Ygael Gluckstein

Stalin’s Satellites in Europe

Part One
The economy of the Russian satellites

Chapter IV
Russia and the economy of the satellite states



Lack of Capital in USSR

The extent to which Russia can assist in the industrialisation if Eastern Europe is determined primarily by the level of her nationa1 income compared with that of her satellites. On this point Colin Clark has given an unequivocal reply:



Real income per head
of working population
in international units

























(Ibid., pp. 40, 86)

The average real income per head of occupied population was lower in USSR than in Czechoslovakia but higher than in the other Eastern European countries. The average figure in. these countries was about 10 per cent lower than in USSR. For the sake of comparison it is important to remember that the real income per head of occupied population over the period 1925-34 (i.e., including the 1929-33 slump) was in Britain 1,069 and in USA 1,381, 182 per cent and 264 per cent higher respectively than in USSR in 1937.

Another consideration must be taken into account. The accumulation of capital is dependent not only on an income level which makes it possible to save by abstaining from immediate consumption, but equally necessarily requires that there should be available to the saver (directly or indirectly) the capital goods which he needs. If peasants abstain from consuming half their products, they cannot invest the surplus in railway construction, unless there is somebody ready to supply, in exchange for their agricultural products, the rails, locomotives, etc. In this connection, the supply of capital goods, the ability of Russia to help the countries of Eastern Europe, is even more limited. Russia~s income is not big enough for part of it to be devoted to investments in Eastern Europe. Her heavy industries producing capital goods-the main constituent of any new investment-are much too weak to spare much for her satellites. This would have been absolutely clear had we been able to compare the amount of capital goods produced per capita in the USSR with that produced in the countries of the West, but the necessary statistics for such a comparison are not available, and we shall have to resort to a less exact means of comparison to throw light on the subject. We shall compare the production in different countries of steel, the chief material from which capital goods are made. In the USSR in 1937 105 kgs. of steel per capita were produced, as against 397 in the USA (1929), 291 in Germany (1929), 279 in England (1929), and 188 in France (1929).

The Manchester Guardian of 19 May 1949 dealt with the need of the satellite states for capital goods and Russia’s inability to satisfy it:

... Russia’s satellites do genuinely want more trade across the Iron Curtain. They badly need both machinery from Western Europe itself and raw materials from the British Commonwealth. Trade with Russia has quite failed to take the part in their economy that the West, and Germany especially, used to do. The Russians cannot make enough capital goods both for their own needs and for the industrialisation of Eastern Europe; it is, of course, the satellites who go without.

This explains why at least two of the satellites, Czechoslovakia and Poland, showed clearly that they wished to take part in the Marshall Plan. On 4th July 1947 the Czechoslovak Government decided unanimously to accept the invitation to the Paris Conference convened to discuss the Marshall Plan. A few days later Gottwald and Masaryk left for Moscow and three days later Prague declared that the Government declined to take part in the Conference. Even when, under Moscow’s orders, the satellites fell into line on this question, the incapacity of Russia to supply their needs made it more and more pressing for them to try to get equipment from Western Europe. This need expressed itself in the case of Yugoslavia in a revolt against the Moscow ukase (see Part III, The Rebellious Satellite) and in the case of the other satellites in an appeal to the West to supply the goods – an appeal that, because of its expediency, was not vetoed by Moscow. At the Conference of the Economic Commission for Europe of the United Nations, the Polish and Czech delegates asked for trade with Western Europe, by which they could obtain capital goods. The Bulgarian delegate stated that his country could not improve her economic position to any extent without increasing her imports, especially of machines, from the West. (United Nations Documents, E/ECE/SR4/1-25).

Russia, wit h the majority of her population engaged in agriculture, is faced with the same problem as her satellites (apart from the Czech lands of Czechoslovakia and the Soviet Zones of Germany and Austria) – large-scale industrialisation. The terrible destruction suffered by the USSR in World War II, as well as the preparations for World War III, which require the same materials as industrialisation-steel, coal, machinery, etc. – render Russia even less able to help the countries of Eastern Europe.



