CHAYfER IV

FREE MARKET ECONOMY IN EASTERN GERMANY AT WORK: ROLE OF TREUHANDANSTALT

INTRODUCfiON

The economic reconstruction in eastern Germany, especially after unification,

depended heavily on the Treuhandanstalt, popularly known as Treuhand. The central '

objective of the Treuhand was to reconstruct and modernize the erstwhile socialist

economy into a free market economy. The focus was on developing an efficient and

competitive modem economy by reducing entrepreneurial activity of the State

through the introduction of privatization.

Treuhand was set up as a trust agency or holding company in March 1990,

and entrusted with the task of dismantling and privatizing the State-run economy.

The Volkskarnmer on 17 June 1990 passed a law reconstituting the Treuhand,

entrusting to it not only the combines and enterprises, but also property belonging

to organizations such as Stasi (secret police) and the army. The new management

board convened the same day. In October the Treuhand was given full legislative

mandate to privatize the economy. 1

During its tenure 1990-94, the Treuhand oversaw privatization, restructuring,

credit guarantees to provide temporary protection for enterprises, and liquidation. Its

motto was II rapid privatization, resolute deployment and cautious closure II. At the

end of 1994, having fulfilled its mandate, the Treuhand wound up its activities. To

monitor the follow-up commitments arising from the Treuhand's activities the

Jonathan Osmond, German Unification: A Reference Guide and Commentary (London: Longman Current Affairs, 1992}, p.165.

86

Federal Institute for Special Tasks Resulting from Unification was established in

January 1995. 2

STATE ASSISTANCE TO FREE MARKET ECONOMY

To encourage investment, the State made available a wide range of direct and

indirect incentives. Direct incentives took the from of tax allowances, credits at

favourable interest rates, and loan guarantees. 3

Investment grants were available for the purchase and production of new,

depreciable movable assets. A tax allowance of 12 per cent of purchase and

production costs was given before 30 June 1992 and 8 per cent. between 1 July 1992

and the end of 1994. Depreciation allowance of up to 50 per cent was available till

the end of 1994 for the purchase or production of fixed assets and for the

modernization or expansion of buildings. 4

The Unification Treaty extended the Law for the Improvement of the

Regional Economic Structure to former GDR, making it eligible for a number of

grants under regional policy programmes. Under this legislation, GDR was to be

treated as a special investment zone for at least five years. Investment grants were

to be made from the programme's funds at the rate of a maximum of 23 per cent for

business start-ups, upto 20 per cent for the expansion of an existing enterprise, and

up to 15 per cent for the conversion and modernization of an enterprise. Small and

medium private concerns were eligible for assistance from a wide range of

2

3

4

Karl Zawadsky, "From A Planned to a Market Economy", Inter Nationes (Bonn), no. 9, 1995, pp.l-9.

Federal Ministry of Economics, Economic Assistance in the New German Laender, (Bonn), 1991, p.l-9.

Ibid.

87

programmes. The European Economic Recovery Programme (ERP) loans were

granted to small and medium companies with annual sales of up to OM 50 million

(OM 500 million in the case of loans for investment in environmental protection).

Equity capital assistance was also provided for the establishment of private business,

the acquisition of a company and follow-up investment. The Federal government and

the five new Laender were obliged each to provide 50 per cent of an annual sum of

OM 3 billion over the period of five years to meet these obligations. 5

Investment loans were given by the Reconstruction Loan Corporation for the

establishment and expansion of small and medium enterprises and for the

improvement of the environment. These loans, supplementing ERP loans and equity

capital assistance, were available to companies with a turnover not usually exceeding

DM 500 million. Investment loans were available for establishing a company,

relocating it and for innovation. Guarantee banks, such as the Berlin Bank of

Industry, were established in the five new Laender to assist people without sufficient

collateral to start up a business. The guarantees, with a ceiling of OM 1 million,

covered up to 80 per cent of land. 6

After the formation of GEMSU, federal government, with some assistance

from the West German Laender governments and local authorities was responsible

for a wide range of support schemes. These included: expansion of the East German

public administration, improvement of infrastructure, bailing out firms threatened by

collapse, securing of experts, payment for job-creation measures and the financing

5

6

Heimpold, in Wolfgang Heisenberg, ed., German Unification in European Perspective, (London: Brassey's, 1991), p.3.

