Have You Driven a Trabant Lately?

Introduction

From 1957 until 1990, East German car manufacturer VEB Sachsenring produced more than 3 million Trabant automobiles. Over the course of its 33-year run of production, the Trabant remained relatively unchanged. Buyers of a 1963 model Trabant received, and drove, almost the exact same automobile as a Trabant buyer would have in 1989. Throughout the years of its production, the Trabant was known for its poor quality, inefficient engine, and for the amount of time it took to receive one once it had been ordered.

During this same time period, West German car manufacturer Volkswagen was also producing millions of automobiles. Buyers of 1989 Volkswagens received, and drove, automobiles that were markedly different from similar models produced in the 1960’s. Throughout years of production, all Volkswagen models were regularly updated and improved in order to meet the needs of consumers who continually demanded better automobiles.

After the fall of the Berlin Wall in 1989 and formal German reunification in 1990, the paths of Trabant-maker VEB Sachsenring and Volkswagen differed greatly. Trabant production ended soon after German reunification while the Volkswagen group went on to become one of the top automobile manufacturers on the planet.

In this lesson, students will apply their reasoning skills to determine why VEB Sachsenring struggled and ultimately failed to produce quality automobiles that would have ensured the life of the company, while Volkswagen has continuously improved the quality of its products.

Concepts

1. Command economy (Central Planning)2. Market economy3. Prices4. Markets5. Resource allocation6. Efficiency

Objectives

1. Explain why command economies rarely meet the needs and wants of citizens.2. Describe the importance of prices and markets in meeting the needs of citizens.3. Explain shortcomings associated with central planning.4. Explain why market economies are efficient at meeting the needs and wants of citizens.5. Explain why businesses must be efficient in a market economy.

Lesson Description

Students participate in a Web-based activity where they will design and “order” their own Volkswagen automobile. Students then participate in a central planning activity that simulates the allocation and production process of Trabant automobiles in the former East Germany.

Time required: approximately two 50-minute class periods

Materials

1. Computers with Internet access.2. Copies of Handout 1- VW Order Form- one per student.3. Enough copies of Handout 2- Trabant and Handout 3- Tractors to meet the production

possibilities of the central planners.4. Copies of Handout 4- East German Marks- 1,000 East German Marks for each student. 5. Copies of Handout 5- Production Scenarios- one scenario for each group of four students.6. Visual 1- Logo7. Visual 2- Trabant 601

Procedure

Part I (computer lab with Internet needed)

1. Prepare for this lesson by making enough copies of Handout 1- VW Order Form so that you have one copy per student, Handout 2- Trabant and Handout 3- Tractors. You should have at least 24 individual Trabants cut out and 12 individual tractors cut out. For Handout 4- East German Mark, each student should have a total of 1,000 East German Marks.

2. Explain to students that this lesson will focus on a few of the differences found between market and command economies when it comes to resource allocation and the roll of prices and markets.

3. Display Visual 1- Logo to students. Show the first logo and ask students to name the company represented. (Volkswagen) Ask students if any of them have recently seen or been in a Volkswagen. (Someone will most likely say yes.) Show the second logo and ask students to name the company represented. (VEB Sachsenring- Trabant). Ask students if any of them have recently seen or been in a Trabant. (Most likely not.) Display Visual 2- Trabant 601 and tell your students that over the course of 33 years more than 3 million Trabants were manufactured in East Germany. Trabant production ended soon after the fall of the Berlin Wall in 1989.

4. Tell students that Volkswagen began producing vehicles in 1937 and is now one of the largest auto manufacturers in the world, while VEB Sachsenring began manufacturing Trabants in 1958 and ceased production in 1991.

5. Explain to students that this lesson will examine some of the factors that led to Volkswagen becoming one of the largest auto manufacturers in the world, while VEB Sachsenring went out of business soon after the fall of the Berlin Wall.

6. Define market economy as an economic system in which economic decision making and the pricing of goods and services is done by individuals and businesses with minimal government intervention.

