Overview: Russia in Historical Perspective

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Overview Russia in Historical Perspective

• Igor Lukashin
• ECN 365/ ECN 394 Lecture

2
Legacy A Timetable

• 1917 - 1991 Building socialism
• 1918 - 1921 War Communism
• 1921 - 1928 New Economic Policy (NEP)
• Late 20 Industrialization debate, start of
  rapid industrialization and collectivizaiton
• 30s - purges, five-year plans
• 40s - Great Patriotic War, rebuilding
• 50s - Stalin/Khrushchev

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Legacy A Timetable, Continued

• 60s - 70s Brezhnev, stagnation
• 80s - Andropov, Chernenko, Gorbachev need for
  a change
• Gorbachev Perestroika, Glasnost
• 1991 - coup detat, old guard and Gorby out
• Break-up of the Soviet Union into independent
  states - former republics
• 90s - Yeltsin, Transition to market, reforms

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Why Study Planned (Command) Economy

• Apparently locally Stable system
• Widely used on a smaller scale within firms
• A viable alternative mechanism for decision
  making
• Path-dependent transition past affects mentality
  and infrastructure now Influences decisions for
  tomorrow
• Communism Resurgence?

5
Planned versus Managed Economy

• Soviets utilized ad hoc techniques gt managed
• 5-year plans
• Command larger resource reallocations possible
  gt rapid industrialization, winning WWII,
  sputnik, nuclear weapons

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Transition Where do we go?

• West Infrastructure real/mentality
• Sweden No high income to afford efficiency
  losses
• Russian Way ??

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Models of Transition

• Tsarist economy
• Too long ago
• Creates revolutionary situations
• NEP
• war ended
• stable currency
• small private businesses
• proportional tax
• Doomed by crisis, lack of economic growth

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History of Economic Performance before 1917

• Previous experience with market economy
• Determined the economic base for Soviets
• Measurement of Performance
• Important economic issues/events
• Modern Economic Growth Framework
• Industry Agriculture Levels
• Statistical Structural Changes
• Problems availability accuracy of data, formed
  stereotypes

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Industrial Growth Under Tsars Peter The Great

• Westernized Russia gt military superpower
• Reinforced serfdom as an economic resource
• Gap in development vis-à-vis the west widens with
  successive rulers

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Industrial Growth Under Tsars Late 19th century

• Witte Railroads from 2k to 70k in 50 years
• Role of State in Development
• Guarantor of bonds gt attracting foreign capital
• Conservative monetary policy Gold Standard
• Development of heavy industry through
• Tariffs Compare Under Soviets
• profit guarantees
• tax reduction/exemption
• key element of military strategy

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Industrial Growth Formation of Entrepreneurial
Class

• Tsars signature required on charter of every
  joint-stock company
• Start through state subsidies or preferred state
  orders
• Bribery - routine cost bureaucratic intervention
  - commonplace
• Entrepreneurial associations lobby for
• For less restrictions on themselves
• For more restrictions on foreign competition

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Accelerated Growth After 1880

• Natural consequence of market forces, or
• Direct State Intervention
• Relative Backwardness the larger the gap, the
  stronger the tension prompting for change

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Agriculture Under Tsars

• Serfdom
• Virtual slavery sale military service work
  lords land give to lord from own crop churchs
  10
• 1861 - emancipation of slaves
• To prevent revolts and keep the status quo
• Allotments of land for peasants redemption
• Communal agriculture retained
• Cant leave until debt-free internal passports

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Agrarian Crisis (1880s)

• Tax arrears, Peasant unrest gt Stolypin reforms
• Consolidation of land
• Cancellation of peasant debt
• Allowed to withdraw from communes
• Was there a crisis?

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Growth/Development

• Extensive growth (increase in inputs, same
  technology)
• Human Capital Investment Literacy rates
• Population Growth (Explosion) Endogenous
• Facilitated by infrastructure growth (railroads)

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Foreign Investment

• No domestic saving gt jump-start development
• Imported technology
• 1913 - domestic production of capital equipment
  limited
• Foreign Capital 40 of industry investment,
  15-20 of total investment
• Russia - largest debtor, 15 of world debt

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Bolshevik Revolution

• 7 Nov 1917 The Great October Socialist
  Revolution
• Land Decree 11/8/1917
• Nationalization of all land
• Peasant distribution of land
• Reinstalled mir, created selsovet
• Industry Strategic Nationalization

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Civil War and Foreign Intevention

• White army (old regime) foreigners (Germans,
  English, French
• Red Army held 25 territory, 10 coal supplies,
  25 iron foundries, 50 grain
• Cut in Real GDP
• No Tax Base
• War expenses up
• No foreign aid

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War Communism Establishment

• 1917 -21 8000 times price increase gt market
  breakdown (unstable currency)
• Barter, naturalization of the economy
• War Communism
• Money Eliminated
• Workers militarized, paid equal wages
• Farm output requisitioned

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War Communism Policies

• Forcible requisitioning - Cheka
• Prodrazverstka - May 9, 1918 gt no incentives for
  peasants
• Nationalization
• Ideological
• Lacking control
• Lacking central direction gt premature
• Abolition of private trade
• Black market gt what did they trade in?

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Warm Communism Policies Continued

• Labor Policy
• Semi-military controls
• Restriction on movement
• Compulsory labor for all able-bodied
• Distribution of income
• Class rations
• Four gradations from heavy work to the unemployed

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Effectiveness of War Communism

• Estranged peasants gt drop of production,
  hoarding
• No coordination in industry
• Economic collapse (20 of 1913 levels)
• Wage disincentives gt lack of labor supply gt
  outflow from cities to rural areas
• Electrificatin GOELRO
• War is over, people not happy gt NEP

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NEP

• Combination of market and socialism
• Government retained commanding heights
• Rural gt market trade for grain

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NEP Policies

• Prodnalog proportional agricultural tax of about
  10 on average
• Allowed
• Lease land
• Hire help
• Sell to anybody in the market
• Money reintroduced, Chervonets - stable currency
  backed by gold
• Savings Encouraged anti-confiscation law

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NEP Policies Continued

• Public Industry
• Decision making still decentralized
• Aggregation into trusts with little government
  control
• Lack of coordination
• Foreign Trade
• Slow growth due to prior foreign debt repudiation
• Actively granting/ seeking concessions

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NEP Results and End

• Agriculture successfully recovered
• Industry recovery reached limits
• Contrary to ideology
• Growing threat of prosperous peasants (kulaks)
• Scissors crisis What was it?
• Failure to appreciate market economy, inflation
  pressures, opportunity costs, price floors, labor
  allocation incentives
• State the main ideas youll be talking about

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Topic One

• Details about this topic
• Supporting information and examples
• How it relates to your audience

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Topic Two

• Details about this topic
• Supporting information and examples
• How it relates to your audience

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Topic Three

• Details about this topic
• Supporting information and examples
• How it relates to your audience

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Real Life

• Give an example or real life anecdote
• Sympathize with the audiences situation if
  appropriate

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What This Means

• Add a strong statement that summarizes how you
  feel or think about this topic
• Summarize key points you want your audience to
  remember

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Next Steps

• Summarize any actions required of your audience
• Summarize any follow up action items required of
  you