Russian Economic Development

“Our actions, aimed at raising the economy and at improving the people’s well-being, will exert on the minds of vacillators an influence which will be stronger than other methods. And such people will be more anxious to cooperate with us, to side with Marxist-Leninist theory, and with the working class in the struggle against capitalism. It will be a great thing, comrades.”

Nikita Khrushchev, 1957

1.

Professor Alexander Gerschenkron is among the most thoughtful, learned and painstaking of specialists in the history of the economic development of modern Europe. Every serious student of European economic affairs in the nineteenth and twentieth centuries should read some of the fifteen essays included in his book. The past century is their time span, and Russian development is their center. Indeed his essay number six (“Russia: Pattern and Problems of Economic Development, 1861-1958”) may be the one it would be the greatest pity to miss. This is perhaps the most helpful outline of its topic in our language. And, in addition to the essays on Russian economic questions, Professor Gerschenkron gives us here a number of other valuable studies. These include a learned and original contribution on Italian economic development before World War I, a six-decade survey of industrialization in Bulgaria, and three chapters on Russian literature. Of the latter, the one entitled “Reflections on Soviet Novels” should, in my judgment not be skipped, while the one on Doctor Zhivago may also be of interest, for its historical perspectives, even to those of us who do not share its enthusiastic appreciation.

Apart from these studies, Gershenkron devotes a good deal of attention to the general phenomenon of “Economic Backwardness.” He focuses particularly on the question of how varying initial degrees of economic backwardness shape the character of the economic development subsequently, when backwardness is being overcome. This part of Gerschenkron’s book, I confess, I do not find of great value. It is not an uncommon practice, in historical study, though always I think an unfortunate one, first to give a complex of interrelated things a name—Renaissance, Reformation, Economic Backwardness—and then to use that name as an explanation for particular events that come within the complex. At best, this usage involves verbal infelicity; more commonly, it evidences some muddle in thinking; at worst, it reflects downright circularity of reasoning. Professor Gerschenkron uses the concept of “Economic Backwardness” repeatedly in a manner which is, I think, not free of these shortcomings.

In the title essay on “Economic Backwardness in Historical Perspective” we find Gerschenkron writing, quite characteristically, “Assuming an adequate endowment of usable resources, and assuming that the great blocks to industrialization had been removed, the opportunities inherent in industrialization may be said to vary directly with the backwardness of the country.” A taxicab driver might have said, “The poorer a country is, the more it has to gain by getting richer—if it can. “But having formulated Gerschenkron’s point in this way, would the taxi driver be able to convince us—or himself—that the point was worth making? Gerschenkron is indeed disarming in his “Postscript,” where he writes: “—the general approach as presented here can be considered as an attempt to systematize the deviations from the English paradigm by relying on the degree of backwardness as the organizing concept.” But this candor in defining Economic Backwardness in terms of deviations from the norm of English non-backwardness does not reassure when, for example, we watch Gerschenkron (page 136) using these concepts to provide a pretended explanation for what happened—or did not happen—in Russian industry during 1906-1914. Gerschenkron there says: “…industry may have been passing through a period as governed by the effects of diminished backwardness.” No; such concepts—“dynamic preparation” and “diminished backwardness”—are not, I think, helpful at all: they do not explain anything.

Even more troubling is Professor Gerschenkron’s elegantly stated rationale of the speed of the Soviet industrial advance. He does not find comparable rates of industrial growth in other countries or in the earlier history of Russia. And he sees the decisive Soviet advantage in agricultural collectivism. “The record-breaking result was achieved,” he says, “because a ruthless dictatorial government succeeded in placing the Russian peasants, then the great majority of the Russian people, into the strait jacket of collective farms.” Before collectivization was begun, he tells us, farm marketings fell off and “…higher prices of higher taxes were politically intolerable…” Also, he contends, Bolshevism then tottered on the edge of the grave: “…the growing resistance of the millions of peasants, strong in their intangible diffusion, seemed to spell the doom of the Soviet dictatorship.” And again, lest we forget: “In retrospect, the threat to the continuation in power of the Soviet regime appears blurred by the indubitable successes achieved subsequently. But it was real indeed.” The dictatorship, he says, only stumbled into full collectivization; the original intention was to create only a limited number of collectives, to provide special sources of food for the cities. However, he states: “The dogged defense by the peasants went down in defeat and a complete, or nearly complete, collectivization was the result.”

