The Political Economy ofBulgarian Communism1963 – 1989
Author: Martin Ivanov
Published by the Institute for Studies of the Recent Past, Open Society Institute and Ciela Publishers
Sofia 2008
This book is result of the extensive research of Martin Ivanov conducted as part of the Communism Research Project.
CONTENTS
List of Tables and Figures
Acknowledgements
List of Frequently Used Abbreviations
Introduction
Part I. Chronology of Changes
- Down the Abyss: Deficits of the Classical Stalinist Economy
- ‘Two steps ahead, one back’
- The First Wave: The New System of Management, 1961-1968
- Reforms in Retreat: The Substitutes to the change, 1968-1975
- The Second Wave: The New Economic Mechanism and the ‘Relaxation’ of Early 1980s, 1976-1983
- The Third Wave: Perestroika as a Second and Improved Edition of NEM and ‘The July Concept’, 1984-1989
Part II. Anatomy of Changes
- Planning
- Contract System.
- Self-Supporting Account and Profits
- Employment and Wages
- Self-governance and ‘Personal’ Property
- Price-Formation, Currency Coefficients and Convertibility of the Lev
- Financial and Bank Control
- Investment Policy
Part III. The Country of the ‘Socialist Prosperity’
Part IV. Revolution of the Proletariat vs. Revolution of the Technocracy
Part V. Sixteen Republic: Co-operation with the USSR as a Substitute to the Reforms
Conclusion
Bibliography
EXECUTIVE SUMMERY
The ever-greater tensions at macro level together with the slowing rate of economic growth were among the chief factors motivating the attempt in the 1960s to radically revise the communist model of development. For the party leadership it was becoming obvious that the classical command economy was drawing near the limits of its potential. In the years between 1963 and 1966 the Politburo experimented with a strategy, which was designed to ensure the switch from extensive to intensive growth. It was not long, however, before the Bulgarian Communist Party’s (BCP) enthusiasm for reforms melted away. By the end of the 1960s the first Bulgarian economic reform has been “supplemented” by a substitutes that seemed far more acceptable from an ideological point of view. The “unique cooperation” with the Soviet Union, the creation of giant economic units and the technological innovation were soon inserted into the reform blueprint. All the three policies were commonly employed in East Europe as a surrogate for reforms. As far as the interrelations with the USSR and the “scientific-technological revolution” were concerned, however, Bulgaria did its best to “out do” all the other communist states.
There would be strong reasons to expect that, having put immense part of its energy into nourishing a cordial relationship with Moscow and into the accomplishment of technological modernization, the BCP would manifest diminishing enthusiasm for reforms. Nevertheless, if we can trust the authoritative Western assessments, the Bulgarian blueprint was more liberal than the changes foreseen by other COMECON countries. In fact both in the 1960s and in the 1980s the Bulgarian reform package ranked immediately after Hungarian and Czech new economic mechanism.
Even though more liberal the reform package was far from what the economy actually needed to overcome the in-built deficits of the system. Due to its heavy ideological impediments Bulgarian communist leadership was not prepared to put in question the foundations of the Stalinist economy. Accumulated macro economic tensions were deciphered by Politburo as reparable defects, which could be “corrected” by perfecting the economic engine. At no instant were the reforms considered by the BCP elite as an alternative to the orthodox communist matrix. The aim was not to dismantle but to optimise the classical system.
For obvious reasons the Politburo did not, and could not, have the insight that the old model was irreparable. With the problem zones thus conceived (as temporary, reparable defects) the strategy chosen by BCP seemed to be reasonable and promising. The programme envisaged reparation of the rustiest economic mechanisms and the duplication of these corrections with several substitutes: the cooperation with the USSR, “scientific and technological revolution” and economic concentration. There was a real danger that those secondary lines of development might turn into leading ones. Nevertheless BCP managed to keep the engine of reforms going, even though at slow speed. The combination chosen by the regime was not just a promise. For some time in the 1960s, early 1970s and in the beginning of the 1980s it successfully got over the immediate problems (the debt crisis, the petrol shock) avoiding the switch to negative or even to zero growth.
