SURVEY OF ECONOMIC DEVELOPMENTS IN THE EUROPEAN SATELLITES UNDER THE FIRST LONG-TERM PLANS

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• Document Creation Date: December 23, 2016
• Document Release Date: June 19, 2013
• Sequence Number: 2
• Publication Date: September 30, 1957
• Content Type: REPORT

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SECRET
N? 96
ECONOMIC INTELLIGENCE REPORT
SURVEY OF ECONOMIC DEVELOPMENTS
IN THE EUROPEAN SATELLITES
UNDER THE FIRST LONG-TERM PLANS
CIA/RR 106
30 September 1957
CENTRAL INTELLIGENCE AGENCY
OFFICE OF RESEARCH AND REPORTS
SECRET
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WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
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ECONOMIC INTELLIGENCE REPORT
SURVEY OF ECONOMIC DEVELOPMENTS IN THE EUROPEAN SATELLITES
UNDER Tat FIRST LONG-TERM PLANS
CIA/RR 106
(ORR Project 10.804)
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
S-E-C.-R-E-T
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FOREWORD
This report consists of surveys of major economic developments during
the first long-term plans of each of the European Satellites except Albania.
The Five Year Plans of East Germany and Rumania and the Six Year Plan of
Poland ended in 1955. The Five Year Plans of Czechoslovakia and Hungary
ended in 1953 and 1954, respectively. The First Five Year Plan of Bulgaria
for the period 1949-53 was concluded 1 year ahead of schedule, in 1952;
the Second Five Year Plan runs from 1953 through 1957. The discussion and
statistical series in these surveys generally have been extended through
1955 for Bulgaria, Czechoslovakia, and Hungary even though their first long-
term plans ended earlier.
The report thus stops short of the dramatic events which followed
de-Stalinization and the concept of "many roads to socialism," culminating
In the armed revolt of Hungary. Economic difficulties contributed to the
eruptions in Poland and Hungary, and these difficulties stem directly
from the policies adopted by the Satellites in their first long-term plans.
The purpose of this report is to present this historical background.
The survey for each Satellite contains a review of (1) economic policy
and economic plans during the period; (2) the principal achievements and
shortcomings in the performance of the economy; (3) the allocation of
labor and investment expenditures by the state in order to promote the
growth of output; and (4) developments within industry, agriculture, and
other major sectors of the economy. In addition to the surveys for the
six countries, the introductory section discusses the economic growth of
the area as a whole since 1950. In order to limit the report to a reason-
able length, it has of course been necessary to omit discussion of some
relevant topics and to treat others very briefly.
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CONTENTS
Summary
I. Introduction: Satellite Economic Growth
Page
1
Since 1950
7
A.
Problems of Data in Estimating Satellite
Economic Performance
7
B.
Trends in Gross National Product
8
C.
Changing Pattern of Output
11
II.
Bulgaria
13
A.
General Policy and Achievements
13
B.
Phases in Postwar Economic Development
15
1. 1947-48
15
2. 1949-53
16
3. 1954-55
17
C.
Survey of Major Sectors of the Economy
17
1. Industry
17
a. Trends in Production
b. Allocation of Resources to
17
Industry
18
2. Agriculture
20
a. Trends in Production
20
b. Food Availabilities
20
c. Socialization
20
3. Foreign Trade
21
4. Housing and Other Construction
23
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III.
Czechoslovakia
A. General Policy and Achievements
B. Use of Resources to Promote Economic
Development
Page
27
27
29
1.
Manpower
29
2.
Investment
30
C.
Phases in Postwar Economic Development
31
1.
Reconstruction, 1947-48
32
2.
Intensive Industrialization) 1949-53
32
3.
Consolidation) 1954-55
32
D.
Survey of Major Sectors of the Economy
33
1.
Industry
33
a. Principal Developments
33
b. Analysis of Plan Fulfillment
34
c. Allocation of Resources to Industry
34
2.
Agriculture
36
a. Trends in Production
36
b. Food Availabilities
36
c. Socialization
36
d. Investment and Manpower
37
3.
Foreign Trade
37
4.
Housing
41
5.
Other Sectors
42
IV.
East Germany
43
A.
General Policy and Achievements
43
1. Introduction
43
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2. Growth of the Economy
3. Changes in Origin and Distribution
of Output
B. Survey of Major Sectors of the Economy
Page
44
44
46
1. Industry
46
a. Trends in Production
b. Manpower, Investment, and
46
Productivity
48
2. Agriculture
50
a. Trends in Production
50
b. Socialization
51
c. Investment and Manpower
53
3. Other Sectors
53
V.
Hungary
59
A. Major Economic Policies and Problems
59
B. Achievements During the First Five Year Plan
(1950-54)
61
1. Introduction
61
2. Fulfillment of Major Production Goals
?
?
63
3. Personal Income and Consumption
64
it, Enlargement of Industrial Capacity
64
5. Labor Productivity
66
C. Use of Resources to Promote Economic
Development
66
1. Manpower
66
2. Investment
67
D. Survey of Major Sectors of the Economy
70
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1. General Economic Growth
2. Industry
Page
70
73
a. Trends in Production
73
b. Principal Problems
75
3. Agriculture
75
a. Trends in Production
75
b. Collectivization
76
c. Mechanization
76
4. Transportation
78
5. Housing
78
6. Retail Trade
79
7. Foreign Trade
79
VI.
Poland
81
A. General Policy and Achievements
81
1. Use of Resources to Promote Economic
Development
82
a. Manpower
82
b., Investment
85
c. Economic Planning and Control
85
2. Phases in Postwar Economic Development
?
?
85
a. 1947-49
87
b. 1950-53
88
C. 1954-55
89
B. Survey of Major Sectors of the Economy
90
1. Industry
90
a. Principal Developments
90
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Page
b. Analysis of Plan Fulfillment
90
c. Allocation of Resources to Industry
92
2.
Agriculture
92
a. Trends in Production
92
b. Food Availabilities
94
c. Socialization
94
d. Investment and Manpower
95
3.
Foreign Trade
95
4.
Housing
101
5.
Other Sectors
102
VII.
Rumania
105
A. General Policy and Achievements
105
B. Economic Plans
106
1.
One Year Plans (1949 and 1950)
106
2.
First Five Year Plan (1951-55)
107
C. Survey of Major Sectors of the Economy
109
1.
Industry
109
2.
Agriculture
a. Trends in Production and Food
110
Availabilities
110
b. Manpower
111
c. Collectivization
' 111
3.
Foreign Trade
111
4.
Housing
112
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Appendixes
Appendix A. Statistical Tables
Appendix B. Methodology
Page
113
121
Tables
1. Gross National Products of the European
Satellites, 1938 and 1948-55
2. Gross National Product Per Capita in the
European Satellites, 1938 and 1948-55
3. Percent of Increase in the Gross National Products
of the European Satellitesl.the USSR, and Selected
Countries of Western Europe, 1938 to 1955 and
1950 to 1955
9
9
10
4. Indexes of Gross National Product and of Production
by Economic Sector in the European Satellites,
1938 and 1948-55 11
5. Gross National Product of the European Satellites,
by Economic Sector, 1938, 1950, and 1955 12
6. Indexes of Gross National Product and of
Production by Economic Sector in.Bulgaria,
1938 and 1948-55 15
7. Population and Labor Force in Bulgaria,
1948 and 1952-55 19
8. Gross Capital Investment in Bulgaria, 1949-54 . 19
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9. Socialization of Agriculture in Bulgaria,
1949-56
10. Geographic Distribution of the Foreign Trade Turnover
of Bulgaria, 1948, 1952, 1954, and 1955
11. Imports and Exports of Bulgaria, by Product Grodp,
1948, 1952, 1954, and 1955
Page
21
22
24
12. Indexes of Gross National Product and of Production
by Economic Sector in Czechoslovakia, 1938
and 1948-55 28
13. Population and Labor Force in Czechoslovakia,
1948 and 1953-55 30
14. Planned and Actual Output of Selected Products in
Czechoslovakia, 1953 and 1955 35
15. Socialization of Agriculture in Czechoslovakia,
1950-55 38
16. Geographic Distribution of the Foreign Trade
Turnover of Czechoslovakia, 1936-38 Average,
1948, 1950, and 1953-55 40
17. IndexeS of Gross National Product and of Production
by Economic Sector in East Germany, 1938 and
1950-55 45
18. Population and Labor Force in East Germany,
1950-55 48
19. Planned and Actual Gross Capital Investment in
East Germany During the First Five Year Plan
(1951-55) 49
20. Socialization of Agriculture in East Germany,
1951-55 52
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Page
21. Indexes of the. Foreign Trade Turnover
of East Germany, 1950-55 55
22. Imports and Exports of East Germany) by Product
Group, 1950 and 1953-55 56
23. Geographic Distribution of the Foreign Trade
Turnover of East Germany, 1950 and 1953-55 57
24. Planned and Reported Actual Increases in National
Income and Gross Production in Major Economic
Sectors in Hungary During the First Five Year
Plan (1949-54) 65
25. Population and Labor Force in Hungary,
1949-55 67
26. Planned and Actual Gross Capital Investment in Hungary
During the First Five Year Plan (1950-54) 69
27?
Indexes of Gross National Product and of Production
by Economic Sector in Hungary, 1938 and 1949-55 . . . 71
28. Planned and Actual Output of Selected Products in
Hungary, 1949, 1954, and 1955 74
29. Socialization of Agriculture in Hungary, 1949-56 . . 77
30. Indexes of Gross National Product, of Production
by Major Economic Sector, and of End Uses of Gross
National Product in Poland, 1948-55 83
31. Population and Labor Force in Poland, 1948-55 84
32. Planned and Actual Gross Capital Investment in Poland,
1947 and 1949-55 86
33. Planned and Actual Output of Selected Products in
Poland, 1955
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Page
34. Employment in Principal Industries in Poland,
1949 and 1954 93
35. Socialization of Agriculture in Poland, 1949-55 . . 94
36. Imports and Exports of Poland, by Product Group,
1949 and 1953-55 96
37. Indexes of the Imports and Exports of Poland,
by Selected Product Group, 1949 and 1953-55 98
38. Foreign Trade in Selected Commodities of Poland,
1949 and 1955 99
39. Geographic Distribution of the Foreign Trade
Turnover of Poland, 1954 and 1955 100
40. Retail Trade Turnover in Poland, 1950-55 103
41. Indexes of Gross National Product and of Production
in Industry and Agriculture in Rumania, 1938
and 1950-55
lo6
42. Planned and Actual Gross Capital Investment in
Rumania During the First Five Year Plan
(1951-55) 108 .
43. Planned and Actual Output of Selected Products in
Rumania, 1950 and 1955 109
44. Population and Labor Force in Rumania, 1948
and 1950-55 110
45. Output of Selected Products in the European Satellites,
by Country) Selected Years, 1938-55 115
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Page
)-i-6. Indexes of Average Daily Per Capita Consumption of
Food in Calories in the European Satellites, Prewar
Average, 1948/49, and 1951/52 - 1955/56 117
47. Officially Announced Increases in Gross Industrial
Production in the European Satellites, 1949-55 . . 118
48. IndexeS of Gross National Product and of Production
by Economic Sector in the European Satellites, 1955 119
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SURVEY OF ECONOMIC DEVELOPMENTS IN THE EUROPEAN SATELLITES
UNDER THE FIRST LONG-TERM PLANS*
Summary
The European Satellites** under the first long-term plans of each
country exhibited most of the characteristics which Western countries
manifest under wartime conditions, although the primary objective was that
of increasing the output of heavy industry rather than the production of
armaments. The frantic concentration on one main production objective
at the expense of others under a system of controlled prices and central
allocations of supplies produced results, both good and bad, that were
analogous in many respects to those in the US from 1941 to 1945. There was
a rapid increase in output in the favored sector) heavy industry. Part of
the increase resulted from a high level of investment, which was Channeled
to an excessive degree into heavy industry. The remaining part resulted)
first, from restoration of war-damaged plants, and then from increasingly
intensive use of capacity. Industrial labor forces in the various countries
were expanded drastically by drawing labor out of agriculture and by em-
ploying hundreds of thousands of women who needed to supplement meager
family incomes.
Controlled prices and central allocations led to familiar results --
shortages and distribution difficulties in the case of both consumer goods:
and industrial supplies. Quality of products declined) and the composi-
tion of output tended to be set with an eye to increasing gross value of
production (at established prices) rather than to meeting demand. The
worst results occurred in the sectors which served the consumer -- that is,
agriculture, housing, personal services) and light industry. In these
sectors the withdrawal of labor and withholding of investment contributed
to declines, stagnation, or at best inadequate growth.
These economic difficulties were gravely aggravated by other policies
and by the limited natural resource endowments of the Satellites. Al].
of the Satellites lack sufficient domestic raw materials to develop and
operate heavy industry and must therefore rely on imports for part of
their needs. Headlong industrialization has created raw material short-
ages in all the countries. The reorientation of trade from West to East
* The estimates and conclusions contained in this report represent the
best judgment of ORB as of 1 July 1957.
** Including Bulgaria, Czechoslovakia, East Germany, Hungary, Poland,
and Rumania but not including Albania.
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made the Satellites dependent on the insulated Soviet Bloc economic
system, in which their bargaining position was weak. Reparations,
occupation costs, and more subtle exploitation through trade have
transferred considerable resources to the USSR. At the same time,
neglect of their former export industries, agriculture, and consumer
goods greatly reduced the ability of the Satellites to trade with the
West on favorable terms. Added to all this, socialization created
waste and inefficiency in industry and was a major factor in the
stagnation of agriculture.
Modifications of policy were introduced in 1953 in the "new
course," which was intended to reduce the imbalances resulting from
industrialization and the too rapid collectivization of agriculture.
These modifications, however, were only partially successful. Although
the Satellites made significant progress under the long-term plans, as
represented by increased industrial capacity, the populations of the
Satellite countries at the beginning of 1956 were frustrated and
dissatisfied both as consumers and as workers and peasants.
The most fundamental objectives of the Satellite regimes under the
first long-term plans, which covered from 4 to 6 years in the different
countries during 1949-55, were maintenance of high rates of economic
growth through preferential development of heavy industry, more complete
socialization of agriculture, and greater interdependence and cooperation
with other Bloc countries. Although these policies were generally adhered
to, there were certain modifications in specific objectives during the
period and significant shortcomings in the carrying out of the plans.
The growth in the gross national products (GNP's) during the period was
rapid, but with the end of the recovery from the effects of the war and
the lessened opportunity to mobilize underutilized resources, the rates
of increase declined in most Satellites. The original goals for the
expansion of national income were not reached in most cases, judging by
the production data available for a sample of products, and even official
reports did not claim that the revised, higher goals adopted in 1950-51
for the terminal years of the plans were reached or even approached except
in East Germany.
With the exception of agriculture the Satellite economies were largely
socialized at the start of the plans. The principal exception -- East
German industry -- remained an exception at the end of the plan, as private
firms still accounted for 15 percent of the gross industrial output in
1955. The campaign to socialize agriculture was characterized by sub-
stantial gains in the early years of the plans, a leveling off or
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reduction in the socialized area after the "new course" was announced in
1953, and a renewed campaign in 1955 and 1956 which made up some of the
losses of 1953-54 and, in certain countries, raised the share of arable
land under socialized ownership above earlier levels. Well over half of
the land in the Satellites, however, iS still in private hands. Bulgaria,
which had socialized 65 percent of its land by the end of 1955 and nearly
80 percent by April 1956, has come closest to the. long-range goal of
complete socialization of agriculture. The proportion of the land in the
socialist sector at the end of 1955 ranged from 30 to 36 percent in
Czechoslovakia, East Germany, and Hungary and approximated about 25 per-
cent of the total area in Poland and Rumania.
The role of the USSR in shaping Satellite economic policy and guiding
broad developments in each country was direct and active during the period.
Soviet pressure reinforced Communist doctrine in the effort to insure
priority development for heavy industry in each Satellite. Several means
were available and were used for the exercise of Soviet influence over the
Satellite economies. Among these were reparations deliveries from East
Germany, Hungary, and Rumania, which gave the USSR some control over the
pattern of output in these countries; the joint Soviet-Satellite companies,
which often had Soviet managers; the granting of credits and technical aid
for projects which had Soviet approval; the providing of Soviet planners
and technicians to act as advisers in the Satellites; the Soviet-dominated
Council for Mutual Economic Assistance (CEMA); and, perhaps most important,
the direct influence of the USSR in bilateral trade negotiations.
The economic interdependence of the Bloc countries increased con-
siderably in the early years of the plans, as evidenced by the increased
relative importance of intra-Bloc foreign trade. This swift redirection
of Satellite trade was halted after the adoption of the "new course"
policy calling for renewed trade with countries outside the Bloc, espe-
cially with underdeveloped areas which could provide needed raw materials.
Greatly increased attention has been given in the Satellites to
coordination of their production and investment plans, greater specializa-
tion in production, organization of joint development projects, and sharing
of technical "know-how." CEMA and its specialized committees have held
numerous meetings since 1953, as a result of which certain major goals for
production, investment, and foreign trade under the Five Year Plans for
1956-60 were coordinated.
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These plans were badly upset by events in 1956, causing the Bloc
countries to resort again to the system of bilateral trade negotiations
which characterized the period of the first long-term plans. Communist
domination up to 1956 produced no significant new economies from special-
ization among the Satellites. On the contrary, their adoption of the
same general policy -- rapid growth of heavy industry -- may have led to
greater similarity of the economies to each other and to the USSR. This
similarity is evidenced by the common shortage of raw materials and fuels
which has appeared in all Bloc countries. It would be possible for the Bloc
countries to specialize even with similar economic goals, but the process
of negotiation in the absence of equilibrium prices and exchange rates
has not yet succeeded in this direction.
A prominent part of each long-term plan -- and the key to the attain-
ment of the large planned increases in output -- was a program of inten-
sified industrialization. Industry had the highest priority in the
distribution of manpower and investment funds, and large gains in produc-
tion were realized. Over-all production targets for industry were not
reached in most of the countries) however, and the growth of output among
the various industrial products was poorly balanced. The tendency of the
production of capital equipment to outrun the supply of raw materials
and to overwhelm the output of light industry not only held growth rates
below what would have been possible with a more balanced expansion of
industry but also severely limited improvements in living standards.
In addition to growing pressure on the raw materials base, there
was a tightening up of supplies of manpower for industry and other non-
agricultural employment. Transfers of labor to industry from agriculture
became more difficult, and the more favorable policy adopted for agri-
culture after the "new course" required a halting or reversal of this
movement in certain countries. By the end of the plans, the agricul-
tural labor forces in Czechoslovakia, East Germany, and Hungary were
comparatively small; only Poland, Rumania) and Bulgaria appeared to
have much prospect of drawing sizable amounts of manpower from agri-
culture in the future.
The most distinctive feature in the distribution of the GNP'S
of the Satellites during this period was the large allocation to
investment. Except in East Germany, where there was a substantial
drain on production through Soviet takings for reparations and occupation
costs, gross investment evidently amounted to about 25 percent of the
GNP's. This ratio was reduced somewhat after the "new course," when the
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scheduled increases in investment were cut back, but it remains high by
Western standards.
Improvements in living standards up to 1953 were held down by the
high level of investment, Soviet takings (which were especially large
in East Germany), the failure of agricultural output to increase
materially, and the poor showing in housing construction. Some moderate
gains in consumption have been achieved since 1953, but these gains were
primarily in goods other than food or housing. In Rumania and in East
Germany, some food rationing continues; in no Satellite has there been
satisfactory improvement in urban housing conditions; and in all Sat-
ellites the cost of.living compels many urban families to have at least
two wage earners in order to maintain family living standards. The
disturbances in Poland and the revolt in Hungary show that there is
still an intense and widespread popular dissatisfaction with living
conditions in the Satellites.
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I. Introduction: Satellite Economic Growth Since 1950.
A. Problems of Data in Estimating Satellite Economic Performance.
Estimation of the size and growth of the Satellite economies has
been rendered extremely uncertain by the scarcity and obscurity of
statistical reporting from these countries in the past. Until recently,
only fragmentary data have been available, and it has been nearly impos-
sible to construct measures of GNP and its components in which much con-
fidence could be placed. Nevertheless, some correction of the excessively
favorable impression created by the published statistics of the Satellites
is necessary.
These statistics have consisted principally of indexes of the
gross value of production in industry) physical outputs for a selected
list of products, and over-all measures of national income according to
the Soviet concept.* These statistics allow great scope for misstate-
ment and for misleading the unwary. The estimates which are presented
in this report represent an attempt to express the economic growth of the
Satellites in terms of the Western concept of GNP** with the minimal goal
of including the sectors which are missing in the Soviet definition of
national income. These sectors generally grow more slowly than those which
are included. Other modifications are of a more dubious quality. Thus
Indexes of net industrial production have been constructed to replace the
official gross value indexes in an attempt to avoid the distortion arising
from the double counting in the latter. The constructed indexes, however,
are necessarily based primarily on the officially selected samples of
products for which output data are published.***
Some use has been made of the detailed statistics and other in-
formation recently released by certain Satellite countries. This in-
formation offers the possibility of constructing more thorough and accurate
measures of economic growth and structure than have been possible to date,
but it also reveals many more complexities and possibilities of distortion
in Satellite statistics than were realized before. As a result, a great
deal of time and effort will be required to construct reliable measures
of economic performance in these countries.
* Depreciation and "unproductive" services
connected directly with material production -
concept of national income.
** Except in the case of Hungary, for which
Income were used.
*** For further details concerning the calculation of indexes
production by major economic sector, see Appendix B.
-- that is, services not
- are excluded in the Soviet
official indexes of national
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Pending completion of this detailed research, the economic
measures given in this report may be used cautiously as broad indicators
of the magnitude, rates of growth, and structure of the Satellite economies
if recognition is given to the possibility that future work may change
these estimates considerably. In the light of recent revelations of dubious
statistical procedures in Poland, which are likely to have been duplicated
In some degree in the other countries, it seems probable that the present
estimates of GNP overstate the economic growth of at least some of the
Satellites.
B. Trends in Gross National Product.
Despite shortages of raw materials and labor, general underful-
fillment of investment plans, and the confusion and waste resulting from
the abrupt changes in the principal economic goals, the European Satellites
succeeded in substantially increasing the total output of goods and services
during 1951-55. The GNP of the Satellites (exeluding Albania) is estimated at
$60 billion in 1955) or about 40 percent more than in 1950. This represents a
relatively high average annual rate of growth of 7 percent. The gains in GNP
for the individual countries ranged from about 32 to 50 percent during the 5-
year period, according to calculations based on output data for a sample of
products (see Table 1*). For the area as a whole and for each of the coun-
tries except East Germany) GNP in 1955 was also much higher than in 1938.
East Germany apparently has had a more rapid expansion in output than most
other Satellites since 1950, but the starting point for this growth was so
low that the prewar level was not approximated until 1954.
The output of the Satellites is concentrated largely in Poland,
East Germany) and Czechoslovakia) which together account for more than
80 percent of the total. Because of the considerable delay which occurred
in the economic recovery of East Germany) Poland has assumed the former's
prewar position as the most productive area among what are now the European
Satellites. Rumania's GNP, which ranks fourth in the group, is rather
small, considering the size and population of the country. The outputs of
the other countries reflect their small populations and comparatively low
levels of productivity. The marked difference in productivity between
East Germany, Czechoslovakia) and Poland, on the one hand, and Hungary,
Rumania) and Bulgaria, on the other, is clearly shown in the estimates of
GNP per capita in the various countries given in Table 2.*
The growth in Satellite GNP generally paralleled the rapid ex-
pansion of Soviet output during 1951-55. In 1955 as in 1950, therefore,
* Tables 1 and 2 follow on p. 9.
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Table 1
Gross National Products of the European Satellites
1938 and 1948-55
Bulnria Czechoslovakia _ gat Germany Runsiii7 Poland R=nals
European Satellites
Value Value Value Value Value value Value
(Billion 1955 index (Billion 1955 - latex (Bi1.11CO 1955 Index (Billion 1955 index (Billion 1955 Index (Billion 1955 Index (1311.11on 1955 index
Year .-1.1LU (1950.1031 mfl) (1950.40) ms 4950.40 _all (1959.49) Alit (1990-40) ml$) (19504co) us 4) (1950-100)
1938 1.03 87 7.30 92 16.1 144 2.45 W 14.5 87 3.07 103 44A) 104
1948 1.11 93 6.71 85 7.81
g.
2.01 75 11.9 71 2.60 87 32.1 75
1949 . 94 7.18 91 9.09 2.21 83 14.6 87 2.71 91 36.9 85
1950 1.19 180 7.93 103 11.2 180 2.61 180 16.7 100 2.98 100 42.7 103
1951 1.27 107 8.34 105 12.8 uh 342 117 17.1 102 3.30 111 45.9 107
1952 1.33 112 9.30 115 13.6 121 3.06 115 17.9 107 3.32 in 48.3 113
1953 1.122 119 9.79 323 14.6 153 5.46 150 19.2 U.S 3.68 123 52.2 122
1954 1.56 131 10.3 130 15.9 142 3.32 124 20.7 124 3.93 134 55.8 131
1955 1.68 141 11.1 340 16.8 150 3.62 136 22.1 132 4.48 150 59.8 140
?. 9:e1uding Albania
Table 2
Gross National Product Per Capita in the European Satellites a/
1938 and 1948-55
1955 US $
Country or Area 1938 1948 1949 1950 1951 1952 1953 1954 1955
Bulgaria 150 160 160 160 180 180 190 210 220
Czechoslovakia 500 550 590 640 670 720 760 800 850
East Germany 970 420 490 610 700 740 800 880 940
Hungary 270 220 240 290 330 320 360 340 370
Poland 460 500 600 670 680 700 730 770 810
Rumania 200 160 170 180 200 200 220 230 260
European Satellites 470 370 420 480 510 530 570 610 640
a. Excluding Albania, whose product per capita probably is somewhat less than
that of Bulgaria.
