austin-murphy-the-triumph-of-evil

152 THE TRIUMPH OF EVIL
In addition, the transformation of Eastern Europe into capitalist countries
did not bring the desired economic prosperity. Instead, the pressure
that the capitalist West put on the Eastern European countries to destroy
all vestiges of Communism merely brought unemployment, inflation,
poverty, financial uncertainty, crime, and chaos (Cox News, 1995).
And Egon Krenz, the East German leader who had acted so quickly
upon the demands oft he peaceful demonstrators to open up the Wa ll and
initiate political reforms in East Germany, was convicted and imprisoned
in the united Germany fo r deaths at the Wall (Associated Press,
1999d). That conviction occurred despite the fact that Krenz (as an East
German government minister merely carrying out the orders of the East
German leader Erich Honecker at the time) was far less responsible
than the West German government itself for the Wall and the tragedies
there (Murphy, 1990b ).
The economic destruction resulting from unification was to create
social and economic divisions between East and West Germany that
would take decades to mend (Dumas and Dumas, 1996). Although the
differences between the two Germanies were not that great at the end of
December 1989, the policy of unifying the countries by destroying East
Germany greatly magnified those differences (Frankfurter Rundschau,
1999) and also contributed significantly to various economic crises of
the 1990s, as will be explained later in Chapter 6.
Before engaging in a thorough analysis of the aggregate new world
order in the post-cold-war era in Chapters 6 and 7, however, the German
case is studied in greater detail in the next two chapters to provide more
concrete perspective on communism. In particular, a comparative analysis
of the East and West German financial systems prior to the 1989
revolution is conducted in the next chapter. This analysis demonstrates
not only the similarities of the two systems and their potential compat·
ibility (implying that the destruction of the . East German system was
unnecessary) but also shows that the East German financial syst�m �as
actually superior and more efficient in many respects. One implication
of these findings is that it was the capitalist West German system that
should have been changed, not communist East German society. At the
very least, the advantages of the East German system should have been
preserved, as Chapter 5 shows was indeed possible.
CHAPTER4
A COMPARATIVE ANALYSIS OF EAST
AND WEST GERMAN FINANCIAL
SYSTEMS IN LIGHT OF THE NEW
EVIDENCE
The political reforms in the communist world led to a popular demand
for the importation ofthe economic and financial system ofthe capital­
ist West. This political demand for capitalism was stimulated by aca­
demic propaganda on the theoretical efficiency of capitalism (e.g., Taga,
1984; and Goldfeld and Quandt, 1988). Unfortunately, such simplistic
theories ignore many practical financial issues, and the result of the
economic reforms in Eastern Europe since 1989 has been depression
instead of the promised prosperity. For example, the IMF ( 1996) reports
that Gross Domestic Product fe ll by over 40% in Eastern Europe over
the interval l990-95. A realistic appraisal of differences between capi­
talist and communist business financial systems is useful in order to
mitigate future economic catastrophes.
HISTORICAL EVOLUTION OF THE DIVIDED GERMAN
FINANCIAL SYSTEMS
_ As a divided country, East and West Germany prior to unification pro­
VIde an interesting example for a comparison of East and West business
finan Cia · 1 decision-making systems. Although Germany was a cap1ta st
country prior to its
• li
capitulation in World War II, the eastern portion
of the country was put under Soviet occupation after the war, and this
sector developed into communist East Germany.