East Germany Table of Contents
The annual industrial growth rate declined steadily after 1959. The Soviet Union therefore recommended that East Germany implement the reforms of Soviet economist Evsei Liberman, an advocate of the principle of profitability and other market principles for communist economies. In 1963 Ulbricht adapted Liberman's theories and introduced the New Economic System (NES), an economic reform program providing for some decentralization in decision making and the consideration of market and performance criteria (see Economic Policy and Performance , ch. 3). The NES aimed at creating an efficient economic system and transforming East Germany into a leading industrial nation.
Under the NES, the task of establishing future economic development was assigned to central planning. Decentralization involved the partial transfer of decision-making authority from the central State Planning Commission and National Economic Council to the Associations of Publicly Owned Enterprises (Vereinigungen Volkseigener Betriebe-- VVBs), parent organizations intended to promote specialization within the same areas of production. The central planning authorities set overall production goals, but each VVB determined its own internal financing, utilization of technology, and allocation of manpower and resources. As intermediary bodies, the VVBs also functioned to synthesize information and recommendations from the VEBs. The NES stipulated that production decisions be made on the basis of profitability, that salaries reflect performance, and that prices respond to supply and demand.
The NES brought forth a new elite in politics as well as in management of the economy, and in 1963 Ulbricht announced a new policy regarding admission to the leading ranks of the SED. Ulbricht opened the Politburo and the Central Committee to younger members who had more education than their predecessors and who had acquired managerial and technical skills. As a consequence of the new policy, the SED elite became divided into political and economic factions, the latter composed of members of the new technocratic elite. Because of the emphasis on professionalization in the SED cadre policy after 1963, the composition of the mass membership changed: in 1967 about 250,000 members (14 percent) of the total 1.8 million SED membership had completed a course of study at a university, technical college, or trade school.
The SED emphasis on managerial and technical competence also enabled members of the technocratic elite to enter the top echelons of the state bureaucracy, formerly reserved for political dogmatists. Managers of the VVBs were chosen on the basis of professional training rather than ideological conformity. Within the individual enterprises, the number of professional positions and jobs for the technically skilled increased. The SED stressed education in managerial and technical sciences as the route to social advancement and material rewards. In addition, it promised to raise the standard of living for all citizens. From 1964 until 1967, real wages increased, and the supply of consumer goods, including luxury items, improved.
Data as of July 1987