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Gross Domestic Reunification: The Tragedy of East Germany Post-Reunification

Image via Tagesspiegel

The fall of the Berlin Wall was one of the most consequential events in modern history. Those who remember it can recall the reactions of their families, the media, and the international community. Those who have come of age afterward can vividly remember learning about it in school. And future generations will likely continue to be taught Reagan’s message to Gorbachev and the subsequent death of communism in Europe. The common teaching and understanding is that the reunification of Germany was good for both sides of the Berlin Wall—and indeed, in many respects, it was. Separated families could once again visit each other, and East Germans now had the chance to experience and participate in Western-style liberal democracy. Not only was reunification celebrated in Germany, Western NATO powers saw it as symbolic of the failure of the socialist system. In spite of Western celebrations of the German Democratic Republic’s (GDR), also known as East Germany’s, demise, this was no victory for much of its population. With German reunification, the citizens of the former GDR saw their increased political freedom come at the expense of the economic well-being and stability of the socialist project.

Three months prior to political reunification, the East and West German economies were unified, marking the end of the economic conditions brought about by GDR socialism. Leading the integration of the two German economies was the Treuhandanstalt (trust agency, or Treuhand for short), tasked with privatizing national industries of the GDR. For most of 1990, the period between economic and political reunification, it was effectively the governing body of East Germany. Its decisions saw the sale of 13,000 companies and the loss of millions of jobs that were stable and guaranteed under the socialist system. Millions became unemployed; and, coupled with rising rents, some 200,000 people in Germany found themselves without permanent shelter. 94 percent of East German companies were bought by West German ones (many of which subsequently closed or significantly contracted out their new acquisitions) and industrial production collapsed, falling 73 percent from 1989 levels. As of 2019, the average monthly income in the former GDR was around $600 lower and unemployment around one percent higher than in the West.

The lost economic well-being was not felt equally in the former GDR, as women were affected on a far greater scale than men. Gender equality was enshrined in the socialist project from the beginning, with the GDR’s 1949 constitution declaring that “men and women are equal.” Laws enacted throughout the 1950s and 1960s expanded upon this principle. Women were provided with resources to develop their own career paths, studies, and engagement in the economy. Policies aimed at helping mothers ensured they could still participate in the workforce. These included financial support for mothers, granting the same rights to single and married mothers, and creating thousands of publicly-funded daycare centers. This stood in stark contrast to West Germany, where women often could not pursue careers if they interfered with so-called “domestic duties.” As Bruni de la Motte and John Green write, “Women in the GDR embarked on a broad variety of professions and trades, were economically independent, had a high level of self-confidence and provided very different images of and for women compared to the West.” Reunification reversed much of this progress in women’s rights. In the furloughs brought about by the Treuhand, women were laid off at disproportionately higher rates than men. In fact, 20 years after reunification, women made up 70 percent of the unemployed population in the former GDR.

Happiness in the East has understandably trailed that of the West due to the economic “shock therapy”—rapid, liberalizing capitalist reforms instituted to kickstart a market economy in former socialist states—associated with reunification and its accompanying losses. Just in 2017 there was a marked difference in happiness between the former GDR and the rest of Germany, even after accounting for demographic and socioeconomic factors. The former GDR need not be denoted on the map: The stark quality-of-life differences between those in present-day East and West Germany makes clear which states comprised the GDR. This can also be seen in maps displaying GDP per capita, which is substantially lower in the East. The effects of economic reunification could very likely be the cause of this greater dissatisfaction with life in Germany today. In surveys of happiness across Germany, former East Germans reported bleaker outlooks overall, but most notably in questions regarding personal and household income. One significant source of distress for the former citizens of the GDR was their concern over job security, an almost alien worry in the socialist system where the right to work was enshrined in the constitution.

Starting with the assassination of Treuhand CEO Detlev Karsten Rohwedder in April 1991—understood to be a political assassination over his management of the Treuhand—the poor economic conditions of the former GDR have had troubling political repercussions in today’s Germany. As many former East Germans saw their wealth, purchasing power, and overall material conditions significantly decline, they turned to political extremism. Several German far-right, neo-Nazi groups have originated from the states of the former GDR, including the infamous National Socialist Underground, which carried out a series of robberies, murders, and terrorist attacks in the early 2000s. However, the most notable and visible shift to the far right is the rise and continued strength of the far-right party Alternative für Deutschland (AfD) in the former GDR. Similarly to maps displaying happiness and GDP per capita, the former GDR is clearly illuminated in maps displaying AfD’s electoral performance in the 2017 and 2021 Bundestag (Germany’s lower legislative chamber) elections. Interestingly, electoral results for Die Linke (The Left) are similar. Despite this support for GDR-esque economic policies, however, Die Linke still trails AfD by a significant margin: In post-reunification East Germany, a “resentment” of elites—stemming from the the top-down economic shock therapy and austerity of the West—spurred a populism that was more easily co-opted by the right than the left. East Germans disillusioned with traditional politics, alongside a youth electorate raised under the dire consequences of reunification, subscribed to these self-declared anti-establishment figures. There were positive effects, especially political, of German reunification, and this article certainly does not seek to downplay them. However, examining other outcomes—specifically economic ones—paints a far more nuanced picture of reunification than is often portrayed in textbooks and media. For East German workers, women, and overall contentment, as well as the contemporary East German political landscape, the consequences of reunification cannot be overstated.