The New Regime and the Consumer

After Stalin, the Soviet leadership was taken up by a group of top party officials. Georgi M. Malenkov was the Premier and the most influential, but apparently several other men held important shares of the responsibility and the power. This elite group included, with varying degrees of personal influence, Beria (temporarily), Molotov, Khrushchev, Voroshilov, Bulganin, Kaganovich, and Mikoyan. None of this new group was new to Soviet leadership. All had been close lieutenants of Stalin. All are known to have had important roles in previous policy formulation, and in directing key operations.

The system that this group took over in the U. S. S. R. was their own as well as Stalin’s creation. Under this system, the economy is organized along authoritarian lines and characterized by state ownership of the means of production and state planning of practically all economic activity. It is the Central Committee of the Communist party which lays down the economic and social policies which the state production plans are desired to implement. The new regime modified this system in no essential respect.

In addition to inheriting the system, Malenkov and his associates inherited economic policies and economic conditions which they themselves had helped to create.

In the U.S.S.R., as we have seen, Soviet economic policy had long been to force industrialization by every means. And this objective required such a concentration of capital investment—both civilian and military—as to deprive the growing population of advances in living standards commensurate with the overall expansion of the Soviet economy. That is another way of saying they took it out of the people’s hides.

Each of the European satellites, too, had undertaken, under Soviet direction, to develop an economic structure similar to that of the Soviet Union. By 1953 all foreign trade, nearly all industry, and a very substantial portion of domestic trade had been nationalized in those countries. Where collectivization of agriculture was not completed, the Government controlled agriculture by means of centralized planning and a system of compulsory deliveries. Each satellite government had drawn up a long-term comprehensive economic plan which, like that of the U.S.S.R., emphasized rapid industrialization.

These developments brought the Communist leaders many serious problems—and the people many deprivations. Before the war, as independent states, most of these satellite countries had devoted a much higher percentage of resources to the consumer sectors of their economies than was customary for the U.S.S.R. When the Communists took control, belts were tightened. The standards of living of the satellite peoples began to decline toward the low levels long prevalent in the U.S.S.R. But denying the satellite peoples the fruits of their labors, in imitation of Moscow patterns, still did not bring the overambitious war-economy plans to success. Agriculture and industry both had difficulty in keeping pace. The world has heard how the transformation of satellite agriculture into the Soviet pattern was impeded by the opposition of the rural populations to collectivization and by the difficulties of mechanizing farm output; how shortages of raw materials slowed the textile program in Czechoslovakia and the electric power industry in Hungary; how the mining and metallurgical industries lagged in some areas; how the rights of labor were obliterated in the attempt to shift manpower into heavy industry; how purges furnished scapegoats for Communist failures.

Letting Off Pressure

In the summer of 1953 came the electrifying news of rioting in East Germany.

Also in the summer of 1953, new economic targets were announced in the U.S.S.R. and some of the satellites. These new targets—which will be discussed further in a moment—were said to be a means of improving the lot of consumers.

Some observers in the West assumed that economic difficulties in the bloc were erupting with such force that they threatened to topple the Malenkov regime. This interpretation is understandable—any democratic nation would have long since replaced a regime that in peacetime so subjugated the needs of the people—but such an interpretation of the Soviet scene must be viewed with great skepticism. At this writing there was some evidence that the problems faced by the Kremlin may in some respects have become more difficult since Stalin’s death, but one could not infer that the chronic economic difficulties of the Soviet bloc were especially different in nature from previous post-war years, nor that the Communist governments with their inhuman police control were about to collapse.

What the Communist rulers were facing was their perennial problem of developing lopsided economies without letting the lopsidedness become so repressive on the people as to upset the plans and timetables. Even in police states there are physical and psychological limits beyond which human beings cannot be driven without lowering their incentives, their energy, their morale to the degree that production is severely hampered. The Soviet leaders have always recognized this. At three different periods in the thirty-odd years of their control of the U.S.S.R. they have shown themselves adept at opening the valves enough to relieve accumulating pressures and then shutting them again—always without swerving very far in the basic drive to build the industrial-military machine.

Many observers believe that even prior to Stalin’s death the time was ripe for a slight relaxation in the postwar consumption squeeze. The Kremlin faced multiple problems in consolidating its new empire. External foreign developments had been adding to the difficulties of achieving the overambitious industrial and military goals. Western export controls on the shipment of strategic goods into the bloc had been impeding the planned development of the military sectors of the economies.

In any event, a close examination of the new actions proposed by the Malenkov regime to improve the consumer’s lot, insofar as they have been revealed, indicate that plans for heavy industry and for military preparation will not be materially affected.

The “New Economic Courses”

During the summer and fall of 1953, Communist governments all over Eastern Europe announced in turn so-called “new economic courses.” East Germany announced its “new economic course” on June 11, just before the East Berlin riots of June 17. Then came Hungary (July 4), the U.S.S.R. (August 8), Rumania (August 22), Bulgaria (September 8) and Czechoslovakia (September 15). Smaller adjustments were announced earlier for Albania, and later for Poland.

