FINAL REPORT TONATIONAL COUNCIL FOR SOVIET AND EAST EUROPEAN RESEARC H

TITLE : ESTIMATING THE IMPACT OF SOVIET

ECONOMIC POLICIES, 1928-194 0

AUTHOR : Holland HunterEverett J. Rutan, II I

CONTRACTOR : Columbia University

PRINCIPAL INVESTIGATOR : Jonathan Sanders, with Holland Hunter asProject Co-Director

COUNCIL CONTRACT NUMBER : 800-26

DATE : February, 1987

The work leading to this report was supported by funds provide dby the National Council for Soviet and East European Research .

EXECUTIVE SUMMARY

ESTIMATING THE IMPACTOF SOVIET ECONOMIC POLICIES ,

1928-194 0

Why was Soviet output driven up so rapidly in the 1930s? Asearly as September 1917 Lenin had said it would be necessary t o"overtake and outstrip the advanced countries economically . . ., "and in February 1931 Stalin added : "We are fifty or a hundredyears behind the advanced countries . We must make good thi sdistance in ten years . Either we do it or they crush us ." I nFebruary 1946 Stalin ascribed Soviet victory over the Nazis t ocorrect Party policies for getting ready, and in February 195 6Khrushchev, even while denouncing Stalin, defended these policie sas correct . Looking back, it seems obvious that Soviet policie sfor rapid growth enabled the USSR to survive the Nazi invasion andemerge from the war victorious .

Nevertheless this project asks whether Soviet preparation sfor World War II might not have been even more effective . Ou ranalysis shows that Soviet economic growth during 1929-1940 ,impressive as it was, could indeed have been more effective unde rdifferent policies . The USSR was made ready for World War II ,but the answer to Alec Nove's question : "Was Stalin ReallyNecessary?" is "No ." We are able to show, using a model calledKAPROST, that proper policies would have produced a somewha tlarger GNP over the period than Stalin did . More importantly ,proper policies would have shifted the GNP's sectoral structure b y1940 toward an optimal growth-inducing pattern while at the sametime maintaining 1928 per-capita consumption levels for a growingpopulation and filling the output gaps painfully evident in actua lSoviet performance .

FIVE ANALYTIC CONCLUSION S

(1) In our view KAPROST has proved to be a realistic way o fcapturing the essence of Soviet operational planning . It matche sup with the Soviet record . Each year KAPROST looks ahead fou ryears in laying out an investment program, which is then fitte dinto the current resource situation and scaled back to b econsistent with a program for consumption . Next year KAPROS Trecalculates on the basis of a new current situation . The rate o ftechnological progress in each sector depends on the rate o finvestment in that sector, together with the rate of depreciationof its old capital . This is how the system worked (and works . . .) .

(2) The forced collectivization of agriculture of course hur tSoviet consumers, but it also hurt Soviet industry . It cut th eavailability of animal tractive power in half, thus forcin gindustry to supply tractors, trucks, and combines that would not

otherwise have had to be delivered at that time . The agricultura lsector delivered a deficit, not a surplus, to the growth of non -agriculture . Soviet collectivization was a very costly erro rwhich no other country would be wise to imitate .

(3) Our KAPROST computations show that the world depressio nof the 1930s did little damage to the Soviet economy . The reasonis that Soviet industrial expansion rested primarily o nduplication and diffusion of plant and equipment domesticall yproduced . An up-to-date vintage was acquired during 1928-1932 ;thereafter the USSR was relatively self-sufficient .

(4) We find that rearmament in the second half of the 1930 scut the level of investment and consumption in the USSR, but didnot lower total GNP . Until then the focus had been on building u pthe heavy industrial base ; after 1935 the machinery and metal ssector switched its deliveries toward defense-related procurement .Agricultural collectivization, purges, and terror were harder o nSoviet consumers than rearmament was .

(5) The main conclusion of this analysis of Soviet economi chistory in the period leading up to World War II is that hast emakes waste . An equivalent Russian proverb says, "If you go mor equietly, you'll get farther ." Millions of Soviet citizens mad eheroic sacrifices to build the economy, but clumsiness an dbrutality extracted contributions that were unnecessary, a sSolzhenitsyn showed in Gulag arkhipelag. Stalin said in Apri l1928 and repeated in February 1931, "There are no fortressesBolsheviks cannot capture ." He called for a frontal assault, bu tKAPROST suggests instead that he would have been wiser to follo wGeneral Wolfe's strategy for defeating Montcalm at Quebec .

UNDERLYING ARGUMENT

The KAPROST (kapitalnyi rost', i .e ., capital growth) mode ltracks the performance of an economy as it expands from aspecified base period in response to specified objectives . Th eexpansion process centers on investment in fixed capital plant andequipment . We divide the economy into 12 producing sector sexpanding over 12 one-year periods, subject to a variety o fspecified constraints . The whole structure is calibrated to fi tthe Soviet economy as of 1928 . Initially it expands in intende ddirections according to its potential . Then deliberate alterationof specific parameters to match a particular event leads t oeconomy-wide changes, thus revealing each event's impact . Afte rseveral such interventions, the economy's performance matches u pfairly closely with the West's incomplete understanding of wha tactually happened in the USSR . Our results validate accepte dbenchmarks and fill intervening gaps to build an internall yconsistent reconstruction of Soviet economic history .

ii

In our earlier work (supported by the Council under a 198 0contract), we used an approach that covered the whole 1929-194 0period as a single problem . However this imputed an unrealisti cdegree of foresight to planners in 1928 ; KAPROST has therefor ebeen recast into a more shortrun and flexible form . The overal lproblem is now solved, annually, in three stages . Looking fou ryears ahead, we first set investment targets that will move th eeconomy quickly toward its optimal growth path . Next, we allo-cate labor, capital, and intermediate resources to maximize cur -rent consumption after trying to meet the investment targets andfit within all the other prevailing constraints . If this combinedproblem is algebraically infeasible, we scale back the investmen ttargets just enough to make them fit within the economy' sproductive capacity and do as much as possible for consumers .

Having found a feasible and optimal solution for 1929 ,KAPROST moves forward one year and solves the same problem unde rthe somewhat different conditions of 1930, again looking forwar dfour years . This "rolling planning" (somewhat similar to Pentago npractice) continues up through 1940, adapting each year to th eevolving structural changes in targets and resources for meetin gthem . Formal precision is combined with adaptive flexibility t omodel Soviet planning in a realistic way .

Our baseline reference solution makes no provision, however ,for four major developments that shaped the actual record . Th efirst was the great drive for rapid growth that surged well beyon dthe expectations embodied in the first Five-Year Plan . Anothe rwas the worldwide depression that hampered Soviet foreign trade .Still another was the rapid, forced collectivization o fagriculture . Later came a substantial shift of resources intorearmament . KAPROST takes account of these developments throug hspecific changes in its parameters . The economy was also affectedby the purges and terror that reached a peak in 1936-1938, but w ehave found no direct way to incorporate their consequences int othis crude economic model .

During the 1920s Soviet authorities accumulated and publishe da wide range of detailed data covering most aspects of th eeconomy . A national population census was taking in 1926, five -year development plans for key sectors began to be formulated ,annual "control figures" for 1926/27, 1927/28, 1928/29, an d1929/30 were promulgated, and a tentative five-year plan fo r1927/28-1931/32 was prepared, all before the first FYP (coverin gthe five fiscal years 1928/29-1932/33) was issued in thre evolumes plus appendices in late 1928 (we use the corrected 3r dedition of 1930) . Ample evidence for the actual 1928 performanc eof the economy is thus available, uncontaminated by th emanipulation that soon began to make official Soviet data suspect .

Our earlier version of KAPROST made use of the "optimal" se tof targets in the first FYP, as opposed to the less ambitiou s

iii

"basic" variant, but we have now switched over to the "basic "targets in deriving KAPROST's parameters . A further improve-ment involves estimating what the agricultural sector might hav eproduced in the absence of collectivization, in order to provid ea contrast with actual developments . Rewriting history is no tto be attempted lightly, but we have made a cautious effort whic his limited to assuming that animal tractive power continued i nuse instead of being killed off .

