Iron Curtain (45 page)

The conflicts in Łódź reached a peak in September 1947, when some 40 percent of the city’s workers went on strike. Not every factory in Poland followed the same pattern. Kenney also notes that in the formerly German city of Wrocław, populated almost entirely by refugees, strikes were far fewer because social ties were much looser. Still, Łódź was not an exception. Miners and factory workers went on strike in
Silesia in 1946. A strike in the ports of
Gdańsk and
Gdynia in that same year ended with two men dead.
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This was not unusual: nationalization politicized ordinary workplace conflicts almost everywhere. When factory workers were angry about pay or conditions in their state-owned factories, they aimed their protests directly at the state. In 1947, when strikes broke out in Csepel, a working-class district of Budapest, workers hijacked twenty trucks and drove into the center of town to demand that the government raise their wages. That afternoon, Interior Minister László Rajk went to Csepel, accompanied by the boss of the official government trade union. Both were heckled by workers. Retribution was swift: the political police immediately entered the striking factory and
arrested 350 people. Taking no chances, the police stepped up their reliance on informers after that and began “cleansing” other factories too. They recorded evidence of discontent—“We had better treatment during the old reactionary period than now in this so-called democracy,” one worker grumbled, according to the police files—and they began to identify and dismiss “troublemaking” workers. In 1948 the Diósgyőr Steel Mill instigated 113 “political” disciplinary procedures in May and June alone. From 1949
onward, any discussion of strike action was considered an “antidemocratic” crime against the state, and workers could be expelled from the party even for suggesting it.
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In the longer term, nationalization of the economy prolonged the shortages and economic distortions created by the war. Central planning and fixed prices distorted markets, making trade between individuals as well as between enterprises difficult. These problems were compounded by weak, nonexistent, or competing national currencies. In 1944 and 1945, the “
occupation” Polish zloty, the Soviet ruble, and the Nazi Reichsmark were all circulating in Poland. Yeast and alcohol served as currency in some places too.
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In their zone of Germany, Soviet officials had closed all banks and expropriated all bank accounts by August 1945. Only those accounts containing fewer than 3,000 Reichsmarks remained accessible to their owners. With those moves, they simultaneously wiped out the wealthiest Germans in their zone, deprived the private economy of capital, and hastened bankruptcies across all sectors.

Like the British, French, and Americans, the Soviet military authorities in Berlin also issued a new currency for their zone of Germany. They called it the “m-mark,” decreed it could be exchanged for Reichsmarks on a one-to-one basis, and used it to pay troops and purchase goods. Though they never admitted to doing so in public, they immediately began printing m-marks as fast as possible—17.5 billion between February and April. The other allies would eventually be forced to carry out a currency
reform in 1946 just in order to stave off hyperinflation.
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In Hungary, the combination of a newly floating currency, the threat of impending nationalization, the high cost of reparations, and general economic insecurity did create, for about a year and a half, what may have been the most extreme bout of hyperinflation ever to take place anywhere, at any time. At its zenith, in the summer of 1946, the Hungarian pengö was counted in thousand millions. Its value halved every day, and prices changed every hour. A Budapest artist, Tamás Lossonczy, kept a diary at the time:

Lossonczy was paid 2,000 thousand million pengö. But by the time he finished the transaction, it was afternoon:

Barter inevitably replaced cash. A few days later, Lossonczy recorded the sale of one of his paintings for “twenty kilos of wheaten flour.” In August, the government finally carried out a currency reform. One unit of the new currency, the forint, was worth 400,000 quadrillion pengö.
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Not all of the distortions were reflected in inflation. Despite angry propaganda, police actions, and political pressure, the semi-legal black market kept expanding, taking the form of everything from primitive street hawkers of the kind Primo Levi saw in Kraków to sophisticated smuggling operations. In the months immediately following the war, most East Germans spent a few hours a day “working” (or “shopping”) in the black market. Berliners then spent their weekends in the countryside, looking for food, for purchase or for barter.
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Staple goods were rationed almost everywhere. But while this ensured basic subsistence and kept people alive, it also meant that black market or free market prices skyrocketed, creating even more discontent. As a Polish propaganda official reported, “The lack of goods and inefficient distribution make for a lot of malcontents. The Łódź worker cannot accept the fact that his children can only gaze at cake from afar, and he is not satisfied that one like himself who works hard earns so little, while some parasite makes big money on the free market and the state gets nothing from him.”
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As nationalization progressed, the shortages worsened, causing difficulties for factories as well as shoppers. In desperation, the Leuna Chemical Works in East Germany began bartering fertilizer for food:

Though that story dates from 1947, it could also have taken place in 1967, or even 1987. Shortages and imbalances plagued the People’s Democracies from the very beginning and lasted until the very end. The economies of Eastern Europe grew after the war because they were starting from nothing—they began literally from ground zero—but they quickly fell behind their counterparts in Western Europe. They never did catch up.