Farm collectivization, once achieved, industrialization could proceed according to Gerschenkron, without hindrance and largely at the expense of the peasants.

Once the peasantry had been successfully forced into the machine of collective farms, once it became possible to extract a large share of agricultural output in the form of “compulsory deliveries” without bothering much about the quid pro quo in the form of industrial consumers’ goods, the difficulties of the late twenties were overcome. The hands of the government were united….A program of perpetual industrialization through a series of five-year plans was now on the agenda. What was originally conceived of as a brief spell became the initial stage in a new great spurt of industrialization, the greatest and the longest in the history of the country’s industrial development.

On at least one occasion, Gerschenkron’s evaluation of Soviet industrialization will not rest content with the image of the miserly compensation of an exploited peasantry; then he sees collectivization, through the eyes of Peter the Great, as a system “…to feed gratis the non-agricultural segments of the economy and at the same time provide a flow of labor for the public works of the government…” The collective farmer is the modern serf, with whose labor is reared the pyramid of Soviet industrialization.

All this is very good fun, and Professor Gerschenkron presents this thesis more persuasively than I have read it elsewhere. But it is a long way from the requirements of a sober historiography, and its economic analysis has no particular cogency. So far as the history of the matter is concerned, Gerschenkron merely sketches a suggestion. His documentation does not begin to approach what is required for the determination of a serious historical issue. Indeed, adequate documentation may not be available for decades. In the meantime, we need not all embrace the creed which expresses itself in the maxim, “I believe because it is absurd.” Professor Gerschenkron would have us believe that, on the eve of collectivization, the Soviet government was too weak politically to raise taxes or prices. But it was strong enough to kill millions of peasants and to deport millions more. And it has remained strong enough, for three subsequent decades, to enforce a collective farm system more widely hated, by the Soviet people, than any other aspect of communist society except the police terror. Pending specific historical evidence, we are also permitted some restraint in embracing Gerschenkron’s thesis that the Soviet government was forced into collectivization by political weakness. Which of the Communist leaders was free of the dogmatism of the economic efficiency of large-scale production—in farming, as elsewhere? And which was free of the Marxist romanticism of violence—not fancying himself as a gun-wielding “midwife of history”? Was not the effective layer of Communist leadership then, in fact, spoiling for a fight with the peasant “class enemy”?

Moreover, much as we recognize the charm of a mytho-poetic (Physiocratic) image of the origin of savings, we must not be entrapped by the idea that the enforced abstinence of the peasant is, in some special way, the provider of the seed-corn of industrialization. Already in 1928 the Soviet government controlled 82 per cent of industrial output and held similar dominance in basic utilities, transport, trade and finance. When he was collectivized, the peasant joined the throng of the centrally controlled. In a laborious and fundamental contribution to our knowledge of “The Real National Income of Soviet Russia from 1928 through 1955, Mr. Abram Bergson has contributed greatly to the ease with which it is now possible to puncture the fable of an exploited peasantry as the special foundation-stone of Soviet industrialization. Mr. Bergson shows that, in 1937, when collectivization was already complete, collective farm income averaged about 3,000 rubles per man-year when industrial workers (including supervisors) averaged 3,005 rubles. Mr. Bergson concludes: “…no basis is found for the familiar assumption that the Soviet government systematically discriminated against the farmer and in favor of the industrial worker.” Because Russian agriculture was so unproductive under collectivization, it could contribute relatively little to industrialization. (Even today, Soviet agriculture employs about 40 per cent of the civilian labor force, while United States agriculture employs less than 8 percent.) The Communist regime achieved light control over a meager agricultural output. Otherwise agriculture does not differ from other economic sectors—industry, mining, transport, etc.—in the nature of its contribution to Soviet industrialization.

