Abstract
Mecklenburg-Westpommerania is among the new Federal States in Germany with the most problems. Unemployment is chronically high, the economic dynamics very weak, and many people are no happier now than they were before the transition. One of the main aims of this study was to find out why things
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are not going as well in this region as elsewhere and how this outcome has been influenced by the development of the area prior to the transition. The first part discribes developments in the GDR and the Eastblock, and its influence on the Northern part of the GDR. The GDR expanded the preexisting industrial base in the south and transformed it in accordance with the Soviet tradition into an area with large-scale heavy industry. As the other parts of the GDR had numerous firms of secondary importance, we may call this a developing region. This terminology also applied to the Rostock region. The rest of the research area remained in its peripheral position.
The second part begins with the revolution and the re-unification. The introduction of Economic, Monetary, and Social Union on 1 July 1990 dealt a mortal blow to the economy of the GDR. The rapid introduction of the D-mark at parity, an unrealistic rate of exchange, made the majority of the companies unprofitable at one fell swoop. The destruction of capital was enormous, due to the course of reform and the way public corporations were privatized. The destruction affected not only physical capital (the manufacturing plant) but also social capital: large segments of the East-German workforce were made redundant. Many West Germans had an inaccurate image of the knowledge base, professional skills, motivation, and capacity to improvise of many East Germans.
One of the main problems of the East-German economy is the gap between productivity and wages. Though reunification was rapid, it did not prevent a massive migration (of about a million East Germans) to West Germany. The migrants were mainly young people with initiative. It is an ominous sign that migration to West Germany picked up again after 1998.
The differences between the western and eastern parts of Mecklenburg-Westpommerania have become quite large. Basically, the regional policy pursued by the State government comes down to the spatial distribution of subsidy flows, and there is too little room for differentiation within that policy. There are considerable problems in the rural interior of Mecklenburg-Westpommerania due to the massive out-migration of young people.
In order to get East Germany off the ground, simply introducing a market economy and a new institutional environment was not enough. Insufficient attention was given to the specific conditions and characteristics of East Germany. It will be necessary to find a way to get the endogenous development of East Germany moving. But judging from how Germany s political scene looked at the end of 2002, things have got off track.
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