The Travails of Unification: East Germany’s Economic Transition since 1989

Abstract

It might have been thought that, at least in economic terms, no post-1989 transition should have been easier than that in East Germany. An economy that was an industrial powerhouse for the Comecon (CMEA: the Council for Mutual Economic Assistance) states fell into the lap of the most powerful West European economy in 1990. It thereby acquired a highly developed legal regime for private property, which other East European economies had to develop from a more rudimentary base. Within a couple of years, perhaps the most highly developed and detailed regime of social welfare and protection in the west was extended to its citizens.’ And yet the former German Democratic Republic (GDR) had (and has had continuing) difficulties, and even today seems to lag behind West German standards. I write ‘seems to lag’ because the most recent assessment proposes that the results are really stronger than usually depicted.² Nonetheless, as of 2008, before the current crisis really hit, the East German unemployment rate was 13.1 per cent compared with 6.4 per cent in the west. Although the East German population is approximately 20 per cent of Germany’s as a whole, labour market expedients were needed far more in the east. A third of those workers in job retraining, and a half of those in various short-term job-creation schemes, which the unemployed had to accept to retain long-term benefits, were in the east.