NATIONAL INCOME AND EXPENDITURES OF EAST GERMANY 1951-60

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01141A002800130001-5
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 49
• Document Creation Date: December 23, 2016
• Document Release Date: August 14, 2013
• Sequence Number: 1
• Publication Date: October 1, 1963
• Content Type: REPORT

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Economic Intelligence Report
N? 3
NATIONAL INCOME AND EXPENDITURES
OF EAST GERMANY
1951-60
CIA/RR ER 63-34
October 1963
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
GROUP I
Excluded from automatic
downgrading and
declassification
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CONFIDENTIAL
Economic Intelligence Report
NATIONAL INCOME AND EXPENDITURES
OF EAST GERMANY
1951-60
CIA/RR ER 63-34
WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
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CONTENTS CONTENTS
Page
Summary and Conclusions . .? ? ? ? ? ? . ?
?
?
?
?
..
...
1
1. Introduction
7
2. Private Income and Expenditures
?
?
?
.?
?
8
a. Households
8
b. Nonprofit Organizations . ? ?
17
3. Public Services and Administration,
1.9
a. Public Services
20
b. Administration
22
4. Military Expenditures . ?..? ? .
?
.
.
?
.
.
3
5. Investment . ....... .
?
?
?
?
?
.
?
28
6. Foreign Accounts. . . . ....
?
.
?
??
?
,
.
30
a.
Appendixes
Appendix A? Statistical Tables . . . .
.
.
......
35
50X1
Tables
1.
2.
East Germany:
East Germany:.
Summary of National Income, 1951-60 .
Summary of Gross National Expenditures,
2
1951-60
3
3.
East Germany:
Personal Incame1,1951-60 . . .. ..
4.
East Germany:
Personal Expenditures and Savings,
1951-60
? ? ?
11
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Page
East Germany: Operating Expenditures of Nonprofit
,Organizations, 1951-60 18
6. East Germany: Operating Expenditures of Public
Services, 1951-60 21
7. East Germany: Operating Expenditures of State Admin-
istration, Including Police Forces, 1951-60 24
8. East Germany: Military Expenditures 1951-60 26
9. East Germany: Investment, 1951-60 29
10. East Germany: Foreign Balance in National Expendi I.
-
tures, 1951-60 31
Ll. East Germany: Gross National Product, 1951-60 . .
12. East Germany: Gross National Expenditures, 1951-60 .
13. East Germany: National Income, 1951-60 . ..... .
14. West Germany: Data on National Accounts 1951-60 . . .
36
37
43
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NATIONAL INCOME AND EXPENDITURES OF EAST GERMANY*
1951-60
Summary and Conclusions
A set of national accounts for East Germany in 1951-60 brings out
much that the Communist regime has tried to obscure -- the extent of
Soviet exploitation, the scale of military expenditures, and the cost
of the police forces and of the state and Communist Party apparatus.
It also puts into perspective the development of investment policy and
decisions affecting the welfare of the population in recent years.
The accounts that are most important for discussing these matters are
those for national income and gross national expenditures, which are
summarized in Tables 1 and 2.** The statistical tables in this report
present data in current prices only, but the discussion in the text
considers the significance of price changes during the period.
East German personal incomes and expenditures (in current East
German marks***) about doubled in 1951-60. Average personal incomes
in East Germany (in East German marks) were about the same as those in
West Germany (in West German marks) throughout the period, and nominal
expenditures per capita were actually somewhat greater in East Germany.
To be sure, prices were much higher in East Germany, and per capita
consumption, in real terms, never was more than three-fourths of West
German consumption, but the nominal parity in earnings was psycho-
logically important to the East German workers, and the regime made 4
'point of trying to maintain it.
The pull of West Germany also is an important cause of the rapid
growth in the supply of consumer goods and services in East Germany.
During the belated East German recovery of the early 1950's, prices de-
clined and real consumption rose even more rapidly than personal incomes.
After 1955, prices rose, and consumption did not keep pace with personal
incomes. The rise in prices -- about 2 percent per year in 1955-60 --
was not in itself especially serious, but the effect was aggravated by
the discontinuance of food rationing in May 1958. The establishment
* The estimates and conclusions in this report represent the best
judgment of this Office as of 1 September 1963.
XX Tables 1 and 2 follow on pp. 2 and 3, respectively. ,
*** ,The currency unit in both East and West Germany is called the
German mark (Deutschemark, or DM). An indication of the internal
purchasing power of the East German mark (DME) is given on p. 8,
below.
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Table 1
East Gertany:
Summary of National Income a/
1951-60
Billion Current DME
Compensation of employees b/
Earnings of the self-employed and house-
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
20.1
23.0
25.7
28.6
29.3
30.6
32.2
34.6
37.6
39.8
hold incomes from property c/
9.7
10.5
11.0
12.3
13.0
12.5
14.2
16.2
17.0
17.8
Savings of enterprises, taxes paid by
enterprises, and state incomes from
economic activities
13.8
14.5
16.3
16.7
18.0
18.8
20.9
21.4
24.5
26.1
Discrepancy d/
-0.1
0.9
-0.8
-0.8
0.7
1.4
-0.1
1.5
, 0.5
-0.7
National income e/
43.5
48.9
52.2
56.8
61.0
63.3
67.1
737
79.6
83.1
Depreciation
2.0
2.3
2.6
2.8
3.0
3.2
3.5
3.8
4.1
4.5
Gross national product
45.4
51.2
54.8
59.6
64.o
66.5
70.7
77.5
83.7
87.6
a. Because of rounding, components may not add to the totals shown.
-b. Including wages and salaries; bonuses and allowances, except for business trips; sick pay out of enter-
prise funds; the cost of rations furnished to troops; and the subsidy to factory cafeterias.
c. Including earnings of members of producer cooperatives, agricultural incomes in kind, imputed rent (net
of owner-occupied housing, rebates of consumer cooperatives, and interest on savings deposits.
d. In part the discrepancies are offsetting because the estimates for savings of enterprises and the like
are based on budget data which include adjustments for the previous year and do not reflect a final adjust-
ment for the current year.
e. Including indirect taxes. Therefore, "national income" in this table is equivalent to "net national
product" in US national accounting terminology. The economic significance of direct taxes compared with
indirect taxes under a Communist regime is a complicated issue, but in any case separating out indirect
taxes in East Germany for all years has not proved feasible.
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Table 2,
East Germany: Summary of Gross National Expenditures a/,
.195i-60
Billion Current DME
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
Private expenditures
29.1
32.5
35.3
38.4
40.3
41.2
44.1
48.2
52.3
55.1
Households
28.3
31.8
34.6
37.5
39.4
40.2
43.1
47.1
51.2
53.9
Nonprofit organizations
0.8
0.7
0.7
0.9
0.9
1.0
1.0
1.1
1.1
1.2
State expenditures
6.7
7.5
8.5
9.6
10.2
10.3
10.8
11.4
12.2
12.6
Public services
2.9
3.5
3.9
4.5
5.0
5.3
5.7
6.1
6.5
7.0
Administration b/
2.7
2.7
2.6
2.7
2.7
2.6
2.6
2.6
2.7
2.7
Defense c/
1.1
1.3
2.0
2.4
2.5
2.4
2.5
2.7
3.0
2.9
Investment d/
5.2
6.4
7.9
6.8
9.0
11.5
13.2
16.8
18.0
18.4
Foreign balance e/
4.2
4.7
3.0
4.8
4.4
3.4
2.3
0.9
1.1
1.4
Discrepancy
0.3
0.1
Negl.
Negl.
0.1
0.1
0.3
0.1
0.1
Negl.
Gross national expenditures
45.4
51.2
54.8
59.6
64.0
66.5
70.7
77.5
83.7
87.6
a. Because of rounding, components may not add to the totals shown.
b. Including police forces.
c. Including investment in military facilities for East German use but not in Soviet installations
(shown in the foreign balance). -
d. Excluding military invesLments.
e. Reflecting, in addition to a nominal export -surplus, East German deliveries to the USSR and the
Soviet forces in East Germany arising out of reparationsdemands and the Soviet occupation.
3
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of a single-price system, in place of the double-price system that had
existed under rationing, much reduced the prices at which consumers
could buy additional amounts of meat and dairy products. Thereafter,
demand for these products grew faster than supplies. In 1960, East
Germany was forced to reintroduce rationing under the guise.of
"customers' lists" -- registration of families with retail outlets,
which are supplied with rationed foods in accordance with the numbers
of people registered. This irritating, inefficient method of allocat-
ing meat and dairy products is a continual reminder of the regime's
miscalculation in ending food rationing, one of its worst mistakes to
date. 4
The discussion of the changing composition of the gross national
expenditures of East Germany -- that is, gross national product (GNP)
by end use -- is a major part of this report, and the percentage shares
going to consumption, investment, government, and the foreign balance
are presented in the accompanying chart:
El Consumption
64.0 63.6
12a
Investment pi Government 1-1 Foreign*
Totals may not add because of rounding
64.5 64.5
7'47,0
63.1
62.0
62.4 62.2
62.5 62.9
9.9 9.2
5.6
8.0
3.7 _
'
1951 1952 1953
38121 7-63
1954 1955. 1956 1957 1958 1959 1960
* Including the small statistical discrepancy
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Somewhat surprisingly the East German accounts show that the regime
was able to prevent increases in the expenditures of the state and
Communist Party apparatus. These expenditures were held down by means
of large cuts in employment, which was a considerable accomplishment,
although it would not have been necessary if the state and Party
apparatus had not been big to begin with. Expenditures for police
forces, including semimilitarized police units, were an exception --
they were substantially increased in the early 1950's and again in
the late 1950's.
State expenditures for welfare rose greatly throughout the 1950's.
Pensions and sickness benefits, mainly financed by social insurance
taxes, more than doubled from 1951 to'1960, the rise being especially
rapid in 1957-59, although they remained much below benefits in West
Germany, even in nominalterms. Outlays for health and education rose
'still faster and are comparable with outlays in West Germany. After
allowing for price and wage increases, there was a substantial growth
of inputs into these services during the decade. The benefits to the
population, however, were questionable. In part, the increase reflected
simply the extension of state control, as in the provision of medical
services. A considerable portion of the real increase in services, as
reflected, for example, in the growth of the universities, was used for
narrowly political and technical ends, "a development tending to alienate
those that benefited.
