Economic Change and the National Question in Twentieth-Century Europe

Economic Change and the National Question in Twentieth-century Europe Edited by Alice Teichova, Herbert Malis ami Jaroshv Ptitek

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ECONOMIC CHANGE AND THE NATIONAL QUESTION IN T W E N T I E T H - C E N T U R Y E U R O P E

The authors in this collection of essays address the largely neglected but significant economic aspects of the national question in historical context during the course of the twentieth century. There exists a large gap in our understanding of the historical rela­ tionship between the 'national question' and economic change. Above all, there is insufficient knowledge about the economic dimension of the historical experience with regard to the former multinational states, such as the Soviet Union, Yugoslavia or Czechoslovakia; and, equally, too little is known about the eco­ nomic component of national tensions and conflicts in bilingual Belgium or Finland, or the multilingual Spain or Switzerland. At the same time as emphasis is placed on the complex relationships between the economy and society in individual European countries, questions of state, identity, language, religion and racism as instruments of economic furtherance are at the centre of the contributors' attention. The overall aim of the volume is to promote a better understanding of the resurgence of the national question in late twentiethcentury Europe against the changing economic, social and political background. T E I G H O V A is Emeritus Professor of Economic History, University of East Anglia and an Honorary Fellow of Girton College, Cambridge.

ALIGE

H E R B E R T M A T I S is Professor of Economic and Social History, Wirtschaftsuniversitat, Vienna. P A T E K is Professor of Economic History, Institute of Economic and Social History, Charles University, Prague.

JAROSLAV

E C O N O M I C C H A N G E AND THE N A T I O N A L Q U E S T I O N IN T W E N T I E T H - C E N T U R Y EUROPE EDITED

BY

ALICE TEICHOVA, HERBERT MATIS ANDJAROSLAV PATEK

PUBLISHED BY THE

PRESS SYNDICATE OF THE UNIVERSITY OF

CAMBRIDGE

The Pitt Building, Trumpington Street, Cambridge, United Kingdom CAMBRIDGE

UNIVERSITY

PRESS

The Edinburgh Building, Cambridge CB2 2RU, U K 40 West 20th Street, New York, N Y 10011-4211, USA 477 Williamstown Road, Port Melbourne, VIC 3207, Australia Ruiz de Alarcon 13, 28014 Madrid, Spain Dock House, The Waterfront, Cape Town 8001, South Africa http://www.cambridge.org © Cambridge University Press 2004 First published in printed format 2000 ISBN 0-511-04008-3 eBook (netLibrary) ISBN 0-521-63037-1 hardback

Contents

List of List of tables Notes on contributors Acknowledgements

figures

page viii ix xi xvi

Introduction Alice Teichova,Herbert Matis and Jaroslav Patek 1

2

3

4

5

6

Nationalism and the economic question in twentiethcentury Ireland Alan O'Day Economic aspects of the nationality problem in nineteenthand twentieth-century Belgium Erik Buyst T h e economy as a pushing or retarding force in the development of the German question during the second half of the twentieth century Jo'rg Roesler

i

g

33

48

Lusatian Sorbs in Germany before the Second World War: the influence of the economy on the national question Eduard KubU

72

Unequal regional development in Switzerland: a question of nationality? Bruno Fritzsche

85

T h e Portuguese national question in the twentieth century: fromSpanish threat to European bliss Nuno Valerio v

vi 7

Contents From autarky to the European Union: nationalist economic policies in twentieth-century Spain Gabriel Tortella and Stefan Houpt

127

8

T h e economic background to the Basque question in Spain Montserrat Gdrate Ojanguren

9

Economic change and nationalism in Italy in the twentieth century Luigi De Rosa

173

National integration and economic change in Greece during the twentieth century Margarita Dritsas

196

National identity and economic conditions in twentiethcentury Austria Herbert Matis

229

Economic, social and political aspects of multinational interwar Czechoslovakia Jaroslav Pdtek

248

10

12

13

14

15

Nationality and competition: Czechs and Germans in the economy of the First Czechoslovak Republic (1918—1938) Christoph Boyer

262

Economic aspects of Slovak national development in the twentieth century Roman Holec

277

Economic change and national minorities: Hungary in the twentieth century Agnes Pogdny

295

16

Economic background to national conflicts in Yugoslavia Neven Borak

17

Economic differentiation and the national question in Poland in the twentieth century Jerzy Tomaszewski

8

150

Economy and ethnicity in the hands of the state: economic change and the national question in twentieth-century Estonia Anu Mai Kbll

310

338

357

Contents 19

20

vii

Changing structure and organisation of foreign trade in Finland after Russian rule Riitta Hjerppe and Juha-Antti Lamberg

382

Economic change and the national question in twentiethcentury USSR/Russia: the enterprise level Andrei Yu. Yudanov

404

Index

425

Figures

2.1 Gross value added at factor cost per inhabitant: page 41 relative figures, 1 9 5 5 - 9 5 2.2 Belgium: regions and provinces, 1 9 9 0 42 5.1 Languages by districts 87 5.2 Migratory balance, 1 9 1 0 91 5.3 Distribution of major branches, 1 9 1 0 96 5.4 T h e Swiss cantons 101 5 . 5 Economic performance, 1 9 5 0 — 1 9 8 0 102 5.6 Cantons. Income per capita 104 5.7 Economic performance, 1 9 8 0 — 1 9 9 0 106 10.1 T h e growth of Greece since 1832 198 1 1 . 1 Gross domestic product, 1920—1995 ( 1 9 1 3 = 100) 243 16.1 Yugoslavia's nationalities 1991 312 16.2 Divergences of per capita social product across Yugoslav federal units, 1 9 5 3 — 1 9 9 0 321 1 6 . 3 ^-divergences of social product per capita across Yugoslav federal units 322 17.1 T h e Polish Republic, 1931 344 18.1 T h e Baltic nations 358 19.1 T h e volume indices of GDP, imports and exports of goods, i 19.2 19.3

8

9

0

—

1

9

3

8

3

8

4

T h e distribution of exports by country, 1 8 9 0 — 1 9 3 8 385 T h e distribution of imports by country, i 8 9 0 — i 9 i 3 3 8 6

viii

Tables

3.1 Regional structure of S O Z / G D R foreign trade in 1 9 3 6 and

page 51

1946-1952

3.2 Trade between G D R and F R G between 1952 and 1 9 9 0 3.3 Monthly net income per employed person in the new and old German Bundeslander in D M , 1 9 9 1 — 1 9 9 7 5.1 Native language of the Swiss population in percentage share, 1880—1990 5.2 Foreign trade in percentage shares of total value, 8

i

9

2

—

i

^

3

9

5.3 Occupational structure by districts, 1 9 1 0 Occupational structure, i 8 8 0 — i 9 4 i 6.1 Main financial flows between Portugal and its colonies,

5.4

1

8

7

5

—

1

9

7

4

62 66 92 3

95 i00

1

6.2 Average rates of growth of Portuguese per capita gross domesticproduct, i 8 3 7 — i 9 9 5 8.1 A H V ' s production expressed as a percentage of total Spanish production for the year i 9 0 5 8.2 Working population by sector 8.3 Unemployment rates, 1 9 8 2 — 1 9 9 9 8.4 Evolution of migratory balances 8.5 Family income per inhabitant i i . i Economic performance of O E C D countries, 1900—1997 12.1 Territorial division of the Czech and Slovak branches of the Czechoslovak nation, i 9 2 i 12.2 Industrial employment of the Czechoslovak and German population in i 9 2 i 1 2 . 3 Occupational distribution in Czechoslovakia, i 9 3 0 i 5 . i T h e occupational structure and the rate of literacy of various Hungarian nations in i 9 i 0 ix

1

8

i2i i6i

162 166

167 i69 244 249 255 256 298

x

List of tables

15.2 T h e population of Hungary according to mother tongue, 1910-1990

300

15.3 T h e population of Hungary according to nationality, I

9

I

4

-

I

" °

1 5 . 4 T h e occupational structure of the Hungarian nation by nationality, in 1 9 9 0 16.1 National structure of Yugoslavia and its federal units in

3

°4

306

9

3

I 8I

16.2 Cross-units regressions 17.1 T h e ethnic structure of the population in Poland, 1931 17.2 T h e agricultural population and the main minorities by province in Poland, 1931 17.3 Nationality of owners of estates above 5 0 hectares by province in Poland, 1921 17.4 Nationality of owners of estates above 5 0 hectares by size in Poland, 1921 17.5 Selected indices of living standard by province in Poland, 1

9

3

1

I

8

9

345 346 347 3

17.6 T h e town population and Jews by province in Poland, 1931 17.7 T h e German population by province in Poland, 1931 1 8 . 1 Ethnic composition of Estonia in the twentieth century, 7

-

I

9

8

9

n

320 339

4

8

350 351 3

6

3

7

4

18.2 Occupational structure of Estonia in the twentieth century, 1

9

1

6

-

1

9

9

4

1

20.1 Inter-republic trade as a percentage of foreign-trade operations of republics (countries) of the U S S R and C I S , 1 9 8 8 and 1 9 9 5 415 20.2 Migration of population between Russia and former U S S R republics, 1 9 8 0 1 9 9 3 4 1 6

Notes on contributors

B O R A K is at the University of Ljubljana, Slovenia. Recent pub­ lications include: Iskanje Guliverja [Searching for Gulliver], (Ljubljana, 1 9 9 4 ) ; Denarne reforme [Monetary reforms], (Ljubljana, 1 9 9 8 ) .

NEVEN

B O Y E R is a Fellow at the Hannah-Arendt Institut fur Totalitarismusforschung, and a Reader in Social and Economic History, Technical University Dresden. Publications include: 'Die deutsch-tschechoslowakischen Wirtschaftsbeziehungen seit 1 9 1 8 . Alte Verbindungen-Neue Angste' in Niedersachsische Landeszentrale fur politische Bildung (ed.), Tschechen,Slowaken und Deutsche. Nachbarn in Europa (Hannover, 1 9 9 6 ) ; Nationale Kontrahenten oder Partner? Studien zu den Beziehungen zwischen Tschechen und Deutschen in der Wirtschaf der CSR (1918-1938) i "

GHRISTOPH

(

M

u

n

i

c

h

,

9

)

.

B U Y S T is Professor of Economic History at the Centrum voor Economische Studien, Katholieke Universiteit Leuven. Publications include: An Economic History of Residential Building in Belgium between 1890 and 1961 (Leicester, 1 9 9 3 ) ; 'National accounts for the Low Countries, 1 8 8 0 - 1 9 9 0 ' , Scandinavian Economic History Review 4 3 (1995), 5 3 - 7 6 .

ERIK

is Professor of Economic History at the Free International University in Social Sciences (LUISS), Rome. He is editor of the Journal of European Economic History, and the author of many books and articles including: 'Economics and nationalism in Italy ( 1 8 6 1 - 1 9 1 4 ) ' , The Journal of European Economic History 11(3) ( 1 9 7 2 ) , 5 3 7 - 7 4 , History of the Bank of Naples, 4 vols. (Naples, 1 9 8 9 - 1 9 9 2 ) ; History of the Bank of Rome (Rome, 1 9 9 2 - 1 9 9 3 ) ; The Economic Development of Italy from the Second World War to 1996 (Rome, 1 9 9 7 ) .

LUIGI

DE

ROSA

DRITSAS is Professor at the Department of History, University of Crete. She is author of books and articles on Greek eco-

M A R G A R I T A

xi

xii

Notes on contributors nomic, social and business history. Her publications include: Industry and Banking in Interwar Greece (Athens, 1 9 9 0 ) ; The History of the Greek Paint Industry 1830-1990 (Athens, 1 9 9 5 ) ; 'Swedish capital in Greece', Scandinavian Economic History Review ( 1 9 9 6 ) , 3 - 2 2 ; editor with Terry Gourvish European Enterprise Strategies of adaptation and renewal in the Twentieth Century (Athens, 1 9 9 7 ) . F R I T Z S G H E is Professor of History at the University of Zurich. His main field of research is the history of urbanisation in the nineteenth and twentieth centuries. His most recent publications include: 'Grenzen und Grenzverletzungen in sozialen Raumen' in Inst. f. Denkmalpflege an der E T H Zurich (ed.), Stadt- und Landmauern, vol. III (Zurich, 1 9 9 9 ) , pp. 4 0 - 8 and (as a coauthor), Handbuch der Buendner Geschichte (Chur, 2 0 0 0 ) .

BRUNO

G A R A T E OJANGUREN is Professor of Economic History, Universidad des Pais Vasco, San Sebastian, Spain. Among her publications are: 'Instituciones financieras en el Pais Vasco. Articulation y crecimiento del sistema bancario en Gipuzkoa ( 1 8 9 9 - 1 9 3 0 ) ' in P. Martin Acerra (ed.), Economiay empresa en el Norte de Espana ( 1 9 9 4 ) ; 'La ilustracion vasca y el sector del Pais' in Ilustrazioa Euskal Herrian (1998); La historia de un banco regional. El Banco Guipuzcoano i"

M O N T S E R R A T

1 8 9 9 - 1 9 9 9

(

9 ) .

H J E R P P E is Professor of Economic History, Department of Economic and Social History, University of Helsinki, Finland, and is editor of Scandinavian Economic History Review. Among her many pub­ lications: The Economic History of Finland (Helsinki, 1 9 8 9 ) .

RIITTA

H O L E G is Reader of History, Philosophical Faculty, Comenius University, Bratislava. Among his publications: 'Medzi slovanskou vzajomnosti a podnikatelskou aktivitou. Prazska banka Slavia v Uhorsku v druhej polovici 10. storotia' [Between Slavic mutuality and business activity. T h e Prague bank Slavia in Hungary in the second half of the nineteenth century], Economic History 21 ( 1 9 9 5 ) , 145—72.

ROMAN

H O U P T is Lecturer at the University of St Louis in Madrid and at the Universidad San Pablo. His dissertation dealt with Technical Change and Loocatioon of the Spanish Integral Iron and Steel Industry, 1882-1998 (Madrid, 1 9 9 8 ) . He is coeditor of Astilleros Espanoles. La contruccibn naval en Espana, 1872-1998 (Madrid, 1 9 9 8 ) .

STEFAN

Notes on contributors

xiii

is Professor of Baltic History, Culture and Society, Department of Baltic Studies, Stockholm University. Among her publications are: Peasants and the World Market (Stockholm, 1 9 9 3 ) ; Economic Nationalism and Industrial Growth: State and Industry in Estonia 934S9 (Stockholm, 1 9 9 8 ) .

ANU

MAI

K O L L

I

K U B U is a Reader at Charles University, Prague. Among his publications are: Nemecko — zahraniene politicke dilema Edvarda Benese [Germany — foreign policy dilemma of Eduard Benes] (Prague, 1 9 9 4 ) ; with Antonin Klimek, Ceskoslovenska zahranieni politika let 1918—1924 [Czechoslovak foreign policy 1 9 1 8 — 1 9 2 4 ] (Prague, 1 9 9 5 ) .

EDUARD

L A M B E R G is Researcher of the Finnish Academy Department of History, University of Jyvaskyla. Recent publications include: 'Economic interest groups in Finnish foreign trade policy decision-making', Scandinavian Economic History Review 2 ( 1 9 9 8 ) ; doctoral dissertation: Taloudelliset eturyhmal neuvolleluprocesseissa — Suomen kauppasoplmuspolitiikka 1918—1938 [Economic interest groups in negoti­ ation processes — Finnish trade agreement policy 1 9 1 8 — 1 9 3 8 ] .

J U H A - A N T T I

M A T I S is Professor of Economic History at the Economics University, Vienna. He is author of books and articles including: with D. Stiefel, 'Mit der vereinigten Kraft des Capitals,des Credits und der Technik . . .' Die Geschichte des osterreichischen Bauwesens am Beispiel der Allgemeinen Baugesellschaft — A. Porr Aktiengesellschaft, 2 vols. (Vienna, Cologne and Weimar, 1 9 9 4 ) ; editor with Alice Teichova, Osterreich und die Tschechoslowakei 1918—1938 Die wirtschaftliche Neuordnung in Zentraleuropa der Zwischenkriegszeit (Vienna, Cologne and Weimar, 1 9 9 6 ) .

HERBERT

O ' D A Y is Professor of Economic History at the University of North London. He is author of many books and articles including: The Making of Modern Irish History Revisionism and the Revisionist Controversy (editor with D. George Boyce) (London, 1 9 9 6 ) .

ALAN

P A T E K is Professor of Economic History at Charles University, Prague. His publications include: Dejiny hospodasstvi oeskych zemi [The economic history of the Czech Lands], (Prague, 1 9 9 5 ) .

JAROSLAV

P O G A N Y is a Senior Research Fellow at the Department of Economic History, Budapest University of Economic Sciences. Among her publications are: 'The history of the Hungarian Bank of Issue, 1 9 1 4 — 1 9 2 4 ' , Parts I V and V of A Magyar Nemzeti Bank Tortenete

AGNES

xiv

Notes on contributors

[The history of the Hungarian National Bank] (Budapest, 1 9 9 3 ) , vol. I, pp. 3 4 3 — 4 9 9 ; 'The liquidation of the Austro-Hungarian Bank' in Fra Spazio e Tempo Studi in Onore di Luigi De Rosa, Edizioni Scientifiche Italiane ( 1 9 9 5 ) , vol. III. T E I G H O V A is Emeritus Professor of Economic History at the University of East Anglia in Norwich and Honorary Fellow of Girton College, Cambridge. She received Honorary Doctorates from the University of Uppsala and the University of Vienna. Recently she edited with EricBussiere and Michel Dumoulin LEurope centrales et orientale en recherche d'integration economique (igoo-igjo) (Louvain-la-Neuve, 1 9 9 8 ) .

ALIGE

is Professor of Economic History and Fellow of the Leibniz-Societat, Berlin. He is author of numerous publications, including: 'Handelsgeschafte im Kalten Krieg' in C h . Buchheim (ed.), Wirtschaftliche Folgen des Krieges in der SB^/DDR (Baden-Baden, 1 9 9 5 ) ; 'Der Einfluss der Aussenwirtschaftspolitik auf die Beziehungen der DDR-Bundesrepublik', Deutschland Archiv 5 ( 1 9 9 3 ) .

JORG

ROESLER

T O M A S Z E W S K I is Professor of Economic History and Director of the M . Anielewicz Centre for the Study and Teaching of the History and Culture of Jews in Poland, Warsaw University. Among recent books are: with J. Adelson, T. Prekerowa and P. Wrobel, Najnowsze dzieje ZZidow w Polsce w zrysie (do igjo roku) [The most recent history of Jews in Poland (until 1 9 5 0 ) ] , (Warsaw, 1 9 9 3 ) ; and with Zbigniew Landau, Bank Handlowy w Warszawie S. A. Zjarys dziejow i8yo—iggj [The Commercial Bank in Warsaw Ltd. The history from 1 8 7 0 to 1 9 9 5 ] , (Warsaw, 1 9 9 5 ) .

JERZY

T O R T E L L A is Professor of Economic History, at the Universidad de Alcala, Madrid. He is President of the Academic Committee of the European Association for Banking History. His latest books include: Una historia de los Bancos Central e Hispano Americano, igoo—2000 with J. L. Garcia Ruiz (forthcoming); editor with R. Sylla and R. Tilly, The State,the Financial System,and Economic Modernization (Cambridge, 1 9 9 9 ) ; El desarrollo de la Espana contempordnea. Historia econbmica de los siglos XIXy XX (Madrid, 1 9 9 4 , 1 9 9 5 and 1 9 9 8 ) .

GABRIEL

V A L E R I O is Professor of Economic History, Technical University of Lisbon. Among his publications, with Eugenia Mata, Historia Economica de Portugal (Lisbon, 1 9 9 4 ) .

NUNO

Notes on contributors

xv

is Professor of Economics at the Financial Academy under the Government of Russia, Moscow. His recent publications include: Applied Theory of Competition (Moscow, 1 9 9 6 ) ; 'Unternehmensmanagement unter den Bedingungen der Wiederherstellung des Wettbewerbes in Russland' in Claus Steinle et al. (eds.), Management in Mittel- und Osteuropa (Frankfurt am Main, 1 9 9 6 ) .

ANDREI

Y U .

Y U D A N O V

Acknowledgements

This volume arose out of the preparations for the session on 'Economic change and the national question in twentieth-century Europe' at the Twelfth International Economic History Congress in Madrid, 2 4 to 2 8 August 1 9 9 8 . The papers were presented and discussed at a preCongress conference in Vienna in June 1997 and at the session in Madrid. We should like to thank the authors of papers, rapporteurs and discussants who made both the Vienna conference and the Madrid session a success. The preparatory period gave authors time to revise their papers and editors the chance to be in close contact with the authors. We have incurred various debts to institutions: the Institute of Economic and Social History of the Economics University of Vienna, the Austrian Ministry of Science and Transport and the British Academy. For their assistance we are truly grateful. Our warm thanks go to Dr Charlotte NatmeBnig who helped in the organisation of the Vienna conference and special thanks are due to William Davies of Cambridge University Press for his interest and help in the completion of this volume.

xvi

Introduction Alice Teichova,Herbert Matis and Jaroslav Pdtek

1

The twentieth century has been called 'the age of extremes' as well as the cruellest and bloodiest century in the history of mankind. Its course was crucially influenced by nationalism combined with racism. During its history, nationalism, intrinsically connected with the national ques­ tion, manifested itself in diverse forms in various countries and regions at different times. While there are a good many publications on nation­ alism, including its political, cultural and religious background, the economic dimension of the national question has been little examined. In the last analysis there lurks the demanding problem of mediation. That is, essentially, the problem of identifying and comprehending the interconnections between political, ideological and economic spheres. The problem has very rarely been addressed and this volume attempts to draw attention to the need to study it. There can be no doubt about the enduring significance and the immense historical impact of the national question, which, we realise, concerns European as well as nonEuropean populations. But, in order to achieve a feasible geographical scope and timescale, this volume deals with the national question in the light of economic change in European countries in the twentieth century. It contains twenty case studies on nations and nationalities in countries spanning Europe from west to east - Ireland to Russia - and south to north — Greece to Estonia. Applying a multifaceted approach by taking into account such aspects as the state, national identity, language or religion, the authors investigate the relationship between economic activity and the national question in the twentieth century. The political landscape of Europe does not permit a neat division of countries into those with a nationally homogeneous population and those with nationally mixed populations. Such divisions have, indeed, never existed as states are dispersed throughout Europe either with linguistic and ethnic majorities, or small ethnic minorities, or bilingual, multilingual and/or multiethnic populations. 2

i

2

ALICE TEIGHOVA,

H E R B E R T MATIS AND J A R O S L A V P A T E K

In countries of western Europe the national question has, generally, not been accompanied by frequent eruptions of violence. The exception is Ireland, discussed in Alan O'Day's essay. The changing contours of Irish nationalism are examined in the framework of Britain's capitalist development and its situation as a world empire and centre of interna­ tional trade and finance to which, as O ' D a y argues, historically Ireland has belonged — even after Southern Ireland's independence in 1921 — down to the present day. Throughout, the strength and violent features of the national question have not abated. Beginning with the western countries of continental Europe, Erik Buyst analyses the history of the close interplay of economics and politics in Belgium that affected the seesawing relationship between the two large language groups, the French speakers in Wallonia and the Dutch speakers in Flanders. He convincingly shows how changes in economic performance in both regions profoundly affected power-political issues. That is, until the 1950s the economic performance of French-speaking Wallonia had been more significant; however, since the 1950s Flemish economic growth has strengthened the political influence of Dutch speakers, leading to linguistic, administrative and fiscal equivalence. In the case study of divided post-Second World War Germany, Jorg Roesler implicitly poses the question of whether Germans living under different socio-economic systems in the Federal Republic of Germany (FRG) and the German Democratic Republic (GDR) developed separate national identities. Taking German—German trade as a touchstone, he examines periods of strong trade links, which tended to strengthen unifying elements against the official policy of political separation, and periods of virtually complete economic and trading separation followed by frozen political relations. Although two separate German national identities had not developed by 1 9 9 0 , when unification occurred differing economic structures in East and West stymied the process of overcoming social and mental differences. Quite different was the fate of the small Slav enclave of the Sorbs in pre-1945 Germany and in the post-1949 G D R , which is examined by Eduard K u b u Before 1 9 4 5 , in the setting of the numerically and economically overwhelming power of the German population, the Sorbs were unable to resist relentless Germanisation in the face of urbanisation and industrialisation. After 1 9 4 5 , even with official support during the decades of the G D R regime, a question mark was hanging over the continuing existence of Sorbs as a separate ethnic and language community.

Introduction

3

Various authors show that the pressures of the market economy tend to sharpen national conflicts and bring them to the surface where they latently exist. In Switzerland considerations of national issues appear as an act of political pragmatism. Thus Bruno Fritzsche maintains that Switzerland is not a multinational but a multilingual state, whose population has acquired a Swiss identity. Historically decisive was the reality of linguistic and administrative autonomy. While national preju­ dices and economic reasons for conflict have not been absent and regional economic differentiation has always existed, economic levels on a cantonal basis have been fairly equal, and there has been no concentrated economic backwardness in any linguistic region. This is shown in detail in Fritzsche's chapter. During the twentieth century, differences due to industrialisation and migration more strongly affected social antagonisms than cultural or national conflicts. Southern European countries of the Mediterranean peninsulas display remarkable parallels of political and economic nationalism in historic perspective but, towards the end of the twentieth century, the European Union played an integrating role. Portugal is one of the few European countries where the population is ethnically almost homogeneous and to which the term 'nation state' can effectively be applied. Nuno Valerio distinguishes between two periods in the course of the twentieth century. T h e first half of the century was dominated by the perception of a threat from Spain, which seems to have been a reaction to Portugal's long-lasting economic decline in the wake of the loss of its empire. However, from the late 1940s this traditional pattern was changing when the Portuguese, turning towards European integration, brought forth economic recovery and growth. Although the threat from Spain, as perceived in Portugal, never materialised, strong Spanish nationalism is, according to Gabriel Tortella and Stefan Houpt, a twentieth-century phenomenon; it devel­ oped almost parallel to Catalan and Basque nationalism, which was brutally suppressed. This was accompanied and supported by Spanish economic nationalism in its extreme forms during the dictatorships of Miguel Primo de Rivera and Francisco Franco. Nationalist interventionist and protectionist policies were slightly loosened during the endphase of Franco's fascist hold on the economy and society and only finally dis­ appeared as late as 1 9 8 6 , with Spain's admission to the European Union. Spain's membership of the European Union has not solved the Basque national question. As one of Europe's serious violent movements, Basque nationalism has long historical roots. These are traced

4

A L I C E TEIGHOVA, H E R B E R T MATIS AND J A R O S L A V

PATEK

from its beginnings to the present by Montserrat Garate Ojanguren, who emphasises the importance of economic factors such as Basque participation in key sectors of the Spanish economy since the late nine­ teenth century, the dramatic impact of the world economic crisis and the decline of heavy industry, which increased social grievances and fanned the Basque nationalist movement. As to Italy, it was the legacy of territorial fragmentation and relative economic backwardness that affected the national question there. Luigi De Rosa shows that there existed a strong and unceasing relationship between nationalism and the economy in the course of the twentieth century. Fascist chauvinism was accompanied by extreme economic pro­ tectionism and military campaigns aimed at colonial conquest in the first half of the century. Italy's participation in the process of European cooperation in the second half-century was not bereft of nationalist tendencies, eager to assert national interests within the European Community. In Greece, as in Italy, memories of a glorious ancient past were prone to be misused to foster the irredentist dream of a 'Great Greece', as Margarita Dritsas remarks. But her concern is with the historical process of nation-building, national integration and economic development, in which commerce played a larger role than industry in comparison with Italy or Spain. Turning to central and south-eastern European states — Austria, Czechoslovakia, Hungary and Yugoslavia — which arose on the ruins of the Habsburg Monarchy, we are confronted with great diversity: such as a west—south-east gradient of relative economic backwardness and ethnic dispersion intensified by wars, national strife and migration. In nationally largely homogeneous Germany the striving for a common national market, in the nineteenth century, furthered the national unification process culminating in the establishment of a nation state. In nationally heterogeneous Austria-Hungary the existence of a common market did not prevent its demise in the wake of its defeat in the First World War. The unsolved national question in a multinational empire, inhabited as it was by twelve ethnic groups with different lan­ guages, various religions and diverse cultures, and at different levels of economic development, proved to have had the explosive force of dynamite. After the dissolution of Austria-Hungary in 1 9 1 8 , the national question reappeared variously in the newly formed small states of central and south-eastern Europe, which had inherited the west—east and, in the case of Yugoslavia, also the north—south gradient of economic development from the former empire.

Introduction

5

T h e German-speaking Austrians living after 1 9 1 8 in a shrunken state that remained from a large empire in which they had been the dominant national group did not, for a long time, see themselves as a people with a national identity separate from that of the Germans. They also doubted the economic viability of their new state. Herbert Matis pursues these issues through the twentieth century and guides the reader through the stages from 'the state that nobody wanted' to the postSecond World War period when the decisive economic upswing supported a common feeling among Austrians of being 'a distinct Austrian nation'. At the same time as Austria became nationally a largely homogeneous state, the Czechoslovak Republic, founded on 2 8 October 1 9 1 8 , remained, asJaroslav Patek writes, a kind of miniature Austria-Hungary. His detailed analysis of the national and social composition of the Czechoslovak population leads the reader towards a deeper understanding of the internal and external forces that, in a relatively successful economy, enhanced national strife and brought about the fateful Munich Agreement in 1 9 3 8 , followed by the dismemberment of the only remaining democracy in Central Europe. Patek's survey of the geographical and occupational distribution of nationalities provides a necessary background to understanding Christoph Boyer's essay on the complicated issue of competition between indigenous German-speaking and Czech-speaking entrepreneurs in the economy of interwar Czechoslovakia. Contrary to some contemporary assertions, Boyer shows that there existed neither a pure Czech nor a separate German economy within Czechoslovakia. He finds both partnership and rivalry in which nationalistic and chauvin­ istic arguments were used, influenced strongly by National Socialism since its rise in Germany in the 1930s. Slovakia's economic development, and particularly the Czech—Slovak relationship through all stages of political changes, from AustroHungarian times to the present receives attention from Roman Holec. He elucidates a little-known chapter in the history of the two nations and throws light on the separation of Czechoslovakia into two separate republics in 1 9 9 2 when, as he says, all differences, including the levelling out of the disparate economic development, were less contentious than at any time during the existence of Czechs and Slovaks in a common state. Slovaks constituted themselves ethnically within the Hungarian state and politically as a nation during the nineteenth century. They are included in Agnes Pogany's account of national minorities in Hungary,

6

A L I C E T E I C H O V A , H E R B E R T MATIS AND J A R O S L A V

PATEK

where the content of the national question rapidly changed with the break-up of Austria-Hungary. Magyars found themselves in a majority accounting for almost 90 per cent of Trianon Hungary's total population. Nevertheless, Magyar nationalism was made use of by Hungary's ruling elite to bolster revisionist demands at the same time as, in an atmosphere of suspicion and aggressive nationalism, ethnic minorities became a weapon in economic competition against neighbouring successor states. Since its foundation in 1 9 1 8 , multinational Yugoslavia — which, not unlike Czechoslovakia, inherited its uneven economic development from the Habsburg Monarchy — has been a country of economic contrasts, from the relatively industrially advanced Slovenia and Croatia to the poorest and economically most backward Kosovo. Neven Borak presents a historical survey of the changing political scene and an analysis of economic changes. He discusses the causes and consequences of events that led, in the course of the post-1945 decades, to the revival and growth of destructive nationalism and the violent dissolution of Yugoslavia in the 1990s. While the economic situation has been misused as a potent instrument for mutual nationalist accusations about 'exploitation' among federal units, the divergent pace of democratisation in different parts of Yugoslavia and the vacuum left by the dissolution of the communist system played an equally, if not more important, role than economic factors in the country's disintegration. The violent consequences of these dramatic events have been witnessed in the last decade of the twentieth century. Lastly, the relationship between the economy and nationalities are explored in states that arose on the territory of Wilhelmine Germany after its defeat in the First World War and of tsarist Russia after the victory of the Bolshevik Revolution in 1917 and following upon the dis­ integration of the Soviet Union after 1 9 8 9 . Jerzy Tomaszewski deals with the considerable socio-economic, national and regional differences in the post-1918 Polish Republic, whose territory had been divided between the three neighbouring powers — Austria, Prussia and Russia. Within Poland, where the dominant Polishspeaking population held a two-thirds majority, the geographic boundaries between nationalities were, similar to Czechoslovakia, seldom clear-cut. This is shown in Tomaszewski's survey, in which he confronts economic statistics with the regional distribution of nationalities from Poland's population censuses. The author states that, generally, historians stress the political aspects of the national question in Poland; against this opinion he puts forward evidence that backs up his conclusion that

Introduction

7

national conflicts could only be solved by fundamental changes in the economic and social structure of Poland accompanied by economic growth and diminishing differences between economically advanced and backward regions. Among the Baltic peoples, Estonians perceived foreign domination, immigration and low demographic growth as the main threats to their survival as a nation. These aspects are addressed by Anu Mai Koll in her discussion of the ethnic division of labour and the economic and ethnic policy of successive governments in Estonia. She details how the social structure of the Estonian population, which came to consist overwhelm­ ingly of workers and employees, was strongly affected by economic change. Remarkably, Riitta Hjerppe and Juha-Antti Lamberg find, on the basis of analysis of foreign trade, that economic developments seem to have had no significant impact on the national question in Finland. In spite of discontinuities, similar to those in Estonia, Finland was able to withstand Russification and Sovietisation in the course of the twentieth century. Also, the equalisation of Finnish and Swedish as official languages seems to have prevented the rise of national antagonisms on a mass scale. The authors conclude that Finland gained independence not as a result of nationalism but rather because of the chaotic developments in Russia. Andrei Yudanov introduces a novel approach as he tackles the complicated case of multinational Russia by investigating entrepreneurship during the period of industrialisation in the Soviet Union and during the period of disintegration in post-Soviet Russia. T h e author's main concern is to approach national issues from the point of view of their impact on the functioning of the community of enterprises. He shows that the break-up of the multinational Soviet state and of the Unionwide web of enterprises that had contributed to unifying it caused a grave crisis in the economy when national conflicts and political power struggles contributed to destroying the centralised macroeconomic superstructure of Soviet enterprises. In conclusion he optimistically finds some evidence of a contemporary trend toward the regeneration of the historically shaped community of enterprises. The subject-matter approached cannot be exhausted in one volume of essays. As indicated, its aim is to stimulate study and debate. This is essential if we wish to begin to understand, for example, the historical background of terrible events in Yugoslavia we see and read about as the book goes to press.

8

A L I C E T E I C H O V A , HERBERT MATIS AND J A R O S L A V P A T E K

NOTES

1 Eric Hobsbawm, Age of Extremes: The Short Twentieth Century igi^-iggi (London, 1994). 2 Cf. Mikulas Teich and Roy Porter, The National Question in Europe in Historical Context (Cambridge, 1993).

C H A P T E R

O N E

Nationalism and the economic question in twentieth-century Ireland Alan O'Day

We believe that Ireland can be made a self-contained unit, pro­ viding all the necessities of living in adequate quantities for the people residing in the island at the moment and probably for a much larger number. (Sean Lemass, 1932)

1

INTRODUCTION

It is commonly suggested that the white-hot flame of Irish nationalism has abated gradually since the earlier part of the twentieth century. If so, this at least fits part of E. J. Hobsbawm's controversial declaration that nationalism at the close of the twentieth century is on the verge of redundancy. Certainly it is true that nationalism in Ireland, especially in economic policy, has different contours now from a generation ago. Nationalism in Ireland has four significant ingredients: it is shaped by the archipelago's history, including its political and social structure as well as economic factors during the great age of capitalist development; it is contingent upon Britain's position in the pre-1914 era as the centre of international trade and finance and its continuing role in exercising these functions since then; it is formed by Britain's situation as a world empire at least up to the 1 9 6 0 s ; and finally England, more specifically London, remains the hub of a multinational internal economy to which Ireland belonged even after 1921 and arguably down to the present day. The experience of the area now incorporated as the Republic of Ireland — which is less than the island of Ireland, it is maintained — falls within the contending frameworks of current theories of nationalism. Because Northern Ireland, the area comprising the north and eastern part of the island, remained part of the United Kingdom, it did not have the option of running an economic policy distinct from that of the British government at Westminster. It is therefore given less attention in the present analysis. Ireland has gone through four stages: a modified 2

9

10

ALAN O ' DAY

economic nationalism of a variety inherited from pre-statehood leaders of the national movement from 1922 to 1 9 3 2 ; more complete adoption of protectionism within an ideology of self-sufficiency after Eamon de Valera's government assumed power, 1932 to 1 9 5 8 ; planned capitalism accompanied by more open trade and foreign investment, 1 9 5 8 to 1 9 7 3 ; and partial protectionism within the capitalist framework of the European Union, post-1973. None of the eras were self-contained, nor were the predominant strategies within any of the time-spans pursued exclusively; opportunities and constraints of a post-colonial economic reality had an impact on the options available. The goal of policy makers at all times is aptly expressed by Sean Lemass, quoted at the beginning of this chapter; the outcome was often different. A theme examined here is one suggested by Liam Kennedy, who implies that broadly the economic policy of the Republic of Ireland has been consistent since the creation of the new state. He observes, 'mir­ roring its role in the nineteenth century as part of the British Empire, Ireland today is an integral part of the developed world. Through its involvement in various international treaties and frameworks, it defends its own interests against Third World countries.' 'The Irish state', Kennedy insists: 3

through its membership of the European Community actively promotes poli­ cies of agricultural protectionism which discriminates strongly against Third World imports. It also participates in schemes to dump European surplus output, produced under conditions of EC subsidy, onto world markets, thereby undercutting the prices of Third World producers. 4

Coming from a younger economic historian, born in the Irish Republic but a member of the faculty at The Queen's University of Belfast, his thesis merits careful consideration for it takes issue with the predominant strain of thinking about Ireland's approach to economic development since 1 9 5 8 , most notably the presumption of a wider perspective and internationalism. I R E L A N D : P R E C O N D I T I O N S OF E C O N O M I C

NATIONALISM

Irish nationalism has been a dynamic ideological movement for attaining and maintaining the autonomy, unity and identity of Ireland and her people; it was a vehicle for activating people and creating solidarity among them in the common quest for a cherished goal. Three ideas are fused - the collective self-determination of the people, an expression of national character and individuality, and the vertical division of the world into unique nations, each contributing its special genius to the

Nationalism and the economic question in Ireland

n

5

common fund of humanity. It rests on what Elie Kedourie describes as the assumption that a nation must have a past and, no less funda­ mentally, a future and, of course, that future must be attractive econom­ ically. What constitutes the state, territory, people and culture has various and far from consistent definitions. This semantic and ideolog­ ical indecision has an economic dimension, leading to a far from clearcut set of national priorities. John Breuilly points to the way nationalism fudges distinctions between the cultural and political community: 6

The demand for statehood is rooted in the national spirit, even if inarticulate and repressed, and the nationalist simply speaks for that spirit. The identity of the nation is provided in arbitrary ways. The leap from culture to politics is made by portraying the nation at one moment as a cultural community and at another as a political community, whilst insisting that in an ideal state the national community will not be split into cultural and political spheres. The nationalist can exploit this perpetual ambiguity. National inde­ pendence can be portrayed as the freedom of the citizens who make up the (political) nation or as the freedom of the collectivity which makes up the (cul­ tural) nation. Nationalist ideology is a pseudo-solution to the problem of the relationship between state and society but its plausibility derives from its roots in genuine intellectual responses to that problem. 7

His assessment is amplified in a rephrased form by a sociologist, Liah Greenfeld, who sees structural, cultural and psychological aspects as part of the same nationalist phenomena. If economic identity is added to constructs proposed by Breuilly and Greenfeld, their descriptions fit Irish circumstances. As a popular political ideology concealing com­ plexities of purpose, Irish nationalism succeeded in the necessary simplification, repetition and concreteness of its message in order to appeal to a mass clientele. By reducing complex emotions to simple expressions, it was able not merely to influence Ireland's politics since the eighteenth century but also to shape the frame of reference within which Anglo-Irish affairs are discussed. Nationalism's success in Ireland, though, was achieved at a heavy cost to the dream of uniting all the peoples of Ireland under one sovereign government and the outcome was narrowed, albeit reluctantly, to a relatively homogeneous state for the twenty-six county area of the island, something depreciated in the derisory republicans' ballad: 8

God save the southern part of Ireland Three quarters of a nation once again.

9

O n a positive note, Kennedy points out, however, that the 'vanishing Protestant' population 'brought ethnic and sectarian confrontation to a close over much of Ireland'. 10

A L A N O' DAY

12

A second casualty has been an inability to define a coherent and dis­ tinctive long-term economic purpose for the community, especially for its relationship to the former colonising power, at least until after 1 9 7 3 when the European Union provided a partial alternative rationale. Mary Daly comments on the interplay of the Anglo-Irish legacy, nation­ alist ideas and practical economics: The fledgling Irish state [in 1922] therefore inherited a confused baggage of ideals: a desire to protect rural society and its values and to stabilize the rural population; a vision of industrial development minus the evils of capitalism, materialism, and urbanization; a desire to redress previous disadvantages suffered by Irish businesses; an expectation of material progress without the state provisions; the restoration of the Irish language and culture; and, though not explicit until the 1920s, the enshrining of Catholic social teaching. Other issues were not clearly addressed, in particular the nature of future economic relations with Britain, how exporting industries would coexist with a protected sector and how to reconcile cattle farmers and the restoration of tillage. Except for hopes that electricity and motor cars would help to create this economic idyll, no account was taken of the dictates of the market economy. 11

Her rather jaundiced assessment can be qualified in three respects: it was not fundamentally distinguishable from the inheritance and outlook of most new states in post-1918 Europe; the confusion of the Irish leader­ ship was not so far removed from that of British policy makers faced with the problems of the interwar economy; and there was more consistency in the approach of the new state than she acknowledges. Always there was a reality, as the Fianna Fail election manifesto stated in 1 9 3 2 , that 'the people of Britain and ourselves are each other's best customers. Our geographical position and other factors make it unlikely that this close trade relationship will rapidly change.' Even in April 1 9 3 9 an official acknowledged 'we are very largely at the mercy of other countries and particularly of the United Kingdom, in respect of our external trade and the economic activities of this country could in such circumstances be completely paralyzed'. This paralysis, induced by British national needs during the Second World War, did strike hard in Ireland, leading to a substantial overall reduction in the standard of living, economic activity and social welfare provision. Nationalists scored much better in influencing the outlook of posterity about their political efforts than they have over the economic development of the country. Historians and economists generally have been critical of the nation's economic performance and policy until the close of the 1950s. In Programmefor Economic Expansion, superintended by an Irish official, T. K . Whittaker, published 12

13

14

Nationalism and the economic question in Ireland

13

in 1 9 5 8 , it was observed, 'after 35 years of native government people are asking whether we can achieve an acceptable degree of economic progress'. Ireland was fertile soil for an outburst of nationalism. Progression from people to nation to state is seen as a natural, legitimate and inevitable course of Ireland's history. Nationalists demanded selfdetermination and statehood as a historic right. In 1907 John Redmond voiced the nationalist postulate: 15

16

That national demand, in plain and popular language, is simply this, that the government of every purely Irish affair shall be controlled by the public opinion of Ireland, and by that alone. We demand this self-government as a right . . . The demand for national self-government is therefore, founded by us, first of all, upon right, and we declare that no ameliorative reforms, no number of land acts, or labourers acts, or education acts, no redress of financial grievances, no material improvements or industrial development, can ever satisfy Ireland until Irish laws are made and administered upon Irish soil by Irishmen. 17

Michael Collins spoke for another vision of the nation: 'I stand for an Irish civilization based on the people and embodying and maintaining the things — their habits, ways of thought, customs — that make them different.' But over the long haul, Irish nationalists devoted far fewer words to questions of abstract rights, to idealised visions of the future, to the historic basis of the nation or the uniqueness of Irish culture — though, to be sure, these ideas feature in their rhetoric — than they did to expressing themselves in the language of 'historical wrongs'. Emphasis upon 'wrongs' had the strategic virtue of offering the widest common denominator, providing a unifying principle capable of binding together peoples, including potentially a significant segment of Protestants. Its limitation was that such appeals were primarily materialistic, focusing heavily on supposed economic deprivation and exploitation. This sense of disadvantage received ample expression in the common rhetoric of the national movement, though the objective basis for these complaints has been subjected to modern criticism. Kennedy, for instance, deflates the tendency of some commentators to compare Ireland with contemporary Third World nations, pointing out that in 1911 the country had much the same living standard as Spain, Norway, Finland and Italy. A second strand of the deprivation or 'grievance' theme revolved around the sense of a section of Ireland's peoples, namely Protestants, benefiting from the British connection at the expense of Catholics. For the Irish it was not continental communities but Great Britain and 18

19

14

ALAN O ' DAY

America that was the point of comparison. Irish standards of living might be comparable to Spain but such comparisons were wide of the mark. Yet even the differentials between Great Britain and Ireland nar­ rowed significantly between the mid-nineteenth century and 1 9 1 4 . Additionally, Donald Akensen shows that if income from rentals is excluded, the economic differential between Irish Protestants and Catholics is quite narrow. It is not, however, what the cold statistics demonstrate so much as what Irish Catholics at the time believed. Greenfeld makes the important observation that feelings of resentment polarised around an ethnic or national cause are likely when a people believes that it is equal to the dominant group but is denied equality because of artificial barriers maintained by the state or the ascendant society. Despite limitations in their strategic vision, nationalists proved remarkably capable of mobilising and retaining the loyalty of most Catholics for the patriotic platform. For the reasons outlined by Greenfeld, they were able to override regional, economic, class and cultural distinctions in spite of British concessions that conceded the substance of their material claims. Several theoretical insights aid understanding of the emerging nationalism and its economic dimension in Ireland. Miroslav Hroch notes that national movements postulate three demands: political aims centring on self-administration; cultural claims in which they try to establish and strengthen an independent culture; and social and eco­ nomic goals, asking for a just division of national income along with a full social structure, corresponding to the stage of capitalist transformation of the dominant state. Also, Hroch points out that: 2 0

21

22

23

conflicts of interest between classes and groups whose members were divided at the same time by the fact that they belonged to different linguistic groups [in Ireland, religious affiliation] had indisputable significance for the intensification of the national movement. The polarity of material contradictions therefore ran parallel to differences of nationality and as a result of this conflicts of inter­ est were articulated not (or not only) at the social and political level appropriate to them but at the level of national categories and demands. 24

The situation in Ireland in the nineteenth century conforms to cases of peasants belonging to the non-dominant ethnic group and landlords to the dominant nation, of an ethnic differentiation between the 'centre', that is England, and 'province', that is Ireland, and where a substantial section of the new intelligentsia (he uses the term 'academics') belong to the non-dominant group and the old elites stem from the ruling nation. By the same token he notes, 'where the national movement . . . w a s not 25

Nationalism and the economic question in Ireland

15

capable of introducing into national agitation . . . the interests of specific classes and groups . . . it was not capable of attaining success'. To this Ernest Gellner affirms that 'conflict of interest and cultural difference are politically effective if, and only if, they are jointly present'. Michael Hechter and Margaret Levi suggest that ethnic solidarity arises in regions developed as internal colonies where there is a hierarchical cul­ tural division of labour determining life's chances. Solidarity increases when members interact within the boundaries of their own group. T h e movement's durability, however, depends on the ability to deliver on its promises. They distinguish between regional and ethnoregional movements: the first couches claims solely in terms of material demands; the second bases its case on ethnic distinctiveness. Greenfeld's analogous point has been examined already. In the battle for 'hearts and minds' in the late nineteenth and early twentieth centuries, national propagandists scored another huge triumph, stigmatising opponents as bigots, reactionaries or at best wellmeaning but misguided dubs; and at the same time engaging their critics to a debate within the parameters defined by themselves. Much of that discussion centres on the two traditions within nationalism — the constitutional and revolutionary — both seeking the same ends by different paths. Redmond's statement above is an example of this dichotomy. A difficulty of the literature on Irish nationalism is that it is politically focused; the economic dimension is typically omitted or given a low priority. It is misleading to break it into political or economic segments. More appropriately, following Daly, it must be viewed as a total process. Nevertheless, Irish nationalists themselves, it must be admitted, often did engage in precisely this sort of myopic analysis at the expense of minimising economic factors. Ireland exhibits characteristics found elsewhere. National movements everywhere had to locate and then persuade people whom they wish to mobilise that distinctions between themselves and the dominant state were fundamental and more important than any common bonds. Also, they needed to pinpoint the dominant state as the enemy. As in other cases, advance of the national movement in Ireland was complicated by a triangular relationship, which in an ethnic phase found the threatened mainly Protestant minority choosing to identify with, and seek the protection of, Britain, associating themselves culturally and, even more completely, economically with it rather than with Ireland. In other respects, the country differed from the European norm where the more economically advanced regions tended to adopt nationalism for, 26

27

28

29

l6

ALAN O ' DAY

excepting the north-eastern corner, it was an economic periphery to Great Britain. Language played a much weaker role in Ireland; religion, which was frequently less important as a catalyst elsewhere, was a sub­ stitute. While the language question was not wholly absent, because Ireland has been integrated into the Atlantic economy since the eighteenth century, nationalist priorities and more fully those of Irish commerce declined to place it above the clear advantages of being part of a transnational economic community. T h e Irish national ideal has three fundamental components — a his­ toric territory, a population 'entitled' to live in the historic territory and an aspiration to establish a separate state coterminous with the island and people. It was least effective in devising a satisfactory definition of what constituted the 'Irish people' for, as George Bernard Shaw observed, 'we are a parcel of mongrels'. Despite a language resplendent with the terminology of 'race' nationalists never developed a 'blood' definition of what constitutes being 'Irish'. Religion was a partial and incomplete substitute. Instead, divisions were horizontal between Protestants and Catholics and laterally within the two groups with the first proving easily the more influential. In Europe lateral divisions within ethnic communities were a more typical feature. Early attempts to include all creeds and classes dissolved ultimately in a national movement, focusing on uniting Catholics alone no doubt because forging a common secular identity proved discordant with Irish realities. In the years before 1 9 2 2 southern Protestants tended to be owners of tenanted land (a declining but still significant feature in 1 9 1 4 ) , industrialists, professionals, mercantile folk or they were engaged in other occupations that appeared to be vulnerable under a Catholic-dominated regime. Protestants were an endangered economic group; their social and economic stations were eagerly sought by an aspiring Catholic petite bour­ geoisie, which, as Greenfeld notes, saw their aspirations of equality blocked by artificial constraints. As in other cases, the Irish were fragmented into numerous localised subcultures. The emergence of national identity owes much to modernising forces. Literacy, education, communication, the centralising bureaucratic state, a more organised and disciplined Catholic Church and the market economy, were factors facilitating the growth of a common culture of which the intelligentsia were its prime agents. This is labelled 'high culture' by Ernest Gellner. T h e cultural dimension by the twentieth century was reinforced with a modern or modernising economy derived from Britain, which paradoxically gave Catholics a 30

31

32

Nationalism and the economic question in Ireland

17

common purpose but, as noted already, tended to alienate the two reli­ gious communities on the island who increasingly were competing for the same opportunities. Daly suggests that the primarily agrarian and petit bourgeois base of the Catholic community derived the greatest benefit from the economic policies of the 1930s, a reminder that national move­ ments are never neutral concepts in any of their manifestations. Problems of timing and of who participated remain to be untangled. Nationalist appeals did not meet with unqualified acceptance even from Catholics, who did not fully adopt them before the 1880s. Even then, as the civil war of 1 9 2 2 - 3 demonstrated, there was a substantial differentiation along class lines about the content of the national movement as well as economic distinctions between those who supported or opposed the Anglo-Irish Treaty signed in December 1 9 2 1 . As the appeal of one or other variety of national identity increasingly became popular with Catholics, nearly all Protestants took up an oppositional posture. This is hardly surprising as Catholic rhetoric sprouting from all patriotic camps appeared antagonistic to Protestant interests, not least to their economic security. Rational-choice theorists emphasise that individuals identify with a particular community because this serves their interest. Identification may bring returns in the form of employment, physical comfort, or merely emotional satisfaction. Cultural nationalism, as John Hutchinson and Greenfeld note, is complementary, reinforcing objectives and thereby elevating the return on investment in patriotism. Finally, the question of who benefits from patriotic activism has been receiving considerable attention. There is a recent trend to see in it a bourgeois effort to strengthen a class position against the existing domi­ nant state and also as a means to exert authority over the masses below. Economic theorists provide a means to resolve the question, pointing to psychology and prestige as nationalism's 'value-added' for groups receiv­ ing fewer of the direct material compensations. In practice the benefits to individuals cannot be measured in terms of concrete material advantages, a point long articulated by nationalists but the modern formulation of this argument is quite different from theirs. 33

3 4

35

THE

ECONOMIC

LEGACY

When the Union of Great Britain and Ireland came into existence on 1 January 1801 the neighbouring islands had already been increasingly linked economically. Previously, Ireland had been under the suzerainty

l8

ALAN O ' DAY

of the British crown and controlled by the government in London. However, prior to incorporation, Ireland was subjected to a number of trade restrictions. Under the Union these limitations were removed gradually and Irish goods obtained free entry into the British market. This should have aided Ireland's economic development but the Union had a reverse effect. Nineteenth-century nationalists were adept at propagating the idea that Irish economic and especially industrial development had been thwarted by British interests that sought to destroy competition. During the first half of the nineteenth century, agriculture in Ireland responded to the opportunities of the British market. Wheat-growing boomed during the Napoleonic wars but contracted afterwards. During this period and throughout the century there was a move away from tillage towards livestock and dairy production. In the hard times of the post1815 years, manufacturing outside Ulster stagnated and declined. Ulster's economy moved in another direction. Linen production, shipbuilding and engineering geared to the British and overseas market boosted the importance of Belfast. These trends were accentuated after the Great Famine (1846—9). In the second half of the nineteenth century the Irish economy was characterised by a highly industrialised north, especially north-east, an east dedicated to livestock and dairying for the British market, a subsistence western region and an excess population that migrated to areas of demand (Britain and overseas) for unskilled labour. By 1 9 1 4 the agricultural share of the labour force was 4 3 per cent, while industry had 25 per cent; both were in line with European norms. Regional concentration of economic specialism is also typical. Industry elsewhere tended to be located in certain areas and not distributed evenly, a pattern that applied with equal force to Great Britain. This 'normal' economic pattern disguises crucial ethnoreligious differences. Land ownership and industrial proprietorship were over­ whelmingly in Protestant hands, while this group also tended to be dominant in the professions and upper echelons of the state bureaucracy (for example, a cultural division of labour). The skilled workers in northern industry were generally Protestants as well, though Catholics were present in lower remunerated employment. By 1 9 1 4 Catholics had made considerable inroads into land ownership (peasant proprietors of their previously tenanted holdings) and had gained an enlarging share of bureaucratic employment, though were still over-represented in the lower grades. They were aided by the growth of a service sector, school teaching and clerical work. Nevertheless, they 36

37

Nationalism and the economic question in Ireland

19

continued to feel disadvantaged. This perception has been analysed by Hutchinson, who points to 'blocked mobility'. Ireland had a bloated but static state bureaucracy (Gladstone in 1 8 8 6 argued for Home Rule, in part, as a way to curb this inflated sector) and teaching positions were stagnant due to a decreasing population while the numbers of qualified Catholics seeking these posts rose. Nationalist economic ideas were ham­ mered out on the anvil of perceptions that viewed Ireland and Catholics as the deliberate victims of discrimination. Although the north was industrialised heavily, this was not part of the 'mental' picture that most nationalists (though not Arthur Griffith) held of 'their' Ireland. Greenfield's observation is germane to the situation. She notes where nationalists seek to emulate a model that makes their own situation appear to themselves as inferior (Great Britain and the Protestant north), the consequence is resentment? From this resentment comes an empha­ sis on elements of indigenous traditions and a rejection of the dominant culture and the original principles of nationalism. This formulation affords context for Daly's estimate of the economic policies of the new state already cited. Ireland had a number of liabilities in the race for economic development, though these must be kept in perspective. These can be expressed simply as a limited natural resource base, a small domestic market, low incomes for a considerable portion of the population, weak traditions of skills and transport deficiencies due to location disadvantages. Such con­ straints were not a product of British policy. Manufacturing in the north was able to circumvent these obstacles by producing for an international market. Ireland, at the same time, had an abundance of natural grass along with a mild climate, facilitating livestock rearing. From a Catholic national point of view, the problem with more modest industrialisation in the southern provinces combined with growing dependence on grazing was that pasturage was not labour intensive and there was no alternative employment locally available; therefore the people (Protestants emigrated in only slightly lower proportions) left the country in large numbers. The disappearing Irish were a central theme in national rhetoric and are reflected in the citation from Lemass at the beginning of this chapter. These trends predated the famine. Set against this picture was a rising standard of living that rapidly converged towards the United Kingdom level by 1 9 1 4 . Much of this admittedly is attributable to the decline in labour supply. Between 1861 and 1911 the male labour force fell by 25 per cent; real wages for agricultural workers in the sixty years to 1911 rose 7 2 per cent while for builders the shift 38

39

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A L A N O ' DAY

upwards was a remarkable 101 per cent, both considerably higher than the average for the United K i n g d o m . Also, Ireland experienced a significant growth of productivity as a consequence of improved tech­ nology and capital accumulation. The Union was accomplished for political reasons but it soon had eco­ nomic repercussions. Isaac Butt in 1 8 4 6 outlined the case for Irish tariffs as the means to aid his country's economic development. At this junc­ ture he was a Conservative in politics and Butt wrote just when protec­ tionism was being abolished in the United Kingdom. He saw that his country was so seriously in arrears to its industrialised neighbour that it required insulation from competition. Butt's arguments found only a limited audience. Modernisation, however, soon bore out Butt's fore­ boding. Between the 1850s and the 1870s Ireland was equipped with a comprehensive rail network. The impact was swiftly felt. In the 1860s Joseph Chamberlain, then a Birmingham manufacturer, traversed the country by rail, selling the nails his firm produced. This was multiplied many times over as superior and cheaper goods penetrated local Irish markets, which previously were isolated from competition. Subsequently, the efficiency of the transport and distribution systems would press hard on Irish farmers, driving down incomes and increasing the attraction of the national agenda. The chief radical-national movement of the late 1850s and 1860s, Fenianism, was composed of urban artisans threatened by displacement. Hroch, comparing recent developments in post-Soviet Europe with nineteenth-century national movements, sees the first as a response to short-term depression and decline, the latter as arising from the general trend towards economic growth joined to social improvement. If his view is correct, Irish circumstances in the nineteenth century more accurately approximate to present-day national movements in the former Soviet bloc rather than they do those of the earlier epoch, for the growth of national sentiment was a response to perceived decline not improvement. Greenfeld and others point to the psychological function of national identity because of its utility to solve a crisis, and Ireland was certainly in the midst of economic turmoil. Two other factors enter into the discussion - capital deficiency and economic theory. The former had a double-barrelled explanation. First, the Irish landowners (and some others) lived in London and/or spent their rentals there (buying goods, etc.), depriving Ireland of muchneeded investment. Secondly, from the 1870s nationalists argued vigorously that the country was overtaxed. Both had some substance though 40

41

42

43

44

Nationalism and the economic question in Ireland

21

there is little objective evidence to suggest that Ireland suffered from a shortage of available capital. T h e argument conveniently ignores reverse expenditure, repatriated funds from overseas investments, remittances from the Irish overseas and similar sources of capitalisation. That the country was overtaxed may have been true — a Royal Commission reporting in 1 8 9 6 adopted this view. L. M . Cullen estimates that there was a net out-flow of capital between the 1870s and 1900 but thereafter a huge in-flow caused by improved prices for agricultural produce, more direct government expenditure and social welfare programmes such as old age pensions created under legislation enacted in 1 9 0 8 . While it is doubtful that the argument about capital shortage is strictly applicable to Ireland's case, there is some reason to accept a core—periphery explanation for the thirty years up to the turn of the century. Irish nationalists were not notably interested in economic theory. Isaac Butt was something of an exception and his views were expressed mainly before he espoused self-government. Another partial exception is Parnell, leader of the national party from 1880 to 1 8 9 0 and a member of parliament between 1875 and 1 8 9 1 , when he died. Parnell was one of the rare advocates of protectionism in the movement. Like Butt, he reasoned that only through some form of tariffs could Irish manufacturing be developed, overlooking the industries of the north-east. As linen, engineering and ship-building depended on access to overseas markets, protection posed a threat to these industries. Parnell, a Protestant, nevertheless had little sensitivity for the north-east. Curiously, though a landlord, he was not concerned about agricultural tariffs in spite of abundant evidence that Irish farmers were being swamped by cheap American imports. He gave voice to his protection­ ist views on several occasions in 1 8 8 5 but his ideas were promptly repudi­ ated by most nationalists. In 1 8 8 6 the British Liberals, a free trade party, adopted Home Rule for Ireland and Parnell shelved his advocacy of protection. T h e mainstream of the national movement was hostile to protection for two reasons — most were imbued with liberal economic thinking and identified themselves with the traditions of the Liberal party; also, home rulers were responsive to the tenant-farmer interest, especially after the electoral changes of 1 8 8 5 , which expanded the rural electorate and redistributed parliamentary constituencies to the advantage of farmers. As they would be obliged to pay more for goods, agriculturists saw in tariffs a threat to their own standard of living. Enthusiasm for protection, then, remained confined to a small section of bourgeois home rulers. 4 5

46

ALAN O ' DAY

22

An Irish unionist, Sir Horace Plunkett, introduced another vital strand to national economic ideas. He spearheaded the modernisation of agricultural production and the marketing of its output. His impetus had several facets: government-sponsored research and training, improved quality of Irish goods, construction of creameries, and he fos­ tered the co-operative movement. Plunkett's economic approach was professedly non-political, though in Ireland politics inevitably intruded. The underpinning theme was self-help and greater self-sufficiency. Plunkett's economic ideas were in harmony with the cultural revivalism that began to flourish in the last decade of the century. In 1 9 0 4 Plunkett's Ireland in the New Century emphasised the Gaelic League's contribution to promulgating the doctrine of self-reliance, observing: 47

in the course of my work of agricultural and industrial development I naturally came across this new intellectual force and found that when it began to take effect, so far from diverting the minds of the peasantry from the practical affairs of life, it made them distinctly more amenable to the teachings of the dry eco­ nomic doctrine of which I was an apostle. 48

That revival, which had two wings, modernising journalists and professionals and romantic nationalists, stressed the virtue of rural culture and of self-help. Cultural revivalists were not distinguished for their economic think­ ing but in the new century protectionism did find a fresh advocate in Arthur Griffith, a moderniser and founder of Sinn Fein. Griffith saw in cultural revivalism a route to induce the rapid economic development of the country. His economic ideas were inspired by the German, Frederick List's, The National System of Political Economy, first published in 1 8 4 2 and available in translation in English in 1 8 8 5 , which advocated national tariffs. Griffith linked economic development with the other aims of nationalism, also making the case for the necessity of a nation fostering both agriculture and industry: 49

With List I reply: a nation cannot promote and further its civilization, its prosperity, and its social progress equally as well by exchanging agricultural products for manufactured goods as by establishing a manufacturing power of its own. A merely agricultural nation can never develop to any extent a home or foreign commerce, with inland means of transport, and its foreign navigation, increase its population in due proportion to their well-being or make notable progress in its moral, intellectual, social and political development . . . A mere agricultural state is infinitely less powerful than an agriculturalmanufacturing state . . . W e must offer our producers protection where protec­ tion is necessary. 50

Nationalism and the economic question in Ireland

23

Following List, he believed that civilisation progressed naturally from pastoral economy to agriculture and then onwards to agriculture, indus­ try and commerce. Griffith shared the hostility of traditional nationalist economics to grazing and asserted that it would have to give way in some considerable degree to a restoration of tillage. Under Griffith's influence Sinn Fein advocated protectionism and self-sufficiency as the economic strategy of the nation in waiting. T h e Sinn Fein constitution in 1917 adopted a number of measures for economic advancement, including 'the introduction of a protective system for Irish industries and com' 51

merce . Neither Sinn Fein nor cultural revivalism generally made more than modest headway. Irish politics was in the hands of the National Party, which to the extent it considered the future economic course of the nation, remained wedded to liberal orthodoxy. In the normal course of events this leadership would have taken control of Irish government on the creation of Home Rule. However, between 1 9 1 6 and 1921 the old leaders were displaced by radicalised successors, including Griffith. This new elite was more committed to the aspirations of the cultural revival than to nationalist economics but the second should not be discounted. Moderating the visible triumph of the new order, though, was its realisation that its rapidly widening popular appeal brought in train old home rulers who shared few of the radical pretensions. If the old elite was virtually wiped out politically speaking, at local level the levers of power remained in the hands of a bourgeoisie that had little sympathy for radical notions of property rights, reversal of the trend toward livestock production and any vast application of protectionism. Finally, the new state founded in 1922 had three important constraints. First, the Anglo-Irish Treaty signed in December 1921 made Ireland a dominion rather than a fully free-standing state; secondly, the most industrialised region, Northern Ireland, was severed from the state, leaving the southern leadership even more politically beholden to a socially conservative petite bourgeoisie; and, thirdly, the civil war that erupted between the victors over the terms of settlement, affected the stability of the regime and increased its reliance upon the entrenched respectable classes. In sum, the new state found that it had to function within perimeters defined by present circumstances and also by the past. These necessitate a pragmatic course, especially on fiscal matters, but it is no more appropriate to label these a jumble of confused ideas than a similar description would fit interwar Britain. The minority views of Butt, 52

24

ALAN O ' DAY

Parnell, Plunkett and Griffith, with the partial exception of the latter, tend to be ignored but, placed in a longer perspective, they, more than the orthodox economics of home rulers generally, have guided future approaches. IRELAND,1922-1932

The problem of the interwar Irish economy confirms the observation that the later the industrialisation, the greater the need for state involve­ ment. As noted, the new regime inherited a dual legacy — colonial dependence and associated British economic ideology along with the doctrine of self-reliance. Three other problems were present as well — partition cut off much of the industrial base, the Great War caused sub­ stantial dislocation and disruption (5 per cent of Ireland's adult males were killed), and the civil war in 1922 and 1 9 2 3 exacerbated the task of establishing stability. The years between 1 9 1 4 and 1 9 2 0 had seen unprecedented prosperity in Ireland; the new regime would be assessed against this standard. It pursued a strategy that downgraded industrialisation, pinning its policy on a booming livestock and dairy sector. The sagging world economy injured economic expectations. By 1 9 2 3 the price of arable produce was 57 per cent below 1920 levels; the value of animals fell by 38 per cent, with store cattle declining in value by 4 0 per cent, whereas the cost of living dipped by merely 10 per cent. Under the Land Purchase Act of 1 9 2 3 the government signalled an intention to complete the traditional national programme on land ownership. It allowed for compulsory purchase of all remaining leasehold land. In the following year legislation was enacted to raise the quality of agricultural produce, again building on Plunkett's earlier vision. Also, the state fostered economic development. Beet sugar production rose from zero in 1 9 2 5 to 2 4 , 0 0 0 tons in 1 9 3 0 , falling again to 5 , 0 0 0 tons the next year. In 1 9 2 6 an independent Tariff Commission was established; it had a marginal impact, not least because many of the newly protected industries were either owned by British interests or the necessary machinery was used under licence from British firms. In 1 9 2 8 5 0 per cent of confectionery was produced by British firms in Ireland, while the manufacture of shoes was dominated by British interests. Economic gains continued in spite of the Currency Act of 1927, attaching Ireland's currency to British sterling, causing it to be overvalued and tied to British monetary policy. Yet Ireland maintained a sound currency and a balanced budget; unlike many of its continental counterparts it did not 53

54

55

56

57

58

Nationalism and the economic question in Ireland

25

resort to printing money, enjoying a good credit rating as a consequence. Some customs duties were implemented, which Daly characterises as a 'rag b a g ' . Between 1925 and 1930 agricultural prices rose in money terms by 12.4 per cent in the south as against only 5.8 per cent in Northern Ireland. David Johnson concludes that probably both parts of Ireland benefited from partition. Northern Ireland received British sub­ sidies while the Free State escaped the costs of supporting the north's high unemployment. T h e first years of the Free State saw slow eco­ nomic progress, some efforts to apply nationalist solutions and a general caution in an atmosphere of political discord at home and weak inter­ national trade. In 1931 the Customs Duties Act attempted to prevent dumping of foreign goods on the Irish market. Overall, however, the pre-existing Anglo-Irish economic relationship remained largely untouched. T h e United Kingdom in 1931 absorbed over 9 6 per cent of Irish exports; Ireland purchased the bulk of its imports from Great Britain. The regime, though, did not go unchallenged. Eamon de Valera formed a new party in 1 9 2 6 , Fianna Fail, which offered many of the same economic recipes but, drawing upon a more radical clientele, it called for the redistribution of land 'so as to get the greatest number possible of Irish families rooted in the soil of Ireland' and to make Ireland 'as self-contained and self-sufficient as possible - with a proper balance between agriculture and the other essential industries'. In the follow­ ing year he linked unemployment to protectionism: 59

60

61

62

Work can be got if we concentrate on protecting and keeping for ourselves the home market, instead of allowing the foreigner to dump their goods upon us, as at present. To concentrate on the diminishing of imports will more quickly reduce the adverse balance of trade than to concentrate on an increase in exports (though there is no reason why we should not endeavour to increase our exports as well). The difference is that in one case we have to face the intense competition in an outside market which we cannot control. In the other case we have the power of control and exclusion. I have said repeatedly that our guiding principle will be to make Ireland as self-contained and as self-supporting as possible. 63

With the sharp downturn in the country's economy, a condition resulting chiefly from external factors, the Cumann na nGaedheal government lost public confidence after 1 9 3 0 . A general election was held in February 1 9 3 2 . Fianna Fail's election manifesto urged that the country should be made as 'independent of foreign imports as possible' and 'to preserve the home market for our farmers'. De Valera's party 64

26

ALAN O ' DAY

won the election, beginning a continuous run in office until 1 9 4 8 . Cumann na nGaedheal had pursued nationalist objectives within the narrow band of possibilities available; its successor would extend this approach.

ECONOMIC NATIONALISM,

1932-58

The new government quickly reinforced the economic nationalist dis­ position of the state. Erhard Rumpf and A. C . Hepburn note that Fianna Fail's concern to disassociate Ireland politically and socially from Britain was less pronounced than the efforts to sever the economic links. According to them, the party's main thrust was to drive the economy in a direction that corresponded to nationalist political aspirations, though their assertion should be treated with caution with respect to outcomes if not intention. In May de Valera asserted, 'we saw that the economy of this country had in the past been dictated not for the advantage of the people here, but for the advantage of people across the water'. He promised the introduction of more rigorous tariffs. Fianna Fail sought to direct balanced growth and push agriculture towards tillage. There was a short-term rise in government spending, expand­ ing from 2 4 per cent of gross national product in 1932 to over 30 per cent by 1 9 3 3 . This was accompanied by efforts to speed up development of the mixed economy. During the next few years state-owned companies were created for several sectors, including beet sugar, industrial alcohol, credit and some other enterprises. Also, the numbers and levels of tariffs rose considerably. By 1936—7 more than 1,900 articles (against 6 8 in 1 9 3 1 ) attracted impositions and on average these were one third higher than similar duties in Great Britain. Some business, though, such as insurance, remained heavily dominated by foreign, usually British, interests. However, there was a limit to self-sufficiency. It completely failed to reduce dependence on imports from Great Britain; further state control was unacceptable to Irish society; a corporatist movement lacked popular support; and it was not pursued with unrelenting commitment. The perceived fall in imports concealed royalty payments to British firms. Moreover, the advent of the de Valera regime had brought about a dispute with Britain over continued payment of the land-purchase annuities, with the resulting trade war between the two countries. Britain retaliated against the withholding of the annuities with a bevy of restrictions on Irish trade, the most irksome being the controls on coal exports. From 1935 the fuel situation eased with a series 65

66

67

68

69

70

Nationalism and the economic question in Ireland

27 71

of Coal-Cattle Pacts. T h e trade agreement of 1 9 3 8 ended the dispute, marking the closure of an attempt to secure pure or nearly complete selfsufficiency, though in theory the state as Sean Lemass reaffirmed that year continued to adhere to it as an ideal. T h e trade war had a mixed impact on Ireland, resulting in both losses and gains, the latter in the form of lower welfare costs from higher levels of domestic employ­ ment. It caused a reduction in gross national product by only 2 to 3 per cent. In the north, however, economic growth during the 1930s comfort­ ably exceeded its southern neighbour's. Self-sufficiency was replaced by a modified form of economic nation­ alism acceptable to middle-class Irish opinion until the late 1950s. Settlement of the trade war did not herald an improvement for, ironically, the conflict in Europe enforced a degree of economic self-reliance beyond the wildest nationalist anticipation. Between 1 9 3 9 and 1 9 4 5 the economy was virtually isolated from world markets. From the beginning of the war to 1 9 4 3 there was a 3 0 per cent drop in real wages and then a slight rise thereafter. Most goods were in very short supply. After a brief recovery at the close of the 1940s and start of the 1950s, the economy stagnated. Ireland remained tied to Great Britain. In 1946—7 de Valera called for 'a dovetailing of the two economies' but this made little impact on British leaders. Instead of rebuilding industries that had been destroyed in the conflict, he advocated that British firms be transplanted to Ireland where there was a surplus of labour; British leaders preferred that the labour migrate to where the rebuilt industries were in the United Kingdom. As Daly observes, the Anglo-Irish relationship was reshaped by British not Irish politicians, something that remained a reality until the 1 9 7 0 s . By the mid-i950s there was widespread disillusionment with aspects of the traditional economic formula. The balance of payments position fluctuated, reaching crisis point in 1951. Internal competitiveness was so limp that the Restrictive Practices Act in 1 9 5 3 attempted to foster efficiency. Emigration rose with an average of approximately 4 0 , 0 0 0 people annually leaving the country. T h e average annual increase in gross national product was only i . i per cent for the five years to 1 9 5 5 , leaving Ireland near the bottom of the league table of the Organisation of Economic Co-operation and Development (OECD). A vigorous debate on the Irish economy took place at official level between 1 9 5 6 and 1 9 5 8 . In January 1957 the eco­ nomic and political consequences of closer harmonisation with other western European nations were outlined. This same report suggested, in addition, that: 72

73

74

75

7 6

28

ALAN O' DAY

The setting up of a free trade area in which both the Six Counties [Northern Ireland] and ourselves participated would lead to the removal of such economic barriers to the reunification of the country as are related to the vested interests on both sides of the Border in the trade protection which would be abolished by the free trade area . . . if we should remain outside the free trade area while the Six Counties go in, the economic disparities between the areas would tend to increase, with a likely strengthening of vested interests opposed to reunification . . . 77

This was a pertinent reminder that economic policy was never wholly detached from the wider nationalist political agenda.

PLANNED CAPITALISM,

1958-73

Coming out of the concerns about economic stagnation, a statesponsored reassessment emerged in November 1 9 5 8 as the Programme for Economic Expansion. It pointed to the inherent economic defects in Ireland, calling for the application of market principles, an end of strict self-sufficiency, the opening up of the internal economy and encourage­ ment of foreign investment. De Valera's retirement in 1 9 5 9 brought the succession of Lemass, facilitating the shift in economic approach. During the 1960s the Republic of Ireland moved to forthright capitalist economics, though the continued dependence on agriculture with the prime destination of the nation's goods still being Great Britain left the position looking outwardly similar to what it had been earlier. It was also the case that the volume of agricultural production did not rise, being virtually the same in 1 9 6 3 as it was in 1 9 5 7 . Moreover, foreign firms investing in the country were to direct their efforts to exports and not compete directly with protected firms producing mainly for the home market. In a sense, nationalist rhetoric was remoulded to conform to an already existing reality, though it would be misleading to say that nothing consequential had changed. Nevertheless, Lee's pithy appraisal that for Lemass by 1 9 5 9 self-reliance had been transformed into meaning not self-sufficiency but an economy sufficiently viable to enable all the Irish to live in their own country encapsulates the position. 7 8

79

80

81

IRELAND AND THE EUROPEAN UNION

SINCE 1 9 7 3

A fourth stage of economic nationalism emerged when Ireland along with the United Kingdom on i January 1973 joined the European Community. The price of membership negated certain political precepts

Nationalism and the economic question in Ireland

29

of historic nationalism. Redmond's insistence 'that national demand, in plain and popular language, is simply this, that the government of every purely Irish affair shall be controlled by the public opinion of Ireland, and by that alone', was necessarily abrogated by the Treaty of Rome. Subscription to the Community explicitly rejected his assertion that 'no redress of financial grievances, no material improvements or industrial development, can ever satisfy Ireland until Irish laws are made and administered upon Irish soil by Irishmen'. However, it is not far-fetched to suppose that Redmond himself would be an enthusiastic European at the opening of the twenty-first century. A small militant faction of orthodox republicans called for a rejection of Ireland's membership on exactly these traditional grounds, though this force was easily overcome by the dominant sector of modernised bourgeois nationalists at the heart of the political establishment. It is true, of course, that membership of the Community has brought substantial material benefits to the country, especially during the past decade. The point here, however, is not whether the last two and a half decades have seen Ireland's prosperity advance but, rather, is this a negation of economic nationalism or its affirmation. O n balance the latter is the more convincing explanation and has the added ingredient that it allowed Ireland to detach itself more thoroughly than overt economic nationalism ever achieved. Though what has emerged is something rather different from traditional eco­ nomic national doctrine, centring on self-sufficiency, it bears similarities with older objectives by affording an insulated if capitalist solution, a par­ tially open and quasi-internationalist approach, to the age-old problem of how to make a country still substantially linked to agricultural commodities, prosperous. To date the amount of sovereignty conceded is minimal, specially as a ratio to economic benefits. Ireland, then, has emerged as the European nation par excellence, if only because the qualified market economy, capitalist ethos and maintenance of national dignity afforded has allowed for a genuine tenable nationalism, an economic nationalism built on a wider regulation of prices, output and market access that suits the Irish environment as well as, if not better than, any other in Europe. This conforms to Liam Kennedy's proposi­ tion. But there is, to be sure, some cost. The core-periphery conundrum has not disappeared but been moved. Power has shifted, in part, from London to Brussels. Within southern Ireland Dublin has been more, not less, the economic hub. If the axis and contour of economic nationalism has shifted during the twentieth century, there is little in the Irish example to uphold Hobsbawm's thesis that the force of nationalism is in terminal decline at the close of the millennium.

ALAN

3°

O'DAY

NOTES

1 Quoted in Cormac O Grada, Ireland: A New Economic History iy8o-igjg (Oxford, 1994), p. 406. 2 E.J. Hobsbawm, Nations and Nationalism since i8yo (Cambridge, 1997). 3 Liam Kennedy, Colonialism,Religion and Nationalism in Ireland (Belfast, 1996), p. 180; also adumbrated in Paul Bew and Henry Patterson, Sean Lemass and the Making of Modern Ireland (Dublin, 1982), p. 194. 4 Kennedy, Colonialism,Religion and Nationalism,p. 180. 5 Peter Alter, Nationalism (2nd edn, London, 1994), p. 4; Anthony D. Smith, National Identity (London, 1991), p. 74; Anthony D. Smith, Theories of Nationalism (London, 97 ), p. 23. 6 Elie Kedourie, 'Dark gods and their rites' in John Hutchinson and Anthony Smith (eds.), Nationalism (Oxford, 994), p. 208. 7 John Breuilly, 'The sources of nationalist ideology', in Hutchinson and Smith, Nationalism,pp. i 0 3 - i 3 at p. i i i . 8 Liah Greenfeld, 'Types of European nationalism', in Hutchinson and Smith, Nationalism,pp. i65—7i at pp. i 7 1 - 2 . 9 Quoted in D. George Boyce, Nationalism in Ireland (3rd edn, London, 995), p. 22. 10 Kennedy, Colonialism,Religion andNationalism,p. 34. 11 Mary E. Daly, Industrial Development and Irish National Identity igss-igjg (Dublin, 993), p. . 12 Though she implicitly modifies her position in Mary E. Daly, 'Integration or diversity? Anglo-Irish economic relations, ^ 2 2 - 3 9 ' in S.J. Connolly (ed.), Kingdoms United? Great Britain and Ireland since i$oo: Integration and Diversity (Dublin, 999), pp. 7 - 8 0 . 13 Quoted in Maurice Moynihan (ed.), Speeches and Statements by Eamon de Valera igi7~73 (Dublin, i98o), p. i 9 ° . 14 Quoted in Cormac O Grada, A Rocky Road: The Irish Economy since igso (Manchester, 997), p. 4. 5 Quoted in ibid., p. 25. 16 See Hugh Seton-Watson, 'Old and new nations', in Hutchinson and Smith, Nationalism,pp. i34—7 at p. i37. 17 John Redmond, 4 September i 9 ° 7 , reproduced in R. Barry O'Brien (ed.), Home Rule Speeches ofJohn Redmond,MP (London, i 9 i o ) , pp. 3 3 7 - 8 . 18 Quoted in Frank O'Connor, The Big Fellow (Dublin, ^ 6 5 ) , p. 6. 19 Kennedy, Colonialism,Religion andNationalism,p. i 7 ° . 20 O Grada, A Rocky Road,p. 35. 21 Donald Harman Akensen, Small Differences: Irish Catholics and Irish Protestants iSi^-igss (Dublin, i988), pp. i5—4i. 22 Greenfeld, 'Types of European nationalism', pp. 6 9 - 7 0 . 23 Miroslav Hroch, 'Nationalism and national movements: comparing the past and present of central and eastern Europe', Nations and Nationalism 2( ) (

i

6

" ^

3

5

-

4

4

a t

p .

3

8

.

Nationalism and the economic question in Ireland

31

24 Miroslav Hroch, .Social Preconditions of National Revival in Europe (Cambridge, 9^5), P- i97 25 Hroch, 'Nationalism and national movements', p. 41. 26 Hroch, Social Preconditions of National Revival,pp. 1 8 5 - 6 . 27 Ernest Gellner, Encounters with Nationalism (Oxford, 1994), p. 198. 28 See Michael Hechter and Margaret Levi, 'Ethno-regional movements in the west', in Hutchinson and Smith, Nationalism,pp. 1 8 4 - 9 5 . 29 See John Coakley, 'Typical case or deviant? Nationalism in Ireland in a European perspective' in Myrtle Hist and Sarah Barber (eds.), Aspects of Irish Studies (Belfast, 1990), pp. 2 9 - 3 5 . 30 Frank Wright, Two Lands on One Soil (Dublin, 1996), p. 20. 31 Quoted in D. H. Greene and D. H. Lawrence, The Matter with Ireland (London, 1962), p. 294. 32 Ernest Gellner, Nations and Nationalism (Oxford, 1993), pp. 3 5 - 8 . 33 Daly, IndustrialDevelopment,pp. 1 7 1 - 8 2 . 34 See E. Rumpf and A. C. Hepburn, Nationalism and Socialism in Twentiethcentury Ireland (Liverpool, 1977); David Fitzpatrick, 'The geography of Irish nationalism 1 9 1 0 - 1 9 2 1 ' in C. H. E. Philpin (ed.), Nationalism and Popular Protest in Ireland (Cambridge, 1987), pp. 4 0 3 - 3 9 . 35 See the stimulating essays in Albert Breton, Gianluigi Galeotti, Pierre Salmon and Ronald Wintrobe (eds.), Nationalism and Rationality (Cambridge, l

:

I

9

9

5

)

\

36 See Liam Kennedy and Philip Ollerenshaw (eds.), An Economic History of Ulster 1820-igjg (Manchester, 1985). 37 Kennedy, Colonialism,Religion and Nationalism^. 169. 38 John Hutchinson, The Dynamics of Cultural Nationalism: The Gaelic Revival and the Creation ofthe Irish Nation State (London, I987), pp. 2 6 6 - 8 2 . 39 Greenfeld, 'Types of European nationalism', pp. I 6 9 - 7 I . 40 George R. Boyer and Timothy J. Hatton, 'Wage trends in the regions of the United Kingdom, 1 8 6 0 - 1 9 1 3 ' in Connolly, Kingdoms United?,pp. 1 3 5 - 5 2 a t p p .

I 3 5 ,

1

4

4

41 Frank Geary and Tom Stark, 'Comparative output and growth in the four countries of the United Kindom, 1 8 6 1 - 1 9 1 1 ' in Connolly, Kingdoms United?, pp. 1 5 3 - 6 8 at p. I 6 8 .

42 R. V Comerford, Fenianism in Context: Irish Politics and Society 1848-82 (Dublin, I985).

43 Hroch, 'Nationalism and national movements', p. 41. 4 4 Greenfeld, 'Types of European nationalism', p. 171. 45 L. M. Cullen, An Economic History of Ireland since 1660 (London, 1972), pp. I67-80.

46 Parnell's outlook is traced in Liam Kennedy, 'The economic thought of the nation's lost leader: Charles Stewart Parnell' in D. George Boyce and Alan O'Day (eds.), Parnell in Perspective (London, 1991), pp. 1 7 1 - 2 0 0 . 47 See Trevor West, Horace Plunkett,Co-operation and Politics: An Irish Biography (Gerrards Cross, 1986).

32

ALAN

O'DAY

48 Sir Horace Plunkett, Ireland in the New Century (reprint, Port Washington, NY, 1974 49 Richard Davis, Arthur Griffith and Non-violent Sinn Fein (Dublin, 1974), pp. p .

1

4

9

50 9 December 1905, quoted in Arthur Mitchell and Padraig O Snodaigh, Irish Political Documents i86g-igi6 (Dublin, 1989), p. 122. 51 Quoted in Arthur Mitchell and Padraig O Snodaigh, Irish Political Documents 9 949 i ^ 52 See David Fitzpatrick, Politics and Irish Life 1913-21 (Dublin, 1977). 53 David Johnson, The Interwar Economy in Ireland (Dublin, 1985), pp. 2 - 5 . 54 O Grada, A Rocky Road,p. 4. 55 Johnson, The Interwar Economy,p. 5. I

56 57

58 59 60 61 62 63 64 65 66 67 68 69

70 71

72 73 74 75 76 77 78

l6-I

( D u b l i n ,

9

8

p .

3 5 .

Ibid., pp. 1 1 - 1 2 .

Daly, 'Integration or diversity?', pp. 1 7 1 - 2 . Also see Johnson, The Interwar Economy,p. 89, for comments on the inheri­ tance of the banking system. Daly, Industrial Development,p. 17. Johnson, The Interwar Economy,p. 7. Daly, 'Integration or diversity?', p. i75. Quoted in Moynihan, Speeches and Statements by Eamon de Valera,p. 131. Quoted in ibid., p. 153. Quoted in ibid., p. 189. Rumpf and Hepburn, Nationalism and Socialism,p. 174. Ibid., p. 175. Quoted in ibid., p. 203. J.J. Lee, Ireland, 1912-85 (Cambridge, 1989), p. 184. Johnson, The Interwar Economy,p. 27; Lee, Ireland, i9i2-8$,pp. 1 8 5 - 7 . Daly, 'Integration or diversity?', p. i78. See, Deirdre McMahon, Republicans and Imperialists: Anglo-Irish Relations in the i93°s (New Haven and London, 1984), pp. 2 3 7 - 8 4 ; Paul Canning, British Policy Towards Ireland i92i-i9^i (Oxford, 1983), pp. 1 2 1 - 2 2 0 . J. Peter Neary and Cormac O Grada, Protection,Economic War and Structural Change: The i93os in Ireland (London, 1986), p. 20. O Grada, A Rocky Road,p. 16. Quoted in Daly, 'Integration or diversity?', p. 179. Ibid., p. 180. D.J. Maher, The Tortuous Path: The Course of Ireland's Entry into the EEC i94&-j3 (Dublin, i986), pp. 3 4 - 5 . Quoted in ibid., p. 65. Raymond D. Crotty, Irish Agricultural Production: Its Volume and Structure (Cork, 1966), p. 210.

79 Lee, Ireland, i9i2-8$,p. 352. 80 Bew and Patterson, Sean Lemass,pp. 1 9 2 - 3 . 81 Lee, Ireland, i9i2-8$,p. 399.

C H A P T E R

T W O

Economic aspects of the nationality problem in nineteenth- and twentieth-century Belgium Erik Buyst

INTRODUCTION

The tensions between Dutch- and French-speakers in Belgium have a long history. Even before the creation of the Belgian state in i 8 3 0 , w e already find traces of linguistic controversies. The political aspects of this conflict have been the subject of much scholarly research and argu­ ment. The impact of economic developments on the issue, however, has received far less attention. Economists started a debate in the late 1970s about the magnitude of the financial transfers between Flanders and Wallonia. Most of these analyses take 1975 as a starting point, which is, for a historical economist, a very short time horizon. Moreover, the link between shifts in relative economic performance and its effect on the political bargaining power of the two linguistic groups is rarely taken explicitly into consideration. The goal of this chapter is to analyse long-term changes in the economic structure of Flanders and Wallonia from the second half of the nineteenth century to the present day. It will be demonstrated that changes in the relative economic performance of both regions affected profoundly their bargaining power in political issues. 1

2

3

THE NINETEENTH

CENTURY

The official linguistic census of 1 8 4 6 indicated clearly that a majority (57 per cent) of the Belgian population used Dutch as its mother tongue. Moreover, the census showed that the two linguistic groups were confined to specific areas: Dutch was spoken in the north of the country (Flanders) and French in the south (Wallonia). Brussels and its suburbs took up a somewhat unusual position. The agglomeration was located north of the linguistic frontier — and was thus in Dutch-speaking terri­ tory — but contained a substantial minority (approximately 30 per cent of the population) of French-speakers. 4

3

3

34

ERIK

BUYST

This reality was not reflected in the administrative organisation of the newly created Belgian state. French was the only official language of all central government services, including the army. T h e Belgian Law Gazette, which published the laws and decrees of the realm, only appeared in French. Translations in Dutch and German were provided for, but they had no legal value. T h e central government's privileging of French had far-reaching consequences for the Flemish part of the country. It led to the virtually exclusive use of French by many provincial and local authorities, law courts and educational institutions, although they were in theory free to choose which language they wanted to use. T h e only exceptions to this general picture were the municipal administrations of small towns and villages located at a certain distance from Brussels and the linguistic border. They continued to use Dutch until well into the second half of the nineteenth century. How can the rapid Frenchification of public life in Flanders during the early Belgian period be explained? First, it should be mentioned that from the second half of the eighteenth century, the language of Moliere became a symbol of refined, modern cultural life in many European countries. Secondly, French was the language used by the Brussels court and by the central administration of the Austrian Low Countries (1713—94). As a result, large segments of the Flemish nobility and bourgeoisie started to adopt French as their mother tongue in the second half of the eighteenth century. This process gained momentum during the annexation of the southern Low Countries to France (1795—1814) as the French authorities pursued an energetic policy to stamp out all other languages in their empire honouring the principle 'one nation, one lan­ guage'. In some instances even theatre performances, books and newspapers in Dutch were forbidden. In the 1820s French was so well established among the 'Belgian' upper classes that attempts of King William I (between 1815 and 1830) to restore the use of Dutch in all official and semi-official institutions dealing with Flanders met stiff resis­ tance. T h e Belgian Revolution in 1 8 3 0 marked the end of the United Kingdom of the Netherlands and brought the French-speaking bourgeoisie to power. They immediately imposed their language on the rest of the country. The large-scale privileging of French in the newly created Belgian state soon provoked reactions from Dutch-speaking intellectuals in Belgium. At first, it was mainly a cultural movement promoting the publication of books and journals in Dutch, organising plays in Dutch and so forth. By 1 8 4 0 , however, a political campaign was launched 5

6

Economic aspects of nationality in Belgium

35

aimed at the restoration of Dutch next to French in Flanders as an official language in public administration, law courts and education: the Flemish Movement was born. Nevertheless, the Belgian government remained deaf to these complaints as it considered a unilingual state as a necessity for enhancing the development of a Belgian nation and maintaining national unity. In the mid-nineteenth century the Belgian government could easily ignore the Flemish Movement for several reasons. First, the Flemish Movement was politically divided between Catholics and freethinkers. Secondly, it relied on the Flemish middle classes, which lacked political muscle in a period of wealth-based voting. Thirdly, Flanders' political bargaining power was handicapped by disastrous economic conditions. In a period in which Wallonia played a pioneering role by launching the so-called Industrial Revolution on the European continent, important sectors of the Flemish economy collapsed. What went wrong economically in Flanders? In the early nineteenth century two sectors dominated the Flemish economy: agriculture and the rural linen industry. In the 1830s cheap cotton textiles and products of the mechanised British linen industry increasingly penetrated markets previously dominated by the Flemish rural linen producers. Flemish rural spinners and weavers responded to this challenge by lowering wages. It proved to be a bad strategy as technological improvements enabled Britain to reduce its linen prices continuously. By the 1840s wages of Flemish spinners and weavers had fallen to subsistence level, which impeded further cuts. British linen prices, however, continued to decline, so sales of Flemish linen dropped dramatically. To make matters worse, the collapse of the Flemish rural linen industry in the second half of the 1840s coincided with severe harvest failures (potato blight, etc.). T h e combination of extremely high food prices and mass unemployment inevitably provoked large-scale starvation and a complete disintegration of the Flemish rural economy. Unfortunately, Flanders could not offer alternative employment opportunities for its desperate rural population, other than the mechanised cotton industry in Ghent and the flourishing port of Antwerp. Consequently, unemployment and underemployment remained a structural problem for several decades to come, resulting in extremely low wages. Hence, it is not surprising that many Flemings decided to emigrate to Wallonia, northern France, the United States and Canada. Others became commuters or seasonal workers in neighbouring areas. These circumstances were detrimental to the social status of Dutch in 7

8

36

ERIK

BUYST

Belgium. As a language it became more and more associated with extreme poverty and poor education. O f course, such a perception stimulated the Frenchification process of the upper middle classes in Flanders. The ailing Flemish economy contrasted sharply with the thriving Walloon manufacturing sector. Based on modern coal-mining, the iron industry and machine-building Wallonia experienced rapid economic growth. But despite this very divergent economic performance, Flanders continued to pay more taxes than Wallonia during the second half of the nineteenth century. The main reason for this paradox is that Belgium's tax system still referred to an agrarian society, so that income from large-scale manufacturing activities remained largely untaxed. The almost exclusive use of French by the Belgian administrative and judicial authorities caused many social abuses. In 1 8 6 0 , for instance, two Dutch-speaking workers were erroneously sentenced to death and decapitated. T h e fact that the trial took place in a language that the accused did not understand was soon identified as the main cause of this dramatic mistake. As a result of such scandals a minimal legal protection was offered in the 1870s to those in Flanders — the large majority — who did not speak French. Although the effects of these first linguistic laws remained very limited, Walloon civil servants posted in Flanders perceived them as a threat for their future careers as they required in some instances some knowledge of Dutch. It was the start of the Walloon Movement, which favoured a monolingual French-speaking Belgium. By the end of the nineteenth century the Flemish economy showed clear signs of recovery. Based on low wages, the mechanised textile industry showed continuous growth. Antwerp attracted not only portrelated industries — food processing, ship-building and ship repair — but also new manufacturing sectors, such as chemicals (photographic paper) and car construction. It also became an important international centre of diamond processing. In addition, Flanders benefited from the gradual exhaustion of Wallonia's coal mines. This necessitated increasing imports of coal from overseas, which encouraged the construction of new coke factories in the neighbourhood of port facilities. Partly for the same reasons the zinc industry moved from Wallonia to the Kempen (north-east Belgium). Other producers of non-ferrous metals soon followed this example. The catching-up movement of Flanders' economy is illustrated by the following figures on employment in manufacturing (domestic industry 9

10

11

12

13

Economic aspects of nationality in Belgium

37

excluded). T h e share of the four integral Flemish provinces as a propor­ tion of the total Belgian manufacturing employment rose from 2 6 per cent in 1 8 9 6 to 32 per cent in 1 9 1 0 . In the same period the share of the four integral Walloon provinces fell from 57 per cent to 51 per cent. T h e share of the linguistically mixed province of Brabant remained unchanged at 17 per cent. In 1 9 1 0 the four integral Flemish provinces accounted for 4 4 per cent of the Belgian population, so the Flemish economy still had a long way to go. T h e revival of the Flemish economy stimulated the self-awareness of the Flemish middle class. They were less and less prepared to accept the hegemony of French in Flemish public life. As a result, the use of Dutch made some progress in provincial and local government, in law courts and in official secondary education. At the national level, a certain move towards bilingualism can be detected. From 1 8 9 5 the Belgian Law Gazette also appeared in Dutch. A couple of years later laws and decrees published in Dutch got legal value. Nevertheless, Dutch-speakers still had a long way to go in their struggle for equal opportunities - Belgium's central administration and army, for instance, remained exclusively French-speaking. Institutions of higher education, including the uni­ versities, continued to offer courses only in French. T h e higher education issue, especially, provoked much discontent in Flanders. As a result, the introduction of Dutch-speaking classes at the State University of Ghent became a top priority for the Flemish Movement in the years just before the First World War. 14

15

16

THE

PERIOD

1914—1945

T h e First World War intensified the tensions between French- and Dutch-speakers in Belgium. O n the one hand, the German occupier pursued a policy of preferential treatment of the Dutch language in occupied Belgium (Flamenpolitik). A n important example of this policy was the reopening of the University of Ghent with Dutch as the language of instruction. It lured a small fraction of the Flemish Movement into political collaboration with the German occupier. At the other side of the IJzer front, much resentment was caused by the fact that French was the only language of command in the Belgian army, although 7 0 per cent of the infantry consisted of Dutch-speakers. These developments changed the agenda of the mainstream Flemish Movement. Full equality of Flanders and Wallonia based on a monolingual status for each region, reform of the central administration and introduction of

38

ERIK

BUYST

separate Flemish and French-speaking units in the army became basic issues. In the first years after the war the demands of the Flemish Movement were largely ignored. T h e University of Ghent, for instance, became French-speaking again after the liberation. A decade later, however, things would change dramatically as a new series of important linguistic legislation was passed in parliament. Economic developments played an important role in the reversal. First, in the postwar years the reconstruction issue and related problems - such as large budget deficits, an exploding public debt, inflation and currency depreciation — dom­ inated the political agenda. It was the end of 1 9 2 6 before the major macroeconomic imbalances in Belgium were corrected. Secondly, the Flemish economy pursued its catching-up process vis-a-vis Wallonia. In 1930 the share of the four integral Flemish provinces as a proportion of total Belgian manufacturing employment (domestic industry excluded) reached 38 per cent (up from 32 per cent in 1 9 1 0 ) . Meanwhile, the share of the four integral Walloon provinces had fallen from 51 per cent in 1 9 1 0 to 41 per cent in 1 9 3 0 . T h e relative success of the Flemish economy is explained by the strong growth performance of sectors such as nonferrous metals, chemicals, car assembly (Ford, General Motors), telecommunications (Bell Telephone), glass production, and the start of coal-mining in Limburg. T h e picture is completed by the emergence of a modern service sector in Flanders based on banking, insurance and so on. Despite remaining structural weaknesses — low wages, much long-distance commuting to Walloon coal mines and heavy industry — these economic successes again strengthened Flemish self-awareness. Therefore, it is probably no coincidence that politicians from Antwerp — a city that attracted a large share of the new investments — were at the forefront of the Flemish Movement in the 1920s and 1930s. As Wallonia refused to accept bilingualism throughout the whole country — thus including the Walloon provinces — the call for a monolingual Flanders became louder. In the decade after 1 9 2 8 this became reality as a series of laws was enacted that converted to Dutch all levels of public administration, of public education (from primary schools to universities), and of law courts in Flanders. Army units were also divided along linguistic lines, so that in principle only officers with a sufficient knowledge of Dutch could command Flemish soldiers. At the same time, territorial integrity became a cornerstone in Belgium's language legislation: Flanders was recognised as being Dutch-speaking, Wallonia 17

18

1 9

20

21

Economic aspects of nationality in Belgium

39

as French-speaking, and Brussels and its suburbs as bilingual. T h e lin­ guistic frontier between these areas could only be adjusted on the basis of population censuses, which explicitly asked about the individual person's language use. In principle, most demands of the mainstream Flemish Movement were realised by the end of the 1930s. But already during the 1930s disillusionment followed as the language laws were openly violated along the linguistic frontier and in Brussels. Consequently, belief in democratic procedures waned in some circles and radical Flemish nationalists gained popular support. In these circumstances it is not surprising that a substantial part of the Flemish Movement decided to collaborate with Germany during the Second World War — the more so as the German occupier fully enforced the existing language laws and pursued a policy of positive discrimination favouring Dutch-speakers in public life. Soon, however, it became clear that this policy was only intended to facilitate the annexation of Flanders to the German Reich. Moreover, the hard­ ship caused by the Nazi occupation regime in Flanders also created much popular hatred vis-a-vis collaborators. As a result, large sections of the Flemish population despised the Flemish Movement as a whole by the end of the war. 22

23

THE

LATE 194OS AND THE I95OS

It was not only the collaboration issue that handicapped the political bargaining power of Flanders in the postwar period. Economic factors also contributed to its weakness. Once the reconstruction phase (1945—7) was over, Flanders became again the victim of relatively high unemployment. Wallonia, on the other hand, faced labour shortages in the early and mid-i950s. How can these striking differences be explained? First, demographic factors played an important role. In Wallonia the so-called demographic transition occurred much earlier than in Flanders. In the first half of the twentieth century the south of Belgium registered considerably lower birth rates than the north. In the 1940s and I950s rapid aging of the population caused a decline in the Walloon labour force. Flanders, on the contrary, experienced a substantial increase in its active population due to a much younger age structure. Secondly, the Flemish economy still included many small farmers in the late 1940s. In the following decade intensified mechanisation pushed many of them out of business, thereby further increasing the number of 24

40

ERIK

BUYST

25

people looking for a (new) j o b . Thirdly, Belgium's hard-currency policy — partly designed to prevent the overheating of the Walloon economy — was detrimental to new job creation. It hurt export opportunities of labour-intensive sectors, such as textiles and leather industries, which were mainly located in the north of the country. As a result, Flanders' traditional image of being a region of high unemployment, low wages and mass long-distance commuting to the industrial areas of Wallonia and northern France and to Brussels, was reinforced. T h e weak position of Flanders from various points of view was immediately reflected in political issues. In the second half of the 1940s and in the 1950s the language laws were again violated on a large scale in Brussels and along the linguistic frontier. In these areas much social pressure was exerted on the local population to declare themselves as being French-speaking in the 1947 census. Consequently, several Flemish municipalities were given bilingual or French-speaking status. Other complaints referred to the striking under-representation of Dutchspeakers in the Belgian government and at top positions in the central administration. T h e most painful defeat for the Flemings, however, was the neglect of the referendum outcome on King Leopold Ill's return to the throne in 1 9 5 0 . Although 5 8 per cent of the Belgian population voted in favour of the king's return, he had to abdicate. What had happened? A closer look at the referendum results shows that the king had only obtained a majority in Flanders (72 per cent). In Wallonia, on the contrary, a majority had voted against his return (58 per cent). Consequently, as soon as the king did actually return riots broke out in the industrial centres of Wallonia. After bloody clashes with the gen­ darmerie, Leopold III decided to abdicate in favour of his son, Baudouin. In Flanders the whole affair was perceived as a defeat of democracy vis­ a-vis street violence. 26

FROM THE LATE

I95OS TO THE EARLY

I97OS

T h e late 1950s marked the start of a rapid and fundamental change in the economic balance of power between Flanders and Wallonia. T h e breakthrough of oil as a major supplier of energy in western Europe caused serious difficulties for many European coal producers. Overproduction and falling prices hit the Walloon coal mines particularly hard because of their irregular seams and problems of exhaustion. In a couple of years employment in the Walloon mines more than

Economic aspects of nationality in Belgium

41

1051-

100

95

90

85

h

80

h

75 1955

1960 1965 1970 1975 1980 1985 1990 1995

Figure 2.1. Gross value added atfactor cost per inhabitant: relativefigures(Belgium's av m = ioo), 1955-1995^° Source: Calculated from NIS, 'Economische groei van de provincies en de gewesten van 1980 tot 1988' [Economic growth of provinces and regions from 1980 to 1988], Statistische Studien 91 (1991), 7 6 - 9 and I N R , Economische groei van de gewesten,provincies en arrondissementen. Periode 1985-1995 [Economic growth of regions, provinces and districts. Period 1985-1995], (Brussels, 1997), p. 39. e

ge

27

halved. It was a blow from which southern Belgium would never really recover. At the same time, Flemish economic growth started to accelerate again. By the end of the 1950s increasing labour shortage in the econom­ ically more developed areas of Europe made Flanders and its large reser­ voir of cheap labour attractive for American and other multinational enterprises that wanted to take advantage of the European integration process. A wave of new investments centred around the Flemish ports not only absorbed unemployment but also modernised the economic structure of northern Belgium. In particular, chemicals, petrochemicals and metal processing (car assembling) expanded rapidly. As a result of these divergent economic developments the income gap between Flanders and Wallonia decreased rapidly in the early 1960s (figure 2 . 1 ) . It helped to restore Flanders' political bargaining power, 28

NORTH SEA

Turnhout« ANTWERP?

Bruges ®

Ostend

Sint

.

. Eeklo"^

/

Veurne'

WEST

-Antwerp

2

Roeselare

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Nete.

Dendermonde

Mons

Regions and provinces

"X

Namur_

Liege_

\ \ > ^«Huy

/

33 ^Verviers/ LIEGE

!

Charleroi N AM

^

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, Dinant "NPhiMppeville

Walloon region

z

*

Boundaries of region

Bastogne* LUXEMBOURG

Boundaries of province

Provincial capital

Waremme

\.,» Nivelles,'-'*-'"'

Thuin

Capital

ST

telle Soignies* HAINAUT

®

Hasselt

0

^f

\Tournai

Brussels region

o

LIMBURG

„ „ ^iLouvain . ® BRUSSELS e^iTongeren

Mouscron

®

.Mechelen BRABANT

fciudenaarde; :ortrii

Maaseik^

v

, A a l s t ^ vilvoorde,

FLANDERS

lYpres a

^

K

s

•oter

Ghent^

•Tielt

FLANDERS'

N i k l a

EAST

\

Diksmuide

Flemish region

N

OJ

A/

Neufchateau ^SemojArlonJ

LUXEMBOURG j t' /

Capital of administrative district .Virton

{

•—\J Figure 2.2. Belgium: regions and provinces, iggo Source: T h e o Hermans et al. (eds.), The Flemish Movement. A Documentary History ij8o-iggo

(London, 1992), p. x.

..

Economic aspects of nationality in Belgium

43

which — after a silence of twenty-five years — led to the introduction of new language laws. In 1 9 6 0 the decennial demarcation of the linguistic border once again provoked mounting tensions between Dutch- and French-speakers. Therefore, the government decided to fix once and for all the linguistic border. At the same time, the monolingual status of Flanders and Wallonia, and the bilingual status of the Brussels urban area, was strengthened ( 1 9 6 2 — 3 ) . Finally, guarantees were given to Dutch-speakers to provide them a fair share of top positions in Belgium's central administration and other public and semi-public institutions. In the 1960s the content of the discussions between Dutch- and French-speakers changed. The Flemish Movement now focused on cul­ tural autonomy, while Wallonia demanded economic autonomy and safeguards against possible domination by the Flemish demographic majority. Shifts in the relative economic performance of the two regions help to explain the changes in political agenda. By the m i d - i 9 6 o s Wallonia had clearly lost its position as Belgium's most powerful economic region ( f i g u r e 2.1). Hence, economic power no longer compensated for its position as a demographic minority in Belgium. Moreover, many Walloons blamed their economic difficulties on the Belgian state's lack of initiative. For that reason, they wanted to take care of their own economic affairs. In 1970—i these discussions resulted in constitutional reform. A Dutchand a French-speaking Community Council were established, each having exclusive authority to issue decrees concerning cultural policy (education excluded) and health policy (social security excluded). French-speakers gained parity in the Council of Ministers, which allayed their fear of being in the minority in Belgium's central government. In 1 9 8 0 additional reforms created three regions (Flanders, Wallonia and Brussels) with powers in the field of town and country planning, housing, environment and supervision of local authorities (see figure 2.2). 29

31

EPILOGUE:

THE

1970s

A N D

B E Y O N D

The oil shocks of the i 9 7 0 s and their aftermath hit southern Belgium particularly hard. Energy-intensive sectors, such as Wallonia's important steel industry, had to go through a phase of substantial downsizing. As a result, the unemployment rate in Wallonia's old industrial areas reached 25 per cent by the mid-i980s. T h e relative impoverishment of southern Belgium created large financial flows from Flanders to Wallonia. In the

44

ERIK

BUYST

system of social security alone, roughly BEF 80 billion went in 1 9 9 0 from north to south, which represents approximately 10 per cent of Flanders' social security contributions. The principle of solidarity between the two regions is not put in jeopardy by the mainstream Flemish Movement. Criticism focuses on the non-transparency of the financial flows and the fact that insufficient incentives were built into the system to keep social spending under control. Another element of controversy deals with the financing of commu­ nities and regions. New constitutional reforms in 1 9 8 8 and 1 9 9 3 extended considerably the power of these institutions: taken together they now control one quarter of total government expenditure (social security included). Moreover, they obtained separate and directly elected parliaments. Nevertheless, the taxation powers of these legislative assemblies remain extremely limited. The federal government still collects more than 9 0 per cent of their tax revenues and distributes it among the communities and regions according to a very complex mechanism. Many Flemish politicians and economists consider it as a violation of the so-called fiscal equivalence principle, which maintains that autonomy concerning expenditure should be matched by equivalent fiscal auton­ omy. Only in such conditions can politicians assume full financial responsibility for their actions. Walloon politicians, however, are very reluctant to change the existing system, as it could lead to higher taxes in Wallonia than in Flanders. 32

33

34

CONCLUSION

From this short overview it is clear that shifts in the relative economic performance of Flanders and Wallonia had a considerable effect on the political bargaining power of the two regions. The deep structural crisis that characterised the Flemish economy during most of the nineteenth century made it relatively easy for the French-speaking bourgeoisie to impose its language on the rest of the Flemish population. From the late nineteenth century the gradual recovery of the Flemish economy helped the Flemish Movement to resist this policy of Frenchification more and more successfully. In the late 1940s and in the 1950s, however, the catching-up process of the Flemish economy stalled. It helps to explain the loss of Flemish political bargaining power during that period. In the late 1950s economic growth in Flanders accelerated again, which led to Flanders overtaking Wallonia in per capita income by the mid-i960s. As a result, important Flemish demands, such as cultural autonomy, could

Economic aspects of nationality in Belgium

45

be realised. From the mid-io.70s onwards the economic decline of south­ ern Belgium has given rise to new tensions between Dutch- and Frenchspeakers. T h e Flemish Movement's demands have shifted from linguistic and cultural issues to economic problems, such as a reduction of financial transfers between the regions, and more fiscal autonomy for the communities and regions. NOTES

1 For example, Jan Baptist Chrysostomus Verlooy, Verhandeling op d'onacht der Moederlyke Taal in deNederlanden [Treatise on the neglect of the mother tongue in the Low Countries], (published anonymously, Maastricht, 1788). 2 To mention just a few of the recent contributions: Martine Goossens, Ontstaan en groei van het Vlaams Parlement igyo-igg^ [Emergence and growth of the Flemish parliament 1 9 7 0 - 1 9 9 5 ] , (Brussels and Kapellen, 1995); Theo Hermans et al. (eds.), The Flemish Movement. A Documentary History 1780-iggo (London, 1992); Lode Wils, Van Clovis tot Happart. De lange weg van de naties in de Lage Landen [From Clovis to Happart. The long way of the nations of the Low Countries], (Leuven and Apeldoorn, 1995); Els Witte, Taal en territorialiteit: een overzicht van de ontwikkelingen in Belgie sinds 1830 [Language and territoriality: an overview of the developments in Belgium since 1830], (Brussels, 1993), pp. 9 7 - 1 2 0 . 3 For example, Philippe Defeyt, De la regionalisation de la securite sociale a la communautarisation des soins de sante (Louvain-la-Neuve, 1991) and Paul Van Rompuy and Valentijn Bilsen, Regionalisering van de sociale zekerheid [Regionalisation of Belgium's social security system], (Leuven, 1993). 4 Population. Recensement general (15 octobre 1846) (Brussels, 1849), pp. xxxvi-xxxvii and 2 5 2 - 3 8 3 . 5 Lode Wils, 'A brief history of the Flemish movement' in Hermans et al., The Flemish Movement,pp. 1-39 at pp. 1-7. 6 Marcel Deneckere, Histoire de la langue frangaise dans les Flandres (iyyo-1823) (Ghent, 954). 7 Renee Doehaerd et al., Geschiedenis van Vlaanderen. Van de oorsprong tot heden [History of Flanders. From the origins till today], (Brussels, i 983), pp. 2 3 7 - 8 . 8 A detailed overview is found in Guillaume Jacquemyns, Histoire de la crise economique des Flandres, 1845-1850 (Brussels, i 929). 9 See Pierre Lebrun et al., Essai sur la revolution industrielle en Belgique, 1770-1847 (Histoire quantitative et developpement de la Belgique, vol. II( i ) (Brussels, i 981 ), pp. 7 8 - 4 7 5 and Joel Mokyr, Industrialization in the Low Countries, i7g5-i850 (New Haven, 976), pp. 4 - 6 7 . i 0 Juul Hannes, 'Met de fiscale bril bekeken. Vlaanderen in Belgie, i 8 3 0 - 1 9 i 4' ['From a fiscal perspective. Flanders in Belgium, i 8 3 0 - 1 9 i 4'] in Adriaan Verhulst and Luc Pareyn (eds.), Huldeboek Prof dr. Marcel Bots. Een bundel historische en wijsgerige opstellen (Ghent, i 995), pp. i 6 7 - 9 4 . Theo Luykx and Marc Patel, Politieke geschiedenis van Belgie [Political history

46

12

13 14 15 16 17 18

19

20 21

ERIK

BUYST

of Belgium], 2 vols. (Antwerp, 1985), p. 174. For a comprehensive evaluation of the linguistic situation of the courts in Flanders, see Herman Van Goethem, De taaltoestanden in het Vlaams-Belgische gerecht, 1795-1935 [The lin­ guistic situation in the Flemish-Belgian courts, 1795—1935], (Brussels, 1990). Wils, 'Brief history', pp. 12—13. Ginette Kurgan-Van Hentenrijk, Industriele ontwikkeling [Industrial develop­ ment] (Haarlem, 1978), pp. 235—6. Paul Olyslaeger, De localiseering de Belgisch nijverheid [The localisation of Belgian manufacturing], (Antwerp, 1947), p. 112. Wils, 'Brief history', p. 17. Luykx and Patel, Politieke geschiedenis,p. 275. Wils, 'Brief history', pp. 18—22. Erik Buyst et al., 'National accounts for the Low Countries, 1800—1990', Scandinavian Economic History Review 43 (1995) 53—76 at pp. 70—2. Statistics from Ministerie van Arbeid en Sociale Voorzorg (MASV: Ministry of Labour and Social Affairs), 'De handels- en nijverheidstelling op 31 december 1930' [The 1930 census of commerce and manufacturing], Arbeidsblad 36 (1935), 1353—1521, at pp. 1366—7. The linguistically mixed province of Brabant is not taken into consideration. Karel Veraghtert, Het economisch leven in Belgie, 1918-1940 [Economic life in Belgium, 1918—1940], (Haarlem, 1979), pp. 98—100. Herman Van der Wee and Monique Verbreyt, Mensen maken geschiedenis: de Kredietbank en de economische opgang van Vaanderen, 1935-1985 [People make history: the Kredietbank and the economic rise of Flanders], (Tielt, 1985), pp. 21—60.

22 For more details, see, for example, Bruno De Wever, Greep naar de macht. Vaams-Nationalisme en Nieuwe Orde: het VNV, 1933-1945 [Seizing power. Flemish nationalism and the new order: the VNV, 1933—1945] (Tielt, 1994). 23 Wallonia also faced pro-Nazi collaboration (Rex) during the war, but it was not rooted in language issues. 24 Ron Lesthaeghe, The Decline of Belgian Fertility, 1800-1970 (Princeton, NJ, I 9 7 7 ) .

25 Jan Blomme, The Economic Development of Belgian Agriculture, 1880-1980.A Quantitative and Qualitative Analysis (Brussels, 1992). 26 Josef Smits (ed.), GastonEyskens:Dememoires [Gaston Eyskens: the memoirs], (Tielt, I993), pp. 428—9. 27 Alan S. Milward, The European Rescue of the Nation-state (London, 1995), pp. 46—II8.

28 Herman Van der Wee, 'De Belgische economie in de maalstroom van een halve eeuw, 1925—1975' [The Belgian economy during half a century, 1925—1975], in Gaston Eyskens et al. (eds.), Gaston Eyskens 80 (Tielt, 1985), pp. 57—118 at pp. 104—5; Andre Mommen, The Belgian Economy in the Twentieth Century (London and New York, 1994), pp. 127—33. 29 The many exceptions to these general rules in the language legislation of the I930s, which entailed so many abuses, were now abolished. For more details, see Wils, 'Brief history', pp. 268—70.

Economic aspects of nationality in Belgium

47

30 Figure 2.1 does not show the data for the Brussels urban area. 31 In the 1960s more than 55 per cent of the Belgian population was Dutchspeaking. 32 Van Rompuy and Bilsen, Regionalisering,pp. 1-18. 33 For a detailed overview of the constitutional reforms of 1970, 1980, 1988 and 1993, see, for example, Goossens, Ontstaan en groei,pp. 4 5 - 4 4 4 . 34 Wim Moesen and Paul Van Rompuy, De kleine kanten van de grote staatshervorming (Leuven, 1993), p. 13.

C H A P T E R

T H R E E

The economy as a pushing or retardingforce in the development of the German question during the second half of the twentieth century Jorg Roesler

INTRODUCTION

The so-called German question is one of the most important features of German history during the last 2 0 0 years. It began to develop in the first half of the nineteenth century, when the Germans became aware that they were lagging behind their neighbours, especially France and Great Britain, in the progress of nation building. For the second half of the twentieth century the German question was about the future of Germany after it had been split up into two states economically and politically after the Second World War. To the solution of the German national question there existed two alternative choices: to re-establish unity or to confirm the separation into two independent states, the Federal Republic of Germany (FRG) in the west and the German Democratic Republic (GDR) in the east. It seemed to be that the latter option had been narrowly avoided, when Germany in 1 9 9 0 once again had one government and one economic system (the market economy of the Federal Republic). Only later did East and West German politicians and social scientists learn that the so-called 'inner unification' ('innere Wiedervereinigung'), which could be reached only after the 'demolition of the wall in the minds' that separated East and West Germans, was a task that would last up to the end of the century or even longer. There exist numerous scholarly works about the latest period of Germany's division into (two) different states, its origins, the attempts of both German states and of their main protective powers (USSR and USA) to avoid or to deepen the split, to develop or to hinder the progress of mutual relations and finally the circumstances of reunification. This chapter is limited to the twenty-five experts' reports on the political and psychological problems of German division and unification policy between 1 9 4 5 and 1 9 9 0 , ordered by the 'Enquete Commission for the research of history and consequences of the SED (Socialistische 1

2

3

4

5

6

48

The economy as a force in divided Germany

49 7

Einheitspartei Deutschlands) dictatorship in Germany' and published in volume V of the series. Compared with this flood of publications, analyses of the economic relations between the F R G and G D R are comparatively rare. In the above-mentioned volume V of the Enquete Commission's publications, dedicated to 'intra-German policy and policy toward Germany', economic analyses are restricted to the development of the trade between both countries so-called intraGerman trade, and to the financial transfers between the F R G and G D R . Economic change in Germany during the last four decades had been analysed usually separately for West and East Germany, often in relation to their main economic partners in the west or east, seldom with reference to the German counterpart in the other economic system. T h e aim of this contribution is to bring together the results of the political and economic research in order to answer the question whether the economic change in the two Germanies has — in comparison with the politics — more favoured the tendency to deepen the separation or whether the economy was a reason to keep the remaining links between both states or even to strengthen them. If we look at the history of Germany between 1 9 4 5 and 1 9 4 9 and 1 9 9 0 and 1 9 9 8 as the road to divi­ sion and from division to formal and real (inner) unification, we may define the economic decision-making and the economic changes of the second half of this century in Germany as a pushing or retarding force on the journey along this road in contrast with the efforts made in the fields of politics. Between 1 9 4 5 and 1 9 9 7 we will define four periods during which the economy can be characterised as pushing force, and another four periods during which it acted as a retarding force on the solution of the German question. During these eight periods the effect of the economy on the German question has to be analysed and juxtaposed with the contemporaneous role of politics. 8

9

T H E R O L E O F E C O N O M I C P O L I C Y IN P R E S E R V I N G U N I T Y IN T H E F O U R - Z O N E P O T S D A M G E R M A N Y

ECONOMIC

(1945-1947)

During their meeting in Potsdam in July/August 1945 the leading states­ men of the United States, Britain and the Soviet Union agreed on a fourpower occupation of Germany, including France. Though an Allied Control Council for Germany was formed, the political responsibility for the development of each zone was to rest with the particular occupa­ tion force. But economically Germany should remain united. T h e influence of the Allied Control Council as a 'superior government for 10

50

JORG ROESLER

the whole of Germany' was limited from the beginning and decreased further in 1 9 4 6 and 1947. In particular, the split in the political treatment of the occupation zones between the Soviet Union and the western Allies became visible as soon as the Cold War became public. Attempts from the German side to bridge the gap that was becoming obvious between the Allies — the most important event of this kind was the meeting of prime ministers of the German states in Munich in June 1947 — were unsuccessful. In contrast to the political development, the economic links and trade between the four zones remained more or less untouched by the increas­ ing hostilities between east and west. The intra-zone trade was allowed to expand between 1 9 4 5 and 1947, starting from a very low point. The more war damages could be overcome and the dismantling (which took place, above all, in the Soviet Occupation Zone — SOZ) became restricted, the more the inner German flow of goods increased. In 1 9 4 6 and 1947 more than two thirds of the whole trade of what would become the G D R was with what would become the FRG. But compared with 1 9 3 6 it was only 5 per cent in 1 9 4 6 and 16 per cent in 1947 of the former level of goods exchange. But it was at least imaginable that the streams of goods would be able to reach prewar levels again, once the shortage of goods became less pressing as the result of an economic upswing. One of the main driving forces behind the intra-zone trade was the inner division of labour between big corporations, which had been split up between the different zones. One example of this is the Agfa photo company, an enterprise of the IG Farben Corporation. The largest enterprise of the corporation was situated in the Soviet zone. In order to keep the production in Wolfen going, the enterprise — which was, from 1 9 4 6 , a Soviet joint-stock company — had to trade with the Agfa enterprises in the other zones. O f the deliveries between the end of the Second World War and July 1 9 4 6 , 4 0 . 8 per cent went to the British, 3 9 . 8 per cent to the Soviet, 18 per cent to the American and 1.4 per cent to the French occupation zone. Economic unity was more than a declaration of the Allies and went further than mutual exchange of deliberately needed goods. This can also be shown by the history of the Zeiss Corporation in the first years after the war. After American troops had taken the management and some of the leading scientists out of Jena, which only was temporarily occupied by American forces, the headquarters of the Zeiss firm was transferred to a small town in Wurttemberg, Oberkochen. They began to build a second optical 11

12

13

14

The economy as a force in divided Germany Table 3.1. Regional structure of SOZ/GDR trade in igj6 and ig46-igj2 Year 3

I9 6 1946 1

9

4

7

1948 1

9

4

i

9 5

9

°

FRG 6 5 .

foreign

Eastern Europe

Other countries

i

5.5

9.4

72.6

25.9

0.5

68.1

26.9

6.0

3

44. 6

5.9

3

9

.

5

2

.

3

5

8

2 3 . 5

.

9.3

4

64.8

.7

1 9 5 1

6.0

76.2

7.8

1

5.2

7

9.9

9

5

2

5 1

4

.

9

Source: Calculations of the author according to Heinz Kohler, Economic Integration in the Soviet Bloc (New York, 1965), pp. 61 and 6 5 ; Statistisches Jahrbuch der DDR ig6o/6i (Berlin, i 9 6 i ) , p . 5 7 3 .

factory there. By a 'gentlemen's agreement' with Zeiss Jena, now under Soviet occupation, Oberkochen got from Jena the necessary optical instruments and other equipment for the start of its plant. Thus the economy can be identified for the first few postwar years as an important sphere, linking the eastern with the western zones in a time when political co-operation between the Allied powers for a common policy in Germany lost momentum. Intra-zone trade and continuing exchange of raw material, equipment and know-how were rare indica­ tors that the negative influence of the emerging Cold War could be limited — at least in the four-zone Potsdam Germany (see table 3.1). 15

THE MUTUAL E C O N O M I C

B L O C K A D E OF B O T H PARTS OF

GERMANY BY THE GREAT POWERS PRESERVE

AND LAST ATTEMPTS TO

G E R M A N U N I T Y IN

1948-1949

T h e (limited) economic unity of Germany came to a virtual standstill soon after the currency reforms in June 1 9 4 8 , in the united US—British—French zone and in the Soviet zone, which created different currencies for the western and eastern parts of Germany. Economic blockade and counter-blockade soon followed the currency reform. T h e blockades occurred as a result of the political strife between the former Allies over Berlin. T h e Berlin Blockade was one of the climaxes of the

52

JORG ROESLER 16

early Cold War. While again and again attempts at the political level were made in 1 9 4 8 and at the beginning of 1 9 4 9 to prevent a final polit­ ical division of Germany, the economy was the forerunner of complete separation. The division of Germany was completed in the field of pol­ itics only sixteen months later, in autumn 1 9 4 9 , when in September the Federal Republic of Germany and in October the German Democratic Republic were founded. The evidence that both parts of Germany could survive (with some help from outside) without trading with each other, an idea that politi­ cians in east and west could not imagine prior to the summer of 1 9 4 8 , turned political separation — hitherto unthinkable — into a manageable question in the eyes of the policy makers in east and west. 17

THE E A S T - W E S T I N T R A - Z O N E T R A D E AS THE ONLY

LINK

B E T W E E N G O V E R N M E N T I N S T I T U T I O N S OF F R G A N D G D R (

i

9

5

o

-

i

9

6 o

)

At the end of 1 9 4 9 the importance of the role of politics and economics in the German question suddenly changed again. Only one day after the second German state, the G D R , was founded and the political division of Germany was completed, representatives of both newly founded states signed an agreement in Frankfurt-am-Main about intra-zone trade. The so-called 'Frankfurt Agreement' was the result of intensive negotiations that had been taking place since May i 9 4 9 , when the socalled Jesup-Malik Agreement' set an end to the Berlin Blockade. The agreement of Frankfurt was the start of trade relations between the two German states. Its main formulae were incorporated into the so-called 'Berlin Agreement' of September 1 9 5 1 , which regulated the trade between the G D R and FRG until 1 9 6 0 and, with some amendments, until 1 9 8 9 . The legal requirements of the Berlin Agreement reflected the delicate political situation of the two states that did not recognise each other, each insisting that it was the only 'true' democratic republic of Germany. The Berlin Agreement evaded the official name of both states. It was entitled 'Agreement about trade between the currency regions (Wahrungsgebiete) of DM-West and DM-East'. Though the partner of the G D R side was the Ministry of 'Inner German and Foreign Trade', the F R G denied official contacts with its Ministry of Economics and created a 'Trustee of Intra-zone Traffic', which officially was not part of the Federal government, but got its instructions from the 1 8

19

The economy as a force in divided Germany

53

20

Ministry of Economics of the F R G . As a result of the non-recognition of the G D R as a political unit, the Federal government did not impose customs on trade between East and West Germany and asked in 1957, when the Economic Community was founded, for the continuation of the special trade regulations with the S O Z . T h e other members of the European Community agreed. Nevertheless, trade between both states developed again. It was heavily regulated, bureaucratically managed and often disturbed by the Cold War, but, after reaching a nadir in 1951 and 1 9 5 2 , it increased sixfold (measured in current prices) by 1 9 6 0 . The share of the Federal Republic as a trading partner of the G D R doubled from 5.2 per cent of the total G D R foreign trade in 1 9 5 2 to 1 0 . 3 per cent in 1 9 6 0 . During that climax year of Cold War and mutual reproaches between the two German governments, the annual trade arrangements signalled that contacts and negotiations between the two German spearheads of Cold War were still possible. It became apparent that political nonrecognition was only a part of the relations between the two Germanies. This was a remarkable contrast with the 'coexistence' of both Koreas after the Korean war. To keep the mutual trade going during the periods of intensive Cold War was far from easy. Not only the German side, but also the former occupation powers, exerted influence on the realisation of the agreements. They did this openly up to 1 9 5 5 , when both German states officially received 'full sovereignty', and also unofficially later on. To a certain degree, albeit a smaller degree than in the first years after the war, the links between enterprises of the same prewar corporations continued to exist in the 1950s. When the German corporations succeeded in regaining their trade marks, which they had lost as a result of the Second World War, the enterprises in the West mostly got the right to use them. But after negotiations, in some important cases gentlemen's agreements came into being, which also allowed the East German parts of the former corporations to take advantage of the trade mark. Gentlemen's agreements of this kind came into being between, for instance, Agfa Wolfen (East) and Agfa Leverkusen (West) or between the institutions responsible for the enterprises in 1 9 5 3 . Similar gentlemen's agreements also became possible for Zeiss East and Zeiss West, but only for a limited time. The intra-zone track was the last link that kept the two parts of Germany officially together. But in the autumn of 1 9 6 0 the ongoing political fight between the F R G and the G D R finally seemed to destroy the trade links between the two states. In any case, the one-sided 2 1

2 2

2 3

24

54

JORG

ROESLER

denouncement of the Berlin Agreement by the Federal government in Bonn put an end to the one decade when the economy was the fore­ runner in keeping together what remained of the former German unity. THE C L I M A X OF E C O N O M I C W A R F A R E B E T W E E N T H E T W O G E R M A N S T A T E S : T H E F R G ' S C A N C E L L A T I O N OF T H E T R A D E AGREEMENTS AND THE G D R 'S CAMPAIGN FOR TOTAL ECONOMIC SEPARATION (1961 — 1 9 6 4 )

Both the cause and the aim of the Federal government's cancellation of the Berlin Trade Agreement of 1951 were completely politically moti­ vated: the G D R authorities threatened to restrict the access of a certain group of West Germans to West Berlin. The West German government threatened to cancel the Berlin Trade Agreement in case the East German threat was carried out. When the unimpressed G D R authorities carried their access restrictions out, the West German government answered with the cancellation of the trade agreement. It looked like the G D R would be the loser, because the inner German trade was much more important for East than West Germany. At the end of the 1950s, 10 per cent of the G D R ' s foreign trade was with the FRG, while only 2 per cent of the FRG's foreign trade was with the G D R . Probably of even greater importance was that the G D R economy depended to a remarkable degree on certain deliveries from the West, mainly steel and iron, while in the Federal Republic the cancellation of trade with the G D R hit only a very limited number of individual firms. But the Federal government — never very united on this question (the Ministry of Economics was much less eager to wage a trade war with the FRG's eastern neighbour than was the Ministry of Foreign Affairs) — had to learn that East German industry only relied up to 7 per cent on West German hard coal and coke in 1 9 6 0 and imported only one tenth the amount of steel products from the F R G compared to the amount it had had to import in 1 9 5 0 . The expected collapse of G D R industry thus did not happen. But the most important reason for the defeat that the Federal Republic suffered was the Soviet government's backing of the G D R political position on West Berlin. At the end of 1 9 6 0 the cancellation of the Berlin Agreement, which would have come into effect in January 1 9 6 1 , was withdrawn by the Federal government and replaced by a revised version, which included a revocation clause ('Widerrufklausel') that gave the Bonn government the right to stop annual deliveries, but did not force it to do so. The bad 2 5

26

2 7

28

The economy as a force in divided Germany

55

experience with the cancellation of the Berlin Agreement of August 1 9 6 0 was reason enough for the Federal government not to make use of the revocation clause, when the wall around West Berlin was built by the G D R only one year later. A long-standing result of the short-lived cancellation of the intrazone trade agreement was the campaign of the G D R government to make the East German economy 'free from intervention' ('Storfreimachung') by the Federal Republic. T h e 'Storfreimachung' was the result of an evaluation of the economic dependencies of East German industrial branches by the Planning Commission and the ministries of economics in the G D R , undertaken under the threat of the cancellation of the intra-zone trade agreement in autumn i 9 6 o . T h e result worried the East German policy makers. Not only was there a dependence on imports from West Germany for coke and steel, but in nearly all branches of the machine-building industry the situation was no better. A campaign was started, therefore, to replace the existing links to enterprises in the Federal Republic by taking over their production in the G D R or shifting the import to the allied east-European countries. The commitment of the G D R leadership to 'Storfreimachung' was very serious. They sacrificed even the young G D R aircraft industry, the pride of many East Germans, in order to free up investment, engineers and skilled labour for their programme of autarky. With enormous pressure from above, it was possible to reduce the number of enterprises in the heavy-machine-building industry that would be endangered by a possible cancellation of the trade treaty from 6 0 to 2 6 per cent, or from 2 5 . 4 to 14.8 per cent of the capacity. Similar 'successes' were envisaged and often also realised in other industrial branches. In the beginning of the 1960s the conflict about trade marks, waged between East and West German firms since the 1950s, escalated. T h e period of gentlemen's agreements between Agfa Leverkusen and Agfa Wolfen, and between Zeiss East and Zeiss West, ended. Both Agfa firms severed their trade mark links peacefully. Agfa Wolfen developed the trade mark O R W O and was renamed O R W O Wolfen at the beginning of the 1960s. Since the second half of the 1 9 5 0 s both Zeiss firms had been going to the courts in the F R G and abroad in order to prevent the former partner from using the Zeiss trade mark. A climax of the trademark war was reached in 1 9 6 1 , when, between Zeiss and Zeiss, seventytwo major cases in twenty-one countries and sixty-nine smaller ones in forty-one countries were pending decisions. The years of 'trade-mark war' and of 'Storfreimachung' (1961—4) 29

30

31

32

56

JORG

ROESLER

became the climax years of industrial separation of the German economies. Month by month, the East German economic links to the western part of Germany, which had developed since the industrial revolution, were cut. The economy was the clear trendsetter in com­ pleting Germany's division during the first half of the 1 9 6 0 s . The amount of mutual trade declined, even in current prices, between 1 9 6 0 and 1 9 6 5 . The political relations became icy with the creation of the Wall in August 1 9 6 1 . But a thaw began in politics much earlier than in economics. While the mutual trade policy of F R G and G D R was characterised by confrontation, as early as 1 9 6 3 the first agreement between both German governments in the political field was signed. The agreement allowed West Berliners to visit their East Berlin relatives for the first time since the building of the Wall. Concerning the German question, relations between both German states in the economic field lagged behind that in politics up to 1 9 6 4 , when the policy confrontation in intra-German or 'German—German' trade, as it now became known, ended. THE

I M P R O V E M E N T OF T R A D E LINKS AS A F O R E R U N N E R OF

POLITICAL DETENTE BETWEEN THE T W O GERMAN ( i

9

6

4

- i

9

STATES

7 0

Between 1 9 6 5 and 1972 the volume of intra-German trade doubled (in current prices). During this time the share of G D R trade with the Federal Republic rose only slightly from 9.5 to 12.3 per cent. The policy of confrontation between East and West German enterprises that used the same traditional trade mark, came to an end. Even the East and West German Zeiss firms reached an agreement in London, based on the status quo, on how to share out the world market for Zeiss products. Thus there were many indications during the second half of the 1960s and the beginning of the 1970s that the severing of economic links between both parts of Germany had ended and was to be followed by a period of mutual co-operation and recognition — at least at the level of firms. Indeed, since the reformers in the S E D leadership had taken over the command in the economy and introduced the 'New economic system of planning and management' (NES) they recognised that a complete severing of the economic links with the Federal Republic would be adverse for the new goals of raising productivity and the technological level of G D R industry. During the first year of the NES, when the reformer Apel became head of the commanding body of the G D R economy, the State Planning Commission, the policy of 'Storfreimachung' ended. To 33

34

35

The economy as a force in divided Germany

57

increase trade with the West in order to benefit from West—East technol­ ogy transfer became one of the main goals of the N E S . But the new attitude to reconstructing and expanding economic links between both German states in the second half of the 1960s was not only felt among G D R policy makers. O n the part of the Federal Republic of Germany there was also a readiness to end its policy of confrontation in the trade sector. T h e revocation clause of the revised Berlin Agreement, which made trade between the F R G and the G D R insecure, was lifted in 1 9 6 7 . Numerous smaller improvements followed during the same year 36

and in 1 9 6 8 .

