austin-murphy-the-triumph-of-evil

206 THE TRIUMPH OF EVIL
encourage the consumption of East German products by East Germans,
each East German citizen would be paid a fixed amount each month
into special KM checking accounts. These checks could be written to
cover 90% of the price of specified subsistence goods such as food,
children's clothing, day care, monthly mass transportation tickets, cul­
tural events, and housing. The annual amount paid into each person's
KM account would be set to equal the per capita amount of subsidies
paid out by the East German government in 1989, which approximated
the M70 billion/16.4 million people=M4268 in per capita subsidies
reported to be paid in 1988 (the M70 billion in subsidies would coo­
ti ? ue to be financed by higher prices for nonessential goods and ser­
vtces that are essentially taxed more heavily by the government).
Although the existence of the additional .KM currency/account/pricing
would create some administrative costs and bureaucratic difficulties,
such problems would probably be far less than those imposed by com­
mercial coupons (of which there are so many different types in capital­
ist societies) and likely even less than with buyers' clubs or cooperatives
which also give a select group of people special discounted prices (Fur­
lough and Strikwerda, 1999). Because the KM coupons could only be
used by East German citizens, the subsidies would not be available to
foreigner tourists, whose cheap purchases of goods and services in East
Germany in 1987 were effectively subsidized by an estimated M 1.3 bil­
li � � (Schwarzer, 1999), and who were in the process of stealing many
btlhons more in the first 2 months of 1990 alone after the removal
of effective border controls (Der Tagesspiege/, 1990i). Thus, the plan
allows the M price of essentials to rise to market-clearing levels while
still permitting limited subsidized purchases fo r domestic residents to
shield East German citizens from the effect of the one-time inflation.14BY
thereby maintaining such advantages of living in East Germany (i.e., a
very low and stable cost of living), this policy should keep the morale of
the East German workers high. As a result, there should be no decline
in productivity, and the incentive to emigrate to higher-paying jobs in
West Germany should be reduced. The vast majority of East Germans
were very content with their socialist system, and, only once it became
clear that the January 1, 1990 opening to West German exploitation
would destroy the system economically, did the East Germans decide to
vote with their feet and ballots for West German capitalism.
CHAPTER 5
207
To provide an example of the important interaction of these factors,
it can be observed that East German real economic output actually rose
2% in 1989 despite the emigration of 343,854 East Germans (over 2%
of the population) during that time period as travel restrictions were
eliminated (Bertie, 1996). The productivity of the remaining East Ger­
mans was so boosted by the positive morale effects of the opening of the
Berlin Wall that the disruptive influence of the movement of so many
East German workers was partially offset. In addition, by December
1989 as the initial flood of emigrations had subsided, daily East German
emigrations had fallen drastically to a much more manageable level of
one thousand per day, which was significantly less than the rate just
before the building of the Berlin Wall in 1961 and was similar to that
experienced by East Germany in the 1950s (Hertle, 1996) when annual
real growth in National Income averaged over 10% (Statistisches Amt,
1990). East German production first declined significantly in 1990 when
travel restrictions and border checks of West Germans were eliminated,
an official M3:DM1 exchange rate was established, and West Germans
thereby not only received the same opportunities for bargain purchases
with M as East Germans but effectively only had to pay 1/3 of their own
DM. Within this environment, daily emigrations doubled (to an annual
rate of over 500,000) in early 1990 despite continuing political reforms
and promises of a unified economy (Murphy, 1990b ).
. Without the proposed plan to maintain East German m _ orale, it is quite
likely that productivity would drop and some disrupttve effects of a
Igh level of emigrations would occur possibly reducmg G gro
h' ' ·
b
NP wth
' J'gbtl
Y as much as several percent. While such problems would only s 1 Y
reduce the very high growth rates possible under the narrower aspects
East German incomes to reach West German levels, thereby prolongmg
of th
e plan, lower growth rates would increase the t1me reqUJ
the negative effects.
· ·red for
On the other hand by combining the advantages of East Ge � an
conununism with th: right to a 1: 1 exchange rate and all the postttve
aspects of a very rapid economic growth rate (which includes good
em 1
·
·
J'kl 1 that
P oyment opportunities and an optimistic outlook), tt ts 1 . e Y
the number of net emigrations would have tapered off constderab1� ;
especially as time, confidence foreign investment, and incomes � ew.
Also co n trib
. ' . .
utmg to lower emtgrahons wou e
ld be th allowance m the
.