Calculating the Costs of German Unity
SHANOR, DONALD R.
AFTER 40 YEARS OF COMMUNISM Calculating the Costs of German Unity By Do?ald R. Shanor A used car lot selling markeddown East German cars and a few expensive Western ones now occupies part...
...Nevertheless, a significant minority of East Germans, particularly the dissidents and peace activists who risked their freedom and livelihoods to start the revolution last autumn, feel that events have passed them by...
...When the various financial costs of unity are added up virtually every figure is staggering, although most are merely guesses at this point...
...Forty per cent of East Germany's foreign trade is with the Soviet Union...
...They project an annual growth rateof7.5per cent after a transition period of five or more years...
...We're facing the largest bankruptcy in history," Klaus Reichenbach, a top aide to East German Prime Minister Lothar de Maizière, told Western journalists...
...instead, the GDR should be viewed as "an area of reserve growth for the European Community...
...Cleaning up the air, earth and water will cost $70 billion, according to Bonn government estimates—and the nation's largest environmental group says that figure must be quadrupled...
...the rest, an official in Bonn's Finance Ministry said, "must be allowed to die...
...In fact, German credits and other concessions that will benefit Soviet consumers appear to have gone a long way toward solving the NATO issue...
...The GDR citizens' frame of mind is one of the imponderables that makes it difficult to calculate the cost of unity...
...Here in the West, pocketbook issues could infringe on the unification process," a Bonn official told me...
...One potential liability, East Germany's trade agreements with the Soviet Union, should also turn into an asset...
...The government is offering 12 per cent investment bonuses and other inducements...
...Some Western firms have had to fire East German refugees who wanted to work like Communists and get paid like capitalists...
...Blue collar workers, newly represented by Western union officials, want Western pay scales, which means raises of 30-50 per cent...
...Bonn officials estimate that about a third of the state factories and service organizations are profitable now...
...Now the task is to replace the wreckage they left behind...
...While no reliable figures are available, West Germans appear to be holding back...
...In both East and West, however, there are concerns about the immediate future...
...Thus West German taxpayers are worried that the billions East Germany needs will increase their burden—notwithstanding Kohl's promise of no new taxes, in a German version of "read my lips," because he faces an election at year's end...
...We haven't had time to set up social safeguards...
...The flow of refugees into the Federal Republic last year—750,000 from East Germany and Eastern Europe—and the continuing arrival of about 30,000a month has become as great a concern as inflation and new taxes...
...In addition, he continued, East Germans have suffered a massive loss of self-respect:" We had little enough selfconfidence before the change, but now we feel we have nothing to offer in this union—certainly not our money, nor even our advice, which is being ignored or overridden...
...Much of the costs of renewing the East German infrastructure can be borne by growth in the economy, the analysts maintain, once the old state enterprises are reprivatized and made efficient...
...Those actions got rid of the Communists...
...GDR trucks, machine tools and consumer goods are staples of the Soviet economy...
...At the same time there is an untapped reservoir of talent and ambition in the East...
...Chancellor Helmut Kohl has made it clear that he wants the bulk of the money for re-equipping East Germany to come from the private sector...
...Half a million West Germans are claiming property expropriated in the East...
...GDR Economics Minister Gerhard Pohl has warned of a "hot autumn" of strikes and unrest as the East German work force tries to cope with the new conditions brought in by private enterprise's insistence on efficiency...
...It is wrong, they contend, to consider the East German economy only as a liability...
...Another 50 per cent might be brought up to Western standards with large investments for equipment...
...In any case, such important Soviet economic concerns were a critical part of the successful July 15-16 talks between Chancellor Kohl and Soviet President Mikhail S. Gorbachev about a unified Germany's membership in NATO...
...Some of these officials also believe it will be possible to trade economic concessions for Soviet acquiescence to a unified Germany's membership in NATO...
...In the German Democratic Republic (GDR), the initial euphoria over unification has similarly changed into doubt and uncertainty for many people...