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the GNP of the Satellites amounted to about 40 percent of the GNP of the
USSR. The USSR, however, has greatly outdistanced the Satellites in economic
growth since 1938, when the total output of the present-day Satellites is
believed to have exceeded 50 percent of the output of the USSR. Although
a substantial portion of the estimated Satellite GNP of $60 billion is
needed to provide even a low standard of living for the area's population
of more than 95 million, the Satellites nevertheless constitute a signi-
ficant addition to the economic capability of the Bloc.
The Satellites, like the USSR, have achieved rates of economic
growth since 1950 which are generally higher than those of the major
countries of Western Europe, excluding West Germany. A comparison of
increases in outputs between 1938 and 1955 is less favorable to the
Satellites, however, and is decidedly unfavorable in the case of East
Germany, as shown in Table 3.
Table 3
Percent of Increase
in the Gross National Products of the European Satellites, 1/
the USSR, and Selected Countries of Western Europe12/
1938 to 1955 and 1950 to 1955
Based on Constant Prices
Area or Country
1950 to 1955
1938 to 1955
European Satellites
4o
35
Bulgaria
41
63
Czechoslovakia
4o
52
East Germany
50
4
Hungary
36
48
Poland
32
52
Rumania
50
46
USSR
4o
78
France
23
46
Italy
31
38
UK
13
38
West Germany
57
49
a. Excluding Albania.
b. Percentage changes for Western European countries are
calculated from index numbers (France and West
Germany in 1938, recalculated to a 1952 base)
(all other Western European countries).
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C. Changing Pattern of Output.
The industrialization of the economies of the Satellites, which
was well under way by 1950, was continued and even intensified during
the succeeding 5 years. In each country, the resources at the disposal
of the regime were focused on the development of industry. Large in-
creases were correspondingly required in construction activity and in
transportation services, although there was little provision for in-
vestment in transportation facilities. Estimated output in industry,
construction, and transportation and communications grew- substantially
faster than output as a whole and by 1955 greatly surpassed the prewar
accomplishment (see Table 4). After several years of neglect, agri-
cultural output rose moderately in 1955, in part as a result of favorable
weather. This probably was the first time since the war that the prewar
level of output was approximated. A rough indication of how these
divergent growth rates have affected the distribution,of total Satellite
output among the major economic sectors is presented in Table 5.*
Table 4
Indexes of Gross National Product and of Production.
by Economic Sector in the European Satellites IV
1938 and 1948-55
1950 F 100
1938
1948
1949
1950
1951
1952
1953
1954
1955
Gross national
ptoduct
104
75
86
100
107
113
122
131
140
Industry
95
72
84
100
112
125
138
149
163
Agriculture and
forestry
111
77
88
100
99
97
99
103
110
Construction
105
55
70
100
122
143
161
164
169
Transportation and
communications
77
76
88
100
117
129
143
146
156
Trade and services
113
79
89
100
105
107
113
126
133
a. Excluding Albania.
* Table 5 follows on p. 12.
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Table 5
Gross National Product of the European Satellites 2/
by Economic Sector
1938, 1950, and 1955
Percent of Total
Economic Sector
1938
1950
1955
Industry
33
36
42
Agriculture and
forestry
32
29
23
Construction
5
5
6
Transportation and
communications
4
6
6
Trade and services
26
24
23
Total
100
100
100
a. Excluding Albania.
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II. Bulgaria.
A. General Policy and Achievements.
The Communist government of Bulgaria has followed economic
policies designed to transform the largely agricultural economy into
one which may be characterized as industrial-agricultural. Whereas
agricultural production predominated in the GNP in prewar years, in-
dustry and agriculture have contributed about equal shares to the
country's output in recent years. Beginning with 1955, the value of
output in industry probably exceeded that in agriculture. Despite
the change in the structure of the national output, almost 75 percent
of the civilian labor force was still engaged in agriculture in 1955.
The program of industrialization and agricultural collectivi-
zation in Bulgaria has been promoted under two Five Year Plans, the
first of which began in 1949 and the second in 1953. The First Five
Year Plan (1949-53) was declared completed after 4 years, but of the
major production goals, only that for industry was realized within
that period. By the end of 1952, about 6o percent of Bulgaria's arable
land was collectivized* -- a much larger proportion than in any other
Satellite. The Second Five Year Plan of Bulgaria, begun in 1953, does
not coincide with the current Five Year Plans of the other European
Satellites, which began in 1956.
Bulgaria offers a typical example of the implementation of Com-
munist economic ideology, with its emphasis on the output of producer
goods as the basis for economic growth. Whereas producer goods out-
put increased about 3-1/2 times during the 1949-55 period, consumer
goods output rose only by about 50 percent, according to intelligence
estimates based on sample production data. Machine building became
a new branch of Bulgarian industry, and the output of chemicals, which
was negligible until 1951, was considerably expanded. Although rapid
strides were made in industry, the prewar level of agricultural pro-
duction probably was not exceeded until 1954.
* The terms collectives and collectivized are used in a general sense
in this report to include all types of cooperative agricultural pro-
ducers' organizations in the European Satellites. These organizations
vary in nature from simple cooperatives in which only the members'
land is pooled to organizations which closely resemble Soviet col-
lective farms.
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It is estimated that the GNP of Bulgaria increased by about
50 percent during the period 1949-55) or at an average annual rate of
about 6 percent. This is a substantial rate of growth, but it is
somewhat lower than the rates registered by the other European Satel-
lites. Although indexes of estimated GNP give an impression of over-
all economic growth, they do not indicate the unevenness of the devel-
opment that has taken place within the various sectors of the economy.
Over the 1949-55 period, industry increased by about 116 percent, for
example, whereas agriculture increased by only 11 percent, as shown in
Table 6.* Activity in the industry-supporting sectors of construction
and transportation and communications more than doubled. Trade and
services output is believed to have risen by about 50 percent, reflect-
ing the increasing urbanization of the country and the associated ad-
vances in health, education, and other social services.
Construction of urban housing was inadequate during the First
Five Year Plan, and the housing situation therefore deteriorated rather
than improved. The regime gave more attention to housing during
1953-55, as a result of which the volume of construction in urban areas
Increased significantly, but serious housing deficiencies remain, par-
ticularly in the larger cities.
* Table 6 follows on p. 15. The indexes of industrial production
which are presented for the various Satellites in Tables 6; 12) p. 28,
below; 17, p. 45, below; 27, p. 71, below; 30) p. 83, below; and 41,
p. 106, below (and which are aggregated for all six countries in Table
5, p. 12, above), refer to estimates of net production. These indexes
are based on production data for a sample of products; their accuracy
varies with the representativeness of the sample and the accuracy of
the production data and the weights used in aggregating the production
data. The officially announced percentage increases in industrial pro-
duction presented for purposes of information in Table 47, p. 118, below,
refer to gross production. These statistics are useful in analyzing
the degree of fulfillment of plan goals expressed in the same terms, but
they are not in general comparable to the independently calculated in-
dexes of net industrial production. Officially announced increases in
gross production may differ from the actual increases in net production
(which are only approximated in the calculated indexes) for several
reasons, including (1) changes in the degree of double counting in the
gross index) (2) changes in the statistical coverage of the gross in-
dex, and (3) bias introduced into the gross index through the use of
Inappropriate prices for new products.
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Table 6
Indexes of Gross National Product and of Production
by Economic Sector in Bulgaria 5.1
1938 and 1948-55
1948
= 100
1938
1948
1949
1950
1951
1952
1953
1954
1955
Gross national product
93
100
101
107
114
120
128
141
151
Industry
84
100
110
128
141
165
177
194
216
Agriculture and
forestry
102
100
94
96
101
96
99
106
111
Construction
84
100
154
157
191
222
248
263
286
Transportation and
communications
56
100
118
134
149
164
189
207
228
Trade and services
92
100
100
103
106
109
119
137
147
? a. For rough comparisons with the other Satellites, see the 1955 indexes
on a 1950 base in Table 48, p. 119, below.
B. Phases in Postwar Economic Development.
Since the assumption of power by the Communists in Bulgaria,
there have been three distinct phases of economic development. The
first phase (1947-48) was a period of reconstruction, socialization of
the economy, and beginning steps in industrial development. In the
second phaSe (1949-53) the structure of the economy was changed mark-
edly, especially in the direction of increased emphasis on heavy in-
dustry. The third phase began in 1954 following the new course" an-
nouncements. No drastic changes occurred in this period, but adjust-
ments were made in the rates of growth of various sectors of the econ-
omy through changes in the allocation of resources among the sectors.
1. 1947-48.
The goal of the Two Year Plan for 1947-48 was to restore,
and in most sectors exceed, prewar levels of production. Industriali-
zation was stressed, particularly the production of fuels and electric
power. Private as well as socialized agriculture was to be given in-
centives and encouragement. The Plan was completed successfully in
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industry but was underfulfilled in agriculture. It was claimed that
industrial production rose about 80 percent over 1939, whereas agri-
cultural production remained 2 percent below that level. 1/ The
government gained a substantial degree of control over the economy
during this period. Mining, banking, wholesale trade, and most manu-
facturing enterprises were nationalized, and almost 70 percent of re-
tail trade was brought into the state sector.
2. 1949-53.
Bulgaria's First Five Year Plan emphasized industrializa-
tion) electrification) and the mechanization and collectivization of
agriculture. Following the Soviet model of economic development, the
Plan gave priority to industry over agriculture and to heavy industry
over light industry. Gross industrial production was to increase 119
percent over 1948, and agricultural production 57 percent; producer
goods output was to rise 220 percent and consumer goods output 75 per-
cent. Li In accordance with these priorities, industry was scheduled
to receive about 40 percent of total investment, and agriculture was
to receive less than 18 percent. 2./ More than 80 percent of industry's
share of investment funds was to be used for the development of heavy
industry.
The First Five Year Plan was concluded after only 4 years,
although only the goal for gross industrial production was stated to
have been fulfilled. It was claimed that the value of gross industrial
production (at 1939 prices) reached 55 billion leva* in 1952, whereas
the Plan called for an output of 50 billion leva in 1953. 4../ The
validity of this claim is uncertain because the statistical coverage
of the two values may not be the same. In any case, the pattern of
output in 1952 was different from that contemplated in the Plan. Of-
ficial data indicate, for example, that the plan for metal-ore mining
was overfulfilled by 100 percent and that the goals for coal and non-
metallic minerals were overfulfilled by 13 percent and 42 percent,
respectively, although production of the metallurgical industry was
70 percent below the planned figure. //
* The official exchange rate for Bulgaria since May 1952 has been
1 lev to US $0.147 or) conversely, US $1 to 6.80 leva. It should be
noted that the official exchange rate considerably overvalues the
currency of Bulgaria.
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While industrial production increased rapidly, agricultural
output remained below the prewar level. Production of industrial crops,
however, was an estimated 115 percent above 1938. The rapid progress
In the socialization of agriculture was by far the most notable develop-
ment in this sector during the Plan. This campaign raised the number
of collective farms from 549 at the end of 1947 to 2,745 at the end of
1952. By December 1952, about 60 percent of Bulgaria's arable land was
cultivated by collectives and an additional 4 percent by state farms.
The area under collectivization increased only slightly, however, from
1952 to the end of 1955. Despite this lull, the extent of collectivi-
zation in 1955 was much greater in Bulgaria than in any other Satellite.
3. 1954_55.
Unlike some of the other Satellites, Bulgaria announced no
drastic changes in economic policy for 1954-55 as a result of the intro-
duction of the "new course" in 1953. Certain shortcomings in the econ-
omy were admitted, however, and minor reforms were ordered. There was
to be a curtailment of diversification in industry, for example, and
although heavy industry would still receive major emphasis, more con-
sumer goods were to be produced. The main effort of the program was to
be directed toward intensive development of raw materials and power.
This new policy was reflected particularly in sizable investment allo-
cations for coal mining and electrification. Subsequent to outlin-
ing these modifications of policy, Bulgaria published the text of the
previously announced Second Five Year Plan for 1953-57.
C. Survey of Major Sectors of the Economy.
1. Industry.
a. Trends in Production.
Most of the output of Bulgaria originated in the agri-
cultural sector in prewar years, but as a result of the Communist em-
phasis on industrial development, the value of industrial output prob-
ably now exceeds that of agriculture. It is estimated that industrial
production in 1955 was about 116 percent above that of 1948. The
greatest expansion took place in the manufacture of producers' equip-
ment. The metalworking industry (including the new branch of machine
building) now ranks after food processing and textiles in importance. 9/
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Production of basic materials such as chemicals)
brown coal, crude oil, lead, zinc, pyrites) and uranium ores
also increased substantially under Communist Plans. The pro-
ductive capacity for basic chemicals) which until 1951 consisted
only of meager facilities for the production of calcium carbide, was
extended to include sulfuric acid, synthetic ammonia, nitric acid,
nitrogen fertilizers, soda ash, and caustic soda. Production of
soda products meets domestic needs and permits some exports.
Bulgaria began commercial production of crude oil in 1954. If the
planned expansion in the production and refining of crude oil is
realized, Bulgaria will be able to supply a substantial part of
its petroleum requirements. Although production of electric power
was almost four times as large in 1955 as in 1948) it continued to
lag behind requirements.*
b. Allocation of Resources to Industry.
Industry has become one of the major sectors in the
Bulgarian economy as the result of the priority which it has enjoyed
In the allocation of resources under the Communist regime. Although
the agricultural labor force increased only slightly during 1948-5.5,
the labor force outside of agriculture increased by nearly 50 percent,
as shown in Table 7.** Most of the expansion in-the nonagricultural
sector took place in industry.
The pattern of gross capital investment expenditure
did not change much during 1949-54. In the First Five Year Plan,
Industry accounted for 38 percent of total investment; most of this
went to heavy industry. In the first 2 years of the Second Five Year
Plan the pattern of investment was similar to that of the First Five
Year Plan, although heavy industry and agriculture. received slightly
higher shares than previously, as shown in Table 8.**
* Selected production data for Bulgaria and the other Satellites
are presented in Table 45, p. 115, below.
** Tables 7 and 8 follow on p. 19.
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Table 7
Population and Labor Force in Bulgaria :a../
1948 and 1952-55
Million
1948
1952
1953
1954
1955
Population
7.10
7.28
7.37
7.47
7.57
Civilian labor force
Agricultural
2.85
2.87
2.87'
2.92
3.02
Nonagricultural
0.78
0.90
0.96
1.07
1.14
Total civilian labor force
3.63
3.77
3.83
3.99
4.16
a. Averages of estimates for the beginning and end of the
year.
Table 8
Gross Capital Investment a/ in Bulgaria 12/
1949-54
Million Post-Reform Leva at 1952 Prices
Economic Sector
1949
1950
1951
1952
1953
1954
Industry
Heavy
931
1,162
1,616
1,603
1,943
2,014
Light
257
137
238
230
306
294
Subtotal
1,188
1,299
1,854
1,833
2,29
2,308
Agriculture
465
.322
707
667
778
988
Housing
467
503
383
481
495
760
Schools and other cultural
establishments
81
97
103
88
138
151
Health and social
establishments
62
49
54
54
51
61
Other
1,228
1,251
1,238
1,899
1,894
1,702
Total
3,491
3,521
4,339
5,022
5,605
5,970
a. Including unplanned investment.
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2. Agriculture.
a. Trends in Production.
Agricultural output) which remains an important part
of the GNP despite the industrialization effort, continued at or be-
low the 1948 level until 1954. This lag in agricultural development
was the result primarily of inadequate investment allocations to this
sector. Even the socialized sector received inadequate supplies of
machinery, fertilizer) and breeding stock. Agricultural production
Increased moderately in both 1954 and 1955 as a result of favorable
weather conditions and the changes in agricultural policy under the
Second Five Year Plan. Although production of wheat) corn, rice, and
potatoes was about the same as before the war, total production of
food crops and livestock products in 1955 is estimated to have been
still below the prewar level. Livestock numbers in 1955, except for
hogs and goats, likewise remained below prewar levels. This lag in
stockbreeding was largely the result of the inadequate fodder base 11/
and the depressing effect of the collectivization program on farmers'
incentives. The output of industrial crops, on the other hand) was
already above the 1938 level in 1948.
b. Food. Availabilities.
Neglect of agriculture in the allocation of resources
and poor weather conditions held the per capita consumption of food-
stuffs below the prewar level during most of the First Five Year Plan.
Significant gains were made during the following 3 years, however
(see Table 46*). Estimates for the 1955/56 food consumption year in-
dicate a per capita caloric intake about 5 percent higher than the
1933-37 average. Because of the lag in animal husbandry, supplies of
meat and milk products have been inadequate from a nutritional stand-
point; supplies of cereals, fats, and oils have been somewhat more
adequate.
c. Socialization.
Socialization of agriculture began earlier and moved
more rapidly in Bulgaria than in any other Satellite. The principal
factors contributing to the peasants' acceptance of socialization
were the long-established cooperative movement in Bulgaria and the
* P. 117, below.
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promise of the Communist regime to assist poor peasants. Collectivi-
zation began as early as 19450 but it was not pursued vigorously until
the period 1948-52. By the end of 1952, some 60 percent of the coun-
try's arable land was in the collectivized sector of agriculture.
Collectivization proceeded very slowly thereafter until early 1956,
when there was another spurt of activity. Collective farms held 75 per-
cent of the arable land in April 1956 (see Table 9). State farms ac-
count for a relatively small part of Bulgaria's land.
Table 9
Socialization of Agriculture in Bulgaria
1949-56
Year
(as of
December)
Collective Farms State Farms
Percent of Percent of
Number Arable Land Number Arable Land
Total
Socialized
Sector
(Percent of
Arable Land)
1949
1,608
11.3
91
1.9
13.2
1950
2,501
44.2
91
2.1
46.3
1951
2,740
46.o
103
2.3
48.3
1952
2,745
60.5
108
3.6
64.1
1953
2,747
61.o
108
3.6
64.6
1954
2,723
61.0
108
3.6
64.6
1955
2,735
63.0
108
3.6
66.6
1956 El/
3,074
75.0
108
3.6
78.6
a. April 1956.
3. Foreign Trade.
Significant changes have taken place since the war in the
direction and composition of Bulgaria's foreign trade. Before World
War TT, Bulgaria's foreign trade was conducted principally with coun-
tries now outside the Soviet Bloc, and Germany was its most important
trading partner. By 1946 the situation had changed greatly. Trade
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with other countries of the Bloc accounted for about 90 percent of the
total, and trade with the USSR alone made up 75 percent of Bulgaria's
turnover. The USSR has continued as Bulgaria's chief supplier and
customer, but its relative importance has declined as Bulgarian trade
with other Bloc countries has expanded. In 1955, other Satellites
accounted for about 38 percent of Bulgaria's total foreign trade turn-
over (see Table 10).
Table 10
Geographic Distribution of the Foreign Trade Turnover of Bulgaria 21
1948, 1952, 1954, and 1955
Percent of Total
Country or Area
1948
1952
1954
1955
Sino-Soviet Bloc
USSR
55.3
57.1
44.8
46.3
European Satellites
22.4
30.5
39.3
38.2
Albania
0.1
0.5
0.5
0.7
Czechoslovakia
11.3
12.6
11.9
11.6
East Germany
3.3
6.8
13.4
13.0
Hungary
1.3
3.6
4.8
4.3
Poland
5.4
5.3
5.0
4.o
Rumania
1.0
1.6
3.6
4.6
Communist China
N.A.
0.7
1.8
2.1
Other Bloc countries
Negligible
o.4
1.1
0.9
Total
77.7
88.7
87.0
87.5
Other countries
22.3
11.3
13.0
12.5
Of which:
Austria
4.8
4.3
3.3
2.5
UK
1.2
1.9
2.5
1.6
West Germany
N.A.
0.9
2.7
2.8
Total
100.0
100.0
100.0
100.0
a. gj
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The trade of Bulgaria outside the Bloc is principally with
the industrialized countries of Western Europe. Since 1954, Bulgaria
has made a special effort to increase trade with the West. Trade agree-
ments were concluded in 1955 with many of Bulgaria's prewar trading
partners and (in accordance with the recent trade policy of the Bloc)
with a number of underdeveloped countries.
The commodity composition of Bulgaria's trade has likewise
changed considerably in the postwar years. To promote economic re-
covery and development, Bulgaria considerably increased its imports
of industrial and agricultural machinery. In 1949) machines, equip-
ment, and other producer goods intended for the industrialization and
electrification of the country and for the development of agriculture
and transport amounted to 38 percent of total imports. By 1951 the
proportion had increased to 45 percent. These goods were supplied by
the USSR and the other European Satellites rather than by the indus-
trialized Western European nations as in the prewar period. During
the First Five Year Plan, the Bloc supplied more then 90 percent of
Bulgaria's imports of metals, petroleum products, chemicals, and
rubber and textile raw materials. The USSR was the primary supplier
of machinery and equipment.
As a result of the industrialization program, the variety
of goods exported by Bulgaria was broadened significantly. Agricul-
tural products and industrial raw materials accounted for more than
90 percent of total exports before the war, but exports of machinery,
equipment, and other manufactures have gained a more prominent posi-
tion in the exports of recent years (see Table 11*).
4. Housing and Other Construction.
The construction goals of the First Five Year Plan were
generally attained, especially those for industrial facilities. In-
sufficient allocations of investment funds to agriculture limited don-
struction activity in this sector. During the Second Five Year Plan
the volume of capital investment in the entire economy is to be about
twice as large as under the previous Plan. During the first 3 years
of the current Plan -- 1953-55 -- the investment goals were underful-
filled, mainly because of bad planning and poor organization at the
construction sites. A decline in planned construction activity in
1956 to a level more in keeping with the industry's capability is
* Table 11 follows on p. 24.
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Table 11
Imports and Exports of Bulgaria, by Product Group Lk/
1948, 1952, 1954, and 1955
Percent
Product Group
1948
1952
1954
1955
Import
Export
Import Export
Import
Export
Import Export
Food, drink, and tobacco
9.5
88.3
1.6
65.4
1.5
63.5
4.4 51.0
Raw materials and fuels
20.8
8.6
22.3
19.4
17.6
14.5
17.2
17.6
Semimanufactured and
chemical products
31.0
2.1
26.7
8.2
30.3
9.2
27.4
11.0
Machinery and transport
equipment
25.6
0.1
39.6
2.2
39.3
2.1
40.6
2.9
Other manufactures
13.1
0.9
9.8
4.8
11.3
10.7
10.4
17.5
Total
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
a. ly
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indicated by the investment plan for that year, which provided for a
reduction of capital investments below the 1955 level.
Throughout the postwar period, there has been an acute
housing shortage in urban areas which has adversely affected the mo-
rale and productivity of the labor force. This serious housing prob-
lem is the result of the heavy influx of workers from rural areas in-
to the cities) the natural increase in the population) and the low
priority assigned housing construction as the regime pursued a policy
of directing the country's resources toward rapid industrial expansion.
The urban housing situation deteriorated rather than im-
proved during the First Five Year Plan. Official reports of state and
private housing construction in urban areas) together with estimates
of the growth in the urban population, indicate that only about 90 new
dwelling units per 1,000 new urban residents were built during 1949-52.
By 1954, there were only 211 dwelling units per 1,000 urban residents,
according to official announcements. The government gave increased
attention to housing during the next 3 years) particularly in 1954
and 1955, when state construction of urban dwellings in each year ap-
proximated such construction during the entire period 1949-52. State
and private construction of housing averaged only about 4,700 units
annually in 1949-52. During the years 1953-55, in contrast, such
construction averaged about 10)000 units annually, or about 200 dwell-
ings per 1,000 additional urban residents. Although housing construc-
tion probably was adequate to meet the needs of new residents in
1953-55, it was not sufficient to overcome the deficiencies of earlier
years. The shortage of housing in urban areas therefore remains acute)
especially in the larger cities.
Construction of dwellings in rural areas numbered about
41,000 units during 1949-52 and 25,400 units during the following 3
years. The peasants generally take care of their own housing needs,
using for the most part local construction materials such as clay and
mud. Although housing in the rural areas of Bulgaria is primitive, it
does not appear to be a major source of grievance among the people.
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III. Czechoslovakia.
A. General Policy and Achievements.
The general aim of Communist economic policy in Czechoslovakia
has been to reorganize the structure of the economy, in respect to both
its output and its institutions. The planned changes in the level and
composition of output were more extensive for industry than for agricul-
ture. The industrial conversion entailed, in addition to nationalization,
a very rapid expansion of heavy industry, particularly of the machine-
building industry, and retardation of the growth of light industries
which had been significant in the prewar period. Chief among these
were the textile, leather, and glass industries, once important in the
extensive prewar trade of Czechoslovakia with the West. Economic
policy was slightly modified at the end of the Five Year Plan period
in 1953. As a result, the output of consumer goods grew more rapidly
than producer goods during the following 2 years, although producer
goods continued to predominate in total industrial output. Greater
attention was likewise paid to agriculture, but there has been no
significant increase in output since 1953. The emphasis on livestock
and fodder crop production, which was introduced in 1949, has been
continued.
The expansion of industry is mainly responsible for the esti-
mated growth in GNP of 65 percent from 1948 to 1955 (see Table 12*).
Industrial output increased about 77 percent, whereas agricultural
output grew only 28 percent during this period. The rate of growth
of industry averaged 8.5 percent during the period and reached a
peak of more than 12 percent in 1952. Increases in electric power
generation and production in the engineering industries were especially
large. The interim "new course" plans of 1954-55 provided for contin-
ued expansion of industry (although at a slower rate than previously), but
the excessive disproportion in the growth of producer goods and con-
sumer goods was to be eliminated. The output pattern of the machine-
building industry was broadened to include durable consumer goods and
capital equipment for such consumer goods industries as food process-
ing and textile manufacturing. This planned shift in output was man-
ifest in Czechoslovakia's trade negotiations during 1955.'
During the 1949-53 period a large share of the national income
was channeled into investment, primarily for expansion of the industrial
* Table 12 follows on p. 28.
