'; ' -
ECONOMIC INTELLIGENCE REPORT1
WITH THE NON^OMMUNIST WORLD' -
CENTRAL INTELLIGENCE AGENCY
OFFICE OF RESEARCH AND REPORTS
nils report ut tempts to auke explicit the Influence of Communist political doctrine on the development of Soviet trade with tht world. Within the limits prescribed by Soviet attitudes toward thel ts which as long ago7 Stalin declared were "set by the opposite characters of the two systems, between which there Is competition and- Soviet economicrc, of course, willing to behave like "economicnd Soviet foreignpolicy is motivated by commercial as well as political Itelieved, however, that the Soviet "world view" and changes In the Soviet "world view" determine the development of Soviet trade with the West. It is also believed that the parameters of this trade, which are determined ty Soviet attitudes toward world historical development, reflect both current and ultimate Corrprurilst political goals.
II. Communist Doctrine and "Coexistence" (lSlfl-ltO)
A. Genesis and
III. Soviet Foreign Trade iu Ihe Prewar Period
Trade and "War Cceamunism")
Trade and the "New Economic Policy"
C- Foreign Trade and the Five Year PlansiO)
IV. Autarky, Security, and the Soviet
V. War Years
VI. Soviet Policy! on Trade with the West in the Postwar
VII. From "Peaceful" to "Competitive" Coexistence
Distribution of Soviet Imports Of
Producer and Consumero
h. Soviet Foreign Trade,
5. OrulgrtC and
IDEOLOGICAL DBTEfiMIflAMTS OF SOVIET TRADE WITH THE MOK-COMMUHIST WORLD*
Sumaary aad Conclusions
For Caranuiiist leaderswho felt themselves poised on the threshold of world revolution, "coexistence" was considered little morehort-run tactic applicable only until thehad consolidated their victory in Russia. They did not foresee any possibilityermanent, orrolonged,between the capitalist world and the USSR. Soon faced, however, with the failure Of world revolution to materialize, with the surprising recuperative powers of world capitalism, and with pressing economic demands ot hone, these leaders saw that some adjustment of Communist doctrine was mandatory in terms of an indeterminate period of "coexistence with thc capitalist That an inevitable and violent struggle between East and West would be the dramatic climax to this transitional epoch,was never seriously doubted, or indeed denied, by Soviet leaders.
In view of the -'breathing space" which history had apparently granted the capitalist world, Soviet foreign trade policy, too, became orientedand ultimately reconcilederiod of coexistence with the non-Communist world. Convinced, however, that the "partial, relative, and temporary stabilization ofwould' notong one one that on ultimate struggle between the two systems was an inescapable part of the historical process, Soviet policymakers viewed international tradeacticul expedient-rather than as an end desirable in itself. Although the advantages of an international division of labor andorldwide exe'nange of goods and services were recognized by Soviet leaders, they accepted only those features which wouldto the strengthening of zhe USSR's economic und military potential und which would not reduce state control over the ecor.-otr.y. Stalin'sathological concern for security mode the pursuit of economic' self-sufficiency an openly avowed goal of Soviet policy and severely limitede volume and the pattern of Sovietdo.
* The estimates and conclusions in this report represent the best judgment of this Office as-
But the quest of thc 'JSSR for economic independence from what it regardedostile capitalist environmentn inaulation which would serve to protect the USSR from econonic penetration during the period ol* coexistence and to guarantee ita victory during th*clash" to followas aot synon>Tcous with autarky In the senseroscription of all trade. Eccmomic realities had clearly demonstrated to Soviet economic planners that self-sufficiency could be achieved most rapidly through an expansion of selected imports from.the more industrialized countries of the West. The "granite wall separating two worlds" which characterized the monopoly of for-cign'trade during the prewar period at the same time was to "serveridge to transfer to thc USSR the advanced technical'of the capitalist countries."
In the postwar period, however, roctors which could not possibly have.beer. foreseen by earlier Soviet policymakershe threat of mutual destruction inherent in waruclear age coupledapid growth in the economic capabilities of the Sino-Sovlet Blocostensibly have motivated Soviet leaders to renounceeans to ultimate Communist aspirations in favorarefully conceived and skillfully executed campaign of "competitive coexistence." Originally devised asactical maneuver, an interval between battles, "peaceful coexistence" in its newform has nowositive clement of Soviett has become the battle itself. The last doctrinal impedimentseaceful modus vlvendl wilh the ncc-Ccrcur-ist worldheor capitalist cncircleewnt and the inevitability of warostensibly have been discarded, and in their place haa beenthe prospectrolonged contest of economic strength with the West.
* 7or serially numbered source references, see the Appendix.
Within thin context, the motives of Soviet roreign economic policy aay be statedn the industrial Ifettj to utilize economic contacts with the Free World to keep abreast of Western technology and to hasten an economic growth the immediate olri of which is to "ove-rtoxo and surpass" the capitalist West,) In the "underdeveloped ureao of the world, to help free those newlyareas from Western Influence and subsequently to create in thea, either through economic blandishments from the Bloc or through the clomestic appeal to Ocemnunlsm, an increasing vulnerability to lUtinate absorption into the Communist sphere. If, in the meantime, economic pressure Is created upon capitalist countries dependent on this area for marxeta and sources of supply aiid/or if it leads lo conflicts within the JTee World tending to weaken Its unity, ao pucS the better.
Inritical evaluation of the history of Soviet policy relating to foreign trade suggests the following conclusions. The extent to which the USSR ia willing to trade with the Free World remains today, as it has for the past hOeflection of its current policies und ultimate aspirations, both political and Thc concept of "coexistence" which characterizes current East-West relations comprises, in Soviet eyes, nothing less than the time required to bring the still economically backward East up Lo the level of thc advanced industrial countries. The active "export" of revolution has been subordinated to an emphasis on rapid economic growth, the ultimate aim of which is to establish the economic and cultural superiority of socialise! over capitalism. If and when this objective is attained, another phase in the development of Bast-West relations will have been reached: thc reactivation of thepotential in the Western world either through thc inherent contradictions and crisesapitalist society increasinglyof its colonial markets and sources of cheap labor and materials or through the active military intervention of the USSR.