The announced programs differed according to local problems, but almost everywhere the solution of agricultural troubles was a key objective. Better collection and distribution facilities for farm products were demanded. This theme was almost invariably played to the popular tune of helping the consumer—especially in the U.S.S.R. Deplorable housing conditions came in for a share of the attention.

In the satellites the programs reflected openly the inability to meet many of the exacting goals that had been set. In some countries, the emphasis was on bigger industrial investments in scarce basic materials. In others, concessions to the peasants were paramount. The initial implementation, as well as some of the program announcements, was confusing and sometimes contradictory.

Malenkov’s Big Announcement

The new economic course for the U.S.S.R. itself was unfolded in three major speeches during the second half of 1953—by Malenkov in August, Khrushchev in September, and Mikoyan in October—and in a series of decrees and lesser pronouncements.

Premier Malenkov, addressing the Supreme Soviet on August 8, made repeated claims of Soviet strength and progress. For example, he said the United States had no monopoly on the hydrogen bomb and added that such facts “are shattering the wagging of tongues about the weakness of the Soviet Union.” But in the section on consumer goods he gave a revealing picture of weakness.

He spoke at great length about lags and failures in agriculture and in the manufacture of consumer articles. He severely criticized the poor quality and appearance of goods, the “serious shortcomings” in the organization of domestic trade, the “unsatisfactory leadership of enterprises,” the “high production costs” and high prices of coal and timber, the “neglected state” of agriculture in many districts, the “serious lagging” in livestock, potatoes, and vegetables. He said the Government considered it “essential to increase considerably” the investment in consumer industries.

The urgent task [Malenkov said] lies in raising sharply in 2 or 3 years the population’s supply of foodstuffs and manufactured goods, meat and meat produce, fish and fish produce, butter, sugar, confectionery, textiles, garments, footwear, crockery, furniture and other cultural and household goods; in raising considerably the supply to the population of all kinds of consumer goods.

The program was to be accomplished in “2 or 3 years,” and this was later repeated in other official statements. In other words it was to be a relatively short-term program of expansion, hardly long enough to make a major shift in industrial emphasis—nor did Malenkov claim such a shift. He said, “We shall continue to develop, by all possible means, heavy industry and transport.... We must always remember that heavy industry constitutes the basic foundation of our socialist economy, because without its development, it is impossible to insure further growth of light industry, increase productivity of agriculture, and the strengthening of the defensive power of our country.” Taking up this theme, the Communist propagandists in the U.S.S.R. and the satellites have constantly assured the people that they should not interpret the “present tasks of the economic policy as a retreat from the Marxist-Leninist principles of building up socialism.” The continued growth of basic industries was declared to be essential.

The assertion was made, not that the consumer program would displace basic industrialization, but that both could progress simultaneously. Malenkov said that heavy industry had risen from 34 percent of the total industrial output in 1924-25 to 70 percent in 1953. And while that was going on, he said, the U.S.S.R. was unable to develop light industry (textiles, garments, shoes) and the food industry at the same rate as heavy industry. But now, he said, the Nation was at last able to develop those industries rapidly.

This “now-we-are-strong-enough” theme runs all through the Communist propaganda on the subject. But it doesn’t harmonize with existing facts and figures.

In the first place, though the Soviet Union has made large industrial gains, it has not built its industrial base anywhere near the long-term goals that Stalin set in 1946 for the ensuing 15 years or so—goals which, even if attained, would not bring the U.S.S.R. in most respects to the production levels which the United States has already reached.

In the second place, the “now-we-are-strong” theme seems to leave out of account the truly deplorable condition of Soviet agriculture. Malenkov himself said a drastic increase in consumer goods could not be achieved without “further development and upsurge” of agriculture, because agriculture “supplies the population with food and light industry with raw materials.”

Khrushchev and the Livestock Lag

On the condition of agriculture, Nikita S. Khrushchev had a great deal to say at a session of the Communist Party’s Central Committee on September 7. Khrushchev is the First Secretary of the Party. His speech was an even more dismal confession of the “serious lag” than Malenkov’s. He revealed that the Soviet Union had 10 million fewer cattle at the beginning of 1953 than in 1928, and that the number fell by 2,200,000 during 1952 alone, instead of increasing by that same number as planned. In biting words he described the sharp decline in pork production and in wool, the unsatisfactory fodder situation, the deficiencies in potatoes and vegetables. His speech showed beyond doubt that even the production of grain, traditionally the Soviet Union’s No. 1 food staple and No. 1 export commodity, was in bad shape and that a far greater acreage needed to be devoted to feed grains in order to bolster the faltering livestock industry.

Khrushchev listed a number of measures to raise production. They included higher farm prices for livestock, milk, butter, and vegetables; the reduction of obligatory deliveries from the small private plots still held by collective farm members; the assignment of more tractors and more skilled workers to the collective farms; and the tightening of Communist Party control over agriculture. The decisions to place greater reliance on material incentives and to give slightly more recognition to what remains of private enterprise were intriguing, but the collective farm system itself remained basically unchanged.

