United States. Congress. House. Select committee o.

Baltic States investigation. [First interim report] (Volume pt. 1) online

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ing, 15,600, textile, 15,600, foodstuff, 12,900, minerals, 6,600, chemicals,
4,300. They had 1,895 elementary schools, 114 secondary, 124 special
schools and two universities. In exports they were about even, about
44 million each way.

In Estonia they had about the same balance but not as large. Their
industries were textile, paper, cement, oil, extracted from shale rock,
150,000 metric tons, forestry, timber, flax.

You see, in both countries they were diversified so that they were on
what I call a pretty sound economic basis from the standpoint of their
industries and agi'iculture.

The exports from Estonia were 28 million, their imports 29 million.
Their imports were cotton and woolen and sugar, exports, dairy prod-
ucts, paper, flax, potatoes, timber.

That is a pretty good diversification.

Mr. Kersten. At the time you understood that these three small
nations had had their independence for only about 20 years, did you

Mr. Watson. Yes.

Mr. Kersten. And what was your information as to how their
economy had progressed, say from when they first regained their
freedom until the time you were there; in other words, during the
course of that 20 years ?

Mr. Watson. 'My understanding was that they had made real
progress all through those years.

Mr. Keusten. Through those 20 years of independence?

Mr. Watson. Yes. Take agriculture, as I said : They cut up the
land, no one could own more than 200 acres. They had some large


landed estates and those were cut up into small farms. That gave
everybody who wanted to get out on the land an opportunity to do so.

Mr. Kerstex. So that in 1938, shortly after the Communists took
over, tlie land was pretty well distributed among the people, is that
correct ?

Mr. Watson. Yes, very well in both countries. We are talking
about two countries. Latvia at that time had approximately 2 million
population and Estonia had only about 1,100,000. They were all get-
ting along; they weren't borrowing any money. They were getting
along on their own power as far as I could learn. I felt they were
doing an outstanding job, that they were people of intelligence, in-
tegrity and they had a proper evaluation of the spiritual values.

Mr. Kersten. And it was your understanding that the same out-
standing progress had been made in Lithuania, was it not?

Mr. Watsox. That was my understanding, although I can't say any-
thing definite about that country.

Mr. Kersten. I mean, there was no contrast, there was approxi-
mately the same outstanding progress ?

Mr. Watson. Yes, that was my general understanding but I couldn't
testif}^ to that. These other two countries — in fact, I was very, very
enthusiastic and I felt they were setting a good example for other

Mr. Kersten. Wliat about the condition of the freedom of the peo-
ple at that time before the Communists took over, as you observed it ?

Mr. Watson. I observed they had real freedom from every stand-
point ; I heard nothing to the contrary.

Mr. Kersten. Did you make any observations as to the condition of
employment of the people, that is in the cities and

Mr. Watson. So far as I recall, there was no unemployment prob-
lem, as I stated. I was told that in agriculture it was necessary for
them to temporarily import harvest labor from Poland.

Mr. Kersten. You say 3^ou met the President, Mr. Ulmanis?

Mr. Watson. Yes, I did.

Mr. Kersten. Did you have a fair opportunity to observe what kind
of person he and other members of his government were?

Mr. Watson. I was very, very much impressed with the sincerity
and intelligence of President Ulmanis. He was a bachelor and he had
given his whole life to education in his country after he went back
from the United States until the time he became President. I was im-
pressed with the people I met who were taking an active part in the
affairs of the country.

Mr. Bentley. Mr. Watson, you have given us a very good picture
of these 3 little countries in 1938, 3 little contended, prosperous, happy
countries. As far as you observed, the people of those countries
certainly would have no cause for complaints against the government
in power at that time ?

Mr. Watson. From my observation, none whatever. I would like
to confine my testimony to the two countries, Latvia and Estonia.

Mr. Bentley. On the basis of Latvia and Estonia, you observed no,
wdiat you might call, popular dissatisfaction in the slightest degree ?

Mr. Watson. No.

Mr. Bentley. And furthermore, in those two countries you didn't
observe any condition such as hardship or misery or poverty or any-


thing like that which are supposed to breed communism? You had
not observed anything of that kind at all ?

Mr. Watson. Nothing whatsoever.

Mr. Bentley. There would have been no reason for those people to
change their governments, particularly as far as adopting a Com-
munist form of government goes, so far as you could observe ?

Mr. Watson. Nothing so far as I observed there,

Mr. Benti.ey. And any type of Soviet propaganda which was put
out to the effect that the people of those countries voted overwhelm-
ingly for a Soviet type of government you would be inclined to dis-
regard entirely ?