7. Define command economy as an economic system in which economic decision making and production and allocation choices are made by the state and state-owned businesses.

8. Define central planners as the people who made the economic decisions in a command economy. Central planners answered the three basic economic questions of what to produce, how to produce and for whom to produce.

9. Ask students what they would need to do if they wanted to purchase a new Volkswagen, assuming they had the money. (Answers may include go to a Volkswagen dealer or order one online.)

10. Give each student a copy of Handout 1- VW Order Form and direct them to www.vw.com. Tell students to complete all sections on Handout 1.

11. Debrief Handout 1 with students by asking them to tell you what make/model they “ordered” and why. Explain that when you place an order for a specific vehicle at a specific price, you are sending a signal to Volkswagen. Your order is telling Volkswagen how to best use their scarce resources. If nobody orders the red GTI- 4 Door Autobahn, they will not make any because it would be a waste of time and resources. Ultimately consumers vote with their money, so Volkswagen has an incentive to make the best vehicles possible. If consumers are not satisfied with Volkswagen products, the company will lose orders which may lead to the closing of the business.

12. Ask students if this activity is an example of how a market economy or command economy works and why. (Market economy. Consumer demands and a beneficial price gave Volkswagen the incentive to produce their product for you.)

Part II

1. Explain to students that they will now look at how East German VEB Sachsenring built Trabants and allocated resources within a totally different economic system.

2. Select two students to be central planners and inform them that their job will be to decide how many Trabants and/or tractors will be produced in two different rounds.

3. Instruct the central planners that they can decide to produce any combination of Trabants and/or tractors as shown on Visual 3- Production Possibilities. Ask them to go out in the hall to make their decision. Be sure the door is closed so they cannot hear what is going on inside the classroom. Before entering the room, they need to tell the teacher the totals they have decided to produce and at what prices the goods will sell for once the market is open. (Do not let the entire class hear the decision of the central planners.)

4. While the central planners are in the hall, assign two students to be the sellers of the Trabants and tractors. These students will sell only the amounts assigned by the central planners at the prices determined by the central planners.

5. Instruct all other students in class that they recently moved ten miles from their jobs and that there is no public transportation anywhere near their new apartments. Being on time to work

each day is of the utmost importance. Missing or being late for work comes with major penalties.

6. Distribute 1,000 East German Marks to each student and tell them they are free to spend this money as they see fit, keeping in mind their living arrangements and job requirements.

7. Step out into the hall and ask the central planners to tell you what they have decided. Quietly convey this information to the sellers in the classroom. Give the sellers the correct number of Handout 2-Trabant and/or Handout 3- Tractor pictures to sell.

8. Tell everyone in the class how much the Trabants and/or tractors will sell for in this round. Open the market for the purchase of Trabants and/or tractors. Allow the central planners to observe what is happening in the market.

9. Close the market when all of the Trabants are sold. Ask how many students are satisfied. (Most likely not everyone had the chance to purchase a Trabant.)

10. Send the central planners back out into the hall and ask them to decide how many Trabants and/or tractors will be produced in round two, based on what they just witnessed. Tell everyone that prices will remain constant in round two.

11. While the central planners are in the hall, tell students that all of them have recently been assigned to work on a collective farm located across the street from their apartments. Planting crops requires that each of them bring their own tractor to the jobsite each morning. Not having a tractor will severely limit their ability to complete their jobs.

12. Step out into the hall and ask the central planners to tell you what they have decided. Quietly convey this information to the sellers in the classroom. Give the sellers the correct number of Handout 2-Trabant and/or Handout 3- Tractor pictures.

13. Open the market for the purchase of Trabants and/or tractors. Allow the central planners to observe what is happening in the market.

14. Close the market when all of the tractors are sold. Ask students how many of them are satisfied. (Most likely not everyone had the chance to purchase a tractor.)

15. Ask the central planners why they couldn’t get the numbers right. (They did not know what the consumers wanted because they did not communicate with them in any way. Lack of information doomed this practice from the start.)

