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Choosing Bankruptcy: The Onset of Debt and Financial Crisis

In: Socialism with a Human Face

Author

Listed:
  • Gary B. Magee

    (Monash University)

  • Wayne Geerling

    (Monash University)

Abstract

In the 1970s and 1980s, the SED’s policy of continually expanding the provision of social welfare brought the state to the point of bankruptcy. Despite awareness of the trajectory the country was on, the party’s leadership opted not to act, choosing instead to continue on the same path. For some, this failure to act to avert crisis is seen as proof of the senior leadership’s irrationality. In this chapter, the decision of the state’s highest rulers to pursue the course they did is evaluated from the perspective of prospect theory. In addition to shedding new light on the thinking that underpinned such a calamitous course of action, this approach also offers a new periodisation of the history of debt accumulation in the GDR.

Suggested Citation

  • Gary B. Magee & Wayne Geerling, 2022. "Choosing Bankruptcy: The Onset of Debt and Financial Crisis," Palgrave Studies in Economic History, in: Socialism with a Human Face, chapter 0, pages 257-312, Palgrave Macmillan.
    • Handle: RePEc:pal:palscp:978-981-19-0664-0_6
    DOI: 10.1007/978-981-19-0664-0_6
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