From Textbook of Political Economy

POLITICAL ECONOMY, A textbook issued by the Institute of Economics of the Academy of Sciences of the U.S.S.R. This Soviet textbook on POLITICAL ECONOMY was first published in Moscow in 1954. A second revised and enlarged edition appeared in 1955. The present translation was made from the second Russian edition, and edited by C.P. Dutt and Andrew Rothstein.

The Building of Socialism in the Countries of People’s Democracy

Chapter XLI

The Economic System of the People’s Democracies in Europe

The Prerequisites of the People’s Democratic Revolution

The people’s democratic revolution in the countries of Central and South-eastern Europe had its way prepared by the whole course of development of capitalism and the class struggle of the working class and working people of these countries, by the entire course of the world liberation movement. Capitalist relations predominated in the economies of these countries, with the exception of Albania. Czechoslovakia was a developed industrial country in which light industry working for export predominated; Poland and Hungary had a medium level of development of industry, with agriculture playing the predominant role; Rumania and, still more, Bulgaria, were agrarian countries with poorly developed industry. Albania was an economically backward country with important survivals of the patriarchal-tribal system.

During a long period the countries of Central and South-eastern Europe underwent oppression by imperialist powers. The landlords and big bourgeoisie who were in power were dependent on foreign finance capital and carried out its will. Exploitation of the working class had reached extreme limits. The development of capitalism in the majority of these countries had been accompanied by the retention of considerable survivals of feudal and serf relations. The bulk of the peasantry, constituting the majority of the population, suffered from land hunger and were poverty-stricken. All this made revolutionary the working class and broad masses of the peasantry.

In the majority of the countries of Central and South-eastern Europe, before the revolution, an enormous section of the land was in the hands of big property-owners – landowners and capitalists. In Poland, peasant farms of up to 12½ acres, which represented about two-thirds of all farms, held less than 15 per cent of the land; landowner and capitalist farms of over 125 acres, which represented 0.9 per cent of the total number of farms, held about one-half of the land. In Hungary, farms of up to 141 acres, which represented 84 per cent of all farms, owned one-fifth of the land; farms of over 125 acres, which represented 0.9 per cent of all farms held nearly half the land, In Rumania, farms of up to 121 acres included three-quarters of the total number of farms, but held 28 per cent of the land, and in Czechoslovakia the figures were 70.5 per cent and 15.7 per cent. Landlord landownership was abolished in Bulgaria in the main as a result of the Russo-Turkish War of 1877-8. A considerable part of the land in Bulgaria before the revolution of 9 September, 1944, was concentrated in big kulak-type, capitalist holdings, while the bulk of the peasantry owned only a little land. Thus, holdings of a dozen acres or less, which made up two-thirds of all holdings, comprised only 30 per cent of the land.

Capitalist monopolies dominated the industry of the countries of Central and South-eastern Europe, and foreign capital held the key positions. In pre-war Poland, nearly two-thirds of capital investments in industry belonged to foreign capital. In pre-war Rumania foreign capital controlled 91.9 per cent of the total capital investments in the oil industry. In Hungarian industry 40 per cent of all capital invested in 1937 belonged to foreign firms. In Bulgaria, in 1937, about one-half of the capital investments in large-scale industry, and about two-thirds of the capital investments in transport companies, were in the hands of foreign firms.

During the second world war the countries of Central and South-eastern Europe fell under the yoke of German imperialism, which drained away their entire wealth. The land-owners and monopolist bourgeoisie became the agents of German fascism and completely isolated themselves from the people. Class and national contradictions were sharpened to the extreme. The working masses under the leadership of the working class, and headed by the Communist and Workers’ Parties, waged a stubborn struggle for liberation from fascist slavery, against the German invaders, and the landowning and capitalist cliques, which had betrayed the national interests of their countries. In the struggle of the working people for their national and social liberation the influence and prestige of the Marxist-Leninist parties of the working class grew enormously.

The Soviet Union, in the course of its victorious struggle against Hitlerite Germany, liberated the peoples of the countries of Central and South-eastern Europe from the German fascist yoke. The masses in these countries overthrew the Hitlerites’ hangers-on and were enabled to go forward to build their own life on new, democratic principles.

In this way, the people’s democratic revolution commenced.

The Character of the People’s Democratic Revolution

The chief motive forces of the people’s democratic revolution are the working class and the peasantry, under the leadership of the former. During the struggle against fascism in the countries of Central and South-eastern Europe, a national front had been formed which united all the anti-fascist forces, including, besides the working class and the peasantry, the urban petty bourgeoisie and part of the middle bourgeoisie. The revolution eliminated the political rule of the landowners and monopolist bourgeoisie. People’s democratic governments came into being, based on an alliance of the working class and the peasantry. The foundations of a State of a new type – the People’s Democratic Republic – were laid down. Together with the Communist and Workers’ Parties, in a number of countries the petty bourgeois and bourgeois parties who had joined the national front of struggle against fascism participated in the government and machinery of State.

The people’s democratic revolution was in the first place anti-imperialist, since it liberated the enslaved peoples from the imperialist yoke and gave them national independence. In the second place, it was anti-feudal, since it eliminated feudal survivals in the economy and in the political systems.

