Introduction
Cotton is one of the most notorious icons of industrialization. It has formed a major material basis for industrial revolutions throughout the world, from nineteenth-century Lancashire to China’s economic expansion in recent decades. During that latter expansion in the second half of the twentieth century, the hubs of the European and North American textile industries fell into decline while places in East Asia, like Osaka and the Pearl River Delta, became industrialized by way of cotton processing. Sven Beckert’s global history of cotton describes this twentieth-century development as a fundamental spatial shift in the ‘empire of cotton’.Footnote 1 The socialist world figured significantly in this shift.Footnote 2 In the long run, the People’s Republic of China became the world’s largest producer of raw cotton and textiles, with the Soviet Union coming second in terms of raw cotton in 1980.Footnote 3 Smaller east European states also developed or maintained considerable textile industries that exported part of their product to global markets.Footnote 4 However, Beckert’s global history of cotton mostly omits the part that socialist eastern Europe played in the ‘cotton empire’. By contrast, this article takes socialist eastern Europe into the focus to show how Bulgarian cotton trade with African countries during the early Cold War years was shaped by the (infra-) structures of the commodity market rather than by a political agenda of self-sufficiency and self-isolation from global capitalism.
Unlike Beckert’s comprehensive book, this article does not consider the whole ‘empire’ from cotton growing and research to textile production and capital transfers, but focuses on trade, namely cotton imports to Bulgaria from Egypt and other African countries. It asks how the (Bulgarian) socialist economic bureaucracy positioned itself in international cotton markets and shifts the focus from trade statistics that suggest strictly bilateral state-controlled exchanges to the traders’ interactions with trade infrastructures. These interactions reveal how socialist trade organizations adaptated to the requirements and conjunctures of capitalist markets. They also highlight, in a more general perspective, the persistence of institutions and structures from the nineteenth-century ‘empire of cotton’ with its British hegemony. A focus on trade infrastructures and day-to-day practices also exposes divergences inside state socialist economic bureaucracies around procedures in international markets and the foreign trade organizations’ negative reaction to the nationalization of trade in cotton-supplying countries.
Global histories of commodities and economies generally marginalize socialist eastern Europe. Based on its image as a world apart and an inscrutable monolithic entity – a ‘bloc’ – it is seen as outside of or opposed to the capitalist world system, its markets and processes of globalization.Footnote 5 Jürgen Osterhammel and Niels Petersson, for example, describe globalization as ‘cut in half’ (‘halbierte Globalisierung’)Footnote 6 and the doyen of German globalization studies Elmar Altvater states that eastern Europe had ‘almost hermetically sealed itself off for many decades.’Footnote 7 Accounts of globalization in eastern Europe usually start from 1989.Footnote 8 Mainstream economic history interprets state socialism as leaning towards ‘functional autarky’ or ‘bloc autarky’.Footnote 9 The traditional Cold War narrative of a ‘conflict of systems’ is still dominant, as demonstrated by Odd Arne Westad’s latest dictum that ‘the Cold War was a confrontation between socialism and capitalism.’Footnote 10
In contrast to this persistent picture of socialist Eastern Europe as a world apart, this article suggests to incorporate socialist Eastern Europe into accounts of globalization and the world economy – in line with recent global history approaches to state socialism.Footnote 11 Global history scrutinizes claims that socialist economies were autarkic. Such claims are based on the small percentage of foreign trade in socialist states’ general economic performance, the bilateral character of their foreign economic relations and the assumed systemic priority of imports in planned economies.Footnote 12 Counterarguments are that the numbers obscure the real significance of hard currency trade, that socialist economies depended on technology imports from the West and that east European states, after joining supranational institutions, ended up heavily indebted to western financiers. Global history approaches also point to the adoption of capitalist world-market prices as the basis of intra-COMECON trade to illustrate the extent of eastern European countries’ economic integration into capitalist economic flows and structures.Footnote 13 As Oscar Sanchez-Sibony summarized it, ‘the Soviet economy was in large measure embedded in global economic structures at all times in its history’.Footnote 14
A major focus in this field has been on the interconnections of socialist Eastern Europe with the Global South, for which recent contributions have introduced the concept of ‘socialist’ or ‘alternative globalization’.Footnote 15 One of the central questions in the debate has been whether the projects, policies and activities of socialist state actors in the post-colonial world represent independent ‘socialist’ projects among multiple processes of globalization or rather a contribution to an assumed general capitalist globalization. The answers remain ambiguous. There is a consensus, however, that not only private entrepreneurs and market actors can be globalizers, but also states and governmental organizations. Global history accounts of East–South relations see the diffusion of economic power to nation states in the wake of decolonization as much as an expression of globalization, as globe spanning, but hierarchical, imperial structures.Footnote 16 If, however, globalization is a multi-layered process of re-spatializations, empire and nation states are not only simply succeeding or mutually exclusive, but also overlapping layers and competing formats of spatiality.Footnote 17 The concurrence of these competing re-spatializations – the persistence of empire, the process of bloc building and nationalization – constituted the working environment for the Bulgarian cotton trade officials.
In order to nuance the debate about East–South relations and socialist globalization, this article shifts the focus in two respects. First, most of the studies in the field concentrate on development and the socialist states’ technical assistance projects, while trade is rarely the focus.Footnote 18 The concentration on aid results in a bias towards a primacy of politics in East–South relations, which will be tackled here by examining a specific branch of trade.
