Economic Theory

An alternative history: REAL socialism is being tried. A drama in 10 acts (Part 3)

Continued from Part 2.


East Germany’s programme of socialist renewal: four years on

The Guardian, 19 March 1994

Four years ago, an unlikely coalition of former street protesters and former members of the GDR’s ruling party took office in East Berlin. Many predicted that it would fall apart immediately. The tenor in the West German press was that the GDR’s days were numbered, and that this desperate attempt to keep in on life support for a little longer would only delay the inevitable. In this view, East German voters had simply taken leave of their senses for a moment, a mistake which they would soon come to regret.

Four years on, the GDR is still alive and well. In yesterday’s general election, the VL/PDS coalition has not just been confirmed in government; it has even increased its majority. It enjoys popularity ratings that the shambolic West German government can only dream of.

Four years ago, the East German government embarked on a programme of socialist renewal. State ownership was to become public ownership. State planning was to become public planning. The programme was an unprecedented shift of power from unelected and unaccountable bureaucrats to ordinary working people and civil society.

During this process, it soon became clear that the combination of revolutionaries (the VL) and reformists (the PDS) was a match made in heaven. The VL brought the energy, the enthusiasm and the zeal for radical change. The PDS brought the experience, the administrative know-how and the continuity. Mixing those ingredients in a ratio of 2:1 turned out to be just right.

But has it worked? Has socialist renewal been a success?

The answer is: It depends. For some, the main priority in 1990 was to shrink the huge East-West gap in economic performance. If this is your only measure of success, then the answer to the above question is no. Despite the current recession in West Germany, the East-West gap remains as large as it has ever been. The gap might even have grown, had it not been for a generous fiscal transfer from West Germany (not wholly motivated by altruism, but to prevent a flood of East German migrants, which would have put downward pressure on wages and upward pressure on rents). So in the economic sphere, the government has yet to come up with a convincing solution.

But in many other respects, the transformation of the GDR has been impressive. The country has reinvented itself as a model of participatory socialism. In West Germany (or Britain, for that matter), millions of people work in jobs they do not particularly enjoy, for companies with which they do not identify, in industries in which they do not feel they have a stake. They work just to pay the bills, lacking a sense of ownership, control, and belonging.

Contrast this to East Germany, where workplaces are democratically run. Ordinary workers can elect their own company director – indeed, they can become their own company director, if they put themselves forward and persuade their colleagues to vote for them. Every East German worker has a right to attend, and to speak at management meetings. They are so much more than cogs in a machine. They own the machine. They run the machine.

And this is just the beginning. The whole economy is democratically run. The State Planning Commission (SPK) is democratically elected, and constantly holds public consultations on matters large and small. Expert planners are still involved, but civil society, represented by over a hundred Consumer Councils and participants in local planning meetings, is calling the shots.

Net emigration has been much lower than expected, not least because, for the first time in the GDR’s history, migration between East and West Germany really is a two-way street. Some East Germans have been lured by the superficial attractions of a consumer society. But at the same time, many idealistic West Germans have been attracted by the promise of a different way of doing things. This appeal goes far beyond West Germany: The GDR is fast becoming a magnet for democratic socialists from all over Europe. It is the place where Western Europeans who have given up on capitalism, and Eastern Europeans who have given up on top-down socialism, are coming together to create something genuinely new.

If you are only interested in productivity figures, then yes, you will find capitalist economies like the West German one more appealing. But nobody finds capitalism ‘inspiring’; nobody would look at a capitalist country thinking ‘this could be the model for a better world’. The new GDR very much does inspire such reactions. There are at least two dozen GDR study groups at British Universities. There is a GDR Solidarity Campaign, whose members include the MP for Islington North, the MP for Glasgow Kelvin and the MP for Hackney North/Stoke Newington.

The GDR is creating a new model of socialism – a socialism from below, a socialism of the people. It shows us that there is a different, and a better way of doing things.

In this sense, yes, the East German government’s programme of socialist renewal has been a phenomenal and unqualified success.


Continue to Part 4

Head of Political Economy

Dr Kristian Niemietz is the IEA's Head of Political Economy. Kristian studied Economics at the Humboldt Universität zu Berlin and the Universidad de Salamanca, graduating in 2007 as Diplom-Volkswirt (≈MSc in Economics). During his studies, he interned at the Central Bank of Bolivia (2004), the National Statistics Office of Paraguay (2005), and at the IEA (2006). He also studied Political Economy at King's College London, graduating in 2013 with a PhD. Kristian previously worked as a Research Fellow at the Berlin-based Institute for Free Enterprise (IUF), and taught Economics at King's College London. He is the author of the books "Socialism: The Failed Idea That Never Dies" (2019), "Universal Healthcare Without The NHS" (2016), "Redefining The Poverty Debate" (2012) and "A New Understanding of Poverty" (2011).

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