NATIONAL INTELLIGENCE SURVEY 13A; EAST GERMANY; THE ECONOMY

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WARNING
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Subsections and graphics are individually classified 1
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tions are:
(U /OU) Unclassified /For Official Use Only
(C) Confidential
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ti
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T"
East
GERMANY
CONTENTS
This chapter supersedes the economic coverage
in the General Survey dated February 1970.
A. Economic appraisal 1
B. Sectors of the economy
3
1. Agriculture, fisheries, and forestry
3
a. Climate and soils
3
b. Production and consumption
4
e. Problems and policies
6
d. Fisheries and forestry
8
2. Fuels and power
9
a. Coal and coke
9
b. Petroleum and natural gas
10
c. Electric power
10
SECRET
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3
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Page
Page
3. Metals and minerals
12
a. Ferrous metals
13
b. Nonferrous metals
14
4. Manufacturing and construction
15
a. Metal products
17
b. Chemicals
18
c. Light industry including textiles)
19
d. Agricultural processing
19
e. Construction
20
5. Domestic trade
21
C. Policy and development 24
1. Policy 24
2. Development 25
3. Government finance 26
D. International economic relations 28
1. Foreign trade 28
a. Policy 28
b. Volume and direction 30
c. Commodity composition 31
2. Balance of payments 31
Glossary 33
FIGURES
if
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Fig. 1
Growth of GNP and industrial ana
agricultural production chart)
2
Fig. 2
Gross fixed capital investment chart)
2
Fig. 3
GNP, by sector of origin chart)
3
Fig. 4
Supply position of basic materials
(table)
4
Fig. 5
Grain harvesting photo)
5
Fig, 6
Land use (chart)
5
Fig. 7
Land use pattern (nap)
6
Fig. 8
Principal agricultural and animal
19
Fig. 23
products (table)
7
Fig. 9
Livestock numbers table)
7
Fig. 10
Agricultural collectivization table)
8
Fig. 1_
Industrial concentrations map)
8
Fig. 12
Fuels and electric power table)
9
Fig. 13
Electric power consumption (table).
11
Fig. 14
Luebbenau powerplants photo)
12
Fig. 15
Saalfeld Hohenwarte powerplant
28
Fig. 29
(photo)
12
Fig. 16
Output of metals, minerals, and
construction materials (table)
13
if
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Fig. 17
Distribution of industrial production
(table)
15
Fig. 18
Distribution of industrial employment
(table)
16
Fig. 19
Output of machinery and equipment
(table)
17
Fig. 20
Shipbuilding photo)
18
Fig. 21
Tractor plant (photo)
18
Fig. 22
Output of chemicals and rubber
(table)
19
Fig. 23
Output of light industry products
(table)
20
Fig. 24
Large -unit construction photo)
21
Fig. 25
Growth of retail sales table)
22
Fig. 26
Retail trade in commodity groups
(table)
23
Fig. 27
Composition of retail sales table)
23
Fig. 28
Consolidated state budgets table)
28
Fig. 29
Value of foreign trade (table)
30
Fig. 30
Geographic distribution of foreign
trade (chart)
30
Fig. 31
Commodity composition of imports
and exports (table)
31
if
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Pcrro0ornicol plane, Lvwna e1 .0 OUI
A. Economic appraisal (C)
Dv a population lc�e�l Illat ha, 1well +t:lhh al
,limit 1; million +iuev 141ii11arid a labor font lll:tl ha,
aCllli {II\ (II�(�Inle'el +liOltl Ills' gms% n alltin:Il linnIted
is[ Ihe� (:e�rrri:ln D(�ennc-ralic� BVIMINir ((:1781 ha riu�le
al a w%pt-c�talilt� V- peer ear rate� ,itl('I� lh(� e -0111nueia-
+Iel. clel .n of Iliv (�url\ 19611', (Fhvirc 1 1 In 1972. the
Ceenrltr\ I' \c:r, r +tinla(rd it ahnul 81Li.1 rlailhisrl
(1971 Ilrit,,I or 52.650 per c�apil.a On .1 pc�r cap11.1
bill' ,K 1 ?a,l G renan (AP Ian+ riwn :1t .0imil Ihe� %.rtnt
rake :l drat of %%'t-%t (:rrrnan. oml ha, re�en:lule�(l it .1
le" +lil:htl\ Ie than thwe�funrth, thud elf '%t
(:PrmawL I hr IEa (:(�rulatt pe�r,onal Crin
le \c I i, re�lali\e�I\ em. Itmvr, hei,\r\rr than thal A
%%'t-%t (;e�timm%. itrre� imc +luu�rll la k-, .1 largur
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L 4
1951 -S5
56-60
6155
66-70
1951-55
56-60
6155
66-70
1951-55
56-60
6155
66-70
Average Annual Rate of Growth
(including salt, sulfur, potash, and fluorspar), and
recently discovered and developed natural gas deposits
of still uncertain size. Before World War II the eastern
German area depended mainly on the western area for
hard coal and ferrous metals. There was also a large,
complex intra- German trade in manufactures. Since
the war, the U.S.S.R. has been the main supplier of
materials to the GDR, although in recent years the
regime has turned to the West, especially to West
Germany, for materials, such as chemicals and
nonferrous metals, as well as for industrial plant and
equipment. The country's overall supply position in
several basic materials is shown in Figure 4.
The economy still bears the scars of being abruptly
cut off from West Germany and other Western mar-
kets at the end of World War 11. The Communist
countries, with which the GDR has conducted about
three fourths of its foreign trade, could not replace
either the materials or the industrial cooperation
formerly supplied by West Germany, nor offer a
comparable market for specialized East German
industries. The GDR was forced to build up new high
cost industries to meet Soviet requirements and to help
replace West German deliveries. These new
industries chiefly mining, ferrous metallurgy,
II
FIGURE 1. Estimated growth rates of GNP and
industrial and agricultural production (U /OU)
of GNP than it does in West Germany. Investments
have risen rapidly, especially since 1963 (Figure 2).
The GDR is the most highly industrialized country
in Eastern Europe; the industrial sector accounts for
more than one -half of its net output of goods and
services (Figure 3). The share of GNP produced by the
industrial sector has risen steadily in the postwar
period, chiefly at the expense of agriculture, while
communications (including transportation) and trade
have each accounted for a relatively stable share of the
total. Although agriculture and forestry have declined
in relative importance, the agricultural sector still
supplies the bulk of the domestic food requirements.
East Germany is deficient in many of the key
natural resources required by modem industry. It has
only small reserves of iron ore (low grade) and small
reserves of hard coal and crude oil. Its main resources
are brown coal, uranium ore, nonmetallic minerals
2
Index (IM�_100)
t;000
!00
X00
.100
goo
91to
400;
aoo
loo
1
'tea
r;.
;Preliminary data
FIGURE 2. Index of gross fixed capital
investment (U /OU)
H
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4
TOTAL GNP
1007, USS41A Billion*
Services
Trade
Transportation and communications
Construction
Agriculture and forestry
Industry
(1
1
*At 1970 prices
FIGURE 3. GNP, by sector of origin, 1971 (U /OU)
shipbuilding, and heavy engineering� provided the
main sources of economic growth until the early
1960's. East Germany's traditional export industries,
producing consumer goods and light machinery,
lagged for lack of supplies, markets, and moderniza-
tion.
The GDR economy has been undergoing partial
modernization since the early 1960's, as a result of the
availability of large amounts of Soviet crude oil, other
changes in supply and demand in the Soviet -East
European market, and increased purchases of Western
machinery on credit. In the late 1960's, the Ulbricht
regime tried to accelerate this transformation by
pushing output and investment in industries
producing goods and services to meet consumer
demand, but this lopsided, overambitious program
bogged down in 1970 in the wake of two hard winters
and poor harvests. In the fall of 1970 the Politburo
overruled Ulbricht and reversed priorities in order to
ease widespread shortages, especially of fuels, power,
and machinery components, and to reduce mounting
trade deficits. Investment growth was curtailed and
investment expenditures were diverted to the coal and
power industries. These decisions formed the basis of
the Honecker regime's policies in 1971 -72.
Indications of another policy shift appeared at the
end of 1971 when the regime acknowledged the
importance of increasing the domestic supply of
industrial consumer goods. Implementation of the
policy change began in 1972 and has been reflected in
the economic plan for 1973. Attempts to appease the
population with more goods has parallels elsewhere in
Eastern Europe; everywhere expectations have risen
faster than supply. The East Germans are also
determined to offset the general disappointment of the
populace over continued, reinforced isolation from
West Germany. This emphasis on increasing
consumption has its cost �a large foreign trade deficit
with the West in 1972 and another large deficit
expected in 1973.
B. Sectors of the economy
1. Agriculture, fisheries, and forestry (U /OU)
a. Climate and soils
The East German terrain is a nearly flat to rolling
plain, bordered in the southwest and south by a
narrow belt of hills. The plain is extensively cultivated
(Figure 5), although the soils, except for one small
area, are low in fertility, requiring large amounts of
fertilizer and good management. Forests are scattered
over most of the area, but timber production is
concentrated in the southern highlands.
The climate is generally favorable for agricultural
production. It is subject to both oceanic and
continental influences, but the continental influences
from the east usually predominate. Temperatures are
less severe than those at comparable latitudes in North
America. Summer temperatures generally rise to
between 70 (F.) and 75 during the day, while
minimum temperatures at night range between 50
and 55 Greater temperature variations occur in the
winter. Precipitation is not abundant, averaging
between 20 and 30 inches annually (20 and 24 inches
over most of the agricultural areas), but it is
distributed fairly evenly throughout the year. The
frequent precipitation and a low rate of evapo-
transpiration, resulting from the relatively cool
temperatures and the small number of sunny days,
insure sufficient moisture for the cultivation of most
crops.
About 58% of the land of East Germany is suitable
for agriculture (43% arable and 15% in meadows and
pastures), 27% is in forests, and 15% is agriculturally
nonproductive (Figure 6). Grain is sown on 50.2% of
the cropland, well below the prewar figure. Principal
grain crops are rye and wheat, but barley and oats are
also grown. Potatoes, also a major crop and used both
as a staple for human consumption and as feed, are
planted on 14.2% of the cropland. The use of land for
3
0
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4
r
FIGURE 4. Supply position of selected basic materials, 1970 (U /OU)
(Thousand metric tons except as indicated)
na Data not available.
*Most of the domestic output is not suitable for metallurgical coke, but most of the imports are.
**All production is from imported phosphate rock.
forage (11.7 and industrial crops (7.5 has
increased significantly since the war, largely by
diversion of land formerly under grain. Areas of most
intensive cultivation generally coincide with the
wheat, sugar beet, and corn growing areas, primarily
in the southwest quarter of the country (Figure 7).
b. Production and consumption
Agricultural production was just recovering its
prewar levels when the regime forcibly completed
collectivization in the spring of 1960. The disruptive
effects of this policy combined with bad weather to
reduce output in 1961 and 1962. In 1963 and, to a
lesser extent, in 1964, mediocre harvests and unusually
poor crops in the Soviet Union (usually the principal
source of East German grain imports) forced East
Germany into the world grain market for the first time.
In the late 1960's production rose as a result of great
increases in inputs (fertilizers, pesticides, etc.) and the
introduction of improved grain varieties. In 1970 and
1971, however, serious weather difficulties �a long
cold wintc r in 1970 and drought in 1971 �again
reduced output. Production of grain was at a near
record in 1971, reflecting the superior resistance to
pests and drought of the new Soviet wheat types, but a
summer drought reduced potato and industrial crop
production to levels lower than those of previous years.
4
Average annual output of grains rose only slightly
after the war, but it increased more rapidly in the late
1960's with the introduction of new, improved
varieties. Production of sugar beets and oilseeds
increased sharply during the 1962 -68 period, but since
then it has experienced a declining trend. The
combination of a labor shortage and high production
costs has caused a gradual decline in the area devoted
to these crops. Production figures for selected
agricultural products are shown in Figure 8.
Livestock is becoming increasingly important in the
East German agricultural economy. Animal products
account for over half of total gross agricultural output;
meat and dairy products output is well above prewar
levels. Numbers of cattle and hogs (Figure 9), are
above the 1956 -60 average. Because of improved
feeding efficiency, the reduced number of horses, and
large imports of high protein concentrated feed,
production of meat and dairy products has risen more
rapidly than animal numbers, reflecting gains in
animal productivity. A major problem is the slow
growth in beef cattle numbers needed to meet
domestic demand for meat.
Although the area tl.at is now East Germany was a
net exporter of food (if t: ade with the rest of Germany
is included) before the H ar, domestic production now
supplies only 76% of East German food consumption.
0
3
9
a
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IMPORTS AS
APPARENT
PERCENT OF
PRODUC-
CONSUMP-
APPARENT
TION
IMPORTS
EXPORTS
TION
CONSUMPTION
Crude oil
150
10,315
0
10,465
99
Hard coal (bituminous and an-
thracite)
1,000
7,927
0
8,927
89
Hard coal coke*
2,572
3,123
Insig
5,695
55
Brown coal
260,582
0
0
260,582
0
Iron ore (Fe content)
105
1,490
0
1,595
93
Rolled steel
3,406
3,494
396
6,504
54
Phosphate fertilizers (P
**430
24
0
454
6
Grains
6,500
3,421
326
9,595
25
Wool (grease basis)
7
20
0
27
71
Cotton
0
106
0
106
100
Lumber (1,000 ms)
7,404
1,042
96
8,350
12
Aluminum (ingot)
63
94
0
157
60
Copper, refined
38
na
0
na
na
Manganese ore (Mn content)
0
68
0
68
100
Chrome ore (Cr content)
0
42
50
42
100
Pig iron
1,994
812
0
2,806
29
Synthetic rubber
118
0
55
63
Electric power (million kw.- hr.)
67,650
886
780
67,756
1
na Data not available.
*Most of the domestic output is not suitable for metallurgical coke, but most of the imports are.
**All production is from imported phosphate rock.
forage (11.7 and industrial crops (7.5 has
increased significantly since the war, largely by
diversion of land formerly under grain. Areas of most
intensive cultivation generally coincide with the
wheat, sugar beet, and corn growing areas, primarily
in the southwest quarter of the country (Figure 7).
b. Production and consumption
Agricultural production was just recovering its
prewar levels when the regime forcibly completed
collectivization in the spring of 1960. The disruptive
effects of this policy combined with bad weather to
reduce output in 1961 and 1962. In 1963 and, to a
lesser extent, in 1964, mediocre harvests and unusually
poor crops in the Soviet Union (usually the principal
source of East German grain imports) forced East
Germany into the world grain market for the first time.
In the late 1960's production rose as a result of great
increases in inputs (fertilizers, pesticides, etc.) and the
introduction of improved grain varieties. In 1970 and
1971, however, serious weather difficulties �a long
cold wintc r in 1970 and drought in 1971 �again
reduced output. Production of grain was at a near
record in 1971, reflecting the superior resistance to
pests and drought of the new Soviet wheat types, but a
summer drought reduced potato and industrial crop
production to levels lower than those of previous years.
4
Average annual output of grains rose only slightly
after the war, but it increased more rapidly in the late
1960's with the introduction of new, improved
varieties. Production of sugar beets and oilseeds
increased sharply during the 1962 -68 period, but since
then it has experienced a declining trend. The
combination of a labor shortage and high production
costs has caused a gradual decline in the area devoted
to these crops. Production figures for selected
agricultural products are shown in Figure 8.
Livestock is becoming increasingly important in the
East German agricultural economy. Animal products
account for over half of total gross agricultural output;
meat and dairy products output is well above prewar
levels. Numbers of cattle and hogs (Figure 9), are
above the 1956 -60 average. Because of improved
feeding efficiency, the reduced number of horses, and
large imports of high protein concentrated feed,
production of meat and dairy products has risen more
rapidly than animal numbers, reflecting gains in
animal productivity. A major problem is the slow
growth in beef cattle numbers needed to meet
domestic demand for meat.
Although the area tl.at is now East Germany was a
net exporter of food (if t: ade with the rest of Germany
is included) before the H ar, domestic production now
supplies only 76% of East German food consumption.
0
3
9
a
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Production has increased only moderately, and
consumption has risen rapidly, particularly in the
19-Ws. The East Ge; man diet, the hest in Eastern
Europe, now compares favorably with that of West
Germany in terms of calories, but the quality of the
East German diet is still inferiur. Average per capita
colnsumption is estimated at over 3,000 calories per
day. Since 1960 the increase in per capita Ftx}d
consumption, has slowed, actually fulling slightly in
the early 1960's, bud the quality of the East German
diet has Lnntinued :o improve. Increased imports of
tropical fruit, coffee, and cocoa, and even hotter and
meat in some rases, have been unable to keep pace
with rising demand.
Imports of other agricultural commodities have also
risen. Since the war East Germany has imported about
one quarter of its grain from the Soviet Union.
Beginning in 1962, when poor Soviet crops and bad
East German harvests forced the East Germans into
the free market, imports from the West, particularly
TOTAL
LAND 41ft "van Room
AgricultursHy nonprodoWet
us
Araby
417 IoW
1� -r�r.
31'
Agriculture!
J, J'�
iA rid
r ..1
,J
lcs
pert"*
dlsrrkuipn
Meadows, paassrnn, aoc.
