Farm to Factory: A Reinterpretation of the Soviet Industrial Revolution (The Princeton Economic History of the Western World Book 29) by Robert C. Allen (PDF)

Description

To say that history’s greatest economic experiment–Soviet communism–was also its greatest economic failure is to say what many consider obvious. Here, in a startling reinterpretation, Robert Allen argues that the USSR was one of the most successful developing economies of the twentieth century. He reaches this provocative conclusion by recalculating national consumption and using economic, demographic, and computer simulation models to address the “what if” questions central to Soviet history. Moreover, by comparing Soviet performance not only with advanced but with less developed countries, he provides a meaningful context for its evaluation.Although the Russian economy began to develop in the late nineteenth century based on wheat exports, modern economic growth proved elusive. But growth was rapid from 1928 to the 1970s–due to successful Five Year Plans. Notwithstanding the horrors of Stalinism, the building of heavy industry accelerated growth during the 1930s and raised living standards, especially for the many peasants who moved to cities. A sudden drop in fertility due to the education of women and their employment outside the home also facilitated growth.While highlighting the previously underemphasized achievements of Soviet planning, Farm to Factory also shows, through methodical analysis set in fluid prose, that Stalin’s worst excesses–such as the bloody collectivization of agriculture–did little to spur growth. Economic development stagnated after 1970, as vital resources were diverted to the military and as a Soviet leadership lacking in original thought pursued wasteful investments.

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⭐I thought this was a fascinating book. It investigates via econometric studies how the Soviet Stalinist command economy developed in the 1930s. It discusses theories of rapid or forced industrialization in the 1920s as espoused by Preobrazhensky, Feldman, and to a certain extent by Bukharin.The author (Robert Allen) then discusses and analyzes three models of economic growth that might have been available to the USSR and the Communist leadership in the 1920s and 1930s: capitalism, a New Economic Policy (NEP) variant, and a command economy that was actually adopted for both ideological and strategic reasons. Allen concludes that the Stalinist command-type economy offered the highest economic growth rates.Potential readers should understand that the “capitalism” compared here is not the advanced free-enterprise capitalism that evolved in western Europe and North America in the late 18th, 19th, and 20th centuries. The capitalism considered here is the style of capitalism that existed in the Russian Empire in 1900 – 1913 and Russia today in the 21rst century and as has developed in South America and southern Asia. A free-enterprise capitalism requires a basis of private property, the rule of law, and enforceable and honored contracts or what is commonly referred to as a civil society. Those concepts have never existed in Russia.Chapter 10 then describes why the command-style economy worked reasonably well in the 1930s – 1950s and then why it started to slow down in the early 1970s and eventually reached a crisis in the 1970s and 1980s. Allen presents several reasons although I think he underestimates the effect that the rising levels spent on armaments had on the overall economy. A couple of very good books that explore this concept are:• “The Price of the Past: Russia’s Struggle with the Legacy of a Militarized Economy” by Gaddy (1996). This is the most comprehensive description of the former Soviet military industry (or military industrial complex — MIC) that I have encountered. It describes the history from the 1930s through the eventual collapse of the USSR in the 1980s and 1990s. The best part of the book is the discussion on how the military industry really accomplished its function and the economic consequences: essentially, it plundered the civilian economic sector with impunity. Massive forced subsidies and hidden costs were just part of the game. The book provides plenty of statistics on the extent of the MIC in terms of labor, investment, and influence of the MIC on the Soviet economy and the society in general.• “The Soviet Defence Industry: Conversion and Economic Reform” by Cooper (1991). The defense complex absorbed an incredible amount of the country’s financial and industrial effort. Apparently, even the top political leadership did not realize the extent of the militarization of the economy until the late 1980s / early 1990s. The author describes the military industrial part of the economy as “hypertrophic” which seems to be a good way of describing its effect on the civilian part of the economy. The military industry may have employed as many as 7.5 million people in industry and a grand total of upwards of 12 million overall. The industrial system may have consisted of up to 5,000 factories and enterprises and absorbed up to 75% of the nation’s industrial research and development investment every year.Another excellent book on the collapse of the Soviet economy and the USSR in general is “The Struggle to Save the Soviet Economy” by Miller (2016). The book discusses a primary reason for the inability of the political leadership to make changes to the economy: for all practical purposes, the bureaucratic and ministerial leadership of the military, the associated military or defense industry, the energy industry, and the agricultural industry (“agro-industrial complex”) ran the Communist Party, not the other way around as you might think. These groups indulged in a complex system of patronage, power, rewards for non-performance, and corruption. They simply had no reason to desire any change in the status quo.Chapters 6 and 7 finally describe the consequences of this system. For example, all those ministries or power-groups previously mentioned successfully extracted enormous subsidies from the central government over the years. Chart 2 in Chapter 7 shows that by 1991, the USSR budget deficit amounted to 30% of GDP. In several cases of specific industries, output was actually decreasing despite massive increases in investment. All this eventually resulted in a combination of inflation and severe shortages. The government planning agencies set prices far below market levels, so enterprises lacked any incentive to produce and sell products. By 1991, the agricultural and food distribution supply chains simply stopped functioning.The final chapter “Conclusion” then summarizes all the problems resulting from the Stalinist economic system and the vast powers of the economic interest groups that successfully resisted any changes. There are some interesting speculations on what might have been done earlier: had Stalin not collectivized agriculture, had Kosygin’s proposed reforms of the 1960s been supported, had Brezhnev refused to provide the massive subsidies to the Soviet agricultural system, had factories been built around Moscow instead of in the frozen wastelands of Siberia, and so forth. But by the 1970s and 1980s the various decisions had been made and the entire system had become ossified and sclerotic.

