P.M.B. 12558

24th January, 1962.

Dear Bill,

Somebody had already sent me Peter Wiles' review of my book. I have not got the time at the moment to answer it in detail because until Budget time there won't be much time for sleep. However, I intend to make some comments on it.

I can tell you now that I know the calculations of Klinkmüller, which I do not consider brilliant, and if you are interested in how reparations fit into my calculations I suggest that you ask for the doctorate thesis of Heinz Köhler who, incidentally, teaches at Amherst at present. You will find it very useful to talk with him: he knows more about reparations and foreign trade in East Germany than anybody else.

I consider the last remark about being too honest to conceal figures a hit below the belt and I intend eventually when I have time to point out the serious difficulties in making comparisons purely on a capital basis. The whole structure of population, earnings per hour worked, and amount of investment needed, all play a role.

Recent developments in East Germany have, of course, indicated that, if anything, I have over-stated the growth rate and I thought the book was explicit enough, even at the price of tedium, to point out these difficulties in making comparisons on a per capita basis. I have, for example, indicated that the capital output ratios in East Germany are higher than West Germany and this despite the fact that there is virtually no housing construction in East Germany. Aside from this, I am not unhappy about the review and it is a reviewer's privilege to be critical.

Incidentally, I consider the calculation of the G.N.P. from the production side much more significant than from the expenditure side and, in any case, the method open to Abe Bergson was not open to me for lack of data but I agree that Abe Bergson, being a pioneer in this field, is difficult to equal and impossible to surpass.

Please give my regards to everybody at Cambridge, that is if anybody is around and not busy working for Kennedy!

Mr. William E. Griffith,
Massachusetts Institute of Technology,
50, Memorial Drive,
CAMBRIDGE, 02132,
Massachusetts.

BOOK REVIEW

perspectives of the authors. Please find her cover on political psychology
In basis on sociology of religion. Prager on the social psychology of
childhood, and Gurvitch on the sociology of law, of morals and of
knowledge will be of particular interest to the American reader who
wishes to have a concise presentation of the work and position of
these well known social scientists.

THOMAS LUCKMANN

Graduate Faculty of the New School

STOLPER, WOLFGANG F., with the assistance of Karl W. Roskamp.
The Structure of the East German Economy. Cambridge: Harvard
University Press. 1960. xxv & 478 pp. $10.

One does not read statistics, one uses them. Hence the only way
to review such a book as this is to ask it specific questions.

The reviewer's first question was what percentage of East Germany's
GNP went into reparations to Russia before they were canceled late in
1953. To this the book contains no reply, since the author refuses
to calculate the national income by the expenditure method, that is, by
use. Following Marx, the East Germans think of the national income
as essentially product, and calculate it not by use but by origin. The
bulk of this book is an evaluation of the official statistics, industry by
industry, followed by an independent reckoning of the value added by
non-material production, omitted from the official statistics on the
usual Marxist grounds. Thus we know how many chemicals or ma-
chines were produced, but not how many were taken in reparations.
A reparations figure, not indeed for chemicals but overall, would
emerge only from a calculation of such items as consumption, invest-
ment, and foreign trade—the national income by use, not origin.
But the author never proceeds in such a breakdown beyond "individ-
ual consumption," "gross investment" (public and private, fixed and
circulating) and "other" (p: 436). "Other" includes a great deal of
"private but collective" consumption (the social services), defense,
police, justice, and the export surplus in normal trade. It is sus-
piciously large, no doubt because of reparations. I find it difficult
to believe that it would have been impossible to break down "other."
It Professor Bergson can set a fairly firm figure for Soviet security-
police expenditures under Stalin, surely Professor Stolper can have a
stab at this no more sensitive magnitude? It is particularly disap-
pointing that he has not used the budget at all. Surely reparations, for
one thing, were actually financed by the budget?

Happily a brilliant calculation of the amount of reparations is avail-

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able, which came out too late, however, for Stolper's use during the period his book was in preparation. in E. Klinkmüller's *Die gegenwärtige Aussenhandelsverflechtung der Sowjetischen Besatzungszone Deutschlands* (Berlin 1958) pp. 99, 176-79. Here we find that the West German reckoning, by amounts of individual products delivered, corresponds very well to the scanty official admissions of the DDR and the USSR as to the total sum. In the years 1946-50, 1951, 1952, and 1953, according to that reckoning, the DDR's net national income (Western concept) was respectively c. 30.0, 43.8, 49.5, and 52.5 billion (American definition). East German marks, omitting indirect taxes, and of these figures reparations amounted to, respectively, 23, 6, 5, and 4 percent. Lack of space prohibits an exact defense of these figures here, but it should be noted that I had great difficulty in extracting from Stolper's book so simple a figure as the national income in current East German marks. It can be inferred from his Table 164, once one has detected a serious misprint: the national income is there given on the East, not the West, German definition (that is, it is the Marxist concept). To this one adds about 12 percent, in accordance with Table 163, for the non-material production included in the Western concept. In any event, the estimated 23 percent of the national income is a very big figure indeed. It is also a considerable understatement, since it omits the occupation costs of the Red Army. It entailed, while it lasted, a serious restriction on investment as well as on consumption, and it surely explains well enough why the absolute level of consumption (though no longer of investment—see Stolper, p. 440) is still only about three-quarters of that obtaining in West Germany.

