ECONOMIC DEVELOPMENTS IN SOVIET ZONE GERMANY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80-00809A000700060110-1
• Release Decision: RIPPUB
• Original Classification: R
• Document Page Count: 13
• Document Creation Date: December 22, 2016
• Document Release Date: October 5, 2011
• Sequence Number: 110
• Publication Date: May 2, 1952
• Content Type: REPORT

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CLASSIFICATIO "? ~"-'RICTF~
CENTRALS II ENOE~AGEN y
INFORMATION FROM
FOREIGN DOCUMENTS OR RADIO BROAD^ASTS
COUNTRY Garman' Denoaratic Republic
Lr
SUBJtCT Economic - 1(aapower, agriculture, industry
HOW
PUBLISHED Pamphlet
WHERE
PUBLISHED Hoorn
DATE
PU9LISHED 1951
LANGUAGE German
nn a wean wnuea nrosaawe amrnw nor unau span
er nor ams nano mue nor euow or unosua an ro
s. s. e.. a au u. u aeons. m nasanNOe a nor aauunos
er m wsnen n an coca n u ausreoems news n ran
cams n ur. urseNrnoe or nu rose u roee~rm.
REPORT
CD H0.
DATE OF
CATE DIST. .L /11~ 1952
N0. OF PAGES 13
SUPPLEMENT TO
REPORT N0.
Die Wirtschaftestruktur der Sow~etzone and ihre gegenwaertigen sozisl
una_wirtschaftsrechtlichea Tendenzen.
ECOAOHLC DEYE7APM6liPB SN SOVIET ZORE GERMANY
Figures and tables referred to are appended
Structural Changes is Soviet, Zone Germany
Order the Nazi regime, the Soviet ~oae area increased its share in total
German industrial Production from about 25 to about 26 percent during the re-
armament period and maintained that level to the end of the war. In contrast,
however, the present production of essential basic materials as opposed to
industrial production in the Soviet Zone area accounts for only the following
percentages of total German production: coal, 2.3; crude iron, 1.3; crude
steel, 6.6; sulfuric acid, 20.0; lumber, 22.1; cellulose, 17.1; cement, 14.4.
The productiott of these basic materials, which since 1945 represent a definite
bottJ~aeck in the East German economy, cannot be appreciably increased in the
Cen~.al German area.
The Soviet Zone's dependence on raw materiels from outside is inherent.
That is why the Soviet Zoae is so interested in interzonal trade, particularl,}.
is coal and steel. Structurally, .the Soviet Zone ie a natural complement to
the vest German econaagy, but the Soviets are attempting to eliminate ;,hie
economic interdepeadeace by iacorpo^ating the Central German area into the
greater Soviet economy.
h
The rigidity of the Soviet planning system and the brutal insistence oa
P~ fulfillment have from the beginning limited the flexibility of the Soviet
Zone economy. Furthermore, the ine]asticity of the reparation deliveries has
increased the zone's sensitivity to crises. Production has been retarded by
experiments with economic planning and by the Sovietization of the economy,
but, since reparation shipments must be made regardless of the level of pro-
duction, it has been the civilise sector of the'populatioa that has suffered.
The c:.andard of living in the Soviet Zone has for years been very low, and
SPATE
AgNY
DISTRIBUTION
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every new interruption of production caussa new and pnlnn,'+ gape in th? supply,
A Px'eaeture and comZilete incorporation of the Soviet Zoae into the planned
economy of the Eastern Bloc would have disturbed Soviet planning, Therefore,.
the Soviets preferred to let the civil Population suffer, In contrast to the
US, which is providing aid for West 0ermany, the Soviet occupation authorities
have refused to alleviate the suppl,}. a-ficiencies, which are caused precisely
by their reparation demands.(aee Table 1).
III the 4 Years since the conclusion of land reform and the first wave oi'
expropriations in industry and trade, the number of independent workers has
dropped at'leas+ @00,000, The number of family members resisting such in-
dependent w~rkera hen decreased by almost 500,000. Bet ore tLe waz, wage
earners and salaried employees made up about 75 percent of all the vorkexs ir.
the Soviet Zone area; the figure is pox 79 pex?cent, and the Five-Year plan
sets 90 percent as the goal for 1955?