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Table 12
Indexes of Gross National Product and of Production by Economic Sector in Czechoslovakia 21
1938 and 1948-55
1948
= 100
1938
1948
1949
3950
1951
1952
1953
1954
1221
Gross national product
109
100
107
118
124
136
146
153
165
Industry
99
100
106
118
124
139
154
162
177
Agriculture and forestry
147
100
110
120
118
127
125
117
128
Construction
105
100
112
148
170
198
228
242
250
Transportation and communications
65
100
109
121
137
147
16Q
172
193
Trade and services
109
100
104
110
116
121
128
143
153
a. For rough comparisons with the other Satellites, see the 1955 indexes on a 1950 base in
Table 48, p. 119, below.
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sector. At the start of the Plan, about 20 percent of the national
income was allocated to investment, rising to about 25 percent in 1950
and 1951 and declining slightly thereafter. Investment is estima-
ted to have doubled during the Plan, whereas it is admitted officially
that consumption increased by only 25 percent. 12/ As planned, the
major portion of the increase in consumption represented growing govern-
ment expenditures for social welfare. Some gains appear to have been
made in personal consumption since 1954, although real wages of indus-
trial workers probably did not exceed prewar levels until 1956. When
the poor living conditions of other groups of the population along
with the acknowledged general deficiencies in housing and the quality
of consumer goods are considered, it is doubtful whether prewar stan-
dards of living were attained by the Czechoslovak population in 1955.
B. Use of Resources to Promote Economic Development.
1. Manpower.
Chronic shortages of manpower hampered the attainment of
Czechoslovakia's ambitious goals for industry and agriculture. Even
before the war, the country had no significant reserves of manpower.
The labor force was seriously reduced by the expulsion of about 2 mil-
lion Germans just after the war, causing a severe strain on the econ-
omy after the First Five Year Plan was launched. In the competition
for workers, industry always received the highest priority. Consequently,
there was a continuous flow of labor from agriculture to industry during
the Plan, with resultant adverse effects on agricultural production.
By the end of 1953 the agricultural labor force comprised
about 25 percent of the total labor force, compared with about 33 per-
cent in 1948. This change reflected a decline of about 18 percent in
the number of agricultural workers over the 5-year period. Meanwhile,
the nonagricultural labor force grew by about 20 percent (see Table 13*).
Although the industrial labor force was augmented by recruiting agri-
cultural workers) youths) women) and the aged, shortages of labor were
nevertheless encountered in such key branches as mining and metallurgy
and in construction. Since 1954, there has been a better balance in
the allocation of labor. New workers have been directed to agriculture
as well as to critical sectors in industry. In order to improve the
tight labor supply, the government planned demobilization of 34)000 men
in 1955 and an additional 10,000 in 1956. 1Q/
* Table 13 follows on p. 30.
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Table 13
Population and Labor Force in Czechoslovakia/
19148
1948 and 1953-55
Million
1948
1953
1954
1955
Population
12.12
12.81
12.95
13.09
Civilian labor force
Agricultural
1.94
1.58
1.53
1.6o
Nonagricultural
3.95
4.75
4.97
5.00
Total civilian labor force
5.89
6.R3
6.50
6.6o
a. Averages of estimates for the beginning and end of the
year.
2. Investment.
During the Five Year Plan, Czechoslovakia maintained a high
level of investment, representing more than 25 percent of national in-
come in some years. The trend in investment during and since the Plan
is shown in the following tabulation 11/:
Gross Capital Investment Index
as Percent of Investment
Year of National Income (1948 = 100)
1948
19
100
1949
20
115
1950
26
162
1951
26
180
1952
24
195
1953
23
195
1954
22
195
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Under the original version of the First Five Year Plan,
capital investments were to be concentrated on industry, transporta-
tion, and public works. Agriculture and trade, on the other hand,
were to receive the smallest allocations, as indicated in the follow-
ing breakdown of planned investment expenditures 1Li/:
Economic Sector
Planned Percentage Share
of Capital Investment
1949-53
Industry 39.2
Transportation 15.7
Public works (roads, bridges, dams) 14.0
Housing 11.7
Social and cultural facilities 8.5
Agriculture 8.0
Trade and building trades 2.9
Total
100.0
Early in 1951, investment goals were increased by one-half, and a greater
proportion of total investment than shown above was to be allocated to
industry. Most of the increase was earmarked for heavy industry. 12/
Accordingly, the industrial sector accounted for almost one-half of
realized investment during the Five Year Plan. ggi Total investment
fell an estimated 15 percent below the revised goal, however. 21/ The
neglected sectors of agriculture, trade, and housing received greater
shares of investment than formerly under the "new course" plans of
1954-55. Because over-all investment was held at the 1953 levels in
each of these years, industry and transportation undoubtedly received
correspondingly smaller shares than previously, but they continued to
account for the major part of total investment.
C. Phases in Postwar Economic Development.
Postwar changes in economic policy in Czechoslovakia fall into
three distinct periods: (1) the reconstruction period (1947-48),
(2) intensive industrialization (1949-53), and (3) consolidation
(1954-55). In all three periods the industrial sector was the main
concern of economic policy, although greater attention has been given
to other sectors since 1954.
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1. Reconstruction, 1947_)48..
TheCzechoslovak plan of reconstruction covered only 1947
and 1948 because the country had emerged from the war with a strong
Industry which was only partly damaged and disorganized. Industrial
production was claimed to have increased 10 percent ggi (contrary to
the indexes of estimated output given in Table 12*), but the GNP was
probably smaller than in 1938 because of the low level of agricultural
production. Substantial gains were registered in coal) steel) and
electricity) although the planned rehabilitation of industries suffer-
ing from capital depletion, particularly coal and steel, was not
achieved; nor were investment goals in housing construction attained.
A serious decline occurred in agriculture as a result of the 1947
drought, which together with a reduction in livestock) adversely affec-
ted the food supply. With about 65 percent of industry nationalized
and subject to central planning, the reconstruction period served as
a proving ground for planning methods applied more comprehensively in
subsequent plans.
2. Intensive Industrialization, 1949-53.
Soon after the Communists seized control of the Czechoslovak
government in 1948, they drafted a Five Year Plan (1949-53) which stressed
development of heavy industry over light industry and provided for the
Industrialization of Slovakia, where a significant segment of the country's
armament industry is now situated. Besides supplying about 65 percent of
the total Satellite output of armaments, the country has developed many
new lines of capital goods necessary for the industrialization programs
of other Satellites. Further sizable increases were also achieved in
the output of electric power, coal, and steel. The goals for coal and
iron ore were not entirely fulfilled, however, and production constantly
lagged behind the demands of industrial consumers. It was these dis-
proportionate rates of growth of various branches of industry which the
interim plans of 1954 and 1955 sought to remedy.
3. Consolidation, 1954-55.
Along with other members of the Soviet Bloc, Czechoslovakia
adopted a "new course" in late 1953 which was referred to as a policy
of "proportionate growth." Under this policy the rate of industrial
expansion was moderated in order to allow time for the correction of
* P. 28, above.
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imbalances that had developed under the forced industrialization of the
Five Year Plan. These Unbalances arose from an overemphasis on indus-
trial development at the expense of consumer goods production and a lag
in the output of coal and basic metals within heavy industry. An effort
was also made to improve the distribution system for consumer goods. In
agriculture, increased investment funds were allocated to both the pri-
vate and the collectivized sectors, and collectivization, although still
a long-run goal, was put on a more voluntary basis. By means of these
moves the government hoped to put the economy on a firm basis for the
launching of the Second Five Year Plan in 1956.
D. Survey of Major Sectors of the Economy.
1. Industry.
a. Principal Developments.
Czechoslovakia made impressive strides in industrial pro-
duction during the Five Year Plan, but the rates of growth were extremely
uneven among the various branches of industry. For example, production
of basic materials increased an estimated 42 percent from 1948 to 1953
compared with an estimated 70-percent increase in the output of the
engineering industries. These industries manufacture a wide range of
products such as transportation equipment, construction and agricul-
tural machinery, heavy electrical equipment, and equipment for the
chemical, oil, textile, and sugar-refining industries. Armaments pro-
duction increased greatly during the Plan.
Shortcomings in the fulfillment of the goals for coal,
iron, and steel were largely responsible for the comparatively slow
rate of growth of output in the basic materials category during the
First Five Year Plan. Production goals for coal, iron, and steel were
not attained, because of inadequate investment and chronic shortages
of experienced labor. Deficiencies in the output of basic materials
adversely affected the engineering industry. Moreover, because the mines
and foundries relied on capital equipment produced by the engineering
industry, the lag in engineering production contributed to the inade-
quate output of basic materials. Output of basic materials has tended
to correspond better to industrial requirements since 1954.
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b. Analysis of Plan Fulfillment.
Most of the revised production goals for basic materials
in 1953 were not fulfilled (see Table 14*), and in some instances these
goals still had not been reached by 1955. Production of hard coal in
1955 was still 12 percent, of iron ore 48 percent, and of crude steel
5 percent below the goals set for 1953. It is interesting to note) how-
ever) that the 1955 outputs of these products were announced as fulfill-
ment or overfulfillment of their goals, indicating the adoption of more
realistic plans for basic materials under the "new course." The degree
of plan fulfillment for machinery and equipment in 1953 is not known,
but the engineering industry appears to have lagged chronically in ful-
fillment of its plans) as it did also in 1954 and 1955 despite the fact
that the planned annual rates of growth were lower than during the Five
Year Plan.
c. Allocation of Resources to Industry.
The change in emphasis from light industry to heavy indus-
try under the First Five Year Plan required a corresponding shift in the
distribution of the industrial labor force. During this period the pro-
portion of industrial labor in the mining, engineering, and metalworking
industries increased from 29 percent to 38 percent of the total, accord-
ing to official sources, whereas the proportion in the textile, clothing,
leather and footwear, and glassware industries declined from 28 percent
to 21 percent. .2.3./
In recent years the percentage of the population in the
most productive age group, 15-64 years, has been declining. Because of
the limited prospects for increasing the labor force, Czechoslovakia has
relied more on increases in labor productivity than on added manpower to
meet industrial goals. According to official reports, 75 to 80 percent
of industrial growth during 1951-55 resulted from increases in labor
productivity. 4/1/
As already stated, industry was the main recipient of
investment funds during the First Five Year Plan) and heavy industry
received the bulk of the allocation.
* Table 14 follows on p. 35.
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Table 14
Planned and Actual Output of Selected Products in Czechoslovakia
1953 and 1955
Product
Planned Output, 1953
(Million Metric Tons aj)
Estimated Actual Output
(Million Metric Tons gi)
Actual Output
in 1953 as Percent
of Revised Plan
Original
Revised
1953
1955
Hard coal
20.8
25.0
20.3
22.1
81
Brown coal and lignite
32.2
35.8
34.3
40.8
96
Coke
8.0
8.0
7.96 y
9.18 12/
loo
Iron ore
1.4
3.8
1.73
1.99
46
Pig iron
2.7
3.0
2.73
2.98
93
Crude steel
3.5
4.7
4.37
4.47
93
Crude oil
0.24
0.31
0.12
0.13
39
Electric power
(billion kilowatt-hours)
11.2
12.3
12.4
15.0
101
a. With the exception indicated for electric power.
b. Intelligence estimates for all types of coke. Lower figures in official sources are believed
to include only metallurgical coke.
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2. Agriculture.
a. Trends in Production.
Agricultural production in Czechoslovakia, as in the
other Satellites, fell far behind the planned goals of the Five Year
Plan. Gross agricultural production increased only 14 percent over
the Plan period) compared with a planned goal of 53 percent. A drought
in 1954 held production at the 1953 level. In 1955, however, it was
claimed that gross output increased to about the prewar level.
Output of foodstuffs and fodder crops has increased
much more rapidly than industrial crops; the greatest gains were in
meat, animal fats, milk) barley, and oats. Production of potatoes,
a basic food for the population, was still far below prewar levels
in 1955) however. The expansion which has taken place in agricul-
tural production reflects mainly governmental efforts to promote
livestock production.
b. Food Availabilities.
The per capita caloric intake of food in Czechoslovakia
has ranged from about 90 to 107 percent of the prewar level since 1948.
It therefore has been generally adequate, although it is rather low for
an industrially advanced country. This level of food consumption prob-
ably would not have been possible, however, without the population los-
ses and a slight shift to lower quality foods during the postwar years.
The stagnation in agricultural output therefore was not fully reflected
in the per capita caloric intake of food. Shortages of potatoes, meat,
and grain exerted some downward effect on food availabilities in the
1954/55 food consumption year, but consumption in 1955/56 was somewhat
higher again and is estimated to have slightly exceeded the prewar
average. This improvement was a result of the exceptionally good har-
vest of 1955 and the continued large imports of high-quality foods,
particularly meat and butter, from the West.
c. Socialization.
The socialized sector of agriculture has been relatively
larger in Czechoslovakia than in most other Satellites, although it has
not yet embraced more than 45 percent of total agricultural land. The
number of collective farms, which comprise the greater part of the so-
cialized sector, has fluctuated sharply in Czechoslovakia, as the rapid
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gains of forced collectivization during 1951 and 1952 were considerably
reduced as a result of the more lenient policy adopted after the death
of Stalin. Many collectives disbanded between June 1953 and June 1955,
reducing the amount of agricultural land held by them from about one-
third to one-fourth of the total (see Table 15*). 251 The decline in
the socialized sector as a whole would have been even greater if some
of the land of disbanded collectives had not been turned over to state
farms and other public bodies such as ministries) schools) factories,
and the army. The area held by state farms has increased gradually
since mid-1953 and in early 1956 amounted to about 12 percent of the
country's arable land. gi Since June 1955 the regime has renewed
the collectivization drive in a determined effort to make socialized
agriculture predominate by the end of 1960. Many new collectives
have been formed since mid-1955.
d. Investment and Manpower.
In accordance with the "new course" policy, there was
some attempt to give the agricultural sector a greater proportion of
investment funds. Whereas total investment outlays for most sectors
of the economy were held at approximately the 1953 level in 1954 and
1955) investment in agriculture renortedly doubled. 2.7./ This invest-
ment pattern continued during 1955.
A separate 3-year plan for agriculture, which called
for the recruiting of 320,000 new permanent workers by 1956, was
adopted in 1954. 211/ These recruits were to be primarily youths and
women who would work for the collectives and machine tractor stations.
In 1955 the Czechoslovak government claimed that 100)000 more workers
had been recruited for agriculture and that 14,000 students had enrolled
in agricultural schools. 22/ Although there is some doubt concerning
the permanency of some of these new workers, the increases registered
in 1955 do manifest some success for the government's effort to augment
the agricultural labor force. Nevertheless) the shortage of agricul-
tural labor remains a persistent economic problem in the country.
3. Foreign Trade.
Changes in the structure of industrial output under the
Communist regime have resulted in substantial changes in the composi-
tion and direction of Czechoslovak foreign trade. Before World War II,
* Table 15 follows on p. 38.
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Table 15
Socialization of Agriculture in Czechoslovakia 2/
1950-55
Collective Farms
(Types II-IV)
Total
Area
State Farms
Socialized Sector
Year
Number
(Percent of Land)
(Percent of Land)
(Percent of Land)
December 1950
3)743
15.1
N.A.
N.A.
December 1951
4,480
17.4
N.A.
N.A.
December 1952
7,819
34.8
8.2
43.0
June 1953
8,248
36.7
8.2
44.9
December 1953
7,350
N.A.
9.0
N.A.
June 1955
6,663
26.7
9.8
36.5
a. All percentages in the table refer to agricultural land, which consists of arable
land plus permanent meadows and pastures.
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Czechoslovakia's trade was conducted principally with countries now
outside the Bloc. Germany (including East Germany and the German areas
now under Polish administration) was the country's most important trad-
ing partner, but the USSR has assumed that role in postwar years) when
trade was increasingly reoriented from Western Europe toward the Sino-
Soviet Bloc. Although industrial raw materials and foodstuffs still
constitute the main categories of Czechoslovakia's imports, foodstuffs
bulk much larger in imports than they did in the prewar period. Man-
ufactures remain the country's chief exports, but producer goods
(especially producers' equipment) now occupy the position once held
by consumer goods as the chief export category.
As can be seen in Table 160* Czechoslovak trade with the
Sino-Soviet Bloc rose from 32 percent of total trade turnover in 1948
to 78 percent in 1953 but declined somewhat in relative importance with
the introduction of the "new course." The Soviet share of Czechoslovak
trade continued at the same high level as in 19530 however. Beginning
with 1953, Soviet trade has accounted for about one-half of Czechoslov-
akia's trade with the Sino-Soviet Bloc and more then one-third of total
trade turnover.
Even though reduced to only 22 percent of Czechoslovakia's
total trade by the end of the First Five Year Plan, 22/ trade with non-
Bloc countries was nevertheless of great importance to the economy. Most
of this trade was conducted with countries of Western Europe. Since 1953,
there has been a minor resurgence of non-Bloc trade, particularly with
underdeveloped countries in Latin America, the Far East, and the Middle
East. Czechoslovakia has been one of the most active Satellites, along
with East Germany and Poland, in the Soviet Bloc's economic penetration
of these areas. Its expenditures at trade fairs in these areas have
been the largest of any Bloc country, accounting for one-third of total
Bloc spending for such purposes in 1955. As a leading exporter of land
armaments to non-Bloc nations, Czechoslovakia concluded arms agreements
in 1955 with Egypt valued at least at $18 million; with Syria, $7 million;
and with Afghanistan, $5 million. The volume of arms shipments increased
still further in 1956. In addition to supplying armaments and railroad
equipment, the country has extended credits and signed contracts to fur-
nish complete industrial units such as cement, ceramic, shoe, textile,
sugar, refrigeration, and power plants, to countries of the Middle East,
Asia, and Latin America.
* Table 16 follows on p. 40.
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Table 16
Geographic Distribution of the Foreign Trade Turnover of Czechoslovakia
1936-38 Average, 19484 1950, and 1953-55
Area or Country
Average
1936-38
1948
1950
1953
1954
1955
Million
Current US $
Percent
Million
Current US $
Percent
Million
Current US $
Percent
Million
Current US $
Percent
Million
Current US $
Percent
Million
Current US $
Percent
Sino-Soviet Bloc
Of which: USSR
Other
Total
120
11
572
.?.2R.
17
2
83
loo
459
229
-975
1,434
32
16
68
loo
744
365
609
14.121
55
27
45
loo
1,46o
655
412
1,872
78
15
22
loo
1,454
698
484
1,918
- 75
36
25
100
1,559
779
668
2,227
70
35
30
100
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Exports of machinery and equipment) primarily to members
of the Soviet Bloc, have more than compensated for the decline in con-
sumer goods exports since the-beginning of the First Five Year Plan.
Machine tools) textile machinery, powerplant equipment, motor vehicles,
other engineering products, and semifinished metal products are well
represented in Czechoslovak agreements for exports of capital goods.
Textiles, footwear, leather, and paper products constitute about 10
percent of total exports and account for a significant part of the
country's hard-currency earnings. Czechoslovakia also exports large
quantities of sulfuric acid and coal-tar derivatives.
Czechoslovakia's raw material requirements are largely
satisfied through imports. It was claimed at the end of 1955 that the
USSR was supplying 80 percent of the iron ore, 70 percent of the copper,
80 percent of the synthetic rubber, and 60 percent of the phosphate
which Czechoslovakia imported. 21/ Petroleum products are imported
from the USSR and Austria, and hard coal from Poland. Because of.Czech-
oslovakia's intensive industrialization drive, the country has become
a net importer instead of a net exporter of coal. Raw cotton, wool,
flax, hides, and crude rubber are also imported in substantial quanti-
ties. Apart from materials for the ceramics industry, timber) woodpulp?
and uranium ores, Czechoslovakia exports few raw materials. It does,
however, make sizable deliveries of coke and semifinished steel to
other countries of the Bloc. In 1955, exports of finished steel prod-
ucts to Western countries were increased on account of a reduction of
Soviet requirements for these products.
I. Housing.
Housing conditions were better in Czechoslovakia than in
most of the other Satellites at the beginning of the first long-term
plans) although both new construction and rehabilitation of old dwell-
ings were needed to keep up with the growth in population and to satisfy
the people's desire for improved living standards. Little or no improve-
ment, however, took place in housing conditions. Construction of new
dwellings averaged only about 37,500 units annually during 1949-55) where-
as there was an estimated net increase of 40,000 to 6o,000 married couples
each year.
Neither the Five Year Plan goal nor the 1954 and 1955 goals
for new housing construction were fulfilled. Construction of dwellings
In 1955, however, was well above the level of preceding years, New
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housing has been concentrated in rapidly expanding urban and industrial
areas; construction and maintenance of rural dwellings have therefore
been neglected. The government has been attempting to ease the housing
shortage by manufacturing prefabricated units and by stimulating private
construction, but in general it appears to be less concerned about the
'problem than are the regimes in the Satellites where housing deficiencies
are more pronounced.
5. Other Sectors.
Goals for the expansion of the transportation and communi-
cations systems during the First Five Year Plan were generally attained.
This was achieved in the case of the railroads, which accounted for
89 percent of the total freight traffic performance in 1955, by inten-
sive utilization of rolling stock and by expanding the railroad network
in the less developed, eastern part of the country. A second track of
the "Friendship Line" from Prague to the Soviet border at Cierna) for
example) was completed in November 1955, further increasing the impor-
tance of this line in trade with the USSR. The railroads, which are
the greatest single consumer of coal, have been hampered by coal short-
ages from time to time in the past. The government plans to curtail
the coal requirements of the railroads by extending electrification)
as powerplants are much more efficient than steam locomotives in con-
verting coal into energy. Highway transport in 1955 accounted only
for about 3 percent of freight traffic performance.
Construction activity is claimed to have increased 130 per-
cent during the First Five Year Plan and 10 percent beyond that during
the following 2 years. 2/ Despite these increases, construction goals
were not fulfilled for any sectors of the economy. The consistently
poor showing of the building industry was due to shortages of qualified
workers, worker absenteeism, failure to introduce modern construction
methods, and the undertaking of too many projects at one time.
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IV. East Germany.
A. General Policy and Achievements.
1. Introduction.
East Germany's two principal economic aims during the
period of its First Five Year Plan (1951-55) were to extend greatly
the socialized sector in both agriculture and industry and to raise
Industrial production to a level well above that of 1950. After a
rapid start in 1952 and the first half of 1953, agricultural col-
lectivization efforts were relaxed somewhat with the advent of the
"new course." The proportion of total agricultural land in the
socialist sector continued at about 30 percent during the last 2
years of the Plan, although some additional collectives were formed
from abandoned farm land administered by local governmental units.
The share of the socialist sector in gross industrial production
increased only from 76 percent in 1,50 to 85 percent in 1955,
leaving a much larger private sector in industry than is found in tae
other Satellites.
The 5-year goal for gross industrial production was offi-
cially claimed to have been fulfilled with an increase of about 90
percent from 1950 to 1955. Independent estimates based on production
data for a sample of products suggest that the growth in net indus-
trial production (which excludes the double counting in measures of
gross production) was somewhat smaller than that. Official East
German statistics show that net output in agriculture and forestry
rose only 12 percent from 1950 to 1955. 3V The combined effect of
the growth of output in industry, agriculture, and other parts of
the economy was claimed to be a 62-percent increase in national in-
come. 3V
East Germany's economic goals during the period probably
were more stable than those of most of the other Satellites. The
first revision of the East German Plan, in 1951, was minor compared
with the changes in several of the other countries and in part merely
took into account the difference between anticipated and actual out-
put of certain products in 1950, the base year of the Plan. The "new
course" program was marked by changes of varying degree in several
aspects of the operational plans for 1953 and 1954, but there was
little or no change in the over-all objectives for 1955. A series of
measures was decreed which slowed up the effort to extend the sociali-
zation of agriculture and industry, provided for improvements in living
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standards, and changed the allocation of resources to some extent to
bolster output of agricultural commodities, raw materials for in-
dustry, and consumer goods. Some of these measures were regarded
merely as correctives for growing imbalances among the different
parts of the economy. Other announced changes, particularly those
aimed at improving living standards, were partly political in moti-
vation and never were carried out to the full extent promised. Sup-
plies of food and dwelling space thus were still well below the ac-
customed standard at the end of the Plan period.
2. Growth of the Economy.
Even though a significant portion of East German indus-
try, agriculture, and trade remained in private hands during the
Plan, the adoption of Soviet techniques of economic planning and
administration gave the regime extensive power to guide the area's
economic development. This power was used to promote high rates
of economic growth while holding down personal consumption and
(during the first years of the Plan) making the required reparations
deliveries to the USSR. The economy was still operating at a com-
paratively depressed level in 1950, and there thus was considerable
scope for more complete and efficient utilization of productive fa-
cilities and the labor supply. Effective advantage Vas taken of
these opportunities to raise the total output of goods and services,
or GNP.
East Germany's GNP increased by an estimated 50 percent
from the low level of 1950 (see Table 17*), or at an average rate
of about 8.5 percent per year. East Germany thus had one of the
more rapidly growing economies in the Soviet Bloc and in Europe
generally during this period. The GNP was only slightly higher in
1955 than in 1938, however, leaving East Germany well behind the
other Satellites and most Western European countries in this respect.
3. Changes in Origin and Distribution of Output.
Significant changes took place both in the origin and in
the distribution of the GNP during the First Five Year Plan. The
preferential development accorded industry resulted in its originating
about one-half of total output in 1955 -- a larger share than ever
before. The share of agriculture in total output, on the other hand,
Is estimated to have declined from 16 percent in 1950 to only 12 per-
cent in 1955.
* Table 17 follows on p. 45.
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Table 17
Indexes of Gross National Product and of Production
by Economic Sector in East Germany
1938 and 1950-55
1950
= 100
1938
1950
1951
1952
1953
1954
1955
Gross national product
144
100
114
121
130
142
150
Industry
137
100
119
134
147
160
175
Agriculture and forestry
130
100
101
98
98
111
112
Construction
204
100
138
152
165
173
185
Transportation and com-
munications
124
100
118
132
154
149
152
Trade and services
153
100
107
106
112
123
126
a. For rough comparisons with the other Satellites, see the 1955
indexes on a 1950 base in Table 48, p. 119, below.
