Lynn Walsh: Can Germany reunite?

[Militant No. 981, 23 February 1990 p. 8-9]

Events in East Germany (GDR) have moved with lightning speed. Until a couple of weeks ago, unification seemed a remote possibility. Now it appears quite possible within a few months.

Last year, the Stalinist regime of Honecker was swept from power by a magnificent movement of the working class and youth. Only a small minority of those on the streets were calling for unification. The workers’ anger was directed against the mismanagement and corruption of the bureaucracy, and the repressive role of the secret police, the Stasi. The foremost demands were for democratisation and freedom of travel.

There appeared to be strong support for the gains achieved under the planned economy. Also workers recognised that fascism and the Second World War arose from the crisis within German capitalism, which bears the ultimate responsibility for the division of Germany-

Since then, East German Stalinism has crumbled, Without the Wall. the regime could not sustain itself. The ruling Communist Party, the SED. has lost over half its members. The economy is in chaos, with droves of young workers and specialists leaving for the West. Industrial production fell five per cent last year.

In the absence of a clear alternative, tens of thousands have lost confidence in the system and voted with their feet. 84.000 have left since the beginning of January.

Had there been a real Marxist party in the East capable of arming the workers with a programme for the overthrow of the bureaucracy and the establishment of workers’ democracy, the political revolution could have easily been carried through. The establishment of a healthy workers‘ state in East Germany would have had a magnetic effect on the workers of both Eastern Europe and Western Europe. including West Germany (FRG).

Lacking such an alternative, the workers have been overtaken by frustration and confusion — grasping desperately for a way out of the ever-worsening situation. Since the Wall came down, about 80 percent of East Germans have visited the West — they have seen the goods in the shops and the current prosperity of West Germans.

Unification now appears to be the shortest, and to many the only, route to higher living standards. One woman commented: “Either the Deutschmark comes to us, or we go to the Deutschmark!”

Kohl and other West German capitalist leaders were proceeding slowly, ‘step by step‘ towards monetary union and eventually a reunited German state. Merging the two states poses complex problems in relation to the economy and the international relations between the USSR. the US, and the European states — to which the capitalists are far from having all the answers.

However, under the impact of the disintegration of the GDR and because of the underlying predatory ambitions of German capitalism, Kohl suddenly announced plans for rapid monetary union — clearly as a stepping stone towards reunification. “History has been telescoped,” commented the Financial Times. “not by a burning desire for unity on either part of Germany, but by the impossibility of keeping the GDR in being as a separate economy, once freedom of movement between it and the Federal Republic have been conceded.”

Kohl announced that monetary union would be pushed through very quickly, possibly within a month of the East German elections on 18 March. This evidently surprised even some of his ministers, and was opposed by the head of the Bundesbank — the FRG’s central bank.

Monetary union means the replacement of the East-Mark by the Deutschmark, which will inevitably mean a dominant influence for the Bundesbank, the big banks and the West German monopolies. They would push for ‘market-orientated reforms‘ — in other words. the restoration of capitalism. With the rapid introduction of capitalist economic relations, how long would the present state survive? Now, it seems entirely possible that if the money union is carried out as Kohl envisages, the East German state will completely dissolve and be absorbed by the West German State.

Marxists stand for the socialist reunification of Germany. But this would require a political revolution in the East. to overthrow the bureaucracy and establish workers’ democracy and a social revolution in the West to abolish capitalism and establish a socialist form of democracy.

Unification would then be an immense step forward. What is happening at the moment, however, is entirely different. Marxists defend the right of nations to self-determination, which is a democratic right. But unification is now taking the form of a counter-revolution, welcomed by many East German workers at the moment — but which they will come to regret as the full consequences of capitalist rule are brought home to them.

The nationalised, planned economy will be rapidly dismantled by the West German capitalists. and the East German workers will experience ruthless exploitation by the big monopoles — who will arrogantly take their revenge for the loss of the eastern zone after the defeat of the Nazis in 1945.

Kohl’s aim is clearly to push through the economic changes very, very rapidly, before the East German working class has time to take on board the consequences of capitalist counter-revolution.