FIGURE b. land use, 1971 (U)DUI
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5
FIGURE 5. Harvesting grain in a leading agricultural
area in the southwest (U t:>U)

FIGURE 7. Land use pattern (U/OU)
501852 7.73
corn and sorghum, have provided significant shares of
East German requirements. Western grain imports
reached a peak in 1970 -71. High protein feed
supplements, like oilcake, are also being imported in
larger quantities each year.
c. Problems and policies
The postwar growth of agricultural production has
been seriously impeded by the regime's insistence on
agricultural collectivization and by its failure to
allocate the resources necessary to support large -scale
farming. Immediately after the war most large
landholdings were confiscated, and the land was
redistributed to small landholders and landless
peasants. During the 1950's pressure for collectiviza-
tion increased, especially through the Machine
Tractor Stations, which controlled most major
agricultural equipment. This campaign made rapid
progress in the late 1950's and was suddenly forced to
completion in the spring of 1960. The land held by
collectives rose from 40% of the total in 1959 to 84% in
1960 (Figure 10). The regime then paused to
consolidate the new collectives and to overcome the
disruptive effects of the forced collectivization. Little
pressure was exerted to transform "lower level"
6
cooperatives, in which only the agricultural land is
held in common, into "higher level" ones, in which all
!and and livestock are collectively held. Since 1966,
however, the regime has been pushing intercoopera-
tive planning, management, and investment, and the
joint use of farm machinery in the hope of increasing
specialization and the efficient use of farm resources.
In 1971 the land held by collectives amounted to
about 86% of all agricultural land. The remainder
consisted of private holdings, including the private
plots owned by members of state and cooperative
farms.
The East German regime apparently did not
anticipate the disruption caused by the collectiviza-
tion campaign, the continued passive resistance of the
peasants, and the drop in production in the early
1960's. The Central authorities did not take positive
action to counter the resistance until 1963, when they
introduced a complex system of production bonuses,
which was subsequently modified and expanded
frequently to reflect the regime's changing priorities.
Production bonuses were originally designed to
encourage livestock and dairy product output, but
they have been extended to feed and industrial crops.
I
`s
is
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Most intensive agricu
(primarily wheat, suf
and corn)
Mixed intensive and e
agriculture (includinf
and potatoes)
Mixed extensive agrict
pasture, and forest
Permanent pasture
Forest
FIGURE 7. Land use pattern (U/OU)
501852 7.73
corn and sorghum, have provided significant shares of
East German requirements. Western grain imports
reached a peak in 1970 -71. High protein feed
supplements, like oilcake, are also being imported in
larger quantities each year.
c. Problems and policies
The postwar growth of agricultural production has
been seriously impeded by the regime's insistence on
agricultural collectivization and by its failure to
allocate the resources necessary to support large -scale
farming. Immediately after the war most large
landholdings were confiscated, and the land was
redistributed to small landholders and landless
peasants. During the 1950's pressure for collectiviza-
tion increased, especially through the Machine
Tractor Stations, which controlled most major
agricultural equipment. This campaign made rapid
progress in the late 1950's and was suddenly forced to
completion in the spring of 1960. The land held by
collectives rose from 40% of the total in 1959 to 84% in
1960 (Figure 10). The regime then paused to
consolidate the new collectives and to overcome the
disruptive effects of the forced collectivization. Little
pressure was exerted to transform "lower level"
6
cooperatives, in which only the agricultural land is
held in common, into "higher level" ones, in which all
!and and livestock are collectively held. Since 1966,
however, the regime has been pushing intercoopera-
tive planning, management, and investment, and the
joint use of farm machinery in the hope of increasing
specialization and the efficient use of farm resources.
In 1971 the land held by collectives amounted to
about 86% of all agricultural land. The remainder
consisted of private holdings, including the private
plots owned by members of state and cooperative
farms.
The East German regime apparently did not
anticipate the disruption caused by the collectiviza-
tion campaign, the continued passive resistance of the
peasants, and the drop in production in the early
1960's. The Central authorities did not take positive
action to counter the resistance until 1963, when they
introduced a complex system of production bonuses,
which was subsequently modified and expanded
frequently to reflect the regime's changing priorities.
Production bonuses were originally designed to
encourage livestock and dairy product output, but
they have been extended to feed and industrial crops.
I
`s
is
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FIGURE 8. Output of principal agricultural and animal products (U /OU)
(Thousands of metric tons)
1966 1967 1968 1969 1970 1971
Wheat and rye 3,163 3,998 4,313 3,531 3,615 4,244
Barley and oats 2,229 2,772 2,985 2,908 2,484 3,093
Potatoes ...................12,823 14,065 12,639 8,832 13,054 9,412
Sugar beets 6,611 6,948 6,998 4,856 6,135 5,128
Vegetable oilseeds (rape) 208 270 263 164 180 '196
Meat 906 946 982 893 972 996
Butter 206 209 220 215 216 225
Milk (whole) 6,728 6,904 7,227 7,232 7,091 7,150
i Sugar (raw)t 671 681 5`18 562 587 640
f
Wool (grease basis) 8.3 8.1 8.0 7.9 7.3 7.3
*Official production data do not make sufficient allowance for dockage or adjustment to a
standard moisture content. Such deductions would range from 5% to 10 depending upon harvest
conditions in a given year.
**Trimmed carcass weight of cattle and hogs, excluding poultry.
*3.5% butter fat, cow milk only.
tIncluding raw sugar imported for refining.
Procurement prices for many commodities have been
raised, and price differentials for quality have also
been introduced.
In the 1960's the regime also introduced programs
to improve management and resource use and
abandoned obviously impossib!e plan goals. Since
1963 the collectives have been able to purchase
equipment previously available only through the
Machine Tractor Stations. These changes have not
overcome the results of forced collectivization, which
are reflected in high cost of increasing agricultural
output, but it has permitted a decline in the farm
labor force, and productivity per unit of land remains
the highest in Eastern Europe.
Although agriculture still occupies a low position in
the regime's priorities, the East German leadership has
apparently accepted the fact that inputs into
agriculture must be improved either quantitatively or
if production is to increase. Industrial
Me to agriculture have increased steadily
FIGURE 9. Livestock numbers (U /OU)
(Thousands
since the early postwar period and are well above
comparable levels in other Eastern European
Communist countries. East Germany has by far the
highest input of mineral fertilizers per hectare of
agricultural land in Eastern Europe (246 kilograms,
nutrient content). Supplies of farm machines -such as
tractors, harvesters, and combines -are also relatively
high, but poor maintenance and unavailability of
many spare parts have in many cases prevented their
full utilization. Investment in agriculture has also
increased, but not sufficiently to support the large
scale farming that the regime favors. The share of
agriculture in total investment rose from 13.3% in
1965 to 15.5% in 1968. Since then investments in
industry have absorbed larger amounts of investment
funds, and the share of agriculture has again fallen
to 13.0% in 1971.
The agricultural labor force has continued to
decline at a rate faster than the labor force as a whole,
largely due to competition from relatively high paying
na Data not available.
*As of 30 November or 3 December census.
7
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1956 -60
1961 -65
AVERAGE
AVERAGE
1966
1967
1968
1969
1970
1971
Cattle..........
4,150
4,623
4,918
5,018
5,109
5,171
5,190
5,293
Cows..........
2,139
2,133
2,196
2,188
2,165
2,167
2,163
2,174
Hogs...........
8,137
8,767
9,312
9,254
9,523
9,237
9,684
9,995
Sheep..........
2,031
1,911
1,928
1,818
1,794
1,696
1,598
1,607
Goats..........
614
377
278
236
204
158
135
na
Horses.........
576
338
250
219
188
148
126
na
na Data not available.
*As of 30 November or 3 December census.
7
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-a flflla rfl/Z l7 V
N
it
FIGURE 10. Progress of agricultural collectivization (U /OU)
(Percent of total arable land)
jobs in the cities. There is little that the regime has
been able to do to reverse the trend, but it is making
an attempt to improve the quality of the remaining
agricultural labor force by training those who stay on
the farms and by trying to attract more young people
into agricultural careers. Many students, soldiers, and
city workers are "volunteered" to work on the
harvests, but they are generally not able to
compensate for the loss of experienced labor formerly
provided by family members of independent peasant
households. (The overall manpower situation of East
Germany is discussed in detail in The Society chapter
of this General Survey.)
d. Fisheries and forestry
As a result of substantial and successful efforts to
increase the fish catch since the war, the domestic
catch now supplies most consumption requirements.
From 1960 to 1971 the catch rose from 114,000 tons to
331,000 tons. Of the latter total, all but 14,000 tons
was caught by the coastal and high -seas fishing fleets.
Forestry, which was an export industry in pre -World
War II years and in the early postwar period, now
supplies only about 85% of domestic, demand for wood
and wood products. Imports of lumber and pulpwood
increased by at least 65% since 1960, to satisfy rising
X
Circles and segments indi
relative importance
Basic materials
Mining, metallurgy, power, cl
icals and fertilizers, rubber,
ing materials
Metal working
Heavy machinery, traneporti
ment, shipbuilding, electrical
precision and optical equipn
Q Light industry
Taztiles, clothing, wood, pap,
glass, ceramics
Food industry
FIGURE 11. Major industrial concentrations (U /OU)
501553 7.73
8
A
t
V
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1955
1960
1965
1970
1971
Socialist
27.3
9$.5
93.9
94.$
94.3
Of which:
State farms
4.4
6.3
6.7
7.0
7.1
Cooperatives
18.6
84.4
85.9
86.0
86.4
Of which:
"Higher level" (Type III)
16.5
52.7
58.7
72.0
75.5
Private
7$.7
7.5
6.1
5.8
5.7
Total
100.0
100.0
100.0
100.0
100.0
jobs in the cities. There is little that the regime has
been able to do to reverse the trend, but it is making
an attempt to improve the quality of the remaining
agricultural labor force by training those who stay on
the farms and by trying to attract more young people
into agricultural careers. Many students, soldiers, and
city workers are "volunteered" to work on the
harvests, but they are generally not able to
compensate for the loss of experienced labor formerly
provided by family members of independent peasant
households. (The overall manpower situation of East
Germany is discussed in detail in The Society chapter
of this General Survey.)
d. Fisheries and forestry
As a result of substantial and successful efforts to
increase the fish catch since the war, the domestic
catch now supplies most consumption requirements.
From 1960 to 1971 the catch rose from 114,000 tons to
331,000 tons. Of the latter total, all but 14,000 tons
was caught by the coastal and high -seas fishing fleets.
Forestry, which was an export industry in pre -World
War II years and in the early postwar period, now
supplies only about 85% of domestic, demand for wood
and wood products. Imports of lumber and pulpwood
increased by at least 65% since 1960, to satisfy rising
X
Circles and segments indi
relative importance
Basic materials
Mining, metallurgy, power, cl
icals and fertilizers, rubber,
ing materials
Metal working
Heavy machinery, traneporti
ment, shipbuilding, electrical
precision and optical equipn
Q Light industry
Taztiles, clothing, wood, pap,
glass, ceramics
Food industry
FIGURE 11. Major industrial concentrations (U /OU)
501553 7.73
8
A
t
V
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Y!}�$';;,! ,ter ".'T�'r- "'y`sfr,+"rra ice:"` e ^r .yrvph {ar,r yr'd M%2. +s{^'Ia^ ^"tcwrw >a!n r a�r .,7 m u.a.;nr "i'!gt` 'f`;'q)kp'S:'uaxory r s ragftw ,'t. i T "�'C :4M
a
S
domestic requirements without resorting to overcut-
ting of the forests. As a result, production of furniture,
toys, paper, and other wood -based products rose
rapidly, while domestic timber output fell from 14
million cubic meters in 1951 to a low of about 6.2
million cubic meters it 1966, probably below new
growth. Since 1966, however, the output of timber has
again increased.
2. Fuels and power (C)
Brown coal, the historical foundation of East
German industry and still the source of 75% of its
primary energy, is steadily losing ground to crude oil
and natural gas as a source of power. Brown coal is
used to generate 84% of the electric power produced,
but it has been displaced by crude oil as a source of
petroleum products and other petrochemicals.
a. Coal and coke
Brown coal mining is centered in the southern part
of East Germany, around the cities of Halle, Leipzig,
and Cottbus (Figure 11). Open -pit mining technique
is used in all brown coal mining; thus, it is highly
mechanized and requires small amounts of labor,
Most raw brown coal ;s consumed by electric
powerplants located at or near the mines. A large, but
decreasing, percentage of the output is made into
briquettes, used principally for household space
heating, but also to a limited extent by railroads,
electric powerplants, gasification plants, and chemical
producers. Although proved reserves are large (about
25 billion tons), the cost of developing them is high
and rising sharply, as the regime has discovered in the
long delayed and still- troubled Schwarze Pumpe
project in Hoyerswerda. About 4 cubic meters of
overburden must now (1971) be removed for each ton
of brown coal produced, as contrasted with 2.3 cubic
meters in 1955 and about 3 cubic meters as recently as
the mid- 1960's. According to one East German report,
FIGURE 12. Output of fuels and electric power (U /OU)
(Thousand metric tons except as indicated)
the ratio of overburden to coal output is over six -to-
one in more than half the mines. Because of this high
cost, the phasing out of marginal mines was being
considered in the mid- 1960's, and output actually fell
in 1965 for the first time since the war. Serious power
shortages in 1969 and 1970 forced a reconsideration,
however, and the regime expects to maintain output at
a 250 million -ton level throughout the 1970's. (Figure
12 shows output of brown coal, other selected fuels,
and electric power.)
Hard coal (chiefly bituminous) supplies less than
10% of the total domestic supply of energy. Domestic
output (about 1.0 million tons) provides a declining
proportion of total hard coal consumption probably
only about 10% in 1970. Consumption is also falling
as railroads are shifted to diesel oil and as gasification
plants are closed or begin using natural gas. Mining
costs are high, and proved reserves are enough for only
a few years at the current rate of production. Most
ha:d coal mimes are being closed, and their workers are
being retrained for other occupations. Imports, mostly
from the Silesian fields in Poland (part of Germany
before World War II), but also from Czechoslovakia
and the U.S.S.R., will likely continue to be the major
sources of supply.
One serious fuel problem is the supply of
metallurgical coke. Very little of the hard coal mined
in East Germany is of coking quality. Coking coal,
moreover, is in short supply throughout Eastern
Europe, and East Germany has found it difficu't to
import enough coke or coking coal suitable for L e in
its iron and steel industry. East Germany has
experimented on a large scale with the production of a
metallurgical -grade coke from brown coal. In recent
years about 1 million tons of this coke ..ave been
produced annually, of which about 300.000 to
350,000 tons have, until recently, been consumed in
specially constructed blast furnaces at the Calbe steel
plant. The Calbe plant was closed in early 1972,
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1055
1960
1965
1966
1967
1968
1969
1970
1971
Hard coal
2,682
2,721
2,212
1,987
1,789
1,600
1,300
1,000
900
Brown coal
200,612
225,465
2S0,839
249,040
242,027
247,113
254,553
260,582
262,914
Brown coal briquettes
50,967
56,047
60,380
59,426
56,087
56,389
56,869
57,079
55,200
Hard coal coke
2,705
3,206
3,209
3,191
2,921
2,551
2,391
2,372
2,316
High temperature brown coal coke...
458
1,008
1,050
1,060
1,087
1,093
1,100
1,308
1,759
Low temperature brown coal coke....
6,368
6,691
6,291
6,263
5,871
5,701
5,334
4,988
4.413
Electric power (million kw.- hr.)
28,695
40,305
53,611
56,866
59,686
63,230
65,463
67,850
69,420
Petroleum products
1,961
3,112
6,092
7,308
7,792
8,741
9,904
11,377
12,109
Natural gas (million cubic meters)
10
26
133
150
200
143
371
1.233
2.800
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y
however, and it is not known whether hib'�-
temperature brown coal coke production will be
continued.
b. Petroleum and natural gas
Petroleum p!ays an important and rapidly
expanding role in the East German economy
providing about 14% of the total energy supply,
compared with 3% in 1%0 and 8% in 1967. East
Germany, in spite of intensive exploration, has not
located significant domestic deposits of crude oil.
Imports from the Soviet Union provide more than 90%
of the total crude oil suppl!. and have increased
rapidly, particularly since the completion of the
CEMA Friendship pipeline in 1963. A large oil
refinery has been built at Schw( dt at the western
terminus of the pipeline. In 1972 the Schwedt refinery
processed 7.5 million tons of crude oil, about 65% of
all the crude processed in East Germany. The
petroleum processing capacity is to rise to 13 million
tons annually by 1975 and 20 million tuns in 1980. To
handle increased Soviet supplies of crude oil a pipeline
paralleling the Friendship line has been recently
completed. Additional pipelines c -nnect Schwedt
with the chemical processing center of Leana and with
the port of Rostock, where crude oil comes in by
tanker.
The regime plans to rely increasingly on petroleum
in modernizing the economy� dimeliAng the
railroads. increasing agricultural mechanization, and
providing more central heating for private horsing.
The U.S.S.R. reportedly plans to supply a total of Flt
million metric tons during the 19i 1 -75 plan period.
compared with .14 million tons in 1Wi -70; deliveries
exceeded 11 million tons in 1972. In addition. the Fast
,;ermans imported over 900.000 tom of crude nil from
Egypt in 1970 and have imported same from Iran as
well (on West German amwnt
East German production of primleum prcxbtcts ha.
risen �harph since the lair IW36s Output of all
products increased from 3.1 million ton% in IqW tit an
estimated 10 8 million ton. in 1970 The bulk of this
inctraw was in itaw4n r and dirwl Intel pnxbic-tion
Almost two-thirds of the total nutp in 1937 w.tt
derived from bmwn coal. while oniv one -third canes
from pritcleum. in 1961 they- ptoltortiom wr-r
reversed (her 90% of the output r.f petttdenm
prothtc-ts and s tnthetic chemKUls now mtnn from
crude nil T%e major trfinerim that ptodute the hulk
of petroleum products are Icaird at Scfiwrdi Lruna.
and Rctehlen
'('ow dtw "lks on law v nraa..w tlw Im 4 twwo% w1 Ito vhd .4
the fiVPff
10
A considerable part of the output of petroleum
products is exported; exports rose by 87% between
1960 and 1975, but since then have declined by about
20%. The most important exports are gasoline and
diesel fuel; substantial amounts of paraffin and fuel
oil are also exported. In the early 1960's about 80% of
all exports of gasoline and diesel fuel went to West
Germany. Following the elimination in 1963 of West
German tariff protection and subsidy payments, East
German shipments of gasoline and diesel fuel fell off
sharply. This trade had been highly profitable to the
GDR, since the protective tariffs and subsidies applied
to both West German and East German producers of
petr(T'eum products. East German shipments were
suspended entirely in January 1967 in an attempt to
force the West Germans to make compensatory
payments, and a settlement was filially reached in
December 1968. Shipments of gasoline and diesel fuel
were resumed in March 1969, but under quotas that
were well beiow the import levels of the 1960's. East
German deliveries of petroleum products to West
Germanv in 1971 totaled only 76,000 tons.
