Towards a command economy, 1917-28

The Nationalisation of industry:

Problems facing Russia:

• Serious economic problems:

o Economy backwards and unsophisticated.
• Russia began to industrialise.
o Economy grew significantly from 1890-1914
o Economy still far behind the more developed nations.

Lenin’s early ideas:

• Believed that socialism was compatible with Russia in 1917

o Argued that as the revolution progressed, advanced
countries would send aid to developing countries and
therefore Russia would grow without capitalism.
• Argued that the revolution had destroyed capitalism
o But the economy was not strong enough for socialism.

Lenin’s vision of a socialist economy:

• Lenin believed that a socialist economy would be very

efficient.
o Believed that it required modern technology, expert
management and a well-educated and highly
disciplined workforce.
• Workers would be free from the capitalists.
o Workers would be free from the capitalists.
• Workers would be better paid and treated better.
o Therefore would no longer resent the work that they did.
• Lenin’s vision of socialism dedicated no time for leisure.
o No sympathy for laziness.
o Assumed that following the revolution people would
find their work fulfilling and therefore leisure would be
unnecessary.
• Lenin’s economic policies reflected his faith in expertise,
desire for efficiency and disciple
 o Plus, disregard for leisure.

State capitalism:

• Lenin’s state capitalist economy was based on

nationalisation of industry.
o Which ended capitalism by taking industry away from
middle-class owners.
o All industries nationalised, were run by Vesenkha.
▪ A group of economic experts:
▪ Designed to ensure factories were managed
by placing them under the control of well-
paid specialists.
▪ Co-ordinate economic production
• Only large industries were nationalised.
• Small factories controlled by workers or back to capitalists.
• Very unpopular.
• Little change from state capitalism and life before the
revolution
• Many workers rejected state capitalism in favour for
workers’ control.
• Lenin ignored opposition and state capitalism was the
official policy of the new government.
o Changed when civil war broke out.

Land reform:

• In order to win support and stimulate agriculture, Lenin

pushed out land reform.
o Took land from the church and aristocrat owners. And
gave them to the peasants.
o Therefore the land reforms were very popular with
peasants.

War Communism:
War communism designed to ensure:

• High levels of industrial output of war goods.

• Efficient allocation of resources.
• Food production to feed soldiers, workers and civilian
population.

Measures:
Food dictatorship:

• Lenin’s food dictatorship’ consisted of:

o Grain requisitioning:
▪ Cheka seized grain from peasants without
payment.
o Rationing: Supply Commissariat rationed the seized
foods.
o Largest rations went to workers and soldiers, smallest
rations given to members of the bourgeoisie.

Labour discipline:

• War communism brought out labour discipline:

o In 1918, working day extended to 11 hours.
o In 1918, work was made compulsory to all people who
were able.
o Harsh punishments given to people who were late or
caught slacking.

Abolition of the Market:

• Following measures introduced to try to abolish the market:

o Abolition of money:
▪ More money printed which led to hyperinflation
o Abolition of trade:
▪ Private trade made illegal.
o Complete nationalisation.
▪ All businesses taken over by state
o Conscription: Workers assigned to either work or fight
in the army.
 • Lenin’s argument that abolition money was a big step away
from capitalism and a move in the direction of a full-fledged
socialist economy.
o Where economic production and distribution were
centrally planned.

Consequences:

• Kept Red Army supplied and won civil war.

• Led to economic collapse.
o Failed to abolish market.

Economic Collapse:

• Grain requisitioning led to lower rates of agricultural

production.
• Peasants not paid for their grain or labour
o Therefore the peasants had no incentive to work.
• Secondly, industrial production declined.
o Too few incentives to work.
o Hunger led to workers leaving the cities and seek work
on farms where there was a greater chance being fed.
• Total workforce declined from 3 million workers in 1917- to 1.2
million in 1922.

Growth of a black market:

• Lenin’s economic controls failed to abolish the market.

o Historians estimate that only 40% of the food
consumed in Russia’s cities came from rationing of
food during the Civil War.
• Workers forced to steal government resources to make
goods that could be bartered for food.
• Metal workers would steal scrap metal and fuel to make
lighters.

Mass poverty:

• By 1921, Russian economy was collapsing.

• Shortages of all kinds of commodities.
 • By 1920, workshops in the major cities were closing due to a
lack of fuel.
• Fuel was in short supply, therefore government officials
would order the destruction of wooden buildings in
Petrograd in order to use the wood for fuel.
• Unemployment rose and harvests declined.
• Famine began as a result.