Sovie? Zone Manpower Balance (see Tables 2, s, 4)
In 1939, there were 15.2 mill~.on people in the present So?,iet Zone. area,
x~ich comprises somewhat less than one fourth of the total wren cf the Weimar
Republic. before the xar, the German regicn east, of thr. Oder-ileisse, actually
larger than the Soviet Zone, had 9.6 million inhabitants, many of whom are
now in the ~aviet Zone sa refugees.
By the end of 1946 the population in the Soviet Zoae had increased by
more the 2 million. Ir Land Sachae+, the numbers remained about the same,
but is Thueringen, Sachsen-Anhalt, and western Brandentxrg, th~_ density cf
population increased 20 percent, and in Mecklenburg owe; 50 percent.
Although the few official population ?igures which the Soviet Zone has
made public arc: contradictory, as a result either of inaccurate statistical
methods or of deliberate intent to deceive, those available make it possible
for us to reconstruct the manpower potential at the zone+e disposal, Ac-
cording to the 1946 census, the social atruct,xre of the zone before the cur-
rency reform xas less favorable than font of West Gex?many, and it cani:ot ilavr
improved very much since teen. Iu both parL:s of Germany, the returnees have
probably improved the demo ra hie com ositi~,n of the
creased the labor potentis~. pThe accent p?pulation and have in-
tone, considerab p ~? ~'= women employed in the Soviet
ly above the percentage in West Germany, must have remair.~a
about the same, rzrticularly since the atr~an: ei political refuga. from the
;:astern 7,cne into Nest German}? consists principally oi' men, and their departure
must intensify the shortage of skit corkers.
Before the xar, active workers made up r:ore than half the total population
is both Central and West Germanf. It iG.a natural result of tYe heavy losses
during the xar, which affected particularly +:he mast rroductive age groups,
that the proportioex oi' active workers is now censiderably cmallE:. In the
Soviet Zone, the number of workers is today about 7,7 million, the same as in
1939, although the number of people to be provided for bas increased by mil-
lions. In both East and West Germany, the number of pars loners an3 ueople oa
relief has increased considerably over the number 1n the prewar perio3.
The workers in the Soviet Zone have to provide not on]y for themselves and
for the large number of their own people xho cannot work, but rise for the
Soviet occupation forces, who are obi?ged to live of.Y the ].and, ibis fact,
and the low productivity, are the reasons why the Five-Year plan require: Y
higher number oY productive workers to imprc+ve the numerical relationship
betxeea xorkers and those provided for. The Five-year Plan requires an in-
crease of about n million new xorkers, who, to a large extent, would have to
`~ drawn from the reservoir of unemployed women.
STAT
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Thus, the social tendencies of the labor policy pursued in the S:rvi~*. Zone
are clearly recognizable: increasing numbers of independent workers are to
become wage earners and hous;~vivee are to be drawn into industry, so that the
inadequate technical productivity can be offset by a mass commitment of xorkers.
The Five-Year Plan expressly demands that the percentage of women workers
be increased from 37 to 42 percent of the total number of workers. Before the
war, the percentage oY female wage earners in the Soviet Zone was under 3^c per-
cent; even iactuding working housewives and independent workers, the total did
not reach 37 percent.
The planned increase in the number of xomen workers in the Soviet 7.one
is of interest not only because of the increase in the labor pool, but also
because of the social implications; behind the propagandistic demands and the
administrative measures is a disregard of the social and cultural attitude
which formerly prevailed in Germany, a 3isregard which is characteristic of
the Sovietization of the Central German area,
The Soviet Zoae Labor Lav of 19 April 1950 obligES "all plants and admini,-
trations to fi]1 s]1 gobs as far as possible with wou:en workers." This is
merely the formal statement of the goal set in the Five-Year plan. However,
since the law excludes only expectant or nursing mothers from mine work or
night work, it violates the established German principle of specific protection
of women from physically unsuitable work. A special law of 27 September 1950,
called, ironically, the Lax for the Protection of Mothers and Children and
for Wcmen's Rights, decrees specifically in Pa:agre-~h 19: "The work of women
is production shall not be limited to the traditional women's vocations, but
shall extend to all branches of production."
Sovietization of Agriculture (see Figure 1)
One of the first Soviet measures after occupation was the e1Lsi.natiou of
large land holdings. During the first year after the war, about one fifth of
the total arable land was divided up end parceled out to new owners, and other
former estate property, totaling about half that amount,, became public p;
zrty. About:': 11,000 owners, mostly fanners, wer? deprived of their property
without indemnity. However, the predominantly agricultural character of
Central Germany did nut change; in fact it vas intensified by 210,000 new peaa-
aiite, most]y refugees. r^urthenuore, t:~e lard holdings of 80,u00 2'ormer sma:11
farmers were increased.
