Introduction

Social experiments do exist. Divide a country in such a way as to create a rich mix of industries, of natural resources and of human capital in either part. Then isolate both halves from one another and expose them to entirely different sets of economic policies. After forty years of experimenting on various stages, just lift the barriers again and let markets decide on the final outcome.

This, in short, is what shapes the economic history of East Germany. It sets the frame for the questions to be asked of East Germany's economic record. In what respect were the starting conditions for East Germany different from those of the West? When did East Germany experience prosperity, and what were the principal moving forces behind it? And are there obvious economic reasons for the final demise of Communism on German soil?

Observers have often pointed to the general inefficiency and backwardness of Communism as the principal explanation. Though this is evidently true, it is also superficial. In history, backwardness itself has not necessarily been unstable; nor have phenomena like massive state intervention or the lack of political freedom.

This chapter is intended not to give easy answers, but to attempt to set a framework for asking these questions in a more specific way. There are two reasons for this limitation. First, existing literature on East German economic growth is only scattered and still quite small. In what follows, it will be attempted to draw some of the literature together and to review the bits of available evidence. Second, methodological problems arise in dealing with the growth record of a Communist economy.