Get this... with GDR's central planning, you had this system where say a municipality would be tasked with building housing units, and the central government would provide funding support. This was not a "loan" in any sense of the word. It's just how central planning works. State enterprises and co-ops were a part of this too.
So the West German government came in just said "these are loans now" and told the various enterprises and municipalities they owed that money back. The skeleton GDR government at the time agreed if the interest rate was kept at 0.5%. The West German government agreed but then promptly jacked up the interest rate to 10%, all while the new "debtors" had no ability to pay.
Reading about the annexation of the GDR is fascinating. Growing up, I had heard propaganda about how "rotten" the GDR economy was and it was just so bad and inefficient that unification has been difficult - that it was communism to blame for the economic woes of the former East Germans. So surprise, turns out it was bullshit. Despite some problems (what economy doesn't have some problems), the GDR economy was actually pretty good, but it was murdered by the West.
Another unrelated fact about the former GDR... there were so many academic and research institutions closed down and educators purged (illegally I might add) that over one million people in the former GDR with a college degree were left unemployed in the wake of unification - about HALF of the entire population with a degree!
:doomer:
The nineties and its consequences has been a disaster for the human race.
When I was phonebanking for Bernie (cringe) I spent like an hour talking with this lady from the South who had grown up in communist Ukraine. Initially she said "communism bad blabla," but eventually we established that she had left after communism collapsed and that she had actually kind of liked it when the communists were in charge. I remember she described life there as "quiet."
In The Lives of Others, an anti-communist film about the GDR, they still manage to make East Germany look pretty quiet in comparison to West Germany. In Deep Under Cover, a memoir about a GDR spy who came to America and eventually defected, he kind of unintentionally describes the GDR as a pretty amazing place which, among many other things, cared deeply about single moms and gave the author himself a pretty incredible free education which he was later able to use as an opportunistic social climber in 1980s Manhattan.
The only communist country I've really been to is Laos, and honestly I would describe it as kind of quiet in comparison to nearby Thailand and Cambodia. (Unfortunately I didn't make it to Vietnam but it honestly looks pretty loud there.)
Just a bunch of random uninvited thoughts on this subject.
My parents went to East Germany on holiday in the late 1970's and quiet also matches their description of the place. The lack of advertising and billboards made a huge difference in the cityscapes there and have the place a calmer feel.
Fun fact: A solid majority of East Germans who were adults before capitalist restoration and experienced life under both systems says that life were better in the DDR than in the BRD.
Lots of things about East Germany sucked and people were genuinely fed up with the Stasi, the censorship and the lack of luxury consumer goods. But once they experienced unemployment, inequality, fascist hooligans and alienation they thought that was worse.
Don't let liberals tell you how great a thing the annexation of the DDR was. It was a disaster and a shameless robbery against the people.
germans reframing the preference for the gdr as "ostalgie"/east-nostalgia and its consequences have been a disaster for europe
Just to reinforce your point, a survey cited in de la Motte's book that was done in 1998 that asked the following of former GDR citizens: "from your personal standpoint, to what extent do you associate life in the GDR with the following aspects?" These were the positive responses:
- Full employment (89%)
- Social security (85%)
- Career opportunities for women (84%)
- Satisfaction in the workplace (65%)
- Anti-fascism (54%)
Negative associations were:
- Restrictions on travel (62%)
- Scarcity of consumer goods (42%)
- Domination of the SED (38%)
- Censorship (30%)
- Being spied on (5%)
I don't think these results disagree with your point at all about people being fed up with the Stasi, just that that feeling is likely rolled up into those responses re: the SED and censorship. And I have seen more than one survey that shows support for socialism in 1989-90 well over 80%.
It was a disaster and a shameless robbery against the people.
It was a horror show worthy of a Saw movie. The section on how unification went for the East German people is the longest section of the book - probably too long to post here, but maybe I could do it in sections. It's just one act of violence after the other, whether it's the Treuhand stripping the assets of the GDR for pennies on the dollar, the common currency destroying exports overnight, the fucking feudal Junkers being able to buy their ancestral land for 40% of the value, or West Germans who left the GDR in the first years and were allowed to claim land and residence FOR FREE. On this last one, like ONE HALF of people in the GDR faced losing their homes or significantly higher rents due to people in the West filing claims that they were the real owners of the house. Despite the fact that these people were already compensated by the FRG! Now, 60% of these claims were eventually thrown out, but that means half the residents of the GDR lived in fear of losing their homes, places some of them had lived in and improved for decades, only to be kicked out. And still like a fifth saw their residences handed over to West Germans who did nothing other than fill out some paperwork and were then given it.
