Iehc 2006 session 101

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IEHC 2006

SESSION 101

Cold War and Neutrality: East-West Economic Relations in Europe

1

Bohumír Brom – Eduard Kub

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The role of Czechoslovak trade with neutral countries in the period of escalating cold war.

The example of Switzerland and Sweden 1949 - 1953

Foreign trade as a means of division of labor in a modern, globalized world has

irreplaceable significance for every economy. This of course increases in particular for small

states with relatively advanced industry but a limited internal market, which is the case of the

Czech Republic, and the former Czechoslovakia. The stability of the Czechoslovak economy

always depended directly on the effectiveness and successfulness of foreign trade, since the

above-mentioned factors multiplied the reality of a limited raw material base for extensive

industry (Czechoslovakia controlled only a fuel base to a sufficient degree). Industry, which

became established during the Austria-Hungary period, was sized to the market of the more

than 50 million-strong Austria-Hungary monarchy. Small Czechoslovakia was forced to

export a substantial part of its production. Czechoslovakia traditionally used exports to pay

not only for imported goods, especially necessary raw materials, but also food and various

services (the so-called invisible trade, i.e. patents and licenses, import of capital, tourism,

transport etc.). Whereas the overall balance of services was always passive for

Czechoslovakia, a trade surplus became indispensable.

Czechoslovak foreign trade after the end of World War II followed on the tradition of

its pre-war development. The economy, which up to 1948 functioned as a market economy in

principle, naturally had to overcome the problems of the altered balance of power in Europe

and economic status of its traditional trade partners. The two biggest, Germany and Austria,

temporarily stepped down from their Central European economic positions and

Czechoslovakia was forced to look for a replacement. This it found among the European

neutral countries, namely Switzerland first of all, and then logically in relations with the

victorious world powers, the U.S., Great Britain and others. The share of capitalist countries

on Czechoslovak foreign trade in the first years after the war quickly rose, reaching nearly

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IEHC 2006

SESSION 101

Cold War and Neutrality: East-West Economic Relations in Europe

2

90% in 1947.

1

  Czechoslovak foreign trade run by national socialist ministers thereby got

itself into flagrant conflict with the foreign policy orientation of the country, which, as the

Košice Government Program of April 1945 declared, preferred the allied Soviet Union and

Slavic countries.

The takeover in February 1948, culminating the gradual communization of the country

and incorporating it definitively into the camp of the Stalinist Soviet Union, set new problems

in front of the Czechoslovak economy. The project of Stalinist industrialization expressed by

the law on the first five-year economic plan to develop the Czechoslovak economy in the

years 1949 - 1953,

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 approved back in October 1948, represented not only an economy

reconstructing the nation for the benefit of heavy industry, and especially machine-building,

to lay the foundation of the future industrialization of the other underdeveloped countries of

the Soviet bloc; it was also a major policy. This resided in a change of orientation of

international economic cooperation, namely away from market economies and towards the

Soviet Union and its satellites, forming after soviet model a centrally planned economy. What

should have been a tool to solidify cooperation was the Council of Mutual Economic

Assistance, in place in 1949 as a means of socialist integration. As was soon to be shown, it

was able to fulfill its coordination role only in very limited manner, the bulk of relations were

resolved through separate bilateral relations. This complicated economic–political process

combined with the big internal social changes took place under the conditions of the so-called

Cold War, which even crossed over into certain parts of the world in military confrontation.

The key conflict was the Korean War.

The conflict of ideologies and political strategies was also carried over necessarily into

the economic field. International disputes, stemming from the problems of eliminating the

consequences of World War II, nationalization, land reforms and, last but not least, the

problems of huge population transfers, were complemented by the reductions in aid from the

West during the post-war renewal of countries falling within the Soviet sphere of influence –

in the words of W. Churchill behind the “iron curtain” – expressed in the form of elimination

of loans, the Marshall plan and ultimately reductions in trade relations. There was talk at the

1

 After Economic Survey of Europe in 1948, Geneva 1949 shows Zden k Procházka following numbers: 1945 –

57 %, 1946 – 78 %, 1947 – 86%. Z. Procházka, Hospodá ská válka proti  eskoslovensku [Economic war against

Czechoslovakia], p. 2.

2

 Zákon  . 241 ze dne 27. 10. 1948 o prvním p tiletém hospodá ském plánu rozvoje  eskoslovenské republiky

[Act No. 241 from 27. 10. 1948 about the First Five Year Plan of Economic Development of  Czechoslovak

Republic], Sbírka zákon  a na ízení republiky  eskoslovenské [Collection of Law and Regulations of

Czechoslovak Republic], 1948, part 90.

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