Encyclopedia of Russian History

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ious prisons, Dzerzhinsky collapsed and died in

July 1926 following an impassioned public defense

of the policies of the existing Politburo majority.

See also: NEW ECONOMIC POLICY; RED TERROR; STATE SE-

CURITY, ORGANS OF

BIBLIOGRAPHY

Blobaum, Robert. (1984). Feliks Dzierzynski and the SD-

KPiL: A Study of the Origins of Polish Communism.

Boulder, CO: East European Monographs (dist. Co-

lumbia University Press).

Gerson, Leonard D. (1976). The Secret Police in Lenin’s Rus-

sia. Philadelphia: Temple University Press.

Leggett, George. (1981). The Cheka: Lenin’s Political Po-

lice. Oxford: Clarendon Press.

OBERT

E. B

LOBAUM

DZERZHINSKY, FELIX EDMUNDOVICH

423

ENCYCLOPEDIA OF RUSSIAN HISTORY

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EARLY RUSSIA See KIEVAN RUS; MUSCOVY; NOV-

GOROD THE GREAT.

ECONOMIC GROWTH, EXTENSIVE

In the quantitative analysis of aggregate economic

development, modern economists commonly dis-

tinguish extensive from intensive growth. Exten-

sive economic growth comes from the expansion

of ordinary inputs of labor, reproducible capital

(i.e., machines and livestock) and natural resources.

Intensive growth, by contrast, involves increased

effectiveness, quality, or efficiency of these inputs—

usually measured as a growth of total factor pro-

ductivity.

The early development of the USSR was pri-

marily of the extensive sort. Increased application

of labor inputs came from reduced unemployment,

use of women previously engaged within the

household, diminished leisure (e.g., communist

sabbaticals or subotniki), and forced or prison la-

bor. Increased capital investments were a result of

forced savings of the population, taxes and com-

pulsory loans, deferred consumption, and a small

and varying amount of foreign investment in the

country. Natural resources were expanded by new

mines and arable acreage, most notably the “vir-

gin lands” opened up in semiarid zones of Kaza-

khstan during the 1950s. But shifting resources

from the backward peasant sector to modern in-

dustry, as well as to borrowed technology, also ac-

counted for some intensive growth.

During the 1950s total growth of gross do-

mestic product (GDP) was an impressive 5.7 per-

cent annually, adjusted for inflation, of which

approximately 3.3 percent came from increased in-

puts and only about 2.4 percent from increased

productivity. Growth rates declined to 5.1 percent

during the 1960s, 3.2 percent during the 1970s,

and a mere 1.9 percent during the 1980s. Less than

1 percent of these growth rates came from inten-

sive sources. The increased share of extensive

sources meant that growth could not be sustained

for several reasons. Population growth was slow-

ing in Russia. Most of the increased labor supplies

came from the less educated populations of Soviet

Central Asia, where industrial productivity was

considerably lower than in the traditional heart-

land of Russia and Ukraine. These Muslim popu-

lations did not move readily to, or were not

welcome in, the most productive areas of the USSR,

425

such as the Baltic states. Some economists, includ-

ing Martin Weitzman and Stanley Fischer, attrib-

uted the slowdown to the difficulty of substituting

new investments for labor, as well. Depletion of oil

and ore fields also played a role in reduced growth.

For systemic reasons, the Soviet command

economy could not develop the new goods, higher

quality, and innovative processes that increasingly

characterized the economies of the developed West.

Nor could it keep up with the newly industrializ-

ing economies of southeast Asia, which by the

1980s displayed higher growth rates, predomi-

nantly from intensive sources.

See also: ECONOMIC GROWTH, IMPERIAL; ECONOMIC

GROWTH, INTENSIVE; ECONOMIC GROWTH, SOVIET

BIBLIOGRAPHY

Gregory, Paul R., and Stuart, Robert C. (1986). Soviet Eco-

nomic Structure and Performance, 3rd rev. ed. New

York: Harper & Row.

Gregory, Paul R., and Stuart, Robert C. (1999). Compar-

ative Economics Systems, 6th ed. Boston: Houghton

Mifflin.

