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

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(farms, factories, etc.) determined the formulation and the implementation

of plans.

In principle, Soviet planners dictated the targets, but at each level

subordinate agents within the system entered into complex strategies with

their superiors to obtain the best possible set of instructions, in other words

to negotiate a plan that was achievable. Since no superior had access to per-

fect information, subordinates were able to understate and conceal productive

capacity. Similarly, plan fulﬁlment required astute and timely action on the part

of enterprises.No manager could afford to be exposed to failure to meet the tar-

gets, and in these circumstances horizontal networks and contacts ﬂourished;

thus managers engaged ‘pushers’ (tolkachi) to obtain inputs over and above the

planned allocation. Ultimately, ﬁrms and ministries came to an understand-

ing that the completion of the plan mattered more than the notional budget

that underpinned it; hence the phenomenon of the ‘soft’ budget constraint,

whereby struggling enterprises could in the last resort rely upon credits or

subsidies in order to survive. Farm managers likewise concealed some of their

grain, rather than deliver it to the authorities, in order to boost the seed fund

for the next harvest. Thus the formal system of subordination disguised the

fact that the principal (the state) did not have perfect information about the

behaviour of its agents (enterprises), about which it frequently remained igno-

rant. In a sense, therefore, the system was sustained less by the hierarchical

character of central economic planning than by the interaction of dictators and

subordinates. It should also be remembered that from time to time the party-

state ‘mobilised’ resources on an ad hoc basis, disrupting the targets agreed

with subordinates and thereby contributing to pervasive uncertainty. Some-

times, too, unforeseen external circumstances, such as war scares, wreaked

havoc with the assumptions that planners had made.

The First FYP rested upon a signiﬁcant planned increase in labour produc-

tivity, as a means of ﬁnancing the increased investment. Attempts were made

to improve the productivity of Soviet workers, by means of ‘shock work’, by

widening wage differentials, and by creating differential access to rationed

goods. But the mass inﬂux of unskilled peasant migrant labour made it difﬁ-

cult to improve output per person. During the mid-1930s the Soviet leadership

acknowledged that the productivity gap between the USSR and its capital-

ist rivals remained wide. All sectors were demanding increased investment,

making it imperative to look for ways of reducing costs. The most famous

such initiative, the Stakhanov movement, took place during the Second FYP,

7 For discussion of this ‘nested dictatorship’ in theory and practice see Paul Gregory and

Andrei Markevich, ‘Creating Soviet Industry: The House that Stalin Built’, Slavic Review

61 (2002): 787–814.

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at a time when the Soviet leadership had embarked on a fresh surge of capital

investment. Pravda (1 January 1936) explained this in orthodox Marxist terms:

‘every newly emerging social system triumphs over the old outdated mode

of production because it brings about a higher productivity of labour’. But

most workers responded passively at best, and managers regarded the entire

campaign as a pointless distraction. The outcome of Stakhanovism was chaos.

By the beginning of 1937 more modest targets for labour productivity were

being contemplated. Recent work has pinpointed concerns about ﬁnancial

stability as a major factor; the state budget was already under great strain as

a result of increased spending on defence, infrastructure and consumer subsi-

dies. Campaigns, such as the Stalinist drive to boost labour productivity and

to over-fulﬁl output targets, could not but create a climate of uncertainty for

Soviet managers and factory directors as well – they suffered a mass purge in

1937 and 1938, at a time when Stalinist ideology celebrated managerial power.

In general it proved much more straightforward to draft millions of additional

workers to the task of social and economic construction than it was to engineer

an improvement in output per person.

What then were results in economic terms? The magnitude of industrial

growth in particular has provoked endless debate as well as ingenious attempts

to deal with measurement problems. Much of the available statistical record

took the form of data on physical output, but apart from issues of concealment

and falsiﬁcation these data raise difﬁcult issues of aggregation. Decisions have

to be reached about the appropriate weights to be applied. Next, there is

the problem of deciding which prices to apply to the data; according to the

‘Gerschenkron effect’, the adoption of early year prices overstates growth

in an economic system that is undergoing rapid structural transformation.

