East Germans lost much in 1989
For many in the GDR, the fall of the Berlin Wall and unification meant the
loss of jobs, homes, security and equality.
By Bruni de la Motte
guardian.co.uk, Sunday 8 November 2009
On 9 November 1989 when the Berlin Wall came down I realised German
unification would soon follow, which it did a year later. This meant the end
of the German Democratic Republic (GDR), the country in which I was born,
grew up, gave birth to my two children, gained my doctorate and enjoyed a
fulfilling job as a lecturer in English literature at Potsdam University. Of
course, unification brought with it the freedom to travel the world and, for
some, more material wealth, but it also brought social breakdown, widespread
unemployment, blacklisting, a crass materialism and an "elbow society" as
well as a demonisation of the country I lived in and helped shape. Despite
the advantages, for many it was more a disaster than a celebratory event.
Just two examples. My best friend, a foreign languages teacher, lost her job
and was blacklisted because, at the time the wall fell, she happened to be
teaching at a government law college. She was not a member of the party or
indeed political at all. After much effort she managed to find a job helping
young people excluded from school, with no long-term contract and on a much
lower salary. My brother, who has a PhD in the philosophy of science, lost
his research job at the academy and ever since has only been able to find
odd, low-paid temporary jobs.
Little is known here about what happened to the GDR economy when the wall
fell. Once the border was open the government decided to set up a
trusteeship to ensure that "publicly owned enterprises" (the majority of
businesses) would be transferred to the citizens who'd created the wealth.
However, a few months before unification, the then newly elected
conservative government handed over the trusteeship to west German
appointees, many representing big business interests. The idea of "publicly
owned" assets being transferred to citizens was quietly dropped. Instead all
assets were privatised at breakneck speed. More then 85% were bought by west
Germans and many were closed soon after. In the countryside 1.7 million
hectares of agricultural and forest land were sold off and 80% of
agricultural workers lost their job.
In July 1990, when the GDR still existed, a hasty "currency union" was
introduced with the result that the GDR economy was plunged into bankruptcy.
Before unification the West German mark was worth 4.50 GDR marks; however,
at currency union it was fixed at parity with an exchange rate of 1:1. The
result was that GDR export products rose in price by 450% overnight and were
no longer competitive; the export market (39% of the economy) inevitably
imploded.
Large numbers of ordinary workers lost their jobs, but so too did thousands
of research workers and academics. As a result of the purging of academia,
research and scientific establishments in a process of political vetting,
more than a million individuals with degrees lost their jobs. This
constituted about 50% of that group, creating in east Germany the highest
percentage of professional unemployment in the world; all university
chancellors and directors of state enterprises as well as 75,000 teachers
lost their jobs and many were blacklisted. This process was in stark
contrast to what happened in west Germany after the war, when few ex-Nazis
were treated in this manner.
In the GDR everyone had a legally guaranteed security of tenure and
ownership to the properties where they lived. After unification, 2.2m claims
by non-GDR citizens were made on their homes. Many lost houses they'd lived
in for decades; a number committed suicide rather than give them up.
Ironically, claims for restitution the other way around, by east Germans on
properties in the west, were rejected as "out of time".
Since the demise of the GDR, many have come to recognise and regret that the
genuine "social achievements" they enjoyed were dismantled: social and
gender equality, full employment and lack of existential fears, as well as
subsidised rents, public transport, culture and sports facilities.
Unfortunately, the collapse of the GDR and "state socialism" came shortly
before the collapse of the "free market" system in the west.
***
http://www.guardian.co.uk/commentisfree/cifamerica/2009/oct/27/bolivia-ecuador-economy
Latin America's economic rebels
Ecuador and Bolivia are achieving remarkable growth because they reject
conventional economic wisdom
By Mark Weisbrot
guardian.co.uk: Wednesday 28 October 2009
Among the conventional wisdom that we hear every day in the business press
is that developing countries should bend over backwards to create a friendly
climate for foreign corporations, follow orthodox (neoliberal) macroeconomic
policy advice and strive to achieve an investment-grade sovereign credit
rating so as to attract more foreign capital.
Guess which country is expected to have the fastest economic growth in the
Americas this year? Bolivia. The country's first indigenous president, Evo
Morales, was elected in 2005 and took office in January 2006. Bolivia, the
poorest country in South America, had been operating under IMF agreements
for 20 consecutive years, and its per-capita income was lower than it had
been 27 years earlier.
