Suny R.G. (ed.) The Cambridge History of Russia, Volume 3: The Twentieth Century

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chapter provides a way of thinking about the economic and demographic

consequences of the ambitions expressed by successive political leaders in

Russia.

Great leaps forward (i): late tsarist industrialisation

The long boom in Russian industry began after 1885 and, after a brief inter-

ruption in 1899–1907, ﬁnally came to an end in 1916. It rested upon a mixture

of direct and indirect initiatives on the part of the state. Under Minister of

Finances Sergei Witte the tsarist government embarked on a massive pro-

gramme of railway-building, including the construction of the Trans-Siberian

Railway, designed in part to open up markets in the Far East and Central

Asia. Railway construction in turn helped kick-start the expansion of heavy

industry. By its adoption of the gold standard in 1897 the government created

an environment favourable to foreign investment. Russia became increasingly

integrated into the international economy, through the medium of capital

movements and the export trade in commodities such as grain and oil. Inter-

national movements of labour were less signiﬁcant, although Russia suffered

a net outﬂow of migrants to the New World, partly because of discriminatory

policies towards the empire’s Jewish population.

The results were impressive: a growth rate for total income of around 5

per cent per annum during the 1890s and again after 1907, combined with

technological modernisation in key industrial sectors such as iron and steel,

oil and engineering. New industrial regions came into existence, including

the Donbass coal basin and the oil industry of the Caucasus, although it is

worth noting that tsarist industrialisation tended to consolidate pre-existing

regional disparities. For example, investment in modern metalworking and

textile factories in the Baltic lands took place in an environment that was

already relatively highly developed in terms of educational attainment and

income per head.

Russia’s industrial upsurge sparked controversy at the time, and its wel-

fare consequences have been debated ever since. Conservatives bemoaned the

intrusion of a modern ﬁnancial sector and foreign investment in Russia, and

charged Witte with the neglect of agriculture. In an inﬂuential assessment

Alexander Gerschenkron defended Witte’s strategy, on the grounds that it

enabled the Russian state to substitute for factors of production that were

for War: Soviet Production, Employment, and the Defence Burden, 1940–1945 (Cambridge:

Cambridge University Press, 1996).

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missing or in short supply. Chief amongst these were skilled labour and cap-

ital. By stabilising the exchange rate, imposing high tariffs and launching a

propaganda offensive, the tsarist state encouraged the inﬂow of foreign direct

investment. Advanced technology imported from Western Europe enabled

Russian entrepreneurs to substitute capital for labour. Yet underpinning the

strategy was a government willingness to maintain a high level of demand for

the output of heavy industry, and this entailed in the view of some observers

injurious taxation of the peasant population and depressed levels of household

consumption. Gerschenkron believed that this was a small price to pay for

economic development. Elements in this story have been challenged: thus

Gerschenkron neglected regional differences in peasant welfare, understated

autonomous industrial growth and discounted the impact of state-ﬁnanced

rearmament in asserting that the state’s role diminished after 1905. However,

his overall interpretative framework has proved remarkably stimulating and

durable.

Industrialisation had important demographic consequences. The rate of

migration to new centres of industry increased (Witte’s critics decried the

squalor of new settlements, and bemoaned the crime that they associated

with urban overcrowding). As a result, on the eve of the First World War

around 16 per cent of the population lived in urban centres. Witte deliber-

ately encouraged population migration, partly because he saw colonisation

as a solution to ‘rural overpopulation’ in Russia’s central agricultural region.

The tempo of economic development greatly increased the settlement of Rus-

sians in far-ﬂung corners of the empire, including Central Asia, the Caucasus,

Poland and the Baltic lands. Non-Russian minorities in turn began to settle

in larger numbers in Russia’s expanding cities. By 1914, for example, around

15 per cent of the empire’s Latvian population lived outside the Baltic region,

the result of a generation of economic development and migration to Euro-

pean Russia. However, few observers attributed any signiﬁcance to this at the

time.