The major domestic political issue in the 1920s was how t omotivate the peasants to produce and make their output availabl eto non-agriculture . From 1926 on, the prices they were offere dfor grain became less and less favorable in relation to the price sthey had to pay for consumer goods, and also less favorable i nrelation to prices for livestock products . Peasants were thu sdiscouraged from enlarging grain production ; they also divertedmore grain into livestock feeding . After Stalin's 1929-30 drivefor "liquidation of the kulaks as a class," the stock of horse sand other draft animals shrank by more than 50% .

Since KAPROST is built around the physical relationsgoverning production, we need to answer the question : If the pric eincentives and other conditions facing Soviet peasants had bee nreasonably favorable, how much might farm output have grown, usingold technology and a slowly-growing supply of animal tractiv epower? Our estimate indicates that, over the 1928-1940 period ,Soviet grain agriculture without collectivization might hav eproduced a total of 1,092 million metric tons of grain, a scompared with 960 million tons under collectivization, a gain o f132 million tons or 14% . The annual extra crop is in the 3- 4million ton range during 1928-1931 and then rises to around 1 4million tons annually over the 1932-1940 period . This added grai nis obtained without any extensive "tractorization," i .e ., withou tany increase in the 1928 ratio of machine to total tractive power .It is enough to keep the 1928 level of per-capita consumption o flivestock products constant through 1940 .

It is enough, moreover, to supply food for the expectedincrease in the Soviet population, as foreseen by Gosplan in afive-year plan "sketch" published a year before the first FY Pitself . Their benchmark estimates for the beginning of 1936 an d1941 anticipated continued population growth at mildly declinin grates . Actual developments were, however, tragically different .From 1933 on, the actual population quickly fell below Gospla nexpectations, to the extent of some 15 million souls in the lat e1930s . Under post-collectivization conditions the birth rat edropped sharply . Millions of people were pulled to towns an dcities looking for jobs and bread, and also pushed out of th ecountryside by mass collectivization . There was in consequence agreat loss of human capital (mostly potential, in the form o funborn children), but one of its grim results was a reduced claimon the agricultural sector for grain and livestock products .

iv

Stalin declared 1929 "a year of great change," and it didindeed launch a period of frenzied activity, going far beyond th eexpectations embodied in the first FYP, whether of the basic o rthe optimal variant . This great surge of measured output brough twith it, however, an unmeasured decline in product quality whic hlowered the effectiveness of input use . It also involved a hug evolume of current investment outlays that added to the mass o funfinished construction without adding to the economy's stock o foperating plant and equipment . Wage rates rose rapidly ; rubl ecosts and current prices rose with them . This enabled the regim eto report remarkable output increases, and even to claim that th etargets for 1932/33 had been achieved by the end of 1932, thoug hin 1933 only four of our twelve sectors in fact reached thei rintended real output levels . Overall, the first FYP target fo rgross output in 1928 prices was underfulfilled by 13% .

The underlying rationale of KAPROST requires us to trea tthis initial surge as a temporary departure from the economy' ssustainable expansion path, not as a reliable indication of it slongrun potential . The latter approach would have implied 194 0output levels literally "off the chart . " After 1932, therefore ,KAPROST reverts to the parameters for capital productivity tha twere originally specified . Our reference solution moves forwar dfrom the levels which incorporate the surge through 1932, but fo rthe 1933-1940 period it computes the developments that wer efeasible on the basis of the capital/output and other ratio sderived from the base-period evidence .

The Soviet drive to "catch up with and surpass . . . in te nyears" confronted a fundamental barrier that is now most vividl yrevealed through the insights of contemporary structural growt htheory . Unless an economy's sectoral structure is already geare dup for rapid expansion of output, a difficult transition period i sunavoidable . The sectors that produce the inputs needed directlyfor growth (especially Construction and Machinebuilding-and -Metalworking) must greatly increase their share of nationa lproduct . But the powerful constraint that frustrates overnigh tprogress lies in the fact that such structural changes take tim e-- a decade or two rather than a year or two . The great humancosts imposed by Stalinist industrialization arose from willfu lignorance and defiance of inexorable limits on the speed wit hwhich structural change can be accomplished .

The period from the late 1920s through the 1930s was adifficult one everywhere, not least in the USSR . There, th edominant agricultural sector was stubbornly unproductive, and ou rhypothetical reconstruction of agricultural performance in th eabsence of collectivization suggests not much progress in th e1930s . Soviet leaders did not want sustained export-led growth ,and in any case were denied favorable terms for it . From 1927 on ,

the USSR was threatened by an international situation that mad ethe danger of war seem increasingly imminent . Under thes e

v

conditions, rapid and painless growth was not possible . Never-theless, a more balanced set of policies would have brought bot hless pain and more output .

vi

PREFAC E

We acknowledge the generous support of the National Council ,

not only for this project but for a previous stage completed i n

July 1980 under Contract No . 621-6 . The work has also bee n

supported by the Haverford College Faculty Research Fund, th e

National Science Foundation, and the Americal Philosophica l

Society . The Harriman Institute at Columbia University provide d

ideal working conditions in the Spring of 1986 .

Initial results have been reported in "The Overambitiou s

First Soviet Five-Year Plan," Slavic Review, June 1973 ; "A Tes t

of Five-Year Plan Feasibility," in Judith Thornton, ed ., Economic

Analysis of the Soviet-Type System (CUP, 1976) ; "Modeling

Structural Change Using Early Soviet Data," Journal of Developmen t

Economics, August 1981 ; and "The New Tasks of Soviet Planning i n

the Thirties," in Padma Desai, ed ., Marxism, CentralPlanning,and

the Soviet Economy (MIT Press, 1983) .

After a briefly identifying the issues we raise and ou r

approach to addressing them, this compact summary offers a non -

technical description of our quantitative tool for studying th e

past . Data highlighting the 1930s situation are summarized an d

hypothetical estimates are offered for Soviet agricultura l

performance in the absence of collectivization . The impacts o n

the economy of an initial surge, world depression, rearmament, an d

collectivization are discussed . Finally, we compare our result s

with other findings and suggest some policy implications .

CHAPTER 1

INTRODUCTION

What were the purposes underlying the rapid expansion o f

Soviet output in the 1930s? As early as September 1917 Lenin had

said it would be necessary to "overtake and outstrip the advance d

countries economically . . .," and in February 1931 Stalin added :

"We are fifty or a hundred years behind the advanced countries .

We must make good this distance in ten years . Either we do it o r

they crush us ." (J . Stalin, Problemsof Leninism, 1947 Eng . ed . ,

p . 358) . In February 1946 Stalin ascribed Soviet victory ove r

the Nazis to correct Party policies for getting ready, and i n

February 1956 Khrushchev, even while denouncing Stalin, defende d

these policies as correct (The Anti-Stalin Campaign an d

International Communism, NY : Columbia Univ . Press, 1956, pp . 11 ,

85, 288) . With the benefit of hindsight it is obvious that thes e

policies for rapid growth enabled the USSR to survive the Naz i

invasion and emerge from the war victorious .

Nevertheless this project asks whether Soviet preparation s

for World War II might not have been even more effective . We seek

an answer through decomposing the record in order to estimate th e

impact of major events . Some events enhanced the economy' s

underlying potential, others hindered it . With sufficientl y

detailed information, one could estimate each event's impact o n

the economy and estimate performance in its absence, ultimately

3

exposing the system's basic underlying trend . Lacking adequat e

data, we have used the reverse (but equivalent) route, startin g

with the economy's 1928 potential and then imposing major events

in order to approximate the actual record . The composite resul t

thus has the effect of weighing the place of each major even t

within the evolving historical structure .

Actual Soviet output expansion is summarized in Table 1 ,

which shows for each of 12 producing sectors its base-period

output in 1928 and the level reached in 1940, measured in billion s

of rubles at 1928 prices (as reconstructed by Western scholars) .

Machinebuilding & metalworking and electric power output ros e

about ten-fold, construction more than five-fold . On the othe r

hand, 1940 livestock products output was 17% below the 1928 level ,

and housing, grain, and trade-and-distribution had advanced very

little . Was this the best that could be done?