The anti-imperialist, anti-feudal revolution is a bourgeois-democratic revolution of a new type, typical for the historical circumstances of the second phase of the general crisis of capitalism. It does not have as its immediate aim the overthrow of capitalism and establishment of the dictatorship of the proletariat, and in this respect belongs to the category of bourgeois-democratic revolutions, but in its content it is broader and deeper than the usual bourgeois-democratic revolution. In the first place, every anti-imperialist and anti-feudal revolution, spearheaded as it is against imperialist oppression, leads to a weakening of the world imperialist system as a whole, shaking its foundations. In the second place, the victory of the anti-imperialist, anti-feudal revolution creates most favourable conditions for going over to the socialist revolution.

The victory of the anti-imperialist, anti-feudal revolution, led by the working class, means the establishment of a revolutionary-democratic dictatorship of the proletariat and peasantry, which advances the revolution, bringing about a direct transition to a second stage, the socialist revolution. Thus, the anti-imperialist, anti-feudal revolution and the socialist revolution are links in a single chain, two stages in one revolutionary process.

In Its first stage the people’s democratic revolution carried out, in the main, the tasks of the bourgeois-democratic revolution; the volume of these tasks, and the consistency and methods with which they were carried out, depended on the historical development and the concrete situation as it had come about in each country.

In all the countries of people’s democracy a broad democratisation of social and political life was carried out. Where it existed the monarchy was abolished. In the majority of the countries concerned, what was most important was revolutionary agrarian transformations. Landed estates with their equipment and animals were confiscated and for the most part distributed among the land-hungry peasants and labourers. The land passed into the possession of the peasantry as private property. On part of the confiscated estate land State farms were set up. As a result of the revolutionary agrarian changes the landlord class was abolished, and the position of the working peasantry considerably improved. The bulk of the poor peasantry; who had received land, rose to the level of middle peasants. The middle peasant became the central figure in agriculture. The relative importance of kulak holdings declined markedly.

In Rumania before the revolution poor-peasant and middle-peasant holdings occupied less than half the land, but in 1948 they covered 80.7 per cent of it. In Hungary poor- and middle-peasant holdings received, as a result of the agrarian changes about five million acres of land; whereas before the revolution these holdings included 40.4 per cent of all the land, in 1947 they included 70.7 per cent. In Poland landless and land-hungry peasants, together with the middle peasants, received more than 15 million acres, owing to the agrarian changes and to the acquisition of the Western Territories. In Bulgaria, where there was no large-scale landlord land-ownership, the extent of anti-feudal tasks (abolition of landownership by the monasteries and the church, etc.) solved by the revolution in the carrying-out of the agrarian reform was less than in the other countries of people’s democracy, so that this reform bore to a considerable degree an anti-kulak character.

The revolutionary agrarian changes were carried out with the active participation of the broad peasant masses, led by the working class, in conditions of acute class struggle. Reactionary forces hacked by foreign imperialists offered fierce resistance to the agrarian changes and tried in every way to disrupt them. The agrarian changes had very great consequences, both economic and political. With the abolition of large-scale land-ownership the reactionary forces were deprived of a very important material base. The liquidation of landlord landownership did away with the survivals of feudal exploitation of the peasantry. The allotment of land to the land-hungry and landless peasants drew them to the side of the people’s rule. As well as being the culminating task of the bourgeois-democratic revolution, the agrarian changes at the same time were one of the preconditions for going over to socialist construction.

As it carried out its anti-feudal tasks, the people’s democratic revolution passed over more and more into its second stage, grew over into the socialist revolution. Though the main content of the revolution’s first stage was the carrying through of changes of a general democratic character, nevertheless the working class, as the leading force in the revolutionary-democratic dictatorship of the proletariat and peasantry, could not restrict itself to these changes and carried through a series of measures which prepared the transition to the second stage of the revolution. Among such measures were: establishment of workers’ control over production; confiscation of the property of war criminals and of capitalists who collaborated with the occupying forces, and of the monopolist bourgeoisie closely connected with them which resulted in the weakening of the economic position of the bourgeoisie and the passing into the hands of the people’s State of part of large-scale industry; establishment of a State monopoly in trade in the most important commodities and State control of foreign trade; and several other measures. As the revolution progressed the nationalisation of the means of production spread further and further. The effect of all this was to weaken the position of the bourgeoisie as a whole and to strengthen that of the working class.

The nationalisation of large and medium industry, transport, means of communication, etc., was carried through in the European People’s Democracies in several stages. Nationalisation began as early as 1945-6 and was in the main completed by 1947-8.

As the transition progressed from the solving of general democratic tasks to the solving of the tasks of the socialist revolution, the struggle between the working class and the counter-revolutionary bourgeoisie inevitably grew more acute. The bourgeoisie, relying upon the economic power which it still retained, and upon the support of foreign capital, making use of its agents in the State apparatus and to some extent in the Government itself, tried by every means to frustrate the measures of the people’s democratic power and recover its economic and political domination. The working class, after consolidating its forces by uniting the workers’ parties on the basis of Marxism-Leninism, welded the peasantry and other strata of the population around itself. In the course of the people’s democratic’ revolution the State organs were purged of counter-revolutionary bourgeois-landlord elements. The old bourgeois State machine was finally broken up and replaced by a new State apparatus answering to the interests of the working people. The masses gave a resolute rebuff to the attempts of the bourgeoisie to restore alien imperialist oppression. As a result of the rout of the bourgeoisie the leading role of the working class in the State was conclusively strengthened. All these tasks had been disposed of in the majority of the European People’s Democracies by 1947-8. The State system of people’s democracy began successfully fulfilling the functions of the dictatorship of the proletariat, People’s Democracy became one of the forms of the proletarian dictatorship.

