A Market Economy Coexisted with Totalitarianism under Stalin, an Arrangement that Continues in Putin’s Russia, Savvin Says

Paul Goble

            Staunton, Sept. 30 – Most people see a market economy and totalitarianism as antithetical phenomena and believe that where one exists, the other cannot. But in fact, even in the darkest days of Stalin’s totalitarian system, a kind of market economy existed albeit not in its own name; and a similar arrangement now exists in Putin’s Russia, Dimitry Savvin says.

            The editor of the Riga-based conservative Russian portal Harbin points to the case of Nikolay Pavlenko who created a private construction firm which operated in the USSR between 1948 and 1952, a case described by Russian historian Oleg Khlevnyuk in a 2023 Moscow book, The Corporation of Imposters (harbin.lv/algoritm-rynochnogo-pererozhdeniya).

            What Pavlenko did was criminal “only” in the official Soviet understanding, Savvin says. In fact, what he did was to “establish a private construction enterprise masked as a military institution and over the course of several years successfully conduct commercial activity” in a totalitarian state.

            As “phantasmagorical” as that may seem, he continues, “in essence, the mechanisms of coexistence with a totalitarian state and a private commercial enterprise which Pavlenko developed are in many respects typical” and were later employed “not only in the Soviet Union” but also in North Korea and since the 1990s by entrepreneurs in Russia.

            Shortly after the German invasion of the USSR in 1941, Pavlenko, “suddenly discovered” that if one had the write papers and stamps, one could operate as a kind of covert free market player. He ran one such business during the war and established a second in 1948, when he was routinely sought out by officials because of his good and speedy work.

            Eventually the party leadership caught up with him; and in 1952, hie operation was shut down and he was shot. But his operation, which was certainly far from unique, dis played four characteristics that help to explain why such things reemerged in some other communist countries, the post-Soviet USSR, and especially in Putin’s time.

            First of all, Pavlenko’s organization was not political but commercial in the purest sense. Second, his organization mimicked state institutions; third, he did nothing criminal except for operating as a private firm in a system that denied that possibility; and fourth, if the leadership hadn’t been obsessed with defending socialism, what he did might have continued.

            “We see that little islands of market arrangements are natural for man and humanity” and emerge in communist and other totalitarian states, Savvin says, a pattern that requires us to recognize that with the proper masking, free market phenomena can and will exist under totalitarianism rather than being totally excluded by it. 

            Savvin’s observation carries with it another implication that he doesn’t discuss but that is critical for those who want to overcome totalitarianism. In the 1990s, many Western leaders believed that if they got the economy right in the Russian Federation, totalitarianism would be precluded. But in fact that was not true.

            Had such leaders focused more on democratic procedures and laws and worried somewhat less about the economy which they expected would do all the heavy lifting Russians and the world might have been spared the rise of the new totalitarianism under Vladimir Putin now.