3 7

Economic relations between both German states not only became more intensive, but took the lead in keeping the relations between both German states going, leaving politics behind again. There was a move in the Federal government, after Konrad Adenauer's chancellorship had ended in 1 9 6 3 , to come to mutual agreements with the other German state. But this move was blocked by a conservative majority in parliament and in the Federal government, which denied the G D R — as in the 1950s — the right to exist or, at least, to be internationally recognised. While these forces were able to block entente during the chancellorships of Ludwig Erhard and Georg Kiesinger and the first chancellorship of Willi Brandt ( 1 9 6 4 — 7 2 ) , the field of the economy, where (camouflaged) relations between both German states already existed, was chosen by successive West German governments as a training ground for political negotiations, which they were convinced would happen in the near future. The 2 0 0 rounds of negotiations in 1967—8, aimed at introducing improvements in intra-German trade agreements, were thus not only of importance for the expansion of the trade between both German states, but had a political function as well. They demonstrated the possibility of establishing a dialogue with the other German state and of reaching agreements in the interests of both partners. T h e economy had again become the forerunner of closer relations between both Germanies. In this sense, developments in the economic relations between the two German states helped keep the 'German question' open. 38

P O L I T I C A L P R O G R E S S A N D E C O N O M I C S T A G N A T I O N IN GERMAN-GERMAN RELATIONS

(1972-1982)

At the end of the 1960s and the beginning of the 1970s, the political situation that had created a deadlock in the relations between the two German states changed in the Federal Republic of Germany. Those

58

JORG

ROESLER

forces that wished officially to recognise the G D R as the second German state became ascendant. Nevertheless, the pledge for the eventual unification of Germany was not given up. This was in accordance with what had been written in the West German Constitution of 1 9 4 9 . A new formula was found: 'Two states — one nation.' In autumn 1 9 6 9 the C D U (Christlich demokratische Union) lost control of the government for the first time in the history of the FRG. Social Democrats and Free Democrats, now forming the government, began to realise their aims of 'Ostpolitik', which included the recognition of the G D R . But it took until 1972 before the resistance of the C D U and — even more so — the C S U (Christlich soziale Union) against the political recognition of the G D R could be overcome and treaties about access to Berlin, improved relations with the G D R ('Grundlagenvertrag'), the U S S R and Poland could be ratified by the Federal parliament. As a consequence, in 1 9 7 3 both German states became members of the United Nations and signed the final documents of the Helsinki Agreement in 1 9 7 5 . The new political relations between the two German states created the conditions for non-trade or non-commercial flows of goods and money between the FRG and G D R . Measures taken by the G D R government to improve access from West Germany to West Berlin and the freeing of political prisoners (for hard currency!) in the G D R were the main reasons, while the Federal Republic decided in favour of the West—East intra-German flow of money, which had only a limited positive impact on the East German currency balance. While the political relations between both German states were put on a new basis, the economic links between the F R G and the G D R remained unchanged. The Berlin Agreement of 1951 in its updated version of 1 9 6 0 remained valid throughout the 1970s and 1980s. That intra-German trade was not put on the level of the new 'Two states — one nation' level of political relations was a political setback for the G D R , which accepted the fact only hesitantly, but it was forced to do so by adverse economic circumstances. Nevertheless, the Federal Republic had become the second most important trading partner of the G D R and its main source of technology imports. It was not only the framework of trading between the F R G and the G D R that remained unchanged. Trade itself more or less stagnated, after a period of fast growth in the second half of the 1960s. 'IntraGerman trade has been in a phase of stagnation for a long time,' wrote Horst Lambrecht, analyst of the West Berlin-based Deutsches Institut fur Wirtschaftsforschung (DIW) in 1 9 8 2 . 'There had only been real growth twice since 1972 — in 1 9 7 6 and 1 9 8 0 . . . During the period 3 9

40

41

The economy as a force in divided Germany

59

between 1972 and 1981 the real trade increase was only 0.6 or 0 . 7 % per '42 4 2

annum. One of the reasons for stagnation in intra-German trade was the increasing difficulty experienced by the G D R processing industry in selling their products on western markets. In the West, competition intensified after the oil-price shock, the 1 9 7 3 / 4 world economic crises and the forceful appearance of the Asian new industrialised countries on western markets. As a result of the G D R being less able to compete in the innovation drive, the share of the G D R ' s machine-building industry in total exports to the F R G fell from 5.8 per cent in the period 1966—70 to 3.5 per cent in 1971—6 and finally to 3.1 per cent in 1 9 7 6 — 8 0 . The treaties of 1970—2 also allowed both German states to propagate detente publicly on the political level. This was not without conse­ quences for the conditions of economic co-operation. It was no longer necessary for the F R G to demonstrate its willingness for detente indi­ rectly by creating favourable conditions for intra-German trade. Some conditions, such as the lowering of Deutschmark interest rates for East Germany, which were subsequently reduced on a fixed, step-by-step basis, were conducive to a dynamic trade upswing. T h e share of intraGerman trade in East Germany's total foreign trade subsequently remained nearly unchanged. 43

44

45

46

T H E E C O N O M Y A G A I N AS F O R E R U N N E R OF C L O S E R BETWEEN BOTH GERMANIES

RELATIONS

(1983-1989)

In December 1981 a climax in the improvement of the political relations had been reached, when the political leaders of the two German states, the SED party boss Erich Honecker and the chancellor of the Federal Republic, Helmut Schmidt, met in the Schorfheide, north of Berlin. Honecker was invited by Schmidt for an official visit to the Federal Republic in the near future. But the political improvement of German— German relations was met with increasing distrust from several quarters. First there was opposition to the 'appeasement policy' of Honecker, who was 'born in western Germany', by hard-liners within the S E D politburo. Secondly, there was growing distrust of the Soviet leadership under Brezhnev and Chernenko in the policy of developing 'special political relations' between the F R G and the G D R leadership. Thirdly, there was a political change in the FRG, which was expected to disturb relations between both German states, as they had been developed between Schmidt and Honecker. T h e SPD-led coalition, which had ini­ tiated political detente with the G D R at the beginning of the 1970s, was 47

48

49

60

JORG

ROESLER

overthrown by a vote of no confidence. The head of the opposition, Helmut Kohl, became chancellor of a CDU-led government. He under­ lined the necessity of reunification in his first speeches. This had not been a topic of the Social Democrats in previous years. Honecker was forced to cancel his visit to the Federal Republic. It looked like the beginning of a period of stagnation in the political relations between both German states. The main field of German—German relations in 1 9 8 3 shifted again from the more frosty — officially, at least — political scene to the economic field, which up to the end of the G D R became the main field of co-operation between the two German states. But the changed political situation was not the only reason why the economy again became more important for German—German relations. In 1 9 8 3 East Germany's economy was in trouble because of its growing hard-currency debt. The causes of this indebtedness went back to the beginning of the 1970s, when the G D R policy makers launched a scheme for the development of foreign economic relations with West Germany, which relied on credit-financed imports for the modernisation of the industrial capital stock. The credits were to be paid back in the second half of the 1970s by the goods produced in the new factories, which were supposed to have been completed by then. This scheme involved several risks: it was assumed that the West Germans would build most of the modern factories, that the same technique could be performed identically in the environment of another economic system and, lastly, that the situation of the markets could be predicted five to ten years ahead. At the end of the 1970s the politburo of the SED became aware of the complete failure of this scheme. The answer was not very innovative: import restrictions and forced export of G D R goods at dumping prices. The results were modest. The hope of getting out of the mess finally had to be given up, when a failure of confidence on the part of the international banking community was sparked off by the insolvency crisis in Poland and Romania. The G D R was also drawn into the crisis. East Germany was in the same situation as Poland, Romania or Hungary, which had also got into financial trouble because of their hard-currency deficit. These countries had rela­ tions with the IMF (International Monetary Fund) and the World Bank, which the G D R did not have. Honecker's intermediary, Alexander Schalck-Golodkowsky, therefore unofficially turned to the influential West German politician and prime minister of the state of Bavaria, Franz-Josef Strauss, asking for the help of the Federal Republic. The G D R got this help. In 1 9 8 3 the Federal government organised and guar50

51

The economy as a force in divided Germany

61

anteed a loan by West German banks to the East German regime worth 1,000 million deutschmarks. Another West German loan, again of 1,000 million deutschmarks, was forthcoming in 1 9 8 4 . This deal allowed East Germany to fulfil its financial obligations and ended the distrust of the international banks towards the G D R . The Deutschmark loans were the beginning of closer co-operation between the two German states in the economic field. T h e Kohl govern­ ment improved the financial framework for trade in order to make intraGerman relations more flexible. But for the first time in the history of economic relations between the German states, trade was no longer the main field of co-operation. There was no upswing in intra-German trade. Trade between the F R G and G D R continued to suffer from the same difficulties as in the 1970s: the competitive weakness of East German processing industries. Real progress was made in the develop­ ment of different versions of contracts between G D R and F R G firms. A G D R government framework for 'Kompensationsgeschafte' made the establishment of factories by West German firms politically possible. T h e attraction for West German firms was cheap labour. T h e G D R authorities envisaged that the investments would be paid back with the products of the newly built enterprises. Other than in the 1970s, the West German firms this time organised market access for the products in West Germany and got the right to intervene in the marketing process and also, indirectly, in other sections of the management of the East German factories. T h e best known of the Kompensationsgeschafte was the construction of an automobile factory according to Volkswagen (VW) specifications. A second form of co-operation was termed 'Gestattungsproduktion'. Products were made in the G D R under West German licence and according to West German quality standards directly for the West German market. The best known of the Gestattungsproduktion deals was with the West German shoe producer 'Salamander'. This co-oper­ ation came close to being a joint venture. But despite some attempts from the most influential economic leader of the SED, Gunther Mittag, joint ventures remained a taboo in the G D R till 1 9 8 9 . Politburo hard-liners resisted any schemes that would, in their view, increase the dependence of the G D R ' s economy on West Germany. (For development of West-East trade, see table 3.2.) During 1 9 8 9 , when the political crisis of the SED regime was looming, and even when the Wall came down in November 1 9 8 9 , the progress in economic co-operation that had been attained seemed to be the firm base for the new political goal of creating a German confederation. 52

5 3

54

55

56

57

JORG ROESLER

62

Table 3.2. Trade between GDR and FRG between igj2 and iggo (in million DM,current prices) Year

G D R export

I95

2

220.3

195

3

306.9

1

9

5

4

1

9

5

5

1

9

5

6

1

9

5

7

9

5

2

9 . 7

1961

9

6

9

1

5

.

3

5

7

8

.

454.4

904.I

562.6 699.2

I,I50.5 I,I50.5

4

+

I

.

9

+ 35.6 -4.7

2

2

5

.

3

817.3

845.9

I,663.2

800.4 1,078.6

I,658.6 I,970.3

+53.8 -I86.9

1,122.4 940.9 914.0

959.5

2,08I.9

+ I62.9

872.9 853.0

I,8I3.8 I,767.0

+68.0 + 62.0

860.0

I,822.0 2,I78.0

+ I63.0 - I24.0

1 , 1 5 1 . 0

4

6

398.7 1

858.2 891.7

1962 1 9 6 3 1 , 0 2 2 . 0 1,017.0 1

7

Balance

+ -45.8 -28.6

9

1960

Turnover

178.4

44 587.9 653.4

1958 1

G D R import

1,260.0 ,

3

4

5

.

0

1966 1967

i 1,264.0

1968

1,440.0

1,206.0

2,I67.0

+ 54. 0

1,625.0

2,97I.0 2,747.0

- 280.0 - 2I9.0

2,872.0

+ 8.0

1,656.0 1,996.0

1,483.0 1,432.0 2,272.0 2,4I6.0

3,928.0 4,4I2.0

- 6I6.0 - 420.0

2,319.0 2,381.0

2,499.0 2,927.0

4,8I7.0 5,308.0

- I80.0 - 546.0

2,660.0

2,998.0

5,568.0

- 338.0

3,252.0 3,342.0

3,67I.0 3,922.0

5,923.0 7,264.0

- 4I8.0 - 579.0

1976

3,877.0

4,269.0

8

1977 1978

3,961.0 3,900.0

4,409.0 4,575.0

8.370.0 8,475.0

- 448.0 - 675.0

4,589.0 5,580.0

4,720.0 5,293.0

9,309.0 I0,873.0

-I3I.0 + 286.0

1 1

9

6

9

7

9

0

1 9 7 1

9 7 2

1

9 7 3

1 1

9

7

4

9 7 5

1

9

7

9

1 1980

,

1

4

5

.

- 392.0

0

1981

6,051.0

5,575.0

II,626.0

+ 476.0

1982

6,639.0 6,878.0

6,382.0 6,947.0

I3,022.0 I3,825.0

+ 257.0 - 69.0

1983

7,744.0

6,408.0

I4,I52.0

+I,336.0

1985 1986

7,636.0 6,844.0

7,90I.0 7,454.0

I5,537.0 I4,298.0

- 265.0 - 6 I I .0

1987 1988

6,650.0 6,790.0

7,406.0 7.230.0

I4,056.0 I4,020.0

- 756.0 - 440.0

1989 1

7,205.4

1

9

8

9

4

9

0

8,274.1

8,I03.5 2

1

,

3

2

5

.

7

I5,038.9 29,599.0

-898.I -

I

3

,

0

5

I

Source: Statistisches Bundesamt Wiesbaden: Warenverkehr mit der D D R und Berlin (Ost), Fachserie 6, Reihe 6.

.

6

The economy as a force in divided Germany

63

But at the end of 1 9 8 9 and the beginning of 1 9 9 0 the demands of the demonstrators turned from democratic socialism with a mixed economy to unification with the market economy of West Germany. During this time the main focus of German—German relations again turned away from economics to politics. 58

S L O W P R O G R E S S IN E C O N O M I C U N I F I C A T I O N E N D A N G E R S T H E A C H I E V E M E N T S OF FAST P O L I T I C A L U N I F I C A T I O N

(1990-1997)

T h e political situation of the G D R changed in the first quarter of 1 9 9 0 dramatically from a scene dominated by the S E D / P D S (Party of Democratic Socialism) and other 'revolutionary' movements, to a polit­ ical landscape like that in the Federal Republic. With the first free elections in March 1 9 9 0 the C D U (Christlich Demokratische Union) and the SPD (Sozialdemokratische Partei Deutschlands) became the main parties in the G D R , too. T h e PDS, the successor of the SED, got only 16 per cent, the revolutionary parties, suc­ cessors of the revolutionary movements, only 5 per cent of the vote. These political decisions of the G D R population were confirmed by the elections to the five provincial parliaments in the East in October. T h e first all-German election was held in December 1 9 9 0 , when the PDS, the remaining 'Eastern party', got only 11 per cent of the votes in the former G D R and 0.3 per cent in the old Federal Republic of Germany. In 1991 the post-communists were in a deep crisis. Generally it was expected that they would be completely marginalised as had been the Communists in the West of Germany some decades before. Political analysts were convinced that with the 1 9 9 4 federal elections the political unification would be completed. But beginning with the Berlin state elections in June 1 9 9 2 the downturn of the post-communists was stopped. During the 'super election year' of 1 9 9 4 , when there was not only the federal election, but also elections for the European parliament and elections in several provinces and local elections, the P D S was able to increase its share of the vote in the East, compared with the December 1 9 9 0 federal election and even with the last G D R elections of March 1 9 9 0 . In the East it got 19.8 per cent of the vote. These elections, which took place at the local and province levels in East Germany, confirmed this result as did the elections for the European parliament. After the 1 9 9 4 super election year there again emerged in Germany two different political landscapes: one in the West, where the post-communists remained marginalised (1 per cent of the 59

60

61

62

64

JORG ROESLER

vote) and the four parties that were able to override the 5 per cent hurdle — the Christian Democrats, the Social Democrats, the Free Democrats and the Greens — and one in the East, where only three parties got above the 5 per cent hurdle: the Christian Democrats, the Social Democrats and the post-communists. The clear backlash that political unification had suffered in 1 9 9 4 was to a remarkable degree the result of the deficits in economic unification, which have become more and more visible for the East Germans since 1 9 9 2 . While the institutional framework of the West German 'social market economy' was introduced on the day of the 'currency union', 1 July 1 9 9 0 , with great haste, privatisation and marketisation did not create an East German economy similar to that in the West. The newly emerging economic structures in the new Bundeslander differed sharply from those in the old ones. Deindustrialisation did not come to a halt before the most industrialised state of the East (Saxony) had a lower share of industry in G N P than the least industrialised state in the West (Schleswig-Holstein). O n average, the industrial level in the East in 1 9 9 5 reached only 6 0 per cent of that of West Germany, the capital intensity 5 6 per cent. The efforts to reduce the size of the former big stateowned enterprises, the Kombinate, called the 'dinosaurs', did not stop before the average enterprise in the East was minimised to such a level that it lacked the capital for marketing, research and development and other 'extra' costs. Only investment in these areas could have prepared these enterprises to face the future. Opening the way for an influx of West German management methods by selling off the East German enterprises to West German private firms — 9 5 per cent of the capacity of former East German industry was privatised this way — did not stop until these enterprises had been turned into pure subsidiaries. In 1 9 9 4 it became known that there was only one remaining large enterprise — with a workforce of more than 1,000 and including all the functions of a modern enterprise — in the former East Germany. The dysfunction in the economy can be pursued to the enterprise level of the 'reference' firms of this chapter, Zeiss and O R W O (formerly Agfa) Wolfen. Though a basic agreement about close co-operation between Zeiss East (Jena) and Zeiss West (Oberkochen) was signed as early as November 1990 and the Oberkochen manager got access to all produc­ tion secrets of Zeiss Jena, the former offspring hesitated to buy the former 'mother' company when it was offered to Zeiss West by the Treuhand privatisation agency. Only when Treuhand threatened to sell the Jena plant to Japanese competitors was Oberkochen ready to take over the traditional optical production of Zeiss Jena. That occurred in 63

64

65

66

67

The economy as a force in divided Germany

65

June 1 9 9 1 . It soon renounced its financial help for the Jena plant and turned the former 'mother' into a subsidiary, denying Zeiss Jena its own responsibility for marketing. T h e chief manager of the Jena plant (a West German), resigned. Only in 1 9 9 5 / 6 did Oberkochen accept Jena as a core enterprise of the Zeiss firm and give it responsibility for special aspects of optical production and greater autonomy. For Agfa Leverkusen, the East German O R W O Wolfen was of no interest, even though O R W O managers and Treuhandanstalt tried to come to terms with the West German firm, which had been a co-operation partner of O R W O for decades, even during the first ten years of separate political development in East and West Germany. O R W O was scaled down by the Treuhandanstalt again and again, in order to make a suitable package out of the former giant that could be sold to a western investor. But for a long time nobody came. Only in 1 9 9 5 did the owner of a medium-sized camera factory from West Germany take over the rem­ nants of the former O R W O giant and begin to deliver films from Wolfen with the famous O R W O trade mark. At the beginning of 1997 the work­ force of the plant was 1 0 0 people, compared with 2 1 , 0 0 0 in i 9 8 9 . O n e year later the last firm with the name O R W O was closed. The differences in the economic structure of East and West Germany have consequences for its social structure. Mainly as a result of highspeed deindustrialisation, unemployment in the new federal provinces is considerably higher than in western Germany. Though unemployment has been relatively high in the whole of Germany since the 1 9 9 2 / 3 economic crises, differences between old and new federal provinces are remarkable. T h e average official unemployment in 1 9 9 8 reached 1 9 . 3 per cent in the east and 9 . 4 per cent in the west of Germany. Unemployment in the most affected state of eastern Germany, SachsenAnhalt, is three times higher than in the state with the lowest level of unemployment in the west, Bavaria. While in the west the real unemployment figures are not far from the official ones, in the east real unemployment is much higher than officially admitted — around 3 0 per cent. Thanks to huge transfers of Deutschmarks from the west to the east after currency union, the disparity in the standard of living is not as big as could be expected from the economic situation. The net income in the new Lander reached around 8 5 per cent of that of the west in 1 9 9 7 . If one considers the property of east and west German households instead of current income, the figure for east Germans is 1 4 . 6 per cent of that of west Germans. Particularly alarming is the fact that — in contrast to the current income development — the east German private wealth level has, in relation to that of the west, not increased but 68

69

70

71

72

7 3

JORG

66

ROESLER

Table 3.3. Monthly net income per employed person in the new and the old German Bundeslander in DM, iggi—iggy

Year

N e w Lander

O l d Lander

1991

1,367

2,248 2 , 5

, 7

1992 i 54 1 9 9 3 2 , 0 3 2

N e w Lander (old Lander = 100)

n

5

4

.

7

6

9

.

9

2,689

75.6

Increase (%)

1

5

.

2

1994

1,108

2,691

1995 1

2,221

2,695

78.4 82.4

2

2,788

84.4

2.0

1997

2,362

2,776

85.0

0.6

9

9

6

2

,

3

5

2.8 4. 0

Source: Calculated from data of Statistisches Bundesamt Wiesbaden, Der Tagesspiegel, 15 August 1 9 9 8 .

decreased (see table 3.3). The forecasts of economists who think that equality in economic performance and income will be reached envisage this happening in the first or second decade of the new century. Taking these estimates into consideration, the period when the economy acts as a brake to the unification process will last much longer than in any other of the earlier periods between 1 9 4 5 and 1 9 8 9 .

CONCLUSION:

T H E IMPACT

OF

T H E ECONOMY

ON

THE

GERMAN

Q U E S T I O N FROM 1 9 4 5 TO THE P R E S E N T A N D ITS RELATIONSHIP

TO

POLITICS

As has been shown, the economy served during the last five decades as either a pushing or a retarding force in the development of the German question. O n the one hand the economy played a pushing role in the solution of the German question. It did this either by keeping Germany at least partially together or by providing the basis for co-operation under the aegis of a special relationship. 'Special' is understood here to mean 'not usual for other neighbouring "capitalist" and "socialist" countries'. T h e economy was the main link that kept together the eastern and the western zones, which were drifting in different directions politically, during the first years after the war (1945—7). The economy also acted as the only bridge between the two German governments when the political dialogue broke down ( 1 9 5 0 - 6 0 ) . Later on, the economy was again the field of intensive negotiations. It was important for the development of trust between the representatives of both German

The economy as a force in divided Germany

67

governments, when it was not possible to co-operate more closely in the political field due to hostility towards the superpowers or internal opposition to a continuation of political negotiations. (1983—9). O n the other hand the economy also acted as a retarding force in the development of the German question, which deepened the division of Germany or prevented closer co-operation between both Germanies. In 1948—9 and in 1961—4 the economy took the lead in the final division of Germany. In the 1970s and beginning of the 1980s, no signals for the improvement of relations between the F R G and the G D R came from the economy. Since unification, the economy has become the main retarding force in the process of what is referred to by politicians and the media as 'real unification', by providing the 'material base' for ongoing social and mental differences. But a look at the history of the German question in the last five decades also reveals that economic activities, directed either towards reunification or separation, have often been connected with political attempts to keep the east and west of Germany separate or together. T h e Cold War policy in 1 9 4 8 jeopardised efforts to keep Germany economically together. In 1 9 6 0 , existing economic links between the G D R and the F R G were almost completely sacrificed to the demands of the Cold War. During the second half of the 1960s and the beginning of the 1970s, the economy acted as a proxy for detente, which, due to internal pressure in the F R G and the G D R , could not take place politically. In the second half of the 1980s, economic co-operation between the two German states had its own logic and momentum. But it was the (partially secret) negotiations in the economic field that created the necessary degree of trust between Honecker and the C D U / C S U - l e d Kohl govern­ ment of the Federal Republic, for the long-delayed 1 9 8 7 Honecker visit to Bonn to have been possible. In the 1990s the slow progress of eco­ nomic unification — the broken promise of a flourishing landscape — seems to have jeopardised progress in political and mental unification, which had been reached initially in 1 9 9 0 and 1 9 9 1 . NOTES

1 The origins of the 'German question' are often dated back to the late middle ages, when the Reformation and the Thirty Years War confirmed religious and cultural diversity and political decentralisation in Germany for more than 200 years: Mary Fulbrook, Germany 1918—1990. The Divided Nation (London, 1991), pp. 1—3. 2 William Carr, The Origins of the Wars of German Unification (New York, 1991),

68

JORG ROESLER

pp.

2 5 - 3 3 ; Mary Fulbrook, pp. 1 1 4 - 1 5 and 123.

A Concise History of Germany (Cambridge,

1990),

3 Christoph Klessmann and Georg Wagner (eds.), Das gespaltene Land. Leben in Deutschland 1945-1990 (Munich, 1993), p. 13. 4 Peter Bender, Episode oder Epoche? Zur Geschichte des geteilten Deutschland (Munich, 1996), pp. 2 5 5 - 6 . 5 Werner Weidenfeld and Karl Rudolf Korte (eds.), Handbuch zur deutschen Einheit (Bonn, 1996), pp. 3 8 5 - 9 6 . 6 Enquete-Kommission (ed.), Aufarbeitung von Geschichte und Folgen der SEDDiktatur in Deutschland im Deutschen Bundestag (Baden-Baden, 1995), vol. V, pp. 1 1 0 8 - 5 4 2 and 7 8 9

10

12 13 14 15

16 17

18

19

20

1572-2600.

For more details see Weidenfeld and Korte, Handbuch,pp. 2 6 4 - 7 5 . Enquete-Kommission, Aufarbeitung von Geschichte,pp. 1 5 4 3 - 7 1 and 2 7 6 1 - 9 7 . Ibid., pp. 1 5 7 9 - 6 4 7 and 2 8 8 9 - 9 4 0 ; Rainer Klump, Wirtschaftsgeschichte der Bundesrepublik Deutschland (Wiesbaden, 1 985); Wolfgang Muhlfriedel and Klaus Wiessner, Die Geschichte der Industrie der DDR bis 1965 (Berlin, 1 989). A look at the other German economy is included to a certain degree in Werner Abelshauser, Wirtschaftsgeschichte der Bundesrepublik Deutschland 1945-1980 (Frankfurt am Main, 1 983), pp. 9 4 - 8 . Karl Bittel (ed.), Das Potsdamer Abkommen und andere Dokumente (Berlin, 1 957), pp. 7 - 2 , 75. Fulbrook, Concise History ofGermany,pp. 3 3 - 4 . Manfred Overesch, Die Deutschen und die Deutsche Frage 1945-1955 (Hanover, 985), p. 25. Heinz Kohler, Economic Integration in the Soviet Bloc (New York, 1 965), pp. 6 1 and 6 5 . Christoph Buchheim (ed.), WirtschaftlicheFolgelasten des Kriegs in der SBZ/DDR (Baden-Baden, 995), p. 95. Wolfgang Schumann, Carl Zeiss Jena. Einst undjetzt (Berlin, 1 962), pp. 6 6 0 - 5 . Gerhard Keiderling, Die Berliner Krise 1948/49 (Berlin, 1 982). In spring 1 948 the prime ministers of the West German Lander - in a first reaction to the demand of the western Allies - refused to take part in the elaboration of a separate constitution for the western zones, because they did not wish to risk the split of Germany. In the Soviet Occupation Zone at the end of 1 947 the 'German Peoples Congress for Unity and a Just Peace' began to resume work: Christoph Klessmann, Die doppelte Staatsgrundung. Deutsche Geschichte 1945-1955 (Bonn, 1 986), pp. 1 99 and 203. Detlef Nakath, Zur Geschichte der deutsch-deutschen Handelsbeziehungen. Die besondereBedeutung der Krisenjahre 1960/61 fur die Entwicklung des innerdeutschen Handels (Berlin, 1 993), p. 1 0. Bender, Episode,pp. 3 6 - 4 6 . Nakath, Zur Geschichte,pp.9- 0; Renate Hrzan and Walter Kupferschmidt, 'Zur historischen Entwicklung der Aussenhandelsorganisation der DDR', Wissenschaftliche Zeitschrift der Hochschulefur Okonomie 'Bruno Leuschner' 4 (1 987), 3-5.

The economy as a force in divided Germany 21

69

Statistisches Jahrbuch der Deutschen Demokratischen Republik 1960/61 (Berlin, 1961), p .

573-

22 Ibid. 23 Rainer Karlsch, Von Agfa zu ORWO. Die Folgen der deutschen Teilung fur die Filmfabrik Wolfen (Wolfen, 1992), pp. 13—17. 24 Federal State Archives (Bundesarchiv), files of the former GDR central state authorities (Abteilung DDR); DE-4, 6128, without folio numbers. In the fol­ lowing: B Arch DDR. 25 B Arch DB102, 108.149, without folio numbers. 26 Ibid. 27 Ibid. 28 For details, see Nakath, Zur Geschichte,pp. 22—35. 29 Hans Georg Lehmann, Deutschland-Chronik 1945—1995 (Berlin, 1995), p. 191. 30 In a contemporary East German publication the re-establishment of the aircraft industry was called 'the true German economic miracle': Rolf Kindscher, Entwicklungstendenzen im Luftverkehr (Berlin, 1960), p. 114. 31 B Arch DDR, DE-4, 4 4 7 , without folio numbers. 32 B Arch DDR, DE-4, 6128, without folio numbers. 33 Ibid. 3 4 Statistisches Jahrbuch der DDR 1970 (Berlin, 1970), pp. 294—5; Statistisches Jahrbuch der DDR 1976 (Berlin, 1976), pp. 265—6. 35 Zeiss West (situated in Oberkochen), for example, got the exclusive rights to sell under the Zeiss trade mark in West Germany, Italy, Scandinavia and the United States. In the Comecon countries only Zeiss East (Jena) had the right to sell products under the Zeiss trade mark. In a third group of countries both Zeiss Corporations were allowed to sell their products. These 'countries of coexistence' included, for example, Great Britain and the British Commonwealth, Spain and some African states: Gustav Neumann, 'Es waren einmal zwei Bruder. Werden Zeiss-Ost und Zeiss-West der erste gesamtdeutsche Konzern?', Neues Deutschland, 6—7 October 1990. 36 B Arch DDR, DE-4, 26678, without folio numbers. See also Gerd Leptin and Manfred Melzer, Economic Reforms in East German Industry (Oxford, 1978), 1

pp. 55—6.

37 Nakath, Zur Geschichte,p. 16. 38 Christoph Klessmann, Zwei Staaten,eine Nation. Deutsche Geschichte 1955—1970 (Gottingen, 1988), pp. 82—98; Lehmann, Deutschland-Chronik,pp. 216—17. 39 Lehmann, Deutschland-Chronik,pp. 239—44. 40 Erich Honecker in an interview with the U.S. journalist Sulzberger, Neues Deutschland, 25 November 1971. 41 Werner Weidenfeld and Hartmut Zimmermann, Deutschland-Handbuch. Eine doppelte Bilanz 1949—1989 (Bonn, 1989), pp. 647—8. The specialist on the intra-German trade history, Nakath, speaks about a 'compromise between extreme different positions. The FRG was able to realise most of her political interests' during the negotiations for the 'Grundlagenvertrag': Nakath, Zur Geschichte,p. 18.

70

JORG

ROESLER

42 Horst Lambrecht, 'Innerdeutscher Handel weiterhin ohne Dynamik', DIW (Deutsches Institut fur Wirtschaftsforschung) -Wochenbericht 22 (1982), 285. 43 US Congress: Joint Economic Committee (ed.), East European Economies: Slow Growth in the ig8os (Washington, 1986), vol. II, pp. 1 2 - 1 3 . 4 4 Lambrecht, 'Innerdeutscher Handel', p. 287. 45 The swing was normally fixed in trade agreements between the two German states as a certain sum of money. The dynamic swing was fixed as percentage of intra-German trade. In the case of growth in trade the volume of the swing grew automatically. 46 Statistisches Bundesamt (ed.), Sonderreihe mit Beitragen fur das Gebiet der ehemaligen DDR (Wiesbaden, 1993), vol. IX, pp. 1 6 - 1 7 . 47 Peter Przybylski, Tatort Politburo. Die Akte Honecker (Berlin, 1991), p. 3 5 2 . Honecker was born in 1912 in the Saarland, near the French-German border. 48 Detlef Nakath and Gerd-Rudiger Stephan, Von Hubertusstock nach Bonn i ^ i 49 Brigitte Zimmermann and Hans-Dieter Schutt (eds.), ohnMacht. DDRFunktionare sagen aus (Berlin, 1992), pp. 2 2 4 - 5 . 50 Lehmann, Deutschland-Chronik,pp. 3 0 3 - 5 , and 332. 51 US Congress: Joint Economic Committee, East European Economies, vol. II, ( B e r l i n ,

p

p

.

1

5

3

-

4

9

9

a

n

p p .

d

l

6

2

9

-

- 4 .

7

0

.

52 Officially there did not exist any condition on the side of the Federal govern­ ment for its help in arranging the credits. But unofficially the GDR government agreed to make the border and the border controls between East and West Germany more humane. It also allowed a wider circle of GDR citi­ zens to emigrate to the West (Lehmann, Deutschland-Handbuch,p. 332). As for the reasons for the credit deal, Strauss, in his memoires, gives another argument: when East Germany, because of the consequences of its indebtedness, seemed likely to get into severe economic and political trouble, the leading circles in the FRG foresaw and feared another intervention of Soviet forces as had happened on 17 June 1953. Strauss and other West German politicians tried to avoid another round of bloodshed, or at least additional hardship, for the population of East Germany: Franz-Josef Strauss, Memoiren (Berlin, 1989), p. 475. 53 Strauss, Memoiren,pp. 4 7 1 - 3 . 54 Horst Lambrecht, 'Innerdeutscher Handel: Kontinuitat erforderlich', DIWWochenbericht 10 (1986), 120; Horst Lambrecht, 'Innerdeutscher Handel. Expansionsmoglichkeiten wirklich nutzen!', DlW-Wochenbericht 9 - 1 0 (1989), i00. 55

Gunter Mittag, Um jeden Preis. Im Spannungsfeld zweier Systeme (Berlin, 1991), p.

i04. 56 Ibid., pp. 1 0 5 - 7 .

57 Detlev Nakath and Gerd-Rudiger Stephan, Countdown zur deutschen Einheit (Berlin, 1996), pp. 3 0 - 2 . 58 Konrad H. Jarausch and Volker Granzow (eds.), Uniting Germany. Documents and Debates ig44~iggj (Providence, RI, 1994), pp. 6 4 - 1 0 2 .

The economy as a force in divided Germany

7 1

Ibid., p. 128. 60 Gero Neugebauer and Richard Stoss, Die PDS. Geschichte,Organisation, W'dhler, Konkurrenten (Opladen, 1996), pp. 1 7 4 - 5 and 184.

59

6

I b i d . , p p .

4

- 5

.

1 3 3 62 Ibid., pp. 2 0 6 - 2 6 .

63 Bernd Rebe and Franz Peter Lang (eds.), Die unvollendete Einheit. Bestandsaufnahme und Perspektiven fur die Wirtschaft (Cloppenburg, 1996), pp. 94-5.

64 Manfred Wegner, 'Die deutsche Einigung oder das Ausbleiben des Wunders', Aus Politik und Zeitgeschichte,B 40 (1996), 18; Wolfgang Dumcke and Fritz Vilmar (eds.), Kolonialisierung der DDR (Munster, 1995), pp. 1 2 7 - 9 ; Der Tagesspiegel, 13 August 1998. 65 Jorg Roesler, 'Privatisation in East Germany - experience with the Treuhand', Europe-Asia Studien 3 (1994), 5 1 0 - 1 1 ; Wegner, 'Die deutsche Einigung', pp. 1 9 - 2 0 . 66 Jorg Roesler, 'Privatisation of East German industry: its economic and social implications', Labour Focus on Eastern Europe 51 (1995), 63. Wegner writes: 'In East Germany mainly subsidiaries emerged ("verlangerte Werkbanke") of West German and foreign enterprises. The headquarters of nearly all larger enterprises are situated outside of the new federal states': Wegner, 'Die deutsche Einigung', p. 19. 67 Ralf Neubauer, 'Gewinne in weiter Ferne', Die Zeit 33 (1994), 17. 68 Peter Liebers, 'Personalkosten belasten die Zeiss-Bilanzen', Neues Deutschland, i2 April i 9 9 6 . 69 Peter Christ and Ralf Neubauer, Kolonie im eigenen Land (Berlin, i 9 9 i ) , p. i 5 8 ; Martin Flug, Treuhandpoker. Die Mechanismen des Ausverkaufs (Berlin, 1992), p. 107; Hans-Dieter Vater, 'ORWO: Nach der Rettung Start zu neuer Fahrt', Neues Deutschland, 18 March 1997. 70 Neues Deutschland, 7 May 1997. 71 Dumcke and Vilmar, Kolonialisierung,pp. i 2 5 - 7 . 72 The net transfer sum from i 9 9 i to i 9 9 6 was 898.4 billion DM. In i 9 9 6 the net transfer amount of i37 billion D M was as large as 34.7 per cent of the east German GDP and 4.3 per cent of the west German GDP: Wegner, 'Die deutsche Einigung', p. 20. 73 Ulrich Busch, 'Vermogensdifferenzierung und Disparitat der Lebensverhaltnisse im vereinigten Deutschland', BerlinerDebatte Initial5 (1996), 105; Der Tagesspiegel, i 5 August i 9 9 8 .

C H A P T E R

4

Lusatian Sorbs in Germany before the Second World War: the influence of the economy on the national question Eduard Kubu

Geographical position, climatic conditions and natural wealth, together with the economic and social development closely related to these factors, have always played a fundamental role in the life of states, peoples or sub-communities. These factors were of particular impor­ tance in the case of the smallest distinct Slavonic ethnic group still in existence — the Lusatian Sorbs. In the medieval and early-modern periods the geographic—economic factor tended to promote the survival of the Sorbs' language and specific social characteristics, hemmed in on all sides by Germans. The Slav areas of Lusatia were mainly poor and sparsely settled and had an incomparably smaller share of towns and town populations than the German-speaking areas that surrounded them. For this reason the Sorbs could live in a degree of isolation from the German environment and were able to develop in their own way, with a significant degree of autonomy. Hartmut Zwahr even goes so far as to speak of the Sorbs' insular existence, citingJakub Lorenc-Zalesky's characterisation of the group as 'an island of the forgotten'. This situation may be convincingly demonstrated using the example of the later Saxon Lusatia as described by Karlheinz Blaschke. In 1 8 3 5 , for instance, in the Saxon territory populated by Sorbs, there was only one town with more than 1 0 , 0 0 0 inhabitants (Budysin (German: Bautzen)), and two towns with a population of between 1,000 and 5 , 0 0 0 (Lubij (German: Lobau) and MuZakow (German: Muskau)). Population density essentially varied between three categories — up to 50 inhabitants per km , up to 100 per km and, in a smaller area, up to only 20 per km . In central Lusatia quite large areas of territory were not settled at all. In contrast, in the southern part of Lusatia, rapidly industrialising and inhabited by a German population spreading out along the Czech border, population density was in most areas up to 200 or up to 500 per km , and where less then at least up to 100 per km . These significantly smaller territories could also boast a larger number of urban areas and, in the same ratio, a larger number of more affluent inhabitants. 1

2

2

2

2

2

2

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Lusatian Sorbs in Germany

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In the later nineteenth and twentieth centuries, however, economic development and modernisation encouraged the ever-deeper integra­ tion of the Lusatian areas settled by Sorbs into German areas. This had a major impact on the formation of modern Lusatian Sorb ethnic society and helped to strengthen Germanising influences that soon raised a series of crucial questions, especially that of the preservation and future development of the Lusatian Sorb language and ethnic life. Germanisation was not simply a consequence of economic development. It was the effect of a constellation of factors, including major international and political questions, and socio-economic change, but also involving developments in administration, military service, culture, education and religion. Scholars are, however, generally agreed that the negative effects of economic and social change were more of a burden on the Lusatian Sorbs than the Germanising policies of the Saxon and Prussian states (between which the Sorb areas of Lusatia were divided), and therefore contributed more to their Germanisation. Both in Prussian and Saxon Lusatia it was the Prussian model of transition from feudal to capitalist agriculture that was applied. In Prussian Lusatia the new agrarian legislation was introduced in 1 8 2 1 , and in Saxon Lusatia, in modified form, a decade later. T h e abolition of serfdom and the corvee led to the transformation of the feudal estate into a capitalist enterprise. In practice the reform meant the impoverishment of the freed peasant, who in Prussia usually had to compensate the former lord with a third of the land in his ownership and a monetary purchase payment, undertake to pay an annual monetary rent for several years and, not infrequently, to provide services as well. In Saxony the conditions of agricultural reform were less burdensome for the serfs; redemption was secured by a single payment or yearly monetary rent, but there was no obligation to give up part of the land. Many poor peasants were forced to work as hired labour in order to pay their dues on their own land. As a result of this heavy burden only a small proportion of the peasantry could enjoy the prospect of becoming substantial landowners. O n the contrary, at the end of the agrarian reforms in the 1860s, the multiplication of the village poor meant the relative overpopulation of the Lusatian countryside, creating the conditions for the subsequent migration of the population in search of work. Increasing industrialisation then logically attracted a wave of migrants to the manufacturing centres. Since the nobility in both Lusatias had been, for centuries, purely German, the result of the agrarian reforms was the weakening of the position of the Slav population to the advantage of the German-speaking element, which consolidated its superior 3

4

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economic position even in the areas dominated by Sorb inhabitants. The 'small peasant' character of Sorb economic activity was reinforced. In the following decades the position of the Sorb rural population deteriorated more slowly, but still inexorably. This was because the major landowners retained rights of first refusal on any land that the freed peasants might wish to acquire. Various German associations with important political and, above all, economic backing were also working quietly to promote Germanisation. The Bund 'Deutscher Osten' oper­ ated with a fund 'for the economic protection of border areas', which at the time of Weimar Germany had 22 million marks at its disposal for the purposes of Germanisation. Newly organised waves of German farmer colonists were given systematic advantages, with ten-year periods of tax relief, cheap credit and assistance in getting a good price for their corn. The Sorb element, however, enjoyed none of these benefits, and was placed at a significant disadvantage. The development of industry dramatically increased the rate at which the Lusatian Sorbs were being Germanised and assimilated. In the Zitawa (German: Zittau) region, textile manufacture had been developing from the eighteenth century, with ironworks, machine-tool enterprises and others following. In Lower Lusatia industrialisation started much later, not before the mid-nineteenth century, when textile production began to develop in Chocebuz (German: Cottbus) - cloth and carpet manufacture. In these phases industrialisation was principally an urban phenomenon. In the last third of the nineteenth century, however, it was penetrating into the Lusatian countryside. Brown coal-mining was introduced and rapidly developed between Chocebuz and the Upper Lusatian border country, as was the mining of high-quality sands, which allowed the development of glass manufactures. In central Lusatia the wood-processing industry developed. At the same time industrialisation also started in the western part of the Upper Lusatian district of Wojerecy (German: Hoyerswerda). Infrastructures were built to serve the needs of manufactures, especially railways, first from the later 1 8 4 0 s in Upper Lusatia and then in Lower Lusatia in the 1870s. Major industrial enterprises included the brown coal industry (in the Seftenberger Revier), the aluminium works in Luty (German: Lauta), which as late as the 1920s were still among the largest works of their kind in Germany, the Mitteldeutsche Stahlwerke in Kalawa (German: Calau), the synthetic benzine factory in Rolany (German: Ruhland), the factory for the manufacture of electrotechnical porcelain in Wulka Dubrawa (German: GroB Dubrau), the locomotive works, ironworks 5

Lusatian Sorbs in Germany

75

and paper factory in Budysin (German: Bautzen) and the glassworks in Bela Woda (German: Weisswasser). Industrialisation proceeded, without exception, on an ethnically German basis. As the Saxon government asserted in 1 9 1 9 , not a single medium-sized or large industrial concern on the territory that it admin­ istered was in Sorb hands, and the economic situation of the Sorb population in Upper Lusatia was, in fact, better than in Lower Lusatia. Jiri Kapitan, who was very well acquainted with Lusatian conditions, wrote that 'The concept of a Sorb industrialist, an owner of a large factory, or indeed of any Sorb capitalist whatsoever, simply does not exist. I have known only one Sorb family that owned some quarries before the First World War (after the war they naturally lost them), and a doctor, who inherited a small spa facility.' He went on to mention a few small building contractors and sawmill owners and ended with the assertion that 'the Lusatian Sorbs are a proletarian nation'. T h e German entrepreneurs used German as the language of communication at work, and so employment in a German enterprise almost automatically involved the gradual Germanisation of employees and their families, where the absence of Sorb schooling also had a negative impact. Nor should we forget the fact that membership of the Sorb ethnic group was, in practice, a barrier to significant upward social and economic mobility. This problem, too, was a driving force for the voluntary 'economic' Germanisation of the Sorb population. T h e lifestyle of the urban population, and the use of German in other areas where Sorbs were employed, such as transport and trade, as well as in public administration, should also be borne in mind. Social confrontation between the workers and employers also tended to undermine the Sorb language, as trade unions and political movements brought their own Germanising pressures. As Kapitan notes, 'The German comrades made fun of the Sorbs, saying that they obeyed their teachers and priests, and they directly challenged them to abandon their language', arguing that it 'split proletarian forces unnecessarily' and saying that German would open up greater 'cultural possibilities'. Life in the large communities and agglomerations therefore led inevitably to bilingualism in the first generation followed by a gradual transfer to German as the only language of communication. The wave of industrialisation that started in the later nineteenth century created new work opportunities and these meant an influx not just of German, but also of Polish and other non-Lusatian, immigrants to the towns and even to the countryside. The population rose, with Sorbs representing 6

7

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an ever smaller percentage, as is clear from statistical data and estimates from the end of the nineteenth century and first half of the twentieth century. In both the Lusatias, Lusatian Sorbs were already clearly in a minority. The only exceptions were in the districts of Kamenz, Bautzen, Lobau, Rothenburg, Hoyerswerda, Spremberg, Calau and Cottbus (Sorbian denotations: Kamjenc, Budysin, Lubij, Rozbork, Wojerecy, Grodk, Kalawa and Chocebuz), or their main constituents — in other words, in the territory that the Sorb National Committee wanted annexed to Czechoslovakia, or, when this suggestion was turned down by the Allies after the First World War, at least to be given autonomy. The most important, massive and also most characteristic branch of industry in Lusatia deserves special attention. This was the brown coal industry, which had the greatest negative impact on the Sorb ethnic group. The first expansion of the Senftenberger Revier came in the years 1871—89. The later 1 8 8 0 s then saw the establishment of the two largest joint-stock companies, which set the pattern for future development. These were Braunkohlenwerke und Brikettfabriken A G , which was under the influence of the Czech 'brown coal king', Ignaz Petschek, and Ilse Bergbau-AG, as the daughter company of the Berlin firm Kunheim & Co., which grew into one of the biggest chemical firms in Wilhelmine Germany. At first the exploitation of the coal required only the seasonal labour of local peasants without enough land to be selfsufficient, but soon a large part of the population was engaged in the industry, which was originally open cast, but came also to include deep mining. Work in the mines provided better opportunities for earnings than work on the Junker estates. Coal-mining grew rapidly: 2.5 million tons were mined in 1 8 9 0 but this figure had jumped to 1 9 . 5 million tons by 1 9 1 3 . Despite the increasing mechanisation of mining, especially the introduction of excavators, the number of employees rose. The local, mainly Sorb workforce was augmented, to an ever greater degree, by workers coming longer distances, from Saxony and Prussia and also Congress Poland and Galicia. The ethnic composition of the coal region acquired a new face. The Sorb population dropped both as a percentage of employees in the coal industry and in the region as a whole. While the Sorbs who had transferred entirely from agriculture to industry assimilated quickly, the 'halfpeasant' miners, who continued to cultivate their small farms as well as working in the mines, continued to preserve their mother tongue and customs. 9

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Lusatian Sorbs in Germany

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T h e establishment of new mines brought about a significant weak­ ening of the Sorb element, because this was usually accomplished through the forced purchase of land and resettlement of the population. As many as seventy-seven villages and small settlements were destroyed as a result of mining. In the years 1924—93 more than 2 5 , 0 0 0 people were resettled. Mined-out land could not be returned to agricultural production and the process of recultivation was long and demanding. Mining also advanced inexorably across the territory. It spread from the original mining centre near Senftenberg, where the coal lay close to the surface, to the deep levels towards the east into the vicinity of the towns of Wojerecy, Grodk and Bela Woda, to the north-west (Lubbenau) and to the north-east (Peitz). Lusatian coal production secured roughly half of the electrical energy of the territory of the former German Democratic Republic. As early as the beginning of the 1870s the strong supporter of German nationalism, Richard Andree, in his 'Wendische Wanderstudien', expressed the hope that coal-mining and industrialisation would be a useful adjunct to the anti-Sorb state policy of the Hohenzollern empire. His words were very soon to become reality. A comparison between Arnost Muka's Sorb language map of 1 8 8 6 and the language map pub­ lished in 1 9 5 6 by Arnost Cernik shows how strikingly Sorb language ter­ ritory shrank as a result of the development of coal mining. Foreign language islands have emerged at the boundary between Lower and Upper Lusatia. T h e whole area between Kalawa, Chocebuz, Grodk and Zly Komorow (German: Calau, Cottbus, Spremberg and Senftenberg) has essentially, and rapidly, succumbed to Germanisation. T h e Sorb population in Upper Lusatia and that of Lower Lusatia have come to form two language islands, and are no longer contiguous. T h e Lusatian Sorb ethnicgroup entered the twentieth century with a very unfavourable social structure. T h e Sorb population was essentially a rural one. T h e overwhelming majority supported themselves by agriculture, and most were small farmers. Richer farmers lived only in two regions — between Budyssin and K a m j e n c i n Upper Lusatia and in the Chocebuz district of Lower Lusatia. Very few Sorbs owned large landed estates. Briefly put, Lusatian Sorb settlement essentially corresponded to the agrarian areas of Lusatia. T h e number of manufacturing concerns inside Lusatian Sorb language territory was very small, and the businesses themselves were usually very limited in size. It is worth mentioning that the Adolfshutte by Chrost-Lomske (German: Crosta-Lomske) and 13

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Margarethenhutte at Wulka Dubrava (GroB Dubrau) were in German hands, and represented only a minimal source of employment. The class of rural artisans and small tradesmen was very narrow and largely tied to agriculture, animal production and small-scale construc­ tion, as were the owners of rural inns, as well as potters and the Lower Lusatian charcoal-burners. Most of the soil in Lusatian Sorb territory was of low fertility, and therefore small farms were frequently unable to yield enough to secure a livelihood for their owners. The lack of land and work opportunities, which, as has been mentioned, caused relative overpopulation in the countryside, drove the Sorb population to migrate to the towns, and often further afield outside Lusatia, or even overseas. In the large neighbouring conurbations such as Berlin and Dresden, the Sorb element soon dispersed and vanished. In the urban agglomerations of both Lusatias, which were traditionally German despite the Slav settlement of the territory overall, the Sorbs represented a minority, albeit often a large minority. In the 1890s the Sorbs represented roughly 17 per cent of Budysin's population of 1 8 , 0 0 0 , 2 5 per cent of Wojerecy's population of almost 3 , 0 0 0 , and 13 per cent of the slightly larger town of Muzakow (German: Muskau). The single exception was Kulow (German: Wittichenau), with Sorbs making up 6 0 per cent of its population of 2 , 0 0 0 . This selection of the most important centres in Saxon Lusatia indicated that we are speaking about very small towns. With the passage of time the size of towns increased, but the number of Sorb inhabitants fell both absolutely and as a percent­ age. Unfortunately, precise figures are not available in a wide range of cases, but a quarter-century later (1910) Sorbs represented only approx­ imately 10 per cent of the population of Budysin. The Sorb population in the towns was principally made up of artisans and small tradesmen (carpenters, smiths, locksmiths, cobblers, tailors, bakers, butchers, innkeepers), and also wage-labourers. The Sorb group lacked economically successful urban strata. For this reason Sorbs did not have the preconditions for the formation of economic elites growing into a strong national bourgeoisie that would be able to formulate and push through a programme of ethnic political and economic emancipation. In the interwar period there was a certain shift in the socioprofessional profile of ethnic Sorbs, but this was not enough to consoli­ date a more affluent nationally conscious entrepreneurial element of the population. In the census of 1 9 2 5 , people who gave Lusatian Sorb as their mother tongue (a total of 7 1 , 0 0 0 , although in fact the real number 16

17

Lusatian Sorbs in Germany

79

was obviously higher) fell into the following categories in relation to employment: 6 6 . 2 4 per cent agricultural, 2 0 . 3 6 per cent industrial workers, 4 . 4 5 per cent tradesmen and 8 . 9 5 per cent other. In the first half of the twentieth century nothing occurred to change this negative state in any substantial way. The building of a strong middle class and economic elite remained a mere desideratum even in 1 9 4 5 . The banner of national revival and the hope for building a modern nation was thus carried by a narrow group of minor clerics and intelli­ gentsia, very limited in terms of real resources and linked to a not par­ ticularly numerous group of Sorb peasants in the medium to small farm range. T h e Lusatian Sorb emancipation movement, which reached its highest point immediately after the end of the First World War, was strik­ ingly petit bourgeois and peasant in character. In 1 9 1 8 — 1 9 , after the defeat of the central powers, it appeared that conditions had been created for the emergence of a Lusatian Sorb emancipation movement. The Sorb National Committee (Serbski narodny wuberk), founded on 16 November 1 9 1 8 in Budysin, demanded the unification of Upper and Lower Lusatia and the right of national self-determination. O n 21 November the committee then sent a memo­ randum to the peace conference, requesting that it recognise the Lusatian Sorbs as a free and independent nation and admit its representatives to the peace negotiations. The original demands for independence or a somewhat hazy linkage to the Czechoslovak state as an autonomous unit (see the Czechoslovak memoranda presented to the peace conference ) proved to be unrealistic. Czechoslovak foreign policy had essentially abandoned the idea of incorporating the Lusatian Sorbs as early as March 1 9 1 8 in the face of the opposition of the Allies. The territory of Sorbian Lusatia, which would have had to be joined to Czechoslovakia by a narrow sixkilometre corridor, would not only have raised the numbers of Czechoslovak Germans but also have created a wedge of land reaching almost as far as Berlin that would have cut through a series of important German communication links. T h e territory would have been militarily indefensible and a permanent source of discontent and tension. T h e peace conference and its results did not bring the Lusatian Sorbs the desired fundamental improvement in their situation. Czech policy, influenced by the small but energetic group of friends of Lusatia around Sorb specialists Adolf Cerny and Josef Pata (the 'Adolf Cerny' of the Czecho-Lusatian Association), nevertheless kept the Lusatian question alive. This was not just the result of a feeling of 18

1 9

20

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EDUARD

KUBIJ

moral responsibility for the support of a related Slavonic ethnic group that for centuries had been a part of the old Bohemian Crown Lands, but also reflected the political attempt to make the Lusatian Sorbs a counterargument against the Czech Germans' agitation for change in the legal position of minorities. However, in the course of time and with growing foreign-policy problems, Czech interest in Lusatia declined. The programme of the Lusatian emancipation movement as repre­ sented by the Sorb National Committee headed by Arnost Bart (a deputy in the Saxon assembly and originally a small peasant and innkeeper) consisted at first of the demand for incorporation into the Czechoslovak Republic, and later for autonomy within the framework of the German Reich. It also involved a range of other demands that could be described as radical left-wing. It demanded the break-up of all estates larger than 300 korces (German: Scheffel), i.e. approximately 8 0 hectares. The large estate-owners would be compensated and the land divided between small and medium-sized peasants at appropriate prices. Large capitalist enterprises 'which have destroyed the small trades and agricultural businesses of the middle ranks' would be prohibited. Tax was to be paid principally by those who had made money during the war. Wartime gains of more than 1 0 0 , 0 0 0 marks would be confiscated. Tax would be removed from foodstuffs and objects of daily consumption. The origin of these demands was not so much ideological as conditioned by the specific overall unfavourable socio-economic development described above and the social composition of the Lusatian Sorb community. It was based on the interests of small and middle-sized peasants, artisans and tradesmen. In the social environment represented by the National Committee, large-scale capital, industry and trade were perceived as German-language institutions hostile to Lusatian Sorbs. This attitude was also expressed in the documents drawn up by Adolf Cerny in Prague to communicate Sorb aspirations on an international stage. The Seventh Memorandum for the peace conferences speaks of how German capital, trade and industry, with their businesses, railways and factories run by German colonists, were robbing the Sorb people of land and forcing it to become Germanised. A draft of a memorandum for the American President Wilson of 17 March 1 9 1 9 states: 'German capital has seized the natural wealth of Lusatia . . . it has taken the soil from under the feet of the Sorb people, proletarianised them and colonised their land with German workers.' After the failure and political defeat of the emancipation movement, Sorbs turned to the idea of strengthening their economic position and 22

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81

closing ranks as a starting-point for a new campaign. This found expres­ sion above all in building up economic and financial self-help mecha­ nisms. The initial impulse came from Czech sources and was carried through by a group of people around the National Committee. Small Sorb deposit and savings banks had existed since the previous century, linked to German-language banking and its unions and serving as col­ lecting points for minor investments in German banks. These Sorbs savings banks, it was considered, should instead serve national goals and have their own Sorb central institution. T h e opportunities for launching major initiatives in this area were, however, limited by a lack of available funds. Oldrich Heidrich, who visited Lusatia at the beginning of September 1920 with his colleague from the Ministry of Foreign Affairs, Josef Pitterman, wrote in his report that 'the Lusatian Sorbs require both moral and financial help'. T h e Sorb People's Bank (Serbska ludowa banka; German: Wendische Volksbank), founded in November 1 9 1 9 with a basic capital of 3 0 0 , 0 0 0 marks, was undoubtedly the most important institution designed to assist in the economic integration of the Sorb population. It was established by the National Committee with a crucial share provided by Czech banking capital. Stocks to a value of 1 2 5 , 0 0 0 marks were taken by the Prague Credit Bank (Czech: Prazska uverni banka), which also appointed its own representative, Blazej Posedel, as director. T h e bank's headquarters were in Sorb House in Budysin, and it had branches in Chocebuz and Wojerecy as well as eight local agencies. The founding of the bank did not, however, meet with the Sorb Lusatian enthusiasm that had been anticipated, and the bank itself, after no more than a year's existence, escaped from the direct influence of individuals close to the National Committee, veered away from support for the Lusatian Sorb political movement and devoted itself mainly to trading activity, to some extent even oriented to a German clientele. Its fumbling business activ­ ities and risky credits already foreshadowed future difficulties. In the great economic crisis in 1 9 3 2 , it collapsed after prolonged rescue attempts. In the long term, no greater success awaited the Sorb Economic Association (Serbske hospodarske towarstwo) in Budyssin, the Association Lusatia (Towarstwo Luzsica) in Besla Woda, the Smoljer's printworks in Budyssin and the Sorb Economic Association (Serbske hospodarske towarstwo) in Chocebuz. O f the few business or agricultural co-operatives that survived the crisis, the most important was Sorb Farmer (Serbski hospodar). 25

26

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The economic pressure of the later 1930s, the ensuing Nazi persecu­ tion, and later the transfers of German population approved at Potsdam, caused further deterioration in the base-line situation of Sorbs in their struggle to preserve their independent existence after the Second World War. Attempts to strengthen the Sorb Lusatians economically and give them cohesion essentially failed. T h e Sorbs never achieved a fully developed social structure, and a clearly defined national bourgeoisie never emerged. T h e chances for a successful outcome of the emancipatory process were therefore severely limited by the absence of one of the fundamental factors in such developments. T h e statistical parameters reflecting the ethnic composition of the Lusation region in the course of the twentieth century have provided ever less favourable indicators. The Czech historian Miroslav Hroch has devoted many decades to the comparative study of the formation of modern European nations. In his most recent book, in which he considers changes in the social division of labour and their influence on the development of ethnic relations, he notes two theories which, although contradictory, are still relevant in different environments. T h e so-called functionalist theory speaks of the way in which ethnic relations are weakened by the onset of modernisation and industrialisation, which may therefore lead to assimilation. According to the reactive theory, on the other hand, industrialisation can strengthen consciousness of ethnic identity, enhance the solidarity between members of an ethnic group and help to transform it into a modern nation. In the case of the Lusatian Sorbs it is the first theory that seems to apply. The negative effects of industrial­ isation were amplified by the demographic processes arising from them, and especially the influx of ethnically different populations into what were economically the most rapidly developing areas of Sorb territory. This increasingly diluted the Sorb population and, in concert with a whole range of other negative factors, led to its Germanisation. 28

NOTES

1 Hartmut Zwahr, Revolutionen in Sachsen. Beitrage zur Sozial- und Kulturgeschichte (Weimar, Cologne and Vienna, 1996), p. 344. 2 Karlheinz Blaschke, Bevblkerungsgeschichte von Sachsen bis zur industriellen Revolution (Weimar, 1967), pp. 5 8 - 9 , 7 3 - 4 , 8 5 - 6 , 1 0 4 - 5 and 1 3 0 - 5 8 . 3 For example, Jan Solta, Abriss der sorbischen Geschichte (Bautzen, 1976); cf. Blaschke, Bevblkerungsgeschichte,pp. 2 1 4 - 1 6 ; Friedrich W. Remes, Die

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83

Sorbenfrage 1918/19. Untersuchung einer gescheiterten Autonomiebewegung (Bautzen, 4 In Prussian Lower Lusatia alone, by 1848 the peasants had been forced to hand over 95,000 morgen of land, pay 710,000 tolars in one-off compensa­ tion payments, 60,000 tolars in annual payments and, individually, fourteen scheffels of rye as rent. 5 Jiri Kapitan, Srbskd Luzice [The Sorb Lusatia], (Prague, 1945), p. 75. 6 Draft memorandum of the Saxon government, drawn up for the peace conference in Paris (February-March 1919), Anlage 11 'Wirtschaftliches im wendischen Sprachgebiet', Sachsisches Landeshauptarchiv Dresden, Sachsische Staatskanzlei, vol. 150, fol. 245. 7 Kapitan, Srbskd Luzice,p. 75. 8 Ibid., p. 76;Solta, Abriss der sorbischen Geschichte,p. 93. 9 Cf. Zdenek Bohac, (Ceske zemea Luzice, cast: Ndrodnostnipomery v Luzici od konce 19. stoleti do soucasnosti [Czech Lands and Lusatia, part: National situation in Lusatia since the end of the nineteenth century to the present]. (TisnovBudysin, 1 993), pp. 7 8 - 8 8 ; cast: Srbskd katolickd Luzice ve svetle statistik [part: Sorb CatholicLusatia in the light of statistics]; Remes, Die Sorbenfrage,pp. 42-52.

1 0 Frank Forster, Senftenberger Revier 1890-1914. Zur Geschichte der Niederlausitzer Braunkohlenindustrie vom Fall des Sozialistengesetzes bis zum Ausbruch des Ersten Weltkrieges (Bautzen, 1 968), pp. 21 - 3 . Ibid., p. 60. 2 Ibid., p. 87. 1 3 Frank Forster, Verschwundene Dorfer. Die Ortsabbruche des Lausitzer Braunkohlenreviers bis 1993 (2nd edn, Bautzen, 1 996), pp. 1 8-1 9. 4 Forster, Senftenberger Revier,p. 86. 1 5 Forster, Verschwundene Dorfer,pp. 20-2; Jan Petr, Ndstin politickych a kulturnich dejin Luzickych Srbu [Political and cultural history of Lusatian Sorbs in outline], (Prague, 1 972), pp. 2 4 8 - 9 ; Antonin Frinta, LuzictiSrboveajejichpisemnictvi [Lusatian Sorbs and their literature] (Prague, 955), Map 2. 6 The number of Sorbs who emigrated overseas in the period from 8 5 to 9 4 has been estimated at 4 per cent of the entire people: Trudla Malinkowa, Ufer der Hoffnung. Sorbische Auswanderer nach Ubersee (Bautzen, 995), p. 7. 7 See Historisches Ortsverzeichnis von Sachsen, bearbeitet von Karlheinz Blaschke, part 4, Oberlausitz (Leipzig, 957), pp. , 43, 49 and 84. 1 8 Petr, Ndstinpolitiskych,p. 249. 1 9 Kapitan, Srbskd Luzice,pp. 74~5;Solta, Abriss der sorbischen Geschichte,p. 93. 20 Z. Bohacs has attempted to produce a statistical picture of the Sorb cultural elite over the last three centuries. This suggests that the key element was the clergy, i.e. 53 per cent from the 1 840s, followed by teachers, 26 per cent. The other levels, obviously mainly peasants, represent 2 1 per cent. Bohac, Ceske zeme a Luzice,ccast: Studie o puvodu luzickosrbskych kulturnich pracovniku

84

E D U A R D KUBIJ

(part: Essay on the origin of Lusatian Sorbs cultural activists), p. n o ; see also Zwahr, Revolutionen,pp. 3 5 4 - 5 . 21 See Hermann Raschhofer, Die tschechoslowakischen Denkschriften fur die Friedenskonferenz von Paris igig/igso (Berlin, 1937), Memoires II and VII, pp. 79

- 8 :

a

n

d

2

2

5

-

5

5

22 Remes, Die Sorbenfrage, Appendix of Documents No. 2, Zehn-PunkteProgramm des Wendischen Nationalausschusses, p. 209. 23 Raschhofer, Die tschechoslowakischen Denkschriften,p.239. 24 Archiv ministerstva zahranicnich ved (Archive of Ministry of Foreign Affairs of the Czech Republic), Paris Archives, No. 5056. 25 Archiv Pamatniku Narodniho pisemnictvi [Archive of National Literature Memorial], fond Josef Pata, referat dr. O. Heidricha o ceste do LuZice [Message of Dr O. Heidrich about his Lusatian tour], 4 - 1 1 September 1920, p. 7. 26 Ibid., Memorandum of B. Posedel, 'Nekolik poznamek o hospodarskem stavu luZicko-srbske vetve' [Some remarks about the economic situation of Lusatian Sorbs], 23 September 1920. 27 Kapitan, Srbskd Luzice,p. 77; Alfred Simon, 'Zum Zusammenbruch der "Serbska Ludowa Banka - Wendische Volksbank AG" in der Weltwirtschaftskrise 1 9 2 9 / 1 9 3 2 ' , Letopis B, 9(1), 3 - 1 6 . 28 Miroslav Hroch, V ndrodnim zdjmu. Pofadavky a cile evropskych ndrodnich hnuti devatendcteho stoleti v komparativni perspektive [In the national interest. Requirements and goals of European national movements in the nine­ teenth century in comparative perspective], (Prague, 1996), p. 18.

C H A P T E R

F I V E

Unequal regional development in Switzerland: a question of nationality? Bruno Fritzsche

In summer 1 9 9 6 the privately owned 'national' airline Swissair made it known that most of its intercontinental flights starting from Geneva were to be discontinued, and that instead there was a shuttle service to be estab­ lished between the airports of Geneva—Cointrin and Zurich—Kloten. This measure provoked an enormous outcry in the French-speaking part of Switzerland (the 'Romandie'). Such a concentration of the long­ distance flights on the airport situated in the German-Swiss part of the country and lying, incidentally, no more than some 200 kilometres from Geneva, passed for one further proof that the French-Swiss minority was and continued to be dominated — or even colonised — by the GermanSwiss majority. In actual fact the great economic crisis setting in after 1 9 9 0 , hitting the French-speaking part of Switzerland rather harder than the rest of the country, only served to accentuate a latent uneasiness of quite a few years' standing. A first peak of tension had been reached on the occa­ sion of the plebiscite of 2 December 1 9 9 2 , when the issue was whether or not Switzerland was to become a member of the EEA (European Economic Area). As a whole the Swiss rejected membership by a very slim majority (50.3 per cent of noes), while the French-speaking cantons quite distinctly voted in favour of membership, the portions of ayes lying between 5 6 per cent (in the Valais) and 80 per cent (in the canton of Neuchatel). Ever since, the relationship between the French- and the German-speaking parts of Switzerland, at all times precariously harmonious at best, has remained quite openly and obviously strained. A public opinion poll of July 1 9 9 6 put the slightly captious question whether the Swiss nation was going to disintegrate. In the Romandie 27 per cent of those replying answered in the affirmative, in the rest of Switzerland distinctly less: 13 per cent in the German-speaking part of the country and 14 per cent in the Italian-speaking Ticino. Among those who predicted the dissolution of the nation, a quarter expected this to 1

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happen within the next ten years. But of course it has to be borne in mind that results like these reflect a mood much more than any trust­ worthy and concrete prognosis. The following is intended to outline the history of the origins of mul­ tilingual Switzerland in the nineteenth century, to delineate the political and institutional settings involved, and to show up the fields of tension operating between the different regions of the country; the chapter will then look at the question of their varying economic development and try to explain the causes thereof.

HISTORIGAL

BAGKGROUND

U p to 1798 the Swiss Confederation consisted of thirteen sovereign states ('Orte') and, additionally, of a number of subject territories. O f these latter some belonged to one or another of these thirteen states, others were under the joint rule of several or all of them and, consequently, were under joint administration. All of the thirteen sovereign states were German-speaking; French or Italian was spoken in some of the subject territories. In 1798 this ancient and all too brittle Confederacy was dealt its death blow by Revolutionary France. Subsequently some of the former subject territories emancipated into separate independent states or cantons, while others remained within their old federation, but claiming equality of status with their former masters, the hitherto-privileged full citizens ('Vollburger'). This process of emancipation, however, took some time and was not fully completed until after 1830. At the end of the NapoleonicWars the Congress of Vienna made it its business to define anew the borderlines of the Swiss Confederacy that by now consisted of twenty-two individual cantons (see figures 5.1 and 5.4). This newly established political structure contained among others the exclusively French-speaking former 'associated republics' of Geneva and Neuchatel. Similarly, the population of the newly constituted canton of Vaud, emerging from a former subject territory of Berne, was of French tongue exclusively. Yet another former subject territory was the Italian-speaking new canton of Ticino. Cantons with partly Frenchand partly German-speaking populations emerged in those instances where former subject territories had not defected from their old masters — that is, in the cantons of Valais and Fribourg. The canton of Berne counted among these as well, since for the loss of its former subject territory of the Vaud it had been compensated with what had previously

Regional and national development in Switzerland

1141 4

5

87

4Q Mixed "1 German French 10 • Italian 5 | Romansh

Figure 5.1. Languages by districts

been the 'Fiirsterzbistum Basel', a small prince-bishopric, left over from the Reformation, and situated in the Jura mountains. T h e Grisons, before 1798 one of the 'associated' republics, make for a special case of further complexity. In accordance with the decisions of the Congress of Vienna, the Grisons were obliged to relinquish their Italian-speaking subject territory of Valtellina. Conversely they retained the remaining three southern Italian-speaking valleys — the Poschiavo, Mesocco and Bregaglia. These had always been sovereign communities within the loosely knit political structure of the so-called 'Three Leagues'. Thus, together with the valleys of Rhaeto-Romanictongue, the population of the new canton came to be composed of people speaking three different idioms, namely German, Italian and Romansh. Moreover, the Romansh idiom in its turn was split up into a number of clearly distinct dialects, which, up to a very few years ago, did not share any common standard or literary language. The Federal Constitution of 1 8 4 8 formed the conclusion of a long process of transformation; it defined the new political structures of the

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transformed state that have, broadly speaking, remained valid ever since. The individual cantons have remained autonomous to a high degree: of particular interest in the present context is the fact that the cantons con­ tinued — and continue — to retain their independence in cultural as well as in educational matters. This means that they are free to cultivate their ancestral language in school as well as in their cantonal administrations. O n a federal level, German, French and Italian count as official lan­ guages ('Amtssprachen') of equal status. In accordance with unwritten customary law, however — and this rule has been observed from the very beginning — out of the total of seven members of the Executive Federal Council at least two have to be provided by either the French-speaking Romandie or the Italian-speaking Ticino. The extensive autonomy allowed to the individual cantons, together with the pronounced protection of linguistic minorities, may help to explain why the former subject territories of Vaud and Ticino, once released from the rule of their former German-Swiss masters, did not display any desire to unite polit­ ically with their respective culture areas. In 1798 the population of the territory of Vaud did indeed hail the French invasion army as their liberators; also, the newly constituted canton subsequently inscribed the revolutionary motto 'Liberte et Patrie' on its flag. Freedom from the hands of their French brethren: yes, of course! But when it came to give meaning to the second term, to that of 'homeland': that could certainly not mean the 'Grande Nation', that could only mean their own native soil, their own, modest little 'Pays de Vaud'! Quite naturally this vision met with far less opposition within the loosely knit Swiss Confederacy than within the definitely centralist, and very soon afterwards once again monarchic, political structure of France. No more was the Ticino hankering for secession. The Irredenta movement, aiming, after the establishment of the Kingdom of Italy in 1 8 6 1 , at liberating the still 'unredeemed' Italian-speaking regions, did indeed achieve the incorporation into Italy of both Istria and South Tyrol after the end of the First World War, but it met with nothing even approaching serious response in the Ticino. It was natural that in the course of time the Confederate government attempted to appropriate a number of domains originally lying within the competence of the cantonal governments. These centralist tendencies, increasingly gathering strength, began with the total revision of the Federal Constitution in 1 8 7 4 and are still well underway today. O n the other hand there are two essential items of cantonal sovereignty never touched by the Union, namely the right of the cantons to raise taxes at 4

Regional and national development in Switzerland

89

their own discretion and their exclusive competence in matters of culture and education. In the face of so strong a position of the cantonal governments, the strengthening of the federal government at the expense of cantonal sov­ ereignty would, of necessity, have to proceed only sluggishly and labori­ ously: attempts had - and have - quite often to be made several times for the central government to succeed. T h e French-Swiss cantons as well as quite a number of other minorities, in constant fear of losing their independence, were and continue to be highly distrustful of 'Berne', that is, of the seat of the Swiss federal government. One of the outstanding characteristics of the Swiss political system consists in the possibility for even relatively small minorities to avail themselves of use of the referendum, one of their chartered rights, which allows them to obstruct what they consider to be undesirable trends or developments. At times, very strange bedfellows thereby happen to join forces: as in i 8 7 2 , f o r instance, when French-Swiss Protestants and German-Swiss Catholics jointly brought to nought the revision of the Constitution, which, in their view, seemed to be of an all-too-centralist bent. Or, to cite a more recent instance, in i 9 7 8 ultra-conservative federalists from the Romandie united with the German-Swiss left-wing in order to forestall the establishment of a federal security police. Showing consideration for minorities is therefore in the very first place an act of political pragmatism since, on the one side, united minorities may easily grow into a majority and since, on the other side, practically every single Swiss citizen may well belong sometime or other to one minority or another, be it religious, political, social or whatever else: this fact makes for the consciousness that, sooner or later and according to circumstances, everyone may depend on the goodwill of other minorities. Seeing that, generally speaking, the confessional, ideological and social distinctions do not follow the linguistic boundaries, the differences of linguistic culture do not usually pose any serious problems in the business of politics. It is only when the Romandie finds itself standing opposed in a solid block to the German-Swiss majority that cries of protest are to be heard and reference is made to a cultural minority being oppressed: and such was the case on the occasion of the plebiscite mentioned above, namely the vote of 1 9 9 2 with respect to Switzerland joining the EEA. While of necessity at the political level there exists constant and lively contact between all parts of the country, on the level of individual or social intercourse the relationship between the various cultural areas 5

6

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tends to remain rather cool and reserved. It is true that, predominantly in the nineteenth century, but continuing until quite recently, upper middle-class families made a point of sending their daughters to one of the many finishing schools in the Romandie for a period of time, to be taught, in addition to the French language, the French way of life. Until recently it was customary for daughters of less well-to-do German-Swiss families to spend some time (usually one year) in French Switzerland after completing school or apprenticeship, almost always living with a family and working as domestic helps or nursery-maids, less frequently as shopgirls, waitresses or some such. Conversely, young people from the Romandie were — and are — hardly ever known to spend their 'year of apprenticeship' in the German-speaking part of Switzerland. This may well have to do with the fact that, worldwide, French was considered to be the fashionable language and that, worldwide, the refinement of the French way of life was seen as an example to be imitated and lived up to. O n the other hand it may well have appeared less than worthwhile to young French-Swiss girls to undergo part of their education in the comparative 'barbarism' of Alamannic Switzerland. Broadly speaking, population exchange between the various linguistic areas has always been relatively slight. As everywhere else, industrialisation in Switzerland triggered a huge internal migration. In connection with the population census of 1910 the inquiry with respect to the place of birth has been analysed. It thereby emerged that in 1910 somewhat more than half of the Swiss population no longer lived in their respective birthplaces (51.6 per cent): at least once in the course of their lives, therefore, they had changed their place of residence. It is to be noted, however, that it was predominantly a matter of migrating to nearby areas. The crossing of language boundaries, changing from one confessional area to another or, less obviously, even migrating from one canton to another, occurred to a markedly lesser degree (see figure 5 . 2 ) . In terms of absolute numbers migration was considerably greater from the German-speaking regions to the Romandie than the other way round, whereas, in terms of percentage and relative to the sum total of the native population, migration from the Romandie to Germanspeaking Switzerland was more important than vice versa. As is shown in table 5 . 1 , the percentage shares of the different lan­ guage groups have, in the long run, remained relatively stable. Nevertheless, and even though on the whole percentage shares remained more or less unchanged, there occurred irritations along the language boundaries because even minute shifts in the make-up of the population shares 7

8

Regional and national development in Switzerland

9

1

H o w t o use this f i g u r e : Taking t h e u p p e r m o s t a r r o w as an e x a m p l e : 73,632 p e r s o n s m i g r a t e d f r o m G e r m a n - s p e a k i n g t o French-speaking districts. T h i s n u m b e r c o r r e s p o n d s t o 2.8% of t h e i n h a b i t a n t s of G e r m a n - s p e a k i n g districts (2,597,317 p e r s o n s ) a n d 8.2% of French-speaking districts (902,824 p e r s o n s ) .

Figure 5.2. Migratory balance igic?

led to grave worries that the respective area might become wholly Frenchified or Germanised, as the case might be. A conflict of some gravity brewed round the turn of the century, pro­ duced, however, much more by economic and international than by internal political problems. T h e great economic growth after 1 8 8 5 , the era of the so-called 'second industrial revolution', provoked a series of fundamental changes leading to the loss of previous identity and to a general sense of insecurity. T h e old and established elites in French Switzerland, in particular, felt that their position was in jeopardy. T h e aggressive economic powers of the newly established German Reich were particularly accused of and blamed for disturbing the former balance. These, in conjunction with the German-speaking part of Switzerland which they were supposed to be dominating already, were accused of being on the point of colonising the Romandie as well. As a matter of fact, German large-scale enterprise had indeed expanded to German-Switzerland in the first place and, starting from 10

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FRITZSGHE

Table 5 . 1 . Native language of the Swiss population in percentage share, 1880-iggo 12

Year 1880 1910 1

9

5

0

1

9

9

0

German

French

7 1 . 3

72.7 7

4

.

2

7

3

.

4

Italian

21.4

5.7

22.1 20.6

3.9 4. 0 4 .

20.5

i

Romansh

Others 0.2 0. i

1.2 i.i

0.2

0.7

i.3

there, had set up branch establishments in the Romandie. Also, the Germans were the most numerous group of foreigners living in Switzerland: in 1910 they made up 5.8 per cent of the total population, while the French percentage share amounted to a mere 1.7 per cent. Italian workers in more important numbers did not migrate to Switzerland before 1 8 8 0 , but their percentage share, growing very rapidly in the course of the following decades, had by 1910 increased to 5.4 per cent. At the same time the sum total of foreigners living in Switzerland reached 14.7 per cent. Furthermore, Swiss foreign trade was increasingly concentrating on Germany while at the same time foreign trade with France showed a definite downward tendency (see table 5.2). What is referred to as the 'Gotthard Agreement' ('Gotthard-Vertrag') gave the formal grounds for large-scale protest against German economic expansion. In 1 8 9 8 the Confederation had decided to transfer to state ownership the hitherto privately owned Swiss railway network. Both Italy and Germany held an interest in the Gotthard railways, the repurchase of which proved particularly difficult. Thus the Gotthard Agreement of 1 9 0 9 had to make considerable concessions to these two foreign co-possessors. As a consequence, one of the foremost exponents of Swiss conservatism, a prominent lawyer otherwise well known for his unbiased judgement, completely lost his sense of proportion in this instance, denouncing the agreement as 'the beginning of a collective protectorate' and as 'something similar to the international Suez Convention with respect to Egypt'. Even though there were harsh voices of protest to be heard from the German-speaking part of Switzerland, coming predominantly from conservative-national circles, the agreement met with far more violent resistance in the Romandie, since there it was rated as one further proof of the impending threat of Germanisation. But in fact it was not the agreement as such that provoked this outraged French-Swiss outcry: rather, it was a matter of 13

14

Regional and national development in Switzerland

93

Table 5.2. Foreign trade in percentage shares of total value, i8g2-igij 15

Importation Year 1892

Exportation

Germany

France

Germany

France

26.1

20.6

24.8

>

32.6

18.7

22.4

10.4

5 . 7

giving vent to the ever-latent resentment against Germany and the German-Swiss, for even though Italy had extorted exactly the same terms as Germany, at no time did the Italians come within the firing line of the French-Swiss opponents. Moreover, the French-Swiss storm of protest led to a mass rally in Lausanne in 1 9 1 3 , some four years after the actual conclusion of the agreement. This French-Swiss eruption may therefore be interpreted as a reaction against the widespread German-Swiss enthusiasm for the German Reich. T h e extent of this enthusiasm had become quite apparent in 1 9 1 2 , when the German emperor had visited Zurich, on which occasion he had not only been paid all due honour but had also been given an exuberant welcome. In fact, the increasing tensions between Germanspeaking Switzerland and the Romandie reflect the increasing rivalry between Germany and France. During the second Moroccan crisis (in 1 9 1 2 ) , the sympathies of the various Swiss areas lay with their respective linguistic kins. But the peak of the crisis was reached during the First World War. The 'gap' between eastern Switzerland, where the German victories were being acclaimed, and the Romandie, where the people were commiserating with France — had become such that the very exis­ tence of the multilingual nation seemed in jeopardy. At the end of the war, linguistic-cultural differences were overlaid by social antagonism. T h e general strike of 1 9 1 8 made apparent the abyss existing between the bourgeoisie and the working class. If the strike movement was hardly paid any attention to in the French part of Switzerland, this was principally because the strike committee consisted of German-Swiss members exclusively. In Alamannic Switzerland, the sympathies for Germany were still quite tangible even after the German defeat in 1 9 1 8 , as was clear on the occasion of the plebiscite where the Swiss entry to the League of Nations was at stake. T h e League of Nations was the organ of the 16

17

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victorious powers from which Germany was to be excluded for the time being. This caused the Latin cantons, in unison, to vote quite massively in favour of joining while a plurality of German-Swiss cantons voted against, which resulted in an accordingly narrow margin of ayes. Not before the world economic crisis of the 1930s did the various parts of the country again find themselves acting in harmony, then, however, joining forces in strong unity and in unanimous opposition to National Socialism. Certainly there did exist German-Swiss supporters of the Nazis, just as there existed in the Romandie admirers of fascism (and Mussolini, who, incidentally, was awarded an honorary doctorate by the University of Lausanne); but their political influence was always quite negligible. After the seizure of power by Hitler in 1 9 3 3 the danger ema­ nating from the Third Reich became increasingly obvious. In order to disassociate from and form a distinct contrast to the various fascist ideologies of the surrounding countries, there emerged in Switzerland a strange and somewhat contradictory sort of national ideology. O n the one hand, this definitely admitted fascistic ideas that were by no means free from the 'blood and soil' myth and were also suggestive of racial prejudice, rejecting everything 'foreign', but also on the other hand and at the same time, laid considerable stress on Switzerland as a nation created by free will ('Willensnation'), a nation embracing a plurality of cultures, a country displaying 'unity in diversity'. To give just one pertinent example in the present context of linguistic minorities: the Romansh, a language spoken by a mere 1 per cent of the sum total of the Swiss population, was in 1 9 3 8 by constitution formally declared to be one of the four Swiss national languages ('Nationalsprache'). This curious ideology, known as 'Geistige Landesverteidigung' ('spiritual home defence'), rendered good service during the Second World War. Also it was quite smoothly taken over into the postwar years. Then, in the era of the Cold War, it was the Soviet Union that was designated the role of the new enemy. Any (political) opinion diverging from the national consensus was apt to be stigmatised as communist and therefore denounced as traitorous to the country. Even though the newly defined internal enemy, said to be 'steered by Moscow', failed to put in an appearance in any appreciable number, it was - just because of that fact - supposed to be particularly dangerous since it was imagined to perform its work of subversive agitation surreptitiously and in the dark. At any rate, this to a wide extent fictitious enemy whom the nation had agreed upon proved an excellent device to sustain the extensive national consensus of the 1950s and 1960s; it very materially helped to achieve 18

19

Regional and national development in Switzerland

95

Table 5.3. Occupational structure by districts, igio (as a percentage of labour force) 20

Sector 1

German 27

11

in

French 28 4

22

Italian

2

3

9

4

3 2

4

3

4

the social unanimity and stability that in turn made possible the unprecedented economic growth of the postwar era as well as the rapid development of the welfare state. But on the other hand the suppression of well-nigh all attempts at criticism tended to engender spiritual nar­ rowing and political stagnation. It thus happened, for instance, that his­ torians taking upon themselves the task of critically evaluating the role of Switzerland during the Second World War, if they were taken account of at all, were quite likely to be pooh-poohed and dismissed as communists. All the more painful and distressing is the awakening going on at present. For, simultaneously with the breakdown of the eastern bloc states, the long-cherished enemy threat dissolved into nothingness. In its stead, problems that had been dammed up, repressed and stowed away for a long time now keep arising with sudden vehemence. It is certainly not merely accidental that the latent tensions between Germanspeaking Switzerland and the Romandie have been flaring up again soon after the end of the Cold War. To sum up: on the political level the sensitivities of minority groups in questions of language were - and still are - invariably treated with due consideration. But on the other hand, conflicts arose in the economic context, that is, in a field traditionally ruthless and inconsiderate in socio­ political matters. Divergencies as well as convergencies occurred in particular with regard to the evaluation of international phenomena that were heavily ideological.

E C O N O M I C D E V E L O P M E N T IN T H E T W E N T I E T H

CENTURY

Not much is known about the economic performance of individual cantons or districts around the turn of the twentieth century, but the occupational structures of the various regions may at least serve as a pointer with regard to their respective levels of technical-industrial development (see table 5.3). The very considerable share held by the

9,6

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20 • W a t c h e s Figure 5.3. Distribution of major branches,

Regional and national development in Switzerland

241

97

Embroidery

T h e s h a d e d areas s h o w w h e r e m o r e t h a n 15 per cent of t h e l a b o u r f o r c e of t h e s e c o n d a r y sector are e m p l o y e d in t h e c o r r e s p o n d i n g b r a n c h .

Figure 5.3. (cont.)

agricultural sector (sector 1) in the Italian-speaking regions points towards their comparative backwardness, which is not very surprising, since the southern Alpine valleys of the Grisons are quite secluded and do not naturally lend themselves easily to the establishment of industrial enterprise (sector n). Also the Gotthard railway did not link up the Ticino to the international or even the national Swiss traffic network until 1 8 8 2 . Within this same period the agricultural sectors in Alamannic Switzerland and the Romandie dwindled to about a quarter. Note­ worthy is the prominence of the services sector (sector m) in the Romandie, caused by the flourishing tourism in the region of Montreux during the 'Belle Epoque' on the one hand and the numerous finishing schools established between Neuchatel and Geneva on the other. The various branches of the secondary sector are distributed quite unevenly among the different districts. We shall here discuss only the few industrial branches displaying the most important growth potential (see figure 5 . 3 ) . The watch- and clock-making industry concentrated — and still concentrates — on the western part of Switzerland. T h e reasons for

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this are mainly historical. The art of watchmaking was brought to Geneva in the seventeenth century by a number of Huguenot families driven out of France after the revocation of the Edict of Nantes in 1 6 8 5 . From thence it spread northward to the upper regions of the Jura moun­ tains belonging to the cantons of Vaud (Vallee de Joux), Neuchatel (La Chaux-de-Fonds, Le Locle) and Berne (Moutier). After the crisis of the 1870s new and modern factories were increasingly set up at the foot of the Jura mountains and, therefore, within the boundaries of the German-Swiss canton of Solothurn. The machine-building industry originated from the repair workshops of the textile industry, which was in the greatest part located in the eastern part of Switzerland. As well as spinning frames and weaving machines these engineering workshops manufactured turbines and steam engines, chiefly employed in the textile industry. In addition, they started, later on, to manufacture railway locomotives, coaches and goods trucks. The rapidly expanding enterprises in the new field of electrotechnology contributed their fair share to the great economic upswing in the years after 1 8 8 5 . Swiss firms such as the Maschinenfabrik Oerlikon and Brown, Boveri & C o . moved to the very top of technological development on an international level, whether with respect to the production, transmission or the application of hydroelectric energy, thus acquiring a leading position in the manufacture of turbines and generators, as well as in the construction of whole power plants, the development of transformers and high-voltage transmission lines and the electrification of the railways. Analogously to the textile industry the Swiss electrical industries preferred to set themselves up in the German part of Switzerland, and there again by preference in the vicinity of Zurich. This choice of location suggested itself for more than one reason: there was, of course, the nearness to the earlier-established engi­ neering industry; but being in the vicinity of Zurich also granted easy access to the main Swiss centre of research, the Swiss Federal Institute of Technology, and to the Swiss capital market, which was increasingly concentrating on the city of Zurich as well. This concentration of both the engineering and the electrical industries in the region around Zurich is very clear when exclusively large-scale business is taken into consideration: in 1905 out of a total of fourteen large-size enterprises with more than 5 0 0 employees, eleven were situated within a radius of forty kilometres from the city of Zurich. Equally resting on scientific research, both the aniline dyes and pharmaceutical industries had increasingly gained importance up to the turn 22

Regional and national development in Switzerland

99

of the century. These were predominantly domiciled in Basle and were thus also in the German-speaking part of the country. Since the produc­ tion process in the chemical industry was automated at a very early date, its importance for the Swiss national economy is not accurately reflected by the number of people employed. But in actual fact the dyestuffs manufacture of Basle contributed in the years around 1 8 9 5 some 15 per cent of total world production. T h e textile industry, which was the industrial branch instrumental in introducing the Industrial Revolution to Switzerland in the first half of the nineteenth century, had by the end of the century lost much of its relative importance — with one single exception, however, for the embroidery works, set up in the eastern part of Switzerland, had by then achieved worldwide fame. Responsible for the great prosperity of the whole region, they continued to export their fashionable articles to the four corners of the world. But the branch broke down altogether in the years of the First World War, never to recover from its disastrous col­ lapse: the fashionable lady of the 1920s liked to pass herself off as emancipated, sporty and tomboyish, therefore no longer having any use for any kind of embroidery work. T h e city of St Gall, centre of the Swiss embroidery business, failed to recover from the crisis throughout the whole period between the two world wars: its population, running to 7 6 , 0 0 0 persons in 1 9 1 0 , shrank to some 6 3 , 0 0 0 by 1 9 4 1 . To sum up: around 1 9 1 0 the economic power between the Romandie and German-Switzerland was fairly evenly balanced while, on the other hand, the economic development in the Italian-speaking districts was somewhat lagging behind. In comparison to the German-speaking part of Switzerland the industrial sector in the Romandie was admittedly less prominent, but the deficiency was almost made up for by the important role played by tourism. Tourism being what may be termed a 'soft' branch of industry, its relative significance and importance is often and easily underrated, though in fact it contributed substantially to the balance of payment and thus ranked among the most important elements of Swiss foreign trade. Its contribution to the national income was quite on a level with that of the watch- and clock-making or the machine-building industries. Thus, allowing for the fact that the different branches of industry were unevenly distributed among the various regions of the country, the trumps in the hands of the different regions were still fairly equal in terms of value. The 'new' trend-setting industries, such as electrotechnology and the chemical industry, were indeed concentrated in German-speaking Switzerland, but conversely 23

100

BRUNO

FRITZSGHE 25

Table 5.4. Occupational structure, 1880—ig^i (in %) Sector

1880

I9I0

I

4

2

27

II

4

2

46

16

28

III

1

9

4

1

2I 36

the old-established watch- and clock-making industry was monopolised by the Romandie for all practical purposes, its economic weight still unimpaired and continuing to dominate the world market. In 1 9 1 3 Switzerland exported about 13.8 million clocks and watches, covering much more than half of the whole world market. A n impressive achievement but, of course, just because the watch- and clock-making industry was - and is - so extremely dependent on exportation, it was and remains - extremely subject to crises. As anywhere else in the industrialised world the decades between the two world wars in Switzerland were stamped with a heavy postwar crisis in the years following 1 9 1 8 , then a few years of boom and prosperity in the 'roaring Twenties', and then with the great worldwide depression of the 1930s, from which Switzerland did not extricate itself until 1 9 3 6 , thus somewhat lagging behind the rest of the industrialised countries. Broadly speaking the time between the wars must be put down as a period of economic stagnation during which the occupational structures of the country changed but slowly and with pronounced reluctance (see table 5.4). Unlike most European countries, Switzerland survived the Second World War unscathed: it did not hesitate to make the very best of this competitive advantage. Never before had the economic growth been greater or more constant than between the 'Korea boom' in 1 9 5 0 and the 'oil crisis' in 1 9 7 4 . But on the other hand the conspicuously comfortable economic situation of the country largely failed to stimulate any spirit of innovation. Thus, Switzerland to a great extent neglected to link up in good time with, for example, the revolution in microelectronics, thereby losing the opportunities this might have offered. This seems a pity, especially so because the watch- and clock-making industry commanded the know-how as well as a labour force used to working with great precision and to dealing competently with diminutive units. T h e easy import of a cheap labour force, however, permitted an expansive economic growth within the existing economic structures. This in turn, 24

Per capita income I 9 8 o

Cantons German-speaking Aargau Appenzell-Innerrhoden Appenzell-Ausserrhoden Bern Basel-Land Basel-Stadt Glarus Luzern Nidwalden Obwalden St Gallen Schaffhausen Solothurn Schwyz Thurgau Uri Zurich French-speaking Geneve Jura* Neuchatel Vaud Italian-speaking Ticino Mixed Graubunden Fribourg Valais

I

AG AI AR BE BL BS GL LU NW OW SG SH SO SZ TG UR ZG ZH

95

o

>

Pop. (in i,ooos) 99o

22,479 6,5o6 9,o5o 2 ,47o 22,9o5 34,485 26,o64 9,939 2 ,945 8,326 2o,8o9 22,892 2 ,26 8,993 9,772 2o,423 3 ,648 29,567

5o8

o 4, 6o ,67o

29,538 7,296 9,947 2 ,6o8

379 66 64 6o2

TI

,o 5

9,o22

282

GR FR VS

2,85o 2,725 2, 55

23,566 8,6o8 9,378

74 2 4 25o

GE JU NE VD

o

3>54 2 , 5 7 5

2 , 9 1 5

3 , 5 2 5

3 , 8 4 5

5,o8o 6

3> 4

o

3 , 1 3 5

2 , 9 4 5

2 , 8 5 5 3 , 3 8 o

3 , 6 9 o

3

>

> >

7 8 o

2 , 9 1 5

3

4 4

> ° 2,865 3 , 5 4 5

4 , 3 0 5

4 , 6 3 5

*Established I 979. Formerly part o f the canton Bern.

Figure 5.4. The Swiss cantons

52 958 233 99 39 326 33 29 428 72 232 i i2 2o9 34 86 79

BRUNO

102 8.0

FRITZSGHE

Low i n c o m e High g r o w t h

High i n c o m e High g r o w t h

7.5 o a>

• VS

7.0

I

• GR •

~~

ZG

»NW • UR F

6.5

-

o

R

. AI

»

, #

.

OW

S

Z

L

• TI

6.0 ^8

o

5.5

U

A

G

#

SG •

TG

SH • GL

»GE

#

V

Low i n c o m e Low g r o w t h

^ S O

High i n c o m e Low g r o w t h • NE

5.0 2000

2500

3000

3500

4000

4500

5000

5500

Income per capita 1950 (Frs.) Figure 5.5. Economic performance, ig^o-igBo

and relative to the total Swiss population, resulted in a percentage share of 1 7 . 2 per cent of foreigners living in Switzerland by 1 9 7 0 . Covering the period after 1950 we possess calculations not only of the national but of the cantonal incomes as well. We are thus able to give more accurate and detailed information with regard to the development of the various regions in the more recent past. In evaluating the available data, however, one must bear in mind that the Swiss cantons are of greatly varying dimensions: the most populous canton, Zurich, has about eighty-five times more inhabitants than the smallest, AppenzellInnerrhoden. In order to obtain valid comparisons therefore, the follow­ ing data will invariably apply to the per capita income (seefigure5 . 4 ) . In only three cantons is the native language of the whole population French — the cantons of Geneva, Neuchatel and Vaud. Three further cantons possess no distinct majorities: in the cantons of Fribourg and Valais more than half but less than two thirds of the inhabitants are French-speaking; similarly, in the Grisons something between a half and two thirds of the population is German-speaking, the native language of the rest being either Italian or Romansh. The canton of Berne is a special case: after a long and rather troublesome period of political conflict the greater part of its French-speaking areas have separated, constituting an additional canton of their own since 1 9 7 9 — the canton of Jura. But owing to the fact that the French-speaking minority has at 2 6

27

Regional and national development in Switzerland

103

no time run to more than a mere 10 per cent, the canton of Berne has always been numbered among the German-speaking cantons. Condensed information regarding the economic performance of individual cantons may be gathered from figure 5 . 5 , where per capita incomes are combined with the economic growth between 1 9 5 0 and 1 9 8 0 . The graph clearly reveals that the three exclusively Frenchspeaking cantons rank among the wealthy ones: Geneva and Neuchatel are placed at the very top, together with the two German-speaking cantons of Zurich and Basle City. But it is also true that their economic growth is less than average, which has resulted in their losing ground in the course of time. This is especially striking in the case of Neuchatel. T h e canton of Neuchatel displays the lowest absolute growth rate. This is a faithful reflection of the whole watch- and clock-making industry, which, helping the region to great prosperity in the first place, appears to have at the same time induced a spirit of self-complacent laziness. As a result the industry reacted with excessive tardiness to the electronic revolution in horology, which in turn led to a serious and protracted crisis of the whole watch- and clock-making industry. T h e predominantly French-speaking Valais, though the least prosper­ ous canton in 1 9 5 0 , has tolerably good prospects because of its aboveaverage economic growth. Among the Romanic cantons the Ticino alone remains below average with respect to both its income and its growth rate. In the present context, however, the salient point lies in the fact that the graph fails to reveal any kind of cluster formed by the Romanic cantons. Quite the reverse is true: they find themselves dispersed over the whole of the spectrum. This proves that any idea of economic backwardness of the French- or Italian-speaking cantons in general is clearly ficticious. T h e determining factor of economic performance of the various cantons therefore is by no means a question of language. In order to explain differences in economic performance there must be a number of other factors taken into consideration, such as the topography or the geographic situation of individual regions, their accessibility by way of the existing traffic system, or, again, the historical background of industrial locations. The cantons of Valais and Ticino, together with other Alpine and prealpine cantons, form a group of low-income regions. Again, the graph places the French-speaking canton of Vaud in a very similar position to that of the German-speaking canton of Berne: here the similarity of economic performance is matched by a similarity of

i04

BRUNO

FRITZSGHE

9 I 4 2•

81 3 2• Figure 5 . 6 . Cantons: income per capita

3036 t o 3717 I 3717 t o 4399 4399 t o 5080

21001 121001 t o 25495 25495 t o 29990 29990 t o 34485

Regional and national development in Switzerland

105

their respective topographical and industrial structure. T h e Frenchspeaking canton of Geneva shares its top position in the graph with the German-speaking Basle City: in their case the similarity in economic performance is matched by and largely due to the fact that both these cantons are made up of a city and nothing else, to the virtual exclusion of any kind of additional rural areas. Our cartographical representation in figure 5 . 6 elucidates these circumstances, indicating at the same time the shift of incomes between 1 9 5 0 and i g 8 o . B y 1 9 8 0 Geneva had lost its position of second place but still manages to retain a respectable placing of third. Meanwhile, the canton of Neuchatel, painfully weakened, shares its economic downfall with the German-Swiss canton of Solothurn, both of them being heavily dependent on the watch- and clock-making industry.

CONCLUSIONS

Does all this suggest that the postulated economic discrimination of the French-Swiss cantons is not more than idle talk? To answer this question, some problems of long-range tendency defying any direct description by means of tables, diagrams and numbers must be touched upon. Two contradictory developments must thereby be noted. O n the one hand, Swiss politics has for the last few decades been trying to level out disparities by way of purposely furthering or supporting the economic structures of backward regions. T h e cantonal data presented here, for instance, are derived from an extensive scientific research work in aid of regional economic development and are meant to form a solid foundation for future political decisions. It appears that the attempt has borne fruit to a certain extent: the cantonal incomes of i 9 8 0 diverge perceptibly less than those of 1 9 5 0 , the coefficient of variation being 2 8 . 5 per cent in 1 9 5 0 as compared with 20.0 per cent in 1 9 8 0 . But on the other hand, and in blatant contradiction to the overall pattern encouraged by political effort, one specific metropolitan area is increasingly, and ever more plainly, standing out against the rest of the country. Figure 5.7 is an attempt to visualise this state of affairs. The large majority of cantons form one fairly compact cluster while the few remaining ones are split off from the rest in an almost offensive way. In three instances these 'outsiders' are easily identifiable as those cantons where the large cities are located — that is, Zurich, Basle and Geneva. O f these three the canton of Zurich, with respect to per capita incomes,

BRUNO

io6

FRITZSGHE

8.50 8.00

ZG

0 7.50 I

a>

0 7.00 8

FR

6.50

LU

_c

ZH

o 6.00 S? 5.50

5.00

"A*

T I

*TG

SG

N

E

GE

VD • BL

JU»VS

AR

SH

AG

GR GL BS

4.50

17000 19000 21000 23000 25000 2 7 0 0 0 2 9 0 0 0 31000 3 3 0 0 0 3 5 0 0 0

Income per capita 1980 Figure 5.7. Economic performance, ig8o-iggo

forms the tail-end. This is not especially astonishing since, unlike Geneva and Basle, the canton of Zurich consists of the city and also quite an extensive rural district. Conversely, and with respect to economic growth, Zurich in the 1980s ran rings around both Basle and Geneva. But none of the cantons can even begin to compete with the canton of Zug, neither with regard to per capita income nor with regard to economic growth. This very small canton boasting no more than 8 6 , o o o inhabitants in i 9 9 o and still forming the absolute peak, represents a unique case in the Swiss economic landscape. Situated a mere thirty kilometres south of the city of Zurich, Z u g has succeeded in turning this happy vicinity greatly to its own advantage by turning into a kind of 'free rider', capitalising on the infrastructure of the neighbouring economic centre of Zurich. At the same time, by way of special and uncommonly advantageous tax legislation laws, it managed to attract a number of important international investment and holding companies. In this way Zug, politically speaking an autonomous unity, is still — seen from the economic point of view — to be categorised as part of the agglomeration belonging to the city of Zurich. Around the beginning of the nineteenth century the economic significance of the city of Zurich was still considerably lagging behind that of Geneva or Basle. Since then it has overtaken them both, in the course of the twentieth century turning into the unchallenged principal centre of Swiss finance and, quite generally, of Swiss economic life. Today more than 15 per cent of the total Swiss population live in the

Regional and national development in Switzerland

107

agglomeration of Zurich, producing about a quarter of the sum total of the Swiss national income. Such a predominance is ominous in a country that is proud of its linguistic and cultural diversity and that cher­ ishes the extensive rights of self-determination of its local communities. As a consequence there exist grave misgivings about the dominating position of Zurich in the rest of Switzerland. Complaints are, indeed, to be heard from all parts of the country, clamouring against the economic centre snatching ever more greedily ever larger bits of the economic 'cake'. But it is true enough that lamentations coming from Basle or St Gall enjoy far less publicity than those expounded in the Romandie, where they blurt out their protest against what they refer to as 'Alamannic predominance' while, in reality, they essentially mean to pillory the city of Zurich. To conclude: uneven economic growth of the various cantons is not to be attributed to language problems. A 'centre versus periphery' model (in the sense of G. Myrdal) is far likelier to account accurately for the existing irritations between the various regions of the country. But why was it Zurich that achieved its present dominating position? Why not Geneva, a city that began the nineteenth century in a position decidedly superior to that of Zurich? If one attempts to argue the point on the basis of the dissimilarities of mentalities, before long a host of difficulties will present themselves. Then the nebulous notion of the socalled 'Teutonic efficiency' would have to be played off against the almost as nebulous concept of the particularly Calvinist affinity to the spirit of capitalism originally forwarded by M a x Weber. It is preferable to offer instead a few hard facts easily submitting to verification. Geneva is situated at the periphery of the Swiss market area emerging after 1 8 4 8 . In sharp contrast to Geneva and unquestionably enjoying a much more central geographical location to begin with, Zurich by means of a consistent and aggressive traffic policy has succeeded in improving continuously — and decisively — upon its initial advantage: an undeviating course of action easily to be traced from the laying of the very first track of the Swiss railway network in the middle of the nine­ teenth century to the construction of the first Swiss intercontinental airport in the immediate vicinity of the city of Zurich shortly after the Second World War. Geneva, headquarters of the International Committee of the Red Cross as well as the League of Nations, has for a long time remained the most distinguished Swiss city. Not so very long ago, on the occasion of the first summit conference in 1 9 5 5 , Geneva still offered itself quite

108

BRUNO

FRITZSGHE

naturally as the meeting place for Eisenhower and Khrushchev. It is only in recent years that the international reputation of Geneva has lost pres­ tige to some extent, not least because reorientation in matters of foreign policy and in relationships with international organisations appear not to come easily to the nation. To wit: Switzerland to this day has not brought itself to apply for membership of the United Nations; also, the nation has only recently declined to become part of the European Economic Area (EEA), and it is still putting up resolute resistance to a proposed entry into the European Union. It is therefore no longer a matter of course that newly founded organisations of the United Nations establish their headquarters in Geneva, nor indeed that the oldestablished ones choose to remain there. Zurich, on the other hand, is not confronted with any such problems. Its rank as the absolute Swiss economic centre recommends the city — as it were automatically — as the first-class address for international economic contact of all kinds. With a view to the economic 'globalisation'; so constantly referred to in recent years, the international aspects of the economic life of Zurich have increasingly gained significance for the further development of the city and its hinterland (including Zug). Considering the steadily progressing development of industrial society towards a postindustrial 'services society', the advantages of easy accessibility as well as the possibility of quick and intensive communication will be of ever greater consequence. It must therefore be conceded that the vigorous French-Swiss remonstrances referred to at the outset of this paper are well founded, beyond a doubt: on an international level the retrenchment of the international air service proposed for Geneva airport will indeed impair the competitive capacities of the Romandie. O n the other hand, however, the notion of this being just one further measure of German-speaking Switzerland calculated to oppress the French-speaking minority has no rational foundation whatever. But we are here faced with well-known resentments of old standing: resentments that have required constant and careful consideration in the past and will continue to require no less careful consideration in the days to come.

NOTES 1 Bundesblatt der Schweizerischen Eidgenossenschaft (Bern, 1993), vol. 2 COOP-Zeitung 31 (31 July 1996), pp. 6—9. 3 From data in Schweizjerische Statistik 195 (Bern, 1915), pp. 18—29.

I, p. 168.

Regional and national development in Switzerland

109

4 Only once, namely from 1876 to 1880, was there just one single repre­ sentative from Romanic Switzerland on the Executive Federal Council. 5 William E. Rappard, Die Bundesverfassung der Schweizerischen Eidgenossenschaft 1848-1948 (Zurich, 1948), pp. 3 1 8 - 2 1 . 6 Bundesblatt der Schweizerischen Eidgenossenschaft (Bern, 1979), vol. I, p. 2 1 3 . 7 For a fuller account, see Ueli Gyr, Lektion furs Leben. Welschlandaufenthalte als traditionelle Bildungs- Erziehungs- und Uebergangsmuster (Zurich, 1989). 8 Urs Rey, Demographische Struckturveranderungen und Binnenwanderung in der Schweiz 1859-1910 (unpublished Master's thesis, University of Zurich, 1990). 9 From data in Schweizerische Statistik / 9 j , p p . 4 2 0 - 8 9 . 1 0 Statistisches Jahrbuch der Schweiz 1979 (Basel, 1 979), p. 27 and Statistisches Jahrbuch der Schweiz 1997 (Zurich, 1 998), p. 440. 1 1 For an in-depth analysis of the language question, see Hans-Peter Muller, Die schweizerische Sprachenfrage vor 1914 (Wiesbaden, 1 977). 1 2 Georg Kreis, 'Krisenreaktionen in der franzosischen Schweiz vor 1 9 1 4 ' i n Andreas Ernst and Erich Wigger (eds.), Die neue Schweiz? Eine Gesellschaft zwischen Integration und Polarisierung (Zurich, 1 996), pp. 21 - 3 9 at pp. 25-7. 1 3 Statistisches Jahrbuch der Schweiz i979,p. 24. 1 4 Alfred Bosshardt, 'Die schweizerische Aussenwirtschaft im Wandel der Zeiten' in Schweizerische Gesellschaft fur Statistik und Volkswirtschaft (ed.), Ein Jahrhundert schweizerischer Wirtschaftsentwicklung(Bern, 964), pp. 302-27 at p. 326. 5 Carl Hilty, Politisches Jahrbuch der schweizerischen Eidgenossenschaft (Bern, 909), p. 375. 6 Kreis, 'Krisenreaktionen', pp. 3 2 - 5 . 1 7 Willi Gautschi, Der Landesstreik 1918 (Zurich, Einsiedeln and Cologne, 1 968), p. 94. 8 Bundesblatt der Schweizerischen Eidgenossenschaft (Bern, 920), vol. III, p. 800. 9 Rappard, Die Bundersverfassung,p. 406. 20 From data in Schweizerische Statistik, 212 (Bern, 1 9 1 9), pp. 204, 208, 292, 336 and 380. 2 From data in ibid., pp. 204, 208, 292, 336 and 380. 22 Bruno Fritzche, 'Die Spinne im Netz' in Geschichte des Kantons Zurich (Zurich, 994), vol. III, pp.

6 4 - 8 0 at p.

69.

23 David S. Landes, 'Technological change and development in western Europe, 1 750-1 9 1 4' in H.J. Habakuk and M. Postan (eds.), The Cambridge Economic History of Europe (Cambridge, 1 966), vol. VI, pp. 2 7 4 - 6 0 3 at p. 503. 24 David S. Landes, 'Swatch! ou l'horlogerie suisse dans le contexte mondial' in Paul Bairoch and Martin Korner (eds.), Die Schweiz in der Weltwirtschaft (Zurich, 990), pp. 2 2 7 - 3 6 at p. 232. 25 From data in Francesco Kneschaurek, 'Wandlungen der schweizerischen Industriestruktur seit 800' in Schweizerische Gesellschaft fur Statistik und Volkswirtschaft, Ein Jahrhundert schweizerischer Wirtschaftsentwicklung,pp. 3 3 - 6 6 at p.

39.

26 Statistisches Jahrbuch der Schweiz i979,p. 24.

no

BRUNO

FRITZSGHE

27 All data with regard to the cantonal incomes are taken from Georges Fischer, Raumliche Disparitaten in der Schweiz (Bern, 1985) (especially from the table on p. 82) and from Bundesamt fur Statistik, Volkswirtschaftliche Gesamtrechnung, electronic file STATINF.

C H A P T E R

6

The Portuguese national question in the twentieth century:from Spanish threat to European bliss Nuno Valerio

INTRODUCTION

In spite of its small size, the Portuguese territory has great geographical diversity. Yet, in spite of this geographical diversity, the Portuguese population has great cultural homogeneity. These two facts ensure that there has never been any internal Portuguese national question during the twentieth century. From an external point of view, however, the situation is rather different. Since at least the eighteenth century, Portuguese society had perceived a Spanish threat to Portuguese independence, and such a problem was still predominant in the first half of the twentieth century. As a matter of fact, this Spanish threat never materialised into aggres­ sion, or even significant interference in Portuguese affairs. Anyway, the absence of any conflict between the two countries should perhaps be explained as a consequence of the three steps Portugal took to protect the country against the Spanish threat: the alliance with Britain, the African adventure, and the efforts to promote modern economic growth. The roots of this perception of a Spanish threat, the relations between the two countries during the first half of the twentieth century, and the measures taken to protect Portugal against the Spanish threat will be dealt with in the first half of this chapter. From the late 1940s until the mid-ig8os, the Portuguese national question gradually moved from the traditional pattern summarised above to a full commitment to European integration. European integration seems to have afforded Portugal economic prosperity and national security. Portuguese steps towards European integration, and the main consequences of European integration for Portuguese society, will be the subject of the second half of this chapter. This inquiry will then consider an important question that still remains unanswered as the century ends: will this European bliss last? 1

2

iii

NUNO

112

VALERIC-

THE SPANISH

THREAT

A prelude

First of all, why is Portugal separated from Spain? This is a complex question, which is beyond the scope of this chapter, but its main aspects must be summarised here, so that the roots of the perception by Portuguese society of a Spanish threat may be understood. Medieval Iberian Christendom was a frontier society, faced directly with hostile Islamic societies. T h e need for a local supply of public goods, especially defence, implied an extreme feudalisation, in which local lords not only exercised defacto state power, but even usurped dejure royal functions. This generated a political fragmentation that Iberian royal houses tried to undo by means of royal marriages. They finally suc­ ceeded in 1580 in gathering all Iberian kingdoms under the rule of the same king, but four different nationalities — Basque, Castilian, Catalan and Portuguese — had already laid their own deep roots. This situation was translated into three distinct kingdoms — Castile (dominating the Basques), Aragon (centred upon Catalonia) and Portugal. Moreover, two of the three kingdoms had sizable colonial empires — Castile in America and the Philippines; Portugal around the Indian Ocean, in the Far East and in Brazil. At the same time, the Iberian kings (of the House of Austria) were also sovereigns of several other European states — Sardinia, Sicily, Naples, Milan, Burgundy and the Low Countries (in revolt since 1572) — forming what may be called the Western Habsburg Empire. As a consequence, the peaceful formation of a unified Iberian nation proved impossible. In 1 6 4 0 , both Catalonia and Portugal broke out in revolt. T h e Western Habsburg Empire was able to subdue Catalonia, but not Portugal. Thus, when the War of Spanish Succession (1701—14) created the Kingdom of Spain (plus Castilian colonies), without any further European territories, Catalonia was integrated, but Portugal remained outside. The coexistence of a small Portugal (slightly less than 1 0 0 , 0 0 0 km and around 10 million inhabitants today) and a large Spain (slightly over 5 0 0 , 0 0 0 km and around 4 0 million inhabitants today) proved to be a stable pattern for the Iberian political map. However, fears of a Spanish attempt to rebuild Iberian unity were a constant feature of Portuguese life after the early eighteenth century. 3

4

2

2

From Spanish threat to European bliss in Portugal

"3

A danger that never materialised

This does not mean that formal relations between the two countries were usually bad. In fact, the peaceful settlement of disputes (the most complex ones being those on the definition of the colonial border in South America during the eighteenth century) was the general rule, and war only broke out on three occasions in the eighteenth and nineteenth centuries, making a total of around three years of war. During the twentieth century, acute friction between the two countries has occurred only twice. In i g i i — 1 2 , the Spanish monarchic government helped Portuguese monarchic refugees to organise military actions against the recently established ( i g i o ) Portuguese republican government, but this attitude was abandoned as soon as it became clear that success was improbable. In i g 3 6 , the Portuguese authoritarian government helped the military revolt against the Spanish republican government, and then supported the right-wing side during the i g 3 6 — g Civil War. This means that the Spanish threat was a danger that never materi­ alised. 5

6

Insurance against the Spanish threat The alliance with Britain It may, however, be argued that the absence of Spanish aggression, or even any really significant actual pressure on Portugal, was simply the consequence of several protective measures taken by Portugal to insure against the Spanish threat. From a strategic point of view, Portugal's main insurance against the Spanish threat was the alliance with Britain. This alliance had medieval roots, and was definitively established in i 6 5 4 , after a war between Portugal and England that had been triggered by Portuguese support for King Charles I and his son in their fight against parliament. In i 8 g g , the alliance was strengthened, when Britain agreed to give formal guarantees to protect the Portuguese colonial empire (and implicitly Portugal proper — that is, the mother country) in exchange for Portuguese help (through its colony of Mozambique) in the war against the South African Boer states. During the twentieth century, the Portuguese—British alliance was formally invoked on three different occasions. In i g i 6 , Britain asked Portugal to impound German ships harboured in Portuguese ports,

114

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VALERIC-

and to lend some of them to Britain. Portugal agreed, and Germany declared war on Portugal, leading the country to a formal intervention in the First World War. In 1 9 4 3 , Britain asked Portugal to permit it to use military bases in the Azores (actually the bases were mainly used by the American air force). Germany protested, but did not declare war; thus, Portugal was able to remain non-belligerent during the Second World War. In 1 9 6 1 , Portugal asked Britain to protect Portuguese possessions in India against an attack from India. Britain declined to act, invoking its compromises with India, as a member of the Commonwealth. This summary does not mean that the invoking of the Portu­ guese-British alliance during the twentieth century was a one-sided affair that always favoured Britain. Its deterrent effect was certainly effective in the general evolution of Iberian and colonial affairs, favouring the more-or-less peaceful survival of the Portuguese colonial empire until the second half of the twentieth century, and the protection of Portugal proper against the perceived Spanish threat. The post-Second World War years saw a decline in the British influence on international affairs, and this meant that the alliance with Britain no longer provided reliable protection against the Spanish threat (nor against the various dangers that threatened the Portuguese colonial empire). Somewhat reluctantly, Portugal turned to the new hegemonic maritime power, the United States of America, for alternative protection. This meant accepting the presence of an American military base in the Azores (which prolonged the Second World War arrangements) and becoming a member of the North Atlantic Treaty Organisation (NATO) from its beginnings in 1 9 4 9 . American protection functioned quite well in the European context, but worked poorly (from the Portuguese point of view) in colonial affairs, because the United States favoured decolonisation and was unwilling to support the Portuguese colonial empire. 7

8

The African adventure The lesson that Portuguese strategists learned from the historical experience of wars against Spain (or previous Iberian neighbours) was that, when Spanish commitment went beyond border attrition, Spanish invasions could not be stopped by border garrisons, but had to be fought by fortifying the main Portuguese cities, resisting along these shorter defensive lines, whilst attacking Spanish communication lines. If this strategy failed, only the Atlantic extension of the Portuguese territory (Azores and Madeira) could save the country. Such an extension could be 9

From Spanish threat to European bliss in Portugal

115

increased by further colonial possessions. Given the popularity of impe­ rial endeavours, and allied to the hope that these possessions might provide a positive contribution to economic growth (a subject which will be dealt with in more detail below), this led Portugal to the building of its fourth colonial empire, in Africa, in the late nineteenth century. The fourth colonial empire was the cause of two periods of war: one from the 1880s until the First World War years, to ensure the submission of the previously existing societies in what was to become Angola, Portuguese Guinea (Guinea-Bissau) and Mozambique; another from 1961 until 1 9 7 4 , to resist independence movements in the same territo­ ries. The first one was not very demanding for Portuguese society, because the small size and technological backwardness of African tribal societies permitted rather easy victories by the Portuguese armies. T h e second one put heavy pressure on Portuguese society, because the coordinated action of the independence movements and the help they received from African, communist, and even western countries prevented any possibility of a Portuguese victory. Attempts were made to mobilise support from Portugal's N A T O allies by invoking the anticommunist significance of the Portuguese colonial wars, but they met with only limited success. Exhaustion finally dampened popular support for the colonial policy, and Portugal abandoned its colonial empire in 1974—5, as soon as the deterioration of the economic situation made the cost of the war prohibitive. 10

11

12

Economic growth

Real insurance against the Spanish threat could, however, only come from the Portuguese capacity to stem any Spanish attempt to take action against the country. This meant the capacity to command enough military resources; and this, in turn, meant the capacity to command enough economic resources. Modern economic growth was a difficult goal for Portugal to achieve. Between the 1 8 5 0 s and the 1 8 8 0 s there was a first spurt of growth, but this proved to be a false start. This first spurt of growth was based on private exploitation of the resources of Portugal proper, with the stimulative support of public investment in infrastructures, within a mildly free-trade framework. T h e breakdown of the Portuguese economy in the early 1 8 9 0 s was mainly due to financial causes, but it led to the suspension of the gold standard and to a partial bankruptcy of the Portuguese government, and called for new ideas to foster economic prosperity. Protectionism, colonial expansion and investment in human

Il6

NUNO

VALERIO

capital were the solutions chosen. Protectionism and colonial expansion became the main elements of a nationalist economic policy that would dominate the first half of the twentieth century and survive until the 1980s, in spite of the gradual drive towards European integration from the 1940s onwards. This nationalist development strategy was initiated by the last governments of the constitutional monarchy (from the 1890s until 1910) and maintained by the governments of the liberal First Republic (1910—26), the military dictatorship (1926—33) and the constitu­ tional authoritarian republican regime (1933—74) that followed, in spite of their political differences. Protectionism was designed to achieve industrialisation and a higher degree of self-sufficiency in agricultural activities. It certainly contrib­ uted to its first goal, although it may be argued that it went far beyond what would be reasonable according to the infant-industry argument, supporting many inefficiencies and introducing many distortions in resource allocation. It failed completely in terms of achieving its second goal, although the supply problems created by the two world wars meant that agricultural protectionism continued to be favourably regarded until late into the second half of the twentieth century. Twice during the twentieth century, additional efforts were made to promote a more intensive use of the land and to introduce some technological improvements, so that dependence upon foreign food supplies could be reduced. However, both the 'wheat campaign' of the military dictatorship and the authoritarian regime in the late I920s and early I930s, based on the support of large landowners, and the 'Portuguese bread' campaign of the transitional governments between authoritarian and democratic regimes in the mid-I970s, based on the support of rural wage-earners and the Communist party, met with complete failure. In the long run, it is possible to say that protectionism spread to too many sectors and lasted for a longer period than was necessary to fulfil its potentially useful role in fostering industrial development. Besides its political goals, colonial expansion aimed at creating a set of economies dependent upon Portugal and acting as providers of raw materials, buyers of final products, and destinations for Portuguese emigration and investment. There is no real agreement about the effects of colonial expansion upon Portuguese economic evolution. It is difficult to believe that they acted as an engine of economic growth for Portugal for two reasons. First, they were usually minor economic partners for the Portuguese economy, in spite of the various schemes of imperial preference and economic integration between Portugal and its 13

14

From Spanish threat to European bliss in Portugal

117

colonies implemented between the late nineteenth century and the 1970s. As for their role as providers of raw materials, it was often possi­ ble for Portugal to find tropical products in international markets at better prices than in Portuguese colonies. Concerning their role as buyers of final products, in spite of their large area (more than 2 million km ), Portuguese colonies did not have a very large population (around 14 million inhabitants, as against 9 million in Portugal proper, in 1 9 6 0 ) , and their per capita gross domestic product was, by that time, already almost ten times lower than the Portuguese. Thus, they were unable to compete with Portugal proper, let alone with developed economies, as outlets for Portuguese products. As for their role as destinations for emigration, Portuguese emigrants continued to prefer other destinations: Brazil until the Second World War and Europe (especially France) after the Second World War. Thus, the population of European origin in Portuguese colonies was still less than 2 0 0 , 0 0 0 in 1 9 6 0 . T h e second reason for believing that colonial endeavours were not beneficial for Portuguese economic growth is the fact that they absorbed significant resources, from both private and government origins. Although it is possible to argue that significant profits compensated for private investment, no revenue ever compensated for the public expenditure needed for economic and military purposes, let alone the human losses caused by the colonial wars. A summary of the main financial flows between Portugal and its colonies provides an interesting perspective on the perceived and actual costs and benefits of nineteenth- and twentieth-century colonial expan­ sion for Portugal (see table 6.1). The figures for the period 1875—90 show that the colonial empire played a negligible role in Portuguese economic life before the building of the fourth Portuguese colonial empire started. The formative phase of the fourth Portuguese colonial empire, until the First World War, was characterised by a rise of government expenditure and trade flows, with a trade balance favourable to Portugal. The stable existence of the fourth Portuguese colonial empire witnessed further increases of trade flows. Until the Second World War the trade balance was usually unfavourable to Portugal, but it became usually favourable to Portugal after the Second World War. As for the government expenditure, it fell until the Second World War, and rose slightly after it, because of the early threats to the empire during the 1950s. During the period of the colonial war, government expenditure boomed, exports fell, imports rose, and the trade balance became unfavourable to Portugal again. As 2

15

1 6

17

Il8

NUNO

VALERIO

Table 6 . 1 . Main financial flows between Portugal and its colonies, 1875-1974 Period

Government expenditure (as % of GDP)

Exports (as % of GDP)

Imports (as % of GDP)

7 5 - 9 °

0.1

0. I

0.I

1891-1918

0.4

0 .

0.3

1

0 .

5 I.0

I

8

9

1

9

-

4

5

I.4

1946-60

3 0.6

3.4

2.8

1961-74

3.6

3.I

3 .

2

Source: N u n o Valerio, ' O significado economico do imperio colonial para um pequeno poder - o caso de Portugal (de finais do seculo 19 ao terceiro quartel do seculo 20)' in Antonio Telo and Hipolito Torre G o m e z (eds.), Portugaly Espana en el sistema internacional (Zamora, 1998), pp. 5 3 - 6 9 at pp. 6 2 - 7 .

government expenditure began to exceed trade flows and the trade rela­ tions seemed to become deleterious for the Portuguese economy, at the same time that the human commitment to the war began to be felt as unbearable, it was impossible to keep the Portuguese society ready to sacrifice to defend the colonial empire. Investment in human capital, something that the mid-nineteenthcentury development blueprint had relegated to a non-priority position, was certainly a good option in the late nineteenth-century blueprint, but it proved slow to implement and slow to bear fruit. Only in the 1920s were any significant efforts made to improve a rather poor situation in terms of literacy and technical education, and only after the Second World War did any significant results begin to be seen in terms of modern economic growth. Anyway, any judgement should be cautious, because other factors interfered with improvements in education and its impact on economic growth. 18

EUROPEAN

INTEGRATION

Towards European bliss

The third quarter of the twentieth century heralded a few significant structural changes in Portuguese society. First of all, there was the definitive take-off of modern economic growth. By the early 1970s, Portugal was already a middle-high income economy. It is impossible to discuss the roots of this success here, but it may be suggested that

From Spanish threat to European bliss in Portugal

119

its main factors were the favourable international background of the golden years of economic growth in western Europe, North America and Japan, the overcoming of the traditional problems of a lack of resources — mainly a qualitative lack of human resources and a quanti­ tative lack of savings — and gains in efficiency resulting from improved technology and freer intercourse with Europe in general. At the same time, the colonial empire crumbled under the pressure of the 'winds of change'. The traditional British protection was rendered ineffectual as Great Britain lost its importance as a significant world power and proved incapable even of defending its own empire, and Portugal's new privileged ally, the United States of America, did not support European colonial empires, as already mentioned above. Portugal tried to resist, both militarily and economically. Military resistance led to the outbreak of the colonial wars mentioned above, and to military defeat as Portuguese society lost its traditional enthusiasm for colonial endeavours. Economic resistance took the form of an attempt to build a free-trade zone and a monetary union between Portugal and its colonies, and this was a failure as well. Balance of payments problems in the two main Portuguese colonies — Angola and Mozambique — and the unwillingness of Portugal to provide enough financial support for them to overcome their short-term problems led to the (formally tem­ porary) suspension of the free-trade zone and monetary union schemes in 1 9 7 1 . Political decolonisation in 1974—5 ensured that no attempts were made to restore them. Europe provided an alternative as a preferential economic partner. As a matter of fact, the main European national economies had never ceased to be Portugal's main economic partners. Portugal was involved from the beginning in the process of European integration: it was one of the (moderate) beneficiaries of the Marshall Plan and one of the found­ ing members of the European Organisation of Economic Co-operation ( E O E C — 1 9 4 8 ) ; it participated in the European Payments Union ( 1 9 5 0 ) , and subscribed to the European Monetary Agreement ( 1 9 5 5 ) ; when the E O E C split into two trading blocks — the European Economic Community (EEC) and the European Free Trade Association (EFTA) — Portugal chose to become a member of the EFTA, so that the economic integration with its colonies would not be disturbed; and, when Great Britain abandoned the EFTA to become an E E C member, Portugal negotiated an association agreement with the E E C ( 1 9 7 3 ) . For a while (from the late 1940s until the early 1970s), there was an attempt to enjoy simultaneously the advantages of the old nationalist 19

20

120

NUNO

VALERIO

(that is, protectionist and colonialist) development strategy, and those of a new export-led and European-biased development strategy. The mix was clearly contradictory and collapsed in 1 9 7 4 under the pressure of the first oil shock. The authoritarian political regime was swept away so that the decolonisation process could be carried out, and political democratisation followed in 1 9 7 6 , after two years of uneasy transition. Cutting its links with its former African colonies and building a demo­ cratic republican regime led to a deepening of Portugal's relations with the E E C . The association treaty was revised ( 1 9 7 6 ) , and an application presented for full membership (1977). Although negotiations proved difficult (mainly because the Portuguese case had to be dealt with at the same time as the much more difficult Spanish case), an agreement was reached and Portugal became a member of the E E C in 1 9 8 6 . In the meantime, it had received significant pre-membership aid, and the influx of European funds increased during the late 1980s and the 1990s, under the scope of European structural funds. O f course, the deepening of Portuguese relations with the E E C (now the European Union) meant the inevitable adoption of the new exportled and European-biased development strategy, which had been developed since the Second World War. This was not an easy process, because short-term difficulties linked to the first ( 1 9 7 3 - 5 ) and second ( 1 9 8 1 - 3 ) oil shocks led to temporary revivals of the old protectionist ideas (and practices, as temporary increases of import duties were implemented). However, the new development strategy triumphed in the long run, as the deepening of European integration brought economic prosperity and national security to Portugal. Economic prosperity means that modern economic growth has been consolidated and Portugal has been able to attain what is currently considered a high level of development during the 1990s. O f course, Portugal suffered from European and world recessions, as would be expected for a small and open economy, but even the 1 9 9 1 - 4 difficulties did not prevent full participation in all economic and monetary union schemes (namely in the single market for commodities, labour and capital from 1 9 9 3 onwards, and in the first group of countries to adopt the euro as their monetary unit from 1 9 9 9 onwards). A look at the rates of growth of the Portuguese economy since the mid-nineteenth century helps to explain why European integration is perceived as very positive from an economic point of view (see table 6.2). First, it is clear that until the mid-i850s and between the 1890s and 21

From Spanish threat to European bliss in Portugal

121

Table 6.2. Average rates of growth of Portuguese per capita gross domestic product, 1837-1995 Period

Rate of growth (%) I

.

O

1837-55 1856-90

+ +2.I

1891-1913 1913-28 1929-46

+0.3 +0.4 +0.8

I947-59

+ 3.3

I960-73

+ 6.2

I974-85

+ 2.9

I985-95

+ 5.I

Source: N u n o Valerio, 'Recent developments on Portuguese retrospective national accounts', Gabinete de Historia Economica e Social do Instituto Superior de Economia et Gestao da Universidade Tecnica de Lisboa, Working Paper I2 (I998).

the mid-i940s, Portuguese economic growth was either sluggish or non-existent, while between the mid-i850s and the 1880s and from the mid-i940s onwards, Portuguese economic growth was either respectable or even exceptional. The positive relationship between the degree of openness of the Portuguese economy and its growth performance is undoubted. Secondly, considering in more detail the post-Second World War period, it is clear that periods of very significant deepening of European integration (the EFTA period between 1 9 6 0 and 1 9 7 3 , and the E E C / E . C . / E . U . period from 1 9 8 6 onwards) witnessed higher growth rates than periods of less significant deepening of European integration (the E O E C period from 1947 until 1 9 5 9 and the pre-membership period of association to the E E C between 1 9 7 4 and 1 9 8 5 ) . O f course, the evolution of the international economy was as important as the degree of European integration in shaping Portuguese economic performance, but the perception of a positive relationship between the degree of European integration of the Portuguese economy and its growth performance was nevertheless reinforced. Together with net transfers from the European Communities, which remained below I per cent of gross domestic product during the association period, but grew after Portugal became a member towards a peak above 3.5 per cent of gross domestic

122

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product in the mid-io,90s, this perception helps to explain the popular­ ity of the European option within Portuguese society. National security means that European integration has become a sur­ rogate for the traditional British protection against the old Spanish threat. From the 1940s until the 1970s, as Spain remained outside the main European organisations, Portugal was able to underline its specificity in relation to its Iberian neighbour. From the late 1970s onwards, as Spain became a partner in the process, the good relationship between the two countries was actually deepened. At the same time, their economic relations were significantly intensified — Spain surged from a modest sixth place to become Portugal's leading trade partner, and also became one of the main sources of foreign investment in the country; the Portuguese role in Spain is, of course, relatively more modest, but there has been a boom there as well. Moreover, the development of collective European security schemes has helped to overcome traditional suspicion. 22

23

To sum up: European integration has so far proved a source of true bliss for Portuguese society. How

long will European bliss last?

It is, however, impossible to avoid the question: how long will this European bliss last? This may be considered to be a two-sided question. First, will Europe keep on providing a context of economic prosperity and national security for Portugal, at least in the long run? Secondly, will Portugal remain a distinct society within the European framework? These are likely to be the main issues in relation to the Portuguese national question in the early decades of the twenty-first century. O f course, the future is uncertain. However, two rather optimistic reflections may be made regarding these matters. First, as the European Union will remain prosperous and stable itself, it will provide a context of economic prosperity and national security for Portugal. Portugal may contribute to the favourable evolution of the Union, but to guarantee this is certainly beyond the capacity of intervention of Portuguese society. In any case, it is of the utmost interest for all European nations that the European Union should remain prosperous and stable. O f course, this does not mean that they will make the right choices, but it increases the likelihood that they will do so. Secondly, Portuguese society has always been and will continue to

From Spanish threat to European bliss in Portugal

123

remain subject to economic, political and cultural influences from abroad regardless of its participation in the European Union. Past expe­ rience shows that these influences from abroad have had a positive effect on the evolution of Portuguese society. It is to be expected that this situation will continue in the future. NOTES

1 The classic study on the geographical diversity of the Portuguese territory - with Mediterranean, Atlantic and semi-continental regions - is Orlando Ribeiro, Portugal,o Mediterrdneo e o Atldntico (4th edn, Lisbon, 1986). 2 According to the nineteenth- and twentieth-century population censuses, the percentage of the population that is of foreign origin, or has a mother tongue other than Portuguese, has always been less than 0.5 per cent of the total Portuguese population, and the percentage of the population with a religious background other than Catholicism has always been less than 2 per cent of the total Portuguese population (although explicit religious indifference and agnosticism extend to some 20 per cent of the population nowadays and practical religious indifference is certainly much more wide­ spread). There is no reason to believe that things have ever been different at any time since the sixteenth century, after the medieval Muslim community had been peacefully converted, and the Jewish community either forcibly converted or expelled (although social discrimination against ex-Jews and their descendants continued until the eighteenth century). 3 The feudal character of medieval Iberian Christendom has been a subject of much controversy. For two contrasting views, see Marc Bloch, La societe feodale (Paris, 1939) and Pierre Bonassie, 'Du Rhone a la Galice: genese et modalites du regime feodal' in Pierre Toubert et al., Structures feodales et feodalisme dans l'Occident Mediterraneen (Xe-Xllle siecles) (Paris, 1980), pp. 1 7 - 5 6 . 4 The discussion of the reasons for the Portuguese success as against the Catalonian failure to become independent from the Western Habsburg Empire in the mid-seventeenth century is beyond the scope of this chapter. I would suggest that the main reason for the difference was the Portuguese capacity to obtain resources from its (mainly Brazilian) colonial empire as against the inability of Catalonia to obtain resources on the same scale from its (mainly Mediterranean) trade connections. 5 In 1 7 6 1 - 3 , there was border attrition, linked to the Seven Years War. In 1801, there was a Spanish invasion of southern Portugal, linked to the War of the Second Coalition against France, leading to the cessionby Portugal of a small piece of its territory (the municipality of Olivenca). In 1 8 0 7 - 8 , Spainjoined with France in occupying the continental part of Portugal, in retaliation for the Portuguese refusal to participate in the so-called Continental Blockade against Great Britain, but Spanish troops withdrew when a revolt against French intervention in internal Spanish affairs broke out on 2 May 1808.

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6 For general surveys of the relations between Portugal and Spain during the twentieth century, see J. M. Ferreira, Um seculo de problemas. As relagoes lusoespanholas da Unido Iberica a Comunidade Europeia (Lisbon, 1989) and Cesar Oliveira, Cem anos nas relagoes luso-espanholas. Politica e economia (Lisbon, 1995). 7 There is no recent general study on the Portuguese-British alliance. The last work that can be quoted is Jose Almada, A alianga inglesa, 2 vols. (Lisbon, I 9 4 6 ) .

8 On the subject of Portuguese participation in NATO during the early years of the organisation, see Antonio Telo, Portugal e a NATO o reencontro da tradigdo atldntica (Lisbon, 1996). 9 After Portugal became an autonomous state in the twelfth century, there were eighteen wars between Portugal and its Iberian neighbour (Leon, Castile or Spain). Two of these wars were fought to impose the recognition of Portuguese autonomy ( 1 1 2 8 - 4 3 and 1 6 4 0 - 6 8 ) . Five were fought to solve border disputes (1169, 1 1 9 6 - 9 , 1 2 5 2 - 3 , 1 2 9 5 - 7 and 1 3 3 6 - 9 ) . Two were Castilian or Habsburg interventions in Portuguese dynastic problems (1383-7 and 1580-3). Six were Portuguese interventions in Castilian or Habsburg dynastic problems ( 3 6 9 - 7 , 3 7 2 - 3 , 38 - 2 , 3 9 6 - 400, 4 7 4 - 9 and 1703-13). Three were part of broader European conflicts in which both countries happened to be in opposite camps ( 7 6 - 3 , 80 and 807-8). In eleven cases, the Leonese, Castilian, or Spanish armies did not penetrate deep into Portuguese territory. In seven cases, they penetrated deep into Portuguese territory. In five cases, they were rebuffed. In two cases they were able to take the Portuguese capital. In 1580, this confirmed that Portugal was to become part of the Western Habsburg Empire. In 1807, the French and Spanish occupation of the Portuguese mainland forced the Portuguese king to establish the country's capital in Rio de Janeiro, in the colony of Brazil. Plans for a similar withdrawal of the Portuguese government (to the Azores) in the case of a German or Spanish attack were made during the Second World War. For a summary of Portuguese wars, see Eugenia Mata and Nuno Valerio, Histdria econdmica de Portugal - umaperspectivaglobal (Lisbon, 1993). For a detailed analysis of the Portuguese situation during the Second World War, see Antonio Telo, Portugal na Segunda Guerra (1941-1945), 2 vols. (Lisbon, 9 9 0 - ). 0 On the subject of the fourth Portuguese colonial empire, see Gervase Clarence-Smith, The Third Portuguese Empire 1825-1975. A Study in Economic Imperialism (Manchester, 1985). I call the African empire of the late nineteenth and twentieth centuries the fourth Portuguese empire, because it was preceded by a North Atlantic empire during the fifteenth century, by an empire located mainly around the Indian Ocean and in the Far East during the sixteenth century, and by a mainly Brazilian empire from the seventeenth until the early nineteenth century. Clarence-Smith speaks only of a third Portuguese empire, because he does not count the first one separately. For an analysis of these late-nineteenth-century and early-twentieth-

From Spanish threat to European bliss in Portugal

125

century colonial wars, see Antonio Telo, Economia e imperio no Portugal contempordneo (Lisbon, 1994). 12 As yet, there is no general study on the colonial wars of the 1960s and early I 9 7

°

s .

13 A discussion of the effects of protectionism on Portuguese economic growth may be found in Paula Fontoura and Nuno Valerio, 'Protection, foreign trade and economic growth in Portugal i84°s-i98°s' in Jean-Michel Chevet, Peter Lindert and John Vincent Nye (eds.), Political Economy of Protectionism and Commerce, iSthsoth Centuries (Milan, 1994), pp. 7 7 - 8 6 . 14 For a defence of the view that the fourth colonial empire was beneficial to the Portuguese economic evolution, see Pedro Lains, 'An account of the Portuguese African empire, 1 8 8 5 - 1 9 7 5 ' in Patrick O'Brien and Leandro Pradros (eds.), The Costs and Benefits of European Imperialism from the Conquest of Ceuta, i4i5,to the Treaty of Lusaka, igj4 (Madrid, 1998), pp. 2 3 5 - 6 3 . 15 As the rate of growth of the Portuguese economy has usually been higher than the rate of growth of the economies of its former colonies, the ratio of Portugal's gross domestic product to the gross domestic product of its former colonial empire has tended to increase in the long run. 16 V M. Godinho, 'L'emigration portugaise (XVe-XXe siecles)', Revista de Historia Econdmica e Social i (1978), 5 - 3 2 is the classical study on Portuguese emigration. Stanley Engerman and J. C. Neves, The Bricks of an Empire 1415—1999. 585 Years of Portuguese Emigration (Lisbon, 1996) provides a more recent synthesis. 17 For a discussion of the financial and human costs of the fourth Portuguese colonial empire see Nuno Valerio, 'O significado economico do imperio colonial para um pequeno poder - o caso de Portugal (de finais do seculo 19 ao terceiro quartel do seculo 20)' in Antonio Telo and Hipolito Torre Gomez (eds.), Portugal y Espana en el sistema internacional (Zamora, 1998), pp. 53-69.

18 For a discussion of the relationship between education and economic growth in Portugal, see A. B. Nunes, 'Education and economic growth in Portugal: a simple regression approach', Estudos de Economia 8(2) (1993), 181-205.

19 For a discussion of the roots of Portuguese modern economic growth, see Mata and Valerio, Histdria econdmica de Portugal. 20 All ex-Portuguese African colonies eventually became members of the group of African, Caribbean and Pacific countries subscribing to the Lome Convention. Thus they became indirectly linked to Portugal again through the mediation of the European Union. In the 1990s, Cape Verde pegged its currency to the Portuguese escudo, and it remained linked to the new European currency after i 9 9 9 . 21 For a discussion of Portuguese relations with Europe during the integration process, see Nuno Valerio, 'Portugal e a integracao europeia', Revista ANPEC 3 (1998), 1 0 3 - 2 4 .

126

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22 It should be recalled that the same thing happened with NATO. 23 Of course, this does not mean that all problems have disappeared in terms of the relations between Portugal and Spain. Nowadays, the main problem in these relations is probably related to the management of Iberian water resources, as around half of Portugal's water resources come from three rivers - the Douro, the Tagus and the Guadiana - that have their sources in Spanish territory. The planning of land routes connecting mainland Portugal to non-Iberian Europe and disputes over the use of maritime resources may become important sources of friction as well.

C H A P T E R

S E V E N

From autarky to the European Union: nationalist economic policies in twentieth-century Spain Gabriel Tortella and Stefan Houpt

INTRODUCTION

Discussions related to the concept of nationalism have given rise to a great deal of recent academic work not only in Spain but also in most of Europe. Part of this is due to the fall of the Iron Curtain, which has led to the kindling of nationalist cinders still alive in former eastern European countries. A second element has been the growing federalism in western Europe. More and more decision-making power has been delegated either to a supranational or to a municipal level, thereby putting national policies into jeopardy. The different formulae of nationalism that have evolved in the past have led to additional confusion relating to the concept itself. A minimal definition of nationalism includes at least four overlapping meanings: patriotism, a world order based on the right of each nation to determine its policies unhindered by others, a struggle for national independence, and a system demanding national conduct of all industries. Each of the above phenomena is present to some extent in the recent history of Spain, although it is perhaps the latter one which best defines the most determinant of the four: 'eco­ nomic nationalism' — a strain that went hand in hand with economic backwardness in Spain throughout part of the nineteenth and most of the twentieth century. The concept of nationalism has evolved considerably in the last two centuries. Originally, the French revolutionaries put the nation before the patrimonial state of the absolute monarchy. The nation therefore was the embodiment of popular sovereignty, the set of free, equal and fra­ ternal citizens. From this a new ideology was created during the nineteenth century, to promote the political and social cohesion of newer nation states such as Italy and Germany or to contribute to the socio­ economic unification and integration of peripheral states such as Poland, Hungary or Spain. In both cases it had a common function — 127

128

GABRIEL TORTELLA AND STEFAN

HOUPT

detracting attention from internal conflicts, be they of an ethnic, social, political, regional or economic nature. T h e driving force behind nation­ alism aimed at establishing a common identity with which to overcome the antagonisms of opposing forces such as traditionalism and modernism, capitalists and proletarians, centralism and regionalism, and other centripetal and centrifugal struggles that arose in the absence of absolutism and with the rise of reason. Spanish nationalism can be characterised in this sense, although over time Spain has also developed a secondary strain of nationalism — regional in nature — located in the Basque country, in Catalonia and more recently in Galicia and Valencia. These are autonomist, separatist or independentist movements of geographic regions of the peninsula limited to those areas. Such regionalisms have contributed and may still contribute to reinforcing central economic nationalism.

