Soviet economic system

In what sense did the Soviet economic system succeed?

After the collapse of the USSR in 1991, it seemed undeniable that the Soviet economic system was a failure. But how bad a failure was it? Isn’t there a criterion through which the economic system can be judged as good? In terms of economic development it did better than the Tsarist system, although it did poorly compared to other countries. But before all, it did well in succeeding in what it was designed for by the administration: increase USSR’s geopolitical and technological power.

The soviet economic system certainly achieved more than Tsarist Russia’s economy;  income per head grew by 55% between 1934 and 1936, whereas GDP grew by 37 % between 1928 and 1938. Such rates would indeed have never been seen in an economy mainly focused on undeveloped agriculture, which employed 70% of the population and counted for 50% of the GNP before 1917 (1). 

     Generally speaking,  however, the soviet economic system did poorly. Although the USSR definitively industrialised, and industry accounted for more than 30% of GNP by 1937 (2), this rate was achieved at the price of a neglected agriculture, whose output in 1928 was only 50% of the 1917 levels (1). Furthermore, although factor productivity rose by around 3% over the whole soviet era, the transition from extensive growth (more input for more output) to intensive growth (more efficient use of input for more output) never occurred: in fact, between 1928 and 1985, capital productivity fell by 1,9% (3). Last but not least, the USSR standards of living were some of the lowest of the industrialised world: the level of consumption in the USSR was only 28% of that in the USA in 1985 (3).

        Nonetheless, the soviet economic system could have achieved greatly: USSR investments grew by 70% between 1928 and 1938 (3); the nation had 33% more scientists than the USA with better qualification (3), along with technological leadership in certain fields such as airframes (2). But this potential was requisitioned and used to support the state in its political ambitions. Before WW2 and during the cold war after the 1960s, USSR wanted to show the world that it was more powerful than its capitalistic rival, the USA (4). Therefore, the administration requisitioned most of the GNP to reinvest it in heavy industry, where the production of electricity and gas grew by 31% and the production of ferrous metals by 11% between 1965 and 1975, and in military industry, where weapon production grew by 150% between 1937 and 1941 (1).

The success of the economic system is peculiar:  It achieved unevenly in terms of general economic patterns, but this system was not meant to bring about development; in fact it was a tool for the state to achieve its political ambitions: To prove that the USSR has a better system than Tsarist capitalism and to be an “apostle of socialism in one country” (p. 568) (4) from an industrial and technological point of view, in respect to Stalin’s words in its campaign of 1924.    

the economic transformation of the soviet union;, chp.1&9 & 9, Davies, Harrison & Wheatcroft,  Cambridge University press, 1994

Canadian journal of economics,  vol 34, 2004 edition, Bob allen

soviet & post-soviet economic structure & performance, P.R Gregory, R.C Stuart, chp. 10-11, fifth edition, 1994,  harper collins college publisher

(4) the emergence of Stalin’s foreign policy Tucker R. in Slavic Review, 1977