In order to maintain exports of petroleum products
to non Communist countries while domestic
consumption increases. East Germany also imports
these products. The U.S.S.R. is the most important
turce of impo t%.
In 1969. after years of intensive exploration.
deposits of natural gas were discovered. apparently
around the town of Mersehurg. Production. which was
about 143 million cubic morn in 196N. rose to 18
billion :-ubir meters in 19'71. Production in 1972 was
estimated at 5 billion cubic melee. and the rrvi%rd
plan for 1975 call+ for output of approximately 9
billion cubic meten In addition. natural ,tas is
imported from the U S S R. via a new pipeline
through (;mchmimakia completed in May 1971
Snrtrr of this increase in supply will replace the
manufacturrd gat o:alput lint in cloning tome of the
Ad "ml Raufivation plank Ovnsumpt. on of natimil
gay it to incr-aw rapidly. particularly in chemical
ImAliclion
L F:Irdde pnwrt
The elrcf ric pmsrt itd rtin is fine of the m.�tt highly
d+rvrinprsl +rctnn of the Eats Getman rcsmnmy. And
pet capita pmduction it erbtnrly htRh F%rn -a,_ the
pnwrt supply has hr" .rt% tight At the end 4 1973
the imtalkrtl rnpacity "at 14 1 million kiknwattt slow 1,
and thr ptodtictisn of rlrcttic pirwrt duttttg the rat
was i3 g hilli m 66"att�hoan (kw -ht t Thrttnal
pnwrrplanta_ including oft- nw4rat installation,
crnnpow In IAt thr latxrst thatr of the catpwctts.
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i
s
hydroelectric plants constitute less than 5% of the total
capacity. Expansion of the power industry has been
achieved, but at a high cost; the industry is largely
dependent on domestic brown coal cf low caloric
value, and much of the powerplant equipment is
outmoded. More than one -fifth of all industrial
investments made during 1966 -70 was for the
development of power facilities, and electric power
installs, ns now account for one seventh of all fixed
assets in the country.
About three fourths of the electric energy produced
is consumed in the highly developed southern half (if
the country, largely in support of manufacturing
industries; the northern regions are largely agricultural
and have less need for electricity. A comparison of
1960 and 1971 power consumption, by sector (Figure
13), indicates that the percentage of the total
consumed by each sector has remained relatively-
stable. Within the industrial sector, the chemical
industry alon? consumed more than .one- fourth of the
net available power in 1971.
The bulk of the generating facilities are located in
the southern and southeastern parts of the country.
close to brown coal deposits and the main consuming
centers. The greatest concentration of powerplants is
in the Cotthus- Dresden area. The powerplants in this
region have a total capacity of over 5 million kw., or
about 40% of the national capacity. Included are such
facilities as the 1.3 million -kw. Luebbenau 1. 2, and �i
powerplants. the largest powerplant installation in the
country (Fixtfre 14). the 1.2 million -kw. Vrt%chau
powerplant: the 750.(X)0-kw. Schwarzr Pumpe East.
FIGURE 13. Electric power consumption, by sectw (U OU)
(Parcwo of tolol)
1941 1971
I
PWwr Sod (Vol im444tr1
r.+ .t
r'
("lwwtirsl iswip"rr
q t
M
N.tallvtt[i al twdtr.tll;
11ttiwioe Iwtwririt iwda�ua
r
f 4
watov .spplj
t 1.
Natal rem *a i%4w49ji
t
Nelit iowwrirr iu'l"4� tatib+
t s
j
FAn4Mq//e iwA gall?
r 8
(11A0q
Toms irt4"ity
't t
t9
Tow.p.vutww �ud p.w(al tp,xs+
r s
I t
Tod.. ha*40lvah'k 004 pat��.:4w.1 ..vti�.
f
e
44ri *hWq
J
f r
Ilwt.h.iM
t
fHlw
v n
a
T MI
Ifin r
ICIO f�
y
Middle, and West powerplants; the 450,000 -kw.
Ttattendorf I and 3 powerplants; and 1,050,000 kw.
(it the partially completed Boxbcrg powerplant. The
second most important group of generating facilities is
in the Bitterfeld- Leipzig; area, where over 4 million
kw. capacity is installed. The powerplant capacities in
that region include 1,000,000 kw. at the Borna
Thierbach powerplant, 470,0(X) kw. at the Lcipzig
E spenhain powerplant, 600,000 kw, at the Lcipzig
Lippendorf powerplant, 384,(XX) kw. at the Vockerode
powerplant, 338,(00 kw. at the Leuna powcrplant,
and 300,000 kw. at the lschornewitz powerplant.
Other important powerplants are located in the
extreme southeast in East Berlin and its vicinity, and
in the southwest. There is a 70,00) -kw. nuclear
powerplant at Rheinsberg in the northern part of the
country, but facilities in the north are sparsely
distributed. The largest hydroelectric: powerplant in
the country is the Saalfeld Ilohenwarte 2 plant, which
has an installed capacity of 320,000 kw. ('Figure 15).
Electric energy is transmitted by in extensive
network of high voltage lin( especially in the
southern part of the rx,untry. Major transmission
facilities are centered on the main electricity
producing end consuming regions of Bill( rfeld-
Leipzig and Coltbus- Dre-Alen. These regions an-
interconnected by high voltage `380 kilovolt (kv.)
lin, s, and wveral line including two at 380 -kv.�
lead to the Berlin arra. In thr northern part of the
countr% the network consist- large -Is of long- distancr
line% that serve isolatc it load crntrts
By IIrl5 Capacitv is expected to grow to 18 a million
k with annual prrxluction of alxnut 90 billion k w.-
hr Main additioni to rxitting plant% will lie '111).000
k% at the Sch%irm Pumipe p merplanit and 1 �i
million kw at the partiAly c.nnplefed Boxlrerg
lxtwrrplant The Bnxtx�rg Ixiwer facility it rgnipp"I
with 2M.OIXI-kw generating unit-, the Iarltett utilized
h- thr F;att Getman irxin--in to dair. w"ind trction
�4 lhit plant r %rntualh will inchide 'm.(m kM
ieeneialinit nnitt An important ptoirct of lhr curirnt
srar plan it IN (.'rtlils llagrnwrnlrt 1 Pt/Mrrplanl.
wherr the brt 5w, k w generating onil in FA'kl
Grtmans �ill for inalallr 1 the t "owl n,jilvir
ltnMrtplanl in the cvtuntrr. At Gtriltwaid. will ha-r a
ralsacitx of titli01) kw oPrm rt.mpirlion Iry the Inl
4 -own. Ptngrrted Iot I(r'4- 7 :1 (;e:n titctcli4in rtntin l e%
'�n Ihr 1 milli4mAu %l a rkrttlrach hi4ttw6itic
1mvrtltfant. Mich mmPirhltn prrtirrted aflrt 11173
Ikirk.letttrnt oI 6w clrmw -tltr lxrttrt ekluiptttent
indtnln hat ltrrn dttrntttagrcl 1wrierw of Ihr rounln "t
trliahcr sal-re Ihr V S It ftt much oI Ihit
rcluiptternt. :Ind mntinurcl groMth all lhr (ottnit"
11
1
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FIGURE 14. Luebbenau 1, 2, and 3
powerplants; this 1,300,000 -kw.
installation was the largest in the
country as of 1971 (U;OU)
w
le
'I
so fi
1,.,Nrt I .t IIIt1. a %III fu'l Ill. Ir111M.t I.It 1..11 .III
rfirLllr,{ Ilml% ..f 240, twill k%% .1111/1 (.srr
F.I�t (.rtImI11% la .1 tit, fill- r of fit, ,.,In, ll f �r
\Ititn.11 %.1%t.ln,. (1 \11 \hl, h,1,n1rt,14
11 r 111t,tti. /1u.11.11 ll,.%\ nl Its tit, It..1%. r .I/nnnt till
Ifirlit t till III t1ra I h,_ 1111 111111//1 1 �elf r�]1.. 11
ntlllrl Ilntia .1111 /1n111 .Ifs 1111 11 11111111 f�
rI 11111r.tft .,I l,s its,
11,.Nrt .im.- ostord 1,. .iliti .ti kill 1,1 Il1 .t1 i%% ;it, it,
1 1 \1 It.11.[ ..f 1.,.N,1 .1 to a lit I- -it .4fit 1,. 11 .I
al,aa11na) df-man(k and (el prmide for peakl(tad
melllirvnivnt\. Ea\I ;vrm nl\ has little� l,lvl,tri( po\%er
rv,vr\l, Ile�c.m Ihv vonlinne d itivmaal in v fi%11fIIvti
etf elcoricit\ ahallrh\ the� a ilia% n( rlr\% vallac1t\ a%
Mmill as it is pla( d in al,nicv \I:1ti\ f,f the� 1�tmntr\'\
in(b.%trics o1wratc \%ilh mitizlttdcd in(Imtrial Itnl(l,aal,\
\%hick .Iry hl,a\\ nal,r\ it[ vlectrie'il\ In rcccid \l,ara.
Alld partivnlarl\ in \\intvr imititha. (timer oipplif-
ha.v Itvvn vitimicd Ili in(Inalrial vfinatilnvra mid
rr�\tri(tiem� h.l\v bucit pI ccd nit till liar lit 11t
tilllva Ili IM�.Ik d"Fliallel I's I al I lhhl,a Itt a, lnle
rllah tills ra I,.,\1 I n paIttall\ aIt t dim it.. Ili( I l,\t to me
I is l %1�r- '.I %If15! 1'. I r 11 I/. 115' l l a ll.l 1M S�11 11).11 Igilr.lfrd
(hrar rron(llnn% 1� .i ty. nl vlfret_ hrlpcd let rrt.lyd
imbiorlal crfi ili
:1. \147121% and mineral% (S)
Faal (:rrti.,III\ (it IN'llda /,n IIr1Ilt fl.r Illt ,.f Ilit'
rnl11rr,I .I till h�rr .Intl II,lllfl,rto.II nlrtala t�Imro-d
Ir\ Iv /1ti%f r I II 11 Ilia .1 It 11111 a111 1111 era s,f IM.I.s %II.
1111 n1t.1r. Intl %111111 \1 tit r.11 1It, ./lti, 1 Is n .tine
111.1%1 /r,1 II. 115; Ih la 1�114 r liff.11, sl III f)). 11 %111\
11111
1�Iltlict11 .Irr.la 1 I I tl' I I 111.1%:11
111 Illy 111 fl /I� f1,:Vlr �I t,I1 I,Ila 11 11 V15' 1 1.1111
.still Dr, asl .11141 111 Ill� I't %I I.I III IIIaIt11 f Ill Ill, 1 rlllf.lf
It.lrt s.f III 1111Ir\ \11 iltstlls' I %,,.Ir( 1 f t11
.fill n. .In 11, fit, 111011, t1 ml\ .4 if
.I1111111r .1111 f1 tr..,;; it), l.,1 l it.. t 1�r, .sit Is. .lit if tl..tlll
,d 11, still Ill- \Ifllltlf\ I. Or, \11111nr \I t.11blrj\
lml 11' /ail 1.�111 �I. Ih, t tiflr. oil. 1.11, .11111 tilm,r.11%
II111111I r\ 1 W mt, %111.11) Ill .oil 4 .1 to .11111 fill' l.lrl%thl hosts
,.I to r .1111h a I., If 1,11114 111.11 11t t% .1 f1'
it h, t 4if..141111.111'sl f�. 11111 11 a /Il ,.I
r
1
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FIGURE 15. Scsol}cId Hol �orte 2 hydroolecttic
powerplonf, A.e largest hydroelectric plant in Ea-t
Ge rmany (U OU)

Qtp?mRFJA!.?ni89!!t' t;^P1tt4i3" r .j ,,i.; Y,Kk54}'Nlp+"'x�74i, ''9'i;t''Y 5'`".^P.!
I
z
i
FIGURE 16. Output of principal metals, minerals, and construction materials (S)
(Thousand metric tons except where otherwise noted)
P
3
no Data not available.
*Preliminary data.
People -owned Enterprises (VVB), such as that for
potash, or are parts of combines. In the iron and steel
industry, for example, the 15 major plants are grouped
in 3 production combines centered at Hennigsdorf,
Eisenhuettenstadt, and Riesa. These combines are
directly responsiblr to the Ministry.
a. Ferrous meats
East Germany lacks the raw materials necessary to
develop a self- sufficient iron and steel industry.
Reserves of iron ore are of poor quality and are nearing
exhaustion. There are no commercial deposits of
manganese or other alloying materials needed for sterl
production. A small amount of ferronicke) is obtained
from domestic ores, and some vanadium is produced
as a byproduct of copper smelting.
Raw materials for the iron and steel industry care
largely imported, mostly from the U.S.S.R. During
1965-69. East (,roman imported 805 of its iron one.
%1 of the imports were of Soviet origin, Dependence
on imports increased even further in 1970 -71, as
domestic output of iron ore dropped sharply to about
one fourth the annual average of the preceding 5
yran Imports, nearly all from the U.S.S.R.. rose to
about 9.19E of the total supply of icon ore in 1970 and
11171. East Germany also imports practically all of its
ferroalkying ores and metals. Domestic produccon of
ferroalloys, although supplemented by import- of
.elected types. is adequate for most internal needs aml
for some exports. The main producers of ferroalloy% a�P
the Maxhusetle Integrated steel plant at Unlerwel-
lenbam and the alkoy plant an l,ippendorf.
Because of its raw material limasitions. East
Germany has been able to achieve only a modest rate
of growth in its Iron and steel indintry in recent years
Production of crude steel in 1971 reached 5.3 million
tons, an increase of about I million tons since 1965. In
comparison, Poland, Czechoslovakia, and Romania
each increased steel output by somewhat more than 3
million tons over the same period, and Bulgaria
increased its output by 1.4 million tons. Among the
Communist countries of Eastern Europe with
established iron and steel industries (i.e., excluding
Albania), only Hungary increased its output less than
East Germanv did.
Production of pig irou in 1971 (2.0 million tons) was
actually M less than in 1965, reflecting the
decreased availability of domestic iron ore. East
Germany is both an importer and an exporter of pig
iron. Imports, mostly from the U.S.S.R.. have
averaged nearly '0,000 tons annually since 1985, and
exports, of which a considerable share is believed to he
reexports of Soviet origin, have been maintained at an
average annual rate of about 50(1.000 tons since 1985.
The principal recipients have been Japan and Westem
Europe.
Production of rolled steel in 1971 (3.8 million tons)
was only 0.8 million tons higher than in 198$.
reflecting the modest growth (31%) in steel
rnmumption over the period. Imports have ammnled
for a slowh rising share of gross rolled steel supplies
since 1965 and now amount to roughly half of the
total_ During 1989.71 imports averaged about 3 3
million tons. of which by far the larger share was
obtained from the U.S S. R. and the remainder from
other Communist countries. Japan, and Western
Europe Although still modest. annual exports of
rolled steel have gradually increased and reached
nearly 700,000 tons in 1971 The principal
cim linations have been Eastern and Westem Europe
13
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1955
1960
1965
1966
1967
1968
1969
1970
1971
Iron ore (as mined)
1,604
1,642
1,630
1,721
1,681
1,414
899
422
318
Iron ore (iron content)
472
407
408
430
420
353
224
105
79
Pig iron
1,517
1,995
2,339
2,448
2,525
2,333
2,098
1,994
2,027
Crude steel
2.815.9
3,749.9
4,313.a
4,484.9
4,591.7
4,695.4
4,823.8
5,052.7
5,350
Rolled steel
1,884
2,613
2,08d
3,051
3,078
3,156
3,182
3,406
3,551
Refined copper
33.3
39.2
40.0
40.0
40.0
40.0
40.0
37.5
na
Lead (smelter production)
8.9
10.4
12.5
12.5
12.5
12.5
12.5
12.5
no
Primary aluminum..........
27
35
45
45
52
58
63
63
nu
Potash (K
1,552
1,666
1,926
2,006
2,206
2,293
2,346
2,419
2,426
Cement
2,971
5,032
6,087
6,450
7,182
7,551
7,410
7,987
8,473
Concrete products...........
1,661
6,973
10,680
11,333
12,381
13,171
13,832
16,551
no
Bricks (million pieces)
1,968
2,272
1,410
1,407
1,414
1,352
1,299
1,280
no
P
3
no Data not available.
*Preliminary data.
People -owned Enterprises (VVB), such as that for
potash, or are parts of combines. In the iron and steel
industry, for example, the 15 major plants are grouped
in 3 production combines centered at Hennigsdorf,
Eisenhuettenstadt, and Riesa. These combines are
directly responsiblr to the Ministry.
a. Ferrous meats
East Germany lacks the raw materials necessary to
develop a self- sufficient iron and steel industry.
Reserves of iron ore are of poor quality and are nearing
exhaustion. There are no commercial deposits of
manganese or other alloying materials needed for sterl
production. A small amount of ferronicke) is obtained
from domestic ores, and some vanadium is produced
as a byproduct of copper smelting.
Raw materials for the iron and steel industry care
largely imported, mostly from the U.S.S.R. During
1965-69. East (,roman imported 805 of its iron one.
