Socialism with a Human Face: Using Behavioural Economics to Understand East German Economic History (Palgrave Studies in Economic History)

East Germany’s economic history is typically told as a story of the unravelling of an inherently flawed system. Yet, while the system’s inefficiency is undeniable, its economic history was much richer than its comparatively poor economic performance suggests. For many who lived there, it was a system that, over its forty years, was capable of achievements and generally functioned at bearable levels. This book combines the insights of behavioural economics with archival research to peel away layers of rhetoric and assumptions about the East German economy and explore aspects of that underlying functionality. Through a series of cases studies that examine the establishment of socialist workplaces, the searches for productivity growth and efficiency, and the emergence of financial crisis, the book considers the system from the perspective of the humans who operated it and made the decisions that made it work. Unencumbered by political preconceptions, it offers a more realistic understanding of East German economic history than that derived from stagnant debates about the clash of systems. The new perspectives and approaches presented demonstrate that, extracted from its Cold War context, East Germany’s economic history can be analysed for what it was, rather than for what it symbolised. Preface 6 Contents 9 Abbreviations 12 List of Figures 14 List of Tables 18 1 Perceptions 20 References 34 2 Making Decisions: Lessons from Behavioural Economics 38 2.1 Prospect Theory and High-Level Decision Making 45 2.2 Information Cascades and Decision-Making Beyond the Centre 54 2.3 Conclusion 66 References 73 3 Establishing the Socialist Workplace: Labour, Norms and the Introduction of Piecework 77 3.1 Inauspicious Beginnings: “Ein Gewirr von Sonderregelungen”8 80 3.2 First Steps: “Mehr Produzieren, Gerechter Verteilen, besser leben!”26 83 3.3 Establishing Control: Der Leistungslohn und der Progressive Akkord56 89 3.4 Tightening Control: “Freund Hennecke gab das Signal”95 96 3.5 Conclusion 107 References 123 4 Learning from the Soviet Union Means Learning to Win: Group Technology and the Mitrofanov Method 128 4.1 Mitrofanov and His Method 131 4.2 Origins of a Campaign 138 4.3 The Mitrofanov Effect 144 4.4 Renewed Efforts 152 4.5 Taking Stock 159 4.6 Conclusion 165 References 181 5 Searching for Socialist Efficiency: The Case of the Schwedt Initiative 183 5.1 Sozialistische Rationalisierung in neuen Dimensionen5: The Schwedt Initiative 185 5.2 A Diagrammatic Representation 197 5.3 “Wir haben nicht zu wenig Arbeitskräfte – sondern zuviel Arbeitsplätze”45: The Origins of a Campaign 199 5.4 Phase der ersten Zugriffs68: The Campaign Begins (1978–1982) 205 5.5 Eine Rationalisierung in größeren Dimensionen94: The Second Phase (1983–1985) 213 5.6 Territoriale Rationalisierung und Schlüsseltechnologien108: The Final Years (1986–1990) 219 5.7 A Quantitative Overview 228 5.7.1 Overall Release of Workers 229 5.7.2 Releases by Industry, Combine and Enterprise 231 5.7.3 Geographical Spread 237 5.7.4 The Case of Bezirk Frankfurt (Oder) 242 5.8 Conclusions 248 References 270 6 Choosing Bankruptcy: The Onset of Debt and Financial Crisis 273 6.1 Framework 278 6.2 Debt in the Era of Ulbricht 284 6.3 Debt in the Era of Honecker 295 6.4 Conclusion 311 References 324 7 Conclusion 329 7.1 New Perspectives 332 7.2 Applications 336 7.2.1 Youth Policy 336 7.2.2 Agricultural Policy 338 7.2.3 The Andreyeva Letter 339 7.3 Implications 340 7.4 Previous Literature 342 7.5 Dynamic Elements 344 7.6 Final Thoughts 346 References 353 Glossary of German Terms 355 Index 359