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Ygael Gluckstein

Stalin’s Satellites in Europe

Part One
The economy of the Russian satellites

Chapter III
Scarcity of capital

Problems of agricultural development

AN EXAMINATION of the economic situation of the countries of Eastern and South-Eastern Europe will make it obvious that no redistribution of the national income and wealth will by itself radically improve the condition of the people. For example, if the total agricultural land of the countries (and not, as has been the case, merely the large estates) were distributed equally among the peasants ( Black Distributions in the phrase of the Russian revolutionaries under the Tsar), the main result would be the equalisation of poverty. As long as the majority of the people are engaged in agriculture and the productivity of labour in agriculture is as low as it is today, no real improvement of their condition is possible.

The level of output of agriculture per head of the agricultural population in Eastern Europe is very low, as can be illustrated by comparing it with other regions. It is, of course, difficult to compare the agricultural productivity of different countries, which produce various products in differing proportions. Fortunately Wilbert E. Moore has undertaken an important statistical work, attempting to fulfil this task for different European countries (op. cit.). He weighs the quantities of agricultural goods produced according to a uniform set of value rations which he calls the Crop Unit (C.U.). For the years 1931-5 on the average, the results were as follows (the index calculation has been made from Moore’s absolute figures).

Although there are differences in the productivity of agriculture as between the different countries of Eastern Europe, there is a much greater inequality between Western Europe as a whole and Eastern Europe as a whole, the latter’s productivity being 4-5 times lower than the former’s.

The large extent to which this is the direct result of the greater density of the agricultural population in Eastern than Western Europe becomes clear if the number of hectares of agricultural land per person dependent on agriculture in the different countries is compared. Taking the number in Denmark as 100, the comparative figures are:

It is clear that there is no exact correlation between countries arranged according to productivity per person dependent on agriculture and according to the quantity of agricultural land per person dependent on agriculture. But that there is a certain correlation can be seen by comparing the countries of Western Europe as a group and the countries of Eastern Europe as a group. In the first group there is twice as much agricultural land per person dependent on agriculture as in the second.

The great density of the agricultural population in Eastern Europe compared with Western Europe goes some way to ,explaining the low productivity per head of the agricultural population in the former compared with the latter. There is another factor that must be mentioned if the explanation is to be complete, namely, that the agricultural output per unit of area is much smaller in Eastern Europe than in Western Europe. This is shown clearly in the following table:

If the agricultural population of Eastern Europe is to have the same quantity of agricultural products per head as in Western Europe, not only must half of them be removed, but the agricultural output must be doubled.

The low productivity in Eastern Europe is not the result of infertility of the soil. On the contrary, the soil of Eastern Europe, and especially the excellent black soil of the Danube Plain, is on the whole much richer than the naturally poor soil of Western Europe. The low productivity is due to three main causes, the scarcity of livestock, the scanty use of fertilizers and the lack of agricultural implements and machinery.

In this table the figures for the countries of Eastern Europe include a large number of oxen and buffaloes which are used mainly as draught animals. In the quality of its livestock Eastern Europe compares even more unfavourably with Western Europe than in the quantity.

On the question of agricultural implements and machinery, the PEP study states:

The value of all agricultural equipment used per hectare of arable land was estimated by a Roumanian source at Lei 1,000 (about £1) for Roumania, Lei 2,000 for Bulgaria, Lei 3,000 for Poland; as against Lei 15,000 for Germany and Lei 42,000 for Switzerland. So far as mechanical equipment is concerned, the disparity was even greater. According to a German source, taking the mechanical equipment per hectare of farm land (in terms of weight) as 100 for Germany, the figure for Bulgaria would be 4, for Yugoslavia 5, for Roumania 3. (Ibid., p.32).

A comparison of the extent to which fertilizers are used is equally unfavourable, as can be seen from the following table:

There are a number of other factors which influence the welfare of the agricultural population. The Eastern European peasants suffered from the bad organisation of the marketing of their produce. Two examples will suffice. In Zurich 63 per cent of the retail price of milk went to the milk producer (the rest was divided between wholesale trade, retail and transport), and in Copenhagen 65 per cent; even in the United States where milk is delivered over very greatdistances the farmer got 46.8 per cent. As against this in Warsaw he got only 30 per cent, and in Belgrade 37.5 per cent (Ibid. pp. 94-5). The Survey of the Royal Institute of International Affairs, World Agriculture(1932), tells of a typical Rumanian barley farm, from which barley to the value of Lei 1,006 was sold. But the middlemen’s profits and transport charges before the grain left Rumania amounted to Lei 1,202 (p.106).

