Who built the Berlin Wall and why? According to a recent piece by Keith Veronese at io9:
The Berlin Wall spanned 155 kilometers, combining concrete walls and razor wire topped fences to create the border. Numerous checkpoints and over 300 watchtowers stretched along the wall. The German Democratic Republic constructed the wall to keep anti-socialist individuals present in West Germany out of East Germany.
Au contraire. In contrast to the propaganda that Keith apparently fell for (back in the day, the GDR used very similar words that Keith used), the GDR actually built the wall to stymie a brain drain, the exodus of East Germans fleeing to the West.
Just how big was this exodus? Between the partitioning and gerrymandering of Germany following WWII with the Potsdam Declaration in 1945 and 1961 (when the wall was built), there were roughly 3.5 million East Germans who fled to the West.
So yea, Keith’s claim is quite a head scratcher — who are these “anti-socialistic individuals” trying to get into the East? David Hasselhoff? Heidi Klum? Thomas Mann?
According to Michael Crammer in German-German Border Trail, “675,000 people fled to West Germany between 1949 and 1952.” More specifically regarding the brain drain, according to this well sourced wiki entry:
By 1960, the combination of World War II and the massive emigration westward left East Germany with only 61% of its population of working age, compared to 70.5% before the war. The loss was disproportionately heavy among professionals—engineers, technicians, physicians, teachers, lawyers and skilled workers. The direct cost of manpower losses has been estimated at $7 billion to $9 billion, with East German party leader Walter Ulbricht later claiming that West Germany owed him $17 billion in compensation, including reparations as well as manpower losses. In addition, the drain of East Germany’s young population potentially cost it over 22.5 billion marks in lost educational investment. The brain drain of professionals had become so damaging to the political credibility and economic viability of East Germany that the re-securing of the Soviet imperial frontier was imperative.
All told between 1950 and 1988, there were roughly 4 million East Germans that migrated to the West (if you did the math: on top of the 3.5 million that fled prior to the erection of the wall, there were approximately 660,000 East Germans that managed to immigrate and flee to the West between 1961 and 1988. The wall fell down in November 1989).
Yet you didn’t have West Germans fleeing in the opposite direction, en masse. Nor were there oodles of machine guns nests on the West side pointed at… the West shooting these non-existent West German refugees.
In fact, this brain drain was so problematic for the East German economy (many of the migrants were teachers, doctors and engineers) that the GDR built a wall down the entire border of the country — not just in Berlin. It was called the Inner German Border (innerdeutsche Grenze) and according to a 2003 research findings more than 1000 people died trying to cross over to the West through it. Here is an excellent entry regarding the escape attempts across the IGB (and here is an awesome entry on the collapse and fall of the IGB).
And more to the point, why were they fleeing? Why would anyone want to flee a utopian socialist paradise?
Needless to say, volumes have written about why socialism cannot work a priori (for starters see Economic Calculation in the Socialist Commonwealth). Many more have been written on why the experiments in the Eastern Bloc and the Soviet Union would and did fail.
But in the end, a more poignant question is: why didn’t East Germany buy out the West? Why didn’t West Germans flee to the East? Why did the West German experiment with freer markets and open trade (“the Miracle on the Rhine” or Wirtschaftswunder) create a wealthier and healthier population compared to their culturally identical cousins?
Two words: organic prices. Prices reflect scarcity relative to supply and demand. In a planned economy the organizers have no inherent method for creating coefficients for their mathematical formula’s — all of the numbers they use are arbitrary and/or taken from existing foreign markets. In contrast, in a market-based economy, prices arise due to interactions with producers, suppliers, entrepreneurs, consumers — via organic interactions.
99 Luft Balloons in the margin
Ceteris paribus, West Germans basically paid a huge tax to buyout — and bailout the East (in short the East German political class ran out of “other people’s money” and the Soviets couldn’t afford to subsidize them).
In alternative world the GDR could have simply gone bankrupt, stayed an independent country and merely opened all of its borders to trade. Instead the Two Plus Four Powers agreement basically got the FRG (West Germany) to pay a big tax to have their “comrades” reunited.
Because this “buyout” was done top-down, there are still huge imbalances that German policy makers have tried to band-aid over (like labor issues, e.g., paying East Germans not to work). Of course the biggest taxpayer handout the FRG ended up giving to the GDR: the deutschmark exchange (see below).
This actually set the stage for the current Euro crisis (see Phillip Bagus’ excellent book, “The Tragedy of the Euro“). The French agreed to reunification with the stipulation that the new Germany would support the Euro which basically meant the West Germans would be yet again, the unwitting financial backbone to another planning failure.
The Deutsche Mark played an important role in the reunification of Germany. It was introduced as the official currency of East Germany in July 1990, replacing the East German Mark (Mark der DDR), in preparation for unification on 3 October 1990. East German marks were exchanged for German marks at a rate of 1:1 for the first 4000 Marks and 2:1 for larger amounts. Before reunification, each citizen of East Germany coming to West Germany was given Begrüßungsgeld, greeting money, a per capita allowance of DM 100 in cash. The government of Germany and the Bundesbank were in major disagreement over the exchange rate between the East German mark and the German mark.
France and the United Kingdom were opposed to German reunification, and attempted to influence the Soviet Union to stop it. However, in late 1989 France extracted German commitment to the Monetary Union in return for support for German reunification.
Last note: be sure to watch the fantastic film, “The Lives of Others” regarding this frequently forgotten period of history.
 “Thatcher told Gorbachev Britain did not want German reunification”. Michael Binyon (London: Times). September 11, 2009.
 Ben Knight (2009-11-08). “Germany’s neighbors try to redeem their 1989 negativity”. Deutsche Welle.
 Dowty, Alan (1988), “The Assault on Freedom of Emigration”, World Affairs 151 (2)
 Volker Rolf Berghahn, Modern Germany: Society, Economy and Politics in the Twentieth Century, p. 227. Cambridge University Press, 1987