Published by EH.NET (July 2004)  
 
Paul R. Gregory, _The Political Economy of Stalinism: Evidence from the 
Soviet Secret Archives_. New York: Cambridge University Press, 2003. xi + 
308 pp. $90 (cloth), ISBN: 0-521-82628-4; $32 (paper), ISBN: 0-521-53367-8. 
Paul R. Gregory and Valery Lazarev, editors, _The Economics of Forced 
Labor: The Soviet Gulag_. Stanford, CA: Hoover Institution Press, 2003. 
xvii + 212 pp. $15 (paperback), ISBN: 0-8179-3942-3.  
 
Reviewed for EH.NET by Mark Harrison, Department of Economics, University 
of Warwick.  
 
  
 
In 1945 Allied victory in Europe opened up the archives of Hitler's Germany 
to investigation. Sponsored by the U.S. and British strategic bombing 
survey groups, a number of talented young economists including John Kenneth 
Galbraith and Nicholas Kaldor spent years combing through twelve years of 
records. The results of their work included path-breaking studies of the 
political economy of the Third Reich.  
 
The Soviet state collapsed in 1991. Its economic administration was more 
complex than that of Nazi Germany by an order of magnitude, and it lasted 
for many decades. It presented a far greater puzzle to western social, 
political, and economic thought. The records that it left are much more 
comprehensive. But economists are barely involved in their exploitation, 
most of which is being left to social and political historians.  
 
Paul Gregory is one of a small band who have promoted economic research in 
the Russian archives; the other major figure, on my side of the Atlantic, 
is Robert W. Davies. For much of the last decade Gregory has been carrying 
on this work in collaboration with Russians and other westerners. Both the 
books under review use this research to investigate the Soviet economy and 
its institutions under Stalin. Gregory's monograph, _The Political Economy 
of Stalinism_, generalizes from it to make a textbook for economists and 
economically-minded historians. The volume that he has co-edited with 
Valery Lazarev, _The Economics of Forced Labor_, brings together a series 
of new archive-based investigations on a specific theme, the role of labor 
coercion in the Soviet economy.  
 
 From a methodological point of view the most important shared aspiration of the two books
is to extend the domain of economic analysis. Traditionally, western Sovietological
economists thought of the Soviet economy as comprised of two spheres. One was the sphere
of "mission oriented" activities that aimed at maximizing technological objectives
regardless of cost, e.g. building sputniks. The other was the sphere of economic
activities that aimed to maximize an economic benefit, e.g. building refrigerators (e.g.
Berliner 1976, p. 506-9). It seemed obvious that economic analysis could throw more light
on the latter than the former. One of the main contributions of new research has been to
extend economic analysis to Soviet centralized decision making with regard to the adoption
and pursuit of major technological and institutional missions including collectivization,
forced industrialization, the foundations of centralized planning, and the development of
the Gulag archipelago. What emerges is that these were also "economic activity" in the
sense that the players were all looking for a payoff of one kind or another, and the costs
they were willing to incur or impose on others depended on the private stakes.
 
First, _The Political Economy of Stalinism_. The argument of the book runs 
as follows. In Chapter 1 Gregory asks whether we should view the rise and 
fall of the Soviet economy in terms of "The Jockey or the Horse?" What was 
more important: the qualities and decisions of individual leaders (the 
jockey) or their institutional context and constraints (the horse)? He 
concludes that this is a largely false distinction: the Soviet command 
economy fostered dictatorship and those who are self-selected for 
dictatorship tend to conform to a type. Thus, "the jockey and horse are not 
selected independently" (p. 21). No one could have beaten Stalin to the 
leadership who was not even more controlled, crafty, and brutal than Stalin 
himself. In chapter 2 Gregory goes on to argue that the emergence of a 
command system with Stalin in charge was a largely inevitable consequence 
of the Bolshevik revolution. The defining event was the decision to 
collectivize peasant agriculture in 1929, which was intended to fix a 
growing crisis of grain marketings. Gregory argues that this crisis was 
largely a result of government policy, but the policy did not result from 
any misunderstanding of economics. Rather, government policy pursued more 
accumulation than the peasantry and market forces were prepared to allow, 
and Stalin's response was then to abolish the market and subordinate the 
peasantry directly to the state.  
 