2.

The common service of the books by Messrs. Bergson and Nutter, and of the twenty-seven staff submissions to the Joint Economic Committee, is to remove Soviet economic development from the realm of the extraordinary economic experience. Each of these volumes is laborious and conscientious. They do honor to American scholarship.

The studies presented to the Joint Economic Committee cover the broadest range of topics, and they are correspondingly uneven in merit and presentation. But there are good things throughout these submissions, and no student of Russian affairs will wish to miss the four papers here brought together under “The Measure of Production” or what is in fact a little book, of some hundred pages on “Demographic Trends and Population Policy.” (Nothing in the perfunctory Hearings would suggest that the writing effort of the staff evoked a corresponding reading effort by the senators and representatives of the Committee.)

Mr. Bergson’s book has a narrower scope. Still, measuring the real national income of the Soviet Union takes him into most corners of the Soviet economy, and he always emerges with credit—though sometimes, as it appears to me (as in the case of military production), with his quarry still unmeasured. Mr. Bergson permits himself the sardonic observation that “…Western scholars have found many reasons to think that the measurement of Russian national income is too important a task to leave to Russian statisticians.” However, in the perspective of the afflictions he has steadfastly borne from the shortcomings of his Russian suppliers of raw materials, this sentence may be taken to be a mild and even charitable response to cruel and unusual punishment.

Mr. Nutter’s volume has the narrowest subject matter. But it is a book worth reading—even by those who will never look at the Appendix tables. Its approach is not narrow, but on the contrary, full of judicious insight and historical perspective. His minimalist appraisal of the present total size of the Soviet industrial establishment seems not greatly popular among Sovietologists. A non-specialist will not pretend to decide among these contestants. But it remains possible that the truth is not far from where Nutter stands.

In 1962 the Gross National Product of the United States was about $554 billion—say $3,000 per capita. The staff reports to the Joint economic Committee suggest a Soviet product, on the same purchasing power basis, somewhere between $250 billion and $275 billion—say $1,200 per capita. Mr. Bergson would apparently agree broadly with such a valuation. Mr. Nutter finds it much too high. But the three are at one in agreeing that Soviet economic growth is not now at all out of the range of other countries. In 1928-37 Soviet gross product may have risen by 10 to 12 per cent annum. The rise for 1950-55 seems to have been in the range of 7 to 7 1/2 per cent, and for 1955-60 nearer 6 1/2 per cent. For 1960-61 alone, Mr. Nutter comes down to about 5 per cent, even for industry alone.

Both west and east, the U.S.S.R. has neighbors doing substantially as well or better that she in economic growth. Where Soviet gross product is computed near $1,200 per capita, the four largest countries of Western Europe are now near $1,700, on the same basis. These four also have a combined gross product about 30 per cent larger than the Soviet Union’s, though their population is about 7 per cent smaller. For the whole decade 1950-60 Japan increased its output at a decidedly faster rate than did the U.S.S.R. And Japan, without dictatorship, was preeminently more successful than the Soviet Union in withdrawing labor from agriculture. Industrial production in Japan rose by a compound rate of 17 per cent per annum during 1950-61, while—to follow our highest source—the Soviet Union achieved only 9.3 per cent. For those who require fresh demonstration by experience that neither agricultural collectivization nor political dictatorship is necessary for high rates of economic growth, Japan and Western Europe are now proving it again. Only the United States, at the top of the pyramid through long past accomplishment, makes no contribution to the current weight of proof.