%1 of the imports were of Soviet origin, Dependence
on imports increased even further in 1970 -71, as
domestic output of iron ore dropped sharply to about
one fourth the annual average of the preceding 5
yran Imports, nearly all from the U.S.S.R.. rose to
about 9.19E of the total supply of icon ore in 1970 and
11171. East Germany also imports practically all of its
ferroalkying ores and metals. Domestic produccon of
ferroalloys, although supplemented by import- of
.elected types. is adequate for most internal needs aml
for some exports. The main producers of ferroalloy% a�P
the Maxhusetle Integrated steel plant at Unlerwel-
lenbam and the alkoy plant an l,ippendorf.
Because of its raw material limasitions. East
Germany has been able to achieve only a modest rate
of growth in its Iron and steel indintry in recent years
Production of crude steel in 1971 reached 5.3 million
tons, an increase of about I million tons since 1965. In
comparison, Poland, Czechoslovakia, and Romania
each increased steel output by somewhat more than 3
million tons over the same period, and Bulgaria
increased its output by 1.4 million tons. Among the
Communist countries of Eastern Europe with
established iron and steel industries (i.e., excluding
Albania), only Hungary increased its output less than
East Germanv did.
Production of pig irou in 1971 (2.0 million tons) was
actually M less than in 1965, reflecting the
decreased availability of domestic iron ore. East
Germany is both an importer and an exporter of pig
iron. Imports, mostly from the U.S.S.R.. have
averaged nearly '0,000 tons annually since 1985, and
exports, of which a considerable share is believed to he
reexports of Soviet origin, have been maintained at an
average annual rate of about 50(1.000 tons since 1985.
The principal recipients have been Japan and Westem
Europe.
Production of rolled steel in 1971 (3.8 million tons)
was only 0.8 million tons higher than in 198$.
reflecting the modest growth (31%) in steel
rnmumption over the period. Imports have ammnled
for a slowh rising share of gross rolled steel supplies
since 1965 and now amount to roughly half of the
total_ During 1989.71 imports averaged about 3 3
million tons. of which by far the larger share was
obtained from the U.S S. R. and the remainder from
other Communist countries. Japan, and Western
Europe Although still modest. annual exports of
rolled steel have gradually increased and reached
nearly 700,000 tons in 1971 The principal
cim linations have been Eastern and Westem Europe
13
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4 Y
Technically, the standards of the iron and steel
industry are far below those of Western countries, and
even below those of sonic other Eastern European
Communist countries. Poland, Czechoslovakia,
Romania, and Bulgaria have constructed, or are
constructing, integrated steel plants with large blast
furnaces, basic oxygen steelmaking furnaces, plate
mills, continuos- hot strip mills, cold rolling mills and
finishing equipment. In contrast, East Germany has
made no major additions to its iron and steelmaking
capacity for more than a decade and remains
committed to an inefficient complex of facilities
constructed in the 1950's. The comparatively small
Maxhuette plant is the only integrated plant. Plans for
construction of a large integrated plant at
Eisenhue.tenstadt have been indefinitely postponed,
if not abandoned. The only facilities in operation at
Eisenhuettenstadt are six Mast furnaces constructed in
the early 1950's and a Soviet cold roving mill
commissioned in 1968. The cold- rolling mill is
supplied with hot rolled steel imported from the
U.S.S.R. The major producers of crude steel are the
Brandenburg and Hennigsdorf plants, which must
(unrcmnomicatlly) mr cold pig iron from Ei%enhuetten-
stadt or frow other sources for smelting and must
send much of their steel elsewhere for further
processing.
The bulk of investment in ferrous metallurgy since
1960 has been concentrated in the rolling and
finishing sector of the industry. Some rolling
equipment of domestic manufacture has been
installed, but a larger part of the new equipment has
been impc�ted frrm the U.S.S.R. and Western Europe.
Such imports have included rolling and drawing
equipment for pipe, sheet, strip, and wire, and
facilities for forging, heat treating, and surfact
conditioning. Tangible gains have been realized from
this program for upgrading of steel products. The
proportion of highly proessed steel, that is, steel
undergoing i,dditional rollinv or finishing oprr,,tions
beyond the hot rolling stagy, increased from !J% of
total rolled %trel in 1960 to 24% in 196.5 and :e,1 ti in
1971.
b. Nmr/ermw metals
East Germany is generally deficient in nonferrous
metals, excrpt for uranium. The output of refined
cop- rr, from scrap as well as local ores, covers Iris than
half of domestic requirements. Imports to make up the
deficit are obtained principally from the U.S.S.R. A
further increase in import% %rrms likely. Prxdt:ction
from the low -grade ore deposits in the Sangerhatnen
basin has brrn c>Mining .nd I% now rtmecdrd by the
14
output from scrap. A further decline in output from
the Sangerhausen ores is anticipated in the 1970's. All
copper processing, from ore through finished product,
is handled by the Wilhelm Pieck Mansfeld Combine,
with facilities located at Eisleben, Helbra, and
Hettstedt.
Lead ore mining at deposits in the Freiberg area was
discontinued in 1968 because of high costs, but
approximately 30,000 tons of lead are recovered each
year from scrap materials. A small amount of tin ore is
mined in the Altenberg area, and a modest increase in
output reportedly is planned. Production of primary
aluminum is entirely dependent on imports of bauxite
and alumina. Imported bauxite, from Hungary and
Yugoslavia, is processed at a plant in Lauta. Alumina
from this source meets about half the requirements of
East German smelters, and imports from Hungary and
West Germany cover the remaining requirements.
Primary aluminum is produced at two plants located
all Bitterfeld and Lauta. Output falls considerably
short of domestic needs. Imports from the U.S.S.R.,
which exceeded 100,000 tons in 1971, make tip most of
the deficit. Most other metals are imported, although
small amounts of metals are obtained as byproducts
from domestic and imported ores, including bismuth,
cadmium, silver, selenium, rher.' .m, and gallium.
East Germany has the capability to process a wide
range of metals to meet high purity standards for
electronics and other exacting applications, among
such metals are antimony, arsenic, indium, lead,
gallium, silicon, and germanium.
Jranium ore mining started in East Germany in
1946 under a Soviet company called Wismut .1G,
which was converted int a joint Soviet -East German
company in 1.9.54. All operations are still supervised by
the U.S.S.R. The firm employs approximately 800)0
people, and its headquarters are located in Karl -Marx-
Stadt. Present estimated annual production is equal to
6,500 tons of uranium metal. Mining started in the
Aue area near Karl- Marx -Stadt in underground mint
but production from these mine% is declining due to
%apply depletion. The output of pitchblrnde. a high
grade ore ranging in average uranium content from
1 to 2%, 1% wnt in an improce%secl %title to the
U.S.S.R. Fa%t Germany i% now depending more on the
lower grade sedimentary depontt% of Thuringia and
recently chscovered depo%it% at Koenig%trin. Open pit
and und"tround mining operations have been carried
out near era in Thuringia since 1952. The average
Krade rf this ore is 0.177% uranium, and over 14000
tom of ore are mined daily. rh. on� i% p- icmwd at a
facility locattrd at %relingstardl. which i% the largest
nraniaim pmmaing plant in the world Annual
y
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i
u
l
J
production in terms of uranium metal is about 3,000
tons a year. The deposits at Koenigstein, 6 miles from
the Czechoslovak border, have been tinder develop-
ment since 1968. The ores, which average between
0.08% and 0.1% uranium content, are processed near
Crossett. Production is small, amounting to several
hundred tons of recoverable uranium metal per year.
When the Koenigstein deposits are fully developed,
the East Germans plan to construct another uranium
concentrating plant nearby.
East Germany is the world's third largest producer
and third largest exporter of potash. Nearly three
fourths of the total output of 2.4 million tons of K
arc exported annually, mainly to Poland, Czecho-
slovakia, and Hungary. Most of the remainder is sold
in Western Europe. Mining and processing are
centered in the area between the Werra river and the
West German border. Production is scheduled to reach
3.0 million tons by 1975, with most of the increase to
come from a new mine and refinery in the Calvoerde
district. Domestic production supplies most of the
fluorspar needed by the chemical and metallurgical
industries. A substantial amount of phosphate is
imported in the form of apatite, phosphate rock, or
fertilizer. Sulfur is produced as a byproduct in the
refining of sulfur -rich Soviet crude oil and from sulfur
bearing domestic ores, but a considerable share of
consumption is derived from imported pyrites.
4. Manufacturing and construction
Manufacturing occupies a central position in the
East German economy, accounting for about 84% of
total gross output of industry and more than 85% of
total industrial employment (Figures 17 and 18). In
1971 gross output in manufacturing amounted to
DME129.7 billion. According to official figures,
annual growth has averaged 6.2% since 1968.
Employment in manufacturing, however, has grown
at a substantially lower annual rate of 0.2 or an
increase of roughly 9,500 workers since 1968. (U /OU)
Within manufacturing, the metal products
industries play the leading role, accounting for about
41% of the sector's gross output and 49% of its
employment in 1971. In the metal products sector, as
well as in manufac:.lring as a whole, the electrical
engineering, electronics, and precision engineering
industries have been growing at the fastest rate. Their
average annual rates of growth in production and
employment from 1968 to 1971 were 10.7% and 3.5%O,
respectively. During this same period the chemical,
mechanical engineering and vehicle construction, acid
the textile industries experienced declines in
employment and below average increases in
production. (U /OU)
Since the nationalization in the late 1940's, most
industry has been directly controlled by the state, but
a significant private sector of semistate -owned
enterprises, private enterprises, and self employed
craftsmen has been tolerated. In February 1972, the
regime launched a drive apparently aimed at
liquidating the private sector, with the main emphasis
being directed at the semistate -owned enterprises.
Most enterprises of this type were reportedly converted
to People -owned Enterprises (VEB's) by mid -1972,
FIGURE 17. Distribution of industrial production (U/OU)
AVERAGE
PERCENT Or TOTAL
ANNUAL
RATE Or
1968
1971
GROIWTH
Peron!
Power and fuel industry
5.9
5.6
4.7
Metallurgical industry
7.7
7.9
7.4
Building materials industry
1.0
1.1
7.o
Water supply
0.5
O..S
6.8
Manufacturing:
Chemicalir. dustry
14.1
14.1
6.1
Mechanical engineering and vehicle construction......
14.7
14.7
6.1
Electrical engineering, electronics, precision engineering.
8.7
9.9
10.7
Light industry (excluding textiles)
11.0
11.0
64
Textile industry
7.1
6.8
4.0
Foodstuffs industry
18.0
17.4
3.0
Total manufacturing
F9.9
85.9
6.1
Totalinduetruil production"
100.0
100.0
6.1
*Data may not add to to" because of rounding.
15
r
i.
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e
r
FIGURE 18. Distribution of industrial employment (U /OU)
AVERAGE
PERCENT OF TOTAL ANNUAL
RATE OF
1968 1971 GROWTH
*Data may not add to totals because of rounding
and private owners have been granted limited
compensation and usually offered management
positions in the fully nationalized firms. Less press
has been applied to small private enterprises and
craftsmen, and a December 1972 party plenum
;promised state support and "generosity in granting
trade licenses" for artisans, shopkeepers, and small
tradesmen. (U /OU)
The latest data available do not yet reflect the new
organizational changes. In 1971, state -owned
enterprises produced 82% of the gross output in
manufacturing, an increase of only one percentage
point from 1968. In the same 3 -year period the output
of cooperative enterprises grew very little, and the
contribution of private firms to total manufacturing
output declined. State -owned facilities play a largo r
role in metal processing and chemicals than they do in
light industry- including textiles -and agricultural
processing, in which cooperatives and semistate-
owned enterprises in the past have accounted for
about 25% to 30% of the output. State -owned
enterprises accounted for about 82% of total
manufacturing employment in 1971, a slight increase
over the 1969 figure of 79 The most dramatic
change occurred in cooperatives, where the
employment level in 1971 was only 61 of the 1968
level, a decrease of 27,600 workers in the 3 -year
period. Within this category of cooperative enterprises,
those in the textile and metal processing sectors
registered the largest percentage decreases in
employment in the 3-year period. ;U /OU)
Most state -owned enterprises (VEB's) are organized
into slightly more than 95 VVB's (Associatioi:ss of
People -owned Enterprises), each comprised of similar
enterprises. With the implementation of the reforms of
the "New Economic System," the VVB's, which
existed prior to the reforms, were given additional
responsibilities and considerably more authority. They
four. an intermediate link between the state planning
authorities and individual enterprises and acquired
their new responsibilities at the expense of both. The
VVB's are responsible for drafting their members'
production plans and insuring their fulfillment,
overseeing enterprise investment policies, technical
and scientific research, working out wage norms and
bonus systems, and sharing in both the domestic and
foreign marketing responsibilities. Other enterprises
are members of industrial combines- People -owned
Combines established in 1969. The position of the
combines in the economic structure of East Germany
varies. Some are subordinate to VVB's, some to
industr.al ministries, and others to organisations such
as district (Bezirk) economic councils. The combines
were established to prevent further concentration of
power under the VVB's and to increase effectivcatss In
introducing technological change and innovation in
the production process. There are also state -owned
plants which are not centrally controlled, but which
are supervised by Bezirk or county (Kreis) economic
councils. Private plants are mer bers of so-called
Chambers of Industry and Trade, which help
integrate private production into the 4ntral planning
Process. (U/0
16
CJ
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Percent
Power and fuel industry
6.6
6.6
-0.8
Metal: urgicalindustry
4.3
4.3
o.7
Building materials industry
3.1
3.8
0.7
Water supply
0.7
0.7
0.1
Manufacturing:
Chemical industry
11.6
11.4
-0.2
Mechanical engineering and vehicle construction......
88.7
88.6
-0.1
Electrical engineering, electronics, precision engineering.
18.8
13.1
3.6
Light industry (excluding textiles)
16.8
16.9
0.6
Textile industry
9.3
8.6
2-4
Foodstuffs industry
7.6
7.8
1.6
Total manufacturing
86.4
86.3
0.8
Total industrial production*
100.0
100.0.
0.8
*Data may not add to totals because of rounding
and private owners have been granted limited
compensation and usually offered management
positions in the fully nationalized firms. Less press
has been applied to small private enterprises and
craftsmen, and a December 1972 party plenum
;promised state support and "generosity in granting
trade licenses" for artisans, shopkeepers, and small
tradesmen. (U /OU)
The latest data available do not yet reflect the new
organizational changes. In 1971, state -owned
enterprises produced 82% of the gross output in
manufacturing, an increase of only one percentage
point from 1968. In the same 3 -year period the output
of cooperative enterprises grew very little, and the
contribution of private firms to total manufacturing
output declined. State -owned facilities play a largo r
role in metal processing and chemicals than they do in
light industry- including textiles -and agricultural
processing, in which cooperatives and semistate-
owned enterprises in the past have accounted for
about 25% to 30% of the output. State -owned
enterprises accounted for about 82% of total
manufacturing employment in 1971, a slight increase
over the 1969 figure of 79 The most dramatic
change occurred in cooperatives, where the
employment level in 1971 was only 61 of the 1968
level, a decrease of 27,600 workers in the 3 -year
period. Within this category of cooperative enterprises,
those in the textile and metal processing sectors
registered the largest percentage decreases in
employment in the 3-year period. ;U /OU)
Most state -owned enterprises (VEB's) are organized
into slightly more than 95 VVB's (Associatioi:ss of
People -owned Enterprises), each comprised of similar
enterprises. With the implementation of the reforms of
the "New Economic System," the VVB's, which
existed prior to the reforms, were given additional
responsibilities and considerably more authority. They
four. an intermediate link between the state planning
authorities and individual enterprises and acquired
their new responsibilities at the expense of both. The
VVB's are responsible for drafting their members'
production plans and insuring their fulfillment,
overseeing enterprise investment policies, technical
and scientific research, working out wage norms and
bonus systems, and sharing in both the domestic and
foreign marketing responsibilities. Other enterprises
are members of industrial combines- People -owned
Combines established in 1969. The position of the
combines in the economic structure of East Germany
varies. Some are subordinate to VVB's, some to
industr.al ministries, and others to organisations such
as district (Bezirk) economic councils. The combines
were established to prevent further concentration of
power under the VVB's and to increase effectivcatss In
introducing technological change and innovation in
the production process. There are also state -owned
plants which are not centrally controlled, but which
are supervised by Bezirk or county (Kreis) economic
councils. Private plants are mer bers of so-called
Chambers of Industry and Trade, which help
integrate private production into the 4ntral planning
Process. (U/0
16
CJ
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M.t 011
�rc!1�, n+, a T'. vn-r M`*ti a3 %JY,n 7l n r Si.v- M .nwF;il i T Y 'r:0',z ti y"Yti.. n N Yt rR., x v t +i'
T
4, f
b
K
f
i
i
Participation in CEMA (the Council for Economic
Mutual Assistance) has, on the whole, had little effect
on the structure of East German manufacturing. Most
CEMA recommendations for the assignment of
production responsibilities were either ignored or were
merely confirmed developments already undertaken
by the East Germans acting independently. In any
case, specialization agreements covered only a small
fraction of the output of the key industries in the East
German economy. Since 1969, 1ew bilateral and
multilateral undertakings have begun to have some
effect on the product -mix, but they have had very
little effect on the branch structure of industries.
(U /OU)
a. Metal products (S)
East Germany has the largest and most diversified
metal products industry in Eastern Europe; its output
of metal products (including products of mechanical,
electrical, and precision engineering, electronics, and
vehicle construction) as a share of total industrial
production is greater than that of any other country in
Eastern Europe. In absolute terms it leads those
countries in the production of railroad passenger cars
and is one of the world's leading exporters of rolling
stock. East Germany ranked first in Eastern Europe in
1971 in the production of transformers and radio
receivers and second in the manufacture of
refrigerators. Output of selected types of machinery
and equipment is shown In Figure 19.
UNITE
LIMN! units...........
....do
....do
....do
....do
.do
....do
Units
....do
....do
....do
,Killion marks'.......
....do
1,000 metric ;ons......
1,000 GRTO'........
do
FIGURE 19. Output of selected types of machinery and equipment (U/OU)
Radio receivers
Television receivers
Washing machines
Household refrigerators...........
