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6 maltatoday | WEDNESDAY • 13 NOVEMBER 2019 NEWS ANALYSIS THE ghost of the Berlin Wall lives on 30 years after its col- lapse. It sweeps through the statistics on immigrant popula- tions (higher in the west) and on poverty, pensioners and electoral support for the Left Party Die Linke and for far- right parties (all higher in the east). Persistent east-west division intersects with class divides, as well as historical and pre- sent forms of institutional racism. This provides the backdrop for the particular success of far-right parties in Germany's eastern provinces. In the years that followed unification, eastern Germany slipped from being one of the most industrialised regions of Europe to one of the least. Average productivity had long been lower than in the west. In 1945 the zone that became the German Democratic Re- public (GDR) was occupied by a weak and war-ravaged superpower, the Soviet Union, which plundered its industries and infrastructure. In contrast, the Federal Re- public of Germany (FRG) was pulled into the US sphere, with its much larger markets. It benefited from immigra- tion flows – including from the GDR – and from self- reinforcing logics of agglom- eration, whereby increased investments attract further capital and skilled workers, and so on in a virtuous circle. The GDR also suffered from the general crises of the So- viet bloc. The Soviet system that took shape in 1928 had enabled Russia, an abysmally poor society, to industrialise rapidly during the interwar era. But with globalisation from the 1960s onward, Soviet bloc enterprises were handi- capped by their weaker abil- ity to internationalise sales and operations. In the 1980s, crisis hit the region and the Soviet bloc's trade networks collapsed. Economic divide On unification, the conserv- ative government of Helmut Kohl set the exchange rate of the Ostmark to the Deutsch- mark at 1:1 – a 300-400% in- crease in the value of the Ost- mark. Profitability for eastern firms could be maintained only if costs were reduced ac- cordingly, but this was impos- sible given that all other input prices and overheads were themselves subject to the re- valuation. No enterprise could withstand that shock unaided. The Kohl government of the early 1990s adopted a blasé attitude to deindustrialisation in the east. It set up an agency, the Treuhandanstalt (nick- named the "Handover Agen- cy") that oversaw the fire-sale privatisation of eastern en- terprises and land – includ- ing the sacrifice of perfectly viable firms. The sell-off was accompanied by legal and ille- gal corruption and was heavily tilted to the interests of west- ern businesses. Beneath the German flag- waving, the pickings of uni- fication were taken by the largely western rich. Overall, only 5% of Treuhandanstalt businesses were sold to east- erners, 85% to westerners. Germany's economic divide resumed, with senior manage- ment and the bulk of high- value activities located in the west. The "great handover" com- bined with agglomeration log- ics to ensure that Germany's western states attracted the bulk of capital and skilled mi- grants – this expanded local markets and, in turn, attract- ed further investment and immigration. Meanwhile, the declining regions of the east experienced emigration and stagnation, depopulated ghost towns and the wholesale dem- olition of housing. Stuttering attempts to close the gap The German government at- tempted to counter this east- west divide in two main ways but both also reinforced un- derlying differences. One was the construction of the east as a low-wage territory and neoliberal testing ground. In a bid to attract investment, employers were encouraged to experiment with practices that the stronger trade unions in the west would block. Na- tional collective bargaining agreements were ripped up in the east. This undermined workers' strength and morale throughout Germany, but the extremes were in the east, particularly in Saxony, which suffers Germany's highest rate of circumvention of collective agreements. The other was state expendi- ture. "Solidarity" transfers of wealth from west to east were very substantial. This helped salaries and per capita GDP in the former east rise to around 80% of the west in the early 2000s. But the gap has stuck at roughly that level ever since, and is predicted to continue or even widen. West-east transfers are rath- er like giving fish to someone after taking their fishing rod. Because most of the east's assets were appropriated by western interests, much of Germany's transfer spending goes from western taxpayers to the east, then boomerangs back in the shape of rent and profits. To this extent, the transfer is from western work- ers to western proprietors, re- cycled through eastern infra- structure projects and welfare recipients. Second-class status Inequality and poverty are relevant to the higher levels of racism found in the east. So too are the recurring cri- ses and insecurity that have wracked eastern Germany since unification, and the global slowdown that followed the 2008 financial crisis. However, reference to re- gional socioeconomic cleav- ages and crises only takes us so far. After all, the right- wing, nationalist Alternative for Germany (AfD) party re- ceives strong support in low- unemployment Zwickau (in Saxony). It polls better in the wealthy western states (Ba- varia, Baden-Wurttemberg) than in the poorer Ruhr. Its support is, according to sev- eral studies, stronger among higher income earners and the self-employed than blue-col- lar workers, with fear of eco- nomic decline and alienation a strong psychological factor. A key piece of this puzzle is found in the tangles of nation and immigration. In 1990, eastern Germans voted for FRG citizenship. In economic terms, as we've seen, some- thing closer to annexation was the outcome. In political terms the hope was for full and rapid equality. "We are one people" was the chant on the streets as 1989 passed to 1990. But politically, too, East Germans have experienced a form of annexation. Sweep- ing transformations were rammed through with little reference to public opinion or even parliament. Unification itself was accomplished by fiat, under the "annexation" paragraph of the federal con- stitution. Westerners were appointed to most positions of power in the east, including senior civil service posts, professorships, and the top jobs in industry and the armed forces. East Germans were plunged into a quasi-immigrant position. They had left their Heimat behind and found themselves in a strange country. Their social furniture was suddenly upended. Their cultural capi- tal (certificates, knowledge, etc) was devalued. Experienc- es of disorientation and dislo- cation were ubiquitous. East Germans, in journalist Toralf Staud's words, "emigrated How divisions between East and West Germany STOCK TAL-GVERN MALTA GOVERNMENT STOCK Secure Investment Issue of €60,000,000 (by auction) Fixed Rate Malta Government Stock (subject to an over-allotment option of an additional amount up to a maximum of €30,000,000) Fixed Rate Malta Government Stock The Treasury shall be issuing by auction €60,000,000 Fixed Rate Malta Government Stock subject to an over-allotment option to increase the sum to be raised up to a maximum additional amount of €30,000,000 as follows: ● 0.5% Malta Government Stock (Second Issue) – Fungibility Issue Maturing in 2025. Applications in the form of sealed bids (competitive auction) for a minimum of €500,000 and multiples of €100,000 each open on Wednesday 20 th November 2019 at 8.30a.m. and close at noon of the same day or earlier at the discretion of the Accountant General. Bids on the prescribed form are to be transmitted by e-mail at the e-mail addresses indicated on the application form or by fax on 2596 7210 or deposited in the Treasury's tender box in Floriana. The application form may be obtained from all members of the Malta Stock Exchange and other authorized Investment Service Providers or downloaded from the Treasury's website at www.treasury.gov.mt. MALTA GOVERNMENT STOCK FOR SAFE INVESTMENT AND LIQUIDITY WITH INTEREST PAID UP TO THE DAY OF RE-SALE OF STOCK ◆ SECURITY ◆ CONTINUOUS LIQUIDITY ◆ INTEREST EVERY SIX MONTHS ◆ (The value of the investment may go up or down during the tenor of the Stock) Treasury Department, Development House, Level 2-3, St. Anne Street, Floriana, Malta.