4

Table 1

Actual Gross Outputs, By Sector, 1928 and 1940 ,in billions of rubles at 1928 prices

1940Annua lGrowth

1928 1940 Index Rate

Agriculture, Grains 4148 4963 120 1 . 5Agriculture, Livestock Products 7136 5937 83 -1 . 5Agriculture, Other Field Crops 7935 11047 139 2 . 8

Electric Power 566 5462 965 20 . 8Machinebuilding & Metalworking 6865 37624 548 15 . 2Other Heavy Industry 7839 15080 192 5 . 6Consumer Goods 8494 9877 116 1 . 3

Construction 3888 20155 518 14 . 7Transport & Communications 2190 8944 408 12 . 4Government Services 2954 7686 260 8 . 3Trade & Distribution 3750 4354 116 1 . 3Housing 2079 3019 145 3 . 2

Whole Economy 57844 134148 232 7 .3

CHAPTER 2

THE KAPROST MODE L

The KAPROST (kapitalnyi rost', i .e ., capital growth) mode l

tracks the performance of an economy as it expands from a

specified base period in response to specified objectives . Th e

expension process centers on investment in fixed capital plant and

equipment . This economy is divided into 12 producing sectors an d

expands over 12 one-year periods, subject to a variety o f

specified constraints . The whole structure is calibrated to fi t

the Soviet economy as of 1928 . Initially it expands in intended

directions according to its potential . Then deliberate alteration

of specific parameters to match a particular event leads t o

changes throughout the economy, thus revealing each event' s

impact . After several such interventions, the economy' s

performance matches up fairly closely with our incomplet e

understanding of what actually happened in the USSR over the 1929 -

1940 period . The effect is to validate accepted benchmarks an d

fill intervening gaps to build an internally consistent historica l

reconstruction of Soviet economic history .

At the behest of Lenin and Stalin, KAPROST seeks to expand

output in the form of both consumption and accumulation

(investment), with a stress on accumulation . In seeking to grow

"as rapidly as possible," KAPROST moves the sectoral structure o f

the economy as quickly as the inherited structure allows toward

6

one that reflects the preferences specified in the objectiv e

function . These are the preferences embodied in Party directives .

Comrade Max (the "little optimizing devil" of classical linea r

programming) in effect searches for the eigenvector of sectora l

gross outputs that accompanies the largest eigenvalue of th e

economy's steady-state annual flow table consistent with thes e

preferences . In other words, he directs the economy toward it s

long-run Von Neumann turnpike .

In our earlier work we followed the approach pioneered by

Richard Eckaus and Kirit Parikh in their analysis of India's five -

year plans (see their Planning for Growth, MIT Press, 1968), and

worked with solutions to the resource-allocation problem tha t

covered the whole 1929-1940 period as a single problem . Jacque s

Cremer and Herbert Levine pointed out to us that this imputes a n

unrealistic degree of foresight to planners in 1928 ; KAPROST has

therefore been reformulated into a more adaptive and flexibl e

form . The overall problem is now solved in three stages . Looking

four years ahead, Comrade Max first proposes a set of investmen t

targets moving the economy quickly toward its optimal growth path .

In the second stage, KAPROST allocates labor and capital an d

intermediate resources to maximize consumption in the current yea r

after trying to meet the ambitious investment targets and fi t

within all the other prevailing constraints . Should this combined

problem prove to be algebraically infeasible, the third stage o f

KAPROST scales back the investment targets just enough to make

7

them fit within the economy's productive capacity and do as muc h

as possible for consumers .

Having found a feasible and optimal solution for 1929, wit h

a four-year planning horizon, KAPROST moves forward one yea r

and solves the same problem under the somewhat differen t

conditions of 1930, again looking forward four years . Thi s

"rolling planning" (formally similar to Pentagon practice )

continues up through 1940, adapting each year to the evolvin g

structural changes in targets and resources for meeting them .

Formal precision is combined with adaptive flexibility to mode l

Soviet planning in a realistic way .

The Soviet drive to catch up with and surpass the advance d

countries of the West involved not only output expansion but als o

technological progress . Soviet planners in the late 1920s could

be quite specific in the kinds of advanced technology the y

proposed to install, based on German, British, and U .S . models .

The targets for 1933 in the first Soviet Five-Year Plan (hereafte r

FYP) incorporate ambitious expectations for technologica l

progress, especially in industry, and KAPROST makes use of these

targets in order to allow for transition from existing to advance d

technology, not at some standardized rate, but at a rate whic h

depends on the rate of investment in each sector .

We build an economywide flow table for 1928 from which th e

coefficients of the USSR's inherited technology can be derive d

simply through long division . A similar table for the intende d

1933 economy can be assembled from the data of the first FYP .

8

Using the planners' expectations for capital depreciation, w e

separate the 1933 sectoral outputs into two portions : One

attributable to surviving 1928 capital and the labor associate d

with it, and another attributable to newly-built capital and it s

associated labor . Subtracting the flows generated by th e

surviving old-technology capital from the flows in the intende d

1933 table, we obtain an incremental economywide flow table i n

which a new set of advanced-technology coefficients is embedded .

These coefficients, it should be noted, are independent of th e

year 1933 . For each sector, the rate of technological progres s

depends on the extent of investment in that sector and the rate a t

which old capital is retired . Thus in KAPROST technologica l

progress is endogenous and sector-specific .

While in the KAPROST model annual output, consumption, in -

vestment, and employment in each sector are determined endo-

genously, three important aspects of the economy are fixed exo-

genously . An annual potential supply of labor is specified o n

the basis of expectations for the size of the working-age popu-

lation . Annual outlays by the state for government service s

(mainly education and health care) are taken from the first FY P

intentions for 1929-1933 and projected for 1934-1940 as straight -

line absolute annual extensions . Soviet exports are similarly

determined, and Soviet imports are limited to what can be finance d

through exports plus expected short-term credits (which are se t

to zero after 1933) .

9

Starting with the actual levels that prevailed in 1928 ,

including the volume of capital construction already underway ,

the model just described computes a full set of sectoral input s

and outputs, year by year, from 1929 forward . In our referenc e

solution, the levels in the late 1930s make provision for capita l

projects to be completed in the early 1940s, on the assumptio n

that catching up would continue to be the goal, though we do no t

report the 1941-1944 results here . This reference solution make s

no provision, however, for several major developments that shaped

the actual record .

The first was the great drive for rapid growth that surged

well beyond first FYP expectations in the early 1930s . Anothe r

was the worldwide depression that altered Soviet foreign trade .

Still another was the rapid, forced collectivization o f

agriculture . Later came a substantial shift of resources int o

national defense . KAPROST takes account of these development s

through specific changes in its parameters, as will be explaine d

in Chapter 5 . The economy was also affected by the purges an d

terror that reached a peak in 1936-1938, but we have found no wa y

to incorporate their consequences into this crude economic model .

CHAPTER 3

BUILDING A REFERENCE SOLUTION

During the 1920s Soviet authorities accumulated and publishe d

a wide range of detailed data covering most aspects of th e

economy . A national population census was taking in 1926, five -

year development plans for key sectors began to be formulated ,

annual "control figures" for 1926/27, 1927/28, 1928/29, an d

1929/30 were promulgated, and a tentative five-year plan fo r

1927/28-1931/32 was prepared, all before the first FYP (coverin g

the five fiscal years 1928/29 through 1932/33) was issued in thre e

volumes plus appendices in late 1928 (we use the corrected 3r d

edition of 1930) . Ample evidence for actual 1928 performance o f

the economy is thus available, uncontaminated by the manipu-

lation that soon began to make official Soviet data suspect .

For this study a 12-sector flow table for 1928, togethe r

with associated data for capital stocks, was built using primaril y

the 1929/30 control figures and data for 1928 in the first FYP .

Some details of classification and assignment were clarifie d

through study of a remarkable document, published "for officia l

use only" in an edition of 600 copies, which presents nationa l

input-output tables for 1928, 1929, and 1930 . The book is no w

available in English as Materials for a balance of the Sovie t

national economy 1928-1930, edited by S .G . Wheatcroft and

R .W .Davies (Cambridge Univ . Press, 1985 . Data for a 1933 flo w

table in the same format were derived from the first FYP .

1 1

Our earlier version of KAPROST made use of the "optimal" se t

of targets in the first FYP, as opposed to the less ambitiou s

"basic" variant . Following the suggestion of Robert Davies, w e

have now switched over to the "basic" targets, which are the basi s

for the 1933 flows in Table 4 below .

