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Ygael Gluckstein

Stalin’s Satellites in Europe

Part One
The economy of the Russian satellites

THE CHANGES in land ownership dealt with above had a relatively simple result-the predominance of small peasant ownership. By contrast, the property relations in industry, transport, etc., are much more complicated. In order to understand the present situation, it is necessary briefly to survey the property relations before the war, the influence of the Nazi occupation, and the immediate effects of the Red Army’s victory.

Chapter Index

State ownership before World War II

In Eastern Europe the bourgeoisie developed late and, in comparison with its Western competitors, was weak and poorly equipped with capital. Thus there arose two antagonistic, but complementary, phenomena. On the one hand foreign capital infiltrated into the region, and on the other hand, in an attempt to avoid relying too much on foreign capital which tended to undermine national independence, the state became the owner of certain means of production, and not, as in the West, mainly a watchman or regulator of the activities of private capitalists. And between and under the pressure of the two – powerful foreign and state capital – private “national” capital managed somehow to keep alive.

The part played by the state in industry was greater in Poland than in any other Eastern European country:

There were many mixed enterprises owned partly by the state and partly by local authorities, private companies and individuals.

The value of state enterprises in Poland in 1930-31 was about 12½ millard zloty, or 22.5 per cent of all the industrial-commercial wealth of Poland, and in the most important undertakings (heavy industry, metal, chemicals, transport), its share was even bigger, as the table shows.

In Yugoslavia the state owned the railways and the telephone and telegraph system. Public utilities were owned by the city authorities. In the very important timber and lumber industry, the state played a considerable part, owning 37.8 per cent of the forest area. A further 27.9 per cent was in the hands of the local authorities. The state owned thirteen coal mines and two iron mines yielding about 25 per cent and 90 per cent respectively of the country’s total output of coal and iron. Tobacco, salt and raw silk were all state monopolies. The production of iron and steel (through the Yugoslav Steel Company), and of armaments, was state controlled and the state had a very large share in the cellulose and sugar industries.

State ownership in the other Eastern European countries was far less extensive, nevertheless it cannot be ignored. For instance, in Czechoslovakia, practically the whole railway system was state owned. Trains, electricity, gas and water, were owned by the local authorities. State capital was of major importance in the powerful Zivnostenska Bank and in the Skoda Works. In industry as a whole, the state owned at least a tenth of all capital invested.

Similar conditions obtained, to a greater or less extent, in the other countries.

Chapter Index

Foreign capital before World War II

Before the War in all the countries nearly all the key positions in industry, transport and banking were controlled by foreign capital. Thus Zweig writes:

“The share of foreign capital in the total capital funds owned by all joint-stock companies in Poland amounted to 33 per cent. The share in the total capital of all active joint-stock companies is given as 44.8 per cent in 1935 and 40.1 in 1937” but “... the controlling power of this capital covered a much wider range than 40.1 per cent of productive capacity.” (Ibid., p.121)

This was because foreign capital, being concentrated in certain key positions, could control a much larger volume of capital. Companies in which foreign capital predominated constituted 63.1 per cent of the capital of all joint-stock companies. The preponderance of foreign capital was particularly great in certain branches of industry-in mining and foundries foreign capital controlled 63.6 of all joint-stock industry; in petroleum extraction, 89.9 per cent; in the chemical industry, about So per cent; in the electro-technical industry, about 90 per cent; in electricity and water-supply, about 95 per cent; in the textile industry, about 40 per cent (ibid. pp. 121-2); in insurance, 85.1 per cent; communication and transport, 68.9 per cent (L. Wellisz, Foreign Capital in Poland, London, 1938, p.145). Only in light industries (foodstuffs, paper, glass, ceramics, etc.) and trade was foreign capital of small importance.

The other countries of Eastern Europe were in a similar position. Boris Kidric, Chairman of the Planning Commision, at the Fifth Congress of the Communist Party of Yugoslavia, said of his country that foreign capital “participated in the mining industry of the old Yugoslavia and in the building materials industry with 77.9%, in the metallurgical industry with 90.9%, in the processing of metals with 55.8%, in the ceramics and glass industry with 28.3%, in the timber industry with 51.4%, in the paper industry with 15.1%, in the chemical industry with 73.6%, in the food and agricultural industry with 27.1%, in the textile industry with 61.4%, in the leather and fur industry with 40.9&, in the electric power industry with 43.5%, in the remaining industries with 32.3%, giving an ,average of 49.5%”. (B. Kidric, On the Construction of Socialist Economy in the FPRY, Belgrade 1948, p.31).

