A strong Mittelstand as a beacon of the social market economy? How historical legacies influenced privatization strategies and outcomes in Brandenburg and Saxony

The incorporation of the German Democratic Republic (GDR) into the Federal Republic of Germany in 1990 meant the introduction of representative democracy and the model of a social market economy. The backbone of the West German “success model” was a strong set of small- and medium-sized companies – the so-called Mittelstand. This paper asks: 1) How did the governments of the newly formed states of Saxony and Brandenburg try to utilize their respective historical legacies to foster the build-up of a strong Mittelstand? 2) How did they use their imagined economic past to offer a narrative for state citizens and entrepreneurs? 3) Which strategies did they choose to engage with the federal privatization agency? While Brandenburg tried to profit from its geographical proximity to the new/old capital Berlin, the Saxon state government wanted to build on the success of Saxon entrepreneurship on the world market in the 1920s, with an attempt to ignore the changes of the post-1945 period. I argue that the latter approach in particular caused political collateral damage in the long-term, as the narrative lacked substance and contributed to a feeling of neglect in regions where the reality could hardly be reconciled with the official narrative.