If consumption levels are our second question, the author does not answer it too well. At all points he compares individual consumption in the East with private consumption in the West. This is forced on him, as I have indicated, by the alleged absence of data on social services and the like. Thus when we learn (p. 449) that in the East individual consumption per head is still only 59 percent of private consumption in the West, we must jump to no conclusion before adding in the missing bit. Assuming it to be a quarter of individual consumption, the comparative figure rises to 74 percent. This becomes fairly creditable to the DDR when we bear in mind that in 1936 private consumption in that area of Germany was only 89 percent of the level in Western Germany (pp. 435, 439). It is an especially unfortunate error that in the table on p. 440 this 89 percent, labeled incorrectly individual consumption, is included alongside postwar

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375

comparisons of the order of 59 percent, which really were for individual consumption.

The reviewer's third question to the book was what economic effect was produced by the continual loss of working population through emigration to West Germany. To this question the book stands up very well, with rich materials bearing directly on the topic. In 1949-55, inclusive, the DDR lost 1.63 million net by migration, or over 5 times its natural population increase. It is not obvious, however, that this was a loss in terms of per capita growth. In so far as an economy is experiencing diminishing returns, or its emigrants are retired or about to retire, emigration is an economic gain. If there are increasing returns, or the emigrants are young skilled workers, it is a loss. The economic balance is quite unclear in the case of a baby, with all the costs of education and upkeep still to come, or in the case of a young parent, whose skill will be outweighed in crude economic terms by his fertility. Actually most of the East German emigrants were young and ablebodied, and many very skilled; the bad effect of this loss of skill has often been admitted by the East German government. Moreover, most of them were male (a point clearly brought out by Mr. Stolper), and thus their loss has unbalanced the sex ratio. The resultant reduction in the number of babies may or may not be an economic loss, but there can be no doubt that available labor has been increased by the release of potential East German wives. Let us accept the common but unproved view that the emigration is indeed a loss in terms of per capita growth. Certainly it is an unanswerable condemnation of two other things: the absolute level of the standard of living today, and political conditions.

My final question was how the DDR has performed beneath the twin burdens of emigration and reparations. Comparison of West and East German rates of growth is precisely the main topic of the book, and here too it must get full marks for its answer. The rate of growth (teal GNP per head of population of working age per annum) has been 7 percent in both parts of the country. From this it follows that the DDR, since it has all the handicaps, shows the better performance, though one searches the text in vain for this conclusion.

An admirable description of communist statistical methods, and an indispensable quarry for those interested in the population and production figures of the DDR. This work is nevertheless not quite the "DDR's Bergson." It is not adventurous enough; it has almost nothing on fiscal matters and foreign trade; it fails to analyze income adequately by use rather than origin. But as a comparison of West

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and East German growth it is—apart from the error noted (national income in Table 164)—surely definitive. And this is a very vital subject. Though the author is anxious to play it down, he is too honest to conceal the figures that reveal one of the least successful communist countries doing as well as one of the most successful capitalist ones.

P. J. D. WILES

Brandeis University

BRY, GERHARD, assisted by Charlotte Boschan. *Wages in Germany, 1871-1945*. [National Bureau of Economic Research, No. 68, General Series.] Princeton: Princeton University Press. 1960. xxvi & 486 pp. $10.

This important study records the behavior of German wages during the rise and fall of the German Reich. As it desributes for an analysis of economic relationships, it organizes its rich material not by historical periods but by topics, and in his conclusion the author compares his findings on Germany with the developments in Great Britain and the United States during the same period.

In 1871-1945 wage rates in Germany showed material losses only twice: in the severe and prolonged depression following the Gründerjahre boom in the early 70s, and again in the Great Depression. During the other business contractions before 1914, there was only a deceleration of wage increases. It is notable that wage rates tended to lag substantially behind turns in general business conditions, in striking similarity to their behavior in Britain and the United States. Over these years hourly wages increased about threefold in Germany and Britain, and real wages doubled, but in the United States the respective increases were sixfold and fivefold. In all three countries the wage structure tightened during that period—in other words, wage differentials became smaller. Of particular interest is the finding that from 1890 to 1900, when real wages rose steeply, the unions in Germany were rather weak and limited in their activities, whereas from 1900 to 1914, when the unions were enlarging their membership and the number and range of their collective agreements were considerably increasing, consumer prices were also rising and real wages became stagnant—though the unions did succeed in reducing hours.

The book is a major contribution to our understanding of wage behavior. In addition to its statistical analyses the investigation offers a wealth of qualitative material dealing with such matters as the process of wage setting, trade-union activity, employers' organizations,