Dark Continent: Europe's Twentieth Century (22 page)

But the pressures of Stalinist industrialization were not confined to cramped living quarters: the years of the first Five-Year Plan also witnessed the explosive development of the camp system. Historically, forced labour had been of crucial importance for the economic development of much of the Americas and of the Tsarist empire. Stalin carried this process further than ever before. In 1929 the OGPU’s concentration camps were renamed “labour camps” and were given an explicit economic function. Starting with the mass arrests during collectivization, and fluctuating in intensity throughout the 1930s, the security organs gained control of millions of prisoners in a complex network of prisons, “corrective labour camps,” labour colonies and special settlements: latest estimates put the total number of prisoners as rising from 2.5 million in 1933 to 3.3 million on the eve of the German invasion in 1941.
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Forced labour played a significant part in the overall industrialization drive: on the eve of the Second World War, the NKVD (OGPU’s successor) was responsible for around 25 per cent of all building work, and dominated construction work in the Urals, Siberia and the Far East; a secret-police official publicly praised his organization’s camps as “pioneers in the cultural development of our remote peripheries.”
Specific commodities located in these regions—gold and other metals, timber and, later, munitions—depended on slave labour. Forced labour also helped construct the White Sea-Baltic canal, one of the regime’s propaganda triumphs of the early 1930s. Special settlers were allocated to new industrial sites like Magnitogorsk. By 1939 there were some 107,000 guards working in NKVD camps and colonies alone.
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Unlike capitalism, whose view of the world was essentially harmonious and benign, communism saw itself as embattled and beleaguered. Enemies outside had tried to stamp out the Revolution at birth; those within had tried to lead the Party astray through their factionalism and “deviations.” Coinciding with the height of repression and the onset of the Terror, Soviet industrialization took place in a conspiratorial world of “saboteurs” and “counter-revolutionary plots.” From the 1928 trial of foreign engineers onwards, technical experts, managers and Party bosses worked under the threat of arbitrary punishment: failure, personal rivalry, or even a sudden change in the leadership’s line might be enough to disgrace them. Tens of thousands of educated professionals were sent to the camps. The need to train a new generation of managers became a priority for the regime, but also an opportunity for social advancement for a younger generation. Stalinism thus meant terror and repression, but also upward mobility and exciting new life chances which compared strikingly with the relatively static and hierarchical structure of Tsarist society: between 1928 and 1933, some 770,000 Party members alone are reckoned to have moved up from the working class into white-collar and administrative jobs.
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Today it is natural to castigate Westerners like H. G. Wells, Bernard Shaw or the Webbs for skating over the nastier and more brutal aspects of Stalinism, and for confusing Soviet propaganda and reality. Yet at a time when capitalism appeared to be committing suicide, Stalin’s Russia formed a striking contrast to the West—an image of energy, commitment, collective achievement and modernity—the more alluring for being so little understood. The few outspoken and knowledgeable critics, like the former Croat communist Ante Ciliga—whose book
In the Land of the Great Lie
appeared in 1938—found their exposés largely ignored.
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In part this credulity reflected what one historian terms “the phenomenal will to believe in utopia” which pervaded inter-war Europe. But it also reflected the West’s gradual detachment from the realities of Soviet life. Soviet contacts with the rest of Europe in the 1920s had been substantial—in technological, scientific and cultural affairs if not in finance and trade. Teams of American, German and British engineers provided technical advice, while some of Europe’s most distinguished architects and town planners, including Le Corbusier and Ernst May, competed to plan Moscow and other cities. But with the 1930s show trials—whose defendants included Western engineers and businessmen—these contacts dwindled and travel in and out of the country became more difficult. As the Soviet “economic miracle” forged ahead, Soviet realities disappeared from Europe’s view and the country closed in on itself.

