1.2 Industry

State Capitalism

Oct 1917 - Land Decree

• Abolished private ownership, putting land in the hands of the “people”
  

Nov 1917 - Decree on Workers Control

• Put workers in control of factories

Dec 1917 - People’s Bank of Russian Republic

• all private banks were nationalised & joined to form…

Dec 1917 - Vesenka

• created to supervise economy

• paid productive workers more to establish discipline

• placed well-paid specialists in charge of factories

• coordinated production to meet society’s needs

War Communism

1. Food dictatorship

   Grain was forcibly requisitioned - 150,000 Bollsheviks used

   Rationed by Supply Commissariat

2. Reintroduction of heirarchies

   Workers Councils in factories were replaced by managers

   Ranks were reintroduced in Red Army

3. Military-Style Discipline

   Death penalty was introduced for striking workers

4. Abolition of the Market

   Money became worthless due to hyperinflation

   Formally abolished & private trade was illegalised

5. Labour Discipline

   11-hour working day introduced

   Unemployed were forced to join Labour Armies on public infrastructure projects

   Communist Saturdays - expected to volunteer for revolution

   Compulsory work for all able-bodied men aged 16-50

Consequences of War Communism

Food production had fallen to 48% of 1913 level

Breakdown of transportation & distribution systems = famine

20 million died due to famine

Heavy industry had fallen to 20% of 1913 level

Industrial workforce left cities in search of food (1917) 2.6 million → 1.2 million (1921)

Opposition grew:

• Kronstadt Mutiny

  • “Soviets without Bolsheviks”

  • Lenin said it lit up reality like a flash of lightning

• Tambov Rising

  • 50,000 Red Army troops put it down

NEP

Ended requisitioning → replaced w/ tax in kind

Ended forced collectivisation

Privatised small-scale industry

Piecework & bonuses were used to improve productivity

Reintroduction of currency to pay wages

Legalised private trading → Nepmen developed

Described by Lenin as an economic retreat to stop a political defeat

Success of NEP

Industrial output rose rapidly

• largely due to repair of roads & bridges

• existing factories were put back into production

• better harvests enabled industrial worker growth & foreign exchange for technology

Better harvests 1922-23

Problems of NEP

Corruption through a black market

Prostitution was widespread

Gangs of children roamed cities to steal goods

Imbalance between agriculture & industry = Scissors Crisis

→ Low grain prices discouraged peasants selling grain

→ Gov stepped in to regulate prices in Dec 1923

Motivations of the Command Economy

1. Political

   • Sideline the Right of the Party (favoured NEP - Trotsky, Bukarin, Rykov)

   • Extend gov control &Stalin’s influence

   • Remove Nepmen & Kulaks

2. Military

   • 1927 British raided Soviet trade mission in London

   • Sparked fears of imminent invasion

   • Peasants started hoarding grain

   • Confirmed Stalin’s suspicions that peasantry held back economic growth

3. Economic

   • NEP hadn’t brought about rapid industrialisation

4. Ideological

   • Inequality had increased, infuriating Communists

   • Increased gambling, crime & prostitution

   • Wanted to abolish capitalist market to lay economic foundation for socialism

First 5 Year Plan (1928-32)

• Made more efficient use of existing factories

• New plants were built but lacked significant impact until 1934

  • Magnitogorsk

    (1929) 25 people → 250,000 (1932)

• By 1933, only 17% of workers in Moscow were skilled

  → Reliance on revolutionary attitudes

• Shock brigades used

  Ex. Alexei Stakhanov mined 15x quota

  Rewarded w/ bigger apartment & rations

• Use of Gulag labour

  • White Sea Canal

    Employed 180,000 prisoners - 10,000 died

    Completed early & under budget → used as propaganda

    Only dug to 12 feet, useless

• Factory managers under severe pressure to meet target

  Increased bribery & corruption

• Quality sacrificed for quantity

  • Stalingrad Tractor Factory

    Supposed to produce 500 per month

    June 1930 - only produced 8

Second 5 Year Plan (1933-37)

