1.2a To what extent did the GDR's economy stabilise after 1961? Flashcards
What was the key aim of the NES?
More decision making at lower levels
Why was the NES (1963) able to be put in place?
- Berlin Wall - Mass exodus of skilled workers to West Germany halted, ensuring a stable and secure workforce, which allowed the GDR to plan and implement economic reforms more effectively.
- USSR Influence - USSR Pushed GDR for economic reform to improve efficiency and productivity, which defeated pushback from the more committed communists in the SED.
What were the Strengths of the NES?
- Profit - Reintroduced profit-making as a performance indicator to focus on quality goods and create funds for reinvestment.
- Incentives - Introduced worker incentives, such as financial bonuses and higher wages for skilled workers.
- Science/Industry - Emphasized industry developments (chemicals/electronics) and encouraged university-industry links to improve production.
What was the focus of consumer goods under the NES?
- Quality Over Quantity -emphasising higher-quality goods over just raising quantity.
- Diversification of Consumer Goods to meet the needs and preferences of the population
- Modernisation of the Production Process with new tech.
What were the Weaknesses of the NES?
- Ideological Conflict - Politically-motivated industrial sabotage occured, as many committed to Socialism felt the NES was a betrayal of the GDR’s values.
- Inept Managers - GDR managers lacked financial skills to understand market dynamics, leading to difficulties in obtaining necessary production resources.
- Pricing Structure - Central Planners set low prices for Promoted Goods, primarily essentials. However, this forced producers to produce less in these areas to retain profits, leading to shortages.
What ultimately ended the NES in 1965?
Brezhnev’s Visit to the GDR (Dec. 1965)
- Brezhnev held far more orthodox views on the economy than his predecessor and was worried that NES would create ultra-rich elites.
- During his visit, he accused Apel of failing to meet targets and relying too much on the West. This damaged Apel’s political standing and in that same month, Apel shot himself.
- Apel’s death signalled an end to any chance of continuing the policy of NES.
Why did the increase in jobs and wages from the NES not effect the lives of GDR citizens?
There were not enough consumer goods to buy
Why did the NES not lead to a diversification of Consumer Goods?
- Limited Implementation Time - NES had only been implemented for 2 years and experienced various challenges and direct condemnation by Brezhnev.
- Centralisation - SED planners and factory managers hadn’t been given sufficient time to adapt to market mechanics, and thus weren’t able to respond to consumer needs effectively.
Evidence that the supply of Industrial Household Goods (e.g. Cars, TVs, etc.) improved under the NES and ESS?
Between 1960-1970:
- TV Ownership rose from 16% to 61%
- Refrigerator Ownership rose from 6% to 56%
- Washing Machine Ownership rose from 6% to 53%
- Car Ownership rose from 3% to 15%
What was the ESS (1968)?
A Modified Version of the NES that re-emphasised centralisation.
How did the SED justify the NES’ replacement?
SED claimed NES was just and experiment and that an economic model based more on Communist ideology was now necessary.
What household goods were typically in shortage? What behaviour did this create in the GDR population?
- Common Household goods from toilet paper to toothbrushes, as well as certain foodstuffs often suffered from periodic and unexplained shortages.
- This led to East Germans carrying ‘perhaps’ bags, in the event they pass a shop that is selling something in short supply.
What were the features of the ESS?
- More Centrally Planned
- Extended to include Agriculture and Trade, as well as Industry.
- Restored Price Subsidies to promote Key industries, with emphasis placed on Computing, Chemicals and Plastics.
What were the Strengths of the ESS?
- Economic Growth - 1968-1971, GDR economy grew by an average of 5.7%, GNP rose from 3.5% (1960-‘65) to 5.1% (1965-‘70).
- Industrial Production - 1958-1965, rose by 43%, which helped to improve supply of consumer goods.
- Quality of Trained Labour improved, as Berlin Wall had stemmed Western Emigration.
- ESS allowed for substantial progress to be made in rebuilding urban areas such as Berlin, Dresden and Leipzig.
Why was Ulbricht’s aim of overtaking the West a long term hinderance on his Economic Reforms?
- It led to too much emphasis being placed on a few industries and not enough on consumer products.
- This led to shortages that increased dissatisfaction amongst GDR citizens.
What were the GDR’s Biggest Economic Strengths by 1970?
- The GDR had replaced Poland as the USSR’s largest trading partner.
- The GDR claimed to be amongst the Top Ten Industrial Nations in the world (at #10).
- GDR had managed to achieve this in spite of heavy reparations and looting by the Soviets in the aftermath of WW2.
- GDR able to proudly claim it did not need Marshall Aid which had enabled the FRG’s ‘economic miracle’
What event led to the downfall of the ESS?
The Warsaw Pact’s Invasion of Czechoslovakia
- Following repression of Prague Spring, Brezhnev imposed centralisation of the economy throughout the Eastern Bloc and the return to hard-line Commie Economics.
- In compliance with this, in September 1970, whilst Ulbricht was on holiday, Honecker introduced a Politburo Resolution that scrapped the ESS.
What were the Weaknesses of the ESS?
- High Expectations - ESS failed to meet Ulbricht’s aim for the GDR to overtake the FRG in productivity.
- International Competitiveness - Did not improve as the GDR still produced too little, with domestic supply failing to meet domestic demand.
How did Comecon undermine the GDR’s Economy after 1961? (5)
- GDR became dependent on raw materials from Comecon (87% of GDR’s Oil coming from the USSR).
- Comecon only kept GDR relatively insulated from OPEC Crisis price rises, as the price of GDR imports rose by 34% (with exports only rising by 17%).
- ‘Sofia Principle’ allowed Comecon Members to access the technology of others at little cost. This meant that the USSR was able to often pillage experts from the GDR.
How did Comecon undermine the GDR economy in the Late 70s and the Early 80s?
GDR Economy severely impacted when USSR raised prices and cut raw material supplies in the late 70s and early 80s
How did Werner Barm highlight the flaws of the GDR Economy in July 1970?
- Criticised GDR’s strategy of ‘Overtaking without Catching Up’
- The Idea was that the GDR could overtake the FRG by reinventing its industries with pioneering technologies and heavy investment.
- However, it often lead to ‘crucial’ industries hoarding the majority of the investment.
- e.g. Chemcials, despite being only 40% as efficient as that of the FRG, was to recieve a 50% increase in investment in 1970.
What did Honecker’s “Unity of Social and Economic Policy” (USEP) set out to achieve?
- Raise standards of living through consumer socialism and better welfare.
- SED theorised that a more contented workforce would work harder for the state.
What reform did USEP require?
Nationalisation of Private Industries
- Policy required the direct redistribution of profits from all firms towards Social Welfare schemes.
- This led to all private and semi-private businesses being nationalised in 1972.
What were the drawbacks of USEP/Nationalisation?
- The Private Sector had created over 11% of the GDR’s production and employed 500,000 people.
- Nationalisation of this sector in 1972 eliminated the efficiency of this sector, and seriously impacted Honecker’s vision of consumer socialism.
- Additionally, the shift of focus to consumer socialism led to a considerable underinvestment in Industry that would manifest itself in the 80s.
- Thus the policy was reversed in 1976
What were the Benefits of USEP?
- Economy stabilised as social aspects of the policy greatly improved welfare and housing standards in the GDR
- Industrial Production grew steadily at 5% per year througout the 70s
- By 1980, nearly every household and a TV and a Refrigerator, while 85% had Washing Machines.