The publication of the Royal Institute of International Affairs, Agrarian Problems from the Baltic to the Aegean (London 1944), states: “Only from 15 to 20 per cent of the capital in Roumanian industry was in Roumanian hands” (p.81).

“In 1936 paid-up foreign capital in Bulgarian companies amounted to ... 42.6 per cent of the total paid-up capital of companies.” .(Royal Institute of International Affairs, South-Eastern Europe. A Political and Economical Survey, London 1939, p.173). The share of foreign capital in large manufacturing industry was 48.03 per cent, in wholesale trade 38 per cent, in insurance 24 per cent, in banking 22 per cent, and in transport 63 per cent. (According to Dobri Terpeshev’s Report to the Fifth Congress of the Bulgarian Communist Party, Sofia 1948).

Similar conditions prevailed in Hungary.

Czechoslovakia was the only country in which foreign capital in banking and industry was of relatively small importance.

Chapter Index

The influence of the German occupation on property relations

So great was the influence of the German occupation that, in the words of S. Perlman: “European capitalism was finally killed by Nazism”, which “so churned up all existing property rights that their restoration even approximately ... is unthinkable.” (Some Reflections on Russia, in Problems of the Post-War World, Symposium, New York and London, 1945, p. 334). That these words are no exaggeration is proved by the following passage in Mr. Sharp’s book:

The extent of the upheaval in property relations caused by the Germans in the Eastern European countries may be seen from a few examples of the acquisitions made by German capital since the Munich Agreement and the establishment of the Protectorate of Bohemia-Moravia.

In addition to the outright confiscation of Jewish property and the acquisition of important Czechoslovak financial claims and capital assets in south-eastern Europe, the Germans assumed control and ownership of the main financial and industrial establishments in Bohemia-Moravia.

Czech banks were forced to merge, so that finally only four banks remained. German capital (Creditanstalt, Dresdner Bank and Deutsche Bank) owned roughly 15 billion of the total capital of 33.6 billion crowns (Koruny) invested in the banks.

Most of the industrial property and interests came under control of the Hermann Goering Werke (Vitkobice Works, Mining and Foundry Company, the Podbrezova foundry in Slovakia, the armament factories of Skoda and Brno, the steel mills and coal mines of the Poldihuette AG). IG Farben took over the chemical works of the former Aussiger Verein and the Bratislava plants of Dynamit Nobel.

In the Sudetenland, which was incorporated into the Reich, a specially-created firm, Sudetenlaendischer Bergbau, con~rolled by the Hermann Goering Werke, took over the former property of the Czech state, of the Zivnostenska Banca and of the Petschek family interests. (op. cit., pp. 6-7).

At the same time the Germans developed certain industries for war purposes, because Czechoslovakia was relatively immune from air attack. For instance, the aircraft industry which before the war employed about 5,000 workers, in 1944 employed more than 100,000. This increased the proportion of industry in Czechoslovakia controlled by Germans.

Since even before Munich, 40 per cent of the industry of Czechoslovakia was owned by German citizens, it is clear that the proportion of German capital at the end of the war was not less tan 6o per cent of industry and almost 100 per cent of financial institutions (banks, insurance, etc.).

Of Poland, Mr. Sharp writes:

Polish banks in the incorporated areas were swallowed by the Ostbank AG, a subsidiary of the Dresdner Bank. A special organization was set up to take over industrial property, either outright or in the form of compulsory administration by the Haupttreuhandstelle Ost. Coal mines were taken over by the Hermann Goering Werke in Silesia and by the Pruessische Bergwerksmid Huetten AG in the Dombrowa basin. The Schlesische AG für Bergbau und Hüttenbetriebe concentrated in its hands the zinc industry (with the exception of some interests left with the Giesche works). By April 1942 not less than 230,000 Polish industrial and commercial enterprises of all sizes were reported Germanized in the annexed part of Poland (this includes very small businesses and presumably also Jewish-owned undertakings).

In the General Government, a state-managed organization, the Werke des Generalgouvernment, took over the largest industrial plants. Two artificial silk factories came under the control of Vereinigte Glanzstoff Fabriken of Wuppertal. Oil was exploited by Karpathen-Öl AG and electric power plants by Ost-Energie AG. (Ibid., pp.7-8).

By taking possession of French, Belgian and Austrian capital (which in 1937 amounted to 56.9 per cent of all foreign capital), as well as Jewish-owned enterprises (constituting about 10 per cent of all industrial-commercial wealth) and the enterprises owned by the state before the war, the Germans gained control of more than half of all industrial and banking capital and nearly all industry, transport and banks of real importance.

