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German re-unification process continues

by whataboutbob Fri Sep 9th, 2005 at 10:56:13 AM EST

It is actually quite amazing to consider that Germany is one of the "engine's of Europe, and the world's largest exporter, larger by far than China. And yet only 15 years ago West Germany had to financially integrate East Germany under the re-unification. How many countries could continue to do this well, all the while trying to integrate a population who lived two generations under a whole other kind of governmental system? There is an interesting and lengthy discussion of this in the BBC World News Waiting for the East to Flourish

It's been 15 years since Germany's reunification, and the once communist east of the country is still in the economic doldrums. But it could be here that the next general election - just a week away - could be decided. The statistics are bleak.

Germany's 'Aufbau Ost' - the rebuilding of Eastern Germany - has cost an estimated 1.25 trillion euro (843bn, $1,550bn) so far. Despite the capital injection, the East's unemployment rate is still 18.6% - in many regions it tops 25%. The economy grows by about 5.5% a year, but from a very low base - and that is not enough to create many new jobs As a result the East is emptying. Since unification some 1.4 million people have moved to the West, most of them young and well-educated.

The question remains, what else does Germany need to do, to improve employment conditions in the old "East Germany", and what kind of factors will be involved in that?


Here are some of the factors involved:

One East German man is quoted: "The market economy can't solve our problems," he says, "big business is just grabbing the profits without accepting any responsibility."

He is not alone; 73% of East Germans believe that Karl Marx's critique of capitalism is still valid, according to a recent poll by news magazine Der Spiegel.

The PDS, successor to the East German communists and now campaigning as "The Left Party", is expected to get more than 30% of the vote here. (...)

In West Germany the average working hour costs 28.14 euro; East German companies have to spend a third less, just 17.15 euro, according to Cologne's Institute of German Industry.

Combined with cheaper living costs and a brand-new infrastructure, the East is getting attractive for some investors.

Already a new chemical industry is emerging around Leuna, an automotive industry is re-energising Dresden and Eisenach, while Jena attracts a cluster of firms and know-how in precision engineering, opto-electronics and biotechnology. But it won't happen fast.

What needs to happen in the meanwhile? What would help make things better for the people in East of Germany?

Display:
Jobs.

Jobs.

Jobs.

by PeWi on Fri Sep 9th, 2005 at 10:59:59 AM EST
Sorry for being so negative, but I do think it is about a feeling of selfworth and usefullness. Which is most easly achieved by feeling a productive member of society - which means, being in employment.

Both selfworth and usefullness, where enourmously undermined after the wall fell and the hordes from the West, Besserwessied the East. I experienced this it myself. Even though I was from the West, but I moved to East Germany / Leipzig in 1991 and people did treat me differently when they realised I was from the West. Which sometimes took them a while. But for the colonial Wessis I encountered, I only have contempt and I was one of them.

It is the small things that give one the realisation of selfworth and very often it is still being connected to your work place and as you all know - everybody in the GDR had the security of life-time employment. The responsibility was with the state and the state took good care of you - for the cost of your liberties. But now, since the liberties are achieved, the responsibilities rest with the individuals, social structures don't work the same way and different working styles were seem to be needed to be learned. But the way it was being enforced, was out of the control of the individual. The carpet they stood on was pulled under their feet - laying on the floor there were being lied to by the politicans.

"I can see blossoming landscapes" Helmut Kohl promised this but he made damn sure, that it was on West German terms.

I still have difficulties to understand why my friends vote for the PDS, but in the end, I would have to vote for them as well, if I trusted Wahl-o-mat
I just cannot. I have seen their politicians promise as much as the CDU, but the Realos in the Greens are still my choice.

by PeWi on Fri Sep 9th, 2005 at 11:16:01 AM EST
[ Parent ]
wahl-o-mat really is a nice tool. And it keeps telling me, too, that I'm a supporter of PDS.
by Saturday (geckes(at)gmx.net) on Fri Sep 9th, 2005 at 12:14:25 PM EST
[ Parent ]
Much worse.  It's not just going from full employment to 18% unemployment. In actual fact total employment has utterly collapsed, the unemployment numbers hide that since they reflect a far smaller workforce. E. Germany has lost massive numbers of working age people to migration, it has also seen large scale early retirement. IIRC the reduction of total employment is on the order of fifty percent but I'd have to check that.

In general the critique should include the disastrous decision to convert the E. German mark on a 1-1 basis and to raise wages to an almost W. German level.  If you take an already struggling enterprise and choose to massively hike its costs overnight, it will die. That's what happened on a large scale in E. Germany. Not that it would have been easy to do anything else - people might have voted with their feet, but still that's a major reason why in many ways the E. German economy has done so much worse than those of the new member states.

by MarekNYC on Fri Sep 9th, 2005 at 03:52:21 PM EST
[ Parent ]
A lot of continental Europe's economic difficulties can be linked to the fateful decision by Kohl to fold the ostmark into the DM at 1:1. It turned the full population of East Germany into Western consumers overnight, but it destroyed, no, it annihilated the whole industry of East Germany at the same time, and the country and its neighbors have been paying this decision ever since:

  • the money spent by the East generated inflation, thus causing the Bundesbank to raise interest rates. France, the Netherlands and others had to follow at the worst time for them, thus triggering the 1993 recession, the nasties in a long time;

  • the loss of employment in East Germany was massive, thus leading to the feelings of inadequacy and resentment described by PeWi above, and forcing the West to provide massive financial social transfers - and these continue to this day. Thus the East became a drain economically speaking, and never recovered enough

  • that effort drained Germany's economy, dragging its neighbors down with it (not as much, but some)

The Bundesbank compounded that by refusing to let the DM slowly devaluate prior to the entry in the euro, which would have been the best thing for all. So Germany had to additionally sweat the overvaluation through the stangnation of wages - and thus of consumption, compounding the problem.