ARTIN

C. S

PECHLER

ECONOMIC GROWTH, IMPERIAL

The economic development of the Russian Empire

can be traced back to the reign of Peter the Great

(1682–1725), who was determined to industrialize

Russia by borrowing contemporary technology

from Western Europe and attracting foreign spe-

cialists. While military considerations played an

important role in this drive, they combined with

vast natural resources and large labor pool to de-

velop an increasingly modern industrial sector by

eighteenth-century standards. The less progressive

policies of Peter’s successors lead to a growing gap

between Russia and its industrializing European

competitors that became evident in the nineteenth

century. Peter’s most significant policy was his

entrenchment of serfdom in the village, which

was abolished in 1861. After the Crimean War

(1854–1856), especially during the tenure of

the Minister of Finance Count Sergei Witte

(1892–1903), recognition of the dangers of the eco-

nomic gap bolstered the accelerated industriali-

zation of the Russian Empire. Large government

investments in the rail network development ex-

panded the transportation network from 2,000

kilometers in 1861 to more than 70,000 kilome-

ters in 1913. This development helped to open up

the iron and coal resources of the Southern regions

(Ukraine) and facilitated the marketing of wheat,

the major export commodity of the Russian em-

pire. A vibrant textile industry grew in Moscow,

and metalworking blossomed in St. Petersburg.

Government policy favored the influx of for-

eign capital, primarily from England, France, and

Belgium, which were attracted by Russia’s vast eco-

nomic potential. The stabilized ruble exchange rate

allowed Russia to join the international gold stan-

dard in 1897. The expansion of domestic heavy in-

dustries was promoted by government protectionist

policies such as high tariffs, profit guarantees, tax

reductions and exemptions, and government orders

at high prices to insure domestic demand. The min-

istry of finance was the major agent in this strat-

egy. Bureaucratic intervention into economic matters

and bribery were among the numerous limitations

on the development of a modern entrepreneurial

class in Russia. More recent data suggest that the

state was not as pervasive in Russian economic life

as was originally thought. Budgetary subsidies

were modest, and tariffs and indirect taxes were

levied strictly for revenue purposes and played lit-

tle role in the industrial policy. Russia had active

commodity markets and was active in world mar-

kets. The state did not engage in economic planning,

and both product and factor prices were set by mar-

kets. The creation of industrial trusts and syndi-

cates in the early years of the twentieth century

implied the existence of some monopolies in Russia.

The success of Russian industrialization before

1917 was evident, but agricultural progress was

more modest (agriculture continued to account for

more than half the national product). During the

industrialization era, the share of agriculture fell

from 58 percent in 1885 to 51 percent in 1913.

Russian agriculture was characterized by feudal el-

ements and serfdom that provided few incentives

for investment, productivity improvements, or bet-

ter management. Russian serfs had to work the

landlords’ land (called barshchina) or make in–kind

or monetary payments from their crops (obrok).

Peasant land prior to 1861 was held communally

and was periodically redistributed. Agricultural re-

forms were modest or too late to prevent what

many contemporary observers feel was a deepen-

ing agrarian crisis. The Emancipation Act of 1861

provided the peasants with juridical freedom and

transferred to them about half the landholdings of

the landed aristocracy. However, peasants had to

ECONOMIC GROWTH, IMPERIAL

426

ENCYCLOPEDIA OF RUSSIAN HISTORY

“redeem” (buy) their allotted plots of land. The size

of land allotments was very small, and backward,

unproductive communal agriculture remained the

main organizational form in villages. While the

production and marketing of grain increased sub-

stantially after the Emancipation Act of 1861, the

primary objective of the Russian emancipation was

not to create a modern agriculture, but to prevent

revolts, preserve the aristocracy, and retain state

control of agriculture.

Many observers feel that the agrarian crisis was

one of the causes of the Revolution of 1905, which

necessitated further reforms by the tsarist govern-

ment. The reforms introduced in 1906 and 1910

by Peter Stolypin allowed the peasants to own land

and cultivate it in consolidated plots rather than in

small, frequently separated strips. The Stolypin re-

forms weakened communal agriculture and created

the base for a class of small peasant proprietors.

