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New Economic System 1963 - 68 - Coggle Diagram
New Economic System 1963 - 68
Reasons for implementation
To improve GDR's economic performance, Ulbricht launched NES under the direction of Gunter Mittag, Head of Office for Industry and Construction.
GDR's new-found security following the Berlin Wall gave SED the opportunity to adopt and experiment with new policies.
It coincided with the USSR and Eastern Bloc, including Hungary and Czechoslovakia, recognising need for economic reforms to hopefully promote innovation and efficiency.
Aims
Government retained control but more decision-making was allowed for directors at low levels in organisations.
Introduced profit-making as an indicator of performance to focus on quality goods.
Incentives for workers such as financial bonuses and increasing wages for higher skill levels.
Focus on scientific and technological developments especially chemical, optics and electronics.
Encouraged universities and industries to form links to improve production.
Khrushchev tolerated the policy despite its move away from central planning.
Ulbricht's key support was Erich Apel, former Nazi and Soviet rocket scientist, Chairman of State Planning Commission. He was les ideologically bound than other SED members.
Problems
Managers did not have the appropriate financial skills and targets were not met.
There were frequent difficulties in getting resources needed.
Wage differentials were seen to be unnecessary when there was a lack of consumer goods so there was little to purchase.
Opposition by those committed to communist ideology.
Some individuals deliberately sabotaged industrial production, broke machinery or took extended sick leave.
Skilled workers found themselves overqualified, leading to dissatisfaction and high labour turnover.
End of NES
In time, these issues could have been overcome but USSR leadership wanted to recentralise economic planning.
This change in beliefs was partly due to Brezhnev becoming leader and ousting Khrushchev.
Failure to meet targets and accusations of relying on FRG, personal attacks on character damaged Apel's political standing, weakened Ulbricht's faith in him.
December 1965 - Apel shot himself, his death signalled the end of a chance to continue NES policies.