DETERIORATION OF ECONOMIC CONDITIONS

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP82-00047R000100160008-4
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 7
• Document Creation Date: December 27, 2016
• Document Release Date: April 4, 2013
• Sequence Number: 8
• Publication Date: January 19, 1952
• Content Type: REPORT

Declassified in Part -Sanitized Copy Approved for Release a~ 50-Yr2013/04/04 :CIA-RDP82-000478000100160008-4
INFORMATION REPO'
CENTRAL INTELLIGENCE AGENC
COUNTRY Czechoslavakia
SU BJECT Deterioration of Economic Conditions
50X1
TMI{ 00 DVYIMT DOM TA IN{ INIOtY ATION A11[DTINO TNL NA TI OMAL 0[I[M{[
01 TNt OMIT{D {tAT[tl ^iTNIN TNt Y[hNIN{01 TI TL[ 10~ t{CTION^ 7i~
AND 7L~~ 01 TN{ U. t. CODtI A^ AY[ND[D. ITC Tt AM {YI{{ION O[ t[V[?
CATION O! IT{ CONTtNT^ TO ON tL~ttl lT 1Y AN UNAU TXOt 12[0 ![{tDM It
50X1
50X1
50X1
50X1
DATE DISTR. 99 den 1952.
N0. OF PAGES ~
N0. OF ENCLS.
(LISTED BELOW)
SUPPLEMENT TO
REPORT N0.
THIS IS UNEVALUATED INFORMATION
The
economic situation during the first hal o ~.95~
could be cha~?acterized as a raaidl deteriorating oneD At
that time it was quite clear to expect an
immed3,ate shakeup on th.e top policy-m ~.ng levels of the _
Czechosloval~ Communist Party in a desperate attea~apt to save
the economic situation, or to face such cotr~plete chaos as
existed in the first bloody years of the Soviet doma..nation
of the USSRo The expected :shakeup came and was fal.lovaed by
the most complete, thorough reorganization of the Czech
econo~ty since its nationalization under the Goznmuzaist regimee
7
izaiy on and ~ s significance could be presented in the
foll.o~ing a~ay:
(a) During the past period ref Con~.nist domination of
Czechoslovakia it was obvious that the Party, and by it
the 'hole c?untry, was run by the a1.1-~aowerftal trio of
the Central Committee: Rudolf Slansky~ Dedrich. Geminder,
and Bruno Koehler, In daily work in state agencies,
and practically in all fields of national life, the definite
Party directive No 1 vr~as strictly applied,=~.'~
"under all eircum>sta~ices, in all operations, political
considerations are to be given first priority"~ In
this respect there was only one ~.tter of importance for
the vast Party machinerym to strengthen the security
?f the existing regime, i e the Party dominationD This
the impelling reasozis for the above reorgan~
SECRET
'ORM N0. 6i-KD
.AM 19a i
CLASSIFICATION SECRET/SECURITI' INP?ORMATION
-G
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~. SECRET" /3~CU~i,ITI I:NI~"FaRMA~ION
'~R~~ ~~~
w~u,s ~t the sa,~r~e tune the a~,in cause of the sapid determ
ioration of the Czech economic situe.tion with3..n so~ae-
thing more than one year o Pract:lc~ally, this aneaaa~G o
to put in all, even lesser positions, only paliticall.y
reliable individuals, or, putting it in the l~ax~ty
language, the "faithful eons. of the workers? Blass",
the thor?~g~l.y disciplined indivi,cluals who knew northing
except whet they .mod been told and taught . This policy
resulted i.n catastrophic losses to the highly developed
Czech industry, and economy. New "workers cadres" were
hurriedly educated in nunaeroua "central workersg sch?o1~tr-
and "workers? univermmitie~" in the basic economic .alphabet.
It soon happened that F~overntnental departments, factories,
distribution c~rgani~ations, state and collectsve .fauns
( ~~D ? s } were run by people who had no qualifioa.ti~-ns for
these ,fobs whatsoever. 1?hese e~camples show the. ea~treanes
to which this wentA Winder the existing party policy
practically-all prasitions were considered "responsible"
and had tra be occupied by "new cadres "' o An adaninistrative
director of a hospital nat~~rally wanted to prove how
responsible the clerical work was in hospital admixais-
tration; high offidials in the Ntinistry of Health wanted
to show the importance of such work alsoo They decided
therefore to gut in these positions new "reliable"
workers ? cadres , Thin has rea~ulted in a real. htx~.t f
tYae workers a cadres in factories and plants o~?de~ .:het theme
into workersa schools, Most capable and skilled workers
were thus taken off production and sent to shoals,
causing great damages to production. in all fields 'of the
national. econea~ny ~ After coanpleting a: 'brief education
consist3_ng mainly of political indoctrination, it
happened8 for eatannple, that a ward from a hospital for
mental diseases became the actual hoses of the famous
P~ysll.vecek psychiatric clinic. The new boss, in hie
position of "political secretar~t", decided that all work
with "crazy' people was sheer nonsense anal putt an end to.