Dismantling, Looting, Requisitioning

When the populations of Eastern Europe, mainly of the ex-enemy countries, first met the Russian Army and State officials, they did not see them bringing gifts, supplying machinery, locomotives, etc., but looting their country.

Stalin forgot that the Communist International had preached for years against the reparation articles of the Versailles Treaty, and had reiterated that the German workers bore the real burden of reparations, although they did not profit in any way from the war. In World War II the crimes of the Nazi Army were incomparably worse than those of the Kaiser Army in World War I, yet the German people drew no benefit stall from this. On the contrary, the first victim of the Hitler terror was the German people itself. The 800 thousand German Communists, Socialists, trade unionists, Catholics, etc. (not including the German Jews) who passed through prisons and concentration camps in the twelve years of Hitler’s rule are testimony to this. What magnificent heroism on the part of unarmed and helpless people to challenge the brutal state machine with its all-seeing eye and unlimited terror!

The Communist Parties knew all this very well. Immediately after June 1941 they emphasised that this time, because of Russia’s part in the war, no new Versailles Treaty with reparations clauses would be imposed and that the German people would not be made to pay for the crimes of their rulers. The German proletariat, they said, was not more responsible for the war than the English or the French, and they repeated the same views on the question of reparations as the Communist International had after World War I. At that time the leaders of the French Communist Party explained why the French workers should oppose the exaction of reparations from Germany. Thus Gabriel Peri wrote in an article entitled On the Eve of the Reparations Conferences: “... the workers of France and Germany have only one interest, viz., that of forming a revolutionary front against financial capital and the heavy industries in both countries. For the enormous sums at stake (the reparations – Y.G.) will naturally be squeezed out of the working masses.” (International Press Correspondence, February 1st, 1929).

But all this changed with the hope of Russian victory. With Russia becoming the Power able to extract reparations, her opposition in principle to reparations vanished. Instead she decided to take reparations on a far larger scale than ever the French Government had dared after World War I.

Edward Charles in his article Reparations, 1919-31, in The Banker of April, 1945, writes on the reparations that Germany paid after the first world war: “Reparations before the Dawes Plan brought in some 8 milliard gold marks. From September, 1924, to the end they yielded a further 10 milliards.” There is no reliable calculation of the national income of Germany between the end of the first world war and the introduction of the Dawes Plan. It is therefore impossible to calculate what proportion of the national income reparations made up. But for the years 1924-32 this figure is available. The total national income of Germany for these 9 years was calculated at 564.3 milliard marks, and in the same period Germany paid reparations to the extent of 9.8 milliard marks, or 1.7 per cent of the national income. In no year after the first world war did the reparations paid by Germany exceed 4 per cent of the national income. To calculate the burden of these reparations, other criteria besides the national income, such as budget revenue or exports, can be applied. The reparations Germany paid rose from 12.9 per cent of the budget revenue of Germany or 9.9 per cent of the value of its exports in 1924-5, to 25.7 per cent and 18.4 per cent respectively in 1928-9.

With regard to Germany’s looting of Europe during the second world war, German official statistics admit that up to 1943 the Reich got from the occupied countries “special incomes” amounting to 50 milliard marks. British official estimates give a figure of 12.8 milliard dollars for the same period. The two figures thus nearly tally. Nearly all the German robbery took place immediately after the occupation. If we, therefore, assume that the annual looting of the occupied countries by Germany after 1943 was the same as the annual average of 1939 to 943, we shall certainly not underestimate it: on this basis the total German looting amounted to 20-25 milliard dollars.

A comparison between the reparations paid by Germany after the first world war – about 18 milliard marks or 3.6 millard dollars-with the “reparations” that Germany took from Europe in the second world war – 20-25 milliard dollars – reveals the increasingly plunderous character of declining capitalism, as exemplified by the Hitler regime.