Of Yugoslavia Mr. Sharp writes:

Yugoslavia was dismembered after the German attack in 1941 and public and private property grabbed by the successor states in the detached provinces. In puppet Serbia the Germans controlled the state-owned railways and mines. Through possession of French interests they acquired the Bor copper mines. German capital infiltration in Serbia was estimated at about 45 million dollars and in Croatia at approximately 35 million. (Ibid., p.9)

German capital also invaded the economy of the German allies, Hungary and Rumania. “In Hungary, for instance, German investments were estimated in February, 1944, officially at about 692 million dollars and unofficially at more than twice the amount.” (Ibid., p.8). Thus about a third of all Hungarian industry was controlled by German capital: six very large metal enterprises, nine mines, three transport companies, three food industries, ten textile enterprises, and thirteen miscellaneous industries. (N. Clarion, Le Glacis Sovietique, Paris 1948, p.89). German capital was especially active in the expansion of the aluminium and oil industries, which were practically new industries for Hungary. The extent to which German capital gained control of the Hungarian economy is revealed by the fact that while German capital was estimated at more than a milliard dollars, the total national wealth of Hungary, excluding land and buildings, was estimated in 1943 at 4.4 milliard dollars.

In Rumania the Hermann Goering Werke came into possession of large shares in a number of industrial enterprises through the seizure of the Czech-owned stock. Similarly in banking and mining the Germans “bought” French and Belgian interests and some Dutch oil interests. One sixth of the capital invested in Rumanian banks and industries was German-owned or controlled, according to an estimate early in 1944. In the oil industry German interests rose from less than 0.5 per cent before the war to 38 per cent (1942). Jewish property was “Rumanized”. (Sharp, op. cit., pp.8-9).

Before the war more than half the foreign capital invested in Rumania was invested in her oil industry, and foreign capital as a whole made up nearly 85 per cent of the capital of all Rumanian industry. Therefore German capital in the oil industry alone made up in 1942 nearly a fifth of all the capital in Rumanian industry, or a quarter of the foreign capital. Moreover, it controlled a few other, not unimportant, enterprises, such as the Malaxa metal enterprise and the mines of Resitza and Copsa Mica-Cugir companies, as well as another two hundred new medium-sized enterprises. (Clarion, op. cit., pp.90-91).

Two countries practically escaped any large-scale infiltration of German capital during the war – Bulgaria and Finland, the former because it lacked the heavy industry needed for the German war effort, the latter because the foreign capital invested in it was not French or Belgian but English and American, and it was impossible for the Germans to buy British and American shares during the war.

Chapter Index

The effect of the military victory of Russia:
Russian-owned enterprises

The military defeat of Germany left a very great part of industry, transport and banks of the East European countries ownerless. The larger part of German property in Czechoslovakia, Poland and Yugoslavia passed into the hands of the national states, while in the countries which were formerly allies of Germany as well as in the Soviet Zone of Germany and Austria it was mostly taken over by the Russian government. Even Czechoslovakia and Poland did not escape having to contribute German booty to Russia. Yugoslavia was the only exception, because the Russian army never occupied the whole of the country, but merely a small part of it and for a few months only. Of the industries formerly owned by Germans and now claimed by Russia, some were dismantled and the rest left intact under Russian control.

The question of dismantling will be dealt with later. Here it is proposed to deal only with the ownership by Russia of certain industrial, transport and banking interests.

Rumania

Since during the war German capital had controlled 38 per cent of all investments in Rumanian oil (as well as a number of industries and banks), Russia was able to obtain almost complete control over a third of the Rumanian oil industry. She also became the owner of much of the metal industry and the banks. For various reasons, Russia found it preferable to build up in Rumania (and Hungary) enterprises in which she owned halt while the other half was in the hands of Rumanian (or Hungarian) private capitalists or the state (the latter from the nationalisation laws of 1948). This enables the Russian state to control a much greater sector of industry than if she had relied on companies with 100 per cent Russian capital. Thus in May, 1945, Russia and Rumania came to an agreement about the establishment of mixed companies in certain branches of industry, first of all the petroleum industry. Sovrompetrol was established which owns the lion’s share of the oil fields and refineries of Rumania. The far-reaching law of nationalization passed on ii June, 1948, did not apply to the mixed companies. In the significant words of The World Today (January, 1949) the monthly journal of the Royal Institute of International Affairs:

... the only capitalist in Rumanian industry is Communist Russia. Only the Russian Government has the right to own private shares, and only the company in which Soviet Russia has private shares is allowed to make profits and distribute them to the shareholders. Sovrompetrol has now the best fields and concessions and the right to export in free currency areas. It is also officially subsidized by the Rumanian Government in the event of loss. Thus it can be seen that Sovrompetrol has the best of the bargain. The second sector belongs in principle to the Rumanian State. Its task will be to prospect for, and explore, new fields as well as to exploit the exhausted wells left by the expropriated companies. Its personnel is untrained. Its trade will be limited to the adverse one with Soviet Russia and the other satellites. Therefore, while both sectors are working for the benefit of Soviet Russia, it is not difficult to guess which has the best chance of successful working, which is doomed to failure.

