COM 06/2015

Is German Unity History?

Andreas Rödder, Prof. Dr., Professor of Modern and Contemporary History at Johannes Gutenberg University Mainz

The German revolution of 1989/90 was a special revolution. Instead of being radicalized like the French revolution of 1789, the peaceful revolution on the streets of the GDR transformed itself into a regulated process of accession to the Federal Republic. In its course, the aims were changing: Whereas gaining freedom had been the main goal in the autumn of 1989, achieving prosperity was becoming more and more important after the fall of the wall. However, these goals do not contradict each other. Rather, according to the “Western” model which prevailed with the end of East-Western confrontation, democracy and prosperity are inseparable. In the winter of 1989/90, a third goal was added: Stopping the mass exodus from the GDR. These three goals defined the agenda of the German revolution.

All of this happened at a breath-taking speed. It was one of those historic moments in which “the world’s process rushes itself into a terrible rapidity”, as Jakob Burckhardt had written in the 19th century: “Developments that would usually take centuries seem to pass by in months and weeks like ephemeral phantoms and thereby seem to be settled.” However, in the course of the reunification process, the driving forces were changing, from the people’s movement in the GDR to the Federal Government in Bonn which, at the latest by the vote of the majority of Eastern Germans in the Volkskammer parliamentary elections of 18 March 1990, assumed the task of furthering the development.

The reunification was like a jump into the darkness, one of these huge and unforeseeable challenges of German 20th century history. In that situation, the Federal Government decided to entirely “republicanise” the GDR according to the West German model by rapidly and comprehensively introducing the Western institutions.

From an institutional point of view, an alternative that would have combined all three goals – democratization, prosperity, and stopping the mass exodus from the GDR– on a sustainable basis has never been developed, neither during that time nor subsequently. One could even – if this term were not as unimaginative and stereotyped as it is – describe the reunification in its form of 1990 as being “without alternative”. At the same time, the reunification was fundamentally misapprehended in two perspectives: in an economic and in a cultural perspective.

I.

Carried by the boom of the Federal Republic in the late 1980s and guided by forty years of “success story” and the “German model”, the Western perception was characterized by the conviction that the “Marxist-Leninist tree needed to be chopped down” (as the German newspaper Handelsblatt once wrote), leaving only the Ampelmännchen (the little man on pedestrian traffic lights) or the green arrow traffic lights as the GDR’s legacy. According to this belief, adopting the West German order would instead ignite an economic miracle comparable to the one that the Federal Republic witnessed in the 1950s. In a short amount of time “flourishing landscapes” (blühende Landschaften) would emerge, the former GDR would merge into the Federal Republic, and the East Germans would turn to become satisfied citizens of the Federal Republic.

Besides the fact that this perception overestimated the “success story” of the Federal Republic and underestimated the problems at hand, it was, ironically, based on a Marxist mode of thought: the material existence would determine the conscience. Indeed, it is the task of a democratic government to provide for material existence rather than individual conscience. However, Western sensitivity for the reunification’s cultural dimension fell clearly short of its institutional regulations. When, on the eve of 3 October 1990, Lothar de Maizière said “Goodbye without tears” to the GDR but at the same time stated that the history of these forty years is “a part of our personal biography, a part of our grown self” which “for some would be hard to leave behind”, West German representatives did not show much of an understanding. In general, people between Flensburg, Saarbrücken, and Berchtesgaden were not quite aware of the scope of the adaption that was requested from East Germans.

In this regard, West-Eastern misunderstandings were deeply rooted within the reunification process. West German self-assurance reaffirming the conviction of being history’s victor and the unity’s shaper met an East German mixture between, on the one hand, a deep feeling of uncertainty and, on the other hand, high expectations towards the Federal Republic. Already at an early stage, East Germans developed a feeling of being discriminated and under external control, of a lack of respect and of an offending devaluation of East German biographies by West German dominance. Though the long predominant and often bitter juxtaposition of (Jammer-) “Ossis” (lamenting “Ossis”) and (Besser-) “Wessis” (know-it-all “Wessis”) has disappeared from the public discourse, polls regularly identify persistent political-cultural and mental differences as well as an East German mentality of demarcation.

