The Soviet Industrialization Policy Debate


by Nedal Awde, May 8, 2000
 

 

The economic policies, preceding those implemented by Stalin, impacted the outcome of these decisions.  In 1928 the first five-year Plan was approved.  The debate over this policy was a historical and critical one.  It reflected a moral exchange of ideals based on Marxist and Leninist economic theories.  The death of Lenin in 1924, lead to a struggle for leadership and re-evaluation of the Soviet economic policies.  The objective of the Bolshevik party was to reach a socialist society.  The question was how would this be accomplished without threatening the post-war recovery of the economy through the New Economic Policies without resulting in high inflation. 

During this period there was a unilateral desire for rapid industrialization because of the fear of war with the capitalist West.  China under Chiang Kai-Shek was now a threat, Poland was unstable and the United Kingdom (U.K.) had cut diplomatic ties with Russia.  Many in the Soviet Union felt that war with the outside world was inevitable.  For this reason, industrialization was desired to develop a strong military defense against this type of threat.  Stalin hoped that industrialization would not only create a military competitiveness but also a strong economic base for the USSR and eventually the use of Soviet resources and potential economic profitability to become self-sufficient.

 

The Soviet Industrialization debate of 1924-1928 was a result of the split in the Communist party in how to obtain a prosperous and self-sufficient Socialist state.  The division was between the right wing of the Bolshevik party and the left wing.  The spokesman of the left was mathematician E.A. Preobrazhensky.  Preobrazhensky favored an unbalanced growth policy, which favored industry.  He believed the maximum investment of capital accumulation must be placed in the industry sector to expand capacity of the economy.  Preobrazhensky believed in Rodan’s “big push” theory.  This meant that there must be a large amount of investment in the industry sector or else the industrialization would not work.  The main reason for Preobrazhensky’s support of this unbalanced policy was to prevent inflation.  He believed that inflation was due to the low capacity of the industrial sector and the loss of savings ability (Gregory and Stuart).  Investing in industry will close the large gap between consumer demand and economic capacity.  The long-run increase in capacity of the economy was to outweigh the short-run investment in agriculture, or what Marx referred to as sector II or the economy.  This proposal of Preobrazhensky also referred to Marx in his method of reducing inflation.  He turned to the Marxist primitive socialist accumulation, which suggested the peasantry finance the costs of the industrialization. Due to the high prices of consumer goods the standard of living for the peasants dropped and so did their spending. This was a method of forced saving.  This would also reduce the power gained by the peasants during the reallocation of the land.  Many criticized Preobrazhensky for this part of his suggested economic policy and for the weakening of the agricultural sector.

 

On the other side of the coin was the right wing economic prospect.  Two big participants on this end of the debate were Lev Shanin and Nikolai Bukharin.  Shanin opposed the leftist view because of the long extent of time needed for capital investment.  Shanin felt the low capital intensity of agriculture and the short-term investment of the industry made an agricultural favored unbalanced policy more efficient.  He also believed that the increase in agricultural investment would lead farmers to save more because of their marginal propensity to save (Gregory and Stuart).  Other benefits of investment in agriculture were the immediate increase in the capacity of the economy, which meant the amelioration of inflation, and foreign trade would benefit.  The Soviet Union could exchange agricultural products for industrial capital equipment based on their comparative advantage (Gregory and Stuart).  The support of the peasantry was very important in Shanin’s policy, unlike Preobrazhensky.  There were a few drawbacks to this analysis as well.  The investment in agriculture meant slower industrialization.  Therefor in the case of military threats industry investment would be necessary.  For this reason Shanin did not eliminate the prospect of industry investment. 

 

Preobrazhensky and Shanin suggested unbalanced policies however, Bukharin, the official spokesman for the right wing of the Bolshevik party argued for a balanced growth economic policy.  Bukharin believed that the two economic sectors, industry and agriculture, were too closely linked to favor one over the other.  Over investment in one would mean the decline in the other, leading to the decline in overall economic development.  Bukharin felt that the state should set prices that would gain the peasants trust and give them incentive to produce.  This policy meant slow but steady economic growth and the eventual outcome of a socialist state.  Unlike Preobrazhensky, Bukharin believed that the peasants should finance the capital accumulation but voluntarily.  He also believed like Shanin that the Soviet Union could finance their industry through trade with capitalist powers.  This meant exporting agricultural goods in exchange for capital goods until Russia became independent.

