THE ECONOMY OF EAST GERMANY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01141A000400120001-2
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 256
• Document Creation Date: December 23, 2016
• Document Release Date: May 1, 2013
• Sequence Number: 1
• Publication Date: February 11, 1955
• Content Type: REPORT

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SECRET
ECONOMIC INTELLIGENCE REPORT
THE ECONOMY OF EAST GERMANY
i
CIA/RR 51
11 February 1955
CENTRAL INTELLIGENCE AGENCY
OFFICE OF RESEARCH AND REPORTS
SECRET
50X1
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This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Sees. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law
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ECONOMIC INTELLIGENCE REPORT
THE ECONOMY OF EAST GERMANY
CIA/RR 51
(ORR Project 16.139)
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
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This report is a more recent and more comprehensive study of
the East German economy
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Its aim is to examine East German economic
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policy and administration to gain a better understanding of how
Soviet-type economies operate and to analyze the structure and
functioning of the principal sectors and industries of the East
German economy in order to assess their strengths and weaknesses.
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CONTENTS
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Summary
I. Economic Organization, Policy, and Development . . 8
A. Soviet Economic Organization and Policy . . . . . . . 8
1? Basic Policy ?. . ? ? ? ? ? ? ? ? ? ? ? ? ? ? 8
2. Development of Economic and Political
Institutions , , , , , , , , , , , , , , ? . , . 9
3. Reparations . 12
4? Soviet Corporations 15
5. Uranium.Mining .. 18
Be East German Economic Organization and Policy ? ? . . 19
1. Governmental Organization 19
2.. Fourth Party Congress of the SED . . . ? . ? ? . 21
3. Extent of State. Control of the Economy ? . . . ? 22
4. Economic Planning . ? . . . . ??. . . . . . .?. . 25
5. Economic Policy ? 30
a. "Building Socialism" 30
b. The "New Course" 32
C. Economic Development . . . . . ? . ? ? ? ? ? ? ? 35
II. Labor and Population ? ? . . ? . . . . . . ? . 38
A. State Control over Labor . ? . . . . o .,o ? . . . 38
B. Manpower and Labor Planning.. ? ? . . ?... . . . . ? 41
C. Labor Force and Population . . . . .. . . . ? . . . 42
D. Incentives and'Other Devices to Increase Output 42
E Migration . . . ? . ? ? . . . . . . . . . . . . . 44
F. Scale of Living . . . . . . ? . . . ? . . . . ? 148
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III, Agriculture . . . . . 49
A. Agricultural Policies . . . . . . . . . . . . 49
11 Land Reform . . . . . . . . . . . . . 49
2. Machine Tractor Stations . 52
3. Agricultural Production Cooperatives . . . 54
4? State Farms .. .. .. . . ? . . . . . 58
5. Delivery Quota System . . . . . . . . . . . . . . 59
B. Agricultural Production . . . . . . . . . 61
1. Grains 61
2. Potatoes .. .. 64
3. Sugar Beets ? . ? . . . . 64
4. Vegetable Oilseeds . ;. 65
5. Other Crops . . . 65
6. Livestock and Livestock Products . . . . . . . . 65
C. Five Year Plan for Agriculture . . 68
D. State Reserves of Foodstuffs . . 69
IV. Industry . . . . . . . . ' . 71
A. General .. 71
B. Mining and Metallurgy . . . . . . . . . . . . . . . . 76
1. Coal Mining 76
a. Administration . . . . . 76
b. Economic Planning and Feasibility of Plans . 77
c? Production . . . . . ? ? . ? . . . ? . . . . 78
d. Consumption . . . . . . . . . . . . . 82
e. Stocks . 82
f. Reserves . . . . . . . . . . . . . . . . . . 88
(1) Hard Coal ? 88
(2) Brown Coal ? ?. ? ? ? ? ? ? ? ? ? ? ? ? ? 89
g. Investment ? . . . . . . ? . . . . . . . . . 90
h. Research . . . ? . . . . 91
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2. Iron and Steel Industry . . . 92
a. General . . . . . . . . e . . . . . '. . . . 92
b,. Iron Ore . . . 00 . . . . . . . . . . 95
(1) Resources . . . . . . . . ... . . . . . . 95
(2) Supply . 96
(a) Production . . . 96
.(b) Imports . . . . 98
-(3). Distribution and Requirements . . . . 98
c. Metallurgical Coke . . . . . . . . . . . . . 99
d. Pig Iron . . . . . . . . . . . . . . . . . . 101
e. Steel Ingots . . 101
f. Iron and Steel Scrap . . . . . .?. . . . 102
g. Rolled Steel . . . . . . . . 102
.h. Ferroalloying Metals and Ferroalloys . . 103
3.
