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The Politics of Economic Decline in East Germany, 1945-1989

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Jeffrey Kopstein offers the first comprehensive study of East German economic policy over the course of the state's forty-year history. Analyzing both the making of economic policy at the national level and the implementation of specific policies on the shop floor, he provides new and essential background to the revolution of 1989. In particular, he shows how decisions made at critical junctures in East Germany's history led to a pattern of economic decline and worker dissatisfaction that contributed to eventual political collapse. East Germany was generally considered to have the most successful economy in the Eastern Bloc, but Kopstein explores what prevented the country's leaders from responding effectively to pressing economic problems. He depicts a regime caught between the demands of a disaffected working class whose support was crucial to continued political stability, an intractable bureaucracy, an intolerant but surprisingly weak Soviet patron state, and a harsh international economic climate. Rather than pushing for genuine economic change, the East German Communist Party retreated into what Kopstein calls a 'campaign economy' in which an endless series of production campaigns was used to squeeze greater output from an inherently inefficient economic system.A UNC Press Enduring Edition -- UNC Press Enduring Editions use the latest in digital technology to make available again books from our distinguished backlist that were previously out of print. These editions are published unaltered from the original, and are presented in affordable paperback formats, bringing readers both historical and cultural value.
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	 	 		 title 		 : 		 The Politics of Economic Decline in East Germany, 1945-1989

	 		 author 		 : 		 Kopstein, Jeffrey.

	 		 publisher 		 : 		 University of North Carolina Press

	 		 isbn10 | asin 		 : 		 0807823031

	 		 print isbn13 		 : 		 9780807823033

	 		 ebook isbn13 		 : 		 9780807862599

	 		 language 		 : 		 English

	 		 subject 		 		 Germany (East)--Economic policy, Germany (East)--Economic conditions.

	 		 publication date 		 : 		 1997

	 		 lcc 		 : 		 HC290.78.K66 1997eb

	 		 ddc 		 : 		 338.9431/00945

	 		 subject 		 : 		 Germany (East)--Economic policy, Germany (East)--Economic conditions.

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The Politics of Economic Decline in East Germany, 1945-1989

Jeffrey Kopstein

The University of North Carolina Press

Chapel Hill and London

Page iv

© 1997 The University of North Carolina Press

All rights reserved

Manufactured in the United States of America

The paper in this book meets the guidelines for permanence and durability of the Committee on Production Guidelines for Book Longevity of the Council on Library Resources.

Library of Congress Cataloging-in-Publication Data

Kopstein, Jeffrey. The politics of economic decline in

East Germany, 1945-1989 / by Jeffrey Kopstein.

p. cm. Includes bibliographical references and

index. ISBN 0-8078-2303-1 (cloth :alk. paper)

1. Germany (East)Economic policy. 2. Germany

(East)Economic conditions1945-1990. I. Title.

HC290.78.K66 1997 96-11614

338.9431'00945dc20 CIP

01 00 99 98 975 4 3 2 1

Page v

To my parents,

Joel and Marlene Kopstein

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Part One. The View from the Top


1 Making Russians from Prussians: Labor and the State, 1945-1961


2 Reform Abandoned: The Elusive Search for Socialist Modernity, 1962-1970


3 Communism and Capital Markets


Part Two. The Campaign Economy


4 Reds and Experts: The Retreat from Technocracy

; 111

5 The Campaign Economy


6 The Party in the Factory: Labor Motivation in the Twilight of Communism


7 Local Politics: Housing and Consumer Goods








Page ix

Tables and Figures


I-1. Capital Accumulation as Percentage of National Income in East Germany, 1970-1988


1-1. Daily Rations in Calories in East Germany, 1945-1949


3-1. GDR Trade with USSR, 1970-1977


3-2. GDR Trade with West Germany, 1961-1976


3-3. GDR Exports to Western Industrial States


4-1. SED Nomenklatura of Party, State, and Economy


6-1. Worker Absenteeism in East Germany and West Germany, 1980s


6-2. Monthly Average Gross and Net Wages in Industry, 1988


6-3. Skilled Labor on the Shop Floor in East Germany and West Germany


7-1. Condition of Apartments in East Germany and West Germany


7-2. GDR Housing Stock, 1950-1989


7-3. Comparative East and West German Consumption, 1970


7-4. Yearly Increase in Savings and Cash Holdings in Relation to Personal Income


C-1. Per Capita Income of East European Countries as Percentage of Advanced European Countries



I-1. Decay of Industrial Infrastructure in East Germany, 1988


I-2. National Income Use in East Germany, 1970-1988


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Having put this book to bed, I can now express my gratitude to Andrew Janos. As a mentor and friend at the University of California, Berkeley, he spent many hours with me discussing this project. His lucid thinking on the rise and demise of authoritarian politics in the twentieth century has influenced my own in so many ways that I am no longer certain where his thoughts end and mine begin. He was the first to suggest to me the potential value of a detailed study of East Germany, of what seemed to me at the time a strange little country. Even in my darkest hours of self-doubt, he always had confidence that I would write something worthwhile. For that, and much more, I thank him.

George Breslauer read portions of the manuscript in its very early stages. He may not see much of what he first read, but many of the improvements are due to his insights. Jim McAdams and Peter Rutland deserve a special thanks; they read the entire manuscript in its penultimate form with great care and made a number of important substantive and stylistic comments. Less tangibly, but no less significantly, I benefited from discussions with colleagues at various universities, especially Leslie Anderson, Frank Beer, Steve Chan, Russ Faeges, Hal Hansen, Padraic Kenney, Gail Lapidus, Mark Lichbach, and Sven Steinmo. I would also like to thank several German colleagues and friends, some of whom read parts of the manuscript, others who simply pointed me in the right direction and gave generously of their time in conversation: Gert-Joachim Glaeßner, Jürgen Joneleit, Rolf Kuhnert, Gero Neugebauer, Karl-Otto Richter, André Steiner, Klaus Steinitz, Herbert Wolf, and the late Hartmut Zimmermann. Several former East German officials, who did not wish to be identified, spent many hours leading me through the intricacies of their work and lives. The pages that follow rely heavily on those conversations, far more than is reflected in the footnotes. Having had so much help, it seems rather odd to say that any shortcomings of this study are my own. But knowing, as I do, that many of those who have assisted me along the way will not agree with what I have written, I hereby absolve them of any responsibility.

When I began the project, I initially conceived of it primarily as a study of the final two decades of Communist rule in East Germany. As I immersed myself in the research, the questions I

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originally asked seemed less important and others began to emerge. Living in East Germany in mid-1989 before the revolution, most people believed that something was going to happen, but no one was sure what. Almost everyone thought that the SEDthe Socialist Unity Partywould try to do something to stave off ultimate collapse. As we now know, it did very little. Why? That question, posed in a way that social scientists could appreciate, became the guiding one of my research. How can political continuity be explained amid such obvious signs of economic and social decay? In confronting economic problems, why did the political elite return time and again to the same solutions that did not work? Once I began writing, it became increasingly difficult to answer these questions without delving into the past. The opening of the Communist Party and state archives after 1989 made such a detour into history not only possible but endlessly fascinating. The helpful staff of the SED archives in Berlin and Dresden, and the federal archives in Potsdam cheerfully entertained the naive inquiries of a political scientist and opened up a world that I never would have thought possible a decade ago.

In helping to bring this book to fruition, a number of institutions have been very generous. Foremost among them are the American Council of Learned Societies and the Berlin Program of the Social Science Research Council. Both provided me with the freedom and resources to do the primary research. The Council on Research and Creative Writing at the University of Colorado at Boulder awarded me a junior faculty fellowship to take one last research trip to Berlin in the summer of 1994. The Center for European Studies at Harvard University, where I put the final touches on the manuscript, generously awarded me a James Bryant Conant Fellowship for 1995-96.

I also owe a great deal to the editorial staff of the University of North Carolina Press, especially Lewis Bateman for his professionalism, confidence, and good judgment.

Of course, the greatest debts I have accumulated are emotional ones. My parents, to whom I dedicate this book, have supported me in every way possible from beginning to end. They are my biggest fans and an emotional well that I have dipped into more times than I can possibly count. Finally, I want to thank my wife, Simone Chambers. She read the entire manuscript, many times, and what little eloquence there is to be found in it is largely due to her. More importantly, several years ago she decided to spend her life with me, knowing that I was a first-time author. Such courage can only be marveled at. Without her love and her confidence in me and this project, I could not have finished it.

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The Politics of Economic Decline in East Germany, 1945-1989

Page 1


One month before the opening of the Berlin Wall, most East Germans were busy getting on with their lives. In the industrial provinces, what little protest that did occur was largelynonpolitical, directed against the inconveniences of purchasing the staples of everyday life under socialism. On October 6, 1989, for example, a party first secretary from Altenburg sent off a panicky, encoded telegram to his superior in Dresden, Hans Modrow: the situation was "tense," the miners were protesting with a work-to-rule campaign, what should he do? The miners objected to the poor quality of consumer goods in their districtthis was not what was "expected after forty years of socialism." Furthermore, they wanted to be able to shop for ''citrus fruit, jams, various types of flour and bread" across the border in Czechoslovakia, which had been closed to them since the summer. On the brink of the greatest political crisis in the history of the German Democratic Republic (GDR), the workers at Altenburg were thinking about fruit, jam, and bread. They wanted a better life and they blamed socialism and the Communist Party for the fact that they could not get it. It was humiliating enough to have to visit a foreign country to buy what they needed; when even this was prohibited, the miners fundamental sense of justice had been violated. 1

The crisis at Altenburg is a graphic illustration of the larger crisisthe regime's failure to satisfy the rising material expectations of the population. At every level of the political hierarchy, the normal problems of the command economy occupied an inordinate amount of time and energy. Even the most casual reading of the party press, published documents, or internal communications reveals how obsessed the leadership of the SEDSozialistische Einheitspartei Deutschlands (Socialist Unity Party of Germany)was with improving economic performance and how focused it was on comparisons with production and consumption levels in the West. At the top of the hierarchy, in the Politburo, several members understood quite well the dimensions and causes of their economy's decline but could only speculate on the long-term political consequences.2

If the political leadership understood the causes and extent of the country's economic decline, if the SED worried about the political consequences of continued substandard economic performance, why did it not try to change course or alter the

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country's economic structure? 3 How can we explain political continuity amid economic decay? As Barrington Moore reminds us in his Social Origins, continuity requires as much explanation as change.4 I believe the answer to this puzzle in the GDR's case is to be found in the orientations and interests of the political elites: the policy makers at the top of the hierarchy, the policy implementers at the middle levels of power, and the interactions between these two groups and the working class.

