Friday, December 2, 2022

Treuhand took the heat for privatizing East Germany’s economy

To turn the planned economy of the GDR into a market economy, there was no blueprint, only the wish to do so. The job was awarded to the Treuhand Privatisierungsagentur.

During the summer of 1990, the Treuhand trust was formed to oversee former state-owned companies in East Germany awaiting their integration into the new unified nation. They employed collectively four million workers, numbering 12,000 in all. Treuhand’s numbers will forever be associated with success, but behind them there are human dramas, triumphs, and dramatic attempts to turn an economy around.

Chairman Detlev Carsten Rohwedder outlined the direction that the agency was taking in no uncertain terms. During the process of privatizing the GDR economy, he planned to use the proceeds generated to cover the costs incurred. It has been said that the ‘whole thing’ is worth 600 billion German marks.

Despite this, by the time the Treuhand collapsed five years later, 300 billion marks of debt had accumulated.

The project, however, was never complete by Rohwedder. He didn’t even have a full term in office before he was shoot. Since the murder, its assassin has remained elusive, but the Red Army Faction (RAF) is widely believe to have carried out the attack. Her successor, Birgit Breuel, took over the job and approached it in the same way her predecessor had.

Economic collapse

A grave overestimation of the GDR’s economy soon became apparent. Overnight, the East and West currencies matched their values, despite the latter being worth four times more. The University of Applied Sciences (HTW) in Berlin’s Jan Priewe believes that the move that saw wages from 1,000 East marks to 1,000 West marks was a precursor of the end of the GDR economy.

Priewe said that income was too high when measured against company productivity, but too low when compared with the prices in unified Germany, adding that wages in GDR companies would soon increase.

Due to high prices and consumer unpopularity, their products were ultimately overprice and their companies close. A third of the east’s gross national product was loss within months.

Eastern Germany’s economic situation prevent companies from sale despite serious efforts. State-owned holding companies could only unload the Treuhand agency by selling them at subsidized prices. The Treuhand was an easy target for hustlers since it was eager to get rid of what it was holding. A “GDR clearance sale” was mention when there were numerous small and medium companies that fell into dubious profiteers’ hands.

Treuhand took a lot of heat

This nation of has experienced deindustrialization that had never experienced before. As people struggled to survive, unemployment soared to 20 percent and dramatic labor disputes became regular occurrences.

A potash mine in Thuringia that had supported the community of Bischofferode for decades was close in 1990, taking the jobs of 1,000 workers. The remainder of the 700 was exterminat three years later. Some of the miners went on a hunger strike rather than follow them into the pit.

 

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