⭐Robert Allen has done what few people have attempted – defending Soviet, in particular Stalinist, industrialization policy from the viewpoint and with the methodology of orthodox neoclassical economics. In so doing he reacts particularly against the works of Paul Gregory, the main academic defender of the thesis that the Czarist system would have developed Russia faster and better than the USSR did. Allen takes great pains to refute this position.Allen shows that the Stalinist policy of industrialization followed the strategy laid out by Preobrazhensky, namely to use terms of trade between agriculture and industry to use the agricultural surplus for investment in heavy industry. All the heavy industry production would then be reinvested in that heavy industry, leading over time to a very fast and strong development of industrialization in the USSR. Although this meant in the short term that living standards, as measured by consumption of consumer goods, would increase but little (and even drop during certain periods), in the long run the result would be that the industrial capacity so built up could be used for production of consumer goods eventually at a much higher level than would otherwise have been the case.This has always been much contested by most economists, both socialist and anti-socialist, especially since the system of NEP seemed to perform decently well and created much more stability than the Stalinist heavy industry planning did. Nonetheless, Allen shows through modelling the different factors involved in simulations of alternative paths that the Preobrazhensky strategy was entirely correct, and indeed had the required results. In fact, Allen argues contrary to most historians of the Soviet 1930s that living standards generally did not even drop during this period, with the exception of the years of collectivization of agriculture.This collectivization is also a subject he addresses, where he, again against almost everyone else, finds that it had a slight positive effect, because it made the marketing (in the sense of bringing into circulation) of agricultural produce much larger proportionally and much easier. This solved the recurring problem in the early USSR of ensuring the peasantry sold sufficient of their produce to feed the large urban population, despite the living standards of the Soviet peasants being low. As Allen shows, there was also a great excess of manpower in Soviet agriculture, so the mechanization that accompanied collectivization allowed millions of redundant peasants to move to the cities. It is this generation of peasants-turned-cadres that would form the main basis of support for Stalin and his policies, as is confirmed by Fitzpatrick and others. Of course, given the enormous human cost of collectivization and the famine that followed it, it is still dubious whether the undertaking was overall worth it. In his simulations Allen also traces alternatives such as industrialization without collectivization, which performs slightly worse, a continuation of NEP, which performs significantly worse but still well, and a ‘capitalist path’ where unemployment was possible and every individual company had to be profit-making; as one could expect, this path works by far the worst. In fact, because the wheat and railroad booms that buoyed the Czarist government in the period 1905-1914 would have ended in the 1920s, a continuation of this road would have brought Russia no further than the level now shown by Mexico or Argentina.The final part of this book contains a much smaller and less detailed discussion of the failures of the Soviet planning models in the late 1970s and the 1980s. The author here makes various subtle and interesting arguments. Firstly, he points out that investment put into military production and upkeep was from a purely economic point of view practically entirely wasted, mostly because it came at the expense of investment in other types of heavy industry than armaments, which the USSR dearly needed. The enormous losses of WWII also contributed here, with much capital being destroyed. A second result here was the enormous costs in manpower for the USSR of their almost Pyrrhic victory in WWII – the end of large quantities of newly free labor coming in from the countryside limited the expansion possibilities of all labor-intensive industry, which the USSR had hitherto relied on. Here again appears as useful the model of Soviet economics developed by Abram Feldman, which explored the interaction between capital and labor and how extra capital in a poor country like the 1920s USSR could lead to a positive feedback loop effect if invested in heavy industry (i.e. production of more ‘capital’), since every unit of capital in such a situation led to vastly larger increases in output than every new unit of labor. From the late 1960s on labor, however, became the main constraint in output, and the old Preobrazhensky accumulation strategy no longer worked.The main question is of course why the Soviet government did not adequately respond to this, and here Allen is for the first time severely critical: he identifies a number of major planning and investment errors on the part of the Brezhnev leadership. The most important of these is the wasteful retooling and upkeep of old industry where the production of new modern industry would have been more efficient, and secondly extremely wasteful unproductive investment in raw materials production in Siberia. This latter part was the result of the minerals and oil production in European Russia, the Ukraine etc. being largely depleted, so expansion had to be sought in Siberia, where costs were vastly higher. Coal production in the Donbass region peaked in 1976, after which the Soviet government was forced to massively invest in lignite (brown coal) production in Krasnoiarsk. Brown coal is not very efficient and the costs of operating in a vast desolate area as central Siberia are high, so that productivity of capital invested plummeted. Much the same applied to oil. Only natural gas production was something of a success story, which can still be seen today in Russia’s position as major exporter of natural gas to the European continent.Allen negatively compares this autarkic development strategy to that pursued by Japan, which had much fewer natural resources after WWII, but nonetheless greatly expanded its industrial production in these sectors by importing the raw materials. Drops in transport costs after the war made this profitably possible. Of course, the USSR, as Allen acknowledges, had political reasons for indigenous development even at higher costs, where Japan could operate entirely as an American vassal. It must be said though that Soviet energy use was very high per $1000 of GDP, and that conservation programs and saving the natural environment mostly failed due to the antique state of much of Soviet industry and the enormous scale of its factories. Short term “shock” responses to these problems by Brezhnev and successive governments only made the situation worse. Here Allen points to systematic deficiencies in proper cost accounting and saving, which had (correctly) not been a priority in the 1930s, but had to become one in the 1970s. The Soviet political system at that time was not very well-suited to adapt to this, and Brezhnev et al.’s ‘dropping the ball’ on these major economic reform issues played a large part in the fall of this system. Allen emphasizes though that it was not planning as such that failed, just that the plans were bad. These analyses are also along the lines of those provided in Paresh Chattopadhyay’s excellent study of Soviet economic policy.Overall this book is an excellent and highly stimulating discussion of Soviet industrialization programs and their beneficial effects as well as their failures. It is decidedly non-political and does not enter into any ideological question, but despite its thorough orthodoxy in methods, it is nonetheless very sensible – indeed Allen shows that such methods CAN be used in an intelligent manner when one really wants to. It must also be mentioned that poor Preobrazhensky had little benefit from the success of his strategy: he was shot in 1937.

