austin-murphy-the-triumph-of-evil

174 THE TRIUMPH OF EVIL
rior, enough East Germans were convinced to vote in March 1990 for
an end to their system. The ruling conservative parties in West Germany
also used a combination of promises and threats to ensure electoral suc­
cess. For instance, 10% annual real economic growth in the first two
years after unification was fo recast if the conservatives won (Berliner
Allgemeine, 1990b ). In addition, because the permission of the conser­
vative ruling parties in the West German parliament was needed for
any unification agre·ement or aid (Wall Street Journal, 1990), they had
a great deal of leverage to offer rewards (like a I: 1 exchange rate) for
a vote favorable to capitalism and "free trade" (Nelson and Du Bois,
1990). 11
A final factor influencing the March 1990 election results was a very
destructive West German currency strategy. In return fo r limited eco
nomic aid, the West German government persuaded the East German
government to change the official exchange rate from 1: 1 to 3 East
German Marks fo r 1 West German Mark in January 1990 and to elimi­
nate strict import and export controls. This action effectively reduced
East German wealth and income by 2/3 (Murphy, 1992a) and totally
demoralized the East German population, as Cote ( 1990) illustrates.
Then, in the week before the March election, the ruling West German
party promised a return to the 1: 1 exchange rate, if it was elected (Fisher,
1992). 1 2 Many left-wing East Germans indicated that they voted for the
right-wing political parties merely so that the money would come (Der
Taggesspiegel, 1990d).
The importance of expensive marketing in defeating communism
should not be underestimated. Through effective advertising, distribu­
tion, sales manipulation, and economic clout (Von Dohnanyi, 1991 ),
and through gross exaggeration of any quality problems fo r commu­
nist products (Zeitmagazin, 1992), a superior "Western" image was cre­
ated (Fox, 1991). As a result, despite the fact that East German products
were frequently demonstrated to be superior in unbiased scientific
analysis (like taste tests without brand names), more expensive West
German products were preferred (Labs, 1991 ). Also contributing to the
rapid increase in West Germany's market share of the East German
market shortly after it was opened up in 1990 was the normal practice of
capitalist penetration pricing (McCarthy, 1975), whereby West German
exports to East Germany were priced low enough to bankrupt their
CHAPTER 4 175
East German competition (Der Spiegel, 1993a). Once the East German
finns (which, in addition to suffering image problems, also had inad­
equate liquidity, experience, and preparation fo r the capitalist competi­
tion) were bankrupted, prices were raised to We st German levels (in
order to maximize West German corporate revenues and profits). Some
evidence of this phenomenon can be found in the fact that prices rose
less rapidly in eastern Germany than in western Germany in 1990,
whereas inflation in eastern Germany was over 13% in 1991 compared
to just 4% in western Germany after the widespread bankruptcy of East
German firms, which was reflected in the 40% decline in economic
output in eastern Germany in 1990 and 1991 (Statistisches Bundesamt,
1992).
Evidence on the Economic Inefficiency of Capitalism In the
East
Despite their current popularity, past capitalist reforms in poorer
countries have never produced any evidence of a material increase in
efficiency (Seib and Murray, 1991 ), neither for Eastern Europe (Gey
and Quaisser, 1989) nor fo r other areas of the world like Latin Amer­
ica {Prebisch, 1982). The indications from the most recent capitalist
reforms in Eastern Europe have demonstrated even more negative indi­
cations. In particular, as previously documented, GOP fell by over 40%
over the interval 1990-95 in the former communist countries of Eastern
Europe and the USSR.
In �tern Germany, the capitalist reforms also led to a catastrophe
desptte hundreds of billion of Marks in aid from western Germany.
F
.
.
or mstance, output was estimated to have fa llen by about 10% m
� 1 (Aeppel and Roth, 1991 ), although transfer payments (like unem­
�tern Germany in 1990 (Kempe, 199la) and substantially more in
p oyment checks) from the western German government amounting to
!001o
of the output of eastern Germany (Kempe, 1991 b) increased their
mcome substantially above the level under communism (and thereby
k ept � em content enough not to rebel). Production fe ll by more than
60% 10 the 1990-9 1 interval (Kempe 1991 b) GNP fell by over 40%
ov th
:ar at short time period (Osmond, 1992), and unemployment m
:ted as unemployed. In addition, despite sizable unemployment
tern Germany reached 40% if the mass of part-time workers were
c ks and higher wages for those able to find work, early surveys indi-
'
'
.