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East Germany, circa 1985
Chris Bertram writes in the comments of MR:
As it happens I spent some time in East Germany in 1984. As I recall, it was then claimed that the per capita GDP was comparable to that of the UK. It was immediately obvious to me that the standard of living for most people was far far lower. But real problem with East Germany was not its comparative level of economic development or the level of health care its citizens could receive (rather good, actually). It was the fact that it was a police state where people were denied the basic liberties.
Given them those liberties and I think you've achieved most of what's morally important. If they then choose a policy of more leisure and lower growth or the opposite ... that's up to them. I don't think it matters, morally speaking, that they are poorer than Americans are.
I am genuinely puzzled by this. I visited East Berlin -- supposedly the showcase of the country - in 1985. Let me try to sound as superficial as possible, in light of the extreme poverty in Africa.
The food was terrible. The cars were a joke, if you even had one. There were hardly shops to be found. I had to spend 40 or so "Ostmarks" and literally could not find a single thing I wanted. I bought a Stendahl book and left the rest of the money on a bench. Few people had the means to travel, even if politics had permitted it. I am skeptical about the health care though I will admit I am not informed. Had the relatively productive people been free to leave, this all would have been much worse. It should also be noted that the country was neither donating much to Africa, nor taking in many immigrants, and again that is not just because of the politics.
Chris and I have a very different notion of what is morally important. I don't wish to force anyone to be richer than East Berlin circa 1985, but if you give them liberty, almost everyone will try to exceed that level, and not just by a little bit.
Posted by Tyler Cowen on November 14, 2006 at 08:26 AM in History | Permalink
Comments
This whole discussion is interesting in light of the contemportary Right (in the U.S. anyway) and their advocacy for scaling back welfare statist policies on the grounds that the "poor", already have plenty to sustain themselves, possess luxury items like electric stoves, refrigerators, microwaves, televisions & even video game consoles at a rate similiar to their middle class counterparts, and far from having not enough to eat, are more likely to suffer from obesity than starvation.
Though I admittedly don't have data available; using the Daniel Davies test of whether we have achieved significant enough growth, the poor in the U.S. (who are predominantly African-American) don't appear to suffer disparaties of height or growth with their white counterparts.
So would the argument then be from the "stablized state" ists that poor blacks in America (who admittedly are wealthy by global standards) habe achieved sufficient wealth & economic growth?
Posted by: DRR at Nov 14, 2006 9:10:42 AM
It just seems to me that growth bring prosperity. Without it, standard of living does not increase. You can't have one without the other. I would argue that you can have growth and better standard of living without many civil liberties, I would posit that Singapore is a good example. They have high economic freedoms, but very restrictive in regards to civil liberties.
On the contrary, you cannot have communism like that found in Soviet Bloc and Red China without imposing on civil liberties. Communism itself, as Hayek pointed out, cannot allow for a difference of opinion because human being what they are will have different conception of what is right both economically and socially. That would take away all "equality" of the system.
I would argue that by working less and having less economic growth is not really a better standard of living if you can't get the things you need to make that time off work more enjoyable. Restrictive labor policies actually make the standard of living worse, just ask the young French. Not having a job is great if you have all the money in the world to fulfill all the requirements of comfort, but that's not what happens.
Posted by: Matt at Nov 14, 2006 9:12:58 AM
Tyler, I stand by my comment. We agree that the standard of living was rather poor. But so much of the economic potential of the country had been directed into military production for decades, at the expense of consumers. If it hadn't been a police state, this wouldn't have been the case.
Try the following thought experiment. There must be some year in which the GDP per capita of the US reached the level that the DDR was at in the mid 1980s. I'm willing to bet that you will concede that it was possible for a typical American to lead a decent life in that year (whenever it was) and that in that year US citizens typically enjoyed a much higher standard of living than DDR citizens did in the mid 1980s.
Posted by: Chris Bertram at Nov 14, 2006 9:14:17 AM
What Stendhal did you buy? When do we get a Stendhal post?
Posted by: Anderson at Nov 14, 2006 9:31:14 AM
I visited East Berlin in January 1990 and found the situation similar to
that described by Tyler. I remember going into a department store and not
seeing a single thing worth buying. The food, while ridiculously cheap, was
quite bad. The sense of being in a false economy was only heightened by the
money itself, whose coins felt more like plastic than metal. And let us not
forget that East Berlin was the country's showcase! I can only imagine what
things were like in some of the more rural parts of the country.