These reforms were considered long overdue, and

they had a positive effect on the development of

agriculture. In spite of persistent regional differ-

ences, peasant living standards rose, and produc-

tivity and per capita output increased. Overall,

agricultural growth during the post–emancipation

period was much like that of Western Europe. In

spite of the late removal of serfdom, there is evi-

dence of significant peasant mobility, and the com-

pletion of an extensive rail network greatly fa-

cilitated the marketing of grain. Regional price

dispersion fell as transportation costs were lowered,

and agricultural marketing and land rents were, in

fact, dictated by normal market principles.

Despite scholarly controversy concerning the

consequences of active government intervention in

economy, the late tsarist era after 1880 is charac-

terized by the significant acceleration of the output

growth rate. Between the 1860s and 1880s the av-

erage annual rate of growth of net national prod-

uct was 1.8 percent, while for the period thereafter,

up to the 1909–1913 period, the rate of economic

growth was 3.3 percent. At the same time, Russia

experienced significant population growth, which

put the Russian empire in the group of poorer West

European countries in per capita terms. Russian

economic growth was largely the consequence of

the relatively rapid rate of growth of population

(1.6% from 1885 to 1913) and labor force (1.7%

from 1885 to 1913), pointing to the extensive char-

acter of the growth. Less reliable data on the tsarist

capital stock suggests that roughly two–thirds of

the growth of Russian output was accounted for

by the growth of conventional labor and capital in-

puts. With respect to structural change, the decline

in the shares of agriculture (from 58% in 1885 to

51% in 1913) and expansion of industry, con-

struction, and transportation (from 23% in 1885

to 32% in 1913) suggests that the Russian econ-

omy had indeed embarked on a path of modern

economic growth.

Russia’s economic power was concentrated in

agriculture. In 1861 Russia produced more grain

than any other country and was surpassed only

by the United States in 1913 (123,000 versus

146,000 metric tons). On a per capita basis, how-

ever, Russia ranked well behind major grain pro-

ducers (the United States and Germany) and was

close to the level of such countries as France and

Austria–Hungary. Russia’s industrial base was

even weaker. In 1861 the country was a minor

producer of essential industrial commodities such

as coal, iron, and steel, and still lagged behind the

major industrial powers in 1913. Russia began its

modern era with a per capita output that was 50

percent that of France and Germany and 15 per-

cent that of England and the United States. On per

capita basis, in 1913 Russia was a poor European

country ranking well below Spain, Italy, and Aus-

tria–Hungary. The relative backwardness of the

Russian empire is explained by rapid population

growth and slow output growth in the years be-

fore the 1880s. Russia’s output growth figures do

not paint a picture of a collapsing economy, but

rather of an economy that was either catching up

or holding its own with the most industrialized

countries of the era.

Data on human capital development (in par-

ticular, literacy data) suggest that Russia was still

a socially backward nation at the turn of the cen-

tury. In 1897 the illiteracy rate was 72 percent; in

1913 it was still as high as 60 percent, with ur-

ban literacy almost three times that of rural liter-

acy. By contrast, in 1900 the illiteracy rate in the

United States was 11 percent. Despite this fact, af-

ter 1880 investment in primary education rose, and

primary school enrollment increased considerably.

While Russia’s birth and death rates began to de-

cline after 1889, birth rates were still at premod-

ern levels at the time of the 1917 revolution.

Foreign investment played a substantial role in

the industrialization of Russia, since the domestic

production of capital equipment was limited. In ad-

dition to importing technology and equipment, the

Russian economy was also aided by the receipt of

foreign savings to finance Russian capital forma-

tion along with domestic savings. Russia was a

ECONOMIC GROWTH, IMPERIAL

427

ENCYCLOPEDIA OF RUSSIAN HISTORY

large debtor country during the period from 1880

to 1913, receiving significant capital influx from

France, England, and Belgium. It accounted for 15

percent of world international debt by 1913. For-

eign capital accounted for nearly 40 percent of

Russian industrial investment, 15 to 20 percent of

total investment, and about 2 percent of Russian

output at the end of tsarist era. The Russian em-

pire was more dependent upon foreign capital in

both magnitude and duration than either the

United States or Japan during their periods of de-

pendence. The large foreign investments in Russia

were a sign of confidence in its potential and re-

sponded to traditional signals such as profits suf-

ficient to offset risk.

