Faulty Foundations

Faulty Foundations: Soviet Economic Policies, 1928-1940

Holland Hunter
Janusz M. Szyrmer
Copyright Date: 1992
Pages: 355
https://www.jstor.org/stable/j.ctt7zvk2w
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  • Book Info
    Faulty Foundations
    Book Description:

    Could the USSR have been prepared for World War II more humanely and efficiently? In this first integrated evaluation of Stalin's economic goals and actions, Holland Hunter and Janusz Szyrmer reconstruct and test Soviet results annually and by sector. Addressing historians, political scientists, and economists, the authors build a new, internally consistent, twelve-sector annual record of output and capital growth (assembling and reconciling Western reconstructions of Soviet data) to assess Soviet policy and test how alternative policies might have worked. They point out lessons from the 1930s that can be applied today. The authors analyze the basic steps marking the prewar Soviet drive: agricultural collectivization, head-long investment in heavy industry, autarkic foreign trade, and rearmament. They conclude that the economy's growth potential was misused, that collectivization was a mistake, and that with a slower drive to build heavy industry, living standards could have been higher throughout the 1930s while the ability to withstand invasion would have been stronger. A related implication for the 1990s is that correct prices, small-scale production, and individual initiative are key requirements for an effective Soviet economy.

    Originally published in 1992.

    ThePrinceton Legacy Libraryuses the latest print-on-demand technology to again make available previously out-of-print books from the distinguished backlist of Princeton University Press. These paperback editions preserve the original texts of these important books while presenting them in durable paperback editions. The goal of the Princeton Legacy Library is to vastly increase access to the rich scholarly heritage found in the thousands of books published by Princeton University Press since its founding in 1905.

    eISBN: 978-1-4008-6270-2
    Subjects: Economics

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. List of Figures
    (pp. vii-x)
  4. List of Tables
    (pp. xi-xiv)
  5. PREFACE
    (pp. xv-xvi)
    Holland Hunter and Janusz M. Szyrmer
  6. Part I: Introductory Background
    • Chapter 1 THE NATURE OF OUR WORK
      (pp. 3-12)

      This is a study in economic history, designed to identify the economic policies and practices, launched at the end of the 1920s, that have gradually brought the USSR to its present unenviable state. The policies and practices appeared very successful for a while, but since the 1960s, Soviet economic performance has become less and less impressive, especially in comparison with that of other major powers. What has gone wrong?

      Our reading of the record suggests that faulty foundations were laid in the early years, and that the basic defects of the contemporary Soviet economy can be accounted for and explained...

    • Chapter 2 SOVIET ECONOMIC POLICY ALTERNATIVES IN THE 1920S
      (pp. 13-25)

      When the Bolsheviks seized power in the fall of 1917, they had many political, economic, and cultural goals, initially dominated by the sheer need to survive. In this study we focus on their economic goals, which in a literal sense were seen by Party leaders as the foundation for all the others. Economically, the goal was output expansion through structural transformation.

      A blueprint for the necessary changes had been hastily sketched in the summer of 1917 by V. I. Lenin, whoseState and Revolutionprovided the only available operational guidelines for a Bolshevik state. Here he revived a cautionary concept...

    • Chapter 3 OVERALL TRENDS IN OUTPUT AND FINAL USE, CAPITAL, LABOR, AND POPULATION
      (pp. 26-50)

      In this chapter we sketch the annual trends in gross output and its uses that actually developed for each of our twelve sectors over the 1929–40 period, along with the associated growth of capital stocks and changes in the population and labor force. We thus summarize the overall results of the new-Bolshevik policies implemented after 1928. The next section of the study, Part II, presents a fresh analysis of how these results were obtained in industry and agriculture, and of developments in the areas of foreign trade and national defense. The most original portion of our work appears in...

  7. Part II: The Charge of the New Bolsheviks
    • Chapter 4 OPERATIONAL ISSUES IN ADMINISTERING RAPID OUTPUT EXPANSION
      (pp. 53-63)

      The new Bolsheviks in charge of the expansion campaign could draw on several obvious sources for output growth, and we begin this chapter by enumerating them quickly before examining some of the choices that lay before the leadership. Party doctrine said that public ownership of the means of production offered an opportunity to employ rational, scientific methods for national planning of a coordinated drive to catch up rapidly with the West. Many practical issues required attention, however. What combination of sources and methods would be most effective? How strenuous should the effort be?

      Our chapter title does not use the...

    • Chapter 5 NEW-BOLSHEVIK POLICIES OUTSIDE AGRICULTURE
      (pp. 64-89)

      In the celebrations of Stalin’s fiftieth birthday on December 21, 1929, he was christened “the Lenin of today,” although as we saw in chapter 2, the Lenin emphasized by Stalin in his speeches was not the Lenin of “Better Fewer, but Better.” Stalin and his followers were imbued precisely with theskoropalitel’nost’(quickshooting style) that Lenin had warned against on the eve of his death. Nevertheless, this extended celebration of the Great Leader’s birthday symbolized the unity of the new Bolsheviks, whose pressures spread rapidly to almost every sphere of Soviet life.

      The focus in this chapter is on their...

    • Chapter 6 NEW-BOLSHEVIK AGRICULTURAL POLICY AND AN ALTERNATIVE
      (pp. 90-123)

      Dealing with Lenin’s internal enemy took a dramatic turn in 1929, when the new Bolsheviks abandoned the previous modest efforts to improve peasant agriculture through persuasion and launched a countrywide campaign to crush peasant independence. In this chapter we present a summary account of subsequent developments in agriculture between 1930 and 1940, followed by a statistical exercise suggesting an alternative outcome if the peasants had been left alone.

