Consumer and Social Welfare  

Social Welfare In a Socialist State:

The East German Case

by Sarah Corrie

Historical Background

In 1945, as the second World War came to an end, a nation which had once been considered one of the most powerful in Europe lay in ruins. Germany had fallen and it was now left to the victors of war to reshape this broken society. England, France and the United States occupied the western and southern portions of the German land. All three of these countries had their own internal issues to deal with following the war and therefore rebuilt their German sectors through fairly loose controls with the assistance of the Marshall Plan. In the eastern region, Russia asserted its position with a tightly clenched fist. The Marxist ideas of socialism and a planned economy were rapidly implemented in this sector. It soon became evident that capitalism and socialism would be the dividing factors in the reformation of Germany.

In 1949 the German Democratic Republic (GDR - officially titled Deutsche Democratische Republic or DDR) was formed. It was led by the Socialist Unity Party of Germany (SED - Sozialistische Einheitspartei Deutschlands). The SED's founders had originally pledged to "seek a distinctively German path to socialism" (Turner 47). The 1949 constitution even guaranteed the citizens of East Germany the following rights (Turner 53)

Freedom of assembly
Freedom of the press
Freedom of speech
Religious freedom
Right to emigrate
Guarantees of
private property
and inheritance rights

"German socialism" was supposed to encompass these original constitutional rights, strengthen the economy and improve social welfare while also pursuing the ideas of a social and centrally planned economy. It is clear that the economy of East Germany did improve from its 1949 standing. In fact, in comparison to the rest of the eastern bloc countries, the GDR grew to have one of the highest rates of growth and even surpassed many of Russia's economic achievements. Despite the remarkable economic progress that was accomplished by East Germany, many westerners were still critical of socialism. Most of this criticism was directed towards the human condition. Could a centrally planned economy improve standards of living and the social welfare of society? What aspects of social welfare would be overlooked while concentrating on boosting national output at the cost of the laborer? These ideas became increasingly voiced as western industrialists soared through the 1970's and 1980's with consumer choices and personal freedoms unmatched by the eastern bloc.


By the early 1970's East Germany had the highest living standard among the communist countries. The two Germanys had started out as one, sharing a common language and history since the 19th century. Especially in Berlin the similarities were highly visible in actual families which had been separated by the Wall. For this reason East Germany could never escape the constant comparison of its society with that of its western counterpart.

The following paper will briefly discuss several aspects of social welfare in the German Democratic Republic. It is imperative to keep in mind that there are two ways of looking at the data. Information can be viewed in comparison to the rest of the eastern bloc (in which case the GDR becomes the most successful model of a socialist society), or it can be seen through western capitalist eyes. From this western point of view, East Germany can only be described as the economic work-horse which nobly strives for societal perfection but was doomed to fail from the start.

Housing in the GDR

"More than half of the housing units in the [GDR's] inner cities were destroyed during World War II; 620,000 housing units were completely destroyed and another 200,000 were partially damaged." (Lemke 121)

From the end of the war German leaders placed economic recovery, rather than social welfare, as the highest priority of the new government. There was no Marshall Plan for the East Germany to lean on and the Soviets continued to extract reparations payments. "The official East German figure for total reparations payments is $4,300 million [while the] American authority puts it at $10,429.12 billion at 1938 prices." (Childs 138) East Germany also lacked raw materials which presented another hindrance in recovery. It was obvious to the central planners that however desperate the housing situation might be, little could be done until the economy was forcefully on its way to recovery.

In the mid 1950's attention was turned more heavily towards housing construction, especially in the industrial areas. There was a need to center the labor force around struggling industrial cites that were targeted for improvement. By the early 1960's 573,841 new living areas had been constructed and this number increased by another 307,400 homes by 1965. (Childs 163)

Not only were the actual number of living quarters a concern but the conditions inside those "Wohnungen" were also a severe problem. In 1961 a survey depicted the following in a comparison of the interior living conditions between East Germans and West Germans...                

Dwellings having the following items - %
  East Germany West Germany
Own Bath  22% 52.4%*
Indoor Lavatories   33% 76.5%
"NO" Piped Water  33% 3%

table created from text in (Lemke 125)

After the Berlin Wall was built in 1961, the continuous loss of skilled labor to the west came to an abrupt halt. Central planners found it easier to meet their economic goals leaving more time and money delegated to social welfare. When a new constitution was adopted in 1968 it made clear the SED's commitment to improving the standard of living and such basic needs as housing. Many more living areas were constructed at this time, however, in order to cut down costs, most buildings were made out of prefabricated parts. Aesthetically these buildings were less pleasing than most western homes. Central planners concentrated on building large housing developments rather than individual homes. Developments were constructed with the socialist way of life in mind. Most were "designed with public or communal facilities and services [such as] clinics, markets, restaurants, pubs, libraries, youth clubs etc." (Lemke 126)

There is no doubt that the SED and socialist planners attempted to improve the housing condition in East Germany. Changes definitely were made in the quantity, quality, and allocation of homes after World War II. Housing was provided at relatively low costs. "In 1969 the average wage earner spent 5% of his monthly income on housing" (Bernier 82) However, housing in the GDR was the one aspect of social welfare that continued to fall behind socialist standards and weighed heavily on the minds of SED party members. Some critics even blamed low birth rates on the over crowded and dreary conditions which existed in the home. When reunification came in 1989 the housing shortages had still not been solved.