See also: AGRICULTURE; BARSHCHINA; INDUSTRIALIZA-

TION; OBROK; PEASANT ECONOMY; PETER I; SERFDOM

BIBLIOGRAPHY

Gatrell, Peter. (1986). The Tsarist Economy, 1850–1917.

New York: St. Martin’s Press.

Gregory, Paul R. (1994). Before Command: An Economic

History of Russia from Emancipation to the First Five

Year Plan. Princeton, NJ: Princeton University Press.

AUL

R. G

REGORY

ECONOMIC GROWTH, INTENSIVE

Increases in aggregate economic activity, or

growth, may be generated by adding more labor

and capital or by improving skills and technology.

Development economists call the latter “intensive

growth” because labor and capital work harder.

Growth is driven by enhanced productivity (higher

output per unit of input) rather than augmented

factor supplies. Theory predicts that all growth

in a steady-state, long-run equilibrium will be

attributable to technological progress (intensive

growth). Developing nations may initially grow

faster than this “golden mean” rate, benefiting both

from rapid capital accumulation (capital deepen-

ing) and technological catch-up, but must converge

to the golden mean thereafter. During the 1970s

many Marxist economists hypothesized that so-

cialist economies were not bound by these neo-

classical principles. They forecasted that extensive

growth (increased factor supply) would be replaced

by socialist–intensive methods ensuring superior

performance, but they were mistaken: Growth fell

below zero in 1989, heralding the collapse of the

Soviet Union two years later.

See also: ECONOMIC GROWTH, EXTENSIVE; ECONOMIC

GROWTH, SOVIET

BIBLIOGRAPHY

Abramowitz, M. (1986). “Catching Up, Forging Ahead,

and Falling Behind.” Journal of Economic History 46:

385–406.

Domar, Evsei. (1957). Essays in the Theory of Economic

Growth. New York: Oxford University Press.

Krugman, P. (1994). “The Myth of Asia’s Miracle.” For-

eign Affairs 73:62-78.

Solow, R. (1957). “Technical Change and the Aggregate

Production Function.” Review of Economics and Sta-

tistics 39(3):312-320.

TEVEN

OSEFIELDE

ECONOMIC GROWTH, SOVIET

During the first decade of Soviet rule and up to

1929, the Soviet economy struggled to recover

from the damages of World War I, the Revolution,

and the civil war, and then to find its way through

policy zigzags of the young and inexperienced So-

viet leadership. It is commonly accepted that dur-

ing this decade of the 1920s the Soviet economy

more or less managed to regain the level of national

product of 1913, the last prewar year. In 1929 the

Soviet Union embarked upon a strategy of rapid

economic growth focused mainly on industrializa-

tion. The main institutional instrument used in or-

der to implement growth was the Five-Year Plan,

the key economic tool of the centrally planned sys-

tem.

The record of Soviet growth since 1928 and the

main factors that contributed to it are presented in

Table 1. The data reflect mostly Western estimates,

based partly on Soviet official data following ad-

justments to conform to Western definitions and

methodology as well as to accuracy. One major

methodological difference related to the national

product was that, following Marxist teaching, the

concept of Net National Product (NNP), the main

Soviet aggregate measure for national income, did

not include the value of most services, considered

nonproductive.