This book tells a story of political responses to economic decline. It does not offer a new explanation for what ailed the East German or other Soviettype economies. The work of Kornai, Winiecki, and Rutland in this area remains quite convincing.5 It does, however, account for the pattern of political response to successive economic crises over a forty-five-year period by examining the behavior and orientations of policy makers, policy implementers, and those whom the policies affected. The argument I develop is straightforward. Despite being initially endowed with a relatively well developed industrial infrastructure and a highly trained work force, the SED could not respond effectively to the economic challenges it faced because of the political environment in which it operated. The pattern of responses reveals a regime hemmed in by three confining conditions: its political and economic dependence on the Soviet Union, the logic anand ideal) of its bureaucracy, and, perhaps most ironically, the "veto power" of its own working class.

East Germany's two rulers, Walter Ulbricht (1945-70) and Erich Honecker (1971-89), each in his turn, struggled with the contradictions of Soviet-style economics, attempting to reconcile state accumulation with economistic legitimation.6 The main tools in their policy repertoire, however, were remnants of the Soviet economic culture developed decades earlier, in a different location, for a different purpose. Such tools could not begin to alter the fundamental relationships at work in the economy at large.

By the time Honecker displaced Ulbricht in 1971, political stability could only be bought at the price of economic decay. Consider, for example, the state of the capital stock of the East German economy in 1988 (figure I-1),7 the relative changes in national income use between 1970 and 1988 (figure I-2), and the yearly decline in accumulation (table I-1). What the figures collectively illustrate is an economy whose infrastructure was in an advanced state of disrepair, an economy that had been devouring its own muscle for quite some time. The paradox here is that despite its capacity to infiltrate and atomize society, to prevent the formation of political opposition, to arrest or even shoot as many people as it wanted, the SED could alter neither the behavior of its economic bureaucracy, the pattern of its trade,

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Figure I-1. Decay of Industrial Infrastructure in East Germany, 1988 (100 percent =

fully worn out). Source: Günter Kusch et al., SchlußbilanzDDR: Fazit einer

verfehlten Wirtschafts- und Sozialpolitik (Berlin: Duncker & Humblot, 1991), 55.

nor its industrial relations in a beneficial direction. From the standpoint of political economy, despite being the most "totalitarian" state in the Soviet bloc, East Germany was in a more important way a weak state.

Economistic Legitimation

Is it really fair to use the word "decline" when speaking of the East German economy? Compared with the economies of the other regimes in the area, many respected scholars contended that the GDR's economy was beyond any doubt the brightest star in the regionthe brightest star, to be sure, in an otherwise dim socialist economic universe. 8 Did not the GDR possess

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Figure I-2. National Income Use in East Germany, 1970-1988

(in billions of DDR marks). Source: Kusch et al., Schlußbilanz, 23.

relatively advanced computer, optics, and machine-building industries? And what kind of declining economy produces refugees who leave their country in cars, as so many East Germans did in the summer of 1989? Apart from the questionable statistics on which most sanguine analyses were made, certainly the decline was only relative to that of the GDR's main economic referent, West Germany. But this fact did not make it any less painful or politically significant. 9 East Germans prided themselves very little on living better than Bulgarians, Poles, or Hungarians.

A second potential objection to my focus on the economy is that it trivializes the political background to the revolution of 1989: the desire for political freedom. Although the extent of political alienation in the East German population should not be ignored, I believe during the 1980s the appeal of Western political institutions and social freedoms among East Europeans was indistinguishable from perceptions of Western material abundance. To-

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Table I-1. Capital Accumulation as Percentage of National Income in East Germany, 1970-1988


Investment Rate











Source: Kusch et al., Schlußbilanz-DDR, 22.

gether they formed a syndromean irreducible and irresistible image of a life-style that consisted both of political and economic elements. This conflation of political liberalism and capitalist development in the collective conscience has since been remedied by the hardships of post-1989 economic changes. But in Eastern Europe in 1989, the connection between relative deprivation and political legitimacy was unmistakable. The vice-president of the Czech Student Union provided a vivid illustration of this complex relationship between scarcity and freedom in his comment on the revolutionary events of 1989 in Prague: "when people went into the streets, they thought communism would fall and they would have cars." 10

The connection between economic welfare and regime legitimacy seems to be especially intimate in the case of Germans. Studies of political attitudes have noted their special sensitivity to economic performance. For example, in their pioneering work on political culture, Almond and Verba found that in response to the question of what they were proud of regarding their country, West Germans in 1959 picked "economic system" far more frequently (33 percent) than their governmental system (7 percent), in compelling contrast to British and American citizens.11 As we know, West German attitudes gradually converged with those other Western countries.12 In East Germany, however, where power was never democratically legitimated and where little effort was made to cultivate a "civic culture," the basis of political stability remained clearly material. It is only logical, then, that popular perceptions of the SED's inability to raise living standards would contribute to the fragility of the regime. The pages that follow discuss the relationship of the SED to the economy, for in this relationship lie the clues to the politics of economic decline.

Page 6

Party and Economy: Conceptual Orientations

Making sense of the pattern of political responses to economic dysfunctions inevitably involves characterizing the role of the party in the economy. In this task, the student of Communist political economy will find no shortage of competing models. Despiteor, perhaps more accurately, because ofthe difficulties in access to reliable data, the field of Communist studies devoted the better part of its energy for thirty-five years to theorizing and modeling the role of Communist parties in various spheres of social life. It is not the purpose of this study to adjudicate between these competing models. Understanding the implications of the following chapters, however, will be aided by placing this study within the broader theoretical issues that have concerned students of East German politics.

The key issue for Western sovietology (and GDR studies) for the past generation was the relationship between economic development and the structure of authority. 13 While scholars recognized the continued relevance of the classical totalitarian model, an approach that emphasized the differences between Communist and non-Communist political systems, most also felt that the desire to industrialize would bring about a change in tng about a change in the way the Communist parties exercised power. Most academics posited a contradiction between the crude mobilization techniques of early Stalinism and the functional necessities of industrial society. Communist parties might never advocate liberal democracy and capitalism but they could and would become more orderly, businesslike, and less "ideological" in working out and implementing economic policy.

Whether influenced by Parsonian modernization theory or Weberian theories of bureaucratization, research on the development of Communist countries set out to prove this hypothesis by focusing on the common needs of all industrial societies.14 Although not explicitly cast in such terms, the lion's share of research in the 1960s and 1970s laid out the fundamentals of a full-blown technocratic theory of Communist politics. For one thing, this literature told us, the greater presence of technical expertise at every level of the policy process after Stalin's death seemed to contradict the totalitarian image of an irrational Communist Party apparatus dominating the realm of social decision making. For another, elite recruitment supposedly based increasingly on merit ran contrary to the totalitarian image of professional careers based primarily on public displays of loyalty and devotion to a social mission.15

Most important, so the argument ran, changing behavior and orientations in Communist countries went beyond the technical intelligentsia, to

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embrace the party apparatus itself. The clearest statement of this view is found in the work of Jerry Hough. Although Hough does not explicitly place himself in the technocratic school, his studies of policy making and implementation portray a party apparatus caught up in the details of economic development. 16 In his Soviet Prefects, the regional party secretary is portrayed as "a textbook example of the classic prefect in a modern setting," rather than a high priest of ideological rectitude. Furthermore, Hough's work on the career profiles of central and regional officials attempts to demonstrate how their educational backgrounds and career paths prepared them for economic functions.

Toward the end of the 1970s the technocratic model in sovietology fell out of favor. Hough's work sustained several direct attacks from authors who claimed that the regional party apparatus remained fixed on political power and ideology rather than economic development.17 Others questioned the efficacy and goodwill of the party organs in implementing economic policy.18 In fact, as the generalized corruption of the Brezhnev years became a wellestablished article of every sovietologist's knowledge, the scholarly community began to rethink some of its most cherished hypotheses and assumptions about the role of the party, its organizational evolution, and its relationship to the economy. Was this really a technocratic organization overseeing a variation of economic modernization? Any graduate student on a research trip to the East bloc understood that his or her daily encounters with universal corruption, all-pervading networks of personal connections, an obsession with secrecy, officially sanctioned public slacking, and trifling concerns with minute status gradations contradicted the notion of East European Communist regimes as somehow "modernizing." It is not surprising, therefore, that in the last decade of Communist rule Western academics drew increasingly on the language of traditionalism and oriental despotism rather than modernity in conceptualizing these societies and their rulers.19

East Germany and Technocracy

While these insights became part of the scholarly consensus on Communist regimes during the Brezhnev era, students of East Germany continued to present their country as an exception to the rule in Eastern Europe. Rather than an example of economic and political decay, the GDR was portrayed almost exclusively as an economically successful, albeit politically unsavory, variation on modern development.20 As in earlier sovietology, the key to the technocratic model as applied to East Germany was the adaptation the party had made to the exigencies of economic development.

