The Financial News, Tuesday, April 11th,
THE FIVE-YEAR PLAN
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is difficult to gauge the industrial achievements of the
Five-Year Plan. It is true that on paper formidable results can be produced,
such as the increase of coal production from 35 million tons in 1927-28 to
62 million tons in 1932, the increase of iron production from 3,283,000 tons
to 6,206,000 tons, and the increase of oil from 11 million tons to 21
million tons in the same period. Official statistics also show great
achievements in the building of tractors, the annual production of which
rose from 1,27 five years ago to 50,000 last year, and in the building of
motor lorries, the production of which increased from 677 in 1927-28 to
24,000 in 1932. In light industry, gigantic figures are also produced. On
the other hand, in 1932 less rolled steel was made than two years
previously, and the production of steel has remained almost stationary since
1929-30. One is justified, however, in having very little confidence in
The giants of Soviet industry,
Dnieperstroy, Magritogorsk, the Nijni-Novgorod factory, and the Kharkoff
Tractor Works, can also be regarded as great achievements, but achievements
of the order of Wembley or the Crystal Palace rather than well-functioning
organisations. Difficulties of production are so great that they will long
continue to be white elephants.
Through the Five-Year Plan the
Soviet Government has succeeded in creating many factories for the
construction of machines, which were never made before in Russia. This was
part of the autarchic aim of the Five-Year Plan, namely, to make the Soviet
Union independent of the rest of the world. This aim has not been reached.
In spite of all the various objects, which can now be made in the Soviet
Union, such as motorcars, aluminium, hydraulic turbines, which were formerly
imported, their quality is so bad, and the lack of specialists is so great,
that the Soviet Union can never be regarded as independent of the capitalist
countries. Autarchy has not been achieved in so brief a span as five years.
The shortage of foreign currency will render the render the import of
machinery difficult, and recent cutting down of orders from abroad points to
a slowing down of Soviet industry. The number of foreign specialists in
Russia grows less month by month and when most of them have gone, the plight
of the machinery will be grave.
According to experts, the
Five-Year Plan has succeeded in its munitions side, and, from the point of
view of ammunition, large gun, rifle and tank factories, there is reason to
believe that it was a great success, for it was first and foremost a
military and not an economic plan. Its primary aim was to render the Soviet
Union powerful in defence against capitalist aggressors.
Another achievement is the
great increase in the production of cotton in Central Asia.
In spite of colossal
achievements, however, on paper the difficulties facing Soviet industry are
greater than ever, and are likely to increase in the future. They are mainly
hunger, lack of skill and fear of responsibility, transport and finance.
In some factories, especially
in the big Moscow factories, the first difficulty, hunger, does not yet
exist, for there solid meals with meat are still given each day. But in the
majority of factories, especially in the provinces, there is
undernourishment. In a Kharkoff factory the male worker received the
following rations: 600 grams (about 1.3/4 lb.) of black bread per day, a
pound of sugar per month, a quarter-litre of sunflower oil per month, and
800 grams (about 1.3/4 pounds) per month of fish, which was usually bad. In
Moscow the worker receives 800 grams (about 1.3/4 lb.) of bread per day,
together with a meal at the factory. If he is a skilled worker, he will have
sufficient to eat. There is every prospect of food conditions worsening,
which will lessen the productivity of the workers.
Lack of skill and fear of
responsibility are other great enemies of industrialisation. The damage done
to good machinery through clumsy handling and negligence is disastrous. Much
of the skill and brains of Russia has disappeared through shooting or
imprisonment, while the successive trials have led to a condition of fear
among many engineers, which is not conducive to good work and
Transport difficulties are
still unconquered and are responsible for most of the bad distribution in
Russia. Last summer, according to "Pravda," perishable goods had from 30% to
95%, losses en route; potatoes sometimes took sixty days to come to Moscow
from a village about forty miles away. The result of these difficulties has
been a rapidly growing unemployment, which is a striking contrast to the
shortage of labour one year ago. There have already been many dismissals
throughout the country. In Kharkoff, for example, 20,000 men have been
recently dismissed. Unemployment is a problem, which will attack the Soviet
Union more and more and lead to increasing dissatisfaction, for there is no
unemployment insurance, and the unemployed man is deprived of his bread
What are the causes of
unemployment in the Soviet Union?
The first is technological.
