Economic System of Socialism

The Economic System of Socialism (ESS) was an economic policy implemented in East Germany between 1968–1970, led by General Secretary of the Socialist Unity Party Walter Ulbricht. It focused on high technology sectors in an attempt to make self-sufficient growth possible. Overall, centralized planning was reintroduced in the so-called structure-determining areas, which included electronics, chemicals, and plastics. Industrial combines were formed to integrate vertically industries involved in the manufacture of vital final products. Price subsidies were restored to accelerate growth in favored sectors.

The annual plan for 1968 set production quotas in the structure-determining areas 2.6% higher than in the remaining sectors in order to achieve industrial growth in these areas. The state set the 1969–70 goals for high-technology sectors even higher. Failure to meet ESS goals resulted in the conclusive termination of the reform effort in 1970.

In order to pacify the critics and to show that New Economic System is compatible with socialism, during the 7th SED congress in April 1967 Ulbricht renamed his economic reforms as Economic System of Socialism (ESS). From 1968 greater state control over economy was reintroduced to achieve accelerated growth in selected segments. A new central plan was meant to prioritize and direct development of these preferred structure-determining projects, while the rest of economy was supposed to continue with NES.

As the GDR was unable to catch up with the West, the idea was to invest heavily in achieving “a leap” in the most modern industries of the time and then to reap profits from exporting products that would be a generation ahead of the West. These were the years when the Soviet Union appeared to be winning the space race, so the socialist optimism was at its peak.

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