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The Soviet Bloc and the Underdeveloped Countries: Some Economic Factors*

Published online by Cambridge University Press:  18 July 2011

Stanley J. Zyzniewski
Stanley J. Zyzniewski
Affiliation:
University of Virginia
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Extract

The growth of economic relations between the states of the Soviet bloc and the underdeveloped countries of Afro-Asia since 1953 has provoked widespread attention and concern in the West. This development is not an isolated phenomenon, but rather a reflection of the larger role which Soviet leaders have assigned to economic activities in the conduct of foreign relations.

Type
Research Article
Information
World Politics , Volume 11 , Issue 3 , April 1959 , pp. 378 - 398
Copyright
Copyright © Trustees of Princeton University 1959

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References

1 The increasingly large share that foreign economic activities have contributed to major Soviet achievements since World War II is discussed in the author's “Soviet Foreign Economic Policy,” Political Science Quarterly, LXXIII, No. 2 (June 1958), pp. 206–33.

2 By “Eastern Europe” is meant Bulgaria, Czechoslovakia, East Germany, Hungary, Poland, and Rumania. Albania is excluded on the principle of de minimis.

3 Between 1950 and 1957, Soviet gross industrial output and the over-all trade turn over grew in the same proportion—by 120 per cent. The Soviet bloc's share of world exports rose from 7 per cent to 8½ per cent by 1956, and of world imports from 6 1/2 to 7 3/4 per cent, attaining about the same level that it reached immediately before World War II. United Nations, Economic Survey of Europe for 1957, Geneva, 1958, ch. VI, pp. 1–2Google Scholar; Scott, N. B., “Soviet Economic Relations with Under-developed Countries,” Soviet Studies, x, No. 1 (July 1958), p. 42.Google Scholar

4 East European imports (excluding those of Rumania) from underdeveloped countries rose from 5 per cent of total imports in 1952 to 7½ per cent in 1957, while East European exports to these countries likewise increased from 5 to 9 per cent of total exports. Simultaneously, the 22 per cent of all East European imports which originated in Western Europe in 1952 rose to 25 per cent by 1957, and exports to Western Europe crept up from 23 to 24 per cent of total exports. For a general discussion of and data on East European trade, see Economic Survey of Europe for 1957, ch. VI and Tables XXXV and XXXVI (pp. A–64 and A–65). Subsequent data for 1957 reveal some variation in the total bloc-trade picture, in that Soviet trade with underdeveloped countries expanded more rapidly than that with Western Europe. This is obviously connected with the utilization of Soviet credits previously extended to such countries as India and Egypt. See United Nations, Economic Bulletin for Europe, X, No. 2 (August 1958), P. 39.Google Scholar

5 Of the 96 trade and/or payments agreements in force between the Soviet bloc and Afro-Asian states at the end of 1957, the Soviet Union figured in only 16, while Czechoslovakia led with 18 and Poland had 15. U.S. Department of State, The SinoSoviet Economic Offensive in Less Developed Countries, Washington, D.C., 1958, p. 41.Google Scholar