Russia’s attitude to the question of reparations after the second world war was expressed clearly by Prof. Varga in an article published in War and the Working Class, 15th October 1943. He concluded that Germany must pay reparations to the tune of 90 milliard marks or about 22 milliard dollars, and he stated that the Russian government asked in addition for ten million German workers to be sent to Russia for reconstruction work.

A claim for such large reparations, coupled with a demand for ten million workers, i.e., nearly a third of the total German working class, was incompatible with the existence of Germany as an important industrial country. At Yalta, consequently, Stalin had to demand that 80 per cent of German industry should be dismantled within two years of the cease-fire. (James F. Byrnes, Speaking Frankly, London 1948, pp.26-7).

In view of the division of Germany between East and West, Russia did not want to exclude the possibility of the Communist Party’s influencing the German people, and so she did not press her claim for ten million slave labourers or the dismantling of 80 per cent of German industry. Nevertheless the total sum lost by Germany directly and indirectly under the post-war arrangements in the East exceeded the total sum for which Varga asked.

It is difficult to get a full picture of this looting, as it was carried out in many guises, and those responsible for it were of course extremely anxious to conceal what was happening. But the following, facts are incontestable.

First, millions of Germans were expelled from their homes and lost their property. The President of Poland, Bierut, estimated that Poland’s gains in the West, i.e., from Germany, have an investment value of 9½ milliard dollars. The property of the Sudeten Germans of Czechoslovakia was estimated at 4 milliard dollars. If we assume that the rest of the Germans who inhabited the former territory of Poland, Hungary, Rumania, etc., were on the average as wealthy as the inhabitants of the portion of Eastern Germany that was annexed to Poland and the Sudeten region, their property must be evaluated at about 6 milliard dollars. Therefore the expulsion of the Germans alone brought in “reparations” amounting to about 20 milliard dollars.

The Yalta Agreement decided in principle that Germany would pay reparations amounting to 20 milliard dollars, half of which would go to Russia.

Unlike what happened after the first world war, after this war no figures were published of the quantity of reparations taken or the form in which they were taken.


Reparations from Rumania

The armistice imposed on Rumania required payment to Russia of reparations in the form of goods amounting in value to 300 million dollars in 1938 world market prices, or 700-800 million dollars today. The reparations were made up as follows:– petroleum products, 50 per cent; ships, barges, Iibcomotives and industrial equipment, 32 per cent; agricultural goods and timber 18 per cent. The second group did make up even as much as 10 per cent of Rumanian exports before the war.

There are no estimates of the proportion of the national income which these reparations represent. The only clue is that given in June 1947 by the vice-Premier, Tatarescu, who gave the proportion as 50 per cent of the total production of Rumanian industry. It would be very unwise to accept this figure uncritically, as it was given on the eve of Tatarescu’s conflict with the Communist Party which ended in his expulsion from the Government. Even if it were accurate, this figure would not be very useful as it relates only to industrial production, and not to the whole national product.

In addition to the reparations, Rumania had to give as restitution for goods looted from Russia 100,000 wagon loads of cereals, 260,000 head of cattle, 5,500 wagon loads of sugar, 250 tractors. (Of course, most of the loot taken from Russia by the Rumanians when they occupied it had already been destroyed and lost, and “restitution” meant taking new products or those in good condition.)

