Economie Achievement in the German Democratic Republic 1949-1969 '

By Sima Lieberman, Salt Lake City

The pistol shot that ended Adolf Hitler's life in Berlin on April 30, 1945, sounded the death knell of the "thousand year Reich", the great German National Socialist empire which lasted for only twelve years. Long before Nazi Germany officially surrendered at Reims and Berlin in the first week of May, a European Advisory Commission representing Great Britain, the United States and the Soviet Union had been preparing during 1944 the details of a plan determining the allocation of future zones of occupation in Germany, each zone to be governed exclusively by one of the three victorious powers. France acquired membership in this Commission in November, 1944. The Commission's protocol of September 1944 provided that Germany, as it existed in December 1937, would be divided into three zones of occupation, the eastern zone being placed under Soviet rule. The city of Berlin was not to be part of any one zone, instead, it was divided into three sectors and was to be administered by a Kommandatura headed by the military commanders of each sector. Furthermore, the British, American and Russian commanders-in-chief were to acquire jointly the power to administer Germany as a whole and each one of them was also to be the supreme ruling authority in his respective zone. This plan was in turn discussed by Churchill, Roosevelt and Stalin during the Big Three Conference at Yalta in the Soviet Union in February 1945. During this Conference, Stalin finally accepted his colleagues' demand that France should also be granted a zone of occupation in Germany, a zone carved out of the British and American zones. The Soviet delegation, in turn introduced a number of proposals, some of which were accepted at this time by Churchill and Roosevelt. A proposal of major significance receiving unanimous approval stipulated that the victorious powers would extract from Germany reparation payments whose amount was then not determined. Germany was to effectuate these payments in a number of ways. In the first place, it was resolved that various types of German economic wealth, e.g., factories, machinery, railroad equipment, ships and other German assets could be confiscated by the Allied Powers within a period of two years after the end of hostilities. Secondly, the victors were also to be allowed to appropriate for an unspecified period of time part of the current German industrial and agricultural outputs, and to obtain further compensation, they would also be able to use the forced services of German war prisoners, both within and outside of Germany. At Yalta, the Soviet delegation also suggested that German war indemnification payments should amount to twenty billion dollars and that the

Schweiz. Zeitschrift für Volkswirtschaft und Statistik, Heft 4/1973 556

Soviet Union should receive half of this sum1. Stalin furthermore proposed that Poland should be compensated for the loss of its eastern territories to the Soviet Union through the transfer to Poland of German lands situated east of the Oder and Western Neisse rivers. The German town of Stettin was to be Polish. Through this cession, Poland would receive 44,000 square miles of land which included both Upper and Lower Silesia2. No final action on these proposals was taken at Yalta. Nevertheless, the Soviet Union entered into an agreement with Poland two months later under which Poland was vested with the power to administer the German territory located east of the Oder-Western Neisse line. Polish presence and Polish rule in this area was di fait accompli when the heads of the Allied Powers met at Potsdam, Germany, in July 1945, following the unconditional surrender of the German armed forces. The heart of the Potsdam protocol was the determination of Great Britain, the United States and the Soviet Union to disarm and demilitarize Germany so that this country could never become again a dangerous military power. Germany was to be weakened industrially and its industrial capacity above "peacetime needs" was to be appropriated by the Allied Powers. To achieve this aim, the occupying powers were to dismantle "excess" German industrial capacity. Industrial produc­ tion ceilings were to be imposed on the German economy by the military govern­ ments in order to prevent the re-birth of undue industrial power. The Potsdam protocol further provided that "the German economy shall be decentralized for the purpose of eliminating the present excessive concentration of economic power", but recognized that "Germany shall be treated as a single economic unit". The Potsdam resolutions explicitly allowed the dismantling of German industrial installations by the occupying powers as a form of reparation payment by the Germans. But provisions permitting German indemnification to take the form of levies on current German output or the use of forced German labor were entirely omitted. The occupation policy pursued by the Soviets in East Germany promptly revealed that the U.S.S.R. understood the Potsdam Agreement to be simply a supplement to the Yalta determinations, an addendum which in no way su­ perseded the Yalta resolutions. The Potsdam protocol allowed each occupying power to extract its share of German compensation from the zone it occupied and

i J.E.Smith: "Germany Beyond the Wall", Boston, Little, Brown & Co., 1967, p.203. Stalin had asked that half of the German war reparation payments of $ 20 billion be paid during the first two years of occupation, the remainder being satisfied by levies on current German production over a period of ten years. The Western Powers accepted the Soviet demand of $20 billion only as "a basis of discussion". 2 A.Grosser: "Germany in Our Time", New York, Praeger, 1971, pp.27-32. At Yalta, the Polish delegation claimed that a Polish western border along the Oder-Western Neisse rivers would not only compensate Poland for territorial losses in the East, but would also allow Poland to obtain in this way war indemnification from Germany and a more militarily secure border. 557 during eight years following the end of the war, the Soviet Union proceeded to exploit the East German economy to obtain the war indemnification it had asked for at Yalta3. Soviet dismantling of East German industrial, commercial and transport facilities proceeded in successive waves until 1954, even though Marshal Sokolovsky had announced as early as May 21,1946, that Soviet dismantling and appropriations had ended4. From 1945 to 1954, over 1,300 factories and about 4,500 miles of railroad track were removed from the Soviet Zone, which in 1949 became the German Democratic Republic, for shipment to the Soviet Union*. The western tourist who has visited the German Democratic Republic in recent years is quite aware of the fact that the people he observed in East Berlin, Dresden or Leipzig, although apparently well-fed, do not dress with the elegance of Germans in Hamburg, Munich or Wiesbaden. In the cities of the G.D.R., the automobile traffic, the quality and variety of wares displayed in shops and the menus in the restaurants compare poorly with their counterpart in West Germany. If this tourist had visited the G. D. R. in the early 1950s and then again in the late 1960s, he would have to acknowledge that economic progress in the country was quite visible, though the standard of living had not yet attained that of the G. F. R. But how often has our tourist, back in his homeland, stated to his friends, with the conviction of the "expert", that "the government in East Berlin could learn something in Bonn"? What our traveler may not have been aware of, is that in the late 1960s, the G.D.R., a country of the size of New York State, was the tenth largest industrial nation in the world and the second largest industrial power in the Soviet blocö. Although the East German economy is much smaller than the West German one, it produced in 1965 more steel per capita than Italy, and also on a per capita basis, more electric power than West Germany and more cement, television sets and refrigerators than Britain7. But even the knowledge of these data would not have altered, in all probability, our visitor's evaluation of East German economic performance because he would still not perceive the significance of this economic achievement in the light of the tremendous handicaps faced by the East

3 It has been estimated that between 1945 and 1954, the U.S.S.R. appropriated 25% of the East German industrial output to satisfy Soviet war indemnification claims. W.Stolper: "The National Product of East Germany", International Review for Social Sciences, Vol. 12, 1959, p. 153. A detailed study of East German reparation payments to the Soviet Union indicates that East Germany (Soviet zone of occupation or German Democratic Republic - SOZ/GDR) made, during the period 1945 to 1960, reparation deliveries to the Soviet Union amounting to $ 19.3 billion in 1938 prices. Compensa­ tion payments of over $ 17 billion to the U.S.S. R. had already been made as early as 1953. It appears that the Soviet Union extracted from East Germany nearly double the compensation it had asked at Yalta. H. Kohler: "Economic Integration in the Soviet Bloc", New York, Praeger, 1965, p. 29. 4 H. Köhler: "Economic Integration in the Soviet Bloc", New York, Praeger, 1965, Ch. 1. See also J. E. Smith, supra, p. 85. 5 A. Grosser, supra, p. 64. 6 E.Richert: "Pas Zweite Deutschland, Ein Staat der nicht sein darf, Gütersloh, Sigbert Mohn Verlag, 1964, p. 121. 7 D. Childs: "East Germany", New York, Praeger, 1969,p. 136. 558

German economy during the first postwar decade. To properly assess the perform­ ance of this economy during the two decades that have lapsed since the creation in October 1949 of the German Democratic Republic, it is not sufficient to merely compare East and West German production data, as so many economists have done. With a territory quite poor in industrial raw materials, having suffered much more extensive war damage than West Germany, burdened by excessive repara­ tion obligations to the Soviet Union at a time when West Germany was receiving billions of dollars of American aid, weakened over more than a decade by great losses of skilled manpower, the economy of the German Democratic Republic did indeed witness in the 1960s an "economic miracle" which in many ways compares quite advantageously with the much advertised Wirtschaftswunder of the German Federal Republic.

/. The East German Economy in 1945.

The G. D. R. covers an area of 46,600 square miles, an area representing about one fourth that of the German Reich in 1938. Its territory comprises the old German provinces of Mecklenburg, Brandenburg, Sachsen-Anhalt, Saxony and Thuringia, as well as a part of Pomerania. Before the war, this area produced less than 3 % of the total hard coal output of the Reich, less than 1 % of its coke and less than 5% of its iron ore. The East German economy also lacked important fuels such as oil and natural gas and was poorly endowed with sources of hydroelectric power. Over ninety percent of its coke requirements had to be imported, largely from the Ruhr area. Except for large deposits of lignite, East Germany was thus quite poor in adequate supplies of industrial fuels. Obviously, the importance of metallurgy in East Germany was quite minimal. The area that eventually became the German Federal Republic produced in 1937 97% of the pig iron output of the Reich, as well as 91 % of its unfinished steel9. It also produced 93% of Germany's blast furnaces. This does not mean however, that prewar East Germany was under-developed industrially. It is often erroneously believed that East Germany was mostly an agricultural area, exporting foodstuffs to Western Germany in exchange for manufactured products. In 1939, the area that became the Soviet zone of occupation contained 22% of the entire German population, produced 26% of the aggregate German agricultural output and 24% of the value of total German industrial production io. This area contained a well-balanced economy, an economy that would encounter nevertheless serious difficulties once cut off from its traditional sources of industrial raw materials and trade in Western 8 J. E. Smith, supra, p. 86. y G.Roustang: "Développement Economique de l'Allemagne Orientale", Paris, SEDES, 1963, p.ll. i° B.Gleitze: "Wirtschaftsprobleme der Besatzungszonen", Berlin-W, 1947, p. 17. 559

Germany and the territories east of the Oder-Neisse line. Before the war, while West Germany concentrated on the products'of heavy industry, e.g., iron, steel, chemicals, East Germany tended to specialize in labor-intensive light industry, producing over 80% of the country's office equipment, one third of the national output of precision tools and optical equipment, two thirds of the textile machin­ ery and almost 50% of clothing appareil l. East Germany was also well-endowed with potassium deposits and in 1937 it produced about 57% of the total German potash output. This wealth in potash was the base of a synthetic fertilizer-oriented chemical industry which in 1937 exported large quantities of nitrogenous and potash-based fertilizers, soda and potash to the other regions of Germany. Looking at agricultural output and trade, it appears that before the war, East Germany, including in it East Berlin, was on the whole a net importer of foodstuffs. A surplus of cereals and sugar beet was produced on the large Junker estates in Mecklenburg and Brandenburg. Further south, smaller ownership units engaged in a more varied type of agriculture. The hills of Thuringia, the Harz and the Ore Mountains were covered by firs providing the raw materials of a growing timber products industry. East Germany was thus able to export to the rest of the country cereals, potatoes, sugar beet, pork meat and paper pulp, but had to import from other German regions vegetables, dairy products, cattle fodder and beef meats. Even before the war had ended, the large-scale destruction of major East German cities and the immigration of thousands of German-speaking persons moving westward from Rumania, Czechoslovakia, Poland and other Eastern European countries ahead of the Red Army, made it imperative to relocate masses of people from urban centers to the countryside. East German peasants had started taking possession of lands belonging to Junkers that were killed during the war or who had otherwise disappeared long before the end of hostilities. In September of 1945, the governments of the five Länder established in the Soviet zone initiated a land reform program. Farms exceeding 100 hectares in size were confiscated for subdivision and redistribution to the peasantry. In this way, over 800,000 new small farms, averaging 7.3 hectares - 18 acres - in size, could be distributed to land-hungry and mostly poorly skilled "new farmers", the majority of which were refugees from central and eastern European areas, now under Soviet control i -. Furthermore, according to Order No. 124 of October 30,1945, issued by the Soviet Military Commander, various types of real property holdings were to be expropriated for redistribution to the people. Properties belonging to active and influential members of the Nazi party, properties belonging to the Reich or to the

11 G.F.R.: "Sowjetische Besatzungszone von A bis Z", Borni, Bundesministerium für gesamt­ deutsche Fragen (henceforth BFGF), 1966, p. 206. ^ M. Kramer: "Die Landwirtschaft inderSBZ", Bonn, 1957. See also W. Ulbricht: "Die Demokra­ tische Bodenreform", Neues Deutschland, Berlin-E, 2. September, 1955. 560

