austin-murphy-the-triumph-of-evil

172 THE TRIUMPH OF EVIL
capita would have far exceeded that in West Germany by 1989 (almost
double). In that situation of fairness in reparations payments, West Ger·
many might have been motivated to build a wall to keep its own work·
ers from emigrating to the higher incomes of East Germany (especially
given the higher quality of life in East Germany with respect to nonfi·
nancial factors, as documented in Chapter 2).
However, East Germany was never compensated for its huge repara·
tions-related losses, and so it constructed the Berlin Wall in 1961 to
stem its already considerable economic losses. As a result, the resettle·
ments stopped after 1961, and the different economic systems in the two
Germanies were allowed to function semi-isolated from each other.
In this separated environment between 1961 and 1989, real East
German Net National Product per capita increased by an average 4.5%
whereas real West German Net National Product per capita increased by
only 2.7% per year. For this comparison, the National Income accounts
reported in constant prices were used,5 so that the nominal growth fig·
ures were effectively deflated by inflation (averaging 0.5% and 4.0%
fo r East and West Germany, respectively).6 Backcasting the 1989 esti·
mated value of the East German Mark (at 1.15 West German Marks in
1989) by the relative aggregate economic inflation rates reported for
the two countries (the 0.5% and 4.0%, respectively) indicates that the
East German Mark had aggregate purchasing power equal to 0.44 West
German Marks in 1961.7 These results imply per capita East German
income was about 2/5 that of West Germany in 1961 compared to
almost 2/3 in 1989. The latter two ratios are identical to those reported
by the Western researchers Merkel and Wahl ( 1991) and Gregory and
Stuart ( 1995), respectively, for the two different time periods. 8
Analysis of Variance (ANOVA) tests revealed that the higher eco·
nomic growth rates fo r East Germany between 1961 and 1989 were sta·
tistically significant from those of West Germany at the .00 I level (with
a t-statistic of 4.4). In addition, as previously hypothesized, income and
consumption per capita in the planned East German economy had lower
annual standard deviations (of 1.1% versus 2. 1% for income, and 2.1%
versus 2.6% for consumption), with Chi-squared statistics of 53.5 and
43.9, respectively, indicating the difference to be statistically significant
at the .005 and .05 levels.
Moreover, even in the I 0 years before its collapse, East German eco·
CHAPTER 4 173
nomic growth was faster than in West Germany, at 4.0% versus 2.0%,
respectively. A listing of economic growth rates in East Germany in its
final decade is provided in the fo llowing Table 4 along with the comparative
numbers for West Germany:
TABLE 4
REAL ECONOMIC GROWTH IN EAST AND WEST GERMANY
BEFORE THE END (1980-89)
.l.28Q .l.lli .1.2R2 .l2B.l 12M .l2B.i .1.2.82 .1281 � .1.28.2
East 4.4% 4.8% 2.6% 4.6% 5.5% 5.2% 4.3% 3.3% 2.8% 2. 1%
West 1.8% 0.0% -1.0% 1.9% 3.3% 2.00/o 2.5% 1.5% 3.7% 4.0%
Source: Statistisches Amt ( 1990) and Statistisches Bundesamt ( 1992).
These aggregated results occurred despite higher social spending and
lower investment spending in East Germany than existed in Western
capitalist countries (Schwarzer, 1999), despite the advantages that West
Gennany had in superior access to the capital, trade, and technology
of the richer Western countries, and despite the substantially higher
military expenditures that East Germany felt obliged to make (6-8%
of National Income versus only 3% in West Germany) to defend itself
(Merkel and Wahl, 1991).9 Thus, aggregated statistical evidence indicates
that the East German system was more efficient in spurring economic
growtb.1o
Causes of Collapse in the East
Like the Berlin Wall, the cause of the collapse of East Germany can be
traced to the income disparities in the two countries (Dieckmann, 1991 ) .
As explained in the previous subsection, the income disparities resulted
:om . the contrasting postwar treatment by the occupying victors (i.e.,
esp•te �aster economic growth, East Germany never caught up). Even
&realer mcome disparities existed for skilled positions, and heavy ceono
ffilc · mcenhves · ·
.
were provided by the much larger and wealthter West
�ermany to East Germans for migrating to the West (like above-average
IDcome, preferential
. housing, and enormous guaranteed loans). This
econom•c situation not only induced massive migrations to the West and
thereby
sabota b) b ·
a 1 � en�bled West Germany to market capitalism as the religion of pros­
�ty, Just as it continues to do (Christ, 1991). With the use of heavy
ged the East German economy (Murphy, 1990 , ut tt
est German propaganda that portrayed the communist system as infe-