The Economics of Communist Eastern Europe, by Nicolas Spulber.
(Chapman and Hall, 100s.)
From Labour Review, Vol. 3, No. 4,, August–September 1958, p.111-113
Transcribed & marked up by Ted Crawford & D. Walters for the Encyclopaedia of Trotskyism On-Line (ETOL) in 2009.
For anyone wishing to make an assessment of the economic development of eastern Europe since 1945 this work provides an indispensable ‘point of departure’, as its author describes it. It is undoubtedly the fullest factual and statistical study of the area to be found between two covers in English and a testimony to the industry, if not to the insight, of Professor Spulber. He is clearly unsympathetic both to planning and to the regimes of eastern Europe, but his personal observations are kept to a minimum and his speculations are, on the whole, extremely cautious. This makes his book one which can be of value to those socialists who wish to understand the implications of Stalinist economic policy. It is true that Spulber identifies Marxism with the parody of it current in the USSR and the ‘people’s democracies’ and that he takes as inherent defects of planning what are merely excrescences and blunders grafted on to it in the Stalin era; and it is necessary to reinterpret much of his material before it can be of use for this purpose.
An important feature of this book is the mass of statistical material which it contains, conveniently laid out in tables and charts. The sources used are those of the government concerned; these sources, with all their defects, can, with careful checking and analysis, yield fairly reliable evidence about the structure and development of the economies. There are, however, important gaps in the official statistics: no balance of payments figures for the years after 1948 and no breakdown of national income figures by type and amount of personal income, for example. No doubt security considerations account for the former: the latter serves to disguise the disproportionate share of national income which has found its way into the pockets of the privileged strata.
The region which this book examines—it includes Yugoslavia, but not east Germany and Albania—was, before 1939, with the exception of Czechoslovakia, one of the most backward in Europe. It was predominantly agricultural, had a rapid rate of population increase, little experience of industrial development and a low average income per head. It was to a large extent under the control of foreign capital; as Spulber admits: ‘The foreign trade of the region as a whole was basically geared to the industrial countries of Europe’ (p.9). Not only did foreign capital control virtually the entire banking and credit system, but it was predominant in the larger enterprises in industry, mining and petroleum. While having a client status in relation to foreign interests, the ruling classes of the area were among the most arrogant, short-sighted, greedy, callous, cowardly and corrupt to be found anywhere in the world. Statesmen, journalists, officials, even monarchs were for sale to the highest bidder. Who can doubt that this area would have remained a fief of foreign capital, economically retarded and exploited as it had been for centuries, if such people had remained in control? There was a necessary cleansing process to be performed: the way it was done, the part played by the Red Army and the Stalinist parties, the holding in check of popular initiative and the installation of a tame bureaucracy, subjugated by purge and pressure of all kinds, account for the peculiar deformations of the new regimes that emerged. But the extent of the transformation, and its historical import, cannot be written down as Spulber appears to do: his relegation of the social and political context to a few lines, or a footnote here or there, makes many of the economic changes appear meaningless.
One does not have to be an apologist for the ‘people’s democracies’ to recognize the significance of what has been happening in eastern Europe. Indeed, the point is that thanks to wrong policies, stupidities, blunders and a slavish application of Russian policies and methods the industrialization of the area—the only way in which its people could be released from their secular backwardness and semi-barbarism—has involved avoidable suffering, the pointless sacrifice of many fine people and the identification of Marxism and socialism with practices fundamentally alien to them. But this industrialization necessarily involved a social revolution to get rid of the old ruling class and could only be undertaken within the framework of a planned, nationalized economy. All this is not to be found in Spulber’s book—in fact it is diametrically opposed to his own preconceptions.
What Spulber does, however, as he ‘objectively’ unfolds and interprets the course of development, is to provide evidence for a critique of ‘Stalinist’ policies—identified by him as socialism, planning or Marxism. And it is for this purpose that his book is especially valuable.