THE

SHAPING

OF N A T I O N A L I S M

The more immediate origins of Spanish nationalism can be situated at the end of the eighteenth century. Geographical proximity and political affinity generated a great interest for the social and political happenings in France, which in turn were bound to shake the fundamental pillars of the ancien regime, the monarchy, the Church and the existing social ties. Joseph Bonaparte's assumption of the Spanish crown and the occupa­ tion of Spain by the French army led to a 'war of independence' against France, which united the geographical area of Spain under the common goals of freedom and sovereignty. T h e struggle against the common enemy united forces — those in favour of simple restoration with those in favour of a more liberal political system with sovereignty placed in the hands of the people. This unanimous and spontaneous expression of sovereignty in defiance of French occupation was the first declaration of national unity for a geographical area that had been — until then — the centre of an empire ruled by a sovereign king. A decade later, with the loss of its colonies, Spain had evolved de facto from an empire to a nation but with elements of social and political discord increasing throughout the century. Feudalism had been dissolved, freedom from mortmain both in ecclesiastic and common land could have left a reserve army of industrial labour — a precondition for industrialisation and modern agrarian production. Unfortunately, agrarian modernisation remained strongly limited by low soil quality, exiguous average rainfall, transhumant institutions; all these factors

From autarky to the European Union: Spain

129

made technologies developed in northern and central Europe inap­ propriate for Mediterranean agriculture, and agriculture remained stag­ nant. The unification of Spain had not been a product of economic integration and the natural formation of a national market but rather the result of a century of administrative centralism, the war against France and the creation of an army. T h e railway network, public education, conversion to the metric system, common law, and monetary and fiscal reform were steps taken throughout the nineteenth century towards the gradual integration of markets while avoiding radical reform. 1

THE

O R I G I N S OF P R O T E C T I O N I S M

This process of nation-building was tied to that of constructing a high wall of protectionism. T h e seed of tariff protection flourished under liberals and absolutists during the first half of the nineteenth century. Liberal, free-trade economic policies in Spain between 1 8 6 9 and 1 8 9 1 , however, followed the well-beaten path of similar policies in Europe. The liberal two-tier tariff system introduced by the Tariff Law of 1 8 6 9 (usually known by the name of its sponsor, the then Finance Minister Laureano Figuerola) combined a lower tariff system — no prohibitions and an average protection of between 20 and 3 5 per cent — with a mechanism of bilateral trade agreements which allowed Spain twenty-two years of trade expansion and substantial foreign investment. Article 5 of the Figuerola Tariff Law established a gradual reduction of tariff protec­ tion to a maximum 15 per cent level to be reached by 1 8 8 1 . In the early 1860s French entrepreneurs contributed to the development of the nascent Spanish banking system, while channelling foreign funds into railway construction. A ten-year exemption on railway material and rolling stock established by the Railway Law of 1 8 5 5 provoked an outcry about lost opportunities for the Spanish iron industry. The 'millions made by foreigners' thesis was to become one of the keystones of nationalism and of putting the blame for backwardness on others. Even so, a few Spaniards had amassed fortunes during this period. The iron-ore mining elite in Biscay fed the Bessemer boom in Europe and the United States, wine merchants quenched phylloxera-stricken markets in France, and Catalan textile producers wove a tight net on colonial markets. But by the late 1880s the period of export-led growth 2

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was seen as coming to an end as the protectionist tide swept over Europe and foreign markets closed to Spanish products. T h e Great Depression (1873—95), the massive imports of overseas grains and rearmament had led Europe to a return to protectionism. Germany, Austria-Hungary, Italy, Switzerland, Sweden, Portugal, Belgium, Russia and France raised barriers before Spain tardily set out to follow their example. T h e renewal of tariff protectionism in Spain was initiated with the Royal Decree of 31 December 1 8 9 1 . This new regulation increased the general level of tariffs substantially but maintained two important exceptions: low tariffs on the imports of railway materials and debenture of duties paid on ship-building materials.

THE Q U E S T I O N OF N A T I O N A L

DEFENCE

In the world arena liberalism was losing its momentum and the ghosts of self-sufficiency, expansionism and state intervention took flesh anew in the last decades of the nineteenth century. Modern imperialism and revolutionary changes in arms technology were upsetting the balance of power. Rising political unrest in Cuba reinforced these rearmament policies in Spain. In 1887, a plan was drawn up for constructing a modern naval force; the navy asked for the construction of three cruisers by the national industry. A new shipyard was built to this end in Bilbao, the centre of Spain's iron and steel industry. Astilleros del Nervion was the first attempt at creating a modern shipyard to diminish the need for imports from France, Germany and Great Britain. And even though its overdimensional installations and undercapitalisation doomed it to failure, it none the less established a precedent that was followed in the future. The ties between the bourgeois 'triumvirate' — Catalan textile production, Castilian agriculture and Biscayan heavy industry — tightened as foreign products threatened to invade their terrain and political and social unrest made them reconsider the differences amongst them. Reserving home markets for Spanish producers should provide a guarantee for income, employment and benefits, and so it became the battle cry of industrialists and landowners. Clientelism and the remnants of other more traditional forms of political control (such as caciquismo, the Spanish version of the rotten boroughs and the spoils system) exerted on behalf of landowners, the commercial bourgeoisie and the nouveau riche industrialists all converged into more centralised forms of corpor-

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atist organisation. T h e Fomento del Trabajo Nacional (Promotion of National Work, an association of Catalan textile industrialists that widened their field of political influence to the national arena in 1 8 8 9 ) and the Liga Nacional de Productores (National League of Manu­ facturers, formed around iron and steel industrialists in 1893) were the main regional employer associations early on and created a common platform for their new economic policy. Other intra-regional associa­ tions were soon to follow: the Spanish Maritime League ( 1 9 0 0 ) , the National Coal Mine Association ( 1 9 0 6 ) and the Iron and Steel Syndicate ( l 9

°

7 ) .

Profit maximising was attained by political lobbying. First, infantindustry protection was requested in order to overcome initial tech­ nological backwardness and to compensate for the difficulties of first establishment; little by little, increases in the coverage and scope of these measures were asked for to defend newly gained market positions or situations in which foreign competition threatened. These policies included tariff barriers, direct benefits, tax cuts or subsidies, preferential interest rates, collaterals for loans, and administrative favours. When these turned out to be insufficient, the state mandated consumption quotas for home production and subjected industry to a system of regulations, authorisations and record-keeping. Thus, tariff protection, administrative intervention and corporatist organisation overlapped in a crescendo of nationalist economic policies. The loss of Spain's last colonial possessions - Cuba and the Philippines — in 1 8 9 8 entailed a minor economic loss and a major polit­ ical impetus to economic nationalism in Spain. 'Defeat at the hands of a foreign army becomes a powerful excuse and a basic reference for identifying the enemy and setting the limits of national image. This helps not only to sanctify the nation and the national project, but also to enhance the nationalistic sentiments and to cement the State's central place as the project leader.' Political, economic and military regenera­ tion was placed foremost on the political agenda. Rebuilding a modern navy fleet, and Spain's imperialist incursion into Morocco between 1 9 0 9 and 1 9 2 5 , were both endeavours intended to increase Spain's standing on the European stage. 3

THE C O N S O L I D A T I O N OF P R O T E C T I O N I S M

Spain never came round to applying Article 5 of the 1 8 6 9 Figuerola Tariff Law whereby the maximum level of tariff duties would be 15 per cent. It

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w a s suspended on n u m e r o u s occasions a n d finally r e v o k e d in 1890.I11 D e c e m b e r o f the following year, S p a i n took a firm step on the r o a d to autarky w i t h the Tariff of 1891 a n d the revocation o f most o f its bilateral trade agreements. W h e n the draft for a n e w trade a g r e e m e n t b e i n g n e g o ­ tiated b e t w e e n S p a i n a n d G e r m a n y w a s anticipated as b e c o m i n g a p r e c e ­ dent for tariff reduction v i a bilateral a g r e e m e n t s and the most-favoured nation clause, the pressure g r o u p o f the industrial north called for support. Before its approval in the C o r t e s in 1 8 9 4 , a l o b b y o f m o r e t h a n thirty parliamentarians c o n d u c t e d press c a m p a i g n s , rallies and continuous political agitation, w h i c h led to a b a n d o n i n g this or any further treaty that m i g h t threaten w h a t a G e r m a n c o n t e m p o r a r y observer called the ' C h i n e s e W a l l ' o f Spanish tariff p r o t e c t i o n , at least for the time being. T w o years later, m e t a l w o r k i n g industrialists obtained the abolition o f the special duties on railway e q u i p m e n t in practice since 1 8 5 5 . A n e w tariff hike in 1 8 9 8 , a higher a n d n e w tariff in 1 9 0 6 a n d the reduction o f the last bastion o f tariff-free trade — debenture on duties paid for r a w materials a n d e q u i p m e n t used in ship-building — in 1 9 0 9 consolidated the 'neces­ sary and sufficient' level o f protectionism in S p a i n . B o t h the 1891 a n d 1 9 0 6 tariffs w e r e n o m i n a l l y h i g h tariffs — the highest in E u r o p e in 1 9 0 6 . B u t they must be considered m o d e r a t e in terms of effective protection; Spain's w e a k position in trade a g r e e m e n t negotia­ tions forced it to c o n c e d e partial reductions for the large majority o f the products it e x c h a n g e d w i t h its p r i m a r y trade partners. F e w alterations affected this trade p o l i c y f r a m e w o r k u p to the Civil War, with only one further increase in duties in 1 9 2 2 , w h i c h m a d e Spanish tariffs c o m e to be r e g a r d e d as the highest in the w o r l d in n o m i n a l terms b y 1 9 2 6 . 4

5

6

INDUSTRIAL

POLICY

T h e V i l l a v e r d e stabilisation plan o f 1 8 9 9 w a s intended to put an e n d to inflation, b u d g e t deficits and large increases in b a n k n o t e circulation, all of w h i c h w e r e due to the C u b a n w a r (1895—8). T h e plan i m p o s e d the principle o f a b a l a n c e d budget, the reduction o f public debt and tax reform, w h i c h w e r e c o m b i n e d w i t h a restrictive m o n e t a r y p o l i c y and put a halt to inflation a n d peseta depreciation. It w a s totally successful. In the atmosphere o f price stability that ensued, the agricultural and industrial lobbies kept u p m o u n t i n g pressure for h i g h e r degrees o f state intervention. In 1907 a L a w for the Protection o f Industry reserved public contracts to Spanish producers. T h e C o m m i s s i o n for the Protection o f N a t i o n a l

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Production was created as a watchdog of this new regulation and it soon evolved into a back-seat driver of nationalist industrial policy. Two years later, in 1 9 0 9 , a law was passed for promoting maritime communications and ship construction. This included an important renewal of the system of subsidies for shipping and ship-building linked to a step-bystep reduction of foreign capital and foreign technicians as a precondition. That same year an industrial giant was born. T h e Sociedad Espanola de Construction Naval — future monopolist of Spanish naval constructions and dominant firm in merchant ship-building up to the Civil War — was a joint venture between British armament firms (Vickers, Brown and Armstrong) and several Spanish industrialists and bankers. It was intended to carry out the reconstruction of the Spanish fleet (after its destruction in Santiago de Cuba and Manila in 1 8 9 8 ) , a 200 million peseta (some £ 7 . 4 million) project that had defeated the plans for an integrated system of irrigation and water supply for Spanish agriculture in the Cortes. Perhaps the need for foreign technical assistance dictated the status of pseudo-public enterprise that the Sociedad Espanola de Construccion Naval acquired. After the original contract had been completed it received numerous new orders, although these were increasingly conditional on it being able to replace imports. T h e company invested 2 6 7 million pesetas in twenty years in order to comply with the navy's goals of self-sufficiency and the 'nationalisation' of naval defence material — from submarines to ammunition — in exchange for a constant backlog of orders. The First World War provided a favourable series of circumstances for furthering the process of economic nationalisation. As Spain remained neutral in the conflict, its economy prospered thanks to high international prices, underproduction in Europe and lack of competitors. T h e process of import substitution received a strong boost from shortages due to the war. During these years legislation promoted the nationalisation of foreign assets; as a consequence most of Spanish public debt bonds abroad, which drew interest paid in gold, were bought up by Spanish citizens who thereby found a refuge against war inflation. Tax exemptions also facilitated the purchase of Spanish firms' equity by Spanish nationals. Industrialisation by import substitution also received a boost with the new Law for the Protection of National Industry, approved in March of 1 9 1 7 , whose general aim was to protect industries which had been established during the war and which felt threatened with the return to 7

8

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normalcy. The protection of the law was actuated through tax exemp­ tions, postponement of tax payments, tax and tariff reductions, prefer­ ential interest rates and guaranteed dividends. A new official bank — Banco de Credito Industrial (BCI) — was established in 1920 as the main agent of the 1917 Law. The new bank's mission was to channel credit at favourable conditions to industrial firms. In June of 1 9 1 8 another law decreed that all defence material purchased by the state should be produced by Spanish firms; and in June of 1 9 2 1 the mining industry was 'nationalised', in the sense that mining companies had to be registered in Spain, their foreign employees limited to one third of the total and all their equipment had to be manufactured in Spain. All this was less earthshaking than it sounds, as Rio Tinto, Tharsis and many other large foreign concerns went on with business as usual, but it shows the obsession with 'nationalisation' in government circles. The exposure to postwar European competition threatened the sur­ vival of many of the companies created during the war. Shallow markets and lack of experience originated low economies of scale, scope and speed so that the majority of these firms were not able to compete even under the umbrella of the 1 9 0 6 tariff.Inflation, shortages and speculative hoarding, combined with growing labour unrest, had driven wages and other costs up during the war. Price and wage stickiness increased the problem of competitiveness, so that additional tariff protection was required and provided by the new tariff law of 1922 to guarantee the survival of the nationalist economy. The Primo de Rivera dictatorship (1923—9), far from complying with what Wicksell termed as the Pareto-optimum 'benevolent dictatorship', provided some degree of political stability, increased the extent of state intervention in economic matters, and pursued nationalist economic policies further. One of its novelties was an extensive public works programme. Road construction and maintenance picked up strongly, tripling the amounts spent the decade before. Railway investment quadrupled with respect to the previous decade (the 1910s) with 31 per cent of that investment being financed by public institutions and instruments. The construction of dams and harbour installations surpassed all previous levels. In an attempt to replace the monarchy's economic and political corruption, the dictator strove to create a new corporatist structure to substitute for the old order. By July of 1 9 2 6 , Miguel Primo de Rivera had initiated a process of industrial modernisation and concentration with growing regulation of enterprises. In September a regulatory board for national industry had been created. Concern was 9

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growing among policy makers about whether private initiative alone could foster growth and development in Spain. Another distinctive trait of economic policy under the Primo de Rivera dictatorship was the expansion of the state banking system. To the Bank of Spain (1782) and the Banco Hipotecario ( 1 8 7 2 ) , the Banco de Credito Industrial had been added in 1920 and reformed in 1 9 2 6 and 1927. This was considered insufficient, and several other credit institu­ tions were created. T h e Banco de Credito Local was founded in M a y of 1 9 2 5 and was oriented towards financing local and municipal administrations; the Banco Exterior de Espana was created in August of 1 9 2 8 and designed to service Spanish firms dealing in foreign markets; other minor sectorial credit institutions were created for fishing and for agriculture. Some of the state monopolies, such as postal communication, salt, tobacco, gunpowder and matches, dated back to the seventeenth century. During the first third of the twentieth century, income from the traditional monopolies followed a downward trend and their weight in total revenues was declining at the same time. In order to compensate for this decline a new monopoly was created: that for the distribution and refining of petroleum. This puzzling monopoly (Spain did not itself produce a drop of petroleum) was the pet project of Jose Calvo Sotelo, finance minister under Primo de Rivera and one of the most remarkable economic nationalists in Spanish history. T h e monopoly, decreed in 1927, was a tax-farming device: the farmer was a newly created company, the Compania Arrendataria del Monopolio de Petroleos S.A., (CAMPSA, or Company for the Leasing of the Petrol Monopoly). C A M P S A , whose life extended until Spain's entry into the European Union, was a quintessential nationalist creation, explicitly intended to prevent Standard Oil and Shell from making profits in Spain and, if pos­ sible, to find petrol in Spain and develop a refining and petrochemical industry, a distribution network and so on. In his memoirs, Calvo Sotelo relates with relish his cavalier treatment of Sir Henry Deterding, then head of Royal Dutch-Shell, when Deterding paid him a visit to try to dissuade him from establishing the oil monopoly. Calvo Sotelo saw himself as the representative of a small but proud nation teaching a lesson to an international plutocrat. All in all, it can be shown that the oil monopoly was not a good idea. It did not yield as much revenue as ordinary taxes could have, the service C A M P S A gave consumers was dismal, and it also produced exactly the opposite effects of those intended by Calvo Sotelo; as a monopolist, C A M P S A was not interested 10

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in prospection or in risking its capital in petrochemicals or even in refining, and so not only did it drag its feet on all these endeavours, but it did all it could to prevent other companies from doing it. T h e Second Republic (1931—6) did not bring about a radical swing back to laissez-faire free-market economics but rather continuity in the growing interventionism in economic affairs. The priority of the new governing groups was to reform the socio-political and economic life of Spain but this affected the existing degree of economic intervention to a very small degree. It definitely increased the amount of regulation — especially for labour markets, banking, foreign trade, armaments and to some extent railway transportation. T h e public works programmes were maintained or increased. Even the oil monopoly was retained, after considerable discussion. In order to face the growing tensions — the economic tensions of the Great Depression, the social tensions of inequality and the political tensions of polarisation — Spain was to follow the same path as other nations in the first decades of the twentieth century. Russia, Italy, Germany and even the United States (the New Deal) had assumed more authoritarian systems of economic governance. There was a mounting demand for economic and political dirigism and in this the Spanish Republic clearly followed the general trend. 11

E C O N O M I C P O L I C I E S IN T H E E A R L Y F R A N Q U I S T

PERIOD

Nationalist economic policies reached a paroxysm in Franco's Spain. Even during the Civil War (18 July 1936—1 April 1 9 3 9 ) the Franco side, who called themselves the nationalists (nacionales), inaugurated economic policies of strong state intervention in the economy, consciously and purposefully imitating those of their Nazi and fascist allies in Germany and Italy. These policies were qualitatively different from those followed by prior regimes, also quite interventionist, in that the Franco government proclaimed total self-sufficiency — autarky — and the development of a powerful military industry as its avowed aims. Agriculture was the area where these comprehensive nationalistic policies were first implemented. T h e body entrusted with the carrying out of these policies was the Servicio Nacional del Trigo (National Wheat Agency, SNT). T h e S N T was created by the Franquist junta during the war, in August 1 9 3 7 , just when the first harvest was about to be collected in nationalist Spain. Originally it was designed to exercise its control only over the wheat market (hence its name) but it soon

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extended its purview to all grains and legumes, thereby extending its scope over the largest share of agricultural output. The basic idea behind the S N T was that Spain could and should be self-sufficient in wheat. The main worry of Franquist officials was that there could be a wheat glut. In the early 1930s there had been serious fluctuations in the wheat market due to a number of miscalculations under the Primo de Rivera dictatorship and under the republic. After the shortages of 1931 two bumper harvests in 1 9 3 2 and 1 9 3 4 depressed prices even further in a domestic market already depressed by international conditions. This alarmed farmers and increased their discontent and their opposition to the republic. In this context the nationalists championed state intervention in order to sustain prices, with the twin aims of proving the superiority of their methods and of consolidating the support of farmers to the Franco side. The SNT, therefore, was charged with purchasing the whole wheat crop at prices fixed by the Ministry of Agriculture, of which the S N T was a branch, albeit with a considerable degree of autonomy. T h e S N T then resold wheat to the milling industry at prices also established by the government, and which the millers had to accept, since the S N T was the only legal seller of wheat. The wheat prices established by the government were on the low side, for two reasons: first, they did not want the main staple in the diet, bread, to be expensive, secondly, since they were afraid of overproduction, they did not want to stimulate it with high prices. Their forecast turned out to be mistaken: shortages ensued. In order not to sell at low official prices (inflation was high during the war, and it continued during the 1940s), farmers started sowing other crops that they could sell freely. T h e S N T then tried to gain control over new products in order to prevent farmers from evading the agency's control. Soon it was fixing prices even for birdseed. T h e consequence was a general decline of agricultural output (at least of officially declared production). Those years were remem­ bered in Spain as the 'hungry years' (los anos del hambre). Wheat and corn (maize) harvests remained below their prewar level until well into the 1950s. Wheat output in particular remained at two thirds of the prewar per capita volume. Franco's government attributed the desperate situation to a 'pertinacious drought' and resorted to food rationing. T h e shortages were partially remedied by food imports and by the black market; food rationing and the black market remained active until the mid-i950s. Imports were expensive and difficult during the Second World War, especially since Spain was viewed as an ally of the

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Axis powers. The isolation of the Franco regime after the war and its chronic commercial deficit aggravated the food situation, which was palliated by a commercial agreement with Argentina (1947—8), whose dictator, Juan Peron, sympathised ideologically with Franco. The per­ vasiveness of the black market during those years has made some histo­ rians think that the real agricultural output was larger than official figures indicate. In any case, the black market was in fact tolerated by the authorities, as it was a way of contenting both buyers and sellers. This toleration, however, was a tacit recognition of the failure of the regime's agricultural policies. A question comes to mind: why were these obviously mistaken price policies not rectified? In fact they were, but not until the mid-i95os. If rectification did not come earlier this was probably for several reasons. First, these policies were ideologically motivated, and the winners of the war were not inclined to recognise their errors — all the more so since, in a dictatorship, popular discontent finds few channels of expression. Secondly, the authorities were afraid that letting agricultural prices rise would worsen the inflationary situation. And thirdly, the black market arrangement was, in the end, agreeable to large landowners, who were among the staunchest supporters of Franco; they benefited by selling at higher than official prices, and they were the ones who had the means to buy the co-operation of the officials and to operate semi-clandestine transportation and distribution networks. Industrial policies were even more imbued by principles of state intervention, economic isolation and autarky. The man who inspired and put into practice these policies was Juan Antonio Suanzes, a naval engineer of extreme views: his radical nationalism had xenophobic overtones, he mistrusted economic liberalism, favoured state intervention and considered industrialisation as being the only way to nation-building and real national sovereignty in the world arena. During his professional life he had occasion to work at the orders of foreign, especially British, engineers, and developed a strong dislike of them, blaming them for the ills of Spain as intruders and agents of hostile interests. Suanzes joined Franco's first cabinet and became Minister of Industry and Commerce in the early years of the Franco regime and at other times. He remained one of the most influential figures in government circles until the early 12

1960s.

Industrial policies and legislation after the Civil War were directly inspired by Suanzes, who at that time enjoyed the full support of Franco. The twin preoccupations of Suanzes in the immediate post-civil war

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period were national economic — and hence political — independence, and reconstruction after the ravages of the war. It has been remarked by several historians that the Civil War damaged more dwellings than factories. In fact, in many areas and sectors factories survived the war in a better state than they had before the hostilities, because forced idleness permitted repairs that were not undertaken in busier times. One could safely say that Spanish industry was more affected by obsolescence and lack of imported parts than by material destruction during the Civil War. At any rate, the obsession after the war was reconstruction and production at any price, while the ultimate aim was political independence from more advanced nations. O f course, a requisite for national independence was thought to be the development of the military industry and the exclusion, or at least a strong limitation, of foreign enterprise. Early industrial legislation in post-civil-war Spain was intended to stimulate the private sector to rebuild and develop while investing in sectors that were considered as preferred by the government and keeping foreigners away from posts of control. These were the aims of two laws issued on 2 4 October and 2 4 November 1 9 3 9 , which were accompanied by some other ancillary measures. T h e first of these laws (for 'protection and development of new industries') proclaimed in its preamble the need 'to redeem Spain from the importation of exotic products which can be made or manufactured within the realm of our Nation'. Its main thrust was the establishment of a new category of industries of 'national interest'. When a firm or a sector was so declared by the state it automatically obtained access to a series of considerable advantages, such as the right to expropriate land, to obtain substantial tax reductions and import facilities, to receive soft loans, and even to have a minimum guaranteed profit. The possibility also existed that the state might declare compul­ sory the consumption by other firms of the products that had been declared 'of national interest'. The second law (for 'regulation and defence of industry') divided industries according to their military value and established rigid state controls over the sector: permits were needed to establish an industrial firm, to expand it or to change its location. No more than 25 per cent of the capital of an industrial firm could be owned by non-nationals. The law again gave the state the power to enforce the use of certain industrial products in the market; it also empowered the state to fix prices, and to make it compulsory for government agencies to purchase only Spanish products. These laws, accompanied by a dense network of ancillary measures, met with total

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failure. What the legislator thought was encouragement of 'national' industry turned out to be the kiss of death. Combined with an iron grip upon foreign trade, these policies left little margin for entrepreneurial discretion. Several other factors explain the lack of industrial response: the population was impoverished, savings - and hence loanable funds were scarce, and so were petroleum and other power sources; on top of all this, the onset of the Second World War introduced an element of uncertainty and aggravated the difficulties of provisioning. The Spanish authorities, however, blamed the private sector for industrial stagnation. The decision was taken to create another state agency, the Institute of National Industry (Instituto Nacional de Industria, INI), which was established by a law of 25 September 1 9 4 1 . INI was modelled upon the Italian IRI (Istituto per la Ricostruzione Industriale), which had been created in 1 9 3 3 in order to acquire a large share of Italian industrial firms so as to avoid a banking crash, and thereafter became a gigantic public holding of industrial companies. The basic ideas behind INI were the following. First, the industrialisa­ tion of Spain was indispensable and therefore had to be attained at any price. Secondly, the private sector was unable to achieve the desirable level of industrialisation because it was short of the 'spirit of initiative' and also because it was only moved by a myopic profit motive and lacked the requisite means of long-term investment. Thirdly, reliance upon capital and technology imports had to be rejected because they implied 'submission to the will of others, foreign intervention . . . Hence the need for firm state action, embodied in this case by the Institute [of National Industry].' T h e president of INI from its creation until 1 9 6 3 was, nat­ urally enough, Juan Antonio Suanzes. Like IRI, INI became a large holding company: its main activity was the promotion of, or participation in, industries that its directors deemed worthy of support. From the m i d - i 9 4 o s one could speak of an 'INI group' of industrial firms in which the Institute owned a substantial share of equity, or all of it. INI specialised in basic industries, especially the power (petrol and electricity) and iron and steel sectors. It also had a strong presence in transport industries (automobiles, aircraft, ship-building, aviation), mining, chemicals, metalworking and mechanical manufacturing. Probably the INI firm that was best known abroad was the aviation carrier IBERIA, but many INI firms were well known within Spain because they were huge by Spanish standards and employed thou­ sands of workers; such was the case of the iron and steel firm Ensidesa, the automotive manufacturer SEAT, the petrochemical E N C A S O , and 13

14

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the electricity giant E N D E S A , among others. Later on, especially during the 1 9 6 0 s and thereafter, INI acquired a series of private firms that were on the verge of bankruptcy, such as Altos Hornos del Mediterraneo and Altos Hornos de Vizcaya (iron and steel) or Hunosa (coal), which added to its smokestack giants, giving employment to tens of thousands and saddling the holding with staggering losses. INI's effort was gigantic, but it must be asked whether it was not also misguided and wasteful. As has been pointed out, Suanzes had 'the mind of an engineer', for whom production was an end in itself regard­ less of cost (comparative, opportunity, or otherwise). Martin Acena and Comin point out that it was an 'outstanding agent of import substitu­ tion' during the 1950s but that its 'strategy of autarkic and state-directed development led to inefficient resource allocation'. It is worth noting that in spite of INI's role of import substitution, and in spite of the xeno­ phobia of its president, its propensity to import was also very high; this is logical, since autarky was largely a myth. All in all, although INI contributed decisively to the development of Spain's basic industries, the output of these industries was uncompetitive in international markets, and this was INI's Achilles' heel. As D o n g e s put it: 15

16

17

product costs and prices tended to be high when compared with international levels. Therefore state firms who sold their basic outputs to other industries saddled the economic system with a relatively high level of cost . . . T h i s turned . . . in detriment of the international competitiveness of Spanish industry . . . In the last analysis, it does not appear that INI may have contributed . . . to an efficient functioning of private industry or that it may have combated efficaciously the existence of monopolies. The fight against monopoly was another role that INI could have played and never seems to have undertaken seriously. There are several studies showing that during the 1940s and 1950s there was a consider­ able degree of monopolisation in Spanish industry. T h e Spanish state contributed to this with its protectionism and with many laws which, on the pretext of economic nationalism, in fact restricted competition. There are three ways in which a state can fight monopoly: it may legislate against it; it may strike down those laws and regulations that favour it; and it may use public-sector firms to compete in monopolised sectors. Slowly and weakly the Spanish state, from the 1960s on, has employed the first two means, with some results. INI could have been the instrument for the third way, and at some times it was touted to be, such as when Ensidesa was founded, supposedly to break the monopoly of the Altos Hornos companies. In effect, INI has not only not been an effective 18

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competitor in monopolistic sectors, but has often allied itself with its would-be rivals to maintain high prices or to obtain government support and in several cases it has played the role of a lifeboat for obsolete firms which were in trouble after protection had been lifted, by acquiring their assets at prices clearly above those of the market or by channelling funds to them. Such was the case with Hunosa, which grouped a number of uncompetitive coal-mining firms acquired in 1 9 6 7 , and of Altos Hornos del Mediterraneo and Altos Hornos de Vizcaya, the largest iron and steel private firms, which were in fact bought by INI in 1 9 7 8 and 1 9 8 1 respectively, after having been supported by the state through INI for many years (this was called the 'clandestine INI' by journalists). Thus, in fact, in this field INI has been doing exactly the reverse of what it was expected to do: not only not fighting monopolists, but aiding them in prosperity and in distress. It has thereby contributed to keeping prices high and Spanish industry non-competitive. The policy of deep state involvement in industry and in agriculture required heavy outlays; hence the need for wide discretionary spending powers for the state and, therefore, for a very weak and subordinate central bank. The trend towards limiting the independence of the Bank of Spain had started with the Banking Law of 1 9 3 1 , and it belonged to a general international current generated by the Great Depression and the Second World War. The Banking Law of 1931 had greatly increased the control the government had over the Bank of Spain. This was achieved by the appointment by the Ministry of Finance of three board members, and by increasing the power the ministry had over the Bank's policies, especially the setting of interest rates. Banking legislation after the Spanish Civil War followed this same interventionist trend. It was consecrated in the Banking Law of 31 December 1 9 4 6 . There were a series of features in this law that made monetary policy subordinate to nationalist agrarian and industrial policies. Spain was one of the few European countries that had never been subjected to the discipline of the gold standard, and this was confirmed in 1 9 4 6 , when the link between fiduciary circulation and the metallic reserves in the Bank of Spain was definitively broken. The bank's monopoly of note issuing was renewed and the control of the state over the bank reinforced through the direct nomination by the cabinet of the bank's governor, deputy governor and five members of the bank's council, plus an extension of the means of control that the Ministry of Finance had over the bank's policies (veto power, amongst others). The 1 9 4 6 law also subjected the private banks to strict control (similar to that applied to industrial firms) 19

2 0

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as relates to the establishment of new firms, expansion, and relocation (this is commonly called the 'statu quo bancario'), and to the setting of interest rates. One of the openly stated aims of interest-rate controls was to ensure that they remained low, so as to encourage private investment and to allow the state to borrow at inexpensive prices. T h e banking law also took exchange-rate policies out of the hands of the Bank of Spain and into those of a Foreign Currency Institute (Instituto Espanol de Moneda Extranjera, IEME), which in fact was a dependency of the Ministry of Industry and Commerce. This permitted the government to exercise strict control over exchange rates, which became a key policy instrument. Combined with quantitative controls over foreign trade (tariff rates became redundant), exchange-rate controls and multiple exchange-rate systems almost totally sealed the Spanish economy from international markets at the government's will. Insulation from foreign market 'contamination', of course, was essential for the autarkic policies of the early years of Francoism.

N A T I O N A L I S A T I O N OF F O R E I G N

COMPANIES

Two interesting examples of nationalism in action were the 'nationalisations' of two foreign firms of long standing, the Barcelona Traction, Light and Power Company and the Rio Tinto Company. The Barcelona Traction, familiarly known as 'La Canadiense', had been created in 1 9 1 1 by the American engineer Frank B. Pearson; it was the main electricity supplier in Catalonia, and the owner of a substantial tramway and railroad network in Barcelona and its periphery. T h e distribution of its equity was extremely complex, as was the case with other electrical firms organised by Pearson. Although its seat was in Toronto, Canada (hence its popular name), most of its shareholders were British, German and, above all, Belgian. Its controlling packet soon fell into the hands of SOFINA, a German—Belgian holding company whose head was Daniel Heineman, an American financier with German origins. Due to war problems (the Spanish Civil War and its aftermath, then the Second World War), 'La Canadiense' was unable to pay interest on its debentures in the early 1940s, not for lack of cash-flow but due to problems in con­ verting pesetas into other currencies. 'La Canadiense', whose public relations policies left something to be desired and whose accounting was extremely arcane, found itself pitted against the hostility of the Minister of Industry and Commerce in the late 1940s, none other than Juan Antonio Suanzes, whose feelings about submission to the will of others 21

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and foreign intervention were, as we know, anything but friendly. Suanzes' ideas were known to Juan March, a colourful and astute Spanish financier, whose shrewdness and lack of scruples were by then legendary. March managed to harp on Suanzes' (and Franco's) extreme nationalist convictions to harass 'La Canadiense' and prevent it from paying its creditors. While doing this March was carrying on negotiations with Heineman trying to buy SOFINA's shares at a reduced price. In December 1 9 4 6 Suanzes had made a speech in the Franquist Cortes about 'La Canadiense', where he had referred to the 'possible concomitancies of the [Spanish] red [i.e. republican] leaders, directly responsible of enormous crimes and of the injuries suffered by our country', with the directors of S O F I N A and even with Paul-Henri Spaak, a Belgian politi­ cian who at the time was the secretary-general of the United Nations. In spite of all this truculent language Heineman stood fast. March then put into practice his alternative plan. Some of his associates, owners of a relatively small number of Barcelona Traction's debentures, sued the company for bankruptcy on the grounds that it had not paid its debt for years. The suit was submitted in a small town, Reus, to make things more difficult to their opponents. A few months afterwards, bankruptcy was declared and an administrator was appointed, thereby depriving the company's managers of access to its premises, documents and so on. Some time afterwards, 'La Canadiense' was declared extinct and its assets sold in auction. They were bought at bargain prices by F E C S A (Fuerzas Electricas de Cataluna, Sociedad Anonima), a recently created corporation whose main shareholder was none other than Juan March himself. The president of F E C S A was Juan March's son and namesake. The case dragged in the courts for twenty years and in the end the International Court at The Hague was unable to produce a substantive verdict. Meanwhile, FECSA's profits had been accruing to its shareholders, largely Juan March and his heirs. The Rio Tinto Company had been exploiting one of the richest copper pyrite lodes in Europe since it acquired it from the Spanish government in 1 8 7 3 . Rio Tinto made enormous profits in the period from 1 8 8 4 to the First World War. Thereafter, with the fall in the price of ores in the 1920s, the world depression in the 1930s, plus the gradual exhaustion of the best veins, the profitability of the company was limited to rather exceptional moments of high copper and sulphur prices. After the Spanish Civil War, with Suanzes' extreme nationalist principles and dislike of Britons on the ascendant, Rio Tinto was viewed in Spain as an 'economic Gibraltar', a phrase that was often used in the press and in government circles. The British company was rather unpopular in Spain 22

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due to the exclusive Britishness of its managers, and to the toughness of its labour relations. During the 1940s the Rio Tinto company was sub­ mitted to undisguised pressure by the Spanish government in an attempt to 'nationalise' it. T h e government control of prices, foreign exchange rates, and production and export quotas was used to coerce the company and induce it to sell. There were serious problems in the government approach, however. First, by harassing the main producer and exporter of copper and sulphur in Spain, it was hurting the country's economy. Secondly, in the dire circumstances of the 1940s, the Spanish government lacked the wherewithal to purchase Rio Tinto outright, and, while it tried to induce private companies to help INI in making an offer, nothing could be achieved. Rio Tinto was not as profitable as it used to be, and its future depended largely on government policies, a fact which no doubt discouraged potential private investors. No Juan March appeared on Rio Tinto's horizon. T h e possibility of expropriation was also contemplated, but British retaliation and international outrage were feared. Franco, who very much wanted to rescue Rio Tinto, was characteristically slow in making a decision, in this case because he thought that delay played in his favour, as the company's value was bound to decline in time. In this, as in many other things, he was wrong. After long and tortuous negotiations, Rio Tinto was acquired in 1 9 5 4 by a group of the top Spanish banks, who, induced by the Spanish government and coordinated by the Governor of the Bank of Spain, purchased two thirds of its capital for a rather high price. The reasons for this deal were that earlier that same year an offer to purchase Rio Tinto had been made by an American company (Texas Gulf Sulphur), and also that the Spanish government was afraid that a hard-nosed approach on its part would have provoked a second uproar after that caused by the rough treatment meted out to the Barcelona Traction Company. Thus the nationalist approach to 'nationalisation' of foreign companies was far from successful: due to the high-handed methods used in the case of Barcelona Traction, the prestige of the country was seriously hurt abroad; and in order to obtain a political victory, the purchase of Rio Tinto was made in disadvantageous conditions. 23

EVOLUTION

The resounding failure of nationalist policies was apparent in the economic stagnation of the 1940s. Compared to the per capita income of other European countries, Spanish income hardly grew during this

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period. The recovery of Italy, France and Germany after the Second World War was swift, whereas in Spain the per capita levels of 1 9 3 5 (the last year before the Civil War) were not reached again until the mid1950s. Ten years after the end of the Second World War, the Italian index of industrial output nearly doubled its 1 9 4 0 value; ten years after the end of the Civil War, the Spanish index was below the 1 9 3 5 level. The performances of France and Great Britain were closer to that of Italy: Spain's failure was the exception. Spain started to grow in the 1950s. This was due to several factors: first, the pull of Europe's growth; secondly, a gradual loosening of the most extreme autarkist policies; thirdly, the onset of Spanish—American co-operation, which started in 1951 and was made firm with the Military Base Agreements of 1 9 5 3 . The dismantling of the most restrictive eco­ nomic policies was initiated by a new cabinet in 1 9 5 1 , which did not include Suanzes who was replaced by two more flexible men (the Industry and Commerce Ministry was split into two); a better manager also became Minister of Agriculture. From then on the S N T started paying more realistic prices, and soon the problems were of overproduction of grains. But in essence, although somewhat mitigated, the nationalistic policies remained and their incompatibility with economic growth became obvious. Inflation shot up, worker unrest reappeared after more than ten years of quiescence, and balance of payments deficits became recurrent and menacing. After years of hesitation, autarky was officially abandoned as an objective in 1 9 5 9 , when a stabilisation plan, drawn up in agreement with the International Monetary Fund and the O E C D , was put into effect. Most quantitative restrictions to international trade were abolished, together with multiple exchange rates. A new and very protectionist tariff was installed in 1 9 6 1 , however. A new Banking Law in 1 9 6 2 partially removed some of the strongest controls over banking. Suanzes angrily abandoned INI in 1 9 6 3 , complaining in a letter to Franco about 'fundamental discrepancies'. Thus, slow, cautious and partial liberalisation proceeded haltingly during the final fifteen years of the Franco dictatorship. The definitive abandonment of nationalist economic policies arrived with the democratic reforms after Franco's death in 1 9 7 5 and the accession of Spain to the European Economic Community in 1 9 8 6 . 24

25

CONCLUSIONS

The balance of nationalist economic policies in Spanish twentiethcentury history is an actively debated topic. Tariff protectionism has

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been defended by some authors and criticised by others. T h e same is true of the interventionist economic policies of the Primo de Rivera dictatorship. T h e extreme nationalist policies of the first twenty years of Franco's long rule (1939—75) have few defenders now, although a number of Franquist economists extolled them in their time. T h e issues are extremely complex. There is no doubt that the twentieth century has witnessed not only the highest levels of economic growth in Spanish history (this is true of many European countries) but also Spain's transi­ tion from backwardness to economic modernity. It is also true that this is the period when economic nationalism reached its highest levels in the country. Some will think that this coincidence implies causation. T h e opposite view is also possible: that nationalist economic policies were a hindrance rather than an agent of growth. There is some evidence in favour of this latter view, which seems the most plausible to us: growth was fastest in the periods after the relaxation of the most extreme nationalist measures: during the 1960s, after the liberalising policies following the stabilisation plan of 1 9 5 9 , and in the 1980s, after further liberalisation during the transition to democracy and in the early democratic years. It could even be argued that the recent ( 1 9 9 7 - 8 ) high rates of growth are the consequence of the further liberalisation that followed the arrival of the Popular (centre-right) Party to power in March of 1 9 9 6 . O f course the subject requires and warrants further study. A careful comparison with other countries in similar circumstances (Italy, Portugal and Greece come readily to mind) could yield more positive conclusions.

NOTES 1 J. Simpson, Spanish Agriculture: The Long Siesta, iy6§-ig6§ (Cambridge, 1995). 2 R. Cameron, France and the Economic Development of Europe, i8oo-igi4. Conquest of Peace and Seeds of War (Princeton, 1961); G. Tortella, Banking,Railroads,and Industry in Spain i8sg-i8y4 (New York, 1977). 3 P Fraile and A. Escribano, 'The Spanish 1898 disaster: the drift towards national protectionism', Working Paper 9 8 - 0 3 , Universidad Carlos III, Madrid, i 9 9 8 , p . 17. 4 A. Gwinner, 'La politica comercial de Espana en los ultimos decenios' in F. Estape (ed.), Textos olvidados (Madrid, 1973), pp. 2 5 3 - 3 3 3 at p. 333. 5 M. Montero, Mineros,banqueros y navieros (Leioa, 1990), pp. 2 5 5 - 6 . 6 See J. M. Serrano Sanz, El virajeproteccionista en la Restauracion. La politica com­ ercial espanola, i8y§-i8g§ (Madrid, 1987) and 'El proteccionismo y el desarrollo economico en la Restauracion. Reflexiones para un debate', Revista de Historia Economica 7 (1989), 133-56. 7 S. Houpt andJ. M. Ortiz-Villajos (eds.), Astilleros Espanoles, i8ys-igg8. La construccion naval en Espana (Madrid, i998).

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8 Jose Luis Garcia Delgado (ed.), Espana, i8g8-igj6: Estructuras y cambio. Coloquio de la Universidad Complutense sobre la Espana Contempordnea (Madrid, 1984), p. 212.

A. Gomez Mendoza, 'Las obras publicas (1850—1935)' in F. Comin and P. Martin Acena (eds.), Historia de la empresa publica en Espana (Madrid, 1991), pp. 177—204 at pp. 192, 196—8 and 200—1. On the general economic policies of the dictatorship, see J. Velarde Fuertes, Politica econdmica de la dictadura (Madrid, 1968). 10 M. Cabrera, La patronal ante la II Republica. Organizaciones y estrategia (1g.31-1g.36) (Madrid, 1983); M. Cabrera et al., Europa en crisis. igig-igjg (Madrid, 1991), pp. 6 2 - 4 . 11 Gabriel Tortella, 'CAMPSA y el monopolio de petroleos, 1927—1947' in P. Martin Acena and F. Comin (eds.), Empresa publica e industrializacidn en Espana (Madrid, 1990), pp. 81—116; Gabriel Tortella, 'El monopolio de petroleos y CAMPSA, 1927—1947', Hacienda Publica Espanola' Num. Homenaje a D. Felipe Ruiz Martin, coordinado por F. Comin y J. Zafra; Gabriel Tortella, Mercedes Cabrera and Sebastian Coll, 'Historia de CAMPSA. Los primeros veinte anos, 1 9 2 7 — 1 9 4 7 ^ 1 9 8 6 , unpublished); J. Calvo Sotelo, Mis servicios al Estado. Seis anos de gestidn. Apuntespara la Historia (2nd edn, Madrid, 9

I 9 7 4 ) .

12 A. Ballestero, Juan Antonio Suanzes, i8gi-igyy. 'La politica industrial de la postguerra' (Leon, 1993), chs. 3—4. 13 The initial plan was to call it the 'Instituto Nacional de Autarquia': see P. Martin Acena and F. Comin, INI. 30 anos de industrializacidn de Espana (Madrid, 1991), p. 78. 14 Cited in ibid., pp. 81 and 82. 15 P Schwarz and M. J. Gonzalez, Una historia del Instituto Nacional de Industria (ig4i-igj6) (Madrid, 1978). 16 Martin Acena and Comin, INI,p. 605. 17 J. B. Donges, La industrializacidn en Espana. Politicas,logros,perspectivas (Barcelona, 1976), pp. 42—3. 18 F. de la Sierra, La concentracidn econdmica en las industrias bdsicas espanolas (Madrid, 1953); J. Velarde Fuertes, 'Consideraciones sobre algunas actividades monopolisticas en el mercado papelero espanol', Revista de Economia Politica 3(3) (1955), 29—125; C. Munoz Linares, 'El pliopolio en algunos sectores del sistema economico espanol', Revista de Economia Politica 6(1) (1955), 3—66; R. Tamames, La lucha contra losmonopolios (Madrid, 1961); R. Tamames, Los monopolios en Espana (Madrid, 1967). 19 Martin Acena and Comin, INI,pp. 507—9; R. Tamames, Estructura econdmica de Espana (19th edn, Madrid, 1990), pp. 234—5 and 331—2. 20 For a summary of the 1946 law, see P. Martin Acena and M. A. Pons, 'Spanish banking after the Civil War, 1940—1962', Financial History Review 1 (1994), 121—38 at pp. 123—4. For a longer description, J. Sarda, 'El Banco de Espana (1931—1962)' in Felipe Ruiz Martin et al., El Banco de Espana. Una his­ toria econdmica (Madrid, 1970), pp. 455—60. On the 1931 law, see G. Tortella

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and J. Palafox, 'Banking and industry in Spain, 1 9 1 8 - 1 9 3 6 ' , Journal of European Economic History 13 (1984), 8 1 - 1 1 1 at pp. 101-3. 21 C. Armstrong and H. V Nelles, 'Corporate enterprise in the public service sector: the performance of Canadian firms in Mexico and Brazil, 1 8 9 6 - 1 9 3 0 ' in C. Marichal (ed.), Foreign Investment in Latin America: Impact on Economic Development, 1850-1930 (Milan, 1994), pp. 6 9 - 9 2 . 22 Ballestero, Juan Antonio Suanzes,pp. 2 5 0 - 6 8 and A. Adany and J. Larraz, La queibra de la Barcelona Traction,Light and Power Company,Limited. Apropdsito de un dictamen. Cartas cruzadas entre (Barcelona, 1957), Annex 3. See also B. Diaz Nosty, La irresistible ascensidn de Juan March (Madrid, 1977), pp. 3 6 6 - 9 0 ; A.Dixon, Senor monopolio. La asombrosa vida de Juan March (Barcelona, 1985), ch. XIX; and H. Capel (ed.), Las tres chimeneas. Implantacidn industrial,cambio tecnoldgico y transformacidn de un espacio urbano barcelones, 3 vols. (Barcelona, 1994), vol. III, pp. 1 5 - 2 0 .

23 D. Avery, Not on Queen Victoria's Birthday. The Story of the Rio Tinto Mines (London, 1974); C. E. Harvey, The Rio Tinto Company. An Economic History of a Leading International Mining Concern, 1873-1954 (Penzance, 1981); A. Gomez Mendoza, El 'Gibraltar econdmico': Franco y Riotinto, 1936-1954 (Madrid, 1994). Some glimpses of how the negotiations proceeded can be culled from the board meetings of the Banco Central and Banco Hispano Americano (among the purchasers of Rio Tinto in 1954) of 23 June, 31 August and 24 November, and 30 June, 30 September and 28 October 1954 respectively. 24 G. Tortella, El desarrollo de la Espana contemporanea. Historia econdmica de los siglos XIXy XX(Madrid, 1994), pp. 1 9 7 - 9 and 2 7 3 - 4 ; see L. Prados de la Escosura and J. C. Sanz, 'Growth and macroeconomic performance in Spain, 1 9 3 9 - 9 3 ' in N. F. R. Crafts and G. Toniolo (eds.), Economic Growth in Europe since 1945 (Cambridge, 1996), pp. 3 5 5 - 8 7 for a stylised economic history of the Franco and post-Franco period. 25 Ballestero, Juan Antonio Suanzes,pp. 4 1 5 - 1 6 . 26 Richard Sylla, Richard Tilly and Gabriel Tortella (eds.), The State,the Financial System and Economic Modernization (Cambridge, 1999), pp. 1 5 9 - 6 0 .

C H A P T E R

E I G H T

The economic background to the Basque question in Spain Montserrat Gdrate Ojanguren

Perhaps more than any other one in the Peninsula, the Basque people has had to endure, from opposing factions, distorted inter­ pretations of its history. Julio Caro Baroja

INTRODUCTION

The Basque autonomous community occupies an area of 7 , 2 3 5 square kilometres, which represents 1.43 per cent of the Spanish territory and its population, of slightly more than 2 , 1 0 0 , 0 0 0 inhabitants, comprises 5.41 per cent of the Spanish total. The Basque autonomous community is made up of three provinces, Alava, Guipuzcoa and Vizcaya, the first of which being historically the least densely inhabited — even today its population amounts to barely 13 per cent of the community's and it is far behind Vizcaya in industrial development. The so-called 'Basque question' is generally understood abroad as the reflection of radical nationalism. An important manifestation of this nationalism is seen to be violence — the latter being the way to attain the Basque country's independence from Spain. Nevertheless, thus understood the phenomenon does not correspond with reality. The Basque question is something entirely different and far more complex, and its roots are to be found in the Basque people's own history. Many scholars who have studied the different nationalist movements in Europe at the close of the nineteenth century and the early twentieth century have pointed out the importance of economic factors in the development of nationalist feeling. Some of these authors have gone so far as to propose that economic changes stimulate the awakening of national feeling in certain countries. In the Basque case the economy has a further significance, since the Basque economic model shows special traits within the Spanish general model, both legally as well as in its structure and development process. All this considered, and in order to appraise the economic framework 1

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in the Basque country and its own particular traits within the Spanish framework, this chapter is divided into two parts: first, a brief analysis of the Basque country's history and characteristics, with special attention to its ruling system and the changes undergone since the middle of the twentieth century, and secondly a concise study of the basic economic changes undergone during the twentieth century and their relation to the Basque fiscal system.

T H E B A S Q U E FUEROS

IN T H E I R H I S T O R I C A L

PERSPECTIVE

T h e ruling system of the provinces actually comprising the Basque autonomous community — Alava, Guipuzcoa and Vizcaya — is encoded in a legal corpus known for a long time as 'jueros', which can easily be defined as the consuetudinary law in force in the Basque country. These jueros, or the Basque common law, have shaped a specific ruling system throughout the centuries. When the Basque provinces freely joined the Kingdom of Castille — all three did not do so at the same time — each one of them brought along its own laws and customs that the king of Castille, and later the king of Spain, was bound to keep. Therefore, the jueros have never been — and are still not — privileges bestowed graciously by the king. Besides, it is important to note that if the jueros have doubtless framed the relationships between the Basque provinces and the crown, they have also, and foremost, defined Basque society's social and institutional relationships throughout the centuries. This double dimension explains that the loss of the jueros had very complex consequences in the Basque country. T h e jueros's legal scope is ample, though there are four aspects that ought to be emphasised in view of their importance: political organisation; the 'Pasejoral'; tax exemptions; and military service. (a) Political organisation. T h e main trait of the Basques' political organ­ isation are the 'juntas' or provincial assemblies, democratically elected by those who had a right to vote due primarily to their being Basque-born, which accounts for the idea of the Basques' general noble status. These provincial assemblies were legislative chambers, and they met at least once a year to elect in turn a junta or governing assembly commissioned to deal with provincial government matters throughout the year. The executive scope of these assemblies was ample, comprising budget, public health, police, schooling system, public works, agriculture and so on. T h e juntas of Alava and Guipuzcoa also had judicial powers. (b) The 'Paseforal'. Foral approval has to be understood in line with the 1

2

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medieval idea of the king sharing the power to the extent that neither of the parties - king or Basque provinces - could take decisions without the agreement of the other. Therefore, the juntas or assem­ blies had the right to give or withhold their consent to any law or measure decreed by the central power, which would be in force only once the junta had judged it was not contrary to its jUeros. (c) Tax exemptions. T h e Basque provinces were never included in the Castillian tax system — the only exception being the 'Alcabala' tax — on account of which they were called 'exempted provinces'. This circumstance does not mean that they did not contribute to the state's expenses, but whenever they did so it was of their own free will. In addition, there were no customs posts on the Basque provinces' border with France or along its coastline. Therefore, continental goods imported into the Basque country for 'the sole consumption of its inhabitants' were duty free. However, there did exist customs posts on the Basque provinces' border with Castille and Aragon. (d) Military service. In peacetime the Basques were also exempted from military service. When Spain entered into war all able men aged from eighteen to sixty were compulsorily drafted into the army, though in the Basque country the juntas had to give their approval beforehand. Likewise, it was the juntas' prerogative to appoint the officers in charge of the Basque forces, who had to be natives of the Basque country. Finally, as long as they served within the Basque country's boundaries the Basques engaged in military service received no wages; otherwise, the king was obliged to pay army wages. What was the central power's attitude towards Basque jueros? Throughout the centuries there have been many attempts to limit the legal scope of the jueros, particularly its tax system. Already as early as the reign of King Henry I V (1454—74) the Castillian Monarchy tried to enforce new taxes on the Basque country. During the Austrian dynasty, Philip II (1556—98), Philip III (1598—1621) and Philip I V (1621—65) continuously attempted to tax salt, as well as to introduce other taxes in the Basque provinces. As these attempts went on, the Basque people's reaction became stronger. T h e arrival of the first Bourbon king at the Spanish throne in 1 7 0 0 meant the reinforcement of a policy of administrative uniformity for all Spanish territories. T h e central power's pressure over the different Spanish regions was increased. This new policy led King Philip V to the abolition of the jueros in Catalonia and in the Kingdom of Valencia. As 3

4

5

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for the Basque provinces, Philip V ordered the establishment of customs posts on the French frontier, thus altering the foral system. T h e reaction in the Basque country to such a one-sided measure was so immediate and unanimous that, in 1 7 2 2 , the king was obliged to remove the customs posts from the French frontier. The same policy explains how in 1776 Guipuzcoa was deprived of its fueros. O n this occasion, four years of negotiations were required so that Guipuzcoa could recover its old rights. The offensive against the Basque foral system increased at the begin­ ning of the nineteenth century. T h e Cadiz Constitution of 1812 was clearly biased about the fueros, as it proclaimed unequivocally the unity of the Spanish nation. From then on, the attempts to abolish the fueros would be continuous. In 1820, the Liberals succeeded in applying various common norms in the Basque provinces, which primarily affected customs duties and military service, which then became obliga­ tory for all Basques. Although King Ferdinand V I I swore to respect the fueros in 1 8 2 3 , as he had previously done in 1 8 1 4 , the fact remains that his tax policy concerning the Basque provinces contravened his sworn promises. Furthermore, the Bourbon policy represented an even greater danger for the significance of the fueros, as it declared that the fueros were nothing but a privilege conceded by the crown. The dynastic troubles that followed the death of King Ferdinand V I I encouraged the outbreak in 1 8 3 6 of the first of the three civil wars that would be known as Carlist wars. Besides the dynastic issue, this war was also fought to preserve the fueros. The Carlists struggled to uphold the fueros while the reformist Liberals wanted to do away with them. According to the former, the fueros represented ancestral ways and laws inherited from a long historical experience; on the other hand, what the Liberals pursued in their attempt to reduce the legal scope of the fueros - if not their abolition - was to question the lifestyle and indigenous ruling system of the Basque country. Throughout the first civil war (1833—9), the central government that had aligned itself with the Liberals brought about a series of measures contrary to the fueros. In 1 8 3 5 it tried to introduce in the Basque country the officially stamped paper and the salt tax. A year after, in 1 8 3 6 , the judicial system in force in the rest of Spain was established in the Basque provinces. Finally, in 1837, the foral governments or 'diputaciones' were replaced by uncompromising provincial governments organised along lines similar to those in other Spanish provinces. The first civil war ended in August 1 8 3 9 , with a Liberal triumph over 6

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the Carlist party. Its consequences would be felt very soon. In November of that same year it was determined that the representatives of the Basque provinces and Navarre in the Congress and Senate should be elected according to the electoral laws in operation for the rest of Spain, and not according to their own system. In January 1 8 4 1 , the Paseforal was abolished in Alava, Guipuzcoa and Vizcaya. The Basque local administrative organisation was to be replaced by the Spanish one, while the Basque country's own judicial organisation was replaced by that of the Spanish state. Customs posts were finally established along the Basque coastline and the French frontier. Social uneasiness in the Basque country grew worse, as the war had breached the defences that had hitherto sheltered Basque society. To meet the challenge, businessmen and industrialists founded new manufacturing enterprises, which needed the Spanish market to sell the goods that they were potentially capable of producing. In this sense, the establishment of customs posts on the French frontier meant welcome protection from competitive foreign manufactured goods, as well as free access to the Spanish market. Social unrest in the Basque country following the loss of the main historical rights consequent on the demise of the fueros was partially reduced with some of the compensations offered in 1 8 4 4 , when the foral governments recovered most of their old rights. However, these were never to include judicial powers. T h e outbreak of the second civil or Carlist war in 1 8 7 0 was partly caused by the weakening of the foral system, which had now lost much of its main substance. During the previous decades the fueros had been reduced to only three — nevertheless important — elements. These were autonomous organisation of the Basque provinces, exemption from mil­ itary service and tax privileges. But the prolonged consequences of the first civil war had given birth to a radical social background that became the background for the outbreak of the second war. From the Carlist party's point of view, the only link between the Basque provinces and Spain was none other than the king. In line with this thesis, the historical agreement between the Spanish sovereign and the Basque provinces could never imply that the Basques had to renounce their laws, ways and own ruling system. And because the Basque country enjoyed an indubitable status of historical freedom, the Liberal forces fighting the Carlist party in the Basque country were considered an army of occupation. In the first place, the Carlists defended not only their own ways of government, 7

The economic background to the Basque question

155

they also stressed the value and uniqueness of their country's ancient language: the Basque language. T h e triumph of the Liberal forces that ended the second civil war in 1 8 7 6 once more had immediate consequences for the Basque provinces. A law passed in July 1 8 7 6 put an end to the traditionalforal regime, or of what was left of it, forcing the Basques to accept compulsory military service and to share the fiscal burden of the state's expenses. Likewise, it determined that since the fueros had been finally suppressed, the Basque provinces had to join the 'Economic Concert' system (see below) common to the remaining Spanish provinces. At the same time, the foral governments as such disappeared, though not without first putting up tough resistance to this measure. All of these measures aggravated the already strained relations between the central government and the Basque provinces, so that the former feared a Basque revolt. After various negotiations with the Basque provincial authorities - already deprived of their foral powers the Spanish government came to an agreement that, notwithstanding its purely economic nature, would attain historical significance. Thus in November 1877 it became established that the Basque provinces' share or 'quota' in the payment of the state's expenses would be provided by the government or 'diputacion' of each province, which, in their role as institutions authorised to collect taxes, 'were empowered to establish the way they considered most harmonious with the Basque country's own circumstances'. Accordingly, the diputacion of each Basque province could decide the amount of tax pressure to be applied to the different economic sectors. Hardly a month later, the diputacion of Vizcaya decided that its quota to the Spanish Central Treasury would be collected from taxing goods and expenses. Thus began the economic policy to be developed in the Basque provinces: no overtaxing of industrial activity, with special care to be taken to promote manufacturing. A Royal Decree passed by the central government on 2 8 February 1 8 7 8 ratified the system's validity for both parties involved - the Spanish state and the Basque provinces - thus establishing the basis of what came to be called the 'Economic Concert' (Concierto Economico). As was expressed by the July 1 8 7 6 law, originally the term 'Concert' did not exactly imply the acknowledgement of taxation sovereignty for the Basque country. Nevertheless, the means devised by the Basque provinces for raising taxes with which to satisfy their quota at the Spanish Treasury, acknowledged the (de facto existence of fiscal sover­ eignty in the Basque country. Therefore, the February 1878 decree may 8

9

10

156

MONTSERRAT GARATE

OJANGUREN 11

well be considered to be the birth certificate of the Economic Concert, even though strictly speaking the Economic Concert is but a conse­ quence of the Basque country's history. Despite some brief interruptions, the Economic Concert has stayed alive throughout the years up to the present day. Its meaning is well explained by what a remarkable non-nationalist Spanish politician said in 1 9 3 5 : 'The Economic Concert must be respected, and not because it is a privilege, but rather because of historical reasons rooted in our oldest historical past and because they have a long secular tradition in History.' What has been the Economic Concert's consolidating process in the twentieth century? It has evolved around three main principles: fiscal proportionality, quota evaluation with successive updating revisions and the agreement system. (a) Fiscal proportionality. If the Economic Concert implies that the Basque provinces are compelled to share the payment of the state's expenses, it means that there exists a fiscal proportionality basis; that is, the Basque provinces' share is proportional to that of the other Spanish provinces. (b) Quota evaluation. The amount of the share or quota provided by the Basque provinces has to be evaluated anew in accordance with economic changes. That is why the quota's duration is temporary. (c) Agreement system. T h e Economic Concert is agreed upon by law, which means that it is established by an agreement between the Spanish state and the Basque country, and that therefore it cannot be altered unilaterally. The principle underlying the agreement system was historically the essence of the foral philosophy in the Basque country. Born following the end of the second civil or Carlist war, the First Economic Concert lasted until 1887. T h e law of 29June 1887 introduced the Second Economic Concert, which contained some innovations. For example, the quota could henceforth only be modified after hearing the opinion of the Basque diputaciones. The lives of later Economic Concerts were to be increasingly long. T h e Fourth Economic Concert lasted from 1 9 0 6 to 1 9 2 5 , and the Fifth Economic Concert lasted even longer, from 12

13

1

9

2

5

t

o

1

9

5

1

.

1

4

During the Spanish Civil War (1936—9), General Franco abolished foral rights in 1937 and with them the Economic Concert in two of the Basque provinces — Guipuzcoa and Vizcaya — as a punishment for their siding with the Republican Party.

The economic background to the Basque question

157

T h e social tension that prevailed in the Basque country throughout the regime of General Franco (1939—75) increased nationalist feeling among many Basques. In 1 9 5 9 E T A (Euskadi ta Askatasuna ) was born, a leftist military organisation that soon led the radical nationalist move­ ment. Franco's state policy favoured the rise of radical nationalism, the develoment and historical significance of which would have been unthinkable, if not impossible, had Basque nationalism not been compelled to engage in resistance activity in the face of extreme political conditions marked by social conflict and unbearable cultural repres15

16

17

sion. T h e new political regime that followed the death of General Franco in 1975 meant a turning point in the history of Spain, and also in that of the Basque country. Basque society was divided between those who supported political reform and those who embraced a radical rupturist position. T h e Spanish Constitution, which was approved in 1 9 7 8 , acknowledged the historical identity, or 'differential fact', of the three Basque provinces, which comprise the Basque autonomous community; Basque historical rights, such as autonomous government and a separate tax system based on the Economic Concert, were thus finally acknowledged as constitutional rights. Only a year later, in 1 9 7 9 , came the approval of the Basque Country Autonomy Statute, also known as the Guernica Statute. For those who had supported political reform, the new political framework of the Guernica Statute meant the beginning of the long-desired reforms. From the radicals' viewpoint, however, the Guernica Statute was far from satisfactory, thus causing the radical movement flatly to reject the changes and the new political and economic structural processes undergone in the Basque country throughout the past decades. T h e Guernica Statute conferred political and public competences upon the Basque country. A step forward was taken in 1981 with the Economic Concert Law, which outlined the policy that henceforth would mould the Economic Concert agreed between central government and the Basque autonomous community until 2 0 0 1 . T h e public finance competences with which the diputaciones of the Basque provinces were empowered strengthened local manufacturing development. It is thus that twentieth-century economic development in the Basque country, so different from Spanish economic experiences, may be partially understood. Additionally, the new legal status of the Economic Concert has implied the recovery of some of the historical Basque rights. 1 8

MONTSERRAT GARATE

i 8 5

THE

OJANGUREN

STAGES OF T H E B A S Q U E E C O N O M Y ' S DURING THE TWENTIETH

DEVELOPMENT

CENTURY

A comparative analysis

The historic development of the Basque economy has been determined to a great extent by the legal—economic peculiarities referred to above. With the establishment of customs authorities along the frontier with France in 1841 (despite the protests of some sectors), Basque production became protected against foreign competition. Thus, most entrepreneurs became the protagonists of an industrialisation process in the Basque country. It was the paper mills, textile factories, ironworks and metallurgy industries which, in a broad sense, led the Industrial Revolution. Moreover, the new customs arrangements allowed direct access for the products of the above-mentioned industries into the Spanish domestic market. Upon the establishment of the Economic Concerts after 1876, the Basque economy displayed considerable growth. The new system allowed Basque institutions to decide upon the sectors that were to bear greater or lesser fiscal pressure. In this period industrial activity was clearly favoured if compared with other parts of Spain. The immediate spin-off was the establishment of a considerable number of industrial companies in the Basque country. Since the late nineteenth century, under the system of the Economic Concert, there had been sectors that had been outstanding in their large volume of production and which brought forth a high degree of industrial specialisation — for example, sectors such as metallurgy, paper mills or ship-building. At the same time, some other traditional industries, such as arms manufacturing, also grew. The Basque economy evolved towards a level of industrialisation that was well above the average of the rest of Spanish society. This degree of industrialisation has been a characteristic feature of the Basque economy throughout the twentieth century. However, the economic indicators of the Basque economy, consider­ ably above the Spanish average until the 1970s, have been converging with those of the rest of Spain in recent years. T h e economic crisis of i 9 7 3 was particularly serious for the most developed industrial sectors in the Basque country. This added to the problems of national identity that arose after the 1936—9 Civil War and which only became more accentu­ ated in the course of the 1960s and 1970s. In that period, even with the Economic Concert abolished, the Basque national issue and the claim of Basque historic rights were strongly represented. From the 1970s

The economic background to the Basque question

159

onwards, the crisis of Basque identity was accompanied by the general economic crisis. Bearing the above changes in mind, the different stages that the Basque economy went through in the twentieth century can also be understood. T h e first third of the century was marked, in general terms, by considerable growth of the industrial sector, which strengthened the relative position of the Basque economy in the modernisation process of Spain. A second stage can be discerned in the 1930s. T h e international crisis overlapped with the crisis of the Spanish economy itself and the Civil War between 1 9 3 6 and 1 9 3 9 . With the conclusion of the war, the Spanish economy was to start an autarkic phase, which extended throughout the 1940s. T h e Basque economy continued to grow, until 1 9 7 3 , in the sectors that had already been outstanding in the first third of the century. From 1 9 7 3 onwards, the crisis especially affected the most character­ istic sectors of the Basque economy. Industrial rationalisation has had a high social and economic cost. Moreover, the crisis coincided with political changes that have had particularly critical results in the Basque country.

The first third of the twentieth century in the Basque country

Even though the Economic Concerts did favour the Basque industrial sector, there were other factors, both endogenous and exogenous, which also contributed to the great economic expansion. Along the endogenous causes was the protectionism of the Spanish market. Among the exogenous causes, there was Spanish neutrality in the 1 9 1 4 - 1 8 war, which opened up exceptional opportunities for the Basque economy; for instance: the profit of the largest Basque iron and steel company in 1 9 1 7 amounted to 1 1 0 per cent of the capital stock and, at the same time, this company was able to increase its capital stock from 3 2 . 7 5 million pesetas to 9 8 . 2 5 million; in 1 9 1 8 some shipping companies had earnings exceed­ ing 200 per cent of their paid-up capital. There are some features that explain this growth. In the first place, there was the great polarisation that took place in the Basque country towards specific industrial sectors. Outstanding among these were steel­ works and the mechanical-engineering industry (machine tools, ship­ building, firearms, railroad supplies and so on), along with paper and cement manufacture. Secondly, Basque financial institutions had great stature on the map of the Spanish economy. Thirdly, the proportion of 19

l6o

MONTSERRAT GARATE

OJANGUREN

the working population employed in the manufacturing sector — a result of the modernisation of the Basque economy — was well ahead of other areas of Spain. The concentration of Basque industry in specific sectors had already started at the end of the nineteenth century. Thus, by 1 8 8 4 , a single Basque establishment manufactured 4 5 . 4 per cent of the total Spanish production of cast iron. Such leadership on the part of Basque iron and steel plants was to be confirmed in successive years. In 1 8 8 6 — ( ^ p r o ­ duction of cast iron in Biscay amounted to 77 per cent of total Spanish production. The rise in production was accompanied by fusions of iron and steel plants. In 1902 a large company, Altos Hornos de Vizcaya, was set up in Biscay, as the result of the merger of three big iron and steel plants (Altos Hornos de Bilbao, La Vizcaya and La Iberia). The capital stock of the new company exceeded 32 million pesetas. This concern was to become the leader in its sector, with iron and steel production of around 6 0 per cent of total Spanish production. For example, in 1 9 0 5 , the production of Altos Hornos de Vizcaya alone was very high when compared with total Spanish production (see table 8.1). Some years later, in 1 9 2 9 , pig-iron production in Biscay amounted to 6 0 . 9 per cent of total Spanish output. As regards steel, Biscay produced 5 6 per cent of the Spanish total. The growth of the metallurgical sector in Biscay was mainly due to the existence of ore deposits; adequate capital to finance new plant, thanks — among other things — to the profit obtained from the sale of iron ore to England, and easy access of English coal to the port of Bilbao. Under the shelter of the growth of the iron and steel industry in the Basque country, ship-building, the production of railroad supplies, armaments, machine tools and bicycles flourished. They were all favoured by the higher protectionist policy enforced in Spain in the early part of the twentieth century. Such industries took up part of the iron produced in Basque ironworks. These new concerns were primarily located in the two most industrialised provinces in the Basque country, namely Biscay and Guipuzcoa, even though their economic structures differed greatly. Thus in Biscay, thanks to the large capital accumulation, the ship-building industries that were established in the early part of the twentieth century were large scale and, through their shareholders, they were connected to the iron and steel plants. O n the other hand, in the neighbouring province of Guipuzcoa the firms were smaller and they were scattered over almost the whole province. At the same time, production was more diversified. However, while Biscay became the great20

22

23

The economic background to the Basque question

161

Table 8.1. AHV's production expressed as a percentage of total Spanish production for theyear igoj 21

Production

% of total

Pig iron Bessemer steel Siemens steel Rolled and hammered iron

55 100 4

4

60

est manufacturer of iron in Spain, Guipuzcoa was to become the great­ est paper manufacturer. This sector began its modernisation in the Basque country after 1 8 4 1 , with the starting up, in Guipuzcoa, of the first web paper factory in Spain. In the last third of the nineteenth century, the output of Basque paper mills almost trebled. In 1 9 0 2 , also in the province of Guipuzcoa, the firm La Papelera Espanola was set up, which made the Basque country the foremost producer of paper and allied products. In 1920 Guipuzcoa's output amounted to 6 0 per cent of total Spanish paper production. The concentration in metallurgy, shipping and paper manufacture compelled Basque entrepreneurs to resort to forming limited companies. In 9 2 2 , almost one fourth of all Spanish joint-stock companies with limited liability had their registered offices in the Basque country. Industrial growth in the Basque country was accompanied by a great expansion of the financial sector. T h e extent of the financial boom can be judged both through the founding of new concerns and through the development of existing ones. Apart from the Banco de Bilbao, founded in 1 8 5 7 , other banks were set up in the Basque country in the late nineteenth and early twentieth centuries. Some of them were incorporated thanks basically to Basque capital funds: among them were Banco de Comercio ( 1 8 9 1 ) , Banco Guipuzcoano ( 1 8 9 9 ) , Banco de Biscay ( 1 9 0 1 ) , Credito de la Union Minera (1901) and Banco de San Sebastian ( 1 9 0 9 ) . Some financial institutes were also set up abroad in the first third of the twentieth century, including Union Bank of Spain and England, Banco Internacional and Sindicato Hispano-Ingles. As a consequence of such an expansion, the Basque country displayed a high degree of concentration both in the number of financial concerns and in the volume of resources. In 9 2 0 , out of the 2 6 companies and credit banks existing in Spain, Biscay and Guipuzcoa respectively ranked second and fourth as to the paid-up capital. In 1 9 2 2 , the banks 24

25

26

162

MONTSERRAT GARATE

OJANGUREN

Table 8.2. Working population by sector Basque country

Year 1910

Primary (%) 3

4

.

Secondary (%)

7

3

7 . 2

Spain Tertiary

Primary (%)

Secondary (%)

Tertiary (%)

28.1

66.00

15.82

18.18

in Bilbao accounted for 22.2 per cent of the registered capital of all Spanish banks. Their situation was even stronger if the legal bank reserves are taken into account. In fact, Bilbao banks held 42.1 per cent of total Spanish legal bank reserves. T h e boost given by Basque banks to some industrial sectors was remarkable. Thus, the Banco de Bilbao acquired shares in the metallurgical and railroad sector; the Banco Guipuzcoano and Banco de Vizcaya invested in electrical, mining, insurance and other sectors. Industrial development and modernisation of company structures made the Basque country the most industrialised and developed area in the whole Spanish territory. T h e distribution of the working population serves to confirm the modern nature of its economy. At the same time, such economic growth fostered the creation of new jobs, which is why the Basque country experienced strong immigration from various Spanish regions. By the year 1 9 1 0 , there was a greater proportion of the working population engaged in the manufacturing sector than in any other. In this respect, the contrast with the Spanish average is striking (see table 8.2). 27

Even in 1 9 5 0 , the structure of the Spanish working population was far from the position reached by the Basque country at the beginning of the twentieth century. Thus in 1 9 5 0 , in Guipuzcoa, the sectoral distribu­ tion of its working population was as follows: primary sector: 21 per cent; secondary sector: 4 6 . 3 per cent; services (tertiary) sector: 32.7 per cent. 28

The 1930s: international crisis,political crisis and Civil War

The economic growth experienced in the previous period gave way to a time of stagnation in the early 1930s. T h e Basque economy, linked to the domestic market, bore the brunt of changes in Spanish economic policy. The problems arose in the basic sectors affected by the international crisis. To these problems were added those posed, after 1 9 3 6 , by the

The economic background to the Basque question

163

Spanish Civil War. In 1 9 3 7 , the two most industrialised Basque territo­ ries — Guipuzcoa and Biscay — were deprived of their Economic Concert. When the civil war ended in 1 9 3 9 , the economic situation was considerably worse than it had been in the early 1930s. The periodfrom igjg to igyj

Devoid of Economic Concerts, the period between 1 9 3 9 and 1 9 7 3 was still to be one of growth for the Basque country, even though growth was slower than during the first third of the century. T h e autarkic policy in the early part of the period was to mould some of the features of Spanish industries in the future. In the industrial sector, 1 9 3 9 saw the birth of a highly protectionist policy coupled with direct state intervention. Protectionism was deter­ mined by two factors: the need to boost national industry coinciding with the weakness of foreign competition due to the war and a lack of trade relations with foreign countries. State intervention took the form of the establishment, in September 1 9 4 1 , of the Instituto Nacional de Industria (INI). Through this organisation, the state sought to promote the creation and resurgence of native industries. Another aim seemingly pursued by INI was to overcome the monopolistic character of some sectors, such as electricity, metallurgy, cement, paper manufacture and ship-building. Some of these, as already mentioned, were both basic features of the Basque economy and were leaders as far as total Spanish production was concerned. The industrial concentration achieved in the Basque country in the first third of the century and the supremacy reached by some sectors still persisted in the 1950s. The Basque company Altos Hornos de Vizcaya alone produced 6 8 per cent of total cast-iron and 3 1 . 5 2 per cent of total steel production in Spain in 1 9 5 7 . However, the Basque ship-building industry, which was tightly linked to the steel and iron industries, was, at the same time, gradually losing its position relative to ship-builders in other parts of Spain. T h e relative decline of Basque production was even sharper at the beginning of the 1970s. At that time, ship-building in the Basque country only amounted to 20 per cent of total Spanish production. With regard to paper manufacturing, the Basque country was still at the head of Spanish production, even though its relative position had declined. Between 1951 and 1 9 5 5 , 4 3 per cent of paper manufactured in Spain came from the Basque country — well ahead of Catalonia, for which the corresponding figure was 2 9 . 5 per cent. 2 9

164

MONTSERRAT GARATE

OJANGUREN

The Basque country, on the other hand, kept a considerable level of activity in the fields of processed metal goods: railroad goods, machine tools, bicycles, armaments and household appliances - the latter subsector having sprung up vigorously. Some figures to illustrate the impor­ tance of these subsectors, both within the Basque economy and in Spain as a whole, follow. For instance, in the field of machine tools, one single Basque province - Guipuzcoa - contributed more than 5 0 per cent of Spanish total output between 1 9 3 9 and 1 9 7 3 . In general, with the exception of some railroad goods manufacturers, the structure of such enterprises was still small, just as it had been at the turn of the century. Guipuzcoa boasted an important number of machine-tool manufacturers, ancillary industries, armaments, bicycles, sewing machines and household appliance companies, which spread all over the province's territory. It displayed a high degree of industrialisation, even though its entrepreneurial structure consisted of small production units. Even the iron and steel works operating in Guipuzcoa, unlike those in Biscay, were based on small companies manufacturing special iron that was used as raw material for the metal goods industry of the province. The financial sector in the Basque country, which had experienced a great development in the first third of the twentieth century, was to retain an outstanding position in the 1939—73 period. Banking policy regarding private banks kept its restrictive features - a heritage of the Civil War — until the 1960s. As the creation of new banks was banned, existing ones consolidated, while small banks were taken over by large ones. Thus, in 1 9 5 8 , there were twelve national banks in Spain (operating all over the country's territory), plus ninety-seven banks of regional, local or foreign character. The Basque economy continued to grow and held its leading position in industrial production, per capita income and the modernity of the structure of its working population. Its high degree of industrialisation kept acting as a magnet for a great number of immigrants from other Spanish regions. A clear indicator of the Basque economic position is per capita income. In 1957 in Spain, it ranged — depending on differences between individual provinces - from 3 0 , 2 3 0 to 7 , 8 9 3 pesetas. The Spanish average in 1 9 5 7 was 9 , 8 6 2 pesetas. The five leading provinces were Biscay (30,230), Guipuzcoa ( 3 0 , 2 2 9 ) , Madrid ( 2 4 , 8 5 8 ) , Barcelona ( 2 2 , 4 5 3 ) and Alava ( 2 1 , 2 9 4 ) . In short, the three provinces that make up the current Basque community were in first, second and fifth position. As has been shown, their incomes by far exceeded the Spanish average. Spain's working population structure also illustrates the backwardness 30

31

The economic background to the Basque question

165

of the rest of Spain compared to the Basque country. In 1 9 7 0 , the national average for the sectoral distribution of the Spanish workforce was 30.1 per cent (primary), 3 6 . 3 per cent (secondary) and 3 3 . 6 per cent (tertiary). Such figures had been surpassed by Basque industry long before (see table 8.2). 32

THE

1 9 7 3

E C O N O M Y :

CRISIS

FROM

A N D ITS EFFECTS

INDUSTRIAL

ESTABLISHMENT

OF

ON A

SPECIALISED

RATIONALISATION E C O N O M I C

TO

T H E

R E -

C O N C E R T S

After the 1 9 7 3 crisis, the new international economic order has had a negative impact on sectors such as metallurgy and ship-building. It has compelled industrialised countries to undertake a profound restructur­ ing of such sectors. T h e Basque economy, traditionally oriented toward the above industries, has been more severely stricken than the Spanish economy as a whole. The consequences of the 1 9 7 3 crisis were evident at once. Economic indicators between 1 9 7 3 and 1 9 7 6 give a clear picture of a general crisis. Unemployment and inflation soared. The economic policies applied in various countries softened the effects, but in the short term they were no solution whatsoever. Only from 1 9 7 6 could certain symptoms of an economic upswing be discerned in the O E C D countries. T h e rise of average O E C D G D P was 5 per cent; in the United States it was 6.25 per cent. Inflation started to fall below 10 per cent (even though it was 2 1 . 8 per cent in Italy and 15 per cent in the United Kingdom). A n increase in foreign trade was also noticeable; however, unemployment was still very high. Analysing the performance of the Spanish economy in the period 1 9 7 3 - 6 , there are big differences compared with the trends conveyed by the above figures. Spain showed little economic dynamism, unemploy­ ment was very high and inflation, even in 1 9 7 6 , was 19.77 per cent. At the same time, a serious trade deficit arose. As these facts show, the Spanish economy was in a worse situation than most other industrialised economies. T h e indicators were no better for the Basque economy. In addition to the structural crisis of Basque production (as a consequence of the Basque economy's heavy dependence on the sectors most affected by the crisis), there was a great dependency of the Basque economy on Spanish and international markets. This dependency was noticeably higher than was the case with other regional economies. In fact, at the time, the Basque country sold 78 per cent of its industrial output on the 33

166

MONTSERRAT GARATE

OJANGUREN

Table 8.3. Unemployment rates ig82-iggg

(%)

Year Region

1982

Alava Guipuzcoa Biscay Basque C o m . (average) Spain (average) European Union (average)

I4 9

.

18.0 21.0 19.0 17.0

1 9 8 3 1 9 8 4

I992

I 9 9 3 I 9 9 9

I7.8

I8.3

2I.4

13.2

2I.3

I8.7

22.I

12.6

2

18.0

44 18.6 5 2 .2

5 23.

2 .9 I8.7

5 23.9

I8.4

2I.7

I8.4

22.7

10.0

II.I

2 2 .

2

. I

. 6

I

5 5

I

.

.

5 5 10.0

Source: Author's own computation based on data from the Instituto Espanol de Estadistica (INE), O E C D , Boletln Estadlstica del Banco de Espana.

Spanish market and 13 per cent on international markets. If the Basque economy's dependency on foreign markets is compared to what hap­ pened in Catalonia, which was also an industrialised area, the result is quite different. Catalonia exported 4 4 per cent of its industrial produc­ tion to the other Spanish regions and 5 per cent to the international market. T h e lack of foreign demand could not be easily replaced in the Basque market itself. Confronted with the need to find outlets for their products, the efforts made by Basque companies to promote exports can be understood. In 1 9 7 6 , despite the crisis, the Basque country increased exports by 15 per cent against 12 per cent for the whole of Spain. All the same, the negative effects of the crisis were more severe in the Basque country than in other Spanish regions. Thus unemployment exceeded the Spanish average; migratory movements started to be neg­ ative; industrial rationalisation was necessary, although costly, due to the Basque economic structure and, as a result, per capita income in the Basque country lost its lead relative to other Spanish regions. Such negative effects coincided with political changes. T h e claim of Basque historic rights was reasserted. Among these, the re-enactment of the Economic Concert was a landmark. Whereas the effects of the 1 9 7 3 crisis were subsiding elsewhere, unemployment figures in the Basque Country still rose in the 1980s. T h e negative evolution of this indicator can be understood by considering the character of the crisis, which was basically industrial and severely affected the metallurgy and ship-building. That is why unemployment figures in the Basque country surpassed the Spanish average in the 1 9 8 0 s and 1990s. Industrial rationalisation did not generate new jobs in the short term. Within the Basque country, the figures were highest in

The economic background to the Basque question

167

Table 8.4. Evolution of migratory balances Year

Basque country

1962

2

5

,

3

3

6

1 9 6 5

3

1966

i

9 6 7

9 6 9

9 7

— 5 1 1

1

,

3

2

9

i983 i984

5

0

—

5

,

2

7

5

— 6,466 -

5

,

5

i

3

—5,884 - 5 , 35i

i985 i986

— 3,789

11,050

i987

— 8,609 —ii,0 5

5

9 7 2

7

-10,887

i98i

i i , 762 i2,835

,

i980

i2, 436

°

6

i979

— 10,246

i982

1 9 7 1

1

i977

17,765 i6,462

1968 1

Basque country

i978

6

I9 3 1964

1

Year

,

8

4

9

8

i988

1 9 7 4

i 6 , 57

i989

— 9,6

1 9 7 5

i 0 , 546

i990

—6,553

i99i

— 4,759

1

9

7

3

1

4

,

1

7

i976 (inclusive of Navarre

i992

— 5 , 907

up to this year)

i993

—5, 99

i994

—4,882

i995

—4,446

1 9 9 6

—

3

,

6

5

1

Source: Author's o w n computation from data from the Instituto Espanol de Estadistica (INE).

Biscay, this province being more closely linked to the iron and steel and ship-building industries (see table 8.3). As a result of the industrial crisis the Basque country, traditionally a recipient of people from other regions, started to show negative migra­ tory balances. A n additional circumstance should be noted: whereas Alava showed positive balances, Guipuzcoa and Biscay - more industri­ alised and crisis-stricken - had been losing population since the 1970s (see table 8.4). Faced with persistent crisis conditions, especially in the metallurgy sector, from 1 9 7 3 onwards, the E E C started a quota policy with the aim of restricting output. As a result Spain had to limit iron and steel exports, which exacerbated the problems confronting the Basque economy. T h e iron and steel sector was forced to restructure. This restructuring commenced in the 1970s and was completed in the 1 9 8 0 s . It was then that the Economic Concert was handed over to the government of the Basque autonomous community. Restructuring of the Basque metallurgical industry — at high social 34

168

MONTSERRAT GARATE

OJANGUREN

and economic cost - resulted in the closure of Altos Hornos de Vizcaya. Its overstaffing, together with its high production costs, rendered this symbolic concern non-competitive. To replace it, a new company was founded: the Aceria Compacta, an electrical steel plant feeding an auto­ matic system, which can turn out a finished product in three hours. Both public and private capital acquired stakes in this new concern. The latest data confirm the new situation in Basque steel production: in 1 9 9 4 , 4 5 per cent of Spanish output came from Basque factories. In a way, this new technology has allowed the Basque country to set off along the track to the future. The tradition of old foundries and nineteenth-century blast furnaces, exporting their products to Europe and America, has been updated. Household appliance manufacture, which experienced a sharp rise in the Basque country in the 1960s, was also affected by the crisis. Its industrial rationalisation has followed European patterns. Thus, in the European Union, the number of manufacturers has decreased, while concentration occurred. This entrepreneurial concentration also occurred in the rest of Spain. T h e Spanish market is currently led by four big groups: the Basque group Fagor, the German Bosch-Siemens, the Swedish Electrolux and Whirlpool (the Dutch branch of the American multinational concern). With the exception of the Basque group, they are funded with foreign capital. For its part, the Basque group trades several brand names (including Westinghouse). The adoption of new technologies has rendered the group's production competitive. T h e share of Basque production of household appliances in the Spanish market amounted to 2 0 . 6 per cent in 1 9 9 4 , an important figure bearing in mind the competition of the other foreign economic groups. In 1 9 9 3 more than half the export of household appliances manufactured in Spain came from Basque companies. Although per capita income in the Basque country is still above the Spanish average, it is no longer in first position, as was formerly the case. If figures for 1 9 9 1 and 1 9 9 5 are compared, the rate of growth in the Basque country has been lower than in the leading Spanish regions (except for Madrid) (see table 8.5).

CONCLUSIONS

When summing up the Basque country's history throughout the last two centuries, some features deserve special mention. T h e fueros or Basque common law have a long history of their own, which the Basque people has always wished to keep in force. T h e policy of administrative uni-

The economic background to the Basque question

169

T a b l e 8.5. Family income per inhabitant (base average = 100) Year Autonomous community

1991

1995

Baleares

138.21

156.29

Catalonia

120.34

118.38

Madrid

H5.72

no.95

Navarre

115.38

118.92

L a Rioja

^9.95

H 4 . 5

1

Basque country

107.41

108.27

Aragon

106.54

107.68

75.43

75.48

Extremadura

Source: Economia Vasca. Informe igg6, Caja LaboralEuskadiko Kuxta, Bilbao.

formity, pursued b y the B o u r b o n s since the eighteenth century, thus m e t w i t h firm resistance in the B a s q u e c o u n t r y because it m e a n t the loss o f m a n y o f the basic principles o f the fueros. A t t e m p t s to abolish the fueros increased t h r o u g h o u t the nineteenth century. T h e rupture o f the tradi­ tional social r e g i m e w a s to have special significance for the B a s q u e country, w h e r e the sense o f traditional values w a s rooted far d e e p e r than in other Spanish regions. T h e loss o f the fueros in the late nineteenth century w a s the o u t c o m e o f t w o civil wars, w h i c h resulted in the division of B a s q u e society. T h e r e f o r e , to claim that the loss o f thefueros gave birth to a national g r i e v a n c e a m o n g the B a s q u e s is a logical proposition. It is equally true to say that if society's 'modernisation' t h r o u g h industrialisation represented a break w i t h the traditional w a y o f life, then the B a s q u e c o u n t r y entered the industrial e r a faster a n d m o r e intensely than a n y other Spanish region. C h a n g e s in the w a y o f life w e r e patently obvious. Industrial d e v e l o p m e n t b r o u g h t to the B a s q u e c o u n t r y w o r k i n g people from different parts o f Spain, a d d i n g a further disruptive factor to B a s q u e society's traditional w a y o f life. F r o m the ideological standpoint, the birth o f B a s q u e nationalism at the e n d o f the nineteenth a n d the b e g i n n i n g o f the twentieth centuries took place at a time m a r k e d b y contradictions arising from a traditional society's crisis a n d the rise o f a liberal bourgeoisie. T h e loss o f the fueros did n o t b y a n y m e a n s m a k e the situation easier. E c o n o m i c g r o w t h a n d the d e v e l o p m e n t o f the E c o n o m i c C o n c e r t proved to b e n o t e n o u g h to satisfy the great n u m b e r o f Basques w h o kept

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d e m a n d i n g their full historical rights. T h e abolition o f the E c o n o m i c C o n c e r t in 1 9 3 7 d u r i n g the Spanish C i v i l W a r (1936—9), a n d G e n e r a l Franco's regime (1939—75) favoured the flourishing o f a radical b r a n c h of B a s q u e nationalism. T h e Spanish political r e f o r m that followed Franco's r e g i m e has n o t b e e n a c c e p t e d b y the B a s q u e radical faction, thus d e e p e n i n g the existing social division in the B a s q u e country. A s far as the e c o n o m i c evolution o f the B a s q u e c o u n t r y is c o n c e r n e d , its m a i n periods since the e n d o f the nineteenth century till t o d a y have already b e e n described in this chapter. T o summarise, the first period, e n d i n g in 1 9 3 0 , shows rapid e c o n o m i c g r o w t h , at least since 1 8 7 6 . D u r i n g the second period, c o v e r i n g the 1930s, B a s q u e e c o n o m i c g r o w t h suffered a major s l o w d o w n due to outside factors. T h e third p e r i o d lasted from 1 9 3 9 to 1 9 7 3 a n d s h o w e d m o d e r a t e e c o n o m i c g r o w t h . Lastly, the 1 9 7 3 crisis o p e n e d a n e w p e r i o d d u r i n g w h i c h the B a s q u e e c o n o m y has b e e n severely d a m a g e d by the c h a n g e s in its industrial structure. E c o n o m i c evolution has also b e e n a c c o m p a n i e d b y endless political disputes over historical rights. T h e s e are so d e e p l y rooted in the B a s q u e people's consciousness that, at least as far as the e c o n o m y is c o n c e r n e d , they w e r e legally a c k n o w l e d g e d t h r o u g h the E c o n o m i c C o n c e r t a g r e e d u p o n in 1 8 7 8 . E c o n o m i c g r o w t h , industrial concentration, h i g h per capita i n c o m e s , m o d e r n social structure a n d the outstanding role o f financial institutions are some o f the traits that have characterised the B a s q u e e c o n o m y t h r o u g h o u t the twentieth century. H i g h e c o n o m i c g r o w t h e x p e r i e n c e d b y the B a s q u e c o u n t r y until 1 9 3 0 p l a c e d the region a h e a d o f the other industrial areas o f S p a i n , w h e r e it r e m a i n e d until the i

9 7

°

s .

F u r t h e r m o r e , as its p r o d u c t i o n rates w e r e so h i g h , B a s q u e industry b e c a m e d e p e n d e n t on markets outside the B a s q u e territory. B e i n g — as it w a s — a protected market, the Spanish m a r k e t w a s to b e c o m e vital for the m a i n t e n a n c e o f B a s q u e industrial production. D e s p i t e the abolition o f the E c o n o m i c C o n c e r t in i 9 3 7 the B a s q u e p r o v i n c e s ' per capita i n c o m e w a s the highest in S p a i n until the i 9 6 0 s . After nearly i 0 0 years o f industrial g r o w t h , m a n u f a c t u r i n g structures h a d hardly c h a n g e d : iron, ship-building, paper, m e t a l l u r g y and hardw a r e still c o m p r i s e d the bulk of industrial p r o d u c t i o n . Likewise, B a s q u e industry continued to be d e p e n d e n t on Spanish a n d foreign markets. B u t the abolition o f the E c o n o m i c C o n c e r t together w i t h the political situation s u r r o u n d i n g the issue o f historical rights created increasing tensions in the B a s q u e c o u n t r y that w e r e to e x p l o d e d u r i n g the latter years o f G e n e r a l Franco's regime. T h e 1 9 7 3 crisis inflicted severe d a m a g e u p o n

The economic background to the Basque question

171

B a s q u e industrial activity. A m o n g the Spanish provinces the B a s q u e provinces bore b y far the most costly b u r d e n o f industrial reorganisation a n d suffered the heaviest u n e m p l o y m e n t rates. T h e result w a s a relative decline in B a s q u e incomes. H o w e v e r , the structural reorganisation soon b e g a n to b e a r fruit; indeed there is evidence o f a ' n e w industrial revolu­ tion' in the B a s q u e economy. A s far as market m o v e m e n t is c o n c e r n e d , the B a s q u e e c o n o m y will most p r o b a b l y continue to exhibit its traditional o p e n attitude. M o r e over, industrial reorganisation in the B a s q u e c o u n t r y c o i n c i d e d with Spain's entry into the E u r o p e a n E c o n o m i c C o m m u n i t y . T h e B a s q u e economy, even m o r e so than the e c o n o m i e s o f other Spanish regions, w a s reorganised with the n e e d to b e competitive in a w o r l d w i d e market b e i n g b o r n e in m i n d . Finally, it must b e pointed out that this important industrial r e o r g a n isation has taken place as the B a s q u e c o u n t r y recovered in full its E c o n o m i c C o n c e r t . A s has already b e e n said, the E c o n o m i c C o n c e r t has proven most positive for the B a s q u e e c o n o m y - b o t h in the past as a vehicle for e c o n o m i c d e v e l o p m e n t a n d t o d a y as a facilitator o f industrial reorganisation. F u r t h e r m o r e , since b e i n g fully reinstated almost fifteen years a g o , the E c o n o m i c C o n c e r t has g o n e some w a y towards satisfying one o f the most e n d u r i n g d e m a n d s o f the B a s q u e p e o p l e - the d e m a n d for the return o f their historic rights.

NOTES

1 The Basque country proper is Euskalherria, which comprises the three Basque-Spanish provinces - that is, Alava, Guipuzcoa and Vizcaya, plus Navarre or 'High Navarre' - and the three Basque-French Provinces - that is, Labourd, Soule and Navarre or 'Low Navarre' - thus totalling seven provinces of the Basque Nation on both sides of the western Pyrenees. 2 V Garmendia, La ideologia carlista (I868-I8J6). Los origenes delnacionalismo vasco (San Sebastian, 1985), pp. 3 6 5 - 6 . 3 Ibid., pp. 3 6 6 - 7 . 4 Ibid. 5 Ibid., pp. 3 6 8 - 9 . In Spanish Navarre or 'High Navarre', only one member of each family was to pay military service. 6 J. M. Angulo, La abolicion de los Fueros e Instituciones Vascas (San Sebastian, 1 976). 7 Garmendia, La ideologia carlista,pp. 3 9 0 - 3 . 8 M. Herrero y Ridriguez de Minon, 'Fundamentos historicos y politicos del Concierto Economico Vasco' in El Concierto Economico Vasco Actas V Semana Delegacion en Corte de la RSBAP (Madrid, 1 997), p. 25. 9 J. Real Cuesta, El carlismo vasco i8j6-igoo (Madrid, 1 985), pp. 3 3 - 4 0 .

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10 Royal Decree, 13 November 1877. 11 Some historians see its birthdate with the Law of 21 July 1876, while others see it in the November 1877 Decree. 12 The non-nationalist politician was Jose Calvo Sotelo. The sentence is quoted by M. Fernandez Pelaz in 'Caracteristicas del Concierto Economico en su dimension tributaria' in El Concierto Economico (1997), p. 57. 13 J. L. Larrea, 'El sistema de cupo dentro del Concierto Economico' in El Concierto Economico (1997), pp. 103-12 at pp. 103 and 112. 14 J. Trebolle, 'Sobre el concepto de cupo como sistema de financiacion: principios historicos y signification actual' in El Concierto Economico,pp. 1 3 2 - 3 . 15 'Basque State and Independence'. 16 J. M. Mata Lopez, El nacionalismo vasco radical (Bilbao, 1995), pp. 2 3 - 4 . 17 Ibid., p. 25. 18 I. Zubiri Oria and M. Vallejo Escudero, Un andlisis metodologicoy empirico del sistema de cupo (Madrid, 1995). 19 M. Gonzalez Portilla (ed.), Bilbao en la formacion del Pais Vasco contempordneo (Bilbao, 1996), pp. 1 6 4 - 5 . 20 San Francisco factory, located near Bilbao: J. Nadal, Elfracaso de la revolucion industrial en Espana (Barcelona, 1975), p. 178. 21 M. Gonzalez Portilla, 'Mecanismos de production y reproduction social de las elites economicas ye del capitalismo en la Restauracion', Revista de Historia Contempordnea, 6 (1992), pp. 143-76. 22 A. Carreras, Industrializacion espanola: estudios de historia cuantitativa (Madrid, , p p .

23

24

25 26

27 28

29

30

31 32 33

34

5 6 - 7 .

R. Tamames, Estructura economica de Espana (Madrid, 1960), p. 291. Foreign capital was also a factor contributing to industrial development: Gonzalez Portilla, Bilbao, pp. 1 2 6 - 8 . M. Garate Ojanguren, 'De los catalanes en Guipuzcoa' in A. Segura and Gonzales Portilla (eds.), Acta del Congreso els catalans a Espanya 1760-1914 (Barcelona, 1996). Gonzalez Portilla, Bilbao,p. 155. M. Martinez Cuadrado, La burguesia conservadora (Madrid, 1979). Gonzalez Portilla, Bilbao,p. 154. In 1950, the Spanish population employed in the primary sector amounted to 47.5 per cent, whereas the secondary sector only occupied 26.5 per cent of the active population. Tamames, Estructura,pp. 1 5 8 - 6 1 . G. Tortella, Modern Financial Institutions in the 20th Century: Spain and Portugal. A Report on Recent Research (Milan, 1994), 10th International Economic History Congress. Anuario Estadistico de Espana (Madrid, 1962). Figures are in pesetas of 1953. Informe Economico del Banco de Bilbao (Bilbao, 1972). Situaciony perspectivas de la economia vasca (San Sebastian, 1977). J. Imaz, 'Perspectivas de la siderurgia vasca. Proyectos y realidades' in Actas de la VSemana de la RSBAP (Madrid, 1997).

C H A P T E R

N I N E

Economic change and nationalism in Italy in the twentieth century Luigi De Rosa

For most o f the nineteenth century the pressure on the Italian g o v e r n ­ m e n t a n d parliament to a b a n d o n liberalism a n d to pursue a p o l i c y that protected and p r o m o t e d the country's e c o n o m i c interests did not c o m e from any political m o v e m e n t as such but from newspapers, cultural a n d e c o n o m i c societies, industrial a n d w o r k e r associations a n d similar organisations. T h e C h a m b e r s of C o m m e r c e , in particular, s h o w e d themselves to be increasingly in favour o f state intervention in the economy, especially in towns w h e r e industrial centres h a d g r o w n up, d e m a n d i n g that contracts to provide the w e a p o n s and ships n e e d e d for the country's defence be a w a r d e d to Italian a n d not to foreign c o m p a nies, as h a d h a p p e n e d in the past, as well as a revision o f trade a n d navigation treaties w i t h foreign powers. It w a s at the end o f the c e n t u r y a n d the b e g i n n i n g o f the n e w that such forces found a political counterpart — that is, a m o v e m e n t of opinion a n d action that sought to increase the country's e c o n o m i c a n d political prestige a m o n g the c o n c e r t o f nations. It is n o c o i n c i d e n c e that the m o v e m e n t e m e r g e d towards the end o f the century, stimulated as it w a s by t w o circumstances. O n e w a s o f a political nature: the reaction to the Italian a r m y ' s defeat at A d u a in 1 8 9 6 in the w a r against R a s M e n e l i k to c o n q u e r the Eritrean Plateau. T h e other w a s e c o n o m i c : the awareness that the c o u n t r y w a s u n d e r g o i n g rapid industrialisation a n d w a s n o longer the c o u n t r y e m e r g i n g from the l o n g and difficult p e r i o d o f the R i s o r g i m e n t o . In the forty years since the creation o f the K i n g d o m o f Italy, the c o u n t r y h a d u n d e r g o n e profound change. O v e r c o m i n g great difficulties a n d c o m p l e x problems, it h a d achieved considerable agricultural progress. T h e m a r s h l a n d a n d m a l a r i a that infested large coastal areas h a d b e e n partly r e d u c e d . M u c h uncultivated land w a s put u n d e r the p l o u g h . A l t h o u g h m a n y areas o f the country, especially in the south, still a p p e a r e d to be in a w o r r y i n g state of b a c k w a r d n e s s , the a g r a r i a n crisis that h a d o v e r c o m e Italy in the 1 8 8 0 s 1 7 3

174

L U I G I DE ROSA

s e e m e d to be c o m i n g to an end. T h e c o r n duty, introduced in 1 8 8 7 , h a d saved the country's cereal g r o w i n g , while the spread o f c h e m i c a l fertil­ isers h a d raised land productivity; at the same time, the increasing e m p l o y m e n t o f agricultural m a c h i n e r y (ploughs, seeders, threshers a n d huskers), especially in the Po Valley a n d in some areas o f central Italy, testified to the m o d e r n i s a t i o n process that w a s underway. E v e n taking a c c o u n t o f the uncertainties c o n n e c t e d to the agricultural cycle, the gross marketable p r o d u c t i o n o f crop f a r m i n g a n d a n i m a l husb a n d r y w a s higher t h a n that o f 1 8 6 1 , s h o w i n g an increase o f just u n d e r 5 0 per cent. M o r e o v e r , a l t h o u g h the p o p u l a t i o n h a d risen from over 2 6 million in 1 8 6 1 to a r o u n d 3 3 million in 1 8 9 6 , the n u m b e r o f w o r k e r s e m p l o y e d in agriculture w a s falling sharply. T h i s w a s m a i n l y due to e m i g r a t i o n b o t h within the c o u n t r y a n d abroad. Internal e m i g r a t i o n w a s directed largely at the towns that w e r e industrialising; the destinations o f overseas e m i g r a t i o n included a n u m b e r of countries, e s p e c i a l l y t h e m o r e distant territories o f A r g e n t i n a , Brazil, the U n i t e d States a n d C a n a d a . In some u r b a n centres, as a result of the flow o f w o r k e r s from the countryside, considerable progress h a d b e e n m a d e in the industrial sector. B e t w e e n 1 8 6 1 a n d 1 9 0 0 m a n u f a c t u r i n g output almost d o u b l e d . Progress w a s m a d e in all areas to v a r y i n g degrees, even in the m i n i n g sector. T h e p r o d u c t i o n o f m e t a l - b e a r i n g minerals, for e x a m p l e , tripled. T h e r e w e r e also substantial increases in the output o f liquid a n d gas fossil fuels a n d of various n o n - m e t a l - b e a r i n g m i n e r a l s . In the m e t a l ­ lurgical industry, steel p r o d u c t i o n - w h i c h did not exist in 1 8 6 1 - w a s introduced a n d while pig-iron output h a d b e e n halved, iron p r o d u c t i o n h a d risen seven t i m e s . In short, great progress h a d b e e n m a d e in nearly all sectors o f industry, including those w h i c h barely existed or did n o t exist at all in the early years o f unification, such as the construction o f boilers a n d steam engines, m a c h i n e r y for farming, textiles, the p a p e r a n d w o o d industry a n d printing, the construction o f iron bridges, roofs a n d revolving platforms, iron ship-building, the manufacture o f m a r i n e engines, the r a i l w a y industry and the c h e m i c a l industry. S u c h a major transformation also h a d an i m p a c t on the service sector. C o n s i d e r a b l e changes h a d b e e n m a d e to the b a n k i n g system, w h i c h at the close o f the century w a s structured a r o u n d three issuing banks ( B a n c a d'Italia, B a n c o di N a p o l i , B a n c o di Sicilia), three large m i x e d banks (Banca C o m m e r c i a l e , C r e d i t o Italiano and B a n c o di R o m a , the first t w o o f w h i c h h a d I t a l o - G e r m a n capital a n d m a n a g e m e n t ) , a large n u m b e r o f saving and co-operative banks, several land credit institutions, n u m e r o u s private banks a n d rural banks. A l t h o u g h it w a s still 1

2

3

4

The economy and the national question in Italy

175

incomplete, a better-organised e c o n o m y w a s e m e r g i n g from the travails of a b a c k w a r d c o u n t r y w h i c h , over a period o f forty years, had: c o m ­ pleted g e o g r a p h i c a l unification w i t h the a n n e x i n g o f V e n i c e a n d the V e n e t o following the w a r w i t h A u s t r i a - H u n g a r y ; taken a d v a n t a g e o f the Franco-Prussian w a r to free R o m e from p a p a l rule a n d raise it to the status o f capital; and e m b a r k e d on an African w a r to assert its presence a m o n g colonial powers. A l l this w a s a c h i e v e d t h r o u g h the a d o p t i o n o f diverse e c o n o m i c a n d m o n e t a r y policies at a time w h e n the e c o n o m i c situation w a s often unfavourable. T h e average g r o w t h rate o f industrial output in this period w a s neither stable nor continuous. A c c o r d i n g to G e r s h e n k r o n , it stood at 4 . 6 per cent in the period 1 8 8 1 - 8 , 0.3 per cent in the period 1 8 8 8 - 9 6 , and 6.7 per cent in 1 8 9 6 - 1 9 0 8 . It is fairly easy to see why, as a result o f this increase in the g r o w t h rate — w h i c h w a s quite extraordinary, overall - sections o f public opinion were c o n v i n c e d that Italy h a d at last found the path that w o u l d lead to its b e c o m i n g a great power, even t h o u g h the process still n e e d e d e n c o u r a g e m e n t a n d support. Progress not only affected the real e c o n o m y but also applied to public finance and the b a l a n c e o f p a y m e n t s . B y the e n d o f the c e n t u r y the a m o u n t o f g o v e r n m e n t stock in the h a n d s o f foreigners h a d g r a d u a l l y fallen. T a k i n g a d v a n t a g e o f a fall in interest rates on the international capital market, the g o v e r n m e n t w a s able to start a process of refunding, as a result o f w h i c h the w e i g h t o f p a y a b l e interest on public spending was reduced. Since agricultural and industrial d e v e l o p m e n t h a d b r o u g h t an increase in tax revenue, at the end o f the century the g o v e r n m e n t b u d g e t s h o w e d a surplus that c o n t i n u e d from one year to the next a n d gave rise to a debate a b o u t h o w to spend it: should it be used to r e d u c e taxation or to improve physical a n d h u m a n infrastructure? T h e situation r e g a r d i n g the b a l a n c e o f p a y m e n t s h a d likewise improved considerably. T h e slow but continuous d e v e l o p m e n t o f the hydroelectric industry r e d u c e d coal imports while industrial progress b r o u g h t a g r a d u a l increase in exports and at the same time led to a fall in imports. A l o n g s i d e this fall in the trade deficit there w a s an increase in the flow o f e m i g r a n t remittances, w h i c h , on a c c o u n t of the e n o r m o u s scale o f Italian emigration, c o n t i n u e d to grow. T h e i m p r o v e m e n t in the b a l a n c e o f p a y m e n t s w a s also partly due to the revenue from freight as a result o f the progress m a d e b y the m e r c h a n t navy, a n d from tourism, w h i c h w a s enjoying particularly favourable circumstances. T h e b a l a n c e of p a y m e n t s thus s h o w e d a surplus; this w a s b o r n e out by the c u r r e n c y situation with the e n d i n g o f the r e g i m e o f fiat m o n e y that h a d b e e n 5

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introduced in 1 8 6 6 a n d w i t h a p r e m i u m on p a p e r lire in relation to gold lire. A w a r e n e s s of such e c o n o m i c progress h a d aroused the nationalistic enthusiasm o f periodicals such as the Marzocco, and the Regno, w h i c h used it to vindicate Italy's expansionist v o c a t i o n : o w i n g to its geography, history a n d needs Italy c o u l d n o t avoid the impulse to extend its inter­ ests b e y o n d the M e d i t e r r a n e a n and to r e a c h areas in the east a n d far east. Since progress h a d b e e n a c h i e v e d through the action o f private citizens, the hoped-for colonial expansion w a s not, at the start, to be m a n a g e d b y the g o v e r n m e n t (which w a s only to provide the necessary military and customs facilities) but by private citizens. It w a s pointed out that in the Eritrean c o l o n y the Italian g o v e r n m e n t h a d given a demonstration of 'ineptitude a n d w r e t c h e d n e s s ' 'for m a n y y e a r s ' a n d so if Italy w a n t e d to c o n q u e r S o m a l i a this could only be done by a c o m ­ mercial c o m p a n y , that is to say the c o m p a n y that w a s already e n g a g e d in c o m m e r c i a l activity in S o m a l i a , the C o m p a g n i a F i l o n a r d i . T h e supporters of colonial expansionism w e r e also c o n v i n c e d that industrial g r o w t h w a s necessary and indispensable for the country's further e c o n o m i c d e v e l o p m e n t a n d that the g o v e r n m e n t h a d to use every m e a n s to p r o m o t e it. O f significance in this respect w a s the polit­ ical clash over the iron and steel works at T e r n i in central Italy, w h i c h the g o v e r n m e n t h a d h e l p e d to set up w i t h the a i m o f p r o d u c i n g steel armour, m a i n l y for defence. T h e p r o d u c t i o n costs of such steel w e r e far above those established by the international market a n d so there w a s lively opposition against k e e p i n g the T e r n i works in operation. In particular, free-traders l a u n c h e d v e h e m e n t attacks in the press a n d in the political clubs a n d in parliament, to the point o f d e n o u n c i n g a collusion of interests b e t w e e n politics a n d industry. W h i l e admitting that steel a r m o u r w o u l d have cost less in French a n d British plants, the nationalists a r g u e d that the greater competitiveness o f foreign prices m a s k e d a political strategy that a i m e d to d a m a g e Italy. ' T h e a i m o f foreign g o v e r n m e n t s ' , they explained, 'is crystal clear: to place [their] plants in a position to c o n q u e r foreign markets a n d defeat foreign plants. A n d the countries that pursue such an objective', they continued, 'are neither T u r k e y nor C o l o m b i a , but Britain, the U n i t e d States, France a n d G e r m a n y , the four giants o f the w o r l d economy.' It w a s thus in Italy's interests to support production at T e r n i , even if it w a s necessary to p a y higher prices, rather than to allow it to be s w a l l o w e d u p b y foreign competition. N o n e the less, from a theoretical point o f view, the nationalists did n o t a d m i t to b e i n g in favour o f either protectionism 6

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or free trade. T h e y a r g u e d 'that the pursuit of a customs policy m i g h t in some cases be to the a d v a n t a g e o f industry a n d [was] therefore to be a d o p t e d ' , a n d 'that in other cases free trade [was] preferable': in other words, they considered themselves to be 'above all, p r a g m a t i c in real l i f e ' . It w a s because of such p r a g m a t i s m a n d the fact that similar policies h a d b e e n i m p l e m e n t e d b y foreign g o v e r n m e n t s to defend their industries, that they a c c e p t e d , albeit w i t h reservations, the setting up o f trusts, such as those for shipyards and sugar refineries. C e n t r a l to their thinking w a s the assumption that ' e v e r y injury to industry or agriculture [was] an obstacle to progress a n d every obstacle [was] an a d v a n t a g e h a n d e d over to foreign industry a n d a delay in the d e v e l o p m e n t o f the e c o n o m i c , intellectual, sanitary conditions o f [Italy's] p r o l e t a r i a t ' . C o l o n i a l expansionism as a w a y of a c c e d i n g to n e w markets in the w a k e of industrial g r o w t h gained currency even outside the nationalist m o v e m e n t . T h i s was a sign that the idea reflected a c o m m o n aspiration. A c c o r d i n g to the reputable scholar M a r c o Fanno, the world market was divided not b e t w e e n developed and u n d e v e l o p e d countries, but between 'industrial capitalism' — concentrated in western Europe and on the Atlantic coast — and 'agrarian capitalism', w h i c h , after the previous favourable period in the second half o f the nineteenth century, was n o w showing increasingly declining terms o f t r a d e . Italian imperialism was in search not only of agrarian and industrial outlets, but above all in search of farmland; that is, Italian imperialism was 'the imperialism of poor people', as it used to be called, or again 'proletarian i m p e r i a l i s m ' . In fact those were the outstanding years of Italian e m i g r a t i o n . Hundreds of thousands o f southern Italians, mostly peasants, set sail from the ports of Naples and Palermo, mostly b o u n d for N o r t h A m e r i c a . A n d since this diaspora was depopulating regions such as Basilicata, C a l a b r i a and Sicily, the nationalists stressed the great benefits that w o u l d derive for the mass of emigrants from Italian colonisation o f north A f r i c a . A p a r t from d e m o g r a p h i c vitality as an impulse for expansion a n d the settlement o f colonial lands, another recurring t h e m e in Italian nationalist thinking w a s , as has already b e e n m e n t i o n e d , the insistence on the n e e d to speed up the country's industrialisation. A g a i n s t positivist theories that did not attribute southern Italians w i t h an aptitude for industrial work, nationalists a n d others a r g u e d that there w a s n o antino m y b e t w e e n industrialisation a n d the L a t i n race. T h e industrial progress r e c o r d e d in north Italy s h o w e d indisputably that the c o u n t r y h a d an aptitude for industrial activity. I n d e e d , w a s not Magna Graecia an 10

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industrialised area w h e n n o r t h e r n E u r o p e , including n o r t h Italy, l a g g e d far b e h i n d as regards the r a n g e a n d the sophistication o f its industrial products? T h e r e f o r e , in order to p r o m o t e industrialisation it w a s i m p o r ­ tant to a d o p t measures that facilitated industrial g r o w t h in south Italy. A l l the m o r e so since industrialisation w a s 'the great e d u c a t o r o f the p o o r a n d the w o n d r o u s p r o p a g a t o r o f civilisation'; 'the d y n a m o m e t e r o f their expansion f o r c e s ' . After the 1907—8 recession, w h i c h h a d c u r b e d Italian e m i g r a t i o n and increased repatriation, Italy also benefited from the general i m p r o v e m e n t in the e c o n o m i c situation. T h e rate of industrial g r o w t h b e g a n to rise again, a l t h o u g h not to the same extent as the previous period: from 1908—13 the average annual increase in industrial p r o d u c t i o n w a s 2 . 4 per cent. T h e m a i n increases w e r e r e c o r d e d in the metallurgical, engineering a n d c h e m i c a l industries b e t w e e n 1 8 8 1 and 1 9 1 3 . A c c o r d i n g to G e r s h e n k r o n ' s figures, metallurgical industries s h o w e d an annual g r o w t h rate o f 9.3 per cent, e n g i n e e r i n g industries 4.7 per cent a n d c h e m i c a l industries 1 1 . 3 per cent. B u t annual increases w e r e also r e c o r d e d in the textile a n d food s e c t o r s , a n d especially in the electrical industry w h e r e output rose considerably. Industrial d e v e l o p m e n t w a s a c c o m p a n i e d b y the consolidation o f the b a n k i n g system w i t h the entry o f a fourth large m i x e d b a n k into the capital market, S o c i e t a B a n c a r i a Italiana. In addition, several Italian banks o p e n e d subsidiaries in France, Britain, the U n i t e d States a n d other c o u n t r i e s , while various mergers w e r e taking place, especially a m o n g co-operative banks and savings banks. Progress w a s also r e c o r d e d by joint-stock c o m p a n i e s , w h i c h increased in n u m b e r as well as in the capital a n d reserves they possessed. A c c o r d i n g to the figures o f the N a t i o n a l Statistics Institute, there w a s a significant increase in the a c c u m u l a t i o n o f s a v i n g s , w h i c h w a s stimu­ lated b y the increasing flow o f e m i g r a n t remittances; w i t h the e n d i n g o f the 1907—8 crisis, m i g r a t i o n h a d started to g r o w a g a i n , especially towards the U n i t e d States. A t the same time, investment in h o u s i n g c o n t i n u e d to grow, a sign o f the persistent m o v e m e n t o f peasant masses towards industrial centres, as did investment in installations a n d e q u i p m e n t , while investment in p u b l i c w o r k s m o r e t h a n d o u b l e d . In c o n c o m i t a n c e w i t h p o p u l a t i o n g r o w t h the n u m b e r of people e m p l o y e d in p u b l i c w o r k s a n d factories also increased. T r a d e unions a n d w o r k e r s ' political o r g a n isations w e r e also strengthened w i t h the e m e r g e n c e o f t w o o p p o s i n g currents o f opinion: one reformist a n d one revolutionary, o f Sorelian origin. S u c h a flurry of activity gave further impetus to the nationalist m o v e 17

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m e n t . B e t w e e n 1 9 0 8 a n d 1 9 1 1 the n u m b e r o f nationalist periodicals m u s h r o o m e d w i t h Il Carroccio (1909), La Grande Italia (1909), Il Tricolore (1909) a n d L'IdeaNazionale ( 1 9 1 1 ) . A t the same time a plethora o f nation­ alist articles a p p e a r e d in various newspapers. T o w a r d s the end o f 1 9 1 0 , the first Nationalist C o n g r e s s addressed the e c o n o m i c p r o b l e m a n d the speech on ' G r e a t Italy's e c o n o m i c policy' w a s given by Filippo Carli, then professor at the University o f P a d u a . For Carli, Italy's industrial d e v e l o p m e n t h a d hitherto b e e n financed by foreign capital. O n the one h a n d this w a s a positive factor because it h a d r e d u c e d the time n e e d e d for Italy's industrial take-off; on the other h a n d it w a s negative because it h a d led to a d e p e n d e n c e on foreign m a c h i n e r y a n d a delay in the d e v e l o p m e n t o f the e n g i n e e r i n g industry a n d the training o f engineers. T h i s delay e m e r g e d from a c o m p a r i s o n b e t w e e n the production a n d c o m m e r c i a l systems in G e r m a n y a n d Italy, w h i c h saw G e r m a n y perf o r m i n g far better than Italy not only in the p r o d u c t i o n a n d c o m m e r c i a l isation o f g o o d s but also as regards education; in G e r m a n y education r e s p o n d e d to the needs o f industrial d e v e l o p m e n t while in Italy the emphasis continued to be on general culture, even in the field o f technology. T h e r e f o r e Italy h a d to a i m at the creation o f a powerful engin e e r i n g industry, the industrialisation o f agriculture, the setting-up o f industrialists' associations with the purpose o f training staff entrusted w i t h the task o f selling industrial products in foreign markets, the creation o f a large m e r c h a n t n a v y a n d the a d o p t i o n of simple a n d practical transport tariffs like those o f the Schnittfrachtsatze. A s for Italy's trade expansion, C a r l i a r g u e d that this should be directed towards the L e v a n t w i t h the aid o f a sound b a n k i n g s y s t e m . Protectionism w a s to be the basis o f this policy but on this point there was no c o n v e r g e n c e at the C o n g r e s s . M a i n l y interested in g a i n i n g power, the nationalists did not wish to m a k e a c o m m i t m e n t and since some participants a r g u e d that protectionism h a d b e e n the m a i n i m p e d i m e n t to Italy's industrial d e v e l o p m e n t the C o n g r e s s c o n c l u d e d that the time w a s not yet ripe to choose b e t w e e n free trade a n d protectionism. N o n e the less, the C o n g r e s s gave birth to the A s s o c i a z i o n e Nazionalista I t a l i a n a , w h i c h w a s organised into sections in all the chief towns t h r o u g h o u t the country, w h e r e the m o v e m e n t sought to gain w i d e s p r e a d support a m o n g the population. T h e speech given b y E. C o r r a d i n i , one o f the m o v e ­ ment's m a i n theorists, in J a n u a r y 1911 in N a p l e s w a s thus repeated in F l o r e n c e , Venice, P a d u a , V e r o n a a n d A r e z z o . In these speeches, w h i c h w e r e held in towns u p a n d d o w n the country, it w a s a r g u e d that 'nationalism w a s s o m e t h i n g quite different from 22

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"patriotism"': while patriotism w a s selfless, nationalism m e a n t selfishness; that is, 'the d e v e l o p m e n t o f the sense o f p o w e r enclosed in the w o r d " n a t i o n " ' . In particular 'the nation [had to be] p o w e r ; the army, the force, the m e a n s ' . In order for this to h a p p e n , Italy h a d to shrug off the state o f e c o n o m i c a n d m o r a l d e p e n d e n c e in w h i c h it lived in the same w a y as it h a d s h r u g g e d off political d e p e n d e n c e . Despite this, the events that took place in Italy in 1911 a n d 1 9 1 2 (the l a n d i n g at Tripoli to c o n q u e r L i b y a , a n d the exclusion o f foreign insurance c o m p a n i e s from the insurance market w i t h the creation o f the N a t i o n a l Insurance Institute ( I N A Instituto N a z i o n a l e delle Assicurazioni)) resulted not from the action o f nationalists but from their opponents. B o t h as regards the conquest o f L i b y a a n d the measures against foreign insurance c o m p a n i e s , the nationalists w e r e beaten in their timing. T h e g o v e r n m e n t , they wrote, 'has taken a w a y the b r e a d from the m o u t h s o f the nationalists' even t h o u g h the nationalists sought to use the L i b y a n c a m p a i g n to g a i n w i d e r consensus. It should also be a d d e d that r e g a r d i n g the nationalisation o f life-insurance c o m panies, several e m i n e n t nationalists took a stand against g o v e r n m e n t m o n o p o l y ; they v i e w e d it as a political manifestation o f state socialism that w a s a d v o c a t e d by the trade unionists a n d not as the assertion o f national interests. It w a s only in 1 9 1 4 that a discourse on the e c o n o m y a p p e a r e d that w a s clearly a n d o p e n l y nationalist in its inspiration. T h e author w a s an illustrious university professor, Alfredo R o c c o , recently converted to nationalism, w h o w a s later to b e c o m e Minister of Justice in Mussolini's g o v e r n m e n t . For Alfredo R o c c o , 'Italy's e c o n o m i c p r o b l e m w a s a pro­ duction p r o b l e m a n d n o t a p r o b l e m o f w e a l t h distribution' given — as 'statistics show — Italy's e n o r m o u s e c o n o m i c inferiority c o m p a r e d to nearly all the major E u r o p e a n countries'. In other w o r d s , as far as w e a l t h w a s c o n c e r n e d , there w a s an e n o r m o u s g a p b e t w e e n Italy a n d the m a i n western countries. Italy's private w e a l t h — estimated at a r o u n d 50—5 billion lire in the 1 8 8 0 s — h a d risen to 80—5 billion lire in 1 9 1 4 . In the same year the figure for Britain w a s 350—400 billion, for France 280—300 billion, for G e r m a n y 400—50 billion a n d for A u s t r i a - H u n g a r y 120—30 billion lire. It w a s calculated, therefore, that if Italy h a d m a n a g e d to b r i n g her w e a l t h to French or G e r m a n levels, the i n c o m e o f workers w o u l d have increased by 3 0 0 per cent and not the 14—15 per cent h o p e d for in the nationalists' political p r o g r a m m e . W i t h the a i m o f increasing production, R o c c o ' s e c o n o m i c prog r a m m e envisaged the r e c l a m a t i o n a n d irrigation o f m a r s h l a n d in south 26

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Italy and on the islands, the valorisation o f a large area o f uncultivated or scarcely productive land a n d at the same time a better use o f hydraulic forces for the production of electricity. A n d yet the central point o f Italy's e c o n o m i c d e v e l o p m e n t in his opinion continued to be the country's territorial expansion. Italy's e c o n o m i c d i l e m m a lay in the b i n o m i a l p o o r land/fertile population. Italians h a d to get used to v i e w i n g pacific emigration, such as the h u g e m i g r a t o r y m o v e m e n t that w a s taking place towards the U n i t e d States, as unsuitable and realise the n e e d 'to turn to another f o r m of emigration, a r m e d emigration, w h i c h is t a n t a m o u n t to w a r ' . B u t this w a s a task for the future. ' T h e task o f the present,' he urged, 'other than the preparation o f souls, is the intensification o f production at h o m e and pacific expansion a b r o a d . ' T h e increase in domestic output h a d to be achieved not only by g o v e r n m e n t action as regards public works, the diffusion o f p o p u l a r and professional culture a n d scientific and technological progress, but also through private action and initiative with the g o v e r n m e n t providing careful and valuable co-operation. M o s t o f R o c c o ' s discourse was c o n ­ c e r n e d with illustrating the social action o f the Nationalist Party, w h i c h saw the n e e d for a better distribution o f income on b e h a l f o f workers and a c c e p t e d class conflict. ' O n l y ' , he specified, 'class conflict must not be denied nor forbidden but disciplined and restrained so that in a contest b e t w e e n two parties, a third party w h o is not involved in the struggle and w h o s e interests are above any party - that is to say, the N a t i o n - is not d a m a g e d or injured.' In this respect the nation w a s to be v i e w e d as one single unity with specific interests to safeguard and bodies to protect t h e m . T h u s 'a national party should not [have] hesitate[d] to support the workers since their d e m a n d s coincided w i t h national interests'; therefore alongside an 'anti-national and anti-state trade unionism' and a ' C a t h o l i c trade unionism', a 'national trade unionism' w a s advocated. A b o u t three m o n t h s after the a n n o u n c e m e n t o f these views, in a b r o a d e r a n d m o r e c o m p l e x essay entitled ' E c o n o m i a liberale, E c o n o m i a socialista ed E c o n o m i a n a z i o n a l e ' published in the Rivista delle Societa Commerciali, R o c c o gave p r o o f o f his historical, legal and e c o n o m i c train­ ing a n d o f the sophistication o f his analyses, as well as his great debating skills. First he presented a e u l o g y of Frederick List, w h o h a d set out to revise the basic concepts o f the individualist e c o n o m y in 1841 a n d to w h o m G e r m a n y w a s indebted for its o w n school o f e c o n o m i c s a n d for its consciousness o f national needs in relation to the economy. A c c o r d i n g to R o c c o , in the space o f fifty years these factors h a d m a d e G e r m a n y

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'the feared a n d often victorious rival o f G r e a t Britain in the sphere o f trade a n d i n d u s t r y ' . T h e n he pointed out that individuals w h o at a par­ ticular m o m e n t in time f o r m a particular society, 'are not this society, w h i c h lives t h r o u g h the centuries, a n d includes all the generations that have b e e n a n d are yet to c o m e ' . T h e r e f o r e individuals are m e r e l y the bodies and instruments o f its aims. ' A n d as l o n g as individuals keep within the limits o f their function, as often h a p p e n s w h e n the obscure instinct o f the species is w o r k i n g within t h e m , societies progress.' A g a i n s t a 'presentist' v i e w R o c c o a d v a n c e d a v i e w b a s e d on future benefits a c c o r d i n g to w h i c h costs a n d sacrifices w e r e justified w h e n they b r o u g h t national benefits; that is, w h e n they p r o d u c e d benefits for the future. N a t u r a l l y R o c c o justified a p o l i c y o f protectionism w h e n a c o u n t r y w a s p o o r a n d unfavourably e n d o w e d as regards p r o d u c t i o n , w h e n a particular industry w a s u n d e r g o i n g a crisis, or w h e n an industry w a s c o n sidered to be o f national strategic i m p o r t a n c e 'for reasons o f state security'. It is well k n o w n that this essay f o r m e d a large part o f the address that R o c c o gave to the Nationalist C o n g r e s s in M i l a n in M a y 1 9 1 4 together w i t h Filippo Carli. T h i s w a s an important congress since the debate on e c o n o m i c p o l i c y led to a s e c o n d schism within the m o v e m e n t , the first h a v i n g b e e n that o f the d e m o c r a t i c nationalists. T h o s e w h o w e r e m o r e in favour o f free trade left the m o v e m e n t since the majority espoused most o f R o c c o ' s ideas a n d opted for a p o l i c y o f state intervention in industry a n d p r o t e c t i o n i s m . T h i s m o v e towards a stricter policy o f intervention a n d protectionism a n d a w a y from a position w h i c h up till then h a d b e e n m a r k e d b y a deliberate p r a g m a t i s m , w a s dictated by d e v e l o p m e n t s in the international economy. N e w countries w e r e industrialising. T h e m a r k e t w a s shrinking a n d in some cases large industrial plants in Italy, such as those of h e a v y industry (iron a n d steel), h a d m a n a g e d to survive only t h r o u g h the large-scale intervention o f banks a n d by r e d u c i n g production. In order to defend themselves from foreign competition, cartels a n d c o n sortiums h a d b e e n set u p in various sectors o f industry in Italy as they h a d b e e n in other parts o f the world. T h e d a n g e r o f excessive indebtedness w i t h banks h a d n o t b e e n dispelled a n d thus protectionism a n d state intervention a p p e a r e d to be an indispensable m e a n s o f defence, especially in the eyes o f the nationalists w h o , despite declarations calling for action on b e h a l f o f agriculture, w e r e basically tied to the t o w n and b i g industry. For a c o u n t r y like Italy, w h i c h h a d not yet fully industrialised a n d 30

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w h i c h w a s still far from r e a c h i n g the levels attained b y other western countries, it w a s not a question o f c o m p a r i n g itself w i t h other countries but rather of protecting itself from other countries' v i g o u r a n d aggressiveness. A n t i - A u s t r i a n in its foreign policy t h r o u g h fear o f Austrian d o m i n a ­ tion o f the Adriatic, the nationalists w e r e in favour o f Italy's g o i n g to w a r from the v e r y outbreak o f hostilities, a n d considered the country's initial neutrality 'as a necessary w a i t i n g period before taking its place in battle in a resolute w a y ' . I n d e e d , in M a y 1 9 1 5 Italy entered the w a r against A u s t r i a - H u n g a r y a n d therefore against G e r m a n y . T h e w a r gave a considerable boost to Italian industry. A p a r t from the n e e d for textiles, clothing, leather g o o d s a n d foodstuffs, there w a s a continuous and relentless n e e d for a r m a m e n t s , a m m u n i t i o n , ships a n d trucks, w h i c h stimulated the metallurgical a n d engineering industries. T h e s e w e r e all sectors m a i n l y b e l o n g i n g to h e a v y industry a n d therefore w a r t i m e d e m a n d gave rise to indisputable technological progress, innovation a n d increases in s c a l e . H o w e v e r , such progress w a s obtained in a disorganised a n d hurried w a y a n d w i t h o u t the possibility o f deriving the benefits that such a process usually engenders in terms o f costs a n d v o l u m e . T h e indifference towards problems o f cost and c o m p a n y efficiency w a s also partly linked to the fact that g o v e r n m e n t orders — w h i c h increased considerably a n d w h i c h all d e m a n d e d urgent consignm e n t — w e r e p l a c e d w i t h o u t sparing any expense. T h e funding n e e d e d to finance the increase in p r o d u c t i o n a n d the expansion o f these industries, w i t h the g r o w t h in the n u m b e r o f factory plants, mostly c a m e from the four m i x e d banks that have already b e e n referred to, including S o c i e t a B a n c a r i a Italiana, w h i c h in 1 9 1 4 b e c a m e B a n c a Italiana di S c o n t o following m e r g e r s w i t h other banks. For the duration o f the w a r these banks p e r f o r m e d an essential role in speeding u p the process o f vertical and horizontal industrial c o m b i n a t i o n , w h i c h w a s a completely n e w experience for Italian industry. T h e most outstanding e x a m p l e s o f this process o f c o m b i n a t i o n w e r e to be found in the iron a n d steel industry, w h e r e two large c o m p a n i e s , Ilva a n d A n s a l d o , r e a c h e d v e r y high levels o f p r o d u c t i o n and w e n t on to b e c o m e the pillars of Italian industry. T h e w a r also provided Italy's aircraft, c h e m i c a l a n d electricity industries with an opportunity for d e v e l o p m e n t . A p a r t from the war, the considerable g r o w t h in industry w a s also m a d e possible b y a series o f g o v e r n m e n t measures. T h e g o v e r n m e n t gave industries that w e r e directly or indirectly linked to the w a r effort various forms o f incentive. T h e s e r a n g e d from substantial a d v a n c e s in 3 3

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the p a y m e n t of g o v e r n m e n t contracts to large contributions for p a y i n g off n e w installations, a n d customs exemptions on m a c h i n e r y a n d materi­ als p u r c h a s e d for installations in n e w f a c t o r i e s . T h i s p o l i c y a n d a n o t h e r p o l i c y in favour of g o v e r n m e n t o w n e r s h i p a n d control o f the w a r industry in particular and o f industry in general, w h i c h e m e r g e d in the debates o f those years, s h o w e d that nationalist t h o u g h t h a d p e r v a d e d m u c h o f public opinion, converting even e m i n e n t liberals w h o u p till then h a d b e e n staunch supporters o f g o v e r n m e n t non-intervention in the economy, especially in industry. T h e d i s b a n d i n g o f the a r m y a n d the dismantling o f industry after the w a r threw the c o u n t r y into a terrible crisis, w h i c h w a s a c c o m p a n i e d by rising inflation. S o m e sectors w e r e affected b y total paralysis t h r o u g h the lack o f r a w materials, uncompetitiveness, the difficulty in converting w a r t i m e p r o d u c t i o n to p e a c e t i m e p r o d u c t i o n , and c u r r e n c y scarcity. A l l this w a s h a p p e n i n g at a time w h e n socialists w e r e stirring u p revolutionary ferment t h r o u g h o u t the country, w h i c h b e c a m e increasingly threate n i n g a n d aggressive in 1 9 1 9 a n d 1 9 2 0 especially considering the serious e c o n o m i c crisis the c o u n t r y w a s undergoing. T h e socialists v i e w e d the nationalists as their worst enemies b e c a u s e the latter h a d always b e e n in favour o f Italy's g o i n g to w a r while the socialists h a d o p p o s e d it v e r y strongly. Since the nationalists h a d w a n t e d Italy to take part in the w a r as a m e a n s of speeding up imperial expansion, the failure to achieve the aims of e x p a n s i o n in A s i a M i n o r at the end o f the w a r gave rise to their insis­ tence on the m y t h o f a 'mutilated v i c t o r y ' a n d their b l a m i n g the liberal a n d d e m o c r a t i c g r o u p s w h o w e r e then in p o w e r for responsibility o f the failure. A s most historians have c o n c u r r e d , it w a s the nationalists' c o n tinual a n d v e h e m e n t attacks that drove the Fascist m o v e m e n t to a d o p t an anti-system stance (the Fascist m o v e m e n t h a d risen in 1 9 1 9 , a n d in 1921 its actions h a d not yet overshot the b o u n d s o f l e g a l i t y ) . A t the same time, to counter the g o v e r n m e n t formulae a d v a n c e d b y the socialists, the nationalists a d v o c a t e d w h a t w a s afterwards to b e c o m e the basis o f Fascist corporativism. In 1 9 1 9 , stressing that the m a i n e c o ­ n o m i c objective h a d to be an increase in p r o d u c t i o n , the nationalists a r g u e d that industrialists h a d to f o r m part o f a r e g i m e that w a s m a d e u p of 'bodies [having] the utmost sensitivity towards their particular inter­ ests'; that is, in 'an organisation . . . m a d e u p o f the direct representatives of all trade unions, b o t h industrialist a n d w o r k e r ' in order to replace the conflict b e t w e e n parties by a conflict b e t w e e n unions; a conflict w h i c h w o u l d find, in the end, 'that unity a m o n g particular interests w h i c h is 36

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c o m m o n l y k n o w n as general interest', a n d from w h i c h 'capital a n d l a b o u r ' c o u l d not recoil w i t h o u t destroying one a n o t h e r . Still m o r e explicitly, in the w o r d s a d d e d by R o c c o to the nationalist p r o g r a m m e of 1 9 1 9 , they declared that 'the c o m m o n principle that necessarily governs a n d must g o v e r n the N a t i o n is the corporative p r i n c i p l e ' , m e a n i n g it not in a n a r r o w sense as a s y n o n y m for w o r k e r trade unionism, since the trade union organisation also h a d to 'include entrepreneurs, industry's chiefs and engineers' and e m b r a c e agriculture and the professions. ' W h e n w e have created the large trade unions o f production,' R o c c o carries on, ' w h i c h will also be bodies o f g o v e r n m e n t interest, w e c a n expect the State to intervene in the country's e c o n o m y w i t h the neces­ sary m e a n s a n d institutions.' S u c h an a p p r o a c h affected the w h o l e structure o f g o v e r n m e n t , the functioning o f institutions a n d thus the survival o f political parties as well as their political role. It is no accident that this p r o g r a m m e o f e c o n o m i c a n d political restructuring o f the Italian state w a s carried out after the fall o f the Liberal, C a t h o l i c a n d Fascist C o a l i t i o n g o v e r n m e n t in 1 9 2 4 following the assassination o f Matteotti that h a d b r o u g h t Mussolini to power, with the inception o f Mussolini's dictatorship in J a n u a r y 1 9 2 5 . A t the b e g i n ning, relations b e t w e e n the nationalist a n d the Fascist m o v e m e n t s w e r e not totally v o i d o f conflict, but in F e b r u a r y 1 9 2 3 they m e r g e d a n d h e n c e forth nationalism, an elite m o v e m e n t , w h i c h h a d always sought to influence the doctrine a n d policies o f the Fascist m o v e m e n t suggesting plans for g o v e r n m e n t action, prevailed. Mussolini's full assuming o f p o w e r enabled the m o v e m e n t to display all its strength. In 1925 the Fascist trade unions w e r e given the m o n o p o l y over w o r k e r a n d peasant representation; on 2 O c t o b e r o f the same year a special l a b o u r authority w a s set u p to decide over disputes b e t w e e n workers a n d m a n a g e m e n t ; on 3 A p r i l 1 9 2 6 a single trade union for e a c h c a t e g o r y of workers w a s created; on 10July 1 9 2 6 the n u m b e r of w o r k e r trade union confederations allowed w a s limited to six, one for e a c h b r a n c h o f p r o d u c t i o n (industry, agriculture, trade, sea a n d air transport, land transport a n d c o m m u n i c a t i o n s , b a n k i n g a n d insurance), against w h i c h there w a s to be an identical n u m b e r o f c o r r e s p o n d i n g organisations representing m a n a g e m e n t . T h e twelve confederations formed the corporations, w i t h the addition o f a thirteenth confederation representing professional p e o p l e a n d artists. T h i s restructuring w a s c o m p l e t e d on 2 July 1 9 2 6 w i t h the setting u p of the M i n i s t r y o f C o r p o r a t i o n s . It is significant that all these measures w e r e p r o m o t e d a n d / o r signed b y Alfredo R o c c o , the Minister of Justice, one o f the nationalist m o v e m e n t ' s most influential spokesmen, as w e 39

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have already seen. R o c c o w a s also responsible for drafting the final text of the L a b o u r Charter, w h i c h , w i t h the text presented by the Fascist Bottai, sanctioned 'the superiority of the values o f capital a n d technol­ o g y over the values o f l a b o u r ' . W i t h o u t d w e l l i n g on the actual functioning o f the corporations, it should be pointed out that corporations only b e g a n to operate in 1 9 3 4 — that is, in the aftermath o f the 1 9 2 9 G r e a t Depression. T h e other g o a l o f the nationalist p r o g r a m m e that w a s looked favour­ ably u p o n by Mussolini — a m o r e active a n d incisive policy o f overseas expansion — started to materialise in July 1 9 2 3 w h e n the Italian g o v e r n ­ m e n t m a n a g e d to obtain the concession o f the A e g e a n Islands (the Dodecanneso) at the C o n f e r e n c e o f L a u s a n n e . T h i s gave rise to a dispute w i t h the G r e e k g o v e r n m e n t involving military intervention a n d the o c c u p a t i o n o f C o r f u by the Italian naval squadron. In the end, u n d e r pressure from Britain, Mussolini a b a n d o n e d the island, a c c e p t i n g the partial apologies o f the G r e e k g o v e r n m e n t . In the following years, the d y n a m i s m o f Mussolini's foreign policy grew. In 1 9 2 6 , at the height o f an e c o n o m i c crisis due to the b a d g r a i n harvests o f 1 9 2 4 / 5 , Mussolini publicly p r o c l a i m e d his ambition to e x p a n d Italy's influence in the M e d i t e r r a n e a n . In 1927 he stipulated a series o f treaties w i t h countries in eastern a n d central E u r o p e , w h i c h caused tension in Italy's relations w i t h France. A n d although the 1 9 2 9 crisis put a brake on Mussolini's foreign policy activism, after 1 9 3 4 — w h e n the crisis w a s over — political a n d military events s u c c e e d e d one another, all b e a r i n g the stamp o f expansionism a n d nationalism. T h e s e w e r e : in 1 9 3 5 the invasion o f E t h i o p i a a n d the c o n s e q u e n t founding o f the empire; in 1 9 3 6 the n o n - d e c l a r e d intervention in the Spanish C i v i l W a r ; in 1 9 3 9 the invasion a n d o c c u p a t i o n o f A l b a n i a ; finally, in J u n e 1 9 4 0 , Italy's siding with G e r m a n y in the w a r against France a n d G r e a t Britain. Nationalist i d e o l o g y h a d s u c c e e d e d in driving Italian foreign policy towards colonial expansion a n d war. B u t w h a t results did it obtain as far as the e c o n o m y w a s c o n c e r n e d ? A b o v e , reference w a s m a d e to the institutional revolution carried out b y the g o v e r n m e n t in the country's productive structure. N o t h i n g has b e e n said a b o u t the e c o n o m i c conditions out o f w h i c h the revolution arose a n d a b o u t the changes it e n g e n d e r e d . It should be r e m e m b e r e d at this point that w h e n Mussolini assumed p o w e r for the first time, at the end o f O c t o b e r 1 9 2 2 , the grave postwar e c o n o m i c , m o n e t a r y a n d financial crisis w a s virtually over, a l t h o u g h it h a d b r o u g h t n u m e r o u s 43

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bankruptcies in its w a k e , including the collapse o f the t w o giant engi­ n e e r i n g c o m p a n i e s , I L V A a n d A n s a l d o , a n d the close o f B a n c a Italiana di S c o n t o , one o f Italy's four largest m i x e d banks. M o r e o v e r , after the U n i t e d States h a d closed its doors to free i m m i g r a t i o n , u n e m p l o y m e n t spread considerably. A s an A m e r i c a n historian has r e m a r k e d , it is u n d e r standable w h y g o v e r n m e n t policy in the p e r i o d 1 9 2 2 - 6 , especially indus­ trial policy, gave ' e c o n o m i c d e v e l o p m e n t priority over social r e f o r m ' ; and, indeed, d u r i n g this p e r i o d industrial g r o w t h w a s continuous a n d significant. T h e situation c h a n g e d in 1 9 2 6 a n d 1927 w h e n Mussolini sought to curb the fall o f the lire, w h i c h h a d b e e n d e v a l u e d b y at least 30 per cent following the b a d harvests from 1 9 2 4 to 1 9 2 6 , b r i n g i n g its value to the p r e - 1 9 2 2 level. Deflation h a d disastrous repercussions for industry, w i t h a m a r k e d fall in p r o d u c t i o n , a n d closures a n d c o m p a n y bankruptcies, at a time w h e n the e c o n o m i c situation w a s euphoric in the western w o r l d , especially in the U n i t e d States. T h e agricultural crisis w a s followed b y an industrial crisis. U n d e r the pressure o f continuous d e m o g r a p h i c g r o w t h , w h i c h the g o v e r n m e n t itself sought to e n c o u r a g e t h r o u g h various measures, u n e m p l o y m e n t w o r s e n e d d u r i n g the 1 9 3 0 s crisis. In order to curb it, the g o v e r n m e n t took measures to create e m p l o y m e n t b o t h in the public sector a n d in agriculture. F r o m the end o f the 1 9 2 0 s to the m i d - i 9 3 0 s , there w a s a g r a d u a l increase in direct a n d indirect e m p l o y m e n t in the large n u m b e r of public works u n d e r t a k e n to m o d e r n i s e the m a i n towns (roads, w a t e r supply, sewers a n d schools) and in the w o r k to r e c l a i m land in various regions, including the r e c l a m a t i o n o f the Pontine M a r s h e s , n e a r to R o m e , a n d their settlement a n d conversion to farmland. B o t h on r e c l a i m e d land and, m o r e generally, on already cultivated land there w a s a great effort to increase productivity t h r o u g h the n e w l y created g o v e r n ­ m e n t incentives w i t h a w i d e r use o f artificial fertilisers, great m e c h a n i s a tion and k n o w l e d g e a b o u t agricultural t e c h n o l o g y as well as i m p r o v e d credit facilities a n d various incentives a n d prizes. In this way, agricultural p r o d u c t i o n m a d e substantial progress. Y e t it w a s in industry that the results w e r e the most notable, particularly considering the crisis that h a d l o n g overrun the m a n u f a c t u r i n g sector in Italy. In 1 9 2 9 , just w h e n Italian industry w a s e m e r g i n g from the depression caused b y deflation, the w o r l d recession set in a n d struck not only industry but also agriculture following the collapse in g r a i n prices. W i t h the shrinking o f the d o m e s ­ tic m a r k e t a n d the difficulty in a c c e d i n g to the international m a r k e t as a 44

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result o f the protectionist customs policies a d o p t e d b y various countries, Italian industry w e n t t h r o u g h one o f the most dramatic periods in its history. It should be a d d e d that the industrial immobilisation that h a d b e e n a d o p t e d since the e n d o f the w a r h a d b e c o m e e n o r m o u s a n d w a s stifling the banks that h a d financed it, above all B a n c a C o m m e r c i a l e a n d C r e d i t o Italiano. In addition to the measures taken to control the situation, such as the creation o f c o m p u l s o r y consortia a m o n g c o m p a n i e s in the same line o f business, the n e e d for g o v e r n m e n t authorisation to enlarge or set u p n e w plants, and checks on internal emigration, in 1 9 3 3 Istituto M o b i l i a r e Italiano (IMI) w a s set up, a l t h o u g h the situation did not improve v e r y m u c h . R e c o v e r y b e g a n only in 1 9 3 3 w i t h the creation o f Istituto per la R i c o s t r u z i o n e Industriale (IRI), w h i c h availed itself o f a substantial l o a n issued on the h o m e m a r k e t and took over the three m i x e d banks, freeing t h e m from industrial immobilisation. W h i l e a l l o w i n g e a c h c o m p a n y to continue to be administered a c c o r d ­ ing to private-sector criteria, I R I set u p a central h o l d i n g for e a c h sector (IRI-ferro, I R I - m a r e , I R I - S T E T (telephones), F i n - M e c c a n i c a , Finelettrica, etc.), a n d got r e a d y to carry out a p r o g r a m m e o f c o m p a n y reorganisation w i t h the a i m o f selling businesses to the private sector after they h a d b e e n reorganised. T h e s e plans w e r e interrupted b y the events o f 1 9 3 5 - 6 , that is the sanctions i m p o s e d on Italy b y the U n i t e d N a t i o n s following the w a r against Abyssinia, w h i c h fully revealed Italy's d e p e n d e n c e on foreign powers. Mussolini b e c a m e c o n v i n c e d that if Italy w a n t e d to have an i n d e p e n d e n t a n d effective foreign p o l i c y a n d obtain e c o n o m i c indep e n d e n c e , I R I could be one o f the m e a n s o f a c h i e v i n g this aim. T h u s , created initially as the pivot o f a rescue operation, I R I w e n t on to b e c o m e the m e a n s for m a n a g i n g the industries that h a d b e e n saved a n d a major instrument in the g o v e r n m e n t ' s p o l i c y o f e c o n o m i c inter­ vention. T h r o u g h I R I , 'national industry' c a m e into being, controlling 9 0 per cent o f the country's m e r c h a n t navy, 7 5 per cent o f the country's pig- and cast-iron output, 4 5 per cent o f its r a w steel output, major building sites a n d n u m e r o u s other sectors. A s regards the banks, w h o s e parcel o f stock h a d b e e n cut o w i n g to the h u g e concentration o f shares in the h a n d s o f I R I , their p o w e r s as m i x e d banks w e r e taken a w a y b y a l a w o f 1 9 3 6 ; henceforth they w e r e authorised only to p e r f o r m ordinary credit services. T h e same l a w reorganised the entire b a n k i n g system, w i t h B a n c a d'Italia - w h i c h b e c a m e the sole issuing b a n k in 1 9 2 6 — at the centre. T h e t w o former south Italian banks

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of issue - B a n c o di N a p o l i a n d B a n c o di Sicilia - w e r e defined as publicsector banks, as w e r e several banks that h a d b e g u n as public banks such as Istituto S a n P a o l o di T o r i n o , M o n t e dei Paschi di S i e n a a n d B a n c a N a z i o n a l e di L a v o r o , while B a n c a C o m m e r c i a l e , B a n c o di R o m a a n d C r e d i t o Italiano b e c a m e banks o f national interest. T h e s e banks w e r e authorised to operate on a n a t i o n w i d e basis a n d to o p e n overseas b r a n c h e s ; after t h e m c a m e the local banks, the savings banks, the c o operative banks and rural banks, on w h o s e b e h a l f the g o v e r n m e n t sought to p r o m o t e mergers. T h u s , the w h o l e b a n k i n g system, w h i c h h a d b e c o m e specialised a n d organised a c c o r d i n g to different functions, w a s n o l o n g e r u n d e r private but g o v e r n m e n t control, even t h o u g h a small n u m b e r o f actions c o u l d be traded on the stock e x c h a n g e . A s well as taking over industry, the g o v e r n m e n t h a d also taken over banking; at the b e g i n n i n g o f the century it h a d taken over the railways. In 1 9 3 7 I R I w a s authorised to b e c o m e a shareholder in 'major industrial enterprises c o n c e r n e d w i t h national defence, autarky and the defence o f the E m p i r e ' (that is, L i b y a , Eritrea, A b y s s i n i a a n d Somalia). A u t a r k y arose from the g o v e r n m e n t ' s e c o n o m i c policy, subordinating the w h o l e e c o n o m y to ' g o v e r n m e n t discipline and control'. Offices a n d bodies w e r e set u p to centralise a n d control the prices o f i m p o r t e d r a w materials a n d other indispensable products. V a r i o u s measures w e r e a d o p t e d to foster the domestic p r o d u c t i o n o f the r a w materials n e e d e d b y industry or their surrogates, even at the cost of h e a v y sacrifices a n d expense. T h e m i n i n g sector w a s given an u n e x p e c t e d boost a n d w a s one of the sectors that s h o w e d the greatest progress. Similar efforts w e r e m a d e to increase the country's supply o f electricity a n d r e d u c e coal imports. I R I u n d e r t o o k to rationalise the industries that h a d c o m e u n d e r its control a n d to transform t h e m into c o n c e r n s p r o d u c i n g m a i n l y military g o o d s . T h e p o l i c y o f autarky a n d a r m a m e n t s led to an increased d e m a n d for all kinds o f industrial machinery, especially e n e r g y g e n e r a t i n g machinery, tools a n d precision instruments, a n d agricultural machinery. Consequently, the country's e n g i n e e r i n g industry r e c o r d e d great progress, even in areas that w e r e c o m p l e t e l y n e w to Italian industry, aided by the i m p r o v e m e n t in k n o w - h o w a n d skills a n d the results o f t e c h n o l o g i c a l a n d scientific study. Progress w a s m a d e b y the c h e m i c a l industry in sectors c o n n e c t e d to a r m a m e n t s p r o d u c t i o n a n d in those g e a r e d to the manufacture o f synthetic products, in order to cut d o w n on imports. T h e p r o d u c t i o n o f synthetic nitrogenous fertilisers, dyes, p h a r m a c e u t i c a l s , synthetic resins and artificial fibres w a s increased or

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started u p c o m p l e t e l y afresh. M o s t progress w a s a c h i e v e d by the mining, c h e m i c a l a n d electrical industries, by industries p r o d u c i n g instrumental g o o d s and all those industries influenced by the p o l i c y o f autarky or e n g a g e d in r e a r m a m e n t p r o g r a m m e s . T h e industrial system w a s d e v e l o p i n g in v e r y e x c e p t i o n a l c i r c u m ­ stances, a n d therefore its d e v e l o p m e n t , while significant, w a s i n c o m plete, u n b a l a n c e d , t e c h n o l o g i c a l l y b a c k w a r d in some sectors, a n d b u r d e n e d by costs that c o u l d never have b o r n e international c o m p e t i t i o n . W h a t is m o r e important, progress w a s a c h i e v e d at the cost o f sacrificing private per capita c o n s u m p t i o n , w h i c h returned to the level 46

47

o f 1 9 2 9 o n l y in 1 9 4 9 .

