problems in social welfare

• finance

  • The cost of subsidising items like food, rents and transport rose from 16.9 billion Ostmarks in 1980 to 49.8 billion by 1989.
  • By this time, for every 100 Ostmarks spent on food, the state was subsidising it to the tune of 89 Ostmarks.
  • Economists understood the problem early on: in 1972, the president of the State Bank had worried that this level of subsidy would make the external debt problem worse.
  • Honecker accused people of sabotage when officials raised the issue with him.
• investment

  • The government spent on social welfare at the expense of investment.
  • In the 1970s, public investment accounted for 24.4% of national income.
  • By 1979 this had fallen to 20.1% – the lowest in the Soviet bloc.
  • This meant that the government simply lacked the money for investment into the economy.
  • This was significant in the 1970s but would become even more critical in the following decade.
• shortages

  • Essential minimum standards were prioritised and items considered luxuries had to wait.
  • took 12-17 years for the delivery of a new car.
  • took 13 to be connected to a telephone.
  • Shoppers often queued up for 4 hours a day
  • choices were very limited
  • There were hard currency shops known as Internships where high quality goods were available