THEBULGARIAN

ECONOMY
In theTWentleth
Century

J O H N R. L A M P E

V
CROOM HELM
London & Sydney
CROOM HELM SERIES ON THE CONTEMPORARY
ECONOMIC HISTORY OF EUROPE
Edited by Derek Aldcroft

The Economy of Yugoslavia

Fred Singleton and Bernard Carter

The Economic Development of the USSR

Roger Munting

The Norwegian Economy

Fritz Hodne

The Polish Economy in the Twentieth Century

Zbigniew Landau and Jerzy Tomaszewski

The Hungarian Economy in the Twentieth Century

Ivan T. Berend and György Ränki
© 1986 John R. Lampe
Croom Hehn Ltd, Provident House, Burrell Row,
Beckenham, Kent BR3 l A T
Croom Hehn Australia Pty Ltd, Suite 4, 6th Floor,
64-76 Kippax Street, Surry HiUs, NSW 2010, Australia

British Library Cataloguing in PubUcation Data

Lampe John R.
The Bulgarian economy in the twentieth century.—
(Croom Hehn series on the contemporary economic
history of Europe)
1. Bulgaria—Economic conditions— 1918 -1944
2. Bulgaria—Economic conditions—1944-
L Title
330.9497'702 HC403
ISBNO-7099-1644-2
CONTENTS

List of Tables and Maps

Preface
Editor's Introduction 1
Introduction 13
1. InitialGrowth,1878-1918 19
2. Recoveryinthel920s 49
3. Isolationinthel930s 78
4. TheSecondWorldWar 105
5. CommunistRevolution,1944-1947 121
6. The First Five-Year Plans 139
7. IndustryandAgriculturesincel960 156
8. Foreign Trade and Domestic Living Standards 177
9. Economic Reforms since 1960 199
Conclusion 223
Select Bibliography 231
Index 237

Л '
 LIST OF T A B L E S AND MAPS

1.1 Gross Social Product in 1911 25

1.2 RealExportspercapita,1886-1910 25
1.3 Distribution of Cultivated Land, 1897 and 1911 26
1.4 Ownership of Private Rural Land, 1897 and 1908 28
1.5 MainFinancialIndicators,1886-1911 33
1.6 Distribution of Bank Assets in 1911 33
1.7 Industrial Output, Capital and Firm Size in 1911 36
2.1 GrainProductionandConsumption,1921-30 53
2.2 Composition of Exports, 1907-30 53
2.3 Direction of Foreign Trade, 1906-30 54
2.4 Sources of Population Change, 1906-40 55
2.5 MainFinanciaIIndicators,1911-30 61
2.6 Loan Value by Bank Type, 1911 and 1928 67
2.7 StructureandGrowthofIndustry,1911-31 69
3.1 Indices of Crop Output, Area and Yield, 1926-38 85
3.2 Foreign Trade Balances, 1926-38 90
3.3 Direction of Foreign Trade, 1929-39 90
3.4 Growth of Net Industrial Output, 1921-37 96
3.5 Number and Size of Industrial Firms in 1937 96
4.1 IndicesofAgriculturalProduction,1939-44 111
4.2 Foreign Trade and Inflation Indices, 1939-44 115
4.3 Indices of Industrial Production, 1939-44 116
5.1 Foreign Trade Volume and Terms of Trade, 1944-50 129
5.2 Direction of Foreign Trade, 1938-50 129
6.1 Growth and Origin of National Product, 1939-80 144
6.2 Balance and Structure of Foreign Trade, 1950-60 152
6.3 Direction of Foreign Trade, 1950-60 152
7.1 Patterns of Population Growth, 1900-83 159
7.2 Distribution of Labour Force, 1948-83 160
7.3 Comparison of Official and Alton's Rates of Growth,
1961-83 162
 List of Tables and Maps vii

7.4 Sources of Non-Agricultural Growth, 1953-74 163

7.5 Capital Investment and Accumulation, 1949-80 165
7.6 Structure of Industrial Production, 1939-83 166
7.7 Index of Agricultural Output per capita, 1932-81 170
7.8 Annual Average Output per capita of Agriculturd
Products, 1939-83 172
8.1 StructureofMajorImports,1955-83 180
8.2 Structure of Major Exports, 1955-83 180
8.3 Foreign Trade Balance and Terms of Trade, 1961-83 182
8.4 Direction of Foreign Trade, 1960-83 188
8.5 IndicatorsofLivingStandard,1956-83 194/195
9.1 Cultivated Area of Personal Plots, 1965-80 211
9.2 Sources of Economic Investment, 1956-81 217

Map 1 Territory and Terrain 12

Map 2 Economic Resources 157
PREFACE

Almost twenty years have passed since I first drove into Sofia on a
hazy hot August day to take up my duties as a young economics
officer at the American Embassy. I returned in 1972 for post­
doctoral research on Bulgarian financial institutions in the pre-1914
period. These two experiences have made Bulgaria's present and
past the object of special interest in a subsequent academic career
whose focus has been Balkan economic history. The editor's invita­
tion to write the Bulgarian volume in this timely series on the
economic history of the modern European states is therefore most
welcome.
The series rightly recognises that the forty years which have now
passed since the end of the Second World War are a long enough
period to be viewed as economic history and deserve to be con­
nected with the earlier decades of this century. This Bulgarian
volume bears a special monographic responsibility. Native
scholars, like their colleagues elsewhere in Eastern Europe, have —
at least until recently — painted the periods before and after the
Communist accession to power as contrasting so shaφly that no
significant links could be discerned. Western scholars have paid
little attention to the earlier period, and less to relating it to the
post-war era. In the present volume, I seek to spell out both the
ways in which the two periods are connected and the ways in which
they aie not.
This volume also bears a special responsibility as a survey. The
general history of modern Bulgaria, like that of most small
European countries, has been neglected in the English language.
The few monographs and the one excellent survey, by Richard
Crampton of the period 1878-1918, listed in the bibUography are
virtually all that has been published recently. I therefore feel
obliged to provide the reader, at the start of each chapter, with
more political background than would be required for familiar
subjects such as France or the USSR.
The following treatment of Bulgarian economic history is
grounded on only a few assumptions: free markets and modern
technology are good, monopoly or isolation are bad, and economic
value and prices are best measured by relative scarcity. Neither

viii
 Preface ix

public nor private enterprise is presumed to be innately superior to

the other.
I must draw on a variety of sources. The official publications of
the Bulgarian statistical service have generally been the Balkan
states' most comprehensive and careful studies throughout the
twentieth century. There are none the less important gaps in these
data. Native scholarship is of help here. Attention to economic
history and analysis began with the founding of the Bulgarian
Economic Society in 1895. Its journal was published continuously
until 1940, and to a high standard. Post-war publications by a new
generation of Marxist economic historians have surpassed pre-war
scholarship in quantity, in detail and in use of primary sources. At
the same time, this new work has concentrated on the pre-1914
period and left the years since 1948 largely uncovered. Western,
and especially American, economic and statistical analysis of the
post-war period has improved markedly since about 1970 and
proved most valuable to this volume. Also valuable, however, have
been current Bulgarian economics journds, and the publications of
the Bulg2uian Chamber of Commerce and Industry, the United
Nation's Economic Commission for Europe, and the Council for
Mutual Economic Assistance.
This volume provides me with an opportunity to update, expand
and revise the treatment of Bulgaria's pre-1950 experience in
Balkan Economic History, 1550-1950: From Imperial Borderlands
to Developing Nations, which I wrote with Marvin R. Jackson for
Indiana University Press (1982). Reviews of that first volume in
Western and in Bulgarian journals helped to point the way towards
preparing the present one. A research grant in 1981 and a travel
grant in 1984 from the International Research and Exchanges
Board enabled me to gather more material in Bulgaria, particularly
on the post-1950 period. The Center for Bulgaristica in Sofia
hosted my trip in 1984 and graciously arranged interviews with a
number of Bulgarian economists and officials on recent trends.
Conversations with scholars from the Higher Economics Institute
'Karl Marx' and the co-operation of Bulgarian Chamber of Com­
merce and Industry were especially helpful. The National Library
'Kiril and Methodius' and the library of the Bulgarian Academy of
Sciences were as usual of great assistance. In the United States, the
Library of Congress in Washington, DC, the National Agricultural
Library in Beltsville, Maryland, and the University of IlUnois
Library at Urbana-Champaign proved to be useful sources of
X Preface

material. I consulted the latter as an Associate in the Summer

Research Laboratory of the university's Russian and East Euro­
pean Center in 1982 and 1984.
The manuscript was read entirely or in part by Alan S. Milward
of the University of Manchester Institute of Science and Tech­
nology, Marvin R. Jackson of Arizona State University, Richard J.
Crampton of the University of Kent at Canterbury, and Liuben
Berov of the Karl Marx Higher Economics Institute in Sofia. Their
critical suggestions were helpful, although full responsibility for the
final text is naturally my own. Iris Mendels provided expert
editorial assistance while proofreading the final text.
The University of Maryland furnished me with indispensable
assistance. A semester grant from the Graduate Research Board
allowed me to draft the largest part of the manuscript. The text was
then prepared on word-processor by the staff of the Department of
History, principally by Darlene King. Department Chairman
Emory G. Evans supported the project consistently and authorised
funding for maps and statistical tables. As with Balkan Economic
History, maps were prepared by Bowring Cartographic Research
and Design, Arlington, Virginia, and tables were typed by Carol
Warrington of the University of Maryland's Computer Science
Center.
Again, I owe a final debt to the unfailing encouragement of my
wife, Dr Anita B. Baker-Lampe, who shares my own appreciation
of Bulgarian hospitality. The volume is dedicated to continued
scholarly exchange between East and West, and to the proposition
that scholars need not agree in order to communicate usefully or to
gain from each other's work.

John R. Lampe
University of Maryland
EDITOR'S INTRODUCTION

By comparison with the nineteenth century, the twentieth has been

very much moreturbulent, both economically and politically. Two
world wars and a great depression are sufficient to substantiate this
claim without invoking the problems of more recent times. Yet
despite these setbacks, Europe's economic performance in the
present century has been very much better than anything recorded
in the historical past, thanks largely to the super-boom conditions
following the post-Second World War reconstruction period. Thus
in the period 1946-75, or 1950-73, the annual increase in total
European GNP per capita was 4.8 per cent and 4.5 per cent respec­
tively, as against a compound rate of just under 1 per cent in the
nineteenth century (1800-1913) and the same during the troubled
years between 1913 and 1950. As Bairoch points out, within a
generation or so European per-capita income rose sUghtly more
than in the previous 150 years (1947-75 by 250 per cent,
1800-1948 by 225 per cent) and, on rough estimates for the half
century before 1800, by about as much as in the preceding two
centuries.·
The dynamic growth and relative stability of the 1950s and 1960s
may, however, belie the natural order of things, as the events of the
later 1970s and early 1980s demonstrate. Certainly it would seem
unlikely that the European economy, or the world economy for
that matter, will see a lasting return to the relatively stable con­
ditions of the nineteenth century. No doubt the experience of the
present century can easily lead to an exaggerated idea about the
stability of the previous one. Nevertheless, one may justifiably
claim that for much of the nineteenth century there was a degree of
harmony in the economic development of the major powers and
between the metropolitan economies and the periphery, which has
been noticeably absent since 1914. Indeed, one of the reasons for
the apparent success of the gold standard post-1870, despite the
aura of stability it allegedly shed, was the absence of serious
external disturbances and imbalance m development among the
major participating powers. As Triffm writes, 'the residual har-
moruzation of national monetary and credit poUcies depended far
less on ex post corrective action, requiring an extreme flexibiUty,

1
2 Editor's introduction

downward as well as upward, of national price and wage levels,

than on an ex ante avoidance of substantial disparities in cost com­
petitiveness and the monetary policies that would allow them to
develop'.^
Whatever the reasons for the absence of serious economic and
political conflict, the fact remains that until 1914 international
development and poUtical relations, though subject to strains of a
minor nature from time to time, were never exposed to internal and
external shocks of the magnitude experienced in the twentieth
century. Not surprisingly, therefore, the First World War rudely
shattered the liberal tranquillity of the later nineteenth and early
twentieth centuries. At the time few people realised that it was
going to be a lengthy war and, even more important, fewer still had
any conception of the enormous impact it would have on economic
and social relationships. Moreover, there was a general feeling,
readily accepted in establishment circles, that following the period
of hostilities it would be possible to resume where one had left off
— in short, to re-create the conditions of the pre-war era.
For obvious reasons this was clearly an impossible task, though
for nearly a decade statesmen strove to get back to what they
regarded as 'normalcy', or the natural order of things. In itself this
was one of the profound mistakes of tne first post-war decade,
since it should have been clear, even aXthat time, that the war and
post-war clearing-up operations hadiindermined Europe's former
equipoise and sapped her strength to a point where the economic
system had become very sensitive to external shocks. The map of
Europe had been rewritten under the political settlements following
the war, and this further weakened the economic viability of the
continent and left a dangerous political vacuum in its wake. More­
over, it was not only in the economic sphere that Europe's strength
had been reduced; in political and social terms, the European con­
tinent was seriously weakened and many countries in the early post­
war years were in a state of social ferment and upheaval.'
Generally speaking, Europe's economic and political fragility
was ignored in the 1920s, probably more out of ignorance than
intent. In their efforts to resurrect the pre-war system, statesmen
beUeved they were providing a viable solution to the problems of
the day, and the fact that Europe shared in the prosperity of the
later 1920s seemed to vindicate their judgement. But the post-war
problems — war debts, external imbalances, currency issues, struc­
tural distortions and the Uke — defied solutions along traditional
 Editor's Introduction 3

lines. The most notable of these was the attempt to restore a

semblance of the gold standard in the belief that it had been respon­
sible for the former stability. The upshot was a set of haphazard
and inconsistent currency-stabilisation policies that took no
account of the changes in relative costs and prices among countries
since 1914. Consequently, despite the apparent prosperity of the
latter half of the decade, Europe remained in a state of unstable
equilibrium, and therefore vulnerable to any external shocks. The
collapse of US foreign lending from the middle of 1928, and the
subsequent downturn of the American economy a year later
exposed the weaknesses of the European economy. The structural
supports were too weak to withstand violent shocks and so the
edifice disintegrated.
That the years 1929-33 experienced one of the worst depressions
and financial crises in history is not altogether suφrising, given the
convergence of many unfavourable forces at that point in time.
Moreover, the fact that a cyclical downturn occurred against the
backdrop of structural disequilibrium only served to exacerbate the
problem, while the inherent weakness of certain financial institu­
tions in Europe and the United States led to extreme instability.
The intensity of the crisis varied a great deal, but few countries,
apart from the USSR, were unaffected. The action of governments
tended to aggravate rather than ease the situation. Such policies
included expenditure cuts, monetary contraction, the abandonment
of the gold standard and protective measures designed to insulate
domestic economies from external events. In effect these policies,
although sometimes affording temporary relief to hard-pressed
countries, in the end led to income destruction rather than income
creation. When recovery finally set in in the winter of 1932/3, it
owed little to policy contributions, though subsequently some
Western governments did attempt more ambitious programmes of
stimulation, while many of the poorer Eastern European countries
adopted autarchic poUcies in an effort to push forward indus­
trialisation. Apart from some notable exceptions, Germany and
Sweden in particular, recovery from the slump, especially in terms
of employment generation, was slow and patchy, and even at the
peak of the upswing in 1937 many countries were still operating
below their resource capacity. A combination of weak real growth
forces and structural imbalances in development would no doubt
have ensured a continuation of resource under utilisation, had not
rearmament and the outbreak of war served to close the gap.
4 Editor's Introduction

Thus, by the eve of the Second World War, Europe as a whole

was in a much weaker state economically than it had been in 1914,
with her shares of world income and trade notably reduced. Worse
still, she emerged from the Second World War in 1945 in a more
prostrate condition than in 1918, with output levels well down on
those of the pre-war period. In terms of the loss of life, physical
destruction and decline in living standards, Europe's position was
much worse than after the First World War. On the other hand,
recovery from wartime destruction was stronger and more secure
than in the previous case. In part, this can be attributed to the fact
that in the reconstruction phase of the later 1940s, some of the mis­
takes and blunders of the earUer experience were avoided. Infla­
tion, for example, was contained more readily between 1939 and
1945, and the violent inflations of the early 1920s were not for the
most part repeated after the Second World War. With the excep­
tion of Berlin, the map of Europe was divided much more cleanly
and neatly than after 1918. Though it resulted in two ideological
power blocs, the East and the West, it did nevertheless dispose of
the power vacuum in Central/East Europe, which had been a
source of friction and contention in the inter-waryears. Moreover,
the fact that each bloc was dominated or backed by a wealthy and
rival super-power meant that support was forthcoming for the
satellite countries. The vanquished powers were not, with the
exception of East Germany, burdened by wreasonable exactions,
which had been the cause of so much bitterness and squabbUng
during the 1920s. Finally, governments no longer hankered after
the 'halcyon' pre-war days, not surprisingly given the rugged
conditions of-Äe 1930s. This time it was to be planning for the
future which occupied their attention, and which found expression
in the commitment to maintain full employment and all that
entailed in terms of growth and stability, together with a conscious
desire to build upon the earlier social welfare foundations. In wider
perspective, the new initiatives found positive expression in terms
of a readiness to co-operate internationally, partic^arly in trade
and monetary matters. The liberal American aid programme for
the West in the later 1940s was a concrete manifestation of this new
approach.
Thus despite the enormity of the reconstruction task facing
Europe at the end of the war, the recovery effort, after some initial
difficulties, was both strong and sustained, and by the early 1950s
Europe had reached a point where it could look to the future with
 Editor's Introduction 5

some confidence. During the next two decades or so, virtually every
European country, in keeping with the buoyant conditions in the
world economy as a whole, expanded very much more rapidly than
in the past. This was the super-growth phase, during which Europe
regained a large part of the relative losses incurred between 1914
and 1945. The Eastern bloc countries forged ahead the most rapidly
under their planned regimes, whereas the Western democracies
achieved their success under mixed-enterprise systems with varying
degrees of market freedom. In both cases, the state played a far
more important role than hitherto, and neither system could be said
to be without its problems. The planning mechanism in Eastern
Europe never functioned as smoothly as originally anticipated by
its proponents, and in due course most of the socialist countries
were forced to make modifications to their systems of control.
Similarly, the semi-market systems of the West did not always pro­
duce the right results, so that governments were obliged to inter­
vene to an increasing extent. One of the major problems encoun­
tered by the demand-managed economies of the West was that of
trying to achieve a series of basically incompatible objectives simul­
taneously — namely, full employment, price stability, growth and
stability, and external equilibrium. Given the limited policy
weapons available to governments, this proved an impossible task
to accomplish in most cases, although West Germany managed to
achieve the seemingly impossible for much of the period.
Although these incompatible objectives proved elusive in toto,
there was, throughout most of the period to the early 1970s, Uttle
cause for serious alarm. It is true that there were minor lapses from
full employment; fluctuations still occurred, but they were very
moderate and took the form of growth cycles; some countries
experienced periodic balance of payments problems, though prices
generally rose continuously, albeit at fairly modest annual rates.
But such lapses could readily be accommodated, even with the
Hmited policy choices, within an economic system that was growing
rapidly. And there was some consolation from the fact that the
planned socialist economies were not immune from some of these
problems, especiaUy later on in the period. By the later 1960s,
despite some warning signs that conditions might be deteriorating,
it seemed that Europe had entered a phase of perpetual prosperity
not dissimileu' to the one the Americans had conceived in the 1920s.
Unfortunately, as in the earlier case, this illusion was to be rudely
shattered in the first half of the 1970s. The super-growth phase of
6 Editor's Introduction

the post-war period culminated in the somewhat feverish and

speculative boom of 1972-3. By the following year, the growth
trend had been reversed, the old business cycle had reappeared and
most countries were experiencing inflation at higher rates than at
any time in the past half century. From that time onwards, accord­
ing to Samuel Brittan, 'everything seems to have gone sour and we
have had slower growth, rising unemployment, faster inflation,
creeping trade restrictions and all the symptoms of stagflation'.* In
fact, compared with the relatively placid and successful decades of
the 1950s and 1960s, the later 1970s and early 1980s have been
extremely turbulent, reminiscent in some respects of the inter-war
years.
It should, of course, be stressed that by comparison with the
inter-war years, or even with the nineteenth century, economic
growth has been quite respectable since the sharp boom and con­
traction in the first half of the 1970s. It only appears poor in
relation to the rapid growth between 1950 and 1973, and the
question arises as to whether this period should be regarded as
somewhat abnormal, with the shift to a lower-growth profile in the
1970s being the inevitable consequence of long-term forces
involving some reversal of the special growth-promoting factors of
the previous decades. In effect this would imply some weakening of
real-growth forces in the 1970s, which was aggravated by specific
factors, for example, energy crises and policy variables.
The most disturbing feature of this later period was not simply
that growth slowed down, but that it became more erratic, with
longer recessionary periods involving absolute contractions in out­
put, and that it was accompanied by mounting unemployment and
high inflation. Traditional Keynesian demand-management poU­
cies were unable to cope with these problems and, in an effort to
deal with them, particularly inflation, governments resorted to
ultradefensive policies and monetary control. These were not very
successful either, since the need for social and poUtical compromise
in policy-making meant that they were not applied rigorously
enough to eradicate inflation, yet at the same time their influence
was sufficiently strong to dampen the rate of growth, thereby
exacerbating unemployment. In other words, economic manage­
ment is faced with an awkward policy dilemma in the prevailing
situation of high unemployment and rapid inflation. Policy action
to deal with either one tends to make the other worse, while the
constraint of the poUtical consensus produces an uneasy com-
 Editor's Introduction 7

promise in an effort to 'minimise macroeconomic misery'.^ Rostow

has neatly summarised the constraints involved in this context:
'Taxes, public expenditure, interest rates, and the supply of money
are not determined antiseptically by men free to move economies
along a Phillips curve to an optimum trade-off between the rate of
unemployment and the rate of inflation. Fiscal and monetary
policy are, inevitably, Uving parts of the democratic political
process.'*
Whether the current problems of contemporary Western capital­
ism or the difficuhies associated with the planning mechanisms of
the socialist countries of Eastern Europe are amenable to solutions
remains to be seen. It is not, for the most part, the purpose of the
volumes in this series to speculate about the future. The series is
designed to provide clear and balanced surveys of the economic
development and problems of individual European countries from
the end of the First World War to the present, against the back­
ground of the general economic and political trends of the time.
Though most European countries have shared a common experi­
ence for much of the period, it is nonetheless true that there has
been considerable variation among countries in the rate of develop­
ment and the manner in which they have sought to regulate and
control their economies. The problems encountered have also
varied widely, in part reflecting disparities in levels of development.
Although most European countries had, by the end of the First
World War, achieved some industrialisation and made the initial
breakthrough into modern economic growth, nevertheless there
existed a wide gulf between the richer and poorer nations. At the
beginning of the period, the most advanced region was north-west
Europe including Scandinavia, and as one moved east and south so
the level of per-capita income relative to the European average
declined. In some cases, notably Bulgaria, Yugoslavia and
Portugal, income levels were barely half the European average. The
gap has narrowed over time, but the general pattern remains
basically the same. Between 1913 and 1973, most of the poorer
countries in the east and south (apart from Spain) raised their real
per-capita income levels relative to the European average, with
most of the improvement taking place after 1950. Even so, by 1973
most of them, with the exception of Czechoslovakia, still fell below
the European average, ranging from 9-15 per cent in the case of
the USSR, Hungary, Greece, Bulgaria and Poland, to as much as
35-45 per cent for Spain, Portugal, Romania and Yugoslavia.
8 Editor's introduction

Italy and Ireland also recorded per-capita income levels some way
below the European average.'
Despite its relatively small size — a population of around 9
million today — Bulgaria deserves more attention than it has so far
been accorded by contemporary historians. It has been one of the
great success stories of the twentieth century, with the highest rate
of economic growth in Europe and a degree of structural change
second to none. Yet up to the end of the First World Wai, and even
beyond, conditions were not especially propitious for such rapid
transformation. Bulgaria had not long gained full independence
and is still smarting from the effects of Ottoman hegemony. The
country was very poor and not over-endowed with natural
resources, while the bulk of the population derived their livelihood
from the land, the development of which was impeded by geogra­
phical and cUmatic limitations. Non-agrarian progress before the
war was confined to a narrow sector, principally in and around
Sofia, a capital which increasingly tended to dominate the country.
Finally, in the First World War Bulgaria backed the wrong horse
and emerged in a weakened state with a reparations bill to boot.
However, it did have two distinct advantages over many other
states that arose from the post-war peace settlements. First, it did
not have any new territories to assimilate, nor did it incur territorial
or resources losses. Second, it was not burdened with the problem
of ethnic integration. Most of the population were real Bulgarians;
the only important minority group was the Turks, whose numbers
were dwindling. In addition, it was an advantage that its key
leaders were trained in economics and perceived the need for
economic progress. The problem, however, was how to capitalise
on its primarily agrarian base by converting produce into a market­
able surplus in order to provide the wherewithal to advance on the
manufacturing front. Given the low level of efficiency in agricul­
ture and the restricted state of world markets for primary products,
there was no easy solution, short of adopting the Soviet method or
the Danish approach, but the first was rejected and the second not
successfully adopted. Hence Bulgaria had to rely on its own efforts
to adapt the product structure of its primary base and on the flow
of Western capital. Limits were thus set to the rate of transforma­
tion, and the share of manufacturing in total output remained very
small, despite impressive growth in this sector during the 1920s.
The insecurity of the economic base became evident in the
ensuing depression, with the steep fall in agricultural prices, the
 Editor's Introduction 9

closing of Western markets and the drying up of foreign aid.

Drastic steps were required to maintain the limited progress so far
achieved, and these were sought in the rise of etatism, import sub­
stitution and increasing isolation through bilateral trade channels
with reorientation towards the German axis in the latter part of the
1930s. Industrial growth was in fact quite spectacular at 4.8 per
cent a year between 1929 and 1938, one of the highest in Europe,
with import substitution accounting for much of it. Nevertheless,
the development of modern mechanised manufacturing was still
very limited, and i f anything there was a tendency for pre-modern
forms of enterprise to gain ground in this period. Sofia's impor­
tance as an economic centre became even more pronounced in these
years. State control and direction of agricuUure, trade and finance
were more extensive than in the case of industry, despite some
increase in the state-owned share in the latter sector.
In view of the closer relations with Germany during the 1930s, it
was ahnost inevitable that Bulgaria would again select the wrong
side in the forthcoming war. The consequences were more far-
reaching than in the case of the earlier conflict, in that the country
succumbed to Communist rule from 1944 onwards, which subse­
quently meant a reorientation of its economy towards planning
Soviet-style, a shift in trading relationships towards the Eastern
bloc, and of course the collectivisation of agriculture and the
expropriation of industry. The late 1940s formed a transitional
period in which the new structural format was being put into place,
although it was not fully complete until later, to be followed by the
first three Five-Year Plans, up to 1960. The main emphasis of the
early plans was on extensive growth, whereby large amounts of
inputs were channelled into a few sectors (mainly heavy industry) at
the expense of the rest of the economy and regardless of efficiency
criteria. Yet one cannot deny that in quantitative terms the resuhs
were highly impressive. Industry grew at a high double-figure rate
throughout the 1950s, and increased its share of net product from
less than a quarter to nearly one-half, with a corresponding fall in
the relative size of the agrarian sector. By the early 1960s, Bulgaria
had firmly estabhshed the basis of modern economic growth and
structural change and had completed the shift to institutions and
structure based on the Soviet planning model. The next step there­
fore was for a change in the nature of the growth criteria and some
reform of the structure.
Subsequent pkns therefore emphasised intensive growth, that is,
10 Editor's Introduction

greater attention to productive resource use as opposed to growth

based on accumulating inputs. In accordance with this objective,
the economic reforms of the recent past have been designed to
streamline the state planning structure, decentralise ministerial con­
trol and provide greater economic incentive and initiative at the
local level of operations. In part, the changes were prompted by the
course of economic events, in particular, a growing labour
shortage, the increasing importance of foreign trade and some
slackening in economic performance after the rapid expansion of
the 1950s and early 1960s,
Even so, growth in more recent years has been hnpressive by any
standard, and Bulgaria was not troubled unduly by the oil shocks
of the 1970s. Whether the economic reforms were instrumental in
helping to maintain the momentum is debatable, since capital pro­
ductivity improvement has been disappointing. One of the main
problems in this regard seems to have been a failure of management
and technology to keep pace with the hectic rate of expansion and
structural change. As in other Eastern bloc countries, consumers
have not secured benefits commensurate with the growth in
recorded output, a reflection in part of the relative neglect of light
industry, while infrastructure and environmental facilities includ­
ing housing still fall well short of Western standards.
Professor Lampe's lucid account demonstrates the way in which
Bulgaria has achieved its remarkable transformation from a back­
ward agrarian economy into a highly industrialised state. He also
compares and contrasts the pre- and the post-Communist periods,
noting the sharp differences between the two periods, but at the
same time drawing attention to the distinct elements of continuity
in the country's history. Problems remain of course for the future,
though perhaps these are not as acute as those facing many other
countries in the Eastern sector. The fact that Bulgaria's rapid
development in the Communist era has been accompanied by great
political stability with relatively little internal friction or disruptive
interference by the Soviet Union has undoubtedly been an impor­
tant factor in faciUtating the country's leap into the twentieth
century, and it is possible that it may continue to be an asset in the
future.
 Editor 's introduction 11

Notes

1. P. Bairoch, 'Europe's Gross National Product, 1800-1975', Journal of

European Economic History, vol.5 no. 2 (Fall 1976), pp. 298-9.
2. R. Triffm, Our International Monetary System: Yesterday, Today and
Tomorrow (New York, 1968), p. 14; see also D.H. Aldcroft, From Versailles to
Wall Street, 1919-1929 (19П), pp. 162-4. Some of the costs of the gold standard
system may, however, have been borne by the countries of the periphery, for
example, Latin America.
3. See P.N. Stearns, European Society in Upheaval (1967).
4. Financial Times, 14 February 1980.
5. J.O.N. Perkins, TheMacroeconomicMix to Stop Stagflation (1980).
6. W.W. Rostow, Getting From Here to There (1979).
7. See Bairoch, 'Europe's Gross National Product', pp. 297, 307.
Map 1: TerritotY and Terrain

0 1Q0 200 KIU3METRES

L
INTRODUCTION

The image of Bulgaria in Western eyes has remained uncertain

throughout the twentieth century. Less attention, whether scholarly
or popular, has been paid to Bulgaria in the English or French
languages than to any other Balkan state except Albania.' This
small country's political history has helped to turn the somewhat
cloudy Western perception dark on more than one occasion. 'Three
times in my life,' observed Winston Churchill acidly in 1944, 'has
this wretched Bulgaria subjected a peasant population to aU the
pangs of war and chastisements of defeat.' The loss of the Second
Balkan War in 1913 had indeed inaugurated the bitter, unavailing
dispute over Macedonia with the neighbouring Yugoslavs, and led
directly to fatal Bulgarian alliances with Germany in the two world
wars. Few Western observers, Churchill included, have bothered to
look carefully into these misfortunes, let alone to search for
positive accomplishment.
The national catastrophes, as they became known within
Bulgaria, contributed to the inter-war failure of parliamentary
democracy. The great Agrarian leader, Aleksandur Stamboliiski,
was only the first victim in a series of assassinations, principally
carried out by Macedotuan irredentists. Their Internal Macedonian
Revolutionary Organisation became synonymous with political
terrorism throughout Europe. Within the Bulgarian government,
first party and then royal, non-party regimes contributed to
growing political intolerance. The immediate post-war period
brought stiU more uncompromising and ruthless consolidation of
political power, now under Communist auspices.
Since then, co-operation with the Soviet Union has been so close,
particularly in foreign policy, that many Western observers have
found it diffic^t to discern a separate Bulgarian identity. But there
is one, and its complexity should not be obscured by the enduring
Soviet alUance or the smaU size of the country, barely 9 million
people. A remarkable economic history has contributed both to
this separate identity and to close relations with the USSR.
Bulgaria is a relatively new state, autonomous since 1878 and
fully independent отйу since 1908. In part because of its youth, the
country has been in the forefront of two significant economic

13
14 Introduction

trends in twentieth-century Europe. Within a spectrum of generally

rapid growth for national product and exports across the continent,
Bulgarian rates of growth have been the highest of all. At the same
time, scarcities of labour and capital have held back these advances
periodically.
A further, more poUtical trend is hard to quantify, but no less
profound a change. It is the rise of state economic control and
initiative. For Bulgaria, this process began long before the Com­
munist accession to power in 1944. It has now evolved into
unusually persistent efforts to reform a centrally planned, Soviet-
style economy in the face of the declining rates of growth and
increasingly scarce resources which confront aU European
countries.
According to the rough calculations of Paul Bairoch, Bulgaria's
gross national product grew by an average of 4.4 per cent a year
across the entire period 1913-73. This rate was the highest among
aU European countries, whose average growth was 3 per cent. Only
the USSR came close to Bulgaria, with 3.9 per cent.^ For 1913-50,
Bulgaria's average increase of 2.7 per cent trailed only Sweden and
Norway, and almost doubled the European average of 1.4 per cent.
This occurred despite an overwhelmingly agricultural economy.
For the period 1950-73, the Bulgarian growth rate of 7.2 per cent
still exceeded the European average of 5.6 per cent, but less drama-
ticaUy. Only the doubtful Romanian figure is higher.
More reliable figures for foreign trade point to another area of
Bulgarian pre-eminence. The smaU Balkan state increased its share
of European export value more rapidly before and since the First
World War than any other country. That share tripled between
1890 and 1910 to reach 0.3 per cent and then quadrupled between
1910 and 1970 to touch 1.2 per cent.' Only the Scandinavian
countries have approached these increases. By the early 1960s,
Bulgarian trade turnover, the sum of exports and imports, had
passed its inter-war peak, 38 per cent of national income and by
1984 reached 100 per cent, obviously growing more rapidly than the
economy as a whole. This disproportion suggests export-led
growth. By the early 1970s, the value of Bulgarian exports and
imports per capita equalled not only the European average, but
also the Yugoslav and Romanian values combined. Thus the rela­
tively smaU share of Bulgarian foreign trade conducted with
Western Europe in recent decades, barely 15 per cent, bulks larger
when considered in absolute terms.
 Introduction 15

The Western role in Bulgaria's large foreign trade, i f we exclude

undivided pre-war Germany, has aU the same been surprisingly
smaU throughout the twentieth century. Even during the heyday of
Bulgarian wheat exports before the First World War, the Western
European share of Bulgarian trade turnover did not amount to 30
per cent. It had already fallen to its present proportion by the
1920s. Then German purchases of tobacco and various foodstuffs
pushed their share of Bulgarian exports close to 40 per cent by
1929. Thus the stage was set for stiU larger German predominance
during the depression decade of the 1930s, now conducted accord­
ing to bilateral clearing agreements. These cut the Bulgarians off
from international prices and the market mechanism, such as they
were in the 1930s. Bulgaria's trade since the Second World War has
also been based on similar bilateral agreements, although on more
favourable terms, with the Soviet Union and other Eastern Euro­
pean states. Trade with the USSR has consistently accounted for at
least half of Bulgarian turnover since 1945. The continent's most
rapidly growing export sector has therefore been more closely tied
to a single buyer for a longer time than any other European
country.
The origins of state control and initiative in Bulgarian economic
history predate the clearing agreements with Nazi Germany. Barred
from instituting protective tariffs under the terms of its pre-1908
ties to the Ottoman Empire, the young government had in 1894
promulgated the first formal industrial legislation in the Balkans.
By 1903, the region's first state bank for agricultural credit had
opened in Sofia. The First World War and its aftermath occasioned
a series of state controls over agricultural marketing that spread
from exports to domestic sales. Their renewal and expansion after
1930 preceded the clearing agreements with Germany and con­
tinued into the Second World War. So did state encouragement and
control of industry, i f not much investment or ownership. What
sort of groundwork was laid for the transition to coUectivised agri­
culture and centrally planned state industry after 1945, and also for
subsequent efforts to reform them? How has a smaU economy so
long oriented to foreign trade adapted to a system which had first
evolved in the huge isolated economy of the inter-war Soviet
Union?
The post-war period has none the less proved pivotal. It has wit­
nessed the structural shift of labour and capital into modern
industry, which typicaUy turns growth into development.
16 Introduction

Industry's pre-war shortage of both inputs abated, at least until the

1970s. Manufactured goods, including foodstuffs, now account for
the great majority of exports. Five of the nine chapters that follow
deal with these forty years since the Second World War.

Geographic Limitations
The physical geography of Bulgaria is not particularly favourable
to modern economic development.* The wooded mountain ranges
that dominate western Bulgaria and extend eastward across its
centre are poor in mineral resources, apart from low-grade coal and
small non-ferrous deposits (see Maps 1 and 2). Petroleum deposits
are smaUer stiU, making the modern Bulgarian economy the most
dependent on energy imports (over 70 per cent of consumption) in
Eastern Europe.
Agricult^al land is also less than ideal. The soU of much of the
western uplands is suitable only for tobacco or vegetable cultiva­
tion. Further east, grain cultivation on the rolUng plain to the north
of the Balkan mountains faces limited rainfall. The climate of
south-eastern Europe is generally less congeiual to crops in this
regard than that of the north-western agricultural plain. An ample
supply of moistme from the Atlantic has been reduced by moun­
tain ranges and the continental landmass to less than 750 mm a
year by the time the flow of weather systems from the west reaches
the Bulgarian lands. The most fertile soUs in the north-east and
south receive less than 500 mm. Periodic droughts and irregular
rainfall are therefore inevitable.
The overwhelming size and isolated location of its capital city has
also distinguished the smaU Bulgarian economy. The combination
is an unusual one in European economic history. Sofia counted
over 150,000 residents in a nationalpopulation of 4.8 milUon in
1920, some 3 per cent, but by 1980 had over 1.1 ndlUon inhabitants,
of a total of 8.9 million, or 13 per cent. Bulgaria's present density
of 81 people per km^, already low by European standards, is thus
lower stiU, i f Sofia is excluded. Throughout the century the capital
has been the centre not only of political power, but also of modern
manufacturing and of urban culture and consumption. Making the
city's poUtical role more important was the general absence else­
where in the country of any strong regional interest or ethnic
separatism. The mixture of interests and peoples m neighbouring
Yugoslavia that has led logically to a federal form of government
 Introduction 17

never existed in Bulgaria.

The present population of 9 million is over 85 per cent ethnically
Bulgarian. That proportion has hardly changed since the Second
World War, despite the departure of 90 per cent of the country's
60,000 Jews for Israel and some 200,000 Turks for Turkey. Turks
had begun leaving when the present borders were essentially fixed
in 1913, after the Second Balkan War.' They and the other large
minority, the Gypsies, have remained politically powerless,
although their combined numbers now exceed one miUion.* All of
this has allowed central control to flow more smoothly from Sofia
than from any of the other Balkan capitals, probably facilitating
the post-war adoption of Soviet-style planning. The sister city in
Eastern Europe would appear to be Budapest, especially in the
recent decades of reforming the same centralised Soviet system.
The Hungarian capital has nearly 20 per cent of an equally smaU,
even more homogeneous population of 10 miUion.
UnUke most other large European capitals, including Budapest,
Sofia is not, however, a port city. Its location on an upland plateau
in the mountainous western quarter of the country places it close to
the large deposits of lignite and lesser ones of hard coal and copper
that are Bulgaria's principal mineral resources (see Map 2). Yet the
city is far from the country's only navigable river, the Danube,
which forms the northern border with Romania, and farther stiU
from the Black Sea. In addition, Sofia has been less of a crossroads
for Western visitors and ideas than for Central or Eastern Emo-
pean influences. The isolation of this large capital city from
Western Europe and within the country itself may help us to under­
stand the strength of the state's role in Bulgarian economic growth
throughout the twentieth century.

Notes

1. For evidence of this neglect in Western economic analysis, see John R. Lampe,
'The Study of Southeast European Economies: 1966-1977', Balkanistica, vol. IV
(1977/8), pp. 63- 88.
2. Paul Bairoch, 'Europe's Gross National Product, 1800-1975', Journal of
European EconomicHistory, vol. 5, no. 2 (1976), table 17, p. 305.
3. Paul Bairoch, 'European Foreign Trade in the X K Century', Journal of
European Economic History, vol. 2, no. 1 (1973), table 5, p. 17.
4. For a technical review of Bulgaria's physical geography in regional perspective,
see Roy. E . H . Mellor, Eastern Europe, A Geography of the Comecon Countries
(New York: Columbia University Press, 1975), pp. 3-34, 306-13.
18 Introduction

5. Atthat time, the 96,345 km^ that had comprised Bulgarian territory since 1886
increased to 111,836 km^. The expansion occurred at Ottoman expense, mainly
along the western two-thirds of the southern border with what now became an
enlarged Greek state. The inter-war loss of the southern Dobrudja to Romania, and
a smaU reduction of the western border in favour of the new Yugoslav state trimmed
Bulgaria's territory to 103,146 km^. The former's restitution in 1940 established the
post-1944 dimensions of 110,669 km^,
6. Some 340,000 Turks emigrated from Bulgaria between 1912 and 1939, joined
by another 200,000 since 1944. Their share of the total population thereby fell from
11.6 per cent in 1910 to 10.2 per cent in 1934 to 8.6 per cent by 1956. High birth rates
for these mainly rural Turks pushed their share back to 9.1 per cent by 1965, the last
year that an ethnic breakdown was officially published. Despite the departure of
another 41,000 since then, the 1965 total of 747,000 Turkish-speakers had probably
grown past 900,000 by 1980. The 197,000 Gypsies recorded in the 1956 census may
now exceed 350,000. Bulgarian Muslims or Pomaks, remain about 160,000. See
Marvin R. Jackson, 'Changes in the Ethnic Content of the Balkan National
Populations, 1912-1970', Faculty Working Papers, Department of Economics, E C
83/84-20, Arizona State University, forthcoming in Southeastern Europe; and also
Radio Free Europe Research (RFER), Bulgarian Situation Report, 2, 30 January
198S.
 INITIAL G R O W T H , 1878-1918

At the start of the nineteenth century the Bulgarian lands were still
under closer Ottoman control than the Sultan's other Balkan terri­
tories. So they had remained since the Ottoman Turks had over­
whelmed Bulgarian feudal forces over four hundred years before.
From the 1820s forward, however, a remarkable cultural revival
spread through the predominantly Bulgarian population of the
upland towns. Primary schools and adult reading rooms became
the crucial institutions. The result was a rediscovery of Bulgarian
national identity, virtually lost since the Ottoman conquest, except
in isolated monasteries.'
Political independence came less quickly. Until it did, in 1878, we
cannot speak of a national economy. By 1870, only approval for
the religious autonomy of the Bulgarian Orthodox Church had
been won. Ottoman authorities struck down a nascent revolu­
tionary movement with death sentences. They brutally suppressed
the wider insurrection of April 1876. It remained for tsarist Russia,
flushed with Pan-Slavic sympathy for its 'little brothers', to drive
Ottoman forces from the territory of what became the Bulgarian
state in 1878.
The political prospects of the new state seemed bright at first. A n
autonomous Bulgarian government had come into being by 1879,
under a liberal constitution which favoured the legislative branch.
The next forty years were not kind to those early prospects. British
and German influence had vetoed the initial Russian settlement of
the Russo-Ottoman war of 1877-8. The Treaty of San Stefano had
created a large Bulgarian state stretching to the Aegean Sea. The
subsequent Treaty of Berlin not only barred any Russian prince
from the throne, but denied the new state the Bulgarian lands south
of the Balkan mountains until 188S and prevented the 1псофога-
tion of Macedonia entirely (see Map 1). Yet the presence of Russian
advisers until 1885 strengthened the ministries at the expense of the
Subranie, or legislative assembly.^ After Tsar Alexander I I I of
Russia forced young Alexander of Battenberg to abdicate, a second
German prince, Ferdinand of Coburg, began his long rule in 1886.
He capitaUsed on the assassination in 1895 of the principal

19
20 Initial Growth, 1878-1918

Bulgarian parliamentary leader, Stefan Stambulov, to undertake a

process of dividing the emerging liberal and conservative poUtical
parties. By the outbreak of the First Balkan War'in 1912, 'Foxy
Ferdinand' had split these parties into nine quarreUing factions and
had himself named tsar.' His ministries ran the country from Sofia.
His one personal achievement was to arramge full Bulgarian inde­
pendence from the Ottoman Empire in 1908; his greatest failure the
vainglorious effort, less for reasons of state than of reUgious
fantasy, to capture Istanbul from the Ottoman Empire during the
First Balkan War in 1912.
The leadership of the large Bulgarian army and ministerial
bureaucracy, and aU of the political parties except the Agrarians
and Narrow Socialists must share the blame with Ferdinand for the
two 'national catastrophes' that foUowed in 1913 and 1918. One
was the Second Balkan War, fought against Bulgaria's former
aUies in the first. Defeat left Macedonia stUl in Serbian hands and
cost the smaU Bulgarian state access to the Aegean Sea and the
grain-exporting southern Dobrudja. Bulgaria entered the First
World War in 1915 on the side of the Central Powers in a futile
effort to reverse these territorial dispositions. Final defeat in 1918
forced Ferdinand into exile and ended his unfortunate influence.
Thetroubled and eventually tragic political history summarised
above should not obscure the more consistent record of economic
and educational advance which characterised this long period,
particularly the last pre-war decades. The century preceding the
disastrous end to the First World War witnessed enough agricul­
tural growth to triple domestic commerce and to increase foreign
trade at an even faster pace. Monetisation and moderncommercial
practice spread into the countryside from upland towns. It was
from there that Bulgarian artisan manufacture expanded during the
mid-nineteenth century. Mechanised factories mushroomed after
1900. This was still small-scale, private production. Some state
initiatives to promote modern growth also emerged from the
government ministries and two senü-official banks in Sofia.
Although not successful in promulgating a single, coherent set of
poUcies, these pubUc institutions had aU the same estabUshed a
clear predominance over the private centres of economic power by
the First World War,
 Initial Growth. 1878-1918 21

The Ottoman Economic Legacy

The long Bulgarian experience as an integral part of the Ottoman

Empire was complex. Native scholars reject the old picture of
unreheved repression and backwardness/ but the eighteenth
century and the first decades of the nineteenth remain difficult to
paint in lighter colours. Disease, disorder and corruption des­
cended. Local MusUm warlords, mainly Turks, carved out their
own fiefdoms in the lowland valleys. Trade routes became unsafe,
tax collection arbitrary and excessive. Record-keeping deteriorated
too much to leave any useful statistical account of the period. AU
of this plainly stood in the way of economic growth or modernisa­
tion.
The land regime in the rural Bulgarian lowlands of the early nine­
teenth century remained, moreover, less fair and less efficient than
the original Ottoman system. At its sixteenth-century apex, the
Sultan's MusUm cavalry officers, or sipahi, had collected low and
fixed proportions of peasant grain harvests without even the right
to pass on the duties of tax coUection to their sons. By the start of
the eighteenth century a new system of private, inheritable land-
holding had replaced the original one. Primarily Turkish officers
and officals used this new chiflik system to keep control of the
Bulgarian lowlands weU into the mid-nineteenth century. They
exacted payment for use of good pasture lands and forced Bul­
garian peasants who wished to cultivate arable land into share-
cropping agreements which exacted half of the grain harvest or
more. Ottoman authorities in Constantinople had already des­
paired of collecting their share of such exactions in the eighteenth
century and began selecting ethiuc Bulgarian traders, viUage elders
or other notables, the chorbadzhii, to be their new tax collectors.
These impositions did not create a series of large, consoUdated
estates practising capitalist agriculture on the Polish or Prussian
pattern. The Bulgarian chiflik were too smaU and unconsolidated
for that.' They were, none the less, exploitative. As a result, the
Bulgarian peasantry moved away from the chiflik estates of the
MusUm notables and from the taxes of the native chorbadzhii by
deserting the lowlands in general. They retreated into the less
accessible uplands of the Balkan mountains, or migrated across the
Danube into the Romanian principalities, especiaUy after the
renewed disorders attending the Russo-Ottoman War of 1828-9.
Yet a restoration of public order and economic activity began in
22 Initial Growth, 1878-1918

the 1820s. Another half century of Ottoman domination followed,

but would provide three stimuli to the formation of a modern
economy. The first came precisely from the Balkan uplands and the
proto-industrial development there of artisan manufacture.* What
in parts of early modern Western Europe had been seasonal artisan
production became almost year-round activity in upland towns like
Gabrovo and Karlovo after 1830. Peasants who had migrated from
the lowlands did not return for the summer harvest, except where
chiflik land could be had for money rentals, as in the Plovdiv area.
The impetus that put this large labour supply to work, manufac­
turing primarily woollen cloth and braid, plus some shoes and iron­
ware, was growing demand from the wider Ottoman market. The
needs of the Sultan's new standing army, created in 1826, soon
resulted in numerous military contracts. Some included the army's
delivery of raw wool or other inputs for local manufacture under
what the Ottomans called the ishleme system. (In Chapter 5, similar
arrangements to use raw cotton from the USSR before and after
the Second World War are described.) Improved public order also
made trade routes more secure. The Ottoman reform decree of
1839 gave Bulgarian merchants the formal right to ti*ade freely
throughout the empire. A large colony of them had already been
doing business in Constantinople, a city of half a million people.
Artisans followed. By 1870, this expanding commercial network
supported a dozen towns with populations over 5,000 and a labour
force of perhaps 100,000 upland artisans, nearly 10 per cent of the
active labour in the Bulgarian lands. Bills of exchange supplied
short-term credit and compensated for the inability of the Ottoman
economy to accept paper money.
What happened, in brief, was the spread of monetisation (the
money-goods relationship in Marx's terms) and the creation of a
broad base of commercial experience in the Bulgarian lands. The
profits and travel of successful artisan owners and traders encour­
aged them to pay for building local schools and for the further
education of their sons outside the Ottoman Empire, in Russia or
the German lands. Eventually, however, this large sector of small-
scale, unmechanised manufacture would create a barrier to the
introduction of modern factory production that endured into the
inter-war period.
The second Ottoman stimulus also promoted monetisation and
market experience. Under Western European pressure, the Porte
had lifted its long-standing ban on the export of wheat from the
 Initial Growth. 1878-1918 23

empire in 1842. The Bulgarian lands responded more quickly than

any other Ottoman territory to this access to the expanding Euro­
pean market. By 1850 Bulgarian exports of wheat and barley, half
to the hungry British market, had risen sharply. Varna's trade turn­
over had moved ahead of Thessaloniki's to become the largest of
any Balkan port, Then came several bad harvests in the 1850s.
Combined with lost rights of tax collection, they prompted a few
Turkish chißik holders to sell off aU or part of their lands. The
Ottoman land code of 1858 guaranteed property rights to the new
Bulgarian owners. They appeared in increasing numbers during the
1860s, as Bulgarian grain exports doubled in value. Turkish sales of
land had become significant by the early 1870s. By then the popula­
tion of the Bulgarian lands had risen to almost 3 milUon, double the
1830 estimate. The MusUm, largely Turkish proportion remained
about 30 per cent of the total. Ethnic Bulgarian movement from
upland to lowland was at the same time large enough to create a
severe labour shortage for artisan manufacturers. Wages rose,
prompting some limited mechanisation, as we shaU see.
The third Ottoman stimulus was the central government's effort
after 1860 to introduce modernising economic reform in return for
increased tax coUection. Under European pressure to repay a
rapidly accumulating sum of foreign loans, Ottoman authorities
could hardly faU to notice the large export surpluses accumulating
in the Bulgarian lands. Their nothern region was therefore selected
in 1864 as the site for a single enlarged province, to be run on
principles of efficiency and modern improvements.' An able
Pomak, or Bulgarian MusUm, Midhat Pasha, was put in charge of
this new Danubian region, or vilayet, with Sofia as his head­
quarters. Despite its location and relatively smaU size, the city thus
became a leading candidate for the capital of a future Bulgarian
state. Midhat's attempts to begin construction of modern roads
and to open a network of co-operative savings banks for agricul­
ture were important more as precedents for the future than for
what they actually accompUshed. He did succeed in raising the col­
lection of tax revenues, mainly levied on crops and Uvestock, by
one-third in three years. Three-quarters were then spent outside the
Bulgarian lands. From this, Bulgarian landholders could only
conclude that they would be better off to break away from the
Ottoman Empire, as the revolutionary movement was now urging.
24 Initial Growth, 1878-1918

Grain Exports and Peasant Agriculture after 1878

For the Bulgarian peasantry, the immediate consequence of the

break in 1878 with the internal regime of the Ottoman Empire was
the hasty departure of perhaps one-half of the remaining Muslim
population. Enough had returned by 1880 to bring Turkish-
speaking numbers back to 700,000.* This was 25 per cent of the esti­
mated population in the new state and the Rumelian south, incor­
porated in 1885 (see Map 1). Turkish officers, officials and also
smallholding peasants scrambled to seU off their holdings at
reduced prices throughout the decade. Turkish speakers were
132,000 fewer by 1892. CThe Treaty of Berlin had revoked the out­
right seizures which B^garian peasants had carried out in the wake
of the Russian army's victory.) These properties were often larger
and used more as pasture than the average B^garian holding, but
were soon subdivided for sale to individual peasant households.
The new supply of better valley land left its new owners with what
one Bulgarian scholar has estimated to be over 40 million leva (or
francs) in debt, typically owed to Bulgarian merchants or officials
who had made the initial purchase.' This burden, plus obligations
remaining from land purchases in the 1870s or earlier, meant that a
large fraction of the Bulgarian peasantry had acquired small­
holdings which would have to generate a marketable suφlus for
debt repayment or be sold off again.
The growth of Bulgarian grain cultivation and the exports that
followed until the Balkan wars of 1912-13 seem at first glance to
have been an 'engine of growth', in the manner sometimes ascribed
to Canadian grain during the same period. The Bulgarian national
product appears by very rough reckoning to have kept pace with
growth rates in the developed European economies, rather than
falling behind as Paul Bairoch has argued. More clearly, its value
per capita by 1911 amounted to one-quarter of the German figure,
far beyond the tiny fractions of the developed economies' average
recorded by most of today's Third World countries.'" Agriculture
still accounted for about three-quarters of gross Bulgarian produc­
tion, and more of the net, even at the end of the period.
Grain hectarage and output per rural inhabitant would continue
to increase even after 1900, when those indicators had begun to
decline in neighbouring Romania and Serbia. Exports had risen
even faster, outstripping continued population growth. Bulgaria
still relied on grain for 70 per cent of export value in 1911, barely
 Initial Growth, 1878-1918 25

Table 1.1: Gross Social Product in 1911

Real growth rate
Million Leva per per capita.
leva capita 1904-11 (%)a

Crop agriculture 611 139 0.5

Livestock 217 48
Forestry 97 22
Large-scate private industry 112 26 13
Small-scale private lndustiy 78 18
Minlng 1 0.3
Other, including trade 310 71

epopulation growth averaged 1.5 per cent a yearfor 1904-11.

Source: J . R . Lampe and M.R. Jackson, Balkan Economic History, 75S0-1950
(Bloomington, Indiana: Indiana University Press, 1982), tables 6.1 and 6.2,
pp. 162-3.

Table 1.2: Real Exports per capita, 1886-1910 (annual average)

Per-capita value Real per-capita
Million leva (leva) value (1906-10 prices)
1886-90 62 19.7 28.4
1891-5 78 23.2 31.6
1896-1900 69 19.0 24.5
1901-5 120 30.8 40.3 ^
1906-10 130 30.9 30.9

Source: Lampe and Jackson, Ba/kan Economic History, 1550-1350, table 6.5,
p. 168.

<i,

less than the 72 per cent of 1886-90.

Closer inspection of foreign trade and agricultural production^
however, reveals a less promising picture. Bulgaria recorded a sig­
nificant export surplus, some 25 per cent, only for the period
1901-5. Totals mainly of grain exports to Western Europe were
otherwise matched by totals mainly of manufactured imports from
Germany and Austria-Hungary. Rising international grain prices
after 1900 put Bulgaria's гед/per-capita exports for 1906-10 back
to the level of 1891-5, as Table 1.2 mdicates.
Behind these falling real values lay the top-heavy structure of
Bulgarian exports. They were overly dependent on wheat and corn
sales. The swelling American, Canadian and Argentinian export of
these two grains to Western Europe threatened to reverse the post-
26 Initial Growth. 1878-1918

Table 1.3: Distribution of Cultivated Land, 1897 and 1911 (per­

centages)

Industrial Vineyards, Forage

Grain crops Vegetables fruits crops
1897a 74.0 0.3 2.4 5.0 18.0
1911b 75.9 1.3 3.4 2.6 16.8

ejotal of 2.45 million hectares.

bTotal of 3.32 million hectares.
Source: K. Popoff, La Bulgarie6conomique, 1879-1911 (Paris: 1920), p. 145.

1900 rise in international prices, even i f the First World War had
not intervened. The war and its aftermath were to do worse to
Bulgarian sales (see Chapter 2).
Another danger from over-dependence on one or two staple
exports is of course vulnerability to bad harvests. Grain crops are
particularly dependent on sufficient and regular rainfall. Bulgaria's
most fertile soils in the north-east and south receive less than
500 mm of rainfall a year, as noted in the Introduction. The con­
fluence of droughts and irregular rainfall in the period 1897-1900
was, however, the worst in modern Bulgarian history. By this time
cereal grains covered 76 per cent of cultivated land and 23 per cent
of total arable land. N0 significant change had occurred by 1911.
Two-thirds of the grain produced was winter wheat, 30 per cent
of which was exported. Three failed harvests out of four at the end
of the century cut wheat production in half and total export value
by one-third. Good weather for 1901-5 allowed metric tonnage
harvested to rise by one-half, but the average figure slipped again
by 20 per cent for the next five-year period, because of bad harvests
in 1907 and 1909. Only rising wheat prices, up 40 per cent for
1906-10 over their 1895 low point, allowed wheat sales to maintain
their share of export value."

Peasant Reaction and Protest after 1900

By this time the B^garian peasantry had taken matters into their
own hands. While augmenting the wheat and other grain land
under cultivation by one-third since 1900, they did not increase
marketed sales nearly so fast. The tonnage of wheat exported
actually feU by 25 per cent for 1906-10 versus 18%-1905. Corn
 Initial Growth, 1878-1918 27

exports, mainly from the larger, share-cropped holdings of the

north, rose by just 5 per cent between these two periods and were
stiU just three-quarters of the total value for wheat. Smallholders
on properties under 20 hectares owned over 75 per cent of private
agricultural land. They reacted economically in two ways.
One was to divert some of their wheat and corn crops, barley and
oats as weU, from the market-place to household consumption.
This tactic not only allowed them to protect their standard of living
from another shock of the sort that it had received before 1900. lt
also allowed them to increase their numbers of pigs per capita by 23
per cent and sheep by 7 per cent between 1900 and 1910.'^ These
animals provided more household necessities than the cattle and
horse population, which decUned. Exports of Uvestock or pro­
cessed meat meanwhUe stayed the smallest of any of the Balkan
states, less than 2 per cent of export value, and draft animals were
in short supply.
Another reaction was to develop different sorts of primary
export. The tenfold rise in egg sales, mainly to Germany, from
1891 - 9 to 1907-11, allowed the value of animal products to main­
tain its 10 per cent share of exports. The other agric^tural exports
to increase were also unprocessed and required no refrigeration or
other modern packing. Turnips, kidney beans, and silk cocoons
together accounted for another 7 per cent of 1911 exports. This
variety showed the readiness of the Bulgarian peasantry to respond
to market signals.
It did not prevent the stagnation of per-capita exports after 1905
and their decline in real terms. Despite the limited movement into
new markets, we cannot escape the reduced real growth of grain
exports. The smallholding peasantry was largely free from share-
cropping or plantation-like restrictions. It rationally chose to feed
and provide for its growing numbers. The Bulgarian population
had passed 4.3 million by 1910, from 2.8 milUon in 1880, and was
stiU 81 per cent rural. Natural increase continued to rise at 1.5 per
cent a year during the last pre-war decade. Sustaining this rise was
rural consumption at or above subsistence, as weU as the lowest
rural density among the independent Balkan states, 45 persons per
hectare.
The prospect for long-term economic growth in such circum­
stances, however, was poor. Agriculture outside the market-place
or outside further value added by the manufacturing process, even
if over the level of subsistence, has never encouraged modern
28 Initial Growth. 1878-1918

Table 1.4: Ownership of Private Rura! Land, 1897 and 1908 (per­
centages)
Under 3 ha 3 - 5 ha 5 - 1 0 ha 10-20 ha 2 0 - 5 0 ha Over 50 ha
1897a 11.3 n.o 26.6 26.4 14.7 10.0
1908b 11.6 10.8 26.8 27.8 14.5 8,7

aPrivate rural land totalled 3.98 million of 7.42 million occupied hectares, the latter
covering 76.9 per cent of the state's territory.
bPrivate rural land totalled 4.63 million of 7.98 million occupied hectares, the latter
covering 82.9 per cent of the state's territory.

Source: Popoff, La Bulgarie 6conomique, 1879-1911, pp. 8 7 - 9 7 .

economic development in Europe or elsewhere. Where agriculture

has played the leading role, as with Denmark's dairy production
before the First World War, a marketed suφlus of increasingly
processed exports has been responsible. Even a larger Bulgarian
wheat surplus would not necessarily have prompted a boom in
flour milling, given the small size of the local urban market and the
predominance of Budapest and Bucharest in regional exports.
The great majority of the Bulgarian peasantry continued to con­
centrate on wheat and corn cultivation during the last pre-war
decade, doubtless encouraged by rising international grain prices
and generaUy good harvests. Some of the smallholdings were
simply too smaU to afford a worthwhile marketed surplus. Table
1.4 reveals that one-third of the country's private owners held less
than 2 hectares, and another 30 per cent 2-5 hectares. Literally no
trend toward larger holdings appeared between the 1897 and 1908
data. Worse stiU, these holdings were unconsoUdated, typicaUy
divided among ten or more scattered plots. Half of the holdings
under 2 hectares were in fact plots away from the peasant's own
viUage, so-caUed parakende land.
Modern agricultural equipment and infrastructure was also
wanting. A British consular report of 1893 blamed the first defi­
ciency on the smalUiolders' illiteracy and resistance to new tools or
techniques. Between 1893 and 1910, however, the number of iron
ploughs and other smaU implements grew almost tenfold. Only 18
per cent of aU peasant households had an iron plough as a result,
but the proportion was reportedly 35-40 per cent in the main
grain-growing areas. The use of steam-powered machinery stayed
very smaU, despite a sixfold rise in reaping and threshing units
imported from 1900 to 1911. The few relatively large landowners
 Initial Growth, 1878-1918 29

used up to 40 per cent of this machinery. Yet they typically rented

out a large part of their property to share-croppers and furnished
them with no equipment. These share-croppers, typically small­
holders supplementing their income, accounted for most of the
hired rural labour, whose numbers almost tripled between 1900 and
1910. By then they were oiüy 9 per cent of the active total in agricul­
ture. Hired labour remained in short supply. Little wonder that
wheat and corn yields showed no pattern of significant increase
after 1900."
According to the staple theory of pre-1914 growth, rising grain
exports were supposed to attract investment capital for railways,
port facilities and other infrastructure. For reasons that the next
section wiU make clear, this kind of capital did not come from
Western Europe to Bulgaria in the proportions that went to Canada
or even neighboming Romania, with its huge share-cropping
estates and greater mechanisation. Regular tax revenues paid for
fully half of the railway and port construction in Bulgaria from
1888 to 1912. Railway connections from the main grain-growing
areas to the Danubian ports of Ruse and Svishtov and to the Black
Sea outlets of Burgas and Varna were only partly complete after
442 km of new northern lines opened in 1899. Modern port facili­
ties at Burgas and Varna were also slow to appear. Large ships
could not dock at the latter until 1906. The inland storage siIos and
elevators that were needed to collect smallholders' sales were not
buih at all.
Peasant smallholders trying to cultivate grain or other crops
more intensively for the market were discouraged by both the tax
structure and the supply of credit. The imposition of money taxes,
first on harvested crop value in 1882 and instead on agricultural
property in 1894, had undoubtedly pushed peasants further into the
market-place to pay what they owed, especially in a period of
falling grain prices. The Bulgarian government of the late 1890s
sought to repair growing budget deficits by revising the tax struc­
ture once again. It decided to replace the land tax with a harvest
tithe in kind, just as grain prices were turning upward. The pro­
posal coincided with the series of disastrous harvests noted above.
Peasant protests led by the newly formed Bulgarian Agrarian
National Union (BZNS) forced its abandonment.
The goverimient followed the general European fiscal trend for
the rest of the pre-war period, and turned to indirect taxes. By 1911
they accounted for twice the revenue from direct taxes, nearly
30 Initial Growth, 1878-1918

reversing the relationship of 1900. This policy had the effect,

according to one British scholar, of reducing the effective tax
burden of the peasantry in a time of rising prices.'* They would
normally consume less than urban residents of the manufactures
that bore high sales taxes by 1910. They also faced similar taxes on
some of the goods they sold in the market-place. In return, direct
state investment in agriculture consisted of little more than import­
ing the mulberry trees that had allowed silk cocoons to rise to 1-2
per cent of export value.
Limited agricultural credit also discouraged peasant smallholders
from consolidating their holdings and from farming them more
intensively. Access to mortgage loans and especially to short-term
credit undoubtedly improved after 1903, under thejoint auspices of
the new Bulgarian Agricultural Bank and the rural credit co­
operatives established by the Agrarian Union. It was nevertheless
insufficient.
The influence of the BZNS had declined after its victory against
tithes in kind. Some 400 hastily organised producers' co-operatives
soon disintegrated. Party fortunes revived after 1903, under the
charismatic leadership of Aleksandur Stamboliiski. Trained as a
schoolteacher, like the other Agrarian leaders, he was a powerful
public speaker and a tireless orgaiuser." His desire to eliminate the
monarchy and to organise a Bulgarian republic according to occu­
pational 'estates', with the peasantry predommant over all urban
interest groups, made him a dangerous radical to Ferdinand's suc­
cessive governments. These prevented the Agrarians from winning
more than 15 per cent of the vote in any pre-war election. They
could not, however, prevent StamboHiski's Agrarians from
rebuilding the network of rural co-operatives, now primarily as
credit unions on the Redffeisen model, but sometimes with
insurance, storage and agricultural extension services as well. Their
numbers jumped from 68 in 1904 to 1,123 by 1908. Some 576 co­
operatives with 40,000 members banded together to join the new
Central Co-operative Bank in 1910.
The state-supervised Bulgarian Agricultural Bank (Bulgarska
Zemedelska Banka) had helped the co-operatives to establish this
new institution and had already extended them crucial lines of
current-account credit. Zemedelska Banka was itself a consoUda-
tion into a single bank in Sofia of the rural savings banks intro­
duced under Ottoman rule and revived by the new national govern­
ment in 1880. Opening in 1903, the consolidated bank's assets grew
 Initial Growth, 187S-1918 31

to one-third of the Bulgarian total by 1911 (see Table 1.6).

Mortgage loans, drawn on livestock as weU as landholdings,
amounted to 15 per cent of the Zemedelska's assets by then. Short-
term credit in sums from 500 to 1,000 leva (equivalent to French
francs) were lent to peasants directly or through the BZNS co­
operatives. Large by Balkan standards, these credits allowed
peasants to purchase seed, fertilisers or iron ploughs. The bank also
promoted the introduction of one new crop, sugar beet now refined
as we shaU see for domestic consumption, not for export. These
short-term loans did not, however, result in significant purchase of
steam-powered equipment for grain cultivation, nor did they
promote any noticeable consolidation of scattered peasant plots.
In other words, the best system of agricultural credit in the
pre-1914 Balkan states was not good enough to spread the more
varied and intensive cultivation mandated by the grain crisis of
1897-1900. Had financial conditions permitted, the rising exports
of eggs, kidney beans, turrüps and silk cocoons might have
increased enough to compensate for the relative decUne in wheat
sales. Their marketing might also have been taken over by the co­
operative network from the few European trading firms which had
exclusive rights to their export.