The most important machinery of the Ploesti Oil Refineries was dismantled by the Russian military authorities, and the Rumanians also had to hand over a fifth of the machinery of the textile and metallurgical industries. It must also be remembered that the Russian army lived off the land. There are no statistics of the total cost thus incurred by the country, but it was certainly very great. According to the estimate made in February 1946 by La Guardia, who was the head of UNRRA at the time, the four occupation armies in Austria cost the country 200 million dollars a year. For three years the Russian army in Rumania was not smaller than all the four occupation armies in Austria put together at the beginning of 1946. In view of the complete silence of the Russian authorities about the amount of reparations they took from Rumania, it is impossible to ignore the estimate given by the US delegate to the Paris Peace Conference, Willard L. Thorp, who said on September 23rd, 1946, that Rumania paid in reparations of all kinds 1,050 million dollars and that he estimated that 950 million dollars remained to be paid. B.D. Tappe wrote: “It has been estimated that in fact Roumania, from the armistice to 1 June 1948, paid the USSR $1,785 million in goods, etc.; a figure which would represent 84 per cent of Roumania’s national income for that period.” (R.R. Betts, editor, Central and South East Europe, 1945-1948, London 1950, pp.20-21).


Reparations from Hungary

Hungary had to pay reparations in goods amounting to 300 million dollars at 1938 prices, 200 million to USSR, 50 million to Czechoslovakia and 50 million to Yugoslavia. Industrial goods constituted 83 per cent and agricultural goods 17 per cent of this total. Yet in 1936-7, the proportion of agricultural goods in the total exports of Hungary was 62 per cent, while industrial goods did not make up even a third of all the exports. From this it is clear that Hungarian industry had to make a tremendous effort to supply the reparation goods, especially in view of the terrible devastation her industry suffered in the war, and her own great needs.

An UNRRA estimate shows that in 1945 94 per cent of the working capacity of the metal and engineering industries in Hungary was being used for reparation-goods for Russia. The British parliamentary delegation which visited Hungary in the spring of 1946 estimated that reparation demands amounted to 18 per cent of the national income.

The Hungarian budget for the year 1946-7 set aside for reparations a sum eight times bigger than that allocated to reconstruction (and we must not forget that a large part of the Russian loot is not even included in the budget as it was taken from industries officially in Russian hands). On 23 July 1946 in a note to the Soviet Government, the US Ambassador in Moscow pointed out that half the current industrial production of Hungary was absorbed in meeting Russia’s demands. In some industries, including coal, iron and machine production, the proportion was 80-90 per cent. At the Peace Conference in Paris in October 1946 the U.S. representatives claimed that in the year since the armistice about 35 per cent of the national income of Hungary was spent on the costs of Soviet reparations, occupation and requisitions. The British parliamentary delegation mentioned above estimated the occupation costs at 12 per cent of the national income of Hungary, making with reparations a total of 30 per cent. Now that the Russian Army has been very much reduced and production has passed the pre-war level, the importance of reparations, acquisitions, etc. in the national income has very much declined. According to T. Mende, who was not unsympathetic to the post-war regime in Hungary, they amounted to 7-11 per cent of the national income (Fortnightly Review, July 948). When Ernö Gerö, the Minister of Finance, introduced the budget for 1949 in the Hungarian parliament on December 15th, 1948, he said that in 1948 25.4 per cent of the total expenditure went to pay the reparations, while in 1949 9.8 per cent of the budget would be allocated for this purpose. This reduction is due largely to the fact that Russia cancelled 50 per cent of the remainder of the reparations from July, 1948.

The value of dismantled machinery, locomotives, wagons, etc., taken by the Russian army in Hungary was estimated at 124 million dollars, and the requisitions of the Russian army that lived on the country were very great. According to the American note of 23rd July 1946 the Soviet forces had up to June 1945 taken out of Hungary four million tons of wheat, rye, barley, maize and oats (the total pre-war annual production of these grains was a little over7 million tons). Of the foodstuffs available for the urban population in the second half of 1945 the Soviet army had appropriated nearly all the meat, one-sixth of the wheat and rye, one-quarter of the legumes, nearly three-quarters of the lard, a tenth of the vegetable oils and a fifth of the milk and dairy products. The note added that extensive requisitioning of food was going on as late as April 1946. And we must not forget that at the same time the food shortage in Hungary was so serious that not more than 850 calories a day per person were provided, which was even fewer than in Germany and Austria. The death rate, especially among babies, reached alarming proportions.