These developmental imperatives continued to operate during the First

World War. Around 140,000 workers, including prisoners of war, were set to

work building railway lines, such as between Petrozavodsk and Murmansk.

They included Kazakh rebels who were punished for having opposed con-

scription in 1916. In general, however, the mainsprings of wartime migration

betrayed other, non-developmental impulses. Jews, Germans and other ‘alien’

populations were forcibly removed from the borderlands during 1915, and

resettled in European Russia (for Russia’s Jews this forced migration marked

the end of the infamous Pale of Settlement).

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Historians have been relatively kind in their assessment of the tsarist great

leap forward. The growth rates and structural change were remarkable. All

the same, on the eve of the First World War the gap between Russia and more

developed countries had actually widened in terms of income per capita – a

consequence of Russia’s rapid population increase and the size of the unre-

constructed rural sector. Traditional forms of tsarist governance persisted; in

particular, there was a surfeit of arbitrary intervention in economic life that

probably had a corrosive effect on entrepreneurship. The post-revolutionary

generation would continue to grapple with the issue of Russia’s relative eco-

nomic backwardness and to experiment with forms of economic administra-

tion.

The radical privatisation impulse (i): pre-1917

experiments with land reform

Themajority of the population in tsarist Russia continued to support itself from

agriculture. Peasant farming gave cause for concern, because it was believed

that traditional methods of cultivation condemned successive generations to

poverty. Hence attention shifted to the prevailing forms of peasant agricul-

ture. Following widespread peasant unrest in 1905 and 1906 Prime Minister

Stolypin targeted the traditional land commune (obshchina), in the expecta-

tion that it would be replaced by a class of ‘sturdy and strong’ farmers who

enjoyed full title to the land. A growing number of economists and other

social scientists bemoaned the restrictions that the commune was believed to

impose on peasant farmers and its deleterious consequences for the growth

of agricultural productivity. Particular attention focused on the custom of

redistributing allotment land, which was believed to act as a disincentive to

improvements in cultivation, and on the fragmentation of peasant allotments.

The edict of 9 November 1906 enabled peasant heads of household to petition

for communal allotment land to be transferred into their personal ownership.

Where such a household had more land than would be allotted at the next

redistribution, its head was entitled to purchase the excess on very favourable

terms, with the help of a Peasant Land Bank. The commune was obliged

to comply with any such request within one month. Furthermore, the head

of a household was entitled to demand the consolidation of scattered strips.

Provision was also made for the entire commune to embark on land con-

solidation, provided two-thirds of its members agreed. Where a commune

appeared to resist, the government was entitled to intervene on behalf of the

‘separator’.

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The reformers faced an uphill struggle to convert – the word is used advis-

edly, since so many embarked on their task with missionary zeal – Russian

peasants from subsistence farming to a capitalist ethic. Much of their analysis

overlooked the fact that the land commune governed all aspects of peasant life,

from the allocation of scattered strips of land (itself a kind of insurance against

risk) and the use of communal pasture to the maintenance of rural infra-

structure and the apportionment of taxation. Thus a householder’s request

to privatise his plot had far-reaching consequences, which the government

sought to minimise by insisting that the household retained other rights of

membership of the commune, such as access to meadows and pasture. Many

peasants resented the claims of their neighbours who sought to take advantage

of the new legislation, and there were stories of intimidation. Besides, subordi-

nate members of the separating household begrudged the new powers vested

in the hands of the paterfamilias. Nor did the reformers dissuade the majority

from the view that their prospects would be greatly enhanced by a revolu-

tionary redistribution of the land privately held by noble landowners. But the

reform impulse amongst a new generation of Russian agronomists swept all

before it, and these enthusiasts themselves did not shrink from intimidation.

Much publicity attended the creation of independent farms (khutora), idealised

and actively promoted by government Land Organisation Committees. More

than one million households took advantage of consolidation between1907 and

1915; this implies that around 8 per cent of peasant communal land underwent

full reorganisation. Particular enthusiasm for enclosure was demonstrated in

the southern provinces of European Russia where cereal production became

increasingly commercialised.