• Used plants established under 1st Plan → Dramatic growth

• Chemical industry developed

  • Oil was underwhelming

• Initially set targets to production of consumer goods

  • Some advances (Footwear production & food processing)

• Rise of Hitler redirected focus to defence

  → Heavy industry & armements prioritised

  → Moved industry east of Ural Mountains for protection

• Development of transport

  • Moscow’s Metro

    Lines first opened in 1935

  • Moscow-Volga Canal opened in 1937

Third 5 Year Plan 1938 →

• Geared more directly towards arms production

  • By 1940, 1/3 of gov spending was devoted to military

  • 1939-41 9 new aircraft factories

• New industry was located in remote areas (Kazakstan)

  → Regional development & even distribution of industrialisation

  → Industry east of Ural Mountains to be protected

• Rapid growth in engineering & transportation

• Stalin attacked members of Gosplan, so it was never finished…

Evaluation of 5 Year Plans (1928-41)

• Completion of projects to power industrial growth

  • Dneiper Dam

• Proved it was able to defend itself against Nazi Germany

• First 5 Yr Plan - textile production decreased

• Housing industry largely ignored

• Purges in 1937 slowed down economy

• Rigidity & lack of understanding of rural communities led to waste

17% growth rate

Steel x4 Coal x6 Oil x3 Electricity x10

Productivity rose 25%

BUT 40% was wasted - poor coordination & transport

Reasons for Collectivisation

1. Ideology

   NEP farming was essentially capitalist

   Communists wanted to abolish private ownership

2. Economics

   Under NEP, gov only took small tax - collectivisation allows more

   Small scale agriculture was inefficient

   Larger scale makes mechisation more cost-effective → reduce labour requirements

3. Failure of NEP

   1927 - production fell leading to food shortages

   Peasants were wary of growing large crops, as the State would seize it at a low price - disincentivised production

4. Political

   Stalin could win support from the Left

   Extend socialism to the countryside - support had declined after Tambov Rising

   Pressure on gov to abolish Kulaks

5. Industrialisation

   Needed to support urban growth

   Stalin was convinced peasants were holding back industrial progress

Collectivisation

Emergency Measures of 1928

• Reintroduced forcible grain requisitioning

  • Peasants responded violently

  • Destroyed crops, machinery & animals

• “Liquidisation of Kulaks” commanded by Stalin

  • 1.5 million peasants sent to Gulags

Collectivisation began in late 1929

• Farms were forcibly merged, equipment was redistributed

• Rest of grain was sent to cities or exported to fund industrialisation

By 1940, almost all farms were collectivised

Grain procurement (1928) 10.8 million → 22.6 million (1933)

Consequences of Collectivisation

Unrest led to deaths of 17 million horses, 26 million cattle

Grain production fell (1928) 73 million tons → 68 million tons (1933) Due to:

• Execution & deportation of kulaks who were often the most experienced

• Lack of incentives (farmers couldn’t make a profit)

Famine Holodomor 1932-33

• Resistance had been fiercest in Ukraine & Stalin punished farmers by seizing grain & livestock

• Famine was used to end resistance in Ukraine

• 5 million died

• Stalin declined international aid

Exports rose (1928) 1 million tons → 4.7 million (1930)

Agriculture during WW2

• Consistently unable to meet needs of Soviet people & Army

• Most able-bodied men were conscripted from collectives, machinery & livestock were requisitioned

• Gov relied on US imports to provide 1/5 calories consumed by Red Army

• (1940) harvest 95.5 million tons → 30 million tons (1942)

  • Number of cattle halved

• Potatoes rations fell by 80%

• Gov lifted restrictions on private plots to incentivise peasants to maintain production

Industry during WW2

• Centralisation of economy proved effective at mobilisation resources for war

• Defence Committees were set up locally to coordinate production

• Factories were converted for war

  • Moscow - children’s bicycle factory → flamethrowers

  • Whole factories in the West were evacuated away from Germany

• Immediate collapse in production then recovered after 1941

• 1943-45 = 73,000 tanks & 94,000 aircraft

• Consumer goods production was non-existant - largely imported through Lend & Lease Scheme

