A balanced view of Soviet Economy

The economy of Russia and of the Soviet Union during the last century has been totally a new experiment from many point of view, and a great failure for many others. I will use as support: the paper “Russia and The Soviet Union Then and Now” by Stanley Fischer(April, 1992), “A documentary History Of Communism in Russia” by Robert Daniels (Vermont, 1993) and the notes that Prof. Bianchini gave me after attending his class about “Modernization and Nationalism in Eastern Europe”.
The issue of modernizing Russia was still sensible to Tsars; that after the abolishment of Serfdom (1861), and the start of the exploitation of Oil in Baku, brought the Russian Empire inside the Industrial Revolution concentrating in the westerns regions many industries (Finland, Baltics, Belarus, Ukraine, Bessarabia and “Congress Poland”). From 1861 to 1913, the growth rate of Russia was always positive arriving near the one of US, UK and Germany if not surpassing it. The many possibilities in the vast Russian empire attracted many capitals, without caring to the big economic crisis (first real big capitalist crisis in the second half of the XIXth century). The many investments brought to Russia railways, in order to connect such a big land country, such as the Trans-Siberian railway connecting Moscow to Vladivostok, and the Trans-Caspian railway connecting the new territories conquered around the Caspian Sea.
With the Brest-Litovsk treaty, Russia had to cede all the Western region, loosing half of its industrial capability. Moreover, with the civil war and the “War Communism’s requisitions” the output dropped to 31% for the industrial’s one and to 60% for the agriculture’s one compared with its condition before the war1.
After the end of the civil war, the “NEP” policy was applied form 1921 to 1928, and thanks to this policy the output succeeded to overcome the pre-war’s one with a surplus of 10%. But, after the introduction of the Stalinist policy of Central Planning and to the “5-years plans” the economy closed any possibility of development of a socialist market, since collectivization was brought with many casualties thanks to famines, and forced requisition in the years when even the harvest wasn’t at the top, or at a level that could satisfy the needs of the countryside, the needs of the cities and the export.
Bucharin and Preobrazhenskij (two Russian communists), offered to Stalin a different view of the economy, in opposition with the requisitions and to the existence of a socialist market, that would not alienate the productive classes of the country. The implementation of NEP to a mix state/private economy in a “realist” way, that obviously is opposed to “Marxist’s utopia” but on the other hand is needed since the country is not developed, and in need of foreign investments and of technology. Giving to factories the possibility to have a surplus and leaving to the farmers the possibility to sell their products could create a dynamic socialist economy.
During the years of collectivization the economy of Russia had to face WWII and its costs, but aside from that we can say that from 1928 to the beginning of the 60’s, Soviet economy was always growing, and in the 30’s with a 10% yearly growth rate according to some sources (mainly soviet) or less according to others (American sources). The main characteristics were the massive use of labour, capitals (took mainly from the requisitions) and natural and energy resources, of which the territory has always been reach. On the other hand there is no a real technological development, there is not international trade or financial services (like
1 “Russia and The Soviet Union Then and Now” by Stanley Fischer(April, 1992) pag.5 table 3
the stock exchange) and there are not investments from the outside. The economy is subsidizes by the state, bringing workers and generally economy to an alienation from efficiency, since there was no real incentive to production.
Another main problem since Stalin’s political economy was the concentration of heavy industry and the absence of the light industry, so at the micro-economical level, consumers could not satisfy their demands because there was not enough goods to buy.
Neither Khruscev and Liberman reforms could succeeded, because there was a need of a strong leader (like Stalin was) that could make a big switch of the country’s political economy. Unfortunately both Kruschev and Gorbacev were not strong leader and they were still believing in Marxist Economy, while China since 1979 thanks to Deng’s reforms succeeded in three decades to become the first economic actor in the world economy.
Gorbacev, has not been totally radical in the reforms, because of the presence of a conservative area inside the CPSU that was always strong and envied every kind of reforms, he feared the country was not able to be radically changed and was not a strong leader, neither one that was ready to use the force in order to make reforms and policies succeeded.
The Soviet Union had to cope with the Helsinki Accord (1975), to the Human Rights “ideology” supported from the USA, and implanted in Western Europe and moreover to the fact that was tied with the Warsaw pact to other European countries and not Asian and to Asian societies. On the other hand, China and also other Asian countries has showed that they were ready even to great loss of people for supporting a war, or internal policies. The human’s life costs that China was ready to bear, was not the same for Russia, or at least it was feared such.
Now I would like to analyze some of the good things of Soviet Economy, and of their heritage in Russia. First of all the heavy industrialization of the 30’s was really important for the Soviet Union and for Russia, even if it had a really bad impact in the population. Thanks to its growth and to the victory in WWII, Soviet Union was able to exit from WWII as a superpower. The industrialization and the imminent war gave a big weapons sector that was dismantled after the war, since there was a fear of another confrontation with the west, and after some years, against other socialist countries; the Soviet Union maintained a big public expense on weapons and defense.