research work conducted in this scientific institution,
Under the name policy s. stoked orignally in charge of
the heating system. in th.e Student Health Institute,,
.'became overnight a high official in the Ministry of
health, Cadre Department, and was put in charge of the
aa~sigaunent of doctors , A garage maintenance man in
the Ministry of Foreign Trade 'became deputy section chief
of flee Cadre Department and an actual head of all person-
nel of foreign trade companieso These are but a few
exam~ales of the new policy wkaic~i resulted in a general
mismanagement .in all fields of the Czechoslovak
economy and. adm~.nistration.
(b } 3?he ill famed trio o Slansky, t~enainder and Koehler .were
the actual creators of the above ps~licy, but as Co,unist
ideologists, being practically separated frc~~n the daily
life of the country, they were not able to cc~ntro7. these.
activities. It was generally 'believed-that Slansky was
a ~te~scow mean, placed by the Soviet4s in charge of the
entire country. In hie bl3.nd drive for tYae securit~? of
the regime he destroyed the econoany~ ao in. '~9~&?~ he
abol~.shed the sso~called Na,r?~a~~.cal~s~spod.arsl~a, t~;:o.~se
(NHI{}-Ecz~nomia~ Coxnrnitte~: o:?' the Ce:ntra.l Secret~s.~~~iat,
headed by Iaudvik ~'~e~&~a, ,f':~ flold.r~~?~?nn a,nd Dr ~vzng I'a~ttiil~o
This coanmittee was the x~igl~at harrc~..of ~ottwal., s.~~~ra, ~;~yeat~z
of flee "Z?e~ ~d latex? tY~e E:l. ?~~e ~e~.~ =~`E. ~,n o .~f"~~. ?U ~;~ lE.~ x~ll~
SECRET~SEGTJR~'I?Y ~'E'~RMAT20I~
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fc)
~I
RET
SEC~tET /SECURITY' ~~i~'ORMA~TI0~1
-3-
waa~ c~iggcal.ved C~ot~w~.Y%! took Fre~ka. witYa ~~im to the
~x~et~ident ? ~ ~ex?gona.l Qf"f"ioe; I7r ~c~lrar~x~ wag a.p~a~?~i~ted
~?eput~ A~ixaig~t~,ez^ i.n State ~?lannin~ (?, ~i i.x~ r.~h~,r~~~P o~?
gtat~ gtiog, and I~r Jung-~'~nc?1,k, who w~~ in oh.a.r~e of x.11
e~onesmio c;a.dx^e~ w:~.t'h tkae ~~~: way ~:~uex~ ;~ r~.i~or pcs~it~.s~z~
with thy: focal Slovak ~overx~naent Sxa ~~r'r~ f, ~~:;.~~va o i;ngt~a.d
o~? NHKj witk~ixa. tree ~or~r~aun:igt P~az?ty a ~ o~? ~.~.~~:ti`
~~.~ erea.ted~ the ~o-c~a1 ].er1 F~rt~~rgA A Iy~x~f~ ~x~~~ ~,sri, s t~l~chod .