16. Explain to students that this activity demonstrated one of the biggest flaws of a command economy. The markets did not function properly because central planners were making production decisions without getting the proper signals from consumers. Central planners were being asked to do something that was virtually impossible and they rarely got it right.

17. Ask students who ultimately suffered from the poor decisions made by the central planners. (Shortages were commonplace for consumers.)

Part III

1. Explain to students that they will now examine another problem associated with central planning. Place students into six different groups and announce that each group will represent a Trabant factory given the task of producing Trabant 601’s during the next month of production.

2. Tell each group that last month 100 Trabants were made in each of their factories for a total of 600 Trabants.

3. Explain to them that the government agency in charge of vehicle production has just mandated that a new output goal has been set and that each group will be responsible for producing 20 percent more Trabants in the next month. (720 Trabants is the new total target goal for the next month, with each group producing 120 Trabants.)

4. Randomly pass out one scenario card from Handout 5- Scenario Cards to each group and tell students they must follow what is written on their scenario card.

5. Explain to students that they are to figure out the number of Trabants they will be able to produce in the next month given the information on their scenario card.

Production Key…Group one can only produce 84 of 120 Trabants.Group two can only produce 96 of 120 Trabants.Group three can only produce 72 of 120 Trabants.Group four can only produce 108 of 120 Trabants.Group five can only produce 90 of 120 Trabants.Group six can only produce 114 of 120 Trabants.

6. Call on each group and ask one representative to report the total number of Trabants they would be able to produce during the next month. Ask each group to explain what circumstances would lead to their failure to reach the new output goal.

7. After all groups have reported, record the total number of Trabants that would be produced in the next month. (564 of 720 Trabants produced, only 78 percent of the new output goal.)

8. Announce to students that because of their failure to meet the new output goals, 156 buyers of Trabants will have to wait another month to receive the vehicles they ordered.

9. Explain to students that waiting times for Trabants sometimes exceeded two years. Shortages at factories and the lack of price incentives for producers compounded monthly. The result was very long wait times for Trabants.

10. Inform students that East German VEB Sachsenring- Trabant was also guilty of making almost identical automobiles year after year. With very little competition from other manufacturers, Trabants sold in 1963 were very similar to Trabants sold in 1989. After the fall of the Berlin Wall, VEB Sachsenring- Trabant quickly went out of business because they simply could not compete with the likes of Volkswagen in a market economy. Volkswagen had been competing for global customers for years and during that time had to continually improve its products in order to attract new customers.

11. Ask students how long they would expect to wait to receive the Volkswagens they “ordered” online. Because of price incentives and competition, it is in Volkswagen’s best interest to get you the automobile you want as quickly as possible. Their economic future depends on it.

Closure

Review the following points with students:

1. Market economies are, for the most part, efficient and driven by the interactions of consumers and producers.

2. Prices act as a signal between buyers and sellers.3. Command economies tend to be inefficient.4. Central planners can rarely get the numbers right due to a lack of market information.5. East German VEB Sachsenring- Trabant could not compete in a market economy after the fall of

the Berlin Wall because it was run inefficiently and consumers had choices.

Handout 1- VW Order Form

Directions:

Visit www.vw.com and click on the “Build & Price” tab at the top of the page. Select a vehicle and follow the instructions until you have completed an unofficial “order.” Complete all sections and questions listed below.

1. Vehicle Make and Model ____________________________

2. Vehicle Trim ______________________________________

3. Vehicle Color ______________________________________

4. Vehicle Wheels ____________________________________

5. Vehicle Accessories _________________________________

6. Total Price _________________________________________

If you were to submit this order to Volkswagen, what message(s) would you be sending them with your order?

Once Volkswagen received your order, what would workers at the factory immediately begin to do with their time and labor?

Why do the workers at the Volkswagen factory need to make yours the best vehicle they can possibly produce?