Ironically, the GDR, the state which seemed least threatened by counter-revolution may now pass over to capitalism more easily than Poland, where the defeat of the mass movement of Solidarity of 1980-81 paved the way für the recent pro-capitalist policies of the Mazowiecki government.

Unlike Poland, East Germany is part of a divided nation. East Germans share a common language, culture and history with West Germans. The only justification for the existence of the GDR was a separate social system based on a plan of production. The crumbling of the state, however, because of the general crisis in Stalinism and the bankruptcy of the East German regime, has opened the door to the restoration of capitalism.

* * *

Capitalist reunification is a profound defeat for the Stalinist bureaucracy.

Bureaucratic rule is a grotesque distortion of socialism. In the past, however, the bureaucracy at least defended and developed the nationalised, planned economy.

Between 1950 and 1975, industrial production increased seven times. The GDR developed into a modern industrial economy, the most advanced of the Eastern states. and tenth in the world league of economic powers. With the economy going forward, the bureaucracy introduced a comprehensive social welfare and education system.

Since 1975, however, the economy has slowed down. As heavy industry and production-line methods became less important relative to more sophisticated production techniques, the bureaucracy became less and less capable of developing the productive forces. Without democratic workers’ management and control, it is not possible to harness the initiative and energy of the workers.

More and more, the Stalinists squandered the gains of planned production. Inefficiency and mismanagement caused enormous waste. On top of this was the obscene corruption — hunting lodges, foreign currency bank accounts — brought out into the open by the downfall of the Honecker regime.

Now the authority of the bureaucracy has dissolved. Asked about the prediction that the SED would get only 12 per cent in the March elections, party leader Gysi replied this was probably an “over estimate”.

In the past the supporters of Leon Trotsky have been falsely accused by the Stalinists of refusing to defend the gains of the planned economy. Yet a section of the GDR’s bureaucracy are now ready to hand the economy over to the West, with reservations only about the timing and the benefits for themselves.

* * *

Not least of the factors In Kohl’s calculations are the FRG elections in December. He wants to present himself as the ‘unity’ chancellor in the face of likely gains by the West German SPD.

On the other hand, the government of Modrow in the East is in no position to bargain with Kohl. The Federal government had steadfastly refused to come up with the DM15 billion (£5.35 billion) ‘solidarity aid‘ repeatedly called for by Modrow.

West German Finance Minister Waigel contemptuously asked how the East Germans could expect any assistance as they were a mere “transitional administration with no negotiating freedoms.”

This is just a foretaste of the arrogance with which German big business will treat the East Germans once they dominate the country economically.

Kohl and company are confident that the SPD in the East will win the elections on 18 March. Its name, and the historic support for the SPD in the industrial areas of East Germany before the Nazis came to power, make it likely that it will emerge as the biggest single party.

It stands for a market economy, offering the hope of living standards more like those in the West, but without the loss of secure jobs, health care or guaranteed housing.

While support for the SPD shows continued support tor socialism amongst East German workers, the leadership of the SPD in reality stand for the restoration of capitalism. They are financed and run from the West, and get continuous coverage on West German television.

The Christian Democrats, on the other hand, find no real echo in the East and the leaders of West German capitalism are, obliged to use the SPD as the stalking horse for capitalist restoration. The reservations about rapid unification put forward by the Bundesbank president (who was brought into line by Kohl) shows that there are conflicting views among the West German capitalists. There are fears that the absorption of the East will lead to more rapid inflation and put a bigger burden on the FRG budget, which will keep West German and international interest rates high.

* * *

West German capitalism is already the most powerful economic force in Europe, and is rivalled in the world arena only by the US and Japan. However, as a political power West Germany has been held in check by the settlement imposed after the Second World War. West Germany has not been able to achieve political power commensurate with its underlying economic position.

Absorption of the East’s 17 million population would give a unified Germany a population of over 77 million. Even allowing for the lower levels of production in the East, the per capita GNP of a unified state would still be three per cent higher than that of France and 20 per cent higher than Britain’s. The big monopolies in West Germany undoubtedly have their eyes on the massive industrial plants built up under the East German economic plan. Most of them will be obtained at bargain basement prices.