      The most traumatic event in Soviet agricultural history was the mass campaign of 1929–30 that forced the peasantry into collective farms, where their farming practices could be controlled and from which...

    • Chapter 7 FOREIGN TRADE DEVELOPMENTS
      (pp. 124-135)

      As part of the process of catching up with and surpassing the advanced economies of the West, foreign trade was expected by the Party to play a significant role, but its scale and nature were matters of considerable dispute. How could the USSR, under conditions of capitalist encirclement, find ways of “trading with the enemy” in order to move past him? How much economic involvement with the outside world was necessary and desirable? Following Stalin’s call for building “socialism in one country,” that is, anticipating a largely self-sufficient course of industrialization, the new Bolsheviks were less inclined toward trade than...

    • Chapter 8 IDENTIFYING THE ROLE OF DEFENSE OUTLAYS
      (pp. 136-143)

      All Bolsheviks saw national defense as one of their major responsibilities. They had seized power against high odds and endured three years of civil war before establishing a feeble and insecure nation-state. They hoped and expected that the Revolution would spread to other countries, but after 1923 that hope was increasingly called into question. Instead, among the new Bolsheviks, there was increasing fear of attack from abroad. Armed struggle, one way or another, was seen as sure to come. Either an effort would be made to crush the Revolution’s base in the USSR or Soviet support would be needed for...

    • Chapter 9 KEEPING TRACK OF CAPITAL GROWTH
      (pp. 144-159)

      Having sketched the new-Bolshevik record of industrial output expansion, agricultural disorder, burgeoning defense outlays, and limited foreign trade, we turn now to developments in the area of fixed capital formation. The intended changes in the economy’s fixed capital stock were seen literally as the foundation for altering the structure of output, creating a new base on which a new superstructure could be erected.

      But the great drive for “accumulation,” that is, investment in fixed capital (we neglect the minor category of circulating capital), soon ran into a major problem that is inherent in the economic development process itself. The problem...

    • Chapter 10 AN APPRAISAL OF NEW-BOLSHEVIK ECONOMIC POLICIES
      (pp. 160-174)

      Before moving to the use of KAPROST for testing the impact of specific policies on the Soviet economy, we end Part II of this study with a general appraisal of the economic policies applied by the new Bolsheviks in their efforts to catch up with and surpass the West during 1929—40. Some results were highly positive, others seriously negative. We start by noting what seem to us the positive aspects of the record.

      The drive for rapid industrialization quickly reduced labor unemployment to negligible levels by 1930; conditions of full employment prevailed continuously throughout the 1930s. All who wanted...

  8. Part III: Testing Alternative Economic Policies
    • Chapter 11 THE KAPROST MODEL: LOGIC AND STRUCTURE
      (pp. 177-204)

      We decided, in reflecting on the characteristics of a model appropriate for the purposes of this study, that two features were crucial. First, it should provide a convenient and usable framework for organizing the information on, and monitoring the levels of, annual intersectoral flows of production and consumption among major sectors of the economy. The model should focus on product rather than on income. The accounting framework should provide systematic locations in which to enter aggregate statistical data, and logical paths for exposing the internal relationships among the economy’s constituent parts and their activities.

      Second, the model should make provision...

    • Chapter 12 INSIGHTS DERIVED FROM THE KAPROST MODEL
      (pp. 205-230)

      In this chapter we display—and compare with the reconstructed record—the overall results generated by the KAPROST model in two versions: its full, disaggregated multisector version (the MSM) and a compact, one-sector version (the OSM). Some figures show the results produced by both models. Where the results generated by the OSM conform closely to the results shown by the MSM, we economize on space by presenting in tables only the MSM data.

      Figure 12-1 compares the time-series record for the economy’s total gross output as we have reconstructed it with the series generated by the two KAPROST versions. The...

    • Chapter 13 TRACING THE CONSEQUENCES OF ALTERNATIVE POLICIES
      (pp. 231-254)

      We turn now to some systematic tests for the economic consequences of alternative policies that might have been followed during the 1929–40 period. Obviously, a large number of interesting and plausible policy variants could be selected for testing, either to reflect the competing proposals under debate in the 1920s or to demonstrate their relevance to current proposals for economic reform, but we cannot test the reader’s patience unduly. While change in almost any feature of the model could be tested, the most desirable testing procedure would focus on key parameters in a nonarbitrary manner and encompass a meaningful range...

    • Chapter 14 LESSONS FROM SOVIET ECONOMIC EXPERIENCE
      (pp. 255-272)

      Before reviewing the lessons to be learned from Soviet economic experience, we ought to remind the reader of our basis for reaching these conclusions. First, we have built a foundation of quantitative historical evidence in considerable detail. Second, we have applied a quantitative tool to the evidence, enabling us to ask and answer a series of interesting questions. The foundation is fairly sturdy. The questions and answers are necessarily more speculative. We nevertheless offer a variety of indications of how the Soviet economy might have responded to a range of alternative policies. At some points in this final chapter we...

    • Appendix A STATISTICAL FOUNDATIONS FOR OUR ANALYSIS
      (pp. 273-301)
    • Appendix B DEALING WITH THE INDEX NUMBER PROBLEM
      (pp. 302-308)
    • Appendix C MODEL EQUATIONS
      (pp. 309-328)
  9. REFERENCES
    (pp. 329-336)
  10. INDEX
    (pp. 337-339)