A utomo bilea
Trucks
Tractors
Buses
Diesel and electric locomotives.....
Railroad passenger cars...........
Railroad freight cars
Agricultural machinery............
Machine tools (metalcutting)
Rolling mill equipment...........
Muitime cargo ships.........
Fi shing vessels
0 1967 prices.
00 0rom register tons.
Other industries which are significant in East
Germany's metal processing sector are motor vehicle
manufacturing, shipbuilding, and the production of
telecommunications equipment. East Germany is
second only to Czechoslovakia in the production of
motor vehicles in Eastern Europe. With regard to
shipbuilding, East Germany ranks first in the world in
the construction of fishing vessels (in terms of
tonnage), and in Eastern Europe it is second, behind
Poland, in the construction of maritime cargo ships
(Figure 20).
Production of military end- items, by the metal
processing sector is confined largely to optical and
precision engineering equipment, small arms,
ammunition, explosives, and some spare parts for
military aircraft. Those items are produced in
enterprises that are either entirely military oriented or
serve both the defense establishment and the general
economy. The former group of enterprises are
organized into VVB's but are subordinated directly to
the Ministry for National Defense. For its supply of
major military equipment, East Germany is entirely
dependent on its Warsaw Pact allies, particularly the
U.S.S.R. Some military related optical and precision
equipment is exported.
The items produced by the metal products
ndustries are an important source of export earnings.
They accounted for 57% of total exports in 1971. East
Germany exports about two thirds of its machine tool
output, one -third of its tractor production (Figure 21),
AVERAGE.
ANNU..L
RATE Or
1955 1960 1965 1970 1971 GROW 111
724.7 809.6
38.6 416.5
18.4 132.5
17.3 138.6
22.2 64.1
14.2 12. b'
7.8 9.1
70es 415
.540 675
697 1,705
4,002 2,360
330.6 600.6
139.7 344.0
24.3 15.9
16.3 123.0
18.1 46.3
808.0
536.7
288.9
364.8
102.9
15.2
12.9
542
572
1,088
2,172
776.9
439.4
19.8
144.3
68.2
806.9
380.1
254.5
380.3
126.6
24.2
16.4
2,587
933
1,519
5,104
1,535.6
679.8
15.4
216.7
101.9
Percent
961.0 1.8
410.9 15,9
280.5 18.6
410.5 21.5
134.2 11.9
25.5 3.7
15.2 4.2
3,032 9.5
480 -0.7
1,437 a.6
5,366 1.8
1,635.6 10.5
721.5 10.8
16.6 2.4
207.7 17.2
93.8 10.8
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J010vn Te Q
i
and over 50% of the automobiles it manufactures. The
shipbuilding and railroad rolling stock industries are
also significant sources of export earnings. East
Germany ranks ninth in the world in the tonnage of
merchant ships exported, and its exports of rolling
stock comprises nearly 10% of all such vehicles
exported in world trade.
Imports of metal products as a percentage of the
value of total imports, approximately 37% in 1971,
increased considerably in the 1960`s and is due to rise
further in the 1979's. For example, between 1968 and
1971 imports of rolling -mill machinery increaser) by
39 antifriction bearings increased by 193 and
regulators and relays increaKd by 340 In terms of
units imported, East Germany increased its imports of
automobiles by 65% over the same 3 -year period.
b. Chemicals (S)
East Germany already had a well developed
chemical industry at the end of World War 11, based
largely on its sizable deposits of brown coal, salt,
limestone, potash, and gypsum. The chemicai
industry, which ranks fourth among East Germa-
industries in value of output, has grown more rapidly
than industry as a whole, although it has advanced
more slowly than the chemical industry of any other
East European country. Its annual output more than
18
doubled between 1960 and 1970; output of selected
major products of the industry is summarized in
Figure 22.
East Germany ranked third in the world in 1970 -71
in output of potash fertilizer, slightly ahead of the
United States and exceeded only by the U.S.S.R. and
Canada. Among the East European countries, it also
leads in production of soda ash and caustic soda,
plastics, synthetic rubber, and tires.
East Germany is an mportant exporter of chemical
products, especially to other CEMA member
countries. In 1971 it exported nearly three- fourths of
its output of potash fertilizer, almost half of its output
of synthetic rubber, and close to one -third of its output
of soda ash, as well as sizable quantities of plastics,
photochemicals, and other products. Pharmaceuticals
are a large export item, but imports in this category
amounted to almost three- fourths of exports in 1971.
Formerly a net exporter of nitrogen fertilizer, East
Germany now imports a large part of its total supply
(about one -third in 1971). The country also is
dependent on imports for some of its major chemical
raw materials, such as pyrites, bituminous coal, coke,
phosphate rock, and especially petroleum, which is
becoming increasingly important as the chemical
industry shifts from a brown coal base to more modern
petrochemical processes. (Reportedly more than one
fourth of all chemical output already was based on
E
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FIGURE 20. This ship was built for the
U.S.S.R. in a Wismar shipyard (U /OU)
FIGURE 21. Tractor plant, Schoonebedr /Elbe (U!OU)

r
FIGURE 22. Output of selected chemicals and rubber (U /OU)
(Thousand metric tons except where otferwise noted)
1955
1960
1965
1970
1971
Sulfuric acid
592
730
985
1,099
1,076
Synthetic ammonia (as nitrogen)
335
393
439
481
576
Caustic soda
257
327
364
413
414
Soda ash
458
594
682
676
714
Calcium carbide
793
923
1,193
1,248
1,302
Nitrogen fertilizer (as nitrogen)
293
334
348
395
388
Phosphate fertilizer (as P,0
85
166
232
430
414
Potash fertilizer (as K
1,552
1,666
1,926
2,419
2,426
Plastics and synthetic resins............
72
115
219
370
420
Synthetic fibers
3.4
7.8
19.0
34.8
47.6
Synthetic rubber
72
87
95
118
129
Tires (thousand units)
1,439
2,714
3,750
4,692
4,922
petroleum in 1970.) Phosphate rock is imported
mainly from the U.S.S.R., as is crude oil, which is
obtained via the Friendship pipeline. In the future,
natural gas from domestic sources and from the
U.S.S.R. via pipeline also will serve as a chemical raw
material, especially for nitrogen fertilizer and plastics.
Large nitrogen fertilizer plants are under
construction at Leuna and Piesteritz, and additional
capacity for plastics is being added at the
Schwarzheide Synthesis Plant and at the Buna Works
in Schkopau. Refineries at Schwedt and Boehlen are
scheduled to increase output of petrochemicals for use
as starting materials for plastics and synthetic fibers. A
large new potash fertilizer plant at Zielitz started trial
operation in January 1973.
Plans call for output of the chemical industry to
increase by 47% to 49% during 1971 -75, or by about
25% during the 3 years 1973 -75. By 1975, production
of plastics and of synthetic fibers is scheduled to be
more than double 1970 output, while output of potash
fertilizers is to increase 20
c. light industry (including textiles) (U /OU)
Although oriented toward the domestic market,
light industry has been unable to satisfy consumers
demand, either in quantity or quality. In the past, it
has been given a lower priority than the metal
processing or chemical industries. Gross investments
by the state in light industry during the period 1965 -71
were only about 39% and 45% of such outlays for the
metal processing and chemical industries, respectively.
For light industry the official growth rate of gross
production was 5.5% during that 6-year period, while
the rates of growth for the metal processing and
chemical industries were 7.5% and 7.3 respectively.
Output of selected light industry products is shown in
Figure 23. Recently, greater importance has been
placed on the development of the consumer goods
industry to increase production and improve the
quality of output. The additional output, however, is
not solely for the fulfillment of domestic needs, but to
meet trade commitments to the CEMA countries,
especially the Soviet Union, and to satisfy the demand
created by tourists from other Eastern European
countries.
On the whole, light industry has not been a major
source of exports. Exports of certain goods, however,
have shown significant increases, absolutely and
relatively to production. During the period 1968 -71
furniture exports increased by 60% and exports of
outer garments for men and boys, by 55 These
increases reflect the decision of East Germany to fulfill
bilateral trade agreements with the U.S.S.R. and seek
hard currency sales to Western countries rather than
satisfy domestic demand. Domestic consumption was
given a higher priority in 1972 and 1973.
d. Agricultural processing (U /OU)
The agricultural processing industries have had the
lowest average annual rates of growth in production of
all the manufacturing sectors. Their share of total
manufacturing employment, however, has been
slowly rising, and the share ui total *manufacturing
investments going into the agricultural processing
industries increased from 7.1% in 1963 to 12._ in
1969. In 1970 this figure dropped to 9.2% of total
manufacturing investment, but it increased to 9.430
the following year, when total investment decreased
slightly. The 1973 economic plan does not suggest any
significant change in the output of the agricultural
processing industries.
Before World War II, the Area that is now East
Germany was a net exporter of processed agricultural
19
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FIGURE 23. Output of selected light industry products (U/OU)
AVERAGE
ANNUAL
RATE OF
VALUE OR UNITS 1955 1960 1965 1970 1971 GROWTH
*Constant 1967 prices.
products. During the postwar period, however,
imports of these products have been greatly increased.
In the early 1960's, roughly 20% to 25% of total
imports were agricultural products, but the percentage
has slowly decreased over the years. Despite the slow
increase in the output of processed agricultural
products, East Germany is first in Eastern Europe in
the production of butter, second in the production of
meat and whole milk, and second in fish catch.
e. Conatrurtion (U /OU)
The construction sector (Figure 24) increased its
contribution to the national income from less than 8%
in 1960 to 8.7% in 1971. It has been growing at an
average annual rate o: 7.8% (value basis) since 1965.
During 1965 -69, the annual rate of growth increased
at an accelerated rate, reaching a high of 10.6% in
1969. In 1970 there was a sudden decline in the
growth rate to 5.3 and a slight rise in 1971 to 5.7
The construction sector consists of three com-
ponents: The building industry, the building crafts,
and the agricultural cooperative building enterprises.
The building industry accounts for the largest portion
of the output of the construction sector -67.9% in
1971. During the same year, 21.8% of the total
construction was performed by the building crafts,
while the remainder, approximately 10 was
accounted for by the agricultural building enterprises.
Slightly more than 85% of the value of output of the
building industry is performed by state -owned
20
enterprises; this share has remained relatively stable
since 1960. Semistate -owned enterprises accounted for
approximately 12% of the building industry's
construction in 1971, while private firms accounted for
less than 1%. The 1972 results should show a
significant decrease in construction by semistate-
owned enterprises and an increase for state -owned
firms, due to the conversion in early 1972 of semistate-
owned enterprises into completely state -owned
entities.
The building crafts consists of cooperative
handicrafts, which accounted for approximately 69%
of the output of this component of the construction
sector in 1971, and private handicrafts. Since 1960, the
percentage of the building crafts' volume of
construction done by the cooperatives has steadily
increased. The same trend should continue and
perhaps accelerate be ause of the state's increased
effort to nationalize private enterprises.
Of the three components of the construction sector,
the agricultural cooperative building enterprises have
experienced the greatest rate of growth in output since
1960. The average annual rate of growth from 1960 to
1971 has been approximately 20 as compared to
5.6% for the building industry and 6.6% for the
building crafts over the same period. The agricultural
building enterprises alone handled the rapid increases
in construction in agriculture resulting from final
collectivization in 1960 and from subsequent efforts to
increase livestock production and irrigation. They are
0
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Percent
Furniture (includes upholstered)
Million marks
556.7
989.9
1,246.9
2,022.9
2,129.5
8.8
Musical instruments
....do................
72.4
94.7
115.0
158.7
169.3
5.5
Gymnastics and sports apparatus
do
25.0
39.6
49.3
95.0
101.5
9.2
Toys
.....do................
99.9
181.3
321.2
520.0
542.5
11.2
Outer garments for men and boys....
....do
410.7
537.0
675.3
815.0
808.5
4.8
Outer garments for women and girls..
....do
410.9
611.0
765.5
860.0
868.6
4.8
Shoes
Million pair...........
40.7
54.1
61.0
73.8
76.9
4.1
Chipboard
1,000 cubic meters......
Insig
44.0
200.1
451.0
479.8
24.3
Household porcelain
1,000 tons.............
18.2
22.2
25.9
28.2
29.2
3.0
Window glass (standard thickness)
Million square meters....
14.3
16.1
21.3
21.0
20.4
2.2
Carpets and runners
....do................
5.1
8.1
11.3
14.8
16.2
7.5
Fabrics
....do................
501.7
609.0
639.1
714.8
723.3
2.3
Yarns
1,000 tons.............
252.0
275.0
269.6
244.6
234.8
0,4
Hosiery
Million pairs...........
142.1
15:.4
172.7
198.5
225.5
2.9
Knitted underwear
Million units...........
103.6
137.1
148.9
144.7
149.3
2.3
Knitted outerwear
....do................
15.8
20.7
22.1
34 0
35.7
5.2
*Constant 1967 prices.
products. During the postwar period, however,
imports of these products have been greatly increased.
In the early 1960's, roughly 20% to 25% of total
imports were agricultural products, but the percentage
has slowly decreased over the years. Despite the slow
increase in the output of processed agricultural
products, East Germany is first in Eastern Europe in
the production of butter, second in the production of
meat and whole milk, and second in fish catch.
e. Conatrurtion (U /OU)
The construction sector (Figure 24) increased its
contribution to the national income from less than 8%
in 1960 to 8.7% in 1971. It has been growing at an
average annual rate o: 7.8% (value basis) since 1965.
During 1965 -69, the annual rate of growth increased
at an accelerated rate, reaching a high of 10.6% in
1969. In 1970 there was a sudden decline in the
growth rate to 5.3 and a slight rise in 1971 to 5.7
The construction sector consists of three com-
ponents: The building industry, the building crafts,
and the agricultural cooperative building enterprises.
The building industry accounts for the largest portion
of the output of the construction sector -67.9% in
1971. During the same year, 21.8% of the total
construction was performed by the building crafts,
while the remainder, approximately 10 was
accounted for by the agricultural building enterprises.
Slightly more than 85% of the value of output of the
building industry is performed by state -owned
20
enterprises; this share has remained relatively stable
since 1960. Semistate -owned enterprises accounted for
approximately 12% of the building industry's
construction in 1971, while private firms accounted for
less than 1%. The 1972 results should show a
significant decrease in construction by semistate-
owned enterprises and an increase for state -owned
firms, due to the conversion in early 1972 of semistate-
owned enterprises into completely state -owned
entities.
The building crafts consists of cooperative
handicrafts, which accounted for approximately 69%
of the output of this component of the construction
sector in 1971, and private handicrafts. Since 1960, the
percentage of the building crafts' volume of
construction done by the cooperatives has steadily
increased. The same trend should continue and
perhaps accelerate be ause of the state's increased
effort to nationalize private enterprises.
Of the three components of the construction sector,
the agricultural cooperative building enterprises have
experienced the greatest rate of growth in output since
1960. The average annual rate of growth from 1960 to
1971 has been approximately 20 as compared to
5.6% for the building industry and 6.6% for the
building crafts over the same period. The agricultural
building enterprises alone handled the rapid increases
in construction in agriculture resulting from final
collectivization in 1960 and from subsequent efforts to
increase livestock production and irrigation. They are
0
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FIGURE 24. Large -unit construction
methods are widespread (U /OU)
responsible not only for the construction of farm
related buildings, but also for the construction of
housing in rural areas.
The government is forced to weigh carefully its
priorities in construction because of labor and building
material shortages. The data for 1970 show that 27.9%
of the value of construction completed was for
industrial and storage plants, while 16.9% was for
dwellings. In 1971 these shares had changed to 29.3%
and 16.5 respectively.
During 1972, a year of increased emphasis on
housing construction, 69,000 new apartments were
built, compared to only 57,300 in 1971. East German
statistics indicate that another 36,000 apartments were
provided in 1972 through expansion, reconstruction,
and modernization of existing units. The 1973
economic plan calls for the construction of 79,000 new
apartments, an increase of slightly more than 14%
over 1972. Because of the housing shortage and the
age of dwellings, more funds must be used for
reconstruction and modernization than normally
required for wear and tear. According to a census
taken by the state in 1972, approximately 38% of the
apartments in residential buildings were 70 years old
or more, while 41 were built between 1900 and 1945.
A portion of new construction is also required to
replace many of the older apartments, which lack
water and sewerage facilities and are too costly to
repair.
5. Domestic trade (C)
Domestic trade is conducted largely by state
organizations at prices set by the state. The central
government plans the volume of sales for various types
of commodities, the level of investments, and the
volume of taxes and profits. Local administrations
control only the day -to -day operations of the trade
network. Private trade is regulated by membership in
the commission trade system or by other indirect but
effective controls.
Wholesale trade, entirely in state hands, is
organized into Wholesale Trade Associations (GHG's),
which supply both private and socialized retail stores.
There are GHG's for each major category of goods,
such as fruits and vegetables, textiles, and household
goods. Agricultural procurement and distribution to
retail outlets and food processors are handled by state-
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owned Procurement and Purchasing Enterprises
(VEAB's), which formerly set yearly quotas for
compulsory deliveries of farm output, mostly grain
and animal products, and which now negotiate
purchase contracts for supplies of these products,
working closely with processors.
The outlets of the retail trade system probably the
most modern in Eastern Europe �can be divided into
three categories: 1) Socialist retail trade outlets; 2)
commission outlets; and 3) private enterprises.
Approximately 80% of total retail trade turnover is
accounted for by socialist outlets, consisting of a
network of state -owned stores and restaurants
belonging to the trade organization (Handelsorganisa-
tion, or HO), under the general supervision of the
Ministry for Trade and Supply, but under the direct
control of the local economic councils. Also included
in the category of socialist enterprises are industrial
outlets and .consumer cooperatives, which are
indirectly controlled by the Ministry for Trade and
Supply. The cooperatives are concentrated in the rural
areas, since farmers apparently find the older
cooperatives more acceptable than the state stores.
