Economic transformation, locality and policy in eastern Germany: A comparison of two Länder

Economic transformation in post-socialist eastern Germany revealed inherent inequalities in development opportunities, which had been disguised during the socialist ancien régime. Using local examples from the two contrasting Länder of Mecklenburg-Vorpommern and Saxony, this paper explores how market forces not only exposed these differences, but further entrenched them at the regional and local scales. Local economies demonstrate the differential development very clearly, exposing the significance of regional economic context and raisons d'être of local economic structures. This is genuine locational advantages vis-à-vis activities imposed through ideology rather than economy-driven decrees by the old GDR regime. Many of these state-decreed activities lacked local, and regional, embeddedness, rendering the respective local economies most vulnerable to market operation. They will continue to rely on state support. The problems were exacerbated in those localities lacking support from a regional economy, as in Mecklenburg-Vorpommern. Conversely, market-favoured, economically attractive regions, like Saxony, generally help localities develop their new economic roles, including those with few indigenous advantages. These fundamental differences in opportunities, illustrated here for six cities, are reflected in local policy-making, especially the role of localness and utilization of local identity.