State Finance within the European Monetary System

The rest of Bulgaria's financial structure was a major restriction

facing the relatively extensive network for agricultural credit which
emerged during the last pre-war decade. DespUe a late start in the
1880s, it was already in place weU before the Zemedelska Banka
was consoUdated. That structure unfortunately lacked the strongest
feature of the Western European model, active commercial banks,
and relied instead on the weakest feature, a state central bank com­
mitted to restricted note issue, government loans and an overvalued
exchange rate. In return for this commitment, the Bulgarian
government was nevertheless to receive less favourable considera­
tion from the Western European capital market, based in Paris,
than any other Balkan state.
The initial Bulgarska Narodna Banka had opened unsuccessfuUy
in Sofia in 1879. AU of its modest paid-in capital had been con­
tributed by the state treasury. State funds constituted aU of the 10
milUon leva (francs) worth of paid-in capital, when the original
32 Initial Growth. 1878-1918

institution was successfully reconstituted as a joint-stock bank of

issue. It reopened for business in 1886, further fortified by a 10
million leva loan from Germany's Deutsche Bank. Prince
Ferdinand reserved the right to appoint the bank's entire adminis­
trative council. Thus wedded to the state, the reorganised bank had
estabUshed the silver-backed leva as the country's only legal tender
within a few years.'* Unlike the Ottoman Empire, Bulgaria's com­
mercial framework was therefore sufficiently modernised to accept
domestic paper money by the 1890s.
The subsequent pre-war history of the Bulgarska Narodna Banka
unfortunately revolved around continuing state control and new­
found aspirations to the gold standard. The obvious attractions of
conversions to the gold-backed leva were twofold. It would
eliminate the gold premium for international use of silver-backed
notes and also bring the government more and cheaper access to the
European capital market.
At first, everything went wrong with the Bulgarian plans. The
government's effective borrowing on the European bond market
had totalled just 202 mUlion francs by 1896, mainly for construc­
tion of the aforementioned Orient Express line across Bulgaria and
for payment on the Ottoman Public Debt. The effective interest
rate was high — 6.6 per cent, or one point more than that paid for
much larger sums by Balkan neighbours." By this time the govern­
ment owed nothing to the Ottoman Public Debt, whose admmistra-
tion was primarily in French hands. In 1896, after some brief
interest from the American Rockefellers, the ownership of the
Oriental Railway Company had passed into German hands, those
of the Deutsche Bank. Its attempt to undercut freight rates on the
Bulgarian state lines soon led to a major dispute. Sofia's reaction
was to start construction parallel to the Orient line east of Plovdiv,
but leading north to the Bulgarian port of Burgas, rather than
south to Ottoman territory and Constantinople, as did the existing
line. French representatives on the Debt Administration blocked
Bulgarian efforts to borrow funds to finish the parallel Une or to
buy out the Deutsche Bank. They joined forces with German
interests to deny the Bulgarian government any access to European
capital on acceptable terms until 1902.
To make matters worse, the agricultural crisis of 1897-1900 cut
into the government's anticipated revenues and made repayment
even of existing debt difficult. Only a series of expensive short-term
loans on the European money market covered the deficits. The
 Initial Growth, 1878-1918 33

Table 1.5: Main Financial Indicators, 1886-1911 (in million leva)

State budget revenues Exports BNB emission Foreign debt

1886 49 37 0.1
1890 69 70 2.0
1895 77 84 19.4
1900 81 96 18.2 355
1905 128 125 37.2
1910 181 198 81.6
1911 191 181 110.8 589

Source: Lampe and Jackson, Balkan Economic History, 7550-1950, tables 7.2,7.3,
7.7 and 7.8, pp. 212, 219, 2 3 3 - 4 .

Table 1.6: Distribution of Bank Assets in 1911 (in franc equivalents

per capita)

Central Other Private Foreign

bank state banks native banks banks Total
Bulgaria 71 54 23 21 167
Romania 109 66 73 42 290
Serbia 72 57 110 24 263
Greece 176 0 45 134 355

Source: Lampe and Jackson, Balkan Economic History, 1550-1950, table 7.4,
p.223.

burden of these years on state revenue and central-bank note issue

was as severe, according to Table 1.5, as the upward turn was sharp
during the subsequent decade.
The Bulgarian contribution to the upturn consisted of more than
enjoying better weather and accepting Franco-German terms.
Budgetary reforms, similar to those in the other Balkan govern­
ments after the Greek bankruptcy of 1897, introduced European
standards of accounting. Revenue forecasts became more reUable,
and the state budget was more predictably balanced. New indirect
taxes and more efficient state enterprise (see the next section)
doubled annual revenue between 1902 and 1911 to 199 million leva.
European lenders, now two-thirds French, accepted Bulgarian state
bonds in the effective sum of 464 milUon francs at only 5.5 per cent
interest between 1902 and 1911.
The price of these funds, however, was high m other respects.
The 85 miUion franc French loan eliminated the expensive floating
debt from .short-term borrowing, bUt tied repayment to state
revenues from the tobacco monopoly. The large loans of 1904,
34 Initial Growth. 1878-1918

1907 and 1909 were secured by claims on indirect tax or customs

revenues, and thereby increased state reliance on them. The
Bulgarian govermnent's use of the new loans was itself ques­
tionable. Only 21 per cent was now directed to railway and harbour
construction or other economic purposes, compared with 37 per
cent of the earlier loans. The rest was divided almost equally
between foreign-debt service, the expenses of an expanding state
bureaucracy, and the increased military spending that followed the
bloody Ottoman suppression of the Macedonian uprising in 1903.
The commercial banking system paid perhaps the greatest price
exacted by renewed access to the European capital market. The
central Ьгтк strengthened its position stiU further. Unlike its
Balkan counterparts, however, it continued to lend heavily to the
government. Such lending quadrupled during the last pre-war
decade to reach one-quarter of the bank's assets. This large
fraction mitigates the stim^us to the private sector of a long-
overdue increase in note issue, recorded in Table 1.5. The increase
could have been much larger, had the bank not kept its reserve ratio
over 50 per cent in order to protect the leva's parity with the gold
franc, finally achieved by 1906. According to Table 1.6, Bulgaria's
private commercial bank assets, foreign affiliates included,
remained the smaUest in theindependent Balkan states on a per-
capita basis.
What held back the growth of native banks was not only
restricted note emission and central bank discounting before 1905,
but also the continuing predominance of the two state banks, the
Narodna and the Zemedelska, especiedly in Sofia. Apart from a
branch of the smaU Bulgarska Turgovska Banka of Ruse, no rival
institution opened its doors in the capital city untU 1905. After­
wards the new banks were foreign-owned, but affiUates, rather
than the branches of major European institutions with the much
larger access to loanable funds that they would afford. The com­
bined founding capital of the German Kreditna Banka, the largely
French Generalna and the largely Austrian Balkanska Banka
amounted to 10 miUion leva, only one-half of the enlarged central-
bank figure. Their long-term activities eschewed any of the direct
investment in infrastructure postulated by the staple theory. Their
assets were instead concentrated in municipal loans and in the state
tobacco and match monopolies. Their equally cautious short-term
lending was restricted to mternational trade. The reduction in range
of interest rates, which typicaUy signals the integration of a
 Initial Growth. 1878-1918 35

nationally competitive banking system, did not occur. Bulgarian

banks still charged the highest rates of any Balkan financial struc­
ture in 1911, despite the relatively low 8 per cent levied by the
Agricultural Bank."
A European-style financial structure had indeed been created in
barely twenty years. Yet it remained too top heavy, given the size of
the two state banks, to provide even short-term credit in large
enough quantity and low enough rates for expanding agricultural
exports or import-substituting manufacture. The overvalued leva
which this structure did assure only added to the demand for credit,
making exports more expensive abroad and imported manufactures
cheaper at home.

Modern Manufacturing and its Limits

The top-heavy structures of the Bulgarian financial system and

export market did not bode weU for the growth of modern
industry. Nevertheless, its annual growth during the last pre-war
decade was the most rapid of any of the Balkan states. The real per-
capita increment for large-scale manufacturing between 1904 and
1911 was 13 per cent, compared with 10 per cent for Serbia and 5.3
per cent for Romania during 1901-11." This impressive rate of
growth forms the strongest part of the argument by Bulgarian
Marxist historians, from their founding father and party leader
Dimitur Blagoev forward, that an industrial revolution was already
under way in pre-war Bulgaria.
Simply citing the very smaU base from which this growth began
does not seem a sufficient answer to the Marxist argument. Had
growth continued at the pre-1914 pace for the next thirty years, a
Bulgarian economy unquestionably close to converting the
majority of its labour and capital to industrial activity would have
existed by the time that a Communist government took power in
1944. A more persuasive response would begin by noting that over
half of the 1904-11 growth occurred in the last two years, hardly a
permanent trend. Further counter-argument comes from problems
of supply and demand which would, even in the absence of the two
world wars, have cut modern industrial growth back from its mini-
spurt of the last pre-war decade.
The supply of capital for self-sustained growth was not
promising. The fixed capital already invested in mechanised
36 Initial Growth. 1878-1918

Table 1.7: Industrial Output, Capital and Firm Size in 1911

Gross Fixed
output (Net) capital Average no.
(million (million (million of'workers Average HP
leva) leva) leva) per firm per worker

Textiles 21.6 (9.5) 15.9 67 0.92

Flour 46.3 (5.0) 15.9 11 5.64
Other foodstuffs 18.6 (10.6) 18.5 24 2.32
Leather 5.5 (0.9) 2.8 18 1.27
Chemicals 4.2 (2.5) 3.3 17 1.05
Paper 0.9 (0.4) 1.6 51 1.53
Wood processing 2.7 (1.2) 3.3 63 0.61
Metal processing 3.0 (1.5) 3.3 56 0.42
Construction materials 4.7 (2.9) 6.4 116 0.57

Total 107.3 (34.5) 82.1 39 1.72

Source; Lampe and Jackson, Balkan Economic History, 1550-1950, tables 8.2 and
8.3, pp. 2 4 2 - 3 .

manufacture by 1911, as recorded in Table 1.7, was oidy slightly

larger per capita than the Serbian figure and just one-third of the
Romanian figure. Average horsepower per worker was under 1.5,
or half the Romanian averages, for all branches except flour and
foodstuffs. The variety of specialised production remained very
limited. Gross output per capita in 1911 was stiU one-quarter less
than the smaU Serbian output.^ Even i f war had not intervened,
such an industrial sector could have looked forward neither to
economies of scale nor the wide spread of European best practice.
Lack of specialisation would in any case have discouraged sales
outside the limited domestic market.
Where could Bulgarian industrial firms hope to flnd the invest­
ment funds and the short-term credit needed to expand fixed
capital beyond the very smaU foundation of 1911? Less than 15 per
cent had incorporated themselves. The chances for pubUc sale of
stock issues were in any case Uiruted. Dividends from incorporated
manufacturing amounted to oidy 8 per cent, compared with the
earnings of 10 per cent or more reported by joint-stock banks and
trading companies. Retained earnings were not therefore a Ukely
source of new capital.
The lower profit available in mdustry provides one obvious
reason why native or foreign banks generaUy avoided stock owner­
ship or other long-terra investment. Native banks were further con­
strained, as we have seen, by their smaU size. The two largest even
 Initial Growth, 1878-1918 37

then cut back the share of their assets directly invested in industry
from 10 per cent to 5 per cent during the last pre-war years. Of the
five banks with European backing, by 1911, aU had political origins
in Great Power rivahies, which put no premium on Balkan indus­
trial development. The banks' principal direct investments, outside
the state monopolies, were in cement and sugar manufacture, plus
coal and copper mining. Private industry received perhaps 3-4
miUion leva from them by 1911, plus another 3-4 miUion directly
from Belgian mining interests. The combined sum was just 10 per
cent of total investment in private industry.^'
Short-term credit came no more easily. The huge Bulgarian
central bank trimmed the industrial share of its loans on discounted
biUs of exchange and current-account overdrafts from 20 per cent
down to 10 per cent during the last pre-war decade. According to
the complaints of Bulgarian manufacturers, the new European-
backed banks in Sofia after 1905 drained away much of this largest
source of loanable funds. Remaining funds were in any case given
overwhelnwngly to manufacturers in the Sofia area, where joint-
stock industrial profits were one-half of the modest national
average. For their part, the European banks coruistently charged
industrial borrowers interest rates 4-5 percentage points higher
than their other customers paid.
The supply of labour also Umited the potential for further indus­
trial growth. After 1900 it was scarce and increasingly expensive.
Rising prices on the international grain market combined with the
rapidly growing populations of the capital cities to push up urban
food prices some 30-40 per cent by 1911 in aU the Balkan states.^
Labour protests and the young socialist movement helped bring
wages up to cover most of these increases, i f not to provide suffi­
cient income for housing as weU. Sofia's industrial wages were the
highest of any of the Balkan capitals. It had after aU been a com­
mercial backwater without significant artisan industry before inde­
pendence in 1878. Constructing a European-style capital and
supporting state-encouraged industry had attracted some Bulgarian
labour, but not enough. State employees stiU outnumbered
industrial workers 3 to 1 in 1910. The resulting shortage and higher
wages attracted migrant labour from Serbia, at least for
construction.
The large force of artisan labour created in the upland towns
along the Balkan range was not much attracted. Enough stayed to
keep artisan numbers, part-time rural producers excluded, at half
38 Initial Growth, 1878-1918

again the total employment of 16,000 in large-scale manufacturing.

The rest, spinners and weavers of woollen textiles, had left for
lowland agriculture long before 1900. Where 60,000 or 70,000
artisans had been employed in the upland towns during the 1860s,
the new textile factories had only 1,200 employees by 1903 and
4,300 by 1911. Factory production had risen from 11 per cent to 82
per cent of Bulgarian woollen output between 1870 and 1903; it was
now the largest branch of Bulgarian industry, apart from flour
milling. Over the same period, according to the British economic
historian Michael Palairet, so many artisans left to become peasant
smallholders and to raise sheep with lower-quality wool for their
own consumption that the per-capita Bulgarian consumption of
manufactured wool dropped by almost one-half.^'
This reduction in domestic woollen demand was perhaps
exceeded by increases for other sorts of manufacture, but not by
much. Sofia's population had risen rapidly from 20,000 in 1880 to
102,000 by 1910, but a majority of that increment had migrated
from other Bulgarian towns." The country's overall urban popula­
tion (towns exceeding even 2,000) remained virtually unchanged at
19 per cent. The prospects for domestic Bulgarian demand before
1914 were thus modest.
In addition, imports of European manufactures now absorbed a
significant share of the domestic market, foodstuffs largely
excepted, as they had not done in Ottoman times or even in the
pre-1900 period. Textiles were the largest single import throughout
the pre-war decades, stiU amounting to 28 per cent of the total 1911
value. Their 55 miUion leva-worth almost tripled the 21 mUlion leva
of native, large-scale manufacture. Import substitution would have
to come before export expansion for industrial growth to continue,
or so it seemed to contemporary Bulgarian observers.

The Industrialisation Debate and Economic Policy

Modern industry and what to do about it lay at the heart of an

ongoing debate over economic policy. The debate occupied the
centre of the Bulgarian political stage for much of the pre-1914
period. The issue of industrialisation was more widely and hotly
debated in Sofia than in any of the other Balkan capitals. In
Athens, Bucharest and Belgrade, economic issues were secondary.
Not so in Sofia. The key to national assertion seemed from the
 Initial Growth, 1878-1918 39

Start to lie more with choosing the correct strategy for economic
development than with pursuing the seemingly futile goals of
parliamentary democracy or the claim to Macedonia. Prince
Ferdinand would not hear of one, nor the Great Powers of the
other.
An initial economic debate in the 1880s had dealt with railway
construction. The questions were where to build the cross-country
lines and who was to build them. By the turn of the century, some
1,345 km of largely east-west track had been added to the 221 km
of the original 1868 line from Ruse to Varna. All but the Oriental
line's 379 km east of Plovdiv were state-owned. Commerce had stiU
to jump sharply upward once the new lines were open. Internal
trade rose by only one-quarter and external trade even less from
1885 to 1895.2' Something more was needed, but what?
The start of the industrialisation debate may be found in early
issues of the journal of the Bulgarian Economic Society, founded
in 1895. The country's agricultural crisis, which began the follow­
ing year, was undoubtedly a catalyst. For solutions, educated
Bulgarians drew on schools of thought in Germany or Russia,
where the great majority of several thousand university graduates
had received their training. More of the country's political leaders
appear to have been trained specifically in economics than their
counterparts elsewhere in the Balkans, where lawyers or engineers
predominated.
By the turn of the century there were few leaders opposed
entirely to modern industry. Their conservatism typicaUy derived
not from European ideas, but from nativist opposition to raUways,
European capital and modern industry as vehicles for 'foreigners
from whom we have more to fear than an epidemic'. Russian popu­
list ideas and immigrants had informed the Agrarian Union's oppo­
sition to industry, when it was first established in 1899.^ Its later
revival under Aleksandur StamboUiski saw the BZNS favour the
continued existence of artisan manufacture, but not decry modern
industry, as opponents often charged, unless it resorted to cartel
restrictions. The answer then, according to Stamboliiski's repeated
statements in Subranie debate, was not to cripple modern industry,
but rather for the state to take over control of the cartels.
By the last years a rough consensus was also emerging eunong the
other political leaders to go ahead with industrialisation. The only
stipulation was to protect artisan and agricultural interests,
especiaUy against abuses by foreign capital. Even the ardent
40 InitialGrowth, 1878-1918

industrialiser Ivan Estatiev Geshov, Finance Minister in the 1890s

and Prime Minister for 1911-13, came to favour the promotion of
food processing, despite his vision of Bulgaria as another Belgium,
because of their common coal resources. He was a German-style
National Liberal, in fact, if not in party label, whose ardent protec­
tionism belied his economics training in the stronghold of free
trade. Great Britain. Dimitur Blagoev, head of the 'Narrow'
Socialist Party which broke with the 'Broads' in 1903, was more
faithful to his schooUng in Russian Marxism. He argued for indus-
triaUsation as the precondition for socialist revolution. The
majority of other political figures drew instead on German stage
theory and Friedrich List's protectionist doctrine to advocate the
protection of infant industry, preferably using agricultural raw
materials, so that the Bulgarian economy could move to a higher
stage.^' They continued to disagree over how to control foreign
investment, but most agreed that it was necessary. The majority
also shared the enthusiasm of Andrei Liapchev, Agriculture and
Trade Minister during 1908-10 and later Prime Minister during
1926-31, for agricultural co-operatives (Stamboliiski's BZNS
aside) and for the promotion of crops other than grain.
The same sort of consensus emerges on import tariffs and legisla­
tion to encourage private industry. Here were the two main policy
tools available to any pre-1914 government. The terms ofB^garia's
1882 agreement with the Ottoman Empire aUowed renegotiation of
the basic Ottoman rate of 8 per cent ad valorem only every seven
years. After an 1890 agreement with Great Britain, the Bulgarian
government signed treaties with all the Great Powers and with
Serbia in 1897 for a general rate of 14 per cent plus a few rates speci­
fically higher. The first comprehensive Bulgarian tariff regulation
was carefully prepared between 1900 and 1905. Its entirely specific
rates set maxima averaging 25 per cent ad valorem. That level
seemed to follow the protectionist example set by Romania and
praised by Geshov and his allies in the Subraide. In fact, the
Romanian average was 33 per cent ad valorem, mainly because of a
29 per cent rate for manufactures, compared with just 20 per cent
for Bulgaria.^' The great majority of Subranie delegates favoured
some increase, but were reluctant to offend agric^twal interests by
passing a genuinely protectionist tariff. This emerges clearly from
the actual ratio of tariff revenues collected to total import values.
The Bulgarian ratio was fully 21 per cent. Imports were little deter­
red, in contrast to Romania with an actual ratio of oiJy 11 per cent.
 Initial Growth, 1878-1918 41

Legislation for industrial encouragement in pre-1914 Central and

Eastern Europe consisted of exempting private firms from certain
taxes and import tariffs, as weU as a reduction in railway freight
rates. Geshov himself drafted the first Bulgarian legislation, passed
in 1894 for ten years' duration. It applied to heavy industry, textiles
and sugar refining. Revisions followed in 1905 and 1909. The 1905
provisions were to last for twenty years and were extended to food,
if not tobacco processing. To qualify, firms had to employ a
minimum of 20,000 leva capital, 15 employees and 5 horsepower,
aU sUght reductions. By 1909, registered firms accounted for just
over 75 per cent of production from aU enterprises meeting the
minima. Unregistered firms presumably wished to avoid the
increasingly rigorous requirements that this legislation introduced
for financial reporting and at least some tax payment.
The economic impact was, however, uncertain. Combined
exemptions for 1912 amounted to 4 per cent of industrial capital,
but industrial profits showed no clear upturn for encouraged firms.
They stiU lagged behind bank and trade profits.^^ The exemptions
encouraged concentration in Sofia, their political source, stiU
further. The customs exemptions also led a number of Sofia manu­
facturers to import more inputs than needed in order to seU them
on the open market. In 1909 encouragement was extended to firms
with as few as 10 employees. Some were plainly artisan enterprises,
thus subverting the original intention of promoting modern
manufacture.
Other, more direct initiatives, although never co-ordinated under
a coherent programme, laid more groundwork for the state control
of industry than did tariffs and encouragement laws. Mineral
lands, limited to coal and some copper, were largely state property.
The state coal mines, principally the Pernik complex near Sofia,
accounted for 90 per cent ofthe coal mined in Bulgaria and over 60
per cent of its consumption. Industrial firms had to rely on British
imports and often complained of shortages. The state railway took
the majority of domestic coal.
From 1901 to 1911, the state railway system had grown by over
one-third to 1,928 km. The acquisition of the 435 km held by the
Oriental Railway Company in 1908 was soon foUowed by the con­
struction of 300 km of badly needed connecting lines in 1909-10.'«
The railways undoubtedly contributed much to the doublmg of
internal and foreign trade between 1901 and 1911. Yet the network
was stiU not lafge enough, as in the Romanian case, to stimulate
42 Initial Growth. 1878-1918

the growth of domestic metallurgy ог machine production. The

system nevertheless earned revenues in 1911 that amounted to 14
per cent of state budget receipts. Railway earnings and those of the
several state monopolies had risen almost as fast as indirect taxes
after 1900. Together these earnings acounted for one-third of the
1911 budget. Without these earnings, in other words, budget
receipts could not have increased at 11 per cent a year during the
last pre-war decade, one percentage point faster than exports.
The tobacco monopoly earned twice the revenue of the match
and other monopolies. Its operation under licence to the large
European-backed banks helped ensure foreign-debt repayment.
Arbitrary price increases also served this end, while keeping exports
to a minimum. Its 40 enterprises, from a total of 58 tobacco
processors, were tied together under a cartel arrangement that state
regulations had sanctioned in 1905. The arrangement merged a
number of smaUer firms and soon covered 70 per cent of produc­
tion, by far the most comprehensive of the half-dozen pre-war
cartels."

The State's Economic Role in the First World War

More direct state control of the economy received a special

impetus, as elsewhere in Europe, from the First World War. The
two Balkan wars of 1912-13 were too brief to bring pressures to
bear for mobiUsing the entire economy. The four wartime years
from 1915 to 1918 were more than long enough. In 1915, Bulgaria's
army of 800,000 men joined German and Austro-Hungarian forces
in ousting the Serbian army from Macedonia. Then it settled into
holding the so-caUed SaloiUka Front on Bulgaria's southern
border. The army faced an ever stronger force assembled by the
Entente powers. This Allied force, although buoyed by a re-
equipped Serbian army, was unable to break through the Bulgarian
defences of the south-eastern Macedonian uplands untU September
1918. Without some success in organising the resources of the home
front, the costly Bulgarian war effort could not have continued as
long as it did.
For agriculture, the war years began and ended badly. The
Second Balkan Wsu- of 1913 had seen the loss to Romania of the
southern Dobrudja (see Map 1), a territory which had accounted
for 20 per cent of grain production. Bad weather in 1914 held the
 Initial Growth, 1878-1918 43

harvest of aU crops to 79 per cent of the 1908-12 average on

post-1912 territory. By 1915, however, the pre-war level of produc­
tion, Dobrudja excluded, had nearly been regained. It would not
sUp badly again untU 1918. Then drought and a disintegrating
mUitary situation combined to keep crops to 52 per cent of the pre­
war level. Even grain imports from Germany, which exceeded
exports, failed to prevent near famine.
State controls contributed sigiuficantly to both initial success and
ultimate failure." In 1915 thegovernment created the Committee
for PubUc Welfare (KZOP) to set prices for authorised exports,
essentially to the Central Powers, and to ban aU others. It
empowered the central and agricultural banks as weU as the local,
or obshtina governments to purchase aU grain and milk, and to
control the sale of flour mills. This apparatus worked weU enough
for exports, but could not control the domestic market, especially
where the army's General Commission for Requisitions took an
interest. The Subranie soon expanded the Committee's powers to
encompass aU areas of the economy related to the war effort. Its
plans for cultivated acreage were enforced through the co-operative
network. Reorganised in 1916 as the Central Committee for
Economic and Public Welfare, it was now responsible for military
as weU as civilian supplies and was authorised to control produc­
tion directly. Although cultivated area, agricuhural labour, draft
animals and transport were down by over one-fifth from pre-war
levels, production held up better. The general staff continued to
press for control of its own foodstuffs. In 1917, this civiUan
Committee was reorganised under müitary auspices as the so^:alled
Directorate. Army agronomists were assigned stiU wider powers
over crop cultivation. Troops were brought in to help with the
harvest. Forced requisitions began. These measures were supposed
to increase the delivered surplus and to restrain a growing black
market. The Directorate's decision to keep delivery prices low only
boosted the black market. By 1918, peasant resistance to these
miUtary requisitions became widespread. The food stores that the
local government had opened in town now had empty shelves. The
rationing coupons that the central government had introduced in
1916 became worthless.
Private industry went through a similar experience. The growing
powers of the government's Committee and then the Directorate
placed 42 per cent of aU industrial labour and fully 60 per cent of
production under state control by 1917. New cement and sugar
44 Initial Growth, 1878-I9I8

cartels added to official leverage. So did the severalfold increase in

the value of joint-stock incoφorations, principaUy in Sofia, where
the ministerial bureaucracy or the Directorate pronuised war con­
tracts. Coal mines, already 90 per cent state-owned, as we have
seen, doubled their production to compensate for the end of
imports. The supply of labour and imported inputs had by 1918
dropped enough to cripple industrial production. Only 30 per cent
of large-scale manufacturing firms stiU worked regularly, two-
thirds of them for army contracts. Artisan shops began to go out of
business.
Bulgaria's wartime alliance with Germany encouraged the
increasingly military effort to mobilise aU resources in both of their
now isolated economies. Their sources of supply in Western
Europe had been severed. The German war effort was assumed,
wrongly as h turned out, to have been the most successful among
the European powers. The Bulgarian alliance with Germany
included copying this model for mobiUsation. It extended to trade
and finance, as weU as to industry. Like the later alUance of
1941-4, the economic consequences were in the end as disastrous
as the political ones.
The initial Bulgarian experience was promising. The govern­
ment's large budget deficits of the period 1912-14 had been
accompanied by import surpluses nearly as large. German loans,
beginning with 270 miUion leva through the BerUner Disconto-
Gesellschaft in July 1914, had cut that year's budget deficit in half.
Subsequent German loans and subsidies would cover half of the
Bulgarian deficits for the period 1914-18. Huge German purchases
of Bulgarian tobacco replaced the lost Belgian grain market.
Tobacco sales, which were 77 per cent of the total exports, gener­
ated trade surpluses until 1918. Over half of export value went to
Germany throughout. The leva held to 75 per cent of its pre-war
value untU the end of 1916, before falUng to 50 per cent by 1918."
Less favourable features of the German alUance increasingly
came to the forefront. From the start, the expensive Bulgarian
miUtary presence in Macedonia did not give its government control
of the most valuable economic resources there. Mines were placed
in German hands. So was the railway system, eventually extending
to the Oriental RaUway Une from Sofia to Nis and Belgrade.
German authorities took over the Bulgarian copper mine at Plakal-
nitsa from its previous Western European ownership, and pur­
chased a majority share in the main coal mine at Pernik to enswe
 Initial Growth, 1878-1918 45

access for mining operations. Minerals, tobacco and also grain

were exported to Germany at prices weU below the international
level. Trade agreements in 1916 and 1917 ratified these terms.
German coUection centres for the forced delivery of agricultural
produce operated not only in Macedonia and occupied Serbia, but
in Bulgaria proper. These goods, as weU as unauthorised purchases
or seizures by individual German soldiers, could aU be taken north
to the Fatherland on a railway system free of Bulgarian control.
Thus the quantity and value of Bulgarian food and mineral exports
to Germany recorded in Sofia for 1916-18 was one-half or less of
the totals set down as received at the German end of the line.'* This
drain undoubtedly added to shortages and inflation in Bulgarian
towns during the last years of the war.
The near famine which overtook a defeated Bulgaria in the faU
of 1918 was only the most visible sign of an economy in crisis.
Macedonia was abandoned, along with any hope of access to the
Aegean Sea. A depreciated currency and a discredited government
were stiU in place. Back from the front came a once proud army,
now demoralised. It had fought for four years at a cost of 101,000
lives, after losing 54,000 in the Balkan wars, and had lost in the
end. Rapid recovery in the post-war period seemed an unUkely
prospect, especiaUy if grain exports or convertible currency on the
pre-war pattern would be requbed for loans from the victorious
Entente powers. Oidy the arrival of an emergency purchase of
American wheat would prevent literal starvation in 1919.

Notes

1. A good brief summary of the Bulgarian national revival may be found in

Barbara Jelavich, History oftheBalkans, vol. I (Cambridge: Cambridge University
Press, 1983), pp. 335-48.
2. See Charles Jelavich, Tsarist Ri4ssia and Balkan Nationalism: Russian Influ­
ence in the Internal Affairs of Bulgaria and Serbia, 1879-1886 ^erkeley,
California: University of CaUfornia Press, 1958); and George F. Kennan, The End
ofBismarck's European Order (Princeton, New Jersey: Princeton University Press,
1979), pp. 103-219.
3. From the aptly titled biography by a descendant of the politically eminent
Danev family, Stephen Constant, Foxy Ferdinand: Tsar of Bulgaria (New York:
Franklin Watts, 1980). The one recent Western survey of the country's history
throughout this period concentrates instructively on the unfortunate dynamics of
internal poUtics. See Richard J. Crampton, Bulgarian 1878-1918: A History (New
York: Columbia University Press, 1983).
4. See, for instance, Nikolai Todorov, The Balkan Town, 15th-I9th Centuries
(Seattle, Washington: University of Washington Press, 1983); and Nikolai Todorov
46 Initial Growth, 1878-1918

et al., Stopanska istoriia na Bulgariia, 681-1981 [Economic History of Bulgaria,

681-1981] (Sofia, 1981), pp. 162-213.
5. For a summary of the evidence that the chiflik covered perhaps 20 per cent of
cultivated land and occupied 10 per cent of peasant labour by the early nineteenth
century, see John R. Lampe and Marvin R. Jackson, Balkan Economic History,
1550-1950: From Imperial Borderlands to Developing Nations (Bloomington,
Indiana: Indiana University Press, 1982), pp. 133-7.
6. Ibid., pp. 139-45. Also see Todorov, The Balkan Town, chs 4-6. The model
for *proto-industrialisation', as posited by Franklin Mendels for some of eighteenth-
century Western Europe, calls in part for rising artisan manufacture from seasonally
unemployed agriculture labour that reaches beyond the local market. Franklin
Mendels, 'Proto-industrialization: The First Phase of the Process of Industrializa­
tion', JournalofEconomicHistory, vol. XXXII, no. 1 (1972), pp. 241-61.
7. Lampe and Jackson, Balkan Economic History, pp. 149-52. Also see
Roderick H. Davidson, Reform in the Ottoman Empire, 1856-1876 (Princeton,
New Jersey: Princeton University Press, 1963), pp. 136-71.
8. Crampton, Bulgaria, 1878-1918, table 1, p. 176.
9. Liuben Berov's evidence for this estimate is summarised in Todorov et al.,
Stopanska istoriia na Bulgariia, pp. 217-35. Nearly one-fifth of the cultivated area
had changed hands between 1878 and the 1897 land census. Crampton, Bulgaria,
1878-1918, pp. 177-86.
10. The estimate for average annual growth of 0.5 per cent for 1860-1910, com­
pared with 1 per cent for 20 European countries, found in Paul Bairoch, 'Europe's
Gross National Product, 1800-1975', Journal of European Economic History,
vol. 5, no. 2 (1976), p. 283, rests on doubtful trade data for the early period, which
probably understates the rate of Bulgarian growth. The best Bulgarian estimate, in
Kiril Popoff, La Bulgarie aconomique, 1879-1911 (Paris, 1920), p. 516, is much
higher, 2 percentayear for 1892-1911, but uses uncertain datafor 1892anda 1911
figure which is undoubtedly overstated. For further discussion, see Lampe and
Jackson, Balkan Economic History, pp. 160-5.
11. On price movements, see Zhak Natan et al., Ikonomika na Bulgariia, vol. 1
(Sofia, 1969), p. 363; on grain area and output, Lampe and Jackson, Balkan
EconomicHistory, tables 6.7-6.8, pp. 171-2.
12. Lampe and Jackson, Balkan EconomicHistory, table 9.6, p. 293. On the dis­
tribution of agricultural exports, see Statisticheski godishnik na Bulgarskoto
Tsarstvo [Statistical Yearbook of the Bulgarian Kingdom], 1911 (Sofia, 1912),
pp. 304-13.
13. Table 6.13, in Lampe and Jackson, Balkan EconomicHistory, p. 188, shows
wheat and corn yields of 9.3 and 10.1 quintals per hectare for 1906-10, compared
with 9.9 and 10.4 for 1896-1905. British consular reports detaiUng Bulgarian agri­
cultural practice may be found in British Parliamentary Papers, Annual Series,
XCII (1893), L X X X I (1901), no. 2642, no. 1300, XCVII (1904), no. 3236, CXXII
(1906), no. 3630, C l X (1908), no. 4132, and X C (1911), no. 4609. Statisticheski
godishniknaBulgarskoto Tsarstvo 1912, p. 165, provides a complete breakdown of
agricultural equipment in use for 1893 and 1910.
14. Michael Palairet, 'Land, Labour and Industrial Progress in Bulgaria and
Serbia before 1914', JournalofEuropeanEconomicHistory, vol. 12, no. 1 (1983),
pp. 81-96. For a contrary view on indirect taxation and detail on the struggle over
tithes and the land tax, see Crampton, Bulgaria, 1878-1918, pp. 206-8, 260-7,
358.
15. See John W. Bell, Peasants in Power: Alexander Stamboliski and the
Bulgarian Agrarian National Union, 1899-1923 (Princeton, New Jersey: Princeton
University Press, 1977), pp. 22-84.
16. The last Russian silver-backed roubles and Ottoman silver coins had by then
 Initial Growth, 1878-1918 47

been driven from their fmal refuge, Austrian construction sites for the Oriental Rail­
way route across Bulgaria to Constantinople. Jelavich, Tsarist Russia and Balkan
Nationalism, pp. 65-73, 96, 107. On the founding of the Bulgarska Narodna
Banka, see John R. Lampe, 'Finance and pre-1914 Industrial Stirrings in Bulgaria
and Serbia', Southeastern Europe, vol. II, no. 1 (1975), pp. 35-42.
17. See Lampe and Jackson, Balkan Economic History, table 7.7, p. 233. For
further details on Bulgarian borrowing, see Lampe, 'Finance', pp. 35-78; and
Tsvetana Todorova, Diplomaticheska istoriia na vunshnite zaemi na Bulgariia,
1878-1912 [A Diplomatic History of Bulgarian Foreign Loans, 1878-1912] (Sofia,
1971), pp. 11-27.
18. Table 7.5, in Lampe and Jackson, Balkan Economic History, p. 225, shows
that private Bulgarian banks had a net profit on total assets, a surrogate for interest
levels, of 2 per cent in 1911, compared with figures under 1 per cent for Romania
and Serbia. On the various activities of Balkan domestic and foreign banks, see
ibid., pp. 219-35.
19. See Lampe and Jackson, Balkan Economic History, table 6.2, p. 163. See
Marvin R. Jackson and John R. Lampe, 'The Evidence of Industrial Growth in
Southeastern Europe before the Second World War', East European Quarterly,
vol. XVI, no. 4 (1983), pp. 393-3.
20. Tables 8.2-8.3, in Lampe and Jackson, Balkan Economic History,
pp, 242-3, include Romanian and Serbian data. Also see John R. Lampe, 'Varieties
of Unsuccessful Industrialization: The Balkan States before 1914', Journal of
Economic History, vol. XXXV, no. 1 (1975), pp. 56-85.
21. Lampe and Jackson, Balkan Economic History, pp. 254-62; Asen
Chakalov, Formi, razmer i deinost na chuzhdiia kapital v Bulgariia, 1878-1944
(Structure, Extent and Activity ofForeign Capital in Bulgaria, 1878-1944] (Sofia,
1962), pp. 54-8.
22. See Lampe and Jackson, Balkan Economic History, table 8.4, p. 245; also
pp. 238-44.
23. For an extensive case-study of Bulgaria and Serbia, see Michael Palairet, 'The
Decline of the Old Balkan Woollen Industries, 1870-1914', Vierteljahrschrift für
Sozial und Wirtschaftsgeschichte, vol. 70, no. 3 (June, 1983), pp. 331-62.
24. The growth of Sofia is treated in John R. Lampe, 'Modernization and Social
Structure. The Case of the pre-1914 Balkan Capitals', Southeastern Europe, vol. 5,
pt2(1979), pp. 11-32.
25. Natan et al., Ikonomika na Bulgariia, vol. I, pp. 348-50.
26. Bell, Peasants in Power, pp. 16-21.
27. Zhak Natan (ed.), Istoriia na ikonomickeska misul v Bulgariia lA History of
EconomicThought in Bulgaria], vol. II (Sofia, 1973), pp. 70-8, 156-81, 275-88.
28. See Lampe and Jackson, Balkan Economic History, table 8.8, p. 266.
Liapchev himself gives a thorough review of Bulgarian tariff policy and sets out his
own advocacy of agriculture-related protectionism in Spisanie na bulgarskoto
ikonomichesko druzhestvo, vol. VIII, no. 10 (1904), pp. 697 -721.
29. Lampe, 'Varieties of Unsuccessful Industrialization', pp. 79-85. On the
several industrial laws, see Crampton, Bulgaria, 1878-1918, pp. 372-4.
30. The Russian loan of 1909 confirmed the acquisition of the Oriental Railway
Company line, claimed by the Bulgarian government since its declaration of
complete independence from the Ottoman Empire in 1908. On railway and port con­
struction, see Doklad do Ferdinand I ot Ministarski Savet, 1887-1912 [Report to
Ferdinand I from the Council of Ministers, 1887-1912] (Sofia, 1912) pp. 711-35.
31. On the tobacco monopoly and tax structure, see Natan et al., Ikonomika na
Bulgariia, vol. I, pp. 384-6, 402-4; and Statisticheski godishnik, 1912,
pp. 349-57.
32. For a brief account see Crampton, Bulgaria, 1878-1918, pp. 491-500;
48 Initial Growth, 1878-1918

Todorov et al., Stopanska istoriia na Bulgariia, pp. 287-94; and, for details,
G. Danailov, Les effets de la guerre en Bulgarie (Paris, 1932).
33. On wartime foreign trade and finance, see Crampton, Bulgaria, 1878-1918,
pp. 476-88.
34. Vera Katsarkova, 'Ograbvaneto na Bulgariia ot germanskiia imperializm'
[The Exploitation of Bulgaria by German Imperialism], Trudove na V.I.I. Karl
Marx, vol. II (1969), pp. 164-223. For a brief survey, see Leo Pasvolsky, Bulgaria's
Economic Position after the War (Washington, DC: Brookings Institution, 1930),
pp. 53-60.
 R E C O V E R Y IN T H E 1920s

Bulgaria's military defeat in 1918 left a legacy of recrimination

which was to last for the entb-e inter-war period. Bitterness settled
over Sofia like the city's winter fog. Political opinion became so
divided that aU sides were ready to resort to violence. The prospects
for a multi-party system of Western parUamentary democracy were
dimmer than ever, despite the hasty abdication and departure of
Tsar Ferdinand. His son Boris assumed the throne in October 1918,
at the young age of 24. Adding to the unsettled political situation
were at least 220,000 refugees from the lost Macedonian lands and
from previously Ottoman Thrace, now north-eastern Greece. They
poured into the Pirin region on the Yugoslav border or the shanty
town that quickly grew up in the western quarter of Sofia. Their
divisions and irredentist frustrations were soon to make 'another
Macedonian murder' a common newspaper headline in the capital
city. By 1920, the burden of AlUed war reparations hung over the
entire country. The phrase 'bulgarska rabota', or a piece of
Bulgarian work, began to spread in the Sofia caf6s as a cyiucal
synonym for something gone wrong because Bulgarians had laid
their hands on it.
How, then, is one to explain the relatively strong domestic
recovery and significant restructuring of foreign trade that charac­
terised the Bulgarian economy during the 1920s? One reason surely
was the co^try's compact character. It had no new territory or
hostile ethnic group to assinUlate from what had previously been
Austria-Hungary. Such assimilation posed immense problems in
greatly expanded Romania and newly constituted Yugoslavia and
Czechoslovakia.
Bulgaria's politicalspectrum was, to be sure, neither compact
nor converging. The divisions of the immediate post-war period
only grew sharper over the next decade. The Bulgarian Agrarian
National Union (BZNS) and Narrow Socialists, now the Bulgarian
Communist Party (BKP), had been the parties consistently opposed
to participation in the First World War, The two not surprisingly
won half of the votes in the relatively free election for the Subranie
in 1919, and fully 58 per cent in 1920, The Communists had

49
50 Recovery in the 1920s

increased their share to 20 per cent by 1920 at the expense of the

fading Broad Socialists, now Social Democrats. The Agrarian
shares of 31 per cent and then 38 per cent in the two elections had
allowed them to form a government in October 1919 and to keep
control in 1920. Yet the radiced Agrarian regime of Aleksandur
Stamboliiski had too many enemies and too few friends to survive
beyond June 1923. Its violent overthrow began with Stamboliiski's
brutal murder. An unholy aUiance between army officers, leaders
of the pre-war establishment and irredentists of the Internal Mace-
doiuan Revolutionary Organisation (IMRO) carried out the coup
d'itat. The failure of Stamboliiski and the Communist Party to co­
operate in any way, now regretted by party historians, and the
general hostility of Great Britain and France to the Stamboliiski
regime over the reparations issues, left the Agrarians without any
powerful alUes of their own.'
The new regime broadened its base through a so-called
Democratic Concord to include some five pre-war political parties.
The Social Democrats decided to join this mixture of liberals and
conservatives. Anti-monarchist Democrats stayed out. Agrarians
and Communists were excluded. The BZNS soon split into emigri
and resident factions, a division which was to plague the party for
the next twenty years. The failed Communist uprising of September
1923 saw at least 5,000 peuty members killed and some of the party
leadership forced into exile in the Soviet Union. Now illegal, the
party was none the less able to establish the surrogate Bulgarian
Workers Party in 1927.
Aleksandur Tsankov, a proto-fascist leader of both the June
coup and the September defeat of the Communists, had meanwhile
failed to retain his leadership of the Democratic Concord beyond
January 1926. Opposition to his arbitrary methods hardened
during the economic slump of 1925-6. The more moderate Andrei
Liapchev now became Prime Minister and headed a series of coali­
tion cabinets. Liapchev survived one resignation crisis in 1928 to
rule until April 1931. He was himself born in Macedonia. His
leniency, for whatever reason, allowed a resurgence of Macedonian
violence and virtual IMRO autonomy in the Pirin region, including
some collection of taxes.
Significant political differences separated the three leaders of
these post-war regimes. Aleksandur Stamboliiski was an Agrarian
populist. His opposition to the First World War had put him in
prison for its duration. Aleksandur Tsankov had helped to orgardse
 Recovery in the 1920s 51

the civilian Committee for Public Welfare during the war and
wanted to remobilise Bulgarian society on the same military
principles afterwards. Andrei Liapchev rejected the state's wartime
ascendancy, on the basis of his own experience in the Ministry of
WiU- in 1918. He wished to rely instead on pre-war European
principles of national liberalism. In different ways, each of these
three men contributed to the growing Bulgarian tradition of
political, although not religious or ethnic, intolerance.
Their economic policies had more in common. AU three regimes
were obviously struggling with the economic consequences of a lost
war. AU were without the consistent support of any of the vic­
torious Western powers. In addition, the three leaders conceived of
any solution to Bulgaria's problems primarily in economic terms.
Unlike most of their counterparts elsewhere in south-eastern
Europe, who were primarily lawyers, they had been trained in
economics. Stamboliiski had studiedagronomy in a German
university and was a schoolteacher. He beUeved in private peasant
property linked by the co-operative movement as the foundation
for organising a better society. Occupational groups would be the
basis for representational democracy.^ To him, the huge peasant
majority among the Bulgarian population justified his one-party
regime. Tsankov was a fully trained economist who had risen to the
rank of professor at Sofia University, a forum through which he
continuedto express his views after being forced from power.
Liapchev had studied economics and finance during his university
days in Zurich, Berlin and Paris. He was also a founder of the co­
operative movement in Bulgaria, Minister of Agriculture and Trade
for 1908-10, and as Minister of Finance in 1915, the major figure
in unifying the growing number of popular savings banks. The
primacy of economic programmes for these three men combined
with continuing external restraint to create a more consistent set of
post-war poUcies than their poUtical differences would suggest.

The Shift from Wheat to Tobacco Exports

After the disastrous drought of 1918, more difficulties awaited

Bulgarian grain cultivation during the post-war decade. Bad
weather in 1921-2, 1924 and again in 1929 meant more bad har­
vests. The loss of the southern Dobrudja (see Map 1), as we have
seen, had reduced the marketed wheat surplus by 20-25 per cent of
52 Recovery in the 1920s

the pre-war export level. This reduction cut the domestic wheat sur­
plus from northern Bulgaria in half. The new territory in the south­
west ran a grain-deficit, which claimed 30 per cent of the smaUer
domestic surplus in the south. What wheat and other grain
remained available for export faced other constraints. Western
European demand for cereal grain failed to regain its per-capita
1909-13 level until after 1925, and then did not exceed it.' Higher
European incomes were being spent, not unexpectedly, according
to Engels' law, on a more varied diet or on goods other than food.
Bulgarian grain had also lost some important competitive
advantages in the remaining market. With Great Britain and
France cut off from continental supplies during the war years,
American and Canadian grain exports had risen sharply to meet the
demand. These new sources of supply proved difficuU for
Bulgarian grain to displace. Railway roUing stock within Bulgaria
had been worn out from heavy wartime use and lines further north
from Yugoslavia had been damaged. Shipping on the Black Sea,
and especiaUy on the Danube, did not resume at pre-war levels for
several years. The best Bulgarian port facilities were at Varna, now
underutihsed because of the loss of Dobrudjan grain. In addition,
the absence of a national network of grain elevators for storing
smallholder sales made quality control at an American or Canadian
standard difficult.''
These post-war pressures accelerated the pre-war trend (noted in
Chapter 1) away from exports of cereal grains, wheat in particular,
and toward increased peasant consumption. Grain production per
capita recovered to less than 90 per cent of the pre-war level by
1926-30, but cuUivated grain area, yields and per-capita consump­
tion allexceeded the 1909-12 norm on post-war territory. Table
2.1 makes the reason clear. The volume of grain exports per capita
dropped to one-third of the pre-war level, the sharpest reduction
for any of the Balkan states.
Tobacco exports more than fiUed the resulting gap. Table 2.2
reveals their striking rise from 1.3 per cent of total export value
before the war to 38.5 per cent by 1926-30. This ascendancy had
begun during the Fh:st World War (see Chapter 1). Cultivation on
the newly acquired south-western lands was largely responsible (see
Map 1). The pattern persisted after the war. As a result, the indus­
trial crops, primarUy tobacco, quadrupled their cultivated area to 3
per cent of the total. They increased from 3.3 per cent of total crop
value in 1911 to 15 per cent by 1921-5. Such crops were stiU 11.9
 Recovery in the 1920s 53

Table 2.1: Graina Production and Consumption, 1921-30

(1909-12 = 100)

Yield Production Net exports Consumption

Area perhectare per capita per capita per capita

1921-5 97 87 72 37 80
1926-30 111 104 89 33 103

^Wheat, corn, rye, barley, oats.

Source: J . R . Lampe and M.R. Jackson, Balkan Economic History, 1550-1950
(Bloomington, Indiana: Indiana University Press, 1982),table 10.12, p. 365.

Table 2.2.: Composition of Exports, 1907-30 (in percentages)

1907-11 1921-5 1926-30

Grain 55.7 23.4 14.5

Grain products 7.5 4.1 3.0
Other unprocessed crops 17.2 5.6 6.4
Tobacco 1.3 26.5 38.5
Rose essence 4.1 1.4 3.5
Eggs 7.6 8.1 12.4
Livestock 5.6 3.1 4.4
Hides 2,2 2.0 4.4
Other 8.8 25.8 12.9

Source: Lampe and Jackson, Balkan Economic History, 1550-1950, table 10.14,
p. 368.

per cent for 1926-30, thanks to sugar beet and sunflower acreage,
which together surpassed slumping tobacco cultivation. For the
latter period, industrial crops were stiU 235 per cent of their real
value for 1911, as against just 92 per cent for rebounding cereal
grains. Total crop production in constant prices had climbed to 126
per cent of the 1911 level by 1926-30, a good recovery by
European standards. Bulgaria was weU ahead of neighbouring
Yugoslavia at 90 per cent and Romania at 95 per cent.'
Bulgarian exports also grew ahead of the European average. The
terms of trading prbnarily agricultural exports for primarily manu­
factured imports feU below the pre-war ratio. Yet the real per-
capita value of exports was 47 per cent ahead of the 1906-10 level
by 1926-30. Their average annual growth amounted to 2 per cent,
compared with less than 1 per cent for Europe as a whole. The pro­
portion of trade turnover (exports plus imports of goods) in
Bulgarian national income had meanwhUe, according to the rough
estimates available for the latter aggregate, increased its one-
54 Recovery in the 1920s

Table 2.3: Direction of Foreign Trade, 1906-30 (in percentages)

North-west Europe3 Germany Central and South-east
North-east Europe
Europeb and
Turkey
X M X M X M X M
1906-10 37 29 12 17 7 30 35 19
1911-14 42 26 15 21 10 33 19 12
1915-18 3 9 42 32 37 33 9 19
1921-5 20 29 14 19 17 15 26 15
1926-30 18 26 25 22 25 20 14 11

X = exports; M = Imports.
aprance, Holland, Belgium, Great Britain, Switzerland and Italy.
bAustria, Hungary, Czechoslovakia, Poland, U S S R or predecessors.
Source: Lampe and Jackson, Ba/kan Economic History, 1550-1950, table 10.13,
p. 366.

quarter share of the pre-war period past the average fraction of

one-third recorded by the developed European economies before
the First World War.«
This promising picture stiU included the same sort of overdepen-
dence on a single export that had threatened pre-war prospects.
True, processed tobacco accounted for less than 40 per cent of
1926-30 export value, in contrast to the 70 per cent of pre-war
cereal grains. For the later period, however, grain exports had
fallen under 15 per cent of the total. Other unprocessed crops,
mainly turrups and kidney beans, had decUned sharply to 6 per
cent, according to Table 2.2, and livestock exports continued to be
less. Only egg exports had continued their pre-war ascent, and were
over 12 per cent of the 1926-30 total.
One consequence of the new overdependence on tobacco exports
was an increasing reliance on trade with Central Europe in general,
and Germany in particular. More groundwork, beyond the special
ties of the First World War, was thereby laid for Bulgaria's close
economic relationship with Nazi Germany during the 1930s. Table
2.3 caUs ОШ attention to the fact that by 1926-30, one-quarter of
Bulgarian export value went to Germany and another quarter to the
rest of Central and North-east Europe. There was no trade with the
Soviet Union untU 1934, and none of significance until 1940.
Once again, as with wheat exports, it was the Bulgarian
peasantry which reacted more quickly than commercial interests or
government policy to the dangerous new dependence on tobacco. A
 Recovery in the 1920s 55

Table 2.4: Sources of Population Change, 1906-40 (annual

average per 1,000)
Natural Actual Implied net
Births Deaths increase increase migration^

1906-10 42.1 24.0 18.1 14.4 -3.7

1911-20 9.1 10.5 + 1.4
1921-5 39.0 20.8 18.2 20.4 + 2.2
1926-30 33.2 17.9 15.3 14.5 -0.8
1931-5 29.3 15.5 13.8 12.0 -1.8
1936-40 23.3 13.7 9.6 7.8 -1.8

^Calculated as the difference in actual and natural increase.

Source: Lampeand Jackson, BalkanEconomicHistory, 1550-1950, tables 10.2and
12.1, pp. 333,437.

bad Bulgarian harvest in 1925 coincided with the full-scale return

of Greek and Turkish tobacco to the European market-place. The
subsequent revival of their exports reduced the European price by
one-third for 1925-6. Bulgarian peasant growers did not wait for
recovery. In 1926, they reduced the land under tobacco cultivation
by one-half from the peak level of 1923. European prices had risen
by 1927, thus permitting Bulgarian tobacco exports for 1926-30 to
increase by 5 per cent over 1921-5, and to record the substantial
increase in their share of total export value seen in Table 2.2. At the
same time, the permanently reduced hectarage caused tobacco out­
put, as reflected in the constant price index of industrial crop pro­
duction, to decline by one-fifth over the same period.'
Peasants also reacted to the uncertainties of the European
market by reducing their rate of population increase, although their
proportion of total Bulgarian popuiation remained overwhelmingly
large during the 1920s. Those dependent on agriculture stiU stood
at 74 per cent of the 6 miUion total in 1930, as against 75 per cent of
4.4 miUion in 1910. By 1930, only 12 per cent resided in towns over
20,000. Rural reluctance, rather than rapid urbanisation, was thus
responsible for cutting what had been the highest pre-war birth rate
in the Balkans from 42 per 1,000 to 33 per 1,000 between 1906-10
and 1926-30, and to 23 per 1,000 by 1936-40. Even a falling death
rate could not prevent the decUne in natural increase noted in Table
2.4.
It would be wrong to attribute aU this decUne to reaction against
market reverses, real or anticipated. War losses and the fear of
overdivided holdings also played their part. AU sons inherited equal
56 Recovery in the 1920s

shares of the father's land. The density of population in 1910 on

what would be Bulgaria's post-war territory was orüy 42.3 people
per kilometre, the lowest Balkan level. Its increase to 55.1 people
per kilometre was the region's sharpest increment, aided by relative
absence of civilian deaths from war and disease during 1912-18
and the subsequent influx of refugees.'
The reduced rate of rural buths was at least in part a sign that the
peasant smallholder was losing confidence in his ability to support
a household of pre-war size during the 1920s. That this could occur
in a period of rising agricultural exports casts doubt on the capacity
of Bulgarian economic growth in the 1920s to sustain itself even
without the arrival of the Great Depression.

Smallholders and StamboUiskl's Legacy

Throughout the decade following the First World War, the three
Bulgarian governments perceived agriculture to be in a state of
almost permanent crisis. Finding land for the refugees from Mace­
donia and Thrace was a continmng problem. Outside aid to
support their rural resettlement did not come until a 1926 loan from
the League of Nations. Its dispersion was spaced out over a period
of five years. Agricultural policy meanwhile revolved around how
to improve the viability and efficiency of smaUholdings. The
journal of the Bulgarian Economic Society repeatedly called the
moderiusation of smaUholdings the biggest task for economic
policy in general.
Inter-war data collected by the Rome Agricultmal Institute and
by a Bulgarian econonUst suggest that the smallholdings' capacity
for efficient performance and a marketed smplus was not
invariably inferior to that of large-scale holdings, as Marxist
scholars, among many others, have tended to assume. The
Bulgarian record suggests that smaUholdings near urban areas
showed several modernising tendencies. They cultivated more
labour- and even capital-intensive crops, and marketed a larger
share of them than aU but the largest properties far from town.»
Whatever their efficiency, smaUholdings became even more pre­
dominant during the 1920s than they had been before the war,
StamboUiski's land reform was largely responsible. Political
motives undoubtedly played theu· part. The notion of '1аЬош
property', restricted to the size of holding which one peasant
 Recovery in the 1920s 57

household could work, was after all central to StamboliisW's

Agrarian ideology.
The reform promulgated in the course of 1920 was, however, the
result of more careful preparation and economic calculation than
Western observers have typically assumed.'" Co-operatives dis­
cussed the shape of the measure throughout the second half of
1919. Its provisions did decree the confiscation of absentee owner­
ship over 4 hectares and provided for distribution of state land to
households with less than 1 hectare. Yet its maximum holdingsof
30 hectares provided exemptions for owners who could promise
conversion to fruit or vegetable cultivation or to some form of
manufacture within three years. Additional maxima of 20-50
hectares for pasture and forest were also specified. The uncertainty
of title that would plague other Balkan land redistributions
throughout the 1920s lasted only until 1922 in Bulgaria. From then,
the Ministry of Agriculture paid former owners their promised
partial compensation. FaUow land accordingly returned by 1924 to
its pre-war proportion of cultivated area, about 17 per cent, com­
pared with 23 per cent in 1921.
Only 330,000 hectares, or 4 per cent of arable land, was thereby
redistributed, compared with 30 per cent in Romania. Nearly two-
thirds of that 4 per cent was in fact state land. By 1926, holdings
under 5 hectares covered 23.6 per cent of arable land, 5-10
hectares fully 34.5 per cent, and 10-30 hectares 36.6 per cent. The
remaining 5.3 per cent over 30 hectares compared to 14.3 per cent
in 1908." Most of these previously large holdings were subdivided
into strips for share-croppers. The land redistributed to peasant
owners did not promote the consoUdation of existing strips, which
would have greatly faciUtated more efficient cultivation, especially
of grain.
The lack of facilities for grain storage also continued to hurt
smaUholders throughout the 1920s. Stamboliisy*s grain consor­
tium of 1920-1 had attempted to remedy this deficiency. Formed
with funds from the state banks, the consortium was supposed to
buy peasant grain at a fixed price and hold it off the market until a
higher price could be obtained. StamboUiski mtended to use 90 per
cent of the profits for constructing storage sUos. The monopoly
power given to the consortium's central purchasing bodies so
provoked European grain traders that they persuaded the AUied
Reparations Commission to force the Agrärian government to dis­
band the system by 1921. Even before then, peasant sellers had won
58 Recovery in the 1920s

the right to 60 per cent of all profits. Allied permission allowed

sizeable export duties to supplement state revenue instead, thus
hampering the Bulgarian return to Western European markets stiU
further.'2
Despite the failure of land consolidation and the grain consor­
tium, Stamboliiski's Agrarian regime left a series of useful legacies
to Bulgarian agriculture. Practical education received special atten­
tion. Faculties of agronomy and veterinary medicine were estab­
Ushed at Sofia University. Agronomists gave priority to new fodder
seeds and staU-bred cattle. Secondary schools now taught more
natural science and accounting. Students were also obligated to
contribute two 'labour weeks' every summer, typicaUy to help with
the harvest, a practice which the present Communist government
perpetuates. The programme for compulsory labour service, as
implemented and revised in 1920-1, also stressed practical educa­
tion. AU males reaching 20 years old were drafted as trudovaki into
uniformed labour battalions for one year's service. Some 30,000
were assembled the first year. StamboUiski saw the service as some­
thing more than a device by which to instU social discipline and to
circumvent treaty limits on a standing army. It became, as he
intended, an institution for agricultural and industrial training.
Until its loss of manpower in 1934 to an enlarged army, the service
also constructed more bridges, roads, railway Unes and economic
enterprises than its support would cost the state budget."
The Bulgarian Agricultural Bank (Bulgarska Zemedelska Banka)
and the rural credit network of the Central Co-operative Bank
emerged during the Stamboliiski regime as the largest sources of
short-term credit in the country. Nearly 400 new credit co-opera­
tives were formed, bringing the total to 1,200, and membership to
over one miUion. Loans, which had been less than the Narodna
Banka's in 1911, were now three times that total. Together, the
Zemedelska Banka and the co-operative network had assembled
the largest assets of any set of agricultural credit institutions in
south-eastern Europe. The industrial crops of tobacco, sunflowers
and sugar beets received short-term credit to improve plant selec­
tion and to introduce artificial fertUiser. Loaru for these two pur­
poses plus irrigation accosted for 40 per cent of the Zemedelska's
credits to co-operatives. Several electric power projects received
long-term credit.
Yet the system had its limits. Mortgage loans from the Agricul­
tural Bank were inadequate; they decUned to just 6 per cent of the
 Recovery in the 1920s 59

bank's assets. The co-operatives themselves, moreover, gave three-

quarters of their credits to payments of debt, purchases of land,
and construction of new buildings, rather than improving agricul­
tural efficiency directly.'* Most of the co-operatives' activity was
uncoordinated.
These limitations continued after the fall of Stamboliiski.
Despite the formation of a central union of 50 tobacco co-opera­
tives in 1925, members continued to undercut each other in seeking
foreign buyers. Too much credit continued to go to rural housing.
Funds were sometimes lost by corruption or, as in the case of a
large electric power station near Plovdiv, by inefficiency. The divi­
sions within the defeated Agrarian Party also began to show up
among co-operatives. Credit organisations aside, agricultural
insurance societies continued to grow, approaching 700 by 1928,
but marketing and especially,producers' co-operatives lagged
behind. Only a few of the 50 producers' co-operatives had banded
together to form 'rings' for buying tractors and other modern
equipment."
Perhaps more important, though, the whole co-operative appa­
ratus survived and grew in assets, i f not efficiency, under the
regimes of the Agrarians' bitter political adversaries. Their publica­
tions pretended that the Stamboliiski era had never happened, but
their policies declined to dismantle its institutions. The Tsankov
regime did not seriously damage the co-operatives. In June 1924, it
increased the general maximum for agricultural holdings by orüy 5
hectares per person in households over four, exempted vineyards
and gardens from expropriation, and allowed some exceptional
farms up to 150 hectares i f they were 'modern and rational'.'* But
the redistribution of land continued under these reduced provisions
and exceeded the total under the Agrarian regime. Exemptions
from compulsory labour service could now be purchased, and the
term of service cut from one year to eight months. Its annual levy
dropped from 30,000 to under 20,000.
The Liapchev regime of 1926-31 had at its head an early pro­
moter of the co-operative movement. Andrei Liapchev had
opposed Stamboliiski's grain consortium of 1921-2 for political
reasons, but had favoured encouragement for industrial or new
crops and more intensive cultivation since before the war. The faU
in tobacco prices none the less revived interest in grain cultivation.
His regime took special interest in promoting the import of iron
ploughs and steam-powered machinery through the credit facUities
60 Recovery in the 1920s

of the Agricultural Bank. As a result, the number of iron ploughs

in use increased by 40 per cent for 1925-9, and their share of all
ploughs approached the same percentage. Modern agricultural
equipment more than doubled. Under Liapchev as weU as under
Tsankov, the Mirdstry of Agriculture continued to receive a larger
share of state budget expenses (stiU only 3 per cent) than their
counterparts elsewhere in south-eastern Europe. The several state
experimental stations promoted better fodder crops and introduced
selected seed to one-third of the area sown in wheat. Similar efforts
were also under way for cotton cultivation, which was previously
not of sufficient quality to permit mechanical spinning." New con­
struction also added 300 km of railway lines to a network now
totalUng 2,440 km.
Much remained to be done by the end of the decade. AU three
regimes, however, had given more aid to agriculture, directly
through state poUcies and indirectly through the Agricultural Bank
and the co-operative network, than had any of their Balkan neigh­
bours. No comparable bank was even estabUshed elsewhere in
south-eastern Europe until 1928.

Burden of Reparations

Bulgarian agriculturalpolicy had to operate within a national

economy whose financial resources as a whole were severely
limited. When deceptively large nominal sums are adjusted for an
11.75-fold depreciation in the international value of the leva, real
state budget revenues and expenditures per capita feU by 22 per cent
between 1911 and 1920. After the leva's further depreciation to
37-fold, and slight improvement to a stable 26.8 times the 1911
parity with the French gold franc, we find real budget totals just
reaching the pre-war level again during 1926-30. In the process, as
Table 2.5 makes plain, note issues by the Bulgarian National Bank
had been cut back by more than one-half from their 1920 level. The
real per-capita average now barely matched the 1911 figure.
Behind these Umitations lay two sets of pressures from the only
source that might have offered the Bulgarian economy financial
relief — the Western European community of bank and monetary
officials. First, they pressured the Bulgarian government to pay its
pre-war debts and the war-related reparations imposed by the Paris
peace conference. Then they encouraged the Bulgarians to foUow a
 Recovery in the 1920s 61

Table 2.5: Main Financial Indicators, 1911-30 (in constant 1911

leva per capita)

State budget BNB note State Debt excluding

revenues Exports emission debt reparations
1911 46 33 25 137 137
1920 35 39a 59 750 232
1926-30 (average) 47 42 25 i77b i47b

ai921-5.
bl930 only.

Source: Lampe and Jackson, Balkan Economic History, 1550-1950, tables 11.2 and
11.3, pp. 3 8 4 - 7 .

restrictive monetary poUcy, which would assure the exchange rate

of the currency in which repayment was made.
Bulgaria was the only Balkan state on the losing side in the First
World War. Afterwards, its neighbours joined the French-led
coalition to make the losers pay. The threat of these new and old
debts depreciated the exchange value of the leva sevenfold between
1919 and 1923, far more than the twofold domestic inflation would
have dictated. The Stamboliiski regime chose to delay debt pay­
ments, thereby incurring the unremitting hostility of the Western
Егяореап financial community." French bondholders and officials
were particularly sensitive to the possibility of another Russian-
style repudiation. Lenin's Bolshevik government had already
refused to pay any of the massive simi due on pre-war and wartime
loans.
Reparations and related debts imposed by the Treaty of Neuilly
in 1919 proved a more difficult problem. The total was far larger
than pre-war obligations. With these impositions, according to
Table 2.5, the state's foreign debt was over five times the 1911 level
in constant foreign-exchange values. Without them, the increment
was just 69 per cent. The initial levy consisted of costs for AUied
mUitary occupation and some service on the Ottoman public debt
as weU as reparations. The total came to 2,250 miUion gold francs,
plus 5 per cent interest on the unpaid principal. It was due in semi­
annual payments over 37-years beginidng 1 January 1921. This
fantastic siun amounted to perhaps twice the country's national
income in 1911, The two payments a year would have totalled half
of the state budget revenues. Its size, however, was consistent with
the impositions levied against Germany, Austria and Hungary,"
62 Recovery in the 1920s

So another French sensitivity, this time to make the Germans pay

under the related Treaty of Versailles, put Bulgaria in a poor
position to protest.
The Stamboliiski regime protested all the same. Payments in
kind, mainly coal and livestock, were made to Yugoslavia and
Greece. By 1922, their estimated value exceeded 100 miUion gold
francs. Stamboliiski refused, however, to make the first cash pay­
ment to the Interallied Reparations Commission in Paris. Their
representativescame to Sofia by February 1921 in order to extract
payment. The government was able to put them off for over a year
by agreeing to the aforementioned resumption of payment on the
pre-war debt. The Commission continued to insist on tying aU
Bulgarian customs revenues to repayment of the full amount. The
impasse lasted until 1923. Once the neighbouring Balkan states had
failed to foUow a French and Italian call for armed intervention,
the Commission finally agreed to a reduction in what was owed.
Only 550 mUlion gold francs were now due over 60 years. Customs
revenues stiU guaranteed payment; thus there was continuing
pressure on the new Tsankov regime to maintain the damaging
export tariffs.2o
By the end of 1929, Bulgaria had paid a total of 41 milUon gold
francs in reparations and related claims, in addition to a sum in
excess of 100 miUion gold francs paid earUer in kind. The cost of
these payments for the Bulgarian government came exactly to the
sum of budgetary deficits for the period 1924-9. Annual obliga­
tions amounted to about 5.5 per cent of average revenues.
The price to the Bulgarian economy was larger than this rela­
tively modest percentage might suggest. First, the threat of much
larger payment between 1920 and 1923 had triggered a depreciation
in the leva's exchange value that brought it down from 11.75 to 37
times the amount required to buy a Swiss franc in 1911. Second
came the pressure to continue export tariffs. Most damaging, how­
ever, was the ConmMssion's subsequent deflationary pressure on
the state budget to minimise expenses so as to assure debt repay­
ment, and on the Bulgarian National Bank to make the leva con­
vertible into gold or Western currency at a stable rate of exchange.
This gold exchange standard was achieved, informally in 1926 and
formally by 1928, at the cost of the most drastic deflation of a
money supply anywhere in southeastern Europe.^' In order to
understand the consequences of this deflation, we must first see
how the Debt Commission and the League of Nations used new
 Recovery in the 1920s 63

Western loans to ensure it.

