East Germany's Doubtful Future
Brand, H.
The events in the German Democratic Republic (GDR), as in the rest of Eastern Europe, have come at a time when the world market dominates as never before the various national economies. The...
...and the workplace attachment of employees be loosened by greater "casualizaFALL • 1990 • 471 East Germany tion," that is, part-time and temporary help...
...Smaller firms have been exempted from many rules governing worker protection...
...Donges et al...
...Some success in applying these "principles" have been recorded in West Germany...
...Its reserve labor pool will likely be enlarged by developments in Eastern Europe generally—the potential Mexico of the Federal Republic...
...You must analyze yourself why you left us by the wayside in the seventies, why, instead of sticking with the oppressed, you preferred to treat with the oppressors or at best looked on as neutrals," a prominent East European guest said at Willy Brandt's birthday party late last year...
...But it must be suffused with the ideas of social democracy to ensure justice in the distribution of social costs...
...The budget deficit of a unified Germany alone has been estimated at $60 billion in 1991, largely from initial costs of unification, such as added unemployment compensation and the start of infrastructure rehabilitation...
...Fiscal Policy for Growth Without Inflation (Johns Hopkins Press, Baltimore— F.G...
...The role of the state in that transformation is indispensable...
...But the Federation, as an agent of political coordination and as a fount of ideas, faces a loss of authority as the impact of the events in East Germany carries over into the West...
...Of course, that may change in time...
...Business has often either contributed to the decline of regions (familiar to American workers in the upper Ohio valley, the Cumberlands, parts of Texas), or has shown itself incapable of spurring economic growth unassisted by government and large military contracts (as in the South or parts of California...
...Kieler Studien (J...
...But they anticipate that, even after the first phase of the "consolidation" —that is, after basic economic and financial reforms have taken hold— joblessness from worker displacement will run to one million, or 12 percent...
...An appraisal of the German labor movement's future is offered by a research associate of the Federation's research institute...
...Virtually all knowledgeable German observers, as well as the May 1990 report of the Central Intelligence Agency (CIA), project very high unemployment in East Germany as economic unification proceeds...
...Wofuer Wir Streiten: Solidaritat and Freiheit (Bund Verlag, Cologne—I.G...
...The CIA expects an unemployment rate in East Germany of 15 to 20 percent, a prediction that "may be on the conservative side...
...Even so, the true "German miracle" is said to have begun in the sixties...
...This "miracle" is unlikely to be repeated in the GDR...
...He may have accurately sensed the course of developments in Eastern Europe over the long term...
...Confessionally based groups of employees affiliated with the evangelical churches show signs of emerging...
...Many plants date from the prewar era...
...In the sixties, new technologies came into use, new products were developed and marketed...
...Automobile production methods are hopelessly backward...
...The boom of the fifties had still been largely engendered by the Korean War and the catch-up needs of European economies stemming from World War II...
...All this will constrain investment in East Germany as in the rest of Eastern Europe...
...it is the resistance of trade unions to raising productivity (that is, lowering costs per unit of output) in ways that weaken them, deliberately or not...
...But then the problem of unemployment in both Germanys will be exacerbated...
...Certain tax allowances may offset, to a degree, the higher costs occasioned by a wage level that is out of line with productivity...
...Certainly, if the supposedly rigid trade union rules are relaxed in East Germany, they must likewise be relaxed in the West...
...The level of productivity in the GDR—that is, the real value of goods and services produced per hour of work—has been conservatively estimated to lag 50 percent behind that of the Federal Republic...
...The wage structure (they argue), rigidly propped by various labor market barriers, prevents the evolution of a wider range of wage differentials and hence the employment of jobless workers at "costeffective," that is, lower, wages...
...The backwardness of East German industries poses problems of re-equipment on a vastly greater scale...
...GDRmade shoes no longer sell, placing 42,000 jobs at risk...
...Here Willy Brandt's vision, pithily expressed in his words that "reality will be impelled toward the social democratic idea," could regain relevance...
