The Soviet Era is one the most important periods in modern history. On the centenary of the Bolshevik revolution of 1917, it is perhaps worth revisiting this period and looking at its thoughts and economic ideas.
The Soviet Union was famously known as “Upper Volta with rockets”, a term coined by Xan Smiley in an article in 1987. This phrase soon caught on and was widely used in certain circles. Burkina Faso was previously known as The Republic of Upper Volta (referring to it containing the upper part of the river Volta). The Republic shared close ties with the Soviet Union. It was a disparaging term to indicate the disproportionate military capabilities of the Soviet Union relative to its economic size (much like Upper Volta).
It is interesting to note that in 1917, Russia was an average economy – far behind the super powers of the time. A 100 years later, Russia remains an average economy. It’s real GDP has been around the global average. But much happened in between.
Emerging from the ashes of the revolution, the country was quick to consolidate. This period continued after the wars. Many countries who were gaining independence were looking to it for guidance in helping share their economies exploited by colonial rule. Their economic model was seen as successful alternative to capitalism propagated by the West. By the 1970s, the Soviet Union was one of the world’s leading power. Yet its economy produced less than half of the real GDP of the US, despite having a similar population size and significantly larger territory.
The Bolshevik revolution gave way to a meltdown, the likes of which we haven’t seen in a while. After the economy recovered, it reached the global mean real GDP, and hovered above it for a few decades. A postmortem on the nature of growth reveals that it was the effect of a system whose primary focus was to lift the level of output by continuous mobilization rather than improving productivity growth. This was one of the factors the Soviet economy never converged on American standards or some of the other developed countries.
The comparative advantage from which the economy acted was the comparative advantage in the production of the means of power in the world. This was reflected in the ideas of the leaders, their policies, and the institutions they created.
The Bolsheviks greatly admired and followed the German and American models of economic organization. The ‘mass’ methods in these economies caught their imagination. The German model followed a ‘modern war economy’ model which focused on mass mobilization for warfare and mass sacrifice – commodities rationed at fixed prices, etc.
The American model, on the other hand, used the power of ‘mass’ to create mass produced standardized commodities under a hierarchical management. An amalgamation of two models results in a ‘Soviet-type economy’ described in western textbooks.
The years between 1917 and 1934 were marked by intense political and social conflict. The government made several U-turns in their policies which influenced the behavior of market organizations and consumers. The Soviet economy wasn’t a preplanned economy, it was one that could have gone down multiple alternative paths. The varied shades of communism that we have seen over the year and still see vary from the likes of China and Cuba to North Korea.
While multiple possibilities emerged, there were some institutions and policies that remained. The centralized single-party dictatorship is one such institution. The elite rulers shared common beliefs and worked on how best to promote their interest. They viewed the world as being intrinsically hostile and built their country as a citadel. They viewed peace as an interim period between two wars constantly prepared for war. This view led to a fundamental change in the allocation of resources. Industrial and military projects were promoted. The result was a vast, mass production-based military industry. In the 1940’s, the Soviets rivaled Germans as one of the top suppliers of armaments. The scope of weaponry expanded as they ventured into areas such as nuclear weapons, space missiles and radio electronics etc. The State did confiscate most personal wealth and ensure incomes were equally distributed.
However, income reveals only a partial story in a communist system as it isn’t a complete indicator of consumption. The access to and distribution of goods was determined by political and social status. This put an enormous amount of pressure on the common man, one that was evident in the large queues outside stores which went on to become a common sight. Periods of famines would make things considerably worse.
The Soviet economy was a product of the wars, beliefs and technologies of the early 20th century. None can deny that the sheer scale at which communism manifested itself in the economy was a wonder. However, many of its decisions were unsustainable and impractical for a world moving towards economic liberalism. Generations of citizens paid a heavy price in this experiment.
-Contributed by Bhargav Dhakappa
Picture Credits: sputniknews.com