Dependence on China, 1961-78
The Albanian leadership's fixation on heavy industry contributed
significantly to its decision to break with the Soviet Union.
Enver Hoxha gambled that China not only would be less likely than
the Soviet Union to threaten his ascendancy but also would be
more likely to provide investment money and equipment for his
pet industrial projects. Albania's Third Five-Year Plan (1961-65)
amounted to outright defiance of Soviet advice to concentrate
mainly on agriculture. The plan allocated industry 54 percent
of all investment and called for a 52-percent rise in overall
industrial production, including increases of 54 percent and 50
percent in the output of producer and consumer goods, respectively.
Moscow responded by canceling credits. The Albanian leaders foresaw
that a cut in Soviet investment and aid would disrupt their economy
but calculated that maintaining power and continuing industrialization
would outweigh the failure of one five-year plan. The Soviet aid
stoppage brought Albania's foreign trade to a near halt and delayed
completion of major construction projects. Spare-parts shortages
led to a 12.5-percent decline in labor productivity between 1960
and 1963. China compensated Albania for the loss of Soviet credits
and supplied about 90 percent of the spare parts, foodstuffs,
and other goods Moscow had promised. The Chinese, however, proved
unable to deliver promised machinery and equipment on time.
In 1962 the Albanian government introduced an austerity program
to keep the country's sputtering economy from stalling entirely.
Official public appeals to cut costs and conserve resources and
equipment netted a claimed 6 percent savings. The government also
initiated a campaign of "popular consultation," asking individuals
to submit suggestions for improving self-sufficiency. Years of
state terror and still-rigid central control, however, had undermined
the Albanians' willingness to assume personal responsibility.
Party hard-liners, fearing they would lose their positions to
a younger generation of more technically sophisticated managers,
sabotaged cost-cutting measures.
The government launched a program to increase the amount and
quality of arable land by terracing hillsides and draining swamps.
A new phase of collectivization was initiated. However, agricultural
output grew only 22 percent over the entire five years instead
of the planned 72 percent. Overall industrial production grew
a mere 14 percent in 1964 and 1965.
Fearful of a potential domestic power struggle and disappointed
that heavy industry's output had failed to increase significantly
overall between 1950 and 1965, the Albanian regime adjusted its
Stalinist economic system in the mid-1960s. The government altered
the planning mechanism in February 1966 by allowing for a small
degree of worker participation in decision making and reducing
by 80 percent the number of indicators in the national economic
plan. The leadership also decentralized decision-making power
from the Council of Ministers to the ministries and local people's
councils and included a slight devolution of control over enterprise
investment funds. The system was specifically designed, however,
to ensure that resources were allocated in accordance with a central
plan. At no time, at least in public, did Albania's rulers entertain
the notion--heretical to all orthodox Stalinists--that economic
decision making should be devolved to the enterprises.
In March 1966, an "open letter" from the Albanian Party of Labor
to the Albanian people heralded radical changes in the egalitarian
job allocation and wage regime. The authorities cut 15,000 jobs
from the state bureaucracy, replaced executives, and shunted managers
and party officials into the countryside. The government then
eliminated income taxes and reduced the salaries of highly paid
workers. Wages varied by industry, but the ratio between the lowest
and highest salaries was only about 1:2.5. Reviving a scheme originally
launched in 1958, the government began assigning all employees
to perform "productive" physical labor. People engaged in "mental
work"--for example, intellectuals, teachers, and party and state
bureaucrats--were required to toil in the fields for one month
each year. Even high-school students took part in "voluntary"
construction and agricultural work. Only the party elite remained
unaffected by the egalitarian reforms.
In emulation of China's Cultural Revolution, which was designed
to rekindle the revolutionary fervor of the masses, Hoxha prescribed
a regular rotation of managers to prevent "bureaucratic stagnation,"
"bureaucratism," "intellectualism," "technocratism," and a whole
neologistic lexicon of other "negative tendencies." The campaign,
called the Cultural and Ideological Revolution, also prescribed
the replacement of men with women in the party and state administrations.
The government's economic adjustments militated against efficiency.
Workers, who were given a voice in planning, lobbied for the easiest
possible production targets and worked to overfulfill them in
order to earn bonuses. But because one year's output figures became
the basis for the next year's targets, they tried to limit overfulfillment
to prevent the imposition of difficult targets in the next planning
period. The government's campaign to send office workers out to
the fields, mines, and factories encountered resistance. The policies
of guaranteed full employment and extensive growth--expanding
productive capacity rather than squeezing more from existing capacity--made
huge numbers of workers redundant. The low quality and quantity
of consumer goods and virtually flat income-distribution curve
dampened incentive. Workers dealt in pilfered state property and
rested at their official jobs in order to moonlight illegally.
Although the government had herded all artisans into cooperatives
by 1959, many craftsmen, including tailors, carpenters, and clothing
dealers, earned undeclared income through private work. Black-market
construction gangs even performed work at factory sites and collective
farms for directors desperate to meet plan targets.
In the late 1960s, thanks mainly to massive capital inflows from
China, the Albanian economy expanded. The Fourth Five-Year Plan
(1966-70) called for an increase of about 50 percent in overall
industrial production, with producer-goods production increasing
by 10.8 percent annually and consumer-goods output rising 6.2
percent. Most sectors exceeded plan targets. Heavy industry's
share of overall industrial production rose from 26 percent in
1965 to 38.5 percent in 1970, the largest increase registered
in any five-year period in Albania's history (see Table 4, Appendix).
In 1967 the government launched a "scientific and technical revolution"
aimed at improving self-sufficiency. For the first time, the Albanian
Party of Labor made a serious attempt to take into account Albania's
natural resources and other competitive advantages while planning
industrial development. Government officials examined blueprints
for coal-fired and hydroelectric power plants as well as plans
for expanding the chemical and engineering industries. Despite
chronic worker absenteeism, the engineering sector performed remarkably
well, tripling output between 1965 and 1973. The late 1960s also
saw changes in the agricultural sector. The authorities announced
a farm collectivization drive in 1967 and, in an attempt to take
advantage of economies of scale, amalgamated smaller collectives
into larger state farms in 1967 and 1968. By 1970, Albania's power
grid linked all the country's rural areas.
In the early 1970s, Albania's economy entered a tailspin when
China reduced aid (see Shifting Alliances, ch. 4). During the
period of close ties, the Chinese had given Albania about US$900
million in aid and had provided extensive credits for industrial
development. In the mid-1970s, China accounted for about half
of Albania's yearly US$200 million in trade turnover. The economic
downturn after the aid reduction clearly showed that Albania's
Stalinist developmental strategy failed to provide growth when
levels of foreign aid were reduced. In the Fifth Five-Year Plan
(1971-75), the government called for an increase of about 60 percent
in the value of overall industrial production; producergoods production
was to increase by about 80 percent and consumer-goods output
by about 40 percent. General results from the first two years
of the plan were relatively satisfactory. But after China reduced
aid to Albania substantially in 1972, many key sectors fell disastrously
short of plan targets. Tiranė responded by launching an export
drive to the capitalist West a year later. In 1974 the government
criticized consumer-goods producers for failing to meet assortment
and quality objectives. During the five-year period, overall industrial
production rose just over 50 percent; producer-goods output, 57
percent; and consumer-goods output, 45 percent. Despite the obvious
link with the curtailment of Chinese aid, the Albanian government
offered no official explanation for the economic downturn. Widespread
purges were reported in 1974, 1975, and 1976.
Data as of April 1992