Industry, Economy and the East German Government
The watch industry, like any other industry in East Germany, had to contend with the political and economic constraints of operating under a communist system. This page endeavours to briefly explain some of those difficulties.
The Centrally Planned Economy
Following the Second World War and the Soviet Administration, the fledgling East German State inherited a centrally planned economy (CPE). In a CPE, the state decides the production targets, prices of commodities and consumer goods and allocates resources. This is usually co-ordinated through a five year plan agreed by the Socialist Unity Party at the party congress and delivered by Council of Ministers by means of The State Planning Commission.
The State Planning Commission provides plans and targets for the ministries beneath it and the ministries deal directly with the Kombinaten. Previously, ministries dealt with the VEBs (people’s enterprises) but following restructuring, the Kombinaten system was introduced as a more streamlined arrangement. Below the Kombinaten are the individual production units of which the Ruhla watch and clock making plant was one in the Kombinaten.
The Five Year Plan
The five year plans used in CPEs are complex and feed into a more long range planning process. One of the criticism of a centrally planned economy is that it is inflexible. However, there was a certain amount of flexibility in the East German model. Since there was an interlocking web of plans covering various aspects of the economy and at different levels across the duration of the five year plan there was a level of flexibility to modify individual parts of the plan to meet any short term needs and to meet unforeseen circumstances. Monitoring of the Plan was a highly bureaucratic exercise.
Prior to the adoption of a five year plan, the State Planning Commission
negotiated with the Kombinaten and the production units to consider supply and purchase of raw materials or services. This was then translated into a draft plan by the State Planning Commission for approval by the Council of Ministers. Following approval, the State Planning Commission assigned relevant production targets and responsibilities to the State Ministries and from there to the Kombinaten and finally down to the production units.
Of all the Warsaw Pact economies, East Germany enjoyed one of the highest standards of living. But, consumerism was affected by the CPE and the ability of the production units to meet the production targets.
The production plan was supplemented by other mechanisms that controlled supplies and established monetary accountability. One such mechanism was the System of Material Balances, which allocated materials, equipment, and consumer goods.
It acted as a rationing system, ensuring each element of the economy access to the basic goods it needed to fulfil its obligations. Since most of the goods produced by the economy were covered by this control mechanism, producing units could have difficulty obtaining needed items over and above their allocated levels.
This produced problems within the CPE and was made worse in some of the Warsaw Pact economies by the corrupt or incompetent
practices at some Kombinaten and production units. If an enterprise received an over delivery of materials or goods, these were not sent back and therefore created a shortfall in another part of industry or consumer economy. Production managers retained these over supplied materials as bartering commodities to acquire materials or goods which had not arrived in the quantities they required to fulfil their own production targets from other VEBs or state enterprises. Sometimes this was not possible or the oversupplied goods found their way into the black market economy. This would lead to a shortage in the state department stores and accounted for the ability to purchase the same item, for a price, from the black market economy.
Having said that, consumerism in the German Democratic Republic was still relatively high. This can be seen from the fact that the State Department Stores issued catalogues of consumer goods to buy from as early as the 1950s. These catalogues were still going strong during the 1980s and were as popular in East Germany as they were in West Germany.
Ruhla watches were exported to the Federal Republic and other parts of Europe. In West Germany, Ruhla watches were sold through department stores and catalogues and were very popular. (c)2011 http://ostagieruhla.wordpress.com