German military, properties owned by governments or citizens of countries that had supported Germany during the war and properties of persons specially designated by the Soviet authorities were in part nationalized and in part redistri­ buted to individuals and their families13. About three million hectares of land were expropriated in 1945, representing about one third of the cultivated land area in the Soviet zone14. Two-thirds of the appropriated land was immediately granted to individual farmers ; the remainder was shared by the Lander and local govern­ ments and the Red Army. The land reform resulted in a large increase in the number of farms whose size varied between half a hectare and twenty hectares15. The large, efficiently-run Junker estates were thus replaced by an excessive number of small farms, operated in many instances by "new farmers" who too often lacked adequate skills and experience, or who did not possess the necessary animals, tools and seed to produce on the basis of efficient, modern techniques. Not only was the East German economy relatively poor in basic resources, specially when compared to the economy of West Germany, but it was further impoverished by the war which had been more destructive in the East than in the West. Allied bombing and massive destruction inflicted by the advancing Red Army, followed by pillaging and looting during the first months following the end of the war, reduced industrial capacity in East Germany to 42.9% of its prewar level, while industrial capacity in West Germany in 1945 was 80% of what it had been in 193616. In the Soviet zone, the surviving industry faced a shortage of raw materials, so that available industrial capacity could not always be used. The Soviet zone was further economically handicapped by its growing isolation from the heavy industry areas of western Germany. Dresden, Plauen, large parts of Leipzig and Rostock, as well as the industries of these cities, lay in ruins in 1945. What remained of usable industrial facilities was also subject, in the first months of occupation, to Soviet dismantling and appropriation. Railroad tracks, machinery of all kinds, stocks of raw materials, bureau installations and university laborato­ ries were taken by the Russians at a time when 60% of the transportation facilities

^G.D.R.: "Zehn Jahre Volkswirtschaft der Deutschen Demokratischen Republik", Berlin-E, Verlag Die Wirtschaft, 1959, Ch. 2. In 1945 and 1946, East German authorities still assured the "large" farmer, i.e., the farmer owning between 50 and 100 hectares of land, that his property would not be confiscated and that he would receive government protection. M.Kramer, supra, p.22. See also W. Ulbricht: "Zur Geschichte der neuesten Zeit", Vol. I, Berlin-E, Dietz Verlag, 1955, p. 377. 14 M. Kramer, supra, p. 10. ' ? G. D. R. : "Die Landwirtschaft in der DDR, Heute und Morgen", Dresden, 1965,p. 21. 16 G.D.R. : "Zehn Jahre Volkswirtschaft der Deutschen Demokratischen Republik", supra, Ch. 2. H. Kohler, however, feels that East German estimates have grossly overvalued the extent of war damage in East Germany in order to minimize the effect on the economy of Soviet dismantling. Köhler estimates that in spite of severe damage inflicted on housing and transportation, war damage in industry ranged from 3% of 1936 capacity in coal mining to 8% in metallurgy and 15% in chemical industries and machine building. Industrial growth in East Germany during the war years could mean, according to Köhler, that industrial capacity in 1945 may have been equal to that of 1936, if not higher. See H. Köhler: "Economic Integration in the Soviet Bloc", supra, p. 13. 561

in the Soviet zone and 2.9 million dwellings in this area had been completely destroyed17. Even though we accept the most conservative estimates of war damage to industry, we still must recognize that the large-scale destruction of transportation, the massive bombing of major cities, the lack of fuel and industrial raw materials and the inflow of refugees brought enormous economic hardships to the Soviet zone of occupation, hardships made worse by the absence of foreign aid and by the continuous Soviet appropriations.

//. The First Eight Years: 1945-1953

During the first eight years after the war, the East German economy continued to be weakened by recurring, unannounced and unpredictable waves of Soviet appropriations of East German wealth. No exact data have ever been published to show how much the Soviet Union took as reparation payments from the East German economy. It has however been estimated that Soviet dismantling may have taken half of the 1936 industrial capacity of East Germany and that for certain heavy industries, confiscations probably amounted to two-thirds of the prewar capacity1**. During the Spring and Summer of 1946, about two hundred German enterprises, including textile, paper, shoe and chemical factories were dismantled for shipment to the U.S.S.R. In 1947, the occupying forces started transferring to the Soviet Union a large number of electric power plants, coal briquette factories and mining and printing machinery. In the same year, 32% of the existing railroad track in the Soviet zone was appropriated and shipped to the Soviet Union19. Dismantling continued till the Spring of 1948 when the synthetic rubber works at Schkopau were appropriated by the Soviets. But although the confiscation of capital equipment finally ended in 1948, East Germany continued to satisfy war obligations to the U. S. S. R. through deliveries of current output to the Soviet Union. These deliveries continued till January 1,1954. An order, issued on June 5, 1946, by the Soviet Military Administration, transformed about two hundred major East German industrial firms into branches of Soviet enterprises. The management of these Sowjetische Aktien- Gesellschaften, usually known as S. A.G., Was placed in Russian hands. Most of their output, representing between one third and one quarter of the total East

17 G.D.R.: "Zwanzig Jahre ein Freies Land", Dresden, Voelkersfreundschaft-Verlag, 1965, p.8. See also E. Riehen : "Das Zweite Deutschland", supra, p. 123. 18 H. Kohler: "Economic Integration in the Soviet Bloc", supra, pp. 15-16. A number of writers have pointed out that for some industries critical equipment was removed by the Soviet military, leaving the remainder worthless. See J. P. Netti: "The Eastern Zone and Soviet Policy in Germany, 1945-1950", London, Oxford University Press, 1951, pp.206,303. 19 B. F.G.F. ."Sowjetische Besatzungszone von 1945 bis 1954", Bonn, 1956, p. 58. 562

