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Germany (East)

 
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East Germany

THE CONSUMER IN THE EAST GERMAN ECONOMY

The East German standard of living has improved greatly since 1949. Most observers, in both East and West, agree that in the 1980s East Germans enjoyed the highest standard of living in Eastern Europe. Major improvements occurred, especially after 1971, when the Honecker regime announced its commitment to fulfilling the "principal task" of the economy, which was defined as the enhancement of the material and cultural well-being of all citizens. Problems remained, however. In the mid-1980s, light industry and consumer goods industries were not performing as well as the economy as a whole, although according to official statistics the net monetary income of the population and retail trade turnover were growing at around 4 percent.

Since the inception of the regime, the monthly earned income of the average East German has increased steadily in terms of effective purchasing power. According to the 1986 East German statistical yearbook, the average monthly income for workers in the socialized sector of the economy increased from 311 GDR marks in 1950 to 555 GDR marks a decade later, 755 GDR marks in 1970, and 1,130 GDR marks in 1985. Because most consumer prices had been stable during this time, the 1985 figure represented a better than threefold increase over the past thirty-five years.

These figures do not mean very much by themselves, but they demonstrate that the upward trend has been consistent and positive. In 1986 at official exchange rates, 1,000 GDR marks amounted to just over US$500, only enough for a very modest subsistence in the United States. But in East Germany, the GDR mark can purchase a great number of basic necessities because the state subsidizes their production and distribution to the people. Thus housing, which consumes a considerable portion of the earnings of an average family in the West, constituted less than 3 percent of the expenditures of a typical worker family in 1984. Milk, potatoes, bread, and public transportation were also relatively cheap. Many services, such as medical care and education, continued to be available without cost to all but a very few. Even restaurant meals, concerts, and postage stamps were inexpensive by Western standards. In the early and mid1980s , however, the government began to signal an intention to reduce somewhat the number of items subsidized by the state, which suggested that some price increases were in store for East German consumers.

If one sought "luxury" items, such as stereos, automobiles, color televisions, and freezers, or even coffee and brandy, 1,000 GDR marks would not go very far, however. In the mid-1980s, prices for clothing (except for the most basic) and linens were relatively high. Products with a special claim to quality or stylishness, sold primarily in so-called Exquisit or Delikat shops, were also very expensive.

In the mid-1980s, East Germans had no difficulty obtaining meat, butter, potatoes, bread, clothing, and most other essentials. Consumers, admittedly, did have to spend considerable time shopping for these items. Fruits and vegetables were more difficult to obtain than basic foodstuffs, particularly in the off-season, and their quality was often inferior to accepted standards in the West.

With regard to housing, another necessity of life, the East German government did not take serious action to provide modern facilities until the late-1960s. The devastation of World War II had created tremendous housing problems in the Soviet occupation zone, particularly in the cities. Beginning in the late 1960s, the government initiated a major campaign to provide modern housing facilities; it sought to eliminate the longstanding housing shortage and modernize fully the existing stock by 1990. By the early 1980s, the program had provided nearly 2 million new or renovated units, and 2 million more were to be added by 1990. As of 1985, progress in this area appeared to be satisfactory, and plan targets were being met or exceeded. Most governmentbuilt housing consists of high-rise apartments, often neither spacious, diverse, nor pleasing to the eye. Nevertheless, such apartments are functional, and they usually provide easy access to schools, transportation, restaurants, playgrounds, post offices, and supermarkets. In addition to this kind of housing, individuals can build their own homes (outside of East Berlin). About 15 percent of the units constructed up to 1981 were privately built and owned.

In the mid-1980s, the availability of durable consumer goods and luxuries remained less satisfactory, though it was improving. Demand for automobiles as well as for such items as washing machines and refrigerators was greater than the supply available; however, improvement over the years had been steady. In 1985 about 99 percent of the households owned refrigerators, compared with only about 26 percent in 1965. For washing machines, the numbers for the same years had increased from 28 percent to 92 percent; for television sets, the numbers had increased from 49 percent to 93 percent. Automobiles were more difficult to obtain, and delivery could come after as many as ten years of waiting. In 1985 about 46 percent of the households owned an automobile, and demand had not been satisfied. The quality of the most common automobile, the domestically produced Trabant, was not up to world market standards.

Services are another important area of consumer welfare in any industrialized society. The term is used here in a broad sense to include retail trade, public transportation, and communications, as well as barbers, plumbers, and automobile service stations. In the mid-1980s, East German consumers continued to complain of both a shortage of workers in the service sector and deficient quality. Automobile repair facilities were inadequate, for example, as were supplies of spare parts. Although again improvements had been made--the number of supermarkets and other stores, restaurants, and service centers had risen significantly by the mid-1980s--it seemed clear that meeting the needs of an increasingly prosperous society would remain a problem in East Germany for the foreseeable future. In the 1980s, the government acknowledged the existence of the problem and encouraged specialized private craftsmen and traders to help fill the void.

East Germans compare their own overall situation as consumers with that of other East Europeans and are aware of their favored economic position in the Soviet bloc. However, they also compare themselves with the West Germans. A comparison between an East German and West German household's normal purchasing capacity has limited value, unfortunately, because the selection of goods available is vastly greater in West Germany and the material inputs and technical characteristics of West German products are usually of higher quality. In 1983, however, the Institute for Economic Research in West Berlin undertook one of its periodic studies in which the purchasing power of the GDR mark was measured against that of the West German D-mark (officially they are exchanged at 1 GDR mark per 1 D-mark). Typical "market baskets" of goods purchased in the two countries were the basis of comparison. When the consumption patterns of the East Germans served as the basis for deciding what should go into the market basket, the GDR mark purchased more than the D-mark. That is, were West Germans to purchase exactly the same things in the same proportions as their East German counterparts, the West Germans would have to pay more (24 percent more for an average worker's household with four members). If, however, West German consumption patterns were used as the basis for the comparison, the results would be reversed (the GDR mark then would purchase only 87 percent as much). The institute concluded that as a whole, the GDR mark could be considered to have 106 percent the value of the D-mark in purchasing power, an impressive gain over the 76 percent estimated for 1960, 86 percent for 1969, and 100 percent for 1977. Although in many ways the West German consumer had a more favorable position, with regard to both consumer options and income, the analysis clearly invalidated the view commonly held in the West that the GDR mark had very little purchasing power.

The East German leadership acknowledged, as of 1985, that the quantity, range, and quality of many goods and services offered to the East German consumer needed improvement and that the public's desires needed to receive more attention. It should also be noted, however, that East German press, television, and radio reports frequently stressed the insecurity of life in the consumer society of West Germany. West German television broadcasts themselves did not convey an idyllic picture of consumer well-being, containing as they did substantial amounts of self-criticism and discussions of West German weaknesses.

Data as of July 1987

Germany [East] - TABLE OF CONTENTS

  • The Economy


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