Sovet Economc Hstory and Statstcs 1) Economc system n Russan agrculture after 1861 2) Revoluton of 190507, 1917, War Communsm, New Economc Polcy 3) Industralzaton Debate and How the Command Economy Emerged 4) Sovet Statstcs 5) Was the Transton to the Command Economy Inevtable?
Transtons from ME to CPE and back 191820 War Communsm (drectve plannng) 192129 NEP market economy 192991 Command Economy 1992onwards Market Economy
Land system after Emancpaton Act of 1861 Land was dvded n two parts about half remaned the property of the landlords, the rest was gven to the peasants (612 hectares plots). The government bought out land from the landlords, so the peasants were ndebted to the government Heavy burden of redempton payments (abolshed after 190507 revoluton) Inequalty n land dstrbuton Agrcultural commune (communal land tenure) was an obstacle for economc growth egaltaran nsttuton (taxes, redempton payments, communal works were the responsblty of the commune) dsmantled n 1906 by Stolypn s decree
Stolypn reforms of 1906 Dssoluton of the communty mr obschna. Peasants got the rght to leave the communty khutor and otrub peasants households Mortgages for peasants to buy out land from the landlords Mgraton to new terrtores Lenn's artcle The Last Valve : elmnaton of the commune s the last valve that could be opened n the overheatng steam machne of the tsarst regme wthout lqudatng large land ownershp. No more valves to avod the exploson(revoluton).
Russan economy n the begnnng of XX century Two major hurdles for development of agrculture large land ownershp and agrcultural commune In 1913 GDP per capta (on a PPP bass) was about $1000 (n US$ of 1985), a bt hgher than n Japan In Europe over $2000, n USA over $3000 at that tme Level of $1000 GDP per capta was reached n South Korea and Tawan n 1965
Economcs of War Communsm (191820) Prodrazverstka mandatory delveres of gran, expropraton of almost all peasants produce Natonalzaton of ndustral enterprses; VSNKh (Supreme Sovet of natonal economy) created to manage natonalzed enterprses Ratonng of supples, accountng n physcal unts Labor s oblgatory, 70 90% of wages pad n knd. Dfferentaton of wages (sklled unsklled) vrtually dsappeared Ratonng of consumer goods, some dstrbuted for free Taxes abolshed, debts annulled, wages pad n knd Prvate sector elmnated, prvate trade n gran prohbted Monetary crculaton hypernflaton Credt and bankng elmnated. People s Bank, formed out of natonalzed banks n 1917, was merged wth the Treasury n 1918 and subordnated to VSNKh
Hypernflaton n War Communsm: Indces of money supply, prces, and the volume of natonal ncome, 1913=1 Years Money Supply Prces Volume of Natonal Income 1913 1.00 1.00 1.00 1916 3.40 1.43 1917 5.57 2.94 0.75 1918 16.60 20.76 1919 36.80 164.00 1920 135.20 2420.00 1921 702.00 16800.00 0.38 Source: Vanshten, A.L., Tsen Tsenoobrazovane v SSSR v Vostanovtelny Perod. 19211928 gg. (Prces and Prce Formaton n the USSR durng Reconstracton Perod, 19211928). Moscow, 1972, p. 31; Narodnoye Khozyastvo SSSR v 1958 godu (Natonal Economy of the USSR n 1958). Moscow, 1959, p. 52.