The principal factor affecting the distribution of the
national product probably was East Germany's reparations obligations
and other drains on its output for the benefit of the USSR. Soviet
takings of all kinds took perhaps one-sixth of total output in
1950.3.1.6j The scaling down of reparations levies in the early years
of the Plan and the termination of such obligations at the end of
1953) together with a reduction in payments for the support of the
Soviet occupation forces after 1953, are estimated to have reduced
this ratio by about one-half by 1955. Increases in personal con-
sumption during the first 3 years of the Plan probably were quite
small, considering.the continuing high level of Soviet takings and
the substantial increases in investment expenditures. In 1954 and
1955, however) the East Germans benefited from more substantial gains
in consumption as investment leveled off and the economic burden of
the Soviet occupation was reduced.
Consumption of food during the First Five Year Plan was
consistently below prewar consumption, averaging less than '90 percent
of the average caloric intake during 1935-38 (see Table 46*). Although
* P. 117, below.
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the volume of food imports has been comparatively large, imports
have not been able to offset the low level of domestic production.
Before the war, this area ranked first in food consumption among
the present-day Satellites, but its per capita caloric intake is
now one of the lowest in the group. Consumption of grains of all
kinds has been maintained at or above the prewar level, however,
Indicating a reduction in the quality as well as the quantity of
food consumed by the population. Meat, fats, and sugar were
rationed throughout the period, but the balance between starchy
foods and animal products has improved somewhat in recent years.
B. Survey of Major Sectors of the Economy.
1. Industry.
a. Trends in Production.
Industry grew much more than any other sector of
the economy except construction during the First Five Year Plan
(see Table 17*). The increase in net industrial production is
estimated at 75 percent, compared with a planned increase in gross
industrial production of 90 percent (later revised to 92 percent)
and the officially announced fulfillment of the goal with an in-
crease of 90 percent.** According to the regime, this accomplish-
ment raised industrial production to more than twice the 1936
level, but estimates derived from sample commodity data indi-
cate an increase of less than 30 percent over 1938, or roughly
50 percent over 1936. East Germany now claims to be the ranking
Industrial producer among the European Satellites and the fifth
largest in Europe, following the USSR, the UK, France, and West
Germany. 19/
In spite of the mediocre resource base, large gains
were made from 1950 to 1955 in the output of some important raw
materials. Brown coal production increased by about 45 percent (to
* P. 45, above.
** Official East German statistics 1// indicate that the goal for
industrial production for the entire 5 years of the Plan period was
fulfilled by 104.4 percent. The more usual comparison, between out-
put in the year preceding the Plan and output in the final year of
the Plan, indicates an increase of 89.6 percent and, consequently,
slight underfulfillment of both the original goal and the revised
goal for 1955.
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over 200 million metric tons), and electric power generation (based
primarily on brown coal supplies) grew to a similar extent. Produc-
tion of crude steel was raised to more than 2-1/2 times the 1950
level, but not without increasing the area's dependence on imported
iron ore, which provided over one-half of requirements in 1955.
Among the nonferrous metals, the outputs of refined copper and lead
increased by about one-fifth and two-thirds, respectively, and pro-
duction of aluminum grew from only 800 metric tons in 1950 to 27,000
metric tons in 1955. In the case of chemicals -- an East German
specialty which provides about one-sixth of exports 112/ -- output
rose by more than three-fourths. Production of bricks and cement
also increased substantially.
Large gains were also made in the output of certain
types of machinery and equipment, particularly trucks, passenger
automobiles, and tractors. Production of mainline locomotives was
negligible throughout the period, on the other hand, and freight
car output declined. Large gains in the output of some consumer
goods other than foodstuffs were achieved.
Unlike most of the long-term plans of the Satellites,
East Germany's Plan did not contain widely divergent goals for heavy
Industry and light industry. The increases planned and officially
reported to have been achieved for these two categories of produc-
tion from 1950 to 1955 were within about 10 percent of the projected
increase for industry as a whole. This relationship is perhaps ex-
plained by the fact that East Germany's engineering industries were
reasonably well developed at the start of the Plan and the invest-
ment program was somewhat less ambitious than in most other Satellites.
Furthermore, the official index for light industry probably has an
upward bias because of the increasing statistical coverage of food
processing and handicraft output in the course of the Plan.
Official reports of annual increases in gross indus-
trial production and calculations of annual increases in net indus-
trial production from available commodity statistics suggest that the
growth of industrial production in East Germany was more regular than
that of most of the other Satellites. In particular, East Germany
apparently avoided the conspicuous slackening in the rate of indus-
trial growth which occurred in Czechoslovakia and Hungary in 1954.
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b. Manpower, Investment, and Productivity.
A vital factor in East Germany'a industrial perform-
ance during the Plan was the enlargement of the industrial labor
force by about 600,000 workers, or more than one-fourth. This was
accomplished in the face of a decline in population of nearly 500,000
persons and a nonagricultural labor force which increased very little
(see Table 18). Through a combination of incentives and pressures)
employment of women was increased by about 650,000 during the period. )21/
Numerous persons were induced to leave agriculture for industrial em-
ployment, but not without adverse effects on agricultural production.
Transfers of labor to industry from agriculture and the less essential
nonagricultural employments became progressively more difficult, how-
ever) and in 1955 there were transfers of industrial workers to agri-
culture and construction. The industrial labor force grew by only
5)000 workers from 1954 to 1955.
The problem of expanding the industrial labor force
was aggravated greatly by emigration. East Germany suffered a net
loss of more than 1 million persons during the period from 31 August
1950 to the end of 1955, judging by official, data on the excess of
births over deaths and the admitted drop in population of 556)000
persons during the period. 112/
Table 18
Population and Labor Force in East Germany Li"
. 1950-55
Million
1950 1951 1952 1953 1954 1955
Population
-18.40
18.35
18.33
18.18
18.06
17.94
Civilian labor force
Agricultural
1.98
1.86
1.74
1.63
1.62
1.67
Nonagricultural
6.52
6.44
6.36
6.27
6.48
6.57
Of which: Industrial hi
2.15
2.40
2.57
2.64
2.76
2.77
Total civilian labor
force 8.50 8.30 8.10 7.90 8.10 8.24
a. Averages of estimates for the beginning and end of the year except
for industrial labor force data, which are annual averages.
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The trend in investment in industry during the Plan
generally paralleled that in the economy as a whole. The largest
Increases evidently were realized in 1951-53, followed by a dip in
1954 and a return to the 1953 volume in 1955. al/ As the plans for
both total investment and industrial investment were fulfilled by
little more than two-thirds, industry accounted for about one-half
of total investment as planned (see Table 19). Investment in light
industry was increased considerably after the "new course" but in
1954 still amounted to less than one-fourth of investment in heavy
industry. 1151
Table 19
Planned and Actual Gross Capital Investment
in East Germany During the First Five Year Plan (1951-55) !,/
Billion Deutsche Ma.rk12/ at 1950 Prices
Planned for Period
Economic Sector
initial
Plan
1951
Revision
Actual Gross Invest-
ment During
Period
Industry
14.1
15.4
10.7
Agriculture
1.4
.1.8
1.9
Transportation and
communications
2.0
2.7
1.82/
Housing
5.1
4.3
3.5
Educational, health, and
cultural facilities
1.6
2.4
0.9
Other
2.7
2.0
1.6
Total
26.9
28.6
20.4
a. IS
b. The official exchange rate for East Germany since November
1953 has been 1 Deutsche Mark LEasg (DME) to US $0.45 or, con-
versely, US $1 to 2.22 DME. The official exchange rate for West
Germany -- 1 Deutsche Mark 5Iesg(DMW) to US $0.2381, US $1 to
4.20 DMW -- is considered a usable conversion rate for the DME.
The rate for the DME on the Berlin free market, which usually falls
within the range of '18 to 20 DME to US $1, is influenced by special
factors such as the illegal Character of the traffic (from the East
'German point of view) and the flow of East German refugees to West
Berlin and the Federal Republic of Germany and understates the gen-
eral purchasing power of the DME.
c. Excluding telecommunications.
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Despite the leveling off in the volume of investment
after 1953, it probably expanded more than the total output of goods
and services during the Plan. The general level of investment, how-
ever, apparently was lower in relation to total output than in the
other Satellites because of the reparations deliveries and other
takings by the USSR. L4-7/ Moreover, as some lines of industry had
already been developed in East Germany) it was necessary in some
instances only to repair, enlarge, or modernize existing facilities
to obtain prompt and substantial increments in output.
Although labor productivity did not rise BS rapidly
as planned) causing East German authorities to step up the flow of
labor into industry, a sizable gain in average output per worker
was nevertheless achieved. More than one-half of the 5-year in-
crease in industrial production is ascribable to improved labor
productivity. In addition to rehabilitating and expanding Pro-
ductive facilities, the regime endeavored to raise average output
per worker through the use of piece-rate pay systems, training
programs, bonus plans, and social security benefits, together with
frequent productivity campaigns and unceasing exhortation.
2. Agriculture.
a. Trends in Production.
Agriculture was the victim of serious neglect by the
East German regime during the First Five Year Plan. In contrast to
the large increase in industrial output during 1951-55, net agri-
cultural output rose only about 12 percent. Most of that gain, more-
over, was registered in 1954; output changed little during the first
3 years of the Plan. Despite better than average weather, the out-
put of most major agricultural commodities in 1955 amounted to only
50 to 75 percent of the Plan goals. Total agricultural production
In 1955 probably was at least 10 percent below the 1935-39 average.
Crop yields per hectare generally remained below the
prewar level, but the output of some minor crops such as oilseeds,
flax, and hemp was raised above the prewar level by expanding their
cultivated area. A more important change in the pattern of agri-
cultural output was the greater emphasis on livestock. Whereas the
average output of grains, potatoes, and sugar beets during 1951-55
was substantially lower than before the war, average inventories of
cattle and hogs were appreciably higher. The output of meat, milk,
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and animal fats did not reach a correspondingly high level, but the
output of such products has increased gradually and now more nearly
approximates the prewar achievement than is the case with grain or
root crops.
The stagnation of East German agriculture during the
Plan was largely the result of the stress on industrial expansion
and the efforts of the regime to collectivize the land rapidly. These
policies led to shortages of agricultural machinery and fertilizer;
serious loss of manpower to industry and to the West; and reduced in-
centives for farmers because of inadequate supplies of consumer goods
in rural areas, onerous government regulations concerning farming
operations, pressure for collectivization, and state procurement of
a large part of their output at controlled low prices. The effect
of these policies on agricultural output has been such that East
Germany requires a sizable net import balance in foodstuffs to main-
tain the present depressed level of consumption, whereas the higher
consumption level of the prewar period was accomplished with balanced
trade in foodstuffs.
b. Socialization.
The drive to socialize agriculture began somewhat
later in East Germany than in the other Satellites. Concerted ef-
forts to form agricultural collectives were first made by the regime
in 1952, and by mid-1952 about 5,000 collectives with a membership
of nearly 150,000 persons had been organized. Several hundred of
these were disbanded during the second half of 1953 (after the
announcement of the "new course"), reducing the proportion of total
agricultural land held by collectives from about 12.5 percent to
11 percent. Abandoned land administered by local units of govern-
ment apparently accounted for about 14 percent of the total agri-
cultural area at this time, or more than the area cultivated by
collectives. More than 500 state farms accounted for an additional
it percent, making a total of about 30 percent of the agricultural
land in the socialist sector (see Table 20*).
The area within the socialist sector increased very
little during the remaining 2 years of the Plan. Approximately
1,000 collectives were formed from part of the land held by the local
governmental units, however, and the proportion of collectives of
* Table 20 follows on p. 52.
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Table 20
Socialization of Agriculture 2/ in East Germany h/
1951-55
Period Ending
Collective Farms
Local Agricultural
Enterprises hi
(Percent of Land)
State Farms
(Percent of Land)
Total Socialized
Sector
(Percent of Land)
Number
Membership
(Thousands)
Area
(Percent of Land)
31 December 1951
Negligible
Negligible
Negligible
Negligible
4 21/
4
31 December 1952
1,815
31.2
2.5
N.A.
142/
N.A.
30 June 1953
5,074
146.9
12.5
N.A.
4 2/
N.A.
31 December 1953
4,691
133.8
11.2
14
4
29
31 December 1954
5,120
158.4
14.6
N.A.
4 2/
N.A.
15 November 1955
6,047
196.9
20.0
6!/
4 2/
30
a. All percentages in the table refer to agricultural land, which consists of arable land plus permanent meadows and
pastures.
c. Abandoned farms and other community lands administered by local units of government.
d. Land held by educational and other institutions (amounting to about 1 percent of total agricultural land) is ex-
cluded to make the percentage comparable with those for 1953 and 1955.
e. Assumed to be the same percentage as reported previously.
f. 15 December 1955.
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"Type III" (which most nearly resemble Soviet collectives) was in-
creased from about one-third to three-fourths of the total. 1457
c. Investment and Manpower.
The preference which industrial development received
under the First Five Year Plan considerably restricted the amount of
investment funds and labor allocated to agriculture. The share of
total capital investment planned for agriculture during the 5-year
period was about 6 percent, or much less than the estimated share of
agricultural output in the GNP. Actual agricultural investment was
especially small until the introduction of the "new course" in 1953.
The level of agricultural investment during the last 3 years of the
Plan was approximately double that of the first 2 years, and the
small goal of the Plan evidently was fulfilled. 22/ However, the new
investment policy for agriculture, which apparently will be continued
during the Second Five Year Plan, has not yet had an appreciable effect
on agricultural output.
Mechanization of East German agriculture, though fairly
advanced by Satellite standards, was not increased enough to compensate
for the heavy losses of agricultural labor during the period of the
Plan. In addition to the transfer of labor from agriculture to indus-
try, which was fostered by all of the Satellites until 1953, East
Germany's agricultural labor force was materially reduced by the loss
of population to West Germany It is estimated that, during the
course of the Plan, the agricultural labor force declined by 300,000
persons, or about 15 percent. Moreover) this group included a larger
than average proportion of males in the most productive age groups
and disproportionately large nutbers of specialists and the more
highly skilled types of laborers. By 1955, only 20 percent of East
Germany's labor force remained in agriculture, compared with a ratio
of 25 percent in Czechoslovakia, the next most industrialized Satellite.
3. Other Sectors.
Transportation, communications, finance, and foreign trade
were largely or entirely nationalized before the start of the Plan,
but private enterprise was still important in some areas other than
indugtry and agriculture at the end of the period. Many small private
handicraft establishments were still in business, and about one-third
of retail trade turnover and one-half of construction output (includ-
ing handicrafts) remained in private hands in 1955.
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The volume of construction output increased somewhat more
than industrial output from 1950 to 1955. Building of industrial
plants and community facilities received a clear priority over hous-
ing construction, Which apparently grew only by about one-third.
Several important industrial plants were built during the Plan, in-
cluding the Stalin Metallurgical Combine near Fuerstenburg/Oder, the
Metallurgical Works/West at Calbe, and a large plant at Lauchhammer
which produces metallurgical-grade coke from brown coal. The opera-
tions at Lauchhammer were not entirely successful at first, but the
process has been improved sufficiently to permit the manufacture of
a reasonably satisfactory substitute for coke made from hard coal.
In addition to these examples of new construction, numerous other
plants were enlarged during the period.
Despite the loss in population of about 500,000 persons
during the First Five Year Plan, a shortage of housing continued to
be a significant economic problem in East Germany East German
housing conditions at the beginning of the Plan were more adequate
than those in any other Satellite except Czechoslovakia, but there
was a marked deterioration from prewar standards. The number of
dwelling units per 1,000 inhabitants, for example, was only about
75 percent as large in 1950 as in 1939.
The plan for construction of 10.1 million square meters
of housing during 1951-55 was fulfilled by about 90 percent. It is
estimated that this represents 212,000 dwelling units, but the net
addition to the stock of housing no doubt was appreciably smaller
because of the retirement of some seriously damaged or dilapidated
units. Some slight improvement in the over-all housing situation
probably took place during the Plan, but little more than a start
was made toward the restoration of prewar housing standards. Over-
crowding is most serious in the cities which suffered the most
severe war damage or in which new industrial facilities and offices
of the state economic administration have been concentrated.
Freight and passenger traffic increased substantially in
volume from 1950 to 1955. Ton-kilometers of railroad freight traffic
In 1955 exceeded the 1936 level by about 30 percent, and highway
freight traffic was several times as great as before the war. Freight
traffic on inland waterways, on the other hand, was much smaller than
in 1938 because of the reduced volume of trade between the areas which
now make up East Germany and West Germany As in the other Satellites,
facilities have been used more and more intensively in recent yearsj
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but the deterioration of both track and equipment under the strain
of heavy traffic probably is most serious in East Germany.
In retail trade, too, considerable progress during the
Plan was claimed officially. The reported doubling of retail trade
turnover (at comparable prices) 2/ undoubtedly gives an exaggerated
impression of the improvement in East German living standards) how-
ever. Part of this increase is due to the further urbanization of
the population, which increased the proportion of consumer goods
marketed through regular retail channels. Furthermore, the official
figures do not adequately reflect the deterioration in the quality
of consumer goods during the Plan.
The foreign trade turnover of East Germany was still far
below the prewar level in 1950. The Plan stressed the need for in-
creased trade and provided for nearly a tripling of the 1950 volume.
This goal was not quite reached, but trade nevertheless increased
substantially (see Table 21). The share of basic raw materials and
foodstuffs in total imports fell during the period) and that of
agricultural products and textiles rose. Produdts of the metal-
Table 21
Indexes of the Foreign Trade Turnover of East Germany 2/
1950-55
1950
= 100
1950
1951 .
1952
1953
1954
1955
Total turnover
100
151
1t3
223
271
280
Imports
100
129
165
209
233
250
Exports
100
176
182
238
315
315
a. Calculated from official data 23i expressed in
rubles.
fabricating industries became particularly important in East German
exports in the course of the Plan, increasing from 32 percent of
total exports in 1950 to about 60 percent in 1955 (see Table 22*).
* Table 22 follows on p. 56.
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Table 22
Imports and Exports of East Germany, by Product Group 21
1950 and 1953-55
Percent of Total
Product Group
1950
1953 1954
1955
Imports
Basic materials
44.6
36.9
37.8
38.6
Of which: Metallurgical products
16.9
13.6
13.7
14.5
Fabricated metal products
8.2
5.2
4.8
U.
Products of light and food industries
34.0
36.3
36.9
34.8
Of which: Textiles
8.4
12.6
13.6
14.0
Food and stimulants
22.3
20.8
18.8
15.9
Agricultural and forest products
13.2
21.6
20.5
21.9
Total
100.0
100.0
100.0
100.0
Exports
Basic materials
42.6
26.2
25.7
28.6
Of which: Chemicals
21.9
14.5
15.7
17.0
Fabricated metal products
31.9
62.7
62.2
60.4
Products of light and food industries
21.7
10.1
11.2
10.1
Agricultural and forest products
3.8
1.0
0.9
0.9
Total
100.0
100.0
100.0
100.0
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The share of other Bloc countries in East Germany's foreign trade
grew from about 72 percent in 1950 to more than 77 percent in 1953,
but a ratio approximating that of 1950 was reestablished in 1955
(see Table 23). This change was a consequence of the general Bloc
campaign to expand trade with Western Europe and with underdeveloped
countries in various parts of the world.
Table 23
Geographic Distribution of the Foreign Trade Turnover of East Germany Lti
1950 and 1953-55
Percent of Total
Country or Area
1950
1953
1954
1955
Sino-Soviet Bloc
USSR
39.7
45.7
44.0
38.3
European Satellites
32.6
25.6
24.7
25.8
Albania
Negligible
0.2
0.1
0.3
Bulgaria
0.9
1.9
2.0
2.1
Czechoslovakia
8.3
5.9
6.3
6.7
Hungary
3.8
3.9
4.0
4.4
Poland
18.9
11.3
10.3
9.7
Rumania
0.7
2.4
2.0
2.6
Communist China, Korea,
and Vietnam
Negligible
6.2
7.4
7.9
Total
124.2
77.5
76.1
72.0
Other countries hi
27.7
22.5
23.9
28.0
Of which: European coun-
tries 1:2/
27.2
20.6
21.5
24.0
Of which: West Germany
16.0
6.9
8.8
11.0
100.0
100.0
100.0
100.0
a. 55/
b. Including Yugoslavia, which is lumped with the Sino- 50X1
Soviet Bloc countries to form the "democratic world market."
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V. Hungary.
A. Major Economic Policies and Problems.
In accordance with Communist theory, the long-term economic
policy of Hungary stresses rapid industrialization of the country and
socialization of the means of production. For the First Five Year
Plan (1950-54) the primary emphasis was placed on the development of
heavy industry: that is, on the machine-building industry and the
supporting industries supplying basic materials and electric power.
This was in line with the Communist principle that investment should
first be concentrated on industries producing capital goods, which
ostensibly would then be used to produce more consumer goods.
Hungary's difficulties consist chiefly in attempting to build
an economy with a broad line of heavy industrial products on a weak
foundation of natural resources. It has attempted to finance sub-
stantial capital investment in heavy industry from domestic resources
and in so doing has limited consumption severely. At the same time,
there has been a large drain on its resources through payments to the
USSR for (1) reparations, (2) relinquishment of the Soviet share in
the so-called "former German assets" organized as joint companies,
and (3) the support of Soviet occupation troops. Raw materials for
Hungarian industries must largely be purchased abroad, and although
the best Hungarian products have been exported in an effort to obtain
essential imports, frequent shortages of raw materials have occurred.
One of Hungary's best resources, fertile land, has been used under
conditions which produced far less output than would have been possible
with good management, better incothe incentives for farmers, and ade-
quate supplies of agricultural implements and fertilizer. In spite of
its endowment of arable land and a relatively large agricultural labor
force, Hungary has been unable to produce sufficient food for domestic
consumption. Housing construction has also been seriously neglected.
Hungary started its first long-term plan in 1950 and almost
immediately raised the production goals for the final year of the Plan.
In 1952, however, there were many signs of industrial difficulty) and
the severe drought of that year caused acute shortages of food products
In 1953. These agricultural and industrial problems were responsible for
the modifications of economic policy in June 1953 known as the "new course."
All of the Bloc countries were suffering in a greater or lesser degree
from over-rapid industrialization and neglect of agriculture, but these
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problems were most serious in Hungary. Hungary was probably the most
radical of the Satellites in its statement of the new policy) and the
measures taken in implementing it were more persistent and complete
than those of the other countries. Some of these measures were later
modified, however, and the more extreme statements of the political
leaders of the early "new course" period were repudiated.
The weaknesses in Hungary's economic structure were by no means
completely remedied in the 2-1/2 years during which the "new course"
policies were followed, and it remains to be seen whether sufficient
changes have been made to ameliorate Hungary's economic conditions sub-
stantially. Party and government officials have frequently disavowed
a policy reestablishing the previous emphasis on development of heavy
industry. The reduction in both total investment and the share allo-
cation to heavy industry under the "new course" policy was considered
a corrective for the admittedly overambitious investment program.
Nevertheless, an increase in the percentage allocation of investment
to that sector was perceptible in the 1956 Plan and even more so in
the Second Five Year Plan. It is doubtful) therefore, whether the
planners have profited from past mistakes in any fundamental sense.
During the period of the "new course" the regime attempted to
raise the standard of living by producing more consumer goods, giving
them a wider distribution, and reducing their prices. Particular
attention was given to the expansion of agricultural output, and the
drive toward collectivization of the peasants accordingly was halted)
suffering a setback from which it has never completely recovered.
Collectivization of the land is considered basic to the efficient growth
of farm production in the long run) however, and has never been aban-
doned as an ultimate goal. Pressure for collectivization was renewed
In 1955, and at least 50 percent of the arable land was planned to be
socialized by 1960. Less advanced forms of collectives, in which the
participants do not give up their ownership of animals and equipment,
have been encouraged to promote cooperative farming among peasants with
above-average amounts of working capital. Nevertheless, new members in
1955 were principally peasants who owned little land and frequently had
sold most of their livestock before joining. The government is still
seeking a policy that will induce the more substantial independent peas-
ants to join the collectives and to do so with their farm capital intact.
With the change of attitude in the USSR toward "new course"
objectives in early 1955) Hungary moved toward the previous emphasis
on the development of heavy industry. Plans for continuing agricultural
growth were maintained, however, and production in the food-processing
industries was scheduled to increase.
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The principal objective of Hungarian economic planning at the
present time is the equalization of its requirements for imported raw
materials and its ability to produce a surplus of salable goods for
export. The planners are attacking this problem from several angles.
One important goal is a widespread replacement of imports with domestic
output. Where possible, domestic resources will be developed to replace
imports of timber, pit props, cotton, nonferrous metals and ferroalloys)
foundry coke, and rubber) among other materials. Another aim is to
change the principal line of exports from consumer goods such as textiles
to machinery and equipment. Improvement of product design and technol-
ogy and a reduction of manufacturing costs to a competitive level are
also major objectives in the effort to balance imports and exports.
Finally, there is a desire to acquire markets in the underdeveloped
countries of the world) where Hungarian products may be traded for raw
materials under favorable circumstances.
The general emphasis on heavy industry in Hungary has now been
modified in the direction of greater concentration of effort on produc-
tion lines in which the country has had long experience or for which it
has special resources. These industries include alumina and aluminum,
railroad equipment, electrical and electronic equipment, farm machinery)
food processing, and pharmaceuticals. Specialization of Hungarian out-
put along these lines has been stressed at conferences held by CEMA.