Second, this article shifts the focus to the first two Cold War decades. Most studies on socialist globalization take détente, decolonization in sub-Saharan Africa or the oil crisis as a starting point. East–South relations and the socialist states’ foreign economic activities are supposed to have undergone a process of commercialization and a turn to the West from the 1970s onwards.Footnote 19 By contrast, early Cold War East–South relations mostly appear as rigidly bilateral and political. To reconsider the character of early East–South relations reveals continuities and market environments stemming from pre-socialist times in the after-war decades, and thus helps to nuance the picture of the 1950s and early 1960s as the height of the nation state’s power before intensified globalization occurred.Footnote 20 Accordingly, the article starts with Bulgaria’s first post-war cotton purchases in Egypt in 1946–47 and the introduction of a foreign trade monopoly in 1948. It closes with the late 1960s/early 1970s as a turning point: alongside Détente and global economic crises, Nasser’s fall and Anwar el-Sadat’s seizure of power in Egypt in 1970 precipitated Cairo’s rejection of both state-dominated foreign trade and its trade partners in the Soviet bloc.Footnote 21
Bulgaria represents a peculiar example for cotton trade in and around the Soviet bloc. It is often considered the Soviet Union’s most faithful satellite, but, nonetheless, it was especially active and creative in the realm of foreign exchanges. More than governments and traders in other socialist states, the Bulgarian trade bureaucracy resorted to founding enterprises in ‘the capitalist abroad’.Footnote 22 Third World states saw Bulgaria as a special partner because it had begun its socialist path of development after the Second World War as a predominantly agrarian country.Footnote 23 Though less visible in the Stalinist industrialization model than dams, coal and steel, textiles and cotton played a particular role in Bulgaria’s economic development during the first Cold War decades. Moreover, Bulgaria was the only Soviet partner state to have its own (substantial) raw cotton production, though this production did not make imports superfluous.Footnote 24 Being representatives of Moscow’s closest ally did not prevent Bulgarian trade officials from seeking advantages from imperial infrastructures and world market integration and from using their room for manoeuvre.
In the early phase of the Cold War, African states were the most important cotton suppliers outside the bloc for Bulgaria and other east European socialist states. Next to Egypt, which held a stable dominant position, a few other African states, most prominently Sudan, are interesting because Bulgarian (and other east European) cotton experts cultivated them to become alternative suppliers; however, the actual volume of cotton imports from these states remained negligible in the period under examination.
This study’s sources include correspondence, reports and agendas of Bulgarian state organizations in the central state archive in Sofia – especially the trade firm Industrialimport, the Ministry of Foreign Trade and the Foreign Ministry’s representations in African countries – and to a lesser extent, reports from other state and party organizations, like the Chamber of Commerce and the foreign relations department of the Bulgarian Communist Party (BCP). These sources also shed light on the context of Bulgarian cotton traders worked in, but mostly secondary sources help to describe the (infra)structures of exporting countries, such as the Alexandrian stock exchange, its cotton merchants and Nasser’s nationalizing economic policies.Footnote 25
The article is divided into three sections. The first outlines the economy of the socialist camp’s international cotton trade during the early Cold War, pointing to the crucial roles of the Council of Mutual Economic Assistance (COMECON) and Egypt as the main outside supplier and defining Bulgaria’s place as a cotton producer and importer. The second section describes the framework in which the Bulgarian traders operated during the 1940s and 1950s. It depicts the development of the Bulgarian (cotton) trade bureaucracy and illuminates the imperial legacy of the international trade infrastructures that Bulgarian traders were confronted with. The third section describes the shift towards increased state-controlled trade in the late 1950s and 1960s in post-colonial cotton supplying countries, and the Bulgarian reaction to it. The conclusion summarizes the main argument that socialist foreign economic activities in the field of cotton were embedded in global capitalist infrastructures.
The economy of cotton in the Soviet bloc and exchanges with the global south
Many researchers have examined the creation and operation of socialist heavy industry and massive infrastructural projects.Footnote 26 Few, however, have tried to develop a history of socialist eastern Europe’s light industry, or of cotton and textiles in particular.Footnote 27 In fact, cotton and textiles held considerable importance for socialist development in the second half of the twentieth century and were a critical issue for planners and foreign traders. Cotton lies at the intersection of agricultural and industrial production, and thus played into both the socialist regimes’ industrialization discourse as well as the collectivization and virgin land campaigns of the 1950s, most prominently the Soviet Hungry Steppe development project.Footnote 28 The textile sector accounted for a significant share of industrial production, and some of its output could be exported for hard currency.Footnote 29 Cotton and textiles were among the easiest industries to reorganize or build anew, so they were especially important in the early post-war years, not only for socialist countries but also for west European countries like the United Kingdom.Footnote 30
After the post-war (re-)construction phase, the Bulgarian textile industry helped meet both domestic consumption needs and export goals. In 1960, far more than 10% of Bulgarian exports were cotton products or other textiles. After fruit and vegetable products and tobacco, they made up the third biggest group of export goods. The majority of textile exports consisted of ready-made cotton garments that went almost completely to the Soviet Union. These garments thus paid for imports of Soviet machinery, which became the backbone of Bulgaria’s post-war industrialization. One-fifth of the Bulgarian textile exports was cotton fabric for further processing, which was sold to the ‘capitalist abroad’ – i.e. to countries in western Europe and in the Global South, mostly the Middle East and northern Africa.Footnote 31 Thus, cotton products also earned much of the hard currency needed to purchase special industrial equipment as well as raw materials, among them prominently cotton itself.
