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Too much emphasis on capital goods expansion?

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Post 05 Nov 2013, 13:52
Did the Eastern Bloc countries put too much emphasis on capital goods expansion at the expense of consumer goods? Should they have concentrated more on consumer goods or would this have resulted in unacceptably low growth rates?

I assume the answer would probably depend on the level of development of each state, with backwards countries such as the early Soviet Union needing higher growth rates and quick industrialization, thus necessitating a concentration on capital goods expansion as opposed to consumer goods. However, East Germany and Czechoslovakia perhaps could have afforded to have a more consumerist economy.

I am interested in this topic because I have been reading about some of the debates regarding economic planning in socialist Poland that focused on this very issue.
Post 05 Nov 2013, 14:58
Piccolo wrote:
I assume the answer would probably depend on the level of development of each state, with backwards countries such as the early Soviet Union needing higher growth rates and quick industrialization, thus necessitating a concentration on capital goods expansion as opposed to consumer goods. However, East Germany and Czechoslovakia perhaps could have afforded to have a more consumerist economy.

The short n' scruffy answer is yes, for the very reasons you cited in your OP. That's the price the USSR and Bloc countries paid for their attempt to circumvent imperialist encirclement and a 45 year Cold War.
Post 05 Nov 2013, 18:50
There is no simple answer; one interesting fact is that within the Bloc there was no division of labour according to the rules of competitive advantage, and all attempts to change this were quashed, hence resulting in large capital goods industries in each respective country. In this way, in the economic sense, Bloc countries were thus more independent from the USSR than Eastern Europe is today from supernational institutions and the world market itself. Hence you have Poland producing things like machine goods, ships and automobiles, nearly all of which are gone today, including the Gdansk shipyards where Solidarnosc was born.

What makes this a difficult question is the time frame. Taking account of all the historical factors (Russia's historical underdevelopment, World War 2, rebuilding, the arms race with the West) there's also the fact in the 1980s China was only beginning to produce consumer goods, and relations with the USSR only beginning to take a more pragmatic course. Roy Medvedev wrote a book about Sino-Soviet relations in the mid-1980s (in English, by the way) where he outlines the potential for Soviet machine tools and resources being sold to China in exchange for consumer goods. Given that China today is now the manufacturing base for virtually the entire Western consumer goods market, I can't see why the USSR and the PRC could not have arrived at a similar relationship. This is one of those 'if only's' of international relations that would have made for a different world even if the USSR made no changes to its pre-perestroika conservatism.
Post 05 Nov 2013, 19:29
The base of the trade agreements of 1953 between the USSR and Argentina was the exchange of soviet capital goods for argentinian primary goods. Basically wheat and meat for machinery (steel works, railroads and for the oil industry).

I remember my grandpa telling me that he had to set up a soviet lathe at a railroad repair shop, which arrived before the soviet engineer sent to do it. By the time the guy came to the shop, the lathe was already working so he just had a few days drinking with the locals.

Anyway, two years later Peron was ousted and the agreement forgotten in the Cold War mentality of the military Junta.
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