...It is very doubtful that private capital is equal to the task...
...Frankfurter Allgemeine Zeitung (Lutz Hoffman...
...The weakening of the German left, which those elections signified, may prove transitory, and, according to Willy Brandt, "in the revolutionary year 1989, not only is the social democratic idea impelled toward reality—now also reality is impelled toward the social democratic idea...
...There is the question whether West German industry (or international firms generally) require the additional capacity that rehabilitation of East German industry and agriculture would make available...
...Der Spiegel...
...That would be roughly 2.5-3 million unemployed, amounting to an army of unemployed [persons] of 4.5-5 million for both Germanys" —or 14 to 15 percent of the total German labor force (except for the self-employed...
...Leave aside the absorption of international capital by the United States in financing its balance-of-payments and budgetary deficits...
...The viability of an entire society is at stake...
...investors in search of low-wage labor will look to Spain, Portugal, and Poland...
...It is difficult to see how, at a time of high interest rates, the aversion of the big banks to risks, and high budgetary deficits, the enormous amounts of capital could be found that would begin to justify the optimistic predictions of another "German economic miracle," such as occurred in the 1950s...
...The events in East Germany are testing the very authority of its leadership along with the idea of a politically unified labor movement, for which the German Trade Union Federation has stood for the past four decades...
...It is scarcely imaginable that West German or Western European political leaders will let that society—or others in the East—sink into further decline...
...Other labor costs, such as employer contributions to social security, may be subsidized by Bonn for a time...
...The wage structure in these industries, so the argument goes, does not adequately reflect the destruction of human capital (and other productive resources) that accompanies the radical changes in industrial technology—that is, the irresistible shift to knowledge-intensive and service-producing activities...
...Feist...
...But so far the evidence demands more sober judgment...
...Addressing these 468 • DISSENT Cast Germany problems has been costly, requiring large subsidies—figured by one research institute at $3.4 billion for coal and nearly $400 million for shipbuilding in 1984—and these have stretched over many years...
...The East German trade union federation, the "transmission belt" designed to ensure the "unity" of Communist party and working class was discredited...
...Its pool had been vastly enlarged by the 3.6 million persons—the majority in the lower age brackets— who had migrated from East Germany to the Federal Republic between 1950 and 1962 (when the wall was erected...
...Similarly, Bonn has had great difficulty in solving the regional employment problems brought on by the decline of steel and coal in the Rhine-Ruhr area, or of the shipyards near the North and Baltic seas...
...The rules imposed by the GDR regime foreclosed improvements in efficiency which the international division of labor makes available to open economies...
...As in the United States, shifts to a more flexible organization of work in the Federal Republic have been closely associated with "rationalizing" production equipment and the structures that house it...
...2) where productivity can be improved by modernized technology, better management, and so on, workers will be dismissed...
...The upheaval was a broad democracy movement, its social content was diffuse, its erstwhile leadership devoid of roots among working people...
...Unions without any affiliation have been created...
...Similar attitudes are found among people in East Germany...
...There are more fundamental factors that render comparisons with the German boom of FALL • 1990 • 469 Cast Germany earlier decades irrelevant...
...Neoconservative positions, which see a free development of the individual only after regulations covering collective bargaining or welfare-state benefits . . . find resonance...
...Their influence in social democratic quarters, too, is rising, the more so as Keynesian approaches cannot adequately deal with the structural unemployment typical in much of Europe...
...q Note on Sources Among others, I have drawn heavily upon, and sometimes quoted from, articles, essays, and books: Gewerkschaftliche Monatshete, the monthly discussion organ of the German Trade Union Federation (U...
...The reign of capital is today less open to challenge: it is mobile and easily governed by the great central banks and the American Treasury Department, acting in concert...
...Hence it represents a powerful counterweight vis-a-vis big business...
...Let me suggest the dimensions of this problem...
...All translations are my own...
...By and large they succeeded in their struggle to reduce average weekly work hours and to maintain the level of real wages...
