ANALYSIS OF THE EAST GERMAN ECONOMIC PLAN FOR 1956

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP81-00280R000200040010-1
• Release Decision: RIPPUB
• Original Classification: U
• Document Page Count: 8
• Document Creation Date: December 22, 2016
• Document Release Date: April 11, 2011
• Sequence Number: 10
• Publication Date: October 31, 1956
• Content Type: REPORT

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ANALYSIS OF THE EAST GERMAN ECONOMIC PLAN FOR 1956
STAT
[Comment: This report presents an analysis of the East German
Economic Plan for 1956, as published on 25 December 1955 in the
weekly report of the German Institute for Economic Research (Deut-
sches? Institut fuer Wirtscbafteforschung), a West German organi-
zation devoted to economic research, located in Berlin.]
Thus far, publications concerning the East German Economic Plan for 1956
are of a preliminary character, since all data are based on estimated results
of the 1955 economic year. The 1955 figures have actually been computed up
to about September. The trend of development indicated in the preliminary
versions is nevertheless worthy of some consideration.
The year 1956 is not only the first year of the Second Five-Year Plan for
East Germany, but also the first year of a new phase of economic integration
within the East Bloc, characterized by mutual coordination of all economic plans
Economic Development up to 1955
Neither the past nor the coming economic year can be contemplated in an
isolated fashion, since they are both subject to the influence of the manifold
changes in the general development of the economy. During the last 3 years,
expectations for an accelerated expansion of the economy after the cessation of
reparations were not realized. This was largely due to the fact that the pre-
vious economic policy, which perforce was hostile to consumers because of the
existing reparations obligations, later gave vsy to the proconsumer New Course.
Increased domestic consumption absorbed not only all goods in the approximate
volume of the former reparations deliveries, but also required adjustments in
production facilities and in investment policies insofar as they hampered a
speedy expansion. Also, the New Course was not confined to East Germany, but
was simultaneously introduced throughout the East Bloc, leading to difficulties
in foreign trade.
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STAT
Development of Gross Industrial Production
The following tables provide information on the development of gross in-
dustrial production in East Germany, gathered from East Gersan sources.
Planned Prices (billion DM)
1950
1953
1954"
1955
Means of production
13.4
21.6
24.0
24.9
Industrial consumer goods
6.5
9.2
11.2
12.1
Foods, beverages, tobacco, etc.
3.4
6.4
6.9
7.4
Total gross production
23.3
37.2
42.1
44.4
Planned Prices (%)
1950
i2a
1954
1955
Means of production
57.4
58
57
56.1
26
7
27.3
27.3
Industrial consumer goods
27.8
27.7 ?
.
Food, beverages, tobacco, etc.
14.8
17.8
16.4
16.6
*Including a 900-million-DH Special Program (sonderprogramm), to increase
at a relatively accelerated pace throughout 1954; the rate of growth dropped
considerably in 1955, although the plan had long since changed the course of pro-
duction.
The production of consumer goods proved to be much more flexible after
certain tax reliefs and material assistance bad been granted to private enter-
prises which worked in this sector of the economy without any specific assign-
ment under the plan. In return for these privileges the enterprises were also'
ooliged to take over two thirds of a special program, amounting to about 965
million DM, which had been launched at great cost; it concerned the subsidiary
manufacture (nebenbetricbliche Herstellung) of consumer goods from waste mate-
rial.
Development in the field of capital goods production is greatly influenced
by the situation in foreign markets. Goods previously produced for reparations
deliveries were supposed to be sold as exports at full value. In 1954, however,
East Germany failed to increase exports by the 2.5 billion DM expected; it
achieved an export rise of only 1,160,000,000 DM because foreign sales of ma-
chines and plant equipment, in the production of which East Germany specializes,
met with difficulties after the introductio?z of the New Course in the East Bloc.
This, together with the difficulties encountered in the production change-over,
explains the sharp reduction of the growth rate reflected in the 1955 plan.
Economic Plan for 1956
The Economic Plan for 1956 keeps to a middle ground in its goods, in com-
parison with previous years.
Over-all gross industrial production is to be increased 8.6 percent, after
having risen 12.2 percent in 1950, 13.1 percent in 1954, and 6.5 percent in 1955,
as planned. The relation of the growth rate of capital goods to that of consumer
goods has been reversed again in the latest plan.