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The initiator of this school among West German scholars was Peter Ludz and, among American specialists, Thomas Baylis. 21 Ludz held that the career profile of the party elite changed in conjunction with industrial progressa trend marked by the emergence within the national leadership of a technocratic stratum (the "institutionalized counter-elite") that was gradually replacing the old, ideological "strategic clique." Baylis identified similar trends in a book that emphasized the changing orientations of the political elite to the technical intelligentsia.

Under Ludz's guidance and inspiration, a series of well-received West German studies appeared on the impact of economic modernization in the GDR on the structure of political authority and elite attitudes. Among the contributions to this school, worth mentioning here are Glaeßner's study of personnel policy and education, which maintained that personnel and training policies had changed since the 1950s to reflect the need for greater technical knowledge as opposed to mere political commitment, and Neugebauer's book on the relationship of the SED to the state apparatusa study in the tradition of Hough's Soviet Prefects.22 Taken as a group, these authors were suggesting, in effect, that there was a noncapitalist path to modernity and East Germany was just the country to prove this.

It is certainly not fair to take these scholars to task for faulty predictions. But it may be worth considering why they were wrong. Why did Western analysts of the GDR continue to find this vision of a technocratic path to socialist modernity so appealing if it did not accord with reality? How could a generation of scholars be so misguided as to the GDR's developmental possibilities? Here, one could point to a number of factors. As already noted, first on this list is Parsonian modernization theory; the influence of evolutionary and adaptationist thought in Western GDR studies was, if anything, stronger than in American sovietology. Nowhere was the logic of technocratic modernization more compelling. East Germany's relatively high level of industrialization and its unusually rigid dictatorship seemed to be the perfect case for demonstrating the supposed tension between ideological dictatorship and industrial society, and its resolution in favor of the latter. But, given the well-known bias in evolutionist thought toward stability and equilibrium, these neo-Parsonians were disinclined to identify retarding factors and impediments to adaptive responses among Soviet-type societies. Nor were they inclined to question whether adaptation at one stage of development creates obstacles to successful adaptation at subsequent stages.

Second, in attempting to avoid the anti-Communist biases that were thought to have diminished the intellectual integrity of an earlier generation of scholarship, Western analysts of East Germany appear to have been

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taken in by the tone of the propaganda literature they were using as their primary research materials. 23 Far in excess of what has ever occurred in Western policy debates, during the 1960s and 1970s East German political elites employed the idiom of scientific discourse in their official discussions. Discounting émigré accounts and denied unofficial documents or other reliable sources of information under the East German policy of Abgrenzung (demarcation), Western academics relied on the GDR's press and official East German intellectuals and, in doing so, instead of "deconstructing the narratives," committed what now appears to be the fundamental error of taking on the discourse of the culture under investigation as their own.

Neither Parsonian categories nor the contaminating effects of scientistic discourse, however, would have distorted the picture of East Germany, as it did for so long, had a further cause not reinforced the perceived predisposition to technocratic authoritarianism. Although rarely discussed in any kind of satisfactory detail, the underlying assumption of much work on the GDR was that, whatever the structural deficiencies of Leninist political institutions leading to poor economic performance and corruption in other Communist countries, the East Germans had avoided these unfavorable outcomes because they were German. In other words, this was a case of German culture overcoming Leninist structure.24 It is difficult to underestimate the influence this idea had on political opinion in the West, both of the left and the right, and, while never expressed in such social scientific categories as "structure" and "culture," popular usage of such phrases as "Red Prussians" and the ''People's Republic of Prussia" reinforced and was itself reinforced by the impression in the scholarly community that East Germany was somehow more honest, efficient, and businesslike (sachlich)thatit worked because of its Germanness.

This book sets out to explain why precisely the opposite was true: Leninist structures regularly reproduce the same bureaucratic cultures and developmental outcomes in significantly different cultural contexts. In Eckstein's sense of the term, the GDR is a "crucial case"; if for cultural reasons Marxism-Leninism worked anywhere, if anywhere there could have been a cultural predisposition to successful technocratic authoritarianism, it should have been in the GDR.25 If historical culture were decisive, East Germany should have been a "developmental state," a Communist variation on the standard East Asian model.

The impediments to East Germany becoming a "developmental state" of the East Asian type, however, were simply too formidable. It may be instructive briefly to draw this comparison with East Asia more explicitly, for the comparison is not as far-fetched as it may at first seem. In East Asia too,

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elites have attempted to legitimate their less than democratic rule on the basis of superior economic performance. Scholars have explained East Asian success chiefly by pointing to the role and composition of economic bureaucracies. Although they do not usually use the term as such, their model too can be understood as technocratic. For one thing, East Asian specialists maintain, recruitment into economic bureaucracies is based on merit and educational achievement; witness, for example, the extraordinarily keen, merit-based competition for entrance to the primary educational conduits to Asia's public economic institutions. Furthermore, this literature emphasizes the businesslike and nonideological behavior and orientations of the developmental bureaucracies. Ministries of finance and state industrial planning agencies perform their tasks with an eye to growth and market control; they pay little attention to market or planning orthodoxies per se, but concentrate instead on what works. Most important, however, the literature stresses that technocratic bureaucracies work when they are "strong," in the sense of being relatively autonomous from the surrounding political environment. East Asian industrial strategies, social policies, and national budgets are worked out in relative isolation from the pressure of social forces such as trade unions, defense lobbies, political parties, and, in most cases, even parliaments. 26

As the following chapters demonstrate, none of these characteristics of East Asian economic bureaucracies obtained for the GDR. East German bureaucrats were neither autonomous nor businesslike, nor were they recruited primarily on the basis of merit. Instead they were highly dependent on the larger political environment in which they operated and hemmed in by a seamless web of ideology and interests, which, when taken together, explain what it was about the nature of Marxism-Leninism that would keep it from being able to innovate and adapt in a way that would rival capitalism and provide an alternative route to modernity.

A Look Ahead

The book is divided into two parts. In part 1, the view taken is from the top down. Our story starts in the late 1940s and early 1950s with the German Communists having come to power under the careful tutelage of the Soviet Military Administration (SMAD). Although German Communists were long considered the group of people best suited by virtue of historical experience and philosophical lineage to bring Marxism to fruition, once in power they found themselves in a difficult bind in their relationship to the German working class. Despite the presence of the Soviet Army and a formidable

Page 11

secret police, chapter 1 shows that even during the 1940s and 1950s, at the height of Stalinism, the SED's repeated attempts to institute a Taylorist technocracy on the shop floor faced stiff resistance culminating in the mass strikes of June 1953. Ultimately most attempts at shop floor technocracy failed. To assure the goodwill of the proletariat, the SED had to give its workers a virtual veto power over wages, prices, and work norms. Even if they did not possess an outright stranglehold on the East German economy, such concessions yielded to workers the power to restrict the range of plausible reforms at a later period.

The SED's weakness among the working class, however, did not mitigate the pressure put upon it to satisfy the rising material needs of the population. In fact, pressure on the regime intensified during the 1950s, as West Germany underwent a revolution in production and popular consumption. And while the construction of the Berlin Wall in 1961 halted the flow of refugees streaming westward, Walter Ulbricht understood that a successful resolution of the German question could only be attained if East Germany became an appealing place to live, more appealing than the West. With this in mind, East Germany initiated an in-system, technocratic reform of its economy. The GDR's reform was initiated under the influence of similar reforms begun by Nikita Khrushchev in the Soviet Union. Even so, the "New Economic System," as the reform was called, quickly took on a life of its own, surpassing anything tried or even contemplated in Moscow. The evidence offered in chapter 2 suggests that Ulbricht never genuinely understood where the reform might ultimately lead his country either politically or economically. And for good reasonnothing of the sort had ever been tried before in the bloc. Such ignorance proved fateful for Ulbricht and his reform team, as they confronted a new confining condition in addition to the already troubled relationship with the working class. From the very outset the reforms faced stiff bureaucratic resistance. Eventually, when difficult economic choices had to be made, Ulbricht was forced to square off against his own Politburo colleagues, who considered the reforms too risky, too capitalist sounding, and too ill-conceived; his erstwhile Moscow allies, who resented his attempt to solve the German question without their consultation; and a surly population, as East Germans were asked to tighten their belts one more time. Having alienated all major "interest groups" in the country, Ulbricht could safely be attacked and removed by a group in the Politburo led by Erich Honecker and backed by the Soviet leadership.

Immobilized by its own working class and unwilling to experiment with capitalist-sounding technocratic ideas, the SED settled in to a conservative consumer socialism during the 1970sand 1980s. Yet here too, the new

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leader, Erich Honecker, and the SED leadership confronted a third confining condition, the international political economy. As long as capital remained plentiful on international markets and the Soviets were willing to subsidize the economy of their East German allies, the GDR could consume and invest on easy terms. The respite lasted but three years. By 1974, the Soviet Union was demanding higher prices for its goods (the key item here was oil). In addition, the East German leadership found it increasingly difficult to sell its goods on recessionary Western markets. By the end of the decade, the GDR was financially insolvent. Chapter 3 examines the high politics of the GDR's debt crisis as it played itself out in the Politburo and the international arena.

Since the book examines economic decline from the standpoint of the SED, it is sensible to move the focus of inquiry outside of Berlin to the provinces where, during the 1970s and 1980s, decline was experienced not as an abstract, statistical phenomenon but as a concrete political reality. In part II of the book, therefore, I explore the politics of economic decline through the eyes of the regional and district political elites, the party secretaries. Chapter 4 asks, What kind of people are we dealing with here? How did the experience of the regional elites prepare them for addressing the growing economic crisis? What we find is an ideologically oriented group of men from the provinces, well suited to the political culture in which they operated but not inclined to change course, even in the face of crisis.