Nonferrous Metals 105
a. Copper 105
b. Aluminum 108
c.. Lead . . . . . . . . . . . . . . . . . . 110
1. Production . e 111
2.
3.
13.
5.
Consumption . 113
Input Factors . . 111
Investment 115
Administration and Organization 115
D. Chemicals., Petroleum., and Rubber . .
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1. Chemicals ? ? . . . . . . . . . . ... . . . . . 117
a. Carbon Disulfide . . . . ? ? . . . . . 117
be Sulfuric Acid 118
c* Soda Ash . 119
d. Caustic Soda 119
e. Nitric Acid . . . . 120
f. Calcium Carbide . . . . . . . . . . . . . . 120
g. Nitrogen Fertilizers ? ? .". . . . . . . . . 121
he Caprolactam . . . . . . . . . ? . . . . . 122
i. Benzene . . . . . . . . . . ? . . . . . . . . 122
J. Pure Phenol ?'. . . ? ? .. . . ? . . . . . 122
2. Petroleum . . ? ? . . . . . . ? . . . ? ? ? . ? . 123
3? Rubber . . . . . . . . . . ? ? ? ? ? ? . . ? ? . 127
a. Natural Rubber 127
be Synthetic Rubber .. 128
c. Reclaimed Rubber 128
d. Motor Vehicle Tires 128
E. Engineering Industries 129
1. Introduction ? . . . . . . . . . . ? ? . . ? ? . 129
2. Scope of the Industries ? . . . . . . ? . . ? 130
3. Administrative Organization and Control ? ? . . . 132
b. Production Goals under the Five Year Plan
(1951-55) ? . ? . . . ? ... . ? ? ? . ? . 135
5. Comments on Selected Industries . ? . ? ? . ? 139
a. Ammunition 139
be Armaments . . . . . . . . . . . . . ? ? . . ? 139
c? Aircraft . ? . ? ? 111
d? Antifriction Bearings . 142
e. Mining Equipment . . . ? ? . ? ? . . ? . . 1112
f. Motor Vehicles . . . . . . ? . ? ? ? . ? . . 143
g. Rail'Transportation Equipment ? . ? . . ? . . 143
he Tractors 143
i. Chemical Processing Equipment ? . ? ? . ? ? . 146
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3. Heavy Construction Equipment . . . ... . 146
k. Metallurgical Plant Equipment . . . . . . . . 147
1. Machine Tools . 147
M. Shipbuilding . . . . . . . . . . . 148
6. Conclusions . . . . . . . . 151
V. Transportation and Communications . 152
A. Rail Transportation 152
1. Conclusions . ... . . . . . . . . . . . . . . . 152
2. Administration . . . . . . . . . . . . . . . . . 152,
3. General Description of the System . . . . . . . . 153
a. Rail Network . . . 153
b. Equipment 157
c. Repair Shops 158
Planned and Actual Performance 160
a. Traffic . . . . . . . . . . . . . . . . . . 160
b. Repair Shop Production . . . . 162
c. Coal Consumption . . . . . . . . . . . . . . 164
5. Transportation Requirements . . . . . . . . . 164
6. Probable Developments . ? . ? ? ? ? . . . . . . . 166
B. Inland Water Transport . . . 167
1. General Description of Waterways . . . . . . . . 167
2.. Description of Individual Waterways . . . . . . 169
a. Elbe River . . . . . . . . . . . . . . . . . 169
b. Berlin System . 169
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Oder-Spree Waterway . 170
Hohenzollern Canal . . 170
Elbe-Spandau Waterway . . . . . . 171
Lower Havel . ? . . . . . . . ? . . . . . 171
Tetlow Canal . . . . . . . . . . . . . . 171
Potsdamer Havel . . . . ... ? . ? 172
Paretz-Niederneuendorf Canal . . . . ? . 172
3.
