Isaac Deutscher 1959

From Stalin to Adam Smith

Source: New Statesman, 4 July 1959. Scanned and prepared for the Marxist Internet Archive by Paul Flewers.

The Soviet news agency Tass announced recently that in May the so-called Council of Economic Mutual Assistance (CEMA) held its eleventh session in Tirana, Albania, and took a number of decisions concerning ‘coordination and specialisation’ of economic activity in the countries of the Soviet bloc. The announcement was both dry-as-dust and full of propagandist overtones; and so it could not arouse much interest in the non-Communist world, and probably it did not cause any great stir in the Communist countries either. Yet the activities of the above-mentioned council are undoubtedly of great consequence, and the council itself is, potentially, perhaps the most important international institution functioning within the Soviet bloc.

The council consists of representatives of the governments of the USSR and of all the Communist-ruled countries of Eastern Europe. Delegates of China, North Korea, North Vietnam and Outer Mongolia also attend the meetings, not as full members but as observers. The council was formed in January 1949; and its title reflects its origin, which was fairly grotesque, rather than its present functions. In a sense, the American Secretary of State, General Marshall, was the council’s unwitting begetter: the council was Stalin’s reply to Marshall Aid. Having at the time forbidden the Poles and the Czechs to get Marshall Aid, which they were only too eager to obtain, Stalin had to make a gesture to compensate them, at least symbolically. He invited his European satellites, with the exception of the East Germans and Albanians, to constitute the council, as the counterpart of the Western European international organisations set up under General Marshall’s auspices. Heralded by propagandist flourishes, the council held its first three sessions within a few months; but then in 1950, it was put into the deep freeze and forgotten for many years.

Stalin had, of course, no use for any Council of Economic Mutual Assistance: he held no council with anyone, least of all with his satellites; and in 1949-50, when the USSR still laboured under the after-effects of war, he was in no position to give assistance to anyone, even if he had wished to. To speed up Soviet recovery, he squeezed his satellites as much as he could; and for this he had no need of any ‘mutual aid’ institution. As during the two decades of the USSR’s prewar isolation, Russian self-sufficiency and sacred egoism were still Stalin’s guiding principles. The isolation was now a matter of the past; but Stalin, dominating the new and vast Soviet bloc, behaved like a driver who had changed over from a horse-drawn cab to a motor car and remained convinced that the car would run better and faster if he went on cracking his old whip.

Only a full year after Stalin’s death was the by-now-forgotten council brought back to life and assembled for a session in Moscow in March 1954. Stalin’s successors, aware of the burden of liabilities he had left them in Eastern Europe, were about to disband the various Soviet – Hungarian, Soviet – Romanian, Soviet – German Mixed Companies, and to renounce other economic privileges Stalin had secured; and they were anxious to associate the Eastern European Communists with the clearing of the Stalinist legacy.

It began to dawn on Moscow’s new leaders that the policy of Russian self-sufficiency and sacred egoism not merely aroused intense resentment in Eastern Europe, but produced tremendous wastage and economic chaos – this was indeed the most inefficient of all conceivable Soviet economic policies. Stalin had killed off all too many geese for whose eggs the Soviet Union might have had some use. Worse still, his economic policies had been zealously copied by every one of the satellites: each Eastern European government aimed at achieving national self-sufficiency, until Eastern Europe could boast of ‘building’ simultaneously seven or eight ‘socialisms in a single country’. Poland, Hungary, Romania, etc, tried each to build up, within its own boundaries, the basic branches of heavy industry (including heavy engineering), and to duplicate, each on its own scale, the Soviet economic structure. The result was a severe overall crisis of over-investment in heavy industry, and under-investment in primary production, light industry and farming.

It was to deal with that crisis that the Council of Economic Mutual Assistance was convened in March 1954 – the crisis was to remain on the council’s agenda for the next three or four years. (Not until several years after Stalin’s death were the Communist governments of Asia invited to join the council as observers: China in 1956, North Korea in 1957, and North Vietnam and Mongolia only last year.)

Already in 1954 some Soviet officials and economists favoured the idea that the council should be used as a sort of a clearing office for the economic planners of all Communist countries and that it should, in due time, be transformed into an International Planning Authority for all the countries of the Soviet bloc. During the post-Stalinist ferment of ideas new notions were making their appearance, or, rather, were re-emerging from the limbo of condemned heresies. A few economists began to speak, very cautiously at first, of the advantages of ‘international division of labour’ – the idea, though stemming from good old Adam Smith, had had a ‘Trotskyist’ flavour about it and had been anathema in Stalinist Russia.