Even countries which were not allies of Germany during the war did not escape the Russian appetite for loot. 60 big industrial enterprises in the Sudeten region and a number of enterprises in other parts of Czechoslovakia were dismantled by the Russian army. In the part of Germany annexed to Poland the Russian army dismantled, according to the estimates of the Communist Minister of Industry, Hilary Minc, 25-30 per cent of all the industrial equipment of the area. (Speech delivered in Warsaw on 20th October 1945). In Old Poland too, the Russian army dismantled machinery, notably in the Lodz and Bialystok textile works. [1]



Trade between Russia and her satellites

An important feature of the foreign trade policy of Russia and her satellites is the tendency towards self-sufficiency or autarchy. The following table illustrates this as far as Russia herself is concerned:

USSR Foreign trade
(in million pre-1914 gold rubles)






















* In the pre-1914 boundaries.

The tendency towards economic isolation from the West on the part of the satellites is shown by the following table dealing with the foreign trade of Czechoslovakia, Hungary, Poland, Rumania, Yugoslavia and Bulgaria:

East European countries’ foreign trade
(millions of dollars in 1938 prices)











Trade among themselves
and with USSR







Trade with other countries














and in percentages:

Trade among themselves
and with USSR








Trade with other countries














* excluding Yugoslavia.
† excluding trade between Germany and Yugoslavia.

(Calculated from the table on pp.66-7 of United Nations,
Economic Survey of Europe in 1948, Geneva 1949)

As Yugoslavia did not publish figures of foreign trade for the years 1947 and 1948 it was not possible to take them into consideration in drawing up this table. Otherwise the tendency of these countries to trade mainly among themselves and with Russia and to restrict trade relations with countries independent of Russia would have been even more pronounced.

It would of course be one-sided to conclude that this tendency is entirely the result of the choice of these countries themselves. To a very considerable extent it was imposed on them by impediments to East-West trade, for which the USA is responsible. She herself and all the countries who get Marshall Aid enforced an embargo on the export to Eastern Europe of strategic goods, as defined by the secret list of the State Department which covers, apparently, nearly all capital equipment. [2] This has been denounced on many occasions by be governments of Eastern Europe. (See, for instance, the speeches of the representatives of the Russian bloc of countries in the United Nations Economic Commission for Europe).

But equally certainly the “Iron Curtain” created by the United States is not the only, or even the chief; cause of the tendency of members of the Russian bloc to trade mainly among themselves. This becomes clear from an examination of the trend of Russian foreign trade since 1929, when it was not faced by conditions of economic blockade. During the world depression it was very easy for any country willing to buy to come to bilateral trade agreements with other countries. This is illustrated by Germany’s trade with the countries of Eastern Europe since 1936. Yet Russia took advantage of this to only a small extent. (See table above). [3]

In 1938, USSR and the countries of Eastern Europe bought 17 per cent of their imports from each other (in this case including Yugoslavia), in 1948 they bought 46.3 per cent (in this case excluding Yugoslavia), while the corresponding percentages for exports were 14.9 per cent and 45 per cent.

An analysis of the item “Trade among themselves and with USSR” reveals a very illuminating fact. The trade between the Eastern European countries themselves is not much larger today than it was before the war, but their trade with USSR has increased tremendously:





(millions of dollars in 1938 prices)








Trade among Eastern European
countries themselves







Trade between Eastern European
countries and USSR








* excluding Yugoslavia

While the foreign trade of the countries of Eastern Europe with each other was 27 per cent higher in 1948 than in 1938, their imports from USSR rose by 2,314 per cent, and their exports to USSR by 814 per cent. It must be remembered, that “reparations” to Russia are not included in these figures and that while Yugoslavia’s trade with the other countries of Eastern Europe is included, her trade with USSR in 1948 is not. Otherwise the rise would have been even bigger.