This impression is reinforced by the next three chapters. These chapters suggest that the technocratic image needs to be replaced with one that can help us understand the complex relationship between the party and economy. Chapter 5 examines the role of regional and district party organizations in implementing economic policy. As we shall see, although the regional and district organs were expected to "solve" the daily problems of the economy, they lacked the resources or the will to address the most weighty concerns. Instead the party secretaries retreated into the "campaign economy," a form of political ritual with an important political logic but little substantive economic impact.

The campaign economy reached its height on the shop floor, the subject of chapter 6. Here, ironically, the state had the least room for maneuver; it was at its weakest. In the absence of a genuine labor market and in the shadow of a continuous, yet hidden battle over work norms and wages, industrial relations in the twilight of communism evolved into a stalemate between the working class and the state. The traditional tool of productivity in the Communist world, the socialist competition, although instituted with the intention of increasing labor productivity, was robbed of its original intent in the face of working-class resistance and managerial acquiescence. It

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served more as a type of ritual exchange of gifts between the party-state and working class than as a stimulus to greater productivity.

Chapter 7 examines the role of the regional political elites in local politics. The two main challenges faced in this realm were in housing and consumer goods. Although the GDR's suburban housing program was mildly successful, it could only succeed at the cost of urban decay. Against this, the regional party secretaries could do little. And, as the opening passage of this chapter indicates, supplying the population with consumer goods became the real flash point of local politics. It was here that public dissatisfaction was most volatile. At the heart of Europe in 1989, shortages of basic food stuffs, consumer durables, and even luxury items were no longer accepted as legitimate. Although the regime had survived an impressive array of political challenges since the 1940s, Communists from the very top of the SED hierarchy to the lowliest district party secretary understood with remarkable clarity that the GDR faced its greatest crisis in its chronic inability to meet the material needs of the population. Ironically, the Communist system, founded on the premise of distributing abundance more justly, foundered on its inability to overcome scarcity.

Seen in this way, the explanation for the GDR's collapse offered here differs from what have become the standard cultural and political approaches to the revolution of 1989, which emphasize the role of intellectuals, generational change in the elite, German political identity, and the mobilization of civil society. 27 Of course, any account of the GDR's demise must include some discussion of the German question and political mobilization against the regime. The Monday demonstrations in Leipzig, the resignations of Honecker, Mittag, and Joachim Herrmann, the spectacle of Christa Wolf, Stephan Heym, and other East German intellectuals speaking to enthusiastic crowds in Berlin, and, finally, the dismantling of the Berlin Wall, all deserve pride of place in the history of 1989.28 These were important, dramatic moments in German history, and they deserve to be remembered. If scholarship in the past generation has taught us anything, however, it is that revolutions have causes rooted deeply in social and political structures.29 Mobilization is but one stage in the revolutionary process, and one that appears relatively late in the game. The following pages draw our attention back to the long-term sources of regime decay by concentrating on the political responses, high and low, to an economy in a chronic state of crisis. In doing so, they hopefully make it easier to understand why mobilization against the regime became such an appealing strategy in the first place and why unification with the West came to be seen as inevitable.

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Part One

The View from the Top

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Chapter 1

Making Russians from Prussians

Labor and the State, 1945-1961

This war is not as in the past; whoever occupies a territory also imposes on it his own social system. Everyone imposes his own system as far as his army can reach. It cannot be otherwise.

Josef Stalin

Although scholars continue to ask whether Stalin actually wanted a separate and Communist East German state, little doubt remains that between 1945 and 1961 the Soviet Military Administration in Germany (SMAD) and its client party, the SED, transferred the essentials of the Soviet-type economy to East Germany. 1 By the end of the period, nationalized property, centralized planning organs, industrial ministries with branch responsibilities, and territorial party organizations with wide-ranging economic powersin short, all the economic institutions one would identify as distinctly Sovietfilled in the landscape of day-to-day economic administration.

Despite the considerable destruction of East German industry in the last months of the war and the heavy burden of reparations to the Soviet Union, taken in the form of dismantled equipment and running production, by 1961 industrial production had grown on average 8 percent for the preceding five years, several badly damaged prewar enterprises were once again running, and, most impressive, a number of newly built industrial giants had come on line. The SED viewed such prime examples of Stalinist industrialization as the Eisenhut Ost Steelworks, the Schwedt Petrochemicals Combine, and the Leuna II Chemical Works with a measure of pride.2

Yet looking back on the past fifteen years, SED leader Walter Ulbricht must have been struck by a paradox. The SED had more or less smoothly transferred the industrial institutions of the Soviet Union to the GDR. Nationalizations in industry and agriculture found, if not a warm reception, at least acceptance

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among large segments of the population who could be convinced that the chaos of capitalism had brought the Nazis to power. Such an instrumentally employed antifascism, however, could only go so far in fostering goodwill. Although we lack systematic public opinion data for East Germany in this period, if the experience of West Germany is any indication, during the 1950s the East German regime was evaluated by most segments of the public not on its ideological pronouncements but, rather, on its economic performance, the working conditions it fostered, and the living standards it afforded its citizens. In this regard, the results were far from satisfactory. And among the working class, the one group from whom the SED hoped for the most support and feared the most resistance, very little headway had been made. The impositions of Soviet-type industrial relations on the East German working class engendered a type of resistance that was both intrepid, unexpected, and difficult to deal with.

It is important to capture the early structure of industrial relations because the choices made at this early stage determined the path of future development. 3 The purpose of this chapter is to show how the adoption of Soviet-type economic institutions in East Germany reshaped labor relations, and how these new labor relations in turn restricted economic policy and hindered structural reform at later periods. Such an analysis will hardly sound original to students of political economy. In the context of capitalist development, various studies have convincingly demonstrated the connection between labor relations and a state's capacity to formulate and implement effective economic policies.4 It may be more difficult, however, to appreciate the nature of the constraints encountered by Communist East Germany in its early years. One might reasonably expect the presence of the Soviet Army to have hindered, if not precluded, any form of organized labor conflict and afforded the SED the leeway to reshape East German industrial relations as it saw fit. But as we shall see, in Communist contexts too, labor effectively restricts the policy repertoire of political elites. It is not my intention to provide a comprehensive history of industrial relations in East Germany. Such a topic deserves a book, perhaps several books, unto itself. Rather, I hope to show how the evolution of this relationship yielded a paradoxical sort of veto power to the East German working class over wages, prices, and work norms, and how this veto power constrained economic policy at later stages.

To anticipate the argument: between 1947 and 1953, the SED attempted to institute a rigorous Taylorist labor regime but, in the face of massive resistance culminating in the June 17, 1953, workers uprising, it backed off. Thereafter, fearing a repetition of the June events, labor peace could be

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bought only at the price of long-term stagnation in labor relations, wage structures, and productivity incentives. When Walter Ulbricht finally did attempt to reform the Stalinist economic structure in 1963 (the subject of chapter 2), he found himself hemmed in by the "labor pact" he had helped to fashion fifteen years earlier.

The Dilemma of Discipline

It is a commonly held belief that East Germany started with a natural advantage among Leninist regimesa developed industrial infrastructure and a highly trained, disciplined, and German work force. Nowhere was this image of the German working class more deeply rooted than in the Soviet Union itself, a country that had developed intensive industrial, military, and intellectual ties with Germany in the interwar period. Stalin himself might have harbored typically Leninist doubts about the fundamental commitment of German workers to socialism, but he too deeply admired their discipline and efficiency. He admitted as much during the final stage of the war when he told Yugoslav Communist Milovan Djilas that Germany "is a highly developed industrial nation with an extremely well qualified and numerous working class and technical intelligentsia. Give them 12 to 15 years and they'll be on their feet again." 5

But whatever the Soviets' hopes for the traditional German virtues of hard work and discipline in their own zone of occupation, the orientations and behavior of East Germans quickly changed under the impact of the difficult postwar conditions and Soviet labor practices. This is not to say that seventy years of German working-class culture could be wiped out overnight by "sovietization." It could not. Indeed, significant aspects of this culture were not at all incompatible with Soviet labor practices. Well into 1947, for example, the extensive system of vocational training developed during the Kaiserreich and extended under the Nazis continued to operate, utilizing many of the principles associated with the "company loyalty" school developed in the 1920s and 1930s by the conservative industrial pedagogue Carl Arnhold.6

However, "sovietization" did change things, albeit not in a simplistic way. The history of labor in postwar East Germany is less a story of implementing a master plan for "sovietization" than it is of crisis management. What we see are a series of responses to pressing problems, which, in their cumulative effect, we may more or less usefully term "sovietization." Of course, as in every country of Eastern Europe, the Soviet military authorities precluded the development in East Germany of independent working-class

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Table 1-1. Daily Rations in Calories in East Germany, 1945-1949


June 1945

July 1946

January 1947

August 1947

July 1948

November 1948

November 1949

December 1949

Daily Requirement

East Berlin

approx. 3,500

Heavy labor




























Heaviest labor




Heavy labor















Source: Wolfgang Zank, Wirtschaft und Arbeit in Ostdeutschland 1945-1949 (Munich: R. Oldenbourg Verlag, 1987), 67.

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organizations, especially after 1947. But suppressing working-class political organizations could not begin to solve all the problems of labor motivation and productivity. Inducing East German workers to work set off a bitter conflict over wages and piece rates. The resolution of this conflict within the confines of the command economy created a new kind of German working class with different habits and expectationswith a different moral economythan those characteristic of its predecessor or developing in the West.

