The Secret of the Soviet Industrial Miracle

by Mr. San Mao(Wechat account: Xun Ji Xiao Jiang), rewritten in English by Mr. Y

Speaking of 20th century history, the rise and fall of the Soviet Union is a very important part of it. Such a red empire rose in a very short period and became a superpower due to various factors. Such a journey was like a dream.

Even now, many people still have illusions about the Soviet Union, thinking that no matter how bad it was, at least it did some things right, allowing a poor agricultural country to have heavy industry in a very short time. Some people say that the “two five-year plans” surpassed the three-hundred-year development of Britain and France, which fully demonstrated the superiority of the Soviet system.

Figure 1. The Soviet Union leapt from a backward agricultural country to a world industrial power in a decade, but ultimately disappeared in modern history. Its rise was rapid, and its fall was sudden; what exactly caused all this?

At first glance, this seems to be what happened in the history, but if you look closely, you will find a different inside story. Anyone with a little common sense knows that agriculture may be self-taught, the threshold for industrialization is extremely high. Even if the Soviet Union has ten Stalins, it will be useless without technology, talents and funds.

It was the capitalists whom the Soviet Union identified as enemies, especially big American businessmen, who helped the Soviet Union break through those obstacles.

So why did the Soviet Union ask its “class enemies” to build industries for it? What happened to these industrialists later? Let’s talk about this topic today.

When the Soviet Union was established, the country had been devastated by wars, and the Soviet Union did not admit any foreign debt owed by the Tsarist government to the West. Its International credibility was bankrupt, and the Soviet Union was clearly hostile to the West in ideology, therefore it was blockaded by the West, and its economy was even worse.

By 1928, when the Soviet Union began to implement its first five-year plan, the Soviet Union’s entire economic scale was not only incomparable to that of the US, but even far inferior to that of Germany, which suffered war reparations. For the top leaders of the Communist Party of the Soviet Union at that time, the only way to break the blockade and strengthen the regime was to devote all their efforts to developing industry, especially heavy industry which was crucial to national defense. Therefore, heavy industry was spontaneously placed in the most important position. Putting aside the money and manpower for the development of heavy industry, as which Soviets could always solve with methods beyond the imagination of normal people, the most critical issue was who should be the teacher to break through the threshold of heavy industry.

They approached the Germans first.

Figure 2. The picture shows the signing scene of the Soviet-German Treaty of Rapallo

As the defeated side in the World war I, Germany was also facing sanctions from Britain, France and other countries under the Treaty of Versailles, so it had a strong need to join forces with the Soviet Union. As early as 1922, the two countries signed the Treaty of Rapallo. After the treaty, Germany did provide a lot of support to the Soviet Union in the military field, but the progress in the military field alone was far from enough for the Soviet Union.

Moreover, soon after, the relationship between Germany and Britain and France tended to ease, and the Soviet Union was estranged. At this time, the Soviet Union still had to find another capitalist country.

Figure 3. Product poster for Germany's "Best Shoe Polish Stick" in the Soviet Union

To the surprise of many people, what the Soviet Union found was the US, the most powerful capitalist country at that time. As early as when Lenin implemented the New Economic Policy, the Soviet Union established the All-Russian Co Operative Society (ARCOS), secretly trading in Britain under the name of this company.

In 1924, the ARCOS successfully persuaded the pro-Soviet capitalist Armand Hammer of the US to establish the Amtorg (short for Amerikanskaya Torgovlya) Trading Corporation. Hammer transported food and medicine to the Bolsheviks during the Russian Civil War, which helped the Soviet a lot. Therefore, Lenin affectionately called him “Comrade Hammer”, completely regarding this capitalist as one of his own friend.

Figure 4. The picture shows Armand Hammer (May 21, 1898 - December 10, 1990), an executive of Western Oil Company, entrepreneur and art collector. Born in New York, he was of Jewish descent. His father, Julius Hammer, was one of the founders of the Communist Party of the US.

After the establishment of the Amtorg Trading Company, the number of employees gradually increased, and the branches were spread across major cities in the US. Hammer also made full use of his connections in the American business community to lobby some industrial and commercial capital giants to contribute to the Soviet industrialization.

For example, Ford, the American automobile tycoon, was originally a staunch anti-Bolshevik; even Ford could not resist Hammer's eloquence, so he signed an agreement with the Soviet Union in May 1929, agreeing to sell cars worth 30 million US dollars to the Soviet Union, and was willing to provide technology to build the world's largest automobile factory in Nizhny Novgorod, the Soviet Union. Ford, who was so generous, was like a living Buddha in the eyes of the Bolsheviks. Stalin also praised him and said that Ford was "one of the greatest industrialists in the world."

Figure 5. The picture shows the photo Lenin gave to Hammer in 1921, with Lenin's handwritten inscription on it.

Shortly after Ford prepared to build a factory in the Soviet Union, the Great Depression broke out amid the stock market crash on Wall Street. The severity, duration and scope of this depression were rare in human history. In the US, many technicians could not find jobs, and many factories had no orders, even survival became a problem.

At this time, the Soviet Union was in urgent need of various technologies and talents. Since there was demand on one side and supply on the other, the two sides hit it off. Ford's automobile factories in the Soviet Union were expanding day by day, and all the old factories in Moscow and Yarovslar were upgraded with the latest machine tools.

Figure 6. The picture shows the Stalin Tractor Factory in its1930s. The Gorky Automobile Factory, the Stalingrad Tractor Factory, the Chelyabinsk Tractor Factory, and the Kharkov Tractor Factory were all designed and manufactured by American companies.

In addition to automobiles, the most important things in developing heavy industry are steel and electricity. During this period, the Soviet Union built three large steel mills, all of which were built using American drawings and guided by American technicians. At the same time, the Soviet Union's largest Dnieper River Hydropower Station was built in 1933 under the guidance of American experts.