Eecause the USSR is committedapid rate of economic growth, the achievement of:whichlanned and controlled economy, Soviet authorities!appear to be unwilling to tolerate any vitiation of their exclusive control of the organs of foreign trade or of the subordination of foreign trade to the dictates of the nationalplan. Although imports from the West nay indeed be called upon toubstantial contribution to Soviet economic growth, it is unlikely that such trade will be permitted toevelhich it mayisruptive influence on planned rates of growth internally. Predicatedhilosophy which conceives as Impossible uny relation but one of hostility between East und West and which regards open conflict, ir not as icevituble, then at least as always un imminent possibility, Soviet policy on foreign trade continues to ignore, asomparison of current Soviet costs with foreign, costs in those industries which are deemedto Soviet national interests- The USSR seems willing (and, perhaps more importantly, capable) of bearing thc economic costseparturerade pattern more nearly reflectingcomparative advantage entails. The sacrifice of productivity and the loss of efficiency, in Soviet eyes, apparently have been amply compensated for by the long-term advantages accruing U> an economy which for <h0 years has sought to accommodate itself to the isolation that war would bring.
"The foreign trade policy of the USSR is an integral part of its foreign/ Implicit In this quotationoviet textbook published6 is tlie fundamental divergence between Communist and capitalist approaches to International tradeetweenoreign trade operated and administered exclusively by state organs, conducted on the basis of national economic planning, and made to subserve the endsolitical creed,rade carried on predominantly by private enterprise more or less in spontaneous response to market Soviet foreign trade is asolitical as an economic phenomenon. Inseparable as it is from Soviet foreign policy, Soviet trade must be viewedramework of hostility between East and West which udmlts of no facile comparison with normal Western economic relations, based as they areommon tradition of mutual trust and confidence.
For the purposes of this report, the Soviet conceptolarized world .economyne encompassing two separate and parallelas been usedoint of departure. The commercialbetween these two systems are the subject of this report. This approach seems justified as much by the presence in Soviet minds of the "antagonistic contradictions and mutual hostility" whichtrade relations with the West as by their presumed absence in the "higher form of economic collaboration" which ostensibly governs Soviet relations with the Satellites. It le the aim of thiso make explicit the influence of thia Soviet 'world view" on the development of Soviet trade with the non-Communist world.
II. CCmunist Doctrine ando).
A.; Genesis and Development.
If there was one characteristic coaaon to all the Bolshevik leaderst was their almost messianic faith in the imminent coming of world revolution and in the rapidly approaching collapse of the capitalist world. Nevertheless, although7 It had been possible to argue that revolutionary prospects in the West weresubsequent events rapidly transformed the prevailing Party raood of optimism to one of disappointment. The wave of revolution that swept'over Europe in the wake of the Bolshevik uprisingin Germany, Italy, Hungary, and the Baltic states endederies of defeats, and5 the Firth World Congress of thc Comint-ern was obliged tothat, the tide of revolution had ebbed and that the world had
raui with the non-!
trade following p. It-.
witnessedartial, relative, arid temporary stabilisation of capitalism." Skepticism as to the successenewed effort- at world revolution and conviction that an extended truce with world capitalism was both unavoidable and, on the whole, desirable for the Soviet State led naturallyeappraisal of the role which the USSR was to play in international affairs. From Stalin's point of view it would have been utter folly to risk the reality of socialism in the USSR for the nebulous shadow of revolution abroad.
In un attempt to clothe his actions in the mantle of Marxist orthodoxy, Stalin took great pains to seek what little doctrinal Justification he could find in the writings of Lenin. He sought it in Lenin's theory of imperialism. "The real greatness ofeclared Stalin, "consists in his raising up openly, honestly, and fearlessly the question of the necessityew formula, and in proclaiming the possibility of the victory of the proletarianin separate'/
Lenin had maintained that capitalism in its last andstage Inevitably turns monopolist and imperialist. Gigantic trusts and international cartels engage in fierce rivalry for the control of world markets. The capitalist system, impelled by its frantic quest for profits, transcends national boundaries,every corner of thed merges into one worldsystem. Revolution, accordingly, occurs not as earlier Marxists had predicted, simplyesult of local conditions, but ratter as the result of the total interplay of forces within the world capitalist system. Revolutions need not take place first in the countries that are most advanced industrially, as Marx's historical materialism seemed once to imply. On thethey are more likely to occurreak in the world "front" of the capitalistoint where the chain has Its weakest link.
Stalin wrote as follows:
The front of capital will be pierced where the chain of imperialism is weakest, for therevolution is the result of the breaking of the chain of the world imperialist front at its weakest link; and it may turn out that the country which has started the revolution, which hasreach in thc front of capital, is less developedapitalist ser.se than other, more developed countries, which have, however, remained within the framework ol" capitalism.
7 the chain of thc imperialist world proved .to be weaker in Russia than in the other countries.