One of the main goals of Soviet communist

leadership was rapid economic growth that would

equal and eventually surpass the West. The pri-

ECONOMIC GROWTH, INTENSIVE

428

ENCYCLOPEDIA OF RUSSIAN HISTORY

mary aim was to demonstrate the superiority of

the communist economic system and growth strat-

egy, based on the teachings of Marx and Lenin, over

capitalism. The goal was needed also in order to

build a sufficient military power base to avert the

perceived military threat of the capitalist world in

general, initially that of Nazi Germany. Indeed the

rates of growth of Soviet GNP were initially, dur-

ing the 1930s and the first Five-Year Plans, excep-

tionally high by international comparisons for that

period; this made the Soviet model a showcase for

imitation to many developing countries that be-

came independent in the aftermath of World War

II. While the Soviet growth rates were still high

during the 1950s and 1960s, they were already

matched or exceeded at that time by countries such

as Germany and Japan, as well as a number of de-

veloping countries. The decade of the 1940s, with

the devastation of World War II, witnessed stag-

nation at first and slow growth during the recon-

struction efforts later. Growth somewhat accelerated

in the aftermath of the death of Josef Stalin, but

from the 1960s onward the rates of economic

growth began to fall, declining continuously

throughout the rest of the Soviet period down to

near zero just before the dissolution of the USSR at

the end of 1991. Various efforts at economic re-

form in order to reverse this trend largely failed.

As a result, the entire postwar growth record de-

clined further by international comparisons to be-

low that of most groups of developed as well as

developing countries, especially a number of East

Asian and Latin American countries. While many

developed market economies suffered from business

cycles and oscillations in growth rates, they expe-

rienced sustained economic growth in the long run.

Per contra the fall in Soviet growth rates proved

to be terminal. Thus, although during the early

decades the Soviet economy grew fast enough in

order to catch up and narrow the gap with the de-

veloped countries, during its last decades it fell be-

hind and the gap widened. The growth record with

respect to GNP per capita, followed a similar trend

of high rates of growth initially, but declined in

later decades (Table 1). While in 1928 the Soviet

level of GDP per capita stood around 20 percent of

that of the United States, it reached about 30 per-

cent in 1990, probably the best record in terms

of comparisons with other Western economies.

Throughout the period, the share of private con-

sumption in GNP was lower than in most other

nonsocialist countries. Consumption levels did go

up significantly from very low levels during the

two decades or so following Stalin’s death. Also,

throughout most of the period, there were rela-

tively high public expenditures of education and

health services, which helped to raise the compar-

ative level of welfare and the quality of life. The

failure of the communist regime to achieve sus-

tained economic growth on a converging path with

developed countries is no doubt the most impor-

tant reason for the fall of the economy.

ECONOMIC GROWTH, SOVIET

429

ENCYCLOPEDIA OF RUSSIAN HISTORY

Growth, Productivity and Consumption 1928–1990

(AVERAGE ANNUAL GROWTH RATES)

Period/Category 1928–1990

1928–1940

1940–1950 1950–1960 1960–1970 1970–1980 1980–1985 1986–1990

GNP 3.2 5.8 2.2 5.2 4.9 2.5 1.8 1.3

Population 1.2 2.1 -0.8 1.8 1.3 0.9 0.9 0.9

GNP per Capita 2.0

.6 3.0 3.3 3.6 1.6 0.9 0.4

Employment 1.4 3.9 0.3 1.6 1.8 1.4 0.7 0.1

Capital 5.7* 9.0 0.4 9.5 8.0 7.4 6.2 ..

Total Factor Productivity (TFP) 0.5* 1.7 2 0.4 0.5 -1.2 -1.0 ..

Consumption 3.2 3.5 3.3 5.25.2 3.4 1.9 2.2

Consumption per Capita 2.1 1.4 2.5 3.3 3.9 2.5 1.0 1.3

*1928–1985.

SOURCE: Ofer, 1987; Laurie Kurtzweg, “Trends in Soviet Gross National Product” in United States Congress, Joint Economic Committee.

Gorbachev’s Economic Plans, Vol. 1, Washington D.C., pp. 126–165; James Noren and Laurie Kurtzweg, “The Soviet Economy Unravels:

1985–91” in United States Congress, Joint Economic Committee. The Former Soviet Union in Transition, Vol. 1, Washington D.C. pp. 8–33,

1993; Angus Maddison. Monitoring the World Economy 1820–1992, OECD, Paris, 1995; Angus Maddison, The World Economy : A Millennial

Pers

ective, OECD, Paris, 2000.

5.2

Table 1.

