ECONOMY UNDER STALIN

ECONOMY UNDER STALIN

Lenin died in 1924, and by 1927 the government had nearly abandoned the NEP. Stalin sought a rapid transformation from an agricultural, peasant-based country into a modern industrial power and initiated the country's First Five-Year Plan (1928-32). Under the plan, the Soviet government began the nationwide collectivization of agriculture to ensure production and distribution of food supplies to the growing industrial sector and to free labor for industry. By the end of the five-year period, however, agricultural output had declined by 23 percent, according to official statistics. The chemical, textile, housing, and consumer goods and services industries were also performing poorly. Heavy industry exceeded the plan targets, but only at a great cost to the rest of the economy. [Source: Library of Congress, July 1996 *]

By the Third Five-Year Plan (1938-41), the Soviet economy was once again on a war footing, devoting increasing amounts of resources to the military sector in response to the rise of Nazi Germany. The Nazi invasion in 1941 forced the government to abandon the five-year plan and concentrate all resources on support for the military sector. This period also included the large-scale evacuation of much of the country's industrial production capacity from European Russia to the Urals and Central Asia to prevent further war damage to its economic base. The Fourth Five-Year Plan (1946-50) was one of repairing and rebuilding after the war.*

Throughout the Stalin era, the government forced the pace of industrial growth by shifting resources from other sectors to heavy industry. The Soviet consumer received little priority in the planning process. By 1950 real household consumption had climbed to a level only marginally higher than that of 1928. Although Stalin died in 1953, his emphasis on heavy industry and central control over all aspects of economic decision making remained virtually intact well into the 1980s.*

The University of Maryland economist Mancur Olson told Newsweek, "The essence of Stalin's system, and of communism now, is that everything is owned by the top guy or the Politburo. Everyone else therefore has no incentive to protect that property but to steal it back."

Stalin's Five Year Plans

In an effort to catch up with the West and industrialize and modernize the Soviet Union, Stalin launched a series of Five Year Plans in 1928 with the declaration: "We are 50 to 100 years behind advanced countries. We must cover the distance in 10 years." Later he warned, "To slacken the tempo means to fall behind. And the backward are always beaten." In heavy industry, and to some degree with consumer goods, the plans worked. By 1939, only the U.S. and Germany had higher industrial output.

In the first Five-Year plan, Stalin called for a quadrupling of outputs of heavy industry to be achieved with massive building projects and production quotas. Between 1929 and 1933, when the West was enduring the Great Depression and the U.S. industrial output declined by nearly half, the Soviet Union was claiming its production had doubled.

Under Stalin, old historical buildings were torn down to make way for new apartments, schools, metro stations and prisons. About half of Moscow's churches were destroyed, and the ones that remained were turned into warehouses, factories, sports clubs and offices. New projects included huge factories and industrial complex, Gothic wedding-cake skyscrapers in Moscow and other cities, extensive canals system and dams that connected the countries rivers and made unnavigable stretches of river navigable. Much of the work was done by labor camp prisoners and German POWs.

Yale history professor Paul Kennedy wrote: “Believing un the superiority of scientific socialism and obsesses with what one might term “giganticism,” they threw money, raw materials and the lives of many millions of laborer into creating large cities, steel mills and extraction plants in the coldest parts of the world.”

History of Stalin's Five Year Plans

At the end of the 1920s, a dramatic new phase in economic development began when Stalin decided to carry out a program of intensive socialist construction. To some extent, Stalin pressed economic development at this point as a political maneuver to eliminate rivals within the party. Because Bukharin and some other party members would not give up the gradualistic NEP in favor of radical development, Stalin branded them "right-wing deviationists" and during 1929 and 1930 used the party organization to remove them from influential positions. Yet Stalin's break with the NEP also revealed that his doctrine of building "socialism in one country" paralleled the line that Trotsky had originally supported early in the 1920s. Marxism supplied no basis for Stalin's model of a planned economy, although the centralized economic controls of the war communism years seemingly furnished a Leninist precedent. Between 1927 and 1929, the State Planning Committee (Gosudarstvennyy planovyy komitet--Gosplan) worked out the First Five-Year Plan for intensive economic growth; Stalin began to implement this plan--his "revolution from above"--in 1928. [Source: Library of Congress, July 1996 *]

The First Five-Year Plan called for rapid industrialization of the economy, with particular emphasis on heavy industry. The economy was centralized: small-scale industry and services were nationalized, managers strove to fulfill Gosplan's output quotas, and the trade unions were converted into mechanisms for increasing worker productivity. But because Stalin insisted on unrealistic production targets, serious problems soon arose. With the greatest share of investment put into heavy industry, widespread shortages of consumer goods occurred, and inflation grew. *

By 1932 Stalin realized that both the economy and society were under serious strain. Although industry failed to meet its production targets and agriculture actually lost ground in comparison with 1928 yields, Stalin declared that the First Five-Year Plan had successfully met its goals in four years. He then proceeded to set more realistic goals. Under the Second Five-Year Plan (1933-37), the state devoted attention to consumer goods, and the factories built under the first plan helped increase industrial output in general. The Third Five-Year Plan, begun in 1938, produced poorer results because of a sudden shift of emphasis to armaments production in response to the worsening international climate. In general, however, the Soviet economy had become industrialized by the end of the 1930s. Agriculture, which had been exploited to finance the industrialization drive, continued to show poor returns throughout the decade. *

Collectivization

In the 1920s and 30s, Stalin government took over privately run farms, organized huge government-run state farms and order peasants to join together and form collective farms. Many peasants whose families had worked their land for centuries resisted and were forced to give up their farms and move to huge collective farms.

