The Politics of Economic Decline in East Germany, 1945-1989

Jeffrey Kopstein

• Publisher: The University of North Carolina Press
• Year: 2000
• Print ISBN: 9780807857076, 9780807823033
• eBook ISBN: 9780807862599
• Topic: Politics & International Relations
• Subtopic: Politics
• Index: Politics & International Relations

Jeffrey Kopstein offers the first comprehensive study of East German economic policy over the course of the state’s forty-year history. Analyzing both the making of economic policy at the national level and the implementation of specific policies on the shop floor, he provides new and essential background to the revolution of 1989. In particular, he shows how decisions made at critical junctures in East Germany’s history led to a pattern of economic decline and worker dissatisfaction that contributed to eventual political collapse. East Germany was generally considered to have the most successful economy in the Eastern Bloc, but Kopstein explores what prevented the country’s leaders from responding effectively to pressing economic problems. He depicts a regime caught between the demands of a disaffected working class whose support was crucial to continued political stability, an intractable bureaucracy, an intolerant but surprisingly weak Soviet patron state, and a harsh international economic climate. Rather than pushing for genuine economic change, the East German Communist Party retreated into what Kopstein calls a 'campaign economy' in which an endless series of production campaigns was used to squeeze greater output from an inherently inefficient economic system.

Originally published in 1996.

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Part One
The View from the Top

Chapter 1
Making Russians from Prussians

Labor and the State, 1945–1961

This war is not as in the past; whoever occupies a territory also imposes on it his own social system. Everyone imposes his own system as far as his army can reach. It cannot be otherwise.—Josef Stalin

Although scholars continue to ask whether Stalin actually wanted a separate and Communist East German state, little doubt remains that between 1945 and 1961 the Soviet Military Administration in Germany (SMAD) and its client party, the SED, transferred the essentials of the Soviet-type economy to East Germany.¹ By the end of the period, nationalized property, centralized planning organs, industrial ministries with branch responsibilities, and territorial party organizations with wide-ranging economic powers—in short, all the economic institutions one would identify as distinctly Soviet—filled in the landscape of day-to-day economic administration.

Despite the considerable destruction of East German industry in the last months of the war and the heavy burden of reparations to the Soviet Union, taken in the form of dismantled equipment and running production, by 1961 industrial production had grown on average 8 percent for the preceding five years, several badly damaged prewar enterprises were once again running, and, most impressive, a number of newly built industrial giants had come on line. The SED viewed such prime examples of Stalinist industrialization as the Eisenhut Ost Steelworks, the Schwedt Petrochemicals Combine, and the Leuna II Chemical Works with a measure of pride.²

Yet looking back on the past fifteen years, SED leader Walter Ulbricht must have been struck by a paradox. The SED had more or less smoothly transferred the industrial institutions of the Soviet Union to the GDR. Nationalizations in industry and agriculture found, if not a warm reception, at least acceptance among large segments of the population who could be convinced that the chaos of capitalism had brought the Nazis to power. Such an instrumentally employed antifascism, however, could only go so far in fostering goodwill. Although we lack systematic public opinion data for East Germany in this period, if the experience of West Germany is any indication, during the 1950s the East German regime was evaluated by most segments of the public not on its ideological pronouncements but, rather, on its economic performance, the working conditions it fostered, and the living standards it afforded its citizens. In this regard, the results were far from satisfactory. And among the working class, the one group from whom the SED hoped for the most support and feared the most resistance, very little headway had been made. The impositions of Soviet-type industrial relations on the East German working class engendered a type of resistance that was both intrepid, unexpected, and difficult to deal with.

It is important to capture the early structure of industrial relations because the choices made at this early stage determined the path of future development.³ The purpose of this chapter is to show how the adoption of Soviet-type economic institutions in East Germany reshaped labor relations, and how these new labor relations in turn restricted economic policy and hindered structural reform at later periods. Such an analysis will hardly sound original to students of political economy. In the context of capitalist development, various studies have convincingly demonstrated the connection between labor relations and a state’s capacity to formulate and implement effective economic policies.⁴ It may be more difficult, however, to appreciate the nature of the constraints encountered by Communist East Germany in its early years. One might reasonably expect the presence of the Soviet Army to have hindered, if not precluded, any form of organized labor conflict and afforded the SED the leeway to reshape East German industrial relations as it saw fit. But as we shall see, in Communist contexts too, labor effectively restricts the policy repertoire of political elites. It is not my intention to provide a comprehensive history of industrial relations in East Germany. Such a topic deserves a book, perhaps several books, unto itself. Rather, I hope to show how the evolution of this relationship yielded a paradoxical sort of veto power to the East German working class over wages, prices, and work norms, and how this veto power constrained economic policy at later stages.