4.
c. Oder River 173
d. Saale River . . . . . . . . . . . . . . . . 173
Inland Waterway Fleet 171.
Inland Water Transport Operations 176
a. Planned and. Actual Traffic .. 176
b, Maintenance of Facilities 179
c.. Coal Consumption 180
Inland Water Transport Requirements . . ? ? . . . 180
a. Plans . : . . . . . ? . ? . . . 180
b. Probable Trends 181
C. Communications ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 185
1. Introduction 185
2. Description of the Telecommunications System . . 186
a, Telecommunications Complex . ? ? ? ? . ? . . 186
(1) Basic System and Its Activities . ? ? . ? 186
(a) Telephone System 187
(b) Telegraph System . . . . . . . . 187
(2) Functional Systems and TheirActivities ? 189
(3) Radiobroadcasting System and Its
Activities ? ? ? ? ? ? ? ? ? ? ? ? ? ? ? 191
b. Organization and Control ? . . . . ? . . . . 194
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3. Plans for Expansion to 1955 ? . . . . . .. . 194
a. 1953 Economic Plan for Telecommunications . . 194
b. Telephone Communications Budget for
1951-55 .................. 195
c. Radio Communications Budget and Plans for
1951-55 . ? ? . . . ? ? ? . ? ? ? ... ? . 196
(1) Expansion of Radio Transmission . ? . . . 196
(2) Development of Microwave Radio Relay
Systems . . . . . . . . . . . . . . . . 197
4. Summary and Conclusions 197
VI. Foreign Economic Relations, . . . . . . . . . . . . 198
A. Pattern of Trade . . . . . 198
1. East German Trade with the West . . . . . . . . . 199
2. East German Trade with Other Soviet Bloc
Countries 202
B. Role of East Germany in the Soviet Bloc Economy . . . 208
Appendixes
Appendix A. Tables 65-72 . ? ? . . ? . . . . . . . . . . 211
1. Composition of East German Gross. National Product by
Sector of Origin, 1938 and 1948-53 . . . . . . . . . . . 37
2. Indexes of Selected Sectors of East German Gross
National Product, 1938 and 1948-53 . . . . . . . . . 37
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3. Employment in East Germany by Sectors, 1952 and
1955 Plan . . . . . .? . . . . . . . . 43
4. Migration between West Germany and East Germany, between
West Berlin and East Germany, and between West Berlin
and East Berlin, by Time Period, 1948-52. . . . . . . . 45
5. Total Persons Passing Through the Emergency Acceptance
Procedure in Berlin by Age and Sex, January 1952-
June 1953 . . . . . . . . . . . . 47
6. Number and Size of Farms in East Germany, May 1939, June
1946, and June 1951 . . . . . . . . . . . . . . . . . 51
7. Development of Agricultural Cooperatives in East !Germany,
July 1952-September 1953 . . . . . . . . . . . . . 56
8. Delivery Quotas for Selected Agricultural Commodities in
Saxony by Size of Farm, 1952 . . . . . . . . . . . . 60
9. Area Cultivated, Yield, and Production of Selected Crops
in East Germany, 1935-39 Average and 1948-52 . . . . . . 62
10. Numbers of Livestock in East Germany, 1935-39 Average,
1948-53, and 1955 Plan .. .66
11. Production of Meat and Animal Fats in East Germany,
1935-39 Average, 1948-52, and 1955 Plan . . . . . . . 67
12. Production of Selected Agricultural Commodities in East
Germany, Annual Average Postwar Peak, 1952, and
.1955 Plan 69
13. Stockpiles of Agricultural Commodities in East Germany,
June 1953 and 1955 Plan . . . . . . . . . . . . . . . 70
14. Indexes of Industrial Production in East Germany, 1938
and 1948-53 . 72
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15. Planned and Actual Production of Hard Coal in East
Germany, 1949-55 .79
16. Planned and Actual Production of Brown Coal in East
Germany, 1949-55 80
17. Production of Hard Coal and Brown Coal in East Germany,
1936-53 81
18. Supply and Distribution of Hard Coal in East Germany,
1935-38 Average, 1948, 1950-52, and 1955 Plan . . .. . 83
19. Supply and Distribution of Brown Coal in East Germany,
1936-38 Average, 1948s 1950-52, and 1955 Plan
85
20. Planned Investment in the Brown Coal Industry in East
Germany and Percentage of Fulfillment, 1950-53 . . . . . 91
21. Planned and Actual or Prospective Investment Expenditures
at Nine Major East German Iron and Steel Plants,
1950-55 . . .... . ..... . .. . .. . . . . . 94
22. Planned and Estimated Actual Production of Iron Ore in
East Germany, 1951-55 . . . . . . . . . . . . . . . . 97
23. Summary Analysis. of the Supply and Demand of Iron Ore in
East Germany, 1947-55 . . 100
24. Planned Investment in the Ferroalloys Industry in East
Germany, 1951-55 , 104
25. Planned Production of Copper Ore in East Germany,
1951-55 .. ................... 107
26. Planned Investment in the Copper Industry in East
Germany, 1951-55 . . . . . . . . . . . . . . . 0. 108
27. Estimated Electric Power Capacity and Planned and
'Estimated Power Production in East. Germany, 1948-55 . . 112
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28. Electric Power Consumption Pattern in East Germany,
1951 and 1952 . . . . . . . . . . . . . . . . . . . . 114
29. Number of Eergius and Fischer-Tropsch Plants in Germany
during World War II and Their Estimated Capacities for
Synthetic Oil Production by Postwar Political Units
30. Estimated Employment and Number of Plants in Selected
Engineering Industries in East Germany by Owner
Category, June 1953 . 131
31. Planned and Estimated Actual Deliveries to the USSR from
East Germany of Selected Types of Engineering Equipment,
1952-53 133
32. Planned Production of Selected Engineering Industries in
East Germany, 1951-55 . . . . . . . . . . . . . . . . "136
33. Estimated Production of Selected Engineering Industries
in East Germany, 1952-55 . . . . . ? . . . . . . . . . . . 140
34. Estimated Employment and Investment Expenditures of
Selected Engineering Industries in East Germany, 1953
and 1955 . . . . . . . . . . . . . . . . . . . . . 141
35. Estimated Production of Rail Transportation Equipment in
East Germany, 1951-55 . .. .... ?...... . 144
36. Estimated Deliveries to the USSR from East Germany of
Rail Transportation Equipment as Reparations, 1952 . . 115
37. Indexes of the Value of Planned Production, Imports, and
Exports of Metallurgical Equipment in East Germany,
1951-55 . . . . . . . . ... . . . . . . . . . . . . . 117
38. Planned Production of Representative Types of Machine
Tools in East Germany, 1953 and 1955 148
. . . . . . . . . .
39. Actual and Planned Shipbuilding in East Germany, 1952,
1953, and 1955 .... . . . . . . . . . . . . . . . . . 150
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40. Capacity and Traffic of Freight Yards in East Germany . . 157
41. Types of Locomotives in Use on Railroads in East Germany,
1952 . . . . . . . . . . . . . . . . . . . . . . . . . . 159
.42. Major Railroad Repair Shops in East Germany . . . . . . . 161
43. Railroad Freight Traffic in East Germany,.1946-53 and
1955 Plan . . . . . . . . . . . . . . . . . . . . 162
44. Locomotive and Freight Car Repairs in East Germany,
1950-53 .. .... 163
45. Operating Stocks of Railroads in East Germany, August
1953 .......................... 165
46.
Principal Navigable Waterways and,Volume of Traffic in
East Germany, 1937 . . . . . . ... . . . . . .... . . . .
168
47.
Inland Waterway-Fleet in East Germany, December 1950
175
48.
Inland Waterway Fleet in East Germany, December 1950 and
February 1953 . . . . . . . . . . . . . . . . . . . .
176
49.
Planned and Actual Traffic on Inland ?Waterways in East
Germany, 1946-51 . . . . . . . ... . .. . . . . . .
177
50.
Traffic on Inland Waterways in East Germany by Commodity
Group, 1946-5o . . ... . . . . . . . . . . . . . . .
17 8
51,
Traffic on Inland Waterways in East Germany by Commodity
Group, 1950 . . . . . . . . . . . . . . . . . . . .
179
52.
Tonnages of Vessels Repaired in the Inland Waterway Fleet
in East Germany, 194951. . . . . . . . .
181
53.
Consumption of Fuel by the Inland Waterway Fleet in East
Germany, 1948-50 . . . . . . . . . . . . . . . . . . . .
182
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54. Planned Expansion of the Inland Waterway Fleet in East
Germany, 1951-55 .... . . ..... . .... .. .. 183
55. Planned Expansion of Inland Water Traffic in East
Germany, 1951-55 . . . . . . . . . . . . . . . . . . . 184
56. Estimated Number of Telephone Subscribers and Number and
Value of Long-Distance Telephone Conversations Handled
Over the Basic System in East Germany, 1938, 1948,
1950-52, and 1955 . . . . . . . . 188
57. Estimated Number and Value of Telegrams Handled Over the
Basic System in East Germany, 1938, 1948, 1950-52, and
1955 .......................... 190
58. Estimated Number of Radio Stations in Selected Functional
Services in East Germany, 1938, 1948, 1950-52, and
1955 . . . . . .. ... . .. . ........ . .. 192
59. Foreign Trade of East Germany, 1948-52 . . . . . . . . . 200
60. Value of the Trade of East Germany with the ;Test by
Countries, 1948-49 and 1951-52 . . . . . . . . . . . 201
61. Commodity Composition of the Trade of East Germany with
the West, 1948, 1949, and 1951 203
62. Comparative Value of the Trade of East Germany with the
West, excluding West Germany, First Six Months of 1952
and 1953 . . . . . . . . . . 2 05
63. Distribution of the Trade of East Germany with Other
Soviet Bloc Countries, 1948-52 . . . . . . . . . 206
64. Commodity Composition of the Trade of East Germany with
Other Soviet Bloc Countries, 1949 207
65. Supply, Distribution, and Stocks of Agricultural
Commodities in East Germany, 1935-38 Average, 19118,
1950-52, and 1955 Plan . . . . . . . . . . . . . . . . 213
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66. Supply of Iron and Steel, Metallurgical Coke, and
Ferroalloys in East Germany, 1935-48 Average, 1948,
1950-52, and 1955 Plan 217
67. Supply and Distribution of Principal Nonferrous Metals
in East Germany, 1935-38 Average, 1948, 1950-52, and
1955 Plan 219
68. Supply, Distribution, and Stocks of Selected Chemicals in
East Germany, 1935-38 Average, 1948, 1950-52, and
1955 Plan . . . . . . . . . . . . . . . . . . . . . . 220
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69. Supply, Distribution, and Stocks of Petroleum Products in
East Germany, 1935-38 Average, 1948, 1950-52, and
1955 Plan . . . . . . . . . : . . . . . . . . . . . . . 225
70. Supply, Distribution, and Stocks of Rubber and Tires in East
Germany, 1935-38 Average, 1948, 1950-52, and 1955 Plan . . 227
71. Supply and Distribution of Selected Products of the
Engineering Industries in East Germany, 1935-38 Average,
1948, 1950-52, and 1955 Plan . . . . . . . . . . . . . . . 230
72. Production of Selected Commodities in East Germany, the
USSR, and the Soviet Bloc, 1952 . . . . . . . . . . 234
Illustrations
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East Germany: Over-All Governmental Structure, 1 July
1954 (Chart) . . . . . . . . . . . . . -. . . . . . 20
East Germany (Map) . . . ... .
Inside
,Back Cover
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CIA/RR 51 S-E-C-R-E-T
(ORR Project 16.139)
The economy of East Germany** closely rivals that of Poland as the
best developed and most productive among the European Satellites. Its
gross national product '(GNP) of about US 3'14.0 billion in 1953 equalled
11 percent of the Soviet GNP, Moreover, East Germany is, in a relative
sense, the most industrialized country in the Soviet Bloc. In East
Germany a larger proportion of the 1953.GNP originated in industry and
a smaller proportion originated in agriculture than in any other Bloc
country. Since real Soviet control of the area continues undiminished,
these measures of East Germany productive capacity must be considered
in any appraisal of Soviet capabilities.
Like the other European Satellites, East Germany has been
progressively remodeled on the Soviet pattern since the war.
Transportation, the greater part of industry, most financial in-
stitutions., and much of the foreign and domestic trade are
nationalized. The shrinking, private sector of the economy has
been tied more and more closely to the state-directed sectors.
Economic policy has followed the Soviet example in stressing the
expansion of heavy industry, and economic planning and adminis-
tration represent faithful attempts to follow current. practices
in the USSR.. Government measures permitting the compulsory
assignment of workers to particular places of employment supplement
Soviet-patterned wage differentials as a means of allocating workers
to various industries and occupations.
Only in agriculture has the Soviet reshaping of the East German
economy failed to develop to a comparable extent. The eventual goal
of complete socialization of agriculture has been made explicit,
however, and remains in effect despite the concessions of the "new
course" in the latter half of 1953. Paralleling these developments
has been a continuing effort by the USSR to strengthen the East
* The estimates and conclusions contained in this report. represent
the best judgment of the responsible analyst as of 15 August 1951.
3* For a map of East Germany, see inside back cover.
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Declassified in Part - Sanitized Copy Approved for Release 2013/05/01 : CIA-RDP79RO1141A000400120001-2
 Declassified in Part - Sanitized Copy Approved for Release 2013/05/01 : CIA-RDP79RO1141A000400120001-2
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German Socialist Unity Party (SED) he East German Communist party) --
the instrument through which a large degree of Soviet control is exercised.
Under the direction of the USSR, the East German economy is
being integrated with that of the rest of the Soviet Bloc. About
75 percent of the foreign trade turnover of East Germany is currently
with other Bloc countries, and the greatest part of that is with the
USSR. As an advanced industrial area, East Germany is an important
supplier of machinery, chemicals, electrical engineering products,'
and precision equipment. In return it receives from the USSR and
the Satellites primarily agricultural and industrial raw materials,
food, mineral fuels, and lubricants, together with certain manu-
factured products.
The scale of living in East Germany is still considerably below
prewar levels. Several factors have contributed to this situation:
(1) production of investment goods has been favored at the expense
of consumer goods; (2) the population of the present area is about
10 percent higher than before the war, and East Germany has been
obliged also to support the.Soviet occupation troops; and
(3) reparations and other uncompensated deliveries have imposed a
heavy burden on the East German economy. In 1952, unfavorable '
weather resulted in poor yields of potatoes, sugar beets, and.fodder,
and harvesting was disrupted by the newly instituted drive for
collectivization. At the same time, the government sought to add
food to the state reserves. As a result of these circumstances, the
scale of living in 1952 declined for the first time since 1917.. Not
only did the scale of living decline in the latter part of 1952 and
early 1953, but the East German regime also adopted_a number of
harshly repressive measures of a political nature. As a consequence,
migration from East to West Germany reached new high levels.
On 9 June 1953 the SED announced that the policies adopted and the
actions taken during the preceding year as part of the program of
building socialism had been incorrect and that its "new course" would be
to improve living standards by increasing the production of.consumer
goods at the expense of the projected growth of heavy industry. On 17
June, widespread rioting occurred throughout East Germany. The increases
which had just been made in work norms probably may be regarded. as the
spark that finally transformed diffuse, latent hostility to the regime
into active protest. Following the riots, there were further con-.
cessions and a hastening of their implementation.
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Declassified in Part - Sanitized Copy Approved for Release 2013/05/01 : CIA-RDP79RO1141A000400120001-2
 Declassified in Part - Sanitized Copy Approved for Release 2013/05/01 : CIA-RDP79RO1141A000400120001-2
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The implementation of the "new course" has been materially aided
by the USSR. In August 1953 a lengthy protocol providing a number
of concessions to East Germany was announced jointly by the govern-
ments of East Germany and the USSR. These concessions included
cessation of reparations deliveries, the return of Soviet-owned
companies in East Germany to German control, and the promise of a
large loan on the foreign trade account. In July 1953, moreover,
Soviet shipments of foodstuffs to East Germany increased
significantly.
Under the "new course," plans for investment in heavy industry
have been cut '. ack, and plans for production of consumer goods have
been raised. Prices and taxes have beer: reduced, and r