We have been on a history binge this month on the blog, so why not keep the fashion as we all focus our energy otherwise on moving through the pandemic and crisis! Many expats and Germans from outside Berlin come to the poorest and sexiest region of Germany and set up camp in the East of the city as a self-employed or freelance person. But do they know the history of the East? Thirty years ago it likely would never have been.
Within the socialist system of values of the GDR society, professional independence and entrepreneurship were largely assessed negatively. Both were regarded as a rather undesirable remnant of capitalist society, which has no place in a workers 'and peasants' state. However, one has to distinguish between appearance and reality, between the pure socialist ideology and the concrete policy towards the private sector in the "real existing socialism" of the GDR.
After the founding of the GDR, the suppression of self-employment was initially driven particularly strongly in agriculture. This took place in the form of forced collectivization. In 1955, 71.6 percent of all people employed in agriculture were privately employed, while this proportion was only around 4 percent in 1960.
In the industrial sector, the socialist government initially took a more moderate approach. Nevertheless, many entrepreneurs left the GDR as early as the 1950s and 1960s, as their leeway was increasingly restricted over time. Plus, there have always been resourceful ways to finance a start up or freelance work in the capitalist side of Germany.
In 1972, private industry was finally expropriated. Since the great wave of expropriations at the beginning of the 1970s, self-employment has only been allowed in a few economic areas. There were only a significant number of self-employed people in the craft and retail sectors.
However, companies in these areas were also subject to strict controls by the state. For example, they were not allowed to employ more than ten people and the state tried to limit the profits of private companies. The production of goods took place increasingly in large state-owned enterprises. These so-called combines were obliged by a central planning committee controlled by the government to produce according to certain specifications.
In 1989 there were only 185,000 self-employed people in the GDR, which corresponds to a rate of around 1.8 percent of the working population (people between 15 and under 65 years of age).
In the course of German reunification in 1990, there was a fundamental transformation in East Germany from a centrally planned economy to a social market economy, as had already existed in West Germany for 40 years. This economic upheaval was associated with an enormous start-up boom. In 1990 alone, around 60,000 new companies were founded, around 60 percent of which were in the service and tourism sectors.
The start-up boom in East Germany during the first years of the transformation process had a number of causes:
- Firstly, due to the extensive suppression of self-employment under the GDR regime, there was a need to catch up on start-ups.
- Second, immediately after the system upheaval, only relatively few eastern German providers faced a sharp rise in demand for production and service goods in eastern Germany.
- Thirdly, unemployment rose sharply in East Germany, so that a lack of professional alternatives when deciding on self-employment was often a leading motive ("necessity entrepreneurship"). The number of employees in East Germany fell between 1989 and 1993 from 9.8 to 6.2 million. The average unemployment rate in 1993 was around 15 percent.
Information about the catching-up process with regard to self-employment is provided by the data material of the working group "Employment accounts of the federal and state governments", which uses various statistical sources to determine the number of employees and employees in various regions. The number of self-employed results from the difference between employed and employed persons.