austin-murphy-the-triumph-of-evil

168
THE TRIUMPH OF EVIL
in other countries (like the USA), about 40% of all West Germans got
their jobs through social connections such as via relatives (Wegener,
1991 ), with the percentage being significantly higher for private company
positions than for government jobs (Noll, 1985), and with better
positions being obtained by those who used their social connections to
obtain their jobs (Noll, 1984).
Although about 40% of all East Germans also used social contacts
to choose where they were going to work, there was no significantly
higher prestige and pay for employment obtained through connections
in East Germany (Voelker and Flap, 1999). Since jobs (and regulated
wages) commensurate with a person's skill and education were effectively
guaranteed by the East German state (so that there were no addi­
tional job search costs associated with not having social contacts in
the right places), the capitalist concept of"social capital" and artificial
"contact networking" had far less material employment value in East
Germany (as contacts in East Germany were used merely to allow
people to work with others they already knew and liked, and not to
ration off scarce jobs). Perhaps as a result of knowing that they were
working for the good of society as a whole (as opposed to slaving to
maximize the profits of the rich), social pressure and awards to work
together for a common goal were stronger in East Germany (Hof, 1983).
As a result, an atmosphere existed that permitted greater cooperation
among workers than in West Germany, with most East German workers
welcoming innovation and new technology, and with 5 times as
many East German workers finding their work increasingly interesting
as those finding it less so over time (Adler, 1980).
EMPIRICAL CoMPARISON OF EFFICIENCY
The analysis of practical financial decision-making indicates that the
East German system may have been superior for purposes of investment
decision-making, funds allocation, and financial management efficiency.
Some evidence on the overall comparative efficiency of the two systems
can be obtained from national economic growth statistics reported in
Das Statistische Jahrbuch der Deutschen Demokratischen Republik and
in the IMF's International Financial Statistics. As explained by Stolper
(1960), "the differences in the concept ofnational income between East
and West Germany are surprisingly small."
CHAPTER 4
Comparative Aggregate Economic Performance
169
In 1989, Net National Income per capita in West Germany was 3 1,774
West German Marks, while Net National Income per capita. in East Ger­
many was 16,7 12 East German Marks. Although the East German Mark
was inconvertible, research indicates that it had a purchasing power
equal to between 75% (for the reasonably affluent) and 150% (for the
less affluent) of the West German Mark for average consumers in the
early 1980s (DIW, 1984). The average higher purchasing power of the
East German Mark was confirmed when average prices rose by about
13.8%-8.6%=5.2% more in eastern Germany between 1989 and 1991
when the East German Mark was replaced with the West German Mark
(and prices in eastern Germany moved close to the market levels in
western Germany), as documented by various West German profes­
sional research estimates (Osmond, 1992). Given the subsequent phas­
ing out of rent controls, and given other factors that caused consumer
prices in eastern Germany to rise another 16% more than in West Ger­
many between 1991 and 1996 (Statisticshes Bundesamt, 1997), it can
be assumed that the average purchasing power of the East German Mark
was equal to at least 1.15 West German Marks in 1989. 2
Deflating the 1989 West German incomes by the average 15% higher
prices that existed in West German Marks, East German income per
capita appeared to be about 40% lower than in West Germany in
1989.1 However, since the East German National Income figures do
not include some ''unproductive" services that are incorporated into the
West German figures, as noted by Stolper ( 1960), a more comparable
National Income for East Germany might be over 10% higher than
reponed (Collier, 1985), making East German income per capita about
213 that of West Germany. On the other hand, given that a larger number
of East Germans were in the work force because a larger percentage
of the females (over 60% of the female population) was employed
(Schwarzer, 1999) and given that unemployment did not exist in East
Germany, the disparity in income per employed worker was p � obably
gJ'eater at about 50%. A similar conclusion was reached by a maJor eco­
nomic research institute in West Germany (Handelsblatt, 1990).
Neve�e1ess, the cause of the disparity between East and West
G
erman mcomes was a function of the post-war treatment of the two
Germ · · · th
antes and can not be traced to different levels of effictency m e