Also they want to exploit the cheap labour. East German workers are highly educated and skilled, unlike the workers of Third World countries.

This is a massive prize for West German capitalism. For the sake of future gains. they will be prepared to pay quite a substantial price for the opportunity to exploit the workers in the East.

Finance Minister Waigel recognised that “the introduction of a comprehensive social-security system. with benefit payments for the unemployed, would also be a priority. itself implying huge transfers of resources from West Germany.”

With its current reserves, West German capitalism can afford to underwrite a return to capitalism in the East. Last year, its trade surplus increased to DM134.7 billion (£48 billion). even higher than Japan’s trade surplus of £45.5 billion. West Germany also has net foreign assets of DM500 billion.

Already, Waigel has introduced a supplementary budget, increasing expenditure by an additional DM7 billion. DM5.7 billion of which is ear-marked for the East. This raises public expenditure six per cent above the 1989 level.

In the short term, the West German government recognise that they have to take measures to halt the mass exodus from the East, otherwise it will defeat the object of unification. In the long run, however. there will be strict limits to how far West Germany will prop up subsidised industries in the East or underwrite the existing welfare state, which under pressure from the West the Modrow government has already begun to undermine.

* * *

The reports of Kohl’s recent talks with Gorbachev show that the leaders of the Soviet bureaucracy have dropped their fundamental objections to German unification.

This is a devastating defeat for the policy followed by the Soviet bureaucracy since the Second World War. One of the main points made against Gorbachev by the hard-line Stalinist, Ligachev. in the recent Central Committee plenum, was Gorbachev’s acceptance of a united Germany — after the USSR sacrificed at least 26 million lives fighting the Nazis in the last war.

In public, Soviet foreign minister Shevardnadze has been arguing that the interests of the Soviet Union (i.e. the bureaucracy) would be best preserved if a united Germany was neutral. This is clearly unacceptable to the Western allies. who insist that a unified Germany should remain in NATO. Nevertheless. behind the scenes. there are indications that the outline of a compromise has been worked out.

It seems the Kremlin is ready to agree to a united Germany staying in NATO, but with reduced Soviet forces still based in the Eastern zone. Such forces would guarantee the bureaucracy’s strategic interest in providing a buffer between their south-western flank and the capitalist states of Europe.

Such an arrangement undoubtedly suits the interest of US imperialism. Although Bush has welcomed the idea of German unification, the US is fearful of a strengthened German capitalism establishing hegemony in Europe.

These fears are clearly echoed by Thatcher on behalf of British capitalism, which is a client of US imperialism.

Paradoxically, the presence of Soviet troops in a unified Germany would provide a check on the power of German capitalism in the interests of Germany’s main rivals — US-British imperialism.

Yakovlev, a Gorbachev supporter on the politburo, said: “We welcome the fact that our friends in the GDR want to move in the direction of reunification … but if this is to happen, then the security of our borders must be firmly guaranteed. We are in favour of a European Germany, not of a German Europe.”

The US and Britain are equally reluctant to see the appearance of a ‚German Europe’. Nor do they want to see, any more than the bureaucracy, any revision of Germany’s borders to the East.

Kohl undoubtedly takes account of this, though he is reluctant to spell it out in public for fear of alienating support from ultra-right. ultra-nationatist opinion, which might switch then from his Christian Democrats to the Republicans.

* * *

If unification is completed, the power and influence of West German capitalism will potentially be enormously augmented. But what effect will this new ‘drive to the East’ have on the world capitalist economy?

In the short term, there could be big investment in the East which could produce additional growth in the FRG’s economy and in some other advanced capitalist economies.

However, already the central bankers and a number of countries in the European Community, notably the Netherlands, are concerned about the high interest rates (pushed up by extra state spending in the FRG) and the effect of possible Deutschmark inflation on their own currencies.

