The Political Economy of East German Privatization

The Political Economy of East German Privatization

by Phyllis Dininio


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Dininio examines patterns of industrial assistance in the new German Länder (federal states) during the difficult transition from central planning to a market economy. She identifies the restructuring assistance given by the privatization agency, the Treuhandanstalt and the new federal state governments as the chief instruments of eastern industrial policy. In seeking to explain how the aid was allocated, Dr. Dininio examines the interests and policy resources of state and societal actors. The analysis shows that institutions condition to a significant extent the societal forces to which state actors respond in their policy choices.

In the case of East Germany, the interplay of institutions and circumstances led to a large-firm bias. The unitary business and labor organizations that were extended into the East could not accommodate the divergent interests of new members and so failed to lobby on their behalf for industrial assistance. While societal actors remained relatively passive, state actors intervened on behalf of select firms. The primacy of certain state actors but not others in these interventions as well as their primary policy agendas, derived from the institutional contours of the German polity. First, the constitution of a federal agency to privatize 13,000 firms singly and under severe time pressure prompted agency officials to give priority to large firms in the interest of expediency. Second, the dominance of the executive branch enabled Chancellor Kohl to help his supporters in the chemical industry and at Carl Zeiss Jena as well as troubled firms of national significance, such as the shipyards and the giant steel mill EKO-Stahl. Third, the federal structure of the government gave Länder officials significant resources to support big employers in their state, especially those from regionally dominant industries.

Product Details

ISBN-13: 9780275964849
Publisher: ABC-CLIO, Incorporated
Publication date: 06/30/1999
Pages: 152
Product dimensions: 5.50(w) x 8.50(h) x 0.50(d)
Lexile: 1690L (what's this?)

About the Author

PHYLLIS DININIO is with the Center for Democracy and Governance at USAID, where she provides guidance on anti-corruption strategies for developing and transitional economies. Dr. Dininio has provided technical assistance to governments in Romania, Bulgaria, Ukraine, and states in Africa, Asia, and Latin America. She recently completed a USAID Handbook on Fighting Corruption (1998).

Table of Contents

State Assistance in Privatizing East German Industry

Business and Labor Groups

The Treuhandanstalt

The Dominance of the Executive Branch

Federalism and the Five New Länder




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