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Bulgaria Table of Contents



Bulgarian postwar economic development can be divided into four phases: the revolutionary period (1944 through 1948); the development of socialism (1949 through 1960); the age of intermittent reform (1961 through 1989); and the transformation to a market economy (beginning in 1990).

Postwar Economic Policy

After the BCP came to power in 1944, the transition to socialism began slowly. Before World War II, the Bulgarian economy had been agrarian and decentralized, so the industrial base was relatively undeveloped (see The Interwar Economy , ch. 1). Following the Soviet model, the BCP first sought control over as many facets of the economy as possible. Thus, restructuring included collectivizing agriculture, confiscating private enterprises, nationalizing industry, and enacting various fiscal and monetary measures.

In the 1940s, the BCP viewed the agricultural sector as a major obstacle to the transformation of the economy. Although collectivization proceeded slowly at first, state power in the agricultural markets was quickly established by nationalizing internal and foreign commodity trade. To accomplish this, the BCP used the wartime organizations that had overseen distribution of major crops.

Industry continued to decentralize from 1944 until 1947. In those years, the majority of labor leaving the military and the farms entered small factories and unmechanized artisan shops. These small enterprises were quite the opposite of the modern, largescale industry that the BCP was committed to creating. Small enterprises also competed with state enterprises for scarce raw materials and skilled labor. Labor discipline also was a major problem during this phase; unexcused absences, sporadic strikes, and high labor turnover plagued the new state enterprises. In September 1947, a decision to accelerate the nationalization of industry was taken at a meeting of the Communist Information Bureau (Cominform--see Glossary). As a result, in December 1947 trained groups of party members entered all the approximately 6,100 remaining private enterprises, seized their capital, and announced their immediate nationalization. This act effectively erased Bulgaria's small class of private industrial entrepreneurs. Also in 1947, government monopolies were established over all items of retail trade. By the end of 1948, 85 percent of the means of production were run by the state.

Although Bulgaria had few private banks when the BCP came to power, by December 1947 those few were merged with the BNB. The BCP also enacted a series of fiscal and monetary measures to gain control over Bulgaria's financial resources by the end of 1947. Monetary reform froze all bank accounts over 20,000 leva, and a tax was imposed on the remaining accounts. These actions reduced the money supply by two-thirds. The new policy also levied high taxes on private income and high profits to absorb any potential new deposits.

This first phase of postwar economic development included a tentative Two-Year Plan (1947-48) that foreshadowed later policies. Aimed principally at speedy recovery from wartime stress, the program began large-scale industrialization and electrification; it sought to raise industrial production by 67 percent and agricultural production by 34 percent over prewar levels. In the event, the first plan disproportionately allocated funds away from agriculture and encountered severe organizational and technical problems, mistakes by inexperienced management, and shortages of energy and production equipment--problems that would continue in ensuing development phases.

Data as of June 1992