This has nothing to do with the fact that East Germany was a police state
and everything to do with how its economy was organized -- basically goods
were produced at the behest of central planners than what people actually
wanted or needed.
Posted by: Colin at Nov 14, 2006 10:02:54 AM
DRR writes:
"the poor in the U.S. (who are predominantly African-American)"
You are incorrect. Here is a US census bureau report:
http://www.census.gov/Press-Release/www/releases/archives/income_wealth/005647.html
"In 2004, the poverty rate declined for Asians (9.8 percent in 2004, down from 11.8 percent in 2003), remained unchanged for Hispanics (21.9 percent) and blacks (24.7 percent) and rose for non-Hispanic whites (8.6 percent in 2004, up from 8.2 percent in 2003)."
This means that non-hispanic whites are the largest group in poverty absolutely, with african americans 2nd.
Posted by: bumbler at Nov 14, 2006 10:03:53 AM
Professor Bertram's position is that the poverty of the East Germans he encountered .....was not "a real problem." Easy for him to say.
Why do so many kindly and thoughtful people on the left so cavalierly dismiss the economic needs and desires of those who live in distant lands? Many of my friends at the Unitarian Church suspect that the concern of "free-market types" for said poverty abroad is just a cover story for people who really want to de-unionize America and dismantle poverty programs here. And their fears are not totally unwarranted.
Nonetheless, they are left in the horrid position of arguing that localized differences in wealth are more important than global ones.... which, if you have lived a simple lifestyle in both first and third world locales is just laughable.
The difference between my beat up old truck and my neighbor's new Mercedes.... pales in comparison to the difference between either of us and someone who has no bike, no water buffalo and not enough food for both of their kids.
Sam Walton's model is liberating millions of Chinese and Vietnamese and East Germans from poverty every year....and yet my most liberal neighbors have signs in their yards that say LittletonAgainsWalmart. Go figure.
Posted by: Dave Meleney at Nov 14, 2006 10:05:42 AM
According to the Hoover Institute, at the time of unification, East German per capita income was about 1/3 of West German per capita income; according to the BLS, in 1985 West German per capita GDP was 22,000. That gives a constant GDP of $7,333, which the United States reached sometime in the 1930's. No, I do not believe that it was possible for the typical American to lead a decent life in the middle of the Great Depression, and though I suspect that they did enjoy a somewhat higher standard of living than the East Germans, comparisons are made fraught by the invention of such things as antibiotics and xrays in the interim.
Posted by: Jane Galt at Nov 14, 2006 10:20:36 AM
Hmm, let's see. I write:
"But the real problem with East Germany was not its comparative level of economic development or the level of health care its citizens could receive (rather good, actually)."
and David Meleney reads:
"Professor Bertram's position is that the poverty of the East Germans he encountered .....was not 'a real problem.'"
Remedial reading class needed?
Commenter Colin remarks:
"This has nothing to do with the fact that East Germany was a police state
and everything to do with how its economy was organized ...."
Maybe the fact that East Germany was a police state has some connection to how its economy was organized?
Posted by: Chris Bertram at Nov 14, 2006 10:22:18 AM
I think I understand the point of Chris Bertram, but the fact that the population was maintained in this state of poverty, when it is obvious that a lot of people would have tried to increase their standard of living IS morally wrong and is part of the police state, as you just commented it yourself.
Posted by: Antoninov at Nov 14, 2006 10:36:30 AM
Maybe the fact that East Germany was a police state has some connection to how its economy was organized?
You have the order of the sentence reversed. It should read:
Maybe how East Germany's economy was organised has some connection to the fact that East Germany was a police state.
It's possible to have capitalism and a police state - Singapore, America in 25 years - but it's not possible to have communism and not have a police state.
- Josh
Posted by: Wild Pegasus at Nov 14, 2006 10:41:45 AM
I'm pretty sure from a bit of googling that Jane's 1/3 figure relates to 1991, which is immediately post-unification and therefore almost certainly a collapse relative to the mid-1980s. Accurate figures are pretty hard to obtain, the CIA estimated in the mid-1980s that East German per capita GDP was higher than West Germany - absurd, I know.
But anyway, let me insist, especially since Tyler berated me for failure of imagination the other day, that I find it very possible to imagine people living decent lives with free institutions at very much lower levels of per capita GDP than United States in 2006.