A director of the Kharkoff Tractor Factory explained why his factory had
dismissed many workers: "We dismissed them because we had improved our
technical knowledge, and thus do not need so many workers!" an admission
that technological unemployment is not confined to capitalist countries.
Lack of Raw Material
The second cause of
unemployment is the lack of raw material. A factors, has to lie idle,
because the supply of coal or of oil has failed. Such is the synchronisation
in the Plan that when one supply fails there are delays in many branches of
industry. "Pravda" of March 10 contained the following item, which throws a
light upon this cause of delay: "In the storehouses of Almaznyanski Metal
Factory 13,000 tons of metal are lying idle, intended mainly for the
agricultural machine factories; 550 tons are waiting to be sent to the
Rostoff Agricultural Machine Factory, 1,500 tons to the Kharkoff Factory,
2,000 tons to Stalingrad Tractor Factory. The Southern Railway is only
sending 12-15 wagons of iron per day, instead of 35. On some days absolutely
no wagons are despatched."
The third cause of unemployment
in the Soviet Union is the food shortage. The factory is now made
responsible for the feeding of its workers, a given a certain agricultural
district or certain State or collective farms from which to draw supplies. A
director is made responsible for the supply department. When the food supply
is not sufficient for the total number of workers, the surplus men are
dismissed. Some experts consider this the chief cause of unemployment.
The final cause of unemployment
is financial. This will be dealt in my next article, which will
appear in tomorrow’s issue of the Financial News.
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News, Tuesday, April 11th, 1933.
BALANCE-SHEET OF THE FIVE-YEAR PLAN
By GARETH JONES
drastic economy drive is now in progress in the Soviet Union. The control
over expenses in the factory is new exceedingly strict. The factories no
longer have financial autonomy and a heavy responsibility is placed upon the
administration of the factories to balance their budget. Last year the
expenses of the factories exceeded the estimates. To counteract the
deficits, which were caused by over spending the planned figures imposed
from above on the factory administrations are now to be absolutely
obligatory, and the financial work of each factory is to be controlled each
month by the bank, which gives it credit.
When a factory or a trust has a
deficit, sanctions are applied. In some cases, where the deficit is
attributed to bad organisation a trial of the director is held and he is
condemned and thrown out of the Communist. Part. Other sanctions in cases of
deficit are: Non-payment of salaries and the obligation for the factory
administration to dismiss a part of the staff. The rigid economy drive has
thus been responsible for a part of the growing unemployment. In some
offices and factories 20 per cent, 30 per cent., and even 40 per cent of the
staff have been dismissed on financial grounds.
The absence of statistics upon
the most vital sections of financial life makes it difficult to form a
judgment concerning the currency. Gold reserve figures are no longer
published. Gold production figures are hard to obtain, but in one official
organisation the figure given for 1932 was 84,000,100 roubles. No figures
are published on the amount of gold obtained from the Torgsin Stores, where
customers have been able to buy with gold, silver, or with foreign currency.
Even on the issue of roubles there have been no statistics published since
September 5th, 1932. Some reliable observers state that they have
seen at least l00 one-rouble notes with the same number printed upon them.
The impression one obtains, is that those in charge of Soviet finances are
There is only one certainly
about. Soviet finances, and that is that there is a large-scale inflation,
however loudly it may be denied by the Soviet Government, and however much
members of the Communist Party may boast that "the chervonetz is the only
stable currency in the world." Some data on prices form sufficient proof of
this. The Government has opened the so-called commercial shops for those who
earn good salaries, where the following prices are now normal:
Butter: From 62 roubles to 75
roubles a kilo. (rouble at par equals 3s.).
Meat: 15 roubles a kilo.
Sugar: 15 roubles a kilo., but
difficult to obtain.
Bread (black): 3 roubles a
(white): 4 roubles 50 kopeks a
In the open market the prices
are as follows:-
Meat: About 20 roubles a kilo.
Tea: 25 roubles a pound.
Butter (when obtainable): 65
roubles a kilo.
In the Ukraine, where the food
shortage is greater, the prices are higher.
In the co-operatives bread may
be obtained cheaply for breadcards at the price of 7 kopeks a pound for
black bread and 12 kopeks a pound for so-called white bread.
The gold prices in the Soviet
Union provide interesting data for the economist:-
Flour (25 per cent.): 47 kopeks
Sugar (refined): 50 kopeks a
Potato flour: 40 kopeks a kilo.