Political crisis:

• Mass starvation deepened the economic crisis, led to a

political crisis.
• Between August 1920-June 1921, peasants in the Tambov
region rebelled against the Communist Government.
• In Kronstadt, soldiers who hard supported the communists
without question, had turned against the government,
demanding a return to free trade.
• In March 1921, the sailors mutinied with a response from the
government of extreme force, defending itself and crushing
the rebellions.

War Communism conclusion:

• Led to military victory.

• But economic ruin.
• Ideological victory.
• Abolition of of money and the capitalist market led to many
Communists believing that War Communism was the new
foundation for a socialist society.
• Bukharin favoured the economic crisis.
• Further rebellions led to a large risk to the end of the
Communist Government.

New Economic Policy:

• Introduced NEP for a number of reasons:
 o Retain political power. Lenin described the NEP as an
economic retreat.
▪ Designed to stop a political defeat.
▪ In that sense, Lenin made an economic
compromise.
o Revive the economy:
▪ Lenin needed a policy to stimulate grain
production and end famine.
o Build socialism:
▪ By 1921, it was clear that a European revolution
would not happen.
▪ Therefore Lenin needed an economic policy that
would build Russia for socialism without foreign
aid.
• As 1921, Lenin argued that the NEP, over War Communism
was the correct economic foundation on which to build
socialism.
• Argued that the Communist Party must learn to trade and
use capitalism to build Communism.
o Also emphasised that the NEP would create peace with
the peasants.

Measures:

• NEP ended War Communism, creating a mixed economy,

which had both socialist and capitalist elements:
o Agricultural production left to free market to end
famine.
▪ Allowed peasants to buy, sell and produce freely.
▪ Grain requisitioning ended and replaced by a tax.
o Small factories and workshops employing fewer than
20 people were denationalised.
▪ Small factories allowed to trade freely.
o Large factories and major industries remained
nationalised.
o Money reintroduced.
• NEP was a major economic compromise.
• Lenin emphasised the need for a stable currency and for all
factories and workshops to make a profit.
 • Even government- run industries were expected to make
money.
• People had to pay for services, even transport which was free
during Civil War.

Consequences:

• NEP led to political and economic stability.

• Did not lead to rapid industrial growth, nor popular within
the Party.

Political and economic stability:

• Ending grain requisitioning was very popular amongst the

peasants.
• Free trade encouraged peasants to grow more food.
• Therefore famine ended.
• Food became more widely available.
• Growth in grain production:

• End in grain requisitioning led to a return of political and

economic stability by ending famine.
• Also led to the removal of a very unpopular policy.
Industrial growth:

• NEP led to industrial growth

• Market stimulated production, government invested the
money gained from tax in reopening factories closed during
the civil war.
• By the end of 1921, Lenin argued that the NEP was not merely
the right policy for creating economic growth.
o But the best way to industrialise the USSR and lay the
foundations for socialism
• Whilst taxing the peasants provided sufficient funds to
reopen and modernise existing factories, it did not provide
the money necessary to build new large scale factories.
• Therefore industry plummeted from 1926-1928.

Scissors crisis:

• NEP led to uneven economic growth.

• Agriculture recovered quickly, more supply of food led to a
fall in prices of agriculture.
• Industry recovered much slowly.
o Therefore prices rose.
• A gap opened up between farmers’ incomes and industrial
prices.
• Trotsky titled this crisis as the “Scissor Crisis”
• The gap between farmers’ incomes and industrial prices had
reached crisis point.
• The rise in industrial prices meant that farmers could not
afford to buy industrial goods and therefore there was no
incentive for farmers to produce large quantities of grain.
o Government intervened and subsidized the prices of
industrial products.
▪ Which led to them becoming more widely
available to peasants.
o However, led to less money being available to improve
the economy.
o Scissors crisis was a strong indicator that the NEP was
failing to industrialise the economy.

Inequality and corruption:

 • NEP led to the re-emergence of inequality and corruption.
• NEP led to emergence of “Nepman” traders who made money
by finding gaps in the market.
• Nepmen would travel to the country, transporting desirable
goods from factories or farms to the markets.
• Communist government regarded the Nep as parasites.
o Produced nothing and made money from selling
luxurys.
o Sometimes, Nepmen would be arrested by the Cheka
for profiteering.
o Continued to operate all the way till the end of the NEP.
• Nepmen grew rich whilst ordinary peasants stayed poor
despite hard work.
• Corruption grew, gambling and prostitution was large under
the NEP.
o Led to lot of social and economic problems.
o Widespread poverty among women in the 1920’s

Conclusion:

• MEP stabilized economy and replaced a very unpopular and

unstable policy.
• Ended rebellion.
• NEP achieved Lenin’s goal of maintaining political power.
• However, did lead to key issues like slow industrial growth,
unbalanced economy, a return of inequality and growth of a
black market.
• NEP still very unpopular with some members of the
Communist party.