II.

The fact that the differences were more deeply rooted and lasting longer than expected is equally true for the cultural as well as economic dimension. By opting for an economic, monetary and social union, the Federal Government opted for a sudden transformation of the GDR scheduled for 1 July 1990 – with all consequences.

Well-filled shelves in stores and supermarkets signaled the end of the economy of scarcity. At the same time, the shock of the upward revaluation caused by the introduction of the new currency was one of the major reasons for the de-industrialization that started at the same time. The issue of determining the exchange rate between the Deutsche Mark (D-Mark) and the GDR Mark is a paradigmatic example for the constraints of the reunification process that, at many instances, “only left the choice between two bad solutions” (Lothar de Maizière). The introduction of the new currency – under the conversion scheme of 1:1 for wages and rents, 2:1 for financial assets and obligations above certain exemption limits, in sum at a conversion rate of 1.8:1 – prevented a politically unsustainable situation in which the purchasing power of East Germans would have lagged behind that of West Germans. At the same time, it produced an unexpectedly severe crash of the uncompetitive GDR economy.

Already in 1991, the unemployment rate soared to more than one million people. These numbers roughly corresponded to those of GDR fake employment and, therefore, were a consequence of the GDR economy’s lack of competitiveness under market conditions. However, from their initial experience onward, East Germans connected unemployment with market economy, not an economic miracle. Even when people did not encounter unemployment, they were often obliged to change their jobs or place of work, something that was very uncommon during the GDR era. In 1993, only 29% of East Germans worked in the same workplace where they worked in November 1989. On top of everything, the eclipse of the workplace did not only mean an eclipse of employment but also an eclipse of the central place in society.

These experiences produced a “deep emotional distance between East Germans and market economy” that was reinforced through an institution that soon became the scapegoat of all reunification rigors: The Treuhandanstalt (Trust Agency). On 1 July 1990, the Treuhandanstalt became the owner of 7,894 Volkseigenen Betrieben (people-owned enterprises) employing four million people and covering an area that accounted for more than half of the GDR territory. Its task was the restructuring of ownership and it was the biggest program of this kind since the secularization in 1803 and the Bodenreform (ground form) in the Soviet-occupied zone after the Second World War. This time, however, the task was not about nationalization but about privatization for which there existed neither any historical precedent nor the necessary time to prepare it conceptually.

The Treuhandanstalt’s motto was: “Privatize quickly, restore resolutely, shut down gently.” However, soon things developed in a different way: The number of companies fit to survive was much smaller than initially thought. Expectations needed to be lowered constantly. The Treuhandanstalt’s field of action soon changed from a sellers’ market to a buyers’ market. When it closed its books in 1994, 3,718 (30.6%) of initially 12,162 companies that mostly developed out of former collective combines were shut down, 6,546 (53.8%) were privatized, 1,588 (13.1%) were handed back to the original owners, and 310 (2.6%) were transformed into communal companies. The new owners of the privatized companies mostly came from Western Germany. More than half of formerly 4 million jobs were lost.

The Treuhandanstalt became the paradigmatic icon of the GDR’s sellout and of the accusation that the West had destroyed viable structures in order to eliminate possible competitors. Especially before this background, one of the main research tasks should be a profound empirical revision of the Treuhandanstalt’s history. However, currently there are good arguments that the Treuhandanstalt itself and its activities were not the central problem, but rather it was its mission that could not be satisfactorily fulfilled within the general conditions. The “management of illusions” (Wolfgang Seibel) was reflected, for instance, in the initial expectation that the newly founded Treuhandanstalt would be able to generate about 600 billion D-Mark and that this amount would be largely sufficient to finance the reunification process. In reality, it ended its activities with a deficit of 230 billion D-Mark. This discrepancy of 830 billion D-Mark – a huge amount of money even in the era of Euro rescue packages – demonstrates not only the economic dimensions of German unity but also 1990’s great illusions.

