Socialism with a Human Face: Using Behavioural Economics to Understand East German Economic History (Palgrave Studies in Economic History) 9811906637, 9789811906633

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PALGRAVE STUDIES IN ECONOMIC HISTORY

Socialism with a Human Face Using Behavioural Economics to Understand East German Economic History Gary B. Magee Wayne Geerling

Palgrave Studies in Economic History

Series Editor Kent Deng, London School of Economics, London, UK

Palgrave Studies in Economic History is designed to illuminate and enrich our understanding of economies and economic phenomena of the past. The series covers a vast range of topics including financial history, labour history, development economics, commercialisation, urbanisation, industrialisation, modernisation, globalisation, and changes in world economic orders.

More information about this series at https://link.springer.com/bookseries/14632

Gary B. Magee · Wayne Geerling

Socialism with a Human Face Using Behavioural Economics to Understand East German Economic History

Gary B. Magee Department of Economics Monash University Clayton, VIC, Australia

Wayne Geerling Department of Economics Monash University Clayton, VIC, Australia

ISSN 2662-6497 ISSN 2662-6500 (electronic) Palgrave Studies in Economic History ISBN 978-981-19-0663-3 ISBN 978-981-19-0664-0 (eBook) https://doi.org/10.1007/978-981-19-0664-0 © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 This work is subject to copyright. All rights are solely and exclusively licensed by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. The publisher, the authors and the editors are safe to assume that the advice and information in this book are believed to be true and accurate at the date of publication. Neither the publisher nor the authors or the editors give a warranty, expressed or implied, with respect to the material contained herein or for any errors or omissions that may have been made. The publisher remains neutral with regard to jurisdictional claims in published maps and institutional affiliations. Cover illustration: Rafael Dols/Getty This Palgrave Macmillan imprint is published by the registered company Springer Nature Singapore Pte Ltd. The registered company address is: 152 Beach Road, #21-01/04 Gateway East, Singapore 189721, Singapore

Preface

Like most of our peers who grew up in the West in the 1970s and 1980s, our view of life on the other side of the Iron Curtain was guided by popular culture and experiences of the Cold War. Although we had not visited the Soviet world ourselves, we understood that the lot of most who lived there was a grim one, characterised by shortages, indoctrination and oppression, all overseen by an ever-present and ruthless secret police. When one of us first had the opportunity to visit the Russian Federation in the first decade of the twenty-first century, those views still lingered in the back of his mind. Arriving at Terminal 2 (now known as Terminal F) at Scheremetyevo airport, a building which still sported the same décor it had when it was opened in the lead up to the 1980 Moscow Olympics, it felt like he had travelled back in time. Confronted by heavily armed soldiers in Red Army uniforms that had also little changed from Soviet times and then being gruffly ordered to wait in long queues to have his passport stamped by dour immigration officials, the old stereotypes rushed back, accompanied by a frisson of excitement. What awaited? An interest to find out more about the lost world of twentieth-century authoritarianism was kindled. Fast forward ten years and we had begun researching internal German resistance to the Nazis. In the archives, we stumbled upon some interesting sources on the sovietisation of the East German workplace in the decade following the end of the Second World War. It piqued our interest; over the coming years, our scope broadened, and we began collating v

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material on different aspects of the economic history of the GDR. That material ultimately became the basis for this book. Widely perceived, as the most sycophantic part of the Soviet bloc, we initially expected to uncover stories of undiluted grimness. Instead, what we found was a series of fascinating accounts of how ordinary people did their best— at times with amazing ingenuity—in an environment that was far from ideal. Their stories prompted us to set down an account of East German economic history that was driven not by our Cold War perceptions, but by the realities of everyday economic life in the GDR. To achieve that new perspective, we turned to the insights of behavioural economics, a field of economics that focuses on how people actually behave, not how theory tells us they should behave. Our realisation that behavioural economics might provide a conceptual framework for a fresh look at Soviet-style command economies also emerged from personal experience. As part of the organisation committee of a conference in Shenzhen, at which Chinese and Australian academics and public servants discussed the then-proposed free trade agreement between the two countries, we planned to host a welcome function at the Australian Consulate in Guangzhou on the evening prior to the beginning of proceedings. The invitations were sent out well in advance, yet a week before the event was due to take place, we still had not received responses from any of the invited officials from the Chinese Ministry of Commerce. Speaking to the ambassador about it, he told us not to worry. He explained: “being a function sponsored by a Western mission, they are just waiting to see if their boss accepts. Only then will they know whether it is okay to come or not. To accept before that green light is given might be a risky move”. Fortunately, two days later a senior official from the Ministry indicated his attendance and, sure enough, within 24 hours all of the other invitees had also responded in the positive. The happening caught our imagination and set in train thoughts about how such behaviour, if it were indeed the norm, might be reflected in economic activity. Those thoughts led us to behavioural economics. The rest, as they say, is history. As anyone who has done research knows, successful research projects, while ultimately the product and responsibility of their chief investigators, require the input of many if they are to bear fruit. This project is no different. In writing this book, we have benefited greatly from the generous support of a host of colleagues and archivists from all around the world. In particular, we would like to acknowledge the wonderful

PREFACE

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and unstinting encouragement, assistance and guidance provided by Alice Li, Sisira Jayasuriya, Judy Taylor, Suzan Ghantous, Marco Luthe, Ciaran Magee, Kevin Magee and Friederike Fischer. Without their help, insights and sage advice, we can honestly say that this book would have been all that much harder to pen. Clayton, Australia

Gary B. Magee Wayne Geerling

Contents

1

Perceptions References

2

Making Decisions: Lessons from Behavioural Economics 2.1 Prospect Theory and High-Level Decision Making 2.2 Information Cascades and Decision-Making Beyond the Centre 2.3 Conclusion References

3

Establishing the Socialist Workplace: Labour, Norms and the Introduction of Piecework 3.1 Inauspicious Beginnings: “ Ein Gewirr von Sonderregelungen” 3.2 First Steps: “ Mehr Produzieren, Gerechter Verteilen, besser leben!” 3.3 Establishing Control: Der Leistungslohn und der Progressive Akkord 3.4 Tightening Control: “ Freund Hennecke gab das Signal” 3.5 Conclusion References

1 15 19 26 35 47 54 59 62 65 71 78 89 105

ix

x

CONTENTS

4

Learning from the Soviet Union Means Learning to Win: Group Technology and the Mitrofanov Method 4.1 Mitrofanov and His Method 4.2 Origins of a Campaign 4.3 The Mitrofanov Effect 4.4 Renewed Efforts 4.5 Taking Stock 4.6 Conclusion References

5

6

Searching for Socialist Efficiency: The Case of the Schwedt Initiative 5.1 Sozialistische Rationalisierung in neuen Dimensionen: The Schwedt Initiative 5.2 A Diagrammatic Representation 5.3 “ Wir haben nicht zu wenig Arbeitskräfte – sondern zuviel Arbeitsplätze”: The Origins of a Campaign 5.4 Phase der ersten Zugriffs: The Campaign Begins (1978–1982) 5.5 Eine Rationalisierung in größeren Dimensionen: The Second Phase (1983–1985) 5.6 Territoriale Rationalisierung und Schlüsseltechnologien: The Final Years (1986–1990) 5.7 A Quantitative Overview 5.7.1 Overall Release of Workers 5.7.2 Releases by Industry, Combine and Enterprise 5.7.3 Geographical Spread 5.7.4 The Case of Bezirk Frankfurt (Oder) 5.8 Conclusions References Choosing Bankruptcy: The Onset of Debt and Financial Crisis 6.1 Framework 6.2 Debt in the Era of Ulbricht 6.3 Debt in the Era of Honecker 6.4 Conclusion References

111 114 121 127 135 142 148 164 167 169 181 183 189 197 203 212 213 215 221 226 232 254 257 262 268 279 295 308

CONTENTS

7

Conclusion 7.1 New Perspectives 7.2 Applications 7.2.1 Youth Policy 7.2.2 Agricultural Policy 7.2.3 The Andreyeva Letter 7.3 Implications 7.4 Previous Literature 7.5 Dynamic Elements 7.6 Final Thoughts References

xi

313 316 320 320 322 323 324 326 328 330 337

Glossary of German Terms

339

Index

343

Abbreviations

ABI CDU COMECON CPSU DABA DDR DM DSF DWK EVT FDGB FDJ FRG GDR GOMZ IG KdT KoKo KPD LITMO LPG MAS NÖS NSW ÖSS PCK

Arbeiter-und-Bauern Inspektion Christlich-Demokratische Union Council for Mutual Economic Assistance Communist Party of the Soviet Union Deutsche Außenhandelsbank Deutsche Demokratische Republic Deutsche Mark Gesellschaft für Deutsch-Sowjetische Freundschaft Deutsche Wirtschaftskommission Expected Value Theory Freier Deutscher Gewerkschaftsbund Freie Deutsche Jugend Federal Republic of Germany German Democratic Republic State Optical-Mechanical Plant Industriegewerkschaft Kammer der Technik Kommerzielle Koordinierung Kommunistische Partei Deutschlands Leningrad Institute for Fine Mechanics and Optics Landwirtschaftliche Produktionsgenossenschaft Ministerium für Arbeit und Sozialfürsorge Neues Ökonomisches System Nichtsozialistisches Wirtschaftsgebiet Ökonomisches System des Sozialismus Petrochemisches Kombinat Schwedt xiii

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ABBREVIATIONS

PT REFA RM SAG SBZ SDAG SED SMAD SPD SPK TAN USSR VbE VDI VEB VM VVB WAO WEMA ZIF

Prospect Theory Reichsausschuss für Arbeitszeitermittlung Reichsmark Sowjetischen Aktien Gesellschaften Sowjetische Besatzungszone Sowjetischen-Deutsche Aktien Gesellschaften Sozialistische Einheitspartei Deutschlands Sowjetische Militäradministration in Deutschland Sozialdemokratische Partei Deutschlands Staatliche Plankommission Technische Arbeitsnormen Union of Soviet Socialist Republics Vollbeschäftigteneinheit Verein Deutscher Ingenieure Volkseigener Betrieb Valutamark Vereinigung Volkseigener Betriebe wissenschaftliche Arbeitsorganisation VEB Werkzeugsmaschinenfabrik Gera Zentralinstitut für Fertigungstechnik des Maschinenbaues

List of Figures

Fig. 2.1 Fig. 3.1

Fig. 3.2

Fig. 4.1 Fig. 4.2

Fig. 4.3

Framework for decision making Coverage of the Hennecke Movement in Neues Deutschland, October 1948–October 1951 (Neues Deutschland archive accessible at https://www.nd-archiv.de/) Coverage of incentive pay (Leistungslohn) in Neues Deutschland, 1947–1958 (Neues Deutschland archive accessible at https://www.nd-archiv.de/) The Mitrofanov Method (adapted from figures found in Blume 1961, p. 10 and Weiz 1962, p. 11) The campaign to introduce group processing, November 1959 to December 1964 (Neues Deutschland archive accessible at https://www.nd-archiv.de/) (Note Fig. 4.2 catches all articles where the most common terms for group processing—Mitrofanow,Gruppenbearbeitung, Gruppentechnologie and Gruppenfertigung —are utilised. Each instance, which mentions at least one of these terms, is counted just once) Group-processing content in Neues Deutschland by Bezirk of origin, 1959–1963 (Neues Deutschland archive accessible at https://www.nd-archiv.de/) (Note Fig. 4.3 catches all articles where the most common terms for group processing—Mitrofanow,Gruppenbearbeitung, Gruppentechnologie and Gruppenfertigung —are utilised. Each instance, which mentions at least one of these terms, is counted just once)

20

84

88 117

126

145

xv

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LIST OF FIGURES

Fig. 4.4

Fig. 4.5

Fig. 5.1 Fig. 5.2 Fig. 5.3

Fig. 5.4

Fig. 5.5

Fig. 5.6

Fig. 5.7

Group-processing content in Neues Deutschland per 10,000 industrial employees by Bezirk of origin, 1959–1963 (Neues Deutschland archive accessible at https://www.nd-archiv.de/) (Note Fig. 4.4 catches all articles where the most common terms for group processing—Mitrofanow,Gruppenbearbeitung, Gruppentechnologie and Gruppenfertigung —are utilised. Each instance, which mentions at least one of these terms, is counted just once) Coverage of the Mitrofanov Method in Neues Deutschland, 1959–1990 (Neues Deutschland archive accessible at https://www.nd-archiv.de/) Enterprise demand for reserve labour The Schwedt Initiative and the local labour market Coverage of the Schwedt Initiative in Neues Deutschland, 1978–1990 (Neues Deutschland archive accessible at https://www.nd-archiv.de/) Workers released in the GDR, 1981–1986 (BA DQ 300/463, January 1987, appendix) (Note Workers released refers to Arbeitskräfte released) Workers released in the GDR as a proportion of the workforce, 1981–1986 (BA DQ 300/463, January 1987, appendix; Statistisches Jahrbuch der Deutschen Demokratischen Republik 1981–1986, passim) (Note Workers released refers to Arbeitskräfte released) Coverage of the Schwedt Initiative in Neues Deutschland by Bezirk, 1978–1990 (Map 1: total number of articles; Map 2: articles per 10,000 employees; Map 3: articles per 10,000 industrial, construction and craft employees) (Statistisches Jahrbuch 1981 der Deutschen Demokratischen Republik, pp. 47–76;Neues Deutschland archive accessible at https://www.nd-archiv.de/) Release of workers in Bezirk Frankfurt (Oder) by Kreis, 1979–1987 (Map 1: total number of released workers; Map 2: released workers as a proportion of the population; Map 3: released workers as a percentage of residents in towns and cities with more than 3000 inhabitants) (Statistisches Jahrbuch 1981 der Deutschen Demokratischen Republik, pp. 47–76; BLHA Rep 601 RdB FfO 30115, 4 March 1988, appendix 1) (Notes Workers released refers to Arbeitskräfte released. The figures for 1987 are for the first three quarters only)

147

149 181 183

188

213

214

225

228

LIST OF FIGURES

Fig. 5.8

Fig. 5.9

Fig. 6.1 Fig. 6.2

Fig. 6.3

Fig. 6.4 Fig. 6.5

Fig. 6.6

Workers saved by key technologies, Bezirk Frankfurt (Oder), 1981–1987 (Statistisches Jahrbuch 1981 der Deutschen Demokratischen Republik, pp. 47–76; BLHA Rep 601 RdB FfO 30115, 4 March 1988, appendix 3) (Notes Workers released refers to Arbeitskräfte released. The figures for 1987 are for the first three quarters only) Workers released, VEB PCK Schwedt, Parent Enterprise (Stammbetrieb), 1979–1990 (BLHA Rep 601 RdB FfO 30115, 4 March 1988, appendix 5) (Notes Workers released refers to Arbeitskräfte released. The figures for 1987 are for the first three quarters only) An overview of decision-making Trade balance with the NSW as a share of NSW export revenue, 1950–1975 (Statistisches Jahrbuch Auβenhandel, 1960, p. 573 and 1975, pp. 263–265) Trade deficit with the NSW as a share of NSW export revenue, 1950–1975 (by periods) (Statistisches Jahrbuch Auβenhandel, 1960, p. 573 and 1975, pp. 263–265) Estimates of GDR Debt, 1975–1989 (Volze 1999, p. 181) Inner German and NSW debt, 1970–1989 (Deutsche Bundesbank 1999, p. 60; Zaitlin 2007, p. 70) (Notes For the years 1970 through to 1974, the figure is an estimate of total NSW debt [inclusive of inner-German debt]. The estimates for those years were based on those provided by Zaitlin from contemporaneous internal East German sources. He presents these for the period 1970–1980. There are methodological concerns with the levels of the NSW debts reported in internal sources. However, if one compares the trend in debt between 1975 and 1980 in the GDR’s internal sources with that captured by the Bundesbank’s NSW debt series for the same period, one finds a near perfect correlation [0.9937]. Given this similarity between the series, we utilize the trend found in the GDR’s own internal series to extrapolate the Bundesbank series back to 1970) NSW debt in terms of national income and exports, 1970–1988 (selected years) (Bundesbank 1999, p. 60; Zaitlin 2007, p. 70; Steiner et al. 2006, p. 63) (Notes For the estimation of debt in the period 1970–1974, see the notes for Fig. 6.6. The calculations use the coefficients and shares provided by Ahrens 2013, p. 164 and Volze 1999, pp. 232–241)

xvii

230

231 264

271

271 280

281

282

xviii

LIST OF FIGURES

Fig. 6.7 Fig. 6.8

Ratio of GDR debt to export earnings in convertible currencies, 1981–1988 (Volze 1999, pp. 180–181) Net interest payments in convertible currencies and inflow of Deutsche Marks, 1981–1989 (Volze 1999, p. 183)

283 284

List of Tables

Table 2.1 Table 2.2 Table Table Table Table

3.1 3.2 3.3 4.1

Table 4.2

Table 5.1 Table 5.2 Table 5.3

Table 5.4

The decision-making landscape of the German Democratic Republic Prospect theory’s predictions: the fourfold pattern of risk attitudes Example of piecework without progression Example of piecework with “apparent” progression Example of piecework with “true” progression Production of parts at VEB Carl Zeiss Jena, 1962 (derived from data found in Weiz 1962, pp. 28–30) Impact of the Mitrofanov Method in VEB Textilwerk Plieβengrund Crimmitschau, 1960–62 (BLHA 907 VVB Vt Ctb 1109, no date, p. 11) Released workers by industrial ministry, 1986 (BA DQ 300/463, January 1987, appendix) Release of workers in the chemical industry, 1981–1986 (BA DQ 300/463, January 1987, appendix) Performance relative to plan of combines under the control of the Ministry of General Machinery, Agricultural Machinery and Vehicle Construction (MALF) in releasing workers, 1981–1984 (plan fulfilment = 100.0) (DG 7/1887 v.2, no date, appendix) Release of workers in a selection of enterprises in Kreis Spremberg in 1986 (BLHA: Rep 877 ABI KK Spremberg 1673, 19 June 1987, appendix)

22 32 73 74 75 120

138 216 218

220

222

xix

xx

LIST OF TABLES

Table 5.5

Table 5.6

Table 6.1

Share of workers released by Bezirk, 1980/1 (Knortz, p. 147; Statistisches Jahrbuch 1981 der Deutschen Demokratischen Republik, pp. 47–76) Released and redeployed workers in the Kreise of Bezirk Frankfurt (Oder), 1979–1987 (BLHA Rep 601 RdB FfO 30115, 4 March 1988, appendix) Risk attitudes to incurring foreign debt

223

227 266

CHAPTER 1

Perceptions

In Volker Braun’s 1966 play, The Dump Trucks (Die Kipper), the story’s main protagonist, Paul Bauch, a determinedly individualistic, cheekily irreverent, yet high performing brigade leader laments how East Germany, especially since the construction of the Wall, had seemingly lost the experimental élan of its early years and sunk into a torpor that rendered it quite simply “the planet’s most boring country” (das langweiligste Land in der Erde).1 Although the play went on to emphasise the merits of both the socialist system and of collectivism over Bauch’s brand of individualism, the observation of his fictional character nonetheless hit a raw nerve, landing Braun in hot water with the authorities. Indeed, it was not until 1972 before the play was permitted to be published and performed. The stagnation that Bauch’s acerbic comments alluded to resonates because it aligns with popular perceptions of life in the German Democratic Republic (GDR), both then and since: a grey and artificial land of drab authoritarianism and imposed Soviet-style communism. Perceived as a lesser, more peripheral copy of the USSR, with little scope for independent action, the GDR—and a fortiori its economic history— have rarely been a subject of great academic interest, except, of course, at that great climacteric of modern history at end of the 1980s and early 1990s, when the SED state, like so many other communist regimes, fell so swiftly and ignobly.2 © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 G. B. Magee and W. Geerling, Socialism with a Human Face, Palgrave Studies in Economic History, https://doi.org/10.1007/978-981-19-0664-0_1

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As such, the GDR’s history has all too readily been categorised as just another example of late-twentieth-century totalitarianism. A one-party, ideologically justified state that used terror and intimidation to exercise complete control over the mass media and all important aspects of the economy and society. Cast in this light, analysis has often been characterised by its “top down” perspective, focusing on the actions of, and policies set by, the SED’s leadership.3 Such analysis carries with it the assumptions, often unstated, that the intensely hierarchical structures of East German society operated in the efficient manner, to which they were designed, and that its citizens were largely passive actors in the story; their role was merely to implement orders dictated from above. To that end, the powers of the different branches of state were deployed, ensuring that the citizenry remained passive and obedient.4 A large literature details how the secret police, the Stasi, permeated every corner of East German society and kept the totalitarian aspirations of the SED alive.5 Told in this light, the history of the GDR, like that of the Soviet Union, becomes the story of the repression and subjugation of its people; its economic history, a boring succession of state plans and bureaucratic reorganisations and their respective failures. Moshe Lewin has observed that as a product of the “highly structured public discourse” of the Cold War, the concept of totalitarianism reduces reality to a tendentious simplification that prevents “contextual reflection” and “obscures historical analyses”.6 As recent research on the GDR has revealed, it is an approach many of whose core assumptions do not align with what were the on-the-ground realities of life in East Germany. In particular, the approach overlooks the manifold and vital interactions between the ruler and ruled, a relationship that far from being one of simple command and obey, afforded considerable independence and room for action by individual actors and groups at all levels of society.7 Indeed, the authority and seeming gravitas of Politbüro resolutions notwithstanding, many of the key decisions of implementation were not—and could not have been—made by the upper echelons of the party. The scope for effective grassroot interpretations and input remained large. Such an appraisal also extends to the process of central economic planning, which did not operate in the smooth, frictionless manner portrayed in socialist propaganda and textbooks of the era. Plans were incomplete, inconsistent, and highly changeable, leaving the onus on ministries, enterprises, and brigades to make of them what they could and to utilise whatever devices at their disposal—either inside or outside

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the plan—to keep the proverbial wheels of the economy turning.8 The state’s “successes”, in truth, could only be arrived at with the active engagement and involvement of large elements of the workforce and broader population. To induce that commitment from society, the state offered material rewards, security, and a modicum of stability. Thus, the relationship between ruler and ruled was a partnership of sorts, albeit one born more out of convenience than genuine love. While undoubtedly authoritarian, the GDR lacked the ability and arguably intent to be truly totalitarian. Other appellations, reflective of the inherent limits of the SED’s control and its willingness to extend some largesse and role to the greater population have been offered in its place, depicting the GDR respectively as a paternalistic, educational, welfare, participatory or contested dictatorship or simply a thoroughly ruled society (eine durchherrschte Gesellschaft ).9 These new directions in the study of GDR history have sought to shift narratives away from the simple dichotomies of the older literature, such as those that pit state against society or the regime against the people, towards an appreciation of how individuals actually experienced life under the dictatorship. They have ventured to move the debate beyond fixations on the leadership and apparatus of control and terror and striven instead for an understanding of the ordinary lives that many in the GDR were able to enjoy. While this approach directly challenges aspects of the totalitarian construal of communist polities, its intention is not to legitimate or sanitise the history of the GDR, but rather to place it in a more complete and realistic perspective that accounts for all aspects of the experience. In doing so, moreover, it seeks through an understanding of the congruence of norms and the routinisation of life, to explain how people and the regime evolved to attain a degree of stability, most notably in the 1960s and 1970s.10 Over the last 20 years, this efflorescence of research has enabled great strides to be made in our understanding of the actuality of many aspects of life,11 work,12 sport,13 love,14 national identity,15 youth,16 technology,17 culture,18 human rights,19 and politics20 in East Germany. The view of a monolithic, all-powerful state, dominated by Stasi machinations and brutality, has now been tempered by a more holistic appreciation of the experience of living under the dictatorship. As some have argued, for those who had to endure it, there eventually came to be something of normality to their existence.21 One important consequence of this recent

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body of scholarship is that we now have a more realistic, multidimensional account of much of East German history.22 The economic history of East Germany, by contrast, does not seem to have been as well served by recent research. While there are exceptions, fewer economists and economic historians have been drawn into exploring the intricacies of the East German economy from new or different perspectives.23 Rather, most work in the field continues to focus its attention on the economy’s failure. Often, that demise is simply stated as being inevitable, its failings merely deemed immanent to the system itself.24 Firmly grounded in neoclassical economic theory, such analyses set the structure and performance of the socialist command economy against the hypothetical benchmark of a freely operating market economy.25 Not surprisingly, given that planned economies by definition reject market mechanisms such as price signals and consciously avoid market fluctuations that lead to unemployment and instability, they do not fare well in such comparisons. In making those choices, however, planned economies expose themselves to significant misallocations of resources and other inefficiencies. These drawbacks in turn ensure that less than optimal levels of economic growth and welfare are obtained. Yet, it is worth pointing out that the planned economy is not alone in receiving such an assessment. Similar, if less dire, predictions are made about all policies within a capitalist economy, such as increased welfare provisions or some form of price controls, which are seen to distort the natural workings of markets. According to mainstream economic analysis, planned economies such as the GDR’s are afflicted by two fundamental and interrelated problems.26 First, there is an information problem. In a market economy, prices play a vital coordination role. Since prices generated by market interactions reflect trading conditions, their value at any point in time contains information of paramount importance to buyers and sellers operating (or planning to operate) in a given market. Prices, thus, act as simple, readily available information-laden signals that allow individuals in that marketplace to make rational decisions, which, when implemented in unison, enable an equilibrium to be struck. If a planned economy is to function without such market-derived price signals at a level of performance comparable to that of a market economy, its planners need to find other means to gather all the information on the demand and supply of each product required for them to arrive at similarly optimal decisions. Given the great volume of information involved in such an

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exercise, meeting this requirement is practically impossible and cognitively challenging to implement, even more so in an era without advanced information technology. As a result, economic problems cannot be resolved optimally in a planned economic system. Second, planned economies are typically depicted as suffering from what economists call complex principal-agent problems. That is to say, within a planned economy, there is an inherent conflict in priorities between those who make the decisions (the principal) and those who are supposed to act on their behalf (the agent). The principal-agent problem stems from the fact that an agent may have incentives to act in a way that is contrary to the best interests of the principal. Within the planned economy, the principals are the central planners, who issue orders, and the agents are those who are empowered to implement those orders. However, for this arrangement to work, the incentives of the implementers have to align with those of the planners. Yet, the structure of the planned socialist system creates incentives and opportunities for implementers to deceive the planners and circumvent many of their orders. This possibility arises because planners are reliant on implementers to provide them with the necessary information to make meaningful orders and to supervise the work of the implementers. Implementers, however, have an incentive not to supply the planners with full or completely accurate information, as they know such information is used to determine the orders that shape their own work and remuneration. More demanding orders simply make the attainment of bonuses and rewards harder. Therefore, in their reporting to the planners, there exists a strong incentive for implementers to underrepresent their on-the-ground capabilities and inflate their need for additional resources. In doing so, they hope to ensure that softer targets are set by planners. Existing privileges and rewards would also be maintained, possibly even augmented, by such behaviour. Given that implementers face soft budget constraints (viz. their enterprises could not go bankrupt or be forced to close because of debt), there are no consequences for enterprises that choose to falsely inflate costs. One way for planners to overcome this tendency is to scrutinise implementers and their reporting more assiduously. In effect, to the extent this is possible, this amounts to planners inserting themselves directly into actual economic processes and observing and acquiring the required information themselves. Yet, while the supervisory abilities of communist states were extensive, such scrutiny in practice could only ever be partial. The alternative course of action for the planners is to design a

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set of incentive compatible rewards (i.e. rewards that align the interest of planners and implementers) that encourage the implementers to comply voluntarily. While socialist systems like the GDR’s regularly experimented with a variety of rewards and reforms that aimed to achieve this goal— always touted as the perfecting of the planning mechanisms—none was ever found that could adequately counteract the powerful incentives that inhered in the system for implementers to mislead and deceive planners. Economic efficiency and dynamism as a consequence remained elusive. As a result of these immanent weaknesses, the planned economy, ex hypothesi, was doomed always to underperform relative to economies adhering more closely to the principles of free markets. As the economic historian Albrecht Ritschel concluded his analysis of the GDR’s poor growth performance, “it was the transition to communism itself which had a hysteresis effect on productivity”. As such, he averred, the economic history of the GDR could be rightly perceived as little more than “an exercise in futility”.27 The belief that, in its conception, the planned economy was inescapably flawed has largely become received opinion, is widely accepted by most historians of East Germany. Even those who have sought to offer more nuanced accounts of other aspects of life in the GDR appear to defer without demur to such an assessment. Thus, to take one prominent example, Mary Fulbrook, who, while not really focusing that much on economic matters in her work, nonetheless variously refers to the GDR’s “economic shortcomings”, “declining performance”, and “ailing” or “failing” economy, as a major inhibiting factor.28 Jeanette Madarász likewise, echoing criticisms of the economically irrational bent of the system, opines that the “political dodging”, which “diluted economic logic … was a fundamental line running through the entire economic history of the GDR”.29 None of these statements are necessarily problematical, of course. The economic logic underpinning them is consistent and meaningful. The facts also lend support. The GDR’s economy was indeed inefficient, very much as predicted by theory. Rather, the point we make here is merely that the perception of GDR economic history as essentially a story of the unravelling of a fatally flawed economic system is well ensconced, while many alternative perspectives and issues that may address the functioning, as opposed to the failings, of the system largely lie fallow.

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More concerning is some of the more extreme interpretations expressed across the broader historical community, where the East German economy is dismissed out of hand as a washout and mocked with colourful epitaphs likening it to a “circus show” or “Potemkin village”.30 One Berlin-based museum dedicated to life in the GDR, heavily frequented by local and foreign tourists, thus begins its description of East German economic history in the following manner: The works of DDR economists resembled that of medieval alchemists, labouring for a tyrannical overlord in an attempt to turn base metals into gold. Some even began to suspect that their labour was in vain, based, as it had to be, on false premises. Just as feudal lords had proven resistant to all evidence, the SED blocked their ears to any protests and merely ordered their minions to redouble their efforts.31

Suffice it to say, East German economic history was not as clear-cut as this imaginative account maintains. While there is no doubt that the system was grossly inefficient, deeply damaging to the environment, and incapable of keeping up with the West, the fact of the matter is that, despite its weaknesses, it did not simply collapse. Nor, it should be added, did anyone seriously believe for most of its existence that it would. The East German economic system did in fact “function” at some, if rarely optimal, level for four decades. It was also capable of some achievements, even if these tended to be blown out of proportion by the outlandish propaganda of the regime. In truth, the image of an inevitably doomed economy has gained prevalence only since the demise of the system itself. In many instances, its embrace is a form of post hoc rationalisation. Western specialists working on the East German economy in the 1980s certainly did not perceive it as an irredeemable basket-case. A Western handbook written in 1987, thus described the GDR as “a world-ranking industrial country”,32 whose “growth displayed dynamism, despite the increasing external and internal problems”33 and whose “economy by any reasonable measure … [was] functioning well”.34 Such authors, of course, may have misjudged the resilience and potential of the economy and society, but their belief that the system was capable of functioning at some acceptable level is not unfounded and readily finds support in the works of contemporary scholars. Raymond Stokes, thus, notes that the GDR, despite all its drawbacks, operated

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as “a modern technological state” with “a system of innovation that was able to deliver some minimal level of technological excellence into the GDR economy and industry”.35 Living standards, too, did improve markedly across the forty years of the GDR’s existence, even if the rate of improvement did lag significantly behind that of the Federal Republic. The ready recognition of such economic capabilities arguably suffers from what Mary Fulbrook has labelled the “contamination effect”, the tendency for researchers to allow what we know to be wrong, harmful and immoral about the GDR—its lack of democracy, its authoritarianism, its persecutions and terrors—to shape our perceptions of all other aspects of the GDR experience.36 Thus, any positive economic outcome is dismissed as either being based on a falsehood or being the by-product of one of the system’s evils. Either way, by acknowledging such achievements, it is felt that one runs the risk of either being duped by the regime or whitewashing it. In practice, though, such a position merely acts as a hindrance to objective analysis. We believe that a richer and fresher economic history of the GDR is possible and strongly concur with Hartmut Berghoff and Uta Andrea Balbier’s observation that: The time is ripe to put aside the simplistic narrative that regards the GDR economy primarily as a failure and as nothing but an example of the inherent deficiencies of central planning, especially when contrasted with the outstanding economic success of the Federal Republic. The story is much more complicated.37

The aim of this book is to contribute to that peeling away of layers of rhetoric and assumptions that cloak the East German economy and to begin exploring its underlying functioning from fresh perspectives. In his masterful analysis of the origins of the geopolitical crisis of July 1914, Christopher Clark usefully reminds us that: Questions of why and how are logically inseparable, but they lead in different directions. The question of how invites us to look closely at the sequences of interactions that produced certain outcomes. By contrast, the question of why invites us to go in search of remote and categorical causes … The why approach brings a certain analytical clarity, but it also has a distorting effect, because it creates the illusion of a steadily building causal

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pressure; the factors pile up on top of each other pushing down on the events; … actors become mere executors of forces long established and beyond their control.38

Clark’s point is that by focusing on the why, the danger is that an important part of the story, the agency of those actually engaged, will be lost. We believe the same danger is clear and present in GDR economic history. Concentration on questions as to why the GDR failed has as a by-product a tendency for researchers to write those engaged in the dayto-day running of the economy out of the analysis, thereby constraining the depth of our understanding of how the economic system actually worked. The focus of this book is, in the parlance of Clark, resolutely on the how, although, we are, of course, aware and motivated by the fact that by knowing more about the how, we will also inform our answers to the whys. Unencumbered by political preconceptions and concerns, we believe that a more realistic understanding of East German economic history can be gleaned than that which is offered by stagnant debates about the clash between two rival systems. Extracted from its Cold War context and all its legacies and informed by contemporary ideas and thinking, East German economic history, like its political, cultural and social cousins, can thus begin to be normalised and analysed for what it was, rather than that which it symbolised. The title of this book—a play on the famous call for a socialism with a human face (i.e. a democratic socialism liberated of Stalinism) during the Prague Spring39 —thus reflects our desire to understand the system by looking at the humans who operated it and made the important, as well as quotidian, decisions that made it work, rather than at the external projections of the system itself. To make such a break requires recognition that the economic system was more than the sum of its policies and institutions, that its ability to function and perpetuate itself hinged integrally on how people working in the system actually operated and interacted within those structures. As Jeanette Madarász has astutely deduced, “a desideratum of historical research on the East German economic system would include an analysis of vertical relations between the central decision-making powers, the middle level and the grassroots”.40 We agree. To do that, though, new concepts and a recharged and updated toolkit are required. To that end, our research draws heavily on insights gleaned from behavioural economics, a highly influential field of study whose objective is to reveal

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how people actually behave in real-world circumstances—and why— rather than on how they are expected to behave according to abstracted neoclassical economic theory. Its goal, thus, is to create a more realistic account of economic life.41 As such, it seems fit for the purpose at hand. Two ideas from behavioural economics in particular figure prominently in our work: prospect theory and information cascades. Both concepts, which are discussed at length in Chapter 2, shed light on how people really make decisions in a world of uncertainty, deficient information, and cognitive frailties. By combining the intuition and insights of behavioural economics with detailed archival research from a wide range of records at all levels of the East German economy (from Politbüro down to individual factories) undertaken at the German Federal Archive (Bundesarchiv), the Main Brandenburg State Archive (Brandenburgisches Landeshauptarchiv), and the Berlin City Archive (Landesarchiv Berlin), this book hopes to begin the process of recasting our understanding of aspects of the GDR’s economic history. To achieve that goal, it utilises detailed cases studies taken from every decade of the GDR’s existence. The case studies selected relate to central themes of the economic history of East Germany: piecework and the establishment of the socialist workplace (Chapter 3), the Mitrofanov Method and the search for productivity growth (Chapter 4), the Schwedt Initiative and the drive for socialist efficiency (Chapter 5), and the decision to accumulate foreign debt and the resulting emergence of the financial crisis (Chapter 6). Together with the theoretical and synthesising chapters (Chapters 2 and 7), these case studies build a picture of what we believe a new, more humanised, GDR economic history might look like. For those more interested in the case studies themselves, they will find that each chapter has been written so as to allow it to be read in isolation without necessarily losing context or understanding. That said, we believe that a richer understanding of every case study can be had by reading Chapter 2 first. There, readers will find a fuller explanation of all the relevant concepts from behavioural economics. As the previous paragraphs have made clear, it is worth emphasising that this book does not purport to offer a chronological overview of all aspects of East German economic history. This is not its purpose, and others have already ably done that.42 Nor does it aim to be encyclopaedic, although readers will find in this volume very comprehensive accounts of our four chosen case studies. Instead, to reiterate, the intention of this book is essentially twofold: (1) to offer new ways of understanding and

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interpreting East German economic history and (2) to provide detailed illustrations on how that new approach can be effectively implemented. If, in doing so, we stimulate readers’ interest in East German economic history and encourage them to begin contemplating it in new, more interesting ways, then our work will have been successful.

Notes 1. Volker Braun, Die Kipper (Berlin: Aufbau Verlag, 1972). 2. Donna Harsch, Revenge of the Domestic: Women, the Family, and Communism in the German Democratic Republic (Princeton: Princeton University Press, 2007), p. 15. 3. For example, see: Klaus Schroeder, Der SED-Staat: Partei, Staat und Gesellschaft, 1949–1990 (Munich: Carl Hanser Verlag, 1998); Klaus-Dietmar Henke (ed.), Totalitarismus (Dresden: HannahArendt-Institut für Totalitarismusforschung, Berichte und Studien, Nr. 18, 1999); and Peter Grieder, The German Democratic Republic (Basingstoke: Palgrave Macmillan, 2012), p. 3. 4. Michael Gehler, Three Germanies: From Partition to Unification and Beyond (London: Reaktion Books, 2021), p. 164; Anna Funder, Stasiland: Stories from Behind the Berlin Wall (Granta Books, 2011). 5. See, for example, Gary Bruce, The Firm: The Inside Story of the Stasi (Oxford: Oxford University Press, 2010); Jens Giesecke, The History of the Stasi: East Germany’s Secret Police, 1945–1990 (London: Berghahn, 2014). 6. Moshe Lewin, The Soviet Century (London: Verso, 2005), pp. 271–273. 7. Mary Fulbrook, The People’s State: East German Society from Hitler to Honecker (New Haven: Yale University Press, 2005), pp. 139 and 295; Corey Ross, Constructing Socialism at the GrassRoots: The Transformation of East Germany, 1945–65 (London: Macmillan, 2000), passim, but especially pp. 3, 203, and 210; Sandrine Kott, Communism Day-to-Day: State Enterprises in East German Society (Ann Arbor: University of Michigan Press, 2014), especially pp. 6–8; Mark Allinson, Politics and Popular Opinion in East Germany, 1945–68 (Manchester: Manchester University Press, 2000), pp. 166–167; and Jeanette Z. Madarász, Working

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in East Germany: Normality in a Socialist Dictatorship, 1961–1979 (London: Palgrave Macmillan, 2006), pp. 25–26. 8. Theo Pirker, M. Rainer Lepsius, Rainer Weinert, and HansHermann Hertle (eds.) Der Plan als Befehl und Fiktion: Wirtschaftsführung in der DDR: Gespräche und Analysen (Opladen: Westdeutscher Verlag, 1995). 9. Kott, Communism Day-to-Day, p. 5; Konrad H. Jarausch, “Realer Sozialismus als Fürsorgediktatur. Zur begrifflichen Einordnung der DDR,” Aus Politik und Zeitgeschichte 20 (1998), pp. 33– 46; Fulbrook, The People’s State, pp. 235–290; Mike Dennis and Jonathan Grix, Sport Under Communism: Behind the East German ‘Miracle’ (London: Palgrave Macmillan, 2012), pp. 4–9; and Jürgen Kocka, “Eine durchherrschte Gesellschaft”, in Hartmut Kaelble, Jürgen Kocka, and Hartmut Zwahr (eds.), Sozialgeschichte der DDR (Stuttgart: Klett-Cotta, 1994), pp. 547–553. 10. Fulbrook, The People’s State, pp. 1–22; Mary Fulbrook, “The Concept of ‘Normalisation’ and the GDR in Comparative Perspective,” in Mary Fulbrook (ed.), Power and Society in the GDR, 1961–1979: The ‘Normalisation of Rule’ (Oxford: Berghahn, 2009), pp. 1–31; Madarász, Working in East Germany, pp. 172– 175. 11. See, for example, Fulbrook, People’s State; Paul Betts, Within Walls: Private Life in the German Democratic Republic (Oxford: Oxford University Press, 2010); Eli Rubin, Amnesiopolis: Modernity, Space, and Memory in East Germany (Oxford: Oxford University Press, 2016). 12. See, for example, Madarász, Working in East Germany; Peter Hübner, Konsens, Konflikt und Kompromiβ: Soziale Arbeiterinteressen und Sozialpolitik in der SBZ /DDR 1945–1970 (Berlin: Akademie Verlag, 1995); idem, Arbeit, Arbeiter und Technik in der DDR 1971 bis 1989: Zwischen Fordismus und digitaler Revolution (Berlin: Dietz Verlag, 2013); Kott, Communism Day-to-Day. 13. Dennis and Grix, Sport Under Communism; Alan McDougall, The People’s Game: Football, State and Society in East Germany (Cambridge: Cambridge University Press, 2014). 14. Josie McLellan, Love in the Time of Communism: Intimacy and Sexuality in the GDR (Cambridge: Cambridge University Press, 2011).

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15. Jan Palmowski, Inventing a Socialist Nation: Heimat and the Politics of Everyday Life in the GDR, 1945–1990 (Cambridge: Cambridge University Press, 2009). 16. Anna Saunders, Honecker’s Children: Youth and Patriotism in East(ern) Germany (Manchester: Manchester University Press, 2007); Alan McDougall, Youth Politics in East Germany: The Free German Youth Movement, 1946–1968 (Oxford: Clarendon Press, 2002). 17. Raymond Stokes, Constructing Socialism: Technology and Change in East Germany, 1945–1990 (Baltimore: Johns Hopkins Press, 2000); Dolores Augustine, Red Prometheus: Engineering and Dictatorship in East Germany, 1945–1990 (Cambridge, MA: MIT Press, 2007); and Eli Rubin, Synthetic Socialism: Plastics and Dictatorship in the German Democratic Republic (Chapel Hill: University of North Carolina Press, 2008). 18. Katherine Pence and Paul Betts (eds.), Socialist Modern: East German Everyday Culture and Politics (Ann Arbor: University of Michigan Press, 2007); Heather L. Gumbert, Envisioning Socialism: Television and the Cold War in the German Democratic Republic (Ann Arbor: University of Michigan Press, 2014). 19. Ned Richardson-Little, The Human Rights Dictatorship: Socialism, Global Solidarity and Revolution in East Germany (Cambridge: Cambridge University Press, 2020). 20. See, for example, Jeffrey Kopstein, The Politics of Economic Decline in East Germany, 1945–1989 (Chapel Hill: University of North Carolina Press, 1997); Allinson, Politics and Popular Opinion; Ross, Constructing Socialism; and Peter Grieder, The East German Leadership 1946–1973: Conflict and Crisis (Manchester: Manchester University Press, 1999). 21. Mary Fulbrook, Ein ganz normales Leben: Alltag und Gesellschaft in der DDR (Darmstadt: Primus Verlag, 2008). 22. For a good overview of the field, see Corey Ross, The East German Dictatorship: Problems and Perspectives in the Interpretation of the GDR (London: Arnold, 2002). 23. André Steiner, The Plans that Failed: An Economic History of the GDR (Oxford: Berghahn, 2010); Jörg Roesler, Aufholen, ohne Einzuholen! Ostdeutschlands rastloser Wettlauf 1965–2015: Ein ökonomischer Abriss (Berlin: Edition Berolina, 2016); Hübner, Konsens, Konflikt und Kompromiβ; Hübner, Arbeit, Arbeiter

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und Technik; Hartmut Berghoff and Uta Andrea Balbier (eds.), The East German Economy, 1945–2010 (Cambridge: Cambridge University Press, 2013); Pirker et al., Der Plan als Befehl und Fiktion; George Last, After the ‘Socialist Spring’: Collectivisation and Economic Transformation in the GDR (Oxford: Berghahn, 2009); Peter C. Caldwell, Dictatorship, State Planning and Social Theory in the German Democratic Republic (Cambridge: Cambridge University Press, 2003); Mark Landsman, Dictatorship and Demand: The Politics of Consumerism in East Germany (Cambridge, MA: Harvard University Press, 2005); Jonathan R. Zaitlin, The Currency of Socialism: Money and Political Culture in East Germany (Cambridge: Cambridge University Press, 2007). 24. Steiner, Plans That Failed, pp. 5–6. 25. It is a hypothetical benchmark because perfectly competitive markets in practice are not that common. As such, they represent, and are typically used analytically, as an ideal state of affairs where economic welfare is maximised. 26. For an authoritative account of the problems of communist economies, see János Kornai, The Socialist System: The Political Economy of Communism (Oxford: Clarendon Press, 1992). 27. Albrecht Ritschl, “An Exercise in Futility: Economic Growth and Decline, 1945–89”, in Nicholas Crafts and Gianni Toniolo (eds.), Economic Growth in Europe Since 1945 (Cambridge: Cambridge University Press, 1996), pp. 498 and 532. 28. Fulbrook, People’s State, pp. 15, 66, 94, and 99. 29. Madarász, Working in East Germany, p. 99. 30. Stefan Wolle, The Ideal World of Dictatorship: Daily Life and Party Rule in the GDR, 1971–1989 (Berlin: Ch. Links Verlag, 2019) [translation of original German-language edition, 1998], p. 23; Gehler, Three Germanies, p. 164. 31. Sören Marotz, Elke Sieber, Stefan Wolle, DDR Guide: A Companion to the Permanent Exhibition (Berlin: DDR Museum Verlag, 2018), p. 90. 32. Ian Jeffries, “The GDR in Historical and International Perspective”, in Ian Jeffries, Manfred Metzler, and Eleonore Brenning (eds.), The East German Economy (Abingdon: Routledge, 2018 [reprint of 1987 original]), p. 1. 33. Manfred Metzler, “The Perfecting of the Planning and Steering Mechanism”, in Jeffries et al., East German Economy, p. 113.

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34. Manfred Metzler and Arthur A. Stahnka, “Product and Process Renewal in GDR Economy Strategy: Goals, Problems and Prospects”, in Jeffries et al., East German Economy, p. 122. 35. Stokes, Constructing Socialism, pp. 6 and 207. 36. Fulbrook, People’s State, p. 111. 37. Hartmut Berghoff and Uta Andrea Balbier, “From Centrally Planned Economy to Capitalist Avant-Garde”, in Berghoff and Balbier, East German Economy, p. 6. 38. Christopher Clark, The Sleepwalkers: How Europe went to War in 1914 (London: Penguin, 2013), p. xvii. 39. The term was first coined by the Czech philosopher Radovan Richta and came to be the key slogan of Alexander Dubˇcek’s Action Programme of April 1968 and indeed the whole Prague Spring. 40. Madarász, Working in East Germany, p. 26. 41. Masao Ogaki and Saori Tanaka, Behavioral Economics: Towards a New Economics by Integration with Traditional Economics (Singapore: Springer Nature, 2017). 42. Steiner, Plans That Failed.

References Secondary Sources Allinson, Mark. 2000. Politics and Popular Opinion in East Germany, 1945–1968. Manchester: Manchester University Press. Augustine, Dolores. 2007. Red Prometheus: Engineering and Dictatorship in East Germany, 1945–1990. Cambridge, MA: MIT Press. Berghoff, Hartmut, and Uta Andrea Balbier, eds. 2013a. The East German Economy, 1945–2010. Cambridge: Cambridge University Press. Berghoff, Hartmut, and Uta Andrea Balbier. 2013b. From Centrally Planned Economy to Capitalist Avant-Garde. In The East German Economy, 1945– 2010, eds. Hartmut Berghoff and Uta Andrea Balbier, 3–16, Cambridge: Cambridge University Press. Betts, Paul. 2010. Within Walls: Private Life in the German Democratic Republic. Oxford: Oxford University Press. Braun, Volker. 1972. Die Kipper. Berlin: Aufbau Verlag. Bruce, Gary. 2010. The Firm: The Inside Story of the Stasi. Oxford: Oxford University Press.

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Caldwell, Peter. 2003. Dictatorship, State Planning, and Social Theory in the German Democratic Republic. Cambridge: Cambridge University Press. Clark, Christopher. 2013. The Sleepwalkers: How Europe Went to War in 1914. London: Penguin. Dennis, Mike, and Jonathan Grix. 2012. Sport Under Communism: Behind the East German ‘Miracle’. London: Palgrave Macmillan. Fulbrook, Mary. 2005. The People’s State: East German Society from Hitler to Honecker. New Haven: Yale University Press. Fulbrook, Mary. 2008. Ein ganz normales Leben: Alltag und Gesellschaft in der DDR. Darmstadt: Primus Verlag. Fulbrook, Mary. 2009. The Concept of ‘Normalisation’ and the GDR in Comparative Perspective. In Power and Society in the GDR, 1961–1979: The ‘Normalisation of Rule’, ed. Mary Fulbrook, 1–31, Oxford: Berghahn. Funder, Anna. 2011. Stasiland: Stories from Behind the Berlin Wall. Granta Books. Gehler, Michael. 2021. Three Germanies: From Partition to Unification and Beyond. London: Reaktion Books. Giesecke, Jens. 2014. The History of the Stasi: East Germany’s Secret Police, 1945– 1990. London: Berghahn. Grieder, Peter. 1999. The East German Leadership 1946–1973: Conflict and Crisis. Manchester: Manchester University Press. Grieder, Peter. 2012. The German Democratic Republic. Basingstoke: Palgrave Macmillan. Gumbert, Heather L. 2014. Envisioning Socialism: Television and the Cold War in the German Democratic Republic. Ann Arbor: University of Michigan Press. Harsch, Donna. 2007. Revenge of the Domestic: Women, the Family, and Communism in the German Democratic Republic. Princeton: Princeton University Press. Henke, Klaus-Dietmar, ed. 1999. Totalitarismus. Dresden: Hannah-ArendtInstitut für Totalitarismusforschung, Berichte und Studien, Nr. 18. Hübner, Peter. 1975. Konsens, Konflikt und Kompromiβ: Soziale Arbeiterinteressen und Sozialpolitik in der SBZ/DDR, 1945–70. Berlin: Akademie Verlag. Hübner, Peter. 2013. Arbeit, Arbeiter und Technik in der DDR 1971 bis 1989: Zwischen Fordismus und digitaler Revolution. Berlin: Dietz Verlag. Jarausch, Konrad H. 1998. Realer Sozialismus als Fürsorgediktatur. Zur begrifflichen Einordnung der DDR. Aus Politik und Zeitgeschichte 20 (1998): 33–46. Jeffries, Ian. 2018. The GDR in Historical and International Perspective. In The East German Economy, eds. Ian Jeffries, Manfred Metzler, and Eleonore Brenning, 1–11, Abingdon: Routledge [reprint of 1987 original]).

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Kocka, Jürgen. 1994. Eine durchherrschte Gesellschaft. In Sozialgeschichte der DDR, eds. Hartmut Kaelble, Jürgen Kocka, and Hartmut Zwahr, 547–553, Stuttgart: Klett-Cotta. Kopstein, Jeffrey. 1997. The Politics of Economic Decline in East Germany, 1945– 1989. Chapel Hill: University of North Carolina Press. Kornai, János. 1992. The Socialist System: The Political Economy of Communism. Oxford: Clarendon Press. Kott, Sandrine. 2014. Communism Day-to-Day: State Enterprises in East German Society. Ann Arbor: University of Michigan Press. Landsman, Mark. 2005. Dictatorship and Demand: The Politics of Consumerism in East Germany. Cambridge, MA: Harvard University Press. Last, George. 2009. After the ‘Socialist Spring’: Collectivisation and Economic Transformation in the GDR. Oxford: Berghahn. Lewin, Moshe. 2005. The Soviet Century. London: Verso. Madarásy, Jeanette Z. 2006. Working in East Germany: Normality in a Socialist Dictatorship 1961–79. New York: Palgrave Macmillan. Marotz, Sören, Elke Sieber, and Stefan Wolle. 2018. DDR Guide: A Companion to the Permanent Exhibition. Berlin: DDR Museum Verlag. McDougall, Alan. 2002. Youth Politics in East Germany: The Free German Youth Movement, 1946–1968. Oxford: Clarendon Press. McDougall, Alan. 2014. The People’s Game: Football, State and Society in East Germany. Cambridge: Cambridge University Press. McLellan, Josie. 2011. Love in the Time of Communism: Intimacy and Sexuality in the GDR. Cambridge: Cambridge University Press. Metzler, Manfred. 2018. The Perfecting of the Planning and Steering Mechanism. In The East German Economy, eds. Ian Jeffries, Manfred Metzlerm, and Eleonore Brenning, 99–118, Abingdon: Routledge [reprint of 1987 original]). Metzler, Manfred, and Arthur A. Stahnka. 2018. Product and Process Renewal in GDR Economy Strategy: Goals, Problems and Prospects. In The East German Economy, eds. Ian Jeffries, Manfred Metzler, and Eleonore Brenning, 119– 140, Abingdon: Routledge [reprint of 1987 original]). Ogaki, Masao, and Saori C. Tanaka. 2017. Behavioral Economics: Towards a New Economics by Integration with Traditional Economics. Singapore: Springer Nature. Palmowski, Jan. 2009. Inventing a Socialist Nation: Heimat and the Politics of Everyday Life in the GDR, 1945–1990. Cambridge: Cambridge University Press. Pence, Katherine, and Paul Betts, eds. 2007. Socialist Modern: East German Everyday Culture and Politics. Ann Arbor: University of Michigan Press.

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Pirker, Theo, M. Rainer Lepsius, Rainer Weiner, and Hans-Hermann Hertle, eds. 1995. Der Plan als Befehl und Fiktion - Wirtschaftsführung in der DDR. Opladen: Westdeutscher Verlag. Richardson-Little, Ned. 2020. The Human Rights Dictatorship: Socialism, Global Solidarity and Revolution in East Germany. Cambridge: Cambridge University Press. Ritschl, Albrecht. 1996. An Exercise in Futility: Economic Growth and Decline, 1945–89. In Economic Growth in Europe Since 1945, eds. Nicholas Crafts and Gianni Toniolo, 498–540, Cambridge: Cambridge University Press. Roesler, Jörg. 2016. Aufholen, ohne Einzuholen! Ostdeutschlands rastloser Wettlauf 1965–2015: Ein ökonomischer Abriss. Berlin: Edition Berolina. Ross, Corey. 2000. Constructing Socialism at the Grass-Roots: The Transformation of East Germany, 1945–65. London: Macmillan. Ross, Corey. 2002. The East German Dictatorship: Problems and Perspectives in the Interpretation of the GDR. London: Arnold. Rubin, Eli. 2008. Synthetic Socialism: Plastics and Dictatorship in the German Democratic Republic. Chapel Hill: University of North Carolina Press. Rubin, Eli. 2016. Amnesiopolis: Modernity, Space, and Memory in East Germany. Oxford: Oxford University Press. Saunders, Anna. 2013. Honecker’s Children: Youth and Patriotism in East(ern) Germany. Manchester: Manchester University Press. Schroeder, Klaus. 1998. Der SED-Staat: Partei, Staat und Gesellschaft, 1949– 1990. Munich: Carl Hanser Verlag. Steiner, André. 2010. The Plans that Failed: An Economic History of the GDR. New York: Berghahn. Stokes, Raymond. 2000. Constructing Socialism: Technology and Change in East Germany, 1945–1990. Baltimore: Johns Hopkins Press. Wolle, Stefan. 2019. The Ideal World of Dictatorship: Daily Life and Party Rule in the GDR, 1971–1989. Berlin: Ch. Links Verlag [translation of original German-language edition, 1998]. Zaitlin, Jonathan R. 2007. The Currency of Socialism: Money and Political Culture in East Germany. New York: Cambridge University Press.

CHAPTER 2

Making Decisions: Lessons from Behavioural Economics

Unique among species, humankind is capable of sophisticated ratiocination. In our day-to-day existence, we routinely scan our environment, identify germane information, and develop what we believe are logically coherent responses to the challenges we face. In short, we make decisions. Indeed, it is not an exaggeration to state that all important humaninitiated action perforce derives from this capacity to think and make choices. Given that we possess this capability, a question arises: how do we actually make decisions? In our daily lives, as in much of our historical analyses, we typically do not consider this question too deeply. Instead, our natural tendency is to conflate the process of decision-making with the rationale for making a decision. It is as if once a reason for a decision exists, then the decision itself—whether right, wrong or mediocre— inevitably follows. In doing so, we tend to give scant reference to the decision-making process itself. We assume it is just something that we do, mostly unseen by others, and, if circumstances dictate, we may attribute the specifics of some decision taken to perceived characteristics of the decision-maker involved, such as, for instance, their decisiveness, insightfulness, laziness, or timidity. Yet, as the research of behavioural economists and psychologists discussed in this chapter highlights, decision-making is not as straightforward or automatic as this assumes. In fact, modern research into decision theory shows that how we make decisions in any © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 G. B. Magee and W. Geerling, Socialism with a Human Face, Palgrave Studies in Economic History, https://doi.org/10.1007/978-981-19-0664-0_2

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Fig. 2.1 Framework for decision making

given situation profoundly reflects the constantly shifting context and cognitive settings we find ourselves in. As such, the process of decisionmaking itself should be seen as volatile and highly changeable. Thus, if Reason A causes Decision B today, tomorrow it might result in Decision C, a completely different outcome. Understanding how decisions are arrived at in given contexts forms an important part of any explanation for why a particular decision may have arisen at a certain time in response to particular stimulus. Possessing such understanding may also assist us in coming to grips with why the right, wrong or mediocre choice was selected. Figure 2.1 encapsulates in skeletal form this framework for decisionmaking. When a decision is required, the information that decisionmakers have at their disposal is filtered through both the context and cognitive setting they encounter. By context here, we mean the cultural, social, political and personal environments, in which the decisionmaker operates. Each of these factors can, and often do, shape how they perceive problems, interpret information presented to them, and configure possible responses. Cognitive considerations matter, too. The limitations on decision-makers’ ability to process all relevant, often complex and voluminous, information at their disposal, not to mention the barriers engendered by their inherent cognitive biases, subjective weightings and proclivity to resort to heuristics, ensure that the route from the need for a decision to the realisation of a decision may be a circuitous one. If the connections presented in Fig. 2.1 appear vague at this point, we ask for your forbearance: their prevalence and salience will, we trust, become clearer as the chapter proceeds. One implication that flows from the changeability of decision-making is that its nature varies considerably, if at times in predictable ways, between decision-makers operating in different contexts. Thus, within systems, the challenges and environment faced by those at the pinnacle of political and economic power differ dramatically from those experienced at both the more intermediate and lower levels of administration. As such,

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we should reasonably expect the decision-making processes deployed by different strata of society engaged in different activities to vary. Table 2.1 provides a stylised snapshot of the decision-making landscape prevalent in Soviet-style economies like the East German. Table 2.1 is derived from our extensive reading of the primary and secondary source material. It decomposes the planning hierarchy of the system into four rather uncontroversial levels of activity. For each level, it then describes in general terms three things: the fundamental task that those deciding at that level are engaged in, the ability of the party to exert control over their decision-making, and the nature of their decision-making process. Table 2.1 indicates the great variety of contexts in which decision-making in the GDR was taking place. It is important to stress here, though, that the characteristics and observations of each level of decision-making—and the levels themselves—are, of course, indicative. We make no claim that each of Table 2.1’s demarcations or reflections necessarily occurred in every circumstance precisely in the manner described, just that there was a tendency more often than not for reality to take on or gravitate towards these characteristics. Two broad observations from Table 2.1 are worth highlighting. First, the greatest divide in terms of context and cognitive settings for decisionmaking in the GDR occurred between decision-makers at the central level of the system, who could pursue more traditional forms of decisionmaking in the face of uncertainty, and those below them in the hierarchy, whose decision-making suffered from less freedom of action, less information, and less clarity of purpose. As a consequence, those below the apex of power were heavily reliant on the signalling of information and intent from others within the system. The second observation is that the further down the hierarchy one proceeds, ceteris paribus, the more distant and faintly perceived the decisions of the central authorities tended to become and the greater the variation in decision-making outcomes that ensued. Indeed, in a real sense, it was at these lower levels of authority that many of the most important decisions of interpretation, which were to shape the eventual impact of the policy, were deliberated upon. Peter Drucker’s warning to those trying to understand decision-making in capitalist corporations appears particularly apt here: “Most discussions of decision making assume that only senior executives make decisions or that only senior executives’ decisions matter. This is a dangerous mistake”.1 Drucker’s observation, it seems, is just as valid for the interplay of decision-makers at all levels of Soviet-style command economies. As the

Task • Set high level policy, plans and strategies

Central authorities (Politbüro, Secretariat and Departments of the Central Committee, Council of Ministers, central leadership of the mass organisations, nationwide institutions)

Nature of decision making

• Tight control and scrutiny of • Individual and small-group the implementation of decision making under central-level decisions uncertainty • Permitted scope for flexibility • Relatively well informed in interpretation across the • Well defined sense of level is low purpose • Flexibility to act • No need to seek feedback or input from subordinate levels of the planning hierarchy • Little variation between decision makers

Nature of party control

The decision-making landscape of the German Democratic Republic

Planning hierarchy

Table 2.1

22 G. B. MAGEE AND W. GEERLING

Task

Intermediate-level authorities • Industry- and Bezirk-level (Bezirk-level party, state and interpretation, adaption and mass organization leadership, refinement of central policy, heads of industrial associations, plans and strategies for their director generals of combines) respective areas of responsibility

Planning hierarchy

Nature of decision making

(continued)

• Moderately large number of • Moderate to strong control and scrutiny of the separate decision-making implementation of groups involved central-level decisions • Moderately well, but imperfectly, informed • Permitted scope for flexibility in interpretation across the • Good, but far from perfect level is moderate to high understanding of what is being required of them • Some level of flexibility to adapt • Heavily reliant on signaling from the central level and across the intermediate level of the planning hierarchy • Closely observant of the actions of other intermediate level organisations • Moderate to high levels of variation between decision makers

Nature of party control

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Task • Enterprise-, state farm-, agricultural cooperative- and Kreis-level interpretation, adaption and refinement of intermediate level policy, plans and strategies for their respective areas of responsibility

Local-level authorities (Kreis-level party, state and mass organization leadership, enterprises directors, the leadership of state farms and agricultural cooperatives)

(continued)

Planning hierarchy

Table 2.1 Nature of decision making

• Moderate to strong control • Large number of separate and scrutiny of the decision-making groups implementation of involved intermediate-level decisions • Moderate to low levels of • Permitted scope for flexibility information in interpretation across the • Partial understanding of level is moderate to high what is required of them • Some level of flexibility to adapt • Heavily reliant on signaling from the central and intermediate levels and from across the local level of the planning hierarchy • Closely observant of the actions of other local level organisations • High to very high levels of variation between decision makers

Nature of party control

24 G. B. MAGEE AND W. GEERLING

Task

Grass-root organisations • Shopfloor-, workplace- and (enterprise-level party and mass community-level organisation leadership, interpretation, adaption and department heads, technical refinement of local level specialists, brigade and policy, plans and strategies collective leaders) for their respective areas of responsibility

Planning hierarchy

Nature of decision making

• Low to moderate control • Extremely large number of and scrutiny of the separate decision-making implementation of local-level groups involved decisions • Poorly or incompletely • Permitted scope for flexibility informed in interpretation across the • Little or no understanding level is moderate to very of what is required of them. high Some level of flexibility to adapt • Significantly reliant on signaling from all levels of the planning hierarchy • Observant of the actions of other similar grass-root organisations • Extremely high levels of variation between decision makers

Nature of party control

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following sections and chapters illustrate, in analysing these economies, it is equally mistaken to assume that the only decisions that mattered were those that occurred in the upper reaches of the hierarchy. In the sections of this chapter that follow, we deploy tools developed by behavioural economists to explore with finer granularity the different natures of decision-making that were at play across the GDR’s system. In the next section, we begin by viewing decision-making at the highest levels in the party-state through the theoretical prism of prospect theory. Following that, we turn our attention to decisions made at other levels of the system. There, we show how the concept of information cascades provides explanations for a range of behavioural patterns widely observed in the sources. The chapter concludes with a brief outline of how these theoretical insights are used elsewhere in this volume.

2.1 Prospect Theory and High-Level Decision Making As in other Marxist–Leninist states, all political and executive power in the GDR was ultimately vested in, and stemmed from, the Politbüro of the Central Committee of the SED (Sozialistische Einheitspartei Deutschlands ). From its creation in July 1950 through to its demise in December 1989, the Politbüro consisted of between 15 and 25 full members and ten non-voting candidate members. The Politbüro was chaired by the General Secretary (Generalsekretär) of the Central Committee.2 Central Committee Secretaries (Sekretäre), an elite group of party officials typically numbering around ten at any point of time, sat on the Politbüro. After the General Secretary, these Secretaries were among the most powerful individuals in the SED and GDR. Each Secretary worked fulltime in the party apparatus and was responsible for certain areas of party work. They had direct control over the ministries and all institutions and bodies that fell within their ambit. Providing Secretaries with administrative support were the departments of the Central Committee (Abteilungen). In 1989, there were 32 such departments, employing over 2000 staff. The heads of each department (Abteilungsleiter) reported directly to their relevant Secretary. Working collectively as the Secretariat of the Central Committee (Sekretariat des Zentralkomitees ), the Secretaries developed party—and by extension government—policy and ensured that Politbüro resolutions were implemented. In function, the

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Secretariat acted as the bridge between the Politbüro and the rest of the party and state apparatus.3 The system thus by design placed enormous power in the hands of a small number of individuals. In reality, power often tended to be even more concentrated than even these formal structures suggested. A good case in point relates to the formation of economic policy. In 1976, Günter Mittag became the Secretary for the Economy of the Central Committee and quickly assumed overarching control over all aspects of the GDR’s economic policy.4 All departments of the Central Committee with responsibilities for the economy—together accounting for about a third of all departments—reported to him.5 In terms of economic policy, he was directly subordinate to only the General Secretary, Erich Honecker, with whom he had a close working relationship.6 Together, they determined SED economic policy, which, once decided, would then be rendered by the relevant departments or Mittag’s personal office into a simple, template format suitable for submission to the Politbüro or Secretariat of the Central Committee for confirmation. Inevitably, all major resolutions were presented to the Politbüro or Secretariat with the prior endorsement of the General Secretary, typically attached to the proposed resolution as preliminary notes bearing an inscription such as “Agreed. E.H.”.7 Such a practice ensured that no serious debate would take place. Thus, within the GDR the most important decisions were made by a small number of individuals and their advisers, often without wider input or deliberation. As we have seen, this was particularly the case with respect to the economic policy during the Honecker era. Given the importance of these decisions for the history of the GDR, it is worth considering further the nature of how determinations in such settings are made. The most common approach to understanding decision-making in complex settings where payoffs are uncertain is Expected Value Theory (EVT).8 It assumes that decision-makers act rationally, by which it is meant that they are always seeking to use the information available to them to maximise the benefit, or value, to themselves.9 To realise that objective, they consciously adjudicate between different risky options available to them, comparing the expected values of each alternative. The preferred option is arrived at by determining the weighted sum of the

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respective expected values of payoffs of options multiplied by their probabilities. This approach yields them the highest possible return. More formally, they determine the choice that maximises expected value with the formula: E[X ] =

k 

xi pi

i=1

where E[X ] is the expected value of k number of possible outcomes, x i is the payoff from option i, and p i is the probability that option i will occur. The intuition behind the approach is best understood by way of a simple example. Imagine an individual has a single dollar to invest. The choice they face is between investing in asset A, which will give a guaranteed return of $200, and investing in asset B, which has a 50 per cent chance of earning $300 and a 50 per cent chance of no return (i.e. earning $0). Which option should they choose? According to EVT, the investor can expect a return of $200 from asset A, whereas their expected return from asset B would only be $150.10 They should opt to invest in asset A, even though asset B has the potential for a larger return. Although EVT is commonly used, especially in statistics, economics and finance, psychological and behavioural economics experiments have found that its predictions about how people behave are consistently violated.11 One important deviation from the predictions of EVT occurs when the choices involved pit potential losses against potential gains. In theory, an objective individual should evaluate the choices available on the basis of their pure payoffs, irrespective of whether a loss or gain is involved. In reality, however, most individuals making decisions perceive similarly valued losses and gains differently. We seemingly hate to lose more than we love to win. Thus, for purely psychological and emotional reasons, most people have a tendency to regard losses as more costly to them than they actually are (in terms of price evaluations) and relative to equivalently priced gains. For example, take the situation where you are paid to work uninterrupted on a task for five minutes. For the sake of clarity, let’s also assume that there are no opportunities to use the money earned from this work until after the task is completed and that there are no transaction costs incurred for any action taken during the five minutes of work. Workers can choose to be paid for their work in two ways. They can receive and keep $20 immediately after the fiveminute period of work is over. In this scenario, the employer pays $5 of

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tax before the $20 is handed to the employee. Alternatively, the employee can receive $25 at the end of the 5 minutes and then hand back $5 of that $25 in tax to the employer to cover their tax liabilities. Since with both payment methods all workers take home the same amount of earnings ($20), EVT would predict that they should be indifferent between the two payment schemes; the eventual decision would be randomly made. In practice, however, workers in such a situation almost always prefer the first option ($20 at the end of the work), because the alternative option requires a perceived loss: they give up $5 that was already in their pocket. The psychological or emotional “costs” engendered by this returning of money leads them to avoid that payment scheme. Such behaviour, which is called loss aversion, has been widely observed in everyday life as well as in hosts of laboratory experiments. Viewed from the perspective of EVT, loss aversion is irrational.12 Loss aversion in turn underpins three other commonly observed, yet unpredicted behavioural phenomena13 : • The endowment effect , where individuals evince more care about retaining the object they already have in their possession and might lose than the same object that they do not yet have but might gain. • The reflection effect , where people are willing to accept more risk when trying to avoid a loss and less when pursuing a gain. • The framing effect , where decisions are influenced by how information is presented, such that options framed as losses (as opposed to gains) are more likely to induce a stronger negative response from individuals. Two other important, empirically demonstrated behavioural patterns that challenge EVT worth mentioning are: • The possibility effect , where individuals tend to attach a disproportionately large weight to highly unlikely, yet possible (as opposed to impossible), events. • The certainty effect , where people affix greater than expected weightings to options that are certain and less than expected weightings to options that require them to take additional risks in return for a higher reward.

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Rather than just being curiosities stumbled upon in laboratory experiments, many psychologists and behavioural economists believe these effects offer insights into the reality of decision-making as practised in the real world. Such beliefs have given rise to a new model of decisionmaking, called prospect theory (PT). First proposed by Amos Tversky and Daniel Kahneman, this Nobel prize-winning model takes phenomena such as loss aversion and the possibility and certainty effects as its fundamental building blocks.14 Decision-making according to PT begins with what is called the editing phase, where a preliminary analysis of the offered prospects (options) takes place.15 Issues that determine the nature of the decision-maker’s value function, such as reference points, framings, weightings and other subjective biases are established. Editing in practice (as opposed to this theoretical exposition) is an internalised, largely sub-conscious process. The concept of reference points is a particularly important part of PT. A reference point is the goal against which prospects are to be evaluated. For example, for a gambler going for a night out at the casino, their reference point for the evening might be to break even. If so, then all their decisions over the course of that night’s gambling session will be determined by comparing their current position relative to that reference point. A gambler still ahead at the end of the night, thus, might take a greater risk on the last game, knowing that even if they lose they will still come out ahead with respect to their break-even reference point. Once the editing phase is completed, we move into the evaluation phase, where the selection of a preferred option takes place. At this stage, two functions come into play. First, there is the aforementioned value function. This function gauges the utility value derived from the options.16 Unlike EVT, value in this content is determined relative to the reference point established in the editing phase. Here, it is assumed that loss aversion is at play, so losses hurt more than gains satisfy. That is to say, individuals make decisions based on the potential gain or losses relative to their specific reference point. Moreover, the value function is also characterised by diminishing sensitivity. This property of the value function means that the marginal impact of a change in value diminishes with distance from the relevant reference point. Diminishing sensitivity in turn implies that outcomes with low probabilities are typically given more weight than they would receive using expected value.

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Second, there is the decision weighting function. This function corresponds to the probabilities of EVT, but instead of using objective probabilities as they occur, it incorporates subjective decision weights, arrived at in the editing phase, such as the tendency to overreact to small probability and more certain events and underreact to high probability and more uncertain events. Operating with these internalised functions, decision-makers then seek to find the outcome that maximises the sum of their overall expected utility. In its simplest form, their task is encapsulated by the formula: V =

n 

π ( pi )v(xi )

i=1

where V is overall expected utility of the outcomes (x 1 , x 2 … x n ) given their respective probabilities (p 1 , p 2 … p n ), π is the decision weighting function, and v the value function. While the outcomes this method generates are consistent with the subjective assessments and proclivities of the decision-maker, it is important to note this does not mean that the outcome obtained is optimal in the sense defined by EVT. If the outcome generated by EVT is taken as a benchmark of what is rationally possible, then it is clear that decision-making based on the reality of loss aversion imposes substantial opportunity costs on decision-makers. Given that the values of prospects vary as a result of their changeable relationship to reference points and the impact of the possibility and certainty effects, illustrating how decisions occur in PT, unlike EVT, is not straightforward and requires a degree of mathematical proof and exposition beyond which is needed here.17 Fortunately for our purposes, the interaction between the possibility and certainty effects and the nature of a value function based on loss aversion produces clear predictions about how individuals will behave when placed in different settings. These predictions, provided in Table 2.2, depend on what is called the fourfold pattern of risk attitudes. Table 2.2 has four cells, each corresponding to a different decisionmaking scenario. The two columns of the table relate to the framing of the prospect, that is, whether it is presented as a gain or loss. These columns reflect the impact of loss aversion. The two rows of the table correspond to the likelihood of the prospect. When there is a high probability that it will occur, then the certainty effect dominates. By contrast, when there is a low probability of a prospect eventuating, the possibility

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Table 2.2 Prospect theory’s predictions: the fourfold pattern of risk attitudes

High probability (Certainty Effect)

Low probability (Possibility effect)

GAINS

LOSSES

• Faces a high probability of winning • Fearful of incurring a major disappointment • Exhibits risk averse behaviour • Tendency to accept unfavourable deals • Faces a low probability of winning • Hopeful of making large gains • Exhibits risk-loving behaviour • Tendency to reject favourable deals

• Faces a high probability of losing • Hopeful of avoiding large losses • Exhibits risk-loving behaviour • Tendency to reject favourable deals • Faces a low probability of losing • Fearful of making a large loss • Exhibits risk-averse behaviour • Tendency to accept unfavourable deals

effect comes to the fore. Within each cell, four pieces of information or expected behaviour predicted by PT are provided. These are: 1. The prevailing probabilistic circumstances to be faced 2. The focus of the emotional and psychological concern evoked 3. The expected response to risk 4. The type of outcome likely to be accepted should some sort of negotiation be required (for example, what would the individual be willing to accept to resolve this matter legally?) Let’s look at each cell of Table 2.2 in turn. Starting with the bottom left-hand corner, this cell reflects a situation where an individual needs to make their choice in the context of a low, but still possible, chance of winning. Here, the possibility effect will influence their decision disproportionately, and they will be willing to take a very risky decision to secure even the small chance of a big win. A good example of this behaviour occurs when we buy a lottery ticket. We make the purchase even though we know that the chance of getting the winning ticket is almost negligible. Nevertheless, we buy the ticket because psychologically we get satisfaction from knowing that we may strike it rich. That dream is worth something to us. Moreover, if an individual offered us a favourable deal, such as to buy our ticket from us just before the winning ticket is announced at

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either the same price we paid or even slightly above it, we are highly likely to reject it.18 Next, we come to the upper left-hand corner of Table 2.2. Here, the individual faces a high, but not certain, chance of winning. In this context, PT tells us that we can become preoccupied by the fear that we may not be able to realise our win. We, therefore, adopt a very risk averse approach. Take, for example, the case of a football team winning a final 1-0 with only 10 minutes to play. Does its manager continue to press and push to extend the lead to 2-0, or do they “shut up shop”, become more defensive, ensuring that the opponent’s remote chance of getting back into the game is completely snuffed out?19 PT suggests that many managers at this point of the game would take off some of their attacking players and bring on fresh defenders to ensure that the team’s 1-0 victory is guaranteed. In a sense, they have accepted the “unfavourable deal” of a certain but normal final win over the “favourable deal” of a more comprehensive scoreline. Turning now to the bottom right-hand cell, we encounter decisionmakers facing a situation where they must make a choice in the face of a low, but not impossible, chance of failure. PT suggests that many of these decision-makers will be deeply concerned about the possibility of making a bigger than expected loss. To prevent that from happening, they will adopt a strongly risk averse stance. Imagine, for example, the situation of a local political leader who receives intelligence that a local event planned for the following day is on a list of 1000 events that a terrorist two years ago was considering as possible targets for an attack. There is, therefore, a very remote, but not impossible, chance that the terrorist, if they decided to act, might choose their local event (over the 999 others on the list) and launch an attack there. To counteract this possibility, the politician introduces strict security measures that drastically limit, perhaps even force the cancelling of, the local event. In doing so, they were willing to accept a more “unfavourable deal” for the event than was probably necessary on the basis of a more neutral assessment of the risk. Finally, we have the cell in the top right-hand corner. In this scenario, individuals face a high, but not certain, probability, of a major loss. PT predicts that their psychological focus will be on avoiding large losses, which, as a result, will incline them to adopt a risk-loving approach to the situation. They may also opt to turn down favourable settlements from others that might resolve the issue. This context is a common one for decision-makers to operate in.

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As Daniel Kahneman notes: Many unfortunate human situations unfold in the top right cell. This is where people who face very hard options take desperate gambles, accepting a high probability of making things worse in exchange for a small hope of avoiding a loss. Risk taking of this kind often turns manageable failures into disasters. The thought of accepting the large size loss is too painful, and the hope of complete relief too enticing, to make the sensible decision that it is time to cut one’s losses. This is where businesses that are losing ground to a superior technology waste their remaining assets in futile attempts to catch up. Because defeat is so difficult to accept, the losing side in wars often fights long past the point at which the victory of the other side is certain, and only a matter of time.20

Beyond its contribution to decision theory, the value of PT is that it offers a framework that can be adapted to a host of real-world decision-making problems. Not surprisingly, it has found applications in a range of social sciences.21 Central to making the abstract theory of PT applicable is the operationalisation of the concept of reference points. What the reference points are and how they change temporally and contextually must be determined. This is because, according to the theory, reference points lie at the heart of how people make decisions. Other findings of PT can provide assistance in this task. The first is the concept of mental accounting. This concept derives from empirical observations that people place different values on the same payoff based on subjective criteria.22 The phenomenon is most commonly seen with respect to how we use money. For instance, it has been found that people are more inclined to spend $100 acquired as a birthday gift or won in a lottery more profligately than $100 earned through, say, a few hours of hard physical labour. In doing so, people are acting as if they have separate “mental accounts” for money coming from different sources; in this case, there is one for money achieved through windfalls and another for money earned through paid work. Such mental accounting is important as it appears to shape the formation of reference points.23 Each mental account is likely to have its own, distinct reference point. Therefore, the more exclusive (viz. the more narrowly defined) the mental accounts we create, the greater the scope for deviations away from EVT and the more important different reference points become. Breadth of framing matters as well. When prospects are framed narrowly, such that each decision is seen to be taken in isolation from

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other decisions, the effects of loss aversion are likely to be exacerbated. By contrast, broad framing that embeds each decision in the context of an extended, more complex decision-making environment tends to reduce the impact of loss aversion.24 Taken together, the literature suggests that the narrower the framing applied and the more exclusive the mental accounting used, the less likely traditional approaches to decision-making, such as EVT, will be helpful.25

2.2 Information Cascades and Decision-Making Beyond the Centre At face value, Soviet-style economies look for all the world like rationally planned, coordinated systems, where each component neatly dovetails into the next to ensure a smooth transition of information from central decision-makers, who set policy, right down to local officials and managers, who implement it. Such a perception of an efficient top-down process is certainly an image of itself that every communist regime actively sought to project. And for true believers, it represented a potential that, with some further perfecting of the system, was indubitably obtainable. A common trope in Marxist–Leninist thinking, dating back to Karl Kautsky and Vladimir Lenin, was that socialist economic systems should be run along the same lines as a large factory. As Pekka Sutela explains, in this “single factory” model of the economy, “the decision-making system is that of a hierarchy; the information system consists predominately of vertical flows and incentives are tied to fulfilling given plans”.26 Core to making this nationwide “factory” work was getting managers with the right orientation and training in place at all levels of the system. These loyal deputies would ensure that the will of the party leadership would be brought to fruition, for, as Katharina Schreiner succinctly puts it, “the command economy needs commanders, only thus can it function”.27 It was expected that with the proper ideological training, the party’s army of cadre would provide those commanders. Joseph Stalin, thus, told the Thirteenth Congress of the Communist Party of the Soviet Union (CPSU) in 1924 that: A cadre must know how to carry out instructions, must understand them, adopt them as his own, attach the greatest importance to them, and make them part of his very existence. Otherwise, politics loses its meaning and consists of merely gesticulating.28

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In practice, however, the reality of the system settled far from this authoritarian ideal. The day-to-day functioning of the party-state—what made it tick—bore little resemblance to the smooth, top-down operation touted by communist textbooks. On many grounds, the posited mechanisms of the Marxist–Leninist system—and certainly the benefits that allegedly flowed from them—largely proved illusory. Above all, in the absence of advanced IT, running a modern, industrialised economy by plan rather than through the market taxed the limits of human capabilities. The incessant tidal waves of orders, directives, and instructions from all levels of the state and party were overwhelming. As we have seen, at the top of the decision-making process sat the Politbüro, composed of the party’s most important leaders. It deliberated not only on the most compelling strategic issues of the day, but, somewhat bizarrely, also regularly chose to debate and direct on everyday aspects of life in the GDR, including the most banal and trivial.29 Between 1949 and 1989, it met 2265 times, essentially once a week. Each meeting typically had around a dozen items with accompanying resolutions on its agenda, suggesting that over its existence it made somewhere between twenty and thirty thousand resolutions. Once made, its resolutions were transmitted down the hierarchy via two channels. First, excerpts from the resolutions (Beschlussauszüge) were sent to leading functionaries of the state and economic apparatus and the mass organisations as well as to members and candidates of the Central Committee, Politbüro, the Secretariat, and department heads of the Central Committee, who were personally responsible for the implementation of the relevant resolutions. Second, individual decisions of the Politbüro were distributed by the Head of the Politbüro office as circulars (Rundschreiben) to elected organs and functionaries of the SED who needed them to carry out their work tasks. An indication of the vast volume of paperwork generated by the Politbüro is revealed in the fact that the Bundesarchiv’s collection of Beschlussauszüge for the period from 1953 to 1989 accounts for 10.3 running metres of shelves; Rundschreiben occupy a further 5.5 metres.30 Critically, though, it was not just the Politbüro that generated immense volumes of orders. It represented literally just the tip of the iceberg. Below it, ministries, and other state and party entities at the national, district (Bezirk) and municipality (Kreis ) levels spawned their own resolutions, directives, and orders. The State Planning Commission (Staatliche Plankommission or SPK ) in the late 1980s, for example, required enterprises across the GDR to report against and take actions with respect to

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no less than 225 plan indicators each year.31 Compounding the problem of volume was the fact that the instructions and plans promulgated were frequently altered, countermanded, rescinded, or simply issued in apparent conflict with existing orders. Discerning what mattered from this constant churning of masses of changeable and often contradictory information, and how it should in turn be interpreted and implemented, was a fundamental challenge faced by all decision-makers in every established Soviet-style economy.32 Rhetoric aside, no amount of talented and committed party cadres could manage this continual plethoric dump of information in the frictionless manner imagined by theorists of the planned economy. And, of course, in practice, they did not. The observations of those who lived the experience first-hand or contemporaneous analysts in the West, who watched on, paint a very different picture. In his seminal monograph on technological change in the GDR, first published in 1984, Raymond Bentley described a reality of confusion, ad hocery, and hesitation far removed from the ideal of a smooth, well-oiled machine: Theoretically, policy decisions of the leadership were supposed to be implemented according to the principle of ‘democratic centralism’. This amounted, in effect, to the obedient fulfillment of the party line by the lower levels of the organization concerned … Often policy implementation took place less rigorously, particularly when measures were unclear, conflicting or impracticable … Consequently, during the process of policy implementation, practitioners lower down the hierarchy were to some extent obliged to engage in their own formulation of policy. The original policy could therefore undergo significant alteration. This mechanism, however, served not only to check the implementation of inappropriate measures: it could also stifle useful ones. Thus, inadequate delimitation of competence between ministry, VVB and enterprise led to inertia, buck-passing and arguments … In a similar fashion, policy underwent modification when measures were conflicting or impracticable. The enterprise was usually faced with a set of irreconcilable plan targets and since it could not fulfil all of them simultaneously it was forced to exercise choice. The VVB were in an analogous situation … Impracticable measures were either ignored or paid lip-service.33

The root cause of the problems faced by the party-state was its inability to communicate effectively clear instruction and priorities down the chain of command across a wide range of issues concurrently. Confronted by

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confusion and uncertainty, decision-makers were often simply left to their own devices. Stefan Wolle’s comments about the consequences for publishing in such a context applied with equal force across all sectors of the GDR: When in doubt, the majority of decision makers, especially those who had been socialized in the 1950s, adopted a wait-and-see strategy, preferring to err on the side of caution. The climate changed often, and sometimes, totally unexpectedly. The irrefutable truth of today could be politically incorrect tomorrow.34

Thus, given the risk that inhered in wrong decisions and the incompleteness of information available, the system, rather than breed a rapid and effective implementation of the central authorities’ plans, induced decision-makers throughout the system to err on the side of conservatism, to postpone making decisions until the situation was clear, and to avoid taking on unnecessary responsibilities. To keep the wheels of the system moving, decision-makers turned to safe and established routines and focused their attention on the objectives and defence of their immediate environment and interests, whether that be a ministry, combine, enterprise or brigade. There were sufficient loopholes and grey areas in the system for such independence of action on most issues to occur. As a result, in stark contrast to the efficient “single factory model” of the economy, the practice of policy implementation tended to fragment between levels, with enormous responsibility for achieving outcomes invested in grassroot decision-makers and activists. Moreover, these circumstances meant that outcomes could—and did—vary markedly by enterprise, region or industry and that the nationwide implementation of a party initiative could be a long drawn out process.35 We contend that such a state of affairs was much more than the unintended by-product of a fundamentally flawed system, proof, as it were, that the Marxist–Leninist economy as conceptualised could not work. All of that is true, but, allusions to the putative rectitude of grand theory aside, such workarounds, adaptions, and traits were not anomalies: they were in fact the everyday norms of “real existing socialism”. If one truly wants to come to grips with how Soviet-style economies, such as the GDR’s, really operated, then these are the hard realities with which one must begin. More than that, instead of being viewed merely as evidence of the fraudulence of the regime’s claims, we believe that such stylised facts

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provide the foundations of a more general organising principle of Sovietstyle economies. Such a principle would in our view offer a more realistic basis for analysis than alternatives derived from unobtainable, hypothetical benchmarks of the Marxist–Leninist or neoclassical economics varieties. As a starting point, it is worth noting that the phenomena experienced in policy implementation in East Germany has parallels outside the context of communist societies. The notion that individuals often make decisions on the basis of observing and following the prior decisions of others is not novel. Indeed, it is decidedly commonplace. Consider the following three situations, undoubtedly familiar to many readers. You have the urge to eat out at, say, a Turkish restaurant. Waking down the street, you encounter two Turkish restaurants of identical size with similar menus and prices side by side? You do not know anything about the quality or reputation of either restaurant. At which will you decide to dine? One restaurant is busy with many people sitting inside; the other has only a handful of customers. Almost invariably, you choose the former, as you assume that the large number of people eating in the busy restaurant must know that it is the better of the two restaurants. In effect, their choice has influenced yours. Interestingly, the sight of a large number of people frequenting one restaurant instead of the other may be powerful enough for you to overlook the restaurant reviews you have just quickly googled, which claim that the near-empty restaurant offers both the finer cuisine and ambience. Nor, in coming to your decision to emulate the choice of other, earlier diners, do you stop to seriously ponder the validity of your assumption they are better informed than you are about the quality of the two restaurants. You do not consider the possibility that each of the other customers has done the same thing as you, viz. made an assumption about the knowledge held by the diners already seated in the restaurant. There is in fact another possibility. It may well be the case that none of the customers in the busy restaurant had prior information about its relative quality before making their decisions. Once the first few customers had randomly selected that restaurant over another, they unwittingly started off a process that encourages more and more customers to favour one restaurant over another.36 Now take the situation of a group of people sitting on a selection panel evaluating two highly competitive candidates for a job. In discussions around which applicant to hire, panel members who volunteer their views first—and do so strongly—have the potential to influence the deliberations of those who speak after them. If a latter speaker is struggling

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to differentiate between the two candidates or does not wish to have a conflict about it, then the certainty of the first speaker’s arguments in favour of one of the candidates may encourage them to go along with the first speaker’s ranking. If the first speaker happens to be the boss or a senior and respected member of the organisation, then the effect of their views on others may be even stronger. Again, the decisions of those who have decided before you can shape your own decision. It is precisely for this reason that in some court systems, when cases are being heard by a number of judges, the votes of judges and the reasoning behind their votes are delivered in a reverse order of seniority.37 Markets, too, are highly susceptible to such behaviour. John Maynard Keynes, for example, famously observed from his own experience that many players in the stock market, not knowing the true potential of a particular stock, were willing to follow others unknown to them in buying or jettisoning it on the assumption that the decision of those other speculators must have been grounded in the information that they themselves did not possess. Such type of behaviour can lead to extreme, unjustified movement in prices that cause the asset in question to experience either a bubble or crash.38 These patterns of behaviour occur because in a world of uncertainty, where information is incomplete, people perforce must rely more heavily on their instincts to function and survive as best they can. As we saw in the last section, these behavioural inclinations lead them to express disproportionately strong preferences (relative to what is predicted by Expected Value Theory) for inter alia certainty, unambiguity and an aversion to loss.39 Facing choice under significant uncertainty, people’s natural inclination is to turn to established heuristics, practical rule of thumb decision rules, that while not always capable of achieving the optimal outcome have proven themselves sufficient to engender satisfactory outcomes. Observing how others have decided before making one’s own choice is such a heuristic. In the Turkish restaurant example above, deploying that heuristic enabled you to make a choice of restaurant. Because more often than not, that choice would be the right one, the heuristic is a useful tool. Moreover, when applied by a series of individuals concomitantly, this heuristic gives rise to another phenomenon called an information cascade, a process that explains how local conformity around a particular decision can evolve. Thus, the fact that my choice to enter the busier restaurant makes it more likely that the next undecided customer, who comes along,

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will make the same choice (because they see even more people in the busier restaurant than I did) indicates that my own decision can be seen as being part of an unfolding information cascade. Information cascades have been observed in a range of settings, both natural and experimental.40 Although the formal dynamics of information cascades are typically presented in terms of Bayesian probability, the intuition behind them can be gleaned without too much recourse to the underlying mathematical proofs.41 For a basic information cascade to occur, there must be a decision to be made; a finite number of discrete choices available; an approximate sequencing of decisions of individuals, such that individuals are able to see the choices selected by others earlier in the process (in other words, everyone or large groups of people do not have to make a decision simultaneously); and an ability of individuals to make inferences about unknown people’s unobserved choice-related knowledge from their decision. Furthermore, the model assumes that the individuals involved are subjected to bounded rationality, that is, their choices are constrained by the intrinsic weaknesses of their own cognitive abilities, such as the natural limits on the ability to retain memories or process multiple pieces of information concurrently. Given these conditions, the likelihood that an information cascade will occur depends on the probability that the “signal” received from previous decision-makers is in fact the correct choice. For ease of illustration, let’s further assume that there are only two choices available (‘Adopt’ and ‘Reject’), each decision-maker faces the same costs and gains of adopting a signal, and the same signal is received or transmitted identically by all decision-makers. In this scenario, each individual thus receives a signal that is either “Adopt” or “Reject”. If signals do not offer any valuable information, then either choice has equal probability of being right (i.e. p = 0.5: each have a 50 per cent chance of being right). It is assumed that when the correct decision is “Adopt” (‘Reject’), individuals will be more likely to receive an “Adopt” (‘Reject’) signal. Thus, if the signal “Adopt” is the true response, then it should be observed in signals at a probability of greater than fifty per cent (p > 0.5). By contrast, if “Adopt” is not the correct choice, it will be observed with a probability of less than fifty per cent (1 – p < 0.5). If standard assumptions about expected values are applied and one further assumes that individuals, who are indifferent between the two options, make their choices randomly, then it is possible to map out how a sequence of individual decisions are likely to proceed.