State control of industry and agriculture:

• NEP led to debate within the Communist Party.
• All Communists agreed that the USSR must industrialise.
• However, they disputed the path to industrialisation.
o On the left: Trotsky and his followers wanted a radical
socialist policy:
▪ Dictatorship of Industry.
 o On the right: Bukharin and his supporters wanted a
continuation of the NEP.
▪ Maintain social peace.
o Centre: Stalin and his followers were prepared to follow
which ever policy worked.

The Left: the Dictatorship of Industry:

• Trotsky, favoured a policy of force agricultural

collectivisation.
• Merged farms.
• State control.
• Allow the state to take all profits generated by farms.
o Use the money to invest in industrialisation.
• Trotsky argued that this scheme would end private property,
and end capitalist market and therefore end inequality.
• He knew that it would lead to massive discontent among the
peasants.

The Right: building socialism with capitalist hands:

• Right-wingers like Bukharin argued that the NEP would be

the best way to industrialise.
• Argued that the NEP was slowly allowing the economy to
grow and industrialisation would happen eventually.
• The left argued that the policy of “riding the peasants nag”
to socialism, was dangerous.
• They argued it would lead to a re-emergence of capitalist
class determined to overthrow Communism.

The Centre: Whatever works:

• Centrists or pragmatists like Stalin argued that the best

policy was the one that actually worked.
• Stalin argued that economic policy wasn’t an ideological
issue, but a practical issue.
• Until 1927, Stalin supported the NEP, as it was leading to
economic growth.
• When growth rates declined, Stalin shifted.
War Communism Legacy:

• Left wanted a return to policies similar to War Communism.

• NEP was a period of time of compromise, whereas War
Communism was a heroic period in which the government
implemented true socialist policy.
• The right argued that War Communism had proved that
extreme measures would lead to chaos + rebellion.

Economic debate and the leadership struggle:

• “Great Industrialisation Debate” was a central part of the

leadership struggle.
• Contenders presented their rival economic plans to the Party
Congress.
• During the 1920’s, the right wingers consistently won the
debate.
• The leaders associated with the NEP held on to power.
• Most Communists were centrists.
• When the NEP failed, Stalin began advocating for a new
more left-wing economic policy.

Conclusion of Lenin’s economy:

• Lenin’s economic policy went through a series of different

changes.
• The changes in policy reflected the fact that Lenin didn’t
even have a detailed plan to began with.
• Lenin took in War Communism due to the nature of the
crisis of the Civil War.
o A crisis that requires state control of the whole
economy.
o Saw War Communism’s potential of destroying
Capitalism.
• By 1921, War Communism created a political and economic
crisis.
• Clear that the European revolution would not happen and
therefore Lenin was forced to build socialism without
foreign aid.
 o Therefore forced to go to NEP.
▪ An economic compromise.
• NEP controversial within the party,
o The left wanted radical change, a return to War
Communism
o The right wanted a continuation of peace through the
NEP
o Most of the government were pragmatic.
Industry and agriculture in the Stalin Era
The Five Year Plans and industrial change: From 1928-41
Main economic objectives:

• Industrialise Russia
• Ambitious goals
• Catch up with the west
• Eliminate Nepmen

Nature of the plans:

A lot of propaganda used to inspire workers to fulfil the objectives
of the FY plans.

• Focused on heroic objectives of the plans

• Celebrated successes of the plans
• Plans will lead to destruction of capitalism

Simply a list of targets, and nothing to do with HOW the economy

would function and create a strong economy, merely a
propaganda campaign used to try and achieve the targets set by
Stalin.
Successes under Stalin’s economic policies:
Heavy industry:
Production of iron, steel, coal and electricity increased greatly.
Achieved by building new factories to exploit the USSR’s natural
resources.
Transport:
Major success of the Plans, Moscow Metro’s first lines opened in
1935, easy transport around Moscow, therefore transported goods
more efficiently.
Labour productivity:

• Very low in the USSR, workers were less productive in the

USSR than in Britain, the USA or Western Europe.
• Little to no incentive to work hard due to low pay and long
hours. (1st FYP)
• Stakhanovite movement

The Stakhanovite movement began during the second FYP in

1935 as a new stage of socialist competition. The Stakhanovite
movement took its name from Aleksei Grigorievich Stakhanov,
who had mined 102 tons of coal in less than 6 hours
As a result, workers who wanted to be like him, wanted to beat his
records and hence productivity rose on the UK.
Rearmament:

• FY plans very successful in terms of rearmament.