"Collectivization" was an aim to produce enough food for everyone and free people to factory workers. It was thought that fewer people would be able to produce more food under the system, but actually productivity dropped and peasantry was destroyed as a class and a way of life.

Stalin forced peasants into collective farms against their will and imposed impossible quotas. Police and party brigades carried off away food and seed grain. Mills and storage facilities were burned down and harvests were confiscated and exported while people went hungry to demonstrate to the world the success of "scientific socialism."

To satisfy the state's need for increased food supplies, the First Five-Year Plan called for the organization of the peasantry into collective units that the authorities could easily control. This collectivization program entailed compounding the peasants' lands and animals into collective farms (kolkhozy; sing., kolkhoz) and state farms (sovkhozy; sing., sovkhoz) and restricting the peasants' movement from these farms. The effect of this restructuring was to reintroduce a kind of serfdom into the countryside.

Agriculture Policy Under Stalin

Under Stalin the government socialized agriculture and created a massive bureaucracy to administer policy. Stalin's campaign of forced collectivization, which began in 1929, confiscated the land, machinery, livestock, and grain stores of the peasantry. By 1937 the government had organized approximately 99 percent of the Soviet countryside into state-run collective farms. Under this grossly inefficient system, agricultural yields declined rather than increased. The situation persisted into the 1980s, when Soviet farmers averaged about 10 percent of the output of their counterparts in the United States. [Source: Library of Congress, July 1996 *]

During Stalin's regime, the government assigned virtually all farmland to one of two basic agricultural production organizations--state farms and collective farms. The state farm was conceived in 1918 as the ideal model for socialist agriculture. It was to be a large, modern enterprise directed and financed by the government. The work force of the state farm received wages and social benefits comparable to those enjoyed by industrial workers. By contrast, the collective farm was a self-financed producer cooperative that farmed parcels of land that the state granted to it rent-free and that paid its members according to their contribution of work. *

In their early stages, the two types of organization also functioned differently in the distribution of agricultural goods. State farms delivered their entire output to state procurement agencies in response to state production quotas. Collective farms also received quotas, but they were free to sell excess output in collective-farm markets where prices were determined by supply and demand. The distinction between the two types of farms gradually narrowed, and the government converted many collective farms to state farms, where the state had more control.

Collectivization and Kulaks

One of the main targets were kulaks, relatively rich peasants accused of exploiting peasants who worked for them. The kulaks were often the hardest working, most energetic and enterprising rural people but it was a misnomer to describe them as rich. They seldom owned more than a few acres and two or three horses and cows. They were useful in organizing peasant society and employing other peasants. Later the kulak label was use to describe any peasant who resisted collectivization, refused to turn grain over to the state or otherwise caused trouble.

Although the program was designed to affect all peasants, Stalin in particular went after the kulaks. Generally, kulaks were only marginally better off than other peasants, but the party claimed that the kulaks had ensnared the rest of the peasantry in capitalistic relationships. In any event, collectivization met widespread resistance not only from the kulaks but from poorer peasants as well, and a desperate struggle of the peasantry against the authorities ensued. Peasants slaughtered their cows and pigs rather than turn them over to the collective farms, with the result that livestock resources remained below the 1929 level for years afterward. The state in turn forcibly collectivized reluctant peasants and deported kulaks and active rebels to Siberia. Within the collective farms, the authorities in many instances exacted such high levels of procurement that starvation was widespread. [Source: Library of Congress, July 1996 *]

"Collectivization" caused hardships particularly in the Ukraine and the Volga-Don region, the heart of the farming belt, where hundreds of thousands of farmers, many of them kulaks, resisted. Many were killed or sent to labor camps or remote areas of Siberia to start new villages and had their grain, homes and possessions were seized. Other protested the action by killing all their animals: sheep, cattle, pigs goats and even the horses and oxen that pulled their plows.

Great Famine in the Early 1930s

The two greatest famines in the 20th century were in China in the 1960s and the Soviet Union in the 1930s. The famine created by Stalin policies between 1929 and 1933 is believed to have caused 5 million and 40 million deaths. The hardest hit area was the Ukraine. The historian Robert Conquest estimated that 14.5 million people died, half of them children and 6.5 million of the kulaks, making it the second or third worst famine ever.

The famine was its worst between the spring of 1932 to the summer of 1933. Much of it was caused the decline of food production that accompanied collectivization. This in turn was caused when the people who worked the land were driven away or killed. At the time of the famine four fifth of the Soviet population was made up of peasant farmers.