Handout 1- VW Order Form (Answer Key)

Directions:

Visit www.vw.com and click on the “Build & Price” tab at the top of the page. Select a vehicle and follow the instructions until you have completed an unofficial “order.” Complete all sections and questions listed below.

1. Vehicle Make and Model ____________________________

2. Vehicle Trim ______________________________________

3. Vehicle Color ______________________________________

4. Vehicle Wheels ____________________________________

5. Vehicle Accessories _________________________________

6. Total Price _________________________________________

If you were to submit this order to Volkswagen, what message(s) would you be sending them with your order?

You would be telling Volkswagen that you want a specific make/model with specific features AND you would be telling them that you agree with the price that has been set for the vehicle you have ordered.

Once Volkswagen received your order, what would workers at the factory immediately begin to do with their time and labor?

The workers at the Volkswagen plant would dedicate their time to making exactly what you ordered as quickly and efficiently as possible. Their labor would be used to build your vehicle.

Why do the workers at the Volkswagen factory need to make yours the best vehicle they can possibly produce?

If you are not satisfied with your vehicle, you can buy from a different company the next time. If people don’t buy their vehicles, Volkswagen will go out of business.

Handout 2- Trabant

Handout 3- Tractors

Handout 4- East German Marks

Handout 5- Production Scenarios

Scenario 1-

A large proportion of the steel produced in East Germany has been exported to the Soviet Union. As a result, your facility will be receiving less steel than is required to build Trabants.

You will only be able to complete 70% of your required goal.

Scenario 2-

Cotton and plastics (used in the production of Trabant car bodies) are hard to find this month, so your facility will be receiving 25% less of what will be needed to build Trabants.

You will only be able to complete 80% of your required goal.

Scenario 3-

One of the three vehicle frame-building machines in your plant has not been updated for 25 years. Last week it broke and as a result you are now down to only two vehicle frame-building machines.

You will only be able to complete 60% of your required goal.

Scenario 4-

Rubber products are in short supply across the country. Your facility has been asked to make do with the same amount of tires allocated last month.

Because of the required boost in output, you will only be able to complete 90% of your goal.

Scenario 5-

One quarter of your factory and 10% of your factory workers were just switched to the production of train cars and train parts. You will only be able to complete 75% of your required goal.

Scenario 6-

A severe shortage of metal wire all across the country has meant you will not receive the proper amounts needed to complete what you had planned to build.

You will only be able to complete 95% of your required goal.

Visual 1- Logo

Can you name this automobile company?

Can you name this automobile company?

Visual 2- Trabant 601

1963-1990

Visual 3- Production Possibilities

Central Planners

Your task …

1. Instruct production managers at the Trabant and tractor factories how much to produce and sell and at what price to sell each item.

Your goals …

1. Use all available resources.

2. Keep consumers as happy as possible.

Consumers each have 1,000 rubles to spend.

The 50 Worst Cars of All Time

Trabants Tractors

24 022 120 218 316 414 512 610 7 8 8 6 9

4 10 2 11 0 12

1975 Trabant

This is the car that gave Communism a bad name. Powered by a two-stroke pollution generator that maxed out at an ear-splitting 18 hp, the Trabant was a hollow lie of a car constructed of recycled worthlessness (actually, the body was made of a fiberglass-like Duroplast, reinforced with recycled fibers like cotton and wood). A virtual antique when it was designed in the 1950s, the Trabant was East Germany's answer to the VW Beetle — a "people's car," as if the people didn't have enough to worry about.

Trabants smoked like an Iraqi oil fire, when they ran at all, and often lacked even the most basic of amenities, like brake lights or turn signals. But history has been kind to the Trabi. Thousands of East Germans drove their Trabants over the border when the Wall fell, which made it a kind of automotive liberator. Once across the border, the none-too-sentimental Ostdeutschlanders immediately abandoned their cars. Ich bin Junk!

YouTube clip- www.youtube.com/watch?v=zBsPFI--muo&noredirect=1

(Trabant)

YouTube clip- www.youtube.com/watch?v=pXBu464dPbI

(Volkswagen)