B. Achievements During the First Five Year Plan (1950-54).
1. Introduction.
At the start of the First Five Year Plan in 1950, Hungary
had just completed a Three Year Plan of reconstruction in 2 years and 5
months, thus permitting a change from fiscal year to calendar year account-
ing. During this period the remaining war damage to the industrial plant
was repaired, the currency was stabilized) the financial and banking system
was reorganized under state management, and first large industries and then
smaller enterprises employing 10 or more persons were brought under state
control. Production in most of the basic industries had exceeded prewar
output by 1947, and by 1949 industry had made a complete recovery in its
productive power. Manpower employed in industry in 1949 far exceeded that
of 1938, and labor productivity had risen about 15 percent in both heavy
and light industry and about 3.5 percent in the food industry. Agri-
cultural output rose substantially in 1949 but still amounted to only an
estimated 75 percent of the prewar level. In short, the country had made
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excellent progress in economic reconstruction and had almost overcome
the inflationary tendencies of the early postwar period.
The First Five Year Plan was prepared in an atmosphere of
optimism by a government completely under the control of Hungary's
Communist Party. The scheduled pace of economic growth was much more
rapid than in the previous Plan, but the planners' assessment at that
time of the possibilities of growth was generally realistic, as the
major industrial production and investment goals set forth in the
original version of the Plan were met or exceeded. Considering the
economy as a whole, the chief planning error was the assumption that
the overfulfillment of some goals in the first year of the Plan in-
dicated that the long-term goals for 1954 were not sufficiently am-
bitious to utilize all the capabilities of the economy. Even in the
first year, when about three-fourths of the major construction projects
were started, requirements for raw materials exceeded the supply, and
the outputs of the electric powerplants, the extractive industries,
and the metallurgical industry could not be pushed fast enough to keep
the advanced processing and fabricating industries fully supplied.
On the strength of the first year's accomplishments, however,
there was an extreme upward revision of the 1954 goals for production
and investment. The planned increase in gross industrial production
was revised upward from 86 percent to 210 percent, and planned capital
Investment by the state was raised from 50.9 billion forints* to 85
* The official exchange rate for Hungary since August 1946 has been
forint to US $0.085 or) conversely, US $1 to 11.74 forints. This rate
of exchange considerably overstates the value of the. forint. Hungary
recently announced a new official exchange rate for transactions other
than regular commercial trade of US $1 to 23.48 forints. This rate
applies to such items as tourist, embassy) and legation expenditures,
and transportation and communications services provided by Hungarian
enterprises. Although this special rate gives a more realistic value
for the forint than does the basic commercial rate of 11.74 forints to
the dollar, it should be regarded only as a rough indicator of the
relative purchasing power of the two currencies.
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billion forints. The central objective of the revised Plan was stated to
be the conversion of Hungary "from a predominantly agricultural economy
to a country of steel, pig iron, and machines."
This revision of the Plan in 1951 probably retarded the
country's economic growth, as it demanded a grossly disproportionate devel-
opment of heavy industry and investment priorities for industry which
hampered agricultural growth. Shortages of foods and other consumet goods)
accompanied by large shipments of goods to the USSR, alienated the workers
and set up resistance to the pressures for increased output. Moreover,
the adoption of unbalanced and unrealistic objectives led to much waste,
confusion, and inefficiency. Some of the most ambitious construction
projects, for example, were severely cut back or abandoned a few years
later.
2. Fulfillment of Major Production Goals.
The national income of Hungary rose about 50 percent during
the First Five Year Plan, according to the official index calculated from
values expressed in constant Plan prices. This is an increase of respect-
able size, but it is somewhat less than the original target for 1954 and
considerably less than the revised goal of the Plan. The following
tabulation shows that much of the increase was achieved in the first 2
years of the period and, more remarkably, that declines in national income
occurred in both 1952 and 1954:
Year
Official Index
of National Income
1949
100.0
1950
120.6
1951
141.2
1952
138.5
1953
156.7
1954
150.3
Hungary probably is the only European Satellite which experienced such
setbacks in economic growth during its first long-term plan.
Comparatively large increases were also claimed in the gross
output of industry and its major components. Although nearly all of the
announced gains for total industry and the various industry groupings fell
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short of the extremely ambitious objectives formulated in 1951 for the
end of the period, they substantially exceeded the original targets in
every case except electric power (see Table 2)t*). The outstanding
failure of the Plan was in agriculture, where an increase of 42 percent
tn gross production was originally scheduled but only a 13-percent gain
was claimed to have been realized.
3. Personal Income and Consumption.
The average per capita real income of workers and employees
was reported to have increased by 20 percent from 1949 to 1954, but,
according to official claims, the per capita real income of peasants
Increased by only 10 percent. The total consumption of the population
increased by 30 percent, compared with the planned rise of 50 percent.
Most of the indicated increase occurred during the last 1-1/2 years of
the Plan, after the announcement of the "new course" policy.
4. Enlargement of Industrial Capacity.
The industrial capacity of the country was enlarged during
the Plan by the completion of 65 new factories, mostly for the production
of machinery and chemicals. Nineteen new electric powerplants were put
into operation, two new foundries were completed and another almost
finished, and a new pipe factory and a rolling mill were completed. In
addition, the capacities of a number of older plants were enlarged. New
equipment was installed in the Ganz freight car and machine factory, the
Red Star tractor plant, the Gheorghiu-Dej shipyard, the Csepel automobile
factory, and others.
The new or enlarged plant capacity permitted the production
of various new products, including mining machines; new types of machine
tools, agricultural machines, construction machines, and locomotives;
antifriction bearings; and synthetic material in a straw cellulose factory.
Chemicals production was advanced by building factories for pharmaceuticals,
dyestuffs, asphalt, fertilizer, and industrial gas. The largest venture of
the Plan, the Stalinvaros iron and steel combine, was discontinued for the
period of the "new course" to permit the reallocation of material and
labor to more urgent uses. A large prestige project -- the Budapest sub-
way -- was also discontinued.
The capacity of light industry was expanded little, except for
an increase in the number of spindles in the spinning mills and the
Table 24 follows on p. 65.
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Table 24
Planned and Reported Actual Increases
In National Income and Gross Production in Major Economic Sectors
in Hungary During the First Five Year Plan (1949-54)
Percent of Increase
Economic Sector
Planned
Reported
Actual
Original
Plan
Revision
of 1951
National income
63
130
50
State-owned industry !/
86
210
155
Heavy industry
104
280
188
Mining
55
142
96
Metallurgy
95
162
132
Machinery
125
390
264
Electric power
94
175-
92
Building materials
115
306
162
Chemicals
138
273
195
Light and food industries
73
145
127
Textiles
52
92
67
Clothing
250
750
355
Woodworking
78
220
162
Paper and printing
56
116
N.A.
Food processing
70
157
170
Construction
131
338
170
Agriculture
42
54
13
a. Excluding cooperative and private industry, which accounted
for about 7 percent of total industrial production in 1954.
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construction of 1 linen mill and 1 hemp mill. In the food industry, some
cold storage plants and bakeries were built in decentralized locations.
5. Labor Productivity.
Labor productivity was reported to have increased 46.6 per-
cent in the manufacturing industry from 1949 to 1954 and 47.4 percent
In the building trades. These increases are well below the planned
increase of 92 percent for all of industry. Approximately 63 percent
of the increase in industrial output was a result of increased manpower
and 37 percent a result of greater productivity.
C. Use of Resources to Promote Economic Development.
1. Manpower.
The population of Hungary in 1955 averaged 9.8 million persons,
of whom about 4.5 million, or 46 percent of the population, were in the
civilian labor force. Although the population increased only 6 percent
from 1949 to 1955, the civilian labor force rose by over 12 percent.
This accretion to the labor force was accomplished despite an abnormally
large proportion of women in the population and a decreasing proportion
of persons in the economically active age group (15-64 years) -- both
the result of war losses.
The nonagricultural labor force increased 35 percent between
1949 and 1955 through absorption of the unemployed (in the early years),
transfers from agriculture, and an increase in the participation of
women in the labor force. The proportion of the civilian labor force in
industry grew from less than one-fifth of the total in 1949 to about
one-fourth in 1955. Construction, transportation, trade, and the civil
service also shared in the general expansion of the nonagricultural
labor force during this period (see Table 25*).
The agricultural labor force was reduced by about 200,000
persons from 1949 to 1953, but this trend subsequently was halted and
even reversed. In recent yeArs the labor force in agriculture has
amounted to an estimated 44 percent of the total. This is still an
excessive proportion by Western standards, but the small farms, backward
methods of cultivation, and limited mechanization keep the productivity
of farm labor low. Practically all of the agricultural machinery has
* Table 25 follows on p.67.
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Table 25
Population and Labor Force in Hungary
1949-55
1949 1950 1951 1952 1953 1954 1955
Million .8-1
Population 9.24 9.33 9.42 9.50 9.59 9.69 9.80
Civilian labor force
Agricultural
Nonagricultural
2.12 2.09 2.07 1.99 1.92 1.93 1.97
1.87 2.06 2.20 2.33 2.45 2.50 2.52
Total civilian labor force 3.99 4.15 4.27 4.32
4.37 4.43
Percent of Civilian Labor Force
4.49
Agricultural labor force 53.1 50.4 48.5 46.1 43.9 43.6 43.9
Nonagricultural labor force 46.9 49.6 51.5 53.9 56.1 56.4 56.1
Industry 19.3 19.3 20.0 21.2 23.0 24.6 24.9
Construction 2.5 3.9 5.2 6.3 6.4 5.4 4.7
Transportation 4.1 4.2 4.5 4.8 5.1 5.2 5.4
Trade 5.3 5.5 5.5 5.4 5.4 5.7 6.1
Other 11/ 15.7 16.7 16.3 16.2 16.2 15.5 15.0
a. Averages of estimates for the beginning and end of the year.
b. Including the civil service, which increased from 4.8 percent of
the civilian labor force in 1949 to 6.3 percent in 1955.
so far been allotted to machine tractor stations, state farms, and
collectives. Relatively few private farmers have been able to obtain
and pay for the costly services of the machine tractor stations.
2. Investment.
Most of the capital investment in Hungary consists of state
Investment financed through the budget. Some investment is made by coop-
eratives, but this is important in amount only in agriculture. The
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amount of private capital investment in agriculture is not known but is
probably small. Medium- and long-term loans have been made by the state
to agricultural collectives or other cooperative enterprises but not to
private persons except for housing. Gross capital investment has been
as follows since 1949:
Million Forints
Total Actual
Investment in
Investment Through the
Budget by the State
(Current Prices)-
Year
Plan Prices
Scheduled
Actual
1949
N.A.
3,320
N.A.
1950
9,700
7,250
N.A.
1951
13,100
11,700
N.A.
1952
16,000
15,300
N.A.
1953
16,800
19,019
15,837
1954
11,800
12,656
9,300
1955
11,200
9,000
9,800
Actual investment through the budget probably equalled or
even exceeded the scheduled amounts until 1953, when investment was
much smaller than scheduled. Hungary was forced to reduce its goal for
budgetary investment in 1954 in the middle of the year, and the target
for 1955 was even more conservative.
The share of heavy industry in gross capital investment was
maintained at a high level (averaging about 4o percent of the total)
throughout the First Five Year Plan. The reduction of more than 40
percent in budgetary investment in 1954, however, reflected a substantial
decline in the absolute amount invested in heavy industry; at the same
time the sums devoted to agriculture and the light and food industries
were increased. The share going to heavy industry was reduced in 1955,
permitting a further increase in the sums allocated to agriculture and
light industry. Planned and actual allocations of gross capital investment
during the First Five Year Plan are shown in Table 26.*
* Table 26 follows on p. 69.
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Table 26
Planned and Actual Gross Capital Investment
in Hungary During the First Five Year Plan (1950-54)
Economic Sector
Billion Forints
Percent of Total
Original
Plan
Revised
Plan
Actual
Original
Plan
Revised
Plan
Actual
Industry
20.45
41.00
29.75
40.2
48.2
44.1
Heavy industry
17.45
37.50
27.45
34.3
44.1
40.7
Light and food
industry
3.00
3.50
2.30
5.9
4.1
3.4
Construction
Industry
0.85
3.00
1.75
1.7
3.5
2.6
Agriculture
8.00
11.00
9.30
15.7
12.9
13.8
Transportation and
communications
7.50
10.00
8.60
14.7
11.8
12.8
Trade
0.90
1.00
1.70
1.8
1.2
2.5
Housing and public
works
7.40
14.00
10.00
14.5
16.5
14.8
Other
5.80
5.00
6.30
11.4
5.9
9.4
Total
50.90
85.00
67.40
100.0
100.0
100.0
a. At Plan prices.
Industrial investments fell short of the augmented goals of
the First Five Year Plan in every major category, but the amounts originally
planned were exceeded except in the machine-building industry and light and
food industry. Investment in machine-building facilities was cut severely
after mid-1953 in order to free resources for the expansion of the basic
materials and power industries. Even the existing plants in the machine-
building industry could not be fully utilized at this time, because of the
shortages or poor quality of forgings, castings, and other iron and steel
products.
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State investment in agriculture has been devoted mainly to
the strengthening of the socialist sector (the machine tractor stations)
state farms, and collectives). Mechanization, livestock breeding) re-
forestation, and irrigation projects have been the major investment
categories. The growth of agricultural investment since 1950 is shown
In the following tabulation:
Investment in Agriculture
Year
Billion Forints
in Plan prices
Percent
of Total
Investment*
1950
0.9
9.8
1951
1.4
10.6
1952
2.1
12.8
1953
2.2
13.2
1954
2.7
22.7
1950-54
9.3
13.8
1955
2.7
23.8
D. Survey of Major Sectors of the Economy.
1. General Economic Growth.
The GNP of Hungary is estimated to have increased by about
50 percent from 1949 to 1954. After a further sizable increase in 1955)
the GNP probably was nearly 50 percent higher than in 1938. Output in
the industry and transportation sectors experienced rapid growth, nearly
doubling in each case from 1949 to 1955 (see Table 27**). There was also
a large increase in the volume of construction over the low level pre-
vailing in 1949. Construction activity apparently reached a peak in 1953
and then declined somewhat with the abandonment of certain projects under
the "new course."
Agricultural production moved erratically because of varying
weather conditions and shifts in agricultural policies. Output in 1951
was well above the 1949 level, for example, but production dropped about
25 percent the following year. A postwar high was reached in 1955) but
output apparently was still somewhat smaller than before the war.
* Calculated before final rounding of values.
** Table 27 follows on p. 71.
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Table 27
Indexes of Gross National Product and of Production
by Economic Sector in Rimpry aJ y
1938 and 1949-55
1949
. 100
1938
1949
1950
1951
1952
.1953
1954
1955
Gross national product
111
100
121
141
138
157
150
164
Industry
86
100
128
144
172
188
186
196
Agriculture and forestry
133
100
106
123
93
110
113
126
Construction
105
100
148
198
256
279
245
262
Transportation and communications
78
100
117
141
169
189
191
204
Trade and services
118
100
109
113
113
121
131
134
a. The indexes of estimated GNP shown for the period 1949-55 are official indexes of
Hungary's national income as published Because the Communist concept of
national income excludes provision for depreciation and the value of services not connected
directly with production of material goods, it is not comparable with the usual Western concept
of GNP. The official indexes for national income nevertheless are regarded as the best in-
dicator of the trend in the GNP which is presently available. The indicated rate of growth in
GNP during the period probably would be somewhat lower if depreciation allowances and excluded
services were taken into account inasmuch as these elements of the GNP are believed to have
increased less rapidly than the elements included in national income by the Hungarian statis-
ticians. The GNP index linking 1938 with 1949 is a weighted average of indexes calculated for
the various sectors of the economy.
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Table 27
Indexes of Gross National Product and of Production
by Economic Sector in Hungary
1938 and 1949-55
(Continued)
Official indexes of net production in the various sectors of the economy (which would be
consistent with the published index for national income) are not available. The indexes shown
for production in the different economic sectors during 1949-55 thus are not directly related
to-the indexes of GNP and are not entirely comparable with them. The indexes for agriculture
and construction for the period 1949-55 are official indexes of gross production
The other sector indexes were calculated independently from production data for a
sample of products or were derived from other rough indicators of economic activity in the
sector. A satisfactory GNP index cannot be calculated from these sector indexes, because
suitable sector weights are not available.
Despite their limitations, these indexes show a pattern of growth among the various
sectors of the economy that is believed to be generally correct. More confidence can be
placed in the growth rates shown for the entire postwar period than in the indicated annual
changes in output. This qualification is particularly applicable to some of the sector
indexes for 1952, which appear to be too high to be consistent with the index of GNP.
b. For rough comparisons with the other Satellites, see the 1955 indexes on a 1950 base in
Table 48, p. 119, below.
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2. Industry.
a. Trends in Production.
Table 28* presents a comparison of the outputs of a number
of important industrial products in 1954 and 1955 with the goals set in
the Five Year Plan for 1954. Although the growth attained in the production
of coal, electric power, iron and steel, and construction materials was
substantial, it was insufficient to keep the economy running at the desired
pace.
Total production of coal increased from 11.8 million metric
tons in 1949 to 22.3 million metric tons in 1955. The heat value of the
coal mined has gradually declined, however, so that greater quantities are
needed to produce the same amount of energy. The quality of Hungarian coal
is for the most part poor and, except for limited deposits near Pecs, is
unfit for making the metallurgical-grade coke required for production of
Iron and steel. Hungary is trying to free itself from dependency on imports
of coke and has constructed a modern byproduct coking plant at Sztalin-
varos which was intended to use coal from Pecs and Komlo. According
to reports, however, the new plant is dependent for its supply on a
mixture of various kinds of coal, chiefly imported. Gas and coke plants
and other plants in heavy industry have priority in the allocation of bi-
tuminous coal, and other consumers such as the railroads use a mixture of
different coals. Some of the lowest quality coals in Hungary cannot be
used without the addition of better grade coals.
Increased production of electric power has been the object
of great effort. During 1949-55, Hungary was reported to have built 19
power stations, increasing output from 2.52 billion kilowatt-hours (kwh)
in 1949 to 5.43 billion kwh in 1955. Electric energy is required in large
quantities for industrial use, particularly for refining aluminum. The
aluminum industry reportedly uses 17 percent of the total output of elec-
tric power, even though most of the bauxite and alumina produced in
Hungary are shipped to Czechoslovakia, East Germany, and the USSR for
refining.
Although production of pig iron and crude steel increased
by 106 percent and 73 percent, respectively, between 1949 and 1954, out-
put of both products fell far short of the Plan. Moreover, the quality of
Iron and steel produced in Hungary has been very poor and has held down
* Table 28 follows on p. 74.
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Table 28
Actual Output of Selected Products in Hungary
1949, 1954, and 1955
Product
Electric power
Coal (all types)
Pig iron
Crude steel
Bauxite
Primary aluminum
Bricks
Cement
Trucks
Combines
Radios
Cotton cloth
Wool cloth
Knitwear
Leather shoes
Unit
Billion kilowatt-hours
Million metric tons
Thousand metric tons
Thousand metric tons
Thousand metric tons
Thousand metric tons
Millions
Thousand metric tons
Units
Units
Thousands
Million square meters
Million square meters
Metric tons
Million pairs
1949
Actual
2.52
11.8
398
860
561
14
389
552
996
z4
166
23
1,280
3.85
1954
1955
Actual
Percent of
Increase
1949 to 1955
Original
Plan
Revised
Plan (1951)
Actual
4.27
6.o5
4.82
5.43
115
18.5
27.5
21.5
22.3
89
960
1,280
820
855
115
1,600
2,200
1,491
1,629
89
N.A.
N.A.
1,260
1,241
121
N.A.
N.A.
33
37
164
N.A.
1,420
1,138
1,198
208
1,050
2,100
947
1,175
113
9,000
9,000
4,217
3,664
268
N.A.
1 46
1,500
N.A.
925
258
1,535
377
2?
45
258
264
224
234
23.9
27.0
21
26
13
N.A.
4,750
4,124
5,057
295
N.A.
12.3
10.7
12.4
222
a. Output in 1949 was negligible or zero.
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the quality of machine products made from it. Because of the large pro-
portion of rejects, usable production has been much smaller than that
reported.
In the chemical industry, Hungary has been struggling to
attain a larger degree of self-sufficiency. Production during the First
Five Year Plan was confined chiefly to the manufacture of basic chemicals
for domestic use, but production of pharmaceuticals was also important.
The country has not been able to meet its own requirements for calcium
carbide, caustic soda, or coal chemicals, and no soda ash is produced.
b. Principal Problems.
The most acute problem of industry is the shortage of raw
materials, which necessitates the export of products badly needed at home
In order to obtain supplies of the most essential materials. Although it
has been admitted officially that shortages of raw materials are the chief
Industrial weakness, it is claimed that new trade agreements will assure
the import of necessary basic materials and power in the future. These
raw materials include not only coal, coke, and iron ore but also nickel,
zinc) pyrites, cotton, lumber, and other commodities. The machine-
building industries are expected to furnish the bulk of future Hungarian
exports to countries outside the Bloc.
A second and related problem is the backward technology
of Hungarian industry, which keeps production costs high and makes it
difficult to sell Hungarian products in the highly competitive markets
of Western Europe. Numerous official statements have emphasized the
obsolescent character of the existing industrial equipment, even in such
Hungarian specialties as the electrical equipment industry.
3. Agriculture.
a. Trends in Production.
During the First Five Year Plan, gross agricultural pro-
duction rose by a meager 13 percent, according to official reports, in
comparison with the 54-percent increase specified in the revised Plan.
The planted acreage in fiber crops, oilseeds, vegetables, and rice rose
substantially during the period, while that in grain crops and livestock
fodder crops declined.
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Agricultural output in 1955 was well above the average
annual output during the First Five Year Plan, and crop production probably
was the highest since 1951. Impressive gains were also made in livestock
and poultry numbers and in the output of animal products. Outputs of bread-
grains, potatoes, and animal products during the past several years have
generally remained well below prewar levels, however.
b. Collectivization.
Agricultural collectivization efforts were renewed in 1955
after the dismissal of Premier Imre Nagy and the repudiation of the "new
course" policy. After the Nagy government granted permission to dissatis-
fied members to leave the collectives, many members withdrew and hundreds
of collectives were dissolved. The number of collectives dropped by
about one-sixth during the 18 months following the "new course" announce-
ment, and the number of households was reduced by nearly 50 percent. This
setback to the collectivization effort was so severe that the losses had
not yet been made up by the end of 1955 (see Table 29*). Recent additions
to the membership of collectives have consisted primarily of families with
small land holdings. In March 1956, collective farms embraced 21 percent
and state farms about 13 percent of the total arable land, making a total
of 34 percent of the arable land in the socialized sector.
0. Mechanization.
Mechanization of agriculture progressed at a faster rate
In 1955 than in previous years, but its level is still low by Western
European standards. Although the production of farm machinery has in-
creased considerably since 1949, the country's export requirements have
absorbed a major part of such manufactures. Consequently, the planned
deliveries of machinery to the agricultural sector during the First Five
Year Plan were not fully carried out, as is shown by the following figures:
Deliveries of Agricultural Machines to State Farms
and Machine Tractor Stations During the First Five Year Plan (1950-64)*
Planned
Actual
Actual Deliveries
as Percent of Plan
Tractors
26,100
12,403
46
Tractor plows
17,320
11,488
66
Harrows
11,300
8,053
71
Grain binders
9,060
3,448
36
Cultivators
6,800
4,277
63
Grain drills
5,300
4,729
89
Combines
2,600
2,052
79
Table 29 follows on p. 77.
A small number of these machines, amounting to less than 5 percent
of the total, were delivered to collective farms or private farmers.
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Table 29
Socialization of Agriculture in Hungary
1949-56
Collective Farms
Area
State Farms
Total
Socialized Sector
Year
Number
of Farms
Number of Households
(Thousand)
Arable Land
(Thousand
Hectares)
Percent
of Total
Arable Land
Arable Land
(Thousand
Hectares)
Percent
of Total
Arable Land
Percent
of Total
Arable Land
December 1949
1,760
40
173
3.0
230
4.0
7.0
September 1950
2,229
89
403
7.0
345
6.0
13.0
November 1951
4,653
236
898
15.6
518
9.0
24.6
December 1952
5,300
318
1,416
24.6
731
12.7
37.3
April 1953
5,315
340
1,445
26.0
734
13.2
39.2
December 1953
4,677
238
1,117
20.1
693
12.5
32.6
December 1954
December 1955
4,381
4,996
185
245
940
1,107
16.9
19.9
689
706
12.4
12.7
29.3
32.6
March 1956
5,186
280
1,174
21.1
706
12.7
33.8
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In 1955, there were 312 machine tractor stations with about 13,000
tractors, or an average of 42 tractors per station. Indications are
that the machinery of the stations has not been fully used, because of
a lack of trained personnel, poor maintenance, shortage of parts, and
poor planning. Because of high and discriminatory fees, it is doubtful
whether the private farms obtain much benefit from the machinery of the
machine tractor stations. Most of the work on private farms is done
with horse-drawn machinery. Small machine and implements have usually
been scarce, but the situation has improved since 1953.
U. Transportation.
Since World War II the major east-west railroad lines of
Hungary have been strengthened, and railroad bridges destroyed in the war
have been rebuilt. Improved signal and communications facilities have
been installed on the major lines, and key railroad yards and stations
have been improved. Investment in railroad rolling stock has not kept
pace with the increase in freight traffic. Despite improvements in
operational efficiency, the railroads have been hard pressed to meet
growing traffic requirements. There were sizable increases in the
volume of freight traffic from 1949 to 1955, however, as shown in the
following tabulation:
Million Ton-Kilometers of Freight Traffic
Year
Railroad
Inland Waterways
Highways
1949
4,545
443
246
1954
8,148
906
826
1955
8,78o
847
868
5. Housing.
Only 103,000 dwelling units, or less than 50 percent of
the planned goal of 220,000 units, were built in Hungary during the First
Five Year Plan. New housing construction did not even keep up with the
Increase in population during the period; 225 dwelling units were con-
structed per 1,000 persons added to the population compared with the stock
of about 265 dwelling units per 1,000 persons at the beginning of the Plan.