The growth record of the Soviet Union—its ini-

tial success and eventual failure—is a joint outcome

of the selected growth strategy and the system of

central planning, including almost full state own-

ership of the means of production. The centrally

planned system was more effective at the start in

mobilizing all needed resources, and directing them

to the goals of industrialization and growth. The

system is also characterized by using commands

instead of incentives and decentralized initiatives:

emphasis on fulfillment of quantitative production

targets rather than on improvements in quality,

technology, and efficiency, routine expansion in-

stead of creativity, and rigidity and “more of the

same” instead of flexibility—a very high cost for

any change. Some of the above characteristics,

while advantageous at the start, turned out to be

obstacles when the economy developed and became

more complex. Other features, such as difficulties

in creating indigenous technological innovations,

were less harmful initially, when technology could

be transferred from abroad, but more of a hin-

drance later when more domestic efforts were

needed.

The Soviet communist growth strategy, fol-

lowing Marxian doctrine, was based on high rates

of investment and a rapid buildup of capital stock.

High rates of investment come at the expense of

lower shares of consumption, sacrificed at the be-

ginning in exchange for hopes of abundance in the

future. Central planning, state ownership, and the

dictatorship of the proletariat were the necessary

tools needed to impose such sacrifices. Next the

regime mobilized the maximum possible number

of able-bodied men and women to the labor force.

A model of growth based mostly on maximum mo-

bilization of capital and labor is called “extensive.”

The increase in output is achieved mainly through

the increase in the amounts of inputs. Under an al-

ternative “intensive” model, most of the increase in

output is achieved through improvements in the

utilization of a given amount of inputs. These in-

clude technological changes and improvements in

management, organization, and networks, termed

total factor productivity (TFP). The mobilization of

capital in the Soviet growth model assumed that

the newly installed equipment would embody also

the most advanced technology. While this was the

case to some extent during the first decade, with

heavy borrowing of technology from abroad, the

failure to generate indigenous civilian technology,

as well as the mounting inefficiencies of central

planning, diminished, eliminated, and turned neg-

ative the intensive contribution (TFP) to Soviet

growth. Only during the 1930s TFP was signifi-

cant and accounted for about 30 percent of total

growth. Soviet leaders and economists were aware

of the efficiency failure and tried to reverse it

through many reforms but to no avail.

The problem with extensive growth is that the

ability to mobilize more labor and capital is being

exhausted over time; furthermore, in both cases

early efforts to mobilize more resources backfire by

reducing their availability in the future. Labor was

mobilized from the start, by moving millions of

people from farms to the cities, by obliging all able-

bodied, especially women, to join the active labor

force, and by limiting the number of people em-

ployed in services, forcing families to self-supply

services during after-work hours. Very low wages

compelled all adult members of the family to seek

work. Table 1 illustrates that until the 1980s em-

ployment grew by a higher rate than the popula-

tion, indicating a growing rate of labor force

participation, achieving at the time one of the high-

est rates, especially for women, in the world. How-

ever, the table also shows that over time the rate

of growth of employment declined, from nearly 4

percent per year from 1928 to 1940 to almost zero

during the late 1980s. In the Soviet Union,

birthrates declined far beyond the normal rates ac-

companying modernization everywhere. This was

due to the heavy pressure on women to work out-

side the household, provide services in off-work

hours, and raise children in small, densely inhab-

ited, and poorly equipped apartments. In this way

larger labor inputs early on resulted in fewer ad-

ditions to the labor force in later years, thereby con-

tributing to declining growth. During the 1980s

employment increased at even a slower rate than

the population.

A similar process affected capital accumulation.

Because a labor force grows naturally by modest

rates, the main vehicle of growth is capital (equip-

ment and construction). This is especially true if

the rate of efficiency growth is modest or near zero,

as was the case most of the time in the USSR. It

follows that the share of investment out of the na-

tional product must increase over time in order to

assure a steady growth rate of the capital stock.

An increased share of investment leaves less for im-

provements in consumption, in the supply of so-

cial services, and for defense. Indeed the share of

(gross) investment increased in the Soviet Union to

more than 30 percent of GNP, and this kept down

the rate of growth of the capital stock and thus of

ECONOMIC GROWTH, SOVIET

430

ENCYCLOPEDIA OF RUSSIAN HISTORY

output. Furthermore, with the earlier drying up of

increments of labor, Soviet growth was driven for

a time, still extensively, by capital alone. This in

turn forced the system to always substitute capi-

tal for labor, a difficult task by itself, more so when

no new technology is offered. The outcome was

further decline in productivity of capital and of

growth.