The utilization :,i the arable land in Central G-rmany has been more or
lees constant for decade;, because of climatic and geological conditions, and
it has not c'nanged appre_iably since the war. Areal increase in agricultural
production can be achieved only by intensifyin? soil fertilization and by
making available sufficient mechanical equip:cent. With the establishment of
a system for assuring t:~~ rational use of the available agricultural machinery,
the Soviets laid the foundation for an effective sovietization of Central Ger-
man agriculture. The MfIS (machine rental stations) are not only foothcl~s
for ideological peaetr:tion, but are also important instruments for regizcenting
farm operations and making the farmers deperdert. Since the beginning oi' 1951,
the local MAS and the shops and schools connected xith Them have been united
under the designation "Federation of People-Owned MAS" and are on a par with
other so-called people-owned enterprises.
In J.946 and 1947, the number of cattle was about one third lower than the
prewar number. By 1950, the number of cattle and pigs reportedly was about
equsl to the prewar figure. The Five-Year Plan calls for the slaughtered
weight of cattle to be increased by 19 percent between 1950 and 1955?
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Sovietization oP Industry and Hand Trades (See Tables 5, 6, and Fi?~ure _)
The heavily industrialized Central German area provided the Soviets xith
a rich source of booty, xhich they proceeded to exploit by means of Atsmantlinge
and requisitions from current productic:r.. To be sure, this highly industrialized
Central German area is short oY rax materials", but its textile production, con-
centrated in the Sachsen-Thueringen area, is of high export value, althougu
there is an inaut'ficiency of spinning mills.
P~?om 1936 to 1939, the output of the capital goods industries increased
00 percent. It increased further during the xar is spite oY bombi7gs, and by
1944 amounted to almost 250 percent of 1936 production. In thr: same period,
the production of rax materials and poxer increased by 50 perce. en this othet?
hand, even in the xar years, the production of consuaers' goods declined con-
siderably.
Tho Soviets thus took over an indvstrial pntentiai with the most rx~?~.r.:1
equipment, especially for machine and vehicle constrrtion, aircraft cnnstrcc-
tion, and chemicals. and electric poxer. ?liemanil.ing operations in there fie?;~s
xere particularly rexarding fer the Soviets, and the consequent declu?:~ i.n pro-
duction x?< mist keenly felt in these industries: in 1946, capital goods produc-
tion amounted to ba}sly i0 percent of 1944 pro;i?::ction.
In the rar material:: industries, p:.r~icul_iriy minim, it was morn alvsn-
tageous for the Soviets to take over the industry itselT rather than to remove
the production ma:hinery. In the fall of 1946, the so-called SAGs (Soviet
Corporations) xeiE formed. By 1949, the SAGS controLed about 25 percent oY
all Soviet Zone industrial production; in the consumers' goods industry, cont:?oi
xas not very extensive, but in the chemical industry, the Soviets controlled
over 50 percent, in metallurgy, 46 percent, in the electrical :nduetry, 41 per-
cent, and in mining, 36 percent.
Industrial pleats xhose production offered the Soviets no especially at-
tractive proYits, but for xhich they could find an excuse for expropriation,
were declared people-oxaed enterprises. Private industry, according to +.';e
1951 plan, ie to be reduced .:0 23.4 percent by the eno o: the year, largely
as a result o^ chs-ineling new investments into the people-owned enterprises.
Under the contract 6yst~m developed in 194y, priva+,e enterprises, doxn to the
smallest ones, have become directly dependent upon those industries which have
Flan quotas and xhich can allot vor:: to supplier plant: as they see fit. Ac-
tually, only the people-owned enterprises and the SAGS have quotas, so pri-
vate industry is at their mercy in the matter of or-~rs and, ccen more, in the
matter of obtaining rax materials. Thus the Soviet.. :an regu?+,te the tempo
of sovietization of the remaining private enterprises as they wi.ah.
Rsnd trades were fi.ially inc~rpornted into the contract system by the
order of 9 August 1950, which stAtes spec ificnlly: "The relationship be-
tween hand trades and the rest of the econowy is to be regulated by contract.''