• Economic planner’s priorities arms production as war
approached.
• By 1940, 1/3 of government spending priorities, were on arms
production.

However, shortages of quality materials like steel, slowed down

arms production.
Issues with the plans:

• Low production quality

• Plans set targets for production, not quality.
• Factory managers rewarded for producing large quantities,
regardless of what was actually produced.

• Plans did not specify what materials should be used for,

therefore little coordination between different factories.
• Materials produced were often stored at a factory and left to
decay, rather than being used.
• 40% of what was produced was wasted.

• Stalin purged the economic planners and industrial

managers, the ones who made the economy work.
• Stalin attacked members of the Gosplan, to an extent that
the 3rd 5YP was never finished.
• Huge pressure on the Gosplan to meet the demands of the
5Y plans.

Consumer goods:
Constant shortages of consumer goods like food shoes and
clothing. The shortages were the result of the following:

• Stalin’s priorities: Heavy industry and defence rather than

consumer production.
• Poor planning, planners did not anticipate the needs of
general consumers.
 • Poor production techniques. By the mid 1930’s, the soviet
economy was good at producing large quantities of raw
materials such as iron and steel. But consumer goods
required more complex techniques which the economy still
didn’t have.

Housing and living conditions:

• Significant issue from 1928-41. The plans required a huge

increase in the urban workforce. However necessary housing
never built.
• Poor living conditions from 1928-1941
• A better living standard was not a priority for Stalin.
• Consumer goods rationing was a constant feature under
Stalin’s economy.
• Working conditions were very harsh.
• Workers forced to work seven days a week.

Black Market:
Five Year Plans failed to end the free market and therefore the
shortage of goods led to a growth of a black market where
consumers could buy goods stolen by workers, who justified it by
covering up falsifying paperwork.
Conclusion to Stalin’s industrial policies:
+Pre 1928, the USSR was a largely capitalist agricultural economy
with a small working class.
+By 1941, the USSR was a powerful, urban, industrial economy that
was able to produce the resources necessary to defeat the
German Army.
–Unbalanced economy
–Arms production led to the expense of consumer goods.
– Wastage of resources was a strong reason why economic growth
did not lead to higher standards of living.
 Agricultural collectivisation and its impact:

Causes of collectivisation:
Communist ideology:

• Private property was the foundation of capitalism.

• During the period of the NEP, peasants with large farms were
able to grow rich, and therefore the communists wanted to
abolish private property and replace private farming with
state run farms. Therefore ending capitalism and inequality.
• Create an efficient economy, large farms were likely to be
more efficient than small farms as expertise and equipment
could be shared to increase production.

Failure of the NEP:

• Agricultural production fell because there was no market for

additional farmed goods, there was a limit to how much
food that consumers wanted.
• Farmers abused the price mechanism in 1926, by increasing
production to make more profit which led to a fall in prices,
and in 1927, farmer’s decreased production to keep grain
prices high.
• Left wing communists described this as “Kulak Grain Strike”
• Communists claimed that farmers put profits ahead of the
USSR’s needs.

Leadership struggle:

• Stalin had political reasons for ending the NEP, Zinoviev,

Kamenev and Trotsky had advocated a radical left- wing
policy of collectivisation and rapid industrialisation. Stalin
defeating them led to the left wing of the Party having no
leader, Stalin shifted to the left and hoped to retain his
supporters of the United Opposition and therefore gained
more supporters than Bukharin.
• As Stalin shifted to the left, he gained the majority of the
support of the central Committee and was therefore the
leader of the Communist Party.
 Introducing Collectivisation:
Emergency measures: 1928

• In July 1928, Stalin ended the NEP in order to end the Kulak
grain strike.
• Stalin reintroduced grain requisitioning from the peasants
through the Cheka.
• Grain would be used to feed the workers and used to sell
overseas to raise money for industrialisation
• Free trade=>Command economy
• Rationing and requisitioning did not mean collectivisation
but did signal an end to the NEP
• “Return to War Communism”

Dekulakisation:

• Peasants responded to requisitioning with violence.