“Embodying the rule of the working people under the leadership of the working class,” said G. M. Dimitrov, “the People’s Democracy, in the existing historical situation, as is already proved by experience, can and must successfully fulfil the functions of the dictatorship of the proletariat for the liquidation of the capitalist elements and the organisation, of a socialist economy.” (Dimitrov, Political Report of the Central Committee of the Bulgarian Workers’ Party, given at the Fifth Party Congress, Sofia, 1948, Russian edition, p. 73.)

Thus the process of growing-over from a revolution bourgeois-democratic in character into a socialist revolution, the process of gradual transition from one stage of people’s democracy to another, was completed: from the revolutionary-democratic dictatorship of the proletariat and peasantry to people’s democracy carrying out the functions of the dictatorship of the proletariat.

Consolidation of the hegemony of the proletariat and of the leading role of the Communist Parties in the course of these democratic transformations was the decisive prerequisite for transition to the socialist revolution and the dictatorship of the proletariat and also determined the nature of this transition. The establishment of the dictatorship of the proletariat took place not as the act of a single moment, not by the overthrow of the existing power, but by a gradual strengthening of the proletariat’s position, by the winning to its side of the great mass of the working people, by putting into effect a number of measures directed towards the liquidation of the economic domination of the bourgeoisie. Among these measures the most decisive was the nationalisation of large-scale capitalist enterprises and banks.

In carrying out the tasks of the socialist revolution, the people’s democratic governments converted the factories and mills, mines and power-stations into public, socialist property. Transport and communications, mineral resources and a part of the land, the banks, foreign trade and internal wholesale trade were also nationalised. Thus, the people’s democratic governments, led by the working class, starting from the requirements of the economic law of obligatory correspondence between production-relations and the nature of the productive forces eliminated the economic rule of the bourgeoisie and took possession of the key positions of the national economy. Thereby were created the conditions needed for transition to the socialist transformation of society, As a result of the nationalisations, production relations in industry were brought into harmony with the socialised character of production: the basic means of production became the property of the whole people in the person of the people’s democratic State. The people’s democracies entered the transitional period from capitalism to socialism.

The formation of the people’s democratic power and the transition period from capitalism to socialism were distinguished by certain special features in the case of the German Democratic Republic, created by the democratic forces of the German people after the splitting of Germany into two parts carried out by the Western Powers. There are two states at present on the territory of Germany – the German Democratic Republic and the German Federal Republic, and these embody different social and economic formations.

In the German Democratic Republic power is in the hands of the working class, in alliance with the working peasantry. The alliance of the workers and the peasants is the decisive force in the political and economic life of the Republic. The State power relies on a bloc of anti-fascist, democratic parties and organisations, the policy of which is determined by the tasks of the struggle to create a unified democratic and peace-loving Germany. The leading role in this bloc belongs to the party of the working class, the Socialist Unity Party of Germany. By abolishing the economic rule of the Junker landlords and the monopolies, the German Democratic Republic has torn up the social roots of militarism and fascism.

It was a great historical event in the life of the German people when the working people of the German Democratic Republic took the road of socialist construction. The building of socialism in the German Democratic Republic answers to the interests of all the working people of Germany. The leading place in the Republic’s economy is held by socialised property in the means of production, on which the public enterprises in industry, the public estates in agriculture, the machine and tractor stations and the agricultural producers’ co-operatives are based. Together with the principal, socialist sector in industry, transport, trade and agriculture there are numerous individual enterprises of simple commodity producers – peasants and artisans – and also medium and small capitalist enterprises. The German Democratic Republic takes as its primary task the struggle to reunite Germany on peace-loving democratic foundations.

Among the countries which broke away from the capitalist system during the Second World Wars Yugoslavia. In place of the former Yugoslavia with its reactionary monarchist regime, based on cruel exploitation of the working people and national oppression, there arose as a result of the people’s revolution the Federal People’s Republic of Yugoslavia, in which power is in the hands of the working class and the peasantry and national inequality has been abolished. Socialised ownership of the main means of production prevails in Yugoslavia – in the fields of large-scale and medium industry, transport, banking, wholesale trade and the overwhelmingly greater part of retail trade. In spite of the efforts made by imperialist forces, Yugoslavia has maintained its national independence and resisted the attempts of foreign capital to penetrate its economy.

At the present stage of world development, when a mighty camp of socialism exists, people’s democracy constitutes a way of revolutionary socialist transformation of society. The historical experience of the Soviet Union and the countries of people’s democracy confirms Lenin’s teaching that, while there must be unity on the main and basic question of securing the victory of socialism in various countries, different forms and methods of solving specific problems of socialist construction may be applied, depending on the historical and national peculiarities of particular countries.