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The increase in state investments raises the share of investments in the
social product, even if large-scale nongovernmental investments in preceding
years are taken into account. Nevertheless, since thus far the rate of con-
sumption has been rather high in view of the low level of total production, it
can be assumed that the investment quota is still lower than in the Federal
Republic. For this reason alone the rates of growth in production, for the
time being, cannot be expected to equal those of the Federal Republic.
Employment of 96,000 new workers in 1956, as compared with 71,000 in 1955,
represents a relatively high estimate. Whether the low number for 1955 indicates
an especially high demand for unproductive purposes during that period (sucn as
the People's Police, etc.) is a moot question. While the addition of new labor
is scheduled to amount to about 1.5 percent of the number employed, the so-called
wage fund is slated to rise 5.3 percent. This, together with a planned increase
in retail turnover of approximately similar scope, provides at least a small im-
provement in the over-all standard of living.
The remaining parts of the Economic Plan for 1956 contain no surprises. In
the field of agriculture, higher yields are demanded mainly from animal husbandry.
Investment funds, however, amounting to 525 million DM, are less than half those
of last year. The number of machines available is to be increased as indicated
(in percent of 1955): harvester combines, 53.7; potato-planting machines, 31.2;
and seed drills, 32.8; this is not very much in view of the prcvailing low sup-
ply of machines. The utilization and care of tractors is to be improved.
Development of Agricultural Yields
According to information from East Germany, the following table presents
actual and planned per-hectare yields of the items listed:
1934-35 1952
1953
1954
1955 Plan
1956 Plan
Grain (100 kg)
20.6
24.8
23.2
23.3
26.3
26.7
Potatoes (100 kg)
173
168
168
210
205
200
Sagar beets (100 kg)
291
293
291
339
339
325
Milk production
per cow; 3.2% fat
content (kg)
2,600
2,532
Increase in total
livestock production
(% of preceding year)
--
--
--
--
25.2
7-8"
No information available for 1953; the increase claimed for 1954 is 233
kilograms; the plan for 1955 stipulated an increase of 10.7 percent.
'Slaughter animals, 7 percent; milk, 6.9 percent; eggs, 13.6 percent; and
wool, 10.5 percent.
The above figures show only a trend. The values given for the period, 1934-
1938 are average, wt.ile the later figures are probably obtained from model farms.
The average yields, oven today, are below the 1934-1938 figures.
 Development of Consumption
The following table presents information on retail turnover, including res-
taurant sales, as gathered from East German sources:
Retail Turnover at Prevailing Prices for Each Year
(billion DM)
1952
1953
1954
1955 Plan
Total retail turnover
25.0
27.4
29.7
30.6
Food, beverages, tobacco
15.0
16.4
17.15
16.95
Industrial Goods
9.95
9.8
11.25
12.4
Tax Load on Domestic con-
sumption through excise
taxes*
9.8
il.6
11.5
10.6
Retail turnover at pre-
vailing prices, minus
excise taxes**
15.2
15.8
18.2
20.0
Increase in net consump-
tion (% of preceding year)
--
0.4
15
10
tConsumption taxes are not only a burden on domestic consumption. Since
these taxes are levied at the production level, an increasing share of the
burden falls on export goods; this is compensated for, however, by export price
equalizations.
*"This series corresponds approximately to the real development of consump-
tion.
As early as 1954, domestic consumption, not counting excise taxes, had in-
creased 2.5 billion DM, or at least by an amount equivalent to the value of
previous reparations deliveries, according to figures on retail trade turnover
and turnover in restaurants. The increase took place mainly in the field of in-
dustrial goods, and to a much smaller extent in the field of foodstuffs and bev-
erages. However, the supply in 1954 did not satisfy the new mass purchasing
power created by wage increases, tax reductions, etc. Hence, the incr-ise in
demand and prod-action, accompanied by a further rise in the relative t,nare of
individual goode, especially during the first quarters of 1955, exceeded the
Such a development of consumption was made possible only through a cbaug:
in the direction of production. A planned economy reacts with extraordinary
slowness to any changes in the plan. Although plans were modified as early as
mid-1953, manufacture of the means of production continued.
