The economic restart was thrice as difficult in the Soviet-occupied zone. Adding to the destruction was the tremendous dismantlement started by the Soviet Union already before the end of the war as well as later reparations and a lack of support comparable to the Marshall Plan.

The fact that the GDR broke down especially due to the economic collapse in the 1980's, is closely related to the idea of the ‘social market economy’. This economy took place in nationally owned concerns, which had arisen through expropriations and forced collectivization, with socialist commodity producers.

The economy consisted not only of productive but also ideological, socialist society-shaping, functions: this meant socialist ownership of means of production instead of initiative promoting, private property. Use of scarce factors of production, not by market mechanisms, free competition and free pricing, but by means of the socialist planned economy under the policy of planning and management on the basis of annual plans and five-year plans.

Plan fulfillment instead of market control

In the State plan, fulfillment of demands and enhancement in living standards are defined as goals. Increase in effectiveness is determined by technical progress and the socialist economic integration in the Council for Mutual Economic Assistance.

Although leading to an evenly spread fulfillment of demands, the non-market based expense budgeting, administrated prices for provisions, rent, power and allocated vacations are often given at poor quality and in shortages.
© Harald Hauswald, Agentur Ostkreuz Berlin

Lack of profit incentive and lack of national and international competition cause a suboptimal use of scarce resources, hinder innovation and prevent the use of the global market of existing optimal technology. The goal of educating a socialist personality, the increase of socialist consciousness and the dissociation with the class enemy do the rest. The society and economy follow Karl Marx and Friedrich Engels instead of Adam Smith and Ludwig Erhard, also represented in bookstore displays.

Through systematic propaganda, rhetoric promoting plan fulfillment, public commendation, beautiful images and platitudinous slogans, forged and deceptive statistics and non-market-conform calculations, the regime catapulted up to the seventh place of the richest industrialized nations.

Without the power and commitment of highly educated workers of the “Arbeiter- und Bauernstaat”, generally appointed through professional guidance, the propaganda tainted prosperity, which in comparison to other Socialist countries did actually exist, would not have been present to this extent.

Nevertheless, the collapse could not be stopped. Additionally, the socialist planned economy was in no position to provide equal and fair fulfillment of demand at a desirable standard and create a modern and technically prominent as well as competitively viable economic structure.

While the portal will be expanded gradually, illuminating all facets of everyday life in the GDR is impossible. Instead, we want to encourage discussions on the topic, enhance textbook knowledge, as well as offer those interested quick access to the major topics.