Teach and research russia
Is the myth of Stalinism being effective on the rise?
Book review
November 23, 2022
November 23, 2022
Oleg Larionov
PhD candidate, University of Oxford
Can the economic model that developed in the USSR during the Stalin era be called successful? This idea is now being spread to audiences of millions, including YouTube channel IZOLENTA and “the Goblin” Dmitri Puchkov, and presented at the St Petersburg International Economic Forum.
Alexander Galushka, Artur Niyazmetov and Maxim Okulov. Source: VK
In 2021, the economists and members of Russia’s Civic Chamber Alexander Galushka, Artur Niyazmetov and Maxim Okulov released an academic work on the Stalinist economic model, which lays out its conclusions right in the title: Growth Crystal: On the Russian Economic Miracle. Its release was accompanied by a large-scale advertising campaign in the pro-government media and on the internet. A video presentation by Galushka was watched by millions. The book was praised by both Gennady Zyuganov and TV presenter Vladimir Solovyov.
The authors suggest that the unprecedented industrial growth of the USSR between 1929 and 1955 couldn’t be based solely on fear, slavery and other factors that make up the essence of Stalinism. Instead, they identify five actual economic factors – the “crystal grains” – that drove the growth in Soviet industry: 1) state planning; 2) a bet on innovative technologies; 3) a “twin-circuit” monetary policy; 4) a focus on efficiency; and 5) support for entrepreneurship.
Have analyzed these factors, the authors conclude that the Stalinist “crystal” was formed by socialist and capitalist practices combining in a special way. The “crystal” was never theoretically understood by contemporaries, including the people who implemented the Stalinist reforms, and was then “split” by the generation of de-Stalinizers. The authors offer what they describe as the Stalinist model as a recipe for improving the modern Russian economy.
The work of Galushka and his co-authors uses historical sources and takes into account the evolution of global economic thought, which might make it look credible to the unsophisticated reader. However, according to the economists Girsh Khanin and Dmitri Fomin, though the Growth Crystal authors claim to be pioneers, they simply ignore the many academic works that critically examine the sources of the Stalin era and the Stalinist economy as a whole. Khanin and Fomin have written a lengthy review, which we look at below.
First of all, the book’s key thesis that the national income of the USSR saw record growth and the living standards of workers and peasants rose multifold in 1929-55 seems dubious. The authors rely on the official Soviet statistics and claim the economy steadily grew by 10-14% each year for 25 years while ignoring the sharp criticism of the data and alternative calculations that put the annual growth at 6.0-7.5%. In addition, even while recognizing the real achievements of the Stalinist economy (the construction of cities, emergence of new industries, development of science, founding of a technologically powerful army), one must take into account the often-low quality of manufactured products, huge losses in human life, extremely hard living conditions, famine and repressions.
The five key factors that are said to have driven the Stalinist "economic miracle" also raise many questions. The first one the authors cite is state planning of the economy, thanks to which resources were supposedly accounted for, production chains purposefully built and standards for manufactured products set.
In the authors’ view, the development of sectoral balances and other innovative planning tools laid the foundation for large economies. Starting with Wassily Leontief (1973), Nobel laureates have shown that the state-planned economy is a boon for large innovation programs such as space exploration. The problem in the Stalinist economy, Khanin and Fomin write, was the implementation of the plan. The lack of necessary data on enterprises and consumer demand, along with difficulties in controlling product quality and regular purges of the Gosplan leadership, gave rise to phantom economic growth, where workers, to save their own skin, had to loudly report having implemented inherently unrealistic targets. Even the undoubted advantage of the planned economy – the ability to orient it toward something – bore fruit mainly in the limited spheres of defense, education and health care, but hardly paid attention to other sectors and the needs of the population.
The authors suggest that the unprecedented industrial growth of the USSR between 1929 and 1955 couldn’t be based solely on fear, slavery and other factors that make up the essence of Stalinism. Instead, they identify five actual economic factors – the “crystal grains” – that drove the growth in Soviet industry: 1) state planning; 2) a bet on innovative technologies; 3) a “twin-circuit” monetary policy; 4) a focus on efficiency; and 5) support for entrepreneurship.
Have analyzed these factors, the authors conclude that the Stalinist “crystal” was formed by socialist and capitalist practices combining in a special way. The “crystal” was never theoretically understood by contemporaries, including the people who implemented the Stalinist reforms, and was then “split” by the generation of de-Stalinizers. The authors offer what they describe as the Stalinist model as a recipe for improving the modern Russian economy.
The work of Galushka and his co-authors uses historical sources and takes into account the evolution of global economic thought, which might make it look credible to the unsophisticated reader. However, according to the economists Girsh Khanin and Dmitri Fomin, though the Growth Crystal authors claim to be pioneers, they simply ignore the many academic works that critically examine the sources of the Stalin era and the Stalinist economy as a whole. Khanin and Fomin have written a lengthy review, which we look at below.