4 8

Industrial d e v e l o p m e n t r e c e i v e d a h e a v y b l o w d u r i n g the war, o w i n g to the scarcity o f r a w materials, aerial b o m b i n g s , a n d the d a m a g e to industrial a n d agricultural organisation a n d infrastructure c a u s e d by the fighting on national territory. T h e rate o f industrial p r o d u c t i o n (1938 = I O O ) , w h i c h h a d risen from 80 in 1 9 3 5 to 1 0 3 in 1 9 4 1 , p l u m m e t e d in the subsequent years, falling to 6 9 in 1 9 4 3 , 4 2 in 1 9 4 4 a n d 2 9 in 1 9 4 5 . A t the e n d o f the S e c o n d W o r l d W a r the rate o f p r o d u c t i o n h a d r e t u r n e d to its 1884 level. T h e end o f the w a r a n d the fall o f M u s s o l i n i did not b r i n g a b o u t a major t u r n a r o u n d in policy. A l t h o u g h autarky w a s a b a n d o n e d and there w a s n o m o r e talk o f colonial expansion, the statist edifice that derived from nationalism w a s n o t dismantled. T h e r e w e r e t w o conflicting schools of t h o u g h t in the country. O n e school, w h i c h consciously or unconsciously cultivated nationalism a n d w h i c h survived a m o n g certain social g r o u p s and w a s p r o p a g a t e d b y various parties b o t h right- a n d leftw i n g , w a s ill disposed to restore to the private sector n o t only the railw a y s , w h i c h h a d b e e n nationalised since 1 9 0 5 , a n d the b a n k i n g system, w h i c h h a d b e e n u n d e r g o v e r n m e n t control from 1 9 2 6 to 1 9 3 6 , but also a n u m b e r o f industrial sectors a n d c o m p a n i e s that h a d f o r m e d part o f I R I since 1 9 3 3 . I n d e e d , I R I c o n t i n u e d to take over ailing industries after 1 9 4 5 a n d later b r o u g h t together all state-owned industries u n d e r a single ministry, the M i n i s t r y for State O w n e r s h i p , w h i c h w a s especially set u p for the purpose. T h e other school o f t h o u g h t favoured a c o m p l e t e o p e n i n g u p to the m a r k e t a n d private initiative. H o w e v e r , a l t h o u g h its supporters o v e r c a m e considerable opposition a n d m a n a g e d to b r i n g the c o u n t r y into a w i d e r market, freeing it from customs restraints, firstly w i t h Italy's entry into the E u r o p e a n C o a l a n d Steel C o m m u n i t y in 1 9 5 3 a n d later its outright m e m b e r s h i p o f the E u r o p e a n E c o n o m i c C o m m u n i t y in 1 9 5 7 , they h a d to relinquish plans to restore to private 49

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initiative all the industrial activity controlled b y the state t h r o u g h g o v e r n m e n t agencies. I n d e e d , the state e x t e n d e d its influence into other sectors. In this c o n n e c t i o n t w o e x a m p l e s are particularly pertinent. T h e first regards the oil-producing a n d c h e m i c a l sector. In 1 9 5 3 the N a t i o n a l H y d r o c a r b o n C o r p o r a t i o n (Ente N a z i o n a l e Idrocarburi) — E N I — w a s set u p a n d w a s given a m o n o p o l y to search for m e t h a n e gas a n d oil t h r o u g h ­ out the Po Valley a n d a l o n g most of the A d r i a t i c continental shelf. A t the same time it c o m p e t e d fiercely w i t h the major foreign oil-producing countries in T h i r d W o r l d countries to procure the necessary supplies. E N I w a s also e n g a g e d in the manufacture o f chemicals and w a s to b e c o m e one o f the foremost p r o d u c e r s in the sector. T h e other e x a m p l e c o n c e r n s the electrical industry. H e r e , in contrast to the policy p u r s u e d d u r i n g the p e r i o d o f autarky in the interests of the country's defence, the a i m w a s n o t so m u c h the g r o w t h o f the national­ ised sector as the possibility o f using the price o f the sector's products, that is the tariff, as a tool of e c o n o m i c policy. U n d e r l y i n g the nationalisation o f the electrical industry w a s the idea o f m a n i p u l a t i n g prices to e n c o u r a g e the d e v e l o p m e n t o f certain sectors (agriculture, n e w or ailing industries), o f certain d e v e l o p i n g areas (south Italy, for example), a n d of social g r o u p s that w e r e especially n e e d y . T h u s the N a t i o n a l Electricity B o a r d (Ente N a z i o n a l e per l ' E n e r g i a Elettrica) — E N E L — c a m e into b e i n g in 1 9 6 2 . In the m i d - i 9 6 o s state enterprise w a s v i e w e d as a tool o f e c o n o m i c policy. S o u t h Italy w a s chosen as the area w h e r e I R I , E N I a n d E N E L w e r e to set u p n e w c o m p a n i e s . Instead o f p u r s u i n g the m a x i m i s a t i o n o f profit, state enterprise w a s thus used to stimulate industrial g r o w t h in depressed areas. T h i s policy led to the o p e n i n g o f the A l f a - R o m e o (Alfa Sud) carm a n u f a c t u r i n g plant at P o m i g l i a n o , w h i c h t o d a y belongs to Fiat, the o p e n i n g o f the iron a n d steel works at T a r a n t o and several others. Presented as a p o l i c y to foster the south's e c o n o m i c a n d social develo p m e n t , the creation o f these enterprises financed a n d m a n a g e d by the state repeated, in essence, the ideas and principles that h a d f o r m e d p a r t of the nationalist e c o n o m i c school o f t h o u g h t at the height o f its influence — that is, after the o c c u p a t i o n o f A b y s s i n i a in i 9 3 6 . E v e n t h o u g h the n e w political class that e m e r g e d after the w a r mostly a d h e r e d to M a r x i s t or C a t h o l i c ideology, w h i c h w a s quite different from nationalist thinking, it too w a s inclined to extol the role of the state in the country's e c o n o m i c d e v e l o p m e n t . T h i s is b o r n e out by the a g r a r i a n reform at the b e g i n n i n g o f the i 9 5 o s , w h i c h led to the expropriation o f 7 2 0 , 0 0 0 hectares o f land, mostly in south Italy, a n d their division into 50

51

192

L U I G I DE ROSA

small peasant holdings (a reform that from an e c o n o m i c and social point of v i e w proved to be a c o m p l e t e failure ), and by the creation o f state m o n o p o l i e s : that o f E N I in the p e t r o c h e m i c a l sector, of E N E L in the electricity sector a n d the g o v e r n m e n t m o n o p o l y over t e l e c o m m u n i c a ­ tions. M e a s u r e s to p r o m o t e agricultural d e v e l o p m e n t m o v e d in the same direction (mechanisation, land reclamation, irrigation, reafforestation a n d so forth), as did those to aid ailing industries and services (motorw a y s and tourism, for example). M e a s u r e s to support domestic m a n u ­ factures w e r e also carried out by w a y of tax concessions, g o v e r n m e n t subsidisation o f welfare contributions, credit facilities a n d transport facilities.) T h e s e measures have radically c h a n g e d the distribution o f l a b o u r in the different sectors resulting in a drastic reduction in the n u m b e r o f agricultural workers, w h i c h in some regions stands v e r y close to the n u m b e r o f such workers in countries that have l o n g b e e n industrialised. T h e n u m b e r o f workers e m p l o y e d in industry a n d in the service sector has, on the other h a n d , increased considerably, a c c o r d i n g to a pattern that is c o m m o n to all the most a d v a n c e d western e c o n o m i e s . L a c k i n g r a w materials a n d e n d o w e d with inadequate sources o f energy, Italy thus s u c c e e d e d in creating an industrial system that is one of the largest a m o n g western e c o n o m i e s , a c h i e v i n g p r i m a c y in certain manufactures w h i c h before the w a r scarcely existed. T h a t all this c a m e a b o u t due to a c o m b i n a t i o n o f international a n d domestic circumstances (Bretton W o o d s , the M a r s h a l l P l a n and the E u r o p e a n U n i o n o f P a y m e n t s , for example), a m o n g w h i c h g o v e r n m e n t intervention played an i m p o r t a n t part, is unquestionable. B u t it is equally true that the domestic a n d international situation has u n d e r g o n e profound c h a n g e . Protracted g o v e r n m e n t intervention — especially w h e n this h a d g r a d u ally c h a n g e d from b e i n g a tool o f e c o n o m i c policy into a tool o f social policy — has h a d its costs (the fragility o f d e v e l o p m e n t a n d its discrepancies a n d the h u g e increase in the national debt), but it has b e c o m e c o m p l e t e l y u n a c c e p t a b l e a n d c o u n t e r p r o d u c t i v e in a w o r l d o f free a n d global markets. A n d yet Italy w o u l d have carried on its p o l i c y of g o v e r n m e n t intervention in railways, banking, insurance a n d industry if the so-called Single A c t h a d not b e e n a p p r o v e d by the E u r o p e a n C o m m u n i t y in 1 9 8 5 w i t h the a i m o f creating a free E u r o p e a n market, to free the m o v e m e n t of capital, to abolish restrictions over the establishment o f foreign banks, and to privatise state-owned enterprises, especially those exercising m o n o p o l i e s , all objectives that should help to u n d e r m i n e the out­ dated areas o f Italy's industrial system a n d r e m o v e old a n d deep-seated 52

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193

prejudices. H o w e v e r , a l t h o u g h fifteen years have elapsed, Italy has not yet s u c c e e d e d in c o m p l e t e l y satisfying the conditions a g r e e d u p o n in the Single A c t . It is true that several g o v e r n m e n t - o w n e d enterprises have b e e n privatised, but privatisation has taken place w i t h o u t the w h o l e property o f c o m p a n i e s b e i n g h a n d e d over to the free market. U n a b l e to preserve 51 per cent o f ownership, the g o v e r n m e n t has taken pains to acquire a g o l d e n share to enable it to continue to exercise a kind of control over the c o m p a n i e s it h a d previously o w n e d . M o r e o v e r , there are still g o v e r n m e n t - o w n e d enterprises that are still a l o n g w a y from b e i n g privatised, a n d there are some sectors w h i c h will never be privatised, at least in the short term, given the veto over their privatisation from political forces that, while defining themselves as M a r x i s t , still h a r b o u r prejudices a n d fears that are strictly nationalistic. It is true that these policies have aroused some strong criticism a n d opposition. T h e y have b e e n a c c u s e d o f slowing d o w n the country's e c o n o m i c a n d industrial d e v e l o p m e n t a n d causing the h u g e g r o w t h o f the national debt. T h i s w o u l d lead on the one h a n d to a shrinkage in the capital market to the detriment o f private enterprise a n d therefore ultimately to a lower rate o f e c o n o m i c g r o w t h ; on the other h a n d , the attempt to r e d u c e the b u d g e t deficit w o u l d result in an increase in taxation, w h i c h by r e d u c i n g d e m a n d w o u l d also lead to a fall in production. B u t the general a n d v e r y h e a v y increase in taxation has h a d another p a r a d o x i c a l o u t c o m e : it has fomented a n e w form o f nationalism, m u c h n a r r o w e r in aspirations a n d scale but all the same deleterious. In areas w h e r e not b i g but small a n d m e d i u m - s i z e d industry has established itself, the shrinking o f the market, the high interest rates b o r n e b y such industry due to the pressure of the national debt on the capital market and, above all, the increase in taxation, have e x a c e r b a t e d parochialism to such a degree that proclamations are m a d e a b o u t the existence o f an oppressed nation o f the Po (a nation that has never existed in history a n d that does not even have its o w n anthropological identity), a n d the revival of the M o s t Serene R e p u b l i c o f V e n i c e , w h i c h w a s overthrown in 1 7 9 7 . In conclusion, the twentieth century b e g a n w i t h m o v e m e n t s a i m i n g to exalt the Italian nation within its linguistic confines a n d on the basis o f its cultural heritage a n d history; later, during Fascism, it witnessed not only the vindication o f claims to a n n e x N i c e , C o r s i c a a n d M a l t a but also vindication o f the right to colonise Africa a n d other regions in the world. N o w the century is closing w i t h aspirations a b o u t a secession enclosed within n a r r o w dialectical confines a n d the hypothetical and nostalgic rebirth o f the old L a g o o n R e p u b l i c .

LUIGI DE ROSA

i94

NOTES

From 82,719 tons in 1861 to 247,278 tons in 1900: see R. Romeo, Breve storia dellagrande industria in Italia, 1861-1960 (Milan, 1988), p. 332. 2 From 33,531 tons in 1861 to 4 7 9 , 8 9 6 tons in 1900: ibid., p. 332. / 4 Ibid., p. 346. 5 A. Gershenkron, Il problema storico dell'arretratezza economica (Turin, 1965), p. 1

3

b i d . , p .

3 3 7 .

75. 6 7

G. Prezzolini, 'Come fare l'espansionismo', Il Regno 30 (1904), 8. Il Regno 14 (1904), 1 1 - 1 2 .

8 See the articles 'Che cosa si deve fare nel Benadir', Il Regno 24 ( i 904), i 3 - i 4 and 'Ancora Benadir', Il Regno 25 (i 904), 4. 9 G. Finazzo, L'Italia nel Benadir. L'azione di Vincenzo Filonardi, 1884-1896 (Rome, 966).

0 See Il Regno 9 ( 904), . Il Regno 5 ( 904), 2 - 3. 2 Ibid. i 3 M. Fanno, L'espansione commerciale e coloniale degli Statimoderni (Turin, i 906), pp. 435-6.

i 4 R. Michels, L'imperialism italiano. Studio politico-demografico (Milan, i 9 i 4), pp. 92-3.

i 5 Commissariato generale dell'emigrazione, Annuario statistico della emigrazione italiana dal 1876 al 1925 con notizie sull'emigrazione negli anni 1869-1825 (Rome, i 926), pp. 6ff. i 6 'Credete voi - si domandavano - che sarebbe la stessa cosa per il Mezzogiorno e per tutta l'ltalia se quell'Africa fosse sotto dominio italiano invece che sotto dominio francese, credete voi che la Sicilia e il Mezzogiorno e l'ltalia sarebbero nelle condizioni in cui sono.' See E. Corradini, Scritti et Discorsi 1901-1914 (Turin, i 980), p. i 70. i 7 Fanno, L'expansione commerciale,p. 436. 8 Gershenkron, Il problema storico,p. 75. 1 9 L. De Rosa, Storia del Banco di Roma (Rome, i 982), vol. I, pp. 256ff. 20 L. De Rosa, La rivoluzione industrial in Italia (Rome and Bari, i 981), p. 45. 2 Ibid. 22 F. Gaeta, Il nazionalism italiano (Bari and Rome, i 981 ), pp. 11 0ff. 23 Ibid., pp. 2 5 - 7 . 24 Ibid., pp. 2 6 - 8 . 25 Corradini, Scritti e Discoursi,p. 77. 26 Ibid., pp. 7 7 - 8 . 27 Gaeta, Il nazionalism italiano, 3 5 . 28 Ibid., pp. 33 and 3 9 - 4 0 . 29 A. Rocco, La lotta nazionale della vigilia e durante la guerra (1913-1918) (preface by B. Mussolini, Milan, i 938), p. i 9. 30 A. Rocco, 'Economia liberale, Economia socialista ed Economia nazionale', Rivista delle Societa Commerciali, 30 April i 9 i 4,pp. 2 9 6 - 7 .

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31 Ibid., pp. 306-7. 32 A. Rocco, Scritti e discorsipolitici (Milan, 1938), vol. II, pp. 6 9 3 - 9 . 33 L'idea nazionale, 6 August 1914. 34 A. Caracciolo, 'La crescita e transformazione della grande industria durante la prima guerra mondiale' in G. Fua (ed.), Lo sviluppo economico in Italia (Milan, 1969), vol. III, p. 233. 35 'A few great financiers and a few great industrialists', wrote an Italian econ­ omist at the end of the war, 'hold the power in the four major banks, and directly or through their representatives they also hold the power in the vast number of industrial, mercantile, and shipping, companies which form the customers of these banks and which are linked to them': R. Bachi, L'economia in guerra (Rome, 1918), p. 6 6 . 36 Decree Law of 17 February I9i6,no. 197. 37 De Rosa, La rivoluzione industriale,pp. 5 2 - 4 . 38 Gaeta, Il nationalisme italiano,p.I95. 39 Cited in ibid., p. 195. 40 Il nazionalismo e i problemi del lavoro e della scuola (Atti del secondo Convegno nazionalista di Roma, Rome, 1919), pp. 3 7 - 4 6 . 41 Ibid., pp. 9 7 - 1 0 9 . 42 D. Veneruso, L'Italia fascista (Bologna, 1981), pp. 1 1 9 - 1 2 0 .

43 Ibid., p. 121. 4 4 R. Sarti, Fascismo egrande industria (Milan, 1977), p. 6 9 . 45 De Rosa, La rivoluzione industriale,pp. 5 5 - 6 0 . 46 F. Guarneri, Battaglie economiche fra le due guerre (Milan, 1953), vol. II, p. 295. 47 De Rosa, La rivoluzione industriale,pp. 6 0 - 7 5 . 48 B. Barberi, Consumi nel primo secolo dell'Unita d'Italia (i86i-ig6o) (Milan, 1971), p. I3I. 49 Romeo, Breve storia,pp.330-I. 50 L. De Rosa, Lo sviluppo economico dell'Italia dal dopoguerra a oggi (Rome and Bari, I 9 9 7 ) ,

p

p

.

I 5 7 f f .

51 Ibid., pp. i52ff. 52 De Rosa, Lo sviluppo economico,pp. 73ff and i02ff.

C H A P T E R

T E N

National integration and economic change in Greece during the twentieth century Margarita Dritsas

INTRODUCTION

M o d e r n e c o n o m i c d e v e l o p m e n t in G r e e c e w a s a process that unfolded parallel to political a n d territorial integration o f the various regions that w e r e liberated in the process o f the b r e a k i n g u p o f the O t t o m a n E m p i r e at different points in time b e t w e e n 1821 a n d 1 9 4 8 . Perhaps the most crit­ ical m o m e n t w a s w h e n , in the w a k e of the First W o r l d W a r a n d d u r i n g the final break-up of the O t t o m a n E m p i r e , eastern T h r a c e and the r e g i o n of S m y r n a w e r e p l a c e d u n d e r G r e e k control. T h e a g e - o l d irredentist d r e a m o f a ' G r e a t G r e e c e ' e x t e n d i n g over 'two continents a n d five seas' a n d e n c o m p a s s i n g ancient lands w h e r e H e l l e n i s m survived a n d pros­ p e r e d despite repeated conquests from outside, b e c a m e real. H o w e v e r , it p r o v e d a short-lived e x p e r i e n c e as Turkish nationalism, w h i c h h a d also g r o w n since the end of the nineteenth century, w a s d e t e r m i n e d not only to overturn the corrupt a n d declining empire but also to cleanse it o f all foreign e c o n o m i c d o m i n a t i o n (Greek, A r m e n i a n a n d so on). In 1 9 2 2 , the defeat o f G r e e c e b y Turkey, after an ill-planned G r e e k c a m p a i g n eastw a r d s from S m y r n a , resulted in territorial a n d u n p r e c e d e n t e d h u m a n loss for G r e e c e . Eastern T h r a c e a n d the islands o f I m v r o s a n d T e n e d o s w e r e lost to T u r k e y and the G r e e k populations, w h i c h d u r i n g previous centuries h a d prospered especially in the A e g e a n coastal areas o f A s i a M i n o r , w e r e expelled or annihilated. H e n c e f o r t h , G r e e c e ' s frontiers b e c a m e fixed a n d attention w a s t u r n e d towards d o m e s t i c e c o n o m i c d e v e l o p m e n t . T h e t w o processes o f nation-building and e c o n o m i c d e v e l o p m e n t did n o t have the same intensity a n d r h y t h m . E c o n o m i c nationalism develo p e d g r a d u a l l y a n d it implied, on the one h a n d , as in every case o f late d e v e l o p m e n t , official action b y the state and, on the other, spontaneous a n d / o r c o n c e r t e d action by various social groups. T h i s chapter attempts to establish, first, the determinants o f the national effort a n d policy and, secondly, the c o n s e q u e n c e s o f national integration. 1

2

3

4

National integration and economic change in Greece THE

1

9

7

BACKGROUND

N a t i o n a l consolidation in the nineteenth a n d early twentieth centuries primarily implied a certain degree o f homogeneity, w h i c h w a s d e p e n ­ dent on the successful integration a n d / o r assimilation o f various diverse groups o f p e o p l e living in the areas that w e r e eventually liberated. T h i s w a s only g r a d u a l l y achieved t h r o u g h central state action a n d policies including e c o n o m i c measures. It c a n be a r g u e d with some confidence that G r e e c e in the nineteenth century enjoyed a considerable degree o f h o m o g e n e i t y since, until the e n d o f that century, populations living in G r e e c e but speaking different languages, such as A l b a n i a n s , w e r e fully assimilated into the G r e e k culture and political system a n d did not exhibit any separate national identity. T h e annexation o f the n o r t h e r n territories, however, at the b e g i n n i n g o f the twentieth century proved to be m o r e complicated. A m i d s t a fervour of nationalistic sentiment all over the B a l k a n peninsula, the territory o f G r e e c e d o u b l e d and differ­ ent 'ethnic' groups previously b e l o n g i n g to the multiethnic O t t o m a n E m p i r e — n o w u n d e r g o i n g rapid disintegration — h a d to choose w h e t h e r to b e c o m e G r e e k , B u l g a r i a n or Serbian citizens. W h a t previously w a s simply a g e o g r a p h i c a l area b e l o n g i n g to a single political authority, w a s n o w divided a m o n g three states — Serbia, B u l g a r i a a n d G r e e c e . T h u s , G r e e k M a c e d o n i a included ' n o n - H e l l e n i c ' populations, p r o m i n e n t a m o n g w h i c h w a s the J e w i s h minority scattered all over the n e w provinces, t h o u g h w i t h a strong concentration in Thessaloniki, the second most i m p o r t a n t city o f the empire until 1 9 1 3 . T h e r e , a c c o r d i n g to one estimate, they represented t w o thirds o f the p o p u l a t i o n , most o f t h e m h a v i n g settled in M a c e d o n i a in successive w a v e s since the end of the fifteenth century after their expulsion from Spain. In addition, there w e r e several Christian O r t h o d o x Slav-speaking groups, w h i c h w e r e loyal either to the B u l g a r i a n E x a r c h a t e or to the Serbian C h u r c h a n d eventually b e c a m e active in a n t i - G r e e k p r o p a g a n d a . T h e r e w e r e also A l b a n i a n s , Turks, other M u s l i m groups, some K o u t s o - V l a c h s w h o m a i n ­ tained ancestral links with R o m a n i a , and G y p s i e s . T h e ' M a c e d o n i a n Q u e s t i o n ' as an expression o f the ' N a t i o n a l Q u e s t i o n ' b e c a m e an issue after the 1870s a n d led to repeated b l o o d y conflicts; it lay at the base of the t w o B a l k a n W a r s whilst p r o p a g a n d a a m o n g the countries that c l a i m e d the territory o f M a c e d o n i a as historically theirs inflamed public opinion for a l o n g time. For G r e e c e , it supposedly e n d e d w i t h the annex­ ation of part o f M a c e d o n i a a n d Epirus in 1 9 1 3 . After the B a l k a n W a r s the question o f minorities b e g a n to emerge, 5

6

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Figure I O . I . The growth of Greece since 1832

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w i t h successive G r e e k g o v e r n m e n t s pursuing an integrationist policy for population g r o u p s o f different ethnicity living in the area. H o w e v e r , while it is useful to look at the various ethnicities a n d minorities living in G r e e c e , this is n o t sufficient in itself to r e a c h an u n d e r s t a n d i n g o f the G r e e k situation: a further dimension needs to be taken into considera­ tion. Refugees from those territories a n n e x e d b y the other states in the area p o u r e d into G r e e c e at different points in time, while a cultural integrationist policy w a s also directed towards the communities o f the G r e e k diaspora. U n t i l after the First W o r l d War, a n u m b e r o f G r e e k populations (Greek speaking, Christian O r t h o d o x in faith and sharing similar national sentiments/consciousness w i t h those G r e e k s living within the frontiers o f the G r e e k nation state) lived outside G r e e c e a n d w e r e e c o n o m i c a l l y and socially as i m p o r t a n t (if not m o r e so) as their helladic compatriots. T h e y h a d b e e n active for several centuries, founding prosperous communities b o t h in E u r o p e a n and Asiatic Turkey, as well as in several B a l k a n a n d central E u r o p e a n states. T h e y h a d also f o r m e d colonies, m a i n l y o f merchants, w h o h a d settled in various countries from A m e r i c a to India and Africa and w h o either r e t u r n e d to G r e e c e in m o m e n t s o f crisis or m a i n t a i n e d channels of emigration and c o m m u n i c a t i o n for m a i n l a n d or island G r e e k s t h r o u g h o u t m o d e r n times. T h e i r i m p a c t on the articulation o f national policies and on the process of G r e e k e c o n o m i c d e v e l o p m e n t in the twentieth c e n t u r y w a s crucial. If ex post facto national d e v e l o p m e n t is u n d e r s t o o d as a total p h e n o m e n o n c o m p r i s i n g state-building, cultural integration and e c o n o m i c g r o w t h , the emphasis in most analyses is usually p l a c e d on one o f these aspects. A s far as the e c o n o m y is c o n c e r n e d , g r o w t h a n d progress is u n d e r s t o o d usually in terms o f structural c h a n g e as a result o f industrialisation policies. H o w e v e r , if such an analytical framework is a d e q u a t e for e x a m i n i n g experiences o f a d v a n c e d countries, it is not always satisfactory for analysing late-developing c o u n t r i e s . In m a n y cases agriculture a n d trade, not industry, w e r e the sectors that d e v e l o p e d at a faster p a c e and in fact inhibited the subsequent d e v e l o p m e n t o f industry, while political m o d e r n i s a t i o n also took p r e c e d e n c e over the economy. In the early nineteenth century in late industrialisers such as G r e e c e , ideas a b o u t w h a t c a m e to be t e r m e d ' d e v e l o p m e n t ' took some time to find concrete expression a n d to be translated into policies. O n the other h a n d , e c o n o m i c policies w e r e not always viable a n d their i m p l e m e n tation w a s rarely consistent. S u c h contradictions b e c o m e intelligible if ideas and policies are e x a m i n e d against the b a c k g r o u n d of political options and choices available. F u r t h e r m o r e , e c o n o m i c l a n g u a g e in political statements w a s not used until relatively late; it is, therefore, difficult 9

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to infer e c o n o m i c p r e o c c u p a t i o n s w h e n dealing w i t h older historical d o c u m e n t s . I n d e e d , until the middle of the nineteenth century, turbu­ lent political events in G r e e c e not only detracted attention from the e c o n o m y but d e t e r m i n e d the quality o f information that w e possess about it. For some time after i n d e p e n d e n c e , G r e e c e generally r e m a i n e d an u n d e v e l o p e d - if not u n d e r d e v e l o p e d - country; agriculture w a s the m a i n activity of helladic G r e e k s (whereas a b r o a d , trade, shipping and b a n k i n g w e r e dominant). L a n d distribution a n d small family property as a w a y o f c o m p e n s a t i o n for services r e n d e r e d d u r i n g the w a r b e c a m e a m e a n s o f political, social and e c o n o m i c integration. P r o m o t i o n o f agriculture w a s given a h i g h priority but little w a s actually d o n e d u r i n g the first two decades o f i n d e p e n d e n t life. S m a l l land tenure w a s a c c o m p a nied by great shortage o f local and o f foreign capital, by h i g h illiteracy rates, by an antiquated technology. A s a result, agriculture r e m a i n e d stagnant, g e a r e d towards self-subsistence. C u r r a n t g r o w i n g w a s the exception: gradually, due to a favourable trend in the E u r o p e a n markets, it b e c a m e the m a i n export crop o f the country. T h e possibility of increased profits from the cultivation o f currants, some e n c o u r a g e m e n t b y the state for w h i c h exports w e r e a vital source o f revenue, and after 1 8 4 1 , the credit p o l i c y o f the N a t i o n a l B a n k , eventually led to the establishment o f a system of m o n o c u l t u r e , w h i c h , however, m a d e the G r e e k e c o n o m y m o r e vulnerable to foreign m a r k e t fluctuations, contributed to serious crises a n d detracted investment a w a y from industrial activity; nor did it solve the chronic deficit o f the trade b a l a n c e , w h i c h h a d also b e c o m e a serious p r o b l e m . T h e state b e c a m e seriously preo c c u p i e d by the inefficiency o f agriculture (that still a b s o r b e d over 6 0 per cent of the population) only after the C r i m e a n W a r w h e n G r e e k irredentist ambitions w e r e violently frustrated. A g o v e r n m e n t p r o g r a m m e of m o d e r a t e drainage works w a s u n d e r t a k e n a n d some care w a s s h o w n for the construction o f several small roads linking port a r e a s . A s foreign trade w a s almost entirely seaborne, u n d e r s t a n d a b l y its p r o m o tion d e p e n d e d on port i m p r o v e m e n t . M o s t importantly, the steps taken towards progress w e r e ad hoc measures a n d did not f o r m part o f any c o h e r e n t policy. For e x a m p l e , railway construction, w h i c h w o u l d have contributed to a m u c h faster unification a n d h o m o g e n i s a t i o n of the country, w a s p o s t p o n e d a n d w a s n e v e r a d e q u a t e l y d e v e l o p e d . L a c k o f sufficient capital resources, limited transfer o f t e c h n o l o g y a n d the inade q u a c y o f state policies w e r e a g a i n a m o n g the m a i n causes of retardation. 11

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Ideas a b o u t d e v e l o p m e n t that did eventually e m e r g e w e r e rather v a g u e a n d closely linked w i t h the political i d e o l o g y a n d aims of those early g r o u p s a n d statesmen that d o m i n a t e d events d u r i n g the first phase of m o d e r n G r e e k history, closing w i t h the e n d o f the absolutist p e r i o d (or the expulsion o f K i n g O t t o in the 1860s). B y the end o f the first half of the century t w o contrasting v i e w s c o u l d be discerned. In one o f t h e m nationalism b e c a m e an instrument that w o u l d , on the one h a n d , unite the otherwise still divided G r e e k s , and that w o u l d , on the other, detract attention from any internal p r o b l e m s the c o u n t r y w a s facing. B y extension, d e v e l o p m e n t w a s seen as d e p e n d e n t on the territorial e x p a n sion o f G r e e c e a n d on the cultural integration o f those forces residing in still u n r e d e e m e d areas ( a m o n g w h i c h there w e r e efficient entrepreneurs w i t h talent a n d k n o w - h o w w h o w e r e active in international trade a n d banking). N e w lands, once liberated, w o u l d also theoretically be put to use, p r e s u m a b l y as agricultural land. T h e emphasis w a s put not on industry but on agriculture a n d trade. A n alternative v i e w favoured the creation o f a strong unified c o u n t r y in the n e a r east b a s e d on a centralised national g o v e r n m e n t with a w o r k i n g constitution a n d w i t h an efficient a n d honest bureaucracy, as free as possible of foreign i n f l u e n c e . B y inference, it c o u l d be a r g u e d that the desire to establish a strong a n d efficient state w o u l d , on the one h a n d , induce d e v e l o p m e n t by allocating rationally b o t h local a n d foreign capital resources — obtain­ able domestically t h r o u g h the major bank, and from foreign financiers t h r o u g h efficient diplomatic relations. O n the other h a n d , the state w o u l d also prepare the d e v e l o p m e n t o f h u m a n resources b y establishing m o d e r n e d u c a t i o n a n d b y e n c o u r a g i n g the diffusion o f innovations. In this project territorial e x p a n s i o n took second p r e c e d e n c e a n d w a s m a d e conditional on the prior domestic d e v e l o p m e n t of the productive forces. B o t h v i e w s w e r e considered progressive, c a r r y i n g the stamp o f major E u r o p e a n ideological trends a n d successful experiences o f e c o n o m i c progress over the previous fifty years. In one o f t h e m , favoured by the statesman Ioannis Kolettes, nationalism e n g a g e d G r e e c e in a constant struggle w i t h T u r k e y and w i t h its protectors, w h i c h ultimately truncated internal d e v e l o p m e n t , adulterated m o d e r n i s a t i o n policies a n d detracted v a l u a b l e e c o n o m i c r e s o u r c e s . E l e m e n t s o f these projects r e m a i n e d traceable in subsequent policies o f d e v e l o p m e n t until well into the twentieth century. M e a n w h i l e , a m o r e articulate d e v e l o p m e n t a l p o l i c y evolved in the 1 8 7 0 s a n d 1 8 8 0 s . W h i l s t in 1 8 7 1 foreign capital continued to be s c a r c e and the rate o f investment w a s still low, land reform w a s finally 1 4

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p r o c l a i m e d . F u r t h e r incentives for d e v e l o p m e n t included the suppres­ sion o f b r i g a n d a g e and measures to e n d the isolation o f the country. A n early p r e o c c u p a t i o n w i t h industry t o o k the f o r m o f exploitation o f local m i n e r a l resources. M i n i n g w a s also seen as a m e a n s o f a l l o w i n g foreign investment to flow in and, therefore, concessions w e r e g r a n t e d to foreign c o m p a n i e s . T h e N a t i o n a l B a n k o f G r e e c e w a s b e g i n n i n g to e m e r g e as the m a i n instrument for the i m p l e m e n t a t i o n o f e c o n o m i c p o l i c y while the foreign debt h a d risen dangerously due, a m o n g other factors, to increased military expenditures for the support o f C r e t a n refugees after the unsuccessful uprising o n the island. D e v e l o p m e n t a l efforts b e c a m e m o r e systematic d u r i n g the following d e c a d e , a l t h o u g h , as will be s h o w n , the o u t c o m e w a s uncertain, at least in the short a n d m e d i u m t e r m . T h e successful settlement o f the foreign debt question (1878) w a s followed by the a n n e x a t i o n o f T h e s s a l y a n d part of Epeiros in 1 8 8 1 , a n d an ambitious reform p r o g r a m m e w a s initiated by the successive H a r i l a o s T r i k o u p i s g o v e r n m e n t s ( 1 8 8 0 - 5 , 1 8 8 6 - 9 0 , 1 8 9 2 - 5 ) . D e v e l o p m e n t a l ideas w e r e n o w strongly inspired b y b o t h political a n d e c o n o m i c liberalism, while the E u r o p e a n aspects of G r e e k identity w e r e emphasised a n d private initiative w a s e n c o u r a g e d . T h e n e w policy w a s multifaceted w i t h an interventionist role for the state. Priority w a s given to m o d e r n i s a t i o n , w h i c h included not only the a r m e d forces, the n a v y a n d the state administrative m a c h i n e but also c o m m u n i c a t i o n s a n d transport (for e x a m p l e , railway construction, the C o r i n t h C a n a l a n d the r o a d network). E d u c a t i o n a l reform w a s also p r o m o t e d , n e w taxation a n d a n e w system o f tariffs w e r e introduced. T h e m a i n purpose of the latter w a s to secure additional revenue for the state, but agriculture w a s a m o n g the m a i n beneficiaries since revenue w a s extracted from the u r b a n b o u r g e o i s strata in favour o f rural interests. It also proved beneficial for the protection o f the nascent industries. T r i k o u p i s sought to utilise w h a t e v e r talent a n d ingenuity existed in the c o u n t r y a n d in the lands b e y o n d the borders w h e r e G r e e k s prospered by a p p e a l i n g to progressive intellectuals, bureaucrats, professionals a n d entrepreneurs to take action. H e contributed to the diffusion of innovations a n d t e c h n o l o g y by inviting foreign engineers a n d experts to advise o n the reorganisation o f the state administration and o n w a y s to exploit national resources. T r i k o u p i s ' consistent p o l i c y o f w e l c o m i n g foreign investment, on the one h a n d , a n d the m i d - i 8 7 0 s e c o n o m i c crisis that hit E u r o p e a n markets, o n the other, led to the attraction o f foreign a n d o f G r e e k (living outside G r e e c e ) investors. O n the w h o l e , reforms w e r e n o t unsuccessful a l t h o u g h o v e r s p e n d i n g led to the eventual default o n 21

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foreign p a y m e n t s in 1 8 9 3 a n d a little later (1898) ushered in direct control of public finances by an International F i n a n c e C o m m i s s i o n . D e v e l o p m e n t a l policies, it c o u l d be argued, generally c a m e rather late for the c o u n t r y a n d did n o t result in any important structural c h a n g e . T h e crisis that h a d afflicted E u r o p e a n e c o n o m i e s as o f 1 8 7 3 forced investors to look for n e w markets a n d m o r e profitable opportunities, w h i c h , however, led to speculative investment. G r e e k capitalists a n d financiers w h o operated in a w i d e area w e r e also e n c o u n t e r i n g problems: increas­ ing competition by E u r o p e a n capital a n d m o r e effective m e t h o d s o f penetration in the O t t o m a n E m p i r e forced G r e e k entrepreneurs to look for other outlets. N a t i o n a l i s m in other B a l k a n countries (Bulgaria, for example) h a d also started to constrain their activity, p u s h i n g t h e m g r a d ­ ually out o f those markets. M a n y a m o n g t h e m chose to m o v e to G r e e c e w h e r e they assumed they could count on the support o f the g o v e r n m e n t a n d they w o u l d act as mediators b e t w e e n the latter a n d foreign investors w i t h w h o m they w e r e v e r y familiar. S o m e also b o u g h t large plots o f land from departing O t t o m a n s in T h e s s a l y and elsewhere, others invested in G r e e k b o n d loans, or they speculated on other titles and foreign e x c h a n g e . W h a t they did not do, however, w a s c o m m i t resources to pro­ ductive activities. T h i s w a s a major weakness o f the country, w h i c h the Trikoupis reform project did not alter. Despite its progressive character, it too w a s an expression o f the older v i e w a n d traditional conviction that agriculture a n d trade w e r e the spine o f the G r e e k e c o n o m y that w o u l d g u a r a n t e e the future a n d create prosperity for G r e e c e . R e f o r m s did not, in fact, prove incisive e n o u g h to c h a n g e the traditional orientation o f the d o m i n a n t class n o r did alternative views disappear. T h e e c o n o m i c logic of h i g h e r taxation that hit the lower strata harder a n d the heavier obligations that an inflated foreign debt entailed w e r e neither a c c e p t e d nor understood. Trikoupis w a s v o t e d d o w n in 1 8 9 5 , left G r e e c e a n d died the following year in France. M e a n w h i l e , public opinion h a d already b e e n inflamed b y d e v e l o p m e n t s in the north. I n d e e d , nationalism h a d b e c o m e pervasive a n d irredentism c r o p p e d u p as a central t h e m e in the opposition's rhetoric. T h e situation h a d n o t b e e n v e r y different elsewhere. In addition to the g r a n d national m o v e m e n t s , for e x a m p l e P a n - S l a v i s m a n d P a n - G e r m a n i s m that g a t h e r e d m o m e n t u m , Italian and G e r m a n unification w a s c o n c l u d e d and national mobilisation h a d led to the establishm e n t of a D u a l M o n a r c h y in A u s t r i a - H u n g a r y . B u t closer to G r e e c e , the foundation o f the B u l g a r i a n E x a r c h a t e in 1 8 7 8 a n d the o c c u p a t i o n a n d subsequent a n n e x a t i o n by B u l g a r i a in 1 8 8 5 o f Eastern R u m e l i a , an area w h e r e large G r e e k populations h a d for centuries prospered, created a 23

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major p r o b l e m for G r e e c e a n d caused conflict. S o m e o f the Slavs in M a c e d o n i a opted for the E x a r c h while others r e m a i n e d u n d e r the p r o ­ tection o f the E c u m e n i c a l Patriarch; others still a c k n o w l e d g e d the N a t i o n a l S e r b i a n C h u r c h . I n f l a m m a t o r y p r o p a g a n d a w a s used b y every­ b o d y a n d conflict w a s especially acute b e t w e e n S e r b i a a n d B u l g a r i a . T h i s w a s the b e g i n n i n g o f an era d u r i n g w h i c h national antagonisms in the Balkans b e c a m e e n d e m i c . For G r e e c e any further e x p a n s i o n in the future w o u l d n o l o n g e r d e p e n d on the consent a n d / o r support o f the G r e a t Powers, or on patience until the O t t o m a n E m p i r e disintegrated c o m p l e t e l y . Potential future confrontation with n e i g h b o u r i n g countries w o u l d imply a r m e d conflict, w h i c h necessitated extensive m o d e r n i s a t i o n of the army, o f the state a n d o f the e c o n o m y . T h e disastrous e n g a g e ­ m e n t o f the G r e e k and Turkish a r m y in 1 8 9 7 and the quick and dis­ h o n o u r a b l e retreat o f the former w a s the first intimation that d i s e n g a g e m e n t from the c o n u n d r u m w o u l d not be a simple affair. I n f a c t it h a d severe repercussions domestically, w h i c h in 1 9 0 9 c u l m i n a t e d in a military coup d'etat a n d soon afterwards in a n e w constitution and a n e w g o v e r n m e n t h e a d e d by Eleutherios Venizelos. 25

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Early twentieth-century policies continued to be affected by c i r c u m stances that d e v e l o p e d d u r i n g the last years of the previous century, a p e r i o d in w h i c h the last and m o r e severe crisis o f the Eastern Q u e s t i o n o c c u r r e d . N a t i o n a l i s m in the region r e a c h e d its c l i m a x w i t h the e m e r g e n c e of the Y o u n g T u r k m o v e m e n t (1906—8), w h i c h m a r k e d the b e g i n ­ n i n g o f the e n d o f the G r e e k presence in the eastern A e g e a n coast a n d b e y o n d . T h e other major influence c a m e from the p o s t w a r international e c o n o m i c situation. T h e y e a r 1 9 2 2 c a n be considered a t u r n i n g point a n d as far as state interventionist policies are c o n c e r n e d , a l t h o u g h they w e r e initiated earlier, they w e r e greatly strengthened after this date until the eve of the S e c o n d W o r l d War. T w o quotes b y Eleutherios Venizelos, the L i b e r a l leader w h o s e personality a n d policies left a d e e p m a r k on the p h y s i o g n o m y o f the c o u n t r y a n d the sentiment o f the people, summarise in a rather succinct w a y the c h a n g e s that h a d taken place, the framework o f the policies followed a n d the m o o d o f p o p u l a r feeling a n d perception. I n d e e d , his w o r d s also unwittingly encapsulated the eventual fusion (if not reconciliation) o f the t w o d o m i n a n t v i e w s a b o u t nationalism. V e n i z e l o s ' a i m in 1 9 0 9 , 'to e x p a n d the stifling borders of our N a t i o n ' , eighteen years later h a d

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c h a n g e d into a ' d r e a m to set the sound bases of an honest a n d well-run b o u r g e o i s state'. In reality he tried to do b o t h at the same time but the course o f external a n d internal events d e t e r m i n e d the different e m p h a ­ sis at the b e g i n n i n g of e a c h o f his t w o terms of office. H i s policies w e r e largely successful but there w a s considerable failure, too, b o t h b e c a u s e of the i m p a c t o f international c h a n g e s a n d that o f domestic inertia. T h e years 1 9 0 0 - 1 7 w e r e m a r k e d b y the successful o u t c o m e o f the B a l k a n W a r s a n d the a n n e x a t i o n o f territories with 'multiethnic' c h a r a c ­ teristics, especially in the north. B y 1 9 1 7 , M a c e d o n i a , Epeirus, T h r a c e , the islands o f the eastern A e g e a n and C r e t e in the south h a d b e c o m e parts o f the national w h o l e . It w a s g r a d u a l l y realised that cultural a n d social assimilation o f the various populations in the n e w territories w o u l d be d e t e r m i n e d not only by effective cultural a n d social policies but w o u l d also be conditional on the degree o f e c o n o m i c integration a n d h o m o g e n i s a t i o n o f the n e w provinces. T h e m a g n i t u d e o f the operation a n d at the same time the intricacies o f securing p e a c e necessitated m u c h h i g h e r state i n t e r v e n t i o n . Earlier national d e v e l o p m e n t policies h a d h a d a limited effect on the economy. A g r i c u l t u r e w a s still antiquated, the c o u n t r y e x p o r t e d m u c h less t h a n it imported, the degree o f industrialisation w a s v e r y low. T r a d e a n d b a n k i n g continued to be the preferences o f a rather w e a k demographically, organisationally a n d e c o n o m i c a l l y - middle class. A large part o f this class continued to reside a b r o a d , its revenues b e i n g g e n e r a t e d within foreign e c o n o m i e s . Industry e m e r g e d t o w a r d s the e n d of the c e n t u r y as a s e c o n d a r y activity, c o m p l e m e n t a r y to trade or as an alternative option d u r i n g periods o f crisis w h e n trade w a s b a d l y afflicted (for e x a m p l e , d u r i n g the c u r r a n t crisis in the m i d - i 8 8 o s a n d later in the 1890s). T h e absence o f an i m p o r t a n t s e c o n d a r y sector also d e t e r m i n e d the weakness - in n u m e r i c a l a n d organisational terms - o f a w o r k i n g class. In the countryside, a mass o f small landholders w e r e still e n g a g e d in subsistence farming. Periodic crises, l o w productivity a n d the v e r y small size o f holdings resulted in a constant outflow o f h u m a n capital. People e m i g r a t e d t o w a r d s the G r e e k c o m m u n i t i e s in the east, or t o w a r d s the U n i t e d States, or w e r e pulled b y the b i g g e r towns w h e r e they filled the ranks o f a b u r g e o n i n g petite bourgeoisie. For most o f t h e m remittances a n d earnings from shipping w h i c h found their w a y b a c k h o m e to families that h a d stayed b e h i n d or filled the cash desks o f banks as savings b e c a m e the link w i t h G r e e c e . In addition to increasing c o n s u m p t i o n these remittances r e d u c e d the deficit in the b a l a n c e o f p a y m e n t s but only m a r g i n a l l y i m p r o v e d the c h a n c e s of d e v e l o p m e n t , to the extent that 28

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they w e r e invested in productive activities either privately or as credits from the banks. W h a t acted as a stronger b o n d , however, a m o n g these disparate g r o u p s w a s the nationalist/irredentist cause ceUbre. U n t i l 1 9 2 2 , ideas o f e c o n o m i c expansionism a n d nationalism w e r e still w i d e s p r e a d in the G r e e k offshore communities — notably in A s i a M i n o r — while n e w sympathisers a p p e a r e d in m a i n l a n d G r e e c e itself. A t the same time, a sort o f assimilationist nationalism started to develop, w h i c h transcended b o t h the ethnic a n d the 'class' dimension. W h e r e a s d u r i n g the previous c e n t u r y nationalist slogans h a d m a i n l y rallied peasant and petit bourgeois forces, in the twentieth century, the indigenous helladic bourgeoisie, w h i c h h a d by that time g r o w n to some importance, b e g a n to appreciate the e c o n o m i c implications o f e x t e n d i n g their businesses further east a n d north. Extensive references a p p e a r e d in the daily a n d e c o n o m i c press a b o u t the a d v a n t a g e s of a w i d e r market, a n d in M a c e d o n i a itself e c o n o m i c action closely followed in the w a k e of political a n d military events. Relations w i t h the state b e c a m e closer as businessmen d o n a t e d h a n d s o m e l y for the 'Hellenic cause', large land-holdings (tsifliks) b e l o n g ­ ing to departing M u s l i m s w e r e appropriated by w e a l t h y G r e e k s (as w a s done earlier in Thessaly). In fact, expropriation o f rural land by G r e e k s was seen by the M i n i s t r y o f Foreign Affairs as a w a y to 'consolidate the " G r e e k c h a r a c t e r " o f M a c e d o n i a a n d T h r a c e ' . G r e e k populations d e p a r t i n g from B u l g a r i a in 1 9 0 6 w e r e assisted e c o n o m i c a l l y b y the state (and w o u l d benefit still m o r e later from the general refugee settlement policy u n d e r t a k e n by the G r e e k state a n d the L e a g u e o f Nations). B e t w e e n 1 8 9 0 a n d 1 9 1 0 c h a m b e r s o f c o m m e r c e w e r e founded in order to assist the 'national' shipping, industry and trade sectors a b r o a d . Banks, especially the N a t i o n a l B a n k o f G r e e c e , w h i c h h a d traditionally a v e r y close relationship w i t h the state, o p e n e d b r a n c h e s in the n e w areas a n d in offshore centres o f strong G r e e k presence not only because o f the lucrative business a n t i c i p a t e d but as part o f a m o r e general nationalist p o l i c y . S u c h activity w a s not devoid o f hostile a n d violent incidences as is indicated b y the frequency w i t h w h i c h businesses o f Slav support­ ers o f the B u l g a r i a n E x a r c h w e r e boycotted in T h e s s a l o n i k i . N a t i o n a l i s m found expression, too, in the introduction of a n e w institutional framework. Legislative m o d e r n i s a t i o n o f this period w a s consistent w i t h nationalist/expansionist feelings on the one h a n d , a n d e c o n o m i c a d v a n c e m e n t on the other. A n e w system of tariffs w a s devised in 1 9 1 7 (although it w a s not actually put into effect until 1 9 2 6 ) : l a w 2 1 9 0 / 1 9 2 0 regulating the operation o f joint-stock c o m p a n i e s a n d l a w 2 9 4 8 / 1 9 2 2 for the p r o m o t i o n o f industry b o t h targeted the creation o f m o d e r n firms that w o u l d e x p a n d into T u r k e y a n d the B a l k a n s . 3 1

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T h e defeat by T u r k e y in A u g u s t 1 9 2 2 frustrated such expectations a n d c h a n g e d the orientation o f the nationalist discourse. L a r g e multidivisional c o m p a n i e s failed to emerge, g i v i n g w a y to the m o r e resilient small family enterprises, while m o n e t a r y devaluation i m p e d e d further the i n - f l o w a n d concentration o f capital. W h i l e until 1921 emigration c o n ­ tinued rising a n d divested G r e e c e o f potential m a n p o w e r (thereby increasing l a b o u r shortages a n d contributing to the m a i n t e n a n c e o f relatively h i g h wages), the possibility o f a reversal o f the trend w a s neutral­ ised thanks b o t h to the q u o t a system introduced by the U n i t e d States in 1 9 2 1 , a n d by the influx o f 1.5 million refugees from Turkey. L a b o u r scarcity n o w gave w a y to l a b o u r congestion a n d chronic u n e m p l o y m e n t . State interventionism w a s increased d u r i n g the w h o l e o f the interwar period, in an attempt to attenuate the p r o b l e m s b y m e a n s o f l a b o u r policies a n d protectionist measures for industry a n d agriculture, but it failed because it lacked cohesion. M o r e o v e r , the defensive nationalist discourse w a s not sufficient to reconcile the conflicting interests o f farmers, m e r chants, industrialists a n d workers and c o n c e a l the confusion o f the aims of a policy b a s e d only on w e a k social forces, especially a w e a k middle class. T h e l o n g O t t o m a n past ( 1 4 5 3 - 1 8 2 1 ) , w h i c h itself preserved the byzantine tradition o f a bureaucratic state, h a d not allowed the forma­ tion o f a f u l l - f l e d g e d bourgeoisie a l o n g the western pattern. Rather, it contributed to the formation o f a less a u t o n o m o u s b u r e a u c r a t i c / m e r chant class. It w a s on this vestige that the m o d e r n G r e e k nation state w a s b a s e d a n d g r a d u a l l y cushioned the e m e r g e n c e o f a w e a k national b o u r geoisie (intra-border a n d extra-border) supported a n d protected by state interventionist a n d protectionist policies. G r e e k nationalism o f the early twentieth century, therefore, c o n t i n u e d to be part o f the traditional liberationist ideology, only enriched n o w b y a symbiotic relationship b e t w e e n the middle class a n d the state, but not l e a d i n g to an effective e m a n c i p a t i o n o f social forces. T h e rise to p o w e r in 1 9 1 0 o f Venizelos and his L i b e r a l Party w a s b o t h a result of the support o f this e m e r g i n g force and the precondition for its full articulation and consolidation. Nationalism b e c a m e the g u i d i n g prin­ ciple o f policy after the successful o u t c o m e of the B a l k a n Wars. In addi­ tion to Venizelos' d i p l o m a t i c i n s i g h t , a w i d e p r o g r a m m e o f institutional reforms was undertaken w i t h the dual purpose to modernise O l d G r e e c e and to h o m o g e n i s e the v e r y diverse n e w provinces. T h e underlying assumption w a s that this w o u l d be easier if G r e e c e maintained friendly relations with her traditional allies, the Entente powers, w h i c h in turn implied participation in the w a r effort. T h i s b r o u g h t Venizelos (and his supporters) into direct conflict with the m o r e traditional forces (royalists) 36

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who favoured neutrality and, as a result, Greece was on the verge of civil war (dichasmos) for a number of years. It is in this period that the seeds of the subsequent civil strife were also sown. Among the immediate postBalkan-war priorities the protection of border areas figured high and was perceived as concomitant with demographic, cultural and economic homogeneity. Incentives were given so that considerable numbers of people would move to the north from southern provinces. In Macedonia a cohesive local administrative network was organised, receiving direct instructions from the central government in Athens; ecclesiastical administration was introduced to achieve religious homogeneity; educational and linguisticintegration of non-Greek speakers received immediate attention. Communications were also given a boost, carrying further the dynamism that was a result of the war as a number of roads, initially near Thessaloniki, were constructed for military purposes. In i g i 7 , a n e w law provided for the construction of 3,205 kilometres of roads in the whole of Greece, of which 1,287 were in the new provinces. Railway construction, which had had its heyday during the Trikoupis era without ever leading to a complete or even adequate network, resumed after 1913. The most important Larissa— Thessaloniki line as of 1916 linked Greece directly with the continent. But it was also realised that successful integration of Macedonia and of the other provinces rested on the development of their local resources. With a shortage of population this was not an easy task. The emphasis was once again placed mainly on agriculture, which became the central instrument of economic policy. Improvement of the primary sector in Thessaly thirty years earlier had not borne the fruits expected. Methods of cultivation remained backward and agrarian reform ran into a stalemate. There remained substantial large holdings that had not been broken up. The situation in Macedonia, Epeiros and Thrace was not very different and full enforcement of the law promulgated in i9i7 did not happen until after i922 and the arrival of the refugees. Land reform was not fully enacted until i923 and the pattern of small-holding — dominant until then in Old Greece — was now general­ ised. However, despite considerable innovation in the institutional frame­ work, which included the foundation of co-operatives (since 1914), easier borrowing from the National Bank and the introduction of credit for smaller farmers, the break-up of large holdings (tsijliks)vmprovedproductivity levels only marginally whereas restructuring of agricultural production was still a desideratum. Land reform had over the years become a central political issue and was seen by the Venizelists primarily as a means of appeasement and control of an otherwise hostile and

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conservative (royalist) peasantry. O n c e again the rationale of policies w a s not purely e c o n o m i c , their implementation incomplete and the results r e m a i n e d m i x e d . It took over fifteen years for any changes to b e c o m e obvious. A m o n g those were a rise in the area o f cultivable l a n d , and a certain restructuring towards industrial a n d export crops. G r e e k exports were n o w d o m i n a t e d by M a c e d o n i a n t o b a c c o , w h i c h h a d replaced cur­ rants, the m a i n crop in Peloponnesos ( O l d G r e e c e ) since the nineteenth century. C o t t o n w a s also promoted, w h e r e a s the policy a i m i n g to encour­ age cereal-growing w a s less successful. T h e cultivation o f cereal w a s seen by the governments o f the period as the cornerstone o f agricultural autarkic policy. T h e aim was to reduce the import o f w h e a t — by far the major import item in the trade balance — to secure a measure of selfsufficiency and to limit the outflow o f foreign e x c h a n g e , a n d h e n c e also reduce the deficit in the balance of payments. C e r e a l production, however, did not pick u p until after 1927 w h e n stronger interventionist action w a s taken, including measures to increase production and productivity a n d to improve concentration a n d distribution. T h e other a i m o f agricultural policy, that o f converting farmers into a mass o f consumers w h o w o u l d support import substitution industrial­ isation, also h a d only limited success. A g r i c u l t u r a l m a c h i n e s w e r e still i m p o r t e d in the late 1 9 3 0 s a n d fertilisers that w e r e domestically pro­ d u c e d w e r e underused. O n l y light c o n s u m e r g o o d s p r o d u c t i o n m a r k e d a steeper d e v e l o p m e n t , w h i c h , however, w a s also a m a r k o f distortion. G i v e n the l o w i n c o m e o f peasants, items p r o d u c e d w e r e cheap, often o f substandard quality. M o r e o v e r , small a n d inefficient p r o d u c t i o n units c o m p e t e d for the same market w i t h larger a n d m o r e m o d e r n firms w h i c h , u n d e r the circumstances, h a d difficulties in surviving. Indeed, there w a s v e r y little difference in industrial d e v e l o p m e n t b e t w e e n 1 9 2 0 a n d 1 9 3 0 and, if anything, industrial units w e r e n o w smaller t h a n before, w h e r e a s larger units r e m a i n e d u n c h a n g e d . Industrialisation o f the north d e p e n d e d on the existence o f a c o m m u n i c a t i o n network b e t w e e n M a c e d o n i a and the rest o f G r e e c e a n d only after the construction o f the Thessaloniki—Monastir railway line did towns such as V e r r o i a , N a o u s s a a n d Edessa start to modernise a n d industrialise. L o c a l e n e r g y resources also r e m a i n e d u n t a p p e d . T o highlight this point it is sufficient to m e n t i o n that in 1 9 1 3 , a m e r e three factories used electricity for lighting (because the O t t o m a n authorities prohibited the p r o d u c t i o n o f electricity). A l t h o u g h the w e a l t h o f M a c e d o n i a b e l o n g e d either to G r e e k s or to the large J e w i s h c o m m u n i t i e s , industrialisation w a s neither easy nor smooth. T h e g r o w t h o f nationalism in the B a l k a n provinces a n d the 37

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c h a n g e in the role o f large t o w n s o f M a c e d o n i a such as T h e s s a l o n i k i from metropolis to provincial towns o f a small a n d w e a k nation, pre­ v e n t e d their fast and successful integration. A l r e a d y by the late 1 9 2 0 s the trend o f concentration o f all industrial activity a r o u n d A t h e n s w a s becoming obvious. A third facet o f d e v e l o p m e n t p o l i c y w a s the p r o m o t i o n o f large infrastructure works. Projects w e r e designed i m m e d i a t e l y after the B a l k a n W a r s but did not actually materialise until the interwar years. T h e y a b s o r b e d large foreign capital resources, m a i n l y foreign contractors w e r e involved a n d some o f t h e m b e c a m e the object o f serious controversy b e c a u s e o f the extremely onerous t e r m s o f the loans involved. M o s t o f the projects a i m e d at i m p r o v i n g agriculture a l t h o u g h a few c o n c e r n e d utilities (the A t h e n s w a t e r s c h e m e a n d the electrification project). G r e e k g o v e r n m e n t s also considered large public w o r k s as a m e c h a n i s m of j o b creation. A m o n g their most i m p o r t a n t c o n s e q u e n c e s , however, w a s the strengthening o f technological d e p e n d e n c e o f G r e e c e on foreign countries, since most o f the e q u i p m e n t a n d material w a s purchased a b r o a d (often b y virtue o f stipulations included in the l o a n a g r e e ­ ments) and G r e e k m a n p o w e r w a s used only as unskilled labour. Despite these serious shortcomings any assessment o f this p o l i c y should take into a c c o u n t the fact that those projects w e r e indispensable and there w a s little possibility that they w o u l d have b e e n constructed w i t h o u t foreign assistance. O n the other h a n d , it should also be n o t e d that the efficiency of e c o n o m i c and d e v e l o p m e n t a l policies also d e p e n d e d not only on the existence o f w e l l - w o r k e d - o u t plans but on the negotiating p o w e r a n d ability o f the b o r r o w i n g g o v e r n m e n t s and on the quality o f bureaucratic a n d advisory services provided. In the case o f G r e e c e , there w a s a serious deficit on b o t h these counts. W h a t is i m p o r t a n t to note is that the policies described above w e r e fully e n a c t e d w h e n expansionism w a s n o longer an option, w h e n e m i g r a t i o n w a s seriously curtailed, b o t h b y the u p r o o t i n g o f the G r e e k c o m m u n i t i e s in the east a n d by q u o t a constraints i m p o s e d b y the U n i t e d States, a n d w h e n pressure w a s exerted domestically on the economy, the society a n d on the political system. A t t e n t i o n o f decision-makers w a s t u r n e d inwards as domestic resources h a d to be mobilised in order to absorb the large refugee p o p u l a t i o n that flowed in after the 1 9 2 2 defeat b y Turkey. W h e r e a s in 1 9 1 9 , the future o f the c o u n t r y w a s still considered e m b e d d e d in the expansion o u t w a r d a n d the d e v e l o p m e n t o f agriculture, shipping a n d t r a d e , in 1 9 2 7 the situation w a s interpreted 42

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differently: T h e N a t i o n a l B a n k o f G r e e c e , w h i c h w a s a central institu­ tion for p o l i c y e n a c t m e n t (including c o n d u c t i n g negotiations with foreign capital holders a n d investors — g o v e r n m e n t s a n d private institu­ tions - h a n d l i n g o f properties b e l o n g i n g to departed M u s l i m s , issuing o f national b o n d loans, c o - o p e r a t i n g w i t h the L e a g u e o f Nations, p l a n n i n g a n d a p p l y i n g e c o n o m i c a n d m o n e t a r y p o l i c y until 1927), left n o d o u b t a b o u t the c h a n g e s required. In his a n n u a l report o f that year, the G o v e r n o r o f the B a n k emphasised that:

it was no longer possible for the Bank [and the Government] to argue whether industry or agriculture or trade should be promoted. The sudden increase in the urban population made imperative the development and support of large and small industries, so that they may absorb the abundant labour manpower of the towns. To ignore this would cause an immediate and acute social problem. 44

A l r e a d y d u r i n g the previous five years c o n c e r t e d efforts h a d b e e n m a d e to that effect, especially b y favouring the industrial class. In addition to public commissions, subsidies, credit a r r a n g e m e n t s a n d tax concessions, a m o n g the most direct a n d at the same time symbolic actions w a s the a p p o i n t m e n t o f a l e a d i n g industrialist, A n d r e a s Hadjikyriakos, as Minister of N a t i o n a l E c o n o m y in the first p o s t - 1 9 2 2 g o v e r n m e n t . T h e influx o f refugees in G r e e c e in 1 9 2 2 has b e e n considered, with reason, the biggest t r a g e d y in m o d e r n G r e e k history; however, it m a y also have b e e n a blessing in disguise b e c a u s e it speeded u p the e n a c t m e n t of the d e v e l o p m e n t policies initiated after the B a l k a n W a r s . Several g r o u p s o f refugees c a m e into G r e e c e b e t w e e n 1 9 1 3 a n d 1 9 2 5 , as a result of the r e a r r a n g e m e n t o f frontiers in the Balkans, but the bulk of t h e m (57 per cent) arrived b e t w e e n 1 9 2 2 and 1 9 2 3 , and 3 0 per cent b e t w e e n 1 9 2 3 a n d 1 9 2 5 . A s a result o f these m o v e m e n t s and o f the abruptness o f the o p e r a t i o n several i m b a l a n c e s w e r e created, a m o n g the most i m p o r tant of w h i c h w a s the r u r a l / u r b a n distribution o f n e w c o m e r s . A c c o r d ­ ing to the settlement policy i m p l e m e n t e d , 4 6 per cent o f refugees w e r e settled in towns a n d 5 4 per cent in the countryside as farmers. A s regards M a c e d o n i a and the north, for almost ten years there w a s n o stability since n e w settlers m o v e d a b o u t every time one o f the belligerent c o u n tries w o n a battle a n d later, after 1 9 2 2 , every time legislation r e g a r d i n g refugee indemnities c h a n g e d . Initially, the w o r k o f rehabilitation w a s u n d e r t a k e n b y the state, a n d an impressive b o d y o f legislation w a s introd u c e d after 1 9 1 3 for the regulation o f the distribution o f land b e l o n g i n g to M u s l i m s or a b o u t confiscating lands b e l o n g i n g to citizens o f e n e m y

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countries. T h e latter w e r e later returned to previous occupants, causing serious confrontation a n d p r o v o k i n g outbursts o f violence. R e g u l a t i o n w a s not always applied objectively a n d farms could hardly be put to use u n d e r such conditions o f uncertainty. In 1 9 2 3 , after the signing o f the T r e a t y for the C o m p u l s o r y E x c h a n g e of Populations b e t w e e n G r e e c e a n d Turkey, G r e e k authorities a p p e a l e d to the L e a g u e of N a t i o n s for support. T h i s led to the negotiation o f a series o f important foreign loans a n d to the establishment o f the Refugee Settlement C o m m i s s i o n ( R S C ) with extensive rights a n d posses­ sion o f 5 0 0 , 0 0 0 hectares of land. T h e R S C h a d jurisdiction over refugee housing, health, e m p l o y m e n t , finance a n d other affairs. In addition to foreign resources, domestic loans w e r e also raised a m o u n t i n g to 12 billion drs or 2 7 . 8 per cent o f the public debt. Refugees w e r e settled either as farmers or as u r b a n settlers. O f the t w o kinds o f settlement the one in agricultural activities w a s faster, m o r e systematic a n d m o r e effective due to the availability o f land, to the fact that tools w e r e relatively inexpensive, a n d that the duration o f the n e e d of settlers to be supported w a s limited, but mostly b e c a u s e it b e c a m e part o f an already articulated national agricultural policy. A g r i c u l t u r a l settlement, m o r e ­ over, h a d important political ramifications a n d w a s actively p r o m o t e d by state, international a n d local authorities, primarily as a conservative response a i m i n g to control the situation against the d a n g e r o f potential social u n r e s t . Refugees w e r e not likely to b e c o m e proletarians nor w o u l d they r e m a i n idle, a n d even if their i n c o m e s w e r e desperately low, they h a d a piece o f land that they w o u l d sooner or later put to use. T h i s w o u l d prevent t h e m from f o r m i n g a c o m m o n front with workers a n d from b e i n g receptive to socialist ideas. In a similar spirit, refugees w e r e never treated as a h o m o g e n e o u s g r o u p . T h e y w e r e dispersed all over G r e e c e , a l t h o u g h the bulk w a s m o v e d to M a c e d o n i a , an area o f 3 4 , 8 9 3 square kilometres w h o s e p o p u l a t i o n h a d g r o w n b e t w e e n 1 9 2 0 a n d 1 9 2 8 b y 3 per cent a n d w h i c h b e c a m e a hothouse o f authoritarian institu­ tional r e f o r m . H a l f o f that p o p u l a t i o n (around 4 5 0 , 0 0 0 people) w e r e refugees a n d another 9 0 , 0 0 0 w e r e settled in T h r a c e . T h e i r dispersion, on the one h a n d , halted any possibility o f mass protest a n d r e n d e r e d t h e m m o r e a m e n a b l e to political influence while, on the other, it contributed to a faster h o m o g e n i s a t i o n o f the country. U r b a n settlement w a s m o r e c o m p l i c a t e d a n d largely ineffective, as h o u s i n g w i t h o u t e m p l o y m e n t w a s not a sufficient condition for viability. A t h e n s , Piraeus a n d T h e s s a l o n i k i c o n c e n t r a t e d the greater v o l u m e of refugees, w h o w e r e usually h o u s e d in t e m p o r a r y facilities in belt zones 45

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a r o u n d the cities while rather primitive p e r m a n e n t h o u s i n g w a s only g r a d u a l l y provided - sold - to t h e m . O v e r c r o w d i n g in the poorest refugee suburbs w a s c o m m o n , u n e m p l o y m e n t high a n d living condi­ tions generally appalling. A g a i n there w a s no uniform policy as in other cases, houses w e r e built by the m o r e affluent refugees on their initiative a n d w i t h their o w n resources. A s there w a s no articulate industrial policy, nor any plan for their assimilation either a c c o r d i n g to their origins or a c c o r d i n g to skills or even to d e v e l o p m e n t a l requirements, u r b a n refu­ gees w e r e left generally alone to fend for themselves. M u c h ingenuity w a s s h o w n in devising strategies for survival on an individual, family or collective level a n d this d e t e r m i n e d their l o n g - t e r m prospects o f success as well as the picture o f the m o r e general d e v e l o p m e n t a l p r o c e s s . O n the other h a n d , b o t h farmer-refugees a n d u r b a n settlers m e t w i t h m u c h hostility from indigenous resident groups to an extent that they w e r e considered collectively as a minority on an equal footing w i t h M u s l i m s , Slavs or Jews. Despite integrationist policies, feelings o f refugee separateness have never b e e n c o m p l e t e l y eradicated from subsequent g e n e r a tions o f descendants to this day. Similar situations arose also after the w a r with refugees arriving in G r e e c e from countries such as R o m a n i a after the consolidation there o f the c o m m u n i s t regime, or later still with G r e e k s from T u r k e y (1955) or E g y p t (late 1 9 5 0 s a n d early 1960s) w h o a b a n d o n e d their countries after the establishment o f staunch nationalistic regimes. A m o n g the darker sides o f refugee activity a n d tactics w a s the brief r e - e m e r g e n c e o f the spectre o f defensive nationalism in the 1920s a n d 1930s. It w a s expressed as anti-semitism and w a s directed m a i n l y against the J e w s o f T h e s s a l o n i k i a n d other towns in the n o r t h . T h e t w o groups w e r e c o m p e t i n g within the same space a n d for similar e c o n o m i c resources, largely w i t h a similar e c o n o m i c mentality but u n d e r v e r y different ideological constellations. Thessaloniki, the p r e w a r metropolis of the Balkans, h a d , after 1 9 2 2 , b e e n relegated to the status o f a provincial t o w n , o v e r c r o w d e d a n d p a c k e d w i t h refugees, m a n y o f t h e m living b e l o w the poverty line, w h e r e G r e e k s from the south h a d also b e e n e n c o u r a g e d to settle. T h e p r e w a r d o m i n a n t J e w i s h c o m m u n i t y w a s n o w officially a minority a n d the e c o n o m i c , social a n d political b a l a n c e o f the w h o l e area h a d b e e n upset for ever. Refugees w e r e largely supporters o f Venizelos but J e w s , w i t h the e x c e p t i o n o f a handful of elite personalities, w e r e not: before A n n e x a t i o n , the latter supported first the O t t o m a n g o v e r n m e n t a n d later the Y o u n g T u r k radical nationalist republican m o v e m e n t , b o t h of w h i c h w e r e a n a t h e m a for G r e e c e . O v e r the years, 48

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an important n u m b e r o f intellectual J e w s w h o m a i n t a i n e d close rela­ tions w i t h the J e w i s h c o m m u n i t i e s o f western a n d central E u r o p e b e c a m e involved in the socialist m o v e m e n t , o f w h i c h G r e e k g o v e r n ­ ments, including Venizelist ones, were rather suspicious. Refugees, on the other h a n d , w e r e e n c o u n t e r i n g problems o f subsistence arising from the procrastination in finding a solution to the c o m p e n s a t i o n p r o b l e m for properties left in T u r k e y ; they w e r e also victims o f frequent unfair discrimination — b o r d e r i n g on racism — b y local or recently arrived from the south populations. T h e g r o u n d w a s , therefore, fertile for extremist, m a i n l y fascist p r o p a g a n d a and the n e w l y arrived inhabitants w e r e vulnerable to extreme activity e m a n a t i n g from various quarters. T o c o n c l u d e b y assessing the role o f the refugees, it could be a r g u e d that on the w h o l e they s e e m e d to have strengthened the traditional aspects of the G r e e k e c o n o m y a n d society. A l t h o u g h this m i g h t n o t have b e e n a m o n g the central aims o f the settlement project, the d o m i n a n c e of political considerations in designing national policy seems to have tilted the scales in favour o f tested m e t h o d s a n d solutions. Substantive foreign a n d domestic financial resources w e r e used for the rehabilitation of refugees, for m o n e t a r y stabilisation and for b a l a n c i n g state b u d g e t s , but d e v e l o p m e n t policies as already m e n t i o n e d were not always e c o n omically consistent or rational. T h e ' a b u n d a n t refugee m a n p o w e r ' w a s n o t systematically or primarily channelled to industry but mostly to largely parasitic, handicraft p r o d u c t i o n or tertiary activity, or to smallh o l d i n g agriculture. T h i s w a s consistent w i t h a social and political logic d o m i n a n t a m o n g the political a n d e c o n o m i c elite circles even within the l e a d i n g financial institutions o f the country. O n c e again the G o v e r n o r of the N a t i o n a l B a n k w a s explicit: 51

the composition of the population of Greece includes many petit-bourgeois ele­ ments that have not yet been absorbed by large production. If these elements, so precious for social balance, are not supported in their struggle to maintain their position, we shall have committed a serious error. For that reason, the Bank, without any reservation, has extended to the limit its credit despite the difficulties involved in following the course of these loans. 52

T h i s logic w a s n o t in h a r m o n y w i t h e c o n o m i c or organisational criteria. It w a s especially found in public e m p l o y m e n t policies that contributed to the functioning o f the civil service as b e i n g s o m e t h i n g akin to an a g e n c y o f j o b c r e a t i o n . In industry, policies w e r e unclear as to their aims and riddled w i t h contradictions. C a r p e t industry is a case in point: it w a s introduced as a c o m p l e t e l y n e w activity for w h i c h refugees h a d an almost exclusive a n d excellent know-how. It failed c o m p l e t e l y because 53

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of deficient organisation of p r o d u c t i o n a n d distribution, inadequate a n d / o r u n t i m e l y state protection in securing co-ordination o f p r o d u c ­ tion a n d distribution o f products in external m a r k e t o u t l e t s . C a r p e t p r o d u c t i o n w a s w r o n g l y p e r c e i v e d m a i n l y as a handicraft activity that could provide only s u p p l e m e n t a r y i n c o m e for farmers a n d craftsmen, often c h e a p female labour, or other small traders, not as an export sector b a s e d on b i g firms, skilled l a b o u r and m o d e r n organisation methods. A s for e n c o u r a g i n g industrial activity in g e n e r a l , there w a s n o c o h e r e n t plan, e d u c a t i o n w a s inadequate, capital if available w a s dear and anyw a y found its w a y m o r e to agriculture a n d to the n e w provinces, at least until 1 9 2 7 . N o r did protectionism in the f o r m o f a n e w tariff system intro­ d u c e d in 1 9 2 3 help industrial policy, as n o particular b r a n c h o f industry w a s targeted (cement p r o d u c t i o n , fertilisers or h e a v y industry, for example); it functioned ultimately to the benefit o f the state as a source of revenue (40 per cent o f regular revenue c a m e from this source) a n d m u c h less to the benefit o f G r e e k industry, w h i c h r e m a i n e d inefficient a n d w i t h o u t incentives to modernise. M o r e o v e r , protectionist policy w a s o n c e a g a i n h a m p e r e d b y internal contradictions: for instance, s o m e times t a x i n g a n d other times g r a n t i n g exemptions to i m p o r t e d m a c h i n ery, r a w materials a n d intermediate g o o d s ; it w a s also designed strictly within the f r a m e w o r k o f import substitution industrialisation a n d i g n o r e d the possibility o f certain sectors b e c o m i n g export orientated, despite e n c o u r a g i n g e v i d e n c e to that effect. O t h e r aspects o f protectionism c o n c e r n e d the system of public p r o c u r e m e n t , tax relief, limited possibility o f land expropriation a n d subsidies for transport and c o m munications. C e r t a i n industries w e r e d e c l a r e d 'saturated', a n d reloca­ tion o f plants b e c a m e impossible. T h e e n a c t m e n t o f these measures w a s c u m b e r s o m e , riddled w i t h red tape a n d ultimately also o p e n to abuse a n d corruptive practices. A s for the 'saturation' or 'sufficiency' principle, a central c o n c e p t in interwar d e v e l o p m e n t policy, it w a s p r o b a b l y the m a i n cause for the delay in the m o d e r n i s a t i o n a n d competitiveness of G r e e k industry. In fact, it satisfied short-term interests o f certain entrepreneurs and at the same time expressed the d e e p belief by most politicians that industry w a s not a viable proposition for G r e e c e . It w a s a self-fulfilling p r o p h e c y since b y the m i d - i 9 3 0 s , a l t h o u g h the n u m b e r o f factories a n d w o r k s h o p s h a d d o u b l e d a n d p r o d u c t i o n h a d increased, the structure o f the s e c o n d a r y sector r e m a i n e d intact. A s late as in i 9 3 2 , the Minister o f N a t i o n a l E c o n o m y w a s still stating that G r e e c e h a d a dual e c o n o m i c identity b a s e d on agriculture a n d t r a d e . T h e clearing a g r e e ments, he believed, w e r e the best g u a r a n t e e for p l a c i n g G r e e k products 54

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a b r o a d . It s e e m e d as t h o u g h the d e v e l o p m e n t p o l i c y h a d c o m e full circle b a c k to the old traditional ideas. A m o r e definite push to industry that o c c u r r e d d u r i n g the last few years before the w a r (marked b y the 1936—40 dictatorial g o v e r n m e n t o f Ioannis M e t a x a s ) w a s n o t able to turn the tide. State intervention w a s strengthened especially in the area of l a b o u r legislation a n d social security but there w a s n o c h a n g e in the overall p o l i c y designed b a c k in the 1 9 2 0 s a n d early 1930s. A l t h o u g h the decision to r e a r m c o u l d be seen as part o f the n e w nationalist discourse that implied the exploitation o f domestic e n e r g y resources, a n d p l a c i n g m i n e r a l p r o d u c t i o n a n d h e a v y industry h i g h o n the g o v e r n m e n t priority list as a basis for t e c h n o l o g i c a l d e v e l o p m e n t a n d military might, the p o o r p e r f o r m a n c e suggests otherwise. In fact, u n d e r the influence o f older G e r m a n - i n s p i r e d doctrines a n d the rise o f socialist forces, e c o ­ n o m i c liberalism quickly r e c e d e d into the b a c k g r o u n d a n d the dictatorial r e g i m e b e c a m e a n x i o u s to enlarge its social base by e m p h a s i s i n g political rather t h a n only e c o n o m i c aims. B o t h projects o f social security for the w o r k e r s a n d m o r e concessions for the m i d d l e class were, anyway, short-lived experiments, as w a s the life o f the regime. T h e w a r interrupted any plans a n d the reshuffle o f social forces a n d policies w a s postponed.

THE W A R YEARS AND THE POST-SECOND W O R L D W A R PERIOD

T h e p o s t w a r years w e r e m a r k e d by a radical b r e a k in ideas a b o u t d e v e l o p m e n t a n d policies. T h e n e w reality o f U n i t e d States h e g e m o n y a n d increased internationalisation o f political d e c i s i o n - m a k i n g soon b r o u g h t G r e e c e into the orbit o f the A m e r i c a n p l a n to stabilise national d e p e n d e n t e c o n o m i e s . B e c a u s e o f the intensity o f the o n g o i n g civil w a r (1946—9) a n d the geo-strategic considerations in the escalating C o l d War, G r e e c e a c q u i r e d a particular i m p o r t a n c e in the s c h e m e as a pilot case. Industrialisation w a s central in the n e w s c h e m e . It h a d a l r e a d y b e e n at the core o f debates since the last years before the w a r a n d d u r i n g the o c c u p a t i o n years, w h e n the c o n c e p t o f a state industrial utility sector (especially a national e n e r g y network) g a t h e r e d m o m e n t u m b o t h w i t h in b o u r g e o i s circles a n d w i t h i n the resistance m o v e m e n t led by the N a t i o n a l L i b e r a t i o n Front ( E A M ) . T h e consensus o n the n e e d to d e v e l o p h e a v y industry w i t h state i n v o l v e m e n t c o n t i n u e d after liberation, a l t h o u g h i m p o r t a n t differences n o w arose b e t w e e n the left ( C P G ) a n d r i g h t - w i n g politicians, e c o n o m i s t s a n d intellectuals ( P P G , D S P G ) . M e a n w h i l e , the p r o d u c t i v e c a p a c i t y o f the c o u n t r y h a d d u r i n g the 5 6

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preceding war and occupation years been seriously reduced both in agriculture and industry, the transport system was utterly destroyed, public finances and banks were in chaos, and living conditions were par­ ticularly harsh due to starvation and disease. Over 500,000 people had perished between 1940 and 1944 as victims of war, of executions, of murders, of starvation and disease. Almost 2 million (over 25 per cent) of the population were, at the end of the war, dependent on relief organisations for their survival. Over 1 million were homeless, one third of the 9,000 villages and almost 23 per cent of buildings of any kind were either completely demolished or seriously damaged. Means of production were in a very bad state both in agriculture and in industry, while means of transport had almost disappeared, including the merchant fleet, which was largely destroyed. T h e impact of war was equally important on the structure and on the moral fibre of Greek society. A part of the old bourgeoisie and almost the totality of the prosperous Jewish entrepreneurial community of Thessaloniki and other towns had either lost their property, went underground or perished in the harsh conditions of the triple occupation (German, Italian and Bulgarian) of the country between 1941 and 1945. Some joined the resistance movement, with organisations on the left and right, as did a mass of the petit-bourgeois and farmer population, while collaboration with the enemy was also considerable. Everywhere, but especially in O l d Greece (south), old cleavages (republicans and royalists, socialists and liberals, and so on) were revived, and after liberation they contributed to the escalation of civil war which prolonged the generalised economic upheaval. Three attempts to stabilise the economy (in October 1944, summer 1945 and in 1946) having failed, hyperinflation, speculation and hoarding became rampant. In the absence of any social cohesion, but also because of the prewar tradition of state interventionism, recovery and reconstruction had to pass directly by the state, which eventually received and allocated considerable American 'AID' resources, exceed­ ing 50 per cent of GDP. According to plans drawn up by international and national expert organisations, industrialisation, which was to be the major vehicle of development, implied reinforcement of the state bureaucracy on the one hand and technical assistance from abroad on the other. However, in the specific conditions of Greece, neither was foreign technology accompanied by a corresponding business culture that would be grafted upon the new environment nor was the allocation of funds devoid of political considerations. Consequently, resources were also used for non-economic purposes, including putting down the 57

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left-wing guerrilla fighters. Moreover, through a series of politically motivated state protectionist and subsidisation policy, it led to the consolidation of a 'nouveau-riche' entrepreneurial class. This group consisted largely of elements that had become rich during the war through dubious practices (speculation, black market and contraband), including appropriation of foreign properties and collaboration with the occupation authorities. In the new conditions, most of them showed a preference for short-term ventures, for trade or banking speculative transactions on foreign exchange that were supposed to fetch high and quick profits, as well as for government-endorsed bids of public works and construction projects. This turn of affairs, despite reactions from a number of elite economists, was not really opposed, since any opposition was offset by the prospects of economic growth that the promised recovery implied, by the desire to return to some kind of normalcy and by the ideological deadlock of anti-communism, which was accompanied by extended state repression against any dissident action or opinion. After the end of the civil war and the defeat of the left, the combination of American influence, the escalating Cold War and the short-term perspectives of the reinstated conservative political elite influenced both economic options and foreign issues. Weak governments, direct American intervention in national politics, confusion over policies and widespread corruption led to a sort of cynicism whereby acquiescence to government choices was rewarded. Rewards took the form of possibilities to collaborate with the state and to benefitfrom various kinds of concessions, which in turn allowed both the survival of new non-qualified entrepreneurs and a steady increase in the number of civil servants. Between 194.1 and 1953 an impressive 40,000 new firms were founded, representing 50 per cent of the total number of indus­ trial firms operating in 1953, while by 1951 the Greek economy had reached 1938 levels, and the industrial production index stood at 241 in relation to 1946 (100). Nevertheless, in the same year (1951), almost 9 5 . 5 % of all industrial units — personal or family firms — employed fewer than ten people, suggesting that the structure of Greek industry had essentially remained unchanged compared with the prewar period. T h e number of civil servants also rose from 55,000 in 1940 to 132,000 in 1970, a rise of 140 per cent, against a 19 per cent population rise in the same period. From 1945 to 1952 half of the resources from Marshall Aid were channelled to military expenses for the civil war and 25 per cent was spent on imports of consumption goods, the remainder going to infrastructure investment and only a minimal amount finding its way to 60

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industry and production. Modernisation without restructuring and high growth rates accompanied by the maintenance of a traditional eco­ nomic structure was the result of policies that once more deviated from strictly rational economic considerations. Politically, the pendulum moved eventually further to the right, neutralising the voice of the moderate liberals and democrats who held power until 1 9 5 1 , while the uninterrupted economic growth had also made possible the survival of a multiparty institutional framework and the absence of overt authoritarian rule, until 1 9 6 7 . This was based on a materially prosperous new middle class, supported by the state, which was in turn supporting the strong anti-communist police state that managed to operate under a cloak of legitimate democratic parliamentary rule. Foreign rela­ tions during this period were also affected by the new circumstances, as territorial claims on northern Epeirus, Dodecannesos and southern Bulgaria were included in the manifesto of most bourgeois parties, which vehemently exploited the confusion about the Macedonian issue that characterised Greek communists faced with the aggressiveness of Balkan Communist parties. National territorial expansion was advocated on the basis of economic considerations such as, for instance, the need to tap energy resources in the north and offset the poverty of the Greek soil. These claims, however, were refuted by reports of international organisations on the postwar economic possibilities of Greece. After the cession of the Dodecanese by Italy to Greece in 1 9 4 5 , national issues definitely receded in the background. T h e intensity of the last two rounds of the civil war and the consequent violent repression and gener­ alised fear, had virtually annihilated any possibility for alternative opin­ ions to be expressed, leaving the way open for American influence and political intervention. T h e contradictions implied above were exacerbated with the military takeover in 1 9 6 7 . Examining the imposition of the military dictatorship lies outside the scope of this chapter. Suffice it to say, however, that the contradictions outlined above were accentuated, the economy suffered severely from gross incompetence and corruption and the quality of political and cul­ tural life was diminished. T h e seven-year authoritarian rule postponed yet again the resolution of the ideological and cultural cleavages created during the war and civil war, which finally became possible after the return to normalcy in 1 9 7 4 . O n the economic front, important opportu­ nities to benefit from the upward trend of the world economy until 1 9 7 3 were lost, making recovery after 1 9 7 4 more difficult. Close co-operation with American advisers and agencies, the memory of early postwar

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a r r o g a n t A m e r i c a n political intervention and suspicion o f involvement in the Turkish invasion o f C y p r u s c o u p l e d with a pro-Turkish stand as regards G r a e c o - T u r k i s h negotiations p r o v o k e d a w a v e o f a n t i - A m e r i c a n demonstrations after 1 9 7 4 . T h i s w a s carried o n into the 1 9 8 0 s a n d w a s e x a c e r b a t e d b y the e c o n o m i c recession. Since the collapse of socialism in eastern E u r o p e n e w realignments have o c c u r r e d , but the massive in­ flow of illegal i m m i g r a n t s from eastern E u r o p e a n a n d A s i a n countries, especially from A l b a n i a , is creating tension m a r k e d b y x e n o p h o b i a , while there is also a g e n e r a l feeling that the question o f the M u s l i m minority in the n o r t h needs to be reassessed, a n d b o t h e c o n o m i c a n d cultural integration policies to b e c o m e m o r e d y n a m i c . CONCLUSION

T h e chapter has a r g u e d that policies o f e c o n o m i c d e v e l o p m e n t a n d the evolution o f the N a t i o n a l Q u e s t i o n in twentieth-century G r e e c e c a n n o t be separated from the g e n e r a l historical process o f political, e c o n o m i c a n d cultural consolidation of the m o d e r n nation state that started in the early nineteenth century. Structural p r o b l e m s a n d ideas that contributed to their m a i n t e n a n c e started early in the century; significant c h a n g e s in social structure a n d e c o n o m i c p o l i c y w e r e slow a n d difficult to achieve. A t t e n t i o n w a s d r a w n to the fact that, especially in late-developing c o u n tries, the role o f the state — and o f a n u m b e r o f c o l l a b o r a t i n g institutions — w a s important in devising a n d e n a c t i n g e c o n o m i c policies — even in s h a p i n g social forces. In a t t e m p t i n g to isolate the determinants of national policy a n d to assess the results o f national integration, it w a s found that a n o n - e c o n o m i c logic prevailed in state p o l i c y - m a k i n g that d e t e r m i n e d the d e g r e e of their efficiency. T h e activities o f social agents themselves h a d a n important part in shaping the o u t c o m e . T h e N a t i o n a l Q u e s t i o n has b e e n inextricably linked with the d e v e l o p m e n t process a n d this relationship has often detracted a n d / o r limited the ability to formulate rational policies. N a t i o n a l i s m e m e r g e d as a multifaceted process or c o n c e p t , b o t h regressive a n d progressive, w i t h an expansionist a n d a defensive dimension, l e a d i n g b o t h to integrationist a n d assimilationist policies at different points in time. It shaped d e v e l o p m e n t ideas a n d poli­ cies certainly until the S e c o n d W o r l d W a r but w a s not b a s e d primarily o n industrialisation. Its i m p o r t a n c e as a m e c h a n i s m o f integration rather r e c e d e d in the p o s t - S e c o n d W o r l d W a r p e r i o d w h e n a significant c h a n g e w a s observed as industrialisation b e c a m e the central process u n d e r increased state intervention a n d A m e r i c a n influence. O l d contradictions, however, did not disappear, as m a n y traditional features o f the G r e e k e c o n o m y a n d society prevailed until well into the 1980s.

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NOTES

1 In 1829, the boundary of the mainland was laid down and the islands adjoining Peloponnesos, Euboea, the Cyclades and the Northern Sporades also became part of the Greek kingdom by the Protocol of 22 March and the Treaty of 21 July 1832 between the three Protecting Powers (England, France and Russia) and Turkey. In 1863 the Ionian Islands were ceded by Britain to Greece, while as a result of the Treaty of Berlin in 1878 the fron­ tiers were changed and in 1881 Thessaly and the district of Arta were added to Greek territory. Finally, after the Balkan wars in 1 9 1 2 - 1 3 and victory, Greece acquired Macedonia and Thrace, as well as the islands of the north­ ern Aegean, and the frontiers with Bulgaria and Serbia were fixed. Turkey finally renounced its claims to the island of Crete in 1913. Crete had taken part in the war of independence and several uprisings occurred on the island. Two years after the last Cretan insurrection of 1896, Crete became autonomous, maintaining this status until 1906; subsequently, union with Greece was proclaimed (see map, figure i o . i ) . 2 An expression used by E. Venizelos after the conclusion of the Treaty of Sevres. 3 The last phase of territorial expansion occurred in 1948 when the Dodecanese Islands - under Italian occupation - were finally ceded to Greece. 4 Whereas the literature on nationalism in general is extensive, there are rel­ atively few works on economic nationalism. Moreover, they usually focus on recent third world development policies. A. Kahan's analysis is a welcome exception. See A. Kahan, 'Nineteenth-century European experience with policies of economic nationalism' in H. G. Johnson (ed.), Economic Nationalism in Old and New States (London, 1968), pp. 1 7 - 3 0 . 5 Albanians in fact had fought in the war of independence as Greeks and became citizens of the new nation. The frequent occurrence of Italian proper names and the Catholic faith in the Cyclades Islands indicating descent from noble Genoese or Venetian families cannot be used as evidence of foreign influence, since these populations were, as a rule, of Greek extraction. See Peace Handbooks, Vol. III, Part I, 'Greece with the Cyclades and Northern Sporades', No. 18 (London, 1920), p. 14. 6 Peace Handbooks, Vol. IV, Part II, 'The Balkan States', No. 21 (London, 1920), pp. 14, 80 and 91. 7 For a detached and detailed contemporary presentation of the ethnic groups in Macedonia, A. A. Pallis, 'Racial migrations in the Balkans during the years 1 9 1 2 - 1 9 2 4 ' , The Geographical Journal 66 (1925), 3 1 5 - 3 1 . 8 The recent rekindling of the issue in the area lies beyond the scope of this chapter. 9 'Ethnicity' is a problematic term too, as different criteria of classification have been used over time. Within the Ottoman Empire, for instance, under the millet system, religion - and not language or national sentiment - was the determining factor. Once independent nations were created, or national

MARGARITA

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consciousness developed, criteria changed. In the case of Macedonia, there was an amazing confusion as the various groups adhered to national poli­ cies that reacted and responded to the manipulation of the Ottoman Empire, which harnessed local antagonisms to maintain her authority for a while longer. 10 As shown by G. Tortella, A latecomer: the modernisation of the Spanish economy 1 8 0 0 - 1 9 9 0 ' in M. Teich and R. Porter (eds.), The Industrial Revolution in National Context,Europe and the USA (Cambridge, 1996), pp. 184-200. 11

12

13

14

15

16

These events included the assassination of the first Governor of Greece, Ioannis Kapodistria, in 1829; civil war; the establishment of a kingdom under King Otto (1832) and the hegemony for a number of years of a Bavarian court; the granting of a constitution as late as 1843; the eventual expulsion of the king twenty years later and the hope of expansion often instigated by the ambitions and designs of foreign powers but also by a deep-rooted popular sentiment in Greece. Such events and concerns absorbed the minds of statesmen and the people in general and detracted attention from questions of economic organisation. After independence all land was passed to the state. It was then gradually sold to the farmers. Because of the inadequate income of the population, and the inability of the state to draw a land registry (cadastre) and efficiently enact the relevant legislation, land distribution was delayed until a law was passed as late as 1871. Squatting became a widespread tactic by peasants. Among propositions for progress, colonisation was also suggested but the scheme failed as there has never been a concrete and homogeneous plan but rather vague ideas about the invitation of foreign immigrants. In i 8 6 8 there were twenty-one roads of a total of 4 6 i kilometres - three times that of the 1850s - but no major road was yet planned. Ioannis Kolettes, an astute politician who had lived and studied in France, was among the main exponents of this policy. He favoured an expansionist foreign policy and integration of the Greek populations in several areas still under Ottoman rule. An ardent admirer of the principles of the French Revolution, he was the leader of the 'French' party, and acted often under the influence of the then French Prime Minister, Francois Guizot. Sensitive to the fact that his party was very heterogeneous, consisting of some of the most traditional sections of Greek society, Kolettes also used nationalism to maintain cohesion. His administration, however, became riddled with immobilism and corruption. For an extensive analysis of the early party system in Greece, see J. A. Petropoulos, Politics and Statecraft in the Kingdom of Greece, 1833-1843 (Princeton, NJ, 1968), pp. 3 4 4 - 4 2 0 . Advocated mainly by another statesman, Alexandros Mavrokordatos, a westernised Phanariot, with strong sympathies and contacts among English philhellenic circles and leader of one of the early Greek parties, the 'English' party. Since the inception of the Greek state, patronage - both foreign and local

National integration and economic change in Greece

17

18

19

20 21

223

- had become the basis of political integration and efforts to introduce an efficient bureaucracy had generally failed. British control over the fate of Greece and its relations with Turkey, for instance, took rather extreme forms as in the first British blockade in 1850, the Franco-British occupation of Piraeus in 1854, at the time of the Crimean war when Greeks sympathised instead with Russia and saw an opportunity to claim Epeirus, Thessaly and Macedonia; and in 1886, during the Diliyannis mandate and Greek involvement in Macedonia, when a second British blockade was imposed. This period coincided with a change in politics and the establishment of a constitutional monarchy under King George I. At the same time, the first important territorial annexation occurred when the Ionian Islands were united with Greece. Greece was blacklisted in European stock markets after the inability of Greek governments to settle the question of the foreign debt, the service of which had stopped in the 1840s. In 1878 an agreement was finally concluded, the ban was lifted and a series of important loans were negotiated. By the Koumoundouros government. Any previous efforts to encourage industrial development had failed. See Christina Agriantoni, Oi Aparches tes Ekviomechanises sten Hellada kata ton igo aiona [Beginnings of Greek industrialisation in the 19th century], (Athens, 1986).

^

22 Margarita Dritsas, 'He Hellada kai o Europaikos Oikonomikos Typos kata ten Trikoupiki periodo: Aparches tes politikes epikoinonias' [Greece and the European economic press during the Trikoupis period: The beginnings of a communication policy], Ariadni 8 (2000). 23 The construction of railways has been picked out by historians as an indication of ill-designed investment outlets that occurred during this period and led to the bankruptcy of the country. Although they could have induced industrialisation, they proved inadequate as they usually linked only coastal areas, and they diverted funds from investment in steamships, which had been for a long time the strongest sector of the economy. What has usually been underestimated in the analysis is the strategic importance of railways in mobilising army troops (see L. Papagiannakis, Oi Hellinikoi Siderodromoi [The Greek railways], (Athens, 1980) and G. Dertilis, Koinonikos metaschematismos kai stratiotiki epemvasi 1880-igog [Social transformation and mil­ itary intervention 1 8 8 0 - 1 9 0 9 ] , (Athens, 1985), p. 96. 24 For an example of the speculative and largely rapacious investment behaviour of Greeks from abroad during this period, see G. Dertilis, To Zetema ton Trapezon [The banking issue], (Athens, 1980). 25 Violent incidents in the north fuelled the opposition's scheme, advocated mainly by Theodoros Diliyannis, who called for immediate military action. He unrealistically aspired to preserve a hegemonic position for Greece in the east through various means, including the preparation of uprisings in foreign lands and/or the spreading of nationalist activity to counteract

224

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propaganda by rival nations in the neighbourhood. Diliyannis succeeded Trikoupis as Prime Minister and the result of his policy was a brief war with Turkey in 1897 in which Greece was defeated. This adventure showed even more vividly the limits of expansive nationalism. With regard to the economy, although government rhetoric emphasised the need to strengthen domestic production and avoid foreign loans, government action was taken to strengthen exports rather than industry (e.g. establishment of chambers of commerce in Constantinople, Smyrna, and in Alexandria where trade was in the hands of Greeks): Ch. Hadjiossif, He Gerea Selene,He Viomechania sten Hellenike Oikonomia 1830-1940 [The waning moon. Industry in the Greek economy 1 8 3 0 - 1 9 9 0 ] , (Athens, 1993), p. 276. 26 These views and policies were articulated and used during all previous phases of the Eastern Question. A third view advocated collaboration with Turkey in order that Greeks inherit the empire. For an analysis of the issue of 'Megali Idea' (irredentism) in Greece, see Elli Skopetea, To 'Protypon Vasileion' kai he Megale Idea [The exemplary kingdom and the great idea], (Athens, 1988). 27 This statement does not imply agreement with the thesis that the require­ ments of military technology in nineteenth-century Europe forced the pace of industrialisation: Kahan 'Nineteenth-century European experience', p. 28 Venizelos to Kanakaris-Roufos, cited in S. and K. Vovolinis, Mega Hellenico Viographico Lexico [Biographical Hellenic dictionary], (Athens, 1958), vol. I, p .

3

8

4

.

29 Venizelos was Prime Minister for two successful full terms of government between I 9 I 0 - I 5 and I 9 2 8 - 3 2 . 30 One particularly sensitive area was that of foreign diplomacy. An example of problems created by a diplomatic oversight (or error) is furnished by the protocol signed between the Greek Foreign Minister and his Bulgarian counterpart in 1924, when, for the first time in the history of the two nations, the existence of a Bulgarian minority was officially recognised. It caused serious delays in the application of Greek policy in the region, it provoked protests from political circles and local groups who resented its implications and it inflamed publicopinion. It was eventually revokedby the Greek parlia­ ment in 1925: A. Fergadi-Tounta, Hellenovoulgarikes Meionotetes. To Protocolo Politis-Kalfov 1924-1925 [Greco-Bulgarian minorities, the Politis- Kalfov Protocol 1 9 2 4 - 1 9 2 5 ] , (Thessaloniki, 1986). For its impact on one area, educational policy, see I. Michailides, 'Minority rights and education problems in Greek inter-war Macedonia: the case of the primer Abecedar', Journal of Modern Greek Studies 1 4 ( 2 ) ^ 9 9 6 ) , 3 2 9 - 4 3 . The role of international organisa­ tions such as the League of Nations with its several Commissions (Section for Minorities, Mixed Commission, Refugee Settlement Commission, etc.) was also important. Some of the problems seem to be still around, as the re-emer­ gence of the Macedonia question showed in recent years.

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31 Historical Archives of the Greek Ministry of External Affairs (HAGMEA), B43, 17.IV 1903-14.XI.1911, cited in Hadjiossif, He Gerea Selene,p. 279. 32 In 1912, it was estimated that Greek entrepreneurs operating in the Ottoman Empire, despite foreign competition, possessed 50 per cent of industrial capital and controlled over 40 per cent of internal trade. See Th. Veremis and K. Kostis, He Ethiniki Trapeza sten Mikra Asia 1919-1922 [The National Bank of Greece in Asia Minor 1 9 1 9 - 1 9 2 2 ] , (Athens, 1984). Among the most extreme propositions of this period was the wish to create an Economic League that would link the homeland with all national forces dis­ persed abroad. Not surprisingly, the German Zollverein and its importance for Pan-Germanism was used as an example worth imitating: K. Zografos, 'Peri tes Enischiseos tou Exo Hellenismou' [The support of offshore hellenism], Hellenismos (March 1900), 1 1 4 - 1 5 . 33 Some historians have described this phenomenon as an 'extrovert economy', minimising the nationalist aspects: Hadjiossif, He Gerea Selene,p. 279; K. Kostis and V Tsokopoulos, Oi Trapezes s ten Hellada 1898-1928 [Banks in Greece 1 8 9 8 - 1 9 2 8 ] , (Athens, 1987). 34 Just before and during the Balkan Wars, many business firms - insurance companies, etc. - were used as front organisations covering up for nationalist activities by Greeks. See Ch. Hadjiossif, ' H E^warpeqia rrjS EAArjviKris OiKovo^ias aris apxes rov 2006 aicbva Kai 01 avveneies rrs arrv ei;a>repiKri noXiK^r' [Greek economic extroversion in the early 20th century] in E.A.I.A. (ed.), H EXXa.8a rwv BaXKaviKwv IJoXe^Mv 1910-1914 [Greece during the Balkan Wars 1 9 1 0 - 1 9 1 4 ] , (Athens, 1993), pp. i

4 3 -

6a

35 M. Dritsas, Viomechania kai Trapezes sten Hellada tou Mesopolemou [Industry and banking in inter-war Greece], (Athens, i990), pp. 9 9 - i i 0 ; Hadjiossif He Gerea Selene,pp. 9 6 - 7 . 36 As soon as Venizelos came into power, in 1911, he formed a defensive alliance with Bulgaria against Turkey. The rise of the Young Turks and their racist policies against Christians and non-Turks had clearly shown to Balkan neighbours that they had to resolve their differences on their own. The treaty signed in 1912 pledged both parties to mutual aid, should either be attacked by Turkey, to secure the peaceful coexistence of the Greek and Bulgarian populations of Turkey and to co-operate in securing the rights of those nationalities. The content of the agreement was kept secret. In the subsequent war with Turkey, Greece was victorious in most battles. The crown prince anticipated the Bulgarians by entering Thessaloniki and the Turkish fleet was also defeated outside the Dardanelles. In the following year more victories followed in Epeiros (Treaty of London 1913) and after the outbreak of the second Balkan war in 1913, Bulgaria was completely defeated. Greece obtained eastern Macedonia and a large strip of the Thracian coast (Treaty of Bucarest in i 9 i 3 ) . 37 In i 9 i 4 an area of only 2,823.4 square kilometres was cultivated. This had

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risen to 4,418 in 1929 and to 6,697 in 9 3 9 Ch. Evelpides, He Georgia tes :

:

Hellados [Greek agriculture], (Athens, 1944), p. 19.

38 K. Kostis, Agrotike Oikonomia kai Georgike Trapeza [Rural economy and agri­ cultural bank], (Athens, 1987), pp. 39 and 58. 39 Measures included concentration of the produce, distribution and use of chemical fertilisers, advice to farmers, a price policy, introduction of import duties, regulation of relations with the flour industry, introduction of new credit arrangements, promotion of co-operatives and the creation in 1931 of a state Agricultural Bank. 40 Hadjiossif, He Gerea Selena p. 94. 41 Jewish entrepreneurs were particularly successful in the processing and trade of tobacco and cereal; they also concentrated almost exclusively in their hands trade transactions with the Ottoman Empire and the rest of the Balkan countries. Jewish presence was also prominent in textiles. 42 In 1913, wool factories, a traditional industry of the area, produced for the Turkish army but the industrialists were Greeks. After unification, they became part of the Greek industrial heritage but lost their main sale outlets and had to adjust to the new reality of regional concentration. Almost all of the Macedonian textile firms by 1938 had established affiliated companies in Athens, the size of the latter exceeding that of the Macedonian factories: Hadjiossif, He Gerea Selena p. 94. 43 Kostis, Agrotike Oikonomia,p. 248, cites a quote of E. Tsouderos, member of the Liberal party and later Governor of the Central Bank in 1919. 4 4 See Dritsas, Viomechania kai Trapezes. 45 In 1923, Venizelos underlined that Greece needed a particularly conserva­ tive agrarian policy. See S. Stefanou (ed.), Keimena tou E. Venizelou [Texts by E. Venizelos], (Athens, 1983), vol. III. 46 C. B. Eddy, chairman of the Refugee Settlement Commission, referred to the refugees as 'the salvation of Macedonia': Greece and the Greek Refugees I^I^ i 47 It is worth noting that during the height of the Macedonian campaign, before the arrival of the refugees, suggestions were made by government officials that farmers from Peloponnesos be moved to the north in order to offset the activity of Slavs. See K. Karavidas, Ta Agrotika [Agrarian affairs], (Athens, 1931, reprinted 1978). 48 In some areas house or flat provision was delayed until the 1960s. 49 Postwar industrial development studies have documented the contribution of first- or second-generation refugees to the building of modern Greek industry, but this was not a foregone conclusion before the war. 50 In 1927, a nationalist organisation was founded in which many refugees were members and which took an active part in anti-semitic demonstrations ( L o n d o n ,

i n

51

'"

p .

3 9 .

3 I .

Between 1923 and 1930, foreign capital in the form of loans that flowed into Greece amounted to 907.8 million gold francs. Of it 48 per cent came from Britain, 31 per cent from the United States, 12 per cent from Belgium, 6 per

National integration and economic change in Greece

52

53 54

55 56

57

227

cent from Sweden and the rest from other countries. A small part of that was used by an Anglo-Hellenic trust for industry. See Dritsas, Viomechania kai Trapezes,pp. 3 3 5 - 6 . Civil servant numbers had increased from 37,660 in 1915 to 72,610 in 1923-4. Dritsas, Viomechania kai Trapezes,pp. 3 1 4 - 1 6 . Ibid., p. 160. The Communist Party (CPG) postulated the prerequisite of a radical change in the productive relations and the political institutions of the country as well as the mobilisation of domestic capital resources. The opposing right wing (Populist Party of Greece (PPG), Democratic Socialist Party of Greece (DSPG)) was united in advocating the attraction of foreign capital, the pro­ motion of consumer industry first and heavy industry later, and the direct involvement of the state without touching, however, the socio-economic structure of the country. A growing anti-communism accompanied the fear of an eventual rise of the CPG via proletarialisation of the population. See Ch. Hadjiossif, 'Apopseis gyro apo te Viosimoteta tes Hellados kai to rolo tes Viomechanias' ('Opinions on the viability of Greece and the role of indus­ try') in V Kremmydas et al. (eds.), Afieroma ston Niko Svorono [Tribute to Nikos Svoronos], (Rethymno, 1986), vol. II, pp. 330-68 at pp. 354-6. United Nations Relief and Rehabilitation Administration (UNRRA, 1946, I 9 4 7 ) .

. 58 American hegemony in Greece became a reality with the Truman Doctrine, which was announced in April 1947, after the British Economic Mission in co-operation with the Greek government failed to bring about stabilisation. 59 See G. Stathakis, 'Finance and the industrial reconstruction: the case of the Marshall Plan in Greece' in A. Teichova, H. Lindgren and Margarita Dritsas (eds.), L'Entreprise en Grece et en Europe XIXe-XXe Siecles (Athens, 1991), pp. 1 3 3 - 5 0 . In 1952, in a critical appraisal of early postwar economic policy, Kyriakos Varvaressos, former Governor of the Bank of Greece and former Deputy Prime Minister, drew attention to the fact that an 'unprincipled economic oligarchy', prone to speculative activities had survived after the war, thanks to the lack of a taxation policy that would tap illegal war profits; that there was a need for a reorganised and strong interventionist state; that heavy industry was not a priori necessary but should follow economic development and the rise of living standards, that agricultural production and the construction industry - via the creation of small self-financed family firms - should be promoted because of their labour-intensive character and low capital requirements; and that dependence on foreign sources of capital, especially from the United States, should be reduced. Varvaressos' remarks met with general hostility from political and economic circles. See K. Varvaressos, Report on the Greek Economic Problem (Washington, DC, International Bank for Reconstruction and Development, I952). 60 See K. Vergopoulos, 'The constitution of the New Bourgeois class 1 9 4 4 - 1 9 5 2 ' in J. O. Iatrides (ed.), Greece in the ig^os and ig$os,A Nation in Crisis ^dim^

p

p

.

5

2

9

-

5

9

.

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61 A new sort of primitive accumulation of capital had occurred during the war years that had led to important investment as is indicated by the 5,000 new industrial enterprises which were founded between 1941 and 1948. See ibid. and K. Tsoukalas 'The ideological impact of the civil war' in Iatrides, Greece in the 1940s and i9jos,pp. 5 6 1 - 9 4 . There is also a number of reports on the economic condition of Greece in the 1940s by the National Bank of Greece, compiled in view of the negotiations about reconstruction. 62 Stathakis, 'Finance and the industrial reconstruction', pp. 1 3 3 - 4 .

C H A P T E R

E L E V E N

National identity and economic conditions in twentieth-century Austria Herbert Matis

E C O N O M I C D E V E L O P M E N T IN A M U L T I N A T I O N A L

SETTING

Interest in questions o f e c o n o m i c a n d political integration o f regions w i t h v a r y i n g s o c i o - e c o n o m i c levels a n d different ethnic a n d cultural b a c k g r o u n d s , understandable in the context o f the establishment o f the E u r o p e a n U n i o n , has d r a w n attention to the specific e x a m p l e o f the former H a b s b u r g E m p i r e . F r o m a retrospective view, the social reality has often b e e n transformed into illusions. Historians asserted the existence o f a w i d e , b r o a d l y cohesive c o m m o n market, driven b y m a r k e t forces a n d b a s e d on c o m p a r a t i v e costs, a division o f l a b o u r a n d a natural division o f resources. B u t even before the outbreak o f the First W o r l d War, one has to recognise a g r o w i n g rivalry b e t w e e n different national­ ities, nationally m o t i v a t e d boycotts and a g r o w t h of 'national industries'. T h e d o m i n a n t nations o f the time, the G e r m a n s a n d the M a g y a r s , a n d to some extent the Polish aristocracy in G a l i c i a , altogether represented only 4 3 per cent o f the entire population. Nevertheless, they d o m i n a t e d in b o t h the political a n d e c o n o m i c spheres. W h i l e Transleithania's feudal a g r a r i a n structure w a s d o m i n a t e d by M a g y a r magnates, in C i s l e i t h a n i a the G e r m a n middle class m a i n t a i n e d strategic positions in cultural a n d social life, in politics a n d the economy. A n d it is an o p e n question to w h a t extent diverse reform projects, such as Austrian P r i m e Minister Ernest v o n K o e r b e r ' s novel p r o g r a m m e of e c o n o m i c develo p m e n t at the turn o f the century, w o u l d have h a d a fair c h a n c e o f o v e r c o m i n g national diversities a n d a n t a g o n i s m s — diversities a n d antagonisms that arose not only from s o c i o - e c o n o m i c causes but also from irrationally m o t i v a t e d mass-psychological p h e n o m e n a . A l t h o u g h various attempts to b a l a n c e domestic political a n d s o c i o - e c o n o m i c inequalities failed, this c a n certainly not be attributed to discrimination against individual nationalities. T h i s failure w a s m o r e a result o f an inability to realise a systematic and c o m p r e h e n s i v e policy for d e v e l o p m e n t . A d d e d to this w a s the missed opportunity to transform the 1

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supranational state into a n e w f o r m acceptable to all peoples. It w o u l d , however, be equally erroneous to m a k e j u d g e m e n t s a b o u t the special national, legal a n d political situation that o b t a i n e d in the H a b s b u r g M o n a r c h y using the m o d e r n notion o f a nation state as a yardstick. Similarly, it w o u l d be w r o n g simply to assess the m o n a r c h y ' s e c o n o m i c b a c k w a r d n e s s in the light o f standards o f present-day theories o f e c o ­ n o m i c g r o w t h . T h e question has to be asked w h e t h e r the d e v e l o p m e n t strategies relevant for a present-day nation state could have b e e n realised in the specific, historically d e t e r m i n e d structures o f the suprana­ tional empire, w i t h its intensifying domestic conflicts a n d nationality struggles. T h e m a i n reason for the failure o f the H a b s b u r g E m p i r e is simply that it functioned in its o w n time as a living a n a c h r o n i s m . O n the one h a n d , it w a s p r e d o m i n a n t l y dynastic and, as such, a historical relic. O n the other h a n d , as a supranational state, it w a s a h e a d o f its time. T h e d i l e m m a arising from these contradictory characteristics w a s that the empire's continued existence as a multiethnic, pluralistic society could n o t possibly be subordinated to a single, centralist a n d universally valid c o n c e p t i o n o f a 'nation state' at a time o f rising nationalism. W h i l e historians mostly emphasise political, legal a n d constitutional p r o b l e m s or cultural factors o f national identity such as the ' l a n g u a g e question', e c o n o m i c historians m a i n l y deal w i t h the i m p a c t o f industrialisation as an integrative or disintegrative force. D u e to the current fascination w i t h integrated large-scale e c o n o m i e s , one is t e m p t e d to overestimate unifying e c o n o m i c factors. In fact there really is a t e n d e n c y — w h i c h anticipates later E u r o p e a n attempts at integration — to select data that point in the direction o f h a r m o n i o u s e c o n o m i c interaction. It w a s a fact that the pattern o f industrialisation in the H a b s b u r g M o n a r c h y reflected that in E u r o p e generally — a gradient from west to east a n d from north to south. T h i s did initially reinforce existing socioe c o n o m i c differences. T h e u n d e r d e v e l o p m e n t o f w h o l e regions neces­ sarily relegated t h e m to a quasi-colonial status. B u t in the l o n g run, industrialisation h a d an equalising effect. E c o n o m i c progress led to increasing productivity a n d steadily g r o w i n g w e a l t h , even in the backw a r d provinces. Nevertheless, in the situation prevailing in the m o n a r ­ chy, steadily g r o w i n g national sentiment w a s p r e p a r e d to sacrifice all obvious a d v a n t a g e s deriving from a c o m m o n market c o m p r i s i n g 5 2 million people for the sake o f ideological a n d nationalistic motives. T h e relationships b e t w e e n the nationalities w e r e not founded on e c o n o m i c partnership but on intensifying rivalry, so that centrifugal factors by far o u t w e i g h e d integrative ones. 3

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T h e diverse nationalities all strove for m o r e national i n d e p e n d e n c e a n d e c o n o m i c autarky. T h e r e was, however, one e x c e p t i o n to this: the H a b s b u r g hereditary lands o f the A l p i n e a n d D a n u b i a n region, the area that comprises the heart of present-day Austria. T h i s part o f AustriaH u n g a r y w a s , on the one h a n d , part o f the G e r m a n l a n g u a g e a n d cul­ tural area o f central E u r o p e ; on the other h a n d , it constituted the core of the multinational empire. A s such, it w a s v e r y well situated to assume a central position, w i t h V i e n n a as the e c o n o m i c centre. T h e peripheral regions found themselves e c o n o m i c a l l y in a position o f asymmetric dependency. In the monarchy, the G e r m a n - s p e a k i n g population, not least due to their central role in the organisation of capital, o c c u p i e d a h e g e m o n i a l position. V i e n n a functioned as the empire's e c o n o m i c clear­ ing house. H e r e w e r e to be found the h e a d q u a r t e r s o f the great indus­ trial a n d services enterprises and, above all, the major banks, w h i c h exerted such a powerful influence on the w h o l e economy. C o m p a r e d w i t h V i e n n a , the other major cities o f Cisleithania, such as P r a g u e a n d B r n o , p l a y e d a purely s e c o n d a r y role. T h u s at the b e g i n n i n g o f the twentieth century, m a n y o f the G e r m a n - s p e a k i n g Austrians found t h e m selves in an a m b i v a l e n t position. A s m e m b e r s o f a privileged nationality they benefited from the a d v a n t a g e s offered by their position in the empire, albeit u n d e r the p e r m a n e n t threat o f b e i n g eclipsed b y the g r o w i n g n u m b e r s and m i g r a t i o n o f the Slav population. O n the other h a n d , like the empire's other 'nations', they also strove to achieve their o w n national identity. A s a minority exercising g r o w i n g political influence, Austrian G e r m a n s ' wishful thinking did not centre a r o u n d the idea of an 'Austrian nation' but on separatist P a n - G e r m a n i s m . T h e latter has to be seen as a historical equivalent o f other national m o v e m e n t s (for instance, P a n - S l a v i s m , Yugoslavism a n d Italian Irredenta), w h i c h w e r e all directed against the empire's cohesion forces. T h u s , w h e n in 1 9 1 8 the A u s t r o - H u n g a r i a n M o n a r c h y collapsed, the fall o f the empire w a s j u d g e d v e r y differently by the various nationalities that h a d formerly b e e n e m b o d i e d in it. S o m e h a d to face losses o f influence a n d territory, others g a i n e d their long-desired national sovereignty a n d political self-determination. In the e c o n o m i c sphere, the creation o f successor states m e a n t the disruption o f a centuries-old interregional division of l a b o u r a n d the splitting-up o f a large, fairly autarkic domestic m a r k e t . In the 1 9 2 0 s most o f the successor states pursued protectionist policies a n d a i m e d at e c o n o m i c autarky. N a t i o n a l i s m , even in its chauvinistic forms, w a s seen as a constitutional e l e m e n t o f sovereignty. H i g h tariff 4

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barriers a n d neo-mercantilistic policies w e r e seen as natural c o n c o m i ­ tants to political i n d e p e n d e n c e . Historically evolved structural interd e p e n d e n c i e s b e c a m e obsolete with the fall o f the monarchy, and the successor states w e r e confronted w i t h a n e w e c o n o m i c situation. T h e p r o b l e m that most o f the n e w nation states h a d w a s that they h a d to build u p functioning institutions in a n e w e c o n o m i c space. For Austria the challenge w a s to adapt to the realities o f w h a t w a s n o w a small state, w h i c h involved o n the one h a n d scaling d o w n surplus capacities, a n d o n the other c a r r y i n g out a n e x p o r t drive. Austria w a s to b e c o m e a c o u n t r y d e p e n d e n t o n international trade, m u c h like B e l g i u m , the N e t h e r l a n d s or S wi t ze r l an d .