Nobody knew, however, how to translate the abstract notion into practical terms. Several schemes for the economic overhaul of Eastern Europe were canvassed. One of these, vaguely associated with the ‘Malenkov line’, advised the Eastern European governments to give up their ambition to develop heavy industry and to concentrate instead on light industry and farming, to export consumer goods to the USSR and to rely mainly on the USSR for their imports of producer goods. Another scheme, which came to be regarded as the ‘Khrushchev line’, sought to maintain some priority for heavy industry in Eastern Europe as well as in the USSR, but to cope with the crisis of over-investment by means of a curtailment of quite a few of the heavy industrial projects. This latter scheme underlay many hasty shifts, carried out in the years 1954-56, and was at the basis of the various East European Five-Year Plans for the years 1956-60.

However, the immediate effect of the remedies was to aggravate the illness. It was not enough to stop some of the biggest heavy industrial projects in order to do away or even to mitigate the scarcity of food, fuel and consumer goods in Eastern Europe; the stoppage, freezing enormous resources, only intensified the economic chaos.

In May 1956 the Council for Economic Mutual Assistance met in East Berlin for a session of crucial importance. It reached the conclusion that the Five-Year Plans adopted in 1954-55 were unworkable. All these plans (covering the period 1956-60) were scrapped, as was also their model, the Soviet plan; and the council recommended the broad principles of a new economic policy. Henceforth – this was the gist of its recommendations – the Eastern European governments should avoid investing in parallel lines of business and building extremely costly engineering plant in small countries, and they should seek to complement and integrate their development schemes. The Soviet members of the council came forward with a specific project for ‘industrial specialisation and coordination’. The project provided for the distribution, or redistribution, of the production centres of not fewer than 600 groups of engineering manufacturers all over Eastern Europe.

The Russians thus took the first long step towards international planning, a quite unprecedented step. At the same crucial session they also urged the council to expand greatly its machinery and to set up permanent ‘branch commissions’, whose job it should be to coordinate in a similar manner the work of the various national industries within the respective branches.

This daring initiative, however, had, at first, few if any practical consequences. The Eastern Europeans voted for the Soviet recommendations but went home and ignored them. True, they had more urgent business to cope with at the moment – the goods famines and the growing unrest in their own countries. Barely a month after the council’s session the workers of Poznan rose in June 1956; in October the Poles moved to the brink of armed insurrection and the Hungarians went beyond it. Throughout Eastern Europe the distrust of all things Russian was at its fiercest. Paradoxically the nationalists and anti-Communists and the most hidebound of Stalinists found themselves as if united in opposition to Moscow’s new economic policy. To the Stalinist all that was coming from Moscow since the Twentieth Congress, the curtailment of heavy industry, the liberalisation and the new talk about ‘international division of labour’ reeked of heresy and treason. To the anti-Communist, and the anti-Russian at large, Moscow’s new talk of ‘international division of labour’ was utterly suspect: was this not a new Muscovite design to despoil the subject nations?

In this situation, while discipline was on the decline throughout the Communist camp, the Council for Economic Mutual Assistance could do nothing. More than a year passed before it assembled again, this time in Warsaw in June 1957. A protracted crisis in the Polish coal industry overshadowed the session. In 1956-57 the output of the Polish miners was extremely low; and this threatened to bring to a standstill Polish, Czech and East German industries, which are all as much dependent on Silesian coal as Western European industry is on the coal of the Ruhr.

Pragmatically, to meet a need of the moment, the council made a further step towards international coordination and planning. To avert the recurrent coal shortages it was decided to re-equip and modernise the Polish mines; and, as the Poles alone could not undertake it, the re-equipment was to be the joint responsibility of Polish, Czech and East German producers of mining equipment. At this session, too, the Russians came out with a definite proposal that the council should at last begin to tackle long-term overall planning for the whole of Eastern Europe; they spoke of a ‘perspective plan’ covering 10 to 15 years.

This was evidently a critical point in the council’s career. Its Russian members pressed for something like a supra-national planning authority. The others replied in effect that the council, being merely a consultative body, on which sovereign national governments were represented, had no authority to engage in international planning and could not claim supra-national prerogatives. A debate of this kind would, of course, not have been possible in Stalin’s days; but now there was a genuine conflict of views. Implicitly, this was a matter of nation-state versus ‘international division of labour’. The council had to refer the conflict to the chiefs of the Communist parties; and the issue figured prominently on the agenda of the Moscow conference of the Communist leaders in May 1958.