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

roles in previous policy formulation, and in directing key operations.

      The system that this group took over in the U. S. S. R. was their own as well as Stalin’s creation. Under this system, the economy is organized along authoritarian lines and characterized by state ownership of the means of production and state planning of practically all economic activity. It is the Central Committee of the Communist party which lays down the economic and social policies which the state production plans are desired to implement. The new regime modified this system in no essential respect.

      In addition to inheriting the system, Malenkov and his associates inherited economic policies and economic conditions which they themselves had helped to create.

      In the U.S.S.R., as we have seen, Soviet economic policy had long been to force industrialization by every means. And this objective required such a concentration of capital investment—both civilian and military—as to deprive the growing population of advances in living standards commensurate with the overall expansion of the Soviet economy. That is another way of saying they took it out of the people’s hides.

      Each of the European satellites, too, had undertaken, under Soviet direction, to develop an economic structure similar to that of the Soviet Union. By 1953 all foreign trade, nearly all industry, and a very substantial portion of domestic trade had been nationalized in those countries. Where collectivization of agriculture was not completed, the Government controlled agriculture by means of centralized planning and a system of compulsory deliveries. Each satellite government had drawn up a long-term comprehensive economic plan which, like that of the U.S.S.R., emphasized rapid industrialization.

      These developments brought the Communist leaders many serious problems—and the people many deprivations. Before the war, as independent states, most of these satellite countries had devoted a much higher percentage of resources to the consumer sectors of their economies than was customary for the U.S.S.R. When the Communists took control, belts were tightened. The standards of living of the satellite peoples began to decline toward the low levels long prevalent in the U.S.S.R. But denying the satellite peoples the fruits of their labors, in imitation of Moscow patterns, still did not bring the overambitious war-economy plans to success. Agriculture and industry both had difficulty in keeping pace. The world has heard how the transformation of satellite agriculture into the Soviet pattern was impeded by the opposition of the rural populations to collectivization and by the difficulties of mechanizing farm output; how shortages of raw materials slowed the textile program in Czechoslovakia and the electric power industry in Hungary; how the mining and metallurgical industries lagged in some areas; how the rights of labor were obliterated in the attempt to shift manpower into heavy industry; how purges furnished scapegoats for Communist failures.

Letting Off Pressure

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      In the summer of 1953 came the electrifying news of rioting in East Germany.

      Also in the summer of 1953, new economic targets were announced in the U.S.S.R. and some of the satellites. These new targets—which will be discussed further in a moment—were said to be a means of improving the lot of consumers.

      Some observers in the West assumed that economic difficulties in the bloc were erupting with such force that they threatened to topple the Malenkov regime. This interpretation is understandable—any democratic nation would have long since replaced a regime that in peacetime so subjugated the needs of the people—but such an interpretation of the Soviet scene must be viewed with great skepticism. At this writing there was some evidence that the problems faced by the Kremlin may in some respects have become more difficult since Stalin’s death, but one could not infer that the chronic economic difficulties of the Soviet bloc were especially different in nature from previous post-war years, nor that the Communist governments with their inhuman police control were about to collapse.

      What the Communist rulers were facing was their perennial problem of developing lopsided economies without letting the lopsidedness become so repressive on the people as to upset the plans and timetables. Even in police states there are physical and psychological limits beyond which human beings cannot be driven without lowering their incentives, their energy, their morale to the degree that production is severely hampered. The Soviet leaders have always recognized this. At three different periods in the thirty-odd years of their control of the U.S.S.R. they have shown themselves adept at opening the valves enough to relieve accumulating pressures and then shutting them again—always without swerving very far in the basic drive to build the industrial-military machine.

      Many observers believe that even prior to Stalin’s death the time was ripe for a slight relaxation in the postwar consumption squeeze. The Kremlin faced multiple problems in consolidating its new empire. External foreign developments had been adding to the difficulties of achieving the overambitious industrial and military goals. Western export controls on the shipment of strategic goods into the bloc had been impeding the planned development of the military sectors of the economies.

      In any event, a close examination of the new actions proposed by the Malenkov regime to improve the consumer’s lot, insofar as they have been revealed, indicate that plans for heavy industry and for military preparation will not be materially affected.

The “New Economic Courses”

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      During the summer and fall of 1953, Communist governments all over Eastern Europe announced in turn so-called “new economic courses.” East Germany announced its “new economic course” on June 11, just before the East Berlin riots of June 17. Then came Hungary (July 4), the U.S.S.R. (August 8), Rumania (August 22), Bulgaria (September 8) and Czechoslovakia (September 15). Smaller adjustments were announced earlier for Albania, and later for Poland.

      The announced programs differed according to local problems, but almost everywhere the solution of agricultural troubles was a key objective. Better collection and distribution facilities for farm products were demanded. This theme was almost invariably played to the popular tune of helping the consumer—especially in the U.S.S.R. Deplorable housing conditions came in for a share of the attention.

      In the satellites the programs reflected openly the inability to meet many of the exacting goals that had been set. In some countries, the emphasis was on bigger industrial investments in scarce basic materials. In others, concessions to the peasants were paramount. The initial implementation, as well as some of the program announcements, was confusing and sometimes contradictory.

Malenkov’s Big Announcement

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      The new economic course for the U.S.S.R. itself was unfolded in three major speeches during the second half of 1953—by Malenkov in August, Khrushchev in September, and Mikoyan in October—and in a series of decrees and lesser pronouncements.

      Premier Malenkov, addressing the Supreme Soviet on August 8, made repeated claims of Soviet strength and progress. For example, he said the United States had no monopoly on the hydrogen bomb and added that such facts “are shattering the wagging of tongues about the weakness of the Soviet Union.” But in the section on consumer goods he gave a revealing picture of weakness.

      He spoke at great length about lags and failures in agriculture and in the manufacture of consumer articles. He severely criticized the poor quality and appearance of goods, the “serious shortcomings” in the organization of domestic trade, the “unsatisfactory leadership of enterprises,” the “high production costs” and high prices of coal and timber, the “neglected state” of agriculture in many districts, the “serious lagging” in livestock, potatoes, and vegetables. He said the Government considered it “essential to increase considerably” the investment in