It was, above all, the rise of Hitler which made it hard to evaluate Russia objectively. With Nazi Germany emerging as the main threat to democracy in Europe, much of the centre and Left in western Europe combined in a largely pro-Soviet anti-fascism: “Support of the Soviet Union at the present juncture is (as the one hope of averting war) of such overwhelming importance,” the British publisher Victor Gollancz warned the writer H. N. Brailsford in 1937, “that anything that could be quoted by the other side should not be said.” For many European intellectuals, the Soviet Union thus became a mirror, reflecting their own obsessions, their hopes and fears of what Nazism held in store.
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NATIONAL RECOVERY

Nowhere was the dazzling Soviet achievement watched with more concern than in crisis-torn central and eastern Europe. “In business and banking circles in Berlin,” reported the British ambassador in early 1931, “the chief topic of conversation has been the menace represented by the progress made by the Soviet Union in carrying out the Five-Year Plan, and the necessity of some serious effort being made by the European countries to put their house in order before Soviet economic pressure becomes too strong.”
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Britain was unable to provide the necessary leadership. Liberal capitalists
talked as though living in an earlier century, and free trade—the British mantra—was an unconvincing and outdated response. Told at Geneva to cut trade barriers and allow in cheap grain from Canada and Argentina, the Yugoslav foreign minister replied bitterly that this was possible “provided they sacrificed four-fifths of their population.” The only difference, he went on, between the free-trade policy proposed by Britain and Stalin’s Five-Year Plan was “that you do not shoot the population, but starve them.”
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Quite fortuitously, though, the collapse of free trade revealed some alternative and unexpected paths out of depression that capitalist countries could follow. Economic nationalism in the 1930s turns out to have been rather more successful than historians have allowed, and many countries did better producing for themselves than they had done struggling to get back on to the gold standard and coping with international competition in the 1920s. Self-sufficiency, to be sure, had its costs. It burdened consumers with expensive home-made goods, but then by the same token it encouraged producers. So did debt standstills which liberated indebted farmers and industrialists alike and boosted domestic demand. The price producers paid for these relatively positive developments was increasing state control. With the abandonment of laissez-faire, governments suddenly found it necessary to decide where they wanted the exchange rate; they were drawn into trade policy and the allocation of foreign exchange; at home they began to plan output, to foster producers’ cartels and intervene in the development and location of new concerns. Thus quite independently of ideology, self-sufficiency altered the relationship between state and private initiative. Capitalist nations took over the idea of planning and state control from the Bolsheviks, and watered it down: the slump prompted the emergence of state-led national capitalism.

In the short term, domestic recovery and industrial growth were impressive. Protected by higher tariffs and non-convertible currencies, prices stopped falling, and employment picked up. Industries aimed at the domestic market such as textiles, chemicals and power generation all grew rapidly, while farming too recovered with the aid of state marketing boards which bought in crops at guaranteed prices. Between 1932 and 1937 industrial output soared by 67 per cent in
Sweden and 48 per cent in the UK, while in gold-obsessed Poland, France and Belgium it stagnated. In Nazi Germany—helped by compulsory labour service, rigid control of wages, work creation schemes and a campaign against working women—unemployment fell from 5.6 million to 0.9 million in five years; by 1939 there was full employment.

New domestic sources of financing emerged to replace the capital markets of the West. Defaulting on foreign debt—or “rescheduling”—was worth a lot to the debtor states of central and eastern Europe—the equivalent of more than 10 per cent of government spending for Greece, Romania and Bulgaria, for example, between 1931 and 1935. What could have been more rational than borrowing heavily in the 1920s and repudiating the debt in the 1930s? British and American bondholders were resentful but helpless.
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Domestically, consumer spending could be squeezed, as could wages, especially in police states where independent unions had been smashed. Inflation, high tax rates, tight control of wages and other forms of forced and “voluntary” savings kept real wages low and funnelled resources into the state’s coffers. The Nazi regime constructed motorways and public buildings, the British council houses; nearly everyone subsidized farmers and sooner or later invested in rearmament. Thus a third form of development strategy emerged between, on the one hand, relying on foreign borrowing and, on the other, Soviet forced industrialization. It permitted a slower rate of growth than in the Soviet Union, but cost fewer lives and helped stabilize the political class.