THE FIRST A U S T R I A N R E P U B L I C NATIONAL

A STATE W I T H O U T A

IDENTITY

O n e o f the most striking features o f Austria's history in the twentieth c e n t u r y is the difference in e c o n o m i c strength b e t w e e n the p o s t - 1 9 4 5 S e c o n d R e p u b l i c a n d its predecessor, the First R e p u b l i c ( 1 9 1 8 - 3 8 ) . D u r i n g the interwar period, A u s t r i a n per capita G N P decreased by a n a n n u a l average rate of 0.4 per cent. For the years 1929—37 alone, the rate of decrease w a s 1.8 per cent. Industrial p r o d u c t i o n in 1 9 2 5 only r e a c h e d 8 3 per cent o f the output o f 1 9 1 3 . In 1 9 2 9 it c a m e v e r y close to the p r e w a r level (98 per cent), but t h e n fell a g a i n until the i n c o r p o r a t i o n o f A u s t r i a into the G e r m a n R e i c h in M a r c h 1 9 3 8 . U n e m p l o y m e n t w a s already h i g h d u r i n g the 1 9 2 0 s (around 9.5 per cent of the l a b o u r force b e t w e e n 1 9 2 5 a n d 1 9 2 9 ) , but soared to a p e a k of 2 3 . 5 per cent after the onset o f the G r e a t D e p r e s s i o n . T h u s , the First A u s t r i a n R e p u b l i c disp l a y e d a picture o f e c o n o m i c weariness and, consequently, political radicalism, m a r k e d by such events as the forced dissolution o f p a r l i a m e n t in 1 9 3 3 , the civil w a r in 1 9 3 4 and, finally, the country's a n n e x a t i o n b y Germany. T h e First A u s t r i a n R e p u b l i c w a s usually referred to as 'the state n o b o d y w a n t e d ' . T h i s j u d g e m e n t also m a y require some critical e x a m i n a t i o n : Austria's potential for e c o n o m i c d e v e l o p m e n t after 1 9 1 8 w a s certainly greater t h a n most c o n t e m p o r a r y c o m m e n t a t o r s a n d later historians w o u l d have considered. T h e fact that the A l p i n e lands' close ties w i t h the east a n d south o f the former H a b s b u r g E m p i r e w e r e severed after the latter's b r e a k u p constituted an a d v a n t a g e for the n e w A u s t r i a n R e p u b l i c . N a t i o n a l i n c o m e per capita r e m a i n e d h i g h e r there d u r i n g the 1 9 2 0 s t h a n in all other successor states, w h i c h indicates that

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the c o u n t r y w a s able to reap some benefits of the political and e c o n o m i c break-up. T h e same conclusion c a n be d r a w n from a look at the sectoral division o f national i n c o m e a n d at l a b o u r force statistics. Austria inherited 2 6 per cent o f the territory and 2 3 per cent o f the population o f former Cisleithania (the H a b s b u r g Empire's western portion). B u t calculations reveal that before the First W o r l d W a r almost one third o f Cisleithania's G N P w a s generated b y inhabitants o f V i e n n a a n d the A l p i n e regions. T h e n e w republic possessed m o r e than 30 per cent o f all the factories o f Cisleithania, and h o u s e d 30 per cent of Cisleithania's industrial m a n p o w e r . T h u s , it h a d a c o m p a r a t i v e l y m o d e r n o c c u p a t i o n a l structure: 41 per cent o f the l a b o u r force w e r e e m p l o y e d in agriculture, 3 5 . 6 per cent in industry a n d mining, a n d 2 3 . 4 per cent in ser­ vices — a pattern similar to that existing in France, Switzerland or G e r m a n y at the t i m e . T h e H a b s b u r g M o n a r c h y (also Cisleithania), b y contrast, h a d b e e n characterised by a m u c h greater relative w e i g h t o f the p r i m a r y sector. N e w Austria also possessed large deposits o f iron ore, m a g n e s i a a n d copper, h u g e exploitable forests a n d hydraulic energy. H e r p a p e r a n d leather industries, machine-building, metal-working, electrical a n d c h e m i c a l industries w e r e fairly d e v e l o p e d . Available data on per capita national i n c o m e c a n serve as evidence for Austria's relative e c o n o m i c strength. N o t only w a s her G D P higher than that o f Cisleithania, it also e x c e e d e d that o f the former B o h e m i a n c r o w n lands in the early 1920s. H o w m u c h Austria profited from disintegration c o m e s out even m o r e clearly w h e n her statistical data are c o m p a r e d to those o f the H a b s b u r g M o n a r c h y as a w h o l e , a n d not only to figures relating to C i s l e i t h a n i a . C o n c l u d i n g from this brief quantitative survey o f Austria's resources after 1 9 1 8 , one c a n say that there w a s little justification in d o u b t i n g the country's e c o n o m i c viability. D o m e s t i c industry w a s sufficiently strong; well-trained civil servants a n d highly qualified factory workers w e r e available; there w a s a h u g e potential for hydroelectrical e n e r g y production; the V i e n n e s e banks administered a remarkable a m o u n t o f foreign assets. S o m e sides o f the disintegration p r o b l e m , however, defy attempts at quantitative analysis. Obviously, this is the case w i t h functional disruption — that is, the separating o f e c o n o m i c a l l y interdependent territories b y m e a n s o f n e w political borders. A l l the successor states o f AustriaH u n g a r y before 1 9 1 8 b e l o n g e d to a large e c o n o m i c unit w i t h a c o m p l e x division o f l a b o u r b e t w e e n different g e o g r a p h i c a l regions. H e a v y industry provided an e x a m p l e for the kind o f functional linkage b o u n d to be 5

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destroyed by p o s t w a r politics. W i t h i n Cisleithania, h u g e deposits o f iron ore in the Styrian E r z b e r g region w e r e c o n n e c t e d w i t h c o a l - m i n i n g in the C z e c h L a n d s . P i g iron w a s p r o d u c e d m a i n l y in the A l p i n e provinces, while cast-iron p r o d u c t i o n c o n c e n t r a t e d in B o h e m i a and M o r a v i a . A similar situation prevailed in the c h e m i c a l a n d textile industries. Basic p r o d u c t i o n in the c h e m i c a l sector c o n c e n t r a t e d in the B o h e m i a n north, final p r o d u c t i o n in the A l p i n e lands. M o s t o f Cisleithania's cottonw e a v i n g mills w e r e situated on C z e c h territory, but A u s t r i a possessed the bulk of textile printing a n d finishing industries. T h e n e w borders d r a w n in central E u r o p e (they a d d e d u p to m o r e t h a n 1,300 kilometres in length) neither took into a c c o u n t the a b o v e m e n t i o n e d division o f l a b o u r b e t w e e n regions nor that b e t w e e n different b r a n c h e s a n d sectors o f the economy. C u s t o m s policies o f the successor states directed t o w a r d s a c h i e v i n g e c o n o m i c autarky further intensified the effects o f functional disruption. T h e h u g e customs u n i o n of the A u s t r o - H u n g a r i a n E m p i r e , previously o p e n to all domestic producers, broke u p into a n u m b e r o f relatively small national markets p r o tected by tariffs and other m e a n s o f foreign trade regulation in order to secure a u t o n o m o u s d e v e l o p m e n t . W i t h hindsight it c a n be said that strategies o f international c o - o p e r a t i o n such as the c o n c l u d i n g o f customs treaties a n d trade a g r e e m e n t s w o u l d have o p e n e d u p m o r e c h a n c e s for e c o n o m i c prosperity in the 1 9 2 0 s . B u t such strategies w e r e prevented by a climate o f w i d e s p r e a d hostility a n d mistrust. If one tries to explain the difference in e c o n o m i c d e v e l o p m e n t b e t w e e n Austria's First a n d S e c o n d R e p u b l i c s , irrational factors such as national resentment, folkish pride a n d political hatred must certainly be taken into a c c o u n t . T h e s e w e i g h e d at least as heavily as the b a l a n c e o f e c o n o m i c resources a n d the attitudes o f those w h o shaped c o m m e r c i a l policy. 7

N o d o u b t Austria's m e a g r e e c o n o m i c p e r f o r m a n c e in the interwar p e r i o d failed to c o n v i n c e her o w n p o p u l a t i o n that defending national sovereignty w a s w o r t h the effort. Austrians d u r i n g the 1 9 2 0 s a n d 1 9 3 0 s proved incapable o f d e v e l o p i n g an e m o t i o n a l a t t a c h m e n t to their small state. A vast majority did not object to G e r m a n o c c u p a t i o n in i 9 3 8 , b u t w a r m l y w e l c o m e d Hitler as the m a n w h o h a d defeated e c o n o m i c depression in G e r m a n y a n d w o u l d n o w achieve the same in his c o u n t r y of birth. T h e r e w a s , however, another reason for the A u s t r i a n s ' o b v i o u s lack o f interest in national i n d e p e n d e n c e . Eric J. H o b s b a w m has p o i n t e d out that the c o n c e p t o f 'nation' originating from the nineteenth century included the idea o f territorial extension a n d space. B e t w e e n the t w o w o r l d w a r s , m a n y p e o p l e refused to be loyal to the R e p u b l i c o f A u s t r i a precisely b e c a u s e this c o u n t r y w a s small. It h a d c o m e into existence as a

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pitiful r e m n a n t after the dismantling o f a powerful empire. T h e French P r i m e Minister, C l e m e n c e a u , h a d c o i n e d the derisory phrase o f 'l'Autriche c'est ce qui reste'. H o w could such a creation claim to be m o r e than a 'republic w i t h o u t republicans', a 'state w i t h o u t a nation', a 'state n o b o d y w a n t e d ' ? M o s t Austrians considered it a product o f polit­ ical b l a c k m a i l by the A l l i e d Powers, sanctioned by the T r e a t y o f SaintG e r m a i n . T h o s e Allied politicians w h o h a d b e e n involved in the m a k i n g of the p e a c e treaty h a d b e e n faithful to the principles o f the w e s t e r n E u r o p e a n nation state a n d d e t e r m i n e d to apply these principles while creating a n e w political order for central E u r o p e . B u t in Austria the western c o n c e p t o f the nation state w a s rejected. H e r e , as in all other parts o f the former H a b s b u r g E m p i r e , nation m e a n t a c o m m u n i t y o f culture a n d l a n g u a g e , not p e o p l e o f c o m m o n citizenship. T h i s is illustrated by the n a m e the provisional Austrian state assembly gave to the republic b o r n in N o v e m b e r 1 9 1 8 : R e p u b l i c o f G e r m a n Austria. T h e n e w state w a s b l a m e d for all the e c o n o m i c difficulties o f the i m m e d i a t e postwar period, a n d w a s seen as b e i n g primarily responsible for the visible social decline o f the u r b a n middle class. Politicians o f all parties shirked their obligation to educate the citizenry in a sense o f m a k i n g t h e m understand the legitimacy a n d v o c a t i o n o f the Austrian R e p u b l i c . Failing such efforts, v e r y few p e o p l e professed their faith in Austria's ability to survive economically. T h e c o u n t r y w a s held together m a i n l y by coercion from outside, not by consent o f the majority o f its population. In the A l p i n e provinces, there w a s strong resentment against the idea o f a centralised state, but also against the capital city, V i e n n a , seen as a h o t b e d o f socialism. T h o s e Austrians w h o refused to a d a p t to the conditions o f life in a small state set their h o p e s on unification with G e r m a n y . In d o i n g so they revived the old d r e a m o f the Paulskirche A s s e m b l y g a t h e r i n g at Frankfurt in 1 8 4 8 to w o r k out a constitution for one great G e r m a n R e i c h stretching from the coast o f the N o r t h S e a to the b o r d e r o f H u n g a r y . Like the revolutionaries of 1 8 4 8 , the Austrian P a n - G e r m a n s o f 1918—38 professed to be e t h n i c G e r m a n s . In the end they w e r e so successful in p r o p a g a t i n g the notion o f ethnic kinship b e t w e e n the A u s t r i a n and G e r m a n populations that m a n y foreign g o v e r n m e n t s a c c e p t e d the 1 9 3 8 Anschluss as an inevitable act correcting the injustice o f one nation c o m p e l l e d by its enemies to live in t w o separate political entities. For m a n y Austrians in the 1 9 2 0 s and 1 9 3 0 s the Anschluss also held out the promise o f solving their country's e c o n o m i c problems. T h i s is underlined by the fact that in years o f acute e c o n o m i c distress, the idea o f unification w i t h G e r m a n y t e n d e d to gain support, while in those few 8

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interwar years witnessing m o d e s t g r o w t h , discussions a b o u t the Anschluss usually e b b e d . A m o n g the political a n d e c o n o m i c elites o f interwar Austria there w a s far-reaching a g r e e m e n t that the R e p u b l i c o f SaintG e r m a i n did not deserve loyalty. T w o p r o m i n e n t figures o f the Socialist party, C h a n c e l l o r K a r l R e n n e r a n d Foreign Secretary O t t o Bauer, p l e a d e d for the Anschluss because they rejected the w e s t e r n c o n c e p t o f a nation state. B u t I g n a z Seipel, the undisputed leader o f the C a t h o l i c conservatives, a m a n k n o w n for his careful a p p r o a c h to the G e r m a n question, also o n c e stated that 'the m o r e w e associate ourselves w i t h the notions o f folkish a n d cultural G e r m a n d o m [Volksdeutschtum a n d Kulturdeutschtum], the easier it will be for us to a c c e p t the limitations of our state'. Just a handful o f w e l l - k n o w n personalities — a m o n g t h e m industrial­ ist Frederick H e r t z , businessman Julius M e i n l a n d the famous satirist K a r l K r a u s — w e l c o m e d the little R e p u b l i c of Austria as an opportunity for a fresh start. 'In a republic', K r a u s wrote, 'people are exactly as b a d a n d foolish as u n d e r the rule o f a m o n a r c h . B u t there exist no barriers to prevent t h e m from altering this situation.' Unfortunately, politicians in Austria did not seem eager to give republicanism a c h a n c e to unfold within the borders o f their small state. Either they favoured association w i t h G e r m a n y , or they were partisans o f a return to the throne of the H a b s b u r g s , in a C o n f e d e r a t i o n o f D a n u b i a n States to be set u p u n d e r Austrian patronage. It w a s clear to t h e m that, for the time being, they w o u l d have to c o n f o r m to the political will o f the A l l i e d Powers, w i n n e r s of the W o r l d War. B u t e c o n o m i c turmoil in Austria w o u l d , sooner or later, force the west to a c c e p t the inevitable a n d consent to a n e w political solution for the D a n u b e basin. T h i s assumption w a s shared in all o f Austria's major political c a m p s — that is, by the Christian Socialist Party, the m o d e r a t e l y M a r x i s t Social D e m o c r a t s , a n d the P a n - G e r m a n s . Different reasons led all these parties to believe in political solutions that ran counter to Austria's i n d e p e n d e n c e . T h e Christian Socialists w e r e inspired b y the idea of a federation o f D a n u b i a n states, h o l d i n g the c h a n c e to b r i n g the H a b s b u r g s b a c k as rulers o f a C e n t r a l E u r o p e a n E m p i r e sooner or later. Social D e m o c r a t s h o p e d that union b e t w e e n Austria and the W e i m a r R e p u b l i c w o u l d m e a n a powerful stimulus to social reform. After all, the j o i n t w o r k e r s ' parties o f Austria a n d G e r m a n y w o u l d have represented the strongest proletarian organisation in the capitalist world. Finally, the P a n - G e r m a n s acted as a lobby for a unified G e r m a n i c nation state, w h i c h they felt o u g h t to have c o m e into b e i n g already, in 1 8 4 8 . 10

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T h e r e is plenty o f evidence that the Austrian p r o b l e m in the interwar period w a s caused m a i n l y b y the local political leadership's inability or unwillingness to c o m p r o m i s e . B u t also the situation w a s c o m p l i c a t e d b y conflicts o f interest b e t w e e n the major E u r o p e a n p o w e r s c o n c e r n i n g the D a n u b i a n region. A u s t r i a n domestic policies w e r e s h a p e d after 1 9 2 0 b y c h a n g i n g coalitions o f m o r e or less radical anti-Marxist forces, but also b y those groups a b r o a d w h o felt they c o u l d use the R e p u b l i c as a card in the central E u r o p e a n p o w e r g a m e played b y G e r m a n y , Italy, France a n d — to a lesser extent — G r e a t Britain. C o h e s i v e forces within Austria proper were so w e a k that g r o u p particularism in most cases defeated c o m m o n national interest. T h e consequences o f this are clearly discern­ ible if one looks at the four subsequent stages o f e c o n o m i c policy­ m a k i n g in Austria during the interwar years: 1. After the armistice o f 1 9 1 8 , Austrian politics w e r e characterised by a stalemate b e t w e e n left a n d right, neither side b e i n g strong e n o u g h to force its will on the other. F r o m 1 9 1 8 to 1 9 2 2 there w a s a coalition g o v e r n m e n t o f Social D e m o c r a t s a n d Christian Socialists, w h o w e r e unable to agree u p o n drastic measures o f e c o n o m i c reconstruction, as such measures w o u l d inevitably hurt the voters o f either the workers' or the bourgeois parties. N o decisive steps were taken to reorganise industrial p r o d u c t i o n a n d banking, while b u d g e t deficits soared a n d the c u r r e n c y w a s allowed to depreciate in order to give exporters an a d v a n t a g e over foreign competition and keep u n e m p l o y m e n t u n d e r control. T h e Socialists could not prevent the dism a n t l i n g o f nationalised industry in the n a m e o f free enterprise, a n d they failed to carry through rigorous taxation o f property, as originally intended. O n the other h a n d , the right h a d to a c c e p t far-reaching measures o f social legislation, tenants' protection a n d the linking of w o r k e r s ' w a g e s to the price index. 2. T h e victory o f the Christian Socialists in the elections o f 1 9 2 0 set the stage for a g r a d u a l return to classical laissez-faire attitudes o f the nine­ teenth century. A L e a g u e of N a t i o n s reconstruction loan w a s g r a n t e d to Austria in 1 9 2 2 u n d e r conditions that her g o v e r n m e n t w o u l d follow a rigorous policy o f tight m o n e y and r e d u c e d public spending. C h a n c e l l o r I g n a z Seipel, w i t h foreign help, s u c c e e d e d in stabilising the Austrian c r o w n a n d linking it to g o l d a n d the dollar, an achievem e n t that e a r n e d h i m w i d e s p r e a d recognition at h o m e , a n d even m o r e in western financial circles. B u t c u r r e n c y stabilisation also put an end to the inflationary b o o m a n d b r o u g h t w i t h it a painful crisis of readjustment. Austrian workers a n d civil servants w e r e hit h a r d b y

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deflation but w e r e told that c o n t i n u i n g foreign assistance d e p e n d e d on precisely such measures o f austerity. U n e m p l o y m e n t started to rise again, a n d soon r e a c h e d the figure o f 2 0 0 , 0 0 0 . 3. D u r i n g the second h a l f o f the 1 9 2 0 s there w e r e signs o f e c o n o m i c i m p r o v e m e n t in Austria, but c h a n c e s for a fundamental reorganisa­ tion o f the industrial a n d financial sectors w e r e missed. C r i t i c a l c o m ­ mentators point to the fact that the large V i e n n e s e banks after 1 9 2 5 returned to their p r e w a r strategy of 'informal imperialism' in eastern central E u r o p e , tightening their h o l d on industries in the region by fuelling t h e m w i t h capital taken u p in Britain, France and the U n i t e d States. Consequently, the banks w e r e a c c u s e d o f i g n o r i n g the financial requirements o f business in n e w Austria, a n d o f contribu t i n g to the country's l o w rate o f investment a n d h i g h u n e m p l o y ment. T h i s w a s n o t the c o m p l e t e truth, t h o u g h . Investing in Austria involved a h i g h political risk, due to the fact that b o t h the right a n d the left h a d their a r m e d militias a n d there w a s latent d a n g e r o f a civil war. In the light o f this it seems at least understandable that V i e n n a ' s banks refused to w i t h d r a w from their traditional financial strong­ holds in the former H a b s b u r g lands a n d to place the liquidation p r o ceeds at the disposal o f Austrian industry. A l s o , there w a s n o significant c h a n g e in the g e o g r a p h i c pattern o f Austria's foreign trade. C o m m e r c i a l activities d u r i n g the 1 9 2 0 s c o n tinued to concentrate on the area o n c e united u n d e r the H a b s b u r g c r o w n . O n l y after the outbreak o f the G r e a t D e p r e s s i o n w e r e Austria's close ties w i t h the D a n u b i a n w o r l d loosened, a n d her trade b a l a n c e b e c a m e d e p e n d e n t on e x c h a n g e s w i t h the t w o fascist powers, G e r m a n y and Italy. 4 . T h e crisis years after 1 9 3 0 w e r e a t r a u m a t i c e x p e r i e n c e for most Austrians, especially for those out o f work. W h i l e u n e m p l o y m e n t rose to a r e c o r d level o f m o r e t h a n 25 per cent, political antagonisms r e m a i n e d as sharp as ever. In M a y 1931 Austria's largest bank, the Credit-Anstalt, collapsed. Panic spread over all o f eastern central E u r o p e , w h e r e the C r e d i t - A n s t a l t h a d played a formidable role as a creditor to industry a n d partner o f local financial institutions. T h e t w o major parties in the Austrian parliament, C h r i s t i a n Socialists a n d Social D e m o c r a t s , a l t h o u g h they united in a hurried (and ill-advised) effort to rescue the Credit-Anstalt, did not f o r m a coalition g o v e r n m e n t that could have tackled the country's e c o n o m i c problems seriously. Instead, they threw themselves into a bitter fight over the question o f w h e t h e r Austria should a c c e p t or decline foreign loans in

National identity and the economy in Austria

239

e x c h a n g e for political concessions to the west. T h e so-called L a u s a n n e loan contract w a s finally signed after C h a n c e l l o r Dollfuss h a d f o r m e d a right-wing coalition o f C a t h o l i c s and fascists (Heimatschutz) in M a y 1 9 3 2 . E l e v e n m o n t h s later, Dollfuss closed d o w n the Nationalrat in V i e n n a and established an authoritarian r e g i m e that e x p o s e d the socialist w o r k e r s ' m o v e m e n t to various measures o f oppression, until o p e n civil w a r broke out in F e b r u a r y 1 9 3 4 . C n 25 July, the C h a n c e l l o r lost his life in the course o f an attempted putsch staged by followers o f A d o l f Hitler. Austria continued to be a clerical dictatorship after this date, but her political leaders w e r e mistrusted b o t h by the w o r k i n g class a n d the traditionally p r o - G e r m a n provincial intelligentsia. In its foreign policy, the g o v e r n m e n t in V i e n n a relied u p o n Mussolini's support against N a z i aggression from across the G e r m a n border. Economically, Austria followed a line o f formal a d h e r e n c e to the g o l d e x c h a n g e standard a n d rigorous deflation, occasionally b r e a k i n g the rules o f o r t h o d o x y by subsidising agriculture and financing a small n u m b e r o f p u b l i c w o r k s . B u t such half-hearted steps failed to impress a p o p u l a t i o n t e m p t e d to c o m p a r e the obviously ailing Austrian e c o n o m y w i t h its b o o m i n g G e r m a n counterpart. C n e m a y see it as a p a r a d o x of history that the g o v e r n m e n t in V i e n n a , w h i c h fought N a t i o n a l Socialism on the political stage, simultaneously p l a y e d into Hitler's h a n d s b y its inflexible e c o n o m i c p o l i c i e s . T h e rise to p o w e r o f N a t i o n a l Socialism in G e r m a n y in 1 9 3 3 affected Austrian political life in different w a y s . P a n - G e r m a n i c circles felt e n c o u r a g e d by Hitler's 'national revolution' a n d opted for the Anschluss w i t h m o r e conviction t h a n ever before. A t the same time, b o t h Social D e m o c r a t s and Christian Socialists felt obliged to modify their standpoints c o n c e r n i n g the national question. Unification w i t h G e r m a n y n o w b e c a m e an a n a t h e m a for t h e m . Instead, C a t h o l i c conservative thinkers b e g a n to depict little Austria as a 'civilised' G e r m a n state set against N a z i G e r m a n y , the s y m b o l o f perverted G e r m a n d o m . For Dollfuss a n d his successor, S c h u s c h n i g g , Austrian national sovereignty b e c a m e a n e c essary prerequisite to defend w h a t they t h o u g h t to be 'true' G e r m a n culture, as o p p o s e d to the n e o - p a g a n i s m o f Hitler's f o l l o w e r s . N o t inci­ dentally, the early 1 9 3 0 s also witnessed the e m e r g e n c e o f a n e w c o n c e p t of 'Austrianity', s o m e w h a t v a g u e but clearly inspired b y reminiscences of the H a b s b u r g E m p i r e ' s cultural pluralism. T h e p o e t A n t o n W i l d g a n s spoke o f der b'sterreichische Mensch called to fulfil a c o s m o p o l i t a n mission, a n d the dramatist H u g o v o n H o f m a n n s t h a l n o t e d that the idea o f Austrianity w a s t a n t a m o u n t to u n i v e r s a l i s m . 12

13

14

24O

HERBERT MATIS

For Social D e m o c r a t s in Austria, the defeat o f the once so p r o u d G e r m a n w o r k e r s ' party at the h a n d s of the N a z i s m a d e it impossible to continue d e m a n d i n g an Anschluss. B u t seeing the hostility they m e t w i t h from part o f Austria's g o v e r n i n g right-wing coalition, Socialists found it equally impossible to a d o p t the C a t h o l i c s ' strategy o f a p p e a l i n g to a n e w mystical sentiment o f Austrian patriotism. T h e m y t h o f Austria the ' g e n u i n e ' G e r m a n i c state, m o r a l l y and culturally superior to its northern neighbour, w a s designed to render the p o p u l a t i o n i m m u n e to the m y t h o f the T h i r d R e i c h . O b v i o u s l y this strategy failed, not least because the m e n in p o w e r in Austria never stopped to think o f t h e m selves as b e l o n g i n g to a united G e r m a n nation. In his last speech on Austrian radio before Hitler's invasion o f his country, C h a n c e l l o r S c h u s c h n i g g spoke o f a ' G e r m a n mission o f Austria', a n d b a d e his c o u n t r y m e n farewell 'with a G e r m a n s a l u t e ' . In the First Austrian R e p u b l i c one could find a N a t i o n a l B a n k , a Provisional N a t i o n a l Assembly, a N a t i o n a l C o u n c i l (the n a m e for the lower house o f parliament), a N a t i o n a l L i b r a r y a n d so on, but v e r y few p e o p l e w e r e willing to a c c e p t the existence o f a nation to w h i c h these institutional n a m e s alluded. O n l y the m a r g i n a l C o m m u n i s t Party of Austria in a c c o r d a n c e w i t h Stalin's writings on the national question defended the c o n c e p t o f Austrian n a t i o n h o o d during the 1930s. S o m e C a t h o l i c conservative writers a n d publicists, such as Ernst K a r l Winter, H a n s K a r l Z e s s n e r - S p i t z e n b e r g and R i c h a r d S c h m i t z , w h o later w o n m u c h praise for their intellectual contributions to shaping Austrian national consciousness, also spoke o f an A u s t r i a n nation. H o w e v e r , their interest focused on H a b s b u r g restoration rather than on anything else, a n d their works r e a c h e d only a minority a m o n g the politically e d u c a t e d Viennese bourgeoisie. 15

16

T H E A W A K E N I N G OF A U S T R I A N N A T I O N A L I S M U N D E R

NAZI

OCCUPATION

Austrians b e g a n to support the idea of their f o r m i n g a distinct nation only after some years o f life u n d e r N a z i rule. T h e i r rejection o f mentalities a n d e v e r y d a y practices c o m m o n a m o n g G e r m a n s from the R e i c h m a d e t h e m m o r e conscious o f their o w n culture a n d p a v e d the w a y for the e m e r g e n c e o f Austrian patriotism after 1 9 4 5 . Austrian national identity g a i n e d shape in opposition against the e x a g g e r a t e d Prussian-style militarism o f the N a z i regime. A l s o , the G e r m a n N a z i s m a d e the mistake o f b a n n i n g the t e r m s 'Austria' and 'Austrian' from public use.

National identity and the economy in Austria

241

T h e y insisted u p o n such verbal monstrosities as ' O s t m a r k ' or 'Alpenu n d D o n a u r e i c h s g a u e ' , thus creating a nostalgic attachment o f the population to w h a t should have b e e n obliterated. Finally, the c o n c e p t o f nation p r o p a g a t e d b y N a t i o n a l Socialism m e a n t n o t h i n g but a c o m m u ­ nity o f people o f the same 'race'. It ran counter to all western individualistic theories, w h i c h w a s in tune w i t h Austrian traditions o f thought, but nevertheless w a s u n a c c e p t a b l e to those Austrians w h o h a d believed in cultural values as constituting the core o f A u s t r o - G e r m a n national unity (Kulturnation). A s Austrians learnt to dislike G e r m a n rule in general, a n d the increasingly offensive b e h a v i o u r o f some high-ranking N a z i administrators in particular, their vision of the Austrian R e p u b l i c o f 1918—38 c h a n g e d . L o o k i n g back, it s e e m e d to have b e e n an a d v a n t a g e living in a small sovereign state, a n d the o n c e - c o n v i n c i n g arguments o f e c o n o m i c n o n viability lost their persuasive power. After r e g a i n i n g i n d e p e n d e n c e in 1 9 4 5 , Austrians did not voice these any more. T h e c o m m o n experience of those w h o h a d suffered in G e r m a n concentration c a m p s (politicians of b o t h the left a n d the right in Austria h a d b e e n imprisoned during the war) h e l p e d to create a n e w climate o f p r a g m a t i s m a n d loyalty to the S e c o n d Austrian R e p u b l i c . For some Austrians the c o u r a g e o u s attempts at resistance against the N a z i s played a major role as a s y m b o l o f n e w national identity. B u t even the majority o f those Austrians w h o in 1 9 3 8 h a d w e l c o m e d the Anschluss t u r n e d a w a y from their earlier enthusiasm for the N a z i s as the w a r w e n t on. In 1 9 4 5 they considered themselves to be loyal Austrian citizens. D e p i c t i n g Austria as the first v i c t i m o f N a t i o n a l Socialism, these people c o m p l e t e d the process o f repressing embarrassing m e m o r i e s o f the past, including their o w n involvement in the crimes o f the Hitler regime — in this respect, the W a l d h e i m case o f 1 9 8 6 w a s a timely r e m i n d e r that one has consciously to confront one's o w n past. W h e n the R e p u b l i c o f Austria w a s reconstituted after the S e c o n d W o r l d War, it defined itself purely as 'Austria'. T h e n e w political leader­ ship in 1 9 4 5 c o u l d m a k e use o f the mental reorientation described above, w h i c h took place during the war. A d d e d to this w a s the pressure o f the ten-year Allied o c c u p a t i o n , a c c o m p a n i e d b y the d a n g e r o f a dism e m b e r m e n t o f Austria into western a n d eastern zones. T h e c o m m o n experience o f rebuilding the c o u n t r y also h e l p e d to strengthen the sense of national belonging. Simultaneously, regional loyalties declined in the face o f an e m e r g e n t unified demos. T h e fact that the c o u n t r y w a s run b y a ' g r a n d coalition' a n d a system o f 'social partnership' contributed 17

242

HERBERT

MATIS

b o t h to the political stability o f Austria and to the e m e r g e n c e o f a r e n e w e d national identity. T h e y e a r 1 9 5 5 m a r k e d a h i g h point in this process. A u s t r i a n i n d e p e n d e n c e w a s legitimated by the State Treaty. O n the other h a n d , one must v i e w critically certain efforts m a d e at this time (frequently the fanatical results o f the n e w l y converted) to create a separ­ ate Austrian national l a n g u a g e . T h e w o r d ' G e r m a n ' w a s so rigorously avoided that even the subject ' G e r m a n ' w a s n o longer taught in the schools, but instead the t e r m ' l a n g u a g e o f instruction' w a s used. S u c h attempts at differentiation, a c c o m p a n i e d b y the p r o m o t i o n o f local dialects, s p r a n g from the desire to distance oneself from e v e r y t h i n g that w a s G e r m a n , and, by implication, the crimes o f the N a z i s . T h e assumption that a c o m m o n standard l a n g u a g e must have an integrative function h a d proved to be a fiction in any case. T h e writer K a r l K r a u s ' witticism still holds g o o d - that there is n o t h i n g that divides the Austrians from the G e r m a n s so m u c h as their c o m m o n l a n g u a g e . In contrast to the interwar period, the S e c o n d R e p u b l i c ' s e c o n o m i c p e r f o r m a n c e after 1 9 4 5 w a s stunning, despite a n u m b e r o f o b v i o u s h a n d i c a p s : extensive w a r d a m a g e , ten years o f costly presence o f Allied troops, a n d the existence o f the Iron C u r t a i n b e t w e e n east a n d west since 1 9 4 8 , p l a c i n g Austria in an uncomfortable position on the outermost fringe o f the n o n - c o m m u n i s t world. B u t already in 1951 Austrian real G D P e x c e e d e d the p r e w a r level b y one third. In the course o f the 1 9 5 0 s Austria's e c o n o m y g r e w faster t h a n those o f all other O E E C countries, n a m e l y b y an average 7.7 per cent per a n n u m . B e t w e e n 1 9 5 2 a n d 1 9 6 0 n o m i n a l G N P d o u b l e d . In real terms its increase a m o u n t e d to 8 0 per cent. A l t h o u g h the p a c e of g r o w t h slowed d o w n after this first stage o f e c o n o m i c reconstruction, e x p a n s i o n continued at a faster speed t h a n in the rest o f E u r o p e . O v e r the p e r i o d o f 1 9 5 5 - 8 2 Austrian per capita G D P g r e w at an average rate o f 3.3 per cent annually, c o m p a r e d with an average o f 2.3 per cent a m o n g the O E C D countries. It is certainly n o t e x a g g e r a t e d to say that Austria h a d already d e v e l o p e d into one of the most d y n a m i c m o d e r n e c o n o m i e s before its accession to the E u r o p e a n U n i o n in 1 9 9 5 (see figure I I . I ) . In a 1 9 9 7 r a n k i n g o f E C countries, Austria held the third position after L u x e m b o u r g a n d D e n m a r k with a G D P per capita o f 2 2 , 4 4 5 e c u , followed b y G e r m a n y and S w e d e n . C o m p a r i n g the e c o n o m i c p e r f o r m a n c e o f t w e n t y O E C D m e m b e r s (excluding the smaller countries) in the p e r i o d from 1 9 0 0 to 1 9 9 7 , Austria's e c o n o m i c position also demonstrates the country's steady i m p r o v e m e n t after the S e c o n d W o r l d W a r (see table I I . I ) . Partly, this a s t o u n d i n g a c h i e v e m e n t c a n be e x p l a i n e d b y the strong 1 8

1 9

2 0

National identity and the economy in Austria Figure I I . I . Gross domestic product, ig20-iggj

243

(1Q13 =100)

600 500 400 300 200 100

0 C

\

J

C

\

J

C

T

>

<

3

"

<

3

"

L

O

C

D

C

D

I

^

C

0

a

>

drive for e c o n o m i c integration in western E u r o p e , for w h i c h M a r s h a l l A i d a n d the n e e d to face the e m e r g i n g c o m m u n i s m in eastern E u r o p e w e r e responsible. After 1 9 4 7 , Austria w a s quickly d r a w n into the process of western E u r o p e a n e c o n o m i c integration, subsequently j o i n i n g the O E E C (later n a m e d O E C D ) , E F T A , E E C , E C and E U , or in terms o f c u r r e n c y the E P U a n d E C U . N o t h i n g c o m p a r a b l e h a d existed before 1 9 4 5 : on the contrary, in the interwar period E u r o p e a n states w e r e used to v i e w i n g e a c h other as opponents in a zero-sum struggle for re­ sources a n d markets. O n l y in rare cases w e r e plans for international c o ­ operation put forward; but they usually m e t w i t h staunch political resistance and, in the end, were d o o m e d to failure. In addition to the m o r e favourable conditions o f western e c o n o m i c co-operation after 1 9 4 5 , m a n y historians have underlined the impor­ tance o f domestic factors contributing to Austria's e c o n o m i c success after the S e c o n d W o r l d War. It is a m o o t question, t h o u g h , to w h a t extent these factors w e r e able to justify a statement like that o f the late Pope Paul V I , w h o o n c e called m o d e r n Austria an 'island o f the blessed'. A l s o , there obviously exists a certain inter-relation b e t w e e n e c o n o m i c a n d psychological factors: since 1 9 4 5 , an Austrian national consciousness arose at grass-roots level through an o n g o i n g process o f increased solidarity. T h i s w a s h e l p e d on b y a n e w orientation a m o n g educators a n d teachers, espousing n e w values. T h i s affirmative conviction w a s also supported b y an outstanding e c o n o m i c success story and, vice versa, g r o w i n g national identity also contributed to e c o n o m i c self-confidence, competitiveness a n d p e r f o r m a n c e , associated w i t h the trademark ' M a d e

HERBERT

244

MATIS

T a b l e I I . I . Economic performance of OECD countries, igoo—gj: Real GDP per capita (Purchasing power parity iggo) (OECD = ioo) 1900

USA Norway Switzerland Japan Denmark Austria Belgium Canada Germany Netherlands France Australia Sweden Italy United K i n g d o m Ireland Finland N e w Zealand Spain Portugal O E C D countries E U 15

1

9

61 I

3

9

3

8

950

970

980

990

997

52

96

67

48

4

90

95

92

88

07

I 38 09

i 38 22

68

62

66

55 86

i 38 95

I 32 I I0

1 1

5

65

4

960

9

i i2

3 102

I I7

06

05

0

02

i i0

95

78

67

87

90

02

04

09

98

92

96

04

I 0 3 1 0 8

0

03 92

26

I I2

07

II6

I 1 3 1 0 6

99

04

66

94

94

98

in

00

02

04

9

94

00

2

98 148

I

3

I

I

3

1

99

i 0 3 1 0 i

06

99

0

06

I I0

07

00

04

0

99

00

07

05

96

98

0

95

98

95

7

94

20

25

67 70 148

07

I I8

75

66

26

20

-

65

62

56

55

6

58

79

74

8

85

94

90

28

42

65

54

46

52

66

9 3 I 0 0 90 83 68 73

44

36 00

36 00

37 00

47

58

67

00

00

00

00

9

80

89

9

94

96

96

00 96

3

I I I

80 1 1

3

90 97

I 2 3 I 0 I

84 75

in Austria'. For e x a m p l e , the gigantic A l p i n e electro-hydraulic p o w e r plant o f K a p r u n , besides its e c o n o m i c importance, w a s seen as a national symbol, strongly associated with Austria's e c o n o m i c reconstitution and recovery after I 9 4 5 . T h e j o i n t efforts o f E u r o p e a n countries in c o n n e c t i o n w i t h the distribution o f the M a r s h a l l Plan A i d not only h e l p e d Austria to participate in western integration but also to develop a n e w national identity within this transnational c o n t e x t . For the first time in history, a clear majority o f the population o w n e d u p to an Austrian national identity in c o n n e c t i o n w i t h the State T r e a t y a n d the declaration o f p e r m a n e n t neutrality in I 9 5 5 . F r o m this time on, the question o f the small republic's non-viability w a s n o t u p for discus­ sion. T h e n e w political a n d e c o n o m i c reality h a d thrusted aside back­ w a r d - o r i e n t a t e d dreams o f a revival o f the former H a b s b u r g E m p i r e as well as p a n - G e r m a n i s m . Since I 9 5 6 the loyalty to an Austrian nation w a s also underlined by opinion polls: recent quantitative research has s h o w n 21

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that it is, above all, a m o n g the y o u n g generation that Austria w a s a c c e p t e d as a separate nation w i t h its o w n identity. T h e a c c e p t a n c e o f a distinct national identity a m o n g Austrians b e t w e e n 1 9 6 4 a n d 1 9 9 5 g r e w from 4 7 to 8 5 per cent, while the percentage o f people d e n y i n g the exis­ tence of the Austrian nation declined from 15 to 4 per c e n t . T h e idea of Austrianity w a s rejected m a i n l y by elderly people, while y o u n g e r a n d u r b a n p e o p l e a c c e p t e d it. T h u s , from the 1 9 6 0 s on, A u s t r i a n selfconfidence has g r o w n to such an extent that one c a n now, without reservation, speak o f a specific Austrian national identity. 22

23

CONCLUSION

In summary, on the basis o f a survey o f Austria's resources after 1 9 1 8 , there w a s no practical reason to d o u b t the n e w republic's e c o n o m i c viability. Nevertheless, the majority o f Austrians could not m a n a g e to free themselves from the e c o n o m i c , social and political fetters o f their times. After twenty years o f half-hearted a n d unsuccessful struggle, Austria w a s s w a l l o w e d u p b y N a z i G e r m a n y . T h e true p r o b l e m o f Austria lay in a d a p t i n g herself to the n e w situation of n o w b e i n g only a small c o u n t r y after the H a b s b u r g M o n a r c h y ' s dissolution. In the interw a r period, Austria never e x p e r i e n c e d the evolution o f a distinct national identity. T h i s w a s obviously an obstacle for the country's e c o n o m i c p e r f o r m a n c e b e t w e e n 1 9 1 8 a n d 1 9 3 8 . F r o m the v e r y b e g i n n i n g influential personalities o f all political directions searched for an alter­ native ('Anschluss' or ' D a n u b e Confederation') to the 'state n o b o d y w a n t e d ' . O n l y a v e r y small minority w e l c o m e d republican Austria as an opportunity for a fresh start. T h e situation c h a n g e d as a result o f G e r m a n o c c u p a t i o n , a n d after 1 9 4 5 Austrians d e v e l o p e d a c o m m o n feeling o f b e i n g a distinct 'Austrian nation'. A steadily strengthening national identity — empirically confirmed b y m a n y opinion polls — sup­ ported the e c o n o m i c u p s w i n g o f the 'Wirtschaftswunder' after the S e c o n d W o r l d W a r and, vice versa, the b o o m i n g e c o n o m y strengthened Austrian national identity. NOTES

1 The river Leitha marked the borderline between Austria and Hungary. 'Transleithania' was used as a synonym for the Lands of the Holy Crown of Saint Stephen, 'Cisleithania' was often substituted for the official term 'Kingdoms and lands represented in the Reichsrat'. 2 Alexander Gerschenkron, An Economic Spurt that Failed. Four Lectures on Austrian

246

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4

5 6

7

8 9

0 2 13

14

15

HERBERT

MATIS

History (Princeton, NJ, 1977), challenges the widespread belief among schol­ ars that the disruptive forces of nationalism decisively influenced the Habsburg Empire's economy. Herbert Matis, 'Austria: industrialization in a multinational setting' in Mikulas Teich and Roy Porter (eds.), The Industrial Revolution in National Context. Europe and the USA (Cambridge, 1996), pp. 2 2 6 - 4 6 at pp. 2446°. Cf. Alice Teichova and Herbert Matis (eds.), Osterreich und die Tschechoslowakei 1918-1938. Die wirtschaftliche Neuordnung in Zentraleuropa in der Zwischenkriegszeit (Vienna, Cologne and Weimar, 1996). Gerschenkron, Economic Spurt,p. 271. Cf. Herbert Matis, 'Disintegration and multi-national enterprises' in Alice Teichova and Philip L. Cottrell (eds.), International Business and Central Europe 1918-1939 (New York and Leicester, 1983), pp. 7 3 - 9 6 at p. 7 6 . Peter Berger, 'The Austrian economy, 1 9 1 8 - 1 9 3 8 ' in John Komlos (ed.), Economic Development in the Habsburg Monarchy and in the Successor States, (New York, 1990), pp. 2 7 0 - 8 4 at p. 272. Norbert Leser, 'Im Kontrast zum Staat, den keiner wollte', in Die Republik. Beitrage zur b'sterreichischen Politik (Vienna, 1975), vol. XI, pp. 26ff. This makes understandable the disappointment when the victorious powers failed to apply their own principle of national self-determination in the cases of the South Tyroleans, South Carinthians, South Styrians and the Bohemian Germans. Ignaz Seipel, Nation und Staat (Vienna and Leipzig, 9 6), p. 6. Berger, 'The Austrian economy', pp. 272. Ibid. Ernst Bruckmuller, 'The national identity of the Austrians' in Roy Porter and Mikulas Teich (eds.), The National Question in Europe in Historical Context (Cambridge, 993), pp. 9 6 - 2 2 7 at p. 220. Anton Wildgans, Rede uber Osterreich (Vienna, 1947), p. 21; Albert F. Reiterer, 'Vom Scheitern eines politischen Entwurfs. Der "osterreichische Mensch" - ein konservatives Nationalprojekt der Zwischenkriegszeit', Osterreich in Geschichte und Literatur 30 (1986), pp. 1 9 - 3 6 . Grete Klingenstein, Die Anleihe von Lausanne (Vienna and Graz, 1965), pp. 96ff.

16 Cf. Gerhard Jagschitz, 'Die Jagd nach dem Gamsbart oder Osterreichs Suche nach seiner Identitat' in Robert Hettlage et al. (eds.), Kollektive Identitat in Krisen. Ethnizitat in Region,Nation,Europa (Opladen, 1997), pp. 1 7 5 - 8 . 17 Bruckmuller, 'National identity', p. 199. 18 Cf. Felix Butschek, Die bsterreichische Wirtschaft im 20. Jahrhundert (Stuttgart, 1985); Felix Butschek, Statistische Reihen zur bsterreichischen Wirtschaftsgeschichte. Die bsterreichische Wirtschaft seit der industriellen Revolution (Vienna, 977). 9 Eurostat 997. 20 Anton Kausel, Ein halbes Jahrhundert des Efolges. Der bkonomische Aufstieg Oster­ reichs im OECD-Raum seit 1950 (Vienna, 1998), table i,p. 15. 2 Cf. William T. Bluhm, Building an Austrian Nation. The Political Integration ofa Western State (New Haven and London, 973).

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22 Max Haller and Stefan Gruber, 'Die Osterreicher und ihre Nation Patrioten oder Chauvinisten? Gesellschaftliche Formen, Bedingungen und Funktionen nationaler Identitat', in Max Haller (ed.), Identitdt und Nationalstolz der Osterreicher (Vienna, Cologne and Weimar, 1996), pp. 4

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23 Bruckmuller, 'National identity', p. 221.

C H A P T E R

T W E L V E

Economic,social and political aspects of multinational interwar Czechoslovakia Jaroslav Pdtek

THE

B I R T H OF I N D E P E N D E N T C Z E C H O S L O V A K I A : ITS STATE AND

NATIONALITIES

T h e idea b e h i n d the f o u n d i n g o f an i n d e p e n d e n t C z e c h o s l o v a k i a w a s T h o m a s G a r r i g u e M a s a r y k ' s (1850—1937) liberal-democratic c o n c e p t i o n of a (putative) C z e c h o s l o v a k nation consisting o f a C z e c h and a Slovak b r a n c h that w a s to u p h o l d E u r o p e a n h u m a n i s t a n d d e m o c r a t i c tradi­ tions. T h u s , he believed, C z e c h o s l o v a k i a ' s existence as a fully fledged nation state w o u l d be g u a r a n t e e d . Intellectually, M a s a r y k ' s political p r o g r a m m e derived from the p h i l o s o p h y o f h u m a n existence and history, d e v e l o p e d b y Frantisek P a l a c k y ( i 7 9 8 — 1 8 7 6 ) . M a s a r y k saw the principal tasks a n d p r o b l e m s of h u m a n existence in te r m s o f a c o n c e p t o f h u m a n ity rooted in the religious h u m a n i s m o f the C z e c h R e f o r m a t i o n a n d f o u n d e d o n d e m o c r a c y . T h e s e ideals w e r e presented as values implicit in the C z e c h national historical tradition that h a d b e g u n w i t h the m e d i e v a l Hussite revolution a n d b e e n r e b o r n w i t h the national revival o f the nine­ teenth century. W h e n M a s a r y k , in 1 9 1 5 , took the final step o f linking the h u m a n i s t tradition o f the C z e c h R e f o r m a t i o n to the idea a n d historical p r e c e d e n t o f i n d e p e n d e n t C z e c h statehood, he p r o m o t e d the idea o f a n i n d e p e n d e n t C z e c h o s l o v a k state o f w h i c h he b e c a m e the first president. A m o n g historians, M a s a r y k ' s interpretation o f C z e c h history h a d its supporters (such as K a m i l Krofta) a n d its o p p o n e n t s (such as J o s e f Pekar). 1

B r o u g h t into b e i n g o n 2 8 O c t o b e r 1 9 1 8 , the n e w state w a s multinational. A kind o f new, miniature A u s t r i a - H u n g a r y w a s created o n the ruins o f the multinational H a b s b u r g M o n a r c h y . T h e borders o f the n e w C z e c h o s l o v a k i a established b y the p e a c e treaties o f Versailles, St G e r m a i n a n d T r i a n o n w e r e the results of a c o m b i n a t i o n of three principles: national self-determination, historical d e v e l o p m e n t a n d e c o n o m i c self-sufficiency. A l s o , strategic considerations played a role m a r k e d l y displayed in the Paris p e a c e m a k e r s ' decision that R u t h e n i a , a 2

248

Multinational Czechoslovakia's economy and society

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T a b l e 1 2 . 1 . Territorial division of the Czech and Slovak branches of the Czechoslovak nation, ig2i

5

Land

C z e c h branch

Bohemia Moravia-Silesia Slovakia Subcarpathian Ruthenia Czechoslovakia overall

Slovak branch 6,657 8,973 i,94i,942 10,298 1,967,870

4 , 3 7 6 , 1 5 9

2

9

.338, 7

4

7 1 , 7 3 3

9 , 4 7 7

6,

7 9

6,

3 4 3

part o f H u n g a r y , b e c a m e , as S u b c a r p a t h i a n R u t h e n i a , the easternmost constituent o f C z e c h o s l o v a k i a , a l o n g w i t h the C z e c h L a n d s ( B o h e m i a , Moravia—Silesia) a n d Slovakia. I n d e p e n d e n t C z e c h o s l o v a k i a contained, in addition to C z e c h o s l o v a k s (made u p o f C z e c h s and Slovaks), G e r m a n s , M a g y a r s , Russians a n d Little Russians (Ukrainians), Jews, Poles, a n d other ethnicities, w h o found themselves in a minority position. A c c o r d i n g to the census o f 1 9 2 1 , C z e c h o s l o v a k s f o r m e d 6 5 . 5 per cent o f the population o f the n e w state. O t h e r national groups w e r e represented in the following proportions: G e r m a n s 2 3 . 4 per cent, M a g y a r s 5 . 6 per cent, Russians a n d Little Russians 3.5 per cent, J e w s 1.4 per cent, Poles 0.6 per cent a n d others, including foreign nationals 0.2 per c e n t . T h e statistics show that C z e c h s and Slovaks, n u m e r i c a l l y the largest g r o u p , h a d settled largely in the interior o f the n e w state. B a s e d on the 1921 census the division b e t w e e n the C z e c h a n d Slovak b r a n c h e s o f the C z e c h o s l o v a k nation w a s as s h o w n in table 12. i . O f national minorities, n u m e r i c a l l y the strongest were the native G e r m a n s . In 1921 they represented 2 3 . 4 per cent a n d in 1 9 3 0 2 2 . 3 per cent o f the population o f the C z e c h o s l o v a k state. G e r m a n s w e r e to be found in all the territorial c o m p o n e n t s o f the state, w i t h the highest pro­ portion in B o h e m i a (32.4 per cent), rather less in Moravia—Silesia (22.8 per cent) a n d fewer in Slovakia (4.5 per cent) a n d S u b c a r p a t h i a n R u t h e n i a (1.9 per cent). T h e native G e r m a n population lived m a i n l y in the b o r d e r areas o f the C z e c h L a n d s , a n d their pattern o f settlement w a s often v e r y c o m p l e x a n d intricate. In some areas the G e r m a n s m a d e u p the majority o f the population. In B o h e m i a this w a s the case in ninetyone j u d i c i a l districts, a n d in Moravia—Silesia in thirty-one districts. It was, however, c o m m o n to find v e r y m i x e d districts, w h e r e C z e c h s a n d G e r m a n s lived side by side. T h e r e w a s some G e r m a n - s p e a k i n g presence even in apparently w h o l l y C z e c h - l a n g u a g e localities o f the interior. In 3

4

6

7

25O

JAROSLAV

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B o h e m i a G e r m a n s m a d e u p at least 20 per cent o f the p o p u l a t i o n in nine districts, in Moravia—Silesia in eleven, a n d in Slovakia in five dis­ tricts. T h e r e w e r e G e r m a n s living in the large cities: P r a g u e (30,429), P l z e f i ( 8 , 2 5 i ) , C e s k e B u d e j o v i c e ( 1 1 , 6 4 2 ) , B r n o ( 5 5 , 8 1 6 ) a n d Bratislava ( 3 1 , 1 5 9 ) . In addition to native G e r m a n s there w e r e a p p r o x i m a t e l y 1 0 0 , 0 0 0 A u s t r i a n a n d R e i c h G e r m a n nationals living in C z e c h ­ oslovakia. T h e r e w e r e also J e w s living in all territorial c o m p o n e n t s of C z e c h o s l o v a k i a . T h e i r n u m b e r s increased as one travelled east. W h i l e in the 1 9 3 0 census the n u m b e r of p e o p l e identifying themselves as J e w s w a s 1 2 , 7 3 5 in B o h e m i a , this increased to 1 7 , 2 6 7 in Moravia—Silesia, to 6 5 , 3 8 5 in Slovakia a n d in S u b c a r p a t h i a n R u t h e n i a to 9 i , 2 5 5 . T h e J e w s did n o t live in c o m p a c t , c o h e r e n t settlements a n d did not have a unified m o t h e r t o n g u e , using the l a n g u a g e o f other nationalities. T h e M a g y a r p o p u l a tion inhabited a n a r r o w belt a l o n g the southern frontier o f Slovakia a n d S u b c a r p a t h i a n R u t h e n i a . T h e census o f i 9 3 0 s h o w e d a relative decline in the M a g y a r p o p u l a t i o n as c o m p a r e d to other nationalities, but this w a s the result o f the fact that in previous censuses a n u m b e r o f Slovak a n d J e w i s h inhabitants h a d opted for M a g y a r nationality. Poles, three times less n u m e r o u s t h a n J e w s in C z e c h o s l o v a k i a , lived c o n c e n t r a t e d in o n e district o f Tesin w h e r e they f o r m e d a majority a n d in t w o other dis­ tricts as a m i n o r i t y . 8

9

10

THE E C O N O M I C C H A R A C T E R OF I N D E P E N D E N T CZECHOSLOVAKIA

A t the time o f its birth as a state, C z e c h o s l o v a k i a ' s e c o n o m y w a s agricultural-industrial ( 3 9 . 6 : 3 3 . 8 per cent). It w a s not until 1 9 3 0 that e m p l o y m e n t in industry overtook e m p l o y m e n t in agriculture a n d forestry, in a ratio of 3 4 . 9 to 3 4 . 7 per c e n t . E v e n before the First W o r l d W a r the C z e c h L a n d s h a d b e c o m e industrial in character. T h e n e w state h a d j o i n e d together t w o g e o g r a p h i c a l areas o f the R e p u b l i c at different stages o f d e v e l o p m e n t : the industrial west ( C z e c h Lands) a n d the agrarian east (Slovakia a n d S u b c a r p a t h i a n Ruthenia). 11

Estimates suggest that the p r o d u c t i o n o f a ten-hectare agricultural enterprise in Slovakia e q u a l l e d that o f a four-hectare agricultural enterprise o f the same p r o d u c t i o n type in the C z e c h L a n d s . In some parts o f Slovakia and in S u b c a r p a t h i a n R u t h e n i a the barter system survived, together w i t h r e m n a n t s o f m e d i e v a l practices. P r o d u c t i o n for the m a r k e t h a d spread only in the m o r e fertile areas o f southern Slovakia. It w a s n o t until i 9 2 0 that obligations to give a p r o p o r t i o n o f p r o d u c e to the C h u r c h

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w e r e abolished, together w i t h the duty to perform u n p a i d l a b o u r on a major estate in return for lease o f l a n d . W h i l e Slovakia a n d S u b c a r p a t h i a n R u t h e n i a were b a c k w a r d , 6 0 to 7 0 per cent o f the industry o f the former H a b s b u r g M o n a r c h y w a s c o n ­ centrated in the C z e c h L a n d s , w h i c h c o u l d also boast o f intensive agricultural production linked to a w e l l - d e v e l o p e d food-processing industry a n d a relatively a d v a n c e d system o f agricultural co-operatives. T h e r e w e r e four m a i n industrial regions, centred on P r a g u e , P l z e h , B r n o a n d O s t r a v a , w i t h fully d e v e l o p e d mining, m e c h a n i c a l engineering, electrotechnical, c h e m i c a l a n d other industries. T h e most i m p o r t a n t o f these regions w a s that o f P r a g u e , w h e r e there existed dozens o f technically sophisticated industrial enterprises, well supplied w i t h capital capable of extensive investments. T h e favourable location o f this region at the biggest rail j u n c t i o n a n d crossroads facilitated domestic and foreign trade. A p a r t from b r e w i n g , the Plzeri industrial region w a s characterised m a i n l y by the S k o d a joint-stock c o m p a n y (formerly the S k o d a Works) in Plzein. T h a n k s to excellent capital and technical e q u i p m e n t this c o m p a n y w a s able to manufacture a b r o a d range o f metal, m e c h a n i c a l engineering and electrotechnical products. T h e B r n o industrial region could also rely on substantial sources o f capital a n d n o d a l points o f c o m m u n i c a t i o n . It w a s also an i m p o r t a n t centre of m e c h a n i c a l engin e e r i n g and the textile industry. T h e O s t r a v a industrial region w a s orientated towards h e a v y industry, m i n i n g a n d smelting. T h e favourable factor here w a s the presence o f cokeable black coal a l l o w i n g m e c h a n i c a l engineering a n d the h e a v y chemicals industry to develop. In addition to these four major regions, there w e r e other localities w h e r e industries d e v e l o p e d such as Usti n a d L a b e m , K o l i n and P a r d u b i c e (chemicals), M l a d a Boleslav (automobiles) a n d Z l i n (Bat'a shoes). Essentially, only southern B o h e m i a a n d the C z e c h — M o r a v i a n U p l a n d s r e m a i n e d primarily agrarian in character. L o o k i n g specifically at the G e r m a n - s p e a k i n g a n d ethnically m i x e d areas, west B o h e m i a , w h i c h w a s d o m i n a t e d b y mining, pottery a n d construction industries, o c c u p i e d an i m p o r t a n t position. S o too did the north B o h e m i a n b r o w n - c o a l basin w i t h its h e a v y industry and chemicals production. L i g h t industry h a d d e v e l o p e d in other areas o f north B o h e m i a , for e x a m p l e textiles a n d glass in the L i b e r e c / J a b l o n e c area, a n d textiles in north-east B o h e m i a e x t e n d i n g into north M o r a v i a . In the C z e c h L a n d s 4 4 per cent o f the native G e r m a n population w a s e m p l o y e d in industry a n d 27.3 per cent in agriculture. T h e C z e c h L a n d s indisputably f o r m e d a relatively strongly integrated e c o n o m i c w h o l e , in 12

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w h i c h the m o r e industrial G e r m a n - s p e a k i n g areas w e r e conveniently c o m p l e m e n t e d by the m o r e agriculturally orientated C z e c h - s p e a k i n g 14 14

areas. B y contrast, the d e v e l o p m e n t o f industry in Slovakia a n d S u b c a r p a t h i a n R u t h e n i a h a d b e e n l a g g i n g b e h i n d that o f the C z e c h L a n d s . T h e eastern territories did not have access to sufficient financial resources, either from the state or private investors, for m o r e intensive industrialisation. A n y major u p s w i n g in p r o d u c t i o n w a s inhibited b y relatively m e a g r e sources of r a w materials a n d lack o f a skilled workforce. It w a s n o t until the 1 9 3 0 s that Slovakia e x p e r i e n c e d some substantial industrial g r o w t h w i t h the d e v e l o p m e n t o f the a r m s industry ( D u b n i c a n a d V a h o m ) , the leather a n d shoe industry (Bat'a works) a n d some b r a n c h e s of h e a v y chemicals. T h e m i n i n g o f b r o w n coal in the H a n d l o v a a n d N o v a k y areas in southern Slovakia h a d a certain i m p o r ­ tance, a n d large quantities o f pyrites w e r e m i n e d in central Slovakia. M o r e important w a s the extraction o f magnesite ores in the eastern part of the m o u n t a i n o u s region Slovak R u d o h o r i e . N i c k e l a n d zinc m i n i n g w e r e generally o f negligible significance a n d the traditional m i n i n g of precious metals b e t w e e n K r e m n i c a a n d B a n s k a Stiavnica h a d ceased almost completely. S a l t - m i n i n g in the vicinity o f Presov a n d in S u b c a r p a t h i a n R u t h e n i a , however, w a s important, a n d c o v e r e d most of the needs o f C z e c h o s l o v a k i a as a w h o l e . A s far as the smelting industry w a s c o n c e r n e d , the most important centre w a s the R i v e r H r o n basin c o m p l e x o f the state ironworks in P o d b r e z o v a , w i t h the blast-furnace works in T i s o v e c a n d a few ancillary works. T h e P o h o r n a d s k a a n d R i m a m u r a n s k a c o m p a n i e s respectively o w n e d the K r o m p a c h y ironworks a n d the U n i o n sheet-metal factories in Z v o l e n . T h e C o b u r g M i n i n g and M e t a l l u r g i c W o r k s h a d their m a i n establishment in T r n a v a . M a n y o f these enterprises w e r e taken over as early as the 1920s by the M i n i n g and M e t a l l u r g i c C o m p a n y in T r i n e c and the V i t k o v i c e M i n i n g a n d F o u n d r y W o r k s in O s t r a v a . T h e output o f the m e t a l - w o r k i n g industry represented 2 3 . 2 per cent o f total industrial p r o d u c t i o n in Slovakia, a n d the food industry h a d a 3 3 . 4 per cent share. O f the other b r a n c h e s the next most significant w a s the textile industry w i t h 12 per cent, followed b y chemicals at 7 . 4 per cent, t i m b e r processing at 7.7 per cent a n d the p a p e r a n d leather industries. In most cases there w a s little concentration of industry a n d enterprises w e r e scattered and fragmentary. T h e p o p u l a t i o n o f S u b c a r p a t h i a n R u t h e n i a w a s almost e x c l u sively agricultural. Statistics show 8 1 . 7 8 per cent o f the p o p u l a t i o n in S u b c a r p a t h i a n R u t h e n i a to have b e e n e m p l o y e d in agriculture, forestry 15

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a n d fishing, w i t h only 6 . 3 6 per cent in industry a n d 2.08 per cent in transport. A m o n g the native G e r m a n s , only 0 . 5 5 per cent w e r e active in agriculture, w i t h 2 1 . 1 1 per cent in industry a n d 3 . 1 6 per cent in transport, a n d a m o n g M a g y a r s the figures w e r e 6 1 . 5 1 per cent in agriculture, 1 7 . 8 5 per cent in industry, a n d 3 . 6 7 per cent in transport. T h e J e w i s h p o p u l a ­ tion in S u b c a r p a t h i a n R u t h e n i a w a s m a i n l y e n g a g e d in trade a n d b a n k i n g — 3 3 . 7 per cent — with 24.31 per cent in industry a n d 2 1 . 4 8 per cent in agriculture. In Slovakia, the Slovaks w e r e p r e d o m i n a n t l y an agri­ cultural people: 5 7 . 6 1 per cent o f Slovaks w o r k e d in agriculture, 18.8 per cent in industry a n d 5 . 6 9 per cent in transport. T h e Russians a n d Little Russians s h o w e d an even greater majority in agriculture — 8 9 . 6 3 per cent — with only 3.32 per cent in industry, and o f the M a g y a r s 6 5 . 3 5 per cent w e r e in agriculture, w i t h 1 6 . 9 2 per cent in industry. In contrast, the G e r m a n s in Slovakia w o r k e d p r e d o m i n a n t l y in industry ( 3 4 . 3 4 per cent) w i t h significantly fewer (29.22 per cent) in agriculture. A substantial percentage of native G e r m a n s were also e m p l o y e d in trade a n d banking, w i t h 5 3 . 0 4 per cent in trade a n d banking, 2 0 . 2 4 per cent in industry a n d only 7 . 0 6 per cent in agriculture. In the C z e c h L a n d s the census o f 1 9 3 0 shows most Poles e m p l o y e d in industry; this w a s u n d o u b t e d l y because o f their proximity to O s t r a v a . 5 6 . 3 6 per cent o f Poles w o r k e d in industry, a n d o f these almost a third w e r e e m p l o y e d in the coal-mines o f the O s t r a v a - K a r v i n a m i n i n g dis­ trict. In the C z e c h L a n d s 4 8 . 1 6 per cent o f native G e r m a n s w e r e active in industry a n d only 20.7 per cent in agriculture. T h e proportion of C z e c h o s l o v a k s ( C z e c h s a n d Slovaks) in industry w a s 3 8 . 8 1 per cent in B o h e m i a a n d 4 0 . 5 7 per cent in M o r a v i a . T h e proportion o f C z e c h o s l o v a k s ( C z e c h s a n d Slovaks) in agriculture w a s 2 6 . 0 4 per cent in B o h e m i a a n d 2 9 . 6 7 per cent in Moravia—Silesia. T h e Jewish p o p u l a t i o n in the C z e c h L a n d s w a s to be found w o r k i n g m a i n l y in trade a n d b a n k i n g (46 per cent) in the free professions (29.48 per cent) a n d in indus­ try ( 1 9 . 3 4 per cent). T h e situation w a s similar in M o r a v i a , w i t h 4 8 . 4 5 per cent o f J e w s w o r k i n g in trade a n d banking, 2 1 . 2 6 per cent in industry a n d 2 2 . 8 4 per cent in the free professions. A s one travelled east the n u m b e r of J e w s increased, a n d so too did the proportion o f p o o r Jews. O v e r a l l , J e w s w e r e i m p o r t a n t as doctors, lawyers, scientists a n d writers. T h o s e involved in industrial enterprise usually identified themselves as C z e c h b y nationality. In m a n y J e w i s h families, however, G e r m a n ( M a g y a r in Slovakia) continued to be the l a n g u a g e o f c o m m u n i c a t i o n . In the C z e c h L a n d s the G e r m a n population lived m a i n l y in the b o r d e r areas r i m m e d b y m o u n t a i n ranges from Jeseniky through 17

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K r k o n o s e , K r u s n e Hory, C e s k y L e s to the S u m a v a . T h e s e w e r e areas covered in thick forest a n d the soil w a s poor. O n l y in a few places w a s it possible to cultivate cereals or root-crops. T h e most productive agricul­ tural areas in B o h e m i a w e r e a r o u n d L i t o m e r i c e and Lovosice, w h e r e fruit a n d vegetables c o u l d be p r o d u c e d as well as grain, and, in the Z a t e c a n d P o d b o r a n y areas, hops a n d sugarbeet. In southern M o r a v i a the m a r k e t - g a r d e n i n g area a r o u n d Z n o j m o , and the M i k u l o v w i n e area, w e r e also outstanding for their agricultural production. In Silesia a n d the adjacent north M o r a v i a n districts, building materials could be quar­ ried; in north-east B o h e m i a there w a s the m i n o r coal basin n e a r Trutnov, a n d in the L i b e r e c area the r a w materials for glass production. T h e most important m i n e r a l resources consisted o f the b r o w n coal o f the north B o h e m i a n basin, m a i n l y a r o u n d M o s t a n d Sokolov. In addition, in west B o h e m i a there w e r e important m i n e r a l springs and substantial deposits o f kaolin. T h e S u m a v a area offered practically n o m i n e r a l w e a l t h but only timber and building materials. O v e r a l l , however, the industrial i m p o r t a n c e o f the north and west B o h e m i a n b o r d e r areas w a s striking. T h e S umava area a n d western Silesia, w i t h their logging, p a p e r industry, stone-quarries a n d cottage industries, w e r e less e c o n o m i c a l l y significant. A n y industry to be found in the towns c o n ­ sisted m a i n l y o f workshops a n d small businesses. O n average, industry in the border areas w a s o f considerable i m p o r tance. In one o f his reports in 1 9 3 4 the G e r m a n A m b a s s a d o r to P r a g u e , W a l t e r K o c h , estimated that the contribution of native G e r m a n s to the C z e c h o s l o v a k e c o n o m y w a s t w o to three times greater than their rela­ tive n u m b e r s w o u l d have suggested. A l t h o u g h this estimate w a s e x a g g e r ­ ated, it remains clear that the G e r m a n s w e r e important in industry. A c c o r d i n g to the 1 9 2 1 census, the participation o f C z e c h o s l o v a k s a n d native G e r m a n s in different b r a n c h e s o f industry w a s as s h o w n in table s

18

19

I2.2.

2 0

T h e results o f the census o f 1 9 3 0 show that differences b e t w e e n levels of industrial e m p l o y m e n t in C z e c h areas w i t h a C z e c h - s p e a k i n g and G e r m a n - s p e a k i n g p o p u l a t i o n w e r e g r a d u a l l y levelling out. O n average, industry in the b o r d e r areas h a d a m o r e significant position than in the interior. T h e c o n s e q u e n c e s w e r e manifest in the social structure of the G e r m a n population, w h i c h w a s p r e d o m i n a n t l y e m p l o y e d in industry, trade a n d transport, while in agriculture its share w a s less in c o m p a r i s o n to other ethnic g r o u p s (25 per cent). In 1921 the G e r m a n p o p u l a t i o n represented 3 3 . 5 per cent o f those e m p l o y e d in industry, o f w h o m 32 per cent w e r e in trade, b a n k i n g a n d transport, 2 7 . 4

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T a b l e 1 2 . 2 . Industrial employment of the Czechoslovak and German population in 1921 Czechoslovaks (numbers per 1,000 actively employed)

Sector Mining and smelting Metal industry Quarrying Glass industry Chemicals T i m b e r industry Textiles Paper industry Construction

Germans (numbers per 1,000 actively employed)

29.8 59.9 15.8

25.9

7.9 6.2

23.5

32.1

0

.

7

9 . 2

3.8

5.0

0.6

3 5

0.6 4

5

.

7

59.4

per cent in state public service a n d 32 per cent in other occupations. Identification o f the percentage o f G e r m a n p o p u l a t i o n in individual b r a n c h e s o f industry is likewise important. A m o n g e c o n o m i c a l l y active m e m b e r s o f the population, the G e r m a n s enjoyed relative p r e p o n d e r ­ ance over C z e c h s and Slovaks in mining, smelting, metal-working, stone a n d earth industry, glass-making, chemicals, lumbering, the p a p e r industry, textiles a n d construction. In the social field it w a s also manifest in the v e r y distinct p r e d o m i n a n c e o f w a g e - e a r n i n g workers over i n d e p e n d e n t entrepreneurs.

THE SOCIAL AND E C O N O M I C C H A R A C T E R I S T I C S AND NATIONAL R E L A T I O N S OF I N T E R W A R C Z E C H O S L O V A K I A

In C z e c h o s l o v a k i a b e t w e e n the wars, the e c o n o m i c a l l y active population represented not quite h a l f o f the total population ( 6 , 5 3 7 , 3 8 4 ) . T h e 1 9 3 0 census statistics broke d o w n this active population into three categories: independents (owners/employers); officials a n d white-collar employees; a n d workers, hired labourers a n d apprentices. T h e results o f this categorisation s h o w e d that there w a s a r o u g h equilibrium b e t w e e n the social categories o f independents a n d workers. T h e most n u m e r o u s social g r o u p w a s that o f workers ( 2 , 5 9 9 , 0 8 9 ) , w h i c h , w h e n hired labourers and apprentices w e r e a d d e d , r e a c h e d 3 , 2 8 1 , 2 3 8 . M o s t w e r e w o r k i n g in industry ( 1 , 9 5 3 , 8 8 0 ) with only 7 4 9 , 8 8 7 in agriculture a n d still fewer in the other sectors. In the social g r o u p o f independents the 1 9 3 0 census s h o w e d a total o f 2 , 2 9 0 , 9 5 8 , a m o n g t h e m

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T a b l e 1 2 . 3 . Occupational distribution in Czechoslovakia,

igjo

Per 1,000 persons actively employed

Sector

Independents

Agriculture, forestry,

5

3

0

.

Officials

2

7.7

Workers, servants, hired labourers 462.1

fisheries

Industry and trades Commerce, banking and transport Civil service, professions and military Domestic and personal services Other professions and professions not specified

2

.

i 4 9 2

.

79 7 58.1

102.3 890.8

4 7 . 3 8 2 7 . 8 7 6 . l

4 4

0

5

.

4

544.2 536.5 896.2

-

i09.2

8 8 6 , 9 9 7 in agriculture a n d 8 2 3 , 7 1 1 in other fields. Persons living off rents a n d social security, w a r d s o f institutes and students w e r e also included in this g r o u p . In industry the n u m b e r o f independents w a s only 3 1 2 , 4 0 0 , a n d in trade, b a n k i n g a n d transport it w a s 2 2 5 , 1 4 8 . T h i s shows the relative concentration o f industrial a n d c o m m e r c i a l enterprise, transport a n d finance, as c o m p a r e d w i t h agricultural enterprise. T h e c a t e g o r y o f officials a n d white-collar employees w a s n u m e r i c a l l y strongest in trade, b a n k i n g a n d transport, in w h i c h 3 9 0 , 7 7 7 p e o p l e w e r e working. T h e next largest n u m b e r w o r k e d in public service, the free pro­ fessions a n d the military ( 3 0 1 , 1 4 2 ) , followed b y industry (235,364) a n d agriculture w i t h only 3 5 , 9 8 0 . T h e s e figures show the level o f tertiarisation o f the C z e c h o s l o v a k e c o n o m y . A m o n g the rest o f the population the n u m e r i c a l l y largest g r o u p w a s that o f p e o p l e w i t h o u t gainful o c c u p a t i o n (children, housewives, p e n sioners a n d so on), w h i c h represented 6 , 9 1 7 , 0 9 7 persons. T h i s w a s fol­ l o w e d b y auxiliary family m e m b e r s ( 1 , 0 7 1 , 5 9 8 ) a n d servants (203,457). T h e largest p e r c e n t a g e o f this n o n - e m p l o y e d population w a s affiliated to industry a n d agriculture. T a b l e 1 2 . 3 shows the status o f the active w o r k i n g population in 1 9 3 0 . T h e tertiary sphere w a s e x p a n d i n g in the interwar period w i t h the d e v e l o p m e n t o f m o d e r n i s a t i o n a n d the rationalisation o f the C z e c h o slovak economy. T h e relatively h i g h level o f industrialisation in the C z e c h L a n d s a n d the g r o w t h o f services linked to it m e a n t that the pro­ portion o f independents in the C z e c h L a n d s w a s less than in Slovakia or Subcarpathian Ruthenia. 21

2 2

Multinational Czechoslovakia's economy and society

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T h e different e c o n o m i c and social character o f the western a n d eastern parts o f the R e p u b l i c caused difficulties in the e c o n o m i c a n d political integration o f the state. A l t h o u g h Slovakia h a d previously b e e n one o f the most industrialised areas o f the former eastern h a l f of A u s t r i a - H u n g a r y (Transleithania), a n d h a d slightly e x c e e d e d the H u n g a r i a n average in v o l u m e o f industrial production, only 1 7 . 6 per cent o f its population w a s e m p l o y e d in industry, w i t h 5 9 per cent o c c u ­ pied in a g r i c u l t u r e . I m m e d i a t e l y after the establishment o f the inde­ p e n d e n t state, C z e c h capital attempted to g a i n control o f Slovak sources of r a w materials a n d to take over the Slovak market for its o w n industrial products. T h e major role in e c o n o m i c penetration o f Slovakia a n d S u b c a r p a t h i a n R u t h e n i a w a s played by C z e c h banks ( L e g i o b a n k a a n d A g r a r n i b a n k a ) . T h e postwar period saw the collapse o f a series of enterprises in h e a v y industry in Slovakia, especially in smelting a n d m e c h a n i c a l engineering, but there w a s also g r o w t h in the i m p o r t a n c e of light industry, particularly in timber processing, food and textiles. In this period Slovakia b e c a m e the market for b e t w e e n 13 and 17 per cent o f the industrial products o f the C z e c h L a n d s . In return, it supplied principally agricultural products a n d r a w materials (iron ore, w o o d , leather and, in small quantities, magnesites), but also included w e r e such industrial products as cables, a n d electrotechnical a n d r u b b e r manufactures. T h e Slovak timber and food industries a n d the m i n i n g o f iron o r e s enjoyed significant d e v e l o p m e n t in the prosperous years o f the 1920s. W i t h the w o r l d e c o n o m i c crisis, however, the fall in industrial p r o d u c t i o n in Slovakia w a s greater than the decline in the C z e c h L a n d s . T h e worst affected w a s the timber industry, w h i c h h a d b e e n orientated towards exports. In the poorest areas o f Slovakia, such as H o r e h r o n i e , K y s u c a a n d O r a v a , this led to mass u n e m p l o y m e n t . T h e extraction o f c o p p e r ores ceased a n d the m i n i n g o f iron ores declined steeply. T h e demise o f the relatively b a c k w a r d smelting industry continued. Several enterprises w e r e closed d o w n and a substantial part o f smelting production from P o d b r e z o v a w a s relocated to V i t k o v i c e . In the textile industry, cotton a n d linen p r o d u c t i o n w a s severely curtailed. T h e cotton works in R u z o m b e r o k - R y b a r p o l e cut p r o d u c t i o n d o w n to 4 0 per cent. In the glass industry only three of the original twelve glassworks r e m a i n e d in operation. T h e r e w a s also a steep fall in p r o d u c t i o n in the food industry, especially the production o f sugar and beer. In S u b c a r p a t h i a n R u t h e n i a the crisis took its toll m a i n l y in logging, w o o d - p r o c e s s i n g a n d salt-mining. T h e agricultural crisis also h a d a v e r y severe i m p a c t on Slovakia a n d S u b c a r p a t h i a n R u t h e n i a . T h e p a u c i t y o f arable soil a n d its u n e q u a l arable distribution e x a c e r b a t e d the effects. In S u b c a r p a t h i a n R u t h e n i a 23

24

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a fifth o f the land b e l o n g e d to the F r e n c h - o w n e d L a t o r i c a company, w h i c h let it out in small parcels for high rents. T h e eastern territories suffered from chronic agricultural overpopulation, the m i g r a t i o n o f the population for seasonal w o r k a n d e m i g r a t i o n . T h e situation in the C z e c h L a n d s w a s v e r y different in that the rela­ tions b e t w e e n C z e c h s a n d native G e r m a n s reflected the position of b o t h as industrially d e v e l o p e d groups. Until r o u g h l y the middle o f the nine­ teenth century it w a s possible, if w i t h certain qualifications, to speak o f a unitary B o h e m i a n society that included b o t h the C z e c h - a n d G e r m a n speaking population. A certain n u m b e r of p e o p l e could speak b o t h lang u a g e s and from the e c o n o m i c a n d civic point o f v i e w m a d e u p a h o m o g e n e o u s w h o l e . Nationalist m o v e m e n t s within b o t h ethnic groups g r a d u a l l y d e e p e n e d the division o f this society into its C z e c h a n d G e r m a n c o m p o n e n t s , w h i c h c a m e frequently into conflict. R o u g h l y from the e n d o f the 1 8 6 0 s the C z e c h ethnicity w a s g a i n i n g in strength, above all, because o f the m i g r a t i o n o f the C z e c h population from the countryside to the t o w n s . D e v e l o p m e n t s in the later nineteenth century challenged the thesis p r o p o u n d e d by the publicist Franz Schuselka in his w o r k Ist Oesterreich deutsch? a r g u i n g that the m o r e a d v a n c e d urbanisation of the G e r m a n - s p e a k i n g population justified its p r i m a c y . B y the end o f the nineteenth century, the C z e c h L a n d s were already an industrial-agricultural society c o m p a r a b l e to the S c a n d i n a v i a n c o u n tries, a n d not too far b e h i n d countries such as France a n d G e r m a n y . T h e industrialisation o f the C z e c h L a n d s led to the g r o w t h o f the C z e c h industrial w o r k i n g class, a n d also strengthened the C z e c h bourgeoisie, c o m p e t i n g w i t h its G e r m a n - s p e a k i n g counterpart. T h e results o f the First W o r l d W a r o p e n e d u p the w a y to profound changes. Following the establishment o f the n e w state, the political a n d e c o n o m i c position o f the C z e c h bourgeoisie w a s fortified t h r o u g h c u r r e n c y reform, nostrification and land reform. After i m m e d i a t e postwar e c o n o m i c difficulties h a d b e e n o v e r c o m e with the help o f foreign loans, modernisation proc e e d e d on all sides. L e a v i n g on one side the i m m e d i a t e postwar attempt to create G e r m a n - A u s t r i a n provinces out o f the b o r d e r regions of B o h e m i a a n d M o r a v i a , the relationship b e t w e e n the native G e r m a n a n d C z e c h ethnic groups stabilised. C o - o p e r a t i o n d e v e l o p e d in the e c o n o m i c fields a n d also in politics — from 1 9 2 6 the G e r m a n A g r a r i a n , Christian Social a n d Social D e m o c r a t i c parties participated in coalition g o v e r n m e n t s . I n d i g e n o u s G e r m a n capital also h a d a share in C z e c h banks. A t the b e g i n n i n g o f the 1920s, the D e u t s c h e r H a u p t v e r b a n d der Industrie, as 26

27

28

29

30

Multinational Czechoslovakia's economy and society

2

5

9

the representative b o d y o f G e r m a n industrialists in C z e c h o s l o v a k i a , w a s set up. It established c o - o p e r a t i o n w i t h the C e n t r a l U n i o n o f C z e c h o s l o v a k Industrialists by j o i n i n g it for a certain period. N a t i v e

m a i n organisations o f small t r a d e s m e n included the H a u p t v e r b a n d des deutschen G e w e r b e s in P r a g u e , the R e i c h s v e r b a n d deutscher G e w e b e v e r e i n e i m tschechoslowakischen Staate in B r n o , a n d the D e u t s c h e r g e w e r b l i c h e r L a n d e s k r e d i t v e r b a n d in Usti n a d L a b e m . A significant e l e m e n t in the e c o n o m i c life of C z e c h o s l o v a k i a w a s R e i c h G e r m a n and Austrian capital. In 1 9 2 3 , for e x a m p l e , twenty-seven R e i c h G e r m a n a n d thirty-four Austrian joint-stock c o m p a n i e s w e r e active on C z e c h o s l o v a k territory. A s indicated, m u c h o f the textile a n d glassm a k i n g industries a n d also o f the timber, p a p e r a n d porcelain industries, as well as a part o f the c h e m i c a l industry, were in native G e r m a n hands. T h e restricted market o f a small c o u n t r y such as C z e c h o s l o v a k i a could scarcely absorb the p r o d u c t i o n o f indigenous light industry w i t h its large capacity. T h u s the bijouterie industry w a s m a n u f a c t u r i n g 9 0 per cent for export, while in porcelain the figure w a s 8 5 per cent, in glass 8 2 per cent, in glove p r o d u c t i o n 8 0 per cent, in h a b e r d a s h e r y 8 0 per cent a n d in tex­ tiles 4 0 per cent. B y contrast, the proportion o f ironworks p r o d u c t i o n destined for export w a s only 3 5 per cent, for chemicals 21 per cent, for c e m e n t 20 per cent a n d for black coal 7 per c e n t . T h e radicalisation o f the native G e r m a n population, w h i c h eventually led to its e m b r a c i n g Hitler's N a t i o n a l Socialism, o c c u r r e d in the course o f the w o r l d e c o n o m i c crisis, w h i c h h a d a particularly severe i m p a c t on the b o r d e r areas and their light industry. T h i s crisis w a s a c c o m p a n i e d by a fall in tourism that h a d a d a m a g i n g i m p a c t on spas ( K a r l o v y Vary, M a r i a n s k e L a z n e a n d Frantiskovy L a z n e ) . U n e m p l o y m e n t in the b o r d e r districts w a s usually higher t h a n in the country's interior. A t the e n d o f 1 9 3 5 , districts w i t h m o r e t h a n 8 0 per cent G e r m a n - s p e a k i n g population h a d an u n e m p l o y m e n t rate o f 1 9 . 2 per cent o f e c o n o m i c a l l y active persons, a n d the figure for districts with 5 0 to 8 0 per cent G e r m a n - s p e a k i n g population w a s 1 7 . 4 6 per cent. M e a n w h i l e , the u n e m p l o y m e n t rate w a s 9 . 1 6 per cent o f e c o n o m i c a l l y active persons in districts w i t h less than 20 per cent G e r m a n - s p e a k i n g population. T h e overall national u n e m p l o y m e n t rate w a s 1 2 . 1 6 per cent o f e c o n o m i c a l l y active persons. T h e worst affected districts w e r e K r a s l i c e , N e j d e k , K r n o v and R y m a r o v . It should, however, be 3 1

32

33

34

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a c k n o w l e d g e d that the C z e c h o s l o v a k coalition g o v e r n m e n t failed to solve the social problems in time. It w a s an historical tragedy that at a time w h e n democrats in G e r m a n y saw in C z e c h o s l o v a k i a a refuge from N a z i s m , m a n y native G e r m a n s in C z e c h o s l o v a k i a were expressing a contrary sympathy for it. 35

NOTES 1

T. G. Masaryk, Ceska ot&zka [The Czech question], (Prague, 1990); T. G. Masaryk, Palackeho idea naroda Ceskoslovenskeho [Palacky's idea of the Czechoslovak nation], (Prague, 1992); J. Pekar, Masarykova Ceska filosofie [Masaryk's Czech philosophy], (Prague, 1927); M. Kucera, PekaC proti Masarykovi [Pekar against Masaryk], (Prague, 1995); J. Patek, 'Die tschechoslowakische Aussen-und Europapolitik in der Zeit zwischen den beiden Weltkriegen' in F. Boldt, R. Hilf and W. Reiter (eds.), Munchen igj8 (Essen, i990).

2 P Feldl, Das verspielte Reich. Die letzten Tage Oesterreich-Ungarns (Vienna and Hamburg, 1968), pp. 7 2 - 3 ; L. Fialova, P Horska et al., DCjiny obyvatelstva ceskych zemi [History of the population of the Czech Lands], (Prague, 1996), p. 264. 3 A. BohaC, Narodnostni mapa republiky Ceskoslovenske [Nationality map of the Czechoslovak Republic], (Prague, 926). 4 Ceskoslovenska statistika [Czechoslovak statistics], (1934), vol. V I / 7 , Scitani lidu v republice (Ceskoslovenske [Census of the population of the Czechoslovak Republic 930], Part I, p. 46. 5 Ibid., p. 46. 6 (Ceskoslovenska statistika (1924), vol. 9, cited also by Z. Deyl, 'Demograficky vyvoj a profesni narodnostni a socialni slozeni obyvatelstva' ['Demographic development and national and social composition of the population'] in V Lacina and J. Patek (eds.), DCjiny hospodaCstvi ceskych zemi odpocatku industrializace do soucCasnosti [Economic history of the Czech Lands from the beginning of industrialisation to the present], (Prague, 995), p. 38. 7 ( eskoslovenska statistika ( 934), vol. V I / 7 , p p . 4 6 - 7 . 8 A. Oberschall, 'Die Nationalitatenfrage in der Tschechoslowakei' in (Ceskoslovenska statistika (i 934), vol. 9, Section VI, pp. 4 1 - 2 . 9 ( eskoslovenska statistika ( 934), vol. V I / 7 , p p . 4 6 - 7 . i 0 Ibid. i i J. Patek, 'Vyvoj zemedelstvi a lesnictvi' [Development of agriculture and forestry] in Lacina and Patek, DCjiny hospodaCstvi Ceskych zemi,pp. 4 3 - 7 0 at p. 43; see also Zpravy SUS (Statni UCadStatisticky) [Reports of the State Statistical Office], i 04 (i 933), Section D, No. i 7. i 2 Patek, 'Vyvoj zemedelstvi a lesnictvi'. i 3 J. Novotny and J. Sousa, 'Vyvoj prumyslove vyroby' ['Development of C

C

Multinational Czechoslovakia's economy and society

industrial production'], in Lacina and Patek, DCjiny hospoddfstvi Ceskych zemi, pp. 7 1 - 9 . 71-3. Statistickd pfirucka republiky Ceskoslovenske [Statistical Handbook of the Czechoslovak Republic], vol. VI (1932), p. 17. Novotny and Sousa, 'Vyvoj prUmyslove vyroby', pp. 7 3 - 6 . V Kral, M. Kropilak and J. KnZek PCehled Ceskoslovenskych dejin [Outline of Czechoslovak history], (Prague, 1960), p. 846. (See also R. Holec, 'Econ­ omic aspects of Slovak national development in the twentieth century' in this volume.) Zprdvy SUS (Prague, 1933 and 1934), vols. XIV and XV, Section D, No. 26, 2, 13. For the Jewish population see A. M. Rabinowicz, The Jews of Czechoslovakia (New York, 1968). J. Cesar and B. Cerny, Politikanemeckych burCoaznich stran v Ceskosloovensku v letech 1918-1938. Exkurze o hospoddrskych a spolecenskych pomerech nemecke menCiny v Ceskoslovenske republice [Politics of German bourgeois parties in Czecho­ slovakia in the years 1 9 1 8 - 1 9 3 8 . Notes on economic and social conditions of the German minority in the Czechoslovak Republic], (Prague, 1962), p. 437. (See also C. Boyer, 'Nationality and competition: Czechs and Germans in the economy of the First Czechoslovak Republic ( 1 9 1 8 - 1 9 3 8 ) ' in this volume.) J. W. Brugel, Tschechen und Deutsche (Munich, 1967), p. 146. Ceskoslovenskd statistika (Prague, 1935), vol. 116, Section VI, No. 10, p. 17. Zprdvy SUS,(i933), vol. XIV, Section D, No. 17. Ibid. Kral, Kropilak and Kmek, Pfehled Ceskoslovenskych dejin, Part 3,p. 52. Ibid., p. 50. a t p p

6

14 15 16

17

18

19 20

21 22 23 24 2

5

261

p

p

.

l

5

3

-

6

.

BM^ 26 Ibid., pp. 3 1 6 - 1 9 .

27 L. Fialova, P Horska et al., DCjiny obyvatelstva Ceskych zemi [History of the population of the Czech Lands], (Prague, 1996), p. 268. 28 F. Schuselka, Ist Oesterreich deutsch? (Leipzig, 1843); see also A.Klima, CeCi a NCmci v revoluci 1848 az 1849 [Czechs and Germans in the Revolution of 1848 to 1849], (Prague, 1988), pp. 1 1 - 1 8 . 29 Fialova, Horska et al., DCjiny obyvatelstva eeskych zemi,pp. 2 7 4 - 8 2 . 30 Cesar and Cerny, Politika nmeckych burzoaznich stran,p. 460. 31 Ibid., p. 462. 32 Statistickdprirueka republiky Ceskoslovenske (Prague, 1925), vol. II, p. 5 9 6 . 33 A. Dobry, HospoddCskd krize Ceskoslovenskehoprwryslu ve vztahu kMnichovu [The economic crisis of Czechoslovak industry in relation to Munich], (Prague, p p .

2 3 - 4 .

34 M. Weirich, Stare a nove Ceskoslovensko [The old and the new Czechoslovakia], (Prague, 1938), pp. 1 6 2 - 3 . 35 A. Teichova, An Economic Background to Munich International Business and Czechoslovakia 1918-1938 (Cambridge, 1974); A. Teichova, The Czechoslovak Economy 1918-1980 (London and New York, 1988).

C H A P T E R

T H I R T E E N

Nationality and competition: Czechs and Germans in the economy of the First Czechoslovak Republic (igi8—igj8) Christoph Boyer

THE

BASIC SITUATION

The nationality issue T h e nationality issue w a s an element o f cardinal i m p o r t a n c e in the polit­ ical, e c o n o m i c a n d social life of the First C z e c h o s l o v a k R e p u b l i c . T h e b a c k g r o u n d o f this issue w a s the presence o f a strong native G e r m a n population ('Volksgruppe') in a state that defined its identity not as multi­ national but as the state o f the C z e c h o s l o v a k s . T o some extent, the G e r m a n s were c o n c e i v e d o f as a m e n a c e to this identity a n d as a threat to the n e w l y g a i n e d national i n d e p e n d e n c e . T h e s e statements are v e r y general; they only characterise m a i n s t r e a m or average attitudes. T h e Volkstumskampf ('ethnic struggle'), as it w a s called by c o n t e m p o raries, characterised the First R e p u b l i c from its foundation in the a u t u m n o f 1 9 1 8 until its end following the T r e a t y o f M u n i c h . H o w e v e r , talking a b o u t conflict alone w o u l d d r a w a strongly distorted picture. Reality w a s characterised by a c o m p l e x mixture o f a n t a g o n i s m a n d c o operation. T h e result w a s a m o d u s v i v e n d i - sometimes arduous but viable on the w h o l e . T h e element of conflict w a s p r e d o m i n a n t in the first years after the First W o r l d War. It faded into the b a c k g r o u n d in the s e c o n d h a l f o f the 1 9 2 0 s w h e n the 'activist' G e r m a n parties — that is, those that professed to be loyal to the state - c o - o p e r a t e d with the C z e c h parties a n d participated in g o v e r n m e n t . A n t a g o n i s m t e n d e d to arise again in the 1930s, w h e n the peaceful coexistence o f C z e c h s a n d G e r m a n s in the R e p u b l i c w a s o v e r s h a d o w e d by the rise o f N a t i o n a l Socialism in G e r m a n y . T h e Sudetendeutsche Partei ( S d P — S u d e t e n G e r m a n party), basically a p u p p e t o f the N a z i party, w a s u n d o u b t e d l y perceived as a threat to the unity a n d security o f the state, a n d therefore the G e r m a n s within the c o u n t r y w e r e suspected o f b e i n g the 'fifth c o l u m n ' o f the R e i c h . 1

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The nationality issue and the economy T h e nationality issue w a s also troublesome in the e c o n o m i c sphere. T h e g o a l o f an i n d e p e n d e n t e c o n o m y — a precondition a n d a c o m p l e m e n t o f political a u t o n o m y — w a s a constant factor in the history o f the First R e p u b l i c . B e c a u s e the C z e c h s feared that G e r m a n e c o n o m i c h e g e m o n y w o u l d be the first step towards political supremacy, they w e r e afraid o f b e i n g subjugated by the e c o n o m i c p o w e r o f the R e i c h — a circumstance that h a d various c o n s e q u e n c e s for bilateral e c o n o m i c relations that c a n n o t be dealt w i t h here. For similar reasons, the C z e c h s considered the strong G e r m a n e c o n o m i c position within the c o u n t r y to be dangerous. In the eyes o f the C z e c h s , the G e r m a n influence h a d t w o aspects. T h e first critical point w a s the i m p a c t o f capital from the G e r m a n R e i c h in C z e c h o s l o v a k i a , especially in technologically a d v a n c e d key industries such as c h e m i c a l production, electrical e n g i n e e r i n g a n d m e c h a n i c a l engineering. A second p r o b l e m w a s the native G e r m a n s ; r o u g h l y speak­ ing, their resources w e r e concentrated in the 'old' light a n d c o n s u m e r g o o d s industries — textiles, glass a n d porcelain, for e x a m p l e . A t this point, some remarks have to be m a d e a b o u t basic concepts. For several reasons it w o u l d be almost impossible to quantify the size a n d borders o f the 'ethnic e c o n o m i e s ' o f the C z e c h s a n d the G e r m a n s . In the first place, it is not clear if the basis for the classification o f an enter­ prise as ' C z e c h ' or ' G e r m a n ' should be the nationality o f its owner, the shareholders, the m a n a g e m e n t or the workers. T h e nationality o f these persons or g r o u p s w a s by n o m e a n s necessarily identical. T h e l a n g u a g e used b y the internal administration o f an enterprise could be a criterion, but it is not c o m p l e x e n o u g h . Secondly, talking a b o u t the nationality o f the o w n e r s already presupposes that national identity c a n be clearly defined. In fact, nationality is n o t h i n g natural or organic but is a historical p h e n o m e n o n b a s e d on a large variety o f criteria such as lang u a g e , national feelings or loyalty towards certain historical traditions. T h i s implies that for p e o p l e to ascribe a nationality to themselves, or for nationality to be defined by m e a n s o f a bureaucratic p r o c e d u r e such as the population census in the First R e p u b l i c , national identity could yield quite different a n d v a r y i n g results. M o r e o v e r , it w a s even possible to c h a n g e one's national identity. T h e diffuse character o f the c o n c e p t is illustrated b y the case o f the J e w s in C z e c h o s l o v a k i a , a g r o u p that p l a y e d a p r o m i n e n t part a m o n g the entrepreneurs o f the country: the J e w s opted to be ' C z e c h ' or ' G e r m a n ' or 'Jewish'. A l s o to be taken into a c c o u n t are the 'cosmopolitans', w h o s h o w e d a v e r y w e a k a d h e r e n c e to 3

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a nationality or confessed no national loyalties at all — a type o f person usually found in circles o f business leaders with international interests a n d a supranational outlook. A p a r t from these c o n c e p t u a l problems there are practical difficulties w i t h statistics: c o m p a n i e s from the G e r m a n R e i c h , w h i c h w e r e not v e r y w e l c o m e in the R e p u b l i c , often pre­ ferred mimicry, w h i c h m e a n s that the basis for the quantification o f G e r m a n e c o n o m i c resources, at least, is fragile. T o sum up: only a r o u g h c o n c e p t o f a ' C z e c h ' or ' G e r m a n ' e c o n o m y c a n be u s e d . Nevertheless these entities are indispensable — utterly diffuse and blurred t h o u g h the borderlines m a y be. T h e y w e r e rooted in the minds o f the p e o p l e o f the time and they were at least distinct e n o u g h to form the precondition for conflict b e t w e e n the ethnic businesses. T h i s struggle b e t w e e n C z e c h s a n d G e r m a n s a b o u t 'nationaler Besitzstand' ('national property') w a s e m b e d d e d in the w h o l e situation of Volhtumskampf, in w h i c h b o t h parties considered a strong e c o n o m i c p o s i t i o n to be an important prerequisite for a g o o d standing. G e r m a n c o n t e m p o r a r y agitation d e n o u n c e d aggressive ' C z e c h i s a t i o n ' ('Tschechisierung'), a policy that constituted in the C z e c h perspective the legitimate attempt to form a C z e c h o s l o v a k national economy, not least w i t h the intent to reverse the H a b s b u r g policy o f ' G e r m a n i s a t i o n ' ('Germanisierung'). T h e C z e c h policy o f e c o n o m i c nationalisation w a s directed against all forms a n d variants o f G e r m a n e c o n o m i c influence — against enterprises from the G e r m a n R e i c h as well as against the e c o n o m y o f the G e r m a n s o f B o h e m i a a n d M o r a v i a . T h e different structure a n d i m p o r tance o f these t w o e c o n o m i c bodies w e r e mostly ignored. T h e e c o n o m i c assets o f the native G e r m a n s significantly e x c e e d e d their share of the population, but they w e r e less i m p o s i n g than they looked in statistics because G e r m a n industries w e r e relatively b a c k w a r d a n d their productivity w a s low. Nevertheless, in the political perspective G e r m a n s of C z e c h o s l o v a k i a never c o m p l e t e l y got rid o f the i m a g e o f b e i n g unreliable; in this respect they w e r e a m e n a c e equal to the i m p a c t o f capital from the R e i c h . E c o n o m i c nationalism, a i m e d at e x t e n d i n g C z e c h capital as well as personal influence in the economy, found expression in a bundle o f measures initiated a n d supported by the majority o f C z e c h political parties, by the cabinets a n d the administration, b y political a n d e c o n o m i c organisations, industrial enterprises a n d the C z e c h banks. A not u n i m p o r t a n t factor w a s the N a r o d n i rada, the 'national c o u n c i l ' — the central organisation o f C z e c h o s l o v a k regional nationally oriented 5

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bodies. T h e essence o f its p r o g r a m m e w a s the c o m p l e t i o n o f the nation state in every respect. A l r e a d y at this point, however, an important restriction has to be imposed. W h a t holds true for the nationality issue as a w h o l e is especially important in the e c o n o m i c field: factors limiting conflict intensity w e r e stronger in this field t h a n elsewhere. T h e g o a l o f b a l a n c e d interests w a s especially p r o m i n e n t in the d o m a i n o f material interests. In other areas of the Volkstumskampf, for e x a m p l e in the field o f l a n g u a g e and school politics, nationalism w a s m u c h m o r e infectious a n d could b e c o m e viru­ lent w i t h considerably less risk o f material loss. T h i s chapter presents three case studies demonstrating that C z e c h — G e r m a n relationships in the e c o n o m i c area w e r e intermingled w i t h an especially strong element of co-operation. T h e studies do not deal primarily w i t h the quarrel over the control o f national capital. Rather, they concentrate on the conflicts b e t w e e n the t w o ethnic groups a b o u t personal or organisational influence. T h e y focus on the networks that led, organised a n d repre­ sented the t w o ethnic e c o n o m i e s : configurations o f persons of the same nationality, sometimes loosely organised groups, sometimes formal organisations. T h e s e networks operate on the basis o f material power, but their influence is also correlated w i t h their intellectual, technical a n d administrative capacities, their political standing, their tactical skill, their k n o w l e d g e , e n e r g y a n d motivations as well as the conflicts, the political alliances a n d contexts in w h i c h they act — in this case, the political system of the C z e c h o s l o v a k state.

F I E L D S OF C O N F L I C T A N D C O - O P E R A T I O N

The organisations of industry After the C z e c h o s l o v a k state w a s established, t w o organisations o f industrialists a l o n g national lines, one C z e c h a n d one G e r m a n , w e r e founded: the U S C P (Ustredni svaz ceskoslovenskych priimyslnikii — C e n t r a l Association of C z e c h o s l o v a k Industrialists) a n d the D H I (Deutscher H a u p t v e r b a n d der Industrie in der T s c h e c h o s l o w a k e i — G e r m a n C e n t r a l Association o f Industry in C z e c h o s l o v a k i a ) . In b o t h cases the m o t i v a t i n g force h a d obviously b e e n the foundation o f the state; the political r e a r r a n g e m e n t m a d e the adaptation o f the industrial organisation to the n e w frontiers necessary. B e c a u s e the 'industry o f the G e r m a n s ' w a s concentrated in the b o r d e r regions o f the western part o f

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the country, w h e r e a s ' C z e c h industry' w a s mostly to be found in the heartlands o f B o h e m i a , the organisations h a d different regional centres of gravity. B u t they b o t h possessed a fully d e v e l o p e d structure inclusive of almost all industrial b r a n c h e s . W i t h i n the rather flexible frame o f C z e c h o s l o v a k association l a w these t w o private organisations h a d the liberty to f o r m coalitions on the basis of a rational calculation o f respective interests. S u c h a g r e e m e n t s w e r e n o t c o m p l e t e l y i n d e p e n d e n t from the political sphere, but they w e r e c o n ­ c l u d e d at a relative distance from the political arena. T h e history o f the relationship b e t w e e n the t w o organisations shows a clear tendency: in the b e g i n n i n g — in the years i m m e d i a t e l y after the First W o r l d W a r — relations w e r e rather inimical. In the following stage there w a s sporadic h a r m o n i s a t i o n , a c o n v e r g e n c e o f respective interests from time to time. In the next phase, co-operation w a s organised u n d e r the aegis o f a c o m m o n c o v e r i n g organisation. In the final stage, the H a u p t v e r b a n d j o i n e d the C z e c h organisation in corpore — a symbiosis that r e m a i n e d stable almost until the e n d o f the R e p u b l i c . T h e details o f this d e v e l o p m e n t c a n be described as follows. T h e identity of the Ustredni svaz w a s ambivalent: it h a d b e e n founded before the end o f the First W o r l d W a r as an organisation for the protection o f national ' C z e c h industry' against the disadvantages it suffered in the A u s t r o - H u n g a r i a n w a r e c o n o m y . After the R e p u b l i c w a s established, the Ustredni svaz declared itself to be the official representation o f C z e c h o s l o v a k industry as a w h o l e , a c l a i m that w a s a c k n o w l e d g e d b y the first cabinets o f the R e p u b l i c , w h i c h consisted only of C z e c h ministers. B u t at the same time the Ustredni svaz r e g a r d e d itself as a national C z e c h body. T h e l e a d i n g personnel w e r e rooted in the C z e c h e m a n c i p a t i o n m o v e m e n t ; at least in the first years after its founda­ tion the Ustredni svaz s h o w e d a certain inclination towards the N a t i o n a l D e m o c r a t i c Party, w h i c h h a d strong nationalistic t e n d e n c i e s . U n d e r these circumstances it w a s s o m e w h a t natural for the H a u p t v e r b a n d to justify its segregation b y the fear o f a n n e x a t i o n , w i t h alleged negative c o n s e q u e n c e s for the ' G e r m a n industry' o f B o h e m i a . T h e preservation o f 'national property' b e c a m e the p r i m a r y reason for its existence. It w a s not b y c h a n c e that the foundation o f the H a u p t v e r b a n d took place at a time w h e n tensions b e t w e e n the t w o nationalities w e r e especially grave: the rallying o f ' G e r m a n industry' u n d e r the national flag w a s a counterpart to the project o f a united front of the G e r m a n parties against C z e c h i s a t i o n , w h i c h , to a certain extent, w a s real; but on the other h a n d , a certain e l e m e n t o f p a r a n o i a c o u l d be 7

8

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found in this context, too. T h e first years after the w a r w e r e character­ ised b y a serious e c o n o m i c crisis, a n d the ' G e r m a n industry' o f B o h e m i a w a s inclined to place the b l a m e for all problems on the official e c o n o m i c policy of the n e w state, thereby blurring the difference b e t w e e n those problems that s t e m m e d from real a n t i - G e r m a n resentment and those p r o d u c e d by objective circumstances such as the crisis o f foreign trade caused b y the n e w frontiers o f the successor states o f the H a b s b u r g M o n a r c h y or b y particular deficits o f the administration. T h e backg r o u n d o f this p a r a n o i a w a s psychological trauma, s t e m m i n g from the fact that the G e r m a n s o f B o h e m i a , w h o h a d perceived themselves as the elite in the H a b s b u r g E m p i r e , found themselves in the position of a minority in a state they did not consider to be theirs. In the same way, ' G e r m a n industry' found itself d e g r a d e d to the e c o n o m y o f a national minority. It is not surprising that on the G e r m a n side there w a s a t e n d e n c y to ' w i t h d r a w into a citadel'. B u t v e r y soon in the l e a d i n g circles o f the H a u p t v e r b a n d this t e n d e n c y w a s superseded by the insight that the policy o f preserving G e r m a n 'national property' c o u l d be successful only if ' G e r m a n industry' c o - o p e r a t e d w i t h the C z e c h o s l o v a k a d m i n ­ istration, trying to influence the g o v e r n m e n t a n d the parliament. V e r y soon the H a u p t v e r b a n d d e m a n d e d political participation a n d rights equal to those o f the Ustredni svaz; it started to use the G e r m a n bourgeois parties as a parliamentary lever. T h u s the H a u p t v e r b a n d at least implicitly c a m e to a c c e p t the existence o f the R e p u b l i c . It b e c a m e part of the 'activist' element — that is, the political forces that p r o c l a i m e d loyalty to the state a n d w e r e in principle ready for a constructive political relationship with the C z e c h s . V e r y soon it also b e c a m e evident that the queries o f the H a u p t v e r b a n d in the central fields o f e c o n o m i c policy w e r e in most cases identical to those o f the Ustredni s v a z . T h i s leads to the c o n c l u sion that to a great extent ' b a d e c o n o m i c p o l i c y ' really w a s ' b a d p o l i c y ' from the point o f v i e w o f industrialists a n d it h a d little to do w i t h a national bias on the C z e c h side. For e x a m p l e , the m a i n social conflicts w e r e b e t w e e n the classes a n d not b e t w e e n nationalities. T h e r e w e r e conflicts over questions o f e c o n o m i c order, tax policy, public finance a n d trade or c u r r e n c y policy, but b e t w e e n different b r a n c h e s a n d only v e r y rarely b e t w e e n the ' C z e c h e c o n o m y ' on the one h a n d a n d the ' G e r m a n ' on the other. S o o n it b e c a m e obvious that the differences b e t w e e n the aims o f the t w o bodies w e r e only a matter o f n u a n c e . B u t the schism considerably w e a k e n e d the p o w e r o f the industrial lobby; moreover, the 12

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existence o f t w o organisations w a s u n e c o n o m i c a l . U n t i l the e n d o f 1 9 2 1 , there w e r e parallel p r o g r a m m e s a n d claims. U n d e r the pressure of a n e w e c o n o m i c crisis that started a r o u n d the b e g i n n i n g o f i 9 2 2 , c o operation w a s for the first time institutionalised in the f o r m o f a central c o m m i t t e e of the t w o bodies. T h e m o t i v e for b r i d g i n g the g a p w a s the economy, at a time w h e n political tensions b e t w e e n C z e c h s a n d G e r m a n s w e r e a b o u t to rise to a n e w height. In 1 9 2 8 the c o - o p e r a t i o n w a s fully institutionalised, w h e n the H a u p t v e r b a n d in corpore j o i n e d the U s t r e d n i s v a z . T h i s time, the alliance w a s not b o r n out o f a crisis; on the contrary, it w a s forged in a rather pleasant e c o n o m i c climate. T h e motive for the u n i o n w a s the relatively w e a k i m p a c t o f the industrial lobby vis-a-vis an e c o n o m i c p o l i c y that, a g a i n from the point o f v i e w o f the industrial organisations, w a s insufficiently oriented t o w a r d s industrial interests. E c o n o m i c policy, for e x a m p l e in the cardinal question o f customs tariffs, w a s m a i n l y directed b y a coalition o f the A g r a r i a n Party a n d the representation o f w o r k e r s ' interests. Politics essentially consisted in a trade-off b e t w e e n these t w o groups, w h e r e a s industry w a s relatively distant from the centre o f p o w e r . T h e a m a l g a m a t i o n o f the t w o bodies w a s also favoured b y certain b a c k g r o u n d conditions, such as a g e n e r a l softening o f the ethnic conflict in a p e r i o d w h e n G e r m a n activist political parties j o i n e d the c a b i n e t . M o r e o v e r the activist course o f G e r m a n industrial interests w a s supported by a n e w l y founded activist party, the D A W G (Deutsche A r b e i t s - u n d Wirtschaftsgemeinschaft — G e r m a n A s s o c i a t i o n for W o r k a n d E c o n o m y ) . A t the same time, bilateral political relations w i t h the Reich improved. T h e first years after the H a u p t v e r b a n d j o i n e d the U s t r e d n i svaz w e r e characterised b y this c o n g r u e n c e o f political activism a n d e c o n o m i c c o - o p e r a t i o n . T h e situation c h a n g e d almost c o m p l e t e l y w i t h the rise of S u d e t e n G e r m a n N a t i o n a l Socialism in the 1930s: the S H F (Sudetendeutsche Heimatfront — S u d e t e n G e r m a n Patriotic Front), later r e n a m e d S d P (Sudetendeutsche Partei — S u d e t e n G e r m a n Party) develo p e d a new, intransigent position on the nationality issue. T h e p r o g r a m m e o f this party c o n t a i n e d at least implicitly, later also explicitly, the postulate that the H a u p t v e r b a n d should give up c o - o p e r a t i o n with the U s t r e d n i svaz within the political framework o f the C z e c h o s l o v a k state. Instead, the H a u p t v e r b a n d w a s n o w u r g e d to incorporate itself in the Sudetendeutsche Volksgemeinschaft (the S u d e t e n G e r m a n people's c o m munity), w h i c h w a s c o n c e i v e d o f as a part o f the all-encompassing Deutsche Volksgemeinschaft ( G e r m a n people's c o m m u n i t y ) , w i t h the S d P or 14

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even the N a z i party as political leaders. T h e e c o n o m i c counterpart o f this Sudetendeutsche Volksgemeinschaft w a s to be an a u t o n o m o u s ' S u d e t e n G e r m a n e c o n o m y ' , separated from the ' C z e c h e c o n o m y ' a n d orientated towards the R e i c h . A n o t h e r implication o f this c o n c e p t w a s that G e r m a n industrialists in B o h e m i a should give up the m o d e r a t e l y liberal a n d democratic principles they shared w i t h their C z e c h partners a n d a d o p t the N a t i o n a l Socialist totalitarian political c r e d o a n d the auth­ oritarian m o d e l o f an e c o n o m i c order. B u t even in this situation the H a u p t v e r b a n d w a s relatively reluctant to give in, to a c k n o w l e d g e the s u p r e m a c y o f the party and cut the n a r r o w links t y i n g it to the U s t f e d n i s v a z . T h e reasons for this w e r e the material interests o f G e r m a n industrialists in B o h e m i a : severing the ties to the part o f the e c o n o m y that w a s considered ' C z e c h ' s e e m e d almost impossible, because it w o u l d have required a c o m p l e t e restructuring. 20

21

T o sum up: the co-operation o f the t w o industrial organisations w a s b a s e d on calculation o f e c o n o m i c interests that were basically identical a n d that superseded nationalistic sentiments. T h i s basic h a r m o n y w a s to a considerable extent i m m u n e to political disturbances. A t times, politics even constituted an outright counterpart to e c o n o m i c s .

The Chambers of Trade and Commerce T h e conflict a n d co-operation in the C h a m b e r s o f T r a d e a n d C o m ­ m e r c e were different from those in the industrial organisations. For a systematic explanation o f these differences w e have to look at the characteristic features of the respective bodies. T h e C h a m b e r s w e r e rooted in the continental C h a m b e r l a w — in the case of the C z e c h o s l o v a k C h a m b e r s this w a s basically the corpus o f the A u s t r o - H u n g a r i a n C h a m b e r law. A c c o r d i n g to this tradition, C h a m b e r s w e r e not private associations but corporations o f public law; m e m b e r s h i p o f firms, regardless of their nationality, w a s compulsory. T h e relationship o f the C h a m b e r s w i t h the state w a s relatively close: C h a m b e r statutes w e r e fixed by the authorities or at least they h a d to be a p p r o v e d b y the Ministry o f T r a d e a n d C o m m e r c e ; the rights o f this ministry to intervene in the internal life o f the C h a m b e r w e r e quite far r e a c h i n g . W i t h this b a c k g r o u n d a n d c o m p a r e d w i t h the industrial organisations, the p r o b l e m o f national representation a n d the possibilities o f c o operation a n d conflict b e t w e e n C z e c h s a n d G e r m a n s took a different shape: within a clear-cut frame o f organisation, w a y s h a d to be found that secured b o t h parties fair representation within the C h a m b e r s . T h e 22

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m a n d a t e s in the l e a d i n g bodies o f the C h a m b e r s , the Verwaltungskommissionen ('administrative commissions'), w e r e distributed proportion­ ally b e t w e e n C z e c h a n d G e r m a n interests. G e r m a n a n d C z e c h commission m e m b e r s were organised in respective 'parliamentary g r o u p s ' . T h e m a n d a t e s were originally to be distributed a c c o r d i n g to the results o f C h a m b e r elections, but this p r o c e d u r e w a s d r a w n out over at least the next twenty years; in fact the M i n i s t r y o f T r a d e a n d C o m m e r c e a p p o i n t e d the m e m b e r s o f the commissions, thus fixing the national quota. A t this point it is important to stress that the distribution of the m a n dates by the ministry w a s not simply dictated by g o v e r n m e n t authorities. T h e ministry h a d to rely on information from below. T h e process w a s highly political because the C h a m b e r s , as corporations o f public law, interpreted their role as the representation o f the e c o n o m y as a w h o l e — the parliament o f the e c o n o m y — w h i c h m e a n t that v e r y different claims h a d to be taken into account: those of industry, trade, c o m m e r c e a n d finance. T h e r e w a s a conflict b e t w e e n b i g business a n d small business; there w e r e ethnic or even nationalistic sentiments and, o f course, there w e r e the d e m a n d s o f political parties representing e c o n o m i c interests. In C h a m b e r politics, the c o n s e q u e n c e o f this highly c o m p l e x system o f manifold a n d often diverging claims w a s a v e r y c o m p l i c a t e d , often arduous and lengthy process o f b a r g a i n i n g in the phase p r e c e d i n g the a p p o i n t m e n t o f the C h a m b e r m e m b e r s . T h i s trade-off n o r m a l l y did not take place in public; it usually m e a n t s c h e m i n g in the b a c k r o o m . T h e a p p o i n t m e n t principle also created sinecures that w e r e at the disposal of party p o l i t i c i a n s . I m m e d i a t e l y after the foundation o f the R e p u b l i c the c o m p o s i t i o n o f the administrative commissions w a s a d a p t e d to the n e w situation, w h i c h m e a n t that the C z e c h q u o t a w a s raised. T h i s first shift w a s m e a n t to be c o m p e n s a t i o n for an undeniable under-representation o f the C z e c h e l e m e n t before 1 9 1 8 . In 1 9 2 6 / 7 a n d again in 1 9 3 6 the m e m b e r s h i p o f the administrative commissions w a s extended. W h e r e a s in 1 9 2 6 / 7 the G e r m a n s g o t a share o f the additional m a n d a t e s that on the w h o l e allowed t h e m to preserve the status q u o , they significantly lost g r o u n d in 1 9 3 6 . T h e r e are several reasons for this. In the first place, the n u m b e r o f political parties — most o f t h e m C z e c h — that c l a i m e d to be represented in the C h a m b e r s h a d risen in the 1930s c o m p a r e d to the 1920s. O n the w h o l e , C z e c h political parties representing e c o n o m i c interests w e r e m u c h keener on e x t e n d i n g their influence in the C h a m b e r s , w h e r e a s on the G e r m a n side similar party influence w a s not to be found. T h e second 23

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reason that the majority o f the additional m a n d a t e s fell on the side o f the C z e c h s in 1 9 3 6 w a s the strong impulse to strengthen the smallbusiness element, w h i c h played an i m p o r t a n t role in the e c o n o m y o f the First R e p u b l i c . B e c a u s e the C z e c h position in the handicraft a n d the small-trade sector w a s stronger than the G e r m a n position, favouring small business m e a n t strengthening the C z e c h element. T o c o n c l u d e : in the l o n g run, the i m p o r t a n c e o f the G e r m a n e l e m e n t in the administrative commissions declined significantly. B u t the reason for this loss o f w e i g h t w a s n o t ethnic aggression on the C z e c h side. T h e r e w a s n o l o n g - t e r m p l a n to extend the C z e c h position in the C h a m b e r s at the cost o f the G e r m a n s by taking a w a y m a n d a t e s from the G e r m a n s a n d g i v i n g t h e m to the C z e c h s . N o w a n d then such projects w e r e devised b y isolated chauvinists; but they r e m a i n e d largely irrelevant. T h e explanation has to be sought in the almost automatic w o r k i n g o f the a p p o i n t m e n t m e c h a n i s m described above. G i v e n the nature o f party politics, this m e c h a n i s m p r o d u c e d as a side effect a bias in favour o f the C z e c h element, but the system as such w a s a result o f the given political structures. It w a s n o t a result o f C z e c h acrimony. T h i s c a n be proved b y the fact that there w a s a m p l e protest against this s w a m p o f intrigue not only on the G e r m a n side but on the C z e c h side, too. E v e r y d a y life in the C h a m b e r s , w h i c h consisted of a w i d e range of activities supporting trade and c o m m e r c e irrespective o f its nationality, w a s relatively h a r m o n i o u s a n d mostly free o f nationalistic resentment. In some isolated cases there w e r e quarrels a b o u t the l a n g u a g e to be used in the C h a m b e r , in some other cases certain other symbolic issues w e r e d i s p u t e d . B u t on the w h o l e these cases w e r e an exception. 25

The industrial elites A n o t h e r v e r y important dimension o f the fight for influence a n d control over the e c o n o m y o f the First R e p u b l i c w a s the over-representation of G e r m a n personnel in the l e a d i n g positions o f C z e c h o s l o v a k industry. T h i s p r o b l e m o f 'narodnostni p o m e r y ' — that is, the 'national conditions' in the e c o n o m y — w a s basically a heritage from the H a b s b u r g M o n a r c h y . B e c a u s e o f their administrative, technical a n d e c o n o m i c know-how, these technicians, engineers, l e a d i n g m a n a g e r s and directors w e r e o f i m m e n s e strategic i m p o r t a n c e in the e c o n o m y of the R e p u b l i c . S o m e m e m b e r s o f this business elite w e r e natives o f B o h e m i a or M o r a v i a a n d C z e c h o s l o v a k citizens. M a n y o f t h e m were A u s t r i a n citizens; but there w e r e also a great n u m b e r of i m m i g r a n t s from the R e i c h — the state to

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w h i c h C z e c h o s l o v a k i a most feared b e i n g subjugated. H e r e , again, in the eyes o f the C z e c h s all G e r m a n s regardless o f their citizenship tended to be perceived as potentially dangerous. T h e m e n a c e w a s all the greater because a concentration o f G e r m a n s w a s to be found n o t only in the h i g h e r echelons o f enterprises classified as G e r m a n ; the situation in C z e c h firms w a s n o t m u c h different. A n especially delicate matter w e r e the G e r m a n s in those enterprises on w h i c h the defence o f the c o u n t r y w a s based: mining, metallurgy, chemicals, m e c h a n i c a l e n g i n e e r i n g a n d electrical engineering. In C z e c h o s l o v a k military circles, w h i c h w e r e closely interconnected w i t h the N a r o d n i rada, this aspect o f national security played an especially important r o l e . Nationalistic currents in public opinion, the N a r o d n i rada, the lobbies of C z e c h qualified e m p l o y e e s a n d professionals and, o f course, the pressure o f the military all u r g e d a r e p l a c e m e n t o f the G e r m a n s already e m p l o y e d in C z e c h o s l o v a k i a ; at the same time they supported measures a i m e d at r e d u c i n g any further influx o f G e r m a n s into l e a d i n g positions in the future. T h e issue o f ndrodnostni pomery b e c a m e virulent for the first time after 1 9 1 8 in the context of the so-called 'nostrification' — the policy b y w h i c h the P r a g u e g o v e r n m e n t tried to urge enterprises p r o d u c i n g on the territory o f the R e p u b l i c to m o v e headquarters from the old capital, V i e n n a , to C z e c h o s l o v a k i a . T h e intention of this measure w a s to g a i n sovereignty in the field o f e c o n o m i c policy. It w e n t h a n d in h a n d w i t h attempts at e x t e n d i n g the influence of C z e c h capital, a n d this w a s to be the m e a n s by w h i c h the ndrodnostni pomery at the top o f the enterprises w e r e to be c h a n g e d . A few years later, in 1 9 2 3 a n d a g a i n in 1 9 2 8 , C z e c h o s l o v a k i a tried to introduce certain legal a n d practical restrictions on the o c c u p a t i o n o f foreigners, primarily G e r m a n s ; but in b o t h cases an escalation w a s prevented by w a y o f negotiations w i t h the R e i c h . T h e conflict b e c a m e sharper in the 1930s: this time it w a s p r o v o k e d by the N a z i regime, w h i c h quite brutally r e m o v e d most C z e c h o s l o v a k workers e m p l o y e d in G e r m a n y . T h i s policy, w h i c h w a s part o f the N a z i anti-crisis policy trying to raise e m p l o y m e n t , w a s answered in P r a g u e by retaliation measures against G e r m a n e m p l o y e e s in C z e c h o s l o v a k i a . T h i n g s c a m e to a h e a d in 1 9 3 6 w h e n the parliament in P r a g u e passed the L a w for the D e f e n c e o f the State. T h i s law, w h i c h w a s the C z e c h response to the N a t i o n a l Socialist threat, enabled the military to intervene in the e c o n o m y in order to guarantee the security o f the c o u n t r y a n d to prepare it for an eventual war. It also significantly e x t e n d e d the rights o f the administration to intervene in all matters of ndrodnostni pomery . In summary, C z e c h policy a i m i n g at i m p r o v i n g ndrodnostni pomery 26

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s h o w e d significant results, especially in the 1 9 3 0 s - results that the G e r m a n side bitterly r e g a r d e d as c o n s e q u e n c e s o f ' C z e c h i s a t i o n ' . C e r t a i n l y this process a g g r a v a t e d the tensions b e t w e e n the ethnic groups. B u t on the other h a n d it w o u l d be e x a g g e r a t e d to interpret this as total 'ethnic cleansing'. In m a n y cases it w a s impossible to r e m o v e G e r m a n s in l e a d i n g positions because there w e r e n o C z e c h substitutes. In other cases, a H e g e l i a n ' c u n n i n g o f reason' w a s operating: the rising influence o f C z e c h capital in G e r m a n enterprises, originally intended as a prerequisite for c h a n g i n g the ndrodnostni pomery, stimulated the interest of C z e c h capital o w n e r s in the s m o o t h functioning o f these enterprises a n d r e d u c e d their interest in nationalistic experiments. Industry w a s , in general, v e r y sceptical a b o u t measures threatening the existence o f m a n a g e r s a n d experts. Finally, the risk o f complications w i t h the R e i c h a n d Austria w a s an a r g u m e n t against rigorous restrictions; C z e c h o s l o v a k citizens e m p l o y e d in the n e i g h b o u r i n g countries w e r e in d a n g e r o f b e i n g taken hostage.

SUMMARY

It is a m y t h that C z e c h - G e r m a n relations in the First R e p u b l i c consisted of n o t h i n g but bitter conflict c a u s e d b y C z e c h m a l e v o l e n c e a n d intran­ sigence. A l t h o u g h there w a s sometimes aggressive conflict over the extension o f 'national property' and a rather short-sighted c h a u v i n i s m on b o t h sides o f the ethnic frontier, there w a s also co-operation a n d compromise. First, m a y b e the m a i n s t r e a m o f C z e c h politics in the First R e p u b l i c w a s p e r m e a t e d b y a basic a n t i - G e r m a n inclination; this disposition was, however, not translated into a c o m p r e h e n s i v e and consistent policy prog r a m m e . In other w o r d s , G e r m a n nationalistic agitation w a s w r o n g in assuming the existence o f a C z e c h master-plan intending to ruin the G e r m a n s . Nationalistic sentiments h a d their ups a n d d o w n s . V e r y often they were instrumentalised b y p o w e r politics; nationalistic topics were, for e x a m p l e , v e r y p o p u l a r in election c a m p a i g n s . N o t all p r o n o u n c e ments b y chauvinists should be taken as gospel truth. Secondly, not all C z e c h measures that l o o k e d nationalistic at first sight w e r e m o t i v a t e d by resentment: discrimination against G e r m a n s w a s in m a n y cases due to objective e c o n o m i c or political constraints, structural weaknesses o f the political system, especially the characteristic m e c h a nisms o f party politics or the dilettantism o f an administration that in m a n y cases w a s characterised by the slackness in the tradition o f the

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H a b s b u r g bureaucracy. T y p i c a l l y e n o u g h in m a n y cases, for e x a m p l e in matters o f e c o n o m i c policy, there w e r e G e r m a n complaints, but there w e r e parallel c o n c e r n s on the C z e c h side as well. T h i r d l y in C z e c h o s l o v a k i a , there w e r e several safeguards against a solution to the nationality issue b y force. For e x a m p l e , the G e r m a n activist parties took part in the political process. E v e n if it is controver­ sial h o w far their influence r e a c h e d , it is plausible to assume that they h a d a certain b a r g a i n i n g power. A l s o , C z e c h o s l o v a k i a w a s a constitu­ tional state w i t h a properly w o r k i n g legal a n d j u d i c i a l apparatus, w h i c h in most cases prevented arbitrary interventions o f the authorities into the sphere o f private business. T h i s m e a n t that there existed a curb against arbitrary a n t i - G e r m a n measures. T h e G e r m a n position in the C h a m b e r s , for e x a m p l e , c o u l d n o t be erased, a n d the legal status of citizens o f the R e i c h could not be c h a n g e d arbitrarily. A fourth point to note is that C z e c h o s l o v a k i a w a s b o u n d by international juridical n o r m s , in the first instance the treaties for the protection of the minorities. A l t h o u g h there w e r e m a n y queries a b o u t C z e c h o slovak infringements of these treaties, they acted as a m i n i m a l curb to arbitrary measures. Finally, especially in the e c o n o m y there w a s relatively far-reaching g o o d w i l l r e g a r d i n g living together profitably — 'profitably' in the strict sense o f the w o r d , because this attitude w a s m a i n l y the expression o f e c o n o m i c p r a g m a t i s m . D a m a g i n g those enterprises that, in the eyes o f c o n temporaries, were considered as a part o f the ' G e r m a n e c o n o m y of C z e c h o s l o v a k i a ' w o u l d in many, if n o t most, cases also have m e a n t d a m a g i n g the sector o f the e c o n o m y that w a s considered to be ' C z e c h ' — w h e r e a s co-operation across ethnic frontiers p r o d u c e d synergetic effects. T h i s t a m i n g o f nationalisticfeelings m a y not always have b e e n a matter of the heart, but g o o d w i l l m o t i v a t e d by profit is perhaps apt to generate a m o r e stable m o d u s v i v e n d i than noble, but volatile, emotions. NOTES

1 For the political background, see Rudolf Jaworski, Vorposten oder Minderheit (Stuttgart, 1977) and Ferdinand Seibt, Deutschland und die Tschechen. Geschichte einerNachbarschaft in derMitteEuropas (Munich and Zurich, 1995), pp. 227—334. 2 See Christoph Boyer and Jaroslav Kucera, 'Die Sudetendeutsche Heimatfront/Sudetendeutsche Partei und der Nationalsozialismus' in Horst Moller, Andreas Wirsching and Walter Ziegler (eds.), Nationalsozialismus in der Region. Beitrage zur regionalen und lokalen Forschung und zum internationalen Vergleich (Munich, 1996), pp. 273—85, and Christoph Boyer and Jaroslav Kucera, 'Die

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Sudetendeutsche Heimatfront/Sudetendeutsche Partei 1 9 3 3 - 1 9 3 8 : Zur Bestimmung ihres politisch-ideologischen Standortes', Bohemia 38(2)(i997), 358-68.

3 Although such trials do exist. The most prominent are to be found in Jin Hejda, 'Komu patfi ceskoslovensky prumsyl' ['To whom does Czechoslovak industry belong?'], Pfitomnost 4 (1927), 7 0 9 - 1 1 , 7 2 4 - 6 , 7 4 2 - 4 , 7 5 9 - 6 1 , 7 8 7 - 9 , 8 0 5 - 7 , 8 2 2 - 4 and Pfitomnost 5 (1928), 2 0 - 4 , 38ft"., 5 4 - 6 , 7 0 - 2 , 86ff., i04ff., ii7ff.

See, for example, Ernest Gellner, Nationalismus undModerne (Berlin, 1991). 5 Whereas the position of western capital can be much better quantified: see Alice Teichova, An Economic Background to Munich (Cambridge, 1974). 6 'German economy', 'German industry', 'Czech economy' and 'Czech industry' are in inverted commas from now on, to indicate the problematic character of the concepts. 7 For the DHI, see Mitteilungen des Deutschen Hauptverbandes der Industrie i (1920), 9 and 23, and 2 ( 92 ), 6 and 89. 4

8

Observer i 5 (i933), pp. 2 4 7 - 5 0 .

9 Stated ustredni archiv (Central National Archive, SUA), Ustredni svaz ceskoslovenskych pramyslniku (Central Association of Czechoslovak Industrialists, USCP), Box 24, 0 / 5 0 / i , letter of the USCP, reporting the founding of the organisation, 9 June 9 8. i 0 SUA, USCP, Box i 0, speech by President Malinsky in the General Assembly of the USCP, i 0 May i 9 i 9. i i Politisches Archiv des Auswartigen Amtes, Bonn ('PA'), R 9 i 03, German embassy in Vienna to Auswartiges Amt ('AA'), 24 October i 9 i 9. 2 As a typical statement, see Rudolf Teltscher, 'Wirtschaftliche Diktatur. Ein Jahr tschechoslowakischer Wirtschaft', Die Wirtschaft 2 (i 921 ), 4 7 2 - 4 . i 3 For a representative list of those queries, see Karl Janovsky, Drei Jahre tsche­ choslowakischer Wirtschaftspolitik (Prague, i 922). 4 Report on the committee meeting of the DHI on 8 September 928, Mitteilungen des Deutschen Hauptverbandes der Industrie 9 (i 928), 833fF. See Prager Tagblatt, i 9 September i 928. 5 Observer 6 ( 924), p. 285. 1 6 PA, R 7 3 7 7 8 , Memo Ropke, March i 927 (no exact date). 7 PA, R 7 3 8 3 3 , letter from German Embassy in Prague to the German Foreign Ministry, 7 August 928. See Die Wirtschaft 0 ( 928), 990. 8 PA, R 7 3 7 7 8 , Memo Ropke, March 927 (no exact date). 9 See, for example, the report on the general assembly of the DHI on 5 April 930, Mitteilungen des Deutschen Hauptverbandes der Industrie ( 930), 2 6 9 . Speech by Mr Preiss, president of the USCP,22 May i 929. See Observer i i ( 929), 2 2 9 - 3 .

20 See, for example, the report on the Conference of Teplitz-Schonau, 20 February i 938, Hospoddfsky archiv i 7 (i 938), i 34. 2 This was obvious, for example, in the general assembly of the DHI on 2 April 938: Mitteilungen des Deutschen Hauptverbandes der Industrie 9 ( 938), 36.

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22 Franz Geissler, 'Die Entstehung und der Entwicklungsgang der Handelskammern in Osterreich' in Hans Mayer (ed.), Hundert Jahre bsterreichischer Wirtschaftsentwicklung 1848-1948 (Vienna, 1949), pp. 2 1 - 1 2 6 and Herbert Matis, Osterreichs Wirtschaft 1848-1913. Konjunkturelle Dynamik und gesellschaftlicher Wandel im Zeitalter Franz Josephs I (Berlin, 1972), pp. 48ff. 23 This was widely criticised. See Hellmuth Freytag, Die Organisation der wirtschaftlichen und berufstandischen Selbstverwaltung in der Tschechoslowakei l- i ' i ^ 24 This process is analysed in detail in Christoph Boyer, Nationale Kontrahenten oder Partner? Studien zu den Beziehungen zwischen Tschechen und Deutschen in der Wirtschaft der Ersten Tschechoslowakischen Republik (Munich, 1999). 25 Speech of Matys Pokorny, Vice-President of the Chamber Pilsen, in the general assembly of the administrative commission of the Chamber on 14 July 1919, Vestnik obchodni zivnostenske komory v Plzni i (1919), 141. 26 SUA, Ministerstvo pramyslu, obchodu a Zivnosti (Ministry of Industry, Trade and Handicraft, MPOZ), dod. (addenda), Box 7 , P - 4 0 4 5 / 1 , Czechoslovak Ministry of National Defence to Czechoslovak Foreign Ministry, . January i 9 3 3 . 27 Vlastislav Lacina, Formovdni ceskoslovenske ekonomiky [The formation of the Czechoslovak economy], (Prague, 1990), pp. 9iff. 28 A good impression can be won from the parliamentary debate on the law. See Prager Tagblatt, 29 and 30 April i 9 3 6 . e

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Economic aspects of Slovak national development in the twentieth century Roman Holec

In the twentieth century the central E u r o p e a n region e x p e r i e n c e d fre­ quent political a n d systemic changes. D u e to the c o m p l e x a n d sensitive nature o f Slovakia's national a n d political d e v e l o p m e n t , questions w e r e asked a b o u t the m e a n i n g of Slovak history, w h i c h have polarised the entire society. Slovakia's e c o n o m i c d e v e l o p m e n t faithfully c o n f o r m e d to all stages o f political changes, w h i c h o u t w a r d l y a p p e a r e d as e c o n o m i c nationalism. D u r i n g the greater part o f the twentieth c e n t u r y Slovaks r e m a i n e d on the defensive r e g a r d i n g their legal status a n d their position in the state. U n d e r the conditions o f the A u s t r o - H u n g a r i a n M o n a r c h y Slovaks h a d to resist strong M a g y a r national — political as well as e c o n o m i c — pressures. L i b e r a l legislation a n d the decisive role o f the state in the economy, characteristic o f H u n g a r y , w e r e a c c o m p a n i e d b y efforts to control a n d restrict n o n - M a g y a r business activities. T h i s b e c a m e evident in strong tendencies towards centralisation affecting banking, as well as co-operatives w i t h the intention to prevent the use o f a c c u m u l a t e d capital in the furtherance of political goals hostile to the interests o f the state. 1

In such conditions a significant defensive role w a s p l a y e d b y active Czech—Slovak co-operation. W h i l e publications have dealt w i t h the political aspects, less attention has b e e n p a i d to e c o n o m i c co-operation b e t w e e n the t w o nations, w h i c h supported the Slovaks' e n d e a v o u r to achieve national e m a n c i p a t i o n a n d assisted in furthering their o w n e c o n o m i c activities. A s Slovak e c o n o m i c nationalism w a s strengthened d u r i n g this process, it g r a d u a l l y created conflicts and contradictions in the e c o n o m i c field. Nevertheless, Czech—Slovak e c o n o m i c co-operation positively influenced several areas o f Slovak d e v e l o p m e n t . A n important part, for instance, w a s played b y the education o f e c o n o m i c personnel at schools in B o h e m i a a n d M o r a v i a , the so-called A p p r e n t i c e s h i p S c h e m e o f the C e s k o s l o v a n s k a j e d n o t a ( C z e c h o s l a v U n i o n ) , w h o s e 277

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co-ordinating organisational activities consisted o f e x p a n d i n g trade relations b e t w e e n individuals a n d firms, p u r c h a s i n g property a n d land in Slovakia, organising extensive educational courses in business m a n ­ a g e m e n t , assisting in the d e v e l o p m e n t o f the Slovak co-operative m o v e ­ m e n t a n d initiating n u m e r o u s other activities. A n exceptionally positive effect o f Czech—Slovak co-operation o f lasting significance w a s the w o r k of n u m e r o u s C z e c h experts a n d engineers in Slovak business enterprises and

financial

institutions.