Although oil is the main industry of Rumania, and Russia directed her main attention to it, she did not overlook other industries. Because of the close fusion of industrial and banking capital in Rumania, the Sovrom Banco was established, as the best means of controlling industry – besides oil – as a whole. Fifty per cent of the shares of the bank are held directly by Russia, and fifty per cent by Rumanian companies. But since Russia, as the heir of the German owners, had part ownership of a number of the latter companies, she has, even formally, the majority of the shares.

In addition there were established Sovrom companies for shipping, air communications, timber, coal, steel, chemicals, gas, building materials, glass, and a few other industries. In all these enterprises the share of Russia has been paid solely by surrendering the claim to German assets in each industry.

Hungary

Under the Potsdam Agreement Russia was entitled to take over all German-owned property in Hungary, officially estimated in February 1944 at 692 million dollars, and unofficially at double this sum, out of an estimated total wealth in 1943 of 4.4 milliard dollars. Russia exercised her rights partly by dismantlement and partly by taking control of industries which continued to operate in Hungary. By an economic agreement between Hungary and Russia in September 1945 mixed Russian-Hungarian companies were to be established in fourteen branches of industry and transport: oil, bauxite; aluminium, coal, chemicals, the large metal industries Weiss Manfred, Ganz and Rimamurany, electricity, railways Danubian shipping, air transport. While their importance in the economy was great, it was considerably less than that of their counterparts in Rumania.

As a political weapon for the subjugation of Hungary to Russia, the mixed companies are of first-rate importance.

Bulgaria

In Bulgaria there are Soviet companies and mixed companies in certain mines and transport undertakings. When the U.S.S.R. took over the assets of the German companies, they did not take over their liabilities, the biggest of which were their debts to the state. Thus while a large part of the assets which were transferred to Russia of the German companies came from open robbery of the Bulgarian people in the past, the liabilities were borne by the Bulgarian taxpayer. This was revealed in the Kostov Trial (December 1949) during which Prof. Stefanov, former Minister of Finance, was accused of opposition to this state of affairs. He was accused further of wishing to impose the same taxes on the Soviet enterprises as the Bulgarian enterprises had to pay. The Prosecutor took it for wanted that Russian enterprises in Bulgaria should enjoy special privileges in taxation.

Yugoslavia

In Yugoslavia there were two mixed Soviet-Yugoslav transport companies, “Juspad” and “Justa”, formed on February 4, 1947, with the alleged intention of “contributing to the recovery and development of productive possibilities of Yugoslavia”. They were liquidated after the rupture with Moscow. After this some light was thrown on the working of the companies. Joze Vilfan, Yugoslav delegate to the United Nations Economic and Social Council, referred to the two mixed companies in a speech before the Council. The participation of the two Governments in the companies was to have been equal, but in practice the companies did not do what they were intended to do. Thus, for example, although by May 1948 the USSR had paid up only 9.83 per cent of its participation in Juspad while Yugoslavia had paid up 76.25 per cent, only 40 per cent of the services of both companies went to Yugoslavia, the remainder going to other countries. Whereas Juspad charged Yugoslav industry 0.40 dinars per kilometre-ton, the USSR was charged only 0.19 dinars, and other countries 0.28 dinars. With the liquidation of both companies, Yugoslavia took over all the liabilities, though the USSR drew its share of the capital, as far as it was paid up, in full. (Tanjug, 11 October 1949).

