The Command Economy of Georgia

by Jacqueline McKeon

The former Soviet Republic of Georgia has enjoyed an infamous reputation within Communist circles; for the past 80 years, Georgia has been recognized as one of the most prosperous members of the Soviet Union, but also as the most reluctant to adopt Soviet policies. Georgian nationalism never waned under the shadow of Communism or Stalinism; the people fought against Russian tyranny with the most potent weapon they possessed: economics. "Breaking the law was for decades a form of rebellion against Moscow. Georgia, which occupied a small place in the Soviet economy by providing wine and fruit to the rest of the empire, was the most corrupt republic, and those who cheated the system based in faraway Moscow were treated as heroes" (

The Georgians were heavily oppressed by Moscow; Stalin's Economic Planning and the Soviet Command Economy hurt Georgia hardest in her agricultural sector. Georgia's economy and society had historically been based in farming and labor, a fact which was thoroughly exploited by the Soviet Union. Stalin's harsh collectivization and industrialization policies squashed out the kulak class in Georgia, along with any remnants of capitalism or prosperity. By 1941, 92.6% of the peasantry class were in collective farms with only 3.4% left in individual farms (Suny). The collectivization campaigns were disastrous, igniting rebellions among the people and inflation within the Georgian economy. Although collectivization policies were relaxed during NEP, and again in 1932, the Soviet government continued to intervene in Georgia's agriculture; the state requisitioned a certain quota of all produce to sell abroad (Suny). This led to a famine in Georgia similar to concurrent periods of starvation in the Ukraine.

Although it appeared that industry advanced during its initiation stage in Georgia, by 1934 productivity had slowed as capital investment declined and inflation rose (Suny). Georgia was more vocal about her discontent as a Soviet republic, and for this reason, was often focused on as a dissenter: by the Fall of 1932, new controls had been issued to Georgia which further suppressed her economy and society. "Georgian nationalists contended that Georgia's role in the division of labor among Soviet republics was unfairly assigned and that other republics, especially Russia, benefited from the terms of trade set by Moscow".

While Georgia was forced to pay high prices for production inputs, her agricultural products and manganese (needed for steel plants) were purchased by the Soviet Union at disproportionately low prices ( Worker absenteeism was punished through lay-offs and the refusal of ration cards; internal passports were issued to most residents, with the exception of the peasants to prevent them from switching factories (Suny).

Stalin's first Five Year Plan was severe and economically disappointing. Peasants tried to hoard their produce, selling it on the black market, rather than giving it to the state. As a result, Stalin decided to institute a new plan which aimed to create more stability in the Georgian economy. "A series of laws was passed in the first three months of 1933 that ended the kontraktatsiia system and established quotas for deliveries of grain (postavki), which were to be paid for by the state at fixed prices" (Suny). However, in actuality, these laws boiled down to the peasants paying a certain percentage of their crops to MTS in return for notification services designed to alleviate burdens on the farmers. "In August 1934 these purchases were made compulsory…only after the postavki were pade to the state were the [peasants] allowed to sell any surplus on the kolkhoz market or in the illegal black market" (Suny).

This "illegal black market" proliferated as part of the Georgian response to Soviet economic control and because it was a natural mobilization out of an evolving Georgian society. "Economic statistics for Georgia are difficult to evaluate for both the Soviet era and the post-Soviet period, primarily because of the country's large underground economy. Traditional Georgian familial and clan relations had intensified the economic corruption that infused the entire communist system" ( However, the Georgians could not have carried out a fully functioning black market without the ready aid of praetorian Soviet officials. "Local elites in the communist party joined with the underground speculators and entrepreneurs to form an economic mafia" (

Corruption in Soviet politics did not end with its mingling in underground economic affairs; Soviet officials exploited Georgians to better their careers, as well as their incomes. "The country's political leaders were also the directors of a huge economic enterprise…economic matters occupied an enormous amount of politician's time as the state obliterated the autonomy of the economy…to make the best of an often impossible situation, officials had to resort to coercion and repression, deception and rule-breaking, protecting their own and shifting the blame for failure to invented enemies" (Suny). This political injustice was exacerbated throughout the 1930s and 1940s under Stalin's paranoid and erratic dictatorship.

The period of state-planning was followed by the terror of the Purges and greater nationalizing of industry; the few individual farms that were left survived strict limitations, while trade was carried out by the state and prices were set by the authorities. "In essence, the Stalinist 'command economy' had curtailed markets and private trade and had centralized decision-making far more than any economy in history" (Suny).

As Georgia faces transition to a market economy, she must contend with the omnipresent effects of the soviet command system which gave birth to a thriving black market. Few Georgians are willing to exchange their privileged way of life for the hardship of economic restructuring. "Rooting out corruption in Georgia will require changing a Soviet-era mentality…There were always ways around the rules, to cheat the law. People invested their whole life into trying to prove they don't abide by any regulation, because rules came from the other side of the universe" ( In light of the collapse of the Soviet Empire, the Georgians have effectively become their own worst enemy.




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