On the whole, however, autarky remained a short-term option for European capitalism. True, it encouraged industrial recovery but only in a sheltered and uncompetitive environment. Established firms were shielded from foreign rivals and even from new entrepreneurs at home, through state-sponsored cartel schemes. Lucky businessmen reaped high profits but had little incentive to reinvest these in plant and equipment, especially when this needed to be imported. The main exception was where—as in the Third Reich—the nationalist state made it clear that it expected results for its protection. A Nazi public utility like Volkswagen, or private corporation like Daimler-Benz, laid down plant, equipment and profits in the 1930s (and early
1940s) that would form the basis for post-war growth. But these were the exceptions: most states were either insufficiently nationalist (like the British), or too disorganized (like the French and Italians) to make autarky pay. For all the talk of “efficiency” and “coordination,” there was overall no leap forward in technology to compare with the “rationalization” drive of the 1920s, and in some cases actual regression. Not until the 1950s would European industry truly modernize; ironically, the post-war Soviet Union became a case study of what could happen when a country persisted with autarky too long.
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In farming the story was similarly mixed, especially in backward eastern Europe. There was some modernization of agriculture—better strains of seed, more intensive use of fertilizers, greater cultivation of cotton and other import substitutes—but too many “battles for grain” kept the countryside alive yet unable to prosper. Peasants retreated from the market back into a subsistence economy. In the long run, autarky offered no solution to Europe’s overcrowded villages: these too would have to wait till the 1950s when communism and international capitalism would between them propel peasants into the towns and create new industrial jobs.

National capitalism in the 1930s had plenty of other drawbacks as well: working-class employment grew but wages were kept low, especially in authoritarian regimes. The Nazi Labour Front organized tourist trips and pressured factory bosses to improve some working conditions, all of which helped dissipate worker dissatisfaction; but none of this helped raise wages substantially. Thus the kind of consumer-led recovery which took place in Britain in the 1930s, based around growing employment in light industry, was essentially incompatible with the kind of recovery pursued in Nazi Germany or Fascist Italy. What, moreover, kept recovery going there was not the consumer but the military state. The Ethiopian war was vital for helping Italy out of recession. Until 1939 German spending on rearmament was roughly double the proportion of GNP that it was in the UK, and ten times what it was in the USA. For Hitler, of course, recovery was not the reason for rearmament; that was, quite simply, the need to prepare for the inevitable “new conflict” with Soviet Bolshevism. Nevertheless, the consequence was a tremendous stimulus to growth,
which generated serious labour shortages and inflationary pressures by the end of the 1930s.

International trade did not come to a complete stop after 1932, but it ran at such reduced levels that it could not stimulate growth in the way it would after 1950. Levels of world trade had plummeted after 1929 and never recovered: even in 1937 world trade was below the 1929 figure, though world production had increased. Europe split into trading blocs with the British building up a zone of Imperial Preference outside the continent, and the French trying unsuccessfully to keep a small gold zone (the Netherlands, Belgium, Switzerland, Poland and Czechoslovakia) in existence. The most determined effort to build a new trading system compatible with autarky was pursued by Germany after 1934 with the New Plan—a network of bilateral clearing accounts with the countries of eastern and south-eastern Europe.

Heralded by some Nazi geopoliticians as the start of a New Order, and attacked by anti-Nazis as a system of fascist exploitation, the New Plan was in reality more modest in its impact. The rather poor and backward economies of eastern Europe were hardly a substitute for Germany’s old export markets. The Nazi regime really wanted their goods, not their custom, and they got their way by running large trade deficits with their poorer neighbours. Bulgaria, Yugoslavia and Greece thus helped pay for the German recovery. Yet no one else would take their exports anyway, and governments continued to humour the Germans because it was important to keep their own farmers happy. When the Greek government threatened to stop tobacco sales to the Third Reich because they were not getting much in return, it was the protests of their own tobacco growers that made them think again.