Economic reform in East Germany

Abstract

East Germany's economy is on track to become a market economy less than a year after the peaceful revolution of the fall of 1989, a revolution caused by people who, even-who worked diligently in their workplaces, participated in demonstrations after working to expel a corrupt administration.
Before the "events", a term commonly used by nationals of the two Germanys to refer to revolution, the country had a centrally planned socialist economy. Doing business for 40 years in accordance with socialist principles created an economic system that reflected a degree of success and a considerable number of flaws. The rigid Stalinist model, distinct from the original Soviet model that allowed private ownership in some activities, instituted a state-controlled bureaucracy and suppressed business initiatives.
East Germany's economy yielded annual growth rates of 18.5% in the 1960s and five to seven percent in the 1970s. Annual growth rates continued to drop from their level to four percent between 1981 and 1988, reaching two percent in 1989. Since the end of the 1970s, the central apparatus of administrative socialism has demonstrated its inability to control the abuse of resources by nationalized industries.1 State-controlled industries have also not been able to develop new materials and implement technologies that have the capacity to save energy and the thus increase input-product relationships.