The fall of the Berlin Wall: how West Germany colonised East Germany

Thirty-five years ago the Berlin Wall came down, paving the way to the wholesale colonisation, dispossession and deindustrialisation of the East German economy by West German capital

Thirty-five years ago — on November 9, 1989 — the Berlin Wall came down, paving the way for German reunification the following year.

The official narrative of economic unification and its consequences speaks of an East Germany economy that, following the fall of the Berlin Wall, was in tatters, destroyed by forty years of socialism, to which the German mark brought prosperity and development. It speaks of an extraordinary economic success, the weight of which was generously borne by West Germany, which decided to share its winning model, the social market economy, with its poor cousins in the East.

Reality, however, is quite different. In truth, the unification process amounted to nothing less than the wholesale colonisation, dispossession and deindustrialisation of the East German economy by West German capital, resulting in an economic, social and political trauma of unprecedented violence for East Germany, the effects of which are still felt today. This was the consequence of the most brutal neoliberal shock therapy ever implemented in a European country, as the economic order of Federal Republic of Germany (FRG), then “West Germany”, was forcefully transplanted to the the German Democratic Republic (GDR), then “East Germany”.

The first instrument through which this shock therapy was implemented was monetary integration, which involved the adoption by the former GDR, practically overnight, of a currency, the West German mark, that was highly overvalued — by 300-400 percent — relative to the fundamentals of the East German economy. This shattered the profitability of East German firms, which quickly became insolvent, resulting in the immediate collapse of East German GDP and industrial production, and in a sharp increase in the number of unemployed — and kicked off a “dramatic process of de-industrialization”.

The second instrument was the mass privatisation of East German state-owned firms, houses and land at the hands of the infamous Treuhandanstalt, a West German government-controlled trust agency that took control of almost all the assets of the former GDR with the aim of privatising them as quickly as possible. By 1992, more than 80 percent of firms had already been privatised or closed. Notably, the overriding majority of the firms was sold to West German investors and companies — at a bargain price, of course.

In other words, virtually the entire economy of the former socialist state was privatised and sold to West German investors — i.e., the citizens from the neighbouring capitalist state that simultaneously implemented its institutions. As Hans Modrow, the last communist premier of East Germany, put it, this resulted in an economic destruction and dispossession “of such magnitude that it is unprecedented in peacetime world economic history and extremely rare even in wartime”. Erich Honecker, the former general-secretary of the East Germany’s Communist Party, lamented: “The former GDR has been plundered like a colony”. Meanwhile, the effects of these policies on East German workers were compounded by the FRG’s “construction of the East as a low-wage territory and neoliberal testing ground” through the radical deregulation of national collective bargaining agreements and workers’ rights.

But the story of the German unification process is more than just one of economic colonisation and neoliberal experimentation. It is also one of political and cultural dispossession. Reunification didn’t just involve the destruction of the “indigenous” economic structure and the exploitation of the East’s economic resources, but also “the social liquidation not only of the political elite but also of the intellectual class of a country, as well as the destruction of the acquired identity (however always problematic) of a people”. That is why some authors have used the term “annexation”, or “Anschluss” in German, to describe reunification — a reference to the annexation of Austria to Hitler’s Third Reich in 1938.

Westerners were appointed to most positions of power in the East, including senior civil service posts, professorships, and the top jobs in industry and the armed forces. As Gareth Dale Senior Lecturer in Politics and International Relations at Brunel University London insightfully put it, “East Germans were plunged into a quasi-immigrant position” — foreigners in their own country. Or, to some extent, a people under occupation. Indeed, the radical transformation of the country’s political, social and economic fabric was rammed through with little consideration for what the citizens of East Germany actually wanted.

An opinion poll taken at the end of November 1989, for example, showed that 89 percent of East Germans preferred to take “the path to better, reformed socialism,” with only 5 percent supporting the “capitalist path”. Many East Germans wanted greater political rights and Western prosperity but they also wanted to keep some of the social supports of socialism in place: guaranteed employment, free education and health care, state-supported maternity leave, etc. Instead what they got was an even more extreme version of the Western capitalist model — and a drastic decline in their living standards, which, relative to the West, continues to this day.

No wonder that more than one-third of East Germans today describe themselves as second-class citizens — and think and vote differently than West Germans, as the recent local elections demonstrated.

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Thomas Fazi

Website: thomasfazi.net

Twitter: @battleforeurope 

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