East German Military expenditures were influenced by the open
Berlin border,.the unpopularity of the Communist regime, and the general
distaste for military service. The regime had to offer strong incen-
tives in order to recruit soldiers. The difficulty of getting re-
cruits and the high cost of paying and maintaining military forces
without conscription tended to limit the size- of the forces -- a limi-
tation that actually may have made for a more effective establishment.
The amount spent for military forces during the period was not
excessive in relation to GNP. In 1952, East German military expen-
ditures may well have risen to 5 percent of GNP, if the initial cost
of equipping the East German armed forces with Sovict weapons is in-
cluded (it is not in the present accounts). For later years, however,
the East German military establishment proper (through 1955 the so-
called Garrisoned People's Police) spent only 3 to 4 percent of GNP to
cover most of the outlays usually included in military budgets. Mili-
tary pensions and research are not included, but East Germany has spent
very little on these items. The inclusion of semimilitarized forces
would raise the share by not more than 1 percent of GNP. On any basis
the share of military expenditures would not be high in relation to
levels in either Eastern or Western Europe. Until the late 1950's,
however, the military expenditures of East Germany were much greater
relative to GNP than the comparable expenditures of West Germany, which
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until 1955 maintained only small semimilitarized units in place of an
army.
The share of expenditures devoted to investment was also low when
compared with the share allocated by other Communist countries or by
West Germany and by no means high in relation to the average for
Western Europe. The share of investment fluctuated between 11 and
14 percent of GNP through 1955, and even the jump made thereafter, as
a result of the easing of Soviet exploitation; brought the share to
only 21 percent at the end of the period. An analysis of GNP in com-
parable Prices for the late 1950's would show that East Germany still
was devoting a smaller share of GNP to investment than West Germany,
and a much smaller share than was devoted to investment by several of
the other European Satellites.
There are two major reasons why East Germany allocated such a
small share of GNP to investment until the late 1950's. First, pro-
duction still could be increased in many branches without additional
investment. Second, output could scarcely take care of the urgent
needs of the population and Soviet demands for the payment of repara-
tions and occupation costs. In addition, the figures for the early ,
1950s do not include investment in enterprises under Soviet ownership,
Including the uranium mines. Investments in those enterprises were
made largely by the Soviet occupation authorities, out of funds budgeted
under reparations and occupation costs. It is likely that East Germany
has since repaid the USSR for such investments.
The extent of Soviet exploitation is hard to determine, but even
the East Germans have come to acknowledge that the Soviet drain on the
economy was one cause of the lag in East German recovery from World
War II. Soviet exploitation mainly accounts for the large export
balance shown in East German national expenditures through 1955.
Similarly the temporary drop in the export balance in 1953 and the
steady decline after 1956 chiefly reflect a decline in Soviet exploita-
tion.' The share of the export balance in the gross national expendi-
tures of East Germany, which was about 9 percent in 1951, dropped to
only 1, to 2 percent in the late 1950's.
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1. Introduction
The economic statistics published by East Germany, though volumi-
nous, are among the least satisfactory in the Soviet Bloc. The East
German regime has withheld almost all evidence relating to the Soviet
role in the East German economy and to East German defense expenditures.
Other gaps in published statistics have discouraged critical study of
fiscal policy, economic growth, and living conditions.
It is possible, however, to fill these gaps and reconstruct the
East German national accounts in some detail, and with some confidence
in the results. The present report is based on such a set of accounts,
recast in Western terms according to the system of the Organization for
European Economic Cooperation (OEEC), 1/* consisting of national in-
come and expenditures in current prices for 1951-60. These accounts
are summarized in Tables 1 and 2.**
The accounts shown in the present report have not been deflated
to real terms. Such a deflation was attempted in an earlier report on
the postwar economic recovery of East Germany -- a comparison of real
trends in output and end uses with those in West Germany. 2./ In that
report, simplified accounts were used, showing only summary data for
selected years (1936, 1950, 1955, and 1957), converted into constant
(1936) prices. The accounts used in the present report, which form a
more complete and, in some respects, a much more detailed series, per-
mit a fuller treatment of important topics in the fields of personal
and public consumption. The need to compete with West Germany for
labor -- a theme already brought out in the earlier report in measur-
ing the real growth of consumption -- is illustrated by the growth of
personal incomes and expenditures; and the key changes in policy dur-
ing the period are examined. The whole field of public consumption in
East Germany is analyzed in detail for the first time. Separate con-
sideration is given to the expenditures of the churches; the Socialist
Unity Party (SED); the East German Communist Party; the state health
organization; public schools and universities; civil administration;
police forces; and the military establishment. Also discussed, though
at less length, are the new data presented on investments and the
foreign balance, which cannot be more fully exploited without going
beyond the scope of the present report.
** Pp. 2 and 3, above, respectively. More detailed tables are shown
in Appendix A, together with remarks on the general scope of the ac-
counts.
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50X1
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A few general comparisons with data for West Germany are the only
international comparisons introduced in this report, and they rest
mainly on the estimates made in the earlier report mentioned above,
comparing real changes in output and end uses in East and West Germany.
The present estimates of East German GNP by end use in 1955 may be'con-
verted into US dollars by means of the following ratios, each repre-
senting an approximation of the geometric mean of the ratios that would
be obtained by using the methods of Milton Gilbert V:
,Conversion Ratio
for 1955 DME
into 1955 US $
Private consumption, including
state expenditures on health
and education 0.23
Public consumption, including
research and development but
excluding state expenditures
on health and education - 0.37
Investment, excluding research
and development 0.23
Foreign balance 0.17
GNP 0.24
2. Private Income and Expenditures
Under the general headingof private expenditures are ranged the
expenditures of both households and nonprofit organizations, accord-
ing to the usual practice in Western accounts systems. In this study
of a Communist economy, it might perhaps, be more suitable to group
nonprofit organizations -- churches, labor unions, political parties,
and the like -- with welfare and administration under the general
heading of public consumption, but the Western convention is followed.
a. Households
The development of East German personal incomes and expendi-
tures in 1951-60 is shown in two accompanying tables. Personal in- ?
comes, shown in Table 3,* include both cash incomes and incomes in ,
kind, broken down into four main categories. Under the first is com-
pensation to employees, which covers wages and salaries, bonuses and
allowances, and payments inkind, consisting of the cost of rations
* Table 3 follows on p. 9.
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Table 3
East Germany: Personal Income
1951-60
Billion Current DME
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
Compensation of employees a/
20.05
23.00
25.71
28.61
29.30
30.65
32.22
34.59
37.60
39.84
Earnings of the self-employed b/
8.74
9.58
10.05
11.38
12.10
11.54
13.17
15.14
15.90
16.63
Household incomes from property c/
0.98
0.96
0.96
0.92
0.92
0.93
0.98
1.05
1.14
1.21
Transfers
Social insurance d/
Pensions
2.50
2.70
2.87
2.99
3.04
3.18
4.13
4.38
4.86
5.13
Sick pay 2/
0.46
0.65
0.55
o.68
0.72
0.72
0.82
0.84
0.93
1.06
Budget
Pensions
0.32
0.32
0.32
0.31
0.28 ,
0.26
0.29
0.26
0.25
0.24
Scholarships
0.13
0.19
0.26
0.28
0.30
0.31
0.32
0.32
0.32
0.34
Welfare f/
0.34
0.37
0.32
0.30
0.41
0.43
0.61
1.18
1.74
1.82
.Other g/
0.10
0.20
0.10
0.10 -
0.10
0.10
0.10
0.20
0.30
0.30
Total personal income
33.62 37.97 41.14 45.57 47.17 48.12 52.64 57.96 63.04 66.57
a. Including wages and salaries, all other payments by employers (except for business trips), and allowances in kind.
b. Including members of producer cooperatives.
c. Rents, which include imputed rents of owner-occupied housing, less expenses and taxes. This category also includes rebates from consumer
cooperatives and interest on savings deposits.
d. Excluding any incomes in kind. Some small payments from social insurance funds (Pflegegelder) are included in the category Welfare.
e. Excluding the supplementary sick pay by enterprises.
f. Including unemployment relief, maternity and dependent allowances, cash payments from unions and other nonprofit organizations, and. special
pensions to intellectuals.
g. Payments from savings accounts blocked in 1948.
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furnished to military personnel and subsidies to factory cafeterias.
In the second category are earnings of self-employed professional
workers, members of producer cooperatives, independent peasants, and
small businessmen, together with the value of farm consumption in kind
(imputed at average prices received by peasants)._* In the third cate-
gory are household incomes from property, of which the most important
are from housing rentals. Housing is treated in the present accounts
as an economic sector, and the personal incomes entered in Table 3
represent gross rentals (including the imputed rental value of owner-
occupied housing), less costs and depreciation.** The other incomes
from property are cash rebates from consumer cooperatives and interest
on savings deposits. In the fourth category are transfers to house-
holds from other sectors, which come almost entirely from social in-
surance and other state budget accounts -- pensions, the social
insurance contribution to sick pay, welfare benefits, and scholar-
ships. Transfers in kind -- such as medical treatment, hospital care,
and medicines furnished under social insurance -- are treated not as
private consumption but rather as state expenditures.
Personal expenditures, shown in Table 4,*** similarly include
both cash expenditures and consumption in kind. Expenditures on goods
and services, broken down by major categories, thus include not only
purchases by households but also military rations, that part of the
value of meals in factory cafeterias not paid for, agricultural produce
consumed on the farm, and imputed rents (gross) of owner-occupied dwell-
ings. The other main categories cover social insurance payments from
wages and salaries and by the self-employed; wage taxes, income taxes,
and other direct taxes; and dues and contributions to unions, churches,
and other organizations. Also shown are savings (net savings deposits
and increases in cash holdings).
Detailed analysis of the household accounts is outside the
scope of the present report. The most interesting approach, moreover
a comparison with West Germany -- is not yet practicable, for the
parallel West German accounts still remain unpublished except for
aggregate figures. 4/ It is safe to say, however, that when they
finally are published they will show striking correspondences with the
present accounts for East Germany. The similarity is indicated by the
* Total farm consumption in kind is entered under incomes of the
self-employed, although a part should properly be entered under com-
pensation of employees as a payment in kind to agricultural laborers.
