Czechoslovakia's "Socialist Miracle"

JZD Slušovice was a socialist miracle in  Czechoslovakia. But not in the way you think. Starting from humble origins, Slušovice  operated largely autonomously - growing to something like another  country within the country.

A simple agricultural cooperative  that produced industrial goods, pesticides and - interestingly enough, computers? Today's subject is a bit of  a weird one. In this video, we look at a strange and unique community  in Communist-run Czechoslovakia.

## Beginnings In 1948, the Communist Party  of Czechoslovakia seized power, establishing the Czechoslovak Socialist Republic. It toppled what was then the last  liberal democracy in Europe and solidified the Soviet Bloc. The Communists  would rule for over forty years thereafter.

New rules passed in wake of the takeover  prohibited money-making activities within the country. Various parts of the economy  like the finance and transportation systems were nationalized. And of  course, there were purges.

In line with Stalinist doctrine, the government  created these massive, state-owned collective farms. These consolidated what had previously  been a multitude of small, privately owned farms. These were called "Unified  Agricultural Cooperatives" or JZD in Czech ("Jednotné zemědělské družstvo") ## The JZDs The Party had wanted these JZDs since  even before the war.

In July 1948, laws were passed to create cooperatives in  the worker, artisan, and farmer sectors. In 1949, private farmers were pressured to  give up their land to the JZDs. At first, this was voluntary.

Later in 1950,  it was not. State enterprises would eventually come to own 95% of  Czechoslovakia's agricultural land. The overall goal for these Czechoslovakian  cooperatives was to fulfill the tasks of the State Plan.

But in how to achieve those tasks,  the cooperatives had a lot of autonomy. They are allowed to manage their own resources  and even set wages for their workers. But throughout the 1950s, the cooperatives  struggled with profitability.

For political reasons, food prices were kept lower  than its production costs. This sapped the cooperatives' ability to generate  financial surpluses for reinvestment. In response in the 1960s, the Party granted  the cooperatives the ability to generate "sideline" revenues.

So if a cooperative  fulfilled their task in the state plan, but is left with some extra  production, then they can sell it. This sounds a lot like capitalism. So in order to keep some cooperatives from  getting too deep into that humbug, restrictions were placed on the number of hours  they can invest into "sideline" activities.

## Cuba JZD Slušovice was established in  1952 in the village of Slušovice. Slušovice - now in Czechia - is about 190 miles  from Prague and right outside the town of Zlin. It first appeared in the written record in 1261, and  was first elevated to the status of small town in 1375.

In 1869, the town's population was about 907  people and it hasn’t changed all that much since. As you might expect, JZD Slušovice’s tiny  collective farm struggled to produce enough goods. The area's soils are not particularly fertile. 

The workforce moved to neighboring cities for higher pay. And the managers were former private  landowners who did not work very well together. The JZD approached bankruptcy.

Then in 1963,  Frantisek Cuba (pronounced more like Chuba) became chairman of the agricultural  cooperative at just 27 years old. Cuba was born in 1936 in the  nearby city of Březová - the son of a farmer. His father later became  the head of that city’s collective, giving the younger Cuba valuable  insight into how they worked.

After graduating from the University of  Agriculture in Prague, he joined the Communist Party where he worked in the Czech Commission for  Scientific, Technical and Investment Development. Upon arriving, he appropriated the  village's only moped and rode it around the village for inspections.  It was in a sorry shape indeed.

Cuba had rare entrepreneurial vision and  ambition. The JZD's sales in 1962 were about 1. 3 million Czech koruna or crowns.

He set  a lofty goal to grow that to 100 million crowns. ## Work Ethic In order to achieve this, Cuba needed to find ways to motivate people within the  confines of the socialist system. The first thing to do was to get the  people working - without the benefit of being able to pay higher wages. 

But as he would say later in life: > "Human nature is such that people  inherently don't want to work and want to have a good life. Therefore, they must  be compelled to work by activation factors" So he promptly announced and enforced  three new rules. First, people who do not show up to their workstation on  time will not get paid for the day.

Second, people cannot drink during working  hours. If they did, then they received a fine. And third, if you want to leave the cooperative,  you can.

But if you leave, you cannot return. Many people indeed did leave because  of these rules. So on Christmas 1963, Cuba and a gatekeeper had to do many farm  tasks themselves, taking care of the cows.