The early mobilization of labor and capital in-

puts at the cost of their future decline is part of a

general policy of haste by the Soviet leadership,

which was frustrated by declining growth, the in-

ability to provide for defense and other needs, and

the failure of partial reforms. In addition to the

above, there were also overuses of natural re-

sources, over-pumping of oil at the expense of

future output, neglect of maintenance of infra-

structure and of the capital stock, and imposition

of taut plans that forced producers to cut corners

and neglect longer-term considerations. Initally this

policy of haste produced some incremental growth

but at a cost of lower growth later. The results of

the policy of haste spilled over to the transition pe-

riod in the form of major obstacles for renewed

economic growth.

The heavy military burden was another sig-

nificant factor adversely affecting Soviet growth.

Early on the Soviet Union was threatened and then

attacked by Germany, and following World War II

engaged in the Cold War. Throughout the entire

period it had to match the military capabilities of

larger and more advanced economies, hence to set

aside a higher share of its output for defense. Dur-

ing the Soviet system’s last decades this share grew

to around 15 percent of GNP. This amount was

unprecedented in peacetime. The real defense bur-

den was even heavier than shown by the figures

because the defense effort forced the leaders to give

priority to defense, in both routine production and

in technological efforts, thereby disrupting civilian

production and depriving it of significant techno-

logical innovation.

Additional causes of declining growth over time

were the deterioration of work motivation and dis-

cipline, increasing corruption and illegal activities,

declining improvements in the standard of living,

and weakening legitimization of the regime. Col-

lective agriculture, the cornerstone of the commu-

nist system, became the millstone around its neck.

See also: ECONOMIC GROWTH, EXTENSIVE; ECONOMIC

GROWTH, INTENSIVE; FIVE-YEAR PLANS; INDUSTRIAL-

IZATION, RAPID; MARXISM; NET MATERIAL PRODUCT

BIBLIOGRAPHY

Bergson, Abram. (1961). The Real National Income of

Soviet Russia since 1928. Cambridge, MA: Harvard

University Press.

Domar, Evsey. (1957). “A Soviet Model of Growth.” In

Essays in the Theory of Economic Growth. New York:

Oxford University Press.

Easterly, William, and Fischer, Stanley. (1995). “The So-

viet Economic Decline: Historical and Republican

Data.” World Bank Economic Review 9(3):341–371.

Maddison, Angus. (2001). The World Economy: A Millen-

nial Perspective. Paris: Development Centre of the

Organisation for Economic Co-operation and Devel-

opment.

Nove, Alec. (1993). Economic History of the USSR,

1917–1991, rev. ed. New York: Penguin.

Ofer, Gur. (1987). “Soviet Economic Growth, 1928–1985.”

Journal of Economic Literature 25(4):1767–1833.

Ofer, Gur. (1996). “Decelerating Economic Growth under

Socialism: The Soviet Case.” In The Wealth of Nations

in the Twentieth Century: The Policies and Institutional

Determinants of Economic Development, ed. Ramon My-

ers. Stanford, CA: Hoover Institution Press.

FER

ECONOMIC REFORM COMMISSION

The State Commission on Economic Reform, chaired

by economist and vice premier Leonid Abalkin, was

created in July 1989. The first fruit of its work

was a background report written for a conference

on radical economic reform held October 30–

November 1, 1989, in Moscow. This document was

very radical by soviet standards. It argued, “We are

not talking about improving the existing economic

mechanism, nor about merely replacing its out-

dated parts. One internally consistent system must

be dismantled and replaced by another one, also in-

ternally consistent and thus incompatible with the

previous one.”

In April 1990 Abalkin and Yuri Maslyukov

(chairman of Gosplan) presented to the Presidential

Council a program for a rapid transition to the

market. This program drew attention to the costs

involved in economic reform (e.g., open inflation,

decline in production, closing of inefficient enter-

prises, fall in living standards, increased inequal-

ity). Most likely the program was rejected because

of its honesty in discussing the costs of rapid mar-

ketization. The program officially adopted in May

was substantially more conservative.