Two years after the reunification, the new federal states (Länder) were “virtually de-industrialized” (Karl-Heinz Paqué). They contributed only 3.5% to Germany’s overall industrial value creation. There was no basis for marketable services. The reasons for this may not so much be found in any institutional shortcomings of the reunification process, but rather in the structural problems within the GDR economy. In this regard, the worn-down capital stock was a lesser problem, one that could be solved by the “Aufbau Ost” (“building up the East”). A bigger problem was the second consequence of 40 years of socialistic planned economy: The lack of products that could be marketed on the world market, the lack of indigenous market knowledge, and the lack of innovative potential, especially with regard to the variety of world markets and the superior competitiveness of Western companies.

Allegedly transitory phenomena became permanent problems that demanded unexpected state interventions without producing the expected results. The process of reconstruction and convergence proceeded much more slowly, more tediously and more narrowly than expected. In 1995, the first phase of deindustrialization that was accompanied by massive investments into infrastructure, a booming expansion of the construction sector and high growth rates, ended with the eclipse of the construction boom and the burst of the real estate bubble that had come with it. The long second phase was characterized by a slower make-up process and – as can be seen especially in retrospect – a continuous process of reindustrialisation that came to an at least temporary halt during the world financial crisis since 2009.

III.

What should be the overall assessment after 25 years? In the new Länder, the production process, as far as it had not been decomposed, has been modernized. We witnessed a true reindustrialization that, in comparison to Western Germany, is characterized in two particular ways: first, companies in the new Länder are mostly of a rather small size and, second, there are production sites of bigger companies. The new Länder continue to function as an extended workbench whereas the research and development departments together with the engineers and managers are situated in Western Germany. Therefore, the East’s potential for innovation and its economic strength do still not reach the levels of Western German regions. For instance, the per capita rate of registered patents in the East amounts only to about 30% of that of Western Germany. In and around Dresden, Leipzig, Jena and Berlin, regional growth and innovation centers were able to develop. Overall, however, neither self-sustaining economic structures nor a self-sustaining tax basis have developed.

Regarding economic indicators, the East’s productivity – depending on the calculation method – has reached about three quarters to four fifths of the Western level, and remains at that level. Except for the agricultural sector, a productivity gap between the old and the new Länder has remained. The Eastern German unit labour costs are still below the Western German level. Initially, unemployment was the most severe problem within the new Länder. In 2003, the unemployment rate even surpassed the 20% mark. Since 2005, it has dropped significantly (from 21% to 12% until 2012), like in the rest of Germany. However, it has constantly been almost twice as high as in Western Germany. At the same time, the Western Länder are now within a reachable distance: In August 2009, the Eastern Land of Thüringen noted down an unemployment rate that was lower than that in the Western Land of Bremen. Even though unemployment is still a major issue in the new Länder, it is not as dramatic as it was during the first two decades after the reunification anymore.

The East’s standard of living has developed faster than its productivity. A “belated explosion of wages” (Rainer Geißler) reached mostly employed persons and retirees who particularly benefited from the fact that, in many married couples in the GDR, both husband and wife had pursued an occupation. From a statistical point of view (whereas the statistics reflect the differing social structure), the per capita income in the new Länder amounts to about 80% of that in the old Länder, with at the same time lower costs of living, especially regarding rents and real estate. With the narrowing of real incomes, the consume patterns have narrowed as well: The gap of equipment with cars, telephones, computers, and home and entertainment electronics was largely closed after one decade already. Even with regard to the losers of unity, i.e. the unemployed and parts of the socialistic elite, Helmut Kohl’s prognosis that, in the East, “no one will be worse off than before, rather, many will be better off” became true at least in the material perspective.

