The Rise of Industrial Middle Europe

AN industrial revolution is taking shape in Europe behind the Iron Curtain. The western boundary of peasant Europe is retreating eastward beyond the Vistula, the Carpathians and the Danube, and when a few more years have passed the majority of the population in Poland, Hungary, Slovakia and Rumanian Transylvania will no longer live by agricultural occupations. This half-enforced and half-spontaneous industrialization of the mid-European area is a major event in European history. The Communist system may endure or perish, but what has already been done can hardly be undone: Middle Europe will not return to its pastoral era.

The plan of this transformation, directed from Moscow, is a comparatively recent development of Russian policy. When, with the tacit consent of the West, the Russians occupied the present European satellite area, they had no economic program for the nations they were to control. They were not sure that the West would allow them to regard Europe beyond the Elbe as a prolongation of the Soviet Union proper, and since their hold on the captive nations was uncertain, they did not wish the region to be strong industrially. For a time it seemed that the Soviets intended to turn the satellite area back to the primitive ruralism of 100 years ago. In Eastern Germany, Hungary and Rumania the Red Army dismantled and sent to Russia a large part of the existing industrial plant; and much of what remained was also declared war booty and administered by the so-called mixed companies. In the part of Germany which is now Polish, little that could be moved was overlooked; according to a story that went the rounds in Warsaw, a Russian general, when transferring an area in western Pomerania to the Warsaw administration, remarked: "You Poles lost this province in the twelfth century; we return it to you exactly as it was then." Most of the present satellite area was stripped of machinery, installations, transportation and raw materials. The main exception was the Czech part of Czechoslovakia, which for political reasons escaped Soviet plunder.

A year or so after the end of hostilities the Soviets began to feel more secure in Middle Europe. The Western Powers had demobilized and there was no likelihood that they would intervene. The satellite governments, not yet quite Communist, insisted that their war-ravaged countries be rebuilt. A new Russian policy was needed, and a precedent was found for it in the New Economic Policy of the years shortly after the revolution in Russia, when the destruction of the civil war was made good by a system combining state ownership of industry and some freedom for private initiative in trade and lesser production. The N.E.P. lasted for some six years, when it was replaced by the Five Year Plan of 1928. In the captive countries the comparable policy lasted until 1948, when the satellite area was considered ripe for long-term plans. Under the N.E.P. policy Czechoslovakia regained almost her normal production, and economic conditions in Poland and Hungary were much improved. The UNRRA aid to Czechoslovakia and Poland--and to Jugoslavia as well--was, of course, a powerful stimulant.

During this period, short-term national rehabilitation plans were instituted in all satellite countries. They were as a rule prepared by non-Communist planners who were permitted to work under Communist supervision, but since all large and medium industrial plants were nationalized the plans could not, perforce, differ much from those recommended by Moscow. While rehabilitation was being carried on, the political situation changed greatly. After Moscow forbade the satellite governments to participate in the Marshall Plan the satellite countries were tightly linked with the Soviet Union and the façade of Communist "coöperation" with the leftist democratic groups was pulled down.

The American ban on strategic materials to Russia and her satellites, and the unexpected refusal of the World Bank to grant loans to Poland and Czechoslovakia made the implementation of the rehabilitation plans impossible, for they depended to a large extent upon international credits and American machinery. The Communists who replaced the original planners made fundamental changes. They bought what machinery could be obtained outside of the United States and put relentless pressure on local industries to deliver more capital goods, at the expense of consumer goods and the general standard of life. Details varied from one captive country to another, but the general picture was the same in all of them. In due course it was declared that the objectives of the plans had been fulfilled ahead of schedule, save for a few items such as pig iron. The quota for steel was exceeded.

In 1949 a series of long-term plans was begun, coordinated with the fifth Five Year Plan of the Soviet Union. The current plan for Bulgaria is scheduled to end in 1953 and the plans for Eastern Germany, Poland and Rumania in 1955, but they will almost certainly be speeded up by a year or more. The Czechoslovak and Hungarian plans are already 18 months ahead of schedule and are to be fulfilled by the middle of 1952 and 1953 respectively. All these plans aim at the development of heavy industries; the ultimate goal is a totally industrialized, urbanized and mechanized Communist society. They bear the clear imprint of the policy which the Soviet Union has followed since 1928. They are justified by the same theoretical arguments, enforced by the same police state methods and serve the same strategic ends. The Soviet theory is that the key to the victory of the Socialist system is heavy industry. The "people's democracies" must therefore build heavy industry, concentrating on those branches which are not yet sufficiently developed in the Soviet Union; in other words, on fuel and power, steel and basic chemicals, heavy engineering and precision tools.

