Soft Goods vs. Hard Goods

...The decision to go into reverse gear and give some immediate relief to the peoples must have been taken by Stalin's successors as early as April 1953, within a few weeks of his death...

...In the meantime the demagogic wage and price concessions made by the governments to the workers and peasants could only produce inflationary pressures and thus aggravate the existing shortages and confusion...

...To be continued next week...

...The Communist parties, both in Russia and the satellite?, were largely left without ideological guidance during this period, and felt deprived of initiative...

...He soon became confidential secretary to its chairman, Bruno Leuschner, and regularly took part in conferences of the Council for Mutual Economic Aid (the Soviet bloc counterpart to the Organization for European Economic Cooperation...

...Fritz Schenk, born in 1930 to a German anti-Nazi working- class home, joined the East German Planning Commission in 1952, the year before Stalin's death...

...Concerned less with political ideologies than with the effort to make the Communist machine work more effectively for the benefit of the people, it was inevitable that in 1956-57 he should become involved in the wide-spread discussions concerning the basic faults of the centralist planning methods of the regime...

...yet it had all the weaknesses of an improvisation, imposed under pressure of events and without either economic or ideological preparation...

...It was Nikita Khrushchev who gradually came forward, from about the middle of 1954, as the spokesman of that alliance and the initiator of an alternative policy...

...Finally, he formed an alliance with the Soviet planners to liquidate the "New Look" in economic policy...

...Yet at the same time the East German revolt confirmed the estimate of the Russian leaders that a danger point had been reached and that a retreat from Stalin's targets and some relief for the suffering peoples were necessary...

...Naturally, the new policy was widely welcomed by the suffering peoples...

...East Germany, formerly ruthlessly pillaged on reparations account, was granted emergency supplies...

...But while the public argument was conducted largely in terms of the dogmatic reassertion of the "primacy of heavy industry," the more serious internal argument was that a broadening of the agricultural and raw material base must precede any rise in the standard of living that was to be more than temporary...

...They failed to take into account that the old machinery was by now worn out, the hidden reserves exhausted, that reparations had ended and the peoples were looking for the fruits of their efforts...

...More important, by August the "New Look" policy was proclaimed by Georgi Malenkov for the Soviet Union itself, and the Soviet Government was committed to major concessions to its peasants and an immediate increase in consumer goods supplies...

...the use of dismantled "enemy" plants on reparations account and the labor of war prisoners had helped in Russia itself...

...Here we present the first of three articles which provide first-hand information on the motives for the various shifts in Soviet planning...

...When that happened, Malenkov was still head of the Soviet Government, and all current economic policies had still to be cleared with him...

...The impression, registered by many Western observers at the time, that Malenkov was relying on the State administration rather than on the Party in in augurating his "New Look" is perfectly correct...

...On the contrary, the planners' practical opposition to what they regarded as the political demagogy of the "New Look" drove them increasingly into alliance with the Party bureaucrats' doctrinaire opposition...

...but to cut them down without providing for alternative sources of future supply simply meant to organize the bottlenecks of tomorrow...

...In the East German case, too, all the correspondence with the Soviet authorities on the implementation of new measures was carried out from Government to Government and not through Party channels...

...Early in June 1953, the admission of failure was made and the retreat proclaimed both in East Germany and in Hungary...

...Naturally, the Party officials at all levels, from the leadership right down to the secretaries in each factory, tended to obstruct the new policy, which offended their inbred prejudices...

...The excessive plans were due not only to the political zeal of Stalin's subordinates, but, in the beginning at least, to genuine miscalculations...

...Thev were not executives entitled to give orders, but "backroom boys" from Maxim Saburov's Gosplan, charged with making an exhaustive study of the production capacities of each country in preparation for the second postwar Five Year Plan—the first plan that was to be drawn up on the basis of "integration...

...The Soviet Military Administration, which at that time still controlled the East Germany "government," transmitted the orders, and the head of its economic department, Khomyakov, helped in working out the necessary measures...

...In these circumstances, the planners and economic administrators throughout the Russian Empire saw the Slansky trial of November 1952, which cost the lives of a number of their Czech colleagues, and the announcement about the Moscow "doctors' plot" the following January as symptoms of the search for scapegoats...

...Determined to base the unity of the Soviet bloc to a larger extent than hitherto on Party ties, he began to press for a gradual replacement of the Soviet ambassadors to the satellite states by men who had received their training not in the Foreign Ministry, but in the Party machine...

...War destruction of industrial plants had proved less thorough than had been feared...

...Arrested under suspicion of having disclosed "state secrets," Schenk was released for lack of proof but then subjected to a Party investigation...

...Communist party leaders and planners therefore concluded that the new plans should be more ambitious...

...For the plans which were then in force throughout the bloc, and had been since 1950, were so much in excess of available resources that they ran into bottlenecks on all sides, and in the general deadlock of the economy the standard of living of the subject peoples was being depressed to a dangerous degree...

...In the view of the planning experts, it was all right to reduce the unproductive expenditure for the swollen armies and investments in the armament industries proper, and to slow down or even reverse the forced collectivization of agriculture and the destruction of small-scale private industry and trade in the satellite countries...

...Few of them could have helped wondering at the time whether they would be the next victims—and some of the top officials in charge of distribution in East Germany were actually arrested...