Federal Ministry of Economics, Investing in the Future: Germany's New Federal States (Bonn), 1991, pp.25-8.

88

of social transfers. 7 State assistance was also given for social purposes such as child

benefit, house assistance, transfers to the social security fund, retirement and

unemployment benefits, etc. The federal government was also responsible for the

obligations inherited from GDR system relating to maternity benefit and care of sick

children.8

ORGANIZATIONAL STRUCTURE OF TREUHANDANSTALT

The notion of a trusteeship for looking after the people's assets originated

with Wolfgang Ullman, the idea taking the concrete shape of Treuhandanstalt under

Hans Modrows. Ullman proposed the creation of a Trust Agency for maintaining

partial ownership by East German citizens in people's property. 9 The institution that

was founded under Modrow on I March 1990, however, was based on a more

centralistic notion than envisaged by the citizen's movement. It was enjoined to

administer the corporate assets of the combines, enterprises and institutions in the

public interest, but not designated as the owner of this property. Its function was to

acquire the shares of combines, enterprises and institutions after their conversion into

limited liability or joint stock companies. Nationally owned companies, such as the

railways and the posts were excluded from the ambit of the Treuhand's functioning.

During Hans Modrow's regime, joint ventures were restricted to East and West

German firms, to obviate the possibility of German property passing into the hands

7

8

9

Horst Siebert, "German Unification", Economic Policy (Cambridge), vol.6, no.12, 1991, pp.141-2.

Monthly Report of the Deutsche Bundesbank, Bundesbank (Frankfurt on Main), vol.44, no.3, 1994, p.17.

Peter H. Merkl, in Welsh and Hancock, eds., German Unification: Process and Outcome, (Boulder: West View Press, 1994), p.204.

89

of non-German bodies. In practice, the Treuhand under the Modrow government was

an agency for the preservation of GDR's assets and not an agency for the

privatization of the country. Reconstruction did not emerge as a major issue as the

Council of Ministers lacked insight into the real economic condition of the

enterprises. 10 Most of the property in GDR now passed in trust to the Treuhand,

which thereby became the largest public corporation holder.

Under the coalition government of Lothar de Maiziere, after the

Volkskammer election of March 1990, the Treuhand became an independent

government agency. It was authorized to privatise State-owned assets in line with the

social-market economy and to promote the structural adjustment of the economy to

meet market requirements by developing potentially viable firms into competitive

enterprises and then transferring them to private ownership. The aim was to create

competitive corporate structures with an efficient industrial base. 11 The Treuhand

Act as enacted under the Maiziere government was adopted virtually unchanged in

the Unification Treaty.

With the establishment of the GEMSU, 12 the Treuhand was to reconcile

collective property, and to privatize the economy. To this end, the Treuhand directly

encouraged entrepreneurial activities giving equal treatment to German and foreign

buyers. The emphasis was on the formation of small and medium companies

(Mittlestand). Enterprises or part of them were sold off to private buyers after

negotiating the best price. It was left to the entrepreneurs to reorganize and

10

II

12

Peter Christ and Ralf Neubauer in Welsh and Hancock, eds., n. 9, p.l19.

Treuhandanstalt, "Promoting the New Germany", Treuhandanstalt (Berlin), 1991' p.5.

The Law for the Privatization and Reorganization of People's Own Property of 1 July 1990, economic unification between FRG and GDR.

90

restructure these companies, with the Treuhand enable to offer assistance with the

approval of its supervisory boards. Enterprises incapable of reorganization were to

be closed. 13

During Hans Modrow's regime the Treuhand was ill equipped to perform its

task. It was confronted with problems of personnel and leadership14 and it even

lacked telephones, fax machines and details about what it owned. Most of the 140

officials attached to it were East Germans with no experience of a market economy.