I use the term ''moral economy" because, in many ways, the German worker of the postwar era finds his counterpart in R. H. Tawney's image of the peasant, "in water up to his neck." 7 In the newspapers of the day, one finds moving reports of severe malnourishment among young workers.8 The line between survival and starvation was one easily crossed. The collapse of the financial system, coupled with shortages in every sector of the economy under the weight of reparations payments, rendered monetary wages a weak instrument for tying labor to the workplace: with almost nothing to buy, it made little sense to work for money. Where money did matter, if one had a lot of it, was on the black market. Most workers spent several hours per day in the black market and several days each month roaming the countryside in search of food.9 Initially, then, it was a matter not so much of getting East German workers to work hard as inducing them to show up for work at all. In the two years following the war, absenteeism remained high and labor discipline lax. As table 1-1 indicates, those who arrived at the factory gates, often did so on empty stomachs or severely malnourished.

Of necessity, then, the ethic on the shop floor was egalitarian, cooperative, defensive, and geared toward survival rather than maximization of gain. The institutional expressions of this ethic were the spontaneously formed enterprise councils, which, with Soviet toleration, coordinated production and distributed equally to their employees a portion of their production and what little food and consumer goods (for barter) they could find.10 Enterprise councils have a rich history in German industrial relations, extending back to the Weimar period and in some cases before. In the postwar years East German enterprise councils took on two new roles. First, they helped identify and root out active Nazis in industry, although in the case of management, the Soviet record on removing these officials was mixed.11 Second, with many managers having fled to the West, councils performed the valuable service of getting production up and running again. But composed as they were of Social Democratic and Communist workers, enterprise councils could hardly have been expected to increase labor discipline with the traditional tools of differential reward and labor segmentation.

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The power of the councils was undoubtedly enhanced by the neglect of the Soviet military authorities. Initially, the SMAD concentrated its energies on reshaping the East German political order and extracting war reparations. Through its various departments and provincial affiliates, the SMAD controlled nearly every aspect of political, social, and economic life in its zone of occupation. During the first year and a half of occupation, it undertook a number of delicate tasks, including the forced merger of the Social Democratic Party with the Communist Party and setting up the mechanisms for reparations payments. In the economy, it oversaw large-scale land reforms in 1945 and nationalizations of industry in 1946. 12 But both of these measures were essentially political in nature, designed more to reshape the German social structure and destroy the economic foundations of bourgeois power than to improve the health of the economy.13 Indeed, apart from ensuring the orderly dismantling of plant and equipment, and reparations from existing production, the Soviets showed little interest in developing a comprehensive strategy for rebuilding the East German economy before 1947.

Thus the first period of the Soviet occupation, from summer 1945 until spring 1947, was marked by a general neglect of labor. Two factors finally moved the Soviets to change their thinking. First, the economic impact of reparations, land reforms, and industrial nationalizations, combined with the bitterly cold "winter of a century" in 1946-47, had depleted and demoralized the labor force. During spring 1947, many workers complained of hunger at their workplace. Absenteeism grew dramatically. In summer, the crisis reached its high point and workers began to walk off the job.14 Even if they continued to use the Eastern Zone primarily as a source of wealth for export to the Soviet Union, growing signs of social unrest, coupled with direct lobbying by the SED leadership, probably convinced the Soviet Military Administration that some sort of centrally guided economic policy was necessary.15

The second and more important reason for new Soviet interest in labor discipline was the realization that the eastern part of Germany might remain in the Soviet orbit for some time to come. Over the course of 1947 the cold war began in earnest. Whereas throughout 1946 and early 1947, Stalin had assiduously avoided giving the impression of approving of a separate East German state, the announcement of the Truman Doctrine in March, the creation of the bizonal economic union between the British and the Americans in May, followed by the Marshall Plan in June, probably convinced him that the division of Germany, if not a permanent fact, at least necessitated the Eastern Zone's economic integration into the "socialist camp."16

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Responding to these social and political crises, the SMAD called into existence what the SED leadership had been demanding for six months: a zonal economic authority. Whereas earlier, German administrative participation in the Soviet Zone had been restricted to the Land level administrations, following the announcement of the Marshall Plan in June, the Deutsche Wirtschaftskommission (DWK; German Economic Commission) became the first German administrative unit responsible for the entire zone.

But administrative centralization would not get to the heart of the problema demoralized and not very productive labor force. By the summer of 1947, East German labor productivity still lay at less than half of its 1936 level. Responding to both the crisis in labor motivation and the changing external political climate, on October 13, 1947, the SMAD issued Order 234what the East German trade unions subsequently called the Aufbaubefehl (construction order). In essence, Order 234 amounted to a full-blown transfer of Soviet-style labor relations to East Germany, although initially it might not have appeared as such. The order called for a number of social measures to address the most urgent needs of workers: industrial safety, strict limits on the use of child labor, longer vacation time for workers involved in physically exhausting labor, "polyclinics" and "nursing stations" in the workplace, improved living conditions for workers, and increased wages for female workers. Most important, enterprises put on a "234 list'' received special deliveries of food for the preparation of hot meals served in the workers' cafeteria and consignments of industrial consumer goods to be distributed directly at the workplace. Workers deemed to be especially productive or those involved in hard physical labor received a type "A" meal. Those evaluated as less productive or performing less strenuous tasks received a less caloric and nutritious type "B" meal. This principle was to be used in the direct distribution of consumer goods at the workplace as well.

Order 234 also contained a number of measures to improve labor productivity. First and foremost came the fight against "slackers and corruption." "People's Control Committees" were set up in enterprises to stem the tide of shady dealings and petty pilfering that were bound to occur in a shortage economy. Absentee workers who could not produce a medical excuse could now have their ration cards taken away or, in extreme cases, be assigned to clear rubble from bomb sites, which, along with construction, was among the most poorly paid work and was almost never included on the Order 234 lists of enterprises receiving extra food. 17 To aid workers in getting to their jobs, the order called for renewed attention on the part of Land governments to local transport networks. And since almost every enterprise reported

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shortages of skilled workers, the order mandated the training of a new cohort of workers under the supervision of the trade unions (Freie Deutsche Gewerkschaftsbund or FDGB). Finally, the order called for the reintroduction of piecework and other forms of productivity-based wages throughout industry. 18 To assist management in raising productivity, Soviet-style "socialist competitions" were to be employed and those individual workers who contributed most to raising productive norms were to be designated "activists" and receive financial and political rewards.

Thus began the process of "sovietization" of the East German labor force. Through a subtle combination of incentives and sanctions, the particular Soviet method of binding the worker to the factory, of refashioning the factory as a social and political, as opposed to a purely economic institution, had begun. Much of this, of course, was not new to German workers or managers. Industrialists such as Siemens and Zeiss had long understood the benefits of a Sozialpolitik internal to the enterprise.19 Yet, as socially oriented as many German workers and industrialists may have been in the prewar era, they operated in a political and economic environment far different from the one confronting workers and managers in Soviet-occupied Germany in 1947. For one thing, the presence of the Soviet military authorities precluded the formation of anything like the independent employer and employee organizations that had hammered out personnel and wage policy in the Weimar era. The absence of legitimate interest representation meant that any wage settlement would be viewed by workers as suspect, as an expression of state policy or, worse, "Russian" policy, rather than as the result of wage negotiations between nominally independent parties.

Beyond the legitimacy question, which of course would persist, East German management faced a far different set of incentives than that faced by its prewar counterparts. Prewar German industry, for all the excesses of a highly organized internal market, still faced a modicum of domestic competition and the discipline of a highly competitive external market. These conditions no longer obtained for East German industry. Unlike the prewar industrialists, East German managers rarely worried whether their products would be marketed properly and ultimately bought. Pervasive shortages and Soviet reparation policy all but guaranteed that the entire productive capacity of almost any given enterprise could be sold. Rather than being determined by demand, the success of East German managers was a function of their ability to secure the necessary inputs of production, of which labor was among the most important. More than any other, this factor yielded a measure of power to the workers and ultimately determined the way in which Order 234 was implemented.

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Order 234 and the SED

Although inclusion of an enterprise on an Order 234 list was a decision made by the provincial or central SMAD, the execution of the order fell to the SED and the protostate administrative unit, the German Administration for Labor and Social Welfare. That the Soviets assigned the utmost importance to the implementation of the order is indicated by their insistence on frequent progress reports as well as the formation of interdepartmental "234 working groups" and "234 committees." These working groups met regularly throughout 1947-48 and their reports tell a story of administrative confusion and working-class resistance.