Flour (85 per cent.): 24 kopeks
Butter in Torgsin (gold or
foreign currency) costs from 1 r. 40k. to 1 r. 90k.
The rapid rise in prices has
been a source of disorder for the Plan, for long-term planning ahead is
disarranged when the currency loses its value, in the same way as in the
capitalist world falling prices disorganise trade. The high prices in the
Soviet Union must, however, be studied in connection with the wages which
are paid. An unskilled labourer receives about 120 roubles a month; a
skilled worker may receive anything from 200 to 600 roubles. Engineers are
well paid, and usually receive monthly from about 500 to 1,500 roubles, and
even 2,000 roubles. A young train conductor receives about 67 roubles a
A part of the wages goes,
however, to the loans and lotteries, which play an important part in
financing the Plan. In 1932 15.9 per cent. of the budgetary receipts came
from loans. In 1933 it is planned to raise 2,800,000,000 roubles through
internal loans. Lotteries, while providing a negligible part of the State
funds compared with the loans, are used to finance such undertakings as the
Soviet Mercantile Marine, the Society for Aviation and Chemical Defence, and
the Motorisation of the Soviet Union. Prizes, such as motor-cars, which may
be owned as private property by one man, and even money prizes, are offered
as incentives to invest in these lotteries.
In internal finances one
obtains impression of disorder. The rouble seems to have run away from the
Plan. On the Black Market 50 to 70 roubles can be obtained for a dollar,
instead of the legal 1 rouble 94 kopeks. Any suggestion of devaluation,
however, is immediately refuted with indignation.
The external financial
situation also arouses no confidence. It is estimated that the Soviet
Union’s obligations abroad total £120,000,000. Recently the adverse balance
has mounted up with the declining prices of the goods exported by Russia. In
1929 the Soviet Union exported 923,700,000 gold roubles’ worth of goods,
whereas in 1932 her exports amounted to 563,900,000 gold roubles. Her
imports have not declined so rapidly, having fallen from 880,600,000 gold
roubles in 1929 to 698,700,000 gold roubles in 1932.
World prices have declined so
much and Russia’s agriculture has received such a blow from the Five-Year
Plan, that it is doubtful whether the Soviet Union will long be able to
maintain her payments abroad, however meticulous she may have been in
meeting payments up to now. If an embargo is placed upon Soviet imports by
the British Government, the difficulties of payment will become still
greater, for normally nearly 30 per cent. of Soviet Russia’s exports are
destined for Great Britain, and a blow will be dealt to the creditors of the
Soviet Union in Britain, and especially in Germany, where the Government has
guaranteed German ex-ports to Russia to a considerable degree.
The concluding article of this
series, dealing with agriculture, will appear to-morrow. The first, on
unemployment, appeared in our issue of yesterday.
* * * * *
The Financial News, Tuesday, April 13th,
BALANCE-SHEET OF THE FIVE-YEAR PLAN
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By GARETH JONES
main result of the Five-Year Plan has been the ruin of Russian agriculture,
a fact which completely outbalances the achievements of Soviet industry and
is already gravely affecting the industrialisation of the country. In the
eyes of responsible foreign observers and of peasants, the famine
Russia to-day is far worse than that of 1921. In 1921 the famine was spread
over wide areas, it is true, but, in comparison with the general famine
throughout the country which exists to-day, it might be considered
localised. In 1921 the towns were short of food, but in most parts of the
Ukraine and elsewhere there was enough bread, and the peasants were able to
live. To-day there is food in the towns although in the provinces not enough
whereas the countryside has been stripped of bread.
Symptomatic of the collapse of
Russian agriculture is the shooting of thirty-five prominent workers in the
Commissariat of Agriculture and in the Commissariat of State Farms,
including the Vice-Commissar of Agriculture himself, and Mr. Wolff, whose
name is well known to foreign agricultural experts. They were accused of
smashing tractors, of burning tractor stations and flax factories, of
stealing grain reserves, of disorganising the sowing campaign and of
destroying cattle. "Pravda " (March 5) stated that "the activities of the
arrested men had as their aim the ruining of agriculture and the creation of
famine in the country." Surely a formidable task for thirty-five men in a
country which stretches 6,000 miles!
