German Reunification Had Its Speedbumps
Beneath the seemingly benign surface of German unification serious problems are emerging. Most of the problems seem to originate in the attitude taken by many western German citizens to their new compatriots in eastern Germany. The generous, welcoming attitude displayed by many western Germans to their eastern German neighbors before unification has changed quite drastically. There is a growing feeling among eastern Germans, expressed numerous times in my visit, that western Germans look upon, and treat them, as second-class citizens. This is not just a psychological phenomenon; it is reflected in concrete social and economic actions of western Grman citizens. It appears more and more than the new Germany is not partnership of equal citizens but the subjugation of one country by another. It is colonization, not confederation.
There seem to be two basic reasons for this disturbing development. First, and most obvious, eastern Germany was clearly the loser in its forty year competition with western Germany.
It was eastern Germany that collapsed, and this fact undoubtedly affects the attitude toward it of even those western Germans who would genuinely like to be magnanimous in their judgment. Second, the route taken to unification reinforced eastern Germany’s inferior position.
The western German constitution permitted two different routes. Under Article 23 eastern Germany could simply be absorbed into western Germany. Under Article 146, unification could occur following a period of negotiation between the two countries, enabling the two to define their status after unification. Such a process could result in a true confederation of states. The first route was effectively chosen in the elections of March 18, 1990. By voting for the fast-track position of Chancellor Helmut Kohl the citizens of eastern Germany opted for absorbtion rather than a negotiated confederation. The social, political, and economic system of western Germany was to become the system for the new Germany. This choice reflected the relative strengths of the two countries and reinforced the loser-victor syndrome that the collapse of eastern Germany had created. Though the choice was freely made, and remains popular, its consequences appear already to be more negative than many citizens of eastern Germany anticipated.
Both in some of their judgements about eastern Germany and in specific actions taken in recent months, many western Germans are displaying a biased, colonial mentality toward eastern Germany. As mentioned in a previous article (CD, March 1990) the western press constantly feeds the impression that the economy of eastern Germany was virtually bankrupt and that almost nothing is salvageable. One would never gather from such reporting that even critical western scholars place the standard of living in the former East Germany at a level just slightly behind Great Britain and ahead of many capitalist economies.
The Treuhandanstalt, the Trust Commission established in March 1990 to assume control of former state enterprises in eastern Germany, estimated in the summer of 1990 that only 50 per cent of these firms would be viable in a unified Germany. Recently the Commission has concluded that the figure is considerably higher than 50 per cent and is putting more effort into salvaging rather than selling them, to the chagrin of western German firms who were hoping for some quick and cheap buys.
Further, there is a widespread conviction – repeated without evidence or qualification in our own media – that eastern German workers are lazy, badly trained, and have no entrepreneurial spirit. The fact is that the training level of these workers is judged by most experts to be at a very high level compared to most industrial countries. In the last six months, when there was no longer any need for firms in western Germany to hire refugees from eastern Germany for charitable reasons, several hundred thousand more “lazy” workers have been actively recruited from eastern Germany to fill positions in western German industry.
As to the entrepreneurial spirit of eastern Germans, recent surveys reveal that during 1990 more than two hundred thousand new private business ventures will have been established by eastern Germans in eastern Germany. Even with a normally high failure rate this could more than double the number of such firms. The virtual elimination of this entrepreneurial private sector in the GDR was, in my opinion, one of the critical economic mistakes made by the GDR government. Even with the substantial growth of this sector in 1990 the ratio of self-employed persons to total employment in eastern Germany will only be about 4 per cent, compared to more than 12 per cent in western Germany. However, the entrepreneurial spirit in the eastern German population obviously remains strong. Beate Kraemer in her new Women’s Clothing store in Weimar, Eckhart Schill in his computer shop in Eisenach, Ilina Niche in her recently – opened video outlet in Wutha, and Eckbert and Ines Pfuhl in their watersport shop in Leipzig are energetic risk-takers, defying the condescending judgments of western commentators.
Condescending judgments are also being made by academics in western Germany about their counterparts in eastern Germany. Eastern Germany has 54 post-secondary institutions, including six universities. A few months ago Professor Hans F. Zacher, president of the prestigious Max Planck Institute in western Germany declared the humanities and social sciences in eastern Germanhy to be a “desert.” This judgment was immediately refuted by several leading scholars in western Germany, who pointed to a number of outstanding eastern German scholars in their respective fields. Despite this rebuttal the attitude of Professor Zacher appears to be a popular one.
The colonial mentality displayed by such judgments results in corresponding types of actions. The composition and decisions of the Trust Commission offer considerable evidence for this. Its role is to save, sell, or dissolve 8,000 former state enterprises with assets valued somewhere around 500 billion marks. The fate of the 2,300 largest firms is being decided at the Commission headquarters in Berlin. Fifteen regional branches have been established for the other 5,700 firms.