German industrial production, was shipped to the Soviet Union. These deliveries were, of course, valued at very low prices20. Most of these firms were returned to German ownership in 1952 and 1953, but were emptied of inventories and equipment prior to their transfer to the G.D.R. Another type of Soviet levy on part of the East German current output took the form of "costs of occupation", financed by East Germany through deliveries of commodities to the Soviet military; these deliveries were not treated as part of East German reparation payments. Occupation costs in East Germany were much higher than the corre­ sponding costs in the western zones and deliveries to the Red Army continued until January 1, 195921. All the S. A. G. enterprises, except one, reverted to the G. D. R. in 1954. S.A.G. Wismut, in charge of uranium mining in East Germany, became a joint Soviet- German enterprise, responsible for the exploitation of uranium mines in the Ore Mountains and Thuringia. Uncompensated deliveries of East German uranium to the Soviet Union amounted to as much as DM-E 250 million as late as I96022. The disintegration of East Germany's traditional trade with West Germany and the territories located east of the Oder-Neisse line further weakened the East German economy. In 1939, the area of the postwar Soviet zone of occupation exported 49% of its total product to the rest of Germany and imported from the latter 55% of its consumer goods23. Within East Germany, internal trade in the early postwar years was seriously hampered by the Soviet removal of practically all the usable railroad rolling stock. The partition of Germany in turn imposed a much larger economic burden on the G.D.R. than on the G.F.R. While West Germany was eventually able to trade with the economically advanced countries of the world, East Germany's foreign trade had to concentrate on the relatively poor economies of the members of the Soviet bloc24. To the economic losses suffered by East Germany through the Russian confisca­ tions of capital equipment, to the losses due to the collapse of normal East German trading relations because of political reasons, must be added the serious economic handicaps brought about by large losses of skilled manpower which for sixteen years weakened the East German economy. The erection of the Berlin Wall in August, 1961, finally brought to an end a mass exodus of over two million people, largely induced by the economic disparity between East and West Germany. This exodus caused East Germany to lose between one and one and a half million 20 B.F.G.F.: "Die Stellung der SAG in der Wirtschaft der Sowjetzone im Jahre 1951", Bonn, 1952, p.15. 21 H. Apel: "East German Miracle?", Challenge, Vol. 12, No. 2, Nov. 1963, p. 11. 22 H.Köhler: "On East Germany's Foreign Economic Relations", Social Research, Vol.9, 1962, p. 227. 23 Deutsches Institut für Wirtschaftsforschung: Vierteljahreshefte zur Wirtschaftsforschung, I, Bonn, 1952, p. 60. 24 A.Zauberman: "Industrial Progress in Poland, Czechoslovakia and East Germany, 1937-1962", London, Oxford University Press, 1964, pp. 1-6. 563 persons of working age and resulted in serious labor shortage problems in East Germany-^. A reasonable appraisal of East German economic performance must recognize the great handicaps that plagued the East German economy at least until G. Ma- lenkov's "New Course" policies of 1953, if not until the late 1950s. For eight years, East Germany paid to the U.S.S. R. the war indemnification which should have been paid by the entire Germany that had been at war with the Soviet Union. And as we saw, these East German payments took the form of yearly transfers to the Soviet Union of capital equipment and commodities whose value varied between one and two billion dollars. This occurred at a time when the United States was giving West Germany over 4 billion dollars in aid26. Shortly after the end of the war, local German administrative bodies were set up in the Soviet zone of occupation, and these were followed by provincial govern­ ments. In September, 1945, zone-wide, German administrative agencies were established in order to implement orders issued by the Soviet Military Administra­ tion. Detailed Russian directives for the renewal of production and the allocation of raw materials brought about much faster economic recovery in the Soviet zone than in the other zones. Taking 1936 as the base year, the index of industrial production in the Soviet zone during the first quarter of 1948 was 63, while it was 49 for the other zones27. Lack of raw materials, the non-availability of excess industrial capacity existing in the West and the stoppage of imports from West Germany during the second half of 1948 gave the East German economy a serious disadvantage in relation to the western economy from 1948 on. Still, until 1948, economic recovery was much faster in the East than in the West, where few commodities reached the masses of consumers until the monetary reform of 1948. In the Soviet zone, limited economic planning had a start toward the end of 1945, when a first, short-term plan was formulated for the first quarter of 1946. Short- term planning was continued until 1948 when a Six Months Plan for the second half of 1948 became a first step toward longer-term, more comprehensive plan­ ning. In 1948, a Two-Year Plan for 1949 and 1950 was finally adopted. The effectiveness of these early planning efforts was very much impaired by the unpredictable and recurring Soviet confiscations of capital equipment and by the adherence to the Stalinist "ton ideology", i.e., the emphasis placed by East German planners on the attainment of production targets expressed in terms of units, weight or volume, without great importance being attached to the quality of production and the sufficiency of demand for whatever was produced. Until the mid-1950s, East German planning aimed at rapid reconstruction and the building

25 W. Stolper: "Labor Force and Industrial Development in Soviet Germany", Quarterly Journal of Economics, Vol. 71, Nov. 1957, pp. 518-545. 26 D. Childs : "East Germany", supra, p. 138. 27 Economic Commission for Europe : "Economic Bulletin for Europe", III, Geneva, 1949, p. 43. 564 of a large industrial sector which would compensate East Germany for the loss of its access to West German industrial markets. The East German economic literature of those days stressed repeatedly the urgent need to eliminate the 'economic disproportions' brought about by the partition of Germany. At a time when the Soviet bloc governments interpretend the Stalinist dogma to mean that socialist states should be as self-sufficient as possible, and at a time when the activities of the Council for Mutual Economic Assistance, established by the Eastern European countries as a parallel to the O. E. E. C, were so limited that they tended to discourage economic specialization in the various countries, the East German pursuit of a higher degree of autarky, regardless of cost, was not only understandable from a political point of view, but was not unwise given the economic conditions faced by East Germany. Indeed, Germany's partition had deprived East Germany of its usual sources of coal, iron and steel. This meant that during the early 1950s, the supply of industrial fuels in the G. D. R. was unable to keep up with the demand for these materials, even though East German scientists had succeeded in producing a metallurgical coke derived from lignite. Because of fuel and raw material shortages, the aggregate metallurgical output in 1950 had not as yet reached its 1936 level. But from 1950 on, the rate of growth of East German production increased rapidly. Through the construction of entirely new iron and steel works, East Germany was soon able to produce enough steel to make its economy viable. Between 1950 and 1953, new steel works were built at Calbe an der Saale, with blast furnaces entirely fuelled by lignite. New ironworks at Fuerstenberg an der Oder started producing 60% of the iron needs of the country during the first Five-Year Plan period, largely through imports of Soviet iron ore and Polish coke. At Riesa, Henningsdorf, near Berlin, and other locations, prewar iron and steel plants were increased in size and provided with new machinery. The output of pig iron increased threefold between 1950 and 1953. Crude steel production more than doubled in this period.

Production Indices for Pig Iron and Steel

1936 1950 1951 1952 1953

Piglron 59 100 101 196 320 Steel Ill 100 155 189 217

Source: G. E. R. : Zehn Jahre Volkswirtschaft der D. D. R., Berlin-E, 1959, p. 89.

Industrial production expanded rapidly during the period of the first Five-Year Plan of the G.D.R. This plan, covering the years 1950 to 1955, aimed at an 565

increase of 190% in industrial ourput. The Plan gave priority to the development of mining, electric power, metallurgy and the production of heavy machinery. More capital was to be allocated to these industries, with consequent reduced investments in other sectors, particulary, in the consumer goods sector28. Produc­ tion targets were generally fulfilled in time, at least quantitatively. Between 1950 and 1955, the G.D.R. succeeded in almost doubling its industrial output. Gross output in 1955 was 189.6% ofthat of 195029.

Indices oflndustrial Output in the G.D.R. 1950 = 100

Total Industry Metallurgy Light Industry

1950. 1 100 100 1951 . ».6 124.5 120 1952. !.3 151.3 131.7 1953. >.6 177.6 141.8 1954. ».0 198.5 157.8 1955. •.6 214.8 166.3

Source: S.J.D.D.R., 1955, Berlin-E, 1956, p. 125.