The effort is directed by the Council for Mutual Economic Assistance, known as Comecon, created in January 1949 by the Soviet Union and the six satellite governments, including Albania but not Jugoslavia. Eastern Germany adhered to the Council in September 1950. The Comecon performs the functions of a central planning office, a clearing-house and a central agency of control for the entire European satellite area. It is presumably run by A. I. Mikoyan, Soviet Minister of Foreign Trade. It publishes no reports and works in silence; but an article by Boleslaw Bierut, the Communist President of Poland, in Bolshevik, October 1950, left no doubt that Soviet specialists had the last word in the preparation of the current Six Year Plan in Poland. Unquestionably Soviet experts are in control everywhere else in captive Europe. The plans have been formally voted by the local quasi-parliaments and are now national statutes. They may be, and are, revised upward on Moscow's initiative.

II

The satellite area has 90,000,000 inhabitants, with an annual population increase of more than 1,000,000. The region is not identical with prewar Central Europe, generally understood to be the area located east of Germany and Italy, and west of Russia. In 1940-1945 it lost its essentially rural provinces--the Baltic States, eastern Poland, eastern Rumania and Carpathian Ukraine--to the Soviet Union. The self-exclusion of Jugoslavia and the acquisition of highly industrialized Eastern Germany gave the area a more balanced semi-agricultural and semi-industrial character. Even so, it was an artificial economic unit embracing areas ranging from industrial to purely rural and primitive territories. It was characterized by under-investment, and was potentially capable of producing much more than it did before World War II.

Since 1948 the area has been molded into a well-knit Russian dependency, and its industrial potential is much more substantial than is generally assumed in the West. The 90,000,000 satellite population produces as many basic industrial goods per capita as the 200,000,000 or more inhabitants of Soviet Russia. Roughly speaking, the captive European countries produce one-half as much hard fuel and electric power, about one-third as much steel, and more than one-fifth as much oil as Russia. If the satellite long-range plans are realized, their share of the production of the Soviet empire will become even larger.

Within four years, the output of hard fuels in satellite Europe is to be increased by some 40 percent; that of steel, electric power, basic chemicals and shipbuilding doubled; that of liquid fuels more than doubled; that of fertilizers and many types of machinery tripled. The alleged rate of industrial growth in the captive countries during 1950 was as follows: Czechoslovakia 16 percent, Bulgaria 22 percent, Poland 31 percent, Hungary 34 percent, and Rumania 39 percent. The corresponding official figure for the Soviet Union is 23 percent. In 1950, the per capita industrial production of Poland and Hungary is said to have exceeded that of Italy, and Czechoslovakia's that of France. The current long-range plans aim to raise the Rumanian per capita output to the present per capita production of Italy, that of Hungary and Poland to the present output of France, and that of Czechoslovakia and Eastern Germany to the prewar per capita industrial output of Western Germany.

Poland alone is scheduled to produce 100,000,000 tons of coal, not an impossible figure since in 1943 the Germans squeezed that much coal from Silesia. The satellite area as a whole is to produce 133,000,000 tons of hard coal. About 290,000,000 tons of lignite are supposed to be produced in 1954, mainly in Eastern Germany. The caloric value of all this fuel would be equivalent to some 212,000,000 tons of coal--a figure comparable to the present output of the United Kingdom. The satellite figures for oil and natural gas are less imposing, but, even so, an output of some 13,000,000 metric tons of oil is projected, including production from the fields in Albania and the Soviet zone of Austria. The output of natural gas is to be several times higher than before the war. Moreover, some of the 17 synthetic oil plants which the Nazis erected in Germany, Poland and Czechoslovakia are in operation and others are being rebuilt; these plants may supply more than 1,400,000 tons of fuel. Electric plants are being feverishly expanded; most of those which are new are supposed to utilize low-quality coal. Many hydroelectrical plants are also being constructed. The total electric power supposed to be produced in 1954-1955 in the entire area may be estimated at 80 billion kwh--more than the war output of Germany.

The heart of the industrial program is its production of steel. In its best year before the Soviet occupation the satellite area produced some 7,000,000 tons of crude steel, much of it for export. After the reconstruction of the plants dismantled by the Russians, the 1950 steel output exceeded 8,000,000 tons--about one-third of the steel production of the Soviet Union during the same year. The goal for 1954-1955 is about 16,500,000 tons, a figure which the British steel industry reached only in 1950 and which is comparable to the present output of the Bethlehem Steel Corporation. With a production half this size, Japan built her immense fleet and embarked upon the conquest of Asia and Oceania, and Germany used less than 16,000,000 tons of steel in direct and indirect preparation for World War II. It should be borne in mind that the satellite countries are not constructing many railroads and highways, are building few houses and are turning out an insignificant number of vehicles. There is no question at all of making the innumerable domestic appliances containing steel which the United States produces. Nearly all steel produced in the satellite area will be used in building factories, making machines and perhaps in making weapons of war, or else the steel will go to Russia and be used there for the same purposes. Sixteen million tons of steel in America, and a similar amount in captive Europe, connote two different things.