The Treuhand Act provided for the establishment of four Treuhand joint-stock

companies with responsibility for heavy industry, investment goods, consumer goods

and service sectors. 15 The Treuhand was responsible to GDR prime minister and

cabinet, who in tum were accountable to the Volkskammer. Together, the cabinet

and parliament appointed an administrative council. The administrative council was

composed of West German and East German business leaders and experts, but no

representatives of small and medium businesses or trade unions. The Treuhand

commenced its operations by establishing five trust stock companies - Treuhand AGs

- to oversee their transformation into private joint stock companies. 16

In August 1990, the Truehand set up was revamped when Detlev Rohwedder

took over from Rainer Gohlke as President. The staff strength was rapidly increased

to over 3,000 well-paid employees, about three quarters of whom were East

Germans. The Truehand structure consisted of eight sections, one each for personnel

13

14

15

16

Inter Nationes, "The Treuhand and Privatization in Eastern Germany, (Bonn), 1993, pp.l6-17.

Treuhandanstalt, lnformationen (Berlin), no.5, September 1991, p.5.

Merkl, n.9, p.209.

Suhr, Ibid., p.206.

91

and finance and stx industrial departments. The industrial departments were

responsible for several branches: department one for machine building and for

supervtsrng privatization, department two for precision engmeerrng, vehicle

construction and liquidation of enterprises, and so on. 17

The Treuhand Management Board reported to the Supervisory Board which

was comparable to the board of directors in a joint-stock company. The Supervisory

Board presided over the industrial departments and had to approve major decisons

taken by the Management Board. 18Treuhand firms with over 500 employees had

to establish a supervisory board. These boards were usually dominated by West

Germans, whose experience and external links were crucial in putting firms on a

sound oommercial footing. 19

The Treuhand had fifteen regional offices in the main cities of eastern

Germany. They were responsible for more than one million workplaces in 6, 718

firms as against the two million workplace in 3,826 firms under the control of the

Treuhand headquarters in Berlin. Experienced West German managers were brought

in to direct them, and the offices were given direct responsibility for all the

companies in their region employing fewer than 1,500 people, or about two-thirds

of the original 8,0<X>. The Liegenschaft, a subsidiary of the Treuhand, assumed

responsibility for the sale of real estate.

The legal status of the Treuhand was as an independent entity constituted in

public law and reporting to the Federal Finance Ministry. The latter monitored the

17

18

19

Treuhandanstalt, n.l4, p.5.

Siebert, n. 7, p. 30 I.

Wendy Carlin, "Privatization in East Germany", German History (Oxford), vol.IO, no.3, 1992, pp.335-5l.

92

legal aspects of the Treuhand's activities and, together with the Federal Economic

Ministry, was responsible for operational policy. Both ministries were represented

on the Treuhand Supervisory Board. This mode of operation put the Treuhand

outside the direct control of parliament. 20 But the statute of the Trust Agency could

be changed with the consent of the Federal cabinet. Article 25 of the Unification

Treaty added representatives of each of the new Laender to the administrative

council, eliminated representatives from the Volkskammer, and increased the number

of council members to twenty. All. members including the chairperson were to be

appointed by the Federal cabinet. The treaty pledged that the people's property

would be used and sold only for the benefit of the eastern areas.

PRIVATIZATION UNDER TREUHANDANSTALT

Privatization was side-tracked under the Hans Modrow government. The

government only planned to convert the 8,000 nationalized firms (VEBs) into public

stock companies that would operate within the market context. The Treuhand

considered most VEBs as being capable of successful restructuring, and it

particularly favoured those that continued to export to their former East European

markets, even though such exports were heavily in need of subsidies.21 In the

name of privatization most of the property in GDR now passed in trust to the

Treuhand, which thereby became the largest holding company in the world. The

Treuhand administered all these concerns, whether or not converted into capitalist

20

21

Treuhandanstalt, n.l4, p.5.

fur example, the Trabant factory m Zwickau, and the truck factory m Ludwigsfelde. Merkl, n.9, p.209.