The high prices of essential industrial goods further militated against the prosperity of the peasants.

The expensiveness of industrial compared with agricultural products in the period before the second world war is revealed by the following index figures of the variation of agricultural and industrial prices in Hungary (July figures):

The same phenomenon was expressed some time before World War II by a Croatian peasant speaking thus to an English investigator:

Life is getting more and more difficult. The prices we can obtain are so very low. Look, before i 914 I could get two pair of boots for a hundredweight of wheat. Today I must give two hundredweights of wheat in exchange for one pair of boots. For one kilogram of nails, I must give one kilogram of wool. When I sold a sheep before i9i4, I could buy fifty metres of cottons in exchange. Now I cannot get fifty metres of cotton- stuff even for four sheep.

Things are no better on the coast of Dalmatia either. Before 1914 they could get a suit of clothes for a hectolitre of wine. Today they must give three hectolitres of wine for a suit. Before 1914 they could get ten boxes of matches for a litre of wine, today they must give a litre of wine for every single box. (P. Lamartine Yates and D. Warriner, Food and Farming in Post-War Europe,London, 1943, p. 28).

High taxation added to the difficulties of the mass of peasants in Eastern Europe.

Last but not least, there was the burden of debts, a result of the poverty of the peasants and a very important contribution to it.

There are two main groups of countries today whose agricultural populations enjoy a relatively high standard of living – on the one hand the corn and meat producing countries with large, highly mechanized farms (USA, Canada and Australia), and on the other hand, countries like Denmark, Switzerland, Holland and Belgium which go in for intensive production of dairy products, meat and vegetables. In both cases only 20-30 per cent of the whole population is engaged in agriculture, the well-organised and highly developed agriculture being the accompaniment of an advanced industrial organization. The highly mechanized, extensive producers are dependent on a huge, world-wide market, the intensive producers are dependent on the existence of an urban population with a high standard of living which is able to pay good prices for the dairy products, meat, eggs, etc. (Thus the prosperity of Holland and Denmark depends on the prosperity of the urban population in Britain). In Eastern Europe the growth of grass and root crops is made difficult by the dry climate, and so, intensive production of meat, as in Denmark, Holland, Eire, England, etc., is impossible. But this does not preclude the production of milk and the raising of pigs. In some areas, there are excellent natural conditions for specialised crops, e.g., in Bulgaria and Serbia for tobacco and grapes. Other areas – and these form the greater part of Eastern Europe – are more suitable for growing corn, which could be done on the American model with tractors and combine harvesters, instead of with draught animals whose feeding takes up a lot of the arable land. In many places the best results could be achieved by mixed farming, combining mechanized corn growing with intensive production of milk, pigs, vegetables and fruits. But however agriculture develops in this area, experience has shown tat the decisive factor in raising the standard of living in the countryside is the accessibility of expanding urban markets. No raising of the rate of agricultural production, no improvement in the standard of living is possible without rapid industrialisation, which will enable the surplus agricultural population to be absorbed, will provide a market for agricultural products and will supply agricultural implements and machinery as well as industrial consumption goods for the peasants. In addition the peasants need cheap government’ and a cheap marketing system.

Chapter Index

Problems of Industrial Development

If Eastern Europe is to be industrialised, large amounts of capital will be needed, which can be estimated by considering the number of people to be absorbed into industry. Obviously ny such calculation can be only approximate and be put forward by way of illustration.

First there is the surplus population in agriculture. W.E. Moore calculated this by estimating what was a “reasonable” European standard of agricultural population. The result was as follows:

46.7 per cent, nearly half the agricultural population of Eastern Europe, is “surplus” population.

Out of its active population, employable in industry and services, agriculture can dispense with about 12 million people.

This calculation of W.E. Moore is based on the assumption tat if the average level of production of agricultural goods for Europe as a whole were to prevail in Eastern Europe, there would be a surplus population of 26.7 million, of whom 12 million would be employable. But if it is assumed that the level of output remains unaltered, then the resulting calculation of surplus employable population will be different. Such a calculation was made by PEP which estimates that in 1937 the agricultural overpopulation in the Eastern European countries was 14-15 million (i.e., about half W.E. Moore’s figure) of which about 6 million were employable in industry and services.

