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The Collapse of the GDR Economy (January 11, 1990)

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Effectiveness of the Capital Stock, Maintenance
Machines and Facilities Begin to Age

Although the material and technical infrastructure was partially renewed, worn-out equipment could be replaced only to an inadequate extent. In the period from 1981 to 1989, for example, 61 billion marks of equipment was scrapped, compared with 330 billion marks worth of equipment added. Thus much of the equipment was too old in almost all sectors of production. While the volume of machines and facilities that had completely depreciated in 1980 totaled some 58 billion marks, by 1989 this had increased to 133 billion marks, or more than double the earlier amount. Twenty percent of all equipment was worn out; in 1980, the figure was 14 percent. [ . . . ]

Beginning in 1985, the gap between new and old equipment grew even further. In "general mechanical engineering, agricultural machinery, and motor vehicle construction," for example, the sector experiencing the greatest requirements for capital goods, the amount of new equipment under five years old grew by 7,900 pieces in the period from 1986 to 1989. In the same period, the number of facilities and machines more than twenty years old grew by 11,100 pieces, to over 66,000, because very little worn-out equipment was retired.

This age structure often led to reduced efficiency and capacity, and thus to inconsistencies between suppliers and producers. In comparison with modern machines and facilities, the large amount of outdated equipment ties up considerably more labor power for operation, and above all for maintenance. Maintenance costs increased over the years. [ . . . ]

Foreign Trade, International Division of Labor
Imports Grew Faster than Exports

Our worsening competitive position on foreign markets, along with limited opportunities to exploit the advantages of the international division of labor, were among the factors that influenced the dynamics of our GNP negatively. On the one hand, embargo provisions tied the GDR's hands regarding many high-tech items in non-socialist countries. On the other hand, these products were unavailable in the socialist world.

Productive GNP was not available in the volume and proportions necessary for domestic use and for resolving international problems. For these reasons, despite the goals of the plan, imports increased more rapidly than exports. Combined with the ineffectiveness of trade [with] non-socialist economies, this placed an additional burden on the GDR's balance of payments over the last four years. [ . . . ]

The main cause of the inadequate volume of exports to the non-socialist economies and the lack of effectiveness in foreign trade lies in the impossibility of making sufficient export goods available. In addition, products did not meet the scientific and technical standards necessary to remain competitive. [ . . . ]

In some decisions, the GDR had little choice but to rely on its own capabilities. For example, it decided to follow the costly path of developing and producing its own very extensive, but inadequately structured, line of micro-electric components. [ . . . ]

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