The long-term trade agreements between USSR and the Eastern European countries stipulated a continuation of the expansion of their mutual trade in 1949 over 1948. Thus the trade of the USSR with Poland was due to rise by some 35 per cent, with Czechoslovakia by more than 45 per cent, while trade with Rumania was to be more than doubled and that with Hungary to be trebled. USSR trade with Yugoslavia on the other hand was to be curtailed in 1949 to a bare eighth of the 1948 value.

The economic needs of these countries will tend to lead in time to increasing integration of their economies and increasing trade among themselves (already today there is a considerable increase in the trade of Czechoslovakia with Poland and a number of other satellites). But so long as their political systems remain unchanged, trade between the satellites will remain subordinated to the trade of each of them with Russia. The pattern of the trade is moulded within the framework of an increasingly autarchic Empire. The establishment of the Council for Mutual Economic Aid (or “Comecon”) in January 1949 to co-ordinate the trade of the “People’s Democracies” with each other and the USSR came to fortify Russian Grossraumwirtschaft.

Let us now pass from the quantities of goods exchanged to their quality. The commodity composition of the present trade between Russia and her satellites is very different from that between an industrial imperialist power and her agrarian colonies. Thus while Britain is a great importer of raw materials and foodstuffs from her colonies and supplies them with manufactured goods, and while a similar relationship existed between Germany and the countries of Eastern Europe before the second world war, Russia both exports and imports primary products and manufactured goods to and from her satellites. She supplies them with tractors and industrial machinery as well as raw materials such as cotton, iron ore, manganese, chemicals and grain. She also imports from them machinery (Czechoslovakia, Hungary) and manufactured consumer goods. Russia supplies raw materials and gets a portion of the manufactured goods produced from the raw materials, e.g., she gives cotton and gets cotton goods, gives leather (especially to Czechos1ovakia) and gets shoes, etc. This composition of Russia’s trade with her satellites shows that she is faced with a problem similar to theirs – the industrialisation of the country. [4]

The prices Russia pays for the commodities she buys from ha satellites and the prices she takes for what she sells to them are, for some reason, kept secret. While it is easy to find out, for example, how many yards of cotton goods Britain sold in 1948 to various countries, and at what prices, information about the quantity of cotton goods supplied to Russia by Hungary and their price is as jealously guarded as a military secret. Tito, after the rift with the Cominform, could say that there was “capitalist trade among socialist countries”. No official of the Cominform has denied that capitalist principles of trade prevail among the “People’s Democracies” and between them and Russia, far less attempted to show what other principles prevail. One of the essential characteristics of capitalist trade is that when one side is in a monopolistic position it can generally buy more cheaply and sell more dearly than the other. The tendency towards autarchy of Russia and her satellites and the political power of the Kremlin over the governments of the satellites-which are, of course, connected phenomena-put each of the satellites into a position of utter dependence on the monopolist trader. This explains both the scarcity of information on prices and the deleterious character for Russia of the information which did leak out and which would otherwise have been inexplicable.

The Polish-Soviet agreement dated August 16th, 1945, stipulated that from 1946 onwards Poland was to deliver to USSR at a special price the following quantities of coal: 1946, 8 million tons; from 1947 to 1950, 13 million tons each year; and subsequently 12 million tons annually as long as the occupation of Germany continued. This coal, however cheap it was, was not to be paid for by Russian products but by reparations taken from Germany by Russia and transferred t~ Poland. According to Prof. W.J. Rose, the price agreed on was said to be 2 dollars per ton (Poland Old and New, London 1948, p.290). Stanislaw Mikolajczyk, who was Vice-Premier of Poland at the time, reports that the agreement was for an even lower price, 1.25 dollars a ton (The Pattern of Soviet Domination, London 1948, pp. 158-9). As far as is known Poland did not get anything on this account. Russia’s excuse could be very simple: the Western Powers did not carry out their obligations to supply Russia with reparations from Western Germany. Anyhow, 12-13 million tons of coal at 2 or 1.25 dollars a ton, was extremely cheap. At the time of the signing of the Polish-Soviet agreement Denmark and Sweden were offering Poland 12 dollars a ton, subsequently to be raised to 16 dollars. The robbery of Poland through this transaction alone amounted to over 100 million dollars a year. [5] In 1948, Russia cut her demands for Polish coal to 7 million tons a year; even so this is a heavy commitment for Poland.