The Soviet Union was COMECON’s chief cotton producer and provider. The Soviets exported a part of the yield from its cotton fields in Uzbekistan, Turkmenistan and Tadzhikistan to eastern Europe and these exports by far exceeded the volume of all other cotton imports of COMECON countries. East European industries even adjusted some of their machinery to accommodate the characteristics of Central Asian cotton, rendering them dependent on Soviet supplies.Footnote 32
Still, Soviet supplies could not satisfy eastern European demand for cotton. The Soviet leadership urged COMECON countries to ratchet up domestic production or else buy cotton from other countries. In the early post-war years, Moscow pressured the Bulgarian government to raise production and directed the Romanian, Albanian and Hungarian governments to start growing cotton.Footnote 33 While the latter attempts were mostly unsuccessful, Bulgarian cotton growing temporarily reached new heights before it stagnated at a moderate 50–60,000 tons in the 1950s and 1960s. High costs and the low quality of the domestic cotton yields pushed Bulgarian planners towards imports from countries outside of COMECON.Footnote 34
As socialist states were barred from the American market,Footnote 35 the remaining cotton producers became extremely important, particularly Egypt. For Bulgaria in the 1950s, China, Syria and Greece became important suppliers alongside Egypt. Bulgaria’s cotton supply was not greatly diversified until the 1980s, however. Then, many more Third World countries became temporary suppliers – among them African countries such as Ethiopia, Cameroon and, most significantly, Tanzania.Footnote 36
Bulgarian Raw Cotton Imports in TonsFootnote 37
Such a diversification of cotton supplies had been a political project of east European socialist countries since the mid-1950s.Footnote 38 For example, Sudan was discussed at COMECON meetings as a potential alternative supplier for long-staple cotton due to its favourable climatic conditions. The east European cotton trade officials hoped to enlarge Sudanese production through scientific exchange, and thus implicitly built upon the British imperialists’ ‘Gezira’ scheme, a large irrigation project that had transformed local agriculture and had turned Sudan into a cotton-export economy in the decades up to the 1950s.Footnote 39 Amid these efforts, Bulgarian foreign trade organizations supported cotton production in various African countries. Thus, for instance, Bulgarian export firms assisted the establishment of state farms for cotton production (and textile factories) in Ghana, and flew sorties over cotton fields in Sudan to provide crop protection.Footnote 40
In spite of these efforts, Egyptian cotton remained indispensable for the whole socialist bloc throughout the Cold War period. The main reason for its special role was its quality. Distinctive characteristics rendered Egyptian long-staple cotton crucial to the textile industries in eastern Europe, and Soviet cotton could not replace it completely. Egyptian cotton has a long history as a substitute for American long staple Sea Island cotton,Footnote 41 which was out of reach for traders from the socialist bloc. In the late 1950s, Egypt produced 59% of the global extra-long staple cotton and thus dominated this market segment that represented 7% of all cotton production at the time.Footnote 42 Because of Egypt’s dominant position as a producer of high-quality cotton, even the Soviet Union, itself a huge cotton exporter, imported Egyptian cotton. Footnote 43
These imports became substantial in the second half of the 1950s. After fluctuating between 0 and 40,000 tons in the first post-war decade, Soviet purchases from Egypt rose to 80,000–110,000 tons from 1957 to 1966.Footnote 44 Considerable quantities of these purchases went into re-export deals. Exact data for these re-exports are not available, but most certainly the lion’s share was supplied to COMECON countries, while another part was sold to western European countries. Thus, Egyptian cotton was not only a needed raw material, but also a means of payment that the Egyptian government used to compensate the Soviet bloc for industrial equipment and weapons.Footnote 45
For Egypt, exports to eastern Europe became increasingly significant. After the bumpy start from the Second World War to the mid-1950s, purchases by Soviet and East European cotton importers grew exponentially. Their share in Egypt’s cotton exports increased from 19% in the 1954–55 season and 31% in 1955–56 to a record high of more than 63% in 1958–59.Footnote 46
The socialist countries’ immense role in Egypt’s cotton exports presented the Egyptian government with a dilemma. The Egyptian economy depended on ongoing exports of cotton, the country’s most valuable product. For decades, Lancashire’s textile industries had purchased the bulk of Egypt’s cotton harvests, but these purchases were now drastically reduced as Egypt moved out of the British realm of influence, leaving the Sterling zone in 1952 and banning English and French businesses after the Suez crisis in 1956. Eastern European socialist states and the PRC became alternative purchasers of large parts of Egyptian cotton harvests by providing industrial equipment and weapons in exchange. At the same time, the Egyptian government urgently needed hard currency and therefore tried to lower the percentage of cotton sold in the framework of the bilateral clearing agreements that dominated trade with socialist states. Given their comfortable buyer position vis-á-vis Egyptian exporters, the most powerful Eastern bloc buyers – the Soviet Union and Czechoslovakia – even imperilled Egypt’s seller position on international markets through the re-exports mentioned above.Footnote 47
The Egyptian government reacted with measures for curtailing exports to eastern Europe. The east European socialist traders, on their part, responded with strategies that exposed mercantile rationales in the socialist economic bureaucracy and helped to undermine the Egyptian nationalization efforts. Both sides theoretically preferred state-controlled foreign trade, but practically, socialist governments’ economic interests translated into benefit-oriented and maximalist day-to-day business practices within their foreign trade organizations.
Under the auspices of empire: Buying cotton in the post-war world
This section examines the early development of socialist Bulgaria’s cotton trade. It shows how the traditional cotton empire’s infrastructures remained important in officially bilateral East–South exchanges. The new socialist leaders had inherited a complex of relations and institutions that had to be rebuilt and reorganized after global depression, fascism and war. To be sure, like all eastern European socialist governments, the Bulgarian one declared a foreign trade monopoly shortly after the foundation of the People’s Republic of Bulgaria (Narodna Republika Bălgariya – NRB).Footnote 48 As in other socialist countries, the monopoly always had its limits. In the 1970s and 1980s, liberalization measures allowed producers or foreign trade firms to carry out a certain range of independent sales or imports for hard currency.Footnote 49 In the 1960s, the monopoly clashed with both the practices of foreign trade agents working abroad and the regime’s own interest of acquiring hard currency assets. And in the post-war decade, a functioning monopoly could not simply be imposed from scratch.