XX Depreciation imputed for private housing, handicrafts enterprises,
and private agriculture is entered as a capital transfer to households
in the basic accounts, but not in Table 3.
xxx Table 4 follows on p. 11.
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Table 4
East Germany: Personal Expenditures and Savings
1951-60
Billion Current DME
Total personal expenditures
Goods
Food and beverages a/
Clothing and shoes
Other
Services
1951
33.51
1952
1953
1954
1955
1956
1957
1958
1959
1960
37.39
40.51
43.68
45.96
46.52
50.21
54.71
59.14
62.31
15.49
3.02
4.35
17.81
3.72
4.64
19.37
4.28
5.18 _
21.02
4.93
5.4o
22.10
5.21
5.88
22.38
4.83
p6.65
23.77
5.21
7.49
26.20
6.10
8.38
28.51
6.71
9.48
29.32
7.34
10.67
Rent a/
2.10
2.12
2.13
2.12
2.13
2.13
2.13
2.15
2.18
2.22
Utilities
0.39
0.41
0.42
0.45
0.46
0.50
0.49
0.53
0.56
0.59
Transportation
1.11
1.20
1.28
1.44
1.50
1.49
1.55
1.48
1.55
1.60
Other
1.84
1.93
1.97
2.18
2.16
2.21
2.43
2.28
2.25
2.21
Social insurance b/
2.48
2.47
2.73
2.86
2.88
3.13
3.34
3.16
3.31
3.44
Wage taxes c/
1.33 _
1.45
1.59
1.27
1.32
1.47
1.61
1.69
2.00
2.33
Other direct taxes 2/
0.85
1.04
0.86
1.06
1.32
1.03
1.09
1.39
1.19
1.09
Dues and contributions e/
0.50
0.55
o.6o
0.65
0.70
0.70
0.80
0.85
0.90
0.95
Other expenditures I/
0.05
0.05
0.10
0.30
0.30
0
0.30
0.50
0.50
0.55
Savings e
0.18
0.64
0.78
1.97
1.12
1.65
2.22
2.96
3.90
4.10
Discrepancy
-0.07
-0.06
-0.15
-0.08
2.09
-0.05
0.21
0.29
0
0.16
Total personal expenditures and savings
33.62
37.97
41.14
45.57
47.17
48.12
52.64
57.96
_
63.04
66.57
. Including consumption in kind.
b. Withholding from pay and remittances by the self-employed (the latter to the commercial ingurance organization after 1955).
c. Including taxes on incomes of certain self-employed professionals (doctors and engineers among them).
d. Chiefly taxes on incomes of "capitalists," together with miscellaneous municipal taxes.
e. To labor unions, the Socialist Unity Party (SED), churches; and other nonprofit organizations.
f. Chiefly net expenditures on lotteries and net repayment of consumer credit.
g. Including changes in savings deposits, cash reserves of insurance policies, and cash holdings.
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following comparison of per capita incomes from wages, salaries, and
other economic activities in East and West Germany in-East German and
West German marks, respectively*:
East Germany
West Germany
1955 1959
2,369 3,174
2,391 3,144
Differences will be found on examining the structure of house-
hold accounts, especially the composition of expenditures. During the
19501s average household expenditures for goods and service were
actually somewhat greater in East than in West Germany',** but .in real
terms, East German consumption never came to more than three-quarters
of the West German level. Accordingly, East German families spent more
in nioney terms than West German families on food and beverages -- about
one-quarter more -- in order to buy about five-sixths as much in real
terms in the late 1950's. On the other hand, they spent less- on rent
and utilities, which are cheap even after making allowance for the
markedly lower housing standards of East Germany. Otherwise, the dif-
ferences in the composition of expenditures were small, as indicated
by household budgets, although in ?very case there were real differences
in consumption, not only in the quantities of goods and services con-
sumed but also in quality and assortment. The following comparison of
monthly expenditures on goods and services of families of employees in
1959 is representative of the nominal similarities and differences in
East and West Germany in East and West German marks, respectively***:
* Incomes before taxes, excluding employer's contributions to social
insurance.
** Per capita disposable incomes including pensions and other transfers
are slightly higher in West than in East Germany, but personal savings
are substantially higher in West Germany thanin East Germany.
*** Middle-income families with two adults and two children. Data are
taken from the East and West German statistical yearbooks. 5/
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Monthly Expenditures
East German
Family
West German
Family
Food
288
229
Beverages and tobacco
58
39
Rent
34
59
Heat and light
17
27
Household goods
56
49
Clothing
87
' 79
Household and personal services
22
28
Education and entertainment
47
43
Transport and communications*
19
21
Total
628
575
The nominal parity in incomes between East and West Germany is
not a coincidence. It.was to the interest of the East German regime to
allow nominal wages to rise with West German wages, for it meant some-
thing to East German workers that they were earning about as much in
East marks as they might earn in West marks across the border. The
nominal equality mattered even though they realized that the East mark
bought much less than the West mark, During the 1950's the middle-
income consumer in East Germany on the whole paid at least 50 percent
more for what he bought than he would have had to pay for more or less
the same goods and services in West Germany. In spite of such a dif-
ference, the regime has continued to be concerned with nominal equality
in dealing with wages, pensions, tax rates, and the like, although the
problem is less pressing now than it was when dissatisfied workers could
leave for West Germany at any time.
Under the influence of the open border, personal incomes and
expenditures in East Germany rose by almost 100 percent from 1951 to
1960, as shown in Tables 3 and 4,** and by more than 100 percent on a
per capita basis.*** From 1951 through 1954 the very rapid rise charac-
teristic of the earlier recovery period continued. In 1955-56 the rise
was slower. In 1957-59, however, in a final spurt of recovery, personal
incomes and expenditures again rose rapidly. Eventually, in 1960 the
rates of increase began to decline again -- a decline that was to be
continued in 1961-62.
* Including cost of privately owned vehicles.
** Pp. 9 and 11, respectively, above.
*** During 1951-60 the population of East Germany was slowly declin-
ing from an annual average of 18.4 million in 1951 to one of 17.2 mil-
lion in mid-1960.
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Until 1955 the regime readily allowed rapid increases both in
wages and salaries and in the earnings of the self-employed, including
peasants, so as to stimulate production and minimize losses of workers
to West Germany. Nominal wages kept pace with West German wages, and
the nominal incomes of the self-employed approached or exceeded West
German levels. At the same time, the growth of output was still large
enough to allow real consumption to rise even more rapidly than per-
sonal income, while prices declined.
Even though the regime gave priority to raising incomes and
increasing consumption, it failed to halt the loss of population to
West Germany. Judging from the number of refugees, improvements in
living conditions were more than offset in the eyes of the population
by the continued encroachment of the state on the rights of individuals
and the intrusion of the Communist Party into business and private life.
Improvements in living conditions doubtless had some effect on attitudes
and behavior,* but the number of refugees nevertheless continued to rise
along with incomes and expenditures Until the end of 1957, when the
regime finally gave up and passed a law forbidding "flight from the
republic.'"
The one important departure from this trend was the decline
in the number of refugees as a result of the "new course" adopted in
mid-1953 after the civil disturbances. And this exception seems to
prove the rule, for though the regime made some economic concessions,
the main reason for the decline in the number leaving for West Germany
probably was the momentary rise of hope that the Communists intended to
relax pressures of all kinds. The "new course" did have an immediate
effect on the growth of personal incomes, as a result of such conces-
sions as a reduction in wage taxes and a cut in compulsory deliveries
for peasants.xx But it was more the tone of Communist pronouncements
after the death of Stalin than specific concessions that apparently
affected the flow of East German refugees.
* There is a negative correlation of 0.54 between annual increments
in net personal incomes in 1951-57 and the annual changes in the'num-
ber of refugees, although there is a positive correlation of 0.81 be-
tween total incomes and the total number of refugees.
** Disposable incomes, which had shown more than an average seasonal
decline in the first quarter of 1953 and less than an average rise in
the second quarter, increased in both the third and the fourth quarters
at double the average seasonal rates. The main result was that savings
deposits failed to grow or even dropped slightly in the first half
year -- a thing that has not happened since -- and rose rapidly in the
second half year. There was no unusual change in cash holdings of the
population, and consumer expenditures did not vary from the usual
season pattern, which is quite stable.
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In the mid-1950's, when the leadership felt that economic re-
covery was sufficiently advanced, the regime undertook a series of
measures to improve the lot of certain groups, especially pensioners,
that had shared least in the improvement of living conditions and to
control or reduce incomes of other groups -- chiefly the self-employed --
that had benefited the most. From 1956 to 1960 the amount of pensions,
sick pay, maternity benefits, and the like increased by about three-
fourths, compared with an increase of about one-third from 1951 to 1956,
as shown in Table 3.* The increases were especially large in 1957
(26 percent) and 1959 (16 percent). As a result, the nominal cash
benefits to East Germans rose substantially in relation to the West
German level. Even so, the per capita benefits in 1960 still were
almost 30 percent less than those in West Germany, and the difference
was somewhat greater in real terms, although low income groups such
as pensioners have benefited most from the low rents in East Germany
and the cheapness of services and staple foods. Various adjustments
also were made in the wage structure in favor of the worst paid groups.
Special allowances for dependents were added in 1958-59, bringing
bonuses and allowances by 1960 to more than double those paid in 1956
or 1957.
In principle, the regime also favored measures to limit further
increases in the purchasing power of higher income groups, but in prac-
tice took such measures only against the self-employed, who were gen-
erally better off than wage earners and salaried employees with the
same qualifications. In 1956 the extremely low rates of social in-
surance payments by independent peasants and self-employed artisans were
raised to rates well above those for wage earners and salaried em-
ployees.** In 1957 the tax rebates granted earlier (in 195)-) to
"capitalists" for purposes of investment were discontinued. In 1958
the income tax rates for self-employed professional workers were
sharply raised, and new regulations for handicrafts enterprises also ,
increased the tax payments for' self-employed artisans. Although these
changes were felt by some people (especially by self-employed profes-
sional men), the amounts involved were small in relation to the in-
crease in welfare payments, let alone the total rise in personal in-
comes.