Hypernflaton n War Communsm MV=PY In the frst stage (191317) the amount of currency n crculaton grew faster than prces (money velocty decreased). In 19181921 prces rose much faster than money supply (money velocty grew). Cagan effect: sharp drop n the demand for real cash balances as nflaton develops Durng hgh nflaton opportunty costs of holdng money ncrease, demand for real cash balances shrnks, and the velocty ncreases MV=PY self sustaned process: ncrease n P=>ncrease n V=> ncrease n P
War Communsm Over the perod of 19131920 n Russa ndustral output fell by 80%, agrcultural output by half. Recovered to prerecesson levels only by 192526 Was supercentralzed economc system of WC brought to lfe by the deology of bolshevks or by extreme crcumstances of the Cvl War? Lenn s vews on socalsm and market before 1921 (Socalsm s a nonmarket economy) 192123 NEP economc polcy to allow more compettve state sector to gradually replace «noncompettve» prvate sector 1923 «On cooperaton» market socalsm
Over the perod of 19131920 n Russan natonal ncome fell probably by more than 2/3 (ndustral output by 80%, agrcultural output by half). Recovered to prerecesson levels only by 19256
New Economc Polcy (192129) End of 1920early 1921 Antonov s revolt n Tambov February March 1921 Kronshtadt revolt March 1921 X Party Congress, NEP ntroduced NEP most successful perod of Russan economc hstory Never before and never after Russan/Sovet economy demonstrated such hgh growth rates (about 20% a year even after the recovery ended n 1925)
New Economc Polcy (192129) Prodnalog a new agrcultural polcy Trusts and syndcates n ndustry Cooperaton Prvate sector Labor and wages Monetary system Credt and bankng Foregn trade and foregn drect nvestment Industral mmgraton from abroad Economc performance under NEP Was NEP consstent wth socalsm? NEP problems the Scssors Crss
New Economc Polcy Prodrazverstka (food requstonng) was replaced by a prodnalog (food tax) 20% of produce, later 10%; frst n knds, later n monetary form (as compared to ~ 20% tax durng prodrazverstka and over 10% tax n 1913) Trusts: assocatons of ndustral enterprses By the end of 1922, 90% of ndustral enterprses were unted n 421 trusts Syndcates voluntary assocatons of trusts By the end of 1922, 80% of trusts were unted nto syndcates Khozraschet (selffnancng): enterprses free to use profts after makng fxed payments to the budget Labor market was renstated Wages pad n monetary form Labor armes elmnated, labor exchange created (unemployment ncreased from 1,2 mln. n 1924 to 1,7 mln. n 1929, but urban employment ncreased nearly 50%)
New Economc Polcy Prvate sector emerged n ndustry and trade Small prvate ndustral enterprses permtted(up to 20 employees, later more) Share of prvate sector n the NEP perod 1/5 to 1/4 of the ndustral output 4080% of the retal trade Small part of wholesale trade Cooperatves of all forms and types developed rapdly By 1927, agrcultural coops produced 2% of total agrcultural output and 7% of marketed agrcultural output By 1928, about 28 mllon people were nvolved n nonproducers coops marketng, supply & procurement,and credt cooperatves 6080% of retal trade was conducted by cooperatves by the end of 1920s In 1928, 13% of ndustral output was produced by cooperatves
New Economc Polcy New monetary unt chervonets ntroduced n 1922 Chervonets had gold content and was freely convertble on the currency market (1,94 rubles = $1, the exchange rate of the tsarst ruble) Deprecated sovznak wthdrawn from crculaton n 1924 Budget defct elmnated, nflaton stopped Credt system restored Gosbank (State Bank) reestablshed n 1921 On October 1, 1923: 17 ndependent banks (33% of all credts); on October 1, 1925: 61 banks (52% of all credts) Banks competed among themselves; trade (nonbank) credts became wdespread
New Economc Polcy Captal nflow A number of enterprses leased to foregn frms under concesson arrangements Concessons n 192627: 117 agreements, 18000 employees, 1% of ndustral output Concessons provded more than 60% of output n lead and slver mnng; almost 85% n the extracton of manganese ore; 30% n the extracton of gold Immgrant workers Thousands of workers from the West offered assstance, knowledge, and experence to the young Sovet republc From 1920 to 1925, a total of 20,000 mmgrants from the US and Canada arrved n the USSR STO decree On Amercan Industral Immgraton
