Economic Theory

An alternative history: REAL socialism is being tried. A drama in 10 acts. (Part 4)

Continued from Part 3


East German government re-centralises control over state-owned enterprises

The Guardian, 21 January 1995

“People-owned, not state-owned” used to be one of the GDR government’s favourite slogans. “Putting the people back into People-Owned Enterprises” was another. For now, though, it looks as if the self-management rights of People-Owned Enterprises (VEBs) are going to be curtailed again, and control over them re-centralised – if only temporarily.

“We need to work out a more coherent system, in which incentives are better aligned”, explained the Minister for Workplace Democratisation. “After democratisation, in many of the large VEBs, workers voted for substantial salary increases, or shorter workdays, or similar measures. Where they have voted for changes in working practices, this has often been with the aim of making them more convenient to the workforce, rather than more productive. There is nothing wrong with any of that, quite the opposite. But this needs to be backed by productivity increases, which we have not had yet. The problem is that many of those VEBs are now behind on their production quotas. 

We could, of course, pay them by outcome, give them responsibility for their own budgets, and let them go bust when they fail to deliver. But then, we would be half-way towards a market economy. That is not the way we want to do things here.

We need to remind ourselves that the VEBs are owned by all the people, not just those who happen to work in them at any given moment. Otherwise, they would just be capitalist enterprises. Maybe we have not made that sufficiently clear during the transition. We remain committed to the principles of worker management and workplace democracy, but we probably rushed it a bit too much. We will put this agenda on hold for the moment, until the backlogs in production have been cleared, and until the new system is better understood.”

The minister emphasised that the recentralisation of competences was only a temporary measure, and that the government had no intention to return to the old top-down model. Critics argue that in effect, this is what it does: what is the point of democratic governance structures in a VEB if those democratically elected managers then just follow orders handed down from East Berlin?

But while the announcement is not popular, it has not provoked a backlash either. In practice, the initial enthusiasm for workplace democracy was already on the wane anyway. Turnout at Worker Council elections and workers’ assemblies had already dropped sharply at VEBs across the nation.

We spoke to several workers at the VEB Kombinat Robotron in Dresden. Olaf Baumgarten, who works for the engineering department, told us:

“I like the idea in principle, but frankly, a lot of those meetings are just long-winded, boring and tedious. Look: I’m an engineer. I want to focus on my job, which is engineering. I don’t want to sit in tedious committee meetings the whole time.”

His colleague Hanna Hoffstädter added:

“Ultimately, all these committees just get dominated by the sort of people who are good at networking and backscratching. The meetings, meanwhile, are dominated by those who are most enamoured with the sound of their own voice, and these are not always the people who have the most interesting things to say. Either way, you don’t get a representative cross-section of the workforce – if there is such a thing.”

The government’s announcements, then, might not make that much difference in practice.


Continue to Part 5

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).

1 thought on “An alternative history: REAL socialism is being tried. A drama in 10 acts. (Part 4)”

  1. Posted 20/12/2017 at 11:32 | Permalink

    Think “structures in a VEB is those democratically elected managers” should be “structures in a VEB *if* those democratically elected managers”.

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