1960s >> 1969 >> no-782-october-1969

Book Review: ‘Economic Devolution in Eastern Europe’

Capitalism in Eastern Europe

‘Economic Devolution in Eastern Europe’, by Ljubo Sirc. (‘Problems of Capitalism in Eastern Europe’ series. Longmans – for the Institute of Economic Affairs, 35/-)


Dr. Sirc, now a lecturer in International economics at Glasgow University, was born in Yugoslavia and fought with Tito’s army during the war but, like a number of other supporters of the Yugoslav regime, he came into conflict with the government and he was imprisoned for seven and a half years in 1947 for “conspiracy against the State”.

His book deals with the way the original centralised control and planning of production, distribution and prices in Eastern European countries, including Russia and Eastern Germany, has had to be modified in the direction of decentralising decision making and allowing the market forces of profits and competitive prices to operate, more on the lines of Western Capitalism. He also tries to foresee further changes that will be forced on the governments concerned.

Dr. Sirc approaches his subject as if it is a study of the problems and failures of Socialism, but once this absurdity is discounted the reader will find in the book many facts and figures illustrating the inescapable capitalist pressures at home and in the world market which have compelled the governments to change their economic and political policies and will continue to do so.

His central theme is that “the old Stalinist Soviet model was very inefficient”, producing as it did, “goods which nobody wants to buy . . . productive capacities which cannot be used, keep personal consumption very low and causes foreign trade difficulties”.

He stresses the point that inefficient centralised control resulted in industries carrying a labour force in excess of their real needs so that when the efficiency is raised by various reforms large scale unemployment appears; hence the movement of thousands of Yugoslavs into Germany. Austria and Sweden and the efforts of the Hungarian government to find work for unemployed Hungarians in Eastern Germany and Russia. Czechoslovakia faces the same problem.

An interesting parallel with this is the British Labour Government’s Selective Employment Tax and other measures designed to squeeze workers out of the distributive trades and induce them to go into production industries ― if they can find jobs there.

Inevitably, in view of Dr. Sirc’s assumption that he is dealing not with State capitalism but with Socialism, the alleged inadequacies of Marxism are brought under attack. Marx’s blueprint for the society of the future, and specifically its “Marxist-Leninist” offshoot, was he says, imprecise and inapplicable to the circumstances of the Eastern European countries under Communist Party dictatorship. He likewise finds that Marx’s historical materialism “has proved false”. To support his case he quotes the head of the Slovene government who argued that some private enterprise is essential in Yugoslavia and that “it is not worth while nationalising all productive processes”. He appears to be quite unaware that, as Marx well knew, nationalisation or state Capitalism is not Socialism.

Although the old, rigidly centralised, organisation is under growing attack among members of the governments and economists the claim that the new methods are also “Marxist” will no doubt continue, at least for many years. An interesting example comes from Yugoslavia, the country which has gone farthest in introducing decentralisation. Sir Fitzroy MacLean, Conservative M.P. recently interviewed Marshal Tito (Sunday Times July 6, 1969). MacLean summarised the present situation in Yugoslavia, following the reforms of 1965:-

“Under which individual, commercial and industrial enterprises dispose of their own funds, fix their own wages and prices and are almost entirely free from State interference or control, while vigorously competing among themselves.”

MacLean also points out that the Yugoslav government allows in foreign capital and encourages “a measure of private enterprise.”

He asked Tito “Is all this good Marxism?” and got the answer : ―

“We ourselves believe that what we are doing is in strict accordance with the principles of Marxism-Leninism, especially in regard to the withering away of the State.”

It remains to be seen, with regard to the economic changes themselves, how far Russia and the other Eastern Countries will be forced to follow the Yugoslav example.

One important factor in this is the need the Russian satellite countries have for foreign capital to speed up development. The West German government is reported to be discussing with the Polish government (at the latter’s invitation) plans to make German capital and technical aid available to build up Polish industry. Behind this, according to Herr Arndt, the German Minister concerned, is “that the Soviet Government is now admitting that it does not have the capacity to supply the necessary technical assistance to the Eastern countries on its own.” (Financial Times, 25 June 1967).


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