⭐Informative, well written

⭐Readable and understandable to the non specialist without dumbing down.

⭐l modello di industrializzazione sovietico è stato un fallimento o no? Dati alla mano, Robert Allen smonta tutti i luoghi comuni e le imprecisioni legate alla storia economica dell’Unione Sovietica, illustrando il fenomenale processo di “catch-up” avvenuto in particolare tra il 1928 e i 1970. La panoramica fornita da Allen è approfonditissima e dettagliata: dall’economia pre-rivoluzionaria al comunismo di guerra, dalla NEP alla collettivizzazione forzata, passando per i dibattiti sull’industrializzazione tra Fel’dman, Preobrazhensky e Bukharin.Tra i grandi traguardi dell’opera, due sono di massima importanza: il primo è l’aver dimostrato come il processo di pianificazione centrale, l’aumento del tasso di investimento e – in misura minore – la collettivizzazione dell’agricoltura ebbero grandi effetti, in particolare per l’economia urbana, comportando una notevole crescita dei beni di consumo a partire dagli anni Trenta; il secondo è che la brutalità di Stalin ebbe effetti economici scarsissimi, implicando anzi un eccesso di mortalità (dovuto sia alla collettivizzazione che alla rapida transizione demografica) e portando modesti contributi alla crescita economica (come mostrano anche i dati derivanti dalla simulazione di uno scenario di non abbandono della NEP, la cui minor efficacia nello spostare lavoratori dalla campagna alla città è spiegata solo dal terrorismo staliniano). La collettivizzazione forzata, nelle parole di Allen “ritardò la crescita durante il primo piano quinquennale e la accelerò dopo, ma l’effetto cumulativo durante gli anni Trenta fu solo quello di un piccolo incremento dell’espansione economica. La miseria umana che accompagnò la collettivizzazione fu davvero vasta, mentre i guadagni economici magri”.il libro è arrivato in pochi giorni e in ottime condizioni: ha soddisfatto pienamente le aspettative previste. anche il contenuto era esattamente quello descritto

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