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AfD rally on the market square in Haldensleben (Saxony-Anhalt)
Photo:
Christian Schroedter / imago images
In the state elections in Saxony-Anhalt, the AfD could get almost 28 percent of the votes if the latest Civey poll on behalf of SPIEGEL proves to be true.
Saxony-Anhalt is not alone in this.
In the other new federal states, between 23.5 percent and 27.5 percent of the population vote for the AfD.
In West Germany, the AfD share of the vote is five to ten percent.
The Federal Government Commissioner for East Germany, Marco Wanderwitz, sees a lack of understanding of democracy among East Germans as the cause of the AfD's popularity in the East.
But the reasons are deeper.
Only a careful analysis of these causes will help to counter right-wing populism in the East.
Today's East Germans not only vote differently, they also think and feel differently.
To understand the reasons, one has to analyze the economic fundamentals:
The per capita income in East Germany initially grew faster than in West Germany until 1996.
In 1996 the East German per capita GDP had already reached 67 percent of the West German level.
Since then, the catching-up process has been slow.
In 2017, the East German per capita level reached 73 percent of the West German level, as can be read in the Federal Government's annual report on the state of German unity.
Bankrupt overnight
Why did East Germany's catch-up process come to a standstill around 25 years ago?
To understand this, one has to turn to the political reforms introduced after the fall of the Berlin Wall.
In 1990 the federal government decided to liberalize trade with East Germany overnight and to remove all existing barriers to the flow of capital and labor.
The exchange rate between the GDR mark and the D-mark was set at 1: 1.
As a result of the currency reform, wages in the east rose to 70 percent of western wages, although productivity in the east was only 30 percent of the western productivity level.
As a result, East German manufacturing went bankrupt overnight and East Germany's formerly successful export markets in Eastern Europe disappeared.
The deindustrialization of the East was initiated.
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In March 1990 the East German government decided to found a new super agency - the Treuhandanstalt. The Treuhandanstalt privatized the East German companies and assets and sold them to Western companies, often at a symbolic price of one D-Mark in exchange for job guarantees. This massive subsidy created an incentive for West German firms to move east, even though the country had lost its comparative advantage of low wages as a result of currency reform. The program worked, and in 1994 the Treuhand had sold all East German companies to West German companies.
After the work was done, the Treuhandanstalt was wound up in 1994 and transferred to the Federal Agency for Unification-Related Special Tasks.
Without the grant from the Treuhand, however, western companies could no longer find an attractive investment location in eastern Germany.
With the drying up of investments from West Germany and those from abroad, the alignment process came to a standstill.
Germany's bumpy reunification process was shaped by two false narratives:
The first was
that the Treuhand had betrayed East Germany by giving away valuable assets to Western companies.
But these gifts were necessary subsidies to induce companies to come to a region that had lost its cost advantage due to the cost explosion in the wake of the currency reform.
The second
damaging narrative was that "East Germany had nothing to sell the world". But the law of comparative advantage of economic theory says that every country has something to sell when wages are low enough. The region had nothing to sell because currency reform had robbed it of the cost advantage that countries at a similar level of development normally enjoy. This narrative had a detrimental effect on the East German psyche because people felt that they were worthless in a market economy. And so the East Germans lost their dignity.
The government's big mistake was to dissolve the trust after the East German goods had been sold.
Instead, the authority would have had to offer non-resident companies that want to invest in East Germany continued subsidies and tax breaks to compensate for the high wages there.
Looking back, one can speak of 30 years of political failure today.
New Hope
But it is not too late to get the economic rapprochement process going again. The East is feeling new hope after years of frustration. This is due to large new investments in the production of electric vehicles in East Germany. The energy transition gives East Germany the opportunity to become the center of future electromobility in Europe. The first signs are the investments made by VW with the ID.3 in Zwickau and Dresden. BMW manufactures its i3 in Leipzig, the Chinese company CATL produces vehicle batteries in a plant in Thuringia, and Tesla produces in its gigafactory in Brandenburg.
These investments will help heal the psychological division in Germany by curbing the deindustrialization of the East - and with it the tendency of East Germans to vote for extremist parties that live off their fears.