6 Syria and Egypt, of course, joined together in 1958 to form the United Arab Republic. A broad categorization of Afro-Asia underdeveloped countries having trade relations with the Soviet European bloc in 1956 would include at least a score of states: Burma, Ceylon, Egypt, Ethiopia, Ghana, India, Indonesia, Iran, Iraq, Israel, Jordan, Lebanon, Malaya, Morocco, Pakistan, Sudan, Syria, Thailand, Turkey, and Vietnam. The volume of trade between these states and the Soviet European bloc totaled approximately $615 million in 1956. Almost 85 per cent of this trade (about $513 million) involved only the eight representative countries listed above. Direction of International Trade (Series T), VIII, NO. 7, pp. 77–78; Tables 1 and 2 below. Moreover, seven of these eight countries (excluding Iran) have received most of the Sovietb-loc credits. The U.S. Department of State estimates that Soviet-bloc credits as of February 1958 were slightly over $1.9 billion (of which almost $1.6 billion was for economic assistance and the remainder for arms). Approximately $1.1 billion of economic assistance was designated for the Afro-Asian regions and over $900 million went to these seven countries (more than 80 per cent). When credits for arms are included as well, $1,475 million of $1,952 million in credits was committed to Afro-Asian nations, the share of the seven representative countries being $1,255 million. In other words, these seven countries have had channeled toward them approximately 65 per cent of all Soviet-bloc credits to underdeveloped countries (most of the remainder, $464 million, went until recently to Yugoslavia). A detailed compilation is found in Review of Foreign Policy, 1958, Hearings before the Committee on Foreign Relations, U.S. Senate, 85th Congress, 2nd Session, Washington, D.C., 1958, Part 1, p. 295. See also Economic Survey of Europe for 1957, ch. VI, p. 55; The Sino-Soviet Economic Offensive, p. 23.

7 The relation of 1938 prices to those of 1948 must be in the vicinity of 1:2. The price variations since 1948 have had no perceptible effect on current comparisons in that the 1948 and 1956 prices remained at 102 and 103 of the 1953 index of 100. Cf. United Nations, World Economic Survey, 1956, New York, 1957, ch. V, p. 184Google Scholar; idem, Statistical Yearbook, 1957, New York, 1957, p. 435.

8 Although the expansion of trade is impressive in terms of percentages, it is necessary to recognize that the share of trade between the Soviet bloc and the Afro-Asian nations in the total trade picture of both regions is still relatively small. In 1956, this trade comprised from 6 to 8 per cent of the total trade of the Soviet bloc, and about 30 per cent of its trade outside the bloc. Among underdeveloped countries, trade with the Soviet bloc in 1957 rarely exceeded 15 per cent of an individual country's total trade, the exceptions being Afghanistan, Egypt, Iran, and Turkey. On the other hand, the Soviet Union has significantly increased its share of certain imports of some countries. For example, it supplied in 1956 about 15 per cent of Indian imports of rolled ferrous metals, 25 per cent of Egypt's oil imports and 38 per cent of its wheat imports, and 95 per cent of Afghan sugar imports. Vneshniaia Torgovlia, No. 11 (1957), p. 65; U.S. Department of Commerce, Value Series on Free World Trade, June 1958.Google Scholar

9 The pattern of expanding Soviet-bloc trade with these eight Afro-Asian countries and with all underdeveloped countries was somewhat altered in 1957, when Soviet trade alone registered a marked increase (almost doubling its 1956 totals with the eight Afro-Asian states), while East European trade rose only slightly. Nonetheless, Soviet trade in 1957 was still about four-fifths of that of Eastern Europe. Cf. Table 1 above; Economic Bulletin for Europe, X, No. 2 (August 1958), pp. 38–40; Vneshniaia Torgovlia SSSR za 1957 god. Statisticheskii obzor, Moscow, 1958, pp. 7–10.

10 Much of the data and analysis in this section are based on Allen, Robert Loring, “Economic Motives in Soviet Foreign Trade Policy,” Southern Economic Journal, XXV, No. 2 (October 1958), pp. 189–201.CrossRefGoogle Scholar