Of course, if one were to judge from the initial reports in the newspapers, Order 234 was an immediate success. Claims of wildly improbable increases in production (based on distorted statistics) dominated the pages of Neues Deutschand and other official East German papers. Soon, however, orders came down from the SED economics departments to stop publishing absolute production numbers. Not only did they discredit all newspaper reporting, but with reports of 30 to 50 percent increases in production, one diplomatically inclined official warned, "workers start inquiring where the goods are." 20

Internally it had to be acknowledged that a host of technical problems of the most elementary sort plagued the implementation of the order. For one thing, enterprises received such a quantity of repetitive questionnaires in connection with 234 that many had found it necessary to open special departments for filling them out and writing reports.21 Apart from the problems generated within the enterprise by 234, shortages of automobiles and fuel made it difficult for representatives of the center to visit the provinces and determine whether the order was actually being implemented. When they did arrive, they often found provincial governments in considerable disarray, having given little thought to the particulars of the order. A report filed from Mecklenburg-Vorpommern by a 234 committee noted that its implementation had become the job of a lowly Oberregierungsrat in the provincial Ministry for Labor and Social Welfare. According to the report, in the hands of this ministry, the order took on a one-sided social flavor. "The measures taken by the [Mecklenburg-Vorpommern] government are restricted almost exclusively to implementing those aspects of the order intended to improve the situation of the workers, such as the introduction of warm meals in the workplace, the distribution of textiles and consumer goods, the introduction of a child labor protection, etc. The basic measures for raising labor productivity have yet to be utilized. The sole ministry

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performing systematic work toward implementing the order is the Ministry of Labor and Social Welfare, while, for example, the Ministry of Economics declares that it actually 'has little to do with the order.' " 22

Apart from the issue of administrative competence, a litany of other, more serious administrative problems accompanied the order's implementation. The most touchy problem, of course, was that of reparations, which was also the most difficult to discuss without appearing to be anti-Soviet. East German "234 committees" and enterprise managers complained that the provincial SMAD administrations drew up the lists of enterprises to be included for food deliveries arbitrarily.23 Left unsaid or unwritten was the understanding that the SMAD channeled resources to those enterprises producing goods to be shipped as reparations to the Soviet Union.24

Some portions of Order 234 could not be fulfilled with any speed or were of little use. The former characterized the calls for improved local transport or construction of apartments by enterprises: neither local governments nor enterprises had the resources to carry out these tasks in the foreseeable future. The latter applies to the "people's control committees." They tended to be staffed either by busybodies who interfered with the necessary deal making between enterprises in a shortage economy, or by corrupt elements who abused their right to confiscate illegally obtained commodities.25 Under conditions of shortage, even a powerful enterprise such as the Leuna Chemical Works found it necessary to engage in extensive black-market trading. A report in December 1947 revealed that "an entire train with 'bartering fertilizer' had been discovered" on its way to a rural district.

Fourteen train wagons of potatoes and vegetables that were to be transported illegally out of the Haldensleben district were sent back. No official found it strange that the Leuna works sent out an entire train with fertilizer in order to set up an exchange with the farmers in the villages of Nordgemersleben and Grossantersleben, although the farmers of these villages have not yet fulfilled their mandatory orders of potatoes and vegetables. Only the vice-chairman of the enterprise's trade-union organization did not go along with it. He approached the accidentally present minister for economics. This organized "barter trade" by the Leuna works is all the more reprehensible because this large enterprise receives guaranteed supplementary [food] deliveries through Order 234.

The report went on to note that the directors of other fertilizer enterprises in Sachsen-Anhalt had been caught trading for pork, bacon, ham, sugar, butter, and beans. Although the preceding example indicates that tradeunion committees could often be counted upon to be loyal to the center in

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the fight against barter trade, the same could not be said for the remaining enterprise councils. Many simply refused to participate in the struggle against barter trade for fear of losing popularity among workers. In any case, the distinction between principled and unprincipled black-market behavior became blurred, and the amateurish people's control committees found themselves hopelessly overwhelmed. 26

Administrative chaos and confusion were only a part of the problem. More important for our purposes was the resistance of workers and managers. The first signs of resistance from the shop floor reveal how easily the ethic of equality among workers could be violated by the most rudimentary tactics designed to segment the labor force. Although over one million workers were receiving warm meals and extra consumer goods at their place of work within months after the order was issued, differential access to food and consumer goods, on whatever basis, injured most workers' fundamental sense of justice. Essentially a cryptomarketization strategy to distribute rewards according to effort and political loyalty, the meal plan of the SED invited wide-ranging acts of what James Scott would term "everyday resistance."27 Segmenting the labor force made little sense to workers when, even with the supplementary meals, average daily caloric intake remained well below daily minimum requirements. Not surprisingly, in April 1948, reports to the SED noted that workers continued to "eat from the same pot" and management still yielded to demands for the equal distribution of consumer goods despite the continued warnings from higher authorities.28 Where management stiffened its resolve to increase wage and consumer good differentials, workers often spontaneously evened out the differences by purchasing goods for each other.29

The nature and scope of the egalitarian impulse are best illustrated in the reaction to the reintroduction of piecework and other forms of "productivity wages" (Leistungslöhne). Although the Nazis had left an unusually disorganized wage structure in industry, the tendency among enterprise councils was to level existing differences, not only among workers but between workers and technical experts. As part of the entire process of wage leveling, enterprise councils, almost without exception, opposed the reintroduction of wage practices common before 1945. Whereas before 1945, 80 percent of the work force performed piecework and other types of Akkordarbeit, by April 1948 the proportion had fallen to 20 percent.30Workers and enterprise councils spontaneously eliminated piecework and often removed time clocks at plant entrances as symbols of work speedups and other distasteful aspects of capitalist (and Nazi) industrial life.31

When finally introduced, resistance to piecework and productivity wages

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was so formidable that, within months, the SMAD and the SED worried that Order 234 had devolved into an Essenbefehl, a one-sided welfare measure to feed industrial workers at their enterprise. 32 Workers complained, staged slowdowns, sabotaged piecework equipment, and used every method imaginableshort of collective actionfor resisting its imposition. When asked, workers voiced three further reasons for resisting piecework in addition to egalitarian sentiments. First, Order 234 came as a final blow to many workers who had seen a steady whittling away of the powers of enterprise councils and their subordination to the officially guided trade unions. The emasculation of the only truly representative working-class institution confirmed working-class fears that piecework, even if introduced by a nominally working-class party, was simply a familiar vehicle of increased exploitation. A clear indication of these fears was the revival in 1947 of the traditional German working-class dictum Akkord ist Mord (piecework is death) on the shop floor.33

Second, many workers who were in principle favorably disposed to increasing industrial discipline argued, with some justification, that any increase in productivity would flow directly into reparations and, as one worker put it, "benefit only the Russians."34 While the total amount of reparations paid by East Germany to the Soviet Union remains a matter of scholarly dispute, the record is clear regarding the demoralizing effect that reparations had on industrial workers. The head of the SMAD, Marshall Sokolovski, had guaranteed the SED leadership on January 11, 1947, that the dismantling of enterprises would be stopped. But a string of complaints from the SED and other evidence suggest that dismantling actually increased after this date.35 Moreover, reparations from running production continued unabated. Officially, the SED claimed to have stemmed the tide of reparations, but as trade-union chairman Herbert Warnke noted in April 1948, such claims were contradicted in the eyes of the population by the fact that the Soviets continued to walk into enterprises unannounced and take much of the production.36

Yet, even those workers resigned to piecework as an inevitable part of modern industry and to reparations as the cost of military defeat still protested that it made little sense to work for anything but hourly wages. Shortages in the energy sector and irregular deliveries of other raw materials virtually guaranteed each week that "after three days the raw materials are used up and in the remaining three days of the week there is nothing left to do."37 Although the micro- and macroeconomic conditions of the East German economy had changed for good, ordinary workers could not yet have known this. To them, idle capacity was a sure sign of impending

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layoffs, a condition that in these circumstances might well have meant starvation.

Naturally, given the presence of the Soviet Army, the forms of resistance to piecework remained largely amorphous and disorganizedshirking, grumbling, work-to-rule, dissimulation, and other weapons of the weak. Such weapons, however, apparently proved to be quite effective. Six months after the proclamation of Order 234, the proportion of the labor force receiving piecework and productivity wages had risen a mere 3 percent (from 23 percent in October to 26 percent in April). According to SED reports from the shop floor, many foremen could not be stopped from putting all the piecework tickets into a common urn in order to ensure equality of reward. 38 Difficulty in introducing piecework is further indicated by SED's strategy for introducing it.39 Rather than begin in the traditional centers of working-class power where it was likely to encounter stiff resistance, the SED concentrated initially on the textile enterprises of the Oberlausitz region, which employed mostly women, relative newcomers to the field of working-class politics in Germany. Not surprisingly, then, by the end of 1947 twice as many female workers received piecework wages as male workers.40

Corrupted Taylorism

However persistent and convincing working-class resistance to piecework may have been, the unrelenting pressure from the Soviet military authorities and the SED departments left management in all branches of industry little choice but to find a way to follow orders. East German management thus found itself in a no-win situation. Pressured on the one side by the Soviets and the SED to introduce piecework, and on the other side by the working class and its (increasingly powerless) enterprise councils to resist, management in the end did introduce piecework and productivity wages. In those cases where productivity wages were introduced honestly, wages immediately fell, and workers complained and often left for other enterprises. Fearing the loss of its workers, management responded by setting weak output norms that workers could easily meet and overshoot.41

The key to understanding management's behavior is the shortage economy. From the very outset of the Soviet occupation, managers were under pressure to produce as much as possible at whatever cost, a standard feature of Stalinist economic planning. Typical for the entire Soviet Zone, in 1946 only 138 of the 465 state-run enterprises in Saxony operated at a profit.42 Here we find the origins of the East German soft budget constraint. To be sure, even without the presence of the Soviet Army, the collapse of the

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German financial and transport systems at the end of the war rendered the hoarding of resources, especially labor, the sole rational economic strategy for producers of all kinds. But even after the East German currency reform in June 1948, which came as a response to the West German currency reform, the problem persisted. Hoarded labor became scarce labor, and scarce labor had more market power than if it were plentiful. 43

Management's problem was to find a way to secure the necessary labor inputs to meet production plans. Whether the wage of a worker corresponded to his productive input was secondary. Under conditions of labor shortage and a soft budget constraint, then, management found it logical to regard the transition from time wages to piecework as a way to raise wages, through weak norms, and make their enterprises more appealing on the labor market. As such, rational managerial behavior transformed what was intended as an economic measure into a sociopolitical one.44

The SMAD and Communist leadership responded with a redeployment of the prewar system of norm setting, using stopwatches, production-line time and motion studies, and the other elements of German Taylorism. The SED even reactivated the old Taylorist personnel, hated as they were on the shop floor. The appeal of Taylorism to Communist labor specialists (both Russian and German) is easy to understand.45 In the Taylorist vision, we find an image of the shop floor and industrial society that is both efficient and free of conflict. Although Taylor is best known for his principles of scientific management, within his thought there is a good dose of social engineering and an image of the shop floor that can be characterized as a technocratic utopia: as workers begin to grasp that greater efficiency means greater profits for the firm and ultimately higher wages, the culture of the shop floor and ultimately of society as a whole moves beyond the old divisions and animosities of class. As Homburg shows in her study of the rationalization movement in Weimar Germany, capitalist managers found in Taylorism the possibility of rationalizing the "human factor" in industry, hoped that it would neutralize the challenges of a labor market that was in many ways as tight as that of East Germany in the 1940s, and "create a new harmonious social order beyond class conflict, but not beyond capitalism."46 If one removes "but not beyond capitalism,'' it is easy to see the appeal of a Taylorist technocracy as the answer to the labor question in East Germany.