The war led to a considerable change as regards the “surplus” agricultural population in Poland. The population of Poland dropped from an estimated 35,090,000 in 1938 to an estimated 23,800,000 in 1948, as a result of the killing of 6 million inhabitants by the Nazis and changes in the eastern frontiers which transferred 6 million Ukrainians and White Russians to the USSR. About 32,100,000 people lived within the present frontiers before the war. It seems, therefore, that Poland has “solved” the problem and may be excluded from the list of countries with an agricultural overpopulation. Even so the overpopulation in the countries of Eastern Europe as a whole remains a vast problem: according to W.E. Moore there is a “surplus” agricultural population of 17 million, according to PEP, 9 million.

Another factor is the natural increase of population. Eastern Europe is undergoing the so-called “vital revolution” – more precisely its first half. During this stage (though which Western Europe passed during the nineteenth century) the death rate declines steeply (as a result of better hygienic conditions, etc.), while the birth rate does not fall. The natural increase of population is therefore very high. In the second half of the “vital revolution” the birth rate falls quickly (the stage which Western Europe has reached). Today the annual increase of population is three times higher in the East than in the West of Europe. Only after the majority of the population has been urbanised (with the resulting increase in the use of birth control) will Eastern Europe get over the first half of the vital revolution. Meanwhile, according to the PEP study, there is in Eastern Europe an annual increase of 610 thousand people of working age, employable in industry and services (free professions, etc.). They will have to be absorbed in the course of industrial development, as well as the present 6 or so million surplus agricultural population. The dimensions of the problem will be appreciated when it is realised that the estimated annual intake into mining and manufacturing industry in the years 1935-7 in these countries was only 270 thousand. If there were an annual intake of 700 thousand into mining and manufacturing industry and services, it would take two generations merely to absorb the surplus agricultural population, without lowering the density of the agricultural population to the level prevailing in Western Europe.

Even this modest industrialisation would require vast capital expenditure. K. Mandelbaum in his book The Industrialisation of Backward Areas,Oxford 1945, estimated the capital requirement per newly employed worker in modern large scale industry in Eastern Europe at £450. In calculating the total cost of the industrialisation of East Europe, account must also be taken of investments needed in public utilities connected with industrialisation (houses, roads, electricity, gas and water supply, etc.), which would, at least, double the amount. On this basis the employment of 700 thousand additional people per year would require about £600-650 million (in pre-war prices) or 2,400-2,600 million dollars. This is a huge sum in relation to the national income of the East European countries, which Colin Clark estimates at:

The 2,400-2,600 million dollars which would have to be invested in order to provide employment for 700,000 additional people per annum in industry and services makes up 22-24 per cent of the real national income. [2] Before the war, the average yearly investments in Eastern Europe equalled only 4 per cent of the (real) national income.

Obviously industrialisation on this scale without help from abroad would require an investment of far greater sums than the inhabitants of the region would be prepared to save voluntarily. The process of capital accumulation would appear to the majority of the people as a coercive driving force alien to their interests. Forced industrialisation on a large enough scale to absorb in two generations the yearly natural increase of the employable population and the agricultural overpopulation can be carried out only by forcing people to save. It will have a fundamental influence on all economic relations between people-between the workers and peasants on the one hand and the state on the other, between the rulers and the ruled- as well as on the economic and therefore political relations between different states, and between the satellites and the mother’ country. But before considering all these problems, it is necessary to examine the influence of Russia on the accumulation of capital in Eastern Europe.

Next Chapter
Russia and the economy of the satellite states

Chapter Index

Footnotes

1. “International Unit” is defined as the amount of goods and services that could be purchased for x dollar in the U.S. over the average of the decade 1925-34. (Colin Clark, The Conditions of Economic Progress,London 1940, p 40).

2. K. Mandelbaum, who dealt specifically and in great detail with the industrialisation of Bulgaria, Hungary, Poland, Rumania, Yugoslavia and Greece, calculated that the absorption of 700,000 annually into industry and services would require “rather more than 15 per cent of the combined national income”. (The substitution of Czechoslovakia for Greece would not fundamentally alter the calculation as the national income per head would be only 9 per cent higher on the basis of Colin Clark’s figures.)

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Last updated on 16.6.2004