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The Chemistry Must Be Right: The Privatization of Buna Sow Leuna Olefinverbund GmbH, 1990-2000. By Rainer Karisch and Raymond Stokes. Berlin: Buna Sow Leuna Olefinverbund GmbH and Edition Leipzig, 2001. 252 pp. Tables, photographs, maps, illustrations, appendix, notes. Cloth, no price. ISBN 3-361-00508-6.
In a paper on the cost of German unification excerpted in the May-June 1996 issue of the World Bank's online Transition Newsletter, economist Jan S. Prybyla writes:
With a view to corporate takeover, Volkswagen AG sent a Herr Heuss to Zwickau to find out how the Trabants [relatively cheap, East German cars] were made there. He emerged shocked from the huge plant, babbling "My God!" The Trabant operation was value-subtracting: valuable material, labor, and capital inputs went in at one end; shabby Trabies came out at the other, their bodies made from compacted trash. The final output was worth less than the sum of the inputs. What was not fully understood at the time was that East Germany's whole economy was value-subtracting and cost-unconscious.
It would be difficult to find a better demonstration of the truth of this observation-and the epic proportions of the effort to remedy the problem-than Rainer Karisch and Raymond Stokes's case study of privatization in the East German chemical industry. If the German Democratic Republic's automobile industry was a disaster, its chemical industry was a greater problem still. By 1995, when car manufacturing had adopted Western standards and 2,000 workers produced 250,000 competitive Volkswagen Polos per year where once 12,000 had built 160,000 smoke-belching Trabants, the future of the chemical company examined by Karlsch and Stokes remained very much in doubt. It would take another five years and billions of additional marks in government subsidies and funds to clean up the environment, before Buna Sow Leuna Olefin Combine (BSL), today a wholly owned subsidiary of Dow Chemical, reached a comparable stage of modernization.
Not surprisingly, the unprecedented amounts of government aid to private investors, dispensed largely through the Treuhandanstalt (a government trustee agency...