ABSTRACT
The typical micro-economic problems associated with command economies were particularly serious in the advanced, industrial, poorly endowed, trade-dependent German Democratic Republic (GDR). The complexities of central planning increase with the level of development, thus involving a greater volume and assortment of goods and more complicated production processes. The combined impact of the growth crisis and other economic problems, especially distorted prices and over-centralisation of decision-making, made the party leaders realise that current planning methods had to be improved. Within the framework of the state plan and in order to uncover reserves and release growth potential, there was increased scope for independent decision-making, economic levers providing incentives and indirect guidance. The construction of a new plant remained a central decision, but the remaining investment was to be steered by economic levers and the constraints imposed by plan production targets.