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The process is kicked off by the first individual who makes a choice between “Adopt” and “Reject”. If the first individual chooses “Adopt” (‘Reject’), then the second individual will also “Adopt” (‘Reject’) if the signal they receive is “Adopt”(‘Reject’). This is because the first individual’s choice raises the overall probability that the “Adopt” (‘Reject’) option is the correct response. If, however, the signal received is for some reason the opposite of what the first individual actually did or the second individual chooses to ignore the first’s signal, then they may choose “Reject” (‘Adopt’). When the third individual’s time comes to make a choice, they will, therefore, be confronted by one of three possibilities: (1) both previous individuals have chosen “Adopt”; (2) both have chosen “Reject”; or (3) one has chosen “Adopt”, the other “Reject”. In situations (1) and (2), the third individual follows the choice of those who have gone before them and an “Adopt” or “Reject” cascade respectively commences. In situation (3), the third individual is indifferent between the two options and makes a decision randomly in the same manner as the first individual. In such circumstances, the process starts again, with the fourth and fifth individuals in the sequence taking on the same roles as the second and third individuals, as described above. The process continues until all individuals have had the opportunity to make a choice. Mathematically, it can be shown that with an even number of n individuals, this process yields the following unconditional ex ante probability of a cascade forming: 1 − (P−P 2 ) 2

n/2

This equation indicates that the higher the probability that the option is the right choice (p), the more rapidly a cascade will develop. Conversely, the lower p drops, the more uncertainty that is injected into the process, which slows down the formation of a cascade or possibly brings it to a halt as p approaches 0.5.42 In short, cascades develop more rapidly when individuals operate with more precise signals regarding the true value of an option and as the number of individuals making decisions increases. One of the consequences of an information cascade is that, as it unfolds, diverse sources of information about the choice being made are disregarded. As a result, the cascade that emerges need not be one that favours the adoption of the correct option.43

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Information cascades possess other interesting properties, especially as we relax some of the assumptions of the basic model. If there is an individual in the sequence of decisions, the precision or accuracy of whose signals exceeds others, and this is known and acknowledged, then the signal of such an individual can expedite the development or collapse of a cascade. Such an individual is called a “fashion leader” in the literature.44 If that “fashion leader” operates across domains, such that their judgement is highly regarded by a selection of different groups, cliques, and interests, their influence as “liaison agents” can be even more profound. Indeed, these findings suggest that if those in authority wish to encourage decision-makers across society to adopt rapidly a policy, innovation or practice, a prudent strategy would be to get “fashion leaders”, especially those capable of liaising across groups, to make their decisions at an early stage of the process. Conversely, if they wanted to shatter a cascade or attempt to reverse the direction it is developing, inserting “fashion leaders” with a contrary signal at a later stage of the process may help that occur. The same effect may also be achieved by publicly releasing relevant information that will encourage decision-makers to choose a certain option and deter them from considering the alternatives. The point is that the existence of cascades offers opportunities to those in power to influence the path of policy implementation. As Bikchandani et al. observe: “If everyone expects others to switch to another equilibrium, then it pays people to conform to the change. Therefore, if people are primed for change, perhaps by a central authority, then the action can be swift”.45 Informational uncertainty is key here. Even within contexts where individuals have heterogenous but correlated values of adoption, cascades can still emerge. In such settings, individuals may still choose to adopt an option despite having relatively lower adoption values for it, simply because they possess neither adequate information about the choice at hand nor perfect knowledge about how other decision makers personally value the benefits of adoption. We believe that the concept of information cascades has relevance to how planned economies like the East German operated. Centrally guided and consciously avoiding almost all usage of market mechanisms, policy implementation in the GDR depended on orders being understood and duly followed at all levels of society. In the ideal, it expected leading cadres, functionaries, and managers to commit to, transmit, and respond to the requisite policy and set the example for others to follow. A receptive and compliant workforce would oblige and work diligently to bring the

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policy to fruition. The system would be kept efficient through tight political and ideological training and the targeted use of rewards and enhanced status for those who excelled and punishment for those who failed. Here, the demonstration effect was an important ingredient in the mix, too, for it was deemed important that all out-of-the-ordinary performance should not only be subjected to public scrutiny, but used to provide vivid lessons for all to absorb. As we discussed earlier in this section, the practice deviated considerably from this image of a well-oiled authoritarian machine. The party had to work hard to get the people of the GDR to enact its wishes. The engulfing flood of directives and the incomplete and at times flatly contradictory information available left many doubtful about which instruction was to be followed and how. Lacking clarity, those responsible for implementation sought out a heuristic to help them sort out the seed from the chaff. Watching what others did and emulating their “successful” actions was a logical, often instinctive, response. The information cascades that emerged ensured that each decision-maker not only could take some course of action, but that they could do so without unduly damaging their reputations or running the risk of being denounced as either incompetent, ideologically incorrect or something far worse. The dangers of misinterpreting, deliberately or unwittingly, the party’s current position were great: lost bonuses, squandered career opportunities, reduced status, and, in cases of acute importance to the party-state, even a potential loss of liberty and life. Erring on the side of caution when there was doubt, when the signalling was opaque, and where one was not in a position of power was a pragmatic response to these circumstances. When confronted with a new initiative, the common strategy, thus, was to wait and see what others, especially key figures and institutions, did followed then either by a disregarding of the initiative or an appropriately calibrated embrace of it. Theory and laboratory experiments with respect to information cascades have also shown that once the process of decision-making is established, belief in the value of prior decisions can become so strong that all social learning stops. Indeed, one of the distinctive characteristics of information cascades is that they are ultimately grounded on a firm belief that such a heuristic works better than, and is preferable to, the use of available private information.46 Cascaded behaviour, as a consequence, has a tendency to become stable and routinised. Once a citizen comes

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to believe that the heuristic is reliable and that the authorities are satisfied with this modus operandi, they are unlikely to alter their behaviour, irrespective of what their private information tells them. After all, if the objective is to survive and flourish within the constraints of the system in place, it matters little whether you believe in what you have been asked to do. For its part, the leadership of the party understood this state of affairs and in turn shaped its own behaviours to accommodate this reality. Its constant concern was to ensure that the intent of its policies was effectively communicated, so that information cascades could be worked to its advantage. Taken together, the literature on information cascades suggests a number of factors which might impact their success or failure in these regards. These factors also shed light on why cascades may have taken off in some circumstances and locations and at certain times, but not others. Eight propositions, adapted here to the context of the GDR, appear to be particularly germane. 1. Clarity of signals. If the message or instruction from the top is unclear, confused, or indeed there are multiple competing voices debating the party’s intent, then policy implementation will struggle to get traction. As decision-makers at the various levels of society do not know what to do, different paths will be taken and many organisations will simply remain inactive as long as the uncertainty prevails. There will be a tendency for departmentalism and enterprise and regional egoism to step up and fill the vacuum created by uncertainty. Performance with regard to the initiative in question will tend to be highly differentiated. 2. Absence of signals. If decision-makers are deprived of a signal, they will have no alternative other than to use their own private information to make a choice. In other words, a cascade cannot happen. Arguably, such a situation might arise in the very early stages of a new initiative when no signals have yet been put out. Typically, in such cases, the individual’s private assessment tells them to be conservative. It is better to do nothing than to do something that might turn out to be politically wrong. 3. Overly complicated signals. As the signal communicated becomes more complicated, its message is more difficult to understand and convey. The growing complexity of society and its policy needs tends to accentuate this problem over time. Confused, decision-makers

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may make errors or give up trying to fathom what they are supposed to do. Enterprises, combines, industrial sectors and even regions may believe that the policy is not relevant to them. A cascade of adoption cannot get started. The policy initiative stagnates, and results vary widely from context to context. 4. “Fashion leaders”. The existence or absence of credible “fashion leaders”, individuals or entities with known better signalling precision, getting behind a campaign or initiative can impact its success. Such individuals or entities in an industry, region or combine can disproportionately contribute to a cascade getting going or, by their absence, ensure that it falters. The lack of involvement of “fashion leaders” early on in a campaign may be a factor leading to its failure to ignite. 5. “Liaison agents ”. The existence of effective “liaison agents”— fashion leaders with broader cross-societal reach—can promote cascades across localities and settings and resolve perceived regional or industry-based hesitancies and sectionalism. When “liaison agents” exist, the heterogeneity of values and responses are reduced and the effectiveness of a central initiative enhanced. 6. Public interventions as signals. Significant high-level public interventions or disclosures can accelerate, stop or even reverse the development of a cascade. Such a revelation might be an announced change in the party line, a new emphasis or redefining of a campaign, or the public rewarding or punishing of high-profile individuals. Public interventions, however, can prove counterproductive if the message of the disclosure is not clear and realistic. In such circumstances, the disclosure may simply add to the existing confusion and lack of clarity in signalling. 7. Experiments as signals. A high-profile event or experiment supported by “fashion leaders” may provide a galvanising signal capable of initiating a cascade. Research in marketing has found how events and stunts by high-profile brand ambassadors or paid social media influencers can engage customers with a new product and have cascading effects on consumption habits and trends.47 Such intuition provides an additional reason, beyond security concerns and risk aversion, why the SED and other ruling communist parties liked to start new initiatives off in model enterprises or localities, whose leaders were lauded as heroes in the national press.

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8. Targets as signals. Setting overly ambitious goals for an initiative potentially provides stronger signals than more moderate ones. The rationale is similar to that which occurs in some real estate markets, where inflated advertised house prices are used because advertising a house at a low price signals low quality and, hence, may start a cascade against buying. By contrast, an excessively high advertised price merely suggests that the house is being overpriced (with no question raised about its quality). By insisting on stretch targets for its most important plan targets and initiatives, the party signals the seriousness of the initiative or target at hand. Softer goals, by contrast, merely imply that the initiative or target is routine and not that important. In short, what we understand about cascades is that they are most likely to occur in settings such as the GDR when there are clear, unambiguous, and straightforward signals, which are openly acted upon by strategically placed “fashion leaders”, capable of crossing industrial and regional boundaries. Often a cascade can be profitably started off by model enterprises or projects, but to become sustained and penetrative, an effective nationwide network of signalling mechanisms is needed. For the SED, this was a daunting task, not least because it had to learn how to construct such a framework suitable to its purposes from scratch. New to power, such learning could only be done in a piecemeal manner through lessons acquired through hard-won experience. Moreover, the ever-increasing complexity and diversity of societal needs between the 1940s and 1980s meant that this was an ongoing process and that added pressures were constantly being placed on even those capabilities it had been able to construct over time.

2.3

Conclusion

This chapter has introduced two concepts from behavioural economics— prospect theory and information cascades—that, we believe, help inform and deepen analysis of the patterns of decision-making observed in the GDR. These concepts are carefully deployed in Chapters 3 through to 6, where detailed case studies illustrate how they and related concepts enable an analytical framework to be constructed that elucidates aspects

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of decision making important to the economic history of East Germany. The broader implications for our understanding of the GDR and Sovietstyle command economies of this tilt to behavioural economics are discussed in the concluding chapter.

Notes 1. Peter Drucker, The Peter F. Drucker Reader: Selected Articles from the Father of Modern Management Thinking (Cambridge, MA: Harvard Business Review Press, 2016), p. 9. 2. Between 1953 and 1976, this position was called the First Secretary (Erster Sekretär) of the Central Committee. 3. Andreas Herbst, Gerd-Rüdiger Stephan, Jürgen Winkler (eds.), Die SED: Geschichte, Organisation, Politik. Ein Handbuch (Berlin: Dietz Verlag, 1997). 4. Mittag’s formal title in 1986 gives a better impression of the reach of his power: Secretary for Construction, Research and Technical Development, Trade Unions and Social Policy, and Raw Materials Industry of the Central Committee of the SED (Sekretär für Bauwesen, Forschung und technische Entwicklung, Gewerkschaften und Sozialpolitik, und Grundstoffsindustrie beim Zentralkomitee der SED). 5. Manfred Uschner, Die zweite Etage - Funktionsweise eines Machtapparates (Berlin: Dietz Verlag, 1993), pp. 98–101; Theo Pirker, M. Rainer Lepsius, Rainer Weiner, Hans-Hermann Hertle, Der Plan als Befehl und Fiktion - Wirtschaftsführung in der DDR (Opladen: Westdeutscher Verlag, 1995), pp. 347–350; and Harry Möbis, Von der Hoffnung gefesselt - zwischen Stoph und Mittag - unter Modrow (Frankfurt Oder: Frankfurt Oder Editionen, 1999), p. 177. 6. Möbis, Ibid., p. 142. 7. Uschner, Die zweite Etage, p. 70. 8. Our account here is only intended to familiarise readers with the basic idea of expected value. For a deeper overview, including mathematical proofs of the propositions, see: Larry Wasserman, All of Statistics: A Concise Course in Statistical Inference (New York: Springer, 2004), pp. 48–61. 9. It is often assumed in decision theory that these values reflect the underlying utility which that option’s payoff provides. As such, in maximising their expected value, a decision maker is in effect also

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maximising the expected value of their utility function. When the utility function is explicitly incorporated into the analysis, units of utility, utils, are maximised instead of money values. Since having more money, ceteris paribus, implies more utility, the two approaches are identical. The utility-based version of the theory is called Expected Utility Theory. 10. 0.5($0) + 0.5($300) = $150. 11. Masao Ogaki and Saori C. Tanaka, Behavioral Economics: Towards a New Economics by Integration with Traditional Economics (Singapore: Springer Nature, 2017). 12. Daniel Kahneman, Thinking Fast and Slow (London: Penguin, 2011), pp. 276–282. For a nice illustration of loss aversion from popular culture, see Marie Briguglio, Charity-Joy Acchiardo, G. Dirk Mateer, and Wayne Geerling, “Behavioral Economics in Film: Insights for Educators,” Journal of Behavioral Economics for Policy 4: 1 (2020), p. 20. 13. For fuller descriptions of all the effects listed below, see, for example, Daniel Kahneman, Jack L. Knetsch, and Richard H. Thaler, “Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias,” Journal of Economic Perspectives 5: 1 (1991), pp. 193–206; Michelle Baddeley, Behavioural Economics: A Very Short Introduction (Cambridge: Cambridge University Press, 2017), pp. 50–80. 14. Daniel Kahneman and Amos Tversky, “Prospect Theory: An Analysis of Decision under Risk,” Econometrica 47: 2 (1979), pp. 263– 292. Daniel Kahneman won the Nobel Prize in economics in 2002. Amos Tversky passed away in 1996. 15. For a more detailed summary of prospect theory than presented here, see, for example, Kahneman, Thinking Fast and Slow, pp. 280–340; Ogaki and Tanaka, Behavioral Economics, pp. 55–70. 16. The value function in prospect theory plays an equivalent role to that of the utility function in Expected Utility Theory. 17. For a full mathematical exposition of the basic version of prospect theory, see Kahneman and Tversky, “Prospect Theory”. 18. In this study from 2016, the authors asked people to sell their lottery tickets for more than the cost of the ticket in a $1.5 billion Powerball jackpot. Most participants refused; see Sara Silverstein, “We Tested an Economic Theory by Trying to Buy People’s Lottery Tickets for Much More Than They Paid”, Business Insider,

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7 May 2016. https://www.businessinsider.com.au/regret-avoida nce-plays-into-lottery-tickets-2016-5. 19. Some football managers like José Mourinho, formerly of Chelsea and Manchester United, are infamous for ‘parking the bus’ with a 1-0 lead. 20. Kahneman, Thinking Fast and Slow, pp. 318–319. 21. For example, see, Colin F. Camerer, “Prospect Theory in the Wild,” in Daniel Kahneman and Amos Tversky (eds.), Choices, Values and Frames (New York: Cambridge University Press, 2000), pp. 281–300; Nicholas Barberis, Ming Heung and Richard H. Thaler, “Individual Preferences, Monetary Gambles, and Stock Market Participation: A Case for Narrow Framing,” American Economic Review 96: 4 (2006), pp. 1069–1090; Ferdinand M. Vieider and Barbara Vis, “Prospect Theory and Political Decision Making,” in Oxford Research Encyclopedia of Politics. Retrieved 26 August 2021, from https://oxfordre.com/politics/view/10. 1093/acrefore/9780190228637.001.0001/acrefore-978019022 8637-e-979; Jonathan Mercer, “Prospect Theory and Political Science,” Annual Review of Political Science 8: 1 (2005), pp. 1– 21; and Rose McDermott, Risk Taking in International Politics: Prospect Theory in Post-War American Foreign Policy (Ann Arbor: University of Michigan Press, 1998). 22. Richard Thaler, “Mental Accounting and Consumer Choice,” Marketing Science 4: 3 (1985), pp. 199–214. Briguglio et al., “Behavioral Economics in Film”, p. 20 provides a link to an amusing clip that neatly captures the essence of mental accounting. 23. Ogaki and Tanaka, Behavioral Economics, p. 65; Makoto Nakada, “Attachment or Ownership: Reference Point Shifts and an Experimental Test of Attachment,” Keio/Kyoto Joint Global COE Discussion Paper Series 2012–012, Keio/Kyoto Joint Global COE Program. 24. John A. List, “Neoclassical versus Prospect Theory: Evidence from the Marketplace,” Econometrica 72: 2 (2004), pp. 615–625. 25. Kahneman, Thinking Fast and Slow, pp. 339 and 372. 26. Pekka Sutela, Economic Thought and Economic Reform in the Soviet Union (Cambridge: Cambridge University Press, 1991), pp. 131–132. Others have seen the economy driven by a similarly hierarchical, but more “militarised mobilizational model”, where production campaigns substituted for actual military campaigns.

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Jeffrey Kopstein, “Ulbricht’s and Honecker’s Volkstaat? The Common Economic History of Militarized Regimes,” in Harmut Berghoff and Uta Andrea Balbier (eds.), The East German Economy, 1945–2010: Falling Behind or Catching Up? (Cambridge: Cambridge University Press, 2013), pp. 177–194. 27. Katharina Schreiner, Das Zeiss-Kombinat: Ein fragmentarisches Zeitzeugnis 1975/1985 (Jena: Jenaer Forum für Bildung und Wissenschaft, 1999), pp. 26–27. 28. Quoted in Moshe Lewin, The Soviet Century (London: Verso, 2005), p. 32. 29. Mary Fulbrook, The People’s State: East German Society from Hitler to Honecker (New Haven; Yale University Press, 2005), pp. 183– 184; Stefan Wolle, The Ideal World of Dictatorship: Daily Life and Party Rule in the GDR, 1971–1989 (Berlin: Ch. Links Verlag, 2019 [translation of original German-language edition, 1998]), p. 128. 30. Die Stiftung Archiv der Parteien und Massenorganisationen der DDR im Bundesarchiv, Protokolle des Politbüros des Zentralkomitees der Sozialistischen Einheitspartei Deutschlands (MikroficheEdition) DY 30 1949–1989 bearbeitet von Elrun Dolatowski, Konrad Reiser, Simone Walther, Sylvia Gräfe und Ute Räuber (Berlin 1999–2015), accessible at http://www.argus.bstu.bun desarchiv.de/dy30pbpr/index.htm; idem, “Einleitung” Politbüro des ZK der SED (Beschlussauszüge und Rundschreiben) DY 30 1953—1989 bearbeitet von Sylvia Gräfe (Berlin 2005), accessible at http://www.argus.bstu.bundesarchiv.de/dy30pbbur/ index.htm. 31. Jonathan R. Zaitlin, The Currency of Socialism: Money and Political Culture in East Germany (New York: Cambridge University Press, 2007), p. 52, fn 110. 32. See, for example, Peter C. Caldwell, Dictatorship, State Planning and Social Theory in the German Democratic Republic (Cambridge: Cambridge University Press, 2003), p. 175. 33. Raymond Bentley, Technological Change in the German Democratic Republic (London: Routledge, 2019 [reprint of 1984 original edition]), pp. 215–216. 34. Wolle, Ideal World of Dictatorship, p. 179.

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35. Fulbrook, The People’s State, pp. 40 and 192–194; Jeanette Z. Madarásy, Working in East Germany: Normality in a Socialist Dictatorship, 1961–79 (New York: Palgrave-Macmillan, 2006), especially pp. 30, 41, 87; Manfred G. Schmidt and Gerhard A. Ritter, The Rise and Fall of a Socialist Welfare State: The German Democratic Republic and German Reunification (Berlin: Springer, 2013), pp. 54–56; Mark Allinson, Politics and Popular Opinion in East Germany, 1945–68 (Manchester: Manchester University Press, 2000), pp. 140–152; Gareth Pritchard, The Making of the GDR, 1945–53 (Manchester: Manchester University Press, 2004), pp. 165–166; and Corey Ross, Constructing Socialism at the GrassRoots: The Transformation of East Germany, 1945–65 (London: Macmillan, 2000), pp. 86–87, 136, 170, 204 and 208. 36. Abhijit V. Banerjee, “A Simple Model of Herd Behaviour,” Quarterly Journal of Economics 107: 3 (1992), pp. 797–817. 37. Ward Farnsworth, The Legal Analyst: A Toolkit for Thinking about the Law (Chicago: University of Chicago Press, 2007). 38. Baddeley, Behavioural Economics, pp. 104–105; David Hirschleifer and Siew Hong Teoh, “Herd Behaviour and Cascading in Capital Markets: A Review and Synthesis,” European Financial Management 9: 1 (2003), pp. 25–66; Kenneth A. Froot, David S. Schafstein, Jeremy C. Stein, “Herd on the Street: Informational Inefficiencies in a Market with Short-Term Speculation,” Journal of Finance 47: 4 (1992), pp. 1461–1484. 39. Ogaki and Tanaka, Behavioral Economics, pp. 8 and 46; Baddeley, Behavioural Economics, pp. 50–57. 40. For a good overview of the literature and the concept’s applications, see, inter alia, Lisa R. Anderson and Charles A. Holt, “Classroom Games: Information Cascades,” Journal of Economic Perspectives 10: 4 (Fall 1996), pp. 187–193; Bo˘gaçhan Çelen and Shachar Kariv, “Distinguishing Informational Cascades from Herd Behavior in the Laboratory,” American Economic Review 94: 3 (May 2004), pp. 484–498; Wenjing Duan, Bin Gu and Andrew B Whinston, “Informational Cascades and Software Adoption on the Internet: An Empirical Investigation,” MIS Quarterly 33: 1 (March 2009), pp. 23–48; Robert J. Schiller, “Rhetoric and Economic Behavior: Conversation, Information and Herd

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Behavior,” American Economic Review: Papers and Proceedings 85: 2 (May 1995), pp. 181–185; Sushil Bikchandani, David Hirschleifer, and Ivo Welch, “Learning from the Behaviour of Others: Conformity, Fads and Informational Cascades,” Journal of Economic Perspectives 12: 3 (1998), pp. 151–170; David Easley, Networks, Crowds and Markets: Reasoning about a Highly Connected World (Cambridge: Cambridge University Press, 2010), esp. pp. 483–506; Clay Shirky, Here Comes Everybody: The Power of Organizing without Organizations (New York: Penguin, 2008), esp. 161–164; and Michelle Baddeley, “Herding, Social Influences and Behavioural Biases in Scientific Research,” European Molecular Biology Organisation Reports 16: 8 (2015), pp. 902–905. 41. Further details including the mathematical underpinnings of information cascades can be found in Sushil Bikchandani, David Hirschleifer, and Ivo Welch, “A Theory of Fads, Fashions, Custom, and Cultural Change as Informational Cascades,” Journal of Political Economy 100: 5 (October 1992), pp. 992–1026. 42. When p = 0.5, the probability that the option is right is no different from what would occur randomly; hence, the signal conveys no information. 43. For our purposes, there is no need to go into the details of how this probability is derived mathematically or, for that matter, what the probability is of a cascade either not forming or a forming around an option that is actually right (or wrong). Such information as well as a generalisation of the model are provided with full mathematical proofs in Bikchandani et al., “Fads, Fashion Custom and Cultural Change”. 44. A social media influencer is a good example of a “fashion leader”. This is a type of social media marketing that uses endorsements and product mentions from influencers, people and organisations who have a purported expert level of knowledge or social influence in their field. 45. Bikchandani et al., “Fads, Fashion Custom and Cultural Change”, p. 1016. 46. Çelen and Kariv, “Distinguishing Informational Cascades from Herd Behavior”, p. 2. 47. Joydip Dhar and Abhishek Kumar Jha, “Analyzing Social Media Engagement and its Effect on Online Product Purchase Decision Behaviour,” Journal of Human Behavior in the Social Environment

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24: 7 (2014), pp. 791–798; Dedy Darsono Gunawan and KunHuang Huarng, “Viral Effects of Social Networks and Media on Consumers’ Purchase Intention,” Journal of Business Research 68: 11 (2015), pp. 2237–2241; Christy M. K. Cheung, Bo Sophia Xiao and Ivy L. B. Liu, “Do Actions Speak Louder than Voices? The Signalling Role of Social Information Cues in Influencing Consumer Purchase Decisions,” Decision Support Systems 65: C (September 2014), pp. 50–58.

References Primary Sources (A) Archival Files (i) Bundesarchiv Die Stiftung Archiv der Parteien und Massenorganisationen der DDR im Bundesarchiv, Protokolle des Politbüros des Zentralkomitees der Sozialistischen Einheitspartei Deutschlands (Mikrofiche-Edition) DY 30 1949–1989 bearbeitet von Elrun Dolatowski, Konrad Reiser, Simone Walther, Sylvia Gräfe und Ute Räuber (Berlin 1999–2015), accessible at http://www.argus.bstu.bundes archiv.de/dy30pbpr/index.htm ; idem, “Einleitung” Politbüro des ZK der SED (Beschlussauszüge und Rundschreiben) DY 30 1953–1989 bearbeitet von Sylvia Gräfe (Berlin 2005), accessible at http://www.argus.bstu.bundes archiv.de/dy30pbbur/index.htm.

Secondary Sources Allinson, Mark. 2000. Politics and Popular Opinion in East Germany, 1945–1968. Manchester: Manchester University Press. Anderson, Lisa R., and Charles A. Holt. 1996. Classroom Games: Information Cascades. Journal of Economic Perspectives 10 (4): 187–193. Baddeley, Michelle. 2015. Herding, Social Influences and Behavioural Biases in Scientific Research. European Molecular Biology Organisation Reports 16 (8): 902–905. Baddeley, Michelle. 2017. Behavioural Economics: A Very Short Introduction. Cambridge: Cambridge University Press. Banerjee, Abhijit V. 1992. A Simple Model of Herd Behaviour. Quarterly Journal of Economics 107 (3): 797–817.

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Barberis, Nicholas, Ming Heung, and Richard H. Thaler. 2006. Individual Preferences, Monetary Gambles, and Stock Market Participation: A Case for Narrow Framing. American Economic Review 96 (4): 1069–1090. Bentley, Raymond. 2019. Technological Change in the German Democratic Republic. London: Routledge. Bikchandani, Sushil, David Hirschleifer, and Ivo Welch. 1992. A Theory of Fads, Fashions, Custom, and Cultural Change as Informational Cascades. Journal of Political Economy 100 (5): 992–1026. Bikchandani, Sushil, David Hirschleifer, and Ivo Welch. 1998. Learning from the Behaviour of Others: Conformity, Fads and Informational Cascades. Journal of Economic Perspectives 12 (3): 151–170. Briguglio, Marie, G. Charity-Joy Acchiardo, Dirk Mateer, and Wayne Geerling. 2020. Behavioral Economics in Film: Insights for Educators. Journal of Behavioral Economics for Policy 4 (1): 17–28. Caldwell, Peter. 2003. Dictatorship, State Planning, and Social Theory in the German Democratic Republic. Cambridge: Cambridge University Press. Camerer, Colin F. 2000. Prospect Theory in the Wild. In Choices, Values and Frames, ed. Daniel Kahneman and Amos Tversky, New York: Cambridge University Press. Çelen, Bo˘gaçhan, and Shachar Kariv. 2004. Distinguishing Informational Cascades from Herd Behavior. American Economic Review 94 (3): 484–498. Cheung, Christy M.K., Bo Sophia Xiao, and Ivy L.B. Liu. 2014. Do Actions Speak Louder than Voices? The Signalling Role of Social Information Cues in Influencing Consumer Purchase Decisions. Decision Support Systems 65: 50–58. Dharm, Joydip, and Abhishek Kumar Jha. 2014. Analyzing Social Media Engagement and Its Effect on Online Product Purchase Decision Behaviour. Journal of Human Behavior in the Social Environment 24 (7): 791–798. Drucker, Peter. 2016. The Peter F. Drucker Reader: Selected Articles from the Father of Modern Management Thinking. Cambridge, MA: Harvard Business Review Press. Duan, Wenjing, Bin Gu, and Andrew B. Whinston. 2009. Informational C and Software Adoption on the Internet: An Empirical Investigation. MIS Quarterly 33 (1): 23–48. Easley, David. 2010. Networks, Crowds and Markets: Reasoning about a Highly Connected World. Cambridge: Cambridge University Press. Farnsworth, Ward. 2007. The Legal Analyst: A Toolkit for Thinking about the Law. Chicago: University of Chicago Press. Froot, Kenneth A., David S. Schafstein, and Jeremy C. Stein. 1992. Herd on the Street: Informational Inefficiencies in a Market with Short-Term Speculation. Journal of Finance 47 (4): 1461–1484.

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Fulbrook, Mary. 2005. The People’s State: East German Society from Hitler to Honecker. New Haven: Yale University Press. Gunawan, Dedy Darsono, and Kun-Huang. Huarng. 2015. Viral Effects of Social Networks and Media on Consumers’ Purchase Intention. Journal of Business Research 68 (11): 2237–2241. Herbst, Andreas, Gerd-Rüdiger Stephan, and Jürgen Winkler, eds. 1997. Die SED: Geschichte, Organisation, Politik. Ein Handbuch. Berlin: Dietz Verlag. Hirschleifer, David, and Siew Hong Teoh. 2003. Herd Behaviour and Cascading in Capital Markets: A Review and Synthesis. European Financial Management 9 (1): 25–66. Kahneman, Daniel. 2011. Thinking Fast and Slow. London: Penguin. Kahneman, Daniel, and Amos Tversky. 1979. Prospect Theory: An Analysis of Decision under Risk. Econometrica 47 (2): 263–292. Kahneman, Daniel, Jack L. Knetsch, and Richard H. Thaler. 1991. Anomalies: The Endowment Effect, Loss Aversion, and Status Quo Bias. Journal of Economic Perspectives 5 (1): 193–206. Kopstein, Jeffrey. 2013. Ulbricht’s and Honecker’s Volkstaat? The Common Economic History of Militarized Regimes. In The East German Economy, 1945–2010: Falling behind or Catching Up?, ed. Harmut Berghoff and Uta Andrea Balbier, 177–194, Cambridge: Cambridge University Press. Lewin, Moshe. 2005. The Soviet Century. London: Verso. List, John A. 2004. Neoclassical versus Prospect Theory: Evidence from the Marketplace. Econometrica 72 (2): 615–625. Madarásy, Jeanette Z. 2006. Working in East Germany: Normality in a Socialist Dictatorship, 1961–79. New York: Palgrave-Macmillan. McDermott, Rose. 1998. Risk Taking in International Politics: Prospect Theory in Post-War American Foreign Policy. Ann Arbor: University of Michigan Press. Mercer, Jonathan. 2005. Prospect Theory and Political Science. Annual Review of Political Science 8 (1): 1–21. Möbis, Harry. 1999. Von der Hoffnung gefesselt - zwischen Stoph und Mittag unter Modrow. Frankfurt Oder: Frankfurter Oder Editionen. Nakada, Makoto. 2012. Attachment or Ownership: Reference Point Shifts and an Experimental Test of Attachment. Keio/Kyoto Joint Global COE Discussion Paper Series 2012–012, Keio/Kyoto Joint Global COE Program. Ogaki, Masao, and Saori C. Tanaka. 2017. Behavioral Economics: Towards a New Economics by Integration with Traditional Economics. Singapore: Springer Nature. Pirker, Theo, M. Rainer Lepsius, Rainer Weiner, and Hans-Hermann Hertle. 1995. Der Plan als Befehl und Fiktion - Wirtschaftsführung in der DDR. Opladen: Westdeutscher Verlag. Pritchard, Gareth. 2004. The Making of the GDR, 1945–53. Manchester: Manchester University Press.

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Ross, Corey. 2000. Constructing Socialism at the Grass-Roots: The Transformation of East Germany, 1945–65. London: Macmillan. Schiller, Robert J. 1995. Rhetoric and Economic Behavior: Conversation, Information and Herd Behavior. American Economic Review: Papers and Proceedings 85 (2): 181–185. Schmidt, Manfred G., and Gerhard A. Ritter. 2013. The Rise and Fall of a Socialist Welfare State: The German Democratic Republic and German Reunification. Berlin: Springer. Schreiner, Katharina. 1999. Das Zeiss-Kombinat: Ein fragmentarisches Zeitzeugnis 1975/1985. Jena: Jenaer Forum für Bildung und Wissenschaft. Shirky, Clay. 2008. Here Comes Everybody: The Power of Organizing without Organizations. New York: Penguin. Silverstein, Sara. 2016. We Tested an Economic Theory by Trying to Buy People’s Lottery Tickets for Much More Than They Paid. Business Insider, 7 May 2016. Accessed 29 Sept 2021 https://www.businessinsider.com.au/ regret-avoidance-plays-into-lottery-tickets-2016-5. Sutela, Pekka. 1991. Economic Thought and Economic Reform in the Soviet Union. Cambridge: Cambridge University Press. Thaler, Richard. 1985. Mental Accounting and Consumer Choice. Marketing Science 4 (3): 199–214. Uschner, Manfred. 1993. Die zweite Etage - Funktionsweise eines Machtapparates. Berlin: Dietz Verlag. Vieider, Ferdinand M., and Barbara Vis. 2021. Prospect Theory and Political Decision Making. In Oxford Research Encyclopedia of Politics. Retrieved 26 August 2021, from https://oxfordre.com/politics/view/https://doi.org/ 10.1093/acrefore/9780190228637.001.0001/acrefore-9780190228637e-979. Wasserman, Larry. 2004. All of Statistics: A Concise Course in Statistical Inference. New York: Springer. Wolle, Stefan. 2019. The Ideal World of Dictatorship: Daily Life and Party Rule in the GDR, 1971–1989. Berlin: Ch. Links Verlag. [translation of original German-language edition, 1998]. Zaitlin, Jonathan R. 2007. The Currency of Socialism: Money and Political Culture in East Germany. New York: Cambridge University Press.

CHAPTER 3

Establishing the Socialist Workplace: Labour, Norms and the Introduction of Piecework

In May 1945, Germany awoke from the nightmare of National Socialism to a world of abject defeat, foreign occupation and extreme privation. Many of its towns and cities and much of its infrastructure lay devastated, its people traumatised by almost six years of merciless war, and much of its once-powerful economy in ruin. The future appeared bleak. The most pressing task at hand was to put the tragedy of the past decade behind it and fashion a new beginning. Yet, much more was called for here than the simple reinstatement of the status quo ex ante. No, this time things would be different. A consensus reigned across Germany that it must be rebuilt in such a way that those failings of the past, which had helped usher in depression, fascism and war, would not be repeatable. Germany would be built back better. It was an aspiration that extended to the reconstruction of the economy. Germans of all political persuasions accepted that it, too, would have to be different. The restoration of unconstrained and unregulated markets guided by powerful industrialists of the Weimar period would no longer be acceptable. Instead, state control and regulations must be afforded greater scope. Nor were these ideas championed by just the left and trade unionists. Different German states (Länder) actively sought to enshrine nationalisation in their post-war constitutions.

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 G. B. Magee and W. Geerling, Socialism with a Human Face, Palgrave Studies in Economic History, https://doi.org/10.1007/978-981-19-0664-0_3

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Even the Christian Democratic Union (Christlich-Demokratische Union or CDU ) was not immune. Its Ahlen Programme for the British Occupation Zone from February 1947 openly criticised the capitalist economic system, guaranteed wide-ranging codetermination rights for workers, and advocated economic planning and the decartelisation and nationalisation of some large-scale industry.1 In the Soviet Occupation Zone, the possibilities for change seemed even more propitious. The Communist Party of Germany (Kommunistische Partei Deutschlands or KPD) sought to leverage its position of influence with the occupying authorities to turn the pervasive sentiment of the time for change into a drive for the Sovietisation of the German economy. Internal party disagreements and geopolitical realities held these aspirations in check for a while; yet, when the opportunity finally arose to move in that direction, albeit in a piecemeal manner, it posed a very real and practical question: how exactly does an imposed government without a mandate erect a new economic order over the wreck of an older one? New economic systems cannot be simply conjured out of thin air. Nor can they be accomplished by diktat alone. All economic systems, including those of the socialist variety, are more than the sum of their parts. The component parts of a functioning Stalinist command economy, after all, extended well beyond the formal architecture of planning and control. These were, of course, essential, but they could only function if placed in a setting that was conducive. Just as organ transplants can be rejected by the recipient’s body, new institutions out of touch with, and unaccepted by, the community it works for are unlikely to take.2 This chapter examines the process whereby socialist workplace norms were introduced and gradually accepted in East Germany. Here, the focus is on the formation of ‘core’ norms: work habits and routines, disciplines and modes of remuneration central to getting things done on the shop floor. For the system to function, these norms needed to be broadly accepted by workers; they need not be warmly embraced by them, however. These “core” norms can be thought of as the rules of work, the rules that even the disengaged, unmotivated worker takes for granted. In attempting to reshape the workplace, the fledgling Socialist Unity Party (Sozialistische Einheitspartei Deutschlands or SED) government faced a formidable challenge. It is, of course, a problem that all economic systems confront, especially in their gestation periods. The revolutionary new work norms based on “punctuality, respect for hierarchy, frugality, and temperance” that the factory system introduced during the industrial

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revolution in Britain were resisted by a first-generation workforce more accustomed to less routinised rural work.3 Factory norms, however, gradually took root, largely thanks to the determined use of incentives—both of the carrot and stick varieties. Appropriate behaviour was rewarded with better pay, promotion and other benefits; bad behaviour with the opposite, plus the added threat of unemployment. Indeed, the existence of competitors beyond the factory’s walls prompted both workers and bosses to respond to and implement appropriate incentives. But how were norms and new work practices established in a Sovietstyle system largely devoid of competitive mechanisms? This chapter addresses this issue with reference to the introduction in occupied East Germany of one important element of the Soviet workplace: piecework (Akkordarbeit ). Much is already known about the establishment of piecework in East Germany. This research has provided a wealth of detail on how workers perceived and resisted piecework. The story of the party’s concessions and arrangements with its workers has been vividly told.4 Either because piecework challenged the traditions of the German labour movement or because it upset the perceived social contract between the worker and boss, the East German labour force opposed its introduction on the shop floor wherever possible.5 In the words of Jeffrey Kopstein, this “everyday resistance” to piecework gave rise to a “cat-and-mouse game” between the state and the working class, a game where the state was constantly forced to put aside its plans to appease the workers.6 Given its ultimate fate, the GDR’s “system-immanent defects” and pathdependence almost lends a sense of futility to the game.7 Demise can be read into every act. Yet, this was surely not how the process seemed from the perspective of the late 1940s. The communist movement, and many who opposed it, did not see its actions as pointless or futile. The possibility that it might build a new and “better” society appeared very real. Nor is it likely that its changes of direction were simply reactions to worker resistance. Such resistance was, of course, an important part of the scenario, and we are indebted to those whose research has uncovered it. Yet resistance was just one part of the story, and needs to be placed in a broader context. This chapter uses a wide range of party, union, state and personal archives as well as contemporary newspapers, magazines, and memoirs. Inter alia it explores how the party’s ability to control the economy—and itself— shaped the evolution of the East German workplace. The focus is thus not just on resistance but also the interactions between party and worker,

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between the different organisations operating within the occupation zone, between the Soviet military and the German communists, and within the party itself. In particular, the experience of introducing piecework—a process which proved both testing and didactic for the party—illustrated the fundamental importance of establishing effective, functional signalling mechanisms within planned economies.

3.1 Inauspicious Beginnings: “Ein Gewirr von Sonderregelungen ”8 Following the defeat of Nazi Germany, a Soviet Occupation Zone (Sowjetische Besatzungszone or SBZ ) was set up to oversee most of the eastern territories, which would later become the GDR. A military government better known by its German acronym, SMAD, was created in an environment marked by utter chaos and confusion. Initially, SMAD concentrated on security considerations, extracting reparations, supplying occupying Soviet forces, and feeding the local population. While SMAD did reshape the East German political order by breaking up the large estates of the Junkers and by merging the KPD and the Social Democratic Party of Germany (Sozialdemokratische Partei Deutschlands or SPD) into the SED in April 1946, at this stage it had no intention of building a Soviet-style economy in the SBZ . Indeed, despite the private urgings of leading German communists for the immediate introduction of socialism, Stalin appears to have favoured a united, democratic Germany, disarmed and denazified.9 Such a position limited the power of SMAD to intervene in an economy significantly weakened by war damage. Nor was there clarity as to who was responsible for the management of the economy in the SBZ . SMAD’s central administration remained unregulated and largely without the means to implement measures. Economic authorities meanwhile had emerged in each of the different German Länder. Their focus was naturally regional and practical. Undesirable SMAD central administration instructions were sidestepped, limiting any chance of policy coordination within the SBZ . As Marshal Zhukov conceded at the time, the Länder were “in no way subordinated to the central administration”, which was not empowered to issue them instructions or place their offices under its control.10 Unrestrained and competing with each other for scarce resources, Länder’s policies often conflicted and heightened the economic confusion of the time.11

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The lack of clear economic direction was compounded by what was occurring on the ground. Workplace councils formed spontaneously in the final days of the war, often with Soviet acquiescence. In thousands of workplaces throughout the SBZ , employees took advantage of their newfound freedom and abolished detested symbols of Taylorism, such as clocking-in machines and piecework. An egalitarian, cooperative spirit permeated the shop floor.12 Wages—monetary or in kind—were equalised, and any profit shared among workers. Economic necessity guided these developments. No work meant starvation for people suffering from both the deprivations of war and ongoing reparations. The SBZ had no clear policy towards workplace relations. As Gareth Pritchard has noted: “If an economic catastrophe were to be averted, the authorities…had little choice but to work with the councils, for they constituted the one active and constructive force in East German industry”.13 As long as they did not interfere with political considerations or reparations, workplace councils were left alone.14 By the end of 1945, workplace councils existed in most enterprises across the SBZ .15 The communist movement, whose leaders had been advocating centralised control of the economy, therefore, decided to harness the influence of these councils for its own ends. In a speech given on 29 August 1945, Walter Ulbricht acknowledged that workplace councils had a central role to play in reconstruction.16 This embrace of egalitarianism and worker management was pure pragmatism. In an environment, where many owners, managers and employers had been tainted by their association with Nazism and, hence, driven out, someone or something needed to fill the void in the short term. Workplace councils were thus expected to carry great responsibilities: overseeing appointments and dismissals, monitoring prices, setting wages and norms, guarding against sabotage and implementing denazification.17 Unsurprisingly, wage policy in the zone remained confused. Egalitarianism coexisted alongside wage differentiation. A temporary wage freeze was put in place throughout all occupied zones in 1945. New wages were supposed to correspond to existing wage laws, but exceptions were permissible in certain cases, such as when there was a pressing need for raw materials.18 Early SMAD orders strengthened the “egalitarian” push of the workplace councils: an 8 hour day (48-hour working week) was regulated in February 1946; confirmed paid holidays offered in May 1946; and in a move designed to encourage people to move back into the industry, equal pay for equal work (men, women and juveniles) was

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established in August 1946. A minimum wage of RM 104 per month was introduced in 1947.19 The overriding concern for SMAD at this point was to find a way to make the SBZ self-sufficient, and this could only be achieved through a rapid, sustainable increase in production in key industries. Thus, at the same time as wages were being harmonised across most industries in the SBZ , strong wage differentiation was being introduced for “specialist workers”.20 The coexistence of Länder-operated nationally owned enterprises (Volkseigener Betrieb or VEB), Soviet-controlled corporations (Sowjetische Aktiengesellschaft ) and privately owned companies amplified the differences in practice across the economy. In 1945–1946, the anti-egalitarianism of piecework was hard to justify, especially to the rank and file of the party where notions of levelling were popular. The German labour movement had a long tradition of opposing piecework. When large enterprises began adopting piecework and elements of Taylorism in the 1920s, trade unions countered with the slogan: “Akkord ist Mord” (piecework is murder).21 Outright union rejection gradually gave way to conciliation in the Weimar Republic: if piecework could not be abolished, then the most exploitative aspects of it would be mitigated through labour contracts.22 The KPD, however, had resolutely opposed piecework throughout the Weimar and Nazi periods, though its opposition gave way to pragmatism in 1945 when the magnitude of the calamity facing East Germans became evident. Piecework was acceptable, but only in exceptional cases. As Jörg Roesler noted “in the East at first, not just the workers but also leading economic functionaries of the SED, sensed that the piecework wage as material incentive would be needless in a future socialist Germany, as they were acting as owners of the confiscated enterprises”.23 Hamstrung by circumstances and for want of any other real alternative course of action, party leaders began advocating that natural ideological drive and pure idealism could substitute for real control over the workplace. Fritz Selbmann, at the time Minister for the Economy and Economic Planning in Saxony, spoke of the hopeful sign of a new relationship to work from the “activists of the first hour”, who on the basis of their “forward-looking political objectives” and “love for their people” prompted them to “take over the leadership in reconstruction”.24 Yet, here the SED was just making the most of a bad situation. The wage regime which emerged in the period following the war was guided

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by an uncertain mix of worker spontaneity, ad hoc activism and official expedience. As Fritz Selbmann told Bruno Leuschner, head of the SED’s Department of Economics and Finances: “the totally confused measures” of SMAD bred a “chaotic situation” and ensured that real economic control could not be established.25 The material conditions for the introduction of a SBZ-wide, performance-related wage did not exist in the period 1945–1947. Change, when it did arrive, was prompted by economic crisis and the worsening relations between the Soviets and Western Allies.

3.2 First Steps: “Mehr Produzieren, Gerechter Verteilen, besser leben! ”26 In the years immediately following the war, Soviet attitudes to the future of East Germany were conditioned by the desire not to provoke international conflicts. While the possibility of a united Germany remained, Joseph Stalin did not want to give the impression that a new state was being built in the SBZ. By 1947, however, he had come to the conclusion that his one-state solution was off the cards. Coupled with the acute food shortages that followed the harsh winter of 1946–1947, the growing realisation that the zone might indefinitely remain under Soviet control led to a shift in thinking at the highest levels of the SBZ: some control of the economy needed to be handed over to local administration.27 On 4 June 1947, SMAD Order 138 established the German Economic Commission (Deutsche Wirtschaftskommission or DWK ).28 Under the chairmanship of Heinrich Rau, the DWK, the first German administrative body responsible for the entire zone, was expected to coordinate all economic activities within the SBZ . The formation of the DWK, however, did not signal Soviet acceptance of the Sovietisation of the economy; rather it was a pragmatic response of SMAD to the internal and external exigencies (including the loss of natural trading partners with the formation of the Bizone) it faced in 1947. The new DWK immediately launched itself into an intensive debate about piecework, a debate that would ultimately lead to the adoption of the motto: “produce more, distribute fairer, live better” at the Second SED Party Congress in September 1947.29 The DWK realised that, alone, the “activists of the first hour” would not save the SBZ . Drawing on the precedent set by the Soviet experience, Walter Ulbricht justified the use of piecework in a “democratic economy” because this system could

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no longer be used for the exploitation of the workforce and the increase in production—one of its final goals—would be used for the benefit of all.30 Was this belated embrace of some of the features of Taylorism that had been most despised by the communists in the Weimar period simply a case of political expediency or, worse, muddled thinking? Our reading of the East German experience suggests an alternative explanation that lies in the party’s understanding of the process of change. In Marxist dialectical materialism, the synthesis, or the outcome of change, is believed to evolve out of, and contain elements of, the thesis (the old state of affairs) and antithesis (the contradictory factors that emerged from the old state of affairs and prompted change). In the process of change, those retained elements lose their contradictory and disharmonious natures and become consistent with the new mode of production.31 What this means in practice is that socialism is bound to contain some of the useful, innovative features of capitalism. This strand of thought was clearly apparent in Vladimir Lenin’s view of Frederick Winslow Taylor even prior to the Russian revolution. For example, in a 1914 article, in which he claimed (in the title no less) that Taylorism represented ‘man’s enslavement by the machine’, Lenin could still conclude that: The Taylor system—without its initiators knowing or wishing it—is preparing the time when the proletariat will take over all social production and appoint its own workers’ committees for the purpose of properly distributing and rationalising all social labour. Large-scale production, machinery, railways, telephone – all provide thousands of opportunities to cut by three-fourths the working time of the organised workers and make them four times better off than they are today.32

Apart from the fact that this pre-revolutionary article contains both the positive and the critical assessment of Taylorism—ruling out the claim that he later changed his position on the topic when confronted by the exigencies of governing Russia33 —it is also important because it shows that Lenin’s evaluation of Taylor is embedded in his understanding of historical processes. Stripped of its exploitative, capitalistic elements, Taylorism could, and would, be crucial to the new society.34 The SED’s rationalisation for its adoption of differential piece rates and technically based work norms (Technische Arbeitsnormen or TANs ) in 1948–1949 is consistent with such an understanding. The East German party’s thinking

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may have been flawed, and it may have been unconvincing to many workers, but it is unlikely, at least in this matter, that its words were entirely hollow or cynical. In addition to having a wealth of Soviet experience and expertise on piece rate and norm determination on tap,35 the East German communists, of course, had significant home-grown experience to draw upon. As in many European countries, scientific management became popular in business circles in Germany in the 1920s. This interest soon became institutionalised. In 1921, the Association of German Engineers (Verein Deutscher Ingenieure or VDI ) established a Committee for Economic Production, from which a subcommittee with a distinctly Taylorist bent was formed. This subcommittee devoted its attentions to investigating ways to save work time, reduce the tiredness of workers, detect mistakes and calculate and calibrate all dimensions of work. In September 1924, the subcommittee broke from the VDI and reconstituted itself as the National Committee for Determining Work Times (Reichsausschuss für Arbeitszeitermittlung or REFA).36 REFA quickly established itself as the most important and enduring of the Taylorist organisations in Germany, acting as consultants to a range of German businesses during the Weimar Republic. During the Nazi period, the organisation was integrated into the German Labour Front (Deutsche Arbeitsfront ), where, together with the more human relations-orientated German Institute of Labour Science and German Institute for Technical Labour Training, it continued to provide advice on the rationalisation of German workplaces, now, though, in a manner consistent with the Nazis’ vision of a people’s community.37 This engagement and association with National Socialism, however, would prove problematic for REFA—and Taylorism more generally—in post-war East Germany. The new resolve of the SED to adopt piecework was supported by SMAD. On 9 October 1947, it issued Order 234. Dubbed the “Construction Order” (Aufbaubefehl ), it consisted of a broad series of measures designed to address the most urgent issues facing the SBZ . Point 4 of the order called for the systematic expansion of piecework wages, the clearest sign yet that wage differentiation would be centralised and coordinated from above and that material stimuli—not egalitarianism—would drive the economic revival.38 In contrast to earlier laws and rulings, this order was: “not an ad hoc response to economic and social problems in the SBZ ”.39 The order may have been issued by SMAD, but the main work behind the scenes came

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from the East Germans: the SED, the Free German Trade Union Association (Freier Deutscher Gewerkschaftsbund or FDGB) and the DWK worked closely together on Order 234. Herbert Warnke, President of the FDGB, and his Deputy, Hans Jendretzky, edited the final text.40 Broadly applied economic incentives, often in the form of wage differentials, were the centrepiece of a campaign from the aforementioned agencies to win the “hearts and minds” of workers. The SMAD newspaper, Tägliche Rundschau, printed 100,000 brochures about Order 234 on 10 October 1947. The day before, a press conference was called to promote the order where Max Herm, Deputy President of the Ministry for Labour and Social Welfare (Ministerium für Arbeit und Sozialfürsorge or MAS), discussed the “wording” of Order 234 with 20 workplace councils and trade unions.41 As noted earlier, for many workers piecework was tainted by its association with capitalist and Nazi industrial life. Workplace councils across the country had abolished it in 1945 as one of their first acts. As a result, the party anticipated significant opposition to the extension of piecework. In a sitting of the FDGB Federal Executive (Bundesvorstand) on the eve of SMAD Order 234, Walter Ulbricht spoke of the need for a “change in attitude towards work” within enterprises.42 The order aimed to transcend traditional workplace practices. The party leadership faced challenges both from the workforce and from within. As a report sent to the SED Party Executive (Parteivorstand) from a local SED group in Kösteritz in December 1947 illustrates, a “lingering egalitarianism” among many workers was causing internal divisions within the SED.43 Why is work morale sinking? Because the incentive to work is missing! The real wage, which sinks from month to month, is a fact that higher piece rates won’t change. There are only a few idealists among the workers who today can develop a better attitude towards work. The attitude which dominates is that all these measures will lead to higher exploitation and lead to little good for the majority. We must use our eyes and ears to understand the masses. And the masses say: don’t let yourself be exploited. Don’t let yourself be exploited, for you are a human being!44

The limited powers of the DWK to curb the actions of Länder posed further problems for policy coordination. The DWK did not yet have the authority to impose orders and conflicting regulations and decisions

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continued.45 As the Thüringen Ministry of Economic Affairs bluntly asserted: “of the decisions of the Berlin Economic Commission, we will implement whatever we consider advisable and correct”.46 The prominence and pervasiveness of workplace councils also limited the DWK’s scope for action. Issues of enterprise management needed to be negotiated with each council. In these discussions, the interests of the enterprise’s workforce usually took precedence. While this situation had been previously tolerated, the SED now saw the councils as obstacles. As Fritz Selbmann explained: “we don’t want an enterprise parliament where the workplace council has to be consulted about every screw that has to be obtained, but…a tight leadership aware of its responsibility upward and downward”.47 The need for Soviet-style one-man-rule and a more centralised control of the economy were now acknowledged. Moreover, it came to be realised that working-class resistance to piecework could, indeed should, be broken with the assistance of the trade union movement. Accordingly, increasing pressure was steadily put on unions and workplace councils to come under the control of the party-run FDGB, whose function, according to Walter Ulbricht, should be to carry out the economicpolitical goals of the party.48 The party used intensive political schooling to make shop stewards and councils “less responsive to pressures from below, and more amenable to manipulation from above”.49 In November 1947, Ulbricht wrote: Of greater importance for the raising of worker productivity are the new work rules, which were devised by the central administration for work together with representatives of the FDGB. In these work rules it is stated that the application of piecework should be expanded as a means to raise worker productivity and wages. While reading these regulations, old trade union colleagues will remember how they earlier fought against piecework and the bonus system. Earlier, that was correct. With the liquidation of the power of corporate and financial capital, the existence of nationally owned enterprises, democratic economic organs and full rights of co-determination for trade unions, we must, however, take a different position.50

The party also realised it needed to give and receive accurate, reliable information in order to promote and gauge the effectiveness of Order 234. At an enterprise level, this would require the cooperation and participation of the FDGB, workplace councils, unions, plant managers and

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workers. 234 Work Groups were set up to get the message down to the grassroots, monitor progress and report back to the SMAD. It was realised that there was also a general lack of “ideological understanding” at the enterprise level and particularly in the press. The problem was twofold: a lack of systematic coordination and the failure to get a single correct message out. A report on the implementation of Order 234 from MecklenburgVorpommern, for example, concluded that in that Land: The participation of the press in the implementation of Order 234 is weak and mainly inept. To our knowledge, no article has appeared in the Mecklenburg press of a leading government figure or politician about the decree. The examples, which are given by the press, are often exaggerated or have nothing to do with the order in reality. For example, changing the amount that should be produced is repeatedly interpreted as the success of Order 234 by the press.51

Such exaggerations in production numbers often had unintended consequences. An internal report from within the DWK entitled “What must become even better: The Press and ‘234’” noted: The impression is aroused in the labour force that the economy finds itself in a rapid boom (in part, this is because of reports of an increase in production of 30-50 per cent) and the question comes up: where is all this excess production? Moreover, these figures depart from the actual purpose of the construction plan 234, which wants to bring about a rise in worker productivity.52

The Chemnitz branch of the FDGB similarly expressed “irritation” with newspaper reports which presented a different view of reality to the one it saw. One such headline appeared in the Sächsischen Volkszeitung on 15 December 1947: “The piecework system is established”. The story reported that in the Saxon metal industry, the number of workers on piecework rates had risen from 20 per cent at the end of the war to 80 per cent. Subsequent enquiries revealed that the figure in December 1947 was a mere 13.6 per cent (a rise of 7.1 per cent from the previous October), a rate regarded as unsatisfactory.53 The problem lay not in the fact that the information was false, rather in the signal it sent to the workers. A report from a 234 Work Group in April 1948 found: “In the press, numbers about the expansion [of piecework] are repeatedly given

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which are extremely exaggerated. It is even claimed here and there that the percentage has already risen again to approximately 70–80 per cent. Such reports must lead to neglect in the task of expanding wage differentials”.54 A similar report concluded: “These irresponsible numbers lead one to assume this important task has been ‘solved’ and is not to be worried about”.55

3.3 Establishing Control: Der Leistungslohn und der Progressive Akkord56 By the beginning of 1948, the SED had demonstrated the will to take control of the economy; what it still lacked was an ability to do so effectively. Despite its hopes, the DWK simply did not have the means at its disposal to take on the power and influence of the Länder and the workplace councils. More than that, the party also began to realise it did not have the mechanisms in place, both outside and, worryingly, inside the SED, to mould convention and opinion in ways conducive to its goals.57 As a consequence, over the course of the second half of 1947 it had made relatively little progress in establishing order and control over the SBZ ’s economy. Such an assessment clearly applied to its attempt to introduce piecework. At the behest of SMAD, members of the DWK travelled across the zone in early 1948 and compiled a series of reports on the implementation of Order 234. The picture which emerged was not encouraging. Before 1945, 80 per cent of the industrial workforce performed under piecework conditions.58 This had fallen to 20–25 per cent by 1946 and a half-year report from MAS in April 1948 showed the percentage of workers on piecework in early 1948 had barely risen: from 23 to 26 per cent.59 Another report from the same period found that the rate was approximately 25–30 per cent.60 Rates of piecework remained relatively high in leading industries like coal mining, which were not so affected by material shortages. Nevertheless, norm fulfilment remained below pre-war levels.61 The DWK attributed its failure to three factors. The first was its lack of authority over the economy and inability to bring SMAD and Länder ministries, not to mention workplace councils, under its control. This gave rise to inconsistencies, even inaction in parts. A report on the implementation of the order from Mecklenburg-Vorpommern noted:

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Fundamental measures to raise worker performance have not been tackled so far. The only Ministry that has accomplished systematic work in the direction of the order is the Ministry for Labour and Social Welfare while, for example, the Ministry for Economics explained it actually “has little to do with the order”.62

Further on, it added: “The subjective resistance to the implementation of the order exists in the inadequate or totally absent initiative and activities of different leading figures (Ministry for Trade and Supply, Ministry for Economics, the Agency for Economic Planning) and the unsatisfactory ideological schooling in the enterprises”.63 These agencies and some workplace councils were accused of “indifference”, “inadequate political understanding of the necessity for the order”, “anarchism”, “corruption” even “sabotage”.64 The SED lobbied the Soviets for a significant extension of the DWK’s power. On 12 February 1948, they obliged with the introduction of SMAD Order 32.65 This order gave the DWK the power to legislate and was quickly followed on 9 March by another placing all existing SMAD and Länder administrations under its direct control. The DWK was now the pre-eminent institution in the SBZ with unprecedented authority to manage its economy.66 The second factor that plagued the introduction of piecework was the lack of consistency in how it had been implemented across the SBZ . No common piecework system had been specified. Versions varied between regions and between enterprises. In many cases, the system in operation provided little incentive for improved performance. The old hourly wage would be guaranteed irrespective of output so that workers were not disadvantaged by irregular production. Workers would also be guaranteed a premium or bonus if a certain target was achieved. Often the difference lay in how the “progressive” element was calculated and at what rate of production it cut in. A coal mine in Altenburg, for example, paid workers a bonus of RM 0.50 when they reached 6500 tons per day in January 1948—even though the daily target was 7000 tons!67 The third factor was that even when introduced piecework did not guarantee workers better wages. A DWK report dated 4 February 1948 conceded: “After the introduction of the piecework wage, wages actually fell in many enterprises. Comrade Rau reports this as characteristic for Brandenburg”.68 Unsurprisingly, workers objected.69 The party realised

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that wage differentiation could only succeed if it actually provided workers with incentives to work harder. Real wages had to go up.70 The DWK began work on a series of guidelines that would standardise practice across enterprises and make piecework more attractive, especially for the best workers. While implicitly based on Taylor’s differential piece rate, the party’s preferred design, the ‘progressive piece rate’, sought to go beyond it.71 If implemented properly, workers could theoretically earn unlimited, progressively increasing premiums over the base piece rate for marginally greater production. Dr. Raphael, an expert from the DWK , compiled a document that set out the new and correct rates. In ‘Progressive Piecework Wages – False and True’, Dr. Raphael explained to readers that a genuinely ‘progressive’ wage differential should be based on total output, not just production beyond the norm, as Taylor had suggested.72 The point was illustrated with examples. Assume, for instance, the following: an hourly wage of RM (Reichsmark) 1, or RM 8 per shift, and a normal shift of 4000 units per day.73 If a base piecework rate of RM 2 for every 1000 units is paid, workers earn the same under either system if they meet the daily norm of 4000 units. However, if workers exceed the daily norm by 1000 units, they would also receive pay for the amount in excess of the daily norm at the base rate. Their total wage would increase in line with production increases. This situation, summarised in Table 3.1, describes a piecework system without progression, that is, a system where wage growth merely matches production and extra effort is not rewarded more highly than expected work. Table 3.1 Example of piecework without progression (1) Total production (units) 4000 4200 4400 4600 4800 5000

(2) Increase in total production (%)

(3) Total wage earned (RM)

0 5 10 15 20 25

8 8.4 8.8 9.2 9.6 10

(4) (5) Increase in total Average piece wage earned rate per 1000 over RM8 (%) units (RM) 0 5 10 15 20 25

2.00 2.00 2.00 2.00 2.00 2.00

Note Total wage earned = {8RM.[(column 2/100) + 1]}; Average piece rate per 1000 units = [column 3/(column 1/1000)]

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Now consider Table 3.2 where a bonus of 7 per cent on top of the base rate is paid for a 5 per cent increase in production above the daily norm (which equates to 4200 units) and rises in line with the progression given in column 3. If workers exceed production by 25 per cent (1000 units), they receive a bonus of 33 per cent on top of the base rate. This is Taylor’s differential piece rate design. Yet, this arrangement, we are told, is not as “progressive” as it appears: the bonus is certainly greater than the increase in production, but only applies to the increase in production that is beyond the daily norm (in this case, 4000 units). The initial 4000 units are still paid at the existing base rate: RM 2 per 1000 units or RM 8 per day. In these circumstances, total piecework wage growth moves marginally ahead of the growth of production. Only when above-target production and the size of the bonus become large, do the benefits increase significantly. While an advance on the situation in Table 3.1, this system is only partially “progressive” in that the productive worker receives an extra reward for a part of their work. By contrast, piecework is said to become truly “progressive” when the rewards of exceptional labour are applied across all production (i.e. up to 5000 units), not just the amount above the daily norm (i.e. Table 3.2 Example of piecework with “apparent” progression (1) Total Production (units)

4000 4200 4400 4600 4800 5000

(2) Increase in total production (%)

0 5 10 15 20 25

(5) (4) (3) Total bonus Total Bonus added earned for wage to the base earned for aboverate and produc- target applied to above-target tion up to production (RM) 4000 production units only (%) (RM) 0 7 12 18 25 33

8 8 8 8 8 8

0 0.43 0.90 1.42 2 2.66

(6) Total wage earned (RM)

(8) (7) Increase Average piece in total rate per wage 1000 earned units over (RM) RM8 (%)

8 8.43 8.90 9.42 10 10.66

0 5.4 11.2 17.7 25 33.3

2.00 2.01 2.02 2.05 2.08 2.13

Note Total bonus earned for above-target production = [(column 1 − 5000)/1000].[(column 3/100) + 1]; Total wage earned = (column 4 + column 5); Average piece rate per 1000 units = [column 6/(column 1/1000)]

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on a maximum of 1000 units). Only then does it lose its ‘MordlohnCharakter’ (murder wage characteristic).74 In Table 3.3, such a “progressive” element is added to the design. In this case, the bonus, once earned, is applied to the base rate across all output. The result is wage growth that runs well in excess of production growth at all levels. The full effort of the good worker, it is argued, is acknowledged and rewarded. Nor would such “progressive” piecework lead to a wage explosion that might jeopardise the financial viability of enterprises. Dr. Raphael optimistically contended that the scale economies wrought by greater production would lower overall costs sufficiently to make ‘progressive’ wages affordable. Adopting common guidelines for piecework, however, was not enough. In March 1948, the DWK issued orders that workers who transferred to piecework were to be guaranteed a 15 per cent increase in income.75 In June of that year, a sitting of the SED Parteivorstand upheld this guarantee and made piecework earnings in principle unlimited in amount.76 Performance bonuses were also no longer to be taxed.77 A report from a 234 Work Group in April 1948 claimed that the new approach had delivered positive results. The case of a wire transmission department at a steel mill in Hettstedt was cited. Every machine had a normal production per shift. If workers reached their daily target, each Table 3.3 Example of piecework with “true” progression (1) Total production (units)

4000 4200 4400 4600 4800 5000

(2) Increase in total production (%)

(3) Bonus added to the base rate and applied to above-target production (%)

(4) Base rate per 1000 units at different levels of total production (RM)

(5) Total wage earned (RM)

0 5 10 15 20 25

0 7 12 18 25 33

2 2.14 2.24 2.36 2.50 2.66

8 8.99 9.86 10.86 12 13.3

(6) (7) Increase in Average total wage piece rate earned over per 1000 RM8 (%) units (RM)

0 12.5 23.1 35.8 50.0 66.3

2.00 2.14 2.24 2.36 2.50 2.66

Note Total wage earned = [(column 1/1000).(column 4)]; Average piece rate per 1000 units = [column 5/(column 1/1000)]

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would receive a 10 per cent bonus on top of the base rate; and if they exceeded norms by 20 per cent, this bonus would rise to 15 per cent. Production per head went up from 4.3 tons to 6.95 tons and performance per hour rose from 24.6 kg to 38.9 kg. The report found that workers also took more care with tools and materials and with better use of work time were able to make the same amount with fewer workers (from 132 to 92). The average wage per hour rose from RM 0.99 to RM 1.58, while the highest paid worker now received RM 2.10. The overall wage bill remained unchanged as the earnings were split among fewer workers. In the period from October 1947 to February 1948, norms were exceeded each month and average monthly performance per worker rose 30 per cent.78 Yet, this example was an anomaly in many respects. The shortage economy and soft budget constraint enterprises operated under led to the hoarding of labour. Enterprise managers responded by setting weak output norms that workers could easily meet and exceed, thereby raising total wages and making their enterprise more appealing on the labour market.79 In a letter to Heinrich Rau, a senior SMAD official complained that by September 1948, 80 per cent of workers at VEB Bergbau- und Hüttenkombinat Maxhütte in Unterwellenborn, the only operating pig iron produce in the SBZ, were on “progressive” wage differentials, yet norms were based on the average performance for July and August (the lowest months in the last 18 months). This led to a wage explosion of more than 60 per cent, though year-on-year productivity actually fell by 24 per cent. Similar examples were supplied from foodstuff, coal and industry enterprises.80 Serious divisions were also emerging in the SED over the direction of wage policy. As wages seemingly spiralled out of control, a bureaucratic battle raged behind the scenes over the primacy of “progressive” wage differentials. Fritz Selbmann, now DWK Deputy Chairman, and Gustav Brack, Head of MAS, held opposing views. Selbmann believed that finding ways to increase work effort was key and that workers would only take up piecework if it remained “progressive”. In other words, wages needed to stay high to stimulate workers to work harder. By contrast, Brack contended that the primary focus of policy should be output and norms—not wage—growth. Wage growth that outstripped productivity growth only raised costs and choked off the expansion of output. Wages needed to be held in check until production had risen.81

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An internal document from the DWK hints at how bitter the dispute between the administrative agencies responsible for implementing the order had become.82 It speaks of “a series of open errors on the part of comrades in the party, administration and the unions”, who used material shortages as an excuse for not devoting enough energy towards Order 234.83 “The underestimation of the ideological schooling of the workers has led to them not yet recognizing the new relationship to work”.84 In a shoe factory in Magdeburg, for example: A female worker explained, in response to a query that she was probably in the position to make 130 pairs of shoes instead of 120, that she only made 120 because she received the same income as for 130. Workplace councils and enterprise leaders explained: “The time of piecework is over: piecework is murder.” When the question was raised whether it was known that coal miners work under the earth in bare feet because there are not enough shoes, they saw the error of their ways.85

This criticism was part of a growing, more general, realisation among the SED leadership that simply having a clear party line would achieve nothing if there were no mechanisms to convey that message clearly and speedily down to the shop floor. These mechanisms needed to be found, strengthened and systematically coordinated. In this light, the DWK noted in early 1948 that the press should be better used to propagate the nascent activist movement.86 It was a theme that would be returned to later in the year. Meanwhile, the SED continued its internal battle over wage policy. The internal report mentioned previously openly criticised wage differentials, which did not take “the financial viability of the enterprise … into consideration”.87 Several high-profile figures were castigated for their excessive enthusiasm. Nevertheless, in September 1948, Fritz Selbmann still maintained: “I regard it correct from the outset to treat the question of progressive wage differentials as the dominant question”.88 In an article published in the magazine, Die Einheit , Herbert Warnke likewise argued that the progressive wage differential was the only correct wage system.89 Indeed, as late as November 1948, despite the growing criticism and calls for tighter norms from within the SED and from SMAD, Heinrich Rau could still counter with a different message: “A further question which needs to be cleared is that of norms. One always speaks about the setting of new norms. That appears to be premature and harmful”.90

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Further on, he added: “We have, for example, in a resolution one such sentence which says one must establish performance norms in all enterprises. That sounds smart and correct; we also believed that it was right. And yet it is false”.91 The lack of consensus on priorities and norms created confusion in enterprises. Amidst acrimonious claims of “opportunistic conspiracy” and “sabotage”, the SED referred the matter to the SMAD which eventually ruled in favour of Gustav Brack’s position.92 The DWK was admonished for “irresponsible behaviour”. Lowering norms had led to a “disproportionate growth in wages and production costs”, which “threatened the currency and financial system” and made many enterprises “non-viable”. A potash-coal mine in Bernburg, for example, was allegedly using norms which corresponded to 40 per cent of the 1943 levels. That meant the same work performance in 1948, when compared with 1943, cost DM (Deutschmark) 2.37 instead of DM 1.10.93 The DWK was ordered to work on a new set of guidelines: norms were to be tightened across the board and progressive wage differentials limited to essential industries and linked to the lowering of production costs.94

3.4

Tightening Control: “Freund Hennecke gab das Signal ”95

The new guidelines were released on 29 September 1948 and made applicable to all state-owned enterprises. At their heart lay a new principle: that “the basis of the wage differential is shaped by the work norms, which are established in the enterprises according to normal performance”.96 Normal performance now corresponded to the time it took a majority of workers to do the job. Time studies would be used to determine the “average time”. This was the first widespread introduction of what would later become known as technically based work norms.97 To alleviate workers’ fears, norms were only supposed to rise when “technical conditions” changed, not through higher performance of the workers alone. Wage commissions were set up within enterprises to deal with issues of norm setting and verification. Work norms were communicated to workers via pay slips and displayed on notice boards within the enterprise.98 These guidelines set out to expand the number of workers on wage differentials. The “progressive” element still existed in theory and without limits, but in addition to being restricted to priority industries like iron,

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coal, metal, machines and transport, its payment was now linked to “genuine” work norms, an enterprise lowering costs and required permission from the relevant industry authority.99 Performance bonuses were also offered for suggestions which raised productivity or led to cost savings.100 To make piecework more appealing, tax rates on wage differentials were also lowered.101 To monitor these work norms, workers on wage differentials were handed out wage slips before the commencement of each job, which made clear exactly what was expected of them. These slips detailed every aspect of the job: type of work, quantity produced, time allowed for production, set up time, total time used, allowance for contingencies, total time allowed, cost per minute and percentage of norm fulfilment.102 Parallel to the extension of progressive wage differentials in 1948, offices for work preparation were created within enterprises and a Central Commission for Time Studies was established in May 1949 within the DWK .103 The main task of this commission was to introduce TANs , which would become the basis of future work norms.104 Fritz Selbmann gave a wide-ranging talk on the issue of technically based norms to the SED Parteivorstand in July 1949, which is useful to quote at length. It demonstrates the party’s—and his—new outlook. Now comrades, the foundation of wage differentials is the application of technically correct work norms. I believe, we must ask ourselves: what then are technical work norms?...Technical work norms—one must express that openly—are not somehow guessed or are work norms by rule of thumb, rather technical work norms rely on the exact determination of times and studies of work. That has been the point of the battle for technical work norms in the USSR.105

Of course, the implementation of TANs , let alone getting workers to accept them, was beset by problems. In 1948–1949, there was a shortage of specialised staff, so while the party educated a new batch of experts, the authorities were forced to use the existing REFA-engineers (re-named as work study engineers) who had worked under the Nazis.106 The hope was that workers, together with enterprise managers, and under the leadership of the unions, would agree the piece rate and time permitted. The outcome should be “technically justifiable” and “socially responsible” norms.107 Circumstances, however, practically ruled out a lengthy consultative process and standardised measures. Over a relatively short period of

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time, thousands of work norms needed to be checked and newly established. In many cases, work studies were replaced with stop watches. Even more frequently, time studies were forgone and figures based on capacity and experience used instead.108 Interruptions in production because of supply bottlenecks, ongoing dislocation from the war and reparations also made it impossible in many cases to set appropriate work-based norms. If norms were set too high because these conditions had been ignored or officials had been too vigilant with their stop watches, workers would lose wages unless a correction was made to the time permitted for a job. Furthermore, a switch from “experience statistics” to TANs would reduce the scope for wage increases. Workers knew this and were determined to defend their wages through the maintenance of soft norms.109 A distinctive feature of this new SED approach to wages was that it was accompanied by an orchestrated campaign from the centre to overcome such resistance. This was a campaign that for the first time coordinated all party, SBZ , and state organisations. Trade unions became “transmission belts” for party policy, while the “sporadic character” of the activism of the early post-war years was transformed into a series of systematic, planned and integrated movements all pushing a single, unambiguous message.110 Heroic feats of labour and socialist competition now became key weapons in the party’s arsenal of influence. First in the SED’s sights was the workplace where competing voices continued to confuse the message. At a FDGB conference in Bitterfeld in November 1948, councils were abolished in enterprises where more than 80 per cent of the workforce was organised into official unions. Shortly thereafter, this ruling was extended to all enterprises. Councils were deemed no longer necessary.111 Unions would now take orders from above and assist in the introduction and promotion of wage differentials based on the performance principle. Nevertheless, resistance within the FDGB continued from former Social Democrats and workplace delegates who still believed that the primary function of unions should be to represent the material interests of workers rather than employers. This attitude was condemned by the FDGB leadership as “only-trade-unionism” (Nurgewerkschaftlertum).112 The SED also actively sought better ways to sell wage differentials and TANs . The Institute for Marxism–Leninism held a conference on the topic in March 1949, at which a series of ideological issues were addressed.113 In its aftermath, all party material openly disavowed direct

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association with pre-war shop floor methods.114 Hence, the rationalisation and exploitative nature of work norms under capitalism, manifested most notably through ‘Das Taylor-System’ and REFA, was contrasted with the emphasis on improving worker productivity in nationally owned enterprises, whose benefits flowed to all workers.115 This injunction, however, was in truth not an outright rejection of Taylorist methods, only their exploitative elements.116 Indeed, its “progressive” parts were to be salvaged and re-badged. As Fritz Selbmann explained in July 1949: We reject the REFA-system. We have made our position against the REFAsystem clear. The rejection of the REFA-system does not mean that we are able to renounce exact determination of times and exact studies of work; otherwise we could not come to objective norms for our work.117

He went on to clarify that there was a difference between “reactionary” and “progressive” norms: Reactionary norms are such, which inhibit the rise of worker productivity; reactionary norms are such, which are based on an earlier level of technology; reactionary norms are such, which guarantee workers an income well above the average with essentially less work effort. Progressive norms are such, which take into account the technical progress, the improvement of the production process, the technical condition of the enterprise and the experience of the activists in the application of work equipment; only such norms are progressive; that means they lead to a progressive and step-by-step improvement in the productivity of work.118

The party acknowledged that a fundamental shift in worker attitudes was needed to embed the new practices in the workplace. Workers should be actively encouraged to see the work study engineers as “comradesin-arms in the struggle to improve living conditions” rather than the despised “REFA men” of the past.119 To that end, the FDGB produced “schooling material for enterprise functionaries”, which aimed to explain similarities and differences between the old piecework system and the new wage differentials. Various newspapers and magazines were used to convey the message.120 The SED also felt it needed a positive role model to inspire workers to take up differential wages and TANs ; it found one in Adolf Hennecke. The heavy propagation of the activist movement from October 1948 can be viewed as an acknowledgement from SMAD and the SED that the

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system was struggling to change workplace conventions. A new, stronger signal was needed to get the system to operate. On 13 October 1948, Hennecke, a coal miner at the Oelsnitz Coal Mine in the Erzgebirge, brought in 24.4 cubic metres of coal during a single shift, a feat which exceeded his work norm by 387.3 per cent.121 There was nothing spontaneous or miraculous about Hennecke’s achievement. His record attempt was planned by the Saxon branch of the SED, indeed stage-managed, more than a year in advance. The initial impulse came from a visit to a large factory in the USSR where the leader of the Saxon SED, Otto Buchwitz, was able to witness first-hand the putative benefits of Stakhanovite workers.122 The Hennecke shift was prepared four days earlier when the management of the mine, along with representatives from other mines, functionaries of the SED and FDGB and colleagues from the Tägliche Rundschau, gathered to discuss ways of promoting an activist movement.123 In a speech delivered to the SED Parteivorstand on 20–21 October 1948, Otto Buchwitz revealed the extent of this involvement: One should not imagine for a moment that this was a chance accomplishment; we consciously developed this case. I would like to say a few words about this: our goal was to find a way that we could develop an activist movement. We said to ourselves that for this we needed a central figure, a personality, and I am perfectly happy to admit that we were influenced [by the fact] that we needed someone like Stakhanov here. We searched for a man, and the district leadership helped us. Director Wellershaus searched for a man and we proceeded from the thought that, best of all, we would take him from coal mining, because that is the basic material we need for everything in the economy.124

Yet, in spite of all this planning, not to mention what was to come, the initial reaction to Hennecke’s feat was painfully reserved. Un-briefed, cautious local party officials and unionists did not know how to react and awaited a clear signal from the leadership as to the event’s importance.125 That sign came three days later when an open letter from the party leaders appeared in all newspapers across the SBZ praising Hennecke’s “ground-breaking act”.126 The official campaign had begun. In the days that followed, a stream of articles lauding Hennecke and reinforcing his significance appeared in the press. The Tägliche Rundschau was typical of the coverage. It explained to its readership: “In this way, the coal miner

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Adolf Hennecke established an unprecedented record in worker productivity in German coal mines and through this created an undisputed new era in the battle of German workers to reconstruct the German economy destroyed through war”.127 The deeds of Hennecke were further popularised and mythologised through songs and poems, films and newsreels, special activist pledges and uniforms, billboards and posters, pins and medals. Schools and streets were even named after him.128 The campaign made Hennecke a household name. He apparently received thousands of letters and telegrams of congratulation from young workers and school children, many clearly sincere, who saw in his movement an opportunity to improve working conditions; by the summer of 1949 up to 60,000 of these Hennecke activists had placed their faith in the power of socialist competition to transform the Eastern zone.129 Once the movement had taken root, the SED and SMAD, which had shown great interest in developments, began to shift their attention to those who followed Hennecke as well. The priority became the promotion of “production activists” within individual factories and ensuring that “Henneckists” were properly rewarded for their deeds. Old Stakhanovite films were shown; the movement was actively promoted in newspapers and journals; and workers were encouraged to “Keep up with the Progressivists”, local heroes of labour, whose example would supposedly inspire fellow workers to similar heights.130 The course of the campaign can be captured in the coverage it received in Neues Deutschland, the official, national newspaper of the SED. Considered by the party’s leadership as its most important organ, it was recognised as the primary channel, through which the SED could signal and explain to citizens its current stances, policies and opinions on all aspects of life in East Germany. Similarly, on the international stage, it played the role of an official mouthpiece for the GDR. With a circulation of over a million, it was second in readership only to the Freie Deutsche Jugend (FDJ) newspaper, Junge Welt. Even if the extent to which the content of its articles and editorials were believed or absorbed by the broader population is debatable,131 its place as a clarion signal of the SED’s thinking and intent was beyond dispute.132 Figure 3.1 depicts the coverage of the Hennecke movement between October 1948 and October 1951 in two ways: first, in terms of the number of articles, in which it is mentioned and, second, by the number of times it appears in the title of an article. Figure 3.1 reveals that the

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Fig. 3.1 Coverage of the Hennecke Movement in Neues Deutschland, October 1948–October 1951 (Neues Deutschland archive accessible at https://www.ndarchiv.de/)

campaign reached its apogee in the months between October 1948 and March 1949. The peak month was January 1949, when there were no fewer than 71 articles on Hennecke or his movement published, 11 of which included his name in the title. Put differently, in that month, discussion of the Hennecke campaign occurred on average in more than two articles every day. The 28 January 1949 edition of the paper is illustrative of the trend. It contained eight articles on Hennecke or his movement. The edition in fact led off with the banner of “We are creating the example for the whole of Germany: leading in a new way, working in a new way”, alongside which the article “Develop the Hennecke Movement further” reported on Hennecke’s speech to the First Party Conference of the SED in Berlin.133 A large photograph of Hennecke adorned the front page as well. On the following page, a story entitled, “Hennecke week in Riesa” discussed how workers at the Riesa steel and rolling mill in the previous week had staged, allegedly with great success, a Hennecke-inspired production blitz. During the week, it was reported that the mill’s two Siemens Martin furnaces had produced a record-breaking 18,211 tonnes of steel.134 On page 7, the article “A big turnaround”, quoted from Heinrich Rau, to stress once again the political importance of the Hennecke movement as a means of the party to activate the broad masses of working people.135 As Fig. 3.1 indicates,

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after March 1949, the coverage of the Hennecke movement dropped off precipitously, the propaganda task seemingly accomplished. By 1951, the campaign had slipped off the radar; it was not to be the focal point of SED propaganda again. The immediate response from workers to the Hennecke movement had, of course, been largely negative.136 It had, after all, threatened existing norms and wages. Nevertheless, this movement and the system of socialist competition it engendered from October 1948 became one of the most important signalling devices at the party’s disposal to influence attitudes to wages, norms and shop floor practices. The movement was soon centralised and directed from above. On 17–18 November 1948, the DWK invited 45 outstanding Hennecke-Activists to a workshop in Berlin. The “Berlin Resolution”, as it became known, was designed to broaden the base of the activist movement, which in the short-term would help the party meet the requirements of the half-year plan of 1948 ahead of schedule and prepare for the first two-year plan of 1949– 1950.137 The FDGB organised the first “Hennecke Activists” conference on 4–5 February 1949, where workers met and pledged to spread the movement through a series of competitions, staged to commemorate key dates, anniversaries and upcoming economic plans.138 Socialist competition commissions were set up within enterprises to oversee these events. In October of the same year, the FDGB organised the inaugural “Day of the Activists” competition to commemorate the first anniversary of Hennecke’s record breaking shift. The goals of such competitions were by then well known: to lift production; to recognise activists and innovators in production; to broaden the activists’ movement; and to eliminate all errors and weaknesses in work.139 By 1951, the system of socialist competition was embedded enough for the FDGB to call for the first “mass-based initiatives” as a prelude to the first five-year plan. Approximately 1.6 million workers participated.140 If viewed purely from the perspectives of whether they increased labour productivity or convinced workers of the need for higher norms, then the activist movement and socialist competition clearly failed. Such is the standard interpretation, rightly offered by most historians.141 Not only did these activists fail to raise labour productivity, they also made a mockery of the party’s claim to organise the shop floor rationally. By placing faith in the extraordinary ability of the ideologically driven worker—not the knowledge of the technical expert—Henneckism, like Stakhanovism,

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appeared to represent the very antithesis of what Taylorism and communism had stood for.142 Yet such an interpretation oversimplifies how at least some of the party’s theorists understood its shock workers. As Boris Markus, for example, a leading Soviet thinker within Gosplan, explained in 1936, Stakhanovites succeeded not through their superhuman abilities per se, but through the “perfect organisation of the workplace” and “the systemisation of movements, the saving of seconds, and the rationalisation of work”, which enabled “the introduction on a genuinely scientific basis, of rhythmical and regular working methods [which] abolished all unnecessary movement, loss of energy, and nervous strain”143 Expressed differently, shock workers triumphed where all else failed because they had internally grasped the essence of Taylorism and had acted accordingly.144 Such a view may well have been self-deceptive, but, if widely held, it would suggest that some party leaders may not have simply regarded Hennecke and his like as alternatives to the rational organisation of the workplace, but rather as another, complementary way of inspiring workers to accept and ultimately get to that cherished goal. Many in the SED leadership undoubtedly knew that the Henneckists had not brought the required workplace transformation. If that were the case, it begs the question: why then did socialist competition remain a visible feature of East German society until the end? Looking at the origins and rationale of the movement in 1948, rather than the productivity gains it failed to deliver over the coming decades, offers an explanation that does not place ideological blindness or “political ritual” at its core.145 To be sure, socialist competitions were ideological, propagandist exercises, but it needs to be asked: to what purpose such contrivances? The answer offered here is grounded in basic pragmatism: to instil, and then maintain, core socialist values and conventions in the East German workplace. In Soviet-style economies, socialist competition was one of the relatively few means available to ruling parties, such as the SED, to signal their intent and directly influence core norms. Their hopes may not have been entirely misplaced. Despite resistance at grassroots level, most workers gradually accepted the need—if purely for cynical or selfish reasons—to adopt wage differentials. From the earlier sections, we know this was linked to weak norms and the opportunity to earn unlimited progressively increasing wages (at least initially). The example of activists like Adolf Hennecke was a counter to the soft norms prevalent in most enterprises. Though trailblazing acts failed to inspire widespread copycat record-setting, they did demonstrate both official

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determination and a potential to raise production. Adolf Hennecke and others like him also clearly revealed the intent of the authorities to snuff out once and for all the egalitarianism of earlier years. However, perhaps their most important significance was the unambiguous signal they gave to workers that hard work, commitment and acceptance of the new shop floor realities would be rewarded. In line with this intention, Hennecke himself was rebuked by no less than Walter Ulbricht for deigning to contemplate handing over a large proportion of the money awarded to him as a part of his National Prize win to kindergartens and youth homes. He was bluntly advised to keep the lion’s share of the money for himself in accord, as he was told, with the true “socialist spirit” of the award.146 The party had come to recognise that mercenary reasons could work were appeals to ideological purity, class solidarity, or morality failed. At the first Activist Conference in November 1948, Fritz Selbmann could thus declare: It is necessary to show the individual activist that his best performance improves not only the situation of our people but also his own personal situation. That is only achievable when the worker knows that when I exceed my work norm by so and so per cent, my wage rises. Only then is the incentive given for a broader en masse commitment of our workforce to the goal of peak performance.147

The number of workers on wage differentials increased steadily from 1949. By 1951, the rate was twice as high as 1948, three times as high as 1946–1947, and higher than the number of piecework workers in Western Germany. Nearly two-thirds of industry workers were on wage differentials—double the amount of 1948.148 The path towards acceptance of incentive pay and wage differentials can be traced via the coverage extended to it in Neues Deutschland. Figure 3.2 reports the number of articles on the topic published in Neues Deutschland for each year between 1947 and 1958.149 It shows that after first making an appearance in the newspaper in 1947 and 1949, the concept of wage differentials became a subject of considerable interest in 1949, when well over 200 articles referred to it. One such article entitled “Bonuses help production” appeared on the front page of the paper on 5 October 1949 and detailed how performance-based wages were being deployed in Wittenberge to ensure that its two-year plan was met ahead of schedule.150 After 1949, Fig. 3.2 reveals a steep and rapid drop in the number of articles on

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Fig. 3.2 Coverage of incentive pay (Leistungslohn) in Neues Deutschland, 1947–1958 (Neues Deutschland archive accessible at https://www.nd-arc hiv.de/)

the topic. By the early 1950s, it was clear that, as an issue, wage differentials had already ceased to be as polarising. The campaign retreated into the background. Piecework had come to be accepted as a norm of the East German workplace. It had not been an easy process, however. Outright opposition to piecework dissipated when workers realised they could make the system work for them. Nominal wages continued to rise during the first twoyear plan of 1949–1950 and the opening of state-run retail stores and restaurants in November 1948 meant Germans in the SBZ could legally shop ration-free for the first time since 1945.151 In this environment, performance-based wages started to make sense. Even allowing for exaggerations in the numbers, and notwithstanding the high expectations of the SED, the attempt to introduce wage differentials from 1948 cannot be categorised as a failure in terms of getting workers to accept, if reluctantly, a key element of the Soviet workplace.152 It was, of course, hardly an unalloyed success either. The acceptance of piecework came at the expense of TANs : soft norms made piecework more appealing to workers, but undermined the attempt to link norms to productivity. All attempts to standardise work norms through time and work studies were resisted by the workers. The SED set ambitious

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targets for raising norms in the second half of 1949 and work preparation bureaus were created in all main branches of industry in the third quarter of 1949. Yet, once again cautiousness prevailed and by the end of 1951, only 10 per cent of norms could be classified as technically based.153 Norms would remain a sensitive and unresolved issue for the next few years, eventually coming to a head in 1953 when the SED arbitrarily called for them to be increased by 10 per cent in honour of Ulbricht’s birthday. The workers revolted.