11 There is still some controversy among Western specialists on the role of Soviet prices, but many accept the general idea that the Soviet Union periodically attempts to rationalize the price system so that it reflects costs as closely as possible, as indicated by major price reforms instituted in 1932, 1936, and 1949/50. Therefore, although the Soviet Union may not exhibit much concern for short-run divergences between prices and costs, these do not make for long-term distortions that would render prices use less. The manifold facets of this field are discussed in Jasny, N., The Soviet Price System, Palo Alto, Calif., 1951Google Scholar; idem, Soviet Prices of Producers' Goods, Palo Alto, Calif., 1951; Bergson, A., Bernaut, R., and Turgeon, L., “Prices of Basic Industrial Products in the USSR, 1928–1950,” Journal of Political Economy, LXIV (August 1956)Google Scholar; R. Moorsteen, “Prices of Prime Movers in the USSR,” RAND Publication RM–1225, Santa Monica, Calif., 1954; Turgeon, L., “Cost-Price Relationships in the Basic Industries During the Soviet Planning Era,” Soviet Studies, IX, No. 2 (October 1957), pp. 143–77.CrossRefGoogle Scholar Recent examples of Soviet opinion on the role of prices can be gleaned from Voprosy Ekonomiki, No. 2 (1957), pp. 71–121; Dengi i Kredit, No. 3 (1957), pp. 40–49; Maisenberg, A., Tsenoobrazovanie v Narodnom Khozaistve SSSR, Moscow, 1953, ch. VIII.Google Scholar

12 Prices of industrial products as a whole rose about 569 per cent between 1928 and 1950. The category of products below this average included such items as cast-iron pipe, rolled steel and steel products, cement, paint, and inorganic chemicals. Those above the average included coal, bricks, blast furnace products, iron ore, lumber, turpentine, peat, wood products—all closer to the extractive state. Coal and iron, in fact, were among those with the highest increases, while chemicals and metal products registered among the smallest increases.

13 Qualitative evidence also exists to indicate relatively greater economies achieved in manufacturing. These include the Soviet practice of reproducing foreign models without assuming costs associated with new designs and testing, few changes in models over long periods of time, and extreme standardization, as well as the ability of the Soviet Union, through belated industrialization, to tap the latest advances by imports and other means, without much cost.

14 Further evidence of an oblique nature corroborates the shift of relative costs to the disadvantage of the extractive industries. In a discussion of the short-run divergences between cost and price in the Soviet economy, two Soviet economists admit that financial plans during the Fifth Five-Year Plan envisaged that about 10 per cent of the engineering enterprises would end up with deficits, but that “in extractive industries about twenty-five percent of the enterprises make planned losses.” Kisman, and Slavny, , Sovetskie finansy v piatoi piatiletke, Moscow, 1956, p. 63Google Scholar, as quoted in Nove, A., “The Problem of [Success Indicators] in Soviet Industry,” Economica, XXV, No. 97 (February 1958), p. 3.Google Scholar

15 The annual plan for 1958 increased investment in iron-ore mines by 73 per cent. Among the many articles concerned with the Soviet attempt to improve agricultural production is Volin, L., “Soviet Agricultural Policy After Stalin,” journal of Farm Economics, XXXVIII, No. 2 (May 1956), pp. 274ff.CrossRefGoogle Scholar, and his “Soviet Agriculture Under Khrushchev,” a paper delivered at the American Economic Association meeting, December 27, 1958. Recent official data on the results of these efforts are contained in Pravda, No. 253 (September 10, 1958), p. 4.

16 That such a trend has appeared in the postwar period is indicated by the commodity composition of Soviet foreign trade. The proportion of grain in total Soviet exports has declined since 1938, when it comprised 22 per cent of exports; in 1955, it was only 10 per cent. Primary products, on the other hand, have increased relative to total Soviet imports. For example, coal imports in 1928 and 1938 were negligible, but amounted to almost 4 per cent of total imports in 1954. Similar increases in the postwar proportion of total imports are evident for such items as petroleum products, iron ore, soy beans, and oil seeds. The Soviet Union in 1956 secured 100 per cent of its shellac imports, 97 per cent of its raw cotton imports, and 28 per cent of its rice imports (among others) from the underdeveloped countries of Afro-Asia. Cf. Narodnoe Khozaistvo SSSRV 1956, Moscow, 1957Google Scholar; Vneshniaia Torgovlia, No. 4 (1958), pp. 21–32; Scott, op.cit., p. 44.Google Scholar

17 The apparent paradox in the Soviet Union's position as a net importer of capital goods is explained by the fact that it still finds specialized forms of capital goods more economical to import than to build at this stage of continuing economic development. Moreover, such trade may arrest the decline in the rate of Soviet industrial growth which has recently developed, and likewise eliminate certain shortages arising from improper planning or failures in plan fulfillment.