Slovakia w a s , before 1 9 1 8 , a n integral part o f the H u n g a r i a n m a r k e t a n d transport system. In their efforts to challenge e c o n o m i c discrimina­ tion, Slovaks a d o p t e d the C z e c h slogan o f e c o n o m i c nationalism, 'svoj k svojmu' (ours to us), a n d tried to strengthen capital links w i t h C z e c h s . Since the e n d o f the nineteenth c e n t u r y C z e c h capital h a d b e g u n to e x p a n d into Slovakia w h e r e it m e t w i t h greater a c c e p t a n c e t h a n in other areas o f A u s t r i a - H u n g a r y , such as G a l i c i a , D a l m a t i a or C r o a t i a . T h e existence o f a strong consciousness o f Czech—Slovak mutuality a n d the lively interchange in practically all spheres o f life created one o f the most viable forms o f the m o v e m e n t s o f national e m a n c i p a t i o n . W i t h i n this framework, however, C z e c h capital a n d its financial institutions found themselves unintentionally in conflict w i t h the ideals o f brotherly assistance a n d the reality o f business practice. In other w o r d s , C z e c h business g o t involved in the political struggles in Slovakia w h e r e the e c o n o m i c nationalism o f the ruling ( M a g y a r ) a n d the ruled (Slovak) nation faced e a c h other in irreconcilable a n t a g o n i s m . In A u g u s t 1 9 1 1 , speaking in the M o r a v i a n spa t o w n o f L u h a c o v i c e , the b a n k e r Julius M a r k o v i c m a d e a n unusually critical statement a b o u t the activity o f C z e c h capital in Slovakia. W h i l s t he attached great i m p o r tance to C z e c h assistance, he rejected Czech—Slovak unity a n d mutuality m e r e l y o n a materialistic basis a n d also emphasised ideological a n d ethnical topics. F r o m the b e g i n n i n g C z e c h assistance focused o n p r o ­ v i d i n g credit, thus aiding Slovak financial institutions to achieve greater i n d e p e n d e n c e . L a r g e credits did not, however, c o r r e s p o n d to the Slovak b a n k s ' o w n financial strength a n d evoked various ' m e g a l o m a n i a c ' m o o d s that resulted in excessive investment activities. G o o d intentions c h a n g e d into the sword o f D a m o c l e s as liquidity o f the majority o f Slovak banks w a s threatened b e c a u s e they w e r e unable to cover the serv i c i n g a n d r e p a y m e n t o f loans. Markovicc ascertained that, while credits of 6 million crowns h a d b e e n taken u p b y Slovak banks in H u n g a r y , 1 4 million crowns o f credits c a m e from Cisleithania, m a i n l y from B o h e m i a a n d M o r a v i a , even t h o u g h interest w a s 0.5 p e r cent higher t h a n from

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M a g y a r or G e r m a n institutions in H u n g a r y ( 7 . 2 5 : 6 . 7 5 per cent). A t the same time a g r a d u a l c h a n g e c o u l d be observed in the b e h a v i o u r o f C z e c h capital, w h i c h , also u n d e r the threat o f discrimination from the H u n g a r i a n state, entered increasingly into business relations with M a g y a r or J e w i s h capital. A c c o r d i n g to M a r k o v i c , the spirit o f altruism faded a n d 'exclusively the b a n k e r s ' spirit o f self-interest and exploita­ tion' g a i n e d p r e p o n d e r a n c e — that is, the spirit a n d direction, t h o u g h entirely correct from the banker's point o f view, w a s not suitable to further brotherly links on the basis of racial a n d e t h n o g r a p h i c mutuality. A p r e w a r survey u n d e r t a k e n b y the periodical Prudy c o n c e r n i n g Czech—Slovak mutuality identified t w o basic p r o b l e m s in the e c o n o m i c a r e a . In the first place, Slovaks sharply criticised business practices o f C z e c h financial institutions towards their Slovak partners. T h i s has to be seen not only against the b a c k g r o u n d o f the less d e v e l o p e d asking for an altruistic a p p r o a c h from the richer partner but rather as reproaches c o n c e r n i n g the connections o f C z e c h w i t h M a g y a r capital, or the higher interest rates a n d rediscount practices that discriminated frequently against Slovaks. In spite o f great expectations b y Slovaks v e r y little assistance w a s given to t h e m by B u d a p e s t - b a s e d C z e c h institutions. Efforts b y M i l a n H o d z a , I g o r H r u s o v s k y a n d other Slovak prominents failed to found a Czech—Slovak b a n k in w h i c h Slovaks w o u l d w i e l d greater influence a n d w h i c h w o u l d take up a central position in Slovak finances. In due course the repercussions o f capital investments o f C z e c h banks in Slovak joint-stock c o m p a n i e s evoked d i s e n c h a n t m e n t a n d indignation. Differences in a p p r o a c h e s as well as divergent views a n d tactical considerations w e r e tangibly revealed at several occasions: for e x a m p l e , at a confidential m e e t i n g o f Ceskoslovanska j e d n o t a in P r a g u e in M a r c h 1 9 0 7 , at several negotiations in L u h a c o v i c e , a n d in particular at the secret consultation o f R u d o l f Pilat, one of the initiators o f Czech— Slovak c o ­ operation at the Z i v n o s t e n s k a b a n k a (Trade Bank), w i t h representatives of Slovak political a n d business life in Ruzsomberok (a small industrial t o w n in central Slovakia) in J u n e 1 9 0 9 , devoted to the project o f the D u n a j s k a b a n k a ( D a n u b e Bank) in B u d a p e s t . N o t always entirely justified reproaches, raining d o w n on Pilat's h e a d d u r i n g the discussions in Ruzsomberok, w e r e m a i n l y directed against persons b e l o n g i n g to the circle o f the b a n k e r a n d politician Alois R a s i n in the Z i v n o s t e n s k a b a n k a w h o , in their struggle against G e r m a n e c o n o m i c superiority, saw a suitable counterpoise in close C z e c h — M a g y a r financial and e c o n o m i c 2

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collaboration. R e a l fears o f the e x p e c t e d d o m i n a n c e o f C z e c h capital in Slovakia existed in the w a k e of a possible C z e c h — G e r m a n under­ standing, w h i c h w o u l d doubtless be followed by a federalist reconstruction of the D u a l M o n a r c h y . ' E c o n o m i c control o f Slovakia a n d subsequent cultural d o m i n a n c e is only a matter o f time; as soon as only an approximate key to a C z e c h — G e r m a n c o m p r o m i s e will be found C z e c h p o w e r will be released a n d quite naturally transferred to u s ! ' T h i s fear literally e m a n a t e d from the commercial-entrepreneurial activities o f C z e c h banks, w h i c h , on the Slovak side, w e r e a c c o m p a n i e d b y correspondingly greater disappointment because all steps o f C z e c h capital in Slovakia w e r e undertaken u n d e r the flag o f Czech—Slovak unity or Slav m u t u a l ­ ity. C o n t r a r y to these claims it w a s critically asserted that 'people b e l o n g ­ ing to C z e c h financial circles . . . a r e often not aware o f the national mission o f C z e c h capital in S l o v a k i a ' . T h e second p r o b l e m arising from the Prudy survey w a s c o n n e c t e d w i t h various aspects o f the w e l l - k n o w n slogan o f C z e c h e c o n o m i c nationalism, 'svoj k svojmu'. H e r e , m o r e p r o n o u n c e d than a n y w h e r e else, political aspects c a m e to the fore, particularly because it o p e n l y contravened the p r o g r a m m e o f M a g y a r policy to achieve greater customs a n d e c o n o m i c i n d e p e n d e n c e from Austria — that is, from Cisleithania, to w h i c h the territory o f the C z e c h L a n d s b e l o n g e d . F r o m the above characterisation it is obvious that, in spite o f the m a n y positive aspects o f Czech—Slovak e c o n o m i c co-operation before the First W o r l d War, not a few disproportions existed e m a n a t i n g chiefly from the u n e q u a l position o f the partners. T h e v e r y problems that h a d troubled m u t u a l capital relations before 1 9 1 8 b e g a n to rise to the surface, b e c a m e politically relevant a n d d e t e r m i n e d all aspects o f Czech—Slovak relationships after the establishment o f the n e w C z e c h o s l o v a k state. In the last year o f the w a r the u n e q u a l e c o n o m i c strength o f b o t h partners b e c a m e fully manifest d u r i n g the discussions a b o u t the e c o n o m i c nature a n d the e c o n o m i c priorities o f the future state. W h i l e in the C z e c h press a n d in the p r o n o u n c e m e n t s o f representatives o f C z e c h political parties the inevitability o f socialisation, land reforms and other questions w e r e discussed, generally w i t h o u t specific plans, Slovakia h a d not yet got that far. E v e n deliberations a b o u t the nature o f a future c o m m o n state a n d a b o u t the position o f Slovaks in it w e r e absent. T h i s w a s formulated only in the so-called M a r t i n D e c l a r a t i o n o f 30 O c t o b e r 1 9 1 8 , w h i c h w a s an official act o f the Slovak N a t i o n a l C o m m i t t e e confirming the decision to establish a c o m m o n state o f C z e c h s a n d Slovaks. 4

5

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Doubtlessly, C z e c h society h a d m a d e substantial progress towards national e m a n c i p a t i o n a n d h a d d e v e l o p e d a high degree o f political consciousness. E v i d e n c e o f this c a n be found in the preparation a n d drafting o f the political a n d e c o n o m i c p r o g r a m m e o f the future state in the s u m m e r o f 1 9 1 8 , the authors o f w h i c h b e l o n g e d to a g r o u p o f experts h e a d e d b y the director o f the Z i v n o s t e n s k a b a n k a , Jaroslav Preiss, and the director o f the M e s t s k a sporitelna prazska ( M u n i c i p a l Savings B a n k o f Prague), V i l e m Pospisil. It is s y m p t o m a t i c that the p r o g r a m m e w a s created w i t h o u t Slovak participation. Indeed, n o consideration w a s given to the specific features, the different c o m p o s i ­ tion a n d levels o f d e v e l o p m e n t o f the e c o n o m i e s o f the C z e c h L a n d s a n d o f Slovakia. O n l y in t w o m a r g i n a l cases w a s Slovakia m e n t i o n e d in the p r o g r a m m e . E v e n d u r i n g the first postwar years n o adequate attention w a s paid to the e c o n o m i c reality and c o m p l e x i t y o f Slovakia. In spite o f their evident unpreparedness, it c a n n o t be m a i n t a i n e d that Slovaks w e r e u n a w a r e o f the d a n g e r e m a n a t i n g from an e c o n o m i c a l l y substantially stronger partner. A y o u n g Slovak economist, formerly a clerk o f the Z i v n o s t e n s k a b a n k a , T o m a s T v a r o z e k , d r e w attention to these p r o b l e m s in an internally circulated m e m o r a n d u m that he indep e n d e n t l y drafted in s u m m e r 1 9 1 8 , essentially c o n c u r r e n t l y w i t h the a b o v e - m e n t i o n e d C z e c h proposal o f the e c o n o m i c p r o g r a m m e . T v a r o z e k analysed the financial situation in Slovakia and tried to impress that timely preparations should be m a d e for the event o f n e w e c o n o m i c conditions b y using the positive a n d eliminating the negative features o f the operations o f C z e c h capital. H i s deliberations reflect the uneasiness e m a n a t i n g from previous experiences with C z e c h capital. T h e ideas contained in the m e m o r a n d u m w e r e a p p r o v e d b y M i l a n Hodzsa a n d other economists. H o w e v e r , Slovak possibilities w e r e restricted a n d conditional u p o n the character o f Slovakia's inclusion in the C z e c h o s l o v a k R e p u b l i c . T h e establishment o f the C z e c h o s l o v a k R e p u b l i c in 1 9 1 8 afforded Slovaks u n t h o u g h t - o f possibilities o f self-realisation in political, cultural, e c o n o m i c and other areas. H o w e v e r , in n o n e of these w a s general satisfaction achieved. O n the contrary, tensions arose, mutual c o m m u n i c a t i o n faltered a n d mutual m i s u n d e r s t a n d i n g grew. After 1 9 1 8 s o m e w h a t less than one fifth o f the industrial c a p a c i t y o f H u n g a r y r e m a i n e d in Slovakia, w h i c h a m o u n t e d to s o m e w h a t over 8 per cent o f the total industrial potential o f the n e w state. A s part o f the C z e c h o s l o v a k R e p u b l i c , Slovakia faced entirely n e w tasks in the framew o r k o f building n e w e c o n o m i c relationships. A t the same time, it w a s 6

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e c o n o m i c a l l y w e a k e n e d as a c o n s e q u e n c e o f the w a r and, particularly, due to military events and p l u n d e r i n g o f 1 9 1 8 and i g i g , military dictat­ orship, the fleeting establishment o f various east-Slovakian republics, sabotage, the negative effects of the r e m o v a l o f entire industrial facil­ ities, factories a n d raw-material stores as well as machinery. W h a t could n o t be r e m o v e d (railway lines, for example) w a s destroyed b y retreating M a g y a r or, later, bolshevik troops. In addition, the process o f c u r r e n c y separation from H u n g a r y in i g i g p r o v e d to be m u c h m o r e c o m p l i c a t e d a n d d a m a g i n g t h a n that o f the C z e c h L a n d s from Austria. A l l this must necessarily be considered w h e n describing the catastrophic e c o n o m i c situation o f Slovakia at the time it entered the n e w state. In the p o s t w a r p e r i o d a w h o l e r a n g e o f objective factors stymied the integration o f the t w o diverse e c o n o m i e s , not least b e c a u s e Slovakia w a s assigned the role o f an a g r a r i a n a p p e n d a g e . P r o p o n e n t s o f the c o n c e p t of industrialisation h a d to challenge views that industry in Slovakia w a s of a g r e e n h o u s e nature a n d that its d e v e l o p m e n t w a s artificial rather t h a n natural. Naturalness w a s seen in the light o f C z e c h a n d Slovak equality but this v i e w o f equality objectively d i s a d v a n t a g e d the w e a k e r — that is, the Slovak — economy. In fact, the liberal, in principle egalitar­ ian, e c o n o m i c p o l i c y p r o c l a i m e d initially b y the state — that is, the p r o g r a m m e o f non-intervention into m a r k e t forces b y rejecting g i v i n g preference to one part o f the C z e c h o s l o v a k R e p u b l i c over another — p a r a d o x i c a l l y caused d a m a g e to Slovakia. N a m e l y , n o consideration w a s given to Slovakia's substantially l o w e r e c o n o m i c p e r f o r m a n c e , neither w e r e specific conditions taken into a c c o u n t , for e x a m p l e the fact that, as a result of H u n g a r i a n legislation that w a s still in force, a higher tax b u r d e n existed in Slovakia until 1927 (speculators used this for e v a d i n g substantial tax payments), or the fact that tariffs on private a n d state rail­ w a y s differed, w h i c h d i s a d v a n t a g e d Slovakia w h e r e transport costs w e r e m u c h higher. Industrial d e v e l o p m e n t w a s held b a c k by the absence of coal m i n i n g a n d m e c h a n i c a l e n g i n e e r i n g production. Similarly, the unified system o f quotas o f distilling, introduced in 1 9 1 9 , d a m a g e d Slovakia w h e r e conditions o f p r o d u c t i o n w e r e entirely different a n d w h e r e the e c o n o m i c i m p o r t a n c e of distilling w a s greater t h a n in the C z e c h L a n d s . Equally, quotas for l o w e r taxes on spirits, decreed in 1 9 2 0 , discriminated against Slovakia. U n i t i n g Slovakia w i t h the industrially m o r e a d v a n c e d C z e c h L a n d s is often appraised from the point o f v i e w o f the captains o f C z e c h industry, w h o r e g a r d e d the eastern region as c o m p e n s a t i o n for the lost markets o f the A u s t r o - H u n g a r i a n M o n a r c h y . H o w e v e r , the limited

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possibilities o f c o n s u m p t i o n in Slovakia a n d S u b c a r p a t h i a n Russia could not, by any stretch o f the imagination, replace the w h o l e D u a l M o n a r c h y but, on the contrary, the C z e c h e c o n o m y represented a potential c o n s u m e r o f Slovak r a w materials a n d s e m i - f i n i s h e d g o o d s (for several interwar years Slovakia's trade w i t h the C z e c h L a n d s s h o w e d an active balance). Slovaks felt discriminated against because o f dispropor­ tions in orders p l a c e d b y the C z e c h o s l o v a k state: the share o f Slovakia in state orders has b e e n estimated as 5 per cent, w h e r e a s the share o f Slovakia's taxes in total tax revenue o f the C z e c h o s l o v a k state varied b e t w e e n 15 and 18 per cent. A l t h o u g h parliament g r a n t e d enterprises in Slovakia a so-called 5-per-cent a d v a n t a g e a c c o r d i n g to w h i c h a Slovak firm could receive state orders even t h o u g h its estimated costs w o u l d be u p to 5 per cent h i g h e r t h a n those o f a firm in the C z e c h L a n d s , the reality in this case w a s also different — namely, C z e c h firms e v a d e d this regulation b y transferring the seat of their enterprise to Slovakia. In the v e r y first years o f the C z e c h o s l o v a k R e p u b l i c ' s existence C z e c h financial circles l a u n c h e d a relatively large expansion o f capital invest­ m e n t in Slovakia with the aim o f dislodging the strong B u d a p e s t banks a n d to establish themselves in the key enterprises a n d industrial branches on Slovak territory. Logically, a n d in a market e c o n o m y as is to be e x p e c t e d , interest centred on lucrative enterprises with g o o d g r o w t h prospects: p a p e r mills, iron works, textile factories, breweries, malthouses, spas, m i n e r a l w e a l t h a n d so on. T h e foundations o f this e x p a n sion of C z e c h capital were already b e i n g laid d u r i n g the last year of the war, in co-operation w i t h the strongest Slovak banks a n d also o w i n g to the p r e w a r connections o f C z e c h banks in Slovakia a n d lively capital a n d c o m m e r c i a l dealings. H o w e v e r , this process did n o t have entirely positive repercussions. T h u s , using the excuse o f the unitary state q u o t a system on distilling, the m o d e r n distillery in L e o p o l d o v — m a i n l y in the h a n d s of Slovak capital — w a s forbidden to distil from sugar beet. Spirit h a d to be distilled from molasses but all seven Slovak sugar refineries w e r e already u n d e r contract for these w i t h distilleries across the M o r a v a river in the C z e c h L a n d s . Similar e c o n o m i c or, rather, e x t r a - e c o n o m i c pressure w a s applied to other efficient Slovak enterprises b y c o m p e t i n g C z e c h business groups. Enterprises within the sphere o f interest o f C z e c h capital m a n a g e d to o v e r c o m e the postwar recession m o r e easily a n d w e r e in a position to register e c o n o m i c g r o w t h b y the second h a l f o f the 1920s. A t the same time, the acute shortage o f credit, investments a n d transfer capital in Slovakia led to steep rises in interest rates. W h e n the postwar recession d e e p e n e d , calls for state intervention in 8

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the e c o n o m y b e c a m e louder in Slovakia. A s the state's e c o n o m i c p o l i c y w a s based on the principle o f non-intervention into the m a r k e t m e c h a ­ nism, public support w a s afforded only to those enterprises that h a d b e e n taken over from the H u n g a r i a n state a n d w h i c h thereafter devel­ o p e d relatively successfully. A s a result o f the p o s t w a r crisis o f 1 9 2 1 - 3 , the interest o f C z e c h financial a n d business circles in Slovakia faded a w a y a n d m a n y industrial enterprises stagnated, w e n t b a n k r u p t and into liquidation. T h i s p r o d u c e d highly restive repercussions as works closed d o w n and thousands lost their j o b s . Social deprivation e n g e n d e r e d polit­ ical tensions a n d the culprit w a s sought in P r a g u e . It w a s in this c o n n e c ­ tion that the m y t h o f the 'dismantling o f industry' arose, w h i c h w a s kept alive b y the press a n d misconstrued for political purposes. It b e c a m e m u c h m o r e difficult to 'dismantle' the m y t h t h a n to invent a n d p e r p e t u ate it. T h e so-called dismantling of Slovak industry resulted from the reality o f competition d u r i n g w h i c h enterprises failed b e c a u s e o f their less efficient e q u i p m e n t a n d h i g h p r o d u c t i o n a n d transport costs. W h i l e the state rejected intervention into private business, it attempted to pacify social tensions b y a l o n g - t e r m rescue action for Slovak banks to help t h e m c o p e w i t h the h u g e deficits the First W o r l d W a r h a d left t h e m . A m o n g others the R u z o m b e r o k L ' u d o v a b a n k a (People's Bank) o f the parish priest A n d r e j H l i n k a (leader o f the C a t h o l i c autonomist People's Party) w a s rescued as its fall w o u l d have m o r a l l y discredited this leader, w h o w a s b e c o m i n g an uncomfortable politician for P r a g u e . Irritation w a s caused in Slovakia by the state's dilatory attitude to solving urgent e c o n o m i c p r o b l e m s c o n c e r n i n g transport, taxation a n d conditions o f production, or to alleviate the d a m a g i n g effects o f the c u r r e n c y reform on Slovakia's exports. O n the financial m a r k e t the concentration o f banks in C z e c h o s l o v a k i a led in m a n y cases to the fusion of Slovak w i t h C z e c h c o m m e r c i a l a n d savings banks w h i c h , in the process, r e p l a c e d former Slovak branches. In the political sphere resentm e n t w a s caused by the insufficient representation o f Slovaks in the state's central e c o n o m i c institutions (the C z e c h o s l o v a k N a t i o n a l Bank) w h e r e Slovak presence w a s largely symbolic or even non-existent. Slovakia's e c o n o m i c p r o b l e m s in the interwar p e r i o d w e r e doubtlessly caused b y unfavourable objective conditions. A l t h o u g h misused as a w e a p o n in the political struggle these e c o n o m i c realities c o u l d n o t speedily be c h a n g e d . Political aspects w e r e o f s e c o n d a r y significance whilst their existence a n d i m p a c t c a n n o t be overlooked. M a n y negative aspects in Slovakia's e c o n o m i c life even b e c a m e targets o f M a g y a r p r o p a g a n d a , w h i c h suddenly n o t only discovered Slovak ethnicity but also w a r n e d 9

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w i t h t o u c h i n g solicitude against ' C z e c h colonialism'. R e a l a n d fabri­ cated e c o n o m i c problems w e r e m a d e the most o f b y individual Slovak politicians, w h i c h w e a k e n e d the y o u n g republic from the v e r y first years of its existence. Slovaks m a y have a c c e p t e d the n e w C z e c h o s l o v a k statehood but did not necessarily identify w i t h it; its reality v e r y slowly penetrated their consciousness. C o n d i t i o n e d as the process w a s , b o t h regionally a n d socially, its acceleration d e p e n d e d largely o n the i m p r o v e m e n t o f the e c o n o m y : the C z e c h o s l o v a k framework w o u l d m e e t w i t h g r o w i n g approval should e c o n o m i c w e l l - b e i n g increase. T h u s political a n d e c o n o m i c aspects w e r e closely intertwined. Slovaks w a n t e d a substantially greater share in political power, w h i c h in N o v e m b e r 1921 h a d already led to d e m a n d s r e g a r d i n g customs jurisdiction a n d a dualistic regime o f the C z e c h o s l o v a k economy. T h e s e d e m a n d s w e r e repeatedly v o i c e d in the Slovak, the central o r g a n o f the Slovak People's Party led b y H l i n k a , as for instance: autonomy of Slovakia is economically based, for the economy is Slovakia's vital issue. Economic vassalage brings about political subjection and stagnation of economic life . . . Slovak industry, in its present state, is not strong enough to maintain its markets in its competitive struggle with Czech business . . . the only solution is: economic dualism. The introduction of duties on industrial goods is an indispensable condition of its reconstruction . . . i.e. a sliding scale of duties which would decrease the competitiveness of Czech industrial products and would equalise production costs . . . The passivity of the government in eco­ nomic affairs in Slovakia directly forces working people to become supporters of autonomy . . . n

A l s o , the Protestant Slovak N a t i o n a l Party (Slovenska n a r o d n a strana) d e m a n d e d a u t o n o m y (excepting protective tariffs b e t w e e n the w e s t e r n a n d eastern halves o f the state). Its influence in interwar C z e c h o s l o v a k i a fell far b e l o w its p r e w a r position. E x p e r i e n c e s w i t h the process o f integration also led p e o p l e close to P r a g u e to recognise the pitfalls, as is evident from the opinion o f the agrarian politician a n d economist J a n C a b l k (1930):

It was our fault that frivolously, superficially and consciencelessly we overlooked the problem of how to integrate economic conditions of Slovakia into the new state successfully. As a consequence, the weaker filled the world with its com­ plaints, the stronger made use of all its options of skill and strengths. 12

W h i l e discussions continued a m o n g Slovak economists a b o u t c o n ­ ceptual questions r e g a r d i n g the agrarian or industrial character o f Slovakia, distressing social c o n s e q u e n c e s o f the e c o n o m i c crisis o f the

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early 1 9 3 0 s further e x t e n d e d the c o n t a g i o n o f national conflicts and, a b o v e all, separatism in the ranks o f the opposition in Slovakia. In this a t m o s p h e r e Hlinka's Slovak People's Party — after a short spell in g o v e r n ­ m e n t ( 1 9 2 7 - 9 ) — rejected the b u d g e t at the b e g i n n i n g o f 1 9 3 0 and, in May, a g a i n presented a bill to p a r l i a m e n t d e m a n d i n g a u t o n o m y for Slovakia. In 1931 this w a s followed by a proposal for state support o f Slovak industry. Before the elections o f 1 9 3 2 the Slovak People's Party m o u n t e d a signature c a m p a i g n against 'the e c o n o m i c d a m a g e c a u s e d to Slovakia' from w h i c h a m e m o r a n d u m w a s presented to P r i m e Minister Frantisek U d r z a l b y a delegation led by A n d r e j H l i n k a in F e b r u a r y 1 9 3 2 . A m o n g its seven points w e r e d e m a n d s for tax relief, c h e a p credit, depoliticising the a g r a r i a n credit co-operatives (dominated b y the A g r a r i a n Party) and state orders for S l o v a k i a . A l s o , after the experiences o f the w o r l d e c o n o m i c crisis other political currents in Slovakia t u r n e d their attention to the e c o n o m i c d i m e n s i o n of the Slovak question. For e x a m p l e , ideas o f the n e w Slovak g e n e r a t i o n w i t h i n the g o v e r n i n g A g r a r i a n Party gave rise to the m o v e m e n t o f 'regionalism'. W h i l e a u t o n o m y w a s not d e m a n d e d , such visions p o i n t e d in that direction. In the m i d - i 9 3 0 s , w h e n the existence o f the C z e c h o s l o v a k R e p u b l i c c a m e u n d e r threat, the centre o f the g o v e r n m e n t ' s industrial-strategic plans shifted to Slovakia w h e r e a n u m b e r o f a r m a m e n t a n d e n g i n e e r i n g works w e r e f o u n d e d a n d w o r k o n t a m i n g the rapids o f the R i v e r V a h for electric p o w e r w a s b e g u n . T h e r e w a s talk a b o u t the reindustrialisation of Slovakia. H o w e v e r , the failure to solve the national-political question u n d e r m i n e d the stability o f the state and w e a k e n e d its internal and external security. B u t also the a u t o n o m y o f Slovakia (proclaimed o n 6 O c t o b e r 1 9 3 8 ) , d u r i n g the short p e r i o d o f C z e c h o - S l o v a k i a , the socalled S e c o n d R e p u b l i c , w a s u n a b l e to solve the country's e c o n o m i c problems. T h e question ' w h o is p a y i n g for w h o m ' d o g g e d all e c o n o m ically m o t i v a t e d conflicts b e t w e e n P r a g u e and Bratislava. T h e S e c o n d R e p u b l i c ceased to exist w h e n Slovakia, w i t h the support of G e r m a n y , seceded a n d d e c l a r e d its state i n d e p e n d e n c e o n 1 4 M a r c h 1 9 3 9 a n d the G e r m a n a r m y o c c u p i e d B o h e m i a a n d M o r a v i a o n 15 M a r c h i 9 3 9 . T h e disintegration o f the S e c o n d C z e c h o s l o v a k R e p u b l i c created dissimilar e c o n o m i c conditions in the G e r m a n - i n s t i t u t e d Protectorate o f B o h e m i a a n d M o r a v i a a n d in the Slovak state. W h i l s t the f o r m e r b e c a m e part o f the G e r m a n T h i r d R e i c h a n d w a s brutally plundered, the latter, due to its formally i n d e p e n d e n t status, w a s m o r e slowly sucked into the system o f the G e r m a n w a r economy. F o l l o w i n g the 13

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establishment o f Slovakia as a vassal state of G e r m a n y , Czech—Slovak relations were not furthered b y the purges o f C z e c h civil servants a n d employees in all walks o f Slovakia's life, including the economy. A l l C z e c h s w e r e forced to leave the territory o f Slovakia w i t h o u t r e g a r d for the significance o f the positions they held, or for the length o f their services to the country, or for interventions on their b e h a l f at the highest places. A particular feature w a s the d e m a n d o f Slovak entrepreneurs for the so-called nationalisation o f capital, that is the transfer o f C z e c h p r o p erty into the h a n d s o f Slovak nationals. In general, Slovakia benefited from the relatively high degree o f militarisation o f its industry, w h i c h , in fact, w a s inherited from the last years o f the C z e c h o s l o v a k R e p u b l i c . For instance, at the height of the b o o m 1 5 , 0 0 0 p e o p l e w e r e e m p l o y e d at the a r m a m e n t works in D u b n i c a . T h e demise o f C z e c h competition c o u p l e d w i t h the favourable conditions o f b o o m i n g w a r production e n g e n d e r e d e c o n o m i c g r o w t h . If the e c o n o m i c gains from 'aryanisation' are a d d e d , the result is a picture o f a G e r m a n satellite enjoying social security and a sound living standard within a E u r o p e suffering from war. T h i s g r e e n h o u s e d y n a m i s m o f a w a r b o o m m a k e s u p the b a c k g r o u n d to the m y t h o f the ' e c o n o m i c m i r a c l e ' a n d prosperity o f the Slovak state, w h i c h did not last long, as the horrors o f w a r also r e a c h e d its territory. A s p o p u l a r dissatisfaction w i t h G e r m a n d o m i n a t i o n o f the Slovak state grew, the Slovak resistance m o v e m e n t d e v e l o p e d a n d r e a c h e d its culmination in the Slovak N a t i o n a l U p r i s i n g in A u g u s t 1 9 4 4 . Its a i m w a s the r e n e w a l of the C z e c h o - S l o v a k state in w h i c h Slovaks w o u l d have c o m p l e t e equality w i t h C z e c h s . T h e restoration o f the C z e c h o s l o v a k R e p u b l i c b r o u g h t a b o u t the recognition o f the Slovaks as an i n d e p e n d e n t nation a n d the declaration of equality w i t h the C z e c h nation, a n c h o r e d in the K o s i c e P r o g r a m m e of the C z e c h o s l o v a k g o v e r n m e n t o f 5 A p r i l 1 9 4 5 . It w a s b a s e d on the experiences o f M u n i c h a n d on the recognition o f Slovak resistance d u r i n g the S e c o n d W o r l d War. Slovak national organs w e r e constituted, w h i c h , however, h a d n o counterpart on the C z e c h side. O n the one h a n d , this asymmetric m o d e l expressed the reality o f Slovak e m a n c i pation and, on the other h a n d , C z e c h society, in the absence o f feelings of national discrimination, identified itself w i t h the w h o l e of Czechoslovakia. F r o m the point o f v i e w o f the interplay o f political (national) a n d e c o n o m i c forces the n e w situation created a n u m b e r o f controversial issues. In v i e w of the m o r e satisfying e c o n o m i c conditions as well as the better

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situation in the supply o f provisions in the Slovak state in c o m p a r i s o n w i t h the Protectorate o f B o h e m i a a n d M o r a v i a , the Slovak p o p u l a t i o n r e g a r d e d the p o s t w a r state and the introduction o f food rationing as a deterioration o f their standard o f living. A further serious irritation w a s felt by the unification o f the c u r r e n c y at an e x c h a n g e rate b e t w e e n the Slovak a n d the Protectorate c r o w n t h o u g h t to be unfavourable to Slovakia. T h e resolution o f the Slovak N a t i o n a l C o u n c i l of 2 M a r c h 1 9 4 5 c o n f i r m e d the e c o n o m i c , customs a n d c u r r e n c y i n d e p e n d e n c e o f Slovakia for a transitional period. A t that time the C o m m i s s i o n e r of F i n a n c e , T o m a s T v a r o z e k , o p e n l y stated that 'from the point o f v i e w of Slovak finances one of the most acute a n d important p r o b l e m s is the decision a b o u t the e x c h a n g e v a l u e o f the Slovak c r o w n . . . and its e q u a l ­ isation w i t h the C z e c h Protectorate c r o w n ' . Unification o f the cur­ r e n c y w a s c o m p l i c a t e d for several reasons: different m o v e m e n t s o f prices a n d w a g e s in Slovakia a n d in the C z e c h L a n d s , different inflationary developments, differences in p u r c h a s i n g p o w e r a n d in levels o f indebt­ edness to G e r m a n y and, last but not least, a different situation b e c a u s e the front line h a d passed t h r o u g h Slovakia. T h e M i n i s t r y o f F i n a n c e a n d the C z e c h o s l o v a k N a t i o n a l B a n k formulated a secret d o c u m e n t on the Principles of Currency Reform and Financial Policy, dated 2 3 A u g u s t 1 9 4 5 , w h i c h states that: 1 4

it is extremely important not to create the impression that one part of the state gained more than the other during unification of the currency, especially . . . dangerous would be a situation in which the Slovak part of the republic would, one way or another, be damaged. Therefore, equalisation should be performed in such a way that Slovakia would not be made to carry a burden which to a greater part was created in the Czech Lands rather than in Slovakia. 15

In spite o f these w o r d s on the e c o n o m i c , social a n d political a p p r o a c h to the c u r r e n c y reform, a course w a s chosen that w a s to pacify the C z e c h c a m p a i g n c l a i m i n g that C z e c h s 'were w o r s e off b y h a v i n g to p a y for Slovakia' rather t h a n trying not to hurt Slovak feelings of injustice. In the end, the c u r r e n c y r e f o r m w a s introduced by decree o f the President of the C z e c h o s l o v a k R e p u b l i c on 1 9 O c t o b e r 1 9 4 5 , w h i c h received, especially in circles o f experts, an adverse reception in Slovakia. T h e e x c h a n g e rate o f the Slovak to the Protectorate c r o w n w a s fixed at 1:1, w h i c h did n o t c o r r e s p o n d to its real v a l u e a n d did lifelong d a m a g e to the holders o f Slovak currency. D i s a d v a n t a g e d Slovakia w a s to be c o m p e n ­ sated by the introduction o f a p r o g r a m m e o f industrialisation to w h i c h all political parties in Slovakia a g r e e d , h o w e v e r m u c h their opinions 16

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differed a b o u t the role o f the state a n d the private sector. A t the same time, a g r e e m e n t w a s r e a c h e d a b o u t the rejection o f liberalism and the inevitability o f state intervention in the economy. T h e idea that e c o n o m i c solutions w o u l d also resolve political a n d national i m b a l a n c e s characterised the postwar opinions o f President E d v a r d B e n e s w h o , w h e n receiving representatives o f the C z e c h o s l o v a k Society on 22 M a r c h 1 9 4 6 , p r o n o u n c e d : 'It is important to realise . . . that the difference in e c o n o m i c levels in Slovakia a n d in the C z e c h L a n d s is the substance o f all difficulties b e t w e e n C z e c h s and S l o v a k s . ' W i t h regards to the m a i n aims o f the re-established C z e c h o s l o v a k state's e c o n o m i c policy, the laws on nationalisation o f O c t o b e r 1 9 4 5 a n d the confiscation o f property o f enemies a n d collaborators h a d a b i g g e r i m p a c t on the industrially m o r e d e v e l o p e d C z e c h L a n d s t h a n in Slovakia. In the course o f the land reform, especially during its second stage, w h i c h b e g a n in 1 9 4 7 , regional specificities a n d traditions in Slovakia w e r e largely disregarded. H o w e v e r , in c o m p a r i s o n w i t h the d e v e l o p m e n t after 1 9 1 8 it w a s generally a c c e p t e d that c h a n g e s in the e c o n o m y and in the social structure o f Slovakia h a d to take place. D u r i n g the industrialisation p r o g r a m m e o f the first postwar years industrial enterprises o f the C z e c h b o r d e r regions w e r e transferred to Slovakia (337 enterprises capable o f e m p l o y i n g 2 4 , 0 0 0 workers). A t the end o f 1 9 4 8 , these h a d a b s o r b e d 13 per cent o f the total e m p l o y e d in Slovakia's industry. O n the C z e c h side this p r o g r a m m e w a s not a c c e p t e d w i t h o u t reservations. W h i l e the C z e c h N a t i o n a l Social Party did not agree w i t h the w e a k e n i n g o f C z e c h industrial capacity, it a d v o c a t e d the increase in the flow o f workers from Slovakia to B o h e m i a a n d M o r a v i a . O n the Slovak side the Slovak D e m o c r a t i c Party d e m a n d e d the transfer of production capacities to Slovakia w h e r e the required workforce w a s available. It is obvious that in this political a r g u m e n t e c o n o m i c efficiency played only a subordinate r o l e . After the C o m m u n i s t s c a m e to p o w e r in F e b r u a r y 1 9 4 8 , the policy o f the centralistic-authoritarian regime w i t h regards to the Slovak questions concentrated solely on eliminating Slovakia's e c o n o m i c b a c k w a r d ness. T h e m a i n , indeed key, design o f a c h i e v i n g e c o n o m i c , social a n d civil equalisation o f Slovakia w i t h the C z e c h L a n d s consisted o f the socalled socialist industrialisation — that is, the p r o g r a m m e o f industrial­ isation in Slovakia significantly affected the process o f national e m a n c i p a t i o n o f Slovak d e v e l o p m e n t . T h e then C z e c h as well as Slovak C o m m u n i s t leadership r e d u c e d the Slovak question exclusively to its e c o n o m i c dimension. It acted u n d e r the illusion that industrialisation o f 17

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Slovakia w o u l d b r i n g a b o u t C z e c h - S l o v a k consensus a n d u n d e r s t a n d i n g at the same time as the a s y m m e t r i c constitutional m o d e l c o u l d be m a i n ­ tained. In reality industrialisation h a d the opposite effect — it contributed to the g r o w t h o f dissatisfaction w i t h the rigid centralism o f P r a g u e a n d the w e a k c o m p e t e n c e o f Slovak authorities. A l l the m o r e so, as the d e c i s i o n - m a k i n g p o w e r of Slovak authorities w a s b e i n g l o w e r e d y e a r by y e a r in r o u g h p r o p o r t i o n to the rise o f Slovakia's e c o n o m i c potential. D u r i n g the 1950s, disparate opinions a b o u t the course o f industrialisation a n d critical voices addressed to P r a g u e w i t h i n the f r a m e w o r k o f the C o m m u n i s t Party w e r e j u d g e d to be indications o f Slovak nationalism a n d ' e c o n o m i c separatism'. Industrialisation w a s considered to be the lawlike transition p e r i o d from capitalism to socialism — later to be r e p l a c e d b y the slogan 'the m o r e industrialisation, the m o r e socialism' — and, b a s e d o n the same a x i o m a t i c a p p r o a c h , preference w a s given to the buildings o f h e a v y industry. Paradoxically, the positive emphasis o n the n e e d to raise the e c o n o m i c level o f Slovakia to that o f the C z e c h L a n d s w a s a c c o m p a n i e d by the virtual liquidation o f the executive and limitation o f the legislative within Slovak political organs. In reality the Slovak question w a s r e d u c e d m e r e l y to industrialisation, that is to a n e c o n o m i c equalisation. T h e r e f o r e , a p o l i c y that c o u l d be defined as v u l g a r e c o n o m i s m w a s u n a b l e to s u c c e e d . In spite o f the p r o b l e m s discussed a b o v e , industrialisation p r o v i d e d the e c o n o m i c basis for the solution o f the national question. Slovakia c h a n g e d from an a g r a r i a n to an industrial-agrarian country. Industrial e m p l o y m e n t e x c e e d e d a g r a r i a n e m p l o y m e n t b y the m i d - i 9 6 o s a n d Slovakia's share o f the national i n c o m e steadily increased. 19

T h e A c t i o n P r o g r a m m e o f the C o m m u n i s t Party o f C z e c h o s l o v a k i a of A p r i l 1 9 6 8 formulated the m a i n aims o f e c o n o m i c a n d social p o l i c y of the state. T h e part c o n c e r n i n g the e c o n o m y c o n t a i n e d a n e w system o f steering a n d control. F r o m the point of v i e w o f Czech—Slovak relations the A c t i o n P r o g r a m m e c o n t a i n e d two c o n t r a d i c t o r y formulations, w h i c h triggered a p o l e m i c a l discussion b e t w e e n C z e c h a n d Slovak economists. O n the one h a n d a unified C z e c h o s l o v a k e c o n o m y w a s talked about; o n the other h a n d the e c o n o m y o f the state w a s seen as the integration o f t w o national e c o n o m i e s . W h i l e the A c t i o n P r o g r a m m e d e m a n d e d the b r o a d e n i n g o f c o m p e t e n c e s o f Slovak national organs, n o m e n t i o n w a s m a d e a b o u t setting u p similar specific C z e c h national bodies. In the e c o n o m i c sphere the task o f Slovak organs w a s to w o r k out a n d sanction a national e c o n o m i c plan, i n c l u d i n g a b u d g e t for Slovakia. T h e process o f e c o n o m i c equalisation o f Slovakia w i t h the

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C z e c h L a n d s w a s to be c o m p l e t e d b y 1 9 8 0 . In practice, this w o u l d have m e a n t s p e e d i n g u p the course o f industrialisation, the intensification o f agricultural p r o d u c t i o n , the e x p a n s i o n of tourism a n d the support o f e c o n o m i c a l l y b a c k w a r d regions. D u r i n g the r e f o r m days o f 1 9 6 8 , the g o v e r n m e n t o f the C z e c h o s l o v a k Socialist R e p u b l i c presented its p r o g r a m m e , together w i t h a critical analysis o f former policies, to the N a t i o n a l A s s e m b l y o n 2 4 A p r i l 1 9 6 8 . In the critique o f the state o f the e c o n o m y the following areas w e r e m e n ­ tioned: overemphasis o n h e a v y industry; pursuit o f autarkic policies; o v e r e x t e n d e d d e m a n d on materials a n d energy, investments a n d imports; restrictions o n c o n s u m p t i o n ; lack of integration into the international division o f labour; underestimation o f technical progress a n d a n u n c o n s i d e r e d a p p r o a c h to e c o n o m i c r e f o r m . T h e invasion o f troops o f the W a r s a w P a c t countries t e r m i n a t e d any efforts at reform. T h e Constitution o f the C z e c h o s l o v a k Federation o f 27 O c t o b e r 1 9 6 8 r e m a i n e d an e m p t y frame w i t h o u t a picture with regards to relations b e t w e e n the t w o nations, particularly b e c a u s e o f the suppression o f civil rights a n d the restriction o f civic freedom, g a p s in legislation a n d the problematic division o f p o w e r s b e t w e e n the national a n d federal organs. In e c o n o m i c affairs the federal g o v e r n m e n t , in c h a r g e o f the central p l a n n i n g authority, w a s substantially strengthened to the detriment o f the national g o v e r n m e n t s , a n d the d e c l a r e d integrity of the state often g e n e r a t e d conflicts with Slovakia. A l t h o u g h differences in the level o f the e c o n o m i e s still persisted, o n the basis o f overall indices the process o f e c o n o m i c , social and cultural equalisation b e t w e e n Slovakia a n d the C z e c h L a n d s w a s officially declared c o m p l e t e d in the mid-i98os. After the fall of c o m m u n i s m in 1 9 8 9 , the e c o n o m i c experiences o f the past four d e c a d e s b e c a m e part o f the g e n e r a l C z e c h - S l o v a k discussions a n d polemics. T h e y w e r e c o n d u c t e d in the strained political a t m o s p h e r e that a c c o m p a n i e d the conversion o f the a r m a m e n t industry b e g u n in i 9 9 i and w h i c h , in the course o f t w o years, r e d u c e d the p r o d u c t i o n of military e q u i p m e n t b y 9 0 per cent. T h e share of the output of the Slovak a r m a m e n t industry a m o u n t e d to 6 4 per cent o f total a r m a m e n t p r o d u c tion o f the federative state o f C z e c h s a n d Slovaks. T h u s the socioe c o n o m i c effects o f the conversion r e a c h e d catastrophic dimensions in Slovakia. T h e industrialisation o f Slovakia arose from the principle o f develo p i n g a unified C z e c h o s l o v a k e c o n o m y — that is, instead o f duplication there should have b e e n m u t u a l c o m p l e m e n t a r i t y o f the C z e c h L a n d s 20

292

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a n d Slovakia. After the division o f the federative state in 1 9 9 2 / 3 into t w o separate republics (the C z e c h R e p u b l i c a n d Slovakia) m a n y problems e m e r g e d — m o r e so o n the Slovak than o n the C z e c h side, w h i c h n o b o d y h a d envisaged a n d h a d never contemplated. A g a i n the question arose ' w h o has paid for w h o m ? ' , indeed ' w h o has r o b b e d w h o m ? ' I n this atmosphere negotiations took place a b o u t the n e w regulation o f relations b e t w e e n the t w o republics, w h i c h , after the elections o f 1 9 9 2 , against the will o f the majority o f the population in b o t h republics, led to the division o f the state. Historical reality shows that, o n the one h a n d , Slovakia's share in total state investments w a s higher than its share in the generation o f the total c o m m o n national i n c o m e while, o n the other h a n d , the c o m p l e m e n t a r i t y o f mutual e c o n o m i c relations strengthened b o t h partners. T h e c o m m o n state fell apart at a time w h e n all, including e c o n o m i c , differences in b o t h republics w e r e less than at a n y time during the c o m m o n existence o f the state. T h u s the break u p o f the unified e c o n o m i c system o f the former C z e c h o s l o v a k i a d a m a g e d b o t h e c o n o m i e s but, with regards to its structure, m o r e serious d a m a g e w a s inflicted u p o n Slovakia. Negotiations a b o u t the division o f the c o m m o n w e a l t h led to insurmountable differences b e t w e e n the t w o n e w states. A s for Slovakia, the e c o n o m i c a n d geopolitical aspects of the Slovak nationalpolitical d e v e l o p m e n t w e r e pushed into the b a c k g r o u n d as preference w a s given to selfish interests o f the political elite h i d i n g b e h i n d the cover of the process o f national e m a nc ipa tion.

NOTES 1 Activities in the field of industrial entrepreneurship were confronted with

non-economic, distinctly political measures. See R. Holec, 'Zapas o martinsku celulozku ako najvacti projekt cesko-slovenskej hospodarskej spoluprace pred I. svetovou vojnou [Struggle for the pulp mill of Martin as the largest project of Czech—Slovak economic collaboration before the First World War], Historicke stuiie 35 (1994), 48—72; R. Holec, 'Medzi slovanskou vzajomnostou a podnikatelskou aktivitou. Prazska banka Slavia v Uhorsku v druhej polovici 19. storocia' [Between Slavic mutuality and business activ­ ity. The Prague bank Slavia in Hungary in the second half of the nineteenth century], Hospoidfske iejiny - Economic History 21 (1995), 145—72. 2 J. Markovic, 'Vyvin slovenskeho penaznictva zo stanoviska cesko-slovenskej jednoty' [Development of Slovak finance in the light of Czech—Slovak unity], Slovensky pehafnik4(3), 20 March 1912. 3 'Anketa o cteskoslovenskej vzajemnosti' [Investigation concerning Czech— Slovak mutuality], Pruiy 5(9—io),July—August 1914 (May 1919), 456—565.

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2

9

3

4 P Blaho to F. Houdek, 7 May 1911, Slovensky narodny archiv (SNA) Bratislava, fond F. Houdek, box 2,inv. 10. 5 'Ceskoslovenska vzajomnost a peiiaznictvo' [Czechoslovak mutuality and finance], Slovensky dennik 2 (88), 11 May 1911. 6 V. Lacina, Formovdni eeskoslovenske ekonomiky 1918—1923 [The forming of the Czechoslovak economy], (Prague, 1990), pp. 5 9 - 6 4 . 7 TomasTvarozek, probably to Anton Stefanek, 15 November 1917. Archiv literatury a umenia Matice slovenskej Martin, sign. 42 Z 38;Clanky a rozpomienky [Articles and reminiscences]. SNA, fond J. Cablk, box io,inv. 798.

8 SNA, fond M. Dula, box io, IV s/i,inv. 211. 9 See L. Hallon, Industrializdcia Slovenska 1918—1938. Rozvoj alebo upadok? [The industrialisation of Slovakia. Growth or decline?], (Bratislava, i 995). i 0 See V Lacina and L. Slezak, Stdtni hospoddfskdpolitika v ekonomickem vyvojiprvni GSR [Policy of the state in the economic development of the First Czechoslovak Republic], (Prague, i 994). i i 'Autonomia' (Autonomy), Slovdk, 7(i 7 3 - 4 ) , 4 - 5 August i 925. 2 Spolky (Associations), SNA, fond J. Cablk, box 0,inv.796. i 3 D. Jancik, 'S Prahou ci proti Praze: l'udacka politika na rozcesti' [With Prague or against Prague: People's Party policy at the crossroad] in J. Dejmek and J. Hanzal (eds.), (Ceske zemea Ceskoslovensko v Evrope XIX. a XX. stoleti [The Czech Lands and Czechoslovakia in nineteenth- and twentiethcentury Europe], (Prague, i 997), pp. 2 4 9 - 7 6 at pp. 261 - 2 . i 4 Report of the Commission for Finance about the financial situation, 2 March 945, SNA, fond V. S robar, box 2,inv.76. i 5 Zdsady menove rformy afinancnipolitika [Principles of the currency reform and financial policy] formulated by the Ministry of Finance and Czechoslovak National Bank: SNA, fond V Srobar, box i 2,inv. 76. i 6 See S. Horvath and J. Valach, PeCaznictvo na Slovensku 1945—1950 [Finance in Slovakia 9 4 5 - 950], (Bratislava, 984), pp. 4 3 - 03. 7 Report on the reception of the Czechoslovak Society by President Benesson 22 March i 946. SNA, fond V Srobar, box i 2,inv. 81 . i 8 M. Barnovsky, 'Problematika industrializacie Slovenska v rokoch 9 4 5 - 950' [Problems of industrialisation of Slovakia during the years i 9 4 5 - 1 950], Historicky easopis i 6 (i 968), i 6 9 - 9 1 ; M. Barnovsky, 'Premiestovanie priemyslu z ceskeho pohranicia na Slovensko v rokoch 9 4 5 - 948' [The transfer of industry from the Czech border areas to Slovakia during the years i 9 4 5 - 1 948], Hospoddfske dejiny — Economic History 6 (i 980), i 01 - 4 5 ; A. Balek, 'Specificke rysy a vzajemne vztahy ceske a slovenske ekonomiky v letech i 9 4 5 - 1 948' [Specific features and mutual relations of the Czech and Slovak economy during i 9 4 5 - 1 948] in Hospoddrsky a socidlni vyvoj Ceskoslovenska (1945—1992) [Economic and social development of Czechoslovakia (i 9 4 5 - 1 948)] in Acta Oeconomica Pragensia 3 (i 996), i 5 - 3 5 ; M . Londak, 'K problematike industrializacie Slovenska v obdobi priprav planov na 2. patrocnicu' [Problems of industrialisation of Slovakia during s

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the preparations of the second five-year plan], Historicky casopis, 46 (1998), 64-78.

19 M. Barnovsky, 'Determinanty a problemy industrializacie Slovenska' [Determinants and problems of industrialisation of Slovakia], Ceskoslovenskd historickd rocenka, 3 (1998), 1 4 9 - 5 9 ; M. Barnovsky, 'Ekonomicka politika KSC a hospodarsky rozvoj Slovenska v prvej polovici sestdesiatych rokov' [Economic policy of the Communist Party of Czechoslovakia and the economic development of Slovakia in the first half of the 1960s] in A. Gabal (ed.), Rozvijanie socializmu na Slovensku v prvej polovici sestdesiatych rokov [The development of socialism in Slovakia in the first half of the 1960s], (Bratislava, 1979), pp. 1 3 - 6 9 at p. 3 6 . 20 V. PrUcha, 'Hospodarska politika a vyvoj ceskoslovenskeho hospodirstvi v obdobi od roku 1960 do 21. srpna 1968' [Economic policy and the develop­ ment of the Czechoslovak economy from 1960 to 21 August 1968] in Hospoddfsky a socidlni vyvoj Ceskoslovenska (1945-1992) [Economic and social development of Czechoslovakia (1945-1992)] in Acta Oeconomica Pragensia 3 1

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F I F T E E N

Economic change and national minorities: Hungary in the twentieth century Agnes Pogdny

In a recent article, H e i n r i c h A u g u s t W i n k l e r pointed out a g e n e r a l char­ acteristic o f research on nationalism: ' U n t i l recently the history o f nationalism . . . has m a i n l y b e e n treated as the history o f its thinkers, w i t h the focus on ideas a n d not on interests. T h e research m e t h o d s have b e e n those o f the intellectual historian a n d not o f the social historian. T h e y tend to be p h e n o m e n a l i s t rather t h a n a n a l y t i c a l . ' T h i s statement could be c o m p l e m e n t e d b y another, n a m e l y that the aspects o f e c o n o m i c history have also hardly b e e n taken into a c c o u n t w h e n studying not only the questions o f nationalism but the p r o b l e m s o f ethnic m i n o r ­ ities a n d national identity. A l t h o u g h these are c o m p l e x p h e n o m e n a a n d it w o u l d be an oversimplification to explain t h e m in purely e c o n o m i c terms, they are strongly intertwined with e c o n o m i c matters. In the case o f H u n g a r y , the c o n n e c t i o n b e t w e e n e c o n o m i c transformation a n d national assimilation has b e e n evaluated in v e r y different w a y s . O n the one h a n d some authors state that m o d e r n i s a t i o n leads to the assimilation o f e t h n i c m i n o r i t i e s : 'it is undeniable that a natural assimilation w a s taking place, especially in the fast d e v e l o p i n g towns and industrial centres. T h e natural assimilation w e n t on understandably as a result o f m o d e r n i z a t i o n and industrialization. T h e r e f o r e this affected those nations w i t h a m o r e m o d e r n social structure, w h e r e a s those w i t h a m o r e archaic structure resisted m o r e effectively.' In the opinion o f others, however, e c o n o m i c d e v e l o p m e n t results in the a w a k e n i n g o f the national feelings b y the creation o f a national m i d d l e class: 'As a c o n s e q u e n c e o f capitalist m o d e r n i z a t i o n a n d o f unfettered d e v e l o p m e n t of b o u r g e o i s conditions o f l a b o u r a n d life the national efforts o f n o n - H u n g a r i a n nations also g a t h e r e d m o m e n t u m in the second h a l f o f the 19th century.' T h e m a i n focus o f this chapter is h o w e c o n o m i c factors influenced national minorities in twentieth-century Hungary. 1

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ECONOMIC TRANSFORMATION AND ETHNIC MINORITIES

H u n g a r y has b e e n a multiethnic society since the M i d d l e A g e s . Slavic p e o p l e lived in the C a r p a t h i a n basin as early as the ninth century. S a x o n i m m i g r a n t s w e r e d r a w n by the regional d e v e l o p m e n t o f the m i n i n g industry in U p p e r H u n g a r y a n d T r a n s y l v a n i a from the twelfth century onwards. In the sixteenth century Serbs c a m e from the Balkans seeking refuge from the O t t o m a n conquest. D u r i n g the Turkish o c c u p a t i o n of H u n g a r y , p o p u l a t i o n n u m b e r s declined dramatically. In the seventeenth a n d eighteenth century, after the expulsion o f the Turks, peasants from other parts o f the H a b s b u r g M o n a r c h y (mainly S w a b i a n s , F r a n c o n i a n s a n d Slovaks) settled the a b a n d o n e d regions to cultivate the d e p o p u l a t e d land. T h e y w e r e even g r a n t e d certain privileges in order to m a k e the h a r d task o f m o v i n g to an u n i n h a b i t e d territory m o r e attractive. In the nineteenth century ethnic H u n g a r i a n s m a d e up less t h a n 5 0 per cent of the population. R o m a n i a n s , Slovaks, G e r m a n s , Serbs, C r o a t s a n d R u t h e n e s w e r e the most important ethnic groups living on the territory of H u n g a r y . In the A u s t r o - H u n g a r i a n M o n a r c h y the national question w a s strongly intertwined w i t h the disparities in regional d e v e l o p m e n t . Before 1 8 0 0 m o d e r n e c o n o m i c g r o w t h took place m a i n l y in the western a n d central parts o f H u n g a r y , w h i c h w e r e p o p u l a t e d mostly b y M a g y a r s . T h e r e w e r e only some regions w i t h a m i x e d p o p u l a t i o n that w e r e able to take part in the rapid industrialisation process; the g r a i n - p r o d u c i n g southern plain (Bacska, Banat), the m i n i n g districts o f central U p p e r H u n g a r y ( G o m o r / G e m e r s k a Zupa, Z o l y o m / Z v o l e n , S z e p e s / S p i s s k a z u p a ) a n d certain parts o f T r a n s y l v a n i a . In that p e r i o d the regional e c o n o m i c d i s p a r i t i e s w i d e n e d . Increasing regional differences in per capita i n c o m e manifested themselves also in the u n e v e n e c o n o m i c d e v e l o p m e n t of the various national groups. E t h n i c m i n o r i t i e s that lived on the northern, eastern a n d southern perimeters o f the c o u n t r y r e m a i n e d in their traditional w a y s o f life a n d s h o w e d a p o o r standard o f living. Relative o v e r p o p u l a t i o n a n d poverty led to mass-emigration m o v e m e n t s towards the rapidly d e v e l o p i n g parts o f H u n g a r y and towards overseas c o u n tries. A l t h o u g h the unevenness o f g r o w t h w a s n o t i n d u c e d b y a definite discrimination policy on the part o f the H u n g a r i a n g o v e r n m e n t , it c o n tained elements o f social tension. W h i l e in territories w i t h d y n a m i c g r o w t h , H u n g a r i a n - s p e a k e r s m a d e u p t w o thirds o f the population, the proportion o f Slovaks, R o m a n i a n s a n d the R u t h e n e s living in the stagn a t i n g parts o f the c o u n t r y e x c e e d e d 7 5 per c e n t . Industrialisation in the 4

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central a n d western parts o f the country, especially in B u d a p e s t , i n d u c e d strong personal a n d generational mobility a m o n g the e t h n i c m i n o r i t i e s a n d strengthened the process o f assimilation. In the years after 1 8 9 0 , m o d e r n e c o n o m i c g r o w t h also r e a c h e d those territories w h e r e the majority o f the population consisted of national minorities. A r e a s w h e r e e c o n o m i c a n d social conditions were b a c k w a r d b e g a n to be transformed. E c o n o m i c a n d i n c o m e inequalities w e r e r e d u c e d , a l t h o u g h they did not disappear. Before the outbreak of the First W o r l d W a r the level o f e c o n o m i c d e v e l o p m e n t o f the b o r d e r regions w a s well above those o f the country's eastern and B a l k a n neigh­ bours. E c o n o m i c integration in the A u s t r o - H u n g a r i a n M o n a r c h y contributed towards o v e r c o m i n g the unevenness o f e c o n o m i c d e v e l o p m e n t . T h e g r o w t h rates o f the less-developed eastern a n d southern parts of H u n g a r y w e r e well above those o f the industrialised parts o f Austria, B o h e m i a or M o r a v i a . In spite o f these processes, the o c c u p a t i o n a l structure a n d the rate o f literacy o f the different ethnic minorities s h o w e d significant differences in 1 9 1 0 . G e r m a n s h a d a m o r e m o d e r n structure, the proportion o f those e m p l o y e d in industry and services w a s m u c h higher than in the case o f the other ethnic groups, including the M a g y a r s . Ruthenes, R o m a n i a n s and Serbs h a d a m o r e traditional structure. A m o n g these latter nationalities, the proportion o f those e n g a g e d in agriculture r e m a i n e d above 7 0 per cent. In the case o f the R u t h e n e a n d Slovak populations, the share o f white-collar workers c o u l d be c o n sidered astonishingly l o w (see table 15.1). B e t w e e n 1 8 9 0 a n d 1 9 1 4 the network o f railways and roads spread into territories inhabited by ethnic minorities. T h e n u m b e r o f factories a n d credit institutes tripled or q u a d r u p l e d . Significant industrialisation took place in West T r a n s d a n u b i a , w h e r e G e r m a n s a n d C r o a t s lived in great number, a n d in regions inhabited b y Slovaks (Kisalfbld, the n o r t h a n d central part o f U p p e r H u n g a r y ) . In these regions, traditional h e a v y industry w a s c o m p l e m e n t e d by textile, leather, c h e m i c a l , glass a n d p a p e r industries. N e w industrial plants e m e r g e d in Petrozseny (Petroseni) a n d V a j d a h u n y a d (Hunedoara), w h e r e c o a l - m i n i n g a n d h e a v y industrial firms w e r e founded. F o o d processing a n d e n g i n e e r i n g enterprises w e r e established in southern H u n g a r y as w e l l . A t the turn o f the twentieth century, 21 per cent o f the H u n g a r i a n industrial plants e m p l o y i n g m o r e than twenty workers w e r e to be found in the n o r t h e r n parts o f the c o u n t r y inhabited by Slovaks. T h e proportion o f factories e m p l o y i n g 5 0 to 1,000 workers w a s 2 6 . 1 per cent in the same territory. O n l y 16 per cent of the M a g y a r population lived t h e r e . 8

9

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POGANY

T a b l e 1 5 . 1 . The occupational structure and the rate of literacy of various Hungarian nations in igio Occupational structure (%)

Nations

Agriculture

Slovaks Serbs Croats Romanians Ruthenes Germans Hungarians

Rate of literacy (%)

Industry and Professionals commerce and civil service

M e n above Women 6 years above 6 years

70.8

20.1

1.0

75.6

76.8

147

2.5

57.8

38.I

1.2

64.2

48.4

14

4

69.7 86.3 89.2

2

1

.

5

7.9 4.8

64.4

I4

24.7

0.5

32.5

23.6

4

9

.

7

37.2

2.7

86.0

78.7

5

5

.

0

30.6

4.8

82.8

75.5

Source: Laslo Katus, 'A nemzetisegi kerdes es Horvatorszag tortenete a 20. szazad elejen' [National question and the history of Croatia at the beginning of the twentieth century] in P. Hanak (ed.), Magyarorszdg tortenete, i8go—igi8 [The history of Hungary, 1 8 9 0 - 1 9 1 8 ] , (Budapest, 1978), vol. V I I , p. 1 0 1 0 .

T h e Industry D e v e l o p m e n t L a w s of 1 8 8 1 , 1 8 9 0 , 1 8 9 9 a n d 1 9 0 7 g r a n t e d state subsidies, tax e x e m p t i o n or r a i l w a y freight rate allowances to n e w l y founded industrial plants. C o m p a r i n g the regional distribution of per capita industrial d e v e l o p m e n t subsidies, the majority o f the state subsidies w e r e p a i d to the industrial c o m p a n i e s in west H u n g a r y , U p p e r H u n g a r y a n d the district a r o u n d Brasso (Brasov). A l t h o u g h these terri­ tories w e r e inhabited mostly by G e r m a n s , Slovaks a n d R o m a n i a n s , the n e w enterprises w e r e founded m a i n l y by Austrian, H u n g a r i a n or foreign capital. M a n y C z e c h entrepreneurs established firms in U p p e r H u n g a r y in order to get state subsidies or tax e x e m p t i o n . Entrepreneurs o f the ethnic minorities only h a d access to smaller a m o u n t s o f capital a n d founded m a i n l y smaller or m e d i u m - s i z e d firms. S t r o n g competition h i n d e r e d the substantial increase o f their industrial u n d e r t a k i n g s . A c c o r d i n g to Imre Polanyi, in 1 9 0 5 there w e r e only seven industrial plants e m p l o y i n g m o r e than t w e n t y workers u n d e r Slovak o w n e r s h i p . A t the same time, local m o n e y markets offered some c h a n c e for success. Banks, saving banks, credit co-operatives a n d e c o n o m i c associations w e r e founded. F r o m the 1 8 8 0 s the n u m b e r o f credit institutes founded by the nationalities b e g a n to increase. In 1 8 9 0 , 6 2 Slovak, S a x o n , S e r b a n d R o m a n i a n banks existed; they n u m b e r e d 2 8 5 in 1 9 1 2 . T h e i r share capital g r e w ten times d u r i n g this period. 11

12

13

1 4

The economy and the national question in Hungary

299

A l t h o u g h most o f these banks w e r e only smaller institutes, some o f t h e m g r e w rather significant, for e x a m p l e the R o m a n i a n A l b i n a at N a g y s z e b e n (Sibiu), V i c t o r i a at A r a d (Oradea), or the Slovak T a t r a B a n k in T u r o c s z e n t m a r t o n (Martin) and the C r e d i t B a n k in R o z s a h e g y (Ruzomberok). T h e m a i n activity o f these banks consisted o f g r a n t i n g m o r t g a g e s a n d loans to smallholders a n d artisans. T h e y also collected a n d transferred the m o n e y sent b y emigrants living in the U n i t e d States to their relatives. Well-to-do Slovak, S e r b a n d R o m a n i a n peasants founded c o n s u m e r a n d seller co-operatives, too. N a t i o n a l political motives a p p e a r e d also, since the 'ethnic banks' w a n t e d to attract custom­ ers b y slogans a b o u t national aims a n d interests. It w a s h o p e d that m a r keting a l o n g ethnic lines w o u l d provide a shield against the strong competition o f local b r a n c h e s o f the b i g B u d a p e s t a n d V i e n n a banks. A l t h o u g h Slovak banks offered c h e a p e r loans, these h o p e s w e r e n o t wholly realised. T h e e m e r g e n c e a n d strengthening o f the a b o v e - m e n t i o n e d n e w e c o n o m i c institutions b r o u g h t a b o u t a c h a n g e in the political activities of the national minorities. A n e w generation o f politicians a p p e a r e d , w h i c h t u r n e d a w a y from the passivity o f the previous generation. T h e n e w leaders of the various national m o v e m e n t s w e r e often b a n k m a n a g e r s of the credit institutes m e n t i o n e d above. T h e Slovak, R o m a n i a n , S a x o n a n d S e r b banks supported the cultural and political activities o f their respective nationalities. Business connections w e r e p r o m o t e d across frontiers b e t w e e n ethnically related nations. C z e c h entrepreneurs, in particular, s h o w e d keen interest in investing in territories w i t h Slavic, m a i n l y Slovak, populations. U n d e r the slogan o f ' N e o - S l a v i s m ' n e w firms a n d credit institutes w e r e p r o m o t e d b y t h e m . T h e Z i v n o s t e n s k a b a n k a w a s one of the most active in investing in U p p e r H u n g a r y . It a c q u i r e d a majority o f the shares o f the R o z s a h e g y (Ruzomberok) C r e d i t B a n k , one o f the biggest Slovak banks, a n d together w i t h the S p o r o b a n k held shares o f another significant Slovak credit institute, the T a t r a B a n k . O t h e r smaller Slovak banks also b e l o n g e d to the clients o f the C z e c h banks (money insti­ tutes in N a g y s z o m b a t (Trnava), Szered, Z o h o r , S z a k o l c a (Skalica), M i a v a (Myjava) a n d others). In the first years following the turn o f the century, P r a g u e banks a n d entrepreneurs founded industrial firms in U p p e r H u n g a r y as well (the w o o d p a p e r mill at R o z s a h e g y ( R u z o m b e r o k ) , the cellulose works at Z s o l n a (Zilina) a n d the K o v a c s & S t o d o l a leather factory at Liptoszentmiklos (Liptovsky M i k u l a s ) . M a g y a r business g r o u p s protested v e h e m e n t l y against the spread o f C z e c h ventures, criticising the 'Pan-Slavic agitation' o f the Slovak b a n k s . 15

16

17

18

19

20

Table 15.2. The population of Hungary according to mother tongue, igio—iggo Year 1910 igio 1920 1930 1941 1949 1960 1970 1980 1990

a

Total

Hung.

Slovak

Roman.

Croat

Serb

Slovene

German

Gypsy

Others

18,264,533 7,612,499 7,980,143 8,685,109 9,316,074 9,204,799 9,961,044 10,322,099

9,944,627

1,946,357 165,317 141,882 104,786

2,948,186 28,491 23,760 16,221 14,142

282,653 62,018 59,786 47,332 37,885 20,423 33,o I 4 21,885 20,484

461,516 26,248

77,398 6,915 6,087 5,464 4,816

1,903,357 553,179

108,825

55!,2II

6,989 7,841 18,640 21,387

59!,6i4 40,032 26,244 18,946

10,709,463 10,374,823

6,730,299 7,147,053 8,000,335 8,655,798 9,076,041 9,786,038 10,166,237 10,579,898 10,222,529

75,877 25,988 30,690 21,176 16,054 12,745

14,785 15,787 12,624 10,141 8,730

17,577

C

I7,i3i 7,031 5,442 5,'58 4,583 7,989 3,426 2,953

4,473 -

4,205 3,142 2,627

477,153 475,491 22,455 50,765 35,594 31,231 37,5"

-

25,633 34,597 27,915 48,072

27,983 14,161 14,534 17,462 17,122 22,079

Notes: Trianon territory of Hungary. Gypsies and others. Croats and Slovenes. Source: A r p a d Meszaros and Janos Foti, 'Nemzetisegek, etnikai csoportok a 20. szazadi Magyarszagon' [Nationalities and ethnic groups in twentieth-century Hungary], Regio 3(1995), pp. 3-34; Istvan Feher Az utolsopercben, Magyarorszag nemzetisegei 1945—iggo [In the last minute, nationalities in Hungary 1940-1990], (Budapest, 1993), pp. 57-60. a

b

c

The economy and the national question in Hungary N A T I O N A L A S S I M I L A T I O N IN T W E N T I E T H - C E N T U R Y

301 HUNGARY

T h e size o f the ethnic minorities in H u n g a r y shrank significantly d u r i n g the twentieth century. W h i l e at the b e g i n n i n g o f the twentieth century, n o n - M a g y a r nationalities m a d e u p 1 1 . 6 per cent o f the p o p u l a t i o n o f the T r i a n o n territory, in 1 9 9 0 it w a s only 1.5 per cent (see table 15.2). T h e causes o f this dramatic decrease w e r e defined a n d evaluated in various w a y s . A u t h o r s in the n e i g h b o u r i n g countries have usually b l a m e d the M a g y a r i s a t i o n policy enforced b y H u n g a r i a n g o v e r n m e n t s d u r i n g the w h o l e o f the twentieth century. In trying to d r a w an objective picture, however, several d e m o g r a p h i c , e c o n o m i c a n d social factors have also to be considered w h e n e x a m i n i n g the process o f assimilation. T h e great transformation b e g i n n i n g at the e n d o f the eighteenth century has b r o u g h t a b o u t the formation o f political nations a n d national markets. T h i s process forced g r o u p s o f people that lived in a w o r l d not yet tinged by national self-awareness, to m a k e choices a b o u t their n e w national identity. States, the evolving legal and administrative structures a n d public e d u c a t i o n pressed for a c o m m o n l a n g u a g e a n d culture. T h i s w a s to p r o m o t e political unification a n d the unification o f national markets. T h e choice of national identity b e c a m e a central political issue from the late nineteenth century on in H u n g a r y . H u n g a r i a n g o v e r n m e n t s forced linguistic M a g y a r i s a t i o n in order to achieve a stable majority o f ethnic M a g y a r s within the D u a l M o n a r c h y a n d also within the b o u n d a r i e s o f H u n g a r y . T h e creation o f a national l a n g u a g e out of the n u m e r o u s dialects, a n d the creation o f a national history (or myth) w e r e considered as essential preconditions for the e m e r g e n c e o f national feelings a m o n g other nations o f central a n d eastern E u r o p e as w e l l . H u n g a r i a n g o v e r n m e n t s w a n t e d to increase assimilation b y spreading the H u n g a r i a n l a n g u a g e a m o n g ethnic minorities. After 1 8 8 0 H u n g a r i a n censuses w e r e taken on the basis o f m o t h e r t o n g u e and not of nationality. In this respect e d u c a t i o n b e c a m e one o f the central issues in enforcing assimilation. M a g y a r i s a t i o n w a s a m a i n a i m o f H u n g a r i a n educational policy. T e a c h i n g o f H u n g a r i a n b e c a m e c o m pulsory in s e c o n d a r y schools from 1 8 8 8 a n d in e l e m e n t a r y schools from 1 9 0 7 o n w a r d s . T h e n u m b e r o f schools t e a c h i n g in the m o t h e r t o n g u e of ethnic minorities w a s drastically r e d u c e d after the turn o f the century. T h i s kind o f educational policy r e m a i n e d characteristic in the interwar years and after the S e c o n d W o r l d W a r until the late 1 9 6 0 s . T h e n u m b e r of Slovak schools declined considerably, b e c a u s e the Slovak minority did not have its o w n national C h u r c h that c o u l d have m a i n t a i n e d schools 21

22

23

2 4

302

AGNES

POGANY

instructing in the m o t h e r tongue, as did R o m a n i a n s , Serbs or Saxons. A l t h o u g h the M a g y a r i s a t i o n p o l i c y w a s carried out v e r y rigorously, it did n o t prove 'successful' in reality. It did n o t succeed in increasing national assimilation. A t the turn o f the century only a small proportion (7 per cent) o f the Slovak p o p u l a t i o n spoke H u n g a r i a n . T h e majority of Slovaks speaking H u n g a r i a n lived in settlements w i t h a m i x e d p o p u l a tion. M o s t o f t h e m w e r e workers in b i g g e r industrial plants or h a d middle-class occupations (professionals, civil servants, m e r c h a n t s or craftsmen) a n d lived in u r b a n centres. A c c o r d i n g to the census o f 1 9 1 0 the situation h a d not c h a n g e d v e r y m u c h by then. O b l i g a t o r y instruction o f the H u n g a r i a n l a n g u a g e w a s hardly practical in the closed c o m munities w h e r e pupils did not understand a w o r d o f H u n g a r i a n . T h e absence o f Slovak s e c o n d a r y schools c a n be r e g a r d e d as b e i n g m o r e harmful b e c a u s e it h i n d e r e d the formation o f a self-conscious Slovak middle class. T h e assimilation o f the Slovak professional classes should n o t be overestimated, however. M o s t o f t h e m retained their bilingualism a n d their links to the original Slovak culture, w h i c h w a s clearly s h o w n b y their rapid re-Slovakisation in the years following the First W o r l d W a r . T h e process o f national assimilation w a s the most spectacular in the case o f the rapidly d e v e l o p i n g cities. B y the e n d of the nineteenth c e n ­ tury, G e r m a n - s p e a k i n g towns b e c a m e almost c o m p l e t e l y H u n g a r i a n s p e a k i n g . A t the e n d o f the eighteenth century, 7 5 per cent o f the 5 0 , 0 0 0 inhabitants o f Pest-Buda h a d b e e n G e r m a n - s p e a k i n g . In 1 9 1 0 8 6 per cent o f the p o p u l a t i o n o f the capital, with nearly a million inhabitants, h a d H u n g a r i a n as their m o t h e r t o n g u e and the other ethnic g r o u p s also understood H u n g a r i a n . T h e size o f the national minorities w a s further r e d u c e d b y the assimilation and d e m o g r a p h i c p r o c e s s e s in the interwar years. H o w e v e r , the most significant decrease w a s a result o f the traumatic events following the S e c o n d W o r l d War. T h e deportation o f the G e r m a n p o p u l a t i o n a c c o r d i n g to the P o t s d a m decisions a n d the Slovak—Magyar p o p u l a t i o n e x c h a n g e r e d u c e d the n u m b e r of G e r m a n a n d Slovak minorities in H u n g a r y . T h e s e measures h a d a long-lasting effect as well, b e c a u s e they led to the disintegration o f the r e m a i n i n g G e r m a n and Slovak c o m m u nities. T h i s m a d e it easier for the relatively small n u m b e r o f G e r m a n s a n d Slovaks w h o r e m a i n e d to be a b s o r b e d b y the H u n g a r i a n majority. In the opinion o f L a s z l o S z a r k a , however, the data o f 1 9 4 9 (table 15.2) s e e m to be unrealistic. In the p o s t w a r atmosphere o f fear a n d atrocities m a n y G e r m a n s a n d Slovaks did not dare declare themselves to be ethnically G e r m a n or Slovakian. In his estimation the real n u m b e r o f the 25

26

27

28

The economy and the national question in Hungary

303

G e r m a n s m a y have b e e n 2 5 0 , 0 0 0 , a n d that o f the Slovaks 4 0 , 0 0 0 in 1 9 4 9 (see table 1 5 . 3 ) .

2 9

Beside the political interventions such as deportations a n d population exchanges, the process o f assimilation w a s a g g r a v a t e d b y other d e m o ­ g r a p h i c factors. In the years after the S e c o n d W o r l d W a r the incidence of intermarriage increased. T h e proportion o f h o m o g e n e o u s marriages w a s lowest a m o n g R o m a n i a n s , Slovaks a n d Serbs ( 4 4 to 4 9 p e r cent) in 1 9 9 0 . A m o n g G e r m a n s it w a s 5 0 to 5 5 p e r cent in the same y e a r . A c c o r d i n g to recent investigations, the c h a n c e o f transmitting the m o t h e r t o n g u e o f the minority parent is m u c h lower in m i x e d m a r r i a g e s than in ethnically h o m o g e n e o u s o n e s . O n l y a b o u t 4 0 to 5 0 p e r cent of the children o f m i x e d marriages involving Slovaks a d o p t e d the Slovakian l a n g u a g e , while 8 0 p e r cent o f G e r m a n a n d Slovene children took over their family's l a n g u a g e . A c c o r d i n g to statistical investigations, the fertility o f m a r r i e d w o m e n w a s significantly b e l o w average in the G e r m a n population, while it w a s above average a m o n g Slovaks, C r o a t s 30

31

a n d R o m a n i a n s in 1 9 9 0 .

3 2

T h e e c o n o m i c transformation b r o u g h t a b o u t p e r m a n e n t interactions w i t h the majority society a n d required adaptation to the c h a n g e d circumstances. T h e s e included increased internal mobility a n d radical c h a n g e s in the country's settlement structure. Forced urbanisation resulted in a c h a n g i n g ethnic structure as well. A c c o r d i n g to the analysis of H o l g e r Fischer, the assimilation a n d s o c i o - e c o n o m i c transformation o f the G e r m a n minority in H u n g a r y were strongly influenced b y the forms a n d size o f settlements. In the years b e t w e e n 1 9 2 0 a n d 1 9 8 0 , G e r m a n s h a d a greater c h a n c e o f retaining their ethnic culture in the settlements w h e r e the e t h n i c G e r m a n population e x c e e d e d 8 0 p e r cent than in the m u l t i e t h n i c o r minority G e r m a n t o w n s h i p s . After 1 9 2 0 , there w a s n o H u n g a r i a n t o w n w h e r e either G e r m a n s or Slovaks w o u l d have b e e n in a majority a n d there w e r e only a few villages w h e r e a single nationality f o r m e d the majority. In the interwar years internal m i g r a t i o n from G e r m a n settlements (5.3 p e r cent) e x c e e d e d the national average (0.9 p e r cent), w h i c h c a n b e attributed to the preference o f the G e r m a n p o p u l a tion for urbanisation a n d mobility. T h i s kind o f mobility c o i n c i d e d with a partial loss o f the national culture a n d identity in the cities. F r o m 1 9 2 0 to 1 9 3 0 the proportion o f G e r m a n s m a k i n g u p the population o f H u n g a r i a n towns declined from 2 1 . 4 p e r cent to 17 per c e n t . Ethnic c o m m u n i t i e s could respond to the changes in various ways. R e c e n t research h a s found several possibilities o p e n for these c o m m u n i ties, r a n g i n g from assimilation to ethno-cultural revival. T h e reactions 33

34

35

Table 15.3. The population of Hungary according to nationality, 1941—1990 Year

Total

Hungarian

Slovak

Romanian

Croat

Serb

Slovene

German

Gypsy

Other

1941

9,316,074 9,204,799 9,961,044 10,709,463 10,374,823

8,918,686 9,104,640

16,677 7,808 14,340 9,101

7,565 8,500 12,326 8,874 10,740

4,177 4,106 14,710* 13,805 13,570

3,629 4,190 3,888 2,805

2,058 666

302,198 2,617 8,640 11,310 30,824

27,033 37,598 56,121 6,404 123,042

33,869 34,674 13,744 16,369 19,640

1949 1960 1980 1990

9,837,275 10,638,974 10,161,712

io,459

* Together with the Slovenes Source: Meszaros and Foti, 'Nemzetisegek', p. 22.

2,905

-

i,73i 1,930

The economy and the national question in Hungary

305

of the ethnic minorities to e c o n o m i c interaction w i t h the majority society could be v e r y different, d e p e n d i n g on the g e o g r a p h i c a l position, social structure a n d c o m m e r c i a l relations o f the given communities. In the case o f the Slovak communities in T r i a n o n H u n g a r y , it c a n be seen that different types o f settlement h a d different kinds of ethno-cultural models. S o m e o f these could g u a r a n t e e optimal e c o n o m i c a n d cultural d e v e l o p m e n t , while others led to an early loss o f ethnic characteristics. C o n t r a r y to the generally a c c e p t e d belief, Slovaks in H u n g a r y h a d a differentiated social structure. A s early as in the eighteenth century, glass works a n d iron foundries e m p l o y e d Slovak workers. In the last century the m a l e p o p u l a t i o n o f m a n y Slovak villages w o r k e d as coal miners. In the 1 9 2 0 s the n u m b e r o f Slovak coal miners increased further w h e n n e w coal mines w e r e o p e n e d in the Slovak villages a r o u n d T a t a b a n y a . In the interwar years a n d in the period following the S e c o n d W o r l d W a r m a n y Slovak industrial workers c o m m u t e d from the villages a n d suburbs a r o u n d the capital to B u d a p e s t . T h e most successful adaptation to e c o n o m i c c h a n g e c a n be observed in the case o f some market towns o f south-east H u n g a r y . A s early as the second half o f the nineteenth century, Slovak c o m m u n i t i e s w i t h c o m p l e x societies c o m p r i s i n g well-to-do peasants, a significant middle class, professionals, craftsmen, civil servants a n d m a n y agrarian labourers lived in these towns. D u e to the prospering o f agricultural a n d c o m ­ mercial activities, these market towns ( T o t k o m l o s , for example) h a d their o w n a u t o n o m o u s local g o v e r n m e n t s a n d cultural institutions, essential for their ethno-cultural d e v e l o p m e n t . C o m m u n i t i e s such as these could successfully m a i n t a i n their Slovak national identity and participate in m o d e r n e c o n o m i c life until the Slovak—Magyar population e x c h a n g e in 36

9

i 46

.

O t h e r types o f settlement could not preserve their national culture. In the case of K i s k o r o s , a rapid assimilation took place as early as the e n d of the eighteenth century. T h e social structure w a s m o r e simple in this case. T h i s market t o w n w a s inhabited m a i n l y b y poor, landless a g r a r i a n labourers w h o h a d to seek w o r k in the n e i g h b o u r i n g M a g y a r settlements. D u e to the one-sided l a b o u r and c o m m e r c i a l relations with the majority society, the Slovak inhabitants o f K i s k o r o s h a d to learn the H u n g a r i a n l a n g u a g e a n d customs, w h i c h led to an early loss o f their original Slovak culture. T h e same c a n be observed in the case o f the industrial settlements a r o u n d the n e w l y established factories. A third type o f Slovak settlement w a s the small closed villages that could be found in the m o u n t a i n areas. H e r e the traditional w a y o f life

Table 15.4. The occupational structure of the Hungarian population by nationality in iggo (%) Total active population Industry and construction Agriculture and forestry Material services N o n material services Total

38.1 15-3 22.0 24.6 100.0

Source: Meszaros and Foti, 'Nemzetisegek', p. 31.

Slovaks 32-5 22.3 17-9 27-3 100.0

Romanians 37-6 20.9 18.0 23-5 100.0

Croats

Serbs

Slovenes

32-7 25.6 19.6 22.1 100.0

29.0 20.9 21.3 28.8 100.0

46.7 21.1 15-3 16.9 100.0

Germans 37-9 18.0 18.7 254 100.0

Gypsies 44.2 21.3 18.7 15.8 100.0

The economy and the national question in Hungary

307

a n d the peasant culture helped preserve the original culture mostly u n t o u c h e d until the 1960s. B e c a u s e o f the l o w incidence o f interaction with the majority society a n d the slow rate o f e c o n o m i c development, the evolution o f a strong national identity is not clearly evident in this type o f community. In the absence o f a middle class, local g o v e r n m e n t a n d differentiated cultural institutions o f their o w n , these c o m m u n i t i e s could not organise themselves as c o m p l e x societies and could not par­ ticipate in m o d e r n e c o n o m i c g r o w t h . 37

CONCLUSION

M o d e r n i s a t i o n b r o u g h t a b o u t the e m e r g e n c e o f the nation state, the centralisation o f p o w e r by g o v e r n m e n t s a n d the curtailment o f the p o w e r o f the local self-governing bodies. A t the e n d o f the nineteenth century, m o d e r n e c o n o m i c g r o w t h n a r r o w e d the d e v e l o p m e n t gaps within the various regions o f Austria-Hungary. E c o n o m i c integration led to the e m e r g e n c e o f a nationwide market. T h e s e institutions, together with the speeding u p o f c o m m u n i c a t i o n s , strengthened the challenge o f assimilation. A c o m p l e x w e b o f d e m o g r a p h i c a n d social changes, urbanisation processes a n d migration furthered the loss o f ethnic culture. After the S e c o n d W o r l d W a r political decisions (the deportations o f the G e r m a n s and the Slovak—Magyar population exchange) led to the significant diminution o f the ethnic minorities (see tables 1 5 . 3 a n d

15.4).

O n the other h a n d , the minority c o m m u n i t i e s could respond in different ways. T h e m o d e r n e c o n o m y (the establishment o f local e c o n o m i c a n d cultural institutions — banks, co-operatives, n e w s p a p e r s a n d so on) offered possibilities to defend or even to revive national identity. Ethnic c o m m u n i t i e s with a flourishing e c o n o m y a n d a c o m p l e x social structure s e e m to have b e e n the most successful in preserving or r e n e w ing their national culture. In the c o m m u n i t i e s that w e r e one-sidedly d e p e n d e n t on interactions with the majority society, assimilation took place v e r y rapidly. NOTES

1 Heinrich August Winkler, 'Nationalism and nation state in Germany' in Mikulas Teich and Roy Porter (eds.), The National Question in Europe in Historical Context (Cambridge, 1993), pp. 181—95 at p. 181.

2 Emil Niederhauser, 'The national question in Hungary' in Teich and Porter, The National Question', pp. 248—69 at p. 261.

308

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POGANY

3 Ferenc Glatz (ed.), Hungarians and their Neighbors in Modern Times 186J—1950 (Boulder, CO, 1995), p. XVI. 4 Ibid., p. XIV. 5 Hungarian and Slovak versions of the various countries. 6 Laszlo Katus, 'A nemzetiseg kerdes es Horvatorszag tortenete a 20. szazad elejen' [National question and the history of Croatia at the beginning of the twentieth century] in P. Hanak (ed.), Magyarorszdg tortenete, i8go—igi8 [The history of Hungary, 1 8 9 0 - 1 9 1 8 ] , (Budapest, 1978), vol. VII, pp. 1 0 0 3 - 6 5 at p. 003. 7 Ibid., p. 004. 8 David F. Good, The Economic Rise of the Habsburg Empire, iy§o—igi4 (Berkeley and London, 984), p. 57. 9 Katus, 'A nemzetisegi kerdes', p. 004. 10 Imre Polanyi, A szlovdk tdrsadalom es polgdri nemzeti mozgalom a szdzadfordulon i8g5—igo5 [Slovak society and the national movement at the turn of the century 8 9 5 - 905], (Budapest, 987), pp. 23-7. 11 Gyorgy Kover, Iparosodds agrdrorszdgban Magyarorszdg gazdasdgtortenete iS^S— igi4 [Industrialisation in an agrarian land: economic history of Hungary 8 4 8 - 9 4], (Budapest, 982), pp. 3 4 - 5 . 12 Polanyi, A szlovdk tdrsadalom,p. 28. 1 14 Zoltan Szasz, 'Banking and nationality in Hungary, 1 8 6 7 - 1 9 1 4 ' in A. Teichova, T. Gourvish and A. Pogany (eds.), Universal Banking in the Twentieth Century (Aldershot, 1994), pp. 3 2 - 4 4 at p. 34. 5 Katus, 'A nemzetisegi kerdes', p. 005. 6 Polanyi, A szlovdk tdrsadalom,pp.29-3 . 17 Istvan Toth, 'Szlovak hitelegyletek a szazadfordulon' [Slovakian credit soci­ eties at the turn of the century], Aetas 4, 6 2 - 7 0 at pp. 6 2 - 5 ; Szasz, 'Banking and nationality', pp. 3 3 - 5 ; G. Gabor Kemeny, Iratok a nemzetisegi kerdes tortenetehez Magyarorszdgon a dualizmus kordban [Papers relating the history of the nationalities in Hungary during the Dualism], vol. III, igoo—igoj (Buda­ pest, 1964), pp. 4 1 6 , 4 2 4 - 7 and 584. 18 Zdenek Jindra, 'Vizsgalodasok a csehorszagi nemet-cseh gazdasagi kapcsolatok targyaban a 9. es 20. szazad fordulojan' [Thoughts on GermanCzech economic relations at the turn of the twentieth century] in Eva Ring and Dorottya Liptak (eds.), Tradiciok es modernitds,Kozep- es kelet-eurdpai perspektivdk [Traditions and modernity, central and eastern European perspectives] (Budapest, 996), pp. 0 9 - 2 2 at p. 2; Laszlo Szarka, A szlovdkok tortenete [The history of the Slovaks], (Budapest, 993), p. 4. 9 Polanyi, A szlovdk tdrsadalom,pp.32-3. 20 Ibid., p. 34. 2 Niederhauser, 'The national question', p. 250. 22 Zoltan David, 'The Hungarians and their neighbors, 1 8 5 1 - 2 0 0 0 ' in Stephen Borsody (ed.), The Hungarians — A Divided Nation (New Haven, 1988), pp. 3 3 3 - 4 5 at p. 334. (The census asked about nationality from 1941 on.) 3

I b i d . , p .

3 3 .

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23 Niederhauser, 'The national question', p. 260. 24 Lorant Tilkovszky, Nemzetisegi politika Magyarorszagon a 20. szazadban [Government's policy concerning nationalities in Hungary in the twentieth century], (Debrecen, 1997), pp. 4 4 - 6 ; Laszlo Szarka, Asszimilacio a 20. szazadi Magyarorszagon (Adatok es adalekok a hazai nemet es szlovak kisebbseg elmagyarosodasanak tortenentehez)' [Assimilation in twentiethcentury Hungary] in P. Hanak and M. Nagy (eds.), Hid a szazadok felett, Tanulmanyok Katus Ldszlo 70. szuletesnapjdra [Bridge over the centuries, in honour of Laszlo Katus], (Pecs, 1997), pp. 3 9 7 - 4 0 9 at p. 401. 25 Polanyi, A szlovak tarsadalom,pp. 4 6 - 7 . 26 Szarka, A szlovakok tortaiete,p. 132. 27 David, 'The Hungarians and their neighbors', pp. 3 3 4 - 5 . 28 Szarka, Asszimilacio a 20. szazadi Magyarorszagon, pp. 3 9 7 - 8 . 29 Ibid., p. 400. 30 Arpad Meszaros and Janos Foti, 'Nemzetisegek, etnikai csoportok a 20. szazadi Magyarorszagon' [Nationalities and ethnic groups in twentiethcentury Hungary], Regio 3 (1995), pp. 3~34 at p. 7. 31 Ibid.; Erika Garami and Janos Szanto, 'A magyarorszagi szlovakok identitasa' [Identity of the Slovaks in Hungary], Regio 2 (1995), pp. 1 1 3 - 3 5 at pp. I

2

8

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9

.

32 Meszaros and Foti, 'Nemzetisegek', pp. 7 - 8 . 33 Holger Fischer, 'A magyarorszagi nemetek 20. szazadi tarsadalmi-gazdasagi atalakulasanak terbeli aspektusai' [Spatial aspects of the socio-economic transformation of German Hungarians in the twentieth century], Regio 2 ^"S^

1

4

7

-

6

6

a t

p

p

.

I

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I

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34 Szarka, 'Asszimilacio a 20. szazadi Magyarorszagon', p. 402. 35 Fischer, 'A magyarorszagi nemetek', p. I5I. 36 Anna Gyivicsan, 'Nemzetiseg-gazdasag-kultura' [Ethnic minorities, econ­ omy and culture] in Ring and Liptak, Tradiciok es modernitas,pp. 1 2 2 - 3 5 . 37 Ibid.

C H A P T E R

S I X T E E N

Economic background to national conflicts in Yugoslavia Neven Borak

INTRODUCTION

Yugoslavia (1918—91) was a conglomerate of several different ethnic groups (table 16.1), two alphabets, three major religions, five languages, it was known for large socio-economic disparities and inequalities and a unique state system. It has threaded the way from a unitary state (1918—41), often accused of being just a hegemony of one nation over the others, to the state of eight federal units (1945—91). After the break-up of Yugoslavia in the 1990s, four of them, namely Slovenia, Croatia, BosniaHerzegovina and Macedonia, became internationally recognised inde­ pendent states, whilst the remaining four (Serbia, Vojvodina, Kosovo and Montenegro) are at the time of writing united under one state, which has, quite unjustifiably, retained the name Yugoslavia. Figure 16.1 reveals one of the most important characteristics of the former Yugoslavia: the further south-east one goes from the north-western part of the country, the smaller is the national homogeneity of the former federal units; in Slovenia 90.5 per cent of the population were Slovenians, in Croatia 75 per cent of the population were Croats, in Serbia 66.4 per cent of the population were Serbs (including Vojvodina and Kosovo), in Macedonia 67 per cent of the population were Macedonians and in Montenegro 68.5 per cent of the population were Montenegrins. Muslims were the most numerous nation in Bosnia-Herzegovina, accounting for 39.5 per cent of the total population. Serbs represented the second most numerous segment of population — 32 per cent — and Croats were the third, representing 18.4 per cent of total population. According to the O E C D estimate, Yugoslavia was at the level of Turkey in terms of per capita gross domestic product at purchasing power parity in 1985. Kosovo, the less-developed part of Yugoslavia, was at the level of Pakistan. The most developed part, Slovenia, was compared with Spain and New Zealand. Vojvodina and Croatia approached Greece and Portugal. Bosnia1

3

i°

Table 16.1. National structure of Yugoslavia and its federal units in ig8i Serbs Slovenia Croatia Serbia (total) Serbia Proper Kosovo Vojvodina Montenegro Bosnia-Herzegovina Macedonia Yugoslavia

2.2 11.6 66.4 85.4 13-3 54-5 3-3 32.0 2.4 36-3

Croats

Muslims

Slovenians

Albanians

3.0

0.7

75-i 1.6 0.6 0.6

°-5 2-3 2.7

90-5 °-5 0.1 0.1 0.0 0.1 0.2 0.1 0.1 7.8

0.1 0.1 14.0

54 1.2 18.4 0.2 19-7

3-7 0.2 134 39-5 2.1 8.9

1-3 77-5 0.2 6-5 0.1 19-7 7-7

Source: Calculated from Statistical Yearbook of Yugoslavia iggi (Belgrade, 1991).

Macedonians 0.2 0.1 °-5 °-5 0.1 0.9 0.2 0.1 67.0 6.0

(%) Montenegrins

Other

Total

0.2 0.2 1.6 1.4 0.2 2.1 68.5 0.3 0.3 2.6

3-2 11.8

100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

13-5 8.1 3-2 36-3 6.8 9-5 8.4 10.9

SLOVENIA 9 0 . 5 % Slovenians 3.0% Croats 2 . 2 % Serbs 0.7% Muslims 0 . 2 % Macedonians 0 . 2 % Montenegrins 0 . 1 % Albanians 3 . 2 % Other

VOJVODINA 54.5% 5.4% 2.1% 0.9% 0.2% 0.2% 0.1% 36.3%

CROATIA 7 5 . 1 % Croats 11.6% Serbs 0.5% Muslims 0.5% Slovenians 0.2% Montenegrins 0 . 1 % Albanians 0 . 1 % Macedonians 11.8% Other BOSNIA-HERZEGOVINA 3 9 . 5 % Muslims 3 2 . 0 % Serbs 18.4% Croats 0.3% Montenegrins 0 . 1 % Albanians 0 . 1 % Macedonians 0 . 1 % Slovenians 9.5% Other

Serbs Croats Montenegrins Macedonians Albanians Muslims Slovenians Other

S E R B I A PROPER 8 5 . 4 % Serbs 2.7% Muslims 1.4% Montenegrins 1.3% Albanians 0.6% Croats 0.5% Macedonians 0 . 1 % Slovenians 8 . 1 % Other

MONTENEGRO 6 8 . 5 % Montenegrins 13.4% Muslims 6.5% Albanians 3.3% Serbs 1.2% Croats 0 . 2 % Slovenians 0 . 2 % Macedonians 6.8% Other

KOSOVO 7 7 . 5 % Albanians 13.3% Serbs 3.7% Muslims 0.6% Croats 0 . 2 % Montenegrins 0 . 1 % Macedonians 3 . 2 % Other

Figure 16.1. Yugoslavia's nationalities ig8i

MACEDONIA 6 7 . 0 % Macedonians 19.7% Albanians 2 . 4 % Serbs 2 . 1 % Muslims 0.3% Montenegrins 0 . 2 % Croats 0 . 1 % Slovenians 8.4% Other

Economic and national conflicts in Yugoslavia

313

H e r z e g o v i n a a n d M a c e d o n i a were c o m p a r e d with T h a i l a n d and M e x i c o , a n d Serbia with Turkey. A u n i q u e state organisation c a n be a d d e d to this diversity, g o v e r n e d in fact at three g o v e r n m e n t levels: the level o f federation, republics a n d a u t o n o m o u s provinces, a n d communities (the latter c a n n o t be directly c o m p a r e d to local g o v e r n m e n t s , as they h a d a m u c h greater portfolio o f authorities and tasks). B e a r i n g all this in m i n d , it is not difficult to under­ stand w h y the c o u n t r y — in times o f b r e a k i n g up — w a s often c o m p a r e d w i t h the tiger's skin: the further one w e n t a l o n g its axis, the m o r e diversified it w a s . T h i s chapter focuses on the e c o n o m i c b a c k g r o u n d o f national conflicts in Y u g o s l a v i a . It offers an insight into Yugoslav e c o n o m i c prac­ tice a n d its interference with political a n d constitutional processes. It is therefore proper to b e g i n b y g i v i n g an e x a m p l e o f a j o i n t project in w h i c h historians o f all Yugoslav nations took part. T h e result o f this j o i n t project w a s t w o parts o f an unfinished publication w i t h the title A History of the Nations of Yugoslavia? It seems fortunate that the title o f the last chapter (which is, b y the way, chapter 13) o f the second b o o k is ' R e a c h i n g the conditions for the rise o f national m o v e m e n t s a n d the struggle for liberation'. T h e third a n d fourth parts o f the publication, w h i c h w e r e to include the nineteenth a n d twentieth centuries, w e r e never written. T h e r e f o r e , Yugoslavia h a d n o general or political history that w o u l d be acceptable to all the nations a n d neither h a d it a c o m p r e h e n s i v e e c o n o m i c history. T h e r e are, however, some parts a n d fragments of the e c o n o m i c history o f former federal units that w e r e m o r e or less systematically studied, and are patiently w a i t i n g to be integrated and properly interpreted. In addition, nationalism and national conflicts are n o t c o n sidered to b e l o n g to the m a i n s t r e a m o f e c o n o m i c research, since this science is t h o u g h t to be too rational a n d too equilibrium-oriented to study these irrational p h e n o m e n a , often considered disturbances. It has not b e e n until recently that some experiments w e r e m a d e to apply some parts o f public-choice theory, fiscal federalism a n d local g o v e r n m e n t finance to generalise the experiences o f the disintegration of countries a n d e m e r g e n c e o f n e w countries on the territory o f the former c o m munist E u r o p e a n d to deliberate a b o u t e c o n o m i c a n d political aspects of break-ups a n d disintegrations. T h e s e findings, however, do not prevent us from m a k i n g the following assertions: • Yugoslavia did not e m e r g e for e c o n o m i c reasons; • Yugoslav nations built their n e w c o u n t r y on large contradictions a n d diversities; 2

4

314

NEVEN BORAK

• the m a i n conflicts in the K i n g d o m o f Yugoslavia (1918—41) w e r e political. T h e y m o v e d from centralism a n d unitarism on the one h a n d to federalism a n d national equality on the other. E c o n o m i c reasons served only as excuses for conflicts; • the m a i n conflicts in C o m m u n i s t Yugoslavia (1945—91), w h i c h ensured that federalism prevailed over centralist tendencies, w e r e e c o n o m i c a n d all ethnic groups a n d federal units took part in the conflicts; • the n o r m a t i v e e c o n o m i c area failed to b e c o m e a l o n g - t e r m func­ tioning area either in the first or the second Yugoslavia; • nationalism w a s the last a n d the most decisive w e a p o n in the fight for d o m i n a t i o n in Yugoslavia. T h i s fight entailed either the capture of the federal state or its abolition.

HERITAGE

W h e n they b e c a m e united u n d e r one state in 1 9 1 8 , the Yugoslav nations w e r e all mature nations. T h e y w e r e a w a r e o f their identity and h a d their cultural a n d historical traditions. T h e y did not k n o w each other well. M o r e o v e r , they all h a d different e c o n o m i c bases. T h e y all b r o u g h t a l o n g their o w n heritage in the form o f national p r o g r a m m e s expressing aspirations and tendencies o f their cultural a n d political elites. S o m e o f t h e m even b r o u g h t a l o n g their former states or, at least, m e m o r y o f it. T h e i m a g e o f the m a i n protagonists o f the Yugoslav d r a m a — Serbs, C r o a t s a n d Slovenians (whose n a m e s w e r e also a part o f the n a m e of the n e w k i n g d o m till 1929) — is as follows: 1. T h e national a n d foreign-policy p r o g r a m m e o f Serbia — the socalled Garasanin's Plan (Nacrtanije) o f 1 8 4 4 — w a s restricted to southern Slavic nations, in particular to the Serbian nation u n d e r Turks and the provinces they considered Serbian, n a m e l y Serbia, M o n t e n e g r o , Bosnia—Herzegovina, historical O l d Serbia a n d north­ ern A l b a n i a , the latter to provide access to the sea. O n the basis o f historical law founded on the tradition o f S e r b i a n m e d i e v a l stateh o o d , Serbia w a s to e x p a n d to e m b r a c e these provinces g r a d u a l l y a n d through diplomacy, a n d not to unite t h e m on the basis o f their self-determination. 2. Slovenians h a d their roots in the p r o g r a m m e U n i t e d Slovenia (Zedinjena Slovenija), w h i c h w a s slightly y o u n g e r than the Serbian plan a n d called for the unification o f all Slovenians. T h e p r o g r a m m e w a s based on ethnic and natural law (not historical) a n d required the 5

6

Economic and national conflicts in Yugoslavia

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a m a l g a m a t i o n o f all Slovenian territories into one a u t o n o m o u s unit, regardless o f the existing historical borders. T h e Yugoslav idea e m e r g e d at the turn o f the twentieth century w h e n the German—Slovenian conservative alliance broke up. 3. R e g a r d i n g the C r o a t s , the Illyrian m o v e m e n t ideology, w h i c h h a d b e e n f o r m e d g r a d u a l l y until 1 8 3 5 , expressed t w o levels o f integration m o v e m e n t s — C r o a t i a n a n d South—Slav. T h e latter m o v e m e n t gave w a y to C r o a t i a n integration a n d co-operation b e t w e e n C r o a t s a n d Serbs in their attempts to set u p j o i n t institutions required to protect the political position o f the so-called 'triple k i n g d o m ' against H u n g a r i a n national e x p a n s i o n i s m . In part, these aspirations w e r e fulfilled b y the Croatian—Hungarian treaty o f 1 8 6 8 , w h i c h g r a n t e d the C r o a t s recognition as a political nation, in principle territorially integral, and w i t h certain administrative i n d e p e n d e n c e . T h e C r o a t i a n aspirations did not g o b e y o n d the borders o f a triple structure o f the monarchy, w h o s e duty w a s to ensure the a m a l g a m a t i o n of all C r o a t i a n territories, including the so-called Vojna krajina (Borderland or M i l i t a r y Croatia), a n d thereby realisation o f histori­ cal C r o a t i a , a n d after that also the unification o f South—Slav nations into a monarchy. T h e d e v e l o p m e n t o f events in the period from the e m e r g e n c e o f the p r o g r a m m e s to the formation o f a n e w state included rises a n d falls, a p p r o a c h i n g to and w i t h d r a w i n g from the Yugoslav idea, a n d constant shifting from minimalist to maximalist tendencies. It c a n nevertheless be established that in essence the national p r o g r a m m e s a n d their derivatives did not refer to a Yugoslavia such as that w h i c h w a s actually f o r m e d in 1 9 1 8 . Serbs e x p e c t e d it to be a c o u n t r y uniting all Serbs. Slovenians e x p e c t e d it to be a S o u t h - S l a v state in w h i c h they w o u l d be united w i t h historical C r o a t i a . T h e C r o a t s e x p e c t e d it to be a state founded on their o w n historical law. C o n s i d e r i n g it from this point o f view, Yugoslavia w a s in a w a y a residual option for all three nations. It just h a p p e n e d . T h e nations found themselves there because o f geopolitical a n d international changes. Yugoslavism is a c o m p l e x c o n c e p t that h a d m o r e than just a single meaning. In general, it m e a n t togetherness o f ideas a b o u t closer co-operation a n d integration a m o n g southern Slavic nations. A t the time o f the First W o r l d W a r no fewer than four variations o f Y u g o slavism c o u l d thus be f o u n d . A s early as 1 9 1 4 the Serbian N a t i o n a l Assembly, in the famous Nis D e c l a r a t i o n , linked the fight for the integration o f all Serbs living in Serbia a n d in the A u s t r o - H u n g a r i a n M o n a r c h y with the idea o f integra7

8

9

316

NEVEN BORAK

tion o f Serbs, C r o a t s and Slovenes. T h e N i s D e c l a r a t i o n b e c a m e the p r o g r a m m e o f realisation o f the Serbian state idea in the w a r that Serbia w a s fighting. In this p r o g r a m m e , Serbia saw itself in the role o f P i e d m o n t in uniting Serbs, C r o a t s a n d Slovenes into a unitary southern Slavic state. T h e second version o f Y u g o s l a v i s m could be founded at the Y u g o s l a v C o m m i t t e e , w h i c h w a s founded in exile b y C r o a t i a n , S e r b i a n a n d Slovenian politicians from the A u s t r o - H u n g a r i a n M o n a r c h y . It a i m e d at f o u n d i n g the Y u g o s l a v state, but it did not have a united v i e w as to w h a t it should look like. T h e C o m m i t t e e w a s c a u g h t b e t w e e n the options o f S e r b i a n unitarian Y u g o s l a v i s m a n d C r o a t i a n M i d d l e E u r o p e a n federal­ ism. Unification o f v i e w s o f the Y u g o s l a v C o m m i t t e e w i t h the views o f the Serbian g o v e r n m e n t — a n d to the former's a d v a n t a g e — c a m e a b o u t in the famous C o r f u D e c l a r a t i o n (1917). T h e third version o f Y u g o s l a v i s m is represented by the M a y D e c l a r a t i o n o f Y u g o s l a v C l u b 3 3 m e m b e r s o f Slovenian, C r o a t i a n a n d S e r b i a n origin in the V i e n n a parliament, w h i c h called for unification o f southern Slavs in the A u s t r o - H u n g a r i a n M o n a r c h y in the A u t o n o m o u s S o u t h e r n Slavic entity. T h i s w a s the basis o f the massive D e c l a r a t i o n m o v e m e n t , particularly in Slovenia, w h e r e Y u g o s l a v i s m b e c a m e a p a r t of the national p r o g r a m m e . T h e idea o f the Y u g o s l a v C l u b later, as it b e c a m e clear that the m o n a r c h y w o u l d break apart, led to the creation o f the N a t i o n a l C o u n c i l of Slovenes, C r o a t s a n d Serbs, the fourth version o f Yugoslavism, w h i c h led to the creation o f the state o f Slovenes, C r o a t s a n d Serbs, a southern Slavic state that lasted only one m o n t h , w h i c h w a s outside the b o u n d a r i e s o f m o n a r c h y a n d w i t h o u t Serbia, M o n t e n e g r o a n d V o j v o d i n a . T h i s short-lived state formation, w h i c h h a d neither precisely d e t e r m i n e d borders nor an army, did substitute the Yugoslav C o m m i t t e e in the negotiations w i t h Serbia on their integration into a c o m m o n state, but w a s not able to impose on Serbia its v i e w on the shape and structure of the n e w state. S o the n e w k i n g d o m w a s created mostly in line w i t h S e r b i a n v i e w s a n d w a s b a s e d on national unitarism o f Serbs, C r o a t s a n d Slovenes. T h e a m a l g a m a t i o n o f Slovenian, C r o a t i a n and S e r b i a n national territories into a n e w state b e c a m e their m a i n task, as well as the search for b a l a n c e b e t w e e n the centralist a n d federalist tendencies. T h e national p r o g r a m m e s , at least the m e m o r y o f t h e m , b e c a m e the b e n c h m a r k a c c o r d i n g to w h i c h the nations or their political elite assessed their positions a n d relevance in a n e w state. T h e assessments o f e c o n o m i c situations o f selected nations a n d administrative formations in

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w h i c h they lived h a d an important role in times of a c o m m o n state. T h e question o f its constitutional a r r a n g e m e n t h a d an important role in the political life o f the K i n g d o m o f Yugoslavia. Differing views on the organisation o f the state to a large extent d e t e r m i n e d characteristics o f the political parties, their functioning a n d their p r o g r a m m e directions; parties a n d nations disagreed primarily over the question o f w h e t h e r the organisation o f the state should be unitarian or federal. T h e S e c o n d W o r l d W a r b r o u g h t a n e w test for Yugoslavia. G e r m a n attacks on Yugoslavia also h a d as an objective its destruction as a state. After the military defeat o f Yugoslavia the four o c c u p a t i o n a l forces split the country, a n n e x e d its individual parts, created quisling states a n d also divided its individual parts a c c o r d i n g to military responsibility. A l l this w a s m e a n t to strengthen the conviction that the state n o longer existed a n d that thereby the incorrect decision m a d e b y the Versailles p e a c e treaty w a s eliminated. O n Yugoslav g r o u n d the civil w a r erupted, par­ ticularly a m o n g Serbs, C r o a t s and M u s l i m s , a n d the resistance against the o c c u p y i n g forces d e v e l o p e d in the same time. T h e only real power, w h i c h united all nations in the fight against the o c c u p y i n g forces, w a s the C o m m u n i s t Party o f Yugoslavia ( C P Y ) . T h e slogan o f ' C o m m o n state of equal voluntarily united nations' w a s manifested t h r o u g h o u t n u m e r ous d o c u m e n t s o f the C P Y a n d the liberation m o v e m e n t u n d e r its leadership. T h e D e c l a r a t i o n of the First Session o f A V N O J (Anti-Fascist L i b e r a t i o n M o v e m e n t o f Yugoslavia) in 1 9 4 2 already contained a distinct structure o f the future state c o m m u n i t y (Serbia, M o n t e n e g r o , C r o a t i a , Slovenia, Bosnia—Herzegovina, M a c e d o n i a ) , although the t e r m federation h a d not yet b e e n m e n t i o n e d . For the communists a n d the national liberation m o v e m e n t the m a i n issue w a s not Yugoslavia yes or no, but w h a t kind o f Yugoslavia. T h e answer to this c a m e soon, in the S e c o n d Session o f A V N O J in 1 9 4 3 , w h e n the decision on federal o r g a n isation o f the future Yugoslav state w a s taken.

BAGKGROUND TO THE FEDERAL

STATE

W h e n j o i n i n g Yugoslavia, Slovenians a n d C r o a t s e x p e c t e d that national h e g e m o n i e s that they k n e w in the previous system's m o n a r c h y w o u l d disappear, but w e r e in fact e n c o u n t e r e d w i t h a n e w hegemony. T h e era of the K i n g d o m o f Yugoslavia w a s m a r k e d by political struggle for autono m y a n d m o v e m e n t s towards the centre. C r o a t s w a n t e d political autonomy. B y setting u p Ban's C o u n t r y C r o a t i a , they c a m e close to it; this caused a strong reaction b y Serbs a n d Slovenians. A l l three nations felt

318

NEVEN BORAK

exploited a n d they all t h o u g h t that the other t w o nations h a d g a i n e d m o r e . In Slovenia, beliefs that C r o a t s i m p r o v e d their situation in Yugoslavia a n d that Slovenia l a g g e d b e h i n d w e r e not rare. Serbs w e r e also stirred. T h e C r o a t i a n economist R u d o l f B i c a n i c triggered a n u m b e r of discussions w i t h his booklet Economic Basis of the Croatian Question. In Slovenia, a booklet w i t h similar substance w a s written b y A n d r e j G o s a r , a n d in Serbia by a g r o u p o f a u t h o r s . F o u n d i n g o f the Ban's C o u n t r y C r o a t i a p u s h e d Yugoslavia towards federalisation in 1 9 3 9 , w h i c h w a s brutally interrupted b y the S e c o n d W o r l d War. In the years 1939—40, there w a s a general a n d lively interest in the organisation a n d operation o f federal states. U n d e r the 1 9 2 9 Constitution, the K i n g d o m o f Serbs, C r o a t s a n d Slovenes w a s r e n a m e d as the K i n g d o m o f Yugoslavia a n d restructured: thirty-three provinces w e r e a b a n d o n e d a n d nine regional units called ' b a n o v i n e ' — ban's c o u n ­ tries (some authors translated this as 'banate') — w e r e established w i t h river valleys as focal points for the n e w regions. T h e y w e r e n a m e d after the rivers. T h e internal borders o f n e w regions w e r e not historical, w i t h the e x c e p t i o n of D r a v a and Z e t a Ban's C o u n t r i e s , w h i c h c o r r e s p o n d e d to Slovenia a n d M o n t e n e g r o respectively. In 1 9 3 9 Serbian a n d C r o a t i a n politicians a g r e e d to restructure the state. T h e m a i n result o f this Serb—Croat a g r e e m e n t w a s the establishment o f B a n ' s C o u n t r y C r o a t i a , w h i c h c o n t a i n e d almost 30 per cent o f the k i n g d o m ' s population a n d territory, its o w n parliament a n d a b a n (governor) appointed by the monarchy, with a u t o n o m o u s b u d g e t a r y a n d internal affairs a n d B e l g r a d e - c o n t r o l l e d foreign affairs, foreign trade, defence, transportation a n d c o m m u n i c a t i o n . M o r e o v e r , there w e r e realistic expectations that other Ban's C o u n t r i e s w o u l d be f o r m e d following the C r o a t i a n m o d e l . In fact all the draft provisions for the r e n a m i n g of the D r a v s k a Ban's C o u n t r y into the Slovenian Ban's C o u n t r y w e r e p r e p a r e d but their i m p l e m e n t a t i o n w a s delayed due to a rapid deterioration o f international relations and the threat o f a p p r o a c h i n g war. T h e third B a n ' s C o u n t r y w a s e x p e c t e d to be S e r b i a n ('Serbian Territories'). It is quite easy to agree w i t h m a n y researchers d e a l i n g w i t h the Yugoslav reality w h o claim that regional e c o n o m i c disparities m a t c h e d the classic north—south division. J. K . G a l b r a i t h found in his report on an i m a g i n a r y trip to eastern E u r o p e , w h i c h w a s to have taken place in 1 8 8 0 a n d again 100 years later a n d w h i c h also included some parts o f the later Yugoslavia, that regional disparities in the c o u n t r y w e r e no less significant 1 0 0 years later. A c c o r d i n g to G a l b r a i t h , c o m m u n i s m i m p r o v e d the social a n d e c o n o m i c situation in absolute terms but failed 10

11

12

13

Economic and national conflicts in Yugoslavia

319

to n a r r o w a relative lag o f these countries b e h i n d their western a n d n o r t h e r n neighbours. 'Eastern E u r o p e . . . shows the practical u n w i s d o m of stressing the e c o n o m i c system as a cause o f or an antidote for p o v e r t y . ' H e also claims that it is m o r e crucial for a researcher dealing w i t h the Yugoslav reality to have k n o w l e d g e a b o u t w h o lived w h e r e before the foundation o f Yugoslavia than the fact that it b e l o n g e d to c o m m u n i s m . N e w d e v e l o p m e n t theories call this ' p a t h - d e p e n d e n c e ' . T h e O E C D report, cited above, on the regional d e v e l o p m e n t of Yugoslavia, w h i c h w a s c o m p l e t e d after the break-up o f the state, shows no surprise a b o u t the above fact. A c c o r d i n g to this report the t w o m a i n obstacles to internal c o n v e r g e n c e have b e e n a qualitative and quantitative lack o f capital formation in the less-developed regions a n d the system o f self-management a n d its effects u p o n the mobility of capital and labour. E c o n o m i c researchers often deal w i t h the question w h e t h e r p o o r countries or p o o r regions within the countries g r o w at faster rates t h a n d e v e l o p e d countries or regions a n d in this w a y catch u p with t h e m a n d n a r r o w the disparities. A l t h o u g h some e c o n o m i c theories forecast c o n v e r g e n c e , the existing empirical evidence raises doubts a b o u t that. T h e Yugoslav experience fails to confirm the hypothesis on c o n v e r g e n c e . O n the contrary, there has not b e e n any researcher in the past that w o u l d not report a b o u t the persistence o f relative a n d absolute disparities, or even their widening. It is m y intention to summarise their findings using a m o d e r n analytical a p p r o a c h that has b e c o m e quite p o p u l a r w h e n analysing c o n v e r g e n c e b e t w e e n countries a n d regions within them. I shall confine myself to the period o f 1 9 5 2 to 1 9 9 0 using the data on the most synthetic d e v e l o p m e n t indicator - social p r o d u c t per capita at c o n ­ stant prices o f 1 9 7 2 . In the Yugoslav statistics, these data, w h i c h w e r e based on the c o n c e p t o f material production, w e r e available in a g g r e gate terms for the w h o l e c o u n t r y as well as for e a c h separate federal unit. T w o concepts o f c o n v e r g e n c e prevail in the e c o n o m i c g r o w t h a n d d e v e l o p m e n t t h e o r y . T h e first c o n c e p t is ^ - c o n v e r g e n c e . It presumes that c o n v e r g e n c e exists u n d e r the condition that a p o o r e r c o u n t r y or a region within the c o u n t r y rises faster than the wealthier one in terms o f per capita p r o d u c t or i n c o m e . T h e second c o n c e p t is ^ - c o n v e r g e n c e . It measures dispersion o f the selected indicator in the observed units in e a c h selected year. T h i s c o n c e p t presumes that c o n v e r g e n c e exists if the dispersion decreases over time. H o w e v e r , there is a relation b e t w e e n the t w o concepts: the first c o n v e r g e n c e (the p o o r e r g r o w faster than the wealthier) generates the second c o n v e r g e n c e (decreasing of dispersion 14

15

16

320

NEVEN

BORAK

T a b l e 1 6 . 2 . Cross-units regressions ^-convergence

Sectoral composition

R

2

All units Year to year 5-year averages

—0.0004 0.971 (— 0 . I 0 0 ) ( 2 I . 0 ) — 0.004 1.035 (— 2 . 6 l ) ( 2 4 . 8 2 )

0.629 0.7II

Seven units (without Kosovo) Year to year

0 (

5-year averages

. 0

0 .

5

0

2

8

0.00I08 (0. 60I )

3

6

)

0 (

(

.

I

9

9

.

2

4 9

7

5

0 . 6 5

)

0.958 .48)

I

0.763

Four units (Bosnia-Herzegovina, Montenegro, Macedonia and Serbia Proper) Year to year 5-year averages

0. 00I 0.908 ( 0 . I 4 I ) ( I 2 . 8 8 ) 0 . 0 0 3 0 . 8 9 3 (

between

0

.

3

5

3

)

(

I

I

.

4

9

2

0.589 0

.

5

7

3

)

the p o o r a n d the wealthy). T h i s relation does not exclude

a

t e m p o r a r y increase in the second — that is, ^ - c o n v e r g e n c e as a conse­ q u e n c e of some e c o n o m i c disturbances increasing the disparities. T h e e c o n o m e t r i c estimations o f ^ - c o n v e r g e n c e (with t-values u n d e r the coefficients) are presented in table I 6 . 2 . Pooled time-series cross-sections w e r e estimated w i t h non-linear least s q u a r e s . T h e estimations w e r e m a d e for the eight federal units together, for the seven units exclud­ ing K o s o v o a n d for four units (Bosnia—Herzegovina, M o n t e n e g r o , M a c e d o n i a a n d Serbia proper). U n c o n d i t i o n a l c o n v e r g e n c e (depen­ d e n c e of g r o w t h rate on the initial level o f social p r o d u c t per capita) is assessed, as is conditional c o n v e r g e n c e , w h i c h includes an additional e x p l a n a t o r y variable. T h e additional variable measures the sectoral c o m p o s i t i o n o f social p r o d u c t in e a c h federal unit. It captures the effects of c h a n g i n g sectoral weights within a federal unit a n d w o u l d equal the g r o w t h rate o f per capita social product in unit i b e t w e e n t w o time periods if each o f the unit's sectors g r e w at the Yugoslav average rate for that sector. T h i s variable captures the effect of sectoral composition o f federal units' e c o n o m i e s on c o n v e r g e n c e . A s shall be s h o w n later, this 17

Economic and national conflicts in Yugoslavia

321

0.050

• Slovenia

0.022 0.018 7.2

Kosovo

7.4

7.6

7.8

8.0

8.2

8.4

8.6

8.8

9.0

Log of 1952 per capita social p r o d u c t

Figure 16.2. Divergences of per capita social product across Yugoslav federal units, ig§g—iggo

variable h a d m o r e t h a n m a r g i n a l significance. T h e calculations w e r e b a s e d on the basic data a n d their five-year averages. T h e results are additionally explained b y figure 1 6 . 2 , w h i c h shows the d e p e n d e n c e of the average g r o w t h rate o f per capita social p r o d u c t in the p e r i o d 1953—90 on the initial level o f per capita social p r o d u c t in i 9 5 2 . I f ^ - c o n v e r g e n c e existed the line in the g r a p h w o u l d have a different direction: it w o u l d be a d o w n w a r d line from north-west t o w a r d s south-east. T h e estimated c o n v e r g e n c e for d e v e l o p e d countries (the U n i t e d States a n d E u r o p e a n countries) h a d a value a r o u n d 2. T h i s value m e a n s that in thirty-five years the initial disparities w o u l d be cut by half. O n the contrary, in Yugoslavia an extreme divergence c a n be seen, as the orientation o f the line indicates that the disparities widened. T h e ^ - c o n v e r g e n c e is a different measure t h a n the ^ - c o n v e r g e n c e , a l t h o u g h they are closely related. T h i s measure is in fact a standard deviation of the l o g a r i t h m o f per capita social p r o d u c t in one year. T h e m o v e m e n t s o f a are presented in figure 1 6 . 3 . T h e r e are three curves in the g r a p h , the first indicating the m o v e m e n t a for the eight Yugoslav federal units, the second indicating its m o v e m e n t for seven units w i t h o u t K o s o v o a n d the third its m o v e m e n t for seven units w i t h o u t Slovenia. T h i s g r a p h also shows a strong divergence rather t h a n c o n v e r g e n c e in the observed period. T h e g r a p h also reveals some periods in w h i c h disparities decreased for a short p e r i o d o f time, w h i c h , however, w a s not e n o u g h to reverse the trend o f constantly increasing disparities.

322

NEVEN

BORAK

0.70 0.65

A l l units W i t h o u t Kosovo

0.60

Without Slovenia

0.55 0.50 0.45 0.40 0.35 0.30 0.25 1955

1960

1965

1970

1975

1980

1985

1990

Figure 16.3. cr-divergences of social product per capita across Yugoslav federal units

T h e results in table 1 6 . 2 show only the results that contain the estima­ tions o f conditional c o n v e r g e n c e (conditional on the sectoral c o m p o s i ­ tions of units' social products). T h e estimated fi coefficients are v e r y low, a n d here a n d there statistically insignificant. T h e estimation for all eight units shows a divergence. A s for d e p e n d e n c e on the initial per capita social p r o d u c t they show that the p o o r r e m a i n poor. A l t h o u g h the exclu­ sion o f K o s o v o c h a n g e s the sign o f the estimated fi coefficient, it is entirely statistically insignificant. T h e r e f o r e , the conclusion for all eight units remains u n c h a n g e d : the p o o r r e m a i n poor. T h e estimation o f the fi coefficient for four federal units is s o m e w h a t surprising, revealing that b e t w e e n t h e m there is n o c o n v e r g e n c e as for the initial size o f per capita social product. T h e i m p o r t a n c e o f sectoral composition is quite different. Apparently, it w a s the sectoral composition that w a s the key p r o m o t i n g or restraining factor o f c o n v e r g e n c e in g r o w t h rates. It is also the basis for all the discussions a b o u t investment, the l e a d i n g sectors a n d the l e a d i n g regions, w h i c h are presented in the following section o f this chapter. A Slovenian economist, Pavle Sicherl, shed some light on the time dimension o f disparities. H e calculated that the time distance (the n u m b e r o f years n e e d e d for the less d e v e l o p e d to catch u p with the m o r e developed) increased. T h e increase w a s different for different e c o n o m i c a n d social indicators. In 1971 the time distance b e t w e e n d e v e l o p e d a n d u n d e r d e v e l o p e d regions in Yugoslavia w a s 11.5 years in t e r m s o f per

Economic and national conflicts in Yugoslavia

323

capita social product, 5 years in terms o f productivity, 15 years in terms of e m p l o y m e n t , 4 0 years in terms o f d e m o g r a p h i c f a c t o r s . H e also m a d e comparisons for Slovenia a n d Yugoslavia in terms o f per capita social p r o d u c t in the period 1 9 5 5 - 8 5 . H e found that disparities in g r o w t h rates are considerably w i d e r w h e n c o m p a r i n g selected units in selected time periods than w h e n disparities b e t w e e n Slovenia a n d Yugoslavia are c o m p a r e d . His results also highlight the periods w h e n dis­ parities n a r r o w e d , visible in figure 1 6 . 3 . A l t h o u g h the relative disparities n a r r o w — w h i c h is largely related to the periods o f stagnation — the time distance increases. T h e developments w e r e as follows: a decline in e c o n o m i c g r o w t h goes h a n d in h a n d w i t h n a r r o w i n g o f relative disparities a n d increasing o f the time distance o f disparities. A s regards per capita social product, the time distance w a s constantly increasing a n d Y u g o slavia's l a g b e h i n d Slovenia w a s w i d e r every year: the lag o f 7.3 years in 1 9 6 0 rose to 17.5 years in 1 9 8 5 . Sicherl also noticed a general t e n d e n c y that the lags w e r e less significant for social indicators than they w e r e for e c o n o m i c indicators. T h e r e is another fact that draws the attention o f economists. T h e disparities b e t w e e n Yugoslavia a n d its federal units on the one h a n d a n d other countries on the other have also w i d e n e d . Sicherl found that Slovenia increased its lag — in terms o f time distance — b e h i n d w e s t e r n countries a n d the E u r o p e a n U n i o n but at the same time increased its a d v a n t a g e over other parts o f Yugoslavia, w h i c h n e e d e d increasingly m o r e time to catch u p w i t h S l o v e n i a . Sicherl m a d e t w o m a i n c o n c l u sions. O n e is that the e c o n o m i c b a c k g r o u n d for m o u n t i n g tensions in Yugoslavia w a s not only the stagnation a n d falling b e h i n d in e c o n o m i c indicators in absolute terms, but also the increasing disparities b e t w e e n the regions. T h i s frustration is the same as is felt b y Slovenia today, w h o s e stagnation m a k e s the prospects o f c a t c h i n g up w i t h E u r o p e a n d develo p e d countries even m o r e distant. T h e second conclusion is that the increasing disparities should be attributed to the inefficiency o f all, a n d not to exploitation a m o n g the r e g i o n s . W i t h this insight into divergence m o v e m e n t s it will be easier to understand the i m p o r t a n c e o f the discussion a b o u t d e v e l o p m e n t orientation a n d d e v e l o p m e n t m o d e l o f the country, w h i c h will be discussed next. 18

1 9

20

21

22

FROM NATIONAL PROGRAMMES TO DEVELOPMENT

MODELS

In the K i n g d o m o f Yugoslavia, the redistribution m e c h a n i s m s w e r e limited to the taxation system. T h e r e f o r e a unification o f a tax system

324

NEVEN BORAK

b e c a m e a sufficient cause for disputes a m o n g nations. T h e m o r e devel­ o p e d parts o f the c o u n t r y felt that they w e r e exploited as their tax b u r d e n w a s higher due to m o r e efficient tax collecting than w a s the case in other parts o f the country. O n the other hand, these m o r e d e v e l o p e d areas benefited from the protection of an internal market assured b y the customs system. T h e actual e c o n o m i c conflicts in fact b e g a n in times o f c o m m u n i s t Yugoslavia. W i t h the formation o f republics a n d the transfer o f a n u m b e r o f state functions, including e c o n o m i c functions, to the republics as well as w i t h the decentralisation o f the state, the conflicts m o v e d to the e c o n o m i c area a n d politics b e c o m e subordinated. T h e politicians h a d to provide an acceptable d e v e l o p m e n t p r o g r a m m e that w o u l d e m b r a c e the c o u n t r y in all its diversity. It never s u c c e e d e d in prov i d i n g one. T h i s p h e n o m e n o n a n d the developments that followed w e r e not overlooked by researchers. In the preface to his b o o k , J o s e p h B o m b e l l e s wrote: ' T h e pattern a n d v o l u m e o f investment s e e m to be v e r y important elements for an understanding o f c h a n g e s a n d conflicts in Y u g o s l a v i a . ' T h i s t h o u g h t shall be used as a starting point for the overview o f various d e v e l o p m e n t concepts a d v o c a t e d b y economists a n d politicians. S a b r i n a P. R a m e t bases his b o o k a b o u t Yugoslavia on the t h e o r y o f equilibrium b e t w e e n sovereign states. A Serbian economist, K o s t a M i h a i l o v i c , one o f the most p r o m i n e n t participants in the discussion a b o u t regional d e v e l o p m e n t a n d the position o f the Serbian nation in Yugoslavia a n d c o a u t h o r of the famous Memorandum of SANU(Serbian A c a d e m y of S c i e n c e a n d Arts) issued by the S e r b i a n A c a d e m y o f Science a n d Arts, also talked a b o u t this p h e n o m e n o n . M o r e o v e r , he a d d e d to it the role o f individual leaders o f n a t i o n s . T h e story a b o u t investment has b e e n in fact the so-called file rouge of the majority o f professional a n d political p o l e m i c s a b o u t centralisation and decentralisation, division o f p o w e r s b e t w e e n the federation, republics a n d a u t o n o m o u s provinces, and the role o f the market a n d a p l a n n e d economy. T h e s e polemics w e r e actually debates a b o u t the e c o n o m i c basis o f a society a n d the establishment o f social organisation. Politics, on the other h a n d , w a s only a m e a n s o f fulfilling certain d e v e l o p m e n t aspirations. Since any detailed presentation o f the polemics goes b e y o n d the scope of this chapter, it shall be restricted only to those parts that fall within the subject o f discussion or present different views o f the d e v e l o p m e n t models. In this w a y the link with the initially listed national p r o g r a m m e s a n d the disparities b e t w e e n the federal units shall be preserved. T h i s is even m o r e justified given the fact that the abolition o f Yugoslavia itself 23

24

25

26

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did not abolish different d e v e l o p m e n t views, w h i c h w e r e inherited by the n e w l y e m e r g e d countries. T h e break-up o f Yugoslavia did not diminish these conflicts: it only c h a n g e d their form. T h e y used to be interrepublic or inter-regional but could easily b e c o m e inter-state conflicts. T h e most i m p o r t a n t d e v e l o p m e n t views that w e r e e x c h a n g e d in c o m munist Yugoslavia are, basically, the views a d v o c a t i n g that a l e a d i n g region should be established w h i c h w o u l d provide a m o m e n t u m for the d e v e l o p m e n t o f other regions. T h e s e are not all d e v e l o p m e n t views. Different views c a n also be found within nations or federal units. T h e d e v e l o p m e n t concepts written d o w n in the federal units' or Yugoslavia's plans have b e e n m o r e or less avoided in this chapter; they mostly m a n i fested the substance o f the concepts that follow. a) The Donava development concept or the concept of the development of a central region. T h i s c o n c e p t has b e e n attributed to the aforementioned Serbian economist K o s t a M i h a i l o v i c . A c c o r d i n g to this c o n c e p t , in order to ensure stable a n d rapid d e v e l o p m e n t Yugoslavia should develop in the first place the production o f electricity, basic c h e m icals, basic iron a n d steel, basic non-ferrous metals, m a c h i n e r y a n d e q u i p m e n t , agriculture a n d food industry. T h e most favourable conditions for these e c o n o m i c sectors were in m e d i u m a n d lessd e v e l o p e d regions o f Yugoslavia - the w a t e r resources in Serbia (the D r i n a a n d D o n a v a rivers) a n d Bosnia, coal mines in K o s o v o , B o s n i a and Serbia, a n d gas a n d oil resources in C r o a t i a , V o j v o d i n a a n d Slovenia. Bosnia, M a c e d o n i a a n d Serbia w e r e rich in iron ore, so the m a i n steelworks were set up there. B a u x i t e as a resource for alumini u m p r o d u c t i o n w a s found in M o n t e n e g r o , D a l m a t i a a n d H e r z e g o v i n a . C o p p e r and lead, used in the production o f n o n ferrous metals, w e r e a b u n d a n t in Serbia and K o s o v o . T h e best conditions for agriculture w e r e in V o j v o d i n a , Slavonija, n o r t h e r n Serbia and B o s n i a and, h e n c e , the food-production industry should be d e v e l o p e d there. G i v e n all this, the priority area for industrialisation w o u l d incorporate the S a v a , T i s a , T a m i s a n d M o r a v a river basins, all flowing into the D o n a v a river, a n d the V a r d a r river basin. Investment in navigable rivers w o u l d m a k e these rivers a skeleton o f the transport infrastructure. T h i s c o n c e p t is close to the c o n c e p t o f a l e a d i n g nation, in this case the Serbian nation, w h i c h w a s the most heavily p o p u l a t e d nation in Yugoslavia. b) The Adriatic development concept. T h i s is a j o i n t project b y a g r o u p o f C r o a t i a n economists. Instead o f orientation towards the north-east implied by the D o n a v a c o n c e p t , the A d r i a t i c d e v e l o p m e n t c o n c e p t 27

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t u r n e d to the west and implied closer co-operation w i t h the w h o l e w o r l d . T h e Adriatic c o n c e p t incorporated the d e v e l o p m e n t o f a transport network t h r o u g h o u t the w h o l e territory o f C r o a t i a , w h i c h has the interesting shape o f an o p e n pair o f compasses that also e m b r a c e s a part o f Bosnia—Herzegovina. T h i s network w a s the last a n d most i m p o r t a n t stage o f the integration o f C r o a t i a n economy. T h e ends o f the compasses c o u l d not be linked w i t h o u t m a i n road connections, w h i c h w o u l d , however, lie on the territory o f the n e i g h b o u r i n g federal unit o f Bosnia—Herzegovina. A t the same time, orientation towards the A d r i a t i c w o u l d imply the shift o f the Yugoslav d e v e l o p m e n t priorities to the A d r i a t i c belt, thus b e c o m i n g a l e a d i n g region. c) K-concept or a decentralised Slovenian concept. T h e letter K coincides with the first letter o f the surnames o f the m a i n Slovenian politicians in the period o f b o t h Yugoslavias (Korosec, K a r d e l j , K i d r i c , K a v c i c a n d K u c a n ) , w h o h a d the most decisive influence in the formation o f the Slovenian idea a b o u t Yugoslavia. T h e notion o f the Slovenian model w a s used b y Susan W o o d w a r d , a n d the notion o f Kavcic's liberalism by a Slovenian historian, BoZo R e p e . T h i s m o d e l c a n be in general described as a Kardelj—Kidric d e v e l o p m e n t m o d e l o f socialism, based on the m a c r o e c o n o m i c proportions in distribution, emphasising the role o f productivity, market, d e m a n d , technological innovation, exports, m a n u f a c t u r i n g — all the c o m p o n e n t s l e a d i n g to so-called market socialism. Q u i t e justifiably, R u d o l f B i c a n i c a d d e d that a c c o r d i n g to this c o n c e p t the role o f the l e a d i n g region belongs to the most d e v e l o p e d region, w h i c h b y p r o m o t i n g rapid developm e n t accumulates investment resources for d e v e l o p m e n t o f other regions, w h i c h in turn follow the d e v e l o p m e n t o f the industrially most d e v e l o p e d part o f the country. T h e investment resources should be ensured by banks a n d enterprises and not by external or political force. T h i s overview, like the findings a b o u t divergence in the previous section, lead to the conclusion that Yugoslavia as such never really prosp e r e d as one single e c o n o m i c area able a u t o n o m o u s l y to r e p r o d u c e w i t h o u t strong and constant political intervention. 28

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A s already m e n t i o n e d in the introduction, the state system o f c o m m u nist Yugoslavia functioned at three levels: the level o f federation,

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republics, and a u t o n o m o u s provinces and communities. T h e same three-level system also applied to the e c o n o m i c content o f the constitu­ tional law. Prior to the constitutional a m e n d m e n t s o f 1 9 6 3 the entire e c o n o m i c system w a s built a r o u n d the federation. T h e 1 9 6 3 C o n ­ stitution still observed hierarchical relations a m o n g the three levels o f the state a n d provided c o r r e s p o n d i n g g r o u n d rules. It obliged the federation to ensure unity o f e c o n o m i c structure and the system o f social p r o d u c t distribution, leaving relatively little space for direction by the republics themselves as regards e c o n o m i c structure. T h e a d o p t i o n o f the Constitution o p e n e d a n e w front o f changes, w h i c h reflected a t e n d e n c y to strengthen the e c o n o m i c role o f the republics a n d provinces a n d lessen the role o f the federal centre. A c c o r d i n g to the belief prevailing at the time, the solution to the national p r o b l e m w a s closely c o n n e c t e d w i t h r e p u b l i c / p r o v i n c e - l e v e l sovereignty, w h i c h w a s supposed to grant republics the right to decide on issues other than u n d e r the federal authority. P o w e r a n d authority that the federal units g a i n e d at the expense o f the federal centre, however, did not r e d u c e disparities in the national structure o f the population nor address the issue o f national inequality within federal units. A n d no matter h o w harsh the subsequent critiques o f the events m a y have b e e n , n o n e of t h e m ever expressed any doubts in the belief that equality o f nations is achieved through autono m y o f federal units. M a n y research reports on the e c o n o m i c system o f Yugoslavia w e r e written in the 1 9 6 0 s , all o f t h e m addressing the issue o f the e c o n o m i c aspect o f the federation a n d the e c o n o m i c role o f federal units. T h e y all spoke in favour o f the belief that the e c o n o m i c role o f the republics w a s the most important element o f their a u t o n o m y and that this a u t o n o m y w a s based on equality a n d i n d e p e n d e n c e o f nations as the fundamental principle of Yugoslavia. It is understandable that recognition o f the e c o n o m i c role o f the republics instantly raised questions as to w h a t position national e c o n o m i e s (economies of federal units) c o u l d assume in a multinational state and, for that matter, in the single e c o n o m i c system o f Yugoslavia. F u r t h e r m o r e , national equality and the e c o n o m i c role o f the republics w e r e recognised as b e i n g closely c o n n e c t e d w i t h t w o issues: the question o f e c o n o m i c system a n d the question o f e c o n o m i c policy. A l l the studies r e g a r d e d co-operation o f all republics as the best solution to be applied in designing e c o n o m i c regulation on the federal level, in prep a r i n g m e d i u m - t e r m a n d l o n g - t e r m plans a n d in a d o p t i n g current or short-term e c o n o m i c policies. A l o n g with their e c o n o m i c role, the v e r y existence o f the republics w a s generally believed to e n c o u r a g e a n d

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confront different interests, particularly e c o n o m i c a n d d e v e l o p m e n t ones. Y e t in reality the studies only c o n f i r m e d w h a t politics w a s already using as the basis for the n e w constitution. T h e authoritarian r e g i m e in p o w e r m a d e it unlikely for the established economists to c o m e u p with views different from the ones described above. Nevertheless, t w o m o r e views o n the Yugoslav federation are e x a m i n e d below, as they provide a better illustration o f the situation. B o t h standpoints w e r e considered m a r g i n a l at the time since they express negative attitude towards the Yugoslav federation, a sentiment that w a s , in a v a r y i n g l y articulate form, present in all periods o f the federation's existence. A booklet from 1 9 6 8 , for e x a m p l e , states that: it is clear that, economically speaking, to the Slovenian people Yugoslavia is a constant loss of funds and an obstacle to a normal economic development . . . It does not allow us to independently manage resources to obtain the standard of living the Slovenian economy makes possible, the standard of living we could have if our development was not held back, the development the nation deserves for working hard and could have already reached if a large part of its resources had not been alienated from it against its will. The present situation is not so much a result of the faults of the leading officials in the present regime but primarily of the fact that we are in Yugoslavia. As it is, Yugoslav economic integration is not very highly valued by Slovenians and is even considered a great economic loss. 32

S i m e D o d a n , a C r o a t , s h o w e d m o r e c o u r a g e . I n the time o f ' C r o a t i a n spring' he published an article in w h i c h h e presented a n evaluation o f the e c o n o m i c position o f C r o a t i a in Yugoslavia a n d c o n c l u d e d that C r o a t i a w a s l a g g i n g b e h i n d other republics. In addition, h e p r o p o s e d some c h a n g e s that w e r e considered incomprehensible at the time: the break-up o f all federal finance a n d foreign trade institutions, the f o r m a ­ tion o f separate financial systems o f federal units, the formation o f central banks across federal units a n d co-ordination o f anticyclical e c o n o m i c policy a n d protection measures w i t h appropriate (but n o t defined) central organs o f the Socialist Federal R e p u b l i c o f Yugoslavia (SFRY). A c c o r d i n g to his view, the f r a m e w o r k o f the Yugoslav e c o n o m i c system should b e b r o a d e n o u g h to ensure the realisation o f the positive aspects of the e c o n o m i c m o d e l o f e a c h r e p u b l i c . V i e w s considered m a r g i n a l at the time o f publication found their place in the official statements o f state a n d political elites, w h i c h arose soon after the multiparty elections only t w e n t y years later. T h e e c o n o m i c contents o f the federation as p r o v i d e d for in the 1 9 7 4 Constitution also n e e d addressing. T h e Constitution g u a r a n t e e d 33

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equality o f nations in the federation as regards m a k i n g decisions a b o u t mutual interests, w h i c h a m o n g other things include c o m m o n e c o n o m i c a n d social d e v e l o p m e n t , based on principles of a g r e e m e n t , solidarity a n d mutuality, equal co-operation o f federal units in the federation bodies a n d direct co-operation a n d a g r e e m e n t s b e t w e e n federal units. W i t h these provisions the Constitution a i m e d to ensure national a n d social equality o f nations a n d abolish d o m i n a t i o n o f the central state or of a particular nation. A s a result, the federation's role w a s to enforce the foundations o f the single Yugoslav market, w h i c h consisted of free m o v e m e n t o f production factors, a single c u r r e n c y w i t h a single m o n e tary a n d foreign e x c h a n g e regulation, a n d c o m m o n monetary, foreign e x c h a n g e a n d credit policies a n d a single customs system w i t h a c o m m o n customs policy. T h e Constitution foresaw a system o f compensations for the entities, including the federal units, w h i c h w o u l d be affected b y the c o m m o n e c o n o m i c policy, the formation o f a Yugoslav social plan t h r o u g h a g r e e m e n t s o f federal units on the e c o n o m i c policy o f m u t u a l i m p o r t a n c e a n d a federal credit fund to accelerate d e v e l o p m e n t o f lessd e v e l o p e d federal units. Federal units b e c a m e responsible for their o w n social a n d e c o n o m i c d e v e l o p m e n t a n d also a c c e p t e d their share of responsibility for the d e v e l o p m e n t o f Yugoslavia as a w h o l e . Constitutional functions o f the federation a n d its republics, consistent fiscal decentralisation a n d a c o m m o n policy p a c k a g e p r e p a r e d b y the Federal A s s e m b l y a n d c o n f i r m e d in talks w i t h federal units r e m o v e d the obstacles to formation and implementation of a n u m b e r o f different federal units' policy mixes a n d styles. A c c o r d i n g to the assumption that the s o c i o - e c o n o m i c environment is the p r i m a r y d e t e r m i n a n t o f public policy and due to the h u g e differences b e t w e e n federal units, the n e w Constitution order g a v e the ultimate incentive to interplay o f different a n d in m a n y circumstances opposite a n d conflicting interests a n d attitudes. T o d a y p e o p l e still believe that the inappropriate social a n d e c o n o m i c regulation w a s the m a i n cause for the crisis. T h i s view, however, needs to be modified. T h e r e were also external e c o n o m i c a n d political factors, t w o o f w h i c h are o f key importance. T h e first factor w a s the disintegra­ tion o f the U S S R a n d the collapse o f c o m m u n i s m . It appears that the existence o f Yugoslavia w a s no longer necessary. T h e second reason is the m e c h a n i s m o f solving the foreign debt crisis. Foreign creditors m a n a g e d to impose on Yugoslavia the c o n c e p t o f total internal solidarity in r e p a y i n g debts, w h i c h required the adaptation o f internal e c o n o m i c order to assure the net out-flow of resources a b r o a d . F i n d i n g a

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solution to this p r o b l e m b e c a m e the p r i m a r y task o f e c o n o m i c policy a n d e c o n o m i c system restructuring. It gave a n additional impetus to dis­ integration of the single m a r k e t a n d single e c o n o m i c space o f the state a n d increased the conflicts over the distribution o f resources t h r o u g h federal g o v e r n m e n t . T h e expectations that the reform p r o g r a m m e s a n d their positive results w o u l d automatically r e m o v e all the a c c u m u l a t e d conflicts a m o n g federal units s e e m e d to be o n shaky g r o u n d . In the b e g i n n i n g o f the 1 9 8 0 s the o u t b r e a k o f the foreign debt crisis set Yugoslavia off o n the r o a d w h e r e the existing tensions a n d conflicting interests b e t w e e n federal units a g a i n strengthened the conflicts b e t w e e n the d e v e l o p e d a n d the less d e v e l o p e d . T h i s conflict w a s followed by a dispute a b o u t the centralisation or decentralisation o f the state, w h i c h w a s stirred u p b y central S e r b i a . S e r b i a d e t e r m i n e d l y e m b a r k e d o n the p a t h o f restructuring the S e r b i a n Constitution and abolishing the auton­ o m y o f the provinces o f K o s o v o a n d V o j v o d i n a , a n d later e n d e a v o u r e d to r e f o r m the federation a n d r e m o v e all its confederal c o m p o n e n t s . In these efforts S e r b i a w a s g u i d e d by a report that stated that central S e r b i a w a s l a g g i n g b e h i n d in e c o n o m i c d e v e l o p m e n t a n d b y dissatisfaction w i t h the constitutional position it h a d w i t h i n the Yugoslav federation, w h e r e it w a s , in practice, structurally e q u a l to the t w o a u t o n o m o u s regions. T h e a b o v e - m e n t i o n e d outbreak o f the debt crisis w a s just the most o b v i o u s a m o n g the d e e p - r o o t e d causes o f e c o n o m i c failure. It indicated ultimate failure o f the investment cycle o f the 1970s, w h i c h w a s financed w i t h r e c y c l e d oil dollars a n d triggered b y estimates that o n the w o r l d level there w a s to be another l o n g - t e r m increase in the prices of p r i m a r y products. T h e s e circumstances gave a fresh impetus to those advocating a d e v e l o p m e n t policy o f autarky, based on domestic natural resources a n d the strategy o f i m p o r t substitution. Internal credit transfer, required by a t u r n a r o u n d in foreign financial flow, w h i c h unsuccessful investments m a d e even harder, w a s designed to cover the losses banks a n d c o m p a nies m a d e a n d to collect funds to r e p a y foreign debts. T h e transfer of resources applied several m e c h a n i s m s : solidarity cycles (three levels o f solidarity w e r e established: b e t w e e n enterprises, banks a n d federal units) to r e p a y foreign debts, b u d g e t a n d off-budget financing o f the federa­ tion, a n d expansive m o n e y creation. F r o m the point o f v i e w o f m a c r o e c o n o m i c s , these fundamental m e c h a n i s m s o f redistribution functioned w i t h i n two adjustments in the b a l a n c e o f p a y m e n t s : the international b a l a n c e o f p a y m e n t s and the (less obvious) inter-regional b a l a n c e . B o t h adjustments are k n o w n in t h e o r y but the p r o b l e m o f adjustment in the inter-regional b a l a n c e o f p a y m e n t s w a s not a c k n o w l e d g e d b y Yugoslav 35

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economists, although they h a d lively debates on the problems o f lessd e v e l o p e d regions, 'extra i n c o m e ' , investments a n d the operation o f the single Yugoslav market. A n interesting feature o f the discussion w a s that it introduced issues k n o w n from the debates on the w o r l d w i d e p r o b l e m s of d e v e l o p e d a n d less-developed regions, but said v e r y little a b o u t the characteristics o f the formation o f the E u r o p e a n internal market, e m e r g i n g on the other side o f the western Yugoslav border. W i t h rising e c o n o m i c a n d political crisis the c o u n t r y entered into constitutional crisis, too. T h e legal system o f federal units w a s closely c o n n e c t e d w i t h the legal system of Yugoslavia. U n d e r the Yugoslav Constitution a single s o c i o - e c o n o m i c order a n d the same foundations o f the Yugoslav market w e r e to apply to the entire area of the state. K e y e c o n o m i c issues w e r e regulated by federal legislation, w h i c h included the current e c o n o m i c policy measures. T h e situation called for the p r e p a r a tion o f appropriate constitutional g r o u n d w o r k . T w o republics w e r e at the forefront o f these changes. Preparations for the c h a n g e s in Slovenian constitutional laws w e r e undertaken simultaneously w i t h the p r e p a r a tions for constitutional c h a n g e s o f the Yugoslav Constitution. B u t c h a n g e s in the constitutional position o f the R e p u b l i c o f Serbia, w h i c h subordinated the provinces o f V o j v o d i n a a n d K o s o v o a n d retained their votes in d e c i s i o n - m a k i n g processes at a federal level, introduced a request for the constitutional a n d legal position o f Slovenia in Yugoslavia to be c h a n g e d as well. After b o t h republics, first Serbia a n d then Slovenia, h a d undertaken constitutional c h a n g e , Yugoslavia b e c a m e an a s y m m e t r i c federation. In Slovenia the a m e n d m e n t s to the 1 9 7 4 Constitution o f the R e p u b l i c o f Slovenia a n d constitutional acts for their i m p l e m e n t a t i o n created the necessary conditions. T h e s e f o r m e d the constitutional framework for either the g r a d u a l abolition o f federal legislative and regulations or their integration into the legal system o f the R e p u b l i c o f Slovenia. T h e p r o c e d u r e m a y well be u n d e r s t o o d as an answer to the a m e n d m e n t s to the Yugoslav Constitution, w h i c h a i m e d at p r o m o t i n g further centralisation o f the federation. In his assessment of the a m e n d m e n t s Ciril R i b i c i c stated: ' W i t h these constitutional rights Slovenia has taken a right to decide for itself, u p to a point, w h i c h decisions m a d e b y the federation bodies c o n c e r n it a n d w h i c h do not, a n d w h i c h it will apply a n d w h i c h not. It is a right to nullification, w h i c h opens for Slovenia the d o o r to an a s y m m e t r i c a n d confederal position in Yugoslavia.' In the a u t u m n o f 1 9 9 0 C r o a t i a a n d Slovenia published a j o i n t d o c u ­ m e n t that c o n t a i n e d a proposal o f confederation a c c o r d . T h e t w o 36

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republics p r o p o s e d that the Yugoslav federation be transformed into a confederal state, f o r m e d by sovereign states with an a i m to i m p l e m e n t their c o m m o n goals. T h e first condition for the m o d e l to be a d o p t e d w a s the basic e c o n o m i c interest — a g u a r a n t e e d c o m m o n m a r k e t — a n d the second, participation in E u r o p e a n integration processes. In the p r o posed confederation a c c o r d special emphasis w a s p l a c e d on e c o n o m i c issues. T h e m o d e l confederation w o u l d have a c o m m o n market, p r o tected with a customs u n i o n and some f o r m o f m o n e t a r y union. In the fields of transport, c o m m u n i c a t i o n s , e n e r g y p r o d u c t i o n and agriculture the states w o u l d h a r m o n i s e their policies or create a c o m m o n policy. A constituent part o f the a g r e e m e n t w o u l d be a n t i - m o n o p o l y provisions a n d regulations g o v e r n i n g competition, d u m p i n g prevention, a n d public invitations for tenders a n d subsidies. B u t the e c o n o m i c content of this p r o p o s e d a c c o r d w a s not the crucial question. T h e transformation of federal units into i n d e p e n d e n t states a n n o u n c e d the c h a n g e o f status o f previously equal nations: they w e r e offered the option only to e x c h a n g e national equality for status o f minorities or even foreigners. T h i s w a s especially u n a c c e p t a b l e for the S e r b i a n nation: the only preferred option for t h e m w a s to retain full sovereignty in Serbia, to be a constituent nation in Bosnia—Herzegovina and a minority in C r o a t i a . T h u s the essence o f the Yugoslav p r o b l e m — the question o f the Serbian nation a n d its relation with the C r o a t s — w a s revealed again. R e s p o n s e to the Slovenian—Croat confederation a c c o r d arrived in the f o r m o f a p r o p o s e d Yugoslav constitutional order b a s e d on federal foundations, w h i c h w a s p r e p a r e d by S e r b i a and M o n t e n e g r o . T h e d o c u m e n t r e g a r d e d republics as i n d e p e n d e n t states that assert a part o f their sovereign rights in the Federal R e p u b l i c o f Yugoslavia. Yugoslavia w a s defined as a single e c o n o m i c territory w h e r e all forms o f property are protected and business initiatives e n c o u r a g e d . Its single m a r k e t w a s to consist of the free flow o f goods, services, l a b o u r force a n d capital; it w a s to have a single monetary, foreign e x c h a n g e , customs a n d b a n k i n g system a n d a c o m m o n m o n e t a r y a n d foreign e x c h a n g e policy, a single fiscal system a n d a c o m m o n fiscal policy, a c o m m o n p o l i c y regulating foreign affairs a n d c o m m o n d e v e l o p m e n t and e c o n o m i c p o l i c y a n d the strategy o f scientific a n d t e c h n o l o g i c a l d e v e l o p m e n t of the state. E c o n o m i c functions o f the federation w o u l d be: regulation o f o w n e r s h i p rights; regulation o f corporate l a w a n d the fiscal a n d b a n k i n g system; regulation a n d provision o f the m o n e t a r y system, foreign trade a n d foreign e x c h a n g e system, and the system o f protection measures; protection o f competition, c o m m o d i t y reserves and large t e c h n o l o g i c a l 3 8

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systems; formation o f a c o m m o n e c o n o m i c policy a n d a policy to e n c o u r a g e d e v e l o p m e n t o f less-developed areas; a n d regulation o f areas i m p o r t a n t to the entire state such as transport a n d c o m m u n i c a t i o n s , w a t e r m a n a g e m e n t a n d the environment. T h e key part o f the proposal, w h i c h w a s radically c h a n g i n g relations within the federation a n d could therefore not count on the support o f Slovenia and C r o a t i a , w a s the introduction o f majority decision-making in the Federal Assembly, w h i c h w o u l d be elected on the principle o f one-man-one-vote. T h i s w o u l d r e m o v e from the constitution the issue o f key i m p o r t a n c e a n d great delicacy in the Yugoslav federalism — consensual v o t i n g o f republics and regions. Yugoslavia entered the final phase o f its existence with t w o diametrically o p p o s e d proposals, a n d without any willingness to h a r m o n i s e its views.