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 Whether these goals can be considered as realistic and attainable is a
moot question. According to the discussions of the 25th Session of the Cen-
tral Committee of the SED (Socialist Unity Partyl, the coordination of the
production plan with the plans of the other East Bloc countries was not fully
achieved, since the contemplated increases were regarded as unattainable by
the competent East German ministries. The increases listed in the plan seem
to be the result of a compromise based on a rather high estimate of the pro-
duction capacities of East German-enterprises.
The following table shows the planned gross industrial production in
East Germany for 1956 (1955 equals 100):
Heavy industry
110.0
Heavy machine construction
113.3
General machine construction
114.1
Light industry
106.4
Foodstuffs industry
108.2
Construction Industry (Ministry for Reconstruction)
110.4
Total
108.6
Increase Rates
Coordinated With East
Bloc Countries
Increase Rates
Proposed by Relevant
Ministries
Heavy machine construc-
tion
115.1
General machine con-
struction
114.1
113.3
Light industry
107.3
106.4
Reconstruction
119.2
110.1
The expected increase in production per worker is correspondingly high;
it has been set at 8.8 percent (1954, 4.1 percent; third quarter 1955, 9.3
percent). The lowering of prime costs is also rather substantial; it has
been set at 5.2 percent (1954, 1.1 percent; so far in 1955, 4.26 percent).
The volume of state investments is scheduled to increase 39.7 percent,
compared with 21 percent and 14 percent, respectively, during the two pre-
ceding years. Since investments in agriculture and construction are to be
lowered, the increase will primarily benefit the industrial sector.
The additional funds are to be employed mainly for rationalization and
modernization. The share of investments for e(raipment is to increase from
45.2 percent to 50.6 percent of the total investment volume. Capacities in
the basic materials are to be expanded subitantiall~? and investments in heavy
industry are to increase 48 percent. The machine industry has been assigned
an increase of as much as 187 percent in investment funds, while investments
in light industries and foodstuff industries are to rise only 5.8 percent over
the preceding year.
This especially affects private industry. Since 1954, this group has had
the privilege of spending 25 percent of its net earnings, free of taxes, on in-
vestments. Now this privilege is to be granted only by special permission, be-
cause it is claimed that too many new investments were made in this sector over
the last 2 years.
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Additional funds in the amount of 332 million. DH have been approved for
residential construction in general; this should enable a 35.8-percent in-
crease in total output. From these data it can be concluded that in 1955,
about 930 million DH, or roughly three quarters of the approved funds, has
actually been used for construction. On the basis of the appropriations for
1956, about 51,000 to 52,000 new apartment units can be counted on -- con-
siderably less than the average of about 70,000 new apartment units annually
which are planned for the Second Five-Year Plan.
The Economic Plan for 1956, in general, seems to have been drawn up in
a relatively careful way, even though the figures in all parts of the plan
closely approach the limits imposed by existing capacities. Great atress*is
laid on the expansion of machine construction, both in production plans and
in the investment program. Also, the volume of exports, which are mainly
based on the machine construction industries, is scheduled to increase 15 per-
cent. All these factors indicate that, now as before, the role assigned to
East Germany in the integration of the East Bloc is that of an important cen-
ter of the machine industry which is to be further expanded in that capacity.
Otherwise, the Economic Plan for 1956 indicates that the more liberal
economic policy in force since 1953 has reverted to a stricter socialist course.
Production of the crafts, for example, is to increase only 2.3 percent; a good
deal of stress is laid on strengthening producer cooperatives for the crafts.
In the field of agriculture, the K['S received clear instructions for the new
year to carry out b5.5 percent, Instead of the previous 35.5 percent, of all
mechanized field work for Agricultural. Producer Cooperatives and to provide
service for the "working peasants" only within the limits of their capacity.
The role of the Agricultural Producer Cooperatives is being strengthened
further by new price regulations for agricultural products, consisting in
rather small increases in compulsory delivery prices (Erfassungspreise) and
greater reductions in purchase prices (Aufkaufpreis), which have a depressing
effect especially on the incomes of the small peasants. The planned expansion-
of the state and of the cooperative trade network is mentioned specifically;
furthermore, as discussed before, the tax relief previously granted on invest-
meats by the privrte sector of industry is being considerably limited.
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