GERMANY
East German crash paves way for austerity in West A LOOK AT the policies pursued by West Germany's rulers since they took over the East suggests an alarming conclusion: a massive attack on the rights and living standards of West German workers Is being planned. WINFRIED WOLF
One year after unity
ON OCTOBER 3 1990, less than a year after the massive demonstrations that led to the fall of the Berlin Wall, the German Democratic Republic (East
Germany) was absorbed into the Federal Republic of Germany (West Germany). The elections that followed in December were won by Helmut Kohl's ruling Christian Democrat Union with a slightly reduced share of the vote.
HIS is clear from a series of features: • The federal government and the West German firms and banks are subjecting the new regions in the East to an economic crash.
• At the same time they are accepting an accumulation of debt which, on the one hand, is leading to the ruin of the state's finances, and, on the other, being largely directed towards stimulating consumption, is not laying the basis for a subsequent "self-generating" upturn.
• This type of economic policy creates a climate in which the call for "severe austerity" rings loud. This demand will cut against the interests of the great majority of the population, and big cuts in earnings Will be used as a weapon to transfer the same policy to the West.
• Pinally, it would be reasonable from the point of view of the introduction of such a policy that there be a national coalition including the social democracy, at least for the initial period.
Entrepreneurs heading to
East
The entrepreneurs who have been heading East for the past twelve months, did not do this with the intention of actually undertaking anything. Their policy has been "buy up and wait"
This is above all true of the riff raff who were not embarrassed to appear in the Wild East in the form of vultures. Thus the Narva light bulb factory was taken over by a notorious speculator.
The same however is true of more respectable concerns. Thus Siemens has been seen as by far the biggest arrival in the East. Six firms with 12,440 employees were bought. Nonetheless, Siemens only added on 274 million marks in promised investments.
In September, the Süddeutsche Zeitung (September 3, 1991) published a list with this conclusion: "By the end of July the Treuhand took in 11.6 billion Deutschmarks for all the successful purchases of enterprises. This was accompanied by promises of DM67.8bn in investment."
Note well - these are only promises and the investments are to be spread out over five or more years.
Thus promised investments in the Wild East are less than in the ancestral West, taking into account the different sizes and situations of the regions. At the same time the Treuhandanstalt has been a splendid instrument for preventing a massive influx of foreign capital where it is not wanted.
The foreign press has several times reported how non-German interests have been hindered and left out of consideration. Of the some 3,000 enterprises bought from the Treuhand, a mere 115 have gone into the hands of foreigners, in almost all cases into the hands of small entrepreneurs.
The four larger concerns that have been taken over by foreign firms are Rüdersdorfer Zement GmbH (workforce of 3,200, new owner Britain's Readymix); the Olympia Baugesellschaft GmbH (workforce of 2,700, buyer, Société Générale d'Entreprise, France); Energiebau Dresden (workforce of 1,850, buyer ABB) and Industriemontagen Meserburg GmbH (workforce of 1,800, buyer, Pallas Invest SA, France).
State investments have largely gone into renovating or constructing the infrastructure — telecommunications, post, roads, rail and energy. Possibilities of nationalizing large firms in the ex-GDR with the aim of restructuring them have not been taken up.
One exception here is the half-state, half-private Konzer VW which, with the purchase of the Sachsenring car works in Zwickau, has become by far the biggest investor in the ex-GDR (promised investments DM4.2bn).
### Collapse of ex-GDR economy
The rather un-entrepreneurial behaviour of the entrepreneurs goes hand in hand with the collapse of the ex-GDR economy and the rise in unemployment. In 1990 industrial production dropped by 28%. The collapse had accelerated by the
Until now the political initiative in creating the new state has been in the hands of the West
German capitalist class, who have sought to impose their institutions and interests on the newly acquired region. This has not only meant the introduction of massive unemployment in the
East to discipline the workforce both in East and West, but also the systematic exclusion of any potential non-German or East
German economic competition.
At the same time movements of resistance to the onslaught - around issues such as abortion rights and unemployment - have wrung limited concessions from the West German bourgeoisie, while the economic costs of unification leave the country heading for a massive budget crisis. Now, as Winfried Wolf explains, the West German capitalist class is contemplating a massive attack on the rights and living standards of the West
German working class in a situation where, as is made clear in the interview with Dieter Reinken on p. 5, the West German labour movement has yet to come to grips with the problem of its own unification, faced with the widely differing problems of workers in the West and East. * end of 1990. In the fourth quarter, the drop over the year was officially estimated at 51%.