The Soviets are removing hand trades as a poss?.bl~ focal point fo:? tie es-
tablishment of a nex group of entrepreneurs. This throttling of individual
initiative has not been replaced in the sovietized enterprises by a stimula-
tion of group initiative-among workers in the large plants, as in Western Ger-
many. Paragraph 4 of the Soviet Zone Iabor I.aw of 19 April 1950 says: "In '
our nev democratic order, in which the key industries belong to th^ people,
the right of xorkers to codetermination in manAgement is realize3 through
the democratic state organs."
Realization oi' the Five-Year Flan wiL depend largely on whether the
completely nationalized power industry can keep pace with the planned indus-
trial expansion. The plan cal]s for a 70-percent increase in the output of
electric poxer. In 1950, the Soviets claimed that they hod reached the prewar
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level of industrial production. This is a propaganda claim based on comparison
of noncooparable fif[ures. The German Institute for Bcoaomic Research has cal-
culated, after ad~vating the claimed plan results of complete iVlfillment of
the 1950 plan, that at beet n production level of 84 percent can have been at-
tained. This figure ie far beiov the production lev.:l in West Germany.
IIovever, the actual social and economic level of the Soviet Zone is not
clear from such a camparieou. It is customary to regard as production only
that pest of the output which is actually marketable. Nonmarketable re,jecta
are merely counted in the coat of plant operation. In the war years and. before
the currency reform, these re~ecta found their way to the market; in tae Soviet
Zone's planning system the use of these rejects is the general rule, and e~-e:*~
euch-re~ects as are reclaimed or are r.fused by the acceptance co~missioss ~..
listed in the production statements. The system of comparative reporting,
"Quota versus Actual Froductioa," forces the adoption of this procedure.
But only part of the useful output of th= Soviet Zone industry 1s avail-
able for domestic consumption. Reparations and direct and indirect siphoning
off of industrial out?.++t. by the Soviets ,jeopardizes the supply of the Soviet
Zone popu]ation. In 1y5O, it least on_ third of industrial producti?~n xas
drain off by the Soviets in one xay or another. The loss to the cony mars
through inferior quality of the products can be estimated at 12-13 percent
of the total production. Ftiu-thermore, almost one tenth of the zone's output
-?as required for the refugees xho entered the zone after the end of the var.
Only the amount left after all these deductions can be considered as normal
civilian supply, which may properly be compared with prewar supply. That
means that the Soviet Zone's domestic supply of industrial goods oY a sorts,
including capital goods, xas not even half 1:tsat of Weat Germany; if one dis-
regards capital goods tha comparison is even more unfavorable.
Sovietization of Trade (Sae Table 7)
Since the Soviet planning system controls all marketing operstiors, the
traditional wholesale trade is the zone Zuickly lost its nat.u-al fielZ of
activity. The nationalization of xholesslr. trade through the establishment
of so-called trade offices and trade centers has already b.en com~;ieted. With
the founding oi' the HO (Trade Organization) in November ly4d, th^_ nati:,ntili-
zation xas ertended to retail trade. Up to that time, crop:rative retail trace
had been alloxed is a modest degree. For c or 3 years prior to :!i+establish-
ment of the H0, consumer cooperatives had accounted f:,r about 17 ;~~:.^~:_ ~. n'_'
retail trade transactions. Hoxever, the HO stures dr=.w a ::^nE?.derabi': p~.
of the retail trade away, because they were privileged tc >li rntionc:~i fog.:-
stuffs and consumers' goods in free track-, although at excre~sive prices. .r~-
vate retailers have been degraded practically to distributors of rationed
goods. At present, about one half the retail transactions go through pri-
vate hands, but the complete sovietization o(' retail tre.fle ie obvicusly act
far off.
Social Conditions in Soviet Zone (See Tables 8, 9)
The reduction of prlvate property by expropriations, the typing up of
cash by blocking accounts, and the develuaticn through currency reform have
destroyed the basic property structure in the Soviet Zone. Nex savings are
completely negligible; it is practically imp:.~~r,ible to form private capital.