New State Loans, the National Bank and the Gold Standard

Returning to the pre-war gold standard was a goal pursued not just
by Liapchev personally, but by the European monetary community
as a whole. Most central bankers and treasury officials wanted it
for their own countries too. They had succeeded, by the middle of
the 1920s, at least in establishing a gold exchange standard which
included the major gold backed denominations as well as gold for
reserves. Several shortcomings of this ultimately unsuccessful
attempt to revive the pre-war monetary system are well known: the
shortage of funds for foreign investment and of gold itself, the
weakness of the London capital market and the inexperience of
New York's Wall Street. The most pervasive problem was the
general desire of European governments, France's excepted, to
stabilise their national currencies at a pre-war, and therefore over­
valued, rate of exchange.^ For Bulgaria, this problem took the
form of a commitment to re-establishing pre-war parity with the
French franc. In return for accepting an overvalued leva, the
Bulgarians received only two relatively small Western loans whose
funds were earmarked for purposes other than reUeving the credit
shortage. Liapchev hoped in vain that adherence to the standard
would give the Bulgarian government access to international loans
and 'room to live'.
Whether because of the general aversion of the European capital
market to state loans or because of specific identification with the
losing side in the war, the Bulgarian government was not able to
present an acceptable request for a Western loan until 1926. In
1ше of that year, the League of Nations' Financial Committee
accepted the Bulgarian request for a loan to aid refugee settlement.
The Committee tied its ascent, however, to strict conditions which
the Liapchev regime reluctantly accepted. Most important was the
Bulgarian side's agreement to bring the statutes of the National
Bank 'into conformity with the best principles of central banking'
as soon as possible. This meant the elimination of the bank's com­
mercial lending, state loans included, and the maintenance of high
reserves to protect the convertibility of the leva at 3.7 American
cents, over one-third more than the low of 2.7 cents recorded in
1923. The loan of December 1926, nominally £2.4 miUion and US
64 Recovery in the 1920s

$4.5 miUion, ог £3.3 miUion total, and £2.9 miUion or 2,246 miUion
leva realised, offered the National Bank no assistance. Some 1,600
milUon leva went to landand housing for refugee settlement in
rural areas. The rest repayed Bulgarian treasury biUs discounted by
the Paris Bas Bank durmg the Balkan wars of 1912-13.
The League authorised a larger loan of £5.5 miUion in 1928. The
£5 milUon realised amounted to 3,370 milUon leva. Some 30 per
cent went toward paying off the state's past borrowing from the
National Bank.^' Rights to customs revenues that superseded the
claim of reparations none the less secured the new loans, the con­
clusion of which also required the Bulgarian government to settle
another pre-war debt, this time with the Disconto GeseUschaft
Bank of Berlin for its 1914 loan. Germany's admission to the
League of Nations now aUowed it to press this claim for 85 miUion
leva.
The repayment burden of these new loans and obligations was
not high. They boosted the share of debt service in the state budget
from 21 per cent to 24 per cent between 1926 and 1929, and the
debt-service ratio to export earnings from 5.4 per cent to 7.7 per
cent. The latter percentages were the lowest of any state in south­
eastern Europe. The greater disadvantage derived from the further
Umitations placed on the activity and currency emissions of the
National Bank. Its discount rate therefore continued to be the
highest among aU the European central banks, except that of
Greece. Its ratio of reserve assets to bank notes averaged 85 per
cent for 1928-9, the highest in south-eastern Europe." For
1926-30, according to Table 2.5 above, Bulgarian currency
emissions in real per-capita terms had fallen back to the 1911 level.

Old Fiscal Problems

Before seeing how European banks made up for the deficiencies of

the Western capital market, the reader should understand why the
Bulgarian government could not do so itself. Simply saying that
European financial orthodoxy stood in the way of the three post­
war regimes does not provide a sufficient explanation for the
budget deficits which plagued them aU. The StamboUiski regime
ran huge deficits which were half of total revenues in 1919-20 and
one-third in 1921-2. The Liapchev regime was responsible for
deficits throughout the period 1926-30 that averaged one-fifth of
 Recovery in the 1920s 65

revenues. Had unUmited credit from the National Bank, on the

pre-1914 Bulgarian pattern, allowed these deficits to be larger still,
the sort of catastrophic internal inflation which reparations trig­
gered in Germany by 1923 - 4 might have overtaken Bulgaria as
weU. At their existing level, moreover, the Bulgarian deficits were
in some measure the result of wasteful expenses and inefficient tax
collection.^'
Already large before the First World War, the state bureaucracy
had almost doubled during the 1920s to reach 87,000 employees by
1930. The military, stiU limited by the terms of the peace treaty,
were only 7,000 of this total. Together, their salaries accounted for
39 per cent of 1930 budget expenditures. Their numbers meant that
17 of every 1,000 Bulgarians were state employees, a figure four or
five times the Western European average and surpassed in south­
eastern Europe only by the bloated Romanian bureaucracy. The
honesty and efficiency of the Bulgarian bureaucracy were also sus­
pect, though again, not as much as the Romanian. The crime rate
among state employees rose by over 400 per cent from 1910 to
1926, compared with an increase of 64 per cent for the total popula­
tion. By 1928, almost one-quarter of aU Bulgarian crimes were
committed by state or local officials. These abuses extended, for
instance, to funds from the refugee loan. Houses were cheaply built
and roads or bridges overpriced. The lower level of officials
remained inadequately trained and paid; those at high levels were
weU paid, but often worked just a few hours a day.^
Revenue coUection had increasingly come to rely, as we have
seen, on indirect taxes. Customs and a variety of excise taxes were
responsible for over half of budget revenues by the early 1920s.
When paid, the major excises on tobacco, alcohol and sugar were
regressive. In rural areas, especiaUy in the Pirin region controlled
by IMRO, they were either not paid, or privately collected with the
government only given a fraction of its due. No proper procedure
existed even to audit the amount of this lost revenue. The Stambo­
liiski regime had tried to introduce a new set of direct taxes that
would coUect 8-50 per cent of trade or industrial profits. Tsankov
cut those percentages back. A bigger problem with these levies and
the 4-10 per cent personal income tax was actuaUy collecting them.
Bribes to tax officials permitted widespread evasion. If the 2 billion
leva cited in one estimate as outstanding dkect taxes for 1928 had
been collected, they wodd have more than covered aU the budget
deficits for 1926-30.«
66 Recovery in the J920s

At least in Balkan perspective, the revenues actuaUy collected

and spent by the Bulgarian government were better distributed.
Economic and educational expenditures accounted for 32 per cent
of the 1929-30 budget, a figure approached only by Yugoslavia
and three times the Greek proportion. Among the economic expen­
ditures, agriculture received the largest share of any Balkan budget,
over 3 per cent of total spending. Some 14 per cent went for educa­
tion and contributed to keeping the Bulgarian system of secondary
education the best attended in south-eastern Europe.

Western European Banks in the Financial Breach

Although steering generaUy clear of state loans through bond

issues. Western European banks none the less stepped in during the
1920s to fiU the public and private breach in Bulgaria's financial
resources. These banks provided short-term credit to both govern­
ment and commercial borrowers, the latter largely industrial, as we
shaU see. The total covered 81 per cent of the sizeable deficit on
current account plus reparations for 1924-6.^ Repayment of these
short-term obligations then absorbed virtually aU of the additions
to capital account from the two state loans of 1926, effectively
1927, and 1928. More short-term credit from these same banks then
flooded in to help cover the record current-account deficit of 1929.
Soon after the First World War a number of these Western
European banks had opened affiliates in Sofia. The now mainly
French Balkanska and Generalna, plus the German Kreditna
Banka remained from the five cautious foreign banks that had
appeared in Sofia during the last pre-war decade. The newcomers
were primarily from France, Italy, Belgium and Switzerland. They
typicaUy sought and attracted sizeable Bulgarian capital. Together,
these 13 banks accounted for about 40 per cent of private bank
capital in Bulgaria by 1929. The foreign share of their capital was
38 per cent. Thus we may speak of Western European shareholders
actuaUy owning about lS per cent of private Bulgarian bank
capital, about the same as their share of industrial capital.
This modest percentage understates their actual influence in
Bulgarian banking. Direction, i f not management, was almost
always in these Western European hands. Their assets amounted to
over 60 per cent of the private Bulgarian total. They were respon­
sible for bringing the real per-capita assets of private commercial
 Recovery in the 1920s 67

Table 2.6: Loan Value by Bank Type, 1911 and 1928 (in millions of
constant 1911 leva)

1911 1928
Private commercial banks 125 239
Central State Bank (BNB) 126 48
Agricultural Bank (BZB) 113 119
Central Co-operative Bank 2 14
Popular banks 53
Agricultural credit co-operatives 18
Total 366 490

Source: Lampe and Jackson, Balkan Economic History, 1550-1950, table 11.5,
p.397.

banks back to the 1912 level by 1928. The public network of agri­
cultural and co-operative banks could recapture only 49 per cent.
The respective real levels of loans from private as against agricul­
tural banks, compared to their 1912 levels, also favoured private
institutions, 89 per cent as against 58 percent.^' Table 2.6 shows
their absolute advantage. With the relative decline of the central
bank, the overall balance of loanable funds had shifted towards
private, primarily European banks by 1928.
The activities of these European affiliates had also broadened
since the pre-war period. They continued to credit the principal
European export traders and insurance firms, most prominently
the French Dreyfus for grain, the English Robinson-Anderson for
eggs, and the Italian Guardini for pouhry. The fact that three-
quarters of the foreign-owned trading firms were French, Belgian
or Italian did not prevent the continuing growth of exports and
imports to Central Europe, as recorded in Table 2.3. A multilateral
system of foreign trade had thereby emerged, and from 1926 a
system of multilateral payment. These multilateral activities, freer
from political manipulation by the respective European foreign
offices than before the war, extended to industry as weU.
Seven European-backed banks, plus three entirely Bulgarian
ones each had networks of industrial and trading enterprises which
they supported through purchase of some stock, typicaUy less than
half, and through short-term credit on current account. Short-term
support predominated by a ratio of perhaps two to one. Direct
investment or sole ownership were rare. Complaints about the high
cost of current-account loans and about the shortage of funds for
long-term industrial investment appeared regularly in the journal
68 Recovery in the 1920s

of the Bulgarian Economic Society. The combined bank networks

none the less included 51 manufacturing or mining firms and 55 in
trade or insurance.'"
Each European bank supported a sugar refinery and other food-
processing enterprises. Coal and copper mining were left to direct
EuropeEm investment. Textiles and metallurgy were almost entirely
neglected. The half-dozen firms of the small German Kreditna
Banka stiU included the large Granitoid cement works of Sofia that
it had helped found before the First World War. The Franco-
Bulgarska Banka inherited the United Tobacco Factory, a tobacco-
processing and sales cartel, from the Generahia. The three
Bulgarian banks with such networks had ties to ten industrial firms
whose capital was less than one-fifth of the foreign total. European
banks had now become the principal source of credit for some
branches of large-scale Bulgarian industry, a role which pre-war
counterparts had failed to play.

Industrial Growth without Development

Mechanised manufacturing apparently grew at an impressive rate

during the 1920s. Considered only in connection with the influx of
European bank credit, this growth suggests the start of sustained
development, including structural shifts of labour and capital.
Only the depression of the 1930s was to caU a hah to their develop­
ment, according to this view. Available evidence, however, argues
otherwise.
The growth rate of industrial production was at first glance
spectacular. Real net output for aU manufacturing enterprises
exceeding 10 employees and 10 horsepower rose by 13.3 per cent a
year for 1921-31. Its price-adjusted value doubled to reach 301 per
cent of the 1911 figure by 1931. The great state-encouraged
majority averaged a 6.8 per cent increase a year for 1909-29, and
an annual 15.6 per cent increase for the post-war decade, according
to Tables 2.7 and 3.4. These rates were the highest in south-eastern
Europe. So were the rates of growth for industrial labour and
horsepower, averaging 11 per cent for 1921-9, compared with 2-4
per cent for Yugoslavia and Romania. The real value of capital
investment recaptured its 1912 level by 1924 and rose 22 per cent a
year to more than double by 1929. The issue of joint-stock capital
for industrial firms had become common practice since the last
 Recovery in the 1920s 69

Table 2.7: Structure and Growth of Industry, 1911-31

Average annual
Net output (%)a growth (%)
1911 1920 1930 1909-298
Metals and machinery 5.0 3.6 8.2 7,4
Chemicals 4.5 4.0 10.5 13.5
Construction materials 7.3 8.0 9.1 10,1
Wood processing 3.9 1.6 2.5 1.5
Textiles 29.4 16.6 22.3 6.5
Leather 2.6 3.0 2.3 1.4
Foodstuffs 46.2 62.3 43.8 6,0b
(Flour) (14.8) (20.4) (9.7) (1.4)

Total 6.8

aprivate encouraged enterprises.

bApproximate.
Sources: Lampe and Jackson, Balkan Economic History, 1550-1950, table 11,9,
pp. 4 0 8 - 9 ; M.R. Jackson and J . R . Lampe, 'The Evidence of Industrial Growth in
Southeastern Europe before the Second World War', EastEuropean Quarterly, vol.
XVI, no. 4 (1983), p. 396,

years of the First World War, at least in Sofia, where over 60 per
cent was concentrated. The number of incorporated manufacturers
had jumped from 37 in 1909 to 128 in 1921 and 263 by 1930.^' In
virtually every branch of industry except metallurgy and
machinery, at least a few large companies produced their wares
according to European standards of best practice for both tech­
nology and organisation. Yet these few firms failed to extend their
best capitalist practice to the rest of Bulgarian industry. Nor did the
structure of industrial production change significantly. As noted in
Table 2.7, metals and machinery were stiU oiJy 8 per cent of output
in 1930, textUes and foodstuffs 66 per cent.
One reason was surely the hmited attractiveness of industry,
especiaUy heavy industry, to private investors, both foreign and
domestic. Profits from joint-stock manufacturing continued their
pre-war pattern by lagging several points behind the 10 per cent
averages for banking and commerce. Some 40 cartel arrangements
appeared during the 1920s, in contrast to a half-dozen before the
war. Most survived only a few years, but even the attempt to
assemble them speaks poorly for the prospects of continued
growth. Joining the tobacco cartel in sustained effectiveness was a
sugar cartel. It included the above-mentioned refineries supported
by the European bank affiliates. Together, they virtually
70 Recovery in the 1920s

eliminated imports, but operated at only two-thirds of capacity.

They priced sugar so high that the processing of jam and other
potential food exports was discouraged. All branches of manufac­
turing, unlike mining, stiU found long-term European investment
hard to attract. Foreign capital accounted for about half of share­
holdings in the smaU private sector for mining. It accounted for
perhaps 15 per cent in manufacturing, owning 45 per cent of the
stock in 15 per cent of the firms."
The new supply of short-term, current-account credit from the
European bank affiliates helped to relieve the long-term shortage,
although not to the extent of financing e)dpensive new European
machinery. In any case, the approximate halving of the National
Bank's commercial credit and also of the share given to industry in
the later 1920s kept loans from the European affiUates expensive,
with an interest rate of 10-15 per cent.
The smaU size of the domestic market was another continuing
problem. True, Sofia had more than doubled its pre-war popula­
tion, rising to 230,000 by 1926. The new residents were now pre­
dominantly refugees or, from 1925, peasants from the tobacco-
raising south-west. The lateral movement from other Bulgarian
towns to the capital city was less important than before the war.
Yet the urban share of Bulgaria's total population hardly rose by a
sigiuficant amount between 1910 and 1930, from 19 per cent to 21
per cent. The share of the population not dependent on agriculture,
and presumably more inclined to buy manufactured goods, rose
even less, from 25 per cent to 26 per cent."
A final obstacle to sustained development, whether under private
or state auspices, was the smaU initial size of the modern industrial
sector and of the average factory. Emplojmient in this sector more
than doubled to reach 55,000 by 1921 and perhaps 75,000 by 1929.
Rural and urban artisans continued to outnumber this factory
employment, so that total 'industrial' employment rose less, from
180,000 to 270,000 from 1910 to 1929, and increased its share of the
entire labour force minimally from 12.5 per cent to 13 per cent.
Equally important, the size of even the encouraged enterprises
stayed the smaUest in south-eastern Europe. The average number
of workers per factory rose shghtly between 1921 and 1929, from
36 to 41, and exceeded 100 only for textiles. Horsepower per
worker decUned sUghtly to 2.56." SmaU enterprises, just meeting
the ndnimum requirements for tax and tariff exemption, continued
to appear. Partnerships and even individual proprietorships that
 Recovery in the 1920s 71

met the minimum requirements had grown from 214 in 1909 to 326
in 1921 and then almost tripled to 899 by 1929. As a result, the
share of joint-stock enterprises actually fell during the decade,
from 23 per cent to 21 per cent."
In order to attract much capital and labour from the rest of the
Bulgarian economy, modern industry would have had to have
grown at a fantastic pace, under any circumstances. The best
Bulgarian estimate of national income before and after the First
World War, by Chakalov, reckons that real per-capita growth was
literally nil between 1911 and 1926, with perhaps some slight
advance from 1926 to 1927.'* Modern industry admittedly showed
the most rapid growth of any sector, but its increase from 1911 to
1926 could lift its share of national income only from 2.7 per cent
to 5.1 per cent. This just surpassed rural and urban artisan produc­
tion, which feU from 6.8 per cent to 5 per cent. Rural household
manufacture, more difficult to estimate than rural artisanware,
actuaUy rose, from 7.7 per cent to 9.3 per cent. The peasant
majority preferred, in other words, to manufacture its own margin
above subsistence.
This diversion, noted both before and after the First World War,
doubled the dUemma so famiUar in other developing economies:
how to assemble a large marketed surplus of primarily agricultural
goods, and then invest the proceeds in modern manufacture so that
the latter becomes the predominant sector, when it is so smaU a
share of national income in the first place. By the late 1920s, the
Soviet Union was offering one alternative: forced coUection of the
agricultural surplus and massive state investment in industry.
Denmark was offering another: the increased processing of agricul­
tural goods for export through the co-operative movement. At the
time, Bulgarian govermnents rejected one approach and failed to
adopt the other successfully.

Protectionüm and Other Industrial Policies

The Bulgarian government's efforts to foUow the Danish example

were most noticeable during the Agrarian regime of Aleksandur
StamboUiski. From none existing before the First World War, the
number of co-operatives qualifying as encouraged manufacturing
enterprises jumped to 95 by 1921, nearly equalling the 128 private
incorporated firms." StamboUiski's other economic poUcies
72 Recovery in the 1920s

confirm his pre-war disposition, noted in Chapter 1, to favour

industrial development i f tied to domestic agricultural inputs. In
1921, his Agrarian regime had also extended the pre-war legislation
for industrial encouragement for another ten years. The incidence
of his new direct taxes on enterprise income was purposely lower
for industry than for conunercial firms or property renters. New
tariff legislation was expressly forbidden by the peace treaty.
Stamboliiski did succeed in applying coefficients for currency
depreciation, which kept pre-war rates partly in place, ffis regime
also banned imports of a few specific luxuries and collected export
tariffs on grain.
The Liapchev regime, buoyed by Bulgaria's better international
standing, passed a new comprehensive tariff in 1926 and a new
industrial law in 1928. On the one hand, the new import tariff laid
down the sharpest set of increases recorded among 13 states of
continental Europe during the 1920s.'« Maximum levels tripled for
foodstuffs between 1913 and 1927, doubled for semi-manufac­
tures, and quadrupled for finished manufactures. As a result their
ad valorem levels increased from 25 per cent to 60 per cent (75 per
cent for fiiushed manufactures). These were genuinely protectionist
levels.
Their role in the rapid growh of Bulgarian industry during the
late 1920s does not, however, appear to have been decisive. Coal
imports had been eUminated by an increase in domestic production
durmg the Fkst World War and remained minmial afterwards.
With the exception of sugar and cement, the highest levels of
protection do not correlate with the highest rates of growth. Yet
sugar production stiU did not exceed two-thirds of capacity.
Cement would face little competition from imports anyway, given
its weight/value ratio. The two fastest-growing branches of
Bulgarian industry, chemicals and metallurgy, were relatively less
protected. Overall, the ratio of import tariff revenues to import
value rose from 13.3 per cent to 16.8 per cent for 1925-9, a smaU
and unclear response to the 1926 tariff. More clearly, the high tariff
levels made entry into most branches easy enough to help frustrate
the great majority of the 40 manufacturing cartels established
during the decade. Little wonder that they typicaUy dissolved after
one or two years, as already noted.
Further faciUtating the easy entry which classically discourages
concentration were the terms of Bulgaria's industrial encourage­
ment laws. Liapchev's much-heralded new legislation of 1928 did
 Recovery in the 1920s 73

not make any significant changes in the pre-war privileges which

StamboUiski had simply renewed, other than a 25 per cent cut in
rates for rail freight.'' The new law kept the minimum number of
employees for qualifying enterprises at ten. The economies of scale
and further mechanisation promised from enterprises of even close
to that size were nil.
The principal economic effect of industrial encouragement
probably lay elsewhere. Exemptions from the high new tariffs of
1926 and reduced rail rates stimulated a flood of new imports, not
of finished manufactures, but rather of semi-finished inputs like
cotton thread, construction materials and metal products. Overall,
the imported fraction more than doubled during the 1920s to reach
40 per cent of total industrial inputs by 1930. Mainly because of
metals, machinery and construction materials, this fraction
exceeded the 29 per cent recorded by the Romanian economy,
which had the largest industrial sector in south-eastern Europe.*
This influx admittedly involved abuses. Bulgarian critics could, for
instance, point to steel wire imported for nail manufacture or
imported wool yarn that cost more than imported nails or cloth.
There were even more reports than before the First World War of
small encouraged enterprises using their duty-free privileges to
import semi-finished goods, which they simply sold on the open
market.*i In addition, these imports put further pressure on the
Bulgarian balance of payments.
Yet a strong case could be made for the propsition that this
influx of inputs promoted the Bulgarian industrial development in
the long run. The imported share of domestic industrial consump­
tion as a whole dropped from 70 per cent in 1909 and 62 per cent in
1921 to 38.5 per cent by 1929. The reduction of finished imports
was much greater than the rise in the semi-fmished. The potential
for abuse, had the first reduction been attempted without the
second increase, may be seen in the actual case of cement, which
was a major industrial input. The large Granitoid plant in Sofia
took advantage of the absence of import competition, more
because of the aforementioned weight/value than the tariff level, to
pass on to customers the full amount of the.tariff and thereby more
than double the selling price. The encouragement laws and the
availability through imports of most other industrial inputs
otherwise combined to spare Bulgarian industry the burden of
protectionism.
The rest of the Bulgarian economy bore the burden of higher
74 Recovery in the 1920s

prices for fiiushed manufactures. At the same time the rising pro­
duction of finished manufactures and imports of semi-finished
goods locked the economy into a new round of import substitution
and export growth that would eventually encourage further indus­
trialisation. One hopeful sign in the late 1920s was the success of
the Agricultural Bank's pilot project for introducing improved
cotton seeds.*2 Their cultivation was to produce cotton of sufficient
quality to be used in textile manufacture. During the 1930s (see
Chapter 3), this cultivation spread widely enough to reduce imports
of raw cotton and cotton yarn.
By then, the world depression had unfortunately served to isolate
the Bulgarian economy from multilateral trade and the short-term
foreign credit that had helped to fuel the striking recovery of the
1920s. During the decade, however, peasant smallholders had
already expressed their doubts about prospects for growth beyond
recovery. They reduced their birth rates. They turned away from
tobacco marketing, as they had from wheat. Multilateral trade did
encourage the search for new exports. But the fragility of the
European recovery during this post-war decade, and especially the
failure of foreign trade to grow at a rate even approaching the pre­
war pace, made the search a frustrating one for most smaU
economies.

Notes

1. On the Agrarians' rise and fall, see John W. Bell, Peasants in Power:
Alexander Stamboliski and the Bulgarian Agrarian National Union, 1899-1923
(Princeton, New Jersey: Princeton University Press, 1977), pp. 122-246. On the
Communist role and the subsequent failure of their September uprising, see Joseph
Rothschild, The Communist Party of Bulgaria: Origins and Development,
1883-1936(New York: Columbia University Press, 1959), pp. 85-151.
2. Bell, Peasants in Power, pp. 55-84.
3. Louis G. Michael, The Cereal Crop Situation in Bulgaria, Technical Bulletin,
no. 25 (Washington, DC: US Department ofAgriculture, 1923), pp. 6-15; Wilfred
Malenbaum, The World WheatEconomy, /SS5-/939(Cambridge, Massachusetts:
Harvard University Press, 1953), pp. 79-84; League of Nations, Agricultural
Production in Continental Europe during the 1914-1918 War and the Reconstruc­
tion Period(Geneva, 1943), pp. 11-18.
4. Louis G. Michael, Agricultural Survey of Europe: Danubian Basin, 2,
Technical Bulletin no. 126 (Washington, DC: US Department ofAgriculture, 1929),
pp. 93-8.
5. See in John R. Lampe and Marvin R. Jackson, Balkan Economic History,
1550-1950: From Imperial Borderlands to Developing Nations (Bloomington,
Indiana: Indiana University Press, 1982), table 10.9, p. 359; Marvin R. Jackson,
'Agricuhural Output in Southeastern Europe, 1910-1938', ACES Bulletin, vol.
 Recovery in the 1920s 75

XXIV, no. 4 (1982), table 3, p. 56. For a still useful survey, see Leo Pasvolsky,
Bulgaria's Economic Position after the War OVashington, DC: Brookings Institu­
tion, 1930), pp. 193-213.
6. See Lampe and Jackson, Balkan Economic History, tables 10.6 and 12.13,
pp. 343 , 480; Nikolai Todorov et al., Stopanska istoriia na Bulgariia, 681-1981
[Economic History of Bulgaria, 681-1981] (Sofia, 1981), pp. 337-40.
7. See Lampe and Jackson, Balkan Economic History, table 10.9, pp. 359, 371.
8. Ibid., tables 10.1 and 10.3, pp. 332-4.
9. See note 13 in Chapter 3 below.
10. Bell, Peasants in Power, pp. 162-7, contradicts the long-established view of
all Balkan land reforms, Bulgaria's included, as hasty political acts, typified by L.S.
Stavrianos, TheBalkanssince 1453 (New York: Holt, Rinehart and Winston, 1958),
p. 594.
11. Lampe and Jackson, Balkan Economic History, table 10.8, p. 357; Michael,
Cereal CropSituation in Bulgaria, pp. 7-10.
12. Overseas Trade Department, Great Britain, Economic Conditions in
Bulgaria, January 1922 (London: HM Printing Office), p! 95; Michael, Danubian
Basin, pt 2, p. 95; League ofNations, Chronology ofPoliticalandEconomicEvents
in theDanubian Basin, 1918-1936, Bulgaria (Paris, 1938), pp. 10-12.
13. George C. Logio, in Bulgaria Past and Present (Manchester: Sherratt and
Hughes, 1936), p. 165, notes that half of the value constructed by the service for
1922-31 was in bridges and roads, and 19 per centin railways and port facilities, 21
per cent in industrial enterprises or sawmills. The standard source on the founding
of the service is Max Lazard, CompulsoryLabor Service in Bulgaria (Geneva, 1922).
14. Lampe and Jackson, Balkan Economic History, tables lUA6 and 11.5,
pp. 372, 396; J.S. Moloff, 'Bulgarian Agriculture', in O.S. Morgan (ed.), Agricul­
tural Systems ofMiddle Europe (1933; reprinted. New York: AMS Press, 1969),
pp. 69-79.
15. Logio, Bulgaria, Past and Present, pp. 151 -60; Lampe and Jackson, Balkan
Economic History, pp. 369-71.
16. G. Danailov, Les effets de la guerre en Bulgarie 0*aris, 1932), pp. 566-72.
17. Moloff, 'Bulgarian Agriculture', pp. 64-7; Statisticheski godishnik na
Bulgarskoto Tsarstvo [Statistical Yearbook of the Bulgarian Kingdom], 79iO(Sof!a,
1931), p. 346.
18. William H. Wynne, StateInsolvency andForeign Bondholders, vol. II (New
Haven, Connecticut: Yale University Press, 1951), pp. 544-9, provides the most
concise and accurate summary of the debt and reparations negotiations.
19. Ibid., pp. 549-51.
20. Harold G. Moulton and Leo Pasvolsky, War Debts and World Prosperity
(New York: Brookings Institution, 1932), pp. 289-90.
21. Lampe and Jackson, Balkan Economic History, pp. 382-8, including table
11.2, and also table 12.13, p. 480; Pasvolsky, Bulgaria's Economic Position,
pp. 115-47.
22. See Derek H. AIdcroft, From Versailles to Wall Street, 1919-1929 (Berkeley,
California: University of California Press, 1977), pp. 125-86.
23. Another 25 per cent went for railway construction, 10 per cent for relief from
the 1928 earthquake, 22 per cent for budget arrears, and 13 per cent for the
Agricultural and Co-operative Banks. Wynne, State Insolvency and Foreign Bond­
holders, pp. 552-6; Logio, Bulgaria Past and Present, pp. 81-107.
24. See Lampe and Jackson, Balkan Economic History, tables 11.4 and 12.13,
pp. 392, 480.
25. The best treatment of this subject remains the pro-Zveno volume of Logio,
Bulgaria Past and Present, pp. 28-49, 91. Bulgarian Marxist scholarship has paid it
surprisingly little attention, concentrating instead on the growth of private industry
76 Recovery in the 1920s

and Europeanflnancialpenetration.
26. See Lampe and Jackson, Balkan EconomicHistory, tables 12.20 and 12.22,
pp. 501-5.
27. Logio, Bulgaria Past and Present, p. 160; Todorov, et al., Stopanska istoriia
naBulgariia, 681-1981, pp. 331-2.
28. National Bank loans and long-term foreign investment in stock shares
covered the rest. The only comprehensive calculation of the Bulgarian balance of
payments during this period is by Marvin Jackson, in Lampe and Jackson, Balkan
Economic History, table 12.25, pp. 512-16. Also see League of Nations,
Memorandum on International Trade andBalance ofPayments, 1913-27{Cenev&,
1928) and Balance ofPayments, 1928-1939 (Geneva, 1929-39). A good Bulgarian
survey is A . L . Georgiev, 'Otrazhenie na vunshnite finansovni dulgovi . . .
1918-1939' [The Impact of Foreign Financial Debts . . . 1918-1939], Trudove na
V.I.I. KarlMarx, vol. II (1966), pp. 355-62.
29. See Lampe and Jackson, Balkan Economic History, tables 11.5 and 11.15,
pp. 396, 430. Also see Asen Chakalov, 'Stokoviiat i bankoviiat kredit v Bulgariia'
[Commodity and Bank Credit in Bulgaria], Spisanie na bulgarskoto ikonomichesko
druzhestvo, vol. XXIX, no. 1 (1930), pp. 18-33.
30. The Balkanska Banka had the largest single network, some 24 firms by 1924,
including five in manufacturing. For details on all banks, see Liuben Berov, 'Le
capital financier occidental et les pays balkaniques dans les annees vingt', Etudes
balkaniques, vol. 2-3 (1965), pp. 139-69.
31. See Lampe and Jackson, Balkan Economic History, tables 11.8 and 11.14,
pp. 404, 426; Todorov et al., Stopanska istoriia na Bulgariia, pp. 304, 381.
32. See Lampe and Jackson, Balkan EconomicHistory, table 11.15, pp. 424-9.
The most thorough Bulgarian treatment of cartels is Liuben Berov, 'Kum vuprosa
na monopolisticheskite organizatsii v Bulgariia' [On the Question of Monopoly
Organisations in Biügaria], IkonomicheskaMisul, vol. 7 (1958), pp. 68-78; vol. 10
(1960), pp. 57-74.
33. See Lampe and Jackson, Balkan Economic History, tables 10.3 and 10.4,
pp. 334-6. On the growth of inter-war Sofia, see John R. Lampe, 'Interwar Sofia
vs. the Nazi-style Garden City: The Struggle over the Muesmann Plan', Journal of
Urban History, vol. 11, no. 1 (November 1984), pp. 39- 62.
34. Lampe and Jackson, Balkan Economic History, tables 10.4 and 11.12,
pp. 336, 419; Marvin R. Jackson and John R. Lampe, 'The Evidence of Industrial
Growth in Southeastern Europe before the Second World War', East European
Quarterly, vol. XVI, no. 4 (1983), pp. 397-8.
35. Lampe and Jackson, Balkan EconomicHistory, table 11.14, p. 426.
36. The uncertainty surrounding records of Uvestock and artisan production
make precise estimates of national income difficult, but earUer Western estimates of
an aggregate decline from 1911 to the kite 1920s seem unwarranted. See Marvin R.
Jackson, 'National Product and Income in Southeastern Europe before the Second
World War', ACES Bulletin, vol. XXIV, no. 3 (1982). pp. 73-103. The Bulgarian
estimates of Chakalov and others are summarised by the leading Bulgarian specialist
on national income analysis, Petur Shapkarev, Statistiko-ikonomicheski etiudi
vurkhu mrodnoto-stopanstvo na NR Bulgaria [Statistical-Economic Studies on the
National Economy of the P.R. Bulgaria] (Varna, 1982), pp. 121-6.
37. Lampe and Jackson, Balkan Economic History, pp. 426-7; Todorov et al.,
Stopanska istoriia na Bulgariia, p. 328.
38. Lampe and Jackson, Balkan Economic History, pp. 411-13; table 11.10 is
extrapolated by Marvin Jackson from the one comprehensive conversion of specific
European tariff rates into ad valorem percentages, H. Liepmann, TariffLevels and
theEconomic Unity ofEurope (New York: MacmiUan, 1938), pp. 396-413.
39. League of Nations, Chronology . . . 1918-1936, Bulgaria, p. 29;
 Recovery in the 1920s 77

κ. Bobchev, Promishlena polilika [Industrial РоИсу] (Sofia, 1932), pp. 186-91.

40. Lampe and Jackson, Balkan Economic History, table 11.11, p. 416.
41. Logio, Bulgaria Past and Present, pp. 134-42.
42. Lampe and Jackson, Balkan Economic History, p. 411.
 I S O L A T I O N IN T H E 1930s

The depression decade began for Bulgaria, like the 1920s, with
unprecedented pressure from the international economy. Political
turmoil followed in 1934. As in 1923, army officers joined civilians
in overthrowing an elected government. As in the previous decade,
three different regimes ruled Bulgaria. Again, they were bitter
political opponents, but pursued economic policies that were sur­
prisingly consistent. Most of the poUcies had in fact already been
launched during the Liapchev regime of 1926-31.
The onset of the depression from 1929 forward doomed the
chances of Liapchev's Democratic Concord in the relatively free
elections of 1931. By then world agricultural prices had tumbled
down by one-half. Bulgarian export earnings started a slide which
was to reduce them to less than half of the 1929 level by 1933. In the
absence of any more state loans, and in the face of a growing
shortage of European bank credit, the Liapchev regime had little to
show for its determined adherence to the gold exchange standard.
The country's balance of payments was protected only because
imports feU much more rapidly than exports. The results for indus­
trial production and consumption were predictably disastrous. A
large 'scissors', in Trotsky's phrase, opened up between the prices
of manufactured and agricultural goods. These economic weak­
nesses fed public dismay over the long tenure of the pre-war politi­
cian, Andrei Liapchev, and over his failure to bring the Internal
Macedonian Revolutionary Organisation (IMRO) under effective
control. The way was thus cleared for a new coalition government.
The victory of the National Bloc over the ruling Democratic
Concord in the election of June 1931 does not suggest a significant
change of ideological disposition. Key participants in the winning
coalition were the smaU Democratic Party and the so-called
Vrabcha Agrarians, stiU unreconciled with the imigri Pladne
Agrarians. Their coalition was none the less able to rally a majority
of peasant voters plus those urban interests hurt by the reduction in
imports and bank credit. The 66-year-old Democratic leader,
Aleksandur Malinov, became Prime Minister, but was quickly
replaced by his younger coUeague, Nikolai Mushanov. Each was a

78
 Isolation in the 1930s 79

pre-war politician and a lawyer by training, rather than an

economist Uke Liapchev. Dimitur Gichev led the several Agrarians
appointed to the new cabinet. The regime aspired to reflect peasant
interests primarily, but could not overcome the continuing decUne
in agricultural exports and the opposition of amigri Agrarians.
The Bulgarian Workers' Party, surrogate for the illegal Commu­
nists, continued to be excluded from the government, despite
increasing support from industrial workers. The party's victory in
Sofia's municipal elections of 1932 was soon nuUifled. The
moderate Mushanov regime also failed either to win over or to
bring the IMRO under control. The Pirin region remained outside
Sofia's effective control, for coUection of taxes as weU as for
support in Balkan foreign policy. Disillusion wUh traditional
poUtical parties spread rapidly in this atmosphere.
The Zveno movement had already attracted a smaU, but dedi­
cated foUowing to its authoritarian ideology. Since its founding in
1927, Zveno had preached technical efficiency under a new, non­
party regime. Its aUiance with the same MUitary League of army
officers who had helped to overthrow Aleksandur Stamboliiski
proved decisive. Together they staged a bloodless coup on 19 May,
1934 and seized power from the Mushanov regime. The Zveno
leader Kimon Georgiev became Prime Minister. Colonel Damian
Velchev played the role of military strong-man behind the scenes.
Under the somewhat contradictory slogans of scientific efficiency
and 'national regeneration', they sought to pursue the domestic
goal of economic modernisation. The existing political parties were
called disruptive and were disregarded. In theabsence of any effort
to found a mass political movement, to set up its own mUitia, or to
deify its leaders, the Zveno must be called authoritarian rather than
fascist.' Its regime aspired to rule better through a more efficient
state bureaucracy. The IMRO was now suppressed, and with sur­
prising ease.
In foreign affairs, Zveno hoped for aUiance with France, rather
than Italy, and for reconciUation with Yugoslavia. The regime also
established diplomatic relations with the Soviet Union; these were
to remain unbroken throughout the Second World War. Yet no
meaningful economic ties had been created with either the Soviet
Union or France by the time that Tsar Boris and the miUtary high
command carried out their own coup, again bloodless, on 22
January, 1935. The Zveno regime had lasted less than a year. Its
orientation in foreign policy was quickly abandoned, but some
80 Isolation in the 1930s

important economic legacies remained.

The energetic Boris was free of the effete pastimes and aristo­
cratic pretensions that made his father such an unsympathetic
figure to most Bulgarians. Although he was a moderniser, he did
not restore the constitution of 1879, but ruled rather through
cabinets of close advisers, led by a figurehead prime minister, the
aged Kioseivanov. The Subranie selected its members from
approved lists of 'non-party' candidates until an election was
finally aUowed in 1938, stiU without the use of party labels. Under
these conditions, aU party structures except that of the Ulegal
Communists began to atrophy. Efforts to reorganise the state
bureaucracy, particularly the economic ministries, continued. The
ministries of agriculture, commerce and industry were combined
into a single Ministry of National Economy.
Ties with France and the Soviet Union were not pursued, and
Boris turned increasingly to Germany. This fatal alUance developed
less rapidly before the Second World War than might be inferred
from the tsar's background as liaison officer to the German army
in 1915-18. Certainly there was scant desire to foUow the Nazi
example politically. I f Boris and his associates had regarded the
Zveno regime as too radical, how could they have accepted the sort
of perpetual mass mobiUsation and strident propaganda campaigns
which characterised Hitler's Germany? As late as 1935, the tsar
specifically rejected the 'absurd theories' and 'totalitarian
methods' of the Nazi regime. Only Aleksandm Tsankov and his
smaU movement, plus several even smaUer groups under General
Lukov and others, advocated a real fascist regime for Bulgaria.
Boris subsequently appointed a few of their adherents to his
cabinets, but with the intention (and effect) of weakening their
movements rather than strengthening them.^
It was instead economic isolation that fu"st pushed Bulgaria into
the German orbit. Where else could the Sofia governments of the
1930s have turned? The depression had reduced Western European
markets for agricultural exports stiU further. New loans were out of
the question. The restrictions of the Reparations Commission of
the League of Nations had ended in 1931 with the collapse of
Bulgaria's capacity to pay. Adherence to the gold exchange stan­
dard became meaningless. The Western powers themselves aban­
doned it, rather than face further domestic deflation. Economic
isolation from the USSR continued a pattern set under the tsarist
regime. Russian exports to other countries during the 1920s had in
 Isolation in the 1930s 81

any case continued to be largely grain, stiU a Bulgarian export and

rarely an import. Only the German economy remained, and it was
expanding, first with rearmament and then with the acquisition of
Austria and the Czech lands.
In addition to widening relations with Germany, the other distin­
guishing economic feature of the 1930s was the growth of state
initiative, now unchecked by the Subranie or by the League's
Reparations Commission. The record of economic growth from
1934 forward gave the Bulgarian government no reason to change
course. National income may have doubled. For aU ofsouth-
eastern Europe, it was a period for *the genesis of etatism', in the
apt phrase of the British economist Michael Kaser.' For Bulgaria,
more precedents were set for state initiative than anywhere in the
region.

State Export Controls and Co-operative Credit

The Agricultural Bank and the co-operative credit networks had

continued to expand their activities throughout the 1920s.
Although state export controls had essentially disappeared with the
demise of StambolUski's grain consortium, the depression brought
them back. One of the last acts of the Liapchev regime was to
estabUsh a central grain-purchasing agency in late December 1930.
Known as Hranoiznos, or 'grain export', the agency began
operations in February 1931. It did not lose its separate identity
untU 1948, after playing a part in the post-war consolidation of
Communist power (see Chapter 5).
As originidly constituted, Hranoiznos could authorise the Agri­
cultural Bank, co-operatives or private traders to act as its agent in
purchasing grain at prices above the fast-sinking international
level. The agency could then seU it to domestic flour mills. Found­
ing capital came from loans secured through the Agricultural and
Central Co-operative Banks. Their representatives sat on the
agency's admiiUstrative board, along with delegates from the
state's Council of Ministers and the private sector's Chamber of
Commerce and grain exchange. Under this mixed management, its
powers expanded into those of a purchasing monopoly by October
1931. Purchases had become so large that in order to pay for them
the agency needed to impose a surcharge on domestic flour sales.
Only monopsony powers could ensure its effectiveness. Hranoiznos
82 Isolation in the 1930s

soon acquired this sales nnonopoly.

The agency had paid for only a fraction of each purchase in cash.
Bonds good for payment of land taxes covered the rest. Yet agency
prices were high enough to attract most of the bumper crops of
1930 and 1931. Almost all was then exported at a substantial loss, if
land taxes foregone are included. The new Malinov-Mushanov
regime had cut purchase prices by 15-20 per cent in August 1931,
but world prices were faUing even faster.* The regime thereupon
decided to charge the urban consumer rather than the state budget
for this programme of price supports. Major beneficiaries were
peasant households with holdings over 10 hectares; they typically
marketed half or more of their grain crops.'
From October 1931, the powers of Hranoiznos went beyond
those of Stamboliiski's grain consortium. The agency's mono­
poly on domestic grain purchase allowed one of its salaried con­
trollers to monitor the operation of each large commercial flour
mill and of groups of smaUer ones. Local milling for the grower's
own consumption was monitored by the state-appointed district
mayor. To aid supervision, the agency required mUls to keep
detailed records open to official inspection. Hranoiznos soon
extended similar regulations to sugar-beet cultivation. From April
1932, the agency set out not only prices, but also designated the
hectarage sown for each of the country's dozen refineries. The pro­
duction was in turn divided into delivery quotas to meet domestic
demand. This was reaUy a state sugar cartel, replacing the private
one which the Mushanov regime had officially dissolved the month
before.
Hranoiznos also joined with the Agricultural Bank in extending
such controls to the raising of sUk cocoons and the rose harvest.
Rose oil was an increasingly valuable export. By the mid-1930s, the
agency was using the Agricultural Bank and the co-operative net­
work to purchase large parts of the cotton, hemp and tobacco
harvests too. The efforts of the short-Uved Zveno regime to set up
domestic purchasing monopolies for both tobacco and plum
brandy were unsuccessful. Rising world prices after 1935 virtuaUy
eliminated grain purchases by Hranoiznos untU the SecondWorld
War. The agency's control of crop marketing had none the less
established a precedent for close regulation of private trade. In the
process, the number of private traders decUned by 15 per cent
between 1929 and 1939. The share of domestic trade, including
non-agricultural goods, conducted by the Agricultural Bank or the
 Isolation in the 1930s 83

co-operative network more than doubled to reach 20 per cent.*

The co-operative network was also responsible for a two-thirds
increase in the supply of agricultural credit during the 1930s. Its
rural membership of 199,000 in 1928 grew to 341,000 by 1939 —
from one-quarter to one-third of the active male labour force in
agriculture. Assets per member increased their lead in south-eastern
Europe when combined with those of the Agricultural Bank. Mar­
keting co-operatives accounted for almost one-fifth of the member­
ship total. They had been joined in the 1920s by some 50 producers'
co-operatives. Here were prototJφes for Soviet-style collective
farms without, of course, tractor stations, compulsory membership
and low delivery prices. These marketing and producers' co­
operatives tripled their assets from 1929 to 1939. They and the
much more numerous credit co-operatives were the beneficiaries of
loans from the Agricultural and Central Co-operative Banks. Loan
value doubled over the same period.' The state budget also
channelled its increased expenditures on agricultural modernisa­
tion, now up from 3 per cent to 5 per cent of total outlays, through
the co-operative network.
The price for all this was paid by individual peasant households.
Their access to short and long-term credit from the two banks, or
from one after their merger in 1934, declined in direct proportion
to the increase in credit to co-operatives. The individual peasants'
share of the loans feU from 70 per cent to 30 per cent. ReUef from
unpaid individual debts was slow in coming any other way. The
Mushanov regime forgave up to 50 per cent of unpaid debt in 1932,
but only i f creditors agreed. The Zveno regime offered less condi­
tional relief, but typicaUy placed most of its hopes for agricultural
assistance on strean:uining the credit system by merging the Agricul­
tural and Central Co-operative Banks. The operations of the new
bank did elimate some dupUcation and inefficiency, but also faciU­
tated central control from the bank's headquarters in Sofia. The
royal regimes that foUowed stiU felt obUged to grant additional
reUef on unpaid individual debts.* Yet the private, non-coop share
of Bulgarian agricultural credit continued to drop. By the late
1930s it had fallen to below 40 per cent, compared with 75 per cent
for neighboiuing Yugoslavia and Romania.
Several modernising trends began under co-operative auspices,
but the Second World War intervened before they had a chance to
develop very far. The most badly needed was the consoUdation of
parcelled strips on smaUholdings. Their size continued to decUne in
84 Isolation in the 1930s

the absence of primogeniture. By 1934, properties under 5 hectares

constituted 30 per cent of all private cropland and those under 10
hectares 69 per cent, compared with 24 and 53 per cent in 1908.
Some consolidation finally got under way in the late 1930s. So did
the revived importation of steam-powered agricultural equipment
and the spread of irrigation typically needed for crop diversifica­
tion. The dairy production that had been at the centre of Danish
econonuc development also began to spread. The crucial change
was wider availability of modern equipment for processing. Its
purchase became feasible not only for co-operatives, but also for
individual households, who took advantage of new mortgage regu­
lations which accepted animals, not just land, as collateral. Co­
operative credit plus specific promotion from state agronomists
encouraged cultivation of higher-quality cotton. Enough was
planted to increase domestic fibre and yarn production ninefold
between 1929 and 1939. Total weight rose from one-quarter to
almost twice the imported tonnage.' Here was the most immediate,
if least permanent with the start of Soviet imports (see Chapters 4
and 5), of these promising trends.

Agricultural Recovery

The record of Bulgarian agricultural performance during the 1930s

suggests that co-operative credit and other initiatives promoted
growth more than Hranoiznos did. Grain exports were only 8-13
per cent of total export value by this tmie. The real output of grain
per capita did increase, as noted in Table 3.1, but by about the
same percentage over the output in 1926-30 m both 1931-5 and
1936-40. Purchases by Hranoiznos predominated in the fkst half
of the 1930s, but not in the second. In the later period, moreover,
rising output per hectare explained most of the increase. Wheat
yields for 1934-9 were fully 30 per cent greater than the 1907-11
average. EarUer in the 1930s, expanding hectarage had explained
more of the increiised output than rismg yields.
The most striking agricultural growth, in any case, occurred
outside grain cultivation. By 1936-8 industrial crop hectarage —
increasingly cotton and especiaUy sunflowers, as weU as tobacco —
jumped to 234 per cent of its 1926-30 level. Output per hectare,
however, feU by one-half with this expansion. The share of indus­
trial crops in real crop output feU sUghtly to 15 per cent. Vegetable
 Isolation in the 1930s 85

Table 3.1: Indices of Crop Output, Area and Yield, 1926-38

(1926-30 = 100)

Gross output Industrial Vineyards,

per capita Grain Vegetables Crops Fruits All crops
1931-5 109 144 95 124 109
1936-8 118 175 107 130 122
Land in cultivation
1931-5 106 127 127 117 109
1936-8 107 154 234 150 116
Yield per hectare
1931-5 109 117 80 114 108
1936-8 123 127 51 102 116
Producers' prices
1931-5 47 47 60 63 51
1936-8 62 73 84 68 66

Source: J . R . Lampe and M.R. Jackson, Bafkan Economic History, 1550-1950

(Bloomington, Indiana: Indiana University Press, 1982), table 12.2, pp. 438-41.

and vine crops gained both at their expense and at that of cereals,
which slipped from 69.4 per cent to 67.2 per cent. Vegetables and
vineyards rose from 13.8 per cent to 17.7 per cent. With both hec­
tarage and yields showing sizeable gains, the real per-capita output
of vegetables was 75 per cent higher in 1936-8 than m 1926-30.
This increment, plus one of 38 per cent for vineyards, was primarily
responsible for the overall increase of 22 per cent for all crops
noted in Table 3.1. Less reliable data suggest that the per-capita
value of arümal products rose by 9 per cent over the same period.'"
These real increases have been hidden from most earlier analyses
by the substantially lower level of agricultural prices throughout
the 1930s. Even by 1936-8, producer prices for all Bulgarian crops
stiU stood at 66 per cent of the 1926-30 level. Vegetable and
industrial crop prices had climbed back to only 73 per cent and 84
per cent of their respective levels before the depression. This was a
modest recovery from a 1931-5 level which stood at just 51 per
cent for overall crop prices. It was stUl sufficient to close com­
pletely the 20-30 per cent scissors that had opened between the
prices of agricultural goods and those of manufactures throughout
the period 1931-6." Peasant purchasing power had, in other
words, regained its 1929 level by 1938-9.
The reasons for real agricultural growth and greater crop
86 Isolation in the 1930s

diversification go beyond co-operative credit and state initiative,

both of which continued to display limitations. Co-operative
organisations typically failed to co-ordinate their efforts even to the
district level. State agronomists were assigned to district centres
and did not go to the villages, except for brief visits.'^ To under­
stand the record of real per-capita growth during the depression
decade, we must also acknowledge two other influences — reduced
population growth and the relatively greater efficiency of smaller
peasant properties.
The peasant-led reduction in the Bidgarian birth rate, which
began after the First World War, accelerated during the 1930s.
According to Table 2.4, the decline was so sharp as to overcome a
falling death rate and to trim the rate of natured increase to under
10 per 1,000 by 1936-40, the lowest in south-eastern Europe. A
higher rate would of course have reduced the growth of per-capita
production.
What rural population growth did occur was sufficient, as noted
above, to subdivide peasant smallholdings still further. Total culti­
vated land rose by only 4 per cent from 1929 to 1939, and mainly
because fallow declined from 11.7 per cent to 8.1 per cent of the
arable total. As a result, the share of smallholdings under 5
hectares increased from 23.6 per cent to 30 per cent of private
hectarage between the 1926 and 1934 censuses, and holdings of
5-10 hectares rose from 34.5 per cent to 36.5 per cent.
Yet, the presumption of much inter-war Western analysis that
these smaller holdings were less efficient than those over 10
hectares cannot bear the weight of calculations by the contem­
porary BulgEuian economist A . Iu. Totev. His painstaking use of
1934 census data reveals that the net output per hectare of holdings
under 5 hectares was slightly greater than for larger holdings. This
greater output resulted from the application of more capital
(machinery as well as animals, buildings and other inventory) and
especially labour per capita. Could not a case stiU be made for that
favourite inter-war indictment of Eastern European agriculture,
'rural over-population'? Not according to the further calculations
of returns per unit of factor input (labour included) divided by the
value of assets, as recently made by the American economist
Marvin Jackson." He finds that these rates of return were
remarkably simUar for holdings under 5 hectares and over 10
hectares, respectively 10 per cent and 10.2 per cent. When we
subtract the greater weight of residential housmg in assets of
 Isolation in the 1930s 87

smaUer holdings, they appear to have been significantly more

efficient than the larger.
Such a conclusion requires two qualifications. First, smaUer
holdings tended to be closer to urban areas, where the incentives
for diversification into the more profitable industrial and vegetable
crops were greater. Second, the larger holdings were not in fact that
much larger, nor their operations significantly more mechanised to
permit major economies of scale or technology. Large holdings stiU
had about 80 per cent of their assets in land and buUdings, and
expended only 5 per cent of their gross income on mechanised
equipment, according to a survey taken by the Agricultural Faculty
of Sofia University.'*

Bilateral Trade in the German Orbit

However else we might explain Bulgaria's relatively better agricul­

tural recovery and also its greater turn toward labour-intensive
crops, the further rise of trade relations with Germany was not the
strong stimulus many observers assumed it to be at the time. These
relations grew from economic adversity rather than advantage.
They became entangled politicaUy with Bulgarian rearmament only
during the late 1930s. Until then the Bulgarian side pursued these
bUateral relations under a clearing agreement, not fundamentally
different from the post-1944 arrangement with the Soviet Union. In
this earUer case, as perhaps in the later one, there was no other
major customer for increased exports.
Alternative markets for agricultural exports were hard to find
during the depression decade. Despite accelerating industrialisa­
tion, the Soviet Union was not yet a likely customer. StaUn's
economic strategy was too autarkic; Soviet foreign trade feU to 1
per cent of its national income by the mid-1930s. Further, the royal
Bulgarian regime's foreign poUcy was too wary of expanding
relations with the USSR. The commercial agreement signed
between the two states under the Zveno regime was to remain a
dead letter for the rest of the decade.
The Western European market for Bulgarian grain had decUned
during the 1920s from its pre-war peak. Access now Ьесгипе harder
stiU. Bulgaria lacked even the agreements for preferential access to
what remained of this Western market. Hungary, Romania and
Yugoslavia had negotiated such agreements by 1932. The legacy of
88 Isolation in the 1930s

being on the losing side in the First World War continued to plague
Bulgaria, i f not Hungary.
The remaining alternative ^d& some sort of agreement between
the several Balkan states and Czechoslovakia, Central Europe's
major industrial exporter after Germany. Bulgarian representatives
did attend a series of conferences which began in Warsaw in 1930.
The meetings explored the possibilities for regional co-operation in
Eastern Europe, but little was accomplished. When Western Euro­
pean governments scuttled the Austro-German customs union in
1931, the prospects for any similar arrangement involving Czecho­
slovakia sank too. France raised political objections over any con­
cession to Germany. The Western side also complained that a
customs union would violate the principle of most-favoured nation
treatment. The notion of a specificaUy Balkan customs union was
discussed at nunisterial meetings in Athens in 1930. It foundered on
Greek fears of exaggerating an already large import surplus. In any
case, the four states of south-eastern Europe conducted only 9 per
cent of their foreign trade with each other. Their exports were too
similar to expect a much greater percentage. The Balkan Tobacco
Office, which they agreed to open in 1932, confined operations to
futile attempts at raising world prices through output reductions.
The Balkan share of world production was too small to affect
prices in a glutted market."
By this time, aU the Central and south-eastern European coun­
tries were seeking an alternative to reduced Western European
markets in bUateral clearing agreements with each other. The new
agreements paid exporters and collected biUs due from importers
only through deposits of domestic currency in central bank
accounts. Currency changed hands at a negotiated rate of exchange
and only when cumulative balances were settled. This was
infrequent and open to delaying tactics by the deficit country.
Barter trade and systems of import licensing soon foUowed to trim
remaiiung imbalances. The rapid Bulgarian turn to clearing
agreements emerges clearly from Table 3.2.
For Bulgaria, exchange controls already pointed the way to
bUateral clearing trade with Germany. Despite good harvests and
export surpluses in 1930-1, deficits in the government budget and
the balance of payments had created a classic 'transfer problem' —
how to find the foreign currency needed to service the foreign debt.
The Bulgarian government faced demands not only for payment on
pre-1914 borrowings from largely French bondholders, but also
 Isolation in the 1930s 89

from the Greek government. Athens was owed three-quarters of

the Bulgarian reparations due in 1932. That June the Lausanne
conference ratified the end of all reparations payments. The French
bank Paris Bas was stiU threatening to stop Bulgarian tobacco
production untU bond-holders guaranteed their interest payments.
It was therefore imperative that the Bulgarian import surplus with
Western Europe be reversed as soon as possible. That reversal
might offer some reUef for the Bulgarian leva from pressures to
devalue and thereby cut capacity for debt servicing.'*
At this point the semi-official German trade organisation
Reemstma came on the scene; Germany was just as eager as
Bulgaria to conduct foreign trade that would not add to debts owed
in Western Europe. Its informal clearing agreement with Bulgaria
in 1931 was formalised the following year at the 1929 exchange rate
of 33 leva for 1 Reichsmark, reflecting their almost equal deprecia­
tion on the free market. The German share of Bulgarian exports
jumped back to 36 per cent, after decliningfrom 42 per cent to 30
per cent between 1929 and 1931. This and other agreements had
already channelled 76 per cent of Bulgarian exports, according to
Table 3.2, into the clearing trade for 1932 and 1934-5. The
clearing proportion rose to 88 per cent by 1939. The German share
of aU Bulgarian exports reached 68 per cent. As indicated in Table
3.3., however, the rise in the German and Austrian share of
Bulgarian exports was not striking until 1938. The import share, on
the other hand, had already doubled between 1931 and 1935.
Bulgarian reluctance to accept overdependence on a single
trading partner surfaced soon after Hitler's Finance Minister,
Hjalmar Schacht, visited Sofia in June 1936 to negotiate a new
clearing agreement. Bulgaria thereupon sold enough wheat to
Great Britain in 1937 to account for 14 per cent of total export
value. Barter arrangements with Poland and Czechoslovakia the
same year, the latter trading railway equipment for tobacco, served
the same purpose. German deliveries of industrial raw materials
had already proved disappointing. Aslate as January 1938, the
Bulgarian War Minister was trying to meet at least a fraction of
Bulgarian rearmament imports through simUar barter deals with
France, Poland and Italy, but to no avail. Only the German side
offered arms on long-term credit. The prospect of a 30 milUon
Reichsmark credit in March 1938 combined with the German
annexation of Austria to settle the issue.'^
Did this bUateral trade provide an export market, which helps
90 Isolation in the 1930s

Table 3.2: Foreign Trade Balances, 1926-38 (annual leva average

per capita in 1929 prices)

Index Percentage clearing

Exports Imports Exports Imports Exports Imports

1906-10 68 78
1926-30 1,414 1,177 100 100
1931-5 1,281 693 90 58 763 76a
1936-8 1,381 876 97 74 81 89

ai932, 1934-5.
Source: Lampe and Jackson, Balkan Economic History, 1650-1950, table 12.8,
pp. 4 6 2 - 3 .

Table 3.3: Direction of Foreign Trade, 1929-39 (percentage)

Central and South-eastern

North-western Germany and North-eastern Europe and
Europe3 Austria Europeb Turkey
X M X M X M X M
1929-31 19 28 41 30 17 13 7 11
1932-4 23 26 45 40 7 9 2 7
1935-7 22 14 50 62 10 12 2 5
1938-9 11 12 63 59 9 13 2 5

X = exports; M = imports.
aprance, Holland, Belgium, Great Britain, Switzerland and Italy.
bHungary, Czechoslovakia, Poland and U S S R .

Source: Lampe and Jackson, Balkan Economic History, 1550-1950. table 12.7,
pp. 458-60.

to explain the relatively better Bulgarian agricultural performance

during the 1930s? The value of German purchases of Bulgarian
exports, virtually all agricultural, did double from 1930 to 1938,
after a slow start. Close inspection of their composition none the
less reveals a pattern of growth that did not favour the new labour-
intensive crops, let alone their further processing. Tobacco sales
doubled in value, and rose 3.5 times by weight, to account for 41
per cent of German purchases by 1938. Eggs dropped from 31 per
cent to 13 per cent, but were replaced by table grapes, up from nil
to 16 per cent. Exports of more labour-intensive crops Uke
tomatoes got under way, but their totals were minimal. Tomatoes
accounted for less than 1 per cent of 1938 exports to Germany (and
Austria). Nor did new processed exports to Germany advance
 Isolation in the 1930s 91

noticeably. Some 48 canning plants, mainly in the Plovdiv area,

were pulping tomatoes and strawberries by 1939. Yet pulp sales
were just 1.5 per cent of Bulgarian exports to the Reich. For straw­
berry pulp, sales to Great Britain were actually larger, despite the
absence of a clearing agreement and a favourable exchange or tariff
rate."
By 1936-8, according to Table 3.2, Bulgaria's real exports per
capita had admittedly climbed back to 97 per cent of their 1926-30
level. Yet this was no better than the world average or Yugoslavia's
performance, and worse than Romania's. The latter's 122 per cent
had been achieved mainly through oil exports to Western markets.
The German share in Romanian exports was less than one-quarter.
When we include the unsatisfactory record of Bulgarian imports
from Germany, it is therefore tempting to extend PhiUp Friedman's
negative appraisal of the effect of German bilateral trade on
Hungary to this small Balkan economy." Bulgarian agricultural
performance, particularly the 22 per cent increase in crop value,
remains impressive, but might have been even better in a wider,
multilateral world market. Between 1929 and 1939, foreign-trade
turnover had after all declined from nearly 40 per cent to less than
30 per cent of our notion of national income.

The Predominance of State Banks

More clearly, the conversion of so much foreign trade to bilateral

agreements aided the ascendancy of what was already the strongest
state sector among the banking systems of south-eastern Europe.
The central bank saw its assets regain their 1929 level by 1937, des­
pite the region's most restrictive poUcy of note issue.^ This poUcy
kept the leva within a few points of its 1929 par value with gold
throughout the 1930s. Restriction perpetuated the overvalued free
exchange rate of the previous decade and discouraged any Bulga­
rian exports outside special clearing or compensation agreements.
As was customary elsewhere, the central bank became the adminis­
trator of these agreements. The Bulgarska Narodna Banka thereby
acquired new powers. They more than made up for the loss of com­
mercial lending rights in 1928. From January 1933, the bank's
authorisation was required for aU imports. By 1936, the Narodna
Banka was supervising the aforementioned system of import
licences and quotas which the clearing agreements had fostered.
92 Isolation in the 1930s

It also monitored the export trade by means of regulations for

'private compensation', under which Bulgarian exporters might seU
their earnings of foreign currency to importers of goods, primarily
from Western Europe, outside the cleEu^ing agreements. Such com­
pensation arrangements covered 35 per cent of Bulgarian foreign
trade by 1938, including some under the German clearing agree­
ments. This complex system included premiums up to 35 per cent
beyond the official exchange rate, charged for leva conversion of
Western currency earned for exports of grain, eggs, tobacco and
other goods considered to be glutting the European market. Dairy
products paid lower premiums and fruit or vegetables none at aU.^'
In this way the Narodna Banka hoped to encourage the export of
the new labour-intensive crops and made sales, even to Great
Britain, as we have seen, more attractive to exporters. The bank
assigned these premium-free conversions to badly needed imports
Uke industrial raw materials, shunting those for grain, etc. into fuU-
premium transactions for luxury imports.
While the central bank was consolidating new powers not
reflected in its balance sheets, the Bulgarian Agricultural Bank
(BZB) was adding to the assets which had already made it the
country's largest financial institution by the 1920s. Those assets
doubled again between 1929 and 1939. Deposits in 1939 had risen
by 42 per cent since 1931, buoyed in 1934 by a merger in that year
with the state's smaU Central Co-operative Bank. This project of
theZveno regime had added only 14 per cent to deposits, but had
never the less strengthened the authority of the BZB. Between 1931
and 1939, its share of new bank credit had cUmbed impressively
from one-third to one-half.
Some 19 native commercial banks were also assembled to form a
new state institution, the Banka Bulgarski Kredit. The Zveno
regime had created it in 1934, with the aim of putting aU of the
country's private banks outside Sofla under one roof. Despite over
twenty failures since the start of the depression, they stiU numbered
nearly a hundred. The new state bank did not come close to
absorbing them aU, but tended to attract the largest ones. Its com­
mercial credit, when combined with that of the Agricultural Bank,
accounted for three-quarters of the new bank credit granted
between 1936 and 1939. This state system also included the Popular
Banks, which were loosely afflliated with the co-operative network.
Their savings deposits rose by one-third during the 1930s. Deposits
in the state system thereby jumped to two-thirds of the Bulgarian
 Isolation in the 1930s 93

total by 1937. The state share of bank assets approached three-

quarters.^
Private commercial banks never recovered from the initial shock
of the depression. Their assets had declined by one-half between
1929 and 1934, and turned up only slightly thereafter. Foreign
banks led the retreat. Their sheu^e of conmiercial bank assets fell
from 39 per cent to 21 per cent (from 21 per cent to only 7 per cent,
if state assets are included) between 1931 and 1939. Fh^st for
economic, and then also for poUtical reasons, Franco-Belgian
interests largely abandoned their joint-stock shares in the large
Sofia banks which had lent and invested so widely during the 1920s.
The state bought out their Sofia Mortgage Bank in 1936. The large
ItaUan bank simply held its ground. Germany's Kreditna Banka
increased its assets and activities, but hardly enough to make up for
the Western European withdrawal.^'
As a result, bank investment in Bulgarian industry also dropped
precipitously. The European bank share in firms with some foreign
capital feU from four-fifths to one-fifth. By 1939 the German
Kreditna Banka accounted for almost half of that smaU fraction.
The Bulgarian Agricultural Bank had meanwhile bought out the
French and Czech ownership in the country's half-dozen modern
sugar refineries. Their private cartel for controlling production and
prices had aheady been replaced at the start of the decade, it may
be recalled, by state regulation.

Industrial Growth without Concentration

The general effect of the depression on domestic demand and the

specific loss of Western European bank investment obviously
limited the prospects for Bulgarian industrial growth during the
decade. At the same time, an authoritative British survey of south­
eastern Europe could already conclude in 1936 that the depression
had transformed industrialisation 'from the poUtical desideratum
which it had largely been in the pre\aous period [the 1920s] into a
vital economic necessity'." FaUing agricultural exports limited
manufactured imports, thus attracting domestic industry to import
substitution. More manufacturing would also increase the potential
for processed exports.
Despite some serious limitations, Bulgarian mdustry at least
overcame the general European pattern of stagnation or decline.
94 Isolation in the 1930s

Real output increased by 52 per cent between 1929 and 1938, at an

average annual rate of 4.8 per cent. This rate was weU beyond the
European average of 1.1 per cent, and ahead of the 3.4 per cent for
neighbouring Yugoslavia and Romania. Only Swedish and Finnish
rates matched the Bulgarian one, and only the Greek and the Soviet
rates exceeded it. Recent Bulgarian calculations record an average
industrial growth rate of 6.9 per cent for the latter period of
1935-41. One-third of aU processed foodstuffs were exported by
1939. Yet manufactured goods stiU amounted to only 4.3 per cent
of export value, down from 8.1 per cent in 1929, because of the
decUne in textUe sales."
Import substitution was responsible for most of Bulgaria's
industrial growth during the 1930s. The domestically produced
share of industrial output consumed in the country rose signifi­
cantly, from 61 per cent to 88 per cent between 1929 and 1938. The
imported share of industrial inputs, that is new materials and semi­
finished goods, continued to be high. Imports stiU represented 38
per cent of industrial input value in 1938, as against 40 per cent in
1930. Yet the structure was changing. Metals and machinery
accounted for half of the value of aU imports by 1938. After 1932,
moreover, the imports of cotton yarn feU from three-quarters to
one-third of domestic consumption, whUe cotton cloth production
increased.^ Here were semi-finished goods whose earlier import
Alexander Gerschenkron had called a classic example of Bulgarian
industrial (and agricultural) immaturity. By the mid-1930s
domestically produced yarn, increasingly spun from home-grown
fibre, was replacing imports of both.
Modern industry none the less made little progress increasing the
share of Bulgarian national income during the 1930s. A recent
American calculation of Bulgarian national income for 1938 by
Marvin Jackson finds modern industry accounting for just 5.6 per
cent of the total, by far the lowest fraction in south-eastern Europe.
This represents only a slight increase over the 5.1 per cent reckoned
for 1926, under admittedly different assumptions, by the Bulgarian
pioneer in national income accounts, Asen Chakalov." StiU more
disturbing, i f we dare call these two sets of calculations com­
parable, is the increase from 1926 to 1938 in the share of artisan
production, from 5 per cent to 9.3 per cent. Rural domestic
industry declined only slightly, from 9.1 per cent to 7.3 per cent.
Mechanised manufacture in firms of ten or more employees was
thus losing a Uttle ground to pre-modem enteφrises during the
 Isolation in the 1930s 95

depression decade. The former's share of the labour force did rise,
but only slightly, from 13 per cent to 14 per cent.
Even among those Bulgarian manufacturers meeting this modest
definition of a modern enterprise, the smallest accounted for most
of the decade's industrial growth. The larger, typically joint-stock
enterprises, which Bulgarian and Western economists both find
essential for technological innovation and economies of scale, were
almost entirely covered by the encouragement legislation for tax
and tariff exemptions. For reasons that the next section wiU make
clear, most of these encouraged enterprises hardly grew at aU
during the 1930s. Table 3.4 reveals that the increasingly numerous
unencouraged factories were almost entirely responsible for indus­
trial production (the stagnant and unencouraged tobacco branch
aside) growing at an annual average of 6.4 per cent from 1931 to
1937. During those years, according to Table 3.5, the number of
encouraged enterprises feU from 1,145 to 854. The unencouraged
rosefrom643 to2,031.
Output of processed food recorded the highest growth rate,
except for the smaU paper branch. The number of food enterprises
grew even faster, doubling during this period. Hard times in agri­
culture undoubtedly diverted some peasants and traders from
selling their produce to processing it. Virtually aU of the new firms
were unencouraged. SimUar trends in mostother branches of
manufacturing kept the average size of Bulgarian manufacturing
enterprises the smaUest in south-eastern Europe. With unen­
couraged firms included, that size feU from 32.5 to 28.6 employees
for 1931-8. fTable 3.5 caUs our attention to the larger size of
encouraged firms.) The average annual growth of labour inputs
and horsepower for Bulgarian industry between 1927 and 1937
increased by just 2 per cent and 3.2 per cent, compared with 4.2 per
cent and 4.8 per cent for Romania.^' Although the number of joint-
stock enterprises did not stop rising during the decade, those
estabUshed from 1931 to 1937 accounted for less than one-fifth of
the new industrial firms.
What growth was occurring during the depression does not there­
fore generaUy fit the model for increased concentration and
monopoly profits to which Marxist scholars have typicaUy looked
to explain the rise of industrial capitalism. Larger firms with over
50 employees did continue to increase in number during the early
1930s. After 1934, however, growth in numbers and output was
coming instead from a flood of new small-scale enterprises, many
96 Isolation in the 1930s

Table 3.4: Growth of Net Industrial Output, 1921-37 (average

annual percentage)

All enterprises Encouraged enterprises

1921-31 1931-7 1921-31 1931-7
Meta(s and machinery 23.5 1.8 26.1 -0.3
Chemicals 27.0 5.9 28.8 1.8
Construction materials 10.4 9.8 13.7 3.4
Wood processing 7.2 0.3 17.2 -6.7
Textiles 23.5 3.5 24.4 2.1
Leather 9.7 6.1 12.2 10.1
Tobacco -0.9 1.0
Flour 6.7 -12.2 11.9 -12.9
Other food 8.1 13.8 7.9 -1.9
Total, excluding tobacco 13.3 6.4 15.6 0.3

Source: M.R. Jackson and J . R . Lampe, 'The Evidence of Industrial Growth in

Southeastern Europe before the Second World War', EastEuropean Quarterly, vol.
XVI, no. 4 (1983), p. 396.

