“Voluntarily dispossessed” 50 years ago

7 February 2022, Berlin. The date was 8 February 1972. The decision by the Politburo of the Central Committee of the Socialist Unity Party of Germany (Sozialistische Einheitspartei Deutschlands, SED) was taken in strict secrecy: the SED leadership demanded that the last remaining private and semi-nationalised businesses in the GDR be converted into nationally owned enterprises. The names of the owner families were to be erased and proud traditions extinguished. The purchase price was to be a small sum as compensation.

At issue were the last 11,800 businesses which until now had survived being broken up and dispossessed. Only very small businesses with less than ten employees were spared. The resolution was implemented a few months later, as Head of State Erich Honecker reported in a letter dated 13 July 1972 (to his “dear comrade” Leonid Ilyich Brezhnev, President of the Soviet Union).

Ownership as the basis of the social market economy

“This experience should give us pause for thought even today”, says Professor Rainer Kirchdörfer, Executive Board member of the Foundation for Family Businesses. “Entrepreneurial property in family hands needs to be protected. Ownership is the source of efficient production, innovation, social welfare and the creation of jobs. The social market economy and a liberal competition system are based on ownership.”

Today there are once again many successful family businesses in eastern Germany. Many people who were dispossessed in 1972 or before won their businesses back following reunification, and others who moved their companies to West Germany after World War II have returned with high investments. In many cases, eastern German managers and founders got together with western German financial backers.

New cores of growth and clusters have been created. “The gradual reindustrialisation of the eastern German federal states is supported mostly by small and medium-sized family businesses”, writes historian Dr Rainer Karlsch in a study on industrial family businesses in eastern Germany entitled “Industrielle Familienunternehmen in Ostdeutschland”, published by the Foundation for Family Businesses.

Industrial powerhouse

Nevertheless, the actual result in eastern Germany makes for sobering reading. It has been largely forgotten today that eastern Germany in the 19th century was the industrial heart of the country. Almost nowhere else did the Industrial Revolution begin as early as it did in Saxony, Thuringia and parts of Saxony-Anhalt: raw materials and textiles, machinery and cars, paper and glass, medicines and precision mechanisms – all produced by family businesses. The Reich capital in Berlin was also an industrial powerhouse

until two world wars, hyperinflation, a global economic crisis and confiscations during the Third Reich changed the picture. In East Germany, a policy of industrial regression began under Soviet occupation from 1945 onwards. Harassment and the process of dismantling made it difficult or even impossible for many family businesses to make a fresh start.

Dramas unfolded

Following the first wave of nationalisations up to 1948, not a single family business with more than 500 employees was left standing. Thousands of entrepreneurs migrated to the West, and those who remained suffered under the planned economy and the regulations, and were fought as class enemies. A shortage of capital led to creeping nationalisation until Honecker became set on “eliminating” the “capitalists” altogether. He staged this change in February 1972 as a voluntary move by the general partners, but they had no choice in the matter. Eyewitnesses report the dramas which unfolded in the family businesses.