The reforms themselves are thus of considerable interest, because they

reveal a concerted willingness to impose modern patterns of land organisation

as well as new kinds of behaviour upon a sceptical peasantry. These grand

ambitions (like the land commune itself) persisted into the Soviet period. Yet,

in economic terms, the direct results of the Stolypin land reforms were quite

modest. As Esther Kingston-Mann and others have pointed out, the reformers

refused to accept that the land commune was quite compatible with improved

cultivation on peasant farms. In truth, of much greater consequence for the

advance of Russian agriculture before the war was the growth of new markets

and the improvement in the terms of trade for food producers, which enabled

farmers to diversify into new products and to invest in agricultural equipment.

Institutions such as co-operatives helped to sustain this activity.

Equally important in economic terms was the continued process of internal

migration. The land reforms gave an added impulse to migration, primarily

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by cancelling the redemption payments that peasants had incurred as a result

of emancipation in 1861 and by enabling poorer peasants to sell land (although

they could not sell to non-peasants) and to move from depressed regions such

as the lower Volga. Some sought work in the expanding urban economy of

European Russia, becoming workers and (as Lenin had suggested) consumers

with ‘civilised habits and requirements’.

Others decided to explore oppor-

tunities further east. The government’s Siberian Committee and the Coloni-

sation Department for Turkestan provided peasant migrants with maps and

itineraries – a noteworthy contrast to the much more chaotic population

displacement that occurred in the First World War. Between 1896 and 1915

around 4.5 million peasants settled permanently in western Siberia and Cen-

tral Asia, where a thriving rural economy began to develop on the eve of war.

But the government continued to impose tight restrictions on the mobility

of the inorodtsy (‘foreigners’), including Jews and the indigenous population

of Siberia, Central Asia and the Caucasus. Freedom of settlement was not an

option available to all.

The reform impulse in Russian economic history

(i): New Economic Policy

The New Economic Policy (NEP) had its roots in the shift away from ‘War

Communism’, a system that heralded imminent utopia so far as some enthu-

siasts were concerned, demonstrating the kind of economic fundamental-

ism that would become fashionable in the 1930s and again during the 1990s.

Between 1918 and 1920 money virtually lost its function as a medium of

exchange, and capitalist institutions evaporated. But the underlying economic

reality showed War Communism in a disastrous light. Production collapsed

(industrial output in 1921 was a mere 12 per cent of the 1913 level) and estab-

lished economic links were broken, being replaced by somewhat arbitrary

bureaucratic determination of priorities for the supply of inputs. This was

an economy of absolute shortage. Deprivation and dictatorship went hand

in hand. The collapse of workers’ control during the civil war represented

defeat for a more libertarian vision of Soviet socialism, and the triumph of

one-man management. Workers who held on to their jobs received payment

in kind, and bartered goods in order to survive. Others returned to the village.

Russia suffered a demographic haemorrhage. Thanks to the ‘Red Terror’, the

3 V. I. Lenin, The Development of Capitalism in Russia (Moscow: Progress Publishers, 1977),

p. 582. Lenin’s work was ﬁrst published in 1899.

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propertied elite (including many former landlords, whose estates were seized

by the peasantry in 1917–18) decided to emigrate. Those who remained on

Russia’s war-ravaged territory were exposed to infectious disease and famine,

which domestic and foreign aid organisations (such as the American Relief

Administration and the Society of Friends) struggled valiantly to overcome.

In 1921 whatcame to be seen as the hallmarks of War Communism – compul-

sory deliveries of produce by peasant farmers (according to assigned quotas,

or prodrazverstka), the nationalisation of enterprises and the administrative

allocation of goods and labour, particularly to support the war effort against

the Bolsheviks’ enemies – were abandoned. In their stead came greater com-

mercial freedom, although NEP led neither to complete deregulation nor to

the abandonment of the ultimate objective of a planned socialist economy. (In

a signiﬁcant indication of the new state’s ambitions, Gosplan was established

in 1921.) Crucial to the transition to NEP was the decision to introduce a single

tax on peasants’ output and to permit them to retain the residual product.