Evo sent the IMF packing just three months after he took office, and then
moved to re-nationalise the hydrocarbons industry (mostly natural gas).
Needless to say this did not sit well with the international corporate
community. Nor did Bolivia's decision in May 2007 to withdraw from the World
Bank's international arbitration panel, which had a tendency to settle
disputes in favour of international corporations and against governments.
But Bolivia's re-nationalisation and increased royalties on hydrocarbons has
given the government billions of dollars of additional revenue (Bolivia's
entire GDP is only about $16.6bn, with a population of 10 million people).
These revenues have been useful for a government that wants to promote
development, and especially to maintain growth during the downturn. Public
investment increased from 6.3% of GDP in 2005 to 10.5% in 2009.
Bolivia's growth through the current world downturn is even more remarkable
in that it was hit hard by falling prices for its most important exports -
natural gas and minerals - and also by a loss of important export
preferences in the US market. The Bush administration cut off Bolivia's
trade preferences that were granted under the Andean Trade Promotion and
Drug Eradication Act, allegedly to punish Bolivia for insufficient
co-operation in the "war on drugs".
In reality, it was more complicated: Bolivia expelled the US ambassador
because of evidence that the US government was supporting the opposition to
the Morales government, and the ATPDA revocation followed soon thereafter.
In any case, the Obama administration has so far not changed the Bush
administration's policies toward Bolivia. But Bolivia has proven that it can
do quite well without Washington's co-operation.
Ecuador's leftist president, Rafael Correa, is an economist who, well before
he was elected in December 2006, understood and wrote about the limitations
of neoliberal economic dogma. He took office in 2007 and established an
international tribunal to examine the legitimacy of the country's debt. In
November 2008 the commission found that part of the debt was not legally
contracted, and in December Correa announced that the government would
default on roughly $3.2bn of its international debt.
He was vilified in the business press, but the default was successful.
Ecuador cleared a third of its foreign debt off its books by defaulting and
then buying the debt back at about 35 cents on the dollar. The country's
international credit rating remains low, but no lower than it was before
Correa's election, and it was even raised a notch after the buyback was
completed.
The Correa government also incurred foreign investors' wrath by
renegotiating its deals with foreign oil companies to capture a larger share
of revenue as oil prices rose. And Correa has bucked pressure from Chevron
and its powerful allies in Washington to drop his support of a lawsuit
against the company for alleged pollution of ground waters, with damages
that could exceed $27bn.
How has Ecuador done? Growth has averaged a healthy 4.5% over Correa's first
two years. And the government has made sure that it has trickled down:
healthcare spending as a percent of GDP has doubled, and social spending in
general has expanded considerably from 5.4% to 8.3% of GDP in two years.
This includes a doubling of the cash transfer programme to poor households,
a $474m increase in spending for housing, and other programmes for
low-income families.
Ecuador was hit hard by a 77% drop in the price of its oil exports from June
2008 to February 2009, as well as a decline in remittances from abroad.
Nonetheless it has weathered the storm pretty well. Other unorthodox
policies, in addition to the debt default, have helped Ecuador to stimulate
its economy without running too low on reserves.
Ecuador's currency is the US dollar, so that rules out using exchange rate
policy and most monetary policy for counter-cyclical efforts in a
recession - a significant handicap. Instead, Ecuador was able to cut deals
with China for a billion-dollar advance payment for oil and another $1bn
loan.
The government also has begun requiring Ecuadorian banks to repatriate some
of their reserves held abroad, expected to bring back another $1.2bn, and it
has started repatriating $2.5bn in central bank reserves held abroad in
order to finance another large stimulus package.
Ecuador's growth will probably come in at about 1% this year, which is
pretty good relative to most of the hemisphere. For example, Mexico, at the
other end of the spectrum, is projected to have a 7.5% decline in GDP for
2009.
The standard reporting and even quasi-academic analysis of Bolivia and
Ecuador says they are victims of populist, socialist, "anti-American"
governments - aligned with Venezuela's Hugo Chavez and Cuba, of course - and
on the road to ruin. To be sure, both countries have many challenges ahead,
the most important of which will be to implement economic strategies that
can diversify and develop their economies over the long run. But they have
made a good start so far, by giving the conventional wisdom of the economic
and foreign policy establishment - in Washington and Europe - the respect it
has earned.
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