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The Economic Model of the German Democratic Republic - 1945-89

The Economic Model of the German Democratic Republic - 1945-89. Socialist Centrally Planned Economy. Based on that of the Soviet Union. State ownership of means of production. Central planning of all economic processes Nationalisation of industry Collectivisation of agriculture.

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The Economic Model of the German Democratic Republic - 1945-89

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  1. The Economic Model of the German Democratic Republic - 1945-89

  2. Socialist Centrally Planned Economy • Based on that of the Soviet Union. • State ownership of means of production. • Central planning of all economic processes • Nationalisation of industry • Collectivisation of agriculture

  3. Modernisation • 1950 - State Planning Commission created. • Country’s first 5 Year Economic Plan introduced. • Achievements – relatively productive, almost self sufficient, decrease in unemployment, wage increase, industry growth • Problems – quantity rather that quality, lack of choice, inefficiency, sheer complexity and unrealistic goals of plan. • 1959 – Introduction of 7 Year Plan

  4. New Economic System (NES) • Late 1950’s - economic growth slows • Aimed to transform economy into dynamic and innovative system • Decentralisation - Associations of People's Enterprises (Vereinigungen Volkseigener Betriebe) • Fear that political decentralisation would follow

  5. Economic System of Socialism – 1967-70 • Planning partially recentralised • Focus on technology sectors • Problems – too much emphasis on certain sectors, price increases • Failure to meet goals resulted in termination

  6. ‘The Main Task’ - 1971 • Higher standard of living in exchange for acceptance of SED’s leading force in society • Achievements – more consumer goods, more housing, job security and stable prices, increased prosperity • Ambitious programme exacerbated hard-currency debts Erich Honecker

  7. World Economic Crisis • Late 70’s/ early 80’s - Explosion of oil prices – GDR heavily dependant on fuel imports, no natural resources • Economic recession • Increasing international debts • Efforts to increase production of exports required import of expensive equipment

  8. To conclude… • Centrally planned economies traditionally unsuccessful as can be seen in GDR model – inefficient, cannot detect consumer preferences, lack of incentives for innovation, lack or reward for hard work, infringes on individual freedom • Some failing factors specific to GDR -No natural resources, traditional economic links to west severed. • However… guaranteed employment & price stability, developed a competitive industrial nation, reasonable standard of living

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