 

The eventual policy implementation of Stalin was influenced by this great debate over the means of attaining a socialist state.  Although Stalin did not make blatant proposals he did observe and side with the right in the beginning of the debate.  Stalin was pro-NEP policies and felt that collective farming had to be voluntary.  However, in 1927 with the grain crisis, Stalin began to see the credibility in the leftist standpoint (Gregory and Stuart).  The peasants supply of grain to the state was low.  Many of the peasants were practicing private trade.  The Russian government even had to import grain (Gregory and Stuart).  Like Preobrazhensky, Stalin felt that the peasant control over production was too risky for the industrial development of Russia.  Soon, Stalin turned to super-industrialization and the implementation of five-year Plans; they called the increase of the industry sector of soviet capital.  His proposed goals were seen as unreasonable by many.  To control the peasant’s production and the speed of industrialization, Stalin went against his former beliefs and followed a policy similar to that proposed by Preobrazhensky.  He believed stricter and forceful policies were necessary.  In 1929 Stalin ordered collectivization of agriculture.  To see that this was done, land and livestock of the peasants were taken by force and accumulated into collective farms which had quotas set for production quantities (Gregory and Stuart). 

 

 The strict policies of animal husbandry and collectivization, which resulted from Stalin’s harsh Industrialization policies, had a negative impact on the Armenian peasantry’s’ living standard.  Much of the livestock in Armenia died out.  Those who refused to join collective farms had their livestock taken away by Soviet forces that left the animals to die (Sarafian p. 423).  Furthermore, the set quotas on agricultural production were unrealistic.  They were too high for the peasants to meet.  This led to a food-shortage during the early 1930s amongst the poor in Armenia (Sarafian p. 421).  The incentive for the farmers to produce was low and their income was minimal.  The severe conditions in the agricultural industry resulted in a large inflow of people moving out of the countryside and into the cities.  This caused a housing shortage in Armenia during the 1930s.  The Soviet leadership’s inability to fund the needed excess housing led the Armenian government to take out loans (Sarafian).  Many rebellions occurred in the country amongst the peasants as retaliation to the coercion and forceful collectivization policies.  Armenia experienced a great deal of civil outbursts as a result of the inhuman policies.

 

Stalin’s Soviet Industrialization followed the ideals of the left wing.  Like Preobrazhensky proposed the industry sector increased substantially.  In 1940 the production of the industry sector rose from 28% to 45% and the agriculture sector declined from 49% to 29% (Gregory and Stuart).  Prices of consumer goods also rose at an obscene rate.  Between 1928 and 1937 consumer prices rose by 700%(Gregory and Stuart).  This shows the peasants contribution to the financing of the industrialization.  The first five-year Plans were “implemented at the expense of the agriculture sector and the consumer” (Gregory and Stuart).  The collectivization cost many people their lives due to starvation and famine.  Also the agricultural production output greatly declined mainly from the killing of livestock of peasants who were reluctant to join collective farms. 

 

The Industrialization Policy of 1928 did not result spontaneously.  It was influenced by the influences of the War Communism policy and the New Economic Policy of Lenin.  For example the nationalization of the economy under War Communism led agricultural output to fall all over the Soviet Union including Armenia.  This was a result of declining incentive of the peasants to produce a surplus (Gregory and Stuart).  The NEP years led to market and communism collaboration.  This system allowed the peasants greater freedom in production and pricing.  High unemployment and the Scissors Crisis, the demand of consumers was greater than the supply of consumer goods, were also the result of Lenin’s NEP.  The impact of these two policies led to the conditions, which resulted in Stalin’s decision to implement his five-year Plans.  There was a need for industrialization, lowering of inflation and control of production.  However, the final outcome of this policy, as mentioned above, resulted in both costs and benefits to the former Soviet Union.

 

 Bibliography

1)      Aslanjan, A.A., Soviet Armenia. Moscow Progress Publishers. 1971.

 2)  Gregory, Paul R. and Robert C. Stuart., Soviet Economic Structure and Performance. 2nd ed., Harper and Row, Publishers., Inc. New York, N.Y., 1981.

3)       History. http://ww.armeniaemb.org/history.html.

4)      Hossep, Abedian., “Armenia” http://www.armenia.html.

5)      Sarafian, Vahe Antranig., Soviet Rule and the Armenian People., BU Graduate  Dissertation.2v., 1956.

 

 

 

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