There was initially plenty of food, but to fulfill the unrealistic quotas, nearly all of it was handed over the state. Some farmers stopped growing grain. There was no incentive to grow it because they had to turn it over to the state, with very little compensation. Those who didn’t turn over their grain were accused of “hoarding” and imprisoned or killed. Marxist brigades searched houses for food; peasant who looked healthy were singled out for intensive searches.

Farmers starved to death while working in the fields. Entire villages perished from starvation. One Ukrainian farmer who returned to his farm in 1933 after a year’s absence, found his village “almost extinct” and survivors living on grass, bark on and occasional rabbit. His brother told him when the food sources gave out: “Mother says we should eat her is she dies.” Survivors of the Great Famine recall piles of bodies and monasteries turned into orphanages. Many children were raised by their grandparents or in orphanages.

Book: Harvest of Sorrow by historian Robert Conquest.

Gulag Labor

The term gulag was used to describes a vast network of hundreds of forced labor camps and prisons that were established mostly in Siberia, the Arctic, the Far East and Central Asia. Gulag is the Russian acronym for “Glavny Upravlenie Lagerey” ("Main Administration of Corrective Labor Camps”). It came to mean “camp” or more generally “the camps.” [Sources: David Renik, The New Yorker, April 11, 2003; Mike Edwards, National Geographic, March 1990; Jean Pierre Vaudon, National Geographic, March 1990]

Gulags served two primary purposes: 1) a means of dealing with unwanted people; and 2) they provided labor to build the industrial infrastructure of the state. The camps were not concentration camps intended for exterminations; they was established on economic grounds. Siberia was full of minerals and resources but few people wanted to work there voluntarily so prisoners were sent there to work and be punished. Most of the camps were set up for mining or timber extraction.

At its height the gulag system contained 476 camp complexes, within which there were often dozens, sometimes hundreds of individual camps. From 1929, when Stalin consolidated his grip on power, until 1953 when he died, 18 million people passed through the camp system. Six million more were exiled to isolated, police villages in Siberia or Kazakhstan or to special settlements known as spetposelki.

The gulags were central to Stalin’s ambition to industrialize the Soviet Union. Gulag labor built roads, railroads, dams and factories. They worked in coal mines, set pipelines, developed oil fields. They fished for salmon, made missiles, clear timbered, slaughtered livestock and made toys. Stalin had hoped the gulags would turn a profit but they ultimately drained more than contributed to the Soviet economy. After Stalin’s death the number of people sent to the camps was great reduced but they continued to exist right up until Gorbachev.

Some of the most notorious camps were in Magadan, Karaganda and Kolyma in the Russian Far East and a group of camps spread along the Ob River every five miles or so between Nadym and Salekhard in Siberia. These camps were known as the "Gulag Archipelago" the title of an Aleksandr Solzhenitsyn book. The system was huge. The Kolyma area alone is six times the size of France. There were hundreds of camps. Many were in places where no one had previously lived. The Komi region cities of Ukhta, Syktyvkar, Pechora, Vorkuta, and Inta all began as camp centers.

Postwar Growth of the Soviet Economy

Soviet economic growth rates during the postwar period appeared impressive. Between the early 1950s and 1975, the Soviet gross national product (GNP) increased an average of about 5 percent per year, outpacing the average growth of the United States and keeping pace with many West European economies--albeit after having started from a much lower point. [Source: Library of Congress, July 1996 *]

However, these aggregate growth figures hid gross inefficiencies that are typical of centrally planned systems. The Soviet Union was able to attain impressive growth through "extensive investments," that is, by infusing the economy with large inputs of labor, capital, and natural resources. But the state-set prices did not reflect the actual costs of inputs, leading to enormous misallocation and waste of resources. In addition, the heavily bureaucratic economic decision-making system and the strong emphasis on meeting targets discouraged the introduction of new technologies that could improve productivity. Central planning also skewed the distribution of investments throughout the economy.*

The aggregate Soviet growth figures also did not reveal either the generally poor quality of Soviet goods and services that resulted from the state monopoly over production or the lack of priority given the consumer sector in the planning process. Eventually, diminishing returns from labor, capital, and other inputs led to a severe slowdown in Soviet economic growth. Furthermore, the availability of inputs, especially capital, labor, and technology, was decreasing. Declining birth rates, particularly in the European republics of the Soviet Union, placed constraints on the labor supply. By the mid-1970s and into the 1980s, average Soviet GNP growth rates had plummeted to about 2 percent, less than half the rates of the immediate postwar period.*

Image Sources:

Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, Lonely Planet Guides, Library of Congress, U.S. government, Compton’s Encyclopedia, The Guardian, National Geographic, Smithsonian magazine, The New Yorker, Time, Newsweek, Reuters, AP, AFP, Wall Street Journal, The Atlantic Monthly, The Economist, Foreign Policy, Wikipedia, BBC, CNN, and various books, websites and other publications.

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© 2008 Jeffrey Hays

Last updated May 2016

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