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GDR Economics Minister Günter Mittag Explains the Failure of the Planned Economy (1991)

In retrospect, the GDR’s leading economist Günter Mittag blames the collapse of the East German economy on the rigidity of Erich Honecker’s pursuit of "unity of economic and social policy." Honecker’s policy, Mittag asserts, was directed toward stabilizing the regime through increased consumption and thereby ruined the country’s productive capacity.

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There were few principles that determined Erich Honecker’s thinking on economic issues. Increased work productivity, yes, but without any perceptible demands on the individual in the sense of needing to work more. Pats on the shoulder instead of discipline. In cases of doubt, better to spend money on the social sector than on manufacturing. He did not understand the interdependency of accumulation and consumption.

At the same time, he also misjudged the changed significance of consumption. He was of the opinion that while new products were certainly desirable, what was ultimately decisive was that people had a roof over their heads and enough to eat. This had to do with his own personal life experience in the past. He had not internalized the fact that needs had taken on a totally different quality and that – owing to generational change – people determined what they wanted based on what they saw of present-day reality in the FRG, and not based on a past they were largely unfamiliar with.

[ . . . ]

Now I better understand why it was often so terribly difficult to get his approval on some essential questions, why ideas were so often rejected. Judging by some of his language, he did in fact make demands for greater work productivity, etc., but as soon as it was a matter of practical consequences, meaning raising the level of productive accumulation at the expense of consumption – and here it would have been society’s consumption – he didn’t approve. On the surface he did not take a negative stance on new issues. As a rule, however, if faced with fundamental decisions, he let himself be guided by his simplified principles.

In essential questions of economics, Erich Honecker unfortunately evinced static thinking. He wanted stability (in the well-understood sense of the word) at any price, and did not understand that it was precisely this insistence on stability – in the sense of holding on to the same old, entrenched structures – that necessarily caused the opposite of stability, namely, instability. So it was neither possible to make corrections in the distribution of resources in favor of industrial investments nor to relieve the burden of subsidies, which had become unbearable, by changing the consumer price policy.

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