GONGLUSION

T h e break-up o f the A u s t r o - H u n g a r i a n M o n a r c h y after the First W o r l d W a r a n d the formation o f the Yugoslav state m e a n t that the united southern Slavic nations w e r e faced w i t h a c h a n g e in the e c o n o m i c area. W h a t these nations b r o u g h t into the n e w state has b e e n d e v e l o p i n g in different circumstances a n d in different settings. Unification o f the n e w state w a s also a unification o f its different inherited e c o n o m i c institutions a n d o f the e c o n o m i c a n d social order. T h e processes o f unification w e r e painful. T h e y included the question o f property rights (sequestration, nationalisation or nostrification, a n d agrarian reform), c u r r e n c y reform, liberalisation o f exports, return to the gold standard, c u s t o m a n d taxes laws, c o m p a n y law, resolution of internal (agricultural) debt crisis a n d introduction o f a social security system, the beginnings o f labour-market policies a n d the subordination to G e r m a n e c o n o m i c pressures in the late 1930s. Before the S e c o n d W o r l d W a r e c o n o m i c d e v e l o p m e n t w a s based p r e d o m i n a n t l y on liberalist market principles, although the 1 9 3 0 s saw a decisive shift to state interventionism in the economy. T h e i m p a c t o f these c h a n g e s w a s u n e q u a l across the country. D u r i n g the S e c o n d W o r l d W a r the c o u n t r y w a s brutally d i s m e m b e r e d and its resources were used to support the G e r m a n w a r effort. T h e tribute that the c o u n t r y paid w a s a m o n g the heaviest in o c c u p i e d E u r o p e . W i t h c h a n g e d social relations a n d a n e w philosophy after 1 9 4 5 , the situation altered in several respects. Initial r e c o v e r y from the w a r w a s successful. B u t e c o n o m i c incentives w e r e denied at the v e r y core o f the

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state a n d society. T h e role o f the state b e c a m e omnipotent: a p l a n n e d e c o n o m i c system a n d ownership of m e a n s of p r o d u c t i o n w e r e c o n c e n ­ trated in the state party apparatus, w h i c h m a d e all decisions a n d c o ­ ordinated everything. W h e n resulting obstacles w e r e recognised by the architects of c o m m u n i s t Yugoslavia, a series o f b r o a d reforms w e r e l a u n c h e d trying to find a p r o p e r g o v e r n a n c e system, w h i c h w o u l d rec­ oncile the n e e d for decentralised d e c i s i o n - m a k i n g in the e c o n o m y w i t h a one-party political system a n d g r o w i n g statehood o f federal units. Constitutional transfer o f p o w e r from the federal state to federal units w a s seen as a p r o p e r solution for Yugoslav m i c r o c o s m s . B u t it w a s soon u n d e r s t o o d that these changes w e r e not e n o u g h . A bridge w a s l o o k e d for to ensure cohesion. It w a s anticipated that this bridge w a s to be c o n structed by the last great transformation o f Yugoslav socialism: the introduction o f free associated l a b o u r a n d o f the system o f delegation as a basis o f political system, w h i c h w a s the last attempt o f the founders o f c o m m u n i s t Yugoslavia to build a society w i t h o u t g r a n t i n g market forces a n d a multiparty system any significant role. Ironically, the c o n c e p t of associated l a b o u r a n d the constitutional responsibilities o f federal units for their o w n d e v e l o p m e n t a n d for the d e v e l o p m e n t o f Yugoslavia as a w h o l e w a s v e r y well understood b y foreign creditors, w h o i m p o s e d total federal responsibility for foreign debts o f Yugoslavia after the outbreak of the foreign debt crisis. T h i s federal responsibility and total socialisation o f foreign debts w a s a greater b l o w to e c o n o m i c incentive even t h a n the socialist system itself. In such circumstances the c o u n t r y w a s defeated. W h a t h a p p e n e d later w a s only the search for a m e c h a n i s m o f allocation o f the burdens i m p o s e d by the defeat. T h e g r o w i n g g a p and the timescale o f c a t c h i n g u p a m o n g the federal units w a s a central p r o b l e m o f Yugoslav e c o n o m i c d e v e l o p m e n t . Inability to solve these g r o w i n g e c o n o m i c disparities led to the nevere n d i n g restructuring o f the country's constitutional order, its political a n d e c o n o m i c system. B e i n g at the same time a peripheral E u r o p e a n c o u n t r y w i t h a mixture o f south-, central- a n d east-European d e v e l o p m e n t characteristics the c o u n t r y w a s in constant search for the proper d e v e l o p m e n t m o d e l that w o u l d satisfy the requirements a n d aspirations of its different nations a n d their political elite. It seems that this search w a s influenced b y geopolitical c h a n g e s after the demise o f socialism. It seems that the c o u n t r y w a s b o r n in b l o o d a n d it died in b l o o d due to a c o m b i n a t i o n o f internal (southern Slav) and external circumstances. T h e proper role a n d w e i g h t o f e a c h o f t h e m is yet to be evaluated.

Economic and national conflicts in Yugoslavia

335

NOTES

1 Regional Disparities and Developments in the Republics of Yugoslavia, (Paris, March 1992, unpublished). 2 Similar attempts were made by Slovenian economist Franjo Stiblar in 'The rise and fall of Yugoslavia: an economic history view' in Alice Teichova (ed.), Central Europe in the Twentieth Century: An Economic History Perspective (Aldershot; 1997), PP. 6 1 - 8 2 and Serbian economist Milica Uvalic in 'The disintegra­ tion of Yugoslavia: its costs and benefits', Communist Economies & Economic Transformation 5 (1993), 2 7 3 - 9 3 .

3 Zgodovina narodov Jugoslavije,Prva in druga knjiga [A history of Yugoslav nations, Books i and 2 ] , (Ljubljana, 1953 and 1959). 4 Patrick Bolton, Gerard Roland and Enrico Spolaore, 'Economic theories of the break-up and integration of nations', European Economic Review 4 9 (1996), 6

9

7

-

7

°

5

.

5 In Charles Jelavich, .South Slav Nationalism Textbook and Yugoslav Union before 1914 (Columbus, OH, 1990) one can find a detailed discussion about the role of educational process in the development and preservation of national identity. 6 Enciklopedija Jugoslavije, 2. izdaja, cetrta knjiga [Encyclopedia of Yugoslavia, 2nd edn, vol. IV], (Zagreb, i 989 - Slovenian edition), p. 3 i 2. The second edition of Enciklopedija Jugoslavije [Encyclopedia of Yugoslavia] remained an unfinished project. 7 The main idea of Illyrianism - to create a common culture for all South-Slavs on the basis of a unique literary language - was rejected by those nations. From 848 the terms Yugoslav and Croatian replaced Illyrian to designate the national movement. The role of Slav nationalism and Yugoslavism in the i 860s in Croatia is explained in Mirjana Gross, 'The union of Dalmatia with northern Croatia: a crucial question of the Croatian national integration in the nineteenth century' in Mikulas Teich and Roy Porter (eds.), The National Question in Europe in Historical Context (Cambridge, 993), pp. 2 7 0 - 9 2 . 8 Enciklopedija Jugoslavije,cesta knjiga [Encyclopedia of Yugoslavia, vol. VI], (Zagreb, - Croat or Serbian edition, in Latinic transcription), p. 33. 9 Janko Pleterski, Narodi,revolucija,Jugoslavija [Nations, revolution, Yugo­ slavia], (Ljubljana, i 986); Branko Petranovic, Istorija Jugoslavije 1918—1978 [A history of Yugoslavia, 9 8 - 978], (Beograd, 980). i 0 Rudolf Bicanic, Ekonomska podloga hrvatskog pitanja [Economic basis of the Croatian question] (Zagreb, 938). i i Andrej Gosar, Banovina Slovenija. Politicna, financna in gospodarska vprasanja [Ban's Country of Slovenia. Political, financial and economic issues], (Ljubljana, 940). i 2 Istina o Ekonomskoj podlozi hrvatskog pitanja — Odgovor g. dr. Bicanicu [The truth about the economic basis of the Croatian question - Answers to Dr Bicanic], (Beograd, i 940). The authors were Gojko Grdic, Vladimir Dordevic, Jovan Lovcevic, Milan J. Zujovic, Bogdan Prica and Slobodan M. Draskovic.

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13 Aleksander Bilimovic, 'Privredno uredenje Jugoslavije: sporazum od 26. avgusta 1939 god' [Economic system of Yugoslavia: the agreement from August 26, 1939], Narodno blagostanje 24 (1940), 5 3 1 - 4 ; Jovan DordeviC, Osnovnapitanjafederalnih drfava [The basic issues of federal states], (Beograd, 1940); Ljubomir S. Dukanac, Privredno uredenje federalnih drCcava [Economic system of federal states], (Beograd, 1940). 14 J. K. Galbraith, The Nature of Mass Poverty (Harmondsworth, 1980), pp. 17-18.

15 OECD, RegionalDisparities,p. 25. 16 R. Barro and X. Sala-I-Martin, Economic Growth (New York, 1995), pp. 25-32.

The formulae for convergence calculation are available in ibid., pp. 3 8 3 - 7 . 18 Pavle Sicherl, 'Time-distance as a dynamic measure of disparities in social and economic development', Kyklos 26 (1973), 5 5 9 - 7 5 . 19 Pavle Sicherl, 'Novi vidiki merjenja razlik v razvitosti: Primerjava Slovenije in Jugoslavije' [New issues in measuring the differences in development: comparison between Slovenia and Yugoslavia], Zbornik znanstvenih razprav 49 17

(1989), 1 8 1 - 2 0 1 .

20 Aleksander Bajt, 'Trideset godina privrednog rasta' [Thirty years of economic growth], Ekonomist 38 (1980), 1 - 1 8 ; Pavle Sicherl, Slovenija zdaj. Primerjava indikatorjev razvitosti [Slovenia now: comparison of development indicators], (Ljubljana, 1990); Ljubomir MadZar, Suton socijalistickih privreda [Decline of socialist economies], (Beograd, 1990). 21 Sicherl, Slovenija zdaj,pp. 1 3 0 - 1 . 22 Ibid., p. 131. 23 Joseph T. Bombelles, Economic Development of Communist Yugoslavia (Stanford, 1968), p. vi.

24 Sabrina P. Ramet, Nationalism and Federalism in Yugoslavia, 1962—1991 (Bloomington, IN, 1992). 25 Memorandum SANU [Memorandum of the Serbian Academy of Sciences and Arts], (Duga,June 1989), special issue. 26 Kosta Mihailovic, Regionalna stvarnost Jugoslavije [A regional reality of Yugoslavia], (Beograd, 1990), pp. 7 7 - 9 6 . 27 Kosta Mihailovic, 'Regionalni aspekti privrednog razvoja' [Regional aspects of economic development], Ekonomist i i (1958), 1 - 4 1 . 28 R. Bicanic, 'O jadranskoj koncepciji ekonomskog razvoja Jugoslavije' [On the Adriatic development concept of Yugoslavia], Pomorstvo 9 - 1 0 (1964), 2 8 6 - 7 . Before the break-up of Yugoslavia, this concept was mentioned in the study by Josip Dezeljin and Dragomir Sundac (eds.), Pomorska orientacija Jugoslavije [A maritime orientation of Yugoslavia], (Rijeka, 1988). 29 Susan L. Woodward, Socialist Unemployment. The Political Economy of Yugoslavia 45 "o i" 30 Bozo Repe, Liberalizem [Liberalism], (Ljubljana, 1992). Although Repe did not invent this notion, he was the one who most thoroughly dealt with its substance. I9

—I

( P r i n c e t o n ,

5

)

.

Economic and national conflicts in Yugoslavia 31

32 33

34 35

36 37

38

337

Rudolf Bicanic, Economic Policy in .Socialist Yugoslavia (Cambridge, 1973), p. 201. See also Repe, Liberalizem,pp. 4 0 - 6 . Slovenja ig68 kam? [Slovenia 1968, where are you going?], (Trieste, 1968; reprinted Ljubljana, 1990), pp. 1 0 - 1 1 ; quoted after the 1990 issue. Sime Dodan, 'Evolucija gospodarskog sustava SFRJ i ekonomski polozaj Hrvatske' [Evolution of the economic system of SFRY and economic posi­ tion of Croatia], Hrvatski knjizevni zbornik 2 (1971), 3 - 1 0 2 . Ustava Socialisticne federativne republike Jugoslavije [Constitution of Socialist Federative Republic of Yugoslavia], (Ljubljana, 1974). Ivan Stambolic, Rasprave o Srbiji [Discussions on Serbia], (Zagreb, 1988). The author was a former president of Serbia and became the first victim of Milosevic's march to Yugoslavia. The book begins with a chapter 'Serbia lagging behind' and finishes with the chapter 'Explanation of a proposal for the change of the Socialist Republic Serbia Constitution'. Ciril Ribicic, Ustavnopravni vidik osamosvajanja Slovenije [A constitutional aspect of the Slovenian road towards independence], (Ljubljana, 1992), p. 23. Modelkonfederacje v Jugoslaviji [A confederate model for Yugoslavia], (Zagreb and Ljubljana, Presidency of the Republic of Croatia and the Republic of Slovenia, joint expert working group, 4 October 1990). Koncept ustavne ureditve Jugoslavije nafederativnih temeljih [A concept of a constitu­ tional system for Yugoslavia on a federal basis], (Beograd, 16 October 1990).

C H A P T E R

17

Economic differentiation and the national question in Poland in the twentieth century Jerzy Tomaszewski

T h e share o f national minorities in P o l a n d in 1931 c a n be estimated at a b o u t 3 6 per cent o f the total population. T h e basic data are s h o w n in table 1 7 . i . T h e characteristic feature o f these minorities w e r e significant differences in their social structure a n d e c o n o m i c situation c o n n e c t e d w i t h the regional differences b e t w e e n the provinces o f the Polish R e p u b l i c . R e g i o n a l differentiation a n d specific social and e c o n o m i c features o f national minorities a n d the d o m i n a t i n g Polish nation w e r e caused by the historical d e v e l o p m e n t o f the country. In some cases these differences w e r e rooted in m e d i e v a l times (for e x a m p l e , the different structure of land ownership) a n d d e e p e n e d d u r i n g the nineteenth century, w h e n the territory o f the former Polish C o m m o n w e a l t h w a s divided b e t w e e n the three n e i g h b o u r i n g p o w e r s - Austria, Prussia a n d Russia — a n d incorporated into the three e c o n o m i c and political units o f greatly differing size, e c o n o m i c structure a n d policy. A t the b e g i n n i n g of the twentieth century the three parts o f the future Polish R e p u b l i c included in these three political a n d e c o n o m i c units varied significantly. T h e lands included at the end o f the eighteenth c e n t u r y a n d after 1 8 1 5 in the Prussian K i n g d o m d e v e l o p e d a strong a n d relatively m o d e r n agriculture with small industrial enterprises and services related to the needs o f the agricultural population. T h e future Poznari a n d P o m o r z e provinces w e r e agricultural lands delivering their products to the industrial regions o f the G e r m a n E m p i r e . T h e Prussian administration supported the G e r m a n minority in these provinces, organised a n d financed the influx o f G e r m a n farmers, businessmen a n d officials from the western part o f the m o n a r c h y a n d tried to impose the G e r m a n l a n g u a g e and culture u p o n the local Polish a n d J e w i s h p o p u l a tion. Polish landlords, farmers a n d small businessmen d e v e l o p e d a net o f Polish co-operatives a n d institutions, w h i c h h e l p e d to defend their interests against the state administration a n d their G e r m a n neighbours. T h e financial centre o f the Polish co-operatives a n d small business w a s the 1

338

Economic and national differentiation in Poland

339

T a b l e 1 7 . 1 . The ethnic structure of the population in Poland, igji Nationality Total Poles Ukrainians Jews Belorussians Germans Lithuanians Russians Others

Thousands

Per cents

32,107

100

20,650

64

, 2

16

5 45

10 1,966

6

784

2

200

1

140

1

89

0

Note: T h e numbers include soldiers in barracks. Sources: J. Tomaszewski, Ojczyzna nie tylko Polakow [A fatherland not only of Poles], (Warsaw, 1985), p. 50 and E. Makowski, Litwini w Polsce igso-iggg [Lithuanians in Poland 1 9 2 0 - 1 9 3 9 ] , (Warsaw, 1986), pp. 2 6 - 8 .

B a n k Z w i a z k u S p o l e k Z a r o b k o w y c h (Bank of the U n i o n o f C o - o p e r a ­ tives). M a n y J e w s (most often p o o r p e o p l e w h o w e r e e x p e n d a b l e from the point o f v i e w o f the G e r m a n administration) e m i g r a t e d — either v o l u n ­ tarily or involuntarily — to the Russian part o f the Polish lands, while their m o r e affluent co-religionists w e r e assimilated (not w i t h o u t legal a n d e c o n o m i c pressure exerted by the G e r m a n administration) into the G e r m a n culture a n d l a n g u a g e . T h e y w e r e not n u m e r o u s in these lands a n d m a n y o f t h e m settled later in the central or western regions o f Germany. T h e G e r m a n administration introduced a similar policy in U p p e r Silesia, m a i n l y inhabited by the Polish-speaking population but w i t h a significant n u m b e r o f G e r m a n workers a n d peasants w h o h a d settled there since the thirteenth century. T h i s region w a s one o f the most important industrial centres o f G e r m a n y . T h e mines a n d most o f the other enterprises r e m a i n e d in the hands o f w e a l t h y G e r m a n aristocratic families, although w i t h g r o w i n g influence o f the businessmen from other social classes. S o m e of the owners w e r e descendants o f or akin to old Slavic local royal families. Silesia h a d a c o m p l i c a t e d history. In the past it h a d b e l o n g e d to the

340

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TOMASZEWSKI

Polish K i n g d o m , later to the C z e c h K i n g d o m a n d w a s i n c o r p o r a t e d — together w i t h other parts o f the C r o w n L a n d s o f St V e n c e s l a v — into the H a b s b u r g M o n a r c h y ; but in the eighteenth c e n t u r y a greater part o f it w a s c o n q u e r e d b y Prussia. O n l y a small part of Silesia (Teschen Silesia, Slask Cieszyriski or Tesinske Slezsko) r e m a i n e d in the H a b s b u r g M o n a r c h y and after 1 9 1 8 w a s divided b e t w e e n P o l a n d a n d C z e c h oslovakia. T h e southern provinces o f the old Polish C o m m o n w e a l t h , included in the H a b s b u r g M o n a r c h y , consisted o f relatively p o o r agricultural land w i t h large estates a n d small peasant farms. T h e m o r e d e v e l o p e d w e s t e r n regions w e r e inhabited by Polish peasants; in the almost exclusively agri­ cultural eastern part (a notable exception here w a s the oil industry) the majority o f peasants w e r e U k r a i n i a n s with, however, a significant n u m b e r o f Polish peasants. T h e t o w n s a n d cities h a d a n u m e r o u s Jewish minority; however, in several small towns the J e w s constituted a majority of the local p o p u l a t i o n as a kind of industrial a n d c o m m e r c i a l class. A significant part o f the territories o f the former Polish C o m m o n w e a l t h b e c a m e the so-called C o n g r e s s P o l a n d created after the V i e n n a C o n g r e s s in 1 8 1 5 a n d subordinated to the Russian emperor, w h o assumed the title o f the K i n g o f Poland. C o n g r e s s P o l a n d w a s deprived of all r e m n a n t s of a u t o n o m y after the uprisings o f 1831 a n d 1 8 6 3 a n d i n c o r p o r a t e d into the Russian E m p i r e . It w a s an important industrial region of Russia; however, a majority o f the p o p u l a t i o n w a s e n g a g e d in agriculture, w h i c h w a s b a c k w a r d in c o m p a r i s o n w i t h western E u r o p e (including the Polish lands i n c o r p o r a t e d in G e r m a n y ) but relatively well d e v e l o p e d c o m p a r e d with Russia. T h e p o p u l a t i o n w a s m a i n l y Polish w i t h a significant J e w i s h minority e n g a g e d in trade a n d industry (mainly small businessmen, peddlars, artisans a n d workers) a n d a tiny g r o u p o f Russian g o v e r n m e n t officials, teachers, p o l i c e m e n a n d other professionals. T h e lands east o f C o n g r e s s P o l a n d (so-called 'lost lands' i n c o r p o r a t e d into Russia in the second half of the eighteenth century) w e r e e c o n o m ically least developed. T h e s e areas w e r e m a i n l y inhabited b y Belorussian, L i t h u a n i a n a n d U k r a i n i a n peasants; however, in some regions, n o t a b l y the c o u n t r y a r o u n d V i l n a (Vilnius or W i l n o ) a n d south from this city, Polish villagers prevailed. T h e towns w e r e mostly i n h a b ited b y J e w s w i t h a significant minority o f Poles, Russians and other national groups. V i l n a w a s the most important city o f this region. It w a s the centre o f flourishing Polish, J e w i s h a n d Belorussian culture a n d the

Economic and national differentiation in Poland

341

historical capital city o f L i t h u a n i a . T h e most b a c k w a r d province w a s Polesie, with strong r e m n a n t s o f a pre-capitalist e c o n o m y — in some remote places a barter e c o n o m y still. T h e s e regional differences w e r e a c c o m p a n i e d by the no less impor­ tant specific social features o f individual ethnic groups. T h e nobility (a political nation) o f the old Polish C o m m o n w e a l t h before the partitions was, as a rule, Polish. It is true that this nobility h a d incorporated different ethnic groups in the past, notably R u t h e n i a n s a n d Lithuanians, in some regions A r m e n i a n s and Tartars, a n d sometimes J e w s w h o w e r e baptised. A l m o s t all o f t h e m were influenced b y the d o m i n a t i n g Polish culture and at the end o f the eighteenth century these ethnic differences lost their importance in most cases, r e m a i n i n g only as a cherished tradition o f a famous past o f particular families. Several o f t h e m were p r o u d of their ancestors, w h o h a d b e e n princes and dukes o f the G r e a t D u c h y of L i t h u a n i a . T h e r e lived, however, in m a n y rural settlements the descendants o f the small gentry (szlachta zagrodowa), m o r e or less similar to English y e o m e n , w h o h a d small farms a n d lived side b y side with peasants. T h e y spoke v e r n a c u l a r (local peasant) dialects, attended the village churches, w o r k e d on their plots a n d r e m e m b e r e d only that their ancestors w e r e knighted b y the Polish kings. T h e gentry m a i n t a i n e d social distance from the peasants; the e c o n o m i c situation o f b o t h groups w a s , however, similar. T h e policy o f the three p o w e r s in the nineteenth century caused significant changes. A n u m b e r o f estates in the G e r m a n part o f Poland w e r e b o u g h t by G e r m a n l a n d o w n e r s and farmers, often with the help o f authorities and not w i t h o u t pressure on former Polish owners. T h e Russian authorities confiscated several Polish estates (especially in the 'lost lands') a n d offered t h e m to loyal Russian landowners. In the second half o f the nineteenth century in all parts o f these territories several estates w e r e divided a m o n g small farmers or sold to people not b e l o n g ing to the nobility; a m o n g t h e m w e r e J e w i s h businessmen, especially in the south-eastern provinces b e l o n g i n g to Austria. T h e s e c h a n g e s did not influence the general conviction of Belorussian, L i t h u a n i a n a n d U k r a i n i a n peasants that the Poles w e r e 'lords' a n d the Polish l a n g u a g e w a s the ' l a n g u a g e o f lords', w h e r e a s their languages w e r e the 'languages o f peasants'. T h e l a n g u a g e w a s a s y m b o l of social status. Small gentry used single Polish w o r d s and addressed socially e q u a l persons with the Polish w o r d pan (Sir) or pani (Lady). T h e

342

JERZY

TOMASZEWSKI

peasants w e r e addressed - a n d used a m o n g themselves - a simple wy (you), w h i c h is the same in the Polish, Belorussian, U k r a i n i a n a n d Russian languages. It is useful to note that this difference (pan or wy) w h e n addressing the p e o p l e from different social classes w a s k n o w n before 1 9 3 9 in other provinces o f Poland, too (I r e m e m b e r this well from m y b o y h o o d ) ; it w a s , however, not b u r d e n e d w i t h ethnic prejudice (with the notable e x c e p t i o n of p o o r Jews). In c o n t e m p o r a r y P o l a n d the w o r d pan lost its old m e a n i n g a n d is used w h e n addressing p e o p l e i n d e p e n d e n t o f their social status (with the possible e x c e p t i o n of v e r y old ladies from aristocratic families). A similar situation existed in the south-eastern territories, u n d e r H a b s b u r g rule. T h e Polish writer Stanislaw V i n c e n z , a descendant o f a landlord's family, related h o w the people spoke in his native c o u n t r y o f L w o w (Lviv). H i s uncle, w h e n m e e t i n g a local J e w i s h peddlar, spoke the vernacular, that is the local H u c u l dialect o f the U k r a i n i a n l a n g u a g e . T h e Polish l a n g u a g e w a s used w h e n speaking w i t h the p e o p l e b e l o n g i n g to the J e w i s h (Hassid) patriciate a n d the G r e e k - C a t h o l i c R u t h e n i a n (Ukrainian) priests. T h e s e p e o p l e were considered m e m b e r s o f the u p p e r social strata. T h e s e priests used the Polish l a n g u a g e even a m o n g their families. N a t i o n a l differences in the eastern parts o f P o l a n d m o r e or less reflected the social differences. In U p p e r Silesia similar national differences w e r e c o n n e c t e d w i t h the social difference b e t w e e n the G e r m a n aristocracy, businessmen and administration a n d the Polish peasants a n d workers. It is necessary to add, however, that in U p p e r Silesia a significant proportion o f workers, in some places the peasants as well, w e r e G e r m a n . T h e Poles (in general, the p e o p l e speaking Polish a n d insufficiently fluent in the G e r m a n language) b e l o n g e d as a rule (with only scarce exceptions) to the lower social strata. T h e assimilation (or, at least, acculturation) w a s a price paid for social a d v a n c e . T h e c o m plicated history o f this region, the nationalist policy o f the G e r m a n g o v e r n m e n t , a n d social a n d ethnic relations influenced a sharp P o l i s h - G e r m a n a n t a g o n i s m in extreme cases. T h e r e existed, however, significant groups o f native population, G e r m a n s a n d Poles as well, w h o m a i n t a i n n o r m a l contact b e t w e e n themselves a n d the people w h o declared themselves to be Silesians rather t h a n Poles or G e r m a n s , speaking the local Polish dialect. T h e J e w i s h population w a s traditionally e n g a g e d in c o m m e r c e a n d small industry (mainly as artisans). T h i s w a s c h a n g i n g slowly a n d - after they h a d a c h i e v e d legal e m a n c i p a t i o n - the J e w s entered other profes2

Economic and national differentiation in Poland

343

sions, often c o n n e c t e d w i t h a c a d e m i c e d u c a t i o n (such as lawyers a n d doctors). T h e J e w s , however, w e r e often seen as m i d d l e m e n b e t w e e n village a n d t o w n . T h i s stereotype did n o t c h a n g e - at least in most cases - after 1 9 1 8 in i n d e p e n d e n t Poland a n d w a s quite popular, n o t a b l y a m o n g peasants. T h e Polish R e p u b l i c after 1 9 1 8 (see figure 17.1) included territories that h a d earlier b e l o n g e d to the three p o w e r s a n d constituted parts o f different e c o n o m i c a n d political units. D u r i n g twenty years o f inde­ p e n d e n c e significant e c o n o m i c c h a n g e s occurred; the period o f indep e n d e n c e , however, w a s short a n d the basic regional social a n d e c o n o m i c differences could n o t b e r e m o v e d in such a brief t i m e . T h e characteristic feature o f the ethnic structure w a s the territorial concentration o f the so-called Slavic minorities in the agricultural provinces, with the e x c e p t i o n o f the agrarian L u b l i n province, w h i c h h a d a relatively small U k r a i n i a n minority in its eastern region (see table 1 7 . 2 ) . Peasants o f the eastern provinces, formerly part o f Russia, w e r e m a i n l y Belorussians or U k r a i n i a n s ; a relatively small n u m b e r o f L i t h u a n i a n peasants lived in the north. T h e r e were, however, villages or even regions w i t h a Polish peasant population, most significant in the W i l n o province. T h e Bialystok province w a s o n the b o r d e r b e t w e e n Polish a n d Belorussian ethnic territory. In Bialystok — the m a i n city o f this region - there were, however, workers (Jews, Belorussians a n d Poles) e n g a g e d m a i n l y in the textile industry. T h e same eastern provinces w e r e k n o w n as h a v i n g a strong tradition of pre-capitalist social relations. T h e traditional social differences b e t w e e n small gentry (szlachta zagrodowa) a n d peasants w e r e m a i n t a i n e d in spite o f the constitutional equality o f civil rights for all the citizens, contrary to the real e c o n o m i c situation o f villagers. A n author well a c q u a i n t e d w i t h the Polesie province wrote o f these people: 3

4

5

'Gentry' constitutes here a separate social class. The membership of it is inde­ pendent of wealth or education. A nobleman can be poor or illiterate. The basic question is only the descent. 'The Polish nobleman' — this definition stands often for the nationality and for all the affiliation . . . The religion is without impor­ tance. The majority is Orthodox. There are, however, villages totally Roman Catholic. 6

People b e l o n g i n g to the small gentry considered themselves, as a rule, to b e a higher a n d better c a t e g o r y o f people, 'the Polish n o b l e m e n ' , most often b e i n g p o o r farmers similar to the majority o f peasants a n d speak­ ing the same 'local' l a n g u a g e — that is, dialects o f the Belorussian or U k r a i n i a n languages. Polish authorities tried to strengthen the Polish

JERZY TOMASZEWSKI

344

LATVIA

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LITHUANIA B a l t i c

!

Sea

6 (Vilnius)

>

GERMANY

Y w

EAST PRUSSIA

GERMANY

Nowogrodek

11

I

7

10

1 I V

WARSZAWA^j (Warsaw)

2 ® )

Piotrkowi

Brest

I ~4

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4

Radom (s ®

GERMANY Krol

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u

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i

n

Czestochowa 3

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Vloclawek k 1

^Poznan^

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3

5

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V X ^ T ^

Kielce

Lutsk i

Hut\y' fJSSpsnowiec

9

L j' 3 ""J? K a t o w i c e ©t'-^Krakow

2?

13

a:

Lwow (Lviv) " —\

c

H o

L

o

KEY International boundary

HUNGARY

Tarnopol

V

/V/ s

w w

•jPrzemyslG \

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ROMANIA

Provincial boundary Railway River

PROVINCES: 1 - Warszawa, 2 - LodZ, 3 - Kielce, 4 - Lublin, 5 - Bialystok, 6 - Wilno, 7 - Nowogrodek,

Towns of over 100,000 inhabitants

8 - Polesie, 9 - Wolyri, 10 Poznarf,

Towns from 50,000 to 100,000 inhabitants

11 - Pomorze, 12 - rilask, 13 - Krakow,

Towns of under 50,000 inhabitants

14 - Lwow, 15 - Stanislawow, 16 - Tarnopol Source: Maly Rocznik Statystyczny

1931

[Concise statistical yearbook 1931]

Figure ij.i. The Polish Republic, ig$i

Economic and national differentiation in Poland

345

T a b l e 1 7 . 2 . The agricultural population and the main minorities by province in Poland, igji

Province Poland Warsaw city Warsaw L 6dz Kielce Lublin Bialystok Wilno Nowogr6dek Polesie Wolyii Poznari Pomorze Slask Krak6w Lw6w Stanislaw6w Tarnopol

Germans (%)

Belorussians and Ukrainians (%)

Population (thousands)

Agricultural (%)

Jews (%)

3i,9i6 1,172

60.6

2.44

22.i5

9.76

0.4

0. i7

0.i7

30.i2

60.8

2.92

0.08

8.66

2,632

48.6

5.89

0.04

i4. 40

2,936

56.8 71.0

0. 27

0 . 0 3 1 0 . 8 0

1,644

69.9

0.43

i6.6i

ii.98

1,276

72.3

0.08

32.2i

8.70

1 , 0 5 7

82.4

0. 00

58.37

7.85

80.6

0.09

77.i2

i0.07

79.4

2.25

69.42

9.97

4 7 .

9.16

0.05

0.33

9.72

0.00

0.28

12.2

9.i6

0.00

i.47

2,298

59.5

0.39

2.57

7.57

3 ,

2

,

2

,

5

4

2

6

9

5

1,132 2,086 2,107 1,080 1 , 2 9 5

>

2 7

i

5 1 . 5

0.65

5 . 0 3 i 2 . 7 4

68.6

0.38

4i.73

i0.94

1,480

74.7

i.i5

72.9i

9.46

1,600

79.6

0.i9

54.50

8.38

Note: T h e numbers do not include soldiers in barracks. Sources:Maly Rocznik Statystyczny ig37 [Concise statistical yearbook], pp. 30, 31 and 32, and Z . Landau and J. Tomaszewski, Robotnicy przemyslowi w Polsce igi8-ig$g. Materialne warunki bytu [Industrial workers in Poland 1 9 1 8 - 1 9 3 9 . Economic conditions of life], (Warsaw, 1971), pp. 9 4 and 1 3 0 - 3

tradition and influence the gentry (for e x a m p l e , an association o f the small g e n t r y w a s organised), introducing additional frictions into the life of the local population. A n i m p o r t a n t question w a s c o n n e c t e d w i t h the existence o f large estates. T h e majority o f l a n d o w n e r s , especially the wealthiest, w e r e Poles (tables 1 7 . 3 a n d 17.4) b e l o n g i n g to old aristocratic families. T h e s e families m a i n t a i n e d often specific habits rooted in the feudal past that stressed their superiority over the simple people from the villages. T h e r e are a n u m b e r o f quite intriguing e x a m p l e s o f these traditions. T h i s linked the ethnic differences to e c o n o m i c a n d social conflicts. Poles in the eastern provinces w e r e often identified w i t h the 'lords' a n d the peasants, rooted d e e p l y in the tradition o f feudal conflicts, considered that the lands of their estates should b e l o n g to the local villagers. T h i s w a s a 7

JERZY

346

TOMASZEWSKI

T a b l e 1 7 . 3 . Nationality of owners of estates above jo hectares by province in Poland, ig2i Nationality of owners (%) Province

Poles

Germans

Poland Warsaw city Warsaw L 6dz Kielce Lublin Bialystok Wilno Nowogr6dek Polesie Wolyn Poznari Pomorze Slask Krak6w Lw6w Stanis law6w Tarnopol

82.0

i0.3

i.3

2.5

i.9

83.3 97.8

-

-

-

l

Ukrainians

Belorussians

Russians

Jews

Others

i.6

0.5

0.i

-

2.4

3.0

86.0

0. 2

0.2

8.2

3.0

0.9

i.5

87.4

0. 2

-

8.2

2.8

0.8

0.6

-

4.6

i7.8

9.3

2.0

i.i

i.3

i7. 6

0.3

i5.i

0.i

4.i

-

-

-

0.i

0. i

0.i

0. i

-

2.i

7 . 2

9 9

.

9

9 7 .

i

9

5

3

.

3

6

5

.

4

6

1

.

5

58.6 67.6

0.6 0.5 0. 2 0.i

40.9 32.2

4 2 . 3 5 5 . 6 94.9

i.0

0.5

87.2

2.3

i.6

84.8

0.9

6.0

90.7

0.5

3.i

i6.7

0. 4

-

i.i

0. i

0. 4

i.7

0.2

0. 2

3.7

i.0

i.8 0.9

-

2.6

i.0

8.5

0.4

5.7

2.6

5.5

0.2

Source: W. Roszkowski, Landowners in Poland igi8-ig$g (Boulder, C O , 1991), p. 27.

fundamental reason for the radical character o f the Belorus national m o v e m e n t , w h i c h often s h o w e d sympathy for the Soviet U n i o n . It is true that the collectivisation in the U S S R c h a n g e d these attitudes significantly, but social radicalism did not vanish a n d even the ChristianD e m o c r a t i c Belorus m o v e m e n t w a s a c c u s e d by the Polish archbishop, R o m u a l d J a l b r z y k o w s k i , o f the 'sin of B o l s h e v i s m ' . T h e followers o f this m o v e m e n t d e m a n d e d radical land reform, n a m e l y the expropriation o f b i g estates. T h e Polish authorities tried to strengthen Polish influence a n d sup­ ported Polish people settled a m o n g the local p o p u l a t i o n . T h e r e f o r e , large estates w e r e often divided (in c o n n e c t i o n with the land reform) b e t w e e n Polish peasants c o m i n g from the provinces that suffered from significant agrarian overpopulation. T h i s policy fostered ethnic conflicts as the n e w c o m e r s w e r e considered to be thieves of land that should be divided a c c o r d i n g to h u m a n justice a n d the L o r d ' s laws and given to the local (mainly Belorussian or Ukrainian) peasants. 8

9

Economic and national differentiation in Poland

347

T a b l e 1 7 . 4 . Nationality of owners of estates above jo hectares by size in Poland, 1921 Groups of estates in hectares and % of owners Nationality of owners All owners Polish German Ukrainian Belorussian Jewish Russian Czech Other

Total

50-100

100-500

500-1,000

over 1,000

100.0

100.0

100.0

100.0

100.0

82.0

77.1

84.7

84.6

81.8

8.9

7.9

1.2

7.1 14

1.2

1.6

3.5

2.4

1.2

1.6

2.0

1.0

1.7 0.2

0.1

0.3

0.3

0.8

10.0 . 3

i 2 .

5 1.6

0.9

.

i 9 0. 2 0 .

0.3 0.4

5

0

.

5

2.7

4.8

Source: Roszkowski, Landowners in Poland,p. 2 8 .

T h e t o w n p e o p l e w e r e m a i n l y Polish (administrators, teachers a n d so on) a n d J e w i s h (shopkeepers a n d artisans), w i t h minority groups o f others, for e x a m p l e Belorussian or U k r a i n i a n workers. Workers from these last t w o nations constituted, as a rule, a majority a m o n g the workers hired b y the owners o f affluent peasant farms a n d — less often — b y owners of estates. T h e s e provinces w e r e e c o n o m i c a l l y least d e v e l o p e d and the poverty of peasants a d d e d another reason for animosity towards the Polish administration and Polish 'lords' to the traditional social a n d ethnic conflicts. T h e Polish administration w a s seen not only as the foreign p o w e r defending the landlords but as a kind o f colonial system. A l t h o u g h there w e r e significant c h a n g e s for the better in the relatively short time o f less than t w o decades of Polish administration (the net o f state-owned schools t e a c h i n g m a i n l y in the Polish l a n g u a g e w a s develo p e d a n d the productivity o f land w a s growing), the eastern provinces r e m a i n e d far b e l o w the level o f the other parts o f the Polish R e p u b l i c in almost all spheres o f life (see table 17.5). T h e poverty o f non-Polish peas­ ants contrasted with the relative affluence o f the Polish administration, the m o r e so w i t h the luxury o f Polish l a n d o w n e r s , w h i c h w a s an important source of social conflict. M a n y p e o p l e (not only peasants) cherished illusions that national i n d e p e n d e n c e (or the Soviet system) w o u l d be a sufficient r e m e d y for all e c o n o m i c , social a n d political pains. A similar — at least to some extent — situation existed in the former 10

348

JERZY

TOMASZEWSKI

T a b l e 1 7 . 5 . Selected indices of living standard by province in Poland,

Poland Warsaw city Warsaw L 6dz Kielce Lublin Bialystok Wilno Nowogr6dek Polesie Wolyn Poznari Pomorze Skjsk Krak6w Lw6w Stanis law6w Tarnopol l

Average number of people in each i-room apartment

Hourly wages of industrial workers (% of the average level in August i937) i00

Illiterate persons aged 1 0 (%)

Apartments with 1 room (%)

People in 1-room apartments (% of total population)

23.1

46.9

43.4

3.9

10.1

42.5

36.9

4.0

i34

22.4

46.7

42.3

4.0

i09

+

Province

igji

21.4

52.8

47.3

3.8

i06

26.2

58.5

55.7

4.i

89

24.2

53.8

50.9

4.2

78

2

37.9

34.4

3.8

73

60.0

57.8

4.2

75

9

63.7

61.3

4.i

46

48.5 47.8 2.8

60.6

58.6

4.0

63

48.7

47.0

3.5

67

1 7 . 9

13.2

3.3

85

4.3

18.4

14.2

3.4

87

14

19.2

12.9

2.8

ii2

3

.

5

29.1 3 4 .

3 7 .

i

32.2

3.6

99

23.1

49.6

47.6

3.7

88

36.6

61.6

58.7

3.7

55

29.8

60.5

58.1

3.9

64

1 3 . 7

Sources: Statystyka Polski, seria C , N o . 6 2 , p p . 2, 3, 6 and 4 7 . Landau and Tomaszewski, Robotnicy przemyslowi w Polsce,p. 5 9 4 .

eastern Austrian provinces, with an i m p o r t a n t exception: the Polish village population w a s m o r e n u m e r o u s in the T a r n o p o l province, a n d the western part o f the L w 6 w province w a s m a i n l y Polish (the ethnic b o r d e r w a s not sharp a n d the population speaking U k r a i n i a n dialects even lived in several villages in the southern part o f K r a k 6 w province). T h e n u m b e r of U k r a i n i a n s e n g a g e d in non-agricultural professions w a s relatively (in c o m p a r i s o n with the Belorussian population) significant a n d this w a s c o n n e c t e d with the existence o f n u m e r o u s private U k r a i n i a n schools, co-operatives a n d associations. A n a n a l o g y c a n be d r a w n b e t w e e n the U k r a i n i a n m o v e m e n t in the former Austrian provinces o f P o l a n d a n d the Polish m o v e m e n t before 1 9 1 8 in the P o z n a n a n d P o m o r z e provinces. O n e o f the most important points of contention w a s the land. U k r a i n i a n peasants and their political organisations

Economic and national differentiation in Poland

349

d e m a n d e d land reform in favour o f the local villagers. T h e Polish administration tried to strengthen the Polish population a n d the land reform w a s often introduced in favour o f the polish peasants, dis­ criminating against U k r a i n i a n s . A l s o , U k r a i n i a n associations, c o - o p e r a tives a n d schools w e r e discriminated against. T h e Polish g o v e r n m e n t refused to create an U k r a i n i a n university in L w o w a n d the U k r a i n i a n s m a n a g e d to organise u n d e r g r o u n d a c a d e m i c studies. T h e r e w e r e often serious reasons for this policy as the U k r a i n i a n institutions w e r e misused b y an illegal terrorist organisation that killed Polish officials a n d U k r a i n i a n s w h o tried to find a kind o f c o m p r o m i s e (at least on a t e m p o r a r y basis) w i t h the Polish authorities, b u r n e d Polish estates a n d r o b b e d banks. T h e often brutal m e t h o d s used b y the authorities h e l p e d to maintain order but aroused n u m e r o u s protests a n d a d d e d fuel to the d e v e l o p i n g enmity o f U k r a i n i a n s towards the w h o l e Polish population. T h e radical left believed that the only solution w a s unification w i t h the Soviet U k r a i n e ; their popularity diminished, however, w h e n the n e w s a b o u t collectivisation a n d famine in the U S S R r e a c h e d Poland. T h e radical r i g h t - w i n g g r o u p s c o - o p e r a t e d w i t h G e r m a n y a n d d e c e i v e d themselves that the T h i r d R e i c h w o u l d help to establish an i n d e p e n d e n t U k r a i n i a n state. T h e m o d e r a t e s (far from b o t h extremes) tried to achieve a m o d u s v i v e n d i w i t h Poland, in the justified conviction that neither the Soviet U n i o n nor G e r m a n y c o u l d or w o u l d solve the U k r a i n i a n question. T h e J e w s w e r e m a i n l y c o n c e n t r a t e d in towns of the former Russian a n d Austrian provinces (table 17.6). T h e y w e r e e n g a g e d in trade, espe­ cially in local c o m m e r c e . J e w s in the eastern a n d south-eastern provinces w e r e in fact a kind o f c o m m e r c i a l class d o m i n a t i n g the retail trade w i t h a s o m e w h a t smaller share in the wholesale trade. A J e w w a s in m a n y villages a s y n o n y m for a peddlar, shopkeeper, innkeeper or purchaser o f agricultural products, that is a representative o f a market e c o n o m y w i t h all its attendant troubles for the average peasant. T h e e c o n o m i c conflicts b e t w e e n the t o w n a n d village, b e t w e e n the small farmer a n d small tradesman, were personified in these p o o r p e o p l e w h o often h a d to suff"er for all the sins o f the capitalist economy. T h e p o p u l a r opinion o f peasants (and even shared to some extent b y m a n y politicians) w a s a kind o f h o m e s p u n physiocratic doctrine. T h e y considered agriculture to be the only (or at least the most important) source o f national wealth, w i t h the other social strata living at the expense o f farmers. T h i s a d d e d an ideological sanctification to the e v e r y d a y quar­ rels in local markets. N o w o n d e r that the radical social m o v e m e n t s in 11

350

JERZY TOMASZEWSKI T a b l e 1 7 . 6 . The town population and Jews by province in Poland,

Province Poland Warsaw city Warsaw L 6dZ Kielce Lublin Bialystok Wilno Nowogr6dek Polesie Wolyii Poznari Pomorze Slask Krak6w Lw6w Stanislaw6w Tarnopol

igji

Population (thousands)

Population of towns (thousands)

Jews as % of town population

3i,9i6 1,172

8,731 1,172

30.1

5

9

2, 2 2,632

5

27.3

8

3

2

9

.

1,104

31.2 30.2

2,936 2

,

4

6

43.7

5

38.4

1,644 1,276 1 , 0 5 7

1,132 2,086

7

29.2

261

1

0

3

4

2

.

6

49.2 2

5

3

4

9

.

i

2,107

838

0.8

1,080

348 418

0.9

580

24.8

1 , 2 9 5

2,298 3 ,

>

2 7

776

1,480

2

1,600

272

9

5

3.9

33.2 34.8 34.7

Note: T h e numbers do not include soldiers in barracks. Source: Maly Rocznik Statystyczny iggy,pp. 23 and 24.

some regions o f P o l a n d w e r e frequently a c c o m p a n i e d by anti-Jewish riots. T h i s w a s especially so in the southern provinces in the years I

9

I

8

-

I

9

.

1

2

Significant c h a n g e s were g o i n g on, however, in the south-eastern provinces (where U k r a i n i a n co-operatives developed) a n d in the central a n d southern provinces (where Polish co-operatives developed). T h e c o operative m o v e m e n t w a s p r o c l a i m i n g its o w n i d e o l o g y a n d political prog r a m m e , akin to some extent to n o n - M a r x i s t socialism, but on the local level there existed m o r e important current a n d practical questions. T h e co-operative shops and other enterprises w e r e rivals o f the local shopkeepers a n d sometimes, i n d e p e n d e n t o f the will o f left-wing activists, co-operative p r o p a g a n d a drifted towards anti-Jewish declara­ tions as the local private tradesmen w e r e often J e w s . T h e e c o n o m i c conflicts b e t w e e n the c o m m e r c i a l class a n d the village p o p u l a t i o n w e r e therefore c o n n e c t e d w i t h ethnic differences a n d religious conflicts. M a n y Christian priests (who h a d a strong influence on the m i n d s o f peasants)

Economic and national differentiation in Poland

351

T a b l e 1 7 . 7 . The German population by province in Poland,

Provinces Poland Warsaw city Warsaw L 6dz Wolyri Poznari Pomorze Slask Stanislaw6w Other

% of Germans of the total population

0

.

2 .

9

5 .

9

2

2

igji

Germans (thousands)

% of Germans occupied as workers

780

20

74

21

-

2

40 .

3

4

0

7

1

9

3

2

2 23

9-7 10.0 1.1 0.0

130

12

17 57

0 0

Sources: Tomaszewski, Ojczyzna nie tylko Polakow,p. 50; Landau and Tomaszewski, Robotnicy przemystowi w Polsce,pp. 9 4 and 1 3 0 - 3 .

believed in ritual murder, and such accusations w e r e printed in p o p u l a r C a t h o l i c j o u r n a l s distributed a m o n g the half-literate p o p u l a t i o n . E c o n o m i c conflicts, religious superstitions a n d anti-semitic p r o p a g a n d a w e r e often a d a n g e r o u s mixture a n d e n d e d in tragedies. T h e radical peasant leaders d u r i n g the first t w o decades o f the twenti­ eth c e n t u r y w e r e often p r o c l a i m i n g w a r against the 'Jewish swindlers a n d usurers'. It w a s only in the 1 9 3 0 s that the influential Polish peasant politicians b e g a n to u n d e r s t a n d that the anti-Jewish slogans w e r e only h e l p i n g the anti-democratic trends in the country. T h e central, southern a n d western provinces o f the Polish R e p u b l i c h a d a d o m i n a n t Polish majority. T h e G e r m a n s in the western provinces (which h a d earlier b e l o n g e d to G e r m a n y ) w e r e a m i n o r i t y (after 1 9 1 9 a significant n u m b e r o f G e r m a n s a n d J e w s w h o a c c e p t e d the G e r m a n l a n g u a g e a n d culture emigrated), but they retained a privileged e c o n o m i c position a n d r e m e m b e r e d their political d o m i n a t i o n before the First W o r l d W a r (see table 17.7). T h e y w e r e often o w n e r s o f estates (see tables 1 7 . 3 a n d 17.4) and relatively large farms, businessmen a n d profes­ sionals. T h e agriculturally most d e v e l o p e d provinces — P o m o r z e a n d Poznafi — h a d a relatively small p e r c e n t a g e o f G e r m a n s but their share in o w n e r s h i p o f b i g estates w a s m u c h m o r e significant. G e r m a n farmers a n d landlords d e v e l o p e d a strong net o f co-operatives, w h i c h r e c e i v e d financial help from G e r m a n y . T h i s state o f affairs w a s inherited from 13

14

15

352

JERZY

TOMASZEWSKI

G e r m a n policy prior to 1 9 1 8 and w a s one o f the i m p o r t a n t sources of resentment o f the Polish p o p u l a t i o n against G e r m a n s . O n the other h a n d , the G e r m a n population w a s afraid o f the policy o f the Polish authorities, notably o f the land reform, w h i c h m e a n t that the b i g estates w e r e divided m a i n l y a m o n g Polish peasant buyers o f land. A s o m e w h a t different situation w a s to be found in Silesia, w h e r e a m o n g the G e r m a n speaking p o p u l a t i o n w e r e n o t only businessmen, l a n d o w n e r s a n d private officials but workers in mines and industrial enterprises as well. T h e G e r m a n Social D e m o c r a t s h a d a relatively large n u m b e r o f supporters a m o n g them. A n o t h e r region w i t h a significant G e r m a n minority w a s the L 6dZ province, w h e r e the G e r m a n - s p e a k i n g population consisted o f industrial workers (mainly in the textile industry), clerks a n d businessmen. T h e G e r m a n s in this region h a d never b e e n a ruling nation a n d local Polish—German relations w e r e not the same as in the western provinces. It is true that after 1 9 3 3 the influence of a radical G e r m a n nationalism g r e w even in this region. M a n y G e r m a n s , however, r e m a i n e d loyal to the Polish R e p u b l i c , a n d not only Social D e m o c r a t s did not w e l c o m e the Wehrmacht in S e p t e m b e r 1 9 3 9 . S o m e o f t h e m were m u r d e r e d b y the N a z i authorities. T h e N a z i policy d u r i n g the S e c o n d W o r l d W a r inevitably c h a n g e d Polish—German relations in L6dZ for the worse. T h e e c o n o m i c strength o f the G e r m a n u p p e r classes a n d the m e m o r y of G e r m a n anti-Polish policy and discrimination w e r e the reasons b e h i n d the conviction, p o p u l a r a m o n g the Polish population, notably in the western provinces, that the Polish administration should regain the e c o n o m i c losses o f Poles suffered before 1 9 1 8 . T h e realisation o f this belief w a s limited because o f international treaties and the Polish law. It was, however, an additional reason for the alienation o f the G e r m a n minority in the Polish R e p u b l i c a n d also for political conflicts. E c o n o m i c and social differentiation in P o l a n d w a s to a large extent c o n n e c t e d w i t h ethnic differences. T h i s h e l p e d to maintain several traditional stereotypes, w h i c h sometimes survived to the present day. T h e Belorussian and U k r a i n i a n p o p u l a t i o n w a s often considered by the Poles as a kind o f primitive folk w i t h o u t national tradition or culture. T h e Belorussians a n d U k r a i n i a n s considered the Poles to be their oppressors from the e c o n o m i c , social and political points o f view. T h e J e w s w e r e seen by all three peoples, especially villagers, as the e c o n o m i c exploiters w h o lived at the expense o f the native population. O f t e n religious bias was added. T h e g r o w i n g surplus o f the village p o p u l a t i o n w h o could not find 16

Economic and national differentiation in Poland

353

w o r k a n d sources o f i n c o m e , a n d similar trends in small trade together w i t h e n o r m o u s u n e m p l o y m e n t in industry a n d administration, influenced rivalries b e t w e e n different social a n d professional strata as well as within t h e m , often in the shape o f ethnic conflicts. T h e policy of the g o v e r n m e n t , w h i c h a i m e d to p r o m o t e n a r r o w l y interpreted interests of the Polish nation at the expense o f national minorities, p o u r e d oil on the flames. T h e J e w s h a d almost no chances to c h a n g e their profession from the p o o r i n d e p e n d e n t shopkeeper or artisan to a w o r k e r or clerk in industry or administration. O n the other h a n d , they suffered g r o w i n g pressure from Christian rivals c o m i n g from the villages to towns or from the western provinces to the eastern ones. T h e co-operative m o v e m e n t b e c a m e an additional threat. In spite o f the poverty prevalent a m o n g the Jews (the rich stratum w a s relatively n a r r o w a n d w i t h o u t significant political influence), there w a s a g e n e r a l conviction that the J e w s w e r e the most influential and affluent g r o u p in the c o u n t r y a n d h a d e n o r m o u s b a c k i n g from abroad. T h i s conviction w a s even shared b y several Polish politicians w h o w e r e apparently quite reasonable in other areas. Belorussian, L i t h u a n i a n a n d U k r a i n i a n peasants w e r e u n d e r the pres­ sure o f administration a n d suffered discrimination in c o n n e c t i o n with the land reform and in some other matters. T h e Polish population c o n tinued an e c o n o m i c w a r against their m o r e affluent G e r m a n neigh­ bours, trying to regain the losses suffered before 1 9 1 8 . It w a s not the a i m of this chapter to discuss the e c o n o m i c or social policy o f the Polish g o v e r n m e n t in its ethnic (national) aspects. T w o decades w e r e too short a period to achieve any stable solution to the conflicts that w e r e inherited from past centuries a n d intensified during the G r e a t D e p r e s s i o n , at least not w i t h o u t an instigation from abroad. It is necessary to stress that any solution required - at least from the purely e c o n o m i c point o f v i e w — the solution o f the agrarian question (that is, the significant diminishing or disappearance o f the agrarian over­ population) a n d the creation of n e w j o b s for the p e o p l e in towns. T h i s w o u l d have required vast investments o f private capital, w h i c h w a s absent in Poland a n d w h i c h failed to c o m e from abroad. T h e efforts o f the Polish g o v e r n m e n t , lacking time a n d sufficient financial resources, w e r e inadequate to m e e t the need. M o s t historians, Polish a n d foreign as well, stress the political aspects of the national question in Poland b e t w e e n the t w o w o r l d wars. T h e r e were, n o doubt, significant political reasons for the national conflicts. T h e analysis o f the s o c i o - e c o n o m i c situation o f the national minorities a n d the differences b e t w e e n the m a i n regions o f the Polish R e p u b l i c

354

JERZY

TOMASZEWSKI

indicates, however, a m o r e c o m p l e x situation. T h e r e were fundamental social conflicts at the b o t t o m o f the national question, c o n n e c t e d w i t h the past d e v e l o p m e n t of individual provinces. It w o u l d be impossible to find any solution — even a t e m p o r a r y one — w i t h o u t fundamental c h a n g e s in the e c o n o m i c a n d social structure o f Poland, rapid e c o n o m i c g r o w t h a n d diminishing differences b e t w e e n b a c k w a r d a n d d e v e l o p e d regions. W i t h o u t this, social, e c o n o m i c a n d regional differences consti­ tuted a great d a n g e r for the Polish R e p u b l i c a n d all her citizens. It is, of course, always possible to try out different policies, even in the worst situations, in an attempt to find solutions for existing problems. T h e inter-war Polish R e p u b l i c w a s by n o m e a n s the only east E u r o p e a n c o u n t r y that contained a mixture o f e c o n o m i c , social a n d ethnic conflicts c o n n e c t e d w i t h regional differences. T h e interconnec­ tion o f these differences a n d conflicts w a s suffered in C z e c h o s l o v a k i a , R o m a n i a a n d Yugoslavia and, to a lesser extent, w a s k n o w n in other countries as well. T h i s situation m a d e the political a n d ideological conflicts, k n o w n in all democratic countries, m o r e c o m p l i c a t e d a n d difficult to solve. T h e difficulties were often even m o r e entangled a n d impossible to solve because o f external intervention, n o t a b l y from G e r m a n y after 1 9 3 3 . T h e S e c o n d W o r l d W a r strengthened these controversies and clashes of interests as the national strivings o f particular nations a p p e a r e d in conflict. T h e resettlement o f populations a n d the expulsion o f great n u m b e r s o f p e o p l e after 1 9 4 5 decided b y the three A l l i e d p o w e r s a n d b y individual g o v e r n m e n t s a p p e a r e d to be the w a y to solve at least the most d a n g e r o u s ethnic conflicts. A n o t h e r solution w a s the federal reconstruction of the state, as u n d e r t a k e n in Yugoslavia a n d C z e c h o s l o v a k i a . A l l these e n d e a v o u r s introduced by the authoritarian political systems failed a n d c o u l d not solve the existing problems. T h e C o m m u n i s t parties that w e r e at the h e a d of the g o v e r n m e n t s superficially fought ethnic enmity a n d c h a u v i n i s m a n d p r o m o t e d internationalism. A t the same time they exploited the nationalist feelings and ethnic biases in internal feuds o f the ruling groups. O f t e n the tragic results o f this policy and the heritage of the still-remembered past c a n be seen in c o n t e m p o r a r y E u r o p e .

NOTES

1 Official data about the population according to mother tongue were not always in accordance with the reality. This was particularly true in the provinces of Lwow, Stanislawow and Tarnopol. See Edward Szturm de

Economic and national differentiation in Poland

2 3 4

5

Sztrem, 'Prawdziwa statystyka' [The true statistics], KwartalnikHistoryczny 3 (1973), 6 6 4 - 7 . The estimation is fromJerzy Tomaszewski, Rzeczpospolita wielu narodow [The republic of many nations], (Warsaw, 1985), pp. 2 5 - 3 7 . Stanislaw Vinzenz, Po stronie dialogu [On the side of dialogue], 2 vols. (Warsaw, 1983), vol. I, p. 193. For a general outline, see Zbigniew Landau and Jerzy Tomaszewski, The Polish Economy in the Twentieth Century (London and Sydney, 1985). The basic studies on the Slavic minorities are Krystyna Gomolka, 'Bialorusini w II Rzeczypospolitej' [Belorussians in the Second Republic], Zeszyty Naukowe Politechniki Gdasskiej, No 4 9 5 , Ekonomia 31 (1992); Ryszard Torzecki, Kwestia ukrainska w Polsce w latach 1923-1929 [The Ukrainian ques­ tion in Poland 1 9 2 3 - 1 9 2 9 ] , (Krakow, 1989). On the Lithuanians, Edward Makowski, Litwini w Polsce 1920-1939 [Lithuanians in Poland, 1 9 2 0 - 1 9 3 9 ] , (Warsaw, 1986). For more detailed analysis of the Belorussian population in Poland, see Jerzy Tomaszewski, 'Bialorusini w spolecznej strukturze Polski ( 1 9 2 1 - 1 9 3 9 ) ' [Belorussians in the social structure of Poland (1921-1939)] in Marek Nadolski (ed.), Mi^dzy politykq a historia. Ksigga pamiatkowa na szjescdzSesi^ciolecie profesora Zygmunta Hemmerlinga [Between politics and history. The memorial book for the sixtieth birthday of Professor Zygmunt Hemmerling], ^ i " ^ | Roman Horoszkiewicz, 'W poleskich zasciankach szlacheckich' [In the vil­ lages of small gentry in Polesie], Zjemia 6 - 7 (1935), p. 127. See Jerzy Tomaszewski, Z dziejow Polesia 1921-1939. Zarys stosunkow spolecznoekonomicznych [From the history of Polesie. An outline of the socio-economic relations], (Warsaw, 1963), pp. 1 3 6 - 4 0 . See Jerzy Tomaszewski, 'Bialoruska Chrzescijaiiska Demokracja. Uwagi o kryteriach ocen' [The Belorus Christian democracy. Comments on the cri­ teria of appraisal] in Jerzy Tomaszewski, Elzbieta Smulkowa and Henryk Majecki (eds.), Studia polsko-litewsko-bialoruskie [Polish-LithuanianBelorussian studies], (Warsaw, i988), pp. i 6 6 - 9 . A basic study on Polish policy is Andrzej Chojnowski, Koncepcjepolityki narodowosciowej rzadow polskich w latach 1921-1939 [The ideas of the nationality policy of the Polish cabinets, 1 9 2 1 - 1 9 3 9 ] (Wroclaw, 1979). For more about workers, see Jerzy Tomaszewski, 'Robotnicy Bialorusini w latach 1 9 1 8 - 1 9 3 9 w Polsce' [The Belorussian workers in Poland 1 9 1 9 - 1 9 3 9 ] , ActaBaltico-Slavica 5 (1967), 9 3 - 1 1 6 ; Jerzy Tomaszewski, 'The national structure of the working class in the south-eastern part of Poland i 9 2 i - i 9 3 9 ' , Acta Poloniae Historica i i (i968), 8 9 - i i i . On the Jews, see Jozef Adelson, Teresa Prekerowa, Jerzy Tomaszewski and Piotr Wrobel, Najnowsze dzieje Z^ydow w Polsce w zarysie (do 1950 roku) [An outline of the contemporary history of Jews in Poland (to i950)], (Warsaw, ( W a r s a w

6 7

8

9

10

11

355

p p .

3 9

9 .

i993).

12 See Jerzy Tomaszewski, 'Spring 1919 in Rzeszow: Pogrom or Revolution?' in Janos Buza, Tamas Csato, Sandor Gyimesi (eds.), A gazdasdgtortenet,

JERZY

356

TOMASZEWSKI

kihivdsai. Tanulmdnyok Berend T. Ivdn 65. szuletesnapjdra. [Challenges of eco­ nomic history. Essays in honour of Ivan T. Berend] (Budapest, 1996), pp. 13 See Anna Landau-Czajka, 'The image of the Jews in Polish religious periodicals in the Second Polish Republic', Polin. Studies in Polish Jewry 8 i4

8 ,

1

5

5

-

6

4

14 About the Germans, see Przemyslaw Hauser, Mniejszosc na Pomorzu w okresie mi§dzywojennym [The German minority in Pomorze between the two world wars], (Poznaii, 1998); Dariusz Matelski, Mniejszoscniemiecka w Wielkopolsce w latach 1919-1939 [German minority in Wielkopolska province 1 9 1 9 - 1 9 3 9 ] , (Poznan, 1997). 15 There is a detailed analysis in Tadeusz Kowalak, Spoldzielczosc niemiecka na Pomorzu 1920-1938 [The German co-operatives in Pomorze 1 9 2 0 - 1 9 3 8 ] , (Warsaw, '965). '6 See Dariusz Matelski, 'Polityka repolonizacji Wielkopolski w latach II Rzeczypospolitej' [The policy of repolonisation in Wielkopolska in the times of the Second Republic], Studia Historica Slavo-Germanica 20 (1995), 47-82.

CHAPTER

l8

Economy and ethnicity in the hands of the state: economic change and the national question in twentieth-century Estonia Anu Mai Koll Inside the multiethnic states o f Imperial Russia a n d the Soviet U n i o n , the Baltic peoples have b e e n nationalist forces of importance. T h e Baltic area (see figure 18.1) is on the verge b e t w e e n 'europeanness' a n d 'other­ ness', as it has b e e n t e r m e d in the discussion on Russian nationalism. In this context, Estonians in the late nineteenth century chose to c o m m i t themselves to E u r o p e a n culture, partly obliged b y Baltic G e r m a n overlords, partly c h o o s i n g b e t w e e n t h e m a n d the Russian central power. G e r m a n romantic nationalism and its organic v i e w o f the state have b e e n recurring in Estonian thought, n o t only in the nineteenth century, but also in the interwar years. In this, Estonians a d h e r e d to the central E u r o p e a n rather t h a n to a S c a n d i n a v i a n pattern. T h i s , however, also influenced their w a y o f m a n a g i n g the economy. H e r e , e c o n o m i c aspects o f nationalism in Estonia will be discussed in the p e r i o d b e t w e e n the so-called national a w a k e n i n g in the late nine­ teenth century u p to the demise o f the Soviet U n i o n in 1 9 9 1 . In this period, Estonia has b e e n subject to four different e c o n o m i c regimes; as part o f tsarist Russia, as an i n d e p e n d e n t capitalist nation state, as a socialist republic within the Soviet U n i o n , a n d again as an i n d e p e n d e n t state w i t h a capitalist a n d liberal e c o n o m i c policy. T h r e e different aspects of the p r o b l e m will be addressed here. O n e is the ethnic division of l a b o u r and its consequences. T h e second aspect is the e c o n o m i c a n d ethnic p o l i c y o f the successive g o v e r n m e n t s . Thirdly, attention will be p a i d to the preservation o f the Estonian l a n g u a g e and culture as the m a i n c o n c e r n for nationalist forces. Foreign d o m i n a t i o n , i m m i g r a t i o n a n d v e r y l o w rates o f d e m o g r a p h i c g r o w t h have b e e n p e r c e i v e d as the m a i n threats to survival o f the Estonians as a nation.

ESTONIAN NATIONALISM AND INDUSTRIALISATION 189O —1917

In 1 8 9 7 , there w e r e almost a million inhabitants in the area that later b e c a m e Estonia: 9 0 per cent w e r e Estonians, 4 per cent Russians a n d 35

7

Vilnius region: taken from Lithuania by Poland 1920; returned to Lithuania 1939 Taken from Estonian SSR, January 1945 and transferred to RSFSR Taken from Latvian SSR, January 1945 and transferred to RSFSR Klaipeda (Memel) district; separated from Germany and placed under League of Nations control 1919; occupied by Lithuania 1923; taken by Germany 1939; attached to Lithuanian SSR 1944-5

Figure 18.1. The Baltic nations

Economy,ethnicity and the state in Estonia

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1

almost 4 per cent G e r m a n s . In tsarist Russia, the provinces w e r e called Estland, L i v l a n d a n d K u r l a n d . Estonians inhabited Estland a n d north­ ern L i v l a n d ; L a t v i a n s inhabited southern L i v l a n d a n d K u r l a n d . T h e s e two peoples speak v e r y different l a n g u a g e s . T h e y w e r e ruled by diets, d o m i n a t e d by Baltic G e r m a n landlords, the Ritterschaft, together with Russian governors, a n d h a d recently u n d e r g o n e a process of russification. In this way, the Baltic peoples w e r e s q u e e z e d b e t w e e n Russians a n d G e r m a n s in an even m o r e literal sense t h a n elsewhere in central a n d eastern E u r o p e . P o w e r h a d shifted s o m e w h a t from the Ritterschaft to Russian administrators, but some also fell, at the local level, on to native Estonians. T h e Estonians w e r e mostly peasants, living in the countryside. Since the 1 8 6 0 s it h a d b e e n possible to b u y land from the large estates in pieces of over 20 hectares on average. T h u s a m o n g the peasant p o p u l a t i o n a small g r o u p o f y e o m e n farmers h a d b e e n f o r m e d . M o s t o f the peasants, however, w e r e landless, w o r k i n g on the estates as tenant crofters or labourers. T h e r e w a s also a small, e d u c a t e d countryside elite of schoolteachers, agronomists, parish clerks a n d so on, w h o w e r e the mainstay o f the national m o v e m e n t that dated b a c k to the 1 8 6 0 s . Before this point, Estonians h a d n o t defined themselves as a nationality, but as c o u n t r y folk. T h e national m o v e m e n t w a s inspired by G e r m a n romantic nationalism, in particular b y J o h a n n Gottfried Herder, w h o actually lived in R i g a in L i v l a n d d u r i n g his formative y e a r s . T h e definition of nation w a s b a s e d on l a n g u a g e , not race or religion. T h e l a n g u a g e is F i n n o - U g r i c , closely related to Finnish. It is, however, v e r y different from G e r m a n , Russian, L a t v i a n a n d L i t h u a n i a n . It w a s e m e r g i n g as a c o m m o n national a n d literary l a n g u a g e in the latter part o f the nineteenth century, w h e r e a s G e r m a n h a d earlier b e e n the l a n g u a g e o f intellectual c o m m u n i c a t i o n . It is written w i t h a L a t i n alphabet. T h e d o m i n a n t religion w a s Protestant L u t h e r a n i s m . Baltic G e r m a n s , the Baltic bishops taking part in the R e f o r m a t i o n process from its early days, administered the C h u r c h . Russian O r t h o d o x religion w a s , however, g a i n i n g some g r o u n d ; there w e r e substantial m o v e m e n t s o f conversion in the 1 8 4 0 s a n d 1 8 8 0 s a m o n g the peasant p o p u l a t i o n . T h i s h a d , o f course, w i d e r cultural implications for the converts, some 10 to 20 per cent o f the Estonian peasantry. R e l i g i o n w a s thus an area o f contest b e t w e e n the t w o ruling ethnicities. T h e L u t h e r a n C h u r c h w a s closely related to the Baltic G e r m a n minority and the local g o v e r n m e n t o f the provinces. T h e G e r m a n landlords elected the clergy. Estonians m a d e u p most o f the congregations, 2

3

4

5

6

7

8

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h a d posts u p to parish clerks and w e r e occasionally even appointed as pastors. T h e C h u r c h h a d an important role in education as well, w i t h lit­ e r a c y b e i n g m o r e a d v a n c e d in the Protestant provinces o f Russia than in the O r t h o d o x ones. In the second h a l f o f the nineteenth century almost 9 0 per cent o f the population over ten years old c o u l d at least read, if not write. T h e national m o v e m e n t h a d a close relationship to e c o n o m i c i m p r o v e m e n t w i t h the introduction of a y e o m a n r y a n d educational possibilities for native Estonians. In the late nineteenth century, the russification process o p e n e d u p some opportunities for Estonians to b e c o m e civil servants as well. T h e r e was, however, n o ruling class, a n d n o bourgeoisie a m o n g Estonians, their social structure thus b e i n g ' i n c o m p l e t e ' in the sense o f M i r o s l a v H r o c h . T h e Baltic G e r m a n s were, in spite of b e i n g only 3.5 per cent o f the population, the d o m i n a t i n g group. E c o n o m i c a l l y a n d politically most i m p o r t a n t were the landlords w h o also g o v e r n e d the area as Ritterschqft, w i t h almost exclusive control of the local diets. Besides the landlords, or the nobility, Baltic G e r m a n s lived mostly in the cities. T o w n dwellers w e r e a diverse g r o u p , from intellectuals a n d professionals, craftsmen a n d shopkeepers, to paupers. It is not easy to define the relationship b e t w e e n the Baltic G e r m a n s a n d G e r m a n s in the G e r m a n lands. It is obvious that the e c o n o m i c m a n a g e m e n t o f the Baltic estates w a s inspired by e x a m p l e s in eastern Prussia. W h e n land w a s sold off to peasants, their land w a s also consolidated. T h e productivity o f G e r m a n estates w a s h i g h c o m p a r e d to the Russian average. A s the e x a m p l e o f J o h a n n Gottfried H e r d e r shows, there w a s a certain a m o u n t o f e x c h a n g e w i t h other parts of G e r m a n y , but this w a s p r o b a b l y due to the nobility b e i n g m o r e international, or at least inter-European, in the early nineteenth century. W h e n , however, G e r m a n y w a s united, the i n d e p e n d e n c e o f Baltic G e r m a n s s e e m e d m o r e m e n a c i n g to the central p o w e r in Russia. T h e jurisdiction, police force and education were transferred to the Russian governors a n d there w e r e (very limited) elections for local t o w n s h i p s . In the countryside, class a n d nationality coincided. L a n d l o r d s w e r e mostly G e r m a n , peasants w e r e almost exclusively Estonian. T h e Baltic G e r m a n s m a d e no distinction b e t w e e n class a n d nationality in their attitudes towards Estonians. T h e Estonians perceived the social g a p as absolute a n d contradictory. In 1 9 0 5 a n d 1 9 1 7 , as well as in 1 9 1 9 , the Baltic G e r m a n estates w e r e the principal targets for expropriation, insurrection and even arson. In an attempt at class analysis, m a d e in a h a n d b o o k 9

1 0

11

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p r o d u c e d d u r i n g Soviet rule, 6 0 per cent o f the population before the revolution b e l o n g e d to the peasantry. A l m o s t h a l f o f these, or 2 5 per cent of the total population, were landless. Industrial workers a n d their fam­ ilies w e r e 31 per cent, petite bourgeoisie 12 per cent a n d the bourgeoisie 2 per cent, consisting o f n o n - E s t o n i a n s . W i t h russification in the 1 8 8 0 s the Russian central p o w e r b e c a m e locally tangible. T h e e c o n o m i c significance o f Russians w a s principally due to their role as representatives for the state. Besides this, there w a s a Russian minority in most realms o f society, as landlords, merchants, workers a n d peasants, mostly in the eastern b o r d e r areas. H o w e v e r , Russian culture a n d identity w e r e not w i d e l y spread e x c e p t in the b o r d e r areas. W h e n , for instance, Russian w a s introduced as the l a n g u a g e o f education, the situation in the schools b e c a m e chaotic b e c a u s e the Estonian teachers m a i n l y k n e w their o w n l a n g u a g e and G e r m a n . H o w e v e r , as T o i v o R a u n has s h o w n , this did not contribute to literacy rates g o i n g d o w n in the a r e a . T h e Cyrillic a l p h a b e t a n d the O r t h o d o x religion contributed to the cultural differences. U n l i k e the G e r m a n s , the Russians thus did not constitute a class or social g r o u p . A s for the tsar, the Estonians wrote the same kind o f v e r y subordinate petitions to h i m as did other subjects, i m p l y i n g that injus­ tices w o u l d be rectified if he took notice o f t h e m . T h i s must be r e g a r d e d as stereotypical behaviour. In the Estonian nationalist m o v e m e n t , discussions o f their position towards G e r m a n and Russian rule w e r e frequent. A p r o - G e r m a n a n d a pro-Russian orientation developed, a n d it seems that the pro-Russians w e r e in the majority by the turn o f the century. Industrialisation in Estonia w a s v e r y rapid in the last d e c a d e s o f the nineteenth century. It c a m e a b o u t largely as a result o f state intervention, the forced industrialisation initiated by F i n a n c e Minister C o u n t Sergei Yulievich Witte. In the Estonian realm, moreover, industrialisation w a s i n d u c e d b y military needs. T h u s , the state w a s responsible b o t h for investments a n d for d e m a n d . Large-scale textile factories in N a r v a district p r o d u c e d the g o o d s for a r m y orders. M e t a l l u r g i c industry in the Tallinn area consisted o f shipyards for the reconstruction of the imperial navy, and o f workshops for railway material as the trans-Siberian railway w a s constructed. Besides these state-oriented factories, others d e v e l o p e d as well - factories for food products, a furniture factory, a n d p r o d u c t i o n o f p a p e r pulp a n d paper. T h i s , however, does not c h a n g e the general d o m i n a n c e o f state-generated industrialisation. D i d industrialisation have any national bias? I f so, it w a s not v e r y 12

13

14

15

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visible. Initiative w a s w i t h the Russian modernisers, w h o m a d e the process w o r k at the central level. O n e o f its basic features w a s its o p e n ­ ness towards foreign investment. Certainly, the process w a s related to h i g h tariffs a n d a protected domestic market, a n d to imperial a r m a m e n t , a n d w a s thus a highly nationalist project. B u t in this period o f rapid g r o w t h , p e o p l e from different ethnic g r o u p s w e r e invited to participate. It is probable that the Baltic provinces h a d h i g h e r rates of investments b y G e r m a n capital than other parts o f Russia b e c a u s e o f cultural c o n ­ tacts with the Baltic G e r m a n s . O n the other h a n d , French investment, frequent in the St Petersburg area, w a s m o r e scarce here. Baltic G e r m a n s on the w h o l e did not c o m b i n e agriculture with industrial activity: they r e m a i n e d a g r a r i a n producers, craftsmen a n d traders. Russians w e r e a m o n g investors, but also a m o n g workers. Estonians did not par­ ticipate to any substantial extent as entrepreneurs and industrialists, but they w e r e d r a w n into the factories as workers and clerks. U r b a n i s a t i o n w a s rapid, and soon Estonians o u t n u m b e r e d other ethnic groups in the cities. Simultaneously, there w a s an influx o f workers o f Russian origin into the area. B y 1 9 1 4 , the Baltic provinces w e r e a m o n g the most industrialised parts of Russia. T h e localisation o f industries in this part o f the empire w a s due to h a r b o u r facilities in the Baltic S e a and to the vicinity o f St Petersburg. T h e r e w e r e few local r a w materials for the industries, e x c e p t in the case o f paper-making. C o t t o n , coal, iron a n d steel w e r e transported by boat or railway. H i g h literacy rates a n d levels o f education contributed to attracting investment, as did the contacts w i t h G e r m a n y . B u t allocation w a s m a i n l y m a d e a c c o r d i n g to administrative decisions, n o t a c c o r d i n g to calculations o f profitability. T h e position as one of the e c o n o m i c a l l y most d e v e l o p e d provinces in the Russian E m p i r e h a d an i m p a c t on the consciousness o f Estonians a n d their attitude towards the rest o f the empire. A s political crises arose in Russia, the nationalist m o v e m e n t took on attitudes m o r e E u r o p e a n than Russian, alleging its closeness to G e r m a n culture, its Protestant religion a n d its kinship to the m o r e i n d e p e n d e n t people o f the Finnish archduchy. Industrialisation w a s not exactly an Estonian a c h i e v e m e n t , but it contributed to the formation o f the national c o n s c i o u s n e s s . B u t it must also be a c k n o w l e d g e d that the Estonian population w a s n o t united b e h i n d the nationalist m o v e m e n t . T h e leadership o f the nationalist m o v e m e n t , as in most places, consisted o f the petite bourgeoisie, mostly e d u c a t e d countryside officials. T h e consciousness o f workers a n d land­ less peasants took other expressions as b o t h the revolution o f 1 9 0 5 a n d 16

17

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the revolution o f 1 9 1 7 took place in the Baltic provinces. T h e revolutions w e r e by n o m e a n s supported b y the Russian minority alone, and w e r e carried out w i t h v i o l e n c e . 18

INDEPENDENCE AND ECONOMIC NATIONALISM 1917— 194O

T h e situation in the area totally c h a n g e d with the First W o r l d War. Bolsheviks took p o w e r in the Baltic provinces, and the nationalist m o v e ­ m e n t d e c i d e d to declare i n d e p e n d e n c e a n d fight the R e d A r m y . Earlier, i n d e p e n d e n c e h a d not b e e n the official g o a l for the national m o v e m e n t , m o r e realistically discussing forms o f local a u t o n o m y . N o w , the Baltic provinces o f Estland, L i v l a n d a n d K u r l a n d w e r e , following the F e b r u a r y R e v o l u t i o n , divided into o n e Estonian-speaking a n d one Latvian-speaking province, later, with some territorial additions, these b e c a m e Estonia and Latvia. I n d e p e n d e n c e w a s a c h i e v e d in a chaotic situation. T h e role o f Estonian nationalism in this process w a s , o f course, crucial, but on the other h a n d the n e i g h b o u r i n g L a t v i a a n d L i t h u a n i a , a n d also a n u m b e r of small states in the area, a c h i e v e d i n d e p e n d e n c e at this point. If nationalism w a s one factor, a larger political g a m e o f security in the area w a s p r o b a b l y also necessary to m a k e the 1 9 2 0 p e a c e a g r e e m e n t in T a r t u possible. In the n e w R e p u b l i c o f Estonia, inhabitants w e r e m o r e h o m o g e n e o u s from an ethnic or national point o f v i e w t h a n in the same area before the w a r (see table 18.1). T h e n u m b e r of G e r m a n s in the Estonian area h a d fallen by m o r e t h a n half, from 3.5 to 1.7 per cent, b y i 9 2 2 . T h e p o p u l a t i o n w i t h Russian origins in Estonia h a d increased w i t h industrialisation, a n d even if part o f the industrial w o r k e r s w e n t b a c k to the Soviet U n i o n in the years o f fighting, the Russian minority b e c a m e the largest in E s t o n i a . Estonians m a d e up, after i n d e p e n d e n c e , 8 8 per cent of the p o p u l a t i o n in the n e w republic. A l a w o f cultural a u t o n o m y r e g u lated the legal situation o f minorities, w h e r e minorities h a d rights to their o w n l a n g u a g e , their o w n schools a n d cultural institutions. F r o m 1 9 2 5 they also h a d the right to state-supported g o v e r n i n g councils to deal w i t h their cultural affairs. T h e w a r arrested rapid e c o n o m i c g r o w t h in the area. W h e n Estonians p r o c e e d e d to take h o l d o f the e c o n o m y in their territory, there w e r e t w o factors they did not control. N o n - E s t o n i a n s o w n e d enterprises in Estonia. Practically n o Estonians o w n e d the large-scale factories in the territory, a l t h o u g h there w e r e a n u m b e r o f lesser enterprises in their 19

20

21

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T a b l e 1 8 . 1 . Ethnic composition of Estonia in the twentieth century, Total population (1,000s)

Year 18971922 1

958 1,107 1,126 800 ± 25

23

9 3 4

2 4

I945 i 5° 1970=5 9

1989

845 1 , 3 5 6

2 6

1,583

Estonians (%)

Russians

Germans (%)

Ukrainians (%)

90.6

3.9 8.2 8.2 24.6 30.3

3.5 i.7 i.5 -

-

87.7 88.2 94± 2 76 ± 2 68.2 i 6

. 5

2 . 3 .

i8gy-ig8g

Belorussians (%) -

i i

i i

. .

4 8

hands. Secondly, as e x p l a i n e d above, large parts o f the local industry w e r e not only tightly linked to the Russian market, it w a s directly d e p e n ­ dent on Russian state orders. E c o n o m i c policy at first a i m e d at finding n e w markets for existing industries, particularly in western E u r o p e . T h i s did not succeed v e r y well. W h i l e the Baltic industries h a d b e e n a d v a n c e d , a n d the Baltic provinces highly e c o n o m i c a l l y d e v e l o p e d inside the Russian E m p i r e , they still h a d a d e v e l o p m e n t g a p in relation to their n e i g h b o u r s to the west. T h i s g a p has b e e n discussed elsewhere, particularly in relation to F i n l a n d . Finland, although part of the empire, h a d n o t b e e n part o f the protected domestic market, a n d so h a d already h a d to m e e t western competition in the nineteenth century. T h e crisis w a s deepest for the metallurgic industry in the area. Paper a n d pulp production w e n t t h r o u g h a successful restructuring and even s h o w e d some g r o w t h in relation to p r e w a r p r o d u c t i o n . T h e textile industry did not resume activity at the same level as before, but survived t h r o u g h export o f semi-processed products such as cotton y a r n . Its second line o f d e v e l o p m e n t w a s to diversify production for the needs o f the small domestic m a r k e t . Shipyards a n d railway carriages, however, did n o t find any n e w outlets, and these enterprises w e n t into a p r o l o n g e d crisis. T h i s crisis w a s also an ownership crisis. E c o n o m i c a l l y d o m i n a n t g r o u p s a m o n g the Baltic G e r m a n s h a d p r o b a b l y fled to G e r m a n y as the w a r front crossed the Baltic provinces and, after the war, they faced an entirely n e w situation. Far from all o f t h e m d e c i d e d to stay on u n d e r Estonian or L a t v i a n rule. Alternatives w e r e p r e s u m a b l y less f o r t h c o m i n g 27

28

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for Baltic G e r m a n s w i t h small e c o n o m i c m e a n s , such as craftsmen or shopkeepers. Russian industrialists faced other difficulties, and appar­ ently did n o t choose Estonia as a n e w field for activity. English a n d French capital h a d b e e n limited in the earlier period. Estonians h a d , however, h a d smaller enterprises in the past, a n d a great n u m b e r o f n e w small enterprises w e r e started in the period o f i n d e p e n d e n c e . T h e i r n e e d for l a b o u r w a s small in c o m p a r i s o n w i t h the failing large-scale works from the p r e w a r period. U n e m p l o y m e n t w a s high t h r o u g h o u t the 1920s. A small n u m b e r of workers, b o t h Russians a n d Estonians, had, on ideological grounds, b e e n j o i n i n g the R e d A r m y a n d w i t h d r e w w i t h it. T h i s diminished the u n e m p l o y m e n t n u m b e r s somewhat. In agriculture, revolutionary c h a n g e took place. A large-scale land reform expropriated the land o f all large estates into a state land reserve. T h i s a m o u n t e d to an expropriation o f the Baltic G e r m a n landlords. T h e land w a s subsequently shared a m o n g Estonians, those w h o h a d par­ ticipated in the nationalist a r m y h a v i n g first priority, previous tenants a n d landless labourers c o m i n g next. T h e land w a s still sparsely p o p u lated, due to l o w birth rates since the 1880s. T h e land reform w a s c o n ­ sciously designed to construct viable farms, w i t h an average a r o u n d 15 hectares, w h i c h , in c o m p a r i s o n to c o n t e m p o r a r y land reforms in eastern E u r o p e , w a s quite s i z e a b l e . P r o d u c t i o n on the farms w a s diversified in the early nineteenth century, a n d this m o v e m e n t b e c a m e accentuated w i t h the land reforms. G r a i n a n d spirits h a d b e e n the d o m i n a t i n g export articles previously. In the years before w a r a n d revolution, some specialisation towards prov i d i n g the St Petersburg market with fresh livestock products took place. After the land reform this transition continued, in spite o f the loss o f the Petersburg market. D a i r y p r o d u c t i o n and m e a t p r o d u c t i o n found outlets in Britain a n d G e r m a n y , a n d the producers chose a co-operative f o r m for processing a n d marketing, after N o r d i c , particularly D a n i s h , m o d e l s . T h e m a n a g e m e n t o f agriculture in the n e w republic thus passed from G e r m a n s to Estonians w i t h o u t losses in productivity a n d w i t h fairly g o o d success. Butter, b a c o n a n d eggs soon b e c a m e the most i m p o r t a n t exports o f the republic. T h e extensive rate o f organisation a m o n g the peasantry a n d m o d e r a t e e c o n o m i c success also contributed to the political stability o f these turbulent times. O f course, the land reform did not solve all the problems. T h e transition to dairy p r o d u c t i o n w a s only u n d e r t a k e n by a p p r o x i m a t e l y h a l f o f 30

31

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the farms and, in addition, landlessness r e m a i n e d a p r o b l e m , a l t h o u g h the landless h a d b e c o m e a minority in the countryside. B u t on the w h o l e , g i v i n g the land to the tillers gave the a g r a r i a n sector and, above all, the individual f a r m families a standard of living that i m p r o v e d w i t h exports in the 1920s. T h e G r e a t D e p r e s s i o n hit the a g r a r i a n countries h a r d e r than the industrialised ones. H o w e v e r , in Estonia it w a s in the towns, with their prevailing high u n e m p l o y m e n t rates, that the situation b e c a m e desperate. T h e r e , as in most other central a n d eastern E u r o p e a n countries, a m o v e m e n t w i t h fascist leanings called the L e a g u e o f Veterans (from the struggle for independence) quickly e a r n e d support a m o n g the y o u n g a n d the u n e m p l o y e d , but also a m o n g students. In the countryside they h a d less support, but the risk w a s obvious that they m i g h t take p o w e r in elections. A preventive coup d'etat took place before elections in 1 9 3 4 . T h e interpretation o f this event is d e b a t e d a n d admittedly c o m p l i c a t e d . It seems as if racism w a s not one of the most frequent tenets o f the L e a g u e o f Veterans, but they w e r e extremely nationalistic, h a d an organic v i e w o f the state and, above all, fought against ideologies o f class struggle a n d individualism. T h i s w a s done w i t h the violent m e t h o d s c o m m o n to the paramilitary m o v e m e n t s o f these years. T h e p r o b l e m for historians seems to be that the authoritarian g o v e r n m e n t , preventing their takeover, w e n t in precisely the same ideological directions, e x c e p t for the violent methods. N a t i o n a l i s m w a s the m a i n ideological c o m p o n e n t , directed against socialism but also against liberalism, called the 'politics of self-interest', egotism a n d g r o u p egotism. T h e self-interest o u g h t to be r e p l a c e d by 'higher interests', w h i c h w e r e c o m m o n to the w h o l e society a n d for w h i c h the state w a s the representative. Politics favoured g r o u p s w h o w i e l d e d state p o w e r w i t h violent m e t h o d s - the a r m y a n d the police. In the rather w e l l - k n o w n t y p o l o g y of J u a n L i n z , the Estonian authoritarian g o v e r n m e n t w o u l d p r o b a b l y be organic conservatism w i t h an invented t r a d i t i o n . T h e e c o n o m i c corollary to this kind o f thinking w a s a h i g h degree o f state intervention in the economy. C a p i t a l i s m a n d profits b e l o n g e d to the r e a l m o f self-interest, a l t h o u g h private property w a s considered natural. In particular, competition w a s seen as the e c o n o m i c counterpart to party politics, creating splits in society a n d destroying unity. T h e higher, c o m m o n interests were represented by the state. T h e state b e c a m e an investor a n d an entrepreneur on quite a large scale. T h i s w a s naturally 33

34

35

Economy,ethnicity and the state in Estonia

367

partly due to the lack of other willing investors, foreign b e c a u s e o f the crisis, domestic that w e r e few to b e g i n with. N o w , necessity w a s m a d e a virtue. M o r e o v e r , the M i n i s t r y of F i n a n c e , as the central state authority in these matters, w a s given p o w e r s to decide w h i c h investments should be a l l o w e d in the private sector. It w a s even given p o w e r s to close d o w n existing plants in cases o f 'destructive competition'. Finally, the state held m o n o p o l y p o w e r s in foreign trade a n d h a d the right to intervene in the price s y s t e m . T h e policy, w h i c h w a s carried t h r o u g h in i 9 3 4 , w a s thus v e r y t h o r o u g h l y state interventionist, a n d also p r o m o t e d a nationalistic economy. T h e question is w h e t h e r this rupture w i t h m a r k e t e c o n o m i c s w a s m o r e radical in Estonia t h a n in other parts o f central a n d eastern E u r o p e . It seems to be the case that the role o f the M i n i s t r y o f F i n a n c e w a s m o r e p r o m i n e n t t h a n in most places. T h e m o d e l s explicitly used in the c o n t e m p o r a r y sources in Estonia w e r e Italy and, m o r e cautiously, G e r m a n y ; however, the industrialisation p o l i c y o f Minister Witte w a s quite close to the Estonian e c o n o m y after 1 9 3 4 as well. T h e m a i n a i m of e c o n o m i c nationalism in this case w a s p r o b a b l y that the e c o n o m y should serve the nation, not private interests. B u t the p o l i c y also clearly favoured, as the slogan h a d it, 'Estonian-speaking Estonian citizens'. T h e nostrification p o l i c y h a d three different levels. T h e m a n ­ a g e m e n t o f any enterprise should include a majority o f Estonians. A n u m b e r o f persons h a v i n g the essential qualifications o f b e i n g Estonians p e a k i n g Estonian citizens w e r e a d d e d to the boards of directors in private enterprises, w i t h o u t c h a n g i n g the actual o w n e r s h i p structure. Foreign specialists a n d skilled workers w e r e a l l o w e d to have w o r k permits on condition that they h a d Estonian apprentices w h o w o u l d be able to replace t h e m eventually. A c c o r d i n g to official statements, only a few foreign specialists w e r e left in the late 1930s. C a s u a l checks do n o t quite support these statements - for instance, there w e r e foreign specialists in the shale oil industry. Finally, a m o n g unskilled workers, Estonians w e r e simply supposed to replace foreigners. S u c h cases exist, a l t h o u g h there is n o full picture as yet. S o , as far as I understand, there w a s n o r a c i s m in the sense that a particular g r o u p w a s officially d e n o u n c e d as s c a p e g o a t for the D e p r e s s i o n , but there w a s a formal nostrification policy, w h e r e nationality, interpreted as citizenship a n d skills o f l a n g u a g e , w e r e m a d e a condition for e c o n o m i c activity. U n e m p l o y m e n t in Estonia w a s eradicated in a few years, by b o t h 36

368

ANU MAI KOLL

o r t h o d o x a n d u n o r t h o d o x m e a n s , such as d e m a n d s o n enterprises, a n d particularly state enterprises, to take o n workers regardless o f need. W i t h the a r m a m e n t b o o m c o m i n g u p in the late 1930s, there w a s a scarcity of m a n p o w e r . T h e r e is some d o c u m e n t a t i o n o n the importation o f l a b o u r in the files o f the M i n i s t r y o f F i n a n c e . It is evident that w o r k permits w e r e given to seasonal w o r k e r s in agriculture, but that the restrictions on foreign l a b o u r in industry w e r e m o r e severe. T o extract shale oil, an i m p o r t a n t e x p o r t p r o d u c t w i t h the G e r m a n m a r i n e as a m a i n customer, permits w e r e given o n l y g r u d g i n g l y to specialists, w h i l e applications from less strategic industries w e r e r e j e c t e d . In sum, d u r i n g the p e r i o d o f i n d e p e n d e n c e 1 9 1 9 - 4 0 , the political as well as a large share o f e c o n o m i c p o w e r w a s transferred to Estonians, a n ideological d o g m a h a v i n g w i d e support in the country. A s market-ori­ ented peasants w i t h co-operative forms o f organisation they w e r e quite successful, considering the circumstances. H o w e v e r , the lack of entrepreneurs a n d o f a bourgeoisie w a s m o r e difficult to o v e r c o m e in this period, full o f e c o n o m i c hardship. A l m o s t all large enterprises h a d b e e n o w n e d by foreign capital, and m a n y of these failed in the 1920s, so a virtual deindustrialisation took place. F o l l o w i n g depression a n d the coup d'etat, the state took o n the responsibility a n d w a s a substitute not only for private financing but also for private m a n a g e m e n t o f industry. It is p r o b a b l e that the disadvantages frequently following from protectionism a n d state enterprises — inefficiency a n d n e p o t i s m — w e r e also present here, but the time u p to the o u t b r e a k o f the S e c o n d W o r l d W a r w a s too short to m a k e any firm conclusions. Finally, the nostrification policies w e r e resolute, e c o n o m i c resources and e m p l o y m e n t b e i n g reserved for Estonian citizens speaking Estonian. 37

38

W h y did the m a r k e t e c o n o m y collapse? In this case, collapse coincided w i t h the demise o f p a r l i a m e n t a r y d e m o c r a c y a n d w a s part o f a larger E u r o p e a n pattern. T h e b a c k d r o p w a s doubtless difficulties in c o m p e t i n g o n foreign markets w i t h the most a d v a n c e d wes t er n p r o d u c ers, a n d the h i g h rate o f u n e m p l o y m e n t resulting from this failure of comp et i t i o n . In m y analysis o f the Estonian case, however, nationalism, as the ideological opposite to socialism but also to liberalism, has a l e a d i n g role. It w a s used as a state i d e o l o g y to avoid social conflict in the years o f e c o n o m i c hardship. W h e n the state h a d b e e n p r o c l a i m e d as the true expression o f c o m m o n national interest, the interventionist e c o n o m i c policy w a s b e i n g f o r m e d accordingly. N o d e m o c r a t i c checks w e r e foreseen for the M i n i s t r y of F i n a n c e , a c c o r d i n g to the belief expressing a h i g h e r interest t h a n individuals a n d social groups.

Economy,ethnicity and the state in Estonia

3

6

9

I N D U S T R I A L I S A T I O N A N D I M M I G R A T I O N IN T H E S O V I E T P E R I O D I

9

4 0 - 1

9

8

5

Identity does not reside in essential and readily identifiable cultural traits but in relations, and the question of where and how borders towards 'the Other' should be drawn therefore become crucial. 39

It seems the Estonians w e r e a m b i g u o u s in defining the Baltic G e r m a n nobility as 'the O t h e r ' in the nineteenth century. H o w e v e r , w i t h the Russian o c c u p a t i o n in the S e c o n d W o r l d War, the identification o f Russians as 'the O t h e r ' seems to have b e e n generalised in Estonia. Soviet rule in Estonia is divided into two periods: the first the o c c u p a ­ tion in 1 9 4 0 , in conditions o f war, soon b r o k e n off b y G e r m a n o c c u p a ­ tion; the second from 1 9 4 4 to 1 9 9 1 , to w h i c h attention is given in this c h a p t e r . W i t h a rapid influx o f Russians into the Baltic area in the 1940s, c o n t i n u i n g into the 1970s, there w a s national resentment against a n e w ruling ethnicity, w i t h ideological, but w i t h o u t clear class, c o n n o t a tions. In the discourse o f these years, two expressions convey important aspects o f the national p r o b l e m a n d its connections w i t h politics a n d e c o n o m i c s . O n e is the c o n c e p t o f Yestonians (in the vernacular, jeestlased). T h e Yestonians w e r e ethnic Estonians w h o h a d b e e n living in Russia d u r i n g the period o f i n d e p e n d e n c e . T h e y w e r e often c o m m u ­ nists, some o f t h e m h a d w i t h d r a w n w i t h the R e d A r m y in 1 9 1 8 , a n d others h a d b e e n living in Russia since tsarist times. T h e n i c k n a m e is due to the h e a v y Russian a c c e n t w i t h w h i c h they spoke Estonian. T h e c o n c e p t conveys the i m p o r t a n c e o f l a n g u a g e in the definition o f nationality in Estonia. B l o o d w a s not the criterion, but c o m m a n d , a n d degree of c o m m a n d , o f the l a n g u a g e . In this c o n n e c t i o n it must be r e m e m b e r e d that the l a n g u a g e is specific and different from G e r m a n i c a n d Slavic languages. Speakers o f Estonian n u m b e r only a b o u t 1 million, a n d in the area there exist a n u m b e r of l a n g u a g e s a n d national cultures that are on the verge o f extinction or extinct, such as the Livs, the Vots a n d the I n g r i a n s . Extinction is thus the b a c k d r o p o f Estonian, a n d p r o b a b l y Baltic, nationalism. In nationalist historiography written in exile, the Yestonians are typically influenced by the time they h a d spent in Russia, a n d their russified n a m e s , w h i c h were eventually c h a n g e d to Estonian v e r s i o n s . Clearly, this is n o t only a question o f their l a n g u a g e , but also o f their b e i n g c o m munist and a p p o i n t e d to the leadership after c o m m u n i s t takeover. T h e i r personal history bears witness o f closeness to Russia, w h e r e nationalists 40

41

42

370

ANU MAI KOLL

w a n t to d r a w a distinct borderline, a n d to ideological affinities that are considered n o n - E s t o n i a n . O f course, Estonian bolshevism has existed but, typically, the p r o b l e m is seen as a d i c h o t o m y b e t w e e n c o m m u n i s m o n the one h a n d , nationalism o n the other. T h e s e c o n d c o n c e p t is ' b o u r g e o i s nationalism', used by Soviet author­ ities. W h e n e v e r there w a s a p u r g e o f the Estonian C o m m u n i s t Party or detentions o f kulaks or dissidents, they w e r e a c c u s e d , not o f b e i n g class e n e m i e s or traitors, but o f b o u r g e o i s nationalism. B o t h the c o n c e p t o f Yestonians a n d o f b o u r g e o i s nationalism thus indicate that nationalism, in spite o f Stalin's stance o n the national question, w a s r e g a r d e d as the ideological opposite o f socialism from b o t h sides, not as a different c a t e g o r y that w o u l d be c o m p a t i b l e w i t h several ideologies. T h i s d o u b l e function is close to the use o f nationalism in the interwar years. The

first

years o f Soviet rule w e r e characterised b y rapid, h e a v y

industrialisation o f Estonia o f the crash-style typical o f Stalinist times. T h e r e w a s a five-year plan for 1946—50, w h i c h directed investments to the republic, a n d the investment per inhabitant w a s several times h i g h e r t h a n investment per inhabitant in the Russian S S R .

4 3

Strategic invest-

m e n t s w e r e m a d e in p o w e r plants using local oil shale, p r o d u c i n g e n e r g y for

the north-western

area, i n c l u d i n g L e n i n g r a d .

4 4

Shipyards

and

m a c h i n e works, some o f t h e m with traditions from the tsarist period, w e r e put to use. R a w materials w e r e i m p o r t e d from distant parts o f the U n i o n , a n d markets w e r e also there. T r a d e w i t h the west w a s almost non-existent.

45

Industrial

p r o d u c t i o n increased tenfold before 1 9 7 0 ,

a c c o r d i n g to available but dubious Soviet statistics. In the same period, the m o r e reliable

figure,

s h o w i n g the n u m b e r o f industrial workers,

m o r e t h a n d o u b l e d (see table 1 8 . 2 ) .

4 6

T h i s g r o w t h w a s a c h i e v e d partly t h r o u g h the i m m i g r a t i o n o f w o r k e r s from other U n i o n republics. P e a k influx w a s in 1945—7, w i t h an estimated 1 8 0 , 0 0 0 non-Estonians a r r i v i n g in Estonia. In this age o f late Stalinism, l a b o u r mobility h a d the c h a r a c t e r o f forced labour. After this period, immigration

slackened

somewhat,

but

the

percentage

of

ethnic

Estonians (including Yestonians) c o n t i n u e d to fall from 8 8 per cent in 1 9 3 9 to 7 2 per cent in 1 9 5 3 .

4 7

In Soviet historiography, the i m m i g r a n t s

are presented as specialists a n d skilled workers, c o m i n g to the aid o f the n e w republic w h e n there w a s a lack of l a b o u r p o w e r after the w a r .

48

The

level o f e d u c a t i o n o f non-Estonians w a s , in fact, h i g h e r t h a n that o f the Estonians.

49

In the so-called t h a w p e r i o d after the death o f Stalin, i m m i g r a t i o n

Economy,ethnicity and the state in Estonia

371 50

T a b l e 1 8 . 2 . Occupational structure of Estonia in the twentieth century,

Year

Total workforce

1916

[ 5°]

1922

[1,107]

9

1

3

4

9

i 5° i 1

9 7

9

° 8

i"4

Agriculture Industry (%) (%)

7

4 > 290 6 1

3

6

4

9

1

— 1

5 11

3

6

4

24

36

6

8

13

26

37

8

9

20

30

8

7

8

27

12

26

7

1

—

Services, other (%)

'5 18

4

9

Trade Transport (%)

21

62

9

Construction

igiG-gf

—

4

1

—

3

3

1

8

9

3

2

continued, but on a m o r e v o l u n t a r y basis. H i g h e r living standards c o m ­ p a r e d to Russia and available h o u s i n g w e r e pull factors. T h e r e w a s also a certain reflux o f Estonians w h o h a d b e e n d e p o r t e d to S i b e r i a . T h e i m m i g r a n t s from other parts o f the U n i o n , mostly Russians, w e r e concentrated in certain branches, certain factories a n d in certain parts of the land. T h e y d o m i n a t e d industrial w o r k in general, a n d h e a v y industry in particular. In industries within the military-industrial c o m p l e x Estonians w e r e almost entirely absent. T h i s also applies to strategic sectors such as high-sea fishing or the police f o r c e . 8 5 per cent o f the non-Estonians lived in towns. T h e y w e r e g e o g r a p h ically concentrated in Tallinn and to a district in north-eastern Estonia. In the capital, Tallinn, w h e r e most o f e n g i n e e r i n g a n d metallurgic industry g r e w up, 47 per cent o f the population w a s Estonian in the 1980s. T h e share o f Estonians in the north-eastern towns o f N a r v a w a s 4 per cent, in the oil-shale districts Sillamae, 3 per cent, a n d Kohtla-Jarve 21 per c e n t . Sectorally a n d territorially, therefore, segregation w a s u p h e l d in spite o f the large n u m b e r s o f immigrants. L a n g u a g e , as the crucial aspect o f Estonian nationalism, w a s part o f the segregating forces. O n l y 13 per cent o f the non-Estonians in the republic spoke Estonian. O n l y a third of Estonians actually admitted h a v i n g a g o o d c o m m a n d o f Russian, in spite o f Russian b e i n g the first foreign l a n g u a g e in the school system, a c c o r d i n g to a study published d u r i n g glasnost in E s t o n i a . O n l y 15 per cent o f the non-Estonians resided in the countryside, but the dramatic collectivisation process w a s still one aspect o f the national question. Soviet rule b e g a n b y a land-to-the-tiller reform, abolishing all holdings over 30 hectares, w h i c h w a s reasonably popular. F r o m 1947 on, 51

52

53

54

372

ANU MAI KOLL

pressures towards collectivisation w e r e m a d e , but the kolkhozes m a d e slow progress. F r o m the highest central authorities in the Soviet U n i o n , orders w e r e given to direct a b l o w against the local kulaks to speed u p the process. T h e Estonian C o m m u n i s t Party ( E C P ) p r e p a r e d detention lists, but a r g u e d that the n e e d for l a b o u r in the local oil-shale mines w a s such that there w a s n o n e e d for deportations to Siberia. T h e y were severely r e p r o a c h e d , a n d eventually, w i t h the help o f commissars from other U n i o n republics, effectuated a large-scale deportation in M a r c h 1 9 4 9 . T h e estimations of the n u m b e r s d e p o r t e d range from 2 0 , 0 0 0 to 8 0 , 0 0 0 people, m a k i n g this p r o b a b l y the most brutal collectivisation process o f the postwar e r a . In the following t w o months, the n u m b e r o f collectivised farms rose from 10 per cent to 7 0 per c e n t . A g r i c u l t u r a l p r o d u c ­ tion declined dramatically. T h e deportations were i m p o r t a n t e n o u g h to tilt the p o p u l a t i o n b a l a n c e in themselves. T h e epilogue w a s that the E C P leadership w a s taken to a c c o u n t at the C e n t r a l C o m m i t t e e m e e t i n g o f the C o m m u n i s t Party o f the Soviet U n i o n ( C P S U ) in F e b r u a r y 1 9 5 0 , and c h a r g e d w i t h bourgeois nationalism. A l l the Estonians in l e a d i n g positions w e r e r e p l a c e d by Yestonians. T h e purge r e a c h e d b e y o n d the party leadership to, for e x a m p l e , intellectuals, all close to the E C P , a n d c o m p r i s e d some 3,000 persons. T h u s , Estonian c o m m u n i s m w a s practically u p r o o t e d . D u r i n g the Stalin era, e c o n o m i c d e c i s i o n - m a k i n g w a s strongly centralised. W i t h the t h a w period in the latter part o f the 1950s, the grip slackened s o m e w h a t . In particular, the sovnarchozy reform in 1 9 5 7 m e a n t a quite far-reaching decentralisation o f e c o n o m i c decisions. E a c h republic b e c a m e a unit o f e c o n o m i c administration, a n d the local sovnarchoz d e c i d e d s o m e t h i n g over 8 0 per cent of the industrial p r o d u c t i o n in the Estonian R e p u b l i c , while the rest w e r e responsible to the u n i o n level. T h e reform, h a p p i l y received on the local level, created chaos, however, in the large-scale division o f labour, a n d p r o d u c t i o n t e n d e d to fall due to w a n t o f strategic inputs, p r o d u c e d in a distant r e g i o n . A m e r e five years later a w a v e o f recentralisation started t h r o u g h o u t the Soviet U n i o n . In this phase, strategic areas such as p o w e r production, construction a n d fisheries w e r e subordinated to suprarepublic, regional sovnarchozy. A n d in 1 9 6 5 , after the fall o f K h r u s h c h e v , the sovnarchozy w e r e abolished inside the Soviet U n i o n . T h e y w e r e r e p l a c e d w i t h a system of three different levels. Strategic sectors, such as military industries, but also civil production w i t h military use, for instance electronics, w e r e submitted to a l l - U n i o n ministries w i t h central planning. In 1 9 8 8 , there w e r e 171 such enterprises in 55

56

57

58

59

6 0

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Estonia, m a k i n g u p 2 9 per cent o f total industrial p r o d u c t i o n . T h e e n g i n e e r i n g a n d metallurgic industries, a n d e n e r g y a n d infrastructure, b e l o n g e d to this level. A p r e d o m i n a n t l y Russian workforce m a n n e d these industries. O n e reason for this w a s that recruitment w a s also m a d e at the central level, in L e n i n g r a d a n d M o s c o w . T h e p l a n n i n g committees in the different republics w e r e to p r e p a r e projects for other industries, a n d submit these projects to an a l l - U n i o n c o m m i t t e e . T h u s there w a s participation from both, but the final deci­ sions w e r e taken on the C e n t r a l C o m m i t t e e on this Union—republic level. T h e majority o f industries in Estonia, including w o o d processing a n d textiles, b e l o n g e d to this middle g r o u p . T h e s e industries h a d a h i g h e r p e r c e n t a g e o f Estonian w o r k e r s . Finally, c o n s u m e r industries, such as food processing w e r e m a n a g e d at the republic level. T h i s part of the industry w a s estimated at 2 5 per cent in 1 9 6 5 a n d only 10 per cent in 1 9 8 5 , but increased in the last years o f Soviet rule u n d e r G o r b a c h e v . T h e Baltic republics were used as a laboratory for e c o n o m i c experi­ ments o f s e l f - m a n a g e m e n t . In this way, Soviet Estonia w a s segregated in b o t h e c o n o m i c a n d g e o g r a p h i c a l terms, w i t h the a l l - U n i o n industries c o n c e i v e d as Russian enclaves inside the country. W h e n i n d e p e n d e n c e w a s discussed in 1990—1, before the fall o f G o r b a c h e v , the a l l - U n i o n industries w e r e at the centre o f the discussion; they could not be considered as national assets, Soviet negotiators m a i n t a i n e d . F r o m 1 9 4 9 onwards, there seems to have b e e n a strong element o f distrust from the central p o w e r towards the ethnic Estonians. T h e preference for 'Yestonians' as p o w e r brokers conveys b o t h a n e e d for national legitimacy and a n e e d for an integrative force, w h i c h are contradictory. T h e t e n d e n c y not to a c c e p t Estonians in the strategic factories a n d the police force, a n d the r e c u r r i n g accusations, invariably o f bourgeois nationalism, w h i c h did n o t stop w i t h the death o f Stalin, express the same attitude. Politically, o f course, the C o m m u n i s t Party w a s d o m i n a n t . T h e r e w a s actually an investigation o f the ethnic c o m p o s i t i o n o f the E C P in 1944—65, w h i c h w a s published in 1 9 6 6 , at the e n d o f the ' t h a w ' period. A c c o r d i n g to this study, Estonians w e r e 70—5 per cent o f the population at the time, but less than 5 0 per cent o f party m e m b e r s . F r o m the m i d 1 9 6 0 s onwards, the share o f Estonians w a s slightly over 5 0 per cent. T h e n u m b e r o f ethnic Estonians in the C e n t r a l C o m m i t t e e also increased after the Stalin era, while the politburo still continued to have a majority o f Russians a n d ' Y e s t o n i a n s ' . T h e majority population thus h a d a 62

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low representation in the party, but the figures do not tell w h e t h e r this resulted from a w a n t o f applications or a w a n t o f admissions into the party. T h e so-called Yestonians were, in this investigation, included a m o n g Estonians. In spite o f a p p a r e n t political suspicions towards the majority p o p u l a ­ tion, d e m o n s t r a t e d in the t e n d e n c y to k e e p t h e m out o f strategic e c o n o m i c a n d political sectors, the central p l a n n i n g authority chose to industrialise the Baltic area m o r e heavily t h a n most other parts o f m a i n ­ land Russia. T h e decisions w e r e taken in the early years o f Soviet o c c u p a t i o n - the late 1 9 4 0 s a n d early 1950s. In this period, deportations a n d purges took place, but, simultaneously, resources w e r e scarce, a n d investment in the n e w republics still e x c e e d e d that o f Russia by some 5 0 per c e n t . In addition to the political and ethnic insecurity in the area, industrialisation m e a n t that r a w materials, e n e r g y a n d l a b o u r h a d to be imported. A n u m b e r o f explanations for this p u z z l i n g b e h a v i o u r have b e e n presented. For a final answer, however, the discussions at the central level must be studied in the archives. O n e a r g u m e n t for the B a l t i c a r e a has b e e n the infrastructure assets. In tsarist Russia, the h a r b o u r s w e r e o f p r i m a r y s t r a t e g i c i m p o r t a n c e , as well as for the transport system o f that period. H o w e v e r , in the Soviet era, trade to the west d e c r e a s e d precipitously, a n d r a w materials, e n e r g y a n d l a b o u r w e r e transported into the area mostly from m a i n l a n d Russia. D u e to l o w r a w - m a t e r i a l prices, this did n o t c h a n g e the investment calculations significantly. H a r b o u r s still h a d important functions for transit to other parts o f Russia, but w e r e less crucial t h a n at the b e g i n n i n g o f the century. For military reasons (for the Soviet navy) the coastline seems to have b e e n o f great value, too. Infrastructural i m p r o v e m e n t s h a d b e e n u n d e r t a k e n in Estonia in the e c o n o m i c nationalist prog r a m m e s o f the late 1930s. S o m e railway investments, but m a i n l y electrification and hard-surface roads, b e l o n g e d to this c a t e g o r y . 69

70

Secondly, a n d m o r e specifically, the oil-shale mines o f north-east Estonia took o n a special i m p o r t a n c e for the L e n i n g r a d area in the 1940s, w h e n e n e r g y w a s in short supply. T h e m i n e s a n d the p o w e r stations w e r e mostly m a n n e d w i t h Russian workers. T h i s p r o d u c t i o n w a s also the first to be referred to a central level in the sovnarchozy period. Thirdly, closeness to the L e n i n g r a d industrial area seems to be a m o r e g e n e r a l w a y o f e x p l a i n i n g industrial allocation to the Baltic countries. T h e r e is a tradition, albeit short, of industrialisation o n the wes t er n r i m of Russia. Historically, a g r a r i a n productivity t e n d e d to be h i g h e r there, as did e d u c a t i o n a l level. W h e t h e r ethnical differences d e t e r m i n e the 71

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h i g h e r education a n d skill levels, as nationalist historiography sometimes maintains, is, however, d e b a t a b l e . Fourthly, the allocation c a n be considered as part o f a conscious plan of ethnic integration, the m a i n a i m b e i n g the i m m i g r a t i o n o f n o n Estonians. A s a c o n s e q u e n c e , the w o r k i n g class in Estonia w o u l d grow, a n d supposedly be m o r e inclined to a c c e p t socialism t h a n the smallh o l d i n g peasantry that d o m i n a t e d the period o f i n d e p e n d e n c e . 72

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A s glasnost o p e n e d the public debate in the Soviet U n i o n , dissent a n d secessionist tendencies proved to be v e r y strong in all three Baltic republics. O r g a n i s a t i o n s w e r e quickly f o r m e d a n d received massive p o p u l a r support, m a i n l y a l o n g ethnic lines. In the early 1980s, a school reform threatened the position of the Estonian l a n g u a g e , w h i c h prov o k e d r e s e n t m e n t . B u t the first protest m o v e m e n t in Estonia w a s o f environmental character. A plan for large-scale phosphorite m i n i n g in north-eastern Estonia, threatening the w a t e r reserves in a large part o f the territory, m e t opposition in the s u m m e r o f 1 9 8 7 , a n d w a s shelved b y O c t o b e r . In the a u t u m n , plans for regional e c o n o m i c self-determination in the Estonian R e p u b l i c b e g a n to be discussed in the Estonian press, t w o years before the fall o f the Berlin W a l l . In the spring o f i 9 8 8 , a P o p u l a r Front for the support o f perestroika, the first political organisation i n d e p e n d e n t o f the C o m m u n i s t Party, w a s f o r m e d in Estonia (it is also said to be the first within the U S S R ) a n d w a s , to a general surprise, a c c e p t e d by the Soviet regime. Shortly afterwards, demonstrations in Tallinn took on a mass character, a n d the 'Yestonian' secretary o f the E C P w a s replaced by a 'local' Estonian a n d friend o f G o r b a c h e v . In M a r c h 1 9 9 0 , there w e r e elections to the S u p r e m e Soviet o f Estonia w i t h i n d e p e n d e n t candidates, a n d the n e w body, called the S u p r e m e C o u n c i l , declared the start o f a transition period to the re-establishment o f an i n d e p e n d e n t E s t o n i a . T h e E C P in its majority supported the m o v e m e n t towards i n d e p e n d e n c e , but eventually split over the matter. Following the unsuccessful coup against G o r b a c h e v in A u g u s t i 9 9 i , a Resolution on N a t i o n a l I n d e p e n d e n c e w a s taken in the S u p r e m e C o u n c i l , a n d recognised by Yeltsin a n d later b y the Soviet State C o u n c i l in S e p t e m b e r 1 9 9 1 . T h e a p p r o x i m a t e l y 6 0 0 , 0 0 0 non-Estonians reacted b y setting u p their o w n organisations. A first pro-Soviet m o v e m e n t , called the Inter-move­ m e n t , w a s dismantled because it supported the coup against G o r b a c h e v , 74

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a n d w a s r e p l a c e d b y the Representative A s s e m b l y o f Russian-speaking Population, w h i c h a c t e d a c c o r d i n g to the Soviet C o n s t i t u t i o n . T h e over­ riding issue since i n d e p e n d e n c e has b e e n the citizenship law. In F e b r u a r y 1 9 9 2 , Estonian citizens w e r e legally defined as those w h o w e r e citizens before Soviet o c c u p a t i o n and their descendants, thus c o n s p i c u o u s l y e x c l u d i n g i m m i g r a n t s o f the Soviet period. T o acquire citizenship, resid e n c e in Estonia for three consecutive years a n d k n o w l e d g e o f the Estonian l a n g u a g e is d e m a n d e d . T h e latter provision has p r o v e d difficult for m a n y Russian-speaking residents. O t h e r s protest b y not a p p l y i n g for citizenship. M a n y r e m a i n stateless today. For t h e m , n e w provisions, a l l o w i n g t h e m to participate in local elections and h a v i n g a certain cultural a u t o n o m y t h r o u g h their o w n schools a n d cultural councils, have facilitated life s o m e w h a t , but the issue remains crucial in the n e w state (see

figure

18.1).

7 9

T h e l e g a c y o f the Soviet U n i o n a n d its p o l i c y o f e c o n o m i c d e v e l o p ­ m e n t w a s , first, that industrialisation h a d b e e n v e r y rapid. T h e industri­ alisation that took place w a s not g e a r e d to self-sufficiency; instead, the internal division o f l a b o u r m a d e i n d e p e n d e n c e m o r e difficult. Secondly, the t e r m s o f trade in the

fixed-price

system h a d b e e n favourable to the

Baltic countries w i t h a relative p a u c i t y o f natural resources and a h i g h level o f v a l u e a d d e d in industry. T r a d i n g on the w o r l d market, t e r m s of trade t u r n e d against the Baltic countries. A third l e g a c y is a large Russian m i n o r i t y inside the Baltic republics. In Estonia, it is still g e o g r a p h i c a l l y c o n c e n t r a t e d in T a l l i n n a n d the north-eastern area, a n d to the factories, w h i c h b e l o n g e d to the a l l - U n i o n level in the p e r i o d 1 9 6 5 - 8 5 . T h e s e factories have k n o w n serious p r o b lems, but luckily, a l t h o u g h m a n y o f t h e m partly relied o n military p r o duction, it seems as if they have b e e n able to c h a n g e to civilian p r o d u c t i o n , at least to some extent. A large u n e m p l o y e d Russian m i n o r ity, stateless a n d d e p e n d i n g o n a v e r y w e a k social security system, w o u l d obviously be a h i g h l y destabilising force. So far, a n explosive situation has b e e n avoided, a l t h o u g h at a h i g h cost o f uneasiness a n d security for all involved.

GONGLUDING

REMARKS

W h a t are the decisive e c o n o m i c aspects o f the national question in this part o f north-eastern E u r o p e , at the Russian b o r d e r ? It is obvious that, historically, a n ethnic division o f l a b o u r has reigned. T h e Baltic peoples have b e e n confined to the role o f a s u b d u e d peasantry, while trade, c o m -

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m e r c e a n d entrepreneurship w e r e the lot o f their masters. In the first period o f i n d e p e n d e n c e , this w a s a p r o b l e m . Severe nostrification poli­ cies a n d a h i g h level o f state intervention in the e c o n o m y w e r e used to c o u n t e r a c t the incomplete class structure. T h e Soviet era did not exactly r e p r o d u c e the historical division o f labour, but agriculture r e m a i n e d an almost exclusively Baltic o c c u p a t i o n , while Estonians w e r e rare to the point o f discrimination in l e a d i n g positions as well as in the most a d v a n c e d industries, n o r m a l l y related to military needs. A l t h o u g h the level o f education is high, the l e g a c y o f the Soviet era w a s not to foster entrepreneurs, traders a n d c o m m e r c i a l talents. T o w h a t extent such skills c a n be quickly learnt in an o p e n e c o n o m y with international competition is still an o p e n matter. Estonia has, like most other e c o n o m i e s in the E u r o p e a n periphery, k n o w n state-led industrialisation and e c o n o m i c d e v e l o p m e n t inside protected markets. In different forms, a n d led by different p e o p l e a n d nationalities, the state itself has b e e n the m a i n e c o n o m i c actor t h r o u g h out the twentieth century. T h e liberal e c o n o m i c policy o f the present is, of course, partly due to I M F conditionalities, but endorsed b y the elected g o v e r n m e n t s , w h i c h have b e e n , by E u r o p e a n standards, rather far to the right. T h e r e has b e e n a rapid social differentiation in the recent transition period w i t h its losers a n d its winners, but this differentiation does not seem to be ethnically lopsided. O p e n n e s s to international investments in the privatisation process has aroused some domestic a l a r m . Small-scale a n d g r o w i n g enterprises are often domestic, while several o f the largest p r o d u c i n g factories have b e e n b o u g h t up, a n d sometimes also closed d o w n , b y international enterprises, often from the N o r d i c n e i g h b o u r i n g countries o f F i n l a n d a n d S w e d e n . T h e preservation o f the Estonian l a n g u a g e , culture and p e o p l e has b e e n the m a i n a i m o f nationalist policies. T h e threat o f extinction facing a small a n d culturally distinctive nation has often e n o u g h b e e n real, a n d should be seen as a b a c k d r o p to the harshly nationalist policies o f the interwar years, a n d the treatment o f the Russian-speaking minority today. W h i l e these reactions m i g h t s e e m s o m e w h a t overzealous, there is a n o t h e r p r o b l e m , w h i c h is less discussed today. T h e c o m b i n e d forces o f international mass culture, brain drain a n d transnational enterprise have swept over the c o u n t r y since i n d e p e n d e n c e . State i n c o m e s are small a n d b u d g e t a r y constraints are rigid. T h e b u d g e t for education a n d cultural purposes has b e e n severely cut. T h e o p e n economy, admittedly the only realistic option, m i g h t turn out to be a n o t h e r threat to cultural preservation.

ANU MAI KOLL

378

NOTES 1 T. U. Raun, Estonia and the Estonians (Stanford, 1991), p. 72. 2 Ibid., pp. 6 0 - 2 . 3 M. Hroch, .Social Preconditions of National Revival in Europe (Cambridge, 1985), p. 77. 4 J. Kahk, 'Peasant movements and national movements in the history of Europe' in A. Loit (ed.), National Movements in the Baltic Countries during the 19th Century (Stockholm, 1983), pp. 1 5 - 2 4 . 5 E. Jansen, 'Aufklarung und estnische Nationale Bewegung in der zweiten Halfte des 19. Jahrhunderts' in G. Pistohlkors (ed.), Aufklarung in denBaltischen Provinzen Russlands (Vienna, 1996), pp. 5 7 - 7 2 at pp. 5 9 - 6 0 . 6 Raun, Estonia and the Estonians,p. 77. 7 D. Kirby, Northern Europe in the Early Modern Period (London, 1990), vol. i,pp. 83-5.

8 Raun, Estonia and the Estonians,pp. 53 and 80. 9

I b i d . , p .

10 Hroch, Social Preconditions,p. 9. 11 Raun, Estonia and the Estonians,p.6i. 12 Eesti NSV Ajalugu [History of the Estonian SSR], (Tallinn, 1971), vol. m,pp. 20-i.

13 Raun, Estonia and the Estonians,p. 79. 14 E. Jansen, Carl Robert Jakobsoni Sakala' (Tallinn, 1971), pp. 2 7 5 - 9 . 15 A. Koll and J. Valge, Economic Nationalism and Industrial Growth (Stockholm, i998), pp. 3 2 - 3 .

16 Raun, Estonia and the Estonians,p. 59 and T. U. Raun, 'The Estonians' in E. C. Thaden et al.,Russification in the Baltic Provinces and Finland (Princeton, i 9 8 i ) , pp. 2 8 7 - 3 5 4 .

17 Hroch, Social Preconditions,p. 79. 18 Raun, Estonia and the Estonians,pp. 8 3 - 6 and i 0 2 - 4 . 19 Ibid., p. i04. 20 Ibid., p. i30. 21 Ibid., p. i33. 22 Ibid., p. 72. 23 Ibid., p. i 3 0 , based on census data from i922 and i 9 3 4 . At independence, border areas with predominantly Russian population were added to the territory. 24 Estimations of the situation in 1945 and 1950 were in ibid., p. 192. In the Second World War, border areas added in 1920 were removed. After 1945, a massive influx of Russian labour took place, not least to supply Leningrad oblast with energy from Estonian oil shale. 25 Eesti NSV rahvamajandus 1970 aastal [Soviet Estonian economy in 1979], (Tallinn, i 9 7 i ) , p. 29. 26 B. Van Arkadie and M. Karlsson, Economic Survey of the Baltic States (London, 1992), p. 20; Raun, Estonia and the Estonians,p. 182.

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27 T. Myllyntaus, 'Standard of living in Estonia and Finland in the 1930s', ETA Toimetised,Proceedings of the Estonian Academy of .Sciences 41(3) (1992), 184-91 and M. Herranen and T. Myllyntaus, 'Effects of the First World War on the engineering industries of Estonia and Finland', Scandinavian Economic History Review3 (1984), 1 2 1 - 4 2 .

28 A. M. Koll, 'The development gap' in Emancipation and Interdependence (Stockholm, 1998), pp. 3 3 - 4 . 29 Koll and Valge, Economic Nationalism,pp. i 8 7 f f 30 ENSVAjalugu, vol. m,p. 214. This official historiography from the Soviet period will evaluate the evidence of Estonian bolshevism higher than would be reasonable, but often the numbers are right. 31 A. M. Koll, Peasants on the World Market (Stockholm, 1994), p. 48. 32 Ibid.,p. 70. 33 For parallels, see E. Hobsbawm, The Age of Extremes (London, 1995), pp. 1 1 0 - 1 6 ; the history of the Estonian movement is in R. Marandi, Must-valge lipu all [Under the black and white flag], with a summary in German (Stockholm, i 9 9 i ) . 34 Hobsbawm, The Age ofExtremes,pp.ii3-i4. 35 Koll and Valge, Economic Nationalism,pp. 5 3 - 6 . 36 Ibid.,pp.78-9. 37 In the archives of the National Finance Committee, April 1937; Estonian National Archives, f. 8 9 1 / 1 . 38 Koll and Valge, Economic Nationalism,p. 75. 39 I. B. Neumann, Russia and the Idea of Europe (London, 1996), p. i. 40 This part of this chapter does not rely on my own research but, rather, on critical reading of the historiography. Due to the extreme polarisation of nationalist history in exile on the one hand and Soviet-type history on the other, in particular regarding this period and precisely this issue, the task is difficult. It is possible to see an outline of events, but I have been very restric­ tive in reproducing figures that seem to be gross estimations. 41 Booklet by Harald Runblom, The Multicultural Baltic Region (Uppsala, 1994), part I, p. 26. 42 The presentations of Johannes Kabin and Karl Vainu in R. Misiunas and R. Taagepera, The Baltic States - Years of Dependence (London, 1983), at pp. 79ff., for instance. 43 S. Sinilind, Moningatest rahvuspoliitika aspektidest [Some aspects of national policies], (Stockholm, 1983), p. 37. 4 4 Raun, Estonia and the Estonians,p. 175 and P. Sandstrom, Baltiskt dilemma (Stockholm, 1991), p. 62. 45 Van Arkadie and Karlsson, Economic Survey,p. 8. 46 Misiunas and Taagepera, The Baltic States,pp. 285ft. 47 Ibid., p. 108 and Sinilind, Moningatest rahvuspoliitika aspektidest,p. 20. The personnel of the Red Army are excluded. 48 ENSV Ajalugu, vol. m,p. 563 and A. Juursoo and R. Pullat, A Brief History of the Estonian Working Class (Tallinn, 1981), pp. i06ff.

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49 Misiunas and Taagepera, The Baltic States,p. 207. This was due to the fact that the immigration did not include peasants. 50 In table 18.2: 1916 and 1922 are based on calculations of the total popula­ tion, not the active population; 1916 is an estimation, made in Eesti NSV Ajalugu, vol. III, pp. 2 0 - 1 (the statistical services in the Baltic provinces of tsarist Russia were not very efficient); the data from 1922 are based on a population census; the 1934 data are from Estonie en chiffres 1920-1935 (Tallinn, 1936), pp. 1 5 - 1 7 ; 1950 and 1970 data are from Eesti NSV rahvamajandus,p. 237; and 1989 and 1994 data are from International Labour Statistics (International Labour Office, Geneva, 1996). 51 Misiunas and Taagepera, The Baltic States,pp. i86ff. 52 Van Arkadie and Karlsson, Economic Survey,p. 92 and Sandstrom, Baltiskt dilemma,p. 27. 53 Sandstrom, Baltiskt dilemma,p.92. 54 Etnilisest uhendusest sotsialistliku rahvuseni (From ethnic unity to socialist nations], (mimeo, Tartu, 1987), pp. 1 4 0 - 2 . 55 The variation in different estimations is dramatic, and they have been done without full access to the local archives. Only local studies have been made since independence. Among them, a Masters thesis from Tartu University by Aigi Rahi estimates the total number at 27,000. 56 Misiunas and Taagepera, The Baltic States,pp. 9 3 - 9 and Raun, Estonia and the Estonians,pp. 1 7 6 - 8 1 .

57 Van Arkadie and Karlsson, Economic Survey,p. 99. 58 Misiunas and Taagepera, The Baltic States,p. 79 and Raun, Estonia and the Estonians,p. 181. 59 For a general discussion of the reform, see A. Nove, An Economic History of the USSR (London, 1992), pp. 3 6 7 - 9 . 60 Misiunas and Taagepera, The Baltic States,pp. 179ft". 61 Sandstrom, Baltiskt dilemma,p. 57ft". 62 Ibid., pp. 26ff and 5 8 ; also Misiunas Taagepera, The Baltic States,pp. i86ff. 63 Sandstrom, Baltiskt dilemma,p. 58. 6 4 Ibid., p. 73; Raun, Estonia and the Estonians,pp. 1 9 8 - 2 0 0 . 65 Raun, Estonia and the Estonians,p. 233; R. Kionka, 'The Estonians' in G. Smith (ed.), The Nationalities Question in the Soviet Union (London, 1990), pp. 4 0 - 5 3 at p. 4 4 .

Sandstrom, Baltiskt dilemma,pp. iiiff. 67 A. Panksejev, 'EKP tegevusest partei ridade kasvu reguleerimisel aastad i 9 4 4 - i 9 6 5 ' [Activities of the ECP concerning regulation of party member­ ship in i 9 4 4 - i 9 6 5 ] in TbidEKPajaloo alalt [Works on the history of the ECP], vol. II (Tallinn, i 9 6 6 ) , cited in Misiunas and Taagepera, The Baltic States,pp. 66

28i-4.

Raun, Estonia and the Estonians,pp. i90ff and Sinilind, Moningatest rahvuspoliitika aspektidest,p. 75. 69 ENSV Ajalugu,p. 5 7 L 70 Van Arkadie and Karlsson, Economic Survey,p. 7; Misiunas and Taagepera, The Baltic States,p. i04; Koll and Valge, Economic Nationalism, app. I. 68

Economy,ethnicity and the state in Estonia 71

72 73 74

75

76

77 78 79

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ENSVAjalugu,pp. 5 7 3 - 5 ; Misiunas and Taagepera, The Baltic States,p. 107; Sandstrom, Baltiskt dilemma,p. 62. Van Arkadie and Karlsson, Economic Survey,p. 9; Sandstrom, Baltiskt dilemma, p. 85; Sinilind, Moningatest rahvuspoliitika aspektidest,p. 37. Misiumas and Taagepera, The Baltic States,p. 107 and Sandstrom, Baltiskt dilemma,p. 85. Raun, Estonia and the Estonians,pp. 2iiff. Ibid.,p. 223; Sandstrom, Baltiskt dilemma,pp. i i and 20; R. Kionka and R. Vetik, 'Estonia and the Estonians' in G. Smith (ed.), The Nationalities Question in the Post-Soviet States (London, 1996), pp. 1 2 9 - 4 6 at p. 135. Sandstrom, Baltiskt dilemma,pp. 28ff; Kionka and Vetik, 'Estonia and the Estonians', pp. i37ff. Raun, Estonia and the Estonians,p.230; Kionka and Vetik, 'Estonia and the Estonians', p. i38. Kionka and Vetik, 'Estonia and the Estonians', p. i38 and A. Lieven, The Baltic Revolution (New Haven, MA, i994), p. 426. Kionka and Vetik, 'Estonia and the Estonians', pp. i42ff.

CHAPTER

ig

Changing structure and organisation of foreign trade in Finland after Russian rule Riitta Hjerppe and Juha-Antti Lamberg

INTRODUCTION

F i n l a n d b e c a m e i n d e p e n d e n t in D e c e m b e r 1 9 1 7 . S e p a r a t i o n from Russia and the n e w E u r o p e a n ' e c o n o m i c order' i m p o s e d m a n y impor­ tant changes on the Finnish e c o n o m y after the First W o r l d War. V e r y notable w e r e the changes in foreign a n d Russian trade, w h i c h w e r e o f utmost i m p o r t a n c e to the Finnish e c o n o m y — separation virtually e n d e d the considerable trade with Russia. N e w markets and a reorganisation of trade w e r e n e e d e d . Finland's i n d e p e n d e n c e w a s also v e r y significant for m a n y g r o u p s in society. T h e Finns w e r e not a united p e o p l e w i t h clear goals; rather, there w e r e severely conflicting fronts. T h e r e w e r e the r i g h t i s t / W h i t e and leftist/Red fronts, w h i c h led to a civil w a r a few m o n t h s after i n d e p e n d e n c e , the result b e i n g a W h i t e victory a n d a politically divided people. T h e r e w e r e also the nationalistic groups w h o s e ideas h a d b e e n stimulated b y the nationalistic m o v e m e n t s o f the other E u r o p e a n countries from the middle o f the nineteenth century. It is difficult to determine the goals o f the nationalistic m o v e m e n t as they seem to have c h a n g e d over time a n d were sometimes even conflicting. O n the one h a n d , an i m p o r tant goal o f the nationalistic m o v e m e n t w a s a better position for the Finnish l a n g u a g e , the l a n g u a g e o f the majority. O n the other h a n d , the a i m w a s a better position for F i n l a n d in the Russian E m p i r e . It seems obvious to try to get a better position, but total i n d e p e n d e n c e w a s not, however, a u n a n i m o u s g o a l o f the nationalistic m o v e m e n t , even if from the 1 8 9 0 s on, the russification p r o g r a m m e h a d antagonised the nationalists. In addition, Swedish-speaking g r o u p s also h a d strong nationalistic aims c o n c e r n i n g the a u t o n o m o u s position, or even the i n d e p e n d e n c e , o f Finland. B u t w a s there a c o n n e c t i o n b e t w e e n the nationalistic ideas a n d the e c o n o m i c goals? D i d the various groups in the e c o n o m y take nationalistic views into a c c o u n t in their e c o n o m i c activities? Studies o f 1

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nationalistic m o v e m e n t s characteristically bypass e c o n o m i c questions. A n exception is M i r o s l a v H r o c h , w h o briefly mentions one g r o u p o f e c o ­ n o m i c actors. H e claims that the industrialists o f a subordinated g r o u p generally do not address national questions but rather follow the views of the stronger partner, a n d that they stress e c o n o m i c questions in their activities. Traditionally, historians have assumed that major political c h a n g e s also affect e c o n o m i c d e v e l o p m e n t strongly. S o m e t i m e s that is clearly the case — for e x a m p l e , the R e v o l u t i o n o f 1 9 1 7 radically modified the w h o l e e c o n o m i c structure o f Russia. Still, the p r o b l e m o f the i m p a c t o f institutional or political c h a n g e s on e c o n o m i c g r o w t h is m u c h m o r e c o m p l i cated if w e a d o p t the hypothesis o f D o u g l a s s C . N o r t h . H e argues that institutional c h a n g e occurs because o f the interaction b e t w e e n the organisations, b o t h formal a n d informal constraints, in contrast to the traditional assumption that emphasises the i m p o r t a n c e o f the formal constraints. Institutional c h a n g e m e a n s to N o r t h that 'yesterday's choices are the initial starting point for today's'. N o r t h argues that 'even w h e n revolutions o c c u r they turn out to be far less revolutionary than the initial rhetoric w o u l d suggest'. T h i s chapter takes a p r a g m a t i c position a n d defines Finland's indep e n d e n c e as an absolute solution o f the national question. I n d e p e n d e n c e is interpreted as an 'historical a c c i d e n t ' w h i c h w a s not expected, especially a m o n g business circles. A l s o analysed is h o w 'revolutionary' w e r e the e c o n o m i c impacts o f the First W o r l d War, inde­ p e n d e n c e and the civil w a r o f 1 9 1 8 on Finland's foreign trade a n d trade relations. T h e chapter also tries to determine w h e t h e r nationalistic ideas w e r e g u i d i n g e c o n o m i c activities or if the e c o n o m y evolved w i t h o u t b e i n g influenced by, or even evolved in contradiction to, nationalistic ideas. T h e chapter concentrates on the e c o n o m i c situation and foreign e c o n o m i c ties o f Finland d u r i n g the couple o f d e c a d e s before the First W o r l d War, d u r i n g the w a r a n d i m m e d i a t e l y after it, a n d finally h o w the situation w a s stabilised in i n d e p e n d e n t F i n l a n d in the 1920s. T h e foreign trade relations o f F i n l a n d are considered, as F i n l a n d w a s a v e r y o p e n e c o n o m y d u r i n g the second h a l f o f the a u t o n o m o u s period (from the 1 8 6 0 s to 1917). A closer look is taken at w h a t h a p p e n e d to the organisation o f foreign trade and h o w decisions c o n c e r n i n g foreign trade relations w e r e m a d e after i n d e p e n d e n c e . Foreign trade as well as m a c r o e c o n o m i c d e v e l o p m e n t have b e e n studied in the past, particularly by Erkki Pihkala, Per S c h y b e r g s o n , J o r m a A h v e n a i n e n and Riitta H j e r p p e . T h e r e f o r e it is not necessary to 4

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RIITTA HJERPPE AND JUHA-ANTTI LAMBERG

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Figure i g . i . T h e volume indices of GDP, imports and exports of goods, 1 8 9 0 - 1 9 3 8 (1926 = 100)

Source: Riitta Hjerppe, The Finnish Economy i86o-ig8§. Growth and Structural Change (Helsinki, 1989).

g o into detail, but rather explain the m a i n lines o f d e v e l o p m e n t s from our point o f view. T h e creation of organisations dealing w i t h foreign trade policy has n o t b e e n presented in this w a y before, a n d the information has b e e n c o m p i l e d from the archives o f the organisations a n d the M i n i s t r y o f T r a d e and C o m m e r c e as well as from a c a d e m i c literature.

THE E C O N O M Y Economic development in Finland

i8go-igij

T h e Finnish e c o n o m y w a s u n d e v e l o p e d at the b e g i n n i n g o f the a u t o n o m o u s period, in 1 8 0 9 , a n d it w a s m a i n l y based on subsistence agriculture with a small c o m m e r c i a l sector. T h e first m a n u f a c t u r i n g enterprises, using m o d e r n technology, found their markets in Russia. T h e s e w e r e aided b y Finland's favoured customs position. T h e Finnish e c o n o m y g r e w gradually, at least from the 1 8 2 0 s o n , even if the standard of living w a s still v e r y low. T o w a r d s the end o f the nineteenth century g r o w t h accelerated a n d the d e c a d e s before the First W o r l d W a r c a n definitely be characterised as a p e r i o d o f industrialisation (see figure 7

I 9 . l ) .

