After breaking with Yugoslavia, Albania turned toward the Soviet Union, forming a twelve-year relationship. In September 1948, Moscow stepped in to compensate for Albania's loss of Yugoslav aid, and Albania's factories quickly became dependent on Soviet technology. Anxious to pay tribute to Joseph Stalin personally, the authorities in Tiranė implemented new elements of the Stalinist economic system. The regime introduced a Soviet-style three-step process for drawing up the national economic plan and adopted basic elements of the Soviet fiscal system, under which enterprises contributed to the state treasury from their residual income and retained only a share of earnings for authorized self-financed investments and other purposes. The Ministry of Finance thus won the authority to set each enterprise's investment policy and regulate its current activity through the state bank.

The First Five-Year Plan (1951-55) emphasized mining and electric-power production as well as transportation improvements. The plan called for an increase in industrial production at an average annual rate of 27.7 percent, including an increase of 26.5 percent in consumer-goods output and a 31-percent rise in production of goods consumed by producers. Shortfalls in agricultural production during the first year doomed the entire plan. The farm sector failed to meet output targets for raw materials, leaving the industrial sector unable to meet targets for consumer goods. Industrial productivity also lagged because recently urbanized peasants had not had enough time to learn to operate factory equipment. The regime then realigned planning priorities in favor of agriculture and consumer-goods production. Over the plan period, annual industrial output reportedly increased at an average of 22.8 percent consumer-goods output rose 24.3 percent and producer-goods output rose 20.7 percent. The Albanian economy's backwardness dashed the leadership's hopes of rapidly developing heavy industries, specifically the mineral-processing and capital-goods manufacturing branches, at the expense of the agricultural sector. Although their efforts brought partial success--the ratio between the values of agricultural and industrial production shifted from 82:18 in 1938 to 40:60 in 1953--70 percent of Albania's work force continued to till the soil.

Having relatively easy access to capital because of generous Soviet aid, the regime redoubled its industrialization drive and tightened control of the agriculture sector. Albania conducted all its foreign commerce with the other communist nations between 1949 and 1951 and over half its trade with the Soviet Union itself. The Soviet Union and its satellites wrote long-term "loans" to cover shortfalls in Albania's balance of payments. Soviet and other East European aid at first dovetailed with the Albanian leadership's ambition to industrialize the country. Tiranė's Second Five-Year Plan (1956-60) called for an annual increase of 14 percent in industrial production. Good results in 1956 and 1957 prompted the authorities to revise plan targets upward. Although tbad the new goals went unattained, industrial production rose an average of about 17 percent annually over the five-year period. In 1955 private farms still produced about 87 percent of Albania's agricultural output, and the government reemphasized its farm collectivization drive. By 1960, however, the proportion of output from collective and state farms was unchanged. The farm sector continued to suffer from low productivity and poor worker motivation. Soviet aid was required, and wheat imports were depended on to meet as much as 48 percent of Albanian need.

Considering Enver Hoxha's obsession with heavy industry misguided, the new Soviet leadership balked at the idea of investing in large-scale industrial projects in Albania after Stalin's death in 1953. The Soviet Union and other communist countries had provided considerable investment and equipment to Tiranė from 1948. Especially after 1955, however, this aid was designed primarily to integrate Albania's economy into a "division of labor" established by the Soviet-led Council for Mutual Economic Assistance ( Comecon--see Glossary). Albania's allotted role demanded that it foster agricultural growth and increase the extraction of raw materials and the production of consumer goods. The leadership in Tiranė considered Moscow's advice to concentrate on production of cash crops and raw materials a disparaging attempt to relegate Albania to the status of a Soviet colony in perpetuity. When Tiranė began to tilt toward China, Moscow and its satellites offered incentives to persuade Hoxha to remain in the Comecon fold. The disagreement over Albania's development policy soon became entangled in the animosities between the Soviet Union and China. In 1959 the two communist giants competing for Albania's hand poured capital into the tiny Balkan country so rapidly that it could not be absorbed. China extended Albania a US$13.8 million loan Moscow followed with new credits totaling US$83.8 million, and other East European countries contributed another US$35 million.

Data as of April 1992