...There is great risk that our rigid union regulations could be imposed in the East...
...G. Baecker and J. Steffen, the authors of this passage, believe that such attitudes prepare the GDR as a training ground for strategies of privatization and deregulation, which will make it harder to maintain the norms of social security that exist in the Federal Republic...
...Schmidt, and P. Schneider...
...The Bonn government in many of those years showed budgetary cash surpluses rather than deficits, with lowcost funds available for investments in plant and equipment...
...There is growing doubt that such investments are forthcoming, or that governments have either the will or capacity to make them on a meaningful scale...
...for example, the express train between Berlin and Cologne must reduce its speed to a crawl on its GDR stretch because the tracks and their supports are too run down...
...However, as of now, the principles of profitability and efficiency will be invoked to resolve the problems of East German industry, with unemployment and widening wage differentials sure to follow...
...Neoconservative orientations are bolstered by theories of employment that in effect reject the Keynesian analysis that relates unemployment to inadequate demand...
...That may indeed be a never-ending process...
...He gives no confident answer...
...and (3) as imports of merchandise from West Germany and other countries displace indigenous products, workers also will be let go...
...Added factors are the large indebtedness of private corporations and the unsettled debt situation of Third World countries, which have been leading the commercial banks to restrict their lending...
...We hope to gain considerable advantages in the East," a high official of the Adam Opel company, a German subsidiary of General Motors, is quoted by the Washington Post (June 30, 1990), "not from lower wages, but from more flexible work rules, Japanese-style team work, and less strict job classification...
...The unemployment rate in these regions has run up to 20 percent in excess of the national average, in some areas as much as 86 percent...
...Lutz Hoffmann writes that "a quarter to a third of the workforce, if not more, could lose their employment...
...But its disrepute has affected attitudes toward the whole idea of a politically oriented labor movement, so Die Zeit could 472 • DISSENT report: "Although they were not listed on the ballot, the trade unions, too, belong to the losers of the [March] elections...
...Christ, K.P...
...The events in the German Democratic Republic (GDR), as in the rest of Eastern Europe, have come at a time when the world market dominates as never before the various national economies...
...The dismissal threshold before an employer must negotiate a so-called social plan with his works council has been raised...
...A new "Marshall Plan" is not in sight...
...But it appears unlikely that East Germany will become a low-wage region...
...Bosch and W. Sengenberger...
...The State and the Labor Market (Plenum Press, New York—G...
...All these tendencies are likely to be accentuated by developments in East Germany...
...The East German parliamentary elections last March and the communal elections of May, giving a majority to the right-of-center Christian Democrats and their right-wing allies, affirmed this situation, as it did the belief that prosperity lies with the power of capital...
...The role of government, of the state, as planner and key supplier of capital and know-how in public administration, will be decisive...
...automobiles made in the GDR are filling up lots, and one hundred thousand of the one hundred fifty thousand jobs in the industry are expected to disappear...
...And social democracy means social solidarity: it will in time replace the ideology of neoconservatism, which will be recognized as a blind alley for any society or economy inherently based on cooperative effort...
...If so, this would also "upgrade" their sister organizations in West Germany...
...Detlef Perner, a research associate in the German Trade Union Federation, writes: "The peaceful revolutionary change in the GDR appears to have encouraged some politicians, especially after the parliamentary elections of March 18th, 1990 to impart an 'all-German' identity to their (neo-)conservative policy of reconstructing society, the economy, and welfarestate institutions...
...Wages in East Germany are bound to rise to average national levels as economic unification gets underway...
...Metall, Peter Glotz and Oskar Negt...
...It is a condition that is bound to affect the trade unions' role in East Germany, and it is not the only unfavorable one...
...These theories argue that the high unemployment that has for years burdened the West German economy despite prosperity is linked to wages that are too high...
...therefore, pressure on interest rates and on the supply of capital seems likely to remain intense...
...Reuss...
...This is already happening...
...Funding just a re-equipment boom presents incomparably greater difficulties...