No rent paid for natural resources

This is an important aspect of the exploitation exercised by the Russian Government through the mixed companies. The prices of certain commodities whose production is dependent on natural resources which exist only in limited quantities and which are the property of individuals (or states) – such as grain, cotton, timber, coal, oil – always include not only wages for the workers, and profit for the owners of the capital, but also rent for the owners of the natural resources. When the Russian state takes from Sovrompetrol, for instance, half of what remains after the cost of production (wages, depreciation of machinery, etc.) is covered, it actually gets not only half the profit, properly so-called, but also half the rent of the oilfields. Thus it becomes part-owner of the natural wealth of Rumania. The enormous rent accruing from oilfields is well known. One example will be sufficient to show this. In 1946 the USSR concluded an agreement with Iran to build a mixed Iran-Soviet oil company. It was agreed that the share that Iran would contribute to the company would be that of providing the oil-bearing soil, and for this alone she would get 49 per cent of all the shares of the company, i.e., 49 per cent of the profit and rent. In the case of the Sovrompetrol Company, Rumania had to supply half the capital and .in addition to give the oil-bearing soil gratis. It would not be difficult to calculate what portion of the shares Rumania would have received had she had the same conditions as were granted Iran. She would have had 49 per cent of the profit as rent for the oilfields and half of the rest – i.e., 25½ per cent – for ownership of half the capital, making altogether 74½ per cent. Instead she gets 50 per cent. And the portion the USSR would have received would have been 25½ per cent instead of 50 per cent. This would have been the case if the mixed companies were established on the principle of legal equality usually prevailing between capitalist partners. The extra profit the USSR gets from the Sovrompetrol Co. and from a number of other mixed companies is the result of political pressure.

Chapter Index

Nationalisation in the Russian satellite states

The appropriation of industries, transport and banks by the Russian state has been described. Now it is necessary to deal with the transfer of industries to the “national” states, states which are, at least formally, distinguished from the Russian state. This transfer is usually described as “nationalisation”, although the term is far from appropriate as it assumes that the state enjoys national independence and that it is identified with the nation, or the majority of it. But if these reservations are borne in mind, there is no danger in using this rather loose term.

As the national states of the satellites are subordinated to the Russian state, one would expect to find that the progress of the nationalisation of industry is subordinated to the needs of Russian infiltration into the national economies. And so in fact it is. In all Eastern Europe only three countries, Poland, Czechoslovakia and Yugoslavia, were allies of Russia during the war. Because of this, Russia could not exact any reparations from them or claim control over German assets in them. They were therefore encouraged to nationalise their industries, and as early as 1945 the majority of their industries were nationallised. (In two of these countries – Czechoslovakia and Poland – the nationalisation was accompanied by a wide-scale and chauvinistic expropriation of the “Teutons” by the “Slavs”.)

In the four countries which had been allied to Germany – Rumania, Hungary, Bulgaria, Finland – the course of events was different. There was no nationalisation in Finland, which was never occupied, nor was there much propaganda by the Communist Party for it. In Rumania and Hungary, Russia’s interests in exacting reparations as well as in building up mixed companies (together with a number of socio-political factors which will be dealt with later) led to the postponement of nationalization on a large scale until 1948, more than three years after the beginning of the Russian occupation. The fear that the revolutionary enthusiasm of the Bulgarian masses (which, except in Yugoslavia, was unparalleled in this region after the war) would lead to too much independence of Russia, and the Russian bureaucracy’s confidence that nationalisation could be carried out whenever they wished, caused them to postpone it until the revolutionary wave had ebbed at the end of 1947.

The timing of nationalisation in Rumania, Hungary and Bulgaria was determined by another very important factor – the Marshall Plan. The urge to trade with Western Europe, as expressed in the unanimous decision of the Czechoslovak government on 4 July 1947 to take part in the Marshall Conference (a decision revoked when Gottwald and Masaryk visited Moscow on 10th July) made it necessary for Russia to strengthen her control over the economy of Eastern Europe, and this could be done only through state ownership of industries in all these countries. Hence the nationalisations in Bulgaria, Rumania and Hungary.

Poland

It is impossible to understand the process of nationalisation in Poland without taking into account two factors, namely, in the area of pre-war Poland, the existence of many industries previously controlled by German capital now remaining ownerless, and, what is even more important, the changes in Polish industry brought about by the annexation of the German area east of the Oder-Neisse and the expulsion of the German population from it. This area will be referred to as the Western territories of Poland, and the area of pre-war Poland as Old Poland.

The importance of the industry of the Western territories compared with the industry of Old Poland is shown by the following table:

The production of pig-iron in the Western territories was about 50 per cent of the production of Old Poland, and of steel 70 per cent. An important chemical industry, with a wide range of products, came to Poland through the annexation of the Western Territories. The sugar refining capacity of the Western Territories was the same as that of Old Poland. In fact, “The total capacity of this industrial belt (i.e., of the Western Territories – Y.G.) is equal to that of the whole of pre-war Poland”. (The World Today, May 1948).