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Moreover, the number of units built during the Plan was only one-third as
large as the net increase in the number of married couples. The rapid
expansion of the urban population made overcrowding especially acute in
urban areas. Construction by the state fell so far short of needs that
a program of incentives for private construction of dwellings was started
In late 1953 and was in large part responsible for the increases in 1954
and 1955 as shown in the following tabulation for new housing construction
during 1950-55:
Year
Construction of Dwelling Units
Total:
Built by State
1950
24,669
5,781
1951
17,742
6,333
1952
16,683
7,379
1953
16,793
9,187
1954
27,211
11,329
1955
31,526
13,604
6. Retail Trade.
After remaining unchanged or actually decreasing in the
early years of the Plan, the volume of retail sales in Hungary rose almost
20 percent in 1954 and 5 percent in 1955. This rapid rise was the result
of the increased volume of consumer goods placed on the market during the
implementation of the "new course" policy. Sales of nonfood items re-
portedly increased by 31 percent from 1953 to 1954 and constituted about
43 percent of total retail trade turnover in the latter year. Sales of
foods and stimulants also increased but only about half as much (in per-
centage terms) as nonfood products. The average intake of food in Hungary
during the food year 1954/55 reached approximately the prewar level (see
Table 46*), but the typical diet in Hungary remaihs inadequate in milk
products, meat, and fish. In spite of improvements since 1949, consumer
goods generally remain scarce and high priced.
7. Foreign Trade.
One of the objectives stressed in Hungary's "new course"
announcement in 1953 was an increase in its trade with non-Bloc countries.
An associated aim was a lessening of emphasis on economic autarky, includ-
ing the attempt of Hungary to supply its own coal, iron, and other raw
materials despite its resource deficiencies. Trade with countries outside
* P. 1171 below.
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the Bloc almost doubled during the next 2 years, rising from 23 percent
of its foreign trade turnover in 1953 to 29 percent In 195U and 39 percent
in 1955. The value of foreign trade with other countries of the Bloc
declined in 1954 and 1955. Trade with the USSR reportedly declined in
both years.
The increase in Hungary's trade with Western countries was
to some extent made possible by credits granted by the latter. By 1955,
Hungary had amassed debts to the West totaling about 4229 million and was
striving for a favorable trade balance with which to pay them off. The
total balance of Hungarian trade in 1955 was reported to be favorable, but
the balance with countries outside the Soviet Bloc was still unfavorable.
Certain changes in the commodity composition of Hungarian
trade have also taken place. Hungary was a net importer of textiles before
the war but is now a net exporter. About 50 percent of total production
of cotton goods was exported in 1955. The country has, on the other hand,
become a net importer of ureadgrains in recent years. As Hungary has had
difficulty in selling such consumer goods as bicycles, toys, and radio sets
In Western Europe, the planners have concluded that the sale of certain
types of consumer goods abroad does not pay. They are therefore attempting
to increase exports of heavy industrial products instead. Among the new
commodities which Hungary is exporting to the West are residual oil, steel
pipe, and rolled steel products.
In spite of Hungary's elaborate plans to balance its
foreign trade, its balance of payments position is precarious. A recent
agreement with Yugoslavia calls for reparations payments totaling $85
million over the next 5 years, and another agreement with the UK provides
for payment of $12.6 million in full settlement of prewar and wartime
claims against Hungary. In addition, a sizable foreign debt must be
serviced, and payments must be made to the USSR and other countries of the
Soviet Bloc, for credits extended in recent years, to enable Hungary to
obtain needed raw materials. As a consequence) Hungary will make sub-
stantial exports without any return in the form of needed raw materials.
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VI. Poland.
A. General Policy and Achievements.
The economic policies of Poland during the postwar period
followed a pattern common to all Soviet Bloc countries. After a
short period of reconstruction (1947-49), during which the Com-
munist Party consolidated and broadened its control over the
economy, Poland entered into a Six Year Plan (1950-55) of economic
development. This Plan was designed primarily to hasten the in-
dustrialization of the country by all possible means. Although
other branches of the economy were also planned to expand rapidly,
it was clearly intended that heavy industry and economic activities
directly connected with it receive the highest priorities in alloca-
tions of the factors of production.
The 6-year targets were in general not achieved. The agri-
cultural goals proved to be completely unrealistic, and official
claims of overfulfillment of goals for industry are open to question.
Nevertheless, Polish industrial growth was extremely rapid during
1950-55 (about U. percent a year, judging by production data avail-
able for a sample of products). With the aid of newly acquired pro-
ductive capacity in the western territories detached from Germany,
Poland not only expanded production of industrial materials such
as steel, coal, electric power, and basic chemicals but also under-
took large-scale production of a wide range of technically complex
Items in the machine-building and chemical industries. Expansion of
heavy industry was the primary factor causing an estimated growth
of about 50 percent in Poland's GNP during the period of the Six
Year Plan. Agriculture, related light industries, and housing, on
the other hand, fared badly. Agricultural production in 1955 was
about 18 percent above 1949 but only 4 percent above the good crop
year of 1950. The stagnation'of agricultural production is attrib-
utable not only to low priorities for skilled labor and capital
goods in this area but also to the deleterious effects on farmers'
incentives of the system of forced deliveries of farm products at
low prices and the continuing threat of collectivization. The
process of collectivization Was very slow, however, and by the end
of 1955 state-owned and cooperative farms controlled only 24 per-
cent of the agricultural land, the lowest percentage in the European
Satellites.
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The great disparity between the growth of heavy industry and
that of light industry and agriculture is reflected in the relative in-
creases in investment and the consumption of goods, the principal end
uses of these products (see Table 30*). Investment increased about three
times faster than the consumption of goods from 1949 to 1955. A small
rise in per capita consumption appears to have taken place) but because
of severe shortages of certain commodities, the poor system of distri-
bution, and a decline in housing space per capita in urban areas, Polish
consumers apparently have not attained a higher standard of living.
Even official statistics show that money wages in many occupations in-
creased more slowly than the cost of living. Since 1953 there has been
widespread criticism of the so-called imbalance in the growth of the
economy, and steps have been taken to correct it to some degree by
devoting a larger part of the gains in production to raising consumption.
1. Use of Resources to Promote Economic Development.
a. Manpower.
The Polish population emerged from World War II severely
reduced in size as a result of heavy war losses, territorial changes, and
forced emigration. The population in 1948 was about 24 million compared
with 31 million before the war within the same boundaries. Although the
lands acquired from Germany were highly industrialized, a large portion
of their German inhabitants had been forced to leave the country. Con-
sequently, only 35 percent of the labor force in 1948 was employed out-
side agriculture. Through about 1950, labor was recruited for industry
and construction from low-productivity occupations such as agriculture,
private trade, and domestic service. There was also a heavy demand for
labor on the part of the military, the internal security forces, and the
civil service.
After 1950, nationalization of nonagricultural occupations
was almost complete, but the movement away from the farms continued. The
"new course" efforts to stimulate agricultural production led to a small
Increase in the agricultural force in 1954, but the downward trend appeared
again in 1955. In addition to transfers from agriculture, the nonagri-
cultural labor force has been augmented to an important extent by increased
employment of women. The number of women employed in the socialist sector
outside of agriculture increased from 1.06 million in 1949 to 1.96 million
In 1955. Low real wages for most men have been an important stimulus in
* Table 30 follows on p. 83.
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inducing wives to work. The announced demobilization of 47,000 men and
amnestying of about 70,000 political prisoners have augmented the civilian
labor force to the extent that they have been carried out. Table 31* shows
the growth of the Polish population and labor force since 1948.
Table 30
Indexes of Gross National Product,
of Production by Major Economic Sector,
and of End Uses of Gross National Product in Poland si
1948-55
1949
= 100
1948
1949
1950
1951
1952
1953
1954
1955
Gross national
product
82
100
114
117
123
132
142
151
Industry
86
100
115
125
135
152
168
185
Heavy industry
89
100
114
126
143
164
185
207
Light industry
82
100
117
122
124
134
141
151
Agriculture and
forestry
78
100
113
108
108
109
114
118
Investment
81
100
142
157
185
211
215
215
Consumption of
goods hi
N.A.
100
114
121
119
122
130
139
Consumption of
goods per
capita
N.A.
100
112
116
112
113
118
124
a. For rough comparisons with the other Satellites, see the 1955
indexes on a 1950 base in Table 48, p. 119, below.
b. Per capita consumption of selected consumer goods (from official
reports) was weighted by estimated average prices in state stores in
1955. The index excludes services and consumer durables, and no adjust-
ment was made for changes in the quality of goods. The index number
for 1955 was derived from an official index of real wages.
* Table 31 follows on p. 84.
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Table 31
and Labor Force in Poland
1948-55
Million 21
Population
Civilian labor force la/
1948
1949
1950
1951
1952
1953
1954
1955
23.85
24.30
24.77
25.27
26.75
26.25
26.76
27.28
Agricultural
8.03
7.81
7.52
7.34
7.30
7.29
7.32
7.22
Nonagricultural 2/
4.40
4.79
5.24
5.54
5.73
6.08
6.33
6.57
Of which: industrial 1/
2.10
2.13
2.33
2.48
2.55
2.69
2.84
3.01
Total civilian labor force
12.43
12.60
12.76
12.88
13.03
13.37
13.65
13.79
a. Averages of estimates for the beginning and end of the year.
b. Including unemployed workers, who decreased from an estimated 160,000 in 1948 to
90,000 in 1952 and thereafter increased to 190,000 by the end of the period.
c. Workers and employees in the socialist sector of forestry, who are included in the
nonagricultural category but not in the industrial labor force, numbered about 100,000 in
1948; 110,000 in 1949-52; 140,000 in 1953; and 150,000 in 1954-55.
d. Including private industry and handicrafts.
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b. Investment.
The bulk of capital investment during the postwar period
has been allocated to industry in order to support the planned growth in
industrial output (see Table 32*). Agriculture received an extremely
small share (about 8.5 percent), considering its importance in the GNP.
Housing also suffered in the allocation of investment funds, resulting
in a decline in housing space per capita. The concentration of investment
in industry, on the other hand, was greater than planned. This policy
undoubtedly was a strong stimulus to economic growth in the short run) but
it was also largely responsible for the lag in consumer .goods production
and has left a legacy of problems which will affect investment allocations
In the new Five Year Plan.
c. Economic Planning and Control.
The operation of economic planning and control has tended
Increasingly to conform to the Soviet pattern. On the whole it has been
Inefficient and wasteful. Plans Were in general unrealistically high, and
when quantity plans were met, the quality or assortment of goods often
suffered. Accounting and financial control over the expenditures of enter-
prises was severely damaged by a great inflation of wage rates during a
period when prices of producer goods were nearly constant. This resulted
In large and increasing subsidy payments from the state budget to nearly
all heavy industries. There has been some recent improvement in both
planning and control methods, however. Planned increases in output for
the next 5 years appear to be much more realistic than in the past.
Measures intended to reduce waste include the major price-cost reform of
January 1956, which is designed to make most industrial enterprises prof-
itable and therefore more amenable to accounting control.
2. Phases in Postwar Economic Development.
Since World War II there have been three clearly delineated
phases in Polish economic development: 1947-49, a reconstruction period;
1950-53) a period of headlong industrialization; and 1954-551 a period
of readjustment. The effect of these changes in policy on the growth
and allocation of output can be seen in Tables 30, 31) and 32,** and in
the following tabulation, which shows the varying share of accumulation
in the Polish national income:
* Table 32 follows on p. 86.
** pp. 83 and 84, above) and p. 86, below) respectively.
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Table 32
Planned and Actual Gross Capital Investment in Poland 2/
1947 and 1949-55
Percent of Total
Actual
Economic Sector
1947
1949
1950
1951
1952
1953
1954
Industry
35.4
43.1
42.1
46.4
56.8
52.4
50.8
Agriculture and
forestry
15.9
11.0
10.1
10.3
8.2
8.3
10.7
Transportation and
communications
27.5
18.4
15.7
15.6
12.6
11.6
10.8
Internal trade
2.2
5.1
5.1
5.3
3.4
3.6
3.1
Housing and communal
building
9.6
12.7
12.0
13.8
13.6
13.5
15.1
Cultural and social
6.4
7.6
8.3
7.7
4.3
4.7
5.81.
Miscellaneous
3.0
2.1
6.7
0.9
1.1
5.9
3.7
Total
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Total for
1950-55
Planned Actual
45.4
11.9
14.9
4.2
11.5 13.6
8.8
3.3
50.7
8.5
12.6
3.7
100.0
10.9
100.0
a. Data refer to investments comprised within the state investment plan. The planned and
actual distributions of investment during 1950-55 are based on 1950 prices and 1956 prices,
respectively, and data for 1953 and 1954 are based on 1953 prices. Changes in relative prices,
however, probably do not greatly affect the percentage distribution of investment by sector, as
the percentages given in the Six Year Plan fulfillment report are close to a wei ted avera e
of the percentages available for individual years through 1954. Data are from
1947 and 1949-52, 1Y; 1953-54, 5 ; 1950-55 total, planned .0.0./ and actual 61
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Accumulation as Percent
Year of National Income*
1949 23.2
1950 27.2
1951 28.1
1952 26.9
1953 25.1
1954 24.2
1955 23.1
a. 1947-49.
The period of the Three Year Plan of reconstruction was
one of extremely rapid recovery of all parts of the economy from the low
levels of output of the first postwar years. Industrial recovery was
greatly aided by the reconstruction of plants in the Silesian territories
during 1947-49 and, to some extent, during the first few years of the
Six Year Plan. In 1946-47, agricultural production was so low that the
urban population could not be fed without extensive imports. By 1949,
agricultural production had recovered sufficiently to satisfy domestic
requirements and in addition permit net exports of some foods. The
Improvement in food supplies was achieved without extensive use of com-
pulsory deliveries of farm products and without collectivization.
During the Three Year Plan, however, the state, which already owned
most large-scale industry, wholesale trade, and transport, rapidly ex-
tended its control over retail trade. By the end of 1949) only a part
of handicrafts and 44 percent of retail trade remained in private hands.
Rapid growth was achieved simultaneously in investment
and consumption, whose shares in the national income did not vary signi-
ficantly during the period. Domestic investment was supplemented con-
siderably from foreign sources, particularly during the period of UNRRA
aid. In terms of either dollars or 1937 zlotys,** imports greatly
exceeded exports in 1947-48. In terms of current domestic prices, the
trade deficit probably was even greater. By 1949, however, foreign
trade was about balanced in terms of dollars.
* Accumulation consists essentially of capital investment plus increases
In working capital and stockpiles. National income, in the Marxist def-
inition, excludes most direct services and depreciation allowances but
includes indirect taxes. The percentages are based on data in current
prices.
** The official exchange rate for Poland since 1950 has been 1 zloty to
US $0.25 or, conversely, US $1 to it zlotys. This rate of exchange
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b. 1950-53.
The first 4 years of the Six Year Plan saw a tremendous
concentration of resources on the construction of new industrial projects
plus the added strain, after the start of the Korean War, of a substantial
program for the production of modern military equipment such as jet air-
craft and tanks. Production of heavy industry increased at a rate of
about 14 percent per year. After a good year in 1950, production of light
Industry grew only an estimated 5 percent per year during 1951-53, and agri-
cultural production fell. A rapid expansion of nonagricultural employment
continued to make inroads on the agricultural labor force, but forced de-
liveries of agricultural products insured food supplies for the cities.
Investment more than doubled during the period, while the
consumption of goods rose little if at all. The share of accumulation in
the national income (at current prices) rose from 23 percent in 1949 to
28 percent in 1951 in spite of the fact that prices of consumer goods were
Increasing faster than those of capital goods. The share of industry in
centralized investment rose from 43 percent in 1949 to 57 percent in 1952,
whereas the share of agriculture fell from 11 percent to 8 percent. The
Investment plan for heavy industry was overfulfilled by 19 percent during
1950-53, but the investment plans for most other sectors were underful-
filled -- for example) in light industry by 23 percent, in agriculture by
25 percent, and in social-cultural construction by 45 percent. e2/ The
low priority of consumption and consumer welfare in this period is also
shown by the decline in both absolute and relative terms of budgetary
expenditures for social and cultural purposes. At the same time) military
expenditures grew rapidly.
Although foreign trade statistics for 1950-53 are very
Incomplete, it is probable that Poland financed its development with
little or no net foreign aid. Polish exports increased by 850 million
rubles from 1949 to 1953, although imports increased by only 570 million
rubles.
considerably overstates the value of the zloty. Poland recently
announced a new official exchange rate for transactions other than
regular commercial trade of US $1 to 24 zlotys. This rate applies to
such items as tourist) embassy, and legation expenditures) and trans-
portation and communications services provided by Polish enterprises.
Although this special rate gives a more realistic value for the zloty
than does the basic commercial rate of 4 zlotys to the dollar) it
should be regarded only as a rough indicator of the relative purchas-
ing power of the two currencies.
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The cost of headlong industrialization was increased by
waste and inefficiency, about which there have been severe and numerous
complaints in the Polish literature. Large new projects were undertaken
although output could have been raised at lower cost by modernizing exist-
ing facilities. Waste resulting from too great a pressure to increase
output was protected and even fostered by the irrational price-cost
structure.
c. 1954-55.
Economic developments in 1954-55 were in sharp contrast
to those of the preceding period (1950-53) with respect to the growth of
production and especially to the allocation of resources, although the
"new course" changes were not as great as in certain other Satellites.
The average rate of growth of heavy industry declined to about 12 percent
a year, and that of light industry and agriculture increased to 6 percent
and 4 percent, respectively. The ratio of accumulation to national income
declined from about 25 percent in 1953 to 23 percent in 1955. This trend
is all the more notable in that consumer goods prices were falling while
prices of capital goods were stable or showed a slight rise. A decided
rise in consumption took place in 1954-55, as is shown by the consumption
index in Table 30.* Although the extent of the rise is indicated only
roughly by the indexes, the level of consumption probably was higher in
1955 than in any other postwar year. The share of investment in industry
fell from 57 percent to 51 percent from 1952 to 1954, and the share of
agriculture and forestry rose from 8 percent to nearly 11 percent. In
addition, private farmers received larger credits than before, and the
flog of workers from the farms to the cities was reversed. Military
expenditures rose much more slowly than in the preceding period. The
share of social-cultural expenditures in the budget increased, and the
share of investment declined.
By the end of 1955 it was apparent that the production
of consumer goods would continue to receive higher priorities than dur-
ing 1950-53. "New course" policies have in general been continued. On
the other hand, recent demobilizations of military personnel, political
amnesties, and reductions of administrative personnel and costs represent
an attempt to minimize the depressive effect of the "new course" on the
country's industrial growth. The relaxation of the international situation
also led to a cut in the military budget for 1956.
* P. 83, above.
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B. Survey of Major Sectors of the Economy.
1. Industry.
a. Principal Developments.
Polish industry grew at a rapid rate during the Six
Year Plan. Production of industrial materials (fuels, metals, chemicals,
and building materials) increased by an estimated 72 percent, and the
output of the machine-building and defense industries almost tripled. A
significant share of industrial production now represents items not pro-
duced or produced only in negligible quantities before 1949. Included
in this category are most pharmaceuticals and synthetic materials, boilers
and turbines, automobiles and trucks, antifriction bearings, various types
of agricultural machinery, and a wide range of consumer durables. The
smallest percentage increases in output during the Plan were in coal,
cotton fabrics, and food processing.
The coal industry presents a special problem because it
not only provides the domestic economy with about 90 percent of its
primary energy but also supplies coal to other Satellites and the USSR
and is the most important means of earning Western currencies. Production
of coal increased by only 28 percent during the period, to a level only
slightly in excess of 1943 production within the same boundaries. g.ti The
internal demand for coal has grown faster than production as a result of
the rapid development of metallurgy, coke chemicals, electric power, and
railroad transport. Increases in coal allocations to domestic users have
aggravated the situation, and exports have dropped considerably.
b. Analysis of Plan Fulfillment.
The Six Year Plan was not fulfilled for any important
Industrial raw material (see Table 33*). Output of the three key products
of electric power, hard coal, and crude steel, for example, fell short of
the 1955 targets by 4 to 8 percent. Increases in production for electric
power and crude steel were quite large, however. Goals for various other
basic materials were underfulfilled by substantially larger percentages.
The degree of plan fulfillment in machinery output cannot be clearly
ascertained from the limited data available for individual products.
Nevertheless, official claims of overfulfillment of the plans for indus-
trial output in the socialist sector and for the output of heavy industry
are difficult to believe. Official indexes of the volume of industrial
production appear to have a substantial upward bias.
* Table 33 follows on p. 91.
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Table 33
Planned and Actual Output of Selected Products in Poland
1955
Product
Output
Actual Output
as Percent of Plan
Percent of Increase
in Output, 1949 to 1955
Unit
Planned
Estimated Actual
Electric power
Billion kilowatt-hours
19.3
17.8
92
114
Hard coal
Million metric tons
loo
94.5
94
28
Brown coal
Million metric tons
8.4
6.0
73.
81
Crude oil
Thousand metric tons
394
3.8o
1+6
20
Pig iron
Million metric tons
3.50
3.11
89
124
Crude steel
Million metric tons
4.6o
4.43
96
92
Refined zinc
Thousand metric tons
198
156
79
44
Sulfuric acid (as
100 percent acid)
Caustic soda
Thousand metric tons
Thousand metric tons
540
162
450
99.8
83
63
80
Nitrogen and phosphorous
fertilizers (as pure
nutrient)
Thousand metric tons
481
286
59
93
Cement
Million metric tons
5.0
3.8
76
63
Bricks
Billion
3.8
2.6
68
125
Freight cars
Thousand Etj
18.8
16.1
86
-4
Tractors
Thousand
fl .0
8.1
74
220
Trucks
Thousand
25.0
12.5
50
4,990
Cotton fabrics
Million linear meters
608
565
93
39
Wool fabrics
Million linear meters
74.9
75.7
101
51
Silk fabrics
Million linear meters
104
81.3
78
70
Leather footwear
Million Pairs
22.2
24.6
111
186
Sugar (raw)
Million metric tons
1.10
1.07
97
26
a. Standard-gauge freight cars in 2-axle equivalent units.
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c. Allocation of Resources to Industry.
Table 34* shows the distribution of the industrial labor
force in 1949 and 1954 and the growth of employment in individual industries
during the period. The metallurgical, construction materials, and metal-
fabricating industries had the largest percentage increases in employment,
whereas textiles, leather, and shoes had the lowest. A comparison of the
growth of production with the growth of employment suggests that output
per worker increased slowly in industries producing primarily basic
materials but increased rapidly in chemicals and the metal-fabricating
Industries, where goods of increasing complexity were being produced. The
highest wages and wage increases were permitted in the key producer goods
industries as a means of attracting labor or raising labor productivity.
Workers in light industries such as textiles, however, probably suffered
a decline in their living standards.
Labor productivity in coal mines in 1955 was at about the
1949 level and thus considerably below prewar levels L/ in spite of sub-
stantial investments and labor incentives in the form of above-average
and rapidly growing wages and high overtime rates.
Apart from the fact that heavy industry received the
great bulk of industrial investment, there is no information on the
allocation of investments to individual industries during the Six Year
Plan.
2. Agriculture.
a. Trends in Production.
Polish agricultural production increased by 18 percent
from 1949 to 1955, whereas the Six Year Plan had called for an increase
of 50 percent. Production in 1955 was only 4 percent above the excep-
tionally good crop year of 1950. After a period of stagnation (1951-53),
favorable weather during 1954 and 1955, combined with more liberal gov-
ernment policies toward private farmers, raised production to approximately
the prewar level.
Crop production rose by less than 10 percent from 1949 to
1955; the output of grains grew more slowly than this and that of indus-
trial crops faster. Livestock numbers increased significantly. In the
* Table 34 follows on p. 93.
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Table 34
Employment in Principal Industries 2/ in Poland hi
1949 and 1954
Industry
Coal mining
Other mining
Ferrous metallurgy
Nonferrous metallurgy
Electric power
Chemicals
Construction materials
Glass and porcelain
Metals manufactures
Electrotechnical
Wood and wood products
Paper and printing
Textiles, leather, and shoes
Food processing
Other industries
Total
1949 2/
(Thousand)
51
100
T106
305
45
123
67
519
225
109
1,993
1954
(Thousand)
279
37
133
45
59
130
145
6o
[651
162
76
560
320
47
2704
Percentage
Increase
1949 to 1954
30
16
i85
(86
32
13
8
42
-57
36
a. Including private industry and
employed).
b. Data are from the US Bureau of
c. Industrial employment in March
in June 1948.
d. Annual averages.
handicrafts (including self-
the Census
1949 plus handicrafts employment
50X1
case of hogs, which are the principal source of meat and fats in Poland,
numbers rose 78 percent, or more than planned. An inadequate fodder base,
however, led to a decline in productivity per animal and a growth in the
output of animal products of only 32 percent. The inability of grain pro-
duction to meet rising bread and fodder requirements has led to a net im-
port position on grain, reversing the 1949-51 net export position.
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b. Food Availabilities.
Poland has been more successful than the other Satellites
in restoring and surpassing prewar levels of food consumption. Per
capita caloric intake of food during the Six Year Plan was generally 5 to
10 percent above the prewar level. This is partly the result of wartime
population losses and the change in Poland's boundaries, which resulted
in a larger amount of arable land per capita. Owing to the increased
availability of meat, animal fats, and vegetable oils, there was also
some improvement in the quality of the diet during the Plan period) espe-
cially in rural areas.
c. Socialization.
The socialization of agriculture in Poland has progressed
very slowly in spite of continuous official pressure. Collective farms,
which were insignificant in 1949, held 7 percent of agricultural land in
1953 and 11 percent in 1955. State farms are more important, representing
9 percent of agricultural land in 1949 and 13 percent in 1955 (see Table
35). Very few of the state and collective farms are in the old Polish
lands, however; Polish peasants have strongly resisted collectivization.
