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Sometime back I saw Deutschland 83 then Deutschland 86 and finally Deutschland 89. The sad part is even though you see the series, you don't really understand why did East Germany fail? Why exactly did East Germany go bankrupt, what went wrong? This is never explained in either of the three mini-series. How much Moscow was responsible for it or any part of it, not known.

The only answer remotely about the whole situation seems to be this question but it is an entirely different question altogether. Looking to know more, thank you.

There is also no explanation provided why the East German Mark failed. I looked at Wikipedia, and hard currency seems to be something like the Euro or the US Dollar or maybe even the Chinese remnibi as they are now pegging their currencies to a basket of currencies and allowing it to fall or rise within a certain range in that.

While it is fascinating to know about those turbulent times, it seems one is left with an incomplete picture of what happened and why?

There is a quote by one of the actors in (I think 1986/1989 series) in which she implies that Soviet stopped funding East Germany but doesn't give any figures as to how much they had been funding per year to give some idea. There is also a documentary which sheds some light as to how East Germany tried to make a shortfall but that also doesn't get into the question as to why East Germany failed.

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    Did the Deutsche mark fail as in the D-Mark or do you mean the DDM ie DDR's mark ? One reason for the trouble in Poland in 1980 were the loans in foreign currency intended to pay for investments in the coal and steel industry - but the world crisis in the steel industry became even worse due to the over supply. Mar 15 at 0:30
  • @StefanSkoglund In the mini-series it is implied that the currency used in east germany failed. To be more precise, I was looking at the East German mark en.wikipedia.org/wiki/East_German_mark.
    – shirish
    Mar 15 at 1:08
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    China currently is using normal currency and accounting, albeit in a totalitarian state. But in true Communist economies, 5 year plans decide who produces what and who gets what. A tractor factory doesnt get paid for its tractors, it produces them. But it also doesn't buy the steel to make them, it gets it. (This is also another reason for Communism' failure: all this shuffling around of resources has to be planned, can't self-organize). As a result, money, and accounting, work differently, unless they are used to in foreign commerce. Hard to compare apples and oranges. Mar 15 at 5:25
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    Upvote - this is a deceptively good question. This is asking us to clarify underlying assumptions that make studying the economic history of the period very difficult. Definition of "hard currency" in command and free economies and similar concepts need to be clearly expressed. Good question.
    – MCW
    Mar 15 at 17:12
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    @shirish: The problem is not that planned economies don't understand about people's needs & desires, and how they change, it's that they have no good way of measuring them. That's because any way of actually measuring is effectively creating a market.
    – jamesqf
    Mar 15 at 17:17
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(Putting this as answer, because while not extremely detailed and scarcely sourced - which would be hard to do effectively - this was an event I was following at the time, living in Europe).

I can't speak to your TV series, but Eastern Europe in general wasn't all that happy with Communism. Once the USSR under Gorbachev indicated that it would not fight to keep control over its satellites, things quickly spiraled out of control in 1989.

The exact economics of the Soviet bloc were always murky in any case with both overestimations of Soviet output by the CIA and overvaluations of their currencies when you compared official vs black market rates.

"Balancing the books" has a vastly different meaning in a command economy than it does in the West. Or even China *.

(note: the paragraph below is deliberately a bit provocative. Is it 100% correct? 80%? 60%? But it is not 100% incorrect either, a Communist state does not have a buy/sell market in the sense we normally understand it, is a centralized command economy. How much did this apply to the DDR vs USSR? Hard to say as well, but the DDR was still operating under a Communist government ultimately subservient to Moscow).

In true Communist economies, 5 year plans decide who produces what and who gets what. A tractor factory doesn't get paid for its tractors, it produces them. But it also doesn't buy the steel to make them, it gets it allocated. This is also another reason for Communism's failure: all this shuffling around of resources has to be planned, it can't self-organize, and it requires unrealistically competent top-government management, something that is often absent in Western systems too.

Some links:

https://warwick.ac.uk/fac/soc/economics/staff/mharrison/public/jce2011postprint.pdf

https://www.sjsu.edu/faculty/watkins/stalinmodel.htm

As a result, money, and accounting*, work differently, unless they are used to engage in foreign commerce. Local money, depending on how doctrinal the system was, might be used mostly by individuals to purchase minor luxuries. Foreign suppliers of needed goods/technology would demand payment in hard currency, or, failing that, would insist on barter arrangements.

In such a context, as a black market develops and shortages generalize, the official currency rate means less, and only hard foreign currency is trusted. Indeed, in some cases, some regimes run foreigner-only, dollar-only stores to soak up hard currency.

Communist governments had chronic shortages of hard currency and some Western companies had set themselves up as barter facilitators to benefit from the situation.

Also at the same time, the Economist was writing that some Soviet activities were subtracting value. I.e. a Lada might objectively be expected to sell for less in a free market than the value of its inputs such as steel, energy and labor. Trabants were off the roads within a few years of the collapse; they would have made a good investment for collectors.

Cuba was also the target of big Soviet wealth transfers, with, for example, oil, for the same reasons: showcasing Communist successes to the world. They suffered greatly, after the USSR collapsed, when those stopped.

So it would be very hard to reason in detail on what caused economic hardships for East Germany, besides the very nature of its economic governance under Communism. Books could certainly be written on forensic economic analysis of Communist systems.

* China currently is using normal currency and accounting, albeit in a totalitarian state.

** post-East Block collapse, The Economist would run articles bemusedly explaining how Western business consultants would struggle to explain the very notion of accounting to factory managers who had never thought in its terms. The implication wasn't that they were stupid, only that this was just not something they had been tasked with looking after.

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  • I believe there is a "not" missing in your second paragraph.
    – Jan
    Mar 15 at 16:45
  • Do you have a source for your assertion that enterprises in Eastern European countries did not receive money when giving their products to other enterprises?
    – Jan
    Mar 15 at 16:52
  • Tangential, but see en.wikipedia.org/wiki/Consumer_goods_in_the_Soviet_Union Group A is what I am talking about - those work by allocation, not purchasing. Also, see spartacus-educational.com/RUSfive.htm and the notion of procurement quotas, for the farmers. This is not grain they sell, it's grain they have to give. Mar 15 at 16:55
  • industriemuseum-schoenebeck.de/seite31.htm claims that VEB Fortschritt, East Germany's producer of tractors, had 1.2 billion DDR-Mark in sales in the 1980s. This seems quite a lot if they were unable to sell to companies (and East German agriculture was quite fully collectivized)
    – Jan
    Mar 15 at 17:04
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    @Jan by touchy I mean that a lot of citations about Communism are going to be ludicrously false misinformation. "In true Communist economies" doesn't mean "DDR in 1980", only that comparisons need to be put into context. I'll tweak this answer later, but my general point stands: reasoning about 1980 DDR in 2020, from a capitalist POV, is not as simple as it might seem. Mar 15 at 18:00

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