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From May to August of 1990 two teams were

working on economic reform programs, one

headed by Abalkin and one headed by Stanislav

Shatalin. The latter produced the Five-Hundred-

Day Plan. Mikhail Gorbachev did not commit him-

self to either. He asked Abel Aganbegyan to merge

the two documents. This compromise was adopted

at the Congress of People’s Deputies in December

1990. Abalkin was dissatisfied by these events and

resigned effective February 1991.

See also: GORBACHEV, MIKHAIL SERGEYEVICH

BIBLIOGRAPHY

Ellman, Michael, and Kontorovich, Vladimir, eds. (1998).

The Destruction of the Soviet Economic System: An In-

siders’ History. Armonk, NY: M. E.Sharpe.

Hough, Jerry. (1997). Democratization and Revolution in

the USSR, 1985–1991. Washington, DC: Brookings

Institution Press.

ICHAEL

LLMAN

ECONOMISM

The label applied to a group of moderate Russian

Social Democrats at the end of the nineteenth and

the beginning of the twentieth century.

An offshoot of the legal Marxists, the econo-

mist group emphasized the role of practical activ-

ity among industrial workers. According to their

theories, activism at the rank-and-file level would

lead to social change: Agitation for a ten–hour day,

limitation on fines for petty infractions, better san-

itation in the workplace, and so forth would ignite

conflict with tsarist officialdom. Class conflict

would provoke revolutionary political demands and

eventually lead to a bourgeois–liberal revolution,

which all Russian Marxists of the time thought nec-

essary before the advent of socialism. For the time

being, though, these economist Marxists were will-

ing to follow worker demands rather than impose

an explicitly socialist agenda on the laboring class.

Workers involved themselves in strikes, mutual aid

societies, and consumer and educational societies to

raise their class consciousness. Thus this faction

criticized the leading role assigned to the revolu-

tionary intelligentsia by scientific Marxists such as

Georgy Plekhanov and Pavel Axelrod.

Organized as the Union of Social Democrats

Abroad, the economists published the newspaper

Rabochaia Mysl from 1897 to 1902 in St. Peters-

burg, Berlin, and Warsaw. While mostly concerned

with worker grievances and local conditions, this

newspaper (at first produced by St. Petersburg

workers) did bring out a “Separate Supplement” in

issue 7, written by Konstantin Takhtarev, that was

critical of the more radical Marxists. The econo-

mists also sponsored the journal with a more po-

litical and theoretical character: Rabochee Delo,

published from 1899 to 1902 in Switzerland.

Economism is sometimes linked to the leading

German revisionist Marxist Eduard Bernstein

(1850–1932).

In 1899 one of the economists, Yekaterina

Kuskova, wrote a “Credo,” which came to the at-

tention of Vladimir Ilich Lenin, who penned a

protest the same year. That group’s practical and

local emphasis continued to be attacked, somewhat

unfairly, by Lenin and his supporters in Iskra

(Spark) and later in “What Is to Be Done?” (1902).

Lenin argued that the opportunist notions of

economism, as opposed to his revolutionary ac-

tivism, justified a split in Russian Social Democracy

the following year.

Several of the leading economists, for example,

Sergei Prokopovich, later became liberals, like the

more famous legal Marxist Peter Struve. Both

Prokopovich and Kuskova became anticommunists

and participated in an emergency relief committee

during the 1920–1921 famine. Soon afterward

they were arrested in the general crackdown on

Lenin’s opponents.

See also: LENIN, VLADIMIR ILICH; MARXISM

BIBLIOGRAPHY

Harding, Neil. (1977). Lenin’s Political Thought, vol. 1.

London: Macmillan.

Lenin, Vladimir Ilich. (1978). Collected Works, vol. 4.

Moscow: Progress Publishers.

ARTIN

C. S

PECHLER

ECONOMY, POST-SOVIET

Establishing a market economy and achieving

strong economic growth remained Russia’s pri-

mary concerns for more than a decade after the

breakup of the Soviet Union in 1991. By the mid-

dle of the decade, Russia had made considerable

progress toward creating the institutions of a mar-

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