Chapter 3 outlines the five "Principles of Governance" of the new Stalinist 
state, which Gregory identifies as a command system based on collective 
farming and forced industrialization; the suppression of views that 
diverged from the party's general line; the merging of the ruling party 
with the state; the prohibition of factions and the subordination of 
interest groups to the encompassing interests of the party-state; and 
Stalin as a personal dictator empowered to settle disputes among the top 
leaders. The result was to place an astonishing workload on Stalin 
personally; since he had the right to arbitrate on all important decisions, 
and to select what was important, the result was that agents at lower 
levels passed a vast array of unselected trivia up to him. Gregory calls 
this "The Dictator's Curse." Although he chafed against it, Stalin 
preferred it to the alternative which could have left him out of the loop 
on decisions that might afterwards have turned out to be significant.  
 
Given a dictatorship, what kind of dictator was Stalin? In chapter 1 
Gregory outlines various types of dictator: benevolent, proprietary (i.e. 
Olson's "stationary bandit"), selfish, or one that holds the ring. The 
Stalin that emerges from the chapters that follow is not benevolent, mainly 
proprietary, sometimes selfish and sometimes ring-holding when it suited 
him. The stationary bandit emerges most clearly in Chapter 4, which deals 
with the core of Stalinist economic policy. Here Gregory outlines a model 
of investment maximization subject to an inherited capital stock and a 
workforce that supplies effort subject to a "fair" wage. He substantiates 
this model with reference to two things: Stalin's well-known obsession with 
accumulation, and his watchful concern for worker discontent that the 
archives have revealed. The secret police monitored worker morale and kept 
Stalin well informed. Stalin controlled this dissatisfaction in two ways: 
locally by redeploying consumer goods when signs of discontent appeared to 
grow critical and, when discontent became general, by cutting investment 
back. Although Stalin could maximize the volume of investment in this way, 
however, he could not make it efficient and the history of the period 
abounds in what look like disastrous decisions when it came to detailed 
allocation.  
 
Chapters 5 to 9 deal, respectively, with long term planning at the center, 
the tensions between central planners and industrial ministries, 
opportunistic behavior within the ministries, the process of planning 
within the ministries, and the implementation of financial controls. 
Gregory suggests that long term plans were primarily political and 
motivational instruments that aimed to shift the focus and balance of power 
in Soviet institutions by flushing out opponents and enabling others to 
signal loyalty. When long term plans were broken down into operational 
targets for each sector responsibility for implementation had to be 
delegated, and this created scope for the pursuit of departmental and 
personal self-interest. This formed the basis of perennial plan bargaining. 
Because the producers themselves controlled the vital information about 
requirements and achievements the result was that Stalin's planning agency, 
Gosplan, clashed repeatedly with the industrial ministries not only over 
real demands and supplies but also over information. Stalin kept Gosplan 
loyal and relatively truthful only by keeping it small and disinterested in 
the fulfillment of plans. Even so, Gosplan had to compromise with industry, 
for example, by leaving central plans highly aggregated; this gave industry 
control over fulfillment in detail.  
 
Detailed allocation was then governed largely by intra-ministerial 
decisions. This was the point at which centralized guidance and the 
requirements of efficiency lost most of their impact. Ministerial planning 
was largely retrospective and plans usually remained preliminary; they were 
rarely taken to the final stage of official confirmation, which made them 
easier to revise. A detailed study of decision making in the chief 
administration for metallurgy shows that, while orders and information 
shuttled up and down the ministerial hierarchy, everyone engaged in 
characteristic forms of opportunism. To their inferiors, each official 
demanded rigorous implementation of orders, while bargaining with and 
concealing resources from those above them. Real allocation took place at a 
level far below that of the plans; more effort went into ensuring supplies 
than organizing production. Loyalty and personal promotion went hand in 
hand; the promotion of individuals required a growing number of high level 
positions, met by continually promoting sub-ministerial organizations to 
ministerial status. Regardless of their personal profile, all ministerial 
officials behaved in much the same way in relation to their own fiefs. 
Finally, in forming the motives for opportunism money was more important 
than has been thought, not necessarily for personal enrichment but for 
easing the path to plan fulfillment, and financial controls were chaotic.  
 
Gregory concludes with a retrospective on the whole Soviet era, including 
the collapse of 1991. The inner logic of the system boiled down to 
coercion. "The extreme concentration of historical power was not a 
historical accident" (p. 252). "The system's founders ... clearly 
understood ... that enterprises must be coerced if resources are allocated 
administratively. The system had to wait more than fifty five years for a 
dictator to come along who did not understand this basic principle" (p. 
256). This would make it seem as if the fault for the Soviet collapse lay 
with Gorbachev. Gregory also argues, however, that the coercive system did 
not only concentrate power; it also deprived the dictator of criteria with 
which to make efficient decisions, and it deprived those below him of any 
motivation towards efficiency. Poor information and bad motivation was 
combined with complexity that increased through time and returns that 
diminished to the point of no return.  
 