Problems arise from the introduction of new types of product that substitute

for old; how quality change is to be measured poses particular difﬁculties

for the measurement of Soviet economic change. For these reasons no ﬁnal

judgement of the growth record is likely to be reached. However, it is now

clear that ofﬁcial Soviet estimates greatly overstated total economic growth;

Girsh Khanin has revised the ofﬁcial rate of increase of national income from

13.9 per cent to 3.2 per cent for the years 1928–41.

The allocation of additional output reﬂected the priorities given to invest-

ment and to government spending, notably on defence. The total stock of

capital more than doubled between 1928 and 1941; this increase was all the

more remarkable, given the sharp fall in livestock herds. Defence production

increased twenty-eight-fold during the 1930s (far in excess of total industrial

production), imposing a heavy burden, particularly after 1936. The Stalin era

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witnessed Russia’s emergence as a modern military power. The hallmarks

were the new tank and aviation industries, supported in turn by steel, met-

alworking, fuel, chemicals and rubber production. Qualitative improvements

had also taken place. But difﬁculties remained: the defence sector was not

immune from the inefﬁciency prevalent in the economic system as a whole,

and by 1941 much of the stock of military equipment was already obsolete.

Much reliance continued to be placed upon sheer manpower. The Red Army’s

increased demand for manpower was met largely by peasant conscription.

The world of the Russian peasantry was turned upside down by a con-

certed attempt to reorganise peasant land tenure, not (as in 1906–11) to create

individual enclosed farms but to realise a vision of collectivised agriculture.

Those who framed the collectivisation project shared with Stolypin’s survey-

ors and agronomists a ﬁrm belief in the need for a more rational organisation

of the land and in the inability of peasants to bring about real change on

their own initiative. In 1929 the order was given to collectivise peasant farms.

After a short interruption following Stalin’s famous speech, ‘Dizziness from

success’ (March 1930), the process recommenced. ‘Kulaks’ (demonised as ‘peas-

ant barons’) were dispossessed and deprived of the opportunity to enter the

new farms. Nomadic groups (such as Roma, and the ‘small peoples of the

North’) were compulsorily settled in collectives, in order to create the basis

for a new ‘proletariat’. Soviet ofﬁcial propaganda treated collectivisation as

a progressive measure (Dovzhenko’s ﬁlm Earth (Zemlia, 1930), gave it a more

subtle and aesthetic treatment). Stalin and his entourage accused peasants of

‘sabotage’ and of starving workers and soldiers, and expressed concern about

the ‘counter-revolutionary chauvinism’ of Ukrainian peasants. The outcome

was uncompromising state violence. Out of a total of 25 million peasant house-

holds, around one million were identiﬁed as kulaks and deported, many of

them to Central Asia, where they were exposed to infectious disease and a

shortened life expectancy.

Land reorganisation was accompanied by a far more concerted attempt to

extract grain from producers. The government overcame widespread peas-

ant opposition by a combination of repression (theft of ‘socialist property’,

including grain, became a capital offence on 7 August 1932) and reform (the

legalisation of trade by peasant households in May 1932 and the creation of

a legal framework for the kolkhoz). In another echo of the Stolypin reforms,

some peasants welcomed the new dispensation as an opportunity to get ahead.

In the short term, however, the outlook was entirely bleak. The famine of

1933, following disastrous harvests in 1931 and 1932, devastated large parts

ofUkraine,theVolgaregion and the North Caucasus. Stalin has been accused of

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preventing shipments of grain from reaching areas of starvation, leading some

scholars to argue that collectivisation-induced famine represented a deliberate

programme of ‘genocide’. Others are unconvinced, citing the overall decline in

food production and the limited room for government manoeuvre.

In purely

economic terms collectivisation resulted in the devastation of livestock herds

(nowhere more so than in Kazakhstan) and the decline of animate power. It

took a generation for the agricultural sector to recover. Only on the very eve

of war did the total stock of power (animate and inanimate) ﬁnally exceed

pre-collectivisation levels.

Gerschenkron famouslypinpointedcontinuitiesbetween the ‘Wittesystem’

and Stalinism. According to this interpretation, Stalin exploited the ‘advan-

tages of backwardness’ to press the claims of heavy industry for investment,

which were secured on the basis of a sharp curtailment of overall consump-

tion.

