Development and Modernization Under Socialism and After: An Introduction

Abstract

The German Democratic Republic (GDR) was the most developed economy under state socialism. After World War II, this system had been introduced in Eastern Central Europe (ECE) under Soviet rule, and it collapsed throughout the region in 1989–90. It had not fulfilled the high expectations concerning development and modernization. In the twentieth century, modernization was pursued along two roads, the liberal and the collectivist. What prevented the latter from succeeding?

Prominent features of the system stood in the way of typical modernization trends, such as the organizational, functional, and international division of labor. Extensive unbalanced growth (industrialization)—imperative for the Soviet Union in its early years—was less urgent for the higher developed societies of ECE. They would have needed continuous structural change, specialization, and innovation to keep up with the West. But they were unable to rid themselves from the fetters of the Soviet system.

The lack of innovation may be seen as major deficiency of the state socialist system. Traditionally, East German science and engineering enjoyed a high reputation and were further promoted in the socialist period. The problem was to get new products and processes adopted to production due to bureaucratic red tape in planning, a monopolistic industry structure, and low risk-taking of the firm managers. The entrepreneurial habitus lay dormant under the cover of socialism. After the system collapse, it had to be resuscitated in the transition period.