It was there the chain gave way and provided an outlet for the proletarian revolution. U/
Having sought doctrinal justification for "socialism in one country"'in Lenin'8 theses on imperialism, Stalin set forth aexposition of his views in Tlie October Revolution and the Tactics Of the Russian Communists, published inb. 'Hie work, however, clearly demonstrated the naivete of those who saw in "socialism in one country" the promiseermanent, peacefulbetween capitalism und Communism. Those arerote Stalin, who regard the victory of socialism in one country aa an end in itself, asnationals "something passive."
lie also wrote us follows:
The world significance of the Octoberlies not only in that Itreat start made by one country inreach In the system of imperialism and that it is the first centre of Socialism in the ocean of imperialist countries, but also in that lt tutes the first stage of the world revolutionighty base for its further development- 5/
Thus the change ln tactics required by the new doctrineto be no alternative to world revolutionitalit. "He who does not understand this peculiar featureOctoberdded Stalin, "will never understand till:: oV^ici: or i'.. for-
Thus it was only with the "ebbing of the revolution tide" in Europe and the establishment of what appeared lo be otemporary equilibrium between capitalism and socialism that some readjustment of Coirnunist dectrine was made mandatory in terms of an indeterminate period of "peaceful coexistence with the capitalist encirclement1'; but that the coexistence need not necessarily beor, indeed, very long was implicit in the concept. ursuit
and-dedicated Marxists the world overask to he accomplished through the instrumentalityilitarily powerful and economically viable Soviet state. The "new economic policy" (NEP) and the forced industrial development of the early Five Sear Plans were victories to be- won on the home frontinal assault on world capitalism could be undertaken.
Perhaps the most convincing demonstration of thc lmpcrmaaence which Soviet lenders attached to their proffers of peaceful coexistence is provided by Soviet doctrine itself, ln the concept of theclash." This assumption of irreconcilable hostility between capitalism and socialism has been so much an integral part of Marxist doctrine and has so permeated the thinking of Lenin and Stalin that current Soviet propagandists have been forced to rationalizein terms of "living Marxism" aad "new conditions" rather than in terms of logical or doctrinal consistency.
the fundamental concept of Inevitable clash has beenln uvery period of pre-Stalin Soviet history. An ultimate struggle between the two systems wnB persistently portrayed as on integral partistorical process the culmination of which was to be the establishmentorldwide, classless, state-lens society. The question- "Who will conquer- Implies Soviet belief ln this ultimate clash. Both Lenin and Stalin clothed the struggle between capitalism and corraunlca with an Inescapable cither-or quality which made peaceful coexistence of the twoatter of tactical expediency rather than an end desirable Id "As long as capitalism and socialismrote Leninwe cannot live in peace; ln the end one or the other will triumphuneral dirge will be nung over the Soviet Republic or over world capitalism. Thiseupite inj In the light, however, of tho pressing internal economic demands uf the Soviet state, it was clearly to the Interest of the Soviet leadership to postpone this conflictime of Its own choosing.
Faced with the failure of concurrent revolutions in Europe, tae surprising recuperative powers of world capitalism, and economic dislocation ln the USSR, Soviet theoreticianseriod of prolonged coexistence with the non-Communist world. What the USSR needed wasreathing 3pacc ln which to fulfill Lenin'sto "overtake and surpass" the capitalist West. Communism was forced to make important concessions to the exigencies of the moment, but ln Its steadfast adherence to the assumption ofhostility between the Communist and capitalist worlds, it left little doubt'as to the historlcul role coexistence was to play in Soviet strategy. Itolicy to be followed ln Interludes betweenemporary respite which Leninmeans of mustering forces for new battles."
The implication of universal destruction Inherent lnwaronsequent significant transformation of the Soviet concept of the "inevitable struggle" iu tlie postwar era hange ln means and immediate objectives if not ia the fundamentalitselflo( discussed ir. VII, below.
As-the theme of "peaceful coexistence" early in Soviet historyactical expedient of Soviet foreign policy, so too was foreign trade considered an integral element of that policy. At the Economic Conference which convened in Genoa onhe first major international meeting at which the USSR wasthe Soviet delegate formulated one of the earliest practical expressions of the economic coexistence of the two social systems, as follows: "Adhering to the principles of Communism, the Russianrecognizes that in the present historical epoch which makes possible the parallel existence of the old and the newly born social systems, economic cooperation between states representing these two property systems is an imperative necessity for general economic8/ The commercial advantages which the KEP seemed toto the capitalist Westa West considered to be market hungry and short of raw materialsere deemed by Soviet leaders as much an inducement for economic cooperation as were the industrial demands of the Soviet state. enin stated the following:
The bourgeois countries must trade with Russia; they know that without some form of economic relations their collapse will proceed further than it has gone up to now. he interests of all the capitalistall for the development, regulation, and expansion of trade with Russia. Since such interestshis fundamental economic necessity wilload for/
The. economic realities whichor "mutually profitable" trade between the USSR and the capitalist West were made further explicit by Stalins follows:
* The emphasis on the "advantages" to be derived by the West in trade with the USSR hasecurrent one in Soviet trade offers. In the EOS inconomic cooperation between East and West was offeredeans of softening the effect of the Western recession-The Soviet delegate declared that "we do not rejoice at the sight of growing unemployment in the West" and reminded his listeners thatthe US depression ins "orders placed abroad by the Soviet Union gave employment to many thousands of workers" in the West. imilar vein, Khrushchev's letter to President Eisenhower* suggested that increased Soviet-US trade 'Vould enable Americanto workigher percentage of their capacity and would raise the level cf employment."
Not only does our economy depend upon the capitalist countries, but the capitalisttoo depend upon our economy, upon our oil, OUTur timber and, lastly, our boundless market. We receive credits, say, from Standard Oil- We receive credits from German capitalists. But we receive them not because of our bright eyes, but because the capitalist countries need our oil, our grain, and our market for theof their machinery. It must not bethat our country constitutes one-sixth of the world, that ituge market, and the capitalist countries cannot managesome connection or other with our market. All this means that tne capitalist countriesupon our
One year later,talinisiting US labor delegation that "the existence of two opposite systems, thesystem and .the socialist system, docs not preclude the possibilityjand that/ such agreements are possible and expedient under conditions of peaceful development."
Exports and imports are the most suitable ground for such agreements. We need equipment, raw materials (raw cotton, forrom metals,hile thcneed oil, timber, grain products; wearket for those goods. There youasis for agreements. We need credits; theneed good interest for their credits. There you have still further basis fornamely. In tbe field.
