New Economic System

The New Economic System (German: Neues Ökonomisches System), officially the New Economic System of Planning and Management, was an economic policy that was implemented by the ruling Socialist Unity Party (SED) of the German Democratic Republic (GDR) in 1963. Its purpose was to replace the system of Five-Year Plans which had been used to run the GDR's economy from 1951 onwards. The System was introduced by Walter Ulbricht to try to improve the performance of the existing central planning, so that the economy might be run in as efficient a manner as possible.

Its main aims were to reduce the wastage of raw materials, increase the level of mechanisation used in production methods and, most significantly, to create a system in which quality rather than quantity was foremost. It was also used to rebuild the economy following the Republikflucht which had devastated the GDR's economy prior to the building of the Berlin Wall on 13 August 1961.

The System was largely unsuccessful and was replaced in 1968 by the Economic System of Socialism which concentrated on building up the GDR's high-tech industries.

The New Economic System was launched in the first half of 1963 in East Germany by its leader Walter Ulbricht. Its goal was to stabilize the ruling regime by demonstrating the GDR’s competitiveness with the West German economic miracle. Ulbricht tried achieving higher economic growth by introducing very limited free market elements into the existing Stalinist state-plan model. Due to ideological reasons, the NES was never fully implemented, did not generate the expected results and after 1967–68 was reorganized into the new Economic System of Socialism, which caused even more disruptions to the rigid socialist economy and was ended by the SED's conservative wing in late 1970/early 1971 with the removal of Walter Ulbricht from power by Erich Honecker.

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