...That has spelled massive worker displacement ("mitigated" in the United States, but not in West Germany, by low-wage, service-producing jobs...
...The technology of the steel industry, for example, is so outdated that a steelworker can produce only half as much as his or her West German counterpart...
...That the climate of opinion has been antagonistic to the labor movement has also been affirmed by Glotz...
...There is also the question to what extent past cooperation in some fields between the German Trade Union Federation on one hand and the East German trade union leadership on the other, as well as exchanges between the social democrats and representatives of the Honecker regime, have mortgaged the future of the German democratic left...
...it is sustained by "neoconservative" ideologies...
...It has been said that wherever movements of emancipation stirred, trade unions played a leading role: Poland, China, Chile...
...The population of the East German market compares with the state of Texas or the German province of North Rhine–Westphalia...
...But the above-mentioned changes have contributed to the segmentation of labor markets and weakened the unions' bargaining power...
...Human capital had, as it were, accumulated, notwithstanding the losses and deprivation of World War II and its aftermath...
...The boom in those years took place at a time when interest rates ran one-third to one-half below what they are now...
...Wages and other labor costs in the GDR, allowing for subsidized prices of basic consumption goods, run to about 42 percent of West Germany's level...
...Even the term "state" or "welfare state" is tainted...
...Such differentials barely existed twenty years ago...
...However crudely, they testify to the GDR's economic backwardness...
...This has been a key factor in East Germany placing the German labor movement on the defensive...
...It may be that computerized production technologies require a more "flexible" organization of work and that the labor movement, in Germany as elsewhere, must adapt accordingly...
...That would turn the earlier boom experience into its very opposite: unemployment then declined to less than 1 percent of the (growing) labor force...
...The wage structure is to be made more "flexible," facilitating downward adjustment...
...Decades of experience with a highly central ized trade union bureaucracy in East Germany have created much distrust among workers— distrust that is bound to affect the German labor movement's top leadership even after the eventual demise of the East German federation...
...Researchers with Hoffmann's institute are somewhat more hopeful about employment in East Germany after unification...
...Recall what was indicated above: the West German trade unions are not "centralized" in the Federation, but the Federation is their political center, coordinating the collective-bargaining policies of the unions in terms of a broadly agreed upon macro-economic policy approach, and sharing with them a broadly defined social democratic outlook...
...The chemical industry relies heavily on brown coal (lignite), despoiling the environment and threatening health...
...Wirtschaftsgeschichte der Bundesrepublic Deutschland, 1945-1980 (Suhrkamp, FrankfurtMain — W.Abelshauser...
...Workers participated, but as part of "Das Volk," not of their class (as they had in the June 1953 uprising...
...East Germany The special interests of individual unions will gain prominence...
...We need not go into the details of such cooperation, some of which was undoubtedly legitimate...
...They are "too high" in relation to the value of the human capital employed, notably in the older, presumably less knowledgeintensive industries such as textiles, metalworking, and mining...
...What the consumptionhungry people of the GDR need can be manufactured by the German economy and its 470 • DISSENT partners on the world market...
...Going further, they argue that these labor market barriers are created by collective bargaining contracts protected by law, which in West Germany often tie all employers in a given industry to the wage rates the contracts stipulate...
...How that influence will make itself felt after unification can be surmised from the labor market policies pursued by the Bonn government during most of the 1980s...
...The basic problem of the GDR economy," writes Lutz Hoffmann of the prestigious German Institute for Economic Research, "is a totally outdated capital stock in its . . . infrastructure as well as in the production sector, and the continued existence of industries which, had they been exposed to world market conditions, would long ago have ceased to have any chance for survival...
...Real poverty is also expected...
...Suitable" work acceptable to the unemployed has been more broadly defined...
...and this antagonism has informed the debates surrounding unification...
...Bitter experience with the . . . Stalinist state has discredited such ideas as unity . . . and solidarity, also with regard to . . . social security...
