Gareth Dale, Between State Capitalism and Globalisation: The Collapse of the East German Economy (Peter Lang, 2004) This is a final draft. It contains typographical and other minor errors. The book is available at www.peterlang.com/view/product/9374?rskey=hx7dzb&result=1 Agreement to post this version was granted by Lucy Melville, Publishing Director at Peter Lang, 27 March 2017. Contents Preface 7 Introduction 9 1. The Geopolitics of Capitalism in Marxist Theory 21 2. War Economies in an Age of De-globalisation 51 3. Soviet Foreign Policy and the Division of Germany 95 4. ‘Socialist Construction’ and Crisis 135 5. The Promise and Threat of Reform 159 6. ‘The Whip to Speed Growth, the Noose to Strangle’ 179 7. Between Comecon and the World Market 261 8. The Revolution of 1989 309 9. German Unification: a ‘Hostile Takeover’? 359 Conclusion 415 Bibliography 429 5 Preface The origins of this book go back to the 1980s, in particular to a series of visits to, followed by periods of residence in, both the German Democratic Republic and West Berlin. Living in and between two such different societies focuses one’s thoughts on the contrasts, whether in terms of the lifestyle and ‘national character’ of the people, or the structures of economy and polity. In the East, one felt that this was a society that, in material terms, lagged Western Europe by five or fifteen years. Roads were more likely to be empty, and cobbled. Cars were fewer, and more basic in their design. Some farmers were still using horse-drawn carts. Televisions were usually black and white, and personal computers the preserve of enthusiasts only. In terms of political structures, the suppression of public debate was, of course, most striking. So too were some of the features of a ‘mobilised society’; hardly had I taken up my teaching post at a university, for example, than my students were called away by the ‘Free German Youth’ organisation to assist farmers bring in the harvest. In terms of ideology, differences to prevailing views in the West were observable in the media and in the streets, whether in the shape of propaganda banners or in their very names, evocative of the Communist pantheon or simply of industry (‘Street of the Workers,’ ‘Aluminium Street,’ ‘Technicians Street’). Yet in many respects the similarities between the two systems were, if not more eye-catching, then certainly more important. As I crossed the Wall to visit family or friends in West Berlin I was aware that the economic and cultural gap was no greater than that experienced by, for example, an inhabitant of San Diego visiting her family in Tijuana, or a Palestinian refugee in Gaza visiting Israel to do the same. Thus, in the East, my colleagues and I would go to work each day, to a work regime that, although a touch more ‘Prussian’ than that which I personally had known in the West, was in central respects identical. We would follow the curriculum, carry out instructions from our superordinates, collect our wages each week and proceed to spend them in shops and on leisure activities, depositing any remainder in our savings accounts. The question that arose, for me, was whether these similarities indicated the presence If anything the differences in everyday life between Were these differences In 1989 civil liberties were won by a mass movement, the Berlin Wall came down, and market reforms were introduced, followed by currency union and then unification with the Federal Republic of Germany (FRG). Public political debate was now tolerated and the ‘mass organisations’ dwindled and died. The streets, now with different names, grew busier and the price of colour televisions fell. At work, we could join an independent trade union but also faced the likelihood of unemployment, and in these respects the work regime changed. Our wages, moreover, were in Deutschmarks, they could be spent in the West, and the savings bank was now owned by the Deutsche Bank. However, in fundamental respects we continued 6 as before: attending work each day, operating within a similar hierarchy of command, collecting and spending our wages, and so forth. The original questions that were to lead, ultimately, to this book arose from out of these experiences: How can one account for the similarities and differences to its Western twin? In particular, what sort of economy was that of the German Democratic Republic (GDR) and, by extension, those of the Eastern bloc? What made them tick? What explains their emergence, growth and demise? And above all: what exactly changed in 1989–90? In addressing them, three main lines of enquiry were pursued. One was to study the ‘political economy of Communism.’ An exploration of this takes up the first two chapters of this book. The second was to study the economic and political history of the GDR, a thread that is pursued in chapters three to eight. Thirdly, questions related to the demise of the East German economy in the 1980s and in particular to its collapse in 1989 led me to back to Berlin in order to research in the archives of the old regime and to conduct interviews with former functionaries. The findings from this research are concentrated in chapters seven and eight. In addition, a final chapter analyses the eastern German economy after unification, enabling the question of ‘what exactly changed in 1989–90’ to be viewed in a new light. 7 Introduction In April 1989 something of a publishing sensation occurred in Germany. The first major work by an East German dissident since Rudolf Bahro’s The Alternative in Eastern Europe was published in the West, to widespread acclaim. Its author, Rolf Henrich, had been a functionary of the Socialist Unity Party (SED), like Bahro before him, but had grown disaffected with the ‘tutelary state’ over which his party presided. Being an essay of considerable intellectual merit, the book received a good deal of attention, and this was amplified when Henrich was expelled from the SED and then when he became a co-founder of the ‘Citizens’ Movement’ organisation New Forum in the late summer of 1989. In many respects Henrich’s The Tutelary State was a sign of its times. Inspired by the recent reforms in Russia, it called for market socialism, involving the transference of the means of production to ‘socialist entrepreneurs.’ Unlike the works of most former dissidents, it did not diagnose the GDR as a flawed but ‘actually existing’ prototype of a future socialist society. Henrich’s emphasis was, as the book’s subtitle indicates, squarely on the ‘failure of real existing socialism,’ a failure that largely stemmed from the imposition by the Soviets of ‘tutelary’ political and juridical institutions and of despotic economic structures of Asiatic provenance upon Germany’s ‘natural’ institutions of private property and market economy. The Tutelary State did not only symbolise a sea-change within dissident thinking in East Germany. It also represented a growing literature that interpreted the demise of the Soviet-bloc in terms of their inbuilt resistance to ‘modernisation.’ Modernisation theory (partly in the guise of ‘globalisation theory’) was enjoying a renaissance in the 1980s, and flourished following the collapse of the Soviet bloc. As the American sociologist Jeffrey Alexander reflected in the aftermath of that transformation, the world was witnessing a process very close to Talcott Parsons’s stipulation that ‘the great civilizations of the world would converge towards the institutional and cultural configurations of Western society.’1 Applied to East Germany, if modernity is interpreted as a composite of market economy, social mobility, individualism, the rule of law, and democratisation, all of which are manifestations of an underlying tendency to the diffe- rentiation of social institutions, this would suggest that the country collapsed having only barely reached the ‘threshold of modernity,’ to borrow a phrase of the East German social scientist (and Henrich’s former comrade) Rolf Reiβig. For Reiβig, the Western framework enabled the ‘essential’ and ‘dynamic’ components of modernity to flourish: self-interest, the market, money, gain and the rule of law. East Germany, by contrast, found itself saddled with social structures that had been formed for entirely different socio-economic objectives – the modernisation and industrialisation of a backward country.2 At around the same time as Henrich and Reiβig were penning these analyses, a similar thesis, albeit grounded explicitly in modernisation theory, was adumbrated by the sociologist Sigrid Meuschel. Socialism, for Meuschel, by centralising ‘economic, political and other societal resources’ effectively destroyed ‘the relative independence of class-and interest-groups, parties and associations.’ In addition ‘autonomous institutions and regulatory mechanisms 1 Alexander, 1995. 2 Reißig, 1992, p. 48. For a similar argument see Henrich, 1989; also Glaessner, 1991, 1992; Reißig and Glaessner, eds, 1991. 8 such as the market and law, the public sphere and democracy’ were dismantled. The outcome was not the withering away of the state, as Marxism would have it, but rather ‘the withering away of society.’3 Under the sclerotic supervision of the SED, civil society remained ‘undifferentiated,’ whether in terms of property relations, income or achievement. Autonomous initiative could not thrive, and the economy ground to a halt. The image presented by these and similar analyses is of the GDR as a modernisation deviant and economic failure – a putt-putting fibreglass Trabant driven by an ideologically possessed driver who, giving nary a thought for passengers or passers-by, steers off the main road of modernisation and onto a mud track. Having followed an aberrant modernisation path and failed, 1989 witnessed East Germany being hoisted back on to a more natural and solid road.