Medical Care and Health Issues

All citizens of the GDR were constitutionally guaranteed "health protection, medical and hospital benefits, and old-age social security benefits in 1949." (Bernier 79) Serious health problems had developed from the unsanitary conditions that existed immediately following the war. In large cities the water supply and sewage systems had been damaged or destroyed. Food shortages added to the many problems. Diseases spread rapidly through crowded living areas and typhus was a great concern. There was a lack of hospitals and medical supplies. Doctors were also among those who frequently fled to the west as socialism took control.

As the economy recovered, so to did national health. Food rationing until the end of the 1950's supplied the average citizen's diet. By the 1960's the overall level of food production had increased and the rationing of the fifties was discontinued. The food supply grew but diets still lacked variety and balance. Families ate mostly potatoes and bread as the cost for these items were very low. "Urban groups with higher purchasing power ate more varied diets" (Bernier 78).

In the 1960's the public health system was a basic mirror image of that in the Soviet Union. East Germany had been "divided into administrative districts and sub districts" each containing a "health council headed by a physician." (Bernier 79) These districts had to report back to the Ministry of Health which played a crucial role in determining the yearly (or five year) plans for health and sanitation improvements. The Ministry of Health guaranteed extensive "health, medical, dental and hospitalization coverage for all workers from birth to death" (Bernier 79) They legally enforced vaccinations to control contagious disease along with inspecting the food and drug industries.

Hospitals in East Germany could be categorized as one of four general types; local, district, statewide, or university run facilities. Most of these organizations were managed by the state. However, in 1969 "16.4% of the medical institutions were still privately owned (mostly church related)." (Bernier 80) Creating large specialized institutions and increasing the number of beds available per capita became one of the top goals of central planners. The following chart shows the different specialized Medical Facilities in East Germany in 1969...

Medical Facility Institutions Beds
General hospitals & maternity wards 433 130,132
University hospitals 110 18,887
Research institutions 7 901
Tuberculosis institutions 51 9,879
Mental Institutions 40 32, 227
Polyclinics 444 n.a.
Ambulatory (dispensaries) 819 n.a.
Cancer consultation centers 202 n.a.
Maternity consultation centers 1,096 n.a.
Prenatal rest homes 17 714
Lying-in homes 6 7,803
Rest Homes 178 18,243

      taken from chart (Bernier 80)

By the 1970's the German Democratic Republic was listed along side western nations as having some of the healthiest people in the world. Life expectancy rates soared as in most modern societies. Health care was always subsidized by the state. As long as central planners could continue to guarantee low cost health provisions for all, this system would remain the pride of the socialist way of life.

We must remember that socialism provided free health care to everyone, but the quality of that health care was generally much lower than that in the west. For this reason, in the United States, we are still debating the pros and cons of a health care system which would be largely controlled by the state.


Education in East Germany was a highly valued and strongly organized system. Socialists supported the idea that equality of the classes could be achieved through education and they used this theory to eliminate what was left of the East German "elite". Central planners were also concerned with the fact that most of the refugees fleeing west before the construction of the Berlin Wall were members of the educated class. In order to boost the economy and compete with the western world they needed to educate the masses.

The socialist school system was highly centralized and organized by three main branches. The Ministry of Public Education was established to train teachers and control primary and secondary schools. Higher education was placed in the hands of the Ministry of University and Technical Schools while art and architectural schools were guided mainly by the Ministry of Culture. These three branches were responsible for guiding the youth and also training the adult (working) populations. The following excerpt on educational goals is from the 1976 Program of the SED. It gives some indication of what education meant to socialist planners.

"The educational system serves education and training of fully developed personalities who unfold their abilities and talents to the good of socialist society, and are distinguished by their love of work and readiness for defense, by a sense of community, and by a striving toward high communist ideals."

* taken from (Lemke 77)

The educational administration was responsible for implementing the goals of the German socialist regime which was controlled by the SED. For this reason party propaganda did play a large role in schools. The party held specific sympathies towards workers and peasant classes who received preferential treatment. Special "workers and peasant facilities" (Bernier 86) existed in universities. For laborers, schools could be found in many factories and there was also the opportunity to participate in evening or correspondence courses. Courses generally emphasized vocational training, science and technology, and the socialist political ideas.

Achievements in East German education were attributed to high excellence in science and also to the fact scholarships and government subsidies allowed all people an equal opportunity to attain higher education. The schools were fairly well rounded, encompassing both artistic and more "practical" aspects of education. The system also provided for special needs children like the mental or physically handicapped.

Criticism generally stemmed from comparing the East German school system with that of the west. The following chart was used to downplay the achievements of the GDR's schools by emphasizing West Germany's higher expenditure on education.