More detailed light is shed on coercion in the Soviet economy by the second 
book under review, _The Economics of Forced Labor_. This book results from 
collaboration between the editors, Gregory and Valery Lazarev, and several 
Russian scholars; there are also contributions by another American, a 
Britisher, and a German, so the cast of characters is genuinely 
multinational. Robert Conquest provides a short foreword after which 
Gregory's introduction sets out the main lines of historical development of 
the Gulag (chief administration of labor camps of the Soviet interior 
ministry, NKVD, later MVD). This information, mostly already known, 
provides the context for the subsequent chapters. In the 1920s there was 
just one Soviet forced labor complex on the northern Solovetskii islands. 
The first big expansion came with the collectivization of peasant 
agriculture which threw hundreds of thousands of well-to-do peasant 
families into captivity; the Gulag was created in 1930 to handle the sudden 
inflow. After that, recruitment became big business and by the early 1950s 
there were about 2.5 million penal laborers, mostly engaged in forestry, 
mining, and construction; they formed significant shares of the workforce 
in these sectors, but never more than about 3 percent of the total 
workforce including farm workers, and less than this in terms of the value 
of national output. By the end the Gulag had evolved a complex functional 
and production branch structure; it employed "freely-hired" civilians in 
large numbers, and rented many of its own inmates out to civilian 
employers; it employed guards in a ratio that rose as high as one to ten 
inmates, but many of the guards were themselves inmates.  
 
The introduction is followed by three overview chapters, five case studies, 
and concluding remarks by Valery Lazarev. Chapter 2 by Andrei Sokolov, 
"Forced Labor in Soviet Industry," provides often neglected context in 
terms of the mechanisms of the wider Soviet labor market. The important 
thing here is that the growth of the Gulag was part of a wider process that 
had largely substituted coercion for other incentives by the end of the 
1930s. State employees now faced draconian penalties of imprisonment and 
forced labor for lateness, minor absenteeism, and unauthorized departures; 
these remained in force until Stalin's death. Wartime decrees imposed still 
harsher penalties on violations by workers in defense industry and 
transport. These laws were widely flouted yet still netted fifteen million 
convictions in twelve years, including a million Gulag terms of between 
three and ten years. They were thus a major recruiting sergeant for the 
labor camps. This also illustrates a fact that is not widely appreciated: 
although the Gulag population was smaller than western observers had 
sometimes guessed, it also had high turnover with many entering the system 
for relatively short periods before returning to society.  
 
In chapter 3, Oleg Khlevniuk gives a short account of the political turning 
points in the history of the Gulag, and goes on to tackle two questions 
about the efficacy of forced labor. He shows that the Gulag authorities 
gradually lost faith in the utility of marshalling human masses into 
unskilled employment at gunpoint; forced labor became increasingly 
mechanized and skilled and even began to attract wage payments. There was a 
process of "conversion of slaves to serfs" (p. 57). Khlevniuk also 
questions the developmental role of forced labor in the sense that the 
projects on which it was employed were valued at cost, but the cost was 
much greater than their true worth to society. "Many prisoner-built 
projects were difficult, or almost impossible, to build with free workers, 
but was it necessary to build them at all?" (p. 64). The White Sea-Baltic 
Canal and the Baikal-Amur Mainline would not have been undertaken in a 
market economy, not because a market economy lacked the "advantages" of 
socialism but because they would never yield a profit under any system.  
 
Aleksei Tikhonov analyzes "The End of the Gulag" in chapter 4. In 1953, 
within three months of Stalin's death, MVD chief Lavrentii Beriia had 
released one and a half million prisoners, 60 percent of the gulag's 
inmates. Tikhonov points out that this could not have been prepared 
overnight. In fact, elements within the MVD wanted to put an end to the 
growing financial losses of the Gulag, and were also alarmed by its high 
rates of recidivism. Seeing that the Gulag was not working in terms of 
either exploitation or rehabilitation, they had been trying to scale it 
down since 1949 with proposals to convert a large part of the camp 
workforce to exiled laborers, "freely-hired" although not free to go home. 
Ironically the original reformers were themselves victimized after Stalin 
died.  
 