In the late 1940s, Bulgaria purchased cotton sporadically, through unstable channels, in an interplay of state and private actors. In some cases, it could import Egyptian cotton in re-export deals with the Soviet Union, but otherwise the Bulgarian government had to send delegations directly to the Middle Eastern cotton exchange hubs of Istanbul and Alexandria. When a delegation abroad failed to strike a beneficial deal, the Bulgarian foreign trade directorate, the predecessor of the Ministry of Foreign Trade, had to rely on representatives of Alexandrian trade companies in Sofia for more expensive purchases of the cotton the textile industry so urgently needed.Footnote 50
A broader historical view helps to explain the presence of Alexandrian cotton merchants’ agents in Sofia in the late 1940s: only seventy years before the founding of the NRB, Sofia and Alexandria had still belonged to the same state. Mid-nineteenth-century Bulgarian proto-industrialization was largely based on textiles produced to meet Ottoman demand – not least that of the Empire’s army – in provincial towns such as Gabrovo, the ‘Bulgarian Manchester’. This textile production was connected to a trade network reaching as far as Alexandria.Footnote 51 However, the nineteenth-century and pre-war textile industries had mostly used raw materials other than cotton, e.g. wool, flax or linen, so raw cotton import volumes were much lower than they would be in the second half of the twentieth century. Cotton imports still were negligible in the 1920s, but figures for the 1930s reflect Bulgaria’s increasing integration into the German ‘Großraumwirtschaft’,Footnote 52 as Nazi Germany monopolized deliveries to Bulgaria (see figures for 1939 above). After the war, which had stopped Bulgaria’s cotton trade almost completely, imports reached an unprecedented level. Despite the distinctiveness of its Ottoman history, Bulgaria’s earlier legacy of cotton and textile trade with Middle Eastern and African countries was not exceptional among socialist countries. Other COMECON members’ cotton trading was similarly based on networks and arrangements from before the war.Footnote 53
Gradually, socialist leaders in Bulgaria nationalized the trade structures and networks they had inherited from pre-socialist times. The foreign trade organization responsible for cotton trade, Industrialimport, was founded in 1947 on the basis of an import office that private industrial enterprises had run jointly to secure raw material supplies. The staff from that earlier office were transferred to the new enterprise. It started as a joint-stock corporation with 30% of the shares held by the state, 30% by the Central Union of Cooperatives and 40% by private industrial enterprises before it was completely nationalized in 1948 and subordinated to the Ministry of Foreign Trade.Footnote 54 Industrialimport was responsible for importing the basic materials needed for Bulgaria’s light industry, particularly cotton and other textile fibres, as well as for selling the products of the textile industry.
While the socialist state could nationalize its trade firm, it could not nationalize the working environment for traders. Bulgarian trade officials depended upon the services of various actors and structures of international capitalist cotton markets at every stage of the purchasing process. The realization of transactions required numerous facilities and systems, such as transport, insurance, information on the quality and characteristics of goods, standardization of quality criteria, pricing information and arbitration in cases of conflict.
An examination of these trade infrastructures demonstrates that socialist traders’ actions were far more systematically integrated into global capitalist markets than trade volume statistics alone would suggest. Traders studied pricing developments on the cotton exchanges of Liverpool, New York and Alexandria, applied the quality standards of the old cotton empire (e.g. gud tu fuli gud, here transliterated from Bulgarian Cyrillic) and used the internationally accepted Incoterms for shipping.Footnote 55 They relied on British banks for financial transactions, employed Liverpool arbitration and engaged brokers to implement cotton purchases.Footnote 56 If we follow a specific charge of cotton, it was bought from an Alexandrian merchant like Mohammed Farghaly, whose Cotton & Investment Co. S.A.E., was the largest Egyptian cotton exporter at the time.Footnote 57 A Certificate of Quality from the Société Misr pour l’exportation du coton S.A.E. stated the quality of the export good according to the Minet-el-Bassal Bourse (the Alexandrian cotton exchange) standard. Prior to transport, cotton had to be pressed into bales, a service performed by the Société General de Pressage et de Dépots, among others. Founded in 1889, it was the oldest establishment specializing in the storage and trading of Egyptian cotton at the time.Footnote 58 For insurance, the business partners turned to platforms or firms like Lloyd’s in the UK.Footnote 59
Among the services needed to conduct trade, transportation arguably was a crucial one. In the early post-war years, shipping was rather haphazard. In some cases, Bulgarian traders bought the cotton and then looked for cargo ships heading towards the Bosporus and the Black Sea and possibly passing by Burgas or Varna.Footnote 60 Like other socialist states, the NRB pursued a long-term goal of enlarging its own shipping fleets’ transport capacities and preferred to use the ships of socialist partner states. In practice, though, they often had to fall back on ships owned by private entrepreneurs from the ‘capitalist abroad’ (Italy and Greece especially) throughout the 1950s and as well into the 1960s.Footnote 61
Once the cotton had arrived at its destination and officials of the Bulgarian Chamber of Commerce had conducted quality control checks, it was payday. Much like means of transportation, modes of payment changed according to circumstance, although Egypt and Bulgaria concluded a payment agreement in 1950 (renewed in 1956). The agreement at first sight corresponded to socialist preferences as it defined state control, bilateralism and balancing of deficits as basic hallmarks. All exchanges were to be recorded in a ‘collector’s account’ held by the NRB at the Egyptian National Bank. Debits to this account reflected Bulgarian purchases; credits reflected Bulgarian sales. All exchanges would be accounted for in Egyptian pounds.Footnote 62
