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E.R. Frank

The Kremlin in Eastern Europe

(November 1946)

From Fourth International, Vol.7 No.11, November 1946, pp.330-345.
Transcribed & marked up by Einde O’ Callaghan for the Encyclopaedia of Trotskyism On-Line (ETOL).

It is interesting to reread today the resolution on Europe adopted by the 1944 Convention of the Socialist Workers Party.

This resolution, written in the summer of 1944 and adopted in November 1944, foresaw to a remarkable degree the kind of Europe that the Allied “liberators” would establish; it foresaw the revolutionary explosion that broke over Europe and with equal clarity predicted the inevitable conflict between Anglo-American imperialism and the USSR. The general estimates and prognoses embodied in this resolution have unquestionably been fully confirmed by the events. [1] But certainly it cannot be claimed that the American Trotskyists, or anyone else, foresaw in 1944, the present European lineup in all of its concreteness, its irrationality, its stark tragedy. As Lenin once remarked, things have turned out more originally; more unique, more multicolored, than could have been anticipated by anyone.

Who could have painted a picture in 1944 which would have done full justice to the barbaric decline that is Europe today? Who could have drawn in all its ghastly details its present crazy patch-quilt? Who could have been sure in 1944 that the scoundrels of Stalinism would again succeed in stemming the revolutionary tide, in resuscitating half-dead European capitalism and providing it with another breathing spell? What prophet could have foretold that the Peace Conference after the war would furnish the very stage from which the representatives of Western imperialism and Russia would direct upon each other the most savage attacks – attacks unprecedented in the history of modern diplomacy? That atom bomb tests, the dispatch of US dreadnoughts into the Mediterranean, and the delivery of an ultimatum by one “ally” to another “ally,” would constitute the off-stage music to give added effect to the debates at the Peace Conference? We Trotskyists understood better than anyone else the flimsy material from which was woven the imperialist-Kremlin war alliance. We never forgot that the social clash was inevitable between the State that rests on nationalized property and Western imperialism. But even we did not know that the struggle between these two social systems would break out so rapidly after the conclusion of the war, and with such unabated ferocity. No sooner did Stalin help the capitalists dam the waters of the revolutionary flood, than the Kremlin itself became one of the chief victims of its counter-revolutionary handiwork. Now that European capitalism has temporarily regained its political equilibrium, Anglo-American imperialism is beginning to crowd its erstwhile ally and to mobilize world public opinion against it.

The chief, the fundamental, the underlying reason for this acute and growing conflict is the incompatibility between the two divergent social systems. What murderously aggravates this historical incompatibility at the present time, is the fact that the Soviet Union is expanding and reaching out to consolidate its “spheres of influence.” What drives the imperialists to frenzy and spurs them to hasten their war preparations against the USSR is not simply the conflicting strategic and commercial interests of world states, but the incompatibility of the antipathetic social systems. They fear – and with reason – that despite Stalinist counter-revolutionary policy, the very existence of the USSR and its expansion are progressively undermining their social system and endangering its very existence.

It is well to recall today that Roosevelt and Churchill agreed to predominant Soviet influence in the Balkans at the Teheran Conference in 1943. For its part, the Kremlin promised to preserve capitalism and to join with Britain and the United States in crushing the revolutionary manifestations. It is our impression that the Kremlin had every intention of living up to its agreement of preserving capitalism in Eastern Europe. However that may be, in at least two countries, Poland and Jugoslavia, capitalism is already badly undermined. And in the case of Rumania, Bulgaria, Eastern Germany, etc., a closed economy is being built up which ties these countries completely to the USSR and by the same token excludes the possibility of economic infiltration and therefore influence of Western imperialism. In this sense Churchill was entirely correct when he said that Europe is divided by an iron curtain that extends from Stettin to Trieste and has divided the continent into two distinct parts.

While the Kremlin is not living up to its agreement to preserve intact the social structure of Eastern Europe, it carried out, unfortunately, only too faithfully its promise to crush the revolution. Without Stalin, without Stalinist treachery in sidetracking the revolutionary mass movement in Western Europe, and Stalinist treachery plus direct counter-revolutionary terror and violence on the part of Red Army troops in Eastern Europe – without that, Western imperialism could never have even hoped to pacify the revolutionary upsurge and prop up the sagging capitalist regimes. In other words, Roosevelt and Churchill did not succumb to Stalin’s craftiness at Teheran, they did not toss the Balkans to Stalin because of humanitarian soft-headedness, they did not give anything away. They simply had to make the necessary concessions to secure the Kremlin’s indispensable aid in preserving capitalism on a continent that they knew would be torn by revolutionary upheavals. After the revolutionary onrush was successfully repulsed, they could turn their attention to bringing these countries again under the imperialist sway. This may have been a bitter pill for Churchill, as the head of a crumbling empire, to swallow. But Roosevelt was sanguine that the concession was only of a temporary character; that at the next stage, American imperialism, with its incalculable wealth, its unrivalled industrial machine and its military might would break down all doors that stood in the path of its world domination. It is clear today that Roosevelt saw further than Stalin at Teheran in 1943. American imperialism has already cashed in on the first, decisive half of its bargain with Stalin. The revolutionary flood-tide, for the time being, has been halted and sluiced off in Europe. Now Washington is moving aggressively to its next task: Opening up Eastern Europe and bending it to its imperialist purposes; plus isolating the Soviet Union and mobilizing the world against it. That is the real balance sheet of Teheran.

Why, we may ask, is the Kremlin oligarchy, which displayed such timidity and caution in its foreign policy of pre-war days, now embarked on a course which throws it into such irreconcilable contest with Britain and America? Why is the Kremlin persisting in a policy so fraught with danger, which can only hasten the military clash between itself and its capitalist world opponents? What precisely is it doing in Eastern Europe and what kind of economies and states are being created there?

* * *

Soviet Policy

It is easiest to understand Soviet policy and the developments in its “sphere of influence” by reviewing the events in chronological order.

The approach of the Red Army in Eastern Europe in 1944-45, in the case of every country, gave an impetus to the revolutionary uprising. The masses, believing in their ignorance that the Red Army was still the banner-bearer of the socialist revolution, took over the factories and various governmental institutions, upon the retreat of the Nazi armies, confident of the support of the approaching troops. By the same token, most of the big capitalists and landlords, who had all collaborated to one degree or another with the Nazis, fled before the Red Army, fearful not only for their property but their lives.

In the existing circumstances, with the absolute breakdown of the capitalist apparati, it would have been almost child’s play for the Red Army to consolidate the people’s victory, to protect and secure newly-created Soviet states and thus to set all of Europe aflame. But alas, the Red Army entered Eastern Europe as an executor of the counter-revolutionary politics of the Kremlin. It did not support the uprisings of the masses; it suppressed them.

In April 1944 as the Red Army was moving eastward toward Rumania, Molotov issued a statement assuring the capitalists of the world that “the existing social structure of Rumania” would not be interfered with. The CBS picked up a broadcast from Moscow on September 20 at a time when the Red Army was already in Eastern Europe, which similarly declared: “The Soviet Union will not introduce its order into other states and it does not change the existing order in them.”

The Balkan masses paid no attention to these stern warnings, and very likely were unaware of them. They rose up against their agelong tryants and oppressors and trustingly believed that the Red Army would help them take their destiny into their own hands.

The Western correspondents reported that a great revolutionary upsurge occurred in Rumania coincident with the approach and entrance of the Red Army. With their rule desperately menaced by the mass revolt from one side and the avenging Red Army from the other, the Rumanian capitalists and landlords organized a coup d’etat in August 23, 1944 under the leadership of King Michael. The king suddenly appeared in the guise of a great “democrat”; he denounced the previous pro-German policy of the government and set up a new coalition People’s Front cabinet, composed of the traditional Rumanian parties, headed by a reactionary army general, Constantin Senatescu. The Stalinists and Social Democrats hastened to enter the Cabinet; and through their able assistance, the revolutionary upheaval was successfully quelled. The old ruling cliques were permitted to reestablish themselves, and the creaking, half-expiring landlord-capitalist regime of Rumania was provided with a new lease on life. Isolated workers’ groups, who persisted in defying or seeking to upset the reestablished “law and order,” were quickly suppressed by the Red Army authority and later by the reestablished internal police, which was likewise headed and manned by the Stalinists.

In Bulgaria, the entrance of the Red troops was the signal for a full-scale revolutionary uprising. The dispatches stated that in the Capital, the Red flag was flying over all the government buildings as well as over thousands of homes. We read of the immediate arrests of fascists by the armed masses; of huge demonstrations in the major cities; of a railway strike that paralyzed the government; of the military authorities losing all effective control over the situation. Civil war had started. The Bulgarian masses were preparing for the new Red dawn.

Stalinist Reaction

But all the revolutionary hopes aroused in the masses were quickly dashed to the ground. The local Stalinist leaders working hand in hand with the Red Army authorities stamped out the fires of the civil war. Joseph M. Levy, correspondent for the New York Times, telephoned from Sophia on September 21 that “In a few of the provinces ... pillaging and even killing of the suspected fascists occurred, but these acts were soon stopped by the militia, composed of strictly disciplined young men and women.” He continued that “Communist (Stalinist) leaders are doing everything they can to prevent extremists in the party from agitating for Sovietization of the country.”

When the local Stalinists were unequal to the counter-revolutionary task at hand, the Red Army stepped into the breach. Levy stated:

On several occasions when local Communists in the provinces tried to displace city officials and take matters into their own hands they were ordered by the Russian military authorities to return the jobs to the old officials until orders were received from the Fatherland Front government in Sophia.

A quisling People’s Front regime, similar to the one in Rumania, was set up under the title of the Fatherland Front Government. The Cabinet, including its quota of Stalinists and Social Democrats, was headed by Premier Kimon Georgieff and War Minister Damian Velcheff, both members of the so-called Zveno Group, a semi-fascist military clique.

The new government, propped up by the bayonets of the Red Army, proceeded immediately to “pacify” the turbulency of the masses and reestablish “order.” John Chamley, special correspondent of the London News Chronicle reported that the government printed an appeal ordering Bulgarian soldiers to return to their barracks. They promised that part of the antifascist militia would be absorbed into the regular army. They furthermore instructed all armed civilians to report to designated places and surrender their arms. Thus the new government, a bloc of traditional capitalist politicians, semi-fascist Bulgarian militarists, and Stalinist Social Democratic quislings, supported by the Kremlin, began its work of governing in the classic manner of all counter-revolutions – the disarming of the insurgent masses. Anton Yugoff, the Stalinist Minister of the Interior, in charge of the police, went out of his way to reassure the capitalists that they had nothing to fear, that the Stalinists were absolutely “reliable.” He said:

“The government of which I am a member and on whose behalf I speak, categorically denies that it has any intention of establishing a Communist regime in Bulgaria. There is no truth in rumors that the government intends to nationalize any private enterprise in the country.”

