by Bill O’Grady

On August 13, 1961, the German Democratic Republic (GDR), otherwise known as East Germany, began construction on a barrier that would slow the emigration of Germans to the Federal Republic of Germany, known as West Germany.  Prior to the construction of the wall, it is estimated that 3.5 million East Germans emigrated to West Germany from 1950 until 1961, often by crossing from East Berlin, which was under Soviet Union control, to West Berlin, under Western allied control.  After the wall was built until November 9, 1989, it is estimated that 100,000 people tried to circumvent the wall, with approximately 5,000 making it across safely.  An estimated 140 to 200 escapees were killed by border guards or by lethal impediments to escape.

By the spring of 1989, the Eastern Bloc was starting to unravel.   On July 7, 1989, Soviet President Mikhail Gorbachev implicitly ended the Brezhnev Doctrine, which gave Moscow the power to intervene in any Warsaw Pact nation.  Gorbachev stated that “any interference in domestic affairs and any attempts to restrict the sovereignty of states—friends, allies or any others, is inadmissible.”

Gorbachev was reacting to developments already in place.  In 1988, Poland, which had been moving away from Moscow for some time due to the Solidarity movement, was the first to break with the Eastern Bloc. Hungary moved to a multi-party democracy in the spring of 1989, and on May 2, 1989, it began to dismantle the 150-mile border fence that separated Hungary from Austria.  Over the summer and autumn of 1989, the “crack” in the Iron Curtain led to an outflow of Czechoslovakians and East Germans.  Before East German officials could stop their citizens from “traveling” to Hungary, it is estimated that 30k East Germans had fled to the West.  By October, demonstrations in the GDR had grown in both number and frequency.  According to reports, Erich Honecker, the leader of the GDR, had planned a Tiananmen Square-type massacre of protestors.[1]  However, GDR security forces refused to fire on its citizens.  Honecker’s last hope was Soviet troops stationed in his country.  However, due to Gorbachev’s rejection of the Brezhnev Doctrine, the Soviet forces did not intervene.

On November 1, 1989, the border with Czechoslovakia was opened to the West.  East Germans began to travel west via this opening.  Protests in the GDR expanded, and, on November 9, the border checkpoints on the East and West German frontier and in Berlin were opened.  In effect, the Berlin Wall and the border between East and West Germany were a fiction.

The breaking of the barrier known as the Berlin Wall was a key event marking the beginning of the end of Soviet communism.  By 1991, the U.S.S.R. had unraveled, and several of the numerous republics within the former Soviet Union had become independent states.  The Soviet Union no longer existed.

For those of us who spent our lives under the shadow of the Cold War, seeing the Berlin Wall being dismantled was shocking.  The world for anyone born after 1947 was one of two competing blocs with fundamentally different systems.  The differences between the two blocs were profound and incompatible.  With the unwinding of the Soviet Union two years later, anything that resembled traditional Marxism was relegated to outposts like Cuba or North Korea.  Mainland China, which to this day describes itself as communist, operates as a capitalist economy.

Considering these amazing events, a number of trends emerged that reflected what leaders, at the time, believed the end of communism meant.  After three decades, we now have a better notion of how well these ideas fared and can reflect on the lessons one should take from such important events.  In Part I of this report, we will cover two ideas about the post-Cold War era and how well they fared.  In Part II, we will cover two more ideas and conclude with market ramifications.

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[1] Fulbrook, Mary. (2002). History of Germany, 1918-2000: The Divided Nation (2^nd ed.). Malden, MA: Fontana Publishers. p. 256.