Between 1950 and 1955, the output of electric power increased from 19,466 million kWh to 28,696 million kWh; new power plants were built at Stalinstadt, Trattendorf, Elbe and Calbe. The number of domestically produced diesel and gasoline engines increased from 1,149 units to 15,388. The output of cement doubled from 1,412 thousand tons to 2,971 thousand tons. The number of diesel locomotives produced in East Germany almost tripled. There was a general boom in industrial output30. Looking at per capita industrial output, Professor Stolper's data reveal that in the 1950s, per capita output advanced more rapidly in East than in West Germany, though given the much larger population of West Germany, total output re­ mained, of course, larger in the West. Utilizing 1950 prices and with 1950 as the base year, these data show the following :

28 S. E. D. : "Documents of the Socialist Unity Party of Germany", Part III, Berlin-E, Dietz Verlag, 1952, p. 133. 29 G.D.R.: "Statistisches Jahrbuch der Deutschen Demokratischen Republik, 1955, Bçrlin-E, Deutscher Zentralverband, 1956, p. 125. (Henceforth denoted as S. J. D. D. R.). 30 G.D.R..S.J.D.D.R., 1964, Berlin-E, Staatsverlag der D.D.R., 1964,pp. 148-161. 566

Indices of Per Capita Industrial Output East and West Germany, 1950-58

West Germany East Germany

1950 100 100 1951 116.7 117.4 1952 123.7 128.7 1953 134.5 150.7 1954 148.8 164.8 1955 169.6 174.2 1956 180.4 185.2 1957 191.8 197.8 1958 193.0 210.9

Source: W.F. Stolper, The Structure of the East German Economy, Cambridge, Harvard Univer­ sity Press, 1960, p. 243.

The Six-Months Plan of 1948 and the Two-Year Plan for 1949 and 1950 were essentially reconstruction plans. The firstFive-Yea r Plan aimed at an expansion of industrial output which would, by 1955, double the 1936 volume. According to East German data, and these are accepted as statistically reliable in both West Germany and the United States, the industrial output targets of the firstFive-Yea r Plan were attained in time. The same was not true of planned agricultural output. Although in 1946 the official policy still purported to protect the individual farmer owning between 50 and 100 hectares of land, Ulbricht's loyalty to Stalinist practices led the East German government from 1948 on, to eliminate the East German kulak and to do away with privately owned farms covering between 20 and 100 hectares of land. In order to "build Socialism" in the rural sector, the burden of obligatory deliveries to the government at very low prices and the rate of taxation imposed on large farmers were raised in order to prevent the latter from selling anything in the free market, so that they would be forced into bankruptcy. Privately owned farms in the 50 to 100 hectares size covered 470,000 hectares of land in 1946 ; by 1950, these farms extended over only 274,000 hectares. In order to further the socialization of agriculture, agricultural production cooperatives, Landwirtschaftliche Produktionsgenossenschaften or LPGs, were established and private farms exceeding twenty acres were to be regarded as "capitalist enterprises"31. By the end of 1952, about two thousand of these cooperatives were in existence, and three years later, there were three times as many. In 1953, these cooperatives and a small number of state-owned farms cultivated 26% of the tilled land area of the G. D. R. This percentage increased to 33% in 1957 although by 1959, more than half of the cultivated area in the country was still in private hands.

31 G. D. R. : "Chronologische Materialen zur Geschichte der S. E. D.", Berlin-E, 1956, p. 316. 567

From the start, the government favored the LPGs in many ways. Government- owned machine-tractor stations had to satisfy first the needs of the coopera­ tives before their equipment could be used by independent farmers. Taxes of LPG members were reduced by 25% and their obligatory deliveries to the state by 10%. The opposite happened to farmers who decided to continue operating their own farms. Because of higher taxes, more burdensome deliveries to the government and reduced services of the machine-tractor stations, thousands of East German farmers abandoned their land and fled to the West, allowing the East German State to confiscate the land they left. The East German cooperative was not a duplicate of the Soviet kolkhoze and it was not a state-owned enterprise. The LPG's leadership was freely chosen by the members of the cooperative and did not necessarily belong to party officials. Members retained the title to the land they placed in the cooperative and could sell it or bequeath it to their heirs^2. There were three different types of LPGs. Under the Type I arrangement, farmers simply pooled their arable land for joint cultiva­ tion, while they retained individual control over their pastures, animals and machinery. Under Type II, equipment and buildings were also pooled and pasture land could also be used jointly. Under Type III, all possessions were pooled, including livestock and pastures. Under each Type of LPG, the farmer was allowed to retain half an acre of land for personal use, and under Type III, he was also allowed to retain two cows, two breeding sows, five sheep and an unlimited number of small animals. In the socialized rural sector, a number of state-owned farms, Volkseigenes Gut, VEG, had been established in 1949 to operate public land largely for research purposes. The VEGs were to deliver seeds and animals of high quality to the LPGs and act as experimental stations. About 500 of these farms cultivated an area representing only about 4% of the total cultivated area in the mid-1950s. In spite of the favored treatment granted by the government to the socialized agricultural sector, productivity in the privately owned sector remained higher than in the socialized one. Noticeable increases in agricultural productivity were not to be realized until after 1960, when the total collectivization of cultivable land made it possible to operate on fields large enough to permit an efficient use of machinery and a more rational application of fertilizers. But in 1950, agricultural productivity in East Germany was still far below that of 1936 and while the first Five-Year Plan aimed at a 57% increase in agricultural output, the realized increase reached only 44%. Throughout the 1950s, agricultural yields in East Germany remained well below those of West Germany.

32 G. Roustang, supra, p. 61. 568

HI. From the Soviet "New Course"Policy of 1953 to the East German ' 'New Economic Policy ' ' of 1963

Throughout Jhe 1950s, East Germany's economic performance continued to be handicapped by adverse demographic trends. An increasingly disadvantageous age structure of the population meant larger labor shortages, more old age pensioners and a growing participation of women in the labor force. In 1939, out of every one hundred inhabitants in East Germany, 67.5% were of working age, i. e. 15 to 65 years of age. In 1963, this figurewa s 56.8%. Between 1955 and 1963, East Germany's population declined from 17.8 million to 17.1 million; but during this same time the total number of children under 15 years of age and pensioners increased from 6.5 million to 7.4 million^. Labor shortages were worsened by the continuing emigration out of the G.D.R. The number of people leaving the country tended to vary directly with economic conditions in East Germany. For instance, the exodus reached a peak in 1953, the year of the East Berlin uprising, triggered by economic factors, but declined by more than one half in 1959, a year of large economic gains for the G. D. R.34.

Number of Emigrants Leaving the G.D. R. 1949-1965

1949 129,245 1958 204,092 1950 197,788 1959 143,917 1951 165,648 1960 199,188 1952 182,393 1961 207,026 1953 331,390 1962 21,356 1954 184,198 1963 42,632 1955 252,870 1964 41,876 1956 279,189 1965 29,532 1957 261,622

Source: Bundesministerium für gesamtdeutsche Fragen, SBZ von A bis Z, Bonn, 1966, p. 145.