Initially many of the top people were from eastern Germany. Now the head of the Commission is Detlev Rohwedder, the former chief executive of the West German steel company, Hoesch, and the person in charge of selling assets is Karl Schviner. The former manager of Daimler Benz. The fifteen regional heads have all been replaced by business people from western Germany. Rohwedder was born in the GDR and seems determined to save as many eastern German firms as allowed. For this he has come under severe attack from the western German press and western German business people, and he has said that he will give up the position at the end of the year. Despite his concerns the eastern German economy is being carved up largely in the interests of western German companies.
During my stay in Berlin the foreman of the largest truck-parts firms, with more than 1,000 employees, explained in detail how the assets of his firm were being purchased. Eastern German trucks are in much greater demand than cars and this foreman realized this past summer that the people buying the trucks would soon be approaching his company for the purchase of its parts. He therefore spent several weeks taking a stock inventory, checking carefully with prices in West Berlin to make sure that his estimates would be valid in terms of the new German mark. He came up with an inventory value of 12 million marks. The week before I visited him a representative of the Trust Commission appeared at his company and spent a day taking a quick inventory. His conclusion: the stock would be sold to a western German buyer for 700 thousand marks (bids are seldom asked for). When my friend voices his objections to this incredibly low estimate he was told brusquely, “This is none of your business. We make the estimates and we make the sales.” When he asked further what might happen to his job and to the jobs of the other employees the reply was: “That too is none of your business. The new company will decide that, but don’t count on being here more than three weeks.”
An assembly line worker in a cosmetics factory had a similar story.” I was all in a favour of unification, and don’t want to go back to our former political state,” she said, “but I am appalled at the attitude of the strangers from western Germany who are marching through our factory deciding our fate. They are treating us in the most brutal colonial fashion.”
The new federal government of Germany will be spending hundreds of billions of marks in the next few years refurbishing the infrastructures of eastern Germany. This will include a variety of technological service sectors, including data recovery experts and those familiar with server repair in general. German citizens will bear much of the brunt of this. However, the evidence so far suggests that business firms from western Germany are participating in the reconstruction of eastern Germany not through a sense of common interest – as their rhetoric claims – but almost entirely through self interest.
They demand, for example, that eastern German assets be sold quickly at bargain prices. When they invest they insist, successfully, that the Trust Commission assume all existing debts of the company being purchased and the responsibility for previous environmental damage. While they claim that private investment will save the economy, they demand, and often receive, considerable financial support from the government.
Mercedes Benz, for example, has been hailed for its decision to build a major truck-assembly plant. What is not mentioned as often is that the Trust Commission is paying the 100 million mark start-up costs for this, and Mercedes will make its first financial commitment in 1992, assuming responsibility for only 25 per cent of the total investment. Volkswagen has made a similar deal: the government will pay 87.5 per cent of the start-up costs and assume responsibility for future risks. The large western German chemical company, BASF, has presumably made similar arrangements in establishing a new plant in eastern Germany, but the government now refuses to reveal the details. A spokesman in the German Finance Ministry acknowledged, however, that in these matters the government is experiencing the “purest form of blackmail.”
In speaking with a manager of BASF I was asked: “Why should we invest in eastern Germany at all? We can supply the eastern German market very easily from our existing plants in western Germany.” “Why do you invest at all, then?” I asked. The reply: “For three reasons: the government is giving us favorable conditions, our president was born in the GDR and would like to do something for it, and we see our new eastern German plant as a bridgehead for penetrating the eastern European market.” The last reason seemed to get the most emphasis.
Other types of colonial corporate behaviour are surfacing all the time. A scandal erupted during my visit around the demise of a large trucking firm – VDT – that had been privatized earlier in the year by citizens of eastern Germany. Several eastern German trucking firms have already been bought by western German firms like Kuehne & Nagel, but a consortium of eastern Germans managed to create VDT out of 56 former state-owned firms with 65,000 employees. They captured about 15 per cent of the eastern German trucking business and were evidently becoming quite profitable. A lobby group formed by the largest western German firms launched a vigorous campaign against this eastern upstart, and succeeded in getting the Trust Commission to dissolve it. The matter is now under investigation.
The venerable eastern German optics firms, Carl Zeiss of Jena, is having a somewhat similar experience. It is a large concern, with more than 30,000 workers in 12 plants, and was able to grow despite vigorous competition from western German firm with the same name. Under the London Agreement of 1971 the two firms officially recognized each other’s right to produce and market optical goods under the Zeiss name. However, in recent months the western German firm has claimed that as a result of unification the old agreement is not in force, and has urged that the Jena operation be closed. Though a compromise is being attempted, it now appears that as a result of the pressure from western Germany the work force in Jena may be reduced to less than 1,000.