With steel, electricity and automobiles, the Soviet Union's heavy industry thrived. Some factories that became renowned later, such as the tractor factories in Stalingrad and Kharkov, and the Ural Locomotive and Rolling Stock Plant, were also built with equipment shipped by Americans, under the guidance of American engineers.

In addition to heavy industry, the Soviet Union was also extremely dependent on the West in agriculture and some light industries. Chase Bank of the United States provided funds to the Soviet Union to allow them to introduce high-quality cotton seeds.

The sunshine in the Caucasus was suitable for growing cotton, but there was a lack of necessary irrigation facilities. American engineers who had served as consultants for the Panama Canal helped design and build a series of irrigation canals.

In this way, the Soviet Union quickly completed industrialization in the first five-year plan in the most unexpected way. In 1931, half of the machine and equipment produced in the US were sold to the Soviet Union; and of the 104 large projects started in 1930 in the Soviet Union, 84 were signed with the US, Germany and other west countries.

In the US at that time, not only did corporate capitalists and technical equipment flow to the Soviet Union, but even ordinary Americans were yearning for this country because of the rapid development and its propaganda.

Figure 7. Fred Koch, who mastered the thermal cracking technology. He helped the Soviet Union build 15 large modern oil refineries in a few years. Later, Fred went to the Third Reich of Germany and built the third largest oil refinery in Hamburg for Nazi Germany.

During the Great Depression, the "Amtorg Trade Company" received an average of 350 requests per day to emigrate to the Soviet Union or even to join Soviet citizenship. At one point, the Soviet Union needed 6,000 skilled workers to build a large factory but received 100,000 job applications. In principle, the Soviet Union welcomed skilled workers. In this way, many Americans settled in the Soviet Union for a long time and even obtained Soviet citizenship.

For large-scale industrial construction, after crossing the technological threshold, the Soviet Union also tried every possible way to solve the problem of capital and manpower shortage.

For example, the Soviet Union conscripted prisoners from labor camps and mobilized ordinary people to do voluntary labor, etc. The Soviet Union also tried every means to plunder gold from the people and even sold cultural relics and artworks from the Tsarist era, thereby raising a lot of funds.

In this way, the Soviet Union's first five-year plan progressed rapidly, and the construction of the country's heavy industry was completed in a very short time. However, the Soviet Union described this as a miracle created by the advantages of the communist system in its external propaganda.

When these industrial facilities were basically completed, Stalin's position in the country was much more stable than before, and the Soviet Union began to be less welcoming to Western capital and skilled workers.

Stalin forcibly nationalized all the Western companies, such as Ford became the GAZ Automobile Factory. The currency paid by the Soviet Union to Western capitalists was the ruble, which could not be freely exchanged for gold, US dollars or pounds. The main idea was that the money earned in the Soviet Union had to be used in the Soviet Union, and no one could take a penny home.

Figure 8. The picture shows the T-34 produced by the Ural Factory, which later made great contributions to the Soviet Union's victory in World War II.

Faced with such treatment, "Comrade" Hammer certainly protested; Stalin responded that you could use rubles to buy Russian arts and cultural relics at high prices and take them away, which is considered to leave a loophole for capital flee. However, celebrities like Comrade Hammer were still a minority after all. Westerners who were lured to settle in the Soviet Union for a long time during the Great Depression and even joined the Soviet nationality were in bad lucks.

Leaving the Soviet Union? forget it! Soon after, the Soviet Union began the Great Purge. At this time, some factories built by the West had been experiencing production regression because no new capital and no new technology coming in.

The Soviet officials who carried out the Great Purge in the factory really believed that all this was caused by those engineers who came from west countries; these engineers wanted to destroy the Soviet Union's socialist system. To solve the production difficulties, the Soviet officials arrested a group of western background engineers and killed them. If that didn't work, they arrested another group and killed them again. In this way, many workers and engineers who had good intentions towards the Soviet Union eventually became ghosts under the knife of the Soviet Great Purge.

Of course, in the eyes of Stalin and his communism comrades, this was just the price they had to pay for "building a paradise on earth."

At this time, the Soviet Union had stood completely opposite the West. Even though the Soviet Union and the West fought together against the German Nazis in World War II, and the West did give the Soviet Union a lot of aid, the trust between the two sides was so fragile that it was almost non-existent.

So not long after the end of World War II, the Iron Curtain fell, and the Cold War began; at this point it became very difficult for the Soviet Union to obtain capital and technology from the West.

For the West, ironically it was their own businessmen and engineers who had cultivated their biggest enemies in the 20th century bit by bit. And for the Soviet Union, it was also because of ideological reasons that it chose to fight the West to the end, which also doomed its path to become narrower and narrower.

Figure 9. The picture shows the bronze statue of Hammer and Xiaoping Deng shaking hands in front of the Shuozhou Gymnasium in Shanxi Province, China. The two old friends jointly gave birth to the Pingshuo Antaibao open-pit coal mine.

Of course, the most tragic and lamentable in this historical process were ordinary people. Celebrities like "Comrade" Hammer had a hundred ways to get out of the Soviet Union unscathed. As for ordinary people, remember "Do not enter a dangerous place, do not live in a chaotic country, no matter how fanciful it looks". This is indeed an old saying that can save your life.

If you want to know more about how American capital and engineers helped the Soviet Union build their industrial system, please read this document,

How America Helped Build the Soviet Machine (Dec 88,Vol:39 Issue:8)

Source & Copyright Notice

This article is translated from the original Chinese article "苏联工业化奇迹：竟然全靠美西方资本?", first published at https://mp.weixin.qq.com/s/gk6tuIkDSiVoKVYLuOZiiQ.

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