Table 3.5: Number and Size of Industrial Firms in 1937

All enterprises Encouraged enterprises

No. Average no. of No. Average no. of
workers workers
Metals and machinery 131 43 103 45
Chemicals 271 15 96 27
Construction materials 141 35 87 44
Wood processing 142 19 46 25
Paper 15 112 4 243
Textiles 382 82 197 125
Leather 63 22 46 19
Food and tobacco 1,740 22 275 19
Total 2,885 31 854 52

Source: Jackson and Lampe, 'Evidence of Industrial Growth in Southeastern

Europe', table 12.18, pp. 3 9 3 - 4 .

of whose owners had doubtless been tied to agricultural exports.

Most Western economists would, however, join their Bulgarian
colleagues in finding such growth an unlikely vehicle for modern
industrial development.

Sofia as an Industrial Centre

Sofia was the main centre of Bulgaria's unencouraged industrial
 Isolation in the 1930s 97

growth during the 1930s, as it had been for state-encouraged

growth before and after the First World War. One-half of Sofia's
industrial enterprises, typically small and unencouraged, had been
founded between 1931 and 1938. By then the capital city accounted
for one-third of aU enterprises and one-quarter of their production.
The city's proportion of the labour force in modern industry was
even higher, over half of the 100,000 estimated by 1939.^'
Here was a kind of concentration, i f not in the classic Marxist
mold of a shrinking number of even larger enterprises. The reasons
for this geographic concentration of new and expanding, though
smaU firms, lay mainly on the demand side. Sofia's population
had continued to rise during the 1930s, in part because of job
seekers leaving a depressed rural economy. Sofia had grown to
287,000 by 1934, with another 41,000 in nearby viUages. Its share
of Bulgaria's urban population had jumped from 16 per cent in
1920 to 22 per cent by 1934. The city's modern mass culture
included foreign films and native radio. These media joined with
the greater availability and advertising of consumer goods to
provide a positive attraction. Sofia was the country's main entrep6t
for imported consumer goods. Their flow into Sofia had increased
during the depression decade. Their value was stUl double that of
manufactures produced in the city by 1937.'" Although priced high
because of tariff impositions, these imports stiU sold out and
increased consumer demand through the so-called demonstration
effect. They also encouraged domestic manufacturers to undercut
them. Import substitution was encouraging industrial growth in
Bulgaria most successfuUy, in other words, where import competi­
tion was stiU the greatest.
The supply side admittedly made some contribution to Sofia's
industrial growth as weU, under conditions which Bulgarian
Marxist scholars have rightly criticised. Industrial employment
increased by perhaps one-half between 1934 and 1939, but without
any significant increase in wages relative to other Bulgarian towns.
A continuing inflow of new job seekers kept unemployment at one-
quarter of the available labour force. The unemployed and most of
the employed subsisted in unauthorised shacks, jerry-built on the
city's western outskirts, together with the Macedonian refugees of
the 1920s. Hygienic conditions were bad, and in the few factory
barracks even worse." Those employed in industry none the less
constituted 30 per cent of the city's active labour force, far sur­
passing the state employees who had outnumbered them 3 to 1
98 Isolation in the 1930s

before the First World War.

Supplies other than labour were less favourable for Sofia's
private manufacturers. We have already seen the contraction in
commercial lending from private banks. In addition, the city's
industrial enterprises faced a scarce supply of coal and an expensive
supply of electricity. The nearby Pernik mine at least favoured
Sofia over other Bulgarian towns, but the first claim of the state
railway on its coal continued to plague private owners from time to
time. The city's foreign-owned electric power station posed more of
a problem. Again, because of Bulgaria's aUiance with the losing
side in the First World War, the electric system's Franco-Belgian
pre-war concessionaires had been able to regain control by 1926
under League of Nations' arbitration. They raised prices to recap­
ture lost profits, but added little new capacity. They also used the
terms of their concession to prevent several private manufacturers
from building their own power plants." Such conditions dis­
couraged private use of the major technological advance avaUable
to inter-war European industry.

Industrial Policy and the State Sector

It was public poUcy rather than private monopoly power that,

together with the world depression, held back encouraged industry.
The virtual zero-growth for these enterprises, recorded in Table 3.4
above, testifies to the effectiveness of the restraints. As with agri­
culture, the main Unes of state policy toward industry during the
depression decade were consistent from the last year of the
Liapchev regime to the royal cabinets.
The principal policy was to withdraw encouragement from most
branches of light industry. The depression had already reduced
production in encouraged sugar, foodstuffs, textUe and leather
enterprises to 50-70 per cent of capacity by 1931. That year
Liapchev's Minister of Trade and Industry introduced the notion
that Bulgaria's major Ught industries were 'saturated' with too
many enterprises. Only the selective withdrawal of the tax and
tariff exemptions accorded in the industrial law of 1928, it was
argued, would relieve this imbalance. The new MaUnov-Mushanov
regime of the National Bloc initially opposed such a poUcy. Its sup­
porters included owners of many small-scale enterprises which
either made or sold encouraged manufactures. Already, high
 Isolation in the 1930s 99

import tariffs on finished goods were boosted in 1931 to ad

valorem rates that averaged 90 per cent. Within less than one year,
however, a Bulgarian consensus to accept the saturation argument
asserted itself. The Mushanov regime began quietly withdrawing
tax and tariff exemptions from existing firms and tightening the
requirements of any new firm applying for exemption.
In 1933, it took the further steps of imposing higher tariffs on
most imported industrial inputs and of limiting exemptions. Rates
ranged to 60 per cent ad valorem. The regime's proposal to
empower the Ministry of Trade and Industry to fix the prices of aU
industrial inputs, domestic as weU as imported, was not imple­
mented until 1936. At that time the royal regime also announced
the formal withdrawal of aU encouragement provisions from 17
branches of manufacturing." Together they accounted for almost
one-half of Bulgarian industrial production. In the words of an
officially favoured Bulgarian economist, the protected production
of finished consumer goods stood condemned as a 'dead-end' for
Bulgarian industry.'* More promising, he argued, would be the
manufacture of industrial inputs like ceUulose and textUe dyes.
Competition with German imports, however, proved too stiff for
domestic production of these particular inputs. The major success
appeared in the aforementioned rise in domestic production of
cotton fibre and yarn. From 1936, the Ministry of Trade and
Industry helped by setting their prices under those charged for
dutied imports. Price controls were in fact the major new precedent
set for state industrial poUcy during the 1930s.
At the start of the decade, it had appeared that state supervision
of private cartels would be the principal source of new leverage.
Apart from the growing influence of the Agricultural Bank in the
sugar cartel, however, state use of the 1931 regulations for cartel
registration remained minimal. Existing cartels simply reported
their activities. The 25 new cartels formed during the 1930s
typicaUy drew their members from smaUer firms in provincial
towns and lasted only one or two years." The flood of new enter­
prises in Sofia largely avoided cartel membership in order to be able
to maximise their sales. Food processors were especiaUy reluctant
to join cartels. They relied strictly on domestic inputs and counted
on the continuing tariff barriers to protect them against imported
output,
PubUc poUcy toward industry thus resulted in less state control
during the 1930s, rather than more as with agriculture, foreign
100 Isolation in the 1930s

trade and finance. The Zveno regime did its part, for efficiency, if
not for decentralisation, by dismissing some 4,000 of the 90,000
state employees, and by attempting to streamline the operation of
the bureaucracy. All economic ministries were consolidated into
one. The royal regime's growing interest in rearmament and in
enlarging Bulgaria's small army, limited by treaty to 20,000 until
1934, did not extend to plans for mobilising industrial production,
either through cartel management or through direct state owner­
ship. The largest part of the doubling in military expenditures that
occurred between 1934 and 1939 went to pay for motor vehicles
imported from Germany. Only domestic cement production
appears to have benefited from the build-up. Although Andrei
Liapchev had written in 1933 of the need for some sort of co­
ordinated planning for the entire economy, nothing to include
industry was even proposed until the Second World War.'«
This is not to say that the state's industrial activity was negU-
gible. The prospect of state regulation was omnipresent. Factory
owners hesitated to take initiatives which they did not regard as
officially favoured. In the words of one contemporary observer,
'Along with the many employees in every industrial enterprise,
there is one unseen, but most important employee, something like a
51 percent shareholder — that is the state.'"
State-owned industry was also growing, especially i f mining and
infrastructure are included. By 1939 some 169 state enterprises, led
by the Pernik coal mines, accounted for 8-9 per cent of total
industrial production. Co-operatives produced another 5-6 per
cent, typicaUy smaU-scale enterprises except for several sugar
refineries. This percentage had nearly doubled during the 1930s.
RaUway, road and pubUc building construction increased from
1934 forward. Railway trackage rose from 2,487 km in 1929 to
3,123 km by 1939. Locomotives and roUing stock also increased
enough to allow freight tonnage to rise by one-quarter. New public
buildings, especiaUy in Sofia, were being constructed although
without the use ofnew technology. In order to provide as much
pubUc employment as possible, construction sometimes proceeded
without automatic cement mixers.
The size of the state's economic activity was thus significant,
despite the absence of much effort to co-ordinate or moderiUse it.
The state and co-operative share of 1939 industrial output, about
15 per cent, now exceeded the figure for foreign investors. The
latter had fallen by one-third during the decade. In addition, state
 Isolation in the 1930s 101

revenues had increased by 60 per cent in real terms during 1929-39,

a pace well ahead of the zero growth for foreign trade. Sofia's
municipal revenues had tripled over the period." In both cases,
earnings from economic enterprises were the largest and most
rapidly growing source of income. The shortfalls in tax caused by
the depression were ironically the major force in expanding the
production, i f not the scope, of state industry during the decade.

Notes

1. The most comprehensive and sympathetic account of the Zveno regime

remains that of George C. Logio, Bulgaria Past and Present (Manchester: Sherratt
and Hughes, 1936), pp. 1-49. A sympathetic view of the National Bloc regime is
that of Nissan Oren, Revolution Administered: Agrarianism and Communism in
Bulgaria (Bahimore, Maryland: Johns Hopkins Press, 1973), pp. 5-43. Recent
Bulgarian scholarship, critical of both regimes, is represented by Vladimir Migev,
Utvurdzhavane na monarkho-fashistkata diktatura v Bulgariia, 1934-1936 [The
Consolidation of the Monarcho-Fascist Dictatorship in Bulgaria, 1934-1936]
(Sofia, 1977).
2. Boris was never the less the first foreign leader received by Hitler in the first of
their several congenial meetings. On Boris's German dealings and the Nazi's
Bulgarian aUies, see Hans-Joachim Hoppe, Bulgarien: Hitlers einwilligen
Verbündeter (Stuttgart, 1979), pp. 39-46; and Georgi Markov, Bulgaro-
germanskite otnosheniia. 1931-1939 [Bulgarian-German Relations, 1931-1939]
(Sofia, 1984). The latter volume is an outstanding piece of Bulgarian scholarship on
the 1930s. On Bulgarian right-wing ideology, see Boris Stavrov, Buzhoaznatasotsio-
logiia V Bulgariia mezhdu dvete svetovni voini [Bourgeois Sociology in Bulgaria
between the Two World Wars] (Sofia, 1979), pp. 149-67.
^ 3. Michael Kaser, 'The Depression and the Genesis of Etatism', in Vasa
Cubrilovic (ed.), Svetska eckonomska kriza, 1929-1934 g. [The World Economic
Crisis, 1929-1934] (Belgrade. 1976), pp. 54-5.
4. Lynn R. Edminister, Leo J . Schaben and Myer Lynsky, Agricultural Price-
Supporting Measures in Foreign Countries, F. S. no. 56 (Washington, DC: US
Department of Agriculture, 1932), pp. 44-8. On the general experience of countries
that were agricultural exporters, see Charles P. Kindleberger, The World in
Depression, 1929-1939{Berkeley, California: UniversityofCaliforniaPress, 1973),
pp. 83-107, 146-72.
5. Nikolai Todorov et al., Stopanska istoriia na Bulgariia, 681-1981 [Economic
History of Bulgaria, 681-1981] (Sofia, 1981), pp. 369-70.
6. Ibid., pp. 396-7; Edminister et al., Agricultural Price-Supporting Measures,
pp. 49-52.
7. Statisticheski godishnik na Bulgarskoto Tsarstvo [Statistical Yearbook of the
Bulgarian Kingdom], 1935 (Sofia, 1936), pp. 608, 618-19; 1940 (Sofia, 1940),
pp.311,320-1.
8. League of Nations, Chronology of Political and Economic Events in the
Danubian Basin, 1918-1936: Bulgaria (Paris, 1938), pp. 50-2. Foreclosures at least
could not deprive a peasant household of the minimum 2-3 hectare holding, which
Stamboliiski's regime had made inalienable,after the First World War.
9. John R. Lampe and Marvin R. Jackson, Balkan Economic History, 1550¬
1950: From Imperial Borderlands to Developing'Nations (Bloomington, Indiana:
102 Isolation in the 1930s

Indiana University Press, 1982), p. 455, and table 12.17, pp. 489-90. On state and
co-operative aid to agriculture, see J.S. Moloff, 'Bulgarian Agriculture', in O.S.
Morgan (ed.), Agricultural Systems ofMiddle Europe (1933; reprinted. New York:
AMS Press, 1969), pp. 62-75. The distribution of private land is summarised in
table 31 of Nikolai Todorov et al., Stopanska istoriia na Bulgariia, p. 373.
10. See Lampe and Jackson, Balkan Economic History, table 12.4, pp. 447-8;
Marvin R. Jackson, 'Agricultural Output in Southeastern Europe, 1910-1938',
ACESBulletin, vol. XXIV, no. 4 (1982), pp. 51-6, 63.
11. Lampe and Jackson, Balkan Economic History, table 12.2, pp. 438-41;
table 29 in Todorov et al., Stopanska istoriia na Bulgariia, p. 371.
12. The limits emerge from the best case-study of an individual viUage during the
1930s, lrwin T. Sanders, Balkan Village (Lexington, Kentucky: University of
Kentucky Press, 1949) on the social anthropology of Dragalevtsi, near Sofia.
13. Lampe and Jackson, Balkan Economic History, table 12.3, pp. 442-5. The
pioneering Bulgarian work is A. lu. Totev, Sravnitelno izuchavane na bulgarskoto-
iugoslovenskoto narodno stopanstvo [A Comparative Inquiry in the Bulgarian and
Yugoslav Economies] (Sofia, 1940).
14. Totev, Sravnitelno izuchavane, pp. 52-61; Todorov et al., Stopanska istoriia
na Bulgariia, pp. 368-76.
15. Theodore I. Geshkoff, Balkan Union (New York: Columbia University
Press, 1940), pp. 145-61; Edminister et al., Agricultural Price-Supporting
Measures, pp. 52-4.
16. This was in fact not accomplished until 1936, according to Table 3.3. The
debt-service ratio had risen to 12.7 per cent by 1930 because of recent loans; peaked
at 14.3 per cent in 1931-2; and then fell to 5 per cent by 1935. The debt's share of
budget expenditures declined from 32 per cent in 1931-2 to 20 per cent by 1939. See
Lampe and Jackson, Balkan Economic History, table 12.13, pp. 480-1, 457-64.
On the Paris Bas dispute and its subsequent history, see William H. Wynne, State
Insolvency and Foreign Bondholders vol. II (New Haven, Connecticut: Yale
University Press, 1951), pp. 560-73.
17. Hoppe, Bulgarien, pp. 46-9; Lampe and Jackson, Balkan Economic
History, table 12.8, pp. 462-3.
18. Statisticheski godishnik na Bulgarskoto Tsarstvo. 1935, pp. 256-9; 1940,
pp. 533-42. Bulgarian exporters outside the clearing agreements paid up to a 35 per
cent premium for access to the earnings in leva stiU formally pegged to gold, an
effective devaluation of 26.5 per cent. On the German clearing trade, see Howard S.
EUis, Exchange Control in Central Europe (Cambridge, Massachusetts; Harvard
University Press, 1941), pp. 259-89.
19. Philip Friedman, 'The Welfare Costs of Bilateralism: German-Hungarian
Trade, 1933-1938', Explorations in Economic History, vol. 13, no. 1 (1976),
pp. 113-25. On Romania, seePhillipeMarguerat,Z.e///Ä«cAei/epefro/TO«wiei>!,
1938-1940{Leiatn, 1977).
20. See Lampe and Jackson, Balkan Economic History, tables 12.10-12.12,
pp. 471-7.
21. S.D. Zagoroff, J . Vegh and A.D. BiUmovich, TheAgrarian Economy ofthe
Danubian Countries, 1933-1945 (Stanford, California: Stanford University Press,
1955), pp. 375-6.
22. Lampe and Jackson, Balkan Economic History, table 12.2, pp. 476-7. The
best-running account of Bulgarian financial and budgetary affairs during the 1930s
is in the annual publication. Overseas Trade Department, Great Britain, Economic
Conditions in Bulgaria (London; HM Printing Office).
23. Mirko Lamer, 'Wandlungen der ausländischen Kapital auf der Balkan',
WeltwirtschaftlichesArchiv, vol. 48 (1938), pp. 501-17; Todorov etal., Stopanska
istoriia na Bulgariia, pp. 360-5, 399-400. Bulgarian Marxist scholarship has long
 Isolation in the 1930s 103

since abandoned its 1950s argument that French and Belgian capital left Bulgaria in
the 1930s as part of a capitaUst conspiracy to make way for German investment, ln
fact, many of the Western investors were Jewish and left largely out of fear.
24. Royal Institute of International Affairs, The Balkan States, vol. I: Economic
(London: Oxford University Press, 1936), p. 115.
25. StatisticheskigodishniknaBulgarskoto Tsarstvo, 1940p. 558. Onindustrial
growth rates, see Marvin R. Jackson and John R. Lampe, 'The Evidence of
Industrial Growth in Southeastern Europe before the Second World War', East
European Quarterly, vol. XVI, no. 4 (1983), pp. 392-8.
26. Lampe and Jackson, Balkan Economic History, tables 12.16-12.17,
pp. 485-8.
27. Agriculture was still the leading sector, with crops accounting for 30 per cent
of 1938 national income, animals 13.8 per cent and trade (largely agricultural) 16.5
per cent. See Marvin R. Jackson, 'National Product and Income in Southeastern
Europe before the Second World War', ACES Bulletin, vol. XXIV, no. 3 (1982),
table 2, pp. 80-1. For a recent Bulgarian summary of previous estimates, see Petur
Shapkarev, Statistiko-ikonomicheski etiudi vurkhu narodnoto stopanstvo na NR
Bulgariia (Statistical-Economic Studies on the National Economy of the PR of
Bulgaria] (Varna, 1982), pp. 121-6.
28. Lampe and Jackson, Balkan Economic History, tables 12.15 and 12.18,
pp. 485, 493-5; Todorov et at., Stopanska istoriia na Bulgariia, pp. 360, 436.
29. Khristo Marinov, 'Geografsko razpredelenie na promishlenostta v Bulgariia
mezhdu dvete scetovni voini' [The Geographic Distribution of Industry in Bulgaria
between the Two World Wars], Trudove na V.I.I. Karl Marx, vol. I (1965),
pp. 7-14.
30. See John R. Lampe, 'Interwar Sofia vs the Nazi-style Garden City: The
Struggle over the Muesmann Plan', Journal of Urban History, vol. II, no. 1
(November 1984), pp. 39-62.
31. See Liuben Berov, Polozhenieto na rabotnicheska klasa v Bulgariia pri
kapitalizm [The Position of the Working Class in Bulgaria under Capitalism] (Sofia,
1968), pp. 25-100. State health and unemployment insurance had been introduced
for urban workers in 1924- 5, and expanded in 1937, but its provisions covered only
a fraction of expenses. L . Radulov (ed.), Sotsialno-ikonomicheskata politika na
Bulgarskata durzhava, 681-1981 [Socio-economic Policy of the Bulgarian State,
681-1981] (Varna, 1981), pp. 181-3.
32. Sofia's electric capacity per capita was one-third of the levels for Belgrade
and Bucharest during the 1930s. Lampe, 'Interwar Sofia', pp. 53-4; and Liuben
Berov, 'Kontsesiiata za elektricheskoto osvetlenie v Sofiia, 1900-194Г [The
Concession for Electric Lighting in Sofia], Izvesltiia na Instituta za istoriia, vol. 12
(1963), pp. 75-109.
33. Overseas Trade Department, Economic Conditions in Bulgaria, 1934,
pp. 36-40; 1937, pp. 14-18; Todorov et al., Stopanska istoriia na Bulgariia,
p. 377-84. On tariff levels, see Lampe and Jackson, Balkan Economic History,
table 11.10, pp. 412-13.
34. St. Bobchev in Spisanie na bulgarskoto ikonomichesko druzhestvo,
vol. XXXVlI, no. 5 (1938), pp. 273 - 81.
35. Liuben Berov, 'Kum vuprosa za monopolisticheskite organizatsii v Bulgariia'
[On the Question of Monopolistic Organizations in Bu\gana],Ikonomicheska
misul, vol. 7 (1958), pp. 67-80.
36. Zhak Natan (ed.), Istoriia na ikonomicheskala misul v Bulgariia [The History
of Economic Thought in Bulgaria], vol. 2 (Sofia, 1973), p. 174. On the growth of
state employment and the army, see Lampe and Jackson, BalkanEconomicHistory,
table 12.22, pp. 505-8.
37. Zh. Burilkov, 'Strukturni promeni v industriiata' [Structural Changes in
104 Isolation in the 1930s

Industry], Spisanie na bulgarskoto ikonomichesko druzhestvo, vol. XXXVII, no. 10

(1938), pp. 640-1.
38. Lampe and Jackson, Balkan Economic History, table 12.13, pp. 480-1;
Lampe, 'Interwar Sofia', pp. 53-4. On the growth of infrastructure and state
industry, see Todorov, et al., Stopanska istoriia na Bulgariia, pp, 359-400.
 THE SECOND WORLD WAR

In 1941, for the second time in 30 years, Bulgaria was drawn into a
world war by ill-fated aUiance with Germany. As in 1915, German
representatives were able to play successfully on the smaU country's
lack of Western European aUies and on its frustrated claim to
Macedonia. The closer economic and then miUtary relations that
had developed with Germany during the 1930s also supported the
Bulgarian decision. Tsar Boris increasingly lent his personal
support. In any case, by August 1939, Nazi Germany had come to
diplomatic terms with the Soviet Union, and within the next year
crushed Poland and France on the battlefield. After the faU of
France, Bulgaria abandoned its formal neutreUity between
Germany and the Western aUies. By September 1940, German and
Soviet pressure had forced the Romanian government to cede the
southern Dobrudja back to Bulgaria.
The war itself also began auspiciously for Bulgaria. The govern­
ment signed the Tripartite Pact of military alUance with Germany
and Italy in March 1941. The German army had already assembled
over half a mUlion men in Bulgaria for Operation Maritsa against
Greece. This force was primeuily responsible for the Blitzkrieg that
overwhelmed Yugoslavia in April and Greece in May. The Nazi
leadership invited the Bulgarian army to occupy Macedonia and
Thrace. The Bulgarian government formally annexed most of this
territory. One weU-quoted Bulgarian observer called these first
months of the war 'a lovely dream' from which he feared a 'terrible
awakening', that would include the loss of territory given as a gift
rather than earned.'
The rest of the war amply fulfilled his prophecy. Occupation
duties drew the Bulgarian army further into Yugoslav and Greek
territory. By 1942, its units were facing Communist-led resistance
movements. The increasing burden on Bulgarian manpower and
resources at least helped the government to resist repeated Nazi
pressures to join the German war on the Soviet Union. The
Bulgarian government, fearing popular reaction, never even
declared war on the USSR. Soviet diplomatic representatives
remained in Sofia through it aU.

105
106 The Second World War

In August 1943, Tsar Boris died mysteriously a few weeks after

returning from a final meeting with Hitler in Germany.^ The
massive crowd at his funeral, the largest yet assembled in Sofia,
mourned not only his passing, but also the fate that had left them
leaderless in a war that was now lost. Anglo-American bombings of
Sofia and several other Bulgarian cities began in November 1943,
further shaking morale on the home front. The Filov regime had
fooHshly declared war on both Great Britain and the United States
in 1941. By 1944 Yugoslavia's massive Partisan movement under
Tito was strong even in Macedonia. In Bulgaria proper, the smaU
resistance movement organised by the Bulgarian Communist Party
since 1942 was now staging guerriUa attacks. Soviet troops were
fast approaching. Before the government could leave the war, units
of the Red Army entered Bulgaria on 8 September, 1944. The Com­
munist resistance seized power in Sofia the foUowing day.
The poUtical history of the German aUiance was more complex
than this summary of miUtary events might suggest. Yet Boris's
appointment of Bogdan Filov as Prime Minister in February 1940
placed a stubborn supporter of that aUiance in a decisive position
untU the summer of 1944. Filov was an archaeologist by training
and had served in no official positions other than rector of Sofia
University and President of the prestigious Bulgarian Academy of
Sciences. Basically a narrow nationalist and an undiscriminating
admirer of aU things German, Filov lacked any coherent vision for
the fascist restructuring of Bulgarian society, the economy
included.' This was undoubtedly one reason why Boris picked him
to replace the belatedly independent Kioseivanov, rather than the
genuinely fascist poUtical leader Aleksandur Tsankov or the
maverick general Khristo Lukov. The tsar and the army's general
staff stiU wanted no mass fascist movement and no fundamental
changes in an internal order based on 'non-party', authoritarian
regimes since 1934.
Thus the Filov regime, though fatally binding the country and
the dynasty to the German fortunes of war, operated under a more
limited, ambiguous mandate on its own territory. By mid-1941, the
occupation of Macedonia brought the regime to the height of its
popularity. Despite setbacks that year, the Communist under­
ground was able, by 1942, to organise a fledgling Fatherland Front
of opposition groups. In 1943, opposition from a variety of
sources, ranging from Communist sympathisers to Tsar Boris him­
self, was able to frustrate the plans of the Filov regime to put
 The Second World War 107

Bulgaria's small and long-respected Jewish population of over

50,000 into the pipeline for evacuation to the Nazi death camps.*
Genered Lukov's assassination in FebruEuy 1943 and Boris's own
sudden death a few months later did not strengthen the regime's
authority as Filov had expected. He became co-regent with the
tsar's uncle Kiril and the pro-German General Mikhov in Septem­
ber 1943. Filov did succeed in naming his pliant Finance Minister,
Bozhilov, as Prime Minister, but was unable to stem growing
criticism in the Subranie or to crush the underground Fatherland
Front. The war was simply going too badly. Communist morale
grew with every Soviet victory. The Anglo-American bombings
prompted some of Filov's associates to press for peace feelers to the
Western allies. Filov hestitantly approved, but then drew back.
Such inquiries were too late, when they finally carae from a cabinet
headed by the Agrarian Ivan Bagrianov. He had replaced Bozhilov
in May 1944. Bagrianov's continued co-operation with German
authorities and his refusal to deal with the Fatherland Front led to
his replacement by Konstantin Muraviev and a pro-Western cabinet
barely a week before the Red Army arrived. Bagrianov's economic
initiatives to halt food shipments to Germany and to hold down
inflation came too late to have much effect.
The economic poUcies pursued in wartime Bulgaria were there­
fore almost entirely those of the Filov regime, but were imple­
mented without full poUtical authority. Both internal opposition
and German interference, especiaUy in the occupied territories,
played an inhibiting role as weU. The regime's efforts to include
industry and agriculture in military mobilisation aspired to central
planning. They were ironically frustrated in important ways
through Bulgaria's bUateral relationship with the German war
economy. Peasant smaUholders and small-scale manufacturers and
traders also posed the regime problems which became worse as the
war continued and the economy became more isolated.
Two principal economic issues emerged from these events. In
what respects was the way prepared or not prepared for post-weu"
central planning on the Soviet model? What sort of growth had this
wartime economy been able to achieve?

State Supervteion of Agriculture

For agriculture, the demand prompting initial growth came from

108 The Second World War

the German war economy and from the efforts of Bulgarian state
agencies to extract greater deliveries from peasant smallholders and
the co-operative network. Yet further growth in 1943 - 4 followed
from peasant efforts to avoid these two sources of non-market
demand.
Sales to Nazi Germany, almost all agricultural except for some
copper ore, rose to 72 per cent of the total Bulgarian export value
for 1941-2 and to 83 per cent for 1943 and the first 8 months of
1944. In the process, the real value of Bulgarian exports for 1941 - 3
averaged 25 per cent more than the 1939 figures.' The structure of
these sales continued generally along pre-war lines. Tobacco was
the principal commodity, rising slightly to reach 42 per cent of
export value in 1943. The price paid, however, was less than in
1939. Eggs, soya beans, fresh fruit and vegetables declined, from
29 per cent to 13 per cent combined. Processed fruit pulp recorded
the one dramatic increase. It climbed to 11.1 per cent of export
value by 1943, from 3.8 per cent in 1939.* Thus a principal export in
the post-war era first became significant during the Second World
War.
The German role in pulping and other agricultural modernisa­
tion was, however, minimal. Only the state monopoly on tobacco
production, already taken over from French interests before the
war began, afforded German authorities any direct control over
crops. The Reemstma trade organisation managed one-third of
total production through the Bulgarian co-operative network. But
cigarette manufacture received no more attention than in the 1930s.
The best post-war study of Nazi food management across Europe
finds no other successful enterprises or programmes, with the
exception of the same I.G. Farben project for promoting soya-bean
cultivation that was at work in Romaiua.' Yet the output and yield
of soya beans fell off sharply after their 1941 increase. The
Sudostropa enterprise was unable to spread flax cultivation for its
processing plants in the Dobrudja. German experts were lacking,
and the weather was bad. The Buschag corporation failed in its
cattle-breeding efforts, nor could it convince the Bulgarian
Ministry of Agriculture to support its project to cross Bulgarian
with Merino sheep. Oiüy a few peasants were trained in the use of
modern farm machinery at two model German villages.
Grain exports to wartime Germany had in any case never
recovered from the disastrous Balkan drought of 1942. Even
imports of German grain proved insufficient to prevent the start of
 The Second World War 109

bread rationing. Bulgaria's 1943 - 4 export of grain to Germany

amounted to only one-half of the 1939-40 level. Had deliveries of
German tractors and other farm machinery arrived in the quantities
promised, however, the Bulgarian capacity for grain exports might
not have continued its inter-war decline.
Grain was the centrepiece of state efforts to mobilise Bulgaria's
economic resources for the war effort. And, as might be expected,
the already existing grain-export organisation, Hranoiznos, was the
most important and effective of the several responsible state
agencies. Its monopsony powers in buying five crops for export or
domestic sale in 1939 (cotton and hemp as weU as wheat, rye and
flax) grew to 23 by 1943. Tobacco and fruit were the only signifi­
cant omissions. The pre-war practice of operating through local
agents and co-operatives to buy whatever they offered for sale had
evolved by the bad harvest of 1942 into ad hoc powers to requi-
sUion grain for the army and the urban population. Norms for
delivery per hectare were set according to local conditions. The
regime's CouncU of Ministers charged Hranoiznos with similar
collections for other crops. A variety of other agencies were soon
attempting to control meat and egg sales in this fashion.' It was,
nevertheless, Hranoiznos upon which the regime's Central Agency
for Special Requisitions relied in order to coUect foodstuffs for
supplying the German army, first for its 1941 attack on Yugoslavia
and Greece, and later for its occupation troops.
The efforts of the FUov regime to set up several new agencies to
co-ordinate agriculturd production with the rest of the country's
economy were less successful.' The War Ministry created a
Directorate for CiviUan Mobilisation (DGM) in May 1940, with
powers to mobiUse aU economic enterprises for the war effort. AU
were required to adhere to yearly production plans, but individual
enterprises were left to draw them up; less than half even submitted
plans. Then the DGM joined the Ministry of Agriculture in pre­
paring a more ambitious Five-Year Plan for 1942-6. It proposed
measures to raise the cultivated area and to consolidate scattered
parcels into unified units of cultivation. This plan for continuing
mobiUsation also foresaw complete state control of agricuUural
prices and income. But repeated requisitions of grain, in particular,
beyond the annual quotas for the mobUisation plan, discouraged
peasant co-operation.
The Directorate for Foreign Trade, established in June 1940, was
meanwhUe attempting to supply the agricultural sector with
110 The Second World War

additional credit and badly needed, affordable fertiliser, as weU as

other imported inputs through a fund for price equalisation. The
fund set aside a share of export earnings for subsidising cheaper
imports. Any chances that the DGM might have had to bring these
agencies under co-ordinated control disappeared in 1943 with the
army's creation of a High Command for the War Economy. Its
functions largely duplicated those of the DGM. The new agency
reflected the general staff's impatience with any plans not geared to
meeting the military's short-term requirements. These needs were
growing in 1943. German pressures led the Bulgarian army to
expand its role in occupied Yugoslavia and Greece.

The Wartime Agricultural Record

Wartime agricultural production could record real net growth over

the 1939 level only in 1941. That year's modest increment of 3 per
cent derived from a surge in animal numbers, plus egg and dairy
production. According to Table 4.1, gross crop production did rise
from a low point in 1940, the first year of mass army mobiUsation,
but came no closer to the 1939 level than 91 per cent in 1943.
More significant for the modernisation of Bulgarian agriculture
was the further shift in crop structure along lines that had first
become visible during the First World War. The share of cereal
grains feU from 48.5 per cent to 35.9 per cent of real crop output
between 1939 and 1944, despite the re-acquisition of the grain-
growing southern Dobrudja in 1940. Industrial crops, primarily
tobacco and cotton, saw their share drop shghtly from 14 per cent
to 12.4 per cent. Sharply reduced yields cancelled out 60-80 per
cent increases in cultivated area. Fruit and vine output, up from 9.3
per cent to 11.9 per cent, drew vntuaUy even with industrial crops.
Table grapes were largely responsible for the surge in fruit produc­
tion noted in Table 4.1, from 1942 forward. The even larger incre­
ment for vegetable production boosted its proportion of total crop
production, from 18.3 per cent to 29.5 per cent. A tremendous
upsurge in potato and kidney-bean cultivation accounted for over
80 per cent of the 1943 volume of vegetable production. Hectarage
for beans, potatoes and sugar beet aU showed sharp increases.
Tomato and green-pepper cultivation, so prominent in Bulgaria's
more recent exports, remained relatively smaU.'"
How can we explain the wartime diversification of Bulgarian
 The Second World War 111

Table 4.1: Indices of Agricultural Production,a 1939-44 (1939 =

100, in 1939 prices)
Industrial Vineyards,
Grain Vegetables crops fruits All crops Net animal
1940 72 72 105 44 78 102
1941 69 107 104 64 84 129
1942 40 103 88 101 68 130
1943 73 140 84 106 91 63
1944 60 131 72 104 81 77

^Gross production minus seed deductions.

Source: J . R . Lampe and M.R. Jackson, Balkan Economic History, 1550-1950
(Bloomington, Indiana: Indiana University Press, 1982), table 13.5, pp. 533-7.

crops that did occur? Conscious German encouragement does not

furnish the answer. The fast-growing potato and bean production
of 1941-3 was largely requisitioned for the Bulgarian army or sold
to the urban population. Barely 5 per cent was exported to
Germany. For fruit, its processing into pulp for easy transport did
send a majority of the relatively smaU strawberry and apricot
production to the Reich. But Nazi officials, especiaUy those in the
party's powerful Foreign Office, had discouraged such processing
in Bulgaria until 1943, arguing instead that the Reich and especiaUy
Vienna should be its centre." By the time they changed their minds,
Bulgaria's processing capacity had already increased, as we shaU
see, on its own account.
More than anything else, the increase in bean and grape cultiva­
tion constituted a reaction by peasant smaUholders to the exactions
which the mobiUsation agencies had placed on other sorts of
agricultural production, especiaUy grain. By the end of 1941,
Hranoiznos found itself with insufficient grain reserves. Too much
had been exported to Germany in 1940 and too much given to the
Bulgarian army, now over 400,000 men, in 1941. A bad harvest
foUowing the drought of 1942 left the agency to choose between
inflationary price increases and forced requisitions in order to meet
military needs. Less than 90 per cent of requisition quotas were
actuaUy coUected. Peasant smaUholders reacted by holding back
grain from the agency's threshing inspectors and German
observers. Some of this grain could then be sold for prices so high
on the black market that was growing in Bulgarian cities that the
rest of the grain could be kept for consumption within the house­
hold." Rising land prices were also discouraging expanded grain
112 The Second World War

cultivation. Agricultural land continued to be sold, typicaUy in

order to cover outstanding debts, but it was becoming too expen­
sive to use for any cultivation that was not intensive. Only the 58
producers' co-operatives operating by 1943-4, complete with con­
soUdated fields and tractor fleets, were able to record high yields
(twice the national average) and to earn a large, legal income from
grain cultivation."
Peasant smaUholders had turned to industrial crops during 1941,
£md especiaUy to mUk production, as more profitable alternatives.
By 1942-3, low official prices and high requisition quotas had
reduced the attraction. A growing fodder shortage made livestock
more expensive to maintain, in any case. The remaining alternative
was fruit and vegetable production. Both commanded better requi­
sition prices and were readily disposable on the country's urban
markets, unlike tobacco and most other industrial crops.
This diversification may weU have contributed to the growing
shortage of bread and meat in Bulgarian towns. Bread rationing
and meat restrictions had begun by 1942. Meatless days and daily
bread rations, reduced to 300 grams, soon foUowed. The prices of
these two commodities led the way among domestic items. The
inflationEu-y spiral pushed up official food prices in Sofia by 563
per cent over the 1939 level by 1944, and by 738 per cent on the
black market.'* Urban consumers, especiaUy in the capital city,
paid the largest part of the price for this further diversification of
Bulgarian agricultural production.

Inflation and the German Alliance

The cost of Bulgaria's wartime alUance with Nazi Germany feU

more heavily on industry and other sectors of the economy than on
agriculture. This greater burden may be judged from rates of infla­
tion which were significantly higher than for agriculture. The
higher prices were the direct result of Bulgaria's participation in the
German war effort. The Filov regime found itself saddled with high
costs and little profit in the occupied areas of Macedonia and
Thrace. Within the old borders, access to badly needed German
imports proved too limited to prevent crippUng shortages and
hence inflationary pressures.
The reincorporation of the southern Dobrudja in 1940 and then
the addition of Macedonia and Thrace in 1941 had increased
 The Second World War 113

Bulgaria's population by 35 per cent. The total was 8.6 miUion,

almost the present figure. Territory increased even more, by 49 per
cent. Yet arable land in this new territory augmented total arable by
only one third. Most of it was more suitable for tobacco or cotton
than grain crops. For Thrace, German pressures obUged Bulgarian
authorities to divert grain and coal supplies to support the local
population as weU. Uttle cotton was coUected for Bulgarian
markets in return. By 1943, the Filov regime had to use half of Us
available hard currency to import Turkish cotton."
For Macedonia, the Bulgarian side supplied a variety of indus­
trial outputs, but found the anticipated market for its own finished
goods pre-empted by German manufactures, which were imported
free of any Bulgarian duties. The terms of the April 1941 agreement
with the head of the economic section in the German Foreign
Ministry, Karl Claudius, speUed out some other unfavourable
arrangements. In return for doubling the German payment to
Bulgaria for supporting the former's troops, the secret agreement
stipulated major concessions from Sofia. The Bulgarian side would
finance German exploitation of Macedonia's valuable chrome and
other mines, pay for German requisitions, and cover some out­
standing Yugoslav and Greek bank debts in Macedonia and
Thrace. It would also accept German army script and cover the cost
of German military construction in Bulgaria proper.'* The
Macedonian mine concession alone yielded the German war effort
annual deliveries that were 30 times Bulgaria's 1939 ore exports.
German economic relations with Bulgaria proper are more diffi-
cuh to appraise. In order to do so, we must enter what has rightly
been called the maze of agreements between the two countries.
Their variety reflects the absence of a fully co-ordinated German
programme for dealing with the Bulgarian economy. This was
hardly surprising, given the early chaos of the Nazi war effort. The
second German-Bulgarian agreement, signed in October 1940, was
the first during wartime. The strong German bargaining position
after the faU of France forced an important concession from the
Bulgarian side. It agreed to accept payment for Bulgarian exporters
in new notes emitted by the Bulgarian National Bank, i f German
imports were not immediately forthconung to balance the transac­
tion. This concession proved no problem vmtil the last four months
of 1941. Then the Bulgarian export surplus, which was to persist in
German trade for the rest of the war, appeared for the first time.
The German response was to press for Bulgarian reductions in
114 The Second World War

the import tariffs appUed to German goods. This was their repre­
sentatives' constant refrain in the nine meetings of the German-
Bulgarian Trade Commission held between 1940 and 1944. At first,
Bulgarian agreement to several tariff reductions cost the national
economy only import duties foregone. Later Nazi demands for still
more reductions helped the German side to evade its responsibility
to deUver specifically promised goods, especially agricultural
machinery and fertiliser, let alone enough to close the trade deficit
with Bulgaria. By the fourth session, in October 1941, the
Bulgarian side was refusing to credit the German clearing account
with the 35 per cent premium on the former's earnings from
exports to other countries which transited Germany. In retaliation,
German representatives denied Bulgaria the right to transfer
earnings from past exports to Germany into hard currency that
could be spent elsewhere, without specific German approval.
Further Bulgarian complaints at these meetings centred on unde-
Uvered military and agricultural equipment, the burden of missing
fibre and oil imports on the Bulgarian industry, and the loss of
tariff revenues. One Bulgarian survey in 1942 found that German
miports had been delivered in only 28 of 132 agreed categories.
Prices for the few arrivals were 50-60 per cent over those stipu­
lated by the trade commission protocols.''
When Bulgaria's bargaining position for its increasingly valuable
agricultural exports improved late in the war, the result was not a
significant improvement in the terms of its essentially German
trade. The slight improvement for 1943 reflected in Table 4.2 still
left the ratio of export versus import prices at 61 per cent of their
1939 level. By 1944 the ratio had fallen to 56 per cent. Shortages of
promised German imports combined with the diversion of 15-20
per cent of Bulgarian agricultural production to the domestic black
market to exert greater upward pressure on aU prices.
Pressure on the Filov regime to increase the emission of currency
was even greater. German support payments for their own troops
repaired what would have otherwise been a large deficit in the
Bulgarian balance of payments. But no German loans were forth­
coming, as at the start of the First World War, to help Bulgaria
finance its own war effort. The Filov regime was forced to cover
these expenses mainly by emissions of new bank notes from the
National Bank. The Agricuhural Bank lent large sums to the
regime from 1941 onwards, but these proved insufficient. As a
result, notes in circulation rose 629 per cent to cover the majority
 The Second World War 115

Table 4.2: Foreign Trade and Inflation Indices, 1939-44 (1939 =

100)
Constant 1939 prices Current prices Terms of BNB note Retail
X M X M trade circulation prices^
1940 85 112 158 103 66 142 113
1941 85 123 239 124 54 276 151
1942 80 127 310 174 56 412 196
1943 82 125 352 215 61 629 252
1944 27 74 448 253 56 1,180 379

X = exports; M = imports.
aList of 34 items.
Sources: Lampe and Jackson, Balkan Economic History, 15S0-1350, tables 13.3
and 13.8, pp. 526-9; N. Todorov etal. Stopanska Istoriia na Bulgariia, 681-1981
(Sofia, 1981), p. 427.

of the fivefold increase in budget expenditures for 1939-43. By

1944, note emission had nearly doubled again. Gold coverage of
the leva dropped from a pre-war 26 per cent to 4 per cent. The
belated efforts of the Bagrianov government to compensate at least
state employees for the rising cost of living, with 50-100 per cent
salary increases, added one last impetus to the inflationary spiral."
This inflation was one major symptom of the strain that associa­
tion with the German war effort imposed on the Bulgarian
economy.

Industry and the German AlUance

The pecuUar pattern of Bulgaria's industrial growth was the other

major symptom of that strain. For manufacturing, real net output
was 18 per cent ahead of 1939 by 1941, but feU back to the pre-war
level by 1943. By then only food, wood, paper and electrical output
were stiU ahead of the 1939 levels. Mining, essentially of coal and
copper, was clearly responsible for the better overall growth of
gross industrial output noted in Table 4.3. It rose steadily to 71 per
cent more than its 1939 level by 1943. The overall increase of 10 per
cent was not enough to prevent the industrial share of Bulgarian
national income from slipping slightly to less than 8 per cent.
Setting back the process of modern industrial development was
the further spread of small-scale enteφrises, just meeting the
definitional minimum of 10 workers and 10 horsepower. The
116 The Second World War

Table 4.3: Indices of Industrial Production, 1939-44 (1939 = 100,

in 1939 prices)

1940 1941 1942 1943 1944

Gross output 111 118 113 110 90
Investment goods 99 91 102 97 97
Food and tobacco 123 150 136 112 106
Textiles 97 92 67 66 58
Metals 81 99 112 89 77
Mining 119 126 157 171 184

Source: Lampe and Jackson, Balkan Economic HKtory, 1560-1950, table 13.12,
pp. 5 6 2 - 3 .

number of enterprises rose by one-third, adding almost a thousand

to the 1939 total of3,100. Most were founded to take advantage of
rising prices for manufactures and to escape DGM controls on
larger firms. Their smaU size reduced the average number of
workers for aU firms from 29 in 1939 to 26 at the end of the war.
Most were partnerships or single-owner enterprises, rather than
joint-stock corporations with their greater potential for capital
accumulation. A majority of the new firms were set up in Sofia,
making the capital's share of aU Bulgarian industrial enterprises
more than 40 per cent by 1942."
Mechanical horsepower per worker, on the other hand, grew
enough to outweigh by a smaU margin the reduction in average firm
size. For metal manufacture, the growth of horsepower was
striking, from less than one to three per worker. Only textiles
experienced a sUght decUne. To reconcile even this smaU increase in
capital formation with decUning firm size, we must refer again to
the indirect effects of economic relations with Germany, rather
than to the direct effect of the Bulgarian regime's programme of
wartime mobilisation.
That programme required annual production plans from aU
designated enterprises by 1942. Barely 40 per cent of 1,400 indus­
trial firms had even submitted plans. The lack of state credit and
raw materials also plagued the industrial part of this first *central
plan'. SimUar limitations frustrated specific programmes in 1942
and again in 1943 to estabUsh new state enterprises for caustic soda,
calcium and even synthetic rubber production. Then the start of
AUied bombing prompted the removal of raw materials and
finished production from Sofia factories, at least as much as the
raU network, a primary bombing target, could stiU carry.
 Пе Second World War 117

By 1944, the share of state enterprises in industrial production

was just 5 per cent, compared whh 9 per cent in 1939. Most of this
production came from the several state coal mines. Here was the
one branch of industry where employment had expanded more
rapidly than output. Some 40 per cent of these 1,800 miners had
been exempted from military service, weU beyond the 9 per cent
average for industry.^ Otherwise, the state's primary role in
Bulgarian industry remained that of a contractor. It drew on
private firms to supply miUtary provisions and to support a civUian
bureaucracy that had grown by one-half during the war.
Those firms with state contracts tended to be larger and relatively
better supplied with raw materials. Best off were the aforemen­
tioned plants for processing fruit pulp. They nearly doubled in
numbers to reach 76 by 1944. Real output rose sixfold, labour and
horsepower even more. Their 3,400 workers by 1944 represented
almost 4 per cent of the total workforce in manufacturing.^' The
German purchasing agency for processed food bought the bulk of
their output.
Other Bulgarian manufacturers, even those steadily receiving
state contracts, had a different sort of experience with the German
war effort. First there was the joint German-Bulgarian Industrial
Commission of 1941-2. Its actusd purpose was to prevent native
industry throughout south-eastern Europe from producing any­
thing that might compete with German manufacturing, and to
control the rest through a single comprehensive cartel. Like their
counterparts in Hungary, Bulgarian representatives postponed
enough meetings and evaded enough commitments to make this
scheme a dead letter by 1942.^^
A more serious burden for Bulgarian industry was the German
failure to deliver promised imports of raw materials and semi­
finished inputs. The imported share of Bulgarian industrial inputs
decUned from 29 per cent in 1937-8 to 14 per cent for 1941-3
because of these shortfalls. By 1944, the real value of metal and
machine production had fallen to 43 per cent of the 1939 level, in
large measure because total inputs were just 24 per cent of what
they had been. Chemical production had in similar fashion fallen to
75 per cent. Inputs were down by one-half. Despite cotton fibre
imported from the Soviet Union in 1940-1 and from Turkey in
1943, textUe production had dropped to 63 per cent of its 1939 level
by 1944."
Compounding these shortages was the diversion of 18,000 skilled
118 The Second World War

workers, about one-fifth of the industrial labour force, to work in

Germany itself.^ Their absence, together with the Bulgarian army's
mobilisation of over 400,000 troops, created a serious shortage of
skilled labour. That shortage persisted into the early post-war
period (see Chapter 5).
What the German side did supply to Bulgarian industry, at least
for 1940-1, was a variety of manufacturing machinery and equip­
ment, though typicaUy not the latest technology, which totalled 20
per cent of import value. This was twice the pre-war fraction. By
1942-3, the fraction had faUen to 5 per cent. Military machinery
and equipment now predominated. The earUer deliveries were
hardly part of any Nazi plan to encourage Bulgeu^ian industry. They
were simply goods which were not essential to the initial German
war effort and whose sale to Bulgaria would reduce the imbalance
in their bUateral trade. Ironically, the German-encouraged shortage
of skilled labour also helped to promote the introduction of such
imported, often labour-saving equipment.
To this limited extent, the wartime Bulgarian aUiance with Nazi
Germany accidentally laid some groundwork for the industrialisa­
tion drive launched by the post-war Communist regime. On the
other hand, the state's wartime controls and the further spread of
smaUer firms weakened the efficiency of the larger, more
mechanised industrial enterprises in private hands. It was this
weakness, rather than the strength of private industry, which both
hindered nationaUsation and made it a more rational policy under
the new CommurUst regime.

Notes

1. These prophetic words are cited in both the major Western studies of wartime
Bulgaria: Marshall Lee Miller, Bulgaria during the Second World War (Stanford,
California: Stanford University Press, 1975), p. 55; and Hans-Joachim Hoppe,
Bulgarien: Hitlers einwilliger Verbündeter (Stuttgart, 1979), p. 124. A recent and
lengthy Bulgarian account of relations with Germany is Vitka Toshkova, Bulgariia i
Tretiiat Reich, 1941-1944 [Bulgaria and the Third Reich] (Sofia, 1975).
2. Boris had again refused to send Bulgarian troops to the Russian front.
Bulgarian public opinion both then and now has little doubt that the Gestapo played
some part in his death. See Miller, Bulgaria, pp. 133-48; and llcho Dimitrov,
'Smurtta na Tsar Boris Ι1Γ [The Death of Tsar Boris III], in his Bulgariia na
Balkanite i v Evropa (Sofia, 1983), pp. 124-57, for a convincing rejection of the
nawed evidence for this view.
3. Miller, Bulgaria, pp. 89-92. Also see Filov's diary as translated in part by
Frederick W. Chary in Southeastern Europe, vol. I, part 2 (1974) and vol. II, parts 1
 The Second World War 119

and 2 (1975).
4. See Frederick W. Chary, The Bulgarian Jews and the Final Solution,
/P40-/944(Pittsburgh, Pennsylvania: UniversityofPittsburghPress, 1972). Onthe
wartime experience of the Communist Party, see Nissan Oren, Bulgarian Com­
munism: The Road to Power, 1934-44 (New York: Columbia University Press,
1971).
5. John R. Lampe and Marvin R. Jackson, tables 13.2-13.3, Balkan Economic
History, 1550-1950: From Imperial Borderlands to Developing Nations (Blooming­
ton, Indiana: Indiana University Press, 1982), pp. 524-7.
6. Spisanie i izvestiia na Glavna Direktsiia na Statistika [Journal and Bulletin of
the Chief Board of Statistics], vol. I (1945), pp. 29-45. Also see David Koen.
'Bulgarska industriia i imperialisticheskata Germaniia prez ftorata svetovna voina'
[Bulgarian Industry and Imperialist Germany during the Second World War], in
Khristo Khristov, V. Hadzinikolov, et al., Bulgarskoto-Germanski otnosheniia i
vruski [Bulgarian-German Relations and Ties], vol. 1 (Sofia, 1972), pp. 526-9;
Nikolai Todorov et al., Stopanska istoriia na Bulgariia, 681-1981 [Economic
History of Bulgaria, 681-1981] (Sofia, 1981), pp. 415-24.
7. See Karl Brandt, Management of Agriculture and Food in the German-
occupied and Other Areas of Fortress Europe (Stanford, California: Stanford
University Press, 1953), pp. 198-212.
8. S.D. Zagoroff, Jeno Vegh and Alexander D. Bilimovitch, The Agrarian
Economy of the Danubian Countries, 1933-1945 (Stanford California: Stanford
University Press, 1955), pp. 387, 428-38.
9. lbid., pp. 418-27; Todorov et al., Stopanska istoriia na Bulgariia,
pp. 413-15.
10. Lampe and Jackson, Balkan Economic History, table 13.5, pp. 533-7; in
Todorov et al., Stopanska istoriia na Bulgariia, table 40, pp. 458-9.
11. Dietrich Orlow, The Nazis in the Balkans (Pittsburgh, Pennsylvania:
University of Pittsburgh Press, 1968), pp. 131-9. On the structure of Bulgarian
agricultural exports to Germany, see Zagoroff, Vegh and Bilimovitch, Agrarian
Economy, tables X I X - X X , p. 461.
12. The way in which peasants shook their sheaves into blankets, thereby
extracting up to one-quarter of the grain for themselves, before taking the sheaves to
official threshing stations is described in Irwin T. Sanders, Balkan Village
(Lexington, Kentucky: University ofKentucky Press, 1949), pp. 186-8. On wartime
agricuhure in general, see Todorov et al., Stopanska istoriia na Bulgariia,
pp. 413-28.
13. Grigor Popisakov, Ikonomicheska otnosheniia mezhdu NR Bulgariia i SSSR
[Economic Relations between the PR Bulgaria and the USSR] (Sofia, 1968),
pp. 257-66.
14. Lampe and Jackson, Balkan Economic History, table 13.5, pp. 533-7;
Zagoroff, Vegh and Bilimovitch, Agrarian Economy, pp. 423-6, 433-7.
15. Hoppe, Bulgarien, pp. 132-3; Koen, 'Bulgarska industriia', p. 516.
16. Popisakov, Ikonomicheska otnosheniia, pp. 37-8.
17. Koen, 'Bulgarska industriia', pp. 499-516.
18. Todorov et al., Stopanska istoriia na Bulgariia, pp. 425-8; Miller, Bulgaria,
p. 179.
19. Lampe and Jackson, Balkan EconomicHistory, pp. 557-64; Liuben Berov,
'Kapitalobrazuvaneto v Bulgariia prez godinite na ftorata svetovna voina' [Capital
Accumulation in Bulgaria during the Second World War], Trudove na V.I.I. Karl
Marx, vol. III (1971), pp. 17-40.
20. Koen, 'Bulgarska industriia', pp. 510-13, 531-4.
21. Ibid., pp. 528-9.
22. Orlow, Nazis in the Balkans, pp. 134-4, 144-5.
120 The Second World War

23. Koen, 'Bulgarska industriia', pp. 5 1 4 - β ,

24. Hoppe, Bulgarien, p. 134.
 C O M M U N I S T R E V O L U T I O N , 1944-1947

Within hours of the Soviet declaration of war and the Red Army's
entry into eastern Bulgaria, detachments of the Communist resis­
tance movement had seized power in Sofia, in the name of the
Fatherland Front. The date of this virtually bloodless coup, 9
September, 1944, has sincebecome an anniversary whose celebra­
tion with a huge parade in Sofia symbohses the Communist acces­
sion to power. In fact, the consolidation of pohtical power took
several years. The economic revolution which accompanied and
assured that consolidation took even longer. Hence this chapter's
framework of four years to examine the interaction of Communist
ideology with Bulgarian precedents for state initiative, existing
government institutions and an immediate post-war economy
which seemed in important ways to defy central control. Until the
state's economic control was complete, at least for industry, central
planning on the Soviet pattern could not reaUy get under way.
The intiad coup that toppled the week-old M^aviev regime
attracted wide popular support beyond Communist ranks. The Red
Army was given a genuinely warm welcome. A number of units in
the Bulgarian army came over immediately to the Fatherland
Front. With the replacement of only 800 officers and the addition
of 700 Communist poUtical officers, nearly half of an army of
450,000 men accompanied the Soviet divisions which pressed on
quickly into Yugoslavia and Hungary. Bulgarian losses totalled
32,000 men kUled, mainly in the bitter fight for Budapest in the
winter of 1944/5. Simultaneously, the absent army ceased to be a
factor in Bulgarian political life. So did those poUtical leaders and
groups associated with the wartime regime. Some 30,000 state
employees were dismissed during September 1944. One-third soon
faced trial and most of them received harsh sentences. Filov and his
cabinet were tried and executed in 1945. The army's General Staff
and a third of the pre-1944 officers were purged the foUowing year.
The young Tsar Simeon could attract few supporters. The vote to
end the monarchy itself in September 1946 was overwhelming.
Communist party membership had meanwhUe jumped from 13,700
before 9 September, 1944 to 422,000 two years later.

121
122 Communist Revolution, 1944-1947

The only potentied contenders for political power besides the

Communists were the three other parties in the Fatherland Front.
The Agrarian, Zveno and Social Democratic representatives were
never able to wrest the real leadership of either the Front or the
immediate post-war government from Communist hands, despite
holding three-quarters of the posts in the 1944-6 cabinet. They did
subject its actions to pubUc scrutiny and some criticism until 1947.
Communist economic poUcy could not therefore proceed at a pace
entirely of its own choosing.
These other parties faced insurmountable obstacles. Communists
outnumbered aU other party members combined on the local com­
mittees of the Fatherland Front. The Communist youth organisa­
tion was the largest by far. In November 1945, the renowned leader
of the Bulgarian Communists, Georgi Dimitrov, returned from his
22-year exile in the Soviet Union to lend the weight of his inter­
national reputation to the Communist campaign for a single slate
for the Fatherland Front in the elections eventuaUy held in Novem­
ber. Such a slate appeared on the ballot and won 86 per cent of the
actual vote, 73 per cent of the eligible electorate. Leaders of the
other parties complained that the Communist-dominated People's
Guard and People's MiUtia inhibited their campaigns for separate
slates by threatening voters and disrupting meetings. Their 1945
appeals to the American members of the AUied Control Commis­
sion and to the US political representative in Sofia had won them
the status of acceptable Opposition parties', with permission to
pubUsh their own newspapers, and two postponements of the
November elections. They could, however, obtain no further effec­
tive outside support from Americans after the postponements. The
Anglo-American members were essentially observers on a commis­
sion controlled by Soviet officers and destined to be disbanded
once a peace treaty was signed with Bulgaria in 1947.
Active American encouragement in 1945 only laid the opposition
parties open to charges of collaboration with Western intelUgence
services. Recent Western scholarship casts doubt on these charges
and makes clear the lack of Anglo-American mUitary or economic
leverage for influencing post-war Bulgarian politics. Both Western
and Bulgarian research also suggests that the other parties in the
Fatherland Front or in the emerging opposition suffered themselves
from internal division and initial weakness.' The Communists
suffered from neither of these.
There seems Uttle doubt that from September 1944 and before.
 CommunistRevolution, 1944-1947 123

the Communist leadership was wholeheartedly committed to

following the Soviet economic example of the 1930s. Its record of
heavy industrial growth was after all unmatched elsewhere in
Europe during the depression decade. On this basis some non-
Communist support might be attracted. For Bulgarian Com­
munists, such a system of central planning for nationalised industry
and collectivised agriculture was as attractive ideologically to
leaders who, like Traicho Kostov, spent the war years in Bulgaria,
as it was to long-time exiles in theUSSR, like Dimitrov, Vasil
Kolarov or Vulko Chervenkov. Kostov, who was General Secretary
of the party until Dimitrov's return, would have primary responsi­
bility for economic poUcy during most of the immediate post-war
period. He had no more desire to preserve private industrial or agri­
cultural property than the others. Like them, he viewed the notion
of opposition parties and a Western-style parUamentary system as
an obstacle that would delay this economic transition. It would also
deny the Communists the monopoly of political power to which
any Leninist party has always aspired.
The presence of both the opposition parties and the Anglo-
American members of the AUied Control Commission were admit­
tedly obstacles which delayed the economic transition, if not much
the political one. The latter was essentially complete with the
appointment of Dimitrov as Prime Minister and of a cabinet at
least half Communist in November 1946. A further and perhaps
more formidable obstacle was the huge mass of peasant small­
holders, the great majority of whom owned their land and owed
their political allegiance to the reviving Agrarian movement. They
had, moreover, emerged from the war free of the serious deteriora­
tion in living standards experienced by the urban population.
Against these obstacles, we must fairly note a number of longer-
term advantages which the post-war context conferred on the
Bulgarian Communist Party, advantages which StamboUiski's
Agrarians did not enjoy after the First World War. First, Bulgarian
peasants and merchants could have no fond memories this time of
the private pre-war market for agricultural exports, supported by
access to international credit in return for adherence to the gold
standard. The free-market mechanism, which was a chief attraction
of European capitalist growth, had almost stopped working during
the 1930s. Who could foresee its striking revival from the 1950s
onward? Second, the Bulgarian economy and Bulgarian society
received fewer permanent scars during the Second World War
124 Communist Revolution, 1944-1947

than during the First. The dead young men were far fewer, 32,000
compared with 155,000. No flood of several hundred thousand
refugees poured in, requiring food, shelter and eventual absorp­
tion. This time, moreover, the loss of Macedonia seemed like an
expected punishment for the Filov regime's aUiance with Nazi
Germany, rather than an injustice to be righted whatever the cost.
As word of Nazi war crimes spread, some Bulgarians were
probably drawn to accept the new Communist regime as a way of
purging the past.
Finally, there was the Soviet Union. Bulgaria's population was
traditionally pro-Russian. The Red Army undoubtedly offered the
militia of Fatherland Front assistance against the Communists'
poUtical opponents in 1945-6. Beyond that, the USSR could
promise Bulgaria the patronage which no Great Power had
accorded it after 1918. Soviet political support would greatly
reduce a reparations burden, which initially threatened to be as
heavy as that of the Treaty of Neuilly. Soviet economic support
also augured weU. Already in late 1944, when Soviet poUcy was stiU
primarily concerned with the Bulgarian war effort, the Red Army's
mission in Sofia included an economic section with experts in
agricultural and industrial planning. Imports of industrial raw
materials Uke oil and cotton fibre had already proved useful in
1940-1. I f agricultural and industrial machinery could also be
provided, in return for Bulgaria's speciaUsed agricultural produce,
both sides might benefit. Only a Communist goverrunent in Sofia
could hope to deUver this last advantage.

Nationalisation of Agricultural Trade

The collectivisation of Bulgarian agriculture went more slowly than

any other part of the Communist economic programme for the
revolutionary period 1944-7. By early 1949, ordy 11.3 per cent of
arable land had been transformed from private peasant smaU­
holdings into much larger collective farms, that is, producers' co­
operatives CTKZS) on the pattern of the Soviet kolhoz. Most of the
1.1 miUion smaUholdings surveyed in 1946 stiU sur\aved. Decisive
state leverage over the agricultural sector had none the less been
estabUshed through the nationalisation of both internal and foreign
trade.
Opposition to collectivisation came from several quarters and
 CommunistRevolution, 1944-1947 125

undoubtecQy helped to slow its pace. The Red Army's economic

advisers had tried to get the process off to a fast start in early 1945
by arranging the deUvery of thousands of tractors from the USSR
before the Second World War had ended. Yet one-third of the
private farms and two-thirds of their arable land were holdings of 5
hectares or more, large enough to promise the household an
adequate income.^ Their peasant owners typicaUy had no desire to
give them up voluntarily. The opposition press of the Agrarian and
Social Democratic parties emphasised this reluctance during the
1945-6 period of relatively free publication. The presence of the
Anglo-American members of the AUied Control Commission may
have further inhibited Communist initiative.
Some inhibitions also came from within the party itself. During
the course of 1945, the Politburo discovered that it had over­
estimated the capacity of the party rank and file to promote a
voluntary groundsweU for coUectivisation from the mass of smaU­
holders. With party secretary Traicho Kostov taking personal
control from the party's economic committee, the PoUtburo pre­
pared a redistribution, in part to private smaUholders, of aU land in
private properties over 20 hectares. Nearly half of this rather smaU
amount of land, 3.6 per cent of total arable, was distributed to
129,000 smaUholders in plots averaging 1 hectare by June 1946.
None of the enlarged private holdings, however, was large enough
to pose a potential threat to the Communist plan to use the existing
framework of credit and other co-operatives to set up more TKZS
than the 100 estabUshed in 1945. The other half of the redistributed
land was contributed to these new farms. Liberal terms were set to
attract private holdings. Not aU of the holding need be contributed,
and the collective would pay the former owner rent for land that
was used. These two provisions, unique in post-war Eastern
Europe, reflected the party's Ungering hopes for a flood of
voluntary members.
On this basis, however, only 3.8 per cent of arable land had been
collectivised by 1947. Low delivery prices for what the collectives
sold the state kept voluntary incentives to join low. Peasants began
to slaughter livestock for lack of food by late 1946. It was in this
troubled atmosphere that both Georgi Dimitrov and Kostov
warned the rest of the party leadership in 1948, after the opposition
press and the AUied Control Commission had ceased to exist,
against 'Ulusions' about the inuninent coUectivisation of aU agricul­
tural land.' No one should have expected, Dimitrov went on, to
126 CommunistRevolution, 1944-1947

create a sociaUst economy within the first five years.

The new regime had been able to take control of internal agricul-
tmal trade much more quickly. Serious food shortages and a wide­
spread black market confronted the Communist-led Fatherland
Front in aU the major towns, especiaUy Sofia, in September 1944.
Heavy rains that faU and severe drought the next spring, foUowed
by a lesser drought in the spring of 1946, made matters worse.
Speculative hoarding spread. The net real value of crop and animal
production for 1945/6 feU to 60 per cent of the 1939 level, down
even from the 75 per cent recorded for 1943/4.*
Yet the Politburo's economic committee and the new govern-
mentsU Higher Economic CouncU (VSS), set up under its auspices
in early 1945, did have one great advantage. They did not need to
create any new institutions to deal with this specific crisis or to
increase their own authority in general. The Council simply
assumed the powers of the wartime Directorate for CivUian Mobili­
sation (DGM), which it replaced. The DGM had continued to func­
tion after 9 September, 1944, as had the Hranoiznos organisation
for controlling sales of 23 major crops (see Chapter 4). Under VSS
direction, Hranoiznos used the wartime systems of delivery or pro­
duction order, and of obUgatory or forced deUveries to extract aU it
could. Local co-operatives rather than private traders were now
charged with carrying out the delivery or production orders due
from each property-owning peasant household. The Communist
militia handled the outright requisitions. These were forms of
'military communism', according to recent Bulgarian scholarship,
which recognises how much the peasantry resented these requisi­
tions.' Rural resistance to collective farms surely hardened in the
process.
Tobacco, fruit and some vegetables were the principal crops out­
side the wide purview of Hranoiznos. Urban shortages of fruit and
vegetables in the spring of 1945 prompted the VSS, under party
direction, to nationalise рШр processing plants. They had grown
rapidly during the war in order to supply the Bulgarian army and
the German home front. The network of rural co-operatives, which
included some 1.6 miUion members, was instructed to reqmsition
vegetables as weU. The pre-war state organisation for vegetable and
fruit export, Bulgarplod, was re-created and brought into the
purchasing process. The Agricultural Bank and the co-operative
network bought up 88 per cent of the 1945 tobacco crop for the
state at fixed prices. By 1946, over 90 per cent of Bulgarian export
 CommunistRevolution, 1944-1947 127

value had been collected by state or co-operative organisations.

