The process of regime change in East Germany: An institutionalist scenario for German unification

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Abstract
When in 1990 German political decision‐makers were confronted with the unexpected opportunity of re‐unification, they based their strategy on the assumption that successful transformation depended essentially on engineered political change transferring the basic institutions of a market economy and liberal democracy. As their advisers told them, these were a stable monetary system not subject to political intervention, the allocation of scarce resources through a flexible price system, private ownership of the means of production, a legal order based on freedom of contracts, freedom of association, free elections and representative government, with the state as the guarantor of fair trading and monetary stability. Within such a framework, powerful economic incentives would unleash private initiative that had long been suppressed. The expected outcome was the transformation of East Germany into a modern, highly competitive economy. In an article written in early 1990 and published here integrally for the first time, the author describes the dominant scenario but then goes on to emphasize the constraints on engineered political change. Essentially, the resulting scenario for political and economic choice is heavily constrained by more deeply rooted ‘second order’ institutional patterns, not easily amenable to political intervention.