Almost all prewar steel plants in the Iron Curtain countries have now been rebuilt, and many of them are being enlarged. Moreover, work is now proceeding on six huge new plants with a total output of some 8,000,000 tons of steel. These plants are being erected at Fürstenberg on the Oder, in Brandenburg; near Ostrava in Czech Silesia (a mill not to be confused with the great prewar Vitkovice plant nearby); north of Kosice in Slovakia; at Dunapentele in Hungary; at Czestochowa and at Nowa Huta near Cracow in Poland. This last plant is expected to have an annual capacity only a little less than that of the Fairless plant now being built at Morrisville, Pennsylvania, which by United States standards is considered huge. A Socialist city of 100,000 inhabitants is being built around the Nowa Huta plant in Poland, and there will be large new cities elsewhere. A number of lesser works are also being constructed, mainly for the production of special steels. All these projects will use Ukrainian iron ore and most of them will use Polish coke; an enormous effort is being made to discover a practicable method for converting lignite into coke. The plants are being built to Russian specifications and under Russian supervision. The construction of another series of huge steelworks is planned in Saxony and Poland after 1955. It is hoped that the total steel-making capacity of the satellite area will ultimately exceed that of the Ruhr.

The steel giants will have their counterparts in the plants producing power, machinery and chemicals. Some of these, too, would seem large even in America. A power plant the Czechs intend to erect on the Danube will have a capacity almost equal to the one at the famous Dnieper Dam. The new cement plants in Poland, either completed or under construction, are described as among the largest in Europe. Much emphasis is laid upon the production of substitutes: artificial yarn, synthetic oil and rubber, and plastics. But the number of trucks and passenger cars to be built annually by 1954-1955 will not exceed 125,000 units, and there will be only 52,000 tractors--an output far below the Western European figure.

The construction of the Danube-Black Sea canal--a prewar Rumanian project--is being carried on rapidly, mainly by the use of political prisoners, but the Oder-Danube canal and the Dnieper-Vistula-Oder canal system are making rather slow headway. Few new railroads will be built, but the East-West trunk lines north and south of the Carpathians, linking the Ukraine with Germany, will be modernized and partly electrified. A map of the principal projects under construction would show that most of them were concentrated in a broad belt stretching from the Black Sea to Saxony and Thuringia.

All satellites are to produce almost every kind of industrial goods, but each will have to stress certain types of production. Thus Czechoslovakia is intended to become the principal steelmaker, and to supply heavy machinery for the entire area. Czechoslovakia will also manufacture precision tools, though Eastern Germany's long tradition of specialization in electrical, optical and electronic equipment gives that region first place in this field. About 60 percent of prewar German production of precision tools was concentrated in what is now the Soviet zone; these plants are being rapidly restored. Eastern Germany will also be called upon for making heavy machinery, shipbuilding and the production of synthetic oil and rubber. Hungary is slated to produce aluminum, rolling stock and much machinery. Poland, which provides coal and coke for the entire area, will become the principal producer of chemicals, as well as a large manufacturer of medium machinery. Rumania is to concentrate on the output of oil and natural gas, and to develop new industries, based on electric power, serving mechanized agriculture. Bulgaria's industrial rôle is inconsequential for the time being.

The Russians have not overlooked strategic factors. The Soviet Empire has little heavy war industry west of the Leningrad-Moscow-Dnepropetrovsk line. The principal industrial areas of the Soviet Union were deliberately located further east, in the eastern Ukraine, the Urals and Asia, in line with traditional Russian concepts of defensive war. But now Russia's reach has extended several hundred miles to the west, and the Soviet divisions on the Elbe and Danube are stationed far from their Russian arsenals. Obviously, Soviet theory now finds room for concepts of offensive war. For such a war, the Soviet command needs an arsenal nearer the presumed theater of military operations. Satellite Europe is thus being developed as a counterpart of the Donets, Ural and Kuznetsk industrial areas. This western arsenal would not form an important source of supply of tanks, planes and other new weapons of war, for Russia reserves the manufacture of these to herself, not least for reasons of secrecy. But the satellite plants will probably produce parts of modern weapons for assembly in Russia, will make artillery and munitions, and, above all, will serve as repair shops for the Red Army; from the Russian view it would be far preferable to recondition a damaged tank in Saxony or Bohemia than to take it for repairs to Moscow, 1,500 miles away along vulnerable railroads. To perform this function adequately, the satellite area needs a broadly based but likewise specialized industrial plant.

