The Currency of Socialism: Money and Political Culture in East Germany

The Currency of Socialism: Money and Political Culture in East Germany. By Jonathan R. Zatlin. New York: Cambridge University Press, 2007. xviii + 377 pp. Figures, tables, illustrations, bibliography, notes, index. Cloth, $75.00. ISBN: 978-0-521-86956-0.

Reviewed by Michael Allen

"Property is Theft!" runs an old communist slogan. But by 1989 East Germany had stood this catchphrase on its head. In response to shortages and the deteriorating quality of consumer goods, alienated East Germans routinely pilfered from the state. Moreover, they believed that purloined goods were their rightful due, because the state was reneging on its promise to provide a just and equitable distribution of commodities. Not private property but nationalized industries created prodigious, "real existing" theft, "with the value of losses increasing by 65 million East German marks over 1986" alone (p. 172).

This was just a minor indication that communism's "world-historical" confrontation with capitalism was ending not with a bang but a whimper. In the German Democratic Republic, this took the form of something like a sellout-at discount prices. East Germans exchanged their currency for West German marks at rates grossly subsidized by Helmut Kohl's government; then they purchased new Opels, Volkswagens, Mercedes, or BMWs, before settling down to complain about their government. Or so goes the stereotype. But by 1995 it was difficult to find anyone, East or West, who would actually admit enthusiasm for unification. So concluded the ignominious "end-phase" of socialism.

Jonathan Zatlin convincingly argues that the Marxist-Leninist experiment was bankrupted because its doctrine offered no viable alternative to money. In the intellectual tradition of Marxist-Leninist and non-Marxist socialists alike, money was immoral. The state set out to eliminate it as a marker of inequality. Of course, money existed in East Germany, but it was nonconvertible. The state sought to use it less as a medium of exchange than as an instrument to balance production and consumption. This entailed the suppression of markets, among many other strategies. In consequence, three things occurred: First, black markets, barter, and theft filled the gaps left by the state's dysfunction. Second, this unofficial economic activity sprang up beyond the purview of the centralized state, making planning all the more ineffective. Finally, and most important for the communist experiment itself, cumulative failures increasingly discredited communism.

It is often believed-as portrayed in the popular film Other People's Lives-that corrupt leaders like Erich Honecker or the repressive State security Police ruined the GDR because they did not live up to socialism's noble ideals. Zatlin argues instead that the GDR collapsed because "Marxist-Leninist economic theory had failed to produce an economic system that did not depend on market mechanisms for assessing economic performance" (p. 47).

Capitalist money not only serves as a marker of haves and havenots. It also serves as a medium of information, vastly facilitating the tracking of trends like commodities shortages, efficiency, production time, or demand. The need for such industrial metrics was never lost upon communist planners, but instead of coming up with an alternative to money and markets, the Eastern-bloc countries belonging to the Council for Mutual Economic Assistance, or COMECON, merely introduced bad money. This helped to spawn bad markets. In Zatlin's view, communism failed because it was communism.

By the time Erich Honecker took power in 1971, many of these internal contradictions were becoming more apparent. This was the decade in which smokestack industries collapsed from Detroit, Michigan, to Magnitogorsk in Russia. Honecker and his capable if despicable economics secretary, G�nter Mittag, turned increasingly to Western loans to shore up the East German economy. Honecker did so in order to buoy consumption levels, which he clearly recognized as the key to stability in East Germany. But both he and Mittag failed to produce either any viable alternative to East Germans' predilection for West German consumer goods or the money needed to buy them. Meanwhile, the attempt to fund unsustainable levels of consumption with West German loans partly monetized the economy. This in turn undermined the regime's legitimacy.

Mittag embarked upon any number of measures that effectively cannibalized East German industry. Some of them were brilliant. He speculated in pork, Soviet oil, and even East German currency, but some of these undertakings were little better than Ponzi schemes. All the while, he sought to balance the GDR's trade deficit while avoiding any cuts in East German consumption. To do this, Mittag resorted increasingly to capitalist-style economic instruments. This was not just ineffective; it was hypocritical in the extreme. East Germans unsurprisingly turned their disgust upon the party leadership or on the GDR itself, a reaction that goes far toward explaining why there was such a crisis of confidence even among party stalwarts in 1989. Some of the earliest objections to Honecker and Mittag's leadership actually came from the State Security Police-hardly the GDR's leading subversive institution. Zatlin carefully weaves together economic, diplomatic, and cultural history, adding some solid business history of the East German auto industry and the chain of government-run retail stores called Intershops to illustrate what communist economic policy looked like from the perspective of management as well as the consumer.

East Germany's ultimate bankruptcy was both financial and intellectual. What could be more indicative of this than Honecker and Mittag's effort to stave off collapse by resorting to stopgap loans from Helmut Kohl and Hans Josef Strauss. West Germany injected almost two billion Deutschmark in credit during the first years of Kohl's government. Without this timely aid, Honecker would have almost certainly fallen from power, as heads of state did in Poland and Romania. Instead, Honecker (and Mittag) continued to run things until 1989.

East Germany remains the only COMECON country that evaded taking responsibility for its own economy after 1989. Instead East and West Germans opted for unification, with consequences that are evident to anyone who has walked through Brandenburg Gate. Might East Germans have been forced to take responsibility for their own economy earlier if Kohl and Strauss had not bailed out Honecker in 1983 and 1984? Might East Germany have remained an independent country? Zatlin suggests that it likely would have. Such conclusions, admittedly hypothetical, can be neither true nor false. They can only be interesting and stimulating. And, in this case, Zatlin's certainly are.

[Author Affiliation]

Michael Allen is author of The Business of Genocide, which won the 2002 GSA-DAAD book prize. He is currently attending Yale Law School.