The Allies divide Germany into four zones, with the East under the USSR. The Soviets confiscate arms plants and firms owned by the state or prominent Nazis, accounting for more than half of production, while large tracts of land go to collective farms or small farmers. The Socialist Unity Party (SED) begins 40 years in power. Relations with the Allies break down, and the Soviets blockade Berlin.
Stalin appoints Walter Ulbricht as SED secretary, giving him enormous power over the new German Democratic Republic (GDR, or East Germany). A Soviet-style Politburo and Central Committee ensure that Marxist-Leninist ideology guides politics, education, and the press. The first Five-Year Plan reinforces central planning and state ownership, and labor protests are violently crushed.
Despite changes in the USSR, destalinization, or the removal of Stalinist leaders and increased concern for welfare, comes slowly to the GDR. Ulbricht retains power, while the Second Five-Year Plan further nationalizes industry and forces collective farming. By 1960, private firms account for less than 10 percent of production. East Germany joins the Warsaw Pact, the Soviet answer to NATO, in 1956.
After 2.5 million citizens flee East Germany, the Berlin Wall goes up. Faltering growth and changes in the USSR lead to the New Economic System (1963-67), which aims for more efficiency by decentralizing and using select market principles. The state sets overall targets, but technocrats in state firms have more influence.
Ulbricht engineers a return to conservative politics and foreign policy, fearing that détente with the West will raise expectations for democracy and reunification. Despite rising wages and access to consumer goods, economic reforms are rescinded and replaced by a focus on self-sufficiency through technology and central planning of electronics, chemicals, and plastics manufacturing.
Ulbricht falls from power at last, done in by weak economic performance and his opposition to détente. Erich Honecker takes over, and talks lead to mutual recognition by the two Germanys and admission to the UN. The Main Task program reaffirms Marxism-Leninism, the class struggle, and central planning, while "consumer socialism" pays more attention to such material needs as housing and child care.
New policies aim to make the economy more efficient and improve relations with West Germany. East Germany becomes a key Soviet ally through its role in defense and Third World military aid. But closer economic ties with West Germany raise the stakes for the GDR's avoiding conflict with the West. An organized opposition based on peace activism emerges in the 1980s, despite repression and exile.
The opening years of East Germany's last Five-Year Plan continue the '80s "intensification" strategy, especially in key technologies such as microelectronics, robotics, and biotechnology. The commitment to central planning remains strong, constraining reform options, and many industries are more rusted out and inefficient than observers realize.
On November 9, 1989, after a confused statement by Communist leaders, huge crowds cross into West Germany. The fall of the Berlin Wall becomes a powerful symbol for the end of the Cold War and of communism itself. The next day a GDR official concedes the "party is basically kaput." Sudden reunification, or absorption into West Germany, brings together vastly different economies and societies.
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