Other state policies also
self-employed. The state "bought
beginning in the late 1950's, and
salaried functionaries, generally
operated to limit the incomes of the
into" many small industrial concerns
the proprietors became in effect
with reduced incomes. This change,
* P. 9, above.
** These payments, and those of self-employed professional men, which
-also were raised, still do not cover the costs of social insurance, be-
cause there is no matching employers' contribution.
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however, had only a small effect on over-all incomes. A direct effort
was made to reduce incomes of artisans, both by more serious efforts
to enforce price controls and by pushing for the ,socialization of
handicrafts, but again with only limited effect. The one important
success of the regime in controlling incomes from private enterprise
was in agriculture, in which output rose more rapidly while incomes
rose less rapidly than in the early 1950's.
? East Germany controlled agricultural incomes through the
manipulation of prices paid to peasants. Obligatory deliveries re-
mained at the 1953 level throughout the 1950's, and the state con-
tinued to offer much higher prices for additional deliveries than for
obligatory deliveries. But in order to limit the increases in incomes
resulting from a given rise in market production, the state began in
1956 to reduce the differential between obligatory delivery prices and
incentive prices, raising the former and reducing the latter.* It
appeared safe to reduce incentive prices somewhat, for with the improve-
ment of food supplies, together with selected consumer price cuts, the
free market price for sales by peasants direct to consumers was falling
below the level of the incentive price offered by the state. The
regime recognized, of course, not only the danger of reducing total
agricultural incomes but also the importance of maintaining a consider-
able price differential between quota prices and above-quota prices.
Peasant incomes still were permitted to rise more rapidly than market
production (measured at constant prices), but the average prices'
realized by the peasant rose much more slowly than in the early 1950's.
It is hard to estimate what effect the shift in agricultural
price structure may have had'on incentives. On the one hand, market
production rose, at least partly vindicating the judgment of the regime.
As expected, moreover, peasant sales direct to households declined.
But farm consumption in kind began to rise sharply for the first time
in the decade, even though the farm population was dropping.
The inflationary problem created by the increase. in incomes
was not unmanageable by itself. The extent of the problem may be
seen from a comparison of the growth of personal consumption and the
rise in disposable incomes. The estimated growth of personal consump-
tion (in constant prices) was about 25 percent from 1955 to 1960, while
disposable incomes rose by 40 percent. What aggravated the problem
greatly was the ending of food rationing and the readjustment of food
prices in May 1958. A new single-price system for such foods replaced
the double-price system that had existed under rationing (low prices for
the ration allotment and high prices for purchases in addition to the
ration).
* The statistical data, shown in the 1962 statistical yearbook, are
discussed in an article in the East German statistical journal. 6/
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The ending of food rationing soon had inflationary effects,
probably because it entailed a large reduction of prices at which
additional purchases could be made. As incomes continued to rise,
it became evident that even substantial increases in the quantities
of meat and dairy products supplied to the market would not satisfy
the demand. The resulting imbalance between supply and demand for
quality foods has remained to plague the regime in the 1960's.
b. Nonprofit Organizations
It is convenient to group nonprofit organizations under three
headings -- Communist "social organizations," the Communist-dominated
political parties, and the churches. Of the Communist "social organi-
zations," the most important are the so-called Free-German Trade
Union (FDGB); the Free German Youth (FDJ); and the Society for Sport
and Technique (GST), which provides premilitary training. The Main
Political party is the SED, which is in effect the Communist Party of
East Germany. The Communists also control the other parties of the
"National Front." Of the churches, the Evangelical Church is much
the largest, followed by the Boman Catholic Church. Estimates of the
operating expenditures of these organizations are shown in 'Fable 5.*
The expenditures of "social organizations" rose substantially
during the 1950's, mainly as a result of an increase of somewhat more
than one-fourth in the full-time staffs employed by them and the usual
rise in wage rates. In the late 1950's employment ran at about 50,000.
One important factor was an expansion in union membership, which rose
from about 4.8 million in 1951 to 6.2 million in 1960. The activities
of the FDJ (the youth organization) probably did not expand to the same
extent, but those of the GST (the Premilitary training organization)
rose even more rapidly,.
The figures hown in Table 5 for the expenditures of political
parties are very approximate, but the trend probably is indicated
correctly. Estimated operating expenditures of the SED and the other
political parties serving the Communists actually showed a slight ten-
dency to decline during 1951-60. With the party as with the state
apparatus,** the Communists developed large, well-paid administrative
organizations in the late 1940's to set up the East German regime, but
'thereafter tried to hold down and, where possible, to reduce such over-
head expenditures. The personnel strength of the full-time party
staffs appears to have fluctuated during the period, declining to a
- level of some 30,000 in the late 1950's. Apart from the increased
efficiency, the level of employment reflected the rise and fall in
* Table 5 follows on p. 18.
** See 3, b, p. 22, below.
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Table 5
East Germany: Operating Expenditures of Nonprofit Organizations
1951-60
a
Party front organizations /
Socialist Unity Party (SED) and other political
parties b/ .
Churches c/
_
Total
Total as share of gross national ,expenditures
1951
1952
1953
1954
1955 1956
1957
1958
1959
1960
Billion Current DME
0.23
0.45
0.10
0.78
0.25
0.34
0.12
0.71
0.24
0.32
0.15
0.71
0.30
0.39
0.20
0.89
0.36 0.39
0.33 0.39
0.25 0.24
0.94 1.02
0.42
0.37
0.26
1.05
0.49
0.32
0.29
1.10
0.46
0.31
0.32
1.09
0.50
0.33
0.33
1.16
Percent
1.7
1.4
1.3
1.5
1.5 1.5
1.5
1.4
1.3
1.3
a. Including the labor unions, youth and women's organizations, sport organization (for premilitary train-
ing), and sundry other "social organizations."
b. Based on calculation of residual. This category does not include expenditures in West Germany.
c. Including other private foundations (hospitals and the like).
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total SED membership, which dropped from more than 1.7 million in 1950
to only about 1.2 million in 1953, though rising again in the middle
and late 1950's. 7/
Church organizations in East Germany have operated on very low
budgets throughout the postwar period. There was, however, a consider-
able rise in church revenues during the 1950's, chiefly from the social
insurance organization in return for medical care in church-operated
hospitals. ? Most of this increase in revenues went to pay the salaries
and living expenses of additional nurses and hospital workers. Employ-
ment-by churches ran at about 45,000 in the late 1950's.* State sup-
port for the religious attivities of the church was limited to the
collection of the "church tax" from members. Revenues from these taxes,
together with any additional state funds, did not increase in the
1950's.**
Nonprofit organizations are financed partly from the state
budget and partly from membership dues and contributions. During the
1950's, dues and contributions amounted to a little less than 2 per-
cent of gross wages and salaries and other private incomes from eco-
nomic activity. Union dues, which were levied at a rate averaging
somewhat more than 1.5 percent*xx of taxable wages of union members,
probably accounted for about one-half of all dues and contributions
and would have come close to covering total union expenditures. Dues
of SED members, at rates averaging nearly 2 percent of taxable salaries,
also covered a considerable part of the cost of the Communist Party
apparatus (not, however, including activities in West Germany).
Nearly all the remaining costs of the trade unions, political parties,
and other Communist front groups in East Germany presumably were met
from the state budget. Church members contributed less than one-half
the cost of church activities, the remainder being covered by contri-
butions from the West and by payments, through the state budget, from
social insurance for medical services in church hospitals.
3. Public Services and Administration
East German state activities, apart from defense, are separated
into two classes for purposes of these national accounts, public
Including employees of the other private charitable organizations.
XX Besides the labor costs and purchases of goods and services which
are covered in Table 5 (p. 18, above), the nonprofit organizations pay
out welfare benefits to members, which all told amounted to perhaps
200 million DME annually in the late 1950's. The only published indi-
cation of the amount is the breakdown of the expenditures of the trade
unions, which shows transfers to members rising to about 75 million DME
per year late in the period.
*** Beginning in 1960, rates were reduced somewhat.
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services and administration. Public services include health, educa-
tion, cultural affairs, and recreation. Administration includes among
other activities the collection of taxes and disbursement of public
funds; the management of the economy above the enterprise level*; and
police and security activities, tbgether with the operations of the
courts and prisons. The estimated consumption of goods dnd services
in these activities is shown in Tables 6** and 7.*xx
a. Public Services
As orthodox Communists, the East German leaders have steadily
expanded the activities of the state in all fields of public service.
They have allowed private activity to continue, however, on a small
scale. -Even in the late 19501S about one-third of all the doctors
practicing in East Germany were self-employed, but it must be remembered
that their fees were paid very largely out of social insurance funds.
Self-employed engineers and scientists, artists, and musicians worked
very largely on state contracts. The churches continued to operate a
good many hospitals, clinics, and kindergartens, and some other private
hospitals remained in operation, but only with state support and, of
course, state supervision. In the field of entertainment, the only
remnants of private enterprise were a few small clubs and cafes.
The importance of these activities to the regime is suggested
by the increased amounts spent on them in the 1950's, as shown in
Table 6. In 1960, expenditures on state services were 2-1/2 times
those in 1951, and after allaying for the rise in wages.and prices
during the decade, the increase in inputs into state services was still
substantial. Estimated employment in these services increased from
somewhat more than 300,000 to nearly 500,000, mostly employed in public
health and education.
Nevertheless, the figures are rather misleading, for the in-
crease in inputs did not reflect any comparable benefit to the popula-
tion or the economy. In public health, for example, the increase in
the number of doctors, nurses, and other hospital workers employed by
* The 'associations of state enterprises" established in industry in
1958, when the industrial ministries and "main administrations" were
dissolved, may have been excluded from administration, although they
were supported by the state budget, rather than from enterprise funds.
In any case, the costs involved were quite small. According to recent
regulations, the strength of these organizations will be increased and
in the future they will be supported from enterprise funds.
** Table 6 follows on p. 21.
P-24, below.