3.5

Conclusion

In outline, the story this chapter has told is familiar: introducing piecework in East Germany was a long struggle beset by resistance and requiring frequent adaptations and the overcoming of many obstacles. Yet, the chapter has also brought other elements, typically left unconsidered, to this story. Above all, it has shown that the history of piecework in the SBZ amounted to more than the SED’s fearful responses to worker resistance. The introduction of piecework was in fact an integral part of a dual process whereby the party acquired control of the economy and then learnt how to exert influence on its direction. To achieve the latter, it first needed to learn how to control and direct itself. The party’s path to Sovietisation was neither clear cut, unidirectional, nor even assured. In the immediate aftermath of the war, egalitarianism pervaded the workplace. To the extent that policy existed at all, it was marked by ambiguity, contradiction and confusion. The SMAD, SED, Länder, workplace councils—and from June 1947 the DWK —all coexisted and often operated at cross-purposes. SMAD Order 234 in October 1947 marked the first major attempt to alter labour practices in East Germany. Yet, its implementation proved problematic. Even with Moscow’s go ahead, the SED and DWK lacked the means and ability to take decisive action. Two things were missing: the political power and authority to act and the support mechanisms to convey its messages to workers and enterprises and influence shop floor conventions. SMAD Order 32 in February 1948 tackled the first weakness, finally empowering the DWK and turning it from one of numerous, competing economic authorities in the SBZ into its pre-eminent. The second requirement took longer to meet. The development and systematic coordination of “transmission belts”, party discipline, campaigns, activist movements

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and socialist competitions evolved over the course of piecework’s introduction. Their evolution was hardly exogenous; rather it was shaped by experience and the encumbrances the SED encountered along the way. The party learnt by doing. This chapter has shown the particular importance to planned economies of mechanisms, by which those in authority can clearly signal their intent, instructions and priorities. In such settings, independent signals such as prices become meaningless and citizens are compelled to find ways to discern which of the growing volume of often contradictory directives flowing down from above need to be observed, and which do not. Here, as Chapter 2 discussed in detail, the role of signalling is vital. To function in accordance with Marxist–Leninist precepts, it was imperative for the fledgling communist state to instigate ways to get its instructions to the public in a comprehensible, unambiguous manner. In the early years of SED rule, due to its complete inexperience in governing, the chaos that abounded, and the persistent coexistence of rival power centres in the form of workplace councils, Länder and SMAD, the attainment of such a goal proved unreachable. The party’s ability to signal was narrowly constrained; indeed, in those early post-war years, it was almost non-existent. It was only when the primacy of its authority had been established in February 1948 that the conscious and meaningful efforts to compile a compendium of effective signalling mechanisms began in earnest. Key individuals—the so-called “fashion leaders” and “liaison agents” of the party who set examples for others to follow—at all levels of the system needed to be found, motivated and engaged. Highprofile publicity events, such as Hennecke’s record-breaking shift, needed to be imagined, coordinated and deployed as signals of the party’s intent in the hope that positive information cascades might ensue. A tight coordination between all branches of the party and state as well as strict party discipline needed to be instilled. The multiple messaging of the early years that had merely bred confusion and complicated policy implementation needed to be expunged. It was not to be an easy process, but the experience the SED acquired through the process of introducing piecework taught it many painful lessons about what was required if it wanted to have its plans heard, heeded, and enacted. This chapter has also challenged the view that the resistance of workers prevented the SMAD and SED from immediately implementing the full Soviet model. As Jeffrey Kopstein asserts: “in essence, Order 234 was a full-blown transfer of Soviet-style labour relations to East Germany”,

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but eventually the political authorities retreated “in the face of labour’s continued resistance on the shop floor”.154 As we have shown, such a view significantly undervalues the other forces and pressures at play that were influencing SMAD and SED decision-making. Here it is important to recognise the difference between the theory of Stalinism, which was well known to the party, and the practice, which due to a lack of first-hand experience in 1947 still had to be worked out. While the SED certainly began with this Soviet “toolkit” at its disposal, its understanding of how those methods could be practicably implemented within the immediate post-war German context remained unclear. Nor did Order 234 signify the beginning of the “full-blown” Soviet workplace in the SBZ. It was introduced at a time when there was no unified economic authority in the zone. The DWK remained relatively weak and was months away from being able to assert itself forcefully. None of this, of course, should be taken to imply that we believe that worker resistance was unimportant. Everyday resistance mattered and the SED certainly did react to it. Our contention is that the party’s response was not simply to acquiesce to workers’ demands; rather it was to step back and devise better ways to influence them in future. It was a strategy that was not without success. From 1949, when material incentives were better structured and signalling had become more effective, the uptake of piecework did gather momentum. Not unlike workforces elsewhere confronted by fundamental workplace change, East German workers’ resistance waned when they saw their pay increase.155 Moreover, as Peter Hübner has previously noted, the line between the ruler and ruled, central to the resistance argument, is not easily drawn.156 Reality is far more complex. In the late 1940s, the SED was not yet a tightly organised entity set above the workplace and separated from the people. Many of its activists were workers and genuinely shared their co-workers’ fears and beliefs. As we have seen, this led to division and uncertainty even within the SED. The party versus the workers’ scenario does not completely ring true. There is a deeper issue here, too. The existence of worker grievance and everyday resistance does not in itself necessarily imply anything. Both occur to some extent in all workplaces, in all systems, especially when work norms are challenged and changed. Attempts to increase work rates and reduce pay foster discontent and opposition in market economies, too. Indeed, it could be contended that there is even a sense in which a modicum of everyday resistance could be a positive thing, a safe way

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for the labour force to express its dissatisfaction without challenging the foundations of the system. For Marxist–Leninist states, where expression is severely curtailed, such a safety valve could be particularly valuable. Yet, this assumes that things do not get out of hand. The impact everyday resistance makes depends on two factors: whether the conditions that prompt it remain, decline or intensify and whether those who are being resisted are able to address the source of the grievances or at least sideline them. Resistance deepens and becomes problematic when both of those factors steadily move in the wrong direction. The events of 17 June 1953 illustrate the point. The June uprising was sparked by a major political miscalculation by the SED. In May, it had simultaneously raised production norms and prices on food, health care and public transportation, actions that together threatened to lower workers’ wages by as much as a third.157 Unsurprisingly, the workers took to the streets. While these demonstrations also provided a forum for political grievances to be openly aired, they were motivated overwhelmingly by material concerns. In this regard, it is noteworthy that workers quickly began returning to work when the hated measures were lifted and before the Soviets intervened.158 Many workers may have resented SED policies, which undermined their standard of living, but most did not take the opportunity to challenge the conventions of the new workplace. Piecework and production norms remained; just the levels at which they were set were recalibrated. By the early 1950s, the SED had thus successfully built the core of a Soviet-style economy in the GDR. As part of that building process, it had had its first successes—albeit eventually—in creating an effective framework for signalling. In saying that, it is worth emphasising here that we do not claim that the SED had perfected the art of signalling, less still that they had built a system that was economically successful. As time would show, it clearly had achieved neither of those goals. The ongoing resistance of workers was one reason why it did not succeed, but, as the massive literature on the weaknesses of Soviet-style planned economies reveals, it was just one of many.159

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Notes 1. Michael Gehler, Three Germanies: From Partition to Unification and Beyond, 2nd edition (London: Reaktion Books, 2021), p. 35. 2. Douglass C. North, Understanding the Process of Economic Change (Princeton: Yale University Press, 2005), pp. 1–8, 65–80. 3. Joel Mokyr (ed.), The British Industrial Revolution: An Economic Perspective (San Francisco: Westview Press, 1993), p. 91. 4. Gottfried Dittrich, Die Anfänge der Aktivistenbewegung (Berlin: Dietz Verlag, 1987); Klaus Ewers, “Einführung der Leistungsentlohnung und verdeckter Lohnkampf in den volkseigenen Betrieben der SBZ (1947–49)”, Deutschland Archiv 13 (1980), pp. 612–633; Peter Hübner, Konsens, Konflikt und Kompromiβ: Soziale Arbeiterinteressen und Sozialpolitik in der SBZ /DDR, 1945–70 (Berlin: Akademie Verlag, 1975); Harry Matthes, Das Leistungsprinzip als Grundlage der Entlohnung in der volkseigenen Wirtschaft (Berlin: Verlag die Wirtschaft Berlin, 1954); Jörg Roesler, “Vom Akkordlohn zum Leistungslohn: Zu den Traditionen des Kampfes der deutschen Arbeiterklasse und zur Einführung des Leistungslohnes in der volkseigenen Wirtschaft der DDR 1948 bis 1950”, Zeitschritt für Geschichtswissenschaft 32 (1984), pp. 778–795; Jörg Roesler, “‘Akkord ist Mord, Normenerhöhung ist das Gleiche’: eine Tradition des Ökonomischen Kampfes der deutschen Arbeiterklasse und der 17. Juni 1953”, Jahrbuch für Forschungen zur Geschichte der Arbeiterbewegung 2 (2004), pp. 4–17; and Wolfgang Zank, Wirtschaft und Arbeit in Ostdeutschland (Munich: R. Oldenbourg Verlag, 1987). Emphasis on the hostility of the workforce can also be seen in the English-language literature. See, for example, Andrew Port, Conflict and Stability in the German Democratic Republic (New York: Cambridge University Press, 2007), Chapter 1; Gareth Pritchard, The Making of the GDR 1945–53. From Antifascism to Stalinism (Manchester: Manchester University Press, 2000), Chapters 2 and 6; Norman M. Naimark, The Russians in Germany: A History of the Soviet Zone of Occupation, 1945– 1949 (Cambridge, MA: Harvard University Press, 1995), p. 203; and Jeffrey Kopstein, The Politics of Economic Decline in East Germany, 1945–1989 (Chapel Hill: University of North Carolina Press, 1997), Chapter 1.

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5. Pritchard, The Making of the GDR, Chapters 2 and 6; Jeffrey Kopstein, “Chipping Away at the State: Workers’ Resistance and the Demise of East Germany”, World Politics 48: 3 (1996), p. 394. 6. Kopstein, “Chipping Away at the State”, pp. 391, 411. 7. The quotation comes from André Steiner, The Plans That Failed: An Economic History of the GDR (New York: Berghahn, 2010), p. 7, while the reference to path-dependence is taken from Kopstein, Politics of Economic Decline, p. 197. See also: Peter Caldwell, Dictatorship, State Planning, and Social Theory in the German Democratic Republic (Cambridge: Cambridge University Press, 2003), Chapter 1. On the dangers of such a teleological approach, see, Port, Conflict and Stability, pp. 1–2. 8. ‘A tangled maze of special decrees’. The quotation comes from Hübner, Konsens, p. 21. 9. Steiner, Plans That Failed, p. 17. In truth, Stalin’s real intentions and longer-term goals remain open to debate. 10. Quoted in Naimark, Russians in Germany, p. 49. See also on p. 48 the comments of the Thueringen President, Dr. Rudolf Paul, made on 13 November 1945: ‘As President, I am responsible for the Land, and I cannot allow the central administration [to mix] into all kinds of questions without my knowledge.’ 11. Steiner, Plans That Failed, pp. 31–32. 12. Kopstein, Politics of Economic Decline, pp. 21–22; Pritchard, Making of the GDR, p. 39. 13. Pritchard, ibid., p. 44. 14. Kopstein, Politics of Economic Decline, p. 22; Pritchard, ibid., p. 142. 15. Pritchard, ibid., pp. 44–45; Siegfried Suckut, Die Betriebsrätebewegung in der sowjetisch besetzten Zone Deutschlands (1945–48) (Frankfurt: Haag und Herchen Verlag, 1982). 16. Walter Ulbricht, Über Gewerkschaften: aus Reden und Aufsätzen, volume 2 1945–1952 (Berlin: Tribüne, Verlag und Druckereien des FDGB, 1953), pp. 34–42. 17. Pritchard, Making of the GDR, p. 45. 18. Hübner, Konsens, p. 16; Zank, Wirtschaft und Arbeit, pp. 124– 125. 19. Hübner, ibid., pp. 18–21. 20. Ibid., p. 17.

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21. Roesler, “Akkord ist Mord”, p. 5. 22. Ibid; Roesler, “Vom Akkordlohn zum Leistungslohn”, p. 779. 23. Roesler, “Akkord ist Mord”, p. 9. 24. Fritz Selbmann, Ausgewählte Reden und Artikel: 1945–57 (Berlin: Dietz Verlag, 1974), p. 56. 25. Stiftung des Archivs der Parteien und Massenorganisationen der ehemaligen DDR im Bundesarchiv (hereafter BA), NY 4113/16 Nachlass Fritz Selbmann, 16.8.1946, “Brief vom Fritz Selbmann an Bruno Leuschner” (no page). 26. ‘Produce more, distribute fairer, live better!’ 27. Crop failure led to widespread hunger and increased worker absenteeism. Industrial production across the zone in 1947 was less than 60 per cent of the 1936 level; see BA DY 34/21707, (no date), “Die Entwicklung der industriellen Produktion in Deutschland, insbesondere in der sowjet. Besatzungszone”, pp. 6–8. 28. Jan Foitzik, Sowjetische Militäradministration in Deutschland (SMAD) 1945–49 (Berlin: Akademie Verlag GmbH, 1999), p. 365. 29. Roesler, “Akkord ist Mord”, p. 10. 30. The introduction of piecework in the Soviet Union involved a long struggle between workers, managers and the CPSU. By the Second World War, however, the use of piecework had been de-politicised, and the principle that it would be based on technical considerations was broadly accepted. The practice remained less clear cut and subject to ongoing disputes, albeit at a ‘largely subterranean’ level. For an excellent overview, see Lewis H. Siegelbaum, “Soviet Norm Determination in Theory and Practice, 1917–41”, Soviet Studies 36: 1 (1984), pp. 45– 68; Abram Bergson, The Structure of Soviet Wages: A Study in Socialist Economics (Cambridge, MA: Harvard University Press, 1954); and Janet G. Chapman, Real Wages in Soviet Russia Since 1928 (Cambridge, MA: Harvard University Press, 1963). For the remarks and thinking of Ulbricht, see DY 34/26804, “Tagung vom 6. bis 7. Juli 1948” and “Tagung vom 5. bis 7. Oktober 1948”, p. 16. 31. Michael C. Howard and John E. King, The Political Economy of Marx (Harlow: Longman, 1985), pp. 30–31.

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32. Vladimir Ilyich Lenin, “The Taylor System—Man’s Enslavement by the Machine.” Republished in: Vladimir Ilyich Lenin, Collected Works (Moscow: Progress Publishers, 1968), vol. 20, p. 152. 33. Peter Hübner, “‘Sozialistischer Fordismus’? Oder: Unerwartete Ergebnisse eines Kopievorganges. Zur Geschichte des Produktionsbrigaden in der DDR”, in Alf Lüdtke, Inge Marßolek and Adelheid von Saldern (eds.), Amerikanisierung: Traum und Alptraum im Deutschland des 20. Jahrhunderts, volume 6 (Stuttgart: Franz Steiner Verlag, 1996), pp. 97–98. 34. Further evidence of Lenin’s thinking, written not long after taking power, can be seen in the following quotation: ‘The Taylor system represents the tremendous progress of science, which systematically analyses the process of production and points the way towards an immense increase in the efficiency of human labour.’ Vladimir Ilyich Lenin, “The Immediate Tasks of Soviet Government”. Republished in: Vladimir Ilyich Lenin, Collected Works (Moscow: Progress Publishers, 1968), vol. 42, pp. 79– 80. Elsewhere, he urged that ‘every use should be made of the scientific methods of work suggested by this system. Without it, productivity cannot be raised, without it, we shall not be able to introduce socialism’. Vladimir Ilyich Lenin, “Speech at a Meeting of the Presidium of the Supreme Economic Council, 1 April 1918”. Republished in: Vladimir Ilyich Lenin, Collected Works (Moscow: Progress Publishers, 1968), vol. 42, pp. 86–87. 35. Siegelbaum, “Soviet Norm Determination”, pp. 45–68. 36. Rüdiger Hachtmann, Industriearbeit im Dritten Reich: Untersuchungen zu den Lohn- und Arbeitsbedingungen in Deutschland, 1933–1945 (Göttingen: Vandenhoeck & Ruprecht, 1989); Mary Nolan, “Rationalization, Racism, and Resistenz: Recent Studies of Work and the Working Class in Nazi Germany”, International Labor and Working-Class History 48 (1995), pp. 141–142; REFA Verband für Arbeitsstudien und Betriebsorganisation (eds.), Methodenlehre des Arbeitsstudiums: Teil 1 Grundlagen, 7th edition (Munich: Hanser, 1984), p. 29; Manfred Schulte-Zurhausen, Organisation, 5th edition (Munich: Vahlen, 2010), p. 11; and Tilla Siegel, “Lean and Flexible into the Future?: Considerations on the Relationship Between Industrial Rationalization and Societal Change”, International Journal of Political Economy 25: 4 (Winter 1995/96), pp. 9–37.

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37. Stefan Link, “From Taylorism to Human Relations: American, German, and Soviet Trajectories in the Interwar Years”. Paper presented to the Business History Conference, March 2011, pp. 5–9. 38. BA DY 30 IV 2/2.027/22 (Lehmann), “Anlage zum Befehls Nr. 234 des Obersten Chefs der SMA vom 9. Oktober 1947” (no page); BA DY 34/1093, (no date), “Befehle der SMAD” (no page). 39. Hübner, Konsens, p. 22. 40. Dittrich, Die Anfänge der Aktivistenbewegung, pp. 46–47. 41. Ibid., p. 47. 42. Hübner, Konsens, p. 28. 43. The phrase comes from Christoph Klessmann, “Arbeiter im ‘Arbeiterstaat’”, Aus Politik und Zeitgeschichte: Beitrage zur Wochenzeitung Das Parlament 50 (2000), pp. 20–28. 44. See BA NY 4036/687 (Pieck), 30 December 1947, “Zum Befehl 234 erhielten wir folgende Information, SED Zentralsekretariat”, p. 45. 45. Policy contradictions opened up in all aspects of government. As the FDGB Bundesvorstand noted in July 1948: ‘Since the regulations in the Länder of the Soviet occupation zone, in part, are different and sometimes also unclear, [there is a] need to strive towards a unified set of guidelines for the entire zone’; see BA DY 34/26804, “Richtlinien zur Lohnpolitik, 6–7 July 1948” (no page). For similar comments on the contradictions, see Selbmann, Ausgewählte Reden, pp. 68–71. 46. BA DY 30/IV 2/6.02/33, “Bericht über die Ergebnisse der bisherigen Arbeit des Abschnitts IV – Kontrolle vom 7.10.47” (no page). 47. Winfrid Halder, ‘Model für Deutschland’. Wirtschaftspolitik in Sachsen 1945–1948 (Paderborn: Schöningh, 2001), p. 259. 48. Ulbricht, Über Gewerkschaften, pp. 181–187. 49. Pritchard, Making of the GDR, p. 146. 50. Ulbricht, Über Gewerkschaften, pp. 184–185. 51. BA DY 30/IV 2/2.027/22 (Lehmann), (no date), “Bericht über die im Lande Mecklenburg-Vorpommern festgestellten Maßnahmen zur Durchführung des Befehls 234”, p. 2. 52. BA DY 30 IV 2/6.02/85, (no date), “Was noch besser werden muss: Die Presse und 234”, p. 1.

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53. BA DY 30 IV 2/6.02/86, 22 January 1948, “Auszug aus einem Gesamtbericht des FDGB Chemnitz über die Durchführung des Befehls 234”, pp. 316–318. 54. BA DY 30/IV 2/6.02/85, 8 April 1948, “Bericht über die bisherige Verwirklichung des Aufbauplans 234. Die Leitung der Verwirklichung des Aufbauplans 234”, p. 281. 55. BA DY 30 IV 2/6.02/85, (no date), “Was noch besser werden muss”, pp. 1–2. 56. ‘Performance pay/wage differentials and progressive piecework’. 57. As Selbmann noted in July 1947, the competing, often contradictory, opinions voiced by different parts of the party with respect to economic policy bred only confusion and meant that ‘no clear information’ could get out; see Selbmann, Ausgewählte Reden, p. 74. 58. BA DY 30/IV 2/6.02/85, (no date), “Bericht über die bisherige Verwirklichung des Aufbauplans 234”, p. 281. 59. BA DY 30/IV 2/2.027/22 (Lehmann), 6 April 1948, “Einschätzung der Ergebnisse des Befehls”, p. 151. 60. BA DY 30/IV 2/6.02/85, (no date), “Bericht über die bisherige Verwirklichung des Aufbauplans 234”, p. 281. 61. Hübner, Konsens, p. 31. 62. BA DY 30/IV 2/2.027/22 (Lehmann), (no date), “Bericht über die im Lande Mecklenburg-Vorpommern festgestellten Maßnahmen zur Durchführung des Befehls 234”, p. 1. 63. Ibid., p. 3. 64. BA NY 4182/1198 (Ulbricht), 18 February 1948, “Bericht über die Überprüfung der Durchführung des Befehls 234 im Lande Thüringen”, p. 317; BA NY 4182/1198 (Ulbricht), 28 January 1948, “Bericht über die Durchführung des Befehls 234”, pp. 193–195. 65. Foitzik, Sowjetische Militäradministration, p. 388. 66. Steiner, Plans That Failed, p. 40. 67. BA DY 30/IV 2/6.02/85, 10 January 1948, “Technische Bezirksbergbau-Inspektion Altenburg/Thür”, p. 135. 68. Ibid., 4 February 1948, “Für Genossen Ulbricht”, p. 28. 69. Kopstein, Politics of Economic Decline, p. 29. 70. See, for example, the resolutions of the FDGB. BA DY 34/26803, 14 January 1948, “Entschlieβung zu den nächsten wirtschaftspolitischen Aufgaben des FDGB”, p. 81.

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71. The notion of a progressive piece rate was borrowed from the Soviet Union; see Siegelbaum, “Soviet Norm Determination”, p. 58. 72. BA DY 30 IV 2/6.02/85, 4 February 1948, “Progressive Akkordlöhne - falsch und richtig”, pp. 97–102. 73. The Reichsmark continued to circulate in Germany, with new banknotes and coins printed in the United States and Soviet Union, until it was replaced in June 1948 by the Deutsche Mark in West Germany, and later in the same year by the Deutsche Mark von der Deutschen Notenbank in East Germany, or Ostmark; see Steiner, Plans That Failed, pp. 42–43. 74. BA DY 30 IV 2/6.02/85, 4 February 1948, “Progressive Akkordlöhne - falsch und richtig”, p. 101. 75. BA DY 30/IV 2/2.027/27 (Lehmann), 15 March 1948, “Richtlinien zur Akkordlohnarbeit”, p. 1. 76. BA DY 30/IV 2/2.1/204, “Protokoll Nr. 81 (II), Sitzung am 1. Juni 1948”, p. 9. 77. For examples of how the contradictory tax regimes of the SBZ had previously undermined the incentives provided by progressive piece rates, see BA DY 30/IV 2/6.02/87 (no date) “Beispiele für Lohnsteuer-Abzug bei Akkordlohn”, pp. 189–191; BA DY 30/IV 2/6.02/87, 20 February 1948, “Eisenhüttenwerk Maximilian-Hütte - landeseigener Betrieb”, p. 203. 78. BA DY 30/IV 2/6.02/85, (no date), “Bericht über die bisherige Verwirklichung des Aufbauplans 234”, pp. 283–284. 79. Kopstein, Politics of Economic Decline, pp. 29–30. 80. BA DY 30/IV 2/2.027/27 (Lehmann), 23 December 1948, “An den Vorsitzenden der Deutschen Wirtschaftskommission”, p. 48. 81. BA DY 30/IV 2/2.027/27 (Lehmann), 21 September 1948, “An die SED Vorsitzenden Herrn Wilhelm Pieck und Otto Grotewohl”, p. 13 and BA DY 30/IV 2/2.027/27 (Lehmann), (no date), “An den Vorsitzenden der Deutschen Wirtschaftskommission”, pp. 48–52. 82. BA DY 30/IV 2/6.02/88, (no date), “Entwurf: Entschlieβung zur Frage der Lohn- und Tarifpolitik”, pp. 37–50. 83. Ibid., p. 37. 84. Ibid., pp. 37–50. 85. Ibid., pp. 37–38.

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86. BA DY 30/IV 2/6.02/85, (no date), “Was noch besser werden muss”, pp. 1–2. 87. BA DY 30/IV 2/6.02/88, (no date), “Entwurf: Entschlieβung zur Frage der Lohn- und Tarifpolitik”, p. 38. 88. Ibid., p. 39. 89. Ibid., pp. 37–50. 90. Ibid., p. 40. 91. Ibid., pp. 37–50. 92. BA DY 30/IV 2/2.027/27 (Lehmann), (no date), “An die SED Vorsitzenden Herrn Wilhelm Pieck und Otto Grotewohl”, p. 13; and BA DY 30/IV 2/2.027/27 (Lehmann), (no date), pp. 48– 52. 93. BA DY 30/IV 2/6.02/88, (no date), “Entwurf: Entschlieβung zur Frage der Lohn- und Tarifpolitik”, p. 40. 94. BA DY 30/IV 2/2.027/27, (no date), “An den Vorsitzenden der Deutschen Wirtschaftskommission”, pp. 47–48. 95. “Friend Hennecke gave the signal”. This comes from the song “Good luck! The Hennecke song”, which was adopted by the Free German Youth. BA, NY 4177/3 (Hennecke), (no date), p. 61. 96. BA DY 34/26804, “Richtlinien zur Lohngestaltung in volkseigenen und SAG-Betrieben. Beschlossen vom Sekretariat der DWK am 24.9.1948”, p. 247; BA DY 30/IV 2/2.1/239, “Protokoll Nr. 119 (II), Sitzung am 11. Oktober 1948”, p. 11; BA DY 30 IV 2/6.02/88, (no date), “Die Lohnfrage in den volkseigenen Betrieben”, p. 51. 97. BA DY 34/26804, “Richtlinien zur Lohngestaltung in volkseigenen und SAG-Betrieben. Beschlossen vom Sekretariat der DWK am 24.9.1948”, p. 247; BA DY 30/IV 2/2.1/239, “Protokoll Nr. 119 (II), Sitzung am 11. Oktober 1948”, p. 11; BA DY 30 IV 2/6.02/88, (no date), “Die Lohnfrage in den volkseigenen Betrieben”, p. 51. 98. BA DY 34/26804, “Richtlinien zur Lohngestaltung in volkseigenen und SAG-Betrieben. Beschlossen vom Sekretariat der DWK am 24.9.1948”, p. 247; BA DY 30/IV 2/2.1/239, “Protokoll Nr. 119 (II), Sitzung am 11. Oktober 1948”, p. 12. 99. BA DY 34/26804, “Richtlinien zur Lohngestaltung in volkseigenen und SAG-Betrieben. Beschlossen vom Sekretariat der

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DWK am 24.9.1948”, p. 248; BA DY 30/IV 2/2.1/239, “Protokoll Nr. 119 (II), Sitzung am 11. Oktober 1948”, p. 13; BA DY 30/IV 2/2.027/27 (Lehmann), (no date), “An den vorsitzenden der Deutschen Wirtschaftskommission”, p. 47. 100. BA DY 34/26804, “Anweisung für die Überprüfung und Neufestsetzung von Arbeitsnormen in den der HV. Leichtindustrie unterstellten volkseigenen Betrieben gemäß der Anordnung der DWK betr. Richtlinien zur Lohngestaltung in den volkseigenen und SAG-Betrieben vom 29. September 1948, Ziffer 20”, p. 2. 101. BA DY 34/26804, “Betr. Steuerreform Stand der Besprechungen per 27.9.1948”, p. 257. 102. BA DY 34/26804, “Richtlinien zur Lohngestaltung in volkseigenen und SAG-Betrieben. Beschlossen vom Sekretariat der DWK am 24.9.1948”, p. 248; BA DY 30/IV 2/2.1/239, “Protokoll Nr. 119 (II), Sitzung am 11. Oktober 1948”, pp. 13–14. 103. Matthes, Das Leistungsprinzip, pp. 135f. 104. BA DY 34/26809, (no date), “Lohnpolitik und Kollektivverträge”, p. 57. 105. BA DY 30/IV 2/1/67, “Tagung des Parteivorstandes am 20. und 21. Juli 1949”, p. 270. 106. M. Friedrich, “Refa und wir”, Der Volksbetrieb, 5 May 1948, p. 75. 107. Selbmann, Ausgewählte Reden, p. 135. 108. Roesler, “Vom Akkordlohn zum Leistungslohn”, p. 792. 109. Roesler, “Akkord ist Mord”, p. 12. 110. Selbmann, Ausgewählte Reden, pp. 131–133. 111. Siegfried Suckut, “Die Betriebsrätebewegung in der sowjetischen Besatzungszone und die Bitterfelder Beschlüsse”, in IG ChemiePapier-Keramik (ed.), Gewerkschaften in der SBZ /DDR 1945 bis 1950: Anspruch und Wirklichkeit (Hannover: IG Chemie-PapierKeramik, 1996), pp. 53–65. 112. Pritchard, Making of the GDR, pp. 201–222. 113. BA DY 30/IV 2/9.07, 19 March 1949, “Diskussionstagung des Forschungsinstituts für wissenschaftlichen Sozialismus, Ökonomische Abteilung, über Arbeitsproduktivität und Leistungslohn”, p. 4. 114. Caldwell, Dictatorship and State Planning, p. 20.

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115. Friedrich, “Refa und wir”, p. 75; Hans Heinz Schober, “Rationalisierung oder Leistungssteigerung?” Die Einheit , 7 July 1948, p. 605; Willi Stoph, “Weitere Steigerung der Arbeitsproduktivität”, Neues Deutschland, 2 July 1948, p. 4; and Carl Uelze, “Taylor-Refa-Hennecke”, Die Arbeit vol. 2, 12 December 1948, pp. 353–356. 116. Friedrich, ibid., p. 75. 117. BA DY 30/IV 2/1/67, “Tagung des Parteivorstandes am 20. und 21. Juli 1949”, p. 270. 118. Ibid., pp. 270–271. 119. Friedrich, “Refa und wir”, p. 75; Schober, “Rationalisierung oder Leistungssteigerung?”, p. 605. 120. Stoph, “Weitere Steigerung”, p. 4. 121. BA NY 4177/6 (Hennecke), (no date), “Drei Tage wußte ich nicht, was ich bin”, p. 25. 122. BA DY 30/IV 2/1/55, “Tagung des Parteivorstandes am 20. und 21. Oktober 1948”, pp. 50–51. 123. Dittrich, Die Anfänge der Aktivistenbewegung, p. 68; Rainer ˝ Gries and Silke Satjukow, “Von Menschen und Ubermenschen: Der ‘Alltag’ und das ‘Aussertägliche’ der sozialistischen Helden”, Aus Politik und Zeitgeschichte: Beitrage zur Wochenzeitung Das Parlament 52: 17 (2002), pp. 39–46. 124. BA DY 30/IV 2/1/55, “Tagung des Parteivorstandes am 20. und 21. Oktober 1948”, pp. 49–52. 125. On the delayed response to Hennecke, see Detlev Balke, “Der den Ring sprennte – und von Walter gerügte wurde”, Neues Deutschland: B-Ausgabe 53 (13 October 1998), p. 12; Gries and Satjukow, “Von Menschen und Übermenschen”, p. 42. 126. Adolf Hennecke, Aktivisten zeigen den Weg (Berlin: Verlag die Wirtschaft Berlin, 1948), p. 21. 127. Ibid. For a general summary, see Stefan Poppitz, Der Beitrag des Zentralorgans der SED ‘Neues Deutschland’ ’zur Popularisierung der Aktivisten- und Wettbewerbsbewegung in den Jahren von 1949 bis 1955 (Ph.D. diss, University of Leipzig, 1982). 128. For the songs and poems, see BA, NY 4177/3 (Hennecke), (no date) “Lied der Brigade Berkenhagen”, p. 39; “Brigadelied”, p. 40; “Werter Genosse”, p. 43; “Adolf Hennecke”, p. 58; “Gruβ den Aktivisten!”, p. 59; “Glück auf! Das Hennecke-Lied”, p. 61; “Hänneke-Lied”, p. 65. Also see Gries and Satjukow,

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˝ “Von Menschen und Ubermenschen”, pp. 39–46 and Naimark, Russians in Germany, pp. 200–201. 129. Hennecke, Aktivisten, p. 17; Naimark, Russians in Germany, p. 200. 130. For films, see Adolf Hennecke, “Kann der sowjetische Film unserer Aktivistenbewegung helfen?” and “Das neue Leben”, BA, NY 4177/7 (Hennecke), (no date), pp. 12–13. For a summary of the media’s response, see Herbert Warnke, “Die Hennecke Bewegung”, Die Einheit , issue 12 (December 1948), pp. 1121– 1127. For a good overview, see Naimark, Russians in Germany, pp. 198–204. 131. Mark Allinson, Politics and Popular Opinion in East Germany, 1945–1968 (Manchester: Manchester University Press, 2000), p. 71. 132. Gregory R. Witkowski, The Campaign State: Communist Mobilizations for the East German Countryside, 1945–1990 (De Kalb: Northern Illinois University Press, 2017), p. 228. 133. “Wir schaffen das Beispiel für ganz Deutschland: Auf neue Art leiten, auf neue Art arbeiten” and “Breiter die HenneckeBewegung entfalten”, Neues Deutschland, Friday 28 January 1949, p. 1. 134. “Hennecke-Woche in Riesa”, Neues Deutschland, Friday 28 January 1949, p. 2. 135. “Ein großer Umschwung”, Neues Deutschland, Friday 28 January 1949, p. 7. 136. BA DY 30/IV 2/1/55, “Tagung des Parteivorstandes am 20. und 21. Oktober 1948”, p. 50; See also BA NY 4177/3 (Hennecke), (no date), pp. 66–71; BA NY 4177/6 (Hennecke), (no date), p. 24. 137. Hennecke, Aktivisten, pp. 54–55. 138. BA NY 4177/8 (Hennecke), (no date), “Genossinnen und Genossen!” p. 94. 139. See the following brochures: “Den Helden der Arbeit Gebührt Ehre und Ruhm”, “Tag der Aktivisten”, “Analyse über den Aktivistentag am 13. Oktober 1949”, BA DY 34/20651, (no date), (no page). 140. Dittrich, Die Anfänge der Aktivistenbewegung, p. 154. 141. See, for example, Naimark, Russians in Germany, pp. 202–204; Kopstein, “Chipping Away”, p. 408.

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142. Siegelbaum, “Soviet Norm Determination”, pp. 59–63; Don Van Atta, “Why Is There No Taylorism in the Soviet Union?” Comparative Politics 18: 3 (April 1986), p. 331. 143. Boris L’vovich Markus, “The Stakhanov Movement in the USSR”, International Labor Review 34 (1936), pp. 23–26. 144. Link, “From Taylorism to Human Relations”, pp. 11–14. 145. Kopstein, “Chipping Away”, p. 407. 146. Naimark, Russians in Germany, p. 202. 147. Selbmann, Ausgewählte Reden, p. 136. 148. Matthes, Das Leistungsprinzip, pp. 53 and 63. 149. The most commonly used German word for piecework, Akkordarbeit , is relatively rarely used in Neues Deutschland, especially from 1948. The regime clearly preferred to run with the more appealing and less historical laden term of Leistungslohn. In the five years following 1948, the word Akkordarbeit appears only four times in the paper. 150. “Prämien helfen der Produktion”, Neues Deutschland, 5 October 1949, p. 1. 151. Mark Landsman, “The Consumer Supply Lobby—Did It Exist? State and Consumption in East Germany in the 1950s”, Central European History 35: 4 (2000), p. 484; for a general summary, see Judd Stitziel, Fashioning Socialism: Clothing, Politics and Consumer Culture in East Germany (Oxford: Berg Publishers, 2005). 152. Hübner, Konsens, p. 40. 153. Kopstein, Politics of Economic Decline, p. 34. 154. Kopstein, “Chipping Away”, pp. 399 and 405; Klessmann, “Arbeiter im ‘Arbeiterstaat’”, pp. 20–28. 155. For example, Perkins’ description of industrial revolution Britain resonates with the East German experience: “by and large, it was the prospect of higher wages which was the most effective means of overcoming the natural dislike for the monotony and quasiimprisonment of the factory”; see Harold Perkins, The Origins of Modern English Society, 1780–1880 (London: Routledge, 1969), p. 130. 156. Hübner, Konsens. 157. Kopstein, “Chipping Away”, p. 412. 158. Kopstein, ibid., p. 413; Arnulf Baring, Der 17. Juni 1953 in der DDR (Cologne: Kiepenhauer und Witsch, 1956), p. 89; Wayne

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Geerling, Gary B. Magee, and Russell Smyth, “Occupation, Reparations and Rebellion: The Soviets and the East German Uprising of 1953”, Journal of Interdisciplinary History LII: 2 (Autumn 2021), pp. 1–26. 159. For a comprehensive overview of that literature, see János Kornai, The Socialist System: The Political Economy of Communism (Oxford: Clarendon Press, 1992).

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(B) Contemporary Publications, Periodicals and Newspapers Breiter die Hennecke-Bewegung entfalten. Neues Deutschland, Friday 28 January 1949, 1. Ein großer Umschwung. 1949. Neues Deutschland, Friday 28 January, 7. Friedrich, Max. 1948. Refa und wir. Der Volksbetrieb, 5 May, 75. Hennecke, Adolf. 1948. Aktivisten zeigen den Weg. Berlin: Verlag die Wirtschaft Berlin. Hennecke-Woche in Riesa. 1949. Neues Deutschland, Friday 28 January, 2. Lenin, Vladimir Ilyich. 1968. The Taylor System—Man’s Enslavement by the Machine. Republished in: Vladimir Ilyich Lenin, Collected Works, vol. 20. Moscow: Progress Publishers. Lenin, Vladimir Ilyich. 1968. The Immediate Tasks of Soviet Government. Republished in: Vladimir Ilyich Lenin, Collected Works, vol. 42. Moscow: Progress Publishers. Lenin, Vladimir Ilyich. 1968. Speech at a Meeting of the Presidium of the Supreme Economic Council, 1 April 1918. Republished in: in Vladimir Ilyich Lenin, Collected Works, vol. 42. Moscow: Progress Publishers. Markus, Boris L’vovich. 1936. The Stakhanov Movement in the USSR. International Labor Review 34: 5–33. Matthes, Harry. 1954. Das Leistungsprinzip als Grundlage der Entlohnung in der volkseigenen Wirtschaft. Berlin: Verlag die Wirtschaft Berlin. Prämien helfen der Produktion. 1949. Neues Deutschland, 5 October, 1. Schober, Hans Heinz. 1948. Rationalisierung oder Leistungssteigerung? Die Einheit, 7 July, 605. Selbmann, Fritz. 1974. Ausgewählte Reden und Artikel: 1945–57 . Berlin: Dietz Verlag. Stoph, Willi. 1948. Weitere Steigerung der Arbeitsproduktivität. Neues Deutschland, 2 July, 4. Uelze, Carl. 1948. Taylor-Refa-Hennecke. Die Arbeit 2, 12 December 1948, 353–356. Ulbricht, Walter. 1953. Über Gewerkschaften: aus Reden und Aufsätzen, volume 2 1945–1952. Berlin: Tribüne, Verlag und Druckereien des FDGB. Warnke, Herbert. 1948. Die Hennecke Bewegung. Die Einheit 12: 1121–1127. Wir schaffen das Beispiel für ganz Deutschland: Auf neue Art leiten, auf neue Art arbeiten. Neues Deutschland, Friday 28 January 1949, 1.

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Balke, Detlev. 1998. Der den Ring sprennte – und von Walter gerügte wurde. Neues Deutschland: B-Ausgabe 53, 13 October, 12. Baring, Arnulf. 1956. Der 17. Juni 1953 in der DDR. Cologne: Kiepenhauer und Witsch. Bergson, Abram. 1954. The Structure of Soviet Wages: A Study in Socialist Economics. Cambridge, MA: Harvard University Press. Caldwell, Peter. 2003. Dictatorship, State Planning, and Social Theory in the German Democratic Republic. Cambridge: Cambridge University Press. Chapman, Janet G. 1963. Real Wages in Soviet Russia Since 1928. Cambridge: MA, Harvard University Press. Dittrich, Gottfried. 1987. Die Anfänge der Aktivistenbewegung. Berlin: Dietz Verlag. Ewers, Klaus. 1980. Einführung der Leistungsentlohnung und verdeckter Lohnkampf in den volkseigenen Betrieben der SBZ (1947–49). Deutschland Archiv 13: 612–633. Foitzik, Jan. 1999. Sowjetische Militäradministration in Deutschland (SMAD) 1945–49. Berlin: Akademie Verlag GmbH. Geerling, Wayne, Gary B. Magee, and Russell Smyth. 2021. Occupation, Reparations and Rebellion: The Soviets and the East German Uprising of 1953. Journal of Interdisciplinary History LII 2: 1–26. Gehler, Michael. 2021. Three Germanies: From Partition to Unification and Beyond, 2nd ed. London: Reaktion Books. ˝ Gries, Rainer, and Silke Satjukow. 2002. Von Menschen und Ubermenschen: Der ‘Alltag’ und das ‘Aussertägliche’ der sozialistischen Helden. Aus Politik und Zeitgeschichte: Beitrage zur Wochenzeitung Das Parlament 52 (17): 39–46. Hachtmann, Rüdiger. 1989. Industriearbeit im ‘Dritten Reich’: Untersuchungen zu den Lohn- und Arbeitsbedingungen in Deutschland, 1933–1945. Göttingen: Vandenhoeck & Ruprecht. Halder, Winfrid. 2001. “Model für Deutschland”: Wirtschaftspolitik in Sachsen 1945–1948. Paderborn: Schöningh. Howard, Michael C., and John E. King. 1985. The Political Economy of Marx. Harlow: Longman. Hübner, Peter. 1975. Konsens, Konflikt und Kompromiβ: Soziale Arbeiterinteressen und Sozialpolitik in der SBZ/DDR, 1945–70. Berlin: Akademie Verlag. Hübner, Peter. 1996. ‘Sozialistischer Fordismus’? Oder: Unerwartete Ergebnisse eines Kopievorganges. Zur Geschichte des Produktionsbrigaden in der DDR. In Amerikanisierung: Traum und Alptraum im Deutschland des 20. Jahrhunderts, eds. Alf Lüdtke, Inge Marßolek and Adelheid von Saldern, volume 6. Stuttgart: Franz Steiner Verlag. Klessmann, Christoph. 2000. Arbeiter im ‘Arbeiterstaat.’ Aus Politik und Zeitgeschichte: Beitrage zur Wochenzeitung Das Parlament 50: 20–28.

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Kopstein, Jeffrey. 1996. Chipping Away at the State: Workers’ Resistance and the Demise of East Germany. World Politics 48 (3): 391–423. Kopstein, Jeffrey. 1997. The Politics of Economic Decline in East Germany, 1945– 1989. Chapel Hill: University of North Carolina Press. Kornai, János. 1992. The Socialist System: The Political Economy of Communism. Oxford: Clarendon Press. Landsman, Mark. 2000. The Consumer Supply Lobby—Did It Exist? State and Consumption in East Germany in the 1950s. Central European History 35 (4): 477–512. Link, Stefan. 2011. From Taylorism to Human Relations: American, German, and Soviet Trajectories in the Interwar Years. Paper presented to the Business History Conference, March 2011, 5–9. Mokyr, Joel, ed. 1993. The British Industrial Revolution. An Economic Perspective. San Francisco: Westview Press. Naimark, Norman M. 1995. The Russians in Germany: A History of the Soviet Zone of Occupation, 1945–1949. Cambridge, MA: Harvard University Press. Nolan, Mary. 1995. Rationalization, Racism, and Resistenz: Recent Studies of Work and the Working Class in Nazi Germany. International Labor and Working-Class History 48: 131–151. North, Douglass C. 2005. Understanding the Process of Economic Change. Princeton: Yale University Press. Perkins, Harold. 1969. The Origins of Modern English Society, 1780–1880. London: Routledge. Poppitz, Stefan. 1982. Der Beitrag des Zentralorgans der SED “Neues Deutschland” zur Popularisierung der Aktivisten- und Wettbewerbsbewegung in den Jahren von 1949 bis 1955. Ph.D. diss: University of Leipzig. Port, Andrew. 2007. Conflict and Stability in the German Democratic Republic. New York: Cambridge University Press. Pritchard, Gareth. 2000. The Making of the GDR 1945–53: From Antifascism to Stalinism. Manchester: Manchester University Press. REFA Verband für Arbeitsstudien und Betriebsorganisation, eds. 1984. Methodenlehre des Arbeitsstudiums: Teil 1 Grundlagen, 7th ed. Munich: Hanser. Roesler, Jörg. 1984. Vom Akkordlohn zum Leistungslohn: Zu den Traditionen des Kampfes der deutschen Arbeiterklasse und zur Einführung des Leistungslohnes in der volkseigenen Wirtschaft der DDR 1948 bis 1950. Zeitschritt für Geschichtswissenschaft 32: 778–795. Roesler, Jörg. 2004. ‘Akkord ist Mord, Normenerhöhung ist das Gleiche’: Eine Tradition des Ökonomischen Kampfes der deutschen Arbeiterklasse und der 17. Juni 1953. Jahrbuch für Forschungen zur Geschichte der Arbeiterbewegung 2: 4–17. Schulte-Zurhausen, Manfred. 2010. Organisation, 5th ed. Munich: Vahlen.

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Siegel, Tilla, and Nicholas Levis. 1996. Lean and Flexible into the Future? Considerations on the Relationship Between Industrial Rationalization and Societal Change. International Journal of Political Economy 25 (4): 9–37. Siegelbaum, Lewis H. 1984. Soviet Norm Determination in Theory and Practice, 1917–41. Soviet Studies 36 (1): 45–68. Steiner, André. 2010. The Plans That Failed: An Economic History of the GDR. New York: Berghahn. Stitziel, Judd. 2005. Fashioning Socialism: Clothing, Politics and Consumer Culture in East Germany. Oxford: Berg Publishers. Suckut, Siegfried. 1982. Die Betriebsrätebewegung in der sowjetisch besetzten Zone Deutschlands (1945–48). Frankfurt: Haag und Herchen Verlag. Suckut, Siegfried. 1996. Die Betriebsrätebewegung in der sowjetischen Besatzungszone und die Bitterfelder Beschlüsse. In Gewerkschaften in der SBZ/DDR 1945 bis 1950: Anspruch und Wirklichkeit. Hannover: IG ChemiePapier-Keramik, 53–65. Van Atta, Don. 1986. Why Is There No Taylorism in the Soviet Union? Comparative Politics 18 (3): 327–337. Witkowski, Gregory R. 2017. The Campaign State: Communist Mobilizations for the East German Countryside, 1945–1990. De Kalb: Northern Illinois University Press. Zank, Wolfgang. 1987. Wirtschaft und Arbeit in Ostdeutschland. Munich: R. Oldenbourg Verlag.

CHAPTER 4

Learning from the Soviet Union Means Learning to Win: Group Technology and the Mitrofanov Method

Over several weeks in November 1960, representatives of eighty-one communist parties from around the world congregated in Moscow to discuss the future direction of the international movement. While its proceedings are best known for the rancorous split between the Chinese and the Soviets that played out there and at a prior meeting in June in Bucharest, the meeting also directed its attention to how existing Marxist–Leninist states should position themselves in the current phase of competition with capitalism.1 Rapid economic development, it was felt, held the key not just to acquiring ascendency in that competition, but in expediting the prophesised transition from socialism to communism. Thus, the Moscow Declaration released in the immediate wake of the meeting called for communist states to demonstrate the inherent superiority of the socialist system by using cutting-edge science and technology to complete the mechanisation and automation of production processes and achieve labour productivity levels well in excess of the leading capitalist nations.2 As Nikita Khrushchev, the Soviet leader, reminded those present, in doing so, they would be fulfilling Marx’s laws of social development:

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 G. B. Magee and W. Geerling, Socialism with a Human Face, Palgrave Studies in Economic History, https://doi.org/10.1007/978-981-19-0664-0_4

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The faster we move ahead in building the economy, the stronger we will be economically and politically, the sooner the socialist camp will influence the pace and direction of historical development and the fate of the world.3

The SED leader, Walter Ulbricht, who had been at the Moscow meeting, informed party delegates to the Eleventh Conference of the Central Committee in mid-December 1960 that this, too, would be the course the GDR would take: The statement of the Moscow Declaration, that the next economic goal is to achieve a high level of production on the basis of modern technology, requiring ever strengthening mechanisation, standardisation and automation of production, also applies to the German Democratic Republic. We also have to concentrate our strengths on these goals.4

Ulbricht’s wholehearted embrace of the Moscow Declaration reflected not only his commitment to the fraternal bonds of the socialist world but more importantly, his understanding that the on-the-ground realities of the GDR required it. Since its formation in 1949, the GDR had been locked in a bitter, existential competition with the Federal Republic of Germany (FRG). Ulbricht and his colleagues knew that if the SED was to retain its rule, and when circumstances permitted, have the chance to extend it across the entirety of Germany, then it would need to dramatically improve its economic performance and demonstrate unequivocally the superiority of its system to the vast majority of Germans. For, as long as the GDR was only able to offer its citizens poorer economic prospects and freedoms than its rival in the West, hope for a socialist unification of Germany could never be anything more than a fanciful pipedream. The more immediate challenge it faced, though, was not to go under. Across the 1950s, the GDR’s economic performance had not lived up to expectations. Its rate of economic growth had steadily declined across the decade, GDP per capita stood at around two-thirds of West German, and its industry remained relatively less productive.5 As a result, until the Berlin Wall was erected in August 1961, its citizens fled to the West in large numbers. Between 1949 and 1961, over 2.7 million people left the GDR, of whom 963,880 had previously been gainfully employed there. It was an exodus that amounted to 11.1 per cent and 13.4 per cent of the total population and the total employed workforce of the GDR in 1950, respectively. Nor were things easing up. In the most immediate

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period, 1959–1961, more than 450,000 had fled the country for good, including no less than 2.6 per cent of its gainfully employed.6 While the Wall eventually stemmed this haemorrhaging of its workforce, relief on that front concomitantly removed the main rationalisation that the SED had adduced to explain why the GDR had been underperforming vis-à-vis the FRG. Now, the GDR had the room, and no excuse not, to build the socialist prosperity it had always claimed was its destiny. In doing so, it expected that SED rule, and the GDR more generally, would garner a degree of legitimacy and respect greater than it had ever had both on the international stage and, most crucially, within Germany. The pertinent question, though, was: how could the sinews of the GDR economy be energised sufficiently to thrust it with the required swiftness to the forefront of industrial nations? The consensus within the SED, even prior to the Moscow Declaration, was that the key to success lay in rapid economy-wide increases in labour productivity brought on by the deeper mechanisation and automation of all aspects of production. As Erich Apel, Head of the Economic Commission of the Politburo (Wirtschaftskommission beim Poiltbüro der SED), told the Ninth Conference of the Central Committee in July 1960 rather laconically, “full mechanisation and automation – that is the technique of socialism”.7 Raising the technological level of industrial production would need to become an imperative; in tandem, new, more efficient forms of organisation would need to be speedily developed and implemented. By radically transforming its industrial core in this manner, the SED felt certain that it would ensure the GDR’s economic victory over the FRG and secure once and for all the establishment of socialism on German soil. In its search for productivity growth, the SED leadership was spurred on by the supreme confidence it possessed that its ultimate success would lie in unleashing the latent potential of the socialist mode of production. As the leader of the socialist world and creator of the first socialist society, it was taken almost as an article of faith that the Soviet Union’s own experiences provided a near infallible guide to the path ahead. Moreover, operating according to socialist principles, the Soviet Union was seen to be already reaping the benefits, generating new technological and production ideas that would enable it and the socialist countries in its orbit to leapfrog the capitalist world in terms of productivity. In the era of sputnik, everything seemed possible.8

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One such revolutionary idea that appeared from this milieu was the Mitrofanov Method, a manufacturing technique which enabled component parts, which hitherto had no other option but to be produced separately, to be manufactured together on a single set of machines, bringing great savings in time and resources. While the idea had emerged in the Soviet Union, it was quickly latched upon by the East German authorities, who took it as further irrefutable proof of what it believed to be the innate superiority of socialist production. How did the regime attempt to take advantage of this perceived opportunity to make a technological leap, and what barriers did it confront along the way? This chapter takes up these questions. It examines the successes and failings of the major campaign to promote the adoption of the Mitrofanov Method across the GDR, and deploying the behavioural economics concept of information cascades discussed in Chapter 2, it evaluates how in meeting this challenge the system was able, seemingly effectively, to mobilise itself in some arenas, regions or activities, but not others.

4.1

Mitrofanov and His Method

One solution to the productivity challenge faced by the GDR was proposed by Sergei Petrovich Mitrofanov, a prominent Soviet industrial engineer. Born in September 1915, Mitrofanov began his scientific education at the Leningrad Training Centre (and from 1933, Institute) for Fine Mechanics and Optics (LITMO).9 Completing his degree in Precision Mechanics in 1939, he went to work at the State Optical-Mechanical Plant (GOMZ ) also located in Leningrad, where over the coming decade he demonstrated a considerable flair for innovation and organisation, progressing rapidly through the ranks from foreman to technologist, to production manager, and finally chief engineer of the plant. A committed communist, he added in 1951 the first secretaryship of the Kalinin district party committee of the Communist Party of the Soviet Union (CPSU) to the list of his responsibilities. Between 1954 and 1961, he moved up again, becoming the secretary of the Leningrad Regional Committee for Industry and Science, a role that brought exposure to, and valuable experience with, the wide range of industrial enterprises and research institutes at work in that city.10 It was at this time and in this conducive setting that his ideas about how parts bearing similar characteristics, but presently manufactured separately, could be fabricated collectively on common

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universal machine tools came to fruition and began to catch the attention of engineers and senior CPSU officials.11 In 1959, his novel insights into production engineering were collated and formalised in the monograph, Scientific Principles of Group Technology, for which, combined with his assiduous work in applying his principles to Soviet industry, he was awarded the Lenin Prize.12 In 1961, he returned to his alma mater, LITMO, as a director and head of the Department of Instrumentation Technology.13 There, he continued working on refining and popularising group technology—both in the USSR and the broader Soviet world. Group technology provided a key foundation stone for his research into the automation of the design of technological processes and flexible production systems.14 Mitrofanov’s work gave him prominence and placed him on the national stage, enabling him, inter alia, to sit on the Soviet Academy of Science’s Scientific Council of Automation and to chair the Group Production Organisation section of the Social and Economic Development Council of the CPSU.15 To grasp the novelty of Mitrofanov’s conception of group technology, one must first understand how production parts prior to its development were designed and constructed in industries with low volume or batch production. The conventional method of preparing for production in such settings perforce began with the processing of every single component part that went into the final product. For each separate part, the technologist, thus, had to define the workflow and draw up a work plan for how it would be processed individually. The devices, tools and settings required to undertake the processing typically had to be customised to the characteristic features of the individual part in question. In practice, this meant that every time a new part was to be made, the machinery utilised had to be recalibrated and reconfigured to the unique specifications of the new part, a process that often required production to grind to a halt. Such arrangements slowed down production, ensured that production runs would remain small, and limited the scope for mechanisation and automation. But what if production parts were not as different from each other as the conventional process assumed? Mitrofanov’s innovation stems from the observation that there were indeed similarities between parts, and that these similarities could in principle be systematically classified. Furthermore, once classified, he surmised, a common technological workflow plan for parts of the same classification could be designed, in effect allowing multiple parts to be manufactured together in the

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same production process with essentially the same machine settings. Such group processing, as he called the method, would open up the potential of the high-volume production of such parts. Key to his approach was the classification of parts into groups with similarities—called part families by contemporary engineers—that would enable some degree of co-production. Such groups could be defined by a range of common characteristics of parts, including their dimensions, similarity in geometric form, commonality of the areas to be processed, the degree of accuracy and surface quality required, and use of semi-finished product.16 Based on his knowledge of precision and optical engineering plants in the Leningrad region, Mitrofanov contended that around 90 per cent of all parts could be processed in the manner he proposed. The experience of VEB Carl Zeiss Jena, the world-famous manufacturer of lens, camera and optical instruments and the first adopter of his methods in East Germany, confirmed his belief. In 1958, its plants used 337 different parts, each of which at the time was being made separately. When, however, these parts were analysed along the lines suggested by Mitrofanov, it was found that they could be broken down and classified into 14 distinct groups of parts bearing similar forms, which, in turn, could be manufactured according to the methods of group processing. Only 7 parts—or just over 2 per cent of all the parts utilised—could not be grouped into a part family and would have to be continued to be processed individually.17 Mitrofanov stressed that classification is not an abstract or academic exercise; its only purpose should be to identify groups of individual parts that could be manufactured collectively. The essential thing in compiling the group of individual parts is the selection of the specific characteristic that links all of the parts together. Where such a characteristic does not naturally occur, Mitrofanov pointed out that it may still be possible by combining simple geometric elements in different ways to design an ideal characteristic that embraces the features of a range of ostensibly different parts. This characteristic part Mitrofanov called a complex part. The larger the number and diversity of the parts in a group, the more complicated in design the complex part becomes. In principle, however, the development of complex parts is the most important component of his conception of group processing, because, once created, a uniform technological process can be developed for groups based on complex parts and standard work plans realised that can transform the nature of production. Such a transformation is possible because a complex part may encompass within its group a large number of individual parts, twenty to forty, for example,

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not being uncommon. If, say, 100 pieces of each of these parts have to be manufactured each day, the total piece numbers manufactured daily through the deployment of a complex part would lie somewhere between 2000 and 4000. Such numbers open up the possibility of automation, something which would have been economically unviable when each part had been manufactured independently.18 An outline of how group processing as developed by Mitrofanov could be applied on the shop floor is provided in Fig. 4.1. At the beginning of the process, all parts used in the manufacture of a device are collated, examined, and sorted into groups with similar characteristics. Conceptually, each part can be categorised in nature as either repeated, where the part is identical to other parts; similar, where the part is distinct in

Fig. 4.1 The Mitrofanov Method (adapted from figures found in Blume 1961, p. 10 and Weiz 1962, p. 11)

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shape and size, but has a geometric similarity to other parts; or comparable, where the part has completely different dimensions and shapes, but can nevertheless be grouped into a family based around a complex part.19 Those parts that share no similarity with other parts and cannot be captured by a complex part should also be identified and excluded from the process. The identified part families are then further classified by the type of machinery on which they are processed. Finally, each of these classes are further subdivided into three groups according to whether the part’s production process cycle can be completed on the same machinery (Type I), a variety of machines (Type III), or only partially completed through the use of a group processing (Type II). Type I groups lend themselves perfectly to continuous group processing. All parts can be manufactured with the same settings and significant economies of scale become possible. Type III groups are likewise characterised by closed processing cycles, but in these cases different stages of a part’s production are carried out on a variety of machinery. To realise significant economies of scale in this context, there needs to be a coordination of technological workflows between the different machinery and stages of production. The collection of machines and equipment arranged in this manner to process an individual part family is known as a machine cell. With Types I and III parts, therefore, the employment of group processing opens up the possibility of continuous flow production lines. The opportunities for Type II groups are more constrained, however, as individual parts still need to be completed across different production lines, including some which are conventional in design and, hence, not amenable to group processing. Even in this instance, though, the introduction of some degree of group processing into the overall production process will reduce downtime due to retooling and, when combined with improved coordination of workflows, enhance productivity. The attractiveness of the group processing method is that it offers significant benefits to industry by reducing downtime through simplified process planning and production scheduling; by saving work in process and manufacturing lead times; by facilitating the development of standardised, core group tools, fixtures and setups adaptable to different uses; by lowering material handling and space costs as a result of the refocusing of design on machine cells overseen by one foreman rather than on production setups that spanned entire factories; and by raising the technological integration and sophistication of production. In effect, the

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value of group processing is that it enables all aspects of manufacturing from design through to production to be rationalised, thereby creating the necessary conditions for the complete mechanisation and automation of the production process.20 While group processing emerged in response to the challenges of manufacturing component parts in industries where small-scale, batch production predominated, the method could in principle be extended to other settings and, indeed, other stages of the production process. As Herbert Weiz, Director of Technology at VEB Carl Zeiss Jena, noted in 1962, Mitrofanov’s methods, once set in motion had the potential to unleash a “revolutionary transformation in technology and production organisation”.21 This potential excited the leadership of the SED, too. In his speech to the Twelfth Conference of the Central Committee of the SED in March 1961, Walter Ulbricht told delegates that group processing provided a means to escape: single or small series production, which is known to have low productivity, and to get to series or mass production, in which the great advantages of mechanisation and automation can be exploited. In this sense, group processing is actually a catalyst for scientific and technological progress. … It turns out that the Mitrofanov Method is an important link in the chain. If we embrace this chain link, we inevitably bring a number of important problems closer to their solution.22

In part, Ulbricht’s confidence in the Mitrofanov Method’s potential stemmed from the fact that at the time over ninety per cent of enterprises in the GDR’s strategically important capital goods sector still operated on the basis of small batch or one-off production runs. Take the case of VEB Carl Zeiss Jena, one of East Germany’s major exporters. Table 4.1 decomposes its manufacture of component parts in 1962 before the widespread introduction of group processing by the scale of their production runs. It reveals the disproportionate amount of effort that was devoted to the manufacture of parts that were being produced in very low volumes. More than half (51.9 per cent) of the labour time devoted to the manufacture of parts went into producing 9 per cent of all of the parts produced. Just over 40 per cent of its range of parts were manufactured in production runs of 50 units or less. Each of these parts on average took

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Table 4.1 Production of parts at VEB Carl Zeiss Jena, 1962 (derived from data found in Weiz 1962, pp. 28–30) Size of production run

1–25 26–50 51–100 101–200 201–300 301–500 501–1000 1001–5000 5001–10,000 More than 10,000

Share of the individual parts out of the total number of part types produced 23.3 18.0 18.5 13.5 6.4 6.2 6.7 6.1 0.8 0.5

Standard time expenditure to produce an individual part (in minutes) 173 94 68 36 25 18 11 5 1.5 2

Share of total volume of parts produced

Share of total standard hours used in making parts required to produce these parts

1.0 1.2 3.0 3.8 4.0 6.1 12.2 20.0 14.1 34.6

12.0 10.4 17.4 12.1 8.6 9.9 11.6 9.4 1.8 6.8

between 94 and 173 minutes to produce. Taken together, their production absorbed 22.4 per cent of the standard hours of labour allocated by the enterprise to the making of parts, even though they constituted in volume just 2.2 per cent of all the parts it fabricated. By contrast, only 1.3 per cent of the range of parts it made emerged from production runs of greater than 5000 units. These parts, however, were generated quickly and in high volume. They each took on average 1.5–2 minutes to manufacture and accounted for 48.7 per cent of all the parts the enterprise produced. Despite representing a half of all its part production, they consumed only 8.6 per cent of the total standard labour hours that VEB Carl Zeiss Jena invested in the manufacture of parts. The key point illustrated by Table 4.1 is that a method such as group processing, which facilitated larger production runs, could bring significant economic benefits to enterprises such as VEB Carl Zeiss Jena. In its first two years of its proper deployment (1960–1), group processing was estimated to have saved the enterprise 1.5 million DM .23 But it was not unique in presenting profitable opportunities for group processing; its preponderance of short production runs was shared right across the entire mechanical engineering sector in the GDR. Erich Apel at a meeting

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in Berlin of leading SED cadre with Mitrofanov on 1 March 1961 was well attuned to the opportunity presented, somewhat flamboyantly telling those assembled that “if we get our mechanical engineering right on this path, we will make billions”.24

4.2

Origins of a Campaign

The East German experience with the Mitrofanov Method began in 1958. As one of the showpiece enterprises of the GDR, VEB Carl Zeiss Jena had been called upon by the new Seven-Year Plan to raise productivity and increase both the scale and range of its production significantly. Given the high proportion of batch manufacturing in its production structure, such stretch targets posed serious challenges for the enterprise.25 At some point in the year, the production manager of the plant, Schmitz, seemingly through word of mouth, became aware of some of the experimentation currently being undertaken in the Soviet Union by Mitrofanov and his colleagues. He was intrigued enough by what he had heard to suggest that the plant should begin identifying geometrically similar parts, so as to make better use of existing machine capacity.26 Weiz, the director of technology, took the lead. However, as no technical literature on group processing was available in the GDR at that time, his efforts were perforce based on pure experimentation and guesswork. Consequently, little progress was made, and much time was wasted pursuing methodological dead ends. The biggest error made was the investigators’ assumption that group processing was at essence a purely technological matter, whose implementation could be achieved by breaking down and handling each technical aspect as a discrete component. There was as yet no awareness that the transformative nature of the method could only be realised if its implications were allowed to permeate all aspects of production and plant life. Somewhat lost and seeking guidance, the enterprise invited Professor A.A. Matalin, director of the Institute of Engineering in Leningrad and leading exponent of the Mitrofanov Method, to present at a conference of technologists to be held in Jena in November 1958. Through his paper and subsequent discussions with VEB Carl Zeiss Jena technologists, Matalin outlined in detail to them the principles of group processing and its implementation that had been established in the Soviet Union. Soon thereafter, Weiz followed up by visiting Mitrofanov in person and seeing his method in practice in various plants across

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Leningrad. The insights gained first-hand from Matalin and Mitrofanov galvanised and refocused the enterprises’ interest in group processing.27 A few months later in early 1959, the first Soviet (Russian language) literature on the Mitrofanov Method appeared in East Germany, followed by German language summaries of some of the material, including a partial translation of Mitrofanov’s seminal book on group processing, in “Press of the Soviet Union” (Die Presse der Sowjetunion). A full German translation of Mitrofanov’s seminal book on group processing was not published till 1960, however.28 At this time, the Central Institute for Manufacturing Technology in Mechanical Engineering (Zentralinstitut für Fertigungstechnik des Maschinenbaues or ZIF ) in Karl-Marx-Stadt also became interested in Mitrofanov’s work, adopting it as one of the focus areas of its own research programme.29 Its researchers acquainted themselves deeply with the Soviet literature and established a working collaboration with the Moscow Institute of Physics and Technology, a relationship which brought a wealth of technical experience to the Institute. ZIF set itself two goals: first, to collect, synthesise and generalise all available knowledge of group processing, so as to give the GDR’s mechanical engineering enterprises effective support in its implementation; second, to further the development of group processing, so that its methods might be applied to other areas of manufacturing or contexts, for which sufficient experience presently did not exist.30 Its findings were to be disseminated via publications and conferences. Now more knowledgeable of group processing and better equipped to handle its implementation, VEB Carl Zeiss Jena renewed its efforts, this time on a more systematic basis in line with Soviet experience. In August 1959, it deployed its first technologist to work full-time on the implementation of the Mitrofanov Method. In November 1959, it formed a standing enterprise-wide working group of activists (the MitrofanowAktiv) to coordinate and plan the necessary work. The Aktiv consisted of the chief technologist, an economist, the head of standardisation, a representative of the technology department, and the technologist already employed full-time on Mitrofanov work. A press collective was founded and given the task of penning a piece about group processing in each edition of the enterprise newspaper “Headlights” (Scheinwerfer). At the beginning of 1960, as the massive volume of analysis required became clearer, a further three technologists were redeployed to working full-time on group processing. The numbers working on the initiative continued to

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grow over the coming months; by the following year, there were fifteen staff engaged in these activities.31 The wider availability of information on group processing meant that its potential quickly began to be perceived and explored by engineers and technologists in other enterprises, too. By the second half of 1959, these enterprises included VEB Industriewerk Karl-Marx-Stadt , VEB Spinnereimaschinenbau Karl-Marx-Stadt , VEB Zahnschneidemaschinenfabrik Modul Karl-Marx-Stadt , VEB Erste Maschinenfabrik Karl-Marx-Stadt , VEB Hydraulik Rochlitz, VEB Rafena-Werke Radeberg , VEB Berliner Werkzeugmaschinenfabrik, and VEB Meβgeräte- und Armaturenwerk “Karl Marx” Magdeburg .32 However, as ambiguities about the practicalities of introducing group processing remained, many of the experiments carried out were ad hoc, poorly designed, and ineffective and, as such, only raised doubts among some about the efficacy of the method. Yet there were enough successes to maintain the building interest in the approach. In enterprises where the examples were organised, considerable economic benefits were achieved through the introduction of group processing. For example, in VEB Hydraulik Rochlitz, an alternating production line for group processing of the fastenings for hydraulic working cylinders was introduced. Central to this development was the extension of an existing precision drill, so that it became capable of machining the cross bore in the fasteners of standard working cylinders. The innovation entailed combining a drilling head box of a vertical drilling machine with a continuously variable drive and control course on the fine boring unit. This blending of technologies made it possible to carry out two operations—the drilling and the finishing of the cross hole—on one device on one machine. The alternating production line it engendered had in its first year brought savings of 40,000 DM in wages alone. In addition, the distances travelled by parts in production were shortened to little more than a tenth of what they had previously been, the number of rejects was reduced from 8 to 3 per cent, and throughput time was reduced by over eighty per cent. The new setup also enabled women to be employed on the production line for the first time.33 Results like this piqued the interest of leading SED figures. In March 1960, a delegation from the central committee, which included Apel, visited Mitrofanov in Leningrad and witnessed first-hand his method in action in a range of enterprises.34 Upon return, the Department of Mechanical Engineering and Metallurgy of the Central Committee was

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commissioned to compile a report on the implementation of the Mitrofanov Method in GDR industry. Completed in June 1960, it noted that while some enterprises in the GDR had already dealt with group processing and in some cases achieved good results: the general level of introduction of group processing is still poor. This is largely due to unclear and diverse ideas about the meaning, nature and methodology of group processing, and an ideological understating of this concrete way to achieve maximum time savings compared to West Germany in the field of manufacturing technology in mechanical engineering.35

The report’s main conclusion was that the fate of the Mitrofanov Method in East German industry should not be left to a handful of technologists alone: implementation worked best when the enterprise party organisation grasped its significance and, along with the district (Bezirk) and municipality (Kreis ) leadership, actively promoted it.36 On 13 September 1960, the report was discussed at the State Planning Commission (Staatliche Plankommission or SPK ) where a number of measures were identified to advance the uptake of the Mitrofanov Method in the mechanical engineering sector. ZIF was instructed to continue its work on fleshing out the scientific principles underpinning the Mitrofanov Method and its optimal introduction. In order to overcome the apparent ambiguities and the weaknesses that have already been encountered, as well as to generalise the knowledge gained in enterprises to date, it was resolved that the mechanical engineering and metallurgy department of the SPK would, in the spirit of the socialist work community (sozialistische Arbeitsgemeinschaft ), form a central, inter-enterprise working party, the Mitrofanov Aktiv. The task of this working party is to create meaningful examples, which can be used for the popularisation, training and preparation for mandatory introduction [of group processing]. In addition, the working group is committed to the task of developing a tried-and-tested methodical guide for the introduction of group processing and solving fundamental technological questions of group processing. ZIM has to determine decisively the work of the Aktiv, to further develop cross-enterprise collaborative work, and to make sure it becomes the organizing centre for the introduction of the Mitrofanov Method in mechanical engineering.37

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The SPK also determined that a parallel, though subordinate, Aktiv for the introduction of group processing ought to be formed in each Association of People’s Owned Enterprises (Vereinigung Volkseigener Betriebe or VVB) and provide leadership in its areas of responsibility. Accordingly, VVB Regelungstechnik, Gerätebau und Optik, the industry association with oversight of control technology, device construction and optics manufacture, reported on 23 September 1960 that it had complied with the SPK’s directives and, in fact, had already shown a movie on the Mitrofanov Method to all its plant managers. The plant managers were further instructed to get on with the introduction of group processing and appoint as soon as possible a full-time employee responsible for carrying out all the preliminary analysis needed for implementation in their enterprise.38 On 9 December 1960, the Department of Mechanical Engineering and Metallurgy’s report eventually found its way onto the agenda of a meeting of the Economic Commission of the Politburo. After lengthy and lively discussion, the Economic Commission endorsed both the report and the pivotal role of the centralised inter-enterprise Aktiv operating out of the SPK . It, however, opted to go further in seeking to accelerate the spread of group processing. To this end, it commissioned the Department of Mechanical Engineering and Metallurgy of the Central Committee to familiarise all party secretaries of mechanical engineering enterprises with the Mitrofanov Method via a short course to be delivered in Brandenburg in early 1961. The Department was further instructed to prepare a letter on behalf of the First Secretary of the Central Committee, Ulbricht, to be sent to the Central Committee of the CPSU requesting that it organise a delegation of Soviet specialists, including Mitrofanov and Matalin, to come to the GDR in early 1961 to train instructors and inspect enterprises. To amplify the benefits from Mitrofanov’s visit, a follow-up three-week trip by a group of specialists from ZIF , members of the inter-enterprise Aktiv, and technologists from various branches of industry to the Soviet Union to study the latest advances in group processing was planned. Finally, the Economic Commission resolved that henceforth a schedule for the adoption of the Mitrofanov Method would become a mandatory feature of the new technology plans of all enterprises in the mechanical engineering sector.39 The resolutions laid the foundations for a nationwide campaign to promote the Mitrofanov Method, although the party’s intentions in these regards were only to become known to the wider public the

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following March, when Ulbricht and others at the Twelfth Conference of the Central Committee afforded the importance of introducing group processing the highest prominence.40 The following sections of the chapter analyse the progress of the campaign as it unfolded. A broad overview of the campaign can be gleaned from Fig. 4.2. Drawing upon the reporting of the campaign in Neues Deutschland, the SED’s national newspaper, Fig. 4.2 captures every mention of group processing, including whether it was explicitly included in the title of an article, between November 1959 and December 1964. It shows that, beyond the early beginnings of the Mitrofanov Method in the GDR (it was first mentioned in Neues Deutschland in November 1959), four phases of the campaign are apparent: first, the initial push beginning in February 1961, which peaked between March and May 1961 and then petered off between June 1961 to February 1962; second, a second wave between May and November 1962, which reached its apogee between May and August of that year; third, the final phase of the campaign from the beginning of 1963, during which regular mention of group processing rapidly tailed off.