The reason for this was the social union that had been established together with the economic and monetary union on 1 July 1990 and that eased social hardships caused by the reunification process. At the same time, the social union produced unexpectedly high costs: It overburdened the social security systems and led to an increase of the state deficit that reached up to 1,500 billion Euro in 2008, a point starting from which the world financial crisis and the Euro debt crisis demanded amounts of an even higher dimension.

For one and a half decades, the notion of a “failed” unity gained ground before this background. It coincided with the perception of a German crisis, a “descent of a superstar” (Gabor Steingart). However, this perception has changed since the German economic ascent in 2005. The economic recovery, in conjunction with the demographic development, defused the problem of unemployment and eased the pressure on social security systems. At the same time, low interest rates rendered manageable the refinancing of the exploding state debts. However, the question remains how sustainable this easing of tensions will be: Low interest rates may be reversed in a short amount of time, and the demographic development, in the long term, does not only bring about easing effects.

Though future perspectives are notoriously uncertain, the historical comparison to other cases of severe financial overburdening in German history – for instance the financing of the First World War which led to hyperinflation, a loss of assets and a radicalization of society – still results in a rather positive assessment.

IV.

Generally, any judgment depends on the standard applied. This is not least true with regard to the assessment of the German unity. Compared to 1990’s expectations, the German unity fell behind exaggerated hopes. Compared to more realistic and reachable goals, it needs to be stated that the German unity stopped the acute mass exodus, even though the loss of more than one million particularly qualified workers between 1991 and 2007 (and the demographic consequences connected therewith) could not be prevented. At the same time, about 400,000 West Germans moved to the East. In political terms, a stable democracy evolved that even managed to integrate the Party of Democratic Socialism (PDS) that had mutated to become the party of the unity’s losers. The living conditions of the vast majority of people improved dramatically, whereas, despite a continuous process of reindustrialization, a self-sustaining economy not really emerged.

Compared to the situation in 1990, Germany witnessed a gigantic solidary reconstruction effort, a national lead of strength with an enormous allocation of resources and massive transfer payments, the overall volume of which is currently estimated at 2,000 billion Euro. The cities, the infrastructure, the supply, the labor productivity, and the social security of the East leaped forward enormously. At many places, though not everywhere, “flourishing landscapes” emerged. That is less than expected in 1990, but more than what could have been expected in full knowledge of the facts.

From an economic perspective, the new Länder have reached the level of an economically underdeveloped region within a highly productive industrial country. Again, the judgment depends on the standard applied: East Germany’s performance is far ahead of all formerly post-soviet transformation states. Compared to the Czech Republic (which initially found itself in a comparable situation), East Germany’s productivity amounts roughly to twice the Czech productivity and the gross wages are about three times as high. Moreover, the new Länder have escaped the fate of left-behind de-industrialized regions like in England and Wales, and they have not become a German Mezzogiorno. Regarding their relation to the West German Länder, we witnessed an approximation, but not an alignment. Small steps seem possible, whereas a full- scale convergence of living conditions moved into an unrealistic distance. Another question is, however, whether that can be a reasonable standard.

Overall, the differences between Eastern and Western Germany are bigger and more persistent than expected, a fact that is currently also reflected by the way resentment and violence against asylum seekers – or more generally, questions of ethnic diversity – are being dealt with. Whereas xenophobic behavior usually faces the civil society’s vigorous rejection in the West, it is given a widely public expression in the new Länder. The dividing lines between old and new Länder have not disappeared. They are still visible from an economic, social and cultural perspective. However, they are overlapping with other problems and challenges: the influx of asylum seekers and the management of immi-gration, the Euro crisis and European integration, or the return of military violence to Europe.

History does not close its books like a company that needs to declare its exact accounts. In this sense, the Germany unity is history. History that is still smoking (Barbara Tuchman), but yet: history.

Original in German, first published in: Deutscher Hochschulverband (ed.), 25 Jahre Wiedervereinigung, Bonn 2015, pp. 99-106, translated by Dr. Lasse Schuldt, DAAD-Expert Lecturer, CPG, Faculty of Law, Thammasat University.