93

companies, the Treuhand being accountable to the Volkskammer. In those businesses

which had private capital too the Treuhand administered the "public" part.22

The objective of the Treuhand, under the Modrow regime, was not economic

viability or profitability but "the general interest". This included matters of

employment, environment, national security, strategic matters, etc. In reality, it was

the last-ditch effort of the government and the bureaucracy of the dying communist­

led regime in GDR to devise a means by which an overwhelming socialized economy

could continue to function. 23

The de Maiziere government had a stronger free-market orientation. The

purpose of the Treuhand now was to dispose of socialized and State property either

into private ownership or into insolvency. It was authorized to enquire into the

operations and finances of concerns and to make funds available to restructure them.

In the longer term its purpose was to sell them off, 24 that is, privatization.

With the establishment of GEMSU, the privatization process under the

Treuhand became the cornerstone to restructure the economy of GDR. 25

Privatization began hesitantly, due to disputes over ownership, 26 the collapse of

East German companies in the wake of GEMSU, and the problems of trading with

COMECON. 27 By mid-July 1990 a quarter of approximately 8,000 concerns

22

23

24

25

26

27

Osmond, n.1, pp.55-6.

Ibid.

Ibid., pp. 76-7.

Treuhandanstalt, The Chance of 90s, Treuhandanstalt, (Berlin), 1991, p.IO.

The categories of property during the socialist regime included: State and semi-statal property (80. 7 per cent), cooperative property ( 14.6 per cent), and private property ( 4. 7 per cent).

-~

OECD, Economic Surveys, Germany 1990/91 (Paris: OECD, 1993), p.101.

94

involved were not transformed into capitalized companies, while the capitalized ones

did not have full complements of chairmen, boards and management. The companies

also laid claims on large amounts of restructuring funds. 28 In order to keep its

hard-pressed companies afloat and to enable them to pay wages, the Treuhand was

obliged to extend blanket guarantees of short-term liquidity of DM 16 billion in July

and DM 10 billion in August 1990. 29 The reason for the slow progress in

overhauling the system was that the ailing industries were allowed to keep going

rather than being sold off, and the bureaucrats and managers in the Treuhand were

from the old system. Only four weeks after his appointment as president of the

Treuhand, Reiner Gohlke resigned, to be replaced by Detlev Rohwedder, chairman

of Hoesch steel and already chairman of the Treuhand's supervisory board, on 20

August 1990. At the end of 1990 the Treuhand had made very limited progress. In

addition to the old debts of East German industry, it had paid out DM 28 billion in

liquidity credits, but its revenue from the proceeds of sales was only DM 2.5 billion.

The number of firms sold off was in hundreds rather than thousands. 30

Subsequently, in order to increase the pace of privatization, the Treuhand

expanded its management team, removed some of the legal barriers to privatization

and developed more sophisticated and more exacting procedures. A serious

impediment to privatization was the principle enshrined in the Unification Treaty

giving priority to restitution of property over compensation to former owners. In

March J 991, through new legislation the Treuhand was authorized to give priority

to investment rather than restitution to former owners who were unable to or

28

29

30

Osmond, n.l, p. 76.

OECD, n.27, p.IOl.

Osmond, n.l, p. 77.

95

unwilling to operate a company or were unable to submit an investment plan. These

were to receive compensation as soon as possible after the new owner undertook

appropriate measures for investment and to secure jobs. Any financial compensation

due to former owners was to be paid from the public purse. 31 Another boost to the

pace of privatization was the law enacted in April 1991 allowing the Treuhand to

select parts of companies and sell them separately. 32 A subsidiary of the Treuhand

was also set up to deal with "small privatization" such as that of smaller industrial

enterprises, service establishments such as shops, restaurants, etc. By April 1991 all

the larger retail stores and smaller hotels were privatized including 76 per cent of

small pharmacies and 62 per cent restaurants.