It is not difﬁcult to see this as a political accommodation that the Bolshevik

Party reached with the peasantry, and that brought with it profound economic

implications. Other policy decisions logically followed: the creation of a stable

currency (ﬁnally completed in 1924), the stabilisation of the state budget (a

factor contributing indirectly to a rising level of unemployment), the aboli-

tion of restrictions on trade, and the introduction of commercial principles in

enterprise transactions (khozraschet). Private traders (Nepmen) replaced the

‘bagmen’ who had engaged in illegal trade in grain during the civil war. By

1923 private traders accounted for more than 75 per cent of all retail trade.

The Communist Party – which enjoyed a monopoly of political power – did

not abandon all forms of economic intervention. In particular, it forced down

industrial prices in 1924, in order to offset the consequences of the ‘scissors’

crisis’ (Trotsky’s famous expression describing the relative movement of agri-

cultural and industrial prices in 1923–4) and to encourage peasants to bring

grain to the market. This was consistent with the social contract between

party and peasantry.

How dynamic was NEP? The question is important (and has been much

debated), because it raises issues concerning the mainsprings of economic

growth beyond 1928. The ofﬁcial Soviet view was that the potential for stim-

ulating further growth within the NEP framework had been exhausted by

1928. However, Paul Gregory argues that the economy had still not recovered

pre-war (1913) levels of output by that date, the implication being that part

of the subsequent Stalinist economic transformation was a consequence of

utilising reserve capacity. Other scholars have taken an intermediate position,

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arguing that Gregory overstated the prosperity of the Russian economy in

1913 and thus understated the rate of growth in 1913–28. Certainly, the Soviet

economy under NEP had important achievements to its credit, for example

by greatly extending the tsarist experiment with electriﬁcation and introduc-

ing new products, such as oil-drilling equipment. Yet some important sectors

(iron and steel, food and drink) lagged considerably. Non-Bolshevik economic

specialists had to answer criticism from the political leadership that NEP was

failing to address issues of technological backwardness in industry, against a

backdrop of greater dynamism in the developed capitalist West.

‘All economy comes down in the last analysis to an economy of time.’

Marx’s words were quoted approvingly by Trotsky, for whom socialism meant

not only the removal of capitalist exploitation but also a greater economy

of time, ‘that most precious raw material of culture’. Most commentators,

whethertsarist or Soviet, had a more narrow conception of labour productivity,

but they all agreed that Russian labour productivity had to be improved if

the gap on economically more advanced countries were to be closed. That

perception was shared by V. I. Grinevetskii, the pre-revolutionary engineer,

and by Aleksei Gastev, the Soviet populariser of ‘scientiﬁc organisation of

labour’ (NOT, nauchnaia organizatsiia truda), whose manuals continued to

ﬁnd favour as late as the 1960s. By 1925 the main authority for state industry

(Vesenkha, the Supreme Council of the National Economy) called for the

‘rationalisation’ of production, by means of improved working methods and

management. The strategy was crucial to NEP, because an improvement in

labour productivity made possible a lowering of costs of production, thereby

enabling enterprises to realise proﬁts, without simply forcing up prices and

jeopardising the relationship with the peasantry, as happened in the scissors’

crisis. But the pace of modernisation remained relatively sluggish.