Lenin wrote: “All nations will reach socialism; this is inevitable. But not all nations will reach socialism in the same way; each will introduce a special feature in the form of democracy it adopts, in the form of the proletarian dictatorship, and in the rate at which it carries out the reconstruction of the various phases of social life.” (Lenin, “A Caricature of Marxism and ‘Imperialist Economism’”, Collected Works, English edition, Vol. XIX, pp. 256-7.)

Forms of Economy and Classes

The economy of the European people’s democracies is a transitional economy containing more than one form. There are to be found in it three basic forms of economy or sectors of the national economy: socialist, small commodity, and capitalist.

The socialist form of economy includes: (1) the industrial enterprises, transport, the banks, trading establishments, agricultural estates machine and tractor stations based on State, or public ownership; (2) various types of enterprises based on co-operative property-industrial, consumer, credit, agricultural, marketing and supply, and agricultural producers co-operatives.

In all the European people’s democracies, the socialist sector occupies the predominant place in the economy. The major part of the national income is produced in this sector.

All banking operations, industry, transport, all internal wholesale trade and the main part of retail trade is in State hands. A State monopoly, of foreign trade has been set up. In agriculture, however, with the exception of Bulgaria, the socialist form of economy does not yet occupy a predominant place.

Occupying a predominant position in the national economy and embracing the key economic positions the socialist form of economy in each of the European people’s democracies, is the determining force in their economic development and is growing stronger from year to year.

In recent years the socialist form of economy represented in the various countries:

In the national income: Poland 76 per cent, Czechoslovakia 92 per cent (in 1953), Hungary 81 per cent (in 1954), Rumania 70 per, cent (in 1952), Bulgaria 87 per cent (in 1954), Albania approximately 70 per cent (in 1952).

In industry: Poland 99.5 per cent (in 1953), Czechoslovakia 99.6 per cent (in 1953), Hungary 97 per cent (in 1954), Rumania 99 per cent (in 1954).

In wholesale trade: 100 per cent in all these countries.

In retail trade in 1954: Poland 96 per cent, Czechoslovakia 99.8 percent, Hungary 99.7 per cent, Rumania 76 per cent, Bulgaria 99.5 per cent.

In the German Democratic Republic the proportion of the socialist sector in industry amounted in 1953 to 85.5 per cent in wholesale trade to 94.5 per cent and in retail trade turnover to about 70 per cent.

In the socialist sector the exploitation of man by man has been eliminated and the character of labour has been changed. From being labour for the capitalists, it has become labour for oneself and for the whole of society. Because of the changed economic conditions in the socialist sector, the economic laws of capitalism which express the relations of exploitation and anarchy of production have quitted the stage. The laws of socialist economy have come into being and have begun to operate: the basic economic law of socialism, the law of planned, proportional development of the national economy the law of distribution according to work done, and others. A continuous growth of socialist production is taking place, based on the highest techniques, with the aim of securing the victory of socialism and satisfying the growing needs of the working people. Socialist production is carried on in a planned way, based on the law of planned, proportional development of the national economy. Planning methods are being constantly improved.

The existence in the economy of the people’s democracies of two forms of socialist property, as well as of small commodity economy, leads to the operation of the law of value and of the economic categories associated with it: money, trade, credit, etc. The law of value is not the regulator of socialist production but does influence it. This influence is taken into account by the people’s democratic States in planning prices, carrying out economic accounting, etc. Trade, money, credit and other economic categories, associated with the law of value, are being successfully utilised as instruments for the building of socialism.

In so far as the socialist sector plays a leading role in the economy of these countries, the basic economic law of socialism, the law of planned development of the national economy and the other economic laws of socialism, are exercising an increasing influence on the development of the national economy as a whole. As socialist relations of production continue to grow, the sphere of operation of the economic laws of socialism is steadily extending.

The small commodity economy includes the farms of the individual working peasants and also small handicraft production based on the personal labour of its owners. In some countries, particularly in Albania, survivals of patriarchal relations still exist in the countryside. Individual peasant farms produce the bulk of agricultural produce; the middle peasants occupy a predominant place among them. Small commodity peasant economy based on private ownership of the means of production inevitably gives birth to elements of capitalism.

Planning in the European people’s democracies does not yet embrace directly the entire national economy. Production in the small commodity sector is regulated by the operation of the law of value. However, the people’s democratic governments, relying on the law of planned development of the national economy, exercise a regulating influence on small commodity production through trade, State purchases, prices, credit, taxes, etc.

The capitalist economy includes the kulak farms, private trading establishments and private industrial enterprises based on the exploitation of hired labour.

The law of value is the economic regulator in the capitalist sector. Within the confines of this sector the law of surplus-value still operates, but its sphere has been greatly reduced. The size of capitalist enterprises and their opportunities for exploiting hired labour are strictly limited. Among the methods whereby the capitalist elements are restricted are high rates of taxation and a number of measures to curb market fluctuations. The working class and the peasantry are the main classes in the people’s democracies. But alongside the toiling classes, there are the bourgeoisie in the form of the kulaks and also the private entrepreneurs in trade and industry.

The close alliance of the working class and the working peasantry, under the leadership of the former is the vital condition for the existence and development of the social and State system of the people’s democracies. This alliance is directed against capitalism and for the building of socialist society.

