The Currency of Socialism: Money and Political Culture in East Germany'

H-German Port on Zatlin, 'The Currency of Socialism: Money and Political Culture in East Germany'

Review published on Wednesday, November 12, 2008

Jonathan R. Zatlin. The Currency of Socialism: Money and Political Culture in East Germany. Cambridge: Cambridge University Press, 2007. 377 pp. $80.00 (cloth), ISBN 978-0-521-86956-0.

Reviewed by Andrew I. Port (Department of History, Wayne State University)Published on H- German (November, 2008) Commissioned by Susan R. Boettcher

The Color of (Red) Money

This book explains how the East German communist leadership dug its own grave. It also tells a story of seemingly good intentions gone stunningly awry. Focusing on developments during the Erich Honecker years, the last two decades of the German Democratic Republic (GDR), Jonathan R. Zatlin looks at the regime's failed efforts to eliminate money as the primary means of economic exchange. The regime's goal, he argues, was to create an alternative to capitalism and make possible an egalitarian "world of consumer plenty" without "poverty, unemployment, and exploitation"--one in which money would no longer be a source of social injustice, an "obstacle to the satisfaction of consumer demands" or an "object of desire and envy" (p. 22). Instead, as Zatlin deftly demonstrates, the leaders of the Socialist Unity Party (SED) instituted a series of policies that inadvertently ruined the economy, heightened social inequality, and in turn undermined whatever remaining political legitimacy the regime might still have enjoyed in the 1970s and 1980s.

For Zatlin, the beginning of the end was Honecker's proclamation of the Principal Task, which promised to improve consumption levels and living standards for ordinary East Germans in the "real- existing here and now" (p. 68). The first half of the book focuses primarily on the financial and economic fallout of that major policy shift, which came shortly after Honecker deposed Walter Ulbricht as SED General Secretary in 1971 and which, for the first time in the history of the GDR, heralded the primacy of consumption over production. Honecker's démarche, aimed at ensuring domestic harmony and thus political stability, led instead to economic insolvency as the GDR increasingly lived beyond its means, amassing ever more debt to the West in order to pay for those expensive goods most desired by East Germans but made at the desired level of quality by the capitalist foe. This spiraling indebtedness--exacerbated by the oil shocks of the 1970s, which led to a steep rise in the price of western imports and Soviet fuel, and subsequently to higher trade deficits-- had a number of unintended consequences. In the first place, and quite ironically, this growing dependence on the West made the socialist state increasingly subject to the market forces it so reviled. Just as seriously, it restricted investment in East Germany's own infrastructure and industry, which was consequently unable to produce material for export, as well as for its own citizens, as it became more and more run down.

To deal with the worsening economic situation, Günter Mittag--Honecker's chief economic adviser and one of the main villains of Zatlin's story--adopted a number of crafty strategies aimed both at reducing the debt and making sure that the regime could continue to placate the populace with

Citation: H-Net Reviews. Port on Zatlin, 'The Currency of Socialism: Money and Political Culture in East Germany'. H-German. 09-30-2014. https://networks.h-net.org/node/35008/reviews/45591/port-zatlin-currency-socialism-money-and-political-culture-east-germany Licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License. 1 H-German enough consumer goods and sufficient housing. Besides limiting domestic investment and introducing a variety of other parsimonious "belt-tightening measures" (p. 92), Mittag and his protégé, Alexander Schalck-Golodkowski, directed all of their energy toward accumulating hard currency from the capitalist West to pay for Honecker's profligacy. To that end, they not only sold political prisoners to the Federal Republic (which was paying DM 95,847 per person by 1977), but they hawked the very cobblestones in Weimar upon which J. W. von Goethe and Friedrich Schiller once walked. When even such desperate measures failed to cover the GDR's growing debt and trade deficits, the regime relied increasingly on short-term intergovernmental "swing" loans from the Federal Republic, whose leaders demanded in recompense political concessions allowing for greater personal contact between East and West.

This growing obsession with money was more than ironic, given the SED's fundamental hostility toward that mode of exchange, which it mistakenly equated with the "market" and thus saw as the root of most evil; this attitude hewed to a long and erroneous tradition of socialist thought--except for that of Karl Marx himself, as the author argues astutely in an impressive historical overview of monetary theory. In fact, that very disdain for money explains why Honecker so cavalierly ignored the warnings of close advisers and colleagues who expressed concern about the growing budgetary deficit and the future dangers that it represented. It was also an important reason for the poor performance and wasteful practices of most East German factories, which were, as a rule, not subject to the disciplinary powers of money, the profit motive, or the laws of supply and demand. The satisfaction of plan figures set on high was all that mattered.

The obsession with money by a regime ideologically hostile toward money is only one of many ironies discussed in this engaging monograph. According to Zatlin, the "perhaps ... most ironic twist in the GDR's history" (p. 140) came when archconservative West German politician Franz-Josef Strauß saved the GDR from impending insolvency by negotiating two massive loans in 1983 and 1984; this deed supposedly "salvaged Honecker's career" and was thus "key to the collapse of socialism in East Germany" (p. 144), because it meant that Honecker's disastrous economic policies would continue apace. This claim is somewhat of an overstatement, given that Honecker's successor might very well have carried on along the same bumpy road. Zatlin's story of the GDR's economic decline contains another irony as well, and one that the author does not point out explicitly. The privileging of production over consumption, which was one major reason for the mass uprising of June 1953, was reversed under Honecker--and it was that very policy reversal that undermined the GDR's industrial base in a fruitless attempt (no pun intended) to keep East German consumers happy. This policy shift led to a serious decline in living standards, which, in turn, helped sow the seeds of discontent and protest that ushered in the demise of the regime in the late 1980s.

