The Development of the East German State, 1961-85
TO WHAT EXTENT DID THE GDR’S ECONOMY STABILISE AFTER 1961?
The building of the wall in 1961 ended mass emigration, stabilised the labour supply and enabled
effective economic planning - HOWEVER, housing shortage as people were no longer leaving.
In the 1960s more experimental economic policies were followed - the New Economic System, 1963-68
(NES) and the Economic System of Socialism, 1968-71 (ESS) with a slight relaxation of central control
and more emphasis on profit making
● BUT both policies lacked Soviet support and were restricted by political manoeuvring within the
SED.
● In 1971, Ulbricht was removed from power and replaced by Honecker who immediately reversed
the policies
In the 1970s there was a return to central planning and nationalisation with Honecker’s Unity of Social
and Economic Policy
● The economy grew - ‘CONSUMER SOCIALISM’ - greater availability of consumer goods,
agriculture was more productive, and scientific & technological industries developed.
○ However, led to underinvestment in industry
● By the 1970s the GDR was the most successful communist state with living standards in many
ways comparable to the FRG
By the 1980s, however, the economy of the GDR was in decline with long term structural problems and
basic inefficiencies rendering it unable to cope with crises - frequently turning away from COMECON
nations and towards the FRG for assistance.
End of Mass Emigration (E > W)
Few mass demonstrations immediately after the construction of the Berlin Wall
- Many in the GDR remembered the June 1953 uprising, and now there was a larger and more
extensive Stasi force present.
- Rearmament of the GDR and FRG since the mid-1950s had created widespread fear of conflict
between the two nations
The people just had to accept the situation with the wall and make the best of it - psychologically, this
encouraged many people to conform and even collaborate with the SED to create a better socialist
future. A guaranteed labour supply was needed to plan the GDR’s economic strategies.
THE NEW ECONOMIC SYSTEM, 1963-68, (ULBRICHT)
● Launched by Ulbricht and placed under the direction of Gunter Mittag, the Head of the Office for
Industry and Construction
● Reflected the new-found confidence of the GDR government following the construction of the
Berlin wall and a willingness to experiment with economic policy. Also reflected similar trends in
other Eastern Bloc countries as well as, to an extent, in the USSR itself under Khrushchev.
● Stressed that there would be no political changes with it
, AIMS OF THE NES
● More decision making would be allowed by directors at much lower levels within organisations
● Profit making was introduced as a key indicator of performance, to focus more on the production
of quality goods and to create funds for reinvestment
● Incentives for workers were introduced e.g. financial bonuses
● Focus on scientific and technological development e.g. in the chemical industry. Emphasised the
need for scientific expertise, which created rewarding opportunities within the GDR
○ Also encouraged links between universities and industries to improve production,
however, skilled workers found themselves overqualified for the available jobs, causing
dissatisfaction and high turnover rates.
PROBLEMS WITH THE NES
- Often difficult to obtain necessary resources
- Ideologically problems from those committed to creating a communist state - the lessening of the
SED control undermined this and the introduction of financial incentives would lead to the
creation of very wealthy individuals
- Although, financial incentives were fairly worthless when there was a lack of consumer goods to
purchase.
These problems caused unease in Moscow, and when Brezhnev came to power he was not pleased
with the results of the system - it was gradually abandoned after 1965.
THE ECONOMIC SYSTEM OF SOCIALISM, 1968-71
● A return to strict central control and socialist economics (ideology!!) - all private and semi-private
businesses were nationalised in 1972
● The central planning of the ESS would be extended to include agriculture and trade, as well as
industry
● Focus on the raising of living standards through the provision of better housing, education and
healthcare in the hope that a better housed, educated and healthy workforce would work longer
and harder for the state and accept state control.
● This would in turn lead to increases in production which would generate the capital needed to
further improve social conditions and promote economic growth
INCREASED ECONOMIC PRODUCTION & CONSUMER GOODS?
SUCCESSES
● Between 1968-71 the GDR economy grew by an average of 5.7%, while the West rose by 3.5%
between 1965-70.
● The economy was stable with industrial production growing at around 5% per year in the 1970s,
allowing the supply of consumer goods to improve
● Industrial production rose by 43% between 1958-65, and the quality of trained labour improved
as emigration was nearly impossible.
● By 1980 nearly every household had a TV and a fridge; 85% had washing machines and 50%
had a car
FAILURES
● Difficult to maintain - the GDR did not have the required facilities, experts, and financial
investment to match those of the West, particularly the FRG.
● Private businesses accounted for 11% of GDR production and employed nearly 500,000 people.
○ Their forced nationalisation had such a detrimental impact on the economy it had to be
reversed in 1976.