Even these less demanding expansion targets were very ambi-

tious, as shown by the figures in Table 2 . Visitors to downtow n

Moscow are familiar with Lenin's slogan : "Communism = Sovie t

power + electrification of the whole country," stretching for 10 0

meters across the top of an old generating plant . It is thus no t

surprising that the first FYP called for tripling electric powe r

output in five years . The construction sector was slated t o

increase its output at 23% per year to almost three times the 192 8

level . The first FYP assumed that consumption could grow alon g

with accumulation : Agricultural output was scheduled to grow a t

7% or 8% per year, consumer goods output at 11% per year, and eve n

housing was to rise at over 5% per year .

The detailed structure of actual Soviet production in 192 8

and the intended structure in 1933 are shown in the two nationa l

flow tables below (Tables 3 and 4) . While not immediately

informative to the eye, they are the basis for calculating th e

technical coefficients that reflect each sector's inherited an d

advanced technology, as explained above . The actual and intended

structure of final demand deliveries provides a basis fo r

computing patterns of peasant consumption, worker consumption ,

investment spending, inventory increments, government purchases,

12

Table 2

Actual 1928 and Intended 1933 Gross Outputs, By Sector ,in billions of rubles at 1928 price s

SectorActua l

1928Intended

1933193 3

Index

Annua lGrowth

Rat e

Agriculture, Grains 4148 5860 142 7 . 3Agriculture, Livestock Products 7136 10095 141 7 . 2Agriculture, Other Field Crops 7935 11788 149 8 . 2

Electric Power 566 1696 300 24 . 5Machinebuilding & Metalworking 6865 11515 168 10 . 9Other Heavy Industry 7839 14227 181 12 . 7Consumer Goods 8494 14021 165 10 . 5

Construction 3888 10733 276 22 . 5Transport & Communications 2190 3463 158 9 . 6Government Services 2954 5207 176 12 . 0Trade & Distribution 3750 7382 197 14 . 5Housing 2079 2689 129 5 . 3

Whole Economy 57844 98676 171 11 .3

and exports . Their intended sectoral shares enter KAPROST t o

shape resource allocation in all our solutions .

The state planning commission (Gosplan) was able to assembl e

from its regional offices very detailed plans for new capita l

construction projects, covering some 1166 projects in 18 branche s

of heavy and light industry, scattered all over the USSR . Some

had been started in 1926 and some were not to be completed unti l

1936 . An appendix to Vol . III of the first FYP lists th e

projects, giving their ruble costs and the years of launching an d

completion . After a good deal of compilation and manipulation

(for details, see pp . 280-89 in the paper in the Thornton volume) ,

1 3

Table 3

Twelve-sector Interindustry Flows, USSR, Actual 1928 ,in millions of rubles at 1928 producers' price s

To Live-stoc kproducts

Othercrops

Elec -tricpower

Machi- Othe rnery h .

ind .From

Grain s

Grains 614 61 6Livestock products :125 35 0Other field crops 27 80 384 42 4

Electric power 5 63 98 7 9Mach . & metals 21 40 39 36 1546 126 1Other heavy ind 29 56 56 50 1399 114 0Consumer goods 66 :L33 125 74 6

Trans . & comm . 64 540 44 1ConstructionHousin gTrade & dist .Govt . service s

Gross output 4148 7136 7935 566 6865 783 9

To Con- Trans . Cons- Trade Govt .sumer truc- Hou- & ser -

From goods comm . tion sinq dist . vices

Grains 2253 :32 1 2Livestock products 510 --- 40Other field crops 691 65 718 4 5

Electric power 108 17 196Mach . & metals 1984 269 41Other heavy ind . 1793 381 2119 142 186 5 9Consumer goods 714 152 11 46 67 2

Trans . & comm . 358 116 --- 13 7Constructio nHousin gTrade & dist .Govt . service s

Gross output 8494 2190 3888 2079 3750 2954

14

Table 3 (Continued )Final demand entrie s

To Pea- Wor- Fixed Ex -From sants kers Govt . capital Stocks port s

Grains 63 390 152 1 6Livestock products 4033 1367 481 23 0Other field crops 1822 892 43 7 1

Electric powerMach . & metals 1591 3 7Other heavy ind . 46 77 43 26 3Consumer goods 2697 2797 51 234 5 0

Trans . & comm . 162 37 2Construction 3373 51 5Housing 958 112 1Trade & dist . 2214 153 6Govt . services 295 4

Totals 11995 8162 2954 5886 1024 63 0

Source : Derived from primary data ; see appendices A and B .

Table 4

Twelve-sector Interindustry Flows, USSR, Intended 1933 ,in millions of rubles at 1928 producers' price s

To

From

Grains

Live -stockproducts,

Othercrops

Elec -tri cpower

Machi- Othe rneryh .

ind .

Grains 859 86 1Livestock products 177 43 5Other field crops 3739 693 62 4

Electric power 25 190 418 38 2Mach . & metals 49 97 97 99 2224 202 8Other heavy ind . 77 155 156 158 2189 199 5Consumer goods 166 348 335 121 7

Trans . & comm . 191 857 78 2ConstructionHousingTrade & dist .Govt . service sGross output 5860 10095 11788 1696 11515 14227

15

Table 4

(Continued )

To Con - Trans . Cons- Trade Govt .sumer & truc- Hou- & ser -

From goods comm . tion sing dist . vice s

Grains 3151 45 17Livestock products 633 5 5Other field crops 1164 96 1056 6 9

Electric power 267 60 35 4Mach . & metals 3105 493 10 5Other heavy ind . 3055 789 3989 279 248 16 8Consumer goods 1165 299 21 62 101 1

Trans . & comm . 535 193 19 3Constructio nHousin gTrade & dist .Govt . service s

Gross output 14021 3463 10733 2689 7382 5207

Final demand entries

To Pea- Wor- Fixed Ex -From sants kers Govt, capital Stocks port s

Grains 86 606 228 7Livestock products 5671 1997 777 --- 35 0Other field crops 2757 1421 63 10 6

Electric powerMach . & metals 3129 8 9Other heavy ind . 70 115 --- 111 67 3Consumer goods 4128 4240 100 824 10 5

Trans . & comm . 214 49 8Construction 9310 142 3Housing 1162 152 7Trade & dist . 4666 2716Govt . services 520 7

Totals 18754 12514 5207 13922 2738 124 1

Source : Derived from primary data ; see appendices A and B .

1 6

one can derive an overall pattern for the outlays on thes e

projects . While a few were expected to require only a year t o

build, and a few were scheduled for construction over seven years ,

even the latter were expected to yield some output after fou r

years, for example, one generator started in a hydroelectri c

project . For all new capital construction projects in industry ,

the indicated pattern was supposed to involve spending some 8% o f

the total cost in the first year, 16% in the second year, 41% i n

the third year, and 35% in the final year before the project wa s

to be commissioned .

In practice these intended gestation periods were quickl y

exceeded and total costs ran far above plan . Nevertheless fo r

KAPROST we have retained this pattern for investment in building s

and structures ("plant") . These deliveries are made by the

construction sector . Investment in equipment, delivered by th e

machinebuilding and metalworking sector, is assumed to be divide d

equally between the year just before commissioning and the yea r

before that . Investment allocations are divided between plant and

equipment in accordance with each receiving sector's intende d

capital stock proportions (derived from the first FYP) . The same

gestation period is applied to investment in other sectors of th e

economy, except that in the grains subsector of agriculture th e

gestation period for animal tractive power (horses, oxen, and a

few camels) is put at three years, and in the livestock product s

subsector the weighted average gestation period for cattle, hogs ,

sheep, goats, fowl, and bees is assumed to be two years .

1 7

Strict application of these gestation periods for fixe d

capital investment as KAPROST is getting underway makes i t

impossible for Comrade Max to find a feasible solution . Th e

reason is that the volume of construction launched during 1925 -

1928 was too small to offset the depreciation of old capita l

expected by Gosplan . Since in fact the economy operate d

vigorously in 1929, we arbitrarily raised sectoral old-capita l

productivity ratios enough to make production feasible with

existing capital stocks . Capital formation then proceeds apac e

and after 1932 the specified productivity ratios prevail .