Thus, when people talk about a "stabilization" of the situation in the middle of 1991, they mean that the economy has come to rest at a level of real output of about a quarter that of 1988.
At the same time the official figures for unemployment in the former GDR rose to 1.1 million by August 1991 with 1.5 million people on short time.
According to the Federal Labour Insti-. 3 tute there were 1.5 million unemployed in
GERMANY the East at the turn of the year, the same number of workers on short time and some 500,000 enrolled in "employment associations" (training programmes). Together with the around iwo million unemployed in the West, this adds up to some five million people without a real job.
I will leave aside the whole issue of hidden unemployment — the official figures paint a horrifying enough picture. Only the Great Crash of the 1930s, and, from the point of view of social misery, the immediate post-war period, were worse.
The public is united on one point when they look at the state of the public finances: "It doesn't add up" (Der Spiegel, no. 37, 1991); "Who is going to pay? (Wirtschaftswoche no. 26, 1991); and "Can our marks hold out?" (Stern, No. 32, 1991). The course has been set towards accelerating indebtedness.
This was shown yet again at the time of the presentation of the proposed budget for 1992 at the start of September. The overall state deficit — which includes the hidden subsidies for the railways, posts, special payments and so on — is rising each year by about DM 200bn according to the SPD's figures. The payment of interest on the state debt had already gone over DM 100bn in 1991 and will grow to DM 200bn by 1995.
To draw a comparison: the Federal state will have an income of DM 425bn in 1992. The major part of the new debts arise from non-investment tasks; for example, in 1991 DM 100bn will go on interest repayments on the state debt, DM 93bn to finance unemployment, insofar as it comes within the purview of the federal budget and a further DM 60bn will go on sustaining the highest level of arms spending since the war.
Such policies must mean inflation. This was 0% in 1986, but had risen to 4.5% by mid-1991 in the West — it is higher in the East.
This inflation will be further accelerated on a governmental level - besides the tax rises announced this summer, there is already talk of a 16% rise in VAT.
### Huge anti-cyclical programme
At the moment, such a policy works like a huge Keynesian anti-cyclical programme, that is to say it prolongs the industrial cycle and makes full use of the capacity of at least the Western firms. This is taking place in an overall climate which the Wirtschafiswoche (no. 32/ 1991) has described thus: "everything points to the fact that we are standing directly in front of a recession". This means that a change in the situation in
Germany will first of all make the crisis in the East worse. 4 gor moment is pursing a sensible anti- It would seem therefore that the federal cyclical economic policy.
However this idea is contradicted by two things; firstly, the present rising pump priming by the state makes no medium-term economic sense. It has nothing in common with the cyclical theories put forward by the economist John Maynard Keynes against the background of the world economic crisis of 1929-32, which envisaged above all investment in, for example, construction, as the economic instrument.
Most of the money in the present case will go for unproductive ends. Under these conditions it is only a matter of time before the growing state debt and inflation put a drastic austerity policy on the agenda.
Secondly, the Federal bank has for a long time been pursuing policies which favour recession. Interest rates are high — they were raised in August and the discount rate renewed.
In pursuing this policy the Federal bank has been going in exactly the opposite direction to the rest of the West's central banks, which have been cutting interest rates, thus making it cheaper to borrow with the aim of counter-acting recession.
The bank's policies anticipate the coming austerity drive — on July 19 the Wirtschaftswoche wrote: "The Bundesbank must defy Bonn [the government]"; the article says "Now is the time for iron austerity".
The same note is also sounded wherever the wise burghers put their heads together. "Our only help now is to save" according to the Frankfurter Allgemeine Zeitung (FAZ) on September 4, 1991. Stern addressed its millions of readers in similarly drastic terms a few weeks ago: "FDP leader Graf Lambsdorff sees in a few months a 'volume of guarantees' of DM 390bn for which the state must be ready" (above all as a result of the abovementioned hidden debts and unforeseeable risks such as the disintegration of the USSR, which owes some 35 billion marks to German banks). And Stern goes on: "without a policy of iron austerity, nothing can be created."