Strange though it may sound, party economists often understood perfectly well what was wrong. The archived files of the
Polish Ministry of Trade and Industry, Minc’s fiefdom, contain many letters from clear-eyed bureaucrats around the country: one after the next, they patiently explain the negative effects of increased state control. Private businesses, many argued, were more productive than their state-owned counterparts. Rapid nationalization of both large and small enterprises was making the economic situation worse. A letter to the minister from an institution called the Central Bureau of Technical Inputs in the spring of 1947 argued that private enterprises “are smaller entities than state enterprises … and are therefore able to carry out orders faster and more effectively, and usually at lower prices, than state enterprises. This is the result of the fact that private and cooperative companies are directly interested in profits and a quick turnover of capital.”
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The letter, in effect a plea for clemency for private business, also contained a list of things that private companies were producing, including pumps, thermometers, machine parts, scales, and building materials. “To sum up,” the Bureau of Technical Inputs concluded, “we confirm that private and cooperative companies supply us with a wide range of articles, so that we may better and more quickly orient ourselves in the means of carrying out the most cost-effective production.”

Individual enterprises also tried to argue against nationalization, sometimes marshaling support for their cases within the government. In June
1946, the managers of the Anczyc printing house in Kraków, a business specializing in high-quality illustrated books—and owned by the same family for seventy years—wrote to the Education Ministry. The “democratic character” of their company, its excellent treatment of its workers, and its unique graphic expertise should make it exempt from the nationalization laws, they argued: “Now, when we are rebuilding Polish culture and art … we will put our illustrated scientific and artistic publications at risk if we remove the individual influence of the owner.”
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The Anczyc owners attached supporting letters from various other institutions—the Kraków Society of Book Lovers, the Jagellonian University—as well from their own printshop workers, who testified that although they favored nationalization “in principle,” they were convinced that “private ownership will not harm our material situation.” This deluge of support won over the Education Ministry, which passed the printer’s request on to various other institutions. Despite all of this support, the effort failed. A bureaucrat at the Ministry of Information and Propaganda decreed that “the firm, under the pretext of acting for the good of the printing industry and the high quality of its work … wants to remain a profit-making enterprise and exploit the excess labor of the technical workers and employees.” The printing house was nationalized in 1949 and the owners’ property confiscated.
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Evidence that private enterprises could be both profitable and popular among their workers proved equally annoying to German communists, who conducted a survey of the private sector in 1950 and passed the results on to the economic department of the Central Committee. The committee members must have found them depressing reading. Party inspectors had discovered that productivity was higher in private companies, workers appeared more satisfied in private companies, and private owners were still very popular. At one firm, the owner “gave 12,500 marks to his employees for Christmas”; another granted his employees two weeks’ extra wages and a food package for the holidays, including butter and sugar.

Though some of these factories contained communist party cells, the report noted that within private factories “the question of class struggle was hardly discussed,” and the workers were unenlightened. One had shockingly declared that the factory owner “is not an exploiter but an entrepreneur.” Another said that if his company were nationalized “we would earn less and there would be no Christmas celebration.” The bureaucrats’ response to this was frankly ideological: the Central Committee members decided that the
“educational and propaganda work in private enterprises must be systematically improved.” Trade union work must be stepped up as well.
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Their response to the relative success of private retail was no different. There is no “trade” in the Soviet zone of Germany, one economist complained in 1948, only “distribution.” But instead of creating better conditions for trade—that would have meant freeing prices and allowing the growth of private retail and wholesalers—the government resolved to create a substitute: a chain of state-managed “free” shops, the
Handelsorganization. At these “HO” shops, people could buy consumer goods and food unavailable elsewhere, without ration tickets, at what purported to be market prices.

The public received them with mixed feelings, as the party surveys recorded. One woman welcomed them because “now we will be able to buy important goods for daily life.” Others complained that “free shops are very nice but not at these prices,” that “a worker cannot buy anything there with the money he earns,” or that they were “only for people with a lot of money.”
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It quickly became clear that even these free shops couldn’t compete with the private sector, a problem that continued to puzzle party economists. At another meeting of the economic department of the Central Committee a few years later, the group analysed the figures. The number of people employed in the private sector had plummeted, which was not surprising given the financial and political pressures on private owners. Yet the private sector’s turnover was increasing. Private retail had maintained its “business connections” to private industry, the bureaucrats speculated, which might be helping shops get “uncontrolled goods” from the state sector. The private sector also seemed more flexible, and it had a more stable customer base.

The conclusion: a commission should be formed. Fewer permits for the creation of private wholesalers should be granted. Taxes on profits should be raised, and commercial space was not to be rented out to private businessmen. Private retail, the committee concluded, must “lower its turnover by 10 percent.” If reality was not conforming to ideology, then it would be forced to do so.
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In 1949, the East German Politburo even decreed that every state enterprise would have, in addition to its economic leadership, a deputy director responsible for politics. He would have to set an “example of discipline and constant vigiliance,” to keep workers apprised of all national events and to keep them informed about the Soviet Union: “Employees have to be convinced that the victory of progressive democratic forces in Germany can only be attained with the support of the USSR.”
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The response was no different in other spheres, or in other Eastern European countries. Strikers’ demands, public discontent, and poor economic performance did not persuade the communists to loosen up the system. Instead of backing away from ideology, they grimly stepped up their propaganda, increased the pace of “reform,” and sought new ways to persuade their compatriots to conform to the rules of the new system. As in the sphere of politics, failure spawned greater radicalism.