To some of its chief advocates, NEP held out the prospect of greater Soviet

exposure to the international economy, which had been severely curtailed

between 1914 and 1920 (although in March 1920 Lenin signed a huge order for

foreign railway equipment). In fact, foreign intervention during the civil war

suggested that European powers had extensive economic ambitions for the

Russian borderlands, such as the Caucasus. Could those interests be harnessed

to the task of socialist economic construction? To be sure, trade agreements

were signed and some foreign capitalists established concessions in sectors

such as timber and minerals (manganese, lead and precious metals). Technical

assistance was imported – the memoirs of foreign specialists provide valuable

insights into the birth pangs of the Sovieteconomy – but the results werefar less

impressive than Grinevetskii had envisaged. The diminished grain marketings

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Economic and demographic change: Russia’s age of economic extremes

mentioned below hindered the recovery of foreign trade, and the trade deﬁcit

continued to increase. By 1926 the Soviet rouble had ceased to be a convertible

currency. This hardly betokened a commitment to internationalisation.

Meanwhile, the early years of NEP coincided with the formation of the

Soviet Union. During the period of War Communism large and resource-

rich parts of the country such as Siberia, the Caucasus and Ukraine had been

controlled by the Bolsheviks’ opponents. The challenge now was to recon-

ﬁgure the internal economic relations of the new country. The creation of

national republics and autonomous regions meant, according to one dyspep-

tic observer, that the national question was looked at ‘through “economic

eyes” – Turkestan means cotton, lemons, etc.; Kirgizia wool, cattle; Bashkiria

timber, hides, cattle’.

That description appeared to conﬁrm rather than to

overturn existing regional specialisation. Indeed the Soviet policy of ‘nativisa-

tion’ (korenizatsiia) did not extend to the economic sphere, at least so far as

the division of labour was concerned. Programmes for ‘national’ development

might reduce the economic role of non-indigenous groups, who sometimes

portrayed themselves as victims of ‘bullying’ by the indigenes. Yet there were

limits to the latter’s leverage: in regions of labour shortage, such as Karelia,

the nationalist leadership complained about Russian in-migration, but no con-

stituent republic was allowed to place restrictions on population resettlement

(the new word for colonisation). Capital investment and migration were to

be determined by the broad strategic goals of all-Union modernisation and

security. Any resulting economic ‘equalisation’ would be a by-product rather

than a guiding principle of economic policy.

Why did NEP come to an end? Opinions have been divided between struc-

turalists, for whom the system was inherently unstable, and intentionalists,

who point to the consequences of policy mistakes at the end of the decade.

It is clear that important issues remained unresolved under NEP. Unemploy-

ment persisted to an unacceptably high extent (in industry it reached around

14 per cent in 1927); transport, education, health and defence were deprived of

resources;the technological level of Soviet industry left much to be desired; and

the pattern of industrial location remained largely pre-Soviet. Yet the system

was evidently capable of delivering economic growth and marked improve-

ments in the quality of life. The difﬁculty was that these advantages seemed

to count for little when set alongside the manifestations of social division and

defence concerns. The system was dealt a fatal blow in 1927–8. In spring 1927 the

4 Quoted in E. H. Carr, A History of Soviet Russia: The Bolshevik Revolution 1917–1923, vol. i,

(Harmondsworth: Penguin, 1973), p. 288.

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party committed itself to more rapid industrialisation, increasing investment

and credits to state enterprises, and simultaneously reducing the retail price

of industrial products. The Russian countryside suffered a goods shortage,

exacerbating existing problems (grain marketings had declined as a propor-

tion of agricultural output, and by the mid-1920s were little more than half

the pre-war level). In 1928 the authorities resolved to criminalise ‘speculation’,

in a measure designed to put pressure on those, particularly rich ‘kulaks’ and

Nepmen, who were believed to be hoarding grain. In essence Stalin’s adoption

in January 1928 of the ‘Urals–Siberian method’, so called because of the regions

where the measures were ﬁrst applied, abrogated the social contract that had

been instituted with the peasantry in March 1921. Stalin did not refrain from

speaking of ‘tribute’ in justifying the need to apply force in order to procure

grain at low prices.