To anticipate the argument: between 1947 and 1953, the SED attempted to institute a rigorous Taylorist labor regime but, in the face of massive resistance culminating in the June 17, 1953, workers uprising, it backed off. Thereafter, fearing a repetition of the June events, labor peace could be bought only at the price of long-term stagnation in labor relations, wage structures, and productivity incentives. When Walter Ulbricht finally did attempt to reform the Stalinist economic structure in 1963 (the subject of chapter 2), he found himself hemmed in by the “Tabor pact” he had helped to fashion fifteen years earlier.

The Dilemma of Discipline

It is a commonly held belief that East Germany started with a natural advantage among Leninist regimes—a developed industrial infrastructure and a highly trained, disciplined, and German work force. Nowhere was this image of the German working class more deeply rooted than in the Soviet Union itself, a country that had developed intensive industrial, military, and intellectual ties with Germany in the interwar period. Stalin himself might have harbored typically Leninist doubts about the fundamental commitment of German workers to socialism, but he too deeply admired their discipline and efficiency. He admitted as much during the final stage of the war when he told Yugoslav Communist Milovan Djilas that Germany “is a highly developed industrial nation with an extremely well qualified and numerous working class and technical intelligentsia. Give them 12 to 15 years and they’ll be on their feet again.”⁵

But whatever the Soviets’ hopes for the traditional German virtues of hard work and discipline in their own zone of occupation, the orientations and behavior of East Germans quickly changed under the impact of the difficult postwar conditions and Soviet labor practices. This is not to say that seventy years of German working-class culture could be wiped out overnight by “sovietization.” It could not. Indeed, significant aspects of this culture were not at all incompatible with Soviet labor practices. Well into 1947, for example, the extensive system of vocational training developed during the Kaiserreich and extended under the Nazis continued to operate, utilizing many of the principles associated with the “company loyalty” school developed in the 1920s and 1930s by the conservative industrial pedagogue Carl Arnhold.⁶

However, “sovietization” did change things, albeit not in a simplistic way. The history of labor in postwar East Germany is less a story of implementing a master plan for “sovietization” than it is of crisis management. What we see are a series of responses to pressing problems, which, in their cumulative effect, we may more or less usefully term “sovietization.” Of course, as in every country of Eastern Europe, the Soviet military authorities precluded the development in East Germany of independent working-class organizations, especially after 1947. But suppressing working-class political organizations could not begin to solve all the problems of labor motivation and productivity. Inducing East German workers to work set off a bitter conflict over wages and piece rates. The resolution of this conflict within the confines of the command economy created a new kind of German working class with different habits and expectations—with a different moral economy—than those characteristic of its predecessor or developing in the West.

Table 1-1. Daily Rations in Calories in East Germany, 1945–1949
	June	July	January	August	July	November	November	December	Daily
City	1945	1946	1947	1947	1948	1948	1949	1949	Requirement
East Berlin									approx. 3,500
Heavy labor	2,497		2,481	2,437	2,568	2,735	2,791	3,306	4,200
Labor	2,000		1,998	1,954	2,070	2,260	2,312	2,804	3,020
White-collar	1,611		1,617	1,573	1,736	1,869	1,919	2,066	2,200
Dresden/Leipzig
Heaviest labor						2,275		3,220	4,200
Heavy labor					2,005	2,087		2,633	3,560
Labor					1,737	1,737		2,168	3,020
White-collar					1,526	1,554		1,790	2,200

Source: Wolfgang Zank, Wirtschaft und Arbeit in Ostdeutschland 1945–1949 (Munich: R. Oldenbourg Verlag, 1987), 67.

I use the term “moral economy” because, in many ways, the German worker of the postwar era finds his counterpart in R. H. Tawney’s image of the peasant, “in water up to his neck.”⁷ In the newspapers of the day, one finds moving reports of severe malnourishment among young workers.⁸ The line between survival and starvation was one easily crossed. The collapse of the financial system, coupled with shortages in every sector of the economy under the weight of reparations payments, rendered monetary wages a weak instrument for tying labor to the workplace: with almost nothing to buy, it made little sense to work for money. Where money did matter, if one had a lot of it, was on the black market. Most workers spent several hours per day in the black market and several days each month roaming the countryside in search of food.⁹ Initially, then, it was a matter not so much of getting East German workers to work hard as inducing them to show up for work at all. In the two years following the war, absenteeism remained high and labor discipline lax. As table 1-1 indicates, those who arrived at the factory gates, often did so on empty stomachs or severely malnourished.