Education Expenditures East Germany West Germany
  (millions DM) (millions DM)
in 1960 3,613 5,559
in 1978 9,539 61, 327
Increase in expenditures 264% 1,103%
Share of total government
outlays 1978
5.95% 10.04%

Other criticism often came from artists and even members of the Free German Youth (a popular political youth organization at the university level) who felt limited in freely expressing ideas other than those approved by the heads of state.

Consumer Goods and Consumption

East German "consumer goods lack the fashionable and functional items commonly available in the west." (Bryson 22) Over the years more varieties of goods were presented in the market. However, problems still remained. One of the most recognizable problems existed with complementary goods. Complementary goods are "goods that go together. A decrease in the price of one results in an increase in demand for the other." (Case G2) In eastern bloc countries you could often find instances where there was an abundance of one good (i.e.. cameras) but a severe shortage of its complementary part (i.e.. film). This was the result of inefficient planning caused by poorly interpreted supply and demand trends and price discrepancies. One of the most common examples of an imbalance in complementary goods exists with electronic commodities and batteries. There were many different types of electronic goods to be purchased but never enough batteries to go around.

Planners also had difficulties when it came to estimating demand for "fickle goods such as shoes, clothing, textiles, and furniture." (Bryson 23) There were often long waiting periods for luxury goods such as cars, TVs, washing machines, etc. Once these goods arrived a family could still find itself in trouble if anything broke down. A shortage of parts and repair services meant that once an item experienced problems, it was likely to be out of commission indefinitely.

The following chart shows the distribution of an average worker's net income in East Germany in 1969. This provides a limited look at consumer items which might be of greater demand in a socialist society.

Item Percent
Food 38
Beverages and tobacco 11
Clothing 16
Household goods 13
Transportation, fuel, and light 8
Housing 5
Personal care 4
Education, entertainment,
and miscellaneous

* taken from chart (Bernier 83)

Many problems did exist in the Soviet-type socialist system with consumer goods production and allocation. However, once again, East Germany experienced less difficulty in this area than did the Soviet Union and other eastern bloc nations.

Personal Freedom

One of the criticisms against socialist planned economies that capitalist democracies seem to vehemently voice, is the suffocating grip socialism seems to have over citizens personal freedom. The idea of personal freedom was expressed in the German Democratic Republic's original constitution and previously mentioned in the "Historical" section of this paper. It includes (but is not confined to) freedom of the press, free speech, and the right to emigrate.

Public information in East Germany was entirely controlled by the government. There were no privately owned newspapers, radio stations, television stations, film studios, or publishing houses. This was primarily due to the regimes need to restrict information on the progress of western nations in order to legitimize its own system. There was always this looming fear that "golden" dreams of West German life would cause mass emigrations as experienced before the construction of the Berlin Wall. If emigrations did not occur there was still the possibility that western information could corrupt the citizens of the GDR, causing them to turn against the SED and all it stood for. Communism was an influence in all aspects of the media and the SED consciously controlled public information in order to emphasize its own party propaganda.

When the 1970's and 1980's introduced modernization in television and radio transmission, it was impossible to keep the west out. There were periodic attempts to jam selected radio and television broadcasts from West Berlin but most of these found limited success.

Freedom of speech was also obstructed in the academic fields of art and literature. Politicians confined these fields to the realms of "socialist realism. Meaning that artistic expression must portray the realities of daily socialist activities and could not encompass a formalistic or abstract sense of life." (Bernier 106) For that reason, most of the books published by East German authors were written in exile.


There are many ideas expressed in socialism that market economists need to consider. Often competitive democracies (like the United States) grasp the idea of "survival of the fittest" and chose not to look beyond its implications. Perhaps there would be less poverty and homelessness if market economies believed in the socialist idea of caring and providing for "all" citizens. Is it possible to provide for society as a whole yet still be successful as a government and economic power?

The rapid improvements in social welfare in East Germany and high living standard prove that a socialist economy can provide for much of society's "basic needs". However, by the 1980's East Germany and other socialist countries began to see their system fail. Regardless of the progress socialism had made, it could not compete with the success of capitalist economies.

In terms of social welfare the German Democratic Republic succeeded in drastically improving housing, medical care, education, and consumer choices from pre-war standards. It surpassed its eastern comrades in almost all aspects of social growth and living standards. However, it could still never shake the hovering shadow of West Germany and the freedoms that existed there.


  • Bernier, Donald W. Area Handbook for East Germany. Washington, D.C.: U.S. Government Printing Office, 1972.

  • Bryson, Phillip J. The Consumer Under Socialist Planning: The East German Case. New York: Praeger Publishers, 1984.

  • Case, Karl E. and Fair, Ray C. Principles of Microeconomics. New Jersey: Prentice Hall, Inc., 1992.

  • Childs, David. East Germany. New York: Praeger Publishers, 1969.

  • Lemke, Christiane and Rueschemeyer, Marilyn. The Quality of Life in the German Democratic Republic. New York: M.E. Sharpe, Inc., 1989.

  • Turner, Henry Ashby Jr. Germany from Partition to Reunification. New Haven: Yale University Press, 1992.




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