“The pivot and motive force of our revolutionary transformation was, and is, the alliance of workers and peasants led by the working class. In the course of decades the working class in its struggle against capitalism and fascism has consolidated its alliance with the basic masses of the working peasantry. Widening, consolidating and deepening this alliance is the main principle in the policy of the people’s government and a guarantee of its strength and successes.” (Bierut, “Report of the Central Committee of the Polish United Workers’ Party to the Second Party Congress”. For a Lasting Peace, For a People’s Democracy, March 19, 1954.)

The basic contradiction in the economy of the people’s democracies, during the transitional period from capitalism to socialism, is between growing socialism and the beaten, but not yet abolished, capitalism, with its roots in small commodity production.

The building of socialism is taking place in conditions of intense class struggle. The opposition of the classes which are dying is manifested in the hostile activity of the remnants of the routed anti-popular political parties, the nationalist, “left” and right-wing deviations in the Communist (Workers’) Parties in the wrecking, sabotage and diversive acts of imperialist agents. The Communist (Workers’) Parties, together with the masses of the people, are unmasking the elements hostile to socialism and securing victory for the policy of building socialism.

The State in the people’s democracies makes objective economic laws the starting-point of its policy, and uses them to achieve the complete victory of the socialist forms of economy over the capitalist.

Guided by Marxist-Leninist teachings on the transitional period from capitalism to socialism, the people’s democratic governments are consolidating the alliance of the working class and the peasantry, and conducting a struggle against the capitalist elements in town and country by restricting and squeezing them out. The people’s democratic States make use of market relations in every possible way in order to develop the trade bond between industry and agriculture. In carrying out socialist industrialisation, they are broadening the production bond between town and country and are following the policy of gradually developing co-operation in production among the peasant farms on a voluntary basis.

Thus, the same fundamental principles which determined the new economic policy in the U.S.S.R. underlie the building of socialism in the people’s democracies: As has already been noted, however, these principles are being applied there with due allowance for the considerable historical peculiarities of each country’s national, economic and political development.

The building of socialism in the people’s democracies is being undertaken in considerably more favourable historical conditions than those in which it took place in the U.S.S.R., the first country where socialism triumphed. In creating the economic and cultural foundations of socialism, the people’s democracies are extensively utilising the very rich experience of socialist construction accumulated by the Soviet Union, and are able to rely on the strength of the whole camp of socialism and on the increasing mutual aid between all the countries that make up this camp. This enormously facilitates the solution of the problems of socialist construction.

With the resolute support of the Soviet Union, the plans for imperialist intervention against the European people’s democracies were frustrated. These countries have thereby been spared a prolonged civil war and the need to carry out the policy of “war communism”. This has enabled them to restore their economies in the shortest possible time and to set about the socialist reconstruction of the national economy.

Socialist Industrialisation

Socialist industrialisation is a very important prerequisite for, building socialism in the people’s democracies; it is put into effect with due allowance for the peculiarities of each country and its role in the international division of labour within the socialist camp. Through industrialisation these countries create the material, production basis for socialism and ensure a sound foundation for a steady growth in production and the people’s welfare.

Before the second world war the share of industrial output in that of agricultural and industrial output combined was: Poland 47.6 per cent, Hungary 53 per cent, Rumania 40 per cent, Bulgaria 33.8 per cent, Albania 18.3 per cent; 65 per cent of the gainfully employed population were engaged in agriculture and about 17 per cent in industry in Poland, 78 and 7 per cent respectively in Rumania, 79.9 per cent in agriculture and 8 per cent in industry and handicrafts in Bulgaria. With regard to the level of national income, volume of production and consumption of industrial output per head of population and a number of other indices, these countries lagged considerably behind the more developed, industrial countries. Thus in Poland, consumption of ferrous metals per head, of population was little more than one-tenth of that in Great Britain and hardly one-eighth of that in Germany; electricity consumption was approximately one-seventh of that in Britain and Germany and one-fifth of that in France.

All these countries have completed the period of restoring their economy, which suffered the effects of the war and fascist, pillage. Relying on the aid of the Soviet Union and utilising the advantages of socialist planned economy, the people’s democracies disposed of the tasks of reconstructing their economies in a very short period, two or three years.

The successful restoration of their national economy provided a stable basis for its socialist reconstruction. The central task of their first Five-Year Plans for developing the national economy (in Poland, the Six-Year Plan) was the laying of the foundations of socialism. Socialist industrialisation – the development of large-scale socialist industry, and above all heavy industry – was the central feature of these plans. At the same time the process of industrialisation in each individual country has its own special features, depending on the level of development and structure of industry and on historical, natural, and economic conditions.

The accumulation taking place in the socialist sector is the main source of industrialisation in the countries of people’s democracy. A part of the savings of the working people, in the form of State loans, is also utilised for industrialisation. The expropriation of part of the incomes of the capitalist elements in town and country, primarily by means of progressive taxation, provides further resources for this purpose.

A systematic increase in the productivity of social labour, by the introduction of advanced techniques and better organisation of labour, is a decisive factor in the growth of socialist accumulation. Socialist emulation is a powerful motive force in the growth of labour productivity. The bulk of the workers take part in socialist emulation. Advanced workers are successfully applying in their work the production experience accumulated in the U.S.S.R. and in other countries of the socialist camp. The utilisation of the economic law of distribution according to work, the application of various forms of piece-rates, and the fight against wage levelling are of primary importance in securing a steady growth of labour productivity. Of great importance for increasing accumulation in socialist production is the use of the law of value, strengthening in every way the regime of economy and consistently introducing economic accounting.