Economc performance under NEP In 192125 ndustral producton ncreased more than threefold Reached 1913 levels Agrcultural producton grew twofold Exceeded the 1913 level by 18 percent In 192128 the average rate of growth the natonal ncome was 18% In 1928 natonal ncome per capta was 10% hgher than n 1913 (better record than n the US that dd not experence wars on ts terrtory)
Source:Novy mr,1987,no.2,p.19295; Narodnoye Khozyastvo SSSR(Natonal Economy of the USSR) for varous years. NEP was the most successful perod for the Sovet economy Average annual rates of economc growth n the USSR, % 20 15 10 5 0 5 10 15 20 6.9 15.3 17.7 16.2 3.4 0.6 4.3 14.6 11.3 9.4 6.3 7.8 5.6 4.3 3.6 9.3 4.4 4.1 3.2 1 0.6 Offcal Statstcs Alternatve Estmate 1913 1917 1921 1928 1932 1937 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985
Was NEP consstent wth socalsm? NEP was a socalst market economy Prvate captal sector dd not play a decsve role State trusts accounted for 2/3 of ndustral output, coops for 13%, prvate frms 2025% Commandng heghts transportaton, communcaton, bankng, etc. controlled by the government Functons of the government: soft prce regulaton (hard from 1925) to acheve balanced economc growth
NEP problems the Scssors Crss Dsproporton n prces Prces for ndustral goods grew much faster than prces for agrcultural produce Factors contrbutng to prce scssors: Acute shortage of ndustral goods due to greater reducton of ndustral output Slower restoraton of productvty n ndustry Most mportant: Olgopolstc (mperfect) competton n ndustry due to creaton of trusts and syndcates by the end of 1922
Prce ndces for ndustral and agrcultural goods,1913=100% 280% 250% 220% 190% 160% 130% 100% "Scssors crss" Agrcultural goods All goods Industral goods 70% 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1 2 3 4 1923 1924 1925 1926 1927 1928
Scssors Crss Trusts and syndcates were bascally monopoles at the markets for ndustral goods The prce ncrease resulted n oversupply of ndustral goods Example: n 1922/23 Sel mash syndcate sold only ¼ of ts output, the rest was stockpled By fall 1923 nventores were twce the sze of the estmated sales of forthcomng year Interventon of the government: prce regulaton (costs+average proft margn), then drect prce settng
Industralzaton Debate and How the Command Economy Emerged The Industralzaton Debate and the Gran Procurement Crss How the command economy emerged Collectvzaton Central plannng n ndustry Prvate sector and foregn concessons Labor and wages Monetary crculaton Taxaton, fnance, and prces Credt system Foregn trade
Gran producton, procurement, and export, mllon tons 100 90 80 70 60 50 40 30 20 10 0 86 83.5 76.8 72.3 73.3 71.7 69.5 69.9 22.1 22.8 16.1 18.5 9.1 11.6 11 10.8 4.8 5.2 0.3 1.8 0.1 1913 1926 1927 1928 1929 1930 1931 1932 Producton State Purchases Export Source: Malafeev A.N. Istorya Tsenoobrazovanya v SSSR.19171963(The Hstory of Prce Formaton n the USSR.191763).M., 1964, pp. 126127, 136137, 173.
Gran Procurement Crss In 1925 everyone understood that the country needed ndustral modernzaton Only one way to get the modern equpment: purchase t from abroad Man export tem n prerevolutonary Russa: gran Economc path to ncrease state gran purchases: rase procurement prces and channel peasants savngs nto ndustral nvestment But the state resorted on noneconomc methods Forced expropraton of gran from peasants Prces of gran not rased (whle prces of consumer goods grew rapdly) Prodrazverstka was used for gran procurement n 1928
How the Command Economy Emerged XV party Congress (1927) Confrmed the polcy of collectvzng agrculture (on a voluntary bass) Approved the frst FveYear Plan (19281932) Collectvzaton n agrculture began n the summer of 1929 By the end 1929, 14% of all peasant farms had been collectvzed By the end of February 1930, 60%, had been collectvzed In 19301931, 1 mln. peasants farms (45 mln. people) were exproprated; 380,000 farms (about 2 mln. people) were resettled Other estmates put the number of lqudated rch farms at 3 mllon, I.e. 1112% of all farms Prce of ndustralzaton: terrble famne of 19321933