Fig. 4.2 The campaign to introduce group processing, November 1959 to December 1964 (Neues Deutschland archive accessible at https://www.nd-arc hiv.de/) (Note Fig. 4.2 catches all articles where the most common terms for group processing—Mitrofanow, Gruppenbearbeitung , Gruppentechnologie and Gruppenfertigung —are utilised. Each instance, which mentions at least one of these terms, is counted just once)

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The Mitrofanov Effect

In planning the campaign to promote the implementation of group processing in GDR industry, the Economic Commission of the Central Committee’s instincts reverted to what had become a well-established communist tradition, namely, the tying of major campaigns to model individuals who typified the behaviour or values to be promoted. The experience of the Hennecke campaign in raising norms during the late 1940s and early 1950s discussed in Chapter 3 was still fresh in the memory of the party, as indeed were the feats of a litany of heroic workers from the Soviet Union. The party’s reliance on such methods was not just ritual, though, even if at times it did take on that appearance. Rather, it was recognition that if an initiative was to capture the attention of decision-makers nationwide, a powerful image that broadly resonated was often instrumental. When skilfully deployed, it transmitted a message to all and sundry that the issue at hand mattered and that if this person, who is like me or whom I aspire to be like, could alter their actions, then so could I. Moreover, by publicising the fame and recognition that compliance could bring, it demonstrated that the choice one makes could yield personal rewards. With the campaign for group processing, the target audience was clear: everyone who had a responsibility for organising production in East German industry, but especially those in the mechanical, precision and optical engineering sectors. There was also an obvious candidate to front the campaign: Mitrofanov himself. Not only had he discovered the process that would, it was believed, unlock the as yet untapped bounty of socialist production, but he had attained his breakthrough by drawing upon his strong communist convictions and values. As Apel told Mitrofanov during his visit to Berlin: We see in you the prototype of the new socialist man, and your experiences give us a great deal. You know life very well, you know practice, you are a scientist, excellent innovator and at the same time a party worker.41 Comrade Ulbricht attaches great importance to the widespread introduction of the Mitrofanov Method to our republic, particularly in the branches of mechanical engineering, where wage developments have run away the most and where labour productivity continues to lag behind the most, that is, it is at its lowest. Comrade Ulbricht is of the opinion – and I fully support this – that this valuable method, which, I would say, has

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taken root with us, hangs upon all these basic questions and, in connection with its increase in labour productivity, has solved the wage problem. In Comrade Weiz’s report, it was expressed that the experiment at Zeiss has been going very well, not least because of the direct instructions received from Comrade Mitrofanov himself. We now have to make a policy out of it for all Bezirke.42

Visits to the GDR by Mitrofanov, it was determined, would form a central plank of the campaign. The planning for his trips were handled by the Society for German-Soviet Friendship (Gesellschaft für DeutschSowjetische Freundschaft or DSF ) with oversight and ultimate approval coming from the Economic Commission of the Central Committee. Tellingly, neither the Free German Trade Union Federation (Freier Deutscher Gewerkschaftsbund or FDGB) nor the party leadership at any level were involved in the planning. Three main events, all highly stagemanaged and to be heavily covered by the press, were to dominate his schedule: His attendance, participation and keynote speech at the Central Mitrofanov Conference at the Volkshaus in Jena on 28 February 1961; his meeting at the House of the Central Committee in Berlin with members of the Economic Commission of the Central Committee, the economic secretaries of each Bezirk, and representatives from the Chamber of Technology (Kammer der Technik or KdT ), FDGB, and DSF on 1 March 1961; and a major exchange of experience event to be held in the Kulturhaus “Ernst Thälmann” in Magdeburg on 6 March 1961.43 A second visit was also planned—and took place—later in the year, the climax of which was his involvement in the Second Central Mitrofanov Conference held at VEB Brandenburger Traktorenwerke on 26 May 1961.44 However, it was the First Central Mitrofanov Conference in Jena in February, whose proceedings were heavily publicised and extensively reported in the press, which proved the pivotal step in the attempt to attract national attention to group processing. At its conclusion, a resolution was passed by delegates, which was to become a rallying cry for the first wave of the campaign. We, the researcher workers, innovators, activists, technologists and scientists of the first major innovator conference, who, with the personal participation of the initiator of the method, Comrade Mitrofanov, winner of the Lenin Prize, have met to examine the state of the introduction of the Mitrofanov Method in our German Democratic Republic and measures

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to accelerate its implementation, consider it our duty to call on all organs of the trade union, the state and economic authorities, and mass organisations to actively take all available means to support the preparation and implementation of the Mitrofanov Method and to make it part of their work.45

As expected, the state and party soon amplified the conferences’ appeal for action. Apel, a fortnight after endorsing the conference’s resolutions at his 1 March 1961 meeting with Mitrofanov, wrote to the economic secretaries of each Bezirk, reminding them of their obligation to plan, guide and oversee the introduction of Mitrofanov’s method in all their respective regions, irrespective of their industrial foci.46 For, as he had assured them at the meeting on 1 March, “the method can be widely used, from the most difficult light machine construction to the largest heavy machine construction”.47 A massive multi-media propaganda campaign quickly rolled into place. It included the standards of communist campaigning, including the widespread utilisation of public lectures and workshops,48 display cabinets and picture walls,49 Soviet instructional films,50 exhibitions,51 and socialist competitions,52 all designed to stress the utility, importance and need for the rapid adoption of the Mitrofanov Method. The central leadership of the key mass organisations also played a part. A joint statement prepared by the Federal Board of the FDGB, the Presidium of the KdT and the Secretariat of the Central Board of the DSF opined that social organisations, and especially the newspapers and executive boards of the unions, must be at the forefront of the “educational work and wage a decisive battle against conservative ideas and the power of habit”.53 They held that it was necessary to ensure that ready-to-go publications about positive experiences on introducing group processing were created and made available so that they could be rapidly printed by central and Bezirk press organs as needed.54 The FDGB’s paper, Tribüne, would henceforth regularly publish articles and reports on the tasks and experiences of union leadership in supporting the introduction of group processing. A new supplement to the Tribüne would also be regularly put out to provide non-technical materials on group processing in an easily accessible format. Similarly, the Central Board of the DSF committed to continue utilising its publication, Die Presse der Sowjetunion, to keep East Germans up to date on developments with group processing in the Soviet Union,55 while the Presidium of the KdT agreed

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to exercise influence on the GDR’s technical, scientific and economic journals to ensure that they continued to cover, update and explain in sufficient detail the scientific basis of the Mitrofanov Method.56 Somewhat more novel was the campaign’s utilisation of the new technological medium of the age, television, to deliver a course on the Mitrofanov Method on Deutscher Fernsehfunk as part of its Television Academy.57 The television series’ purpose was to position the Mitrofanov Method as an integral part of the GDR’s drive to accelerate the pace of technological change and productivity growth, emphasise the method’s revolutionary socialist character, and enhance the public’s awareness of the need for its rapid adoption. As the editorial office of propaganda production at Deutscher Fernsehfunk explained, “ultimately, the goal of this series is to make this clear to our viewers in a simple, convincing form. At the same time, the audience should receive suggestions for their practical work, recognize the nature and meaning of the Mitrofanov Method, and be called upon to be mobilised”.58 The TV course started on 25 April 1961 with an 11 minute episode presented by Professor Matalin, who spoke about the Soviet experience with the Mitrofanov Method and the benefits that had ensued there. In all, 19 episodes were aired over the period running from 25 April 1961 through to 29 May 1962. In 1961, a new episode was released each month; from the beginning of 1962, new episodes appeared fortnightly. Each episode was repeated in the week after its premiere. How did the first phase of the campaign fare? In November 1961, the Commission for the Production of Propaganda of the Economics Department of the Central Committee drafted an internal report on the topic. While it acknowledged some successes had been achieved, especially in the immediate aftermath of February’s Central Mitrofanov Conference in Jena, its findings were far from glowing. It estimated that just over 200 mechanical engineering enterprises and a few others in the ceramic, woodworking and clothing industries have started to use group processing, yielding an economic benefit of over 10 million DM for the GDR economy. Yet for the majority of enterprises, which operated small scale or batch production runs, their efforts in adopting group processing remained elementary and had not proceeded beyond sorting, classifying and forming complex parts for a few rotary-turned parts. In no instance, had an enterprise been able to group process more than 5 per cent of its individual parts. The report concluded that:

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The introduction of group processing is still sluggish and to a certain extent has come to a standstill because the production and use of group resources (basic devices and tools with interchangeable elements), the purposeful modernisation of the existing machine tools and the development of group flow production lines is still very poor.59

Disturbingly for the advocates of Mitrofanov’s ideas and very much in spite of the intensive propaganda and educational campaign that had been undertaken, the essence of group processing, it seems, remained largely unknown or misunderstood. Blume, the main technologist from VEB Carl Zeiss Jena, who had travelled across the GDR attempting to spread Mitrofanov’s message, told Roscher, the First Secretary of Bezirk Gera, that everywhere he spoke he encountered widespread uncertainty about the meaning of the Mitrofanov Method, most worryingly even among leading party and economic functionaries.60 Not only did they show an inadequate awareness of the method’s benefits and, hence importance, the task of its implementation was commonly viewed as being little more than a technical exercise of collecting and matching, something best entrusted to technology departments or, in some case, just those individual technologists or engineers who had expressed a personal interest in group processing. The scope for managerial involvement in implementation, thus, was often regarded as being minimal.61 But it appears more than a misunderstanding or a paucity of educational instruction was at play here. Most disquieting of all from the party’s perspective was the observation that conscious attempts by production managers, unionist and party officials to evade and deflect responsibility was being frequently identified at all levels of GDR society. It was noted that, even at the showpiece Central Mitrofanov Conference, not a single enterprise director and only a handful of party secretaries and plant managers bothered to attend.62 In some enterprises, group production plans had been developed, but ‘only on paper’ and, as yet, had not seen any follow-through or action.63 In May 1961, Willi Schmidt, the party secretary for Greater Berlin commented that, while there certainly had been an uptick in experimentation with group processing in Berlin, the determination required for its systematic introduction was clearly “still lacking”.64 In a similar vein, the economic secretary of Bezirk Gera revealed that:

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I myself have been in a number of enterprises, for example at WEMA [VEB Werkzeugsmaschinenfabrik Gera] in Gera and in a number of other enterprises, and have spoken to the party secretaries there. They had little idea of things and despite all the hints did not bother to orientate themselves to the materials that lay before them or to speak to the people who have already engaged in this area. … Second, there was no cooperation with the union at all. Basically, this shows, politically speaking, the lack of understanding from the plant manager to the heads of the mass organisations and the party, in the first place, of course, but also the unions.”65

Evaluations of the early experiences at the joint German-Soviet company SDAG (Soviet-German controlled corporation) Wismut also raised concerns about the lack of union involvement. As a report from the Department of Mass Production of the Central Board of the local industrial union (Industriegewerkschaft or IG) Wismut, opined: the union leadership has cared too little about the introduction of the Mitrofanov Method. In the Agit-Seminar as well as in consultations, the production functionary spoke in general about its importance, but no exact measures have yet been specified.66

There was also, in the words of Apel, a tendency for “unions, the party and organs of the state apparatus to mutually pass the buck”, a pattern of behaviour which ought to be fiercely resisted.67 Thus, for some Kreis and Bezirk party-level leaders, the heavy involvement of the DSF in the campaign and in hosting Mitrofanov was taken as an indication that the matter was its concern and not the local party’s.68 Some VVBs also displayed less than the hoped-for alacrity in adopting group processing. On 14 March 1961, in response to Apel’s appeal and the resolution of the Mitrofanov Conference in Jena, a proposal was put to the Presidium of the Central Board of IG Bau-Holz, the union representing the construction and timber industry workers, urging an action plan for the widespread introduction of the Mitrofanov that would conform to the Economic Commission of the Central Committee’s resolutions by inter alia setting up a Mitrofanov Aktiv in the sector dedicated to the task, revising all technology plans, establishing within the sector model enterprises for group processing, and organising the exchange of experiences between VVBs operating in cognate fields. According to the minutes of the meeting, the proposal evoked “in-depth discussion”, but the Presidium at that stage opted not to accept the proposal, choosing

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instead to wait and see. It resolved to write to “Soviet brother organisations” to elicit their experiences and views on the suitability of the Mitrofanov Method in this branch of industry. Similar discussions were also recommended to be had with colleagues at VEB Pianoforte and with relevant political representatives.69 At this juncture, it is important to pause to reflect on the motivation for these seemingly blatant attempts to ignore or thwart the will of the party leadership. Yet, by framing the question in such a manner, one presupposes the will of the party was always unambiguously identifiable and clearly articulated. The reality, however, was often very different. The messages sent out by the party leadership were numerous and vague. Lacking an infallible mechanism by which the intention of the party on any matter—not to mention the relative importance of its manifold pronouncements—could be discerned made the work of functionaries and activists at all levels of society fraught with difficulties. At times, it could be like reading the tea leaves, except in this context the consequences of doing so incorrectly could potentially imperil one’s life and career. This fostered caution. As one socialist working group operating in Bezirk Potsdam astutely observed in June 1961, much of the local resistance to the Mitrofanov Method could be traced back to the fact that functionaries, bombarded by impositions from above, were already “overloaded with requirements for the introduction of newer methods”.70 As we discussed in Chapter 2, in such circumstances the best bet for decision-makers was, through the accumulation of experience, to identify, watch and follow those who had demonstrated records of transmitting reliably signals correctly or, failing that, to sit back and wait and see what your peers around you were doing. There was safety in numbers. In pursuing such an approach, outcomes would cascade through society with relative ease or otherwise on the basis of the configuration, consistency and efficiency of both the signals conveyed and those who were looking out for them. Seen through this visor, the hesitancy occurring with respect to the uptake of group processing may have had more to do with rationality than disloyalty to the regime. For success, there was, thus, an absolute imperative of the party to make the importance of each of its initiatives abundantly clear to everyone who was needed for the realisation of its goals.

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Interestingly, such an imperative was evident to those, who in 1961, were most familiar with the implementation of group processing. Mitrofanov, for example, dipping into his own experiences from the USSR, told his GDR colleagues that the work should be: carried out on the basis of personal contacts enjoyed by the district, raion and city committees with the representatives in the enterprises and institutions. … This is where the main work begins, namely, the implementation of the decisions into reality. Great attention is paid to this side of the work. We believe that preparing decisions is much easier than implementing them. In principle, you have to proceed in these questions so that the people with whom you are dealing feel that the decisions have to be fulfilled [our italics].71

He emphasised the role that leadership must play: “Senior functionaries themselves must understand the meaning of this subject. Because when it is carried out, many small questions arise that a technologist or a master cannot solve”.72 Moreover, he warned of the hesitancy that they would encounter, and how that must be overcome by continuing to push forward at all costs: The group processing method is introduced in an enterprise, and then it is said: We all want to take a look at it, and if we think it is good, we will also apply it to ourselves. It is not correct to depict it this way, as this does not give enough benefit and it takes a lot of time. It is therefore necessary that the method is introduced in each plant without waiting for another plant to go ahead.73

Weiz, one of East Germany’s pioneers of group processing at VEB Carl Zeiss Jena, provided the Economic Commission of the Central Committee with much the same advice: I am convinced that if it is not possible to persuade the senior officials, the plant managers, the union chairmen, the party secretaries and the general directors of the VVBs to make this their personal matter, nothing will come of it. … We need the leader’s authority, his enthusiastic calling, and we need him to make it his own cause. He doesn’t have to implement it himself, but the people who do have to struggle with such difficulties with ideological difficulties - they have to break with the power of habit, they have to revolutionize the conventional, which is a high political task that can never be done by the second or third in charge; they need the

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whole organisation of the enterprises and the party. Every comrade has to notice that behind him is the first secretary, every union member has to notice, behind him is the chairman of the union, and behind him is the plant manager.74

In short, both Weiz and Mitrofanov highlighted that success of group processing was contingent on the correct signal being loudly, consistently and comprehensively understood through all rungs of the system. Above all, those in key roles in Bezirke and Kreise needed both to be and to be seen to be on board with the initiative. In its first year of existence, the campaign to introduce group processing had patently failed to do that.

4.4

Renewed Efforts

In May 1962, following a period of relative quiet since June 1961, the intense propaganda campaign to implement group processing renewed in earnest. A surge of articles on the topic, reaching its apogee in June 1962, appeared in the national media. Once again, Mitrofanov and the Soviet experience played prominent roles in the campaign. A week-long visit in May by a delegation of Soviet Mitrofanov specialists as part of GDR’s annual week of German-Soviet friendship kicked the process off. The delegation visited VEB Carl Zeiss Jena, ZIF , and VEB Groβdrehmaschinenbau “8 Mai” Karl-Marx-Stadt , where it engaged in an experience sharing event with 170 guests. To coincide with the visit, a joint Radio DDR (Deutsche Demokratische Republic) and Radio Moscow forum was organised on the role of technology and technological planning in promoting productivity growth.75 In June, a delegation of German innovators once again reciprocated the trip and travelled to Moscow, where they witnessed enterprises, such as the “Ordzhonikidze” Machine Tool Factory, where state-of-the-art Soviet-style group processing had been extensively introduced.76 From July 1962 onward, the intensity of the publicity campaign began tapering off; it was not to emerge again with the same vigour. This did not indicate a declining interest of the party in group processing, however. While it figured less frequently in the general press, it certainly did not disappear from the party’s agenda. On 19 September 1962, the National Economic Council (Volkswirtschaftsrat ) of the GDR’s Council of Ministers issued a series of directives reiterating the continued drive to integrate group processing into East German industry. These directives explicitly

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stressed the importance, indeed obligation, of social organisations in the process. To that end, the National Economic Council imposed uniform criteria and processes that were to be followed by all organisations.77 It adopted the approach developed at VEB Groβdrehmaschinenbau “8 Mai” Karl-Marx-Stadt as its template. This approach required enterprises to draw up plans that articulated precise measures that were to be taken, who had responsibility for delivering them, and when the measures had to be completed. Once constituted, the plan would be binding on all who worked within the enterprise and would form the basis for the allocation of duties and tasks within each department, division, brigade and working group. The plan would also lay down precise measures to gauge performance and facilitate regional review and inspection.78 In many ways, the National Economic Council’s directives reflected and reinforced developments already playing out on the ground. Over the course of 1962, increasing numbers of leaders at the regional level and across a variety of sectors had come to accept that the successful implementation of group processing into their bailiwick should be a priority. The transition, of course, remained patchy and varied in impact, not to mention enthusiasm, both between and within Bezirke, Kreise and even enterprises. There remained opposition and procrastination, yet compared to the situation twelve months earlier, there were clear signs of progress. Perhaps the most promising development for the authorities was the visible spread of the Mitrofanov Method beyond its traditional locale, optical mechanical and precision engineering, into other sectors, including light industry. VEB Textilwerk Plieβengrund Crimmitschau, for example, provided a model of how group processing could be implemented in the textile industry. Prompted and supported by VVB Volltuch Cottbus’s Mitrofanov Aktiv, which had identified it as the VVB’s showcase enterprise, it set up a socialist working group on 15 March 1961 to verify if the knowledge of Mitrofanov could be made applicable to the manufacture of blankets. As internal reporting indicated, “so far, neither in the Soviet Union nor in our country have there been any conception of using this important method to increase labour productivity and reduce costs in the textile industry”.79 Technology and the design of products in the blanket industry were determined by the choice of fabric, which in turn depended on fashion. As tastes varied and diversified over time, producers had manufactured an increasingly broader range of blankets, each with different features and fabrics. It was a development that promoted small-scale production, as

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the technology deployed in manufacturing typically had to be designed for specific use in the fabrication of a certain product. Shifting to a different product required retooling and potentially different machinery. The parallels with the situation encountered in conventional mechanical engineering were apparent to the working group. Employing the Mitrofanov Method, their studies found that despite the diversity of products demanded, the various technologies utilised and the size of orders stipulated in contracts, there were in fact many similar features in the basic elements of the technology. They surmised that certain basic elements could be combined into a production group, thus, clearing a path for a technological setup that would enable large-scale production to take place. In April 1961, the action plan it had drawn up was accepted and the actual move to group processing began. The working group conceived the transition as having five stages. First, the products would be sorted and broken down into their basic elements. Each basic element corresponded to a stage of the production process, such as the treatment of raw material, the weaving of the yarn, the imparting of twists, and the finishing of the cloth. Second, the sorted elements would be further grouped, this time by similar features, such as warp density, the blend and strength of the yarn, and the number of twists per minute. The blend of the yarn used, for example, could be categorised in distinct groups by its percentage of wool content, that is, it could be classified into a range of either, say, 50–60 per cent or 60–75 per cent wool. Such classification could also be used to reduce excessive individualisation of elements. Third, once grouped in this manner, ways of standardising the manufacture of these groups concurrently from beginning to end on the same machinery would be explored. In other words, the entire manufacturing process from patterning through to finishing would be re-shaped according to requirements of the specific production group. Fourth, to maximise the economies of scale, individual production departments or plants would then be assigned to the manufacture of a single production groups for a full quarter. This extended period of production would limit downtime and ensure the uniform and full utilisation of machine groups. Fifth, the output of production groups would be assembled into a range of common article groups which would form the basis of sales negotiations with retailers. Sales, however, would have to be managed carefully so as to ensure the full usage of existing capacity. After all, applied

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group production could only become fully effective if all sales groups orders were distributed evenly over the entire quarter and matched up in volume with the output of the relevant machine group. If sales could be managed in this manner, batch production would be eliminated, supply and demand equated, and the greatest possible increase in labour productivity achieved. In practice, though, such an arrangement could only be sustained by retailers either withholding the sales of certain articles to the public at certain times of the year or by their accumulating larger inventories of products across the year so that demand during periods of production downtime could be catered for. Both alternatives imposed costs on consumers and retailers. The enterprise began introducing its methods into actual production in the third quarter of 1961. Its impact was immediate. Table 4.2 contrasts the situation before and after the implementation of group processing. It illustrates that by using the Mitrofanov Method, the enterprise decreased the number of basic elements it was dealing with and significantly reduced technologically required downtime, while at the same time increasing its actual product range. The scale of many of its production runs also grew noticeably and brought real economic benefits. Comparing the second quarters of 1961 and 1962, the total savings to the enterprise attributable to the Mitrofanov Method amounted to 25,977 DM , of which 13.3 per cent came from savings in the preparation time of the weaver, 19.6 per cent in the preparation time of device operators, 29.8 per cent in Table 4.2 Impact of the Mitrofanov Method in VEB Textilwerk Plieβengrund Crimmitschau, 1960–62 (BLHA 907 VVB Vt Ctb 1109, no date, p. 11)

Number of different articles produced Number of different fabric settings Number of different twists Number of different blends Number of different thread counts

Third Quarter 1960 (before the introduction)

Fourth Quarter 1961/First Quarter 1962 (after the introduction)

53

212

48

14

22

13

12

4

9

6

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the number of workers employed in weaving and 37.34 per cent in the numbers of workers employed in drawing and winding. The achievements of the enterprise galvanised VVB Volltuch Cottbus , whose chief engineer wrote in September 1962 to all enterprise directorates within the VVB drawing their attention to the work of VEB Textilwerk Plieβengrund Crimmitschau and enjoining them to pursue a similar course. By that stage, a number of other textile enterprises, such as VEB Cottbuser Wollwaren-Fabrik, VEB Tuchfabrik Crimmitschau, VEB Volltuchfabrik Crimmitschau, and VEB Volltuchwerke Rödelbachtal Cottbuser, had already begun experimenting along the lines pioneered by VEB Textilwerk Plieβengrund Crimmitschau.80 To a large extent, the spread of group processing in 1962 depended greatly on actions and attitudes evinced at the regional level. Party Bezirk leadership was particularly germane, for it was best placed to signal the seriousness of the initiative, know what the local potential might be, and oversee enterprises’ compliance. The effectiveness, commitment and focus of each Bezirk’s efforts varied, of course. Moreover, within each Bezirk, indeed Kreis, the alacrity with which group processing was embraced could markedly differ. The case of Bezirk Potsdam is illustrative. Its leadership in early 1962 noted a disparity between its enterprises in their respective uptake of group processing.81 It observed that whenever the management of the enterprise was attuned to the potential, there was a visible upswing in the application of the Mitrofanov Method, otherwise implementation proceeded slowly or not at all. Bezirk- and Kreis-led enterprises in particular seemed to lag behind. Under the auspices of an instructional and counselling centre for new technology (Kabinett “Neue Technik” ) housed within the Economics Department of the Bezirk, a Mitrofanov working group (Arbeitsgruppe “Mitrofanow” ) was established to identify problems associated with the introduction of group processing and to provide policy guidance. At a meeting on 18 April 1962 held at the VEB Rathnower Optische Werke, the working group recommended the creation of consultation points (Konsultationspunkte) within the enterprises of the Bezirk. It was hoped that these would enable the sharing of best practices with respect to group processing. The results were disappointing. The Kabinett “Neue Technik” attributed the failure of the consultation points to the fact that how they would be established had been left to the discretion of the enterprise. As a result, it found that in most cases the resulting entity had neither been sufficiently popularised, nor

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consistently or appropriately constructed. There was also no uniformity in organisational structure between enterprises. The Kabinett “Neue Technik” urged more direct intervention by the Bezirk. Accordingly, a meeting of the Mitrofanov working group on 16 May 1962 inserted Bezirk-led consultations points for the implementation of the Mitrofanov Method into 6 of the Bezirk’s enterprises: VEB Industriewerke Ludwigsfelde, VEB Brandenburger Traktorenwerke, VEB LKW “Hans Beimler” Hennigsdorf , VEB Geräte- und Reglerwerk Teltow, VEB Lokomotivbau “Karl Marx” Babelsberg and VEB Rathenower Optische Werke. The tasks of the new consultation points were sixfold: first, to assist identified backward enterprises in quickly implementing the Mitrofanov Method; second, to transfer best practice experience; third, to explain the political and economic importance of the Mitrofanov Method; fourth, to advise enterprises on how to develop a plan for the systematic introduction of the Mitrofanov Method; fifth, to develop in-house working groups; and sixth, to develop relevant regional training courses in conjunction with the Kabinett “Neue Technik”, Kreis boards of the FDGB, the KdT , and the Society for the Dissemination of Scientific Knowledge (Gesellschaft zur Verbreitung wissenschaftlicher Kenntnisse). The primary aim of the training was to familiarise senior functionaries of the enterprises, union officials, and plant managers with the Mitrofanov Method and to inspire them to take on leading roles in its implementation.82 It was emphasised that the intent of consultation points, however, was not to limit or remove the enterprise’s own responsibility for introducing the Mitrofanov Method, but enable its ability to deliver on that obligation. It was foreseen that employees of the consultation point, or a technologist appointed by it, could be temporarily deployed to specific enterprises by the Bezirk to help it undertake specific tasks— analytical, technical or managerial—related to the introduction of the Mitrofanov Method. Where implementation called for the use of equipment not currently possessed by the enterprise, the consultation point could step in and either assist in arranging its acquisition or set up a sharing arrangement with another enterprise. In installing its own consultation points, one of the primary goals of the Bezirk leadership was to inaugurate a regime of close oversight over the progress of the Mitrofanov Method in its enterprises. To that end, consultation points were required to provide short reports every month to the Kabinett “Neue Technik”, which along with the Mitrofanov

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working group would provide critical feedback and propose a course of action, where necessary. A schedule of regular visits and inspections of the working groups in individual enterprises was implemented. To guarantee that best practice was widely disseminated—something the Bezirk felt was also being greatly neglected by enterprises—the Kabinett “Neue Technik” centralised all agitprop work relating to group processing, placing responsibility for this with an editorial collective that would operate under its direction. Six months after their creation, the Kabinett “Neue Technik” took stock of the progress of the implementation of group processing across the Bezirk with a specific view to evaluating the extent to which its refashioned consultation points had made a difference. Its report noted with pleasure the considerable successes that the new consultation points had had, especially at two enterprises: VEB Industriewerke Ludwigsfelde, which since the introduction of the new consultation points had transformed itself into a “centre of innovation”, not just within its own walls, but also for other enterprises within the Kreise of Zossen, Luckenwalde and Jüterbog, and VEB Geräte- und Reglerwerk Teltow, which by November 1962 had introduced 95 complex part groups with a saving of 4676 standard hours of labour.83 Yet, the success was far from universal. In particular, the performance of VEB Rathenower Optische Werke continued to pose serious problems. As early as December 1961, the sluggish rate of activity at the enterprise had led the Kabinett “Neue Technik” to call for urgent changes in how it planned and organised the implementation of group processing. These were agreed to by the enterprise. However, when Petrofsky of the Kabinett “Neue Technk” visited the enterprise in April 1962, he found that “nothing had changed”.84 In his report, he explained that: In the factory, the political and economic importance of this method for the economy is significantly underestimated by the leading officials of the party and the FDGB … Due to the lack of clear orientation by the party organisation, it can be noted that this enterprise does not yet have a central socialist working group that defines the main task of introducing the Mitrofanov Method, coordinates the individual solutions to the tasks, and carries out oversight. The individual work collectives in the production areas thus work separately from one another, and it is difficult for the management to execute precise oversight. As a result, certain problems that have to be dealt with in connection with the introduction of the method are being solved only slowly.85

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Nor, according to the assessment of the Kabinett “Neue Technik”, had things improved that much by November 1962. There was still no plan for expanding the use of the Mitrofanov method and the working group existed “only on paper”. All of the work that had been done at the enterprise in relation to the incorporation of cutting ceramics, an integral tool for group processing in the industry, had been carried out independently by a single technologist.86 As the report concluded, the key concern lay with the enterprise, party and union leadership, for whom “the political importance of the use of cutting ceramics still has not been clearly recognised. There is no specific centralised oversight of the execution of tests, the evaluation of analyses received, or even the final determination of technology.”87

4.5

Taking Stock

In March 1963, some two years after the Mitrofanov campaign had been launched, the Main Technology Committee of the KdT surveyed the evidence on how the implementation of group processing across the GDR had hitherto fared. While it acknowledged that much work was still needed if the full benefits of Mitrofanov’s methods were to be reaped, overall it concluded that especially after the intervention of the National Economic Council, significant progress had been made. The story, however, remained mixed.88 Good performance was achieved in the automotive, machine tool, toolmaking industries, and VVB Polygraph and Nagema … It is worse in heavy engineering and electrical engineering, where only a few attempts at the implementation of group processing are at hand. Although there are special conditions there that impair the use of group processing, this does not correspond to the given possibilities. There is also backwardness in local mechanical engineering, where through the sensible use of group processing large reserves could be tapped, the extent of which cannot be overlooked.89

In mechanical engineering, it asserted that the problem was that the Mitrofanov Method was often seen at enterprise level to be applicable only to a select group of work processes, a state of affairs that had allegedly arisen because, first, the state authorities responsible had systematically underestimated the economic importance of group processing for the

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rational design of production and, second, the relevant mass organisations and economic functionaries had not correctly or consistently performed the role of coordinating across enterprises and regions that had been assigned to them by the National Economic Council.90 On the positive side, the report noted that some excellent results had been achieved when Mitrofanov’s approach was transferred to sectors beyond heavy industry and the manufacture of capital goods. VEB Deutsche Werkstätten Hellerau, a leader of the furniture industry in the GDR, was reported to have taken every opportunity to use group production methods. While a continuous flow production line had by March 1963 been working successfully in final assembly for some time, there was another project in a fairly advanced stage of development that sought to organise the production of living room furniture along group processing lines. Although the organisation of continuous flow production lines had posed challenges for the enterprise that had indeed required some serious rethinking in plant organisation, no insurmountable difficulties had been encountered.91 Group processing and continuous flow manufacturing was also found, albeit with industry-specific adaptions, in the clothing industry. By March 1963, trouser production, for example, had been standardised at VEB Bekleidungswerk Berlin. There, all trousers were now being manufactured according to their classification in terms of technical processes, groups, and types. The new, more highly mechanised method of trousers production had created an annual saving of 72,314 DM for the enterprise and increased its labour productivity by 6 per cent.92 Despite some lingering hesitation in some quarters, the introduction of group processing had gained traction. Cognisant of that fact, the intensive publicity campaigns steadily receded into the background from the last quarter of 1962. All efforts now were placed on building and cementing the connections between regional and enterprise leaderships necessary to undertake the next stage of the process: the further deepening and widening of group processing. The notion that such an objective mattered to the party’s central leadership had well and truly become ensconced and was discernible from top to bottom right across the entire party-state structure. What accounted for the oft-reported hesitancy to adopt Mitrofanov’s innovation? In part, there were natural limits on the extent to which his method could be profitably diffused, which held irrespective of the ideological fervour of party and mass organisation functionaries involved.

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After all, an organisational innovation that emerged out of the shared characteristics of machine parts in mechanical engineering not surprisingly held little immediate relevance for wide swathes of the economy. Notwithstanding the successes obtained in the textile and furniture industries, its significance to many light, service or craft-based industries, retail, transportation, or agriculture to give a few examples was always theoretically tenuous and, in most instances, practically unrealisable. Even in precision mechanical engineering, the method’s “natural home”, group processing only made economic sense if there existed a level of demand that warranted large-scale production. Not all precision mechanical productions met that criteria. Putting all the hype about the revolutionary nature of socialist technology to one side, the Mitrofanov Method was not—and could never have been—the much longed-for key to raising productivity in GDR industry across the board. That was not the whole story, though. Beyond these natural limits, there were, as we have seen, major encumbrances to the rapid realisation of group processing’s genuine benefits that had more human origins. The intentions and importance of the party’s initiative were at times poorly conveyed and not evenly grasped across the towns, villages, and factories of the GDR. There, at the grassroots where the changes had to be enacted, the campaign confronted, and often could become enmeshed in, other concerns and ambitions. The Main Technology Committee of the KdT reported that it still found “unhealthy competition” in many places whereby organisations claimed results for themselves and pursued “a selfish success that does not serve our common cause, namely, to increase labour productivity”. It also uncovered instances of “departmental spirit”, the belief that the place you lived or entity, for which you work, was constantly in a zero-sum battle with other regions and organisations for resources and rewards. Such a stance inhibited the development of complex, yet essential, cooperation between mass organisations, enterprises, VVBs and regional administrations. The report noted that “a similar situation exists on a central scale”.93 Bezirke, ministries, and the leading party organs were not always pursuing the same common line. Such an outcome was especially the case, when the central line itself, confusingly or not forcefully enough espoused, created a vacuum, into which regional or sectional interests could slip. A sense of the spread of the Mitrofanov Method across the GDR is given by the heat map in Fig. 4.3, which captures the frequency of groupprocessing-related content in Neues Deutschland between 1959 and 1963

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Fig. 4.3 Group-processing content in Neues Deutschland by Bezirk of origin, 1959–1963 (Neues Deutschland archive accessible at https://www.nd-arc hiv.de/) (Note Fig. 4.3 catches all articles where the most common terms for group processing—Mitrofanow, Gruppenbearbeitung , Gruppentechnologie and Gruppenfertigung —are utilised. Each instance, which mentions at least one of these terms, is counted just once)

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by Bezirk of the content’s origin. The vast majority of the articles in question related to local initiatives undertaken, achievements recorded or to a lesser extent, the visits of Soviet experts like Mitrofanov or leading national-level party leadership to the Bezirk for the purposes of promoting and supporting local group processing activities. While far from providing a perfect picture of the geographical spread of group processing during the initial campaign, Fig. 4.3 does give an indication of the relative intensity of effort and campaigning in the different Bezirke. Not surprisingly, Fig. 4.3 shows the heaviest coverage in Bezirke where heavy industry and mechanical engineering were more prominent. The most active Bezirke were Karl-Marx-Stadt, the most industrialised Bezirk in the GDR, and Gera, the home of leading precision engineering enterprises such as VEB Carl Zeiss Jena. There was also a comparatively high level of activity observable in the moderately industrial Bezirke of East Berlin and Magdeburg. In short, Fig. 4.3 confirms that the more industrial regions were the parts of the country more likely to have the greater level of interest in group processing.94 Figure 4.4 attempts to remove this scale of industry effect by mapping the number of articles published in Neues Deutschland per 10,000 industrial workers in the Bezirk. This measure affords a better geographical overview of the intensity of group processing activity. It confirms that Bezirk Gera and East Berlin were both foci of the drive to implement group processing, but also reveals that less industrialised Bezirke like Rostock, Frankfurt (Oder), Magdeburg and even Schwerin, which possessed just 1.3 per cent of the GDR’s industrial workforce, were relatively active as well. By contrast, the intensity of effort in the most industrialised Bezirke of the GDR—Karl-Marx-Stadt, Dresden, Halle and Leipzig, which together accounted for 56.8 per cent of the entire industrial workforce—was underwhelming, attracting only 37.2 per cent of the coverage in Neues Deutschland. Bezirk Dresden, for example, with 13.9 per cent of the GDR’s industrial workforce and 13.6 per cent of the nation’s workforce in precision and optical engineering, had the lowest intensity of reported activity in the country. Bezirke Erfurt, with the largest workforce in precision and optical engineering (19.5 per cent of the GDR total), also seems to have engaged less than one might have expected, not least given the Mitrofanov Method’s natural affiliation with that sector. It is clear from Fig. 4.4 that the connection between coverage of activities and the scale of industry in a Bezirk observable in Fig. 4.3 breaks down when one takes into account the level of industrial

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Fig. 4.4 Group-processing content in Neues Deutschland per 10,000 industrial employees by Bezirk of origin, 1959–1963 (Neues Deutschland archive accessible at https://www.nd-archiv.de/) (Note Fig. 4.4 catches all articles where the most common terms for group processing—Mitrofanow, Gruppenbearbeitung , Gruppentechnologie and Gruppenfertigung —are utilised. Each instance, which mentions at least one of these terms, is counted just once)

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employment. In other words, while industrial Bezirke overall tended to generate more activities that were reportable, there was no direct relationship between the scale of industry and the intensity of group processing efforts taking place in a Bezirk.95 Other factors, such as those related to the success or otherwise of regional measures and initiative to implement group processing evidently played a significant role.

4.6

Conclusion

Despite the strategic importance at the time attached to the GDR’s campaign to implement group processing, its story has largely disappeared from the economic histories of East Germany. Apart from Stokes’ excellent account, which uses the experience to dispel the notion of there being distinctively “socialist technologies”, it has attracted little attention.96 The presumption behind the neglect, no doubt, is that the benefits of Mitrofanov Method and the campaign associated with it represented just another example of communist promises that in the end amounted to little more than hollow hyperbole. By focusing on the first year of the campaign, which had the highest profile publicity events, it is not hard to understand the scepticism. After all, as we have seen, in 1961 progress was indeed very slow and unsatisfactory. Reflecting on the modest gains made, Stokes located the biggest hindrances to the adoption of the Mitrofanov Method in constraints imposed by the rapidly changing external environment: the Second Berlin Crisis, the erection of the Berlin Wall, and policy of disentangling the GDR’s economy from the West (Störfreimachung ).97 Yet, while such disruptions may help explain why the central leadership of the party’s attention may have to some extent been distracted away from the implementation of group processing and from taking a more hands on approach themselves, it is not clear how such factors would have prevented the further introduction of Mitrofanov’s methods in East German enterprises. Its principles were organisational in nature and held irrespective of the changes occurring in foreign policy. On the contrary, as Stokes himself states,98 instead of hindering group processing’s progress, such external events actually had the effect of more firmly forcing the reorientation of GDR science and technology towards the Soviet bloc and away from the West, enhancing, one would assume, the appeal of Mitrofanov. Here was an innovation that did not rely on ongoing connections with the capitalist world.

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Moreover, it is important to bear in mind that the campaign to implement group processing did not cease at the end of 1961. It continued for another two years beyond that and even witnessed another major efflorescence in terms of publicity in 1962. That second wave of campaigning in fact received even more coverage in the media than the first (211 articles in Neues Deutschland compared to 196). And when it, too, had passed, group processing did not disappear. Neues Deutschland, for example, continued reporting on it intermittently right up to the demise of the GDR, averaging around 2–3 articles on the topic each year. How group processing was reported, of course, did change over time. As Fig. 4.5 reveals, in the heady years of 1961 and 1962 between 80 and 100 per cent of all titles of group processing articles bore Mitrofanov’s name. By 1963, the percentage of articles that did so had fallen to just 40 per cent. From 1965 his name was not to figure in a title again. More generally, too, over time and in all contexts, the attribution of the group processing method to Mitrofanov himself also waned. In 1960 and 1961, it was the most dominant way of describing the method. It was indisputably Mitrofanov’s method. From 1962, the preference of Neues Deutschland and other contemporary sources shifted with mounting intensity toward the use of de-personalised, technical terms such as Gruppenbearbeitung (group processing), Gruppentechnologie (group technology) or Gruppenfertigung (group manufacturing). By the second half

Fig. 4.5 Coverage of the Mitrofanov Method in Neues Deutschland, 1959– 1990 (Neues Deutschland archive accessible at https://www.nd-archiv.de/)

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of the 1970s, Mitrofanov’s name had ceased to be cited in the press at all. Given the heavy focus in the early phases of the campaign on Mitrofanov himself, this change in terminology may give the impression that this development reflected the fact that his approach was no longer relevant. This was not the case. Far from being discarded or simply fading away, Mitrofanov’s ideas, although now rarely described eponymously, continued to be deployed and refined in the GDR and elsewhere.99 Indeed, to this day, his approach lives on in the concept and practice of cellular manufacturing, a subsection of lean manufacturing that encompasses group technology.100 Viewed from the longer perspective, it is hard not to conclude that the strategy to integrate and embed group processing in the GDR had proved largely successful. While by 1964, the high-profile campaigns, Soviet delegations, and inflated rhetoric pushing it had gone, the on-the-ground reality of group processing remained a feature of the East German industrial landscape through to 1990. True, for the GDR it had not turned out to be “the catalyst for scientific and technological progress” that Ulbricht had wistfully promised, but it had nonetheless undoubtedly contributed to the modernisation of its industrial sector.101 The problem, however, was that the rest of the industrial world had embraced it with alacrity as well so that GDR and the Soviet bloc more generally could not leverage its first-mover advantage into a source of international competitiveness.102 By the latter half of the 1960s, group processing, where appropriate, had become an entrenched facet of East German production systems. This is not a matter to be lightly dismissed, for had that not been the case, many East German industries by the 1970s and beyond would have languished even further behind their international competitors. The story of the introduction of group processing is also revealing for the light it sheds on some of the encumbrances and challenges the SED regime encountered in attempting to have its policies implemented. It illustrated, for example, that complex messaging posed significant problems for the regime. While group processing was at essence an organisational innovation, comprehension of its inherent potential and how it might be implemented required some knowledge of mechanical engineering and the assembling of production lines. As such, explaining in simple language what the introduction of group processing entailed was not a straightforward proposition. Moreover, it is evident from the primary sources that non-technically minded party apparatchiks struggled not only to grasp the gist of the initiative, but to perceive how it might

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relate to their own areas of responsibility. The fact that the initiative’s model enterprise, VEB Carl Zeiss Jena, was widely known across the GDR as one of its most technologically sophisticated enterprises, operating in highly specialised niche industries, merely confirmed in some decisionmakers’ minds that group processing actually had no direct relevance to them. Why, after all, would one expect enterprise directors working in, say, the foodstuff or timber sawing industries to see, at first blush no less, the relevance to their production processes of an innovation extracted from mechanical engineering? And if they could not realise that potential themselves, who would be there to tell them? In the early stages of the Mitrofanov campaign, there were no obvious answers to such questions. As a consequence of these difficulties in explaining the initiative’s broader relevance and the intrinsic underlying technical complexity of what had to be signalled, the panoply of standard campaigning techniques that the SED had grown accustomed to using did not appear to gain much immediate traction. Surges in the methods’ coverage in Neues Deutschland, for example, do not correspond temporally with any great upswing of interest in, or uptake of, the Mitrofanov Method. Similarly, the SED encountered difficulties in finding the right figurehead for the movement. Choosing Sergei Mitrofanov as its prime “fashion leader”, while perfectly understandable in terms of his association with the genesis of group processing and his impeccable communist credentials, was a misstep. Outside the upper echelons of the SED, many of whose members had actually spent time in, and had close personal affinities with, the Soviet Union, there was in fact a high level of local ambivalence, even negativity, about the Union of Soviet Socialist Republics (USSR). In some cases, this sentiment extended to outright resentment and condescension of Soviet methods, including their technologies. In the early 1960s, many industrially orientated engineers still looked to the West for their technological inspiration.103 As one report from Bezirk Potsdam related in 1961, there existed among some a certain “’German arrogance’ that reduces the managers’ view of the importance of the Mitrofanov Method”.104 Despite the ceremony and fulsome respect afforded to Mitrofanov and his acolytes whenever they visited, his example and presence alone do not appear to have been capable of unleashing cascades of adoption. By 1963, the SED had itself come to this realisation, and his place in the campaign steadily retreated into the background. More generally, though, the SED learnt from the experience that, putting all party propaganda aside, overegging the Soviet connections of an innovation need not always be that helpful

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in soliciting local engagement. As the Schwedt Initiative discussed in the next chapter will illustrate, in time the SED would come to downplay, even conceal, the origins of initiatives with Soviet pedigrees. This pattern of behaviour, however, emerged not so much, if at all, because the SED wished to distance itself from its “eternal friend”, but for the more pragmatic reason that it believed that deploying local “fashion leaders” as the faces of its campaigns would prove more effective in inducing cascades of adoption. Indubitably, though, the most significant problem faced by the campaign in its earlier stages was its inability to present a common, comprehensible and consistent message. Beyond their high-level endorsement of the campaign, the party’s central organs acted slowly to take on direct responsibility for embedding Mitrofanov’s methods in the GDR. There were no visible German “fashion leaders”, let alone “liaison agents”, at the national level. Even responsibility for the organisation of Mitrofanov’s high-profile visits to East Germany were delegated to the DSF . The party state, moreover, appeared to offer little by way of financial reward to those who had understood its signals correctly. Unlike the introduction of piecework analysed in Chapter 3, incentives in this instance seemed to have been regarded as unnecessary. Perhaps, it was the fact that group processing concerned itself with the technological reorganisation of factories and did not—directly at any rate—affect the take home pay of workers that made the difference. Whatever the reason, the absence of financial inducement could only have worked to dampen the potential scale of the response. With no clear signals emanating from the central authorities, it was thus left up to regions and mass organisations themselves to work out, adapt and implement group processing as they saw fit. At these levels, too, though, the same problems of uncertainty and ambiguity presented themselves. Responses, as a result, varied across the country. Some regions and enterprises moved with more alacrity and precipitousness than others, a state of affairs that yielded a hotchpotch of differing rates of implementation and experiences. The turning point in the campaign came in September 1962 when the National Economic Council, concerned by the tardy progress made in introducing group processing, intervened directly and publicly. Its resolutions put in place a common set of procedures for enterprises, which outlined how they should go about integrating group processing into their planning. The structure and consistency these measures afforded

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were long overdue and made a difference. Critically, though, the onus for the actual implementation of group processing itself stayed on enterprise directors. Throughout the campaign, they remained both the pivotal and weakest link in the party’s plans for the rapid, nationwide diffusion of group processing. Nevertheless, there is clear evidence that the National Economic Council’s public intervention did seem to have a galvanising effect in some quarters. In its aftermath, some Bezirk leaderships, like that of Potsdam, did start to engage more proactively with the initiative, coordinating enterprises and relevant scientific and technological organisations in their localities, sharing information and experience, and stepping more comfortably into the roles of local ‘fashion leader’ and ‘liaison agent’. Momentum gradually, if fitfully, built and by the middle of the 1960s, cascades of adoption had been successfully instigated wherever the introduction of group processing proved feasible. The SED state’s ability to signal had undoubtedly improved over the course of this process, but the problems it encountered with respect to complex messaging and the elicitation of cooperation and coordination between enterprises, industries, and regional leadership remained. As we will see in the next chapter, these issues continued to pose challenges in the years ahead.

Notes 1. William E. Griffith, “The November 1960 Moscow Meeting: A Preliminary Reconstruction”, The China Quarterly 11 (July– September 1962), pp. 38–57. 2. For a full transcript of the statement, see the pamphlet produced by the Marxist monthly Political Affairs: Statement of 81 Communist and Workers Parties Meeting in Moscow, USSR, 1960 (New York: New Century Publishers, 1961). Accessible at https://www.marxists.org/history/international/comintern/ sino-soviet-split/other/1960statement.htm. 3. Stiftung des Archivs der Parteien und Massenorganisationen der ehemaligen DDR im Bundesarchiv (hereafter BA) DY 34/16848, 18 February 1961, “Plan für den deutschsowjetischen Erfahrungsaustausch über die Anwendung der Gruppentechnologie mit Leninpreisträger Ingenieur S. P. Mitrofanow und Professor Dr. A.A. Matalin”, p. 1. 4. Ibid.

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5. André Steiner, The Plans That Failed: An Economic History of the GDR (Oxford: Berghahn Books, 2010), pp. 83–85. 6. Ibid., p. 86. 7. Quoted in Herbert Weiz, Methoden und ökonomischer Nutzen der Gruppenbearbeitung (Berlin: Dietz Verlag, 1962), p. 17. 8. For an excellent discussion and evaluation of the mood in the Soviet world at this time and the flawed concept of socialist technology, see Raymond G. Stokes, Constructing Socialism. Technology and Change in East Germany, 1945–1990 (Baltimore: The Johns Hopkins University Press, 2000) and Raymond Stokes, “In Search of the Socialist Artefact: Technology and Ideology in East Germany, 1945–1962”, German History 15 (1997), pp. 223–239. 9. In its current manifestation, LITMO is called the National Research University of Information Technologies, Mechanics and Optics. 10. Mikhail Ivanovich Poteev (ed.), ITMO University: Years and People (Saint Petersberg: Iva, 2000) (Russian: ITMO: Gody i ldi). 11. Numerous other engineers had, of course, previously considered some of the aspects of group technology. This is not the place to evaluate their respective roles in the emergence of this approach to manufacturing. Suffice to say, as Benders and Badham’s survey of the forerunners of group production concluded, in most cases the earlier engineers’ use of group layout typically occurred as ‘isolated experiments rather than as a new dominant way of organizing.’ Jos Benders and Richard Badham, “History of Cell-Based Manufacturing”, in Michael M. Beyerlein (ed.), Work Teams: Past, Present and Future (Dordrecht: Springer, 2000), pp. 45–57. The quotation comes from page 49. In terms of earlier forays into the area of what came to be known as group technology, there are numerous examples. Mercedes in the 1930s applied a technique, called group manufacturing (Gruppenfabrikation), which grouped objects together in the assembly of aspects of its automobiles, but not in relation to the fabrication of component parts or the whole manufacturing process. Likewise, in the immediate aftermath of World War II, the Italian engineer, L. Patrignani, also apparently explored similar ground, although, as he did not publish his thoughts on production management, it is hard to assess his contributions to the field. These earlier explorations

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notwithstanding, Mitrofanov’s original contribution lay in his realisation of how the approach could be applied as an organising principle across entire production systems and different industries. See Stokes, “In Search of the Socialist Artefact”, p. 233; Bernard Bellon, Mercedes in Peace and War: German Automobile Workers, 1903–1945 (New York: Colombia University Press 1990), pp. 163, 210; and Gary Herrigel, Industrial Constructions: The Sources of German Industrial Power (Cambridge: Cambridge University Press, 1996), p. 153. 12. Sergei P. Mitrofanov, Scientific Principles of Group Technology, English translation by J. Grayson (Yorkshire: National Lending Library for Science and Technology, 1966) (Russian: Hayqnye ocnovy gpyppovo texnologii). 13. Mitrofanov eventually rose to become LITMO’s Rector. 14. Mitrofanov’s ideas also quickly caught the imagination of managers and engineers outside the Soviet’s immediate orbit. By 1962, for example, the French electrical equipment manufacturers, Forges et Ateliers de Construction Electriques de Jeurmont were actively exploring the potential of group technology; see Benders and Badham, “History of Cell-Based Manufacturing”. 15. Poteev (ed.), ITMO University: Years and People. 16. Detailed descriptions of the Mitrofanov Method, as understood by contemporaries in the German Democratic Republic, can be found in Paul Blume, Die Mitrofanow-Methode und ihre Einführung im VEB Carl Zeiss Jena (Gera: Abteilung Propaganda/Agitation der Bezirksleitung Gera der SED, 1961) and Weiz, Methoden. 17. Weiz, ibid., pp. 9–10. 18. Blume, Mitofanow-Methode, p. 12. 19. The pamphlet from 1962 is by the Innovator Aktiv of the Federal Board of the FDBG; see BA DY 34/22034 (no date), “Die Anwendung der Mitrofanow-Methode in den Betrieben der DDR”, pp. 47–48. 20. BA DY 30/78969, February 1961, “Genosse Blume, Haupttechnologie im VEB Carl Zeis, Jena spricht zum Problem der Gruppenfertigung der Mitrofanow-Methode”, pp. 243–250; Weiz, Methoden, p. 6. 21. Weiz, Methoden, p. 20.

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22. For text of Walter Ulbricht’s speech prepared for the Twelfth Party Conference of the Central Committee of SED; see BA DY 30/78969, 16–19 March 1961, “Für Referat W. Ulbricht 12. Tagung”, pp. 241–242. 23. Weiz, Methoden, p. 187. 24. BA DY 30/3352, “Beratung mit dem Genossen Mitrofanow am 1. März 1961 im Hause des Zentralkomitees der SED”, p. 30. 25. BA DY 30/70597, “Protokoll der Sitzung der Wirtschaftskommission des Politbürosam 9. Dezember 1960”, pp. 1–3. 26. Blume, Mitrofanow-Methode, p. 1. 27. Ibid., pp. 1–4. 28. Sergei P. Mitrofanov, Wissenschaftliche Grundlage der Gruppenbearbeitung (Berlin: Verlag Technik, 1960). 29. BA DY 30/70597 (no date), “Bericht über die Erfahrungen bei der Durchsetzung der Mitrofanow-Methode in den Betrieben des Maschinenbaues”, pp. 1–11; BA DY 30/70597, 8 December 1960, “Welche Erfahrungen gibt es im Zentralinstitut und was arbeitet das Zentralinstitut auf dem Gebiet der MitrofanowMethode”, pp. 1–7. 30. BA DY 30/70597, 8 December 1960, “Welche Erfahrungen gibt es im Zentralinstitut und was arbeitet das Zentralinstitut auf dem Gebiet der Mitrofanow-Methode”, pp. 1–7. 31. Blume, Mitrofanow-Methode, pp. 1–4. 32. BA DY 30/70597 (no date), “Bericht über die Erfahrungen bei der Durchsetzung der Mitrofanow-Methode in den Betrieben des Maschinenbaues”, pp. 1–11. 33. BA DY 34/22034, “Referat des Genossen Herbert Weiz auf der zentralen Mitrofanow-Konferenz am 28.2.1961 in Jena”, pp. 1– 33; BA DY 30/70597 (no date), “Bericht über die Erfahrungen bei der Durchsetzung der Mitrofanow-Methode in den Betrieben des Maschinenbaues”, pp. 1–11. 34. BA DY 30/3352, “Beratung mit dem Genossen Mitrofanow am 1. März 1961 im Hause des Zentralkomitees der SED”, p. 3. 35. BA DY 30/70597 (no date), “Bericht über die Erfahrungen bei der Durchsetzung der Mitrofanow-Methode in den Betrieben des Maschinenbaues”, pp. 1–11. 36. BA DY 30/70597, “Protokoll der Sitzung der Wirtschaftskommission des Politbürosam 9. Dezember 1960”, pp. 1–3. 37. Ibid.

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38. Ibid. 39. BA DY 30/70597, “Beschluss der Wirtschaftskommission vom 9.12.1960 zum Bericht der Abteilung Maschinenbau und Metallurgie beim ZK über die Erfahrungen bei der Durchführung der Mitrofanow-Methode in den Betrieben des Maschinenbaues”, pp. 1–3. 40. The campaign was further publicly confirmed shortly thereafter at the Seventh and Eighth Conferences of the Federal of the FDGB and the Sixteenth Conference of the Central Board of the DSF. Brandenburgisches Landeshauptarchiv (hereafter BLHA) 540 DSF BV Pdm 9, no date, “Durchsetzung der MitrofanowMethode in den Industriebetrieben” (no page). 41. BA DY 30/3352, “Beratung mit dem Genossen Mitrofanow am 1. März 1961 im Hause des Zentralkomitees der SED”, p. 9. 42. Ibid., p. 26. 43. BA DY 34/16848, 18 February 1961, “Plan für den deutschsowjetischen Erfahrungsaustausch über die Anwendung der Gruppentechnologie mit Leninpreisträger Ingenieur S. P. Mitrofanow und Professor Dr A.A. Matalin”, pp. 1–4. 44. BLHA 101 Fotos D540, 26 May 1961, “Mitrofanow besucht die Revolverdreherei im Brandenburger Traktorenwerk” (no page). 45. BA DY 30/78968, “Entschliessung der Zentralen MitrofanowKonferenz der Deutschen Demokratischen Republik vom 28.2.1961 in Jena”, p. 2. In terms of disseminating news of the Conference and the Mitrofanov delegation, the Commission for Propaganda Production of the Federal Executive of the FDGB had 250,000 copies of Tribüne der Neuerer No. 9 containing documents from the Jena conference, 100,000 copies of the minutes of the Central Mitrofanov Conference, and 100,000 copies of a brochure summarising the highlights of discussions with the Mitrofanov delegation in Magdeburg published and circulated; see BLHA 540 DSF BV Pdm 9 (no date), “Gemeinsame Maβnahmen des Bundesvorstandes des FDGB, des Präsidiums der Kammer der Technik und des Sekretariats des Zentralvorstandes der Gesellschaft für Deutsch-Sowjetische Freundschaft zur Durchsetzung der Gruppenbearbeitung nach Leninpreisträger Dr. Mitrofanow in den sozialistischen Betrieben der DDR”, pp. 1–7.

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46. BA DY 30/78970, 15 March 1961, “An den Sekretär für Wirtschaftspolitik bei der Bezirksleitung”, p. 1. 47. BA DY 30/3352, “Beratung mit dem Genossen Mitrofanow am 1. März 1961 im Hause des Zentralkomitees der SED”, p. 3. 48. See, for example, a report on a public lecture delivered in Cottbus by Comrade Grosser of RAW Cottbus; BLHA 907 VVB Vt Ctb 1109, 3 June 1961, “Unsere Erfahrungen bei der Durchsetzung der Mitrofanow-Methode”, pp. 1–2. 49. BLHA 540 DSF BV Pdm 9 (no date), “Gemeinsame Maβnahmen des Bundesvorstandes des FDGB, des Präsidiums der Kammer der Technik und des Sekretariats des Zentralvorstandes der Gesellschaft für Deutsch-Sowjetische Freundschaft zur Durchsetzung der Gruppenbearbeitung nach Leninpreisträger Dr. Mitrofanow in den sozialistischen Betrieben der DDR”, pp. 1–7. 50. Helmut Rückert, “BWF – Beispiel für Berliner Maschinenbaubetriebe”, Die Presse der Sowjetunion (1960), Nr. 100, p. 2197. 51. For example, the Learn for Mitrofanov Exhibition ran in the Kulturhaus in Frankfurt (Oder) between 8 and 10 August 1961 and was sponsored by the Bezirkvorstand of the FDGB; see BLHA 747 FDGB FfO P D75 (no page). 52. BA DY 30/78970, 24 March 1961, “Politische Konzeption zur Einführung und Durchsetzungder Mitrofanow-Methode”, pp. 1– 9. This report, produced by the BPO of VEB Karl-Marx-Werk in Magdeburg, asserted that ‘The Mitrofanov Method must be included as a crucial point in socialist competition. It is important to organize and regularly evaluate the competition between the mechanical areas of an individual enterprise (e.g. between the revolver-turning shop and measurement device construction). The same applies to the designers of the measuring instrument and fitting sections’; see ibid., p. 7. 53. BLHA 540 DSF BV Pdm 9 (no date), “Gemeinsame Maβnahmen des Bundesvorstandes des FDGB, des Präsidiums der Kammer der Technik und des Sekretariats des Zentralvorstandes der Gesellschaft für Deutsch-Sowjetische Freundschaft zur Durchsetzung der Gruppenbearbeitung nach Leninpreisträger Dr. Mitrofanow in den sozialistischen Betrieben der DDR”, pp. 1–7. 54. For an example of a ‘ready-to go’ publication, see BA DY 52/1111, 28 September 1961, “Mit der Mitrofanow-Methode

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schneller zum Sieg des Sozialismus. Wie nun weiter mit der Mitrofanow-Methode?”, pp. 1–14. 55. At the height of the first wave of the campaign, Die Presse der Sowjetunion ran numerous issues exclusively focused on the Mitrofanov Method, such as the editions that appeared on 17 February 1961 (special issue), 10 March 1961 (Nr. 30), 23 April 1961 (Nr. 43), and 12 May 1961 (Nr. 56). 56. For an early example, see Ing Agsten, “Durch Gruppenbearbeitung zu einer hochproduktiven Fertigungsform”, Der Maschinenbauer (August 1960) Nr. 8, pp. 230–235. 57. For some of the early planning for the television series, see BA DY 30/78970, 16 February 1961, “Vortragsdisposition für die Vortragsreihe ‘Einführung der Mitrofanow-Methode’ beim Deutschen Fernsehfunk”, pp. 1–2. For the mass organisations’ joint decision to influence and support such programming, see BLHA 540 DSF BV Pdm 9 (no date), “Gemeinsame Maβnahmen des Bundesvorstandes des FDGB, des Präsidiums der Kammer der Technik und des Sekretariats des Zentralvorstandes der Gesellschaft für Deutsch-Sowjetische Freundschaft zur Durchsetzung der Gruppenbearbeitung nach Leninpreisträger Dr. Mitrofanow in den sozialistischen Betrieben der DDR”, pp. 1–7. 58. BA DY 30/78970, 29 May 1961, “Ziel, Inhalt, Sendefolge und Auswertung des Fernsehkurses: Mitrofanow-Methode im Rahmen der Fernsehakademie”, p. 1. 59. BA DY 30/78970, “Berichterstattung über die Durchführung des Beschlusses vom 9.5.1961, Nr. S 276/61 Gemeinsame Maβnahmen des Bundesvorstandes des FDGB, des Präsidiums der Kammer der Technik und des Sekretariats des Zentralvorstandes der Gesellschaft für Deutsch-Sowjetische Freundschaft zur Durchsetzung der Gruppenbearbeitung nach Leninpreisträger Dr. Mitrofanow in den sozialistischen Betrieben der DDR”, p. 3. 60. BA DY 30/78969 (no date), “Schlusswort des Genossen Roscher”, pp. 1–5. 61. BA DY 30/3352, “Beratung mit dem Genossen Mitrofanow am 1. März 1961 im Hause des Zentralkomitees der SED”, p. 1; BA DY 30/78969, 21 February 1961, “Einschätzung des Standes der Durchsetzung der Gruppenbearbeitung nack Mitrofanow in

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der DDR und Information über Maβnahmen zur Verbesserung ihrer Einführung”, pp. 1–18. 62. BA DY 30/3352, “Beratung mit dem Genossen Mitrofanow am 1. März 1961 im Hause des Zentralkomitees der SED”, p. 42. 63. BA DY 30/3352, “Beratung mit dem Genossen Mitrofanow am 1. März 1961 im Hause des Zentralkomitees der SED”, p. 1; BA DY 30/78969, 21 February 1961, “Einschätzung des Standes der Durchsetzung der Gruppenbearbeitung nack Mitrofanow in der DDR und Information über Maβnahmen zur Verbesserung ihrer Einführung”, pp. 1–18. 64. BA DY 30/78970, 6 May 1961, “Kommunique der Berliner Neuerer- und Aktivistenkonferenz”, p. 65. 65. BA DY 30/3352, “Beratung mit dem Genossen Mitrofanow am 1. März 1961 im Hause des Zentralkomitees der SED”, p. 43. 66. BA DY 52/1111, 12 March 1961, “Untersuchung der Entwicklung und des Standes der Mitrofanow-Methode in den Werken 512 and 536”, p. 3. 67. The German term is “den schwarzen Peter zuschieben”; see BA DY 30/3352, “Beratung mit dem Genossen Mitrofanow am 1. März 1961 im Hause des Zentralkomitees der SED”, p. 28. 68. See the comments, for example, of Hanke in ibid., p. 43. 69. BA DY 36/125, 14 March 1961, “Festlegung des Präsidiums zur Präsidiumssitzung”, p. 1. 70. BLHA 530 SED BL Pdm 1212, 5 June 1961, “Erfahrungen und Hinweise zur weiteren Durchsetzung der Mitrofanow-Methode”, pp. 1–6. 71. BA DY 30/3352, “Beratung mit dem Genossen Mitrofanow am 1. März 1961 im Hause des Zentralkomitees der SED”, p. 5. 72. Ibid., p. 52. 73. Ibid., p. 53. 74. Ibid., p. 42. 75. Letter from Kurt Heutehaus, member of the secretariat of the Central Board of the DSF; see BA DY 30/78970, 16 April 1962, “An das ZK der SED zu Genossen Brock, Abt. Maschinenbau”, pp. 1–3. 76. For the draft of the manuscript penned by the Innovator Aktiv of the Federal Board of the FDGB; see BA DY 34/22034, “Die Anwendung der Mitrofanow-Methode in den Betrieben der DDR”, pp. 1–62.

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77. Report by the Main Technology Committee of the KdT; see BA DY 34/22034, 21 March 1963, “Welche Aufgaben sind von den gesellschaftlichen Organisationen in Auswertung des Beschlusses des VI. Parteitages der SED zur Durchsetzung der Methode der Gruppenbearbeitung nach Prof. Dr. Mitrofanow in verschiedenen Zweigen der Industrie der DDR zu lösen”, pp. 7 and 11. 78. BLHA 547 IG M 207, 17 July 1962, “Konzeption über die Einrichtung und Aufgaben der Konsultationspunkte zur breiten Einführung der Gruppenbearbeitung nach Dr. Mitrofanow”, pp. 1–7. 79. Letter from the Enterprise Director to the Production and Technology Department; see BLHA 907 VVB Vt Ctb 1109, 4 August 1961, “Mitrofanow-Methode in der Textilindustrie”, pp. 1–2. 80. Ibid; for the letter from the Enterprise Director; see BLHA 907 VVB Vt Ctb 1109, 29 November 1961, “Betr.: MitrofanowMethode”, pp. 1–2. 81. BLHA 547 IG M 207, 17 July 1962, “Konzeption über die Einrichtung und Aufgaben der Konsultationspunkte zur breiten Einführung der Gruppenbearbeitung nach Dr. Mitrofanow”, pp. 1–7. 82. Ibid; BLHA 547 IG M 207, 17 September 1962, “Auswertung der Ergebnisse der Arbeit der Konsultationspunkte für die Durchsetzung der Mitrofanow-Methode u. Schneidekeramik”, pp. 1–2. 83. BLHA 547 IG M 207, November 1962, “Durchgeführte Untersuchungen zur Erarbeitung des Berichtes über die Ergebnisse der Arbeit der Konsultationspunkte für die Durchsetzung der Mitrofanow-Bewegung und das Keramik-Drehens”, p. 1; BLHA 547 IG M 207, 17 September 1962, “Geforderter Bericht über Konsultationsstützpunkt”, pp. 1–3; BLHA 504 GRW Tlt 187/1, 11 December 1962, “Die Durchführung der Mechanisierung und die Einführung der Mitrofanov-Methode sowie hochproduktiver Fertigungsmethoden”, pp. 11–13. 84. BLHA 530 SED BL Pdm 1136, 13 April 1962, “Bericht über die durchgeführte Untersuchung, über den Stand der Anwendung der Gruppenbearbeitung nach Mitrofanow im ROW – Rathenow”, pp. 1–5.

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85. Ibid. 86. Cutting ceramics are inserts used as cutting edges on milling tools, turning tools and drills. They are indexable, meaning that they can be exchanged, and often can be rotated or flipped, without disturbing the overall geometry of the tool. They are harder and more wear-resistant than hard metals even at high temperatures and are capable of being run at higher cutting speeds. 87. BLHA 547 IG M 207, November 1962, “Durchgeführte Untersuchungen zur Erarbeitung des Berichtes über die Ergebnisse der Arbeit der Konsultationspunkte für die Durchsetzung der Mitrofanow-Bewegung und das Keramik-Drehens”, by Kabinett ‘Neue Technik’ Potsdam. 88. BA DY 34/22034, 21 March 1963, “Welche Aufgaben sind von den gesellschaftlichen Organisationen in Auswertung des Beschlusses des VI. Parteitages der SED zur Durchsetzung der Methode der Gruppenbearbeitung nach Prof. Dr. Mitrofanow in verschiedenen Zweigen der Industrie der DDR zu lösen”, p. 7. 89. Ibid., p. 8. 90. Ibid., p. 11. 91. Ibid., pp. 17–18. 92. Ibid., p. 19. 93. Ibid., p. 21. 94. The rank correlation between articles on group processing and industrial employment in a Bezirk was +0.71, suggesting a close, if not perfect, alignment. 95. The rank correlation between articles on group processing per 10,000 industrial employees and industrial employment in a Bezirk was very low and, in fact, negative (−0.1). The correlation coefficient between the intensity of articles and employment in precision and optical engineering was also very low (+0.04), but at least positively signed. Chi-square analyses of the data support the same conclusion that the considerable variation between observed and expected coverage based on Bezirk-level industrial employment indicates that other Bezirk-relevant factors were at play. These findings also suggest that the existence of showcase VEBs in a Bezirk need not necessarily imply a Bezirk-wide strength in group processing even within the same sector as the model enterprise.

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96. Stokes, Constructing Socialism, especially pp. 110–128 and Stokes, “In Search of the Socialist Artefact”, pp. 223–239. 97. Stokes, Constructing Socialism, p. 116. 98. Ibid., pp. 125–126. 99. Nor did Mitrofanov disappear from the scene in the mid1960s. He and his research group continued to develop and update his philosophy of flexible production through the use of group technologies well into the 1980s. As an example of his later work, see Sergei. P. Mitrofanov, D.D. Kulikov, O.N. Milayev, B.S. Padun, Technological Preparation of Flexible Production Systems (Russian: Texnologiqecka podgotovka gibkix ppoizvodctvennyx cictem), Leningrad: Mechanical Engineering, 1987). Mitrofanov died in October 2003. 100. John Brandon, Cellular Manufacturing: Integrating Technology and Management (Somerset: Research Studies Press LTD, 1996); Benders and Badham, “History of Cell-Based Manufacturing”, pp. 45–50. 101. BA DY 30/78969, 16–19 March 1961, “Für Referat W. Ulbricht 12. Tagung”, pp. 241–242. 102. Stokes, Constructing Socialism, p. 116. 103. Many East German engineers and technologists in the late 1950s and early 1960s were of the age where they had been thoroughly exposed to the practices of Western engineering and technology prior to the division of Germany. In many cases, their natural inclination was to remain engaged with the West. Their reorientation towards the USSR only occurred when that other option had been closed off; see Stokes, ibid., pp. 114 and 125. For an example of how East German antipathy to the Soviets could spill over into rebellious behaviour; see Wayne Geerling, Gary B. Magee and Russell Smyth, “Occupation, Reparations and Rebellion: The Soviets and the East German Uprising of 1953”, Journal of Interdisciplinary History LII: 2 (Autumn 2021), pp. 1–26. 104. BLHA 530 SED BL Pdm 1212, 5 June 1961, “Erfahrungen und Hinweise zur weiteren Durchsetzung der Mitrofanow-Methode”, pp. 1–6.

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References Primary Sources (A) Archival Files (i) Bundesarchiv BA DY 30/3352 BA DY 30/70597 BA DY 30/78968 BA DY 30/78969 BA DY 30/78970 BA DY 34/16848 BA DY 34/22034 BA DY 36/125 BA DY 52/1111 (ii) Brandenburgisches Landeshauptarchiv BLHA 101 Fotos D540 BLHA 504 GRW Tlt 187/1 BLHA 530 SED BL Pdm 1136 BLHA 530 SED BL Pdm 1212 BLHA 540 DSF BV Pdm 9 BLHA 547 IG M 207 BLHA 747 FDGB FfO P D75. BLHA 907 VVB Vt Ctb 1109 (B) Contemporary Publications, Periodicals and Newspapers Agsten, Ing. 1960. Durch Gruppenbearbeitung zu einer hochproduktiven Fertigungsform. Der Maschinenbauer 8: 230–235. Blume, Paul. 1961. Die Mitrofanow-Methode und ihre Einführung im VEB Carl Zeiss Jena. Gera: Abteilung Propaganda/Agitation der Bezirksleitung Gera der SED. Mitrofanow, Sergei Petrovich 1960. Wissenschaftliche Grundlage der Gruppenbearbeitung. Berlin: Verlag Technik. Mitrofanov, Sergei Petrovich. 1966. Scientific Principles of Group Technology. Yorkshire: National Lending Library for Science and Technology. Originally published as: Nauchnye osnovy gruppovoi tekhnologii, Leningrad, 1959. Translated by E. Harris. Edited by T. J. Grayson, 1966. Rückert, Helmut. 1960. BWF – Beispiel für Berliner Maschinenbaubetriebe. Die Presse der Sowjetunion 100, p. 217.

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Statement of 81 Communist and Workers Parties Meeting in Moscow, USSR, 1960. 1961. New York: New Century Publishers. Accessible at https://www.marxists.org/history/international/comintern/sino-sov iet-split/other/1960statement.htm. Weiz, Herbert. 1962. Methoden und ökonomischer Nutzen der Gruppenbearbeitung. Berlin: Dietz Verlag.

Secondary Sources Bellon, Bernard P. 1990. Mercedes in Peace and War: German Automobile Workers, 1903–1945. New York: Colombia University Press. Benders, Jos, and Richard Badham. 2000. History of Cell-Based Manufacturing. In Work Teams: Past, Present and Future, ed. Michael M. Beyerlein, 45–57, Dordrecht: Springer. Brandon, John. 1996. Cellular Manufacturing: Integrating Technology and Management. Somerset: Research Studies Press LTD. Geerling, Wayne, Gary B. Magee, and Russell Smyth. 2021. Occupation, Reparations and Rebellion: The Soviets and the East German Uprising of 1953. Journal of Interdisciplinary History LII (2): 1–26. Griffith, William E. 1962. The November 1960 Moscow Meeting: A Preliminary Reconstruction. The China Quarterly 11: 38–57. Herrigel, Gary. 1996. Industrial Constructions: The Sources of German Industrial Power. Cambridge: Cambridge University Press. Mitrofanov, Sergei P., D.D. Kulikov, O.N. Milayev, B.S. Padun. 1987. Technological Preparation of Flexible Production Systems (Russian: Texnologiqecka podgotovka gibkix ppoizvodctvennyx cictem) Leningrad: Mechanical Engineering. Poteev, Mikhail Ivanovich. 2000. ITMO University: Years and People. Saint Petersberg: Iva. Steiner, André. 2010. The Plans That Failed: An Economic History of the GDR. New York: Berghahn. Stokes, Raymond G. 1997. In Search of the Socialist Artefact: Technology and Ideology in East Germany, 1945–1962. German History 15: 223–239. Stokes, Raymond G. 2000. Constructing Socialism: Technology and Change in East Germany, 1945–1990. Baltimore: The Johns Hopkins University Press.

CHAPTER 5

Searching for Socialist Efficiency: The Case of the Schwedt Initiative

In May 1971, Erich Honecker assumed the leadership of the SED. With his ascension to the pinnacle of power in the GDR, the focus of the party’s economic policy swung decisively away from the experimentation that had characterised much of the latter years of Walter Ulbricht’s reign towards a platform of stability and steady, predictable progress. Raising the material and cultural standard of living for the people of the GDR became the new primary goal, superseding in importance even the competition with West Germany. Above all else, the new orientation aimed to significantly expand welfare provisions to the general populace and prioritise both the production and consumption of consumer goods. “Everything for the good of the people” (Alles zum Wohle des Volkes ) became the new catchcry. The underpinning rationality for the new policy was that by demonstrating the regime’s ability to generate real benefits for its citizens, it would secure their support and augment a belief in the system that would in turn stimulate greater effort and productivity in the workplace. Economic performance would as a result be improved. Thus, as the adopted name of the new policy made clear, the aim was to achieve the unity of economic and social policy (Einheit von Wirtschafts- und Sozialpolitik).

© The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 G. B. Magee and W. Geerling, Socialism with a Human Face, Palgrave Studies in Economic History, https://doi.org/10.1007/978-981-19-0664-0_5

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The ensuing improvement in wellbeing across the 1970s, however, came at a cost. Much of the ongoing social progress had essentially been unfunded. Foreign debt levels steadily mounted, while precious investment funds were diverted from productive to consumptive activities. By the second half of the 1970s, productivity levels began declining and GDR products were finding it increasingly difficult to remain internationally competitive. Their share, even in markets which the GDR had till recently fared relatively well, such as in office equipment, machine tools, optical and precision machinery, steadily diminished. Facing a ballooning trade imbalance, imports, including foreign technology, were curtailed and domestic investment reduced. Together with the contracting revenues now available from exports, these changes placed more downward pressure on the economy’s ability to generate productivity growth, further amplifying over time its underlying problem with the saleability of its exports, especially outside the communist and developing worlds. A vicious circle of declining international competitiveness had been set in train.1 As the 1970s drew to their end, the need to rationalise the economy and reboot competitiveness grew in urgency. Given that reducing wages or welfare provisions were inconceivable to the leadership of the SED and the limited investment funds that were available for building new plant or importing foreign technology, a systematic rationalisation of the East German economy could only occur through the identification of means to utilise existing resources more effectively. This internal national efficiency drive, or “intensification” (Intensivierung ) to use the language of the day, urged all party managers and officials to seek out ways—consistent with the values of socialism, of course—of achieving savings within their dayto-day operations. As Günter Mittag explained at the Eighth Conference of the Central Committee in May 1978: In this sense everyone bears political responsibility for rationalisation ... Either way, no branch of the economy, no enterprise, no territory is spared from these changes in production aimed at higher performance. Socialist rationalisation affects every enterprise - both those who work with old equipment and those who use new machines.2

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One factor in particular posed an acute and, arguably, defining challenge for the process of intensification: optimising the size and utilisation of the nation’s labour resources. In addition to the unhelpful, if widespread, practice of deploying large volumes of labour in essentially unproductive pursuits, prevailing demographic and societal trends of the time pointed towards a future of stagnant participation rates and a shrinking workforce. In 1980, Honecker himself observed that: We have to face the necessity in the GDR of increasing production almost exclusively by way of higher labour productivity. This is because in the long term, the number of workers will continue to decrease and the volume of working hours will become smaller. Last but not least, there are social policy measures that have led to the reduction of working hours, such as the extension of holidays. At the same time, we need to employ more workers for additional tasks in areas such as services, education and culture.3

Thus, by the end of the 1970s, economising on the use of labour had become one of the most important—if indeed not the most important— foci of the party’s intensification drive. At its heart lay an initiative, the Schwedt Initiative, which sought to use material incentives to free up labour, sitting underutilised, sometimes even idle, in enterprises and bureaucracies, for redeployment in new, more efficiently designed plants, shopfloors and offices. The initiative represented the high-water mark of the GDR’s attempts to bring a meaningful “socialist” efficiency to its workplaces. This chapter tells the story of the initiative and analyses the pitfalls, tribulations and successes of what Jeffrey Kopstein has called “the last great production experiment in GDR history”.4

5.1

Sozialistische Rationalisierung in neuen Dimensionen5 : The Schwedt Initiative

At the forefront of GDR’s pursuit of heightened intensification was an experiment, which began simply in a chemical plant in the town of Schwedt in Bezirk Frankfurt (Oder), but which was to spread across all parts of the economy over the course of the 1980s. At its heart, the Schwedt Initiative (die Schwedter Initiative), as it came to be known, attempted to tackle one of the chronic problems of the East Germany economy: how could the requisite labour be found to realise its ambitious

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growth plans? The novelty of the Schwedt Initiative was that it sought to overcome the prevailing dearth of labour, not by focusing on expanding the supply of labour per se, as had been the case previously, but by instead rationalising its demand. In other words, it sought to raise labour productivity and free up resources for growth elsewhere in the economy by encouraging enterprises to release the excess, unneeded and unproductively utilised labourers they retained in employment. Such a hoarding of labour, made possible by soft budget constraints, was a rational, indeed strategically sensible, insurance mechanism for enterprises that constantly faced both the vagaries of supply and planning uncertainty from above.6 If the state orders for the enterprise, for example, were to be suddenly ratcheted up, having a surplus supply of labour on tap could make the enterprise’s shift to greater volumes of production easier and ensure that bonuses for plan fulfilment were not jeopardised. However, it meant that many labourers were inefficiently utilised. For their part, workers were content with such overstaffing arrangements, as having more hands on deck reduced workloads without putting pressure on wages and other benefits. One of the slogans adopted by the Initiative summed the situation up nicely: “we don’t have too few workers – we have too many jobs”.7 The Schwedt initiative was thus a rationalisation strategy that sought to induce enterprises and their workers with material incentives—higher wages and benefits and a continued guarantee of work—to relinquish hoarded labour and thereby make their operations more efficient. As Siegfried Kipp, Deputy Director General and one of the pioneers of the initiative at VEB Petrochemisches Kombinat Schwedt (PCK ) proclaimed: The Schwedt Initiative provides a concrete answer to a problem of the 1980s that the economy has to solve urgently, namely, to achieve a possible release of labour beyond previously usual levels through the saving of jobs in new dimensions to maximise the increase in labour productivity. To realise this, the principle to be followed is that at least as many jobs are saved as economically necessary new ones created, or that manpower freed up is used for the better utilization of basic resources or outside the respective enterprise on other tasks. Concurrently with the mass saving of jobs, all scientific findings are used to redesign the remaining jobs. These changes are linked to an improvement in working conditions, which at the same time create conditions for better performance.8

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Yet how exactly was this mass savings of jobs to come about and render the promised transformations? The analysis carried out by contemporaries was thin, drew its inspiration and approach not surprisingly from the canon of Marxism-Leninism, and sought above all else to justify the initiative rather than explain it. Allusions were made to two of Marx’s observations in particular: first, that a country which produced the same level of output as others but with a lower ratio of productive workers to unproductive tended to be the richer country and, second, that anything that increased the effectiveness of living labour shortened the socially necessary amount of labour needed to create a product and bestowed greater use value to each unit of labour.9 Further justification was found in a fleeting comment made by Lenin from 1921, in which he stated that the total wage fund of enterprises should not be reduced when “the number of workers has been reduced as a consequence of better organization of business” and that pay in such circumstances should be allocated to the enterprise “in accordance with the result of its work, not with the number of people entered on its rolls”.10 Seemingly perturbed by the prospect that workers might equate the intention of this initiative with those of the cost cutting exercises of pre-war bosses, the party, much as it had been compelled to do with the introduction of piecework and technically determined norms in the late 1940s, were keen to ensure that workers comprehended the difference between the progressive socialist rationalisation that they offered and the regressive capitalist versions of the past; the former was “based on advancing people and humanity, the latter on profit”.11 But how was the Schwedt Initiative intended to work? At its core lay a promise: enterprises, which voluntarily reduced the number of workers they hired (without diminishing output) could count on keeping a large share of the savings engendered by their rationalisations.12 In the language of the planner, what this meant was that instead of seeing its wage fund (Lohnfonds ) fall pari passu with its declining number of employees and the gains forfeited to the state, much of the saved wages would be redirected back into the enterprise’s funds for internal redistribution.13 In other words, some of the money saved from releasing underemployed labour would be utilised to increase the wages and benefits of all employees of the enterprise. In principle, the initiative, although cloaked in the language of socialist values and virtues, appealed to the material interests of workers and management.

