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East Germany New Economic System
The annual industrial growth rate declined steadily after
1959. The Soviet Union therefore recommended that East Germany
implement the reforms of Soviet economist Evsei Liberman, an
advocate of the principle of profitability and other market
principles for communist economies. In 1963 Ulbricht adapted
Liberman's theories and introduced the New Economic System (NES),
an economic reform program providing for some decentralization in
decision making and the consideration of market and performance
criteria
(see Economic Policy and Performance
, ch. 3). The NES
aimed at creating an efficient economic system and transforming
East Germany into a leading industrial nation.
Under the NES, the task of establishing future economic
development was assigned to central planning. Decentralization
involved the partial transfer of decision-making authority from
the central State Planning Commission and National Economic
Council to the Associations of Publicly Owned Enterprises
(Vereinigungen Volkseigener Betriebe-- VVBs), parent
organizations intended to promote specialization within the same
areas of production. The central planning authorities set overall
production goals, but each VVB determined its own internal
financing, utilization of technology, and allocation of manpower
and resources. As intermediary bodies, the VVBs also functioned
to synthesize information and recommendations from the VEBs. The
NES stipulated that production decisions be made on the basis of
profitability, that salaries reflect performance, and that prices
respond to supply and demand.
The NES brought forth a new elite in politics as well as in
management of the economy, and in 1963 Ulbricht announced a new
policy regarding admission to the leading ranks of the SED.
Ulbricht opened the Politburo and the Central Committee to
younger members who had more education than their predecessors
and who had acquired managerial and technical skills. As a
consequence of the new policy, the SED elite became divided into
political and economic factions, the latter composed of members
of the new technocratic elite. Because of the emphasis on
professionalization in the SED cadre policy after 1963, the
composition of the mass membership changed: in 1967 about 250,000
members (14 percent) of the total 1.8 million SED membership had
completed a course of study at a university, technical college,
or trade school.
The SED emphasis on managerial and technical competence also
enabled members of the technocratic elite to enter the top
echelons of the state bureaucracy, formerly reserved for
political dogmatists. Managers of the VVBs were chosen on the
basis of professional training rather than ideological
conformity. Within the individual enterprises, the number of
professional positions and jobs for the technically skilled
increased. The SED stressed education in managerial and technical
sciences as the route to social advancement and material rewards.
In addition, it promised to raise the standard of living for all
citizens. From 1964 until 1967, real wages increased, and the
supply of consumer goods, including luxury items, improved.
Data as of July 1987
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