Out of the two million people employed in 937 in all the mines, industry and handicrafts of Poland, the majority, 1,177,858 people, worked in small-scale industry and handicrafts (employing fewer than 15 workers), while large and medium-sized industry (which includes all enterprises with more than 15 people) employed only 830,000 people. By contrast, the industries of the Western territories employed before the war over 1,000,000 workers, the great majority of them in large enterprises, hundreds of which employed more than a thousand workers each.

It is therefore clear that when, after the expulsion of the German population (the great majority of them workers and their families), the industry of the Western territories was declared state property, an important – if not the major – part of the industry of new Poland was by that act removed from private ownership. If this had been the only nationalisation undertaken, state ownership in industry proper, i.e., excluding handicrafts and industries employing less than fifteen people, would already have far outstripped private ownership. This was not immediately clear because a certain time-lag was inevitable before enough Polish workers could be found to man the industries of the Western territories. Thus, for some time after the war the nationalised industry of the Western Territories played a less important role in the total industry of the new Poland than would have been expected.

Of the territory of Old Poland Clarion writes:

When we take into account the fact that large and medium industry in Old Poland mean medium and small industry in the West, the nationalisation measures left outside state property 45 per cent of the total number of industries, or at the very least 60 per cent of the total number of workers employed in industry. (op. cit., p. 94) [4]

Clarion would seem to exaggerate the part played by private industry in Old Poland. Even there at least half of all the workers in mining, industry and transport, are working in state enterprises, and so the overwhelming majority of all the industry of present-day Poland is state-owned.

Boleslaw Bierut, the President of the Polish Republic, emphasized in a speech on New Year’s Eve 1946 that the expropriation of the Germans was a key factor in making the Polish state the owner of the majority of the industry. He said: “... the war completely overturned the system of our pre-war production relations ...” “After the expulsion of the occupant a huge majority of the industrial plants, even the smallest, had to be classified as abandoned property, taken over by the state, and reopened through the efforts of the state, territorial self-government, co-operatives and new private firms. After investing public money in the plants, the state feels compelled to, regulate their judicial form and title of ownership. The only way out of the situation, especially in the case of large enterprises, is nationalisation.” Thus nationalisation is “a legal act sanctioning already existing facts and procedures. It is an adaptation of the law to realities.” This was the situation in 1945 and the nationalisation law of 3 January 1946 gave it legal sanction. First, all German property, both in the Western territories and in Old Poland, in industry, mines, transport, banking, insurance and trade was declared the property of the Polish state. Further, a number of other enterprises belonging to Polish citizens was taken over by the state: all firms with more than 50 workers were affected. The situation was summed up byRoman Zambrowski, Secretary of the Central Committee of the Polish Workers’ Party (Communist Party) in a speech he made on July 12th, 1948, when he stated that 85 per cent of the total industrial output is produced by state and cooperatively owned enterprises (the latter not more than 5 per cent), the same proportion in communication and finance, and 100 per cent in banking. Only small-scale industry and handicrafts were in the hands of private owners. (Glos Ludu, 13th July 1948).

Czechoslovakia

As a result of the defeat of the German army and the expulsion of the Sudeten Germans, the major part of industry, transport and banking was left without an owner. As President Beneš wrote in an article in the Manchester Guardian of 15th December 1945: “... the Germans simply took control of all main industries, and of all banks ... If they did not nationalise them directly, they at least put them in the hands of big German concerns ... In this way they automatically prepared the economic and financial capital in our country for nationalisation ... To return this property and the banks into the hands of Czech individuals or to consoldidate them without considerable State assistance and without new financial guarantees was simply impossible. The State had to step in ...”

Three decrees of October 24th, 1945, made all banks, insurance companies, joint stock companies, key industries and large-scale enterprises the property of the state. All the enterprises in the key industries (mines, iron and steel, electricity, etc.), whatever their size, were nationalised. In other industries, all the enterprises employing a certain number of workers, or with certain technical capacities, were nationalised.

The ownership of industry on November 1, 1946, in terms of percentage of total employment, was as follows:

Between 24th October 1945 and February 1948 no new nationalisation laws were passed, so that it can be assumed that throughout this period not more than a quarter of industry (reckoned by the number employed) was privately owned. Since private enterprises were small compared with state enterprises (on the average every industrial enterprise owned by the state employed eight times as many people as the private enterprises), their economic importance in the total industry of the country was even less.

After the establishment of the new government in February, 1948, further nationalisation took place, and the proportion of private industry decreased from about 25 per cent to 7 per cent of all industry, according to the number employed.

Thus the really large-scale state acquisitions took place in 1945 and were directed almost entirely against ownerless enterprises, i.e., formerly German-owned enterprises.