How the Command Economy Emerged Trusts were gven producton plans n 1927 By the begnnng of 1930s trusts ceased to exst Syndcates transformed nto GLAVKs, ntermedate management body between ndustral mnstres and enterprses By the end of 1930, only 5% of ndustral supples were delvered by agreement between producer and consumer (wholesale trade) as opposed to 85% n 1929 Collectve farms n fact became part of CPE Ther man task was to fulfll the plan System of oblgatory delvery of products to the state accordng to fxed norms and at a fxed prces Before 1933 contractaton, after producton quotas
How the Command Economy Emerged Smallscale prvate traders and entrepreneurs were squeezed out In 192833, the share of prvate sector n output decreased from 18 to 0.5% n ndustry, from 97 to 20% n agrculture, from 24 to 0% n retal trade Almost all concessons lqudated by 1933 Tax reform 63 types of taxes durng NEP were replaced by two basc taxes: turnover tax and proft tax Wth the ntroducton of oblgatory producton quotas, tax system was no longer a mean of regulaton
How the Command Economy Emerged Zagotzerno sold gran to the state mlls at 104 rubles. The proceeds were used as follows: Pad to collectve farms = 78 rubles Costs of Zagotzerno = 78 rubles TURNOVER TAX = 85 RUBLES
How the Command Economy Emerged Credt reform 19301932 Commercal credt replaced wth drect centralzed bank credt Crculaton of commercal notes abolshed Credt system replaced wth planned bank fnancng Be 1933, Gosbank accounted for 97% of all shortterm credt By the war, only seven banks remaned Gosbank, Vneshtorgbank, and fve longterm nvestment banks (n 1959 fve long term credt banks were merged nto Strobank Chervonets could no longer be exchanged for gold
How the Command Economy Emerged Gosbank began to pump money nto crculaton 1.31.4 bllon rubles n 192627, 2.8 bllon n 1930, 8.4 bllon n 1933, 11.2 bllon n 1937 The rse n prces on the open market; state prces remaned stable; ths caused acute goods famne Ratonng system ntroduced n 1928 Frst bread, then basc foodstuff, then manufactured goods By 1934, 50 mllon people were recevng ratoned supples from centralzed and local funds By the end of the Frst FveYear Plan (19281932) the command economy began to domnate all spheres of economc lfe
Ratonng of consumer goods and legal restrcton on labor moblty n the USSR Ratonng of Consumer Goods 191821, War Communsm 192835, Industralzaton 194147, Great Patrotc War and postwar recovery 1970s onwards, ratonng of some food supply n medumsze ctes due to reluctance to ncrease prces Restrctons on Changng Jobs 191821, War Communsm 1932 end of 1950s, restrctons for peasants not havng passports 19381956, restrctons for workers of state enterprses
Sovet Statstcs Materal balances system How prce and output ndces were calculated Alternatve estmates versus offcal statstcs Relablty of Sovet offcal data
Value, prce and volume ndces Type of ndex Value of output Prce of output Volume of output Method of computaton Drect comparson: the value of output n the current perod n current prces dvded by the value of output n the base perod n base prces Montorng prce changes for a sample of goods (several hundred commodtes) assumng that prce dynamcs for each of those goods s representatve for the whole group of smlar goods, and weghtng these prce changes by the value of goods n the group Deflatng the value ndex,.e. dvdng the value ndex by the prce ndex
Measurng real economc growth: nternatonal statstcal practce Growth s measured by deflatng value ndces Prce ndces calculated for representatve goods Inaccuraces and errors are unavodable: Qualty and consumer characterstcs of goods changes over tme New products appear (what was the prce of a personal computer n 1930?)
Value, prce and volume ndces Value ndex = value p q p q I 0 0 1 1 Volume ndces = Laspeyres volume p q p q I 0 0 0 1 = Paashe volume p q p q I 1 0 1 1 Prce ndces = Laspeyres prce p q p q I 0 0 1 0 = Paashe prce p q p q I 0 1 1 1 p 0, q 0 prces and volumes of output n the base perod, p 1, q 1 prces and volumes of output n current perod.