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While the task of determining which labour could be released was left to the enterprise to establish, the initiative’s proponents felt that savings could be best be made through four key channels. First, in a direct, if unspoken, reference to overstaffing, inessential tasks should be simply abolished, deployed more efficiently, or merged with other existing roles, releasing labour as a consequence. A central component of this channel was the central campaign to push enterprises to establish a three-shift system that would utilise its labour power more fully.14 Second, where feasible, the responsibilities of certain jobs should be redefined and extended to embrace wider zones of operation. The linchpin of our proposal is the assumption of a larger area of responsibility by individual comrades and colleagues – regardless of whether they are manager, shift engineer or plant operator … Under our conditions, the expansion of the operating zones means that everyone must be able to use and replace each other on all sides.15

Third, suitable labour-saving innovations and state-of-art technologies should be identified and introduced. Lacking a ready supply of capital to defray a widespread transformation, each enterprise was encouraged to utilise better and extend the capabilities of its Rationalisierungsmittelbau, the in-house department it maintained to produce tools or machines to improve operational processes, and engage more fully with other existing innovation-based initiatives such as Ideas-Solutions-Patents (Ideen – Lösungen - Patente) and the Young Innovators Fair (Messe der Meister von Morgen).16 It was also realised that, to be achievable, the second and third channels of releasing labour would require a fundamental expansion of both enterprise and regional training facilities. As the First Secretary of the Frankfurt (Oder) Bezirk Party organisation, Jochen Hertwig, noted: Where the principle of ‘fewer produce more’ is put on the agenda, there is a massive development of initiative, willingness to take responsibility, a spirit of innovation and the need for education, because often different and expanded tasks and qualification requirements challenge the individual. It is already becoming apparent that the Schwedt Initiative is also stimulating the process of socialist personality development in a new and marked way.17

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Fourth, production and labour processes within the enterprise should be subjected to analyses based on the science of work organisation. For the advocates of this initiative, this channel was the most important and was perceived to be the key to unlocking the potential of the other three. The required analyses would be undertaken by the scientific work organisation (Wissenschaftliche Arbeitsorganisation or WAO) unit housed within the enterprise itself. Since the promulgation of the Directive on the Application of Scientific Work Organisation (Richtlinie über der Anwendung der wissenschaftlichen Arbeitsorganisation) of 17 April 1975, WAOs had become a required feature of the organisational structure of all industrial enterprises.18 For the most part, these WAOs operated as standalone specialist departments reporting to the senior management, but largely disconnected from the day-to-day running of the shopfloor. The Schwedt Initiative sought to upturn this arrangement, by integrating work science into all facets of the enterprise and placing the WAO at the very heart of the transformation process. Indeed, to Werner Frohn, the Director General (Generaldirektor) of the combine that gave birth to the initiative, its successes lay therein: Behind this is the completely new design of the scientific work organization, the relocation of WAO functions, which were previously reserved for certain specialist departments, down to the work collectives. The Schwedt Initiative – it is the hundreds of working groups in which the people working together compile and process the materials necessary for the WAO collectives. It is the thousands of official proposals from workers, engineers and scientists - well-founded material that management can eventually use … Rationalization in new dimensions - this can no longer be done with a stopwatch and a table of norms alone. Rather, it requires a thorough examination of each section of the reproduction process, an in-depth analysis of the individual impact factors, and in this way one finds the reserves that can be tapped in the future under firmly fixed conditions. The Schwedt Initiative is also a higher form of socialist democracy. The old, tried and tested slogan “plan together, work together, rule together!” has had its content confirmed.19

To realise the potential of the Schwedt Initiative, however, a restructuring of the WAO within the enterprise was necessary. The Director must take direct responsibility for the overall process of rationalisation and must not delegate it to the level of the operational or department heads. The enterprise’s council for scientific work organisation (Rat für WAO) would

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provide the expertise and drive the process of change. Chaired by the Director, it would be made up of a range of influential individuals in the enterprise and typically included among its ranks all specialist department heads; representatives of the enterprise-level party, trade union and FDJ management; a senior WAO expert and sometimes relevant municipality (Kreis )- and/or district (Bezirk)-level state officials.20 The function of the WAO Council was to generate information required for scientific decision-making; manage, plan, coordinate and control the implementation of all rationalisation measures determined by the Director; establish basic work directions (tasks, priorities, timelines, etc.); clarify uncertainty whenever it arises and discuss solutions to specific problems that emerge from the process of implementation. A unit (WAOStab) was typically created to provide administrative support to the work of WAO Council. Reporting to the WAO Council were a series of enterprise-wide working groups (WAO Arbeitsgruppen) whose duties were to analyse and advise on complex rationalisation issues pertaining to specific aspects of the enterprise’s work. At the sheet glass manufacture, VEB Flachglaswerk Uhsmanndorf , for example, nine WAO working groups supported the WAO Council in 1983. It operated working groups on material incentives (led by the head of the economics department); personnel and qualifications (led by the head of the personnel and education department); operational organisation (led by the head of operations); technological security (led by the head technological security); social issues (led by the head of the social department) and competitions and publicity (led by the enterprise’s union chairman). There were also three areaspecific working groups responsible for the conduct of comprehensive WAO studies (Komplexe WAO-Studien) of the manufacture of table glass, thermal glass and coloured glass completing the set.21 Supporting and implementing the findings of the working groups and WAO Council were WAO collectives (WAO-Kollektiven), which had been set up in every department. The aim of this hierarchical structure was to ensure that consistent information could flow up and down the organisation and that the rationalisation strategy of the enterprise permeated every corner. What directed the path of rationalisations taken were the WAO studies carried out. While these evolved over time, their essence remained the same.22 They began with detailed current state analyses (IstzustandsAnalysen), which provided frank examinations of whether the existing work organisation and capacity were sufficient to meet performance

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requirements and identified areas where measures to enhance performance and quality would be necessary. These current state analyses provide an important basis for the development of the target projects (Soll-projekte), major rationalisation initiatives, which drew in all areas of the enterprise and were designed to transform the efficiency of the enterprise operations and ultimately release labour. Beyond these bigger projects, the current state analyses proved helpful in identifying more immediate, if at times short-term, solutions to production problems, which could be quickly tested out within existing arrangements.23 A common method to test out an aspect of the WAO work under normal production conditions was through so-called Initiative shifts (Initiativschichten), which in effect were short-term socialist competitions between shifts deploying an experimental idea and shifts acting as controls. As an information document prepared by the FDGB’s Department of Labour and Wages in August 1980 advised workers, the experience generated was an excellent way “to gain knowledge that leads to the constant attainment of the best values”.24 Yet, even when the WAO had identified a possible improvement, it was not always easy to implement. Workers often resisted attempts to be relocated. On 12 September 1980, the personnel department of VEB Papierund Kartonwerke Schwedt informed its WAO Council by memorandum that: Via the WAO unit, the personnel team was given the names of Christiane Seiffert, Carola Jahnke and Carola Koehler, with whom a discussion could be carried out about their move into the wallpaper department in a 3-shift system. For personal reasons, all three colleagues refused to be moved into the wallpaper department, although the wallpaper department had moved Colleague Koehler in 1978 into stock preparation. As a result, the colleagues have resumed their duties in their former departments from September 1, 1980.25

The memorandum then provided a list of workers who had to leave the shift system for either health or personal reasons. It contained nineteen names, the case of fourteen of whom at the time of the memorandum remained unresolved. Five, however, had been recently successfully returned to shift work. In three cases, workers had been allowed to stay on in the same paper machine room as before, meaning that in taking up the new shift work, they did not have to change

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their work environment. The other two “successes” were workers who had been persuaded to go onto shift work in different, seemingly more amenable workplaces, such as the sports department.26 Four days later the WAO Council met to discuss the report. As the minutes of the meeting note, it urged the personnel department to keep pressing those who were reluctant: With regard to the list of workers who have to leave the shift system for reasons of health, it was determined that there should be further talks about the urgency, necessity and reasonableness of shift work. Records are to be made of the discussions and an evaluation of the records is to be carried out by the executive department … Personal discussions with the women who have applied for the transition to normal shift because of the care of their children are to be kept on record with the aim of learning about social problems and personal desires or of furthering interest in shift work. The personnel department should carry out an evaluation after the interviews and compile a template.27

Pivotal to the perceived potential of the Schwedt Initiative was the “principle of material interest” (Prinzip der materiellen Interessierheit ).28 A widely publicised aspect of the campaign was the commitment that up to 50 per cent of all wages saved as a result of rationalisation would be returned to the enterprise and its workers in the form of higher wages and benefits. In practice, there were significant variations in how material incentives were applied; the fifty per cent share represented a maximum that many industries did not seek to attain. The material rewards for the active participation of workers in the process of rationalisation was underpinned by the belief that additional payments should not be viewed as gifts, but rather as recognition for demonstrated improvements in performance. Hence, to receive a salary increase, collectives and individual workers had to be able to point to either a sustained record of introducing initiatives that saved jobs, labour or time; significant new or expanded tasks as a result of rationalisation measures; or a decisive contribution to the implementation of the measures resulting from the WAO studies.29 How the payment was made varied by the circumstances. If the content of work tasks had been expanded as a result of the rationalisation measures and the requirements for quality or responsibility had increased as a result, then the changed work tasks would be re-evaluated and, if justified,

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qualify the worker to be grouped into a higher wage or salary group. If, as a result of the rationalisation measures implemented, there were higher demands on the worker, which led to the expansion of work tasks, but did not justify their grouping into a high wage or salary group, an extra wage bonus could be awarded up to a maximum limit of usually 100 M per month. Finally, if the worker had already exhausted all the possibilities within their current salary range, a one-off premium of somewhere between 100 and 1000 M (subject to 5 per cent tax) could in special circumstances be granted from the enterprise’s wage fund.30 The amount of actual material incentives awarded varied considerably between industries. Deutsche Post , for example, structured its rewards on the basis of a sliding scale that provided an incentive for offices to exceed planned levels of release. Formally, its payments were determined according to the formulation:   L planned × L actual Waverage = α L actual where ΔW average was the change in the average wage, L planned the planned number of workers employed in the office; L actual the number of labour actually employed; ΔL actual the change in the number of employees achieved and α a constant determined by Deutsche Post Bezirk leadership on the basis of the required qualification structures of its offices. In 1982, α was set at 0.27.31 An implication of this remuneration structure was that releases of labour from offices that were already comparatively lean would be rewarded more generously. Thus, if an office began with 100 employees and released 10 of them over the course of the year and if L planned = 100, then average wages would grow by 3 per cent. If, however, planned labour was lower, such that L planned = 80, the growth of average wages would contract to 2.4 per cent, the slower growth reflecting the poorer starting position of the office in terms of employment levels.32 Yet, for most enterprises the payment of material incentives was fraught with challenges. The biggest problem related to confusion over what rewards they could legally provide. As there was no overarching law, it was left to each Ministry periodically to set its own guidelines and principles on material incentives for its enterprises.33 These agreements were complicated documents that typically did not cover all contingencies. As a result, ministries and state organs regularly struck down enterprise plans

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that they felt did not align with their understanding of how material incentives should operate.34 The lack of clarity, certainty, and indeed, incentive of the reward regimes was a complaint commonly voiced by enterprise directors.35 The matter was further ramified by confusion between enterprises and state authorities over the quantum of funds that would be made available to enterprises in return for their release of labour. Additional payments to workers stemming from the Schwedt Initiative had to be discharged from the enterprise in question’s wage fund, the annual budget it had been allocated to cover all its labour expenses. The size of the wage fund was determined on the basis of the planned number of workers and employees in the enterprise as well as the planned average wage paid. Enterprises, thus, had a strong incentive to fight for a higher workforce plan as this would increase the allocated wage fund, the full amount of which it could expend irrespective of the actual number of workers it engaged. The point of the Schwedt Initiative was that, by allowing the same planned wage fund to be spent across a smaller workforce, it provided a financial incentive that would counteract this tendency towards exaggerated labour demands.36 In practice, however, what happened to the wage fund following rationalisation proved a thorn of contention. From the perspective of enterprises and industry representatives, the problem was that the amount that could be accessed through the wage fund was calculated on the basis of the change in the number of total labourers used relative to that year’s plan, not the number actually released. The two numbers, however, were not necessarily the same and in fact often diverged because from one year to the next, planned investment in the same enterprise may have actually increased its demand for labour, some, if not all of which would be met by released labour. Such increases in the number of workers hired (relative to the amount consistent with the rationalised original planned amount) masked—and possibly eliminated on paper—the scale of the release of labour. When that happened, material incentives for workers in a growing enterprise were actually supressed below what they should have been. This state of affairs ran counter to the intention of the Schwedt Initiative, which aimed precisely at freeing up labour for other more productive uses. In effect, the monetary gains from the Schwedt Initiative in these circumstances were at least partially being funnelled back into the plan and not being paid to the worker as a reward for their performance.37 To counteract this situation, enterprises typically called for additional funds

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to be incorporated into the planned wage fund to ensure that equivalent to fifty per cent of the actual wage savings engendered by the Schwedt Initiative were available to be used for material incentives. Günther Wyschofsky, the Minster for the Chemical Industry, further proposed for the sake of clarity that the productive redeployment of labour into approved investments within the enterprises should be recognised as savings, something that some in the state economic apparatus regarded as inconsistent with performance-orientated wage policy38 : The basic principle must be that every enterprise has to meet its labour requirements from its own resources and that a planned increase in workers only becomes effective where this is necessary for economic reasons and the territorial opportunities are also available. The material stimulation must be designed according to this principle.39

State planners, however, often viewed the issue differently. Their concern was both a perceived rise in the number of “dead souls” (tote Seelen)40 — workers who existed only on paper—in the plan and the general lack of discipline with, and inadequate control and influence over, the wage funds that was being exercised at all levels of the economy. In September 1987, a report from the State Secretariat of Work and Wages concluded that: It is to be appreciated that wage discipline is increasingly being consciously violated. In order to stimulate special shifts and surplus hours to ensure that the plans are fulfilled, illegal contributions to the workers are increasingly being made. For example, VEB Kombinat NARVA Berlin workers, on the instructions of the Director General, receive additional “money in the hand” from the wage fund of 50 marks per special shift. For this purpose, the wages fund of the parent enterprise required 950 TM alone, which is about half its excess use of the wages fund … Compliance with the wage fund and the average wage was checked in 170 companies where the introduction of productive wages has already been completed. It can be seen that in a large share of these enterprises, despite the significantly higher planned wage increases in 1986 and 1987, wage discipline was inadequate. The state requirement for wage funds was exceeded in two thirds of these enterprises, even though some of their labour plans were not fully met.41

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Such differing perspectives on the situation sparked disagreements. On 14 June 1978, for example, representatives from PCK , the Ministry of the Chemical Industry, the Central Board of IG Chemie, Glas und Keramik and Dr. Büchel from SPK congregated at the House of Ministries in Berlin to discuss inter alia the material incentives to be deployed as part of the Schwedt Initiative. No clear guidelines existed. As a first step towards devising a framework for the financing of material incentives for the period 1978–1982, Siegfried Kipp and colleagues from PCK were requested to study the Soviet experience in the area and come up with a proposal for consideration by the end of the month.42 Duly done, PCK’s plan for its parent enterprise (Stammbetrieb) was evaluated and formally rejected by the SPK on 20 July 1978. The plan was criticised for being “unreal” and unreflective of the “latest knowledge”, which included the enterprise’s failure to reduce its workforce, reach current productivity targets and control wage growth. On 22 September, Günther Wyschofsky from the Ministry wrote to the SPK to disagree with its assessment, stating its analysis contained “statements which contradict reality”. Undertaking a detailed critique of the SPK’s case, he pointed out that, far from acting unilaterally, PCK had in fact deeply involved the SPK in all of its key decisions, including those to staff new plant using saved labour and to introduce the government’s mandated slower than planned growth in oil processing at Schwedt.43 It is hardly understandable that the comrades of the SPK, of all people, accuse this enterprise of having “primarily viewed these measures as a wage increase”. If the ideas of the comrades in Schwedt are viewed critically, it should be taken into account that there are no government regulations on how the saving of jobs should be achieved. A constructive participation of the state organs is, therefore, necessary. The SPK’s determination that the measures proposed by PCK meant additions to the wage fund does not correspond to the fact. In its considerations, PCK assumes that wages are planned and accounted for in the five-year plan period 1976/1980 and that only they can be the starting point for all entitlements.44

Following further discussions, a revised agreement on material incentives was struck to coincide with the enterprise’s new plan of November 1978.

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A Diagrammatic Representation

Putting aside for the time being concerns about its implementation, we can depict graphically the essence of what the Schwedt Initiative sought in theory to achieve. The reality of what it actually achieved is a matter taken up in later sections of the chapter. Figure 5.1 considers the enterprise’s decision as to what volume of reserve labour it should hold. Its choice depended on both the enterprise’s benefit (Bi ) and cost (Ci ) of holding excess labour. More formally expressed, the enterprise’s situation is captured by the functions Bi = f (R) and Ci = f (W, O, F), where R represents the value of the reduction in risk from unplanned variations that reserve labour bestows; W the wages paid to hold the labour; O the overheads associated with holding reserve labour and F the opportunity cost of bonuses and salary increase foregone because of the labour that has been held in reserve. The marginal benefit (MB) of holding excess labour is negative, whereas the marginal cost (MC) of holding it is positive. Figure 5.1 plots the enterprise’s marginal benefit and cost of holding reserve labour. Prior to the introduction of the initiative, the equilibrium level of excess labour held occurs where its marginal benefit (MB1 ) equates with its marginal

Fig. 5.1 Enterprise demand for reserve labour

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cost (MC1 ). At that point, the enterprise has an incentive neither to acquire nor give up workers. In this case, the enterprise holds L3 units of reserve labour. When the initiative is introduced, the opportunity costs of holding labour increases (new potential bonuses and better conditions are now being sacrificed), causing the marginal cost to move to the left (MC2 ). As a result, the enterprise chooses to hold less reserve labour (L2 ) than before, in the process releasing some of it (L3 – L2 ) for redeployment elsewhere. Over time, the successful implementation of the Schwedt Initiative raises average wages in the enterprise, which in turn increases the costs of holding labour and provides further incentive for the enterprise to seek out and introduce labour-saving technology. This process causes the marginal benefit to shift downward (MB2 ). A new equilibrium is established at L1 , where further reserve labour is released (L2 − L1 ). Hypothetically, this process repeats itself across a series of iterations, each of which sees the marginal cost and benefit curves continue to move (to the left and downward respectively) until all reserve labour has been released at 0. One factor that may stymie this progression is the uncertainty for the enterprise that the initiative injects into the planning process. Such uncertainty, if present, might shift the marginal benefit curve upwards, potentially even to a point where all incentive to release labour is eliminated (MB3 ; MC2 ; L3 ). Figure 5.2 turns its attention to how local labour markets were meant to have been impacted by the advent of the Schwedt Initiative. In the preinitiative context (S; D1 ), the centrally set average wage of W1 creates an excess demand of labour (L5 − L1 ), which is compounded by the enterprise’s desire to hold reserve labour beyond that (L6 − L5 ). L6 units of labour are demanded. When the Schwedt Initiative is introduced, enterprises in the locality are encouraged to relinquish their reserve labour stock (L6 − L5 ), shrinking the level of demand back to L5 . As a consequence of the promise to raise wages when labour is released, the wage level rises to W2 . The higher wages encourage more labour to enter the labour market (L2 ), while curtailing the demand for labour (L4 ). Both effects cause the level of excess demand for labour (L4 − L2 ) to decrease. In the longer term, these higher wages induce the introduction of more labour-saving technology, shifting the demand curve downward (D2 ) and reducing the demand for labour to L3 . As a result, excess demand (L3 − L2 ) falls further. As the dynamic of the rationalisations associated with the Schwedt Initiative take root and continue, this cycle of rising wages and shifting demand is repeated until all held reserve labour disappears.

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Fig. 5.2 The Schwedt Initiative and the local labour market

Such a scenario might occur at L* , an outcome that would be brought about by wages rising to W* and demand shifting down to D3 . At this new equilibrium (L* ; W* ), all reserve labour has been released, there is no excess demand, and more productive labour is being employed than before (L* > L2 > L1 ). The following sections consider whether the actual initiative unfolded in the manner described in Figs. 5.1 and 5.2.

5.3 “Wir haben nicht zu wenig Arbeitskra¨ fte – sondern zuviel Arbeitspla¨ tze ”45 : The Origins of a Campaign Although the Schwedt Initiative became a prominent feature of the GDR’s drive for intensification in the 1980s, its origins and inspiration were not in fact East German. Rather, the initiative had its roots in an idea first developed in 1967 in the Soviet Union at Shchekino Chemical Combine in Tula. There, they began experimenting with the proposition that labour productivity could be raised by using the wage fund to reduce

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labour inputs.46 Following promising successes, the Shchekino Method, as it became known, quickly spread to other enterprises across the Soviet Union, particularly in the chemical industry. From 1973, however, the campaign began hitting diminishing returns and tapered off rapidly. So much so that by 1977, the Shchekino Method, no longer regarded as a priority project for the Soviet leadership, appeared to be on the verge of extinction with only a small number of enterprises still comprehensively applying its principles. However, just as the idea was about to exit the stage, it was revived and revamped by the Soviet state increasingly more desperate to find means of raising productivity. This time around a more formal administrative and institutional structure to support it was put in place and the basic principles expounded at Shchekino were extended to embrace a broader conception of rationalisation than just the mere elimination of redundant jobs.47 The model for the new phase of the campaign became the “Novopolotsk Method” pioneered at the Polymir chemical plant in Novopolotsk in the Belarusian Soviet Republic. This method called for comprehensive, expert analyses of all work processes, guided by the principle of universal interchangeability, that is, the view that with restructuring and appropriate training, workers, rather than being tied to one role, could expand their “zones of operation” across multiple tasks. The enhanced workplace flexibility this afforded would enable more timely responses to be made to problems associated with start-up and shutdown processes, accidents and malfunctions, and facilitate a more thorough rationalisation and restructuring of plant.48 Championed both politically and in print by Konstantin Cherednichenko, the Soviet Deputy Minister for the Chemical Industry, the updated Shchekino Method soon garnered interest across the Eastern bloc, including in the GDR.49 On the occasion of the sixtieth anniversary of the October Revolution, a delegation from the Bezirk Frankfurt (Oder), led by its First Secretary, Jochen Hertwig, visited Polymir Novopolotsk (German: “Polimir” Nowopolozk). The plant just happened to be located in Vitebsk, the Bezirk’s sister Oblast in the Soviet Union. There, they witnessed firsthand the Novopolotsk Method (German: Nowopolozk-Methode) in action and were particularly struck by its attempts to use, what the delegation saw as, every opportunity to rationalise management and production organisation to save jobs.50 The trip, however, had not been the GDR’s first exposure to the Shchekino Method. Early versions of it had been experimented with in the chemical industry, where in conjunction with the introduction of WAO staff, rationalisation efforts, admittedly

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limited by later standards, were implemented and freed up thousands of workers.51 PCK Schwedt under the leadership of its then new, dynamic Director General, Werner Frohn, took the lead. Between his arrival in 1971 and the advent of the Schwedt Initiative in 1978, its rationalisation program, closely emulating the Shchekino experience, had released an estimated 1833 full-time equivalent workers (Vollbeschäftigteneinheit or VbE).52 A few weeks after returning from its trip to Novopolotsk, a working group from the Secretariat of the Bezirk paid a visit to PCK to discuss what they had observed and sound it out on the possibility of using the Novopolotsk experience as a template for expanding socialist rationalisation, not just at PCK, but across the Bezirk. To deepen understanding of the method, an exchange of experiences with Polymir Novopolotsk was initiated later in December 1977 and formalised in January 1978, when an agreement enabling the bilateral exchange of delegations between Vitebsk and Frankfurt (Oder) was signed.53 Official approval for the proposed experiment to proceed was also provided at a sitting of the Secretariat of the Bezirk Frankfurt (Oder) on 4 January 1978. Keen to build on the promise it clearly perceived, the Secretariat nevertheless opted to proceed in a cautious, step-by-step manner, starting with just one department within a single enterprise and using it as a full-blown test case of the method. “All energy”, it argued, should be concentrated on the task at hand, from which, it was hoped, learnings could be acquired and then generalised across the entire Bezirk. It resolved that PCK’s parent enterprise would be that enterprise and ordered it to draw up suitable plans.54 This it duly did on 30 March 1978. Taking on the experiment was, as Werner Frohn later conceded, a “risk” for him and the enterprise.55 One of the reasons PCK had been selected as the test case was that it faced a major labour force challenge at the time. It needed to find from its own internal resources over 600 workers to staff the new feed protein complex and aromatic compound plants it was building. No external supply of labour was, or would be, on offer. A course of rationalisation along the lines of the Novopolotsk experience, the only viable option in such circumstances, was embarked upon, and the ambitious target of releasing for redeployment between 15 and 20 per cent of all its workers from existing facilities and administration was set.56 “Fewer produce more” (weniger produzieren mehr) was the apt and pithy slogan that emerged at the time and was to stick for the rest of initiative’s duration.

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On 11 October 1978, PCK delivered a report on the experiment to the Secretariat of the Bezirk Frankfurt (Oder). It was satisfied enough with the progress that had been made to allow the experiment not only to continue at PCK , but to be rolled out to a further eighteen enterprises in the Bezirk spanning a diverse array of industries including tyre manufacturers, railway repair workers, paper and cardboard makers, meatpackers, chipboard manufacturers, agricultural machinery makers and even dairy farmers.57 Two days later, Günter Mittag received a short briefing on the progress of the experiment at PCK . He confirmed that it should continue to be closely evaluated, but be publicised centrally only when clear results were available. At that stage, a decision about a generalisation of the experience across the nation would be taken.58 That central discussion of the experiment eventually took place on 28 May 1979, when a report on the result of PCK’s “battle to save jobs” was presented to the Economic Commission by Horst Wambutt, the Head of the Raw Material Industries Department of the Central Committee, Günther Wyschofsky, the Minister for the Chemical Industry, and Werner Frohn, the Director General of PCK . The Economic Commission was suitably impressed and, as its Secretary, Günter Mittag emphasised, “the results in saving workers at PCK Schwedt represented a good basis for further work…all combines had to be taken in this direction”.59 Six weeks later on 9 July 1979, the experiment was discussed at the Council of Ministers, where it met with the same approval. It was resolved there that twenty-nine enterprises in the chemical industry in addition to PCK —together accounting for nearly two-thirds of the industry’s entire work force—should be instructed to adopt and implement the Schwedt Initiative. To that end, the Ministry for the Chemical Industry was directed to develop, in consultation with the Central Board of IG Chemie, Glas und Keramik, the relevant union, an appropriate plan. This task was completed on 10 September and received Council of Ministers’ approval on 15 October 1979. The accepted plan set an annual savings target of at least 3.3 per cent of the selected enterprises’ workforces and projected that a further fifteen enterprises would join the initiative in 1981. On 10 July 1980, arrangements concerning the Schwedt Initiative were then enacted for the first time in orders related to planning and budgeting.60 At the time, forty enterprises in Bezirk Frankfurt (Oder) alone had adopted the Schwedt Initiative.61

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Confirmation, if it were needed, that the Schwedt Initiative’s time had indeed come was delivered at the Tenth Party Congress in April 1981, where it was explicitly acknowledged as a key plank of the SED’s economic policy for the coming decade. Willi Stoph, Politbüro member and chairman of the State Council, set the tone: Comrades! A key question is the saving of jobs and the recruitment of labour for the commissioning of new production capacities and for increasing shift work. There is no other alternative than to release workers to unprecedented levels through socialist rationalization. With their initiative ‘Fewer produce more’, the workers of the parent enterprise of VEB Petrochemisches Kombinat Schwedt have created the example. In a growing number of enterprises, the Schwedt Initiative has already proven suitable for solving worker supply issues on their own and without being supplied from outside. We, therefore, once again direct all party and economic officials to evaluate this experience and consistently apply scientific and technical knowledge and scientific work organization methods. In a word: It is about the effective use of our society’s workforce. We emphasize that socialist rationalization and the right to work, which we have achieved, are inseparably united. No employed person need fear for a job in our republic.62

The party’s chief economic functionary, Günter Mittag, reinforced the point in his speech: The focus of socialist rationalization must clearly be on saving jobs. As a result, each combine has to create the conditions for its expanded reproduction itself, as it is in the Schwedt Initiative. The resolutions of the Tenth Party Congress definitively identify that the push for rationalization in the combine must lead to a noticeable saving in jobs and labour. This has been marked out as a key issue for high growth performance.63

The Politbüro had thus now come fully behind the initiative and given its blessing for its rapid introduction across entire economy.64 On 15 October 1981, the Council of Ministers, working to put an appropriate administrative structure in place, approved standardised work guidelines for the introduction of the Schwedt Initiative in GDR enterprises.65 Its resolutions effectively signified the launch of the Schwedt Initiative as a national campaign. The guidelines expounded identified three priorities for the campaign: (1) the installation of new productive capacity; (2) an increase in the share of workers on a multiple shift system that would

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foster greater utilisation of available capacity and (3) the strengthening of enterprises’ own Rationalisierungsmittelbau sections, with a particular focus placed on the production of industrial robotics. These goals were all to be achieved “in the enterprise and without supplies from the territory in order to gain employees for tasks outside of the enterprise … with significant rationalization and reconstruction projects”. A 3 per cent release of labour each year was set as the target, and seventeen quantitative indicators (Kennziffern) were identified to guide the performance of enterprises.66 The Council noted the importance of there being a standardised message for the campaign that would be actively and consistently voiced across the leaderships of the party, state and union. The national campaign to promote the Schwedt Initiative hatched in the second half of 1981 and unleashed in 1982 was to persevere across the 1980s and remain a part of the GDR’s economic policy environment right up until the dying days of SED rule. Along the way, the campaign evolved, shifting its focus and intensity. Figure 5.3 provides an overview of one dimension of that evolution. It tracks the reporting of the Schwedt Initiative and its pre-eminent catchphrase, weniger produzieren mehr, in the party’s national newspaper, Neues Deutschland. Given the strategic importance of the Schwedt Initiative in the SED’s intensification drive, major events, achievements, speeches and activities related to it

Fig. 5.3 Coverage of the Schwedt Initiative in Neues Deutschland, 1978–1990 (Neues Deutschland archive accessible at https://www.nd-archiv.de/)

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were typically picked up and run by the newspaper. As such, its reporting sheds light on the course and timing of the campaign. Two randomly selected examples will suffice to illustrate the practice. In its 29 January 1981 edition, Neues Deutschland published Marina Pehle’s article: “The Initiative from Schwedt is now also in practice with us”, outlining how the initiative had taken root at VEB Käsewerk Seelow. Similarly, on 16 April 1981, Jochen Hertwig, the First Secretary of Frankfurt (Oder) and member of the central committee’s speech on the diffusion of the initiative, “The Schwedt initiative has met with a great response”, was allocated an entire column.67 For each year between 1978 and 1990, Fig. 5.3 provides snapshots of two things: the total number of articles, in which the initiative is mentioned, and the total number of times it appeared in the title of the article. Both series move in parallel. Interest in the Schwedt Initiative steadily developed from its origins at PCK in 1978, peaked in 1982 with the rolling out of the first nationwide campaign, but fell off rapidly to much lower levels between 1983 and 1985. During this period, the campaign returned to a level of reporting not dissimilar to that experienced in 1979, when the initiative was still in its infancy and largely contained to the chemical industry and Bezirk Frankfurt (Oder). Only 7.7 per cent of articles at this time explicitly mentioned the initiative in the title of the article: down from 13.3 per cent in the period 1979 to 1982. Figure 5.3 reveals a second wave of the campaign beginning in 1986. Its intensity of reporting is sustained in 1987 and 1988 (the share of articles in these three years which bore the initiative’s name in their title rose to 11.7 per cent), but tapers off in the turbulent year of 1989. Nonetheless, even in that year, interest still remained at levels above that experienced in the thin years of 1983–1985. With the fall of the SED regime in 1990, the initiative finally disappeared from the pages of Neues Deutschland.

5.4 Phase der ersten Zugriffs68 : The Campaign Begins (1978–1982) In its early years, the focus of the Schwedt Initiative campaign fell tightly on the attempt to get enterprises to free up labour that was, or could with reasonable adjustments suggested by WAO staff be made, surplus to their needs. In this vein, a publication put out to promote the onset of the national campaign in 1981 succinctly summarised the Schwedt Initiative

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as a “movement to release workers for other tasks”.69 For many, this was precisely how the initiative was understood. Erich Honecker at the Tenth Party Congress, while acknowledging the breadth of the rationalisation policy that the party was pursuing, also asserted the primacy within it of unleashing the underutilised reserves of labour held captive by enterprises. He promised that in coming years: The contribution of socialist rationalisation in using up these reserves, above all in releasing workers for new tasks, will continue to increase … Our economic strategy for the 1980s aims to significantly increase labour productivity. It is about reaching a much higher level across the board. In crucial sectors, we will multiply productivity through rationalization. The saving of jobs must make it possible to release workers for other jobs.70

The expectation at this time was that these releases would be chiefly accomplished by the enterprises themselves carrying out and implementing the recommendations of vigorous WAO studies. As explained earlier in the chapter, these studies were intended both to identify the jobs that were no longer needed and to advise on how the current organisation of work, production processes and administration might be restructured and placed on a leaner, more scientific, footing. While the state, party and unions were there to offer support in the form of “political-ideological clarification”, the onus was very much placed on each enterprise—unless, of course, it was one of the hand-picked model enterprises (Beispielbetrieb)—to kick the process off itself internally.71 The starting point for most enterprises was the development of a rationalisation strategy. The plans produced by VEB Chemie- und Tankanlagenbau “Ottomar Geschke” Fürstenwalde were fairly typical.72 Based on the WAO studies it had previously undertaken, the enterprise committed to release “in the sense of the Schwedt Initiative” 283 workers in the period between 1979 and 1983 as well as to increase its utilisation of a multiple shift system, its Rationalisierungsmittelbau and all relevant existing technologies. However, above all, it placed maximum emphasis on finding internal means to introduce labour-saving technology, hoping to achieve this primarily by increasing the output of its Rationalisierungsmittelbau by no less than 160 per cent between 1978 and 1983. It was expected that this vamping up of in-house technological tinkering would create the opportunities to save labour and raise labour productivity.

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The 283 released workers were targeted to come from departments across the entire enterprise: 180 from production, 30 from research and development, 20 from the Rationalisierungsmittelbau, 10 from construction, 32 from the production preparation and maintenance, 6 from management and administration and 5 from the WAO unit. The savings would be realised by focusing the enterprise’s efforts on inter alia the centralisation of tasks, such as procurement, inter-enterprise cooperation, legal and transportation, previously undertaken independently by different departments; the reduction of management levels; the simplification of work processes and avoidance of duplications; the better use of modern office technology, especially in the preparatory stage of production; the development of a more refined standardisation of workloads and the introduction of computing to management, production preparation, warehousing and production control and inspection. Technologically, a rationalisation of the manufacture of petroleum gas drying systems, modular container construction and add-on parts was foreshadowed, as was the fuller mechanisation of its assembly, welding and blasting processes. In return for these changes in how they worked, the enterprise promised to use up to 50 per cent of saved wage funds to provide material rewards to the remaining workforce—on the proviso that, even with the reduced number of workers, the enterprise’s planned labour productivity and performance targets would still be achieved or surpassed. To galvanise further interest among the workforce in meeting the release targets that had been set, the enterprise planned to adapt the trusted and familiar technique of socialist competition. Collectives and departments across the enterprise would be called on to compete with each other for the honour of becoming the collective or department of “maximum effectiveness”. In these regards, the enterprise was far from atypical. Indeed, socialist competition was regarded at all levels of the party-state as an integral, indispensable tool in the successful rollout of the campaign. As a device that focused the minds of workers, managers and officials on what were at that point of time the party’s truly important priorities—and rewarded them for having and acting on that awareness— socialist competition, when carried out correctly, could convey valuable information in information-starved Soviet-style command economies. Those who drove the campaign earnestly believed that competitions were vital because they raised a consciousness of the meaning and importance of the initiative that would not only encourage its uptake, but spur

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workers and managers on to implement the findings of WAO studies with greater commitment.73 It was stressed that the integration of tasks related to the release of workers into competitions must be done in a clear, structured and purposeful fashion.74 The collectives above all else should be oriented towards saving jobs, guaranteeing that reconfigured work arrangements operated according to the principle of “new technology - new standards”, and achieving the smooth takeover of additional and different tasks through better work organisation and increased work discipline. Thus, at VEB Chemiekombinat Bitterfeld, members of the “Friendship of the Peoples” Collective each committed to a competition whereby they would use technology and scientific organisation to save fifty hours of working time. In doing so, they would free up labour for extended repair services.75 Socialist competitions were also utilised to promote the upskilling of workers, necessary if jobs were to be merged and expanded, and to elicit the creative input of workers.76 The practice of calling for “Notes on the Plan” (Notizen zum Plan) was for the latter considered imperative. As one how-to manual on the Schwedt Initiative opined, such “Notes” had been proven: To be suitable means, to reveal reserves and possibilities for saving jobs. For this reason, they have a permanent place in the Schwedt Initiative. Today, for example, more than 100 working collectives in the production and technology areas at PCK Schwedt work with ‘Notes on the Plan’ for the development of target projects and action plans and their implementation. Together with the work collectives, the focal points for the writing of plan notes for the Schwedt Initiative should be oriented toward notes on the work organization process and notes on the technological process.77

The gist of the “Notes on the Plan” scheme was to provide workers with opportunities to advise and make creative suggestions on any problem or difficulty that arose in the course of their implementation of rationalisation measures. The flow of input this engendered not only enhanced the effectiveness of changes already in train, but generated valuable ideas for the development of new WAO analyses and target projects. The suggestions made could form the basis for new Initiative shifts or socialist competitions. But, as the manual warned, “Notes on the Plan” were only effective:

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If both the collective member and the manager take the matter seriously and really make it an instrument of creative discussion. A formal, loveless way of working does nothing. The goal mustn’t be to just write it down, but to really fight for genuine solutions.78

Workers, of course, did not always greet the Schwedt Initiative with the hoped-for level of enthusiasm. Many were suspicious of the motivation driving it, fearing it to be an indirect way of raising norms and workloads. Some were concerned that its introduction might see the erosion of existing working conditions and customs. Breaks and leave entitlements might be whittled away. Others were resistant to the idea of breaking up collectives—and workplace friendships—that had a long history, could not work different hours or simply feared that the whole process of rationalisation might be used a pretext for grudges and enmities to be played out.79 Nor were feelings of hesitancy just restricted to workers. Managers and unionists contended that the context they operated in differed to that at PCK . A host of explanations were presented. The Schwedt Initiative could not be applied to their industry. Their plant had already been modernised, so no special rationalisation initiative was required. There was neither overstaffing nor plans for expansion at their enterprise. They had already rationalised their workforce and were meeting all planned targets for labour savings. The initiative concerned technical matters that did not impinge on the overall management of the enterprise and, hence, were best delegated to WAO staff to handle.80 Given the uncertainty on what to do, many opted to wait and see.81 When it became apparent to enterprises that action was required, some initially responded cynically, allegedly taking the opportunity to offload troublemakers or attempt to poach skilled workers from neighbouring enterprises.82 Certainly, most enterprises acted to retain the labour they had “saved” and rarely released it for the benefit of other enterprises or organisations. Thus, across the entire chemical industry in 1982, only 5 per cent of labour that had been saved was deployed outside the enterprise, from which it had been released. Of those who stayed in the same enterprise, a third had their tasks redefined, just over a quarter were engaged in the implementation of new technologies, 17 per cent transferred to newly constructed plant, 17 per cent placed on a new multishift system and 11 per cent moved into the Rationalisierungsmittelbau section.83

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Rivalries between enterprises could also exert an influence, especially if the idea that was being promoted challenged perceived pecking orders. It was a problem that was amplified by the Marxist-Leninist convention of naming campaigns after the model enterprises or locations where the campaign had its roots and which had often along the way to their success received extraordinary party privileges and favours. The public acclaim and promotion afforded to the enterprise directors and party secretaries of these model entities received only acted to intensify the already existing jealously between ambitious, highly competitive apparatchiks. At times, the antipathy this engendered could manifest itself in attempts, typically veiled, to ignore or diminish their rivals’ initiatives. This tendency was no less apparent with the Schwedt Initiative, the propaganda and literature for which, after all, highlighted strongly the contributions of Werner Frohn of PCK and Jochen Hertwig, Party Secretary of Bezirk Frankfurt (Oder). On 30 June 1982, a major exchange of experiences event focusing on the Schwedt Initiative sponsored by the State Council of the GDR and the Federal Board of the FDGB was held at the Clubhouse of the Working Peoples at VEB Leuna-Werke “Walter Ulbricht ”. Two hundred and sixty people attended, including many of the pioneers of the initiative as well as leadership from a range of combines, ministries and different levels of party, state and the union. The opening speeches predictably lauded the Schwedt Initiative, emphasising its historical importance and potential. Yet the initiative’s attribution to Schwedt and PCK was not universally echoed. Peter Bäumler, Director of Cadre and Training at VEB Spanplattenwerk Beeskow, while fully approving of the goals of the initiative, was at pains to remind those in attendance that, despite its name, its origins lay in Novopolotsk, not Schwedt. PCK’s contribution had chiefly been to render a “creative application” of existing Soviet methods.84 Not long afterwards, Dr. Dieter Krug, Deputy Director General of VEB Leuna-Werke “Walter Ulbricht ”, the host institution, expounded further on the theme. Some background on the chemical industry is in order here. PCK Schwedt, which had only been founded in April 1964, together with the long-standing VEB LeunaWerke “Walter Ulbricht ” were the two most important producers of fuels and raw materials for the production of synthetic fibres in the GDR. The enterprises were rivals and naturally competed with each other for attention. In this context, Krug explained how VEB Leuna-Werke “Walter Ulbricht ” had itself been using the Shchekino Method since 1971 and the Novopolotsk Method since 1978. He reported that since beginning

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experiments in 1971, the company had saved 6341 workers (VbE), more than half (3227 VbE) of which had been released before the advent of the Schwedt Initiative at PCK in 1978. The enterprise’s early experience with Soviet methods, he contended, had “enabled a smooth transition to the Schwedt Initiative”. The clear undertone of these remarks was that the insights that the Schwedt experience purported to teach was already well-known to it and had been independently acted on for a long time.85 While there had clearly been high-profile successes with the Schwedt Initiative in the early 1980s, differential performance both between and within combines prevented the attainment of the desired overall results. For example, in 1982 within just the chemical industry, the combines VEB Fotochemisches Kombinat , VEB Leuna-Werke “Walter Ulbricht ” and VEB Synthesewerk Schwarzheide had only realised approximately one third of their total release as physical releases of labour (viz. in person, not on paper), while others such as VEB Petrochemisches Kombinat Schwedt (66.7 per cent), VEB Chemiefaserkombinat Schwarza (66.6 per cent) or VEB Reifenkombinat Fürstenwalde (70.4 per cent) had achieved significantly better results. In terms of total releases, widespread differences were also observed within combines. To take just a few examples, VEB Chemiefaserkombinat Schwarza recorded a 3.0 per cent saving of its workers at its Premnitz enterprise, but only 1.5 per cent at its plant in Pirna, whereas VEB Chemische Werke Buna experienced comparable disparities between its Greiz-Dölau (2.8 per cent) and Ellenburg (0.9 per cent) locations.86 Reports at the time expressed dissatisfaction for what was seen as the unjustified degree of the differentiation experienced. While objective technological and production differences between plants undoubtedly accounted for some variation, the consensus among contemporary internal analysts was that the source of the problem lay in the fact that Director Generals, Directors and local party secretaries had not assumed the required responsibility for the introduction of the initiative.87 Their reluctance, in turn, was attributed to failures of the campaign to convey the correct message. Complaints were made that no uniform position had yet been articulated across all branches of the economy and that clarity about the importance of the Schwedt Initiative was missing, as, too, was understanding of its relevance and orientation outside the industrial sector.88 As a result, there was a general lack of awareness of the initiative and knowledge of what was required was often low or nonexistent. Some managers, especially in small to medium-sized enterprises,

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apparently could not even distinguish between the Schwedt Initiative and previous campaigns and competitions.89 Two consequences of such widespread uncertainties about the nature of the Schwedt Initiative were the inability of many to identify with the initiative and an unwillingness for some in authority to take responsibility for its realisation.90 This detachment from the initiative drew the ire of the chief editor of the Tribüne, the FDGB’s national paper, in a speech made in October 1980: He who mouths the new demands, which have been placed on socialist rationalization, who only uses the necessary economic push for rationalization as a catchphrase, is not up to the task of our time … What use are well-formulated stipulations in competition resolutions to apply the Schwedt Initiative if nothing happens afterwards? If we were to assess the state of application of the Schwedt Initiative based on whether commitments were made, the picture would certainly be far too favourable … Wherever the nature of the Schwedt Initiative is understood, there is a targeted generalization of these experiences. However, where this is not the case, there are no clear positions on its creative application … Adopting a waiting position is definitely out of place here; a creative contribution is required.91

Some indication of the situation faced in different parts of the country is found in the 1981 Worker and Peasant Inspection (Arbeiter-und-Bauern Inspektion or ABI ) investigation of the progress of the Schwedt Initiative in six enterprises in the city of Cottbus. As its final report concluded, across these enterprises: The differentiation in the levels of work for the releasing of labour and saving of jobs is still too large. While a good job in the area of broadening the application of the Schwedt Initiative is noted in the enterprises of SAC Cottbus and Backenwarenkombinat , in the remaining enterprises there is still significant arrears in the application of available good experience relating to the Schwedt Initiative in such enterprises, such as RAW Cottbus and TKB. The causes for this is that state leadership has not yet grasped the deeper sense and content of the Schwedt Initiative, and for the solution to the labour problem place hope on help from outside and from the region. A further reason is that the targets allocated in the joint planning agreement are not taken seriously and some were described to inspectors as illusory.92

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The most troubling state of affairs the investigation uncovered occurred in the enterprises of VEB Tuchfabrik Cottbus , VEB Polstermöbelindustrie Cottbus and VEB Kraftfahrzeug-Instandsetzungbetrieb Cottbus . During an on-site inspection at VEB Tuchfabrik Cottbus , the investigators determined that the enterprise was still working according to an implementation plan from January 1980, which had long been superseded and which allocated tasks only to the WAO unit. The city council’s set targets for VEB Tuchfabrik Cottbus , which were to save twenty jobs and thirteen workers and to redesign 130 jobs, were unknown to the enterprise director. As a result, they did not figure in any of the enterprise’s planning. As for complex WAO studies, although there were eleven WAO collectives in the enterprise, at the time of the inspection none of these had received instructions or work plans. Knowledge of the Schwedt Initiative in the work collectives was reported to have been grossly insufficient, such that “the essence and content of this so important task is not correctly recognised”. These shortcomings were reflected in the enterprise’s utilisation of socialist competitions, which had not been meaningfully adapted to desired Schwedt Initiative outcomes, but operated according to standard formulations. The same unsatisfactory situation was also observed in the VEB Polstermöbelindustrie Cottbus . As for VEB Kraftfahrzeug-Instandsetzungbetrieb Cottbus , its director likewise claimed not to know the set targets of the City Council, which for his enterprise were to save 5 workers and 4 jobs, and to redesign 16 jobs. Upon hearing them, the director told the inspectors that such targets were not realisable, since the enterprise planned to continue to expand its plant in coming years and needed additional labour, not less. As the ABI’s report concluded, “this makes it clear that he has not understood the essence of the Schwedt Initiative”. The director also fervently denied that there were possibilities to save workers in the areas of administration and support personnel.93

5.5 Eine Rationalisierung in gro¨ ßeren Dimensionen94 : The Second Phase (1983–1985) In June 1983, the Economic Commission took stock of the progress made to date by the Schwedt Initiative. Discussion centred on the cases of the chemical, coal, energy, ore mining, metallurgical and potash industries. While successes had undoubtedly been experienced in each of these

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industries, the patchiness and thinness of the Schwedt Initiative’s penetration elicited comment. 27 per cent of combines operating in the coal and energy industry alone in 1982 had not fulfilled their planned releases of labour. The sense of the meeting was that the initiative needed to be revitalised and endowed with greater heft. As Günter Mittag noted in his summation of the debate: In general, it is necessary to further improve the complex analysis of the processes in order to find basic solutions for increasing the effectiveness of work. The present analysis on the use of society’s workforce clearly shows that these are fundamental questions and that the solutions have to be worked out with a high level of responsibility. One should not overlook the fact that in certain enterprises some workers are underemployed and on the other hand in others overtime is necessary. It is a matter of leading the process of deploying society’s workforce in a more advanced manner, improving planning, and striving for fundamental solutions.95

Wolfgang Mitzinger, the Minister for Coal and Energy expanded further on the perceived situation, laying some of the blame for the problems encountered on deficiencies in the utilisation of science and technology: Measured against the necessary development of labour productivity and effectiveness, the results do not yet meet requirements. The use of science and technology, the elaboration and consistent implementation of scientific-technical solutions for the comprehensive rationalization of entire production sites, working time, and the release of workers in new dimensions are not sufficient … The differentiation in the level of saving labour and in the fulfilment of releasing workers between combines and between the combine enterprises … is too large … Starting from the results of this analysis, the unjustified differentiation between combines must be overcome.96

While it is right to regard this internal debate within the SED in 1983 as a point of inflection for the Schwedt Initiative, it is important to understand that the changes that occurred at this time did not constitute new approaches or ideas about how it could be implemented, but rather alterations in the emphasis and intensity of effort that was allocated to already existing priorities. As Siegfried Kipp put it, this phase represented a “new qualitative step … born from previous knowledge”.97 It called for a fuller, more complete form of rationalisation that utilised all available means to

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bring about a comprehensive intensification of existing capacity.98 Once again, the onus was placed on the enterprise. Apart from a new ordinance passed by the Council of Ministers, which compelled enterprises to operate social funds equivalent to 70 per cent of their wage funds, thereby raising the cost of holding excess labour, combines and enterprises were for all intent and purposes left to themselves to come to terms with the requested transformations.99 Whereas organisational change had hitherto been at the forefront of the Schwedt Initiative, under the new imperatives, enterprises were now encouraged to look to labour-saving technology as its main source of rationalisation. The proportion of new investment spent on technology was expected to rise. Industrial robotics, electronic data processing and control of machinery and personal computers were to be incorporated. A widespread adoption of modern office equipment should ensue.100 None of this was new, of course. The greater use of devices, such as the desk calculator, electronic typewriters and posting machines had, for example, been a feature of the first phase of the initiative. Such equipment had indubitably saved labour and enabled the automation of some isolated data processing functions, but it had not fundamentally transformed the organisation or management of enterprises. Moreover, the potential of inter-departmental, not to mention inter-combine, collaboration had remained largely fallow. In this new phase of the initiative, however, enterprises were now being encouraged to take the proverbial next step and begin to integrate the automation of processing and economic tasks across its departments and ideally, where feasible, across the enterprises of its combine. As such a development would inevitably necessitate major organisational and managerial transformations, in addition to a retraining of parts of the workforce and a reconceptualisation of its capture and use of data, at least an enterprise-, but preferably a combine-wide, strategy was seen as a sine qua non. The party believed that by introducing flexible systems of automation, it could solve its productivity problems. Yet, other aspects of its new understanding of the Schwedt Initiative and its purpose appeared to work against this relentless drive for technological efficiency. Industrial enterprises, irrespective of what they produced, were now instructed as part of their Schwedt Initiative measures to use portions of their freed up labour both to manufacture consumer good products, for which they had no expertise, and to extend their Rationalisierungsmittelbau sections.101 The former requirement derived from a desire to satiate pent up local

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consumer demand and expectations; the latter from chronic capital shortages that left planners with no other option but to turn to the enterprises themselves to generate in-house a significant proportion of the technological innovations needed to make their production processes more efficient. As both stipulations potentially transferred workers from low to even lower efficiency activities, their impact often would have been to have lowered productivity growth below what it otherwise would have been. VEB Schwermaschinenbau-Kombinat “Ernst Thälmann” Magdeburg ’s Schwedt Initiative plan for the period 1983 to 1985 encapsulated the new priorities.102 Over those three years it aimed to reduce its workforce by 684 workers, a decline of some 11.4 per cent. While all areas of the enterprise would have to find savings, the largest cuts—19 per cent—would be borne by administrative and managerial departments. The corresponding declines in production and other ancillary personnel would be of the magnitude of 10.5 and 6.5 per cent, respectively. Two mechanisms were identified to achieve these targets. The primary pathway to these savings was the introduction of state-of-art technology. Particular emphasis in this regard would be placed on the deployment of computer technology that automated the control of machinery, microelectronics and robotic technology. Introduced in conjunction with a systematic and targeted application of the WAO, such changes would, it claimed, lower labour needs and enhance the performance across the plant. For example, within its management and administrative departments, it calculated that 24.1 per cent of the released labour would come from the rationalisation of data capturing through the deployment of modern organisational forms and technologies, 56.8 per cent from the introduction of work organisational measures and structural realignments, 9.7 per cent through the deployment of the electronic office system METOSTAT200 and the computer-aided design-user system AS 350 DES/KON, 2.2 per cent through the reduction of management’s driver pool and 7.2 per cent through other small-scale rationalisations. The enterprise’s other identified source of savings would be the more tightly focused use of socialist competitions related to the rationalisation of work operations and processes. These would target the application of work studies and process analyses that encompassed and used available reserves. It was believed that these competitions, together with an expanded output from its Rationalisierungsmittelbau section, would ensure that the planned levels of innovation would be met and systematically integrated into operations.

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A further feature of this second phase of the initiative, in keeping with the party’s desire for a more complete rationalisation, was the renewed drive to push its implementation more resolutely beyond its natural home in the chemical and energy industries. Accordingly, all sectors, including the service, increasingly came under pressure to adopt plans to introduce the Schwedt Initiative. Invariably, these plans in the first instance took the form of the industry establishing model offices or branches, which were tasked with the job of experimenting with various rationalisation measures and which, if successful, would become the template for their broader dissemination across the rest of the industry. Deutsche Post , thus, began with 4 model offices—its main post office in Leipzig, a post and telecommunication office in Dessau, its main mail distribution centre in Dresden, and a telecommunication construction office in Erfurt—where the focus was placed on deepening the degree of mechanisation and automation of business processes.103 German Railway (Deutsche Reichsbahn), for its part, chose to concentrate most of its rationalisation efforts initially on the general cargo handling facility at its Berlin-Ostgüterbahnhof station. There, the goal was to raise overall performance and increase freight traffic by 25 per cent and loaded wagon traffic by around 10 per cent without incurring additional labour expenditure. It aimed to do this by investing in machinery and industrial robotics that would accelerate the loading and turnaround of wagons.104 Similarly, in wholesale trading, one of its five model enterprises, VEB Kombinat Groβhandel Waren tägliche Bedarf (Stammbetrieb), was able to save 25 jobs, thanks to a simplification of its management and administrative organisation, expansion in the use of standing orders, better utilisation of its workshop capabilities and introduction of new technology that accelerated the handling and reduced the losses of goods.105 Despite the efforts to broaden the scope of the Schwedt Initiative between 1983 and 1985, the campaign appears to have waned in these years. There was palpably less enthusiasm being expressed and the processes associated with Schwedt Initiative, now much less novel, had become more routinised. Correspondingly, while one encounters plenty of standardised reporting in the archives from this time, documents containing general discussions or overarching perspectives on the initiative are far rarer, a trend which seems to parallel its declining coverage in the national press, which was observed in Fig. 5.3. What accounted for this languidness? Two factors appeared to have played a role.

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First, over time the messaging about what the Schwedt Initiative was had become more, not less, opaque. The comparatively simple message of the first phase—fewer produce more—that equated the reduction of labour used in your enterprise with your own improved wage was relatively straightforward to convey, easy to intuit and potentially appealing. By comparison, the fuller, more extensive form of rationalisation posited during the second phase with its much heavier technical and bureaucratic focus projected a more diffuse message that proved harder to encapsulate. The point is neatly illustrated by the fact that no notable or pervasive catchphrases emerged from this phase. Second, the campaign lost impetus simply because results on the ground remained disappointing. The days of seemingly remarkable and compelling successes of first movers like PCK were gone. Diminishing returns and fatigue within the campaign had set in. In short, relative to the opening years of the decade, in this second phase there was less to report and less material that activists could use to excite and invigorate. The failure to improve signalling during the second phase posed challenges for the initiative. As a report from VEB Reifenwerk Neubrandenburg from July 1985 reveals, familiar problems continued to plague attempts at rationalisation. In practice, the call for the more rapid incorporation of better technology was easier said than done. Many enterprises, given their limited technical capabilities and the resources at their disposal, found it impossible to innovate and master new technology at the required rate. Moreover, persistent estrangement from, and lack of identification with, the initiative meant that it often had no local champions: When evaluating the causes of poor compliance with the Schwedt conceptual plan, it must be determined that, taking all objective factors into account, the main cause is a lack of responsibility. Up until now, no area has considered how additional measures and initiatives can be used to achieve the release of labour necessary for the workforce balance of the enterprise.106

The situation was not too different in the food industry. Although by the end of 1984, 59 per cent of its enterprises had allegedly embraced the Schwedt Initiative, the results they had obtained from doing so were

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highly variable. Accounting for the disappointing performance to date, Dieter Koschella, the Deputy Minister for Bezirk-Managed and Foodstuffs Industries, pointed not only to the persistence of misunderstandings about the initiative and its importance to the national economy, but, interestingly, the failure to tackle such profound issues of rationalisation from a broader, more regional perspective: The reasons for the sometimes inadequate and differentiated results lie, among other things, in the still insufficient recognition of the objective necessity for the effective, mass implementation of the Schwedt Initiative by state management. The opinion that rationalization must be inextricably linked to the purchase of new machines and systems is still too widespread. Furthermore, it has not been possible to include in complex territorial rationalizations a management plan for the application and implementation of the Schwedt Initiative for all enterprises in the food industry.107

The Deputy Minister’s comments reflected a building awareness in policy circles that relying on enterprises to plan the implementation of rationalisation measures like the Schwedt Initiative in isolation from each other need not deliver the best results.

5.6 Territoriale Rationalisierung 108 : ¨ und Schlusseltechnologien The Final Years (1986–1990) As the 1980s moved into its second half, serious concerns about the progress of the Schwedt Initiative lingered at all levels of the party-state. Its penetration of workplaces continued to be problematical and subject to high variability. Even in areas where it had been broadly implemented, the outcomes produced had been mixed and on the whole unsatisfactory. It was recognised that a new approach was needed. When it eventually did appear, it did so gradually as a coalescence of two distinct independently arising ideas. The first idea—that a concerted effort to effect the more widespread adoption of key technologies (Schlüsseltechnologien) held the solutions to the economic problems faced—emerged from above and represented very much the logical extension of the technological primacy argument established during the second phase. The key technologies themselves—industrial robotics, microelectronics, CAD/CAM and modern computing systems—had not changed. This time, however,

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the opportunities they afforded would be more relentlessly exploited. The WAO remained central to the process, but the expected share of labour saved directly attributable to the wider usage of these key technologies was to be pushed up to at least 75 per cent. The hope was that by the 1990s, fully automated, electronically controlled flexible production lines, based on integrated automatic data processing, would become commonplace across the GDR. As a result, large quantities of labour would be freed up and reallocated to more productive uses.109 By contrast, the second idea—to tackle the task of rationalisation at the regional rather than enterprise level—emerged from below. As even a cursory glance of the record would reveal, an important feature of the stories of the most successful enterprises with respect to the Schwedt Initiative was the close involvement of the local party and government officials in the implementation process. PCK’s collaboration with Kreis Schwedt and Bezirk Frankfurt (Oder) have been well documented and were familiar to contemporaries.110 The benefits of such collaborations were numerous. Apart from providing enterprises access to larger pools of resources, experiences and knowledge, these regional actions worked to reduce the misunderstandings, wrongheaded ideas and plain deceptions about the implementation of the Schwedt Initiative that inevitably arose when enterprises were left to their own devices. As Wolfgang Bayreuther, the State Secretary for Labour and Wages, remarked, such interventions could help ensure that “circuits are broken, which begin with unrealistic workforce plans and lead to undesired fluctuation”.111 In other words, when local officials stepped in to coordinate and oversee the initiative, there was a greater consistency of message and a stronger likelihood that plans would be followed. After all, the active engagement of the regional party and the establishment of Kreis- and Bezirk-level plans that were actually monitored sent a very clear signal to even the most recalcitrant enterprise director that the initiative was a party priority and prudence would require them to pay due attention. The model for “territorial rationalisation” (Territoriale Rationalisierung ), as it came to be called, was Kreis Staβfurt, a district whose main town, Staβfurt, lay approximately 15 kms northeast of Aschersleben and 30 kms to the south of Magdeburg. In 1984, it had a population of 72,415 and had an economic structure that spanned crop production, livestock production and industry. Its best-known enterprise was VEB Fernsehgerätewerk “Friedrich Engels” Staβfurt , which was the sole

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producer of colour TVs in the GDR. It produced over 60 per cent of its black and white TVs as well. From the early stages of the national campaign, the local party leadership began experimenting with the idea of transferring the management and work principles first elaborated at PCK to the entire Kreis. Its focus was to “bring society’s existing and necessary workforce and all related social tasks in the territory into line with one another in terms of quality and quality”.112 To that purpose, a Kreis implementation plan was developed, within which all enterprises and organisations would plan and coordinate their rationalisations. Within a few years, over ninety per cent of the Kreis workforce was operating off this plan and had directly engaged with Schwedt Initiative.113 The Kreis saw its approach as one of building a “socialist work community” around the challenge, the beating heart of which was the Kreis coordination council it formed to take the reins of the initiative. Chaired by the SED’s First Secretary for the Kreis, Peter Thiele, it included other relevant Kreis-level officials, representatives of state organisations, plant directors and enterprise-level party secretaries. Its chief tasks were to develop a Kreis-wide, Schwedt-inspired rationalisation plan, coordinate its implementation, and ensure a unity and consistency of analysis and decision-making across all of the Kreis ’ enterprises and cooperatives. Local government organs were empowered to facilitate the seamless transition of workers from one enterprise to another while remaining fully compliant with labour regulations.114 Strenuous efforts were also made to instil a Kreis-orientated mindset within enterprises and cooperatives. To that effect, a Kreis-level WAO collective was established to oversee and coordinate those already operating within individual organisations and to assist small- and mediumsized enterprises in particular with their rationalisation planning. Regular experience exchange events were organised where local enterprises, cooperatives and scientific institutions shared first-hand knowledge of relevant technologies, the scientific organisation of production and work, the maintenance of workplace health and safety and the introduction of productive wages and other material incentives. By sharing and comparing experiences it was felt that great benefits might be had at little cost. As the popular slogan of the time went: Comparing performance means increasing performance (Leistungen vergleichen heiβt Leistungen erhöhen).115

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Aware that a long-term rationalisation strategy largely based on technological change would require a plan for appropriate vocational training facilities, the council also undertook measures to coordinate and update adult education in the Kreis, so as to align it with the new needs. As a result, in 1982 and 1983 alone, 60 workers were trained in the field of microelectronics, 72 workers received basic welding training and 116 cooperative farmers and agricultural workers acquired basic instruction in the science of animal husbandry.116 The council also devoted considerable resources to increasing the awareness of enterprise directors of the party’s economic strategy and the personal responsibilities flowing to them from it, the most important of which being the effective and full use of their workforces. It saw this as a vital component of its strategy.117 Despite praising the “politicalideological” exertions already made, the Kreis ’s First Secretary in 1984 was still not satisfied: Nonetheless: the enforcement of the Schwedt Initiative is not yet completely clear in every enterprise. This manifests itself in the fact that the political-ideological attitude of some leaders is not yet fully geared to economic-strategic requirements … Consultations and control examinations, which have taken place in several enterprises, have revealed that management have often faced the processes without a conceptual understanding. There was a lack of long-term rationalization ideas with concrete measures to save jobs and to recruit workers for other or new tasks. Others calmed their ‘consciences’ with the mere existence of a conceptual understanding. In the meantime, there existed contradictory objectives for the creation of jobs for other tasks in the enterprises … In not a few cases, there was also a tendency to perceive it [the pursuit of various planning targets] more as numerical nonsense than a matter of demonstrating performance in connection with the recruitment of workers for other tasks. Practices according to which reduced production times have been converted into manpower releases or where under-fulfilment of the manpower plan without any reduction in jobs was declared as manpower released must be a thing of the past.118

Problems aside, the Kreis ’ strategy appeared to yield results. By 1983, the output of its Rationalisierungsmittelbau sections had grown by close on 57 per cent and 1679 workers had not only been released through the Schwedt Initiatives, but were actually employed now in new jobs

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in the Kreis, including 1002 workers in industrial enterprise.119 These released workers bought tangible economic benefits to the residents of the Kreis. 193 additional workers, for example, were found to strengthen the agriculture workforce, especially in animal production; 18 workers were added to several Kreis-directed construction enterprises, raising productivity and increasing local capacity in a range of activities, including roofing, façade making, the installation of toilets and drainage and the renovation of chimneys; 32 people working in retail were freed up from existing sales outlets and redeployed in new retail outlets, including an Exquisit up-market clothing store and a new delicatessen; and 6 workers released from within VEB Orbitaplast and VEB Grundfuttermittelwerk were used by the village of Westeregeln to set up its own bakery, thereby reducing the labour previously employed transporting bread to the village.120 News of the success spread rapidly and, now labelled as the “Staβfurt experience” (Staβfurter Erfahrungen), it became in the remaining years of the GDR the model to be emulated, for, as one early pundit touted, it was “the next stage of the Schwedt Initiative” that would “unleash a new quality of work”.121 By July 1983, territorial production and user communities for microelectronics and robotics led by experienced experts and incorporating various combines had already emerged in many leading industrial centres, including Berlin, Dresden, Karl-Marx-Stadt, Leipzig, Magdeburg, Halle, Erfurt, Gera and Suhl.122 On 28 June 1984, the Staβfurt experience was discussed by the State Council and formerly endorsed as living proof of “the great opportunities inherent in the Schwedt Initiative if it is applied uniformly and coordinated for all enterprises in the territory”.123 For many of the party’s economic experts, what had been uncovered in Staβfurt was potentially one of the missing keys to unlocking socialist prosperity. As a ministerial briefing from the Central Research Institute for Work explained: The Schwedt Initiative and the Staβfurt experience have demonstrated themselves to be the proven path of socialist rationalisation in our Republic. … ‘Schwedt’ and ‘Staβfurt’ in compact form express all important tasks of increasing the performance and effectiveness of the workforce. It is now a matter of using this experience on a mass scale. This is of great importance in the struggle for high labour productivity.124

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If the application of the Schwedt Initiative at the Kreis-level brought benefits, then might not even richer returns be had by extending its planning to Bezirke? It was a proposition that soon arose and which Bezirk Halle in 1986 and 1987 seized upon and sought to test. In shape and form, its experiment was essentially the Staβfurt experience writ large. By building tight cooperation between a Bezirk-wide coordination council and the regions’ centrally managed combines, it aimed at generalising best practice and optimising the efficient use of the Bezirk’s workforce. This outcome would be achieved by making explicit performance comparisons between effective and ineffective measures and by leading a Bezirk-wide rationalisation according to a uniform plan, to which all participating enterprises were bound. A distinctive feature of Bezirk Halle’s plan was the collaboration of combines with Kreis councils, in whose area of responsibility enterprises were concentrated. For example, in the Mansfeld Country (Mansfelder Land) coordination council, VEB Mansfeld Kombinat “Wilhelm Pieck” and the Kreise of Hettstedt, Eisleben and Sangerhausen worked together and across Kreis and enterprise boundaries to promote intensification in coal and steel production and in the extraction and processing of the region’s copper, silver and other non-ferrous metal deposits. The ‘Territorial Rationalisation’ working group of the Mansfelder Land coordination council in particular contributed to creating or imparting scientific preparatory work and ready-to-use knowledge in the setting up and use of CAD/CAM workstations. The increasing breadth of participation in these “user communities of computer-aided work”, which expanded from 24 to 57 companies over the course of the first six months of the experiment, illustrated the utility of the council’s gathering together of regional expertise and experience to enterprises falling under its remit.125 By July 1987, the State Council had become sufficiently satisfied with the progress of the Halle experiment to recommend that its findings be evaluated and implemented with appropriate local adaptions by all Bezirke.126 Most complied quickly. Bezirk Frankfurt (Oder), for example, had begun planning its Bezirk-wide plan for the Schwedt Initiative by the first half of 1988.127 When finally instituted in March 1989, it set itself a target of a 2.8 per cent redeployment of the workforce, a target which it believed could be realised through a territorial rationalisation plan that focused overwhelmingly on the acceleration of technological change. To hasten that process and ensure the efficacious uptake of key technologies, the Bezirk fostered closer collaborations both among its combines,

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and between those combines and some of the GDR’s leading scientific and technical research institutions, all of which lay beyond the Bezirk’s own boundaries. Bezirk plans were beginning to take on nationwide dimensions.128 VEB Reifenkombinat Fürstenwalde Stammbetrieb’s plan for the extension of the Schwedt initiative for the period through 1995 provides an interesting glimpse on late-GDR thinking about the Schwedt Initiative.129 From that document, it becomes immediately clear that releasing labour through the more astute organisation of work processes was no longer a central theme of the strategy. Indeed, the section of the plan devoted to the release and redeploying of workers had fallen from its once dominant position to a mere handful of short paragraphs. In its place, there was a new focus on the adoption of the key technologies of CAD/CAM and modern computing systems. In conjunction with other rationalisation measures, the plan foresaw data processing systems, personal computers, local computer networks and a combine-wide automated data network in place by 1991. Automation and control systems, computer-aided information and control systems based on microelectronics were also to be introduced. It was understood that such an integration of key technologies into the areas of production preparation and implementation would evidently necessitate an analogous development in management, planning and accounting processes. To this end, the application of electronic data processing, which had hitherto been oriented towards batch processing in computer centres, would be transformed by the decentralised use of workstations, office and personal computers. These disperse workstations would be connected to each other via a central computing function, permitting the more rapid and consistent spread of informed managerial decisions and opening up the potential for the remote transmission of machine-readable data across local datacarrying networks. In sum, the ultimate vision of the plan was to utilise computer technology to transform the entire production process from preliminary research on product and technology development, through investment preparation and realisation, up to the execution of production and the sale of product. The management, planning and accounting of this process would likewise be redesigned and fully integrated via computing systems with the production side of the operation. External political events, however, were to ensure that the enterprise’s ability to realise this ambitious transformation would never be put to the test.

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For this final iteration of the Schwedt Initiative, campaigning, after falling into abeyance for a number of years, was resuscitated. There were, after all, new concepts and buzzwords—territorial rationalisations, key technologies and the Staβfurt experience—which could be used to enliven the campaign and enabled an updated, seemingly contemporary version of the Schwedt Initiative to be projected. While the level of coverage and some of the enthusiasm experienced during the first wave of the initiative returned, the campaign, however, had not absorbed the lessons of the second phase. Rather than simplifying its message, the official position on the Schwedt Initiative had in fact become progressively more complicated and, hence, even harder for the uninitiated or uncommitted to ingest. For, far from being a new, contemporised version, the term “Schwedt Initiative” by the late 1980s had come to be little more than a symbolic reference to the inspiration of PCK’s fabled past than a guide to what lay ahead. It had become a convenient shorthand for all of the party’s efforts at intensification. This transition from precision to imprecision in its understanding is apparent, too, in how the Schwedt Initiative was defined over time. At its outset, it was comprehended as a very specific method to encourage enterprises to relinquish their holdings of excess labour. By contrast, in its final phase, the term had taken on a more general, all-encompassing meaning: The goal of the Schwedt Initiative is to make the entire sphere of activity of living work more productive, to thoroughly improve the expenditure and yield in the relationship, and on this basis to create conditions for increased production with improved working and living conditions.130

The Cottbus Stadt Kreis Council phrased it somewhat more prosaically in the dying months of SED rule: the Schwedt Initiative was “a rationalisation strategy, the most important method for the rational use of society’s labour reserves and inseparable from the implementation of key technologies”.131 Elsewhere, some enterprise’s conceptual plans for the upcoming period 1990–1995, such as that drafted by VEB Reifenkombinat Fürstenwalde Stammbetrieb in May 1989, did not even bother to mention the Schwedt Initiative at all, except on its title page, preferring in its place to coin throughout the document a new term: Ratio-Strategie “Schwedt” (Ratio[nationalisation]-Strategy “Schwedt”).132 Such developments indicated, perhaps, a belated realisation that the original term—and the

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campaign based around it—had lost its meaningfulness to even enterprises at the cutting edge of the intensification drive. As a consequence, familiar misunderstandings and problems of noncompliance persisted. In June 1987, an ABI analysis of the state of the Schwedt Initiative in a selection of enterprises in Kreis Spremberg uncovered high levels of differentiation in performance. Following its investigation, the inspectors concluded that “the decisions of the Kreis leadership to enforce the Schwedt Initiative have not yet been taken into account in all enterprises”. They noted that “in order to fulfil the decision of the SED Kreis leadership, great efforts are required in all enterprises as well as taunt management and control activities”. Above all, they identified the situation at VEB Textilwerk Spremberg as especially troubling, both in terms of its poor orientation and lack of compliance. In its view, the enterprise was blatantly “not living up to the decisions of the Kreis management to enforce the Schwedt Initiative”. The enterprise’s attitude to its failure to meet Kreis targets for the release of labour met with particular condemnation from the inspectors. This failing was attributed by the enterprise’s Economic Director to the fact that the Kreis ’ directives were not only mistaken, but, more importantly, conflicted with those of the parent combine, which in his view took precedence. As the investigation report commented about this exchange, this “attitude shows that the decision of the Kreis leadership in this area is ignored”. The ABI also found an overstaffing of machinery, which had not been corrected, despite having been previously identified. While the investigation found evidence of better, if far from perfect, situations at the other enterprises reviewed, it did point out in its report that none of the workers released in any of the inspected enterprises were used outside the enterprise.133 Two years later, a comparable ABI review of two enterprises in Cottbus evinced similar concerns there.134 It concluded that “it has not yet been possible in both enterprises to consistently develop suitable positions on the Schwedt Initiative in the management collectives. Inspection results show that there is a great deal of differentiation between the specialist directors and the directorate areas on questions of attitude to the work itself”. For example, the Economic Director at VEB Energiekombinat Cottbus Stammbetrieb, who oversaw the management of all its Schwedt Initiative activities, commented to the investigators the objectives set by the Director General for 1989 were “unreal” and everyone grumbled and complained to him about them. The WAO department head, who was also present at the interview, confirmed that management

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conviction to pursue the current Schwedt Initiative objectives was “lacking”. It was subsequently conceded by the Economic Director that, out of fear of rebuke from the Director General, he had provided inaccurate briefings on the state of play to him and in supporting documentation. Regarding this admission, the ABI report noted that the “healthy inner conviction of the reality of the objectives and the necessary ideological clarity for implementation in management collectives” were painfully absent. The investigation also uncovered problems in the actual Schwedt Initiative activities undertaken. Concerning differentiation was found in the work of the enterprise’s departmental WAO collectives. Three of the seven examined had no WAO collectives at all; another had one that had not met since 1987. As for the release of labour that had been officially reported, the inspection made a number of disquieting observations. All redeployed labour had been placed either within the same section from which it had been released or in one of the enterprise’s administrative area. All separations without redeployment had come about through retirements rather than as a result of the redesign of jobs. The ABI review also found that group leaders had been converted into employees in order to give the appearance that a management level had been eliminated. This action did not result in the saving of a single worker or a job. The employees concerned continued to do similar work but were merely reclassified one salary group lower. Performance supplements were then used to ensure that their gross salaries remained the same as they had been previously. However, in line with their salary group downgrading, the employee received one day less vacation. As the inspection report concluded, such a litany of mistakes only bred anger within the enterprise and reduced “the inner willingness of colleagues to participate fully in the further implementation of the Schwedt Initiative”.

5.7

A Quantitative Overview

The previous sections have shown that over the course of the campaign’s existence the SED leadership had been concerned by what it regarded as disappointingly mixed—at times lacklustre—implementation of the Schwedt Initiative. As the examples mentioned in previous sections have illustrated, many enterprises and local leaderships at times patently had not afforded the initiative the party-required level of attention. But to what extent did these concerns reflect genuine widespread problems for

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this rationalisation initiative across the GDR? At heart, this is an empirical question. In this section, an overview of the best available data on the outcomes of the Schwedt Initiative is provided. The task, however, is complicated greatly by the paucity of overarching data and syntheses on the impact of the campaign undertaken at any level of the state and party. As a result, the analysis carried out here perforce draws upon and integrates a wide array of unconnected sources written, often with a narrow purview, within enterprises, combines, local governments, unions, ministries and even by the press. Given the incompleteness of the material extant, the pictures that emerge are, of course, more partial than one would like. That said, we believe that these snapshots do nonetheless shed valuable quantitative light on broader patterns of the implementation of the Schwedt Initiative across the GDR. 5.7.1

Overall Release of Workers

66000 64000 62000 60000 58000 56000 54000 52000 50000

400000 300000 200000 100000 0 1981

1982

1983

1984

1985

1986

Year Annual release

Aggregate number of workers released

Annual release of workerse

We start by considering how many workers were actually released by the Schwedt Initiative. Figure 5.4 provides the annual and cumulative releases of labour across the GDR between 1981 and 1986. In that time, 355,593 workers were released at any average rate of 59,265 per year. 1984 was the most successful year with 63,754 releases. There was a slow annual growth in releases across time, averaging about 1572 additional workers each year (or about at a rate of growth of 2.5 per cent), but the effect was not dramatic. Thus, once the national campaign was launched,

Aggregate release

Fig. 5.4 Workers released in the GDR, 1981–1986 (BA DQ 300/463, January 1987, appendix) (Note Workers released refers to Arbeitskräfte released)

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there was no significant rising wave in releases, just a slow incremental drift upwards, punctuated by fluctuations. In the first three years of the campaign, 169,306 workers were released compared to 186,287 in the following three years. Although data are not available for the final phase of the campaign, the primary sources do not suggest that any profound shift in the pattern was likely to have occurred in the last remaining years of SED rule.135 If this assumption is accurate, then extrapolating from the growth experienced between 1981 and 1987, this means that by the end of the regime over 536,000 workers in total—about 6.1 per cent of the total workforce or 6.9 per cent of all workers and employees in 1981—may have been released through the initiative. Figure 5.5 tracks these releases in terms of their share of GDR workforce. Allowing for the possibility that, arguably, the Schwedt Initiate was not primarily intended for all parts of the workforce, Fig. 5.5 presents the share in terms of two definitions of workforce: first, as everyone who is engaged in some form of work and, second, as workers and employees only. The latter definition thus focuses on the industrial and service sector workforce and excludes members of agricultural and craft production co-operatives, commission takers, individual farmers as well as private

Percentage released

1 0.9 0.8 0.7 0.6 0.5 0.4 1981

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Total workforce

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1986

Total number of workers and employees

Fig. 5.5 Workers released in the GDR as a proportion of the workforce, 1981– 1986 (BA DQ 300/463, January 1987, appendix; Statistisches Jahrbuch der Deutschen Demokratischen Republik 1981–1986, passim) (Note Workers released refers to Arbeitskräfte released)

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tradesmen, wholesalers, retailers and freelancers. Between 1981 and 1986, the proportion of the workforce released annually remained fairly stable within the range of between 0.63 and 0.72 per cent or between 0.70 and 0.80 per cent depending on the workforce measure utilised. In short, consistently less than 1 per cent of the workforce, however defined, was released annually, although over time there was probably some very modest growth in this share. 5.7.2

Releases by Industry, Combine and Enterprise

Table 5.1 reports the release rates for each of the eleven industrial ministries in 1986, as well as the contributions made in each by the introduction of microelectronics and the proportion of their freed-up workers who ended up in Rationalisierungsmittelbau sections. While at the beginning of the campaign, the Schwedt Initiative was disproportionately taken up in the chemical, coal and energy industries, as well as in general and agricultural machinery, and vehicle manufacture,136 by 1986, it is evident that the initiative had permeated right across all industrial sectors. As a whole, GDR industry released between 1.5 and 1.9 per cent of its workforce in that year. Although there was clear variation, the rate of release hovered somewhere between 1.1 and 2.0 per cent across most major branches of industry. The best performances were recorded in the ministries of tool and processing machine construction (2.5–3.2 per cent) and geology (2.0–2.5 per cent) and the weakest in light industry (1.1– 1.3 per cent). With a release share of between 1.5 and 1.9 per cent, the chemical industry performed at the average rate. Table 5.1 also reveals the relatively small contribution of microelectronics in 1986, which accounted for only 12.3 per cent of all releases that occurred in the industrial ministries. The effect was strongest in tool and processing machine construction (30.0 per cent) and of least significance in the Bezirk-managed and foodstuff industries (3.4 per cent). The position of the chemical industry was slightly below average. With respect to building internal enterprise capacities to construct their own rationalisation tools, 4.7 per cent of all freed up industrial labour was reallocated to Rationalisierungsmittelbau sections. This trend was most common in the Ministry for Ore Mining, Metallurgy and Potash (8.1 per cent) and least in light industry (1.5 per cent). Within branches of industry, there were also significant variations in performance both between combines and across time. Take the case of

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Table 5.1 Released workers by industrial ministry, 1986 (BA DQ 300/463, January 1987, appendix) Ministry

Released workers per 1000 employees (full year estimates in parenthesis)

Workers released through the application of microelectronics (%)

Released workers redeployed to Rationalisierungsmittelbau sections (%)

Coal and Energy (MfKE) Ore Mining, Metallurgy and Potash (MfEMK) Chemical Industry (MfC) Electrical Engineering and Electronics (MfEE) Heavy Machinery and Plant Engineering (MfSAB) Tool and Processing Machine Construction (MfWV) General Machinery, Agricultural Machinery and Vehicle Construction (MALF) Light Industry (MfL) Glass and Ceramics Industry (MfGuK)

13.7 (17.1)

12.1

3.8

17.8 (22.3)

9.9

8.1

15.3 (19.1)

10.1

5.5

18.8 (23.5)

14.8

4.3

14.2 (17.8)

14.2

4.2

25.2 (31.5)

30.0

4.2

14.9 (18.6)

11.9

5.9

10.7 (13.4)

9.8

1.5

12.4 (15.5)

4.0

4.9

(continued)

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Table 5.1 (continued) Ministry

Released workers per 1000 employees (full year estimates in parenthesis)

Geology (MfG) 20.1 (25.1) Bezirk-Managed 12.5 (15.6) industry and the Foodstuff Industry (MfBL) Average 15 (18.8)

Workers released through the application of microelectronics (%)

Released workers redeployed to Rationalisierungsmittelbau sections (%)

4.7 3.4

5.2 4.1

12.3

4.7

Note Data are for the first three quarters of 1986. Estimates for workers (Arbeitskräfte) released for the entirety of 1986 are given in parenthesis

the chemical industry. As Table 5.2 indicates, between 1981 and 1986, in the combines of the chemical industry, there was an average fall in the release share from 2.8 to 1.9 per cent. The chemical industry that had provided the initial spur for the Schwedt Initiative could not maintain the momentum. Not surprisingly, VEB Petrochemisches Kombinat Schwedt (PCK ) did the best, although by 1986 even its release share had declined and was sitting just above the average for the chemical industry and, indeed, all industry. Troubling for the authorities would have been the fact that the poorest performers across this period were three of its highest profile chemical combines: VEB Kombinat Minol Berlin, VEB Leuna-Werke “Walter Ulbricht ” and VEB Chemische Werke Buna Schkopau. There was also year-on-year considerable variation in release rates. VEB Fotochemisches Kombinat Wolfen, for example, began very well in 1981 with a release rate of 4.0 per cent, only to see that rate fall below average from 1983 and even sinking to as low as 1.1 per cent in 1985. In terms of Table 5.2’s other panel, the share of releases due to the deployment of microelectronic technology appears to have increased, roughly doubling from about 5 per cent to over 10 per cent after 1981, in line with the advent of the second phase of the campaign. There was once again wide variation between combines. Comparatively strong performances at this time were recorded in VEB Kombinat “Agrochemie”

7.5 9.1 13.5 12.8 6.3 6.8 2.4 24.4 5.2 2.8 21.8 3.9 8.0

10.2 0.0 8.4 1.7 4.0 5.4 0.0 5.7 12.5 3.4 11.6 4.1 8.9

3.0 21.0 9.6 – 21.8 1.1 32.5

2.0

13.0 11.8 15.9 8.1

13.6

8.0 9.5 2.8 – 10.5 5.2 26.7

6.7

12.8 16.3 9.2 10.4

11.4

1985

4.6 19.0 4.8 – 4.3 5.5 43.4

4.8

7.2 22.3 12.1 8.9

10.0

1986

9 40 12 19 27 2.5 17

25

25 31 56 19

31

15 27 8 13 27 17 22

19

27 21 34 21

24

1982

22 17 22 16 22 24 24

27

26 23 25 27

23

1983

16.4 23.6 25.8 – 25.3 16.1 27.2

24.9

28.5 26.3 30.6 26.9

27.1

1984

1981

1984

1982

1983

Released workers per 1000 employees

Workers released through the application of microelectronics (%)

19.9 10.6 27.7 – 11.1 6.5 18.5

24.5

13.5 23.3 31.7 24.2

35.0

1985

Release of workers in the chemical industry, 1981–1986 (BA DQ 300/463, January 1987, appendix)

VEB Chemieaserkombinat “Wilhelm Pieck” Schwarza VEB Chemiekombinat Bitterfeld VEB Kombinat “Agrochemie” Piesteritz VEB Petrochemisches Kombinat Schwedt VEB Kombinat Plast- und Elastverarbeitung Berlin VEB Pharmazeutisches Kombinat GERMED Dresden VEB Kombinat Lacke und Farben Berlin VEB Fotochemisches Kombinat Wolfen VEB Kosmetik-Kombinat Berlin VEB Kombinat Haushaltchemie Genthin VEB Leuna-Werke “Walter Ulbricht” Leuna VEB Chemische Werke Buna Schkopau VEB Reifenkombinat Fürstenwalde

Combine

Table 5.2

16.8 15.3 17.8 – 9.1 15.0 13.4

22.4

18.8 21.6 20.8 22.4

31.9

1986

218 G. B. MAGEE AND W. GEERLING

13.2 4.7 9.5 0.0 9.7

17.2 1.1 0.0 0.0 5.6

3.7 4.4 12.6

6.3

11.4

6.8 6.5 10.4

8.1

9.4

1985

4.4 10.3 10.1

5.1

6.3

1986

15 13 28

32

26

17 7 22

17

23

1982

22 21 24

22

25

1983

22.1 19.7 24.1

16.8

22.8

1984

1981

1984

1982

1983

Released workers per 1000 employees

Workers released through the application of microelectronics (%)

21.6 18.7 20.3

19.8

20.6

1985

23.3 9.6 19.1

22.3

20.9

1986

Note The 1986 figures for released workers (Arbeitskräfte) per 1000 employees are estimates based on data from the first three quarters. VEB Kombinat Haushaltchemie Genthin was dissolved in 1984

VEB Kombinat Synthesewerk “Walter Ulbricht” Schwarzheide VEB Chemieanlagenbaukombinat Leipzig-Grimma Staatliches Chemie-Kontor Berlin VEB Kombinat Minol Berlin Average

Combine

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Piesteritz, VEB Reifenkombinat Fürstenwalde and VEB Fotochemisches Kombinat Wolfen, whereas noticeably slower microelectronics-induced releases of labour were observed in VEB Pharmazeutisches Kombinat GERMED Dresden, VEB Kosmetik-Kombinat Berlin, VEB Chemische Werke Buna Schkopau and Staatliches Chemie-Kontor Berlin. Variations in performance across time and combines was a feature of other ministries as well. Another measure of the success of the initiative was whether or not planned releases of labour were met or not. Table 5.3 provides the rates of plan fulfilment for each of the Ministry of General Machinery, Agricultural Machinery and Vehicle Construction’s combines between 1981 and 1984. Across the Ministry, the level of realised releases fell well below planned levels every single year. To be sure, there were some improvements over time, but in 1984, the best recorded year, more than a quarter of the expected releases were still not being delivered. This was not a uniform problem across combines. Some combines like VEB NAGEMA and VEB Kombinat Spezialtechnik Dresden performed consistently better, even reaching their targets, while others such as the three Table 5.3 Performance relative to plan of combines under the control of the Ministry of General Machinery, Agricultural Machinery and Vehicle Construction (MALF) in releasing workers, 1981–1984 (plan fulfilment = 100.0) (DG 7/1887 v.2, no date, appendix) Combine

1981

1982

1983

1984

VEB IFA-Kombinat Nutzkraftwagen, Ludwigsfelde VEB IFA-Kombinat Personenkraftwagen, Karl-Marx-Stadt VEB IFA-Kombinat Zweiradfahrzeuge, Suhl VEB Kombinat “Fortschritt” Landmaschinen, Neustadt VEB Kombinat Verpackungsmaschinen, Schokoladenmaschinen und Wägetechnik (NAGEMA), Dresden VEB Kombinat Haushaltgeräte, Karl-Marx-Stadt VEB Kombinat Wälzlager und Normteile, Karl-Marx-Stadt VEB Kombinat Medizin und Labortechnik, Leipzig VEB Kombinat Spezialtechnik, Dresden Average

58.7 51.0

67.6 45.3

55.0 64.2

63.7 69.3

53.2 70.8 88.8

49.8 65.1 85.6

34.6 75.2 100.0

77.9 75.3 87.7

80.9 62.2

57.1 58.9

100.0 76.9

76.8 75.1

63.7 98.0 66.6

72.1 79.7 61.7

64.1 103.7 71.8

72.8 100.0 73.4

Note Workers released refers to Arbeitskräfte released

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motor vehicle IFA combines evidently struggled to even approach the release targets. Variations between enterprises and combines were commonly observed within regional settings, too. Table 5.4 illustrates the case of Kreis Spremberg in Bezirk Cottbus in 1986. Across a selection of some of its more prominent combines and enterprises, release plan fulfilment ran at just over 89 per cent. The performance of its enterprises varied from those which did not realise a single planned released worker, to others which manifestly exceeded what had been asked of them. Overall, just under 22 per cent of all the enterprises and combines with set targets actually met them. Focusing on just the nine larger enterprises and combines which had been requested to free up ten or more workers, four exceeded the target—VEB Baumaschinen Welzow (Baumasch), VEB Fernsehkolbenwerk Tschernitz (FSKW ), VEB Braunkohlenwerk Welzow (BKW Welz) and VEB Gaskombinat Schwarze Pumpe (GK SP )—and the remaining five fell well short—VEB Braunkohlbohrungen und Schachtbau Welzow (BuS Welz), VEB Sprela-Werke Spremberg (Sprela), VEB Spremag Spremberg (Spremag ), VEB Textilwerk Spremberg (Textilw) and VEB Gaswerk Welzow (GW Welz). 5.7.3

Geographical Spread

Did the implantation of the Schwedt Initiative have a specific geographical pattern? Comparable regional data on this question are decidedly sparse. We begin our examination of this issue by extending the analysis of data on the release of labour by different Bezirke in 1980/1 first described by Knortz.137 Table 5.5 presents the share of workers released by each reporting Bezirk in 1980/1. Three definition of the workforce are utilised and compared in the table: the total number of people working in the Bezirk; the total number of people working in industry, construction and crafts in the Bezirk and the total number of people working just in industry in the Bezirk. The purpose of the three different definitions is to make some allowances for the fact that the more industrial Bezirke were, ceteris paribus, more likely to have greater opportunities to release labour than the predominately agricultural Bezirke. As Table 5.5 shows, the average rate of release across the Bezirke in this period was of the magnitude of 0.58 per cent of the total workforce, 1.26 per cent of the industrial, construction and craft workforce and 1.62 per

360 5 32 19 29 13 40 8 15 8 4 4

GK SP Ferro Sprela Baumasch Spremag Textilw FSKW IVR GW Haid GW Welz Getränke Tech Bürs

371 4 11 22 0 5 45 0 7 0 0 0

234 69

Note Workers released refers to Arbeitskräfte released

216 94

Planned release Achieved release (Number of (Number of workers) workers)

BKW Welz BuS Welz

Enterprise (VEB)

103.1 80.0 59.4 115.8 00.0 38.5 112.5 00.0 46.7 00.0 00.0 00.0

108.3 73.4

Performance relative to target (plan fulfilment = 100.0)

Across the sample

BLK RBD KV SP VEG (T) Reitz KfL AGZ GHG WtB NO KGV Gebäudewir.

KBB IAG

Enterprise (VEB)

875

3 3 3 2 2 2 2 4 4 2

1 0

780

0 0 1 0 0 0 0 5 0 0

0 6

89.1

00.0 No target set 00.0 00.0 33.3 00.0 00.0 00.0 00.0 120.0 00.0 00.0

Planned release Achieved release Performance (Number of (Number of relative to workers) workers) target (plan fulfilment = 100.0)

Table 5.4 Release of workers in a selection of enterprises in Kreis Spremberg in 1986 (BLHA: Rep 877 ABI KK Spremberg 1673, 19 June 1987, appendix)

222 G. B. MAGEE AND W. GEERLING

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Table 5.5 Share of workers released by Bezirk, 1980/1 (Knortz, p. 147; Statistisches Jahrbuch 1981 der Deutschen Demokratischen Republik, pp. 47–76) Bezirk

Released workers as proportion of total workforce (%)

Released workers as proportion of workforce engaged in industry, construction and crafts (%)

Released workers as a proportion of the total industrial workforce (%)

Berlin Cottbus Dresden Erfurt Frankfurt/Oder Gera Halle Karl-Marx-Stadt Leipzig Magdeburg Neubrandenburg Potsdam Rostock Schwerin Suhl Average

0.37 0.44 NR 0.62 1.24 0.47 0.12 NR NR 0.92 0.66 0.67 0.41 0.51 0.97 0.58

1.03 0.82 NR 1.20 3.02 0.89 0.23 NR NR 2.12 2.09 1.58 1.17 1.46 1.67 1.26

1.48 1.04 NR 1.50 4.22 1.08 0.27 NR NR 2.80 3.21 2.16 1.67 2.11 1.97 1.62

Notes NR means that no data were recorded for that Bezirk. Workers released refers to Arbeitskräfte released. Apart from Frankfurt (Oder), the total number of released workers for each Bezirk is estimated by extrapolating the two or three quarters of 1980 that have been recorded to the full year. The numbers of released workers for Berlin and Erfurt are taken from the recorded two quarters of jobs saved for 1980, which are then multiplied by the average national ratio of jobs saved to workers released. This number is then extrapolated out to the full year in the same manner as other Bezirke. For the cases of Neubrandenburg, Schwerin and Suhl, the recorded planned amount for 1981 are used. The volumes thus calculated are then divided by the size of the relevant workforce in 1980/1 to arrive at the final figures presented in the table

cent of the industrial workforce. The strongest performing Bezirk across all definitions of workforce were Frankfurt (Oder), Magdeburg and Suhl. Disappointing release shares were observed in Berlin, Cottbus, Gera and especially Halle. It is noteworthy that once we control for the size of industry in the Bezirk, the raw shares of the more agricultural Bezirke improve considerably, suggesting that the performance of Neubrandenburg, Schwerin and Potsdam could in fact be interpreted to be better than the respectable average release shares the raw data reveal.