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Table 6
East Germany: Operating Expenditures of Public Services a/
1951-60
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
Billion Current DME
Health b/
1.60
1.75
1.90
2.05
2.15
2.35
2.45
2.65
2.95
3.10
Education
1.00
1.40
1.60
2.05
2.15
2.25
2.4o
2.55
2.70
3.15
Other c/
0.27
0.38
0.38
0.43
0.73
0.71
0.81
0.92
0.84
0.78
Total
2.87
3.53
3.88
4.53
5.o3
5.31
5.66
6.12
6.49
7.03
Percent'
Total as share of gross national
expenditures
6.3 6.9 7.1 y.6 7.9 8.0 8.0 7.9 7.8 8.o
a. Excluding cash transfers and investments, but not capital repairs.
b. Including cost of contract medical services provided and drugs and medicines prescribed under social
insurance.
c. Residual from total. This category includes municipal, cultural, and welfare services for which no payment
is received. It does not include research and development.
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the state was offset by a decline in the number of self-employed, with
their employees. East Germany made a large investment in medical
education during the period but succeeded only in replacing losses
resulting from the continued flight of doctors to West Germany. In
education, there was a striking increase in staff and in enrollments
in universities and technical colleges, and nearly all students re-
ceived stipends covering most of their expenses. The expansion in
higher education, however, was designed to serve narrowly political
and technical ends, and even from this point of view, Communist poli-
cies were in part self-defeating. As it became more difficult for the
children of the unreconstructed middle classes to attend universities,
the families left East Germany in increasing numbers. The loss of
doctors, engineers, and administrators more than offset the rise in
the number of new graduates. And even the "children of workers and
peasants," who owed the Communists their chance for a higher educa-
tion, were often repelled by the dogmatic Marxism imposed on the uni-
versities. -Many defected to the West.
East Germany also failed to hold its own in scientific research
and development.* Although the regime succeeded in holding some older
scientists -- including Manfred von Ardenne -- by special treatment,
East German research was limited by the heavy loss of trained manpower
to West Germany. For this reason as well as for lack of resources,
East German expenditures for research and development were compara-
tively small, though they grew rapidly in the 1950's. Much of what
was spent was wasted as a result of poor management and bad judgment
by the Communist leadership. The best known example of waste is the
expensive failure to develop an independent .aircraft industry. Begin-
ning in the mid-1950's the regime spent large amounts on investments
and subsidies for this industry, but only a few planes were turned out
by 1960, and the attempt was abandoned early in 1961, presumably at
Soviet urging. 8/
In the fields of culture and recreation the regime was scarcely
more successful, in spite of some technically respectable work in con-
cert and operatic music and in television. The most notable failure
was in producing films. East German films were so poor -- and so few
good films were imported -- that attendance at movies dropped signifi-
cantly in the later 1950's.
b. Administration
In civil administration the East German leadership was able to
impose effective control over expenditures, much as it did over the
* Expenditures on research and development are under the general head-
ing of investments, in accord with the usual practice in Western
accounts (see Table 9, p. 29, below).
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\staffing and outlays of the SED. Total expenditures for the state
apparatus and the various police forces, as shown in Table 7,* re-
mained almost the same throughout the 1950's. Such control, exercised
as it was in a period of generally rising wages and prices, represents
an apparent violation of Parkinson's law. It suggests that at least in
this one respect Communist management has been successful.
It is estimated that during the decade 1951-60 the East German
leadership actually cut the size of the state apparatus (not including
police organizations) from about 225,000 to about 140,000. The reduc-
tions were sharpest in ministries and other central organizations.
The administrative organizations, to be sure, were large to begin with,
but the reduction reflects not only a reduction of excess staff but
also a substantial increase in efficiency.
The police organizations, on the other hand, expanded during
the period. The police included under administration are not only
the regular territorial police (Volkspolizei) but also the transport
police (Transportpolizei), the border police (Grenzpolizei), and the
semimilitarized alert police (Bereitschaften). The strength of the
police organizations was increased in the early 1950's from about
100,000 to 125,000; after remaining fairly stable for several years,
the strength again was increased in the late 1950's to about 150,000.
The main reason for the increases was the tightening of border
controls -- the border police, which numbered only 9,000 in 1949,
numbered 48,000 in the late 1950's. 9/
Basic pay rates, a big factor in the total expenditures, were
ihe same as for comparable grades in the armed forces, blit the average
pay was lower because there were relatively fewer field and general
grade officers. Along with police expenditures are entered those of
the internal security organization (Staatssicherheitsdienst) and the
overhead of the Ministries of State Security and the Interior.
4. Military Expenditures
The East Gelman military establishment was formally set up only
at the beginning of 1956, after the West German decision to rearm.
But in reality it dates from the reorganization and expansion of the
"Garrisoned National Police" (Kasernierte Volkspolizei, or KVP) in
1952. During 1952 the small militarized units of the KVP that had
been recruited and trained since 1948 were reorganized into military
,forces, including six army divisions. At the same time, the strength
of the KVP was increased from 55,000 to 85,000. The peak strength
reached during the early 1950's was more than 100,000. Beginning in
* Table 7 follows on p. 24.
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Table 7
East Germany: Operating Expenditures of State Administration, Including Police Forces
1951-60
1951
1952
1953
1954 1955
1956 1957
1958
1959
1960
Billion Current DME
Economic and political administration
2.00
1.81
1.50
1.51
1.48
1.48
1.39
1.36
1.31
1.21
Police and security a/
0.70
0.85
1.14
1.16
-1.17
1.17
1.18
1.25
1.35
1.50
Total
2.70
2.66
2.64
2.67
2.65
2.65
2.57
2.61
2.66
2.71
Percent
Total as share of gross national
expenditures 5.9 5.2 4.8 4.5 4.1 4.0 3.6 3.4 3.2 3.1
a. Including both regular civil police and special semimilitarized units, together with internal security.
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1956, however, as the result of a drop in the authorized strength to
90,000, East German military forces were reduced somewhat. 10/
The present estimates of East German'military expenditures, shown
in Table 8,* include pay and allowances, social insurance, rations,
housekeeping, other procurement in East Germany, munitions imports,
and investments in East German military facilities. They do not cover
1 '
occupation costs, research and development, military pensions, or the
expenditures of militarized police units.** They are based mainly' on
an analysis of the East German budget, together with data on strength,
pay and allowances, and expenditures published in Western sources. 11/
In 1956, having formally set up a military establishment, the East
Germans began announcing purported defense expenditures but gave merely
a nominal-figure, just less than 1 billion DME (probably covering pay
and allowances and housekeeping). From 1956 to 1961 the regime con-
tinued to announce practically the same figure, 12/ but in 1962 it
announced that military expenditures would be 2.7 billion DME, 13/
which probably covers moet of the costs shown in Table 8.
a k
In evaluating the estimates for pay and allowances shown in Table 8,
it should be kept in mind that East German military personnel were
'paid comparatively well. During this period and until after the build-
ing of the Berlin wall, they were recruited entirely from volunteers.
Not only was the regime unpopular but also military service itself was
disliked, and the authol-ities had to rely heavily on material induce-
ments in order to get acceptable recruits. The monthly pay of a private
newly recruited was 300 DME, 14/ which until the late 1950's compared
very favorably with the wages of semiskilled labor.xxx Well-cut uni-
forms and ample rations represented additional inducements. Even so,
great pressure had to be used at tines to obtain enough volunteers.
If the pay was high, expenditures on rations were low. Agricultural
products entering industry and trade have always been priced far below
cost in East Germany. The prices received by the farmer average at
least double the prices at which agricultural products are resold by
'the state procurement organization, the difference being absorbed by a
large subsidy. Part of this subsidy is offset by indirect taxes on
food, but the armed forces, in all probability, do not pay these taxes,
although there is no direct evidence bearing on the point.
* Table 8 follows on p. 26.
** These expenditures are covered in the foreign balance, investments,
transfers to the household account, and administration, respectively.
*XX In 1958, for example, as shown in the statistical yearbook, a
production worker in the third lowest group, out of eight wage groups
for industrial workers, averaged about 315 DME per month.
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uviulamBriaL
Table 8
East Germany: Military Expenditures
1951-60
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
Billion Current DME
Pay and allowances
0.41
0.52
o.74
0.82
0.76
0.70
0.71
0.72
0.73
0.74
Social insurance
0.03
0.03
0.04
0.05
0.04
0.04
0.04
0.04
0.04
0.04
Rations in kind
0.07
0.09
0.13
0.14
0.13
0.12
0.12
0.12
0.12
0.12
Domestic procurement a/
0.46
0.49
0.99
1.18
1.35
1.31
1.24
1.46
1.47
1.38
Munitions imports b/
N.A.
N.A.
N.A.
0.10
0.13
0.03
0.28
0.23
0.46
0.41
Military, investments c/
0.12
0.16
0.10
0.09
0.12
0.15
0.15
0.15
0.20
0.20
Total
1.09
1.29
2.00
2.38
2.53
2.35
2.54
2.72
3.02
2.89
Percent
Total as share of gross national
expenditures
2.4
2.5
3.6
4.0
4.0 3.5
3.6
3.5
3.6
3.3
a. Excluding cost of rations.
b. In the early 1950's, mainly in 1952, East German forces were equipped' with old Soviet weapons.
The cost to East Germany, which may have been about 1 billion DME -- as suggested in the accompanying
text -- is not entered as an import in these accounts. The total for later years is based mainly on a
statement (discussed on p. 27) covering 1956-60. The estimates for individual years reflect the dif-
ference between Soviet and East German data for the total value of Soviet deliveries to East Germany.
c. Including investment in military facilities for East German use, but not in Soviet installations.
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IThe estimates shown for imports of military hard 4
ware in 195-60
are based chiefly on'a defector report published by Informationsbuero
West in Berlin, 15/ which gives average annual imports of munitions
I for
after 1955 as 300 million DME. No imports of munitions are sho1951-53, the years in which the East German armed forces were being '
shown
I equipped initially with Soviet weapons. The jump in uncompensated
deliveries on Soviet account in 1952 -- they are more than 1 billion
DME above such deliveries in 1951 and 1953* -- is perhaps an ] indica-
- equipment was delivered. If an entry of, say, 1 billion
tion of the cost to East Germany, for 1952 was the year in which most
of the Soviet e
1 DME were made for such a transaction, it would involve reducing the
foreign balance, which is an export balance, by the same amount. Pub-
lished sources say nothing about the prices at which such deliveries
/ were made.