These agricultural controls led the way in reducing the private share
of internal trade to 57 per cent by 1947 and to 13 per cent by 1949.«
It remained only for a variety of state org2misations to take over
the role of the pre-war co-operative network after 1947. The co­
operatives had served to manage almost half of this huge system for
purchase and requisition in 1945-6. Without the prior extistence of
this network and of Hranoiznos, however, it is doubtful that Com­
munist authorities could have assumed control of agricultural trade
with such relative ease. For foreign trade, no explicit decree for
nationalisation was even necessary. It is also doubtful whether,
without Hranoiznos and the co-operatives, gross real crop produc­
tion marketed could have risen to 99 per cent of the 1939 level by
1948, up from 60 per cent in 1945.' At the same time, the 8 per cent
increase in animal production over 1939 derived from the survival
of private smaUholdings more than from any state programme.

Economic Relations with the USSR

The new Communist regime faced another powerful pressure for

agricultural recovery, beyond the food storage in the towns. This
was the need to find exports to compensate the Soviet Union for the
essential imports which the large, but war-ravaged Soviet economy
was furnishing Bulgaria. Soviet political motives surely played their
part. The attraction of assisting the Bulgarian Communists was
obviously greater now that they were in power than in 1940-1, the
only previous period of significant Soviet-Bulgarian trade. But now
the Soviet need for compensation was also greater.
When that need had been less, the Soviet side had purchased
more from Bulgaria than it had provided. The Soviet oil, cotton,
metals and machinery furnished in 1940 amounted to 2.9 per cent
of Bulgarian import value, compared with an export value of 4.6
per cent. Tobacco, pork and other agricultural goods made up the
Bulgarian deUveries under the bUateral agreement signed in May
1940.« Trade in these goods resumed once the first post-war agree­
ment was signed, soon after the Soviet Union accepted a formal
truce with Bulgaria on 23 October, 1944. Its virtual barter terms
specified the goods which both sides were to deUver. Subsequent
annual agreements with the USSR in 1945 and 1946 have been
foUowed by longer-term pacts since 1947.
128 CommunistRevolution, 1944-1947

The value of imports from the USSR accounted for 80 per cent
of the reduced Bulgarian total for 1945 - 6 . The commodities were
crucial to the smaU economy's survival. The Red Army's command
m Bucharest had already diverted some Romanian oil to Bulgarian
use in 1944. Direct deliveries from the USSR began in 1945 and
relieved a serious shortage in a coratry which had no oil of its own.
Fibre from Soviet Central Asia aUowed cotton textile production to
recover its pre-war level. Thus ended the interwar Bulgarian effort
(see Chapters 2 and 3) to use domestic cotton, except, ironically,
for its promotion by Soviet advisers in the early 1950s (see Chapter
6). Soviet grain reheved the shortfalls created by the bad Bulgarian
harvests of 1945 and 1946. Imports of fertUiser and agricultural
machinery, especially tractors, assisted recovery and alsofacilitated
the creation of the machine-tractor stations, which were then
essential in Soviet-style collective farming. Most important among
the machinery and metal products that made up the rest of Soviet
imports were railway locomotives and roUing stock and an electric
power station. This station, together with some equipment from
Czechoslovakia, eUlowed the distribution of electric power to
extend beyond Sofia again, for the first time since early 1944.'
Bulgarian exports to the Soviet Union were fully 95 per cent of
total value in 1945. They decUned to 61 per cent in 1946, while the
imported percentage rose. From 1947 to the present, both have
remained at just over 50 per cent. As may be seen from Table 5.2,
these export fractions did not match imports from the USSR agidn
until 1950. Bulgaria's overaU trade balance was significantly
positive only for 1945, and then only because of greatly reduced
imports. The surpluses with other countries thereafter could not be
converted into payment for the USSR. Hence, there was continuing
pressure on the Bulgarian side to export even more to the Soviet
Union.
Tobacco was by far the largest item; 64 per cent of sales went to
the Soviet Union in 1945-6 and 80 per cent in 1947. The Bulgarian
Agricultural Bank (BZB) easily arranged the sales through co­
operatives, which were by then controlling tobacco leaf produc­
tion. Some stocks of tobacco wsold in 1943 - 4 were also used.
Greater diversification was clearly needed in the future. Fruit pulp
and wine, however, were the only other commodities sold in sigrUfi-
cant amounts in these first post-war years, principaUy through
Hranoiznos.'"
Commerce with countries other than the Soviet Union, let alone
 CommunistRevolution, 1944-1947 129

Table 5.1: Foreign Trade Volume and Terms of Trade, 1944-50

Current prices Index
(million pre-war leva) Х/М (1939=100, in 1939 prices) Terms of
X Μ ratio X M trade
1944 11,357 6,478 1.75 74 27 56
1945 12,397 5,820 2.13
1946 14,942 17,514 0.85
1947 24,533 21,416 1.15
1948 36,351 37,741 0.96 66 87 110
1949 369а 310a 1.19 74 118
1950 797а 910a 0.88 102 102 71

X = Exports; M = Imports,
a|n post-war leva.
Source: J . R . Lampe and M.R. Jackson, Balkan Economic History, 1550-1950
(Bloomington, Indiana; Indiana University Press, 1982), table 13.3, pp. 526-9.

Table 5.2: Direction of Foreign Trade, 1938-50 (percentages)

USSR Czechoslovakia Eastern Europe Other
X M X M X M X M
1938 5 6 13 18 88 82
1945 95 80 2 9 3 12
1946 61 82 11 6 17 9 17 9
1947 52 61 19 16 34 27 14 13
1948 52 58 11 12 29 25 19 17
1950 55 50 15 16 37 37 8 14

X = Exports; M = Imports.
Source: Lampe and Jackson, Balkan Economic History, 1550-1950, table 13.2,
pp. 5 2 4 - 5 .

genuine multilateral trade, got off to a much slower start in the

immediate post-war period. The Bulgarian government signed
bilateral trade agreements with Romania, Czechoslovakia and also
Switzerland as early as 1945. The Czech connection was the largest
and also the most valuable, because of access to more sophisticated
machinery than the USSR could provide. There was little past his­
torical or present poUtical basis for trade with the United States,
whose industrial economy emerged from the war undamaged as the
world's strongest.
The one realistic opportunity for multUateral trade was the
limited Balkan customs union proposed by Georgi Dimitrov in
January 1948, after his warm fmal meeting with President Tito in
Yugoslavia. Whatever the political rationale and problems of this
130 Communist Revolution, 1944-1947

proposal, its economic advantages would have been long-run rather

than immediate. The potential members did not have enough
industrial raw materials or manufacturing capacity between them
to provide for aU. StUl, Romanian iron ore and oil and Yugoslav
iron ore and non-ferrous metals would have helped Bulgarian
industry by the 1950s. The Soviet rejection of Dimitrov's ideas as a
'cooked-up federation' came only five days after it had appeared in
Pravda." Stalin's split with Tito a few months later ended even
normal Bulgarian trade with Yugoslavia by the end of 1948.

Consolidating Financial Control

Most of the financial sector had already been nationalised before

the Communist regime came to power. Previous chapters have
described the rise of the Agricultural Bank before and after the
First World War, the resurgence of the central bank during the
1930s, and the merger of private provincial banks into the Banka
Bulgarski Kredit in 1934. Their leverage had only increased during
the war years. By 1944, their combined capital was 80 per cent of
the Bulgarian total.
European-dominated commercial banks in Sofia comprised most
of the remaining private sector. The German or Italian affiliates,
including several banks simply taken over from their French or
Belgian owners once the war had begun, became Soviet property
under the terms of the AUied agreement at Potsdam in July 1945.
The Soviet Union received 90 per cent of their stock, and they
quickly ceased to exist. The one large Western European institution
that tried briefly to establish its pre-war position was the famous
French investment bank, Paris Bas. By October 1946, however, the
bank's management had agreed to seU to the Bulgarian government
its share in the Banque Franco-Belge, the United Tobacco Factory,
and several textUe firms. The original Communist plan to use the
Banka Bulgarski Kredit to absorb private banks had not material­
ised; perhaps it proved unnecessary. When the 32 remaining private
banks were merged with the central bank in December 1947, they
held no more than 11 per cent of total bank capital and 6 per cent
of deposits.'^
The Bulgarska Narodna Banka was on its way to becoming the
one important Bulgarian bank of the Communist era. The central
bank's later absorption in 1951 of the co-operative and popular
 CommunistRevolution, 1944-1947 131

banks was to leave the previously powerful Agricultural Bank to

languish. Already in 1948, the first in a series of state banks set up
to invest in nationalised industry had fmled to survive for more
than a short period. The VSS and the Narodna Banka soon took
over its activities.
Private financial assets outside commercial banking never recap­
tured their pre-war position. Western loans to the Bulgarian
government were out of the question, and not just for politicEd
reasons. Bulgarian payment on its loans before and after the First
World War had been suspended in 1940. French representatives
were not able to arrange even partial payment until 1947. A
broader agreement with aU Western bondholders was negotiated in
1948, but never honoured." No reparations were owed to the
Western aUies, according to the peace treaty signed in Paris in July
1947. Yugoslavia's Communist government forgave Bulgaria the
550 mUlion leva ($25 miUion) owed for war damages, and Soviet
pressure forced the Greek government to cuta claim twice as large
down to $50 miUion. Its payment was left to fruitless bUateral nego­
tiations. Thus the Western leverage over the Bulgarian state budget
and the central bank that foUowed from the reparations issue after
the First World War never materialised after the Second. Neverthe­
less the spectre of its possible reappearance served to encourage
reliance on Soviet support.
The Communist-dominated government was meanwhile free to
use both monetary and fiscal policy to soak up domestic funds stiU
privately held. Large deficits in the state budget for 1945 and 1946
led the Narodna Banka to restrict new note emissions severely.
Inflation was thereby better restrained than in neighbouring Greece
or Romania. The cost of living did not even double from 1944 to
1947; it merely increased by 86 per cent, as note emissions rose only
13 per cent.'* Credit in an economy stiU largely in private hands was
also restricted. The entirely internal Freedom Loan for the 1945
state budget attracted some of the remaining private funds. Many
more were appropriated in the monetary reform of 1947. Its pro­
vision blocked aU private accounts, including those in state banks,
over 20,000 leva, and imposed a one-time tax on the remainder. Its
effect was to cut the Bulgarian money supply by two-thirds at a
single stroke. Progressive taxes on individual income and excess
profits soaked up potential new deposits. Their coUection increased
from 8 per cent to 27 per cent of state budget revenues between
1944 and 1947." By then the Communist government had
132 Communist Revolution, 1944-1947

established virtually complete control of Bulgaria's financial

resources. This proved to be a source of poUtical as weU as
economic strength.

Problems with Private Industry

Private industry posed more problems for the Communist pro­

gramme to consoUdate economic power than did the financial
sector. This was not surprising, given the nature of the average
Bulgarian industrial enterprise. The war years had accelerated the
inter-war tendency towards an increasing number of smaUer and
smaUer firms, as noted in Chapter 4. A majority were not tied to
the war effort or tainted by charges of speculation. Thus they were
not vulnerable to nationaUsation immediately after the war. But
neither were they a likely basis for the modern, large-scale industry
that the Communist leadership was conmiitted to creating in the
long run.'* In the short run, Traicho Kostov and the party's other
economic authorities concentrated on using aU of the existing
industriad capacity and restricting speculation or excess profits.
A majority of the industrial labour demobiUsed from the army or
attracted from agricultural employment in the first post-war years
found its way into the smaUer factories and even unmechanised
artisan shops. Total employment in industrial enterprises with
more than 20 workers and 20 horsepower rose from 111,000 to
145,000 for 1944-7, but artisan employment climbed faster and
nearly caught up, increasing from 80,000 to 127,000. The average
size of firms meeting the minimal official defimtion of an industrial
enterprise (10 workers and 10 horsepower) had already faUen to 24
by 1946. That year the Ministry for Industry needed 16 meetings to
process the applications for new enterprises. The total number of
enterprises had risen one-third by mid-1947 to pass 5,500. For
1944-7, the greatest changes were the decUning size of the urban
enterprise and the growing number of viUage shops. The average
size of the former sUpped from 59 to 49, led by Sofia which
dropped to just 42. The number of artisan shops rose by one-half,
because of growing numbers in viUages and also m the Sofia area.
Unmechanised lumber and brickyards might employ weU over 20
workers, whereas the mushrooraing metal shops typicaUy employed
three or less. By 1947, firms meeting even the official definition of
an industrial enterprise had faUen from over 10 per cent to 3 per
 CommunistRevolution, 1944-1947 133

cent of the total number of metidlurgical enterprises and shops."

The immediate consequences of this deconcentration spelled
trouble for the Communist Party programme. Agrarian opposition
to the Communist rural poUcy of obligatory or actuaUy forced food
deliveries were now joined by complaints from the Union of
Bulgarian Industrialists. They represented private owners who were
Ioyal to the new regime, but found it increasingly difficult to
operate efficiently. The VSS had raised authorised profits from 10
per cent to 15 per cent of sales volume in 1945, but actual earnings
were usually less. Shortages of skiUed labour and raw materials
were responsible. The spread of smaUer firms made both shortages
much worse. SkiUed metal or textile workers demobiUsed from the
army or back from Germany were assigned to large enterprises, but
they left these enterprises in droves to found their own smaU shops.
National reserves of metals, cotton, rubber and other inputs
amounted to one or two months worth in 1945. These shortages
affected even food-processing plants. In Plovdiv there was the
special problem of tobacco supplies, which had been moved out of
town in 1944 to avoid AlUed bombing raids. Now they could not be
moved back, because of the lack of rail transport.
The ample supply of unskiUed labour available once the army
had been demobiUsed in 1945 could not therefore be fully
employed. Industrial unemployment rose to 38,000 by 1946, or
over 20 per cent of the workforce." More than half of the
unemployed were tobacco workers, many of whom were Commu­
nist Party members or sympathisers. I f the party programme had
promised anything to its foUowers during the 1930s, it was to
eliminate unemployment. The appearance of that most lamentable
capitalist phenomenon during the immediate post-war period must
have made the transition to sociaUst industry on the Soviet pattern
seem aU the more urgent to the Bulgarian party leadership.

State Industry and Nationalisation

The industrial enterprises already under state ownership in 1944

and those nationaUsed in 1945-6 also encouraged this transition.
They did so more because of the problems they faced than because
of the successes they recorded. The size of the state sector, it may
be recalled from Chapter 4, had faUen during the war years from
8-9 per cent to 5-6 per cent of industrial production. The mining
134 Communist Revolution. 1944-1947

of hard coal and the generation of electric power remained largely

in state hands. State mines and power stations accounted for 89 per
cent and 65 per cent of 1945 output respectively.
By 1947 the state industrial sector had grown in size to a
prominent, though not commanding position. Its enterprises now
included over half of total capacity, but only one-quarter of actual
production. The conversion of the Varna shipyards from a German
into a Soviet-Bulgarian joint enterprise and of the several arms
factories, including the Lovech airplane works, into agricultural
machinery plants, involved enterprises already under state owner­
ship. The aforementioned acquisition of enterprises under Western
European, German and Italian bank ownership served to national­
ise tobacco-processing and the large Granitoid cement plant in
Sofia, but little else. The largest addition to the state sector came
from government offers to buy out firms producing necessities and
from the confiscations decreed by the People's Courts." They had
been set up to deal with wartime collaborators. These tribunals
were not to be trifled with; they handed down a minimum of 2,000
death sentences. There was no appeal to their decrees of confisca­
tion for 137 industrial enterprises during 1944-5. By 1945 they
were also empowered to take over any enterprises which defied the
VSS decree banning any unexcused cutback in production.
The net effect of these confiscations none the less was minimal in
a number of industrial branches. The seven textile firms taken over
during 1945, for instEmce, accounted for less than 9 per cent of the
joint-stock capital in the branch. More state leverage over textile
production derived from the assigning of up to 8,000 workers,
many of them unemployed, to factories designated in 1945-6 to
process renewed imports of Soviet cotton. This method of produc­
tion for state use with state-furnished raw materials closely
paralleled the ishleme system of manufacturing cloth and shoes for
the Ottoman army in the early nineteenth century.^ No large new
state enterprises were established during this difficult period.
For workers already employed in state industry, moreover, the
experience of the immediate post-war period was not a happy one.
Wages were low, and consumer goods extremely scarce. An urban
food shortage, following the bad harvests of 1945 and 1946,
reached its peak in 1947. Workers in state factories, and especially
the hard coal mines, 'voted with their feet' during the summer
months. They simply left their jobs to help cultivate the family
smallholding and thereby assure their own food supply. Communist
 CommunistRevolution. 1944-1947 135

officials complained that 'we cannot hold winter workers once

spring comes', because 'it is impossible to keep workers from crop
cultivation'.^' Fully two-thirds of the labour force left one coal
mine. Several hundred army troops had to be sent in to keep
another mine operating. Railway operation was curtailed because
of the resulting coal shortage. During the winter months, some
state enterprises were plagued with so many unexcused absences
that regular hours of operation could not be maintained. Turnover
was rapid. Sporadic strikes broke out. Even unskilled workers
began to leave state plants manufacturing agricultural and other
machinery and to seek out the small private metal works that were
springing up. By 1947, the Communist regime was therefore facing
a long-term threat to the coal and metal production that would be
crucial to its vision of a modern industrial economy. It was also
confronted with the last short-term problem which it had expected
to face, a crisis in labour disciphne.
Thus the Cominform decision to proceed more quickly with
nationalisation of industry, taken at the meeting near Warsaw in
September 1947 between Soviet and other Eastern Europe Com­
munist leaders, was a welcome one for the Bulgarian party. None
of its leaders could conceive of another solution to the problem
they were facing in 1947. Nationalisation of industry on the Soviet
pattern had always been their long-term goal anyway. Party
Chairman Georgi Dimitrov called it 'the most important revolu­
tionary step for the economy'. Now it was undertaken with all the
urgency and secrecy of a military operation. By December of that
year, 1,200 trusted party cadre had been assembled in Sofia and
given several days of special training, aU without public notice.
Then came sealed instructions, and the party cadre positioned
themselves around the country. At 11 o'clock on the morning of 23
December, 1947, they and local party leaders began entering the
private industrial enterprises (numbering about 6,000) to announce
the firms' nationalisation." Public notices were then posted, and
new Communist directors appeared the next day. There were no
violent incidents or significant opposition. Over 90 per cent of the
enterprises had less than 50 employees, and their average size was
23. These typicaUy smaU firms could no longer act as a magnet to
attract workers from the large state enterprises.
The problem now facing the Communist leadership was how to
combine these smaU firms into the modern factories that they
beUeved would assure the rapid development of the Bulgarian
136 Communist Revolution, 1944-1947

economy and solidify their political power. This they could not
begin to do without the transition to Soviet-type central planning.
That transition would last for at least a decade and is the subject of
the next chapter. The tentative plan for industry and infrastructure
in 1947-8 can then be considered in proper perspective, as a
prelude to the three longer and increasingly comprehensive plans
for 1949-60.

Notes

1. The Agrarians were badly split just as before the war. The Gichev faction was
excluded from the front, compromised by the leader's peu-ticipation in the Muraviev
regime during the last week of the war. The έηιίξΓέ Agrarians were led by the other
Georgi M. Dimitrov, not to be confused with the Communist leader of the same
name. When he returned to Bulgaria in 1944 to attempt to unify the Agrarians once
again, this Dimitrov could not overcome the handicap of his wartime association
with British authorities in Cairo. Communist objections forced his resignation. A
large group of left-wing Agrarians, led by Nikola Petkov, had originally opted to
work within the Fatherland Front in 1944. Petkov and a part of the rapidly growing
Agrarian membership total broke away the following year, charging Communist
domination. The faction's membership had risen by 1946 to at least 50,000 and
perhaps past 150,000; the figures remain in dispute. More clearly, Petkov's faction
became the focus for opposition to Communist rule. Petkov organised a single slate
of opposition candidates, which won 29 per cent of the vote in the October 1946
elections for a constituent assembly. The Communists, however, won 54 per cent
and their Fatherland Front 70 per cent. Petkov's trial and execution in 1947, on
questionable charges of plotting to overthrow the regime, symbolised the ruthless
Communist determination to brook no public opposition or Western pressure once
the AUied Control Commission had been disbanded.
The Zveno faction in the Fatherland Front sought to avoid these Agrarian
problems by working behind the scenes. As in the mid-1930s, however, lack of mass
support made their cabinet members, even the Prime Minister Kimon Georgiev,
vuinerable to easy removal. The Social Democrats had been significantly weaker
than the Communists since the 1920s. Like Zveno, their candidates had won less
than 2 per cent of the vote in the 1946 election. The skiUed industrial labourers who
were their major support had been taken to Germany for war work, if they had not
been drafted into the army. The agreement of a new, more pliant leadership to
merge with the Communists in mid-1948 marked the end of organised political
opposition in Bulgaria. A separate, but smaU and allied Agrarian Party has been
aUowed to remain to this day. The Bulgarian Communist Party (BKP) formally
assumed that title again in December 1948, ending the long use of 'Bulgarian
Workers' Party', adopted in 1927 during its own period of illegal opposition.
A balanced Western account of post-war political developments is Phyllis Auty,
'Bulgaria', in R.R. Betts (ed.), Central and South East Europe, 1945-48 (Westport,
Connecticut: Greenwood Press, 1971, reprint from 1951), pp. 25-51. On the British
and American roles, see EUzabeth Barker, British Policy in SoutheastEurope in the
Second World War (London: MacmiUan, 1976); and Michael M. BoU, The Cold
War in the Balkans: American Foreign Policy and the Emergeru:e of Communist
Bulgaria, 1943-1947 (Lexington, Kentucky: Kentucky University Press, 1984). The
most accessible Bulgarian account is Mito Ususov, 'Formation of the Political
 CommunistRevolution, 1944-1947 137

Structure of the People's Democracy in Bulgaria', in Isusov (ed.), Problems of the

Transition from Capitalism to Socialism (Sofia, 1975), pp. 43-51. On the
opposition parties, see Isusov, Politicheskite partii v Bulgariia, 1944-1948 (Sofia,
1978). On the Communist Party, see Isusov, Komunisticheskata partiia i
revolutsioniiat protses v Bulgariia, 1944-1948 (Sofla, 1983); and Ilcho Dimitrov,
'BKP', in Bulgariia na Balkanitei i v Evropa (Sofia, 1983), pp. 307-28.
2. See S.D. Zagoroff, Jeno Vegh and Alexander D. Bilimovich, The Agrarian
Economy of the Danubian Countries, 1935-1945 (Stanford, California: Stanford
University Press, tables 9-10), pp. 381-2. The change from 1934 was a slight
decline for both farms and land over 5 hectares (see chapter 3). On the Soviet role in
supplying and even drafting the decrees for the first labour collectives, see Angel
Nikov, Bulgaro-suveiski otnosheniia, 1944-1948 [Bulgarian-Soviet Relations,
1944-1948] (Sofia, 1978).
3. Nikolai Todorov et al., Stopanska istoriia na Bulgariia, 681-1981 [Economic
History of Bulgaria, 681-1981] (Sofia, 1981), pp. 442-9; J.F. Brown, Bulgaria
under CommunistRule (New York: Praeger, 1970), pp. 198-201.
4. P. Kiranov, 'Natsionalen dokhod na Bulgariia, 1939, 1944, 1945' [The
National Income of Bulgaria, 1939, 1944, 1945], lzvanredno izdanie naspisanie na
Glavnata Direktsiia na Statistika (Sofia, 1946), p. 85.
5. Mito Isusov, Rabotnicheskata klasa v Bulgariia, 1944-47 [The Working Class
in Bulgaria, 1944-1947] (Sofia, 1971), p. 45-9; Nikola Popov (ed.), Ikonomika na
Bulgariia [The Economy of Bulgaria], vol. II (Sofia, 1972), pp. 78-9.
6. Todorov et al., Stopanska istoriia na Bulgariia, pp. 434-42, 479; Popov (ed.),
Ikonomika na Bulgariia, vol. II, pp. 103-6.
7. John R. Lampe and Marvin R. Jackson, Balkan Economic History,
1550-1950: From Imperial Borderlands to Developing Nations (Bloomington,
Indiana: Indiana University Press, 1982), table 13.6, pp. 538-40. On the state
absorption of private trade, see Z1. Zlatev, 'Sotsialno-ikonomicheska
preobrazovaniia v Bulgariia, 1944-1948' [The Socio-economic Transition in
Bulgaria, 1944-1948], Istoricheskipregled, vol. XXXVII, no. 1 (1981), pp. 7-19.
8. On 1940-1 trade, see Grigor Popisakov, Ikonomicheska otnosheniia mezhdu
NR Bulgariia i SSSR [Economic Relations between the PR Bulgaria and the USSR]
(Sofia, 1968), pp. 27-40.
9. Ibid., pp. 112-14; B. Simov, B. Blagoev and 0. Oslianin, Vustanovanie i
razvitie na promishlenostta v NR Bulgariia, 1944-1948 [The Growth and Develop­
ment of Industry in the PR Bulgaria, 1944-1948] (Sofia, 1968), pp. 117, 161-3.
10. Lampe and Jackson, Balkan Economic History, p. 544; Todorov et at.
Stopanska istoriia na Bulgariia, pp. 474-8.
11. Pravda, 23 and 28 January, 1948.
12. Totiu Totev, 'Bankovata sistema na NR Bulgariia sled sotsialisticheskata
revoliutsiia' [The Banking System of the PR Bulgaria after the Socialist Revolution],
Finansi i kredit, vol. X X X I , no. 7 (1981), pp. 45-52.
13. It stipulated payment of interest arrears for 1940-8 and of 10-13 per cent of
further interest from 1949 forward. William H. Wynne, State Insolvency and
Foreign Bondholders, vol. II (New Haven, Connecticut: Yale University Press,
1951), p. 574.
14. Lampe and Jackson, Balkan Economic History, table 13.8, p. 552.
15. Todorov et al., Stopanska istoriia na Bulgariia, pp. 480-5.
16. In the words of a recent Bulgarian study of the immediate post-war period,
'The small-scale and insufficiently profitable private economy was not in a position
to secure large capital investments for the development of industry' (Z1. Zlatev,
'Socialist Industrialization in Bulgaria', in Isusov (ed.), Problems of the Traraition,
p. 176).
17. Lampe and Jackson, Balkan Economic History, Table 13.13, p. 564; Isusov,
138 CommunistRevolution, 1944-1947

Rabotnicheskata klasa, pp. 34-41, 87-8, 103-9. Also see Vishiia Stopanska
Kamera, Industrialni problemi v Bulgariia prez 1947 g. [Industrial Problems in
Bulgaria for 1947] (Sofia, 1947).
18. Isusov, Rabotnicheskata klasa, pp. 92-100, 186-96.
19. Simov, Blagoev, Oslianin, Vustanovanie, pp. 90, 168-78; Popov et al.,
Ikonomika na Bulgariia, vol. II, pp. 74-5, 96-9.
20. Isusov, Rabotnicheskata klasa, pp. 25-30, 91-2. On the ishleme system, see
Chapter 1.
21. lbid., pp. 26-36, 92-8; Simov, Blagoev, Oslianin, Vustanovanie, pp.
106-10.
22. Petko Petkov, 'Restriction and Abolition of Capitalist Ownership in
Bulgaria', in Isusov (ed.), Problems ofthe Transition, pp. 162-71.
 THE FIRST FIVE-YEAR PLANS

The Bulgarian transition to a socialist economy on the Soviet

pattern took longer than the immediate post-war period. Simply
nationalising private industrial enterprises was not enough. A
system of long-term central planning to co-ordinate outputs with
inputs also had to be set in place. And for such planning to include
aU production, the coUectivisation of smaU-scsde, private agricul­
ture seemed necessary. Bulgarian economists typicaUy identify the
date of its completion, 1958, as the end of the transition to the
Soviet system. Yet the Third Five-Year Plan, which began that
year, seems to have been as much a part of the Bulgarian effort to
solve planning problems simply by adopting more of the Soviet
system, as were the trial run in 1947-8 and the first two plans in
1949-52 and 1953-7. Like the first plan, the third was to be com­
pleted in less than five years. Misnamed by Western econonusts as a
'Chinese-style Great Leap Forward', the third plan (1958-60) drew
primarUy on Soviet practice and priorities.
Each of the first three plans foUowed a strategy of extensive
growth. Huge amounts of capital and labour were funnelled into a
few branches of industrial production. The five fuU-term plans
since then have pursued more intensive growth, conserving labour,
if not capital, as a way of increasing productivity. These plans stiU
honour Soviet ideology, but have used a growing reUance on
foreign trade as the basis for repeated reforms (see Chapters 7-9).
The present chapter can be brief for two reasons. First, the basic
Soviet system for central planning is weU known. So is Soviet
development strategy: rapid growth of heavy industry to be
achieved through concentrated investment from the state budget
and a labour force augmented by peaseuit influx.' A smaUer rural
labour force is left on the mechanised collective farms to produce
the surplus needed to feed a growing urban population. Bulgaria's
post-1948 transition to this planning system and strategy foUowed
the Soviet pattern perhaps more closely than did any of the other
Communist governments in Eastern Europe. Second, although its
general pattern is famiUar, the period of the first three Five-Year
Plans is the most neglected in modern Bulgarian economic history.

139
140 The First Five- Year Plans

Western and Bulgarian economists have concentrated their efforts

on the period since 1960, where reliable statistical evidence is more
available and connections to the international economy more
important. (Bulgaria published no statistical yearbook in the 1950s
until 1956.) Western historians have typically not gone beyond the
Second World War, nor have their Bulgarian or Soviet colleagues
gone beyond the immediate post-war period.
Bulgarian political history from 1949 to 1960 also makes a
detailed appraisal of these years more difficult. Accompanying
several changes in Bulgarian party leadership was the Soviet transi­
tion from the Stalin to the Khrushchev eras. The single line of
authority from party leadership to economic policy that is a hall­
mark of Soviet-style economies was doubtless present, but harder
for outside observers to discern. Subsequent Bulgarian scholarship
has trodden too lightly on these political links to make clear the
inner dyniunics of economic poUcy.
The period began with the iUness and death of the party's
respected leader, Georgi Dimitrov. A sick man at least from 1947
onward, he died in April 1949 after several months of treatment in
the Soviet Union. Dimitrov enjoyed international prestige on the
left as the eloquent defendant in the Reichstag fire trial, staged
unsuccessfuUy by the Nazis in 1934, and as head of the Comintern
thereafter. He kept his position as Bulgarian Prime Minister during
the Tito-Stalin split, despite his advocacy with Tito of a Balkan
customs union and federation just a few months before the dispute
erupted (see Chapter 5). Traicho Kostov, one of his logical suc­
cessors and the party leader most responsible for economic policy
since 1944, did not survive the purge foUowing the Tito-StaUn
spUt.2
The actual successor, Vulko Chervenkov, had been trained in the
Soviet Union for party work since his exile there in 1925. He co­
ordinated propaganda for the Comintern from the late 1930s, and
for the Bulgarian party's Central Conunittee after his return to the
country in 1946. His background did not prepare him weU, in other
words, for overseeing the first Five-Year Plans. His two decades of
Soviet exile did, however, prepEu:e him to foUow Stalin's lead after
the split with Yugoslavia in 1948, and to reject any further delay in
proceeding with rapid industrialisation and forced coUectivisation
according to the Soviet experience of the 1930s. In addition,
Chervenkov came to power during Stalin's last years, when the
Soviet Union's own reliance on propaganda slogans and the threat
 The First Five- Year Plans 141

of arbitrary punishment reached its post-war peak. These were dis­

tinguishing features of economic policy in both countries from
1950 until Stalin died in 1953. Chervenkov had begun his regime by
expelling one-fifth of a party membership that had grown to half a
milUon. Мгту of those expeUed, like half of the party membership,
were peasants. So were many of the unknown numbers of sus­
pected 'enemies of the people', who were sent to concentration
camps in the early 1950s. AU this made the atmosphere surrounding
further collectivisation onünous, rather than encouraging.
The first challenges to Chervenkov's leadership none the less
appeared surprisingly early in the Second Five-Year Plan (1953-7).
The plan was itself a retreat from the harsh, sometimes counter­
productive measures of the first. Criticism of Chervenkov for these
excesses appeared in the Bulgarian Politiburo as early as 1953, and
reappeared in 1955 because of continuing agricultural problems.
Khrushchev's 1956 speech exposing Stalin's 'mistakes' and his 'cult
of personality' was perhaps the most important, but not the first
step in Chervenkov's demotion. Todor Zhivkov emerged from the
new generation of post-war party leaders to become First Secretary
in 1954, at the age of 43, and Deputy Prime Minister in 1956. But
Chervenkov was to remain the other Deputy Prime Minister untU
1961. Anton Iugov, the Interior Minister during the mass arrests of
1949-50 and one of the older generation of 'home Communists',
had re-emerged in 1956 as Prime Minister. Zhivkov strengthened
his position in this triumverate as the 1950s drew to a close. The
influence of the other two stiU remained to be reckoned wUh untU
the shortcomings of the Third Five-Year Plan had become clear.
Bulgarian economic poUcy did not therefore pass fully into the
hands of Zhivkovand his post-war generation untU the 1960s.

The Rlse of Heavy Industry

Bulgaria's First Five-Year Plan made two important contributions

to the pattern of subsequent economic development. The first was
to create an institutional apparatus for long-term planning of
industrial production, which had been entirely removed from
private hands since December 1947. The state's existing economic
ministries were subdivided into one ministry for virtually every
branch of production. By January 1948, a separate and politicaUy
powerful State Planning Commission (DPK) had come into being.'
142 The First Five- Year Plans

The long pre-war experience of the Main Directorate for Statistics

(GDS), probably the most rigorous and comprehensive such agency
among the Balkan states, served this new commission well. By
March 1948, representatives of the new DPK and the old GDS had
agreed on how to calculate national income, and by October had
set out eleven criteria for calculating plan fulfilment. The major
priority was to promote the rapid growth of heavy industry, maxi­
mising output and minimising inputs. This 'central place' for heavy
industry was the first plan's other legacy to Bulgarian development.
No programme of any pre-war regime, including the rearmament
of the late 1930s, had made such a commitment.
The Communist commitment to what Soviet economists call
category A, or producers' goods, could already be seen in the tenta­
tive two-year plan for 1947-8. Drawn up in 1946, weU ahead of the
nationalisation of a majority of existing industrial capacity, the
plan was intended to restore production to the pre-war level.* Yet it
also placed 45 per cent of state economic investment in a series of
53 new projects, 17 of them for the production of industrial
outputs. Huge cement and chemical plants were to be the centre­
pieces of the new industrial city of Dimitrovgrad, situated on the
River Maritsa in south-western Bulgaria. For the central region, a
hydroelectric dam was projected for Kazanluk. This and other
projects to increase electric capacity foUowed in the footsteps of the
early Soviet emphasis on planning the expansion of electric power
through GOERLO in the 1920s, weU before its First Five-Year Plan
of 1928-32. Expanding Bulgarian capacity also made good
economic sense, given the limited construction of the inter-war
period (see Chapter 3). What did not make sense was the tiny pro­
portion of new investment, just 6 per cent, allocated to agriculture.
This approach replicated Soviet investment strategy during the
1930s.
The new projects of the 1947-8 plan faced not only serious
orgarusational and technical problems, but also severe shortages of
imported or agricultural inputs. These difficulties were already
clear by the time the party convened its Fifth Congress in December
1948. The occasion marked the announcement of the targets for the
First Five-Year Plan, projected for 1949-53. Agriculture was
promised more than before, 17 per cent of new economic invest­
ment, and industry 47 per cent. Electric power and chemical pro­
duction alone were to receive 45 per cent of the industrial total.
Gross industrial output was to more than double, an increase of
 The First Five- Year Plans 143

119 per cent, primarily on the basis of a massive 220 per cent incre­
ment for heavy industry. Light industry would increase its produc­
tion by 75 per cent, and agriculture by 59 per cent. The rapid collec­
tivisation and mechanisation of agriculture was relied upon to
achieve this last target, while also freeing more labour for industry,
construction and transport.
In 1952 the plan was declared fulfilled a year ahead of schedule,
although annual data suggest increases averaging 80 per cent of
target value.' Overall industrial output had climbed at an impres­
sive 21 per cent a year, according to the somewhat questionable
official statistics for 1949-52 in Table 6.1. Electric capacity and
steel production had supposedly risen threefold, hard coal 3.7
times, and lignite, previously little mined, 26 times. Even i f fully
achieved, these impressive increases came from too smaU a base to
provide the supplies that were needed in the mushrooming
machinery sector and throughout the rest of the economy. The
national network of electric power remained incomplete, the
quality of electrical manufactures very low. Despite the new Soviet
and Czech equipment brought in to mechanise the coal mines, their
output lagged behind the planned figure. As a result, raUway trans­
port, which was just recovering from war losses of roUing stock,
and factory power suffered, particularly during the winter. Here
were the key 'bottlenecks' in the interrelated matrix of material
inputs and outputs that had also proved a weak point for early
Soviet central planning.
Agriculture received less new investment than planned, only 13
per cent of the total. Related industries suffered because agricul­
tural targets were not met. The sector grew by only 11 per cent,
compared with the planned 59 per cent. For the economy as a
whole, the investment level was excessively high. In Marxist terms,
the rate of accumulation (investment in fixed caphal net of depre­
ciation, but including net inventories as a fraction of net material
product) reached 28 per cent by 1951-2. Like its neighbours in
Eastern Europe, Bulgaria thus recorded an accumulation rate twice
the contemporary West European average and 2.5 times its own
1929-39 rate of 12 per cent.* Huge investments in heavy industry
were largely responsible.
Labour proved more difficult than capital to accumulate. A
curious combination of revolutionary enthusiasm and police
pressure generaUy prevented strikes, with the major exception of a
stoppage by Plovdiv tobacco workers in 1953. But excessive labour
144 The First Five- Year Plans

Table 6.1: Growth and Originof National Product, 1939-80

A. Origin of Net Material Product

1939 1948 1952 1956 1960 1970 1980

Net material product
INMP) per capita 100 89 121 14S 226 440 825
Percentage of which:
Industry 15 23 29 37 48 55 57
Agriculture 65 59 40 32 27 17 11
Construction 3 4 7 8 7 9 9
Trade and transport 14 10 19 17 15 16 20

B. Annual Growth (percentages)

1949-52 1953-7 1958-60

NMP 8.4 7.8 11.6
Industry 20.7 12.7 16.2
Agriculture -0.9 4.9 6.6
Construction 19.6 7.1 20.8

Sources: Statisticheskigodishnik na NR Bulgariia, 1982 (Sofia, 1983), pp. 12-13;

StatistlcheskispravochniknaNRBulgarila, 1984{Sofa, 1984), pp. 14-15.

turnover could not be prevented, as it could not during the first

Soviet plans. EstabUshed faciUties Uke the Pernik coal mines
recorded 100 per cent rates of turnover in 1952.'
Despite its desire to press ahead with heavy industrial growth at
the fastest possible pace, the Chervenkov regime was forced by
these problems to cut back the A targets for the Second Five-Year
Plan (1953-7). Its publication in January 1953 predated Stalin's
death, unUke other second plans elsewhere in Eastern Europe. Yet
it made the same adjustments that are usually associated with the
post-Stalin period. Total investments were to double, led by extrac­
tion of coal and iron ore, but both agriculture and Ught industry
were to receive greater increases than heavy industry, as were
housing and education. Gross industrial production was to rise 60
per cent by 1957, in 1952 prices. However, crop and livestock
production was to increase more, by 66 per cent. A 40 per cent rise
in personal incomes was planned. The rate of accumulation was
therefore expected to faU by one-half by 1956 to only 14 per cent, as
indeed it did.«
Industrial growth slowed with these adjustments from 21 per
cent to 13 per cent a year between 1949-52 and 1953-7 (see Table
 The First Five- Year Plans 145

6.1). Here was the first of the surprisingly large swings that have
characterised the pace of Bulgarian development throughout the
post-war period. Recent Bulgarian scholarship has blamed this first
swing on the slower growth of electrical power capacity and a
shortage of industrial inputs, especiidly imports.' But Bulgarian
coal production, however much its quantity might increase,
remained of a quality too low for metallurgical coking. The Soviet
Union fiUed some of the gap and provided fliushed metals, untU a
1955 cut in these imports trinuned them back close to the 1950
level. Machine production for agriculture and industry combined
was stiU only 11 per cent of manufactmed goods by 1956, trailing
food and textiles with 33 per cent and 14 per cent respectively. Food
and textUe exports to the USSR had risen in 1953 - 4 , before being
reduced in 1955 because of Soviet demands for industrial inputs
instead. At least the industrial targets for this Second Five-Year
Plan were more modest and were more nearly met. In addition, in
1956 the industrial share of the net material product exceeded that
of agriculture for the first time, as noted in Table 6.1. Investment
in consumer, or B goods, feU to 16 per cent of the industrial total
by 1956, however, in the face of party pressure to reduce overaU
accumulation and ministerial pressure to maintain the growth of
investment in heavy industry, or A goods.
Here we should acknowledge the obstacles in aU these initial
plans to using inputs efficiently and to producing outputs of high
quality that do not appear in quantitative calculations, however
refined and revised, of investment and output. Prices for Bulgarian
food exports were set too low to encourage specialisation, even i f
investment funds were available. Imported machinery was typicaUy
outdated. Repair facUities were often primitive or non-existent.
Most industrial.workers and managers were poorly trained and
inexperienced. The industrial labour force had doubled between
1948 and 1957, increasing from 210,000 to 450,000. Industrial
management rose from 52,000 to 111,000. In addition, the atten­
tion that managers were required to give to the political education
of the workers probably detracted from the economic efficiency of
both. This was, in any case, an era when party credentials often
counted more than performance for rapid promotion. Incentives
for quality control, even of consumer goods, were minimal.
Other difficulties must have come from the rapid merger in 1948
of so many smaU, previously private firms into a much smaUer
number of state enterprises. For textiles, the total number was
146 The First Five- Year Pians

trimmed from 564 to 105, for metallurgy from 167 to 27 and for
food processing from 746 to 77. At the same time, what had been
the country with the smallest average-size for industrial enterprises
in the Balkans, 24 employees in 1946, very quickly became one of
the largest. By 1960, the average size of Bulgarian enterprises had
reached 372. Some 6,000 firms had been reduced to 1,650.'»
Just how this was accomplished and what its consequences were
have never been properly examined. But the rapid merger of so
many previously separate units, especially when joined with the
rapid influx of peasant labour, suggests some diseconomy of scale.
The apparently larger production of newly built plants, whether for
chemicals, metallurgy, or whatever, offers indirect confirmation of
this notion. Merged facilities of existing units in machine manufac­
ture typicaUy recorded production runs that were too short to
prevent unexpectedly high costs. In textUes, mechanisation of
merged enterprises was slow, electric power not self-generated, and
wages too low to prevent high turnover. Case-studies of both new
and merged enterprises are needed i f our understanding is to pro­
ceed beyond its present state: Bulgarian celebration of the increas­
ing quantity of output and Western criticism of inefficient use of
inputs and of the poor quality of firUshed products.

Completing Collectivisation

A major prerequisite for the unprecedented targets of the Third

Five-Year Plan was the full coUectivisation of agriculture.
Bulgarian economic historians now recognise the attendant abuses,
but stiU regard its achievement during the period 1948-58 as the
most important single success of that decade.
The first two phases of the drive, one voluntary and one forced,
had collectivised 11.3 per cent of arable land by 1949. Two related
measures had been tried, but had failed to force many peasants into
the TKZS collectives during 1948. First, the Ministry of Agriculture
initiated the obUgatory sale to the state of aU agricultural
machinery and larger pieces of equipment that were privately
owned. Second, the regime's 'anti-kulak' campaign against the
larger peasant smaUholders became much more intensive. Criti­
cised in the press from 1944 to 1947 for individual cases of
speculating or black marketeering, these larger landowners were
now chastised for the size of their holdings alone. The influential
 The First Five- Year Plans 147

party magazine Novo Vreme applied the Soviet pejorative 'kulak',

or 'fist' (in the sense of having some hold over lesser peasants), to
all with holdings over 10 hectares. This definition included some 9
per cent of peasant households and 26 per cent of cultivated land."
These households, however, were responsible for half of the grain
marketed in 1947 and owned over 60 per cent of the tractors in
operation. The state's obligatory purchase of aU tractors thus hurt
the larger holdings. So did the very low prices paid for grain
deliveries to the state.
By 1949, the larger smallholders were reacting to adversity as
Bulgarian peasants had done since the decade beforethe First
World War. They began to seU only to the free market, consuming
the rest of their crops, or they seeded less of their land. With
tractors sold off, they accumulated more draft animals. They also
began to barter grain to poorer peasants in return for manufac­
tured goods or their labour. AU these tactics aided survival in the
short run, but they also provided the country's Communist leader­
ship with ammunition to use against the private agricultural sector
in the long run. The definition of 'kulak' was broadened again to
include holdings of 4-5 hectares. New measures were sought to
wUhhold manufactured goods or state services even from these
smaUholders.'^
Such was the background to the third phase of the regime's col­
lectivisation drive, during 1950-2. It began with the promulgation
of a model charter for the organisation of collective farms. As else­
where in Eastern Europe, these statutes were the culmination of the
renewed Communist interest in coUectivisation since 1950. This
interest may be traced to more than poUtical desire to tame
Bulgarian smaUholders and the easing of the immediate post-war
food shortage. In addition, Stalin's paranoid suspicion of any
further deviations, after the split with Tito in 1948, created compe­
tition between aU Eastern European parties to show their devotion
to Soviet first principles.
The Bulgarian statutes were closely based on the Soviet charter
of 1935 in most respects. Members owed the farm a minimum
number of labour-day units and might receive up to half of their
projected cash income from the collective in advance. Private plots
of 0.2-0.5 hectares and ownership of smaU, specified numbers of
Uvestock were aUowed. Two departures from the Soviet charter are
worth noting. They are the member's residual ownership of his
share of the collective's land (from 1958, of its assets), and his
148 The First Five- Year Plans

right, again until 1958, to receive rent for the farm's use of his
land."
The collectives' share of arable land rose spectacularly during
1950 to reach 44 per cent by the year's end. Another spurt during
1952, the last year of the Fkst Five-Year Plan, brought the share to
61 per cent. The pace was the fastest in Eastern Europe.
The 1950 statutes themselves cannot fairly be said to have
attracted many voluntary members by so-called 'self-dekulakisa-
tion'. Western analysis has emphasised, and recent Bulgarian
scholarship has recognised, the role of 'extra-legal' pressures in the
enlargement of membership Usts. In plainer language, this meant
threats, physical beatings and arbitrary arrests. Several important
legal inducements must also be acknowledged. Most obvious was
the continued growth of Soviet-style machine-tractor stations
{MTS), rismg from 71 in 1949 to 200 by 1957. Tractors per 1,000
hectares more than doubled to reach 3.6 for 1953-7, over 10 times
the 1939 level, i f stiU just one-third the Western European average.
The machine-tractor stations had received monopoly rights to such
modern equipment in 1948. More important, delivery quotas per
hectare for the state-controlled system of agriculturau marketing,
already in place since the Second World War (see Chapter 4), were
set higher for private holdings than for collective farms. From
AprU 1950, holdings over 10 hectares owed the state 75 per cent of
their grain crop. New income tax rates in May also hit the indivi­
dual smallholder harder.·*
Finally, the reUance of aU peasants on sales to the residual free
market, briefly aboUshed and then reinstated in 1949, was dis­
couraged in two ways. One was the threat of criminal charges for
any peasant accused of diverting produce due for deUvery quotas
into the free market. The other involved some recognition, even by
the early 1950s, that the Bulgarian peasant would respond rather
quickly to price incentives. The 1949 party plenum had frankly
admUted Conmiunist failure to win the support of the larger smaU­
holders. It recognised the need to raise agricultural delivery prices,
especiaUy in view of the high prices of manufactured goods. Agri-
c^tural prices were soon increased for coUective farms, although
not enough to bring peasant income close to that of industrial
labour."
These legal devices were more important in the final phase of the
collectivisation drive. They were combined with a 10-50 per cent
reduction in the amount of compulsory deliveries after 1953 and an
 The First Five- Year Plans 149

effort to use old Agrarian Party members to persuade the remain­

ing peasants to join. As a result, the process was finally completed
between 1956 and 1958. The land belonging to collective farms
reached 77 per cent of the arable total by the end of 1956 and 92 per
cent by 1958.'* By 1956, only 756 private holdings exceeded 10
hectares. Most of those were in mountainous areas. The 3,200 col­
lectives dwarfed the 86 state farms run on the Soviet sovkhoz model
by the same preponderance in area as in numbers. This was the
smallest share for state versus collective farms in Eastern Europe,
and was very far behind the Soviet proportion of one-third. Like
the rest of Eastern Europe, however, the size of the average
Bulgarian collective farm, about 1,000 hectares, was much smaUer,
under one-fifth the average Soviet size.'' That discrepancy was
about to be repaired under the Third Five-Year Plan.

Reappraising the Great Leap Forward

Bulgaria's Third Five-Year Plan (1958-60) has invariably been

indentified by Western economists as a 'Chinese-style Great Leap
Forward'. The merger of the existing coUective farms into 957 giant
units, averaging about 4,500 hectares a piece, was regarded as a
lasting monument to the leap, untU stUl larger agro-industriiU
complexes were assembled in the 1970s (see Chapter 9). Yet the role
of the Chinese example in the origins and implementation of the
third plan is less important than Soviet priorities and a series of
internal Bulgarian pressures.
The third plan's major goals had already been laid down at the
Central Committee plenum of AprU 1956. This was too early for
there to be any question of a Chinese example. The plenum was
instead concerned with correcting the failings of the second plan,
not oiUy the arbitrary centraUsm of Chervenkov, but also the
lagging production of output and especiaUy inputs for heavy
industry. Stipulations for a second large complex for ferrous
metaUurgy at Kremikovtsi were set down, and the whole plan was
elaborated in more detaU than before. The seventh party congress
in June 1958 merely made the plan public.
Throughout the period 1956-8 the major internal pressure was,
of aU things, urban unemployment. The completion of coUectivisa­
tion had led a large number of male peasants to abandon the
countryside for the major towns. Once there, they needed factory
150 The First Five- Year Plans

jobs, as did artisans from the now-extinct private sector. (Some

3,300 artisan shops had been nationalised in 1951.) A reduction in
the burgeoning state bureaucracy created new candidates for posi­
tions in factory management. The aforementioned cutback in
Soviet imports for 1955 created some excess capacity in heavy
industry. At the start of 1956, registered unemployment in Sofia
reached 27,000 andin Plovdiv 12,000. In Plovdiv and several other
towns, tobacco workers displaced by long-overdue mechanisation
numbered 77,000. AU jobs seekers combined may have totalled
350,000 by 1958." One reason for the plan's unprecedented growth
targets was the obvious need to employ these people. The original
plan therefore projected the creation of 140,000 new jobs by 1959
and 400,000 by 1962. Some 10,000 agricultural workers were
scheduled to go to the Soviet Union for special projects, the first
large-scale movement of Bulgarian labour since the Second World
War.
Foreign trade with the USSR, Eastern Europe and also the FRG
largely explained the plan's new investment priorities, along with
the continuing commitment to heavy industry. Food processing
and agriculture perse were tagged for increased growth. These were
areas of special Bulgarian responsibility, together with chemical
fertiUsers imd smaU electrical equipment, in the now active plans of
the CouncU for Mutual Economic Assistance (CMEA) for greater
East European trade.
Created at Soviet initiative in 1949, the organisation had done
little during the first two Five-Year Plans. This had initially been an
era in Eastern Europe of emulating the autarkic Soviet growth
strategy of the 1930s. What foreign trade occurred was handled
through bilateral agreements, also famiUar from the 1930s. The
first CMEA sessions in 1949-50 had largely ignored Bulgaria,
except to approve construction of a Romanian-Bulgarian bridge
across the Danube, and to ratify the creation of the joint Soviet-
Bulgarian company Gorubso (one of five joint companies) for geo­
logical surveying and mining of new deposits of petroleum, iron
and non-ferrous ores. (None were discovered in the expected
quantity or quality.) No more sessions were even held until 1954,
after StaUn's death. By then budget funding of Gorubso surveys
had already been cut back, and a Soviet scheme to expand
Bulgarian cultivation of cotton, thus eliminating the need for large
imports from the USSR, had been set aside. Gorubso was soon left
entirely in Bulgarian hands, as were the other joint companies for
 The First Five- Year Plans 151

housing and ship construction, for the TABSO airline EUid finally,
in 1956, for uranium mining. Subsequent Soviet readiness to
breathe some life into CMEA may be seen in the multilateral com­
missions and expanded trade plans put in place at the 1956 session
in East Berlin." After a reduction in 1955, Bulgaria now faced
greatly increased export obligations to the USSR, Czechoslovakia
and the GDR for the late 1950s. From the last two, there was the
promise of badly needed machine imports in return.
This need had already led Bulgarian authorities to increase trade
with West Germany significantly, despite the breach in formal
diplomatic relations since 1957. By 1959, West Germanyaccounted
for 8 per cent of Bulgarian import value. Table 6.2 reflects the rise
in overall foreign trade that had begun by this time, albeit without a
significant shift in the structure of exports or imports. Table 6.3
recalls the overwhelming predominance of Soviet trade throughout
the period.
The need to increase both industrial employment and agricul­
tural exports helped push the party leadership into its decision —
taken in October 1958 — to fulfil the third plan, like the first,
within three or four years. In addition, the targets for agricultural
production and processed food were more than doubled. They both
surpassed the 77 per cent increase planned for heavy industrial pro­
duction. Such targets would presumably quadruple the modest
annual growth of 2.4 per cent for agriculture that had so troubled
the leadership at the party congress in June.
These decisions had already been reached by the time a party
delegation, headed by Vulko Chervenkov, departed to visit China.
Chervenkov returned in November full of praise for the huge
Chinese farms, which relied not only on peasant labour, but also on
urban party members to bring in the harvest. Perhaps as a way of
reasserting his authority against the ascending Zhivkov faction
within the party, he took the lead in a brief campaign to foUow the
Chinese example specificaUy. Party functionaries vied to pledge
pubUcly that they would contribute 30-40 days of agricultural
labour a year. (The Agrarian leader Stamboliiski had wanted to
oblige aU urban officials and professionals to do the same in the
early 1920s.) In December, party leaders in Botevgrad district pro­
claimed the entire area a 'giant commune' on the Chinese model.
And then, before the year's end, aU talk of emulating China
stopped as quickly as it had started.^ The actual programmes that
had characterised the Chinese experience were in any case designed
152 The First Five- Year Plans

Table 6.2: Balance and Structure of Foreign Trade, 1950-60 (in

million leva)

Commodity 1950 1955 1960

X M X M X M
Ferrous metals 0.5 29.3 17.4 36.1 23.9 112.1
Machinery 0.0 56.6 7.2 150.7 89.0 323.5
Chemicals 3.3 18.6 11.0 26.1 25.1 65.7
Textiles 0.8 12.5 32.4 15.1 82.7 72.1
Processed tobacco 43.4 0.0 47.1 0.0 100.5 0.5
Other processed food 39.4 1.4 58.1 4.3 142.4 25.8
Unprocessed crops 26.8 4.3 31.0 9.4 86.5 19.1
Other 22.8 32.3 72.2 50.7 118.5 121.3
Total 137.0 155.0 276.4 292.4 668.6 740.1

X = Exports; M = Imports.
Source: Vunshna turgoviia na NR Bulgariia, 1939-1975 (Sofia, 1976), pp. 18-28.

Table 6.3: Direction of Foreign Trade, 1950-60 (percentage)

Country 1950 1955 1960

X M X M X M
USSR 54.4 50.2 50.5 47.5 53.8 52.4
Czechoslovakia 14.7 15.9 10.8 16.6 9.6 9.8
Poland 10.1 9.5 3.0 4.2 3.6 3.4
GDR 5.5 3.8 13.7 9.2 9.8 11.1
Other CMEA 7.2 6.2 9.2 9.9 4.8 3.8
FRG 0.7 3.4 2.3 2.5 3.5 5.9
Other Western 7.2 1.3 8.3 9.3 12.5 13.7

Source: Vunshna turgoviia na NR Bulgariia, 1339-1975, pp. 18-28.

to relieve population pressure. This was hardly a Bulgarian prob­

lem by the 1950s.
Zhivkov's leadership had apparently asserted itself. The mergers
of collective farms into units, which he had opposed in 1957, were
in fact carried to completion from November 1958 into 1959. But
their size no longer exceeded Soviet proportions, as the Botevgrad
commune would have done, i f it had actually been implemented.
Their advantages were now publicised in Soviet terms of commit­
ment to industrial-size units of production and to improved
leverage for the apparatus of central planning in Sofia. The
mystique of large-scaie, mechanised production, after all, had per­
vaded Soviet economic thinking from the earliest days. By 1958-9,
moreover, Soviet-style problems of localism, or mestnichestvo (the
 The First Five- Year Plans 153

failure to co-ordinate the activities of many local enterprises

enough to prevent bottlenecks and input hoarding), were being dis­
cussed in Bulgarian economic journals.^' The logic of the larger
collective farms was, in other words, allowed to stand. When less
than three-quarters of the ambitious growth foreseen in the revised
Third Five-Year Plan was actually achieved, however, the blame
for this failure was laid on Chervenkov and his supporters. His
ouster from the Central Committee and even the party followed in
1962.
During the period 1948-60, the Bulgarian economy had none the
less undergone major structural changes. Industry's share of the
net material product had increased from 23 per cent to 48 per cent.
Agriculture's share had fallen from 59 per cent to 27 per cent. As
may be seen in Table 6.1, this was the major sectoral shift of the
post-war period. At the same time, crop production had risen by
1.6 per cent a year since 1950, more than the 1.4 per cent recorded
for 1925-39 with a growing supply of peasant labour.^ The com­
pletion of collectivisation had shifted 678,000 peasants — about
one-fifth of the active labour force — into industrid jobs, mainly
in the larger towns. The average annual increase in industrial
employment peaked at 11.5 per cent during the period 1955-60,
the highest rate ever recorded in post-war Eastern Europe. Some
20,000 engineers and 5,000 'economists', mainly accountants and
managers, had graduated from a university system organised
around science and technology as much as Lenirüst ideology. By
the end of the period, the value produced by heavy industry
matched that by light industry. Machine-building and chemical
processing had begun to determine the character of Bulgarian
industrial development. Food processing, especially for export, was
also growing rapidly. Budget expenditures consisted liu-gely of
reinvestment in these fastest-growing sectors. Freight tonnage on a
slightly increased rail network had quadrupled between 1948 and
1960, as more roUing stock was added." At the same time, energy
shortages persisted, and a labour shortage threatened once the
peasant movement to the towns had been completed."
In facing these and other problems since 1960, Bulgarian
economic policy has not abandoned its readiness to create even
larger-scale units of production in industry as weU as agriculture.
But the goal of this subsequent poUcy has been greater efficiency
and technological modernisation, not rapid growth at any cost.
Economic incentives have increasingly replaced reUance on mass
154 The First Five- Year Plans

mobilisation and political enthusiasm. The era of economic reform

and the pursuit of intensive growth was about to begin. The era of
economic revolution and extensive growth had come to an end.

Notes

1. For an overview of the Soviet transition to central planning, see Roger

Munting, The Economic Development of the USSR (New York: St Martin's Press,
1982), pp. 63-110. The most detailed Western study is Eugene Zaleski, Stalinist
Planning and Economic Growth, 1932-1952 (Chapel Hill, North CaroUna: North
Carolina University Press, 1980).
2. He was tried and executed in 1949, on charges of Titoist ties and even links to
Western intelligence services, which party historians have long since repudiated as
false. His vulnerability derived mainly from being a 'home Communist' who had
not spent long years in the USSR. Kostov was also an easy scapegoat for the
economic problems of the immediate post-war period.
The other logical successor to Dimitrov was Vasil Kolarov, a 'Moscovite' in
Western parlance, but edso Bulgaria's able representative at the Paris peace talks in
1946. He was, however, 72 years old when he assumed party leadership in mid-1949.
Kolarov himself died six months after Dimitrov.
The internal dynamics of Bulgarian political history during the late 1940s and the
1950s are not thoroughly or dispassionately treated anywhere. A brief, but useful
Bulgarian account is Mito Isusov, 'The Socialist Revolution in Bulgaria', Bulgarian
Historical Review, vol. 1-2 (1981), pp. 18-24. The most extensive Western treat­
ments are Nissan Oren, Revolution Administered: Agrarianism and Communism in
Bulgaria (Baltimore, Maryland: Johns Hopkins University Press, 1973),
pp. 103-53; and J.F. Brown, Bulgaria under Communist Rule (New York: Praeger,
1970), pp. 3-39, 53-142.
3. Peter Shapkarev, Statistiko-ikonomicheski etiudi vurkhu narodnoto
stoparKtvo na NR Bulgariia [Statistical-Economic Studies of the National Economy
of the PR Bulgaria] (Varna, 1982), pp. 189-229, provides a Tirst-hand account of
the commission's work on the initial long-term plan and co-ordination with the state
statistical service.
4. L. Radulov (ed.), Sotsialno-ikonomicheska politika na Bulgarskata durzhava.
681-1981 [The Socio-Economic Policy of the Bulgarian State, 681-19811 (Sofla,
1981), pp. 343-7.
5. L.A.D. Dellin, Bulgaria (New York: Praeger, 1957), pp. 315-17. Brown,
Bulgaria, pp. 19-27; Nikolai Todorov et al., Stopanska istoriia na Bulgariia,
681-1981 [Economic History of Bulgaria, 681-1981] (Sofia, 1981), pp. 436-57.
6. Z1. Zlatev, 'Socialist Industrialization in Bulgaria', in M. Isusov (ed.),
Problems ofthe Transitionfrom Capitalism to Socialism (Sofia, 1975), pp. 176-87.
7. Brown, Bulgaria, pp. 28-30.
8. Ibid., pp. 39-45.
9. Zlatev, 'Socialist Industrialization', pp. 183-4; G. Nikova, 'Bulgaria and
Cooperation of the CMEA Member-Countries in Production Planning 1949-1956',
Bulgarian HistoricalReview, vol. 12, no. 2 (1984), p. 13. Todorov et al., Stopanska
istoriia na Bulgariia, pp. 458-60; Shapkarev, Statistiko-ikonomicheski etiudi,
pp. 130-5.
10. S.D. Zagoroff, The Economy of Bulgaria (Washington, DC: Council for
Economic and Industry Research, 1955), p. 21; Zlatev, 'Socialist IndustriaUzation',
pp. 198-9.
 The First Five- Year Plans 155

11. VI. Migev, 'Borbata sreshtu kulachestvoto i negovoto likvidirane v Bulgariia

1944-1958' [The Struggle against Kulakism and its Liquidation in Bulgaria,
1944-1958], in Kh. Khristov (ed.), Iz istoriia na stopanskiia i sotsialniia zhivot v
bulgarskite zemi [From the History of Economic and Social Life in the Bulgarian
Lands] (Sofia. 1984), pp. 44-9.
12. Ibid., pp. 47-65.
13. Throughout 1950 rent payments accounted for over a quarter of the collec­
tive's distributed income, before dropping below 10 per cent by 1955 and disap­
pearing by the end of the decade. Nikola Popov (ed.), Ikonomika na Bulgariia [The
Economy of Bulgaria], vol. II (Sofia, 1972), pp. 285-308. A precise comparison of
the Soviet and Bulgarian charters is found in Karl-Eugen Wädekin, Agrarian
Policies in Communist Europe (London: Martinus Nijhoff, 1982), pp. 72-9.
14. Wädekin, Agrarian Policies, pp. 31-43; Migev, 'Borbata', pp. 65 -76. On
tractors, other inputs and agricultural output, see Gregor Lazarchik, Bulgarian
Agricultural Production, Output, Expenses, Gross and Net Product, and Produc­
tivity, at 1968 Prices, for 1939 and 1948-1970, OP-39 (New York: L.W. Inter­
national Financial Research, 1973).
15. Todorov et al., Stopanska istoriia na Bulgariia, pp. 450-3, 462-9.
16. Brown, Bulgaria, pp. 201-8.
17. Wädekin, Agrarian Policies, tables 6.1-6.2, pp.85-8; Todorov et al.,
Stopanska istoriia na Bulgariia, table 3, p. 465.
18. Brown, Bulgaria, pp. 83-7; Boika Vasileva, 'Problemi na urbanizatsiiata i
migrationsionite protsesi v Bulgariia prez prekhodniia period' [Problems of
Urbanisation and Migration Processes in Bulgaria in the Recent Past], in Khristov
(ed.), Iz istoriiata, pp. I06-8.
19. Nikova, 'Bulgaria and CMEA Cooperation', pp. 3-18, provides a useful
overview of the period 1949-56. Also see Todorov et al., Stopanska istoriia na
Bulgariia, pp. 504-12.
20. George R. Feiwel, Growth and Reforms in Centrally Planned Economies:
The Lessons ofthe Bulgarian Experience (New York: Praeger, 1977), pp. 45-8;
Discussion by Mark Alien in Paul Marer and John Michael Montias (eds.), East
European Integration and East-West Trade (Bloomington, Indiana: Indiana
University Press, 1980), pp. 318-20.
21. Brown, Bulgaria, pp. 104-7.
22. The Bulgarian rate of crop growth for 1950-64 lagged slightly behind those
of Romania and Yugoslavia, and further behind Greece's 1.8 per cent. In none of
these neighbouring countries, however, was there a comparable shift from rural to
urban employment. See Marvin R. Jackson, 'Agricultural Output in Southeastern
Europe, 1910-1938', ACESBulU:tin,.vol XXIV, no. 4 (1982), p. 63.
23. Railway freight of 9.8 milUon tonnes in 1948, compared with 7 miUion tonnes
in 1940, had increased to 25.5 miUion tonnes by 1956 and 38.4 miUion tonnes by
1960. Total railway lines in operation had meanwhilerisenonly to 4,136 km in 1960,
from a network of 3.732 km in 1946, already extensive as a result of 1,500 km of
new lines built between 1930 and 1944. A number of existing lines were double-
tracked, however, during the 1950s, and a smaU start was made at electrification,
which covered one-fifth of aU track by 1970. B.R. MitcheU, European Historical
Statistics, 1750-1970 (New York: Columbia University Press, 1978), pp. 319, 334;
Todorov et al., Stopanska istoriia na Bulgariia, pp. 470-3, 513-17.
24. Zlatev. *Socialist Industrialization", pp. 192-200; Feiwel, Growth and
Reforms, tables B.52 and B.53, p. 309.
 I N D U S T R Y A N D A G R I C U L T U R E S I N C E 1960

The Bulgarian transition to economic priorities and institutions

based on the Soviet pattern was essentially complete by the end of
the 1950s. It was on this basis that economic development (modern
growth supported by structural change) was under way for the first
time in Bulgarian history. The concentration of investment capital
and the arrival of factory labour from a newly collectivised agricul­
tural sector were the key structural changes that sustained rapid
growth of heavy industry and modern technology. This is the first
of three chapters devoted to the economy's rather more distinctive
course of development since 1960. Bulgarian economic develop­
ment derived in part from a larger commitment to foreign trade
than that of the Soviet Union or of any other Eastern European
country. Since 1960, moreover, the making of Bulgarian economic
policy has been marked by virtually unbroken discussion about
how to improve the productivity of labour and capital. The discus­
sion has prompted recurring reforms in the initial Soviet system of
central planning and ministerial control. Chapter 8 wiU deal with
foreign trade and Chapter 9 with internal reform.
First, the present chapter must set down the further growth and
structmal change of the national economy since 1960. Map 2
indicates the pattern of production during this period, as weU as the
range of natural resources. More attention must now be paid to
statistical turning-points than in the previous chapter, bicreasingly
less attention need be paid to discrepancies between plarmed and
actual growth; they become less glaring after 1%0 and virtuaUy
disappear after 1980.
Comparisons across the entire post-war period suggest another
important change under way in the Bulgarian economy from about
1960 onward. This has been the transition from extensive to inten­
sive growth, more precisely from growth based on increased inputs
to growth based on greater productivity per input. For labour, the
transition was fuelled by massive injections of new fixed capital
and proceeded more rapidly than anywhere else in Eastern Europe.
For capital and other inputs, the growth of productivity has been
sporadic and remains Ulusive. Management and technology have

156
 Industry and Agriculture since 1960 157

Map 2: Economic Resources

ECONOMIC RESOURCES
INDUSTRY: MINING: AGRICULTURE:
@ Iron and steel Ш Bituminous coal Vineyards, orchards,
vegetables
^ Non-ferrous metals • Lignite
A Petroleum [ Wheaf,com,sugar beets,
Ф Chemicals
animal husbandry
Δ Natural gas
@ Engineering
Fe Iron ore ::| Wheat, fobocco
0 Textiles
Mn A^αngαnese

®
Ф Refining/petrochemicals Cu Copper Щ Forests, grazing
-LARGE Zn Zinc and lead
—MEDIUM
-SMALL CENTERS Cr Chromium _32_Jf
KllOAAETRES
158 Industry and Agriculture since 1960

not improved consistently enough to increase the efficiency with

which capitid in particular is used. The concentration of more and
more inputs into modern industrial production, however, has
continued to be the principal source of structural change in the
economy.
During the past decade, the overall rate of Bulgarian economic
growth has itself decUned. The productivity of capital has failed to
keep up with that of labour. Raw materials have become more
expensive, as they have everywhere in the world. Yet the record of
growth remains a remarkable one, particularly when compared to
economies of similar size in Western and Eastern Europe. The dis­
continuities of the general European performance before and after
the oU shock of 1973 do not appear in the Bulgarian case.' I f there
was no economic miracle for Bulgaria in the 1960s, neither was
there a serious setback during the 1970s.
PoUtical continuity provides part of the explanation for this
relatively stable performance. By the early 1960s, as speUed out in
the previous chapter, Todor Zhivkov had consoUdated his position
as party First Secretary and had become Prime Minister. In 1971,
he exchanged the latter position, now eUminated, for the
Presidency of the new State CouncU. Under this reorganisation,
Zhivkov has retained authority over the CouncU of Ministers,
although he is no longer its chairman. He is therefore head of state
as weU as head of the party. The coUective leadership of the
Politburo of the party's Central Committee and the 27 members of
the slightly larger CouncU of Ministers have none the less come to
play the wider role in making decisions that the equivalent bodies
do in the Soviet Union. Enough younger members have entered the
Politburo in recent years to lower the average age to below 60,
which is significantly younger than the Soviet figure.
No independently powerful figure or likely successor to Zhivkov
has yet emerged. (His daughter, Liudmila, though a member of the
Politburo, was never considered his probable successor nor equal;
she was none the less widely mourned at her early death in 1981.)
This quarter of a century constitutes the longest period of
unbroken political stability under a single leadership in modern
Bulgarian history. Among a population whose historical memory
of the twentieth century is dominated by uncertainty and imper-
manence, by brief triumphs and enduring defeats, this recent
continuity must be of significance. In the rest of Eastern Europe,
only Hungary has had a comparable experience.
 Industry and Agriculture since 1960 159

Population Growth and Labour Shortage

Bulgaria's declining birth rate has introduced demographic stability

and also stagnation. The low rate of natural increase typical of
post-war Eastern Europe has prevented a population explosion of
the sort that has eaten up the aggregate growth achieved by a
number of Third World economies, when reduced to per-capita
terms. In the short run, the limited Bulgarian increases in popula­
tion have helped to push ahead of per-captia growth. The long-run
consequences of this demographic trend for the supply of labour
for domestic demEmd are, however, much less desirable.
The decline of the Bulgarian birth rate predates the post-war
period. This tendency had appeared in the country's predominantly
rural population by the early 1920s. As noted in Chapter 2, this was
primarily a peasant response to war losses and then to post-war
uncertainty. Table 7.1 shows how the decline has continued, with

Table 7.1: Patterns of Population Growth, 1900-83

Birth Death Natural Total Urban
rate rate increase population share Density
per 1,000 per 1,000 per 1,000 (thousands) (%) (per k m 2 )
1900 42.2 22.5 19.7 3,716 19.8 38.9
1920 39.9 21.4 18.5 4,825 19.9 47.0
1940 22.2 13.4 8.8 6,368 23.0 61.7
1950 25.2 10.2 15.0 7,273 27.5 65.7
1960 17.8 8.1 9.7 7,906 38.0 71.4
1970 16.3 9.1 7.2 8,515 53.0 76.8
1980 14.5 11.1 3.4 8,877 62.5 80.0
1983 13.6 11.4 2.2 8,939 65.0 80.7

Sources: StatisticheskigodishniknaNR Bulgariia, 1982 (Sofia, 1983), pp. 29-34;

StatistlcheskispravochniknaNRBulgariia, iSe4(Sofia, 1984), pp. 168, 180.

few interruptions, into the 1980s. A post-war baby boom pushed

the rate of births per 1,000 to 25.2 by 1950, briefly recapturing the
level of the mid-1930s. The decline soon resumed; the rate feU
below 20 per 1,000 by 1956 and, after a smaU upturn for 1968-74,
was down to 13.6 by 1983. An aging population has prompted a
slightly rising death rate since 1965. The rate of natural increase
decreased more abruptly, from 10 per 1,000 in 1958 to only 2.2 in
1983. Bulgarian economists have begun to speak seriously about
the prospect of zero population growth within the next decade. A
new series of tax incentives for child-bearing households and
160 Industry and Agriculture since 1960

Table 7.2: Distribution of Labour Force, 1948-83 (percentage of

active labour)
Transport
Industry Agriculture^ Construction and tradeb Services
1948 7.9 82.1 2.0 3.7 4.3
1956 12.9 70.5 3.3 6.0 7.2
1960 21.9 55.5 5.2 8.1 9.2
1965 26.3 45.3 7.0 10.3 10.8
1970 30.3 35.7 8.4 12.5 13.1
1975 33.5 27.5 8.0 14.6 15.7
1980 35.2 23.8 8.2 15.8 17.0
1983 36.1 21.9 8.2 15.7 17.2

a Includes forestry,
b|ncludes communications..