Certainly, for ordinary people, this turbulent economic transformation

imposed severe strain. Day-to-day survival required the adoption of imagina-

tive strategies: sufﬁcient goods could be secured only by recourse to the legal

and illegal markets, in order to supplement organised (planned) distribution.

Workers’ families traded output from domestic food production and artisanal

activity. Peasants relied upon sales of produce from their private plots; their

income from the kolkhoz, calculated as ‘labour-day payment’, was neither reli-

able (it was treated as a residual claim on the farm’s product) nor adequate.

Other than the prison-camp population, those of pensionable age were hardest

hit (peasants counted as self-employed and were not entitled to a pension).

The Stalinist economic transformation promoted upward social mobility.

Some peasants escaped the kolkhoz, making use of well-established village

networks and institutions in order to seek a more secure future than could

be obtained in the uncertain world of the collective farm. Many worked as

seasonal labourers, as their parents’ generation had done in pre-revolutionary

times. Between 1926 and 1939 around 23 million people ﬂocked to Soviet cities,

including 2 million to the Moscow conurbation. This mass inﬂux owed very

little to organised recruitment. Indeed the government sought to restrict the

movement of peasants,bydenyingthem an entitlement to the internal passport

8 For a summary of the arguments see R. W. Davies, M. B. Tauger and S. G. Wheatcroft,

‘Stalin, Grain Stocks, and the Famine of 1932–33’, Slavic Review 54 (1995): 642–57. Important

remarks on the politics of collectivisation,based on new archival research, areto be found

in Terry Martin, The Afﬁrmative Action Empire: Nations and Nationalism in the Soviet Union,

1923–1939 (Ithaca, N.Y.: Cornell University Press, 2001), pp. 302–7.

9 This is not to say that the investment programme was sacrosanct: in 1933 and 1938 the

Politburo ordered cuts in investment, in order to improve the supply of consumer goods.

10 Peasants who were employed on state farms received a money wage.

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that was reintroduced in 1932. But this discriminatory measure had little effect

on overall geographical mobility, because peasants could enter the urban econ-

omy by various means, for example as domestic servants employed by the

emerging Soviet elite so bitterly denounced by Trotsky.

Notwithstanding these pressures, or perhaps because of them, Stalinist

industrialisation supported a growing ethos of consumption, particularly after

the abolition of rationing in 1935–6. Soviet advice literature emphasised the

need to maintain standards, at least by members of the new elite, in the prepa-

ration of food and the provision of one’s apartment with furniture and books.

In general, housing left a great deal to be desired – throughout the 1930s the

majority of the population had to make do with communal arrangements, in

shared apartments, workers’ hostels or barracks. Pervasive shortages of con-

sumer goods and accommodation gave rise to a variety of practices, at all levels

of Soviet society, to smooth access to goods and services by circumventing the

ofﬁcial system of distribution. The Soviet lexicon designated these informal

reciprocal practices as blat. They long outlived Stalin.

Impressive resources were devoted to education and cultural improvement.

The Stalin revolution entailed the construction of schools and universities,

public parks and squares, theatres, cinemas and sports arenas and department

stores. Campaigns to improve school attendance and to extend adult learning

opportunities resulted in signiﬁcant gains in literacy. Particular importance was

attached to vocational training for the new generation of engineers and man-

agers. These projects were accompanied by injunctions to self-improvement,

supported by advice literature that related this to the construction of a new,

socialist society and a duty to one’s fellow citizens. By 1939 the total numbers

employed in social and cultural projects, as well as health, housing and eco-

nomic administration, exceeded 8 million, compared with fewer than 2 million

in 1926.

The demographic consequences of Stalinism were related to this profound

economic transformation, and to the terror that accompanied it. Collectivi-

sation prompted a mass exodus of peasants in 1931–2, and as a result the

government closed the borders of Ukraine and the Kuban’ in January 1933.

