State Machinery Building and Economic Transition: Lessons from the German Unification

Abstract

East Germany was deficient in the human resources to establish a new state machinery that was equal to that of West Germany. The solution was transferring knowledge and know-hows from West to East Germany through dispatching West German personnel, retraining and building informal personal networks. East Germany could establish the new state machinery quickly, although copying West Germany left little room to build a better state machinery, and the sudden change might undermine East German personnel’s efforts to increase their capacities. The German experience suggests that the other ex-socialist countries that could not expect a fast and extensive transfer of knowledge and know-how would need a long period measured by the unit of decade or generation to establish the new state machinery. Those countries needed a commonly understood goal of systemic transformation and public support for it over a long period. JEL: H10, N44, O15, P20, P37