Espionage boosted East Germany's economic output by 7.4 per cent

East Germany’s espionage activities in the West boosted the country’s economic output by 7.4 per cent. Value added in manufacturing alone increased by 22.3 per cent through industrial espionage, equivalent to 20.2 billion East German marks or approximately 4.1 billion euros at 2020 prices. These figures are based on data from 1988, one year before the fall of the Berlin Wall. This is the result of a new Research Insight from the ROCKWOOL Foundation Berlin (RFBerlin).

If a company obtained one percentage point more information through espionage, its value added and labour productivity also increased by almost one percentage point per year. “The Stasi’s espionage strengthened the GDR’s position within the socialist bloc. However, it did not significantly improve its success in Western markets,” says Albrecht Glitz, RFBerlin project manager and professor at Pompeu Fabra University in Barcelona. “Nevertheless, companies that received valuable information had a better chance of surviving the transition to a market economy following reunification.” Companies with better access to intelligence recorded faster productivity growth, invested more in their capital stock, relied more heavily on intermediate inputs and specialised more in their core products. These advantages spread through supplier and customer networks, thereby boosting macroeconomic gains. “Every additional piece of valuable information yielded an estimated annual economic return of around 330,000 euros at 2020 prices, or 1.64 million East German marks,” adds Glitz. However, the Stasi also provided information that was of no use to the economy. Co-author Adrian Lerche from the Institute for Employment Research (IAB) in Nuremberg says: “Although our study examines events from the Cold War, the underlying issues remain highly relevant today with regard to export controls, industrial policy, the protection of intellectual property and technological competition.” Glitz adds: “Many governments are currently tightening export controls, scrutinising foreign investment and strengthening the protection of strategic technologies. Access to cutting-edge knowledge is of great economic importance. That is why debates on this subject have become a central element of international economic policy.” In response to the Russian invasion of Ukraine, for example, the West tightened export controls on goods with potential military applications, which Russia is attempting to circumvent with the help of agents abroad. Similarly, there are concerns Chinese efforts to acquire the technology to build certain lithography machines. These machines are indispensable to the production of the most advanced semiconductors and are currently manufactured exclusively by the Dutch company ASML. Background: During the Cold War, the GDR ran one of the world’s largest economic espionage programmes, gathering scientific and technical information from companies and research institutions in the West. Using previously inaccessible intelligence archives and newly digitised corporate documents, the authors were able to trace espionage information from its source in the West to its final recipient in the East German economy.

Prof. Albrecht Glitz, [email protected]; Tel.: 0034 93 542 27 57 Dr. Adrian Lerche, [email protected]; Tel.: 0049 911 179-9213

Research Insight: “When Knowledge Crosses Borders - Economic Espionage and Technological Progress” by Albrecht Glitz, Adrian Lerche and Lukas Mergele:

Discussion Paper: “Economic Espionage, Knowledge Flows, and Firm Performance” by Albrecht Glitz, Adrian Lerche and Lukas Mergele

Criteria of this press release: Journalists Economics / business administration, Politics, Social studies transregional, national Research results English