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The conclusions of Table 5.5, however, are weakened by the fact that they are for just one year and are based on analysis that contains no data for three of the GDR’s most economically important Bezirke, accounting for over 30 per cent of its entire workforce: Karl-Marx-Stadt, Dresden and Leipzig. Therefore, to supplement Table 5.5, we turn to the coverage of the Schwedt Initiative in Neues Deutschland across the period 1978– 1990. As previously discussed, our assumption is that the Bezirke that were most active in this space, both in terms of actual achievements and in intent to act, received the greater attention in the party’s main national newspaper. Figure 5.6 provides heat maps of respectively the raw number of articles on the Schwedt Initiative in Neues Deutschland by Bezirk of concern; the number of articles per 10,000 employees; and the number of articles per 10,000 industrial, construction and craft employees. These figures demonstrate that while Frankfurt (Oder), Berlin and the heavily industrialised southern Bezirke all featured prominently in the coverage, once we deflate that coverage by the size of the total workforces only Frankfurt (Oder) and Gera stand out. When the workforce is narrowed to just those engaged in industry, construction and crafts, Frankfurt (Oder) and Gera retain their pre-eminent positions and the coverage of the more agricultural Bezirke of Rostock, Schwerin and Neubrandenburg become relatively stronger than most of the more industrial Bezirke. Reporting from Halle and Cottbus was particularly low, irrespective of which measure we look at. Taken together the information provided by Table 5.5 and Figure 5.6 reveal a number of salient features of the geographical spread of the Schwedt Initiative. First, the initiative was not taken up evenly across the GDR. Second, certain Bezirke—most notably Frankfurt (Oder)—clearly led the way, whereas others, such as Halle and Cottbus, lagged far behind. Third, the industrial Bezirke on the whole did not appear to embrace the initiative with greater alacrity than anywhere else. Fourth, while individual enterprises within Bezirke may have keenly adopted the initiative, at the Bezirk-level there is strong empirical evidence that the pattern of implementation was not being driven by the population size of, or the scale and structure of industry in, different Bezirke. The more agricultural Bezirke, after all, appeared to have done relatively well.138 These findings suggest that much of the differences in uptake between Bezirke were being propelled by Bezirk-specific factors, policies and attitudes.

(Map 2)

(Map 3)

Fig. 5.6 Coverage of the Schwedt Initiative in Neues Deutschland by Bezirk, 1978–1990 (Map 1: total number of articles; Map 2: articles per 10,000 employees; Map 3: articles per 10,000 industrial, construction and craft employees) (Statistisches Jahrbuch 1981 der Deutschen Demokratischen Republik, pp. 47–76; Neues Deutschland archive accessible at https://www.nd-archiv.de/)

(Map 1)

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5.7.4

The Case of Bezirk Frankfurt (Oder)

All evidence suggests that Bezirk Frankfurt (Oder) was not just the origin, but one of the driving forces behind the Schwedt Initiative. Did similar patterns of implementation observed nationally and in ministries appear within this Bezirk as well? The first panel of Table 5.6 provides information on the Bezirk’s release of labour at the Kreis level between 1979 and 1987. Details of how that freed up labour was redeployed in 1987 is given in the other panel. Overall, Table 5.6 indicates that the Bezirk did well. Over this period, it released 30,030 workers at an annual rate of 2.8 per cent and effectively met its set Schwedt Initiative targets. While all Kreise managed to get within 10 percentage points of their targets, there was some degree of variation between Kreise. Kreis Schwedt, the home of PCK , naturally stands out with a 114 per cent over-fulfilment of its release targets over these nine years, while the predominantly agricultural Kreis Seelow seemingly struggled the most. If Kreis Schwedt is removed from the calculations, the Bezirk’s overall rate of plan fulfilment drops from 99.9 to 96.8 per cent. PCK , thus, clearly influenced the Bezirk’s performance, but it did not dominate it. The tightness of the degree of plan fulfilments between Kreis, when viewed across the whole period, demonstrates that the message of the Schwedt Initiative was being absorbed to some meaningful extent in all corners of the Bezirk. But were all Kreise performing equally well? The heat maps of Fig. 5.7 provide some perspective on this question. Figure 5.7 (Map 1) maps the number of released workers in each Kreis between the years of 1979 and 1987; Fig. 5.7 (Map 2) maps the number of released workers as a proportion of the Kreis ’ population and Fig. 5.7 (Map 3) maps the number of released workers as a percentage of the Kreis ’ population in towns or cities with more than 3000 inhabitants. The logic underpinning the calculations depicted in Fig. 5.7 (Maps 2 and 3) is that larger releases of workers were more readily obtainable when the Kreis had itself a larger population (viz. a greater pool of workers) and when it possessed more significantly sized towns and cities where industry and the service sector had a greater propensity to locate. Figure 5.7 (Maps 2 and 3), thus, attempt to control

931 1071 2015 3972 853 615 4470 760 1908 4169 3980 5323 30,067

Angermünde Beeskow Bernau Eberswalde Freienwalde Eisenhüttenstadt (Land) Fürstenwalde Seelow Strausberg Frankfurt (Oder) Eisenhüttenstadt (Stadt) Schwedt Across entire Bezirk

919 1077 1843 3739 830 568 4459 682 1915 4159 3770 6069 30,030

Achieved releases (Number of workers)

98.7 100.6 91.5 94.1 97.3 92.4 99.8 89.7 100.4 99.8 94.7 114.0 99.9

Performance relative to target (plan fulfilment = 100.0)

7.7 6.0 3.5 10.2 9.8 7.0 18.6 5.4 10.4 13.1 6.2 10.9 10.7

Share of labour released in 1987 redeployed outside original enterprise (%) 21.5 27.5 35.3 34.3 22.0 49.3 28.9 32.4 25.0 52.2 30.2 6.5 29.8

Share of labour released in 1987 onto multiple shift systems (%) 5.7 12.6 12.2 5.1 9.8 14.8 9.1 8.7 11.6 6.5 6.3 6.7 7 .8

Share of labour released in 1987 to consumer good production (%) 16.9 22.1 10.2 11.7 9.5 11.9 9.7 7.4 11.8 6.2 18.2 6.8 10.9

Share of released in 1987 to Rationalisierungsmittelbau (%)

Notes Workers released refers to Arbeitskräfte released. The figures for 1987 are for the first three quarters only. The figures for where released labour was redeployed refer only to workers who continued to work in their original enterprise

Planned releases (Number of workers)

Kreis

Table 5.6 Released and redeployed workers in the Kreise of Bezirk Frankfurt (Oder), 1979–1987 (BLHA Rep 601 RdB FfO 30115, 4 March 1988, appendix)

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(Map 2)

(Map 3)

Fig. 5.7 Release of workers in Bezirk Frankfurt (Oder) by Kreis, 1979–1987 (Map 1: total number of released workers; Map 2: released workers as a proportion of the population; Map 3: released workers as a percentage of residents in towns and cities with more than 3000 inhabitants) (Statistisches Jahrbuch 1981 der Deutschen Demokratischen Republik, pp. 47– 76; BLHA Rep 601 RdB FfO 30115, 4 March 1988, appendix 1) (Notes Workers released refers to Arbeitskräfte released. The figures for 1987 are for the first three quarters only)

(Map 1)

228 G. B. MAGEE AND W. GEERLING

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for the effects of respectively the size and economic structure of the Kreis on its ability to release workers. Beginning with Fig. 5.7 (Map 1), it provides a visual representation of the Kreis-level release figures reported in Table 5.6. It shows that the more industrialised Kreise of Schwedt, Fürstenwalde, Frankfurt (Oder), Eisenhüttenstadt (Stadt) and Eberswalde provided the most savings: almost three quarters of all workers released in the Bezirk between 1979 and 1987. Expressing these releases in per capita terms, as Fig. 5.7 (Map 2) does, highlights the relatively high intensity of Schwedt Initiative activities in Schwedt itself, Eisenhüttenstadt (Stadt) and, to a lesser extent, in the city of Frankfurt (Oder). Finally, in Fig. 5.7 (Map 3) the impact of economic structure on the intensity of labour releases is taken into consideration. It shows that Kreise with smaller proportions of their populations in urban settings and, hence, less likely to have been deeply engaged in non-agricultural pursuits—namely, Eisenhüttenstadt (Land), Seelow, Angermünde and Beeskow—released labour with equal, if not potentially greater, intensity than most industrial Kreise. Even by this measure, the performance of Schwedt remains strong, as does Eisenhüttenstadt (Stadt), especially if its gains are merged with its hinterland in Eisenhüttenstadt (Land). By contrast, the efforts of the other Kreise were less distinctive and in the cases of Strausberg, Bernau, and Bad Freienwalde downright poor. The second part of Table 5.6 turns our attention to how the freed up labour was used. It shows that 10.7 per cent of all released labour in 1987 was redeployed in a different enterprise within the Bezirk. This figure appears to be higher than the norm of around 5 per cent allegedly experienced in a number of industries.139 Of those freed labourers who remained in their home enterprise, 58.5 per cent were moved into new or redefined roles, 29.8 per cent were placed on new multiple shift systems, 10.8 per cent joined the Rationalisierungsmittelbau section and 7.8 per cent were employed in new consumer good production functions established within the enterprise. The combination of usages of freed up labour varied between Kreise. More agricultural Kreise, for example, were less likely to release labour to other enterprises. There were also stark differences between industrial Kreise. For example, whereas Kreis Schwedt in 1987 relied heavily on the redesign and creation of new jobs (80.0 per cent) and redeployed relatively few workers to shift work (6.5

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G. B. MAGEE AND W. GEERLING

per cent), consumer production (6.7 per cent), and Rationalisierungsmittelbau sections (6.8 per cent), the Kreis for the city of Frankfurt (Oder) in that year focused more on moving workers onto new types of shift work (52.2 per cent) and comparatively less into redesigned or new jobs (35.1 per cent). Each Kreise were evidently still extended considerable latitude in determining how their release targets were to be achieved. Between 1979 and 1987, a clear majority of labour saved in Bezirk Frankfurt (Oder), some 61.1 per cent, had been released through the implementation of WAO studies, which had re-organised and redesigned work within its enterprises. Key technologies, although of secondary importance, also had a role to play. Figure 5.8 plots the growth of the three most important key technologies over the period 1981–1987. Of these, industrial robotics was in each year the most important and was responsible in total for 71.1 per cent of the key technology-related releases, followed by microelectronics, which accounted for 25.0 per cent. Computing systems, which began to appear in the Bezirk in 1986, contributed a further 3.9 per cent. The trend over time was for a modest acceleration, consistent in timing with the advent of the more technologically orientated second phase of the initiative, in the number of labour released through the deployment of key technologies. Thus, compared

Fig. 5.8 Workers saved by key technologies, Bezirk Frankfurt (Oder), 1981– 1987 (Statistisches Jahrbuch 1981 der Deutschen Demokratischen Republik, pp. 47– 76; BLHA Rep 601 RdB FfO 30115, 4 March 1988, appendix 3) (Notes Workers released refers to Arbeitskräfte released. The figures for 1987 are for the first three quarters only)

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to the period between 1981 and 1983, the number of workers each year added to the total volume released by key technologies between 1984 and 1987 grew on average by a further 380. It is fitting, perhaps, to finish this analysis of the Schwedt Initiative in Bezirk Frankfurt (Oder) with PCK , the enterprise where it all began and whose story has been so deeply interwoven into the history that this chapter has attempted to relate. Figure 5.9 provides another, this time graphic, retelling of its story. Following the dizzying successes of the early years of the Schwedt Initiative, the ability of PCK to continue to generate large volumes of new releases diminished rapidly, especially after 1982. The era of easy rationalisations had passed. Yet, an even greater problem awaited. The transition to the more rapid releases unlocked by science and technology, which both the second and final phases of the initiative had promised and for which the likes of Werner Frohn and Siegfried Kipp at PCK had openly advocated, turned out to be illusory. It was not to be alone in finding the rewards of socialist rationalisation elusive. By the latter half of the 1980s, at least in terms of its ability to generate labour releases, PCK had lost its model status and had sunken bit by bit back into the pack of East German enterprises struggling with the very

Fig. 5.9 Workers released, VEB PCK Schwedt, Parent Enterprise (Stammbetrieb), 1979–1990 (BLHA Rep 601 RdB FfO 30115, 4 March 1988, appendix 5) (Notes Workers released refers to Arbeitskräfte released. The figures for 1987 are for the first three quarters only)

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real challenges posed by the party’s faltering search for an ever deeper intensification of the workplace.

5.8

Conclusions

Over the course of the 1980s, the Schwedt Initiative constituted a major plank of the SED’s plans to modernise and enhance the competitiveness of the East German economy. Its story thus provides important insight on the regime’s drive for intensification, but, more than that, it also sheds light both on how the GDR’s system, now fully matured, attempted to communicate its intentions, and how those objectives could be thwarted by the inherent limitations of the means that system imposed. In assessing the impact of the Schwedt Initiative, historians and contemporaneous Western observers alike have tended to view the whole episode harshly and, at times, with a modicum of bemusement. Almost without exception, the initiative has been deemed either a complete failure or, perhaps more commonly, as a failure mitigated only by a handful of some partial, fleeting successes.140 Either way, the Schwedt Initiative is typically relegated to the margins of historical analysis, an example of yet another failed experiment. One can, of course, understand where such sentiments come from. It is incontrovertible that the Schwedt Initiative and all that was associated with it did not unlock the promised secrets of socialist rationalisation. Yet, in acknowledging that, it is worth pausing here a while to reflect further on what success and failure actually meant in a context such as this. Failure, by definition, connotes some ex ante conception of a goal sought after, but not attained. Expressed differently, failure requires a benchmark. Typically, in the case of the Schwedt Initiative, its failure has been cast in terms of its inability to achieve some ideal outcome: the productivity levels of the leading Western nations, the optimal efficiency of perfectly competitive markets or simply the aspirational goals set by the regime itself. On all these three scores, the Schwedt Initiative clearly and decisively failed. But beyond allowing one to claim that the SED regime was not able to pull an economic miracle like the proverbial rabbit out of its hat and rescue itself from its ultimate demise, how helpful in understanding the system are such claims of failure? After all, even liberal market economies experience variance in performance, typically fail to realise the hypothetical optimality of perfectly competitive markets, and in many ways fail to live up to the grand metanarratives they proclaim. Failure in this sense

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should not be equated with absolute collapse or nothingness. Sub-optimal performance is still performance. Life and history persist. As historians and economic historians, we should not let such judgements about the ultimate economic failure of the SED state distract us from the task of piecing together the story of what actually happened, even if that story is one that does eventually end in collapse. Our concern here is that, in simply dispelling the Schwedt Initiative as a failure, we run the risk of suppressing as many historical questions as we answer. Let us not forget that the Schwedt Initiative did manage to release around half a million workers for other activities and did see some genuine rationalisation and modernisation of East German workplaces. Nor was this in just highprofile cases like PCK . To acknowledge those achievements is not to claim triumphs where there are none, but merely to recognise that, despite its failure to alter significantly the trajectory of the bigger picture, the Schwedt Initiative nonetheless did have impact. And that impact is part of the story too. Indeed, what interests us about the Schwedt Initiative is not so much whether it failed or succeeded, but what its attempted implementation tells us about how the system operated, what it was capable of, and what its inherent limitations were. In coming to terms with why the Schwedt Initiative was unable to ignite the productivity growth craved by the East German authorities, it is clear that objective considerations and the context, into which it was implemented, mattered. No doubt, at times, the rewards on offer could be too insecure and insufficient, the formal apparatus of planning too rigid, the attitudes of managers too risk averse, the influence of sectional interests too powerful and the distrust and power of workers too deep to elicit the type of response hoped for. But beyond these constraints, it is our contention that the broad differentiation of performance exhibited across the GDR, its industries, regions, combines and enterprises, is better understood as—and in terms of pattern is more consistent with— an outcome generated by a command and control system, whose ability to accomplish tasks was depended on its capability to signal its intent effectively. That ability could be both regionally and temporally highly variable. When supported by key placed individuals or entities—often called “fashion leaders” in the cascade literature discussed in Chapter 2— the authorities’ signals could be amplified and appropriately honed; when they were not, those messages could get swamped in the morass of numerous, often seemingly competing or contradictory, orders. As this chapter has illustrated, participants in the system were well aware of this

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weakness, even if they rarely articulated it as explicitly or in a theoretical manner as employed here. The primary sources are replete with examples of misunderstandings over the intent or importance of party policies or even just the difficulties encountered in making sense and reconciling the competing priorities. It was one of the reasons why “political-ideological” leadership and education, which aimed to train those it targeted to listen out more acutely for and act upon the correct party line, was valued so highly. But, irrespective of the “successes” of such ideological inculcation, as long as confusion could be interposed at intervals at any stage of the signalling process, from its top down, an efficacious flow of direction could not be guaranteed. Try as some might have, the functioning of the state and economy could not be turned into an exchange between flawless transmitters of information and perfect receptors. As a researcher from the Central Research Institute for Work lamented at a discussion on questions of leadership in the economy in June 1987: In 1986 we carried out investigations into the planned mastery of the extraction process [of surplus labour]. We found that it was primarily ideological issues and leadership approach, rather than the different objective reproductive conditions that caused the differentiated results of the securing workers. I would just like to go into a few particularly inhibiting factors here. In the first place, this includes ideological ambiguities about the necessity and requirements of securing workers. Even today, local councils are confronted with additional demands on workers. At the same time, the fulfilment of the labour plan deteriorates. These ideological ambiguities are associated with reservations about the broad application of the Schwedt Initiative and formal approaches. In enterprises, we had to deal with arguments such as “Schwedt is a method of the chemical industry; it is not practicable in the metalworking” or “Schwedt was valid 5 years ago; it is no longer current under today’s conditions”.141

After more than half a decade of campaigning, it must have been troubling for policy makers to see that the same doubts, misconceptions and misunderstandings that had existed at the inception of the initiative were still commonplace in the late 1980s. Their persistence in itself suggests that the problems that the party experienced in signalling its intent on this central initiative had not been mastered. Again, it is important to remember here that this failure to signal as effectively as desired did not mean that the signalling, which did occur, had no effect. It did. As the slowly growing number of releases across the decade indicated, what the

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system could manage was patently good enough to keep the ball rolling and ensure that a continued, if piecemeal, process of rationalisation did unfold. It just was not capable of bringing about the revolutionary transformation, for which the party longed. There were inherent limits to what a system reliant on signalling could do. Rapid, complex, multidimensional change was one of them. The experience of the Schwedt Initiative also permits light to be shone on a number of other aspects of the signalling process. It shows, for example, that GDR patriotism mattered. Despite the Schwedt Initiative’s direct ties to both Soviet experience and experts, something that was candidly referred to in documents at its inception in Frankfurt (Oder) and PCK in late 1977, the SED had learnt, not least from its experience with the Mitrofanov Method discussed in Chapter 4, that championing the Soviet credentials of an initiative typically did not endear it to anyone other than the most ideologically committed comrades. In part, this desire to downplay the Soviet connection reflected the hopes of a leadership keen to come out from under the shadow of the bigger brother and demonstrate the GDR’s unique contributions to the socialist world. Perhaps, more importantly, though, it echoed the reality that having a respected local role model and brand name would strengthen the power of the signalling communicated. In these regards, the timing of the abandonment of the initiative’s Soviet pedigree is revealing. This process began in November 1978, once the powerfulness of the initial experiment at PCK was realised. At that juncture, all discussion of learning from the Soviet experience ceased and new terms, the “Schwedt Initiative” and “Fewer produce more”, came into circulation for the first time.142 By the early months of 1979, the rebranding was complete. All mention of the initiative’s Soviet origins disappeared from the campaign and the sole emphasis was now placed on learning from the Schwedt experience. For all intents and purposes, the Schwedt Initiative had morphed into a quintessentially German innovation. The Schwedt Initiative also demonstrated the power of simplicity, especially in signalling. An uncomplicated message is easier to communicate and motivate people with. As this chapter has detailed, however, over the course of the 1980s, the Schwedt Initiative evolved steadily into an ever more complicated and less precise proposition. By the late 1980s, it was no longer simply about reallocating unproductively deployed labour to more productive uses. On to that unadorned base had been grafted a host of other ideas: key technologies, the internal capability to craft

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rationalisation tools, territorial planning and even the production of consumer goods. It was a confusing package, whose complexity was only compounded by the continued coexistence of the late stage campaign with residual propaganda left over from the simpler first phase of the initiative. Frankly speaking, it was hard for us as contemporary researchers looking back on the initiative to disentangle its variegated and multiplying dimensions. One can only imagine how difficult it would have been to piece together all these components and determine what was important in real time as the initiative unfolded within a context of plethoric party issuances. In truth, by the final years of the GDR, the Schwedt Initiative on offer bore little resemblance to the version, which had launched the campaign. The phrase had become little more than a catch-all for the party’s rationalisation efforts. Stripped of its precise meaning, the Schwedt Initiative as a concept had not only ceased to add value, it probably now heightened the degree of confusion that already pervaded its signalling. A more efficacious approach would have been to have ended the Schwedt Initiative in 1983 and run the subsequent phases as new and distinct next generational campaigns. The Schwedt experience also highlights the pivotal role of “fashion leaders” and “liaison agents” in signalling networks. Signalling worked best when those responsible for implementation had a regular and trusted source of information, to whom they could reliably turn to see what was the right course of action. Within the enterprises of East Germany, such “fashion leaders” were those who had clout at the most appropriate level of operation; invariably, these were Kreis and Bezirk party secretaries and combine Director Generals. The most compelling examples of successes with the Schwedt Initiative, whether in Schwedt, Staβfurt or Halle, all featured prominent local leaders, who, acting as “liaison agents”, ably transmitted, translated and put into place the mechanisms needed to implement the party’s directives meaningfully. When their presences were absent, however, the success of the initiative fell entirely to the understanding and whims of individual enterprise directors and local officials. Some, of course, made a good fist of it; many others, unsure of themselves, did not and merely resorted to the perfectly rational position of waiting and seeing. If queried on their actions, bland reassurances that progress was in fact afoot would often suffice or, at the very least, buy time. These problems of signalling had dynamic properties, too. Past misunderstandings like poor decisions were not left in the past, but, if left

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uncorrected, could fester and compound insecurity among those involved in reading the signals, undermining their confidence in the functionality of the system. If the local party official had got it wrong last time, why wouldn’t they be wrong again next time? If I invested in and fervently pursued a specific interpretation of a party initiative that turned out to be a political dead-end, or something worse, then I would obviously think twice before taking another leap of faith. In short, persistent poor signalling prompted over time ever more conservative, risk averse behaviour by key decision-makers at all levels of the system and, as a consequence, made change steadily harder to effect. Moreover, in such a milieu of weakened and indeterminate authority, the ever-present resistance of the workforce, management and bureaucracy was afforded more scope to come to the fore and be entertained to an extent unlikely to have happened if the party line had been well understood and enforced. As a close reading of the sources at the level of actual implementation make abundantly clear, the Schwedt Initiative could be—and in many places was—used to usher in enhanced efficiency, but, to make that happen, it took understanding, commitment, persuasion and genuine engagement from all involved, attributes that in practice were not always forthcoming or possible. Such, however, was the nature of the system, and such were the very real structurally imposed limitations, to which those who lived within it had to accommodate themselves.

Notes 1. For a good overview of the period, see André Steiner, The Plans that Failed: An Economic History of the GDR (Oxford: Berghahn Books, 2010), pp. 153–178. 2. Quoted in Dieter Weger (Head and overall editor), Siegfried Kipp, Günther Kwast, Dieter Meyer, Werner Poethe, Hans Träthner, Georg Wiedermann, and Gerd-Uwe Fritsch, Weniger produzieren mehr. Erfahrungen mit der Schwedter Initiative (Berlin: Dietz Verlag, 1981), p. 37. 3. Erich Honecker, Aus meinem Leben (Berlin: Dietz Verlag, 1980), p. 289. 4. Jeffrey Kopstein, The Politics of Economic Decline in East Germany, 1945–1989 (Chapel Hill: University of North Carolina Press, 1997), p. 168. 5. Socialist rationalisation in new dimensions.

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6. János Kornai, The Socialist System: The Political Economy of Communism (Princeton, NJ: Princeton University Press, 1992), pp. 140–145. 7. Transcript of session run by the Frankfurt (Oder) Bezirkvorstand Gewerkschaft Handel, Nahrung und Genuss; see Brandenburgisches Landeshauptarchiv (hereafter BLHA) 747 Gew HaNaGe 95, 24 July 1980, “Erfahrungsaustausch über die Anwendung der Schwedter Initiative ‘Weniger produzieren mehr’ in unseren Betrieben der Lebensmittelindustrie und Verarbeitungsindustrie des Bezirkes”, p. 5. 8. Quotation comes from Siegfried Kipp, “Schwedter Initiative – wichtiger Maβstab und bedeutende Methode für die Steigerung der Arbeitsproduktivität und die Erhöhung der Effektivität sozialistischer Produktion in neuen Dimensionen”. Doctoral Dissertation, Parteihochschule ‘Karl Marx’ beim Zentralkomitee der Sozialistischen Einheitspartei Deutschlands (1981), p. 36. 9. Dieter Weger, Siegfried Kipp, Horst Günther, Werner Heinrichs, Günter Kwast, Werne Poethe, and Herbert Strobach, Arbeitsproduktivität, Sozialistische Rationalisierung, Schwedter Initiative. Erfahrungen, Initiativen und Wege zu höherem Niveau der sozialistische Rationalisierung im VEB Petrochemisches Kombinat Schwedt (Frankfurt an der Oder: Bezirksleitung Frankfurt an der Oder, 1978), pp. 9 and 15. 10. The Lenin quotation comes from Henry Norr, “Shchekino: Another Look”, Soviet Studies 38: 2 (April 1986), p. 141. 11. Quotation from Werner Frohn, “Die sozialistische Rationalisierung in neuen Dimensionen durch Anwendung der wissenschaftlichen Arbeitsorganisation. Der rationelle Einsatz des gesellschaftlichen Arbeitsvermögen im sozialistischen Industriebetrieb durch die Schwedter Initiative ‘Weniger produzierien mehr’. Vermittlung und Darstellung von Erfahrungen, ihre Durchsetzung im Leitungsprozeβ sozialistischer Kombinate”. Autorenreferat Dissertation, Parteihochschule ‘Karl Marx’ beim Zentralkomitee der Sozialistischen Einheitspartei Deutschlands, Berlin, den 17. Oktober 1980, p. 10. 12. David Lane, Soviet Labour and the Ethics of Communism: Full Employment and the Labour Process in the USSR (London: Routledge, 1987 [reprinted 2019]), pp. 143–144.

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13. Savings that did not end up back in the wage fund typically found their way into the enterprise’s bonus fund (Prämienfonds), performance fund (Leistungsfonds) or culture and social fund (Kulturund Sozialfonds). 14. Peter Hübner, Arbeit, Arbeiter und Technik in der DDR 1971 bis 1989: Zwischen Fordismus und digitaler Revolution (Berlin: Dietz Verlag, 2013), p. 438. 15. Quotation comes from Kipp, “Schwedter Initiative”, pp. 122– 123. 16. Presentation delivered by the Kreis Board to Central Board of IG Chemie, Glas und Keramik at VEB Chemiekombinat Bitterfeld; see Stiftung des Archivs der Parteien und Massenorganisationen der ehemaligen DDR im Bundesarchiv (hereafter BA) DY 34/11981, 26 June 1980, “Welche Erfahrungen und Ergebnisse gibt es bei der Durchsetzung der Schwedter Initiative ‘weniger produzieren mehr’ im Chemiekombinat Bitterfeld?”, pp. 1–9; Kipp, “Schwedter Initiative”, pp. 105, 117. 17. Quoted in Kipp, “Schwedter Initiative”, p. 40. See also comments on p. 170. 18. BA DG 11/2624 v.2, 29 May 1977, “Bericht über die Entwicklung der wissenschaftlichen Arbeitsorganisation in den Betrieben und Kombinaten der chemischen Industrie im Jahre 1976”, pp. 1–11. 19. Quotation from Frohn, “Die sozialistische Rationalisierung in neuen Dimensionen”, pp. 12–13. 20. BA DY 30/70640, “Protokoll der Sitzung der Wirtschaftskommission am 28 Mai 1979”, pp. 1–11. 21. BA DY 34/15911, 16 June 1983, “Konzeption zur komplexen Rationalisierung von Arbeitsplätzen zur Freisetzung von AK im VEB Flachglaswerk Uhsmannsdorf unter Nutzung der Erfharungen des VEB Petrolchemischen Kombinat Schwedt”, pp. 1–7. 22. Heike Knortz, Innovationsmanagement in der DDR 1973/791989. Der sozialistische Manager zwischen ökonomischen Herausforderungen & Systemblockaden (Berlin: Duncker & Humblot, 2004), p. 114. 23. Report by the Institut für sozialistische Wirtschaftsführung des Post- und Fernmeldewesens; see BA DM 302/4711, 30 January

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1983, “Information für leitende Kader des Post- und Fernmeldewesens”, pp. 1–47. 24. Report prepared by the Department of Labour and Wages, IG Druck und Papier; see BA DY 39/1376, 11 August 1980, “Arbeitsmaterial über gewerkschaftliche Erfahrungen und Probleme bei der Verbreitung der Schwedter Initiative ‘Weniger produzieren mehr’”, p. 10; see also Weger et al., Arbeitsproduktivität, Sozialistische Rationalisierung, Schwedter Initiative, p. 37. 25. BLHA Rep 707 Papier SchwO 876, 12 September 1980, “Mitteilung von Kaderabteilung”, p. 1. 26. Ibid. 27. BLHA Rep 707 Papier SchwO 876, 16 September 1980, “Protokoll der Beratung des Rates für WAO vom 16.9.1980”, p. 2. 28. Letter from Horst Wambutt and Günter Ehrensperger of the Raw Material Industry Department to Günter Mittag; see BA DY 30/38516, 12 September 1978, “Werter Genosse Mittag!”, pp. 1–3. 29. BLHA Rep 703 CTA Füwa 309, 26 October 1981, “Materielle Stimulierung der Rationaliseriung von Arbeitsplätzen und der Freisetzung in neuen Dimensionen (Schwedter Initiative)”, pp. 1–5. 30. Lecture by Dr. Brigitte Vögel; see BA DQ 300/464, 20 January 1988, “Erfahrungen aus der Leitung der Arbeitskräftegewinnung in den Industriekombinaten und -betrieben der DDR”, pp. 1–14; Internal VEB Chemie- und Tankanlagenbau ‘Ottomar Geschke’ report; see BLHA Rep 703 CTA Füwa 309, 26 October 1981, “Materielle Stimulierung der Rationaliseriung von Arbeitsplätzen und der Freisetzung in neuen Dimensionen (Schwedter Initiative)”, pp. 1–5. 31. BA DM 3/13812, 5 March 1982, “Zur Einführung und Anwendung von Kostennormativen für Leitung und Verwaltung (LuV) in Zusammenhang mit der Schwedter Initiative”, pp. 1–4 and an internal memorandum BA DM 3/13812, 18 August 1982, “Arbeitsberatung zur Anwendung der Schwedter Initiative in Beispielämtern der Deutschen Post”, pp. 1–3. 32. 0.27 (100/90) × 10 = 3.0 per cent; 0.27 (80/90) × 10 = 2.4 per cent.

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33. See, for example, BLHA Rep 711 BMK Ffo 789, 30 December 1982, “Vereinbarung über materielle Stimulierung von Maβnahmen der sozialistischen Rationalisierung des Bauwesens von Arbeitskräften für die Erfüllung neuer Aufgaben unter Anwendung der Schwedter Erfahrungen in ausgewählten Kombinaten und Betrieben des Bauwesens”, pp. 1–6; BA DC 201/3/1765, 15 October 1981, “Beschluss zur Arbeitsrichtlinie für die Ausarbeitung und Bestätigung der Konzeptionen zur Verallgemeinerung der Erfahrungen des VEB Petrochemisches Kombinat Schwedt in ausgewählten Betrieben”, pp. 1–14. 34. Report for State Council prepared by Kügler, Deputy Minister for the Chemical Industry; see BA DG 11/2624 v.1, 24 October 1980, “Bericht über Stand, Probleme und Schlussfolgerungen bei der Durchsetzung der Schwedter Initiative zur besseren Nutzung des gesellschaftlichen Arbeitsvermögens in der chemischen Industrie”, pp. 1–11. 35. BLHA 730 SED BL FfO 5320, “Seminarschwerpunkte zur Aussprache am 24.11.1978”, pp. 1–9. 36. Report by Arbeit und Löhne; see BA DQ 3/1909, 30 January 1987, “Vorschläge zur wirksamen Verbindung der leistungsorientierten Lohnpolitik mit der Freisetzung von Werktätigen”, pp. 1–4. 37. An example to illustrate the problem: imagine an enterprise with a planned number of workers of 100. If it shrinks its workforce to 90, this represents a 10 per cent reduction in its overall size. Up to fifty per cent of the saved wages would be returned to the wage fund. However, if the 10 released workers are immediately relocated to new sanctioned projects in the same enterprise, then the total number of workers in the enterprise remains at 100. As there has been no change from the planned labour levels, the authorities may not allow any of the saved wages to be retained in the wage fund. If, at the same time, a new state sponsored investment project begins and employs an additional 10 workers, all of whom are new to the enterprise, then the total number of employees in the enterprise will rise to 110. Seeing these numbers, an onlooking official may conclude that there had been no release of workers at all. 38. Letter from Horst Wambutt and Günter Ehrensperger of the Raw Material Industry Department to Günter Mittag; see BA

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DY 30/38516, 12 September 1978, “Werter Genosse Mittag!”, pp. 1–3. 39. Letter from Wyschofsky to Wolfgang Bayreuther; see BA DG 11/2624 v.1, 27 June 1980, “Planung von Stimulierungsmitteln aus dem Lohnfonds im Rahmen der Anwendung der Schwedter Initiative”, pp. 1–2. 40. BA DQ 3/1909, 28 July 1987, “Vorschläge zur Qualifizierung der Arbeitskräfte und Lohnplanung für den effektiveren Einsatz des Arbeitsvermögens und die Schwedter Initiative”, pp. 1–13. 41. BA DQ 3/1909, “Information über die Inanspruchnahme des Lohnfonds und des Durchschnittslohnes per 30.9.1987 im Bereich der Industrieministerien und über Maβnahmen zur Festigung der Lohndisziplin”, p. 4. 42. BA DG 11/2624 v.2, “Festlegungsprotokoll über die Beratung der Konzeption zur Organisierung eines Beispieles im VEB PCK Schwedt – SB – für die Rationalisierung von Arbeitsplätzen in neuen Dimensionen unter Nutzung der Erfharungen der Produktionsvereinigung ‘Polymir’ Nowopolozt am 14.6.1978 in Berlin”, pp. 1–3. 43. Letter from Wyschofsky to Bellery; see BA DG 11/2624 v.2, 22 September 1978, “Werter Genosse Bellery”, p. 2. 44. Ibid. 45. “We don’t have too few workers - we have too many jobs”. 46. David Lane, Soviet Labour and the Ethics of Communism: Full Employment and the Labour Process in the USSR (London: Routledge, 1987), p. 142. 47. Bob Arnot, Controlling Soviet Labour: Experimental Change from Brezhnev to Gorbachev (London: Macmillan, 1988), pp. 105, 180; Norr, “Shchenkino: Another Look”, pp. 142–158. 48. BLHA 730 SED BL FfO 5320, 4 January 1978, “Schlussfolgerungen und Maβnahmen zur Verallgemeinerung der Erfahrungen der Produktionsvereinigung”, pp. 1–12. 49. Konstantin Konstantinovich Cherednichenko and Lev Lazarevitsj Gol’din, The Shchekino Method (Moscow: 1978) (Russian: Щëкинcкий Meтoд). 50. Weger et al., Arbeitsproduktivität, Sozialistische Rationalisierung, Schwedter Initiative, p. 3. 51. BA DG 11/2624 v.2, 29 May 1977, “Bericht über die Entwicklung der wissenschaftlichen Arbeitsorganisation in den Betrieben

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und Kombinaten der chemischen Industrie im Jahre 1976”, pp. 1–11. 52. Kopstein, Politics of Economic Decline, pp. 168–172; Knortz, Innovationsmanagement, pp. 94–95. 53. Rainer Deppe and Dietrich Hoβ, Arbeitspolitik im Staatssozialismus: Zwei Varianten, DDR und Ungarn (Frankfurt: Campus, 1989), p. 364; Weger et al., Arbeitsproduktivität, Sozialistische Rationalisierung, Schwedter Initiative, pp. 3–5; BLHA 730 SED BL FfO 5320, 4 January 1978, “Schlussfolgerungen und Maβnahmen zur Verallgemeinerung der Erfahrungen der Produktionsvereinigung”, pp. 1–12. 54. BLHA 730 SED BL FfO 5320, 4 January 1978, “Schlussfolgerungen und Maβnahmen zur Verallgemeinerung der Erfahrungen der Produktionsvereinigung”, pp. 1–12. 55. Frohn, “Die sozialistische Rationalisierung in neuen Dimensionen”, p. 1. 56. Briefing for Günter Mittag on the progress of the Schwedt experiment, written by Horst Wambutt; see BA DY 30/38516, 13 October 1978, “Informationen über die Schwedter Initiative ‘weniger produzieren mehr’ zur Einsparung von Arbeitsplätzen”, pp. 1–2. 57. BLHA 730 SED BL FfO 5320, 11 October 1978, “Orientierung und Maβnahmen zur Weiterführung und Verallgemeinerung der im VEB PCK Schwedt erarbeiteten Rationalisierungsstrategie zur Einsparung von Arbeitsplätzen und der daraus hervorgegangenen Wettbewerbsinitiative ‘weniger produzieren mehr’”, pp. 1–15. 58. Briefing for Günter Mittag; see BA DY 30/38516, 13 October 1978, “Informationen über die Schwedter Initiative ‘weniger produzieren mehr’ zur Einsparung von Arbeitsplätzen”, pp. 1–2. 59. BA DY 30/70640, “Protokoll der Sitzung der Wirtschaftskommission am 28 Mai 1979”, p. 10. 60. Anordnung über die Ausarbeitung des Volkswirtschaftsplanes & des Staatshaushaltsplanes 1981 vom 20. Juni 1980. In: DDRGBL, Teil I/1980. Nr. 20 vom 10. Juli 1980, pp. 195–205, p. 202f. 61. Knortz, Innovationsmanagement, p. 135.

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62. BA DY 30/40416, “Stenografisches Protokoll des X. Parteitages der SED in Berlin (11–16 April 1981)”, pp. 981–984; 1013– 1016. For Willi Stoph’s speech addressing the topic; see ibid., pp. 1015–1016. 63. Quoted in Kipp, “Schwedter Initiative”, p. 2. 64. Erich Honecker confirmed that this was the Politbüro’s position at the Third Tagung der ZK der SED (19–20 November 1981); see ibid., p. 8. 65. BA DC 20-1/3/1765, 15 October 1981, “Beschluss zur Arbeitsrichtlinie für die Ausarbeitung und Bestätigung der Konzeptionen zur Verallgemeinerung der Erfahrungen des VEB Petrolchemisches Kombinat Schwedt in ausgewählten Betrieben”, pp. 1–14. 66. The indicators were: the number of workers and employees before the release of workers (VbE); the number of workers and employees after the release of workers (VbE); the average annual release of workers in total (VbE); the number of workers released respectively by investment in reconstruction, through the optimisation of labour demand for plants new plants, by scientific and technical measures, and by the deployment of robotics and application of microelectronics (VbE); the number of workers released through additional initiatives of the workers (complex applications of the WAO) (VbE); the state planning targets for released labour (converted to yearly average) (VbE); the development of the wage fund before the release of workers (according to state requirements of the 5-year plan) (million Marks); the development of the wage fund after the release of workers without material incentives (million Marks); the wage fund for material incentives calculated on the release of workers (million Marks); the wage fund for material incentives calculated on the release of workers through additional initiatives of the workers (million Marks); the development of the wage fund after the release of workers inclusive of material incentives (million Marks); jobs before the release of workers according to state orders in the 5year plan (number and as percentage of the previous year); jobs after the release of workers (number and as percentage of the previous year); administrative and service jobs before the release of workers according to state orders in the 5-year plan (number and as percentage of the previous year); administrative and service

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jobs after the release of workers (number and as percentage of the previous year); the development of the ratio of total jobs to administrative and service jobs before the release of workers (according to state requirements of the 5-year plan); the development of the ratio of total jobs to administrative and service jobs after the release of workers. 67. Marina Pehle, “Die Initiative von Schwedt ist jetzt auch bei uns Praxis”, Neues Deutschland (B), 29 January 1981, p. 3; Jochen Hertwig, “Schwedter Initiative fand groβen Widerhall”, Neues Deutschand (B), 16 April 1981, p. 3. 68. Phase of first access. 69. Weger et al., Weniger produzieren mehr, p. 30. 70. Ibid., pp. 6 and 30. 71. Frohn, “Die sozialistische Rationalisierung in neuen Dimensionen”, p. 5; Paper prepared by Zentral Forschungsinstitut für Arbeit; see BA DQ 300/464, 26 April 1988, “Zehn Jahre Schwedter Initiative – Bilanz und Ausblick”, pp. 1–12; Knortz, Innovationsmanagement, pp. 132–133. 72. BLHA Rep 703 CTA Füwa 469, 15 October 1979, “Rationalisierungsstratgie zur Durchsetzung der Schwedter Initiative ‘Weniger produzieren mehr’. VEB Chemie- und Tankanlagenbau ‘Ottomar Geschke’ Fürstenwalde”, pp. 1–16. 73. Kipp, “Schwedter Initiative”, pp. 27–29; Speech given by Claus Friedrich, editor-in-chief of Tribüne delivered at the 34th Tribüne Meeting, held at PCK Schwedt (Stammbetrieb); see BA DY 34/11819, 9 October 1980, “Erfahrungen bei der Verwirklichung der Schwedter Initiative ‘weniger produzieren mehr’”, pp. 1–14. 74. Weger et al., Arbeitsproduktivität, Sozialistische Rationalisierung, Schwedter Initiative, p. 37. 75. BA DY 34/11981, 20 February 1979, “Bericht der Betriebsgewerkschaftsleitung des Eisenhüttenkombinates Ost über gewerkschaftliche Aktivitäten zur Durchsetzung der Initiative ‘weniger produzieren mehr’”, pp. 1–10; BA DY 34/11981, 26 June 1980, “Welche Erfahrungen und Ergebnisse gibt es bei der Durchsetzung der Schwedter Initiative ‘weniger produzieren mehr’ im Chemiekombinat Bitterfeld?”, p. 2. 76. Kipp, “Schwedter Initiative”, pp. 103 and 123. 77. Weger et al., Weniger produzieren mehr, pp. 32–33.

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78. Ibid., p. 33. 79. Deppe and Hoβ, Arbeitspolitik im Staatssozialismus, pp. 368– 369; Kopstein, Politics of Economic Decline, p. 170. 80. BA DY 34/11981, 18 February 1980, “Bericht des Sekretariats des Kreisvorstandes des FDGB über Ergebnisse und weitere Aufgaben der politischen Führung der Schwedter Initiative ‘weniger produzieren mehr’ in untrennbarem Zusammenhang mit der Initiative ‘Ideen, Lösungen, Patente’ und der Arbeit mit neuer Vereinbarungen”, pp. 1–10; BA DY 34/11981, 20 February 1979, “Bericht der Betriebsgewerkschaftsleitung des Eisenhüttenkombinates Ost über gewerkschaftliche Aktivitäten zur Durchsetzung der Initiative ‘weniger produzieren mehr’”, pp. 1–10; BA DY 34/11981, 10 December 1980, “Information zum Stand der Durchsetzung der Schwedter Initiative ‘weniger produzieren mehr’”, pp. 1–7; speech of Dr. Dieter Knoch in the Klubhaus der Werktätigen of VEB Leuna-Werke ‘Walter Ulbricht’; see BA DY 34/13648, 30 June 1982, “Arbeitsprotokoll über den gemeinsamen Erfahrungsaustausch des Ministerrates der DDR und des Bundesvorstandes des FDGB”, p. 51. 81. Presentation prepared by the BGL of VEB Arzneimittelwerk Dresden Stammbetrieb of VEB Pharmazeutisches Kombinat GERMED (Dresden/Radebeul branch) to a meeting of the Presidium of the Central Board of IG Chemie, Glas und Keramik; see BA DY 34/11981, 25 June 1980, “Erfahrungen und Ergebnisse bei der Durchsetzung der Schwedter-Initiative”, pp. 1–7. 82. Deppe and Hoβ, Arbeitspolitik im Staatssozialismus, p. 368. 83. Presentation by Dr. Dieter Knoch of the Chemical Industry’s Ministry’s Arbeit und Löhne section to the Economic Commission of the Central Committee of the SED; BA DG 11/3013, 11 April 1983, “Ergebnisse und Erfahrungen bei der Verallgemeinerung der ‘Schwedter Initiative’ in der chemischen Industrie”, pp. 1–9. 84. DY 34/13648, 30 June 1982, “Arbeitsprotokoll über den gemeinsamen Erfahrungsaustausch des Ministerrates der DDR und des Bundesvorstandes des FDGB”, p. 55. 85. Ibid., p. 125. 86. Presentation by Dr. Dieter Knoch of the Chemical Industry’s Ministry’s Arbeit und Löhne section to the Economic Commission of the Central Committee of the SED; see BA DG 11/3013,

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11 April 1983, “Ergebnisse und Erfahrungen bei der Verallgemeinerung der ‘Schwedter Initiative ‘ in der chemischen Industrie”, pp. 1–9. 87. Ibid; report for State Council prepared by Kügler, Deputy Minister for the Chemical Industry; see BA DG 11/2624 v.1, 24 October 1980, “Bericht über Stand, Probleme und Schlussfolgerungen bei der Durchsetzung der Schwedter Initiative zur besseren Nutzung des gesellschaftlichen Arbeitsvermögens in der chemischen Industrie”, pp. 1–11. 88. BA DY 34/11981, 20 February 1979, “Bericht der Betriebsgewerkschaftsleitung des Eisenhüttenkombinates Ost über gewerkschaftliche Aktivitäten zur Durchsetzung der Initiative ‘weniger produzieren mehr’”, pp. 1–10; BA DY 34/11981, 14 October 1980, “Bericht über Erfahrungen, Ergebnisse und Probleme der gewerkschaftspolitischen Einflussnahme auf die Ausarbeitung langfristiger Rationalisierungskonzeptionen und die Vorbereitung der Intensivierungskonferenzen mit dem Ziel, entsprechend der Schwedter Initiative ‘weniger produzieren mehr’”, pp. 1–9; Letter from the Minister of Trade and Provisioning, Gerhard Briksa, to the State Secretary of the SPK; see BA DC 20-I/3/1765, 18 September 1981, “Werter Genosse Klopfer!”, pp. 1–2. 89. Report for State Council prepared by Kügler, Deputy Minister for the Chemical Industry; see BA DG 11/2624 v.1, 24 October 1980, “Bericht über Stand, Probleme und Schlussfolgerungen bei der Durchsetzung der Schwedter Initiative zur besseren Nutzung des gesellschaftlichen Arbeitsvermögens in der chemischen Industrie”, pp. 1–11; document prepared by the Secretariat of the Bezirksvorstand Karl-Marx-Stadt of the FDGB; see BA DY 34/11981, 10 December 1980, “Information zum Stand der Durchsetzung der Schwedter Initiative ‘weniger produzieren mehr’”, pp. 1–7. 90. Report presented by the BGL of VEB Arzneimittelwerk Dresden Stammbetrieb of VEB Pharmazeutisches Kombinat GERMED (Dresden/Radebeul branch) to a meeting of the Presidium of the Central Board of IG Chemie, Glas und Keramik; see BA DY 34/11981, 25 June 1980, “Erfahrungen und Ergebnisse bei der Durchsetzung der Schwedter Initiative”, pp. 1–7.

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91. Speech given by Claus Friedrich, editor-in-chief of Tribüne delivered at the 34th Tribüne Meeting, held at PCK Schwedt (Stammbetrieb); see BA DY 34/11819, 9 October 1980, “Erfahrungen bei der Verwirklichung der Schwedter Initiative ‘weniger produzieren mehr’”, pp. 4–5. 92. BLHA Rep 877 ABI KK Cottbus-St 988, 27 March 1981, “Bericht über die Kontrolle zur Realisierung der Rationalisierungsmaβnahmen und der Anwendung der WAO zur Umgestaltung von Arbeitsplätzen und zur Freisetzung von Arbeitskräften durch die breitere Anwendung der Schwedter Initiative. Arbeiter-und-Bauern Inspektion Kreiskomitee CottbusStadt”, p. 1. 93. Ibid. 94. Rationalisation on a larger scale. 95. BA DY 30/70675, “Protokoll der Sitzung der Wirtschaftskommission beim Politbüro des ZK der SED am 27. Juni 1983”, p.4. 96. Presentation by Günther Wyschofsky, Kurt Singhuber, and Wolfgang Mitzinger to the meeting of the Economic Commission of the Central Committee held in Berlin; see BA DY 30/70675, 27 June 1983, “Bericht der Minister für Chemische Industrie, Kohle und Energie sowie Erzbergbau, Metallurgie und Kali über Ergebnisse und Erfahrungen bei der Verallgemeinerung der ‘Schwedter Initiative’”, pp. 2–3. 97. Kipp, “Schwedter Initiative”, p. 47. 98. Presentation by the Central Research Institute for Labour; see BA DQ 300/464, 26 April 1988, “Zehn Jahre Schwedter Initiative – Bilanz und Ausblick”, pp. 1–12; BA DY 34/15911, 16 June 1983, “Konzeption zur komplexen Rationalisierung von Arbeitsplätzen zur Freisetzung von AK im VEB Flachglaswerk Uhsmannsdorf unter Nutzung der Erfahrungen des VEB Petrochemischen Kombinat Schwedt”, pp. 1–7. 99. Kopstein, Politics of Economic Decline, p. 170. 100. Knortz, Innovationsmanagement, p. 98; Presentation by Dr. Dieter Knoch of the Chemical Industry’s Ministry’s Arbeit und Löhne section to the Economic Commission of the Central Committee of the SED; BA DG 11/3013, 11 April 1983, “Ergebnisse und Erfahrungen bei der Verallgemeinerung der ‘Schwedter Initiative’ in der chemischen Industrie”, pp. 1–9;

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presentation by the Central Research Institute for Labour; see BA DQ 300/464, 26 April 1988, “Zehn Jahre Schwedter Initiative – Bilanz und Ausblick”, pp. 1–12; speech of Dr. Werner Frohn in the Klubhaus der Werktätigen of VEB Leuna-Werke ‘Walter Ulbricht’; see BA DY 34/13648, 30 June 1982, “Arbeitsprotokoll über den gemeinsamen Erfahrungsaustausch des Ministerrates der DDR und des Bundesvorstandes des FDGB”, pp. 42– 43. 101. Presented by Günther Wyschofsky, Kurt Singhuber, and Wolfgang Mitzinger to the meeting of the Economic Commission of the Central Committee held in Berlin on 27 June 1983; see BA DY 30/70675, “Bericht der Minister für Chemische Industrie, Kohle und Energie sowie Erzbergbau, Metallurgie und Kali über Ergebnisse und Erfahrungen bei der Verallgemeinerung der ‘Schwedter Initiative’”, pp. 2–4. See, for example, the comments of Günther Wyschofsky, ibid., p. 2. 102. BLHA Rep 505 SHR Wildau 1655, 14 June 1982, “Führungskonzeption der Generaldirektors des VEB Schwermaschinenbau-Kombinat ‘Ernst Thälmann’ Magdeburg – Stammwerk – zur Verwirklichung der Rationalisierungsstrategie durch breite Anwendung der ‘Schwedter Initiative’ im Perspektivzietraum bis 1985”, pp. 1–18. 103. BA DY 34/12292, no date but most likely sometime in 1983, “Gesamtkonzeption zur Anwendung der Schwedter Initiative im Post- und Fernmeldewesen”, pp. 1–7. 104. Landesarchiv Berlin (hereafter LA) C Rep 309 2392, 14 May 1982, “Konzeption zur Anwendung und Durchsetzung der Schwedter Initiative bei der beschleunigten Rationalisierung im Eisenbahnwesen im Rbd-Bezirk Berlin, Bahnhof Berlin Ostgüterbahnhof”, pp. 1–7. 105. BA DY 42/2640, 17 June 1983, “Bericht über die Ergebnisse bei der weiteren Durchsetzung der Schwedter Initiative im Bereich des Konsumgüterbinnenhandels”, pp. 1–6. 106. BLHA Rep 703 Reifwe Füwa 2063, 16 July 1985, “Stand der Realisierung der weiterführungskonzeption Schwedter Initiative vom 11.1.1985 im 1. Halbjahr 1985”, p. 2. 107. BA DY 42/2646, 7 November 1984, “Vorlage über die Verallgemeinerung der Grundsätze zur weiteren Vervollkommnung der Leitung und Planung der gesellschaftlichen Arbeitsvermögens

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unter besonderer Berücksichtigung der weiteren Durchsetzung der Schwedter Initiative”, pp. 4–5. 108. Territorial rationalisation and key technologies. 109. BA DQ 300/464, 26 April 1988, “Zehn Jahre Schwedter Initiative – Bilanz und Ausblick”, pp. 1–12; Knortz, Innovationsmanagement, pp. 132–133. 110. Deppe and Hoβ, Arbeitspolitik im Staatssozialismus, pp. 364– 379; Jeanette Z. Madarász, Working in East Germany: Normality in a Socialist Dictatorship, 1961–1979 (New York: PalgraveMacmillan, 2006), p. 99; and Weger et al., Arbeitsproduktivität, Sozialistische Rationalisierung, Schwedter Initiative, pp. 1–10. 111. BA DY 34/13648, 30 June 1982, “Arbeitsprotokoll über den gemeinsamen Erfahrungsaustausch des Ministerrates der DDR und des Bundesvorstandes des FDGB”, p. 16. 112. BA DC 20-I/3/2056, 28 June 1984, “Beschluss zum Bericht des Rates des Kreises Staβfurt über Ergebnisse und Erfahrungen bei der Anwendung der Schwedter Initiative ‘weniger produzieren mehr’”, pp. 1–15. 113. Peter Thiele, “Wie das Schwedter Beispiel in Staβfurt Schule machte,” Arbeit und Arbeitsrecht (July 1983), p. 291. 114. Editor, “Rationeller Einsatz des Arbeitsvermögens: Anliegen von Betrieben und Staatsorganen,” Arbeit und Arbeitsrecht (July 1983), p. 286; BA DC 20-I/3/2056, 28 June 1984, “Beschluss zum Bericht des Rates des Kreises Staβfurt über Ergebnisse und Erfahrungen bei der Anwendung der Schwedter Initiative ‘weniger produzieren mehr’”, pp. 1–15. 115. Editor, “Rationeller Einsatz des Arbeitsvermögens”, p. 288; Editor, “Neue Maβstäbe für die territoriale Rationalisierung: Engstes Zusammenwirken der Leitungen der Kombinate und Betriebe mit den örtlichen Räten unerläβlich,” Arbeit und Arbeitsrecht (July 1983), pp. 295–296. 116. BA DC 20-I/3/2056, 28 June 1984, “Beschluss zum Bericht des Rates des Kreises Staβfurt über Ergebnisse und Erfahrungen bei der Anwendung der Schwedter Initiative ‘weniger produzieren mehr’”, pp. 1–15. 117. Ibid. 118. Thiele, “Wie das Schwedter Beispiel in Staβfurt Schule machte”, p. 292.

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119. The workers gained were deployed in the following ways: on more efficient multiple shift systems (24.7 per cent), on strengthening Rationalisierungsmittelbau sections (23.5 per cent), on expanding consumer good production (14.7 per cent), and on new production facilities, including microelectronics and industrial robotic technology (27.4 per cent). 120. BA DC 20-I/3/2056, 28 June 1984, “Beschluss zum Bericht des Rates des Kreises Staβfurt über Ergebnisse und Erfahrungen bei der Anwendung der Schwedter Initiative ‘weniger produzieren mehr’”, pp. 1–15. 121. Editor, “Rationeller Einsatz des Arbeitsvermögens”, p. 287. 122. Editor, “Neue Maβstäbe für die territoriale Rationalisierung”, p. 295. 123. BA DC 20-I/3/2056, 28 June 1984, “Beschluss zum Bericht des Rates des Kreises Staβfurt über Ergebnisse und Erfahrungen bei der Anwendung der Schwedter Initiative ‘weniger produzieren mehr’”, pp. 1–15. 124. BA DQ 300/464, 6 March 1986, “Die Verantwortung der Staatsorgane für den effektiven Einsatz und die rationelle Nutzung des gesellschaftlichen Arbeitsvermögens in der neuen Etappe der ökonomischen Strategie, insbesondere zur breite Durchsetzung der Schwedter Initiative – weniger produzieren mehr”, p. 30. 125. BA DC 20-I/3/2492, 8 July 1987, “Beschluss zum Bericht des Rates des Bezirkes Halles über Ergebnisse der Nutzung der Erfahrungen des Kreises Staβfurt bei der Anwendung der Schwedter Initiative ‘weniger produzieren mehr’”, pp. 1– 28. Other prominent coordination councils included “ChemieTerritorium”, in which VEB Kombinat Leuna and VEB Kombinat Buna, together with the Kreise of Merseberg, Weissenfels, Saalkreis and the cities of Halle and Halle-Neustadt worked together; “Kohle-Chemie-Territorium” which operated around the Bitterfeld conurbation; and the community of interests based on a collaboration between VEB Agrochemical Kombinat Piesteritz with the city of Wittenberg. In 1986, there were already 57 territorial working groups and inter-enterprise user communities supporting microelectronics work, in which 920 companies, facilities and cooperatives sought to accelerate the application of key technologies. In that year, these working groups processed 288 applications of microelectronics and 296

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for industrial robotic technology, work which resulted in 193 jobs being saved and 780 workers gaining other jobs. 126. Ibid. 127. Report prepared by the Chair of the Bezirk Frankfurt (Oder) planning commission; see BLHA Rep 601 RdB FfO 10596, 16 June 1988, “Gesamteinschätzung der Konzeption des Bezirkswirtschaftsrates, des Bezirkesbauamtes, der Abt. Land-, Forstund Nahrungsgüterwirtschaft, der Abt. Verkehrs- und Nachrichtenwesen und der Abt. Handel und Versorgung zur Anwednung der Schwedter Initiative ‘Weninger produzieren mehr’ bis 1990 und darüber hinaus”, pp. 1–5. 128. Report by the Economic Council of the Bezirk Frankfurt (Oder); see BLHA Rep 601 RdB FfO 30115, 25 March 1989, “Konzeption für weitere Anwendung der Schwedter Initiative ‘Weniger produzieren mehr’ für den Zeitraum bis 1990 und darüber hinaus”, pp. 1–12. 129. BLHA Rep 703 Reifwe Füwa 1825, 30 May 1989, “Konzeption zur Entwicklung des gesellschaftlichen Arbeitsvermögens und Weiterführung der Schwedter Initiative im Zeitraum 1990– 1995 im VEB RKF/S”, pp. 1–17. By this stage, Siegfried Kipp, formerly one of the pioneers of the Schwedt Initiative at PCK, had taken on the role of Director General of this combine. 130. Editor, “Rationeller Einsatz des Arbeitsvermögens”, p. 287. 131. Cottbus City Kreis Committee; see BLHA Rep 877 ABI KK Cottbus-St 1725, 7 June 1989, “Bericht über die Ergebnisse der Kontrolle zur Durchsetzung der neuen Qualität in der WAOArbeit – der umfassender Nutzung der Schwedter Initiative – in ausgewählten Betrieben des Territoriums der Stadt Cottbus”, p. 1. 132. BLHA Rep 703 Reifwe Füwa 1825, 30 May 1989, “Konzeption zur Entwicklung des gesellschaftlichen Arbeitsvermögens und Weiterführung der Schwedter Initiative im Zeitraum 1990–1995 im VEB RKF/S”, p. 1. 133. Spremberg City Kreis Committee; see BLHA Rep 877 ABI KK Spremberg 1673, 19 June 1987, “Information über durchgeführte Kontrollen zur Wirksamkeit der Schwedter Initiative”, pp. 1–4. 134. Cottbus City Kreis Committee; see BLHA Rep 877 ABI KK Cottbus-St 1725, 7 June 1989, “Bericht über die Ergebnisse der

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Kontrolle zur Durchsetzung der neuen Qualität in der WAOArbeit – der umfassender Nutzung der Schwedter Initiative – in ausgewählten Betrieben des Territoriums der Stadt Cottbus”, pp. 1–8. 135. Surveys from 1989, for example, suggested that as few as 15 per cent of enterprises and 12.8 per cent of combines were meeting the desired 3.0 per cent release rate in that year; see Knortz, Innovationsmanagement, p. 155. 136. Ibid., p. 152. 137. Ibid., Tabelle 8, p. 147. 138. Statistical analyses of the data underpinning Table 5.5 and Figs. 5.6 through 5.8 not reported here strongly confirm that neither the geographical pattern of workers released nor coverage of the Schwedt Initiative were statistically being driven by either Bezirk population size, its industry’s share of the workforce or the share of its workforce in any of the high-profile expansionary industries (i.e. the chemical, energy, machinery or electrical industries). 139. Knortz, Innovationsmanagement, p. 155. 140. See, for example, Madarázy, Working in East Germany, p. 99; Jori Kosta, “Manpower Problems in the GDR”, in Jan Adam (ed.), Employment Policies in the Soviet Union and Eastern Europe, 2nd edition (New York: Palgrave Macmillan, 1987), pp. 70– 71; Toni Pierenkemper, “Vierzig Jahre vergebliches Mühen – die Bechäftigungs – und Arbeitsmarktpolitik”, in André Steiner (ed.), Überholen ohne einzuholen. Die DDR-Wirtschaft als Fußnote der deutschen Geschichte? (Berlin: Christoph Links Verlag, 2006), pp. 61–63; Kopstein, Politics of Economic Decline, pp, 170–171; Hübner, Arbeit, Arbeiter und Technik in der DDR 1971 bis 1989, pp. 435–438; Knortz, Innovationsmanagement, pp. 132–164; and Deppe und Hoβ, Arbeitspolitik im Staatssozialismus, p. 378. 141. BA DQ 300/464, 19 June 1987, “Diskussionsbeitrag zur Ratstagung des Rates für Fragen der Leitung in der Wirtschaft”, p. 1. 142. Prior to November 1978, the slogan “fewer produce more” had been used only in relation to a specific enterprise level competition initiative (Wettbewerbsinitiative).

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Secondary Sources Arnot, Bob. 1988. Controlling Soviet Labour: Experimental Change from Brezhnev to Gorbachev. London: Macmillan. Deppe, Rainer and Dietrich Hoβ. 1989. Arbeitspolitik im Staatssozialismus: Zwei Varianten, DDR und Ungarn. Frankfurt: Campus. Hübner, Peter. 2013. Arbeit, Arbeiter und Technik in der DDR 1971 bis 1989: Zwischen Fordismus und digitaler Revolution. Berlin: Dietz Verlag. Knortz, Heike. 2004. Innovationsmanagement in der DDR 1973/79-1989. Der sozialistische Manager zwischen ökonomischen Herausforderungen & Systemblockaden. Berlin: Duncker & Humblot. Kopstein, Jeffrey. 1997. The Politics of Economic Decline in East Germany, 1945– 1989. Chapel Hill: University of North Carolina Press. Kornai, János. 1992. The Socialist System: The Political Economy of Communism. Oxford: Clarendon Press. Kosta, Jori. 1987. Manpower Problems in the GDR. In Employment Policies in the Soviet Union and Eastern Europe 2e, ed. Jan Adam, 49–71. New York: Palgrave Macmillan. Lane, David. 1987. Soviet Labour and the Ethics of Communism: Full Employment and the Labour Process in the USSR. London: Routledge. Madarásy, Jeanette Z. 2006. Working in East Germany: Normality in a Socialist Dictatorship 1961–79. New York: Palgrave-Macmillan. Norr, Henry. 1986. Shchekino: Another Look. Soviet Studies 38 (2): 141–169. Pierenkemper, Toni. 2006. Vierzig Jahre vergebliches Mühen – die Bechäftigungs- und Arbeitsmarktpolitik. In Überholen ohne einzuholen. Die DDR-Wirtschaft als Fußnote der deutschen Geschichte? ed. André Steiner, 45–66. Berlin: Christoph Links Verlag. Steiner, André. 2010. The Plans That Failed: An Economic History of the GDR. Oxford: Berghahn Books.

CHAPTER 6

Choosing Bankruptcy: The Onset of Debt and Financial Crisis

In the first lecture of our introductory economic history course each semester, we give our students a quiz designed to test their general knowledge. Its results help us calibrate the content of the course to the level of students’ historical understanding. One of the questions on the test asks them to list three things they know about the former German Democratic Republic (GDR). Most have never been to Germany and almost all were born after the GDR’s demise. While blank responses to the question are not uncommon, three aspects of the GDR’s experience more than any others dominate their replies: (1) the fall of the Berlin Wall, (2) the omnipresent terror of the Stasi and (3) the financial and economic failings of its rulers and the system they presided over. Their responses no doubt reflect contemporary lay perceptions of the erstwhile Republic. With respect to the last of these most common observations, when further probed, we find that there is genuine disbelief that a communist regime, avowedly in conflict with the capitalist world, would knowingly allow itself to become so deeply indebted to its “class enemy”. The students, of course, are not alone in their puzzlement. Disbelief and incredulity were felt by many at the time, too, especially when the news of the true extent of the GDR’s debt finally became public. Many in the East German Politbüro itself, who had been kept largely in the dark, were among the shocked and dismayed.1 The day following Erich © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 G. B. Magee and W. Geerling, Socialism with a Human Face, Palgrave Studies in Economic History, https://doi.org/10.1007/978-981-19-0664-0_6

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Honecker’s removal from the General Secretaryship of the SED on 24 October 1989, Gerhard Schürer, head of the State Planning Commission (Staatliche Plankommission or SPK ), delivered a candid report to the incoming General Secretary, Egon Krenz. The situation was worse than Krenz had expected: US$26.5 million of foreign debt, a current account deficit in excess of $12 billion for that year and interest payments of $4.5 billion to be found. Up to 60 per cent of all its annual export revenue would be required just to service the debt. The SPK advised Krenz that, while a modest export surplus could be expected in 1989, export growth could not cover the growing debt crisis. Drastic rationalisation was needed if default and bankruptcy were to be circumvented. Above all, the state’s generous consumption subsidies and investments in priority projects would need to be dramatically curtailed. The bottom-line was that, without further massive financial assistance, living standards for the citizens of the GDR would have to fall by an estimated 25–30 per cent.2 Krenz, who remained opposed to introducing such an austerity programme, dispatched Alexander Schalck-Golodkowski, head of the GDR’s Commercial Coordination (Kommerzielle Koordinierung or KoKo) to West Germany in a forlorn attempt to secure a short-term loan with no conditions.3 It was too late. With the scale of the disaster now public knowledge, the credibility of the SED regime—both politically and financially—had been fatally wounded. Party members were disillusioned and the ranks of those demanding root and branch reform swelled. Any remaining perception that the SED could manage the economic crisis was shot. As one protest slogan of the time mocked: “Marx on the currency, botch-up in the economy” (Marx auf der Währung, Murks in der Wirtschaft ).4 The endgame for the SED regime was well and truly in train. The unravelling of its rule moved rapidly. Within less than eight weeks of Krenz’s ascension to power, the Wall had fallen, the People’s Chamber (Volkskammer) had rescinded the clause in the Constitution which gave the SED its monopoly on power, the entire Central Committee and Politbüro had resigned, and the SED had expelled its leadership and abandoned Marxism–Leninism.5 While the financial crisis was, of course, just one factor contributing to the demise of the GDR, this largely self-inflicted disaster played a prominent role in discrediting the regime and limiting the scope of action it could conceivably take. Looking beyond the immediate causes of the debt, which are outlined in later sections, there is a further, less frequently

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posed question to be answered. That question is the same one pondered by our students: how could the leadership have continued to pursue such a risky strategy of accumulating ever-larger volumes of debt, cognisant of the mounting debt and despite the constant and intensifying warnings it was receiving from within the party and state apparatus? To come to terms with this question, we contend that some understanding of how decisions were made at the pinnacle of the SED is essential. During the key period of the Honecker years, fundamental questions of economic strategy typically bypassed the Politbüro and were decided by a small circle of its members (and their advisers) with responsibility for the economy. The circle was overseen by Günter Mittag, the Economic Secretary of the Central Committee, and its function was purely advisory. Mittag, who had a close—many of his Politbüro colleagues called it toadying6 —relationship with Honecker, acted as his chief economic adviser. Key decisions typically were discussed and determined by Mittag and Honecker before being sent to the Politbüro for ratification, often without debate.7 Such decision-making by a coterie of individuals directly tied to Honecker and Mittag’s offices did not exactly lend itself to the type of lateral, out-of-the-box thinking needed to negotiate the vexing debt trap the GDR was in. Indeed, both in the existence of this exclusive policymaking bubble and in the personalities and weaknesses of those who peopled it, many have found key components of their explanation for why such a calamity could have come about. The limitation of this inner circle played out in various ways. Most commonly, attention is drawn to Honecker’s conscious eschewal of detailed analyses of the GDR’s growing debt problems. It is a matter of record that on many occasions Gerhard Schürer and others had attempted to alert Honecker to the need to alter course, only to have their approaches spurned. As Schürer noted, unlike his successor Egon Krenz, Honecker showed no desire to learn “the full truth about the real economic situation in the country”.8 Not only did he not want to know but he found the warnings offered sufficiently irritating to attempt to have future versions nipped in the bud. Thus, in November 1973, the Central Committee’s finance expert, Günter Ehrensperger, drew Honecker’s attention to the fact that on current trends the GDR’s foreign debt would balloon to 20 billion Valutamark by 1980.9 As Ehrensperger later related, Honecker’s response, far from expressing concern about the situation, reflected instead his annoyance at the efforts being made to enlighten him:

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I was summoned to him on the same evening, and he told me I was to cease working on such calculations and studies immediately. I was to receive no further material and I was to have all statistical databases in the department destroyed.10

Such dereliction of duty had profound consequences. As Jonathan Zaitlin has asserted, Honecker’s “cavalier attitude toward economic policy, his wilful neglect of the GDR’s financial health, and his refusal to listen to the counsel of his economic aides permitted the debt to spin out of control”.11 What drove this lack of interest in the true nature of the grave situation that was developing around him? In part, for some, it revealed a weakness of character, the proclivity of an “aging dictator” to prefer to “muddle through” indecisively ever fearful of receiving “a rude awakening”.12 Others, however, have attributed more sinister motivations. In this view, the accumulation of foreign debt was little more than a “Ponzi scheme”,13 a “fraud” devised by Honecker’s “most devious of advisors”, Mittag, to deliberately “conceal the GDR’s predicament” and through such “duplicity” sustain the vital inflow of foreign capital.14 Or, it might have had its origins in Honecker and his acolytes’ “autocratic, unrealistic and self-delusory”15 thinking that lent itself to the propagation of an “increasingly irrational quality of economic policy”.16 Such economic irrationality in turn may have had its genesis in “ideological commitments”17 that bred a dogmatism, which rationalised the pursuit of “politics at the expense of economic substance”.18 Honecker and the senior leadership of the SED were, after all, devout Marxist–Leninists with an ingrained belief that economics could, and should, be bent to political will.19 Moreover, those within the SED, who may have had doubts about the wisdom of their General Secretary’s position, were bound by the principle of democratic centralism and would put such thoughts aside for the good of the party. “The party is always right” (Die Partei hat immer recht ). To challenge such a tenet of Marxism–Leninism would place one outside the party and the international communist movement. Few senior party members, who had devoted their life to the party’s advancement, could consider such a fate. As Stephen Kotkin has reminded us, none of this should surprise us:

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the mundane fact about the Communist establishments in Eastern Europe was that they were full of … Communists. And the single most important fact about the formerly secret Communist archives is this: behind closed doors the Communists spoke with the same vocabulary and worldview that they used in public.20

The problems of ideology were seemingly compounded by the alleged limitations of Honecker’s understanding of, indeed interest in, economics. He had “no profound knowledge of economic matters”21 and was in fact in these regards a “dilettante”,22 captured by “economic illiteracy” and a fondness for “economic adventurism”.23 As Charles Maier put it, writing in relation to his efforts to tackle the mounting debt crisis: Honecker’s interventions were fitful. He contended himself with homey examples that suggested the large implications of issues might be beyond his grasp, and he avoided any resolute course of action.24

In short, to the extent that the literature addresses the matter at all, the answer it gives to the question why the senior leadership of the SED were able to make decisions that they knew would in all likelihood plunge the GDR into ever greater debt and pose an existential crisis for their own regime appears to lie in the irrationality of Honecker, Mittag and their closest advisers. Whether out of ignorance, ideological delusion, simple human frailties or a combination of all three, they continuously opted to pursue a ruinous and irrational path. One can, of course, understand where such a belief comes from. All of the elements of behaviour and personality referred to are readily evident in the sources. Honecker was an ageing, intolerant ideologue, much more interested and au fait with political strategy and positioning than the management of the economy. Nevertheless, it is somewhat unsatisfying that such an important dimension of the origins of the debt crisis is reduced to a few individuals’ irrationality, claims that to boot are for the most part made ex post facto with full knowledge of the crisis’ denouement. And what of the label of “irrationality” itself? What is meant here? It is not explained. If such irrationality is inferred from the regime’s inability to halt the accumulation of debt and its ultimate demise, then one is erroneously equating a failure of policy and political strategy with irrationality. In itself, rationality does not mean or even imply success. Many eminently rational policy makers see their plans come asunder. Rather, what rationality means, if it means

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anything, is that a decision is grounded in consistent reasoning and logic. Rationality, understood in this manner and observed in abstraction, is completely neutral in terms of outcomes. A decision may certainly fail because it is irrationally conceived, but it may also fail because on-theground circumstances and realities made it impossible to realise. Although the literature does not cast itself in terms of decision theory, so here we must speculate, it appears that when the decisions of Honecker and Mittag are deemed irrational, delusional or unrealistic, what is typically being meant is that their decisions did not accord with what one would expect economical rational agents to do, namely, to maximise expected value or utility. In other words, Honecker and Mittag set a policy framework within which borrowing decisions, which could not have been justified at the time on the basis of expected value, were regularly being entered into. If this is what is meant by its use of the term “economic irrationality”, then the literature is not far off the mark. Reckless and risky decisions were made. However, as Chapter 2 revealed, in a world of uncertainty, there are severe limitations to such economically based rational decision-making. Not least among the problems is the fact that such an approach does allow for the subjective and cognitive biases and traits that have been consistently shown by psychologists and behavioural economists to be highly influential in the deliberations of individuals. In the following sections, we explore how an alternative, more empirically based, approach to rational decision-making, prospect theory, can inform our understanding of why Honecker and those around him may have decided to opt to take on ever-larger volumes of foreign debt.

6.1

Framework

One of the most important developments in decision theory in recent years has been the emergence of a new approach with broader explanatory and predictive powers than its predecessors. That approach, called prospect theory (PT), describes how people make decisions when presented with alternatives that involve risk, probability and uncertainty. PT is grounded in the empirically demonstrated observation that decision-making is profoundly influenced by whether the choice to be made involves a perceived loss or gain. Controlled experimentation has shown that individuals hate to lose more than they like to win, a phenomenon called loss aversion. In this section, we briefly outline a framework based on the predictions of PT that can help explain why

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the leadership of the SED was willing to continue accumulating foreign debt, despite receiving grave warnings from many of its own experts. This framework provides the theoretical foundation for the chapter’s analysis. For further details on the underpinnings of the framework, the concepts involved, or PT more generally, we encourage readers to turn to Chapter 2.25 In deploying PT to understand the choices made by the SED, we are, of course, not breaking entirely new ground. There already exists a burgeoning literature in political science and international relations that applies PT to a range of scenarios.26 Much of this research has focussed on how issues such as framing and loss aversion shape the choices taken by political actors. Among other things, this literature has explained why politically vulnerable governments in Latin America have proven more inclined to implement major and unpopular market-oriented reforms27 ; why party platforms change more profoundly in response to electoral defeats than comparable vote gains28 ; why systemic welfare reforms in Italy have tended to be more successful when framed in terms of loss29 ; and why disparate interest groups in Chile are better able to accept the risk of free riding and act collectively, when a challenge that could potentially bind them together is similarly presented as a loss.30 To the best of our knowledge, PT has hitherto not been applied to the economic history of the GDR. To familiarise readers with the concepts involved in our analysis, Fig. 6.1 provides an overview of the decision-making framework of PT. Analytically speaking, the process of decision-making is decomposed into two phases. In the first phase, the evaluation phase, the nature of the decision to be made is fleshed out. In practice, much of this phase is carried out subconsciously. Once a decision is required, the choice to be made is framed as either a loss or a gain. Given decision-makers’ propensity to be affected by loss aversion, how the choice presented to them is framed has important implications for the outcome of the decision-making process. Whether pitched as a loss or gain, the choice also passes through two other filters. The first relates to the breadth of the framing, that is, the extent to which the present choice is associated with other pertinent choices. In other words, to what degree does the decision-maker draw upon information gleaned from, and impactful on, other relevant decisions in their deliberations? The decision-maker’s framing is regarded as narrow when they neglect or do not see connections between different decisions. By contrast, broad framing is said to occur when the decision

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Fig. 6.1 An overview of decision-making

is determined within a context that incorporates all germane decisions. Narrow (broad) framing implies that a decision-maker views each decision in isolation (as interconnected). The other filter is the “mental accounting” of the decision-maker. The notion of mental accounting stems from the empirical observation that

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people derive pleasure from not just an object’s value but also the quality of the deal that secured the object. The concept of mental accounting implies that a dollar is not always a dollar. In other words, people treat money differently and place it into distinct “mental accounts”, depending on how it is acquired and how it is intended to be used. Thus, internally, we have a tendency to regard and utilise $5 found on the pavement as different from $5 earned through labour. We are much more likely to spend the former in a profligate manner. Mental accounts can be defined by decision-makers either inclusively or exclusively. An exclusive account is one which is focussed on a very narrow or specific quality of the value. Thus, a decision-maker with a series of accounts that are configured in terms of each of the different forms of windfall gains they receive—viz. one for lottery wins, one for unexpected gifts and one for money found on the street—operates with more exclusive mental accounts than another decision-maker who is happy to lump all windfall gains into the same account. Mental accounts and breadth of framing matter for two reasons. First, they shape what form of decision-making will take place. According to PT, the broader (narrower) the framing and the more inclusive (exclusive) the accounts, the more (less) likely traditional rational decision-making based on expected value will occur. Put differently, the behaviour of a decision-maker who views their current decision in isolation from other decisions and who regards the values generated by each of their decisions distinctly is more likely to conform to the predictions of PT. Second, framing and mental accounts matter because they are believed to be important determinants of reference points. Reference points are the benchmarks against which decision-makers evaluate the options available to them. Pivotal to the mechanics of PT is the belief that decision-makers make their decision based on gains or losses relative to specific reference points (rather than, say, in terms of each option’s expected value). Determining a decision-maker’s reference point is, therefore, a vital part of the analysis. A variety of methods for ascertaining reference points have been suggested in the literature.31 Most researchers, however, have taken either the prevailing conditions at the time of the decision or the avowed political aspirations and party platforms of the decision-makers as the appropriate reference points.32 In this chapter, we follow this approach by inferring reference points from the SED’s stated positions and aspirations, supplemented by the recorded internal utterances of its key decision-makers.

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Once the editing stage is completed, we come to the point in the process where decisions are actually made, the evaluation phase. One of the great advantages of PT is that it makes clear predictions about how individuals will behave when placed in specific risk settings. These predictions for four different patterns of risk attitude, adapted to the case of the GDR’s incurrence of foreign debt, are provided in Table 6.1. Table 6.1 has four quadrants, each corresponding to a different decision-making scenario. The two columns of the table relate to the framing of the prospect, that is, whether the decision to incur further debt is presented as leading to a gain or a loss. These columns reflect the impact of loss aversion. The two rows of the table correspond to Table 6.1 Risk attitudes to incurring foreign debt

High probability

(Certainty Effect)

Low probability

(Possibility effect)

Gains

Losses

[1] • High probability that borrowing will significantly advance the superiority of the socialist system • Fearful of not realising the system’s perceived intrinsic potential • Reference points based on achieving the goals of socialist development • Strong risk aversion to taking on debt with the capitalist world [3] • Low probability that borrowing will significantly advance the superiority of the socialist system • Hopeful of making large gains in demonstrating the systems’ perceived intrinsic potential • Reference points based on achieving the goals of socialist development • Willingness to take on highly risky debt positions with the capitalist world

[2] • High probability that borrowing will significantly damage the survivability of the socialist system • Hopeful of avoiding an existential crisis for the system • Reference points based on maintaining the status quo of real existing socialism • Willingness to take on highly risky debt positions with the capitalist world [4] • Low probability that borrowing will significantly damage the survivability of the socialist system • Fearful of bringing on an existential crisis for the system • Reference points based on maintaining the status quo of real existing socialism • Strong risk aversion to taking on debt with the capitalist world

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the likelihood of the prospect. When there is a high probability that the expected outcomes of foreign borrowing will occur, the certainty effect dominates.33 By contrast, when there is a low probability of a prospect eventuating, the possibility effect comes to the fore.34 Within each quadrant, four pieces of information or expected behaviour predicted by PT are provided. These are: (1) the prevailing probabilistic circumstances to be faced; (2) the focus of the emotional and psychological concern evoked among key SED leaders; (3) the type of reference point they are likely to strike and (4) their expected response to risk. Let’s consider each of Table 6.1’s four quadrants in turn. In quadrant [1], decision-makers find themselves in a situation where they face a high, but not certain, chance that their proposed borrowing will significantly advance the success of the socialist system. From the perspective of the SED regime, the borrowing is thus framed as an unalloyed gain. In this context, PT tells us that the certainty effect will nevertheless exert a disproportionate influence on their decision and that, while their reference points will remain firmly rooted in the achievement of the goals of socialist development, their psychological outlook will be strongly shaped by a fear of squandering the chance to achieve the system’s perceived potential. As a result, they adopt a very risk-averse approach towards foreign borrowing. Quadrant [2] describes the scenario where decision-makers are confronted by a high, but not certain, probability, that continued borrowing will significantly damage the survivability of the socialist system. In other words, decision-makers understand that there is a real potential that the proposed borrowing will induce a great loss for the regime. Here, PT once again predicts that the certainty effect will predominate. The leadership’s reference points in this instance, however, will shift to protecting as much of the existing system as possible, while their psychological focus will accordingly be directed towards avoiding the type of losses that might engender an existential crisis for the system. In such a context, it is predicted that decision-makers will be inclined to adopt a risk-loving approach to the taking on of more foreign debt. Turning now to quadrant [3], we find a situation where decisionmakers make their choices faced by a low, but still possible, chance that the proposed borrowing will significantly advance the cause of socialism. The framing of the choice is, thus, projected in terms of a gain, while the reference points remain firmly fixed on the goals of socialist development. It is predicted that the possibility effect will influence their decisions

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disproportionately, and they will be willing to take very risky decisions with respect to foreign borrowing in the hope that this will help secure that small chance of making great strides in the demonstration of the system’s potential. Finally, in quadrant [4], we encounter decision-makers operating in a situation where there is a low, but not impossible, chance that additional foreign borrowing will significantly damage the viability of the socialist system. The choice before them, thus, is couched in terms of potential losses, and their reference points are shaped by a desire to protect the status quo. PT suggests that decision-makers will be deeply concerned by the possibility that further borrowing may bring on an existential crisis for the state. To prevent that from happening, they will adopt a strongly risk-averse stance to foreign borrowing. In the next two sections, we apply the theoretical framework presented in Table 6.1 to the GDR’s experience. Given that this framework provides concrete ex ante predictions on how decision-makers will behave in different circumstances, it offers, we believe, a useful theoretical basis for the formulation of an analytically robust history of debt in the GDR.