Capitalists pursue class policy
It cannot be said that the capitalist class is hiding the fact that it will use the crisis to pursue a class policy. It can however be criticized for, as usual, concealing this fact in small print.
Thus the main headline in the FAZ's economic section on August 16, 1991 reads: "Business expresses understanding for the interest-rate rise." This means that an increase in the price of credit, something that is greeted with dismay by business people everywhere else in the world, is "welcomed" in Germany.
Indeed, the president of the employers' association, Murmann, praised the Bundesbank for its policy. On June 23, 1991,
International Viewpoint #215 • October 28, 1991 the Süddeutsche Zeitung reported: "Murmann on higher interest rates: 'We must keep them high!''. A predecessor of Murmann's, Sohl, spoke in the same vein when the Bundesbank set a similar course towards recession in 1965.
All the papers are agreed that "stability" is now more important than growth. This, however, means that they are not bothered about the already profound recession in the East.
The previously quoted editorial from Wirtschaftswoche has already formulated the matter clearly: "If capacities in the West are not at full stretch then readiness to invest in the East will also suffer."
In the long term it seems hard to imagine that Germany can remain economically divided in the way it is at the moment — with growth in the West (accompanied by 1.7 million unemployed, now considered as a "norm"and a sociopolitical non-entity) while in the East there is a massive and worsening crisis.
In what way this crisis will affect the rest of Germany, what role will be played by the growing number of East-West commuters and the increasing levels of illegal and part time working, at what point the tendency towards wage unification strikes the West, remain unknown.
Explosive social situation apparent
The explosive social situation in which we find ourselves is already becoming apparent. And it is also already apparent where the government and the capitalists want to get to through a change in the relationship of forces.
According to the FAZ: "a spiral is underway; given the loss of purchasing power and the higher taxes, the unions will respond with higher demands in the next wage round."
This spiral must be stopped: "The only help now will be iron austerity. Every contribution to international relief actions must be paid for in cuts and savings" (September 3, 1991).
This is nicely put — German military involvement in the Yugoslav war implies a war on the domestic front against wage earners and the unions.
This is spelt out in the new domestic budget for 1992 — cuts in wealth tax and trade tax counter-balance the rise in VAT. According to Economy Minister Möllemann there must be big reductions in social spending and the elimination of subsidies be proceeded with.
Then the campaign against "shirkers" and the elimination of "resting days" which has been kept on the boil for months will be unleashed on a broad scale. *
ROM the beginning of 1991 you were in East Germany as an official of the IG-Metall trade union. What were your impressions of the development of the union in terms of its membership base and its structures?
There was a very large influx of members. By May we had about 22,000 members in Rostock and the surrounding district. This is less than the old East German IG-Metall, but is nonetheless a good level of organization. The members are mainly in the big plants such as NeptunWerft, Warno-Werft, Schiffelektronik, Dieselmotorenwerke. Here we have so to speak taken over most of our members from the old East German union.
The origin of the officials is a more complicated matter. Since the changes there has been something of a revival of trade union activity in most of the big plants in Rostock. There had been attempts at change in the framework of the Northern Region of the IG-MetallDDR.
In February 1990 it split from the centre and founded its own regional centre from which developed a series of initiatives in the plants. New elections for representatives and leading instances were held to establish new structures and put new people into the leading positions. It is these circles that are mainly responsible for forming workers' councils in the big plants.!
These people were not wholly inexperienced. However they were ill-prepared for dealing with Federal German enterprise law and the new daily reality — like, for example, West German managerial methods which were now being energetically applied.
This began with apparently small problems. Already in the summer of 1990 there was propaganda flying around, largely instigated by Western enterprise advisers, concerning the reduction of the costs of production. Individual departments were hived off if they were not considered necessary for that particular plant. They were then handed over to foreign and Western firms and to some extent sold to groups of employees as private property. This, naturally, called into question a whole series of social benefits. Canteens were closed almost at once and cleaning staff fired.
Then there was the question of how to work out the rules for short time working — unemployment still being illegal at that time. Then there were questions which come under the heading of organization, such as the organization of payment of wages, and issues relating to the confidentiality of personal data.
These are all issues that we in the West had had years to grapple with, while these people had to get to grips with them in a few months, apart from dealing with the destruction of entire sites, the sacking of