The 1945 nationalisation hardly touched the Czechoslovak bourgeoisie and did not affect the Czechoslovak owners of middle and small industry at all. After it the Communist leaders declared that no more nationalisation measures would be taken. Thus on March 27th, 1947, “In an interview the Prime Minister of Czechoslovakia, Klement Gottwald, declared that from the programme of the present Government it is clear that it considers the statification in the field of production closed” (Neue Zürcher Zeitung, 29th March 1947). A few weeks later, at a general meeting of the Central Trade Union Council, Antonin Zapotocky, the President, said: “We agree that medium-sized, and even some big enterprises should remain in private hands, and we see no reason why we should change these views.”

But in February 1948 Gottwald and Zapotocky “forgot” all this, and for the first time the Czechoslovak bourgeoisie, including the owners of middle and small industry, was seriously affected by nationalisation. This second nationalisation was a relatively small operation after the big one of 1945.

Yugoslavia

No nationalisation law was published in Yugoslavia, until 5th December, 1946, when the two Houses of the National Assembly adopted a bill for the nationalisation of private enterprises which applied to 42 branches of industry, transport and banking, and wholesale trade. But it would be wrong to conclude that until then these sectors of the economy were in private hands. In practice, nationalisation was carried out without legal sanction and under cover of a law passed on 24th November 1944 for the expropriation of the property of the national enemy and his collaborators, On 19th January 1946 The Economist estimated that the proportion of state and co-operative industry in Yugoslavia was 70-80 per cent, and the Moscow journal New Times of 15th March 1946 wrote: “The Government is in possession of 82 per cent of all industry, while private establishments account for only 18%.”

After this survey of the ownership of industry in Poland, Czechoslovakia and Yugoslavia, a brief examination is necessary of the control of trade. In all three countries private property lingers on to a large extent in one sphere besides agriculture, that of retail trade. In his speech mentioned above, Roman Zambrowski pointed out that in Poland the state and the cooperatives handle only 25-30 per cent of retail trade (in wholesale trade private ownership is negligible, the state taking 59 per cent of the turnover, the co-operatives 36.6 per cent, a total of 95.6 per cent). A similar situation exists in Czechoslovakia. Of the situation in Yugoslavia, B. Kidric, said:

Whereas in 1945, 85% of trade was still carried on through private shops, 12% through co-operatives and only 3% through state shops, in 1946 state shops already participated in trade with 19.2%, cooperative with 32% and the private shops dropped to 48.8%. (B. Kidric, op. cit., p.29)

... on March 31st, 1948, private shops still participated with only 1.78%, the state shops with 39.91% and the cooperative with 58.31%. (Ibid., p. 31)

In May, 1948, a new law nationalised all the remaining private trade in Yugoslavia.

In these three countries, the proportion of the economy in private hands was no greater than in Soviet Russia during the N.E.P. [5]

Hungary and Rumania

In Hungary and Rumania, Russia’s demand for reparations and her schemes for the building of mixed companies which would give her direct control of certain key positions in their economies, resulted in the postponement of any nationalisation until requisitions, dismantling, etc., had been terminated, the reparations payments were nearly completed, and the mixed companies were already established. Then, in the first half of 1948, nationalisation was carried out on a large scale.

For the Russian government nationalisation is only a means to the end of the extraction of surplus value and the accumuladon of capital, and the purpose of nationalisation is fundamentally no different from that of the mixed companies, whose function is openly that of the extraction of “reparations”. This is illustrated by the following incident.

After the big defeat of the Hungarian Communist Party in the general elections (November 1945) when it polled only 17 per cent of the votes, the Hungarian bourgeoisie felt self-confident, and the government, headed by the Smallholders’ Party, tried to delay agreement to the Mixed Companies. Suddenly, the Communist Party began an intensive campaign for the nationalisation of industry on a large scale. The General Secretary of the Party and Vice-Premier, Mátyas Rakosi, in a speech over Radio Budapest, on 4th March 1946 demanded the nationalisation of exactly the same industries in which Russia demanded the establishment of Mixed Companies. To the demand for nationalisation was added a demand the removal of reactionary elements from the Smallholders’ Party. As a result the Hungarian Government gave way, the Mixed Companies were established, and the Communist Party forgot about the nationalisation (for the time being).

Nationalisation was introduced piecemeal into Hungary. The coal mines were nationalised in January 1946, the power stations a little later in the year. Five big heavy industrial firms were brought under state control as a temporary measure, “until the end of reparations”, in November 1946. In September 1947 all the banks were nationalised. Even so, until the nationalisation law of March 25th, 1948, a quarter of heavy industry and four-fifths of the rest of industry remained private property. According to this law, all industrial enterprises employing more than 100 persons became state property. The state now owned 78 per cent of industry, according to the number employed. On December 28th, 1949, the Government decided to take over all enterprises employing more than ten workers and all those owned by foreign capital. Of course the nationalisation laws did not affect the property of the Mixed Companies.