• Requisitioning being one of the most hated aspects of War
Communism
• Stalin initiated “Liquidation of Kulaks”
• Meaning to take farms and equipment from the richer
peasants.
• However, in practice it meant that many peasants were
killed or deported if they resisted government policies.
• 1.5 million Peasants sent to labour camps as a result of the
dekulakisation campaigns.

Collectivisation:

• Introduced in 1929.
• Farms forcibly merged
• Equipment taken away from richer peasants and given to
the poorer.
• Peasants who worked in collective farms were allowed to
keep a small proportion of grain to live off of.
• Rest of the food used to feed workers in the city or sold
abroad to fund industrialisation.

Consequences of collectivisation:
 • Ruined soviet agriculture.
• However, funded industrialisation
• From 1929-1930, there was a drive initiated to ensure all
farms were collectivised which led to chaos and therefore
Stalin halted collectivisation temporarily.
• By 1941, almost all farms were collectivised.

Destruction of Soviet Farming:

• Peasants responded to requisitioning/Collectivisation by

destroying their crops, animals and machinery.
• Many peasants would prefer to destroy over help the
government.
• Stalin’s policies led to the destruction of:
• 17 Million horses
• 26 Million cattle
• 11 Million pigs
• 60 Million Sheep and goats.

Reduction of agricultural production was because of:

• Execution or deportation of kulaks who were often the most

experienced farmers
• Absence of incentives as farmers were no longer able to
make a profit.

Famine:

• Collectivisation led to famine in the Ukraine

• Ukrainian farmers were often unable to meet government
targets for farm production
 • Resistance to collectivisation had been at it’s fiercest in the
Ukraine.
• Stalin punished the farmers by seizing their grain and
livestock.
• Used famine to end resistance in the Ukraine
• Although he was offered support internationally, declined.

Mechanisation:

• Collectivisation was accompanied by mechanisation,

• Government allowed farms to hire tractors from machine
tractor stations, across the country.
• 75,000 tractors they provided had little impact on soviet
agriculture.

Grain procurement:

• Collectivisation allowed the government to procure more

grain than the NEP in 1928.
• In 1928, the government procured 10.8 million tons of grain
from the peasants.
• Which rose to 22.6 million by 1933
• Grain export rose too from 1 million – 4.7 million from 1928-
1930.

Long term issues of collectivisation:

Agriculture:

• Collective farms a lot less productive than private farms.

• Led to a decrease in production.
• Decline in grain production.
• Private farming continued on small scale in 1941.
• Private farms very important for soviet agriculture.

Agriculture during WW2:

• Consistently unable to meet needs of the soviet people and

the army during WW2.
 • Soviet government relied on US imports to provide almost a
fifth of the calories consumed by the Red Army.
• Harvests decline from a pre-war high of 95.5 million tonnes
to 46.8 million tonnes by 1945.
• Bread rations fell by 40%
• Potato rations fell by 80%

Recovery from war after 1945:

Fourth Five Year Plan, 1945-1950:

• Led to extremely high levels of industrial growth.

• 88% of investment went into heavy industry.
• Industrial output increased by 80% from 1945-50

• Soviet post-war plans continued to focus on military

spending, emergence of Cold War in 1946 led to the
expansion of the Soviet military.
Consumer goods:

• Production increased.
• However FYP focused mainly on heavy industry
• Only 12% of investment went into consumer goods like food
production.
• Although production of consumer goods doubled, they
continued to be scarce.
• Reconstruction focused on factories rather than homes.
• Equally, reconstruction of historic cities were given priorities
on historic cities over towns.

Employment:

• Wages were kept low.

• Made money more available for reconstruction.
• Women were forced to go out to work because their families
needed income.
• Stalin recognized that women were vital for the
reconstruction of soviet industry.
• Again, the FYP was full of inefficiencies and issues,
nonetheless the economy was the fastest growing economy
in the world.
• Although there was still major shortages of consumer goods
and housing.

Post War Agriculture:

• Soviet agriculture recovered slowly from the impact of the

War..
• Stalin’s top economic priorities after the war was industrial
reconstruction.
• As a result, Soviet agriculture suffered shortages pf
resources and workers from 1946 to 1949.
• After war was over, Stalin re-imposed strict discipline over
soviet farms.
• During the War, there had been a small increase in private
farming which was ending following the end of WW2.
• Overall, production still grew from 1947-1953.
 • Grain production reached its pre-war levels.