But the state also directly engineered population displacement. Thus ‘de-

kulakisation’ resulted in the deportation of peasants (of all nationalities) to

‘special settlements’; by 1933 these housed around 1.1 million men, women and

children. Other forced labour was concentrated in prisons, in labour camps,

and in labour colonies. All of these – a combined population of 2.52 million in

1933, rising to 3.35 million by 1941 – provided an important source of labour for

the Stalinist economy. Ostensibly, the Gulag had impressive ‘achievements’ to

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its credit. Construction of mines, roads, railways and urban transport systems

(such as the Moscow metro), canals and waterways (for example, the White Sea

Canal), and new industrial towns, such as Magnitogorsk and Komsomol’sk-

na-Amure, depended upon the labour of dispossessed kulaks and other forced

labour, celebrated by Maxim Gorky as a demonstration of the potential to

rehabilitate the criminal ‘element’. The NKVD also used forced labour to pro-

duce non-ferrous metals and for the felling of timber. But the Gulag imposed

a heavy burden, because productive workers were wrenched from the occu-

pations for which they had been trained and because immense resources were

tied up in monitoring the work of prisoners.

Terror also meant the forced migration of entire ‘enemy’ populations,

beginning with Ingrian peasants who were designated as ‘kulaks’ and deported

to Murmansk and to Central Asia in 1930. Further deportations, of Kore-

ans, Germans and Poles took place before the Second World War; during

the war Crimean Tatars and Chechen and Ingush civilians suffered the same

fate. Deportation disrupted and even destroyed viable economic activity. The

Soviet occupation of Central and Eastern Europe after 1945 brought forth fresh

deportations, notably in the Baltic lands, but these were related to economic

development only in so far as they ‘encouraged’ the incorporation of hitherto

independent states into the socialist economy. Meanwhile, post-war construc-

tion in the USSR, such as the creation of the closed city of Krasnoiarsk-26,a

major centre of producing weapons-grade plutonium, depended heavily upon

forced labour.

The welfare consequences of the Stalinist economic transformation have

proved particularly controversial where the interests of nationalities are con-

cerned. During the Second FYP the Soviet leadership sought to reduce the

development gap between the more advanced and less-developed parts of

the Soviet Union. The main plank in this strategy was to encourage rapid

growth by means of investment in production, infrastructure and education.

The results were undoubtedly impressive, at least in terms of accelerating the

economic development of less-developed regions such as Central Asia, where

new factories, power stations and transport links were built, along with hospi-

tals, schools and universities. These policies produced a nationalist backlash.

In pre-war Ukraine, for example, the Soviet regime faced accusations of having

expanded heavy industry in the eastern region, at the expense of light industry

and agriculture in the ethnically more homogeneous western parts of Ukraine.

And in Kazakhstan, the construction of the Turksib railway – achieved in part

by the recruitment of native labour – was accompanied by the charge that this

grand project had destroyed the ‘traditional’ Kazakh nomad way of life.

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Great leaps forward (iii)

The Second World War left an enduring imprint on the Soviet economy. Eco-

nomic reconstruction was rendered difﬁcult by the magnitude of wartime

devastation and by the shock of sudden famine in 1946–7. Recent work has

demonstrated that key industrial sectors, notably coal mining, ferrous met-

allurgy and construction, experienced a desperate labour shortage that was

made good by prisoners (by 1953 the forced labour system incarcerated 5.5

million persons) and by semi-free workers recruited from the village.

These

workers were bound by the draconian labour legislation introduced in 1938

and 1940 that imposed rigorous controls over job mobility. These controls were

not lifted until 1951, by which time managers were refusing to enforce them,

lest they deprive the enterprise of scarce skilled labour.

The campaign style in Soviet economic policy was reiterated during the

1950s by Nikita Khrushchev, whose regime became synonymous with fresh

ideological fervour, such as supporting the ambitious goals of building com-

munism and overtaking the USA. Khrushchev denounced the spread of own-

ership of dachas and attacked the private plot. None of these campaigns had

any pronounced economic impact. Much more consequential was his decision

to promote population migration to Siberia and Central Asia, in order to settle

new farmland. Constant pressure to maintain sowings on virgin land quickly

led to soil erosion. In general, however, the continued de-ruralisation of Russia

continued: by 1970 only 44 per cent of households were rural, compared to 66

per cent on the eve of the Second World War. The relatively poor quality of life

in villages, particularly in Russia’s non-Black Earth region, encouraged rural

depopulation, a process that persisted throughout the ﬁnal quarter of the cen-

tury notwithstanding formal restrictions on rural out-migration.