Thanks to the research for the use of nuclear energy and the development of nuclear weapons on the one hand, and to the “race” for the “space” on the other hand; Soviet Union expenditure and research in this two field was massive, but also the results give to Russia the possibility to be one of the first (if not the first) countries in the world for nuclear energy/weapons and “Cosmo” related activities.
The energy sector was not really well developed in the Soviet Union, and moreover, because of the ideological non-interest in becoming integrated with the world economy, didn’t developed the possibility for the SU to be the major world energy producer. We know that in the 70s and in the 80s; Soviet Union was supplying Europe with energy but there was not a real image of developing this role for the Soviet Union, also the autarchic Stalinist view of economy that permeated the Soviet Union until its end.
Today energy is the main driver of the Russian economy of the former Soviet Republics rich of resources; and it’s today that this sector is developing even with foreign investments. Russia is still trying to attract foreign investments and capitals, also with the free economic zones like the one is going to be created Crimea. The former Soviet Union is a market in expansion that give many possibilities, but it needs technology, because it was the lack of technology that stopped in the Soviet Union any possibility of
economic growth and it is now something that is needed in Russia and in many republics in order to have their own economy and not totally depending from the selling of energy resources.
2) Suggestions for a new EU-Russia partnership
After the facts of the last year, the Ukrainian crisis and the fall of relation between EU and Russia the relationship between the two subjects must be reconstructed, also considering the fact that it is mostly European’s fault for the decline of relations between the two subjects. Europe must first of all, as a sign of friendship lift all the sanctions and ask to other side to do the same.
After having established a normal trade cooperation that is good also for Europe and vital for many small and medium European business that are the most affected from the trade crisis. After a normalization from the “trade” point of view has to recognize Crimea, while has to not recognize the independence of Kosovo.
Economic partnership cannot be discussed without a political common point of view of some issues. Europe must stop to look at Russia as the “cold war” enemy, while on the other hand should deeply question its own relationship of subjection from the US that is totally an heritage of the Cold War not needed anymore.
Countries inside the EU that are irrelevant like the Baltics or Poland, must understand that their own interest are not the one of the European Union, while the US must accept the fact that the EU is not its own pet. In respect of the first case, there should be sanctions against the EU members who prefers to do its own interests instead the one of the whole Europe; if sanctions don’t work, there should be the expulsion from the EU. In the case of the Baltics, there should be strong sanctions from the EU in order to recognize to the “Russian populations” equal rights compared to the Baltic’s one. In relation with the second problem, US’ hegemony over Europe, the EU should ask for more Russian participation in European issues in order to balance the American hegemony, that will always has the first place in European elites, thanks to its soft power and with the presence of US’ international police “NATO”.
The EU must stop immediately any support to the actual Ukrainian government, instead there should be a strong critique against it, EU should ask to Kiev to stop any hostility, to embrace a real peaceful approach and to try together with Russia to solve the problem. The possible solution are a reconciliation between the East and the West of the country, that would bring to the Federalization of Ukraine asked from the Kremlin or to a division of the country, and let the two parts freely choose which path follow.
Finally, EU should stop to finance ONG, or political opposition to the Kremlin and to its elected president and government; EU doesn’t have to appreciate Vladimir Putin, since no European leader is asked to be appreciate by Putin, but a mutual respect should drive the relations between the parts. Finally, Europe should remember that their citizens are not Americans, and their interests are European not Americans.
Finally, the last political problem, is the ambiguous role of the UK, which is supporting Kiev massacres with Weapons as Baltics and Poland send mercenaries. Every country who doesn’t respect EU policy, EU interests and instead has its own agenda that it is contrast with the development of good relations between EU and Russia must be actively sanctioned, and if this bring to no result, must be expelled from the EU.
Without solving first these political problems there cannot be any political trust, and so mutual respect, respect of each one’s system, sovereignty, culture, traditions and interests.
Considering the economical aspect of the relationship between the EU and Russia, what really needs Russia and all the Soviet space is the advanced European technology. Just considering the energy sector, Russia cannot efficiently extract and use all the resources that has because of the lack of investments from the West, which is needed. Europe must re-activate the “South Stream” (южный поток) project, in order to better supply Southern Europe.
About energy Europe must create a common framework with all the former soviet republics, in order to not create competition. Caspian states’ resources, should not be thought as competitors instead with the creation of a consortium between EU and the Soviet Republic in order to satisfy all the European needs of natural resources, what on the other hand should do Europe, is to bring its own technicians and specialist in order to develop the countries starting from the energy sector and then for “induction” to develop other sectors, bring European technologies and support local and national production in the soviet space instead that a mere energetic relation.