33 G.D.R.: S.J.D.D.R., 1967, Berlin-E., Staatsverlag der D.D.R., 1964, pp.498^*99. 34 A. Baring: "Der 17. Juni 1953", Cologne, Kiepenheuer & Witsch, 1965. 569

Working and Non working Persons per 100 Inhabitants

Per Cent Within Working Per Cent Under 15 or Over 65 Age:15to65

Children under 15 Persons over 65 Total

1939 67.5 21.4 11.1 32.5 1946 62.5 24.5 13.0 37.5 1950 63,3 22.9. 13.8 36.7 1955 63.2 20.9 15.9 36.8 1956 63.0 20.6 16.4 37.0 1957 62.6 20.6 16.8 37.4 1958 62.3 20.5 17.2 37.7 1959 61.9 20.8 17.3 38.1 1960 61.0 21.4 17.6 39.0 1961 58.5 23.6 17.9 41.5 1962 57.6 24.3 18.1 42.4 1963 56.8 25.0 18.2 43.2

Source: S.J.D.D.R., 1964, Staatsverlag der D.D.R., 1964, Berlin-E, p.498.

Percentage of Women in Employed Labor Force

1939 36.7 1962 46.0 1946 44.9 1963 46.0 1948 41.0 1964 46.3 1950 37.0 1965 46.7 1952 42.7 1966 46.9 1955 44.0 1967 47.2 1960 45.0 1968 47.4 1961 45.7 1969 48.0

Source: S.J.D.D.R., 1967, p. 65, and S.J.D.D.R., 1970, p. 59.

The rising percentage of employed women probably explains best why the ratio of births to deaths has steadily declined over years35. In 1965, the East German rate of population growth was the second lowest in the world, the lowest being Hungary. Low fertility rates and a curious East German reluctance to import foreign labor until late in the 1960s prevented the elimination of labor shortages ; these, of course, brought about a larger participation of women in the labor force. A vicious demographic circle ensued, since a rising participation rate of women in the labor force tended in turn to reduce fertility rates.

35 G. D. R.:S. J. D. D. R., 1967, Berlin-E, Staatsverlag der D. D. R., 1967, p. 539. 570

During the 1950s, further economic difficulties were caused by the overcentral- ized East German planning methods. The duplication of Soviet planning tended to encourage factory managers to fulfill purely quantitative goals with inferior, non- marketable products. A result of such inefficient and ineffective planning was a deterioration in the East German rate of growth in the early 1960s and the adoption in 1963 of some of the ideas proposed in the Soviet Union in 1962 by Professor E.G. Libermanof the Kharkov Academy of Engineering and Economics3**. Major changes in the direction of planning had already occurred in East Germany before theadoption of the "New Economic Policy" of 1963. Until the mid-1950s, the plan­ ning strategy of the G.D.R. gave development priority to heavy industry in con­ formity to Stalinist tradition. Large industrial projects were completed in order to expand the capacity of heavy industry. For instance, new shipyards were built at Warnemünde, near Rostock. Special coking facilities were established at Lauch- hammer,northofDresden,abletotransformlignite into metallurgical coke. The first Five-Year Plan aimed almost exclusively to increase the output of heavy industry, particularly the production of steel, heavy machinery, locomotives and ships. A change occurred after 1955. Less importance was given to the further growth of heavy industry; planning emphasis started focusing on the growth of other industries, industries producing light machinery, precision and optical instru­ ments, consumer goods. The idea now was to produce on the basis of comparative advantage and to maximize national income through specialization and interna­ tional trade. This change in planning policy was mostly due to an expansion of the activities of the Council for Mutual Economic Assistance, the CMEA, following Stalin's death in 1953. Until 1954, the U. S. S. R. continued to uphold the policy of national autarky and demanded that the other CMEA countries follow the same viewpoint. From 1955 onwards, this policy was modified in the U.S.S.R. The autarky principle was no longer to be limited to a single nation but was to be applied within the communist world as a whole. CMEA member countries were now encouraged to specialize and to exchange resources and commodities to further economic efficiency within the entire territory covered by the CMEA. And to improve the international socialist division of labor, national economic plans of the various member nations were to be effectively coordinated. This was not undertaken until 195637.

?6 For a more detailed study of the Liberman reforms see : E. G. Liberman : "Economic Methods and the Effectiveness of Production", White Plains, International Arts & Sciences Press, 1972; M.E. Sharpe, editor: "Planning, Profit and Incentives in the U.S.S.R. ". White Plains, International Arts & Sciences Press, 1972; M.Bornstein: "The Soviet Price Reforms Discussion", Quarterly Journal of Economics, Vol.78, February 1964; A.Zauberman: "Liberman's Rules of the Game for Soviet Industry", Slavic Review, Vol. 22, December 1963. 37 A.Korbonski: "The Evolution of Comecon", InternationalConcilization, September 1964. 571

Not only did East Germany's participation in the CMEA result in a drastic change in East German industrial production, but this production continued to expand rapidly from 1955 on. The end of reparation payments to the Soviet Union resulted in an increase in industrial output of 75% between 1955 and 1963 with yearly growth rates varying between 6% and 12% for different industries.

Indices of Gross Industrial Output in East Germany 1936-1967 1936=100

1936 100 1953 177 1961 342 1946 42 1954 195 1962 365 1947 54 1955 210 1963 380 1948 71 1956 223 1964 406 1949 87 1957 240 1965 430 1950 Ill 1958 266 1966 456 1951 136 1959 299 1967 491 1952 157 1960 324

Source: S.J. D.D.R., 1966,p. 151.

Industrial output doubled between 1950 and 1956. It doubled again during the decade 1956-1966. By 1964, the G. D. R. was producing an industrial output that was larger than that produced by the Third Reich. Even though East and West German production data in this period are computed on the basis of different statistical methods, West German data being based on net production, while East German statistics refer to total production and include the value of intermediate goods, from the internal consistency in each set of data, it appears that for the period 1958-1965, East German industrial output increased by 61 %, whereas West German industrial output expanded by 49% 38. Let us notice that East German industrial growth during this period was based on an unchanging labor force size while the number of employed persons in West Germany during these years increased by about 44%. The years 1960 to 1963 brought three major politico-economic changes in the G. D. R. that were to strengthen the East German economy in later years. As of 1960, private property in agriculture practically disappeared in the G.D.R. On November 1,1959, 51 % of the cultivable land was still privately owned. One year later, almost 100% of this land was in the possession of agricultural cooperatives and state-owned farms. Collectivization allowed the LPGs to cultivate much larger fields on the basis of modern agricultural methods. The result was a

38 G.D.R..S.J.D.D.R., 1966, p. 151, and Statistisches Jahrbuch für die Bundesrepublik Deutsch­ land, 1965, Wiesbaden, Statistisches Bundesamt, 1966,p.252. 572 remarkable increase in per-hectare yields from 1962 on. The second major change involved the building of the Berlin Wall, ugly and sinister to the western world but, from the East German point of view, effective in bringing to an end large losses of manpower which for sixteen years had weakened the economy of East Germany. The last major change was introduced by Walter Ulbricht in his address to the Sixth Congress of the German Socialist Unity party in January 1963. His propo­ sals borrowed heavily from E.G. Liberman's thesis. Ulbrichts economic reform program became known as the The New Economic System of Planning and Managing the Economy, more simply, The New Economic System.