In 1991 the privatization of the large enterprises speeded up after a slow start.

More than 450 enterprises were privatized in January, and 1,261 by April. By the

end of August around 3,400 large enterprises had been sold off, raising DM 12.5

billion, but only 156 had been sold to foreigners. 33 By the end of 1991, out of

10,500 firms due for sale, 4,000 firms had been sold off. The "small privatization"

included 24,000 retail stores, restaurants and similar consumer outlets, and

liquidation of 800 companies. 34 To promote such sales, branch offices were

established in New York, Tokyo and other megapolises.

31

32

33

34

Treuhandanstalt, "Promoting The New Germany" Treuhandanstalt, (Berlin), 1992, p.9.

David Goodhart, "So Much To Do, So Little Tune", Financial Times (London), 9 April1991, p.25.

France accounted for 44 enterprises, Switzerland 42 and the United Kingdom 26. Osmond, n.1, pp.165-6.

The Economist (London), 14 September 1991.

96

Even so, the pace of privatization was much below expectation. To speed up

the process, the German government came up with new incentives. It announced

investment grants of up to 23 per cent of the total acquisition including real estate,

and up to 20 per cent of the costs associated with the expansion of an existing

business. The government also offered grants up to 12 per cent on purchases of vital

capital equipment. Further, extraordinary tax incentives and depreciation allowances

were made available and the Treuhand absorbed 85 per cent of the old debts of

privatized businesses. 35

The Treuhand report of March 1992 revealed that it had privatized around

5,500 manufacturing and service companies, leaving, 5,800 still in its administration,

and nearly 15,000 retail outlets, securing over DM 100 billion in investment in East

Germany and over one milliqn jobs. Around 250 foreign companies invested more

than DM 10.5 billion. The proceeds from the sales had reached DM 26.8 billion by

the end of March 1992. However, this sum did not include the obligations incurred

by the Treuhand, such as contributions toward the clean-up of the environment. 36

Towards the end of 1992, 9,500 firms had been privatized, 3,800 were set to be

privatized and 1,600 had been closed down. 37 The Federal government's

investment in eastern Germany was DM 108 billion. The public sector, including the

35

36

37

Federal Ministry of Economics, Investing in the Future: Germany's New federal states (Bonn), 1991, pp.25-8.

Treuhandanstalt, lnformationen (Berlin), no.l3, May 1992, p.4.

David Marsh and Lesley Col itt, "The Lasting Legacy of the Treuhand", Financial Times (London), 12 November 1992, p.23.

97

Deutsche Bundesbank and the Deutsche Bundespost, assumed a pioneering role in

reconstructing new Federal states, investing large sums in new infrastructures. 38

According to the Treuhand report, by mid-1993, 12,360 industrial firms were

privatized and their sale brought in DM 43 billion. The buyers pledged to invest

a total of DM 178.9 billion. In addition, over 30,000 hectares of farm and forest

land were sold for production purposes. The foreign investors accounted for 10 per

cent of the total number of companies sold. They pledged to invest DM 18.7 billion

and create or preserve around 132,000 jobs. 39

At the end of 1994, the Treuhand claimed that eastern Gemany's economy

had developed into a variegated entre-preneurial landscape characterized by

international commitment. Over 14,000 enterprises had been privatized. These

included building enterprises, large-scale chemical concerns, integrated steelworks,

etc. New private owners were found for more than 5,000 enterprises; 4,000

enterprises were re-privatized, that is, returned to their former dispossessed owners;

3,700 firms had to be closed down; and not more than 66 enterprise were to be

privatized. To fulfil its financial commitments to entrepreneurs the Treuhand incurred

an expenditure of DM 337 billion (DM 73 billion for the privatization of State-owned

companies and additional loans of DM 264 billion). Around DM 154 billion were

spent to give a head-start to privatized firms, DM 30 billion on employment

companies (job-creation measures), and DM 60 billion for contractual obligations.