III

Will these plans be fulfilled? Can satellite industry be developed as planned without foreign capital (or, for that matter, any capital) and without plant equipment from the West? Can the satellite countries develop enough technicians and skilled workmen to construct and operate so large and diversified an industrial plant? Can their manpower stand the ever-increasing pressure, the long hours, the inadequate wages, the lack of freedom and incentives? We should not assume that the answers to these questions must be in the negative. Some people made the mistake of supposing that Hitler could never make the German people work and produce for him. A generation ago Russia was a backward rural country and today she is the second industrial power of the world. Given time, what could be done in Russia could undoubtedly be done in the captive countries, whose manpower is perhaps more intelligent, and where, as in Eastern Germany, there is already a great deal of industrial experience. The crucial question is whether it can be done at such fierce speed.

Although satellite Europe cannot now buy capital goods from the United States, nor expect credit from this source, Switzerland, Sweden and other European countries make deliveries behind the Iron Curtain and do it partly on credit. Western European industry and railroads depend on Polish coal, and the British need mid-European foodstuffs; these imports must be paid for in industrial goods and raw materials. The resources of the satellite bloc are expanding constantly, and it is more self-sufficient than the West is inclined to believe.

Capital comes from "internal accumulation," a euphemism for a ruthless enforcement of a low standard of living, particularly in the villages, and a no less heartless exploitation of labor. In the West, men are regarded as ends in themselves, but behind the Iron Curtain a human being is merely an economic unit, one of several components of economic activity. A Communist state has many methods of squeezing out of the people a substantial part of the national income and reinvesting it in industry: full control of consumption, inflation and devaluation of currency, compulsory loans, "voluntary" contributions in working time and money, arbitrary taxation. One way or another, capital will no doubt be raised.

As to the effect of working conditions on the productivity of labor, we must remember that the Russians have had a good deal of experience with forced labor. The Russian imperial capital of St. Petersburg was built by slaves, as was the White Sea-Volga canal under the Soviets. The majority of the satellite workmen are not slaves, but they are not free men, and those in the labor camps are slaves in the full sense of the word. Semi-free labor under severe control can apparently compete with the free labor of the West--in the short run at least--though the per capita production is less. It should also be borne in mind that some of the workmen behind the Curtain have been stimulated to a sort of frenzy for their task. In the West, industrial production and the well-being of the people are considered two sides of the same coin. But in Russian-controlled Eastern Europe, in spite of lofty Communist theory, they have little in common: life is cheap, freedom no longer known, and the pursuit of personal happiness deferred to a misty future. The average workman or technician lives in constant fear of reprisals from the omnipotent state, and in the long run has no choice but to deliver the goods. There can be important differences in the qualities of specialized goods, but there is no difference between cement or fertilizer made by free or non-free labor.

Industrial production in satellite Europe nevertheless does suffer from many diseases which are more or less chronic under Communism: the impossibility of planning, at once and in detail, on a national and supra-national scale; monstrous red tape and occasional corruption; and, indeed, confusion, maladjustments and bottlenecks of every kind. Now one item becomes scarce, now another, and entire lines of production suffer, not to speak of the hardships which these shortages have on the ordinary citizen. Since the middle of 1950 there has not been enough coal, oil, electric power or iron scrap for the mushrooming factories; the people have been shivering from cold in the coal basin of Silesia, and there is an extreme shortage of gasoline in oil-producing Rumania. Last fall in a village behind the Iron Curtain there was a waiting list for a needle, or rather the needle--the only one available: it was being rented against deposit 24 hours a day, and that in a country producing plenty of special steels. And yet, despite incompetence, waste and irresponsibility, there is sufficient evidence that the satellite industrial plant is growing fast.

Though directed by Russia for her own benefit, the industrial revolution of Middle Europe is also of profit to that area. This statement needs qualification, but it embodies a truth which the West should take pains to understand. With the exception of the areas which were German prior to 1918, and of the Czech part of Czechoslovakia, the mid-European region had missed the industrial progress of the nineteenth century. It remained essentially rural. As a result of the destruction during World War II, and the curtailment of emigration to America, the national states which inherited that backwardness were unable to cope with the problem of rural poverty. Foreign capital was unwilling to invest in so turbulent a region, and local capital was weak and too often sought safety abroad. Though some industrial progress was made during the inter-war period and cities were growing, there was not enough employment for the ever-increasing number of peasants. The higher the birth rate in the various countries, the more insoluble the problem; the agrarian reforms of the 'twenties did little more than ameliorate it temporarily. The situation was not so critical in Czechoslovakia, Hungary, Latvia and Estonia because of their low birth rates; elsewhere, the outlook was bleak.