IV. The Impacts of Agricultural Collectivization and The New Economic System in the Period 1963 to 1970.

Agriculture remained East Germany's laggard sector in the 1950s. A major cause of the relative poor performance of this sector was the land reform program of 1945 which had produced about 870,000 new small farms of an average size of eighteen acres. On these small units, farmers tried to survive on the basis of a mixed type of production, carried out inefficiently and without the benefit of modern machinery and sufficient fertilizers. Until 1963, the State, in the old Stalinist fashion, deliberately exploited the agricultural sector to finance the building of new heavy industry. Extremely low prices were paid by the government for the obligatory deliveries of agricultural commodities imposed on the farmers. Farm income in East Germany was so low in comparison to income in the other sectors, that poverty induced many skilled East German farmers to flee to the West. Throughout the 1950s, the East German farmer was not provided with enough mechanized power and fertilizers to allow him to indrease yields per hectare and the aggregate utilization of nitrogenous and phosphate-rich fertilizers attained their prewar level only in 1957?9. The end result of these conditions was that food rationing continued in the G.D.R. until May 1958. Following the general transfer of land still in private hands to agricultural cooperatives in 1960, prices of agricultural products were raised in 1963 and agricultural machinery was transferred from the Stalin-type machine tractor stations to the cooperatives. Capital investment in agriculture expanded rapidly after 1963. From 1965 on, more nitrogen, potash and lime were applied per hectare of land in the G. D. R. than in the G. F. R., while the use of phosphates per hectare became about equal in the two countries40. Larger investments in agriculture and larger fields permitted a more rational use of machinery and fertilizers, and yields

39 G.Z>.JR.:S.J.D.D.R.,1966,p.281. 40 G.D.R.: S.J.D.D.R., 1967, p.279and Statistisches Jahrbuch für die Bundesrepublik Deutsch­ land, 1966, p. 191. 573 started risingrapidl y after 1962. East German crop yields became soon the highest in Eastern Europe and by 1965, they were equal to those of the G. F. R., France and Italy. Compared to these countries, the G. D. R. was leading in per-hectare yields of wheat, barley and oats. Among Europe's ten leading crop producing nations, the G.D.R. ranked first in per-hectare yields of wheat, barley and oats, second for rye yields, third in the case of potato yields.

G.D.R.: Crop Yields per Hectare 1934/1938-1969 (In 100 kilograms per hectare)

Wheat Rye Barley Oats Sugar Potatoes Beets

1934/1938 24.6 17.1 23.4 21.5 291.0 173.0 1953 27.4 18.7 25.4 24.7 284.0 159.3 1955 30.3 21.8 27.4 25.4 265.9 132.8 1959 31.3 20.7 29.4 23.6 198.9 161.3 1960 34.8 22.5 32.6 28.1 287.6 192.4 1961 27.5 18.2 21.9 24.4 213.8 123.7 1962 31.1 21.3 31.1 28.3 213.8 179.0 1963 30.0 20.4 28.2 25.6 266.0 172.6 1964 31.1 23.0 32.3 26.2 261.3 172.8 1965 36.7 23.2 33.2 29.2 253.1 177.2 1966 31.4 21.3 29.3 26.9 313.5 184.8 1967 37.8 26.6 34.9 31.4 332.6 205.0 1968 41.7 26.3 35.6 33.8 343.8 188.1 1969 35.5 22.4 32.2 20.9 253.2 146.2

Source: S.J.D.D.R., 1967, pp.280-292, and S.J.D.D.R., 1970, pp.200-203.

Not only did agricultural productivity rise after the socialization of land in 1960, but farm income also increased rapidly, so that by the end of the 1960s, the farmer's average income had surpassed that of the industrial worker. The second Five-Year Plan, covering the period 1956 to 1960, was abandoned in 1958 and replaced by a first Seven-Year Plan for the years 1959 to 1965. The main purpose of the change in plans was to synchronize the planning periods of the various CMEA countries. This last plan was in turn discarded in 1962 and in 1963, a new Seven-Year Plan went into effect for the period 1963 to 1970. This new plan was to implement the ideas contained in The New Economic System. The rate of growth in East Germany started declining during the first years of the 1960s. The inevitable disruptions brought about by the land tenure changes of 1960 and the changes in resource allocations made necessary by the closure of the Berlin border in 1961, caused an inevitable economic slow-down. The yearly rate of increase of industrial output fell from a peak of 12% in 1959 to 9% in 1960 and 574

5.8% in 1961. This explains why Professor Liberman's proposals of 1962 were so well received by the East German government, which had to recognize the fact that overcentralized planning in a larger and more complex economy had become inefficient. Although economic reform in the G. D. R. was proposed and accepted in 1963, East German writers were eager to point out that the New Economic System was a logical development of former policies of the German Socialist Unity Party rather than a break with past policy41. The central idea of the new program was to give enterprise managers more autonomy in the making of decisions concerning production and sales. The soundness of their decisions was to be revealed by market sales and the efficiency with which they operated their plants was to be shown by profits. Managers were no longer to be subsidized by the State and their task was no longer the attainment of a certain quantum of output. Bonuses and premiums now depended on profits rather than on the level of output. The hero of the reform program was the technocrat, the plant manager willing to assume new responsibilities, able to produce efficiently and willing to have his performance evaluated according to international standards. Long-range economic plans - Perspektivpläne - were to be formulated by a Planning Commission - Staatliche Plankommission. These plans were not to give detailed directives, but were simply to present general guidelines of economic activity, leaving other planning agencies, including the individual enterprise, relatively free in the making of production decisions. Eight Ministries, responsible to a Council of Ministers and its Presidium, were to undertake more detailed planning on the basis of both the long-term plan and the planning of enterprises. Under these Ministries, eighty associations of nationalized concerns - Vereinigun­ gen Volkseigener Betriebe, VVB - were to act as socialist holding companies and supervise the performance of enterprises under their control. The VVBs were responsible for the marketing of products, for market research and advertising as well as for the quality of output. For each VVB, a Technical Control Organization was to supervise the quality of production. Profit was to determine the efficiency of each Wb42. Other reforms introduced comprehensive cost accounting systems and raw materials prices were raised by an average of 20% in order to bring them in line with world market prices. Prices were still to be determined by a government agency. There was also a revaluation of capital equipment and inventories, completed in 196443.

