The Dictators by Richard Overy

Author:Richard Overy
Language: eng
Format: epub
ISBN: 9780141912240
Publisher: Penguin Books Ltd
Published: 2009-02-10T16:00:00+00:00

The command economies performed the functions of choice and allocation normally associated with the market under liberal capitalism. The consequence of displacing the market was a fundamental restructuring of the two economies so that they more closely matched the political planning preferences of the two dictatorships, rather than the preferences of ordinary consumers, producers and traders. In both regimes this meant not only control of domestic economic variables, but also the reduction of dependence on the wider world market and the elimination of foreign influence on domestic economic conditions.

For Germany and the Soviet Union there were histories of dependence to overcome. The modernization of the Tsarist state had relied on high levels of foreign lending, the forced export of grain and the transfer of experts and technical know-how from the more developed western economies. During the late 1920s the Soviet state was compelled to adopt a similar strategy in order to complete the First Five-Year Plan. Hundreds of foreign experts helped to set up Soviet factories; a slow stream of imported machines and industrial equipment became a flood after 1927, reaching 71 per cent of total imports against the more modest Tsarist total of 21.5 per cent in 1913; foreign debt, which had been repudiated in 1918, reached the high levels of Tsarist days again between 1930 and 1932. The deficit expanded as the Soviet Union urgently imported the technical means to further industrialization at precisely the time that the Great Crash emasculated the capacity of other countries to buy Soviet exports in exchange.69 Grain, desperately needed by peasants starving as a consequence of collectivization, was dumped on world markets to try to stem the rising tide of debt.

Germany before 1914 was the world's second largest trading nation behind Britain; one-quarter of its industrial workforce produced exports. After the war, trade revived sluggishly, leaving the German economy particularly vulnerable to the international business cycle. Defeat in 1918 also saddled Germany with a bill for wartime reparation scheduled to last until 1988, and brought the loss of resource-rich territory in Alsace-Lorraine and Silesia. The collapse of the currency in 1923 placed Germany in the position of a developing state: its currency was reconstructed with the help of the richer countries of the West, and throughout the 1920s Germany was forced to rely on exceptional levels of foreign lending to make up for the absence of adequate sources of domestic capital. When the world boom ended in 1929, Germany, like the Soviet Union, found herself under pressure to repay the debt without any longer being able to export goods to do so. In 1931 the German balance of payments produced virtual bankruptcy; disaster was staved off only because her creditors agreed temporarily to suspend debt repayment. Trade fell by half, leaving millions of Germans in the export industries unemployed or on short-time. Many German exporters survived only because for three years Soviet importers took more than half German machinery exports to feed the machine-tool shortages of the Five-Year Plan.70

Over the course of

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