The Economic Model of the German Democratic Republic - 1945-89

1
The Economic Model of the German Democratic
Republic - 1945-89
2
Socialist Centrally Planned Economy

• Based on that of the Soviet Union.
• State ownership of means of production.
• Central planning of all economic processes
• Nationalisation of industry
• Collectivisation of agriculture

3
Modernisation

• 1950 - State Planning Commission created.
• Countrys first 5 Year Economic Plan introduced.
• Achievements relatively productive, almost self
  sufficient, decrease in unemployment, wage
  increase, industry growth
• Problems quantity rather that quality, lack of
  choice, inefficiency, sheer complexity and
  unrealistic goals of plan.
• 1959 Introduction of 7 Year Plan

4
New Economic System (NES)

• Late 1950s - economic growth slows
• Aimed to transform economy into dynamic and
  innovative system
• Decentralisation - Associations of People's
  Enterprises (Vereinigungen Volkseigener Betriebe)
• Fear that political decentralisation would follow

5
Economic System of Socialism 1967-70

• Planning partially recentralised
• Focus on technology sectors
• Problems too much emphasis on certain sectors,
  price increases
• Failure to meet goals resulted in termination

6
The Main Task - 1971

• Higher standard of living in exchange for
  acceptance of SEDs leading force in society
• Achievements more consumer goods, more housing,
  job security and stable prices, increased
  prosperity
• Ambitious programme exacerbated hard-currency
  debts

Erich Honecker
7
World Economic Crisis

• Late 70s/ early 80s - Explosion of oil prices
  GDR heavily dependant on fuel imports, no natural
  resources
• Economic recession
• Increasing international debts
• Efforts to increase production of exports
  required import of expensive equipment

8
To conclude

• Centrally planned economies traditionally
  unsuccessful as can be seen in GDR model
  inefficient, cannot detect consumer preferences,
  lack of incentives for innovation, lack or reward
  for hard work, infringes on individual freedom
• Some failing factors specific to GDR -No natural
  resources, traditional economic links to west
  severed.
• However guaranteed employment price stability,
  developed a competitive industrial nation,
  reasonable standard of living