As indicated above, the KAPROST way of handling techno-

logical progress involves two complete sets of parameters, on e

expressing the inherited technology operating in 1928 (when ver y

few up-to-date facilities were already in operation though many

were underway -- all assumed to embody advanced technology), an d

the other characterized by the parameters we have derived in an

incremental way from the basic targets of the first FYP . As old -

technology capital depreciates, its share of output declines ,

while the share of each sector's output that comes from advanced -

technology capital rises as quickly as Comrade Max arranges for

completion of new fixed capital in that sector .

The labor productivity ratios in each producing sector wer e

generally expected to be far higher in the new than in the ol d

technology . On the other hand some of the capital productivit y

ratios were expected to decline, where capital-intensive method s

replaced more primitive forms of production . These two sets are

1 8

shown in Table 5 . Since the interindustry technical coefficient s

derived for KAPROST display few marked changes from their 192 8

values, we do not reproduce them here .

Table 5

Productivity Ratios for Capital and Labor, By Sector ,Old-technology and Advanced-technology, in ruble' sworth of gross output per ruble's worth of inpu t

SectorCAPITAL

Old

New OldLABOR

New

Agriculture, Grains .75 .82 .43 .6 5Agriculture, Livestock Products 1 .10 1 .24 .75 1 .1 0Agriculture, Other Field Crops 2 .37 2 .60 .63 .7 1

Electric Power .94 .55 101 .01 84 .7 5Machinebuilding & Metalworking 5 .73 2 .42 8 .85 11 .5 5Other Heavy Industry 4 .50 2 .02 7 .91 11 .9 0Consumer Goods 3 .11 2,69 2 .18 4 .6 8

Construction 6 .54 6 .54 3 .08 6 .2 3Transport & Communications .19 .21 1 .55 5 .3 7Government Services .52 .64 1 .33 3 .5 0Trade & Distribution 7 .70 2 .61 3 .52 8 .4 7Housing .09 .11 2 .76 4 .50

CHAPTER 4

AGRICULTURE WITHOUT COLLECTIVIZATION

As indicated above, our reference solution needs to sho w

what the agricultural sector might have produced in the absenc e

of collectivization, in order to provide a contrast with actua l

developments . Rewriting history is not to be attempted lightly ,

but we have made a cautious effort which is limited to altering a

single key aspect of the agricultural production process so tha t

we can trace its consequences . The key feature involves th e

tractive power employed, which in 1928 was 99 .9% animal power .

The central domestic political issue in the 1920s was how t o

motivate the peasants to produce and make their output availabl e

to non-agriculture . From 1926 on, the prices they were offered

for grain became less and less favorable in relation to the price s

they had to pay for consumer goods, and also less favorable in

relation to prices for livestock products . Peasants were thu s

discouraged from enlarging grain production ; they also diverted

more of their grain into livestock feeding .

Since KAPROST is built around the physical relation s

governing production, our reference solution needs to reflect th e

productive potential of Soviet agriculture under the condition s

that prevailed before collectivization . Our question is : If the

price incentives and other conditions facing Soviet peasants ha d

been reasonably favorable, how much might production have grown ,

using old technology?

2 0

Agriculture in the USSR faced a variety of constraints o n

its expansion, mainly of two kinds . There were politica l

constraints growing out of suspicion and hostility between th e

Bolsheviks and the peasantry, centering on Bolshevik unwillingnes s

to give free rein to private peasant agriculture . There were als o

real, physical, technological constraints reflecting th e

availability of land, labor, and other inputs, all subject t o

erratic climatic conditions and the limitations of backwar d

traditional technology . It is by no means clear, however, tha t

the physical potential of traditional Russian agriculture had bee n

exhausted by 1929 . In spite of repressive Bolshevik policies ,

Soviet agriculture was regaining pre-WW I levels under NEP, thoug h

it had not yet reached them . In efficiency terms these level s

were not especially high by comparison with those of othe r

countries . We therefore ask whether further agricultura l

expansion could have occurred in the USSR without any substantia l

institutional change or technological progress .

Before examining that question, it will add usefu l

perspective to summarize the main contours of the actual record ,

year by year from 1928 through 1940, subdividing agriculture int o

three sub-sectors : The production of (wheat and other) grains ,

the production of livestock products (including furs and fish) ,

and the production of all other field crops (cotton, sugar beets ,

flax, vegetables and fruit, tobacco) and forestry . The year 192 8

was a difficult one for agriculture, and yet (or therefore) a

2 1

wholesale drive for mass collectivization was launched in the fal l

of 1929 . Table 6 shows some results .

The population of the USSR had been growing fairly rapidly ,

but as column 1 shows, growth came to an end by 1933 ; there wa s

an absolute fall in population for two or three years, then slow

growth toward the end of the decade . The output of grain

fluctuated around its initial level but grew only very modestly

over the period . The output of livestock products decline d

sharply by about fifty percent and failed to recover its initia l

level by 1940 . The output of other agricultural products showe d

an upward trend, though it too fluctuated markedly from year t o

year . Total agricultural output remained below the 1928 level i n

all but two years, 1937 and 1940, and the 1940 figure include s

output on acquired territory . It is thus obvious tha t

collectivization did not raise agricultural production . Could

agriculture without collectivization have done so ?

The Bolsheviks focused on grain production, giving inadequat e

attention to the livestock products sector which depended on it .

The lower panel of Table 6 presents some key data for the grain s

subsector, covering the gross harvest, sown area, an index o f

weather conditions, and the availability of tractive power, bot h

animal and machine . One sees that the harvest was good in fou r

years : 1930, 1935, 1937, and 1940 . It was extremely low in 1936 ,

and seriously short in 1932 and 1933 .

Much of the variation reflected annual changes in th e

weather . The area sown to wheat and other grains expanded quickly

2 2

through 1931 but then stayed level through 1937, only to declin e

somewhat thereafter .

The last three columns of Table 6 tell a dramatic story .

Though agriculture depended overwhelmingly on animal tractiv e

power, its supply after 1929 was cut by more than half in th e

next few years . From a total of 28 .9 million horsepower in 1929 ,

it fell to 13 .7 million in 1936 . Recovery thereafter was only t o

15 .8 million horsepower in 1940 .

After 1930 the stock of machine tractive power increase d

rapidly, rising from a few hundred thousand to 13 .9 million

horsepower by 1940, thus restoring the combined total to it s

initial level . Throughout the intervening decade, however, Soviet

grain production was seriously hampered by a shortage of tractiv e

power . It is surprising that crops were as large as they were .

What if the stock of tractive power had been maintained, or eve n

grown modestly ?

Grain production is limited by the availability of man y

factors ; arable land, timely rainfall, animal or machine draf t

power, a labor force, fertilizer, and the level of technolog y

employed . During the late 1920s, the pre-Revolutionary surplus o f

labor in grain-growing regions continued, and the area sown t o

grains was below the 1913 level . Very little fertilizer was use d

for grain crops . Improvements in technology were under study bu t

not easily brought into practice . The shortrun binding constrain t

came from the shortage of draft power . The stock of workin g

horses, oxen, and camels had not regained its pre-Revolutionary

2 3

level, especially in the regions that could generate marketabl e

grain surpluses .

Before WW I, horse herds in the Russian Empire had grow n

from about 23 million head in 1885 to over 36 million in 1914 .

Between 1908 and 1914, the herd grew at 3 .7% per year (see App .

Table H .l, p . 268 in Paul R . Gregory, Russian National Income ,

1885-1913 (CUP, 1982)) . Usually about 75% were of working age .

A large part of the herd was taken for the army in WW I and th e

stock was further reduced by revolution and civil war . Durin g

the 1920s peasants bred horses to replenish their stock ; by 192 9

the total had reached 34 million, of which some 24 million wer e

of working age .

Computations based on the number of one-, two-, and three-

year-old horses in the late 1920s, combined with a cautiou s

extension of the numbers likely to be bred in the 1930s, suggest

that the stock of working-age horses by 1940 might have grown from

the 24 million of 1929 to almost 34 million, at a rate of about 3 %

per year . Combining this series for a hypothetical stock o f

animal tractive power with a series for sown area assumed t o

expand gradually by 20%, from 92 .2 million hectares in 1928 to

110 .6 in 1940, and with the weather index shown above, allows u s

to estimate a production function for grain output .