The New Economic Policy has had a good press from many Western

observers (as well as from the advocates of perestroika during the 1980s), who

associate it with an era of relative political freedom and cultural experimenta-

tion before the onset of Stalinism. However, the underlying rationale of NEP

was at odds with the cultural intelligentsia’s contempt for the profane world

of commerce and the proﬁt motive – ‘romantic anti-capitalism’, in Katerina

Clark’s words.

In less exalted society, too, NEP failed to register except as

a framework that promoted the visibility and the prosperity of the ‘money-

grabbing’ merchant (Nepman), the ‘kulak’, and the ‘bourgeoisspecialist’ – all of

whom actually provided important services – without apparently doing much

to improve job prospects and social welfare. The Stalinist political leadership

took advantage of this disaffection, as well as with the misgivings mentioned

earlier about housing, health and so forth, to launch a radically different system

after 1928.

Great leaps forward (ii): the Five-Year Plans

and collectivisation

The adoption of the First Five-Year Plan in 1928 marks the next attempt to

engineer rapid economic growth by means of concerted state intervention.

With its ambitious targets for capital investment, increased labour productivity

and the expansion of output, the Five-Year Plan (FYP) reﬂected a clear redirec-

tion in Soviet life. Cultural revolution affected economics no less than other

5 His use of this term was only made public in 1949.

6 Katerina Clark, Petersburg: Crucible of Cultural Revolution (Cambridge, Mass.: Harvard

University Press, 1995).

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forms of intellectual activity. Enthusiasts such as Strumilin, who espoused a

‘teleological’ commitment to economic planning, triumphed over economists

such as Groman, Varzar and Kafengauz, who preferred an ‘organic’ approach

to growth. In this atmosphere, one hallmark of which was a pronounced mil-

itarisation of economic rhetoric, it took considerable courage to proclaim the

need for caution. As Strumilin put it in 1929, ‘specialists prefer to stand for high

rates of growth rather than to sit in jail (sidet’) for low ones’.

Why then did the Communist Party commit itself to a new course? Apart

from the distasteful encouragement that NEP appeared to give to ‘hostile’

elements, the existing economic system had not ‘solved’ the questions of

unemployment and the foreign trade deﬁcit. A commitment to rapid indus-

trial growth implied the absorption of unemployed labour, import substitution

and the creation of a modern defence industry, something that a war scare

in 1927 made yet more imperative. The decision to embark on industrialisa-

tion meant a decision, in the words of Maurice Dobb, to forsake ‘the slow

rhythm of the plough for the more complex rhythm of the machine’, with

Gosplan conducting from Stalin’s score and Stalin tolerating no dissent from

the orchestral forces.

Tsarist ofﬁcials sometimes referred to ‘His Excellency, the Harvest’ as the

factor governing economic affairs in pre-revolutionary Russia. Their counter-

parts in Stalin’s Russia acknowledged the dictatorship of the plan. ‘His Excel-

lency, the Plan’ lay at the core of the economic system. Unlike the harvest, plans

took a monthly, quarterly and annual form, whilst for broad strategic purposes

the FYP dominated decision-making. Plans were imposed upon state-owned

enterprises by superior authorities, notably Gosplan and the economic min-

istries or commissariats. Targets normally took the form of physical indicators,

that is in terms of tons of steel or yards of cloth, but could also be expressed in

money terms, such as of the gross value of output in ‘constant prices’. Other

elements of planned performance might include targets for product assort-

ment, cost reduction, labour productivity and so forth. Quality considerations

were secondary. Accompanying the targets were centrally allocated supplies

to industrial enterprises. Preparation for this level of intervention had already

taken place under NEP, when ‘control ﬁgures’ were formulated and published

from 1925 onwards. In the FYP period this process became much more exten-

sive. A large economic bureaucracy supported this hugely ambitious exercise

in co-ordination, and intervened when needed to restore a degree of balance.

The consequences were profound in terms of economic behaviour. A com-

plex interplay of interests between the party, the planning agencies, eco-

nomic ministries, republican,regional and local authorities, and the enterprises

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