Europe must try to achieve a more integrate economy with Russia and the CIS, while TTIP is totally anti-European, and would damage the European people in support of American corporations. Putin2 proposed to EU that instead of choosing the street of TTIP, they could create a custom union between EU and EEU (Eurasian Economic Union).
The other platforms on which EU and Russia/CIS are the so-called “R&D” (Research and Development). About research, there should be an implementation of common exchange programs for schools and universities (like the Erasmus Mundus); moreover there should not be a movement only from the CIS to Europe but also on the opposite from Europe to the CIS. These programs are meant to meet many cultures and different people meet each other, for knowing and understand better “the others”. From the European “side” there is a lot of ignorance (mainly in the once-wealthy Western Europe) about what there is at east of the European Union. This would really bring people to analyze Russia not from the Cold War’s point of view, or from the Pentagon’s point of view, but maybe with a more analytical and objective mean.
There is a need of integration also of titles and diplomas, in order to make possible to those graduated in Russia or in the CIS to have the possibility to work in Europe without any problem, and vice-versa. So an exchange of teachers, professors, and instructors between the two sides in order to have a better understanding each other. Russia and CIS countries must implement the “Bologna process” and the convertibility in ECTS of exams, in order to bring equivalence between diplomas.
About research, the European efforts could be joined with the one of the CIS, Russia has many brains that could work together in European scientific project, since in the Soviet Union, scientific subjects had the priority. Moreover, EU could support itself research projects about all fields in Russia/CIS together projects of the singles European countries. This would bring development in the Soviet area and could expand European research.
2 http://fortruss.blogspot.it/2015/01/putin-to-eu-dump-ttip-and-embrace.html
Another important point about EU-Russia relationship is the expansion of the European Union eastward. The main problem about for Russia is that the enlargements of EU came after the enlargements of NATO, and from Moscow are seen at the same level, since the whole Eastern European countries that joined EU or are planning to joining it are also NATO member (with the exclusion of Serbia that at least now, is not planning to join NATO). With valid reasons the enlargement of EU (and NATO) are seen from the Kremlin as threat to Russia and to its hegemony in its region.
Europe has to stop its expansion Eastwards, instead should focus on the integration of the Balkans countries (Albania, Bosnia, Montenegro, Makedonia, Serbia), and Russia should assist Europe in this mission. In all these countries there is a strong presence of Orthodox people, in some of these people are also Serbian, the first friendly country of Europe towards Russia. It is still hard for Serbians to accept the decapitation of their country and of their unity in many little pieces. A reconciliation between the Balkan people can be made only by the EU and Russia together.
Another point of cooperation between Russia and Europe must be in the Mediterranean and in the Middle East, for centuries Russia wanted an access to the warm seas, and Europe always prevented it. Today the situation it is really complicate and globalized that everyone has its own interests. UK and French interest in Middle East are not really European but “Neo-colonial” while there is European’s opinion different from the one of U.S. Russia with the defense of Syria, is showing how the continuous messing in Middle East’s internal affair, the uncritical defense of Israel, the partnership with Saudi and other oil-salafi-wahabi monarchies, together with the support to the Neo-Ottomanism of Turkey brought to the total mess and to the rise of ISIL.
If Europe and Russia wants to fight against terrorism, Europeans should not to be so hypocrites to put before their interests to the stability of the Middle East.
Finally, Russia and CIS could be seen as a bridge between Europe and China. For many reasons the EU is critical towards China, while Europeans have its own interests in China, mainly economical, but Russia could serve as a bridge, for the re-establishment of a “Silk Route” between the Europe and China, involving Russia, the Caucasus, Central Asia, Persia and India.
At this point the economic and logistic cooperation between Europe and Russia/CIS (that could be expanded to the other “Silk Route” Asian countries) could bring many economical/trade opportunities, and could unite the Eurasia continent, a dream for Russia, a nightmare for Washington and for its supporters.
For concluding, and sum up I can express in two points the policy the EU should pursue:
– Start to be European and to do European interests and not Trans-Atlantic’s ones.
– Go East, move the European interests towards East, not by backing US-NATO, neither by doing European neo-colonialism, but looking for an Eurasian integration that would start with Russia/CIS region (that already integrating themselves in an Asian context thank to the Shanghai Cooperation Organization), and then with the Middle East and the Far East. Russia can be the key for Europe to any integration towards East.

– Fischer, Stanley, “Russia and the Soviet Union Then and Now” Paper published in 1992.
– Daniels, Robert, “A Documentary History of Communism in Russia”, Vermont, 1993.
– Bianchini, Stefano, “The Challenges of modernity. Idea, Politics and Itineraries of Eastern Europe in the 19th and 20th century” (lecture notes, MIREES, 2014-2015).
– http://fortruss.blogspot.it/2015/01/putin-to-eu-dump-ttip-and-embrace.html
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