6.2

Debt in the Era of Ulbricht

Prior to 1979, it was not difficult for sovereign countries to borrow from the international market. Interest rates were comparatively low and bankers saw good business in providing loans to nation states.35 The GDR, in particular, the economically strongest of the Soviet bloc, had no problems in finding creditors, should they have been needed, in the first two decades of its existence. There was no supply constraint on credit. The question was how deeply, if at all, the GDR wanted to engage with the capitalist world. Imbued with an ingrained Marxist disdain for money and a visceral distrust of international financiers and their motivations, a desire to become embroiled in Western capital markets did not exist. Running up anything more than unavoidable short-term liabilities to the West was deemed highly risky, not least because, it was felt, that debt could be weaponised by the capitalist world in its struggle with socialism and potentially jeopardise the GDR’s independence.36 To the extent that external capital was needed to finance the GDR’s development and ensure its viability, the inclination of its SED rulers was to turn to the Soviet Union.37 And, certainly when circumstances pressed, that is what it did. The introduction of the “New Course” (Neuer Kurs )

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in June 1953, for example, called for an expansion of consumer good production and a raising of the living standards of GDR citizens. In that quest, Soviet financial aid was utilised to fund some of the price reductions and wage increases introduced. The Second Five-Year Plan (1955–1960) that followed envisaged the abolition of all rationing, the reduction of the work week to forty hours, and the overtaking of West Germany in terms standard of living. It was an ambitious plan that relied for its realisation not only on the GDR’s close integration within the Soviet bloc, but generous assistance from the Soviet Union. Some 7.5 billion Roubles in the form of grants-in-aid, raw materials and foodstuffs were secured to support the fulfilment of the second five-year plan.38 As Walter Ulbricht informed the Twenty-Eighth Plenum of the SED Central Committee in August 1956 such financial assistance was indispensable: We cannot complete this great task by our own strength alone but we require the fraternal help of the Soviet Union and the other states of the international socialist camp. Without international solidarity it is impossible to solve such great tasks.39

GDR trade, too, throughout the 1950s and into the 1960s became ever more closely tied to the Soviet Union and, to a lesser extent, the other socialist countries. Trade with the West by contrast declined. The need to pay reparations to, and its natural ideological affinity with, the Soviet Union in part explained this drift, but external factors also propelled it. Growing East–West tensions in the 1950s spilled over into trade flows as the export of certain strategic goods to the Soviet bloc were prohibited by most NATO members. Large increases in world market prices for raw materials in the aftermath of the Korean War likewise promoted the economic reliance of the GDR on the USSR. At the same time, the GDR concluded long-term trade and payments agreements with a number of non-communist countries, which had either adopted a position of neutrality in the Cold War or opted for a non-capitalist path of development.40 Yet, trade with the West never disappeared nor lost its appeal to the rulers of the GDR. Dissatisfaction with the quality of Soviet products and a need to secure cutting-edge technologies only available from Western providers ensured that trade would continue. Moreover, when in 1954 the Soviets returned control of all but one of the remaining enterprises,

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which had been producing goods as reparations under Soviet management, the GDR’s capacity to export, particularly to lucrative Western markets, expanded. According to official GDR trade statistics, only around one-fifth of its annual trade remained with Western developed countries right throughout the 1950s and 1960s.41 That trade could not always be balanced and, as a result, year-on-year liabilities and assets were acquired. These were managed through the East German banking system, initially by the foreign department (Auslandsabteilung ) of its central bank (Deutsche Notenbank—renamed Staatsbank der DDR in 1968), but later specialised institutions were established to take charge of foreign trade. Thus, in 1956 the German Trade Bank (Deutsche Handelsbank) took over responsibility for banking transactions in connection with export and import, including the granting of loans and the assuming of guarantee obligations. In 1966, it was joined by the German Foreign Trade Bank (Deutsche Außenhandelsbank or DABA), whose remit included the granting of credit to foreign trade companies, as well as the handling of payment and clearing transactions with foreign countries, including foreign exchange transactions, clearing agreements and financial participation in domestic and foreign companies. Precisely how much debt with Western countries was accumulated at different points of the Ulbricht era is hard to establish, since no data are readily available. However, as most debt was incurred through commercial transactions, information on the GDR’s trade balance across time with Western countries sheds some light on the broad trends.42 Figure 6.2 presents the GDR trade balance with the non-socialist world (NSW) as a share of its NSW export revenue between 1950 and 1975. Given that annual figures may reflect short-term vagaries that are smoothed out across years, Fig. 6.3 reports the same information for five distinct periods. Figure 6.3 is calculated by dividing the sum of NSW trade balances by the sum of NSW export revenues for that period. Both figures also distinguish between all NSW trade, developed NSW trade and developed non-German (i.e. it excludes trade with West Germany) NSW trade. The picture they reveal is clear. Prior to 1969, the GDR’s trade deficit with the NSW averaged at about 1.03 per cent of its NSW export revenue and in all but two deficit years (1951 and 1966) remained less than ten per

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Fig. 6.2 Trade balance with the NSW as a share of NSW export revenue, 1950– 1975 (Statistisches Jahrbuch Auβenhandel, 1960, p. 573 and 1975, pp. 263–265)

Fig. 6.3 Trade deficit with the NSW as a share of NSW export revenue, 1950– 1975 (by periods) (Statistisches Jahrbuch Auβenhandel, 1960, p. 573 and 1975, pp. 263–265)

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cent. These were amounts easily serviceable. Indeed, in nine of the nineteen years in this period, a trade surplus with the NSW was obtained. The balance was typically worse with the developed NSW (excluding innerGerman trade) which on average experienced a deficit equivalent to 8.76 per cent of its export revenue from those sources. While small in comparison to later years, it is evident that the GDR’s trade performance with the developing world and West Germany in these early years was already masking a larger trade gap with the rest of the industrial capitalist world. From 1969, the situation changed. There was a precipitous deterioration in the GDR’s trade balance with the NSW, which between 1967 and 1970 went from 3.2 per cent to 67.36 per cent of NSW export revenue. While the trade imbalance with all NSW trade deteriorated at this point, it was particularly acutely felt in the non-German developed NSW, whose imbalance rose to 145.29 per cent of exports in 1971 and only bottoms out in the period under consideration, post-Ulbricht, in 1973 at 153.72 per cent of exports. In other words, at this time, there was a massive surge of imports (unfunded by matching exports) from developed NSW countries other than West Germany.43 Interestingly, Figs. 6.2 and 6.3 also indicate that the trade imbalance remained high in the immediate postUlbricht era, although there were signs of a partial improvement in 1974 and 1975.44 Taken together, Figs. 6.2 and 6.3 suggest that the GDR’s debt with the developed NSW, assuming it moved in tandem with the trade balance, was probably fairly small and tightly controlled up to the last few years of the 1960s. There is some indication in Fig. 6.3 that, while the overall trade imbalance (and hence the likely debt) with the NSW and with West Germany stayed constant or possibly fell marginally in this period, its position vis-à-vis the rest of the NSW developed world was already beginning to inch up, most notably in the 1960s. The GDR’s average trade deficit with the developed NSW (excluding West Germany) as a share of export revenue rose between the periods of 1954–1960 and 1961– 1967 from 8.8 per cent to 11.3 per cent. This implies a potentially slowly growing debt, admittedly from a low base, with Western developed countries across the 1950s and 1960s. After 1969, however, the trade deficit, and hence debt, increased in a dramatic fashion. What accounts for the patterns identified in Figs. 6.2 and 6.3? For command economies like the GDR, exposure to foreign trade and borrowing brought significant risks, leaving the ruling party’s economic planning and political control open to potentially undesirable external

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influences and disruptions.45 Up to the last few years of the 1960s, the SED consequently exhibited considerable caution in engaging with foreign capital markets, while retaining at all times an unshakable conviction in the eventual triumph of socialism both in Germany and internationally. Their outlook on the future was thus positive, but wary. While raising debt with the NSW was viewed as a practice laden with danger, it was not completely eschewed. Nor was the management of debt a key focus or driving concern of state policy. There were, of course, fears, but the determination of debt levels, by comparison to later years, was not considered in isolation nor were its outcomes evaluated differently. In other words, the GDR’s position on debt up until the second half of the 1960s can be characterised as being comparatively broadly framed with decision-makers operating a reasonably inclusive set of mental accounts. This combination of settings, by allowing a degree of economic rational thinking based on expected value to influence decision-making, ensured that there was scope for the effects of subjective biases to be moderated to some extent. In terms of the different risk attitudes discussed in Table 6.1, Ulbricht and the key decision-makers of the GDR found themselves at this juncture either in quadrants [1] or [4]. Which of these two quadrants they were operating in at any point of time depended on whether the environment was dominated by issues of loss or gain concerning the future of the system. If they were in quadrant [1], the leadership would be fearful that they may not be able to realise the system’s potential but would retain positive reference points encapsulated in terms of the attainment of some of the goals of socialist development. By contrast, if they found themselves in quadrant [4], there was some, though far from compelling, suspicion that further borrowing might harm the development of the socialism. The regime’s overwhelming concern would be to ensure that they do not create avoidable problems for the still fledgling system. Their reference points would, therefore, be geared towards stabilising and maintaining the “socialist gains” already achieved. At the beginning of the 1950s and the years that immediately ensued, the GDR was very much still in its infancy. As Mary Fulbrook has noted, at this time it was tackling a host of “major existential crises”, each of which threatened to end its experiment with socialism before it had even really started. The challenges were manifold. It faced difficulties obtaining sufficient supplies and foodstuffs for its citizens and industries; had not yet secured full political control over its own party, let alone the country;

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was paying, and recovering from recent sizeable payments of, reparations to the Soviet Union; and, of course, had open borders with the West, which enabled the opposition to more readily marshal itself and provided an escape valve for those who did not want to stick around to see firsthand how the building of socialism unfolded.46 Between 1950 and 1952, the state was haemorrhaging citizens at a rate of about fifteen thousand per month, with the numbers in some months much higher. And it was getting worse. In the first half of 1953, the average rate more than doubled to 37,500 escapees per month.47 It was not that the party’s leadership lacked belief. Far from it. Despite all the challenges, it remained convinced that the building of socialism along the lines of the Soviet model, which became official party policy at the Second Party Conference in the summer of 1952, would prove successful and lead in the not-too-distant future not only to higher productivity and better standards of livings than the West but an eventual reunification of Germany on SED terms. The problems faced in the early fifties were dismissed as teething problems encountered on the way to socialism.48 Yet, lofty ambitions aside, the conditions on-the-ground were not ripe for the type of rapid sovietisation of East German society that was envisioned. As one leading economic historian of East Germany has observed: When the ‘construction of socialism’ was to be further speeded up after autumn 1952, the Party leaders found themselves compelled at the beginning of 1953, to admit to the Soviet leadership that it was impossible to achieve all their economic tasks—reparation deliveries, export obligations, rearmament, fast development of primary industry and heavy industry, improved supplies for the population, as well as a strengthening of the state’s reserves.49

The foot was taken off the proverbial accelerator and a new focus placed on stabilising the system. A less aggressive pace of change was advocated and a greater emphasis was devoted to providing affordable consumer goods for the population. The goal of the leadership appears to have been to guarantee a standard of living comparable to or beyond that of working-class Germans of the Weimar period. Cultural and social policy was liberalised. The regime at least for the time being recognised that it needed to protect what it had. The outbreak of an uprising in July 1953 reinforced the view that such caution was indeed warranted.50 In terms

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of PT, the setting in which decision-makers deliberated about foreign borrowing thus appears to have matched closely with that of quadrant [4] of Table 6.1. Already facing a series of existential problems, the regime did not want to add another in the form of a growing indebtedness to the NSW. Fearful of what such borrowing might bring, exhibiting a strong risk aversion to accumulating further debt with the capitalist world made sense to the leadership of the SED. As some of the more pressing existential crises eased, the confidence of the regime in renewing the rate of change increased.51 By the end of the 1950s and early 1960s, Soviet successes in space, science and technology bred enormous confidence in the superiority of the socialist system right across the communist world (and beyond). The GDR was not immune. It was an era when the party believed that the promised fruits of the socialist system would now finally begin to be realised. Anything seemed possible, and, as such, its benchmark shifted away from meeting the aspirations of the Weimar era to a head-to-head competition with West Germany. Fritz Selbmann, at the time Deputy Chairman of the Council of Ministers and Chairman of its Commission for Industry and Transport, explained the new sentiment succinctly at a meeting of the editors of Einheit, the party’s theoretical journal, in October 1957: “he who is first in sending an earth satellite into space will also be able to solve the main economic task— to outstrip capitalism in the production of meat and fat”.52 The Fifth Party Congress of 1958 ratified the new direction and formally unveiled the main economic task of the era: to catch up and overtake (einholen und überholen) the Federal Republic. The building of the Berlin Wall in August 1961 raised this thinking to the next level. Freed from the mass exodus of its citizens, the SED leadership could with greater confidence turn its mind to building a system that would realise the latent potential of the socialist mode of production. With the unveiling in 1963 of his New Economic System (Neues Ökonomisches System or NÖS), which sought to introduce some decentralisation and market-like mechanisms into planning, and through heavy investment in the latest science and technology, Ulbricht and his followers believed that the keys to unlock a new form of socialist modernity were finally in their possession.53 This optimism did not correspond to any great intensification of activity in foreign capital markets. While more technological sophisticated equipment was acquired from the developed West, the growth in imports at least until the latter years of the 1960s was matched by expanding exports. The party’s risk aversion towards foreign borrowing had not

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disappeared. Thus, from the second half of the 1950s through to the late 1960s, the risk attitudes of Ulbricht and other key leaders appears to have shifted—gradually though with building momentum—to quadrant [1] of Table 6.1. While borrowing from the West to fund the GDR’s technological development was certainly seen as potentially beneficial and the reference points for the regime were now well and truly focussed on bringing the goals of socialist development to fruition, the leadership of the SED feared that engaging in further borrowing might undermine not the survival of the system as before, but rather its ability to succeed and realise its potential. To reduce that risk, it continued to constrain its desire to tap Western capital markets. Such an attitude can be seen as part of the broader SED policy of “disturbance clearance” (Störfreimachung ) introduced in 1960, which aimed to minimise all unnecessary economic reliance on West German imports in the belief that this would curtail the potential for external interference in the development of the GDR’s economy.54 Internal belief in the potential of the socialist economy continued to grow across the 1960s and reached its apogee during Ulbricht’s era with the advent of the Economic System of Socialism (Ökonomisches System des Sozialismus or ÖSS) announced at the Seventh Party Congress in April 1967. Designed as a refinement and extension of the NÖS, the ÖSS retained many of its reforms, but in order to promote more rapid technological development, which the previous reforms had failed to achieve, it reintroduced centralised control over key structuredetermining areas (Strukturbestimmende Zweige), branches of industry, which, it was believed, could lead to a structural transformation of the economy and accelerated growth. These areas, which were given priority access to resources and provided with state-of-the-art capital, were selected by the Council of Ministers in June 1967. It chose to place the focus of the states’ efforts on a range of high-tech, high-growth areas such as petrochemicals, artificial fibres, machine tools, plant construction, electronics, data processing equipment and automation technologies. The new system began in earnest in 1968 and 1969.55 Underpinning the new approach was a desire to fashion a great and decisive leap in productivity, so that the GDR in its competition with West Germany could be, as the slogan of the time went, overtaken without first being caught up (überholen ohne einzuholen). Cognisant that the technology required to build these structure-determining sectors and make them internationally competitive could not be supplied from within, nor

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by the GDR’s Council for Mutual Economic Assistance (COMECON) partners, Ulbricht understood that the technology required to realise the ÖSS would have to be—and could only be—sourced from the developed capitalist world. It was a realisation that perforce called for an acceptance of greater trade deficits with the West and a readiness to accumulate external debts at levels previously unheard of.56 Such was the confidence that Ulbricht placed in his structural policy (Strukturpolitik) that this was now a path that he was willing to go down. By his calculations, the productivity and export growth unleashed by this imported technology would more than cover the debt incurred. Moreover, by ushering in the scientific-technological revolution (wissenschaftlich-technische Revolution), this technology bought on the hock from the West would unleash the still untapped dynamism of the GDR’s socialist economy and enable it to economically leapfrog the Federal Republic in a short space of time. In June 1970 at a meeting in Moscow with the deputy chairman of the Soviet Council of Ministers, Nikolai Tikhonov, Ulbricht prophesied that within five years, the GDR would be exporting computers to the capitalists.57 At that meeting, he explained his debt strategy with amazing candidness: It is straightforward: we get as much debt with the capitalists, up to the limits of what is possible, so that we can pull through in some way. A part of the products from the new plants must then be exported back to where we bought the machines and took on the debt. In a short time we must pay for the equipment … We are, therefore, now correcting the lags from the time of open borders. We will make a leap forward, but with exact measurements. We know the plan will be upset by it. Comrade Schürer cannot really balance the whole thing. But in the interest of the structural policy it was necessary to act the way we did.58

The appealing dialectical nature of Ulbricht’s argument of using capitalism to advance socialism notwithstanding, the Soviets were not convinced. Leonid Brezhnev in particular was deeply disturbed by the GDR’s rapid accumulation of debt to the West, which had grown by then, according to contemporary estimates, to around 2 billion Marks.59 Most of all, Brezhnev was concerned by Ulbricht’s departure from wellworn socialist conventions regarding debt and the resulting jeopardy such deviations placed on the independence of not only the GDR’s but his

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own foreign policy. He was further taken aback by Ulbricht’s haughtiness and had grown suspicious of the East German leader’s motivations for drawing closer to the West Germans. Not long after this exchange, Brezhnev indicated to Erich Honecker his support for Ulbricht’s removal as First Secretary of the SED, something that after months of attacks on his policy and leadership was finally achieved on 3 May 1971.60 In many ways, the turn in Ulbricht’s attitude to foreign debt in the late 1960s aligns very closely with the expectations of PT. An ageing leader, keen to make the decisive impact that he felt was within his reach, pushed hard, despite the disruption caused, to see his plans implemented as rapidly as possible.61 There was in his actions a preoccupation, to an extent hitherto not seen in the GDR, on the short-term, on getting the technology needed to move forward with his plans for the ÖSS at whatever cost. Such narrow framing of a choice and exclusivity of mental accounting renders decision-makers highly vulnerable to subjective biases. Ulbricht’s decisions with respect to debt in the last few years of his tenure at the top indicate that he conformed to this trend. His attitude to taking on further debt at this time provides a textbook example of decisionmaking within quadrant [3] of Table 6.1. Facing a perceived, if far from certain, possibility of significantly advancing the cause of the socialism by borrowing more Western capital, he hoped to provide the decisive demonstration of the inherent superiority of the socialist mode of production and thereby unify Germany under the SED banner. To do that, he set ambitious reference points that corresponded with the progress of socialist development and exhibited an alacrity to descend deeper into debt with that same capitalist world he purported to be in conflict with. As he wrote in the draft of a letter to Leonid Brezhnev from April 1969, the victory of his plans for socialism in the GDR would provide the basis for the victory over the Federal Republic: Corresponding to the directives of the Seventh Party Congress, we assert that the main task of the Perspektivplan in the all-round strengthening of the GDR consists in putting the superiority of our socialist society over that of West Germany to proof. This requires us to overcome the lag in labour productivity, still holding at 20 per cent for the last several years. Only in this way can we increase the influence of the GDR over Western Germany.62

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Ulbricht, however, was not to be afforded the time to test the alleged superiority of his latest model for a socialist economy. Within a year, with the full blessing of the Soviets, moves were afoot within the Politbüro to supplant Ulbricht, cease his economic experimentations and avert the seemingly relentless drift he had initiated towards ever greater indebtedness to the West.

6.3

Debt in the Era of Honecker

In his ascent to power, Erich Honecker had skilfully and ruthlessly castigated Ulbricht’s recklessness with regard to the debt that, he contended, had driven the state “to the brink of a catastrophe” and had provided the West German enemy with “a foothold in the GDR”.63 On assuming the office of First Secretary on 3 May 1971, he set to work rectifying the imbalance. The SPK drew up plans for the coming five years that would see annually a 0.2 per cent reduction of imports from the NSW and a massive expansion of exports to the West. If implemented, these proposed changes would have rapidly improved the GDR’s hard currency debt problems.64 The plans, however, were to prove unrealisable and rather than improving the GDR’s debt position, Honecker oversaw the state’s descent into ever deeper and more perilous financial indebtedness to the West. Unlike the Ulbricht years, we have a more solid empirical grasp of the GDR’s growing debt under Honecker. That said, there remain problems in estimating the true level of debt at different junctures, not just because of the incredible secrecy within the SED surrounding such sensitive data, but also because the methodology it used in calculating the scale of indebtedness was problematical. Fortunately, post-unification reworkings of the data allow a more consistent and accurate picture of the nature and path of the GDR’s indebtedness to be captured. Figure 6.4 depicts estimates produced by the Bundesbank and the Bank for International Settlements (Bank für internationalen Zahlungsausgleich) of the GDR’s external debt, evaluated in US dollars, for the period 1975 through 1989. Both series move in tandem and from 1985 are virtually identical. They show that in 1975, the level of foreign debt stood at somewhere around $2–$3 billion. Thereafter, it steadily rose, reaching its zenith in 1981 at $8.4–11 billion, then declined to 1985 when it stood at just under $4 billion. However, from 1986, the

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Fig. 6.4 Estimates of GDR Debt, 1975–1989 (Volze 1999, p. 181)

level of debt resumed its rapid growth. By 1989, it had risen to $7.5–8.2 billion once again. In Fig. 6.5, the courses of the GDR’s debt with the NSW and with the Federal Republic (inner-German debt) are presented, this time measured in East German Valutamarks (VM ). For the period 1970–1974 inclusive, no separate inner-German debt figures are available, so the numbers depicted for those years are estimates for the whole of its NSW debt. Figure 6.5 indicates that NSW debt rose from 2.1 billion VM in 1971, the last year of Ulbricht’s rule, up to a peak in 1982 of 25.1 billion (of which 4.6 billion VM was inner German). It then fell slowly year-on-year until 1985 when it stood at 15.4 billion VM (of which 5.3 billion VM was inner German), but once more picked up, reaching a total of 19.9 billion VM (of which 6.3 billion was inner German) in 1989. Debt to West Germany, thus, constituted an important part of the overall debt to the NSW. In 1975, it stood at 2.4 billion VM and rose across time, most rapidly from 1985 onwards. Between 1975 and 1984, inner-German debt accounted for on average 26.1 per cent of all the GDR’s NSW debt; from 1985 to 1989 that percentage rose precipitously to 49.1 per cent. In the final years of its rule, the SED had become ever more reliant on West German credit.

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Fig. 6.5 Inner German and NSW debt, 1970–1989 (Deutsche Bundesbank 1999, p. 60; Zaitlin 2007, p. 70) (Notes For the years 1970 through to 1974, the figure is an estimate of total NSW debt [inclusive of inner-German debt]. The estimates for those years were based on those provided by Zaitlin from contemporaneous internal East German sources. He presents these for the period 1970–1980. There are methodological concerns with the levels of the NSW debts reported in internal sources. However, if one compares the trend in debt between 1975 and 1980 in the GDR’s internal sources with that captured by the Bundesbank’s NSW debt series for the same period, one finds a near perfect correlation [0.9937]. Given this similarity between the series, we utilize the trend found in the GDR’s own internal series to extrapolate the Bundesbank series back to 1970)

Figure 6.6 places the GDR’s debt to NSW in four benchmark years in some perspective. In 1970, NSW debt accounted for around 2.8 per cent of the GDR’s national income, 10.6 per cent of its export revenue and 31.1 per cent of its export revenue from the NSW. Across the 1970s, all of these shares grew, so that in 1980 as the GDR entered its first debt crisis, NSW debt amounted to a quarter of its national income, just under 60 per cent of its total export revenue, and nearly 150 per cent of its export earnings from the NSW. While these figures had moderated somewhat by 1985, they began to increase yet again thereafter. In 1988, the GDR’s indebtedness to the NSW stood at the equivalent of 27.1 per cent of its

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Fig. 6.6 NSW debt in terms of national income and exports, 1970–1988 (selected years) (Bundesbank 1999, p. 60; Zaitlin 2007, p. 70; Steiner et al. 2006, p. 63) (Notes For the estimation of debt in the period 1970–1974, see the notes for Fig. 6.6. The calculations use the coefficients and shares provided by Ahrens 2013, p. 164 and Volze 1999, pp. 232–241)

national income, 47.3 per cent of its gross export revenue and 86.7 per cent of its NSW export earnings. One of the greatest challenges for the SED regime was that much of this NSW debt was held in hard, readily convertible currencies, such as the US dollar, Japanese yen, British pound, German mark and French and Swiss francs. These currencies were widely accepted around the world and were indeed often preferred by exporters over their domestic currency. It was precisely the reserves of these currencies that the GDR needed to purchase technology from advanced Western nations. Unfortunately, the majority of the GDR’s export earnings came from either Eastern Europe or the developing world, countries which could not pay for GDR products in hard currencies. As a result, the GDR faced major difficulties in accumulating sufficient reserves of hard currencies. Figure 6.7 tracks its trade imbalance in convertible currencies across the 1980s. It shows that in 1981 the GDR’s debt in such currencies was around two-and-a-half times the size of its ability to acquire them. In line with the historical patterns revealed by previous figures, this ratio fell in subsequent years to

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Fig. 6.7 Ratio of GDR debt to export earnings in convertible currencies, 1981–1988 (Volze 1999, pp. 180–181)

around 1.26 times in 1985, only once again to pick up in the final years of the GDR. In 1988, its liabilities in convertible currencies were more than double its earnings of such currencies. The GDR’s debt with the NSW also attracted considerable annual interest payments. Figure 6.8 plots two estimates of the net value of annual interest payments paid in convertible currencies, expressed in Valutamarks, between 1975 and 1989. The first series is extracted from a secret paper prepared for the Politbüro in 1988, while the other is corrected Bundesbank estimates compiled by Armin Volze. Figure 6.8 also reports the net inflow of Deutschmarks (DM ) to the GDR over the same period. Focussing on Volze’s estimates first, they suggest that in 1975, the GDR was paying 0.7 billion VM in interest payments to the West. This figure steadily grew year-on-year, eventually reaching a peak in 1982 at around 3.6 billion VM . It then began diminishing slowly over the following years, although there was some sign of net interest payments inching up again from 1987. In 1989, interest payments breached the 2 billion VM (2.2 billion VM ) mark for the first time since 1985. The estimates created for the Politbüro present a very similar story. The main difference between the two series lies in the period of crisis between 1979

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Fig. 6.8 Net interest payments in convertible currencies and inflow of Deutsche Marks, 1981–1989 (Volze 1999, p. 183)

and 1982, when the Politbüro’s own internal figures were suggesting a noticeably worse situation (4.9 billion VM compared to 3.6 billion VM in 1982, for example) than that indicated by subsequent postWende estimates. Turning to the inflow of DM , this series exhibits less dramatic change. With the exception of 1982 and 1984, when the volume exceeded 2 billion VM , the typical annual inflow amounted to about 1.8– 1.9 billion VM . Aside from the years of most acute debt crisis between 1979 and 1986, the volume of DM received was sufficient to cover the GDR’s annual net interest payments, illustrating how its financial solvency was intimately tied to its deepening connection with the Federal Republic. How was it possible that Erich Honecker, who came to power promising to curtail foreign debt and restore economic stability after the adventurism of the Ulbricht years, could end up plunging the country into even greater financial peril? To a large extent, the answer lay in the other promises and ambitions he acted upon once handed the reins of power. In contrast to Ulbricht’s promise of a flamboyant form of socialist modernity driven by the forces of scientific and technological change within a reformed planned economy, Honecker returned to his Marxist– Leninist roots by restoring large elements of centralised Stalinist planning,

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but with a more visible focus on the fruits that socialist productive relations had already delivered, or would in the very near future deliver, for the citizens of the workers and peasants state.65 It was also believed that priority ought to be afforded to criteria that reflected socialist values and strengths, not the mindless competition with West Germany in this or that production or consumption indictor. Alfred Neumann, First Deputy Chairman of the Council of Ministers, candidly foreshadowed the new perspective and its rationale in a confidential letter to Ulbricht in April 1969: But all these comparisons with the capitalist top achievements always gives rise to an aversion in me … We should really think over politically and ideologically the type and manner of comparison with those capitalist states. Maybe it is better to assume from the outset the advantages of the socialist GDR over the other leading capitalist industrial states … I am also against us making such one-sided comparisons with other foreign top achievements as is often done, expressed as if two boxers—whoever has the longer reach must win. Whoever has the most plastic per person is best. If this kind of one-sided argumentation were valid, then the Americans would have long ago won in Vietnam. I am against this kind of comparison of the socialist GDR with the capitalist West Germany. Should we put up the slogan: ‘The GDR must become better than West Germany in the economic area’? That will not do! That does not fit into our constitution or our socialist national and state consciousness.66

When the opportunity arose in 1979 to install this new orthodoxy based on the distinctive achievements of socialism, a confident and emboldened Honecker revealed an extensive agenda. Higher wages and pensions; shorter working hours; paid maternity leave; a wider provision of subsidised health, education and cultural services; cheap public transportation, childcare and rent as well as a more reliable supply of affordable consumer goods were promised.67 The jewel in the crown, however, was an ambitious and expensive housing programme that aimed to construct or refurbish 2.8–3 million apartments by 1990, up to 800,000 of which would be completed between 1976 and 1980.68 It was felt that by implementing a brand of socialist consumerism, the actual benefits of “real existing socialism” (real existierender Sozialismus ), as opposed to the golden promises of a distant communist future, would be made apparent and enhance the regime’s popularity and survivability.

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Although the literature places emphasis on the consumer socialism of this period, Honecker’s programme, or “main task” (Hauptaufgabe),69 did not ignore questions of production or how such a high-quality lifestyle could—in theory—be sustained. As we saw in Chapter 5, the drive for intensification and higher levels of labour productivity were pivotal features of the party’s platform of the 1970s and 1980s. Their importance was evident from the outset of Honecker’s reign. Thus, at the Eighth Party Congress in June 1971, he explained that the benefits of socialism could in fact only be obtained through technological advance, productivity growth and hard work: The main task of the Five-Year Plan is to further increase the material and cultural standard of living of our people on the basis of the rapid development of socialist production, increased effectiveness, scientifictechnological progress, and higher work productivity. This statement characterizes the goal of our economic activity in its indissoluble connection to the preconditions that must be achieved for it. Through life experience, our people have learned the important lesson that our society can never consume more than has been produced. Doing a better job to satisfy the needs of the people means that great demands are initially made on the hard work, expert knowledge, and sense of responsibility of every one of us, no matter where we perform our duty in our great community. The main task of the Five-Year Plan of 1971 to 1975 outlines an entire economic policy program. The aim corresponds to the basic economic law of socialism. For our society, the economy is the means to an end, the means to the ever-better satisfaction of the growing material and cultural needs of the working people.70

So what were these economic laws of socialism to which Honecker alluded? This is important to understand as it explains the thinking underpinning the SED’s policy stance that, to the surprise of party ideologues, would end up generating so much debt. In essence, Honecker’s platform was based on the Marxist belief that, as the means of productions had been taken into the hands of the proletariat, workers, once they had witnessed how the benefits of their labour now flowed directly to them, would change their attitude to work and voluntarily strive harder and cleverer to advance production.71 Work would cease to be a drudgery endured to survive and become instead an activity that improved the

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quality of their lives. As a 1975 study on the introduction of the eighthour day and other improved work conditions noted, such improvements represented: an important political and morale factor in increasing productivity by increasing working discipline and improving working organization. Equally, a reduction of work time creates more favorable opportunities for workers to restore their energies. This is particularly the case for workers on multi-shift patterns who make a particularly important contribution to intensification by making full use of the industrial assets for which they are responsible.72

So confident was Honecker in these theoretical predictions that he boldly informed the Second plenum of the Central Committee in 1971 that workers would soon become the driving force of economic growth, to such an extent that “the domestic market will no longer be the stepchild of our economic upswing. This will be noticeable in a few months”.73 Likewise, Willi Stoph opined in a discussion about some of the SPK ’s advice to the Politbüro that “if we appeal to the working class with the announcement of the social welfare measures, this will yield such results in production as are not yet contained in the calculation of the SPK”.74 To unleash this potential, of course, it was acknowledged that investment in new technology and plant was required. As capital capable of augmenting East German productivity was not obtainable from within COMECON, Honecker, like Ulbricht before him, was willing to turn to the West and acquire it on credit. Again, this was regarded as a shortterm expediency, a burden that would in time evaporate as the anticipated productivity surge took root. The fact that, especially after the first oil crisis of 1973, cheaply acquired Soviet crude oil, which could be refined in the GDR and re-exported to the West at much higher international prices, provided a ready source of hard currency revenue, only intensified the appeal and logic of the party’s platform.75 Naturally, those responsible for the economic and financial functions voiced concerns. As early as 1972, an SPK paper warning of an impending explosion of debt was submitted by Gerhard Schürer to the Politbüro, only to be brusquely dismissed by Honecker as little more than fear-mongering.76 Werner Krolikowski’s 1973 report on the growing imbalance between consumption received a similar pillorying.77 Honecker

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appeared to regard those who questioned the putative economic benefits of the party’s social welfare programme as either irresolute or lacking faith in the veracity of Marxism–Leninism, a stance that naturally cowed opposition. Yet, as the GDR’s financial position deteriorated, queries and concerns were periodically raised. In March 1977, in the context of a rise in the world price of coffee, Schürer and Mittag, in a rare piece of collaboration, wrote to Honecker and supplied him with a detailed report that indicated that some modification in course might be warranted.78 Honecker took umbrage at what he perceived as a direct attack on his policies: I am surprised at how some questions are asked in the material. It is right to put the problems on the table openly. But it is incomprehensible why this did not happen at the party congress, or at the beginning of the year, or at the Fifth plenum. We cannot change our entire policy overnight. What is suggested means deep changes in policy. We would have to go to the Central Committee and say: We did not foresee this or we lied to you. … The resolutions of the Eighth Party Congress would be wrong and those of the Ninth Conference too. … In the material it comes out as if the policy after Ulbricht was wrong, as if Ulbricht did not go into debt and Honecker does? What political path should we have taken? The policy of raising prices would have solved nothing … It also says the deficit came about because of import subsidies between 1971 and 1975. So, now everyone is going to say, before there were no debts. Honecker made the debts.79

Yet, while Honecker was keen to distance himself from the policies of his predecessor, in practice the two First Secretaries’ thinking, risk attitudes and psychological outlooks with respect to foreign debt, although couched in different language, closely matched. As with Ulbricht’s ÖSS, at the heart of Honecker’s conception of “real existing socialism” throughout the 1970s was the belief that there was a plausible, if far from certain, possibility that such borrowing would be a means of demonstrating the inherent superiority of the socialist system. While in hindsight his faith in the potential of “real existing socialism” appears overly sanguine and unjustified, it cannot be denied that his outlook on the future, which helped fashion his decisions, was positive or that goals that advanced socialist development remained the avowed reference points of the regime. Given such a setting, consistent with the quadrant [3] risk profile of Table 6.1, it is not surprising that, despite lambasting

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Ulbricht for the doing same, Honecker, psychologically captured by the powerful possibility effect, was willing to take on an increasingly risky debt position with the capitalist world. For now at least, Honecker’s attention was well and truly locked on the gains of borrowing rather than its losses. With no existential crisis for the SED-state yet on the horizon, the tantalising possibility that his policies for the GDR might be able to fulfil the historical role of the socialist mode of production prophesised by Marx and Lenin was in itself sufficiently inducing for Honecker and his supporters to stomach what they saw as an irritating, but transient, indebtedness to the West. Yet, the optimism that underpinned Honecker’s decisions was built on little more than ideological illusions and a misapprehension of global economic trends. As the 1970s progressed into their second half and as the debt mounted, such misplaced thinking combined with a series of inauspicious and unforeseen turn of events relentlessly led the regime to the brink of financial collapse. Four factors—some self-generated, others externally imposed— coalesced to bring the GDR by 1981 and 1982 to the point of insolvency. First, there were the flawed assumptions about the economic behaviour of workers under socialism. The spur to productivity growth, which the SED had wishfully imagined would accompany the largesse it had handed to its citizens, simply failed to materialise. Contrary to theoretical expectations, workers did not respond to the generosity of “their state” by re-engaging with their work with a renewed sense of purpose or enhanced vigour.80 Second, much of the precious hard currency intended for imports from the West needed to augment the GDR’s industrial competitiveness ended up instead being diverted into satiating consumer demands evoked by the party’s fulsome rhetoric about the benefits of “real existing socialism”. Consequently, outside a few priority areas (and even then only partially), the planned-for technological upgrade of East German industry never eventuated and the trade balance with the NSW continued to deteriorate.81 Third, the international economic environment profoundly changed to the detriment of the GDR’s strategy. The prices of key imported raw materials rose sharply, especially in the wake of the first oil crisis of 1973. This development placed an added burden on the GDR’s balance of payments, as now ever greater volumes of exports needed to be found just to cover the nation’s existing import requirements. In these regards, changes in the oil market proved particularly deleterious. The availability

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of cheap Soviet oil, which had afforded the GDR considerable advantages especially following the onset of the first oil crisis, began to dry up. In January 1975, the Soviets turned the arcane and negotiable pricing formula used to determine prices for its COMECON partners into a simplified five-year rolling average of world market prices. In doing so, the USSR ensured that the price it received for its oil from within the socialist camp gravitated, albeit with a lag, towards the world price. The arbitrage gap that the GDR had enthusiastically exploited to secure large volumes of hard currencies was progressively narrowed. The screw was further tightened in August 1981, when the GDR was informed that, because of the USSR’s own financial difficulties, its importation of Soviet oil would be cut by 20 per cent. The Soviet’s decision shocked and dismayed the SED leadership and, once it realised that the proposed changes could not be averted with the usual supplications, it resolved to radically realign its energy policy, a portentous decision for the future viability of its economy and environment. Henceforth, domestic energy needs were as far as possible met out of locally available, though highly polluting, brown coal. With domestic oil usage suppressed, the GDR’s extensive petrochemical facilities were turned almost exclusively to converting imported crude oil into refined products saleable on the world market.82 Finally, as the true extent of the value of debt held by a number of Eastern bloc countries began to percolate out and its ramifications became more widely understood, the concerns of creditors swiftly and markedly intensified. The relaxed and liberal credit environment that to a large degree had induced and underwritten the accumulation of the debt in the first place began to tighten, a process that raised interest rates and eventually culminated in the introduction of a Western credit boycott in 1981.83 Caught in an escalating debt trap, from which there appeared no easy escape, the SED leadership considered its options. Discussions between the SPK , the Ministry of Finance and the Central Bank (Staatsbank) in March 1982 identified three potential courses of actions: (1) ask the USSR to intervene and provide short-term credit that would guarantee solvency; (2) renegotiate loan repayments with Western creditors or (3) take immediate measures to restore a trade surplus with the West. As the first two were deemed unlikely to succeed and, if they did, would require major political concessions on the part of the GDR that would limit its independence, Honecker opted for the third. A decree formalising the

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approach was duly agreed by the Politbüro on 19 March 1982.84 The adopted strategy called for the rapid expansion of exports to the capitalist world, a deep curtailment of Western imports and the authorisation of Alexander Schalck-Golodkowski and KoKo to seek out by any means available as much foreign currency for the GDR as possible. These means extended to inter alia the indiscriminate sale of hundreds of thousands of automatic weapons to belligerents all around the world, the clandestine hawking of cultural artefacts and antiques to Western dealers, and the turning of the GDR into a dumping ground for West German refuse.85 The Politbüro’s injunctions of 1982 set the tone for what was to be a dismal and dark final decade of the GDR’s existence. It was a desperate, single-minded and increasingly ruthless struggle to avoid bankruptcy, which, in the words of Hans-Hermann Herle, resembled a “balancing act over the abyss”.86 Assisted by two billion DM in loans (Milliardenkredite) that Schalck-Golodkowski was able to negotiate with the Bavarian Prime Minister Josef Strauβ—the first appearing deus ex machina in late June 1983, the second (950 million DM ) in the summer of 1984—the GDR managed to avoid financial meltdown.87 Yet, it was a pyrrhic victory. In staving off insolvency in the short term, the SED had inflicted enormous long-term damage on its economy, environment and people. The economy had been systematically starved of the investment needed to keep it productive enough to sell to markets in the West. The proportion of national income devoted to net investment in the “producing” sectors of the economy had halved between 1970 and 1985 from 16.1 per cent to 8.1 per cent.88 By the end of the 1980s, with its industry visibly falling into disrepair and with dangerous levels of pollutants pervading its environment, the belief that the SED-state could somehow wheel and deal its way out of its debt crisis—indeed even survive—without fundamentally altering its course had become untenable.89 When precisely the accumulation of foreign debt, dealt with so phlegmatically in the early Honecker years, metamorphosed into a concern of paramount importance to the regime is hard to discern. Most tend to pinpoint the end of the 1970s, in particular the year 1979, when the extent of the crisis it confronted began to dawn, as the switching point.90 Instrumental no doubt in the transition was the intervention of the Soviets. As early as 1975, they had forcefully counselled the GDR to limit its indebtedness to the West to no more than 6 billion DM , although the advice went unheeded. Visiting the GDR during its 30th anniversary celebrations in October 1979, Leonid Brezhnev took the opportunity to

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express his deepest concerns to the Politbüro about its now even greater accumulation of debt. Allegedly rattling the table with his fist for effect, Brezhnev accused Honecker in the most forthright terms of driving the GDR into bankruptcy to the West and endangering its and the Soviet Union’s freedom to act independently. This could not continue.91 Whether or not, this rebuke was the trigger that transmuted the SED’s calculus or whether such a change was already afoot, it is notable how in the period beginning around 1979 Honecker and the senior leadership of the SED’s in petto discussions about debt changed.92 Three new features stood out. First, the triumphalism of the early days of the Hauptaufgabe and its corresponding insouciance about foreign borrowing had vanished. The management of debt, once a secondary consideration, had now morphed into almost the defining, existential question of the regime. In extending unprecedented authority and means to KoKo to uncover hitherto untapped reserves of foreign currencies, Honecker reminded Schalck-Golodkowski that his task would determine the very existence (“sein oder nicht sein”) of the GDR.93 Similarly, Gerhard Schürer’s comments to Nikolai Baibakov, head of Gosplan, when he visited the SPK in 1981 to discuss its plans in a world of less Soviet oil, reflected how the senior leadership of the SED now viewed its circumstances. The stakes could not be higher: I assume that a healthy, stable, socialist GDR plays an important role in the strategic thinking of the USSR. Imperialism stands right at the door of our house with its hate on three television channels. Now we have counterrevolution in Poland at our backs. If the stability were endangered here, it could not be restored with 3.1 million tons of fuel.94

For many, there appeared no option but to keep to the path already determined. Key to that strategy was the opening up of new export markets that would strengthen the balance of payments. In the pursuit of this goal, Honecker and Mittag placed enormous faith in their decision to pump a large share of the state’s limited investment funds into microelectronics— the wisdom of which was increasingly being called into question95 —in the hope that this emerging sector would provide the needed fillip to NSW exports. At a discussion with members of the Politbüro and the secretariat of the Central Committee in mid-January 1986, Mittag told those present that if they did not remain true to the plans and seize this opportunity

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“then we say farewell to the world”. It was, he stated, nothing less than a matter of “victory or defeat”.96 Second, the ambitions of the regime had shrunk to defending what it had already achieved. Grandiose talk of the additional bounties that socialist production would yield were shelved for the moment, and there was a focus on securing the stability of the basics.97 In December 1978, in the lead up to Ninth Conference of the Central Committee, Honecker informed Schürer that in his speech to delegates Schürer should indicate that the party’s programme would be “implemented exactly as it has been decided and not piled up higher”, for, as the General Secretary observed, “in no country are needs completely satisfied; that comes only under communism. Satisfying all needs today, that will not happen”.98 The following summer, he confirmed the new outlook with Schürer, rejecting the need for price reforms and urging a continuance on the fundamentals of “real existing socialism”: “The people need cheap bread, a dry apartment and work. If these three things are all right, nothing can happen to socialism”.99 Third, policy settings had ceased to be driven by notions of grand strategy or vision and now increasingly resembled a series of short-term, ad hoc measures intended to handle immediate exigencies. Decisionmakers were searching with increasing desperation for gaps and quick fixes that would buy the regime more time without necessarily addressing the root causes of the crisis.100 As the 1980s progressed, it seemed that fewer and fewer taboos remained. Almost no sacrifice would not be entertained. Export contracts would be accepted at any price. The needs of industry and the population were routinely subordinated in order to tide over the balance of payments.101 Even the “eternal friendship” with the Soviet Union could be called into question if that relationship threatened to challenge “real existing socialism” as practised in the GDR.102 Often the gaps that were exploited were financial in nature. In July and August of 1982 at the height of the solvency crisis, for example, the GDR deployed a highly risky tactical move to provide a short-term solution for an acute foreign currency shortage. The move took advantage of the long-standing practice of banks engaged in international trade holding sizable hard currency accounts with each other. These accounts primarily ensure that payments associated with trade are not interrupted, but they are also taken a display of trust in each other’s institutions. Casting such considerations aside, the Ministry of Finance instructed DABA to withdraw with immediate effect 500 million VM worth of its deposits held

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with Western banks. These funds were to be remitted back to the GDR and utilised to plug the foreign currency gap and avert a threatening insolvency. The danger of the move lay in the fact that such an unconventional action might engender countervailing measures from the affected Western banks. At best, their countermoves would reinstate the GDR’s immediate foreign currency problems that had initiated the whole episode; at worst, if the Western banks’ responses incorporated a punitive element, it could have deepened them. The GDR’s bet on its ability to withdraw the funds, obtain technical solvency at a critical juncture, and then redeposit the money back into the Western banks before they had had a chance to reciprocate. On this occasion, the tactic worked, but it could have easily transpired otherwise. Needless to say, the exercise did nothing to rectify the underlying financial problem faced by the GDR.103 In terms of PT, the final decade of the SED rule witnessed the confluence of a pronounced narrowing in its leaders’ framing of the debt decisions and a growing exclusivity in the configuration of its mental accounts. To an extent not experienced previously the senior leadership’s decisions about borrowing and debt servicing took precedence over other matters and were approached in a detached, short-term manner that did not link the outcomes with developments much beyond the consideration of whether they improved the balance of payments or would be sufficient to service the next round of interest payments. How a measure might be impacted by—and in turn impact—decisions about the environment or the competitiveness of the economy played a diminishing part in the key deliberations. Similarly, the key decision-makers acted as if the monies attached to external trade and the national deficit counted for more than similar monies generated in purely domestic pursuits. Thus, for each DM it spent on transitioning machinery and equipment from oil to brown coal usage, the GDR saved on average only 0.05 DM of hard currency.104 With such a pairing of framing and mental accounts, decision-making becomes highly susceptible to the influences of subjective and cognitive biases. Across the 1980s, the psychological context in which Honecker and those who advised him made decisions resembled closely that depicted by quadrant [2] of Table 6.1. Honecker comprehended that there was a high probability that continued borrowing would significantly damage the survivability of the socialist system, a system which he fervently believed in. However, as financial collapse had not yet come to pass, nor was there a certainty that it ever would (and in fact it never did), he remained

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hopeful that he would be able to avoid, as he had in fact been doing since the late 1970s, an existential crisis for the system. The game was not over. His understanding of the history of the working-class movement told him that setbacks and delays were an inevitable part of the road to ultimate triumph. One way or another, he figured, as long as one continued to bet on the system, the GDR would find a way out of the financial quagmire it had found itself in. And if that were possible, then a revitalisation of the socialist system in time would even be possible. Accordingly, the reference points that he adopted reflected, as expected, the desire to maintain the status quo of, and limit the losses to, “real existing socialism”. For now, holding ground in itself would be a significant sign of success for the GDR. To achieve such goals, though, Honecker, much like a gambler doubling down in an effort to stay in the game long enough to recoup their losses, had to be willing to take on even further highly risky debt with the capitalist world. He was. He had sufficient faith in both the system’s historical mission and its ability to regenerate to place that next bet. Had he felt otherwise and come instead to regard financial and political collapse as a certainty or that the threat posed to the system was less menacing, prospect theory tells us that he would have in all probability behaved differently.

6.4

Conclusion

Thanks to the opening of archives following unification, the technical elements of how the GDR’s financial crisis of the 1980s came about are now fairly well-understood. This chapter has made a contribution to that body of knowledge by stepping back and focussing on a less frequently explored dimension of the crisis, namely, why was it even permitted to happen? Given that Erich Honecker and his chief economic adviser, Günter Mittag, were well aware of, and were periodically briefed on, the risks of continued borrowing from the West, why did they continue to pursue such a ruinous course? Seen in retrospect, their choices have come to be viewed as examples of wanton recklessness and foolhardiness, the products of some form of irrationality, delusion, or personality defect that prevented prudent decision-making from occurring. Those making such claims, of course, rarely bother to articulate how decisionmaking in such contexts and with such actors could, and should, have

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been carried out. Rather, they tend to simply assume that had more “normal” decision-making processes been deployed, different outcomes would have pertained. This chapter has used the tools of decision theory to explore such propositions more closely. In contrast to the hard-nosed, logical and emotional detached information processers posited by more traditional theories, such as expected utility theory, recent developments in psychology and behavioural economics suggest that the choices of realworld decision-makers are in fact heavily influenced by a host of subjective and cognitive biases. These biases, the most important of which were discussed in Chapter 2, have been identified and verified in the field and via numerous controlled experiments. These behavioural traits are not aberrations or quirks; on the contrary, they form an intrinsic part of human cognition. Once their prevalence and importance are recognised, new, more realistic vistas on decision-making based on actual rather than hypothesised human behaviour become possible. Prospect theory is the fruit of such new perspectives. It tells us that if we want to comprehend how decision-makers make their choices, one must first understand the psychological and cognitive contexts in which they function. Moreover, as context changes, so, too, can not only people’s choices but also the explanation underpinning their choices. Even a seeming continuity of choice on the surface over time may mask the changing influences of different cognitive and environmental influences. When viewed through the lens of prospect theory, the history of debt accumulation in the GDR takes on new dimensions. Most obviously, the exercise challenges the view that there was something necessarily wrong or lacking in the mind or character of Erich Honecker and that his behaviour was somewhere abnormal or peculiar.105 It is no doubt convenient to attribute the source of great mistakes to the failings of individuals. Understanding what motivates complex human choice is messier than allocating fault. Moreover, placing all responsibilities for failure on the character, personality and cognitive ability of the leaders of the SED resonates with existing narratives that see much of GDR history as a catalogue of lies, deceptions and irrationalities. But how are these assessments of irrationality substantiated? Typically, two types of evidence are adduced. First, it is assumed that since the choice selected by Honecker was the wrong one, ipso facto, his decision-making processes must have been flawed. Such reasoning, however, is a non sequitur that conflates rationality with successful outcomes. Second, it is demonstrated that Honecker

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made his choice despite experts advising him, correctly as it turned out, what the consequences of his decisions would be. Let us examine this reasoning a bit closer. If we extract the benefit of hindsight from this argument, then, in essence, it boils down to a claim that Honecker must have been delusional or irrational because he rejected the advice of one group of advisers in preference for the advice of another. In a world of uncertainty, competing ideas and ambitious actors, such a scenario, especially in the world of politics, is not only not unusual, it is in fact the norm. All policy makers reject advice, at times to their peril. That may make them wrong, but it does not make them irrational. Moreover, it is hard to sustain the assertion of delusions or irrationality when, as we have argued in this chapter, at every stage Honecker and his predecessor’s decision-making behaviour maps so neatly onto the predictions of prospect theory about how an individual in such settings is prone to act. It is important to note here that we are not alleging that Honecker’s reasoning was flawless—patently it was not. Nor do we seek to restore credibility to a deeply inadequate and ruthless leader. Rather, what we are contending is that how he arrived at crucial decisions about debt can be adequately explained within existing theory without recourse to claims of irrationality, ignorance or delusions. Prospect theory has also proved helpful in providing us with a richer periodisation of the history of debt in the GDR. We have identified at least four distinct periods. First, there was a period of low debt and acute risk wariness between the establishment of the GDR and the advent of ÖSS. Psychologically, underpinning such aversion to debt at first was a fear that borrowing might jeopardise the viability of the fledging and still insecure state (viz. decisions at this time were driven by the possibility of suffering a real loss). From sometime in the late 1950s till 1968, this fear was supplanted by a concern that foreign debt may lead to the socialist system’s perceived intrinsic potential not being realised (viz. decisions began to be driven by the lack of certainty that a gain would be obtained). Both psychological outlooks led, as prospect theory predicts, to risk aversion.106 The second phase (1969–1971) coincided with the duration of Ulbricht’s ÖSS. This was the period when the GDR’s dalliance with Western debt really began. Ulbricht’s decisions were shaped by a supreme optimism about the future of socialism in East Germany and a deeply held belief that there was a distinct possibility of making large gains in demonstrating the systems’ perceived intrinsic superiority (viz. the possibility of

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making a real gain dominated thinking). The willingness to take risks by borrowing more freely for the West was deemed worthwhile. The third phase (1972–1979) began with the rise of Honecker to the First Secretaryship of the party and the introduction of his new Hauptaufgabe. It came to a close sometime around 1979 with the development of an awareness that a financial crisis was brewing. This period was characterised by an acceleration in the rate at which the GDR was accumulating debt. Optimism about the future of the system still prevailed, albeit now with a focus on the benefits of “real existing socialism” rather than the promised socialist modernity touted by Ulbricht. As a result, an alacrity to tap foreign capital markets in the name of socialist development remained (viz. the possibility effect continued to be dominant). Our analysis of the second and third phases complements Ralf Ahrens’ observation that there was no great difference in attitudes to trade and debt between Honecker and Ulbricht.107 We, however, add a nuance, namely, that the similarities between the two periods went beyond the fact that debt was accrued in both; we argue that the parallels extended to both periods sharing the same psychological outlook, frame of mind and risk attitude (viz. quadrant 3 of Table 6.1) with regard to the debt accumulation. Another insight that prospect theory has offered is that debt in the Honecker era is best understood as two distinct periods of debt accumulation (instead of one). The first, which we have just discussed, was one of optimism that was dominated by the possibility effect; the other, which ran from about 1980 to 1989, was characterised by the prospect that further borrowing might stave off the likely, but not yet certain, collapse of the system. Buoyed by that remaining degree of uncertainty, Honecker was willing to keep rolling the dice in the hope that large elements of “real existing socialism” might be saved and provide the foundations for a subsequent rejuvenation of the SED state. Consistent with the theme of this book, this chapter has demonstrated that it is possible to explain—and thereby in one sense “normalise”— Honecker’s decisions with respect to debt accumulation. His actions may have been wrongheaded and in vain, but they were not unusual. Many others in the leadership of the SED with similar backgrounds and facing the same circumstances would have behaved in much the same way. It is worth pausing for a moment here to ponder a hypothetical: while remaining true to himself , what could Honecker have realistically changed that would have rendered a markedly different outcome? It is certainly true that he always had room at the margin to recalibrate his decisions;

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one suspects, however, that exercising such latitude could not have altered the trajectory the GDR was on; at best, it may have slowed its progression. No, short of some sort of fanciful epiphany on his behalf that his brand of socialism was fatally flawed and would inevitably collapse or, alternatively, the emergence of a belief that somehow the probability of a major debtinduced crisis for the regime had subsided significantly, it is hard to see how he could have himself plausibly adopted a less risk-exposing stance. But perhaps asking why Honecker did not course correct misses the point. Barring a major improvement in the external setting and given Honecker’s Weltanschauung, such change could only ever eventuate when new leadership had emerged. Such an evaluation was well-understood at the time within the upper echelons of the SED.108 The more pertinent question to pose, it would seem, is: why did the other senior leaders of the SED, long aware of the troubled waters into which Honecker was steering them, not engineer his removal earlier than they did? That, however, is a question for another day. No doubt, it, too, is a conundrum whose satisfactory resolution can be advanced by having a solid grasp of decision theory.

Notes 1. Krenz told Mikhail Gorbachev at their meeting in Moscow on 1 November 1989 that in making key decisions on debt, Honecker did not involve the Politbüro; see Svetlana Savranskaya, Thomas Blanton, and Vladislav Zubok (eds.), Masterpieces of History: The Peaceful End of the Cold War in Europe (Budapest: Central European University, 2010); Document 97 “Record of Conversation between Mikhail Gorbachev and Egon Krenz, 1 November 1989”, pp. 569–573. 2. Charles S. Maier, Dissolution: The Crisis of Communism and the End of East Germany (Princeton: Princeton University Press, 1997), pp. 59–60; Jonathan R. Zaitlin, The Currency of Socialism: Money and Political Culture in East Germany (Cambridge: Cambridge University Press, 2007), p. 197. 3. KoKo was an organisation whose primary task was to engage in commercial activities internationally and generate as much hard currency as possible. It operated largely outside normal GDR governance structures and reported to Erich Honecker, Günter Mittag and Erich Mielke; see Matthias Judt, Der Bereich

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Kommerzielle Koordinierung . Das DDR-Wirtschaftsimperium des Alexander Schalck-Golodkowski – Mythos und Realität (Berlin: Christoph Links, 2013). 4. Zaitlin, Currency of Socialism, p. 327. 5. The name Socialist Unity Party was finally dropped in March 1990, after which it became known as the Party of Democratic Socialism. For more on the party’s history, see Andreas Herbst, Gerd-Rüdiger Stephan, and Jürgen Winkler (eds.), Die SED: Geschichte, Organisation, Politik. Ein Handbuch (Berlin: Dietz Verlag, 1997). 6. Zaitlin, Currency of Socialism, p. 81. 7. Hans-Hermann Herle, “Die Diskussion der ökonomischen Krisen in der Führungsspitze der SED”, in Theo Pirker, M. Rainer Lepsius, Rainer Weinert, and Hans-Hermann Hertle (eds.), Der Plan als Befehl und Fiktion: Wirtschaftsführung in der DDR: Gespräche und Analysen (Opladen: Westdeutscher Verlag, 1995), p. 311; Maier, Dissolution, p. 71; Manfred Uschner, Die zweite Etage - Funktionsweise eines Machtapparates (Berlin: Dietz Verlag, 1993), p. 70; and Harry Möbis, Von der Hoffnung gefesselt zwischen Stoph und Mittag - unter Modrow (Frankfurt Oder: Frankfurt Oder Editionen, 1999), p. 142. 8. Gerhard Schürer, Gewagt und Verloren: Eine deutsche Biographie (Frankfurt Oder: Frankfurter Oder Editionen, 1996), p. 200. 9. The Valutamark was a unit of account deployed by GDR planners and statisticians to measure foreign trade and convert international import and export prices into plan-consistent values. It was not an actual currency, and it could not be used as a means of payments. 10. Stiftung des Archivs der Parteien und Massenorganisationen der ehemaligen DDR im Bundesarchiv (hereafter BA) DY 30 IV 2/1/708, “10. Tagung des Zentralkomitees der SED am 9.11.1989”, (no page number). 11. Zaitlin, Currency of Socialism, p. 102. 12. Maier, Dissolution, pp. 70–72; Egon Krenz, Wenn Mauern fallen. Die friedliche Revolution: Vorgeschichte, Ablauf, Auswirkungen (Vienna: Paul Neff Verlag, 1990), p. 78. 13. Stephen Kotkin, The Kiss of Death: “The East Bloc Goes Borrowing”, in Niall Ferguson, Charles S. Maier, Erez Manela,

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and Daniel J. Sargent (eds.), The Shock of the Global: The 1970s in Perspective (London: Belknap Press, 2010), p. 89. 14. Zaitlin, Currency of Socialism, pp. 147–148. 15. Raymond Bentley, Research and Technology in the Former German Democratic Republic (London: Routledge, 2010 [original edition 1992]), p. 147. 16. Zaitlin, Currency of Socialism, p. 91. 17. Maier, Dissolution, p. 90. 18. André Steiner, “From the Soviet Occupation Zone to the ‘New Eastern States’: A Survey”, in Harmut Berghoff and Uta Andrea Balbier (eds.), The East German Economy, 1945–2010: Falling Behind or Catching Up (Cambridge: Cambridge University Press, 2013), p. 33. 19. Zaitlin, Currency of Socialism, pp. 64 and 78. 20. Kotkin, “Kiss of Death”, pp. 91–92. 21. Bentley, Research and Technology, p. 149. 22. Jeffrey Kopstein, The Politics of Economic Decline in East Germany, 1945–1989 (Chapel Hill: University of North Carolina Press, 1997), p. 8. 23. Zaitlin, Currency of Socialism, p. 64. 24. Maier, Dissolution, pp. 70–71. 25. For amusing visual introductions to prospect theory (and some of its key concepts like loss aversion and mental accounting) taken from pop culture, see Marie Briguglio, Charity-Joy Acchiardo, G. Dirk Mateer, and Wayne Geerling, “Behavioral Economics in Film: Insights for Educators”, Journal of Behavioral Economics for Policy 4: 1 (2020), p. 20. 26. For an overview of the literature, see Ferdinand M. Vieider and Barbara Vis, “Prospect Theory and Political Decision Making”, in Oxford Research Encyclopedia of Politics, retrievable from https:// oxfordre.com/politics/view/10.1093/acrefore/978019022 8637.001.0001/acrefore-9780190228637-e-979; Jonathan Mercer, “Prospect Theory and Political Science”, Annual Review of Political Science 8: 1 (2005), pp. 1–21; Rose McDermott, “Prospect Theory in Political Science: Gains and Losses from the First Decade”, Political Psychology 25: 2 (2004), pp. 289– 312; Jack S. Levy, “Prospect Theory, Rational Choice, and International Relations”, International Studies Quarterly 141: 1 (1997), pp. 87–112; William A. Boettcher III, “The Prospects

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of Prospect Theory: An Empirical Evaluation of International Relations Applications of Framing and Loss Aversion”, Political Psychology 25: 3 (2004), pp. 331–362; and Rose McDermott, Risk Taking in International Politics: Prospect Theory in Post-War American Foreign Policy (Ann Arbor: University of Michigan Press, 1998). 27. Kurt Weyland, The Politics of Market Reform in Fragile Democracies: Argentina, Brazil, Peru, and Venezuela (Princeton: Princeton University Press, 2002). 28. Zeynep Somer-Topcu, “Timely Decisions: The Effects of Past National Elections on Party Policy Change”, Journal of Politics 71: 1 (2009), pp. 238–248. 29. Barbara Vis and Kees van Kersbergen, “Why and How do Political Actors Pursue Risky Reforms?” Journal of Theoretical Politics 19: 2 (2007), pp. 153–172. 30. Maria Fanis, “Collective Action Meets Prospect Theory: An Application to Coalition Building in Chile, 1973–75”, Political Psychology 25: 3 (2004), pp. 363–388. 31. For an overview, see Mercer, “Prospect Theory and Political Science”, p. 4. 32. See, for example, Daniel Kahneman and Amos Tversky, “Prospect Theory: An Analysis of Decision under Risk”, Econometrica 47: 2 (1979), pp. 263–292; Ariel S. Levi and Glen Whyte, “A CrossCultural Exploration of the Reference Dependence of Crucial Group Decisions under Risk: Japan’s 1941 Decision for War”, The Journal of Conflict Resolution 41: 6 (1997), pp. 792–813; Jeffrey W. Taliaferro, “Power Politics and the Balance of Risk: Hypotheses on Great Power Intervention in the Periphery”, Political Psychology 25: 2 (2004), pp. 177–211; Barbara Vis, Politics of Risk-Taking: Welfare State Reform in Advanced Democracies (Amsterdam: Amsterdam University Press, 2010); Gijs Schumacher, Marc van de Wardt, Barbara Vis, and Michael Baggesen Klitgaard, “How Aspiration to Office Conditions the Impact of Government Participation on Party Platform Changes”, American Journal of Political Science 59: 4 (2015), pp. 1040– 1054; and Jonathan Bendor, Daniel Diermeier, David Siegel, and Michael Ting, A Behavioral Theory of Elections (Princeton: Princeton University Press, 2011).

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33. The certainty effect is an empirically demonstrated phenomenon that sees people affix greater than expected weightings to options that are certain and less than expected weightings to options that require them to take on additional risks in return for a higher reward. 34. Another frequently observed behaviour, the possibility effect, occurs when individuals attach disproportionately large weights to highly improbable, yet possible (as opposed to impossible), events. 35. Kotkin, “Kiss of Debt”, pp. 88–89. 36. Zaitlin, Currency of Socialism. 37. André Steiner, The Plans That Failed: An Economic History of the GDR (New York: Berghahn, 2010), p. 91. 38. Melvin Croan and Carl J. Friedrich, “The East German Regime and Soviet Policy in Germany”, Journal of Politics 20: 1 (1958), p. 50. 39. Walter Ulbricht’s speech to the Twenty-Eighth Plenum of the SED Central Committee, Neues Deutschland, 1 August 1956, p. 1. 40. Michel Vale and Hanns-Dieter Jacobsen, “Strategy and Focal Points of GDR Foreign Trade Relations”, International Journal of Politics 12: 1 (1982), pp. 129–132 and 149. 41. Given the unrealistic exchange rates used in GDR trade statistics, the officially reported figures tended to overestimate the share of socialist world trade. It is, therefore, almost certain that the West’s share of trade exceeded this mark. In 1965, for example, revised GDR’s trade figures, revalued with more appropriate exchange rates, see 29.9 per cent of its imports and 32.1 per cent of its exports being tied to the NSW; see Ahrens, “Debt, Cooperation, and Collapse”, pp. 163–164. 42. While Figs. 6.2 and 6.3 should be interpreted with care and be seen as indicative in nature, concerns about the GDR statisticians’ use of unrealistic exchange rates in its trade statistics (see the previous footnote) do not apply to the trends they reveal. This is because these figures only use data related to the GDR’s trade balance with the NSW expressed as a proportion of its export revenue, again, just from the NSW. 43. This deficit occurred in the context of growing trade between the developed capitalist world and the GDR. Between 1967 and

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1973, the volume of imports from, and export to, the nonGerman developed world grew by 376.4 per cent and 114.8 per cent, respectively. 44. This improvement, which occurred against the backdrop of a continued expansion of trade between the GDR and the NSW, was driven by a surge of exports and a moderation in the growth of imports. Thus, between 1973 and 1975, exports to the nonGerman NSW increased by 124.1 per cent, whereas imports from those parts of the world grew at just 28.3 per cent. 45. Ahrens, “Debt, Cooperation, and Collapse”, p. 162. 46. Mary Fulbrook, The People’s State: East German Society from Hitler to Honecker (New Haven: Yale University Press, 2005), p. 100. 47. Steiner, Plans That Failed, p. 59. 48. Ibid., pp. 56–58. 49. Ibid., p. 58. 50. Wayne Geerling, Gary B. Magee, and Russell Smyth, “Occupation, Reparations, and Rebellion: The Soviets and the East German Uprising of 1953”, Journal of Interdisciplinary History LII: 2 (2021), pp. 225–250. 51. Fulbrook, People’s State, p. 100. 52. BA NY 4113, 10.10.1958, “Stenografische Niederschrift des wissenschaftlichen Gesprächs der Redaktion der ‘Einheit’ über die Bedeutung des Starts des sowjetischen Erdsatelliten”, p. 11. 53. Jeffrey Kopstein, “Ulbricht Embattled: The Quest for Socialist Modernity in The Light of New Sources”, Europe-Asia Studies 46: 4 (1994), pp. 597–615; Steiner, Plans That Failed, pp. 105– 106. 54. Steiner, ibid., p. 106. 55. Kopstein, “Ulbricht Embattled”, pp. 606–609. 56. Ahrens, “Debt, Cooperation, and Collapse”, pp. 166–168; Steiner, Plans That Failed, pp. 105–106; and Kopstein, “Ulbricht Embattled”, pp. 608–611. 57. Kotkin, “Kiss of Debt”, p. 82. 58. Quoted in Kopstein, “Ulbricht Embattled”, p. 611. 59. Zaitlin, Currency of Socialism, p. 70. 60. Kopstein, “Ulbricht Embattled”, pp. 611–612. 61. Ibid., p. 609.

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62. BA DY 30 IV A2/2021/153; also cited in Kopstein, “Ulbricht Embattled”, p. 610. 63. BA DY 30J IV 2/2A 3196, (no date), “Zur Korrektur der Wirtschaftspolitik Walter Ulbricht auf der 14. Tagung des Zentralkomitees der SED 1970”, p. 3. 64. Ahrens, “Debt, Cooperation, and Collapse”, pp. 168–169. 65. Steiner, Plans That Failed, pp. 142–144. 66. BA DY 30 NL 182/974, 17.4.1969, “Brief von Alfred Neumann an Walter Ulbricht”. The letter is also cited in Kopstein, “Ulbricht Embattled”, p. 609. 67. Kopstein, Politics of Economic Decline, pp. 74–84. 68. Annemarie Sammartino, “The New Socialist Man in the Plattenbau: The East German Housing Program and the Development of the Socialist Way of Life”, Journal of Urban History 44: 1 (2018), p. 82; Gerhard Krenz, “Big Plans for Housing in the GDR”, Building Research and Practice 4: 2 (March/April 1976), p. 106. 69. In 1976, the “main task” was renamed “the unity of economic and social policy” (Einheit von Wirtschafts- und Sozialpolitik). 70. Erich Honecker, “VIII. Parteitag der SED – Bericht des Zentralkomitees, 15.-19. Juni 1971. Berichterstatter: 1. Sekretär des ZK der SED Erich Honecker”, in Günter Benser, ed., Dokumente zur Geschichte der SED, vol. 3: 1971–1986 (Berlin: Dietz Verlag, 1986), pp. 7–33. 71. Zaitlin, Currency of Socialism, pp. 68, 77, and 78; Mark Allinson, “More from Less: Ideological Gambling with the Unity of Economic and Social Policy in Honecker’s GDR”, Central European History 45: 1 (March 2012), pp. 102–127. 72. Quoted in Allinson, “More from Less”, pp. 107–108. 73. Quoted in Joachim Nawrocki, “Verfehlte Wirtschaftspolitik belastet DDR-Wirtschaft”, Deutschland Archiv 11 (1971), p. 1121. 74. BA DE 1/56129, 15.3.1972, “SPK: Aufträge und Vorschläge aus der Beratung des Politbüros am 14.3.1972” (no page number). 75. Ray Stokes, “From Schadenfreude to Going-Out-Of-Business Sale: East Germany and the Oil Crises of the 1970s”, in Harmut Berghoff and Uta Andrea Balbier (eds.), The East German Economy, 1945–2010: Falling Behind or Catching Up (Cambridge: Cambridge University Press, 2013), pp. 131–143.

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76. Kopstein, Politics of Economic Decline, p. 82. 77. Ibid., p. 87. 78. BA P E-1-56323, 14.3.1977, “Brief von Günter Mittag und Gerhard Schürer an Erich Honecker”, p. 2. 79. BA P E-1-56323, 27.4.1977, “Gerhard Schürer, Persönliche Aufzeichnungen” (no page number). 80. Allinson, “More from Less”, pp. 120–127; Steiner, Plans That Failed, pp. 164–165. 81. Ahrens, “Debt, Cooperation, and Collapse”, pp. 174–175. 82. Stokes, “From Schadenfreude to Going-Out-Of-Business”, pp. 136–141; Ahrens, “Debt, Cooperation, and Collapse”, pp. 171–175. 83. Herle, “Die Diskussion der ökonomischen Krisen”, pp. 317–325. 84. BA DY 30J IV 2/2/1936, 10.3.1982, “Das Protokoll Nr. 10/82 der Sitzung des Politbüros am 10 März 1982” (no page number); Andreas Malycha, Die SED in der Ära Honecker: Machtstrukturen, Entscheidungsmechanismen und Konfliktfelder in der Staatspartei 1971 bis 1989 (Berlin: De Gruyter Oldenbourg, 2014), pp. 277–281. 85. Alexander Schalck-Golodkowski, Deutsch-deutsche Erinnerungen (Reinbek: Rowohlt Verlag, 2000), p. 203; Judt, Der Bereich Kommerzielle Koordinierung . 86. Herle, “Die Diskussion der ökonomischen Krisen”, p. 325. 87. Maier, Dissolution, p. 62. 88. Bentley, Research and Technology, p. 24. 89. Such a view was held by even leading economic functionaries and the Stasi; see Malycha, Die SED in der Ära Honecker, pp. 288– 289. 90. Armin Volze, “Zur Devisenverschuldung der DDR - Enstehung, Bewältigung und Folgen”, in E. Kuhrt (ed.), Die Endzeit der DDR-Wirtschaft - Analysen zur Wirtschafts-, Sozial- und Umweltpolitik (Opladen: Leske und Budrich, 1999), p. 151; Zaitlin, Currency of Socialism, p. 104; and Kopstein, Politics of Economic Decline, p. 89. 91. Michael Gehler, Three Germanies: From Partition to Unification and Beyond, 2nd edition (London: Reaktion Books, 2021), p. 163.

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92. Kopstein, Politics of Economic Decline, p. 89, for example, notes a change of attitude in the lead up to the Ninth Conference of the Central Committee in December 1978. 93. Schalck-Golodkowski, Deutsch-deutsche Erinnerungen, p. 202. 94. Quoted in Kopstein, Politics of Economic Decline, p. 93. 95. Maier, Dissolution, p. 70; Kopstein, ibid., p. 102. 96. Quoted in Herle, “Die Diskussion der ökonomischen Krisen”, pp. 334–335. 97. Günter Mittag, Um Jeden Preis: Im Spannungsfeld zweier Systeme (Berlin: Das Neue Berlin, 2015), p. 90; Maier, Dissolution, pp. 70–71. 98. Quoted in Kopstein, Politics of Economic Decline, p. 89. 99. Gerhard Schürer, “Die gescheiterte Preisreform 1979 in der DDR. Protokoll einer Diskussion”, in Rainer Weinert (ed.), “Preise sind gefährlicher als Ideen”. Das Scheitern der Preisreform 1979 in der DDR. Protokoll einer Tagung (Berlin: Forschungsstelle Diktatur und Demokratie, 1999), p. 26. 100. Herle, “Die Diskussion der ökonomischen Krisen”, pp. 325–334. 101. Maximilian Graf, “Before Strauβ: The East German Struggle to Avoid Bankruptcy During The Crisis Revisited”, International History Review 42: 4 (2020), p. 742; Stokes, “From Schadenfreude to Going-Out-Of-Business”, pp. 141–143; and Ahrens, “Debt, Cooperation, and Collapse”, p. 174. 102. Following the introduction of perestroika and glasnost , the SED’s leadership, unwilling to embrace Gorbachev’s reform agenda, actively distanced itself from the Soviet Union. Honecker’s view was that there was no need for such change in the GDR because his policies with respect to intensification and the formation of combines had resolved, or were in the process of resolving, all of the important economic difficulties of the planned economy. He also believed that Gorbachev’s approach would lead to political disaster. To prevent the contagion of reform from infecting the GDR, it was decided in January 1987 to begin censuring or removing from distribution articles (including many of those reporting Gorbachev’s speeches) and magazines from the Soviet Union, and to cut back on the number of party members sent to learn in the USSR. Emphasis was now placed on displaying the achievements of the East German system and a campaign under the slogan of “Socialism in the colours of the GDR” (Sozialismus

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in den Farben der DDR) was launched in 1988. See Kopstein, Politics of Economic Decline, pp. 101–102. 103. Graf, “Before Strauβ”, p. 744. 104. Stokes, “From Schadenfreude to Going-Out-of-Business”, p. 141. 105. In the remainder of the section, we use ‘Honecker’ as a shorthand for the small circle of individuals around Honecker who set economic policy in its final decade and a half. 106. When exactly in the 1950s the concern of not realising a gain (the certainty effect) replaced the fear of loss (the possibility effect) as the dominant driving force for the GDR’s attitude to the accumulation of foreign debt is unclear. It is a subject worthy of further study. 107. Ahrens, “Debt, Cooperation, and Collapse”, pp. 165 and 168. 108. Egon Krenz told Gorbachev in November 1989 that there had been no movement against Honecker because they were waiting for him to pass away. “Record of Conversation between Mikhail Gorbachev and Egon Krenz, 1 November 1989” in Savranskaya et al. (eds.), Masterpieces of History, pp. 570–571.

References Primary Sources (A) Archival Files (i) Bundesarchiv BA, DE 1/56129 BA, DY 30 IV A2/2021/153 BA, DY 30 IV 2/1/708 BA, DY 30 J IV 2/2A 3196 BA, DY 30 J IV 2/2/1936 BA, DY 30 NL 182/974 BA, NY 4113 BA, P E-1-56323 (B) Contemporary Publications, Periodicals and Newspapers Walter Ulbricht’s speech to the Twenty-Eighth Plenum of the SED Central Committee, Neues Deutschland, August 1 1956, p. 1.

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Secondary Sources Allinson, Mark. 2012. More from Less: Ideological Gambling with the Unity of Economic and Social Policy in Honecker’s GDR. Central European History 45 (1): 102–127. Bendor, Jonathan, Daniel Diermeier, David Siegel, and Michael Ting. 2011. A Behavioral Theory of Elections. Princeton: Princeton University Press. Bentley, Raymond. 2010. Research and Technology in the Former German Democratic Republic. London: Routledge (original edition 1992). Boettcher III, William A. 2004. The Prospects of Prospect Theory: An Empirical Evaluation of International Relations Applications of Framing and Loss Aversion. Political Psychology 25 (3): 331–362. Briguglio, Marie, Charity-Joy Acchiardo, G. Dirk Mateer, and Wayne Geerling. 2020. Behavioral Economics in Film: Insights for Educators. Journal of Behavioral Economics for Policy 4 (1): 17–28. Croan, Melvin and Carl J. Friedrich. 1958. The East German Regime and Soviet Policy in Germany. Journal of Politics 20 (1): 44–63. Fanis, Maria. 2004. Collective Action Meets Prospect Theory: An Application to Coalition Building in Chile, 1973–75. Political Psychology 25 (3): 363–388. Fulbrook, Mary. 2005. The People’s State: East German Society from Hitler to Honecker. New Haven: Yale University Press. Geerling, Wayne, Gary B. Magee, and Russell Smyth. 2021. Occupation, Reparations, and Rebellion: The Soviets and the East German Uprising of 1953. Journal of Interdisciplinary History LII (2): 225–250. Gehler, Michael. 2021. Three Germanies: From Partition to Unification and Beyond. 2nd edition. London: Reaktion Books. Graf, Maximilian. 2020. Before Strauβ: The East German Struggle to Avoid Bankruptcy During the Crisis Revisited. International History Review 42 (4): 737-754. Herbst, Andreas, Gerd-Rüdiger Stephan, and Jürgen Winkler eds. 1997. Die SED: Geschichte, Organisation, Politik. Ein Handbuch. Berlin: Dietz Verlag. Herle, Hans-Hermann. 1995. Die Diskussion der ökonomischen Krisen in der Führungsspitze der SED. In Der Plan als Befehl und Fiktion: Wirtschaftsführung in der DDR: Gespräche und Analysen, eds. Theo Pirker, M. Rainer Lepsius, Rainer Weinert, and Hans-Hermann Hertle, 309–345, Opladen: Westdeutscher Verlag. Honecker, Erich. 1986. VIII. Parteitag der SED—Bericht des Zentralkomitees, 15.-19. Juni 1971. Berichterstatter: 1. Sekretär des ZK der SED Erich Honecker. In Dokumente zur Geschichte der SED, volume 3: 1971–1986, ed. Günter Benser, 7–33, Berlin: Dietz Verlag. Judt, Matthias. 2013. Der Bereich Kommerzielle Koordinierung. Das DDRWirtschaftsimperium des Alexander Schalck-Golodkowski—Mythos und Realität. Berlin: Christoph Links.

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Kahneman, Daniel and Amos Tversky. 1979. Prospect Theory: An Analysis of Decision under Risk. Econometrica 47 (2): 263–292. Kopstein, Jeffrey. 1994. Ulbricht Embattled: The Quest for Socialist Modernity in the Light of New Sources. Europe-Asia Studies 46 (4): 597–615. Kopstein, Jeffrey. 1997. The Politics of Economic Decline in East Germany, 19451989. Chapel Hill: University of North Carolina Press. Kotkin, Stephen. 2010. The Kiss of Death: The East Bloc goes Borrowing. In The Shock of the Global: The 1970s in Perspective, eds. Niall Ferguson, Charles S. Maier, Erez Manela, and Daniel J. Sargent, 80–93, London: Belknap Press. Krenz, Egon. 1990. Wenn Mauern fallen. Die friedliche Revolution: Vorgeschichte, Ablauf, Auswirkungen. Vienna: Paul Neff Verlag. Krenz, Gerhard. 1976. Big Plans for Housing in the GDR. Building Research and Practice 4 (2): 106. Levi, Ariel S. and Glen Whyte. 1997. A Cross-Cultural Exploration of the Reference Dependence of Crucial Group Decisions under Risk: Japan’s 1941 Decision for War. The Journal of Conflict Resolution 41 (6): 792–813. Levy, Jack S. 1997. Prospect Theory, Rational Choice, and International Relations. International Studies Quarterly 141 (1): 87–112. Maier, Charles S. 1997. Dissolution: The Crisis of Communism and the End of East Germany. Princeton: Princeton University Press. Malycha, Andreas. 2014. Die SED in der Ära Honecker: Machtstrukturen, Entscheidungsmechanismen und Konfliktfelder in der Staatspartei 1971 bis 1989. Berlin: De Gruyter Oldenbourg. McDermott, Rose. 1998. Risk Taking in International Politics: Prospect Theory in Post-War American Foreign Policy. Ann Arbor: University of Michigan Press. McDermott, Rose. 2004. Prospect Theory in Political Science: Gains and Losses from the First Decade. Political Psychology 25 (2): 289–312. Mercer, Jonathan. 2005. Prospect Theory and Political Science. Annual Review of Political Science 8 (1): 1–21. Mittag, Günter. 2015. Um Jeden Preis: Im Spannungsfeld zweier Systeme. Berlin: Das Neue Berlin. Möbis, Harry. 1999. Von der Hoffnung gefesselt - zwischen Stoph und Mittag unter Modrow. Frankfurt (Oder): Frankfurt Oder Editionen. Nawrocki, Joachim. 1971. Verfehlte Wirtschaftspolitik belastet DDR-Wirtschaft. Deutschland Archiv 11: 1123–1124. Sammartino, Annemarie. 2018. The New Socialist Man in the Plattenbau: The East German Housing Program and the Development of the Socialist Way of Life. Journal of Urban History 44 (1): 78–94. Savranskaya, Svetlana, Thomas Blanton and Vladislav Zubok eds. 2010. Document 97 Record of Conversation between Mikhail Gorbachev, and Egon Krenz, 1 November 1989. In Masterpieces of History: The Peaceful End of the Cold War in Europe, 569–573, Budapest: Central European University.

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Schalck-Golodkowski, Alexander. 2000. Deutsch-deutsche Erinnerungen. Reinbek: Rowohlt Verlag. Schürer, Gerhard. 1996. Gewagt und Verloren: Eine deutsche Biographie. Frankfurt (Oder): Frankfurter Oder Editionen. Schürer, Gerhard. 1999. Die gescheiterte Preisreform 1979 in der DDR. Protokoll einer Diskussion. In ‘Preise sind gefährlicher als Ideen’. Das Scheitern der Preisreform 1979 in der DDR. Protokoll einer Tagung, ed., Rainer Weinert, 1–3, Berlin: Forschungsstelle Diktatur und Demokratie. Schumacher, Gijs, Marc van de Wardt, Barbara Vis, and Michael Baggesen Klitgaard. 2015. How Aspiration to Office Conditions the Impact of Government Participation on Party Platform Changes. American Journal of Political Science 59 (4): 1040–1054. Somer-Topcu, Zeynep. 2009. Timely Decisions: The Effects of Past National Elections on Party Policy Change. Journal of Politics 71 (1): 238–248. Steiner, André. 2010. The Plans that Failed: An Economic History of the GDR. New York: Berghahn. Steiner, André. 2013. From the Soviet Occupation Zone to the ‘New Eastern States’: A Survey. In The East German Economy, 1945–2010: Falling Behind or Catching Up, eds., Harmut Berghoff and Uta Andrea Balbier, 17–50, Cambridge: Cambridge University Press. Stokes, Ray. 2013. From Schadenfreude to Going-Out-Of-Business Sale: East Germany and the Oil Crises of the 1970s. In The East German Economy, 1945–2010: Falling Behind or Catching Up, eds., Harmut Berghoff and Uta Andrea Balbier, 131–143, Cambridge: Cambridge University Press. Taliaferro, Jeffrey W. 2004. Power Politics and the Balance of Risk: Hypotheses on Great Power Intervention in the Periphery. Political Psychology 25 (2): 177–211. Uschner, Manfred. 1993. Die zweite Etage - Funktionsweise eines Machtapparates. Berlin: Dietz Verlag. Vale, Michel and Hanns-Dieter Jacobsen. 1982. Strategy and Focal Points of GDR Foreign Trade Relations. International Journal of Politics 12 (1): 125– 150. Vieider, Ferdinand M. and Barbara Vis. 2021. Prospect Theory and Political Decision Making. In Oxford Research Encyclopedia of Politics. https://oxf ordre.com/politics/view/https://doi.org/10.1093/acrefore/978019022 8637.001.0001/acrefore-9780190228637-e-979. Accessed 10 Oct 2021. Vis, Barbara. 2010. Politics of Risk-Taking: Welfare State Reform in Advanced Democracies. Amsterdam: Amsterdam University Press. Vis, Barbara and Kees van Kersbergen. 2007. Why and How do Political Actors Pursue Risky Reforms? Journal of Theoretical Politics 19 (2): 153–172. Volze, Armin. 1999. Zur Devisenverschuldung der DDR - Enstehung, Bewältigung und Folgen. In Die Endzeit der DDR-Wirtschaft - Analysen zur

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Wirtschafts-, Sozial- und Umweltpolitik, ed., Eberhard Kuhrt, 151–187, Opladen: Leske und Budrich. Weyland, Kurt. 2002. The Politics of Market Reform in Fragile Democracies: Argentina, Brazil, Peru, and Venezuela. Princeton: Princeton University Press. Zaitlin, Jonathan R. 2007. The Currency of Socialism: Money and Political Culture in East Germany. Cambridge: Cambridge University Press.

CHAPTER 7

Conclusion

For over four decades, the Cold War polarised the world. All aspects of life in every country inexorably came to be defined in terms of how local practice accorded with the worldviews of the two competing ideological camps. Although the tone of debate could be modulated by the respective thawing or chilling of relations between the superpowers, discourse operated largely within well-defined bands. Countries and systems were categorised by their superpower alignment, or, if the country was not fully ensconced in either camp, by the degree to which it was influenced by their relative gravitational pulls. Strategically placed countries, especially in the developing world, to some extent could play the two superpowers off against each other—or adopt a neutral stance via the Non-Aligned Movement—although such high-stakes wagers in themselves could prove dangerous, as shifting one’s allegiance back and forth between the USSR and the USA in the longer term often merely served to exacerbate superpower rivalry and fuel internal conflict that might culminate in debilitating civil war. For most countries, however, their geographical location or recent history made their positioning in the global order anything but ambiguous.1 Situated literally on the dividing line of the Cold War in Europe, the German Democratic Republic (GDR), itself a direct product of Russian foreign policy and occupation, was, in the perspective of © The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 G. B. Magee and W. Geerling, Socialism with a Human Face, Palgrave Studies in Economic History, https://doi.org/10.1007/978-981-19-0664-0_7

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most Westerners at the time, the quintessential Soviet-aligned “People’s Democracy” of Europe. More than that, for most of its existence, the GDR was generally understood in the West as the showcase of that bloc, its most economically advanced and prosperous nation.2 Apart from its experimentation with the New Economic System in the 1960s, it was known for its strict adherence to the Stalinist orthodoxy that dominated thinking in the Soviet Union until the advent of glasnost and perestroika. Given its “eternal friendship” to, indeed absolute existential dependence on, the Soviet Union, Western analysts were wont, almost by default, to perceive all aspects of its society, governance and economy through a Soviet filter that permitted little allowance for local context. Perceptions once formed are hard to shift. Tropes first germinated during the Cold War survive down to the present day and are still freely evoked, often without much thought, especially in the media, to account for a range of modern-day phenomena. While the lasting effects of beliefs and ideas on actions is a serious intellectual and practical matter that warrants study, far too often putative legacies such as the East German’s “Wall in the Head” (Mauer im Kopf ) or the longterm consequences of their socialist upbringing on contemporary voting behaviour in Eastern Germany are adduced as simple, unsubstantiated and at times frankly tendentious, explanations for occurrences that are in fact extremely complicated and call for more rigorous analysis.3 In the first flush of freedom following reunification, the priority of many historical researchers was, quite rightly, to overcome the legacy of the SED regime’s furtiveness and reveal its darkest secrets. There was much to uncover. The resulting focus on the machinations of the state and the deeper than expected penetration of the Stasi to all corners of GDR society brought much welcome and needed relief to its victims, while educating others of the tyrannical elements of the regime that they had— explicitly, tacitly or perhaps unwittingly—lent their support. However, along with its elucidating and liberating effects, this focus also acted to reinforce and lock in simplified perceptions of everyday life in the GDR. Such perceptions at times have had the unfortunate effect of seemingly rendering the lived experiences of those who grew up in the GDR as, if not tainted by its association with the dictatorship, then at least purposeless and misguided.4 It was as if the only value their experiences, and indeed the history of the GDR, afforded was the chilling moral lesson they provided on what can go wrong.

