Prediction and Conclusion
Care should be taken in making predictions for an eastern German future that is either too pessimistic or optimistic. We look forward with cautious optimism, seeing Germany as a country that still holds its breath with lingering problems of rigidity. The process of reunification is still far from completion and it will take time before Germany reassembles itself into a truly united whole. In the confused excitement of formal reunification, complicated missteps were made in setting short-sighted policies that should have accounted for the differences in labor skill between west and east. The Germans knew what an obstacle expensive labor could be, yet missed the chance to circumvent inflated wage problems. Instead, Germany has swerved to evade development obstacles as and when they arise. Responsibility for Germany's future lies on policymakers who must take the right economic steps. Already the adjustment and updating of labor policies hint at better things. In a recent (July, 1999) report, German Economics Minister Werner M
- A substantial reduction of state spending to 40% of GDP (1998: 48%). Subsidies and social-security spending should be reduced to gain room for manoeuvre for a comprehensive tax reform.
- Structural reforms of the social-security system in order to improve private provision instead of state provision.
- Deregulation and measures for more flexibility, especially on the labour market. It is underscored that wage policy should take account of the labour-market situation and make allowances for different levels of skills and qualifications and regional differences in the economic situation, which are usually neglected in the collective wage-bargaining process in Germany.
On top of which, the "trade unions themselves recently agreed to similar principles for wage policy at the pact for jobs talks (round-table talks with the government and employers’ associations). In keeping with making proper policy adjustments, "Schroeder said the aim was to balance the budget by 2006 and slash a $780 billion national debt run up mainly with the cost of rebuilding former communist East Germany." The repositioning of these policies marks a departure from traditional paternalistic German labor laws and shows a willingness to do what's necessary to balance out wage problems. Prosperity is not predetermined solely by the introduction of advanced western technology. The social and economic network needed to harness it must also be set in place.
Yet taken in perspective, the pronounced dislocation, unemployment, and frictional adjustments in post-reunification East Germany are externalities that can be expected as a result of the east's technological redevelopment. East German life is shaken violently as it catapults toward modernity, as is the case with any late developing industrial region seeking to come into its own. Dislocation is a natural pain of late development, and East Germany has a bright chance at successfully pulling off a Gershenkronian "leap frog" to the cutting edge of modern industry. Though difficult, the retiring of old industry is the creative destruction (Schumpeter) necessary for future prosperity.
Technology widens the existing divide between ossies and wessies, but will eventually be a leveling force, bringing the east and west to equal footing. In this way, technology will be a lever that lifts the east up to developed world standards. Mental barriers crumble slower than walls, and it may take young/future generations of ossies to adapt east to west. Time and education will mend the gap, and eastern mentality will eventually "catch up" with the west. Ultimately the tide of dependence will end, and not a moment too soon. The unalloyed joy of reunification has turned to mutual resentment from both sides of the former east and west. Support for subsidies and the 7.5% solidarity tax is tenuous. Patience is needed to see both halves properly align.
East Germany may be late in seeing economic benefits – measured in growth of industry and employment – but has already realized the benefits of political freedom and increasing wealth. Despite the dislocating social effects explained in this project, support for reunification remains high. "A (Berlin Zeitung) poll . . . found most eastern Germans – 70 percent – say the advantages of unification outweigh the negatives, especially because of improved living standards." In the process of continuing reunification, positive effects cannot be taken without negative effects.
Though they lament some of the discomforts of reunification, most Germans are supportive of reunification. At its recent 10 year celebration commemorating the fall of the Berlin Wall, only the former leaders of the Soviet Union, the United States, and West Germany – Gorbachev, Bush, and Kohl – were present. It is interesting to notice the political actors who did not advocate German reunification. "The skeptics included Francois Mitterrand, the former French president, who was fond of the old quip that Germany was such a splendid place, it was a good thing there were two of them. Margaret Thatcher was equally hesitant. The absence of a British or French leader at Tuesday's Berlin ceremony was striking."
The integration of East and West Germany created a united Germany that now leads Europe with the European Union's largest population and largest economy, thus increasing Germany's political weight and power vis-à-vis other EU nations. Unsurprisingly, Germany's reunification is most threatening to the pride and relative position of Britain and France, the other historically powerful actors in Europe.
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