TO WHAT EXTENT DID THE GDR’S ECONOMY STABILISE AFTER 1961?
The building of the wall in 1961 ended mass emigration, stabilised the labour supply and enabled
effective economic planning - HOWEVER, housing shortage as people were no longer leaving.
In the 1960s more experimental economic policies were followed - the New Economic System, 1963-68
(NES) and the Economic System of Socialism, 1968-71 (ESS) with a slight relaxation of central control
and more emphasis on profit making
● BUT both policies lacked Soviet support and were restricted by political manoeuvring within the
SED.
● In 1971, Ulbricht was removed from power and replaced by Honecker who immediately reversed
the policies
In the 1970s there was a return to central planning and nationalisation with Honecker’s Unity of Social
and Economic Policy
● The economy grew - ‘CONSUMER SOCIALISM’ - greater availability of consumer goods,
agriculture was more productive, and scientific & technological industries developed.
○ However, led to underinvestment in industry
● By the 1970s the GDR was the most successful communist state with living standards in many
ways comparable to the FRG
By the 1980s, however, the economy of the GDR was in decline with long term structural problems and
basic inefficiencies rendering it unable to cope with crises - frequently turning away from COMECON
nations and towards the FRG for assistance.
End of Mass Emigration (E > W)
Few mass demonstrations immediately after the construction of the Berlin Wall
- Many in the GDR remembered the June 1953 uprising, and now there was a larger and more
extensive Stasi force present.
- Rearmament of the GDR and FRG since the mid-1950s had created widespread fear of conflict
between the two nations
The people just had to accept the situation with the wall and make the best of it - psychologically, this
encouraged many people to conform and even collaborate with the SED to create a better socialist
future. A guaranteed labour supply was needed to plan the GDR’s economic strategies.
THE NEW ECONOMIC SYSTEM, 1963-68, (ULBRICHT)
● Launched by Ulbricht and placed under the direction of Gunter Mittag, the Head of the Office for
Industry and Construction
● Reflected the new-found confidence of the GDR government following the construction of the
Berlin wall and a willingness to experiment with economic policy. Also reflected similar trends in
other Eastern Bloc countries as well as, to an extent, in the USSR itself under Khrushchev.
● Stressed that there would be no political changes with it
, AIMS OF THE NES
● More decision making would be allowed by directors at much lower levels within organisations
● Profit making was introduced as a key indicator of performance, to focus more on the production
of quality goods and to create funds for reinvestment
● Incentives for workers were introduced e.g. financial bonuses
● Focus on scientific and technological development e.g. in the chemical industry. Emphasised the
need for scientific expertise, which created rewarding opportunities within the GDR
○ Also encouraged links between universities and industries to improve production,
however, skilled workers found themselves overqualified for the available jobs, causing
dissatisfaction and high turnover rates.
PROBLEMS WITH THE NES
- Often difficult to obtain necessary resources
- Ideologically problems from those committed to creating a communist state - the lessening of the
SED control undermined this and the introduction of financial incentives would lead to the
creation of very wealthy individuals
- Although, financial incentives were fairly worthless when there was a lack of consumer goods to
purchase.
These problems caused unease in Moscow, and when Brezhnev came to power he was not pleased
with the results of the system - it was gradually abandoned after 1965.
THE ECONOMIC SYSTEM OF SOCIALISM, 1968-71
● A return to strict central control and socialist economics (ideology!!) - all private and semi-private
businesses were nationalised in 1972
● The central planning of the ESS would be extended to include agriculture and trade, as well as
industry
● Focus on the raising of living standards through the provision of better housing, education and
healthcare in the hope that a better housed, educated and healthy workforce would work longer
and harder for the state and accept state control.
● This would in turn lead to increases in production which would generate the capital needed to
further improve social conditions and promote economic growth
INCREASED ECONOMIC PRODUCTION & CONSUMER GOODS?
SUCCESSES
● Between 1968-71 the GDR economy grew by an average of 5.7%, while the West rose by 3.5%
between 1965-70.
● The economy was stable with industrial production growing at around 5% per year in the 1970s,
allowing the supply of consumer goods to improve
● Industrial production rose by 43% between 1958-65, and the quality of trained labour improved
as emigration was nearly impossible.
● By 1980 nearly every household had a TV and a fridge; 85% had washing machines and 50%
had a car
FAILURES
● Difficult to maintain - the GDR did not have the required facilities, experts, and financial
investment to match those of the West, particularly the FRG.
● Private businesses accounted for 11% of GDR production and employed nearly 500,000 people.
○ Their forced nationalisation had such a detrimental impact on the economy it had to be
reversed in 1976.
