Why the East European countries became socialist after WWII
The Great Depression of 1930s affected most of the Europe very badly. There was a wide spread feeling that capitalism and free market economy failed. Then fascism emerged in Germany, Italy, Spain, and strong autocratic regimes in most of Eastern Europe. This seemed to signify the failure of political democracy. Czechoslovakia, the only remaining democratic country of central and Eastern Europe was given to Hitler by its French and British allies, in Munich (1938).
After WWII the disappointment with private free market economy spread all over Europe. Even in Western Europe socialist and communist parties became very strong. Some West European countries nationalized significant parts of their economies and instituted various forms of planning.
All the EE countries of our concern were liberated by the Soviet army, so that the Soviet influence on their post war development was particularly strong. It also probably helped, that population of many EE countries was Slavic (Poles in Poland; Czechs and Slovaks in Czechoslovakia; Slovenes, Croats, Serbs, and Macedonians in Yugoslavia; Bulgarians in Bulgaria) and therefore had some language and historical affinity to the major ethnic groups of the Soviet Union (Russians, Belorussians, Ukrainians).
Brief survey of EE history after WWII
Social, political and economic changes in most of the EE countries were parallel. The main exception was Yugoslavia that deviated from the other countries from the very beginning. Romania and Albania began to deviate in 1960s.
Precommunist period: 1945 - 1948Immediately after the end of WWII communists fully controlled government existed only in Yugoslavia. Josip Broz Tito, the head of Yugoslavian communists, lead the country immediately to adopt the Soviet-type political and economic system. In the other EE countries democratic governments were restored and reasonably free elections were held. (East Germany was not an independent state then, but a Soviet occupation zone.) In 1946 free elections in Czechoslovakia Communists got 37 per cent and with Social Democrats 52 percent of votes. A coalition government of all five legally existing parties with the communist prime minister was created. In other EE countries (except Yugoslavia) communists were weaker and did not control the government. The official Soviet line was, that the EE countries would not be socialist or communist states but the so called “peoples democracies" with coalition governments. Economically the EE countries were still market economies with prevailing private ownership. Key industries were soon nationalized and attempts were made to adopt planning, however, rather of the West European than Soviet type.
Transition to the Soviet-type system 1948 - 1953Around 1948 the Soviet Union succeeded to eliminate opposition forces and get East European countries fully under the control of communist parties. An example is the Coup d'etat in February 20, 1948 in Czechoslovakia. When seeing that Czechoslovak communists were controlling and misusing police and army, "democratic" ministers (that is members of government from other parties than the Communist party and left wing of the Social Democratic party) resigned, hoping that they would force the communist prime minister to resign as well, and that the Czechoslovak president (who was not communist) would appoint a new noncommunist government. But communists had already organized strong and well armed "militia" forces that went to streets of Prague and forced the president to accept the victory of communism.
After the political power of their communist parties was secured all the EE countries started to convert their economies. Extensive nationalization eliminated most of the private property in industry and trade, and later collectivization eliminated most of private property from agriculture. Nationalized firms were amalgamated into huge state enterprises and put under the direct control of a large number of economic ministries. Soviet-type central planning offices were created, that started to formulate annual and five year plans, prescribing obligatory targets to all the enterprises. They also allocated centrally all the scarce resources. All the prices were put under the government control. Market coordination was thus replaced by the hierarchical administrative central planning. In other words the Soviet-type command economy was created.
These were the years of the cold war. The trade with West was substantially reduced. The Soviet Union directed all of its satellites to forced industrialization and military build-up. Government investments into economy increased enormously and the share of consumption declined. The EE economies experienced fast industrial growth but the standard of living was stagnating or declining.
Yugoslavia, however, took somewhat different path. In 1948 there was a political break between Stalin and Tito. The Soviet Union imposed embargo on the trade with Yugoslavia, which was forced to seek commercial ties with the West. Yugoslavia that started earlier than other EE countries began slowly to dismantle and modify the Soviet-type command economy.
Political thaw and economic stabilization. 1953 - 1956
At the time of the Stalin's death the Soviet-type political and economic system was fully entrenched in EE countries. The cold war was at its peak, but the EE population could hardly tolerate the economic hardship and political oppression of the Stalinist period any further. The new leadership stopped the harshest political practices and reduced the speed of military build-up. This resulted in redirection of investment from the heavy to consumer goods industry. The economic rates of growth were somewhat reduced and the standard of living began to improve fast. The political relaxation opened doors to dissent and criticism of the Soviet policies. This process intensified after 20th Congress of the Soviet Communist Party, on which Khruschev in a secret speech criticized Stalin's "cult of personality" and revealed his crimes. In 1956 Poland and Hungary experienced enormous political upheavals. In both countries former communist leaders (Wladyslaw Gomulka in Poland and Imre Nagy in Hungary) who were removed from power under Stalin were returned to power pledging to implement more liberal form of communism and more consumer oriented economic system. The Soviet Union threatened to invade. Gomulka stood to Khruschev and Poland was spared, but the soviet invasion of Hungary was very bloody. Imre Nagy was taken to the Soviet Union and eventually executed. The puppet "workers-peasant government" lead by Janos Kadar was put in power by Soviets. It is one of paradoxes of history that later Gomulka's rule in Poland developed into as bad totalitarian system as anywhere else in the Eastern Europe, while Kadar's Hungary became the most liberal one.
In this period Yugoslavia started to change its political and economic system towards market socialism with a kind of "participatory democracy" or workers' management. Market forces were revived, obligatory targets of the central plan scrapped and the state ownership of industrial firms was de facto replaced by employee ownership.
Political stabilization and first economic reforms 1956 - 1960.
Political turmoil of 1956 was suppressed and communist parties reestablished their power. Inadequacy of the Soviet-type command economy for the more developed East European countries became obvious. The first attempts to reform the system by partial decentralization, better incentives and improved methods of planning were made. This first reforms, however, did not question the basic nature of the centrally planned socialist economy, they aimed only to improve it. No other EE country went so far in direction of market socialism as Yugoslavia. The reforms did not work and were soon abandoned. The classical Soviet-type system was restored.
Political split with China, economic recession and the second wave of economic reforms. 1960 - 1968.
The political split with China resulted in the reduction of trade, which further impaired the EE economies that were already in bad shape. Serious recession appeared especially in Czechoslovakia. Romania and Albania sided with China and fell out of the sphere of Soviet political control Their political and economic systems remained more orthodox than in the rest of EE. The bad economic performance triggered a stream of reform proposals. Some of them as for example the Lieberman-Kosygin reform in the USSR or reforms in GDR. Poland, and Bulgaria were only half-hearted. They tried to introduce some price flexibility and profit motives, but stopped short of abandoning the obligatory character of central plan. They can be characterized by better incentives and more decision-making power to managers of state owned enterprises, but no real market and no private ownership. On the other hand Czechoslovakia and Hungary came out (1964-1965) with the blueprint for radical economic reforms , that would remove the Soviet-type administrative planning and actually restore the market in the "socialist framework". This reforms began in 1967 (Czechoslovakia) and 1968 (Hungary). In 1968 came in Czechoslovakia also a political revival known as "the Prague Spring". It was an attempt to create "the socialism with a human face". The old Stalinist communist party leader Antonin Novotny was replaced by Alexander Dubcek, who supported the radical political and economic reform programs.