Growing Crises and the Collapse of Communist Rule in
the GDR, 1985-90
WHY WERE THE ECONOMIC PROBLEMS OF THE GDR SO SEVERE BY THE LATE
1980s?
THE ECONOMY IN THE 1980s
Between 1982 and 1985 economic growth slowed to 1.5% pa compared to 2% between 1976 and 1980
● The resulting falling levels of prosperity eroded the GDR’s claim to legitimacy.
● To make up for the fall in income, the government was forced to reduce spending and boost
exports, resulting in shortages within the GDR
The Five Year Plan of 1986-90 aimed at the construction, or modernisation of over a million homes and
encouraged the development of new technologies such as microchips. However, the technological gap
between the GDR and the FRG was growing larger
● With a population of only 16 million, the GDR was perhaps too small to compete with the vast
resources of the West
● High levels of defence spending (up to 8% of total spending) and funding the 91,000 full-time
employees of the Stasi (DM14 billion per year) were large drains on the GDR economy
By the 1980s debts to Western institutions increased to over DM40 billion. In theory the GDR, with a
GDP of DM250 billion pa, was capable of servicing these debts.
The main issue was a lack of exports with which to generate currency to service these debts. The
Schurer-Papier highlighted the scale of the problem, projecting a need to increase export surplus by
over 500% in 5 years in order to stabilise debt levels.
● The GDR aimed to increase its exports in the long term by developing new technological
industries. However, this required initial imports of technologies and resources to kick-start
development. This added to the GDRs debt.
● In a bid to gain hard currency the GDR resold Russian oil to the West. This meant the GDR had
to use inefficient brown coal for its own industries.
● The West was much better at developing new technologies, both in new industries such as
computing and in older ones such as machine building and electronics. Thus the ability of the
GDR to export goods was hampered by the relatively poor quality of its goods. Between 1986
and 1988 exports of heavy industry dropped by 30%.
The situation was made worse by Hoecker’s refusal to face up to the problems - he kept the scale of the
GDR’s debts hidden from most of the SED leadership, even from his own economics minister, Gunter
Mittag.
● The GDR became more dependent on emergency loans from the FRG.
, HIGH SPENDING ON HEALTH AND WELFARE
Expenditure on subsidised housing, education and welfare rose from DM72.9 billion in 1980 to DM
112.3 billion in 1985. A well-funded healthcare system was vital in maintaining public satisfaction with
the GDR’s government and added to its international prestige - a healthy workforce was also needed.
However, by the 1980s, the ability of the GDR to fund its healthcare system was hampered by the
slowdown in economic growth and the debt crisis
● ALSO, chronic air pollution caused by rapid industrial growth without regard for environmental
considerations put more burden on the system by increasing respiratory problems such as
bronchitis.
THE POOR QUALITY OF CONSUMER (AND OTHER) GOODS
In the 1970s Honecker tried to address the problem by ordering factories producing for the industrial
sector to produce 5% consumer goods. This initiative resulted in poor quality goods e.g. microwave
ovens produced by steel factories
By the 1980s the private sector was making up some of the shortfall, e.g. by making spare parts for
cars. On the whole, however, the SED leadership was reluctant to allow significant expansion of the
relatively more efficient private sector which made up just 2.8% of NNP in 1985.
● Basic items such as bread, potatoes and meat were readily available, but with long queues.
● Basic items of clothing were readily available, but size and variety of items were restricted.
People with large amounts of savings amassed through years of consumer goods shortages were keen
to spend their money on Buckware bought on the black market. Such practices only highlighted the
inadequacies of the East German services and consumer goods sectors.
Some high quality consumer goods were produced in the GDR, e.g. cameras, but these were mainly
exported to gain hard currency, and by the 1980s East Germans were well aware of the inferior quality
of their consumer goods compared to those in the West.
● Access to West German TV stations along the border raised awareness of the stark contrast
between Western capitalist lifestyles, including fashion, music and cinema, and those in the
GDR.
○ In June 1987 over 4,000 young East Germans got to listen to David Bowie and Genesis
when the speakers at a rock festival in West Berlin were turned towards the East.
ECONOMIC RELATIONS WITH WEST GERMANY
By 1989 20% of all trade was with the FRG which also kept the GDR’s economy afloat with emergency
loans. The sale of political prisoners to the FRG was also a big currency earner.
● This increasing inter-German contact cooperation prolonged the existence of the GDR in the
short term but badly undermined it in the long term by contradicting the SED’s depiction of the
FRG as a dangerous ideological enemy.
● It is estimated that through the ‘enemies of socialism’ scheme of releasing dissidents, West
Germany paid DM 3 billion.