Events on the ground looked different, though. Regardless of the basic hallmarks defined by the agreement, the cotton trade involved capitalist institutions and currencies. The payment agreement itself stipulated that if one of the two countries was unable to balance the account at the end of the year, after six months the debts were to be repaid in pounds sterling, US dollars or Swiss francs. Because Bulgaria’s cotton imports constantly exceeded its exports to Egypt, this rule led Bulgarian trade officials to launch hectic searches for Egyptian import firms to buy Bulgarian goods every time the six-month period came to its close.Footnote 63 Furthermore, even though there was a clearing agreement between the two governments, the exporting companies nevertheless had to be paid for each transaction. Theoretically, the payment would be realized via Bulgaria’s account at the Egyptian National Bank, but Bulgaria’s structural deficit meant that Industrialimport often had to buy cotton using short-term corporate loans issued by the exporting enterprise itself. The Bulgarian National Bank (BNB) had to guarantee repayment of the sum in freely convertible currency in the case that, by the payment deadline, still no credit was available in Bulgaria’s account at the Egyptian Central Bank.Footnote 64 A general alternative was to pay hard currency for cotton from the start – if such means were available. In this way, the (Bulgarian) buyers received a bonus, called a disagio, because prices in hard currency were up to a fifth lower than those in Egyptian pounds in the framework of the clearing account.Footnote 65 Another way of buying cotton despite the deficit, involved triangular deals conducted via third countries’ clearing accounts with Egypt, which will be elaborated in the next section.
The deficit and the resulting constant need for hard currency created conflict between the Industrialimport officials and the BNB. The realization of deals depended on pre-financing and guarantees by the central bank. The BNB was in charge of the state’s solvency in international markets and carefully monitored all cotton deals involving hard currency transactions. In many cases, BNB officials cancelled or deferred cotton purchases that Industrialimport’s traders would have preferred to realize quickly.Footnote 66 In an episode in 1956, tensions ran so high that, when the BNB denied a Bulgarian economic delegation’s request to cover its travel costs, the trade officials travelled to Ethiopia with expenses paid by Angelo Kutareli, a prominent Egyptian importer of Bulgarian tobacco. The BNB, which otherwise lacked means to sanction the foreign trade organizations, in response pointed to directives issued by the Council of Ministers that prohibited any state official from incurring liabilities in foreign currency without the authorization of the Ministry of Finance, making it a crime punishable by up to three years in prison.Footnote 67 The divergence between the BNB’s frugality and the traders’ drive to expand trade relations is an example for how different institutions involved in cross-border transactions of socialist states ‘had their own logics, stakes and interests’.Footnote 68
Bilateral payment agreements and the BNB’s pivotal role notwithstanding, international banking maintained its role in the cotton business as well. Bulgarian deals with African countries involved western banks in various functions, which changed over time. The most prominent players were the traditional cotton trade financiers Midland Bank, Barclays and Crédit Lyonnais, which were headquartered in the metropoles of colonial empires and had branch offices in Alexandria.Footnote 69 Bulgarian cotton traders needed these banks to transmit money via letters of credit, evaluate Alexandrian cotton exporters for a fee or finance services ranging from transport to insurance. In the early post-war years, Crédit Lyonnais and the internationally owned Banque d’Athène functioned as correspondent banks for the BNB, issuing letters of credit for Industrialimport’s cotton purchases in Alexandria.Footnote 70 In the following years, the Egyptian banking and international payment system was gradually nationalized. In 1956, in the wake of the Suez crisis, British and French banks moved their cotton business mostly to Switzerland as their representations in Cairo and Alexandria were taken over by state and private Egyptian banks.Footnote 71 But even after trade nationalization in decolonizing countries large West European banks continued to be involved in deals between (nationalized) cotton trading companies of African and eastern European states. For example, in the late 1960s, when Industrialimport bought raw cotton from the Sudanese National Cotton Trade or sold cotton textiles to the recently nationalized Tanzanian Cooperative Supply Association of Tanganyika (COSATA), the money was transmitted through letters of credit from the Midland Bank, Barclays and the Algemene Bank Nederland (successor to the colonial Netherlands Trading Society) and arbitration by the Liverpool Cotton Association was codified in the treaties in case of conflict.Footnote 72
The dispute inside the Bulgarian trade bureaucracy about the location of the NRB’s trade representation in Egypt offers another outstanding example of how the persistence of structures and spatial patterns from the ‘age of empire’Footnote 73 affected socialist bureaucracies in the realm of cotton. The Bulgarian trade representation was eventually moved to Cairo in the late 1950s, but only after a year-long discussion and a lengthy gradual process. Before that it had been headquartered in the traditional trading hub of Alexandria. Since the nineteenth century, the port city had functioned as a nodal point in the British Empire’s trade networks and had boasted one of the world’s most important cotton exchanges (next to New York and Liverpool). The exchange had been largely reserved for Europeans until 1919 when the rise of large Egyptian cotton houses like those of Mohammed Farghaly or T’alat Harb began.Footnote 74 Named after the Alexandrian district Minet-el-Bassal, it was located near warehouses and docks that served the cotton trade.Footnote 75
Because of this business environment, Bulgarian trading professionals in Alexandria were outraged by the ministerial decision to relocate the chairmanship of the trade representation to Cairo. They argued that such a representation made sense only in Alexandria, where ‘99% of importers of our goods’Footnote 76 had their seats. Ministerial officials in Sofia, for their part, argued that all other socialist (and most other) states except Yugoslavia had pivoted to Cairo, and government offices, which controlled a growing number of state enterprises, were easier to reach in the national capital.Footnote 77 In the meantime, the Bulgarian trade representation had offices in both cities and an additional exhibition shop in Alexandria.Footnote 78 Over the second half of the 1950s, the Alexandrian staff was reduced and the trade representation moved to Cairo, in line with the national capital’s increasing importance in the wake of the nationalization of Egyptian trade.