In the long run, we're all dead. John Maynard Keynes
by Jerome a Paris (etg@eurotrib.com) on Fri Sep 9th, 2005 at 04:25:10 PM EST
[ Parent ]
This:
One East German man is quoted: "The market economy can't solve our problems," he says, "big business is just grabbing the profits without accepting any responsibility."

I heard being said from day one. It was the West German companies that set up their subsidiaries in the East, in buying all the companies and skills that were there. The critique from day one was, all the profits go back to the West. Cheap labour, skilled force - great, no Taxes, even better, lets buy that company.

Already a new chemical industry is emerging around Leuna, an automotive industry is re-energising Dresden and Eisenach, while Jena attracts a cluster of firms and know-how in precision engineering, opto-electronics and biotechnology. But it won't happen fast.

Already - hah
Lothar Spaeth was a former head of State in Badenwuertemberg, who had to leave in disgrace, before he came to Jena. It is probably fair to say, it is mainly down to him, that there is still something in Jena. Jena you might know was even in GDR times a centre for world excellence. producing lenses, precision glass, microcomputers and all sorts. He radically privatised and shrunk the existing workforce and concentrated on only a few areas.

Btw another area that is growth is specialist watches

But all these success are so slow and frustrating, but you are very right. They are there and need to be told over and over again.

by PeWi on Fri Sep 9th, 2005 at 11:37:22 AM EST
This:
One East German man is quoted: "The market economy can't solve our problems," he says, "big business is just grabbing the profits without accepting any responsibility."

I heard being said from day one. It was the West German companies that set up their subsidiaries in the East, in buying all the companies and skills that were there. The critique from day one was, all the profits go back to the West. Cheap labour, skilled force - great, no Taxes, even better, lets buy that company.

Already a new chemical industry is emerging around Leuna, an automotive industry is re-energising Dresden and Eisenach, while Jena attracts a cluster of firms and know-how in precision engineering, opto-electronics and biotechnology. But it won't happen fast.

Already - hah
Lothar Spaeth was a former head of State in Badenwuertemberg, who had to leave in disgrace, before he came to Jena. It is probably fair to say, it is mainly down to him, that there is still something in Jena. Jena you might know was even in GDR times a centre for world excellence. producing lenses, precision glass, microcomputers and all sorts. He radically privatised and shrunk the existing workforce and concentrated on only a few areas.

Btw another area that is growth is specialist watches

But all these success are so slow and frustrating, yet you are very right. They are there and need to be told over and over again.

by PeWi on Fri Sep 9th, 2005 at 11:38:05 AM EST
Marx's critique of capitalism is valid and is accepted as valid by most reputable economists.

The only reason he was wrong is that there hasn't ever been a capitalist economy. The Bush admin is on a path to test his theories though.

by Colman (colman at eurotrib.com) on Fri Sep 9th, 2005 at 01:00:28 PM EST
Accepted by economists? I'm no expert on economics or economists' opinions but I'll say this, Marx predicted ever falling wages for all except an ever smaller number of capitalists. He was blatantly wrong about that as was pointed out as early as the late nineteenth century by Bernstein. Standards of living for average people may have stagnated in many advanced Western economies over recent years but they are still far, far, higher than they were in Marx's time.  The only part of Marx's take on capitalism that I've seen praised in recent years is his highly impressionistic description of globalization in the Manifesto - and that's not really a 'critique', if anything the opposite.  Like the good child of the Enlightenment that he was Marx believed in Progress, he saw capitalism as the chief motor of Progress.  It's just that his deterministic version of historical teleology argued that capitalism would inevitably collapse and turn into socialism.

I also don't understand what you  mean by capitalism never existing. If by that you mean that the abstract model has never existed - sure. But no model ever does, they are just heuristic tools. In the messy reality of this world we have had various forms of capitalism which have functioned in different ways.

by MarekNYC on Fri Sep 9th, 2005 at 03:37:45 PM EST
[ Parent ]
I mean that the economies that actually exist are so far from capitalism that the models have distinctly limited application.

Not to mention the fact that the models are crap.

by Colman (colman at eurotrib.com) on Fri Sep 9th, 2005 at 05:23:20 PM EST
[ Parent ]
How, then, does one measure the desirability of one system over another?
by asdf on Fri Sep 9th, 2005 at 08:48:48 PM EST
[ Parent ]
objective measurement is not possible. It depends on your point of view. In social sciences, knowledge can be intersubjective but not really objective.

Recommended reading:

Max Weber, The Objectivity of the Sociological and Social-Political Knowledge

by Saturday (geckes(at)gmx.net) on Sat Sep 10th, 2005 at 04:52:09 PM EST
[ Parent ]


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