A fundamental question, raised at a number of points, which clearly shows the conscious adoption of a pattern derived from the USSR, is that of the priority allotted to the building up of heavy industry on the model of the Russian five-year plans. Now, given the conditions of eastern Europe, and the fact that little or no external aid could be expected, capital for economic development had to come from domestic resources. The greater the emphasis on heavy industry, the larger the proportion of current output which had to be devoted to investment, the less there was available for increasing (or even maintaining) levels of consumption. In the early stages of industrialization it is inescapable that the latter will be held in check: a socialist policy should aim at winning voluntary acceptance for this necessity at the same time as it shows a realistic grasp of the fact that this is conditional upon providing material inducements in the shape of a flow of consumption goods. Obviously a government with an overwhelming apparatus of coercion could, for a certain period, impose a high fate of accumulation and depress standards of consumption—but only at the price of alienating a large and growing proportion of the population. In eastern Europe when this process was being carried forward the people had already borne years of war, occupation, economic disorganization and shortages: there were limits to the further sacrifices which they could be expected to bear. A correct policy would, therefore, have aimed at keeping sacrifices to a minimum, consistent with providing the industrial basis for a considerable improvement in living standards in the future.
The policy actually pursued was a replica of that carried out in the. USSR. After the short, two or three year plans of reconstruction, five-year industrial plans were embarked upon which gave overwhelming priority to heavy industry, particularly iron and steel and engineering. Obviously these industries had to have special attention if industrialization was to proceed. But this was not all. Each country ‘aimed at all-round development, each stressed the necessity of producing within the economy every type of goods, even those whose cost had previously appeared prohibitive’. The policy of providing the basis for industrialization was therefore pursued beyond all reason and within the economically irrelevant boundaries of the national States. Every set of bureaucrats had to have their ‘own’ steel works or heavy engineering complex, their Nowa Huta or Sztalinvaros, and the economy of each country was screwed up to the attainment of objectives which both common sense and socialist theory should have shown to be irrational.
We therefore have the spectacle of each country pursuing its own objective of building up heavy industry with scarcely any co-ordination of the national plans. The programme of ‘socialism in one country’ was applied to a number of small countries, most of them backward, and with resources quite unsuited for an all-round development of industry, particularly for a complete heavy industry. Thus, in Spulber’s words: ‘Each country set itself the task of developing a complete engineering industry, almost regardless of cost and of the duplication of efforts involved'’(p.330). This type of development involved abandoning international specialization and lowering the efficiency of investment’ (p.304—Spulber’s emphasis). Instead of the area being conceived as a whole, in conjunction with the USSR, and in relation to the opportunities of trade with the rest of the world, each set of planners sought to work out their own salvation. Those of Rumania and Hungary were further burdened in the early post-war years by the need to pay reparations to the USSR! It is true that some division of labour was imposed by circumstances—primarily the distribution of natural resources, which made Poland an exporter of coal, Rumania of oil, Czechoslovakia of manufactured goods etc. Since 1956 more conscious, but still limited, efforts at co-ordination and co-operation have been made, because of the break-down of the old methods. But the damage had been done: one-sided development, massive misdirection of resources, unnecessary sacrifice of consumer goods production, the wasting away of popular goodwill and nightmare years of penury and purge. Far from discrediting planning, however, as seems to be in Spulber’s intention, this reflects the negation of planning, the fanatical pursuit of the form while sacrificing the essence, which comprises the sum total of Stalinism in this field.
Why was such a policy adopted? By his self-denying unwillingness to consider the political implications Spulber can give no clear answer. It all seems perverse, unreal, contributing to some omniscient purpose. No doubt he is right in declaring that it was not ‘simple mimicry’ of the Soviet pattern. That doesn’t make it any the less mimicry of a kind: but the process by which it was reached was complex and would take too long to investigate here. Certainly the thinking of the political and economic leaders must have been rigidly circumscribed by Stalinist orthodoxy in these matters: but it included a large element of sycophancy and servility as well as mere dogmatism.
In the closing pages of the book, where this problem is reverted to under the heading of ‘autonomy v. integration’, Spulber puts up a fuller but still inadequate explanation. In the course of the plans each of these countries became increasingly closely linked by trade with the USSR—a trend which was, of course, reinforced by the cold war, and especially by the Battle Act restrictions on ‘strategic’ exports from western sources. This focused attention on the ‘preeminence’ of the USSR. Indeed, since the area as a whole did not constitute an integrated economic unit—and the policies pursued had been working in the contrary direction—each State was highly dependent on the Soviet market and on Soviet supplies of key materials, such as iron ore and some machinery. What Spulber does not make clear is that as a consequence this underlined the political dependence of each government, and its servility to Soviet policy. To a considerable degree this must have been deliberate—especially after the Yugoslav break-out. A greater degree of economic co-operation within the area—which could have done much to ease and speed the process of industrialization—would have weakened the ties which bound each ruling clique to the Soviet Union, and enabled it to play an independent role in relation both to the West and to Russian demands. This was not to the liking of the Soviet rulers. And the vigorous efforts to stamp out ‘Titoism’ in the trials of Rajk, Kostov and Slansky show also that the rules of economic policy as made in Moscow were not followed without qualm by responsible leaders in the satellites.
