Economic Theory

An alternative history: REAL socialism is being tried. A drama in 10 acts (Part 5)

Continued from Part 4.


The return of the technocrats? East Germany moves away from ‘People’s Planning’

The Guardian, 04 March 1995

The system of ‘People’s Planning’ is considered one of the flagship achievements of the current East German government. According to its supporters, the democratisation of the State Planning Commission (SPK), which drafts the GDR’s Five-Year Plans, has resulted in an amazing transfer of power from the state to civil society. If there is one measure that symbolises the difference between the old top-down socialism inspired by the Soviet Union, and the new bottom-up socialism of the GDR, it is this. Democratic socialists around the world admire the system. Many governments are trying to copy aspects of it. Critics of socialism are dumbfounded, because it contradicts their stereotype of socialism as a command-and-control system.

But now East Germany seems to be quietly abandoning this trademark policy. We met with Katrin Krause, a senior civil servant at the SPK, who told us:

“I’m not saying that the old system was great, believe me, I know its downsides better than anyone. But at least, we used to get things done. The plans were usually finished on time, and the production quotas mostly fulfilled.

Now, it’s just a nightmare. When the government told us to consult with ‘the people’, they assumed that ‘the people’ would speak with one voice. Guess what – they don’t. The ‘voice of the people’ sounds more like a cacofonie, because this imaginary entity called ‘the people’ actually consists of lots of different groups and different individuals with very different preferences.

All these different Consumer Councils that we have to consult with are all just pushing their own pet projects. They all tell us: “We care a lot about product X. West Germany is so much better at producing X. You need to produce more X, and you also need to increase the quality and variety.” When we ask them where they think we should get the inputs from, they say, “Oh, we don’t know. Just take it from somewhere. Produce less of Y, maybe. Y isn’t that important.” Then we contact the Consumer Council which cares about Y, and ask them what they make of it. They are livid. “Are you insane?”, they ask us. “We already have a massive Y-deficit. West Germany is so much better at producing Y. You need to produce more Y, and you also need to increase the quality and variety.”

I don’t mind consulting people. I really don’t. In a limited sense, we have always done that. But the problem is that we have no rational way of trading these competing demands off against one another. Suppose for every additional unit of X, we’d have to give up two units of Y. What should we do? Sacrifice 200 units of Y for 100 extra units of X? Sacrifice 2,000 units of Y for 1,000 extra units of X? Sacrifice 500 units of X for 1,000 extra units of Y? Leave everything as it is? Any of these options is as good as any other.

In West Germany, they don’t have that problem. There, consumer demand is revealed through willingness to pay, and supply adjusts. I’m not saying we should go down that road, which would spell the end of socialism. But at least the West Germans have a method of rational economic planning. And we don’t.”

From now on, the SPK will still be obliged to consult with consumer representatives, but when their demands are incompatible, the SPK will be allowed to revert to its old models for predicting consumer demand. The government insists that this is not a retreat from People’s Planning. Stefan Bergmüller, the Minister of Economic Democracy, explains:

“People’s Planning will remain the normal mode of economic planning in the GDR. Nobody wants to change that. But we need to have a Plan B for those instances in which People’s Planning does not produce a conclusive answer. We need a backup, a way to fill the remaining gaps. That’s all this is.

Perhaps we haven’t made sufficiently clear how People’s Planning was supposed to work. Consumer Councils need to bear in mind that the Five-Year Plans are there to satisfy the needs of all people, not just selected groups. Of course we need to hear those groups. And we will continue to hear them. But we need a better way to balance the needs of the whole community with the wishes of individual groups.

We remain committed to People’s Planning, but I think we rushed it a bit. We expect that over time, as the public’s understanding of the system improves, we will then need less and less SPK discretion.”

This does not sound like a retreat at all. But for Mrs Krause, that is what it is:

“They say that we should only use our old models when the demands of the Consumer Councils are incompatible. Here’s the thing: They are always incompatible. If we wanted to produce everything the Consumer Councils tell us to produce, we would need an economy more than fourteen times the size of ours. We would need the whole economy of West Germany, basically. Plus a few Swiss cantons.”    

The minister’s announcements have provoked surprisingly little criticism. In practice, East Germans were already falling out of love with People’s Planning. Active participation in the planning process has dropped sharply over the last year. Annette Hartmann, who runs the SPK’s Public Engagement Unit, tells us:

“It is really hard to keep people involved. When we started these public consultations, there was a lot of enthusiasm. But a lot of people just turn up for two or three meetings, and then drop out. I don’t blame them: Once you get to the nuts and bolts, economic planning is, admittedly, a very dry and technical matter. I can totally see why, after a long workday, most people would rather do something a little bit more entertaining or more relaxing. This is, ultimately, a very specialised job. Maybe the idea of getting everyone involved was never realistic.”

The government remains optimistic that this is merely a matter of time, and that People’s Planning will take off once people become used to it.


Continue to Part 6.

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 5)”

  1. Posted 21/12/2017 at 14:12 | Permalink

    Personally I would love to spent every Monday of my life voluntarily attending the planning meeting for Determining Screw Sizes To Be Manufactured This Week In Our Screw Factory. And every Tuesday attending the Plastic Bucket Colour Numbers meeting. Unfortunately the meetings clashed.

    But at least I can spend all Wednesday at the Meeting for Understanding Why Our No. 7 Tractors Keep Breaking Down meeting.

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