38

39

Inter Nationes "The Treuhand and Privatization in Eastern Germany" (Bonn), 1993, p.3.

Inter Nationes, "From a Planned to a market Economy" (Bonn), 1995, pp.1-9.

98

The debt of Treuhand had been transferred to the Fund for the Redemption of

Inherited Burdens under the Federal Finance Ministry. 40

The Treuhand was wound up on I January 1995, to be replaced with the

Federal Institution for Special Tasks Resulting from Unification. The function of the

new body was to look after the obligations arising from privatization, such as the

regulation of sale, the obligations regarding investment, and the preservation and

creation of jobs. Furthermore, the assets of former GDR political parties and mass

organizations were to be administered and utilized. Under the Federal Institution four

companies were set up, namely, Participation Management Company (for further

redevelopment and privatization of the remaining enterprises), Treuhand Real Estate

Company (for the privatization of properties), Soil Utilization and Administration

Company (for farming and forest areas of the new Laender}, and DP Information

Systems, Organization and Service Ltd. (for services in the electronic processing

sector). As the Trueuhand was being wound up, Treuhand President Birgit Breuel

commented:

40

41

Overall, more is being invested than initiated by the Treuhandanstalt. More people are employed in the economy than the. Treuhandanstalt was able to achieve in the way of employment pledges. This confirms the stimulative effect on the one hand and the ongoing dynamism of the economy in the new Bundeslaender. The end of the Treuhandanstalt symbolizes the fact that a major stage has been completed along the road from the socialist planned economy of a now defunct communist-oriented social order to a liberal market economy system.41

Ibid.

Ibid., p.9.

99

AN ASSESSMENT

The Treuhand has attracted fierce criticism from various quarters on many

counts. According to the critics this organization, which had the objective of boosting

industrialization, privatization and job creation, itself bears a heavy responsibility for

eastern Germany's deindustrialization and mass unemployment. Workers in eastern

Germany described the organization as a job killer, even though the Treuhand

laboured hard to save at least some jobs and obliged VEBs to work out "social

plans" for those who might lose their jobs. One critic described the Treuhand

phenomenon as the revenge of former GDR on the West Germans, who had to pay

about DM 30 billion a year for its operation while its sales generated only modest

revenue. 42There was paucity of industrial ideas within the Treuhand. The statute

of Treuhand also neglected policy of labour market, region and environment.

Another p(>int of criticism is that the privatization process of Treuhand destroyed

eastern Germany's network of suppliers and markets.

The rehabilitation of firms and their orientation to the market were left

entirely to the whims of the new owners especially during the initial phases. No

attempt was made to harmonize privatization with the remaining mixed economic

structures. In giving subsidies to enterprises, the Treuhand did not check each claim

on merit; rather it gave a certain per cent of the requested amount to each applicant,

whenever the need arose. 43 The Treuhand also often had to waive binding on job

guarantees in order to achieve a sale.

The Treuhand has also been criticized for failing to develop a coherent

strategy for the active restructuring of its firms. It opted either for liquidation or part

42

43

Merkl, in Welsh and Hancock, eds., n.9, pp.213-14.

Ibid.

100

closure of enterprises or left the task to the new investor. Some firms it retained as

they were, hoping for an eventual sale. The decisions of the Treuhand on the fate of

individual firms often seemed to outsiders to lack a coherent rationale and

transparency. The Treuhand has also been castigated for inadequate consultation with

the workforce, excessive labour shedding and selling firms cheap, favouring West

German industrialists. Greater transparency, it has been argued, would have been

achieved if more open bidding process had been implemented through widespread

dissemination of information. 44

Privatization entailed many changes in GDR, ranging from the freedom to

travel to the freedom to be cast into unemployment. Unemployment or

underemployment propelled many into seeking work in western Germany. On the

other hand, the West German firms became increasingly disinclined to risk investing

in East Germany which was beset with a myriad of problems, such as dispute over

ownership, collapse in demand for East German products and widespread

environmental damage.