• Steel production (1940) 18 million tons → 12 million (1945)

25 million homeless, 70,000 villages destroyed

4th Five Yr Plan (1945-50)

Prioritised reconstruction

• 88% of investment went into heavy industry

• Industrial output increased by 80%

• Continued to focus on military → Cold War

• Production of Customer goods doubled

  • Remained scarce - only 12% of investment

  • Made worse due to end of Lend & Lease

• Reconstruction focused on factories, not homes

• USSR could now exploit E Europe

  • machinery was taken as reparations

• Use of 2 million slave labourers from the Gulag

• Strong central planning → Plan was overfufilled

• Retraining programmes & harsh penalties

  • Failure to adopt new technologies (plastics or chemicals)

Post-War Agriculture

• Recovered slowly

• Prioritized industrial reconstruction so agriculture suffered shortages of resources & workers

• Reimposed strict discipline

• Taxed private plots to reduce their importance

• Imbalance of sexes were more pronounced

  • Worse w/ shortage of livestock - women had to shackle themselves to plows

• 1947 - famine in parts of Ukraine

• By 1952, grain production still hadn’t recovered - less productive than 1913

• Khrushchev, as Party Secretary, introduced larger collectives (easier for larger-machinery & to control)

  • By 1952 - 10,000 larger collectives were created

5th 5 Yr Plan (1951-55)

Continued growth, just at a slower & more realistic rate

Cold War led to increased arms expenditure

Resources were diverted into grandiose projects

→ Ex Volga-Don Canal

Huge undertaking that carried very little traffic

Living standards started to recover

1952 real wages reached level of 1928

Opposition to Khrushchev

1. Vast bureaucratic system stifled initiative

   Harsh labour laws

2. System was clumsy & wasteful

   Unable to deal w/ unforeseen events & trends

   Ex. Harsh winter increased demand for warm coats

Khrushchev’s Reforms

1. 105 Regional Economic Councils

   Decentralised supervision of enterprises - hoped it would better respond to local circumstances

2. Removal of harsh Labour Laws

   Working week reduced from 48 hours → 41 (1960)

   Incentives replaced Coersion

3. Managers were given more influence

   Allowed to keep 40% of profits to increase inovation, as they could reinvest as they wished

4. Greater emphasis on vocational education

5. Liberman Plan 1962

   greater autonomy for local managers & market influence on prices

Seven Year Plan (1959-65)

• Discovery of new mineral resources

  • Encouraged gov to transform fuel & chemical industries

Khrushchev - Promotion of Light Industry

• De-Stalinisation saw a move towards consumer goods & agriculture at a more realistic rate

Investment in Agriculture under Khrushchev

• Reduced quotas & introduced higher prices for everything beyond quota

  • 250% rise in farm income 1952-56

• Invested in farm equipment & fertilisers

  • By 1955 - 30% more tractors 40% more fertlisers

• 1953-58 Food production increased 51%

• Harvests declined below 1958 levels

Issues w/ Khrushchev’s Policies

Khrushchev’s Agricultural Campaigns

Virgin Lands Scheme

• Launched Sept 1953

• Required significant investment (budget grew from 3% → 12.8% 1954-59

• Used unfarmed lands - 6 million acres cultivation

• Initially very successful but then failed to lead to further success

  • Harvests began declining below 1958 levels

  • Moderately successful but considered a failure as it didn’t meet targets

But the land was only usable for grazing - too dry

• Inadequate storage = wastage

Corn Campaign

• Sept 1958 - encouraged Ukrainian farmers to grow maize, shifting wheat to new Virgin Land Farms

• Supposedly would feed animals to increase meat

• Soviet Farms only produced 50% corn per hectare than US farms

  • low labour productivity

  • inferiority of tractors & fertilisers

Kosygin’s Reform 1965

Aimed to unleash creativity in decision-making process & improve productivity

Gave incentives to managers to use resources more effectively