Posted by: Chris Bertram at Nov 14, 2006 10:46:49 AM
Chris wrote:
"But so much of the economic potential of the country had been directed into military production for decades, at the expense of consumers. If it hadn't been a police state, this wouldn't have been the case."
It wouldn't have mattered if everything would have been directed to
consumers -- because of the way the economy was organized no one knew how
to produce things consumers wanted.
Posted by: Colin at Nov 14, 2006 10:57:42 AM
If one wants to be cynical, one could even ask how much of the uprising in East Germany in 1989 was actually driven by the desire for more political freedom, and how much by the wish to enjoy economic living standards comparable to West Germany. Clearly, the nucleus of the East German dissidents was motivated by the former. I am however not sure about the masses that assembled in front of the Berlin Wall on the night of November 9, 1989. The shopping binge of the East Berliners in the west part of town in the following days gives some indications. A comparison of the welfare of East Germans with Americans during the 30s is somewhat flawed, as subjective economic well being also depends on the group to which one compares one's own wealth. For the East Germans, this certainly were their brothers and sisters in the West, whose wealth they could admire on West German television programs ( except in Dresden, the "valley of the innocents" as it was called because one couldn't receive West German television in this city )
Concerning the living standard in East Germany, you can add to Tyler's list: very few telephone lines, often no central heating but coal ovens, waiting times of up to 20 years for Trabandt cars ... The health system and child care were very good, though. And especially child care today is still better in East Germany than it is in the West.
Posted by: andreas at Nov 14, 2006 10:59:16 AM
Professor Bertram chastises me thusly:
"Hmm, let's see. I write:
"But the real problem with East Germany was not its comparative level of economic development or the level of health care its citizens could receive (rather good, actually)."
and David Meleney reads:
"Professor Bertram's position is that the poverty of the East Germans he encountered .....was not 'a real problem.'"
Remedial reading class needed?"
Having lived for short periods with poor people in the 2nd and 3rd worlds, I am awaiting an explanation of the difference between what Professor Bertram said and my paraphrase of his statement. Would you have been happy if I quoted "the real problem" rather than the inaccurate "a real problem"?
Awaiting remediation,
Dave Meleney
Posted by: Dave Meleney at Nov 14, 2006 11:01:30 AM
1985 might not be the best point to determine the state of the consumer economy in East Germany--the nation was obviously headed for a crisis, no matter what the "official" economic figures suggest. However, for a Soviet-bloc nation, consumerism was well developed such that, on the one hand, Eastern Europeans would tap into it to fulfill their own needs and, on the other, comparisons with Western European markets was possible (even if East Germans came out wanting, literally and figuratively).
What might be most interesting about East German consumerism is that it created a hunger rather than satisfying a need.
Posted by: NDR at Nov 14, 2006 11:07:47 AM
David Meleney. Your elementary comprehension failure has two parts: (1) To say that X is not “the problem” with respect to some question does not imply a denial that X is , unrestrictedly, “a problem”; (2) my comment concerned the level of economic development of the country and your reading of it concerned the poverty of its citizens. It is perfectly possible for one country to have a higher level of economic development than another country whilst its citizens are in greater poverty, because, e.g. of the diversion of productive resources to goals other than consumption.
Posted by: Chris Bertram at Nov 14, 2006 11:18:06 AM
The distinction between political and economic liberty is false. They are connected, although obviously one can be regulated more than the other just as subsets within each sphere can be regulated more than others. It has to do with issues of control and how monmaniacal the government is. Communist governments will be highly monomaniacal.
Economic liberty is more important than the political aspects. Most people do not have the desire to involve themselves in the high culture of politics or art, but they are intimately concerned with whether they have food on the table and the prospect of a better life for their children. This is why a much greater percentage of people will become radicalized in a free society with bad economic conditions (Weimar Germany or America during the Depression) than a repressed society with great economic conditions (Singapore or a lot of post WWII East Asia). A good definition of decadence is a society that places a higher value on the elite's political/social/artistic freedoms than the economic conditions of most people.
After a certain point, absolute economic values become less important than relative ones (how are "we" compared to "them", and will the future be better than now).
Posted by: Chris Durnell at Nov 14, 2006 11:52:44 AM
Chris, the figure that you cite was the result of a) poor information and b) differing exchange rates used by the Soviet bloc analysts (they used an adjusted ppp measure, while the West German analysts used floating exchange rates) and c) a soaring dollar compared to the deutschmark. It was a bureaucratic snafu--not the considered opinion of the CIA that East Germany's GDP was higher than that of West Germany, although it has been erroneously so cited by journalists.