The estimates given for military investments probably cover only ,
East German military facilities. Investments for military purposes
in research and development, highways and railroads, and communications
are excluded.** The estimates are based on data of Informationsbuero
West 16/ for allocations of building materials to the East German
forces in 1956, and on the results of subtracting all other invest-
ments from figures for total investments.***
'Although the absolute level of military expenditures rose during
1951-60, those shown in the present report never amounted to more
than 4 percent of GNP, and the share declined in the late 1950's.
Even the inclusion of militarized police units would not bring the
figure to 5 percent even for the mid-1950's. Through 1958, to be
sure, East Germany also was paying "occupation costs." If occupation
costs are included as defense expenditures, as in West Germany and as
provided for in the OEEC system of accounts, the share of defense in
GNP is greater. Because occupation costs declined and GNP increased
rapidly from 1951 to 1958, the difference is much greater for the
earlier than the later years. Defense, including occupation costs,
would represent 10 percent of GNP in 1951, and the share would decline
steadily to less than 5 percent in 1958.
See Table 12, Appendix A, p. 37, below.
** Investments for Soviet forces are treated in the present accounts
as deliveries on Soviet account (under the foreign balance); the other
investments mentioned, under investments.
*** Similar data provide the basis for estimates of investments for
Soviet forces. A much higher level of military investments is implied
in the plan .figure of 3.6 billion DME for 1956-60 published by the East
Germans, 17/ but this figure undoubtedly covers not only military facili-
ties for both East German and Soviet use but also industrial facilities
under military control.
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5. Investment
The categories into which East German investment is broken down in
these, accounts are gross fixed capital investment, changes in inven-
tories, and allocations to research and development. Estimates of
these cxpenditures, which are shown in Table 9,* include capital re-
pairs, except in administration and public services, and thus cover
some expenditures that in the accounts of most other countries would
be treated as a current expense of production (and, therefore, would be
deducted from GNP).** The cost of military facilities for either East
German or Soviet use is also excluded. Changes in inventories cover
state material reserves and stocks in the hands of enterprises, in-
cluding the value of standing timber and of livestock herds. Alloca-
tions to research and development cover both the expenditures of budget
organizations (scientific institutes and technical colleges)(and grants
to enterprises for this purpose, which are treated as purchases of
services.
During the early 1950's the share of investment in GNP was' quite
small (varying between 11 and 14 percent in 1951-55), not only by the
standards of the Soviet Bloc but also in comparison with West Germany.
These data do not include investments made in enterprises under Soviet
ownership, financed largely out of funds made available to the Soviet
authorities as reparations and occupation costs. A considerable part
of East German heavy industry was in Soviet hands through April 1952,
and 33 enterprises were not turned over (even nominally) until the end
of 1954. Finally, in 1954 the uranium mining company was converted
into a "joint Soviet-East German" company. But even if the investments
made in these enterprises while in Soviet hands were all included, the
figures for East German investments in the early 1950's still would be
relatively low. At the time it was less urgent to expand investment
than to increase consumption; for existing capacity still was not being
used fully in most sectors of the economy, and real wages were lagging
dangerously behind those in West Germany. Both fixed capital invest-
ment and expenditures on research and development are shown in Table 9
as increasing in the early 1950's, not only in absolute terms but also
as a.share of GNP. These figures, however, overstate the increase in
the real volume of investment, because of the rapid rise in costs, par-
ticularly in construction costs, which went up by 44 percent from
1951 to 1954.***
* Table 9 follows on p. 29.
** In West German statistics, however, capital repairs are included
in investments to about the same extent as in East German statistics.
*XX According to unpublished East German data cited by the UN. 1.Y
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Table 9
East Germany: Investment
1951-60
1951
1952
1953
1954
1955 1956
1957
1958
1959
1960
Billion Current DME
Gross fixed capital investment a
3.68
4.56
5.95
6.04
7.84 10.00
10.76
12.33
14.16
15.85
Increases in inventories b/
1.31
1.59
1.64
0.34
0.71 0.87
1.74
3.65
2.86
1.41
' Research and development c/
0.18
0.28
0.33
0.40
0.47 0.61
0.67
0.86
0.97
1.15
Total
5.17
6.43
7.92
6.78
9.02 11.48
13.17
16.84
17.99
18.41
Percent
Total as share of gross national
expenditures
11.4
12.6
14.4
11.4
14.1 17.3
18.6
21.7
21.5
21.0
a. Excluding military investments, for both Soviet and East German forces, and capital repairs in public
services and administration. Data for 1951-54 do not include investment in Soviet-owned corporations.
b. Including changes in state material reserves, livestock holdings, and the stand of-timber.
c. Both by state academies, institutes, and universities and by enterprises on state contracts.
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The increase in investment shown after 1954 correctly reflects a
very rapid rise in investment activity, for only mall adjustments
need be made for price changes in the middle and late 1950's. These
increases in the volume of investment were possible mainly because of
the easing of the burden of Soviet exploitation from 1955 to 1959,
especially in 1956, when payments arising out of reparations were
finally discontinued.*
The rise in investment activity in the mid-1950's did not have a
marked effect on economic growth. Most of the increase in investment
had to be put into capital-intensive basic industries -- especially
fuels and power -- which had been neglected in the early 1950's. Too
many big projects were started, few were finished on schedule, and the
backlog of unfinished projects rose rapidly. Finally, the forces making
for a lower rate of growth in the late 1950's -- the completion of re-
covery and a reductibn in employment-- tended to offset the effect of
increases in capital.
Even the rapid growth of investment in the late 1950's did not
brin the 'share of investment in GNP to the level found in most coun-
tries of Eastern Europe and in West Germany. When research and develop-
ment are included, the share in 1958-60 still was only 21 to 22 per-
cent. In West Germany, on the other hand, the share in 1958-60 was
24 to 26 percent, without research and development. Differences in
price structure have little net effect on this comparison. Prices are
relatively lower for investment goods and relatively higher for con-
struction in East Germany than in West Germany, and the differences
are largely offsetting. Thus in comparable terms the share of invest-
ment in GNP in the late 1950's was still substantially less in East
Germany than in West Germany.
6. Foreign Accounts
The present estimates of the East German foreign balance, given in
Table 10,** show only a balance on current accounts -- the difference
between exports and imports of goods and services. The net commercial
balance covers all transactions handled by the foreign trade organiza-
tions, including uranium deliveries and munitions imports in 1954-60,*xx
together with invisibles (transportation services and the like), on
which East Germany invariably incurs a net unfavorable balance.t The
See the discussion of reparations, p. 33, below.
XX Table 10 follows on.p. 31.
*XX Uranium deliveries and munitions imports in 1951-53 are treated
in the present accounts, as they probably were treated at the time, in
the framework of reparations.
t The entry made for invisibles does not include transactions on
"noncommercial account," but the effect of this exclusion on the balance
should not be great.
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Table 10
East Germany: Foreign Balance in National Expenditures
1951-60
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
Billion Current DME
Net commercial balance 2/
1.42
0.43
0.28
2.00
0.90
1.14
0.30
-0.54
-0.26
0.06
Additional deliveries on Soviet account b/
2.83
4.22
2.76
2.76
3.47
2.29
2.03
1.40
1.37
1.33
Total foreign balance c/
4.25
4.65
3.04
4.76
4.37
3.43
2.33
0.86
1.11
1.39
Percent
Total as share of gross national
expenditures
9.4
9.1
5.5
8.0
6.8
5.2
3.3
1.1
1.3
1.6
a. Exports lees imports at producer prices plus indirect taxes. Domestic transport costs and nominal
foreign trade markup are added to export price, subtracted from import price. For 1954-60, exports of
uranium ores and imports of munitions are included. Net balance on inVisibles, which is unfavorable,
is added to imports.
b. Including purchases of Soviet troops in East Germany, military construction for Soviet occupation
forces, and goods delivered without compensation. This category also includes deliveries in 1951-53
required to pay for old Soviet munitions with which to equip East German armed forces. The amount
charged for these munitions, estimated at perhaps 1 billion DME in 1952, could properly be subtracted
from foreign balance in these years.
c. Not reflecting balance on "noncommercial account," which probably is somewhat unfavorable to East
Germany.
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entry in Table 10 for additional deliveries on Soviet account includes
goods and services provided to the occupation authorities, purchased by
Soviet personnel in East Germany, and delivered to the USSR without
compensation. These goods and services were provided in fulfillment
of reparations demands, in payment of occupation costs, and in settle-
ment of other Soviet claims -- notably for Soviet equipment initially
furnished to the East German forces in 1952 and for the Soviet-owned
corporations returned to East German control in 1954.*
In the published East German national accounts used in setting up
these balances, the prices are East German internal prices, presumably
those at which transactions actually took place between the East German
foreign trade organizations, on the one hand, and importing and export-
. ihg enterprises, on the other. In special'cases, however, including
uranium ore exports, munitions imports, and invisibles (transportation
services, insurance, and the like), domestic prices are not relevant.,
The entries for such transactions represent values in terms of foreign
units of accounts converted into East German marks.**
East German internal prices, in which most imports and exports are
valued, do not correctly reflect East German costs. In particular,
imports are undervalued in domestic prices. The greatest distortion
is in the value of agricultural imports, which were sold to industry
and trade at extremely low prices (those at which peasants are paid
for obligatory deliveries). In the present account the foreign balance
has been reduced to offset the estimated effect of this distortion.***
The resulting adjusted balance, however, still fails to reflect East
German costs. In the early 19501s, domestic prices of industrial raw
materials, which bulk large in the imports and small in the exports of
East Germany, were kept much below cost. In order to correct this dis-
tortion, prices of industrial raw materials were repeatedly raised,
especially in 1953 and 1955-56, while other industrial prices remained
* The known Soviet claims were largely satisfied, however, by 1956
except for occupation costs, which were reduced in 1957 and 1958 and
finally were eliminated in 1959. It is uncertain on what basis East
Germany was credited with goods and services provided to the occupation
authorities and Soviet personnel in 1959-60.