...Walter Ulbricht, the East German Party leader, had powerfully argued that an open abandonment of the projects and policies proclaimed only a year before as laying the foundations of socialism would dangerously weaken the authority of the regime...

...The picture drawn in Imre Nagy's account of this period, of a government trying to implement a new policy and of the Party machine sabotaging it, is just as true of East Germany and Russia itself as of Hungary...

...It was agreed directly between the Party secretaries of the satellite states and Khrushchev—a new departure in political form as well as economic content...

...In short, the planners argued that it was impossible to increase the supply of consumer goods substantially before there was a much broader basis in agriculture and the output of basic raw materials...

...bul he had also come to the conclusion that to make the Party resume an active and leading role in the new conditions, a more open and explicit break with certain Stalinist traditions would have to be carried out...

...Yet the experts were appalled at orders to stop or reduce investment in the production of the very raw materials whose supply formed the principal bottleneck throughout the bloc, and at the political leaders' expectation that a lasting increase in consumption could be brought about by withdrawing scarce labor, materials and foreign exchange from half-finished investment projects and switching them to the consumer goods industries...

...On one side, while some short-term relief could be given to the peoples by throwing in foreign exchange reserves and emergency stocks, these reserves were severely limited even in the Soviet Union itself, and any more lasting improvement was bound to take time...

...As First Secretary of the Soviet Communist party, he had worked steadily for the iestoration of its primacy...

...When the East German revolt of June 17 followed within a week, Ulbricht naturally felt that his warnings had been justified, and his stature within the international Communist leadership was ultimately increased rather than diminished by these events...

...In many cases, moreover, the sudden interruption of work on current projects could result only in costly damage to unfinished buildings ("investment ruins" as they came to be called) or defaulting on valuable export contracts...

...By May, at any rate, the East German Planning Commission had secret instructions to prepare the "New Look"—to stop some of the investment projects which lacked a local raw material basis, and to increase quickly the output of consumer goods...

...and the eagerness of the peoples to be done with destruction and misery had done the rest...

...His story, as told to our frequent contributor Richard Lowentlial, himself an authority on Soviet affairs, originally appeared in the London Observer...

...In 1952 the decline in the standard of living was obvious throughout the Soviet orbit, yet in order to reduce purchasing power in accordance with the shortage of goods, labor norms were increased, while the peasants' growing reluctance to deliver their produce was to be broken by a speed-up in collectivization...

...old machinery had been found still serviceable and hidden reserves had turned up with the end of hostilities...

...The early postwar reconstruction plans for Russia and satellite Europe, which ended in 1949, had been fulfilled beyond expectation...

...HARD GOODS By Fritz Schenk and Richard Lowenthal The twists and turns of Soviet Premier Nikita Khrushchev's numerous economic pronouncements have understandably led to much speculation and even confusion in the free world...

...As the Soviet Government under Stalin insisted that the targets for heavy industry must be fulfilled at all costs, the consumer goods industries had to take the strain...

...He finally escaped to the West...

...EVEN IF Stalin had not suffered a stroke in late February or early March 1953, a sharp turn in the economic policy of the Soviet bloc would have become unavoidable about that time...

...Lack of raw materials was taken as a pretext to starve the remaining private industrialists, craftsmen and traders out of existence...

...True, many of the steel plants under construction, like Stalinstadt in East Germany, Sztalinvaros in Hungary and the Huko works in Slovakia, were located so far from the needed coal and ore deposits that their production was bound to be wasteful in the extreme...

...But the dispatch of rhe new planning advisers was not arranged and the new idea governing their work not conveyed by the Government...

...It was as part of this new Khrushchevian initiative that internal preparations for a new co-ordination of resources within the Soviet bloc were started in the summer of 1954...

...yet no ideological effort was made to "destalinize" their brains...

...One of the top planners in East Germany expressed the feelings of his colleagues throughout the bloc in saying that "you cannot re-jig the whole economy overnight as if it were a sausage factory...

...Yet the equally widespread Western assumption that Malenkov represented the "practical economists" as against the "Party politicians" is not correct, at least not with regard to the attitude of the economic planners on this particular issue...

...On the other hand, the Party bureaucrats, reared on Stalin's doctrine that absolute priority for heavy industry and ruthless collectivization of agriculture were the hallmarks of "socialist construction," resented the new policy as a retreat in the face of the class enemy...

...In East Germany, this policy, known under the slogan of "Building Socialism," led to the mass flight of farmers, technicians and skilled workers to the West...

...At first the intention was to make the switch quietly without a general announcement...

...In Russia itself, by the winter of 1952-53 there were widespread shortages of basic necessities, and even the principal cities had stocks for only a few weeks...

...But neither the stopping of forced collectivization, nor the withdrawal of labor from half-finished investment projects or the attempt to revive the private initiative of craftsmen and retailers was possible without some kind of general explanation...

...After a preliminary correspondence, a new kind of "Soviet advisers" made their appearance in the planning commissions and fcev industries of all the satellites in August 1954...

...By 1951, shortages of coal and power, iron and steel and breakdowns of machinery were occurring everywhere, while the Western embargoes imposed as a result of the Korean War made the attempt to fill the gaps by imports costly and hazardous...