Since 1950 socialist retail trade turnover has
consistently grown at a faster average annual rate than
total retail trade (Figure 25).
Commission outlets account for a little more than
9% of total retail sales, and since the late 1950's their
sales have been increasing at a substantial rate. This
can partly be explained by state pressure to force
private stores to become commission outlets for the
state network buying and selling goods for the
account of an HO or cooperative. The 1971 results,
however, did not conform to the past growth trend.
The portion of total sales attributed to commission
outlets declined slightly, and the percentage increase
from the previous year was less than that for total
sales.
FIGURE 25. Average annual rates of growth of retail
sales, by form of ownership (U /OU)
(Percent)*
TOTAL commis
RETAIL SOCIALIST SION PRIVATE
TRADE TRADE TRADE TRADE
1951 1955....
12.8
21.3
2.1
1956- 1960....
7.3
10.1
In8ig
�6.2
1961 1965....
2.6
2.8
8.9
�1.6
1966 1970....
4.6
5.3
6.2
�1.0
1971.........
3.9
5.0
2.0
�1.8
Not pertinent.
*Growth rates are calculated using sales in current marks.
*State -owned retail outlets, consumer cooperatives, and
other socialist enterprises.
Private retail trade has been declining steadily since
1950; however, in spite of constant political and
economic pressure, the private sector still accounted
for 9.5% of total retail sales in 1971. A substantial
portion of this can be attributed to the sale of
foodstuffs; private outlets accounted for 13.7% of total
foodstuffs turnover in 1971, but their share of the
foodstuffs trade has been declining slowly since 1965
(Figure 26).
All trade is carried on at prices set by the state.
During the 1950's and early 1960's, there were two sets
of procurement prices �low prices for compulsory
deliveries within the quotas assigned by the VEAB's,
and high prices for deliveries above the quotas. In
1964 a single price system was established for g gains
and feedstuffs, in 1966 for poultry and wool, and in
1969 for meat and dairy products. The new single
prices were set so as to provide about the same average
return per unit of sales as farmers had been receiving
under the dual price system.
There are two types of industrial prices: The
enterprise, or factory price, based on production costs
plus a small profit, which is used to verify plan
fulfillment; and the industry delivery price �the
enterprise price plus a turnover tax �which is used to
measure the returns from sales to other enterprises and
to wholesalers. The final consumer price is the industry
delivery price plus an additional trade markup.
A dual pricing system for consumer goods existed
until 1959. It consisted of relatively low ration prices
and much higher HO prices for additional quantities
above the ration amounts. The system reflected the
large discrepancy which existed between supply and
demand. In setting consumer prices the state is acutely
aware of the need to meet the social requirements of
the people. The 1972 state budget provided 9.2 billion
marks -11% of the total budget �in subsidies so that
the state could maintain low prices for goods and
services which satisfy basic needs, such as food,
transportation, and housing. In contrast, items which
are considered nonessential or luxuries have extremely
high prices. The government is also sensitive to
increases in the price level and has insti'.uted a price
stabilization program designed to combat creeping
inflation. During the present 5 -year plan, it has
decreed that consumer prices may not be increased
and that ;Mail prices of new and imprr ved consumer
goods must be confirmed by the Council of Ministers
or by the Minister and Chairman of the Price Office.
The state also began an attempt in 1972 to insure
adequate supplies of selected lower priced goods by
incorporating the production of fixed minimum
amounts of these goods in the economic plan.
i
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f
i`
FIGURE 26. Summary of retail trade In major commodity groups (U /OU)
AVERAGE
The growth of retail sales has been rapid, reflecting have been growing at a faster rate than food sales
not only a substantial increase in the volume of (Figure 27). Within the'nonfood category, sales of
personal consumption but also a change in electrical appliances and other luxury items, along
consumption patterns. According to East German with building materials, have grown more rapidly
statistics, retail sales (in current prices) in 1971 were than those of shoes and textiles.
48% above the 1960 level, an average annual growth Problems still exist in retail trade, however, in terms
rate of about 3.6 Both the growth in the volume of of quality and shortages of goods. As the consumers
trade and the changes in its composition reflect an have been able to satisfy most of their quantitative
improvement in the standard of living. Nonfood sales needs for goods and services, they have become
FIGURE 27. Composition of retail sales, by major commodity groups (U /OU)
(Percentages of respective totals)
PERCENTAGE
DISTRIBUTION
OF TRADE
OF WHICH
ANNUAL
FOODSTUFFS
OF WHICH
RATE OF
AND
1965
1966
1967
1908
1969
1970
1971
GROWTH
RELATED
Related INDUSTRIAL
and
Percent
Total
goods
GOODS
Shoes
Other
TOTAL
4.5
Socialist
77.9
78.4
78.8
79.0
80.0
80.5
81.3
5.1
Commission
8.8
8.9
9.1
9.1
9.3
9.4
9.8
5.3
Private
13.3
13.7
18.1
11.6
10.7
10.1
9.5
-1.2
Foodstuffs
31.3
43.5
6.5
61.0
100
3.7
Socialist
77.0
77.6
78.1
78.4
79.1
79.8
80.8
4.4
Commission
6.1
6.8
6.,E
6.3
6.3
6.8
6.1
3.3
Private
16.8
16.1
16.7
15.3
14.6
14.0
13.7
0.1
Related
NOTE Percentages are calculated
5.1
Socialist
76.4
77.0
77.7
79.1
80.1
81.0
81.9
6.3
Commission
16.7
16.6
15.4
14.9
14.5
14.,E
13.6
2.6
Private
7.9
7.4
6.9
6.0
5.4
4.8
4.5
4.3
Shoes........................................................,............
4.1
Socialist
75.9
75.9
76.7
77.5
78.0
78.8
80.1
5.1
Commission
13.4
18.9
13.9
13.8
14.3
14.6
13.9
4.9
Private
10.7
10.1
9.4
8.7
7.7
6.7
5.9
-5.8
Textiles clothing
4.1
Socialist
88.9
84.0
84.E
84.3
85.1
86.5
86.3
4.6
Commission
7.1
7.8
7.5
7.7
7.8
8.1
8.0
6.3
Private
9.0
8.7
8.3
8.0
7.0
6.3
5.7
-3.7
Other industrial goods
5.5
Socialist
77.4
77.7
78.0
78.0
78.4
78.9
80.0
6.1
Commission
8.3
8.7
9.1
9.7
10.3
10.7
10.5
9.7
Private
14.3
13.6
12.8
11.3
11.3
10.4
9.6
-1 .4
The growth of retail sales has been rapid, reflecting have been growing at a faster rate than food sales
not only a substantial increase in the volume of (Figure 27). Within the'nonfood category, sales of
personal consumption but also a change in electrical appliances and other luxury items, along
consumption patterns. According to East German with building materials, have grown more rapidly
statistics, retail sales (in current prices) in 1971 were than those of shoes and textiles.
48% above the 1960 level, an average annual growth Problems still exist in retail trade, however, in terms
rate of about 3.6 Both the growth in the volume of of quality and shortages of goods. As the consumers
trade and the changes in its composition reflect an have been able to satisfy most of their quantitative
improvement in the standard of living. Nonfood sales needs for goods and services, they have become
FIGURE 27. Composition of retail sales, by major commodity groups (U /OU)
(Percentages of respective totals)
OF WHICH
FOODSTUFFS
OF WHICH
AND
Textiles
RELATED
Related INDUSTRIAL
and
GOODS
Foodstuffs
goods
GOODS
Shoes
clothing
Other
TOTAL
1950 61.1
66.7
83.3
38.9
6.1
41.6
51.3
100
1955 57.7
68.4
31.6
48.3
6.7
43.9
49.4
100
1960 66.4
69.1
30.9
44.6
5.1
36.1
58.8
100
1965 56.5
68:7
31.3
43.5
6.5
31.5
61.0
100
1970 55.8
67.1
31.8
44.1
6.�
31.1
61.7
100
1971 66.3
66.8
33.1
44.7
6.1
$0.9
61.9
100
NOTE Percentages are calculated
using sales
in 1972 marks.
23
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increasingly quality conscious. The state has
acknowledged that such items as shoes, yard goti ds,
and ready -made clothing have failed to meet quality
standards and it has admitted that shortages exist in
fruits and vegetables, furniture, chinaware, leather
shoes, and hosiery. The current 5-year plan
acknowledges the problems of quality, shortages, and
creeping inflation, but solutions have been elusive.
C. Policy and development (C)
1. Policy
The accelerated pace of technological Mange has
been the main consideration in Fast German
economic policy since the mid- 1960's. Earlier policy,
oriented toward catching up with West Germany. had
encouraged the application of new technology, but it
had mainly emphasized increasing output by tapping
"hidden reserves." By the early 1960's this policy had
clearly failed, and the regime was soon converted to a
more systematic approach to introducing new
technology, or, in East German terminology,
"mastering the scientific technical revolution."
The possibility and necessity of accelerating
technological change grew out of a large increase in
the availability of Soviet crude oil and a concurrent
weakening of Soviet willingness and ability to increase
deliveries of other essential raw materials, including
coal, ferrous metals, textile fibers, and wood and
cellulose. The rise in Soviet crude oil deliveries from
less than 2 million tons in 1960 to over 1 I million tons
in 1972 led to .arge investments not only in oil refining
but also in the petrochemical industries, in trucking, in
dieseliuition of the railroads, and in developing plastic
and synthetic products. At the same time, demand on
the CEMA market for more up-to-date manufactures
became more insistent, also stimulating technological
change, especially in machine building industries.
Trade with the industrial West also played an
important part in technological change. Increased
imports were needed not only of investment goo d% but
also of intermediate produce rarely available through
CEMA trade, and even of raw materials in short
supply. To plat and manage the complex changes in
economic structure required higher technical
competence at all levels and more reliance on
decisionmaking at lower levels. The first response of
the regime, worked out by a former engineer and
industrial minister, Erich Apcl, was the reform
program called the "New Economic System of
Planning and Management, announced in June
1963. This program gave increased responsibility to
24
the State Planning Commission and to the industrial
associations (VVB' but in 2 years' trial in 1964 -65,
decentralization did not produce the higher growth
rates promised by Apel. Mote setioudy. ;he
encroachment of planner and managers into police
matters sharpened opp..ition within the patty
apparatus and the leadership.
Vie initial tr form movement ended with the suicide
of Erich Apel iii December 1961. apparently in despair
over basic disagreements over plans for 1966 -70. In
January 1966, industrial ministries wrie again
established, and the powers of the State Planning
t ommission and the VVB's were sharply reduced.
Waller Ulbricht, who thereupon "timed full, direct
control of economic policy. discontinued efforts at
formal decentralization. The main changes after 19%
came in 1969, with the establishment of prxedures for
conseNdating group enterprises into comhines
(Komhinita), and the general use of foreign trade
multipliers as a basis of internal pricing of exports and
imports. otherwise. he rrliecd on giving increased
discretionary authority to maoagen and on efforts to
stimulate managerial incrn.ives
Ulbricht by no means abandoned, but rather
speeded tip. the efforts to stimulate and to adapt to
technological change. Beginning in 1966. he radicadl,
revised investment priorities to push the development
of agriculture, transport, and construction. and to
expand nutp of rhrtronid, plastid. %ynthrtic%, and
industrial consumer goods. The effort was converted
into it crash program at the Seventh Party Grngre%% in
1967. and it gathered speed in 196449.
Ulbricht prnisted in this program in 1970 in %pity of
increasing supply difficudtim. aggravated by the
exceptionally hard winters of 1964 -69 and 1969.70
and mediocre crops in 1969 and 1970 The warning
signs included growi.ig backloh of unfinished
investment projects: mounting trade deficih. and
spreading ;hortagc% of fuel and power. of nv.ny
intermediate product% for the enginrring indontrir%.
and of foodstuffs and consumer goods
Finally, in September 1970 the- Polithuro decided.
over Ulbricht'% objections, to adopt revised national
economic priorities and publicired them at the 20th
meeting of the Central Committee that followed in
Decrmbrr. Total investment was to be cut slightl in
1971 and was to grow slowly thereafter through i9i5.
with sharp increases in the %harts allocated to the fuel%
and power and chemical indutttim and corresponding
reductions in the %hare% of the rlectronid induory.
consumer goods. agriculture, and services. A major
effort was to be made to expand %upplin of machinery
component% and %pan- parts. and supplie%of ImAtuff%
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W_ xw
and consumer goods were to be stabilized. Trade with
the U.S.S.R. was to he balanced at any cost, and an
effort was to be made to balance trade with West
Germany.
In order to catty out these decisions, patty contml
over the economy was greatly tightened. Enterprises
lost the discretionary authority that they had acquired
in the late 1960'1 to change their prod ct -mix, to plan
investments, and in some cases to engage in foreign
trade on their own account. Increased awe was made of
physical indicators in setting plan goals.
This policy was taken over by Etich Honecker when
he replaced Walter Ulbricht in May 1971 as Party
First Secretary. In 1911 -72 he attained the most urgent
objectives in the fields of investment, supply, and
foreign trade. Toward the end of 1971, as conditions
began to improve, lionecket allowed enterprises to
change approved plans by small percentages �by I%
to 1.5% for plan indexes, by I% for plan balances, by
10% fer product -mix, and by 3% for other product
balances. Controls over investment and foreign trade,
however, weir not loosened.
Noneckei s most notable initiative in economic
policy was his rapid takeover of wmistate -owned
enterprises in 1972. By mid -1972- most had been
turned into or absorbed inter state enterprises. This was
a sharp change from the recent policies of Ulbrichl.
who in the late 1960'% had allowed private and
srmistate�owned enterprises to flourish.
The rust tmublewme problem that remained at the
end of 1972 was the unsatisfactory supply of industrial
consumer goods. Supplies of some scarce prxduct
especially furniture, kitchen utensils, china and
pottery. carpets and floor covering, and detergents
"se substantially in 1972, but these irctra%m made
only a beginning in satisfying pent-up consurtwf
demand. Accordingly, the leadership planned large
additional increases in 1973 by expanding domestic
comumet goods production. by dirrding a greater
$hair of output to domestic consumption (and a
smaller share to export$), and by gnaelly in, rrasing
import%. booth from Communht coumirim and from the
West. Thew efforts wrre dr.ignessd not only to appraw
long-standing complaints. boil aLo to h Ap compensate
for popular disappointment over the results of the
basic treaty with West Germany increased ideologi-
cal prmsure and retention of tight cnhnls on East
Carman visits the West.
liemecket successors in 1971.72 came at the cost of
rising trade deficits with the West. also the price of
carrying out the plan for 1973. In 19'51. East Germany
managed to narrow its deficit in ir&& with West
Germany. but deficits continued in of[ er trade with
the industrial West, and a deficit appeared again in
1972 in trade with West Germany. If economic growth
continues to depend so heavily on imports from the
West, East Germany's dept servicing is likely to rise by
tv'ie mid- 1970's to the point at which it will be hard to
manage.
The solution to this problem is not in sight. East
Germany espouses closer economic integration with
the U.S. S. R. and the rest of Eastern Europe and hopes
thereby to further specialization and, in turn,
competitiveness, but integration will hardly reduce the
need for alternate sources of supply, especially for
scarce raw materials and new technology. Finding
ways to finance the increasing imports from the West
appears to be the key to continued stability, growth,
and technological change in the 1970'x.
4. Development
After the first significant postwar reconstruction
effort in 1949 -30, the economy began a period of
impressive growth. During 1931 -33, GNP increased by
40 and industrial output by i0%. A substantial part
Of the increase was achieved through more intensive
use of existing plants by increasing their employment
and supply of materials. investments during that
period were small and were devoted largely to heavy
Industry. In contrast to the rapid industrial recovery.
agricultural output stagnated because of pooh weather
and a harsh collectivization policy. The Berlin riots in
June 19.53, combined with the "New Course" in all of
Eastern Europe that year, tesulted in some
improvement in living conditions and in the allocation
Of materials to agriculture, basic materials, and light
indntrv.
During 19.% -60, industrial output tine sulman-
tially �at a early rate of about 7%�but more slowly
than p- ojected by the planners. Planner had largely
ignored the rffrcts of emigration, which doomed the
planned increases in induntrial employment. As
unused prxluctivr capacity was bring rapidly
abtsnrbrd. new invr�tmrnt (organ to play an increasing
role in incbntrial drvrlopmrnt. almost doubling in
value bretsvrrn IV36 and 1960. Most investment was
channe;..l to the furls and powrt sector. with an
increased shirr also going into the manufacturing
sector. (onstrerctio *n output rise 58% during the 193Fr-
60 period as the result of increased supplies of building
materials. and agriculturr also reghtcred strady
improwemenl.
Encouraged by the $ucrrsses of the late 19.50'$. the
regime proclaimed the goal of surpassing Wrsl
Germane by 196.5. both in output per %%ofkrr and
consumplioa per capita In order to reach thh goal,
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the regime planned "o maintain a high rate of
economic growth throughout the period of the Seven
Year Plan (1959 -65). he regime failed, however, to
take into full account the lack of further reserves of
productive capacity, the unfavorable age structure of
the population, and the negative impact of its policies.
The policies increased pressure against the remaining
private sector and brought about the abolition of the
industrial ministries in 1938 which led to disorganiza-
tion and confushn of industrial management.
By 1961, an extremely hard wint a massive
exodus of iahor to West Germany, and increasing
foreign trade imbalances all combined to produce a
real economic crisis. The border with West Germany
was closed in August 1961, the unrealistic Seven Year
Plan was quietly abandoned in early 1962, and the
publicity about overtaking �'est Germany was
dropped. During i96i -63. GNP grew at an average
annual rate of only 2.3 and agriculture fell well
below the 1960 level. Per capita penopal consumption
rose by only I between 1960 and 1963, actually
falling slightly in 1962 and 1963. Investment was
particularly hard -hit, growing by only 2% annually
during this period.