Example: Calculaton of the volume and prce ndces Textles Machnes Producton n 1928, unts 100 50 Prce n 1928, rubles 1 2 Producton n 1980, unts 200 1000 Prce n 1980, rubles 10 10 I I I I 1928 volume 1980 volume 1928 prce 1980 prce = = = = q q q q q q q q 1980 1928 1980 1928 1928 1928 1980 1980 p p p p p p p p 1928 1928 1980 1980 1980 1928 1980 1928 200 + 2000 = = 100 + 100 2000 + 10000 = = 1000 + 500 1000 + 500 = = 100 + 100 2000 + 10000 = = 200 + 2000 2200 200 = 11 12000 1500 1500 200 = 8 = 7.5 12000 2200 5.5 Indces dffer due to structural changes n producton
Sovet statstcs In 1925 ndces of output began to be calculated n terms of current wholesale prces From the late 1920s, the growth of real volume of output was constantly overstated
Sovet statstcs Untl 1925 volume ndces n the USSR were calculated as elsewhere In 19251950s, rates of real growth rates were calculated n 1926/27 prces All new types of products entered the calculaton n current prces (when they frst appeared n the market) Indces of wholesale prces were not calculated untl the late 1950s Calculaton of prce ndces dd not nclude new products Although these tems showed the most rapd prce ncrease
Relablty of Sovet offcal statstcs of output n comparable prces, by ndustry Relablty Product nomenclature Industres LESS RELIABLE Large varety of products, rapdly changng nomenclature Machnebuldng Consumer goods ndustres Constructon Communcaton Servces MORE RELIABLE Small number of products, slowly changng productmx Mnng Electrc energy Wood ndustres Prmary manufacturng Agrculture Ralway transportaton
Reasons for dstortons n offcal statstcs Outrght falsfcaton of the data Cotton Affar 3% of ndustral output and 525% of raw materal output were falsfed For example, statstcs tracked the hopper weght of the gran (the entre volume unloaded from the combne hopper) nstead of the actual weght Erroneous practces of calculatng the volume of producton (new goods ncluded n current prces) Prce ndces were not calculated n the 1930s1940s (except retal trade prce ndex); later prce ndces were computed wth the excluson of new goods (that were subject to creepng nflaton)
Sovet offcal data on economc development 192890 (1928=1) 1928 1932 1937 1940 1950 1958 1960 1970 1980 1985 1990 Natonal ncome produced n constant prces n current prces (1958=19.1) natonal ncome prce deflator a (1958=100%) 1 1.8 3.9 5.1 8.4 19.1 19.1 100 22.0 21.6 98 43.8 43.2 99 71.5 68.9 96 85.1 86.1 101 90.8 Gross ndustral output n constant prces n current wholesale prces of enterprse (1955=100%) n current wholesale prces of ndustry (1960=100%) ndex of wholesale prces of enterprse a (1955=100%) ndex of wholesale prces ofndustry a (1960=100%) 1 2.0 4.5 6.5 11.2 25.2 33.8 100 100 78.0 395 216 106 95 136.5 651 362 98 90 162.5 849 446 107 92 Labor productvty n ndustry 1 1.4 2.6 3.4 4.7 8.2 10.2 16.7 26.2 30.6 Gross agrcultural output n constant prces n current prces (1960=100%) n constant prces (1960=100%) ndex of wholesale prces a (1960=100%) 1 0.9 1.1 1.1 1.1 1.7 1.8 100 100 100 2.4 211 138 153 2.8 310 153 203 3.0 443 170 261 Gross nvestment n constant prces b 1 4.5 7.0 9.1 18.5 47.1 57.3 111.9 182.9 218.4 Retal trade turnover of state and cooperatve trade c n current prces n constant prces prce ndex a 1 1 1 3.4 1.3 2.6 10.7 2.0 5.4 14.8 2.3 6.4 30.5 2.6 11.9 57.4 6.4 8.9 66.7 7.6 8.8 127.6 14.5 8.8 222.4 24.4 9.1 266.6 28.3 9.4 Real per capta ncome (1940=1) 0.5 1 0.6 d 2.5 4.0 5.8 6.5 a Prce ndces calculated as the rato of the growth ndces n current and constant prces. b In relaton to fourth quarter data, at annual rate. c Excludng prvate trade and farmers' markets turnover,whch dropped from 36.9 percent of the overal trade n 1926/27 to 2.6 percent n 1990. d Estmate. Source: Narodnoe Khozyastvo SSSR (Natonal Economy of the USSR) for varous years; Malafeev A.N., Istora tsenoobrazovana v SSSR. 19171963 (The Hstory of prce Formaton n the USSR. 19171963. Moscow, 1964, p. 82, 4078.