Klement Gottwald wrote:

“Have we not had, do we not still have, quite a number of economic and political workers among us who have forgotten about the operation of the law of value, and for whom as a consequence questions of economic accounting and profitability of enterprises, the question of costs, prices, etc:, have ceased to play any role? Is it not clear that such a mistaken attitude causes great losses to our economy and hinders our advance towards socialism? I think that this much is clear; and that it must cause all our people, particularly those in managerial and responsible positions constantly to observe a regime of economy in production and in the sphere of State purchases and sales.” (Gottwald, The Historic XIXth Congress of the Communist Party of the Soviet Union and our Tasks”, For a Lasting Peace, For a People’s Democracy, November 7, 1952.)

Socialist industrialisation in the people’s democracies is being carried out in different and more favourable historical conditions from what was the case in the U.S.S.R.; and it has important special features.

The Soviet Union was the only country building socialism, and effected its industrialisation without any outside assistance, relying exclusively on its internal resources. The people’s democracies, on the contrary, are industrialising their economy when a powerful socialist camp exists. In the course of socialist industrialisation the countries of this camp rely on extensive mutual aid in a great variety of forms.

The Soviet Union had to build up all branches of industry, and in the first place heavy industry, at forced rates. The people’s democracies have been spared the impossible task of developing all branches of industry in each of their countries. Each of the countries of people’s democracy, entering in the socialist camp, is able to create and develop above all those branches of industry for which it is most favourably suited by natural and economic conditions. The successful carrying out of this task is facilitated by extensive division of labour, economic mutual aid and co-operation between the States of the socialist camp.

With the successful fulfilment of the long-term plans for socialist reconstruction of the national economy, the pre-war levels of industrial output had been exceeded by 1954 as follows: Poland more than 4-fold, Hungary about 3.5-fold, Czechoslovakia 2.3-fold, Bulgaria 5-fold, Rumania 2.6-fold. The proportion of industrial output combined, was considerably increased. In all the people’s democracies, apart from Bulgaria and Albania, output of the industries producing the means of production accounts for more than half the total industrial production. The European people’s democracies have become equipped with the latest techniques.

In Poland, the coal and chemical industries, ferrous metallurgy and the building materials industry have made great advances. Automobile and tractor production, shipbuilding, production of artificial fibres and other branches of industry have been brought into existence and oil equipment, shipbuilding and others have been brought into existence. In 1954 per capita output had increased, compared with 1938, of steel 3.5-fold, electric power more than 5-bold, cement about 3-fold. In Hungary there has been a great development of the aluminium industry, engineering and machine-tool construction, production of mining equipment and agricultural machinery. In Rumania the oil extracting and oil processing industry and the chemical industry are developing successfully. Important branches of engineering such as the manufacture of agricultural machinery and oil equipment, shipbuilding and others have been brought into existence.

In the German Democratic Republic the volume of industrial production in 1954 was nearly double what it had been in 1936. In recent years the disproportion in the economy caused by the partition of Germany has been substantially reduced. A metallurgical base has been created in the Republic, the productive capacity of heavy engineering and shipbuilding has been extended, the production of modern agricultural machinery organised, and the output of chemical products increased.

While ensuring priority growth of heavy industry as the basis for the advance and technical reconstruction of the whole national economy, the people’s democracies are making large-scale investments in agriculture, and in the light and food industries. This will provide a considerable expansion of output of agricultural produce and manufactured mass consumption goods, and will raise the living standards of the working people.

The Socialist Transformation of Agriculture

The building of socialism assumes the victory of socialist forms of economy not only in the towns, but in the countryside too. As the experience of the U.S.S.R. has shown, the only successful solution to the peasant question is the change-over of the bulk of the peasantry from small-scale individual farming to large-scale collective farming. Gradual development of producer co-operation among the small and middle peasant farms, on a voluntary basis, is an objective necessity for countries undertaking to build socialism.

Accordingly, the people’s democracies are developing the production of tractors and other agricultural machinery, organising a network of State farms, which demonstrate the advantages of large-scale socialist production, and setting up machine and tractor stations to provide the technical re-equipment of agriculture. Help is being given to the poor and middle peasant masses to enable them to increase output, and steps are being taken to draw them into various forms of purchasing, marketing, and producer co-operatives.

The socialist transformation of agriculture in the people’s democracies has its own special features. These countries are undertaking this transformation at a time when there is already a developed system of socialist agriculture in the U.S.S.R., in the form of collective farms, State farms, and M.T.S. Familiarity with the experience of the Soviet Union in the field of the socialist transformation of agriculture, and with the achievements of the collective farms, M.T.S. and State farms, is playing a big part in drawing the bulk of the peasantry in the people’s democracies on to the road to socialism. The U.S.S.R.’s experience in organisational and economic consolidation of the collective farms, its forms of organisation and remuneration of labour, the distribution of incomes etc. are being extensively utilised in building up the system of producer co-operative among the peasant farms.