European capitalist leaders who publicly applaud the moves towards unification are privately warning that they will not accept any of the cost of the FRG’s absorption of the East. This is particularly true for Thatcher.

West Germany has an enormous trade surplus and big reserves. But if these are mainly directed towards the East, to extend the feeding ground for German profits, they will not be available for investment in the US, southern Europe, and elsewhere. Germany’s turn to the East, therefore, could actually rebound on the capitalist world economy.

At the moment, the West German capitalists are buoyed up with confidence. ‘Communism‘ (i.e. Stalinism) is dead. Capitalism is triumphant. With the collapse of the GDR they have been forced to step in, faster than they intended. They believe that in the long run they can reap big profits in the East, and for the sake of future rewards are ready to pay a certain entrance fee as the price of the transition.

But they are taking a gamble. By the time the transition is complete, they may well find that the current world boom has exhausted itself. With a recession or slump in the next one, two or three years. the outlook for the German capitalists would be completely different. In a crisis, they may well come to regret that they have dangerously overextended themselves.

Workers in East Germany see the West as the automatic source of higher living standards. They will soon find out that everything in the capitalist garden is not so lovely. They will experience intense exploitation — unemployment for many — and cuts in the ‘social wage’. Today’s illusions will give way to bitter disappointment, and they will move into struggle against their new capitalist bosses.

The absorption of the East German working class, moreover, will have a radicalising effect on the West German workers. Commitment to the genuine ideas of socialism among large numbers of East German workers. and their fresh collision with West German capitalism. will later help shatter the FRG’s relative social peace and political stability.

The ruling class of West Germany no doubt believes it is about to make a big advance. But it is building volatile new materials for a future crisis into its foundations. The expansion of German capitalism will give rise to new economic contradictions between the main capitalist economies. It will also complicate the relations between the two super-powers and the main European States.

The collapse of a nationalised planned economy, even though misdirected by a bureaucracy, is an historic setback for the working class. The bureaucracy has also opened the door to counter-revolution in Poland, Hungary, and possibly other states of Eastern Europe.

But the working class in Eastern Europe has only just begun to move and the proletariat of the Soviet Union has yet to have a decisive say. Recent events show that we are beginning a new period of political storm and stress. Despite complications and setbacks. the perspective is for the continued unfolding of the political revolution in the Stalinist states, which will march hand in hand with the development of the social revolution in the capitalist world.

Box: Currency union — one mark for two

Monetary union has always been seen as a vital precondition of capitalist investment in the East. Without the stability of a common currency and a check on inflation through control by the Bundesbank, the capitalists would not have the necessary security for their investments or the ability to repatriate their profits.

West German capitalism, however, faces a number of unresolved problems. One crucial question is at what rate of exchange should the Deutschmark replace the East-Mark. The capitalists cannot accept one to one. Productivity in the GDR is less than half the West German levels. The exchange of the Deutschmark for East-Marks in circulation and savings accounts at a one to one rate would have an enormously inflationary effect.

Writing in the Financial Times, Samuel Brittan draws attention to the effect of currency conversion on the “key variable … of the level of real wages to be paid to East German workers.”

“If they are too high — too near West German levels — they will be priced out of jobs and mass unemployment will ensue. Real wages need to remain lower than in the West if the region is to remain attractive to investors.”

Even if the conversion ratio is right for the economy as a whole, Brittan comments, “many East German enterprises will have to close down under competitive conditions.”

The West German capitalists want to exploit cheap labour in the East. However, they face a problem. “If real wages are too low,” Brittan says, “the two German governments will have failed in what is now their prime objective; staunching the migration drain to the West…”

It seems probable that the conversion ratio will be in the range of between one to three or five.

A further problem occupying Kohl’s advisers, is what should be done about savings accounts in the East. Big personal deposits have been built up because of the lack of goods for workers to spend their money on in the GDR. To convert these to Deutschmarks immediately would have an additional inflationary effect.

Account holders will probably be offered some kind of Deutschmark bonds, which will be repaid over a period. However, fears that savings will be devalued with the introduction of a unified currency has already had the effect of encouraging more workers over to the West.


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