18 Cf. Spulber, N., The Economics of Communist Eastern Europe, New York, 1957, pp. 410–20Google Scholar; Economic Survey of Europe for 1957, ch. VI, pp. 35 and A–64ff.

19 Based on statistics presented in a supplement to Vneshniaia Torgovlia, No. 5 (1958), entitled Vneshniaia Torgovlia SSSR za 1956 god. Statisticheskii obzor, Moscow, 1958, pp. 12–34, 52ff., 58ff., 75ff., 81ff., 95ff., 121ff. China's dependency upon Soviet oil exports is evidenced by the 250 per cent increase between 1952 and 1956. Some 11.7 per cent of all Chinese imports of Soviet origin in 1956 consisted of oil imports, and in fact fuels constituted about one-fourth of Soviet exports to China during that year. Cf. Vneshniaia Torgovlia, No. 11 (1957), pp. 39ff.; No. 4 (1958), pp. 22ff.; No. 5 (1958), pp. 3ff.; and New YorK Times, July 28, 1958, p. 9.

20 The Soviet Union was still a net importer of coal in 1956, exporting 5.6 million tons and importing 6.4 million tons. Vneshniaia Torgovlia, No. 11 (1957), p. 41, and No. 4 (1958), p. 22. To view the matter from another standpoint, five East European countries of the bloc imported over 11,600 tons of iron ore in 1956 (about 60 per cent of total consumption). The Soviet Union in that year produced about 78.1 million tons of iron ore, consumed 69 million, and exported the remainder (over 9 million tons, or about 12 per cent of production) to Eastern Europe. Cf. Economic Survey of Europe for 1917, ch. VI, p. 41Google Scholar, and ch. 1, p. 13, for additional data on East European imports of some industrial raw materials in 1957. More specifically, the trade of Czechoslovakia with the Soviet Union in 1956 was about 34 per cent of its total turnover, and about 70 per cent of its Soviet imports consisted of raw materials and goods necessary for industry. Vneshniaia Torgovlia, No. 5 (1957), p. 4. Poland's trade with the Soviet Union was almost 31 per cent of its total 1957 turnover. Between 50 and 98 per cent of its import requirements of crude oil, petroleum products, iron ore, cotton, and wheat were met by Soviet deliveries. The same order of magnitude applies to East German reliance upon Soviet supplies. Cf. Voprosy Ekonomiki, No. 5 (1958), pp. 85–86; G.U.S., Rocznik statystyczny, 1958, Warsaw, 1958, pp. 273–77. “The Soviet Economic Impact upon Poland,” a case study of intra-bloc economic relations by the present writer, appears in the April 1959 issue of the American Slavic and East European Review.

21 A summary of East European planning and development during these years is found in Spulber, op.cit., section in, pp. 271–381. For a comparison of the increase in the bloc's industrial production and coal output in 1956, cf. World Economic Survey, 1916, ch. VI, p. 237.

22 Cf. Herman, L. M., Foreign Trade of the USSR, Report No. A–6, Council for Economic and Industry Research, Washington, D.C., 1954, pp. 18–36Google Scholar; Spulber, , op.cit., p. 410Google Scholar; related data in Vneshniaia Torgovlia za 1956 god.

