Leslie Holmes, Communist economy: Types of ownership

In Communist states,most factories, banks, and other forms of enterprise were owned by the state. Communists called this social ownership of the means of production. Most Westerners are more familiar with the term nationalized; this is an acceptable termto use, as long as it is understood that different levels of the state (centre, republic, local municipality, etc.) in Communist systems could own economic enterprises.There were occasional exceptions to this notion of social ownership, with the last privately owned factory in East Germany – a perfume factory! – being nationalized as late as 1972.

Ownership in the countryside was more complex. Some farms were completely owned by the state, and hence were called state farms; the people working on these had similar conditions to their counterparts working in factories. Thus, they received guaranteed minimum incomes, irrespective of natural conditions (e.g. changing weather conditions from year to year), and were entitled to state pensions. A second type of arrangement was the collective farm. Their original development in the USSR was in line with Stalin’s approach to the modernization of the Soviet economy. His commitment to the concept is reflected in the scale and pace of their development; between 1928 and 1931, the number of collective farms increased from 33,300 to 211,100, while the percentage of peasant households collectivized rose dramatically, from 1.7% to 52.7%. Whereas the state owned the land in collective farms, the machinery, buildings, seeds, animals, and so on belonged collectively to those who worked the land, the collective farmers. The conditions of collective farmers were usually different from those of their peers in state farms. Their income was more variable, subject inter alia to the whims of the weather, and many were not guaranteed state retirement pensions; it was not until the 1960s that Soviet collective farmers became eligible for such pensions, for example.

One feature common to most state and collective farmers was that they were both entitled to small private plots; Albania was an exception, and did not permit such plots. Farmers were permitted to grow food or raise animals on their plots for personal consumption, but were also free to sell any excesses in private markets. Had it not been for these private markets, urban dwellers in many Communist countries would have found it much more difficult to buy eggs, chickens, rabbits, and other types of food; Poland and Yugoslavia took private ownership in the countryside even further, in that most farms in these two states were privately owned and operated.

The small private plots and the related private food markets were not the only form of private enterprise, however. Again with the notable exception of hard line Albania, where citizens were not even permitted to purchase private cars, most Communist states were by the 1970s allowing small-scale private enterprise in urban areas too. There were a small number of private shops, restaurants, taxis, and tradespeople in many Communist states in the later years of Communist power. The general guideline was that these private enterprises should not be large enough to require many staff, off whose labour the entrepreneur could live without working. This approach was said to be compatible with Marxism, since it did not permit the emergence of large-scale capitalism or exploitation.

A number of Communist states also permitted cooperative ownership of housing. Here, a group of citizens would pool resources to build a (usually small) apartment block, into which they would move. Again, the Communist justification of this was that people were acting together – communally – to help themselves, rather than to generate capital and exploit others.

All of the forms of ownership described so far were legal and open. But there was always also an informal – unregistered and unrecorded – private economy, parts of which were illegal. Sometimes, this involved actual payment to a trades person or someone else who was offering their services clandestinely. But at other times, a form of bartering operated. A plumber might be prepared to offer his services to a farmer in return for a chicken, for example. Such shadow economy activity did not show up in any official economic statistics.