Mr. Watson. From my observations, you understand; I can only
give you my personal observations. I came away very enthusiastic
about what I saw in those two countries, also the people I met.

Mr. Bentley. But you were there only, I believe, about 2 years
before this so-called referendum elected for union with the Soviet
Kepublic under Communist government and from your observations
in 1938 you would have said there would have been no reason for the
people to want to change ?

Mr. Watson. As I stated, from my observations I felt they were a
contented people, happy and prosj)erous enough. I heard nothing
about any poverty or anything of that kind while I was there.

Mr. Bentley. Thank you very much, Mr. Watson.

Mr. Kersten. Mr. Machrowicz.

Mr. Machrowicz. Just one question, Mr. Watson. Did you notice
while you were there whether or not there existed any Communist
Party of any strength whatsoever ?

Mr. Watson. No, I heard nothing about anything of that kind.

Mr. Machrowicz. So then it was quite a surprise to you that the
Communists should have taken over shortly after you were there
when, while you were there, there was no evidence of any such party
even in existence ?

Mr. Watson. I saw no evidence of it.

Mr. Bonin. Mr. Watson, the accomplishments that were made by
those two small countries were made on the basis of a free enterprise
system, were they not ?

Mr. Watson. Yes, from my observations it was absolutely free

Mr. BoNiN. On what is sometimes called the capitalistic system ?

Mr. Watson. I don't know what they call the capitalistic system
there but I observed that the people were getting along and taking
care of themselves and I think the records will show that they weren't
borrowing money outside of their countries. I didn't knoAv about any-
thing of that kind.

Mr. Kersten. Mr. Dodd ?

Mr. Dodd. I have no questions.

Mr. Kersten. Thank you, Mr. Watson, for appearing before us.
Your testimony is important as showing the economy of these coun-
tries before the Communists took over.

Mr. Watson. I thank all of you gentlemen for your courteous treat-
ment of me while I liave been at this table.

Mr. Kersten. Thank you.



Mr, Kersten. Mr. Kiitt, will you raise your right hand, please?
You do solemnly swear to tell the truth, the whole truth, and nothing
but the truth, so help you God ?

Mr. KuTT. I do.

Mr. MoTiGUE. Will you identify yourself, Mr. Kutt ?

Mr. KuiT. My name is Aleksander Kutt, K-u-t-t. I was born in
Tallinn, Estonia, on November 9, 1900.

Mr. McTiGUE. You are the author of a number of articles on eco-
nomic problems?

Mr. Kutt. Yes, between the years of 1925 and 1930 I wrote quite
a number of articles on economic subjects.

Mr. McTiGUE. In addition to that, you were a businessman in
Estonia; is that correct?

Mr. Kutt. Yes.

Mr. McTiGUE. What was your business?

Mr. Kutt. My last main occupation was executive vice chairman
of a large agricultural central association.

Mr. McTiGUE. What were some of your other business connections ?

Mr. Kutt. Other companies in which I was active were Anglo-
Estonian shipping lines,

Mr. McTiGUE. What was your position?

IVir. Kutt. I was a member of the council board. Then I was in a
cold-storage company that was semiofficial, where I was vice chair-

Mr. McTiGUE. Will you please speak right into that microphone so
we can all hear you better ?

Mr. Kutt. Then I was on the control board of the Mobile, Ltd.,
representatives of the Ford Motor Co. in Estonia.

Mr. BoNiN. If it is possible would you speak a little louder because
some of these newspaper people would like to hear you. We can hear
you but it is difficult for them.

Mr. McTiGUE. So you had a great many business comiections in
Estonia prior to 1940 ; is that correct ?

Mr. Kutt, Yes, quite a large number,

Mr. McTiGUE. Were you in Estonia when the Communists seized
power there in June 1940?

Mr. Kutt. I was in Estonia, in Tallinn, at the time.

Mr, McTiGUE, After the Communists seized power in Estonia in
June 1940, were there any reflections of that takeover in the economy
of Estonia?

Mr, Kutt. Not immediately, but very soon. In about 1 month it
was started with nationaliaztion. Actually, two main trends could be
distinguished : One was nationalization and the other was lowering of
living standards.

Mr. Kersten. I would like to ask a question at this point if I may,
Mr. Counsel.

You remained there after the Communists took over ; did you ?

Mr. Kutt. Yes.

Mr. Kersten. How long were you there under the Communists?

Mr. Kutt. I was under the Communists until the beginning of
March 1941'; that is about 8 months.