Table 35
Socialization of Agriculture in Poland
1949-55
Percent of Agricultural Land filL
Year
(as of December2
Collective
Farms
State
Farms
Total 'Socialized
Sector
1949
0.2
9.0
9.2
1950
2.1
10.9
13.0
1951
3.2
11.8
15.0
1952
4.8
12.0
16.8
1953
7.2
12.8
20.0
1954
8.6
12.5
21.1
1955
10.6
13.0
23.6
a. Agricultural land consists of arable land plus per-
manent meadows and pastures.
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d. Investment and Manpower.
Agricultural investment comprised within the state in-
vestment plan doubled during 1949-53. This represented only 75 percent
fulfillment of the plan) however, and it was partly counteracted by a
fall in private agricultural investments. .62/ Since 1953 an increase of
84 percent in agricultural investment is officially claimed, together
with a substantial growth of credits to private farmers.
The number of tractors available to agriculture at the
end of 1955 was announced to be 56,000 -- which is only 69 percent of the
Six Year Plan goal -- and deliveries of other types of agricultural ma-
chinery appear to have lagged even more. The following tabulation shows
the growth of the tractor park during 1949-55:
Year
Tractor Park*
(15 Horsepower Units)
1949
18,019
1950
22,800
1951
31,800
1952
39,200
1953
45,691
1954
51,303
1955
56,000
The recent emphasis on agriculture has led to a reversal
of the downward trend in the agricultural labor force. Agricultural
labor continues to be scarce, however, especially in the western terri-
tories, which are incompletely settled.
3. Foreign Trade.
Rapid industrialization created substantial changes in the
pattern of Polish foreign trade. In general, it led to a rapid growth of
imports of machinery and of heavy industrial materials with which Poland
is poorly endowed -- for example, petroleum, iron ore, and phosphorous
fertilizer. At the same time, the pressure of domestic demand led to a
considerable reduction in the ratio of exports to domestic production for
such goods as coal, coke, cement, caustic soda) soda ash, and rolled steel
products. In the case of coal, there was an absolute decline in exports.
Poland's most important and most salable exports increased slowly or not
at all, while the portion of its imports which were tied to the industrial-
lization program was growing rapidly. Consequently, other imports, re-
presenting mostly fibers and foods, had to be ruduced. Exports of machinery
* ?2_3/
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and equipment increased very rapidly but only recently have become an
Important source of foreign currency.
The effect of "new course" policies is clearly reflected in
trade statistics for 1954-55. Exports of textile fabrics declined, but
imports of light industrial materials recovered to the 1949 level and
imports of foods tripled. In this manner, domestic availabilities of
consumer goods were increased. These changes, however, did not funda-
mentally alter the trade pattern established as a result of the in-
dustrial development program. Table 36 shows the percentage distri-
bution of the value of imports and exports by major product group in
1949 and 1953-55. In 1955, Poland still depended on coal and coke for
nearly one-half of its export earnings. Machinery and, equipment re-
presented 13 percent of exports, compared with 2.4 percent in 1949. The
share of machinery and raw materials for heavy industry in total imports
rose from 42 percent in 1949 to 51 percent in 1955, whereas the share of
raw materials for light industry fell from 36 percent to 24 percent.
Table 36
Imports and Exports of Poland, by Product Group a/
1949 and 1953-55
Percent of Total
Product Group
1949
1953
1954
1955
Imports
Machines, installations, and transport
equipment
24.4
40.6
32.5
30.9
Of which: Machines and installations
for complete industrial
projects
N.A.
10.7
10.4
9.8
Electrical and power
machines and instal-
lations
5.0
6.2
4.7
3.5
Transport equipment
6.5
6.3
5.0
2.3
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Table 36
Imports and Exports of Poland, by Product Group
1949 and 1953-55
(Continued)
aJ
Percent of Total
Product Group
1949
1953
1954
1955
Imports
Raw materials
Fuels
3.4
3.5
4.2
4.7
Raw materials for heavy industry
17.5
19.8
19.8
20.4
Raw materials for light industry
35.8
22.3
23.0
23.7
Supplies for agriculture
4.7
4.3
3.6
2.9
Subtotal
61.4
5o.o,
5o.6
51.7
Agricultural consumer goods
11.4
6.7
13.5
13.1
Industrial consumer goods
2.8
2.7
3.4
4.3
Total
100.0
100.0
100.0
100.0
Exports
Machines, installations, and transport
equipment
2.4
12.3
11.1
13.1
Of which: Land transport equipment
0.7
7.3
6.3
5.4
Marine transport equipment
0.4
3.1
2.9
4.o
Raw materials
68.7
57.8
61.6
64.4
Of which: Coal and coke
47.8
38.0
44.6
46.6
Iron and zinc
9.7
9.9
7.8
8.0
Chemicals
3.6
2.0
2.6
3.1
Wood and paper
3.5
3.9
3.8
3.7
Agricultural consumer goods
19.8
20.3
18.0
15.3
Industrial consumer goods
9.1
9.6
9.3
7.2
Total 100.0 100.0 100.0 100.0
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The growth of imports and exports in certain categories
during the Six Year Plan is indicated in Table 37. Although the
basis of calculation of these official indexes is not known) the magni-
tudes are reasonable and consistent with the data on imports and exports
of individual commodities shown in Table 38.* Polish trade with the
USSR has declined recently in relative importance) but the USSR is still
Poland's leading trading partner by a wide margin. The neighboring
Satellites of East Germany and Czechoslovakia rank next in importance.
Trade with Communist China formed a larger part of Poland's turnover in
1955 than trade with several of the other Satellites or any country of
Western Europe other than the UK (see Table 39**).
Table 37
Indexes of the Imports and Exports of Poland
by Selected Product Group 21
1949 and 1953-55
1949
= 100
Product Group
1949
1953
1954
1955
Imports
Machinery and equipment
100
204
190
186
Materials for heavy industry
100
138
162
165
Materials for light industry
100
77
92
100
Agricultural products (including
foodstuffs)
100
98
282
293
Exports
Machinery and equipment
100
706
658
816
Materials for heavy industry
100
110
126
135
Agricultural products (including
foodstuffs)
100
131
136
128
Table 38 follows on p. 99.
** Table 39 follows on p. 100.
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Table 38
Foreign Trade in Selected Commodities of Poland E/
1949 and 1955
Commodity
Unit
Volume of Trade
Trade as
Percent of
Production
1949
1955
1949
1955
Imports
Crude petroleum
Thousand metric tons
91.5
545
61
303
Petroleum products
Thousand metric tons
255
886
111
120
Iron ore
Wheat and rye
Million metric tons
Thousand metric tons
1.69
165
4.41.
1,154
444 12/
2
374 11/
13
Cotton
Thousand metric tons
98.3
95.2
LI
LI
Wool
Thousand metric tons
15.4
16.3
497
166
Exports
Hard coal
Million metric tons
26.3
24.3
35
26
Coke
Million metric tons
1.85
2.24
32
21
Caustic soda and soda ash
Cement
Thousand metric tons
Thousand metric tons
54.7
5o6
51.8
674
32
22
17
18
Rolled steel products
Thousand metric tons
162
247
11
8
Tier
Thousand metric tons
697
915
6
5
Cotton fabrics
Million linear meters
50.5
57.5
12
10
Wool fabrics
Million linear meters
5.9
5.8
12
8
Sugar
Thousand metric tons
184
372
22
35
Meat and meat products
Thousand metric tons
26
71
5
8
b. In terns of iron content. The average iron content of domestic ore is estimated at 35 percent and
that of imported ore at 63 percent in 1949 and 55 percent in 1955.
c. Poland's production of cotton is negligible or zero.
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Table 39
Geographic Distribution of the Foreign Trade Turnover of Poland it/
1954 and 1955
Percent of Total
Country or Area
1954
1955
Sino-Soviet Bloc b./
USSR
37.6
32.1
European Satellites
28.6
27.0
Bulgaria
1.3
0.9
Czechoslovakia
8.9
8.4
East Germany
14.1
13.3
Hungary
3.0
3.1
Rumania
1.3
1.3
Communist China
3.8
3.8
Total
70.0
62.9
Other European countries
21.2
26.6
Of which:
Austria
2.2
2.5
Finland
2.3
2.6
France
2.1
2.6
UK
5.2
6.5
West Germany
1.9
2.9
Asia excepting Communist China
2.2
3.2
Other areas
6.6
7.3
Total
100.0
100.0
b. Excluding Albania and Communist Korea and Vietnam.
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Like most rapidly industrializing countries, Poland has
experienced a chronic shortage of foreign exchange during the postwar
period. UNRRA gifts greatly aided the Three Year Plan of reconstruction.
After the cessation of UNRRA aid, the recovery of agricultural production
continued to increase export availabilities and reduce import requirements
until about 1950. The 1951-53 period was one of maximum balance-of-pay-
ments pressure because of the rapidly growing demands of domestic industry
and the stagnation of agriculture. Imports of low priority such as con-
sumer-oriented goods fell sharply. The foreign exchange shortage was
relieved somewhat by the high prices paid for Polish coal in the West
during the early part of the period and by Soviet credits for the purchase
of equipment. These advantages were partly offset, however, by the low
prices paid for Polish coal exports to the USSR. There was an export
surplus of 227 million rubles in 1953, but exports increased too slowly
during the "new course" to pay for the additional imports of consumer
goods. Imports exceeded exports by 140 millien rubles in 1954 and 73
million rubles in 1955, leaving trade barely balanced for the last 3
years of the Plan.
4. Housing.
Housing conditions throughout the urban areas of Poland
deteriorated during the Six Year Plan. That they were not favorable
initially is indicated by the fact that there was an average of 1.54
persons per urban habitable room (including kitchens) in 1950.
Furthermore, about 15 percent of the entire population lived-in 1-room
dwellings, averaging 2.7 persons to each dwelling. Overcrowding was
especially pronounced in the larger cities outside the underpopulated
former German territories. About 26 percent and 40 percent of the
populations of Warsaw and Lodz, respectively, for example, occupied
1-room dwellings in 1950) and there was an average of about 3 persons
for each dwelling.
Even this situation was an improvement over the desperate
housing conditions of the early postwar years) but the regime did not
fully maintain the gains which had been made. The urban population
grew by about 2.4 million persons from 1950 to 1955) whereas there was
a net increase in the number of urban rooms of only 740,000, or roughly
1 room for every 3 new residents. As a result, the average number of
residents per room rose to 1.72 in urban areas and reached 2 or more
In almost every major city in the region which was part of prewar Poland.
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Many Polish families must share their apartments with
strangers, and instances of newlyweds forced to live apart for want of
a room and of couples wanting to separate who are forced to live to-
gether for want of two rooms are not uncommon. Moreover) tens of
thousands of families are compelled by the housing shortage to occupy
quarters dangerous to their health and safety. The regime has admitted
that thousands of persons occupy rooms in unreconstructed World War II
ruins) in condemned and crumbling buildings) and in unheated attics and
basements. Besides its impact on the morale and health of the popula-
tion) the housing shortage adversely affects the mobility and produc-
tivity of workers.
The shortage of housing in rural areas has received even
less attention from the regime than the urban housing problem, despite
the average density of 2 persons per room. The state constructed only
110,000 rooms in rural areas during the Six Year Plan, and the peasants
built an additional 260,000 rooms with whatever materials were at hand.
Premier Gomulka stated in October 1956 that the combined total of this
construction was inadequate to meet the high rate of deterioration of
rural housing. Although housing conditions doubtless are worse in
rural than in urban areas) the greater publicity given to the need to
Improve urban housing indicates that Polish officials consider this the
more crucial problem.
5. Other Sectors.
Polish railroads attained a large increase in ton-kilometers
of freight traffic (about 59 percent) from 1949 to 19551 primarily through
more efficient use of existing facilities. Very little electrification
and dieselization has taken place up to now, however, and the added strain
of increased traffic has caused some deterioration of rolling stock.
Although motor, air, and sea transport grew much more rapidly than rail-
road transport, they accounted for only about a quarter of total ton-
kilometers of traffic in 1955. Communications services also increased
rapidly.
The growth of retail trade (see Table 40*) reflects in
large part the process of urbanization. Employment in education, health,
and other state services has grown rapidly) as have the number of students 1
in schools and the number of hospital beds, but the level of social serv-
ices in Poland remains comparatively low. Private services have slowly
declined in volume since 1950 and are now of small importance.
* Table 40 follows on p. 103.
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Table 40
Retail Trade Turnover in Poland 9../
1950-55
Retail Trade Turnover b/
(Billion 1950 Zlotys)
Index of Total
Retail Trade Turnover
Year
Private
Socialist
Total
(1950 = 100)
1950
9.5
46.5
56.0
loo
1951
5.4
53.8
59.2
105.7
1952
4.4
56.9
61.3
109.5
1953
2.1
57.3
59.4
106.1
1954
2.3
68.4
70.7
126.2
1955
2.1
75.9
78.0
139.3
b. Including sales of food-serving establishments but
excluding sales by farmers directly to the population.
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VII. Rumania.
A. General Policy and Achievements.
Rumania was still a comparatively underdeveloped country at
the end of World War II, when the Communists gained control. About
three-fourths of the population was dependent on agriculture, and the
living standard was one of the lowest in Europe. The Communist re-
gime has attempted to develop the economy through industrial develop-
ment and agricultural reform. As a result, most of the large estates
were broken up, but the largest ones were converted into state farms
which were to serve as models of agricultural production. Industrial
development was promoted within the framework of the Soviet-Rumanian
joint stock companies (Sovroms)) which were established in the spring
of 1945. The Sovroms included a wide variety of nonagricultural en-
terprises. Consequently, there was a large degree of state ownership
in the economy long before nationalization was undertaken officially
in June 1948.
Nationalization of productive facilities was followed by the
introduction of national economic plans, consisting first of annual
plans for 1949 and 1950 and more recently of Five Year Plans for
1951-55 and 1956-60. Although these plans have had the usual aim of
general development of a heavy industrial base, particular attention
has been given to the exploitation of the country's principal mineral
resource -- petroleum. Production of crude oil increased considerably
during the First Five Year Plan and is somewhat larger than before
the war. Production before the war Was concentrated very largely
In Ploesti) but this area has declined in importance as other areas
have been developed.
During the First Five Year Plan, Rumania's GNP increased an
estimated 50 percent, and substantial progress was made in the effort
to industrialize the economy. Heavy investment in industry contrib-
uted to an increase in industrial production of about three-fourths
during the Plan period. Producer goods output increased even more,
according to intelligence estimates, and consumer goods output prob-
ably rose by about 50 percent. Agricultural production has generally
lagged behind the prewar accomplishment. A substantial improvement
was registered in 1955, however, as a result of favorable weather and
expansion of the cultivated area (see Table 41*).
* Table 41 follows on p. 106.
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Table 41
Indexes of Gross National Product and of Production
in Industry and Agriculture in Rumania Li./
1938 and 1950-55
1950
. 100
1938
1950
1951
1952
1953
1954
1955
Gross national product
103
100
111
111
123
134
150
Industry
79
100
116
132
146
156
178
Agriculture and forestry
122
100
112
97
106
121
148
a. For rough comparisons with the other Satellites, see the 1955
indexes on a 1950 base in Table 48, p. 119, below.
B. Economic Plans.
1. One Year Plans (1949 and 1950).
The first Rumanian economic plans were relatively simple
and, unambitious One Year Plans for 1949 and 1950. The major goal of
a rapid recovery of industry apparently was achieved. According to
official claims, gross industrial production in 1949 and 1950 increased
by about 40 percent and 37 percent, respectively, over the preceding
years. 74/ On the other hand, agricultural production remained well
below the prewar level, primarily because of the low level of invest-
ment.
In 1949, heavy industry received 37 percent of total in-
vestment; light and food industries, 10 percent; transport and tele-
communications, 21 percent; social and cultural activities, 11 percent;
and agriculture and forestry, only 9 percent. Di The funds available
for investment in the 1950 Plan were similarly allocated, except that
agriculture received a larger share (15 percent) to expedite collectivi-
zation. /?1 Rumania's foreign trade was drastically reoriented under
the 1949 and 1950 Plans. Trade turnover with the countries which now
make up the Soviet Bloc increased from 23 percent of the total in 1938
to 83 percent in 1950.
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2. First Five Year Plan (1951-55).
The main goals of the First Five Year Plan were greater
industrialization, gradual collectivization and mechanization of agri-
culture, and expansion of the state and cooperative trade network. As
in the earlier One Year Plans, about one-half of planned total invest-
ment was allocated to industry, most of it to heavy industry. Invest-
ment in agriculture, however, comprised a still smaller share of total
outlays than previously.
The goals for gross industrial production in 1951 and 1952
were overfulfilled. Apparently impressed with this performance, Ruma-
nian planners increased the goals for the remaining years and spoke
of attaining the over-all industrial objective of the Five Year Plan
In 4 years. Certain factors, however) interfered with the successful
completion of the revised Plan. First of all) the industry was be-
ginning to outstrip its limited base of raw materials. The coal in-
dustry, for example, failed to meet its goals for 1952 and 1953.
Second, the government's indifference to consumer welfare had begun
to have an unfavorable effect on labor productivity. These problems
were aggravated by the subnormal harvests of food crops in 1952 and
1953. As a consequence, the 1953 plan for industrial output would not
have been fulfilled if the target had not been lowered substantially.
The gross output of industry grew only 14 percent in 1953, compared
with a rise of 23 percent in the previous year. /V This decline prob-
ably was one of the principal considerations underlying the "new course"
modification in economic policy in the latter part of 1953. .
The "new course" also called for an increase in the share
of national income distributed to consumers. The consumption fund,
which includes some governmental outlays for defense as well as pri-
vate comsumption expenditures, was to be increased from 62 percent
to 72 percent of the national income. Capital investments in agricul-
ture also were scheduled to increase sharply. The original 1953 plan
allocated 7.2 percent of total capital investment to agriculture, but
this share was increased to 16.4 percent in 1955. 7_./ Capital invest-
ments in industry, particularly in heavy industry, were to be reduced.
For example, planning work on such large-scale projects as the Danube -
Black Sea Canal, the Bucharest subway, the Bistrita-Bicaz hydroelectric
complex, and the Roman iron and steel complex in Moldavia was either
halted or slowed down.
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The plan revisions of the "new course" were ostensibly de-
signed to redress the excessive disproportions which had arisen during
the first part of the Five Year Plan. These revisions were partly dis-
regarded, however, and the actual allocation of investment during the
"new course" followed much the same pattern as in earlier years. The
share of heavy industry in total investment exceeded the very high
level of the original schedule for 1951-55, but the share of the con-
sumer goods industries fell below the original Plan (see Table 42).
Table 42
Planned and Actual Gross Capital Investment in Rumania
During the First Five Year Plan (1951-55)
Percent of Total
Economic Sector
Planned
Actual 2/
Original 2/
"New Course"
Revision 12/
Industry
51.4
48.2
58.0.
Producer goods
42.1
34.1
50.6
Consumer goods
9.3
14.1
7.4
Agriculture and forestry
10.0
13.1
10.4
Transportation and communications
16.2
16.2
11.2
Construction industry
2.0
2.2
4.6
Social and cultural projects
13.4
15.2
N.A.1
Of which: workers' dwellings
3.2
5.2
3.8
15.8
Other
7.0
5.1
N.A.
Total
100.0
100.0
100.0
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With the exception of crude oil, production of major indus-
trial materials in 1955 failed to meet the goals set down in the origi-
nal Five Year Plan. Only in a few instances were the Five Year Plan
targets in the basic materials) chemicals, building materials) and food
industries fulfilled more than 70 percent. The 1955 outputs of coal,
pig iron, steel, and cement) for example, were well below the original
goals (see Table 43). A general overfulfillment of goals was claimed
by the regime, however, on the basis of the reduced goals adopted during
the "new course."
Table 43
Planned and Actual Output of Selected Products in Rumania
1950 and 1955
Actual Output
(Million,
Metric Tons !/)
Original
Planned Output
1955
Actual Output
In 1955
as Percent
Product
1950
1955
Metric Tons 21)
of Plan
Coal (all types)
3.9
6.2
8.5
73
Crude oil
5.1
10.6
10.0
106
Pig iron
0.32
0.58
0.8
72
Crude steel
0.56
0.76
1.25
61
Finished steel
0.50
0.62
0.83
75
Cement
1.0
2.0
2.9
69
Electric power
kilowatt-hours)
2.2
4.3
4.7
91
a. With the exception Indicated for electric power.
C. Survey of Major Sectors of the Economy.
1. Industry.
Rumanian industry had recovered from wartime damage and
dislocation by the beginning of the First Five Year Plan in 1951.
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Industrial production is estimated to have been about one-fourth above
the 1938 level in 1950 and to have increased an additional three-fourths
during the Plan. The petroleum industry was expanded greatly to meet
reparations requirements until 1953, and increments to output since then
have served as a means of earning foreign exchange, particularly hard
currencies. Outputs of electric power, crude oil, pig iron, and cement
in 1955 were roughly twice as high as in 1950. As in the other Satel-
lites, these gains were accomplished by a sizable increase in the in-
dustrial labor force and by limitation of investment in other sectors
of the economy. The gains in nonagricultural employment did not, how-
ever, appreciably affect the labor force in agriculture, which still
has a surplus of workers (see Table 44).
Table 44
Population and Labor Force in Rumania
1948 and 1950-55
Million 2/
1948
1950
1951
1952
1953
1954
1955
Population
15.98
16.37
16.57
16.80
17.02
17.23
17.43
Civilian labor force
Agricultural
7.12
7.17
7.07
7.01
7.00
7.00
7.04
Nonagricultural
2.20
2.70
2.95
3.12
3.20
3.27
3.34
Total civilian
labor force
9.32
9.87
10.02
10.13
10.20
10.27
10.38
a. Averages of estimates for the beginning and end of the year.
2. Agriculture.
a. Trends in Production and Food Availabilities.
Agricultural policy during the First Five Year Plan was
conditioned by the investment priority of heavy industry and by the
Communist dogma calling for the socialization of agriculture. As a re-
sult of this policy) agriculture did not achieve very high levels of
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output until the end of the Plan. The substantial gain in agricultural
production in 1954 served only to restore the prewar level, but an ad-
ditional large increase in 1955 pushed output well above the prewar
accomplishment. Output in 1955 nevertheless was considerably smaller
than scheduled in the Plan.
Food consumption per capita dropped to about 80 per-
cent of the prewar average in the 1952/53 consumption year but has
risen steadily since then (see Table 46*). The estimated level of
about 2,500 calories per day in 1955/56 was still slightly under the
prewar average, however.
b. Manpower.
The labor force in agriculture changed little during
the First Five Year Plan. About 7 million people were employed in agri-
culture in 1955, representing about 70 percent of the civilian labor
force and 40 percent of the population.
c. Collectivization.
Socialization of agriculture has been less rapid in
Rumania than in most other Satellites. The holdings in the socialist
sector advanced from about 9 percent of the total arable land at the
end of 1950 to more than 26 percent at the end of 1955. iipg" The "new
course" policies initiated in mid-1953 relaxed somewhat the earlier
pressure on farmers to join collectives. By the beginning of 1955,
however, the old doctrines were in operation again. Although the in-
crease in 1955 in the amount of arable land under collectivization
was relatively modest because of the small size of the new collectives,
the program made notable gains on the organizational level. The num-
ber of collective farms and agricultural associations increased from
4,968 in January 1955 to 6,600 by the end of the year. ?/. There was
also a gain of about 21 percent during the year in the number of farm
families in collectives.
3. Foreign Trade.
Rumania's trade during the First Five Year Plan was char-
acterized by a steady growth in volume and by a general shift in its
direction toward other Bloc countries. The value of Rumanian foreign
* P. 117, below.
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trade rose from less than $500
in 1955. Ls] About 80 percent
compared with a ratio of about
countries offer a ready market
and timber products, they have
imports.
million in 1950 to about $870 million
of this trade was with Bloc countries,
23 percent in 1938. Although Bloc
for Rumanian exports, especially oil
been unable to supply all its needed
In 1950) Rumania exported 70 percent of its production of
petroleum products) of which 97 percent went to the Sino-Soviet Bloc
and 3 percent to the West. By 1955, however, about 73 percent of the
output of petroleum products was exported, of which only 70 percent
went to Bloc countries. Petroleum exports accounted for at least 4o
percent of Rumania's exports to non-Bloc countries in 1955 and were
a valuable source of badly needed foreign exchange.
4. Housing.
The volume of housing construction in the urban areas of
Rumania was much too small during the First Five Year Plan to meet the
needs of the rapidly increasing urban population. Even the low Plan
goal of 2.8 million square meters of new housing during the period was
underfulfilled, inasmuch as state and state-aided construction amounted
to only about 1.9 million square meters. As the urban population grew
by about 1 million from 1950 to 1955 and as 50,000 to 60,000 dwelling
units would be a generous estimate of the amount of new housing con-
struction) only 60 units at most were provided for every thousand new
urban residents. The shortage of housing, which was a serious problem
at the beginning of the Plan, therefore got worse during the period.
Referring to housing conditions in the cities in a speech in August
1955) the Rumanian premier admitted that "the quantity of housing is
unsatisfactory' and that there is "a serious lag in the building of
new houses."
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APPENDIX A
STATISTICAL TABLES
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Table 45
Output of Selected Products in the European Satellites, by Country
Selected Years, 1938-55
Cater27
hergY PiatMth
tartan Derr
green coal sod limit.
Pant coal
Coke (ail me.) y
Crude ell
Petroleum motet. (ell tin.)
Natal. sad minerals
Mg iron
crude ?teel
? Hammer on
Bosnite
Primary slain
Refined copper
Refined lead
Refined Sine
Chemical. aal robber
Sulfuric amid (es 103 percent amid)
Nitric ,te hs ILO percent rid)
Slatletie sammia (ss no treiro)
Caustic soda
Chlorine
Soda rh
Calcium carbide
O11.T06e, sad phossieraus fertilisers
(es pare mtrient)
SYetnetie rubber
Motor vehicle tires
Building miterials
Cement
brick.