Even to date, the question of property claims is still far from solved, and the

Treuhand and the new Laender governments have been swamped by it. Furthermore,

labour unrest in western Germany has increased as the competition from the cheap

east German labour has increased. In a few cases the wages have been held back

allegedly in order to reduce the cost of German unity. In agriculture, unemployment

was quite high in mid-1992 itself, around 600,000 persons. 45 There was also a

sudden slump in demand as the consumers avoided domestic products, considering

44

45

Jozef van Brabant, Privatizing Eastern Europe: The Role of Markets and Ownership in the Transition, (London: Kluwer, 1993), pp.230-34.

Osmond, n.l, p.80.

101

the east German products inferior and even price cuts failed to attract purchasers ..

Towards the end of 1994, however, the slump was overcome.

Politically, the emergence of free-market economy in eastern-Germany has

led to the growth of Neo-Nazism.46 The parties of the radical and extreme right,

such as the Republicans and the German People's Union (DVU) and cadre groups

like the banned Nationalist Front and German Alternative have sought to establish

a viable organizational network and expand their membership. Unemployment,

housing shortage and the visible presence of a large number of Turks, Yugoslavs,

gypsies and settlers from Eastern Europe have encouraged gang violence and political

mobilization of the right in the west, where they experience occasional waves of

electoral popularity. In 1992 itself 370, 000 foreigners had sought political asylum

in the country, an increase of 81 per cent over the previous year. 47 The

Republicans gained over 8 per cent of the popular vote in the local elections (Hesse)

of March 1993.48

The political change in GDR witnessed a rapid transformation of the media,

especially the party newspapers. There was a huge incursion of west German

material. Western publishers also bought out their east German counterparts

(including the SED publishing house) and began to publish regional editions of their

own papers. The television and radio service also responded to the changes with

46

47

48

Ibid., p.86.

Anna Tom ford, "Bonn Bends Rules To Speed Asylum Curbs into Law", The Guardian, (Manchester), 3 November 1992, p.9.

Gunnar Winkler, in Welsh and Hancock, eds., n.9, p.251.

102

many staff departure and a new, more open tone to programmes on current affairs.

Their function primarily became to reflect local, regional interests and problems. 49

The economic and political change inevitably accompanying privatization

could make their impact on patterns of thinking and behaviour, fundamentally

altering the social structures. Privatization of the economy encouraged the creation

of a middle class and cooperative in agriculture and trade disappeared. The

proportion of white collar workers in the working population increased while that of

blue collar workers declined. Professional and educational arrangements had to be

adjusted to the new economic structures. Completely new employment structures

came about with uncertain future contours. The new employment structures increased

the variety of individual employment, but also implied changes in demographic

structures. The proportion of employed women was reduced drastically in the new

dispensation in favour of their male counterparts. The number of workers who had

almost overnight been rendered unskilled was also expected to increase. 50

The different initial levels of the economy and standard of living in both parts

of Germany have long-term implications for the social system of the unified

Germany. As the new federal states continue to develop economically and socially

viable programmes, poverty would depend not only on one's position in life but also

on existing resources. The living conditions of the entire region would be influenced

by a lack of individual provisions for the future, small savings, and capital. In

addition, income differentials between east and west would continue to exist for a

number of years while consumer goods, rents and services would cost nearly the same

49

50

Osmond, n. 1, pp. 86-7.

Gunnar Winkler, in Welsh and Hancock eds., n.9, pp.229-30.

103

m both parts of Germany. 51 Of late, the material standard of living in eastern

Germany has improved, in particular when measured in terms of consumption levels,

the availability of products, and unlimited travel opportunities. At the same time,

social insecurity and fear have increased, especially concerning employment and

employability. 52

51

52

Heinz Vortmann, Ibid, p. 232.

Winkler, Ibid., p.232.

104