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West Germany Vs. East Germany: Capitalism vs Socialism and Communism



The visuals of East Germans desperately trying to get into West Berlin on the night of November 9, 1989, have become symbols or depictions of the beginning of the conclusion of the Cold War and, more evidently, a mark of the failure of communist rule in the German Democratic Republic (GDR, or East Germany) and its non-viable, impractical Socialist economic system. Yet that landmark moment was only the final dramatic high point in the long history of dissatisfaction and discontent with respect to the living conditions existent in the eastern half of Germany.


Between the formal political division of Germany in 1949 and the construction of the Berlin Wall in 1961, a constant population flow from east to west took place, an escape from Soviet-style Socialism to embrace and get a taste of Western Capitalism. This constant infiltration by East Germans into the Western territory of Germany stopped only when the construction of the Wall in Berlin made it impossible to leave. Prohibitive barriers had already stretched across the whole country. Nonetheless, multiple people still continued to try and escape, and hundreds of them lost their lives in the process when they were shot by border guards in brave attempts to “flee the republic,” as the crime was cynically designated.


Obviously, there are no similar records or accounts of throngs of westerners clamoring to enter East Germany. Between 1950 and 1989, the GDR’s population decreased from 18.4 million to 16.4 million, while in the same period, the population of West Germany (the Federal Republic of Germany, or FRG) grew from 50 million to 62 million (Source- Planning Ahead and Falling Behind: The East German Economy in Comparison with West Germany). This data is an indispensable judgement and report on the failure of Socialism in East Germany. The Socialist system in GDR was unable and incapable of persuading its population to remain willingly. Only the Wall and the rifles of the border guards prevented and restricted the East Germans from departing/fleeing.


In a column written by B.R. Shenoy, an Indian Economist, on 15th August, 1960, even before there was a Berlin Wall, he had compared the two halves of the city.


Here is his take on the Capitalist half(FRG):

“The contrast between the two Berlins cannot miss the attention of a school child. West Berlin, though an island within East Germany, is an integral part of West German economy and shares the latter’s prosperity. Destruction through bombing was impartial to the two parts of the city. Rebuilding is virtually complete in West Berlin. …The main thoroughfares of West Berlin are near jammed with prosperous looking automobile traffic, the German make of cars, big and small, being much in evidence. …The departmental stores in West Berlin are cramming with wearing apparel, other personal effects and a multiplicity of household equipment, temptingly displayed.”


Here is his observation with respect to the Communist half(GDR):

“…In East Berlin a good part of the destruction still remains; twisted iron, broken walls and heaped up rubble are common enough sights. The new structures, especially the pre-fabricated workers’ tenements, look drab. …automobiles, generally old and small cars, are in much smaller numbers than in West Berlin. …shops in East Berlin exhibit cheap articles in indifferent wrappers or containers and the prices for comparable items, despite the poor quality, are noticeably higher than in West Berlin. …Visiting East Berlin gives the impression of visiting a prison camp.”


The concluding lessons by B.R. Shenoy:

“…the contrast of the two Berlins…the main explanation lies in the divergent political systems. The people being the same, there is no difference in talent, technological skill and aspirations of the residents of the two parts of the city. In West Berlin efforts are spontaneous and self-directed by free men, under the urge to go ahead. In East Berlin effort is centrally directed by Communist planners… The contrast in prosperity is convincing proof of the superiority of the forces of freedom over centralised planning.”


Although the prices of commodities in West Germany were higher in comparison to its eastern half, the Per Capita GDP, the Quantity and Quality of goods, Investments and Number of operative firms in the economy were also far higher/better in the western half of Germany. The following tables substantiate the claims made:



The comparative data of GDP Per Capita in 1991 and GDP Per Capita in 2018 of East Germany and West Germany shows that reunification has helped East Germany from the economic point of view. However, East Germany still lags behind West Germany showing that once affected by Socialism, it'll take years of treatment to regain normalcy. In 1991, East Germany's GDP Per Capita was 43% of that of West Germany and in 2018 it has climbed up to 75%. 27 years of recalibration, reforms etc. and still only 3/4th of the desired level.


West Germany routinely scored in the top 10 for economic liberty between 1950 and 1975 and this itself is an answer to the question: Why modern economies need Capitalism?


On the other hand, East Germany is another example to back the claim of: Socialism doesn’t work.


The bottom line is that the economic conditions in West Germany and East Germany diverged dramatically because one had good economic policies and the other suffered from the viruses named as Socialism and Communism.



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References:

  1. Mises.org

  2. Libertarianism.org

  3. Hoover.org

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