Those who feel in their bones that the Russian economic establishment must be of approximately the size of American, and growing more rapidly than any other, might well ponder the relatively unequivocal fact of energy use. In 1961 the Soviet use of all energy was equal to the American in 1920. (U.S. energy use in 1961 was 2 1/3 times that of the U.S.S.R.) True, American houses are more heated—though Russia is colder; Americans drive more cars; etc., etc. But the Russian rate of increase is energy use during 1950-61 was also only 4.3 per cent per year. We know that in the United States since 1920 the rise in gross product has been accomplished by a less-than-proportional increase in energy use. But how far can this disproportion be carried—and particularly in an economy like the Soviet, which emphasizes metals, machinery, and munitions? Does not the slow rise in Soviet energy consumption weigh on the side of those who tend to the lower range of evaluations of current Russian economic growth?

Nikital Khrushchev proclaims determination to persevere in increasing Soviet consumer supplies. In the world-wide competition of co-existence , supporters are to be won by the better life under Communism. This now makes part of the received Soviet doctrine; “The sphere of material production is the decisive sphere in human relations.”

Professor Gerschenkron remains, at best, agnostic. There is, he believes, “…an intimate connections between the totalitarian dictatorship in Russia and an economic policy of investment for the sake of investment…” And again:

It is doubtful that a consumption economy can be established in Soviet Russia. A decentralized economic system geared to a steady rise in levels of consumption would leave the Soviet dictatorship without a social function…It is more likely that the dictatorship will continue the policy of willfully provoking one international crisis after the other and of maintaining a high rate of investment as the economic pendant to such a policy.

Mr. Bergson and Mr. Nutter hold to statistical limits. In 1937 or 1940 or even 1950 Soviet consumption per employed worker was lower than it had been in 1928. Indeed, Bergson says, “…the Russians did not again reattain the 1928 standard per employed worker until around the time of Stalin’s death.” But in the 1950’s Soviet consumption rose dramatically. In 1955 consumption per employed worker was already 40 to 45 per cent higher than in 1950. By now it may be near twice the level of 1950. Bergson concludes that the Russians are probably able to increase both consumption and investment at substantial rates. And Mr. Nutter’s picture of consumers’ supply agrees basically with Bergson’s.

On Soviet consumer welfare, it is, however, the submissions to the Joint Economic Committee that constitutes the most interesting documents. These submissions reflect the acute, unresolved and even unformulated dualism of American policy toward Russia. Is the U.S.S.R. and enemy to be fought, or is it a society which humanity and prudence alike dictate ought not to be fought, and which one must therefore endeavor to win to peaceful contest? And, as aggression requires only one decision, but peace two, what risks are to be taken? Where childish minds prevail, and their imagery is thought adequate, responses to these issues are expressed in the reductive dualism of hawks and doves.

For the most part, the U.S.A. looks on the U.S.S.R. as an enemy. The enemy is to be fought—and therefore, where possible, weakened. Do not trade with him. He is clever, and obviously would not trade if he were not the gainer. Interpose obstacles to his trade with others, where you can—and then criticise him (as the Joint Economic Committee submissions do) for concentrating his trade too much in a small regional circle. In general, challenge his motives (and if you are the Joint Economic Committee authors, do so with occasional flows of tears). In public, deny the enemy’s accomplishments, where possible, denigrate them where total denial is unfeasible.

Yet the evidence is there. In 1950 the Soviet standard of consumption was lower than the standard of the United States ninety or one hundred years earlier. But in the 1950’s and early 1960’s Soviet consumption has risen, year by year, at rates two and three and four times the American. The U.S.S.R. now has more doctors than the U.S.A. Russian school teachers handle smaller classes. In 1958-60 Russian hours of work were reduced from 47 to 41 per week. While hours of work went down so sharply, consumption went up each year. The personalist party dictatorship became more conciliatory and more popular, The foundations of Stalinism were challenged. But the foundations of Leninism remained visibly undisturbed.