...Historical experience shows that not the "market" but big investments of capital build economies...
...Only a few industries require new production capacities in truly large volume," noted a writer in Der Spiegel...
...Die Zeit (P...
...These policies have been guided by the notion made popular in the United States under Reagan that market forces should allocate labor and set wages...
...An enormous housing construction program facilitated the accommodation of this stream...
...The importance of whitecollar organizations is expected to increase, and these may emphasize status differences vis-à-vis blue-collar workers...
...In the words of Peter Glotz, an outstanding social democratic intellectual, "mass unemployment—more than three million unemployed [in 1988]—will remain for many a year to come one of the basic conditions affecting trade union activity...
...FALL • 1990 473...
...The problem for German industry (as for industry in much of the world) is not (relatively) high wages per se...
...That means that income protection should be curtailed and subjected to stricter tests...
...The unprecedented economic situation that the demise of Stalinist regimes in East Germany and elsewhere in Eastern Europe has created lends a powerful impetus to these neoconservative theories...
...Although these contracts make for a stable work force, and save hiring, training, and other so-called transaction costs, these costs are high because of (legally enforceable) worker protections such as discharge notice, the employer's obligation to formulate a "social plan" before laying off workers or closing a plant, codetermination, and consultation rights of shop councils...
...With illconcealed anxiety, Ernst Breit, the head of the German Trade Union Federation, states (after an apologia for past relations with his East German counterparts), "There remains the fact that the November revolution took place at best without, at worst against the trade unions of the West and the East...
...This was not true in East Germany...
...More human capital—know-how and skills— rather than mere physical capital was required...
...For example, the effective ratio of income replacement by unemployment compensation has been significantly lowered...
...and the advocates of workers' rights, in Germany as elsewhere, are on the defensive...
...Yet the problems the German labor movement faces are by no means confined to West Germany...
...Nor is it at all certain that the ethos of social democracy that has infused the German labor movement's politics for one hundred twenty-five years will retain its force...
...It is possible that the unions will coordinate their efforts on some regional levels, but whether this can offset the prospective loss of authority by the political center represented by the Federation, we do not know...
...The problem of East Germany cannot be understood merely in terms of regional economic disparities or of the poverty-stricken periphery versus the prosperity core...
...Moreover, despite losses during World War II, German industry possessed a relatively modern capital stock, and could devote a large part of its cash flow from retained profits and depreciation set-asides to the expansion of productive capacity...
...These differences have not changed in many years, especially as economic growth in the Federal Republic has exceeded that in the GDR...
...But the remark speaks volumes...
...Together, these factors will erode social solidarity and dim, for some time to come, the prospects for social democracy...
...dismissal policy be made less severe...
...The rehabilitation and modernization of the economy of East Germany, as of the other East European economies, are obviously the prime tasks facing their people...
...The public service infrastructure is equally decrepit...
...The productivity of physical capital has thus been steadily raised, reducing the need for additions...
...it is equated with mismanagement, authoritarianism, control...
...Social democracy traditionally has been based on the prospect of creating social solidarity...
...That sum is roughly twice as high in relation to the unified country's projected national income as for the United States...
...Will things also continue without and against the trade unions...
...There are still deeper problems for German labor...
...WSI Mitteilungen, the monthly organ of the Institute of Economic and Social Science, attached to the GTUF (H...
...Luechle and G. Mueller, G. Baecker and J. Steffen, W. Lecher...
...Unemployment will result from three developments: (1) Establishments unprofitable to rehabilitate will be closed...
...It is quite unlikely that the German central bank—or the Federal Reserve—will deviate from their firm antiinflationary credit policies...
...The German unions, although embracing little more than two-fifths of the German work force, remain strong...
...For it is quite unlikely that the people of the GDR (or other parts of Eastern Europe) will passively submit for long to the imposition of the social costs of transforming their economy in terms of largescale unemployment, low living standards, incipient poverty, and, for many, hopelessness...
Vol. 37 • September 1990 • No. 4