The next five chapters cover more specific aspects arising from forced 
labor in Noril'sk (Leonid Borodkin and Simon Ertz), the Far East (David 
Nordlander), Noril'sk again (Ertz), the White Sea-Baltic Canal project 
(Mikhail Morukov), and Karelia (Christopher Joyce). Some highlights: the 
experience of the Far Eastern camps illustrates the perennial tension 
between the possibilities for exploiting the forced laborers and the 
requirements of maintaining them. The Karelian camps show the experimental 
process by which the authorities learned the scope and limits of the 
exploitation of forced labor. The White Sea-Baltic Canal project was 
initially seen as a story of "successful" completion, and this stimulated 
illusory expectations for the future. The Gulag leaders willingly undertook 
the building of Noril'sk as a result because they underestimated the risks 
and difficulties that would arise. The operation of Noril'sk helped to 
expose illusions about the ease with which the inmates could be manipulated 
and coerced into supplying effort. The "profitable" exploitation of forced 
labor proved an elusive goal. As time went on the authorities lost faith in 
unbridled coercion and heavy punishments, and turned more and more to 
positive inducements including higher wages and early release in return for 
extra effort.  
 
Both the volumes that I have reviewed here adopt the methodology of social 
science. Narrative provides background but is not the central focus. 
Alternative hypotheses are formulated and tested informally. The standards 
of evidence and proof are not those that are usually available in 
conventional applied economics. There are figures and tables but no large 
quantitative datasets and hardly any regressions. The great bulk of the 
evidence is qualitative: decrees, memoranda, judgments, letters, reports of 
conversations, and anecdotes. The argument proceeds mainly by illustration. 
This is characteristic of the new institutional economic history associated 
with the writing of figures such as Douglass C. North and Avner Greif. At 
the present it is not clear that anyone can do better.  
 
One possible criticism of both books is that while it is obvious that the 
source materials are new it is not so clear that the conclusions are always 
novel. To give an example from each book: Gregory finds that the main 
purpose of long term plans was motivational, but Eugène Zaleski (1971, p. 
291) also concluded that the main role of these plans was to act as a 
"vision of growth." Several contributors to _The Economics of Forced Labor_ 
note the surprising importance of positive incentives in securing effort 
from prisoners who were apparently completely powerless and whose 
reservation wage was apparently close to zero; but the same point was made 
before by Rasma Karklins (1989). Indeed, in the early chapters of his 
_Gulag Archipelago_ Alexander Solzhenitsyn (1974) provided an extended 
analysis of the labor economics of the camps, based on anecdote and memoir; 
the incentives that he described are quite different from those emphasized 
by the work presently under review, and it would be of interest to see 
discussion of the possible reasons for this divergence. Having said this, 
there can be no doubt that the general level of evidential detail and 
economic analysis in the present works is greatly superior to anything that 
has been available hitherto.  
 
These books share still other features. There is something in them to 
challenge everyone. Both assume some background knowledge of Russian and 
Soviet history and will be read with great interest by specialists and 
Honors students. Historians may find that they need to rethink historical 
problems in terms of the economic choices that were available. Economists 
will find themselves challenged by unfamiliar institutions and unusual 
problems to solve; in the past year I have used _The Political Economy of 
Stalinism_ as a textbook for economics undergraduates who have been excited 
by the opportunity to think outside the boxes of Micro 101. As a teacher of 
economics and economic history I believe that these books signal new 
directions in the study of the Soviet economy that have interesting 
parallels with the new thinking in economic history and political economy 
associated with scholars like Greif and Daron Acemoglu. They will greatly 
influence the ways that we teach and do research in the future.  
 
In summary, if you want to know more about where Soviet economic history is 
going I strongly recommend that you read these exciting new books. The 
Hoover Institution has generously made the full text of _The Economics of 
Forced Labor_ available free of charge; the URL is:  
 
http://www-hoover.stanford.edu/publications/books/gulag.html.  
 
References:Berliner, Joseph S. 1976. _The Innovation Decision in Soviet Industry_.
Cambridge, MA: MIT Press.
 
Karklins, Rasma. 1989. "The Organisation of Power in Soviet Labour Camps." 
_Soviet Studies_, 41:2, pp. 276-297.  
 
Solzhenitsyn, Alexander. 1974. _The Gulag Archipelago, 1918-1956_. Volume 
1. London: Collins/Fontana.  
 
Zaleski, Eugène. 1971. _Planning for Economic Growth in the Soviet Union, 
1918-1932_. Chapel Hill, NC: University of North Carolina Press  
 
  
 
Mark Harrison is professor of economics at the University of Warwick and 
honorary senior research fellow of the Centre for Russian and East European 
Studies, University of Birmingham. He is the author of a number of books 
and articles on Soviet economic history including "The Political Economy of 
a Soviet Military R&D Failure: Steam Power for Aviation, 1932 to 1939," 
_Journal of Economic History_, 63:1, 2003, pp. 178-212.  He edits the PERSA 
(Political Economy Research in Soviet Archives)Working Papers, available 
from http://www.warwick.ac.uk/go/sovietarchives.  
 
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