Sources: Statisticheski godishnik na NR Bulgariia, 1971, p. 38, 1982, p. 106;

Statlstlchesk!spravochniknaNRBulgariia, 1984, pp. 16-17.

of disincentives for the childless was introduced in 1984.

Whereas Western economists regard the restriction of output and
consumer demand as the major long-run burdens of reduced popu­
lation growth, their Bulgarian counterparts consider capping the
supply of labour as most ominous. The last significant influx of
immigrant labour came from Thrace and the Macedonian lands in
the early 1920s (see Chapter 2). For the expanding industrial sector
of the 1950s and 1960s, the influx of peasant labour from the
cotmtryside to the towns provided an ample supply of new workers.
But by the late 1960s, just as the urban share of the population
passed 50 per cent, the Bulgarian press and scholarly journals
began lamenting a shortage of industrial labour. By the early 1980s,
Bulgaria's urban population of working age had begun to decline in
absolute numbers. Not even a slight increase is forecast until the
1990s.^ Tables 7.1 and 7.2 indicate how much rural ndgration and
the growth of the industrial labour force have slowed down since
1970. At 49 per cent of the industrial and overall labour force by
1981, the absorption of women has reached its upper bound. The
decUning birth rate has compounded these Umitations, as has the
reduced number of working hours. The weekly norm was cut from
48 hours to 42.5 hours with the introduction of the fuU weekend
since 1974. By 1975, the demand for labour reportedly exceeded
supply by 2 per cent in industry and by 3 per cent and 4 per cent in
construction and transport. An annual 3.3 per cent increase in
 Industry and Agriculture since I960 161

industrial employment for 1976-80 allowed this gap to widen,

given the higher rate of industrial growth.'
Three consequences of this labour shortage sho^d be borne in
mind for the discussion of national emd industrial production that
follows. One is the pressure placed on this relatively fixed labour
force to increase its productivity, and thereby permit intensive
growth. Another is the planners' temptation to replace scarce
labour with excessive investment of capital, running the risk of
increasing the demand for labour stiU further, i f new machinery
does not actuaUy save labour. A third is the workers' temptation to
escape these pressures by moving from job to job. The annual turn­
over of the existing force of industrial labour was stUl 29 per cent in
1981, a high figure by Eastern or Western European standards,
although weU under the 50-100 per cent rates recorded in the
1950s.

National Income and Industrial Growth

National income, by Bulgarian definition, consists of net material

production (NMP) of goods, minus that of most services, including
government, aU indirect tiuces and depreciation. The NMP has
maintained an impressive, i f declining rate of growth. Official
statistics record a rise of 8.3 per cent for 1966-75, before slipping
6.1 per cent for 1976-80 and to 4.1 per cent since 1980. It is
difficult to compare these net aggregates of goods with the gross
value of goods and services produced, or GNP, used in Western
practice.
Table 7.3 matches NMP figures with the principal Western
effort, by Thad Alton and associates, to calculate rates of growth
for Bulgarian GNP since 1960. Alton's addition of one-fifth for
services, plus his factor-cost formula for price-indexing physical
output, and a higher weighting of agriculture m total output com­
bine to reduce the Bulgarian rate of aggregate growth and
especially industrial growth after 1965. The downward bias in
Alton's calculations emerges from their dollar conversions, which
continue to rank Bulgaria behind Romania, at $3,830 compared
with $4,240 per capita for 1981. The World Bank has reversed
those rankings, dramatically for 1981, with Bulgaria's $4,150
virtuaUy equal to Hungary's $4,180, and over twice the Romanian
$1,900. Estimates by the United Nations Economic Commission for
162 Industry and Agriculture since 1960

Table 7.3: Comparison of Official and Alton's Rate of Growth,

1961-83 (percentage average annual growth)

A. NMP, GNP, Industrial and Agricultural Growth

1961-5 1966-70 1971-5 1976-80 1981-3

Net material product
(official) 6.7 8.8 7.8 6.1 4.1
Gross national product
(Alton) 6.7 5.1 4.7 0.9 2.9a

Industry (official) 11.7 10.9 9.1 6.0 4.5

Industry (Alton) 11.5 4.7 6.4 3.2 2.8a

Agriculture (official) 3.2 3.5 2.9 0.9 1.2

Agriculture (Alton) 0.0 0.2 2.2 -3.4 4.6a

B. Percentage weighting, 1975

Trade and
Industry Agriculture Construction transport Services
NMP (1971 prices) 54.0 18.6 9.0 15.4 —
GNP (1975 prices) 35.1 27.6 6.7 14.3 21.0

C. Other Official Growth Rates

1961-5 1966-70 1971-5 1976-80 1981-3
Capital investments 7.9 12.5 8.6 4.0 6.8
Real wages 2.0 5.3 3.0 0.5 2.6
Foreign trade turnover 14.6 11.3 12.0 8.5 6.9

ai981-2.
Sources: Statisticheski spravochnik na NR Bulgariia, 1384, pp. 14-15, 169; T.
Alton et al., Economic Growth in Eastern Europe, 1365, 1370and 1375-1981. OP-70
(New York, 1982), p. 7.

Europe, which used physical indicators to calculate the Eastern

European countries' GDP (gross domestic product, GNP minus
foreign trade, but including services), were unfortunately replaced
with official NMP figures after 1973. For the period 1958-60 to
1967-9, the GDP estimates placed Bulgaria one point ahead of the
Eastern (and Southern) European averages (7.4 per cent, compared
with 6.5 per cent and 6.6 per cent respectively) and further ahead of
Western Europe's 4.7 per cent.*
This sort of exercise raises serious statistical problems. The
quality of production resists international comparison, as does the
 Industry and Agriculture since 1960 163

Table 7.4: Sources of Non-Agricultural Growth, 1953-74 (per­

centages)
Aggregate growth from 1953-7 1958-60 1961-5 1966-70 1971-4

Labour force 54 68 48 30 32
Labour productivity 43 32 43 71 62

Capital stock 79 45 128 100 133

Capital productivity -26 39 -84 -16 -46

Capital broadening^ 68 151 38 30 27

Capital deepeningb -21 -24 74 70 72

^Defined as increasing the labour force at a constant capital/labour ratio.

bDefined as increasing the capital/labour ratio.
Sources: M. Allen, 'The Bulgarian Economy in the 1970s', J E C , East European
Economies Post-Helsinki (Washington, DC: US Government Printing Office,
1977), p. 648.

role of foreign trade in domestic growth. Pricing formulas to com­

pensate for the absence of the market mechanism are hard to stan­
dardise. For Bulgaria by itself, there is the added problem of
weighting agricuhural production in an economy that has under­
gone such a rapid transition from peasant agriculture to factory
industry.' With the above limitations in mind, let us none the less
look more closely at industry and agriculture, the two major
sectors.
By 19S6 the industrial share of Bulgarian net material product
had exceeded that of agriculture and reached 48 per cent by 1960,
according to the official figures in Table 6.1. It reached 57 per cent
by 1980, though admittedly it was buoyed by overpricing. Agricul­
ture had by then slipped from 27 per cent to 11 per cent, well below
the 24 per cent represented by construction, trade and transport
combined.
The Bulgarianturn toward intensive growth during the 1960s
emerges clearly from a World Bank economist's calculation of the
contribution made by labour, capital and material inputs to non-
agricultural NMP. Table 7.4 differentiates between the growth
attributable to increased amounts of these inputs compared with
the growth attributable to their greater productivity. The increase
in labour productivity exceeded the contribution of larger employ­
ment for the first time in the period 1961-5. The productivity of
massive amounts of new capital investment and material inputs, on
the other hand, continued to decline significantly except for
164 industry and Agriculture since 1960

the period 1966-70. The ratio of capital to output doubled between

1960 £md 1970. Capital now deepened increasingly more than it
broadened, according to Table 7.4.
Industry accounted for about two-thirds of Bulgaria's non-agri­
cultural growth during the 1960s. The improved productivity of
industrial labour, and especially capital, during the Fifth Five-Year
Plan (1966-70) over the Fourth (1961-5) did not, however, trans­
late into a higher rate of growth for industrial output. According to
Table 7.3, annual growth for 1966-70 declined slightly, from 11.7
per cent for 1961-5 to a stiU impressive 10.9 per cent. This decline
masks the more efficient use of capital and material inputs for
1966-70 suggested by Table 7.4. The reUance of official figures on
Five-Year Plan periods is deceiving in this instance. It overlooks the
unusually large increment for the last year of the fourth-plan
period. Industrial output increased by 15 per cent in 1965, and
averaged 13 per cent a year for 1965 - 8 . Otherwise, Bulgarian
industrial growth has displayed remarkable stabUity since 1960,
increasing annually by about 10 per cent for 1961-4, 9 per cent for
1969-75 and 6 per cent for 1976-83, aU without more than one
point's deviation. This record may be contrasted with the relative
volatUity of NMP increases. Their standard deviation for the
period 1953-79 was fully 4 per cent, less than the Romanian or
Hungarian figures, but double the 2 per cent average for Eastern
and Western Europe.*
The other distinctive feature of Bulgarian industrial performance
during the 1960s was a stiU higher growth rate for net capital invest­
ment. Its average increment of 12 per cent for 1960-70 surpassed
even the Romanian figure to lead aU Eastern European countries,
again buoyed by 23 per cent increments in 1966 and 1967.'
Producer (or A) goods naturally led the way, receiving over four-
fifths of industrial investment, while stiU accounting for barely
one-half of output. The overaU percentage of capital accumulation
(investment in fixed capital net of depreciation, but including net
inventories) in national income fluctuated, but averaged 29 per cent
throughout the decade. As the supply of new labour began to drop,
capital deepened with a vengeance. Table 7.5 reveals that the indus­
trial share of capital investment peaked during the late 1960s.
During the 1970s, the growth of net investment for the entire
economy slowed to 7 per cent a year, but continued to be erratic. So
did the overaU share of investment in national income. This
accumulation ratio rose to 33 per cent in 1975 and then feU to 25
 Industry and Agriculture since 1960 165

Table 7.5: Capital Investment and Accumulation, 1949-80 (per­

centages)
Fixed capital investment 1949 1956 1960 1965 1970 1975 1980
Industry 31.4 36.8 34.2 44.8 45.2 39.9 41.9
Agriculture8 12.4 22.9 29.7 19.7 15.8 14.7 12.4
Construction 2.2 0.5 1.6 2.7 2.9 4,1 2.5
Transport 16.5 6.2 5.4 6.1 7.8 12,0 9.7
Housing 22.9 23.8 19.2 16,9 15.8 15,3 20.2
Education, science, arts 2.9 3.6 3.5 3.0 4.2 4.9 4.9
Health, insurance.
tourism 2.2 1.9 1.5 1,2 1.6 1.5 1.2
Other 9.5 4.3 4.9 5.6 6.7 7.6 7.2
Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0
Ratio of accumulation
to NMP used — 14.3 27.5 28.3 30.8 32.8 25.0

a|ncluding forestry.
Sources: Statisticheskigodishnikna NR Bulgariia, 1971, p. 51, 1982, p. 138, 146;
StatisticheskispravochniknaNRBulgarila, 1976, p. 14.

per cent by the end of the decade. For 1981, it climbed to 27 per
cent, but sUpped back to 22 per cent in 1983.Gross investment,
including depreciation aUowances, has grown more steadily, but
unfortunately because these aUowances have been used more to
accumulate inventories of unsold goods and to stockpUe unused
inputs rather than to replace old machinery.
Rising input costs have helped to keep the productivity of capital
from reversing its decUne since 1970. Fuel and energy inputs now
became more expensive, as in the rest of the world, but also con­
tinued to be used in larger quantities than in Western Europe.
Chapter 8 wiU examine the predominance of imports in providing
them. According to a Western estimate, the cost of aU inputs in
1980 rose faster than industrial output, by 6 per cent, as against 4
per cent in real terms, to hold the real increase in industrial value-
added output to 0.4 per cent.'
Profits on total industrial assets climbed steadily since the 1960s,
from 9.4 per cent in 1965 to a peak of 20.7 per cent in 1979.« These
profits became important by the 1970s, as enteφrises increasingly
reUed on them for future investment funds (see Table 9.2). Not
until the early 1980s, as we shaU see in Chapter 9, was this reUance
accompanied by greater attention to modernising existing faciUties
than to investing in new capacity.
166 Industry and Agriculture since 1960

Industrial Structure: Old Metallurgy and New Machinery

More readily understandable and perhaps more important than this

maze of aggregate changes in production and investment have been
several significant shifts in industrial structure. As would be
expected, given the emphasis on investment in heavy industry, the
share of food processing has declined. Textiles and other consumer
goods have retained their smaU portions of total output. The
principal gainers, as may be seen in Table 7.6, have been the
branches of metallurgy, machinery, electronics and chemicals. By
1980 they accounted for 36 per cent of industrial production, com­
pared with 17 per cent in 1952.

Table 7.6: Structure of Industrial Production, 1939-83 (per­

centages)

Branch 1939 1952 1960 1970 1980 1983

Electricity 1.8 2.1 2.0 2.5 2.4 3.9

Fuel, heat 4.6 3.2 2.8 4.6 3.7 1.4
Metallurgy 0.5 3.7 5.6 6,6 3.4 3.5
Machinery 2.4 10.0 12.4 16,5 15.6 14.2
Electronics 7.6 8.8
Chemicals 1.9 3.1 3.7 7.5 8,9 8.2
Food processing 51.2 39.2 33.5 25.4 22,9 26.9
Textiles 19.8 14,7 13.5 9.1 5,1 5.5
Construction, wood processing 1.8 2.2 3.1 3.7 4.9 4.5
Other 16.0 21.8 23.4 24.1 22.5 28.1

100.0 100.0 100.0 100.0 100.0 100.0

Sources: Statisticheski godishnik na NR Bulgariia, 1971, p, 73; Statisticheski

spravochnik na NR Bulgariia, 1984, p. 94.

Within heavy industry itself, two continuing trends seem to be

significant. One is the enduring Bulgarian commitment to pro­
ducing basic ferrous metals, however high the cost, in order to
avoid dependence on imports. The second is the somewhat contra­
dictory commUment to producing internationally competitive
machinery, especially electrical equipment. Dming the past decade,
according to a number of Western businessmen, the quality of
Bulgarian electrical equipment has improved significantly. In order
to examine both metal and machine production properly, however,
microeconomic case-studies of individual enterprises would be
required. Bulgarian official statistics have not pubUshed the
 Industry and Agriculture since I960 167

necessary information for this. Native economists have considered,

but not yet prepared, case-studies.
The Kremikovtsi metallurgical complex near Sofia is one excep­
tion, because of its size and troubled history. It began production
in 1963, after nearly a decade of debate and planning. The complex
has been called both the giant and the graveyard of Bulgarian
ferrous metallurgy. The initial Lenin complex at Pernik, also near
Sofia, had opened in 1953. Soviet-supported geological surveys the
following year (see Chapter 6) had suggested that major new
deposits of higher-quality iron ore would support a second com­
plex. It was soon clear that such deposits did not in fact exist. Large
imports of enriching ore would now be needed. The project none
the less went ahead, with the USSR as the potential ore supplier.
Some 80 per cent of the necessary eqmpment was also imported
from the Soviet Union. Construction got underway in 1960. The
project reportedly took one-fifth of total investment in Bulgarian
industry for 1962-3.'» Since opening, the complex has expanded to
include four blast furnaces, three coking plants and roUing mills.
Its output for the period 1963-78 accounted for over half of the
national production of steel, cast and rolled iron. Bulgarian output
of these goods has ranked ahead of aU the other Balkan states, with
the exception of Romania, on a per-capita basis.
The problems associated with the complex have been equaUy
prodigious. The fraction of Bulgarian ore and coking coal used was
never as much as half, and had dropped to less than one-quarter by
the mid-1970s. Extraordinary wages, paid to restrain a high
turnover rate, and delays in construction, deUvery or repair forced
costs upward. The enterprise has never shown a profit. Its produc­
tion has consistently failed to meet planned targets, or even to use
more than three-quarters of plant capacity. For Bulgarian ferrous
metaUurgy as a branch, labour productivUy's average annual
increase feU by over one-half to 3.5 per cent between 1971-5 and
1976-80, weU below the 5.2 per cent recorded for industry as a
whole.
The case of the Kremikovtsi complex helps us to understand the
price that Bulgarian industry has paid for continuing to consume
metal, fuel and other inputs at the higher. Eastern European level
per unit of output, rather than the lower Western one. Bulgarian
economists recognise the cost of this expensive import substitution,
but do not evidence any readiness to abandon existing metallurgical
capacity as 'old industry'." Lower-cost and more specialised
168 Industry and Agriculture since 1960

metals are expected to come neither from Kremikovtsi nor Pernik,

nor from, say, Czech or Swedish imports, but rather from the
country's third complex, scheduled to begin operation near Burgas
in 1985. Its location by a Black Sea port at least places it much
closer than Sofia, some 400 km from the coast, to the necessary
imports, primarily Soviet, of iron ore and coking coal.
The branches of Bulgarian industry that have made the most pro­
gress since the 1960s in reducing their costs and in modernising
their production are those most committed to exports. Goods sold
outside the country have been primarily responsible for the average
annual increase of 16 per cent recorded by the machine-building
and electronics branches over the period 1960-80. During that
period, these two branches combined to become the leading sector
of Bulgarian industrial production, with 23 per cent of the 1980
total. Their foreign sales increased rapidly enough to suggest that
export creation was more responsible than import substitution.
Such substitution had been the pre-war stimulus for most Bulgarian
industrial growth (see Chapters 2 and 3). The two branches' com­
bined share of a rapidly rising export value jumped from 13 per
cent in 1960 to 27 per cent in 1970 to 55 per cent by 1982. Leading
the way in exports have been the weU-known fork-lift trucks and
electrical hoisting gear, produced by Balkancar, Bulgaria's largest
single industrial enterprise, and a lesser known, but increasing
amount and variety of computer equipment. Each now accorats
for almost one-fifth of the branches' export value.'^ The same sort
of export orientation may be found in certain chemical enterprises,
particularly the pharmaceutical and cosmetic producer Pharma-
chim. Its exports, packaged and marketed with growing sophisti­
cation, helped to push chemicals to 8.2 per cent of total industry
output by 1983, and nearly doubled its share of export value, to 3
per cent, between 1965 and 1983.
Processed foods, beverages and tobacco have been unable to
maintain their comparably large share of total exports, slipping
from 40 per cent in 1965 to 23 per cent in 1975 and 13 per cent by
1983. Their proportion of industrial output has held up better. A 32
per cent share in 1965 feU to 25 per cent by 1975 and 23 per cent by
1980, but rebounded to 27 per cent for 1982-3. Investment in new
plemt and equipment has none the less lagged. The branch received
a meagre 1.5 per cent of total industrial investment for 1958-78
and 6 per cent since then." Most processing faciUties remain scat­
tered in smaUer plants with old equipment. Their modernisation
 Industry and Agriculture since 1960 169

has become a pressing priority for agriculture as weU as for

industry.

Growth of Agriculture

Bulgaria's agricultural record is an impressive one, for at least part

of the post-war period. From 1956 to 1970, crop and aiUmal pro­
duction grew at an annual average of 4.1 per cent per capita, a
higher rate than that achieved anywhere else in Eastern Europe.
For the decade before 1960, the advance of its final years came
primarily as a resuU of massive new investments associated with the
completion of coUectivisation. From 15 per cent in 1950, agricul­
ture's share in net Bulgarian investment rose to 28 per cent by 1960,
also the highest figure for Eastern Europe. Bulgaria was thereby
the first country in the area to overcome one of the most serious
failings of the initial Soviet pattern of coUectivisation. This was the
notion that reoganisation was a substitute for large investment in
the sector.'*
The period since 1960 has witnessed Bulgarian reliance on
increasing labour productivity in agriculture. For 1960-70, the
average annual increment in output per person occupied in agricul­
ture was in fact 8.6 per cent, weU above rates recorded elsewhere in
the region. Helping to force this intensive growth was the con­
tinuing decline in the agricultural labour force. The yearly losses of
labourers had averaged 3 per cent of the total during the 1950s and
4 per cent during the 1960s. Agricultural labour had faUen over 40
per cent from its 1950 total by 1970. Its numbers now dropped
below industrial labour for the first time." No new investment
surge appeared after 1960, however. The agricultural share of total
Bulgarian investment decUned rapidly from its 1960 peak to 19 per
cent by 1965 Bpd to 16 per cent by 1975. Gross investment stiU
increased in absolute terms, at an annual rate of 4.5 per cent for
1960-79.
After 1970, however, agricultural production itself grew less
rapidly, despite an average increase of 6.5 per cent in labour produc­
tivity untU 1979. Output alternated between 4-5 per cent annual
advances and, in years of bad weather, virtual zero growth, a
pattern which had persisted into the 1980s. The combination of a
spring drought and heavy summer rains in 1983 helped to force a faU
in agricultural production of 7 per cent compared with that of 1982.
170 Industry and Agriculture since 1960

Table 7.7: Index of Agricultural Output per capita, 1932-81

(1932-8 = 100)
1948-52a 1956-60b 1966-70 1971- 5 1976-80 1981

Crops 97 131 181 188 191 200

Livestock 82 100 149 175 208 234
Total 91 119 169 183 199 210

Percentage share of total 1956 1960 1965 1970 1975 1980 1983
Crops 64.4 67.3 64.4 64.7 56.7 52.2 44.9
Livestock 35.6 32.7 35.6 35.3 43.3, 47.8 55.9

aMissing 1949and 1951.

bMissing 1958.
Sources: Statisticheskigodishnikna NRBulgariia, 1982, pp. 18-19; Statisticheski
spravochnik na NR Bulgariia, 1976, p. 51, 1984, p. 52.

Bad weather alone does not explain the reduced growth rates
since 1970. The vulnerability to limited or irregular rainfall has
always been a fact of Bulgarian agricultural life, as noted in the
Introduction to this volume. The principal man-made problem
since 1970 has come from costs of production that have risen
without a comparable advance in yields or labour productivity.
Bulgaria ranks ahead of its Balkan neighbours in the application of
fertiliser per hectare, but domestic production continued through­
out 1980 to lag behind consumption. Expensive imports of higher-
quality mineral fertilisers fill the gap. The Bulgarian press has
periodically lamented the poor results from the introduction of
mechanically powered equipment and irrigation.'* They have
apparently been used too Uttle or too irregularly after investment
funds have secured them.
Perhaps one-half of the existing irrigation network is not fully
used. That network has grown rapidly from only 126,000 hectares
in 1950 to 715,000 by 1960 and to one million by 1968. Plans to
extend irrigation to 2 million hectares, or nearly half of Bulgaria's
4.7 million hectares of cultivated land, have not materialised. The
lagging productivity of irrigated land suggests one reason for a
total network that, in 1983, was stiU only 1.2 million hectares. The
irrigated area has increased yields only irregularly. Where it has,
production costs have risen 40 per cent in return for a yield 20 per
cent higher.
Tractor numbers (in 15 horsepower equivalents) grew by one-
half during the 1960s to reach 153,000 units by 1980. This total.
 Industry and Agriculture since 1960 171

when divided by arable land, continues to exceed the Romanian

and Soviet figures, if not the Yugoslav. An increasing number of
olderunhs none the less needs replacement. To these higher costs
must be added a level of agricuhural wages which doubled between
1960 and 1980. AU of these costs, according to the American cal­
culations by the Alton team, combined to increase the sum of agri­
cultural expenses and depreciation by 116 per cent between 1975
and 1980."

The Changing Balance of Crops and Livestock

Two major trends have reshaped the structure of Bulgarian agricul­

tural production since 1960. One is the growth of livestock at the
expense of crop cultivation, backed by a related rise in feed as
against bread grains. The other is a shift away from the industrial
crops, primarily tobacco and cotton, that had become so important
by the inter-war period, in favour of fruit, vegetables and vineyard
production. Both of these trends may have served, at least in part,
to mitigate the reduced and erratic growth of aggregate crop
production since 1975.
Raising livestock, particularly pigs, had played a smaUer part in
Bulgarian agriculture during the nineteenth century than in that of
its neighbours. The growth of husbandry over the past 25 years has
continued the post-1900 reversal of a previously modest role (see
Chapter 1). Since the Second World War, as late as 1970, Uvestock
accounted for only 35 per cent of the value of Bulgarian agricul­
tural production. By 1983, if we use the higher 1982 prices for live­
stock, that proportion had risen dramatically to 55 per cent."
Grassland now took 24 per cent of the country's virtuaUy stable
agricuUural area, compared with 17 per cent in 1965. Land under
crop cultivation had thus decUned absolutely.
How had this upsurge in livestock occurred? Much of the answer
Ues with meeting export demand and rearranging agricultural
organisation, topics treated in the next two chapters. Here we must
set down the structure of the upsurge. Pork and poultry have been
largely responsible. Pigs provided 45 per cent of Uve-meat value
produced in 1980, after their numbers were doubled during the
1970s. Faster reproduction and fattening techniques have proved
effective, although the slaughtering weights are stiU low by Western
European standards. Poultry production has relied more heavUy
172 Industry and Agriculture since 1960

Table 7.8: Annual Average Output per capita of Agricultural

Products, 1939-83
Wheat Corn Tobacco Tomatoes Grapes Milk Eggs8 Mea

1939 317 159 6 7 104 105 117 32

1953-7 267 159 8 39 64 97 110 34
1961-5 273 198 13 91 125 148 167 48
1966-70 344 256 13 85 135 183 190 59
1971-5 370 290 15 91 122 194 204 67
1976-80 399 301 14 94 117 224 245 85
1981-3 483 383 13 91 127 263 283 92

All outputs are given in kilograms, with the exception of eggs, where the number of
eggs are given.

Sources: StatisticheskigodishniknaNRBulgariia, 1982, pp. 18-19; Statisticheski

spravochnik na NR Bulgariia, 1984, p. 137.

on the same industrial techniques of accelerated fattening to

become the second largest source of meat. Bird numbers rose by
one-third during the 1970s. Egg sales have also risen significantly,
up by two-thirds for 1970-83. Again, the number of eggs laid
annually per hen remains low (145) by Western European stan­
dards. The number of cattle increased to 45 per cent of the animal
numbers, after a spurt during the second half of the 1970s. The
source was not meat, but rather milk production, which was up 54
per cent for 1970-83." Table 7.8 indicates the near tripling of
milk, egg and meat production per capita that has occurred since
the late 1950s.
The ascendancy of livestock has also had its effect on the struc­
ture of grain production. The quantity of feed grains harvested has,
not surprisingly, increased from 92 per cent of the total for bread
grains in 1965 to 136 per cent by 1978. Wheat cultivation continued
a decline that had begun after the First World War (see Chapter 2).
Its area feU 11 per cent for the period 1965 -75. Rye dropped fully
43 per cent. Corn, barley and soya beans (aU Uvestock feeds) more
than took up the slack — in output, i f not in area. Together they
rose sufficiently to push up gross grain production by an average of
4.1 per cent for 1965-75. The area ™der barley cultivation
increased by 20 per cent, while yields rose 27 per cent. The initially
smaU soya-bean area increased threefold, and output doubled.
Corn production grew less as a resuU of the 8 per cent increase in
cultivated area between 1965 and 1975, than as a result of the use of
more fertUiser, greater irrigation and the introduction of high-
 Industry and Agriculture since I960 173

jdeld hybrids. OveraU, the cereal share of total crop and vineyard
land had faUen to 59 per cent by 1970, from 75 per cent in both
1938 and 1948.
Since 1975, however, the lesser vulnerability of wheat to drought
compared with corn has prevented its eclipse by the latter as the
leading Bulgarian grain. Wheat yields have also risen during the
past decade to average 43 hectolitres for 1980-2, virtuaUy
matching the Hungarian and East German levels. They are half
again those of Romania and Yugoslavia. (Grain production for
1978-80 averaged 44 per cent wheat, 32 per cent corn and 18 per
cent barley.)
What has continued, however, is the rising share of animal feed,
compared with food or seed, in Bulgarian grain consumption,
including imports. The feed share increased from 55 per cent to 71
per cent between 1975 and 1980.^o Such a shift makes it difficult to
judge the significance of the reduced and more erratic performance
of aggregate crop production. It averaged only a 2 per cent annual
increase for 1975-82.
The same uncertainty accompanies the changing structure of the
other main type of Bulgarian agricultural cultivation, the so-caUed
specialty crops. The wide spread of sugar beet, sunflower, cotton
and especially tobacco dming the 1920s may be recalled from
Chapter 2. Since 1960, these industrial crops have increasingly
given way to directly edible fruit and vegetables or wine grapes.^'
Tobacco stiU accounted for 13 per cent of gross agricultural
production during 1981-3, but its physical output and yield con­
tinued a decline unbroken since the early 1970s. Relocation of the
tobacco fields in order to introduce new varieties may explain the
slightly faUing yields. Yields have also dropped for sugar beet. Its
output stagnated in the 1970s and feU off after 1980. Sugar beet stiU
managed to cover domestic demand, as it has done since the inter­
war period. Sunflower production has risen little. Reduced
hectarage has largely cancelled out improved yields since 1980.
Cotton cultivation has experienced the clearest decline. Its area has
faUen steadUy to one-sixth of the 1960 average by 1983. Yields have
also slipped, despite the concentration of cultivation in the warmer,
south-eastern districts. Imported Soviet cotton was already
covering over 80 per cent of domestic consumption by the end of
the 1940s, as noted in Chapter 5.
The relatively smaU rise in fruit and vegetable production since
1960 has resulted mainly from the increased area under cultivation.
174 Industry and Agriculture since 1960

rather than from better yields. Most of this increase took place
during the 1960s. Tomatoes and apples led the way. By the 1970s
tomatoes accounted for half of the Bulgarian vegetable production,
on land that was 94 per cent irrigated. Apple and other fruit
orchards were by this time 90 per cent irrigated. The vineyard area
remained larger than that of all orchards. Wine grapes recorded a
25 per cent increase in yields for the period 1976-82 over 1965-75,
thus explaining their greater output."
The sum of these changes in the structure of special crops was to
boost the fruit, vegetable and vineyard share of total agricultural
production slightly, from 15 per cent to 16 per cent for 1975-82.
Industrial crops meanwhile declined from 15 per cent to 10 per cent
for 1975-82.

A Summary of Structural Change

A balance sheet of structural change since 1960 in Bulgarian agri­

culture and industry should therefore reflect the foUowing shifts.
Livestock and feed grains have made the most rapid agricultural
advance. They now account for two-thirds of the value of produc­
tion. OveraU grain cultivation has become concentrated almost
exclusively in wheat, corn and barley, raising vulnerability to bad
weather. The share of special crops in agriculture production
decUned to 26 per cent by 1982, from 30 per cent in 1965 (or in
1925). Fruit, vegetable and vineyard cultivation advanced sUghtly
in absolute terms. The industrial manufacture of foodstuffs has
depended more on meat than on fruit or vegetables in order to keep
a one-quarter share of total industrial production constant since the
mid-1960s.
. Machine-building, electronic and chemical manufactures have
led the rise of producers' goods to industrial pre-eminence,
accounting for 55 per cent of output by the 1970s. Continued
investment in and reliance upon high-cost domestic metaUurgy has
held back the otherwise improved performance of these leading
branches, particularly their exports. The spread of a serious labour
shortage from agriculture to industry, foUowed by slower rates of
aggregate growth since 1975, has intensified pressure throughout
the economy to use labour more intensively and capital more effi­
ciently. With the possible exception of the late 1960s, less progress
has been made on the latter task.
 Industry and Agriculture since 1960 175

Notes

1. A good recent overview of the post-war Western European experience before

and after 1973 is Angus Maddison, Phases of Capitalist Development (Oxford:
Oxford University Press, 1982).
2. L. Radulov, Naselenie i ikonomika [Polulation and Economics] (Sofia, 1981),
pp. 58-112, furnishes a frank Bulgarian appraisal of past trends and future
prospects.
3. Mark Allen, 'The Bulgarian Economy in the 1970s', in Joint Economic Com­
mittee of the US Congress (JEC), East European Economies Post-Helsinki
(Washington, DC: US Government Printing Office, 1977), pp. 662-4; Marvin R.
Jackson, 'Bulgaria's Economy in the 1970s: Adjusting Productivity to Structure', in
JEC, East European Economic Assessment, pt I (Washington, DC: US Government
Printing Office, 1981), pp. 555-8.
4. United Nations Economic Commission for Europe, Economic Survey of
Europe, 1971, pt I (New York: UN Secretariat, 1972), pp. 6-8; Thad Alton et al.,
Economic Growth in Eastern Europe, 1965, 1970, 1975-81, OP-70 (New York:
L.W. InternationalFinancialResearch, 1982), p. 12;EuropeanMarketingDataand
Statistics, 1983 (London: Euromonitor Publications, 1983), p. 167. A good critical
review of available estimates is Paul Marer, 'Economic Performance and Prospects
in Eastern Europe', JEC, Easl European Assessment, pt 1 (Washington, DC: US
Government Printing Office, 1981), pp. 87-91.
5. This is the view of Bulgaria's leading expert on national accounts, Peter
Shapkarev, in his Statistiko-ikonomicheski etiudi vurkhu narodnoto stopanstvo na
NR Bulgariia [Statistical-Economic Studies on the National Economy of the PR
Bulgaria] (Varna, 1982), pp. 127-32.
6. Nita Watts, 'Eastern and Western Europe', in Andrea Bohho (ed.), The Euro­
pean Economy: Growth and Crisis (Oxford: Oxford University Press, 1982),
table 9.4, p. 265. Watts's article (pp. 259-86) affords a balanced and useful
comparison of post-war Eastern and Western growth records.
7. Nikolai Todorov et al.. Stopanska istoriia na Bulgaria, 681-1981 [Economic
History of Bulgaria, 681-1981] (Sofia, 1981), 493 -503; George R. Feiwel, Growth
and Reforms in Centrally Planned Economies: The Lessons of the Bulgarian
Experience (New York: Praeger, 1977), pp. 30-7, 271.
8. Marvin R. Jackson, 'Recent Economic Performance and Policy in Bulgaria',
in JEC, East European Economies: Slow Growth in the 1980s, pt 3 (Washington,
DC: US Government Printing Office, 1985), pp. 6-8.
9. Ibid.: Todorov et al., Stopanska istoriia na Bulgariia, pp. 493-4, 540;
Statisticheski godishnik na NR Bulgariia, [Statistical Yearbook of the PR Bulgaria],
1982 (Sofia, 1983), p. 148.
10. J.F. Brown, Bulgaria under Communist Rule (New York: Praeger, 1970),
pp. 156-60: Radio Free Europe Research (RFER), Bulgarian Situation Report, 20,
4 December 1978; Statisticheski godishnik na NR Bulgariia, 1982, p. 638;
lkonomicheski zhivot, 3 March, 1976, and 20 September, 1978.
11. See, for instance, the article by I. Dimitrov in lkonomicheski zhivot, 16
March 1983, as reported in RFER, Bulgarian Situation Report. 5. 18 April 1983,
p. 15. The author received the same unanimous opinion in interviews with faculty
members of the Higher Economics Institute Karl Marx in Sofia in May 1984. For
Western analysis of the higher (8-27 per cent) cost of Bulgarian output per input,
compared with Western European output per input, and of the continued under-
ultilisation of machinery because of scarce metal inputs, see Feiwel, Growth and
Reforms, pp. 177-8; and also Feiwel, 'Economic Development and Planning in
Bulgaria in the 1970s', in Alec Nove, Hans Hermann Höhemann, Gertrud
176 Industry and Agriculture since 1960

Seidenstecher (eds.), The East European Economies in the 1970s (London:

Butterworths, 1982), pp. 222-3.
12. Bulgaria's Presence in 5 Continents, 11/101 (Sofia Press, 1983). Balkancar
employs 45,000 people, and is the world's largest producer of fork-lift trucks. Its
hard-currency surplus for 1983 topped $100 milHon and allowed the firm to bid,
albeit unsuccessfully, for an equity share in a French enterprise. See David Buchan,
'Balkancar's European Ambitions', Financial Times 7 June 1984, p. 24.
13. OECD, ProspectsforAgricultural Production and Trade in Eastern Europe,
vol. 2, Bulgaria (Paris: OECD, 1982), pp. 188-91.
14. On Soviet collectivisation and agricultural performance under Stalin and
Khrushchev, see Karl-Eugen Wädekin, Agrarian Policies in Communist Europe
(London: Martinus Nijhoff, 1982), pp. 14-30, 44-62.
15. Gur Ofer, 'Growth Strategy, Specialization in Agriculture, and Trade:
Bulgaria and Eastern Europe', in Paul Marer and John Michael Montias (eds.), East
European Integration and East-West Trade (Bloomington, Indiana: Indiana
University Press, 1980), pp. 308-9. Bulgaria's agricultured labour force per hectare
fell from 38 to 17 for 1960-78, but still remained high by Western European
standards. OECD, Prospects, vol. 2, Bulgaria, pp. 157-8.
16. OECD, Prospects, vol. 2, Bulgaria, pp. 150-63; RFER, Bulgarian Situation
Report, 25, 8 September, 1976; 16, 3 March, 1977;6,6March, 1983. Foracompari-
son of BulgEU'ia's agricultural inputs and efficiency with the rest of Eastern Europe,
including the USSR, see the United Nations Economic Commission for Europe,
Economic Survey of Europe, 1981 (New York: UN Secretariat, 1982), pp. 178-94;
and 1983 (New York: UN Secretariat, 1984), pp. 182-90.
17. The same source finds that only a 44 per cent increase occurred between 1965
and 1975. See Thad Alton et al., Agricultural Output, Expenses and Depreciation,
Gross Product and Net Product in Eastern Europe, 196S, 1970, and 1975-1981,
Research Project on National Income in East Central Europe, OP-71 (New York:
L.W. International Financial Research, 1982), table 1, p. 16. For a Bulgarian
accounting, see Todorov et al., Stopanska istoriia na Bulgariia, pp. 566-71.
18. Jackson, 'Recent Economic Performance and Policy in Bulgaria', p. 22;
Statisticheski spravochnik na NR Bulgariia, 1984 [Statistical Handbook of the PR
Bulgaria, 1984] (Sofia, 1984), table 10, p. 119.
19. OECD, Prospects, vol. 2, Bulgaria, pp. 179-83; Statisticheski spravochruk,
1984, table 26, p. 133.
20. OECD, Prospects, vol. 2, Bulgaria, pp. 165-72.
21. The following accotmt is largely from ibid., pp. 175-6.
22. Statisticheski spravochnik, 1984, pp. 121-41; RFER, Bulgarian Situation
Report, 6, 3 March, 1977.
8 F O R E I G N T R A D E A N D D O M E S T I C LIVING
STANDARDS

The post-war pattern of Bulgarian production and investment des­

cribed in Chapters 6 and 7 does not display striking differences,
except for sUghtly higher rates of growth, from the Soviet
experience. Western observers sometimes cite this simUarity to
support the notion that part of the Bulgarian goveriunent's
unfailing loyalty to Soviet foreign policy derives from an economy
that is not only tied closely to that of the USSR, but is also a mirror
image of it. This is one of two chapters devoted to aspects of the
Bulgarian economy that afford greater contrast with the Soviet
pattern. This chapter exanünes the larger role of foreign trade and
the steadier advance of living standards. Chapter 9 treats Bulgaria's
more continuous attention to reforming the system. Both distinc­
tions help to explaina better Bulgarian performance. But whether
these distinctions explain more than do Bulgaria's smaUer size,
lower initial level of industrial development, and lower continuing
level of mUitary expenditure, compared with the USSR, we cannot
say with certainty.
Three featшes of Bulgaria's foreign trade in the post-1960 period
stand out. First is the well-known record of greater dependence on
Eastern Europe in general, and on the Soviet Union in particular,
than other members of the Council for Mutual Economic Assis­
tance (CMEA). Secondly, Bulgarian exports have consisted of
more agricultural goods, processed and unprocessed combined,
than have those from any of the countries of eastern or southern
Europe. This second famiUar feature has faciUtated a significant
advance in the Bulgarian standard of living. Here, along with
Himgary and its equaUy smaU population, is the only Eastern Euro­
pean economy to have fed its own population without recurring
shortages or large-scale imports for the past two decades. An
improved supply and variety of foodstuffs Ues at the heart of the
limited, but significant improvement in the country's overaU
standard of living that began during the 1960s. That improvement
has become more noticeable during the past decade.
Less weU known is a third distinction, the large relative size of
Bulgaria's foreign trade. As may be seen in Table 8.3, the sum of

177
178 Foreign Trade and Domestic Living Standards

exports and imports, or trade turnover, now matches the value of

the net material product (NMP). This proportion places Bulgaria
ahead of ги1 other Eastern European economies. It also matches the
ratio of turnover to gross domestic product, admittedly a larger
aggregate than NMP, for aU smaUer Western European economies
except Belgium, i f we overlook artificial Eastern European
exchange rates and also the Eastern European disparity between
foreign trade and domestic prices. Bulgaria's present position is the
result of rapid growth in trade turnover since the mid-1950s. Turn­
over growth averaged 16 per cent a year for 1955-70 and, as noted
in Table 7.3, 10 per cent for 1971-80. Comparable figures for
Eastern Europe as a whole were 9 per cent and 7 per cent, respec­
tively, about the same as for Western Europe.
Foreign trade was of course growing faster than national income
in aU of these countries, suggesting a leading role for trade in
economic growth across the continent. The elasticity of Bulgarian
exports and imports with respect to national product (that is, the
ratio of trade to NMP or GDP growth) was, however, consistently
ahead of the European average. Bulgarian export elasticity stood at
1.7 for 1971-80, compared with an Eastern and Western European
average of 1.4.' This rate of growth brought export value from 15
per cent of NMP in 1960 to 23 per cent by 1970, to 43 per cent by
1980 and to 50 per cent by 1983. The exact relationship of foreign
trade to domestic development remains hard to quantify, but such
a large surge in exports, half again the growth rate for NMP
recorded in Table 7.3, must have played a positive part. This is true
even when we reduce the above percentages to compensate for the
Eastern European distortion of separate, often higher prices set for
exports and imports as opposed to the prices fixed for the same
goods domestically produced and consumed. The actual Bulgarian
trade/income ratio since 1960 has probably stiU exceeded the
'expected ratio' calculated by the United Nations Economic Com­
mission for Europe from population size and per-capita income.^
Bulgaria's rapidly growing foreign trade has affected domestic
growth not just because of its size, but also because of recurring
imbalances between exports and imports to different countries and
regions. We need to know the changing structure of trade in order
to appraise its effect on domestic growth and living standards — in
other words, on investment and consumption. After aU, the ratio
of exports to roughly estimated national income had reached nearly
15 per cent in the last years before the First World War, as noted in
 Foreign Trade and Domestic Living Standards 179

Chapter 1. Its rapid rise in those pre-war decades did facilitate the
rapid monetisation of the Bulgarian economy, but hardly its indus­
trialisation. How the present advance in the export ratio, weU past
the pre-1914 level, is connected to industrial investment and urban
consumption helps to define the difference between the two
periods. So does the new set of economic relationships with both
Eastern and Western Europe that have emerged since the Second
World War.

Dynamics of the Trade Balance

Bulgaria's post-war emphasis on foreign trade emerged, as might

be expected in an economy based on the first principles of Soviet-
style planning, from initial attention to imports rather than
exports. Imports demanded as inputs for rapidly expanding indus­
trial output were the first foreign-trade data entered into the pro­
jections for central planning. UnUke the Soviet Union, however,
the Bulgarian list of necessary industrial imports included not only
machinery, but also large quantities of fuel and other raw materials
or semi-finished goods. The BulgEuian effort to manufacture
import substitutes during the 1920s, it may be recalled from
Chapter 2, had already prompted an equivalent upsurge in imports
of industrial inputs. Many of the smaUer developing economies in
the Third World have faced a similar dilemma, to which more
manufactured exports stUl seem their best answer.
Bulgarian demand for imported industrial inputs rose sharply
during the 1960s and 1970s. First came the machmery, iron ore and
even coal, needed for the growing production of ferrous metals.
Machinery and equipment, primarUy for industry, has accounted
for almost half of total import value,as noted in Table 8.1. In
absolute terms, it rose almost threefold during the 1960s and again
during the 1970s. Imports as a share of industrial consumption of
inputs climbed from 20 per cent to 28 per cent between 1955-7 and
1968-70, stiU short of the 40 per cent share of the 1920s.'
Energy suppUes, primarily petroleum, have accounted for the
largest proportional increase within the structure of Bulgarian
imports. During the 1970s the energy share virtuaUy doubled, from
13 per cent to 25 per cent. As a result, combined purchase of
machinery and energy supplies took the largest share of imports,
some two-thirds, of aU the Eastern European countries. This
180 Foreign Trade and Domestic Living Standards

Table 8.1: Structure of Major Imports, 1955-83 (percentages)

19B5-7 1968-70 1975-7 1981-3
Machinery 47,7 50.7 49,1 47.3
Fuels, metals and minerals 29.9 27.2 25,4 25.3
Chemicals 9.9 9.0 6.1 7.1
Construction and non-food inputs 4.2 4.1 7.4 7.0
Foodstuffs 1.0 4.4 2.5 3.0
Processed foods 2.2 1.6
Consumer manufactures 6.5 4.0 6.2 7.8

Sources: United Nations Economic Commission for Europe (UNECE), Economic

Survey ofEurope, 1971 (New York: UN Secretariat), vol. 1, p. 55; Statisticheski
godishnikna NR Bulgariia, 1982 (Sofia, 1983), p. 380; Statistichesklspravochnikna
NR Bulgariia, 1984 (Sofia, 1984), pp, 6 5 - 6 .

Table 8.2: Structure of Major Exports, 1955-83 (percentages)

1955-7 1968-70 1975-7 1981-3
Machinery 8.2 35.5 47.2 53.8
Fuels, metals and minerals 27.9 27.2 8.1 11.0
Chemicals 2.9 4.6 3.5 2.9
Construction and non-food inputs 8.0 4.7 4.1 3.0
Foodstuffs 28.0 35.1 4.8 3.1
Processed foods 20.8 13.6
Consumer manufactures 24.8 10.5 10.4 9.9

Sources:UNECE, Economic Survey ofEurope, 1971, vol. 1, p. 55; Statisticheski

godishniknaNRBulgariia, 1982[SoWa, 1983), p. 380; Statistichesklspravochnikna
NR Bulgariia, 1984 (Sofia, 1984), pp. 6 5 - 6 .

ranking follows logically from a degree of dependence on imported

energy supplies, about 75 per cent of domestic consumption, which
is also umnatched among the other Eastern European economies,
typicaUy weU endowed with coal, i f not much with oU. Only neigh­
bouring Greece depends on imported energy to a simUar extent.
Bulgaria's efforts to reduce its dependence by the introduction of
nuclear power have gone much more slowly than expected, stiU
producing less than 10 per cent of the coimtry's electricUy.*
The exports generated to pay for these investment-oriented
imports (barely 10 per cent have been consumer goods) have
increasingly come from the sale of machinery, especially electronics
equipment. According to Table 8.2, machinery's share of export
value climbed spectacularly from 8 per cent for 1955-7 to 36 per
cent in 1968-70 to 54 per cent by 1981-3. By itself, this relative
growth suggests a continuing Bulgarian transition away from the
 Foreign Trade and Domestic Living Standards 181

agricultural exports upon which the country had depended before

the Second World War to modern manufactures with more value
added. Such a suggestion is in part deceptive. The role of agricul­
tural exports, albeit over 80 per cent processed, was until 1980 the
largest of any Eastern European country. Their 35 per cent share in
1968-70 had admittedly been cut to 26 per cent by 1975-7 and to
17 per cent by 1981-3.
These shrinking percentages understate the share of food exports
in two ways, one potential and the other actual. First, they are
based on sales which, like the rest of Bulgaria's export value, are 80
per cent to other Eastern European countries. These countries paid
prices which were, in 1970, according to the calculations of an
American economist, 26 per cent under world prices for com-
piu-able foodstuffs. But for aU exports, Eastern European prices
were 23 per cent above the world level. I f revalued at world prices,
Bulgarian agricultural exports would therefore have accounted for
43 per cent rather than 35 per cent of export earnings from trade
with Eastern countries.' In fact, this extra amount was earning for­
gone by the Bulgarian export sector in its Eastern European trade
and an incentive to increase sales to Western countries paying the
world price. Bulgaria's terms of trade with Eastern Europe have led
the decUne for total trade noted in Table 8.3, sUpping to 72 per cent
of the 1970 level by 1980 and to 59 per cent by 1982. This drop con­
firms the relative lack of improvement in the price of agricultural
compared with industrial or energy exports. The former was a
relatively larger share of Bulgarian exports, and the latter a
relatively larger share of its imports, than was the case for the rest
of Eastern Europe.* Since 1975 the implicit price index for imports
has risen 74 per cent, mainly because of Soviet oU, whereas the
export index climbed only 9 per cent.
The second feature of Bulgaria's relatively large food exports to
Eastern Europe has — untU the early 1980s at least — compensated
for losses attributable to prices below the world level. The scarcity
of foodstuffs in much of Eastern Europe has made them 'hard
goods' and aUowed them to command non-price premiums. The
premiums have taken a form described by Western economists as
'piggy-backing', that is, higher-priced, but lower-quality 'soft'
machinery added onto the annual bUateral agreements with
Bulgaria's Eastern European partners, in return for the deUvery of
eggs, meat, vegetables, cigarettes and other desirables.'
Since 1978 the country's Eastern European trade has run a
182 Foreign Trade and Domestic Living Standards

Table 8.3: Foreign Trade Balance and Terms of Trade, 1961 - 8 3 (in
million leva)

A. Foreign trade balance

Annual average 1961-3 1968 - 7 0 1975 - 7 1981-3

X-M X- M X- M X-M

USSR 457 - 506 1151- •1121 2 8 4 9 - 3024 5669 - 6172

Other СМЕДа 257 - 251 4 4 8 - 432 1246- 1163 2010 - 2310<:
Western 89-105 3 0 9 - 366 5 1 3 - 1061 1267-1812
Third World 2 2 - 16 9 9 - • 105 5 3 2 - 243 1716- 618
Otherb 6 0 - 52 104- - 67 114- 87 191 - 24c

Totals 885 - 930 2111- -2091 5 2 5 4 - 5578 10853-10927

B. Terms of trade
1960 1965 1970 1975 1980 1982
Terms of total trade^ 102 104 100 96 76 65
Total X + M a s % of NMPe 31 43 46 69 82 96

X - M = exportsminusimports.
a|ncluding Cuba.
bMainly Yugoslavia.
=Approximate values.
<"Export divided by import price index, 1970 = 100.
aNet material product.
Sources: StatisticheskigodishniknaNRBulgariia, 1964, p. 305; 757/, pp. 195-7;
1982, 382-4; Vunshna turgoviia na NR Bulgariia, 1939-1975 (Sofia, 1976),
pp. 2 6 - 8 ; Statisticheski spravochnik na NR Bulgariia, 1984, pp. 6 7 - 9 ; M. Allen,
'The Bulgarian Economy in the 1970s', in J E C , EasternEuropean Economies Post-
Helsinki (Washington, DC: U S Government Printing Office, 1977), p. 689; M.R.
Jackson, 'Recent Economic Performance and Policy in Bulgaria', in J E C , East
European Economies: Slow Growth in the 1980s (Washington, DC: U S Government
Printing Office, 1985), p. 13.

significant import surplus. To some extent this surplus is another

indication of the economic value placed on its agricultural exports;
it is also a reflection of political capital earned by loyalty to the
Soviet Union. Accompanying this trade deficit with the Eastern
European countries has been a small export surplus with Western
Europe and a large one with the Third World. A sizeable deficit in
Western European trade had appeared in the mid-1970s. The
breakdown of Bulgarian trade balances in Table 8.3 makes it clear
that significant regional deficits and surpluses have been typical of
the period since 1970. The foUowing analysis of economic relations
 Foreign Trade and Domestic Living Standards 183

with the three principal regions concentrates on this more recent

period. The balance of payments, and not just the balance of trade,
also become relevant; import surpluses require covering credits and
eventual obligations of debt repayment.

CMEA Integration and the Soviet Connection

Bulgarian economic relations with the Soviet Union and the rest of
Eastern Europe have become more complex with the trade
imbalances of the past 15 years. Adding to this complexity since the
late 1950s have been the efforts of the Council of Mutual Economic
Assistance (CMEA) to integrate the Eastern European economies
according to what Marxist terminology caUs the international
division of labour and what Western terminology caUs comparative
advantage.' Such specialisation has not gone far enough to
eliminate the annual bUateral agreements by which each member
determines its trade with every other, or to introduce a single, fully
convertible currency in which surpluses in trade with one member
can regularly be used to cover deficits with another. Thus the
organisation has not made much progress toward the 'liberalisation
of trade*, which has been a hallmark of the Western European
experience under the European Economic Community (EEC). The
quotas impUcit in these bilateral agreements continue to play the
part of pre-war tariff barriers in restricting trade outside the
agreements.
On the other hand, the purpose of CMEA since its emergence as
an active organisation in the late 1950s has never been to create a
Western-style customs union or to lay the groundwork for a
socialist market economy operating according to world price
signals. Instead, its emphasis has remained on the joint orchestra­
tion of the national planning mechanisms to select a few priorities
for specialisation among the membership, and to eliminate some of
the dupUcation fostered by the original Soviet model of balanced
industrialisation, based on each country producing a fuU range of
aU major goods. The movement of capital and labour between
members to collaborate on joint investment, mainly Soviet projects
for raw materials, has remained far smaUer than in the market
economies of the EEC. SpeciaUsation has not gone so far as to
eliminate major areas of unprofitable industrial production in any
member country (for example, Bulgarian ferrous metaUurgy). It
184 Foreign Trade and Domestic Living Standards

had gone far enough, by 1983, however, to force the Soviet Union
to abandon plans for replacing imports of Bulgarian fork-Uft
trucks with its own production from a projected new plant at Kiev.
CMEA's existence has all the same encouraged a rate of trade
growth roughly comparable to the Western European one. This
alone, in the judgement of one Western economic historian, has set
the post-war period far apart from the sad Eastern European
experience with economic nationalism and reduced trade levels
during the inter-war period.'
Bulgaria's entire post-war experience has of course been charac­
terised by a closer economic relationship with the USSR, beyond
trade alone, than has any other Eastern Ешореап country's.
Regardless of the Soviet political motives stressed by Western
observers or the joint CMEA membership stressed by the Bulgarian
side, economic relations between the largest and smallest of the
Eastern European economies — one rich in industriid raw materials
and the other rich in agricultural resources — should rationaUy
have been large. Political alliance nevertheless encouraged trade
and seems the best explanation for the movement of capital and
labour that has occurred. After taking virtually no reparations
from post-war Bulgaria, in contrast to Romania, the Soviet Union
afforded Bulgaria's heavy industry credits worth 2,200 million
roubles (in 1950 rates) between 1947 and 1957. Several electric
power plants, the Varna shipyards, agricultural machinery in Ruse
and mining equipment in Sofia, plus the Lenin metallurgical com­
plex near there, received the bulk of these credits. The five joint
Soviet-Bulgarian companies made little positive contribution (see
Chapter 6), but at least were not exploitative as were the Sovroms
in Romania.
During the period 1958-75, more clearly within the CMEA
framework, the Soviet Union dispersed another 2,200 million
roubles worth of credits. New joint projects with the USSR were two
textile plants, production of the Balkancar electric fork-lift trucks
in Sofia, more machine manufacturing in Ruse, and the Kremi­
kovtsi metallurgical complex. In the most recent decade, major new
Soviet projects have been the three proposed nuclear power plants
(one is now operating) and the new metallurgical complex at Burgas
(not yet open £md now relying on East German machinery). AU
credits have carried nominal interest rates of 2-3 per cent, but have
been due for repayment in just ten or twelve years. Although these
form a smaU share of Soviet resources, the contribution of these
 Foreign Trade and Domestic Living Standards 185

credits to Bulgarian industry cannot be dismissed lightly. They

reportedly amounted to 27 per cent of total investment for 1948-56
and 15 per cent for 1958-75, including one-third of the value of
new machinery and equipment during the latter period.'"
The above projects have brought an undetermined number of
Soviet engineers and technicians to Bulgaria, sometimes for several
years at a time, but rarely with public notice. Since the 1960s a
reverse flow of skiUed Bulgarian workers, mainly in construction,
to the Soviet Union has swamped the Soviet totals. Bulgarians
working on several CMEA projects in the USSR reached 10,000 by
1975; the official total was 27,000 by 1984." The absence of these
skiUed workers, together with another 20,000 primarily in East
Germany, Cuba and Libya (the only non-member of CMEA), has
become a serious drain on a domestic labour force 8dready
stretched too thin (see Chapter 7).
The principal area of Bulgarian integration with the Soviet and
other Eastern European economies has remained the planning of
their joint trade for several Five-Year Plans in advance. Since 1956,
this has been done through multUateral CMEA negotiations as weU
as through bUateral written agreements. The earliestevidence of a
CMEA session seeking to synchronise Five-Year Plan trade and
production for at least some branches of industry dates back to
1954 (see Chapter 6). By 1957, a session in Sofia approved the
Bulgarian proposal to expand its CMEA exports of fruit and vege­
tables in return for Soviet metals and raw materials, Czech ceUulose
and paper, and East German chemicals and minerals. What has
developed since then is a series of 'specialisation agreements' for
each branch of production, which are incorporated into the annual
bilateral trade pacts.'^ In electronics, for instance, some 121 agree­
ments for producing specific items accounted for 52 per cent of the
value of Bulgarian export earnings in 1979. The figure for
machinery exports exceeded 40 per cent. By the 1980s, Bulgaria was
responsible for 40 per cent of the export of both electric hoisting
and data-processmg equipment. OveraU, according to one
Bulgarian source, 30 per cent of trade turnover with CMEA
partners and 35 per cent with the USSR were tied to specialisation
agreements by 1980."
With or without these agreements, Bulgarian trade with the
USSR has proved to be so large as to raise speculation among
Western economists about the integration of the former's economy
into the latter's. Certainly the predominant position of the Soviet
186 Foreign Trade and Domestic Living Standards

Union in CMEA and in bilateral relations has had a major impact

on the shape of Bulgarian foreign trade and also transport. By
1975, trade with the USSR accounted for 77 per cent of Bulgaria's
transport tonnage, mainly as a result of Soviet imports. Some 21
bilateral agreements provided for this traffic. Its movement was
mainly across the Black Sea, and even before the opening of the
ferry service between Varna and Iliechovsk, near Odessa, in 1978, it
was responsible for increasing Bulgarian imports brought in by ship
to nearly 90 per cent of total tonnage.'* The railway share feU
accordingly. But the leap from these ties to fuU-scale integration,
where each country abandons hs existing lines of less efficient pro­
duction, has simply not occurred.
Throughout the 1970s, the USSR none the less continued to pur­
chase half of Bulgaria's machinery exports and one-quarter of its
electronics exports within CMEA. Food products accounted for
only 23 per cent of Bulgarian export value within CMEA over the
same period, less than either of the first two branches, despite the
latter's more complementary role as scarce, or 'hard' goods for the
USSR. Soviet purchases accounted for most of the overaU
Bulgarian exports of cigarettes, eggs, canned meat and vegetables.
Other food exports have gone much further afield. For the
1970-80 period, 77 per cent of their value was sold outside the
CMEA, primarily, as we shaU see, to Western Europe. Only
Bulgarian exports of non-food consumer goods fit a pattern of
integration wUh the USSR. Two-thirds of Bulgaria's overaU
exports in this category are sent there. Much of their production is
based on inputs of cotton, leather, wood or other raw materials
that are imported from the USSR specificaUy for processing on the
ishleme basis first practised in the Ottoman period (see Chapter
1)." Yet light industry other than food comprises just 10 per cent of
total Bulgarian production.
The bulk of Soviet imports into Bulgaria have consisted instead
of industrial raw materials, primarily iron ore and petroleum.
These imports have above aU supported the continuing Bulgarian
effort to develop its own production of ferrous metaUurgy, despite
the absence of comparative advantage. Soviet prices for petroleum,
which were set substantially below world levels until the late 1970s
and somewhat below since then, made the agreed quotas for each
Five-Year Plan a subsidised encouragement to Bulgarian heavy
industry.'* Since 1976, any additional oil sales have been made at
world prices, and since 1981 agreed quotas have been held
 Foreign Trade and Domestic Living Standards 187

constant. Thus the planned growth of Bulgarian industry, and

producers' goods in particular, can no longer proceed on the
assumption of comparable increases in Soviet oil supplies. Nor are
Soviet negotiators reportedly now willing to accept inferior sorts of
Bulgarian machinery in return for these supplies.
Other problems have also plagued Bulgarian foreign trade within
the CMEA framework. Exported manufactures have been kept too
isolated from world prices and their assortment too wide for an
increasingly specialised world market. Bulgarian and Western
economists agree that this isolation and 'universalism' have
inhibited the matching of Western best practice in machinery or
electronics production." Too many prices and products have
remained unchanged for too long under a CMEA framework
geared to Five-Year Plans. The importance of Bulgaria's relatively
small Western trade lies precisely in the access to more recent tech­
nology and to a more flexible supply of imported inputs for
industry.

Economic Relations with the West and the Third World

The first significant change in post-war Bulgarian trade outside
Eastern Europe did not occur until the late 1960s. The increase in
Western imports, primarily from West Germany, was responsible.
The Western share of 14 per cent of Bulgarian imports in 1960 had
grown to 19 per cent by 1970. It peaked at 24 per cent in 1975. As
recorded in Table 8.4, Bulgarian exports to Western markets did
not increase proportionally over the same period. By 1975 they had
slipped to 9 per cent of total export value. Since then the deficit in
Western trade was briefly replaced by a surplus, but a small
negative balance has reappeared since 1980. In the absence of a
convertible currency, Bulgaria could only cover these trade deficits
with its Western partners by borrowing the money from them. This
section must therefore treat the rise and at least temporary reso­
lution of a Bulgarian problem of debt repayment, hardly as serious
as the famous Polish case, but stiU significant. Bulgarian exports to
Third World countries grew from only 3 per cent of the total in
1960 to 6 per cent in 1970 to 11 per cent in 1975 and 13 per cent for
1980-3, mainly because of increased sales and projects in Libya
and Iraq. These exports have done little, however, to reUeve the
problem of paying for Western imports. The large export surplus
that has resulted in trade with the Third World has not in the main
188 Foreign Trade and Domestic Living Standards

Table 8.4: Direction of Foreign Trade, 1960-83 (in percentages)

Imports 1960 1965 1970 1975 1980 1983
USSR 52.6 50.0 52.2 50.7 57.3 58.5
GDR 11.1 7.2 8.6 6.3 6.6 5.7
Other CMEAa 21.6 17.1 15.4 15.0 15.0 16.1
FRG 5.9 5.8 2.7 7.8 4.8 3.9
Other Westernb 7.7 16.5 16.5 15.8 12.4 9.8
Libya — — — 1.0 2.0
Other Third World«: 2.4 3.5 4.7 3.9 2.9 4.1

Exports
USSR 53.8 52.1 53.8 54.6 49.9 58.5
GDR 10.2 9.2 8.7 7.0 5.5 5.7
Other CMEAa 20.0 18.0 16.8 18.4 18.0 14.9
FRG 3.3 3.5 2.6 1.7 2.5 1.7
Other Westernb 9.1 12.3 11.6 7.6 13.3 8.8
Llbya — — — 2.2 3.6 4.1
Other Third World= 3.4 4.6 6.1 8.5 9.8 9.0

a|ncluding Cuba.
bMainly Switzerland and ltaly.
=Mainly lraq, Iran, Turkey and Algeria.
Sources: Statisticheskigodishnikna NR Bulgariia, 1964, p. 305; 1971, pp. 195-7;
1982, pp. 382-4; Vunshna turgoviia na NR Bulgariia, 1939-1975 (Sofia, 1976),
pp. 2 6 - 8 ; StatisticheskispravochniknaNRBulgariia, 1984, pp. 6 7 - 9 ; Allen, 'The
Bulgarian Economy in the 1970s', p. 689; Jackson, 'Recent Economic Performance
and Policy in Bulgaria', pp. 13.

been available to Bulgaria in convertible currency.