Of necessity, then, the ethic on the shop floor was egalitarian, cooperative, defensive, and geared toward survival rather than maximization of gain. The institutional expressions of this ethic were the spontaneously formed enterprise councils, which, with Soviet toleration, coordinated production and distributed equally to their employees a portion of their production and what little food and consumer goods (for barter) they could find.¹⁰ Enterprise councils have a rich history in German industrial relations, extending back to the Weimar period and in some cases before. In the postwar years East German enterprise councils took on two new roles. First, they helped identify and root out active Nazis in industry, although in the case of management, the Soviet record on removing these officials was mixed.¹¹ Second, with many managers having fled to the West, councils performed the valuable service of getting production up and running again. But composed as they were of Social Democratic and Communist workers, enterprise councils could hardly have been expected to increase labor discipline with the traditional tools of differential reward and labor segmentation.

The power of the councils was undoubtedly enhanced by the neglect of the Soviet military authorities. Initially the SMAD concentrated its energies on reshaping the East German political order and extracting war reparations. Through its various departments and provincial affiliates, the SMAD controlled nearly every aspect of political, social, and economic life in its zone of occupation. During the first year and a half of occupation, it undertook a number of delicate tasks, including the forced merger of the Social Democratic Party with the Communist Party and setting up the mechanisms for reparations payments. In the economy, it oversaw large-scale land reforms in 1945 and nationalizations of industry in 1946.¹² But both of these measures were essentially political in nature, designed more to reshape the German social structure and destroy the economic foundations of bourgeois power than to improve the health of the economy.¹³ Indeed, apart from ensuring the orderly dismantling of plant and equipment, and reparations from existing production, the Soviets showed little interest in developing a comprehensive strategy for rebuilding the East German economy before 1947.

Thus the first period of the Soviet occupation, from summer 1945 until spring 1947, was marked by a general neglect of labor. Two factors finally moved the Soviets to change their thinking. First, the economic impact of reparations, land reforms, and industrial nationalizations, combined with the bitterly cold “winter of a century” in 1946–47, had depleted and demoralized the labor force. During spring 1947, many workers complained of hunger at their workplace. Absenteeism grew dramatically. In summer, the crisis reached its high point and workers began to walk off the job.¹⁴ Even if they continued to use the Eastern Zone primarily as a source of wealth for export to the Soviet Union, growing signs of social unrest, coupled with direct lobbying by the SED leadership, probably convinced the Soviet Military Administration that some sort of centrally guided economic policy was necessary.¹⁵

The second and more important reason for new Soviet interest in labor discipline was the realization that the eastern part of Germany might remain in the Soviet orbit for some time to come. Over the course of 1947 the cold war began in earnest. Whereas throughout 1946 and early 1947, Stalin had assiduously avoided giving the impression of approving of a separate East German state, the announcement of the Truman Doctrine in March, the creation of the bizonal economic union between the British and the Americans in May, followed by the Marshall Plan in June, probably convinced him that the division of Germany, if not a permanent fact, at least necessitated the Eastern Zone’s economic integration into the “socialist camp.”¹⁶

Responding to these social and political crises, the SMAD called into existence what the SED leadership had been demanding for six months: a zonal economic authority. Whereas earlier, German administrative participation in the Soviet Zone had been restricted to the Land level administrations, following the announcement of the Marshall Plan in June, the Deutsche Wirtschaftskommission (DWK; German Economic Commission) became the first German administrative unit responsible for the entire zone.

But administrative centralization would not get to the heart of the problem—a demoralized and not very productive labor force. By the summer of 1947, East German labor productivity still lay at less than half of its 1936 level. Responding to both the crisis in labor motivation and the changing external political climate, on October 13, 1947, the SMAD issued Order 234—what the East German trade unions subsequently called the Aufbaubefehl (construction order). In essence, Order 234 amou...

Table of contents

• Cover Page
• The Politics of Economic Decline in East Germany, 1945–1989
• Copyright Page
• Dedication
• Contents
• Tables and Figures
• Acknowledgments
• Introduction
• Part One The View from the Top
• Part Two The Campaign Economy
• Conclusion
• Notes
• Index