The special features of peasant producer co-operation in people’s democracies spring from the fact that it is developing while there is still small peasant ownership of the land whereas, collectivisation in the U.S.S.R. took place after the whole of the land had been nationalised. The experience of the people’s democracies has shown that immediate nationalisation of all the land is not, in all countries, an indispensable condition for building socialism in the countryside. In the people’s democracies part of the land taken from the landlords during the agrarian revolution has remained in the hands of the State, while the rest has become the private property of the peasants. Owing to the prohibition of buying and selling of land and restrictions on the renting of it the retention of private ownership of land by the peasants does not lead, however, to concentration of landownership in the hands of capitalist elements.

The agricultural producers’ co-operatives in the people’s democracies fall into three main categories. These depend on the extent of socialisation of the land and the means of production, and the methods of distribution of incomes which follow from this. In the first place, there are associations for joint working of the land: only the labour for carrying out the various agricultural jobs (ploughing, sowing, crop cultivation, harvesting) is collective, while the land allotments themselves are the property of individual members of the association. In the second place, there are producer co-operatives: both the means of production and the labour are socialised and the land is amalgamated into a single block, although still remaining the private property of the co-operative members. The bulk of the produce in co-operatives of this type (70-5 per cent) is distributed according to work-days earned, while a smaller part is distributed according to the share of land put into the pool. In the third place, there are artels: labour, land and means of production have been socialised, while the produce is distributed only according to work performed.

Thus, at present, there are three kinds of property in land in the people’s democracies: State, co-operative and private. The complete victory of socialism in agriculture presupposes socialisation of all the land and its conversion into social property. The turn towards socialisation of all the land will take place gradually, on voluntary principles, as the peasantry, in the course of the development of producer co-operation and the gradual extension of its higher forms, become convinced by experience of the indisputable superiority of large-scale collective farming over petty privately-owned farming.

The socialist transformation of agriculture is taking place in the process of an intense class struggle. The kulaks are striving in every possible way to undermine peasant producer cooperation. The people’s democratic States are giving all-round material assistance to the poor and middle peasant farms, taking steps to strengthen the organisation and economy of the producer co-operatives, and waging an implacable struggle against the kulaks.

In Bulgaria by 1954, there were more than 2,700 working co-operatives on the land, uniting 52 per cent of peasant farms, 108 State farms and 150 M.T.S. more than 60 per cent of the cultivated land was in the socialist sector. In Hungary, producer co-operatives unite about 200,000 peasant families and occupy about 18 per cent of the arable land. State farms occupy more than 12 per cent of the arable. In Poland, in 1954, there were more than 9,300 co-operatives, occupying 7.5 per cent of all plough-land. State farms dispose of more than 12 per cent of all the sawn area. In Rumania, by the end of 1954, there were 5,000 collective farms and associations, uniting 318,000 peasant households with 2,750,000 acres, or more than 10 per cent of the total. In Czechoslovakia, producer co-operatives are cultivating about 33 per cent the plough-land, and State farms more than 10 per cent. In the German Democratic Republic, in 1955, State farms occupied 4 per cent and agricultural producer co-operatives 18 per cent the total useful agricultural area.

Two kinds of mistakes have occurred in the process of the socialist transformation of the countryside in the countries of people’s democracy – on the one hand, artificial co-operation upon the peasant farms, and violation of the voluntary principle in admission to the co-operatives; on the other hand, underestimation of the need to organise and lead the movement to co-operation and adopting a laissez-faire policy in the work of setting up co-operatives. The Communist and Workers’ Parties are waging a campaign against both types of mistake.

On the basis of this, socialist transformation, the people’s democracies have won important successes in developing agriculture and raising the living standards of the peasantry. Nevertheless, the growth of agricultural output still to a considerable extent lags behind that of industrial output, and is inadequate for satisfying the growing needs of the national economy and the population.

In this connection it is very important to ensure a further rapid advance of agriculture, from the standpoint of the national economy as a whole.

This requires a further development of co-operative production, organisational and economic strengthening of the existing co-operatives, and improved work of the State farms. At the same time the State power in the people’s democracies, pursuing the general policy of gradual socialist transformation of agriculture, is making use of the still unexhausted opportunities for obtaining a further growth of output in the individual farms of working peasantry. To this end, productive, technical, credit and scientific assistance is being given to the individual working peasantry and the development of their holdings is being stimulated by means of the trade bond between town and country, advantageous conditions of production by contract, and an appropriate tax and procurement policy.

All these measures promote the expansion of agriculture and the consolidation of the workers’ and peasants’ alliance.

The Rise of the Living Standards and Culture of the Working People

Socialist construction in the people’s democracies is being accompanied by a steady rise in the living standards and culture of the working people. This is an expression of the operation of the basic economic law of socialism. As a result of the rapid growth of industry, unemployment both in town and country was already eliminated in the course of 1948-9. The number of workers employed in socialist enterprises is growing from year to year.

The national income of these countries is increasing steadily and rapidly. With the elimination of the classes of great land-owners and big capitalists, the national income is used in the interests of the living standards of the working people, and of socialist extended reproduction in town and country.

The real wages of manual and clerical workers, and the real incomes of the peasants, are steadily rising. Price reductions are of great importance in this respect. Important factors, too, are the reduction of rents and of the cost of other municipal services. The raising of living standards is also ensured by the development of social insurance for manual and clerical workers at State expense, free education and health services, and the provision of an extensive network of sanatoria and rest-homes.