A closer look at the after-war cotton trade’s infrastructures reveals that East–South trade practices diverged fundamentally from the ideal type of socialist or state-driven bilateral trade often assumed in research. Despite the efforts of governments in eastern Europe and the Global South to build up independent, mostly national, structures, the transactions remained deeply entrenched in imperial trade infrastructures built in previous decades by West European colonial states and capitalists. Though the cotton empire’s old centres might have started to lose their role as main production sites, they still maintained a strong position in standardization, pricing, capital circulation, arbitration, cadre education and transport technology. Still, Third World governments’ efforts to nationalize trade and trade structures represent a turning point in East–South relations even if the process remained incomplete, partial and temporary: the nation state was taking over.
The nation state takes over: Trade nationalization and globalization in the late 1950s and 1960s
Far from ending international exchange and transregional interaction, the nation state’s takeover of trade instead opened up alternative (though at first sight bilaterally organized) paths to cooperation and new forms of interconnection. From the second half of the 1950s, the earlier process of implementing centralized state control over foreign trade in eastern Europe was mirrored by a similar process in cotton exporting countries of the Global South, notably in Egypt.Footnote 79 This third section will show that Bulgarian cotton traders, who themselves represented a state foreign trade monopoly, were reluctant to accept trade nationalization in their partner countries, because they feared that their mercantile interests and networks would be damaged. Furthermore, this section will describe how trade bilateralism fostered the development of a re-export market that also included non-socialist countries. Nationalized, bilateral trade was not exclusively socialist and did not preclude world market integration.
In Egypt, the Nasser government gradually seized control from the earlier European colonial enterprises that had dominated the cotton trade until the Second World War, and from their direct, private Egyptian heirs. Nasser’s government took control of the Alexandrian cotton exchange and tasked the Egyptian Cotton Commission with supervision of all cotton exports. All exporting enterprises were partially nationalized by vesting 30% of shares with the state.Footnote 80
Bulgarian officials, for their part, were reluctant to endorse the expansion of state-led trade patterns in their partner countries.Footnote 81 They welcomed the state’s takeover in fields where they hoped to benefit, like tobacco sales to Egypt,Footnote 82 but aside from occasional rhetoric emphasizing the rightfulness of the Egyptian cause,Footnote 83 fears prevailed.
This ambiguity created tensions among the officials in the Bulgarian trade representation in Egypt. The trade representative Nikolaj Baranovski’s moderate approach of accommodation with the host government’s rules got into conflict with more aggressive business approaches, represented by the trade representations’ director for commodity exchange Georgi Naidenov. In a letter to the foreign trade minister Zhivko Zhivkov in summer 1956, Baranovski complained bitterly about Naidenov’s methods focusing only on maximal benefits for export goods and warned that they would undermine the Egyptian government’s policy. He took the stance that ‘it is right to harmonise our import–export trade with the general lines and tendencies of the Egyptian government striving to exclude foreign and private capital from its import-export trade’.Footnote 84 He also reproached his colleague for presenting exaggerated transaction plans to the ministry to advance his career. Having made his own career through the foreign trade bureaucracy since the early post-war period, Baranovski was well connected in the ministerial bureaucracy in Sofia, and the powerful chairman of the ‘Department for Trade Agreements’ Avakum Branichev, who later would become head of the Bulgarian Trade Chamber, advised him not to ‘let Naidenov accomplish jobs that you have not agreed upon’.Footnote 85 Naidenov’s networks, however, proved to be of another quality. He was a state security officer and former partisan, personally connected with higher echelons of the party and received protection from the foreign trade minister Zhivko Zhivkov. His connections and his preparedness to apply risky methods on the brink of legality helped Naidenov to rise in the economic bureaucracy to become the lead manager of the NRB’s hidden foreign trade empire.Footnote 86
Diverging approaches inside Bulgaria’s trade bureaucracy notwithstanding, Nasser’s trade nationalization policy posed immense problems for Bulgarian cotton purchases. The trade officials were particularly troubled by the threat to the trade network they had established over the years. During the sequestration of British, French and non-Egyptian Jewish enterprises in the aftermath of the Suez Crisis, Baranovski reported his concerns about the nationalized enterprises’ cadre situation and their complete lack of operative means. The report states that officials of the Bulgarian trade representation found a remedy by intervening in the personnel policy of private firms in Egypt, and in one case helped a close partner find a more secure employer.Footnote 87 These actions, taken to evade consequences of the Egyptian government’s nationalization policy, show how in the day-to-day organization of exchanges, Bulgarian traders’ actions were directly entangled to local structures and networks.