In response to the economic crisis, the regime
fostered a consolidation and recovery and began for
the first time to consider problem., of quality and
efficiency. Investment was concentrated on modemiz-
in% and improving existing installations tather than
initiating large new projects. The culmination of thr
regime's efforts to deal with these problems was the
New Economic System,
By 1961 the worst of the crisis had passed, and the
econotny, temporarily freed from the wont forms of
central control and operating under looser and more
realistic plans, began to grow again, though at well
below the rates of the late 1950'%. In 1964 -68, GNP
grew at an average of 3.4% annually, industrial
production. at 3.1%x, and agricultural production, at
3.4%.
In a remarkably similar parallel to the late 1950's.
the regime, at Ulbricht's personal urging, launched
another program of forced growth in 1966-67. The
main emphasis was placed an the petrochemical and
electronic industries, with the goal of placing East
Germany in a position of leadership in these fields and
providing it with more competitive exports that could
he sold to both Wester and Communist markets.
Dogged punu:t of this policy. in spite of two harsh
winten and poor harvests in 1969 and 1970, resulted in
supply bottlerrcks, backlogs of unfinished investment
projects, and severe shortages. Output of potatom.
sultm bras, and fodder crops in 1969 all fell below
25
1965 production. Consumer supplies of fotxlstuffs in
1969 -70 could be maintained only by increasing
imports of agricultural and food supplies by 23% in
1969 and 26% in 1970. Investment and construction
not only fell far short of planned levels, but also
resulted in shortages and rationing of electric power, as
power projects tinder construction remained
unfinished. Severe shortages of semi manufactures,
spare parts, and st.bassemblies also developed. Large
above -plan imports were necessary to keep the
economy functioning, and a 2 -year. $800 million trade
deficit accumulated in 1969 -70, which contributed to
the discarding of the forced growth program it the end
of 1970 and the subsequent removal of Ulbricht from
leadership.
The new leadership under flonecker sought to bring
the economy into balance, in part by expanding the
production of spare parts and industrial materials and
boosting the capacity of the power industry. Rolled
steel production is to be increased to 6.1 million tons in
19 (compared to 3.4 million tons in 1970), and 3046
of industrial investment between 1971 and 1975 is to
be channeled into the power and coal industries.
Overall investment policy included a cutback in 1971
in total investments, a modest 277- increase in
investments between 1970 and 1975, and a restriction
of new plant construction to 50 to 60 large projects,
which will he carried out as state planning projects
under direct control of the government.
The 1943 plan continues the basic pattern of 1971
and M72, which were admitted to be years of
"consolidation." National income in 1973 is
scheduled to grow by 5.746, industrial production, by
6.5%x, and labor productivity, by 5.7%. Efficiency in
production continues to he emphasized in 1973, a% in
19 1 and 1972, and the production expenditure per
unit of output is scheduled to drop by 2.1% for
industrial materials, 2.0% for electric power, and 4.6%
for rolled steel. The major shift in 1973 is in the greater
effort to be made to increase consumzr supplies.
especially for products in chronic short supply.
Consumer goods for the population are 0 increase at
an annual rate of 6.2 in 1973, and investment
eypenditures are to rise by 63% for the glass and
ceramic itodi stries and 37% for the food industry.
3. Government finance
The financial institutions in the centrally planned
East German economy are divided into the organs of
the Ministry for Finance including the financial
wection% of all regional levels of government �and the
,.late banking system. Until January 1968 the latter
was headed by the German Bank of Issue (DNB).
,J
t
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which controlled the issue of currency, carried on
foreign exchange transactions, collected taxes,
maintained the obligatory accounts of state -owned
industrial enterprises, and handled all indust ia) short-
term credit. The other specialized banks were directly
responsible to the DNB and had no policy
independence. The investment Bank maintained the
current accounts and handled short -term credits for
i construction enterprises and provided long -term
credits for industrial investment. The Farmers' Bank
made loans largely for agricultural investment, while
the Trade Bank handled the accounts of and provided
long- and short -term credit for trading enterprises.
As the result of a January 1968 reorganization, the
State Bank of the CDR (Steatsbank der DDR) is now
responsible for general monetary and fiscal policy,
currency regulation, and interbank lending opera-
tions. The Industry and Trade Bank (IHB) handles all
current operations, including both long- and short
term credit for industrial, construction, transportation,
and trade enterprises. The IIIIi, which took over the
regional and industrial branches of the DNB, is also
supposed to work closely with the enterprises in
drawing up financial, investment, and operating
plans. The Farmers' Bar.k (now known as the Bank for
Agriculture and Food Industries) has taken over
responsibility for industrial enterprises processing
foodstuffs. As under the old system, the most
important function of the banks and of the Ministry
for Finance is to control and monitor the operations of
i the economy �a function embodied in the financial
,.Jan.
The financial plan on the national level organized
the flow of funds within the economy according to the
dictates of the national economic plan for productien
i and consumption. All lower levels of government, all
state enterprises, and some types of cooperatives also
have their own financial plans. Projections are made
for the financial needs not only of the state sector but
3 also of private enterprises, as well as far the incomes
and expenditures of the population. The main
components of the financial plan are the long- and
short -term credit plans, the cash plan, and the budget.
The State Bank draws up both the long- and short-
term credit plans. Before 1963 short -term credits were
automatically extended to finance accounts receivable
and inventories, and short -term credit almost doubled
between 1955 and 1962, a period when inventories
j were rising rapidly. Beginning in 1963, enterprises
were encouraged to use their own resources to cover a
larger share of current expenses as well as for longer
term investment needs. The normal interest rate for
i credit is 5%. but lower rates are granted for priority
government tasks. Preferential rates are granted to
finance above -plan production, maintenance of
economic reserves, changes in production to improve
quality, and assistance to the housing program.
Banks are also empowered to charge punitive
interest rates (up to 10%) to enterprises which are
suffering from unplanned losses, are failing to pay
their hills, or are accumulating unplanned inventories.
Increased emphasis has been placed on hank
intervention in the economy since 1971, especially in
regard to unplanned inventories, which had risen to
11% of total inventories of centrally controlled
industries by ".970. These inventories were sharply
reduced in 1972, in part because of the assistance of
the IHB in providing funds to eliminate bottlenecks in
production.
The rash plan is a projection of currency flows into
and out of the banking system. Since the regime tries
to keep cash payments to a minimum, the only major
cash transactions are wages and salaries and retail
sales. Thus, the cash plan is c%wntially an estimate of
income and expenditures in private households. The
chief aim of the plan is to insure that increases in
income are absorbed by increased purchases of gotAs.
Inflation is a emotant problem, since the available
supply of consumer goods and services cannot keep up
with rising money incomes. The cash plan is backed
up by detailed quarterly balances of household
incomes and expenditures.
Although the importance of the credit plan has
risen, the heart of the financial plan continues to he
the budget. It is a major means of implementing the
regime's plans for economic growth and of financing
the activities of the state. The state haadget is made up
of the budget of the republic, the budgets of regional
authorities, and the centrally planned financial
resources of state -owne3 enterprises. Because it
includes valuable information on important and
sensitive aspects of economic activity and state policy,
detailed information on its contents is closely held.
The Ministry for Finance insures that versions
circulated within the government are carefully edited
and that only selected and meaningless figures are
released for publication. Figure 28, showing published
revenue and expenditure data for 1972 and 1973,
illustrates the limitations in the available data.
The budget is still a major source of funds for
capital investment, although budget grants for
investment have dropped. The greater part of
investment funds is now channeled from the budget
through the banking system. The budget also supports
industrial and agricultural enterprises with subsidies
and other payments. It makes substantial direct
27
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FIGURE 28. Consolidated state budgets (U /OU)
(Million GOR marks)
payments to individuals, mostly as pensions, social
security benefits, and scholarships, and is the sole
source of financing for national defense, civil
administration, and public services.
Turnover taxes, paid by producers but levied mostly
on consumer goods, provide a large share of budget
revenues. Profit taxes on socialized enterprises are also
an important source of revenue, as are various taxes on
private and semistate -owned concerns. In 1968 the
regime introduced land -use taxes designed to
prevent alienation of valuable agricultural land �and
capital -use charges �to encourage full use of capital
goods and to reduce excess inventories. Contributions
of these taxes to revenues are probably not large.
Additional revenues are derived from direct wage and
income taxes and from payments made into the social
security fund by employees, employers, cooperative
members, and the self- employed.
The East German currency is the mark, usually
referred to In Western usage as the DME (Deutsche
:Nark East). It is used exclusively in internal
transactions. At the end of 1971, the GDR announced
it was revising its exchange rate DME4.2 to US$1.00
to DME3.15 to US$1.00 to keep it in parity with the
West German mark. A comparison of foreign trade
statistics reveal, however, that East Germanv revalued
the "valuta mark� by 9% �from DME4.2 to US$1.00
to DME3.8 to US$1.00 �in keeping with the changes
made by the U.S.S.R. and other CEMA countries. In
1973 the rate undoubtedly will be adjusted again to
reflect the dollar devaluation and West German mark
revaluation.
D. Iniernational economic relations
1. Foreign trade
a. Policy (C)
The development of East German foreign trade
since World War If has been determined by the
absorption of East Germany into the Soviet economic
sphere of influence. The Soviet Union and the other
Eastern European Communist countries have largely
replaced West Germany as a market and as a source of
raw materials. This forced redirection of trade
handicapped East German recovery and growth
throughout the postwar period.
During the early postwar years the U.S.S.R.
continued to collect reparations from East Germany;
still worse, however, the U.S.S.R. could not supply the
industrial raw materials previously supplied by West
Germany, nor could it provide a market for :nano
specialized East German manufactures. In addition,
the redirection of trade toward Soviet markets forced
the East Germans to develop some inefficient new
industries, such as shipbuilding and uranium mining.
Exporting to the relatively undeveloped markets of
Communist Eastern Europe and the U.S.S.R. �where
most East German exports of machinery and
equipment were readily saleable and where there was
little competition from Western suppliers� provided
no incentive for modernizing designs and technology.
In addition, the rapidly growing machinery trade with
the Communist countries was not accompanied by an
exchange of components or subassemblies; the
exchanges involved increasingly obsolete machinery
lines with little interrelationship.
As Western suppliers began to compete with East
Germany to supply machinery and equipment to the
Soviet Union and the other countries of Communist
Eastern Europe, and when East Germany began
trying to expand its own machinery sales in the West,
it discovered that even the line' in which it was
traditionally strong were 10 to 15 years behind
comparable equipment in the West. Recent strenuous
l
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1012
1973
Revenges:
Social security
10,203.7
10,470.4
Production,, inventory, profits, and
output taxes and other receipts....
44,229.8
51,297.7
Socialise, cooperatives and workers'
to �es
1,062.6
0.50.8
Others
26,805.2
2. 442.9
Total revenues
82,301.3
90,261.8
Of which:
Central government.........
64, 381.9
70, 498.0
Besirke
17,919.4
19,763.8
Expenditures:
Education, culture, health, housing,
subsidies
22,6x:1.4
24,826.5
Replacement of fixed assets for sports,
education, etc
979.1
1,002.9
Social security
15,904.8
19,569.6
Financing of scientific tasks for in-
vestments of VEB's, state com-
bines, and VVB's
3,965.3
5,214.5
State farms investments, price sur-
charges, soil improvement. etc....
2,202.8
2,061.3
Defense
7,525.0
8.328.0
Others
28,885.9
30,196.0
Total expenditures
82,244.3
90,198.8
Of which:
Central government.........
64,324.9
70,435.0
Besirke
17,919.4
19,763.8
payments to individuals, mostly as pensions, social
security benefits, and scholarships, and is the sole
source of financing for national defense, civil
administration, and public services.
Turnover taxes, paid by producers but levied mostly
on consumer goods, provide a large share of budget
revenues. Profit taxes on socialized enterprises are also
an important source of revenue, as are various taxes on
private and semistate -owned concerns. In 1968 the
regime introduced land -use taxes designed to
prevent alienation of valuable agricultural land �and
capital -use charges �to encourage full use of capital
goods and to reduce excess inventories. Contributions
of these taxes to revenues are probably not large.
Additional revenues are derived from direct wage and
income taxes and from payments made into the social
security fund by employees, employers, cooperative
members, and the self- employed.
The East German currency is the mark, usually
referred to In Western usage as the DME (Deutsche
:Nark East). It is used exclusively in internal
transactions. At the end of 1971, the GDR announced
it was revising its exchange rate DME4.2 to US$1.00
to DME3.15 to US$1.00 to keep it in parity with the
West German mark. A comparison of foreign trade
statistics reveal, however, that East Germanv revalued
the "valuta mark� by 9% �from DME4.2 to US$1.00
to DME3.8 to US$1.00 �in keeping with the changes
made by the U.S.S.R. and other CEMA countries. In
1973 the rate undoubtedly will be adjusted again to
reflect the dollar devaluation and West German mark
revaluation.
D. Iniernational economic relations
1. Foreign trade
a. Policy (C)
The development of East German foreign trade
since World War If has been determined by the
absorption of East Germany into the Soviet economic
sphere of influence. The Soviet Union and the other
Eastern European Communist countries have largely
replaced West Germany as a market and as a source of
raw materials. This forced redirection of trade
handicapped East German recovery and growth
throughout the postwar period.
During the early postwar years the U.S.S.R.
continued to collect reparations from East Germany;
still worse, however, the U.S.S.R. could not supply the
industrial raw materials previously supplied by West
Germany, nor could it provide a market for :nano
specialized East German manufactures. In addition,
the redirection of trade toward Soviet markets forced
the East Germans to develop some inefficient new
industries, such as shipbuilding and uranium mining.
Exporting to the relatively undeveloped markets of
Communist Eastern Europe and the U.S.S.R. �where
most East German exports of machinery and
equipment were readily saleable and where there was
little competition from Western suppliers� provided
no incentive for modernizing designs and technology.
In addition, the rapidly growing machinery trade with
the Communist countries was not accompanied by an
exchange of components or subassemblies; the
exchanges involved increasingly obsolete machinery
lines with little interrelationship.
As Western suppliers began to compete with East
Germany to supply machinery and equipment to the
Soviet Union and the other countries of Communist
Eastern Europe, and when East Germany began
trying to expand its own machinery sales in the West,
it discovered that even the line' in which it was
traditionally strong were 10 to 15 years behind
comparable equipment in the West. Recent strenuous
l
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efforts by the East Germans to upgrade their
production have resulted in modest success, especially
since 1970, in gaining export markets in the West for
particular lines of machinery and equipment, notably
office and textile machines, machine tools, and ships,
Despite these recent gains, East Germany still trades
at somewhat of a disadvantage with most countries of
Western Europe, paving prices that are substantially
higher than world market prices for its imports and
receiving prices that are much less than world market
prices for its exports. With West Germany, East
Germany has enjoyed more favorable terms of ,rade.
East German terms of trade with Communist countries
are on the whole favorable �the higher prices of many
imports are fully offset by the relatively high prices
received for its exports.
Membership in CEMA had little effect on foreign
trade prior to the 1970's because of East German
preference for bilateral integration with the U.S.S.R.,
coupled with the weakness of the organization due to
its unwillingness to tackle the kcy problems of bilateral
trade, lack of specialization, and nonconvertible
currencies. The establishment of the much- heralded
International Bank for Economic (',00peration (IBEC)
in 1964, while facilitating the clearing of accounts, did
little to encourage multilateral trade. In 1969 -70,
however, the East Germans changed course and
grudgingly accepted the goal of integration within
CEMA, in part as a consequence of Soviet refusal !o
support Ulbricht's program of bilateral integration,
but also because of the apparent willingness of the
CEMA membership at that time to foster moderniza-
tion through specialization and coordination.
As one result of the new attitude toward CEMA,
East Germany signed a CEMA agreement in January
1972 for specialization in the production of
metalcutting lathes and products made of glass and
ceramics. East Germany has also been granted project
funding by CEMA's new International Investment
Bank (IIB) for expansion of a machine building
enterprise (1971) and for a factory to produce
chemical equipment (19'12). Despite its acceptance of
an increased role in CEMA integration and
specialization, East Germany remains a conservative
within the organization and opposes Hungarian and
Polish proposals for decentralized trade and
convertible currencies.
Trade between East Germany and non Communist
countries has been strongly influeuuced by the political
aims of the regime. Trade with the less developed
countries has grown rapidly since 1963, as the cast
Germans have increased their economic assistance to
encourage recognition by nonaligned governments.
The first breakthrough was recognition by Iraq in
April 1969, followed in quick succession by several
other Middle Eastern and Afro -Asian countries. Trade
with the industrialized countries of the West has been
allowed to grow rapidly during periods of comparative
political relaxation such as the mid- 1960's, but it has
been restricted daring periods of strain. Throughout
the entire postwar period, there has been an erratic
policy of attempting to reduce economic dependence
on West Germany by shifting trade to other
industrialized countries. but this policy has had little
long -term success.
The interrelationship between economic and
political motives are most visible in interzonal trade
with West Germany. For West Germany, political
considerations have been the overriding factor in its
involvement with interzonal trade even though a
number of individual West German firms derive
considerable financial benefit from the trade. In the
early !960's interzonal trade was viewed by the West
Germans as a means of keeping access to West Berlin
open while now it represents a part of its Ostpolitik.
East Germany has also experienced the conflict
between political and economic considerations
associated with interzonal trade. In contrast to West
Germany, however, economic factors have in most
cases dominated the GDR's policy for the develop-
ment of interzonal trade. In the early 1960's trade fell
as Easi Germany tried to reduce its economic
dependence on interzonal trade. From 1963 to 1966
the value of trade grew steadily, but its composition
changed to reflect East Germany's policy of reducing
its economic dependence on West Germany and to
bring pressure on the West German Government to
make political concessions to encourage fur'her
increases. in December 1968, a new interzonal trade
agreement was signed, embodying a number of
featares East Germany wanted, including an interest
free "swing" credit amounting to 25% of the value of
East German exports to West Germany in the previous
year. In recent years interzonal trade has become an
important factor in the economic growth of the CDR.
