Wednesday, December 18, 2019

Putin Bringing Back a Stalinist Economic System, Prokofyev Says

Paul Goble

            Staunton, December 16 – In the coming decade, Moscow economist Dmitry Prokofyev says, “Russia risks repeating collectivization,” that is, “instead of oil, profit will be extracted from people,” exactly what Stalin did in the late 1920s and 1930s however improbable this may seem to many.

            The economist says that “comparing Stalin’s ‘command’ economy and the ‘market’ economy of Russia may seem strange – but only at first glance and only for those who imagine the Soviet Union of the first five-year plans from pictures in children’s books and contemporary Russia from official television” (

            If you ask 100 Russians “how Stalin ran the economy of the USSR, 99 will answer that the leader ‘build socialism in a single country.’ But as is well-known, neither Marx nor Lenin, whose follower Stalin declared himself to be never said that it would be necessary to ‘build’ socialism,’” just as is the case that “no one ‘builds’ capitalism.” 

            Instead, people would choose socialism because it would give them a better life. That is what those who followed the Bolsheviks in 1917 thought. But “approximately in the middle of the 1920s, after land was divided and factories seized, it turned out that life became happier but not easier.” Instead, the situation returned more or less to what it had been in 1913.

            As Prokofyev puts it, “Stalin and his entourage knew very well what could happen if there were too few goods in the countryside and too little bread in the cities;” and they remembered the slogan “Soviets without Communists” that some of their opponents had used during the Civil War.

            But to solve the problems they faced, Stalin and his system needed “one critically important thing – money. And there wasn’t any.” They couldn’t obtain it by exporting grain as the tsars had because world prices for that had collapsed.  And they could hardly attract foreign capital having seized factories foreigner had owned.

            Stalin personally might have been willing to take that latter step – “he was a pragmatist and cynic,” the economist says – “but how would he convince his comrades in the Politburo?” At the same time, he and they knew that there wasn’t enough money in the hands of the NEPmen to solve the problem.

            Consequently, “it was necessary to look for money within, in the pockets of workers and peasants. There were more peasants” and so they became “’the resource’ for industrialization,’” “’the second oil’” to put it in present-day parlance. At first, the Bolsheviks hoped to use the scissors crisis to extract money but that didn’t provide enough either.

            Hence, the decision was made to carry out enforced collectivization, something that sparked resistance that was put down forcefully and led those who could to flee to the cities, providing cheap labor for Moscow’s industrialization projects. “From the point of view of economics,” Prokofyev says, “’collectivization’ was nothing than a super tax on the peasantry.”

            That policy led to a radical reduction of incomes and consumption for most of the population, “but the concentration of resources in the hands of the government allowed it to ensure an increase in consumption by privileged groups, in the first instance the bosses, the propagandists and the siloviki.” There was no equality under Stalin, “even officially.”

            Only in the 1960s did that begin to change because the regime was able to use oil to buy grain and because of the rise of the relatively numerous generations who began to ask where the payoff was for all the sacrifices they had been forced to make. But oil could do only so much, and it could not solve the longterm investment needs of the country.

            As a result, the economist says, “the heirs of Stalin decided to use means from the arsenal of the leader of the peoples -- to take resources from consumption and direct them to investment” via higher taxes. The Kremlin attempted to cover up what it was doing by saying that oil exports were paying the bills but that was never the case.

            Today, “looking at the practice of the construction of Russian state capitalism,” Prokofyev says, “Comrade Stalin would praise the builders for following his directions,” including using the scissors crisis of buying cheaply from the people and selling the products for more, thus impoverishing the population while allowing the state to continue to flourish.

            The question now arises, he says, “if our bosses really are following Stalin’s recipe of running the economy,” why aren’t they getting the growth rates he did? The answer of course is that Stalin shifted the population from low productivity agriculture to higher productivity industry. But a country can do that only once.

             Moreover, now as compared with the 1930s, the regime’s “’Stalinist’ policy of cheap labor … in combination with the same policy of expensive capital … is leading to a situation where industry is using labor rather than capital intensive technologies” just as in the 1930s and 1940s.

            “Formally,” the economist suggests, “unemployment is not high and there are many jobs. But these are ‘bad’ workplace which do not allow the worker either to produce capital for investment or rise beyond the minimum necessary for his own survival.” But the reduction of real wages means that what capital the leaders get has to be sent abroad as there simply isn’t enough domestic demand to do otherwise.

            And as a result, “the growth of profits of major enterprises and the growth of incomes of their owners do not translate into the growth of the Russian economy as expressed in the growth of the well-being of the citizens.” 

            There is something the regime could do about this: provide real protection for property and thus of investors, Prokofyev says. Bud doing so would undermine “the main paradigm Russian bosses use – power is the source of property and not the reverse.”  That means that again as in the 1920s, the Kremlin leaders face problems without good or acceptable solutions.

No comments:

Post a Comment