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Economic System of Socialism
The Economic System of Socialism (ESS) was an economic policy implemented in East Germany between 1968 and 1970, which was introduced and led by the country's leader, Walter Ulbricht. It focused on high technology sectors in an attempt to make self-sufficient growth possible. Overall, centralized planning was reintroduced in the so-called structure-determining areas, which included electronics, chemicals, and plastics. Industrial combines were formed to vertically integrate industries involved in the manufacture of vital final products. Price subsidies were restored to accelerate growth in favored sectors.
The annual plan for 1968 set production quotas 2.6% higher in the structure-determining areas than in the remaining sectors in order to achieve industrial growth in these areas. The state set the 1969–1970 goals for high-technology sectors even higher still. Failure to meet the ESS's goals resulted in the termination of the reform effort in 1970.
In order to pacify the critics and to show that the New Economic System was compatible with socialism, at the 7th SED congress in April 1967, Ulbricht renamed his economic reforms as the Economic System of Socialism (ESS). From 1968, greater state control over the economy was reintroduced to achieve accelerated growth in selected segments. A new central plan was meant to prioritize and direct development of these preferred structure-determining projects, while the rest of economy was supposed to continue with the NES.
As the GDR was unable to catch up with the West, the idea was to invest heavily to achieve a "leap" in the most modern industries of the time and then to reap profits from exporting products that would be a generation ahead of the West. At the time, the Soviet Union was advancing technologically in the space race faster than the United States, so socialist optimism was at its peak.
The increasingly technocratic Ulbricht saw a scientific-technological revolution as the quickest way forward for the GDR.
ESS was introduced under the slogan "overtaking without catching up" (überholen ohne einzuholen). Ulbricht, instead of trying to make the whole economy grow, concentrated all state efforts and investments on a few high-growth industries that were expected to bring the greatest returns. In these selected industries, the GDR hoped to “overtake” West Germany without the whole economy of the GDR "catching up" with West Germany.
The first list of structure-determining projects was created by the Council of Ministers in June 1967. The main areas of development were chemicals (petrochemicals and artificial fibers), engineering (machine tools and plant construction), electronics, data processing equipment, and automation technologies.
As the GDR lacked its own resources, it asked for more support from the USSR, and also began borrowing from the West. Ulbricht described the whole idea as:
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Economic System of Socialism
The Economic System of Socialism (ESS) was an economic policy implemented in East Germany between 1968 and 1970, which was introduced and led by the country's leader, Walter Ulbricht. It focused on high technology sectors in an attempt to make self-sufficient growth possible. Overall, centralized planning was reintroduced in the so-called structure-determining areas, which included electronics, chemicals, and plastics. Industrial combines were formed to vertically integrate industries involved in the manufacture of vital final products. Price subsidies were restored to accelerate growth in favored sectors.
The annual plan for 1968 set production quotas 2.6% higher in the structure-determining areas than in the remaining sectors in order to achieve industrial growth in these areas. The state set the 1969–1970 goals for high-technology sectors even higher still. Failure to meet the ESS's goals resulted in the termination of the reform effort in 1970.
In order to pacify the critics and to show that the New Economic System was compatible with socialism, at the 7th SED congress in April 1967, Ulbricht renamed his economic reforms as the Economic System of Socialism (ESS). From 1968, greater state control over the economy was reintroduced to achieve accelerated growth in selected segments. A new central plan was meant to prioritize and direct development of these preferred structure-determining projects, while the rest of economy was supposed to continue with the NES.
As the GDR was unable to catch up with the West, the idea was to invest heavily to achieve a "leap" in the most modern industries of the time and then to reap profits from exporting products that would be a generation ahead of the West. At the time, the Soviet Union was advancing technologically in the space race faster than the United States, so socialist optimism was at its peak.
The increasingly technocratic Ulbricht saw a scientific-technological revolution as the quickest way forward for the GDR.
ESS was introduced under the slogan "overtaking without catching up" (überholen ohne einzuholen). Ulbricht, instead of trying to make the whole economy grow, concentrated all state efforts and investments on a few high-growth industries that were expected to bring the greatest returns. In these selected industries, the GDR hoped to “overtake” West Germany without the whole economy of the GDR "catching up" with West Germany.
The first list of structure-determining projects was created by the Council of Ministers in June 1967. The main areas of development were chemicals (petrochemicals and artificial fibers), engineering (machine tools and plant construction), electronics, data processing equipment, and automation technologies.
As the GDR lacked its own resources, it asked for more support from the USSR, and also began borrowing from the West. Ulbricht described the whole idea as: