East Germany, also known as the German Democratic Republic, was a country that lasted as a command economy - an economy in which production, investment, prices, and incomes are determined centrally by the government - as a satellite state under the USSR federation. This was one of the two states of ‘Germany’.
The other being the West Germany, otherwise known as the Federal Republic of Germany, existed as a capitalist economy - the economic system whereby monetary goods are owned by individuals or companies – as a puppet of the western allies, mainly influenced by the USA.
East Germany (GDR) - GDP (Per Capita): $82 Billion ($5,011) [1989]
The GDR, as it was a command economy, had its means of production almost entirely state owned. 90% of the economy was formed by industry and non-agricultural sectors, the remaining 10% was agriculture. The exports of the economy totaled to $30.7 billion and imports totaling to a $31 billion meaning an overall trade deficit of $0.3 billion.
A small thing to note was that USSR citizens everywhere else on average did not earn as much as the East Germans. This reason isn’t however some sort of favoritism towards East Germans, but rather the USSR government needed to show off the Eastern German side to both the West’s citizens and to their own citizens so that people don’t want to defect to the Western side. This meant that the East Germans were subjected to a lot of USSR aid which many countries that actually needed it didn’t receive, including medical aid which was all either for free or at a very low cost – much cheaper than the FDG; this was all done to make sure the Western capitalist side didn’t look better than them. As a result, the GDR had the higher standards of living than other Eastern Bloc countries or the Soviet Union. It was also the one of the most stable economies in Europe… which leads to the question – was it better than the West?
West Germany (FDG) - GDP (Per Capita): $1 Trillion ($19,038) [1991]
The FDR being a capitalist economy had pretty much full freedom regarding the economy and the decisions it took (except for military). Hence, they chose what to produce and who to sell to. As a result - West German exports amounted to $294 billion, compared with $250 billion for the United States, laying the foundation for the economic powerhouse Germany is today. Unlike America however West German imports accounted to $228 billion leading to a $66 Billion trade surplus.
From first glance the West look like they have an enormous advantage over their eastern counterpart, and in all fairness, they do – but they did have the economic giant of the USA pumping money into the economy – so much so in the 1980s that they had the same as the UKs GDP per capita all whilst losing half the country (which had most of the industries) and whilst having to pay reparations for World War 2.
The main time period that made the US really pump money into the FDG was during the Berlin Blockade (1948-1949). It was this that made the US realize that the USSR would completely takeover West Berlin/Germany if no aid was given to them. Hence the US spent vast sums of money to fix the country and to ensure West Berlin/Germany didn’t fall to the USSR. This eventually led them to pump a lot of money into West Germany to ensure security and capitalism so much so that compared to even before the war, the West Germans under the USA were living their best lives ever and had their highest ever standard of living.
Post Re-unification
The basics of any economy need money of some sort. In the two different economies they used two different currencies, the East German Mark, also known as Ostmarks, and the Deutschmarks, D-mark, for West Germany. The value the two currencies had didn’t matter until the 3rd of October 1990 when the two zones were officially merged together into a unified Germany. This is because they had to slowly phase out the Ostmarks – from the East - and bring in the already in use Deutschmarks, but Germany and the USSR still argued on the exchange rate for the new currency for the East Germans to buy the D-mark. Eventually it was agreed that for most small amounts one Ostmark would buy one D-mark. But what did that mean for East Germany?
Well, the new amount of money the East Germans had was a very new concept to them and very few had the idea of savings. This meant a lot of people would travel to the West side and buy a lot of things from there with their new currency – completely disregarding the East German companies. As a result, East German manufacturers lost almost all their customers overnight and because wages were now paid in Deutschmarks it meant East German products were no longer so cheap in comparison to West German goods. Experts at the time regretted later on that if the D-marks weren’t switched to that quickly, there could’ve been a very strong East Germany with a GDP per capita the same as its Western counterpart. But today, less than 30% of East Germans think reunification has been a success.
Who Wins?
It’s quite simple in the form that West Germany were ahead in every single differentiating factor regarding the economy. Even though the Soviet Union were meant to be communist, it was quite commonly agreed that East Germany had more homeless and starving – simply due to the low amount of funds the USSR injected into their side of Germany, even though they received the most out of any member. The sheer number of resources however taken from the GDR to be given to the other parts of the union was so large that East Germans were worse off after 40 years of Soviet rule in 1990 than before in 1930.