First of all, the book’s key thesis that the national income of the USSR saw record growth and the living standards of workers and peasants rose multifold in 1929-55 seems dubious. The authors rely on the official Soviet statistics and claim the economy steadily grew by 10-14% each year for 25 years while ignoring the sharp criticism of the data and alternative calculations that put the annual growth at 6.0-7.5%. In addition, even while recognizing the real achievements of the Stalinist economy (the construction of cities, emergence of new industries, development of science, founding of a technologically powerful army), one must take into account the often-low quality of manufactured products, huge losses in human life, extremely hard living conditions, famine and repressions.
The five key factors that are said to have driven the Stalinist "economic miracle" also raise many questions. The first one the authors cite is state planning of the economy, thanks to which resources were supposedly accounted for, production chains purposefully built and standards for manufactured products set.
In the authors’ view, the development of sectoral balances and other innovative planning tools laid the foundation for large economies. Starting with Wassily Leontief (1973), Nobel laureates have shown that the state-planned economy is a boon for large innovation programs such as space exploration. The problem in the Stalinist economy, Khanin and Fomin write, was the implementation of the plan. The lack of necessary data on enterprises and consumer demand, along with difficulties in controlling product quality and regular purges of the Gosplan leadership, gave rise to phantom economic growth, where workers, to save their own skin, had to loudly report having implemented inherently unrealistic targets. Even the undoubted advantage of the planned economy – the ability to orient it toward something – bore fruit mainly in the limited spheres of defense, education and health care, but hardly paid attention to other sectors and the needs of the population.
Growth Crystal: On the Russian Economic Miracle. Source: VK
The second factor is technology: large-scale imports of Western inventions in the 1930s, followed by Soviet innovation. Stalin invested huge money to import Western specialists and technologies and copied foreign institutions in the USSR. The authors excitedly describe the history of cooperation and technology imports, showing how science and technology in the USSR progressed. Indeed, by the 1950s, even with all the negative aspects of the Stalinist economic mobilization, the modernization had borne fruit and helped boost the production of consumer goods.
Here, Khanin and Fomin point to the need for comparative analysis. The USSR, while indeed being ahead of the US in the sphere of rocket technology, was also vastly inferior in all other spheres, even though the countries had a similar number of scientists and engineers. The main problem of the planned economy was its inefficiency, which in turn was driven by negative motivations: the fact that production volumes had to be maintained, for example, hindered innovation that would have had the result of depressing output, as well as the massive repression of scientists, which the authors of the book forgot to mention.
The third grain of the “crystal” is the “twin-circuit” monetary policy, which essentially meant the simultaneous existence of non-cash money – used in settlements between enterprises and foreign trade – and domestic paper money – for use in stores. Domestic money had no market value and was a sort of convention. It couldn’t be exchanged for hard currency or real financial means.
The system was indeed innovative but didn’t work miracles. In the authors’ view, the state's singular control over money created a system of "non-cash issuance" that doubled capital investment in long-term projects every five years. However, here again the idealization of the Stalinist financial model is shattered by a critical approach to the data. According to the authors of the book, the state could create "endless money" while keeping down inflation, the key indicator for the stability of the monetary system. The fact is, however, that the Stalin era was characterized by price instability that saw prices double, triple and even quintuple. Besides, the stimulation of production through the printing of money and bills was more typical of the NEP era than the Stalinist mobilization economy.
The fourth factor in the growth of the Stalinist economy is said to be the focus on efficiency: reducing production costs, increasing productivity and creating material incentives. Such assertions are based on unreliable official Soviet statistics and ignore the problem of quality, however.
The authors erroneously equate the practices of socialist and capitalist competition. So-called “shock work” and the Stakhanovite movement of the Stalin era were situational phenomena that only concerned labor productivity without contributing to an improvement in quality or a real decline in production costs. Shock workers were often resented by peers, and the idea of socialist competition failed to produce effective economic competition.
Finally, the fifth grain of the "crystal" represents state support for entrepreneurship where private initiative and common economic interests overlapped. This unexpected, so un-Stalinist factor refers to two forms of legal economic activity outside the state: trade cooperatives (artels) and private farms. The authors of the book claim that artels and handicraftsmen accounted for 80% of the variety of goods in the Stalin era, while private peasant farms produced from 48% to 84% of food products across key categories.
However, Khanin and Fomin show that these impressive figures are based on erroneous calculations. The authors of the book compare the incomparable: Gosplan nomenclature and the assortment of non-state production. Reliable numbers show that in 1928-55 the share of cooperatives in output fell from 13% to 8%, while private farms took up only 4.4% of total agricultural land by 1950.
Just as important, neither form of entrepreneurship was originally conceived as part of the system. Each emerged as a concession, a retreat from the state economy in the face of economic collapse and a new famine. Small artels produced consumer goods, while private household plots were the only way for rural families to survive. The existence of these non-state economic institutions owed to the shortcomings of the Soviet planned economy.
The Growth Crystal is now popping in pro-government circles. The book seeks to prove the Stalinist economic model’s supposedly high efficiency and offers the five factors it was built on as a recipe for a new "Russian economic miracle.” It begins with the quote by Jean Jaurès to “take from the altars of the past the fire, not the ashes;” meanwhile, the end of the book offers ideas for applying the “growth crystal” to shape the future of Russia.