So Cuba realized that he needed  to do more than just crack a whip. Following the work of the famous Czech shoe  entrepreneur Tomas Bata, he added a "sugar". He got people involved in the work on the JZD. 

Problem solvers got promotions. Small rewards were given daily. And people were divided  into small groups to rouse up competitive spirit.

And famously, anyone who worked  at the JZD for ten years got pensions. Over time, he came up with and classified six  activation factors - fear, existential, material interest, moral appreciation, self-actualization,  and the factor of joy from work. These motivation systems sound  like business school mumbo-jumbo, but back in socialist Czechoslovakia,  these motivations were valuable.

I know this personally. The more that  you put into your fields, the more you are likely to get out of it. JZD Slušovice had  no access to farming machines or fertilizers, but through hard work they were able to generate  the agricultural surpluses to move them forward.

## Diversification By the end of the 1960s, JZD Slušovice had  largely maximized its agricultural production. Yields in grain and cow milk were as high as  they could get them. And JZD Slušovice had absorbed neighboring lands through mergers  with neighboring JZDs - growing from a mere 106 hectares in 1952 to 6,000 hectares  spanning 17 other villages in the 1970s.

At this point, Cuba fatefully decided to  steer the JZD beyond simple agricultural work - despite being explicitly  forbidden to do so. He looked for gaps in the Czechoslovakian markets and  started projects to produce those items. The JZD would organize meetings where  they invited experts and professors to speak to them about new trends.

If  the team decided a product can be made to take advantage of these trends, they  would set up a new department to do so. The cooperative bought products in  neighboring markets. For instance, raw potatoes from the Czech highlands  or Slovakia.

Which Slušovice then professionally peeled and resold  to private individuals, schools, or cafeterias. The peels were not thrown  away but re-routed to the cattle for fodder. As JZD Slušovice expanded, Cuba organized  these projects into profit centers headed up by regional leaders with a lot  of autonomy.

He believed that only a small percentage of people had the  capability to manage hundreds of people. To find those individuals, JZD Slušovice  took on people that others would not take, including many party dissidents. A bad political  background did not matter.

The only thing that mattered was whether they could pass  the internal training and do the work. ## Protectors As I mentioned, Czechoslovakian  laws prevented the JZDs from wandering too deeply in economic  activities other than agriculture. Newspapers pondering Slušovice's "excessive  capitalism" had started to appear as early as 1964.

They noted with consternation that people  there might work for up to ten hours each day. So what gives? How did the JZD avoid prosecution  for all this?

To justify its diversification, Cuba and other JZD officials  constantly argued the unsuitable qualities of Slušovice's soil. In an 1988  article, the cooperative's CFO explained: > The tradition of innovation has its  roots in the poverty of the farmers here . .

. The soil is not fertile and farmers  always had difficulties making ends meet, so there have always been  small businesses on the side They sought out loopholes. In a later  interview, Cuba said that they studied the rules closely and found that it allowed  them to do many of the things they were doing.

For instance, the use of a privately  owned company to acquire foreign exchange. But of course, Slušovice benefitted from links  to high ranking individuals in the Communist Party with regional ties, the most notable being  the reformist Prime Minister Lubomír Štrougal. The JZD also had powerful enemies. 

These include Gustav Husak, First Secretary of the Communist Party  of Czechoslovakia and later president. Husak kept an eye on Slušovice. Whenever  newspapers reported on the JZD's achievements, he would underline them in red and ask  to find out who funded them.

Upon finding that it was not the government, he would get  angry. But Štrougal's protection remained. Cuba also had ties to the Czechoslovak  secret police or StB, which helped facilitate JZD Slušovice's imports of foreign  technologies or expertise - for instance, cattle embryos or chips from the West  - without paying excessive amounts of money.

It is not hard to imagine  possible instances of corruption. Ultimately, what kept the whole organization  from being prosecuted and taken apart was its own success - validated by attention  from the Soviet Union and even capitalist countries. Its exploding growth became a  ray of light in an otherwise dour economy.

## Seeming Prosperity At its peak in the late 1980s, JZD  Slušovice would make and sell yogurt, pesticides, tires, cattle, and more. Slušovice also had its own bank network, with 25 branches. They operated their own  department stores that sold foreign goods, potato chips and coke.

You could buy  things in that store using a charge card. They even ran their own football team. As well  as a charter airline called Air Moravia with six aircraft.