To this rise in the Soviet standard of living, the United States appears as an enemy. When the Government of the U.S.A. denies the U.S.S.R. the right to buy in the United States large diameter steel pipe (for transporting oil and gas), and also exerts pressure east and west to prevent others from selling pipe to the U.S.S.R., we lend American support for all those in the Soviet Union who work for the shaping of Soviet economy into an even more autarchic structure of power. We thereby do an injury to the potential enemy in the myopic present. But do we not also strengthen in him the forces of enmity and diminish our chances for a better future? What do we wish? Do we wish the Russians to believe they can live with us, learning from one another, and in a rivalry not incompatible with fruitful exchange of products, or do we prefer to confirm in them the belief that, no matter what they do, we shall always stand across their paths as an enemy? Are we really interested in proving that Mao is right, against Khrushchev?

In probing the motives of Soviet industrialization, Professor Gerschenkron gives great weight to the military. “There is very little doubt,” he concludes “that …Russian industrialization in the Soviet period was a function of the country’s foreign and military policies.” Even late in 1961 he remains doubtful that anything important has changed: “One cannot help feeling …that behind the screen of the so-called de-Stalinization vigorous attempts were made in several important directions to return to the ‘normalcy’ of the past.”

The efforts of Western economists (even such distinguished ones as Messrs. Bergson and Nutter) to calculate the real magnitude of Soviet military outlays, from year to year, by relying on published information, impress a non-specialist as intimidatingly laborious and quite unproductive. There is a tendency, in such matters, for History to become, in Voltaire’s phrase, “a lie agreed upon.” Estimates are passed from author to author, and they gain standing from repeated citation. But the abundance of respectful citation does not add to validity. It merely reflects two situations: first, he who cites has no better way of guessing, and second, he does not wish to say, “I do not know.”

Against this background, the paper entitled ‘The Claim of the Soviet Military Establishment,” submitted to the Joint Economic committee by Mr. J.G. Godaire does not believe that published information suffices to establish, even approximately, how many rubles the Russians spend for military purposes—much less what they get for their money. He estimates Russian military outlays at 8 to 11 billion rubles in 1950 and 13 to 21 billion rubles in 1962. But he adds, “These values are only general orders of magnitude which probably bracket the truth.” He surmises that Soviet military and space expenditures may now be half again as great as in the early 1950’s. and utilizing Russian concepts of National Income, he concludes that defense and space may have claimed 15 to 25 per cent of Soviet National income in the early 1950’s but require only 8 to 15 per cent of the Soviet Nation Income now. He rightly, I believe, adverts repeatedly to the uncertainties:

The most the figures can portray is that the defense claim in the Soviet Union is and has been a substantial one and that in all probability the claim was…relatively more burdensome during the early fifties than it has been since 1956.

The acknowledged manpower of the Russian armed services has been larger than the American at all times since World War II. In 1945 each had 11.4 million men. By 1948 the U.S.A. was down to 1.5 million, while the U.S.S.R. claimed 2.9 million. During the Korean War the U.S.A. built up to 3.6million men and the U.S.S.R. reportedly to 5.8 million. In 1960, when Eisenhower had reduced U.S. forces to 2.5 million, Khrushchev announced that the Soviet Union would reduce form 3.6 million to 2.4 million—in 1961. But this target was not maintained. On the contrary, Khrushchev cancelled it explicitly in the middle of 1961—avowedly as a response to President Kennedy’s armament increases. Since 1961 Russian armed forces have probably numbered somewhere in the range of 3 to 3.5 million men, while American forces have numbered about 2.8 million.

Nevertheless, at this time, in the first months of 1963, Russia’s men under arms are perhaps only a little more than half as numerous as they were a decade earlier, at Stalins’s death. Russian munitions production seems now a smaller part of a larger economy. The U.S.S.R. does not seem to be concentrating its economy or its manpower on preparations for the waging of war. Mr. Khrushchev announces that the desire of the working class, under his leadership, is not “…to die spectacularly but to build a happy life.”