East German labor leaders acknowledged that scientific management, time studies, and the like had been a source of labor unrest in the prewar era. They enjoyed the distinct advantage, however, of being able in effect to say: yes, in the prewar period the vision of a harmonious social order based on Taylorism was simply ideology, a mask to hide exploitation and profit seek-

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ing. But with the negation of capitalist production relations and the advent of socialism, there is no reason why methods of industrial rationalization, no matter where they were developed, could not benefit working people.

Yet, as tempting as it might have been to rely on earlier German traditions of industrial authority and management, East German Taylorism was corrupted from the outset by the environment in which it functioned. Like their prewar counterparts, East German managers could use the technocratic solutions of Taylorism neither to solve the problem of labor shortage nor to harmonize relations on the shop floor. The SED felt constrained to issue assurances that the use of capitalist methods did not imply the reintroduction of capitalism; workers were not competing against each other for their "share" of an overall wage bill. In March 1948 the SED issued orders that those who transferred to piecework or other types of performance wages were to be guaranteed an income 15 percent higher than they received previously. 47 Two months later, Tribüne, the official newspaper of the FDGB demanded that "the calculative and rational nucleus of REFA [scientific piecework rates] be used without the technical exaggerations and without the capitalist intensification of work."48 Taken together, these provisos hollowed out the core of classical Taylorism and amounted to a retreat by the political authorities in the face of labor's position on the market.

In itself, paying a premium for piecework might not necessarily have been counterproductive had work norms been more closely watched. But with weak norms, piecework inevitably led to skyrocketing wage bills. The situation worsened after February 1948 with the introduction of "progressive productivity wages," which paid a premium over the piece rate for marginally greater production.49 Although economic planning called for productivity to rise twice as fast as wages, "labor power" ensured just the opposite: wages rose much faster than productivity. In the Bitterfeld Electrochemical Combine, for example, wages rose in 1948 four times faster than labor productivity.50 In the Maximillian Forge, 8 percent of the workers had been put on progressive productivity wages by the end of 1948, but productivity norms dropped below where they had been eighteen months before and, compared with rates in the previous year, wages had risen 60 percent while labor productivity had dropped by 24 percent.51 Similarly disappointing results were reported in the potash, iron, and coal mining industries, as well as other key sectors of the East German economy.52

In spring 1948, less than six months after the proclamation of Order 234, both the Soviets and the SED sounded the alarm on wages. The East German party and state bureaucracy split on the question in a rather nasty bureaucratic battle, which drew in the entire leadership as well as the Soviets, each

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side accusing the other of "conspiracy" and "sabotage." Fritz Selbmann, deputy chief of the DWK for industry, argued that the working class could only be convinced to take up "productivity wages" if the remuneration remained progressive. His concern was obviously with maximizing production. On the other side, the organization most closely associated with carrying out Order 234, the Administration for Labor and Social Welfare, headed by Gustav Brack, argued that wage levels had gotten out of control. 53 Brack took his case to the Soviets. By December they agreed that Brack was right. In a letter to DWK chief Heinrich Rau, a senior SMAD labor official warned that continued wage increases "threaten the normal monetary circulation and the financial system of the [Soviet] zone."54 On orders from the SMAD's labor department, the East Germans set to work on a new set of wage guidelines, designed to restrict the use of progressive productivity wages to essential industries and tighten norms in all branches.

The Aktivist Movement

Commitment to higher norms was one thing; implementing this in practice was something completely different. Unable or unwilling to use the threat of unemployment as a tool for increasing labor discipline, the Soviets fell back on their own particular experience of industrialization in the 1930s to demonstrate that with enough dedication, ingenuity, and effort, work norms could be raised dramatically. The "activist" and "competition" movements had been initiated under Order 234 with precisely this idea in mind, but one year later reports from the industrial provinces revealed that these movements had made little headway. East German managers had never before used socialist competitions. Most had no idea where to begin or what the fundamental organizing principles were. In many enterprises, workers were not even aware of when or in what sorts of competitions they participated.55

The SMAD decided that the movement needed a new push. Much as the "hero of socialist labor" Alexei Stakhanov had done as a coal miner in the 1930s, on the first anniversary of Order 234, October 13, 1948, under specially prepared conditions, Adolf Hennecke, a fifty-one-year-old coal miner from Zwickau, mined 387 percent of his normal quota of coal for his shift. Run as political campaign, the "Hennecke movement" soon spread across East Germany into every sector of the economy.56 It is no accident that the movement began in a coal mine. Not only was coal in short supply, but with a relatively unskilled labor force and a work process that was amenable to arithmetic accounting of individual work, methods of norm breaking could be easily incorporated as political actions.

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Hennecke's feat was supposed to inspire workers by demonstrating to the average person that it indeed was possible to do three and a half times the normal amount of work in a shift. Notwithstanding the spate of copycat record setting, however, one finds little evidence that the Hennecke movement actually increased labor productivity or that it convinced the working class of the need for higher norms. Most workers doubted the logic behind creating special conditions for one worker to produce faster than the norm for the simple reason that the normal work day simply did not function that way. One central committee instructor captured the attitude on the shop floor in his report of a visit to the Dresden Machine Building works during a "Hennecke Week" in December 1948. "I asked three skilled workers from the enterprise about their opinion of the Hennecke movement.... All three immediately agreed that the Hennecke movement would never work and would be discredited if 'Hennecke shifts' [as such record breaking shifts were referred to] continued to be prepared days in advance so that two or three workers could start well prepared." 57 In an interview with a retired steelworker, historian Lutz Niethammer confirms the general impressions one gets from the archival record. Hennecke shifts were always possible as one-time affairs, but only with a considerable loss of time for readying materials and machinery. "Only with such support was Hennecke the man. We had to clean everything in the morning and then they came in, and there stood the iron, impeccable, and they worked for eight hours, and they did something, didn't they? But it wasn't like that every day. That's not the way it's done. There is too much waste. It has to be cleaned up. You have to wash up this and that. The channels for the hot iron have to be built, don't they?"58

The regime, moreover, could only partially use the activist and competition movements to raise norms. As Bendix notes, the activists and other rate busters tended to be despised and isolated by the rank-and-file employees of an enterprise.59 The evidence on this point is overwhelming, not only from the testimony of Hennecke himself, but from those who followed in his footsteps. Activists regularly suffered abuse at the hands of their fellow workers. Many were labeled "bloodsuckers," while others were spit upon; some even faced physical danger. The noted East German playwright Heiner Müller brought these passions to dramatic form in his 1958 work Der Lohndrücker, following a long tradition of such plays in the GDR. The play's hero, the activist Balke, addressed a member of his brigade after beginning the reconstruction of a blast furnace while the furnace is still hot, so that his factory will not shut down and the plan could be met. "You've been blathering like mad about the rate busters. You don't want to understand what this

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is all about. You've thrown rocks at me [while I was in the furnace]. I used them for the wall. You beat me up, you and Zemke, as I came out of the oven." 60 During the turbulent 1950s, the publication of works that had as their central theme the question of how otherwise recalcitrant workers could possibly be mobilized in support of socialist goals attests to a problem so large that it could not be ignored, even by a Stalinist cultural apparatus.

Given the frequency and intensity of resistance, in the end Hennecke shifts and production records amounted to little more than political ritual. Control over this ritual, however, constituted an important arena of working-class politics and remained so for the next forty years. The attempt to create a Stalinist East German labor aristocracy failed in the face of strong egalitarian working-class solidarity, but such evidence did not deter the continued use of Hennecke-like campaigns.61 On the contrary, within the SED bureaucracy there was some talk of appointing Hennecke and others like him as enterprise directors.62 Hennecke himself even proposed the wholesale replacement of management in the mining industry with activists, once the latter had gone through special remedial courses in mathematics, science, and mining engineering.63 While none of these plans came to fruitionindeed, they were quickly slapped down at higher political instancesthe Aktivist movement continued to enjoy high-level SED support, perhaps because it remained the sole device for breaking the egalitarian consensus among industrial workers, or perhaps because it nourished the illusion that workers might voluntarily produce more for less.64

The evidence from the shop floor, however, is that the workers would not produce more for lower wages. In the four years following Hennecke's feat, the SED employed dozens of "methods" to toughen work norms and standardize wage scales. However, the structure of the economy and the power of the working class within this structure made rate busting an unusually trying task. For all the discussion of "technically grounded work norms" (know by the German acronym TAN) and the presence of TAN-bureaus in enterprises, constant interruptions in production due to the everyday chaos of the command economy rendered nearly impossible any accurate calculation of the relationship between labor and productive output. At best, norms could be a compromise between conditions at the workplace and downtime because of supply bottlenecks. At worst, they were mere guesswork.65

Furthermore, as noted earlier, the shortage of qualified labor and the existence of open borders yielded to labor an "exit option" that it might not otherwise have enjoyed. If pushed too far, the more talented could pick up and leave for the West. During the economic upswing in the West following the West German currency reform in June 1948, and the economic downswing

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in East Germany because of its separation from the West, the problem of migration worsened. 66 Not surprisingly, every time the center attempted to reform the wage system, management catered to the egalitarian impulse of its employees and continued to even out wage differentials with funds supposedly set up for production bonuses.67 Well into the early 1950s, despite its best efforts, the SED had still not gained control over the shop floor.

