Wednesday, May 14, 2008

because the government is not terribly good at knowing what individual people want

Last year I took a class on 20th Century Euro history, and wrote a paper on East German consumerism. It was so fascinating. I learned a lot, wrote a huge paper and always intended to pare it down to a post to share. Now I'm re-reading my paper to pare it down for a 10 minute history lesson on life behind the iron curtain, so it's probably a good time to do that.

Basically, if you lived in East Germany and wanted to buy were screwed. For the East German, your consumption was restricted by rations, shortages, high prices, poor quality, limited choices, or just plain empty shelves. I think it's rather hard to wrap our minds around this, for those of us who live in America, so here are a few concrete examples:
  • eggs, milk, butter, meat, fruit...basic foods were rationed in East G until 1958! (whereas it ended in West G in 1950)
  • cocoa and coffee were often unavailable
  • the food on the shelves might be ruined; the meat spoiled
  • the packaging was poor
  • If you would like to buy a luxury item (toaster, refrigerator, TV) you faced:
    • limited choices
    • waiting list, years long
    • you might wait on a list for years to get X-brand, and then be told you would have to take Y, which was poorer quality

East Germany = German Democratic Republic = GDR
Ruling Party as of 1949 = Socialist Unity Party = SED

The SED's goal was to reduce excesses of capitalism: capitalism thrives on production and waste. The more you spend, the mo' better our economy does (which, by the way, is why i got a letter in the mail yesterday from my government telling me a $600 check is on its way...i'm glad my government does know a little bit better at what i want, after all). But the socialist wanted none of that. They wanted to level the social classes and see that its citizens equally had just what they needed. So, the SED created a planned economy: they regulated what would be produced, how it would be distributed, and how much it would cost. Prices reflected the cost of production/distribution, rather than demand. Basic goods were subsidized by the gov't. Luxury items were taxed. Basically, the government had to make the decisions about what people would want to buy and how much would be sold. The government is not very good at knowing this sort of thing...

The government's bureaucracy, surprisingly enough, was not efficient at responding to changes in production to reflect need and demand. Trade and industry didn't cooperate. Industry, driven to meet quotas, did not care for style, quality and variety; their goal was to produce as much as possible with minimal work. The result was mass production of poor quality products that consumers did not want. Prices were set by the state, so retail stores could NOT sell the goods. Just to make a silly example, the industry might produce 500 t-shirts with the logo upside down; they didn't care, they just had to meet quotas. Of course the stores couldn't sell them, but they weren't allowed to put it on sale. Hence, the economy could have surpluses when it still was not meeting its citizens' basic needs.

The reality for consumers in East Germany was terrible. Ration cards were left undelivered; rotten meat was delivered to stores; the overall quality of the food was poor. Products available for purchase in the store had little variety. There was no brand-name competition to drive quality or encouragement improvements. Products stayed the same from the 1960s to 1989. Poor craftsmanship, poor appearances, bland packaging and lack of design characterized GDR goods. With subsidized goods and higher wages, scarcity was a serious problem: the result was great frustration which often became ugly in stores. The discrepancy between supply and purchasing power increased as prices fell and wages increased. High taxes were imposed to “soak up as much purchasing power as possible." Consequently, citizens complained that they could not afford goods.

And this was a problem. Because communism wanted to prove to the world that it was better. Since East Germany was in proximity to the west, it was supposed to be the "showcase" of socialism. The world was watching to see who would win. And the SED felt pressure to show that communism was superior through the products of their economy. They promised their citizens that socialism would win. The competition between capitalism and communism was most evident in East and West Germany because divided Berlin was an easy place for those behind the curtain to see the consumer successes of life on the other side - where the Marshall Plan was helping West Germany get back on its feet, where the Soviet Union was not demanding reparations, and where capitalism was working - where citizens could buy quality consumer goods.

The GDR bureaucracy didn't fulfill its promises; it was unable to meet the consumer demands. And so East Germans fled. They fled in such great numbers that the crops didn't get harvested because the farmers left the land...and the food shortage problem was compounded. Of course eventually they built the Berlin Wall to stop the refugees (in 1961). But the wall didn't fix the consumer problems, nor did it stop the consumers from demanding more.

The Berlin Wall fell in 1989, and in 1990, the SED was voted out of office. Socialism was discredited as a viable economy. As long as consumer goods were a measure of GDR success, the SED failed. Consumption had been a problem for the whole life of the GDR. Mass consumption was an important element of the twentieth century, and a “culture of consumption” was created through a rise in fashion and advertising. East Germany, for all its efforts to be different and to shut out the West, was not immune to this. While socialism tried to fight against such bourgeois, capitalist ideas, the ever present example of prosperity in West Germany was too alluring. The GDR promised that it would be a place of social mobility and the end of class, but there was no workable plan for consumption. Instead, its citizens suffered through shortages and deprivation.

  • For further reading: These were a novelty in East Germany in the 1950s: self-service stores. It really is a fascinating concept: read about it.
  • A side note: the SED attempted to match product and demand by working with the fashion industry. It didn't work.
  • I really really wanted to include this quote in my paper. I couldn't squeeze it in.

(please email me for citations. =)

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