GDR Illusions in 1989

From From Peoples into Nations: A History of Eastern Europe, by John Connelly (Princeton University Press, 2020), Kindle pp. 704-705:

Gorbachev was not alone in admiring the apparent East German economic strength. In 1987, Western economists, looking primarily at numerical data, placed East Germany ahead of the United Kingdom in per capita income, a major index of development. As late as 1988, even sober Western newspapers were describing the GDR as a powerhouse. Its deep debt, similar to that of other countries (in per capita terms) was known but was not considered an impediment to growth and continued “success.” The times when East Germany’s economy was lame were “long past,” wrote journalist Peter Merseburger in 1987. He imagined the GDR lasting far into the unspecified future, thriving as a state that had solved the problem of unemployment and social insecurity, and he praised it for low rents, ignoring the fact that they reflected low investment in housing. The data existed to draw more sobering conclusions, but few did so. The GDR was so much wealthier than Poland that no one believed it, too, might have deep problems. Per capita East German gross national product was 40 percent higher than that of the Soviet Union.

The success of the GDR’s economy was an illusion. The state carried an unsustainable debt and tore down centuries-old buildings in world-class architectural gems (like Greifswald, Weimar, and Brandenburg), because it was too poor renovate them. The GDR could not compete even in areas where the state made its heaviest investments, like microelectronic technology, a major focus from the late 1970s. By September 1988, some 250,000 workers at seventeen Kombinate and 14 billion marks of investment had yielded the production of the GDR’s own 1-megabyte microchip, much celebrated in the party press, but already years behind the standard in the West. Toshiba had been mass-producing a 1-megabyte chip for two years at that point and was at work on a 4-megabyte chip.

The relatively high living standards were made possible by fortuitous circumstances: a strong preexisting industrial base; heavy investments in the 1950s; rational organizational reforms in the 1970s and 1980s (Kombinate); and the fact that West Germany considered the GDR a part of united Germany and gave it full access to the markets of the European Union, as well as several massive loans. Still, East Germany’s leaders felt that no reform was needed. Kurt Hager, East German ideology chief, said his land did not need Gorbachev’s plans for greater openness and restructuring. Simply because your neighbor puts up new wallpaper does not mean that you should do the same. The GDR leader Erich Honecker even mocked Gorbachev. “The young man has been making policy for only a year, and already he wants to take on more than he can chew.”