Mr. Kersten. And what happened then to you at that time? Did
you get out of the country ?

Mr. KuTT. I got out of the counti-y at the beginning of March 1941.

Mr. KJERSTEN. So you had about 8 months under the Communist

Mr. KuTT. About 8 months ; yes.

Mr. McTiGUE. What happened to you personally after the Com-
munists took over?

Mr. Ktjtt. About the middle of July the newspapers started a cer-
tain campaign where they, for some reason or other, thought proper
to point out that my activities have been to the loss of the Estonian
state and Estonian nation and that I have been — it was called sucking
out the juices of Estonia's economy. My name was brought together
with the name of another man in Estonia, Mr. Jurima, and the slogan
was, it seemed to be that Jurima and I were the wrongdoers in Estonia.

Moreover, during the same time, the prime minister of the Puppet

Mr. McTiCxUE. Let me ask you this : Soon after the takeover in 1940,
did the Communists start slandering you in your position as head of
the butter industry ?

Mr. KuTT. Yes.

Mr. McTiGUE. Did they continue to slander you ?

Mr. KuTT. They slandered for about 10 days. During this 10 days
also, another thing happened. It was just after the first or second
article — I cannot remember exactly — I got a call from a provincial
store owner who told me that just the day before a Russian in uniform
had bought a small piece of butter and had returned it the day when
the store owner called me and he showed him a handful of glass and
the Russian had told that he had found glass in the butter.

Mr. McTiGDE. And you began to feel that was the beginning of the
end as far as you were concerned ? *^

Mr. KuTT. 1 just felt that especially, because in 1938 or perhaps it
might have been in 1937, I just by occasion had heard a piece of the
Moscow purge trial. Mr. Vishinsky, the attorney general at that
time on purge trials, was interrogating a man whom I thought at that
time to be some director of a butter trust company, but who, it came
out later, was the chairman of the 5-year plan commission. I cannot
remember his name.

Mr. McTiGUE. This was in the Moscow purge trial ?

Mr. KuTT. Yes.

Mr. McTiGUE. Wliat did Vishinsky charge him with ?

Mr. ^KuTT. Vishinsky charged him — I heard only one piece of that
interrogation and that was that Mr. Vishinsky asked the man whether
there were occasions when glass was put into butter and the man
answered "yes," there were occasions when glass was put in butter.
Then Mr. Vishinsky raised his voice and asked whether there have
been occasions when glass was put into the butter but not when glass
was in the butter and whether the man understands the difference.
Then he said "yes," there were occasions when glass was put into
butter, but later on

Mr. MgTigue. At this time you were the executive vice chairman
of the Central Association of Cooperative Dairies, is that correct?

Mr. KuTT. Yes, that is riiiht.


Mr. McTiGUE. What is the biggest commodity export that the Es-
tonians have ?

Mr. KuTT. Just butter it was.

Mr. McTiGUE. So, in your position as executive vice chairman you
held one of the most responsible industrial positions in Estonia ?

Mr. KuTT. Yes.

Mr. McTiGUE. After you began to see the handwriting on the wall,
what with the charges being passed around that glass was being found
in the butter, did you try to resign ?

Mr. KuTT. Yes, I just thought that the best thing I could do w^ould
be to resign and I sent up a letter of resignation and tried to give it
to the minister of agriculture. My resignation had to go at that time
through the minister.

Mr. McTiGUE. Did he accept it ?

Mr. KuTT. No, he didn't accept it. He said that I must not go
away, that all my reasons which I brought — I thought I seemed to
have no confidence and that therefore I would like to resign, but I
didn't tell him anything about glass because I thought it is too dan-
gerous to touch on that subject, but I brought up other things, mainly
the confidence point. He thought that he cannot accept the resigna-

Later on he told me that perhaps all the reasons which I am giving
are not the real reasons and that there might be some other reasons why
I wanted to go away. Then he told me that if my real reason is that
I think perhaps the Estonian agriculture would be nationalized, then
he told me I should not have any fear of that because

Mr. McTiGUE. Wlien did you finally resign your post?

Mr. KuTT. I didn't resign because he didn't accept my resignation
at that time. We argued quite a lot of time. Then after I tried to
resign, I was dismissed by the Minister of the Interior.

Mr. McTiGUE. Your resignation was refused, but 10 days later you
were dismissed ?

Mr. KuTT. Yes.

Mr. McTiGUE. What reason was given for your dismissal ?

Mr. KuTT. No reason at all.

Mr. McTiGUE. What happened to your various businesses ?

