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The Collapse of the GDR Economy (January 11, 1990)

In early 1990, the communist newspaper Neues Deutschland finally admitted the impending collapse of the planned economy. The following article attributes the impasse to specific policy mistakes as well as general structural rigidities, thereby scuttling any hopes for the further reform of an independent GDR.

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On the State of the GDR Economy

In the past few weeks, there have been countless calls for a thorough disclosure of the economic situation of the GDR.
[ . . . ] We appealed to the Central State Office of Statistics for information. On the basis of figures withheld from the public until now, we present a survey of central economic issues. [ . . . ]

Despite strenuous and industrious efforts, the speed of economic development has slowed perceptibly: planning mistakes in industry, insufficient supplies of consumer goods, an infrastructure that fell far short of satisfying the demands made upon it. Looking at the country as a whole, all this was reflected in the gross national product. While it grew between 1981 and 1985 – as we discovered – by an average of 4.5 percent, the years 1986 to 1989 showed an annual increase of only 3.1 percent. What caused this? What processes characterize the GDR economy?

Accumulation and Investment
Too Little Investment Was Directed into Production

The slowdown in GNP growth is reflected in the trends of the economy's labor productivity: in the years 1981 to 1985, it increased by 4.3 percent annually. From 1986 to 1989, growth totaled an average of only 3.4 percent annually. Productivity in the GDR was some 40 percent lower than in the FRG.

What processes were responsible for this development? It involved many negative factors, some of which overlap. They include the long-term consequences of insufficient capital accumulation and inadequate returns on investments. [ . . . ] At present, the GDR economy has at its disposal a capital stock of approximately 1,750 billion marks. This amount grew by 535 billion marks – that is, 44 percent – in comparison with 1980. [ . . . ]

During the same period (1981-1989), the GNP rose by 41 percent. But in the 1980s, this was not enough to achieve a transition to an intensively expanded reproduction of capital stock.

In addition, one of the basic economic relationships of accumulation to consumption was not structured in accordance with the country's needs. Thus necessary capital could not be ensured for the productive sectors. [ . . . ]

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