You're not going to believe this but.... private West German banks who "bought" the debt on a discount! Shocking I know!
I googled this because of this post and apparently they bought it so cheaply that the first year's interest was more than they payed to acquire the newly privatized East German banks.
What a travesty. "The communist economy of the GDR is a complete failure and repudiation of communism," screeches a West German banker who is probably a literal Nazi, as he siphons money out of the East.
In all, ‘four major western banks, which had acquired the East’s banks for DM 824.3m, found themselves in possession of DM 40.5bn of debt’ (1). The interest alone, which had gone from less than 1% to more than 10% in a year, amounted to several times the acquisition price. Such are the wonders of capitalism.
https://mondediplo.com/2019/11/08germany-box
Stasi State or Socialist Paradise is the book I'm reading on it, good stuff.
How did they justify it? Did they like charge east Germany for the aerial transports to west Berlin?
I don't know exactly how they justified it, but since my professional background is in this area I think I understand what they did. They saw this transaction in the example I gave as the central government incurring an expense in order to get the housing unit built. And since the FRG was taking over the assets and liabilities of the GDR government, they saw this as money the municipality "owed" the central government, which was now them. Of course, this ignores how everything is connected in a centrally planned economy, and there isn't really a "debt" being incurred. You're just having the local govt chip in less so the people living there can pay less, presumably.
I didn't give an example of this, but it's even worse with former state run enterprises. These would pay most of their profits back to the GDR government. But the enterprise would get like investment credits back in return. So the FRG said these credits were debts that the enterprise owed, despite the fact that these were just compensation for plowing profits back to the central government.
I believe it was some legal sleight of hand where they claimed that loans were the closest equivalent of the socialist resource allocation system they had just conquered. And in the middle of all the celebrations people forgot to notice or wouldn't listen to those who noticed what was going on.
I didn't know this.
From the article TheLepidopterists posted, I came across this more in-depth article about reunification ("The economic Anschluss of the GDR"). Looks like the looting of the GDR wasn't dissimilar to that in the USSR.
This year’s commemorations of the fall of the Berlin Wall are less triumphalist than usual: the far-right Alternative für Deutschland (AfD) won over 20% of the vote this year in several former East German Länder (:shocked-pikachu:); opinion polls suggest that 58% of East Germans ‘feel no better protected from state arbitrariness than in the GDR’ (Die Zeit, 3 October 2019); successful books tell the story of the 1990s from the viewpoint of the ‘losers’. Something no longer rings true in the noble history of a bountiful West Germany bestowing democracy and the Deutschmark on a neighbour ruined by four decades of Communist dictatorship.
With US backing, and no opposition from a weakened Soviet Union, West Germany under conservative chancellor Helmut Kohl took over within a few months, annexing a sovereign state, liquidating its economy and institutions, and transplanting a neoliberal capitalist regime.
Not only the currency but the whole market economy was transplanted. Sarrazin recalled, ‘We could only give them the Deutschmark in exchange for the complete transformation of the economic system.’ The terms of the treaty signed on 18 May confirmed this regime change. ‘The basis of the Economic Union shall be the social market economy as the common economic system of the two contracting parties. It shall be determined particularly by private ownership, competition, free pricing and, as a basic principle, complete freedom of movement of labour, capital, goods and services’ (article 1.3). ‘Provisions of the constitution of the German Democratic Republic relating to its former socialist social and political system shall no longer be applied’ where they clash with neoliberalism, free trade and ‘ownership of land and means of production by private investors’ (article 2).
Soon after the treaty came into force, East Germans became disenchanted. As consumers clamoured for products from the West, real prices of goods and services produced in the East went up 300-400% and business competitiveness evaporated. Businesses lost not only their domestic market to western companies, but their customers in the East, especially the Soviet Union, which had taken 60-80% of East German exports. Former Bundesbank president Karl Otto Pöhl admitted that the GDR had swallowed ‘horse medicine that no economy would be able to cope with’ (8). But convinced of the need for shock therapy, Bonn’s negotiators rejected supportive countermeasures, such as phased currency alignment, subsidies for East German manufacturing or a surtax on West German goods.
The GDR underwent an overnight economic liberalisation that had taken postwar West Germany a decade. In July 1990, industrial output had fallen 43.7% from 1989; by August, 51.9% and by the end of the year, 70%. The official unemployment figure rose from 7,500 in January 1990 to 1.4 million in January 1992, but was more than double that when short-time working, retraining and pre-retirement were factored in. No other country in Central or Eastern Europe suffered more economically by leaving the Soviet Union’s orbit.