23 The strain on Soviet resources is evidenced by the increasing export surplus in raw materials registered between 1950 and 1955. In the earlier years, this totaled about $86 million, but by 1955 it had leaped to $626 million, at a time when 79 per cent of Soviet trade was with the bloc. The two most industrialized states of that region—Czechoslovakia and East Germany—registered a $143 million import surplus in raw materials in 1950 which increased to $215 million in 1953 and $246 million in 1955. In the latter year, Poland, the third most industrialized member of the bloc, achieved an export surplus in raw materials of $131 million that was due chiefly to its huge export of coal (over 24 million tons). This, however, does not truly indicate the extent to which Poland is dependent upon raw material imports. In 1955, more than 67 per cent of its $534 million in imports consisted of raw materials, delivered primarily by the Soviet Union. Cf. Economic Survey of Europe for 1957, pp. A–53 to A–59.Google Scholar

24 Cognizance of the need for such efforts was demonstrated even earlier, as in Malenkov's speech of August 8, 1953, which admitted that shortages of essential supplies not only threatened Soviet internal development but also endangered Soviet economic control of Eastern Europe. For an earlier analysis of the situation, see Lias, G., “Satellite States in the Post-Stalin Era,” International Affairs (London), XXX, No. 1 (January 1954), pp. 40–49.Google Scholar

25 Production costs naturally increase when the depletion of richer mineral deposits requires added labor and capital in mining, and when less accessible reserves increase transportation costs. The depletion factor is corroborated by the size of recent Soviet efforts to develop sources in the east. Declining reserves and relative efficiency have been exhibited in the Donbas coal and Baku oil fields, thereby compounding the problem of Soviet exports to Eastern Europe on the basis of transportation costs alone. Moreover, in Soviet coal production, depletion is evidenced by the increased share of lignite in total production. In 1956 it comprised about 30 per cent of all coal output. Coal continues to be a bottleneck in Soviet industrial expansion. The shift in oil production has moved east to the trans-Volga fields, whose output between 1940 and 1955 increased sevenfold, while that of Baku declined by a third. Baku's share of total output, therefore, has fallen from three-fourths to one-third, but the expanded production in the trans-Volga fields has been accompanied by a deterioration in quality, especially for diesel fuels. Cf. Naradnoe Khoziaistvo SSSR v 1956 godu. Statisticheskii Ezhegodnik Moscow, 1957, pp. 72–75; Economic Survey of Europe for 1957, ch. 1, p. 16; Jasny, N., The Soviet 1956 Statistical Handbook: A Commentary, East Lansing, Mich., 1957.Google Scholar

26 Approximately $1.26 billion in credits and $200 million in grants were given by the Soviet Union to both Asian and East European members of the Communist bloc, Czechoslovakia being the only member not requiring either. Nearly two-thirds of all credits went to Hungary, Poland, and East Germany. Cf. Economic Survey of Europe for 1957 ch. VI, pp. 55–58.

27 Cf. Vvedensky, G. A., “Soviet Industry in 1957 and 1958,” Bulletin of the Institute for the Study of the USSR, V, No. 4 (April 1958), pp. 19–24Google Scholar; Economic Survey of Europe for 1957, ch. 1, pp. 16–17.

28 Cf. Economic Survey of Europe for 1956, ch. 11, p. 18, and Economic Bulletin for Europe, IX, No. 3 (November 1957), p. 18, for an illustration of the types of industrial production that appear to have been assigned to bloc members on behalf of this international division of labor, and also for a list of committees set up to promote co-operation in various sectors. Permanent secretariats established in September 1957 were given the task of co-ordinating the allocation of materials in Warsaw (coal), Berlin (chemicals), Budapest (timber), etc. Among the pronouncements released after the May 1958 conference of CEMA, continued emphasis was given to further collaboration in the “faster development of fuel, power, and material supplies.” East Europe, VII, No. 7 (July 1958), p. 33; Christian Science Monitor, May 23, 1958; New York Times, May 26, 1958.

29 Economic Survey of Europe for 1957, ch. 1, pp. 10–14.

30 See Khrushchev's speech in Hungary, quoted in Nepszabadsag, July 21, 1957, and reprinted in part in Economic Survey of Europe for 1957, ch. VI, n. 45.

