Economic Transformations in the Periphery: Post-War & Soviet Experiences
Lesson 10: The Economics of the Periphery
10.1 The Disintegration of Central and Eastern Europe
This was a consequence of the war crisis. A nationalist strategy, focused on economic independence and strengthening national production, was generally adopted.
In the Industrial Sector
The “Import Substitution” policy aimed to bolster domestic industry, foregoing the comparative advantages of the international market. This involved creating industrial complexes focused on consumer goods production, partly state-financed and partly due to lower capital requirements. Strong protectionism shielded uncompetitive production from foreign competition. The results were high costs and prices, and despite seeking economic independence, technological dependence persisted.
In the Agricultural Sector
State-driven, anti-oligarchic agricultural reforms redistributed land among peasants. This resulted in a dual agricultural sector: one export-oriented, financing industrial policy, and the other meeting domestic demand. This policy failed due to a depressed international situation and uncompetitive exports. The result was land abandonment and widespread underemployment.
Demography
Population growth worsened the economic situation, as the immigration valve was gone. This led to a saturated labor market, increased unemployment and poverty, compounded by reduced remittances.
10.2 The Soviet Experience
Contrasting this, the Soviet economy grew until World War I, reaching 5th place globally by 1914. Its economic structure exhibited dualism: a backward agriculture alongside a modern capitalist industry, creating fragility during the war.
The February 1917 bourgeois revolution established a short-lived parliamentary republic that failed to end the war or implement social reforms. This led to its overthrow and the establishment of the first socialist state in October 1917.
Three phases followed:
I. War Communism
The Bolsheviks nationalized economic activity and created government plans. However, the Civil War hampered long-term planning.
II. New Economic Policy (NEP)
The NEP revitalized the struggling productive system by authorizing private management of crafts, small-scale trade, and agriculture. The state retained control of strategic sectors like foreign trade, heavy industry, and banking. Fiscal and monetary changes aimed to stimulate exchange and attract foreign investment. This improvement phase laid the foundation for development, but the Communist Party saw it as a threat and returned to orthodox communism, suppressing private enterprise and assuming full economic control.
III. Five-Year Plans
Starting in 1928, forced agricultural collectivization aimed to finance industry through price controls. Large, combined industrial complexes prioritized heavy industry to achieve economies of scale. The five-year plans emphasized workforce qualification, but progress was disrupted by World War II.
10.3 Expansion and Crisis of the Overseas Economy
The Latin American economy saw changes in finance and production during the war.
a) Finance
Foreign investment increased, with British investments gradually replaced by U.S. ones. American banks became more prominent. Foreign capital shifted from distribution (transport and trade) to production, particularly in high-demand commodities (oil, copper, bananas). This displaced local oligarchies from key economic sectors, leading to a loss of political power and autonomy due to state debt.
b) Production
Raw materials production thrived until the 1930s, but foodstuff production declined as Europe rebuilt its capacity. The industrial sector remained focused on consumer goods under protectionism. However, growing U.S. influence pressured governments to liberalize imports, providing an outlet for U.S. products, starting around 1925 as the U.S. focused on Latin America to manage its surplus production.