The Egyptian government’s more strategic approach posed a second problem for the Bulgarian traders. They feared that the Egyptian government would reduce the quota of cotton traded through the bilateral clearing agreements, raise prices for socialist countries relative to hard currency payers and increasingly deny import licences to potential buyers of Bulgarian goods, which, due to the bilateral clearing system, would directly reduce Bulgaria’s capacity to purchase cotton.Footnote 88 Indeed, the Egyptian government needed hard currency and thus reduced the amount of cotton sold to socialist states on a clearing basis.Footnote 89 This issue surfaced at the 1960–61 COMECON cotton meetings. A bad harvest and new measures tightening government control left most of the socialist trade firms unable to purchase the necessary amount of cotton on the Egyptian market. The general director of the Soviet trade firm Eksportlyon urged his fellow general directors not to compete with each other and to avoid signing cotton purchase deals requiring freely convertible currencies. Instead, he proposed to establish stronger ties to Sudan, especially through scientific exchange, to validate Sudanese cotton as a substitute for the urgently needed long-staple Egyptian cotton.Footnote 90 Meanwhile, the bloc’s most powerful cotton and textile trade firms, the Czechoslovak Centroteks and the Soviet Eksportlyon, which had strong purchasing capabilities due to their government’s delivery of equipment and weapons to Egypt, ignored the appeals lodged at COMECON coordination meetings and waited for a seasonal low to buy almost two-thirds of the Egyptian harvest of the 1960–61 season.Footnote 91 As described above, parts of the purchased cotton was used for re-export. Again, the socialist traders acted to evade consequences of the nationalization process, effectively undermining what the Egyptian government had hoped to achieve, namely a diversification of its cotton sales.
Given the socialist traders’ resentment of nationalization in business partner countries, the attempt to establish state-controlled, bilateral trade based in clearing agreements might still look like a specific ‘socialist’ manner of exchange. However, bilateral clearing agreements in the early post-war years were not reserved for socialist and post-colonial states alone. West European countries only hesitantly loosened the strict state controls on foreign trade enacted in years of depression and war.Footnote 92 Even the United Kingdom – once the global centre of free trade – conducted its international cotton trade through a state ‘Cotton Control’ succeeded by a ‘Raw Cotton Commission’. The post-war UK needed dollar revenues to mitigate its balance of payments crisis, and sale of cotton textiles was considered the most feasible way to earn such dollars. Thus, the government maintained and renewed the wartime state control of raw cotton imports, domestic textile prices and textile exports. Confronted with strict dollar restrictions, the Raw Cotton Commission’s import traders found themselves in a direct opposition to the Treasury reminiscent of the Industrialimport traders’ stance vis-à-vis the BNB. Not until 1954 were price controls lifted and the Liverpool cotton exchange reopened.Footnote 93
Furthermore, like their counterparts from west European and Third World countries, traders from socialist states had to break out of the narrow confines of bilateral clearing by brokering triangular business deals: a deficit with one partner country was compensated by re-exports of goods from another country whose trade balance with the first country was positive. Socialist trade officials applied this technique to trade not only with fellow socialist partner countries but also with the ‘capitalist abroad’. A veritable re-export market developed.
In Bulgaria’s case, cotton imports created a permanent deficit with Egypt. For years, tobacco was the only relevant attractive good the Bulgarians had to offer, which was insufficient to ensure stable compensation for cotton purchases.Footnote 94 Thus, the balancing of bilateral trade with Egypt was a mosaic of re-exports and similar methods. Bulgarian trade officials often resorted to paying for Egyptian cotton ‘on the Chinese account’; that is, Egyptian cotton was treated as an import from the PRC in the Bulgarian–-Chinese trade balance, while Bulgaria compensated China and China compensated Egypt. Bulgarian traders also brought Argentinian hard cheese to the Egyptian market and used corn exports via Austria and Italy to balance their deficit.Footnote 95
Triangular currency deals were another method of compensating for deficits. For instance, Bulgarian traders remitted a sum in pounds sterling to Prague to reduce Egypt’s debt, incurred by arms purchases in Czechoslovakia, and Bulgaria received a negotiated bonus in the bilateral clearing account with Egypt for this hard currency transfer.Footnote 96 In another example for their hazardous methods to pay for Egyptian cotton, Bulgarian foreign trade officials bought tobacco in Japan and mixed it with Bulgarian tobacco to sell it to the above-mentioned Egyptian cigarette factory owner Kutareli. Kutareli imported the tobacco as Bulgarian and made an extra-profit because of reduced tariff costs.Footnote 97 As early as the mid-1950s, the Bulgarian Ministry of Foreign Trade had a special re-export department dedicated to clinching such kind of deals that could generate hard currency profits or other means to pay for imports.Footnote 98
As of the late 1950s, Bulgaria’s re-export business was further professionalized by the foundation of enterprises that were allowed to operate autonomously on foreign markets. These enterprises engaged in trade, trade services from banking to transport and foreign investment projects.Footnote 99 Their operations’ main aim was to amass foreign currency and open up markets for Bulgarian products. The enterprises were exempt from customs duties and the BNB’s hard currency control. They only had to transfer fixed sums of foreign currency to the state treasury. These holdings were used to establish multitudinous enterprises in the capitalist abroad, either officially owned by Bulgarian citizens or held by middlemen.Footnote 100
In the 1960s, the ‘Teksim’ Group and its Liechtenstein-based affiliate Imekstrakom formed the centrepiece of this ‘empire of foreign firms’.Footnote 101 These companies’ most lucrative business was arms deals with countries in the Global South, but Teksim also sold services related to cotton growing. For instance, its agricultural air fleet flew sorties over cotton fields in Sudan to spray crops with pesticides paid for in hard currency.Footnote 102 Teksim’s director, Georgi Naidenov, had started his career in the trade bureaucracy in the mid-1950s in Egypt, as seen above. After his occupation in Alexandria and Cairo, he rose through various official positions from trade representative in Istanbul in the late 1950s to vice transport minister in the late 1960s and at the same time functioned as the head of an informal government- and party-supported arms contraband network.Footnote 103 With his career and his profit-oriented business methods, he became an early emblematic figure of the genesis of a new managerial class linked to foreign exchange in socialist Bulgaria.Footnote 104
The relative autonomy of the special foreign trade firms and its agents created tensions with the centre’s claim of control of economic activities. In Naidenov’s case, these tensions culminated in a fraud and misappropriation trial against him in 1971, pursued by the BCP leader Todor Zhivkov personally. His case led also to the demotion of the top-level protagonists in the foreign trade bureaucracy that had backed him, not least the vice premier and former foreign trade minister Zhivko Zhivkov and the sitting foreign trade minister Lăchezar Avramov. The quarrels around Teksim and Naidenov, however, did not mean that the Bulgarian economic bureaucracy would abandon the management methods and trade strategies behind. On the contrary, semi-autonomous trans-border firms, semi-legal joint ventures and profit-oriented managerial styles continued to flourish and became increasingly important in the NRB’s last decades until 1989.Footnote 105
On the level of socialist traders’ day-to-day practices, the reality of integration into global markets differed considerably from the picture suggested by trade statistics that reflect only bilateral exchanges. Taking these statistics and the official foreign trade monopoly for granted has led to an assumption that East–South trade in the early Cold War was purely bilateral barter or compensation trade. In fact, the state’s takeover of foreign trade in the Second and the Third World had its limits. East–South exchanges and transactions remained deeply entrenched in the conditions and requirements of global capitalist trade and these requirements created tension between different strands of the socialist economic bureaucracy.