Another example of these sharp trade practices is given by Felix Belair in the New York Herald Tribune (quoted by E. Germain, L’Europe orientale depuis deux ans, Quatrième Internationale, Paris, March-April 1949). He quotes the case of the agreement of USSR with Czechoslovakia by which shoes manufactured from leather supplied by USSR to the former Bata Plants were sold to Russia at a price fixed at 170 Crowns although the actual cost price per pair was 300 Crowns. At the same time, when Czechoslovakia was forced by the severe drought of 1947-8 to buy 600 thousand tons of grain from Russia, she was made to pay more than 4 dollars a bushel, while the United States sold a bushel of grain for 2.5 dollars. The price charged was thus over 50 per cent higher than that prevailing in the world market. Another example is that of Bulgarian tobacco. Russia bought four-fifths of Bulgaria’s 1948 tobacco crop so cheaply that she could afford to sell it Italy for dollars at a price which undercut by 35 per cent the Bulgarians who were also trying to secure dollars with the remander of their tobacco. Borba of 31 March 1949 printed the following fact: while it cost Yugoslavia 500,000 dinars to produce one ton of molybdenum – the essential ingredient of steel – Russia before the Stalin-Tito rift, paid only 45,000 dinars a ton.



The “advantage” of being a colony of an industrially backward imperialist power

The industrial backwardness of the imperialist country can have one good result for the colonies which is not usually offered by a highly industrialized imperialist country. Because of her backwardness the imperialist country looks upon the colonies as an additional source of industrial strength, supporting her in world competition. She is therefore more kindly disposed towards industrial development in her colonies than a highly industrialized imperialist country.

The best example of this is Japan’s policy in Manchuria. F. Sternberg in his book The Coming Crisis, London 1947 writes:

When Great Britain and France founded their empire they were both leading industrial countries. Their empire were never intended to strengthen their own industrial position Japan was in a very different situation. Her aim was to achieve a rate of development which would reduce the industrial gap between her and the other capitalist countries, and to become a least as strong and if possible still stronger than they were. (p.43)

The result was an unparalleled export of Japanese capital to Manchuria:


Japanese investments in Manchuria
(million yen)





















(For 1932-9, G.C. Allen, M.S. Gordon, E.F. Penrose, E.B. Schumpeter, The Industrialisation
of Japan and Manchukuo, 1930-1940
, New York 19.40, p.399; for 1940-43, A.J. Grajdanzev,
Manchuria: an Industrial Survey, Pacific Affairs, December 1945)

The Manchurian Five-Year Plan (1937-41) provided for a investment of 2,800 million yen, which was subsequently raised to 4,800 million in the revised plan, and then, in September 1938, to 6,000 million yen. This could not be achieved because of Japan’s lack of equipment, and her scarcity of labour in general and of skilled labour in particular. Investments reached only about 3,000 million yen in the period laid down by the Plan. But even this expressed a very big rise in production, as the following table shows:

Output of some products of Manchuria


(million tons)

Iron Ore
(million tons)

(thousand tons)

(million kwh)

















          5.3 (1943)


(K.L. Mitchell, Industrialization of the Western Pacific, New York 1942, pp.75-76;
Allan Rodgers, The Manchurian Iron and Steel Industry and its Resource Base,
Geographical Review, New York, January 1948; A.J. Grajdanzev, op. cit.)