Stalin took great pains, however, to emphasize the limited and "temporary" nature of such agreements. "The limits to thesee maintained, "are set by the opposite characters of the two systems, between which there Is rivalry and conflict. the limits allowed by these two systems, but only within Inese limits, agreement is quite
Perhaps the most explicit statement of the "limits"the USSR was willing to trade in tJie prewar period wasin the program adopted by thc Sixth World Congress ofinprophetic anticipation of the
course of Soviet foreign trade in thc ensuing j0 years warrants its quotation in full, as follows:
The simultaneous existence of two economic '. systems, thc Socialist system in the USSR and the Capitalist system in Other countries,on the Proletarian State the task of warding off the blows showered upon it by the capitalist world (boycott, blockade,nd also compels it to resort to economicand utilizing economic contacts withcountries (with the aid of the monopoly of foreign tradewhich is one of theconditions for the successful building up of Socialism, and also with the eld of credits, loans, concessions, etc.). The principul and fundamental line to be followed in this connec-- tion must be the line of establishing the widest ; possible contact with foreign countrieswithin limits determined by their usefulness to the USSR rimarily for strengtheningIn the USSR for laying the base for her own ; heavy industry and electrification and, finally, for the development of her own Socialist neering industry. Only to the extent that the economic independence of the USSR ir. theenvironment Is secured, can solidbe obtained against the danger that Socialist construction in the USSR may be royed and tliat the USSR may be transformed into * an appendage of the world capitalist
III. Soviet Foreign Trade in the Prewar Period
A. Foreign Trade and "War.
With its advent to power in7 the Sovietintroduced little reorganization of Russian roreign trade beyond the enforcement of an all-embracing system Of export and import Thc nationalization of foreign trade was proclaimed only several months later in But other than to declare that thc central government was henceforth to carry out the country'sT.rade, the decree of nationalization did not specify whichwere to carry out import and export transactions on behalf of thc state. Occasional purchases of essentials were made byof the Commissariat of Commerce and Industry in foreign countries, and no definite foreign trude machinery was devised during the.
capitalism and socialism that some readjustment of Communist doctrine was made mandatory ln terras of an indeterminate period of "peaceful coexistence with thc capitalist encirclement." The equilibrium which "replaced the phase of warhase ofhichrief respite into an entire period ofeclared Stalin in
us the opportunity, aszm.nj said, for some'collaboration' with the capitalist The pursuitproletarian victory thereforeask to bethrough the active leadershipilitarilyeconomically viable Soviet statetate made strong byexploitation of the experience and resources of theWest.
The objectives of Soviet foreign economic policy werein Lenin's stern admonition: "Either death or we overtake and surpass the advanced capitalist countries." Heaid: "We are behind the advanced countries by fifty or one hundred years. We must cover this distance in ten years; we either do this, or we shall be/ An official journal made even more explicit tbe urgent task which faced the nation's foreign commerce:
It will be necessary to export what we need ourselves simply in order to buy in exchange what we need even more. For every locomotive, every plough, we shall be obliged literally to use pieces torn out of the body of our national economy.
It was largely through the mediumonopoly of foreign trade that the fledgling Soviet state sought realization of its two busic economic goals"maximum assistance to and stimulation of the country's productive forces, and defense of the buildingeconomy against encroachment by capitalistharacterized by Lenincommanding height" of the socialist economy, the foreign trade monopoly was Itself so merged withBolshevik success that, in the words of one Soviet official, "the.Soviet Union cannot contemplate its existence without this
Stalin himself was no less expansive in his appreciation of the foreign trade monopolyital protective bufferostile capitalist environment. peech before the Seventh Plenum of the Executive Committee of the Cororauclst International in
Capitalist controlree run of ourIt means abolition of the monopoly of foreign trade. ciow that the Western capitalists have
time and again dashed their heads against thc vail trying to-shatter the armour-plate of the foreign trade monopoly. You know that the foreign trude monopoly is the shield and protection of our young socialist industry. But have the capitalists achieved any success in liquidating the foreign trade monopoly? Is it so hard to understand that so long as Soviet power exista, the foreign trade monopoly will continue to live and flourish, in spite of/
A year later, in an interviewelegation of American Trade Unionists, Stalin also said:
In point of fact, what would the abolition of the monopoly of foreign trade mean for the workers? For them it would mean abandoning theof the country, stopping the construction of new mills and factories, and the expansion of thc old ones. For them it would mean flooding the USSR with goods from capitalist countries, winding up Our Industry because of its relative weakness, an increase lnorsening of the material conditions of the working class, and the weakening:of its economic and political positions.
And what would the abolition of the monopoly of foreign trade mean for the laboring masses of the peasantry? It would mean transforming our country from an Independent countryemi-colonial one and impoverishing the peasant masses.
sot obvious that the laboring masses Of the pcasuntry cannot be in favor cf abolishing
the monopoly of foreign trade?
Any group, that would demand abolition of the monopoly of foreign trade, concluded Stalin, "could not Support the Soviet government, becauseroup could only be one that washostile to the whole Soviet
The monopoly of foreign trade during the period ofrehabilitation was faced with the task of providing the goods needed to put Soviet factories back jn production. Imported goods which were required to restore former levels of industrial output took precedence almost to the point of exclusionver those imports classified foree.
* ollows on p. ll.
Percentage Distribution of Soviet Importa Of Producer and Consumer Goodsomparedverage
With the uid cf imported raw materials and equipment, the Soviet government was enabled, during the firstears of its:to restore the industry, transportation, and agriculture of the country to their prewar effectiveness.
In spite of urgent domestic requirements, the volume of Soviet exports and imports increased about sevenfold during thes Soviet gold resources and foreign credits were more effectively utilized (see.
C.' Foreign Trade and the ?lve Yeara;).
" Procurementcale required by the First Five Yearajorhe Soviet trading The Commissariat of Foreign Trade was called upon toide range of industrial equipment and raw materials thenwithin the USSR. At their,e, it was expected to raise from domesticolume of exports commensurate with the foreign-exchange needs of the enlarged Import program.