The national income was in Poland in 1954, more than twice what it had been before the war; in Bulgaria in 1953 it had increased by 86.7 per cent; and in Czechoslovakia by about two-thirds.

In Poland, per capita real incomes outside agriculture were 40 per cent higher in 1953 than in the immediate pre-war years; per capita real incomes of the rural population were 75 per cent above those of 1938. In Hungary, the real wages of a factory worker in the first half of 1954 were 57 per cent above the 1938 level; the real income of a peasant family was 50 per cent above 1938. The growth of real incomes is leading to a substantial increase in consumption by the working people. In Rumania, the food consumed by a worker’s family in 1953 had increased as follows compared with 1938: bread 20 per cent, sugar 48 per cent, vegetable oil 164 per cent. The Rumanian peasant had increased his personal consumption of rye and wheat by 50 per cent in the same period. The real wages of manual and clerical workers in Bulgaria in 1953 were 38 per cent higher than in 1939.

During 1954 a further increase took place in the real income of the working people of the people’s democracies.

The building of socialism in the people’s democracies is inseparably bound up with the cultural revolution. The broadest strata of the working people are acquiring culture and knowledge. The revolution has put an end to the monopoly of education and culture held by the bourgeoisie and the land-owners. Education and culture have become the property of the whole people. With increasing speed a new socialist intelligentsia is coming into being. The numbers of engineers and technical personnel are increasing. Putting to use in every way the rich heritage of progressive culture from the past of their peoples, who have made notable contributions to world culture, the people’s democracies are creating a new culture socialist in content and national in form. The socialist culture of the U.S.S.R., profoundly international in its character is exerting a great influence on the development of the national cultures of the people’s democracies. As a result of the broad development of cultural co-operation between the countries of the socialist camp they are reciprocally enriching each other’s cultures.

In Rumania, between 1938-9 and 1953-4, the number of pupils in 7-year schools had increased 4.7-fold, in secondary schools more than 4-fold, in higher educational institutions more than 2.2-fold – from 29,000 to 64,300, apart from 19,000 correspondence students. In the old Poland, in 1937-8, there were twenty-eight higher educational institutions with 48,000 students of whom no more than 5 per cent were children of workers and 9 per cent children of peasants. In 1953, Poland had eighty-three higher educational institutions with 134,000 students, of whom the overwhelming majority were children of workers and peasants.

In Hungary in 1954-5 the number of pupils in secondary schools was three times what it had been in the last year before the war, and the number of students was four times as many.

In 1938 there were nine institutions of higher education in Czechoslovakia, with a total of 19,000 students. Today there are 40 such institutions, with 47,900 students. In Albania in 1954 the number of pupils in primary schools was over 2.6 times as many as in 1938, and there were 7.7 times as many secondary school pupils.

The successes of socialist construction in the people’s democracies are fresh proof that the socialist economic system is indisputably superior to the capitalist system.

Brief Conclusions

 (1) The people’s democratic revolution in the countries of Central and South-eastern Europe in the first stage of its development completed the tasks of the bourgeois-democratic revolution. The anti-imperialist character of the revolution was expressed in the fact that it freed the peoples of these countries from the yoke of imperialism and, with the support of the Soviet Union and the whole socialist camp, ensured their national independence. The anti-feudal character of the revolution was expressed in a broad democratisation of social and State structure, in the abolition of the monarchy where it existed, and in the carrying through of revolutionary agrarian changes; the land of the landlords was confiscated and divided among the landless and land-hungry peasants. With the fulfilment of the anti-feudal tasks, the bourgeois-democratic revolution developed into the socialist revolution. This was reflected in the socialist nationalisation of large-scale and medium industry, transport, the banks, foreign trade and internal wholesale trade. The people’s democratic State began successfully to fulfil the functions of the dictatorship of the proletariat.

(2) The economy of the people’s democracies in the transitional period from capitalism to socialism comprises three basic economic forms: socialist, small commodity, and capitalist. The leading part is played by socialist economy. In the course of struggle against the capitalist elements, the people’s democratic States, relying on objective economic laws and basing themselves on the socialist sector, are pursuing a policy of building socialism.

(3) Socialist industrialisation in the European people’s democracies is a decisive condition for building socialism, and ensuring a rise in the living standards of the people. Thanks to the advantages of the socialist forms of economy and the mutual assistance and co-operation within the socialist camp, the people’s democracies are rapidly advancing along the road of industrial development, ensuring the priority development of heavy industry.

(4) The victory of socialism in the European countries of people’s democracy requires the socialist transformation of agriculture. This socialist transformation of the peasant farms is taking place through their gradual organisation in producer co-operatives on a voluntary basis, while retaining private peasant ownership of the land. Socialisation of all the land will be the result of the development of higher forms of producer co-operatives. The advance of agriculture is being achieved through further development of producer co-operation, with increasing aid from socialist industry, and also through making use of the existing possibilities for the development of individual peasant economy.

(5) The building of socialism in the European countries people’s democracy is leading to a steady rise in the standards and cultural level of the working people. Unemployment has been abolished and the real wages of the workers and the real incomes of the peasants are growing.

Click here to return to the index of archival material.