The steel industry, established in 1935, was after a few years producing more than a million tons per annum. Machinery factories were established, which supplied the majority of equipment for Manchurian industry; in 1939 a car industry was established which planned to employ 100,000 workers; a large aeroplane factory was begun; the railways of Manchuria increased from 5,570 kilometers in 1932 to 15,000 kms. in 1943 – more than the whole railway system of China proper. In view of this development, it is clear why one writer could say: “Manchuria ... was to be developed as an extension of the homeland.” (Allan Rodgers, op. cit.) Sternberg remarked:

The given historical conditions in which Japanese imperialism developed caused it to encourage and force the developmerit of industrialisation in its empire, whilst different historical conditions caused the European imperialists to prevent or retard industrial development in their empires. (op. cit., p.74).

In the ten years between Japan’s invasion of Manchuria and its entry into the Second World War (1931-41) she so accelerated the industrialisation of Manchuria that although Manchuria’s population is only about 10 per cent of British India’s, as much, if not more, industry was created there in one decade as was created in India in a century of imperialist rule. (Ibid., p.73).

The industrialisation of Manchuria was not left to the blind, unorganised activity of the different Japanese companies, but was carried out by mixed companies of the state and the trusts according to a plan. Such organisation was necessary for rapid industrialisation. (At the same time, while Japanese imperialism encouraged the industrial development – mainly of heavy industries – in Manchuria, it hampered and even ruined the industries of other regions of China: thus in Shanghai, after the textile industries were bombed, the machinery that remained intact was looted and taken to Japan proper. Thus the policy of industrialisation was not all-sided, but distorted and limited to the interests of Japanese capitalism).

Two examples nearer home may be cited – the great development and importance of Ukrainian industry and that of Polish light industry in backward Tsarist Russia; the part of Poland which fell into the hands of industrially advanced Prussia remained very backward, lagging far behind Russian Poland.

Russia’s need “to reduce the industrial gap between her and the other countries” will compel her to look upon the satellites as “an extension of the homeland”, to try to develop them industrially, even if because of her poverty, bureaucratic mismanagement, and various other factors, she can do so only in a very unsatisfactory way. All the time she will of course reserve for herself the first fruits of their industrial development.




1. Incidentally, even backward China was not left untouched by the greed of the Russian bureaucracy. In June 1946 Edwin Pauley, U.S. Reparations Commissioner, visited Manchuria and inspected 80 per cent of the Japanese war industry. In his report he stated that the Russian removal of equipment was on such a scale as to retard Manchuria’s development by a generation and reduce the country to an agricultural economy. The principal items of equipment removed were machine tools and electrical equipment, although in some cases whole plants were completely stripped. Steel production was reduced by more than 50 per cent Pauley estimated that altogether the machinery dismantled by the Russians was worth 850 million dollars. (The World Today, August 1946). That this was a very heavy burden for Manchuria is clear from the fact that in 1932-1943 the total Japanese investments in Manchuria were evaluated at 5,393 million yen (about 1,200 million dollars).

2. According to Poland’s Foreign Minister, Modzelewski, this term is interpreted to include “cotton linsers, synthetic resin, condenser tubes, radio valves, measuring apparatus, gramophone recording discs, needles for the textile industry, ball bearings, etc.”. (Speech in the second committee of the United Nations General Assemb1y, 2nd November 1948).

3. This shows how demagogic is the slogan of the Communist Party in Britain today – “Trade with USSR and the People’s Democracies!” – which assumes that these countries, in contradistinction to the USA, indulge in trade with no political strings attached, that they are ready to trade on a large scale with Britain or any other country that is not under the same political system. Yet USSR and her satellites broke nearly all trade relations with Yugoslavia after the Stalin-Tito clash. See pp.238-9.

4. In the future, it seems, it will be impossible to find out how the foreign trade of the Russian satellites is divided among different countries, as instead of the foreign trade being evaluated in dollars it will be evaluated in rubles (as is already being done in Poland).

5. To get some idea of this amount, it is worth mentioning that British capitalists never got such a large annual profit out of their investments in India.


Last updated on 30.1.2005