Only intensive industrialization could improve the situation, and most mid-European governments had prepared plans for industrial development. Some were put in motion in the late 'thirties, and were enthusiastically received by the rural populations. The war interrupted that process, but it solved some of the difficulties. In Czechoslovakia, Hungary and Rumania many new industries grew under German occupation, and in Poland and Jugoslavia the pressure was reduced by a large decrease in population through terror and war casualties. At the same time, the destruction during World War II and the plundering by the Russians set the clock back. The drastic agrarian reform imposed by the Red Army solved nothing, economically speaking, and merely reduced agricultural production; the Russian objective in the introduction of collective farms was the destruction of the independent peasantry. But, paradoxically, the enforced industrialization of the mid-European area may, under certain conditions, lead to a solution of the problem of rural poverty.

The villages are being drained of their surplus population. It is a harsh surgical operation. No less than 6,000,000 men and women are expected to be recruited in the captive countries during the next five years, half of them for factory work, the other half for the various services of the Communist state. Most of these will come from the countryside, and many will leave the villages voluntarily, since they cannot expect much improvement by staying on their small farms. They feel socially promoted when they join the supposedly privileged urban working class. That process of urbanization is already on its way; in many rural districts the population is actually decreasing, and the December 1950 census of Poland showed that the proportion of population living by agricultural occupations has fallen from 61 percent in 1931 to 45 percent. The same process is going on everywhere behind the Iron Curtain.

There is, of course, such a thing as over-industrialization. The Czech part of Czechoslovakia, and southeastern Germany, may suffer from too much concentration of population in cities, if the present enforced tempo of factory building is continued. But the industrial development of the rest of satellite Europe is a step in the right direction, making possible a better utilization of manpower and of economic reserves. This is the one hopeful fact which stands out against the somber background of captive Europe. Of course the workers resent being exploited and terrorized by the local Communist bosses; and the Russian "advisers" are even more hated. The standard of life is far below that of the West. Neither individuals nor nations are free. But the urban working class, now or soon the majority of the population, is proud of the new mines and factories and cities.

It would be erroneous, and perhaps even dangerous, for the West to underrate the powerful appeal of industrial creation for the new generation of intellectuals in the captive part of Europe. Many of these young people sincerely believe that, at the cost of immense efforts and privations, they are laying foundations for the future prosperity of their countries. They hope that one day the Iron Curtain will be lifted, that the Russians will go (or be sent) where they belong, and that they themselves will then deal with the local Communist rulers. When that day of liberation comes, the belated industrial revolution of backward peasant Europe will have been accomplished: the mines, plants and factories will remain as the heritage of strong and free nations.

IV

Thus satellite Europe, now a dependency of Soviet Russia, has become a single large producing and consuming region. Within this area, private industrial interests have disappeared, and customs duties have lost their meaning. Trade relations with the outside world are withering away, while new trade links have been forged between the captive countries themselves and between the captive countries and Russia. The mutual economic interdependence of the satellite nations grows with the expansion of their industries. In a broader sense, the captive area is undergoing social engineering which tends to level down differences between its national units. Abandonment of the principle of economic planning could henceforth lead only to chaos. Should the Iron Curtain be raised, no power on earth could keep the captive nations within the Russian orbit--no matter what the immediate economic cost of breaking away. Eastern Germany would likewise at once fall away and reunite with the bulk of Germany. But Russia's victims would have been integrated economically. They are now in the same boat; and they will always be. After liberation, economic necessity will keep them integrated within a united Europe. They would have much to lose and nothing to gain by reverting to their prewar national economic sovereignties.

The industrial revolution in Middle Europe is more painful than any the world has ever seen, save the one in Communist Russia herself. The transformation might have taken place in due course without the Russian intervention, and it would then have been more gradual and far less brutal. But as things happened, the doctrinaire and imperialist interests of Soviet Russia coincided, in the industrial domain, with the interest of most of the captive countries in ridding themselves of their primitive economies and overpopulated countrysides. That much is gain; all else is loss. In every respect save this, the interests of Communist Russia are opposed to the interests and secular traditions of the captive part of Europe--as they are opposed to all humane considerations. But Western thought must rid itself of the notion that Middle Europe is still primarily an agricultural area. Any sound policy toward captive Europe requires the recognition of new facts. The industrial revolution of that area is a reality.