' The scarcity of exportable commodities waa aggravated during the First Five Year Plan and the world depression, when prices of raw materials and agricultural productsie bulk of Sovietliyr. the world market. So urgent, however, was bh- need for Imports to carry out the ?'i.rst Jive Year Plan that
Soviet Foreign Trade
Million US J
Dollar figures are given in current pricesfrom ruble values at the present official rateubles to-
imports (particularly machinery andere expanded in spite of the impossibility of paying fully for them out of the
" Machinery and equipment accounted for uimost three-quartersSoviet imports. Approximately one-third inalmost one-half2 of the world export of machinery andwere sent to 'the USSR. As domestic production increased,reliance upon foreign suppliers diminished. Indexes ofimports of machinery for there
derived from current ex] balance of trade called for by a! actual developments in the Sovie1ersistently unfavorable tn excluded) and contributed to the
avorable ient, the
Debts had to paid, however,avorable bular:ee Of trude was therefore essential. All previous efforts to augment the export capability of the USSR had met with little success in the light of the adverse terms or trudc or. the world market and the ambitious growth rates of tlie domestic Five Year Plan. The solution now was to be foundrastic curtuilment of Soviet imports. Nevertoirtue out of necessity, Soviet economiststhe curtailment of imports as evidence that "technical andindependence from the capitalist world" had been achieved and that consequently the USSR "wus enabled to implement the Second Five Year Plan with fewer
The conclusion of the First Five Year Plan; the Soviet policy of restricting imports; the improvement in Soviet terms of trade; and the considerable increase in the production of gold, which became availableapid repayment of foreign Indebtedness, were factors which contributedarked improvement in the Soviet balance of payments. The USSR was able to achieve an active balance of trade for every year37 and accumulated fairlyforeign-exchange balances, particularly in pounds sterling (see Table ft*).
In brief, the fundamental aim of prewar Soviet economic policy was that expressed in the draft of the First Five Year Plan: "Our country is conducting ar. unexampled experieraent inuge scale at the cost of current savings, at the costigid regime of economies andenunciation of present-cay needs in order to achieve great historical Objectives." Inwith this general guiding principle, the Coamissa.-laL of Foreign Trade systematically decreased imports of articles for per-
imports of these two basic groups of commodities fluctuated ir. re-latior, to total imports, as shown ii: tlie following tabulation:
i*-g> 2 7
me rProducer goods
h follows or, p,
program to expand and modernize the chemical and chemical equipment industries, for example, the USSK looks once more to thc Westontribution in advanced technology. There remains, however, the very likely prospect that If the West does provide the neededand equipment, these vill be immediately applied toward making the USSR independent of the need for such imports us soon as possible or, more importantly for the West, will enhance Soviet capability to continue an "economiche consequences of which aremajor concern.
IV. Autarky, Security, and the Soviet StateO).
It would be erroneous to conclude that Soviet economic planners ever viewed the attainment of self-sufficiency as desirable oer se. Neither in the writings of Marxist economic theoreticians nor in the official pronouncements of the Soviet government con one find autarky advocated as an integral element of Communist economic On the contrary, the opposite was commonly asserted, and the advantages.and desirability of participation in an international division of labor and of the worldwide exchange of goods wereby Soviet leaders insofar as they would contribute to the strengthening of the Soviet state. Soviet commercial policy in the prewar period was. Inouble-edged sword. Underlying the desire for expansion of trade with the Westoal never lost Sight Of by Soviet economic plannersthe quest for anself-reliant state. This apparent paradox in SovietpolicyelTorts to Increase trade on the one hand and an equally determined desire to achieve self-sufficiency on theeed hotource of confusion. The two policies, far from being mutually exclusive, served to complement each other. Economic realities had clearly demonstrated to Soviet economic planners that selective trade with the core technically advanced countries of the Westajor instrument for thc more rapid achievement Of that greater self-sufficiency for which Soviet leaders strove.ne Soviet official stated the following:
In the final analysis, the balance of the tradebetween the Soviet Union and the world market Shall beature as to contribute to theof Uie economic independence and national defense of the USSR against the capitalist world. There is nothing contradictory about this policy. Ztesult Of and is die luted by all the conditions of theof the socialist and capitalist systems of economics and the great historical competition that is taking place between these two. economic/ 1,
If the actual policies of the Soviet government have beendirected toward rendering the USSR economically independent of the outside world, they stemmed lesslavish acceptance of autarkyalid principle of Soviet economics thanractical quest for security against the resumption of another economic blockadeetermination more effectively to "build for itself thatrock against which break the waves and blows of the world market, world exchanges, crises, and "ffiilsj line isdeclared-Stalin, "as long as thc capitalist encirclement 6 he said:
No one denies that thereependence of our national economy on the world capitalist economy. Toocialist economy as something absolutely self-contained and absolutely Independent of the surrounding national economies ls to talk nonsense. Can ltocialist economy will have absolutely noor Imports, will not import products it does not itself possess, and will not, in consequence of this, export Its own products? No, it cannot.ur country depends upon other countries just as other countrieson our national economy; but this docs not mean our country has thereby lost, or will lose its independence, that it cannot uphold its independence, that Itapitalist
In spite of the demonstrated advantages of international trade during the period of reconstruction, the economic blockadeemained for theymptomymbol ofostile world. Stalin's almost pathological concern for "security" continued to dominate Soviet foreign trade policythe prewar period, and the pursuit of economic self-sufficiency became an Openly avowed principle of Soviet commercial policy.