...Thousands of East Germans are used to working half days at full pay because of the material shortages and equipment failures that regularly shut down factories and construction projects at noon...
...There seems to be no other way aroundit, but theprocess of unification is taking place much too fast," ahuman rights activist in East Berlin said...
...Unemployment is at roughly 200,000 and could riseto 1-3 million of the 8.8 millionEast German labor force...
...The new GDR capitalists range from people who want to start bars or taxi businesses to sophisticated engineers with plans for pollution control and cleanup services—talents not wanted under the old regime...
...Numerous other opportunities await those who have marks to invest, including the EC's rapidly developing Single Market, and most of these seem far less risky than the rundown enterprises of East Germany with their demoralized workers...
...This 16.5 million-strong human resource is the key to whether the shock of change in the East can be absorbed through economic growth—currently running at a robust 4.4 per cent in the West—or will cause increased taxes or inflation or both...
...We're telling a population that has been taken care of, led around, for 40 years that now everything is up to the individual—wages, jobs, social services...
...They sought an alternative German state, where social justice would outweigh consumerism...
...Donald R. Shanor, a frequent contributor to The New Leader, is Director of the International Division of Columbia University's Journalism School...
...Indeed, the view is widespread that compared to what lies just ahead, the peaceful revolution last fall and the free elections last spring were the easy part...
...But the politicians and ordinary people on each side of the border face a period of uncertainty no less serious than that of the early postwar years...
...Given their defeat in the March elections, they talk gloomily of a "second occupation," with West Germans moving into the mayor's offices in Chemnitz and Leipzig and Bonn's political tacticians overseeing the work of their East German sister parties...
...People want unity, yet they don't want to pay too much for it...
...So many would-be entrepreneurs contacted the German business daily Handelsblatt that it has been putting out directories to link them with partners or investors...
...With the July 1 union of the economic and social systems of East and West Germany, that division has to all intents and purposes been overcome...
...Bonn has promised to honor all existing trade treaties, but it is expected that Moscow's accounts will have to be paid in convertible West German marks —perhaps those the USSR will be earning from its considerable sale of natural gas and oil to East Germany...
...Every timeGerman settlers from Poland, the Soviet Union or East Germany are moved from their corrugated metal huts into statesubsidized permanent housing, a social worker at a refugee camp in Hamburg noted, the resentment of West Germans waiting for housing increases, and this can only help fringe parties like the neoNazi Republicans...
...Government analysts in Bonn think the Deutsche mark will work the same magic on the GDR that it did on West Germany following the currency reform in the '40s...
...There are predictions, too, of a 10 per cent loss in East German GNP during the year ahead as factories and services shut down, of a $200 billion bill for renewing the infrastructure, and of East German budget deficits that will require far greater subsidies than the $64 billion in the German Unity Fund set up by the Federal Republic to ease the transition...
...Confident officials in the Bonn ministries envision a short transition to a powerful all-German economy that will not only continue to dominate the European Community (EC) but serve as a model and source of aid and credit for Eastern Europe's recovery...
...As the new East German Trade Minister, Sybille Reider, said the other evening on a live television callin show—itself a sign of the remarkable changes under way—"you can't expect us to undo the damage of four decades in eight weeks...
...AFTER 40 YEARS OF COMMUNISM Calculating the Costs of German Unity By Do?ald R. Shanor A used car lot selling markeddown East German cars and a few expensive Western ones now occupies part of the palace grounds in Potsdam, not far from where the Allies divided up a defeated Germany 45 years ago...
...Even if taxes are not raised, West Germans anticipate that the borrowing necessary to help East Germany will raise interest rates and fuel inflation...
...The overwhelming votes for pro-unity parties show that the majority of East Germans still look upon unification as the quickest, surest way out of their economic misery, as well as insurance against the return to power of their former Communist rulers...
Vol. 73 • July 1990 • No. 9