Since the authors see the application of Stalinist practices on the Russian economy not as a total revolutionary transformation of the regime, but as a strict and just uncle putting away the bad guys and bringing up the good guys, it isn’t worth discussing them in detail. In the imagination of the authors, it is possible to create a state planning institute while maintaining the principles of a capitalist economy and private property, to innovate under centralized management and to raise efficiency through state control. The recipe for a “growth crystal” being actively discussed today – and not just anywhere, but at meetings of the Russian government – isn’t Stalinism as it actually existed in the USSR, but conservative dreams of a paternalistic regime inspired by the “glorious times,” armed with a “Eurasian ruble” and applying the best practices of the past and rejecting all the bad ones. In recent years, the slogan “we can do it again” gained widespread popularity in Russia. Now, the ghosts of Stalinism haunting the corridors of the government building make us worry that they can do it again too.
Here, Khanin and Fomin point to the need for comparative analysis. The USSR, while indeed being ahead of the US in the sphere of rocket technology, was also vastly inferior in all other spheres, even though the countries had a similar number of scientists and engineers. The main problem of the planned economy was its inefficiency, which in turn was driven by negative motivations: the fact that production volumes had to be maintained, for example, hindered innovation that would have had the result of depressing output, as well as the massive repression of scientists, which the authors of the book forgot to mention.
The third grain of the “crystal” is the “twin-circuit” monetary policy, which essentially meant the simultaneous existence of non-cash money – used in settlements between enterprises and foreign trade – and domestic paper money – for use in stores. Domestic money had no market value and was a sort of convention. It couldn’t be exchanged for hard currency or real financial means.
The system was indeed innovative but didn’t work miracles. In the authors’ view, the state's singular control over money created a system of "non-cash issuance" that doubled capital investment in long-term projects every five years. However, here again the idealization of the Stalinist financial model is shattered by a critical approach to the data. According to the authors of the book, the state could create "endless money" while keeping down inflation, the key indicator for the stability of the monetary system. The fact is, however, that the Stalin era was characterized by price instability that saw prices double, triple and even quintuple. Besides, the stimulation of production through the printing of money and bills was more typical of the NEP era than the Stalinist mobilization economy.
The fourth factor in the growth of the Stalinist economy is said to be the focus on efficiency: reducing production costs, increasing productivity and creating material incentives. Such assertions are based on unreliable official Soviet statistics and ignore the problem of quality, however.
The authors erroneously equate the practices of socialist and capitalist competition. So-called “shock work” and the Stakhanovite movement of the Stalin era were situational phenomena that only concerned labor productivity without contributing to an improvement in quality or a real decline in production costs. Shock workers were often resented by peers, and the idea of socialist competition failed to produce effective economic competition.
Finally, the fifth grain of the "crystal" represents state support for entrepreneurship where private initiative and common economic interests overlapped. This unexpected, so un-Stalinist factor refers to two forms of legal economic activity outside the state: trade cooperatives (artels) and private farms. The authors of the book claim that artels and handicraftsmen accounted for 80% of the variety of goods in the Stalin era, while private peasant farms produced from 48% to 84% of food products across key categories.
However, Khanin and Fomin show that these impressive figures are based on erroneous calculations. The authors of the book compare the incomparable: Gosplan nomenclature and the assortment of non-state production. Reliable numbers show that in 1928-55 the share of cooperatives in output fell from 13% to 8%, while private farms took up only 4.4% of total agricultural land by 1950.
Just as important, neither form of entrepreneurship was originally conceived as part of the system. Each emerged as a concession, a retreat from the state economy in the face of economic collapse and a new famine. Small artels produced consumer goods, while private household plots were the only way for rural families to survive. The existence of these non-state economic institutions owed to the shortcomings of the Soviet planned economy.
The Growth Crystal is now popping in pro-government circles. The book seeks to prove the Stalinist economic model’s supposedly high efficiency and offers the five factors it was built on as a recipe for a new "Russian economic miracle.” It begins with the quote by Jean Jaurès to “take from the altars of the past the fire, not the ashes;” meanwhile, the end of the book offers ideas for applying the “growth crystal” to shape the future of Russia.
Since the authors see the application of Stalinist practices on the Russian economy not as a total revolutionary transformation of the regime, but as a strict and just uncle putting away the bad guys and bringing up the good guys, it isn’t worth discussing them in detail. In the imagination of the authors, it is possible to create a state planning institute while maintaining the principles of a capitalist economy and private property, to innovate under centralized management and to raise efficiency through state control. The recipe for a “growth crystal” being actively discussed today – and not just anywhere, but at meetings of the Russian government – isn’t Stalinism as it actually existed in the USSR, but conservative dreams of a paternalistic regime inspired by the “glorious times,” armed with a “Eurasian ruble” and applying the best practices of the past and rejecting all the bad ones. In recent years, the slogan “we can do it again” gained widespread popularity in Russia. Now, the ghosts of Stalinism haunting the corridors of the government building make us worry that they can do it again too.
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