With perhaps more bravado than truth. Foreign Trade Commissar Anastas Mlkoyan triumphantly declared "Now with theof socialism the country has become so rich that it can retaintself everything that it needs and export only the surplus. Our country is so strong now in thc economic sense that it can satisfy its fundamental needs without AnStudy on world trade, published by the Ministry of Foreign TradeiO, voiced approval of the fact that the USSR ranked second among the nations from the point of view of Industrialand nineteenth with respect to foreign trade. Tills fact, the study concluded, "confirms onco more the absence iu ourof that dependency upon the foreign market which ls experienced by the capitalist
When Mikoyan boasted9 that the USSR "is so strong now in the economic sense that it can satisfy its fundamental needs withoute had little reason to expect It to be put to an acid testears later. With tlie rapid German advance Inhe expansion of import requirements, both civil and military,with the deprivation of many of the richest agricultural andareas ill the USSR,rofound transformation in the pattern of Soviet foreign trade. Soviet commodity Imports3 increased almost fivefold, and commodity exports fell to almost one-fourth of0 level (see
Soviet Foreign Trade0
Million US $
To meet the Soviet need for Immediate outside aid, the US lend-lease and the UK and Canadian mutual aid programs transferred goods worthillion to the USSR during the course of the war-Although the paucity of trade data makes difficult any quantitative estimate of the effects of the wartime disruption of the USSR's normal- pattern of trade on its internal economy, at least this much seems clear: without the aid of its three Western allies thesurvival Of the USSR would have been immeasurably more
VI. Soviet Policy on Trade with the West in the Postwar Period.
With the postwar consolidation of Soviet power in Eastern Europe and The promise of rapid technological advances at home, Sovieteconomic activity appeared to be less firmly anchored In tliec'f self-defense and was assigned more aggressive missions, the
noat lmoortant being the creation of an economic Bloc "As fur as this area isaid Kikoyauthe monopoly oftrade no longer performs the function of protecting the Soviet, economy buteans for the planned linking of the Soviet economy with the economies of the nations of the peoples democracies, directed toward mutual cooperation in economic/
The concentration of Soviet efforts to provide an ideological framework for the self-contained trading area it has created among its Satellites reached its zenith in the summerben Stalin promulgated the thesis of "two parallel world markets." In his last work. Economic Problems of Socialism in the USSR, Stalin contended that "thc disintegration of the single, all-embracing world market must be regarded as the most Important economic sequel of the second worldnd he warned the West that the strength and unity of the socialist camp would soonowerful commercial competitor for the capitalist powers:
It may be confidently said that with this pace of industrial development, it will soon come to pass that these countries will not only be in no need of imports from capitalist 'countries, but will themselves feel the necessity of finding an outside market Tor their surplus products.
Indeed, during the last years of Stalin's rule, the level of Soviet exchange with the markets of thc West was allowed to drift downward. The guiding policy here, apparently, wae to punish the West and, if possible, to lend force to the repeated Soviet argument that the security safeguards in trade adopted by the Western nations9 would prove harmful only to themselves. Duringhe share of the Free World declined fromercent toercent of total Soviet foreign trade.
The advent of Malenkov to power3 and the expansion of imports from the Free World implicit in his program to raiseof consumption in the USSR provided un Ironic refutation of the prognosis contained in Stalin's last work. In spite of theon Intra-Bloe trade, the ueed for imports from the West, now hampered by Free World trace controls, was becoming more imperative for tne USSR in the light of its own projected economic growth and of increasing Satellite requirements for industrial equipment. 4 the European Satellites were ceasing to represent for theruitful plundering ground from which it could obtain at little or no cost goods which were needed to augment Soviet resources. Indeed,6 the increasing flow of financial assistance frcca the USSR, coupled with the elimination of some of the more obvious I
Soviet abuses, bad begun tohift in the net flow of real goods and services ln favor of the Satellites.
With the USSR accounting for little moreercent of total Free World trade, however, it was difficult for Soviet strategists totrong case for the significance of tlie Soviet market in the commercial life Of the West. Although the loss resulting from the decline in the volume of trade was mutual, thereotable difference in effect upon the economies of the two areas concerned. The West had little difficulty in replacing Soviet raw materials from overseas sources. The USSR, on the other hand, could find no ready .substitute for many items of modern industrial equipment ln any other market than that of the industrial West.
From the Soviet point of view, then, this lapse in commercial contact had to be mended as quickly as possible. The only way to reverse the downward trend in trade with the West was by practical action. Under the circumstances, this action had to be initiated by the USSR, simply by bringing more of its goods to the Western markets and byarger volume of orders with Western Once the Soviet government decided to reverse the trend In its trade with the West, it had no difficulty in getting results. Demand for the standard type of Soviet exports on the part ofWestern industry was quite firm. Improved Sovietin supplying these markets, and increasing its earnings there, resultedteady Increase in thc exchange of commodities. 37 the value of Soviet trade with the Free World increased fromillion9 billion, ao increaseercent.
