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Stabilisation and Control: The GDR, 1962-87 » Economic Stabilisation: The New Economic System and Comecon

What you'll learn this session

Study time: 30 minutes

Edexcel spec: Paper 2 Section A, Investigation A5, Key topic 2

Why East Germany's economy became more stable after the Wall
What the New Economic System and the Economic System of Socialism tried to do
The part played by Comecon and the Soviet Union
How to answer a 6-mark 'Describe TWO features' question

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Why the economy needed stabilising

The German Democratic Republic (GDR), also called East Germany, was a communist state led by the Socialist Unity Party (SED). Its economy was a planned economy: the government, not private businesses, decided what factories and farms should produce. In the 1950s that economy was in trouble. The country had lost factories to the Soviet Union after the war, it had little money, and it kept losing skilled workers, doctors and engineers who moved to West Germany. A shortage of workers made every plan harder to meet.

Everything changed on 13 August 1961, when the border in Berlin was sealed. The Wall ended the mass emigration. For the first time, the government knew its skilled workers would stay, so it could plan ahead. Historians use the term economic stabilisation for what followed in the 1960s: the economy stopped slipping and began to grow steadily. Ending emigration was the first cause. The other two were reform from inside (the New Economic System) and help from outside (Comecon and the Soviet Union).

Key terms:

Planned economy: an economy where the state sets targets for what is produced and in what amounts.
Economic stabilisation: making an economy steadier and stronger after a period of weakness.
Incentive: a reward, such as a bonus, that encourages people to work harder or produce more.

The New Economic System, 1963

In 1963 the SED leader, Walter Ulbricht, launched the New Economic System (NES). Planners in Berlin had been trying to control every detail, and factories mostly waited for orders. The NES tried a different approach. The central plan still set the main targets, but factory managers were given more freedom to decide how to reach them. Profit became a measure of success, and prices were reformed so that they reflected what things cost to make. Managers and workers received bonuses when their factory did well.

🏭 What changed

Managers gained more say over how their factories ran. Bonuses and profit rewarded efficiency. The government still kept control of the overall plan.

📈 What it achieved

Output rose through the 1960s. More households could buy goods such as televisions, fridges and washing machines. The GDR gained one of the highest living standards in the Eastern bloc.

This is why many East Germans saw the 1960s as a time when life became more comfortable. It also gave the SED something it badly needed: a reason for people to accept the regime after the Wall.

The Economic System of Socialism, 1967-71

By the late 1960s Ulbricht wanted more. He launched the Economic System of Socialism (ESS), which kept some of the NES ideas but shifted the focus to a few key industries chosen because they were seen as the future: electronics, chemicals and machine-building. The aim was to compete with the West by building modern, high-technology industries. Ulbricht's slogan was 'overtaking without catching up': the GDR would pull ahead of the West in a few key industries without first matching it everywhere. These industries got money, materials and skilled workers first.

The trouble was that this left other industries short. Supplies of materials and everyday goods fell behind, and by about 1970 there were shortages. Planners were also pulled back into controlling more things from the centre. The ESS ended when Ulbricht was removed as SED leader in 1971 and his successor, Erich Honecker, changed direction. You can read about Honecker's approach in Honecker, GDR Identity, the Media and Sport.

Comecon and the Soviet Union

Comecon was the Council for Mutual Economic Assistance, a trading organisation of communist states set up in 1949 under the leadership of the Soviet Union. The GDR joined in 1950. It was the Eastern bloc's answer to the American Marshall Plan, which was helping the economies of Western Europe.

Comecon mattered to the GDR in three ways:

Raw materials: the Soviet Union supplied oil and other raw materials that the GDR lacked.
Markets: the GDR was one of the most advanced industrial countries in the bloc, so it sold machinery, chemicals and other manufactured goods to the Soviet Union and other members. These markets bought what the GDR made, even if the quality was not good enough for the West.
Planning: members tried to coordinate their plans so that each country specialised in what it did best.

The Soviet Union became the GDR's largest trading partner, which tied East Germany's economy closely to Moscow.

Key terms:

New Economic System (NES): Ulbricht's 1963 reform that gave factory managers more freedom and rewarded profit and efficiency.
Economic System of Socialism (ESS): the late 1960s policy that put key high-technology industries first.
Comecon: the Council for Mutual Economic Assistance, the trading organisation of the communist states.

Common mistakes

Saying the NES ended central planning. It did not: the state still set the main targets.
Mixing up the NES (1963, more freedom and bonuses) and the ESS (late 1960s, key industries first).
Saying the GDR was rich. It had some of the highest living standards in the Eastern bloc, but it was still behind West Germany.
Forgetting that the Wall was the first cause of stabilisation. Without it, the workers would have kept leaving.

Exam-style question

Describe TWO features of EITHER the New Economic System OR Comecon. [6 marks]

Model answer

I will describe the New Economic System. One feature was that factory managers were given more freedom. The central plan still set the main targets, but managers could decide for themselves how to reach them, instead of waiting for orders from Berlin. This was meant to make factories more efficient.

A second feature was the use of rewards and profit. Under the system, profit became a measure of success and prices were reformed to show real costs. Managers and workers were paid bonuses when their factory did well. This gave them an incentive to work harder, and it helped output rise through the 1960s.

What lifts it to the top level: two different features, each explained with specific detail, not one feature stated twice.

Exam tip

Choose your option and name it at the start. Then give two clearly separate features, with two or three facts for each. One feature alone can score no more than 3 out of 6.

Recap

The Wall ended mass emigration, which allowed the economy to stabilise.
The NES (1963) gave managers freedom and used bonuses and profit as rewards.
The ESS (late 1960s) put key industries first, but other goods ran short.
Comecon gave the GDR raw materials and markets and tied it to the Soviet Union.

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