Sign of Panic
The shooting of thirty-five is
a sign of the panic which has come over the Soviet regime on account of the
failure of collectivisation. The writer has visited villages in the Moscow
district, in the Black Earth district, and in North Ukraine, parts, which
are far from being the most badly hit in Russia. He has collected evidence
from peasants and foreign observers and residents concerning the Ukraine,
Crimea, North Caucasia, Nijni-Novgorod district, West Siberia, Kazakstan,
Tashkent area, the German Volga and Ukrainian colonists, and all the
evidence proves that there is a general famine threatening the lives of
millions of people. The Soviet Government tries its best to conceal the
situation, but the grim facts will out. Under the conditions of censorship
existing in Moscow, foreign journalists have to tone down their messages and
have become masters at the art of understatement. The existence of the
general famine is none the less true, in spite of the fact that Moscow still
What are the causes of the famine? The main reason for
the catastrophe in Russian agriculture is the Soviet policy of
collectivisation. The prophecy of Paul Scheffer in 1920-30 that
collectivisation of agriculture would be the nemesis of Communism has come
absolutely true. Except for drought in certain areas, climatic conditions
have blessed the Soviet Government in the last few years. Then why the
In the first place, the policy
of creating large collective farms, where the land was to be owned and
cultivated in common, led to the land being taken away from more than
two-thirds of the peasantry, and incentive to work disappeared. Moreover,
last year nearly all the crops were violently seized, and the peasant was
left almost nothing for himself. The passive resistance of the peasant has
been a far more important factor in Russian development than the ability to
In the second place, the
massacre of cattle by peasants not wishing to sacrifice their property for
nothing to the collective farm, the perishing of horses through lack of
fodder, the death of innumerable livestock through exposure, epidemics and
hunger on those mad ventures, the cattle factories, have so depleted the
livestock of the Soviet Union that not until 1945 could that livestock reach
the level of 1928. And that is, provided that all the plans for import of
cattle succeed, provided there is no disease, and provided there is fodder.
That date 1945 is given by one of the most reliable foreign agricultural
experts in Moscow. In all villages visited by the writer most of the cattle
and of the horses bad been slaughtered or died of lack of fodder, while the
remaining horses were scraggy and diseased.
In the third place, six or
seven millions of the best workers (the Kulaks) have been uprooted
and deprived of their land. Apart from all consideration of human feelings,
the existence of many millions of good producers is an immense capital value
to any country, and to have destroyed such capital value means an
inestimable loss to the national wealth of Russia. Although two years ago
the Soviet authorities stated that they had liquidated the Kulak as a class,
the drive against the better peasants was carried on with renewed violence
The final reason for the famine
in the Soviet Union has been the export of foodstuffs. For this it is not so
much the Soviet Government as the world crisis, which is to blame. The crash
in world prices has been an important factor in creating the grave situation
in Russia. Prices have dropped most in precisely those products, wheat,
timber, oil, butter, &c., which the Soviet Union exports, and least in those
products, such as machinery, which the Soviet Union imports. The result has
been that Russia has had to export increased quantities at lower value.
What of the Future?
What of the future? In order to
try and gauge the prospects for the next harvest, the writer asked in March
the following questions in each village:-
(1) Have you seed?
(2) What will the spring sowing
(3) What were the winter sowing
and the winter ploughing like?
(4) What do you think of the
On the question of seed,
several villages were provided with seed, but many lacked seed. Experts are
confident that the Government has far greater reserves of grain than in
1921, but evidence points to a lack of seed in certain areas.
Peasants were emphatic in
stating that the spring sowing would be bad. They stated that they were too
weak and swollen to sow, that there would be little cattle fodder left for
them to eat in a month’s time, that there were few horses left to plough,
that the remaining horses were weak, that the tractors, when they had any,
stopped all the time, and, finally, that weeds might destroy the crops.
Information received concerning
the winter sowing and the winter ploughing was black. There had been little
winter sowing, which accounts for about one-third of the total crops, and
winter ploughing had been bad. The winter sowing had been very late.
On the question of the Soviet
Government’s new agricultural policy, peasants were also doubtful. The new
tax, by which the collective farms will pay so much grain (usually about 2
and half centners) per hectare and be free to sell, the rest on the open
market, is not likely to make much difference to the situation, for the
peasants have completely lost faith in the Government.
The outlook for the next
harvest is, therefore, black. It is dangerous to make any prophecy, for the
miracle of perfect climatic conditions can always make good a part of the
The chief fact remains,
however, that in building up industry the Soviet Government has destroyed
its greatest source of wealth - its agriculture.
This is the concluding article
of a series of three; the first appeared in our Issue of Tuesday and
the second yesterday.