The GDR operated a ___________ system of economic planning based on the ______ model
centralised
Soviet
What was the main organisation responsible for economic planning in the GDR?
The State Planning Commission (SPC) was the central authority in charge of formulating and implementing the national economic plan
The SPC drew up a series of…
Five-Year Plans in which targets were set and labour and resources to meet them
Centralised economic planning
Centralised economic planning is a system in which the government exercises significant control over resource allocation, production decisions, and distribution of goods and services within an economy
What were the advantages to the centralised system of economic planning in the GDR?
- The Government could harness the economy to the perceived needs of the state and desired outcomes - for example a concentration on public transport rather than private cars
- Social rather than personal needs were emphasised — items were produced for the good of the community such as housing rather than consumer goods which may have been unnecessary
What were the disadvantages to the centralised system of economic planning in the GDR?
- Emphasis tended to be on quantity over quality
- Too centralised a system stifled innovation and creativity
- The system was inefficient, it was difficult to plan needs five years hence and often goods were produced which were not required at the expense of those that were
- As all production was planned and resources provided, there was no profit motive. The goods would still be produced whether they were cost effective or not
Economic rules of ______ and ______ were not always considered
supply and demand
Supply and demand
The rule of supply and demand states that the price and quantity of a product or service in a market are determined by the balance (equilibrium) between the availability (supply) and desire (demand) for that product or service
Why were the economic rules of supply and demand were not always considered by the GDR?
The central planning authorities controlled production and distribution according to their own priorities and goals
The aim of the First Five-Year Plan
- To develop heavy industry in key industries such as iron and steel, energy and chemicals
- To increase living standards significantly above pre-war levels
- To overtake the living standards in the FRG to make the GDR more appealing to all German workers
The SED had overestimated the economic capacity of the GDR and their calculations for the First Five-Year Plan had failed to account for…
the development of the armed forces or the continuing reparation payments to the USSR
What is a trade deficit?
A trade deficit occurs when a country or entity imports more goods and services than it exports, resulting in a negative balance of trade
Trade deficit in the GDR — example
The GDR bought goods to the value of 600 million Ostmarks in excess of what it sold to its Eastern European partners
The GDR bought goods to the value of 600 million Ostmarks in excess of what it sold to its Eastern European partners — what does this suggest?
This implies that the GDR had a trade deficit with its Eastern European partners
The GDR bought more goods from its Eastern European partners than it sold to them
This led to a net outflow of Ostmarks from the GDR to the Eastern European countries.
What is a net outflow?
A net outflow refers to the overall movement of money or assets leaving a particular entity or country, exceeding the inflow
What did the GDR do in their attempt to reduce the deficit?
- Cuts in cheap transport — although it was still heavily subsidised (supported financially)
- Cancellation of working mothers’ monthly day off work to catch up on domestic chores
- Price rises in subsidised foodstuffs including jam, bread and confectionary
Further cuts to the welfare budget had been made in order to reduce the deficit — what was the result of these cuts?
The cuts were not enough to reduce the deficit and by 1953 shortages were beginning to appear, not only in agriculture but in industry too
Agricultural collectivisation
Agricultural collectivisation involves the consolidation of individual farms into larger, collectively managed units (often under state control) with the aim of promoting efficiency and productivity in agricultural production
What did Grotewohl announce at the Central Committee in December 1959?
Grotewohl announced that collectives were superior to private farming and initiated a hurried campaign to bring all private farmers into collectives
The Socialist Spring
The process of collectivisation soared between 1959 and 1960, giving rise to the term “The Socialist Spring”
What were the goals of agricultural collectivisation?
- To make the GDR self-sufficient in food production
- To overtake the FRG in terms of agricultural production
What did the process of agricultural collectivisation lead to?
Disruption and resentment — and often farmers leaving for the West
Provide an example showcasing that there was considerable opposition to socialist economics
Many farmers resented collectivisation and left the GDR: by mid-1953 750,000 hectares were unused as landowners fled
What did the removal of the profit motive in industry lead to?
- Disincentives to innovate and take risks
- Many managers did not try very hard to improve production while their workers grumbled and did as little as possible
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The post-war division of Germany45
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The system of government34
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Economic developments, 1949-6146
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Defending the GDR, 1949-6116
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Economic stabilisation after 196146
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The development of a GDR identity31
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Relations with West Germany21
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Growing international prestige17
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Social change and welfare programmes49
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Repression and control39
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The SED and the Protestant Churches18
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Western influences on the GDR15
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Economic stagnation in the 1980s17
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Gorbachev's influence22
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The events of 198913
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The end of the GDR, 1989–901