Students of the Soviet economy, surveying previous efforts to stimulate agriculture and especially mindful of the biological limitations on the reproduction of livestock, were doubtful that the new measures could bring anything like the planned increase in 1954 or 1955.

Mikoyan Advertises the Program

Anastas I. Mikoyan, the Soviet Minister of Domestic Trade, then made a speech October 17 before the All-Union Conference of Trade Workers.

Mikoyan, as the man in charge of large segments of the consumer goods program, enthusiastically described the program as “gigantic”. In the manner of Malenkov and Khrushchev, he also enthusiastically flayed an astonishing number of deficiencies in the production, packaging, distribution, and marketing of consumer goods. He even condemned dull advertising slogans and inconsiderate retail clerks, and said there were some things about capitalist business methods that were worthy of emulating.

He stated, too, that not only the Ministry of Consumer Goods Industry but other ministries—including aircraft and defense—were getting assignments to produce such things as refrigerators, washing machines, metal beds, bicycles, and radio and television sets. Actually, small quantities of durable consumer goods have always been produced by heavy industry ministries. Mikoyan’s statement was, no doubt, intended to sound as if these ministries were being transformed, but there is no evidence that the U.S.S.R. actually planned to reduce its production of aircraft and armaments to make way for household appliances. If such evidence shows up, the free world will welcome it.

Mikoyan gave a few figures on the production of household appliances. They revealed plans for large percentage increases, but even if achieved, these increases would still leave the consumer many years behind. For example, he said the output of refrigerators would rise from 62,000 in 1953 to 330,000 in 1955 (for a population of more than 200 million). This, even if achieved, would still be tiny by Western standards.

In August, Premier Malenkov had spoken cordially of the expansion of trade of the U.S.S.R. with Western countries but he had avoided connecting this with consumer goods. Now, however, the following brief passage appeared in the middle of Mikoyan’s long and rambling speech:

A few words must be said about the import of consumer goods. During recent years we have been making use of this additional source of supply for the population. Having become better off we can now allow ourselves to import such foodstuffs as rice, citrus fruits, bananas, pineapples, herrings, and such manufactured goods as high standard woolens and silk fabrics, furniture, and certain other goods supplementing our range. These goods are in demand by the population.

Although we are buying 4 billion rubles’ worth of consumer goods from abroad this year, two-thirds of this sum will be spent on goods from the People’s Democracies. In turn, we are exporting certain consumer goods of which we have a sufficiency, and are helping the People’s Democracies with certain commodities.

Mikoyan, revising his figures in December, estimated the Soviet Union’s imports of consumer goods from non-Communist countries in 1953 at 1 billion rubles. Rubles are not used in foreign trade and translation into dollar values may be misleading, but at the official (although artificial) rate, 1 billion rubles would be 250 million dollars. This is a slender figure in relation to the annual consumption needs of more than 200 million persons. Even so, the amount that was actually imported during the year did not equal the $250 million estimate.

There is, however, some connection between the new regime’s promises of more consumer goods and the recent activities of the Soviet Union in the field of East-West trade. We shall be examining those activities in the next chapter.

Has Stalin Been Overruled?

In early 1954 the situation could be summarized something like this:

The Soviet-bloc rulers have put on a more affable diplomatic face and made a number of conciliatory gestures to the Western world without altering their fundamental hostile objectives, and they have made a great fanfare about supplying more consumer goods to their people without basically changing their war-oriented economy.

The conciliatory diplomatic tactics of Stalin’s successors have sometimes been called a “peace offensive,” but the term is hardly justified. Since last June the peaceful sounds have alternated curiously with renewals of the old name-calling and intransigeance. And behind their Curtain the Communists never stopped teaching their students that capitalistic society must be overthrown. The North Atlantic Council could not avoid the conclusion at Paris on December 16 “that there had been no evidence of any change in ultimate Soviet objectives and that it remained a principal Soviet aim to bring about the disintegration of the Atlantic alliance.”

The evidence indicated that the Communist rulers, while making gestures to their multitudes, were trying not to interfere with industrial-military development.

The evidence included the Soviet Union’s own budget figures, which indicated that the state investment (there is no private investment) in consumer goods ministries is still extremely small; that the extremely large specific allocations to the military in the 1953 budget were no lower than actual expenditures in 1952; and that the budget’s “unexplained” category, which almost certainly includes “sensitive” military projects, greatly increased.

It seemed most unlikely that increases in domestic output of consumer goods, even supplemented by increased imports, could be large enough to make a substantial improvement in the traditionally low living standards in the Soviet Union.

We must suppose that the intent of any steps to improve the lot of the Soviet-bloc consumer is to improve it just enough to rescue his productivity in the interest of the state, but not enough to give him such a taste of better living as would lead to a wider and wider opening of the valves and hinder the buildup of the totalitarian war economy.

If that is a correct assumption, the world, yearning for assurance of peace, is entitled to wish that the Kremlin’s calculations might be upset and the consumer might get enough to whet his appetite in a big way.

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