Mr. KuTT. The only thing which happened was about 3 months
later I got an invitation to participate at liquidation of a company
called Poul Kojerman & Co.

Mr. McTiGUE. And you were one of the leading businessmen in
Estonia ; is that correct ?

Mr. KuTT. That is right.

Mr. McTiGUE. Wliat was your overall income approximately ?

Mr. KuTT. My overall income was about 18,000 to 20,000 crowns
a year.

Mr. McTiGUE. Wliat does that mean in the exchange rate ?

Mr. KuTT. If we take it by the official exchange rate it would have
been about $5,000 to $5,500 but naturally the dollars at that time were
something else than they are now.

Mr. McTiGUE. Was that your salary ?

Mr. KuTT, That was my total income.

Mr. McTiGUE. How much did you say it was, again ?

Mr. KuTT. About 18,000 to 20,000 crowns a year.

Mr. Kersten. And that is equivalent to what in dollars ?


Mr. KuTT. That is about $5,500.

Mr. McTiGUE. What happened to that income after the Commu-
nists took over, after you resigned or were dismissed ? Were all your
interests nationalized 'i

Mr. KuTT. Oh, yes ; nothing was left.

Mr. McTiGUE, Was your income cut off ?

Mr. KuTT. All was cut off. I had income from my salaries and
income from my house. The house was nationalized, so nothing was

Mr. McTiGUE. Wliat did you do then ?

Mr. KuTT. I just tried to live selling off' my personal things.

Mr. McTiGUE, Did you stay in Estonia ?

Mr. KuTT. Yes ; I stayed on until the beginning of March.

Mr. McTiGUE. What did you do in March ?

Mr. KuTT. In March I went away to Germany by a method of
which I was told that I cannot

Mr. McTiGTjE. You got out through the underground ?

Mr. KuTT. Yes.

Mr. MoTiGTJE. "Wliat efforts were made by the Communist regime
to influence the opinion of workers in Estonia favorably toward
nationalization ?

Mr. KuTT. At all meetings the Communists tried to drive home the
point that now all the sorrows are ended, that now there would be
work for everyone and bread for everyone, since all the means of
production are now in the hands of the people. All this propaganda
was repeated also, sometimes in official declarations which were pub-
lished in the State Gazette — just the usual Communist propaganda.

Mr. McTiGUE. Do you have any knowledge, supported by factual
observation, of the reaction of the Estonian workers toward the Com-
munist economic plan in general of the nationalization program ?

Mr. KuTT. Yes. Naturally all the organized expression of opinion
was suppressed and it was not possible to hear that openly, but some-
times when the workers couldn't hold back their emotions or when they
were just in small groups, then one could hear what they meant
about it.

I personally was a witness to an incident where just a director of
a firm had been dismissed and was just on his way out. He walked
over tlie yard in the direction of the main gate. It happened to be
that the workers were just returning from their lunch and streamed
through the gate into the yard.

At the same time the workers somehow got the word that the direc-
tor had been just dismissed in the cause of nationalization and, as soon
as the workers heard that, they sent around a man and started asking
question why and how and offered to send a delegation to the Govern-
ment to have the order changed.

It took time for the man to explain that it is not a good idea to send
a delegation, but even then when they broke out of their ring of
workers and walked toward the gate, about half a dozen workers were
coming behind him and beside him and still all the time offered a

Mr. McTkute. Mr. Kutt, can you tell us what happened to prices
and wluit happened to wages of the workers after the Communists took
over in Estonia?


Mr. KuTT. Actually at the beginning nothing happened, but it was
either at the end of September or in October when, one day, nearly
all stores were closed.

Mr. McTiGTJE. You mean just from June to September?

Mr. KuTT. Yes ; nothing ha})pened. Only before that, the exchange
rate of 1 Estonian crown was fixed, 1 crown, 1 ruble 25. But then at
the end of September, or m October, 1 day nearly all stores were closed,
especially were closed all stores for industrial consumer goods. Not
all food stores were closed because the food was needed. After about
3 days the stores were opened again and then, instead of former prices,
the public saw the prices raised in industrial goods up to 10 to 15

Mr. Kersten. You mean 10 to 15 times what they had been before ?

Mr. KuTT, What they had been before.

Mr. IvERSTEN. If I understand you correctly, Mr. Kutt, 2 or 3
months after the Communists took over, the stores were closed for a
few days and reopened and prices were then 10 to 15 times higher; is
that right?

Mr. Kutt. For industrial goods, consumer goods, prices were 10 to
15 times highei".