(~.b'breviated k'FQ)~-17e;aartmtex~t lrb~3ugtr-y,~ ~~i.n~j,nce a.nd CoEt~'iE:r~e,
with new peop~.e ix~ oha.r~e o ~axr,~ ~F:~ra.ex~a:~. d:~.,xnec~.~c~,~^g of
r~e.ti~sn,a1 C:or'~9(ax~'~.t?, ioa~a~ C?~~,~ i z~ ~~ ~:~he ~a~{&~ fl_ia~~~e~ P~~ i~{a
a,nd J'anci.~r were dis~mig~sed~, :Y~~az~dlegg c~:f? ~;~.~et~'
teo~anical c~ua.li,f"~catr~i~ang, ~.n~~ giv~^xa ~or~e ~n~'~x~~~.:?r pogi-tion~;
gcza~e even. went fs~a ~ai~. m New pergor~ne~ ~e~e ~ppdi~n~~d:
.~'U'C~1 po5`~~l'?Tl:a 'fohl"'o'41~~1 t~1e E'x~w ~'E~xIr~3',~3.~. e~~`,w:~.~`"f` ~':''~ "'t:1f~.~3i'~e
~aeaded hit ~x^unc~ KoPhle.~?, a ~~~~^m~~xx Oo~~.un~.~t vaho did not
even. gpeak :~?l~~,r~nt ~2ech ~ T'he ~~'ax?ei(p~ Af?~`'.a.irg Mi.nigtr~r
head~;d h~ ~learaea~t~i+~~ tr~in~ degpera~te~,~. fo:r' the g~.ke of
foreign trade tc~ ~~~+ gla~w1? in ~',hi.g over^a~~.l cfon~unizatioa~,
w;ag a.lwa.~rg ~ecare and ma~~e pregged by ~ezni~ader9 wk~o wag
'believ~:d to ~',e the li.aigc~n ma~a for the t~o~~oo T
enti:r~e nation wag becox~in~; rnore and move dig~agt~d by
State propaganda, methc~dg e the a~tiona.l ?~atput decre$sed
t~teadil.y ag a. r~'a~ult o:f? the araiga~.anF~gement cif riew ~ac~ggeg,
deep apathy of the work~.ng maggegA ever ~rcaw.i.n.~ ghox?tage~
of raw a~ateria.lg, and. d.i~sor~~a,r~i~a.t~i.oxa ofT the e~nt.~re
economic anal admini.g,tr^~tive 1i.fQ of the co~~,zatr,~ a Sine
propaganda. ds?i..veg had not ~arou~;ht forward an,~ pog~~ti~v~
regu~.tg, the ever-~x"owin~ a.nd ~,4~ieokerain~, "tarn:-~aver?" s~f
emp~oyeeg had. only added to the ra,pl.d.l..~ gpreadln~
general chaos in the ccsuxatr?y ~ ~#nd yet, even if the
gitua.tion had regulte~i in coxn?~aJ.@te laaxx~r^~~,pts~ay,, it wou3.d
he wi~an~ tea ear,.pec~; thax?, ~:;k~r.:, f,~s1~?t:~.cal ~ni~tsfi~ a~nc~ ~~he
iron drip of #ohe ~omm.~~nni,a~t ,cjax~fy uuo~.i~c~ ~ae? we~a,kened to
guoh a.n e~cter~#; ag to per'~ait a general ~aprigin~ or game
kind of 1.nter^na.l x^evoiution, ~h. #;h~ c~an~to.~a.x^~r~ with
the wea.kex~~.n~ Pc~onomy the ~;c~a~a~x~xniat terror brow in it~i
~r~elty and gca~.e a Axed then i.n the ~.a,a~t r~~oa~aexat, whew
tYae c,oa.l output and the a.~,ricultura~. prcadt~cti?n wire
~etti.n.~ da.n~e~rougly low a.xnd the ~encraa. dh~a,s~~~
in administration had x~ea.ched d gta~e tlda.t ~ao~od~' knew
a.ny more what wag going on in the co~xnt,r^y ~ dame the blow9
~Ghe 3~ig~egt e~hakeup in the Oon~t~n.3.~t ~'arty~ ordex?ed un-
d~.t,'b?~~~dly :from Niotscowa ,Rudolph STa.ra.gl~:~r wa.g ~:~e~?ov~1s-
te~ a.n ~~~air~~r~rt~>~~/s~c~>~ n~rFO~A~~~~
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SEC'R~~SEOtl'~~' I1P~'ORMA'ITON
-6~
~70 ,,;9e~e are` xao published st~ttistiaal dt~-te on the nat3~ona1 wealth
sand acortality, but he situation in this respect has
50X1 '~flrsened fponsiderably dur ng the ls,a~t two ~"E:~:r~ . ~oXls'ptivxa
is s.lway~' lower,. apprc~~.ahing the leeel of the -s~ a . ~~ ~~ci~~ira~
close eaonom,ia and political am?>peration coaxtributes of
aaurse to the leveling of di~ferer~oe~ between C~eehcs~lovakia a~.a
the i1SSR. With the irarlusion of ind.~tstralized Czechoslovakia
50X1 into the Eastern Hloc'the entire star~ds.rd of Czech living
was immediately lowered. the weakest-sprat in the
present administration iaa "zec gas gvakia to be ire production,
beas.u~se of the growing chaos in it o Cont?ary to this, the
~ata?~angest, and presumably .the best orgaaaized agency, is the
A~ix~istry of National Securitye
8. The last sharp pride increase in Jane 1951 in many basis ~on-
sumer goods has destroyed the last , ~onf ideaaoe Q,f brcaad masses a~?