NEP was the most successful perod for the Sovet economy, Source:Novy mr,1987,no.2,p.19295; Narodnoye Khozyastvo SSSR(Natonal Economy of the USSR) for varous years. whereas n the 1930s the growth rates fell markedly Average annual rates of economc growth n the USSR, % 20 15 10 5 0 5 10 15 20 6.9 15.3 17.7 16.2 3.4 0.6 4.3 14.6 11.3 9.4 6.3 7.8 5.6 4.3 3.6 9.3 4.4 4.1 3.2 1 0.6 Offcal Statstcs Alternatve Estmate 1913 1917 1921 1928 1932 1937 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985
Average annual growth of ndustral output 30 25 25.5 percent 20 22.5 17.1 15 10 7.0 8.0 5 9.0 5.0 6.5 2.5 0 1921 1929 1938 1950 19861990 Offcal Statstcs Alternatve Estmate
Average annual growth of natonal ncome percent 20 18 16 14 12 10 8 6 4 2 0 17.5 13.6 16.2 8.0 6.2 4.3 1921 1929 1938 1950 19861990 6.9 4.7 1.4 Offcal Statstcs Alternatve Estmate
Average annual growth of agrcultural output percent 8.0 7.0 6.0 5.0 4.0 3.0 2.0 1.0 0.0 6.8 6.7 1.4 3.1 2.8 1.0 1.2 0.1 0.1 1921 1929 1938 1950 19861990 Offcal Statstcs Alternatve Estmate
Sovet real rates of economc growth n the 1930s, varous estmates, annual averages, % Estmate Natonal ncome Industral producton Agrcultural producton Offcal statstcs, 192837 16.5 18.1 0.9 Bergson, Kuznets, 192837 4.8(GNP) 11.3 1.1 Khann/Sel'unn, 192840 3.4 Bolotn, 192938 8.0 9.0 1.2 Source: Narodnoye Khozyastvo SSSR (Natonal Economy of the USSR) for varous years; Bergson A., Kuznets S., eds. Economc Trends n the Sovet Unon. Cambr., Mass., Harvard Unversty Press, 1963, p. 36, 155, 208; Sel'unn V., Khann G. "Lukavaya Tsfra" (Deceptve Fgure). Novy Mr, 1987, N2, p. 181201; Bolotn B. "Sovetsky Souz v Mrovo Ekonomke, 19171987 gg." (The Sovet Unon n the World Economy, 19171987). MEMO, 1987, N11, p. 145157; N12, p. 141148.
Sovet offcal and CIA estmates of GNP and net materal product growth rates, annual averages, % Sovet offcal Estmates 195155 195660 196165 196670 197175 Net materal product 11.3 9.4 6.3 7.8 5.6 CIA, GNP Prevous 5.5 5.9 5.0 5.2 3.7 Revsed 4.9 3.0 Sovet alternatve (Khann, Sel'unn), net materal product 9.3 4.4 4.1 3.2 contnuaton Estmates 1976 80 1981 85 1986 1987 1988 1989 1990 Sovet offcal GNP 4.8 3.7 3.3 2.9 5.5 3.0 2.0 Net materal product 4.3 3.2 2.3 1.6 4.4 2.4 4.0 CIA, GNP Prevous 2.7 Revsed 1.9 1.8 4.1 1.3 2.2 1.4 4.0 Sovet alternatve (Khann, Sel'unn), net materal product 1.0 0.6
GNP by ndustry, % of total Sector Sovet offcal statstcs (current prces) CIA estmate for 1988 CIA estmate for 1982 at 1980 1988 n 1982 prces Establshed prces Adjusted factor cost Industry 42 34 33 51 32 Agrculture 13 18 19 15 21 Constructon 8 10 8 7 8 Transportaton 6 6 10 8 10 Communcaton 1 1 1 Trade 13 12 6 5 6 Servces 18 20 21 12 20 Other (ncludng mltary personnel) 2 2 2 Source: Narodhoye Khozyastvo SSSR v 1989 godu (Natonal Economy of the USSR n 1989). Moscow, 1990, p. 11; The Sovet Economy Stumbles Badly n 1989. CIA and DIA. Aprl 1990, p. 30; Mesures of Sovet Gross Natonal Product n 1982 Prces. A Study prepared for the use of Jont Economc Commttee. Congress of the Unted States. Wash. GPO, 1990, p. 23.