If the first half of the book looks at how Honecker and Mittag's reckless policies wreaked havoc upon the East German economy, the second half looks at how supply shortages, as well as consumption practices fostered by the SED, relentlessly undercut whatever political legitimacy and authority to which the regime could still lay claim during its waning years. Using revised versions of three pioneering articles he originally published in the late 1990s, Zatlin focuses here on the production and consumption of automobiles, which he drolly refers to as "vehicle[s] of desire" (p. 203); on the workings of the Intershop and Genex retail empires, which offered access to luxury goods from the West to those in possession of hard-to-come-by hard (that is, western) currency (yet another scheme aimed at procuring dollars and West German marks for the regime); and, finally, on the petition

Zatlin makes a number of insightful observations in these three chapters. With respect to supply practices, for example, he discusses not only the material but also the ideological reasons why East German car production (and quality) lagged so far behind consumer demand. For example, he suggests that official fears about the possibly deleterious effects of greater individual mobility were one important reason why Trabants that had been ordered in 1976 were first being delivered the year the Berlin Wall fell! More generally, he emphasizes the social cleavages and resentment engendered by differential access to automobiles, which not only led to thriving black market sales but also nepotism on the part of party functionaries. Such envy was further intensified by the proliferation of Intershops in the 1970s, which fueled conflict between those who had--and those who did not have-- access to the coveted West German mark. As Zatlin shrewdly notes, this state of affairs created a bizarre constellation in which those who had the least sympathy for the regime, such as persons with friends and family in the Federal Republic, were often most privileged. Rank-and-file party members, conversely, were cut off from the West--and thus from western currency and the Intershops. Anger about such social differentiation frequently found expression in the written petitions Zaitlin examined, which pointed out in no uncertain terms the hypocritical discrepancy between official rhetoric about social equality and actual practices that created second-class citizens. The petitions, the numbers of which rose exponentially in the 1980s, also revealed the connection in the minds of many East Germans between economic prosperity and western money--as well as a growing belief that the deutsche Mark could help overcome scarcity and magically solve most material problems.

In short, Zatlin suggests that the introduction of capitalist currency and commodities during the Honecker era--as well as increasing fiscal and material reliance on the West--represented a major change that had a number of important repercussions and unintended consequences. In the first place, it promoted commodity fetishism as well as fetishism of the West German mark itself, which devalued the East German mark (literally and figuratively) and led many East Germans to falsely equate West German money with wealth--an error that became a major source of discontent after the currency union and political unification of 1990. Just as importantly, it helped stabilize the East German economy in the short term, but in so doing, "undermined the political authority of socialism" (p. 3)--especially as authorities proved increasingly unable to make good on their promises and satisfy the expectations heightened by Honecker's pronouncement of the Principal Task. According to Zatlin, this "desire intensified by its frustration ultimately drove the East German population to insurrection" (p. 205).

This book is--despite some irksome repetition of clever phrasing--a wonderfully written and insightful monograph, one in which the author moves gracefully and assuredly between economic, political, social, and cultural history. Relying on an abundance of archival material, as well as oral interviews with more than a dozen leading East and West German officials, Zatlin presents a number of stimulating theses that are sure to provoke further debate. The study puts yet another chink in the armor of those who continue to characterize the GDR as a totalitarian state by demonstrating the power of the East German masses, who made officials think twice about adopting more economically sound policies because of the negative effect that they might have had on living standards.

That said, there is one major methodological problem with this study: Because Zatlin chose to focus on the last two decades of the GDR, he makes a number of erroneous claims suggesting that certain developments--ones that supposedly helped hasten the demise of the socialist state--were new to this period. The social divisions, resentment, and envy that Zatlin correctly identifies in the 1970s and 1980s had existed long before, and were the result of much more than differential access to automobiles and hard currency. Similarly, the "gap between East German shortcomings and West German achievements" had been familiar to East Germans long before "the late 1970s" (p. 10), and disillusionment among the party rank-and-file had set in--and people "began to hold the state and party that directed it responsible for their economic position" (p. 302)--well before Honecker had come to power. It may be true that "anger over what was perceived as unjust economic conditions was clearly on the increase during the 1980s" (p. 240)--but that had also been the case since the late 1940s. Many of the problems Zatlin associates with the recurrent economic and supply crises of the 1980s--theft, black-market activity, poor working conditions and run-down machinery, the "decrepit infrastructure" (p. 160), and mass absenteeism among shirkers who left the workplace in search of scarce commodities--all of this was old hat. Zatlin's claims about the "integrative force" (p. 10) of antifascism during the early years of the regime are also questionable, and one can only wonder why East Germans flocked to the deutsche Mark during the Wende if, as Zatlin claims, they considered it to be a "symbol of social inequity" (p. 304). These criticisms notwithstanding, this work is not only a major contribution to the literature but also one of the few monographs to have appeared about the GDR since the opening of the archives that is worth reading from cover to cover.

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Citation: Andrew I. Port. Review of Zatlin, Jonathan R.,The Currency of Socialism: Money and Political Culture in East Germany. H-German, H-Net Reviews. November, 2008.URL: http://www.h-net.org/reviews/showrev.php?id=15514

This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License.