East-West Trade Trends. United States. Foreign Operations Administration

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      The basic cause of these continual disappointments now is widely understood: The Communist elite, while preaching continually about the “uneven development of capitalism” and the “ever-increasing decomposition of the world economic system of capitalism,” created a remarkably lopsided economy of their own, in comparison with which the free economies of the West look very well-balanced indeed.

      Beginning in the 1920’s the Bolsheviks deliberately concentrated on building a base of heavy industry. In their 5-year plans, pig iron, steel, coal, oil, electric power, factories, heavy machinery, armaments have always been given the right of way over the needs of the people for meat, fish, vegetables, vegetable oils, milk, butter, chairs, tables, beds, bicycles, watches and clocks, radio sets, decent homes, boots and shoes, fabrics of cotton, wool, and silk—and so on through the myriads of consumer items that are commonplace in most Western countries.

      Impressive advances have been made in heavy industry. But this was done at a staggering cost to the inhabitants. It was accomplished through a vast use of forced labor and police discipline, and through the neglect of the manufacturing of consumer articles, the growing of foodstuffs and textile fibers, and the building of homes and retail stores.

      The Kremlin made strenuous efforts to maintain the flow of farm products to the cities, even while drawing labor away from the farms. But heavy metalworking industry was always considered more important than food and clothing. And more important, too, was the long, bitter and as yet unsuccessful attempt to cram collectivism down the throat of the Russian farmer. Stalin considered this struggle ideologically essential. Moreover, it was the means of forcing the peasants to supply food and raw materials to the growing industrial complex without receiving consumer goods in return. All in all, the failure of Soviet farm policy was one of the most resounding failures in the brief history of the U.S.S.R.—and it still is. Bread and potatoes are the principal diet of the masses, and even the grain and potato crops are unsatisfactory.

      During the years of Hitler’s devastating invasion, the Kremlin had to dedicate the energies of Soviet Russia to a fight for survival. But when the Grand Alliance crushed Hitler, and the western nations, hoping for a peaceful world under the United Nations, practically dismantled their military establishments and fell back into their normal roles as consumption economies, the Kremlin did not alter the lopsided war economy of the Soviet setup. The Stalin regime inaugurated a new phase of hostility toward the West. The grim drive to build up an industrial-military foundation continued. Consumer goods were still given a low priority in the scheme of things. And all this was discouraging not only to prospects of world peace but also to the prospects of happiness and dignity for the weary and heroic Soviet peoples.

How Forced Industrialization Affects Trade

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      Moscow laid the same pattern upon the European satellite countries and cut them to fit the pattern. Heavy industrialization was imposed on them regardless of their desires and the needs of the people. This forced industrialization absorbed large amounts of commodities that were formerly available for export to the free world. At the same time the collectivization of agriculture was imposed on the satellites, and this aggravated the difficulties of keeping pace in farm output.

      While these policies were reducing the total amounts of goods the satellites had available for export to the West, the U.S.S.R. was siphoning off great trainloads of what remained. The ability of these countries to trade with the West was further reduced as they were pushed into granting priorities to one another on the exchange of items they could have more profitably sold to the free world.

      Moscow also forced upon the satellites the characteristic Soviet trading goal of reducing and eventually eliminating all dependence on the free world. Lenin himself had emphasized that the first goal of the Soviet Union in its economic relations with the outside world was to gain “economic independence from the capitalist countries.” A prominent Soviet economist, Mishustin, in a book published in 1941, spelled out this principle in greater detail:

      The main goal of the Soviet import (policy) is to utilize foreign products, and above all, foreign machinery ... for the technical and economic independence of the U.S.S.R.... The import (policy) of the U.S.S.R. is so organized that it aids the speediest liberation from the need to import.

      In 1946 the leading Soviet economist, Vosnosensky, restated the objective in the Government periodical, Planned Economy:

      The U.S.S.R. will continue in the future to maintain economic ties with foreign countries in accordance with the tested line of the Soviet government directed towards the attainment of the technical-economic independence of the Soviet Union.

      The Kremlin’s new Eastern European empire included vast natural resources and sizeable labor reserves. Nevertheless it was—and still is—a long way from being self-sufficient, in the sense of being able to match the production levels of the free world, or even in the sense of fulfilling its own ambitious production plans, without trade with the West. Imposing an ultimate goal of self-sufficiency thus could not eliminate the Soviet bloc’s dependence on the free world. Communist trade planners still found it advantageous to import from the free world many things the bloc countries needed. The new goal did, however, affect the composition of the satellites’ trade. The planners placed much greater emphasis on the importation of industrial raw materials and equipment that would, in the long run, reduce the need to import.

      In the U.S.S.R. itself, the Government had always been disinclined to offer exports in order to import consumer goods, like meat, butter, textiles, and appliances. Now the same policy was clamped on the satellites. So the bulk of Soviet-bloc imports from the West consisted of goods that did not enter the homes of the people.

      The result of all this was a big decline in trade between Western and Eastern Europe, as compared with prewar years. Before the war, countries which now make up the Soviet bloc in Europe carried on less than 10 percent of their foreign trade with one another; now this has risen to more than 75 percent.

How the Kremlin Controls Trade

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      All foreign trade of the countries of the enlarged Soviet empire was placed under absolute state control. For both the U.S.S.R. and the satellites, international trade is now not only a 100-percent monopoly of the state, but also an in*tegral part of the planned economy, officially proclaimed as such. Each country, as a part of its general economic plan, estimates its import requirements and then develops a program of exports to pay for the imports. These country plans are coordinated by Moscow. Part of the machinery of all this economic planning and trade coordination is an organization, with headquarters in Moscow, called the Council of Mutual Economic Assistance.

      This totalitarian trading system insures that foreign trade serves the purposes of the state.

      Top priority in trade planning is given to the requirements of the U.S.S.R. Bloc countries are required to give one another preferential treatment in trade. With this system the export of any items to the West is easily restricted as it suits government purposes—whether or not the items could be considered as “strategic.”

      A vast amount of commercial information is obtained by bloc governments through their dealings with free-world traders and through their intelligence services. This provides Moscow with a comprehensive picture of the bargaining strengths and weaknesses of free-world traders.

      Moreover the Soviet-bloc governments, as large buyers and sellers controlling the production and trade of a whole country, indeed a group of countries, enjoy certain bargaining advantages in dealing with the