GNP by component, % of total Sovet offcal statstcs (current prces) CIA estmates n 1982 prces Components 1985 1989 At factor cost At establshed Consumpton, total personal consumer expendture provded free by state organzaton 54.2 47.5 6.7 55.0 48.1 6.9 1987 1982 prces for 1982 55.9 55.3 53.4 Investment 32.0 31.1 31.8 30.4 28.1 Other government purchases of goods and servces, total a defence nondefence 13.8 13.9 8.2 b 5.7 12.3 14.3 18.6 1617 c 1617 b a Includes other tems. b Defence expendture fnanced from the government budget. c Total defence expendture estmated wth no relaton to GNP statstcs. Source: Narodnoye Khozyastvo SSSR v 1989 godu (Natonal Economy of the USSR n 1989). Moscow, 1990, p. 11; Measures of Sovet Gross Natonal Product n 1982. Wash. GPO, 1990, p. 26, 83; The Sovet Economy Stumbles Badly. CIA, 1990, p. 6.
Conclusons From the late 1920s, the Sovet statstcs overestmated the real rates of growth of output and underestmated the rates of prce ncreases; Most sgnfcantly real growth rates were overstated for the perod of the 1930s; The real growth rates of ndustral output were much more overstated by offcal statstcs than the real growth rates n agrculture and other resource ndustres; Durng the frst Fve Year Plan perods (1930s) real growth rates fell consderably as compared wth the NEP perod; Snce the late 1950s, the rates of economc growth were fallng constantly, approachng zero level by md 1980s.
Was the Transton to the Command Economy Inevtable? Achevements of Command Economy Costs of transton Loss of human lves Stagnaton n agrculture Waste of resources n ndustry Lack of mprovement of lvng standards
Achevements of the Command Economy Sovet Unon was transformed from a backward agraran country nto a strong ndustral power n a decade Staln found Russa wth a plough and left her equpped wth nuclear weapons (Wnston Churchll) Increase n producton from 1928 to 1940: Coal mnng almost 5 tmes Ol almost 3 tmes Electrcal power 10 tmes Mneral fertlzers 3 tmes Cars, tractors, combnes, machnes tens and hundreds of tmes In 1913 Russan GDP was lower than n US, Brtan, Germany, France; by 1940 t was second only to the US. Industral output was at par wth France Hundreds of new ctes, thousands of new factores bult n the 1930s Increase n gran procurements (from 1012 mln. tons n the late 1920s to 3032 mln. tons n the late 1930s) and exports
PPP GDP per capta n major countres and regons snce 1500, 1990 nternatonal GearyKhams dollars; source: A. Maddson; log scale) 100,000 Unted States Japan Total 29 Western Europe Total Former USSR 10,000 Total Latn Amerca Chna Inda Total Afrca 1,000 100 1500 1550 1600 1650 1700 1750 1820 1860 1900 1950 2006
Catch up development: only Japan (+Korea, Tawan, HK, Sngapore) managed to reach the level of GDP per capta of developed countres Source: Maddson 1995.