Czechoslovak people in +,;}~e na~:tiox~.I ~u~x?~xt~yo A.~,~~.augl, ~ tie
Central Comaeittee of the Comixunist Party has tried to keep
~~i~ ~.nt~~nd.~~ pxi~~- increase ~ecr~-~ un?~i]. ~~~ ~.~t mi.n~a~te'
the news. le~.ked somehow and a real panic among the population
resulted. The stares were stormed by huge crowds of people
buyiaag everything available, in any quality anti quantity.
The ~aopulation hs.s expected actually a currency refor~a
~imi.iar ?Go ~~~ Pnli~ha The buying spell preceding the 'prise '
increase rasa- showa~ also laves mmuah mexa,ey was still 'in the
aoutatry. Z~stediately after -the new pricey went into effect,
aaa~e a nationwide drive f Qr wage and salary refc~r~~s . This
was done in two waysm by the direct lowering of basin wr~gea,
and by "hardening'r of production norms. This drive sti1, goes
on. There were also some rumors th2~t the govern~aent ie pre-, ,
~~a?ing a oamp~ign for an internal loan to finance the
Soaialis~ Construction Program", similar~to that in ~~e USSR,
As things are now, nobody except a few fanatic Communi?ts '
trusts the national currency.
~. The value of the YJS dollar has lately somewhat decreased for
the following reasons; until 199 there was still sous
emigration., ana3nly of Jews , who were seeking dollars e,nd
smuggling theA abroad;. the Darex organization, selling
export goods for hard currency, was better supplied with
high quality ffierchandise st reasonable prices. At that time
the dollar was available on the black market at the pri~:e
of 60C Czech gowns to a dollar (the official rate was j0
crowns). Since emigration has been stopped and esaape
from tk~e a?untry m,~.de practically impossible z the value of
~S ..dollars ha.s slightly decreased t~o SQQ=~55~ ~~ ~. ci4~3.ar~ ~,.~
newest Darex regulations allow the population 'to buy Darex
goods for hard currency without any identification of pttz?~-
ahaser, The purpose is to get d?llars and .other hard
csurrency from the bleak market and savings, Othe~c reasons
-that dollars arc no mare sa feverishly sought as in 1~~8 _ 49
are a.s follows a discontinuation of imports from the 'CS;
US export regca,lat3ons on one side, and the inaapability of the
foreign trade employees too buy goods on foreign bleak a~.rkets
and to bring them home illegally, on the other side,
1C. Nothing 'ak~otat the national budget f,s known, except the
figures published during the budget presentation in Parl3.ament.
But it eras rumored that the iaaaome from the "general ao~a-
sumption tax", which t~ro.s siYarply inar~eased by the June 1~3~1
prise increase, was not fully used for budgetary pu:~~acase~s and ~a~
