Foreign Relations of the United States, 1949, Eastern Europe; The Soviet Union, Volume V

861.50/1–1049

The Chargé in the Soviet Union (Kohler) to the Secretary of State

secret

Moscow, January 10, 1949.

No. 21

The Chargé d’Affaires ad interim has the honor to acknowledge the receipt of the Department’s instruction No. 180 of December 9, 1948² in regard to a recent meeting in the Department at which Ruth Fischer, former German Communist, developed her interpretation of the Varga incident with reference to the publication in 1947 of criticism of Varga’s book entitled: “Changes in the Economy of Capitalism”³ (see Embdespatch No. 1713 of October 10, 1947²) and to continued attacks in Soviet periodicals during the early part of 1948 on Varga and his supporters (see Emb despatches 309, March 31; 395, April 30; 495, June 21; and Emb A–622, June 26, and A–639, June 30, 1948⁴). The Department’s reference instruction evidently crossed the Embassy’s telegram No. 2850 of December 8 [6]⁵ and its despatch No. 833 of December 9, 1948,⁶ reportingand giving the Embassy’s interpretation of a recrudescence of severe criticism in public print against the still unrepentant Varga.

As the Embassy commented when this new evidence of the continued existence of a fundamental split between Soviet economists first appeared in Planned Economy No. 5, 1948, it believes that the Varga affair, which can no longer be classed as an incident, reveals a fundamental uncertainty in the highest levels of the Soviet regime. Upon this point the Embassy is in full agreement with Miss Fischer’s thesis that there is probably a profound difference of opinion in the highest ranks of the Party on the crucial question of the capacity of the West to maintain a healthy economy and increase its industrial-military potential. Otherwise it would seem impossible to account for the fact that Varga, who is accused of “teaching bourgeois theories of the ‘planned nature’ of capitalistic economy, of soft-pedaling the class conflicts of capitalism and its general crises, of adopting a conciliatory attitude toward bourgeois theoretical apologetics, etc.” could survive for more than a year and a half and still be permitted to repeat his “errors” in a speech at the October, 1948 session of the Institute of Economics, whereas in the other fields of Soviet Science, art and literature where the Party broom has swept, the heretics have either rushed to confess their mistakes and to conform to the Party line or been pushed into the background. Of the Varga group originally condemned only Eventov, according to Planned Economy, acknowledged his mistakes while “as a whole, this group displayed a non-party, un-Bolshevist attitude toward criticism and self-criticism, thus intensifying to a great extent the error of their whole position”. That Varga still continues to hold a prominent place in the Academy of Sciences after this terrifying indictment has been confirmed as recently as January 3, 1949 when Evening Moscow reported the departure from Moscow of a group of scholars for Leningrad to participate in the Academy’s meeting devoted to the history of Russian science (See Emb A–1292 December 30, 1948⁷). Among the scholars mentioned who were to participate in the meeting and deliver speeches, was Varga.

As regards Miss Fischer’s view that this cleavage carries through into a difference of opinion on Soviet policy, one school pressing for constant and active expansion while the other deriving support from Varga’s economic conclusions advocates a more cautious approach, it is believed that the Varga affair is an important indication of the doubts and perplexities necessarily assailing Soviet policy-makers and a reflection of one of the fundamental considerations which must weigh heavily in the councils of the Politburo.⁸ The Embassy has always felt that in the deliberations of the Politburo there have been, to a certain extent at least, clashes of opinion on subjects to be decided, but once a decision has been reached, ranks are closed and the whole party hierarchy, as well as the Government, is committed by loyalty and discipline to carry out in full measure the policy decided upon. Moreover, no evidence has appeared to cast doubt in the Embassy’s mind on the thesis that Stalin⁹ continues to exercise actively in all major questions the final word. It is undoubtedly significant that he has not yet committed his authority to either side in this dispute nor has any other top-level leader of the Party.

Thus, if Miss Fischer means to say by her reference to two schools of thought on a policy level that there are clashes of opinion amongst members of the Politburo (always excepting the Leader) on this or that question of policy to be decided at the moment, then the Embassy is in agreement that in reaching a decision on matters involving the calculation of Western stability and strength, the views of the Varga school are probably being carefully weighed. There are also many other considerations, such as military, social and psychological factors, both external and internal, which would be involved in reaching a decision on matters involving a more or a less aggressive policy. In our view, however, these considerations as a whole now apply rather to questions of timing and tactics than to strategy and ultimate objectives.

If Miss Fischer means to imply that there is a split in the Politburo on policies already adopted or that there are now two factions in that body, one contending for a radical change in present Soviet policies, the Embassy cannot agree. It is clear that the basic decision to revert to militant Communism and to identify the “Anglo-Americans” as the principal enemy was taken in 1945, if not before. If there were any doubters of the wisdom of this decision they have certainly long since swallowed their doubts or been removed from any role of authority. The only “Soviet leader” we know of who disclosed any qualms on the subject was the already powerless Litvinov,¹⁰ who did so to Ambassadors Harriman (in September 1945¹¹) and Smith (in March 1946¹²) thereby incidentally confirming that the great decision had in fact already been taken. Given the Soviet Union’s objective as the attainment of preponderant strength over any possibly unfriendly combination and the eventual victory of communism throughout the world, it would be natural that differences of opinion would arise amongst any group of men responsible for the policies to attain this objective. But the inner dynamics of the objective supported by a “scientific” dogma, which teaches the historical correctness of the end sought, compel the Soviet leaders to press on with the world revolution. There may be periods of ebb and flow in the revolutionary movement, as Stalin has said (see Embtel 3030 Dec. 27, 1948¹³), requiring the adoption of more and then less dynamic policies, but the pressure must be kept on. Tactics may change but the strategic objective never.