Conclusion
Socialist cotton traders transgressed the borders of the bloc and the nation state in many ways. To fulfil their task, they had to bend and erode the framework of the foreign trade monopoly. Instead of following the politically imposed patterns of the Cold War order, they stuck to the logic of their professional field of cotton exchange. ‘Chairman Cotton’, not just national governments or communist party leaderships, dominated their activities. In no way were these traders struggling against an enemy system, as some contributions to Cold War discussions have implied.Footnote 106 Instead, socialist foreign trade organizations’ undertakings were deeply embedded in the infrastructures of the (capitalist) world of cotton.
While national statistics suggest that socialist foreign trade and East–South trade was strictly bilateral and operated beyond the reach of the capitalist economy, examination of the trade infrastructures reveals the involvement of more actors. Arbitration, credit, insurance, quality standards and standardization, shipping and pricing were mostly realized at the level of globalized infrastructures built by the former British Empire and other third parties, not least during the era often framed as the ‘first globalization’.Footnote 107 Bulgarian cotton traders’ work was still rooted in these transnational trade networks and infrastructures. More often than not, they actively maintained these networks rather than working towards an implementation of formalised state monopolies.
Thus, especially for the socialist world, national trade statistics cannot capture the whole picture of global power relations and entanglements. Their bilateral bias hides not only re-export businesses, but also the multilateral trade networks that were necessary to broker and realise transactions. A focus on the daily practices of Bulgarian traders highlights that in the 1950s, the imperial world and its traditional nodal points still dominated the global ‘empire of cotton’. While textile production and some cotton trade shifted geographically from former centres to (semi)peripheries, the old centres maintained strong positions with regard to trade infrastructures.
In the 1960s, nationalization measures played out in the Global South as the post-colonial cotton-supplying states worked on placing trade flows and networks under government control. But even then, much of the imperial age’s infrastructural legacy persisted in the processes examined here. Thus, although socialist East European cotton traders contributed to international exchanges in their own right, for example through engineering re-export markets, all along they had little prospect of operating outside the traditional cotton empire. Even in well-protected, bilateral exchange operations with other state firms, they were unable or unwilling to work, think or speak beyond the infrastructures, standards, prices and even the language of the global capitalist (cotton) market. Globalization was not split in two, and actors of socialist foreign trade sought their own distinct ways of positioning themselves in the growing, globalizing post-war economy.
Acknowledgements
The research for this article has been completed in my function as a researcher at the Collaborative Research Centre (SFB) 1199 ‘Processes of Spatialization under the Global Condition’ at Leipzig University funded by the German Research Council (DFG). I have to thank my colleagues in the Research Centre’s working group ‘East-South Relations during the Global Cold War’, who helped me to develop the topic and made comments on the manuscript at an early stage: Frank Hadler, Anne-Kristin Hartmetz, Bence Kocsev, Uwe Müller and Stefan Troebst. I owe thanks to the Centre for Advanced Studies in Sofia for supporting me with my research stay in Sofia in 2017 and namely Rumen Avramov and Dimităr Dimov for giving me crucial advice on the topic. I also have to thank the anonymous reviewers for their extremely helpful comments, and Heidi Tworek for going through the manuscript several times and incessantly insisting on improving the text. I owe thanks also to Forrest Kilimnik, Jaime Taber and Marjory Ruiz for first language copy editing and proofreading at different stages. I owe special thanks to Erik Radisch for the hint to the COMECON decision over cotton production and the archival documentation in this reference. I owe thanks to Anne-Kristin Hartmetz for the hint to and the insight into the material from the Ghanaian state archive.
Jan Zofka is a historian of Eastern Europe, specializing in the social and economic history of state socialism. As a researcher at the Leibniz-Institute for the History and Culture of Eastern Europe Leipzig (GWZO), he currently works on a project on technology transfers between Eastern Europe and the People’s Republic of China in the 1950s. His first book was on post-Soviet separatist movements in Eastern Moldova and Crimea.
