Trouble in the Satellites

From Berlin to Sofia, Russia's satellites were in the grip of a new crisis last week as the political upheaval of past months took its toll on their carefully coordinated economies. With industrial production in Hungary cut 75% by weeks of revolt and strikes, the Communist Government announced mass dismissals of industrial workers and government employees. East Germany's Red leaders arrived in Moscow to ask Russian aid for the faltering East German economy. In Warsaw the Polish government set up a 25-man "brain trust" to grapple with Poland's serious economic ills. All three nations have announced intentions to cut back their five-year plans.

The satellites could blame their sorry economic plight directly on Russia, which conducts 1/5 of its foreign trade with Iron Curtain countries--mostly to its own advantage. Reversing the usual form of colonial exploitation, in which colonies are used as sources of raw materials, Russia feeds the satellites raw materials, takes the finished products they manufacture. Czechoslovakia, for example, did 5.5 billion crowns ($770,000,000) worth of trade with Russia in 1955, giving engineering products in return for metals, petroleum, rubber, timber.

Milk Your Neighbor. In its trade with the satellites, Russia has consistently milked its unhappy neighbors. It overvalues its ruble to set the prices of raw materials, undervalues the currencies of the satellite countries when setting the prices of their products. The upshot of the entire relationship is that satellite nations have been kept so weak economically that Hungary's revolt and Poland's new freedom disrupted the entire system.

The satellites were hit hardest where it hurts most: in coal production, the key to the whole area's economy. A drop in coal output forced Poland to close plants and trim rail schedules, and the Poles have sharply reduced coal exports to satellite neighbors to give priority to their own ailing economy. Because of the cutback in Polish coal, East Germany's vital metalworking industry has been seriously crippled. "The coal problem." said the party organ Neues Dentschland last month, "is a question of our entire people's economy." Industrial production may have to be curtailed in Czechoslovakia, which leans heavily on Polish coal. Battered Hungary's coal industry is operating at only 25% to 30% of normal. The satellites have been trying to get coal from Russia, but the Soviet coal industry itself fell short of quotas last year.

Strain on Russia. The slump in coal production is only the most glaring of the satellites' economic difficulties. The shattering of Hungary's economy has cut off scarce manufactured goods--buses, railway cars, consumer products--needed by the other satellites. Lack of Hungarian bauxite and processed aluminum is slowly forcing East Germany's young aircraft industry to a halt. Hungary may have to lay off more than 200,000 workers in the next few months, and unemployment is a major problem in Bulgaria. The breakdown of Hungary's vitally located railroad system has prevented the normal flow of Rumanian oil to Poland, forcing the Poles to ration oil and gas. And poor harvests in Rumania, Poland, Hungary and Bulgaria have cruelly pinched already inadequate food production; East Germany, which had hoped to end food rationing in 1957, has dropped the idea.

Economic disruption in the satellites has already placed such an added strain on Russia that it has cut back on its own five-year plan (TIME, Jan. 7). Worst of all, in the Russian view, the Soviet Bloc will be able to export fewer goods to areas of the world that it hopes to impress with its economic prowess. Of the $191.5 million in Red exports that went to Asia and Africa in 1955, more than 10% was supplied by the now shattered Hungarian economy. Measuring the stresses and strains. West Germany's Foreign Minister Heinrich von Brentano foresaw a great economic opportunity for the West, provided the NATO nations develop a new economic policy toward the satellites. Said he: "Our aim would be to attract those countries, especially Poland, into the economic orbit of NATO. To do that, Germany would be willing to make large capital investments. Close economic cooperation between Poland and Germany would open new political horizons, for being tied together in a common economic market would be a great push toward political unity. To our mind this is the only way to bring about a 'Greater Europe.' "

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