German economy at top of East-bloc heap
It is hard to find bananas here. It takes years on a waiting list to buy a car. Yet a respectable 42 percent of all households have automobiles, as the exhaust fumes in the Berlin air attest. Virtually all households have refrigerators, 90 percent have television, 84 percent washing machines, 64 percent hot water, 68 percent baths, 60 percent their own inside toilets.
Meat consumption is a high 91 kilograms (200 pounds) per person a year. And given the low rents and the relatively few luxury goods to spend savings on, there is a lot of money around with the average monthly (nonfarm) wage of 1,080 marks ($360).
This is, in short, the best economy in the Soviet bloc, micro as well as macro.
The standard of living is the highest here, give or take a few Hungarian and Bulgarian tomatoes in the diet. Household goods are, or can be, Western export quality, as millions of West German housewives know from their everyday appliances.
The macroeconomy, too, has turned in an impressive performance in the past 11 /2 years. Overall growth rose to 4.4 percent in 1983 (and 5.1 percent in the first half of 1984) after a slow 2.6 percent increase in 1982. East Germany produced a surplus in trade both with the West (which accounts for just under one-third of total trade volume) and with the Soviet Union (40 percent of trade).
Moreover, through stringent conservation and recycling measures, the recent growth has been accomplished with a much slower rise in consumption of raw materials: only 2 percent in the first half of this year. Some 11.5 percent of all industrial raw materials were obtained from secondary sources last year. As a consequence industrial productivity rose by a gratifying 5.8 percent in 1983 and 7.2 percent in the first half of 1984.
What accounts for this success? And what problems remain? Prof. Rolf Sieber, rector of the economics university in East Berlin, former ambassador to the United States, and member of the team that is thrashing out the 1986-90 five-year plan, answers this way:
1. Applied science and technology.
2. The close association of the East German and Soviet economies.
3. The correct organizational form of ''combinat'' (the new vertically integrated industrial trusts) that can respond rapidly to world markets.
To these factors Western economists would add the development of very capable managers in recent years, the introduction of more sophisticated indexes for plan fulfillment in the 1980s, the sheer hard work of Germans, and the advantages that accrue from West German supplier credits and tacit East German membership in the European Community. (West Germany insists that all Germany, East and West, be treated as one country economically and that East German products be accepted as West German domestic products and not be socked with external tariff rates inside the EC). West German economists go on to warn against exaggerating the external factors in assessing the East German economy, however.
Professor Sieber's first category, applied technology, is an area in which East Germany is proud of its expertise. The Soviet Union certainly excels in military technology and in certain branches of civilian technology. But East Germany is the leader in the Soviet bloc in such general areas as machine tools and robotics. And its civilian industry is much more efficient than Soviet industry in getting new technology onto the production line.
The close link of the Soviet and East German economies has been especially advantageous to East Berlin in the past decade in keeping oil prices below skyrocketing world levels. Resources-poor East Germany gets more than 90 percent of its needed raw material imports from the Soviet Union, Sieber points out. And the five-year-lag formula on the price of Soviet oil sold in Eastern Europe in the years since oil prices shot up has amounted to a Soviet subsidy for East Europe.
Even this year, when Soviet prices were adjusted to a level above declining world prices, East Germany is not badly off. The relatively favorable terms of trade for the machinery that it exports mean that it is paying only slightly more than world prices this year for Soviet oil, Sieber confirmed. He also said the expectation that a new price formula to be adopted soon should mean the oil price will stay in line with world prices in the 1980s.
The new production guidelines introduced into centralized planning in the 1980s include greater stress on efficiency rather than bulk, a 70 percent wage tax to stimulate rationalization of use of labor, and rewards for reduced energy consumption.
And where are the problems? Investment, keeping up with the current technological revolution, and making do with the country's very limited resources are the ones Seiber pinpointed.
Official statistics show that investment dropped 5.2 percent in 1982, did not recover in 1983, and fell 3 percent in the first half of 1984. This has blocked modernization in a period of rapid technological change.
Western economists say East Germany must import more technology from the West to stay competitive and prolong its recent success. That is clear from figures cited by state chief Erich Honecker, which show a productivity lag of East behind West Germany of some 30 percent. Financing for such imports is increasingly hard to find.