60 GDP per capta n the USSR and Russa, % of the US level (source: A. Maddson, 50 40 30 20 USSR as a % of the US 10 Russa as a % of the US 0 1820 1826 1832 1838 1844 1850 1856 1862 1868 1874 1880 1886 1892 1898 1904 1910 1916 1922 1928 1934 1940 1946 1952 1958 1964 1970 1976 1982 1988 1994 2000 2006
Loss of human lves Costs of transton Famne of 19321933: up to 5 mllon people starved to death Durng two decades (193050) the populaton wthn the borders of the USSR before Sept. 17, 1939 dd not ncrease Census of 1926 147 mllon; natural ncrease 2% => by 1950 there should have been +60 mllon people (27 mllon losses n the war; about 20 mllon losses due to the reducton of brth rate) Number of death sentences n 193053 over 600,000
Costs of transton Stagnaton n agrculture no ncrease n agrcultural output per capta n 19301955 Reducton of growth rates n ndustry (compared to NEP perod) despte the ncrease n nvestment/gdp rato dramatc declne n captal productvty Vrtually no growth n real ncome n the 1930s
Selected ndcators of agrcultural development Average annual gran harvest (mllon tons) 250 200 167.6 181.6 205.0 180.3 212.1 150 121.5 130.3 100 86.0 69.3 73.6 72.9 77.9 64.8 88.5 50 0 1913 1924 1928 1933 19371940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990
Selected ndcators of agrcultural development Meat producton (Mllon tons) 20 18 16 14 12 10 8 6 4 2 1913 5 3 4.9 1928 1932 2.8 3 1937 4.7 1940 8.7 4.9 6.3 2.6 1945 1950 1955 1960 10 1965 15 12.3 1970 1975 19.9 17.1 15.1 1980 1985 1990
Selected ndcators of agrcultural development Cattle (Mllon Head) 120 100 80 60 40 20 58.4 50.8 1916 1918 1922 40.9 58.2 1929 1933 50.9 33.5 1938 1941 54.5 47.6 1946 57.1 1951 55.8 74.2 1954 1960 111 87.2 99.2 1965 1971 1976 120.9 115.1 116.2 1981 1986 1991
Selected ndcators of agrcultural development Per capta agrcultural output (1913=100%) 206% 209% 221% 200% 169% 176% 202% 228% 150% 100% 50% 100% 129% 128% 86% 70% 114% 102% 125% 116% 79% 139% 1913 1917 1921 1926 1928 1933 1938 1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990
If NEP was so successful economcally, why t was rolled back? Arguments justfyng transton to Command Economy 1. Centralzaton of the economy was needed to ndustralze the country and to wn the war. NEP was effcent, but could not ensure the massve transfer of resources from agrculture to ndustry, from lght to heavy ndustry, from nondefense to defense ndustres, from consumpton to savngs, and from savngs to nvestment Ths argument s dubous because the ncrease n gran procurements and exports was not that substantal addtonal 20 mllon tons of gran a year (ncrease n gran procurements from the late1920s to the late 1930s could have been receved wth 2% annual ncrease n gran output n 192840 (75 mln. tons => 95 mln. tons). Also, agrcultural forced savngs were used extremely neffcently n ndustry and constructon.
If NEP was so successful economcally, why t was rolled back? Arguments justfyng transton to Command Economy 2. Agrcultural commune that exsted for 1000 years cultvated egaltaran feelngs among Russan peasants, so they eagerly accepted the collectve farms, there was no mass peasant uprsng that was expected as a response to collectvzaton Ths argument does not stand because: Collectve farm was not a commune: peasants enjoyed personal freedom for over 50 years (after 1861), but lost n after collectvzaton (were attached to land) peasants lost property (agrcultural mplements and cattle) 1/3 of peasants households n the European part of Russa left the commune n 190617 (after Stolypn s reforms) There were peasants revolts and uprsngs durng collectvzaton
Conclusons The burden mposed on agrculture was not that heavy (addtonal 20 mllon tons of gran a year), but the collectve farm system was so neffcent that output dd not grow despte new massve nvestment n agrcultural machnery and mechanzaton, so the moderate burden led to famne Savngs that were extracted from agrculture and gven to ndustry and constructon were large (the accumulaton rate doubled n the 1930s as compared to the 1920s), but they were used neffcently the command economy n ndustry was so neffcent that growth rates fell despte the ncrease n nvestment