East Germany: The Primacy of Dogma over Reform

Betz, Horst
March 1974
Journal of Economic Issues (Association for Evolutionary Economi;Mar74, Vol. 8 Issue 1, p83
Academic Journal
Ten years ago the German Democratic Republic (GDR) became the first of the Comecon countries to introduce a comprehensive set of economic reform measures. Far-reaching organizational and functional changes were made in the cumbersome central planning apparatus, and, above all, a system of economic levers was set up to supplement the central plan and replace the inordinate number of administrative directives issued to the enterprises. Profits, in a new role, were now to serve both as an enterprise performance indicator and a source of investment over and above the state loans, which were to supplant, at least partially, outright investment grants. In addition, a revaluation of existing capital equipment at replacement cost and a new set of depreciation rates were introduced. A comprehensive price reform and an interest charge on capital followed. It is the intention of this article to look for the deeper causes for recentralization. Certainly, there are immediate causes: the already mentioned supply problems and disproportionalities and the fact that most of the reform measures were somewhat half-hearted to begin with. The latter is at least partially responsible for the economic problems as such. These developments, however, are but a reflection of the real dilemma arising in connection with the implementation of economic reforms in a society where all aspects of life are controlled by an all-powerful party.


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