Efforts were now Intensified to rationalize the avowed quest for self-sufficiency with the already manifest expansion of trade ties with the West- An example of such efforts Is the followingfrom M. Nesterov, Chairman of the Soviet ChumCer or Commerce:
To the question of whether the Soviet Union cantrade with the capitalist countries and manageown resources and industrial production, the answerfound in the past, when the Soviet state carried onits economy in spitelockade. At thetime thc USSR enjoys ample opportunities to buildeconomy without extensive foreign trade, but this: '
fact Is that one way of assuring the most expedient and rapid development of economy Is participation in inter-
Andimilar vein, V. Spandaryan, Soviet economist and: :for autarky vith
trade in the following terms:
Opponents of wider East-West trade usually putthe following "arguments" that East-West trade isow ebb and does not develop, firstly, because theof the East are interested in importing from the Westimited range of good3 and because, lt is alleged, they are leaning towards autarky; and, secondly, because the countries of the East lack adequate resources for exports. lance at the facts will show howand fictitious these "arguments" are. The authors and propagandists of this kind of "argument" cannot or do not wish to understandesire for economicor self-sufficiency is by no means equivalentleaning toward autarky." The Soviet Unionreat economic power. Its economy is of course quite self-sufficient, independent, and able to meet the growing requirements of the population and of advancing its own progress. But does that lead to self-isolation, to autarky? Hot in the least. On the contrary, it Isthe uninterrupted progress of Soviet economy that creates greater possibilities for thc expansion of the USSR's foreign trade and Other economic relations with all countries of the/
The Twentieth Party Congress inharacterised by First Deputy Premier HikOyan as "the most important Party Congress sinceas notable, among other things, for some important pronouncements on foreign trade. The restrictive implications for foreign trade contained in the Stalinist concept of "two parallel world markets" as enunciated in Stalin's Economic Problems Ofin the USSR was subject to tacit modification by the MIkoyan urged Soviet economists "toeep study androm the point of view of Marxism-Leninism" of certain postualtes in thc Economic Problems arid denied that, the existence Ofcond world market did, indeed, preclude trade "between all countries":
We firmly believe that stable, peaceful coexistence is unthinkable without trade, which canood basis for this in spite of the establishment of two worldThe existence of two world marketshose of socialism snd capitalismot only does not preclude, but, on the contrary,eveloped, mutually profitable trade between all countries. The Correct
understanding of this question is offrom the point of view of the coexistence of the two worlds and is also of practical, economic357
Onreelection speech to his YerevanMikoyaninal blow to the Stalinist thesis of "two parallel world markets." He attacked certain "comrade economists" who, basing themselves on the Soviet conceptivision of the world.economy into two world markets, socialist and capitalist,that there is no possibility of significant or meaningful trade or other economic ties between the two markets:
We have, however, economists who reason thus: once we say that the world market Is split Into two markets, this means that lt is impossible already to speak of any unity of the two world markets; it means there is no world economy; there ore not even world prices. These comrade economists obviously have forgotten that unity is, not identity, thut there is the unity of oppoaites and, in the given case, of antagonistic opposltes.
But all the same this Is unity. To deny this means to err and toross mistake, to proceedogmatic interpretation, to close one's eyes to the existing significant trade turnover between the two markets and to other foros of economic ties- If one looks more deeply, then ^ne sees that/ such reasoning essentially contradicts the Leninist principle of the coexistence of the two
And ln this connection, we now stand and will stand on the position Of Lenin, who considered that thereorce greater than the wish, will, and decision of any government Or class, and this force Is general, universal economic
Most recently, Khrushchev, in his report to the Central Committee Plenumlso pointedispute over thc Issue of East-West trade, suggesting that those "comrades" on the "wrong" side had argued that such trade helps tc Shore up capitalism:
Some comrades may allege that we cannot profit from increased orders from the United States, West Germany. Britain, and other capitalist countries. By so doing we, as lt were, support capitalism. These comrades are wrong. We stand on Leninist position and proceed from
the fact that we liveine when twohe capitalist and socialistxist, and economic-relations between them can develop
Why such questions should be posed at this time and what the specific sources of contention may be are, at present, matters for speculation. It is not unlikely, however, that thc positionto the "comrade economists" is one of favoring the moreStalinist concept of economic isolationism and in opposition to the "new look" in Soviet foreign economic policy- In light of what purports toolicy of expanding trade ties with capitalist nations, the Soviet leadership may well feel constrained to quell any latent domestic opposition to this policy by branding itsas "dogmatists" and non-Marxists.*
VII. Prom "Peaceful" to "Competitive" Coexistence.
The apparent acceptance by Soviet leaders of the idea of aeconomic competition with the capitalist West necessitated the reodaptation of some fundamental doctrinal tenets in response to "changed conditions." The exaggerated Communist polar view of the world, the dichotomous split between the "capitalistadajor rationale for prewar Soviet foreign trade policy. Stalin himself often repeated that, as long as the capitalist?encirclement exists, "our economy shalls an independent economic entity relying chiefly on the InternalJI/
5 Some intimation of such differences was provided by what seemsa calculated Soviet effort to suppress Maxim Saburov's speechFebruary at the* Twenty-first Party Congress. ailurethe speech Is striking in light of its publication, inof every other speech reported by Radio Moscow to have beenat the Congress. Saburov's speech appeared in fullthe first time with the publication of the officialof the Congress- In his speech, SuburCV Is reported tothe "antiparty group" with having "opposed or delayedor. vital measures in the sphere Of foreignnamely,U> develop our economic relations with the people'sand to extend them economico say nothingprogram to aid the underdeveloped and dependent countries ofthe Near East." If Saburov's speech was deemed to giveto opposition by people such as Molotov to Khrushchev'sof loans and assistance to neutral countries, concern overof elements toth in the USSR snd inc who mayagreed with Khrushchev's opponents could have been onesuppression^
to prove an obstacle to
clear at the Twentieth Party hev relegated Stalin's already ent" and the "inevitable clash"
to historical significance only ime when the USSR, the "first socialisteleuguered islandostile capitalist sea. "The main feature of oureclared Khrushchev, "is the emergence of socialism from within the boundsingle country and its transformationorld system." Two years later, Khrushchev repeated: "One cannot speak any longer about capitalist encirclement in the former conception of it." With the formation of the world system of socialism, he said, "it is not known who encircles whom, whether.the capitalist countries encircle the socialist states, or vice versa. The socialist countries cannot be considered as some kind of islandough capitalist
The'logical inconsistency of advocating "peaceful coexistence" and an expansion of trade with the West, on the one hand, and the "inevitability" of war, on the other, was also not lost on Soviet theoreticians. At the Twentieth Party Congress, efforts were made