The rise in Western imports during the period 1965-75 derived
mainly from Bulgaria's aforementioned demand for a flexible
supply of inputs to support industrial development. Capital goods,
primarily sophisticated machinery, accounted for 30-50 per cent
of Western imporis, chemicals another 10-30 per cent, and special
metals 10-15 per cent. Consumer goods were typically a small and
residual fraction. West Germany furnished 30-40 per cent of the
Western total. Italy, France and Switzerland provided another
quarter. To cover the purchases, Bulgaria reUed on foodstuffs for
40 per cent of its exports to West Germany, and only 20 per cent to
the other three main partners. Textiles typicaUy covered another 20
per cent of hard-currency exports, with metals and machinery
about 10 per cent a piece," Deficiencies in punctual delivery,
packaging and advertising contributed as much as the standard
explanations of inferior Bulgarian quaUty or EEC trade restrictions
 Foreign Trade and Domestic Living Standards 189

to the failure of Bulgarian exports to match Western inputs over

this decade. In 1970, an infusion of Soviet hard-currency credit
allowed Bulgaria to pay off the Western debt accumulated during
1966-8. In return, Bulgaria ran a large export surplus in its trade
with the USSR from 1970 to 1973.
Since 1975, West German imports have slipped to one-quarter of
the Western aggregate. Austria, Japan and the United States have
stepped in to take up about one-fifth of that total. American
imports, however, have consisted mainly of feed grains, rather than
industrial inputs. American trade has been hampered not only by
Bulgarian deficiencies in exporting competitive products, but also
by official US denial of most-favoured-nation (MFN) status and
the preferential tariffs that go with i t . "
The reduction of Bulgaria's Western trade deficit and the
elimination of its overall deficit since 1975 stiU left substantial
short-term debts owed to Western European banks from borrowing
over the previous decade. By 1976, the Bulgarian debt had cUmbed
to 13 per cent of estimated gross national product and the annual
debt-service ratio to 44 per cent of hard currency, that is, Western
export earnings. The former ratio was the highest in Eastern
Europe at the time. The latter was triple the inter-war peak in the
Bulgarian debt-service ratio to aU export earnings in 1931-2 (see
Chapter 3). By 1981, however, a Bulgarian debt of $3,000 miUion
had been cut in half. According to American analysis, this reduc­
tion was largely the result of extra Soviet deUveries of petroleum,
which were in turn sold as refined products for hard currency to
Western buyers.^" These deUveries helped to create a new Bulgarian
trade deficit with the USSR, however. The recent Soviet desire to
repair this deficU and the growing Umits on Soviet petroleum pro­
duction since 1980 make it unUkely that such largesse can be
counted on another time.
Two major Bulgarian strategies to avoid Western credit and stiU
maintain access to Western imports and technology have been the
promotion of tourism and joint-investment ventures. Extensive
hotel, restaurant and road construction on the Black Sea coast
helped to double the number of Western tourists between 1960 and
1970. Since that time, the pace of construction for tourism has
accelerated. However, other Eastern European countries, plus
neighbouring Yugoslavia, Greece and especiaUy Turkey, have been
solely responsible for doubling the annual number of visitors
between 1970 and 1980.^' In the absence of pubUshed Bulgarian
190 Foreign Trade and Domestic Living Standards

data on the bfdance of payments, we can only speculate on how

much hard currency Western tourists have contributed to current-
account earnings over time.
The other Bulgarian strategy for covering the cost of hard-
currency imports has been to promote direct Western investment
under licence or through joint ventures. Legal provisions for both
were introduced during the mid-1960s. An initial joint venture with
the French car manufacturer Renault failed within a few years, but
a number of licensing agreements soon worked out to the satisfac­
tion of both Bulgarian and Western enterprises. Agreement with
Coca-Cola has been followed in more recent years by similar
Ucences for Schweppes and Pepsi-Cola. By the late 1970s, licensing
agreements had spread into industrial manufacture, including the
fork-lift truck firm, Balkancar. Some 40 joint ventures were
operating in trade and tourism, including hotel construction.
Direct Western investment in joint industrial ventures remained
miniscule, perhaps prompting the new Bulgarian legislation of
1980. Its terms allow foreign partners to claim majority rights in
controlling the enterprise and in receiving hard-currency earnings.
Bulgarian officials had initially hoped to attract Western capital
and technology for raw-material extraction or processing for
export to third countries. The four ventures signed to date,
including three with Japanese partners, have dealt instead with the
manufacture of electronics, plastics and consumer goods."
Although 20 joint trading ventures have now been concluded with
West Germany, Italy and France, Bulgarian exports to these
countries have not increased since 1970. Significant import substi­
tution or a reduction in export of domestically scarce goods like
cement or fertiUser must await, respectively, a higher level of
Western investment or a lower level of Eastern European demand
than has so far been the case.

Living Standards and Consumption Patterns

Bulgaria'a post-war standard of living has been slow to benefit from

the country's booming foreign trade, at least on the import side. The
share of consumer goods in total imports stayed too smaU, about 10
per cent, to add significantly to domestic consumption or to
stimulate import substitution along the lines of the Yugoslav
experience. On the export side, however, a real connection appeared
 Foreign Trade and Domestic Living Standards 191

by the 1960s. Large exports of foodstuffs raised rural incomes, and

rising production left a surplus to improve the urban supply of
food. Since 1970, the relationship of exports to living standards has
been more complex.
No significant upturn in Bulgaria's post-war standard of living,
official figures not withstanding, was achieved until the 1960s.
Standards had probably fallen from 1948 to 1952, largely because
of agricultural problems during collectivisation. Collective-farm
income rose only 35 per cent from its low 1951 level by 1958.
Mitigating a 10 per cent annual rise in largely industrial wages over
this period were hidden price increases and the continuing scarcity
and poor quality of most consumer goods."
Improvement began after 1960, first with agricultural income. Its
real increase over the period 1960-70 averaged 6.7 per cent a year,
compared with 4.9 per cent for real industrial wages. Average
peasant income rose from one-third to two-thirds of wages for the
urban factory worker in money terms for 1952-68, and came even
closer, i f self-consumption of agricultural produce coidd be fully
calculated. By the mid-1960s. Western vishors to the Bulgarian
countryside, including the author, were struck by the number of
new houses under construction and the number of new cars parked
in front of them. The improvement reckoned by a Bulgarian
economic historian in the rural standard of living between 1939 and
1968, which consisted of a doubHng of real income and a 33 per
cent rise in food consumption, occurred largely during the last
decade of the period." By 1970, a corresponding improvement in
urban food supplies made the decade's increase in industrial wages
mearüngful. The share of foodstuffs in personal consumption fell
from 52.5 per cent to 48.3 per cent for 1960-8, and then to 44.5 per
cent by 1977; meanwhile the average daily consumption of calories
had climbed to a Western European level of 3,500."
During the period 1970-83, urban workers saw their money
wages increase by 3.9 per cent a year, reaching a monthly average
of 197 leva, but real wages rose only by a 2 per cent annual average.
Responsible for this return to the modest increments of the early
1960s was the tiny 0.5 per cent rise in real wages for 1976-80
recorded in Table 7.3, the lowest annual rate in Europe. The
cause now was not massive new metallurgical investment, as in
1962-3 (see Chapter 7), but rather a price increase of at least 25 per
cent for foodstuffs and of 15 per cent for all consumer goods.
These price rises were imposed to facilitate foreign trade and to
192 Foreign Trade and Domestic Living Standards

generate a trade surplus by bringing Bulgarian prices more into line

with both world levels and the domestic cost of production. Data
from the United Nation's International Labour Organization find
major food prices for 1981 consistent with French levels, despite
the fact that wages for Bulgarian manufacturing remain about one-
quarter of the French level.^
Given these limitations, it is unlikely that the large share of
Bulgarian personal consumption devoted to foodstuffs has
declined further since 1977. That was a level similar to others in
Eastern Europe, but over half again the Western European average
of about 25 per cent. None the less, progress has been made in the
composition of the Bulgarian diet. According to Table 8.5, the
cereal share has declined in favour of meat, but not enough. Meat
consumption per capita rose by 70 per cent for 1970-83, despite a 3
per cent drop in 1980. Poultry was the chief gainer. The meat
aggregate stiU covered only seven-eighths of the 'scientific norms'
set by the United Nations. MUk and egg consumption also rose
sharply, but feU short of UN norms. Fruit and vegetables barely
met half of these norms, but at least ranked weU ahead of the levels
elsewhere in Eastern Europe."
Deficiencies may be traced not only to export diversion, but also
to retaU networks for domestic distribution. The number of food-
stores increased by 25 per cent during the 1970s and their floor space
increased even more, because of new supermarkets. Yet the typical
shop remains smaU and poorly organised by Western standards.
Separate lines to select, pay for and pick up purchases delay
customers needlessly. Self-service stiU accounts for only one-third
of retail sales. Bad packing and inconsistent shipment of produce,
ahernating shortages with unsaleable gluts, hit perishable fruit and
vegetables the hardest.^ Sofia and the larger towns had more super­
markets by the end of the decade, but also paid higher prices for
what was available. AU foodstuffs continued to be vulnerable to
diversion to the tourist hotels on the Black Sea coast. Since the late
1970s, however, the relative regularity of Bulgarian food suppUes
has stood in sharp contrast to neighbouring Romania and has
attracted customers from there and sometimes from Yugoslavia.^*
Other consumer goods, more specificaUy durables Uke clothing
and household appliances, did not record a real upturn untU the
1970s. Then private cars — mainly Soviet Fiats, partly produced in
Bulgaria — and refrigerators led the advances noted in Table 8.5.
Car auto sales exceeded half a million cars, before dropping off
 Foreign Trade and Domestic Living Standards 193

abruptly to modest annual increases since 1978. Sofia far surpasses

the national average of 34 cars per 100 households. Its 350,000
private vehicles by 1980 joined with public transport to create a
very modern problem for the Bulgarian capital city. Leaded petrol
has compounded air pollution, already a serious problem, caused
by burning lignite for heat.
Until the past few years, the smaller durables like clothing, shoes
and household appliances have ranked low in quaHty and variety.
Both have improved since 1980 to an extent that has impressed
Western visitors, again including the author. Prices for the better-
quality items are also high, for instance, 50-75 leva for shoes or
dresses, when monthly salaries stiU average only 200 leva. Yet these
items do not go unsold, but are bought by people in households
with several incomes and low housing costs. They are also sold for
Bulgarian leva, rather than for hard currency in the Corecom
shops, which have introduced the urban elite to Western consumer
goods since the 1970s. Chapter 9 wiU deal with the poUcy decisions
and managerial reorganisation that have generated such home­
made goods. For the time being, we must categorise their appear­
ance as 'import emulation', rather than substitution. They are
taking the place of the larger fraction of consumer goods in imports
{up to 30 per cent) that had been planned, but never purchased.
Housing for a largely urban population and faciUties for a com­
prehensive set of social services have continued to be the most
serious shortcomings in the Bulgarian standard of living. Their
construction is classified, according to the Soviet pattern, under
services, and therefore is treated as a residual in a plamUng and
accosting process organised around producing goods. Schools
and hospitals are overcrowded and often poorly equipped. Most
elementary schools in Sofia and the larger towns stUl operate on
split shifts. Residential housing has received sunbitious targets in
recent Five-Year Plans, but has typicaUy failed to meet more than
two-thirds of the planned apartment total. In 1975, Bulgaria's
average of 22.5 units of housing per 1,000 population stiU ranked
bottom in Eastern Europe, below even Romania's 26.5.'" Since
then apartment construction, typicaUy for a form of condominium
ownership based on fifteen-year mortgages for prices ten times
aimual income, has received higher planning priority. The current
goal is one room for each famUy member by 1990. Targetsare stUl
not being met, with the shortfaUs exceeding 20 per cent. Despite
650,000 new units built for two milUon people between 1972 and
194 Foreign Trade and Domestic Living Standards

Table 8.5: Indicators of Living Standard, 1956-83

A. Per capita consumption (in kilograms)

1956 1970 1983 UN norm

Meat 27 41 70 80
Milk, d a i r y 8 81 117 183 260
Eggsb 69 122 225 265
Fish — 6 8 10
Vegetables 74 89 109 180
Fruit 84 119 115 200
Sugar 12 33 36 32
Bread 257 239 209 135

Cotton, wool 3 8.5 13.2

Knitwearb
Footwearb 0.6 1.7 2.3

B. Consumption index (1968 = 100) (Alton)

1960 1977
Food 78 121
Clothing 62 126
Kitchen durables 63 194
Transport 41 289
Housing 81 134

C. Consumer durables (per 100 households)

1965 1970 1983

Radios 59 62 92
Televisions 8 42 87
Electric washing machines 23 50 81
Refrigerators 5 29 88
Pt^ivate cars 2 6 34

D. Housing and services (per 1,000 population)

1956 1970 1983

Urban housing= 5.8 9.7 14.3
Retail shops 2.9 3.8 4.5
Hospital beds 5.0 8.4 9.0
Physicians 1.9 4.5
High-school students 165 182 172
University students 4.8 10.5 9.6
 Foreign Trade and Domestic Living Standards 195

Table 8.5: Indicators of Living Standard, 1956-83 — continued

E. Consumer price indices (1960= 100)

1965 1970 1975 1980
Official 107 110 112 137
Alton 110 125 142 161

a|n litres,
b|n units.
c|n square metres per capita.
Sources: Statisticheskispravochnik, 1976, pp. 88, 105; 1984, pp. 171-4, 191, 199,
212, 218-20; T. Alton etal., Personal Consumption, in Eastern Europe, 1960-1978,
OP-57 (New York, 1979|, pp. 2 2 - 8 ; T. Alton et al., Official and Alternative
Consumer Price Indices in Eastern Europe, OP-73 (New York, 1982), p. 14.

1982, qualified households wait several years for apartments in

large towns, and sometimes five or ten years in Sofia, where the
overcrowding is most serious.
The capital's growth from 650,000 in 1960 to 1.3 milHon by 1980,
as both an industrial and administrative centre, would have posed a
housing problem under any political system. The continuing export
of domestically scarce cement to the Soviet Union may be cited as
one political component of the housing shortage. More important,
however, has been the shortage of skiUed labour, resuUing basically
from rapid industrialisation and slow population growth, as noted
in Chapter 7. The diversion of some skiUed construction labour
abroad for projects undertaken for reasons of foreign policy, or at
home for prestige projects Uke the new National Centre of Culture
(NDK) complex in Sofia, have, on the other hand, aggravated the
labour shortage for residential construction.
One approach to the general labour shortage has been to cut
back on the number of university students by reducing the often-
abused time-UmU for completing degrees and by making the
entrance requirements harder. SimUar restrictions have appeared
across Europe, from France to the USSR, for varying reasons.
Enrolment at the main university in Sofia has faUen by 25 per cent
since 1978, the peak year for new, often overqualified and over-age
graduates. In the early 1980s, an educational reform was launched
in the high schools to make the fmal year mainly vocational
training in a skiUed trade. By this time, however, many of the
urban eUte, Uke their counterparts elsewhere in Europe, have come
to regard a utuversity education as something to which their
196 Foreign Trade and Domestic Living Standards

children are entitled. Broader access to a university education, after

all, has been the major change, together with greater stress on
science and technology, made in the country's educational system
during the Communist era." Educational reform has not therefore
been widely welcomed, and the consequences of these initial
changes remain unclear.
The availability of housing and the price of food aside, the
Bulgarian standard of living seems to have risen again, after the
restrictive period of the late 1970s. The minimal increase in real
wages for 1976-80 was accompanied by declining consumption in
several important areas, culminating in the meat shortage of 1980.
In the process, however, the Bulgarian economy was able to use
this reduced consumption to trim the pressure on its balance of
payments. We now turn to the recmring set of reforms by which
Bulgarian authorities hope to achieve both rising domestic con­
sumption and the competitive exports needed to protect the balance
of payments. I f economic reform is to succeed, however, the
system of higher education will have to pay as much attention to
training better managers as it now does to eiüarging the labour
force.

Notes

1. Nita Watts, 'Eastern and Western Europe', in Andrea Boltho (ed.), The
European Economy: Growth and Crisis (Oxford: Oxford University Press, 1982),
pp. 278-80; United Nations Economic Commission for Europe Economic Survey
ofEurope, 1981 (Geneva: United Naüons, 1982), p. 282.
2. The actual ratios during 1963-7 for East Germany, Czechoslovakia, Hungary
and also for Spain, Portugal and Greece were stiU less than the calculated ones,
according to the United Nations Economic Commission for Europe (UNECE),
EconomicBulletinforEurope, vol. 21, no. 1 (Geneva: United Nations, 1970). By
then the Bulgarian ratio had risen to 1.13. A useful discussion of these ratios is
Edward A. Hewett, 'Foreign Trade Outcomes in Eastern and Western Economies',
in Paul Marer and John Michael Montias (eds.), East European Integration and
East-West Trade (Bloomington, Indiana: Indiana University Press, 1980),
pp. 41-68.
3. UNECE, Economic Survey of Europe, 1971 O^ew York: United Nations,
1972), p. 57.
4. Bulgarian expectations for deriving half of the country's electricity from
nuclear power have now been put off from 1990 to 2000. On energy imports, see
Marvin R. Jackson, 'Bulgaria's Economy in the 1970s: Adjusting Productivity to
Structure', in Joint Economic Committee of the US Congress (JEC), East European
Economic Assessment, pt 1 (Washington, DC: US Government Printing Office,
1981), p. 602; Nikolai Todorov et al.. Stopanska istoriia na Bulgariia. 681-1981
[Economic History of Bulgaria, 681-1981] (Sofia, 1981), pp. 526, 588-9.
 Foreign Trade and Domestic Living Standards 197

5. See the discussion by Jan Vanous, in Marer and Montias, East European
Integration, p. 315.
6. The Bulgarian terms of trade held virtually steady for the 1960s, falling by only
2 per cent. Jackson, 'Bulgaria's Economy in the 1970s', p. 597; and Mark Allen,
'The Bulgarian Economy in the 1970s', in Joint Economic Committee of the US
Congress, East European Economies Post-Helsinki (Washington, DC: US Govern­
ment Printing Office, 1977), p. 689.
7. Gur Ofer, 'Growth Strategy, SpeciaUzation in Agriculture, and Trade:
Bulgaria and Eastern Europe', in Mater and Montias, East European Integration,
pp. 299-313.
8. Cuba, Mongolia and Vietnam are CMEA members, together with the Eastern
European states of Poland, Czechoslovakia, East Germany, Hungary, Romania,
Bulgaria and the USSR. For a Western survey of the organisation and its activities,
see Jozef M. Van Brabant, Socialist Economic Integration (Cambridge: Cambridge
University Press, 1980). A Bulgarian critique of Western analysis is Zhak Ario (ed.),
Ikonomicheskoto sublizhavane na stranite ot sotsialisticheskata obshtost [Economic
Convergence of the Countries of the Socialist Camp] (Sofia, 1983), pp. 218-35.
9. See Sidney Pollard, Peaceful Conquest, The Industrialization of Europe,
1760-1970 (Oxford: Oxford University Press, 1981), pp. 309-34.
10. Stefan Sharenkov and Vasil Sirov, 'Participation of the PR Bulgaria in the
CMEA', and also Zlatko Zlatev, 'Socialist Industrialization in Bulgaria', in Mito
Isusov (ed.), Problems of the Transition from Capitalism to Socialism in Bulgaria
(Sofia, 1975), pp. 353-60 and 177-85, respectively.
11. Allen, 'Bulgarian Economy in the 1970s', p. 665; Zemedelsko zname, 6
November 1984.
12. Sharenkov and Sirov, 'Participation of Bulgaria in the CMEA', pp. 345-9;
Triatko Bozhkov, Nauchno-teknicheska i proizvodna integratsiia mezhdu NR
Bulgariia i SSSR [Scientific-Technical and Production Integration between the PR
Bulgaria and the USSR] (Sofia, 1976), pp. 174-217.
13. L . Radulov (ed.), Sotsialno-ikonomicheskata politika na Bulgarskata
durzhava, 681-1981 [Socio-economic Policy of the Bulgarian State, 681-1981]
(Varna, 1981), pp. 497-8.
14. Sea freight to and from Bulgaria jumped 19-fold for the period 1958-70,
while rail freight barely doubled. The latter increased only 10 per cent for 1970-8.
Truck transport grew by 40 per cent, after a sevenfold leap for 1958-70, mainly
because of exports and internal trade. Todorov et al., Stopanska istoriia na
Bulgariia, pp. 513-17, 526; Bozhkov, Nauchno-teknicheska integratsiia,
pp. 182-4.
15. Bozhkov, Nauchno-teknicheska integratsiia, pp. 176-8.
16. See Michael Manese and Jan Vanous, 'Soviet Policy Options in Trade with
Eastern Europe', in Joint Economic Committee of the US Congress, 77ie Soviet
Economy in the 1980s: Problems and Prospects, pt 1 (Washington, DC: US Govern­
ment Printing Office, 1982), pp. 102-15.
17. Alec Nove, The Soviet Economic System (Oxford: Oxford University Press,
1977), pp. 178-81; Todorov et al., Stopanska istoriia na Bulgariia, pp. 591-2.
18. George W. Feiwel, 'Economic Development and Planning in Bulgaria in the
1970s', in Alec Nove, Hans Hermann Höhemann, Gertrud Seidenstecher (eds.), The
East European Economies in the 1970s (London: Butterworths, 1982), pp. 223-5.
19. Deborah A. Lamb, 'Bulgaria: Performance and Prospects in Trade with the
United States and the West', in Joint Economic Committee of the US Congress,
East-West Trade: The Prospects to 1985 (Washington, DC: US Government
Printing Office, 1982), pp. 37-9.
20. See Jackson, 'Bulgaria's Economy', pp. 593-603; and Chapter 3 above.
21. Statisticheski goadishnik na NR Bulgaria [Statistical Yearbook of the PR
198 Foreign Trade and Domestic Living Standards

Bulgaria] 1982 (Sofia, 1983), p. 461; Paul Marer, 'Tourism in Eastern Europe', in
Joseph Brada (ed.), Quantitative and Ananlytical Studies in East-West Economic
Relations (Bloomington, Indiana: Indiana University Press, 1976), pp. 37-116.
22. Michael C. Kaser, 'The Industrial Enterprise in Bulgaria', in Ian Jefferies
(ed.), 77ie Industrial Enterprise in Eastern Europe (New York: Praeger, 1981),
pp. 91-2; Sofia Press Agency, 'Bulgaria's Presence in Five Continents', 111, 103
(1983); RFER, Bulgarian Situation Report, 5, 18 April 1980; and 12, 23 July 1982.
23. J.F. Brown, Bulgaria under Communist Rule (New York: Praeger, 1970),
pp. 43-6.
24. Liuben Berov, 'Realnite dokhodi i potreblenieto na trudeshite i seliani v
Bulgariia prez 1938-1969' [Real Income and the Consumption of Workers and
Peasants in Bulgaria, 1938-1969], Problemi na truda, vol. 1 (1970), pp. 23-34.
Also see Todorov et al., Statisticheski godishnik na NR Bulgariia, pp. 531-2; and
George W. Feiwel, Growth and Reforms in the Centrally Planned Economies: The
LessorK of the Bulgarian Experience (New York: Praeger, 1977), pp. 214-24.
25. Organization for Economic Co-operation and Development (OECD),
Prospects for Agricultural Production and Trade in Eastern Europe, vol. 2,
Bulgaria (Paris: OECD, 1982), pp. 145-8; Thad Alton et al., Personal Consump­
tion in Eastern Europe, 1960-1978, OP-57 (New York: L.W. International
Financial Research, 1979), p. 18.
26. European MarketingData and Statistics, 1983 (London: Euromonitor Publi­
cations, 1983), pp. 177, 181. Also see Feiwel, 'Economic Development in Bulgaria',
pp. 227 - 30; Statisticheski godishnik na NR Bulgariia, 1982, p. 367; Thad Alton et
al., Official and Alternate Consumer Price Indices in Eastern Europe, Selected
Years, 1960-1981, OP-73 (New York: L.W. International Financial Research,
1982), p. 14.
27. OECO,Prospects, pp. 145-8; TodoTOvetal.,StatisticheskigodishniknaNR
Bulgariia, pp. 600-1; RFER, Bulgarian Situation Repori, 4, 25 March 1983;
UNECE, Economic Survey of Europe, 1983 Q>iev/ York: United Nations, 1984),
pp. 178-81.
28. Todorov et al., Stopanska istoriia na Bulgariia, pp. 578-98; RFER,
Bulgarian Situation Report, 12, 10 September 1981.
29. Marvin R. Jackson, 'Recent Economic Performance and Policy in Bulgaria',
Joint Economic Committee of the US Congress (JEC), East European Economies:
Slow Growth in the 1980s, pt 3 (Washington, DC: US Government Printing Office,
1985), pp. 15-23; Marvin R. Jackson, 'Romania's Economy at the end of the
1970s: Turning the Corner on Intensive Development', JEC, East European
Economic Assessment, pt 1 (Washington, DC: US Government Printing Office,
1981), pp. 231-98.
30. Feiwel, Growth, p. 221; and also his 'Economic Development in Bulgaria',
p. 230; Todorov et al., Stopanska istoriia na Bulgariia, p. 598; RFER, Bulgarian
Situation Report, 18, 31 October 1978; and 4, 25 March 1983. The average size of
new dwellings in 1981 remained — together with that of the USSR — Europe's
smallest: 2.3 rooms, excluding kitchens. European Marketing Data, 1983, p. 299.
31. The number of university-level students per 10,000 population rose from 16 in
1939 to 55 in 1948, 70 in 1960 and 122 by 1974, before decreasing, first because of
demographic decUne and then as part of educational reform, to the 1983 level of 94.
Primary and secondary-school students per 10,000, on the other hand, have
returned to the 1939 level of less than 1,700, after reaching 2,000 in 1964.
Statisticheski godishnik na NR Bulgariia, 1982, pp. 22-3. Illiteracy had already
been reduced by 1934 to 31.5 per cent of the population over 7 years of age, the
lowest rate in any of the Balkan states. By 1965, the Bulgarianfigurewas jшt 8.3 per
cent, again the lowest in the region. Paul Shoup, East European and Soviet Data
Handbook (New York: Columbia Univeristy Press, 1981), p. 169.
 E C O N O M I C R E F O R M S S I N C E 1960

The general phrase 'economic reform' has a specific meaning for

Eastern Europe and the Soviet Union. Since the 1960s, it has been
synonymous with the streamlining of state planning and the decen­
tralisation of ministerial controls. Its goal has been to create greater
efficiency, not a market economy. During the first years following
the Second World War, aU of Eastern Europe adopted the Soviet
system of central planning. In Bulgaria, the system's capacity for
promoting the extensive growth of a few branches of industry,
based on massive infusions of labour and capital, was weU demon­
strated (see Chapter 6). By the early 1960s, however, it was equaUy
clear that sustained growth in aU branches of production, including
agriculture, would require changes in the original system. The
looming shortage of labour and the growing importance of foreign
trade (detailed in Chapters 7 and 8) were powerful pressures for
reform in Bulgaria.
Subsequent reform throughout Eastern Europe has given greater
responsibility to enterprise management, although not to the work­
force. Rarely has reform aUowed the market mechanism to set
prices, to determine or to influence new investment. Only Hungary
has pursued such market-oriented reform over a prolonged period.
The more common strategy, appUed most rigorously in East
Germany, has been to rely on larger units of organisation.' These
industrial associations have sought to promote efficiency through
less central control over a smaUer number of units. Higher manage­
ment faces severe sanctions for poor performance. But even the
continuing Hungarian reform, with its greater stress on profits and
market prices as performance indicators and less ministerial
administration, cannot fairly be called a fuU-scale repudiation of
central planning. Only the economy of independent Yugoslavia,
long outside the Soviet poUtical orbit, has repudiated such planning
in favour of what has been called тги-ket socialism. At least one
Western economist now acknowledges the positive role of central
planning as Eastern Europe's 'engine of growth' from the 1950s to
the early 1970s, if not the past decade.^ Few would dispute its role
as 'an engine of structural change'.

199
200 Economic Reforms since 1960

Bulgarian confidence in the framework of Soviet-style planning

has never been shaken, for whatever mixture of political motives
and economic achievement. Official efforts to reshape that frame­
work none the less began by the early 1960s. The enlarged Soviet-
size collective farms created during the Third Five-Year Plan
(1958-60) were the first target. Measures to streamline farm
organisation and to give management more responsibility were
soon extended, as we shaU see, to industrial enterprises. For the
next decade the Bulgarian strategy for reform essentially followed
this approach, pioneered in East Germany. Little more than lip-
service was paid to the need for profit indicators and market prices.
By the late 1970s, however, a new series of measures made financiid
indicators more prominent and promised to apply market prin­
ciples to some prices and new investment.
What sets Bulgaria apart form the Soviet UiUon is the virtuaUy
unbroken process ofimplementing, or at least discussing, economic
reform for the past two decades. We must speak, according to
Bulgarian economists, of reforms, rather than гту one reform. One
Western source that is generaUy critical of Bulgarian policy com­
mends 'the degree to which its economic poUcy-makers have
demonstrated that they are ready to undertake a new round of
organizational changes' when the old approach is not working weU;
another acknowledges Bulgarian readiness 'to persevere with the
reforms that have made it one of the most successful and economi­
cally progressive countries in Eastern Europe'.'
Bulgarian initiatives are always formaUy presented in terms of
respect for Soviet precedent. Such initiatives have been too many
and too widely implemented to be regarded as simply foUowing
Soviet leads. Economic reform in the USSR itself has been too
sporadic and limited to support even the Western notion that
Bulgaria has served as a laboratory for economic experiments
which, if successful there, could then be introduced on Soviet soU.
There has been too much Bulgarian flexibiUty and experimenta­
tion, at least compared to the reforms reluctantly introduced in the
Soviet Union, to sustain this argument.*

The New System of Management, 1963-68

Post-war Bulgaria's first comprehensive set of reform measures

was introduced in the period 1964-5 and endured without major
 Economic Reforms since 1960 201

alterations until 1968. This nov sistem na rukovodstvo (or New

System of Management) had its origins in party discussions behind
closed doors and also in public debate in scholarly journals during
1963. The green light for these deliberations may indeed have come
from a Pravda article on 9 September, 1962, by the Soviet
economist Evgeni Liberman. His ideas for a series of self-
supporting, market-oriented enterprises to produce clothing and
other consumer goods in the USSR had actually resulted in several
successful pilot projects. His name became synonymous with
Soviet economic reform for the next decade. Public discussion of
possible economic reforms did first appear in East Germany and
Czechoslovakia, as well as Bulgaria, following the Liberman
article. Yet both the Bulgarian debate and the subsequent reform
measures went weU beyond the scope of Liberman's focus on
consumer goods.
A scholarly debate encouraged by the Party's Central Committee
agreed on the pressing need for a more comprehensive reform that
would reach aU branches of production. The decUne in overaU rates
of economic growth during the early 1960s were contrasted with the
stiU rapid rise in foreign trade. How could exports be maintained
over time, a number of economists argued, i f the growth of labour
productivity in industry and construction, and eventually agricul­
ture, slacked off? Petko Kunin, a rehabilitated supporter of the
post-war economic chief Traicho Kostov, argued that state fac­
tories should now be self-supporting. Angel Mihailovski advocated
the adoption of workers' councils on the Yugoslav pattern. Evgeni
Mateev, perhaps Bulgaria's most eminent post-war economist, sup­
ported the majority's emphasis on new initiatives from manage­
ment rather than labour. These discussions continued into 1966,
when they reached their peak of intensity according to some
Bulgarian scholars.' Yet no real agreement was ever reached on
what part profits and market prices might play.
What one Bulgarian account recently called 'the great social
experiment' began in June 1964.* Some 50 industrial enterprises,
typicaUy producing textUes or other consumer goods along the lines
suggested by Liberman, were placed under the new system. Wages,
bonuses and even funds for new investment were tied to plant
profits, up to 70 per cent of which could be retained. Outside
investment funds would come from bank credit, rather than the
state budget. The number of compulsory targets for the Five-Year
Plan was cut to four: physical output, upper limits on investment
202 Economic Reforms since 1960

and on inputs, and foreign-trade targets. The pilot enterprises

generally prospered, earning profits double the 5-10 per cent of
gross income that was then the norm.
Despite these initial successes, internal party debate about how to
introduce the system more widely without vitiating the planning
apparatus delayed the publication of the reform's 'theses' until
December 1965. By that time, however, enterprises responsible for
43 per cent of total industrial production were operating under this
system. Their output increased 16 per cent during 1965, compared
with 11.5 per cent for other enterprises. (Many of the former may
weU have been more successful firms in the first place.) By 1967,
two-thirds of industrial production came from firms under the new
system, which now went far beyond the bounds of consumer goods
alone.
Its price regime was a compromise along the pattern evolving in
Czechoslovakia. Retail prices were divided into three categories
(fixed, flexible within linUts, or free). Wholesale prices were
supposed to be set along the same Unes. In fact, most remained
fixed. Producers' goods were stiU priced at average-industry cost
plus 2 per cent profit, and consumer goods at cost plus turnover
tax. Reform measures to aUow 10 per cent mark-ups for high
quaUty foundered on enterprise reluctance both to set prices for
new goods and to wah untU after retail sale to receive a mark-up on
old goods.'
The Bulgarian retreat from this initial reform is typicaUy linked
in Western accounts to the chiUing effect of the Soviet invasion of
Czechoslovakia in August 1968. Building Soviet displeasure over
the possible spread of Czech-style reforms probably played its part,
but the timing and the rationale for the actual changes made in
Sofia suggest an important Bulgarian side to the decision. Signs of
recentralisation may be found as early as Todor Zhivkov's speech
to the party plenum of April 1966. Discussions continued at subse­
quent piu-ty meetings. The decisions that were fmiUly announced in
July 1968 were probably made in some internal, preUminary form
weU before the end of 1967. These decisions eliminated the three-
tiered price system. Free or flexible prices had never won wide
acceptance in the party leadership. In the words of Grisha FiUpov,
when Planning Vice Chairman in 1964, 'The market can estabUsh
neither prices nor production . . . They should remain strictly
according to plan.' In a speech in 1982, Filipov poted in retrospect
that 'we had some difficulties because of the fact that there was no
 Economic Reforms since 1960 203

place from which to borrow a concrete mechanism corresponding

entirely to our own concrete requirements and to our aims'.« The
Soviet example, in other words, was of little concrete use for the
New System of Management.
Helping to fuel resistance to reform were a series of corruption
cases emanating from large enteφгises. Certain directors had used
flexible pricing and profit retention to line their own pockets. The
scandals at a textile importing enterprise, which had landed the
lucrative licence for bottling Coca-Cola, and a Black Sea shipping
enterprise were only the most notorious.'
The several new planning indicators that were now added had
two aims — to correct these abuses and to encourage exports for
hard currency. Neither goal seems to fit the scenario of a Soviet
crack-down on Eastern European reform, however viable this view
may be elsewhere in the region. The new limits to the size of an
enterprise's wage and salary bill, and to self-contracted obligations,
were all aimed at curbing future corruption. Specifications for new
investment did Umh initiatives by enterprise management, but
sought to maximize exports and to minimize imports.
The Bulgarian retreat of 1967-8, whatever its origins and extent,
has tended to obscure two changes associated with the New System
of Management. Both have become a permanent part of the
economy's operation, one for agriculture and one for industry.
A new set of operating procedures was introduced on the
enlarged collective farms in the early 1960s. This culminated in a
complete set of farm statutes in 1967. In order to obtain better
results from the large amount of new equipment introduced during
the consolidation of the late 1950s, farms were assigned more agro­
nomists and were paid higher prices for their produce. Their
peasant members were no longer shuffled around between different
tasks and sites, but placed in fixed brigades performing the same
job as close to their viUage as possible. Directors and their agrono­
mists stiU had to meet targets set by the Ministry of State Planning,
but could now negotiate those targets at the farm, rather than send
a representative to the ministry's forbidding building in Sofia. The
increased labour productivity of farms adopting this set of changes
undoubtedly helped to persuade the Bulgarian party leadership to
extend the New System to industry in 1964-5. Most of its
provisions had already been introduced on some coUective farms by
1963. The farm statutes of 1967 ratified these provisions and also
extended pensions, health benefits and other social services to
204 Economic Reforms since 1960

peasant members before any other Eastern European regime. All of

this prompted one often-criticid Western observer to characterise
Bulgarian agricultural policy of the 1960s by 'its willingness to
imitate and experiment. . . [as] more pioneer than imitator'.'"
For industry, the combination of some 2,000 industrial enter­
prises into 120 state economic organisations (DSO) in July 1963
seems at first glance only a step towards more concentrated central
control. The effort to free these associations from ministerial
supervision, beyond the New System's four indicators, admittedly
foundered when more indicators were introduced in 1967. But it
was the associations, not the ministries, that were charged with
supervising the new system of supply contracts between enterprises.
This system has grown steadily and now generates several thousand
contracts a year, with prices fixed on the basis of enterprise bar­
gaining, rather than imnisterial fiat." Allocating efficiency has
clearly benefited, although by Western standards not as much as if
a free market priced all supplies according to their relative
scarcities.

First Financial Reforms

The Bulgarian turn toward financial reforms in general, not just

rational pricing in particular, has been slow. Karl Marx regarded
money as a facade behind which the real productive forces of
labour power and capital goods were at work. Soviet economists
have subsequently been reluctant to attach much importance to
monetary policy. Post-war Bulgarian poücy has shared this reluc­
tance. Some initial monetary measures were taken during the
1960s, but more sweeping initiatives did not appear until the end of
tht 1970s. These are the subject of this chapter's final section
(pp. 215-19).
The initial monetary measure of the 1960s was the exchange of
all domestic currency on a 10-1 basis for a new 'heavy leva'. This
1961 exchange appeared at first as another instance of Bulgaria
following a Soviet lead; in this case, h was the only Eastern
Еигорегт country to do so. Then came confusion about the gold
purchase price of the new leva. The Bulgarian National Bank
eventually set the price at 2.88 leva per gram, rather than the 1.32
rate first announced. This had the effect of devaluing the Bulgarian
leva in terms of, i f not in direct convertible exchange for, the
 Economic Reforms since 1960 205

'hard' Western currencies by 40 per cent.'^

Monetary controls have remained tightly held in the hands of the
Bulgarian National Bank. Only the Bulgarian Foreign Trade Bank,
established in 1964 with 40 million leva in capital, survived as a
separate entity. The bank has probably endured because it grants
domestic credits in hard currency as weU as in leva, and because it
has developed the ties to Western banks and their acceptances
needed to overcome the inconvertibility of Bulgarian currency. In
brief, it manages the country's balance of payments. The Bulgarian
Investment Bank was merged with the National Bank in 1967, on
the grounds that their sep2uate procedures limited credit access and
that a single centre for long and short-term credit would be more
efficient. The Overseas Trade Bank opened in 1968 and the Indus­
trial Bank and Agricultural and Trade Bank opened in 1969. None
lasted more than two years. They lacked branches outside Sofia
and were criticised for arbitraryjudgement of credk applications."
The National Bank quietly absorbed their activities.
Bank credit in any case continued throughout the 1960s to con­
stitute an insignificant share of investment funds. In 1964, such
long-term credit amounted to just 6 per cent of enterprise invest­
ment. The state budget stUl furnished 58 per cent, and enterprise
income the rest.'* The main function of the National Bank was to
furnish short-term credit.
Bulgarian fiscal policy reorgaiused the structure of budget
revenues after 1960 with a view to trimming price distortion and to
capturing more net income from large-scale enterprises whose unit
costs of production were now decUning. The brief experiment of
the late 1950s, shifting expenditures in the unified state budget
from the central toward the local level, was quickly abandoned.
Attention soon turned to the tax structure. Over half of total
budget revenues had previously come from the turnover, or
variable sales tax on consumer goods. That fraction was trimmed
to one-third by 1968, and to one-quarter by 1982. These cuts
reduced the aforementioned distortion in consumer prices set
according to cost plus turnover tax. The place of this levy was taken
by taxation of net enterprise income (and briefly, for 1964-6, by a
tax on investment funds). The share of enterprise taxes in budget
revenues rose from 13 per cent to 32 per cent between 1958 and
1970, and to 47 per cent by 1982." Mitigafing the higher rates of
this new taxation were the lower tax brackets accorded to larger
enterprises. This tax incentive prompted some enterprises to hire
206 Economic Reforms since 1960

more workers, even beyond the reserve supply kept for 'storming'
to meet targets at the end of the planning period. The incipient
shortage of industrial labour was thus made more acute.

Evolution of Agro-Industrial Complexes

The more munediate labour shortage in agriculture prompted

further combination of collective farms by the late 1960s. The
party's ideological inclination towards the large scale also
encouraged this step. The so-called agro-industrial complexes now
came into being. Accompanying this major agricultural reorganisa­
tion was another Soviet-style propaganda campaign and a series of
Bulgarian-style reforms aimed at specific problems arising from the
reorganisation. Once again, as we shall see in the next section, these
agricultural measures opened the way for a more comprehensive set
of reforms, which also included industry.
The new agro-industrial complexes (APK) were from the start
intended to accompUsh more than simply the horizontal integration
of existing collectives into state farms. This third stage of post-war
Bulgarian agricultural development, following the creation and
then the enlargement of Soviet-style farms, sought to industrialise
agricultural production. The APK did not begin converting
peasants into state farm employees earning a fixed wage until after
1972, on the pattern dominant in Soviet agriculture, but otherwise
attempted to introduce industrial methods of production from the
start. The effort began with modern facilities for mass egg-laying
and livestock-fattening. Its fmal goal was vertical integration with
food, fertiliser, or fibre-processing plants on the farm's own
territory. This integration was to constitute a fourth stage in post­
war agricultural development.
The party's Central Committee first discussed the new form of
organisation, calling them 'agro-industrial combines', in its July
plenum of 1968. Five experimental 'combines' were operating by
the end of the year, and twelve more by the end of 1969. Several
were merely mergers of existing state farms already organised on an
industrial basis. They were hardly a major component in Bulgarian
agriculture, with just 4 per cent of cultivated land. Others, how­
ever, combined several collective farms (TKZS) and introduced
new methods of production. The 'combine' at Novi Kirchim, near
Plovdiv, not only modernised livestock breeding and feeding, but
 Economic Reforms since 1960 207

also linked its fruit production to the canning-plant Vitamin. This

vertical integration made it the first of what have since been called
industrial-agricultural complexes (PAK).
Final party approval and comprehensive adoption of this new
framework of complexes followed in 1970-1. The Central Com­
mittee set out the formal basis for estabUshing APKs or PAKs in its
April 1970 plenum. By the end of 1971, aU of Bulgaria's 744 collec­
tives and 56 state farms had been merged into 161 complexes,
mostly APKs. They averaged 24,000 hectares and 6,500 members.
Average arable and fixed capital had both risen 4.6-fold, with grain
and vegetable plots increased over 10-fold.
The reasons for the decision, according to the best Western
analysis of the transition, go beyond the party's traditional Leninist
faith in economies of scale and capital-intensive production.'* The
new complexes were also intended to boost the value-added com­
ponent in Bulgarian exports by processing more agricultural goods.
A further task was to raise the игЬгт supply of food without
diverting labour back from industry. Both of these goals were being
frustrated by the relatively poor agricultural performance of the
late 1960s. As noted in Chapter 7, meat, fruU and vegetable pro­
duction had lagged in particular. According to one Bulgarian
account, canning sustained 'unbearable losses'." Popular discon­
tent at seeing these goods in abundance only before major holidays
or at the Plovdiv International Trade Fair could not be denied,
especiaUy among those aware of the foodstuffs regularly avaUable
in neighbouring Yugoslavia and Greece by the 1960s. Party appre­
hension rose. Then, in 1972, Todor Zhivkov made a major speech
in which he promised a ten-year programme to raise living
standards in general, and to bring food consumption in particular,
up to the 'scientific norms' set by the United Nations (see
Table 8.5).
The new agricuUural framework afforded only mixed resuUs
during ks first years of operation. Yields per hectare rose between
1972 and 1976 for wheat, apples and grapes, but not for the other
crops which, together, made up a majority of cultivated output.
Gross agricuUural output, including livestock, did increase by an
annual average of 5.3 per cent for 1972-6, compared with 3.1 per
cent for 1966-70. At the same time, gross investment in fixed
capital stiU grew at a sUghtly higher rate, 5.5 per cent, than did
output. Investment growth was at least lower than the 6.9 per cent
average for 1966-70. The anticipated freeing of more farm labour
208 Economic Reforms since 1960

for industrial jobs, however, did not take place. The annual reduc­
tion in agricultural employment dropped from 4 per cent to 2 per
cent. Productivity of the remaining farm labour also declined.
Agricultme's share of gross investment in fixed capital feU back to
18 per cent by 1976, a level last seen in the mid-1950s. Investment in ^
human caphal also sUpped. The number of specialists entering
agriculture dropped from 6 per cent to 2 per cent of the national
total.'«
In the absence of funds to stem the decUning level of investment,
more reorganisation has been the only Bulgarian recourse. One
change has been to foUow the logic of reducing the number of units
for control to its final extreme. In 1976, a single national Agro-
Industrial Union was set up. The Ministry of Agriculture and
Food, itself a recent merger of two ministries, was initially in
charge. Although elections from the various complexes were held
and connections from scientific institutes to the national union
were created, neither device could overcome the new mirUstry's
heavy-handed surpervision of co-ordinated activities. Press
criticism in 1979 of the ministry's 'petty tutoring and rude inter­
ference' signalled the party's growingdispleasure. The ministry was
thereupon aboUshed, and the union charged with aU of its func­
tions." The change has at least eUminated the wasteful assignment
of many Bulgarian scientists to part-time duties at one complex or
another.
More positive results have come from the sUmming down of the
complexes themselves. By 1977, the APKs totalledjust 143. Several
were larger than 100,000 hectares and 25 were over 36,000 hectares.
Their reduction in size and the creation of new, smaUer complexes
began the foUowing year. By 1982, the total of old and new APKs
reached 296. As a resuU of this doubling of numbers, the average
size has been cut in half, to 16,000 hectares. The management of
each complex, typicaUy a merger of five or six farms, is now
divided into directorates for each type of production. The inter­
mediate level of management between the directorate and the
working brigade was swept away. Most importantly, the number of
annual indicators for plan fulfilment, which had ballooned to four­
teen, feU to four. Surviving targets are obUgatory deliveries, pay­
ments due to the state budget, a minimum for export earnings in
hard currency, an import maximum, and a maximum of inputs
from other sectors.^ Greater APK freedom to negotiate prices on
production beyond the plan and to sign contracts for its own
 Economic Reforms since 1960 209

supplies is therefore provided.

The other major change since the creation of the complexes has
been the expansion of two other types of organisation, the indus­
trial-agricultural and scientific-productive. These PAKs and NPKs
(or NPOs) are intended to achieve vertical integration and intro­
duce advanced technology by bringing processing plants and scien­
tific institutes directly into the complex. In fact, industrial enter­
prises have tended to dominate the management of PAKs, and the
institutes the NPKs. Both sorts of complexes have also been
substantially larger than the APKs, over twice the arable land and
almost twice the labour and fixed capital.^' Most of them have been
assembled by combining several APKswith existing enterprises or
institutes.
The first PAK was the Bulgarian Sugar Association. Set up in
1972, Bulgarski Zakhar encompassed eight APKs and seven
refineries by 1976. Its vast cultivation of sugar beet demanded
fodder crops for rotation. Livestock herds were added to make use
of the fodder. Sugar-beet yields did not generally increase, how­
ever. With the major exception of the Rodopa meat-exporting
enterprise, which had already integrated with several collective
farms in the 1960s, resuhs from the other PAKs were disappoint­
ing. Capital/output and labour/output ratios were soon at the
same high level of the APKs. Hence the turn to the institute-
dominated NPKs and NPOs.
The first NPK, or scientific-productive complex, was organised
in 1974 for viticulture and wine production. Wine has subsequently
proved to be one of the most successful new hard-currency exports
from Bulgaria over the past decade (see Chapter 8). That same
year, the first of the more frequent and more loosely structured
NPO Organisations' (associations in Western terms) was put
together for poultry production, another area of subsequent
success. The largest of them has been the merger of two Plovidiv
institutes, the two huge and already profitable APKs at Purvenets
and Novi Kirchim, with additional vegetable and fruit areas, and
with the local hothouse faciUties of the Bulgarplod export enter­
prise for fruit and vegetables. Its employees and members total
32,000. Set up in 1977, after a year's delay for.negotiations, this
NPO has increased labour productivity and cut production costs
significantly, though not as much as planned."
*
210 Economic Reforms since 1960

The Rise of Personal Plots

Although some of these further combinations among the agricul­

tural complexes of the socialist sector have boosted agricuhural
exports, family farming for private profit has been largely respon­
sible for the improved supply of domestic foodstuffs during the
past decade. This production, it must be emphasised, has not come
from privately owned land. The completion of collectivisation cut
the share of private land to 2 per cent of the arable total by 1959.
The figure has only declined further since then, touching 0.4 per
cent by 1972. Most of this tiny fraction was located in mountainous
areas.
Instead, the recent revival of private farming in Bulgaria has
come about on plots leased from the agricultural complexes. These
are the so-called personal plots that were first authorised to peasant
households in 1957, as compensation for joining the collective.
Based on the system of plots granted to Soviet kolkhoz households
since 1935, their size varied by land use 1-10.2 hectares for inten­
sive cultivation, 0.5 hectares for grain, and 1 hectare for mountain­
ous areas or fields not used for large-scale cultivation." Another
0.1 hectare was added for each head of cattle raised. Regulations in
1963 and 1967 reaffirmed the permanence of these plots, which
typically adjoin the family house. Together, they amounted to
about 10 per cent of cultivated land.
Special measures to expand the number, activities and market
sales of the personal plots did not begin until 1971. That year saw
previous restrictions on the number of livestock lifted. Major
encouragement for a variety of marketed production materiaUsed
in 1974 and 1977. The party leadership had, like that of Hungary,
overcome the ideological reservations that continue to restrict the
Soviet plots. From 1974 onwards, peasant households have been
permitted to lease additional plots and to have free access to ferti­
liser, fodder seed and equipment, from the agricultural complex.
The Central Co-operative Union, cut off from the complexes after
1970, was now empowered to sign contracts for the sale of plot sur­
pluses at their network of town market-places. The Union has also
provided a growing number of deliyery points and recdved rights
to inspect leased plots and to set del|lvery targets. To encourage new
takers, loans were extended and ihcome taxes waived for 1974.
More importantly, delivery prices were raised. This was also the
year in which the reduction of Bulgaria's non-agricultural working
 Economic Reforms since 1960 211

Table 9.1: Cultivated Area of Personal Plots, 1965-80 (in 1,000

hectares)
Grains Vegetables and Forage crops
fruit
Area Percentage Area Percentage Area Percentage
of ef of of of of
plot total plot total plot total
1965 302 12.7 46 31.2 41 5.4
1970 257 11.3 42 27.5 44 6.5
1975 299 12.6 46 29.2 48 7.0
1980 287 13.0 65 41.3 56 6.4

Sources: StatisticheskigodishniknaNRBulgariia, 7572(Sofia, 1973),p. 201; 1982,

pp. 2 6 8 - 9 .

week, from 48 to 42.5 hours, was largely completed. Townspeople

could now enjoy a Western-style weekend. They were free to assist
their typicaUy older relatives in the countryside with personal
plots."
Further measures in 1977 actively promoted urban participation.
Town residents might themselves apply for plots directly to the
complex, even i f they had no relatives there. (More recently, com­
plexes have taken to advertising avaUable plots in newspapers,
complete with number to telephone for further information.)
Applicants need only be already employed in the socialist sector
and refrain from using their plot to build a summer-vacation
house. In addition, no lessee can employ hired labour, in effect
non-family members, or leave his or her job in the sociaUst sector,
whether in a factory or on the complex, to work full-time on the
plot." Size limits were also removed at this time, and further tax
exemptions and fodder allocations offered. A flood of appUcations
for the additional 150,000 hectares of land offered from the
agricultural complexes brought the amount of land under personal
plots to 14 per cent ofthe cultivated total by 1980.
Accompanying the increase in the area of personal plots between
1965 and 1980 was a change in crop structure, which favoured
urban market-places. The rise in the plot shares of vegetable and
forage crops (the latter for raising livestock) more than made up for
the decUne in the area devoted to grain noted in Table 9.1. By 1978,
personal plots accounted for 22 per cent of Bulgarian vegetable and
feed-grain production. The proportions were even higher for fruit,
39 per cent, and more for individual vegetables such as green
212 Economic Reforms since 1960

peppers and green beans. Yields were growing more quickly for
wheat and forage crops than in the socialist sector, surpassing those
levels by 1981. That year overall crop output from the plots grew by
4 per cent, compared with 3.5 per cent from the sociaUst com­
plexes. By 1982, the plots produced 33 per cent of aU vegetables and
51 per cent of potatoes.
Animal products have done even better. Meat and milk produc­
tion from the plots jumped almost threefold from 1973 to 1975.
Since then they have consistently provided nearly 40 per cent of
meat sales, 30 per cent for milk, and over one-half of egg produc­
tion. AU together, by 1982, the plots accounted for one-quarter of
agricultural output and of farm workers' income.^
For the urban consumer, deUveries from the plots have clearly
become indispensible for aU major foodstuffs except bread. Food
prices were increased again in 1979, and are high by Eastern Euro­
pean standards. The more successful extended-famUy enterprises
earn profits that are large enough to pay for lmturies Uke second
cars or lavish weddings. Townspeople sometimes take resentful
note of these trappings. At the same tune, plot sales to town
markets resolve the paradox of overaU rates of agricultural growth,
which have been low during the past decade, and an urban food
supply which has undeniably improved.

Industrial Concentration during the 1970s

The latest round of combining existing enterprises into a smaUer,

and presumably more easily controlled, number of units spread
quickly from agriculture to industry. What a West German econo­
mist has called 'an extremely consistent process of concentration'
was again at work in industrial organisation by the mid-1970s."
Recent official views seek, in retrospect, to Unk such concentration
with aparallel emphasis on greater responsibility for individual
managers and brigades. At the time, however, this emphasis was
greatly overshadowed by the initial promise of the Soviet campaign
to use automated systems and information processing to boost pro­
ductivity. Soviet planners had launched the campaign in 1968. It
was an alternative to the Czech proposals for decentraUsing
econonuc reforms that had emanated from the soon-suppressed
Prague Spring. The Bulgarian CouncU of Ministers established a
potentially powerful committee to replace the industrial ministries
 Economic Reforms since 1960 213

in co-ordinating production with long-term plans. Little specifi­

cally came of its activities, however. The main legacy of the cyber­
netic approach has been a more comprehensive system of collecting
economic data."
The basic Bulgarian strategy for better management in the early
1970s none the less was wedded to promises of automated manage­
ment under a simpUfied surperstructure. Measures followed to
reduce the number and increase the size of the associations into
which industrial enterprises had already been combined in 1963.
The enterprises were themselves larger than their Western counter­
parts. They dwarfed the tiny firms, which were identified in earlier
chapters as a constraint on modern industrial development before
and immediately after the Second World War. By 1970, plants with
over 1,000 employees (one-quarter of which were located in the
wider Sofia area) accounted for 47 per cent of the labour in the
country's 2,471 industrial enterprises. Here was a higher level of
concentration than that indicated by East German or Western
European plant size." The number of enterprises was less than
before the Second World War (see Table 3.5) and under one-half
the number in excess of 6,000 on the eve of nationalisation in 1947
(see Chapter 5).
At the end of the 1970s, the number of state economic organisa­
tions (DSOs) into which industrial enterprises had been grouped
since 1960 was virtually cut in half. The 64 enlarged organisations
received the right to make decisions for their enterprises about new
investments, bank credits or budget subsidies. The larger enter­
prises (now called subsidiaries) could stiU sign their own supply
contracts and maintain their own bank accounts, but ceased to be
legal entities. SmaUer enterprises (now called subdivisions) became
fully dependent on the enlarged DSOs. By 1975, moreover, seven
new industrial ministries had set up eleven 'combines', one for each
major branch of industry. Praised by Todor Zhivkov as the organi-
sationsd 'unit of the future', which would finally achieve vertical
integration, the combines effectively bypassed by DSOs. The latter
retained oiUy a formal identity, and the chemical industry dissolved
even that.'"
The advantages of this streamlined organisation appeared to be
several. It again promised greater economies of scale — the grand
passion of Soviet (and much American) investment strategy —
through easier speciaUsation and a simpUfied flow of information.
The combines would presumably be better equipped to make
214 Economic Reforms since 1960

investment decisions than either the smaU number of old ministries

or the large number of enterprises. The same superior co-ordina­
tion was expected in distributing suppUes of scarce inputs, labour
included. The new framework was to introduce the same sort of
Unkage between specific industrial enterprises and scientific insti­
tutes that had been arranged for the agricultural complexes.
Finally, the combines were relied upon to improve the effectiveness
of 'counterplanning', the major Soviet innovation of the early
1970s. Bulgaria adopted this device in 1971. Counterplanning
called on enterprises to submit their own, presumably higher
targets for obUgatory production, as a response to those set by the
State Planning Commission. Such counterplans would presumably
draw down input reserves, whose hoarding held production under
three-quarters of capacity in many industrial enterprises.
The results of these decisions to reduce and then to eliminate the
DSOs in favour of eleven combines appear to have been dis­
appointing." Counterplanning continued to leave reserve industrial
capacity unused and did nothing to improve quality control. Both
Western buyers and domestic customers remained unsatisfied with
the quality of too many Bulgarian manufactures. New planning
indicators that set norms for cost reduction actuaUy reduced
quality in a number of cases. The programme mandating that every
scientific institute assign its members to part-time service for a
specific enterprise did not work any better for industry than it had
for agriculture. Individual members of institutes lacked the power
to reach combine or ministry levels, where decisions to import or to
invest in new technology were made.
In summary, the new framework only accentuated the dangers of
socialist monopoly. These dangers were divorced from the abuses
of exorbitant pricing in earUer capitalist monopolies, but not from
the risk of restricted output or irrational decisions immune from
punishment by competitors in the market-place. Bulgarian authori­
ties, from Todor Zhivkov down, have refused to acknowledge
expUcitely the threat of monopoly practices, which are associated
exclusively in their vocabulary with capitalist economies. But the
monopolistic abuses of irrational decisions taken arbitrarUy at the
top, or rational ones poorly implemented at the enterprise level,
were increasingly criticised in party meetings and the press. By the
end of the 1970s, a further set of reforms had therefore been
launched.
 Economic Reforms since 1960 215

Financial Reforms since 1978

The latest Bulgarian reforms began in 1978 and have continued

under the designation, since 1979, of the New Economic Mechan­
ism (NEM). This time they have involved the agricultural com­
plexes and the industrial enterprises almost simultaneously. Their
principal measures, in 1978-9 and 1982-3, have been financial
incentives and accounting regulations aimed at aU levels of manage­
ment, but especiaUy at the smaUest unit of labour, the brigade. The
overriding aim has been to provide financial accountability. The
absence of such accountability, according to a leading Bulgarian
economist, has kept the concentrated organisation of and linkages
between Bulgarian enterprises from having the co-ordinating effect
that they do in a large Western corporation.'^ With this co-ordina­
tion, the Bulgarian economy can aspire to become a single, sociaUst
corporation. The means to this end are seen as those of the
financial market-place. In the words of Todor Zhivkov, the
Bulgarian economy should operate in future on the basis of 'the
money-goods relationship' and its indicators: prices, profits,
interest rates, credit, etc.
Two important initiatives were launched in 1978. A series of
decrees Ufted the long-standing limits on enterprise investment,
previously set by the State Planning Commission. In their place was
put an investment plan based on the enteφrises' contractual obliga­
tions and credits with the Bulgarian National Bank. The bank
would also monitor the cash balance of enterprise contracts with
customers and suppliers, granting credits only when required. Self-
finance thus became the watchword for aU economic organisations,
according to the best Western summary of the 1978-9 reforms."
The second major change made wages and salaries a residual,
rather than a first claim on gross enterprise income. Wages could
rise only after an increase in labour productivity, and then by half
of that increase. Management salaries could moreover be cut by as
much as 20 per cent, i f the complex or enterprise faUed to meet ks
norms for production and productivity. Since their introduction,
the formula for these sanctions against management salaries has
changed several times. The consistent'aim has been to make them
fearsome. In 1980-1, a fraction was'lctually withheld pending the
enterprise's successful performance; more recently, that fraction
must be repaid by the manager foUowing an unsuccessful perfor­
mance. Here, according to one American appraisal of the latest
216 Economic Reforms since I960

Bulgarian reforms, is the biggest change made so far.'*

The New Economic Mechanism was formally proclaimed in
1979, first for agriculture and foreign trade, and shortly thereafter
for industry. Its principal concern was to redefine the norms for
successful performance and also for the disposition of profits.
Binding criteria for performance were limited to five financial
indicators for agricultural complexes and industrial associations,
and to four for individual enterprises." Profit criteria were set only
for the complexes or associations. Three separate funds for
reinvestment received first claim on net income. One, the so-caUed
Additional Material Incentive Fund, was specifically intended to
compensate firms for avoiding excess cost reduction and the poor
quaUty that was often a by-product. A new set of proportional
taxes would then take an average of 80 per cent of net enterprise
income for the state budget, thus preserving the latter's economic
leverage. Although budgetary subsidies were not being eUminated,
the NEM directives repeatedly stressed the responsibUity of higher
management and even individual brigades for losses incurred.
Complexes or associations were given explicit freedom to sign their
own contracts with suppliers and customers at home and abroad."
Several supporting measures were also introduced during the late
1970s. A campaign to cut the excessive number of administrative
and supervisory personnel, one of a series in the post-1950 period,
did not achieve hs ambitious target, but never the less trimmed
management's share in the labour force from 13 per cent to 9 per
cent. In 1979, as noted in Chapter 8, prices of many consumer
goods were raised by 25-30 per cent, and wages or salaries just
10-15 per cent, in order to offer producers a greater chance for
profitable production.
The Bulgarian National Bank (BNB) was already aUocating more
investment credit, a rise from 7 per centto 39 per cent of the total
distributed between 1965 and 1970, according to Table 9.2, at the
expense of the state budget's share. But the BNB's decisions
remained too dependent on the permissive preferences of planning
authorities in Sofia. In order to combat this frankly admitted
'centralism', the bank was granted some flexibiUty in restricting its
terms and in charging interest rates above the nominal 2 per cent
stUl assessed. AU these measures were designed to promote greater
rewards for efficiency and to reduce the number of unfinished,
often unprofitable new projects. The latter had accounted for 57
per cent of aU Bulgarian investment as late as 1976. By 1981, this
 Economic Reforms since 1960 217

Table 9.2: Sources of Economic Investment, 1956-81 (percent­

ages)
1956 1960 1965 1970 1975 1981
Enterprise funds 29 23 30 34 25 45
Bank credits 9 13 7 39 54 28
Budget subsidies 62 64 63 27 16 28

Source: Statisticheskigodishnik na NR Bulgariia, 1367, p. 321; 1982, p. 466.

'new' proportion had been cut in half, to just 27 per cent."

Perhaps the clearest institutional commitment to increased effi­
ciency has come from the creation, in April 1980, of the Bulgarian
Industrial Economic Association (BIEA). EstabUshed outside the
ministerial framework, but with strong backing from the party's
Central Committee, the BIEA is a voluntary organisation of
existing industrial associations and enterprises. Its president holds a
higher rank than any economic minister does. Its membership
represents over 700 organisations, accounting for 75 per cent of
industrial output. Members retain their previous autonomy,
although the BIEA is a legal entity. Its sole purpose has been to
increase member efficiency in domestic and foreign markets. To
this end, it has set up its own computer centre to analyse member
income, has helped to seU surplus inventories, and even helped to
co-ordinate regional construction projects.
The BIEA's most successful project to date has been the promo­
tion of some 200 new, smaUer enterprises, designed to produce
either consumer goods or component parts that are in heavy
demand. They remain state enterprises, unlike their famous
Hungarian counterparts, but their size (less than 200 employees, in
fact most have under 50) and product mix are quite simUar. The Ust
of best-selling products runs from denim jeans, jogging shoes and
babywear, or scarce components such as zippers on the domestic
market, to ceramics and oriental rugs for export. Plans were
announced in 1984 to boost the number of such firms to 500 and to
accord them 10 per cent of funds for new investment." Yet the very
success of these new, smaUer enterprises has highlighted the failure
of the larger complexes and associations to perform as weU under
the NEM. The youthfulness of a number of the smaU-enterprise
directors also caUs attention to the need for more rapid advance­
ment of able young managers elsewhere in the economy.
Already in 1982, both Bulgarian economists and the party leader-
218 Economic Reforms since 1960

ship were prepared to admit that the NEM had not led to the antici­
pated upturn in overall productivity and efficiency. Aggregate
economic growth, as detailed in Chapter 7, had slowed to its lowest
post-war level by the early 1980s. The limits on better Bulgarian
performance, moreover, seemed to go beyond the international
barriers of costlier oil supphes and slower Western and Soviet
growth. The Bulgarian response has been to begin a second set of
reforms under the rubric of the NEM, with the new promise that
more will follow, i f these do not yield satisfactory results.
The 1982-3 measures have concentrated almost exclusively on
financial incentives and that most change-resistant of Bulgarian
indicators, the price mechanism. 'Final economic performance',
that is, net income, has been identified as the major basis for
judging plan fulfilment. The only other targets are tax payments,
maximum-use levels for domestic and imported inputs, and mini­
mum export levels. The emphasis on self-supporting net income has
been extended downwards to the brigade-level and upwards to the
large associations headed by economic branch ministries. The
guarantees of a minimum wage have been removed for workers, as
well as management at aU levels. A pilot project in Ruse is experi­
menting with ranking managers' performance over five years. A
substandard record by their enterprise, that is, net income ranking
in the lowest 10 per cent of the pilot group, will supposedly result in
demotion. Ministers themselves are nowsubject to salary reduc­
tions i f their industrial association fails to meet the streamlined list
of targets. They are also held responsible i f their massive associa­
tions meet targets by using monopoly power to hoard inputs etc.
Their access to budgetary subsidies for new investment is now rare,
and then for a fixed term only."
Most investment capital outside net income must be sought from
the Bulgarian National Bank. Its increasingly independent guide­
lines include the authorisation to hold regional competitions for
investment funds. Interest rates remain low, at 2.5-8 per cent. But
the competitions may be described as auctions of the sort that
Yugoslavia attempted in the mid-1950s. Only a minority of appli­
cants can win in any one competition.*" The regional distribution
may also help to spread the bank access from Sofia to the provin­
cial towns. OvercentraUsation in Sofia is a problem that has
plagued the National Bank's operations, we may recall, since
before the First World War.
The State Agency for Prices and Price Information has been
 Economic Reforms since 1960 219

given a new mandate and new data-processing equipment to coUect

cost data independently. It continues to police the fixed prices set
for consumer necessities and some industrial inputs by the CouncU
of Ministers. But for the majority of prices, the Agency is charged
simply with setting maximum levels under which the various
econonuc associations, complexes and subunits may negotiate
prices with each other.*' Its guidelines for these prices stipulate only
that they must prevent either excess profits or essential production
at a loss.
The effectiveness of this latest and most serious attempt to
restructure prices, so that they better reflect production costs and
world prices, deserves to be watched closely. Its fate may determine
whether the prolonged Bulgarian experience with economic reform
wiU finally stimulate the economy's aggregate performance, rather
than only that of certain individual enterprises. That fate may
depend, in turn, on whether thorough price and economic reform
wiU finally spread to the Soviet Union, which by the weight of its
trade alone sets important parameters for the Bulgarian economy.
The brief tenure of Yuri Andropov as Soviet leader in 1983-4
seemed, from the Bulgarian viewpoint, to promise such reforms. In
the event, only the same temporary tightening of labour discipUne
that Andropov launched in the USSR spread to Bulgaria before his
death.