41 W. Berger & O. Reinhold: "Zu den wissenschaftlichen Grundlagen des neuen ökonomischen Systems", Berlin-E, Dietz Verlag, 1966, p. 10. 42 G. D. R. : "Richtlinie für das Neue Ökonomische System der Planung und Leitung der Volkswirt­ schaft, Beschluss des Präsidiums des Ministerrates der D.D. R.*\ Berlin-E, Dietz Verlag, 1963, p.28. 43 H.Böhme: "East German Price Formation under the New Economic System", Soviet Studies, January 1968, pp. 340-358. 575

Walter Ulbrichts New Economie System brought a new economie boom to East Germany, a boom that was not interrupted by a West German-like mid-1960s recession. A growing trade with CMEA countries allowed the G. D. R. to import larger quantities of needed industrial raw materials. Oil and iron ores were imported from the Soviet Union, coal and coke from Poland, timber from Rumania, bauxite from Hungary and electric power from both Poland and Czechoslovakia. On the basis of these raw materials, over 75% of the G. D. R.'s gross social product could be constituted by industrial output. East Germany became a major exporter of machinery, trucks, cars, railroad rolling stock and ships, selling these products not only within the CMEA area, but also in West Germany, Scandinavia and other countries. By 1967, the chemical industry had become the most important industry in the G.D.R. and the largest employer of labor. Another industry that expanded rapidly in the 1960s was the electric equipment industry, Berlin being the main center of this industry. Whereas the Neptun AG shipyards at Rostock employed only about 5,000 workers toward the end of the war, these shipyards, together with the new Wornowwerft shipyard at Warnemünde, employed 38,000 workers in 1965. In 1964, the G. D. R. was already producing more automobiles than Poland, Yugoslavia and Czechoslovakia put together. If motor transportation remained deficient in the G.D.R., it was not because of a deficient output of trucks and automobiles, but rather, because of the large exports of East German vehicles, mostly to the other CMEA countries. Large imports of raw materials had to be paid for through the export of manufactured goods. East Germany's trade with the socialist countries has steadily expanded in the 1960s and the year 1962 alone ended with a balance of trade deficit44. About 75% of East Germany's foreign trade consists of exchanges with the CMEA countries, the Soviet Union being the G.D.R.'s largest trading partner. At least since 1956, the value of this trade has been based on world market prices45.

44 G.D.R.:S.J.D.D.R., 1970,p.294. 45 J.Nawrocki: "Das geplante Wunder", Hamburg, Christian Wegner Verlag, 1967, pp. 176-184. 576

G. D. R. Output of Selected Commodities

1955 1960 1969

Piglron: lOOOtons 1,516.6 1,994.7 2,098.3 RolledSteel: lOOOtons 1,884.1 2,613.3 3,181.9 Cement: lOOOtons 2,971 5,032 7,410 Automobiles : units 22,247 64,071 120,915 Trucks: units 14,191 12,865 25,314 Tractors : units 7,792 9,076 15,499 Meat (no poultry): 1000 tons 496.4 664.1 986.3 Butter: lOOOtons 143.8 174.6 215.2 Phosphated Fertilizer: tons 84,552 165,750 368,557

Source: S.J.D.D.R., 1970,pp. 114-120.

Since the size of the East German labor force has tended to remain quite constant, larger outputs had to be obtained by means of rapidly increasing productivity. Productivity increases have been due, to a major extent, to better educational facilities for the young and larger enrollments of students in advanced schools, colleges and universities.

Number of Students Enrolled in Advanced Educational Institutions

1951 31,512 1964 110,664 1955 74,742 1965 108,791 1960 101,773 1966 106.422 1961 112,929 1967 106,534 1962 114 002 1968 110,581 1963 115 673 196Q P2.790

Source: S.J.D.D.R., 1970, p. 386.

V. Conclusion

Even though historians will hold Walter Ulbricht responsible for the building of the Berlin Wall, even though his command economy appears to the western visitor to have imposed harsh measures on the people of East Germany, even though, in the face of rebelling workers, he decided to continue in the 1950s the orthodox Stalinist economic system, he nevertheless was able to bring to East Germany a remarkable economic expansion in spite of very adverse conditions. Poor in raw materials, plundered for nearly a decade by the Soviet Union, lacking foreign aid in the difficult early postwar years, weakened by large population losses, the East 577

German economy in the 1960s was able nevertheless to reduce considerably the disparity in the standard ofliving of the two Germanies. In order to reduce thegap existing between its own and the West German standard ofliving, East German industrial output had to grow, by necessity, faster than that of West Germany. In spiteof asmallerandstagnantlaborforce, theG.D.R. hasachieved this. Looking at the data, it appears that the "German economic miracle" was, if not more so, an Eastern as well as a Western phenomenon. 578

Summary

Economic Achievement in the German Democratic Republic 1949-1969

In the late 1960s, the German Democratic Republic, a country whose size does not exceed that of the State of New York, ranked tenth among the world's industrial nations. To achieve this level of industrialization, East Germany had to overcome very severe economic and political handicaps. This article traces the history of industrial and agricultural development in East Germany during the "Stalinist" period in the light of the tremendous economic difficulties resulting from the country's poverty in industrial raw materials, the burden of war reparations to the Soviet Union, the absence of foreign aid and foreign trade and the continuous loss of manpower over a period of sixteen years. The reforms of the early 1960s are analyzed as a form of rational "response" to the "challenge" presented by the politico-economic obstacles to economic growth.

Zusammenfassung

Die wirtschaftliche Entwicklung der DDR 1949-1969

Am Ende der sechziger Jahre nahm die DDR, deren Fläche kleiner ist als diejenige des Staates New York, den 10. Rang unter den Industrienationen der Welt ein. Diese Position erreichte die DDR nach der Überwindung von politischen und ökonomischen Schwierigkeiten. Der Aufsatz verfolgt die Entwicklung auf dem Industrie- und Agrarsektor in Ostdeutschland während des Stalinismus, welche durch eine Rohstoffarmut, die Reparationszahlungen an die Sowjetunion, das Fehlen jeglicher Entwicklungshilfe und Aussenhandels und den ständigen Verlust an Arbeitskräften erschwert wurde. Der Beitrag geht zusätzlich der Frage nach, inwieweit die Reformen der frühen sechziger Jahre als eine «rationale» Antwort auf die erwähnten Schwierigkeiten aufgefasst werden können.

Résumé

Le développement économique de la République démocratique allemande de 1949-1969

A la fin des années soixante, la République démocratique allemande, dont la surface ne dépasse pas celle de l'Etat de New York, occupait le dixième rang parmi les nations industrielles du monde. La RDA est arrivée à cette position après avoir surmonté des difficultés politiques et économiques sérieuses. L'article retrace le développement de l'Allemagne de l'Est dans le secteur industriel et agraire pendant le stalinisme, période difficile à cause du peu de matières premières, des paiements de réparation à l'Union soviétique, du manque total d'aide et de commerce extérieurs et de la perte continuelle de main- d'œuvre. En plus, l'article analyse dans quelle mesure la réforme du début des années soixante était une réponse «rationnelle» aux difficultés mentionnées.