The way the nationalisation was carried out in Hungary illustrates the tactical methods of the Hungarian Communist Party leaders and their view that the active participation of the workers in the nationalisation is unnecessary. Easter Monday, 1948, was declared a holiday, and when the workers were not in the factories, state officials came down and took them over. The next day the workers arrived to find a new master. (Continental News Service, April 16th, 1948).

In Rumania the first step towards the nationalisation of industry was the creation in the summer of 1947 of a number of industrial boards which grouped together the factories of different branches, controlled the allocation of raw materials and framed the production plans of the various factories. This prepared the ground for the first nationalisation law for industry of 11th June 1948. On that date, without prior warning, the government introduced a bill in parliament which became law after only three hours discussion, providing for the nationalisation of the overwhelming majority of industries. A few months earlier at the Congress of the Rumanian Workers’ Party (Communists) on February 21-23, 1948, which had to decide on the policy of Rumania for the immediate future, no mention was made of early nationalisation on a large scale. All oil companies, including those in which foreign capital was invested (except the Sovrompetrol Company) were nationalised, as well as all metallurigical factories employing more than 100 workers, textile factories using more than 100 horse power, timber plants using more than 20 horse power, all the shipping companies (except the Sovrom Shipping Company) and railroads, radio and telephone companies, and all the banks (except the Sovrombank).

Bulgaria

The Bulgarian State owned only 6 per cent of the total industry of the country until December 23rd, 1947, when, at one stroke, practically all industry was nationalised. 93 per cent of industry was taken over by the state (2 per cent owned by cooperatives and 5 per cent was in private hands), 100 per cent of the banks and insurance companies and 100 per cent of foreign trade. (For a Lasting Peace, For a People’s Democracy!, the Cominform organ, 15th December 1948). Cyril Lazarov in Rabotnichesko Delo of October 31st, 1948, estimates the state share of wholesale trade at 64 per cent and of retail trade at 22.3 per cent.

Austria and Finland, although they are outside the region under review, throw valuable light on the motives determining the attitude of the Communist Parties to nationalisation.

In Austria Russia is the main impediment to nationalisation, while the Austrian bourgeoisie and the Western Powers appear as its enthusiastic supporters.

The Austrian parliament hoped, by a large-scale nationalisation of industry, to stop the dismantling of factories and the taking over of industries by Russia. In July 1946, therefore, a bill was passed, which was based on the election programme of the three parties of the Coalition Government (including the Communist Party) and provided for the nationalisation of 71 major enterprises. The Soviet High Command protested against the law on the grounds that it would affect Russian reparation rights, and the Soviet vote prevented the law from coming into effect. Thereupon the Communist Party changed its policy to opposition to nationalisation.

In Finland, the Popular Democratic Party (Communist Party) was in a better tactical position, as the Russian Control commission informed the Finnish Government at an early stage that “nationalisation is contrary to Soviet interests”, and the Popular Democratic Party was therefore warned in time to oppose nationalisation.

The difference between the nationalisation policies in the various countries shows how this policy has in every case been determined by the interests of the rulers of Russia. It is clear, therefore, that for Russia nationalisation is only a device for the transfer of industry into the hands of the state, which means the appropriation of the industry by the owners of that state – the Russian ruling class.

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Scarcity of capital

Chapter Index

Footnotes

1. Another source gives the percentage of state ownership of the metal industry, as a whole, as 50 per cent (F. Zweig, op. cit., p.109).

2. Zweig gives the following figure for the state ownership of forests: three-eighths (Ibid.).

3. According to Zweig the larger part of the chemical industry was state owned (Ibid.).

4. Probably the ground for Clarion’s estimate was the declaration of the Polish Minister of Industry, Hilary Minc, on January 2nd, 1946, that after the nationalisation bill, only 40 per cent of all industrial workers would be employed by the state, while 60 per cent would continue to work for private employers.

5. According to the Comintern weekly, International Press Correspondence, of 26th November 1927, the percentage of private industry in the total industrial production of Russia in 1925/6 was 18.7 per cent. The proportion of wholesale trade in private hands was 9.4 per cent of the turnover and of retail trade 38.8 per cent (In 1927/8 the figures were respectively 1.5 and 27.0).

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Last updated on 16.8.2004