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The Economic Model of the German Democratic Republic - 1945-89.

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Presentation on theme: "The Economic Model of the German Democratic Republic - 1945-89."— Presentation transcript:

1 The Economic Model of the German Democratic Republic

2 Socialist Centrally Planned Economy Based on that of the Soviet Union. State ownership of means of production. Central planning of all economic processes Nationalisation of industry Collectivisation of agriculture

3 Modernisation State Planning Commission created. Countrys first 5 Year Economic Plan introduced. Achievements – relatively productive, almost self sufficient, decrease in unemployment, wage increase, industry growth Problems – quantity rather that quality, lack of choice, inefficiency, sheer complexity and unrealistic goals of plan – Introduction of 7 Year Plan

4 New Economic System (NES) Late 1950s - economic growth slows Aimed to transform economy into dynamic and innovative system Decentralisation - Associations of People's Enterprises (Vereinigungen Volkseigener Betriebe) Fear that political decentralisation would follow

5 Economic System of Socialism – Planning partially recentralised Focus on technology sectors Problems – too much emphasis on certain sectors, price increases Failure to meet goals resulted in termination

6 The Main Task Higher standard of living in exchange for acceptance of SEDs leading force in society Achievements – more consumer goods, more housing, job security and stable prices, increased prosperity Ambitious programme exacerbated hard-currency debts Erich Honecker

7 World Economic Crisis Late 70s/ early 80s - Explosion of oil prices – GDR heavily dependant on fuel imports, no natural resources Economic recession Increasing international debts Efforts to increase production of exports required import of expensive equipment

8 To conclude… Centrally planned economies traditionally unsuccessful as can be seen in GDR model – inefficient, cannot detect consumer preferences, lack of incentives for innovation, lack or reward for hard work, infringes on individual freedom Some failing factors specific to GDR -No natural resources, traditional economic links to west severed. However… guaranteed employment & price stability, developed a competitive industrial nation, reasonable standard of living

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