* At the Twenty-first Party Congress the concept of "capitalistwas still further vitiatedeterminant of Sovietpolicy. It will be recalled that the danger of intervention posed by the "capitalist encirclement" was repeatedly advanced by Soviet leaders during the prewar period as the major obstacle to the "final" victory of socialism in the USSR and to theommunist society. Tn his much-publicized Letter to Ivanpvtalin declared, "Only blockheads or maskedan deny the danger of military intervention and of attempts to^of capitalism/ as long as the capitalist encirclementlthough socialism in the USSR had been "built ine contended, "we could say that this victory was final if our country were situated on an island and had not been surroundedumber of Other, capitalist countries. But since we liven island butsystem ofonsiderable number of which are hostile to the country of socialism, thusanger ofand restoration, we say Openly and honestly that the victory Of Socialism in our country is not yett0/ Twenty years later, at Ihe Twenty-first Party Congress, Khrushchev confidently asserted: "Ko forces exist at present in the world capable ofcapitalism in our country and of shattering the socialist camp. The danger of the restoration of capitalism in the Soviet Union has been excluded. This means that socialise has triumphed, triumphed fully and finally. Thus, it eon be considered that the problem of building socialism in one country, of its complete and final victory, has been solved by the world-historic progress of
to reconcile the embarrassing contradiction between the doctrine of inevitable conflict and Soviet expressionseaceful foreign policy. Khrushchev, accordingly, rejected the allegation that the USSR puts forth thc principle of coexistence from purely tactical considerations and.proclaimed the doctrineasic principle of Soviet foreign policy." He declared that Soviet Bloc strength and political conditions have so changed since Lenin's day that "war is not fatalistically inevitable."* The socialist system will win the competition between the two systems, he added, but "this by no means signifies that its-victory will be achieved through armedby the socialist countries in the internal affairs of thecountries."Virtually repudiating Lenin's stern admonition voicedears earlier, that "as long as capltalisa and socialism exist, we cannot live Inhrushchev at the Twenty-first Party Congress predicted the "real possibility of excluding world war from the life ofven before the universal triumph of socialism, while capitalism still existsart of the
Thus, impelledactor which could not possibly have been foreseen by earlier Soviet policymakersthat is, the threat of mutual destruction.inherent ln waruclear age coupledapid growth in the economic capabilities of the Sino-Soviet Bloccurrent Soviet leaders have apparently chosen less violent (if no less effective) means of. resolving the East-West power struggle. Peaceful coexistence appears to have been abandonedactical maneuver, as an interval between battles. Instead, In its newform it hasositive element of Soviet strategyit has become the battle itself.
In summary, then, the following conclusions may be drawn from postwar developments in Soviet trade policy. For the present Soviet leaders the determining factor in the world situation is that the development of socialismor, more accurately, the transition to Communism In the USSR parallels the general "crisis" of capitalism in the West (rather than following lt as envisaged by more orthodox Marxian theory). The ability of capitalism to weather successfully the destructive propensities "inherent in its own contradictions" has ledrolonged, (and unexpected) stabilization of worldndew Communist stratagem. Tlie "export" of revolution has
* The Soviet renunciation of war as notonditional one, valid only "at the given -n : '. t ,r.
exclude the possibilityjust war." The transition to world Communism may indeedeaceful one if, to quote Marx, "the old has enough intelligence to go to its deathtruggle; /hut7 forcibly if it resists thiskj
been replaced by an emphasisapid economic growth, the ultimate aim oi' which ia to establish the economic and cultural superiority of socialism over capitalism and to spread socialism "by contagion" und "example" and by the sheer weight of its efficacy as an economic system. As long as thia parallelism exists, it is likely to be the basic factor in the orientation of both Soviet domestic and foreign policy.
Because the USSR is committedapid rate of economic growth, the achievement of whichlanned and controlled economy, the Soviet authorities are still unwilling to tolerate any significant vitiation of their exclusive control of the organs of foreign trade or of the subordination of foreign trade to the dictates of the national economic plan. Although Imports from the West may indeed be called upon toubstantial contribution to Soviet economict is unlikely that such trade will be allowed toevel at which It mightisruptive Western Influence or. internal plans. Thus the volume of trade with the West continues to reflect the Soviet world view, but, whereas in earlier yearsphasis was predominantly defensive and therefore tended to Inhibit trade, the emphasis now has become more aggressive, and the mainlimiting trade are the administrative requirements of theplan.
The USSR thus seeks to resume once again the kind of contact with Western industry which in the past has served to foster the existence of present-day Industrial techniques in the USSR by the introduction of tested methods of production which had been developed in the West by slow stages, under the rigorous discipline of cost calculationon the producerarket economy. Indeed, if Soviet trade were conducted entirely on the basis of thc international division of labor or solely in the interest of improving domestic productivity, the West, rather than the Bloc would hold the center of the Soviettrade interest. As It ls, this sector of the world economy'to be used by the USSRependable pool of critical goods needed "to supplement domestic sources. These imported goods are used mainly to stimulate industrial technology, to balance the annual output of the'domestic economy, and to correct the failures and miscalculations ot' the .planning mechanism.
Finally, the intimation of differences of opinion over East-West trade within the USSR suggests that the current, more flexible approach to foreign trade may have elicited some opposition among Soviet economists. 3ecause it Is unlikely that the "comradeare objectingontinuance of traditional Soviet trade, one logical assumption would be that their Opposition is directed at the new Soviet economic offensive, particularly In underdevelopedThere certainly is aturkingtates
one recent report, "between the goal of Bloc self-sufficiency on the one hand and the economic offensive in the underdevelopedon the other. It is logical to assume that theaid commitments recently 'undertaken by theave troubled certain groups such! as economists, planners, and perhaps even some top leaders, who are keenly aware of internal Soviet needs for capital equipment as well as of the needs of other Bloc countries, hjj Whatever the sources of contention, however, there is evidence torowing awareness on Uie part of Soviet leaders of the need to explain,ore properly, to explain away, the rapidly expanding trade with the Free World iu terms of what hasraditional Soviet malevolence toward such extensive economic ties.
Evaluations, following the classification entry and designatedave the following significance:
by other sources
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Evaluations not otherwise designated are those appearing On the cited document; those designated "RR" are by the author of this report. Ho "RR" evaluation is glvenwhec The author agrees with the evaluation on the cited document.
All sources used in this report are evaluated RR 2.
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