Albania Bulgaria Czetbalowaltis hat aereany
1950
_1222_
1952
1955 1935 s1953 1953 _RA_ 1950 1955
hishr/ Poland Paola reamman Satellites Si
19_ 1959 _1951_ _2225_ _Iv_
hula lalowattaeun 0.003 0.001 0.13 0.23 0.55 1.35 2.1 5.05 7.52 12.1 15.0 18.0 19.5 20.7 1.10
Killion metric was 0.021 0.055 0.10 1.91 Ells 7.22 9.85 16.0 23.6 34.3 ao.8 119.6 137.0 200.6 5.32
1011loo metric tons 0 0 0 0.14 0.13 0.19 0.30 15.8 17.7 20.1 22.1 3.51 2.50 2.67 1.01
Killion metric WM 0 0 0 0.001 0.009 0.015 0.025 3.02 5.20 7.56 9.18 1.23 6.85 9.27 0.31
Killica metric teas 0.13 0.13 0.21 0 0 0 0.15 0.02 0.03 0.52 0.13 0 0 !kali/tole 0.043
Millis? settle tons 0 0.02 0.0E 9.03 0 0 0.03 LA. 0.42 0.68 0.81 LA. 1.3 2.1 0.21
Vicarat lactic has
Tamar metric tons
Incematod mettle tons
1104flett metric tons
Thonuted metric toms
Samar mune tam
"Maar =trim In
Thotard mtric tom
Moser mettle tem
Threes! metric In
Vassar metric tom
Mum] metric tem
Vassar mirth tors
Thousand ...trio In
Toccuss neat wee
7hatani antic Was
Theured attic Lau
Thomers
Ihcaser metric tons
Millions
9
11 15 *7
0.2 3.6 sa
2.52
10.5
1.35
0.22
0.51
0.50
1.02
19.1
2.1.1
0.20
1.10
1959
5955 lo35
1950 _1255_
5.13 6.95 5.30 17.8 1.15 2.17 1.3
19.6 5.53 /4.62 6.01 2.50 3.52 5.58
69.5
5.33 71.1
5.06 91.5
10.6 0.33
o.N6 0.37
0.12 0.62
1.60 0.51 0.15 0.18 6.6 1:15
1.70 LA. 0.23 0.71. 5.9 9.1
prewar 121 1950 1055
31.8
151.2
93.3
13.0
7.3
1.0.1
193.2
101.2
20.1
6.0
7.1
73.5
252.9
122.9
29.7
12.9
11.5
O 0 1,611 2,781 232 337 1.517 820 555 720 31/ 1,391 3.112
2 /0 102 1.M3 2.621 1,366 :1742 1,695 939 2,501 0 0 1,591 1,629 2,1 320 575 2,7/3 1,589 9,011
Si 20 45 0 150 210 303 0 0 0 1,168y 2,301 4,426 555 765 5.0 8,265 13,913
O 0 0 0 0 o 0 o 13 58 n no 0 0 0 60 93 390 210 545 655
o 0 0 o 2.7 25.7 78.7 0.8 510 561 1.260 1.211 0 0 0 11.8 9.8 62 552 588 1,303
4 1.0 2.8 7.1 0.6 3 5.7 29.5 29.5 n 1.3 II 33 37 0 0 20.4 o 0 0 W 1.5 109
33.2 Negligible Negligible Negligible Negligible 0 0 15.7 0 2.5 5.6 29.5
12.5 y 58 sy 55 4.1 5.7 9.2 10 15 12.1 20.3 Negligibl. Negligible Negligible Negligible tO 20.9 31.2 5.5 8.6 31.1 72.1
16 71 128
9.1 LI 27J ss y 9 2.2 4.7 5.7 45.1 0 3.2 0 o 0 0 055 108 156 0 3 6 161 132 222
O 13 20.5 1130 215 311 ses hici 280 593 50.0 ho 120 124. 0 276 550 53 51.6 92 976 914
Ike CM.* Regoligible 50 50 36.3 37.5 62.2 93.6 161 Oh 276 15 30 55 30 5.8 53 200 0.5 3.5 1,641
17 32 21 25-7 35-0 12 320 212 335 5.4 12 16.1 9 1.1 221 316
Negligible Negligible 2.6 27 37 60.6 71.5 195 119 257 2.9 g:g 1.3.1 137 o.6 1.7 378 131 563
*eligible Negligible megligal? II 19.5
g.5 45.5 226 e/
596 112 t.6 10 11.7 55.3 99.6 73.8 25.5 k0 205 21, 582
3 o1.5 0
5.2 50
8.7 2.0o
36 102
/7.2 61.5 95-5
80 la 212 2.5 3.6 10 1.0 5 8.1 3 1.7 5 250 see an
390 y 19s
815 0
5.8 1.3 0
10.5 1? 65.7
67.9 118
151 207
211 16.8
9.1 78.5
27.5 65s
505 387 en
Machinery sod eguiMent
Machina tools (wetal-Cotur) y 00.....0. 0 Negligible negligible
Trucks Thournds 0 0 0
Trento. Themanats 0 0 0
It intim Iceeattimi *Its 0 0 0
height cars Thottards (Phreleal
mite) 0 0 0
Prseager automobiles Ilammards 0 0 0
Footwear end textile.
Lamb, footmen.
Cotton fabrics/
Wool fabrics
Processed tem. if
mot.
Last r9n,
loll
now
Seen Cm')
egricuitural protect.
Wheat
he
Barley
on.
Corn y
Rost-.
10:00, tens
Malmo pairs
Rallis, liner We.
Million limper erten
Thmard mimic tom
Thoesard metric tons
Timmer mettle teas
Thousand mule toss
Theanane atrio tom
Mamma metric tom
Thcaterd metric tom
Thousard =trim tons
Thomas, =stria tons
Massed metric tom
Tbousard metric Wes
Vacates! metric tom
55.0
4.0
6.0
10.0
izt
2.0
31.4
5-5 54.2
1 452
180
52 e/ 378
130
41.5
0
671
550
16.5
0
817
655
29-7
60 57
0
1.273 y 1.658
895 921
545
0
592 9503.3
83.7
2,320
1.212
1.7`20"
302
22:8922:0.6
1.575 1,656 g/ 1MS
3,655 6/ 1,356
561
3135.9
? 261
391
39
f.N1
1,22770.7
376
957 5.1 1.5 1.493 8,351 13,712
15.1
0 260.3
72 183
L3.8
0
393 31.5
O 85.5
2.311
1,111
1720.6
118
286
525"
3.610 510
372
0.3
0
10:05
350
sI 78.5
0.3
0
2,0:0
664
217
13.6
0
5,705
7.156
650
1.9
2,226
555 899
5,119
72.0 5,081 8,537
Negligible
0
0
0
00.2
0
? 1 0
0
0.2
0
0
0 0.57
0
1.2
0
3173.11.41 42.
71 171
5.16g 8.8
? 0.ny 9.1-0
11.5
1.65
18.0
5.37
7.22
96
ll.1
6.12
7.3
6.52
LIG
12.5
15.7
10.5
12.6
5.55 U*13885..10/3 si 16
0
5.0
7.16
5.17
1.03
22.2
20
11..2
2.1
8.21
3 Negligible 2.1
60
0.21
0.70 gi
195
0
2.75
1.5 1.9
1.00
161
0
3.5
5.0
11.22
3.70
151
0
3.5
5.4
3.66
4.66
28
0.53
0.57
2.0
0412 g
728
16.1
0
0.24
2.51
5.36
305
11.9
15.5
12.5
5.05
5.32 95
0
2 01.32
01.6
g.A.
0.5
0
5
1.5
3
no 351
12.2
1.65!!;0 695
28.6
35.8
58
431:?
15.6
0.5 31.1 58-3
5.3 5./ 0.5
5.5 105
9.2
1.2
132
10.6
1.5
?mar 1/ 21-71
23.3
39.8 M.5
289 316 356
39.5
hewer
264 e/
233 8.1 221
82
7.95
351
122
17.6
Pres. 1/
185
15
3.5
237
16
3.85
320
10.7
331
15 19
12.5 2.8
ass
50.1
8.6
sot 565
75.7
21.6
14'6
5.8
11.7
3.6
350
13.6
229 2,14
92.2
PreNS Ne.
Prewar S/ Prewar 5/
7.0 15.5 153 103 121 121 300 263 131 551
126 611 283 116 215 266 965 510 894
3.5 so 19.0 25-1 22.3 LA 57.9 91.2 92.2 0.r. 112 226 117 17.1 76.1 101 LA. 191 277295 t02 2,520
125 1,C60 1.203 1.370 1.810 1.7/0 1,720 1,650 e 2,050 1,950 1.120 9/ 1.130 1.130 11:572t 10.2C0 7.110 9,620 1,100
55
1,67o
24.9
2.610
50.6
23,200
13.6 55% 150 516 371 1.5w 3.150 3.120 1,950 y moo 5,530 1,703 1,163 1,450
1.2003/ 3.700 1,190
0.6 13.0 25 50 62 630 627 730 732 79olJ 750 720 1213/ 160 271 2/6 954 555 1,065 1,250 1.150 1,810 11,1C0
75 95 159 2,603
62.0
3.0
5.6
9.6
127
6.3
83.7
0.0
8.5
10
197
in6
1.0 2,thO 1.760 1,913
200 25s 23e 279
318 135 312 393
133 1 101 122
W
1,010 550 1,2C0
113 103 62 127
152 193 sa 556
1.500 1.120 1,570 1,01131,550/ 1.0/0 2.200 1,830 1,670 1.980 1,05.3 1.783 2430
1,630 1.110 1.190 918 t210
1,930 Ter 776
176 513 050 6,760 7.000 2.320 2,090 3.120 ll,203
155 123 100 1003
1.103 925 1.203 1.33o 587 631 1.630 1.310 1,210
5.593
1.200 1.020 975 1.650 91 lap 279 213 7,11 2.830 2.250 2.290
5C0
6.713
270 0 219 518 F7r53,gibl. mho 1,530 2.520 2.700 1,0
3.700 6.580 5.070 7.920 2,150 1:% 1.993 38.?2 W 30.0 27,L03 L030 7,110
1.303 1.010 64.830
.'051 21 9.000 ton? 5.903 6,03 9./ 5.733 5,103 952 1.933 2,2).3 4.793 7.290 21:14
652 727 17,930
2,319 2,690
671 503
17.700 23.103
11,720 12,930
2,860 3,030
10,600
11,000
1.050
1,550
5.720
59,503
19,800
11.803
10.930
5,930
5,120
9.093
19.000
stoe of mu:ding, to for Ion Sete tas my ? rum Epsrta for
*mildly 1938. See Cloves for individma comtrim for ereptione.
Laver figureu for crechoslovabia In official sourms ore bell.v.d to inelre only metallum}cal coke.
bt1sted recoverable mtal In comeotratm.
!Delano' sla0 metal/Meting tembleet7 oft *hr.
I. official naves in evert asters nai. rat Oennany we Samna mare convermol to linear setera.ing ? tacter et 1.13 (1.0... cotton-tyre fabrics to hat Germs).
orrici.1 flames in eCeStre INOttre tot Mthon for the poster yam vere converted to linear new!. using ? teeter of 1.13.
3. orneyi In men atm for ftSt OwaV. Amon, and n.....es? wen co...rue to linear oaten wing ? teeter of 0.714 Unclean tert-01 taario in het Onersay).
b. 1913-37 ?hreite?
1. 1931-38
a. mtgs. or ?mt enrage. rew periods vtich ary tree ertn to nototn. tot enteral, The period is 1933-3/ ter khans, radgeria, grecMalmakto, Roatia7.?01 Reams:
1935-39 or 1935-35 for East Lemma: sr 1931-38 for Soler. Ste figural for indIvidaal camatries for carnations.
n. Ottlatte. iselids Mee materiel.
o. Slaughter fr. and butter.
P. 1935-38 ann.",
o. 1935-39 annen?
r. holtaing miseelhnome grains In LteChoelovalth CM Out *ream.
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Table 46
Indexes of Average Daily Per Capita Consumption of Food
in Calories in the European Satellites
Prewar Average, 1948/49, and 1951/52 - 1955/56 2/
Prewar Average = 100
Prewar
Country Average 1948/49
Albania
Bulgaria
Czechoslovakia
East Germany
Hungary
Poland
Rumania
100 12/
100W
100 LI/
100 2/
100W
100 4/
100W
N.A.
110
107
83
91
98
93
1951/52
92
98
101
86
101
110
97
1952/53 1953/54 1954/55 1955/56
84
88
90
85
99
106
79
85
96
101
89
98
106
86
101
103
98
89
100
110
92
111
105
105
89
101
105
97
a.
b.
C.
d.
Food consumption years beginning
1933-37.
1935-38.
1934-38.
on 1 July.
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Table 47
Officially Announced Increases in Gross Industrial Production
in the European Satellites
1949-55
Percent
Increase During First Long-Term Plan
Average Annual
Reported in
Increase over
Country
Announced Increase over Previous Year 2/
Cumulation
of Annual
Increases
Announced
at End
of Plan 12/
Recent Official
Statistical,
Publications Ei
Increase
During Period
of 1951-55
Previous Year
During Period of,
Long-Term Plan Ell
1...22.
1950 1951
1952
1953
1954 1955
Albania
N.A.
174
179
N.A.
179
22.8
N.A. 147.1
20
22
10.7 14.9
Bulgaria
29.5
23.2 19
18.01
12
8.7 9.-
124
130
115
87
21.1
Czechoslovakia
7.8
15.3 14.9
18.3
10
4.4 10.6
86
102
93
73
14.1
East Germany
Hungary
20
N.A.
26 1 21.9
16
12.5
10
90
158
90
155
90
130
90
103
13.7
18.1
37.3 30.5
25.5
11.2
3.1 1 8.2
Poland 2/
38
30.8 24
20
17.5
11 11
182
170
170
115
18.0
Rumania f/
140
37 1 28.7
23.0
14.4
6.6 14.0
120
120
N.A.
120
17.1
a. Increases during the first long-term plans are enelosed in boxes.
b. The increase announced at the end of the long-term plan probably differs in some instances from the cumulation of the announced annual increases
because the latter are either preliminary or rounded figures or are applicable only to the socialist sector of industry. This explanation seems
inadequate for Czechoslovakia, considering the extent and direction of the discrepancy, but no other explanation is presently available.
c. Corresponding annual percentage increases reported for Bulgaria, East Germany, and Hungary in these publications are as follows:
1950
1951
1952
1953
1954
1955
Bulgaria
N.A.
N.A.
N.A.
14.2
10.2
8.8
East Germany
N.A.
22.7
15.8
11.3
11.7
7.7
Hungary
26.8
27.5
22.2
11.3
4.5
9.6
d. Calculated from increases reported in recent official statistical publications or, lacking such publications, from the over-all increases
announced at the end of the Plan.
e. Announced annual increases probably refer only to the socialist sector of industry.
f. All increases shown probably refer only to the socialist sector of industry.
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Table 46
Indexes of Gross National Product and of Production
by Economic Sector in the European Satellites
1955
1950 = 100
Bulgaria
Czecho-
slovakia
East
Germany
Hungary
Poland
Rumania
European
Satellites
Gross national product
141
140
150
136
132
150
140
Industry
169
150
175
154
161
178
163
Agriculture and
forestry
116
107
112
119
104
148
110
Construction
182
169
185
177
151
205
169
Transportation and
communications
170
160
152
174
166
172
156
Trade and services
143
139
126
123
138
125
133
a. Excluding Albania.
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APPENDIX B
METHODOLOGY
2. Industrial Production Indexes.
The following major changes were made in the calculation of the
industrial production indexes:
a. Subsector weights for Poland's industrial production
index are now based on the wage bill and depreciation in 1954 rather
than on estimated employment in 1952. These weights were calculated
from data on employment and average wages by industry in Poland's
Statistical Yearbook, 1955. Depreciation allowances were added.to
the wage bill in order to raise the relative weights of industries
which use little labor and a great deal of capital (for example, elec-
tric power). The revised weights are as follows:.
Value-Added Weights Used
In Construction of Indus-
trial Production Index
for Poland
(Base Year: 1954)
Basic materials
40.5
Electric power
3.4
Solid fuels
15.2
Petroleum and petroleum products
0.8
Ferrous metals
6.8
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Value-Added Weights Used
in Construction of Indus-
trial Production Index
for Poland
(Base Year: 1954)
Nonferrous metals
2.3
Construction materials
6.3
Chemicals
5.7
Machinery and equipment*
24.7
Merchant shipbuilding
2.9
Motor vehicles and tractors
1.9
Mainline railroad equipment
4.6
Machine tools
1.6
Agricultural machinery
1.1
Electrotechnical equipment
8.3
Miscellaneous machinery
4.3
Military end items
1.4
Light industry (excluding food processing)
23.0
Food processing
10.4
Total
100.0
b. In calculating the industrial production index for East
Germany, the index obtained in the customary way for the postwar
period for the basic materials industries (electric power, fuels,
metals, chemicals, and construction materials) was discarded in
favor of other sources of information which show more reasonable
rates of growth in output. Official East German data on gross pro-
duction in these industries were'Used for 1948-50, and an inde-
pendently calculated index of net production valued in 1950 West
German prices rather than in East German Plan prices was used for
1950-55. The latter is from a preliminary report of an external re-
search project undertaken by the Center for International Studies,
Massachusetts Institute of Technology.
* Weighting within the machinery and equipment subsector is based
on estimated employment in the various industries in 1955. The weights
shown here for the various categories of machinery and equipment are
the implicit weights for 1954.
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c. Weights for the military end items subsector were revised.
The new weights are substantially smaller than those shown in PR-111.
The indexes of total industrial production in the Euro-
pean Satellites which are calculated by CIA differ widely froth the
official indexes. The former show substantially lower rates of
growth, although they are based for the most part on official pro-
duction statistics for a sample of important products. Official
indexes of the production of heavy industry are believed to have a
substantial upward bias because of such factors as inflated valuation
of new products, increases in the degree of double-counting in the
Indexes, and use in some instances of unrealistic price relation-
ships (for example, prewar prices). The bias is probably concentrated
in the indexes for the machinery and chemical industries. In cal-
culating the CIA indexes, an attempt has been made to eliminate this
bias by using production data expressed in physical units rather than
In monetary values and by applying estimated value-added weights to
industrial subsector indexes in order to eliminate or at least reduce
double-counting.
The CIA indexes for industrial materials are constructed
from a large sample of commodities and therefore are believed to be
fairly reliable. The sample used for the indexes of machinery pro-
duction is very small, however. Although these indexes show more
reasonable trends in output than most official Satellite indexes for
this component of industry, they cannot be considered reliable indi-
cators of year-to-year changes. In some cases, the machinery indexes
may be responsible for an incorrect movement in the indexes for heavy
industry and the indexes for total industrial production.
In the case of the food-processing industry, the lower
growth rates of the CIA indexes result from differences in coverage.
The official indexes cover only commercial food-processing establish-
ments considered to be a part of industry, whereas an attempt is made
in the CIA indexes to cover all food processing, including home proc-
essing.
3. Agricultural Production Indexes.
Official indexes of agricultural production were used for East
Germany for 1950-55, Hungary for 1949-55, and Poland for the entire
period. The other agricultural production indexes were calculated
as described in PR-111 except that production of timber is included
in this sector in the present calculations.
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4. Construction Indexes.
The CIA construction indexes have in the past been based on the
output of construction materials. For Czechoslovakia, Rumania, and
(before the Five Year Plan) East Germany, the present indexes repre-
sent estimates of the growth in constant prices of the construction
component of capital investment. Official data on net output in the
construction sector in the Statistisches Jahrbuch, 1955 were used
for East Germany for 1950-55. For Hungary, an official index of total
construction and installation work at current prices (which apparently
changed only moderately) was used for 1949-55. This index is con-
sidered a more accurate indicator of the trend in net construction
output than is the official index of the gross output of the "con-
struction industry" at constant Flan prices. Indexes of total capital
investment were employed for Bulgaria and Poland. Construction and
installation work usually amount to 60 to 70 percent of capital in-
vestment.
5. Transportation and Communications Indexes.
Official data on net output in the transportation and communica-
tions sector were adopted for East Germany for 1950-55 in preference
to indexes calculated from figures on freight traffic and selected
communications services.
6. Trade and Services Indexes.
Except for East Germany and Poland during the period of their
long-term plans, the indexes for trade and services are weighted
averages of indexes of retail trade turnover in constant prices
and indexes of the growth of the nonagricultural labor force (used
to represent the growth of services). The East German index for
1950-55 is a weighted average of an index of net output in the trade
sector and a services index based on the number of workers and em-
ployees outside of material production plus an allowance for in-
creasing productivity. Data on net output in the trade sector and
employment outside of material production were published in the
official Statistisches Jahrbuch, 1955. In the case of Poland, the
services index was calculated from indexes of employment in several
types of services weighted by average wages in these occupations.
As data on trade turnover and the nonagricultural labor force in
1938 which are comparable to the data used for the postwar period
were not available for most countries, trade and services were as-
sumed to constitute the same percentage of GNP in 1938 as in 1948.
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Trade indexes based on retail trade turnover can be regarded only
as rough indicators at best. In the first place, data on trade turn-
over probably exaggerate the growth of net output in retail establish-
ments because value added per unit of turnover tends to decline as
turnover increases. Second) there is some question whether proper
adjustments for price changes have been made by the state statistical
offices in every case. Third, wholesale trade and foreign trade have
not been taken into account explicitly, it being assumed that the
retail trade index is indicative of the trend of net output in the
entire trade sector.
It is questionable whether the use of employment in trade estab-
lisnments, for the countries for which such data are available, would
provide more accurate trade indexes, since changes in labor produc-
tivity would not be reflected in the indexes. Some increase in labor
productivity would be expected in countries undergoing industrializa-
tion and urbanization.
The assumption that the volume of services increases proportion-
ately with the nonagricultural labor force is a very rough rule of
thumb, but it seems preferable to the assumption made in PR-111 that
services grow at the same rate as population. Several important types
of services are either primarily urban (municipal services) or tend
to be connected with the process of industrialization (education,
health, social welfare, and government administration).
A second major group of services consists of the personal ser-
vices provided by domestic servants, laundries and dry cleaners,
barber and beauty shops, and the like. The volume of services of
this type has grown during the postwar period covered by the in-
dexes but probably not to the same extent as the nonagricultural
labor force. It seems reasonable to assume, however, that the
growth in this part of the labor force is representative of the
combined growth of these personal services and of the public ser-
vices mentioned above, which may well have expanded somewhat more
rapidly than the nonagricultural labor force.
In contrast to the trend in the volume of these types of ser-
vices, there appears to have been only a very small increase in
housing services, the third important element of this sector. The
failure to take housing services into account therefore introduces
an upward bias into the trade and services and GNP indexes. This
deficiency has only a minor effect on the calculated rates of growth
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of the GNP's of the Satellites, however. This may be illustrated by
recalculating the trade and services and GNP indexes for 1950-55 for
Czechoslovakia, East Germany, and Poland under the extreme assumptions
that the net output of housing services did not increase at all and
that housing services contributed one-half of total value added in
the services sector at the beginning of the period. The effect of.
this adjustment for each country is to reduce the 1955 trade and ser-
vices index by 4 or 5 points and to reduce the 1955 GNP index by only
I point.
Most of the trade and services indexes are obviously very crude.
They may indicate a reasonable long-run trend but cannot be expected
to measure accurately changes from year to year.
7. Gross National Product Indexes and Dollar Values.
a. Use of Official Index for Hungary.
The indexes of estimated GNP presented for 1949-55 for Hungary
are official indexes of national income published in the Hungarian
Statistical Handbook, 1956. Because the Communist concept of national
Income excludes provision for depreciation and the value of services
not connected directly with production of material goods, it is not
comparable with the usual Western concept of GNP. The official in-
dexes for national income nevertheless are regarded as the best avail-
able indicator of the trend in Hungary's GNP. For further comments
concerning the GNP index for Hungary and its relationship to the in-
dexes presented for production in the various sectors of the economy,
see the footnote to Table 27.*
b. changes in Sector Weights.
The sector weights used in the calculation of the indexes of
GNP in Bulgaria, Czechoslovakia, and East Germany are those shown in
PR-111. The following revised weights were adopted for Poland and
Rumania:
* P. 71, above.
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Percent
Poland
Rumania
Economic Sector
(1948)
(1938)
Industry
31.0
19.8
Agriculture
40.3
41.4
Construction
3.8
2.3
Transportation and
communications
5.7
4.2
Trade and services
19.2
32.3
Total
100.0
100.0
The new sector weights for Poland, like those in PR-111, were
calculated from official national income statistics for 1947. The
adjustment for services, however, was recalculated on the basis of
data on employment and average wages in services. An attempt was
also made to adjust sector values to a factor cost basis by deduct-
ing indirect taxes and certain profits which are functionally similar
to indirect taxes and by adding direct and indirect subsidies.
Because of the lack of postwar national income statistics for
Rumania, which required that the weights in PR-111 be obtained by
analogy with other Satellites, prewar weights have been used in the
present calculations.
c. Change in Price Basis of Dollar Values.
Estimates of Satellite GNP's in dollars are now expressed in
1955 US prices rather than in 1951 US prices. This was done through
an appropriate inflation of dollar estimates in prewar prices for
1938; all postwar values are obtained by moving the 1938 values with
the calculated indexes of GNP. The price index used in inflating the
1938 values to a postwar price basis has also been changed. The im-
plicit deflator calculated by the Department of Commerce for the US
GNP is used in the present calculations, whereas the retail price in-
dex of the Department of Commerce was used previously. The change
from 1951 prices to 1955 prices and the change from the retail price
index to the GNP deflator coincidentally offset each other exactly.
The 1938 values in 1955 prices are therefore the same as the previous
1938 values in 1951 prices.
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d. General Effect of the Changes.
Most of the changes in methodology described above tended to
increase the estimated rates of growth of the Satellite GNP's. This
was particularly true of the revisions made in the indexes for trade
and services and construction. The shifting of the sector weights
for several countries to a more appropriate year (1948) also contrib-
uted to higher growth rates, but this was offset to some degree in
the case of Poland by a concurrent increase in the weights for agri-
culture and a reduction in the weights for trade and services.
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