This social demolition was deliberate: dozens of reports had explored its consequences. ‘Better to achieve unity with a ruined economy than remain in the Soviet bloc with a half-ruined one,’ said SPD politician Richard Schröder (9). His wish was more than granted. To Ossies (East Germans) the exterminating angel had a name: the Treuhand (Treuhandanstalt, trust agency), created on 1 March 1990, the tool to convert the former GDR to capitalism. It privatised or liquidated almost all of the ‘patrimony of the people’, the name for the GDR’s state businesses and assets, which it took possession of in July 1990. This made it the world’s biggest conglomerate, responsible for 4.1 million employees (45% of the workforce) working for 8,000 businesses at 32,000 sites, from steelworks to holiday camps, grocers to local cinemas.
By the time the Treuhand was wound up in December 1994, it had privatised or liquidated most of its portfolio with an impact unequalled in industrial history: a country deindustrialised, 2.5 million jobs gone and losses estimated at DM 256bn despite an opening balance sheet of DM 600bn, according to its own president’s estimate (10). This miracle of neoliberalism was, according to Christa Luft, ‘the largest ever destruction of productive capital in peacetime’ (11). Researchers Wolfgang Dümcke and Fritz Vilmar regard this as the key period in the structural colonisation of the GDR (12): West German investors and companies bought up 85% of East German production sites, East Germans just 6%.
When the Treuhand was created, it did not set out to privatise the old GDR economy. In the view of dissident circles and civic movements, this ‘trust agency for the preservation of East German citizens’ rights over the patrimony of the people of the GDR’ was expected to divide up state businesses among the people. The IG Metall union proposed that ownership should be transferred directly to workers. But the conservative victory in the East German election changed that. A fortnight before monetary union on 1 July 1990, East Germany’s parliament, the Volkskammer, passed an emergency law ‘for the privatisation and organisation of the patrimony of the people’. This ended any search for compromise between socialism and capitalism, the focus of reformist economic thought in the GDR since the fall of the Wall. Shock therapy prevailed.
The Treuhand was set up within weeks and improvised its work. As East and West Germany had no shared phone network, the Treuhand’s East German employees had to go to West Berlin phone boxes at a pre-arranged time to speak to colleagues in the West (14). This did not discourage West German business restructuring consultants from offering their services. The Treuhand’s first president, Reiner Maria Gohlke, a former CEO of IBM, handed over in August 1990 to Detlev Karsten Rohwedder, head of the Hoesch steel and mining group. Its oversight board was headed by a friend of Chancellor Kohl, Jens Odewald, CEO of the West German department store chain Kaufhof, which later acquired lucrative retail sites on Alexanderplatz. From summer 1990, Bonn supervised operations: the finance ministry appointed a cabinet of consultants from firms such as KPMG, McKinsey and Roland Berger, who determined (without explicit criteria) whether companies were destined for improvement, immediate privatisation or liquidation (15).
Absurd decisions — with collusion between the Treuhand, the conservative government and West Germany’s business leaders — produced a conviction in the East that has never been refuted: the Treuhand was principally acting to eliminate any competitor that would reduce West German groups’ profit margins. Though largely stagnant, East German industry did have some successes. On 2 October 1990 the Treuhand management decided to close the Pentacon camera factory in Dresden and export its Praktica model to western countries.
One of East Germany’s rare environmental achievements was Sero, a national recycling company. Local authorities asked for it to be turned into a network of municipal businesses, but the Treuhand broke it up and sold it off to West German companies. The agency’s zeal in destroying the Interflug airline, which was largely in the black, and transferring its routes and Berlin Schönefeld hub free of charge to its West German competitor Lufthansa, is almost beyond parody.
It was hard to sell ‘free and fair competition’ to the Thuringian mining village of Bischofferode. In 1990 the Treuhand bundled together all its potash mines and transferred them to a western competitor, K+S, which immediately closed them down. Dietmar Bartsch, a parliamentarian from the leftwing Die Linke party said, ‘Bischofferode is an example of a competitive business shut down because of West German competition. It was about showing that the GDR was over, that there was nothing of value in it.’
the right-wing coups of 1989 were an unmitigated disaster for the world
Stasi State or Socialist Paradise by Bruni de la Motte, she actually lived in the GDR for decades.
Another unrelated fact about the former GDR… there were so many academic and research institutions closed down and educators purged (illegally I might add) that over one million people in the former GDR with a college degree were left unemployed in the wake of unification - about HALF of the entire population with a degree!
<boomerposting>Yeah and all of those degrees were in gender studies and critical race theory</boomerposting>
