The experiment — VOICES for REASON

One thing the anniversary of the fall of the Berlin Wall should remind us of, in addition to the sheer brutality of communism, is the economic devastation it caused–and the unequivocal economic superiority of freedom. “If you want a contemporary demonstration of the respective merits and performances of a free economy and of a controlled economy,” Ayn Rand wrote in 1961, “a demonstration that comes as close to an historical laboratory experiment as one could hope to see–take a look at the condition of West Germany and of East Germany.”

From the end of World War II until the collapse of the Berlin Wall in 1989, East and West Germany were separated, not only by bricks and mortar shells, but by economic doctrines. People who shared a common history, a language, an environment, demonstrated over the course of decades the superiority of markets over government planning.

While retaining various forms of welfare and interventionism, Western Germany’s economy was largely free after the war. Property was privately owned, and prices and wages were determined by market forces. East Germany, however, conformed to Soviet-style central planning. The Socialist Unity Party of Germany oversaw all production, most of the means of production were owned by the state, and prices and wages were placed under centralized control. In other words, the government dictated what to produce, how to produce it, and how to distribute what was produced.

The results? Here is a 1963 report from Time magazine:

East Germans are barely getting enough to eat. Their faces tend to look grey because of the lack of citrus and other fresh fruits (the average consumer gets fewer than five oranges a year). With the exception of bread, meal, some baked products and margarine, most foods are rationed. In Saxony, for example, each person’s theoretical weekly allowance is one-half pound of meat, two eggs, one-half pound of hard sausage, and about six ounces of butter. The favorite strategy for buying up unrationed goods in short supply is to dispatch every member of the family to stand in line at different shops. Prices are about four or five times as high as in West Germany, and many families help make ends meet by selling such scarce items as coffee ($10 per Ib.) at a markup to people who do not have the time to wait in line for hours.

The differences were so stark that mere statistics don’t fully capture the East’s economic despair. In the West, for instance, forty-one percent of Germans owned cars in 1983; in the East, less than twenty did. But the only car available to most East Germans was the Trabant, a vehicle so pitiful that Germans used to joke you could double its value by filling up the gas tank.

In 1989, the Berlin wall fell, and the world learned that even the pathetic productivity claimed by the East Germans had been wildly exaggerated. When, in the early days of reunification, a desperate East Germany offered a free factory to one Italian company in the hopes of attracting investment, it was turned down. “The restructuring costs were so great,” said the company’s chairman, “it did not make sense for us to take over the East German operation, even though it was being offered to us free.” Such was the state of what had been, as the New York Times noted in 1990, “Communism’s strongest economy.”

It’s no wonder East Germany needed a wall to keep people from fleeing–or that so many East Germans were willing to risk their lives to escape.

The contrast between East and West Germany reveals, at the deepest level, the true source of wealth production. As Ayn Rand’s put it:

The root of production is man’s mind; the mind is an attribute of the individual and it does not work under orders, controls and compulsion, as centuries of stagnation have demonstrated. Progress cannot be planned by government, and it cannot be restricted or retarded; it can only be stopped, as every statist government has demonstrated.

Image: Wikimedia Commons