TIME: Almanac 1993/TIME Almanac 1993.iso/time/040990/0409006.000

Text File | 1992-08-28 | 5KB | 119 lines

                                                                                WORLD, Page 50

THE GERMANYS

A Westerner for the East


De Maiziere picks a can-do capitalist from across the border
for the daunting task of rejuvenating his country's flaccid
economy


    Question: In a country that for more than four decades has
known nothing but central planning and its attendant
inefficiencies and sluggishness, where do you find a manager
who can transform the economy into a free market, bustling and
lean?

    Answer: You don't. You look abroad.

    That is the conclusion reached by Lothar de Maiziere, the
leader of the Christian Democratic Union, who is likely to
become East Germany's Prime Minister when a newly convened
parliament forms a government next week. For the post of
Economics Minister, De Maiziere has designated Elmar Pieroth,
a prominent economist in West Germany and stalwart of that
country's CDU. "De Maiziere told me he sought an experienced
market economist and couldn't find one in a planned economy --
would I give it a try?" says Pieroth. "I said yes."

    It was an answer characteristic of the affable Pieroth, 55.
A scion of West Germany's pre-eminent family of wine merchants,
Pieroth is a model of can-do spirit. Despite the immensity of
the task before him, he is confident that, once unshackled, the
East Germans will build for themselves a vibrant new economy
just as surely as their West German counterparts did after the
devastation of World War II. "In the coming years, we can
harness the idea of keeping up with the Joneses," he says. "The
East Germans want to show the West Germans that they can do
just as well."

    Pieroth's first priority will be to eliminate the
absurdities that now infect the system. Some 85% of East
Germany's economy is controlled by 220 unwieldy state Kombinate
(conglomerates), whose production  has been dictated by
ill-conceived five-year plans rather than by supply and demand.
Heavy-industry manufacturers, for instance, have had to
shoehorn consumer goods into their production lines, so that
TuR, East Germany's largest producer of electrical transformers,
also makes appliances for melting cheese at home.

    To reduce the role of the Kombinate, Pieroth aims to spawn
a healthy Mittelstand, the sector of small and medium-size
businesses that is the backbone of West Germany's economy.
There is a great need for such firms in the East, which suffers
a dearth of everything from corner restaurants to car
dealerships. In the past two months, some 40,000 East Germans
have applied for a share of the $3.5 billion that Bonn will
make available to them over the next three years for loans to
start small enterprises.

    Obviously, the move from big and bungling to small and
snappy will not be painless. Even those Kombinate most likely
to survive the rigors of a free market, such as optics
manufacturer Zeiss-Ikon Jena, will have to cut their bloated
payrolls. Officials in Bonn have estimated that the ranks of
the East German jobless will grow from 26,000 today to an
estimated 2 million (out of a work force of 8 million) by next
year.

    Yet Pieroth insists that unemployment can be kept to a
manageable 500,000, or 5.5%. Part of his strategy is to
encourage Westerners involved in joint ventures to retrain
workers whose skills are made obsolete. Pieroth also plans to
generate new jobs by pumping up to $12 billion in public and
private funds annually for several years into rebuilding East
Germany's decrepit infrastructure.

    Ironically, the transition to a sleeker economy will be
eased further by the estimated 1 million East German workers
who will be occupied over the next two years filling orders
placed by the Soviet Union. Bonn has pledged that a unified
Germany will honor those contracts. "The Soviets cannot
generate economic success on their own," says Pieroth, "and it
is in no one's interest for them to fail."

    Private investments from West Germany will fund most of East
Germany's make over, but the Bonn government will bear the huge
costs of swapping the East's nonconvertible currency for
deutsche marks and establishing social benefits, like
unemployment insurance, in the East. But Pieroth insists that
those expenditures will be offset by an additional one to two
percentage points of economic growth he reckons will be created
in West Germany by new business opportunities in the East.

    To many East Germans, Pieroth is a trenchant symbol of an
unwanted West German economic anschluss with East Germany. "The
process of developing our own character won't be advanced by
flying in experts with their own agendas," says Wolfgang
Templin, a member of the parliament from the leftist,
ecology-minded Initiative for Peace and Human Rights. To
develop a free-market economy, Templin and other critics
maintain, East Germany does not have to ape the economy of West
Germany. But that is precisely what East Germans voted for
overwhelmingly last month, Pieroth responds. Says he: "We can't
dictate to the East things that we think should be different
if what they want is what we have." In Pieroth's view, the
mandate is anything but ambiguous.


By Lisa Beyer. Reported by James L. Graff/Berlin.