In Czechoslovakia, the approach of the Red Army produced a sweeping overturn. The Prague correspondent of the London Economist (February 9, 1946) reported that Czechoslovakia was the scene of a “revolution” in May 1945, that “Councils were established in every town, village and hamlet”; that “the committees, which took over control in practically every factory during the Revolution, were mainly the achievements of underground Communist fighters.” When the country was “liberated,” the Councils and Committees possessed, in reality, far more actual power than did the central government which had no armed forces at its disposal and which came in from abroad on the heels of the victorious Russian troops.

Here too the Kremlin authority, employing both the prestige of the native Stalinists and its own power, propped up a four-party coalition regime of the pro-Allied Czech bourgeoisie plus the Stalinists and Social Democrats, in accordance with the agreement which Stalin had previously worked out with Beneš. The Stalinists, as usual, made use of their prestige as Communist underground fighters and as spokesmen of the Russian Revolution to gradually drain the Workers’ Committees of their power and transfer all power to the Coalition regime. Bohumil Lausman, the Minister of Industry, told the representatives of the Factory Committees immediately upon his return from a trip to Moscow that they were exceeding their authority and pointed out that in the Soviet Union he found that the factory manager is supreme! Antonin Zapatocki, Stalinist head of the trade union movement, immediately began making speeches in the manner of a British Labor Party “statesman.” At a trade union meeting in Prague, he advised the workers that “although working morale has definitely improved and in some sectors great results have been achieved, total results are far from satisfactory. More efficient work and greater efforts are necessary for the speedy rebuilding of our state.”

Even in Poland, despite the debacle of the Warsaw uprising, the entrance of the Red Army stimulated a revolutionary movement with workers taking over the factories and peasants seizing the land. The developments in both Poland and Jugoslavia, however, proceeded along somewhat individual lines and will therefore be discussed in a separate connection.

Even in Eastern Germany, despite Goebbels’ campaign to incite fear of the Russian forces and the Kremlin’s own chauvinist anti-German tirades, the approach of the Red Army stimulated the revolutionary actions of the working masses. “Here, as elsewhere,” the London Economist reports, “the collapse of Nazism was followed by demonstrations of a socially revolutionary spirit. Workers seized factories and settled accounts with Nazi or Nazified managements.” The Economist contrasts “the revolutionary myth that preceded the Red Army, the certainty of whose arrival encouraged radical elements among the working class to revolutionary acts” and “the myth of social conservatism which preceded the British and American armies in the West ... discouraging the radical elements among the German population and encouraging the conservative elements.”

We can sum up the first stage in Eastern Europe after the retreat of the Nazis and the entrance of the Red Armies as follows: Everywhere, the approach of the Red Army stimulated and inspired mass uprisings. The old state apparati collapsed. Many of the big industrialists and landlords fled. The workers took over the factories. Armed militia bands sought to arrest the old officials and collaborators and to wipe out fascism by direct methods. To a greater or lesser extent, organizations of dual power sprang up, under conditions of the utter crumbling of the capitalist institutions. The path was thus wide open for the extension of the Workers Committees, toward the establishment of Soviet power.

The Kremlin stepped into the breach to refurbish the old capitalist apparati and prop them up with its bayonets. Utilizing the combination of native Stalinist influence and its own direct military authority, the Kremlin everywhere sidetracked and quelled the mass uprisings, proceeded to disarm the irregular militias and armed bands, moved to bureaucratize and house-break the independent organizations of dual power and impose on the masses hand-picked, subservient People’s Front regimes. In this earliest stage of “liberation,” the Kremlin occupation authorities played a role not too dissimilar from the Anglo-American “liberators” in the West. But once the Kremlin broke the back of the mass uprisings, restored a modicum of equilibrium and guaranteed the authority of their newly-hatched Coalition governments, the similarity with the West abruptly came to an end.

A Different Course

Now, the native Stalinist leaders pursued a far different course from that of the West-European Stalinists, and the Kremlin organization of its “sphere of influence” diverged sharply from the policies and methods of the Western imperialists. The reasons are obvious: They derived from the different social basis of the USSR and the consequently different needs and aims of the USSR under its present rule of the Stalinist oligarchy.

The peculiar way in which the Nazi power declined and then crumbled provided the Kremlin with its unparalleled opportunity to move its legions into half of Europe. The mouths of the Stalinist satraps must have watered as they saw one country after another fall, like a ripe plum, into its hungry maw. The Kremlin saw in this blessed newly-opened backyard the opportunity of overcoming many of its internal difficulties and solving many of its growing problems. Of course, their vision being strictly circumscribed by national considerations, not to speak of bureaucratic cynicism, prejudices and narrow-mindedness, they could only view these countries as milch cows to be milked dry.

At first, the Kremlin oligarchs marched their armies into Eastern Europe like the marauding armies of ancient days. They pillaged and looted and raped. It was truly as if a horde of barbarians had descended on the land. This pillaging and picking the countries clean was not limited to the “enemy” countries; it was practiced impartially on “enemy” and “ally” alike. The barbaric conduct of the Red Army soldiers is scarcely surprising. What other results could have been expected? Under Stalin’s rule, these soldiers have been brought up in constant want and penury, living under conditions of indescribable brutality and violence, and subjected especially during the war years to the fiercest kind of chauvinist propaganda and incitement for revanche.

Then the mortifying reports began coming in that the Red Army authorities were dismantling plants and shipping them to the USSR. This became an increasingly common practice again in both “enemy” and “ally” countries alike. No reliable figures exist as to the number of such plants that have been dismantled. But estimates have run as high as 20 per cent of Czech industry, 30 per cent of Polish industry, a third of the industrial equipment of Eastern Germany.

It was unquestionably this policy of plunder and violence which turned the anger of the peoples upon the Red Army and was responsible for the trouncing that the Stalinists received in the elections in Hungary and Austria. The motive for this incredibly shortsighted and reactionary conduct is obvious. Russia was starved for consumers’ goods; the country was horribly ravaged and desperately short of all industrial tools and products. The temptation to steal everything it could lay its hands on to alleviate its own raging internal crisis was too great for the Kremlin to resist. It was only after the anger of the masses rose to a furious pitch and the Kremlin bureaucrats feared that by their ruthlessness they were killing the goose that they were intending should lay golden eggs for them, that they put a halt to their wholesale looting, even returning here and there a dismantled plant, and made other gestures to mollify the antagonize working masses.

Using the four defeated Axis satellite countries as their wedge, the Kremlin soon installed itself as the overlord of all of Eastern Europe, reorganized its economy to serve its needs, tied it firmly to the economy of the USSR as a serf is tied to the land of his lord, and closed it to Western capital. Russia signed Armistice terms with Rumania on September 12, 1944; with Finland on September 19, 1944; with Bulgaria on October 28, 1944; and with Hungary on January 20, 1945. All the Armistice terms followed the same general pattern: They provided for an Allied Control Commission under Soviet direction, which meant in practice a Kremlin overlordship. The Control Commission was granted authority over all communications, transportation and censorship. The four countries undertook to repeal all Fascist legislation, purge the pro-Nazi elements and restore all stolen allied property. In addition Rumania, Hungary and Finland were obligated to pay reparations to Russia of $300,000,000 to be paid out over a period of six years.

These reparation sums represent considerable percentages of the total wealth of these countries, as they have to be squeezed out of economies that have been sucked dry by the Nazis, and in addition, thoroughly shattered by the war. The sums furthermore are larger than the figures would indicate as reparations are based not on present but on 1938 prices. Furthermore these countries are groaning under the weight of Red Army occupation, an army which lives off the land and voraciously eats up the substance of its wealth.

Through these means the four countries have been rendered completely dependent on the Soviet Union and tied to its economic needs.

In the case of Austria the same result was achieved by military pressure and plunder. Although the Moscow Conference of 1943 guaranteed a “free and independent Austria,” the Kremlin maintains an army of occupation of 60,000 soldiers and has been seizing for its own, whole segments of industry under the clause of the Potsdam agreement which permits it to confiscate Nazi-owned wealth.

Thus by a combination of military pressure, the exercise of conqueror’s “rights,” looting, and maintenance of huge armies of occupation, the Kremlin has placed virtually all of Eastern Europe at its mercy and has converted it into a vast hinterland subservient to the economy of the USSR. As a consequence the Soviet Union occupies the place in Eastern Europe that was held recently by Germany and after the last world war by France.

No sooner did the East-European regimes achieve a kind of equilibrium with the passing of the first revolutionary wave, than the capitalist politicians in the People’s Front combinations began to balk at the Kremlin’s ruthless economic demands and to intrigue against Stalinist control of the governmental machinery as well as the social-revolutionary measures which the Stalinists were carrying through. Their actions against Kremlin military rule were, of course, encouraged and often instigated by the Western imperialists. The United States and Britain were by this time viewing with increasing alarm the conversion of Eastern Europe into a closed preserve of the Russian colossus. Anglo-American imperialism felt that the time had come to “get tough” with Russia. That is why they embarked on an energetic policy of building up points of political support within every one of these countries in the Soviet sphere. And because the Kremlin’s policy was so unashamedly predatory, fascist and semi-fascist Balkan politicians, allied with Western imperialism, could pose as democratic knights-in-armor and carry on their pro-capitalist struggle under the banner of “democracy,” “free elections,” “freedom of the press,” etc., etc.

Confronted with this growing resistance from the native capitalist elements from within, and on the part of imperialism from without, the Kremlin sought refuge in tightening its stranglehold upon these countries. They forced the recalcitrant bourgeois politicians out of the governments, they harassed the “non-cooperative” political organizations, arresting their leaders and suppressing their papers; they bought off other leaders who set up new rival parties, etc., etc. Thus in a short space of time, the East-European People’s Fronts, while retaining their formal coalition character, were converted into outright Stalinist-dominated police dictatorships, that ruled by terror and repression and rested on secret police systems modelled after the Russian.

Governmental Evolution

A few examples will illustrate this process. The first People’s Front Cabinet set up in Bulgaria in September 1944 was broadly representative of the leading capitalist parties plus the Stalinists and Social Democrats. Soon the Kremlin was alarmed by the attitude of Dr. G.M. Dimitrov, the leader of the Agrarian National Union, probably the most influential party in Bulgaria. Dimitrov did not wish to integrate himself in the Kremlin-dominated government and insisted on retaining his close and friendly connections with the Western powers. A political struggle developed between the Stalinists and the Agrarians, which, for a while, became the central axis of Bulgarian politics. In January 1945, the Stalinists forced Dimitrov’s resignation from the secretaryship of his party, and when his successor continued to follow Dimitrov’s policy, the Fatherland Front sponsored a rival Agrarian party under the dissident leader Alexander Obbov. When the Social-Democrats followed suit in opposing the Fatherland Front Cabinet, they were promptly deprived of their newspaper which was handed to a minority group. The latter blossomed forth immediately as the Social Democratic party. It condemned the Social Democratic Ministers and pledged allegiance to the Fatherland Front Government.

Encouraged by the attitude of Britain and the United States, who were making use of this Kremlin terror to scandalize and discredit the Soviet Union, and emboldened especially by the Yalta declaration, all four Agrarian members of the Cabinet, and one of the two Social Democrats resigned in July and August 1945 in protest against the electoral law which made mandatory the single Fatherland Front ticket. The reign of terror unleashed by the Stalinists in Bulgaria at that time has not yet ceased.

The evolution of the government followed a very similar course in Rumania. The first People’s Front Cabinet was set up after the coup d’etat of King Michael in August 1944. This Cabinet included practically all important “non-collaborationist” bourgeois groups and the Stalinists and Social Democrats. Within a few months the National Peasant Party headed by Juliu Maniu, and the National Liberal Party headed by Constantin Bratianu, began to complain and balk at the Cabinet’s policy, for the same general reasons that animated the opposition in Bulgaria. This led to the break-up of the National Democratic Bloc. The Rumanian bourgeoisie, acting through King Michael, displayed considerable truculence toward the Kremlin, encouraged as they were by the Western powers and feeling that Britain and the United States were determined not to permit Rumania to get sucked into Russia’s orbit. But the Kremlin was in no mood for shilly-shallying. Vyshinsky, Soviet Foreign Vice-Commissar, immediately arrived in Bucharest and delivered an ultimatum to King Michael. The latter, powerless to resist, approved the new Cabinet as proposed by Vyshinsky, and the Groza government came into being on March 6, 1945. The Peasant and Liberal parties were now excluded from the government and their press was suppressed; only the pro-Kremlin Social Democrats were included in the Cabinet. The Social Democratic Party itself was subjected to increasing attack and finally on March 1946, Petrescu was ousted from its leadership in favor of the pro-Stalinist leader Stefan Voitec. The Groza government is a Stalinist police dictatorship ruling by terror, although according to the reports, it has never approached the Bulgarian bloodbath in ferocity.

The Hungarian government which signed the Armistice was established in December 1944. It followed the general pattern of the other East-European coalition governments and included the four principle Hungarian parties; the Smallholders representing the middle classes, Stalinists, Social Democrats and the National Peasant Party. As we shall see later on, the economic and social evolution of Hungary follows very closely along the same lines as the other countries in the Soviet sphere. But although the Stalinists are powerful in the government and control the political police, the regime has been much milder and the original coalition bloc has been retained. Hungary was the one country in the Soviet sphere which was permitted to hold a more or less free election, which resulted in a big victory for the Small Landowners party and a defeat for the Stalinists. Nevertheless, whether due to fear of the West or other reasons, the Kremlin has not disturbed the existing coalition and is relying on integrating Hungary into its sphere by means of reparations and an economic squeeze.

Poland, Jugoslavia and Czechoslovakia fall into the same general pattern of development as the rest of the Soviet sphere. Nevertheless the development of each of these countries has been peculiar to itself and will have to be discussed individually.

First on Czechoslovakia. Here, German capital even before the war played the decisive role. All the leading sections of the capitalists went over to the Nazis after the Munich agreement. Beneš, representing the pro-Allied Czech capitalists and middle classes (in much the same way that de Gaulle represented the Pro-Allied French capitalists and middle classes) organized in London a government-in-exile after the Germans had overrun the country. But unlike all the other governments-in-exile, Beneš and his supporters, from the first, demonstratively adopted a pro-Russian orientation. The Czech liberal bourgeoisie proved itself far-sighted enough to understand that it could survive only by agreement with and by making all the necessary concessions to Moscow. Unlike the other governments, Beneš set up in London a broad People’s Front Cabinet, which included the Stalinists. As soon as the Red Army began moving eastward, Beneš hastened to Moscow and then to Kosice in Slovakia where in April 1945 a new People’s Front Cabinet was set up along lines similar to the first cabinets of Rumania, Bulgaria etc. Beneš’ whole policy has been one of not crossing Moscow and in holding firm to the alliance with the Czech Stalinists. He has gone along with the Stalinist social program; when the Kremlin demanded the cession of Carpatho-Ukraine, it was given up without a murmur. Beneš did not even quarrel when a sizable segment of Czech industry was dismantled and shipped to Russia, under the legalism that it was Nazi-owned property. He has displayed such a spirit of exemplary “cooperativeness” that he succeeded in securing at an early stage the withdrawal of practically all the Red Army occupation troops, and recently, according to the London Economist, the Kremlin has “generously presented as a free gift” to Czechoslovakia “the big German synthetic petrol works at Baix in Bohemia.”

Because the Czech liberal bourgeoisie is bending over backwards to keep on friendly terms with the Kremlin, the People’s Front government has survived in Czechoslovakia in more or less its original form. Another key factor, of course, is that the country is far richer, far more industrially developed, far less devastated by the war than the rest of its Eastern neighbors. Its recovery has therefore been more rapid, and has made somewhat easier the government’s problems. The Stalinists, who were powerful even in the pre-war days, have now emerged as the strongest single party. The regime, therefore, while by no means liberal in the traditional sense, has been far milder than that of its neighbors, and the Stalinists felt sufficiently secure to permit recently the holding of a more or less free election from which they emerged as the leading party.

In sharp contrast to Beneš and his policy, the Polish government-in-exile in London, dominated by the same “colonels” who controlled Polish politics for two decades, remained obdurately anti-Soviet. Even in exile, they continued their mad, adventuristic game of trying to play off the Western powers against Russia. The Kremlin constantly grew more hostile to this government and increasingly suspicious of its intentions. Finally in 1943, when the Anti-Soviet orientation of the London government was dramatically flaunted, the Kremlin broke off diplomatic relations, and set up its own rival puppet Polish government-in-exile. In the winter of 1944, in agreement with the Kremlin, a new provisional government was set up in Lublin composed of the Polish Democrats (PPS), the Stalinists, the Peasant Party and the Democratic Party, on the basis that all participants favored “friendly relations” with Russia, were willing to collaborate with the Polish Stalinists, and agreed to the partition of Poland, that is the giving up of Poland’s prewar eastern frontier.

The Polish Regime

This new government, while formally a coalition of the same type as elsewhere in Eastern Europe, constituted in reality little more than a Stalinist-front government, composed of obscure Polish Stalinists, outright GPU agents, Social Democrats with no political past and a variegated assortment of reactionary bureaucrats and generals of the pre-war Polish regimes. As usual, the police was in the hands of a reliable Stalinist, M. Stanyslaw Radkiewicz, a GPU agent, who assumed in the new government the Ministry of the Interior. The Kremlin could not help itself: All the leading, well-known Polish Stalinists had long since been liquidated in the blood purges. So were many of the prominent Social Democrats. The rest had fled abroad. As for the prominent and influential bourgeois politicians – they were adhering to the London government. The new Polish government was thus strictly a handpicked proposition resting on the bayonets of the foreigner; with little support in the native population. It must be recalled that Stalin felt so unsure of his position and was so fearful of the London government, that he did not want it to have any share in “liberating” the country and that he permitted the Warsaw uprising to be drowned in blood by the Nazis, rather than conquer Warsaw in partnership with General Bor.

The savage character of the Polish regime was determined by its negligible influence in the population and the unrestrained campaign which the exiled Polish leaders were directing against it. Three distinct military organizations operate on Polish soil today and fight the existing Polish government: the Polish Home Army (Armja Krajova), the National Military Force (NSZ) led by Bielicki of the London Government, and the National Democrats. All three constitute semi-fascist or fascist formations, with their own underground press, political organization etc. The Polish Government – an unalloyed police dictatorship – thus has its hands full sending out constant punitive expeditions, arresting thousands of oppositionists, etc. In the early days, the Red Army itself arrested thousands of dissidents and deported them to Russia. According to Radkiewicz these numbered about 5,000. The bourgeois correspondents give far higher figures. As this evoked tremendous indignation among the highly nationalistic Poles and redounded against the government, the practice was discontinued, and the Polish Security Police took over the job of “pacifying” the population.

After the Yalta Conference, where Britain and America demanded that the Polish regime be “democratized,” the Cabinet was enlarged to include several prominent bourgeois political figures headed by Mikolaczyk, leader of the Peasant Party, and including Jan Stanczyk, prominent Social Democrat. But the attempt to stabilize a Coalition between the representatives of the bourgeoisie and the Stalinists was no more successful in Poland than in Bulgaria or Rumania. The two divergent social trends that the two contending sides espouse proved incompatible. Soon Mikolaczyk became the rallying point for all the variegated groups which constitute the capitalist opposition to the government: The fascist military formations; the Catholic Church hierarchy, which is headed in Poland by the Pilsudskist politician, Cardinal Hlond; the dispossessed landlord and factory owners; elements of the middle class and peasantry, who are suffering grave hardships and are outraged by the seizures of the Red Army and the brutalities of the police regime which governs over them. While formally Mikolaczyk is still part of the governmental bloc, in practice he is leading this capitalist-reactionary opposition to the government. Encouraged by the world diplomatic offensive against the USSR, and the demonstrative applause of the Western press, the opposition has renewed its attack with great vigor. The government for its part still feels too weak to chance an election in which Mikolaczyk would run in opposition.

The Tito regime of Jugoslavia has a considerably different origin than the other East-European governments. Tito, a veteran Stalinist functionary, was the leader of the Jugoslav Partisan movement, which was organized in 1941 to harass the German armies, in support of the Soviet Union. This so-called National Liberation Movement grew to stormy proportions and assumed, in the cause of the war, the character of a social revolutionary movement. It not only fought the Nazi and Fascist invaders, but fought the armies of Mikhailovich, which represented the old landlord-capitalist classes. The march of its armies through the country took on the character of a social revolution. The old landlord and capitalist classes were driven out and Committees representing the workers and peasants took over government administrative organs, the factories, the land. Tito, as well as a number of other Stalinist leaders, became legendary figures. The new government began to rule under far different circumstances than its Polish counterpart. It unquestionably enjoyed tremendous support among broad layers of the population. It was, as a matter of fact, the one government in Eastern Europe not installed or directly propped up by the Red Army.

Nevertheless, during the war, Stalinist bureaucratization and suppression must have proceeded apace along with the growth of the popular movement and the promulgation of the social revolutionary measures. For no sooner was the present Tito government installed than it began to emulate all the other East-European police regimes in its savagery and terror. The correspondents reported that an atmosphere of fear pervaded the Capital and that the dreaded secret police, the OZNA, were operating everywhere. Tito is imitating Stalinist Russia even to copying the elegantly cut uniforms of the Kremlin bureaucrats and weighing down his military tunic with countless shining medals. The black reactionary character of Stalinism is exposed by its need of a police dictatorship in Jugoslavia – a country where it enjoyed tremendous popularity and support. This development cannot be explained solely on the grounds of the horrible economic dislocations. It was unquestionably bred by Tito’s twin needs of not only suppressing the old counterrevolutionary classes but at the same time keeping an iron hand on the working class and preventing their emergence as an independent non-bureaucratized – and therefore anti-Stalinist – force.

As in the case of the other countries, Britain and the United States attempted to secure the “broadening” of the Tito regime in order to strengthen the capitalist forces inside Jugoslavia. To this end the Yalta Conference recommended that a new government be formed on the basis of the Moscow agreement between Tito and Dr. Subasich, the head of the Jugoslav government-in-exile in London. But this forced marriage proved no more successful than the one in Poland. Subasich and his supporters were soon clashing sharply with the Tito government. Finally Dr. Milan Grol, the Serb leader demonstratively resigned, followed on October 11, 1945, by Subasich’s resignation as Foreign Minister. The whole opposition thereupon decided to boycott the scheduled elections. Jugoslavia, in its present political administration, is similar in essentials to Stalinist Russia: a police regime headed by an individual leader; a Stalinist-led army, courts, secret police, and a totalitarian press and educational system.

Thus throughout Eastern Europe we find a common political pattern: The establishment upon “liberation” or soon afterwards of a Coalition regime with important Stalinist participation. This broad coalition is soon narrowed down to the point where the coalition becomes a facade for essentially Stalinist-dominated police governments. (Finland is a special case and lies outside the framework of this study.) Only in Czechoslovakia and Hungary can one speak of actual Coalition regimes which still enjoy a measure of popular support.

The Kremlin Master Plan

The Kremlin master plan to convert Eastern Europe into a pro-Russian hinterland is not exhausted by its lootings, its policy of extracting the maximum in reparations and plunder, or its imposition of reactionary police regimes. In addition, the Red Armies entered Europe as carriers of new socio-economic relations. This has been demonstrated by the social revolutionary program that the Stalinists led in carrying out throughout the Soviet sphere, exemplified in the land reform and the nationalization of industry. In 1939 Trotsky explained that the Kremlin would be forced to extend its social-economic basis to the newly incorporated territories in Eastern Poland and the Baltics. Not because of the Kremlin’s devotion to Sovietization, but because it could not tolerate the existence of another ruling class within its borders. To safeguard its own regime, it was compelled to expropriate the landlords and capitalists of the newly-incorporated lands, and nationalize both land and industry, to conform with the economy of the rest of the USSR.

The Kremlin, however, did not dare attempt to incorporate half of Europe into the USSR at the conclusion of this war. For obvious reasons. First, it might disrupt dangerously its own police control over the Soviet peoples and saddle the regime with insoluble national difficulties. Secondly, and what is decisive, it dared not – in the face of the opposition of Western imperialism.

But while it found itself unable to incorporate the East-European countries into the USSR, it also could not tolerate the continued existence of the old, bitterly anti-Soviet ruling classes, who were firmly tied to the apron strings of the West. The Kremlin oligarchs attempted to solve this dilemma by encouraging and setting into motion a managed and partial revolution in the occupied territories. The revolution, and the new socio-economic relations that it brought into being, was intended to wipe out the old ruling groups; create an independent yeomanry on the countryside tied to the new regimes and grateful to them (in the manner of the French peasantry after the great French revolution) ; place the main levers of economic power in the hands of the new States and build up new bureaucracies dependent upon and loyal to the Kremlin. Stalin, as the years go by, has gained more and more faith in his ability to flout the historical process; and where he possesses the military or police power, to directly manipulate and control it. By setting into motion this controlled and partial revolutionary wave, Stalin believed he could have his cake and eat it too. The old ruling cliques would be destroyed; new States – neither capitalist, nor Soviet – would come into being completely dependent upon and firmly tied to the Kremlin – and Western imperialism would be sufficiently confused and bamboozled to acquiesce in the fait accompli. It is clear from the uniformity of the measures adopted in purging the old pro-fascist bureaucracies, in expropriating the landed estates and parcelling out the land to the peasantry, in setting up coalition Cabinets, in nationalizing the banks and credit institutions, that the Red Army occupation authorities and the native Stalinists were working from a previously-conceived master plan. Only in the case of the nationalization of industry has there appeared a wide disparity from country to country; only here have the Kremlin governments proceeded empirically, suiting their actions to the particular developments and needs.

The different class approach in the East as against the West was exhibited from the start in the carrying through of the purge of the pro-fascist bureaucracies and collaborators. Throughout Western Europe, the bourgeois-dominated governments stifled the “purge”; the courts run by the old bureaucracies procrastinated and dragged out matters to the utmost, and leaned over backwards in their leniency toward the pro-fascists. And as soon as the masses were tired out and their anger had abated, the whole “purge” was abruptly discontinued. The case was qualitatively different in Eastern Europe. Here, the State institutions cooperated fully with the militias and Resistance groups. The guilty ones were promptly brought to trial and sentences were swiftly carried out. In Bulgaria for instance 11,000 “war criminals” were brought to trial. Almost 3,000 of these, including former Regents, Cabinet ministers and numerous deputies, received death sentences, which were promptly executed. The clear-cut class difference between the “purges” in Eastern Europe and Western Europe should not be lost sight of, because here, as in all cases and spheres, the Stalinists made amalgams, shot down worker-oppositionists along with real fascist collaborators, shielded other fascists and gave them high government offices, carried through the whole offensive under sickening nationalistic formulas, and utilized the purges to consolidate its own police regimes. In the West, despite all the hullabaloo about “purging” the “collaborators,” the big capitalists felt safe and continued their machinations and intrigues against the people. In the East, the big capitalists and landlords fled before the Red Armies.

In this is revealed once again the two-sided character of the Stalinist bureaucracy. On the one hand, it cannot tolerate the existence of powerful capitalist groups; it undermines the capitalist class structure. On the other hand, it must stifle the masses and impose over them a dictatorial rule. Under the different conditions of Eastern Europe, the Kremlin duplicates the essential mechanism of its rule inside the USSR.


The Land Reforms

Concomitant with the purge of the old capitalist bureaucracies, all the new governments expropriated the landed estates, and thereby destroyed the semi-feudal landlord class of Eastern Europe. This agrarian revolution – a task of the bourgeois revolution – the East-European ruling classes proved incapable of accomplishing, despite agitation for land reform which lasted half a century. It was now finally accomplished by the masses under Stalinist leadership, in the tempest of the Second World War. The importance of the agrarian revolution in Eastern Europe is underlined by the fact that agriculture still remains the most important segment of its economy.

In Poland, the Lublin government issued a decree as early as September 6, 1944 confiscating all large estates, wiping out the landlord class and guaranteeing property rights to the individual farmer. Premier Osubka-Morawski informed Edgar Snow in an interview that

“... there wouldn’t be any large estates left in Poland, except for land owned by the Church ... Land of the Germans, traitors to the Polish people, and landed estates of over 50 hectares (123 acres) were confiscated ... In the case of lands taken from the Reich, individual landowners would be permitted to retain estates as large as 100 hectares ... the bulk was divided among small and middle peasants, small tenant farmers with large families and agricultural laborers ... taking as a basis five hectares of arable land for the average family.”

The Land Reform Act affected 9,000 big estates covering about 5 million acres of land, which represents approximately one-seventh of Poland’s present farmland, excluding the new western territories. About 3¾ million acres have been parcelled out to poor peasants, involving about 2 million people. About 1 million acres have been set aside for special government use. The remainder is still to be distributed. Poland possesses, in addition, some 20 million acres of land in the new western regions. But much of this land is unarable, and the whole territory is today barren and war-scarred. No reliable figures exist as to the number of Polish farm settlers who have entered these lands.

In an important policy speech at the Ninth session of the Polish National Council (December 29, 1945) Hilary Minc, the Stalinist Minister of Industry and Commerce contrasted the government’s policies in industry and agriculture.

“This is not a socialist revolution,” he declared, “and therefore like Czechoslovakia, France or Britain, we pay indemnities. The agrarian reform, on the other hand, was a revolution, an agrarian revolution, that has long been overdue in our country where our obsolete system kept us far behind the other countries of the West. In 1945 the system of feudal overlordship was abolished in Poland in much the same way as was a similar system in the France of the Nineteenth Century.”

Czechoslovakia followed the same course. No sooner was the new government set up at Kosice in Slovakia than it promulgated a land decree on April 5, 1945. The Prague radio announced that a National Land Fund was created which was to consist of “all land, buildings, live stock and implements formerly belonging to the German and Hungarian gentry or large estate owners irrespective of their citizenship, or citizens of enemy countries ... or to Czechoslovak citizens of German or Hungarian nationality who actively assisted in the dismemberment and occupation of Czechoslovakia, and of citizens who betrayed the nation by actively supporting the occupation forces ... All of these estates and holdings will be confiscated without compensation” and their temporary administration will be entrusted to regional committees until a distribution method is perfected to allocate the land. “For land given in full ownership to the farmers, the payment must not exceed the value of the average harvest of one to two years and actual payment will be spread over a period up to fifteen years.” (News Flashes From Czechoslovakia, June 15, 1945.) The maximum for land holding was fixed at 50 hectares (123 acres). Approximately 2,300,000 hectares of forest and arable land are available for distribution to peasants who may receive from 8 to 13 hectares per family.

The gold of the “agrarian revolution” in Czechoslovakia was generously compounded with the alloys and dross of rampant chauvinism, which seems to characterize every feature of the new Czechoslovak Republic. In addition to landlords, tens of thousands of Hungarian and German farmers had their lands confiscated and were driven out of the country for no other crimes but that of belonging to “enemy nations.”

In Rumania, the original Sanatescu government announced almost immediately after its formation that it would break up all estates exceeding 50 hectares, including Church, royal and all other properties (with the exception of model farms). In addition, all lands belonging to German and Rumanian collaborators were to be confiscated in full. The Moscow Radio announced that the lands of over 500 estates consisting of 1,000 or more hectares each have been distributed to landless peasants who received land parcels of up to five hectares per family.

Bulgaria was the only country in the Soviet sphere where very little has been heard about land confiscation or redistribution. The reason, probably, is that Bulgaria has been a chronic sufferer from rural over-population, the smallness of the individual plots of land, and the backwardness of its agricultural technique, rather than from the existence of large estates. This would explain the agricultural law passed by the Fatherland Front Government shortly after Bulgaria’s “liberation” in November 1944. This law called for the cooperative cultivation of the soil. It aimed at increasing production and modernizing farm methods – where the peasants of a given region agreed to join a cooperative. The law pointed in the correct direction to a solution of Bulgaria’s ills in agriculture. But Stalinist brutality plus the fears of the peasantry that they were faced with a repetition of the 1929 horrors of “Stalinist collectivization” in the USSR, led to serious unrest in the countryside and the government was forced to suspend the enforcement of the law.

Agrarian Reform in Hungary

Of all the East-European countries, Hungary was the one where the agrarian revolution was most overdue. Here too, no sooner was the first People’s Front regime constructed than it initiated land reforms, first publicly announced on March 17, 1945. This law decreed that all lands owned by individuals of pro-fascist record would be confiscated. In addition all estates larger than 142 acres, comprising a total of 7 million acres, would be expropriated. It was expected that 4 to 5 million acres would be distributed to some 600,000 peasants in lots of five to twenty acres each. The remainder of the land would be assigned to local communities or held by the state. The International Federation of Trade Unions Bulletin carried the information in its August 1, 1945 issue, which it received from the official Hungarian radio service, that local committees operating in 3,000 municipalities were dividing up the big estates, and that out of 682,000 agricultural workers and peasants who had made application up to that time, 524,000 had received their allotments. It was estimated that the final number of applicants would be 800,000. The radio announcement also stated that there had been numerous attempts to circumvent or sabotage the land reforms, but that it was nevertheless being speedily carried through.

In line with the other Eastern states, the Tito government issued a Land and Colonization Act which proposed to break up the big estates into units of 25 and 30 hectares (60 to 75 acres), including specifically the Church lands and the properties of banks and other institutions. The law further proposed to confiscate the properties of collaborators. But the land problem in Jugoslavia is somewhat analogous to Bulgaria. Jugoslavia, throughout the pre-war period suffered from overpopulation in the rural areas – the lack of land plus its poor fertility. A special study on Jugoslavia appearing in Business Week (August 25, 1945), informs us “that the far-reaching land reforms have not yet satisfied land-hungry peasants, 75 per cent of whom own less than twelve acres of exceedingly poor soil.”

Finally, in Germany, the Soviet authority, by special decrees, confiscated in its zone the big land estates (Saxony, Mecklenburg and Brandenburg) of all “war criminals,” big landowners and Junkers (possessing holdings of over 100 hectares). The confiscated lands were parcelled out among the small farmers and landless workers to permit them to work holdings of from 5 to 10 hectares (12½ to 25 acres). The Director of Land and Forest Economy for the Russian Zone, Edwin Hoernle, estimated that about 4,250,000 acres had been confiscated and distributed among the small farmers. “Even with division of all these estates there will still not be enough land for those who want it,” he explained.

The AP provided an interesting description of the actual process of this land redistribution in the province of Mecklenburg. Its dispatch of September 9, 1945 states:

“The Soviet land reform in Meckenburg will be relatively easy, it was believed, partly because many of the feudal owners fled with the approach of the Red Army, and most of those who remained were killed during a peasant revolt in the province when the Hitler regime fell.”

We can sum up the land reforms by stating that throughout Kremlin-dominated Europe, the old landlord class is no more. It has been wiped out. Regardless of the future development in these countries, it is doubtful that the old landowners can ever return. Nevertheless this so-necessary and basic reform has not achieved any popularity for the Stalinists. The peasantry of Eastern Europe has been land-hungry for decades. The Kremlin-designed measures have undoubtedly satisfied the peasant’s land-hunger at least in Hungary, Rumania and Slovakia and to some extent in Poland. Still nowhere has the peasantry turned to the Stalinists. In Poland it remains virulently hostile to the present regime. In Hungary, the peasantry voted overwhelmingly for the Conservative small Landowner Party. In Rumania and Bulgaria it continues in sullen opposition to the government. Even in Czechoslovakia where the Stalinists emerged as the first party, their support came from industrialized Bohemia-Moravia. They were badly defeated in Slovakia, the agricultural section.

Undoubtedly this is to be explained by the fact that the land redistribution has not solved the present problems of the countryside. Agricultural conditions throughout Eastern Europe are in a state bordering on the catastrophic. The peasants, furthermore, are forced to sell approximately a quarter of their produce to the government at extremely low fixed prices. They have been subjected for years to military requisitions, to war destruction, to looting, and at the very last, the wholesale seizures of the Red Army. To this day, the Kremlin maintains, according to American military intelligence reports, 750,000 troops in Germany, 450,000 in Poland, 10,000 in Czechoslovakia, 60,000 in Hungary, 300,000 in Rumania, 7,000 in Jugoslavia, 90,000 in Bulgaria. And all these vast armies of human locusts continue to live off the countryside. Small wonder that the Stalinists are not very popular among the peasantry.

To really improve conditions in agriculture it would be necessary to either fuse or group together the small holdings to provide agricultural machinery, seed, fertilizers, research stations and industrial goods. But the USSR is itself desperately short of these very same things. The mere acquisition of increased land holdings – pitifully small at that – does not at all alleviate the crisis. The peasant lacks livestock, machinery, seed, fertilizer. Previously Germany supplied these as well as manufactured goods to Eastern Europe. But Russia cannot take Germany’s place in this regard for a long time. The USSR itself lacks all these goods. Local capital is likewise lacking and Western capital cannot and will not come in under the present political conditions. Agriculture thus continues to dangerously stagnate and no hope exists for its rapid improvement. It is undoubtedly this economic blind alley that the East-European peasantry is in that accounts for the peasant’s opposition to the Stalinists.


Nationalization of Industry

The industrial policy of the Kremlin in Eastern Europe and Germany has to be approached very cautiously as the information is still fragmentary, the pattern is not completed or fixed, considerable differences are to be found from country to country and the governments themselves are putting into effect their rehabilitation schemes very cautiously and evolving their policies in empiric fashion.

In the course of the war, German capital became dominant throughout Eastern Europe, so much so, that every major industrial or banking enterprise was in the grip of the German banks and cartels. This prison-unification and integration of European economy effected by the Nazis could have served as a starting point for a vast socialization of the economy and its harmonious unification – the first step in the organization of the Socialist United States of Europe. The Kremlin, however, viewed these countries not as potential allies in the struggle for socialism, but as victims who were now at its mercy and could be turned into serfs of the Russian overlords. This German predominance in the majority of the economic and financial enterprises served for the Kremlin as the legal starting point and justification for its policy of large scale plunder.

First, let us review the events in the “enemy” countries – Rumania, Hungary and Bulgaria. By the collection of big reparations in kind, the extraction of additional huge sums for costs to maintain the occupation troops and by additional seizures of “German” property, the Kremlin has bled these countries white and has gained complete domination of their economies. According to a recent American estimate, the Kremlin in the course of two years has extracted about $2,200,000,000 in property and services from these three countries and Finland.

On May 8, 1945, Rumania signed a treaty of economic collaboration with the USSR which guarantees Russian hegemony of Rumanian economy. This treaty provides that

  1. the two countries will set up joint companies in various economic fields.
  2. Each country will put up one-half the capital, the board of directors will be made up of equal numbers of Russians and Rumanians, but in each case the manager of the company will be a Russian.
  3. Russia’s capital contribution will come from former German property in Rumania seized by Moscow for reparations.
  4. The companies will operate as strict capitalist enterprises.

Already four such joint enterprises have been set up: Sovrom Transport, a joint shipping company, Sovrom Petrol, for petroleum production and distribution, Sovrom bank, comprising a merger of three Soviet industrial and foreign trade financial institutions and a group of Rumanian banks and an insurance society, which is designed to finance trade between the USSR and Rumania and to develop Rumanian industries. The fourth joint company is Tars, an air transport enterprise, to establish Rumanian air services with connecting lines to the USSR and the neighboring Balkan countries. Three more similar joint-stock enterprises are planned for forest products, chemicals and insurance.

Rumania, wracked by a galloping inflation, with its economy creaking at every joint, thus finds itself helplessly reduced to that of an economic dependency of the Kremlin. In 1945, its steel output was barely half of 1937 production. This year’s production is still lower. Last year petroleum totalled 65 per cent of 1937 output (and in the last quarter 68 per cent went to the USSR as reparations). Coal and lignite were only 70 per cent of 1937 output. Its basic equipment has been ruined by the war and its trade has been reduced to pitiably low levels.

In its present bankrupt condition it is desperately in need of loans and manufactured goods. But the Kremlin’s expansionism is predicated on poverty, not wealth, on shortages, not surpluses. As for the West, it will not make loans given the present political set-up.

The situation is very similar in Hungary. On top of the war depradations which ruined the country, Hungary must pay out 37 per cent of all present expenditures as reparation costs. Together with occupation costs these total 65 per cent of all its State expenditures. The poverty-stricken country does not have the wherewithal to meet these onerous demands, and thus is constantly falling behind in its payments. And as the reparations agreement carries a penalty of 6 per cent a month for arrears, Hungary is sinking deeper and deeper into the quagmire. Its present income is estimated at half its pre-war level. On top of that, all of the country’s gold as well as its shipping is held by the United States.

The Kremlin has seized hold of Hungarian economy in much the same manner as Rumanian. In October 1946 a “50-50” Russo-Hungarian economic pact was signed in Moscow under identical terms as the Rumanian agreement. Under its proposed conditions, which are to run for five years, joint-stock companies will be set up in the bauxite, oil, coal, chemical, river transport, civil aircraft, and other fields. Thus the Kremlin in five years will be the absolute economic master of Hungary. All of the key levers of Hungarian economy including the National Bank, which issues currency, and the National Credit Bank, which owns a third of all Hungarian industry, will rest securely in its hands.

Bulgaria is very weak industrially; only 10 per cent of its population is engaged in industry. While the Kremlin has not yet exacted any reparations from her, the country nevertheless, has fallen into the status of an economic dependency of Russia by its necessity of paying out the huge occupation costs to Russia, and the latter’s seizure of German-owned properties in its territories. A Bulgarian-Soviet trade pact was concluded in March 1945 which, it may be presumed, guarantees Russian hegemony of Bulgaria’s economy.

Thus we see how in these “ex-enemy countries,” the Kremlin, by means of reparations, occupation costs and seizures of German-owned properties has installed itself as the major owner and controlling power of the whole economy. By means of this control, it is now redirecting all efforts to dovetail the economies of these countries with its own. It has displaced pre-war Germany as the foreign master of the Balkans. But the USSR is not able to play the role of the industrially powerful prewar Germany. Especially now after these normally poor countries have been ruined by the war, they stand in dire need of capital and manufactured goods. But, as we have seen, the USSR stands in need of the very same things. The USSR is not a capital-exporting country. It is a country desperately in need of capital. The USSR is not an exporter of manufactured goods. It is desperately short of all varieties of manufactured goods. Hence it cannot gain the support of the Balkan ruling classes or gain control of its economies by “normal” economic pressures or loans. The Kremlin is unable to organize harmonious economic and commercial relations with these countries. It has sought to get around this difficulty by converting the Balkans into its dependency and holding sway over its economy primarily by military and bureaucratic means. This explains its desperate need to shut off the entrance of Western capital and convert Eastern Europe into a closed economy.

The Balkan States

How has this Kremlin overlordship affected the class character of these Balkan states? To all appearances, the basic capitalist relations have been left undisturbed. The land distributions, as we have seen, were on a capitalist basis. The old semi-feudal landowning class has been wiped out. But agriculture continues under the ownership of petty proprietors who enter the market on a capitalist basis.

In industry, the capitalist relations likewise continue. The individual entrepreneurs, managers and bond holders of old remain. No nationalization of industry has taken place in either Rumania or Bulgaria, although in Rumania certain industries were State-owned before the war.

But even in Hungary, where because of the absolute breakdown of the economy, the State has instituted rigid controls and undertaken to nationalize coal, bauxite, oil wells and refineries, electric plants and metal works, this will be carried out on a capitalist basis as in Czechoslovakia, or for that matter, in England. The industries will continue to operate with capitalist managements on a capitalist foundation, to be supervised by a capitalist bureaucracy; and the State will continue paying out profits in the form of interest on State bonds.

The capitalist nature of the Hungarian nationalization is furthermore made clear by an interesting side-light. As in Austria, but for somewhat different reasons, many of the Hungarian capitalist representatives even took the lead in advocating the nationalization measures. The Kremlin thus enters into Balkan economic relations today as a capitalist partner, drawing its 50 per cent profits from industry on the basis of capitalist ownership.

The Kremlin certainly gathered together its “primitive accumulation” of capital, which furnish the basis for its 50 per cent ownership of Balkan industry, in a violent and roughshod manner. In this it is emulating the great-grandfathers of the present British Tories, who likewise achieved their “primitive accumulation” by means none too pacific or gentle.

It is of course true that these Balkan countries by no means present a picture of classical capitalist relations. It is a rather bizarre capitalism, where a Soviet bureaucracy owns half the capital of the key sectors of the economy, where the countries are under occupation by Soviet armies, where the Stalinist-controlled police governments are in control, and where bureaucratized, Stalinist-controlled factory committees continue to exercise a measure of influence over industry.

But the period of the death agony of capitalism is obviously not favorable for the flourishing of classical capitalism. Even once mighty England, home of “free trade” and “laissez faire” has had to bend before the storm to the extent of permitting the State to take over some of its key industries. It is certainly a sickening as well as a bizarre spectacle to see the usurpers of the proud State that was formed by the Russian Revolution emerge as the caretakers of this neo-capitalism in the Balkans. But all normality and normal concepts have been swept off this planet in the period of capitalism’s death agony. And so yellow “socialists” step forth to try to hold back the revolutionary tide and hold together the perfidious British empire. And Stalinist oligarchs enter the Balkans to quell the mass insurgence and to prop up on their bayonets a sickly, scarcely recognizable but nonetheless authentic capitalism.

From the defeated Balkan countries, let us proceed to Czechoslovakia. This country was the most industrialized and prosperous in the pre-war days of Eastern, or as this particular area used to be called, Central Europe. Czechoslovakia was particularly fortunate in rapidly ridding itself of all occupation armies, and being an “ally,” it has to pay no indemnities to its “liberators.”

The springing up of Factory Committees and Councils, their seizure of the factories and establishment of a de facto dual power in the first phase of “liberation,” which occurred to one extent or another throughout Eastern Europe – this movement swept through Czechoslovakia with more power and effectiveness and on a larger scale than anywhere else. Here the Factory Committees established themselves more securely, exercised more real control, disposed of more real power and held on longer. To this day, vestiges of this workers’ control of production remain.

The four major parties that made up the first Coalition Government agreed even in April 1945 in Kosice to the principle of nationalizing industry. But no one anticipated at that time that fully 70 per cent of all industry would be converted into State property. The revolution that took place in May 1945 was expected by all the parties, but no one anticipated its great sweep. All the big industrial undertakings and many small ones were taken over from their owners by the Workers’ Committees. The workers of Czechoslovakia had put through a genuine overturn. The fact that their Workers’ Committees have gradually been drained of their power; that the nationalization is being drained of its socialist content, that capitalism has again succeeded in restoring itself in Czechoslovakia – all this is due exclusively to the treachery of the Stalinists who enjoyed the confidence of the masses, and who used this confidence to betray them.

The nationalization of Czech industry was furthermore forced upon the government by the fact that in its decisive sectors industry was in German hands. A vacuum of ownership was thus created in nearly two-thirds of Czech industry after the German defeat. In some industries, the proportion of German ownership was even higher. Practically the whole of the porcelain industry, 90 per cent of the paper industry, 75 per cent of the chemical works were German-owned.

Next, the government faced the compelling necessity of overhauling the whole structure of the economy, as the most important industries, such as aircraft, synthetic oil, etc., were monstrously expanded for German war needs, and either had to be sharply reduced or eliminated altogether.

A Farsighted Bourgeois

Eduard Beneš, the farsighted Czech bourgeois, the President of the newly reconstituted Republic, wrote an article in the December 15, 1945 issue of the Manchester Guardian, (and a similar article in the April 1946 Foreign Affairs), wherein he tried to make clear to Western capitalism that the nationalization measures were unavoidable, but that nevertheless the Western capitalists need have no fear, that despite the thoroughness and far-reaching character of the nationalization law, the country would continue to move within capitalist grooves.

When, after the liberation of Czechoslovakia, we made an economic war balance sheet in our principle industries and banks [Beneš wrote] we ascertained that the banks had been totally plundered and ruined by this German procedure and industries either alienated or expropriated from the hands of the original owners, for they were to a large extent in the hands of the people of German origin. To return this property and the banks into the hands of Czech individuals or to consolidate them without considerable state assistance and without new financial guarantees was simply impossible. The State had to step in, partly in order to save labor and employment for the large masses of the people and partly to save people’s savings in the looted Czechoslovak banks ... But what to do with the big German industries and banks in Czechoslovakia? We confiscated this property as the property of traitors. Are we now to divide it among Czech capitalists and industrialists in accordance with some arbitrarily chosen principle and criterion, or is not better to give it to the State and nation, also as a partial reparation for the enormous war damages caused by Germany?

Beneš further calls attention to the great leftward swing throughout Europe: “This can also be seen in Czechoslovakia,” he states. “Perhaps in our case there is a difference because we are one of those states which are mature enough and whose citizens are sufficiently enlightened and do not need to be forced into any Socialist measures by strikes, revolts, and conflicts, or even by a civil war, but who try to avoid all this by a wise and progressive policy.” Beneš adds significantly: “The French rightly say, ‘Gouverner c’est prevoir’ (To govern is to foresee), and that is what we are doing.”

By his policy of “rolling with the punch,” Beneš hoped to drag out things interminably and reduce the final nationalizations to a minimum; and with the help of his Stalinist and Social Democratic allies, housebreak the obstreperous Factory Councils. But the pressure of the unions and Workers’ Committees proved too strong. In October 1945, just before the first meeting of the Provisional National Assembly, Beneš reluctantly had to sign the far-reaching nationalization decrees, saying publicly that he wished the Government had proceeded more gradually, but it was they and not he, who had decided on the thorough-going nationalization measures. This law provides for State ownership of commercial banks, insurance companies, mines, mineral deposits, defense industries, steel plants, the Bata Shoe factories, manufacturies of drugs and phonograph records, glass, chemical, power plants, gas works, and flour mills. It also includes paper industries with more than 300 workers, spinning mills with more than 400 workers and clothing factories with more than 500 workers.

Over 10,000 concerns including all the key industries and plants had already been nationalized by the end of 1945. These State enterprises, Beneš assured the West, will be run strictly “according to the principles of private enterprise.” All these enterprises are being placed under managers; most of them remaining, as a matter of fact, under their old managements. They are formally run by the manager and a managing committee – the Works Administration. The members of this body are one-third elected by the employees, one-third nominated by the Central Authority for the industry, and one-third selected by the government. The over-all plan for the country as a whole is drawn up by the Economic Council, which is composed of six cabinet Ministers and the representatives of the Trade Unions and Cooperatives.

As the workers’ organs of dual control have been largely suppressed and their initiative stifled, the new State industries now fall increasingly under the sway of a growing bureaucracy composed of the old owners, managers, capitalist officials and functionaries, plus a new crop of Stalinist and Social Democratic functionaries and bureaucrats. We have previously quoted Lausman who approvingly pointed to the Russian example and informed the Factory Committees that in Russia the manager rules supreme. The Works Councils are now required to concern themselves exclusively with workers’ welfare problems and leave the running of the factories to the managers.

The capitalist character of this nationalization was further guaranteed by the issuance of State bonds, in lieu of the previous individual shares, to all former owners (except enemies whose property was confiscated), and interest on these bonds will be the first charge on the profits of these works. All State concerns, moreover, will be run independently, subject only to the direction of the State planning authority. In many cases the former owners will be consulted as to the running of their works, even to the extent of permitting them to appoint managers.

The foreign (non-enemy) owners of Czech industry are being treated with no less generosity. Business Week of August 31, 1946, announces that “the Czech Cabinet has finally approved the conditions for compensating foreign owners ... Principal American companies involved are Socony-Vacuum and IT&T ... Terms of the offer about to be made by Prague are said to be acceptable to the American companies, but Unilever of Britain is reported to be asking a price that Czech officials consider exorbitant.” (Unilever is demanding a modest $44,000,-000 compensation for the Schlicht Margarine factories which have been nationalized.) Business Week attributes “the sudden outbreak of good will in Prague” to its desperate need of loans from the United States. The Western imperialists know how to collect their pound of flesh. In June, “our” Ambassador to Prague, the outstanding “democrat,” Laurence Steinhardt, wrote a letter to Harold Sheets, Chairman of the Board of Directors of the Socony Vacuum Company, where he expressed the hope that the Stalinists would be defeated and “it should be possible to get under way very soon thereafter in discussing claims for American nationalized property. Should you hear reports of an Export-Import Bank reconstruction loan to Czechoslovakia, do not let this alarm you, as one of the conditions of the loan will be adequate and effective compensation for American nationalized properties.”

Steinhardt’s hopes for a Stalinist set-back did not materialize. Nevertheless, as we see, “American interests” have been fully taken care of even under the Stalinist-dominated government.

State Capitalism

Czechoslovakia is today the exemplar of State capitalism. Privately-run and managed establishments now comprise only 1/3 of the smaller works, the cooperatives and agriculture. Nevertheless, the Czechoslovak nationalizations, despite their sweeping character, can be compared in their essentials, with the nationalizations in England.

It is true, of course, that the Czech nationalizations took place under far different conditions, and the actual state of political and social affairs is far more left in Czechoslovakia than England. First, nationalization was decreed while workers’ control existed throughout industry. Next, the Stalinists dominated the government. Last, the country was under Red Army occupation. But the Stalinists succeeded in pressing back the revolutionary tide and infusing the socialist forms with capitalist content.

If the Stalinists succeeded in preserving the capitalist system in Czechoslovakia on the basis of State capitalism, the same bald statement cannot be made in the case of Poland and Jugoslavia. In these two countries the situation is far more chaotic and unsettled, and capitalism has been far more seriously undermined.

If we begin with Poland, we find that here as throughout Eastern Europe, the workers took over the factories in the first flush of “liberation.” If the factory committees were but anemic counterparts of the virile committees in Czechoslovakia, let us not be surprised. After all the Polish workers had probably still not forgotten how the Red Army commanders in 1939 had arrested the leaders of the newly-formed Soviets and had replaced them with hand-picked party representatives; they had probably not forgotten the murder of Ehrlich and Alter and countless other working class leaders of Poland; they had probably not forgotten how the Red Army permitted their uprising in Warsaw to be drowned in blood, after the Kremlin had urged them to rise up against the Nazis, arms in hand.

Poland, like Czechoslovakia, was confronted with a herculean task of reconstruction, after the “liberation” but – in the case of Poland – many, many times more difficult. Nationalization of industry was the only way to get industry in motion at all after the war. The German retreat left the bulk of Polish industry with neither owners nor managers. They had all fled. Poland was one of the worst devastated of all countries. Warsaw, Poland’s Capital, with a pre-war population of over a million, was demolished block by block. Many factories, as a consequence, were either burned or shattered, but still contained much machinery that was repairable or usable. Furthermore, the whole of the newly acquired western territories was an economic no-man’s land, with most of the industries similarly without managers or owners. Under these circumstances it was not only a simple matter to carry through the nationalization projects. It was also mandatory.

Throughout 1945 the government was taking over plants and industries and operating them under improvized methods of production. The workers played a tremendous role in this work of reconstruction. Irving Brant, Polish correspondent for the Chicago Sun, wrote in the fall of 1945:

“Among the workers themselves, the feeling of social revolution is strong. It has run Polish labor unions up to a membership of more than 1,100,000 ... When Minister of Industry Mine, a Communist, shows himself ready to deal with old factory owners and managers in order to get production going, the workers are likely to say to him: ‘Who repaired this factory? We did. We will operate it. Give us a manager from our own ranks.’”

Only on January 2, 1946 – fully a year later – was the law adopted authorizing nationalization of key industries. The nationalization measures followed very closely along the lines of those in Czechoslovakia. The works of all Germans or “enemy aliens” was confiscated. Compensation was to be paid out to all Poles or “Allied aliens” whose establishments were taken over by the State. The motivation for full compensation was likewise the same as in Czechoslovakia: “We are in favor of maintaining normal economic relations with the Western countries by indemnifying foreign capitalists justly and adequately for their property.” (Report of Hilary Minc to Polish National Council, Poland of Today, May 1946.) In a word, Poland, even more desperately than Czechoslovakia, needs American loans.

In Poland the nationalization law applies to all enterprises employing 50 or more workers per shift. Although this sounds more sweeping even than Czechoslovakia’s law, in actuality a far smaller proportion of industry has been nationalized. According to the pre-war figures, 2,775 plants would fall into this category ; almost 2,000 of these employ from 50 to 200 workers. 20,014 plants in Poland employ less than 50 workers and thus remain in private hands. In the absence of new statistics, it is impossible to analyze any later data on what the nationalization decrees mean in practice. According to the report of Mine, the Minister of Industry and Commerce, private industry will continue to absorb 60 per cent of all employees in trade and industry, while the nationalized sector will employ 40 per cent. The industries to be nationalized will employ about 25 per cent of all industrial wage earners, while the total percentage of persons involved in the whole nationalization program will amount to 10 per cent of all wage earners.

Thus, according to the figures, the sector of State property, although including all the key and decisive portions of the economy in industry, finance, transportation etc., will comprise a far smaller proportion of total property than was the case in Czechoslovakia. It must be remembered that pre-war Poland was far less industrialized than its Czechoslovak neighbor and that the greater part of its industry was carried on in small shops and plants.

In the pre-war days, 40 per cent of total capital investments in Poland lay in foreign hands, and the most important industries were completely foreign-controlled. For example, foreign capital owned 52 per cent of mining and smelting, 57 per cent of petroleum, 66 per cent of the electrical industry, 60 per cent of chemical, 52 per cent of lumber, 81 per cent of public utilities, 59 per cent of insurance companies etc. The bulk of these holdings were German-owned. Thus Minc estimated that under the principles previously outlined, three-fourths of all enterprises will be confiscated outright, while one-fourth will be indemnified.

In many important respects Poland has not proceeded as drastically as Czechoslovakia in its nationalization measures, and Polish private capital continues to dominate a far larger segment of the economy. The statistics, however, while probably accurate enough in and of themselves, do not tell the whole story. The first important difference between Poland and Czechoslovakia is that in the latter country the bourgeoisie is working in agreement with the Stalinists; the bourgeois cliques and bureaucracy have survived and continue to play a dominant role in industry as government officers and State rentiers. In Poland, the bourgeoisie is in opposition to the regime. The leading capitalist cliques are abroad intriguing and organizing military forays against the government. The Stalinists are unable to lean upon any of the pillars of the old “colonels” administrations.

A New Dual Power

In addition, a kind of dual power can be said to exist in the country today, but it is wholly unlike the classical Marxist conception of dual power. The government, the police, the army, the courts, the press, public education are in the hands of the Stalinists. The clandestine, illegal, dual power, in the form of military formations, the Catholic hierarchy etc., is in the hands of the bourgeoisie. Thus if Czechoslovakia could be defined with absolute precision as State capitalism, the definition of Poland will have to be more involved and lengthy, if it is to correspond to the complex, contradictory and baffling reality. Poland is ruled by a Stalinist police regime, engaged in a savage war with the fascist-minded Polish bourgeoisie, which has brought the devastated country to the brink of civil war. The Stalinist regime is acting, to the best of its abilities, as the care-taker for the oppositionist bourgeoisie and has laid the legal groundwork for the recreation of a Polish State on State capitalist lines similar to Czechoslovakia. Why do we say that the present trend of the Polish nationalizations is one of establishing a State capitalism, based on a mixed economy (State capitalist and private property) such as in Czechoslovakia and not toward a workers’ state such as the USSR?

He is a poor Marxist who permits himself to be dazzled by a common formula and neglects to examine the essence of the process. We have seen in the past year nationalizations in England, France and in Eastern Europe. In their totality they constitute an unanswerable demonstration that society cannot go on in the old capitalist manner and is straining at the leash to socialize economy; that the whole trend of modern society is toward an unavoidable collectivization. This, of course, the Comintern pointed out as far back as 1919 in its first Manifesto to the workers of the world. But what class is to carry out this State-ization of economy? And in whose interests is it to be accomplished? In the interests of the capitalists? Or in the interests of the working class, and therefore of all humanity?

In England, as we know, it is being done in the interests of the capitalists. To weather the storm, the capitalists are permitting large scale nationalizations. But these are so arranged as to empty the measures of all real content. The form is there; but the essence is gone. In other words, basically, the measures are a fraud, and the old capitalist relations and exploitation continue as before, with only the administrative forms modified and altered. That is why Marxists explain that the nationalizations in England are not socialist measures at all, but simply measures of State capitalism.

As we have demonstrated, the same process is taking place in Czechoslovakia, in its fundamental aspects. In Poland, the pattern is not as clear, because the country is in a state of latent civil war, and therefore the State forms have not jelled to the degree that they have in Czechoslovakia. But the policies and aims are the same and the legal structure is the same. The policy of the Stalinists is pointed toward arriving at an agreement with the bourgeoisie; it has bureaucratized the Factory Committees and is attempting to operate nationalized industry along capitalist lines; it is acting as a caretaker of capitalist property; it is seeking to encourage the development of private capital in small industry and trade; it has preserved capitalist relations in agriculture; it is seeking to build up a new bourgeoisie which will consent to cooperate with it. The Polish Stalinists are, with might and main, trying to duplicate the achievement of the Czech Stalinists – thus far not too successfully.

The State in Eastern Europe which is modelling itself most closely after the USSR is Jugoslavia. In Poland, the Kremlin entered as a foreign conqueror and installed by force, in defiance of the major cliques of the Polish bourgeoisie, an unpopular government. In Jugoslavia, the government took power in the normal course of creating a massive people’s revolutionary movement, driving out the foreign invaders, and destroying the armies of the old ruling classes. The government, in its origin, rested on broad popular support, and the masses had wiped out the power of the old ruling groups in the course of a fiercely-fought civil war.

Despite its present savage repressions and unrestricted police rule, the Tito regime displays in many characteristics its social-revolutionary origin. The actual content of its nationalization and reconstruction measures scarcely differ from those of Poland or Czechoslovakia. But they were carried through under socialistic and not exclusively nationalistic motivations. Andria Hebrang, Minister for Industry, explained in the early part of this year the purposes of the “State General Economic Plan,” since adopted, to the People’s Skupchina, employing the following arguments:

  1. As planned economy has defeated the anarchic economy of the capitalist world, as it has proven its superiority in the USSR, it should be adopted by Jugoslavia.
  2. Since private industry and commerce still exist, and there are 2 million small peasant proprietors, the full program of State planning cannot be immediately introduced completely and effectively. But the present should be considered a transitory stage toward planned economy.
  3. The General State Plan is intended to apply not only to industry and husbandry, but cultural development, education, science, art, public health, social insurance, etc.

Of course, the reality, the actual prospects for genuine State planning are far less radiant in Jugoslavia. The country is one of the worst sufferers of the war. It emerges from the conflict minus a third of its industry, a fourth of its peasants’ households, a tenth of its population. It has drawn up a reparation bill for damages totalling 61 billions. The country has always been weak industrially; 75 per cent of its population are on the land.

According to the most reliable figures, industrial production stands today at about 40 per cent of 1938. And whereas the bulk of 1938 productive effort was devoted to consumer goods or to raw materials that could readily be exchanged for consumer goods, Jugoslavia is now compelled to devote a major part of its productive labors to repair and reconstruction.

As “enemy” property is confiscated by the government for war booty, the State will run and operate more than 50 per cent of all industry and practically all of heavy industry. In addition, the government issued a decree in August 1945 cancelling all existing mining concessions and nationalizing all mines. This involves especially the French-owned Bor Copper mines, and the British-owned Trepca lead and zinc mines. Although the principle of compensation has been accepted, unlike Czechoslovakia, Jugoslavia has not yet come to terms with the foreign owners.

As in Czechoslovakia or Poland, private property is permitted by law, and continues to function in small industry, trading and agriculture. Even for foreign trade, the policy is not to conduct State barter but to license private importers and exporters. Tito himself declared at a reception of foreign correspondents “that private property was respected in Jugoslavia.”

Resembles USSR

Jugoslavia, however, resembles the USSR far more than any other East-European country, because, arising on the crest of a social revolutionary movement which wiped out the power of the capitalists and landlords, it proceeded to consolidate its rule by bureaucratizing the mass movement, destroying the democratic rights of the toiling masses, suppressing the workers’ committees and independent organs of expression, and ruling by police measures and terror. Because of its origins, so dissimilar from Poland, or any other East-European country, it was able to totalitarianize every phase of Jugoslav life in far more thorough-going and widespread fashion. Nevertheless, despite the fact that the power of the old landlord-capitalist classes has been broken, Jugoslavia must still be considered as being in the capitalist orbit, because of the following facts: The continued existence of capitalist property in agriculture, in half of industry, in trade and commerce, including foreign commerce. Furthermore, the creation of a huge capitalist-like governmental bureaucracy composed of old pre-war bureaucrats, dispossessed landlords and factory owners, Stalinist functionaries, “reconstructed” Fascists, monarchists, generals and the like. No clear information exists as to the precise manner in which State-owned industry is being operated. In the absence of functioning factory committees and workers’ control, it can be assumed that the methods are very similar to those employed in Czechoslovakia or Poland.

In the Soviet sphere of Germany, the ambiguity of economic forms, the provisional character of economy, has been commented upon by all the leading correspondents. The correspondent of the London Economist asks the question (March 1946):

“What social system are the Russians establishing in Eastern Germany? Has private enterprise been abolished there? Is a socialist economy, on the Soviet model, being set up? Conditions are still too fluctuating for any definite answers to be given to all these questions.”

The New York Times correspondent, Dana Adams Schmidt conveys the same impression. Writing in July 8, 1946, he states:

The evidence of this tendency (public ownership or control) contained in key measures – land reform, the confiscation of businesses allegedly belonging to active Nazis and war criminals and the freezing of all old bank accounts – was, however, frequently ambiguous. It led me to conclude that the developments, instigated in the final analysis by the Russian occupation administration, were not intended to socialize economic life in the Russian sense. Rather they appeared primarily designed by various devices to give dominance, in the economic as in the political sphere, to elements that the Russians would consider dependable and could control. The steps in this direction during more than a year of occupation have been progressive and circumspect, taking local traditions into careful consideration.

While Russia, like Britain and the United States, exercises naked military control over its sphere of Germany, and while it has the “legal right” to plunder Germany, the economic measures undertaken have not been as radical as in a number of East-European countries. While all “Nazi-owned” industries have been confiscated and turned over to the State or municipal authorities for operation, the final disposition of these enterprises, whether they would pass into State ownership or be turned over to new private owners, has been left open. Outside of the land expropriations previously discussed, the Russian administration has not carried out a single act of expropriation in industry comparable to the British expropriation of the coal mines of the Ruhr. In addition, owners of medium and small plants who did not flee before the Red Army have been left in possession and permitted to continue operating their plants.

The large factories are mostly managed by four directors, often representatives of the political parties, with the technical directors of the old managements often retained. The directors are supposed to work in close contact with the Works Councils, which are very similar to the set-up in Czechoslovakia. Because East-Germany is geared to the economy of the USSR, which does not fear German competition and is desperately hungry for all manner of goods, the German plants have been showered with Russian orders and have been experiencing a false prosperity. In contrast to Western Germany, the wheels of industry are turning ever more rapidly, but most of the goods are carried away to Russia as reparations. No official data are available, but business representatives claim that at least 50 per cent of all products go to Russia.

Recently the Kremlin has established legal relations with part of German industry in its sphere along lines that closely resemble the joint stock companies set up in Rumania and Hungary. According to Time magazine (August 26, 1946), a joint trust has been set up in Soviet-controlled Germany called Sowjetische Industrie AG, owned 51 per cent by the USSR and 49 per cent by Germans. The corporation is to be officially capitalized at over 8 billion marks ($800,000,000) and to employ nearly 400,000 workers. Its plants are said to embrace 30 per cent of German industry in the Soviet zone, including IG Farben. The trust is headed by a Russian, Alexei Resnikov.


Summary of Developments

We are ready to summarize the developments: The Red Armies occupied half of Europe – a Europe absolutely shattered by the war. They moved to break the power of the old ruling classes by expropriating landed estates, confiscating industries owned by “war criminals,” and turning them over to States run by loyal puppet governments, or setting up joint economic enterprises under their own control. If a social revolution signifies the transfer of power from one class to another, than certainly a social revolution was set in motion in Eastern Europe after “liberation.” But these revolutionary developments were not the direct consequence of mass uprisings, but were in every case dominated and controlled by the iron bureaucratic hand of the Kremlin conqueror. The upsurge of the peoples was stamped out. Their initiative was thwarted and prohibited. While Stalin for his own purposes and security, was determined to crush the old ruling cliques, he was equally determined to crush the revolutionary mass movements and to preserve the capitalist structure, in order to appease Western imperialism. Thus these revolutionary developments were in every case cut short of their goal. The consequent results are bastard formations; so-called “mixed economies,” resting on capitalist juridical foundations, and with the emergence of new capitalist groups in small-scale industry, agriculture, trade, the governmental bureaucracy, etc. This development, directly attributable to the counter-revolutionary Kremlin policy, demonstrates that the Stalin bureaucracy has no historical perspective, that it rests on no firm ground. It cannot tolerate Sovietization, as it showed in Eastern Europe. At the same time, it fears to the death and cannot tolerate capitalism. That is why Stalinism is a doomed ruling clique. It has no historical future. It will be engulfed in the coming events.

But perchance the Kremlin has created some new State forms, which represent its peculiar mode of production? The facts do not bear out such a hypothesis. The East-European countries reveal no new modes of production. The facts demonstrate very conclusively that the new States represent the attempt at unnatural union between the Soviet property forms and capitalist property. Stalin’s power may seem unlimited to him wherever his armies hold sway. Nevertheless, it is not given to him to create a new historical class, neither in the USSR, where his regime still rests on the property relations founded by the Bolshevik revolution, nor in Eastern Europe, where Stalin is attempting to act as the caretaker and beneficiary of capitalism.

Here is the balance sheet of Stalinism in Eastern Europe. By the Kremlin’s sell-outs and dirty maneuvers, their crushing of the revolution, their destruction of the organs of workers’ dual power, their preservation and legalization of capitalist property, their looting and marauding, the Kremlin has succeeded in antagonizing and earning the enmity of the bulk of the working masses. As for their agreements with the East-European capitalists – these are of the flimsiest kind, destined to be broken at the first real crisis. And the Kremlin’s hopes for friendship with the Western imperialists have already gone up in smoke. Stalin’s treacheries and crimes against the working class invariably deal blows to the world revolution and undermine the Soviet Union. But they cannot win for him friendship with the Western world. Because the USSR – despite the Stalinist counter-revolutionary ruling clique – represents by its very existence a mortal threat and a disintegrating influence upon world capitalism. That is why America and England refuse to reconcile themselves to Stalinist control of half of Europe and are bent upon wiping out this threat to their reign.

All these little Eastern States, wracked and ruined by the war, are now caught in the swirl of the raging battle between the USSR and world imperialism. They are all in a state of most acute crisis; their economies are obviously of a makeshift, episodic and transitional character; their regimes are jerry-built. They are geared to the economy of the USSR by main force. But they can secure capital, manufactured goods, loans, only from the West. And the United States is already putting on a murderous squeeze. It is holding Hungary’s gold. It has captured most of the fleets plying the Danube, and will not return

them until the Danube is opened up and made “free.” UNRRA is ending, and all the East-European governments will be forced to come to Washington, begging for loans, to arrest the famine. The Kremlin’s policy of “closing” Eastern Europe to Western capital will thus be far more difficult to enforce, than is the case with its own monopoly of foreign trade. We have already witnessed many small breaks in the “iron curtain,” as witness Czechoslovakia’s compensation agreement, Poland’s concessions to secure two small loans, etc. The fate of all the small countries in the Balkans, the Danubian area, and what used to be called Central Europe, cannot be gleaned by riveting one’s gaze upon these small dependent countries themselves. Their fate, and the evolution of their State and property forms, will be determined not through their own internal independent developments, but by the outcome of the world struggle between the giants – Anglo-American imperialism and the USSR and the course of the socialist revolution.

In 1939 Trotsky observed that if the Kremlin did not incorporate its newly secured border areas into the Soviet Union, but attempted to exercise control over them after the Nazi manner, this could become the starting point for new profound changes inside the USSR. Given an extended period of development, the new Kremlin-owned capitalist trusts in Eastern Europe, plus the emergence of a new Stalinist bureaucracy resting en capitalist foundations, would undoubtedly lead to decisive conflicts and changes in the structure of the USSR. But the present conflict between the Kremlin and Western imperialism has grown so sharp, and dominates so completely the international scene, it seems most likely that the further evolution of the East-European states, as of the Soviet Union itself, will be determined in the main by the outcome of this monstrous tug-of-war.

It might be objected that this analysis tends to give too much credit to the Stalinists; that there might be the implication that Stalinism can fulfill a progressive function in the capitalist world. Of course, the overturns in Eastern Europe possess many highly progressive features – the redistribution of land; the confiscation and nationalization of industry. World Trotskyism has already taken an unambiguous stand in defending these progressive measures from all attempts at capitalist reaction and restoration of the status quo ante bellum. But just as Trotsky pointed out in 1939 that the progressivism of Stalinist nationalizations in Eastern Poland and the Baltics were far outweighed by the Kremlin’s antagonizing the masses of the world and thereby weakening the world socialist movement, so today we must declare that the progressive aspects of Stalinist land redistributions and nationalizations of industry do not compensate by a tenth the mortal blows the Stalinists have dealt the proletarian revolution, the socialist cause. Their unspeakable treacheries, their stamping out of mass uprisings, their counter-revolutionary terror, their depradations and plunderings – these are discrediting in the eyes of the toilers the very word, the very idea of communism. How weighty are the East-European nationalizations on the scales as against Stalin’s crimes against the working class? The Stalinist counter-revolutionary adventures in Eastern Europe, rather than endowing it with the aura of a progressive mission in history, have made more urgent the necessity of crushing this bloody fiend, and preventing it from doing any more damage than it already has done to the world working class and its struggle for emancipation.

The blindness of Stalinism, its unutterably reactionary character, its historical bankruptcy is exposed glaringly above all in Eastern Europe. For the sake of paltry loot, for the sake of the small change of reparations – completely meaningless so far as solving the USSR’s economic needs – the Kremlin has raised against itself a wall of hatred throughout Eastern Europe and the world. For the sake of military control over the poverty-stricken, bankrupt Balkans, the Kremlin has helped the Anglo-American imperialists crush the revolution and prop up decaying capitalism. And now having done this butcher’s work for imperialism, the Kremlin is face to face with the Wall Street colossus, which is already mobilizing its world resources to crush the USSR.


1. The resolution printed in the December 1944 FI states:

“The Kremlin bureaucracy is fully aware of the fact that with the defeat of the Axis, their ability to maneuver between the imperialist groups becomes very sharply restricted and the Soviet Union will face the concentrated pressure of the victorious Anglo-American imperialist camp. Stalin attempts to secure himself against this new threatening danger by guaranteeing the preservation of the capitalist system in Europe while employing the Soviet military power to establish ‘friendly’ governments under its influence on the periphery of the Soviet Union (Poland, Rumania, Jugoslavia, Czechoslovakia, etc.)

“At the same time, fearing the independent action of the masses and the approaching Socialist revolution, Stalin has given guarantees to Roosevelt and Churchill ... that he will join them in their program of trying to strangle the European revolution, dismembering Europe, subjugating its peoples and propping up subservient regimes ...

“If the dastardly conspiracy which Stalin hatched with Roosevelt and Churchill at Teheran to crush the European revolution were to succeed, it would simply open the road to capitalist restoration inside the Soviet Union itself, by internal counter-revolution or military intervention or both. The Anglo-American imperialists cannot – any more than could the Nazis – reconcile themselves to the existence of nationalized property for any extended period in the territory comprising one-sixth of the earth’s surface ... The alliance of the Soviet proletariat with the insurgent masses of Europe is thus indispensable for the preservation of the Soviet Union.”

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