A major weakness of the east European economies was the failure of agricultural output to rise as planned, which added a serious food shortage to the general crisis and overstrain which produced the changes in 1953 known as the ‘new course’. This followed soon after the death of Stalin and took place together with the Malenkov line of increased emphasis on consumers’ goods. It also coincided with the admission by Khrushchev of the shortcomings of kolkhoz agriculture in the USSR itself. In eastern Europe we find in the agrarian measures the same slavish adherence to Stalinist practice as in the case of industry. No fundamental attempt was made to adapt the policy of collectivization to the nature and needs of the agrarian system in each country, which could vary from the high concentration of land ownership in Hungary to its quite wide distribution in Bulgaria.
A series of ‘mistakes’ was made in agricultural policy, mostly directly traceable to an inflexible adherence to the Soviet model, notably over-haste in establishing collective farms, which could not be supplied with machinery of suitable quality, and measures against ‘kulaks’ which drove them off the land without providing for satisfactory alternative methods of cultivation. The ‘new course’ represented a slowing down, or even reversal, of the policies of previous years. But the change was not prolonged; within a year or two, and accompanying the rejection of the ‘Malenkov’ policy in the USSR, its exponents were denounced as ‘Right deviationists’ as, for instance, Imre Nagy. The return to the old policies in an unadulterated form was, however, out of the question. It was generally admitted that collectivization would have to be spread over a longer period than had been at first envisaged. The alacrity with which most of the Polish kolkhozes were dissolved in October 1956 shows how they had failed to strike deep roots among the peasantry, largely owing to the ham-handedness which marked their history. Agrarian policy as a whole was a conspicuous failure, not only because of bureaucratic methods, but because of the allocation of insufficient investment to this sector, which was, of course, tied up with the general unbalance associated with the emphasis on heavy industry at any price. The equipment in the collective farms, as well as in agriculture as a whole, was inadequate in amount and frequently worn out. Productivity often lagged behind pre-war and even total outputs at the end of the five-year plans were ‘for all countries except Rumania … below the ones scheduled for 1948-9 at the end of the reconstruction period’ (p.354 — Spulber’s emphasis).
The acceptance of Stalinist methods at the level of the enterprise produced no better results. Piece-work payments, wages differentials and Stakhanovism were introduced; ‘socialist emulation’ was organized by the trade unions, which were, in effect, part of the State apparatus; ‘one-man management’—one of Stalin’s ‘contributions’ to socialist theory—installed the leadership principle in the factory. The continuous Press criticism of ‘bureaucratism’ failed to get to the heart of the matter, which was the failure to elicit the full co-operation and support of the workers. Defence expenditure still further burdened the national income. The struggle to exist assumed in many cases a desperate and savage form. There were general indifference and ‘constant recrimination against increased waste of social property, widespread theft, and depletion of resources. Innumerable decrees have imposed severe sentences for such “offences”, but they have continued to grow and multiply’ (p.345). Spulber’s material on consumption levels is not very full and his assertion that it was curtailed during the five-year plan rests primarily upon the ratio of consumption to the national income. Considerably more information is required on this aspect, and it seems clear, from Poland and Hungary, that resentment at the privileged scale of living of the bureaucracy has been a factor as important as the low or declining absolute level of a large section of the population.
Recognition of the shortcomings of Stalinist factory policy produced the Yugoslav innovations of ‘decentralized management’ and elected workers' councils, which subsequently influenced developments in neighbouring countries. But such devices, when introduced from above, are merely fig-leaves to cover the naked irreconcilability of the interests of the ruling, clique with those of the mass of the workers. Only when solidly based upon the active support of the workers themselves, growing out of their aspirations and needs, can they provide the way out.
All in all, the experience of the countries surveyed in Professor Spulber’s study helps us very much to understand the problems of countries undergoing economic development. This experience should be analysed more fully by socialists. Approaching the material from a contrasting starting point, Spulber sets up some valuable signposts, although they may at times bear misleading inscriptions. Let us hope that we shall some day have an equally thorough job performed from a socialist standpoint.
Last updated: 17 October 2009