They operated a big construction  company that built resort projects in Vietnam. The cooperative regularly held horse  races - some of which attracted up to 55,000 people. There were also discos and  parties for the youths to enjoy.

These in addition to the unique items sold there made  Slušovice a bit of a tourist attraction. The 1980s saw Slušovice gain increased  attention in the regional and even foreign media. Reformists in agreement with the  reforms initiated in the Soviet Union by Mikhail Gorbachev saw JZD Slušovice as  an example to be admired and followed.

Visitors to the JZD often marveled at what they  saw. But while critics might admire the results, they often pointed out issues with how  those results were being achieved. And there indeed can be issues found  with how Slušovice ran things.

Most notably, the way it worked people.  Remember what they wrote about the 10 hour days. Slušovice's managers tied their  workers' compensation to their output.

In 1987, a tractor driver can earn anywhere from  2,300 to 5,200 crowns - depending on their performance. Work more, earn more, one might say. But the country was not necessarily in the mood to  accept such things.

Add to all that, the constant work evaluations and you can start to see why  critics might call JZD Slušovice a sweatshop. ## Computers One of JZD Slušovice's most famous products  was their own line of personal computers. Cuba first launched the project in 1982 to replace the poorly performing MINSK 22 computer  they had been using since the early 1970s.

Cuba would be a big proponent of microelectronics  and automation. No one else was working on computers in Czechoslovakia. So he went to  the Slovakian academy of sciences and hired three programmers - offering them double  the pay and better working conditions.

The first computers were used to help  dose vegetables, monitor milk production, and other simple automated tasks.  Several organizations heard about this new computer and came to  Slušovice to ask for their own. Cuba and his team at first hesitated at selling  the TNS - short for Terminal Network System, but later retroactively renamed to the  Ten Náš Systém or "that system of ours".

TNS PCs were copies of 8-bit  PCs found in the West. It was introduced with pride in 1982  at an agricultural exposition, where it received a prize. These computers  were later sold to schools for youth education.

By the 1980s the West was already moving on  to 16-bit PCs - powered by powerful chips like the Motorola 68000. These required semiconductor  manufacturing techniques beyond what was available in the COMECON countries, so JZD Slušovice had  to import these more advanced chips from abroad. Nevertheless, the cooperative had plenty  of foreign exchange from its agriculture and fertilizer businesses.

The expanding line  of TNS computers drove a lot of sales in the second half of 1980s in the wake of the Soviet  Union's economic restructuring - perestroika. ## Downfall In these years, JZD Slušovice grew to be  the largest that it ever was. In 1989, it generated 7 billion crowns in revenue.

That same year, the people rose  up against the Communist Party of Czechoslovakia in what is now remembered  as the Velvet Revolution. It ended the Party's 41 years of rule and ushered in  a rapid transition to a market economy. JZD Slušovice could not remain the way it  was.

The new regime was not particularly friendly to them. New president Vaclav Havel  had called out Slušovice by name for being a tentacled mafia growing throughout and  controlling the Czech food industry. Cuba resigned in 1990 soon after these  speeches.

He was later charged with the crime of creating private bank accounts  for the cooperative's members - violating the regulations of the Czechoslovak  State Bank but was acquitted in 2000. Much of the cooperative's assets were spun off  into over a hundred companies - most of whom fell into bankruptcy. The main organization  turned into a corporation as well, interestingly retaining the "JZD" in their name.

But that company ended up falling into  bankruptcy as well. Their products were no longer competitive now that  cheap imports were available. And large fines had been levied  for illegal export of farm goods.

## Conclusion After retiring, Cuba ran for office  and became a Senator in the Czech Republic - winning by a very high margin  thanks to nostalgia for the good old days. During his tenure, he endorsed the creation of a 2 billion crown industrial zone in  Holesov, one of the largest in Czechia. Originally built for a car factory, it  unfortunately did not turn out the way it should have.

By then, he was well  over 70 years old. Ill health caused him to scale down his activities. He  passed away in 2019 at the age of 83.

Today JZD Slušovice is long gone. And unlike  other ruins, there remains little to remember it by. Maybe a horse racing track in an old town. 

Socialist miracle, tentacled mafia, electronics sweatshop, or archaic symbol of its time. Whatever  it had been, it was definitely one of a kind.