There is a tight exchange barrier between Ens: and Wes+. Germany; flight of
capital in the form of exchange of 1:-et marks for West csrrs is prevented,
sad the cash funds of every Soviet Zone inhabitant are k~_p?. u^.ier strict
control. The curve of variation of legally acquired irco;aes has flattened r~?.L
considerably; on the other hand, there is a greater 3;ifcrenti=tion than be-
fore in the range oi' uagee and salnries, since the incasti~_ :.,stem, of
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netiviet wages and bonuses occasionally permits 'rorkers to reach an income
level far above the average, a level which is still nominA~~V lower than in
reductlorn ads s result of theeet ehsystemeoi'Ldaalipzice3levels.g Fevggoodsve
can be bought at prices comtnenaurate with those in bleat Germany, and these
are almost nlvays rationed goods. In an East-West comparison of the vur-
chasing power of poorly paid *+orkers, the results would be about equal. But
if one takes into account the poorer quality of the Soviet Zone "ationed goods
and realizes that they must be supplemented by purchases from the H0, then the
comparison is not favorable. According to the German Instituta for Economic
Research, a worker in the Soviet Zone would have had to pay 260 East m,:ks to
attain a standard equal to that of a West G-:rman xorker with an incoma of i50
bleat marks. A comparison based on a higher standard of living shows the p~o-
ai'essive reduction in purchasing power mentioned above: a West Germ;~.c;tead-?
and that coats 255 West mark; would requir~> sn Eat;t German income of 65~ hest
marks. In other words, the purchasing power of an income o*' 200 East :.sr1:s
in the Soviet Zone is only 66 percent of the purc.~:.sing power. of the same
income in West marks is iles~ CexnianY; with an income of 350 East mark^ the
ratio drops to only 50 percent; and with an ycoLe of 600 East marks, it dr~>?c?
to 40 percent.
~ppended tables anc figures follow)
Table 1. Nominal Yalue of Goods and Services Producai
in West Germany and Scvi.t Zone
(Estimated in bi.)lion Reichsmarics or Deutsche marks. Cheinaeov^r
to Deutsche marks occured Sn mi4-lg4a.)
-' ' ~
L
~C~
-i= ~
~~
104C
Consumers' goods and services
30
40
5-
13
li,
to
Investments
2
5
3
1
Public requirements
5
~
F 3
~ 5
j
3 ,~
Deliieries to occupying powere
~
-
4.?
!i ~
4 5
4.3
Net product
43
i'i
'i3
20
~~.5
X5,5
Minus deliveries t~
occupying powers
6
5
4.7
4.5
4.5
4.3
Plus foreign aid
1
_
_
-
-
Available far German use
38
53
70.3
15.5
18
21.2
* Price ad,7uatments arz necesa~ry to make the comparative figures mean-
ingful. Amouate ranging from 4 to 4.5 billion R~ichsmsr;c:. or Deutsche narks
a year must be deducted from the Soviet Zone fLgures because of the inflated
prices resulting Prom liquor tax, free market sales, and HO (Srade Organization)
sales; about 1.5 billion Reichsmarlw or DeiY scha marks a year must be added
to the Soviet Zone figures to make up for the unrealistically lox prices of
Soviet Zone reparations s:iipmente.
STAT
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Table 2. Manpower Struotuie Before sad diter the liar
(ia thoueande);
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~' Discrepancies ir. totals are due to rourdin,~ off numbers to thousands. ~` ~i12 zatnf~~Iy employe3 and the unemployed;
1939 includes pereona'in obligstory military and labor sarvice. Uaemplaye~ in3ependent workers.
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Fercentage
Total Men Warren of Women
(in thousands)
193?
17 *~ay+F 7,685
4,861
2,824
36.7
1845
Dec 5,^'.'!
3,138
z,SFy
45.2
lo4F,
29 Oct 7,7+t1
4,268
.~,73
44.
,
19~
Dec 7,489
4,126
3,364
,
44.
~i
1947
Dec 7,822
4,478
3,344
,
5:2.7
1948
Dec 7,762
4,676
ly4y
3o Jun** 7,580
4,631
3,9~
;>8.9
1949
SeP 7,706
4,727
2,079
38.7
1950
30 ,7uA 7,622
4,723
2,898
38.0
1939
17 Hay*
Dependent Work
5,742
ers*~*
3,921
1,82'-
31.
1946
29 oct
5,476
? 18':
2,292
41.?
1949
3o Jun
5,916
'.,7~?;
2,zo7
37.3
1950
3o sun
5,996
3,816
2,180
3b.4
1955
Plan
7,600
4,400
3,200
42
Sndependent Workers
1939
17 Mayes
954
799
155
15.2
1946
29 oct
1,224
919
305
24.9
1949
15 Apr
1,043
844
i99
19.1
1950
3o dun
1,028
837
192
18.6
Feaily ?ambers Assisting IndepFndent Workers
: