Posted by: ingogulde | March 18, 2010

How East Germans Craved Material Things

We could have been perfectly happy from a materialistic point of view if we had not had “West TV”. We were lucky (or unlucky) to live close enough to West Berlin which broadcasted the two public West German TV stations ARD and ZDF. Both were our window to the other world. On TV, we saw how life was in the West. Watching TV made the contrast between East and West very apparent and inflamed a strong material desire. Even though, we had similar products, there were some very distinct differences between the goods available in the West and the goods available in the East.

The first difference was pricing. In the planned market economy, the federal government defined retail prices. Here are a few examples of how the federal government set the prices in East Germany. The prices are in East German Mark (M). 1 EUR = ~2 DM = ~10 M.

Price Product Name

0.05 M    Bread Rolls (Broetchen)
0.08 M    Electricity (price per kWh)
<1.00 M    Loaf of Bread
2.55 M    Gallon of Milk
2.40 M    250g butter (2 American Sticks of butter)
~5.70 M    1 gallon of gasoline (1.50 M / liter)
16.00 M    LP (music album)
70.00 M    Monthly rent for 60m² (645 square feet)

400 M   Digital watch
>1,000 M    Sony-Walkman
1,900 M    Moped (Simson S51)
~3,000 M    Washing machine
4,500-8,300M   Color TV
~10,000 M   Trabant Standard Edition, smallest and most affordable car model
~25,000 M   Wartburg 353, one step up
~35,000 M   Lada Samara
~45,000 M   Volvo 244

(More prices at http://de.wikipedia.org/wiki/Einzelhandelsverkaufspreis and http://de.wikipedia.org/wiki/Mark_(DDR))

You will notice that prices for basic need products such as food, transportation, energy, and shelter were extremely low. That is because the government heavily subsidized these products. Prices for consumer products such as TVs, washing machines, and cars were disproportionately high. However, with a monthly income between 500 and 1,000 M, not out of reach.

The second difference was availability of consumer products. In order to buy a car, for example, one either had to wait very long or had to rely on “connections”. Because of production shortages for cars, it took up to 15 year from order to delivery. In the black market, used cars often sold for more than the retail price. One closing remark regarding availability. Contrary to common belief, we really had enough to eat in the East. Food supply was not an issue.

The third difference was product innovation. Like price, product development was driven by the federal government and not by consumer needs or demand. Cars provide a very striking example for the lack of innovation in the East. I am sure our engineers would have had the ability to innovate, but the socialist system limited their freedoms. The following chart illustrates the difference of 40 years of car development between the East and the West.

40 Years of Car Innovation

Notice how little the Trabant changed in 40 years. Compare this to the innovation leap at VW from the VW Beetle to the VW Golf.

The fourth difference was product variety. Continuing with the car example, there were only a handful of car brands on the market in East Germany. The same was true for cameras, TVs, digital watches, chocolate, coffee, beer, career options, etc.. The good thing about having limited options is that it made life simpler. The bad thing is that one can not fully satisfy individual preferences and is not able to learn to make decisions in more complex situations. Consider an example from today’s world. Picking the right breakfast cereal out of 30-50 different types requires some decision-making skill. One has to know the individual preferences (strawberry flavor, crunchy texture, little sugar, whole wheat, organic, etc.) and has to stay on top of health trends. In a way, the more variety, the more responsibility for the customer to decide for right product. (More about psychological aspects of life behind and beyond the Iron Curtain in another article.)

Differences in pricing models, product availability, product innovation, and product variety led to a strong material desire for West products. Expressing and fulfilling this desire was one of the drivers for the Change that happened in 1989.

IG

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Responses

  1. […] Why did Socialism fail? In my personal studies about Positive Psychology, I came across a very good explanation in Tal Ben-Shahar’s book “The Pursuit of PERFECT“. The key to answer the question why socialism did fail lies in an assumption about human nature. Capitalism has a constrained vision of human nature. Capitalists believe that human nature and in particular everyone’s self-interest cannot be changed. It is better to accept this fact and leverage people’s self-interest for the common good. Utopianism assumes that human nature is unconstrained and therefore can be changed. Basic human instincts can be altered and self-interest can be replaced by altruism. Eventually, one could create a society made up of superhuman beings being in control of their human nature. Socialism was founded on a wrong assumption. People did not change their human nature. We, in East Germany, maintained our self-interest. On higher political levels this led to misappropriation of resources and in everyday life self-interest decided about the allocation of consumer goods. In the end, it was also self-interest or human nature that led to the Change. See also previous posts about the drivers for change (Freedom and Material Desire). […]


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