Stalin’s economy conclusion:

• Stalin’s great turn transformed the soviet economy and the

USSR.
• Policies were harsh, inefficient, and wasteful.
• However, they transformed the USSR into an industrial giant.
• Equally, collectivisation placed farming under Stalin’s
control.
• Issues like: Low productivity, unproductive agricultural
sector, inefficient industry, scarce consumer goods and a
massive military budget would continue to cause issues for
the Soviet leaders until the fall of the USSR in 1991.
Changing Economic Priorities, 1953-1985
Investment in agriculture: 1953-64:

Improved incentives:

• In 1954, Khrushchev changed the relationship between the

collective farms and the government in order to create
incentive for higher production rates.
• Wanted to invest in farming by offering farmers pries for
their produce.
• Under Stalin, each farm had to produce a quota of goods,
which was bought off the government for a very low price.
• Khrushchev reduced the quotas and introduced higher
prices for everything that was produced in addition to the
quota.
• Led to a 250% rise in farm incomes between 1952-1956.

Investment in resource:

• Khrushchev also invested in farm equipment and fertilisers.

• In 1954, Khrushchev announced the construction of new
fertiliser factories and an increase in the production of
tractors.
• By 1955, this resulted in a 30% increase in the number of
tractors available and a 40% increase in fertilisers created.

Virgin Lands Scheme:

• Khrushchev’s most ambitious agricultural policy.

• Hoped to increase Soviet agricultural production by turning
un farmed lands in the Northern Caucasus, Kazakhstan, and
Western Siberia into new farms.
• Launched in September 1953, it required significant
investment, so agricultural investment grew from under 3%
a year to 12.8% oft he Soviet budget between 1954-1959.
Corn Campaign:

• Khrushchev introduced the Corn campaign:

• From September 1958, Khrushchev encouraged farmers in
the Ukraine to grow maize.
• Plan to shift wheat production to the newly created Virgin
Lands farms, while maize would be produced in the
traditional farms of the Ukraine.
• Maize would be used to feed animals and would therefore
increase the amount of meat available to people.

• Corn campaign was a failure.

• Initiative focused on the success of US farms.
• Whilst soviet farms were only able to produce 50% of the
corn per hectare that the US farms managed due:
• To differences in climate.
• Lower labour productivity.
• And the inferiority of the Soviet tractors and fertilisers.
• The opportunity cost of producing more corn meant that
Soviet farms produced less hay.
• As a result, the amount of animal feed produced by Soviet
farms, reduced by 30%.

Agricultural success:

• Initially, the Virgin Land Scheme was very successful.

 • Grain harvests, meat and milk production all rose
significantly between 1953-1958.
• Overall, agriculture rose by 35.3%

• Virgin Land scheme led to a greater availability of food in

Soviet shops.
• Better living standards for Soviet citizens.
• Greater production also led to a 400% increase in income of
farm workers.
• Success of the scheme allowed Khrushchev to consolidate
his position and led him to take on even more ambitious
schemes.
• In 1956, Khrushchev introduced a new commitment o
produce more food than the US by 1960. This required a
300% increase in production in four years.

Agricultural failures :1954-1964

• Even during successful periods of 1954-1958, Soviet

agriculture remained very inefficient.
• Virgin Lands Scheme very expensive.
• Soviet agriculture was labour intensive.
• During the 1950’s and 1960’s, between 54% and 44% of the
Soviet population worked on farms.
• By comparison, only 5% of the American population worked
on farms, ans still produced double the food that the USSR
produced.
• Clearly, issues in efficiency in the USSR.
 • After initial success, the Virgin Lands Scheme failed to lead
to further growth.
• Harvests began declining below 1958 levels,
• Between 1960-1964, production slowly increased, so that
overall agricultural production was around 15% higher in
1964 than in 1958.
• Although this was good, it was no where near what
Khrushchev was aiming for in his plans.
• Therefore, although being moderately successful, it didn’t
meet his aims and therefore considered a failure.

Issues with Khrushchev’s policies:

• Machine and tractor machines abolish. Therefore farm

workers were less able to obtain modern farming equipment.
• Centrally directed campaigns were ineffective as they didn’t
reflect local initiative, for example, Khrushchev advocated
maize production where some parts of soviet farms had
poor climate and therefore led to a wastage of resources and
labour.
• Farmers didn’t always deliver the correct fertiliser to the
farms that needed it.
• Khrushchev repeatedly reformed the ministries dealing with
agriculture, leading to confusion.
• Soviet farms often had inadequate storage, therefore some
of the food produced was wasted.
• Pay for agricultural workers increase but remained poor.
• Khrushchev cut investment in agriculture from 12.8% a year
from 1954 to 1959 to 2% a year in 1960.
• Investment failed to make soviet farms more efficient,
therefore long term issues of inefficiency remained.

