Before World War II, the Eastern European nations, Albania, Bulgaria, Czechoslovakia,
Hungary, Yugoslavia, Poland and Romania, were largely underdeveloped. The majority of
their population, approximately four fifths, lived in rural areas. The region had limited
industry and was almost self-sufficient in food. The exception was Czechoslovakia, the
only country in the area that had highly developed industry, especially in armament and
certain lines of machinery.
The Nazi military occupation and later the influence of the Soviet Union transformed and
altered the economy of the region. Under the Third Reich the economies, especially
industries, of Hungary and Czechoslovakia were put under considerable expansion.
Romania's economy concentrated on the production of petroleum and grain. On the other
hand Albania, Poland and Bulgaria were left to stagnate. All the countries of the region
suffered a tremendous amount of damage during World War II and eventually became
satellites of the Soviet Union.
USSR kept a tight control on the economies of Eastern European countries. In the first
years after World War II, Moscow discouraged any economical relationships among its
satellites. Any transactions had to be approved first by the Soviet Union. The Marshall
Plan (1947) offered to all European countries following World War II, was not accepted by
USSR and Stalin would not allow the Soviet satellites to participate. As a result, the
economic recovery of the region after the World War II was slow compared to the
countries that received the aid.
To counterbalance the animosity caused by this situation, in October 1947, Stalin set up
the Cominform (Bureau of Information of the Communist and Workers Party). The purpose
of Cominform was to spread Communist propaganda within the Soviet satellites. Two
years later, in 1949, USSR set up a plan of economic aid and cooperation among the Iron
Curtain countries. It was called Comecon or CMEA (Council of Mutual Economic
Assistance)and the founding members were the Soviet Union, Bulgaria, Czechoslovakia,
Hungary, Poland and Romania. Eastern European countries however, were not able to
achieve economic growth comparable to that of Western Europe.
After Stalin's death a change took place in the Soviet bloc. The new leader of USSR,
Nikita Khrushchev, began a program of de-Stanilization. The CMEA was open to new
members: Albania, East Germany, Mongolia, Cuba and Vietnam. To keep an image of an
open, international organization, CMEA signed agreements of cooperation with various
countries and granted "observers status" to others. Its primary goal, set for 1956, was to
encourage the coordination of economic plans between the members in order to boost
their development. However, the protests and rebellions in Hungary and Czechoslovakia
disrupted the trade and communications within the organization. In order to reestablish
control, USSR, after suppressing the demonstrations, sent considerable credits into the
area, and by 1958 Moscow had complete control over the region.
CMEA's policy was massive industrialization, joint investment programs and complete
collectivization in agriculture. All these were to be made possible by central planning
through economic integration and bilateral and multilateral cooperation. Industrialization
was the main objective of the communist countries, more often than not, this was done
at a heavy cost to the population. The emphasis was on heavy industry, the investments
were badly managed and usually the plants were located in regions that lacked the raw
materials. The central planning did not take in consideration each country's situation and
this resulted in the highest investment of resources in industry at the expense of other
economical sectors especially agriculture. The best example would be the iron and steel
facilities in Poland, Romania and Bulgaria that relied heavily on iron ore imports from USSR.
The joint projects were very much publicized and theoretically should have provided a
form of cooperation between the CMEA members. They were also designed to emphasize
central planning and communist propaganda. They were usually ambitious projects; pipe
lines for petroleum that would have supply the needs for the whole region, electrical
power facilities, coal and steel plants. It is interesting to observe that not all East
European countries were willing to participate; Romania and Yugoslavia kept only affiliate
status. With few exceptions all the projects were directly coordinated by Moscow.
The communist belief was that faming must be done collectively and that planning has to
be made by the government who owned the agricultural equipment too. The collectivized
farmers and their families were paid for labor -days that they accumulate. Collectivization
alienated the rural communities and destroyed the feeling of personal incentive and
responsibility. If before the war the Eastern European countries were able to support
themselves in food this was not the case after collectivization. Following poor harvest
too, the region had to import grain and some governments redirected funds towards
improvements in agriculture. However, the deteriorating economic situation could not be
stopped and the local population rioted in several countries.
Until 1989, when the last of the countries in the Soviet bloc abandoned the communist
regimes, few changes in economical policies were adopted in the region. The planned
economy led to political stagnation and economical bankruptcy. Even though some of the
communist countries adopted a series of reforms and relaxed the centralization policies
the changes were not sufficient. Shortages in food, clothing and other daily basics
together with a wide spread dissatisfaction and resentment towards the Soviet
domination eventually led to the collapse of all the communist regimes of the region.
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Connor, Walter, Socialism, Politics, and Equality: Hierarchy and Change in Eastern Europe
and the USSR. New York, Columbia University, 1979.
Drachkovitc, Miloradh, East Central Europe: Yesterday, Today, Tomorrow. Stanford,
California, Hoover Institution press, 1982.
Fischer-Galati, Stephen (ed.), The Communist Parties of Eastern Europe. New York,
Columbia University Press, 1979.
Kaser, Michael, Comecon: Integration Problems of the Planned Economies. London,
Oxford University Press, 1967.