24

Table 6

Total Population, Agricultural Output, and Agricultura lInputs, By Year, in millions of people, rubles at 192 8

prices, metric tons, hectares, and horsepower .

YearPopulatio nJanuary 1

GrainsOutput.

Anima lProduct sOutput

Othe rAgricultural

Tota lAgricultural

Outpu tOutpu t

192 8192 9193 0193 1193 2

193 3193 4193 5193 6193 7

193 8193 91940

150 . 6154 . 3157 . 6160 . 7163 . 2

165 . 7162 . 1160 . 3161 . 9163 . 8

167 . 0170 . 6173 .6

44433

34435

444

14 811 444 198 772 9

84 403 940 039 149 6

26 3280963

7 13 66 72 25 20 94 84 53 90 3

3 3823 75 44 4815 00 25 68 0

6 2516 20 15 937

7

93 57

86 08 57 29 02 69 17 6

8 85 08 86 69 8468 80 19 99 4

8 13 48 613

11 047

1 91 81 8171 6

1 61 61 81 72 1

1 81 921

21 969622 285 880 8

07 665 972719 417 0

64 809 494 7

YearGross Harvest

Weather

SownKarcz Wheatcroft

Index

AreaTractive Power

Tota lAnimal Machin e

1925 73 .9 72 .8 87 87 .3 24 .6 .026 24 . 61926 77 .8 76 .4 112 93 .7 26 .4 .073 26 . 51927 73 .6 72 .9 89 94 .7 28 .4 .203 28 . 61928 73 .1 72 .3 101 92 .2 28 .9 .262 29 . 21929 71 .7 71 .7 104 96 .0 29 .2 .294 29 . 5

1930 77 .2 77 .4 115 101 .8 25 .7 .428 26 . 11931 68 .0 69 .5 79 104 .4 21 .5 1 .082 22 . 61932 67 .1 65 .0 95 99 .7 18 .1 2 .056 20 . 21933 68 .4 67 .0 108 101 .6 15 .8 2 .636 18 . 41934 67 .6 70 .4 94 104 .7 14 .9 3 .866 18 . 8

1935 75 .0 76 .7 118 103 .4 14 .0 5 .483 19 . 51936 56 .1 59 .1 86 102 .6 13 .7 8 .092 21 . 81937 97 .4 95 .8 113 104 .5 14 .0 10 .390 24 . 41938 74 .5 74 .3 95 102 .4 14 .4 11 .410 25 . 81939 74 .8 74 .6 91 99 .9 15 .3 12 .800 28 . 1

1940 84 .5 86 .5 113 100 .4 15 .8 13

870 29 .7

2 5

The formulation that yields the most plausible elasticitie s

of output with respect to specific inputs puts sown area in th e

denominator on both sides of the equation, i .e ., focuses on yield s

per hectare, making them depend solely on (the logs of) weathe r

and tractive power per hectare .

For the 16 years, 1925-1940,

th e

results are as follows :

VariableRegressionCoefficient

StandardError T Valu e

Constant - .4341 .7912 - .5487Weather Index .4600 .1711 2 .6887Tractive Power .3581 .1055 3 .392 5

R2

per hectare

SEE

.0813 Durbin-Watson 2 .35 2(corrected)

.5319

The T values are over 2 .0 but a good deal of the year-to -

year variation remains unexplained . Nevertheless the regression

coefficients for weather and tractive power per hectare can serv e

as rough measures of their influence on grain yields per hectare .

Applying them to our projected series for horse herds, divided b y

our series for grain sown area, together with the actual weathe r

index, we obtain annual estimates for the grain crops that migh t

have been produced . They are somewhat larger than the actua l

crops (except for 1937), though they involve yields per hectar e

and per unit of tractive power that are little improved over the

base period .

This projection rests on a degree of expansion in anima l

tractive power and the area sown to grain that was physically

possible and fairly modest by comparison with other times an d

2 6

places . Yet over the 1928-1940 period Soviet grain agricultur e

without collectivization produces a total of 1092 million metri c

tons of grain, as compared with 960 million tons unde r

collectivization, a gain of 132 million tons of grain . The annua l

extra crop is in the 3-4 million ton range during 1928-1931 an d

then rises to around 14 million tons annually over the 1932-194 0

period . Note that the added grain is obtained without an y

extensive " tractorization," i .e ., without any increase in the 192 8

ratio of machine to total tractive power .

What about meat, milk, and other livestock products? Unde r

the strained conditions of the late 1920s, and given Party

priorities, there was little prospect of marked output increases .

We know that in fact their output declined precipitously . Fo r

the KAPROST reference solution, however, it may be reasonable t o

assume that the Party might have tried to maintain the 1928 leve l

of per-capita consumption of livestock products unchanged ove r

the next twelve years . Was even this standard, ignoring th e

promises of the first FYP, achievable using our projected grai n

crops?

The answer turns in part on the expected increase in th e

population to be served, and here we can draw on a Gospla n

forecast in a five-year plan "sketch" published a year before th e

first FYP itself (see Gosplan SSR, Perspektivnaia orientirovka n a

1927/28-1931/32 gg. (1928), p . 41) . Their benchmark estimates fo r

the beginning of 1936 and 1941 anticipated continued populatio n

growth at mildly declining rates . As we saw in column 1 of Table

2 7

6, however, actual developments were tragically different . From

1933 on, the actual population quickly fell below the Gospla n

expectations, to the extent of some 15 million souls in the late

1930s . Under post-collectivization conditions the birth rat e

dropped sharply . Millions of people were pulled to towns an d

cities looking for jobs and bread, and also pushed out of th e

countryside by mass collectivization . There was in consequence a

great loss of human capital (mostly potential, in the form o f

unborn children), but one of its grim byproducts was a reduce d

claim on the agricultural sector . The need for grain and fo r

livestock products was reduced .

The impact of collectivization on the output of livestoc k

products was so severe that actual per-capita consumption in 193 3

was only 43% of the 1928 level ; even at the end of the decade i t

was still about 25% below its starting point . By contrast wit h

this harsh belt-tightening, our projection for KAPROST assign s

enough grain to the livestock sector (for use as feed) to maintain

per-capita consumption by the anticipated population at its 192 8

level, along with the direct consumption of grain by the public a s

flour and bread .

Using the standard Soviet practice of constructing annua l

sources-and-uses estimates, and drawing on Naum Jasny's 194 9

classic, The Socialized Agriculture of the USSR, we find that ou r

projected crops meet overall requirements fairly well . In th e

late 1920s the situation was rather tight ; a small annua l

carryover of grain would have grown modestly in 1928, 1929, and

2 8

1930, only to be drawn down seriously in 1931 and 1932 . Not unti l

1933 would it have been safe to consider exporting grain .

Thereafter, since we assume that the claims on the crop would hav e

been growing steadily, the balance between sources and uses woul d

have been equal or somewhat negative in 1934, 1936, 1938, an d

1939 . Nevertheless a cumulative carryover would have bee n

growing, available either for export or for stockpiling . Fo r

example the USSR might have exported some 12 million tons of grai n

during the 1933-1940 period and still had on hand a reserve o f

about 14 million tons at the end of 1940, substantially large r

than the 6 million tons on hand in January 1941 . Thus th e

agricultural sector would have been meeting the economy's need s

and maintaining 1928 per-capita food consumption levels for a

growing population, all without requiring a large flow o f

tractors, trucks, and combines from industry .

Comparing actual developments in agriculture with thes e

alternative projections, and with the over-optimistic expectation s

of the first FYP, throws new light on the question of whethe r

Soviet agriculture did or did not yield up a "surplus" to the res t

of the economy . First, it should be stressed that in 1928 ther e

was no agricultural surplus in the Western sense, i.e., there wa s

no unsold agricultural output hanging over the market, removabl e

through a lowering of prices . Grain procurement prices were i n

fact below market-clearing levels, diverting grain into feed fo r

livestock . More importantly, the low procurement prices wer e

inhibiting output expansion, suppressing any potential surplus .

2 9

Even the prewar output level had not been regained . Nor was ther e

any surplus of investible funds in the agricultural sector ,

voluntarily seeking profitable returns elsewhere, for example fro m

State bonds .