Mr. Kersten. All right ; I wanted to get that clear.

Mr. Kutt. In some categories even more. For example

Mr. Kersten. For example, what kind of consumer industrial goods
do you have in mind ?

Mr. Kutt. For example, shoes. Shoes were before the occupation,
about middle quality shoes, about 10 to 12 crowns.

Mr. Kersten. In dollars what would that be ?

Mr. Kutt. In dollars it would be about $2.70 up to $3.20.

Mr. Kersten. That was before the Communists took over?

Mr. Kutt. Yes.

Mr. Kersten. What were shoes after the Communists took over
when these stores opened up ?

Mr. Kutt. After the stores were opened up, after the 3 days, I saw
in 1 store a pair of shoes which was priced at 240 rubles.

Mr. Kersten. Wliat would that be in dollars at that time?

Mr. Kutt. 240 rubles, that would have been in crowns about 190
crowns and 190 crowns would have been about $51 or $52 a pair.

Mr. Kersten. So shoes went from about $2.70 to $3.20 to $50 or $60
a pair?

Mr. Kutt. $51 or $52 a pair.

Mr. McTiGUE. How many people in Estonia could afford to pay that
for a pair of shoes ?

Mr. Kutt. At that time nobody, because who had money? The
money was frozen and the wages were so low. For example, the wages
were so low that one hospital attendant would have needed nearly 2
months' wages to buy a pair of shoes.

Mr. McTiGUE. Two months wages to buy a pair of shoes.

Mr. Kutt. Yes.

Mr. McTiGUE. Wliat happened to the wages of the workers?

Mr. Kutt. At the same time, when the prices went up, also the wages
went up. When the prices of industrial goods rose about 10 to 15
times and the prices for foodstuff about 3 to 4 times, which gave a so-
called weighted average of about 4 to 4i/2 times, the wages went up


only 214 up to 3 times. So, the end result was that the real wages had
lost about 35 percent during these 3 days.

Mr. McTiGUE. Of the purchasing power ?

Mr. KuTT. Yes, about 35 percent of real wages were lost during the
3 days.

Mr. McTiGUE. Did they try to persuade the people that they were
doing them a great good by increasing their wages ?

Mr. KuTT. I can't remember the word in the newspapers at that
time about the raising of prices, but there was a raising of wages by
21/2 to 3 times. It just happened during these 3 days too, when the
prices were raised, there was quite a lot in the newspapers about the
benefits which the workers are getting with the raise in wages.

Mr. Kersten. So all the propaganda was about the raise in wages,
but nothing about the rise in prices ?

Mr. KuTT. No.

Mr. McTiGUE. What, briefly, happened to the Estonian monetary
system ? Wliat happened to the banks?

' Mr. KuTT. Just about the end of July or the middle of the second
half, all banks were given a moratorium. That meant that all the
savings were frozen and checks were honored only by special permis-
sion for larger amounts. The savings account owners could get also
once a month $30 ; 100 crowns. At the exchange that was about $30.

In any case, with the raising of prices of industrial goods up to 10
to 15 times, the savings were all inflated and the savings account
owners lost just about three-quarters of their savings, or even more.

Mr. McTiGUE. They lost three-quarters of their savings ?

Mr. KuTT. Yes; during these 3 days. That loss naturally went
further because, after the 3 days, during the next 6 months or so, there
was a further gradual rise in prices.

Mr. McTiGUE. How was the nationalization actually carried out?

Mr. KuTT. At the beginning it was told that nothing else would be
nationalized, only the banks, then large scale industries, mines, and
transport enterprise, but that was only the beginning. The nationali-
zation ended actually even by nationalizing also the scissors and razors
of barbers, sewing machines of seamstresses and the shoe-repair tools
of cobblers.

Mr. Kersten. Do you mean the small instruments like cobblers'
tools, barbers' instruments and sewing machines were nationalized?
In other words, the ownership was taken away from these people?

Mr. KuTT. Nothing was left.

Mr. McTigue. Even a small barber or even a single seamstress was
no longer able to go on with his or her very small enterprise, but rather
was taken into a collective group where he or she had to contribute
to the group and was given a salary of a certain stated amount?

Mr. KuTT, Yes ; and the collective group was then the owner of that
sewing machine or hammer or whatever it was,

Mr. McTiGUE. What about the rents in Estonia before and after?
How much, for example, did you pay for your apartment ?

Mr. Ktjtt. I had an apartment, yes ; but naturally after the Com-
munists came in, then they proclaimed that everybody couldn't have

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