One other

campaign attracted enormous international publicity: in 1957 the Soviet Union

launched the world’s ﬁrst satellite into orbit, heralding the onset of a major

space programme. These campaigns went hand in hand with continued eco-

nomic growth. During the 1950s, according to Khanin, Soviet national income

grew at an annual average rate of 7.2 per cent, falling to 4.4 per cent in 1960–5.

Further campaigns were launched by Khrushchev’s successors to secure

improved economic performance by means of institutional reform. In 1965

11 The deﬁnition of forced labour is the same as used earlier, comprising those in prison,

in labour camps, in labour colonies and in special settlements. By 1953 the latter housed

2.75 million. Gulag workers began to receive wages after 1950, although they were set at

no more than half the wages paid to free workers.

12 L. N. Denisova, Ischezaiushchaia derevnia Rossii: nechernozem’e v 1960–1980 gody (Moscow:

RAN, 1996).

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industrial ministries were empowered to use ‘economic levers’, such as bonus

payments and retained proﬁts, in order to stimulate enterprise performance.

This era was also associated with a renewed emphasis upon consumption.

Consumption was in part a purely ‘private’ matter, but it was also secured

by informal social networks (blat) and an extensive range of practices (such as

petty pilfering and the theft of state property) that have been grouped together

in the term ‘second economy’ and that enabled consumers to reroute goods

from the state to other sectors of the economy. Ofﬁcialdom frequently turned

a blind eye, partly because ofﬁcials themselves participated in these infor-

mal transactions.

From one point of view, consumption in its ofﬁcial and

unofﬁcial variants helped to cement the legitimacy of the regime. But con-

sumers’ access to goods imposed constraints, in that Soviet citizens became

accustomed to price subsidies. Consumers were prepared to overlook short-

ages and poor-quality products provided there were no untoward increases in

their price. When working-class consumers went on strike in protest against

price increases in Novocherkassk in 1962, they met with brutal state repression.

This exceptional episode proved the rule (and helped cost Khrushchev his job):

Brezhnev’s lengthy tenure of ofﬁce as General Secretary rested in large part

upon the use of retail price subsidies, whereby the state absorbed increases

in the procurement prices paid to Soviet farmers during the late 1960s and

1970s.

At least for a while, the state budget became the opium of the masses.

The post-Stalinist transformation also brought about Soviet exposure to the

international economy. In the ﬁrst instance this meant the creation of closer

links with the countries that made up the ‘Soviet bloc’. Here the Council for

Mutual Economic Assistance (Comecon) promoted socialist economic inte-

gration, meaning the transfer of engineering products from Eastern Europe in

exchange for cheap energy from Russia. Meanwhile during the 1970s and early

1980s the Soviet Union extended its international proﬁle by importing Western

technology (and some consumer goods) and exporting oil during a period of

rapidly rising energy prices on the world market. The great oil boom, and its

availability at below-market prices, did nothing to discourage wasteful energy

consumption. Policies to accelerate technological progress did not improve

overall economic performance, partly because Soviet enterprises lacked the

ability to assimilate foreign technology. To all intents and purposes the Soviet

13 Gregory Grossman, ‘The Second Economy of the USSR’, Problems of Communism 26

(1977): 25–40.

14 As a result, and taking into account farmers’ incomes from their private plots, the

disparity between rural and urban incomes that was a feature of the Stalinist economy

all but disappeared under Brezhnev.

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economy under Brezhnev suffered the same shortcomings as in the era of NEP.

In both periods the Soviet Union lagged behind more dynamic economies in

the capitalist West.

The reform impulse in Russian economic

history (ii): perestroika

Perestroika (literally, ‘restructuring’) was a bold attempt to address economic

deceleration and to revitalise Soviet society. In the ﬁrst instance, perestroika rep-

resented the triumph of a generation of reform-minded social scientists, such

as Abel Aganbegian and Tat’iana Zaslavskaia, who had been arguing since the

1970s that the socio-economic system was outmoded. Created at a time when

factors of production, labour and capital were relatively abundant and when

the general level of educational attainment amongst the population was low,

they maintained that the ‘administrative-command economy’ discouraged the

kind of energy and enterprise that the modern economy required and whose

absence was reﬂected in the poor level of labour productivity. Long-serving

ofﬁcials, accustomed to interfere in the affairs of ﬁrms, were encouraged to

devote their time instead to broad strategic issues. Chief amongst these was

the need (in the words of Mikhail Gorbachev) for a ‘renewal of socialism’.