East Germany was able to bring interzonal trade
nearly into balance in 1971, but could do so only by
incurring a large deficit with other industrial
countries. Another large deficit in 1972 brought East
Germany's interzonal trade debt to more than $550
million by the end of 1972.
The future of interzonal trade in the short run seems
assured since West Germany has pledged a
continuation of the special "innerdeutsche" trade,
and the other Common Market countries have at
present accepted this special relationship. In the
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longer run, however, as trade between the Common
Market and the GDR expands and becomes
significant it is difficult to predict the EEC's posture
on the interzonal trade issue. Another factor which
must be considered when discussing the future of
Interzonal tr,.de is the attitude of the CEMA countries
with respect to East Germany's special economic
relationship with West Germany after the GDR is
generally rec- agnized as an independent state by the
West.
b. Volume and direction (U /OU)
East German foreign trade on commercial account
has grown rapidly since 1950. Estimated at constant
prices, the volume of commercial trade in 1970 was
about 7 times that of 1950, whereas GNP was only
about 2 th times the 1950 level. If the 1950 trade is
adjusted to include uncompensated deliveries to the
U.S.S.R., however, the value of exports in 1971 .vas
only about five times the 1950 level. In spite of this
rapid growth, total foreign trade in 1971 was still only
about two- fifths more than East Germany's external
trade (including trade with the rest of Germany) in
1936. Commercial trade, expressed in terms of U.S.
dollar equivalents, is summarized in Figure 29.
The geographical composition of East German
trade has remained largely stable since the 1950's.
About three- fourths of the trade is with other
Communist countries, although the Communist
countries' share has gradually declined. The U.S.S.R.
alone accounts for over half of East German trade with
Communist countries, and the other Eastern
European Communist countries account for most of
the balance. Because of East German dependence on
imports of essential raw materials from the U.S.S.R.,
this trade plays a key role in the development of the
economy. The Soviet share in total trade rose from
FIGURE 29. Value of commercial foreign trade (U /OU)
(Millions of equivalent U.S. dollars)
TOTAL T11AOti
UfVIA billion
Communist
US$7.2 billion
71.7 percent
Other
Pattern
Europe
u.s.s.a.
4.1 Other
Other
Non Communist 14.1 Industrialized
USSL2 billion
211.7 percent 10.7 West Germany
!VOTE: Totals may not equal sum of components
because of rounding
FIGURE 30. Geographic distribution of foreign trade,
1971 (U /OU)
about 43% in 1960 to 49% in 1962 and 1963, and then
declined to about 38% in 1971 (Figure 30). There have
been changes in the shares of other Communist
countries, notably a sharp drop in trade with the
People's Republic of China (in 1971 less than half the
1960 level) and a large increase (in 1963) in trade with
Cuba, to which East Germany has extended
substantial credits.
1
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COMMUNIST
NON COMMUNIST
TOTAL TRADE
Exports
Imports
Balance
Exports
Imports
Balance
Exports
Imports
Balance
1950.....
276.9
356.4
-79.5
129.1
113.2
15.9
406.0
469.6
-63.6
1960.....
1,669.4
1,616.1
53.3
537.9
578.3
-40.4
2,207.3
2,194.4
12.9
1965.....
2,296.7
2,046.4
250.3
773.0
763.2
9.8
3,069.7
2,809.6
260.1
1966.....
2,385.9
2,306.7
79.2
819.1
908.3
-89.3
3,205.0
3,215.0
-10.0
1967.....
2,599.0
2,394.3
204.7
857.0
884.3
27.3
3,456.0
3,278.6
177.4
1968.....
2,903.5
2,558.0
345.5
887.6
834.8
52.8
3,791.1
3,392.8
398.3
1969.....
3,033.7
2,987.5
46.2
1,119.4
1,135.8
-16.4
4,153.1
4,123.3
29.8
1970.....
3,386.0
3,361.6
24.4
1,195.0
1,485.4
-290.4
4,581.0
4,847.0
-266.0
1971.....
3,783.5
3,410.0
373.5
1,292.8
1,549.6
-256.8
5,076.3
4,959.6
116.7
30
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i
The share of trade with non Communist countries,
which accounted for 25% to 30% of total East German
trade throughout the IP50's, dropped in the early
1960's, but since then it has recovered and now
accounts for about 28% of total trade. Trade with
West Germany -the most important trading partner
in the non Communist area- declined absolutely
between 1959, when it accounted for I 1 of the total,
and 1962, when the share was only 8.5 it has since
risen to between 10% and I I% during 1969 -71.
Interzonal trade affords access to Western industrial
materials and sophisticated engineering products,
which are paid for through clearing accounts rather
than with convertible currency. The remaining trade
with the industrial West is widely dispersed, with no
other Western country accounting for as much as 2%
of total East German trade. In an attempt to dilute
West German influence, however, East Germany
increased its 1971 trade with France_ and japan by
72% and 62 respectively.
c. Commodity composition (1710U)
The commodity composition of East German
foreign trade (Figure 31) reflects a heavy rclinL. on
imports for supplies of foods, fibers, fuels, minerals,
and metals, and on exports of manufactured goods.
Raw materials for industry and agricultural products
accounted for about three fifths of imports until 1960,
since then their share has fallen to a little over two
fifths. Imports of light industry products and food
products have fallen as a share since 1960, as
production of those products has increased enough to
satisfy most domestic needs. Imports of machinery and
equipment declined from 5% of total imports in 1950
to 3% in 1955, but they rose sharply with the
expansion of East German investment reaching 14%
of the total by 1960 and continuing to grow rapidly
since that time. Much of this equipment has come
from Western Europe, but current long -term
agreements provide for large increases in Imports of
machinery from the U.S.S.R. and the other countries
of Communist Eastern Europe.
The commodity distribution of commercial exports
has also changed somewhat. Deliveries of machinery
and equipment, which made up only 28% of
commercial ueliveries in 1950, were more than 55% of
deliveries by 1953. The share of machinery declined in
the mid- 1950's to about 50% of total exports, as a
result of the inclusion of uranium (Aiveries in the
commercial account. Since then, the share of
machinery and equipment has risen somewhat, but
not as rapidly as the regime hoped or expected. The
other major groups of exports are chemicals and
rubber products, textiles and clothing, and petroleum
products.
The basic pattern of East German trade exports
predominantly of manufactures and imports
predominantly of basic materials -holds true both for
trade with the Communist countries and for trade
with the less developed non Communist countries.
The pattern is different, however, for trade with the
industrialized non Communist countries, in which
there is a higher proportion of raw materials and
intermediate products in exports, and a higher
proportion of manufactures, especially machinery and
equipment, in imports.
2. Balance of payments (S)
East Germany's balance of payments showed an
overall surplus on current account until the late
1950's, due to large though declining reparations
deliveries and occupation costs levied by the U.S.S.R.
From then until 1963, there was a deficit in the current
account. Thereafter there has been a slight overall
surplus; surpluses with the U.S.S.R. and less developed
countries have been largely offset by deficits with the
FIGURE. 31. Commodity composition of Imports and exports, by major groups (U /OU)
(Percentages of respective totals)
Total 100.0 100.0 100.0 100.0 100.0 100.0
*Not separately reported; presumably included in "light and food industries."
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IMPORTS
EXPORTS
COMMODITY GROUP
1960
1970
1971
1960
1970
1971
Basic materials industry......
41.8
31.3
33.8
30.5
80.8
80.6
Metalworking industry.......
14.4
36.7
36.9
51.8
56.3
56.8
Light and food industries.....
87.7
80.9
19.1
15.8
80.6
80.8
Agriculture and forestry......
15.4
10.0
9.4
Other
.7
1.1
1.4
1.9
8.3
1.8
Total 100.0 100.0 100.0 100.0 100.0 100.0
*Not separately reported; presumably included in "light and food industries."
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Industrial West. The current account with the
U.S.S.R. was nearly in balance in the early 1960's; in
more recent years surpluses have followed, except for a
deficit in 1970. Imbalances in transactions with the
East European countries have been small and have
been quickly adjusted, apart from the effect of several
sizable commodity credits, notably one of $100
million to Poland. The account with the industrial
West showed surpluses with West Germany and
deficits with other countries in the early 1960's, wiien
East Germany was trying to demonstrate its
independence of Bonn. Since the mid- 1960's, deficits
have risen sharply, both with West Germany and with
other industrial countries, mainly reflecting a
strenuous effort to stimulate technological change and
growth. At the same time, East Germany has been
running surpluses with the less developed countries,
both in the Communist area (Cuba, North Korea, and
t North Vietnam) and the non- Communist area, as a
result of aid programs and credit extensions.
Substantial trade deficits with the U.S.S.R. in 1959
62 were almost offset by earnings from goods and
services furnished to Soviet forces in East Germany,
which ran over $140 million a year. In 1963 -69 those
earnings more than offset the small trade deficits with
the U.S.S.R. In 1970 East Germany ran a net deficit
on Soviet account, but experienced a surplus again in
1971 -72.
Small annual deficits on current account with the
industrial West first appeared in the late 1950's, as the
leadership began pushing output to "overtake" its
f arch rival. In the early 1960's, as East Germany was
forced into painful readjustments as a result of this
campaign, surpluses with West Germany were offset
by growing deficits with other industrial countries. In
the mid- 1960's, larger deficits began to show up, both
with West Germany and with other Western industrial
countries, and they rose to a peak in 1970 -72.
Mounting shortages of key materials in CEMA,
together with a growing demand for Western
machinery and equipment, led to rapid increases in
imports and to estimated deficits averaging perhaps
$150 million a year in those years.
East Germany's surpluses with less developed
countries (LDC's) have mounted, especially since the
mid- 1960's. Cumulative trade surpluses with Cuba,
North Korea, and North Vietnam (chiefly the last
named) came to about $250 million by the end of
1971. Surpluses with non Communist LDC's were of
approximately the same magnitude; exports went
mainly to the Middle Eastern countries and to several
I small countries, mostly in Asia, which were ready to
grant official recognition to East Germany.
32
Commodity trade is the orJy element of the current
account that is adequately covered (for balance -of-
payments purposes) in official statistics. East German
statistics in the 1960's appear to cover total payments
made and received for commodities by major trading
areas, with two exceptions: first, Soviet deliveries of
military -end items were not included until 1966, and
second, trade with West Germany (and therefore total
trade) was not fully represented. In the 1960's East
Germany persisted in converting this trade on a basis
of 1 East German mark =I West German mark, even
though the parity achieved in the late 1950's (at 1
mark 0.238) had been upset by the successive
upward valuation of the West German mark to $0.25
(1960) and $0.273 (1969). Beginning with 1972
statistics, the nominal vaiue of the East German mark
was once again pegged at the value of the West
German mark, and this nominal correspondence will
probably be maintained.
Statistics on invisible transactions are fragmentary.
East Germany runs a substantial deficit on transport
with the Communist countries, notably with Poland.
On tourism (and movement of official delegations),
balances with the Communist countries were probably
small until 1972, when East Germany had a large
surplus with Poland (roughly $100 million) as a result
of the opining of borders and easing of foreign
exchange restrictions. The other major item in
accounts with the Communist countries is the annual
Soviet payment of over $140 million for goods and
services furnished to Soviet forces in East Germany.
This payment has been made since the beginning of
1959. Other payments interest on debts, private
transfers, licenses and copyrights, and the like �have
yielded very small balances in either direction.
Invisible transactions with the industrial West
began with substantial net earnings from tourism
(rising from a few million dollars in 1960 to $50
million in 1972). Anotber source of income is charges
for transport, postal, and telecommunications services
between West Germany and West Berlin, running at
over $50 million a year in 1971, plus some payments
for transit of Soviet and Polish goods across East
Germany. In addition Wes Germany has made two
payments of 250 million marks each on clearing
accounts, one in 1971 and one in 1972, in
consideration of East German claims on transport and
communications services to West Berlin in the postwar
period through 1966. Major outlays include
2 fwo payments of 60 million marks each were also made in 1968
and 1969 to recompense East Germany for the withdrawal of
subsidies for petroleum products, and a payment of 68 million
marks was made in 1970 to cover communications services in
1967 -69.
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Mt'!'+'!! RSS Wfwhld "`_e.!'vaR.".,. ..C Y., b! Y, r, +,Y!'i;rM.%'
payments to West Germany for rail transport and port
services in Hamburg, running at $80 million in 1971.
Payments to other Western countries for transport
services more than offset East German earnings from
those countries; the net outlay may now run at $25
million a year. Interest payments on the East German
debt may run at about $40 million. Finally, East
Germany has made outlays in West Germany [or
espionage and for the maintenance of the West
German Communist apparatus. These were estimated
in 1959 at $12 million a year, and they have probably
grown. Overall, the balance of payments with the
industrial West has probably been nearly in balance,
apart from the large retroactive payments made by
West Germany.
On capital account with the U.S.S.R., the East
German position has improved since 1959. Soviet
claims against East Germany at that time are not
known, apart from hard currency and commodity
credits of nearly $300 million drawn in 1957 -58. These
were probably repaid by 1965, but credits of about
$310 million drawn in 1961 -62 have probably been
refinanced, and credits of $200 million or more drawn
in 1970 are also probably largely outstanding. Thus,
there has been a net increase of perhaps $200 million
in East German liabilities to the U.S.S.R. since 1959.
Assets increased by more, however. The annual
"contribution" to Soviet heavy industry since 1967,
amounting to perhaps $150 million a year, will just
begin to flow back in the form of oil and other
materials in the mid- 1970's, so the cumulative
"contribution" (as of the end of 1972) might be about
$900 million.
Mur (u/ou)
ABBREVIATION
FOREIGN
CEMA........
DN3.........
Deutsche Notenbank
GHG.........
Crosshandelageaellaehajt
HO...........
Handelaorganisation
IBEC
IHB..........
IIB...........
VEAB........
VEB..........
VVB..........
Capital accounts with West Germany indicate
significant indebtedness in 1960, which increased little
through 1965, but has risen sharply thereafter and
amounted to more than $550 million (1972 exchange
rate) at the end of 1972. Of this amount, about $180
million was on "swing" credit, the unpaid balance on
the clearing account, which since 1968 has been
allowed to run to as much as 25% of East German
deliveries in the previous year. Of the remainder,
almost $145 million represents medium- and long-
term credit drawn to finance machinery purchases,
and the remainder is partly short -term and partly
medium -term credit.
Hard currency debts to other Western creditors rose
from a very low level in the early 1960's to as much as
$400 million (1970 exchange rates) on medium -teen, a
few million dollars on long -term, and an unknown
amount on short -term at the end of 1971. Of the
medium- and long -term indebtedness, perhaps $240
million was owed to NATO countries (mainly France
and the United Kingdom), with most of the rest being
owed to Switzerland and the Soviet banks in Western
Europe.
A partial offset to East German debts is a stock of
some $70 million in gold. East Germany bought
roughly $100 million in 1967 -68, but has since :'old
perhaps a third of it.
East Germany's cumulative surpluses of $175
million with North Vietnam through 1971 are
presumed to have been financed with grants. Similar
surpluses with Cuba and North Korea and with
Western LDC's have probably been financed by
credits repayable in kind.
Induetrie and Handelsbank...........
Staatabank der DDR
Volkaeigenen Erfassunga- and Auf-
koufbetrieben
Volkaeigener Betrieb
Vereinigung Volkaeigener BeMebe.....
ENGLISH
Council for Economic Mutual Assistance
German Bank of Issue
-Wholesale Trade Association
Trade organization
International Bank for Economic Co-
operation
Industry and Trade Bank
International Investment Bank
State Bank of the GDR
Procurement and Purchasing Enter-
prises
People -owned Enterprise
Association of People -owned Enter-
prises
33
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Jff1ffA"1E1 ern M-
SECRET
Places and features referred to in this chapter (u/ou)
COORDINATES
0 PN. PE.
Altenberg 50 59 12 27
Aue 50 35 12 42
Berlin 52 31 13 24
Bitterfeld 51 37 12 19
H61ilen 51 12 12 23
Bonn, West Germany 50 44 7 06
Boxberg 51 24 14 34
Brandenburg 52 25 12 33
Calvdrde 52 24 11 18
Cottbus 51 46 14 20
Crosden 50 46 12 29
Dresden 51 03 13 45
East Berlin 52 30 13 33
Eisenhiittenstadt 52 09 14 39
Eisleben 51 32 11 33
Espenhain 51 11 12 28
Freiberg 50 55 13 22
Gera 50 52 12 05
Greifawaid 54 06 13 23
Halle 51 30 12 00
Hamburg, West Germany 53 33 10 00
Helbra 51 33 11 30
Hennigsdorf 52 38 13 12
Hettstedt 51 39 11 30
Hohenwarte 50 36 11 29
Hoyerswerda 51 26 14 15
Karl-Marx-Stadt 50 50 12 55
K6nigstein 50 55 14 04
Lauta 51 28 14 04
Leipzig 51 18 12 20
Leuna 51 19 12 01
Lippendorf 51 11 12 23
Lfibbenau 51 52 13 58
Markersbach 50 32 12 52
Merseburg 51 22 12 00
Piesteritz 51 52 12 36
Potsdam 52 24 13 04
Rheinsberg 53 06 12 53
Riess 51 18 13 18
Rosthck 54 05 12 08
Saalfeld 50 39 11 22
Sangerhausen 51 28 11 18
Schkopau 51 24 11 59
Sch6nebeck 52 01 11 45
Schwarze Pumps 51 32 14 21
Schwedt 53 04 14 18
Seelingstddt 50 47 12 15
Silesia, Poland and Czechoslovakia (region) 51 00 18 00
Thuringia (region) 51 00 11 00
Trattendorf 51 32 14 23
Unterwel!enborn 50 39 11 26
Vetachau 51 47 14 04
Vockerode 51 51 12 21
Werra (stream) 51 26 9 39
Wismar 53 54 11 28
Zielitz 52 17 11 41
Zs.chornewitz 51 43 12 24
MY
I SECRET
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