Secondly, extensive discussion during the 20s shows that i n

the minds of Party members there were nevertheless two version s

of the "surplus" concept that made sense . For stern Part y

members, "surplus" meant an excess of peasant incomes above a

subsistence level, the surplus that in Tsarist times was ex-

tracted by landowners and the state . This excess, in the form o f

grain and cash, was somehow to be obtained in order to feed th e

cities and be available for exports and government uses . Thi s

shift within existing GNP flows would channel labor and material s

into increasing the stocks of fixed capital, especially in heavy

industry, raising GNP and in due course raising rural incomes .

For gentler and more optimistic Party members, "surplus" meant th e

deflection of output increments away from rural (and urban )

additions to consumption . Going further, the first FYP projecte d

no belt-tightening at all, and even anticipated per-capit a

consumption gains, though output increments were to go mainly int o

heavy industrial investment .

Thirdly, the tragic fact is that since collectivizatio n

reduced agricultural output below the 1928 level, what was yielde d

up was not a surplus in either Party sense but a deficit . What

agriculture delivered to non-agriculture came neither from a n

increased share of its output at the 1928 level nor from an

3 0

enlargement of agricultural output . There was a deficit rathe r

than a surplus, an absolute shortfall that cut cruelly into rura l

living standards and lowered urban living standards as well .

Collectivization not only undermined potential deliverie s

from agriculture to non-agriculture but required an emergenc y

flow of resources from industry to agriculture, in the form o f

tractors, trucks, and combines to replace the lost animal tractiv e

power . This diverted resources away from the industrial expansio n

the Party was seeking .

CHAPTER 5

TAKING ACCOUNT OF FOUR MAJOR EVENT S

Stalin declared 1929 "a year of great change," and it di d

indeed launch a period of frenzied activity, going far beyond th e

expectations embodied in the first FYP, whether of the basic o r

the optimal variant . Enthusiastic Party activists initiate d

hundreds of construction projects and stepped up production level s

at thousands of old facilities, hiring unemployed workers and

pressing all existing capacity into service . During 1929-1932 ,

the whole country was mobilized for compulsive campaigns tha t

generated large increments of output and set a very large volum e

of construction underway .

Some of the immediate results are shown in Table 7 . Th e

volume of construction activity doubled in two years . Electri c

power output rose 67% ; machine-building and metalworking outpu t

rose 61% . The volume of freight and passenger traffic increase d

64% during 1929-1930 . Since not much new capital capacity had

yet been completed, this surge was accomplished primarily throug h

squeezing more output from old capital . We have therefore raise d

the output/capital ratios derived from the 1928 flow table jus t

enough so that KAPROST can produce the 1929-1932 output level s

actually achieved (not those officially claimed) . There was no

need to alter labor productivity ratios since KAPROST could simply

draw on the very large pool of available labor . For the grains

and

32

Table 7

Actual Gross Outputs, By Sector, 1928-1932 ,in millions of rubles at 1928 price s

Sector 1928 1929 1930 1932 193 2

Agriculture, Grains 4148 4114 4441 3987 372 9Agriculture, Livestock Products 7136 6722 5209 4845 390 3Agriculture, Other Field Crops 7935 7860 8572 9026 917 6

Electric Power 566 703 946 1208 153 0Machinebuilding & Metalworking 6865 8650 11053 12700 1585 8Other Heavy Industry 7839 9720 12778 13483 1387 5Consumer Goods 8494 9004 9089 9683 874 9

Construction 3888 5148 7920 9506 1108 1Transport & Communications 2190 2661 3583 4176 497 3Government Services 2954 3161 3625 4322 495 7Trade and Distribution 3750 3968 4054 4020 318 8Housing 2079 2146 2281 2214 234 7

Whole Economy 57844 63857 73551 79170 83366

livestock products sub-sectors of agriculture, we gave KAPROS T

projected rather than actual annual output levels to reflec t

plausible demands and supplies without collectivization .

This great surge of measured output brought with it an un-

measured decline in product quality which lowered the effective-

ness of input use . It also involved a huge volume of curren t

investment outlays that added to the mass of unfinished con-

struction without adding to the economy's stock of operating plan t

and equipment . Wage rates rose rapidly, so ruble costs and

current prices rose with them ; this enabled the regime to repor t

remarkable output increases, and even to declare that the target s

3 3

for 1932/33 had been achieved by the end of 1932, though i n

physical terms very few of the first FYP targets were reached .

Nevertheless the surge pulled the economy well above th e

levels it might have reached if its 1928 potential had been

allowed to unfold gradually in accordance with the parameters we

supplied to KAPROST on the basis of the 1928 evidence and the

first FYP targets . This first major event had the effect o f

driving the actual performance of the economy above the level s

that would have emerged out of the base period in the absence o f

the USSR's pre-Maoist great leap forward . But the drive was ver y

selective . The great increases in high-priority sectors were no t

matched in consumer-related areas ; production of consumer good s

rose modestly for three years but then fell almost back to 192 8

levels, while the trade-and-distribution sector fell off to below

its starting level, and housing expanded by only 13% . Moreover ,

even in high-priority sectors, the drive could not be sustained .

The year 1933 was one of adjustment, and thereafter the utterl y

unrealistic targeting of the 1929-1932 period was abandoned .

The underlying rationale of KAPROST requires us to trea t

this initial surge as a temporary departure from the economy' s

sustainable expansion path, not as a reliable indication of it s

longrun potential . The latter approach would have implied 194 0

output levels literally "off the chart ." After 1932, therefore ,

KAPROST reverts to the parameters for capital productivity tha t

were originally specified . Our reference solution moves forward

from the levels which incorporate the surge through 1932, but for

3 4

the 1933-1940 period it computes the developments that wer e

feasible on the basis of the capital/output and other ratio s

derived from the base-period evidence .

The Soviet drive to "catch up with and surpass . . . in te n

years" confronted a fundamental barrier that is now most vividl y

revealed through the insights of contemporary structural growt h

theory . Unless an economy's sectoral structure is already geare d

up for rapid expansion of output, a difficult transition period i s

unavoidable . The sectors that produce the inputs for growt h

(especially Construction and Machinebuilding-and-Metalworking )

must greatly increase their share of national product . The

inherited structural pattern of capital stocks must give way to a

quite different pattern . While the economy is building u p

effective capital stocks (and an associated competent labor force )

in the sectors that provide direct inputs for expansion, othe r

sectors may appear superfluous and ineffective . The powerfu l

constraint that frustrates overnight progress lies in the fac t

that these structural changes take time -- a decade or two rathe r

than a year or two . On the way to the turnpike, disproportion s

are almost sure to cause pain ; the more strenuous the pressur e

for speed, the greater the economic pain .

In their clumsy algebraic way, the annual flow table s

generated by KAPROST for the period from 1929 through the middl e

1930s illustrate the disproportions, the inefficiencies, and th e

sectoral pockets of idle labor and capital that appear on the wa y

to the turnpike . Eventually the sectoral structure of the Soviet

3 5

economy might have reached a steady state appropriate fo r

producing a Party-designed vector of final outputs expanding a t

maximum speed . The great human costs imposed by Stalinis t

industrialization arose from willful ignorance and defiance of

inexorable limits on the speed with which structural change can b e

accomplished . KAPROST exposes these costs most explicitly in th e

high dual valuations attached to key structural constraints in th e

early years .

While the strenuous efforts to increase output during th e

first FYP period pulled the economy above its apparent potential ,

the drive for mass collectivization of agriculture launched i n

the fall of 1929 (under the slogan "liquidation of the kulaks a s

a class") had a substantial negative impact, as was shown in th e

preceding chapter . It drove millions of people into the citie s

where crowded conditions led to a drastic reduction in the birt h

rate . The rural birth rate also suffered . A quite adequate

supply of bread, meat, milk, dairy products, fruit and vegetables

in the late 1920s soon shrank to a limited supply (tightl y

rationed in most parts of the country) of low-quality food . I n

some regions in 1932-33 there was famine .