** The conversion has been made according to the East German prac-
tice at the time. For uranium ores the official exchange rates are
used through 1958. Thereafter the rate of 4.2 DME to US $1 is used.
Munitions are estimated on the basis of a value originally given in
East German marks, presumably as the result of a similar conversion.
Invisibles are converted at 3.33 DME to US Sl throughout the period.
*** Similar reductions have been made in the net output (value added)
of enterprises.
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generally stable. Even so, however, raw material prices still did not
fully reflect costs in 1960, even to the extent permitted in the Soviet
type of cost accounting. One East German estimate indicates that
prices still were at least 20 percent below cost in 1962.* 19/
Even without such an adjustment for the underpricing of imports of
raw materials, however, the East German export surplus during the
1950.1s would appear relatively small if it were not for Soviet exac-
tions. Through 1955, East Germany shipped considerable quantities of
goods to the USSR as reparations and in payment for the Soviet-owned
corporations turned over to East German control in 1952 and 1954.
Through 1958, East Germany also furnished goods and services to the
Soviet forces in East Germany in payment of occupation costs, includ-
ing transportation and construction work. The cessation of uncom-
pensated deliveries to the USSR in 1956 and the subsequent reduction
in occupation costs are clearly reflected in Table 10.** Export
balances still appear for 1959-60, after the final cancellation of
occupation costs, but they are relatively small in relation to the
level of trade.
It is worth noting in this connection that the much-publicized
Soviet concessions announced in 1953 (the USSR agreed to cancel repara-
tions payments, reduce occupation costs, and forego further profits
from the Soviet-owned corporations, the last of which*** were returned
to East German control) were largely offset by the shift to East
Germany of the entire -cost of financing uranium mining and the insist-
ence that East Germany repay the USSR for the Soviet interest in the
enterprises returned to East German ownership in 1954, and perhaps
for a "share" in the uranium mining-company. Thus it was not in 1954,
when these arrangements took effect, but in 1956, after the repayment
(and perhaps the partial commutation) of the East German debt, that
the burden of Soviet exploitation dropped significantly -- and then
much less than indicated by the magnitude of the concessions announced
in 1953. The further decline in Soviet takings after 1956 reflects
later reductions in occupation costs and improvements in East German
terms of trade with the USSR (including the higher prices paid for
uranium deliveries beginning in 1957).
f'* East German costs for producing raw materials, however, are rela-
tively high, and the internal price adjustments of the 1950's did
bring the structure of East German producer prices more or less into
line with the structure of prices in the Western European market.
** P. 31, above.
*** Except for the uranium corporation, which became nominally a
"joint" Soviet-East German company, and perhaps some small plants
working entirely for the occupation forces.
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A full reconciliation of financial data with the foreign balance
would have to show-not only the budget data discussed above but also
Soviet credits, which began to figure in East German accounts in 1954;
the'repayment of these credits; and any cancellation of East German
debts that may have been conceded.. A satisfactory presentation of the
East German balance of payments, reflecting all these elements, cannot
be made with the information now available.
The present estimates of the East German foreign balance cannot be
compared with data for West Germany. The West German export balance
on commercial account shows the actual net earnings .on current account
of West Germany, whereas the East German balance on .commercial account,
as explained above, reflects the structure of domestic prices, as ,
adjusted. Instead of earning a substantial surplus on commercial
account, East Germany probably incurred a cumulative deficit over the
entire decade. Moreover, occupation costs, reparations, and similar
transfers to foreign account, which bulk large in the over-all East
German export balance, have little-part in the West German balance.
The West German balance does not reflect either occupation costs or
the contribution to European defense made after the cancellation of
occupation costs in May 1955; instead, these transfers are shown under
defense, as provided for in the OFC system of accounts. The only
transfers reflected in the West German balance are the payments made
to Jews and foreign nationals for property seized by the Nazis, and
these transfers represented a much smaller burden than the East German
payments to the USSR growing out of reparations demands.
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APPENDIX A
'STATISTICAL TABLES
The estimates of East German national income and expenditures
shown and discussed in the text are brought together in the accompany-
ing tables, along with other information needed to round out the
accounts. Table 11 shows a summary of the gross national product by
sector of origin; Table 12, the gross national expenditures, or GNP
by end use; and Table 13, the national income distributed by sector.*
These accounts were prepared generally according to the rules worked
out for the OEEC. The notes to the tables explain special features of
classification and coverage. The derivation of the estimates is dis-
cussed in Appendix B. Selected data from the national accounts of
West Germany are shown in Table 14.** They are shown for comparison,
but there are various differences between West-German accounting
practices and those used in setting up the present East German accounts,
some of which are discussed in the text.***
The national product account given in Table 11 is shown in summary
form for the sake of completeness, although the origin of the national
product is not discussed in this report. The presentation of gross
national expenditures in Table 12 shows. more detail for private and
public consumption than is shown in the text tables. The breakdown of
personal incomes in Table 13 is also more detailed than that given in
the text tables. But the entry made in Table 13 covering the savings
of enterprises, taxes paid by enterprises, and state incomes from eco-
nomic activities cannot be broken down further in any useful way.
All the tables in this report are based-,entirely on Unclassified
sources.
* Tables 11, 12, and 13 follow on pp. 36, 37, and 41, respectively.
** Table 14 follows on p. 43.
*** Pp. 27, 30, and 34, respectively; above.
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Table 11
East Germany:
Gross National product
1951-60
Billion Current DME
Private sector
Households a/
Nonprofit organizations
1951
1952
1953
1954
1955
1956
1957
1958 1959 1960
0.80
0.30
0.50
0.71
0.28
0.43
0.72
0.26
0.46
0.84
0.25
0.59
0.78
0.15
0.63
0.86
0.15
0.71
0.88
0.15
0.73
0.93
0.15
0.78
0.88
0.11
0.77
0.93
0.10
0.83
Enterprise sector
39.17
44.26
46.72
50.82
55.11
57.13
60.86
67.12
72.71
75.90
"Productive" enterprises
35.85
40.86
42.86
46.56
50.62
52.73
56.23
62.40_
67.67
70.73
"Nonproductive" enterprises b
3.32
3.40
3.86
4.26
4.49
4.40
4.63
4.72
5.04
5.17
State sector
3.51
3.92
4.78
5.13
5.14
5.28
5.40
5.60
6.01
6.23
Public services
1.41
1.60
1.97
2.25
2.32
2.50
2.62
2.81
3.19
3.36
Administration c/
1.59
1.68
1.90
1.87
1.89
1.92
'1.91
1.91
1.93
1.97
Defense
0.51
0.64
0.91
1.01
0.93
0.86
0.87
0.88
0.89
0.90
National income 2j
43.48
48.89
52.22
56.79
61.03
63.27
67.14
-73.65
79.60
83.06
Depreciation e/
1.95
2.27
2.61
2.79
3.01
3.25
3.54
3.83
4.11
4.49
Gross national product
45.43
51.16
54.83
59.58
64.04
66.52
70.68
77.48
83.71
87.55\
a. Domestic services.
b. Including "productive" enterprises' (the uranium mines and plants under military control) not covered in
official -statisticson "productive" enterprises.
c. Including police forces.
d. At established prices, including indirect taxes.
e. Including depreciation of "nonproductive" enterprises.
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Table 12
East Germany: Gross National Expenditures
1951-60
Billion Current DME
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
Private expenditures
29.08
32.54
35.34
38.43
40.38
41.21
44.12
48.22
52.33
55.11
Households
28.30
31.83
34.63
37.54
39.44
40.19
43.07
47.12
51.24
53.95
Goods
22.86
26.17
28.83
31.35
33719
33.86
36.47
40.68
44.70
47.33
Foods and beverages
15.49
17.81
19.37
21.02
22.10
22.38
23.77
26.20
28.51
29.32
Retail trade 2/*
12.22
14.52
15.92
17.41
18.04
18.66
19.56
21.60
23.82
24.81
Subsidized meals b/
Cash
0.55
0.60
0.64
o.66
0.66
0.68
0.70
0.73
0.76
0.82
In kind
0.55
o.6o
0.64
o.66
0.66
0.68
0.70
0.73
0.76
0.82
,
From peasants c/
0.02
0.03
0.17
0.30
0.73
0.58
0.45
0.32
0.11
0.04
Military rations d/
0.07
0.09
0.13
0.14
0.13
0.12
0.12
0.12
0.12
0.12
Farm consumption e/
2.08
1.97
1.87
1.85
1.88
1.66
2.24
2.70
2.94
2.71
Clothing and shoes 1J
3.02
3.72
4.28
4.93
5.21
4.83
5.21
6.10
6.71
7.34
Other 8/
4.35
4.64
5.18
5.4o
5.88
6.65
7.49
8.38
9.48
10.67
Services
5.44
5.66
5.80
6.19
6.25
6.33
6.60
6.44
6.54
6.62
Rent
,
Cash
1.13
1.16
1.18
1.19
1.21
1.23
1.25
1.29
1.34
1.41
Imputed hi
0.97
0.96
0.95
0.93
0.92
0.90
0.88
0.86
0.84
0.81
Utilities i/
0.39
0.41
0.42
0.45
o.46
0.50
0.49
0.53
o.56
0.59
Transportation 1/
1.11
1.20
1.28
1.44
1.50
1.49
1.55
1.48
1.55
1.60
Post and telephone
0.24
0.25
0.25
0.27
0.28
0.29
0.32
0.34
0.37
0.38
Theaters k/
0.19
0.20
0.21
0.27
0.27
0.28
0.30
0.27
0.25
0.23
Domestic services
0.30
0.28
0.26
0.25
0.15
0.15
0.15
0.15
0.11
0.10
Other 1/
1.11
1.20
1.25
1.39
1.46
1.49
1.66
1.52
1.52
1.50
* Footnotes for Table 12 follow on p. 39.