There was indeed a dramatic collapse in GDP in Eastern Germany, thanks to the shuttering of loss-making firms, as well as the slightly lunatic decision to peg Eastern German wages at Western levels. However, my understanding is that it was a decline from that 1/3rd . . . the Library of COngress COuntry Studies pegs East German 1991 output as low as 8% of West German output.
Posted by: Jane Galt at Nov 14, 2006 12:07:49 PM
"But anyway, let me insist, especially since Tyler berated me for failure of imagination the other day, that I find it very possible to imagine people living decent lives with free institutions at very much lower levels of per capita GDP than United States in 2006."
I'll repeat my question from the CrookedTimber debate. How does this square with the egalitarian redistribution ethic? If it is true that decent lives can be lived at VERY MUCH LOWER levels of per capita GDP, why is it so important to redistribute wealth within the United States?
Posted by: Sebastian Holsclaw at Nov 14, 2006 12:13:29 PM
I want to thank Mr. Bertram for reminding me that animals who walk on all fours can still live satisfactory lives. Since I am too old to cease being a bi-ped, I commend his four-legged economic vision to the intrepid young who are looking for a beastly rewarding existence and a break from modern life. I have heard there are caravansaries around Humboldt California who embrace this vision. But I am not sure.
Posted by: Rue Des Quatre Vents at Nov 14, 2006 12:21:13 PM
It should also be noted that the country was neither donating much to Africa, nor taking in many immigrants, and again that is not just because of the politics...
Errr, this is a bit loose on facts. At the time, East Germany was using large numbers of gastarbeiter from Vietnam, among other places, and also making a considerable effort to curry favour in the third world. (Many of the Vietnamese were essentially abandoned there in 1989, to be kicked around by small-town skinheads until they realised moving to the west was an excellent idea.)
Anyway, I'm sure people lived decent lives with free institutions at very much lower levels of per-capita GDP than the US in 2006 - the US in 1956 (or the UK in 1966) springs to mind.
Posted by: Alex at Nov 14, 2006 12:24:47 PM
Chris Bertram and Jane Galt,
The Hoover numbers are after the fact estimates
of 1985 realities, using data not known in 1985.
It does not reflect the collapse.
The CIA never said DDR was higher than BDR,
but as of 1989 they were supposedly just about
equal in real per capita income.
The problem ex post was what Tyler and Chris both
saw, lousy quality. That is what lay behind the
sudden downgrading to 1/3 of real per capita income
once the Wall fell and the DDR economy was opened up
to the outside world. Nobody wanted those Trabants.
This was a much greater fall than the short, but
sharp, macro collapse in 1990.
This was a broader problem. The CIA was underestimating
real GDP for the whole Soviet bloc, not just the DDR,
which was pretty much at the top of that bloc. There
was much huffing and puffing after the fact about
the CIA overestimating Soviet GDP. Warren Nutter and
some others at U.Va. criticized the CIA's estimates,
but most believed them, and they were ideologically
convenient for those who wanted bigger defense budgets
to fight the scary USSR war machine.
Ironically, among those who believed the CIA numbers
were the Soviet central planners themselves. This is
the ultimate in Hayekian information problems: the
GOSPLAN's access to data within its own ministries
and society was so bad that it ended up using numbers
stolen from foreign intelligence agencies. The CIA
was not just fooling US policmakers, but the Soviets
themselves.
Posted by: Barkley Rosser at Nov 14, 2006 12:59:46 PM
Does egalitarianism stretch across time or just space?
Posted by: josh at Nov 14, 2006 1:09:30 PM
Professor Bertram:
I agree 100% with your points that lower, and even much lower GDP can be quite tolerable, and I have lived happily in Thailand and China quite simply. I wish more Americans (Brits too) recognized what you are saying here.
But I ask you to consider those folk you remember from your travels in East Germany…. to the extent they seemed less joyful was it partly because their lack of economic freedoms made them less the “author or their own life”?
And when you consider the amazing range of opportunities open to your children and mine….would you for a second want our children to be stuck in an East German economy, even if they had the full range of civil liberties?
Dave
Posted by: Dave Meleney at Nov 14, 2006 1:26:25 PM
