The economic wall - economic comparisons between West and East Germany - column

National Review, Dec 22, 1989 by Ed Rubenstein

INTERNATIONAL economic comparisons are always tricky, especially when planned economies are compared with capitalist ones.

The per-capita GNP figure, for example, shows only a 14.3 per cent advantage for West Germany. The actual gap in living standards is many times larger, since East German central planners channel the bulk of GNP into heavy industry, chemicals, and other exports, while giving short shrift to consumer products.

The East German economy is now believed to be in far worse shape than portrayed above. The recently departed finance minister, for example, disclosed a hitherto unacknowledged budget deficit of about $70 billion-roughly one-third of GNP. Industrial productivity, always a problem, has reportedly sunk by almost 50 per cent over the past nine years. Despite frequent attempts to "rationalize" production, East German factories still use two and a half times as much coal and twice as much steel per unit of output as their West German counterparts.

Inflation, theoretically impossible in a centrally planned economy, is now acknowledged to be well into double digits, although the exact figure is unknown. Debt owed to Western creditors totals $20 billion, putting East Germany in about the same position as Poland and Hungary on a per-capita basis.

Still, East Germany is far and away the economic class act of Eastern Europe. Its per-capita income in 1988 was estimated by the CIA to be 2.3 times that of Rumania, 1.7 times that of Poland, and 1.4 times that of Hungary. East German exports exceed those of Poland, a country nearly three times as populous. It is the only Eastern Bloc nation to export significant amounts to the West.

That this (relative) success occurred without an real attempt at perestroika is a tribute to the efficiency of the East German worker. Indeed, despite losing perhaps 100,000 skilled workers over the past few months, the East German labor force remains a big potential draw for Western businesses seeking investment opportunities. There are, according to the CIA, 8.9 million workers in the population. By comparison, West Germany's labor force is put at 28.1 million, or 46 per cent of the population.

Unify East and West Germany and you would have a nation with 78 million people, more than 660,000 of them under arms, and a GNP (assuming that the East Germans are brought up to West German levels) of $1.2 trillion, about two-thirds that of Japan.