2. Socialism versus Capitalism: Industry

Concerning the Slovak industrial and construction development during socialism, again propaganda from abroad during the last 40 years of socialism has persuaded us that our nationalized and centrally planned socialist economy has not been as effective as the private free marked economy in the developed capitalist countries. That socialism, nationalized property, collective ownership, centrally planned economy, socialist ideology and communism are responsible for our underdevelopment in industrial and contractual production. That in order to develop our construction and industry, we need to get rid of socialism, privatize industry and follow the free market economy.


The facts and figures:


Until 1948, Slovakia was mostly an agricultural country and its industry was not well developed. During the capitalistic years up until 1945 industrial and construction production in Slovakia was in private hands. In 1948 communists came to power, nationalized the private property and started socialist centrally planned economy. After the transition of socialism to capitalism, in 1989, privatization of industry started and the centrally planned economy was replaced by the capitalist free market economy. At the beginning of 2004, the share of the private sector in the production of GDP in industry was 81%.


Construction in Slovakia remained at constant prices from 1948 until 2002, as shown in Figure 10. Production before 1948 was low (data not shown), it increased during socialism to 2041% in 1948-1989, and dramatically decreased after the transformation to capitalism. Construction production in 2004 decreased to 41% of the 1989 value, and in 2004 it was similar to production in Slovakia in 1970, i. e. the production was set back 34 years.

Of course, as I said before, respected scholars dealing with socialist-capitalist issues do not remember to stress or even mention this fact. They are still repeating the myths about inability of socialist economies to advance in construction in comparison to capitalist economies.


One of the results of construction production is the number of dwellings completed in Slovakia. It is shown in Figure 11. The number of completed dwellings increased during socialism and decreased during capitalism after 1989. The number of dwellings completed per year in 2004 decreased to 38% of the level it was at in 1989. During socialism, this number was reached in 1950. It means that in this parameter we returned 54 years back. With the decreasing number of completed dwellings, price of flats and rentals increased several times. 


The industrial production in Slovakia from 1936 until 2004 at constant prices is shown in the Figure 12. Production during capitalism until 1948 was very low, since Slovakia was mostly an agricultural country. Industrial production increased dramatically during socialism. From 1948 until 1989 it increased from 100% to 3286% and decreased after the transformation to capitalism after 1989 and later it increased again. Most of the industry was privatized and after that destroyed. The most profitable industry was privatized by foreign companies.


According to respected scholars, and nearly everybody talking with the media, capitalism is the best system to carry on business and enterprise, which leads to increased production and satisfies demands. It may be valid in the theoretical world, but it was not valid in the real experiment in Slovakia. For example, production of refrigerators, tractors, arms, wood and many other goods (Figure 13,14,15,16).


Why was industrial production increased during socialism after capitalism was removed in Slovakia in 1948, when according to respected scholars, people were not free to do business and enterprise. Why was industrial production decreased after introducing capitalism in Slovakia after 1989, when anybody can participate in business and started enterprise?

Of course, many foreign companies invested in Slovakia and started producing many goods there. Actually, we do not produce them; we are only giving our labor force to produce them. When foreign companies close factories in Slovakia, we can not continue production.

After 1989 most of the industry was privatized and many companies were purposely liquidated. The increase of the industry production after 1994 was mostly the result of increased foreign investment and the building of foreign industrial parks in Slovakia using our cheap labor. This reminds me of BBC TV news from ~May 2006: Automobile Firm Peguet decided to close its factory in England. The manager of Pegout explained that the cost of the Peguet automobile firm in Slovakia was only 10% of the cost to operate the English firm. A paradoxical relation of foreign investment and living standards in Slovakia is discussed in the next blog.


Growth of GDP in Slovakia from 1948 until 2005, at constant prices, is shown in Figure 17. The GDP during capitalism until 1948 was very low. The GDP increased dramatically during socialism, and it decreased after the transformation to capitalism after 1989 and later increased again. In 2005 the GDP production at constant prices was 136% of the value in 1989, which was equal to 100%. The growth of GDP for the last several years was also a result of growing services, which reach about 60% of the share of the GDP.

The share of the production of industry, construction and agriculture altogether in total GDP during socialism was high (68% in 1989), but it decreased to 33% after the transition to capitalism (Figure 18).


(From: Crimes of Democracy versus Crimes of Communism)




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