A historical appreciation of the reform agenda requires that they be assessed against the authentic aims of the regime. Communist leadership considered economic changes solely in view of preserving its position of power. This, however, trapped the Politburo into an unenviable position: to reconcile two tasks incompatible by nature. The dilemma of reforms was how to decentralize economic processes without decentralizing Party’s control over them. Or, as the long-lived Bulgarian communist leader Todor Zhivkov frankly acknowledged: “We are trying to do so, as to preserve some of the power for us too and not to find ourselves out of the game.”
All the time the Party leadership felt as if it was carrying out a controlled experiment, in which its principle task was to keep its eye on what was happening in the test-tube. Given this aim, the preservation of political stability had to remain the primary task while the “perfection of economic mechanisms” was pursued, as far it was not contradicting the leadership’s effort to keep power. That is why the Politburo was inclined to choose the “remedies” from the traditional communist medicine-chest. This, indeed, meant that BCP was addressing the external symptoms and not the intrinsic causes of the economic deficits.
However rational within its fictitious world, the BCP’s strategy proved incapable or reviving the rusty economic system. Although more liberal then some other reorganization programmes of the COMECOM countries, Bulgarian reform did not dispose of the necessary instruments to diminish the macro economic tensions and to alleviate the inborn defects of the system.
The figure underlines the narrow temporal horizon that the applied economic strategy had. Since 1975 the rate of growth fell markedly (the black line on the diagram, showing the 5-years moving averages). In addition the economy became mired in external debt. During six (more then half of the period) of the years between 1977 and 1989 Bulgaria experienced a negative or zero growth. Moreover, as the time passed the crisis aggravated. From 3.6 per cent for the sixth five-year-period (1970-1975) in the next three five year periods it fell to 0.7, 0.58 and -0.86% respectively.
What was BCP’s reaction to the deteriorating results of its anti-crisis strategy? Since the mid-1970s the Politburo speeded up the technological modernization, undertook even closer rapprochement with the Soviet Union and only as last resort initiated a moderate reform programme. Neither the integration with Moscow nor the “scientific and technological revolution” was able to make amends for the lack of radical reform in the economy. The three decades of inconsistent economic experiments proved how unsusceptible to corrections the classical system was. The few pro-market implants have soon been rejected by the unreformed economic organism.
As the crisis deepened and the social and economic mechanisms were ever more visibly corroded, reforms became inevitable. Since the mid-1980s the BCP was already aware that, in order to keep the power, it had to undertake a more radical transformation of economy. This brought the third wave of reform to life. Despite of this sudden selfish interest of the communist elite in the accomplishment of the transition, ideological impediments remained. Even in those last years of the regime the armoured ideological strait jacket quieted any attempt for a more profound change. As a result even the most radical reforms were like a palliative diet rather then a surgery to cut out the economic tumours. Even with its most liberal reforms (the creation of joint-stock companies) the Party kept striving to correct and perfect the old classical model, and certainly not to dismantle it.
Even in its most radical edition (Edict No. 56) the Bulgarian reform programme was not able to throw off the burden of ideology. Changes, although extremely limited, have been treated as a temporary retreat. Hope lived on that the situation was, perhaps, going to “turn the other way round” and then, as in the years of the Soviet NEP, the gains of the “profiteers” would be confiscated by the state. However, the state had to preserve its control on the economy. Only the responsibility for overcoming economic deficiencies and the supply of commodities for the deficit market was to be decentralized.
Practiced for nearly three decades cosmetic optimisation proved to have no future. This demonstrates the ultimate insusceptibility to reforms of the communist economic system. Sooner or later, all changes run against the limits of admissibility imposed by the Marxist-Leninist matrix. This was the place, at the border between the market and the plan where the reform enthusiasm of “enlightened” party elites faded away.