F r o m the m i d d l e o f the nineteenth c e n t u r y F i n l a n d e x p e r i e n c e d rapid structural changes, particularly significant a m o n g w h i c h w a s the increase in the openness o f the economy. T h e relation o f export a n d i m p o r t values to G D P h a d quickly g r o w n from insignificant levels to

Foreign trade in Finland after Russian rule

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Figure 19.2. T h e distribution of exports by country, 1 8 9 0 - 1 9 3 8 Source: Kaarina Vattula, Suomen taloushistoria 111, Historiallinen tilasto [Finnish economic history, vol. 111, Historical statistics], (Helsinki, 1983). a b o u t a fifth a n d a quarter respectively. T h o s e w e r e considerable shares in those d a y s . It has b e e n considered that e c o n o m i c a l l y F i n l a n d h a d a relatively favourable position as a part o f the Russian E m p i r e b e c a u s e o f the trade opportunities it o p e n e d to the F i n n s . Russian trade w a s at its highest in the 1860s, 1 8 7 0 s a n d 1 8 8 0 s w h e n a b o u t half o f Finland's imports a n d exports w e r e w i t h R u s s i a . T h i s share clearly declined b y the outbreak of the First W o r l d W a r w h e n m o r e t h a n a quarter o f the trade w a s w i t h Russia. G e r m a n y r e p l a c e d Russia as a major supplier o f g o o d s a n d G r e a t Britain b e c a m e the largest export c o u n t r y (see figures 8

9

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T h e structure o f trade also c h a n g e d . D u r i n g the a u t o n o m o u s p e r i o d Finnish exports w e r e divided as follows. T h e Russian m a r k e t w e l c o m e d textiles, other c o n s u m e r g o o d s a n d increasing a m o u n t s o f p a p e r m a d e of w o o d fibre; relatively unprocessed p i g iron a n d w r o u g h t iron w e r e g r a d u a l l y r e p l a c e d b y e n g i n e e r i n g p r o d u c t s . W h i l e a b s o r b i n g relatively few processed products b a s e d on t i m b e r or cattle rearing, the western m a r k e t b o u g h t diminishing a m o u n t s o f tar, but rapidly increasing a m o u n t s o f sawn t i m b e r a n d some butter. D u r i n g the last years before the First W o r l d War, three quarters of exports c o n t a i n e d products based on w o o d , mostly sawn g o o d s , but also paper, pulp a n d r o u n d timber. T h e export selection actually b e c a m e m o r e one-sided towards the last decades of the nineteenth century: sawn t i m b e r to w e s t e r n markets a n d p a p e r to Russia. E x p o r t s paid for imports, w h i c h for the most part w e r e r a w materials a n d intermediate products, most importantly grain. Finnish g r a i n tariffs h a d b e e n abolished in the spirit o f free trade in the 1 8 6 0 s (Russian g r a i n 11

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Figure 19.3. T h e distribution of imports by country, 1 8 9 0 - 1 9 3 8

Source: Vattula, Suomen taloushistoria III.

w o u l d have c o m e to the c o u n t r y duty free in a n y case). O t h e r p r i m a r y i m p o r t items from Russia w e r e r a w sugar a n d r a w t o b a c c o . Finnish selfsufficiency in g r a i n w a s only a b o u t 4 0 per cent before the First W o r l d War. F i n l a n d h a d actually a d a p t e d itself well to the w o r l d of relatively free trade a n d w a s i m p o r t i n g materials it w a s not v e r y fit to p r o d u c e b e c a u s e o f natural conditions (notably grain). It p a i d for the latter with products better suited to Finnish conditions (cattle products, timber). R a w material imports as a share of total imports w a s 5 6 per cent in 1 8 9 0 , w h i c h g r e w to 6 0 per cent in 1 9 1 3 . T h e s e c o n d i m p o r t a n t g r o u p o f imports consisted o f c o n s u m e r g o o d s , partly from Russia, partly from w e s t e r n countries. T h e third w a s m a d e u p o f investment g o o d s , the share o f w h i c h w a s still low. In an u n d e v e l o p e d country, the investment ratio w a s still low, a n d so w a s the n e e d o f investment g o o d s in trade. A b o u t 6 per cent o f imports consisted of m a c h i n e r y a n d e q u i p m e n t in 1 8 9 0 . T h i s share h a d risen to 9 per cent in 1 9 1 3 . W h a t is significant a b o u t imports is that almost n o investment g o o d s c a m e from Russia — they c a m e m a i n l y from G e r m a n y a n d the United Kingdom. F i n l a n d also h a d other lively international relations t h r o u g h m i g r a tion, t h r o u g h the activity o f some foreign entrepreneurs, t h r o u g h financial ties a n d the g o l d s t a n d a r d . T h e Finnish Senate w a s a b o r ­ r o w e r o n the international financial market, b o t h in St Petersburg a n d in central E u r o p e a n financial centres since the 1 8 6 0 s . P r o x i m i t y o f the large city o f St Petersburg w a s a n i m p o r t a n t factor in the livelihood o f the p e o p l e in the south-eastern b o r d e r area, the C a r e l i a n Isthmus. T h e y c o u l d provide the city with food a n d firewood, for e x a m p l e , and also find 13

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w o r k there for longer or shorter periods o f time. Finnish c o m p a n i e s a n d private businessmen consistently h a d lively c o m m e r c i a l relations with Russians, for e x a m p l e the sales agencies o f the Finnish p a p e r industry. M a n y Finnish businessmen acted primarily in the Russian markets.

World waryears W h e n the First W o r l d W a r started, the most i m p o r t a n t effects on the Finnish e c o n o m y w e r e problems of foreign trade. T h e largest import item, flour from G e r m a n y , and the largest export item, sawn g o o d s to the U n i t e d K i n g d o m , p l u m m e t e d immediately, as all imports from G e r m a n y , an e n e m y country, w e r e prohibited, and G e r m a n y also closed the s e a w a y to the U n i t e d K i n g d o m . Consequently, m a n y b r a n c h e s o f industry faced great difficulties because o f lack of i m p o r t e d r a w materi­ als or intermediate goods: chemicals for the p a p e r industry, c e m e n t for construction, cotton for textile factories, coal for fuel. S o m e of these w e r e partly r e p l a c e d by imports from Russia or transit traffic through S w e d e n , some by transportation via the A r c t i c Sea. T r a d e in food h a d b e e n controlled b y Finland's Senate, the g o v e r n m e n t , since 1 9 1 4 , and, at the same time, the first domestic rationing organisations for food distri­ bution w e r e c r e a t e d . A t the outbreak o f war, the Russian a r m y sent its orders to Finnish industry. T h e Finnish e n g i n e e r i n g industry, as well as the textile, leather a n d shoe industries, could sell all they could produce. In the m e t a l indus­ try this even led to the expansion o f p l a n t s . A b o u t a quarter o f all import a n d export v o l u m e s w e r e lost i m m e d i a t e l y in 1 9 1 4 , but then v o l u m e s r e m a i n e d at a b o u t this level in 1 9 1 5 to 1 9 1 6 . G D P fell by 4 to 5 per cent in 1 9 1 4 a n d 1 9 1 5 , but by 1 9 1 6 the decrease stopped because o f increased orders for w a r supplies from Russia. T h e revolutions o f 1 9 1 7 threw the Russian e c o n o m y into turmoil, a n d the Finnish e c o n o m y really started to suffer. Finnish imports and exports d r o p p e d by a b o u t 4 0 per cent, G D P by 1 6 per cent. Exports to Russia continued until the summer, but n o t all o f t h e m w e r e p a i d for; the unfavourable e x c h a n g e rates also caused losses for Finnish industrialists. T h e most dramatic collapse w a s in the grain trade w h e r e imports fell from 3 7 8 , 0 0 0 tons in 1 9 1 6 to 2 7 , 0 0 0 tons in 1 9 1 7 , w h e n imports ceased altogether early in the year. In addition to food shortages, the chaotic conditions in Russia caused u n e m p l o y m e n t in Finland. T h e Russians discontinued fortification works in southern Finland, a n d industries laid off workers w h e n orders stopped c o m i n g in. T h e end o f the small-scale 15

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peasant trade in St Petersburg a n d the disappearance o f the Russian vacationers caused e c o n o m i c difficulties for the inhabitants o f eastern Finland, particularly those o f the C a r e l i a n I s t h m u s . 18

Independence and the civil war Finland's declaration o f i n d e p e n d e n c e in D e c e m b e r 1 9 1 7 in n o w a y c h a n g e d the e c o n o m i c situation immediately. International recognition of i n d e p e n d e n c e took time a n d so did the political a n d administrative reorientation. T h e e c o n o m i c problems w e r e well k n o w n , but it w a s obvious that there w e r e n o quick solutions. T h e r e w a s n o b a l a n c e o f political p o w e r in the n e w nation, either. Accordingly, the situation soon t u r n e d into chaos. For e x a m p l e , there w e r e 4 0 , 0 0 0 Russian soldiers in the c o u n t r y a n d the labourers a n d leftist peasants b e g a n to f o r m R e d G u a r d s units following the Russian e x a m p l e . O n the other side, the middle class a n d other peasants organised paramilitary g r o u p s in all parts o f the c o u n t r y and also sent a couple o f thousand o f their y o u n g m e n to G e r m a n y to be trained as soldiers for the e x p e c t e d battle for i n d e p e n d e n c e . In addition, just before the outbreak o f civil war, Finnish officers w h o h a d fought in the Russian a r m y but h a d returned to F i n l a n d started to f o r m the W h i t e A r m y u n d e r the leadership o f B a r o n C a r l Gustav Emil Mannerheim. Social a n d political contrasts led to a civil w a r in J a n u a r y 1 9 1 8 . Practically the w h o l e o f southern F i n l a n d w a s at war. M i l i t a r y opera­ tions w e r e , at least at first, m o r e chaotic than organised. H o w e v e r , quite soon the W h i t e A r m y w a s able to dominate the w a r a n d to defeat the R e d A r m y , w h i c h w a s supported by some Russian units. Additionally, G e r m a n troops c a m e to F i n l a n d to help the W h i t e A r m y and they c o n q u e r e d Finland's capital, Helsinki. T h e last R e d units surrendered at the beginning of M a y 1918. T h e civil w a r a n d the First W o r l d W a r r e d u c e d e c o n o m i c activity still further. In 1 9 1 8 G D P fell by another 1 3 per cent, b r i n g i n g the total fall since 1 9 1 3 to one third. M a n y factories w e r e closed for m o n t h s a n d the p r o d u c t i o n v o l u m e o f industry, w h i c h h a d kept its p r e w a r v o l u m e s because o f Russian d e m a n d , d r o p p e d by a fifth in 1917 and m o r e than a third in 1 9 1 8 , to a b o u t h a l f o f the 1 9 1 3 level. In 1 9 1 8 foreign trade v o l u m e s w e r e only a b o u t a tenth o f the p r e - w a r level, a n d only m i n i m a l a m o u n t s o f grain, previously a necessity, were imported. In 1 9 1 8 imports a n d exports w e r e hardly possible other t h a n w i t h S w e d e n , D e n m a r k a n d G e r m a n y . T h e difficult situation led to unfavourable trade a g r e e m e n t s

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w i t h G e r m a n y , A u s t r i a - H u n g a r y , T u r k e y a n d B u l g a r i a , w h i c h w e r e sub­ sequently nullified by the Versailles Treaty. N e w trade partners w e r e sought, for e x a m p l e in the U k r a i n e a n d southern Russia, but that did not succeed, either. Foreign trade w a s strictly controlled by the domestic rationing o r g a n ­ isations from J a n u a r y 1 9 1 8 to the a u t u m n o f 1 9 1 9 . A l s o the Inter A l l i e d T r a d e C o m m i t t e e w a s m o n i t o r i n g trade from F e b r u a r y 1 9 1 9 to the a u t u m n o f that year. T r a d e w i t h G e r m a n y w a s forbidden. B e c a u s e of the unresolved situation r e g a r d i n g political and e c o n o m i c relations, trade w i t h Soviet Russia required permission from Finland's Ministry of T r a d e a n d Industry until the spring o f 1921 — that is, until after the T a r t o p e a c e treaty. 19

Stabilisation of the economy after the First World War W h i l e Finland's eastern trade virtually ceased and stayed insignificant d u r i n g the interwar period, w e s t e r n trade, however, revived relatively quickly (see figures 1 9 . 1 , 1 9 . 2 a n d 1 9 . 3 for trade details). L o o k i n g at the stabilisation o f trade relations b o t h in the short run a n d in the longer run, A h v e n a i n e n holds that the most important period in the formation of postwar trade relations w a s the period 1 9 1 8 - 2 0 . In the short run, Soviet Russia, because o f the civil war, w a s unable to deliver g o o d s that w e r e desperately n e e d e d in Finland - grain, sugar, t o b a c c o and other r a w materials. T h e shortage o f i m p o r t e d food m a y have even contributed to the outbreak o f the civil w a r in Finland. Regionally, the i m p a c t of the separation from Russia affected the c o u n t r y unevenly. It caused critical difficulties to the population a n d businesses o f eastern Finland, w h i c h h a d h a d close connections w i t h the Russians. In the longer run, the T a r t o p e a c e treaty in late 1 9 2 0 w a s not satisfactory from an e c o n o m i c point o f v i e w a n d n o trade a g r e e m e n t could be w o r k e d out d u r i n g the 1920s a n d 1 9 3 0 s b e t w e e n Finland and the Soviet U n i o n . Finland, w h i c h w a s v e r y d e p e n d e n t on foreign trade, h a d to seize every opportunity to start trade. Finnish producers l o o k e d for a n d found n e w markets in the west. F u r t h e r m o r e , products, w h i c h h a d previously b e e n b o u g h t from Russia, started to be in a m p l e supply at favourable prices in w o r l d markets. M a n y Finnish agriculturists a n d forest o w n e r s w e r e u n h a p p y with potential Soviet competition in grain a n d r o u n d timber a n d did not w a n t revival o f t r a d e . Relatively quickly, the n e e d for m a n y e c o n o m i c ties b e t w e e n Soviet R u s s i a / t h e Soviet U n i o n 20

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a n d F i n l a n d d i s a p p e a r e d . O n the other h a n d , it is not surprising that Finnish m e r c h a n t s a n d industrialists w e r e h o p i n g that eastern markets w o u l d b e c o m e accessible. Particularly p a p e r exporters, w h o h a d h a d their major markets there, w e r e e a g e r to continue trade with familiar customers, even if there w a s uncertainty a b o u t the c o n t i n u a n c e o f trade as some o f their bills from the revolution y e a r r e m a i n e d u n p a i d . A n i m p o r t a n t h i n d r a n c e w a s the n e w Soviet bureaucracy, w h i c h m a d e direct private trade relations impossible. H o w e v e r , the continuation o f old relations w o u l d still have b e e n a relief. It is difficult to see a n y nationalistic m o t i v a t i o n in the activities o f businessmen, w h o s e m o t i v e w a s to m a k e profits. Nationalistic ideas w e r e not h i n d e r i n g some n e w entrepreneurs from entering eastern F i n l a n d in the 1920s. T h e y w a n t e d to use the vast natural resources o f Soviet C a r e l i a , a n d built w o o d - w o r k i n g factories, saw-mills a n d p u l p factories w i t h the a i m o f b u y i n g their r o u n d w o o d from C a r e l i a . T h e use o f i m p o r t e d t i m b e r stayed insignificant, however. T h e overall trade shares w i t h the Soviet U n i o n rose to less t h a n 5 per cent at their highest in the m i d d l e o f the 1 9 2 0 s . W e s t e r n trade routes o p e n e d in F e b r u a r y 1 9 1 9 . Finnish exports started to rise from 1 9 1 8 and r e a c h e d a fivefold increase. Foreign trade r e g a i n e d its important place. T h e t i m b e r a n d p a p e r industries w e r e the first to r e a c h their p r e w a r levels. In the interwar period, the structure of Finland's exports c a m e to be almost totally d o m i n a t e d b y w o o d , p a p e r a n d pulp (on average 8 5 per cent, 1 9 2 0 - 3 8 ) . T h e c o m m o d i t y structure h a d c h a n g e d in the direction it h a d already b e g u n to take a r o u n d the turn o f the century. In 1 9 1 9 G D P rose b y a fifth, a n d a n o t h e r 12 per cent in 1 9 2 0 . T h e g r o w t h o f G D P in the 1 9 2 0 s and the 1 9 3 0 s d e v e l o p e d v e r y favourably (4.7 per cent a n n u a l g r o w t h , 1920—38). T h e c u r r e n c y situation stabilised after a b o u t t w o to three years o f turbulence, a n d F i n l a n d j o i n e d the n e w g o l d standard in 1 9 2 6 . 24

S a w n g o o d s relatively quickly found their old markets in the west. T h e reconstruction b o o m caused an e n o r m o u s d e m a n d for timber w h e n the w a r w a s over, a n d p r e w a r v o l u m e s o f w o o d and p a p e r w e r e r e a c h e d or passed in 1 9 2 0 . S o m e pulp h a d b e e n sold to the w e s t e r n m a r k e t since the 1 8 9 0 s a n d this c o n t i n u e d slowly. T h e bulk o f p a p e r h a d g o n e to Russia before and d u r i n g the war, but there w a s little or n o h o p e o f r e c o v e r i n g the markets there. T h e n e w w e s t e r n buyers w e r e m o r e interested in m e c h a n i c a l a n d c h e m i c a l pulp t h a n p a p e r . T h e relative share o f p a p e r as a p r o p o r t i o n o f total exports fell while that o f p u l p increased. 25

Foreign trade in Finland after Russian rule

391

Consequently, the result o f trading solely with the west w a s a c h a n g e of exports to less-processed goods. T h i s pattern persisted for a l o n g time. T h e chaos in Russia favoured the Finnish w o o d - w o r k i n g industry as Russian sellers stayed out o f the export markets o f timber until the e n d of the 1920s. F i n l a n d w a s one o f the largest sellers o f timber in the inter­ national markets in the 1920s a n d 1930s. T h e reorientation to western export markets w a s relatively s m o o t h a n d w a s aided by the foundation o f p r o d u c e r s ' cartels after the civil war. A s producers o f bulky, relatively unprocessed items, the separate sellers w e r e n o t large e n o u g h in the international market. H o w e v e r , with the support o f strong central m a r k e t i n g organisations, domestic producers w e r e able to find buyers a n d stabilise their position in western markets. T h e most important cartels w e r e created in the pulp, p a p e r a n d w o o d fibre industries. D a i r y producers h a d already created a central sales organisation, Valio, before the First W o r l d War. T h e producers o f sawn timber did not, however, centralise their sales e x c e p t for a short period after 1 9 1 8 . E n g i n e e r i n g products a n d ships as well as c o n s u m e r goods, w h i c h h a d already b e e n losing significance in trade with Russia, w e r e almost totally w i t h o u t foreign markets. E v e n on the domestic market, they h a d to c o m p e t e h a r d w i t h western products, w h i c h forced the industries that h a d to c o m p e t e w i t h imports to seek tariff protection. T h e c o m m o d i t y structure o f imports soon r e g a i n e d its earlier content: r a w materials a n d intermediate g o o d s d o m i n a t e d . Investment g o o d s actually increased their share as c o n s u m p t i o n g o o d s relatively declined. B y 1 9 2 2 the m a i n western trade partners h a d almost secured the shares that they w o u l d hold u p to the 1930s. In addition to the earlier trade part­ ners — n a m e l y the U n i t e d K i n g d o m a n d G e r m a n y — S w e d e n and the U n i t e d States also c a m e to have significant shares.

FOREIGN TRADE

POLICY

Administration of trade (during the autonomous period F i n l a n d stayed administratively relatively i n d e p e n d e n t d u r i n g the period of the G r a n d D u c h y (1809—1917). T h e bureaucratic m a c h i n e r y devel­ o p e d significantly while e c o n o m i c g r o w t h w a s accelerating. Finnish foreign trade relations w e r e characterised by a lack o f their o w n trade a g r e e m e n t s , but, on the other h a n d , by formal customs autonomy. After 1 8 1 0 Finland w a s treated as an i n d e p e n d e n t customs area even in 26

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relation to Russia. Consequently, it h a d its o w n tariff administration with, for e x a m p l e , its o w n trade statistics. Nevertheless, Finland h a d to follow Russian guidelines in foreign trade policy. D u r i n g the 1850s, 1 8 6 0 s a n d 1870s, Finland's customs duties b e c a m e low, especially on food imports. It has b e e n c l a i m e d that after 1 8 8 0 , w h e n m a n y countries returned to m o r e protected markets, Finnish politicians a n d bureaucrats w e r e reluctant to try to raise duties because they w e r e afraid that the Russian g o v e r n m e n t w o u l d incorporate F i n l a n d m o r e closely into the Russian customs area. H o w e v e r , Finland's tariff policy c a n be character­ ised as passive at the b e g i n n i n g o f the twentieth c e n t u r y . 27

Foreign trade administration during the civil war Since F i n l a n d h a d n o military organisation u n d e r the Russian regime, the a r m y h a d to be recruited from volunteers. It is natural that the most c o m p e t e n t civilians got the top positions o f responsibility in the W h i t e A r m y . T h e Finnish business elite — factory owners, landlords a n d profes­ sional m a n a g e r s — c a m e to d o m i n a t e the d e c i s i o n - m a k i n g a n d administration, especially r e g a r d i n g e c o n o m i c q u e s t i o n s . Already, at the v e r y b e g i n n i n g o f the civil war, it w a s obvious that the financial a n d material p r o b l e m s h a d to be solved before any serious military m a n o e u vres could be started. O n these questions, the role o f the representatives of industry a n d banks b e c a m e crucial. Finnish banks w e r e able to finance military e x p e n s e s . T h e r e w a s also a n e e d for quick organisation o f the foreign policy administration. Foreign policy, foreign trade policy a n d military issues w e r e the only sectors in w h i c h there w a s n o significant bureaucratic tradition from the p r e w a r period. T w o central organisations, the Special Staff o f E n g i n e e r s o f the W h i t e A r m y a n d the T r a d e a n d Industry C o m m i s s i o n w e r e f o r m e d to p e r f o r m e c o n o m i c policy tasks. T h e most important administrative a n d organisational decisions c o n c e r n i n g foreign trade w e r e m a d e in these two organisations, w h i c h controlled non-food trade d u r i n g 1 9 1 8 a n d 1 9 1 9 : the former controlled foreign trade d u r i n g the civil w a r a n d the latter w a s created to take over its functions after the w a r in the spring o f 1 9 1 8 . T h e T r a d e and Industry C o m m i s s i o n w a s discontinued in 1 9 1 9 a n d replaced b y m o r e formal a n d p e r m a n e n t organisations, initially by the Ministry o f T r a d e a n d Industry. T h e Special Staff of E n g i n e e r s w a s a p p o i n t e d in J a n u a r y 1 9 1 8 by the C o m m a n d e r - i n - C h i e f o f the W h i t e A r m y w i t h the task o f 'learning 28

29

30

Foreign trade in Finland after Russian rule

393

w h a t stocks o f c o m m e r c i a l a n d industrial c o m m o d i t i e s w e r e already in the c o u n t r y a n d taking the initiative in b o t h putting t h e m to use a n d in creating n e w b r a n c h e s of production'. T h e control of foreign trade w a s also the responsibility o f the Staff. T h e Staff w a s divided into six sub­ sections, o f w h i c h the Section o f E c o n o m y and Purchases w a s responsi­ ble for foreign trade policy. Regionally, F i n l a n d w a s divided into eight ' E n g i n e e r i n g T e r r i t o r i e s ' . A t the e n d o f the w a r there w e r e a b o u t 100 'engineers' w o r k i n g at the m a n a g e r i a l level. T h e h i g h e r officers of the Staff w e r e engineers w h o h a d previously w o r k e d in Finnish industry. T h e m a n a g i n g director o f the Staff w a s G u s t a f Aminoff, w h o w a s responsible to G o s t a Serlachius, the 'chief o f the E q u i p m e n t Section', o w n e r o f a b i g pulp a n d p a p e r company, a n d to R u d o l f W a l d e n , the ' m a n a g e r o f the Service Section o f the W h i t e A r m y ' , w h o later o w n e d the m i g h t y p a p e r a n d pulp corporation, the U n i t e d P a p e r Mills. T h e officers w h o h a d responsibility for the territories also b e l o n g e d to the small g r o u p o f key persons in Finnish trade a n d industry. W o r t h special m e n t i o n are V a i n o M a t t i V i l j a n e n a n d A x e l Solitander, w h o were later recruited as m a n a g e r s for the national pressure groups: V i l j a n e n for the Association o f Finnish Industry (AFT) a n d Solitander for the C e n t r a l Association o f Finnish W o o d w o r k i n g Industries ( C A F W I ) . W a l d e n , Solitander a n d V i l j a n e n c a n be described as ' n e w faces' in the Finnish business elite, as they clearly improved their status d u r i n g the civil w a r . T h e s e m e n w e r e businessmen with a strong self-interest a n d w e r e only loosely c o n n e c t e d to the nationalistic m o v e m e n t . T h e i r willingness to j o i n rationing organisations c a n be analysed as profit-seeking rather than nationalistically m o t i v a t e d behaviour, even t h o u g h it is obvious that these key people h a d patriotic motives, too. 31

32

33

The formative period (igi8—igig)

in foreign trade administration

T h e S p e c i a l Staff w a s p l a n n e d to take care o f military a n d w a r t i m e needs a n d the l e a d i n g officers felt that the organisation w a s unable to take responsibility for postwar non-military issues. W h e n the defeat of the R e d A r m y s e e m e d probable in A p r i l 1 9 1 8 , the Staff of E n g i n e e r s reco m m e n d e d that the Senate o f F i n l a n d create a civil organisation that w o u l d replace the Staff. A m i n o f f also promised to provide the n e w organisation w i t h p e r s o n n e l . Consequently, the Senate o f F i n l a n d d e c i d e d to create a T r a d e and Industry C o m m i s s i o n ( T I C ) in A p r i l 1 9 1 8 . Its task w a s to supervise trade a n d industry, including export a n d import trade. A s the w o r k l o a d o f the C o m m i s s i o n increased, n e w subsections 34

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394

LAMBERG

w e r e created. T h e most i m p o r t a n t o f these w a s the L i c e n c e B u r e a u , w h i c h dealt w i t h export a n d i m p o r t a p p l i c a t i o n s . It w a s stated in the regulation of its foundation that the c h a i r m a n a n d the m e m b e r s o f the C o m m i s s i o n w e r e to be chosen from 'the l e a d i n g representatives o f industry, trade, banking, agriculture a n d also o f the state administra­ t i o n ' . In practice, the highest personnel o f the Staff o f E n g i n e e r s m o v e d to the n e w organisation — for e x a m p l e , G u s t a f A m i n o f f himself a n d Solitander a n d V i l j a n e n from the Territorial Section got the top posts. W h a t must be underlined is the fact that the p e o p l e w h o d e m a n d e d the creation o f the C o m m i s s i o n , a n d later c h a n g e s to the organisation, w e r e themselves m e m b e r s o f the Staff of E n g i n e e r s a n d later m e m b e r s of the executive c o m m i t t e e of the T I C . Consequently, the formative p e r i o d o f the n e w trade p o l i c y institutions/organisations w a s character­ ised b y the influence of a relatively small g r o u p o f people w h o c o u l d affect the early trade p o l i c y a n d integrate themselves a n d the private sector into the political d e c i s i o n - m a k i n g machinery. D o u g l a s s C . N o r t h uses the t e r m ' w i n d o w o f opportunity' to describe a situation w h e r e some e x t r a o r d i n a r y institutional c h a n g e s are possible. A c c o r d i n g l y , it c a n be c l a i m e d that Finland's civil w a r a n d the rationing p e r i o d w e r e this kind o f a ' w i n d o w ' , w h i c h m a d e it possible for those in e c o n o m i c circles to integrate into the political system. It w a s at this particular time w h e n persons such as Solitander a n d V i l j a n e n obtained h i g h positions a n d a c q u i r e d the p o w e r they w e r e able to h o l d d u r i n g the w h o l e interwar period. T h e Staff o f E n g i n e e r s a n d the T r a d e a n d Industry C o m m i s s i o n themselves w e r e only t e m p o r a r y controlling organs that faded w h e n the e c o n o m i c a n d political system n o r m a l i s e d after 1 9 1 9 . B u t w i t h these organisations, the private sector w a s p e r m a nently d r a w n into the d e c i s i o n - m a k i n g process, and this continued in the following decades. 35

36

37

3 8

The period of stabilisation in Finnish foreign trade policy

39

(igig-igjg)

F i n l a n d started to stabilise her foreign trade p o l i c y after i 9 i 9 . T h e r a t i o n i n g system h a d to be e n d e d and it w a s necessary to create a p o l i c y a n d administration that w o u l d fit into n o r m a l international conditions. Foreign trade policy w a s to be i m p l e m e n t e d in a w o r l d w h i c h h a d not yet recovered from the shock o f the w a r a n d w a s living in an era o f e c o n o m i c nationalism. F i n l a n d h a d lost her markets in Russia, the w e s t e r n countries h a d m o v e d t o w a r d protectionism, a n d the Finnish adminis-

Foreign trade in Finland after Russian rule

395

trative system w a s b a d l y u n p r e p a r e d . A m o n g other problems, Finnish prohibition l a w h a d irritated the w i n e - e x p o r t i n g countries a n d F i n l a n d w a s threatened with the loss o f her markets in those countries that h a d previously taken a b o u t 15 per cent o f Finnish e x p o r t s . T h e principal questions, w h i c h actually c a m e to d e t e r m i n e Finland's foreign trade p o l i c y in the interwar years, w e r e officially formulated as follows: first, protection o f national agriculture a n d self-sufficiency in essential foodstuffs; secondly, protection o f industry w o r k i n g exclusively or m a i n l y for the h o m e market; a n d thirdly, m a i n t e n a n c e a n d expansion of exports o f products b a s e d on the natural resources o f the c o u n t r y b y m e a n s o f the most-favoured nation ( M F N ) p r i n c i p l e . T h e s e questions h a d a strong rhetorical link w i t h nationalistic ideas. H o w e v e r , rhetoric a n d nationalistic ideas s e l d o m direct trade p o l i c y but they c a n easily be used to legitimise the profit-seeking motives o f interest groups. T h e reconciliation of these principles, w h i c h w e r e in fact at times contradictory, w a s n o t easy. T h e result w a s that the i m p o r t a n c e o f exports m o d e r a t e d the influence o f the first two principles. W h a t is to be pointed out is that protection o f agriculture w a s a c c e p t e d b y all e c o n o m i c interest groups. T h i s c a n be interpreted as the heritage o f the civil war, w h e n F i n l a n d h a d a critical shortage o f food, a l t h o u g h self-sufficiency w a s a target in the interwar w o r l d elsewhere, t o o . T h e principles o f tariff policy w e r e f o r m e d in 1 9 1 9 w h e n the g o v e r n ­ m e n t enforced a 'provisional' tariff, a n d a y e a r later w h e n the first l u x u r y tariff (for the b u d g e t y e a r 1921) w a s imposed. Finnish tariff policy in the interwar p e r i o d w a s characterised by: m o d e r a t e protectionism; customs duties w e r e an i m p o r t a n t part o f the state revenue; a n d imports o f 'luxuries' w e r e subject to special taxation. In the 1 9 3 0 s the l u x u r y tariff c a m e to be the foremost protectionist w e a p o n against imports, but it w a s used in trade a g r e e m e n t negotiations, too. T h e 1 9 1 9 tariff w a s preserved until 1 9 3 8 and parliament r e n e w e d the tariff annually as a part o f the bud­ getary process. T h e trade a g r e e m e n t policy ( 1 9 1 9 - 3 9 ) c a n be divided into t w o periods. In the 1 9 2 0 s practically all treaties w e r e b a s e d on the M F N clause. Special concessions h a d to be m a d e for France, G e r m a n y , S p a i n a n d Estonia, but their e c o n o m i c i m p a c t w a s insignificant. In the 1 9 3 0 s F i n l a n d h a d to adapt itself to international protectionism. T h e major treaties w e r e m a d e w i t h G e r m a n y a n d Britain in 1 9 3 3 a n d i 9 3 4 . F o r e x a m p l e , the i m p o r t quotas F i n l a n d h a d to g r a n t to Britain in 1 9 3 3 w e r e e c o n o m i c a l l y considerable, a n d also affected the structure o f the Finnish foreign trade. O n the other h a n d , G e r m a n y lost her share o f imports 40

41

4 2

43

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LAMBERG

m a i n l y b e c a u s e o f her restrictive tariff policy. A c c o r d i n g l y , in the 1 9 2 0 s F i n l a n d f o u n d e d her trade a g r e e m e n t policy and trade a g r e e m e n t n e g o ­ tiation machinery. T h e foreign policy administration w a s i n e x p e r i e n c e d in n e g o t i a t i n g trade a g r e e m e n t s and, consequently, representatives of the private sector c a m e to have an important role in the negotiations. A g o o d e x a m p l e is the ' F l y i n g T r a d e C o m m i s s i o n ' , w h i c h negotiated in the we s t e rn countries in 1 9 1 9 . T h e C o m m i s s i o n h a d an official status but there w e r e n o representatives from the Foreign M i n i s t r y in the g r o u p . In the 1 9 3 0 s the trade a g r e e m e n t p o l i c y b e c a m e crucial for the w h o l e e c o n o m y and, consequently, the e c o n o m i c i m p a c t w a s greater. T h e influence o f e c o n o m i c pressure groups b e c a m e a significant feature in the Finnish foreign trade p o l i c y in the interwar p e r i o d . T h i s is in a c c o r d a n c e with w h a t , for e x a m p l e , N o r t h a n d the rent-seeking school have described: w h e n the possible p a y - o f f from political action is raised h i g h e n o u g h , c o m p a n i e s will invest in political action. A c c o r d i n g l y , exercising political pressure is basically seen as an investm e n t decision. A s already m e n t i o n e d , the representatives o f the private sector, in practice, d o m i n a t e d the trade a g r e e m e n t negotiations. In tariff policy the situation w a s m o r e c o m p l i c a t e d since the decisions w e r e m a d e in parliament. T h e most i m p o r t a n t c h a n n e l o f influence for trade a n d industry w a s the Finnish corporatist c o m m i t t e e system. A l l the central associations w e r e represented in the T r a d e A g r e e m e n t C o m m i s s i o n ( 1 9 1 9 ) , w h i c h controlled foreign trade policy, in the c o m m i t t e e s p l a n n i n g n e w tariffs, a n d in the c o m m i t t e e s p l a n n i n g state p u r c h a s e s . H o w e v e r , a traditional rational-choice hypothesis a b o u t a situation in w h i c h the different g r o u p s w e r e c o m p e t i n g w i t h e a c h other c a n only be partially a c c e p t e d . T h e heritage o f the civil w a r a n d anti-socialist attitudes w e r e strong a m o n g Finnish business circles and, therefore, all the central organisations w e r e able to co-operate. A g o o d e x a m p l e o f this is the grain tariff question, in w h i c h the various groups c o - o p e r a t e d despite their different orientations o n the questions o f protection or n o n - p r o ­ tection. A l s o , as m e n t i o n e d in earlier studies, b o t h the industries that h a d to c o m p e t e w i t h imports a n d the e x p o r t i n g industries started to finance r i g h t - w i n g parties in the 1930s, purely for political reasons. O b v i o u s l y , they saw that they w e r e n o longer able to m a n i p u l a t e foreign trade p o l i c y issues as efficiently as earlier. T h i s kind o f e v i d e n c e does not c o n f i r m to the findings o f p u b l i c - c h o i c e studies. H o w e v e r , there is n o evidence that nationalistic ideas or the l a n g u a g e question h a d any m a j o r effect o n the political direction o f these pressure g r o u p s . 44

45

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Elements b o t h o f continuity a n d discontinuity c a n be discerned in the formation o f organisations, formal institutions a n d informal institutions in this period. T h e s e are presented b e l o w in a schematic form. Elements of continuity Organisations: F o r m a l institutions: Informal institutions:

Companies Persons M a j o r part o f the legislative system Property rights Personal networks Business traditions P o w e r / c l a s s structure

Elements of discontinuity/New elements Organisations: Foreign trade policy a d m i n i s t r a t i o n National cartels C e n t r a l pressure groups F o r m a l institutions: Relations with Russia H i g h e s t authority in Finland T r a d e agreements Tariff s y s t e m A d a p t a t i o n o f corporatism Informal institutions: U s e o f 'experts' in formal decision-making (cor­ poratism) Anti-socialism C o n s e n s u s (in the 1930s) W e s t e r n orientation in foreign policy 47

48

49

Despite the significant changes, especially on the formal level, the continuity o f informal institutions, persons, natural resources a n d production tended to k e e p Finland on the p r e - i n d e p e n d e n c e d e v e l o p m e n t path, at least in the interwar period. T h i s is in a c c o r d a n c e w i t h North's a r g u m e n t that revolutions (here, political independence) are seldom as revolutionary as their rhetoric w o u l d suggest.

DISCUSSION:

THE

NATIONAL

QUESTION

A N D

E C O N O M I C

C H A N G E

Finnish historians have recently continued discussions a b o u t the conseq u e n c e s o f Finland's c o n n e c t i o n w i t h Russia. E c o n o m i c historians

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LAMBERG

generally c l a i m that the c o n n e c t i o n w a s n o t a b a d one for the economy. O t h e r points o f v i e w tend to stress the a u t o n o m o u s p e r i o d as a p r e p a r a ­ tion for Finnish i n d e p e n d e n c e , F i n l a n d h a v i n g d e v e l o p e d nationally, cul­ turally a n d politically despite Russian r u l e . 50

It is obvious that the largest groups of the nationalistic m o v e m e n t , w h i c h h a d started d u r i n g the m i d d l e o f the nineteenth century, did not have total i n d e p e n d e n c e as a target. A r e c o g n i s e d position for the Finnish l a n g u a g e has to be seen as one aim. T h e position o f the Finnish l a n g u a g e h a d b e e n i m p r o v i n g s o m e w h a t since the 1860s. T h e other rel­ atively clear target w a s the preservation o f Finland's a u t o n o m o u s posi­ tion in the Russian E m p i r e . Tariff autonomy, self-administration, their o w n l a n g u a g e s (Finnish a n d Swedish) a n d c u r r e n c y h a d raised nationalistic feelings especially a m o n g the city bourgeoisie a n d intellectuals. T h e cultural contrast b e t w e e n Russia a n d F i n l a n d b e c a m e m o r e significant w h e n Russia started the 'russification p r o g r a m m e ' in the 1890s. O n the other h a n d , the russification p r o g r a m m e did not s e e m to affect directly any private business relations. T r a d e a n d other e c o n o m i c activities c o n t i n u e d as usual. Obviously, n o businessmen refused trade relations b e c a u s e of russification. T h i s is in a c c o r d a n c e with the ideas o f H r o c h w h o , in his studies o f attitudes of various g r o u p s w i t h i n society, finds that industrialists are m o s t p r o n e to act in collaboration w i t h the stronger partner and are not affected by nationalistic ideas. It c a n n o t be c l a i m e d that i n d e p e n d e n c e w a s a result of systematic w o r k by the nationalistic m o v e m e n t . Rather, F i n l a n d g a i n e d its indep e n d e n c e b e c a u s e o f the chaotic d e v e l o p m e n t s in Russia a n d by using the w i n d o w of o p p o r t u n i t y that suddenly o p e n e d . F u r t h e r m o r e , as c a n be seen a b o v e , there h a d clearly b e e n n o systematic p l a n n i n g o n h o w to m a n a g e Finland's n e w l y g a i n e d i n d e p e n d e n c e . T h e e c o n o m i c targets of the n e w g o v e r n m e n t w e r e the revival o f the e c o n o m y — including foreign trade relations — a n d k e e p i n g the p o p u l a ­ tion from starvation. T h e food shortage w a s a b u r n i n g question. In the l o n g e r run, the target c a m e to be self-sufficiency in food w i t h protected h o m e markets a n d g o v e r n m e n t support for the agricultural sector, w h i c h w e r e also nationalistic targets. T h e s e w e r e alleviated by the n e e d to k e e p strong e x p o r t markets a n d e x p o r t relations, as the trade needs o f the c o u n t r y c o n t i n u e d to be considerable. A s for the private sector o f the e c o n o m y , targets o f the business elite w e r e to o p e n u p trade relations a n d get their businesses going. Nationalist sentiments h a r d l y interfered at all. T h e Finnish c o m p a n i e s w h o h a d traditionally e x p o r t e d to Russia w e r e in n o w a y u n w i l l i n g to

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399

continue trade. It also seems that l a n g u a g e questions did not arise either; the l a n g u a g e o f business w a s still Swedish to a great extent, or alterna­ tively, Finnish and Swedish w e r e used together. Rather, the business elite w a s h o p i n g that old, w e l l - k n o w n business relations could be re-estab­ lished w i t h the Russians. T h a t t u r n e d out to be impossible, m a i n l y because o f Russia's n e w policy orientation. D u r i n g the first d e c a d e o f i n d e p e n d e n c e , Finnish business continued efforts to b u y r a w materials from the Soviets. D u r i n g the N e w E c o n o m i c Plan (NEP) period Finnish c o m p a n i e s w e r e eager to get concessions to o p e n u p e c o n o m i c activities in the Soviet U n i o n . T h e e c o n o m y recovered relatively soon w i t h the help o f postwar western d e m a n d for supplies from the old customers a n d the establishm e n t o f n e w trade relations. T h e structural d e v e l o p m e n t of the e c o n o m y continued in m a n y w a y s in the same direction it h a d b e e n taking before the First W o r l d War. Foreign trade m a i n t a i n e d its relative importance, e x c e p t for a few critical years during the war. Soviet markets lost their significance a n d western markets c a m e to dominate. R e g a r d i n g commodities, western markets d e m a n d e d less-processed goods, a n d a c c o r d i n g l y the c o m m o d i t y structure o f exports c a m e to be almost entirely d o m i n a t e d by timber products, pulp a n d paper. A n e w organisation w a s n e e d e d for foreign trade. A s c a n be seen above, it w a s created rather painlessly a n d fairly quickly. T h e private sector c a m e to have an important role in the public decision-making process t h r o u g h committees, cartels and pressure groups. O n the one h a n d , the n e w state recruited m e n w h o w e r e already e x p e r i e n c e d for the most influential positions. O n the other h a n d , n e w talented m e n , w h o h a d c o m e to the fore as a result o f the civil war, c a m e to have influence. Generally, the m e n w h o d o m i n a t e d foreign trade policy decision-making in 1 9 1 8 to 1 9 1 9 w e r e able to maintain their political p o w e r in the interw a r period. Pressure groups representing the m a i n industries e m e r g e d in western E u r o p e a n style, a n d they c a m e to exert p o w e r in e c o n o m i c policy decision-making. E v e n if there w e r e significant discontinuities in the organisations a n d formal a n d informal institutions o f the economy, the continuities seem to have o u t w e i g h e d t h e m in the n e w e c o n o m i c order. P r e - i n d e p e n d e n c e personal a n d business networks, existing legislation and existing p r o p erty rights f o r m e d the foundation for the continuing path of d e v e l o p ment. T h e national question seems to have b e e n insignificant in these developments.

400

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LAMBERG

NOTES

1 The Finnish language had been in a subordinate position while the lan­ guage of administration, higher education and business had been Swedish, generally not known by the lower classes. The position of the Finnish lan­ guage had improved somewhat since the 1860s. The language quarrel cul­ minated in the 1930s in strikes at the University of Helsinki demanding a better position for the Finnish language in teaching and research. The conflict was solved by legislation that raised the Finnish language to the dominant position, but guaranteed the Swedish-speaking minority a fair position. See Pekka Kalevi Hamalainen, Kielitaistelu Suomessa 1917—1939 [Language question 1 9 1 7 - 1 9 3 9 ] , (Porvoo, 1968). 2 The russification programme (1899-1917) aimed at, for example, the gradual integration of the Russian and Finnish postal administrations, joining Finland to Russian military organisations, russification of the Finnish senate (government) and joining Finland to the Russian legislative system. See, for example, Jussi T. Lappalainen, Itsendisen Suomen synty [The emergence of the independent Finland], (Jyvaskyla, 1967), p. 19. 3 See E. J. Hobsbawm, Nations and Nationalism since 1780. Programme,Myth, Reality (Cambridge, 1994). Hobsbawm does not discuss economic aspects in this book - he discusses political, language and cultural matters. 4 Miroslav Hroch, Social Preconditions of National Revival in Europe (Cambridge, 1985).

5 Douglass C. North, 'Where have we been and where are we going?' (pub­ lished on the internet at http://econwpa.wustl.edu/eprints/eh/papers/ 9612/96i200i.abs), p. 10. See also Douglass C. North, Institutions,Institutional Change and Economic Performance (Cambridge, 1994) and Douglass C. North, 'The process of economic change', paper presented at the UNU/Wider Project Meeting on New Models of Provision and Financing of Public Goods, Helsinki, 1997. 6 Erkki Pihkala, 'Suomen ja Venajan taloudelliset suhtteet I maailmansodan aikana' [The economic relations between Russia and Finland during the First World War], Historiallinen aikakauskirja i (1980), 2 9 - j 2 ; P e r Schybergson, 'Finlands industri och den ryska marknaden under autonomins tid (1809-1917), Nagra synpunkter' [Finnish industry and the Russian market during the autonomuos period], Turun Historiallinen Arkisto 41 (1986), 1 2 0 - 3 5 ; Jorma Ahvenainen, 'Suomen ja Neuvostoliiton valiset kauppasuhteet i920-ja i930-luvalla' [Trade relations between Finland and the Soviet Union in the 1920s and 1930s], Turun Historiallinen Arkisto 41 (1986), 1 6 8 - 8 5 ; Riitta Hjerppe, The Finnish Economy i86o—i98§,Growth and Structural Change (Helsinki, 1989). 7 The Finns could export handicrafts and cottage industry products as well as agricultural and forestry products duty free to Russia. Industrial products had relatively high duty-free quotas. Russian products came to Finland duty free except for a group consisting mainly of luxury goods with financial tariffs. See, for example, Schybergson, 'Finlands industri'.

Foreign trade in Finland after Russian rule

401

8 Hjerppe, 'The Finnish Economy'. 9 Pihkala, 'Suomen ja Venajan', p. 29. 10 The Russian trade can be regarded as foreign trade, as Finland had had her own tariff since the early 1810s. 11 In 'Finlands industri', Per Schybergson claims that the Finnish goods were of better quality than the Russian ones and that explains their success. In particular, paper production, based on wood and starting in the late 1860s, grew into a large-scale industry in Finland by selling to the Russian market. According to Schybergson, the customs benefits helped Finnish products to compete in the Russian market. On the other hand, the competitiveness of Finnish industrial products was relatively good, as the Finnish import tariffs had been low since the 1840s, whereas the Russian customs protection had been higher in general. Only a few Russian industrial products drove Finnish goods out of the Finnish markets (namely leather and woollen goods and sail cloth). 12 See Erkki Pihkala, Suomen ulkomaankauppa 1860-1917 [Finland's foreign trade 1 8 6 0 - 1 9 1 7 ] , (Helsinki, 1969). The favourable price development of sawn timber was also the cause of the considerable improvement of the Finnish terms of trade in the 1870s and again in the 1890s and 1900s, which was very significant for the whole development of industrialisation. 13 As the Finnish mark was pegged to gold in 1878 and the Russian rouble only in the 1890s, this probably emphasised the separateness of Finland from Russia in international matters. 14 See Riitta Hjerppe andJorma Ahvenainen, 'Foreign enterprises and nation­ alistic control: the case of Finland since the end of the nineteenth century' in Alice Teichova, Maurice Levy Leboyer and Helga Nussbaum (eds.), Multinational Enterprise in Historical Perspective (Cambridge, 1986). 15 Leo Harmaja, Maailmansodan vaikutus Suomen taloudelliseen kehitykseen [The economic consequences of the First World War], (Porvoo, 1940), pp. 352;4 see also Heikki Rantatupa, Elintarvikehuolto ja saannbstely Suomessa vuosina 1914-1921 [Food supply and rationing in Finland in 1 9 1 4 - 1 9 2 1 ] , Jyvaskyla, I 9 7 9 ) .

. 16 See Timo Herranen and Timo Myllyntaus, 'Effects of the First World War on the engineering industries of Estonia and Finland', Scandinavian Economic History Review 3 (1984), 1 2 1 - 4 and Pihkala, 'Suomen ja Venajan'. 17 Hjerppe, 'The Finnish economy' and Pihkala, 'Suomen ja Venajan'. Pikhala has estimated the volume of war trade with Russia as if this were not included in the official trade statistics. 18 Pihkala, 'Suomen ja Venajan', pp. 3 4 - 8 and Rantatupa, Elintarvikehuolto. 19 Ahvenainen, 'Suomenja Neuvostoliiton' and Pikhala, 'Suomen ja Venajan'. 20 Ahvenainen, 'Suomen ja Neuvostoliiton', p. 181. 21 Ibid. 22 Ibid. 23 Ibid. 24 Ibid., and Tapio Hamynen, Liikkeella leivan tahden. Raja-Karjalan vaestbb ja sen

402

25

26

27 28 29 30 31 32 33

34 35

36 37

38

39

RIITTA HJERPPE AND J U H A - A N T T I LAMBERG

toimeentulo 1880-1940 [On the move for bread. The population of Border Carelia and its livelihood], (Helsinki, 1993). Kalevi Ahonen, 'Suomen paperinviennin murroskausi' [The critical period of Finland's paper exports], Jyvaskyla, 1972, unpublished) and Jorma Ahvenainen, Paperitehtaista suuryhtioiksi. Kymin Osakeyhtio vuosina 1918-1939 [From a paper mill to a large company. Kymin Ltd 1 9 1 8 - 1 9 3 9 ] , (Kuusankoski, 1972). It has not been adequately clarified why the western market preferred pulp to paper. Some studies have referred, for example, to different marketing and packing techniques of paper, which does not seem an adequate explanation (see Ahonen, 'Suomen paperinviennin murroskausi'). In 1887, Finland was mentioned in the Russian-Spanish trade agreement separately, but that does not mean that Finland had any kind of trade agreement policy. See Schybergson, 'Finlands industri'. Rule 8 / 2 9 , 7 . 5 , 0 7 - 3 0 , Archive of the Special Staff of Engineers ('AE'), Finnish Military Archive ('MA'). Memorandum of Gustaf Aminoff, 25 February 1 9 1 8 , 0 7 - 3 2 , A E , M A ; Eino Kuusi, Kauppapolitiikka [Trade policy], (Helsinki, 1921), p. 515. In some studies the Special Staff of Engineers has been translated as 'Engineering High Command'. Memorandum of Gustaf Aminoff, 25 February 1 9 1 8 , 0 7 - 3 2 , A E , M A . Ibid. Memorandum of Gustaf Aminoff, 15 April 1 9 1 8 , 0 7 - 3 0 , A E , M A . For per­ sonnel, see Jari Eilola, 'Insinooriesikunnan jasenten sijoittuminen sotien valisella ajalla' [The career development of the personnel of the Special Staff of Engineers 1 9 1 8 - 1 9 3 9 ] , (Jyvaskyla, 1997, unpublished). Solitander, Walden and Viljanen did not start their careers during the civil war, even if they did manage to improve their ranking in business circles. In 1914, both Solitander and Viljanen were teachers at the Technical College of Tempere and Walden worked as a sales agent for Finnish pulp and paper industries in Russia. Aminoff to Senate of Finland, 3 April 1 9 1 8 , 0 5 - 1 5 1 9 , A E , M A . Regulation 26, 17 M a y 1918, Statute Book of Finland 1918; Regulation 50, 6 June 1918, Statute Book of Finland 1918; Harmaja, Maailmansodan vaikutus Suomen,p. 82 and Kuusi, Kauppapolitiikka,p. 518. Regulation 50, 6 June 1918, Statute Book of Finland 1918. Memorandum of Special Staff of Engineers, H A 2 , Archive of the Trade and Industry Commission ('ATI'), Finnish National Archive ('NA'); Regulation 50, 6 June 1918, Statute book of Finland, 1918. The Central Chamber of Commerce to the Trade and Industry Commission, April i 9 i 8 , H A 2 , A T I , NA; Aminoff to Senate of Finland, 3 April 1 9 1 8 , 0 5 - 1 5 1 9 , A E , M A . Some foreign trade restrictions continued until 1921 but grosso mode, the 1919 constitutional reform can be thought of as the start of normalisation.

Foreign trade in Finland after Russian rule

403

40 Riitta Hjerppe, 'Finnish trade and trade policy in the 20th century', •Scandinavian Journal of History 1 (1993), 5 7 - 7 6 ; Erkki Pihkala, Suomen kauppapolittiikka igi8-ig44 [Finnish foreign trade policy 1 9 1 8 - 1 9 4 4 ] , (Keuruu, 1978), pp. 1 2 - 1 8 ; Henrik Ramsay, 'Det ekonomiska laget' [Economic posi­ tion], Ekonomiska Samfundets Tidskrift (1921); Henrik Ramsay, 'Handelsfordrag och traktatpolitik' [Tariff and trade agreement policy], Ekonomiska Samfundets Tidskrift (1923). 41 Memorandum of Vaino Voionmaa (manager of the economic department of the Foreign Ministry) for the International Studies Conference, January 1939, in the Collection of Henrik Ramsay, NA; Regulation 32, 29 March 1919, Statute book of Finland 1919. Also see, for example, Hjalmar Procope, 'Vart tulltariffsystem ur traktatpolitisk synpunkt' [Our tariff policy from the viewpoint of trade agreement policy], Ekonomiska Samfundets Tidskrift (1927), and Hjalmar Procope, 'Nagra randanmarkningar till Finlands handelstraktatpolitik' [Finland's trade agreement policy], Ekonomiska Samfundets Tidskrift (1933).

42 Pihkala, Suomen kauppapolitiikka; PM of Vaino Voionmaa for the International Studies Conference, January 1939, in the Collection of Henrik Ramsay, NA. 43 Regulation 32, 29 March 1919, Statute Book of Finland 1919; Procope, 'Vart tulltariffsystem'; Pihkala, Suomen Kauppapolitiikka. 44 Pressure groups at the national level were founded when the economic interest groups realised that the political independence also made organised political action necessary. Between 1917 and 1921, three such groups were created. These represented agricultural production (the Central Union of Agricultural Producers, CUAP), export industries (the Central Association of Finnish Woodworking Industries, CAFWI, also nicknamed the 'second Foreign Ministry') and import competing industries (the Association of Finnish Industry). See the Annual Report of the CAFWI 1919, protocol of the Central Association of Finnish Industries (CAFI), 28 January 1921,in the Archive of the CAFI; 1918 protocols of the CUAP in the Archive of the CUAP. 45 See, for example, the Annual Reports of the CAFI 1 9 2 1 - 3 1 in the Archive of the CAFI, and the Annual Reports of the CUAP 1 9 1 8 - 3 9 in the Archive of the CUAP See also Juha-Antti Lamberg, 'Vaalirahoituksen poliittinen taloustiede' [The political economy of campaign funding] in Uusi institutionaalinen taloushistoria Jyvaskyla, 1997), pp. 1 4 3 - 7 0 . 46 Lamberg, 'Vaalirahoituksen poliittinen taloustiede'. 47 Except tariff administration. 48 New cartels started in the summer of 1918. 49 The 1919 tariff was remarkably different from the tariff under the Russian regime. 50 Historiallinen aikakauskirja 1 (1997), 1-2.

C H A P T E R

20

Economic change and the national question in twentiethcentury USSR/Russia: the enterprise level Andrei Yu. Yudanov

T h e break-up of the U S S R b r o u g h t to a close the history o f the state w h i c h h a d b e e n the largest multinational entity in E u r o p e over the pre­ c e d i n g three centuries. For a l o n g time to c o m e , historians will p r o b a bly g o on discussing the role the national factor proper h a d to play in this, the greatest cataclysm o f the late twentieth century - notably, the extent to w h i c h the peoples within the Soviet U n i o n y e a r n e d for inde­ p e n d e n c e . After all, in the referendum held democratically some six m o n t h s before the demise o f the U S S R , a majority o f the population of the c o u n t r y as a w h o l e a n d o f e a c h o f the subsequently i n d e p e n d e n t states (apart from the Baltic countries) c a m e out in favour of retaining the U n i o n . H o w e v e r that m a y be, the ultimate results o f the break-up indisputably h a d a national hue: in place o f the polyethnic s u p e r p o w e r there e m e r g e d some fifteen states organised, in most cases, on the monoethnicprinciple. T h e break-up o f the U S S R c a m e as a terrible u p h e a v a l for the e c o n o m y o f all the successor countries. N o r is it only a matter o f the actual c o n s e q u e n c e s o f the destruction o f the single state, but also o f the kind o f state that w e n t to pieces in this case. T h e Soviet U n i o n (in c o n ­ trast, say, to Austria-Hungary, the other multinational G r e a t P o w e r that fell apart in the twentieth century) w a s based on the so-called single national economic complex principle, the implication b e i n g that Soviet enterprises were not a u t o n o m o u s organisms, but w e r e parts o f a centralised m a c r o e c o n o m i c superstructure. It should be noted that, b o t h in the prehistory a n d in the v e r y course of these painful adaptation processes, the national factor played a noticeable role, above all because, in virtue o f various historical factors, the core o f this single national e c o n o m i c c o m p l e x d e v e l o p e d as the Unionwide web of Russian enterprises even b e y o n d the boundaries o f the age-old Russian lands. 404

Nationality and enterprises in

USSR/Russia

C O M M U N I T Y OF A L L - U N I O N S U B O R D I N A T E D

4

0

5

ENTERPRISES,

RUSSIAN F R A M E W O R K OF S O V I E T E C O N O M Y

T h e specific ethnic features in the d e v e l o p m e n t of the Soviet e c o n o m y w e r e d e t e r m i n e d b y t w o m a i n political factors: first, the officially pro­ c l a i m e d a n d actually pursued policy of e v e n i n g out levels of develop­ m e n t a n d equalising living standards a m o n g the country's diverse nationalities t h r o u g h the accelerated modernisation o f b a c k w a r d U S S R republics; a n d secondly, the principle of priority o f all-Union interests over the interests o f the republics, w h i c h w a s not officially recognised, but w a s just as actively applied in practice. T h e interaction o f the t w o factors resulted on the m i c r o e c o n o m i c level in the fact that the modernisation o f the republics within the U S S R w e n t the w a y o f the formation within t h e m o f a powerful stratum o f enterprises operating not so m u c h for the satisfaction o f local requirements as for the fulfilment of a l l - U n i o n tasks.

Brief survey of ethnic history of all-Union subordinated enterprises T h e policy o f accelerated creation o f industrial enterprises in the b a c k w a r d non-Russian outlying areas o f the c o u n t r y w a s first put into effect in the early years after the revolution. In the dislocation caused by the revolution a n d the civil war, it a m o u n t e d not so m u c h to n e w construction as to the relocation into these areas o f enterprises already existing in the centre o f the country. F r o m 1 9 2 2 to 1 9 2 5 , some twenty industrial enterprises w e r e transferred from Russia a n d the U k r a i n e to the republics of C e n t r a l A s i a a n d the T r a n s c a u c a s u s . Since the n e w sites, as a rule, lacked skilled personnel, the relocation o f e q u i p m e n t w e n t h a n d in h a n d w i t h a part o f the Russian personnel travelling a l o n g with it. T h u s , a cloth factory b e g a n operation in K u s t a n a i (Kazakhstan) in 1 9 2 3 , after the w h o l e o f it w a s transferred to the n e w place together w i t h the b a s i c p e r s o n n e l from the t o w n o f K o l o m n a , w h i c h is n e a r Moscow. H o w e v e r , the effort to create n e w industrial enterprises in the 'national republics' (as the n o n - S l a v republics o f the U S S R used to be called) b e c a m e massive later, w h e n the implementation of the plan for the country's industrialisation got u n d e r w a y in the late 1920s a n d in the 1930s. In this period the m o d e l m e c h a n i s m o f the creation o f n e w enterprises in the national republics took shape precisely, a n d it is w o r t h w h i l e 1

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YUDANOV

g i v i n g a brief description of this m e c h a n i s m , for it r e m a i n e d in o p e r a ­ tion t h r o u g h o u t the entire U S S R period, w i t h insignificant c h a n g e s here a n d there. T h e mobility o f the p o p u l a t i o n required for the construction o f plants outside the traditional centres o f industry w a s a c h i e v e d b y m e a n s o f allU n i o n political measures k n o w n as ' c a m p a i g n s ' . Officially, the c a m ­ paigns for the construction o f plants w e r e not o f a coercive nature. A sizeable part of the U S S R p o p u l a t i o n v i e w e d these w i t h approval a n d w i t h enthusiasm, r e g a r d i n g the massive construction effort as a w a y o f o v e r c o m i n g the country's b a c k w a r d n e s s . B u t in practice c a m p a i g n s left the individual w i t h v e r y little opportunity to refuse to travel to distant parts or to return from these before the end o f his t e r m . C a m p a i g n s w e r e a n n o u n c e d for the construction o f the largest enter­ prises, electric-power plants a n d railways. T h e s e projects w e r e given the status o f an ' a l l - U n i o n shock-work construction project', w h i c h implied direct control on the part o f the U S S R g o v e r n m e n t and the party's C e n t r a l C o m m i t t e e , m a k i n g it possible to recruit l a b o u r p o w e r in all the republics, ensuring priority deliveries of e q u i p m e n t a n d access to foreign-currency resources and h o l d i n g out various other benefits. T h e centre's control o f the largest enterprises also continued after the e n d o f construction, w h i c h is w h y such enterprises w e r e k n o w n as 'allU n i o n subordinated enterprises'. N o t only in the national republics, but also in Russia, the giant enterprises w e r e s o m e t h i n g o f a state within the state, subordinate only to the country's top leadership. B y contrast, the local authorities w e r e virtually unable to interfere in their activity. In order to have a clearer v i e w o f the overall picture, one should b e a r in m i n d the strong propensity of large Soviet enterprises for autarky, or self-sufficiency. B e c a u s e o f the constant shortages o f various g o o d s , Soviet enterprises strove to p r o d u c e e v e r y t h i n g themselves. T h e y h a d their o w n b u i l d i n g organisations, their o w n h o u s i n g facilities for their workers, their o w n agricultural p r o d u c t i o n to k e e p their personnel supplied w i t h foodstuffs, a n d even their o w n w o r k s h o p s for the repair of freight cars to m a k e sure that their finished products w e r e delivered in w a g o n s in g o o d repair. A n d such enterprises, reminiscent o f fortresses p r e p a r e d for a l o n g siege, w e r e i n d e p e n d e n t o f the local authorities a n d w e r e subordinate only to the central authorities. In u n d e r d e v e l o p e d republics, a l l - U n i o n subordinated enterprises w e r e m a n n e d b y resettlers o f various nationalities: Russians, U k r a i n i a n s , Belorussians, J e w s , Tatars a n d others. T h e y w e r e usually g r o u p e d r o u n d those w h o c a m e from Russia a n d w h o w e r e m o r e n u m e r o u s , a n d 2

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altogether they w e r e r e g a r d e d by the local p o p u l a t i o n as Russians. T h a t is the basis on w h i c h a 'Russian-speaking population' g r a d u a l l y took shape in the national republics. T h i s t e r m w a s usually used to identify a metaethnic entity o f people, m e m b e r s h i p o f w h i c h w a s felt b y all n e w arrivals in each o f the republics. T h u s , in L a t v i a , it w a s not only a Russian, but also an A r m e n i a n w h o felt himself to be Russian or, at any rate, a Russian-speaker; for his part, a L a t v i a n felt himself to be almost Russian in the T r a n s c a u c a s u s . T h e next w a v e o f mass relocation o f industrial enterprises from the centre o f the c o u n t r y to the east (notably, to central A s i a a n d K a z a k h s t a n ) that followed u p o n the industrialisation w a s caused by their evacuation in the first period o f the S e c o n d W o r l d War, w h i c h w a s most unfortunate for the U S S R . B y m i d - 1 9 4 2 , the n u m b e r o f relocated enter­ prises r e a c h e d 1,200, w i t h most o f these getting d o w n to production at the n e w site within n o m o r e than six m o n t h s following relocation. S u c h a rapid c o m m e n c e m e n t o f operations w a s due to the fact that the bulk of the personnel c a m e over together with the enterprises. After the war, most of the evacuees r e t u r n e d to their h o m e s in Russia, Belorussia and the U k r a i n e . B u t not everyone returned. T h e point is that the e q u i p m e n t taken out to the east w a s not, in the m a i n , r e t u r n e d to the enterprises o f the old industrial centres, but w a s simply replaced at these enterprises w i t h n e w e q u i p m e n t . T h e p r o d u c e r capacities r e m a i n i n g in the east could not be left w i t h o u t skilled personnel, w h i c h is w h y for m a n y Russian-speaking workers the t e m p o r a r y evacuation e n d e d in a p e r m a n e n t resettlement to K a z a k h s t a n or central Asia. In the postwar period, the d e v e l o p m e n t o f virgin lands in n o r t h e r n K a z a k h s t a n a n d the construction o f large hydroelectric p o w e r stations, m i n i n g a n d processing enterprises, a n d metallurgical a n d m a c h i n e building plants in virtually all the national republics w e r e carried out in a c c o r d a n c e w i t h the c a m p a i g n scenario described above. Russian ethnologists V I. B u s h k o v and D . V M i k u l s k y note that 'the industry created in C e n t r a l A s i a over several decades w a s provided w i t h m a n p o w e r m a i n l y t h r o u g h its importation from Russia'. For instance, 'in only 22 years ( 1 9 5 0 - 1 9 7 1 ) , 2 3 5 , 7 0 0 persons w e r e resettled to Tajikistan towns from the E u r o p e a n part o f the former U S S R ' . It should be pointed out, by w a y o f c o m p a r i s o n , that the entire u r b a n population o f Tajikistan in the aforesaid period did not e x c e e d 1 million people. T h e distinctions b e t w e e n the c a m p a i g n s o f the postwar period from those o f the Stalin e p o c h a m o u n t e d m a i n l y to a greater role for m o n e y incentives and lesser i m p o r t a n c e o f c o m p u l s i o n in the recruitment o f 3

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resettlers. W h a t w a s entirely n e w in those years w a s the spread o f this process to the Baltic republics, w h i c h were highly d e v e l o p e d c o m p a r e d w i t h other parts o f the U S S R . T h e skill levels o f L a t v i a n , Estonian a n d L i t h u a n i a n workers did not require the participation of resettlers in the establishment o f n e w enterprises. Nevertheless, students o f the ethnic structure o f the population in the Baltic republics note that 'the sharp increase . . . in the n u m b e r s o f Russians is due to migrations from other republics a r r a n g e d for the purposes o f creating n e w industrial enterprises . Indeed, the proportion of Russians in the entire population o f L a t v i a increased from 1 9 3 5 to 1 9 8 9 by 3 . 9 times (from 8.8 to 3 4 . 0 per cent). In the cities - that is, w h e r e n e w enterprises w e r e set u p - the proportion of the Russian population w e n t u p 6.2 times (from 7.1 to 4 4 . 0 per cent), w h e r e a s in the rural localities - in the absence of this process - the c h a n g e s w e r e m u c h w e a k e r (the proportion increased less than twofold — from 9.8 to 1 8 . 2 per cent). In Estonia, the proportion o f the Russian population increased from 1 9 3 9 to 1 9 8 9 from 4.7 to 3 0 . 5 per c e n t . B y the end o f the Soviet e p o c h , a l l - U n i o n subordinated enterprises played a d o m i n a n t role in the e c o n o m y o f all the U n i o n republics. In 1 9 8 9 , they e m p l o y e d 5 1 per cent o f all those w o r k i n g in industry in K a z a k h s t a n a n d A z e r b a i j a n , 5 4 per cent in Belorussia, 6 3 per cent in U k r a i n e , a n d 71 per cent in Russia. 4

5

6

7

Causes of stability of Russian character of all-Union subordinated enterprises T h e nationalities policy o f the Soviet state w a s n o t at all a i m e d at investing a l l - U n i o n subordinated enterprises w i t h the character o f isolated Russian (Russian-speaking) settlements insinuated into an alien local population. O n the contrary, from the earliest years o f the U S S R , the authorities attached m u c h i m p o r t a n c e to the education and professional training o f inhabitants o f l a g g i n g republics. T h e p e r c e n t a g e o f local personnel in the total n u m b e r o f p e o p l e e m p l o y e d at industrial enterprises w a s r e g a r d e d as a politically i m p o r tant p a r a m e t e r a n d w a s u n d e r constant party control. T h e address of builders o f the K a r a g a n d a C o a l Basin ( K a z a k h s t a n , 1935) to the workers of D o n b a s s (Ukraine) m a y serve as a characteristic d o c u m e n t o f the e p o c h : ' W e are building K a r a g a n d a in the conditions o f a national republic, a former tsarist colony, in the c o m p l e t e absence of m e c h a n i s a tion, a n d in harsh h o u s i n g a n d e v e r y d a y conditions. T h a t is w h y w e request y o u , proletarians o f D o n b a s s : send y o u r shock workers to

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K a r a g a n d a for the purpose o f training the former K a z a k h n o m a d in the m o d e r n m e c h a n i s e d extraction o f coal, for the creation o f personnel o f skilled m i n e r s . ' D u r i n g the years of the G r e a t Patriotic W a r (the S e c o n d W o r l d War), w h e n the cadre workers o f industrial enterprises in the Slav republics w e r e mobilised to serve in the R e d A r m y , replenishment o f the shortage of m a n p o w e r in p r o d u c t i o n b e c a m e an altogether vital necessity. S o m e 1 9 , 0 0 0 skilled workers from a m o n g local inhabitants w e r e trained at defence enterprises d u r i n g the years o f the w a r in K a z a k h s t a n a l o n e . T h i s process w e n t on a p a c e in the postwar years as well. O n the w h o l e , impressive a n d incontestable successes w e r e scored in the field o f education a n d professional training o f inhabitants o f the national republics d u r i n g the years o f the U S S R . Before the revolution, literacy a m o n g the adult p o p u l a t i o n (from nine to forty-nine years) in various parts o f central A s i a a n d K a z a k h s t a n fluctuated b e t w e e n 2 a n d 8 per cent, but by the e n d o f the 1 9 5 0 s it w e n t up to 9 5 to 9 8 per cent. W h a t is more, in the final decades o f the existence o f the single state, m a n y o n c e - b a c k w a r d republics even led in the n u m b e r o f skilled specialists e m p l o y e d in the economy. In 1 9 8 3 , for instance, the U S S R average w a s 8 5 8 persons w i t h a higher a n d s e c o n d a r y special education per 10,000 persons in work. B u t in K a z a k h s t a n , the figure w a s 8 5 9 persons; in T u r k m e n i a , 8 7 9 ; in G e o r g i a , 8 9 5 ; a n d in U z b e k i s t a n , 8 9 9 . Nevertheless, a l l - U n i o n subordinated enterprises continued to retain their Russian (Russian-speaking) character t h r o u g h o u t the entire history of the U S S R w i t h a m a z i n g stability. T h i s w a s p r o m o t e d b y a n u m b e r o f factors. First, the Russian population, w h i c h is in principle characterised b y a low mobility, after b e i n g relocated in the course o f c a m p a i g n s to a n e w locality, usually again lost its mobility on the spot, because in Russia's conditions m o v e m e n t from t o w n to t o w n w a s (and still remains) a grave trial for the family. A s a result, stable enclaves o f Russian (Russian-speaking) population t e n d e d to e m e r g e in the places w h e r e n e w enterprises w e r e built. T h i s w a s also greatly p r o m o t e d b y the gigantic size o f the enterprises designed to cater for the requirement o f the entire U n i o n . N o w and again, the enterprises w e r e so large that the towns in w h i c h they w e r e located simply lacked the required n u m b e r o f local inhabitants to service t h e m . Resettlers b e c a m e the majority section o f the population and, in effect, converted their t o w n into a part o f Russia, from w h i c h there w a s naturally n o g o o d reason to g o away. T h e D a u g a v p i l s C h e m i c a l Fibre Works (Latvia) provides one o f the 8

9

1 0

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outstanding e x a m p l e s o f this kind. It w a s built in the years o f the K r u s h c h e v seven-year plan a n d b r o u g h t a b o u t a massive influx o f resettlers into w h a t w a s once a quiet little t o w n . W h e n the construction o f the plant w a s c o m p l e t e d , Latvians in D a u g a v p i l s b e c a m e an insignificant national minority. In 1 9 8 9 , it h a d 1 6 , 5 0 0 Latvians a n d 7 3 , 9 0 0 R u s s i a n s . Secondly, despite the efforts o f the authorities, they usually failed actually to get the local population to take on j o b s at the e m e r g i n g allU n i o n subordinated enterprises. Initially, the m a i n reason there, as has b e e n n o t e d above, w a s the low skill standards a m o n g the local workers. L a t e r on, w h a t c a m e to the fore w a s the unwillingness o f the local population to w o r k in industry (especially in h e a v y industry). For political reasons, the latter circumstance could not be discussed aloud by Soviet researchers, but it w a s w i d e l y k n o w n a m o n g the p e o p l e a n d often provided the basis for Russian e v e r y d a y nationalism. O n the other h a n d , western researchers usually explained the unwillingness o f n o n - S l a v peoples in the U S S R to w o r k at industrial enterprises for the following reasons: either, the pre-industrial mentality of these peoples, notably, the O r i e n t a l traditions o f w o r k i n g in agriculture, trade or the state apparatus, but not at industrial enterprises; or an urge to obtain h i g h unofficial ('grey' or 'black') earnings. In industry, especially in h e a v y industry, all i n c o m e s c a m e d o w n to official w a g e s . B y contrast, agriculture, trade, services and the state apparatus offered m a n y w a y s o f obtaining semi-legal or illegal earnings, r a n g i n g from the g r o w i n g a n d private sale of southern fruits a n d flowers, w h i c h in the U S S R w a s an exceptionally profitable o c c u p a t i o n , all the w a y to bribery a n d theft. N a n c y L u b i n , for instance, cites data to show that the illegal earnings o f a doctor in U z b e k i s t a n in the early 1 9 8 0 s w e r e six times higher than his official salary, a n d those o f a salesman fifty times h i g h e r . It is important to emphasise that the receipt o f unofficial earnings in the national republics w a s m u c h m o r e w i d e s p r e a d , a n d that the authorities took a m u c h m o r e c o n d o n i n g v i e w o f these, than in Russia. W e s t e r n researchers have l o n g b e e n saying that this state o f affairs resulted from a c o m p r o m i s e b e t w e e n socialist i d e o l o g y a n d the traditional O r i e n t a l w a y o f life. 11

12

13

Union-wide web of Russian enterprises T h e t e n d e n c y towards the self-isolation o f industrial enterprises (notably, large enterprises in h e a v y industry) from the local surroundings

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ran t h r o u g h the w h o l e history o f such enterprises set u p in the national republics. T h e alien national m a k e - u p o f j o b - h o l d e r s at a l l - U n i o n sub­ ordinated enterprises with respect to local inhabitants has already b e e n m e n t i o n e d , but it is also important to b e a r in m i n d the quantitative aspect o f the matter. E x a m p l e s o f an o v e r w h e l m i n g prevalence o f Russian (Russian-speak­ ing) personnel m a y be found in the most different periods in virtually all the national republics. T h u s , trade-union statistics show that, in 1 9 3 1 , m o r e t h a n 4 0 per cent o f those e m p l o y e d at industrial enterprises in A z e r b a i j a n w e r e Russians, while in technically intricate industries the n u m b e r s o f Russian workers (52.1 per cent in the oil industry a n d 61.1 per cent in machine-building) w e r e altogether m a n y times larger than the n u m b e r s o f Azerbaijanis w o r k i n g at the enterprises ( 1 8 . 6 a n d 1 2 . 5 per cent respectively). In U z b e k i s t a n , some 1 1 0 , 0 0 0 n e w j o b s w e r e created at large industrial enterprises from 1 9 2 9 to 1 9 4 0 . H o w e v e r , only 14 per cent o f these (15,700 jobs) w e r e held by U z b e k s together w i t h other native nationalities. In later years, official Soviet sources b e g a n to c o n c e a l similar informa­ tion, because it did not a c c o r d w i t h the m y t h o f the e m e r g e n c e o f a single Soviet nationality, a n d so w a s politically inconvenient. Nevertheless, western studies confirmed that n o fundamental c h a n g e s h a d o c c u r r e d . L u b i n , a m o n g others, gives the figures o f representive polls carried out in the 1 9 7 0 s at seven major m a c h i n e - b u i l d i n g plants in U z b e k i s t a n . O n average, U z b e k s at these plants m a d e u p less than 20 per cent o f the total n u m b e r o f e m p l o y e d , while at the m a m m o t h m a k e r o f agricultural h a r d w a r e C h i r c h i k s e l m a s h (15,000 employees), their proportion w a s altogether u n d e r 2 per c e n t . In the years o f perestroika, w h e n national p r o b l e m s w e r e freely dealt with, the 'Russianness' o f the implanted industry w a s n o t e d even b y Soviet authors. G . L . Smirnov, for instance, writes a b o u t 'the obvious p r e p o n d e r a n c e o f other-nationality [that is, Russian-speaking] g r o u p s in various lines o f industrial p r o d u c t i o n a n d building (for instance, in L a t v i a a n d Estonia — u p to 8 0 % ) ' . T h i s state o f affairs w a s also characteristic for K a z a k h s t a n : ' O n the w h o l e , in terms o f percentage, e m p l o y m e n t o f non-native g r o u p s o f the p o p u l a t i o n in industry in 1991 c a m e to 7 9 % o f all those e m p l o y e d in industry.' T h e isolation o f a l l - U n i o n subordinated enterprises from the local e n v i r o n m e n t w a s p r o m o t e d , to n o lesser extent than by the Russianspeaking m a k e - u p o f personnel, by the nature o f their p r o d u c t i o n ties: they delivered their products not to enterprises in their o w n republic a n d 14

15

16

1 7

18

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r e c e i v e d s e m i - f i n i s h e d products n o t from these, but e x c h a n g e d products w i t h other a l l - U n i o n subordinated

enterprises

scattered across the

Union. T h u s , the D a u g a v p i l s C h e m i c a l Fibre W o r k s (Latvia) used only r a w materials supplied by other republics, while its

finished

products w e r e

c o n s u m e d m a i n l y outside L a t v i a (cord fabric, one o f the m a i n products m a d e at this works, w a s used in the m a n u f a c t u r e o f a u t o m o b i l e tyres, w h i c h L a t v i a did not turn out at all). S u c h e x a m p l e s o f a l l - U n i o n subordinated enterprises integrating not so m u c h w i t h the local e c o n o m y as w i t h the a l l - U n i o n e c o n o m y are fairly typical. T h i s w a s p r o m o t e d by the following factors. (1) In the urge to obtain e c o n o m i e s of scale a n d scope, a large n u m b e r of giant enterprises w e r e created in the Soviet U n i o n . T h e urge for giganticism w a s obviously h y p e r t r o p h i e d ,

since b e c a u s e o f

the

artificial u n d e r s t a t e m e n t o f the prices of energy, r a w materials a n d transport the projects o f even irrationally large enterprises a p p e a r e d to be quite profitable. R a w materials for these w e r e often h a u l e d from thousands o f kilometres away, w h i l e the

finished

products w e r e

shipped out across the w h o l e U n i o n . In such conditions, the framew o r k o f a single republic a p p e a r e d to be m u c h t o o n a r r o w for giant enterprises: simply b e c a u s e o f their size, they c o u l d function only in an a l l - U n i o n e c o n o m i c e n v i r o n m e n t , but not in a r e p u b l i c a n one. (2) T h e centralised system of administration o f the U S S R e c o n o m y w a s a r r a n g e d on the sectoral principle, w h i l e territorial c o n n e c t i o n s w e r e w e a k . A n y sectoral ministry (say, ferrous or non-ferrous metallurgy) found it simpler to organise deliveries o f r a w materials a n d semifinished

products b e t w e e n its own enterprises, n o matter h o w far a w a y

from e a c h other these w e r e located, t h a n to be oriented towards alien suppliers - that is, those outside their subordination - even w h e r e these suppliers w e r e territorially m u c h nearer. (3) Financially, a l l - U n i o n subordinated enterprises w e r e also linked w i t h the a l l - U n i o n b u d g e t , a n d not w i t h the places in w h i c h they w e r e situ­ ated. Prior to 1 9 8 0 , for instance, the l a w w a s such that they did not p a y a n y taxes or other charges into the local budgets at all. O n e c o u l d say, by w a y o f s u m m i n g up, that the U S S R h a d a U n i o n w i d e w e b o f large enterprises o f impressive proportions c o v e r i n g all the U n i o n republics. H i s t o r y has k n o w n o f empires w h o s e unity w a s ensured b y garrisons o f soldiers o f the d o m i n a n t

nation

erected

t h r o u g h o u t the territory. T h e Soviet multinational s u p e r p o w e r generated a m o d e r n , industrial version of i m p l e m e n t a t i o n o f this principle.

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T h e U n i o n - w i d e w e b o f a l l - U n i o n subordinated enterprises w a s the ' h a n d o f M o s c o w ' , w h i c h stretched to the most distant parts of the state. A n d while the Russian resettled-worker, in contrast to the R o m a n legion­ naire, w a s not an instrument o f national coercion a n d enjoyed virtually n o privileges, the network o f enterprises - u p to 9 0 or 8 0 per cent o f it m a n n e d by Russian or Russian-speaking personnel - constituted a p o w erful force e c o n o m i c a l l y b i n d i n g together a gigantic multinational country.

F A T E OF A F R A G M E N T E D C O M M U N I T Y OF E N T E R P R I S E S

T h e break-up o f the U S S R a n d the e m e r g e n c e o f fifteen nation states in its place w a s a powerful force, w h i c h intervened in the functioning of the U n i o n - w i d e w e b o f enterprises that h a d taken place over a period of m a n y years. H o w did it withstand such intervention?

Disruption of economic ties T h e treaty on the establishment o f the C I S provided that the twelve former U n i o n republics entering the n e w organisation w o u l d maintain the single e c o n o m i c space. H o w e v e r , history ran a different course. T h e e c o n o m i c a n d political situation in e a c h o f the n e w l y f o r m e d states d e v e l o p e d in its o w n w a y : there were differences in the state o f the budget, credit policy, level o f taxation, p a c e o f privatisation a n d implementation o f other reforms. T h e o n c e single e c o n o m y w a s b e i n g t o r n apart b y centrifugal forces. T h e c o m m o n c u r r e n c y w a s the first to s u c c u m b . S o m e time later export a n d import tariffs and restrictions a p p e a r e d on the scene. T h e disintegration w a s most sharply intensified by the isolationist policy of Russia, the most powerful C I S state. Y e g o r G a i d a r ' s radical reformist g o v e r n m e n t r e g a r d e d the other former republics o f the U S S R as, above all, spongers a n d hangers-on seeking to obtain Russian oil and gas for next to nothing. T h e g o v e r n m e n t strove to fence itself off from its former allies, regardless o f the losses this w a s b o u n d to cause to t h e m , a n d obviously underestimating the d a m a g e to its o w n country. T h e maladjustment o f the old ties to the n e w m a r k e t conditions w a s yet another highly important factor. C o - o p e r a t i o n b e t w e e n enterprises in the various republics - well justified in the U S S R ' s p l a n n e d e c o n o m y - in m a n y cases b e c a m e disadvantageous in a market economy. In other words, m a n y o f the ties w e r e not broken off by external forces (the

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foreign-currency disorders, the customs restrictions a n d so on), but w e r e a b r o g a t e d by the enterprises themselves as b e i n g n o longer useful. T h e n e w l y acquired openness o f the n e w countries w i t h respect to the external w o r l d likewise operated in the same direction. M a n y o f the g o o d s m a d e b y former Soviet enterprises t u r n e d out to be altogether uncompetitive w h e n c o m p a r e d w i t h western g o o d s , a n d for that reason n o t required b y erstwhile c o n s u m e r s in other C I S countries. A l l these factors p r o d u c e d a c a s c a d i n g process o f foreign-trade shrinkage. W i t h i n n o m o r e than t w o or three years, the level o f integration attained in the Soviet period b e t w e e n the e c o n o m i e s o f the C I S countries w a s r e d u c e d m a n y times over (see table 20.1). It w a s , o f course, the former a l l - U n i o n subordinated enterprises that suffered most from the disintegration. Since they h a d operated w i t h many, sometimes w i t h tens and h u n d r e d s of, suppliers in the various republics o f the former Soviet U n i o n , they were often forced to stop production because of even one b r o k e n c o - o p e r a t i o n tie. T h e effects o f the shrinkage o f m a r k e t i n g outlets w e r e just as disastrous for the former a l l - U n i o n subordinated enterprises. M a n y o f these enterprises w e r e set u p for the full satisfaction o f all the require­ ments o f the U S S R in a given type o f product. In machine-building, for instance, 5 , 1 2 0 c o m m o d i t y groups, or 87 per cent o f the total n u m b e r o f c o m m o d i t y groups identified for this industry, w e r e m a n u f a c t u r e d for the w h o l e c o u n t r y by only one producer. In chemicals, the respective figure w a s 4 7 per cent, and in metallurgy, 2 8 per c e n t . H a v i n g lost the possibility o f m a r k e t i n g their products outside their o w n republic, the former a l l - U n i o n monopolists w e r e confronted w i t h the highly acute p r o b l e m o f l o w capacity utilisation. N o w a n d again, c a p a c i t y utilisation fell to such a l o w level that pro­ duction b e c a m e not just e c o n o m i c a l l y unprofitable, but even t e c h n o l o g ically impossible. T h e A k r i k h i n p h a r m a c e u t i c a l plant, w h i c h is situated at K u p a v n a n e a r M o s c o w , w a s the U S S R ' s largest p r o d u c e r o f active substances, from w h i c h finished forms of drugs w e r e m a d e at forty-four enterprises o p e r a t i n g in various republics o f the U n i o n . Following the break-up of the U S S R , traditional c o n s u m e r s outside Russia disc o n t i n u e d their purchases. T h e p r o d u c t i o n o f active substances at A k r i k h i n d r o p p e d to a quarter. W i t h that kind of c a p a c i t y utilisation it b e c a m e impossible to use c h e m i c a l reactors. A s it w a s put most bluntly b y the workers, 'the stirring rod don't r e a c h , w o n ' t do the m i x i n g ' . A p a r t from the reduction in mutual trade, the e x o d u s o f the Russianspeaking population from the national republics b e c a m e a specific 19

20

Nationality and enterprises in

USSR/Russia

:

4 5

T a b l e 2 0 . 1 . Inter-republic trade as a percentage of foreign-trade operations* of republics (countries) of the USSR and CIS, ig88 and iggj Republic (country) Armenia Azerbaijan Georgia Kazakhstan Kirghizia Moldavia Russia Tajikistan Turkmenia Ukraine Uzbekistan Belorussia USSR/CIS

1988

1

89.1

5 I . 9

85.6

36.8

86.5 8

6

86.9 87.8 57.8 86.3

9 9 5

7 .

4 4 .

3

5

9

Change —

3

7

.

2

-48.8 —

3

9

.

I

9

— 26.4

65.8

— 2I.I

64.7 21.1 36.9

23.I -36.7

.

—49.4

7 9 . 0

74.6

— 4.4

7 9 . 0

57.3

—2I.7

85.8

42.1

— 43.7

85.8

6 5 .

— 20.7

71.8

i

32.2

3 9 . 6

Notes: *For the U S S R , the proportion of inter-republic trade turnover in the amount of foreign-trade turnover and inter-republic turnover; for the C I S , the proportion of trade with other C I S countries in the total foreign-trade turnover. Sources: R. Langhammer and M . Luecke, Die Handelsbeziehungen der Nachfolgerstaaten der Sowjetunion (Kiel, I995), p. 4; Sodruzhestvo nezavisimykhgosudarstv v igg§godu [Statistical Yearbook of the CIS] (Moscow, I996), p. 9 6 .

p r o b l e m facing all the former a l l - U n i o n subordinated enterprises. It b e g a n b a c k in the late I 9 8 o s , o n the a p p e a r a n c e o f the first few acute conflicts o n a n ethnic basis. H o w e v e r , the return resettlement a s s u m e d massive proportions in I 9 9 2 , that is after the b r e a k - u p o f the U n i o n . T a b l e 2 0 . 2 shows that the m i g r a t i o n streams b e t w e e n Russia, U k r a i n e a n d Belorussia w e r e sharply r e d u c e d after the b r e a k - u p o f the U S S R . T h e r e w a s a decline b o t h in arrivals in Russia a n d in departures from it, s o m e t h i n g that m a y be easily explained: in v i e w o f the e m e r g e n c e o f n e w frontiers, w h i c h cut across the old m i g r a t i o n streams, and the sharp decline in living standards in the post-Soviet space, people c a m e to c h a n g e their place o f residence most unwillingly, unless they were impelled to do so by special causes. A g a i n s t this b a c k g r o u n d , the sharp g r o w t h o f arrivals in Russia o f

ANDREI

416

YUDANOV

T a b l e 2 0 . 2 . Migration of population between Russia andformer USSR republics, 1980-93 (in thousands) Migration streams with Ukraine and Belorussia

Years

Arrivals in Russia

Departures from Russia

1980

436.2

4i9.8 383.3

1985 1989 1

9

9

1

i992

357.1 2

5

5

.

7

235.6

i 9 9 3 2 2 4 . i

Migration streams with other republics

N e t arrivals in Russia

Arrivals in Russia

Departures from Russia

Net arrival in Russia

16.4

439.9

353.8

86.i

27.8

465.7

3i8.7

i47.0 i65.2

359.7

-2.6

497.2

332.0

326.5

-70.8

436.3

260.7

i75.6

1 3 1 . 3 6 9 0 . 2 698.8

203.2

487.0

i50.9

547.9

366.9 2i8.2

-

5

.

9

Source: The Demographic Yearbook of Russian Federation 1993 (Moscow, 1994), pp. 3 8 0 , 3 8 2 , 4 0 0 and 4 0 i .

inhabitants o f former U S S R national republics (from 4 4 0 , 0 0 0 in 1 9 8 0 to almost 7 0 0 , 0 0 0 in 1 9 9 3 ) provides pertinent evidence that they w e r e impelled to return to their historical m o t h e r l a n d by special circumstances, n o t a b l y local nationalism, r a n g i n g from infringement o f rights to out­ right threats to life. E v e n m o r e impressive is the over-six-fold g r o w t h in net arrivals in Russia (from 8 6 , 0 0 0 to 5 4 8 , 0 0 0 people) from the national republics. W i t h i n five years (1990—4), some 14 per cent o f the Russians living in the n o n - S l a v republics left t h e m , with the Baltic countries and K a z a k h s t a n e a c h losing 8 per cent o f the Russian population, central A s i a 21 per cent, a n d the T r a n s c a u c a s u s 37 per c e n t . Accordingly, the former a l l - U n i o n subordinated enterprises have lost a sizeable part o f their skilled personnel. It is not only Russians w h o are leaving (for Russia), but also G e r m a n s (for G e r m a n y ) , J e w s (for Israel), a n d representatives o f other regions o f the former U S S R (for instance, the n o r t h e r n C a u c a s u s and the Transcaucasus). It is not only representatives of the intelligent professions, such as scientists (including those w h o h a d w o r k e d all their life in Tajikistan and w h o m a k e u p the c r e a m o f Tajik science), that are leaving, but also representatives o f w o r k e r s ' professions, m a i n l y those w i t h h i g h skill standards. T h i s w a s , for instance, the description given to the situation in Tajikistan b y B u s h k o v and M i k u l s k y before the start o f the civil w a r in 21

22

Nationality and enterprises in USSR/Russia

417

that c o u n t r y (and so before the a p p e a r a n c e o f the m a i n flood o f refugees). B y 1 9 9 4 , that unfortunate c o u n t r y w a s a b a n d o n e d b y 4 2 per cent o f the Russians w h o h a d lived t h e r e . T h e scale of the decline in p r o d u c t i o n caused by the disruption o f e c o n o m i c ties is impressive. It is well k n o w n that the overall drop o f the G D P in the C I S countries in 1 9 9 5 , as c o m p a r e d with 1 9 9 0 , c a m e to a b o u t 4 2 per cent, while industrial p r o d u c t i o n shrank even m o r e heavily — b y 5 2 per c e n t . Researchers c o m e to v e r y different conclusions w h e n assessing the significance o f the break-up o f the U n i o n for this catastro­ phe, but all o f t h e m cite some v e r y large figures. I v a n K o r o t c h e n y a , for instance, assumes that the break-up o f the U S S R caused some 30 to 6 0 per cent o f the overall G D P drop. S. A . Sitoryan a n d O l e g B o g o m o l o v speak o f 30 to 5 0 per cent, while A r k a d i V o l s k y ' s assessment m a y be interpreted as 4 0 per cent. 23

24

25

2 6

27

Search for ways of adaptation T h e present state of the e c o n o m y does not suit any o f the countries that e m e r g e d in place o f the U S S R . B e l o w are considered three outlined w a y s o f adaptation to the n e w conditions in the context o f three c o u n tries in w h i c h the said trends have b e e n most p r o n o u n c e d . Russia: between isolationism and reintegration Russia is the only one o f the U S S R successor countries that is large e n o u g h to be capable o f producing, by itself, e v e r y t h i n g (or almost everything) necessary. T h a t is exactly the route taken b y m a n y o f Russia's enterprises that were o n c e part of the U n i o n - w i d e w e b . A t any rate, the history o f almost every successfully operating Russian enterprise includes a description o f h o w it took steps, over the course of time, to reorient its e c o n o m i c ties towards Russia, so surviving the break-up o f the U S S R . ' O u r raw-material network w a s scattered across the U S S R : U k r a i n i a n plants, Belorussian plants, the Baltic, Russia — a vast list', says A . V. Rassadnev, D i r e c t o r - G e n e r a l of the M o s c o w T y r e W o r k s . ' B u t w h e n the struggle o f sovereignties got u n d e r way, and the U S S R b e g a n to b r e a k up, w e were found to be ready for that, in contrast to m a n y other enterprises. I realised that one should be oriented solely towards Russia . . . Everything, if y o u recall, b e g a n w i t h the Baltic, a n d there I h a d [a supplier,] the D a u g a v p i l s C h e m i c a l Fibre Works. T h i s m e a n s the customs and generally a mass o f impediments. Accordingly, w e t u r n e d 28

418

ANDREI YUDANOV

our attention to the S h c h y o k i n o K h i m v o l o k n o , w h i c h is quite near, in the T u l a R e g i o n . ' V i r t u a l l y the same thing is told b y V K o n e v , D i r e c t o r o f the M o s c o w Electrical M e a s u r i n g Instruments Works: ' W h e n information w a s received that, say, w e could not obtain s o m e t h i n g from Belorussia or M o l d a v i a , the designers w e r e set the following task: here is a resistor that is not m a d e in Russia, it has b e e n left in M i n s k or Kishinyov. T h a t is w h y some other resistor needs to replace this o n e . ' Consequently, in Russia the break-up o f the U S S R intensified the trend towards autarky, w h i c h w a s even then characteristic o f Soviet enterprises. Instead o f a l l - U n i o n co-operation, orders for required parts a n d c o m p o n e n t s w e r e placed w i t h the nearest enterprises or, w h e r e v e r possible, these w e r e replaced b y items o f their o w n making. G A Z , one o f the largest a u t o m o b i l e enterprises in Russia, off"ers an indicative e x a m p l e . For the manufacture o f its n e w truck m o d e l , the G A Z e l , w h i c h is, incidentally, h i g h l y successful on the C I S market, it itself m a n u f a c t u r e d 2 0 0 n e w machine-tools a n d 12,000 tools for these. C o m m e n t i n g on G A Z ' s success, the authoritative Russian j o u r n a l Expert said that one o f the reasons w a s the ' c o m p a n y ' s autarky: it does everything not to be d e p e n d e n t on anyone e l s e ' . B u t w h e n there arises a possibility to re-establish co-operation ties w i t h enterprises from other C I S countries, m a n y Russian enterprises display great interest in it. N o r is that surprising: the largest part o f the 'single national e c o n o m i c c o m p l e x ' o f the former U S S R remains in Russia, a n d it m a y have its gains m a x i m i s e d b y the re-establishment o f lost ties. T h u s , in the first eight m o n t h s after the creation o f the C u s t o m s U n i o n o f Russia, Belorussia, K a z a k h s t a n and K i r g h i z i a in 1 9 9 6 , the trade turnover b e t w e e n these countries increased b y 8 0 per c e n t . T h e r e are n u m e r o u s e x a m p l e s o f mutually a d v a n t a g e o u s re-establishment o f co-operation ties b e t w e e n enterprises o f the four countries m e n t i o n e d above, a n d also of U k r a i n e (even if to a lesser extent). T h e Belorussian works Tsentrolit w a s , for all practical purposes, restored to life after the resumption o f deliveries to the Russian enterprises Norilsk Nikel, the M u r o m and the M a i k o p M a c h i n e - B u i l d i n g Works, while the latter got a supplier o f precision cast items required for the n o r m a l functioning o f their e q u i p m e n t . In U k r a i n e , the monopsonistic c o n s u m e r o f large-diametre pipes, G a z p r o m , a Russian gas c o n c e r n that is gigantic even b y w o r l d standards, is building u p a multinational enterprise called Trubtrans. T h e 29

30

31

Nationality and enterprises in USSR/Russia

419

latter is to supply pipes to G a z p r o m , m a n u f a c t u r i n g these t h r o u g h indepth co-operation b e t w e e n Russian a n d U k r a i n i a n plants, in the course of w h i c h s e m i - f i n i s h e d products o f different stages o f readiness are to cross the b o r d e r of the t w o countries to a n d fro. Consequently, the m a i n line o f the Russian w a y o f o v e r c o m i n g the crisis caused b y the break-up of the single c o u n t r y is to maintain the key enterprises o f the historically rooted w e b o f enterprises either t h r o u g h autarkic reliance on one's o w n forces or b y m e a n s o f re-establishment o f lost ties w i t h other post-Soviet countries. T h i s does not m e a n , o f course, that the n e w Russian c o m m u n i t y o f enterprises will be an exact c o p y of the erstwhile U n i o n - w i d e w e b . In the conditions o f the market, the links b e t w e e n enterprises c a n n o t r e m a i n such as they w e r e u n d e r the p l a n n e d economy. H o w e v e r , the most important enterprises set u p in the Soviet e p o c h a n d the t e c h n o l o g i c a l a n d e c o n o m i c ties linking t h e m together are to be retained. The Baltic countries: rejection of Soviet heritage? D e v e l o p m e n t s in L a t v i a , Estonia a n d L i t h u a n i a took a fundamentally different turn. T h e national factor is h a v i n g a great influence on the future o f enterprises in these countries. T h e former U n i o n - w i d e w e b o f a l l - U n i o n subordinated (Russian) enterprises is r e g a r d e d either as an e c o n o m i c threat to i n d e p e n d e n c e or as a chain m a n a c l i n g the Baltic to Russia. T h a t is w h y the re-establishment o f integration ties w i t h former partners is seen as an extremely undesirable prospect. N o w o n d e r all three countries refused to j o i n the C I S . For Estonia a n d L a t v i a , almost one half o f w h o s e p o p u l a t i o n consists of Russian-speaking inhabitants, the p r o b l e m has yet another aspect. T h e national m o v e m e n t in these countries d e v e l o p e d u n d e r the slogans of struggle against the d a n g e r o f transformation o f the native nation into an ethnic minority on its o w n territory. Since the attainment of i n d e p e n d e n c e , it has b e c o m e a policy in the national question in b o t h countries (not recognised officially, but n o n e the less real for all that) to try to m a k e the Russian-speaking population leave the Baltic. T h i s purpose is served by n u m e r o u s acts o f discrimination on the national principle, r a n g i n g from infringement o f the rights of the Russian-speaking population to take part in privatisation a n d to o w n land, to refusal to g r a n t citizenship, w h i c h has led, for instance, to such things — inconceivable in m o d e r n E u r o p e — as deprivation of Russian-speaking inhabitants o f the right to take part in elections,

420

ANDREI

YUDANOV

including elections o f m u n i c i p a l authorities in the cities in w h i c h they m a k e u p a majority (such, in particular, are the laws o f Latvia). G u i d e d b y the logic o f ousting the Russians, the authorities o f the Baltic countries, while they m a y n o t have striven to increase the g r o w i n g desolation that g r i p p e d the former a l l - U n i o n subordinated enterprises after the break-up o f the U S S R , have not d o n e m u c h to prevent it, either. M e a n w h i l e , n u m e r o u s unofficial statements have expressed the h o p e that u p o n the b a n k r u p t c y o f the enterprises, the Russians e m p l o y e d there w o u l d be forced to leave the country. V i r t u a l l y all the major enterprises o f the h e a v y industry o f the Baltic have found t h e m selves in a v e r y grave situation. R A F (Latvia), the Baltic's only autom o b i l e works, for e x a m p l e , has ceased to turn out m o t o r cars, has b e e n fragmented into three parts, a n d is e x p e c t e d , in the l o n g run, to turn out only simple spare parts for western m o t o r cars. In place o f the industry built up in the Soviet period, banking, trade, insurance a n d the traditionally d e v e l o p e d local agriculture w e r e to b e c o m e the basis of the e c o n o m y o f the Baltic countries. In other w o r d s , it w a s an attempt to reject the Soviet industrial heritage a n d to create a fundamentally new, post-industrial c o m m u n i t y of c o m p a n i e s . H o w e v e r , most o f the plans described above have t u r n e d out to be utopian. A post-industrial society c a n n o t be instantly created in a v a c u u m . T h e fact is that the e c o n o m i c ties w i t h Russia and other C I S countries are m u c h too important to be a b a n d o n e d . T h u s , the servicing of the transit o f foreign-trade flows b e t w e e n the C I S a n d w e s t e r n c o u n tries across their territory has b e c o m e the m a i n source o f foreign-curr e n c y earnings for the Baltic countries. It has b e e n estimated that Estonia, for instance, is getting u p to 8 0 per cent of its foreign-currency revenues and u p to 4 0 per cent o f G D P from these s e r v i c e s . A s a result, the urge to fence one's c o u n t r y off from Russia has given w a y to acute c o m p e t i t i o n for the servicing o f its foreign trade, w h i c h has b e e n j o i n e d b y the seaports o f R i g a a n d Ventspils (Latvia), Tallinn (Estonia) a n d K l a i p e d a (Lithuania). Incidentally, v e r y m a n y Russians are e m p l o y e d in the Baltic ports, so that there a g a i n d e v e l o p m e n t s tend to run c o u n t e r to the p o l i c y o f ousting the aliens. T h e key i m p o r t a n c e o f the Russian m a r k e t for the m a r k e t i n g o f foodstuffs has likewise b e e n demonstrated. T h e future will show w h e t h e r this revival o f Russo-Baltic e c o n o m i c ties will also subsequently involve the enterprises o n c e constituting a part of the U n i o n - w i d e w e b o f a l l - U n i o n subordinated enterprises. 32

Nationality and enterprises in USSR/Russia

421

Uzbekistan: creative nationalism? T h e enthusiasm o f a w h o l e people for a national idea has on m a n y o c c a ­ sions in w o r l d history served as a socio-psychological prerequisite for the e c o n o m i c flourishing of this or that country. In the post-Soviet space, U z b e k i s t a n is the only candidate for the role o f a successfully self-asserting nation. In contrast to other U S S R successor nations, U z b e k i s t a n did not opt for a 'shock', but for a slow, ' C h i n e s e ' w a y o f reformation o f its e c o n o m y w i t h the retention of the authoritarian political system a n d strong state regulation o f the economy. U z b e k i s t a n did not live t h r o u g h any sharp decline in production: by 1 9 9 5 , industrial output in the c o u n t r y h a d not d r o p p e d b e l o w the 1 9 9 0 level. U z b e k i s t a n has g r a d u a l l y d e v e l o p e d into the incontestably strongest state of central A s i a and has even c o m ­ m e n c e d e c o n o m i c expansion into Russia, the former 'metropolitan country'. In U z b e k i s t a n , the transformation of the former U n i o n - w i d e w e b of a l l - U n i o n subordinated enterprises took the form o f their radical modernisation w i t h the aid o f foreign capital. T h e most impressive e x a m p l e o f this kind is offered b y the a u t o m o b i l e enterprise U z D a e w o o A v t o (projected capacity o f 2 0 0 , 0 0 0 automobiles a year) founded as a j o i n t venture w i t h the S o u t h K o r e a n D a e w o o corporation. T h e U z D a e w o o A v t o enterprise, erected on the site o f an old tractortrailer works in the t o w n o f A s a k a , is designed not only to satisfy the requirements in automobiles o f U z b e k i s t a n itself a n d o f its central A s i a n neighbours, but also to w i n the Russian market, on w h i c h some 7 0 per cent o f the automobiles are to be sold. Virtually all the m a c h i n e building enterprises in the c o u n t r y are b e i n g reprofiled for supplying the n e w giant w i t h parts and c o m p o n e n t s : at first twenty, and, after the auto­ m o b i l e m a k e r reaches the p l a n n e d capacity, over fifty, plants are to deliver their products to the a u t o m o b i l e maker, so that the proportion of l o c a l - m a d e parts a n d c o m p o n e n t s is to g o u p from 30 to 7 0 per cent. T h e signs o f national self-assertion are in evidence in all the features of the U z D a e w o o A v t o project b e g i n n i n g from a demonstrative mainten a n c e o f super-natural cleanliness on the shop floor (workers operate in white gloves, w h i c h they c h a n g e four times a day), to the p r o u d declaration issued b y President Islam K a r i m o v o f U z b e k i s t a n at the o p e n i n g o f the works: 'In the past, Russia supplied us w i t h b a d cars, w h i c h is w h y the roads w e r e bad; w e n o w have g o o d cars - and the roads will be good.' 3 3

422

ANDREI YUDANOV

T h e U z D a e w o o A v t o project is not the only one o f its kind. T h e U z B A T t o b a c c o corporation, set u p as a j o i n t venture w i t h B A T , is like­ wise e x p e c t e d to supply the w h o l e o f central A s i a and, possibly, other countries o f the C I S as well. Negotiations are u n d e r w a y w i t h I v e c o on a j o i n t venture to manufacture buses, with D a i m l e r - B e n z on the m a n u facture o f trucks, a n d so on. Inspired by the early successes a n d constantly rousing the national consciousness w i t h reminiscences o f the country's greatness in the T a m e r l a n e e p o c h , U z b e k i s t a n has b e e n actively transforming the part of the U n i o n - w i d e w e b o f enterprises that fell to its lot. It will be easily seen, however, that the old ties continue to exert an influence on this process. T h e m a r k e t i n g outlets a n d the suppliers o f parts a n d c o m p o nents (for instance, for the U z D a e w o o d A v t o project - enterprises o f Russia a n d K i r g h i z i a ) , the h i g h - t e c h n o l o g y facilities persistently m a i n tained despite their loss-making (the C h k a l o v Aircraft factory in Tashkent), a n d the e c o n o m i c alliances (apart from the fairly a m o r p h o u s C I S , there is Uzbekistan's closer alliance w i t h K i r g h i z i a a n d K a z a k h s t a n ) - all these are primarily oriented towards the post-Soviet space.

GONGLUDING

REMARKS

J o h n Rothschild, a theorist o f ethnopolitics, has expressed the v i e w that in a m o d e r n i s i n g society the non-ethnicised political forces usually strive to transform the modernisation-caused national contradictions either into a class policy (socialists) or into an i d e o l o g y of individualism (liberals). B u t these efforts often e n d in an explosion o f n a t i o n a l i s m . S o m e t h i n g similar has apparently o c c u r r e d in the U S S R . A c o u n t r y craving political a n d e c o n o m i c change, while b e i n g relatively c a l m in the sense o f interethnic relations, found itself p l u n g e d into a series o f acute national conflicts after the Russian democrats led by Boris Yeltsin tried to use the national factor in the struggle for power. T h e process o f transition to a market e c o n o m y t u r n e d out to be an onerous one for all the post-socialist countries. H o w e v e r , the break-up of the multinational Soviet state and o f the U n i o n - w i d e w e b o f enterprises that unified it — preceding the start o f the transformations — caused a grave crisis in the e c o n o m y even before the e m e r g e n c e o f the difficulties caused b y the transition itself. T h e course of reforms in the republics o f the former U S S R m a y be p r o c e e d i n g so painfully because the reforms 34

Nationality and enterprises in USSR/Russia

423

b e g a n with the e c o n o m i c disaster generated b y the tragic resolution o f the national question in the U S S R . However, there is some evidence o f a trend towards the regeneration of the historically shaped c o m m u n i t y o f enterprises. T h e all-Union (Russian) w e b o f enterprises turned out to b e stronger than the state that created it, a n d m a y well g o o n d e t e r m i n i n g e c o n o m i c d e v e l o p m e n t o n the entire post-Soviet space for a l o n g time to c o m e . NOTES

1 L. A. Brutyan and B. G. Ivanovsky, Trudoyoe sodruzhestvo sovetskikh narodov. Uchastiye narodov SSSR v sozdanii yedinogo narodnokhozyaistvennogo compleksa (Moscow, 1986), p. 27. 2 For details, see A. Yudanov, 'Large enterprises in the USSR: functional dis­ order' in A. Chandler, F. Amatori and T. Hikino (eds.), Big Business and the Wealth of Nations (Cambridge, 1997), pp. 3 9 7 - 4 3 2 . 3 V. I. Bushkov and D. V Mikulsky, Tadzhikskoye obshchestvo na rubezhe tysyacheletiy (etnopoliticheskaya situatsiya v nachale 1990-ykh godov) (Moscow, 1992), p. 9. 4 O. Ye. Kazmina, 'Dinamika etnicheskoi struktury naseleniya Latvii v X X veke' in M. N. Gubolgo (ed.), Natsionalnyeprotsessy v SSSR (Moscow, 1991), pp. 1 8 5 - 2 1 2 at p. 202.

5 Ibid., pp. 199 and 209. 6 A. Kirkh and M. Kirkh, 'Nuzhna li regionalnaya natsionalnaya politika?' in Natsionalnye protsessy v SSSR,pp. 138-51 at p. 141. 7 S. A. Sitoryan and O. T. Bogomolov (eds.), Problemy reintegratsii i formirovaniya ekonomicheskogo soyuza stran SNG (Moscow, 1994), p. 3 1 . 8 Brutyan and Ivanovsky, Trudoyoe sodruzhestvo sovetskikh narodov,p. 57. 9 Ibid., p. 74. 10 Ibid. ,p. i28. 11 Latviya v tsifrakh v 1989 godu. Kratkiy statisticheskiy sbornik (Riga, 1990), pp. 26 and 29. 12 N. Lubin, Labour and Nationality in Soviet Central Asia: An Uneasy Compromise (London, i984), pp. i 9 i and i 9 2 . 13 See, for instance, L. Dienes, Soviet Asia: Economic Development and National Policy Choices (London, 1987), pp. 1 5 0 - 5 and 270. 14 Sotsialisticheskaya industrializatsiy Azerbaidzhana. Dokumenty i materialy (Baku, i957), p. 5 8 6 .

15 Lubin, Labour and Nationality ,p. 77. 16 Ibid., pp. 8 7 - 8 . 17 G. A. Smirnov, 'Obrazovaniye SSSR - voploshcheniye leninskoi contseptsii federatsii svobodnykh natsiy' in Sotsialno-politicheskiyeproblemy mezhnatsionalnykh otnosheniy v SSSR (Moscow, 1989), p. 4 1 . 18 Institut razvitiya Kazakhstana, Mezhnatsionalnye otnosheniya v Kazakhstane: etnicheskiy aspekt kadrovoipolitiki (Almaty, 1994), p. 25.

424

ANDREI

YUDANOV

19 I. M. Korotchenya, Ekonomicheskiy soyuz suverennykh gosudarstv: strategiya i taktika stanovleniya (St Petersburg, 1995), p. 58. 0 i" ^ 21 Naseleniye Rossii 1995. Tretiy yezhegodnyi demograficheskiy doklad [3rd demo­ graphic report of the Institut narodnokhozyaistvennogo pronozirovaniya RAN] (Moscow, 1996), p. 82. 22 Bushkov and Mikulsky, Tadzhikskoye obshchestvo na rubezhetysyacheletiy,p.55. 23 Naseleniye Rossii i995,p. 82. 24 Sodruzhestvo nezavisimykh gosudarstv v 1995 godu [Statistical Yearbook of the CIS], (Moscow, 1996), pp. 16 and 19. 25 Korotchenya, Ekonomicheskiy soyuz suverennykh gosudarstv,p. 60. 26 Sitoryan and Bogomolov, Problemy reintegratsii i formirovaniya,p. 12. 27 A. Volsky, 'Stanovleniye obshchesoyuznogo rynka - osnova ekonomicheskogo razvitiya strany', Ekonomicheskiye nauki 5 (1991), p. 5. " ^ 29 Expert 8 (1996), 38. 30 Expert 16 (1995), 14 and 18. 31 Financial Izvestiya, 3 October 1996. 32 Expert 4 4 (1996), i o . 33 Kommersant 46 (1996), 13. 3 4 J. Rothschild, Ethnopolitics: A Conceptual Framework (New York, 1982), p. 3. 2

E x p e r t

9

(

2 8

E x p e r t

8

( l

5

5

3 9 .

Index

Abyssinia 188, 191 Adenauer, K . 57 A h v e n a i n e n , J. 383, 389 Akenson, D . 14 A l b a n i a 186, 220 AminofF, G. 393 Andree, R . 77 Anglo-Irish Treaty 17, 23 A p e l 56 Argentina 174 Austria 4, 5, 6, 183, 232-45

B a n c o G u i p u z c o a n o 161, 162 B a n c o Internacional 161 Credito de la U n i o n M i n e r a 161 E T A 157 financial sector 161—2, 164 fueros 151—7, 168—9 historical rights 170 immigration 162 industrialisation 158—62, 169 L a Papelera Espanola 161 military service 152 'Pase foral' 151—2, 153—5 political organisation 151 taxation 152, 155 see also Spain B a u d o i n 40 Bauer, O . 236 Belgian Law Gazette 37 Belgium 2, 130

Anschluss 235—6, 239—40, 241 Catholics 239, 240 Christian Socialists 236, 237, 238 C o m m u n i s t s 240 Credit-Anstalt 238 economic decline 232 —4 First Republic 232—40 functional disruption 233—4 G e r m a n occupation 234, 240—2 growth 242, 244 interwar economic policy 237—9 National Socialism 239, 241 neutrality 244 P a n - G e r m a n s 236 patriotism 240—2, 244—5 political weakness 234—7 Social D e m o c r a t s 236, 237, 238, 240 Socialists 237, 240 Austrian L o w Countries 34 Austro-Hungarian M o n a r c h y 4, 130, 296, 315, 333, 389

( (

I 9 I 4 — 4 5 )

I 9 4 6 — 5 9 )

( l 9 5 9 — 7 9 )

3 7 — 9

3

4

9

0

—

—

4

0

3

C o m m u n i t y C o u n c i l 43 constitutional reforms 44 D u t c h / F r e n c h population split 33—7 Flemish movement 34—5, 37—9, 43—4 language 34, 36, 43 long-term economic changes 33—47 migration 35 oil shocks 43—4 University of G h e n t 37—8 Walloon M o v e m e n t 36, 43 Benes, E. 289 Bicanic, R. 318 Blaschke, K . 72 Bombelles, J. 324 Bogomolov, O . 417 B o h e m i a 234, 264, 286, 288, 289 Bonaparte, Joseph 128 Borak, N . 6, 310—37 Bosnia—Herzegovina 310

Basque country 128, 150—72 1973 crisis 165—7 A c e r i a C o m p a c t a 168 B a n c o de Bilbao 162 B a n c o de Biscay 161 B a n c o de C o m e r c i o 161 B a n c o de San Sebastian 161 B a n c o de V i z c a y a 162

4

2

5

Index

426

Bottai 186 Boyer, C . 262-76 Brandt, W. 57 Brazil 117, 174 Breuilly,J. 11 Britain 48, 49, 146, 176, 178, 182, 238 alliance with Portugal 111, 113—14, 119 inflation 165 relationship with Ireland 9, 12, 14—15, 17, 23, 2 5 — 7

Rio T i n t o 144—5 Second World W a r 186 t r a d e

3 8 6 ,

3 8 7 ,

3 9 5

^ wealth 180 Bulgaria 197, 204, 389 Bulgarian Exarchate 203—4, 206 Bushkov, V I. 407, 416 Butt, I. 20, 2i , 23 Buyst, E. 2, 33—47 C a b l k , J . 285 C a l v o Sotelo, J. i35 C a n a d a 35, i74 C a r l i , F . 179, 182 C a r o Baroja, J. 150 Cernik, A . 77 C e r n y , A . 79—80 C h a m b e r l a i n , J. 20 C I S 4i3—i4, 4i8—20 C l e m e n c e a u 235 C o l d War 50, 53, 67, 2i6 Collins, M . 13 C o l o m b i a i76 Corradini, E. i79 C r o a t i a 6, 3i0, 3i5

see also Yugoslavia C u b a i30—i , i32 Cullen, L. M . 21 Czech—Slovak economic co-operation 277—80 Czechoslovakia 4—5, 6, 248—60, 262—76, 79—80 A g r a r i a n Party 286 break-up 286—7, 292 Central U n i o n of C z e c h o s l o v a k Industrialists 259 C h a m b e r s of Trade and C o m m e r c e 269—7i Christian Socialists 258 C o b u r g M i n i n g and Metallurgic C o m p a n y 252 Communists 289—9i C z e c h colonialism 285 C z e c h / G e r m a n distinction 263—4 C z e c h / G e r m a n relations 258—60, 262—76 Deutsche Arbeits- und Wirtschafts gemeinshaft (DAWG) 268 Deutsche Volksgemeinschaft 268

Deutscher gewerblicher Landeskreditverband 259 Deutscher Hauptverband der Industrie 258, 265—9 east—west differences 257—8 economic and regional structure 250—5 establishment 28i ethnic groups 249 —50 , 253 foundation of Czechoslovakia 5, 248 G e r m a n A g r a r i a n Party 258 Hauptverband der deutschen Kaufmannschaft 259 H a u p t v e r b a n d des deutschen G e w e r b e s 2

5

9

. industrial elites 27i—3 industrialisation 29i Jews 253, 263 K o f i c e Programme 287 land reform 289 Narodni rada 264, 272 narodnostni pomery 271—3 National Bank 284, 288 National Socialism 259, 262, 268—9 occupational structure 255 —6 Pohornadska 252 problems of economic integration 282—3 Protestant Slovak National Party 285 Reichsverband deutscher Gewebevereine im tschechslowakischen Staate 259 restoration 287 Rimamuranska 25i R u z o m b e r o k L'udova banka 284 Slovak People's Party 286 Slovaks' wish for power 285 Sudetendeutsche Partei (SdP) 262, 268 Sudetendeutsche Volksgemeinschaft 268—9 Ustfedni svaz ceskoslovenskych prumyslniku (USCP) 265—9 V e r b a n d deutscher Kaufleute 259 Vitkovice M i n i n g and Foundry Works 252 Volkstumskampf 262, 264, 265 see also Slovakia Czechs economic nationalism 278, 280 political consciousness 28i Daly, M . i2, i5, i7, i9, 25, 27 D e Rosa, L. 4, i73—95 de Valera, E. i0, 25, 26—7, 28 D e n m a r k 242, 388 Deterding, Sir H e n r y i35 D o d a n , S. 328 Dollfuss, F., Chancellor 239 Donges, J. B . i4i Dritsas, M . 4, i96—227

Index Egypt Eisenhower, D . 108 Erhard, L. 57 Eritrea 176 3 " , ( 9 9 ) ( ~ ) 3 3 3 E

s

t

o

n

i

a

I 8

7

I 9 I 7

(

i

9

5 7

0 - I

4

8 1

I 7

4 0

0

-

8

5

( i 9 8 7 - 9 i )

3

3

5

6

9

-

5

-

6

6

)

3

7

7

9

—

5

6

4

I

9

-

2

0

3

- 8

7

5

agriculture 365—6 Baltic G e r m a n s 360—I Bolsheviks 363 bourgeois nationalism 370 citizenship 376 collectivisation 37I—2 C o m m u n i s t Party (ECP) 370, 372, 373, 375 coup d'etat 366, 368 deportations 372 economic decision-making 372—3 education 360 ethnic groups 357-8, 363 division of labour 376—7 immigration 370—I independence 363 industrialisation 36I— 2, 374—5, 377 land reform 365—6 language 37I, 376, 377 L e a g u e of Veterans 366 peasants 359 Popular Front 375 religion 359—60 Representative Assembly of Russianspeaking Population 376 Russians 36I Soviet rule 369—75 state economic intervention 366—8 Yestonians 369—70, 373—4 Ethiopia I86 European Coal and Steel Community (ECSC) I90 E u r o p e a n E c o n o m i c A r e a (EEA) 85, 89, I08 E u r o p e a n E c o n o m i c C o m m u n i t y (EEC) II9—22, I67, I7I, I90, 243 European Free Trade Association (EFTA) II9, 243 E u r o p e a n M o n e t a r y A g r e e m e n t II9 E u r o p e a n Organisation of E c o n o m i c C o ­ operation ( E O E C ) II9 E u r o p e a n Payments U n i o n II9, 243 E u r o p e a n U n i o n 53, I08, 229, 243 Ireland I0, I2, 28—9 Portugal I22—3 Single A c t I92 —3 Fanno, M . I77 Federal Republic of G e r m a n y (FRG) see Germany

427

Feher, I. 300 Ferdinand V I I I53 Figuerola, L. I29, I3I Finland 7, I3, 364 Association of Finnish Industry (AFI) 393 Central Association of Finnish W o o d w o r k i n g Industries ( C A F W I ) 393 civil war 388—9, 392—3 consequences of Russian connection 397—9 First World War 387—8 Flying Trade C o m m i s s i o n 396 food shortage 398 foreign trade 382—403 (I890—I9I3) 384—7 continuity and discontinuity 397 policy 39I—7 post-First World W a r 389—9I protection 395 independence 382, 383, 388, 39I —2 language 382 Licence Bureau 394 migration 386—7 N e w E c o n o m i c Plan 399 Tarto peace treaty 389 Trade A g r e e m e n t C o m m i s s i o n 396 Trade and Industry C o m m i s s i o n (TIC) 393—4 wood-working industry 390—I Fischer, H . 303 F 6 t i , J .

3

0

4

3

0

6

France 48—9, I29—30, I46, I76, I78, 238 S e c o n d World W a r I86 trade 395 wealth I80 Franco, G e n e r a l F. 3, I36—43, I46—7, I56—7, I70 Fritzsche, B . 3, 85—II0 Gaidar, Y. 4I3 G a l b r a i t h , J . K . 3I8 Garate Ojanguren, M . 4, I50—72 Gellner, E. I5, I6 G e r m a n D e m o c r a t i c Republic ( G D R ) see Germany G e r m a n R e i c h 9I , 93, 263, 264 G e r m a n y 2, 4, 6, 48—7I, I27, I46, I76, I79 (I945—7) 47—5I (I950—60) 52—4 (I96I—4) 54—6 (I964—7I) 56—7 (I972—82) 57—9 (I983—9) 59—63 (I990—7) 63—6 Agfa 50 Agfa Leverkusen (West) 53, 55 Agfa Wolfen (East) 53, 55

Index

428

G e r m a n y (cant.) Allied Control C o u n c i l 49 Berlin A g r e e m e n t 52, 54—5, 58 blockades 51—2 Braunkohlenwerke und Brikettfabriken A G Christian D e m o c r a t s 64 Christlich demokratische U n i o n ( C D U ) 58, 63, 6_7 Christlich soziale U n i o n (CSU) 67 currency reform 51 First World W a r 183 Frankfurt A g r e e m e n t 52 Free D e m o c r a t s 58—9, 64 G D P 242 G D R debt 60—1 G e r m a n question 48, 66—7 Greens 64 I G Farben C o r p o r a t i o n 50 Ilse B e r g b a u - A G 76 intra-zone trade 50, 52—4, 56—7 Jesup-Malik A g r e e m e n t 52 K o m b i n a t e 64 Kompensationsgeschafte 61 K u n h e i m & C o . 76 Nazis 136, 238 O R W O Wolfen 55, 64—5 Party of D e m o c r a t i c Socialism (PDS) 63 Salamander 61 S e c o n d World W a r 186 Social D e m o c r a t s 58 —9 , 64 Sozialistische Einheitspartei Deutschlands (SED) 4 8 ^ , 56, 61, 63 Sozialdemokratische Partei Deutschlands (SPD) 63 special relationship 66 'Storfreimachung' 55—6 T h i r d Reich 94 trade 130, 132, 181—2, 386—8, 391, 395 unification 48, 63—6, 67, 203 Volkswagen 61 Wall comes down 61 wealth 180 West G e r m a n Constitution 58 Zeiss 50—1, 64—5 Zeiss East 53, 55, 56 Zeiss West 53, 55, 56 see also Lusatia; Lusatian Sorbs Gershenkron, A . 175, 178 Gladstone, W. 19 Gorbachev, M . 373, 375 G r e e c e 4, 186, 196—227 19th century 197—294 ( i 9 0 0 — 3 9 )

2

0

4

—

6

i agriculture 199—201, 205, 208—10 A m e r i c a n intervention 2i7—20

carpet production 2i4—i5 civil service 2i4, 2i8 civil strife 208, 2i6, 2i7 defeat by Turkey i96, 207 Eastern Question 204 emigration 205, 207 Greeks abroad i99, 205 Hellenic cause 206 industrialisation 209—i0, 2i6—i7 infrastructure 208, 2i0 International Finance C o m m i s s i o n 203 Jews 2i3—i4 land reform 208 Liberal Party 207 M a c e d o n i a 206, 208, 2ii —i2, 2i9 M a c e d o n i a n Question i97 military dictatorship 2i9 mining 202 minorities i97—8 National Bank 200, 202, 206, 208, 2ii , 2i4 national consolidation i96, i97 National Liberation Front ( E A M ) 2i6 National Question 220 Refugee Settlement C o m m i s s i o n ( R S C ) 212 refugees 207, 2ii—i4 saturation principle 2i5 S e c o n d World W a r 2i7 territorial expansion 201, 204—5, 210, 219 trade 2i5 urban settlement 2i2—i3 Greenfield, L. i i , 14, 15, 16, 17, 19, 20 Griffith, A . 19, 22—3, 24 Guinea-Bissau i i 5 Habsburg Empire 229—3i , 267 industrialisation 230 internal rivalry 230—i V i e n n a 23i Hadjikyriakos, A . 211 Hechtner, M . i5 Heidrich, O . 8i Heineman, D . i43—4 Helsinki A g r e e m e n t 58 H e n r y I V i52 Hepburn, A . C . 26 H e r d e r , J . G . 359, 360 Hertz, F. 236 Hitler, A . 94, 234, 239, 240, 259 Hjerppe, R. 7, 382—403 Hlinka, A . 284—6 H o b s b a w m , E. J. 9, 29, 234 H o d z a , M . 279, 281 Holec, R . 277—94 Honecker, E. 59, 60, 67

Index Houpt, S. 3, 127-47 Hroch, M . 14, 20, 82, 360, 383 Hrusovsky, I. 279 n g a y 4. 5 1 5 Credit B a n k 299 cross-border business connections 299 degree of assimilation 303—7 education 301—2 emigrants 299 ethnic minorities and economic change 296-9 shrinking 301—2 Industry D e v e l o p m e n t L a w s 298 m i x e d marriages 303 national language 301—2 population movements 302-3 R o m a n i a n A l b i n a 299 R o z s a h e g y Credit B a n k 299 settlement structure 303 Tatra B a n k 299 Victoria 299 Zivnostenska banka 299 Hutchinson, J. 17, 19 H u

r

- 6 ,

2 7 ,

2

9

-

3

0

9

International Monetary Fund (IMF) 60, 146, 376 Ireland 2, 9-29 to )

22-32

2

4

-

6

( l 9 3 2 - 5 8

2

6

-

8

) agriculture 2 2 - 3 , 26 capital deficiency 20-1 civil war 23 C o a l - C a t t l e Pacts 27 costs of nationalism 1 1 - 1 3 C u m a n n na n G a e l h e a l 2 5 - 6 C u r r e n c y A c t 24 C u s t o m s Duties A c t 25 d e m a n d for self-determination 13 emigration 27 in the E U 2 8 ^ falling labour force 19 Fenianism 20 Fianna Fail 12, 25, 26 G a e l i c L e a g u e 22 G r e a t Famine 18 historical wrongs 1 3 - 1 4 interest in economic theory 20-1 L a n d Purchase A c t 24 language 16 planned capitalism 28 relationship with Britain 9, 12, 14-15, 17, 23, 25-7 religion 13-14, 16-17, 18 Restrictive Practices A c t 27 Sinn Fein 22-3 Tariff C o m m i s s i o n 24 T h i r d World 10

429

I t a l y

3 ,

4. 1

1

2 7 ,

1

3

0

1

3 6 ,

1

4 6 ,

1

6 5 ,

1

7

3

-

9

5

,

238 A d u a defeat 173 agriculture 174, 187 A l f a - R o m e o 191 Ansaldo 187 Associazione Nazionalista Italiana 179 autarky 189 balance of payments 175-6 B a n c a C o m m e r c i a l e 174, 188, 189 B a n c a d'Italia 174, 188 B a n c a Italiana di Sconto 183, 187 B a n c a N a z i o n a l e di Lavoro 189 B a n c o di N a p o l i 174, 189 B a n c o di R o m a 174, 189 B a n c o di Sicilia 174, 189 banking system 178, 188-9 colonial expansion 176-7, 186 Credito Italiano 174, 188, 189 emigration 174, 177, 181, 188 fascists 136, 184-5, 193 First World War 183-4 II Carroccio 179 II Tricolore 179 I L V A 187 industrialisation 173-5, 177-8 Istituto Mobiliare Italiano (IMI) 188 Istituto per la Ricostruzione Industriale (IRI) 188-90 Istituto S a n Paolo di Torino 189 La Grande Italia 179 LLIdea Nazionale 179 Marzocco 176 M o n t e dei Paschi di Siena 189 Most Serene Republic of Venice 193 N a t i o n a l Electricity B o a r d ( E N E L ) 1

9

1

-

2

National H y d r o c a r b o n C o r p o r a t i o n (ENI) 1

9

1

-

2

National Insurance Institute (INA) 180 Nationalist Congress 182 Nationalist Party 181 protectionism 182 public finance 175 recession 187-80 Regno 176 Rivista delle Societa Commerciali 181 S e c o n d World W a r 186, 190 service sector 174 socialists 184 Societa Bancaria Italiana 178, 183 taxation 193 trade 176-7, 179 trade unions 185-6 U N sanctions 188 unification 203

Index

43° Jalbrzykowski, R . 346 Johnson, D . 25 K a p i t

, J .

5

an 7 Karimov, I. 421 Katus, L. 298 Kedourie, E. 11 Kennedy, L. 10-11, 13, 29 Khrushchev, N . 108, 372, 410 Kiesinger, G. 57 K o c h , W. 254 K o h l , H . 61, 67 Kolettes, I. 201 K o l l , A . M . 7, 357-81 Konev, V 418 K o r e a n War 53 K o r o t c h e n y a , I. 417 Kosovo 6 K r a u s , K . 236, 242 Krofta, K . 248 KubU, E. 2, 72-84

Makowski, E. 339 M a r c h , J. 144-5 Markovice, J. 278-9 Masaryk, T. G. 248 Matis, H . 1-7, 229-47 Matteotti,J. 185 Meinl, J. 236 Menelik, R . 173 Meszaros, A . 300, 304 Metaxas, I. 216 Mihailovic, K . 324, 325 Mikulsky, D . V 407, 416 M i t t a g G. 61 M o r a v i a 234, 264, 286, 288, 289 M o r o c c o 131 M o z a m b i q u e 115 M u k a , A . 77 Mussolini 94, 180, 185, 186-8, 190, 239 M y r d a l , G. 107 North, D . C . 383, 394, 396-7 N o r t h Atlantic Treaty Organisation ( N A T O )

L a m b e r g , J.-A. 7, 382-403 Lambrecht, H . 58 L a n d a u , Z . 345 Langhammer, R . 415 Latvia 419-20 L e a g u e of Nations 93, 206, 211, 212, 237 L e e , J . J . 28 Lemass, S. 9, 10, 19, 27, 28 L e o p o l d III of Belgium 40 Levi, M . 15 Libya 180 Linz, J. 366 List, F. 22, 181 Lithuania 419-20 Lorenc-Zalesky, J. 72 Lubin, N . 410 Luecke, M . 415 Lusatia agricultrual reform 7 3 - 4 brown coal industry 7 6 - 7 industrialisation 7 4 - 6 Lusatian Sorbs 7 2 - 8 4 E c o n o m i c Association 81 isolation 72 lack of schooling 75 language territory 77 migration 73 Sorb National C o m m i t t e e 78-81 Sorb People's B a n k 81 urban population 78 L u x e m b o u r g 242 M a c e d o n i a 310

1 1 4 - 1 5

N o r t h e r n Ireland 9, 23, 25, 28 N o r w a y 13 O ' D a y , A . 2, 9-29 O E E C 242, 243 Organisation of E c o n o m i c C o - o p e r a t i o n and D e v e l o p m e n t ( O E C D ) 27, 146, 165, 242, 2 4 3 ,

9

^ ^ Otto of G r e e c e 201 O t t o m a n Empire 196, 197, 203, 204 Palacky,F. 248 Parnell 21, 24 Pata, J. 79 Patek,J. 1-7, 248-60 Paul V I , Pope 243 Pearson, F. B . 143 Pekare,J. 248 Per6n,J. 138 Petschek, I. 76 Philip II 152 Philip III 152 Philip I V 152 Philip V 152-3 Philippines 131 Pihkala, E. 383 Pilat, R . 279 Pitterman,J. 81 Plunkett, Sir H o r a c e 22, 24 Pogany, A . 5, 295-309 Poland 6-7, 58, 60, 127, 338-56 B a n k Z w i a z k u Sp6-ek Z a r o b k o w y c h 339

Index co-operative movement 350, 353 Congress Poland 76, 340 -I e

t

G

J

h

e

e

w

n

r

i

c

m

s

g

a

3

r

n

3

8

o

s

-

9

u

p

3

3

,

s

8

3

3

-

9

3 4 0 ,

8

-

9

3 4 0

3 4 I ,

3

4

2

-

,

3 4

2

,

3

3

4

9

-

5

0

3

1

Tsentrolit 4i8 see also Soviet U n i o n Russian Empire 382, 385, 398

3 4 3

3 5 I -

4

2 ,

3

5

1

3

5

3

land reform 346, 349 language 341-2 peasants 345-7, 35I regional differences 338-41 Republic 343 S e c o n d World W a r 354 Silesia 339-40 social structure 34I - 2 , 343-5 Polanyi, I. 298 Pospisil, V 281 Portugal 3, III-23, I30 African adventure I I I , 114-15 British alliance I I I , 113-14, 119 colonialism II6-I8, II9 creation of 112 European integration I I I , I I 8 - 2 2 h u m a n capital 118 m o d e r n economic growth I I I , 115-18, i i 8 - i 9 , i20 - 2 protectionism i i 6 Spanish threat i i i Preiss,J. 281 Primo de Rivera, M . 3, 134-5, I37, I47 Prussia 6 R a m e t , S. P. 324 Rasin, A . 279 Rassadnev, A . V 417 R a u n , T. 361 R e d m o n d , J. i3, i5, 29 Renner, K . 236 Ribicic, C . 331 R o c c o , A . i80-2, i 8 5 - 6 Roesler, J. 2, 48-7i R o m a n i a 60, 2i3 Roszkowski, W. 346-7 Rothschild, J. 422 Royal Dutch-Shell 135 Rumpf, E. 26 Russia 6, 7, i30, i36, 404-24 Daugavpils C h e m i c a l Fibre Works 417 Electrical M e a s u r i n g Instruments Works 4i8 G A Z 418 G a z p r o m 418-19 M a i k o p Machine-building Works 4i8 M o s c o w Tyre Works 4i7 M u r o m 4i8 Norilsk nikel 418 trade with Finland 384-6, 387-8 Trubtrans 4i8

Schalck-Golodkowsky, A . 60 Schmidt, H . 59 Schmitz, R. 240 Schuschnigg, Chancellor 239, 240 Schybergson, P. 383 Seipel, I. 236 - 7 Serbia i97, 204 see also Yugoslavia Serlachius, G. 393 Shaw, G. B . i6 Sicherl, P. 322-3 Sindicato Hispano-Ingles 161 Sitoryan, S. A . 4i7 Slovakia 5, 277-94 autonomy 286 National Uprising 287 wish for power 285 see also Czechoslovakia Slovenia 6, 3i0, 3 i 4 - i 5 see also Yugoslavia Smirnov, G. L. 411 Solitander, A . 393 Somalia i76 Soviet U n i o n 6, 7, 48, 49-50, 58, 404-23 break-up 329, 404, 4i3-22 capacity utilisation 4 i 4 C o m m u n i s t Party of the Soviet U n i o n ( C P S U ) 372 currency 4i3 Daugavpils C h e m i c a l Fibre Works 409, 4i2, 4i7 enterprises all-Union subordinated 404-i3 autarky 406, 4i8 stability 4 0 8 - i 0 foreign trade 4i3 industrial relocation 405-8 internal migration 405-8, 4 i 4 - i 7 K a r a g a n d a C o a l Basin 408 Russian settlers in the republics 4 0 9 - i 3 see also Russia Spaak, P.-H. i44 Spain 3-4, i3, i4, i22, i27-47, 395 i973 crisis i 6 5 - 7 i978 constitution i57 agriculture i 3 6 - 7 Altos Hornos i 4 i - 2 , i60, i63, i67 Astilleros del N e r v i o n 130 B a n c o de Credito Industrial (BCI) i34, i35 B a n c o de Credito L o c a l i35 B a n c o Exterior de Espana 135

Index

432

Spain (cant.) B a n c o Hipotecario 135 Bank of Spain 135, 145 banking laws 142—3, 146 B a r c e l o n a T r a c t i o n (La C a n a d i e n s e ) 143—4 Bosch-Siemens 168 C a d i z Constitution 153 Carlist wars 153—6 C a t a l a n 128 C o m m i s s i o n for the Protection of National Production 132—3 C o m p a n i a Arrendataria del M o n o p o l i o de Petroleos S.A. ( C A M P S A ) 135 defence 130—1, 133 E c o n o m i c C o n c e r t 155, 157, 158, 159, 163, 166—7, 169—71 Electrolux 168 E N C A S O 140 E N D E S A 141 Ensidesa 140—1 Fagor168 First World W a r 159 Fomento del Trabajo N a c i o n a l 131 Foreign C u r r e n c y Institute (IEME) 143 Fuerzas Electricas de Cataluna, Sociedad A n o n i m a ( F E C S A ) 144 growth 146 G u e r n i c a statute 157 Hunosa 141—2 I B E R I A 140 industrial policy 132—6, 138—42 Instituto N a c i o n a l de Industria (INI) 140—2, 1 Iron and Steel Syndicate 131 Liga N a c i o n a l de Productores 131 National C o a l M i n e Association 131 nationalisation of foreign c o m p a n i e s 6 3

1 4 3 — 5

nationalism origins 128—9 price fixing 137—8 protectionism 132, 158, 159, 163 consolidated 131—2 origins 129—30 R a i l w a y L a w 129 regional nationalism 128 R i o T i n t o 134, 144—5 S E A T 140 Servicio N a c i o n a l del T r o g o (SNT) 136—7, 146 Sociedad Espanola de Construccion N a v a l S O F I N A 144 Spanish Maritime L e a g u e 131 Tariff L a w 129, 131 Tharsis 134

threat to Portugal 111 Whirlpool 168 see also Basque country Spanish Civil W a r 156, 162—3, 70 Stalin, J. 240, 370, 372, 407 Strauss, F.-J. 60 Suanzes, J. A . 138, 140, 143—4, 46 Sweden 130, 242, 388, 391, 399 Switzerland 3, 85—110, 130 Basle 99, 103, 105—6 Brown, Boveri & C o . 98 canton autonomy 88—9 canton incomes 102—3, 4 Congress of V i e n n a 87 core versus periphery model 107 cross-regional social relations 89—90 disintegration 85—6 dyes and pharmaceuticals 98—9 economic development 95—105 electrical industries 98 Federal Constitution (1848) 87—8 Geistige Landesverteidigung 94 general strike 93 G e n e v a 85, 102—3, 5 , 107—8 G e r m a n enterprise 91—2 Gotthard A g r e e m e n t 92 industrialisation 90 languages 88, 90, 94 machine-building industry 98 Maschinenfabrik Oerlikon 98 occupational structures 95 —9 referenda 89 resident foreigners 92 support for b a c k w a r d regions 105—6 textiles 99 watch- and clock-making 97—8, 100 Z u r i c h 85, 98, 103, 105—8 Szarka, L. 302 T

T

m

m

Teichova, A . 1—7 Telo, A . 118 Tomaszewski, J. 6, 338—56 Torre G o m e z , H . 118 Tortella, G. 3, 127—47 Trikoupis, H . 202—3, 208 Turkey 176, 206, 213, 389 defeat G r e e c e 196, 207 Tvarozek, T. 281, 288 Udrzal, F. 286 Ukraine 348—9, 389 U n i o n B a n k of Spain and E n g l a n d 161 U n i t e d Nations 58, 108, 188 U n i t e d States 35, 48, 49, 114, 129, 136, 174, 176, 178, 181, 207, 216, 238

Index aid 217 H u n g a r i a n migrants 299 inflation 165 Marshall aid 119, 243, 244 Texas G u l f Sulphur 145 trade 391 Uzbekistan 421—2 Valerio, N . 3, 111—23 Vattula, K . 385—6 Venizelos, E. 204, 207 Versailles Treaty 389 V i e n n a Congress (1815) 340 Viljanen, V M . 393 V i n c e n z , S. 342 Volsky, A . 417 von Hofmannsthal, H . 239 von Koerber, E. 229 Walden, R. 393 Waldheim, K . 241 Weber, M . 107 Whittaker, T. K . 12 Wildgans, A . 239 William I of Belgium 34 Wilson, President 79 Winkler, H . A . 295 Winter,E.K.240 W o o d w a r d , S. 326 World Bank 60 Yeltsin, B . 375 Yudanov, A . Y 7, 404—24 Yugoslavia 4, 6, 310—37 1929 Constitution 318 1963 Constitution 327 1974 Constitution 328—9

433 A History of the Nations of Yugoslavia 313 Anti-Fascist Liberation M o v e m e n t of Yugoslavia (AVNOJ) 317 Ban's C o u n t r y C r o a t i a 317—18 break-up 310 reasons for 313—14 run up to 329—33 civil war 317 C o m m u n i s t Party of Yugoslavia ( C P Y ) 317 constitutional amendments 331 convergence 319—22 Corfu Declaration 316 Croatian heritage 315 development concepts 325—6 economic failure 330—1 foreign debt 330, 334 K i n g d o m of 317—26 national structure 311 Nis Declaration 315—16 regional disparities 310, 318—23 regional time distance 322—3, 334 republics' economic role 327 S e c o n d World W a r 317, 318, 333 Serb—Montenegran federal proposal 332—3 Serbian heritage 314 Serbian question 314, 315—16 Slovenian heritage 314—15 Slovenian—Croat confederation proposal i 3 3

— 2

Socialist Federal Republic of, (SFRY) 328 state organisation 313 state system 326—7 taxation 323—4 Yugoslav C l u b 33 316 Zessner-Spitzenberg, H . K . 240 Zwahr, H . 72