Concerning the genetic issue, I really don't think that's the issue with your baby. Abuse or neglect of some sort seems much more likely.
What I can suggest is that you be patient with your dog and slowly socialize the pup with new things, new people, new places, etc. And if you get the chance I really would suggest that you get a good dog trainer to help you start socializing your GSD - and then in the future you can possible even participate in a full blown dog obedience class with other dogs.
It will take time but be patient and you'll be surprised how your dog turns around behaviourally speaking. Good luck!