Summary of Khrushchev’s agricultural policies:

• Did not improve Soviet agriculture.

• However, further improvements were hampered by problems
with the system.
 • Like central direction of agriculture meant that local
conditions were not taken into account.
• Therefore could never be truly effective.
• Khrushchev’s reforms did not address the issues of
inefficiencies in the system.
• Soviet agriculture was too inefficient to meet his ambitious
targets.

Industrial modernisation:
Military spending:

• Stalin deliberately kept living standards low for increased

spending in military.
• Stalin’s heirs were dedicated into increasing living
standards for the people.
• Khrushchev began cuts in military in 1955.
• Consequently, percentage of GDP spent on military
decreased from 12.1% in 1955, to 9.1% in 1958.
• Returned in 1962.
• By 1964, military spending reached 11% of total GDP.
• Rise in military spending coincided with the fall in economic
growth.
• Therefore increasing military spending leads to a fall in
economic growth.

Seven Year plan: Light industry: January 1959

• Plan designed to boost agricultural production and the

production of consumer goods by investment
• Khrushchev hoped that more chemical production would
lead to better production of fertilizers and consequently lead
to a better production of crops.
 • Khrushchev believed that chemical production would
stimulate the two sectors of the economy that the USSR
needed to increase living standards.
• Shift in focus also reflected that the USSR no longer needed
to focus on heavy industry because it was mostly complete,
therefore a focus in heavy industry was unnecessary.

• Khrushchev’s very optimistic plan, which he hoped would lay

the foundations for the USSR to overtake the USA by 1970
and have Communism ready by 1980.
• Plan based a lot of optimism due to:
• Success of the Virgin Lands Scheme (1958)
• High rates of economic growth
• Success in the space race.

Achievements suggested to Khrushchev that the economy was

capable of growth and technical sophistication.

Success of the 7YP:

• Production of chemical and consumer goods rose between

1959 – 1965
• Increase not as significant as economic planners had
anticipated.
• 60% increase in the production of consumer goods, but still
5% less than Khrushchev’s goals.
• Fertilizer production increased by 19 million tons, 3.5 million
less than Khrushchev’s targets.
• Synthetic fibers production increased by 241,000 tons,
200,000 less than the target.

Problems with the 7YP:

Khrushchev continually introduced economic re-
organisation which was counterproductive, or so short lived that
they don’t have time to take effect.

• February 1957 Sovnarkhoz reforms decentralized power from

Gosplan to105 Sovnarkhoz. Reforms destroyed central co-
 ordination of the plan and therefore ruined economic
growth. Decentralisation didn’t even solve any of the issues.
• From 1958-1964, Khrushchev introduced increased
centralisation to solve the issues created by the Sovnarkhoz
reforms. However, the responsibilities of the Sovnarkhoz and
the new central bodies were not clear and therefore there
was confusion in the system.
• February 1962, Khrushchev divided the party in two. One half
for agriculture and one half for industry. VERY unpopular and
took place half way through the Soviet 7YP.
• Khrushchev changed the targets of the plan in 1962 with
more ambitious goals.

Khrushchev’s continued meddling led to a joke that Khrushchev

had changed the 5YP with not a 7YP, but 3 plans a year.

• Soviet economy itself was not designed to produce

consumer goods.
• Economy was not designed to meet targets.
• Production targets were set in weight.
• Therefore, factories produced thick sheet metal over thin
steel as it met targets quicker.
• However, light industry needed thin sheet steel to turn into
lamps and watches.
• Therefore factories produced light fittings that were too
heavy for ceilings.

• Consumer industries were set targets for the value of goods

that they produced.
• Therefore it made sense to produce less, but expensive
goods to produce.
• Consequently, Soviet furniture factories produced large
expensive sofas that consumers couldn’t afford in order to
fulfil the plan.
• Fundamental issue with the command economy was the
focus on production over consumption.
• Therefore, although the economy focused on consumer
goods a lot more following Stalin’s death, the goods
produced were often useless, undesirable and expensive
 Economic reform and decline after 1964:
Restoration of the economy:

• Khrushchev’s fall led to rejection of many of his reforms:

• Party reunited and the division between agriculture and
industry was ended.
• 7YP: abolished. From 1966, return of 5YP’s.
• Brezhnev continued what Stalin had set up, however, like
Khrushchev he also wanted an increase in consumer goods.
• However, Brezhnev, a lot less ambitious in terms of quality
and quantity of consumer goods.