31 The rising capacity of Eastern Europe to export manufactured goods is illustrated by the exports of Czechoslovakia, East Germany, and Hungary. In 1950, these three states had an export surplus of manufactured goods amounting to $684 million; by 1955, it had risen to over $1,260 million. Moreover, more than half of the Czechoslovakian and East German exports to underdeveloped countries in 1956 consisted of machinery, compared with only 15 per cent of the exports of the Soviet Union. Although a breakdown by area of destination is not always available and it must be assumed that much of the export surplus of manufactures involved intra-bloc trade, the data indicate how the composition of trade can be shifted to enable these states to ship manufactures to underdeveloped countries in exchange for raw materials. Cf. Economic Survey of Europe for 1956, Table XXXIII; Economic Bulletin for Europe, X, No. 2 (August 1958), p. 39.

32 For example, this was partly confirmed by a dispatch in the New York Times, February 6, 1958, which referred to a new three-year trade agreement between Poland and the Soviet Union, in effect until 1960. Polish negotiators had difficulty in securing a Soviet agreement to purchase increased Polish exports of machinery and industrial equipment, in order to assure Poland a steady flow of vital raw materials and still avoid an import surplus. This is one of several indications that Soviet import needs in the way of machinery and equipment cannot be met to any great extent by the relatively simple products of a still industrializing Eastern Europe.

33 In 1952 prices, Western Europe annually imported between 1934 and 1938 approximately 244 million dollars' worth of seven basic primary products (wheat, maize, sugar, tobacco, cotton, wool, oil seeds, and fats). This figure had decreased almost by half in 1952 ($126 million) and fell to $99 million in 1956, or less man 41 per cent of the prewar average. Economic Survey of Europe for 1957, ch. IV, p. 17. This shift in Eastern Europe's structure of trade, along with conditions aggravated by political tensions, obviously accounts for the fact that by 1953 Western Europe was exporting only 31 per cent of its prewar volume of goods to Eastern Europe, and importing only 22 per cent. Spulber, , op.cit., p. 444.Google Scholar

34 For example, raw cotton imports to the Soviet bloc from overseas countries rose from 55.6 thousand tons in 1953 to 85 thousand tons in 1955, with Eastern Europe absorbing over 85 per cent of these imports in the latter year. After a decline in 1956, this relative increase was restored in 1957. Meantime, the autarkic policies which fostered domestic production of cotton were abandoned by all states in the bloc except Bulgaria. Cf. Economic Bulletin for Europe, VIII, No. 3 (November 1956), p. 29; Economic Survey of Europe for 1957, ch. 1, p. 15. Since 1953, an increasing share of Soviet imports has consisted of ores, rubber, and raw textiles, amounting to 10.4, 3.4, and 6 per cent, respectively, of total imports in 1956. Compared with 1955, Soviet imports of rubber in 1956 more than tripled, while its imports of oil and cotton fibers more than doubled. Vneshniaia Torgovlia, No. 4 (1958), p. 27; Vneshniaia Torgovlia za 1956 god., pp. 26, 29–30.

35 United Nations, World Economic Survey, 1956, New York, 1956, pp. 63–66Google Scholar; World Economic Survey, 1956, p. 184; Statistical Yearbook, 1957, pp. 434–35. By the end of 1957, the price index of primary commodities in world trade had declined to “the lowest point since the outbreak of hostilities in Korea.” New York Times, May 4, 1958, quoting the U.N.'s Commodity Survey, 1957.

36 In the Soviet Ministry of Foreign Trade, a specific subdivision has been established to promote non-bloc trade, especially with underdeveloped countries. Throughout early 1958, debates among Russian economists centered on a change in the exchange value of the ruble representative of its purchasing power in terms of world prices, and apparently Minister of Foreign Trade A. Mikoyan viewed the proposal sympathetically. This issue is evidently related to Communist plans to establish an international bank to finance trade between the Soviet bloc and underdeveloped countries. See New York Times, April 20, 1958, p. 19.