Agricultural collectivization hurt industrial expansion b y

forcing the regime to divert resources into hasty production o f

tractors, trucks, and combines to replace lost animal tractiv e

power . Grain requisitioned by the state for the cities could no t

feed the peasants' horses, and horses "collectivized" into

collective-farm herds suffered badly from poor maintenance . In

3 6

similar fashion the herds of cattle, hogs, sheep, and goats, and

the flocks of poultry and swarms of bees that had given breadt h

to the Russian diet fell by more than half as feed and othe r

resources were snatched away from them . Grain for off-farm us e

was thus freed up, but the price paid by both the urban and th e

rural population in terms of a restricted diet and lowered labo r

efficiency was non-negligible . The "surplus" thus obtained fo r

industrial growth was a very expensive one .

CHAPTER 6

CONCLUSION S

This study demonstrates that the performance of the Sovie t

economy during 1929-1940, impressive as it was, could have been

more effective under different policies . The USSR was made read y

for World War II, but the answer to Alec Nove's question : "Wa s

Stalin Really Necessary? " is " No . " Comrade Max, using KAPROST ,

is able to produce a somewhat larger GNP over the period tha n

Stalin did . More importantly, the GNP's sectoral structure b y

1940 has been shifted toward an optimal growth-inducing patter n

while at the same time the economy has delivered more consumptio n

to the Soviet people . KAPROST is able to maintain 1928 per-capita

consumption levels for a growing population and fill the outpu t

gaps painfully evident in actual Soviet performance . With morale

thus improved, the USSR would have been in a stronger position t o

deal with the Nazi invasion when it came . It may be surmise d

that without the extreme stresses brought on by the surge and by

forced collectivization of agriculture, purges and terror migh t

not have been so severe . A healthier political climate would hav e

strengthened the USSR's defensive position .

The period from the late 1920s through the 1930s was a

difficult one for economic policy everywhere, not least in th e

USSR . Here, the dominant agricultural sector was stubbornl y

unproductive, and our hypothetical reconstruction of agricultura l

performance in the absence of collectivization suggests very

3 8

little progress in the 1930s . Soviet leaders did not wan t

sustained export-led growth, and in any case were denied favorabl e

terms for it . From 1927 on, the USSR was threatened by an

international situation that made the danger of war see m

increasingly imminent . Under these conditions, rapid and placid

growth was not possible .

Our intersectoral analysis shows that rapid growth require s

a painful restructuring of the economy . The growth-inducing

sectors of the economy must expand rapidly, drawing resources awa y

from those serving "mere" consumption . This means rapid growt h

especially for the construction sector, along with machinery-and-

metalworking . It also means expansion of education and publi c

health activities serving to build human capital . Capita l

construction involves gestation periods that run from a year to a

decade ; in the USSR they quickly lengthened to at least fou r

years . Soviet experience shows that a large mass of unfinishe d

construction puts a heavy weight on the economy .

In our view KAPROST is a realistic way of capturing th e

essence of Soviet operational planning . Each year KAPROST look s

ahead for four years in laying out an investment program . The

program is then fitted into the current resource situation an d

scaled back to be consistent with a program for consumption . Nex t

year KAPROST recalculates on the basis of a new current situation .

The rate of technological progress in each sector depends on th e

rate of investment in that sector together with the rate o f

depreciation of its old capital .

3 9

The forced collectivization of agriculture of course hur t

Soviet consumers, but it also hurt Soviet industry . It cut th e

availability of animal tractive power in half, thus forcin g

industry to supply tractors, trucks, and combines that would no t

otherwise have had to be delivered at that time . The agricultura l

sector delivered a deficit, not a surplus, to the growth of non -

agriculture . Soviet collectivization was a very costly erro r

which no other country would be wise to imitate .

Our KAPROST computations show that the world depression o f

the 1930s did little damage to the Soviet economy . The reason i s

that Soviet industrial expansion rested primarily on duplicatio n

and diffusion of plant and equipment domestically produced . An

up-to-date vintage was acquired during 1928-1932 ; thereafter th e

USSR chose to be relatively self-sufficient . Unlike the West ,

the USSR suffered in the 1930s from internal inflation and outpu t

shortages, not deflation and unemployment .

We find that rearmament in the second half of the 1930s cu t

the level of investment and consumption in the USSR, but did no t

lower total GNP . Until then the focus had been on building u p

the heavy industrial base ; after 1935 the machinery-and-metal s

sector switched its deliveries toward defense-related procurement .

The main conclusion of this analysis of Soviet economi c

history in the period leading up to World War II is that hast e

makes waste . An equivalent Russian proverb says, "If you go mor e

quietly, you'll get farther ." Millions of Soviet citizens mad e

heroic sacrifices to build the economy, but clumsiness and

4 0

brutality extracted contributions that were unnecessary, a s

Solzhenitsyn has shown in Gulag arkhipelag . Stalin said in Apri l

1928 and repeated in February 1931, "There are no fortresses whic h

Bolsheviks cannot capture ." He called for a frontal assault, bu t

KAPROST suggests instead that he would have been wiser to imitat e

General Wolfe's method for defeating Montcalm at Quebec .

4 1

APPENDIX A

A NOTE ON THE UNDERLYING DATA

All the value data in KAPROST reflect base-period pric e

weights . We chose this among many alternatives because planner s

usually plan this way, and in spite of the fact that early-yea r

weights produce the highest growth rates . Our focus is on th e

comparative' impact of major events and we assume that use of late -

year weights would not notably alter our findings .

The flow tables for 1928 and 1933 place the available data

in an internally-consistent accounting framework providin g

numerous cross-checks . Sectoral definition and coverage ar e

straightforward except for the construction and housing sectors ,

where somewhat tenuous output/capital ratios had to be used .

The available data on 1928 and 1933 capital stocks are quit e

detailed and only require rearrangement to match up with pro-

ducing sectors . They are for the start of each year and exclud e

unfinished capital . Similarly the data for the labor force, b y

sector, are fairly easy to rearrange . For the total potential

1933-40 labor force, our projection uses the Gosplan populatio n

estimates and holds the planned 1933 participation rate constant .

Data for actual 1928 and planned 1933 exports are fairl y

readily assigned to sectors . Our projection for 1933-40 assume s

that each sector's average annual increment during 1928-3 3

continues to apply . After 1932 we assume no trade credits .

42

APPENDIX B

BIBLIOGRAPHY

Principal Soviet Source s

Gosplan SSSR, Kontrol'nye tsifry nar . khoz .SSSR na 1929/30 god(Moscow : Izdat . 'Plan . Khoz .', 1930) .

,

Piatiletniiplan nar .-knoz . stroitel'stva SSSR, 2nded ., (Moscow :

Izdat . 'Plan . Khoz .', 1929) .

Tsentral'noe Upravlenie Nar .-khoz . Ucheta SSSR, Materialy pbalansu nar . khoz . SSSR za 1928, 1929, i 1930 g.g .(Moscow : Oktiabr, 1930) .

Principal Sources in Englis h

Bergson, Abram, The Real National Income of Soviet Russia Sinc e1928 (Cambridge : Harvard University Press, 1961) .

Davies, Robert W ., The Collectivization of Soviet Agriculture ,1929-1930 (Cambridge : Harvard Univ . Press, 1980) .

Dohan, Michael R ., Two Studies in Soviet Terms of Trade, 1918-1970 (Bloomington : Int . D&R Center, 1973) .

Eckaus, Richard S . and Kirit S . Parikh, Planning for Growth :Multisectoral, Intertemporal Models applied t oIndia (Cambridge : MIT Press, 1968) .

Hunter, Holland, "The New Tasks of Soviet Planning in the Thir-ties," in Padma Desai, editor, Marxism, CentralPlanning and the Soviet Economy_ (Cambridge : Th eMIT Press, 1983) .

Jasny, Naum, The Socialized Agriculture of the USSR (Stanford :Stanford University Press, 1949) .

Karcz, Jerzy F ., The Economics of Communist Agriculture, editedby Arthur W . Wright (Bloomington : IDRC, 1979) .

Moorsteen, Richard and Raymond P . Powell, The Soviet Capita lStock, 1928-1962 (Homewood, Ill . : Irwin, 1966) .

Nutter, G . Warren, Growth of Industrial Production in th eSoviet Union (Princeton : Princeton Univ . P .

4 3

APPENDIX C EQUATIONS OF THE MODEL

Available on request, from :

Professor Holland Hunte rDe partment of Economic sHaverford Colleg eHaverford, PA 19041-139 2Telephone :

(215) 896-1074