kept separately for the fins.nc~,rxg of the ~,x?mariaent p~:'?~.~t~'a'?a~s~~~ o
Hut I have no statistics or eve~a estimates o The~^e ~,r~; a-u~a
signs of financial weakne~sa~ in thr a~au;~try.q ~a~r~?s'~~s~;? ,
SE~RET~SEGURI'~?Y I~tFORMATI01q
r
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S~~RE~'SE~URI~Y ~F'ORMA~'I(}N
lI o I~ ~~de~ a tx~~de ~i"~~ ~caux~l;~ie~ ~~a~r1y ~.~ ~~.~d o~?~^e~a~y, ~~~
~I~~?~ta.~ia ~s~x~pe~x~~t~.~r~ w~~ ~rgani~ed m I~ wa,~ ox~e~~~x ~~ ~t~e
~~gge~loiox~ ea~? the :~"ar~~e~ I7eptxtoy ~Iim~,~~e~ ~fi f~'~x~~e3g~~. h~:~a.~ie
~~ E~r~~n T~Qe1~10 ~~i~ co~p~ny akaci~ld ~e e~c~~.~,~.~~.ve~,y ins ~k~~,~~ge
oaf ta~,z?~er 'b~~~..~.e~ ~ o I~, i~a ~~~~-~~.c~i~a~,~ ~~e: ~~a~.~:aa.~ay f'iref~
~h~vaed a~a~~e p~.~~r?~ive x~e~ul~~ e Ma,~y ~~a~~a~~?ie~ ~~h~,~ did. nt~
~~.ve p~capex~ ~~~de ~x~d p~;yr~aex~t agx~eearn~era~t~ ~.it,~ ~~e~k~x~a~..ov~ki"
~:~d we~~e ~ka~~t ?~.#~ ~~,cal.~.~x~~, were ~e~ved ~~ Me:~?lx^ia, on ~, ba,~~~r-
baai~ , Irs. ~uo~ ~~~e~ ~ter~ta.~ia ~~~x~.~.~y ~aeg~~ia.lyed wi?Iwh ~u~h
c~~he~ ~or~pa.nie~ ~~ ~en~x~c~te~, Ck~ea~ap~a~., Kcav~ 9 ego e a,~a~>~x~ ~k~e
vari~~~ it4em~ cad e,~'.pc~r~ a?~d ~.~p~ar~ fl Eve~~?~~~,lly, '~ka~~gk~, ~hi~a
b~.s?ter b~xaine~~ ~~~ ~7,ov~ed. d~~a~, at~o~ ~e~?~iau e~c~a~~~ex?ed ~Q~~
a,r~d ffi~~e dia~~?3.~~.~.?~~~y i~ ~e~~~is~~ixag tui~~~ o?~he~ ~~ampa.niea,
tryia~g tsa get a~ai~~~X.e gc~~d~ ~?ea:r? ba,x?te~^, ~t ~~a~ ~inae ~~e
f ore~~. ~~~de ~~a~pa4xa~..e~ t~~.ed t~ deep ka~.~ d.e~~~rnd, g~~d~ f?Q~
t1~eaelve~, i~ ~rdex~ ~~ e~~~ ~heat~ a,~a~caa;~l,~ a,x~d ~~ give ~~
A~erl~x~?i~ #~ka~ gs~~ad~ they c~u1d r~a~ gel z~id ~~ ~~~e~~~.ae 4
Skara~?tly ~ae.~~~e nmy ~~~a.pe I k~e~,rd ~~a~~ ~'.e~~Yr~~.~ is ~~ lie olo~ed,
12 , Coveraena~ pr?~apa.g~~.da. c?n~er?rai~g the r~~,~.a~e~.~ ~~ tide~tex?~
Ger?.~y ixai.~?i~~.l.y l~a.d ~ at~~ng e~~e~~ ~n ?~h~ rz~~Y~.~~~,~v~ pcp.~,~~n
which 1e?ea.r~d~ ire ~tlde o~.ae c~~' a. new .w~~, a,z~c~~kaer ~e~r~ ~a~~upa.t~.~~.s
H~wevex~g fhe ~i~u~.~?i.oa~ ha,~ oha,xsged ~cax~a3d~~a.'~~.y9 wi1~h the
.~~~?ity ~a~ ~~e~ha ~ael~.evir~g 1~ha,~ ~Icax~~.d W~~ III i~ ir~evit~,~ble
The v~.~?t ~a~,~~riffly de~ire~ ~ra~? ~~ ~Yae t~r~iy ea~~~ by why.
~~e~h~alov~,i~i~ ~i~r~a~ he 7libera.~ed, de~pi~~ ~kae ua~~e~t~~~le k~a~?d~-
~h~pa~ ~~i ~~a ~~?~ x~a?ts~.~n m.~.gh~ a~_f?fze~~ dur~.ng 1~he ~ra.~ o LT~dex~
~~oh ~nmd.i~:~r~xx~, O~ec~h~aa~.ava.~~ d.ca ~~1a ~e~~ f~e~~ ~ea~~en~
~.~ t~k~~~a a p~~;vica~.~sl.y a C~aope~?~~iora vaith a~a~y~~~e ~ evex.~ ~r~it?h ~h~
Ge~aa,n~, is a,pp~~ea~~lly ~av~.~ed ~.~ ~a~de~ ~?~ ge?~ x~~.d. ~~ ~~~he
G~~ux~is~ x~egi~e a,~d ~o deatx?oy Soviet; 3.~~'~,~ex~~~ im
~~~~1~t~a~.eava.~~~ o
sBC/~E~vx~ ~a~~~~~
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