The Political Economy of East German Privatization

The Political Economy of East German Privatization

The Political Economy of East German Privatization

The Political Economy of East German Privatization

Synopsis

Dininio examines the political economy of East German privatization. She shows that the transferred business and labor organizations in the East failed to lobby for assistance, but the government nonetheless responded to economic collapse by subsidizing large firms with grants, loans, loan guarantees, and a host of innovative programs.

Excerpt

Events following the dismantling of the Berlin Wall set Germany on a historic course of reunification. With its decision to permit free travel between West and East Berlin, East Germany's leadership reversed nearly three decades of separation on November 9, 1989. This policy reversal was a response to weekly demonstrations against the regime, the daily exodus of nearly 2,000 East Germans into West Germany, and the exhortation of Soviet leader Mikhail Gorbachev for liberalization. Rather than appeasing the regime's opponents, however, this political opening led to calls for democratic elections and to a growing interest in unification with the Federal Republic of Germany (FRG) instead of internal reform. Yielding to popular pressure, the communist leadership scheduled a national election for the Volkskammer (parliament) for March 18, 1990. The election became a referendum on the German Democratic Republic's (GDR) future, and the clear victory of Allianz, a conservative alliance advocating speedy unification, secured the country's reorientation to the West. Once in office, the Allianz government negotiated a monetary, economic, and social union withHelmut Kohl government which went into effect on July 1, 1990. This union transferred . . .

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