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Table 12
East Germany: Gross National Expenditures
1951-60
(Continued)
Billion Current DME
Private expenditures (Continued)
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
Nonprofit organizations
0.78
0.71
0.71
0.89
0.94
1.02
1.05
1.10
1.09
1.16
Labor costs
0.52
0.47
0.47
0.59
0.64
0.71
0.73
0.78
0.77
0.83
Goods and services
0.26
0.24
0.24
0.30
0.30
0.31
0.32
0.32
0.32
0.33
State expenditures
6.66
7.48
8.52
9.58
10.21
10.31
10.77
11.45
12.17
12.63
Public services
2.87
3.53
3.88
4.53
5.03
5.31
5.66
6.12
6.49
7.03
Labor costs
1.21
1.39
1.70
1.93
2.07
2.17
2.33
2.55
2.92
3.16
Goods and services
1.66
2.14
2.18
2.60
2.96
3.14
3.33
3.57
3.57
3.87
Administration E./
2.70
2.66
2.64
2.67
2.65
2.65
2.57
2.61
2.66
2.71
Labor costs
1.59
1.68
1.90
1.87
1.89
1.92
1.91
1.91
1.93
1.97
Goods and services
1.11
0.98
o.74
0.80
0.76
0.73
0.66
0.70
0.73
0.74
Defense
1.09
1.29 -
2.00
2.38
2.53
2.35
2.54
2.72
3.02
2.89
Labor costs LI/
0.51
0.64
0.91
1.01
0.93
0.86
0.87
0.88
0.89
0.90
Goods and services 2/
0.58
0.65
1.09
1.37
1.60
1.49
1.67
1.84
2.13
1.99
Investment
5.17
6.43
7.92
6.78
9.02
11.48
13.17
16.84
17.99
18.41
Gross fixed capital investment p/
3.68
4.56
5.95
6.04
7.84
10.00
10.76
12.33
14.16
15.85
Increases in inventories 9/
1.31
1.59
1.64
0.34
0.71
0.87
1.74
3.65
2.86
1.41
Research and development r/-
0.18
0.28
0.33
0.40
0.47
0.61
0.67
0.86
0.97
1.15
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Table 12
East Germany: Gross National Expenditures
1951-60
(Continued)
Billion Current DME
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
Foreign balance s/
4.25
4.65
3.04
4.76
4.37
3.43
2.33
0.86
1.11
1.39
Net commercial balance
1.42
0.43
0.28
2.00
0.90
1.14
0.30
-0.54
-0.26
0.06
Exports t/
3.46
3.38
4.26
7.16
7.24
8.01
9.96
10.55
12.03
13.15
Imports u/
-2.04
-2.95
-3.98
-5.16
-6.34
-6.87
-9.66
-11.09
-12.29
-13.09
Soviet personnel purchases
1.56
1.88
1.74
1.73
1.75
1.87
1.88
1.25
1.06
1.08
Other deliveries on Soviet account a/
1.27
2.34
1.02
1.03
1.72
0.42
0.15
0.15
0.31
0.25
Discrepancy
0.27
o.o6
0.01
0.03
0.06
0.09
0.29
0.11
0.11
0.01
Gross national expenditures
45.4351.16
54.83
22:5_q
64.04
66.52
70.68
- 77.48
83.71
87.55
a. Including tobacco products and restaurant meals.
b. In factory and school cafeterias.
c. Both purchases on the farm markets and directly at the farm.
d. At cost of the food to military authorities at low prices excluding indirect taxes.
e. At average prices paid to the peasant. This category includes meals furnished to agricultural workers and some small amount of nonfood items
for example, firewood.
f. Including work clothing purchased at the factory.
g. Including cosmetics; china, glassware, and cutlery; and consumer durables.
h. Owner-occupied housing at currently fixed rents.'
i. Excluding water bills paid by private housing owners. Water bills normally are paid by the landlord.
j. Excluding allowances for business trips.
k. Including movies, opera, and the like.
1. Other personal services, professional services, repair services, and "services" of insurance. No value is imputed to services of banking.
m. Including police forces.
n. Including cost of rations.
o. Including military investments.
p. Excluding military investments and capital repairs of public services and administration. For 1951-54 they also exclude investments in Soviet-
owned corporations.
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Table 12
East Germany: Gross National Expenditures
1951-60
(Continued)
q. Covering inventories in the hands of enterprises and state material reserves. Increases in livestock holdings and the timber stand are included.
r. Covering activities of state research institutes and research done by enterprises on state contracts.
s. As noted in footnote v, below, the balance in 1951-53 should properly be reduced by the amount paid for secondhand Soviet weapons. For all years
the balance probably is overstated by a small amount because no allowance is made for transactions on "noncommercial account."
t. At producer prices plus indirect taxes plus transport costs to the border plus a share of the expenses of the foreign trade organizations.
Uranium exports are included for 1954-60.
u. At producer prices plus indirect taxes less transport costs from the border. An adjustment is necessary to bring agricultural import prices to the
producer price level. With imports are included purchases of munitions after 1953 and the net import surplus for invisibles (on commercial account).
v. Including deliveries financed.from occupation costs, reparations payments, and repurchase of Soviet-owned corporations., For 1951-53 they also
Include payments for secondhand Soviet weapons and payments to equip the East German armed forces. (The "purchase" of these weapons is not entered
above under imports.) For all years they also include construction for Soviet forces in East Germany, which probably was financed out of occupation -
costs until 1959, when those were discontinued.
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Table 13
East Germany: National Income
1951-60
Billion Current DME
1951
1952
1953
1954
1955
1956
'1957
1958
1959
1960
Total households
29.77
33.54
36.72
40.91
42.32
43.12
46.37 ,
50.78
54.64
57.68
Compensation of employees
Wages and salaries
18.79
21.52
23.96
26.67
27.35
28.58
30.12
31.95
34.64
36.42
"Supplementary sick pay" a/*
0.29
0.34
0.38
0.44
0.45
0.46
0.49
0.52
0.550.
Bonuses and allowances br
0.40
0.50
0.65
0.75
0.75
0.85
0.85
1.35
2.05
In kind
Military rations c/
0.07
0.09
0.13
0.14
0.13
0.12
0.12
0.12
0.12 -
0.12
Subsidy to factory cafeterias
0.50
0.55
0.59
0.61
0.62
0.64
o.64
0.65
0.64
o.67
Earnings of the self-employed d/
Cash
6.66
7.61
8.18
9.53
10.22
9.88
10.93
12.44
12.96
13.92
Agricultural incomes in kind
2.08
1.97
1.87
1.85
1.88
1.66
2.24
2.70
2.94
2.71
Household incomes from property
Rents
Cash
0.38
0.35
0.34
0.30
0.29
0.30
0.30
0.30
0.31
0.31
Imputed 2/
0.49
0.48
0.43
0.40
0.39
0.37
0.36
0.35
0.33
0.31
Interest on savings deposits
0.06
0.07
0.10
0.13
0.14
0.16
0.21
0.30
0.37
0.46
Rebates from consumer cooperatives
0.05
0.06
0.09
0.09
0.10
0.10
0.11
0.10
0.13
0.13
* Footnotes for Table 13 follow on p. 42.
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Table 13
East Germany: National Income
1951-60
(Continued)
Billion Current DME
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
Savings of enterprises, taxes paid by
enterprises, and state incomes from
economic activities f/
13.85
14.47
16.26
16.66
18.03
18.80
20.86
21.38
24.49
26.10
Of which:
Indirect taxes
8.28
9.77
12.23
12.65
13.34
N.A.
N.A.
N.A.
N.A.
N.A.
Discrepancy gi
-0,14
0.88
-0.76
-o.78
0.68
1.35
-0.09
1.49
0.47
-0.72
National income h/
43.48
48.89
52.22
56.79
61.03
63.27
67.14
73.65
79.60
83.06
a. Paid out of enterprise funds. For "nonproductive" enterprises (and certain others) supplementary sick pay is included
salaries in this table. In the published wage bill they are included for all enterprises in certain years and for none in
estimates have been adjusted to a consistent basis. These payments are not to be confused with the sickness benefits paid
b. Excluding allowances for business trips.
c. Representing only the cost of the food itself at wholesale prices.
d. Including owners of small businesses, independent handicrafts masters, self-employed professional workers, and peasants
cooperative members but not agricultural laborers).
e. Rent of owner-occupied housing at legal rates less expenses and real estate taxes.
f. Based on analysis of the state budget. Because of great changesin tax regulations and accounting practices during the
break down this entry would have little value. Indirect taxes, however, are shown for the early years, before the complete
tax system.
g. In part the discrepancies are offsetting, for the underlying budget data have
year in the following year.
h. At established prices, including indirect taxes.
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in the category wages and
others, but the present
by social insurance.
(landowners and
period, any attempt to
changeover to a Soviet
not been corrected for final adjustments of accounts for each
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Table 14
West Germany: Data on National Accounts a/
1951-60
Billion Current DME
1951
1952
1953
1954
1955
1956
1957
1958
1959
1960
Gross national product
118.6
135.6
145.5
156.4
,178.3
196.4
213.6
228.5
247.9
277.7
National income at market prices
106.7
122.3
132.1
142.8
163.5
179.8
195.3
208.6
227.1
254.7
Depreciation
11.9
13.3
13.4
13.6
14.8
16.6
18.3
19.9
20.8
23.0
Gross national expenditures
118.6
135.6
145.5
156.4
178.3
196.4
213.6
228.5
247.9
277.7
Private consumption
72.5
79.9
87.6
92.8
103.4
115.1
125.6
134.9
144.2
157.2
State consumption
11.3
13.3
14.7
16.0
17.7
19.9
21.9
24.5
25.9
28.3
Defense
6.1
7.5
6.3
6.o
6.0
5.5
5.4
6.1
7.7
_ 9.5
Investment
26.4
31.5
31.4
36.3
47.0
49.3
52.0
54.1
61.6
74.3
Foreign balance
2.3
3.4
5.5
5.3
4.2
6.6
8.7
8.9
8.5
8.4
National income
106.7
122.3
132.1
142.8
163.5
179.8
195.3
208.6
227.1
254.7
Households
82.5
88.1
93.7
103.1
117.6
130.4
140.5
150.2
162.8
183.4
State
24.2
34.2
38.4
39.7
45.9
49.4
54.8
58.4
64.3
71.3
a. These selected data from official West German publications 20/ are included for comparison with East German
data, but reference should be made to the text for remarkson differences in definition.
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