Germany Planned Economy
Source: The Library of Congress Country Studies
In the GDR, as in the other new "people's republics," the authorities' goal of abolishing private property and every trace of capitalism was to be implemented in several steps. By taking possession of all resources, as well as of the means of production and distribution, the socialist state hoped to be able to compete successfully with the capitalist West and finally demonstrate the superiority of the socialist system.
Patterned on the Soviet model, the East German economy was transformed into a state-controlled, centrally planned production and distribution system by 1948. Beginning in 1945, large tracts of real estate and factories were taken over by the state under reform programs for agriculture and industry. After the foundation of the GDR, these reforms were pursued with vigor. In 1949 the new state became a member of the Council for Mutual Economic Assistance (Comecon), which included all other Soviet satellite states and had been created in order to coordinate economic planning in socialist states worldwide.
The concept of multiyear plans was introduced with the First Five-Year Plan of 1951. It was intended to make up war losses and also make possible reparations payments to the Soviet Union. For this purpose, heavy industry was built up on a large scale. Production goals could not be reached, however, because of a chronic shortage of raw materials. The manufacture of consumer products was neglected completely.
The Second Five-Year Plan, started in 1956, aimed to complete the nationalization of all industrial concerns and the collectivization of agricultural enterprises. By the early 1960s, Kombinate (collective farms) accounted for about 90 percent of all farm production. Private farmers who resisted collectivization were arrested.
When production began to decline in the early 1960s, the SED introduced the so-called New Economic System of decentralized planning, which delegated some production decisions previously the prerogative of the central planning authorities to the Association of Publicly Owned Enterprises (Vereinigung Volkseigener Betriebe--VVB). The VVB was to foster specialized production within individual branches of industry, including the previously neglected production of consumer goods. Production declined even further, however, and it became increasingly evident to many East Germans that their "planned economy" had lost the economic battle with the capitalist West.
The Warsaw Pact and the National People's Army
The Warsaw Pact, which included the Soviet Union and all its satellite states in Eastern Europe, was created on May 14, 1955, just days after the FRG joined NATO. Like NATO, its Western counterpart, the Warsaw Pact guaranteed mutual military assistance to its members in the event of an attack and coordination of all member forces in a unified command. The existence of this command, which was situated in Moscow, allowed the Soviet Union to station troops on its allies' territories. Each member state was also obligated to establish its own armed forces. In the GDR, the People's Police (Volkspolizei, or Vopo) had created paramilitary units in 1952. The Soviet Union had unofficially helped form East German naval and air force units beginning in 1950.
On March 1, 1956, the National People's Army (Nationale Volksarmee--NVA) was officially created by transferring the existing paramilitary units of the People's Police to the NVA. The new army was officially under the leadership of the SED and under the direction of the newly created Ministry for National Defense. Initially, the NVA was to be staffed by volunteers only, but in 1962, when recruitment presented increasing difficulties for the SED and its support organizations, conscription was introduced. Before the construction of the Berlin Wall, conscription had been seen as impossible to enforce.
As early as the 1950s, the NVA became the most effective and best-equipped fighting force in the Warsaw Pact aside from the Soviet army. By the early 1980s, the NVA had an active strength of 167,000, of which approximately 60,000 were professional soldiers; there were approximately 3 million reservists. Most weapons were of Soviet origin.
Data as of August 1995
NOTE: The information regarding Germany on this page is re-published from The Library of Congress Country Studies. No claims are made regarding the accuracy of Germany Planned Economy information contained here. All suggestions for corrections of any errors about Germany Planned Economy should be addressed to the Library of Congress.