With these cautions, therefore, the Embassy is in wholehearted agreement with Miss Fischer’s contention that the original public airing of the Varga dispute coupled with the recently published confirmation of the continued existence of two schools of opinion on this subject reflects an as yet unresolved difference of views at such high levels that each side in the controversy has powerful and effective support. The dispute has so far occurred on a comparatively low technical level and it may be that a revision of the present party line by a higher authority will be called for which will see the Varga group emerge at the top.

Yugoslavia is another matter. The Embassy cannot agree with Miss Fischer’s reasoning that a connection existed between the Tito¹⁴ episode and the issues involved in the Varga controversy, in that Tito was forced by the exigencies of the Yugoslav internal situation into alignment with the school advocating caution. There were undoubtedly many factors governing the decision to make an issue of Tito’s Yugoslavia. As the Embassy has previously reported (Embtel 3008, Dec. 23, 1948¹⁵) it appears evident that the Tito break was consciously decided upon by the Soviet leaders who, although there were many choices open to them for settling the issues involved, deliberately chose an open split with all its consequences. The possible connection between this decision and the issues in the Varga dispute, as the Embassy views it, is that having decided that the advance of Communism in Western Europe was temporarily halted by the growing forces of stabilization, the Politburo came to the conclusion that a policy of consolidation and stricter Soviet control over the satellites was necessary at this time even at the price of temporary weakness in order to gain strength for the inevitable future conflict. If this be true, Varga’s theories on post-war developments in the capitalistic countries would have supported those advocating this policy.

The Varga dispute has not been allowed to die down. An article by I. Kuzminov entitled “On the Crisis-Like Character of the Economic Growth of the USA in the Post-War Period” appeared in the December 15 issue No. 23 of Bolshevik, a periodical of the Central Committee of the CPSU(B) and the renewed criticism of the Varga group at the meeting of the Institute of Economics October 2–5 first reported in Planned Economy No. 5 has been expanded upon in the recently received issue of Annals of the Academy of Sciences USSR Section of Economics and Law No. 6, Nov.–Dec. 1948, in an article entitled “Scientific Life—on the Shortcomings in Scientific Research Work in the Field of Economics and the Tasks of Soviet Economists” as well as in Questions of Economics No. 8 just received where the report of K. V. Ostrovityanov,¹⁶ head of the Institute of Economics, is reprinted in full. The text of Varga’s much criticized speech has not been published.

These articles will be the subject of a future report. They do not add anything essentially new to present knowledge of the affair but their appearance indicates no desire to conceal the differences—rather a wish to bring them into the open pending a final definitive stand on the question by the Party in the unknown future.

F[oy] D. K[ohler]

2. Not printed.
3. Yevgeny (Eugene) Samoylovich Varga was a Hungarian-born famous Soviet economist and Director of the Institute of World Economics and World Politics in the Academy of Sciences of the Soviet Union until October 1947. His severely criticized book was entitled Changes in the Economy of Capitalism as a Result of the Second World War.
2. Not printed.
4. None printed; however, in regard to despatch No. 495, see Foreign Relations, 1948, vol. iv, footnote 2, p. 942.
5. Ibid., p. 940.
6. Not printed, but see ibid., footnote 1, p. 947.
7. Not printed.
8. The Political Bureau of the Central Committee of the Communist Party of the Soviet Union.
9. Iosif Vissarionovich Stalin, Marshal and Generalissimo, Chairman of the Council of Ministers of the Soviet Union (premier).
10. Maxim Maximovich Litvinov had been the People’s Commissar for Foreign Affairs of the Soviet Union from 1930 until May 3, 1939, and Ambassador to the United States, 1941–1943. After his recall he had served as an Assistant Commissar (from March 15, 1946, a Deputy Minister) for Foreign Affairs until his retirement on August 24, 1946.
11. Ambassador Harriman reported on the disquieting conversation he had had with Litvinov on the previous evening in telegram 3930 from Moscow on November 22, 1945; Foreign Relations, 1945, vol. v, p. 921.
12. For a quotation from Litvinov’s private conversation with Ambassador Smith on May 23, 1946, see ibid., 1946, vol. vi, footnote 11, p. 763.
13. Ibid., 1948, vol. iv, p. 947.
14. Josip Broz Tito, Marshal, President of the Council of Ministers, and Minister of National Defense of the Federal People’s Republic of Yugoslavia.
15. Foreign Relations, 1948, vol. iv, p. 943.
16. Konstantin Vasilyevich Ostrovityanov was a Soviet economist, Director of the new Institute of Economy, following the fusion of the Institute of World Economy and World Politics (headed by Varga until October 1947), and Director of the Institute of Economy of the Presidium of the Academy of Sciences.