Notes

1. An instructive set of articles on all the Eastern European economies, including

the Soviet Union, may be found in Alec Nove, Hans Hermann Huhemann, Gertrud
Seidenstecher (eds.), The East European Economies in the 1970s (London:
Butterworths, 1982).
2. See Nita Watts, 'Eastern and Western Europe', in Andrea Boltho (ed.), The
European Economy: Growth and Crisis (Oxford: Oxford University Press, 1982),
pp. 284-5.
3. Radio Free Europe Research (RFER), Bulgarian Situation Report, 12, 2 July
1982; The Economist (London), 14-20 January 1984, p. 13.
4. On Soviet reform, see Alec Nove, 'The USSR: Economic Policy and Methods
after 1970', in Nove et al., East European Economies in the 1970s, pp. 17-43.
5. These articles appeared primarily in the journals Sovo vreme, Ikonomicheska
misul and Planovo stopanstvo. Some are translated in the journal East European
Economies for these years. The lines of argument are summarised in J.F. Brown,
Bulgaria under Communist Rule (New York: Praeger, 1970), pp. 161-7.
6. Ivan Nikov, Ikonomicheskiiat podkhod [The Economic Approach] (Sofia,
1983), pp. 50-4. In Bulgarian terms, the 'economic approach' stands for the
objective search for economic efficiency, in contrast to the earUer reUance on
subjective administration for political control.
220 Economic Reforms since 1960

7. GeorgeW. Feiwel, GrowthandReformsinCentrallyPlannedEconomies: The

Lessons of the Bulgarian Experience (New York: Praeger, 1977), pp. 72-5,97-127.
8. Brown, Bulgaria, pp, 167-72; Rabotnichesko delo, 15 January 1982. Also see
Michael C. Kaser, 'The Industrial Enterprise in Bulgaria', in Ian Jeffries (ed.), The
Industrial Enterprise in Eastern Europe (New York: Praeger, 1981), pp. 85-6.
9. Heinrich Vogel, 'Bulgaria', in Hans-Hermann Höhemann, Michael C . Kaser
and Karl C . Thalheim (eds.), The New Economic Systems of Eastern Europe
(Berkeley, California: University ofCalifornia Press, 1975), p. 215.
10. Brown, Bulgaria, pp. 209-13.
11. RFER, Bulgarian Situation Report, 20, 26 January 1982. This contractual
system is similar to Hungarian practice, and in sharp contrast to the continuing
Soviet reliance on the planning mechanism and the Grossnab central agency to
distribute inputs to enterprises. See Nove, 'The USSR', pp. 37-43.
12. The dollar rate remained at 1.17 leva = $1 until appreciating to 0.85, in
tandem with the West German mark in the late 1970s, compared with 6.80 leva for
1951-61, or 0.68 after a 10-1 conversion. Brown, Bulgaria, pp. 144-5; Nikolai
Todorov et al., Stopanska istoriia na Bulgariia, 681-1981 [The Economic History
ofBulgaria, 681-1981] (Sofia, 1981), pp. 518-22. By 1983 the dollar rate had faUen
to 1.34, again in tandem with the mark. Tourists have received a 50 per cent
premium since 1974.
13. T. Totev, 'Bankovata sistema na NR Bulgariia',finansi / kredit, vol. X X X I ,
no. 7 (1981), pp. 48-50. On the Yugoslav banking system, see Laura D'Andrea
Tyson, Yugoslav Socialism: Economic Performance in the 1970s (Berkeley,
California: University of CaUfornia, 1980).
14. George W. Feiwel, 'Economic Reform in Bulgaria', Osteuropa-Wirtschaft,
vol. 24, no. 2 (1979), p. 80.
15. The local share of budget expense feU quickly back from its 1959 high point
of 30 per cent to the previous level of 17 per cent. In the absence of detailed break­
downs of budget expenses and revenues in official statistical publications since the
late 1960s, we may note only that aggregate expenses rose from 52 per cent of
national income (NMP) in 1960 to 58 per cent by 1970, and to 63 per cent by 1980.
Over one-half of these funds have untU recently been directed toward investment in
the economy, and about one-third toward social services. By 1980, however, the
former had faUen to 44 per cent and the latter risen to 42 per cent. The military share
increased slightly in the early 1970s, from 5 per cent to 6 per cent of budgeted
expenses. Although it was exceeded in Eastern Europe only by East Germany, three-
quarters of this relatively large defence share is spent on miUtary salaries. Expenses
for military research and development, never included in Eastern European defence
budgets, are presumably smaU for Bulgaria. The economy benefits to the con­
siderable extent that many units are regularly assigned to non-miUtary construction
projects, on the inter-war pattern estabUshed by StamboUiski's trudovak battaUons
(see Chapter 2). Feiwel, Growth and Reforms, pp. 99, 115, 145; N. Popov, 100
godini na bulgarska ikonomika [100 years of the Bulgarian Economy] (Sofia, 1978),
p. 313; annual budget reviews by the Finance Minister, V. Velchev, in Finansi i
kredit, vols. 21-33, no. I (1970-82), pp. 3 - I 2 . Vienna Institute for Comparative
Economic Studies, Comecon Data, 1979 (New York: Holmes and Meier, 1979),
pp. 35, 399. On military expenditure, see Thad P. Alton, Gregor Lazarchik,
Elizabeth M. Bass and Wassyl Znayenko, 'East European Defense Expenditures,
1965-1978', in Joint Economic Committee of the US Congress, East European
Economic Assessment, pt 2 (Washington, DC: US Government Printing Office,
1981), p.. 409-33.
16. Paul Wiedemann, 'The Origins and Development of Agro-Industrial Com­
plexes in Bulgaria', in Ronald A. Francisco, Betty A. Boyd and Roy D. Laird (eds.),
Agricultural Policies in the USSR and Eastern Europe (Boulder, Colorado:
 Economic Reforms since 1960 221

Westview Press, 1980), pp. 98-109.

17. P. Daskalov in Ikonomicheska misul, vol.l (1969), pp. 22-34, as cited in
Wiedemann, Origins', p. 107.
18. Ibid., pp. 122-31.
19. Todorov et al., Stopanska istoriia na Bulgariia, pp. 565-70. Also see RFER,
Bulgarian Situation Report, 34, 14 February 1977.
20. Everett M. Jacobs, 'The Impact of Agro-Industrial Programs in East­
European Agriculture', in Francisco, Boyd and Laird (eds.), AgriculturalPolicies,
pp. 238-41; Organization for Economic Co-operation and Development (OECD),
Prospects for Agricultural Production and Trade in Eastern Europe, vol. 2,
Bulgaria (Paris: OECD, 1982), pp. 142-4. On the redistricting of Bulgarian
territory into 'inhabited places', see RFER, Bulgarian Situation Report, 3, 15
February 1979.
21. Wiedemann, Origins', pp. 111-20.
22. Jacobs, 'Impact of Agro-Industrial Programs', pp. 252-3; RFER, Bulgarian
Situation Report, 2, 21 January 1977 and 34, 14 February 1977; Todorov et al.,
Stopanska istoriia na Bulgariia, pp. 564-70.
23. Brown, Bulgaria, pp. 207-8; RFER Bulgarian Situation Report, 12, 17
January 1975. Soviet agricultural reforms have centred on the spread of state farms
and wage-labour thereon. On the evolution of Soviet agriculture, see Karl-Eugen
Wädekin, Agrarian Policies in Communist Eastern Europe (The Hague: Martinus
Nijhoff, 1982), pp. 14-30, 44-62.
24. OECD, Prospects, vol.2, pp. 177-80; RFER Bulgarian Situation Report, 30,
23 November 1977.
25. Abuses have none the less appeared in the use of personal plots, for example,
resale of the collective's Uvestock, excessive use of coUective equipment and
supplies, excess profits and even the abandoning of jobs in the sociaUst sector. See
Mark AUen, 'The Bulgarian Economy in the 1970s', in Joint Economic Committee
of US Congress, East European Economies Post-Helsinki (Washington, DC: US
Government Printing Office, 1977), pp. 683-5.
26. Statisticheski godishnik na NR Bulgariia [Statistical Yearbook of the PR
Bulgaria], 1975 (Sofia, 1976), pp. 219-36, 1983, pp. 262-76; OECD, Prospects,
vol. 2, pp. 177-80; RFER, Background Report, 224, 28 December 1984.
27. Vogel, 'Bulgaria', p. 217.
28. Ibid., pp. 207-11.
29. The 98 largest enterprises employed 23 per cent of Bulgarian industrial labour
and were responsible for 75 per cent of industrial capital and 77 per cent of profits.
Total enterprise numbers for industry dropped by 13 per cent for 1970-7, thanks to
a two-thirds decline by artisan co-operatives. Their share of industrial production
dropped from 10 per cent to 5 per cent. Todorov et al., Stopanska istoriia na
Bulgariia, pp. 461, 489-97, 540-58.
30. George W. Feiwel, 'Economic Development and Planning in Bulgaria in the
1970s', in Nove et al., East European Economies in the 1970s, pp. 226-37.
31. Ibid., 238-48; Feiwel, 'Economic Reforms', pp. 75-86. Alec Nove aptly
caUs this Soviet-style approach 'the curse of scale', in his 'USSR', pp. 30-1.
32. Author's interview with Academician Evgeni Mateev, Higher Economics
Institute Karl Marx, 10 May 1984.
33. Kaser, 'Industrial Enterprise', pp. 88-9.
34. Marvin R. Jackson, 'Recent Economic Performance and PoUcy in Bulgaria',
Joint Economic Committee of the US Congress, East European Economies: Slow
Growth in the 1980s, pt 3 (Washington, DC: US Government Printing Office,
1985), p. 25. The present author shares this view.
35. Kaser, 'Industrial Enterprise', p. 88; Todorov et al., Stopanska istoriia na
Bulgariia, pp. 582-5. Compare these few indicators with the large number of
222 Economic Reforms since 1960

remaining Soviet targets noted in Nove, 'Tlie USSR', pp. 35-43.

36. FeiweI, 'Economic Development', pp. 226-37.
37. Ibid., pp. 238-40; Feiwel, 'Economic Reforms', pp. 76-80; Todorov et al.,
Stopanska istoriia na Bulgariia, pp. 577-81.
38. RFER, Bulgarian Situation Report, 12, 23 July 1982; 1, 16 January 1985.
39. Jackson, 'Recent Economic Performance', pp. 28-31; RFER, Bulgarian
Situation Report, 20, 26 January 1982, summarising a lengthy speech on the NEM
by the Prime Minister, Grisha Filipov, printed in full 'm'Rabotnichesko delo,
15 January 1982.
40. Author's interview with Ivan Dragnevski, Vice Director, Bulgarian National
Bank, 16 May 1984.
41. Nikov, Ikonomicheskiiat podkhod, pp. 148-56; Cam Hudson, 'Bulgarian
Economic Reforms: Between the Devil and the Deep Black Sea', RFER, Back­
ground Report, 142 (Bulgaria), 2 July 1982.
CONCLUSION

The prospects and problems facing the Bulgarian economy during

the rest of the twentieth century derive principally from the socialist
framework put in place by the post-war Communist government.
More distant historical dimensions must of course be added, i f we
are to grasp the full relevance of Bulgaria's economic past to its
future. But we cannot honestly conclude that they deserve pride of
place over the major post-war changes described in the past five
chapters. Soviet-style central planning of production and invest­
ment, the Marxist priority of rapid and balanced industrial growth,
the ties to the other socialist economies, primarily the USSR, and
the Bulgarian Communist Party's persistent efforts to reform its
own system since 1960 — these are the major facts of the country's
present economic Ufe.
Investment strategy continues to emphasise heavy industry. To
the extent that this emphasis promotes an increasing array of elec­
trical equipment exportable even to Western markets, it is plainly
positive. So was the construction of electric power plants during the
1950s, which first made feasible the nationwide spread of modern
industry. On the other hand, the enduring Bulgarian determination
to manufacture most of its own ferrous metallurgy, despite a
record of inefficient production and the need to import iron ore
and coking coal, does not hold out much promise. The delayed
conversion to nuclear energy, now aiming to provide half of all
electric capacity by the year 2000, wiU at least reUeve some of the
drain on remaining coal reserves.
Investment strategy continues to neglect Ught industry. The
principal victims of this neglect throughout the post-war period
have been consumer goods, mainly for domestic use, and processed
foods for export. The spate of new smaU firms charged with pro­
ducing better-quality consumer goods have now recorded some
early successes. More investment and more Western imports wiU
probably be required, however, i f such goods are to be exported
profitably outside of Eastern Europe. Food-processing plants are
in urgent need of modernisation. I f their production is to meet
world standards, new Western processing equipment must be
imported. Otherwise, the proportion of processed food in

223
224 Conclusion

Bulgarian exports wiU continue to faU.

If the Eastern European CouncU for Mutual EcononUc Assist­
ance were pursuing full-scale integration of its member economies,
the share of Bulgarian food exports would undoubtedly have to rise
again. But CMEA's principal goal appears instead to be the con­
vergence of its members' productivity levels in aU industrial
branches. Hence its support for Bulgaria's new metallurgical
complex at Burgas. In addition, the USSR and Eastern Europe now
promise to be a tougher market for Bulgarian manufactured
exports and a more expensive source of raw materials, especiaUy of
Soviet oU. If, in return, the Eastern Ешореап economies could
guarantee Bulgarian enterprises a supply of industrial eqmpment at
the highest levels of current technology, the genuine Bulgarian
advantage enjoyed in past economic relations with CMEA might be
more certain to continue.
In addition to CMEA ties and the new socialist framework, the
course of the post-war Bulgarian economy stands separate from the
pre-war pattern in several other important ways. That framework
admittedly dictated the massive structural shift in production from
agriculture to industry, and in population from countryside to
town which, more than anything else, distinguishes the post-war
period. Yet the large factories and agricultural complexes that now
dominate the production process have a special significance, aside
from their state ownership and sociaUst management. Their dimen­
sions are also a striking departure from the smaU sceUe of produc­
tion in the pre-war Bulgarian economy.
These post-war enterprises are large, even by contemporary
European standards. The contrast to the smaU farms and unusually
smaU industrial enterprises that predominated during the pre-war
period is even sharper. As we have seen in Chapters 2-5, average
farm and enterprise size continued to shrink throughout the Second
World War and even in the first few post-war years. The shift since
1948 to huge units of production undoubtedly afforded the
B^garian economy some valuable economies of scale. How much
the abruptness and the extent of that shift have reduced those
economies remains a serious question. Clearly, training a pre­
viously peasant labour force to work within a large, inevitably
impersonal enterprise was a task as formidable as providing purely
technical education. Both tasks continue to confront the manage­
ment of these factories and farms, who in turn need better training
and greater opportunity to advance.
 Conclusion 225

The post-war redirection of Bulgaria's foreign trade toward the

Soviet Union and the newly Communist states of Eastern Europe is
a second major departure, sociaUsm and CMEA aside, from the
pre-war pattern. The pre-1914 and inter-war dependence on
Centrid Europe in general, and on Germany in particular, has now
shifted eastward. The difficulty of selling manufactured exports to
a highly developed and united German economy was an enduring
barrier to pre-war Bulgarian industrialisation. Access to the less
demanding Soviet market for manufactures has undoubtedly aided
post-war industry, as have Soviet supplies to Bulgaria of oil, iron
ore, cotton and other raw materials of which pre-war Germany was
itself an importer. The extensive export of Bulgarian canned foods,
cigarettes and wine to the USSR, £md also to Poland, Czecho­
slovakia and East Germany, may be traced in part to a climatic
advantage over these north-eastern economies. But this was an
advantage also enjoyed over a united Germany. The general weak­
ness of sociahst agricultural performance, with the exception of
Hungary, seems as important as climate in accounting for
Bulgarian food exports to the USSR and the rest of Eastern
Europe.
The Soviet Union's political desire to strengthen its new camp of
Communist states after the Second World War admittedly provides
the best explanation for Bulgaria's better access than before 1944 to
foreign investment, at least during the 1960s. The USSR took
virtually nothing in post-war reparations, and protected the
BulgEuian economy from the kmd of AlUed clEums that hung over it
throughout the 1920s (see Chapter 2). Soviet credits at low interest
furnished over one-quarter of Bulgeuiem industrial investment
capital during the 1950s, compared with the 10 per cent provided by
the European Great Banks during the last pre-1914 decade and 15
per cent during the 1920s. Yet the renewed Bulgarian turn to
Western European bank credits to cover machinery Unports during
the 1970s offers another reminder that the smaU Balkan economy's
search for best technological practice, frustrated by pre-war
capitaUst neglect, faces a post-war sociaUst problem: that is, an
Eastern European record of technical modernisation and
managerial initiative that has consistently lagged behind Western
best practice. To this deficiency, add Soviet economic difficulties
since the mid-1970s, which have held back new investment and now
cheap oU suppUes from the USSR. Even overdue Soviet reforms
may not fiU these gaps.
226 Conclusion

Unbroken political continuity constitutes a third distinguishing

feature of the post-war Bulgarian economy. The four decades of
Communist rule since 1944 are by far the longest period of stable
government in modern Bulgarian history. The shorter period (from
1886) of Prince FerdinEmd's rule before the First World War must
be further subdivided by the frequent changes of regime and the
poUtical divisions that hehimself encouraged. Then came the tur­
moil of two world wars, framing two contentious inter-war
decades. Each included a coup ά'έίαΐ (1923 and 1934) and other
changes in government. The post-war period is not only longer, but
has also been unmarked by the violent opposition that has con­
vulsed each of the Communist regimes to the north (East Germany
in 1953, Hungary and Poland in 1956, Czechoslovakia in 1968, and
Poland again in 1980). Nor have the three decades of Todor
Zhivkov's tenure as party First Secretary resulted in the sort of per­
sonality cult and defensive isolation around a long-time leader that
has paralysed the prospects for economic reform in neighbouring
Romania. Without Zhivkov's personal wilUngness to accept some
measure of coUective leadership and to face some shortcomings
honestly, Bulgaria's nearly continuous pursuU of econonuc reform
would not have been possible.
To the considerable extent that the most recent reforms rest on
personal agricultural plots, smaU new manufacturing firms for con­
sumer goods, and employee responsibility for enterprise profits,
they depart from the Soviet pattern of central planning and minis­
terial supervision for large units of production. These reforms a\so
appear to reverse a fourth pre-war tendency, the Bulgarian popula­
tion's readiness to withdraw from the regular market-place in
reaction to state pressure for increased sales. Recall the peasant
cuts in grain marketed before and after the First World War, in
favour of tobacco and then away from it again. During the Second
World War, they favoured fruU and vegetables in order to escape
requisitions by the grain-trading monopoly, Hranoiznos (see
Chapters 1-4). The urban black markets of both world wars were
part of the same pattern of behaviour. The recent official encour­
agement of smaU-scale production and individual initiative, albeU
within a sociaUst framework, has helped to keep the Bulgarian
black market one of the smaUest in Eastern Europe.
Despite these four significant departures from the pre-war
pattern, beyond the sociaUst framework and CMEA, the present
Bulgarian economy stiU contains important elements of historical
 Conclusion 227

continuity. The Ottoman legacy of imperial subjugation does seem

largely to have faded, despite its continuing reputation among
some Western observers as an easy explanation for what is pre­
sumed to be Bulgaria's simple, subordinate relationship to the
Soviet Union. Much more relevant to the complex economic
relationship with the USSR and to the economy's internal dynEunics
are legacies from the first decades of Bulgaria's past century as a
nation-state, governed from Sofia within roughly the present
borders. These historical legacies apply respectively to the state's
role in industry, agriculture and foreign trade, and to the limits of
population growth and political leadership.
Modern industry has grown since the turn of the century at a
faster rate and with greater state participation than in most other
European economies. In part, mechanically powered production
grew at rapid rates before and after the First World War, as weU as
since the Second World War, because it began from the smaUest
industrial base of any Eastern European country. The large artisan
sector of the nineteenth century served only to impede the rise of
modern industry. Chapter 1 has described artisan hardships from
the loss of the large Ottoman market and from the movement of its
labour force to lowland agricuUure. The state's tax and tariff
exemptions to encourage modern industry, dating from the 1890s,
were therefore essential to attracting capital away from booming
agricultural exports to Central Europe. Easier access to these state
encouragements in the capital city started a concentration of
industry in Sofia that continued throughout the inter-war period.
Actual state ownership had begun by 1900 wUh the raUway system
and the major coal mines. By 1939, the state's share of industrial
production had risen to 15 per cent, i f co-operative output is
included.
Also paving the way for post-war nationalisation was the state's
role in the pre-1914 cartel for tobacco processing and its leverage in
several industrial branches by the 1930s, which was achieved
primarily through price controls and government purchase.
MUitary mobiUsation for the Second World War expanded this
leverage. The fact that state controls and the earUer encouragement
laws promoted the appearance of small-scale private firms and did
not aid the larger ones only strengthened the post-war Communist
argument for nationalisation. Private enterprise could not promise
the badly needed economies of large-scale production. The present
Bulgarian problem is how to reduce the size of overly large
228 Conclusion

enterprises, whose diseconomies of scale are partly the resuU of the

abrupt post-war transition from smaU to large.
Bulgaria's agricultural tradition during the twentieth century is
perhaps the most progressive, by any definition, among aU the
Eastern European economies. The rapid growth pf gridn cultiva­
tion and export before the First World War was foUowed by a
diversification first to tobacco, and then to other crops and to Uve­
stock. Aggregate growth continued at a significant rate during the
difficult interwar years, in contrast to low rates for its Balkan
neighbours. Under the primary leadership of Aleksandur Stam­
bolUski's Agrarian Party, a massive Bulgarian co-operative move­
ment created its own credU network. This network linked up with
the region's earliest (1903) and largest agricultural bank to provide
peasant smaUholders with a relatively large — though stiU insuffi­
cient — amount of credit and other modernising assistance. By the
1920s, the bemk was Bulgaria's largest financial institution. By the
1930s, however, it was affording cO-operatives more credit than
individual peasant smaUholders. The existence of this semi-pubUc
bank and co-operative network also furnished the post-war Com­
munist government useful leverage in the rapid nationalisation of
agricultural trade after the Second World War.
StUl greater state leverage CEune from the food export and
tobacco monopolies. These had been set up by the early 1930s and
greatly increased their powers during the war. The disappearance
since then of a separate agricultural bank has combined with the
familiar Communist emphasis on heavy industry to set increasingly
restrictive limits on modernising investment in agriculture and food
processing.
Bulgaria's foreign trade was already based on bUateral inter-state
agreements at artificial exchange rates before the post-war turn to
such agreements with the USSR and the other CMEA members.
Similar, i f less favourable, arrangements were signed with Nazi
Germany during the 1930s, as detailed in Chapter 3. They
accounted for over one-half of exports and imports before the
Second World War began. This early departure from free trade at
fixed rates of convertible exchange was not reaUy the result of close
political aUiance with Germany. It derived instead from the 1930s
depression, and also from unpromising Bulgarian experiences with
free Western European markets and with an overvalued currency
before and after the First World War (see Chapters 1 and 2). High
protective tariffs during the 1920s had faUed to improve this bad
 Conclusion 229

bargain with free multilateral trade. The most heavily protected

branches did not respond with rapid growth, while prohibitive rates
discouraged the growth of large-scale industry by facilitating the
easy entry of smaU firms.
Bulgaria's bilateral agreements within CMEA undoubtedly
created more exports and imports, particularly during the general
European trade boom of the 1960s, than did the less favourable
pacts of the 1930s wUh Nazi Germany. But the general damage of
such agreements to prices based on relative scarcity and to resource
allocation based on opportunity cost has also been real. Most of
Bulgaria's overdue price increases in 1979 were designed to repair
some of this damage.
Higher export prices would hopefully reduce the deficU in
Bulgaria's Western trade. Its short-run coverage had required
heavy borrowing from Western banks. By 1976, as noted in
Chapter 8, the 44 per cent ratio of debt service to hard-currency
exports was the highest in Eastern Europe and greatly exceeded
Bulgaria's inter-war peak. That ratio's sharp reduction since then
has been the resuU of arbitrary cuts in Western imports and one­
time Soviet oil deliveries for re-export. A long-term problem
remains: how to trade for fuU comparative advantage with the free
Western market, while stUl conducting a large majority of
Bulgarian commerce under bUateral agreements at politicaUy
determined prices? Only area-wide economic reform around cost-
based, market prices, including rates of multUateral currency
exchange, can hope to resolve this contradiction.
The greatest historical pressure pushing current Bulgarian
economic reform in the direction of cost-efficient use of aU
resources is the shortage of labour. Sofia, long the centre of
Bulgarian industry, firstexperienced such a shortage before the
First World War. Caused then by too little peasant immigration,
the shortage forced up wages for some industrial workers and
emboldened others, less fortunate, to join the young socialist
movement. From the inter-war years throughout the 1950s, Sofia at
least had a surplus of such labour. The roots of a longer-term
labour shortage, which reached Bulgariem cities by the 1970s, lay
instead in the countryside. The demographic losses of the First
World War dovetailed wUh the poor agricultural prospects after­
wards to push the rurid Bulgarian birth rate downward. The decUne
has since become a national tendency. After a brief revival in the
early 1950s, the Bulgarian birth rate turned down once again. The
230 Conclusion

shock of collectivisation during the 1950s pushed many young

peasants into the towns, where by the end of the decade too few
factory jobs awaited them (see Chapter 6). This decline toward zero
population growth created an inevitable labour shortage, which
therefore appeared first on the collective farms. Economic reform,
not surprisingly, was launched there first, in the early 1960s, as we
saw in Chapter 9. The urban labour surplus of the late 1950s had
meanwhile encouraged the expansion of industry, so that its needs
exceeded the workforce available by roughly 1970. By the 1980s,
the urban supply of male labour was facing an absolute decline for
the rest of the decade. Turnover none the less remains too high and
efficiency too low.
Declining rates of growth for national income since 1980 (down
to 3 per cent for 1983) may continue to faU, or at least to stagnate
under current Western levels, if productivity per worker and — per­
haps more important — per unit of investment do not move
upward. Less Soviet (and Western) lending, plus the Bulgarian
government's commUment to continuing the recent rise in domestic
consumption, bars a return to the excessive, often inefficient
investment of the first Five-Year Plans. Thus, the scarcities ofboth
capital and labour, which plagued the growth of the pre-war
Bulgarian economy, have now returned.
One final pre-war legacy can assist Bulgaria's political leadership
in facing the challenge of growth and scarcity. That is modern
Bulgaria's tradition, dating even from late Ottoman times, of pur­
suing national development more successfuUy through internal
economic progress, rather than external political manoeuvres. His­
torically, such manoeuvres have aU ended in disaster. Popular
sentiment has long since lost confidence in them. Alternatives to a
Communist government in the Soviet camp are not considered. But
the idea of hard work for the home economy stiU enjoys wide­
spread respect. More poUtical leaders of the pre-war period were
trained primarily in an economic discipline and advocated
primarily economic programmes than in any neighbouring state.
This primacy explains in part why agrarian and socialist move­
ments appeared in Bulgaria first and why they were further
developed there before the Second World War than anywhere else
in south-eastern Europe. It remains a significant advantage in the
present Communist pursuit of economic reform.
SELECT BIBUOGRAPHY

Economic Development and History

Allen, Mark. 'The Bulgarian Economy in the 1970s', in Joint Economic Committee
of the US Congress (JEC), East European Economies Post-Helsinki,
(Washington, DC: US Government Printing Office, 1977), pp. 647 - 99.
Berov, Liuben, Bulgaria'sEconomicDevelopment through theAges (Sofia, 1980).
Feiwel, George R. Growth and Reforms in Centrally Planned Economies: The
Lessors ofthe Bulgarian Experience (New York: Praeger, 1977).
Jackson, Marvin R. 'Bulgaria's Economy in the 1970s: Adjusting Productivity to
Structure', in Joint Economic Committee of the US Congress, East European
Economic Assessment, pt 1 (Washington, DC: US Government Printing Office,
1981), pp. 571-618.
'Recent Economic Performance and Policy in Bulgaria', in Joint Economic
Committee of the US Congress, East European Economies: Slow Growth in the
1980s, pt 3 (Washington, DC: US Government Printing Office, 1985), pp. 1-36.
Khristov, Khristo (ed.). Iz istoriia na stopanskiia i sotsialniia zhivot v bulgarskite
zemi [From the History of Economic and Social Life in the Bulgarian Lands]
(Sofia, 1984).
Lampe, John R. and Marvin R. Jackson. Balkan Economic History, 1550-1950:
From Imperial Borderlands to Developing Nations (Bloomington, Indiana:
Indiana University Press, 1982).
Pasvolsky, Leo. Bulgaria's Economic Position ttfter the War (Washington, DC:
Brookings Institution, 1930).
Popov, Nikola, (ed.). Ikonomika na Bulgaria [The Economy of Bulgaria],
vols. I - V I (Sofia, 1969-80).
Royal Institute of International Affairs. The Balkan States, vol. I: Economic
(London: Oxford University Press, 1936).
Todorov, Nikolai, el al. Stopanska istoriia na Bulgariia, 681-1981 [The Economic
History ofBulgaria, 681-1981] (Sofia, 1981).
Totev, A. Iu. Sravnitelno izuchavane na bulgarskoto ijugoslovenskoto narodno
stopanstvo [A Comparative Inquiry on the Bulgarian and Yugoslav Economies)
(Sofia, 1940).
Zagoroff, S.D. TheEconomy of Bulgaria (Washington, DC: Council for Economic
and Industry Research, 1955).

Statistics

Bass, Elizabeth. Bulgarian GNP by Sectors of Origin, 1950-1974, ОРЧ4 (New

York: L.W. International Financial Research, 1975).
Chakalov, Asen. Natsionalen dokhod i razkhodnaBulgariia, 1924-1945 [National
Income and Outlay of Bulgaria, 1924-1945] (Sofia, 1946).
Council of Mutual Economic Assistance. Statistical Yearbook of the CMEA
Member Slates, 1962- (London: IPC Industrial Press).

231
232 Select Bibliography

Jackson, Marvin R. 'Agricultural Output in Southeastern Europe, 1910-1938',

ACES Bulletin, vol. XXIV, no. 4 (1982), pp. 49-87.
'National Product and Income in Southeastern Europe before the Second
World War', ACESBulletin, vol. XXIV, no. 3 (1982), pp. 73-103.
Jackson, Marvin R. and John R. Lampe, 'The Evidence of Industrial Growth in
Southeastern Europe before the Second World War', East European Quarterly,
vol. XVI, no. 4 (1983), pp. 385-415.
Kiranov, P. 'Natsionalen dokhod na Bulgariia, 1939, 1944, 1945' [The National
IncomeofBulgaria, 1939,1944, \945],IzvanrednoizdanienaspisanienaGlavna
Direktsiia na Statistika (Sofia, 1946).
Lazarchik, Gregor. Bulgarian Agricultural Production, Output, Expenses, Gross
and Net Product, and Productivity, at 1968 Prices, for 1939 and 1948-1970,
OP-39 (New York: Riverside Research Institute, 1973).
MoUev, I. and A. Iu. Totev. Tseni na zemedelskite produkti u nas, 1881-1934
[Prices of our Agricultural Products, 1881-1934] (Sofia, 1935).
Overseas Trade Department, Great Britain. Economic Conditionsin Bulgaria.
Annual, 1921-39 (London: HM Printing Office).
Popoff, Kiril. La Bulgarie aconomique, 1879-1911 (Paris, 1920).
Shapkarev, Petur. Proizvodstveniiat ritum v narodnoto stopanstvo na NR Bulgariia
[The Productive Growth of the National Economy of the PR Bulgaria] (Sofia,
1983).
Staller, George. Bulgaria:A NewJndustrialProduclion Index. 1963-1972, OP-47
(New York: L.W. International Financial Research, 1975).
Statisticheski godishnik na Bulgarskoto Tsarstvo, 1909-42 [The Statistical Year­
book of the Bulgarian Kingdom, 1909-42] (Sofia, 1910-43).
Statisticheski godishnik na NR Bulgariia, 1956- [The Statistical Yearbook of the
PR Bulgaria, 1956- ] (Sofia, 1957- ).
Statisticheski spravochnik na NR Bulgariia, 1958- [Statistical Reference Book of
the PR Bulgaria, 1958- ] (Sofia, 1958- ).
United Nations Economic Commission for Europe. Economic Survey ofEurope.
Annual since 1948. (New York: UN Secretariat).
Vunshna turgoviia na NR Bulgariia, 1939-1975 (Foreign Trade of the PR Bulgaria,
1939-1975] (Sofia, 1976).

General History and Politics

Pre-1944
Bell, John W. Peasants in Power; Alexander Stamboliski and the Bulgarian
Agrarian National Union, 1899-1923 (Princeton, New Jersey: Princeton
University Press, 1977).
Crampton, Richard J . Bulgaria, 1878-1918: A History. East European Mono­
graphs no. 138. (New York: Columbia University Press, 1983).
Dimitrov, Ucho (ed.). Kratka istoriia na Bulgariia [A Short History of Bulgaria]
(Sofia, 1983).
Hoppe, Hans-Joachim. Bulgarien: Hitlers einwilliger Verbündeter (Stuttgart,
1979).
Jelavich, Charles. Tsarist Russia and Balkan Nationalism: Russian Influence in the
Internal Affairs of Bulgaria and Serbia, 1879-1886 (Berkeley, CaUfornia:
University of CaUfornia Press, 1958).
League of Nations. Chronology ofPolitical and Economic Events in the Danubian
Basin, 1918-1936, Bulgaria (Paris. 1938).
 Select Bibliography 233

Logio, George C. Bulgaria Past and Present (Manchester: Sherratt and Hughes,
1936).
Miller, Marshal Lee. Bulgaria during the Second World War (Stanford, California:
Stanford University Press, 1975).
Oren, Nissan. Bulgarian Communism: The Road to Power, 1934-1944 (New York:
Columbia University Press, 1971).
Rothschild, Joseph. The Communist Party of Bulgaria: Origins andDevelopment,
1883-1936 (New York: Columbia University Press, 1959).

Post-1944
Auty, Phyllis. 'Bulgaria', in R.R. Betts (ed.), Central and South East Europe,
1945-1948(Westpoit, Connecticut: GreenwoodPress, 1971; reprintfrom 195.1),
pp. 25-51.
Boll, Michael M. The Cold War in the Balkans: American Foreign Policy and the
Emergence of Communist Bulgaria, 1943-1947 (Lexington, Kentucky:
University of Kentucky Press, 1984).
Bokov, Georgi (ed.), Modern Bulgaria (Sofia Press, 1981).
Brown, J.F. Bulgaria under Communist Rule (New York: Praeger, 1970).
Isusov, Mito (ed.) Problems of the Transition from Capitalism to Socialism (Sofia,
1975).
Oren, Nissan. Revolution Administered: Agrarianism and Communism in Bulgaria
(Baltimore, Maryland: Johns Hopkins Press, 1973).

Industry

Gerschenkron, Alexander. 'Some Aspects of Industrialization in Bulgaria, 1878¬

1939', in Gerschenkron, Economic Backwardness in Historical Perspective (New
York: Praeger, 1965), pp. 233-98.
Kaser, Michael C. 'The Industrial Enterprise in Bulgaria', in Ian Jeffries (ed.),
The Industrial Enterprise in Eastern Europe (New York: Praeger, 1981),
pp. 84-94.
Marinov, Khristo. 'Geografsko razpredelenie na promishlenostta v Bulgariia
mezhdu dvete svetovni voini' [The Geographic Distribution of Industry in
Bulgaria between the Two Wars]. Trudove na V.I.I. KariMarx, vol. 1 (1965),
pp. 3-41.
Palairet, Michael. 'The Decline of the Old Balkan Woollen Industries, 1870-1914',
Vierteljahrschrift für Sozial und Wirtschaftsgeschichte, vol. 70, no. 3 (1983),
pp. 331-62.
Simov, B., B. Blagoev and 0. Oslianin. Vustanovanie i razvitie na promishlen­
ostta V NR Bulgariia, 1944-1948 [The Growth and Development of Industry in
the PR Bulgaria, 1944-1948] (Sofia, 1968).
Vasliev, V. 'Za glavnite faktori na industrialniia podem (1925-1929)' [Concerning
the Main Factors of the Industrial Boom (1925-1929)], Izvestiia na institut za
istoriia, vol. XI (1962), pp. 83-100.

Agriculture

Michael, Louis G. Agricultural Survey of Europe: The Danubian Basin, Part 2:

234 Select Bibliography

Rumania, Buigaria and Yugosiavia. Technical Bulletin no. 126 (Washington,

DC: US Department of Agriculture, 1929).
Minkov, M., Poiava i razvitie na kooperativno zemedelie v Bulgariia pri usioviiata
na kapializma [The Appearance and Development of Co-operative Agriculture
under Conditions of Capitalism] (Sofia, 1968).
Moloff, J.S. 'Bulgarian Agriculture', in O.S. Morgan (ed.), Agricultural Systems
of Middle Europe, (New York: AMS Press, 1969; reprint from 1933),
pp. 41-85.
Organization for Economic Co-operation and Development. ProspectsforAgricul­
tural Production and Trade in Eastern Europe, vol. 2, Bulgaria (Paris: OECD,
1982).
Sanders, Irwin T. Balkan Village (Lexington, Kentucky: University of Kentucky
Press, 1949).
Wädekin, Karl-Eugen. Agrarian Policies in Communist Europe (London: Martinus
Nijhoff, 1982).
Wiedemann, Paul. 'The Origins and Development of Agro-Industrial Complexes in
Bulgaria', in Ronald A. Francisco, Betty A. Boyd and Roy D. Laird (eds.),
Agricultural Policies in the USSR and Eastern Europe (Boulder, Colorado:
Westview Press, 1980), pp. 98-109.
Zagoroff, S.D., J . Vegh and A.D. Bilimovich. The Agrarian Economy of the
Danubian Countries, 1933-1945 (Stanford, California: Stanford University
Press, 1955).

Foreign Economic Relations

Bozhkov, Triatko. Nauchno-teknicheska i proizvodna integratsiia mezhdu NR
Bulgariia i SSSR [Scientific-Technical and Productive Integration between the
PR Bulgaria and the USSR] (Sofia, 1976).
Katsarkova, Vera. 'Ograbvaneto na Bulgariia ot germanskiia imperializm' [The
Exploitation of Bulgaria by German Imperialism] Trudove na V.I.I. KarlMarx,
vol. II (1969), pp. 164-223.
Khristov, Khristo, V. Hadzinikolov et al. Bulgarskoto-Germanski otnosheniia i
vruski [Bulgarian-German Relations and Ties], vols. I-II1 (Sofia, 1972-81).
Lamb, Deborah A. 'Bulgaria: Performance and Prospects in Trade with the United
States and the West', in Joint Economic Committee of the US Congress, East-
West Trade: The Prospects to 1985 (Washington, DC: US Government Printing
Office, 1982), pp. 22-50.
Markov, Georgi. Bulgaro-germanskite otnosheniia, 1931-1939 [Bulgarian-German
. Relations, 1931-1939] (Sofia, 1984).
Nikov, Angel. Bulgaro-suveiski otnosheniia, 1944-1948 [Bulgarian-Soviet
Relations, 1944-1948] (Sofia, 1978).
Nikova, G. 'Bulgaria and Cooperation of the CMEA Member-Countries in Pro­
duction Planning, 1949-1956', Bulgarian Historical Review, vol. 12, no. 2
(1984), pp. 3-17.
Ofer, Gur. 'Growth Strategy, Specialization in Agriculture, and Trade: Bulgaria
and Eastern Europe', inPaul Marer and John Michael Montias (eds.), East
European Integration and East-West Trade (Bloomington, Indiana: Indiana
University Press, 1981), pp. 299-313.
Popisakov, Grigor. Ikonomicheska otnosheniia mezdhu NRBulgariia i SSSR
[Economic Relations between the PR Bulgaria and the USSR) (Sofia, 1968).
Todorova, Tsvetana. Diplomaticheska istoriia na vunshnite zaemi na Bulgariia,
1878-1912 [A Diplomaüc History of Bulgarian Foreign Loans, 1878-1912)
(Sofia, 1971).
 Select Bibliography 235

Finance and Banking

Berov, Liuben. 'Le capital financier occidental et les pays balkaniques dans les
ann6es vingt'. Etudes balkaniques, vols. 2-3 (1965), pp. 139-69.
Chakalov, Asen. Formi, razmer i deinost na chuzhdiia kapital v Bulgariia, 1878¬
1944 [The Form, Extent and Activity ofForeign Capital in Bulgaria, 1878-1912]
(Sofia, 1962).
Lampe, John R. 'Finance and pre-1914 Industrial Stirrings in Bulgaria and Serbia',
Southeastern Europe, vol. II, no. 1 (1975), pp. 23-52.
Nedelchev, Kiril. Parichnoto delo v Bulgariia, 1879-1940 [Monetary Affairs in
Bulgaria, 1879-1940] (Sofia, 1940).
Totev, Totiu, 'Bankovata sistema na NR Bulgariia sled sotsialisticheskata revo­
liutsiia', [The Banking System of the PR Bulgaria after the Socialist Revolution],
Finansi i kredit, vol. X X X I , no. 7 (1981), pp. 42-52.
Wynne, William H. State Insolvency and Foreign Bondholders, vol. II (New Haven,
Connecticut: Yale University Press, 1951), pp. 530-74.

Population and Living Standards

Berov, Liuben. Polozhenieto na rabotnicheska klasa v Bulgariia pri kapitalizm

[The Position of the Working Class in Bulgaria under Capitalism] (Sofia, 1968).
'Realnite dokhodi i potreblenieto na trudeshite i seliana v Bulgariia prez
1938-1969' [Real Income and the Consumption of Workers and Peasants in
Bulgaria, 1938-1969], Problemi na truda, vol. I (1970), pp. 23-34.
Isusov, Mito. Rabotnicheska klasa v Bulgariia, 1944-1947 [The Working Class in
Bulgaria, 1944-1947] (Sofia, 1971).
Jackson, Marvin R. 'Changes in the Ethnic Content of the Balkan National Popula­
tions, 1912-1970', Faculty Working Papers, Department of Economics,
E C 83/84-20, Arizona State University. Forthcoming in Southeastern Europe.
Lampe, John R. 'Interwar Sofia vs. the Nazi-style Garden City: The Struggle over
the Muesmann Plan', Journal of Urban History, vol. II, no. 1 (1984),
pp. 39-62.
Radulov, L . Naselenie i ikonomika [Population and Economics] (Sofia, 1981).
(ed.), Sotsialno-ikonomicheska politika na Bulgarskata durzhava, 681-1981
[The Socio-Economic Policy of the Bulgarian State, 681-1981] (Varna, 1981).

Economic Reform

Feiwel, George W. 'Economic Reform in Bulgaria', Osteuropa Wirtschaft, vol. 24,

no.2(1979), pp. 71-91.
'Economic Development and Planning in Bulgaria in the 1970s', in Alec
Nove, Hans Hermann Höhemann, Gertrud Seidenstecher (eds.), The East
European Economies in the 1970s (London: Butterworths, 1982), pp. 222-37.
Nikov, Ivan. Ikonomicheskiiat podkhod [The Economic Approach] (Sofia, 1983).
Vogel, Heinrich. 'Bulgaria', in Hans-Hermann Höhemann, Michael C. Kaser and
Karl C. Thalheim (eds.), The New Economic Systems of Eastern Europe
(Berkeley, California: University of California Press, 1975).
236 Select Bibliography

Periodicals
Bulgarian
Bulgarian Historical Review
Economic Outlook of the PR Bulgaria (Bulgarian Chamber of Commerce and
Industry)
Finansi i kredit
Ikonomicheska misul
lkonomicheski zhivot
Ikonomika na selsko stopanstvo
Izvestiia na Bulgarska Narodna Banka (1924-40)
Izvestiia na lkonomicheski Institut na BAN
Novo vreme
Planovo stopanstvo
Problemi na truda
Rabotnichesko delo

Spisanie na bulgarskoto ikonomichesko druzhestvo (1896-1940)

Western
East European Economies (New York: IASP Press)
The Economist Intelligence Unit, Bulgaria and Romania (London)
Radio Free Europe Research, Bulgarian Situation Report (Munich)
Wharton Econometric Forecasting Associates, Centrally Planned Economies,
Current Analysis (Washington, DC)
INDEX

Agrarian Union 30 Bairoch, Paul 1, 14, 24

agriculture 16, 23-4, 27-9, 43, 60, balance of payments 73, 196
228 deficit 114, 189-90, 205
consolidation of strips 57, 83, 112 Balkancar enterprise 168, 184, 190
control of43, 107-10, 127 Balkan customs union 88, 120-30
credit 83-4 Balkan Tobacco Office 88
delivery prices 43, 148 Balkan War, First 20
exports 31, 56, 84, 90, 108, 114, Balkan War, Second 13, 17, 20, 42
177, 181, 227 bank assets 31, 33-4, 93
see ako grdn; tobacco banks, Bulgarian 37, 130
fertiliser 58, 110, 170-2, 190, 206 Agricultural Bank (Bulgarska
irrigation 84, 170, 172, 174 Zemedelska Banka) 30-1,
marketing 8-9, 27-8, 56, 59, 80, 34-5, 58, 60, 67, 81-3, 92-3,
123, 147-8 99, 114, 126, 128, 131, 205,
Ministry of Agriculture 57, 60, 228
146, 208 Bulgarska Narodna 31-4, 91-2,
personal plots 28, 210-12, 226 130-1
prices 78, 85 Bulgarski Kredit 92, 130
surplus, forced collection of 71 Central Co-operative Bank 30, 58,
trade, nationalisation of 124-7 81, 83, 92
use of iron ploughs 28, 59-60 co-operative 30, 58
use of tractors 170 Foreign Trade Bank 205
workers for Soviet Union 150 Industrial Bank 205
see also banks; Agricultural Bank; Investment Bank 205
coUectivisation; crops; growth; National Bank 31, 33, 37, 63-4,
industrial crops; machine- 70, 204-5, 215-16, 218
tractor stations reserve ratio 34, 63, 115
Agro-Industrial Complexes (APK) see also currency; note issue
206-9 popular banks 36, 51, 92, 130-1
Agro-Industrial Union 208 Turgovska Banka (Ruse) 34
agronomists 43 banks, foreign 34, 93, 130
of Sofia University Faculty of Balkanska and Generalna 66
Agronomy 58 Berliner Disconto-GeseUschaft 44,
Alexander III, Tsar 19 64
Alexander of Battenberg, Prince 19 Deutsche Bank 32
AlUed Control Commission 122-3, Franco-Belge 130
125 Franco-BuIgarska 68
Alton, Thad 161 Generalna 34
Andropov, Yuri 219 Kreditna Banka 66, 68, 93
army purge 121 Paris Bas 89, 130
artisan manufacture 20, 22-3, 39, West European 66-8, 70, 93, 225
41,71,94, 132, 150,227 barter trade 88-9, 127
Austria 34, 61, 88-9, 189 birth rates 55, 74, 86, 159, 229
autarchy. East European 3 blackmarket 114, 126, 226
authoritarianism 79, 106 Black Sea 17, 29, 52, 186, 189, 203
automobiles, private 192-4 Blagoev, Dimitur 35, 40
bombing raids, Anglo-American
Bagrianov, Ivan 107 106-7, 116, 133

237
238 Index

Boris, Tsar 79- 80, 105 -6, 107 141, 179, 185, 199, 200, 223, 226
Bozhilov, Prime Minister 107 reformed 14-15, 156
Brittan, S. 6 transition to 17, 107, 121, 136,
Bucharest 28 139, 141, 152
Budapest 17, 28 Chakalov, Asen 71, 94
Budget, State chemicals, production of 72, 117,
agriculture 60, 66 153, 168, 174, 190
debt burden, see foreign loans Chervenkov, Vulko 123, 140-1, 144,
defence 34, 100 149, 151, 153
deficits 29, 44, 62, 64-6 chiflik 21-3
education 66 China 149, 151
expenditure 115, 153, 205, 220nl5 chorbadzhiia 21
revenues 33, 42, 61, 65, 101, 205 Churchill, Winston 13
state bureaucracy and 65, 117 Claudius, Kari 113
Bulgarian Agrarian National Union clearing agreements 91
(BZNS) 29-30, 39-40, 49-50, bilateral 87-8
57-9, 123 with Germany 87-8, 92
Pladne Agrarians 78-9 coal 17, 41, 68, 115, 117, 145
Vrabcha Agrarians 78 imports41, 72, 168, 223
Bulgarian Communist Party (BKP), lignite 17, 192
(1918-27) 49-50, 106-7, Pernik mines 41, 44, 100, 134, 144
121-3; (1948-) 140-1, 149, Coca-Cola 190, 203
158, 201,207, 217,223,226 collective farms (TZKS or kolkhoz)
Bulgarian Economic Society (BID) 125, 146, 152-3, 191, 200, 203,
39, 56 206-7, 210, 230
Bulgarian Industrial Association 217 Model Charter for 147
Bulgarian Workers' Party (1927-48) collectivisation 15, 71, 124-6,
50, 79 140-1, 143, 146- 9, 169, 206,
Bulgarplod enterprise 209 228-9
Burgas 29, 32 Cominform 135
Compulsory Labour Service
Canada 29 {trudovaki) 58-9
capital 14, 230 consumer goods 97, 134, 188, 190,
investment (accumulation) 29, 217, 223, 226
35-7, 40,71, 156, 161,223 durables 192, 194
agricultural 169, 207-8 consumption 191, 194, 196, 230
funds, competitions on 218 meat 192, 196
Western 67-8, 190 personal 97, 191-2
output ratio 209 co-operative banks 67, 130
productivity 10, 86-7, 158, 163-5, co-operatives 51, 82, 126-7, 228
174 credit 30, 58, 81, 83-4
rate of accumulation 143, 164-5 marketing 82-3
state investment 144, 216 producers 30-1, 40, 68, 115
cartels 39, 69, 99 copper mining 17, 44, 68, 115
sugar 43-4, 69-70, 82, 99 Corecom shops 193
tobacco 69, 227 cotton 82, 84, 99, 109
cement production 43 -4, 72, 100, imports 22, 94, 113, 117, 128, 134,
190, 195 173, 186
Granitoid plant 68, 73, 134 production 60, 74, 84, 94, 110,
Central Co-operative Bank 30, 5?, 150, 173
81, 83, 92 Council for Mutual Economic
Central Co-operative Union 210 Assistance (CMEA) 150-1, 177,
Central Europe 54, 67 183-7, 224, 229
central planning, Soviet-style 139, Specialisation Agreements 183, 185
 Index 239

Council of Ministers 158, 212 education 19, 22, 58

counterplanning 214 higher 195
credit 29-31, 92, 205 literacy 28
long-term 37, 83, 89, 205 primary 19, 193
mortgage 30, 58-9 secondary 58, 66
short-term 22, 30-1, 36-7, 58, technical 195
66-7, 70, 83, 205 eggs 27, 31, 54, 67, 90, 108 -9, 172,
crops 186, 206
diversification of 85-6, 87, 112, elections 30, 49-50, 78-80, 122
228 electric power 58-9, 128, 142-3,
land distribution by 26 145-6, 153, 180, 184, 223
livestock ratio to 171-4 electronics 168, 174, 180, 185-6,
production of 27-9, 53, 84-6, 190, 212-13
126-7, 143-4, 151, 153, emigration 17
171-4, 207, 226 employment
wartime 110-12, 169-70 industrial 37-8, 68, 70, 97,
see also industrial crops 132-3, 153
Cuba 185 state 37, 64, 100, 121, 134-5
currency environment 10
convertible 62-3 Europe 1-8, 14, 32, 66-8
depreciation 45, 60, 62-3, 72, 89, European Economic Community 183
204 exchange rate, see currency
exchange rate 35, 44, 61-3, 91, exports 14, 78, 92, 108, 128, 151,
228 168, 177, 186, 224
premiums 92 diversification 27
money supply 62 growth 74, 94, 178
note issue 33, 60-1, 63, 114-15, prices of 108, 114, 145, 178, 181,
131 229
Czechoslovakia49, 88-9, 129, 151, real 25
201-2, 212, 225-6 state controls 81-2
surplus 23, 25, 44, 113
dairy production 84
see ako agriculture; exports
Danube River 17, 29
death rates 55, 159
fascism 80, 106
debt, relief from 83
Fatherland Front (OF) 106-7,
see also under foreign loans
121-2, 124
decentralisation 10, 199, 212
Ferdinand of Coburg, Tsar 19-20,
demand-management policies 6
30, 32, 39, 49, 112-14, 123, 226
Democratic Concord 50, 78
fertility 16
Democratic Party 50, 78
Filipov, Grisha 202
Denmark 28, 71
Filov, Bogdan 106, 109
Depression (1929-33) 3, 8, 74, 78,
First World War 2, 8, 20, 42-5
80, 93, 98, 228
Five-Year Plans 9, 139-54
development 8, 10, 15, 68, 70, 142,
1942-6 109
156, 230
1949-52 141-3, 147-8
Dimitrov, Georgi 122-3, 125, 130,
1953 - 7 144, 148-9, 185
135, 140
1958-60 141, 146, 149 -54, 200
Dimitrovgrad 142
1961-5 139, 164
discount rate 64
1966-70 164
Dobrudja 18n5, 20, 42, 51-2, 104,
flax 108-9
108, 112
flour sales surcharge 81
Eastern Europe food
growth 5 consumption 191-2, 212
reform 199, 201 exports 45, 71, 90-1, 94, 145, 168,
240 Index

181, 186, 188, 191, 224-5, wartime deliveries to 107-9, 114

228 Central Agency for Special
processing 117, 151, 153, 206-7, Requisitions (ASR) 109
223-4 Directorate for Civilian
growth of 69, 95, 150 Mobilisation (DGM) 109-10,
shortage 125-6, 134-5, 207 116, 126
forage crops 172-4, 210-12 Directorate for Special
foreign loans 23, 32, 34, 63-4, 67 Requisitions 43, 45, 109
debt burden 32-3, 61, 64, 131, Gerschenkron, Alexander 94
189 Geshov, Ivan Estatiev 40-1
debt service 34, 42, 64, 88-9 Gichev, Dimitur 79
ratio to export earnings 64, 189, gold exchange standard 62-3, 78, 80
229 gold standard 1, 3, 32, 63
France 33, 131 Gorubso joint enterprise with the
League of Nations 62 USSR 150
see also under Germany; Union of grain 16, 67, 111, 113
Soviet Socialist Republics consortium 57, 59
foreign trade 88-9, 92, 129-30, consumption 27, 52-3, 173
150-2, 156, 177, 228-9 corn 25-7, 29, 172
balance of 179-83 exports 23-9, 52-4, 81, 87.
direction 54, 129, 152, 188, 225 108-9, 228
Directorate for 109-10 composition of 53
growth of 20, 178-9, 184 imports 43
structure 178, 180 prices 25-6, 28-9, 37, 57, 82
terms oftrade 115, 181-2 production 24, 26-7, 31, 51-3,
turnover 14-15, 178, 185 85, 110-11, 172, 211, 228
see also under Germany; Great rye 109, 172
Britain; Union of Soviet storage 52, 57
Socialist Republics; Western wheat 15, 23, 25-6, 28-9, 31,
Europe 51-2, 109, 172-3
France 32, 50, 52, 62, 79, 89, 190 yields 29. 52. 84, 172-3, 207, 212
bank affiliates 34, 66-7 Great Britain 50, 67
gold franc 62 trade relations with 40-1, 52, 89,
loans from 33, 61 91
Friedman, Philip 91 Greece 62, 88-9, 94, 105, 110, 113,
fruit 131, 180, 189, 207
exports 90-1, 108, 128 bankruptcy of 1897 33
growing 110-12, 126, 173 - 4 , 207, Gross Domestic Product (GDP) 162
209, 211 Gross National Product (GNP) 14,
pulp processing 91, 108, 117, 126 24, 161-2
f^I employment in Europe 4-5 Alton estimates 161
Gross Social Product 25
Georgiev, Kimon 79 growth 8, 10-13, 17, 24, 81, 158,
German-Bulgarian Industrial 199, 201, 218
Commission 117 agricultural 20, 27, 84-5, 144,
Germany 13, 80, 88 150-1,162-3,169-71, 212,
bank afflliates 34, 66 228
Democratic Repubhc (GDR) cycles 5-6
199-201, 226 export-led 14
loans from 32, 44, 64, 89 extensive 9
trade relations with 9, 44-5, 54, industrial 9, 35, 68-72, 93 - 8 .
87-91, 99-100, 113-14, 229 115-16, 227, 230
East (GDR) 151, 184, 213, 225 under communism 144-5, 150,
West (FRG) 5, 151, 187-8 153, 156, 162-4
 Index 241

intensive9-10, 156, 163 light (coiKumer goods) 10, 143,

rate, real 25 223
see abo Eastern Europe management 10
Gypsies 17 nationalisation of 9, 132-6, 227
output 10, 36, 68, 94-5, 116,
hemp 82, 109 143-4
Higher Economic Council (VSS) 126 productivity 156, 165, 230
horsepower 36, 68, 70, 116 profitability 69, 201-2, 215-18,
housing 10, 59, 65, 151, 191, 193 - 5 226
Hranoiznos ferain export agency) 'saturated' 98-9
81-2, 84, 109, 111, 126-7, 226 statecontrol 98-100
Hungary 81, 91, 117, 158, 164, 173, state-encouraged 9, 20, 37, 59, 68,
177, 217, 225-6 72-3, 95, 98-9, 227
economic reform 199, 210 structure of 166-9
subsidiaries 213
immigration 49, 160 Union of Bulgarian Industrialists
import(s) 25, 38, 100, 117 133
elasticity 178 wartime 43-4, 115-18
growth 179 see also under growth
ofinputs41, 73, 94, 99, 117. 145, infiation 65, 112-15
179, 186 European 4, 6-7
licences 88, 91, 190 infrastructure 10, 28, 34
prices 114, 178, 181 insurance societies, agricultural 59
substitution 9, 38, 72, 74, 93-4, interest rates 32-4, 37, 216
96, 99, 167-8, 179, 190, 193 Internal Macedonian Revolutionary
surplus 89, 182 Organisation (IMRO) 13, 50, 65,
incentives 10, 145, 153-4, 205, 215, 78-9
218 International Labour Organization
Incentives Fund, Additional Material 192
216 iron ore. see metallurgy
income per capita, European 1, 7-8 iron ploughs 28, 59-60
independence 13, 19-20 ishleme 22, 134, 186
Industrial-Agricultural Complex Istanbul (Constantinople till 1908) 20,
(PAK) 207 21-2
industrial crops 52-3, 57, 59, 84-5, Italy 89
110, 171, 173-4 Iugov, Anton 141
industrial firms, number of sizes of
95-6, 116-17, 132, 146, 153
industrialisation 93, 118, 140, 225 Jackson, Marvin R. 86, 94
debate 38-45 Japan 189
industry 15, 69 Jews 107
combines206. 212-14 joint-stock companies 37, 44, 68-9,
DSO (state economic organisa­ 71, 94-5
tions) 204. 212, 214 joint ventures 150-1, 184
employment 37-8, 68, 70 Law of 1980 190
encouragement laws 41, 72-3, 227 with Japan 190
heavy (producers' goods) 40, 69,
139, 141-6, 150-1,223. 228 Kaser, Michael 81
inputs Khrushchev, N. S. 140-1
imports of41, 73. 94, 99, 117, Kioseivanov, G. 80, 106
145, 179, 186 Kostov, Traicho 123, 125, 132. 140.
prices 99, 165 201
labour force 139, 143, I45-6, 151, KuUks 146-8
153, 156, 163, 185, 224 Kunin, Petko 201
242 Index

labour 22, 29 management 10, 217

abroad 185 new system of 200-4, 213, 216
force, distribution of 160 manufacturing 35-7, 68-9, 73-4,
per enterprise 95 115, 145, 214
productivity 161, 163, 167, 169, share in total output 8-9, 94-5
201, 203, 208-9 Mateev, Evgeni 201
property 56-7 mechanisation 23, 28, 87, 143, 227
shortage 29, 37, 160-1, 174, 195 factory 20, 68, 84-5
causes of23, 118, 153, 185, metallurgy 68, 145, 166-7, 191, 223
229-30 Burgas Complex 168, 224
trudovaki (Compulsory Labour iron ore imports 167 - 8, 186, 223
Service) 58-9 Kremikovtsi Complex 149, 167
turnover 143-4, 161, 230 Lenin Complex 167, 184
week 58 production 69, 72, 146, 174, 183
see also industry, labour force Midhat Pasha 23
land ownership 28, 57, 84 Mihailovski, Angel 201
land reform 21, 23 Mikhov, General 107
1920s 56-7, 59 Military League 79
1946 125 Ministry of National Economy 80
League of Nations Ministry of State Planning 203
Interallied Debt Commission 62 mobilisation, economic 109-10
refugee loans 56, 63-4 Directorate for Civilian Mobilisa­
Lenin, V. 1. 61 tion (DGM)43 -4, 109-10,
Liapchev, Andrei 40, 50-1, 59-60, 116, 126
63, 72-3, 78, 98, 100 modernisation 79-80, 83-4, 153,
Liberman, Evgeni 201 168, 228
Libya 185 monetary control in Europe 6
List, Friedrich 40 monetary policy 61, 131, 204
literacy 28 monetisation 20, 22, 29, 32, 35, 179
livestock 54, 144, 169-71, 174, 206, money supply 62
212 monopoly 82, 98, 214
cattle27, 108, 112, 127, 172 monopsony 81, 109
hogs 27, 171 most-favoured nation treatment
poultry27, 67, 171-2,209 (MFN) 88
sheep 27, 108 municipal loans 34
loans Muraviev, Konstantin 107
municipal 34 Mushanov, Nikolai 78-9, 82-3,
state 63-4, 66, 131 98-9
see also foreign loans
Lukov, General 80, 107 National Bloc (AUiance Concord) 50,
78
Macedonia 13, 19, 20, 44-5, 105 -6, national identity 19
112-13, 123 national income 51-2, 71, 94, 115,
machinery 28-9, 31, 87, 108, 112, 230
170, 185, 187-8 net material product (NMP)
imports 59, 94, 179-80, 188 161-4, 178
from Germany 109, 114, 118, official estimates 162
184 New Economic Mechanism (NlM)
from USSR 125, 128, 143, 184 215-19
production 35-6, 69, 117, 134, Norway 14
145-6, 153, 166, 168, 174 nuclear power 180, 184, 223
machine-tractor stations (MTS) 128,
148 oU imports 114, 128, 179, 186-7,
Malinov, Aleksandur 78, 82, 98 224-5, 229
 Index 243

Orthodox Church 19 revenue 42

Ottoman Empire 19, 21-4, 40, 134, Rockefeller interest 32
227 rolling stock 52, 100, 143
Ottoman Public Debt 32 trackage 52, 100
rainfall 16, 26
Palairet, Michael 38 rationing 43
parakende 28 bread 108-9
partnerships 70-1 . meat 112
People's Courts 134 recovery, European 4-5
People's Guard and Militia 122 Reemstma (German trade organisa­
Pepsi-Cola 190 tion) 89, 108
Pharmakhim enterprise 168 reforms, economic 199, 200, 219,
Pirin region 65, 70 224, 230
planned socialist economies 5, 7 agricultural 206-12
planning5, 9-10, 100, 116 financial 204-6, 215-19
see also central planning industrial concentration 212-14
Plovdiv 22, 150 management 200-4, 213, 216
pIum brandy 82 market-oriented 199, 201, 229
Poland 21, 89, 225-6 refugee loans 56, 63-4
Pomaks 23 refugees 49, 56, 70
population 13, 16, 113, 159 Renault 190
birth rates 55, 74, 86, 159, 229 reparations 60-3, 89, 124, 131, 184,
density 16, 27, 56, 159 225
emigration 17 Interallied Reparations Commission
growth 23, 25, 27, 37, 55, 70, 86, 62, 80-1
159, 229 resettlement loan 56
immigration 49, 160 retailtrade 115, 192, 202
mortality rates 55, 159 Rhodopa enterprise 209
see also refugees road construction 23, 65, 100
ports 23, 29, 34 Romania 21, 29, 42, 49, 87, 104,
poultry 27, 67, 171-2, 209 129, 184, 226
see also eggs comparisons with 24, 36, 40, 53,
power bIocs 4 57, 65, 73, 83, 91, 94
price(s) 37, 73-4, 115, 191, 193, 202, under Communist rule 131, 161,
205,212 164, 171, 173, 192-3
control of 43, 99, 216, 227 rose oil 82
mechanism 218 Rostow, W. W. 7
scissors 78 Ruse 29, 184, 218
see also export prices; import Russo-Ottoman Wars (1828-9) 21;
prices; inflation (1877-8) 19
Prices and Price Information, State
Agency for 218-19 savings banks 30
protectionist tariffs 3, 15, 40, 72, scarce resources 14, 16
228 Schacht, HjaImar 89
pulp processing of fruit, see under Schweppes 190
fruit Scientific-Productive Complex (NPK)
209
railways 44 Second World War 4, 9, 105-18
construction 29, 32, 34, 39, 41, 60, Serbia 20, 24, 36-7, 40
100, 135 sharecropping 27, 29
Deutsche Bank interest 32 ship construction 134, 151
freight rates 73 silk cocoons 27, 30-1, 82
freight usage 143, 153 small-scaleenterprises 115-16,
Oriental Railway 32, 39, 41, 44 132-3, 135, 145-6, 227
244 Index

smallholders 123, 147-8 exports 189

smallholdings 24, 27-30, 52, 56, 112 production 38, 69, 98, 117, 145-6
percentage of arable land 57, 86 Third World 24, 159, 182, 187
Social Democratic Party (1918-48) Thrace 105, 112-13, 179
50, 122, 125 Tito, Josip Broz 129
Socialist Party 49-50 Tito-Stalin split 130, 140
social services 193-4 tobacco 15-16, 113, 126, 133, 228
Sofia9, 17, 41, 101, 106, 184, 218 cartel 69, 227
Mortgage Bank 93 cigarette production 108, 186
industrial concentration 41, 96-9 co-operatives 59
population 38, 70, 195 exports 44, 52-5, 90, 108, 128,
University 51, 87, 153, 195 168
soya beans 108, 172 prices 59
stagflation 6 production 52-5, 74, 84, 110, 150,
Stalin. J . V. 140-1, 144, 147 173
Stamboliiski, Aleksandur 13, 30, 39, state monopoly 33 -4, 42, 82
50-1, 56-8, 79, 123, 151, 228 United Tobacco Factory 130
regime of 56-8, 62, 64-5, 71-2, tomatoes
82 exports 90
Stambulov, Stefan 20 production 174
standard of living 27, 177, 190-6 Totev, A. Iu. 86
State control 9, 14, 15, 17, 19-20, tourism 189-90, 192
41-5 tractors, use of 170
Stateenterprise 100-1, 116-17, see also machine-tractor stations
133-6, 227 trade, internal 22, 39
State initiative 81 retail 192, 202
State Planning Commission (DPK) see also foreign trade
141,215 Treaty of
Statistics, Main Directorate for Berlin (1878) 19, 24
(GDS) 142 Neuilly(1919)61,72
structural change 8-10, 68, 166-9, San Stefano (1878) 19
171-4, 224 Triffin, R. 1-2
structural imbalance in Europe 3 Tsankov, Aleksandur 50-1, 59-60,
Subranie (National Assembly) 19, 62, 65, 80, 106
39-40, 43, 80-1 Turkey 113. 117, 189
Sugar Association (Bulgarski Zakhar) Turks 17, 18n6,21, 24
209
sugar beet 53, 72, 98, 173 unemployment 6-7, 133, 149-50,
cartel 43 -4, 69-70, 82, 99-100 230
refining31,41,68,93 Union of Soviet Socialist Republics
sunflowers 53, 84, 173 14, 61,71.94.200
Sweden 14 joint companies 150-1, 184
Switzerland 129 loans from 184, 189, 225
oil imports from 128, 179, 186-7,
TABSO joint enterprise with the 189
USSR 151 political relations with 10, 13, 105,
tariffs 3, 15, 227-9 184, 227
customs revenue 34, 62, 64-5 Red Army 106-7, 124
export 58, 62, 72 role on AUied Control Commission
import40. 72, 99, 114 122
taxes 21,23,29-30, 131 trade relations 15, 79, 80, 84, 87,
direct65,72, 148, 211,227 117, 127-30, 151, 167,
indirect 29-30, 34, 65, 205, 216 183-7, 189, 195, 224-5
textiles41, 68, 134, 184 United Nations Economic
 Index 245

Commission for Europe wartime mobilisation

(UNECE) 161, 178 Committee for Public Welfare
United States of America 3, 4 (KZOP) 43, 51
most-favoured nation treatment Directorate for Civilian
189 Mobilisation (DGM) 43-4,
role on Allied Control Commission 109-10, 116, 126
122-3, 125 Western Europe, trade with 182, 184,
uranium mining 151 186-90, 229
urbanisation 37, 70, 159, 229-30 Wool Directorate for Foreign Trade
38
Varna, 23, 52, 134, 186 working week 210-11
vegetable-growing 16, 26-7, 31, 57, World Bank 161, 163
112, 126, 209, 211-12
exports 54, 108 Yugoslavia 16, 18n5, 49, 62, 79, 87,
growth of84-5, 110, 173-4 105, 110, 113, 131, 189
Velchev, Damian 79 comparisons with 7, 53, 66, 83, 91,
vineyards 85, 110, 173-4, 209 94
wine exports 128, 209 under Communist rule 173, 207,
218
market socialism in 199
wages 23, 37, 134, 146, 171, 191,
215, 218 Zhivkov, Todor 141, 151-2, 158,
money 191 202, 213, 215, 226
real 191, 196 Zveno 79, 83, 87, 92, 122