Kosygin reforms:

• Kosygin advocated for reforms that were designed to cut

investment in the inefficient collective farms and divert the
funding into light industry.
• Proposed giving power over production to factory managers
and judging their success by the profit they made over the
production levels.
• Designed to force factories to produce goods that
consumers wanted.
• Introduced in January 1968- ended in August.
• Similar reforms in Czechoslovakia, led to a rebellion against
the USSR.
• Rebellion discredited Kosygin reforms.
• Therefore reforms halted in August.
• Authority returned to central planners.

Increase in Military investment:

• Brezhnev increased military spending.

• Goal was to achieve parity with the USSR in terms of their
nuclear power.
• During the Berlin Crisis of 1961 and Cuban missile crisis of
1962, Khrushchev had been forced to back down due to the
scale of power held by USA.
• Brezhnev wanted to be equal to the USSR and therefore
won’t be forced to back down by the USSR.
• Military spending increased from 11% to 13% from 1964-1970.
 • Policy was successful and nuclear parity achieved by 1970.
• However, maintaining this parity drained the economy
which led to more economic issues.

“Developed Socialism”:

• Brezhnev dropped Khrushchev’s commitment of becoming a

communist state by 1980.
• Slower economic growth and increased military spending
led to no possibility of transforming the USSR into a land of
plenty
• Although, Brezhnev still pushed for rising living standards in
the USSR.
• Abandoned Khrushchev’s promise of communism by 1980,
and replaced it with ‘Developed socialism’
• An economy with job security and low prices.
• Low food prices achieved by importing a lot of grain from the
West, rather than expanding Khrushchev’s Virgin Land’s
Scheme, or by reforming the economy.

Second economy:

• Brezhnev also accepted the black market, as a “necessary

evil”
• Rather than try to get rid of it, Brezhnev allowed it to exist as
it increased access to consumer goods and food and
eventually raise living standards.

‘Andropov’s reforms’, 1982-84:

• Andropov, like Brezhnev, refused reform.

• Approach to economy was important, because unlike
Brezhnev, he was willing to admit that there were economic
problems in the USSR that should be fixed.
• To improve productivity, he introduced three campaigns:
• Anti-Corruption campaign:
o Investigated senior Party officials and managers who
were using Soviet resources to become rich.
o Brezhnev’s Minister of the Interior was sacks and put
on trial for corruption, and took his own life before the
end of the trial.
 • Anti-Alcohol campaign:
o Workers sacked for drunkenness and fined for
damaging machinery or products if drunk at work.
• Operation Trawl:
o Anti-Drunkenness campaign: KGB officers visited
parks and public places and arrested people who were
drunk or absent from work.
• Andropov’s campaign did lead to a reduction in
consumption of Vodka but consumption of Andropoka, a low
quality cheap vodka, increased.
• Andropov’s campaigns were poorly enforced and so poor
discipline continued in the USSR.
• Andropov’s reforms did not lead to fall of the USSR and still
did not stop economic decline.

Declining growth:

• In 1945, the Soviet Economy was the fasted growing

economy in the world.
• From 1950-1958, the economy grew at an average rate of 7.1%
a year.
o The US by contrast, grew at an average of 2.9% during
the same period.
• Therefore, the Soviet economy seemed to outperform the US
economy.
• However, Soviet growth rates declined to 5.3%
• Reached 2% in the 1970’s
• Shift reflected some of the key issues in the Soviet economy.
• Unable to create ‘intensive growth’
o Growth that is based on improving efficiency of
existing factories.
• Central planning agencies, even at local levels, did not have
the information to improve efficiency of individual factories.
• Problem with central planning meant that the Soviet System
was never able to conquer the inefficiencies that had
emerged in the system in the 1930’s.

The impact of oil price:

 • One of the main features of the Soviet economy in the 1970’s
was declining growth and rising standards of living.
• General rise in international prices of oil in the early 1970’s
masked the issues of the Soviet economy.
o Rising prices ensured the USSR made more money
from selling oil.
o Oil production increased from 243 Million tons in 1965
to 603 million tons in 1980 in order to supply
international demand.
o Allowed soviet government to import grain from the
west
o Soviet government was able to borrow from the West
based on income from oil.
o As a result, Living standards continued to increase.

Soviet Economy 1964-85:

• Economic reforms following Khrushchev were very minor.

• Brezhnev accepted the economy as it was and rather than
improve the economy, he lowered the expectations.
• Andropov’s reforms did try to address the problems of Soviet
economic decline that had become evident in the 1970’s.
• Still remained committed to the essential features of the
economy:
o Central planning of industry
o Collectivisation of agriculture.