June 1953: Origins and Long-Term Consequences

The cat-and-mouse game between state and class might have carried on undisturbed had the cold war not taken a new turn. After the rejection of the second Soviet "Germany Note" by West Germany, followed by Adenauer's signature to the European Defence Community Treaty in May 1952, Stalin decided on the full integration of the GDR into the East bloc. Under Soviet orders the East Germans committed themselves to building up their armed forces and defense industry at a cost of 1.5 billion marks, to be financed from reductions in social spending coupled with higher taxation.

In July the SED quickly convened a party conference where it announced the "planned construction of socialism in the GDR." Apart from the ideological bluster, in the economy the shift amounted to a new emphasis on investment in heavy industry, forced collectivization of agriculture, and discriminatory taxation against the remaining private industrial enterprises. The economic and social impacts of these measures were felt immediately. In November 1952, West German newspapers reported sporadic riots and industrial unrest in the major industrial centers of the GDR, including Leipzig, Dresden, Halle, and Suhl.68 As a result of the collectivization campaign, by April 1953 approximately 40 percent of the wealthier farmers in the GDR had fled to the West, leaving over 500,000 hectares of otherwise productive land lying fallow.69 By spring 1953, severe food shortages hit the cities and, as punitive taxation on the private sector effectively shut down crucial suppliers of the state sector, consumer goods began to disappear from the shelves too.

Faced with the inflationary pressures of increased defense spending and declining agricultural and industrial output, the SED leadership had little choice but to attack industrial wage inflation. In May 1953, the SED announced an across-the-board norm increase of 10 percent, set according to strict technical standards. Such an increase might once again have been undermined at the enterprise level, and gone unnoticed, had it not been accompanied by other unprecedented measures: increases in prices for food, health care, and public transportation. Taken together, the norm and price

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increases amounted to a 33 percent monthly wage cut. Despite the confusion in the leadership following Stalin's death in March, the Soviet leadership retained enough internal cohesion to respond to the numerous SMAD reports that pointed to the strain these policies had put on East German society. In a series of meetings with the SED leadership, the Soviets "suggested" a number of steps for the GDR's economic recovery. 70 The SED followed most of the Soviet recommendations but, curiously, did not rescind the industrial norm increases.71

In any case it was too late. On June 16, 1953, workers at several Berlin construction sites walked off the job, demanding a reinstatement of the old norms. On the next day, June 17, the protests spread to 272 cities and towns throughout the GDR.72 Wage demands quickly turned into political demands for free elections and unification with the West. In the end, public order and SED rule could only be restored with the help of Soviet tanks.

The June uprising shocked and frightened both the Soviets and the SED leadership. Across the republic, demonstrators ransacked SED regional and district headquarters and, in a few instances, physically assaulted functionaries and soldiers. On the morning of June 17, Soviet High Commissioner Semionov instructed the entire Politburo to drive to SMAD headquarters in Karlshorst. Politburo member Rudolf Hernnstadt reports that the SED leadership drove in convoy through the center of Berlin. "We proceeded very quickly in a closed convoy through the streets, which in the meantime had filled with agitated people. Several ran at the car with raised fists. Neither Ulbricht nor I talked."73 During the first night of the revolt, the SED leadership spent the night under Soviet protection at SMAD headquarters in Karlshorst. In the early afternoon of June 17, Marshall Sokolovski, who had since become Soviet Army chief of staff, arrived from Moscow and immediately expressed an astonishment that probably reflected that of the entire Soviet leadership: "How could such a thing happen? I don't understand. Such things are not started up from one day to the next."74

For our purposes, even more important than the immediate shock were the long-term effects of the June events on the East German political economy. One month after the June uprising, a report to the general secretary of the Christian Democratic Union, the most important of the SED-aligned bloc parties, warned that "under a seemingly calm surface [lay] dangerous seeds of discontent," and concluded "that an external calm exists in the population and in reality the mood has in no way improved since June 17, 1953."75 The SED could hardly have been less affected by the mood of the population than its sister party, since most public anger was directed at Ulbricht, Pieck, Grotewohl, and other leading Communist luminaries. In

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fact, from the testimony of his colleagues, we know that throughout the 1950s, SED leader Walter Ulbricht feared, more than anything else, a repetition of June 17. 76

In the weeks immediately preceding and following the June strikes, Ulbricht squared off against several of his most important Politburo colleagues, including Interior Minister Wilhelm Zaisser and Rudolf Herrnstadt, the editor of Neues Deutschland, who insisted that Ulbricht had led the party astray by calling for the rapid construction of socialism. In a long and emotional nighttime Politburo meeting on July 7, 1953, nine members voted for Ulbricht's removal as general secretary and only two (Erich Honecker and Hermann Matern) supported him. But in a strange twist of events, Ulbricht was able not only to stay in office but, with the assistance of the Soviet Military Administration, in the following weeks managed to turn the tables on his opponents, forcing many into silence and removing the most ambitious from power altogether. Indeed, with Moscow's assistance, he emerged stronger in the SED than ever before.

How did Ulbricht pull this off? As Rudolf Herrnstadt suggests in his memoirs, the key was certainly Moscow's fear that disturbances similar to the June strikes might break out elsewhere in the Soviet orbit.77 In explaining the behavior of the Soviet leadership, it must be kept in mind how close all of this came after Stalin's death; while in Moscow the new triumvirate of Malenkov, Molotov, and Khrushchev were in the process of displacing their main rival, Lavrenti Beria, removing an experienced and loyal Soviet ally like Ulbricht immediately after the greatest crisis socialism had seen since the end of the war must have seemed too risky. The evidence indicates that Ulbricht, who immediately after the July 7 Politburo meeting flew to Moscow for consultations, convinced the Soviet authorities during his short stay that his removal was unwise, that his opponents had capitulated to street demonstrators on June 17, and that whatever his weaknesses were as general secretary, he could be kept on a fairly short leash.78 On July 9, 1953, Ulbricht returned to Berlin confident that the Soviet leadership in Moscow and the Soviet advisors on the ground in Germany would support him in unseating his opponents.

Having come away politically secure, Ulbricht nevertheless understood that politically charged industrial unrest had almost cost him his job and, given the clear connection between unrest and wage-price policy, he had good reason to avoid making this mistake again. It appears certain that Ulbricht feared his own working class. Not surprisingly, then, the uprising in June effectively crippled the regime on the shop floor. Norms quickly returned to the status quo ante.79 In order to buy labor quiescence, the SED

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continued to corrupt the entire Taylorist apparatus set up for measuring old norms and implementing new ones. Taylorism's corruption in the East German context did not decrease the allure of the pseudoscientific and technocratic language so present in the various charts, graphs, and equations that litter the regime's labor studies of the 1950s. 80 Gradually, however, the outlines of an implicit agreement between the workers' state and the working class began to take shape: production could rise so long as norms remained low and wages high, relative to productivity. Industrial unrest did reappear sporadically throughout the 1950s, as the regime tried time and again to manipulate wages and norms. But enterprise party organizations and management had little interest in creating unnecessary industrial conflict and, in the few cases of conflict that have been studied thoroughly, both tended to acquiesce to whatever industrial demands workers might make.

Throughout the 1950s wages rose faster than productivity in virtually every sector of industry, a problem that the leadership would repeatedly attempt to rectify, albeit with little success.81 Twelve years after the June events, for example, when the management of the Oberspree Cable Works tried to adjust piece rates in the first half of 1961, a report of the Committee for Labor and Wages lamented that "the workers declared that if new piece rates were introduced, they would take up work in another enterprise. Five workers took the discussion about the use of new rates, which would not have led to any wage reductions, as cause to quit."82 In the same year, a member of the Economic Council of Rostock could characterize only 15 percent of the wages in his province as subject to any kind of rigorous standardized output norms.83 Even though industrial relations could be stabilized on the basis of "high wages" (high, that is, relative to productivity gains) and low productivity (low, relative to the West), this arrangement did not in any way relieve the pressure on the regime to improve economic performance. It merely restricted one path of capital accumulation (through wage suppression) and rendered economic competition with the West that much more difficult. Wage egalitarianism remained a constant of East German industry; in fact, over the years it gradually became a social norm. Interestingly, egalitarian sentiments among workers in the GDR appear to have been replicated with equal strength in other Communist countries, leading one to suspect that the dynamics at work were inherent in Communist work experience and structures of authority rather than in any cultural particularity of the GDR.84

As the institutions and practices of Soviet-style economic administration took hold during the 1950s under the constraint of the implicit "labor agreement," the issue of rising wage levels constituted but one part of a larger,

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generalized problem of financial discipline throughout the East German economy. 85 In the first half of 1954, for example, as an unmistakable consequence of the wage concessions to the working class after June 1953, the East German money supply increased by 19.6 percent. Soviet advisors in the GDR's State Planning Commission and the Finance Ministry repeatedly complained of wage increases, industrial investment, and other sources of state expenditure being undertaken without sufficient care to the productive return on these outlays. But with little help in the way of extra consumer goods from the Soviet Union, and Ulbricht's desire to avoid a repetition of the June strikes, the confidential recommendations of the Soviet advisors quickly to "attain a level of welfare for laborers and working people of the GDR which at least equals that of the same stratum of population in West Germany" sounded comical and was largely ignored at higher levels. Similar and contradictory advice t