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With the passing of time, the ability to look at the history of the GDR, extricated from the long penumbra of Cold War rhetoric, has grown. Over recent decades, new, more complete accounts of what it was like to live in East Germany have steadily emerged. Taken as a whole, these narratives permit a much more variegated picture of life in the GDR to be crafted than that gleaned from dry totalitarian takes where nothing but the repressive apparatus of the state is on display. Above all else, they have shown how people, who endured such circumstances, nevertheless could still live perfectly normal lives. The end result is a history that is simply richer, more interesting and more compelling.5 One aspect of the GDR’s history has to a large extent bypassed this trend, however. The economic history of East Germany, in distinct contrast with other branches of history, has remained locked in a discourse about the system’s inevitable failure, a discourse that can be traced back to the theoretical polemics of the capitalism versus socialism debate, but which in effect has been extended into the post-socialist (or at least postSoviet socialist) era. It has remained deeply politicised terrain. Fortified by the collapse of communism, the view has blossomed into “fact”. Sovietstyle command economies, such as that which operated in the GDR, are deemed inescapably to be doomed to failure. While clear justification for such views can be found in mainstream neoclassical economic theory, declaring on the basis of principle alone that all planned economies must fail, becomes a statement of one’s conviction in the perfection of liberal market economics. By contrast, to contend that the pursuit of a planned economic system could be more than an exercise in unalloyed futility places one at risk of being labelled a regime apologist or economic illiterate. Cast in this light, the purpose of GDR economic history easily contracts to the simple mapping out of the details of its inevitable decline, often delivered as a parable, so that the same egregious errors might not be repeated in future. While the story of the system’s demise must be told and indeed must figure prominently—there is no denying that it was a pivotal event of the late-twentieth century—it is equally valid to point out that the system’s economic history, especially for those who lived it, was more than just a story of decline. After all, the system did “function” at some level of competency for four decades, over which time the standard of living of the average East German did steadily rise. Understanding how the system could operate in spite of its apparent flaws seems to us

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to pose a range of valid questions that warrant attention, especially if we truly wish to come to terms with the erstwhile Republic’s total economic history.

7.1

New Perspectives

This book has sought to shed light on GDR economic history by bringing new, more contemporary tools to the debate. In doing so, we have not looked to rehabilitate, let alone glorify, the East German economic system. While it functioned, its performance did lag considerably behind the achievements of the leading non-socialist economies. Moreover, even in achieving its comparatively modest gains, it applied unnecessary coercion, wasted scarce resources and inflicted enormous environmental damage. These facts can neither be denied nor should they be forgotten. Efficiency, too, is a vitally important economic concept crucial for progress and must be considered in any assessment of the GDR’s economic history, but it is not everything. After all, not many people would voluntarily define their lives or see their purpose in terms of the attainment of ever greater efficiency. It also needs to be remembered that efficiency is by design a relative concept. In other words, it means nothing without a benchmark, and benchmarks are subjectively determined. Pitting the planned economies’ outcomes against either the ideals of a perfectly competitive market equilibrium or West German performance is a valid and revealing exercise, but such comparisons alone do not exhaust the criteria that can be used to determine success or failure.6 Economic history is, and should be, much richer than that. Just as a student, who scores a below-average mark in an exam has not necessarily failed the subject and may still have learnt something of great value from their study, East German economic history deserves to be understood in broader terms than just its weak comparative performance. One of the new tools brought to bear in this volume has been the insights on individual and small group decision-making generated by prospect theory. This theory, grounded in rigorous psychological and experimental economic analyses provides new perspectives on and predictions about how decisions are made in an environment where risk, uncertainty and frequently observed cognitive quirks exist, that is to say, in real-world contexts. In Chapter 6, these insights were applied to the decisions taken by the senior leadership of the SED with respect to its continued borrowing from the West, even when debt levels had long

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exceeded what normally might have been regarded as acceptable. That this was allowed to happen at all has often been adduced as irrefutable proof of the economic irrationality, ignorance or cognitive weaknesses of the rulers of the GDR, most particularly Erich Honecker. Yet, when behavioural traits such as loss aversion and the possibility and certainty effects are factored into the analysis, the choices made appear less perverse and in fact accord with how prospect theory predicts people in such settings will tend to behave. This, of course, did not mean that the decisions made were right or even sensible, merely that in explaining them there is no need to resort, as is often the case, to arguments based on the irrationality, incompetence, delusions or character faults of the decisionmaker. The distinction matters, for it helps to place decisions of such momentous consequence, reached at the highest levels of the system, in a more normalised light. In eschewing the abnormal and peculiar as explanations, it forces researchers to come to terms with the less clear-cut matter of how context, framing and risk profiles motivate complex human choices. Prospect theory, moreover, tells us that highly risky behaviour, such as that exhibited with regards to foreign borrowing during Honecker’s reign, can have rational roots. Such an approach undercuts narratives, which seek to depict all aspects of East German history as ultimately flowing from the lies, delusions and stupidity of its rulers and their belief system. Furthermore, by providing an alternative, more differentiated periodisation, it counteracts a corollary to that view, namely, that the history of the accumulation of foreign debt can be regarded as a homogenous whole. In fact, viewed in the long run, the psychological basis of decisions with respect to foreign borrowing, both under Walter Ulbricht and Erich Honecker, varied across changing times and contexts. While in this book we have used the insights of prospect theory to understand the decision-making surrounding the accumulation of foreign debt, its value is not restricted to this matter. Indeed, our hope is that by illustrating how the theory can be gainfully deployed to an important issue like debt, its more general worth might be recognised. One can imagine, for example, it shedding new light on a host of other important, high-level decisions of the SED, such as whether to adopt or not an economic reform agenda or what its position vis-à-vis West Germany should be. Despite the attention normally extended to the seemingly lofty deliberations of the Politbüro, most important decisions within the planned economy did not actually take place at that pinnacle of power. Genuine implementation of party plans and policy necessitated decision-makers

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at all levels of the economy and society to receive, understand and act on the orders issued. This requirement afforded considerable latitude to decision-makers, especially at the local level. Given the sheer volume of directives, orders, initiatives and plans handed down, it also engendered considerable confusion, wasted effort and inconsistency. As Sandrine Kott has observed, daily economic life was characterised by: the incessant introduction of new working methods and new production campaigns to be promoted with no thought for the factory’s own difficulties. The party apparatus was thus permanently engaged in a whirlwind of apparently meaningless activity.7

This oft-mentioned reality of all planned economies, a feature that essentially stemmed from the absence of clear signals such as prices, is typically cited as evidence of the inefficiency and fictitious nature of socialist planning. Such a conclusion is not misplaced. Confusion and arbitrariness reigned where cold, hard rationalism was meant to prevail. However, this feature of the system was more than an unfortunate by-product of its flawed design. In this book, we have argued that how the system adapted to this basic, inextricable reality constitutes an essential component of an understanding of how the society and economy actually functioned. If one wants to come to terms with how Soviet-style economies, such as the GDR’s, really operated, then these are the hard actualities, with which one must begin. We further believe that these stylised facts provide the foundations of a more general organising principle of the day-today functioning of Soviet-style economies. Such a principle would in our view offer a more realistic basis for analysis than alternatives derived from hypothetical ideals that rarely pertain. Knowing that they lacked the means to replicate the price signals of a market system, planners and party bosses consciously turned to means that would smooth the flow of orders and information down the hierarchy of command, signal its actual intent and limit confusion. Coordinated campaigns and initiatives became the preferred techniques.8 Mass mobilisation, thus, was the system’s answer to the question of how it would diffuse new ideas. Yet, designing campaigns that cut through and were effective was not always a matter of simply lifting pre-existing models off the proverbial shelf and applying them; the development of successful campaigns was a learning process, where the best knowledge was typically acquired through practice. Nonetheless, over time, a series

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of standard, recognisable campaigning techniques emerged, although, as circumstances inevitably changed, even these had to be regularly updated and adapted to the fresh challenges at hand. However, underlying all of the party’s campaigning strategies, effective or otherwise, were fundamental psychological processes of the types intimately associated with the concept of information cascades. Confronted by choice under uncertainty and incomplete and contradictory information, we know that humans instinctively turn for guidance to established heuristics, which have proven themselves sufficient to engender satisfactory outcomes. Observing how others have decided before making one’s own choice is one such common heuristic. Moreover, when applied by a series of individuals concomitantly, this heuristic explains how local conformity around a particular decision can rapidly evolve. That conformity is heavily influenced by the prior choices of others, especially “fashion leaders” or “liaison agents”, those key individuals in the system who are assumed, usually based on past successes, to possess better or broader insights into the correct outcomes. By watching and following the actions of others, information cascades across the system, increasingly locking one choice in preference to others. Such a process has direct application to the confusion of decisionmaking engendered by the ubiquity of top-down directives. Lacking clarity, we would expect those responsible for implementation in the GDR to utilise a heuristic to help them sort out which of the manifold orders received were actually important and which were not. Watching what others did and emulating their “successful” actions was a logical response to such a setting. The information cascades that emerged ensured that each decision-maker not only could take some course of action but that they could do so without unduly damaging their reputations or running the risk of violating the party line. As the dangers of misinterpreting the party’s current position were great, erring on the side of caution when there was doubt was an entirely pragmatic response. When confronted with a new initiative, the common strategy was, not surprisingly, to wait and see what others, especially key figures and institutions, did, followed then by either a disregarding of the initiative or an appropriately configured adoption of it. In Chapter 2, eight propositions calibrated to the GDR’s context were presented. These propositions shed light on why cascades may have taken off in some circumstances and locations, but not others.

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7.2

Applications

In this book, we used the eight propositions laid out in Chapter 2 to examine the development of three historically important campaigns associated with proposed major changes to the structure and organisation of the planned economy: the introductions of piecework (Chapter 3), the Mitrofanov Method (Chapter 4) and the Schwedt Initiative (Chapter 5). Each of these detailed case studies tells a story of anything but a smooth roll out of the initiative in question. Each was, in fact, beset with failures, problems and setbacks, which were confronted seriatim and partially overcome through experimentation and adaptations in the techniques and methods deployed. In each case, the party ultimately proved successful in implementing the desired changes. The processes involved were, of course, messy, yet they reveal that the system possessed mechanisms that permitted some functionality, even change, to occur. The three examples studied in this book, of course, were not anomalies. The same approach could be easily extended to any campaign or initiative. Given the space constraints, three brief examples lifted from the existing secondary literature will have to suffice for now to illustrate its broader applicability. 7.2.1

Youth Policy

Take the case of the party’s youth policies in the 1960s. In the period leading up to the building of the Berlin Wall, Walter Ulbricht undertook a number of initiatives aimed at reorientating and reinvigorating the party’s approach to young people. His actions arose from a concern that existing party policy and practice was lacklustre and did not sufficiently engage the right young people. As such, its failings had in part contributed to the growing problems of juvenile crime and flight to the West. In particular, he identified one source of the problems in the overly bureaucratic and rigid attitudes of the Free German Youth (Freie Deutsche Jugend— FDJ ) movement. In February 1961, the Politbüro on his instructions released a communiqué on youth problems, which sought to concentrate the FDJ’s activities on those aged between 14 and 22 years, tighten the organisation’s entry standards to exclude those who were not genuinely committed to its goals and improve the socialist education of youth by drawing upon resources outside the FDJ .9 Needless to say, it was not well received by FDJ functionaries, not least Erich Honecker, who as

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co-founder and former Chairman of the FDJ , rightly saw it as diminishing their influence and powerbase. The leadership of the FDJ was reluctant to advocate or endorse the changes; within the organisation, many actively opposed the introduction of the communiqué’s provisions, hoping thereby to limit the damage to the FDJ they would cause. As a result, some key reforms were openly ignored. As Alan McDougall’s excellent account of the situation summarised: FDJ functionaries in schools and universities were reluctant to follow the youth communiqué’s instructions to the letter. Faced with little pressure from above … they largely ignored the directive to delete uncommitted FDJers from their membership list, behaving … as if there had never been any such order … The first youth communiqué thus effected no major changes in the FDJ’s work during the six months before the construction of the Berlin Wall in August 1961 rendered it obsolete. The tendency of apathetic and overworked party and FDJ functionaries to view it … as ‘one measure among many’ … rather than as a fundamental expression of party youth policy, was hard to resist.10

Ulbricht renewed his efforts against FDJ practices with a second youth communiqué in September 1963, which called for a more liberal, if still controlled, approach to youth culture and debate, in the hope that the display of relative openness would strengthen young people’s commitment to socialist society. It met, however, with the same opposition and response from FDJ functionaries. By the autumn of 1965, it, too, had been effectively sidelined by Honecker and his allies. A key part of the problem was that Ulbricht’s chosen vehicle to promote his vision, the youth commission (Jugendkommission beim Politbüro) under Kurt Turba remained a purely advisory body with no institutional status and little support beyond Ulbricht himself. As such, with no “fashion leaders” with serious political clout sponsoring it and many behind the scenes actively undermining it, confusion as to the actual status of the 1963 communiqué remained. Was it to be considered anything more than words? In such uncertain circumstances, FDJ officials erred, as predicted, on the side of caution. Information cascades that implemented the provisions of the communiqués could not be induced. Ulbricht’s plans for revamping youth policy had gone awry in essence because “in trying to faithfully follow the party line, when two such lines existed, the FDJ fell between two stools”.11

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7.2.2

Agricultural Policy

Poor communication hindered the creation of information cascades in other areas of policy, too. In the late 1960s, the SED hoped to accelerate the modernisation of GDR agriculture through a mutually reinforcing process of industrialisation and specialisation. Central to this thrust was the creation of more extensive forms of cooperative crop production. Such cooperation, however, required significant reforms in the institutional relationship between existing cooperative farms and the food industry, something of which agricultural production cooperative (Landwirtschaftliche Produktionsgenossenschaft or LPG) chairmen were decidedly suspicious. They feared that in any new arrangement, they would lose control over their cooperative. At both the Seventh Party Congress and the Tenth German Farmers Congress in 1968, advocates of the change, however, made robust public moves to promote the more rapid specialisation of production. It was indicated that a more industrialised form of farming was on the horizon. Rumours spread, spurred on by likeminded party activists, that, among other things, new organisational forms, better suited for cooperative crop production and closely integrated with the food processing industry would soon be established and render many existing LPGs redundant. As concerns in the agricultural sector mounted, Walter Ulbricht attempted to allay the growing fears at the Tenth Plenum of the Central Committee in April 1969. There, he reassured the sector of the primacy of the LPG and castigated the excessive enthusiasm of some party activists. Cooperative crop production, he claimed, must be achieved in gradual steps in full consultation with, and with the active involvement of, the LPGs. Rather than easing the situation, though, the statement created more confusion. First of all, no one really understood the status of Ulbricht’s comments relative to the remarks of others who were still actively advocating for a more aggressive interpretation of the party’s policy. Was the chief part of his message the continuance of the drive for cooperative crop production or was it his emphasis that the gains should be achieved more gradually and with the full input of LPGs ? Certainly, many first secretaries in agricultural Kreise interpreted Ulbricht’s comments not as a change of policy per se, but rather as a restatement of the same policy that encouraged them to proceed as before, albeit at a somewhat less hasty pace. In contrast, many LPG chairmen believed that Ulbricht’s actual intent was to signal that no change could in fact occur without their expressed agreement. In the

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confusion that ensued, the dispute intensified and all change ground to a halt. As one LPG Chairman from Kreis Heiligenstadt in Bezirk Erfurt in May 1969 worried: The question which concerns me is whether agricultural policy has changed since the 10th Plenum? There are currently many discussions, cooperation is going to be broken up, or cooperation is leading to the liquidation of the class of the collective farmer. I am not against new things, but it’s not so easy for us up here … We’re losing the will to work.12

As George Last’s insightful analysis of the crisis astutely concludes, “the response to the tenth Plenum had clearly highlighted the dangers of any neglect of the chain of communication at the local level”.13 The uncertainty that had stymied and raised doubts about closer cooperative crop production lingered until Erich Honecker’s formal confirmation at the Eighth Party Congress in 1971 that the party intended to progress, admittedly in consultative steps, towards the introduction of cooperative crop production as a key plank of its plan to industrialise the farming sector.14 7.2.3

The Andreyeva Letter

Outcomes were not just the unwitting products of mistakes and poor signalling. The psychological basis of information cascading was also consciously used by those in positions of power in all Soviet-style societies to propagate beliefs and expectations. An interesting example relates to Nina Andreyeva’s famous letter affirming traditional Soviet values and criticising the process of glasnost , which appeared in Sovetskaya Rossiya on 13 March 1988. Following Yegor Ligachev’s swift public approval of the letter—at the time he was Second Secretary of the CPSU and its Secretary for Ideology—the party’s propaganda apparatus took his endorsement as a signal that the party line had changed and it began distributing the letter and commentary about it via the Telegraph Agency of the Soviet Union (TASS), the state’s central information distribution agency. The letter was part of an orchestrated campaign by traditionalist forces within the Party to re-establish the pre-glasnost orthodoxy. On seeing the activity generated, provincial papers across the Soviet world began republishing the material as well as local content supportive of it. Thus, within three weeks of its first appearance, it had also been picked up and commented

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upon favourably by the East German press, including by Neues Deutschland, not least because its views on Mikhail Gorbachev’s reform agenda aligned at the time with those of the SED leadership.15 Party organisations across the Soviet Union began holding discussion sessions to study the insights of the article. Driven by fear, even the Central Committee, apparently approximately half of whom did not support the letter’s position, remained quiet while all this was going on. As Grigory Baklanov, the novelist and the reformist editor of the monthly literary magazine Znamya, remarked: “I knew no articles of this kind were published accidentally in our press”.16 The cascade was only stopped by the public intervention of Gorbachev, who had been out of the country for part of the time, and the Politbüro, which authorised the publication of commentary highly critical of the Andreyeva letter in Pravda. The repudiation of the letter occurred only on 5 April 1988, a good three and a half weeks after the cascade it initiated had begun.

7.3

Implications

The approach adopted in this book has placed considerable emphasis on structural features of Soviet-type planned economies. It has focussed on the second-best mechanisms that were needed to make those systems function at an acceptable level of performance. These same mechanisms, in turn, set the limits within which the system, as it was then configured, could operate. It is our view that a substantial part of the GDR’s economic history revolved around, and should be analysed from the perspective of, how the system and the people within it confronted these limitations and adapted their responses and behaviours accordingly. In addition to providing an analytical framework to study East German economic history, the imperatives of information cascades also shed light on a range of attributes of Soviet-style planned economies often dismissed as peculiarities or symbolic rituals. A case in point is socialist competition, a pervasively employed technique of people’s own enterprises, which were allegedly intended to induce heroic bursts of productivity or ingenuity, but in practice typically only aggravated already significant misallocation problems. Often seen as little more than “political rituals” or part of the “theatre of working-class political affirmation”, there is no denying their propagandist value.17 Yet, one wonders, given the opportunity costs involved, whether that factor alone would have been sufficient for their continued widespread usage? If one wishes to assert

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the economic irrationality of communist functionaries, perhaps so, but the logic of information cascades suggests a more pragmatic purpose, namely, a vivid display—undoubtedly theatrical at times, too—of where the priorities or meaning of party policies and initiatives lay. In Sovietstyle economies, socialist competition was one of the relatively few means available to ruling parties, such as the SED, to signal their intent and directly influence core norms. The incessant rounds of meetings and party-led discussions, often highly formulaic in design, although tedious and rationalised as participatory democracy in action, played a similar role in ensuring that rank and file members and workers were kept aware of decisions on all relevant issues.18 Likewise, the constant fixation of party organisations on having thorough political-ideological plans in place for every initiative, unavoidable to anyone who reads the primary sources, reflected not just the desire to blame the system’s failings on ineffective propaganda and instruction. They were also part of the broader apparatus of signalling used by the regime to impart the correct meanings of its decisions to grass-root party members, in the process hopefully turning them into effective local “fashion leaders” and “liaison agents”.19 Indeed, the regularity and routinisation of life and behaviour, which some have found to be so central to the predictability and stability of East Germany, was only possible because of the widespread acceptance of the heuristics embodied in information cascades.20 The dynamics of information cascades also expose the limits of totalitarianism. Unless signals could be completely controlled from the centre, made unambiguously intelligible to all, and be communicated with the same meaning and intent across the entire system, implementation perforce would be subject to a wide variety of interpretations. This local or domain-specific discretion constrained the ability of the central authorities to impose its will arbitrarily. It also gave rise to one of the most interesting dimensions of information cascades: a mechanism by which the differentiated implementation of orders and plans can be understood. A striking feature of most campaigns and initiatives was that they exhibited significant variations in outcomes between districts, regions and even branches within the same enterprise, differences which could not be accounted for by on-the-ground factors, such as, for example, a shortage of a key raw material or differing technologies. Given the complexity of signalling and the involvement of different key individuals at each level of the party-state and across a large number of localities, the scope for a wide variation in

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either the clarity, consistency or even the importance of messages between settings could be—and often was—enormous. The party leadership of one Bezirk, for example, might interpret a campaign message as being of paramount importance and compel all the Kreise under its watch to embrace it. Their counterparts in another Bezirk, by contrast, might adopt a more dismissive attitude to the campaign, ensuring that its Kreise would tend to lag behind in the implementation of the same initiative. But the extent of the problem did not end there. Where the discretion was permitted, the same level of judgement with regard to the importance of the campaign might extend to individual Kreise and then, in turn, enterprise directors, a state of affairs that would compound a number of times over the differentiation in outcomes evinced. Perceived through the lens of information cascades, it is thus possible to understand how the pattern of diverse differentiation, observed for example in all of our case studies, could emerge.

7.4

Previous Literature

How do information cascades relate to the existing literature? On the face of it, in its focus on signals and information flows, our approach certainly has theoretical affinities with previous analyses of socialist systems. Ludwig von Mises and Friedrich Hayek’s famous expositions of the economic calculation problem of socialist planning, for example, were grounded in the belief that planners would not be able to acquire or process the vast volume of information about supply and demand (normally provided via the price system) needed to match what could be achieved through market mechanisms.21 Likewise, Raymond Powell’s observation that Soviet planners, attune to the badgering of ministries and enterprises for further resources, could partially mitigate the economic calculation problem by inferring relative scarcities from informal signals generated from below, such as, for instance, the frequency, urgency and nature of phone calls received.22 Although our approach also places great emphasis on signalling, information cascades differs in significant ways from the insights of Hayek and Powell. Crucially, information cascades concern themselves with the flow of information down, not up, the planning hierarchy. As such, they do not relate to the gathering of information for planning, that is, how central planners tackle the economic calculation problem. Rather, information cascades are about implementation; they are mechanisms that explain how decisions made by central planners are

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transmitted, understood and acted upon by those responsible for their execution. There is a closer connection with recent work that has described East Germany’s “campaign economy”. This literature identifies the SED’s proclivity for campaigns as one of the system’s more important substitutes for effective centrally determined incentives.23 In contrast to our understanding of campaigns as implementation mechanisms, however, one of its key exponents, Jeffrey Kopstein, emphasises their ritualistic role, a characteristic which, he averred, ensured campaigns “coincided only partially with economic rationality”: While appearing to address pressing economic problems, the campaign economy as an institution organized some issues into politics and organized others out. The public rituals and political theatre surrounding the endless cycles of ever new “methods” helped to prevent alternative ways of conceiving the GDR’s economic problems from coming to the fore by nourishing the illusion (at least among the central and provincial elites) that the economic challenges of the 1970s and 1980s were being addressed in a specifically Communist manner that had always worked. In the campaign economy the party secretaries were the big men, the men who appeared to get things done, when nothing else worked.24

By contrast, Gregory Witkowski’s riveting account of three major agricultural campaigns promoting the development of LPGs —Industrial workers in the countryside (industriearbeiter aufs Land), Northern Lands (nördliche Länder) and Free German Youth Animal Production Initiative (FDJ -Initiative Tierproduktion)—comes much closer to our approach, especially in its explicit recognition of campaigns as means of implementing the plans of the central state: Whether the aim was to increase factory productivity, beautify a village, or build housing, party leaders and government officials used campaigns to implement policy. They were essential parts both of the long-term state planning characteristic of communist regimes and the often hastily implemented short-term initiatives to overcome immediate crises. Campaigns were a ubiquitous part of life in East Germany.25

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Yet, while acknowledging their necessary contribution to the functioning of a planned economy, Witkowski neither ponders in any depth the psychological underpinnings of campaigns nor provides a theoretical explanation of how campaigns actually functioned. As a result, his approach, while highly illustrative of the practice, offers no generalised description on how they fit into the boarder diffusion of centrally determined decisions, what factors were more or less likely to make a campaign successful, or why they almost always generated highly differential outcomes between settings.

7.5

Dynamic Elements

Although not explicitly touched on in the preceding chapters, the logic of cascades suggests a number of dynamic features of signalling. Let us consider three of the most important. First, we know that the mechanism’s efficacy depended on its ability to generate successful choices for decision-makers at all levels of East German society. It was through this capability to deliver desirable and predictable outcomes that trust in its value as a heuristic was built. However, the longer term impact on decision-makers of wave after wave of orders, directives and campaigns, many of which appeared to lead nowhere, activated against the preservation of that trust. In addition to the confusion and conservatism created by the deluge of orders, disappointment at the perceived failure of the system to get things done also bred apathy and disengagement. The comments, for example, of Hans Becker, a scientific researcher at the Laboratory for Molecular Electronics (Arbeitsstelle für Molekularelektronik), about the development of integrated circuit production in the GDR, are typical. Asked for his views on the role played by Ulbricht’s New Economic System in that process, he simply remarked: “I hardly remember what that was. One experienced it as a slogan. There were so many state initiatives. They never really changed much of anything”.26 Certainly, by the final decades of the regime, there is evidence that fatigue at, and cynicism about, the party’s constant campaigning had become pervasive. To many, the plans seemed to be little more than words written on pieces of paper. In the teenage argot of the period, the relentless stream of strategies and campaigns came to be known euphemistically as “red light radiation treatment” (Rotlichtbestrahlung ), something, which was ever present, could potentially harm those who

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received it, but which was typically ignored almost as if it did not exist.27 The danger for the system was that such disregard, even cynicism, would encourage people to stop looking for signals, thereby, unintentionally, actually impairing the state’s ability to utilise cascades to realise its plans. As Werner Hartmann, the physicist who introduced microelectronics to the GDR, harking back to the days after the heady optimism of the 1960s had dissipated, recalled: “Back then, I came to realise for the first time that resolutions and directives were seen as goals unto themselves, and that the relevant issues were seen as having been taken care of, as having been seen through to the end”.28 Such beliefs reflect what we call the disengagement effect of poor signalling. Once started, this effect could become self-reinforcing. The cycle began with underperformance. Poor or unintended outcomes created doubts about the efficacy of following the signals of the “fashion leaders” and “liaison agents”. These uncertainties in turn engendered concerns about the reliability of the whole heuristic as a tool of decisionmaking, scepticism which made the next wave of central decisions harder to communicate. Implementation would be impacted adversely and the new “failures” would further reinforce doubts about the heuristic. The vicious cycle of increasing disengagement would start again. Indeed, if a way to arrest the cycle were not found, this process would see the ability of central planners to convey their decisions accurately to implementers steadily diminish over time. Put simply, information cascades would cease to work. Second, for centrally initiated cascades to percolate across a broad and diverse economy, they needed the “faithful” engagement and input of “fashion leaders” and “liaison agents” at all relevant levels of society. To ensure that the correct signals were conveyed, it was, therefore, imperative that the interests of these individuals were at all times kept tightly aligned with those of the central authorities. Yet, in extending important roles of interpretation and implementation to officials and functionaries beyond the centre of the power in Berlin, the system actually enhanced those implementers’ profiles, setting them up as alternative sources of power and influence. By potentially weakening authority at the centre in this manner, information cascades reinforced the development of regional and sectional identities, a trend that ultimately activated against the centre’s ability to have its true intentions followed. Third, complexity is no friend of information cascades. When a message cannot be conveyed clearly and unambiguously, the probability

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that the desired cascade will be induced diminishes. Wherever possible, it behoves central authorities to stipulate its intentions and goals in plain language. Discussions and debates that offer alternative interpretations of its intent must be avoided. In this book, we have encountered numerous instances where these basic principles were violated. Implementation, as a result, quickly stagnated.29 The problem, however, was not just a matter of choice of words and party discipline. It also reflected the fact that across time the complexity of East German society and the economic issues it had to contend with steadily grew. As a consequence, the task of keeping signalling simple became an evermore challenging proposition. Take the example of the Schwedt Initiative, which was discussed in Chapter 5. There, we found that earlier versions of the initiative, which focussed simply on eliminating redundant jobs at one’s own workplace, was much easier to convey to—and be understood by—the broader community than later versions, which concentrated on the adoption of new technological systems and regional level rationalisation strategies. This constantly increasing complexity of the GDR’s economy and society inevitably placed ever greater strains of the efficacy of cascading as a means of effecting policy implementation.

7.6

Final Thoughts

While this book does not provide an account of the GDR’s demise, in this concluding section we think it nonetheless worthwhile to reflect on how our analysis of behaviour and decision-making in East Germany has shaped our thinking of that question. Was the GDR’s economic system really so inherently flawed that its ultimate collapse was inevitable? Like any complex issue of import, we believe the matter does not lend itself to simple, clear-cut answers. Multiple interacting factors were involved, and nuance is called for. Theoretically and factually speaking, though, the answer must surely be in the negative. Very little in history can be said to be truly inevitable. There are always alternatives. Nor can the unforeseen and random ever be totally discarded. Moreover, while the system undoubtedly confronted profound challenges, it remained in essence operational till its end. Abstracting for a moment away from the uncontrollable external events that exerted such decisive influence over the demise of the GDR, such as the changed foreign policy stances of the USSR under Mikhail Gorbachev, there were arguably three hypothetical courses of action that, economically speaking, the SED could have

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pursued that may not have ended in reunification in 1990. Two of these, if realisable, may have allowed the system to have survived for a while in a form not strikingly different from that which it had existed over the previous four decades. Firstly, there was the “North Korean solution”. In this scenario, the SED would have accepted the intrinsic limitations of its system and realised that its preservation could be best obtained by closing the GDR off from the international community as much as possible. Such a strategy, of course, would mean accepting a lower standard of living. However, by operating largely in isolation and at a significantly contracted level of functioning, the effectiveness of traditional methods of control and signalling would have been easier to re-establish. In such a circumstance, the party no doubt would have comforted itself with thoughts that, although it was for the time being losing the race with the imperialists, it had at least preserved socialism in Germany. Secondly, there was what we would call the “Ulbricht 1960s solution”. With this “solution”, the SED would have looked to have maintained the key elements of the economic system that it believed defined it as distinctively socialist (in the colours of the GDR, of course), but would have also sought over time to introduce new technologies and reforms that facilitated the more effective and disciplined signalling and cascading of plans and orders. The focus here on reforms that aided the functioning of the system and the formation of cascades is intentional. Reform in itself may not have assisted greatly. Indeed, the introduction of reforms that did not accept the realities of the socialist planned economy and instead sought to graft alien mechanisms and behaviour on to it, based, for example, on independently determined prices, would have merely further confounded the difficulties the party faced in establishing cascades and executing decisions.30 Such a tightly targeted reform process, of course, would not have dramatically transformed the GDR’s economy. If accomplishable at all, it would have improved at best its performance at the margin, leaving the GDR still far behind the West. Yet, such gains might have been enough to buy the regime more time. This strategy could have been implemented in tandem with the “North Korean solution”, but in our view, its chances of success would have been better with more, rather than less, access to foreign technologies and markets. The third option that was available to the SED might be called the “Chinese solution”. In this state of affairs, the SED would have accepted that the economic status quo could not continue. Planning would have to

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cease to be the foundation of the economy, and a new economic system that incorporated large elements of the market system would be introduced. Profound institutional and organisational change would naturally have to ensue, and many of the core precepts of Marxism–Leninism would have to be abandoned. If properly implemented, economic performance, now driven by price signals and the profit motive, would steadily improve over time. The need for state-controlled signalling mechanisms to implement policies would disappear. Assuming these economic changes could be carried out, the greatest remaining challenge the SED would face would have been political. In such a context, how would it justify its continued hold on power? We wish to stress here once again that all of these options are entirely hypothetical. In our minds, they were all extremely unlikely to have ever been adopted and, if they had been, even less likely to have succeeded. With no superpower allies, no nuclear capability and no obvious strategic advantages to exploit, the durability of an isolated East Germany, a veritable hermit kingdom at the heart of a rapidly integrating and growing Europe, is hard to conceive. It is even harder to believe that the citizens of the GDR would have long acquiesced in such a foolhardy venture. Although the “Ulbricht 1960s and Chinese solutions” may require slightly less credulity to imagine, without the ongoing backing of the Soviet Union for such arrangements, the likelihood that the GDR could have gone it alone down either of these paths is remote. Lacking that powerful external support, it would not have taken long for the citizenry of the country, armed with the knowledge that a successful West German alternative was available to them, to pose the question why SED control and diktat was necessary. So, where does that leave us? While the GDR’s collapse may not have been inevitable in the strictest sense of the word, given the external geopolitical and economic realities of the late 1980s and early 1990s, its demise was far from surprising. Indeed, in such a context, where even the Soviet Union was moving away from its past, it is hard to imagine how a conventional Marxist–Leninist GDR could have survived. But, perhaps, it is wrong to think in terms of the two extremes. After all, there were other possible outcomes in between that did not involve the state’s subsumption within the Federal Republic. A democratic GDR within a German confederation, which allowed it sufficient autonomy to retain some of its socialistic values and operate a mixed economy, for a time carried significant potential and, indeed, was the preferred option of many of the

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GDR’s own reformers.31 That changing circumstances were eventually to sweep such vistas away does not mean that at some point of time they did not have real currency. We do not make this point because we wish that such vistas had been explored, even less so because we lament the passing of the GDR. Rather, we draw readers’ attention to them to emphasise that there were alternatives. Nothing was pre-ordained. As a result of these and other possibilities that pertained across its entire existence, the economic history of East Germany, turns out to be a far richer and more interesting field of study, decidedly more worthy of investigation from fresh, cuttingedge perspectives than the dismal litany of unmitigated failures, so often recounted, suggests. These promises of new understandings beckon a new generation of researchers.

Notes 1. For an excellent introduction to the period, see Odd Arne Westad, The Cold War: A World History (London: Penguin, 2018). 2. See, for example, the frequent positive assessments made in Ian Jeffries, Manfred Metzler and Eleonore Brenning (eds.), The East German Economy (Abingdon: Routledge, 2018 [reprint of 1987 original]), passim. 3. For an introduction to this literature, see: Wayne Geerling, Gary Magee and Russell Smyth, “The Evolution of Democratic Tradition and Regional Variation in Resistance in Nazi Germany”, Southern Economic Journal 87: 4 (2021), pp. 1320–1344; Sasha O. Becker, Lukas Mergele, and Ludger Woessmann, “Es liegt nicht alles am Sozialismus — über Ost-West-Unterschiede und ihre Ursprünge”, Wirtschaftsdienst 101 (2021), pp. 32–36. 4. Hester Vaizey, Born in the GDR: Living in the Shadow of the Wall (Oxford: Oxford University Press, 2014). 5. The key work in this literature is Mary Fulbrook, The People’s State: East German Society from Hitler to Honecker (New Haven: Yale University Press, 2005). A list of some other important contributions in this field can be found in the Notes of Chapter 1. 6. Indeed, if we take the performance of the other Soviet bloc countries as our benchmark, East German economic history would appear a resounding success.

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7. Sandrine Kott, Communism Day-to-Day: State Enterprises in East German Society (Ann Arbor: University of Michigan Press, 2014), p. 30. 8. Gregory R. Witkowski, The Campaign State: Communist Mobilizations for the East German Countryside, 1945–1990 (De Kalb: Northern Illinois University Press, 2017), pp. 1–15. 9. Alan McDougall, Youth Politics in East Germany: The Free German Youth Movement, 1946–1968 (Oxford: Clarendon Press, 2002), pp. 119–121. 10. Ibid., pp. 120–121. 11. Ibid., pp. 158–175. The quotation comes from p. 171. 12. Quoted in George Last, “Rural Functionaries and the Transmission of Agricultural Policy: The Case of Bezirk Erfurt from the 1960s to the 1970s”, in Mary Fulbrook (ed.), Power and Society in the GDR, 1961–1979: The ‘Normalisation’ of Rule? (Oxford: Berghahn, 2009), p. 97. 13. Last, “Rural Functionaries”, p. 99. 14. George Last, After the ‘Socialist Spring’: Collectivisation and Economic Transformation in the GDR (Oxford: Berghahn, 2009), p. 164. 15. “Ich kann meine Prinzipien nicht preisgeben. Brief der Leninigrader Dozentin Nina Andreyewa”, Neues Deutschland, 2 April 1988, p. 11; Jeffrey Kopstein, The Politics of Economic Decline in East Germany, 1945–1989 (Chapel Hill: University of North Carolina Press, 1997), p. 102. 16. William Taubmann, Gorbachev: His Life and Times (London: Simon Schuster, 2017), p. 345. An account of the whole episode can be found on pp. 342–346. 17. Kopstein, Politics of Economic Decline, pp. 164–165. 18. Kott, Communism Day-to-Day, p. 24; Fulbrook, People’s State, p. 258. 19. Jeanette Z. Madarász, Working in East Germany: Normality in a Socialist Dictatorship, 1961–1979 (London: Palgrave Macmillan, 2006), p. 146. 20. Ibid., p. 174; Mary Fulbrook, “The Concept of ‘Normalisation’ and the GDR in Comparative Perspective”, in Mary Fulbrook (ed.), Power and Society in the GDR, 1961–1979: The ‘Normalisation of Rule’ (Oxford: Berghahn, 2009), p. 27.

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21. Ludwig von Mises, “Economic Calculation in the Socialist Commonwealth”; Friedrich Hayek, “The Nature and History of the Problem”; and idem, “The Present State of the Debate”, in Friedrich Hayek (ed.), Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism (Auburn: Ludwig Von Mises Institute, 2009 [original 1935]), pp. 1–40, 87–130, 201–243. 22. Raymond P. Powell, “Plan Execution and the Workability of Soviet Planning”, Journal of Comparative Economics 1: 1 (1977), pp. 69– 73. 23. Kopstein, Politics of Economic Decline, p. 144; Witkowski, Campaign State, p. 6. 24. Kopstein, Politics of Economic Decline, p. 148 for the shorter quotation and pp. 152–153 for the longer quotation. 25. Witkowski, Campaign State, p. 5. 26. Quoted in Dolores Augustine, Red Prometheus: Engineering and Dictatorship in East Germany, 1945–1990 (Cambridge, MA: MIT Press, 2007), p. 93. 27. Anna Saunders, Honecker’s Children: Youth and Patriotism in East(ern) Germany (Manchester: Manchester University Press, 2007), p. 97. 28. Quoted in Augustine, Red Prometheus, p. 128. 29. This factor explains why planned economies could actually perform well in some very challenging circumstances, such as during wartime or when a strategically important industry needed to be rapidly built. Given clear, well delineated and popularly understood goals and purposes and a strong chain of command, information cascades can be powerful and highly focused means of implementation. Their power, however, dissipates as that focus is lost. 30. This book does not concern itself with how the socialist planned economy of the late 1980s could have been effectively reformed. However, it is clear that some organisational changes might have aided the regime in its desire to signal more effectively. One of the impressions we formed from reading the primary sources was that, while there was anything but a shortage of reports written about literally everything in East Germany, the passage of these reports tended to follow very circumscribed, regimented paths. Take the case of the reporting associated with a factory’s compliance with an existing party initiative. In essence, everyday economic matters such as these, the system and its reporting lines rigidly ran in one

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of two directions. First, it could run from the department of the enterprise to the enterprise management to the management of the overseeing combine and then possibly onto a central ministry, which may or may not choose to report it to the Politbüro or one of the other central organs. Alternatively, the reporting might proceed along geographical lines from the enterprise’s management to the Kreis leadership, then on to the Bezirk leadership, and finally the central authorities. At each level of reporting, prior to onward distribution, the facts presented by the previous level of management would be aggregated and summarised. Parallel closed pathways operated for the party and mass organisations like the FDGB and the FDJ. Such reporting lines mirrored and undoubtedly evolved from internal planning structures and the silo-like nature of ministerial and regional power in Marxist–Leninist states. One of the consequences of such an arrangement, though, was that those at the heart of the system rarely received comprehensive overviews of what was happening across the nation. We were particularly struck at how few deep and insightful nationallevel analyses of the implementation of piecework, the Mitrofanov Method or the Schwedt Initiative we encountered. Instead, what members of the Politbüro were typically provided with tended to be patchy accounts of what was happening in a specific Bezirk or Kreis at a given point of time, with little attempt to place that information into a more meaningful comparative perspective. Such a deficiency in the system no doubt constrained the creation of meaningful, more nuanced overarching policies. Reform of the reporting structures and the creation of a genuine independent central capability to synthesise disaggregated information would have arguably not only improved the quality of decision making undertaken, but would have made the resulting context-finessed instructions more easily understandable, conveyable and ultimately actionable at the grassroots. 31. Dietrich Orlow, Socialist Reformers and the Collapse of the German Democratic Republic (London: Palgrave Macmillan, 2015).

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References Primary Sources (A) Contemporary Publications, Periodicals and Newspapers Andreyeva, Nina. 1988. “Ich kann meine Prinzipien nicht preisgeben. Brief der Leninigrader Dozentin Nina Andreyewa”, Neues Deutschland, 2 April, 11.

Secondary Sources Augustine, Dolores. 2007. Red Prometheus: Engineering and Dictatorship in East Germany, 1945–1990. Cambridge, MA: MIT Press. Becker, Sasha O., Lukas Mergele, and Ludger Woessmann. 2021. Es liegt nicht alles am Sozialismus — über Ost-West-Unterschiede und ihre Ursprünge. Wirtschaftsdienst 101: 32–36. Fulbrook, Mary. 2005. The People’s State: East German Society from Hitler to Honecker. New Haven: Yale University Press. Fulbrook, Mary. 2009. The Concept of ‘Normalisation’ and the GDR in Comparative Perspective. In Power and Society in the GDR, 1961–1979: The ‘Normalisation of Rule’, ed. Mary Fulbrook, 1–30, Oxford: Berghahn. Geerling, Wayne, Gary Magee, and Russell Smyth. 2021. The Evolution of Democratic Tradition and Regional Variation in Resistance in Nazi Germany. Southern Economic Journal 87 (4): 1320–1344. Hayek, Friedrich. 2009a. The Nature and History of the Problem. In Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism, ed. F. Hayek, 1–40, Auburn: Ludwig Von Mises Institute. Hayek, Friedrich. 2009b. The Present State of the Debate. In Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism, ed. F. Hayek, 201–243, Auburn: Ludwig Von Mises Institute. Jeffries, Ian, Manfred Metzler, and Eleonore Brenning, eds. 2018. The East German Economy. Abingdon: Routledge [reprint of 1987 original]. Kopstein, Jeffrey. 1997. The Politics of Economic Decline in East Germany, 1945– 1989. Chapel Hill: University of North Carolina Press. Kott, Sandrine. 2014. Communism Day-to-Day: State Enterprises in East German Society. Ann Arbor: University of Michigan Press. Last, George. 2009a. Rural Functionaries and the Transmission of Agricultural Policy: The Case of Bezirk Erfurt from the 1960s to the 1970s. In Power and Society in the GDR, 1961–1979: The ‘Normalisation’ of Rule?, ed. Mary Fulbrook, 76–101, Oxford: Berghahn. Last, George. 2009b. After the ‘Socialist Spring’: Collectivisation and Economic Transformation in the GDR. Oxford: Berghahn. Madarász, Jeanette Z. 2006. Working in East Germany: Normality in a Socialist Dictatorship, 1961–1979. London: Palgrave Macmillan.

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McDougall, Alan. 2002. Youth Politics in East Germany: The Free German Youth Movement, 1946–1968. Oxford: Clarendon Press. Orlow, Dietrich. 2015. Socialist Reformers and the Collapse of the German Democratic Republic. London: Palgrave Macmillan. Powell, Raymond P. 1977. Plan Execution and the Workability of Soviet Planning. Journal of Comparative Economics 1 (1): 69–73. Saunders, Anna. 2007. Honecker’s Children: Youth and Patriotism in East(ern) Germany. Manchester: Manchester University Press. Taubmann, William. 2017. Gorbachev: His Life and Times. London: Simon Schuster. Vaizey, Hester. 2014. Born in the GDR: Living in the Shadow of the Wall. Oxford: Oxford University Press. von Mises, Ludwig. 2009. Economic Calculation in the Socialist Commonwealth. In Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism, ed. F. Hayek, 87–130, Auburn: Ludwig Von Mises Institute. Westad, Odd Arne. 2018. The Cold War: A World History. London: Penguin. Witkowski, Gregory R. 2017. The Campaign State: Communist Mobilizations for the East German Countryside, 1945–1990. De Kalb: Northern Illinois University Press.

Glossary of German Terms

Abteilungen departments Abteilungsleiter heads of each department Akkordarbeit piecework Akkord ist Mord piecework is murder Alles zum Wohle des Volkes everything for the good of the people Arbeiter-und-Bauern Inspektion Worker and Peasant Inspection Arbeitsstelle für Molekularelektronik Laboratory for Molecular Electronics Aufbaubefehl construction order Auslandsabteilung foreign department Bank für internationalen Zahlungsausgleich Bank for International Settlements Beispielbetrieb model enterprise Beschlussauszug excerpt from a Politbüro resolution Bezirk district Brandenburgisches Landeshauptarchiv Brandenburg State Archive Bundesarchiv Federal Archive Bundesvorstand Federal Executive Christlich-Demokratische Union Christian Democratic Union das langweiligste Land in der Erde the planet’s most boring country Deutsche Arbeitsfront German Labour Front Deutsche Außenhandelsbank German Foreign Trade Bank © The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 G. B. Magee and W. Geerling, Socialism with a Human Face, Palgrave Studies in Economic History, https://doi.org/10.1007/978-981-19-0664-0

339

340

GLOSSARY OF GERMAN TERMS

Deutsche Handelsbank German Trade Bank Deutsche Notenbank Central Bank Deutsche Post East German Postal Service Deutsche Reichsbahn German Railway Deutsche Wirtschaftskommission German Economic Commission die Schwedter Initiative Schwedt Initiative eine durchherrschte Gesellschaft a thoroughly ruled society Einheit von Wirtschafts- und Sozialpolitik Unity of Economic and Social Policy einholen und überholen catch up and overtake Freier Deutscher Gewerkschaftsbund Free German Trade Union Association FDJ-Initiative Tierproduktion Free German Youth Animal Production Initiative Generaldirektor Director General of a combine Generalsekretär General Secretary of the SED Gesellschaft für Deutsch-Sowjetische Freundschaft Society for GermanSoviet Friendship Gruppenbearbeitung group processing Gruppenfertigung group manufacturing Gruppentechnologie group technology Hauptaufgabe main task Ideen – Lösungen – Patente Ideas-Solutions-Patents Industriearbeiter aufs Land industrial workers in the countryside Initiativschichten initiative shifts Intensivierung intensification Istzustands-Analysen current state analyses Jugendkommission beim Politbüro youth commission Junkers large German land owners Kammer der Technik Chamber of Technology Kennziffern quantitative indicators Kommerzielle Koordinierung Commercial Coordination Kommunistische Partei Deutschlands Communist Party of Germany Komplexe WAO-Studien comprehensive WAO studies Kreis municipality Länder German states Landesarchiv Berlin Berlin City Archive Landwirtschaftliche Produktionsgenossenschaft agricultural production cooperative

GLOSSARY OF GERMAN TERMS

341

Leistungen vergleichen heiβt Leistungen erhöhen comparing performance means increasing performance Leistungslohn efficiency wage Lohnfonds wage fund Mauer im Kopf wall in the head Messe der Meister von Morgen Young Innovators Fair Milliardenkredite billion mark loan Ministerium für Arbeit und Sozialfürsorge Ministry for Labour and Social Welfare Mitrofanow-Aktiv Mitrofanov activists Mordlohn-Charakter murder wage characteristic Neuer Kurs New Course Neues Ökonomisches System New Economic System nördliche Länder northern lands campaign Notizen zum Plan notes on the plan Nurgewerkschaftlertum only-trade-unionism Ökonomisches System des Sozialismus Economic System of Socialism Parteivorstand Party Executive Politbüro principal policymaking committee of a communist party. Prinzip der materiellen Interessierheit principle of material interest Rationalisierungsmittelbau the in-house department that enterprises maintained to produce tools or machines to improve operational processes real existierender Sozialismus real existing socialism Reichsausschuss für Arbeitszeitermittlung National Committee for Determining Work Times Richtlinie über der Anwendung der wissenschaftlichen Arbeitsorganisation Directive on the Application of Scientific Work Organisation Rotlichtbestrahlung red light radiation treatment Rundschreiben circulars concerning Politbüro resolutions Schlüsseltechnologien key technologies sein oder nicht sein to be or not to be Sekretäre secretaries of the central committee Sekretariat des Zentralkomitee Secretariat of the Central Committee Soll-projekt target project Sowjetische Besatzungszone Soviet Occupation Zone Sowjetische Aktien Gesellschaft Soviet-controlled corporation Sowjetisch-Deutsche Aktien Gesellschaft Soviet-German controlled corporation

342

GLOSSARY OF GERMAN TERMS

Sozialistische Arbeitsgemeinschaft socialist work community Sozialdemokratische Partei Deutschlands Social Democratic Party of Germany Sozialistische Einheitspartei Socialist Unity Party Stammbetrieb parent enterprise Staatliche Plankommission State Planning Commission Staatsbank central bank Störfreimachung policy of disentangling the GDR’s economy from the West Strukturpolitik structural policy Stschokino-Methode Shchekino Method Strukturbestimmende Zweige structure-determining areas TASS Telegraph Agency of the Soviet Union Technische Arbeitsnormen technically-based work norms Territoriale Rationalisierung territorial rationalisation tote Seelen dead souls - workers who existed only on paper Verein Deutscher Ingenieure Association of German Engineers Vereinigung Volkseigener Betriebe Association of People’s Owned Enterprises Volkseigener Betrieb Nationally-Owned Enterprise Volkskammer People’s Chamber Volkswirtschaftsrat National Economic Council Vollbeschäftigteneinheit full time equivalent workers WAO-Kollektiven scientific work collectives weniger produzieren mehr less produces more Wirtschaftskommission beim Poiltbüro der SED Economic Commission of the Politburo wissenschaftliche Arbeitsorganisation scientific work organisation wissenschaftlich-technische Revolution scientific-technological revolution Zentralinstitut für Fertigungstechnik des Maschinenbaues Central Institute for Manufacturing Technology in Mechanical Engineering

Index

A agricultural policy, 322, 323 agricultural production co-operatives, 322 Ahlen Programme, 60 Akkordarbeit , 61, 104 Akkord ist Mord, 64, 93, 95, 101 Alles zum Wohle des Volkes , 167 Andreyeva, Nina, 323, 324 Angermünde, 227, 229 Apel, Erich, 113, 120, 123, 127, 129, 132 Arbeiter-und-Bauern Inspektion, 196, 197, 211, 212 Arbeitsstelle für Molekularelektronik, 328 Aschersleben, 204 Association of German Engineers, 67 Aufbaubefehl , 67 Auslandsabteilung , 270 automation, 111–113, 115, 117, 119, 199, 201, 209, 276

B Backenwarenkombinat , 196 Bad Freienwalde, 229 Baklanov, Grigory, 324 Balbier, Uta Andrea, 8, 14, 15, 51, 301, 305 Bank for International Settlements, 279 Bank für internationalen Zahlungsausgleich, 279 batch manufacturing, 121 batch production, 115, 119, 130, 138 Bauch, Paul, 1 Bäumler, Peter, 194 Bayesian probability, 41 Bayreuther, Wolfgang, 204, 242 Beeskow, 227, 229 behavioural economics, 9, 10, 28, 47, 48, 114, 296 Beispielbetrieb, 190 Belarusian Soviet Republic, 184 Berghoff, Hartmut, 8, 14, 15, 51, 301, 305

© The Editor(s) (if applicable) and The Author(s), under exclusive license to Springer Nature Singapore Pte Ltd. 2022 G. B. Magee and W. Geerling, Socialism with a Human Face, Palgrave Studies in Economic History, https://doi.org/10.1007/978-981-19-0664-0

343

344

INDEX

Berlin, 7, 13, 14, 48, 51, 52, 84, 85, 93, 94, 102, 121, 127, 128, 131, 154, 156, 180, 207, 223, 224, 237–239, 244, 248, 253, 300, 305–307, 329 Berlin City Archive, 10 Berlin Economic Commission, 69 Berlin-Ostgüterbahnhof station, 201 Berlin Wall, 112, 148, 257, 275, 320, 321 Bernau, 227, 229 Bezirk Cottbus, 221 Bezirk Frankfurt (Oder), 169, 184–186, 189, 194, 204, 208, 226–228, 230, 231, 252 Bezirk Halle, 208 Bitterfeld, 80, 218, 251 bizone, 65 Blume, Paul, 117, 131, 155, 156 bonuses, 5, 44, 69, 72, 74–76, 170, 181, 182, 239 Brack, Gustav, 76, 78 Brandenburgisches Landeshauptarchiv, 10, 157, 238 Braun, Volker, 1, 11 Brezhnev, Leonid, 277, 278, 291 brigades, 1, 2, 38, 136 British Occupation Zone, 60 Bundesarchiv, 10, 36, 51, 95, 153, 239, 300 Bundesbank, 279, 281–283

C CAD/CAM, 203, 208, 209 capitalist world, 113, 148, 257, 266, 268, 272, 275, 277, 278, 289, 291, 295, 303 cascades, 41–43, 45–47, 53, 133, 151–153, 233, 319, 324, 326, 328–331 CDU , 60

Central Commission for Time Studies, 79 Central Institute for Manufacturing Technology in Mechanical Engineering, 122 central planners, 5, 326, 329 Central Research Institute for Work, 207, 234 certainty effect, 29–31, 267, 303, 308, 317 Chamber of Technology, 128 chemical industry, 184, 186, 189, 193–195, 215–218, 234 Chemnitz, 70, 98 Cherednichenko, Konstantin, 184, 242 childcare, 285 Chinese solution, 331, 332 Christlich-Demokratische Union, 60 Clark, Christopher, 8, 9, 15 cognition, 296 cognitive bias, 20, 262, 294, 296 collapse of the GDR, 332 collectives, 141, 173, 174, 176, 191–193, 197, 211, 212 combines, 46, 186, 194, 195, 198, 199, 207, 208, 213, 215, 217, 220, 221, 233, 253, 307 command economies, 21, 48, 191, 272, 315 Commission for Industry and Transport, 275 Commission for the Production of Propaganda, 130 Committee for Economic Production, 67 communist movement, 61, 63, 260 Communist Party of Germany, 60 Communist Party of the Soviet Union (CPSU), 35, 95, 114, 115, 125, 323 competitiveness, 168, 232, 289, 294

INDEX

complex parts, 116–118, 130, 141 computer technology, 200, 209 consumers, 138 consumption subsidies, 258 contamination effect, 8 convertible currencies, 282–284 Cottbus, 158, 196, 210, 211, 223, 224 Council of Ministers, 135, 186, 187, 199, 275, 276 craft production, 214 crafts, 144, 221, 223–225, 235 cultural services, 285 culture, 3, 49, 169, 239, 301, 321 currencies, 279, 282, 283, 287, 289, 291–294, 300, 333 current state analyses, 174, 175

D Das Taylor-System, 81 data processing equipment, 276 debt accumulation, 296, 298 debt crisis, 258, 261, 281, 284, 291 debt strategy, 277 decartelisation, 60 decision maker, 19–21, 27, 30, 31, 33, 35, 37, 38, 41, 43–45, 48, 127, 133, 151, 237, 263–265, 267, 268, 273, 275, 278, 293, 294, 296, 317, 319, 328 decision making, 9, 19–21, 26, 27, 30, 31, 34–36, 44, 47, 91, 174, 205, 259, 262–266, 273, 278, 294–297, 316, 317, 319, 329, 330, 336 decision theory, 19, 34, 48, 262, 296, 299 decision weighting function, 31 demand for labour, 178, 182 demonstration effect, 44 departmentalism, 45

345

Department of Instrumentation Technology, 115 Department of Mechanical Engineering and Metallurgy, 123, 125 Dessau, 201 Deutsche Arbeitsfront , 67 Deutsche Außenhandelsbank, 270, 293 Deutsche Handelsbank, 270 Deutsche Mark, 99, 284 Deutsche Notenbank, 270 Deutsche Post , 177, 201 Deutsche Reichsbahn, 201 Deutscher Fernsehfunk, 130 Deutsche Wirtschaftskommission, 65, 68–73, 75, 77–79, 85, 89, 91 Deutschmarks (DM ), 78, 120, 123, 130, 138, 143, 283, 294 developing world, 168, 272, 282, 313 dialectical materialism, 66 Die Einheit , 77, 102, 103 differential piece rate, 66, 73, 74 Director, 115, 173, 174, 195, 197, 211 Director General, 170, 173, 179, 185, 186, 194, 195, 211, 212, 236, 252 DM , 284, 291 domestic oil usage, 290 Dresden, 11, 146, 201, 207, 220, 223, 224, 246, 247 DSF , 128, 129, 132, 152, 157, 160

E East Berlin, 146 East German postal service, 340 Eberswalde, 227, 229 economic calculation problem, 326 Economic System of Socialism, 276 egalitarianism, 63, 64, 67, 68, 87, 89 Ehrensperger, Günter, 240, 241, 259

346

INDEX

Eighth Conference of the Central Committee, 168 Eighth Party Congress, 286, 288, 323 Einheit von Wirtschafts- und Sozialpolitik, 167 einholen und überholen, 275 Eisenhüttenstadt, 227, 229 Eisleben, 208 electronic data processing, 199, 209 electronics, 276 Eleventh Conference of the Central Committee, 112 Ellenburg, 195 endowment effect, 29 energy, 77, 86, 197, 198, 201, 215, 253, 290 enterprises, 2, 5, 36–38, 45, 46, 63, 64, 68–70, 72, 73, 75–81, 85, 86, 89, 114, 119–125, 130–132, 134–136, 138–14, 146, 148, 152, 153, 158, 168–182, 184–191, 193–200, 202–213, 215, 221, 222, 224, 227, 229–231, 233, 234, 236, 239, 241, 253, 269, 324–326, 336 enterprise directors, 131, 151, 153, 178, 194, 197, 204, 206, 236, 326 enterprise managers, 76 Erfurt, 146, 201, 207, 223, 323, 334 excess demand of labour, 182 excess labour, 181, 199, 210 expected utility, 31, 296 Expected Value Theory (EVT), 27–31, 34, 35, 40 export earnings, 281–283 export growth, 258, 277 export revenue, 258, 270–272, 281, 282, 303 exports, 168, 258, 269, 270, 272, 274, 275, 279, 282, 289, 291–293, 300, 303, 304

F fashion leaders, 43, 46, 47, 53, 90, 151–153, 233, 236, 319, 321, 325, 329 FDGB, 68–70, 80–82, 85, 94, 97, 98, 128, 129, 140, 141, 157, 158, 160, 175, 194, 196, 247, 336 FDGB Federal Executive, 68, 157 FDJ , 83, 174, 320, 321, 327, 336 fewer produce more, 172, 185, 187, 202, 235, 253 First Central Mitrofanov Conference, 128 First Deputy Chairman of the Council of Ministers, 285 First Party Conference, 84 flexible production systems, 115 flexible systems of automation, 199 foodstuff industries, 215 foreign borrowing, 267, 268, 275, 292, 317 foreign capital, 260, 273, 275, 298 foreign debt, 10, 168, 258–260, 262, 263, 266, 267, 278, 279, 284, 288, 291, 297, 308, 317 foreign department, 270 foreign exchange transactions, 270 foreign technology, 168 framing effect, 29 framings, 30, 31, 34, 35, 133, 263–267, 278, 294, 317 Frankfurt (Oder), 146, 158, 172, 185, 189, 223, 224, 227, 229, 230, 235, 238, 300 Free German Trade Union Association, 68 Freie Deutsche Jugend, 83, 320 Freier Deutscher Gewerkschaftsbund, 68, 128 Frohn, Werner, 173, 185, 186, 194, 231, 238, 239, 243, 245, 249

INDEX

Fulbrook, Mary, 6, 8, 11–15, 51, 52, 273, 304, 333, 334 Fürstenwalde, 227, 229 G Gera, 131, 132, 146, 155, 207, 223, 224 German Economic Commission, 65 German Federal Archive, 10 German Foreign Trade Bank, 270 German Institute for Technical Labour Training, 67 German Institute of Labour Science, 67 Gesellschaft für Deutsch-Sowjetische Freundschaft , 128, 157–159 glasnost, 307, 314, 323 Gorbachev, Mikhail, 299, 307, 308, 324, 330 Gosplan, 86, 292 Greiz-Dölau, 195 group manufacturing, 149, 154 group processing, 116–139, 141–153, 162 Group Production Organisation, 115 group technology, 115, 149, 150, 154, 155 Gruppenbearbeitung , 126, 145, 147, 149 Gruppenfertigung , 126, 145, 147, 149, 340 Gruppentechnologie, 126, 145, 147, 149, 153, 157, 340 H Halle, 146, 207, 208, 223, 224, 236, 251 hard currencies, 282, 290 Hartmann, Werner, 329 Hauptaufgabe, 286, 292, 298 Hayek, Friedrich, 326, 335

347

Hennecke activists, 83, 85 Hennecke, Adolf, 81–87, 90 Hennecke campaign, 84, 127 Herle, Hans-Hermann, 291, 300, 306, 307 Herm, Max, 68 Hertwig, Jochen, 172, 184, 189, 194, 245 Hettstedt, 75, 208 Honecker, Erich, 27, 167, 169, 190, 237, 244, 258–262, 278, 279, 284–299, 305, 307, 317, 320, 321, 323 House of Ministries, 180 housing programme, 285 I Ideen – Lösungen – Patente, 172 IG Bau-Holz, 132 IG Chemie, Glas und Keramik, 180, 186 imported crude oil, 290 importing foreign technology, 168 imports, 168, 272, 275, 276, 279, 289, 291, 303, 304 incentive pay, 87, 88 indicators, 37, 244 industrial ministries, 215, 216 industrial robotics, 188, 199, 201, 203, 230 informational uncertainty, 43 information cascade, 10, 26, 35, 40–45, 47, 53, 90, 114, 319, 321, 322, 324–326, 329, 335 information problem, 4 Initiativschichten, 175, 192 intensification, 168, 169, 183, 188, 199, 208, 210, 211, 232, 275, 286, 287, 307 interchangeable elements, 131 interest payments, 258, 283, 284, 294 internal redistribution, 171

348

INDEX

international competitiveness, 150, 168 Istzustands-Analysen, 174 J Jena, 51, 121, 128, 130, 132, 157 Jendretzky, Hans, 68 17 June 1953 Uprising, 92 Junkers , 62 Jüterbog, 141 K Kabinett “Neue Technik” , 139–142, 162 Kahneman, Daniel, 30, 34, 49, 50, 302 Kammer der Technik, 128, 129, 140, 142, 144, 157–159, 161 Karl-Marx-Stadt, 122, 146, 207, 220, 223, 224, 247 Kautsky, Karl, 35 Kennziffern, 188 Keynes, John Maynard, 40 key structure-determining areas, 276 key technologies, 203, 204, 208–210, 230, 231, 235, 250, 251 Khrushchev, Nikita, 111 Kipp, Siegfried, 170, 180, 198, 231, 237–239, 244, 245, 248, 252 Knortz, Heike, 221, 223, 239, 243, 245, 248, 253 KoKo, 258, 291, 292, 299 Kommerzielle Koordinierung , 258, 300, 306 Kommunistische Partei Deutschlands , 60 Komplexe WAO-Studien, 174 Kopstein, Jeffrey, 13, 51, 61, 90, 93, 94, 98, 99, 103, 104, 169, 237, 243, 246, 248, 253, 301, 304–307, 327, 334, 335

Korean War, 269 Koschella, Dieter, 203 Kösteritz, 68 Kotkin, Stephen, 260, 300, 301, 303, 304 Kott, Sandrine, 11, 12, 318, 334 KPD, 60, 62, 64 Kreis Heiligenstadt, 323 Kreis Schwedt, 204, 226, 229 Kreis Seelow, 226 Kreis Spremberg, 211, 221, 222 Kreis Staβfurt, 204 Krenz, Egon, 258, 259, 299, 300, 308 Krolikowski, Werner, 287

L Laboratory for Molecular Electronics, 328 labour productivity, 85, 111, 113, 127, 128, 136, 138, 143, 144, 169, 170, 183, 190, 191, 198, 207, 278, 286 labour-saving technology, 182, 190, 199 Landesarchiv Berlin, 10, 249 Landwirtschaftliche Produktionsgenossenschaft , 322 Last, George, 14, 323, 334 Leipzig, 146, 201, 207, 220, 223, 224 Leistungslohn, 88 Leningrad, 114, 116, 121–123, 163 Lenin, Vladimir, 35, 66, 96, 171, 289 Leuschner, Bruno, 65 Lewin, Moshe, 2, 11, 51 liaison agents, 43, 46, 90, 152, 153, 236, 319, 325, 329 Ligachev, Yegor, 323 light industry, 136, 215 LITMO, 114, 115, 154, 155

INDEX

Lohnfonds , 171 loss aversion, 29–31, 35, 49, 262, 263, 266, 301, 317 LPG, 322, 323, 327 Luckenwalde, 141

M machine tools, 115, 131, 142, 168, 276 Madarász, Jeanette, 6, 9, 11, 12, 14, 15, 250, 334 Magdeburg, 77, 128, 146, 157, 158, 204, 207, 223 main task, 79, 141, 278, 286, 305 manufacturing technique, 114 market economy, 4 Markus, Boris L’vovich, 86, 104 Marxism-Leninism, 26, 35, 36, 38, 39, 80, 90, 92, 111, 171, 194, 258, 260, 284, 288, 332, 336 MAS, 68, 71, 76 mass-based initiatives, 85 Matalin, A.A., 121, 125, 130, 153, 157 material incentives, 64, 91, 169, 170, 174, 176–180, 205, 244 material stimulation, 179 Mauer im Kopf , 314 McDougall, Alan, 13, 321, 334 mechanisation, 111–113, 115, 119, 191, 201 Mecklenburg-Vorpommern, 70, 71 mental accounting, 34, 35, 50, 264, 265, 278, 301 mental accounts, 34, 265, 273, 294 Messe der Meister von Morgen, 172 metallurgical industry, 197 microelectronics, 200, 203, 206, 207, 209, 215–220, 230, 244, 251, 292, 329 Minister for Coal and Energy, 198

349

Minister for the Economy and Economic Planning, 64 Ministerium für Arbeit und Sozialfürsorge, 68 Ministry for Economics, 72 Ministry for Labour and Social Welfare, 68, 72 Ministry for Ore Mining, Metallurgy and Potash, 215 Ministry for Trade and Supply, 72 Ministry of Economic Affairs, 69 Ministry of Finance, 290, 293 Ministry of General Machinery, Agricultural Machinery and Vehicle Construction, 220 Minster for the Chemical Industry, 179 Mitrofanov Method, 10, 114, 117, 119, 121, 122, 124–133, 136–142, 144, 146, 148, 149, 151, 155, 158, 159, 235, 320, 336 Mitrofanov, Sergei, 114–117, 121–123, 125, 127–132, 134, 135, 139, 140, 142, 143, 151, 152, 155, 156, 163 Mitrofanow-Aktiv, 122 Mittag, Günter, 27, 48, 168, 186, 187, 198, 240, 241, 243, 259–262, 288, 292, 295, 299, 307 Mitzinger, Wolfgang, 198, 248, 249 model enterprises, 46, 47, 132, 151, 162, 190, 194, 201 Mordlohn-Charakter, 75 Moscow Declaration, 111–113 N National Committee for Determining Work Times, 67 National Economic Council, 135, 136, 142, 143, 152, 153

350

INDEX

nationalisation, 59, 60, 210 nationally owned enterprises, 64, 69, 81 neoclassical economic theory, 4, 10, 315 Neubrandenburg, 223, 224 Neuer Kurs , 268 Neues Deutschland, 83, 84, 87, 88, 102–104, 126, 144–147, 149, 151, 188, 189, 224, 225, 245, 303, 324, 334 Neues Ökonomisches System, 275 Neumann, Alfred, 285 New Course, 268 New Economic System, 60, 275, 314, 328, 332 non-ferrous metal industry, 208 Non-Socialist World, 270–273, 277, 279, 280–284, 289, 292, 303, 304 norm determination, 67 norms, 3, 38, 60, 61, 63, 71, 73, 74, 76–82, 85–89, 92, 127, 171, 173, 193, 229, 297, 325 North Korean solution, 331 Notizen zum Plan, 192 Novopolotsk, 184, 185, 194 Novopolotsk Method, 184, 194 Nurgewerkschaftlertum, 80

O Oelsnitz Coal Mine, 82 office technology, 191 oil, 180, 287, 289, 290, 294 Ökonomisches System des Sozialismus , 276 Ordzhonikidze Machine Tool Factory, 135 ore mining, 197

P paid maternity leave, 285 Parteivorstand, 68, 75, 79, 82 Party Executive, 68 party leaders, 64, 82, 86, 274, 327 path-dependence, 61, 94 patriotism, 235 PCK , 170, 180, 185, 186, 189, 193–195, 202, 204, 205, 210, 217, 226, 231, 233, 235 Pehle, Marina, 189, 245 People’s Chamber, 258 perestroika, 307, 314 perfectly competitive markets, 14, 232, 316 performance bonus, 75, 79 petrochemical facilities, 290 petrochemical industry, 276 picture walls, 129 piecework, 10, 61–65, 67–77, 79, 81, 87–92, 95, 104, 152, 171, 320, 336 piecework is murder, 64, 77 piecework rates, 70, 73 Pirna, 195 plan fulfilment, 170, 220–222, 226, 227 planned economies, 4, 5, 43, 62, 90, 92, 315, 316, 318, 324, 335 planning mechanisms, 6 plant construction, 276 Politbüro, 2, 10, 26, 27, 36, 187, 257–259, 279, 283, 287, 291, 292, 317, 320, 321, 324 Polymir chemical plant, 184 population, 3, 62, 83, 112, 204, 224, 226, 228, 229, 253, 274, 293 possibility effect, 29, 32, 266, 267, 289, 298, 303, 308 potash industry, 197 Potsdam, 133, 139, 151, 153, 162, 223

INDEX

Powell, Raymond, 326, 335 Prague Spring, 9, 15 Premnitz, 195 Presidium of the Central Board, 132, 246, 247 price signals, 4, 47, 318, 332 principal-agent problems, 5 Prinzip der materiellen Interessierheit , 176 processing machine construction, 215 production costs, 78 production downtime, 138 production groups, 137 production runs, 115, 119, 120, 138 production structure, 121 productivity, 6, 10, 69, 70, 76, 79, 81, 83, 86, 88, 96, 113, 114, 118, 119, 121, 130, 135, 144, 167, 168, 180, 184, 199, 200, 207, 232, 233, 274, 276, 277, 286, 287, 289, 324, 327 progressive wages, 73, 75–79 prospect theory (PT), 10, 26, 30–34, 47, 49, 262, 263, 265–268, 275, 278, 294–298, 301, 316, 317 psychological focus, 33, 267

Q quantitative indicators, 188

R Radio Moscow, 135 rationalisation, 7, 66, 67, 81, 86, 113, 168, 170, 171, 174, 178, 182, 184, 185, 190, 191, 193, 198–205, 210, 213, 215, 231, 233, 235, 236, 258, 330 rationalisation measures, 174, 176, 177, 192, 201, 203, 209

351

Rationalisierungsmittelbau, 172, 188, 190, 191, 193, 199, 200, 206, 215–217, 227, 229, 230, 251 rationality, 41, 133, 167, 261, 262, 296, 327 Rau, Heinrich, 65, 76, 77, 84 RAW Cottbus , 196 real existing socialism, 38, 266, 285, 288, 289, 293, 295, 298 REFA, 67, 81, 96 REFA-engineers, 79 reference points, 30, 31, 34, 265–268, 273, 276, 278, 288, 295 refined products, 290 reflection effect, 29 Reichsausschuss für Arbeitszeitermittlung , 67 Reichsmark (RM ), 64, 72–74, 76, 99 release of labour, 170, 178, 188, 202, 211, 212, 221, 226 reserve labour, 181–183, 190, 210 reserves, 142, 173, 181, 190, 192, 200, 274, 282, 292 Richtlinie über der Anwendung der wissenschaftlichen Arbeitsorganisation, 173 Riesa, 84 risk, 8, 29–33, 38, 44, 181, 185, 233, 237, 262, 263, 266–268, 272, 273, 276, 288, 295, 297, 298, 303, 315–317, 319 risk aversion, 46, 266, 275, 297 risk taking, 34 Ritschel, Albrecht, 6 Rostock, 146, 223, 224 rotary-turned parts, 130 Rotlichtbestrahlung , 328 Roubles, 269 Rundschreiben, 36

352

INDEX

S SAC Cottbus , 196 Sächsischen Volkszeitung , 70 Sangerhausen, 208 Saxony, 64 SBZ , 12, 62–65, 67, 71, 72, 76, 80, 82, 88, 89, 91, 93, 99, 101 Schalck-Golodkowski, Alexander, 258, 291, 292, 306, 307 Schlüsseltechnologien, 203 Schmidt, Willi, 131 Schürer, Gerhard, 258, 259, 287, 288, 292, 293, 300, 307 Schwedter Initiative, 169, 237–240, 242–245, 248–250 Schwedt Initiative, 10, 152, 169–173, 176, 178–183, 185–190, 192–213, 215, 217, 221, 224–226, 229, 231–237, 253, 320, 330, 336 Schwerin, 146, 223, 224 Scientific Principles of Group Technology, 115 scientific work organisation, 173 SDAG Wismut , 132 Second Berlin Crisis, 148 Second Central Mitrofanov Conference, 128 Second Five-Year Plan, 269 Second Party Conference, 274 Second SED Party Congress, 65 secretaries, 26, 125, 128, 129, 131, 132, 134, 194, 195, 205, 236, 322, 327 SED, 1–3, 7, 26, 27, 36, 46–48, 51, 60, 62, 64–69, 71, 72, 75–86, 88–92, 97, 100, 102, 112, 113, 119, 121, 123, 126, 150–153, 155–160, 167, 168, 187–189, 198, 205, 210, 212, 214, 232, 233, 235, 244, 246, 248, 258–261, 263, 265, 267, 268,

273–276, 278–280, 282, 286, 289–292, 294, 296, 298–300, 306, 307, 314, 316, 317, 322, 324, 325, 327, 330–332 Sekretäre, 26 Sekretariat des Zentralkomitees , 26 Selbmann, Fritz, 64, 65, 69, 76, 77, 79, 81, 87, 95, 98, 101, 104, 275 semi-finished products, 116 Seventh Party Congress, 276, 278, 322 Seven-Year Plan, 121 Shchekino Chemical Combine, 183 Shchekino Method, 184, 194 shift system, 172, 175, 176, 187, 190, 193, 229, 251 shock workers, 86 signalling, 21, 44, 46, 47, 62, 85, 90–92, 202, 234–237, 323, 325, 326, 328–332 signals, 4, 41–43, 45–47, 53, 65, 70, 82, 83, 86, 87, 90, 133, 135, 139, 152, 153, 204, 233, 234, 237, 318, 322, 323, 325, 326, 329, 335 SMAD, 62–65, 67, 68, 70–72, 76–78, 81, 83, 89–91, 95 SMAD Order 234, 68, 89 Social Democratic Party of Germany, 62 Social Democrats, 80 socialist competition, 80, 83, 85, 86, 90, 129, 158, 175, 191, 192, 197, 200, 324, 325 socialist consumerism, 285 socialist efficiency, 10 socialist rationalisation, 168, 171, 190, 207, 231, 232, 237 Society for German-Soviet Friendship, 128 soft budget constraints, 5, 170

INDEX

soft norms, 80, 86, 88 Soll-projekte, 175 Sovetskaya Rossiya, 323 Soviet Academy of Science’s Scientific Council of Automation, 115 Soviet Council of Ministers, 277 Soviet Deputy Minister for the Chemical Industry, 184 Soviet instructional films, 129 Sovietisation, 60, 65, 89 Soviet oil, 290, 292 Soviet-style economies, 1, 21, 35, 37–39, 48, 61, 62, 69, 86, 90, 92, 135, 191, 315, 318, 323–325 Sowjetisch-Deutsche Aktien Gesellschaft , 341 Sowjetische Aktiengesellschaft , 64 Sowjetische Besatzungszone, 62 Sozialdemokratische Partei Deutschlands , 62 Sozialistische Arbeitsgemeinschaft , 124 Sozialistische Einheitspartei Deutschlands , 26, 60 SPD, 62 SPK , 36, 124, 125, 180, 247, 258, 279, 287, 290, 292, 305 Staatliche Plankommission, 36, 124, 258 Staatliches Chemie-Kontor Berlin, 219, 220 Staatsbank, 270, 290 Staβfurt, 204, 207, 208, 210, 236 Stakhanovism, 85 Stalin, Joseph, 35, 62, 65, 94 Stasi, 2, 3, 257, 306, 314 State Council, 187, 194, 207, 208, 241, 247 State Secretariat of Work and Wages, 179 Stokes, Raymond, 7, 13, 15, 154, 163 Stoph, Willi, 102, 187, 244, 287 Störfreimachung , 148, 276

353

Strauβ, Josef, 291, 307, 308 Strausberg, 229 structural policy, 277 Strukturbestimmende Zweige, 276 Strukturpolitik, 277 Stschokino-Methode, 342 subjective bias, 30, 273, 278 Suhl, 207, 223 superpower alignment, 313 supply of labour, 170, 185

T Tägliche Rundschau, 68, 82 TAN , 66, 79–81, 88 target production, 74 target projects, 175, 192 TASS, 323 tax, 29, 79, 99, 177 Taylor, Frederick Winslow, 66, 73, 74 Taylorism, 63, 64, 66, 67, 86 technically based work norms, 66, 78 Technische Arbeitsnormen, 66 technological processes, 115 technologists, 121–125, 128, 131, 163 Tenth German Farmers Congress, 322 Tenth Party Congress, 187, 190 Tenth Plenum of the Central Committee, 322 territorial rationalisation, 204, 208, 210, 250 textile industry, 136 Tikhonov, Nikolai, 277 time studies, 78, 80 totalitarianism, 2, 325 tote Seelen, 179 trade balance, 270–272, 289, 303 trade deficit, 270–272, 277 trade imbalance, 168, 272, 282 trade unionists, 59 trade unions, 64, 68, 69, 80

354

INDEX

transmission belts, 80, 89 Tribüne, 129, 196 Tula, 183 Turba, Kurt, 321 Tversky, Amos, 30, 49, 50, 302 Twelfth Conference of the Central Committee, 119, 126 Twenty-Eighth Plenum of the SED Central Committee, 269, 303

U Überholen ohne einzuholen, 253, 276 Ulbricht 1960s solution, 331, 332 Ulbricht, Walter, 51, 63, 65, 68, 69, 87, 89, 94, 95, 97, 98, 112, 119, 125–127, 150, 156, 167, 269, 270, 273, 275–280, 284, 285, 287–289, 297, 298, 303, 317, 320–322, 328 uncertainty, 10, 21, 38, 40, 42, 45, 91, 131, 152, 170, 174, 182, 193, 196, 262, 297, 298, 316, 319, 323, 329 underemployed labour, 171 unemployment, 4, 61 Unterwellenborn, 76

V value function, 30, 31, 49 VbE, 185, 195, 244 VDI , 67 VEB Baumaschinen Welzow (Baumasch), 221 VEB Bekleidungswerk Berlin, 143 VEB Bergbau- und Hüttenkombinat Maxhütte, 76 VEB Berliner Werkzeugmaschinenfabrik, 123 VEB Brandenburger Traktorenwerke, 128, 140

VEB Braunkohlbohrungen und Schachtbau Welzow (BuS Welz), 221 VEB Braunkohlenwerk Welzow (BKW Welz), 221 VEB Carl Zeiss Jena, 116, 119–122, 131, 134, 135, 146, 151, 155 VEB Chemiefaserkombinat Schwarza, 195 VEB Chemiekombinat Bitterfeld, 192, 239 VEB Chemie- und Tankanlagenbau “Ottomar Geschke” Fürstenwalde, 190, 245 VEB Chemische Werke Buna Schkopau, 195, 217, 218, 220 VEB Cottbuser Wollwaren-Fabrik, 139 VEB Deutsche Werkstätten Hellerau, 143 VEB Energiekombinat Cottbus Stammbetrieb, 211 VEB Erste Maschinenfabrik Karl-Marx-Stadt , 123 VEB Fernsehgerätewerk “Friedrich Engels” Staβfurt , 204 VEB Fernsehkolbenwerk Tschernitz (FSKW ), 221 VEB Flachglaswerk Uhsmanndorf , 174 VEB Fotochemisches Kombinat Wolfen, 195, 217, 220 VEB Gaskombinat Schwarze Pumpe (GK SP ), 221 VEB Gaswerk Welzow (GW Welz), 221 VEB Geräte- und Reglerwerk Teltow, 140, 141 VEB Groβdrehmaschinenbau “8 Mai” Karl-Marx-Stadt , 135, 136 VEB Grundfuttermittelwerk, 207 VEB Hydraulik Rochlitz, 123 VEB Industriewerke Ludwigsfelde, 140, 141

INDEX

VEB Industriewerk Karl-Marx-Stadt , 123 VEB Käsewerk Seelow, 189 VEB Kombinat “Agrochemie” Piesteritz, 218, 220 VEB Kombinat Groβhandel Waren tägliche Bedarf (Stammbetrieb), 201 VEB Kombinat Minol Berlin, 217, 219 VEB Kombinat NARVA Berlin, 179 VEB Kombinat Spezialtechnik Dresden, 220 VEB Kosmetik-Kombinat Berlin, 218, 220 VEB KraftfahrzeugInstandsetzungbetrieb Cottbus , 197 VEB Leuna-Werke “Walter Ulbricht” , 194, 195, 217, 218, 249 VEB LKW “Hans Beimler” Hennigsdorf , 140 VEB Lokomotivbau “Karl Marx” Babelsberg , 140 VEB Mansfeld Kombinat “Wilhelm Pieck” , 208 VEB Meβgeräte- und Armaturenwerk “Karl Marx” Magdeburg , 123 VEB NAGEMA, 142, 220 VEB Orbitaplast , 207 VEB Papier- und Kartonwerke Schwedt , 175 VEB Petrochemisches Kombinat Schwedt , 170, 187, 195, 217, 218, 238, 241 VEB Pharmazeutisches Kombinat GERMED Dresden, 218, 220 VEB Pianoforte, 133 VEB Polstermöbelindustrie Cottbus , 197 VEB Rafena-Werke Radeberg , 123 VEB Rathnower Optische Werke, 139

355

VEB Reifenkombinat Fürstenwalde, 195, 209, 210, 218, 220 VEB Reifenwerk Neubrandenburg , 202 VEB Schwermaschinenbau-Kombinat “Ernst Thälmann”Magdeburg , 200 VEB Spanplattenwerk Beeskow, 194 VEB Spinnereimaschinenbau Karl-Marx-Stadt , 123 VEB Sprela-Werke Spremberg (Sprela), 221 VEB Spremag Spremberg (Spremag ), 221 VEB Synthesewerk Schwarzheide, 195 VEB Textilwerk Plieβengrund Crimmitschau, 136, 138, 139 VEB Textilwerk Spremberg (Textilw), 211, 221 VEB Tuchfabrik Cottbus , 197 VEB Tuchfabrik Crimmitschau, 139 VEB Volltuchfabrik Crimmitschau, 139 VEB Volltuchwerke Rödelbachtal Cottbuser, 139 VEB Zahnschneidemaschinenfabrik Modul Karl-Marx-Stadt , 123 Verein Deutscher Ingenieure, 67 Vereinigung Volkseigener Betriebe, 125 vertical drilling machine, 123 Vitebsk, 184, 185 Volkseigener Betrieb, 64 Volkskammer, 258 Volkswirtschaftsrat , 135 Vollbeschäftigteneinheit , 185 Volze, Armin, 280, 282–284, 306 von Mises, Ludwig, 326, 335 VVB Regelungstechnik, Gerätebau und Optik, 125 VVB Volltuch Cottbus , 136, 139

356

INDEX

W wage bonuses, 177 wage commission, 78 wage differentiation, 63, 64, 67, 73 wage discipline, 179 wage fund, 171, 177–180, 183, 191, 199, 239, 241, 244 wage growth, 73–76, 180 wages, 63–65, 67–69, 71–73, 75–81, 85–88, 92, 123, 127, 129, 168, 170, 171, 176, 177, 179–182, 202, 205, 269, 285 Wall in the Head, 314 Wambutt, Horst, 186, 240, 241, 243 WAO, 173–176, 184, 189–193, 197, 200, 204, 211, 244 WAO Arbeitsgruppen, 174 WAO Council, 174–176 WAO-Kollektiven, 174 Warnke, Herbert, 68, 77, 103 weaving, 137, 139 Weimar, 59, 64, 66, 274, 275 Weiz, Herbert, 117, 119–121, 128, 134, 135, 154–156 weniger produzieren mehr, 185, 188, 237–240, 243, 245–248, 250–252 Westeregeln, 207 Western capital markets, 268, 276 West German credit, 280 wholesalers, 215

Wirtschaftskommission beim Poiltbüro der SED, 113 Wissenschaftliche Arbeitsorganisation, 173 Wittenberge, 87 Worker and Peasant Inspection, 196 workflow, 115, 118 Work Groups, 70, 75 work habits, 60 work norms, 60, 78–81, 88, 91 workplace councils, 63, 68, 69, 71, 72, 77, 89, 90 workshops, 129 work study engineers, 79, 81 Wyschofsky, Günther, 179, 180, 186, 242, 248, 249

Y yarn, 137 Young Innovators Fair, 172 youth policy, 320, 321

Z Zaitlin, Jonathan, 14, 51, 260, 281, 282, 299–301, 303–306 Zentralinstitut für Fertigungstechnik des Maschinenbaues , 122, 124, 125, 135 Zossen, 141