Publicity campaigns once more accompanied economic reform initiatives.

A remarkable burst of ‘openness’ (glasnost’) far exceeded anything witnessed in

the Khrushchev era. The Soviet press and intelligentsia rediscovered the New

Economic Policy, which was trumpeted (somewhat misleadingly) as a kind

of golden age of economic freedom and dynamism.

Technocrats deplored

widespread wastage (brak) in industry. Gorbachev denounced alcohol abuse

and absenteeism. In a concerted attempt to boost economic growth, the lead-

ership pinned its hopes on technological change in key sectors such as engi-

neering. This policy of acceleration (uskorenie), closely associated with Prime

Minister Nikolai Ryzhkov, failed to live up to expectations. Little came of an

attempt to establish joint ventures with foreign ﬁrms. In 1987–8 more radical

measures were introduced to reform property relations, extending from the

legalisation of co-operative and private enterprise to the removal of restric-

tions on state enterprise. Unfortunately, the Law on State Enterprise (May

1987) failed to have the desired impact. The revival of the doctrine of com-

mercial accounting (khozraschet), ﬁrst formulated in the NEP era, implied

15 R. W. Davies, Soviet History in the Gorbachev Revolution (London: Macmillan, 1989); Alec

Nove, Glasnost’ in Action: Cultural Renaissance in Russia (London: Unwin Hyman, 1989).

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

that enterprises would no longer receive support from the state but would

instead respond to consumer wants. However, ﬁrms were still expected to

give priority to orders placed by the state authorities. In 1990, Gorbachev

appeared to endorse a still bolder but hastily put together initiative for a ‘500-

day’ transition programme, which envisaged the privatisation of around three-

quarters of all state enterprises and a liberalisation of prices. Responding per-

haps to public anxieties about the consequences of radical reform, Gorbachev

held back from committing himself to the adoption of the programme in its

entirety.

What went wrong? The budget deﬁcit spiralled out of control, a conse-

quence of reduced tax receipts and a decision to maintain huge spending on

consumer subsidies, as well as social welfare and defence. In 1984, before pere-

stroika, the deﬁcit was approximately 4 per cent of GNP. By 1989 it stood at 10

per cent. Two years later it had ballooned to 20 per cent. No serious attempt

was made to institute a signiﬁcant reform of the price system. Gorbachev

negotiated fresh foreign loans, bequeathing a mountain of debt to his succes-

sors. The state kept the system aﬂoat by printing roubles, whilst enterprises

survived by granting one another vast credits. Inﬂation was rampant. The

basic problem in late Soviet Russia, namely the failure to engineer economic

and technological modernisation, continued unabated.

Perestroika unleashed a wave of dissatisfaction, from vested interests whose

secure position in Soviet society was threatened, from workers who demanded

improvements in food supplies and housing and from nationalists whodeclared

that only independence could restore the fortunes of the Soviet republics. The

reformers’ stance appeared likely to threaten the perquisites of the Soviet

elite. Yet not all Soviet bureaucrats opposed radical economic reform. Paul

Gregory has distinguished between planners (apparatchiki) and entrepreneurs

(khoziaistvenniki). The former were directly threatened by attempts to erode

the supremacy of Gosplan, whereas the latter entertained the possibility of

greater leverage within a more mixed economic system. Post-Soviet reform

would subsequently demonstrate that they were well placed to take advan-

tage of full-scale economic liberalisation. Workers also took to the streets

to demand wage rises and greater enterprise ‘autonomy’; to the extent that

their demands were satisﬁed, costs increased and inter-enterprise debt accu-

mulated. Gorbachev refused to sanction signiﬁcant increases in retail prices.

16 Ed Hewett described it as ‘a valiant effort to reconstruct the union virtually out of

whole cloth, on the basis of economic interests, rather than fear’ (E. A. Hewett and

V. H. Winston (eds.), Milestones in Glasnost and Perestroyka: The Economy (Washington:

Brookings Institution Press, 1991), p. 457).

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