The costs of keeping secrets
Today many people think modern dictatorships such as that of the Chinese Communist Party might have the upper hand over constitutional democracies in effective decision making. Examples include fi scal consolidation, migration, and infrastructure projects. However, the true costs of dictatorship are usually invisible because they are secret. The archives of the Soviet state and communist party that have become available in the wake of the collapse of the Soviet Union reveal the hidden costs of dictatorial decision making.
My research uncovers a story that took place in 1949. After World War II, the Soviet state entered its most secretive phase. one of the Soviet state’s most important secrets was the location of its labour camps.
Today, we read that two members of the rock band Pussy Riot convicted of hooliganism will be sent to prisons far from Moscow in Mordovia and Perm. This kind of information was once protected by an elaborate wall of state secrets, the details of which are only now beginning to surface.
The identity and whereabouts of Soviet labour camps was one of the most tightly protected secrets of the twentieth century, and my research underscores the price the Soviets paid to keep them hidden. one anecdote illustrates the depth of the secrecy covering Soviet forced labour at the time. In March 1953, after Joseph Stalin’s death, the Gulag (administration of forced labour camps) was transferred from one ministry to another. For this transition to take place, officials needed to know the names and locations of the camps. maps were needed. Though the government had long had the capacity and money to print maps, none was available. new maps of the camps were drawn in pen and pencil. The inference was clear. When it came to the Gulag, there were no maps.
In 1947, on Stalin’s initiative, a law enacted long prison terms for disclosing secrets even accidentally. His target was offi cials and researchers who were, in his view, too ready to share government information and scientific findings with the public and with foreigners. new, more inclusive lists of secrets were promulgated. The new regulations were so secret that many of those responsible under them could not be told offi cially about them. As a result a wave of fear swept through the Soviet administration.
The labour camps operated as government owned businesses, so they had to receive supplies, deliver products, and manage their financial accounts, as written down in secret government plans. As their secrecy was guarded more and more closely, camp bosses found it increasingly diffi cult to do this everyday business. In order to turn over goods and money, even within the planned economy, they had to risk severe punishments for disclosing a state secret: the fact that they existed. This crippled their business. Ultra-secrecy led to breakdowns of Kafkaesque proportions. orders for food, clothing, and building materials, began to fail. The camp commanders were victims of the Catch-22 of keeping secrets. Suppliers required full addresses to fi ll orders. Giving suppliers full addresses meant breaking the law on secrets. They could not pay for supplies, using their accounts in the state bank, without confi rming their account details, which contained state secrets. Historical fi les, made available in the wake of the collapse of the Soviet Union, show how Gulag offi cials tried to manage their mounting anxiety.
The basic problem of how to conduct basic business while keeping the camps and their locations secret played itself out over four years. offi cials worked around their dilemmas, expending considerable efforts to come up with alternatives. The efforts of camp commanders went into spreading responsibility and securing the collusion of higher offi cial in workarounds. The efforts of higher offi cials went into endless committees and drafts of alternative solutions, none of which was ever adopted.
In the end, rather than solve the problem, they got used to it and learned to live with it. Their fears subsided. The irony is this: The contractual parties and counterparties involved were not independent buyers and sellers in a real market. They were owned by the state, were commissioned by the state to operate in an internal market the state had created, and were trying to make or complete contracts that the state had pre-authorized. But the state’s own laws prevented them from identifying themselves to each other in a way that would let this happen. or, as it happened, it was at a higher cost than would have been necessary in the absence of these laws.
The cost was paid, ultimately, by the state that made the internal market and the laws that regulate it. The case study throws light on the quality of Stalin’s decision making. The process of growing secrecy was driven by Stalin himself. The story shows the lengths to which he was willing to go to cover his system of rule under the blanket of secrecy. Stalin’s motivation is clear. He launched the intensifi cation of secrecy because he wanted to reduce perceived losses from the leaking and sharing of government information and scientifi c research. It is not clear whether he considered the resulting increase in transactions costs and nevertheless considered it worthwhile, or whether he failed to consider the consequences and miscalculated. We do not know. This gives us a sense of the distance we have to go before we fully understand the purposes of Soviet secrecy in its full scope and complexity.
About the author
Mark Harrison is a professor in the Department of Economics at the University of Warwick who specializes in Russia, conflict, and security. He is a research associate of CAGE and a research fellow of the centre for Russian and East European Studies at the University of Birmingham and the Hoover Institution at Stanford University. The research for this paper was carried out in the Archives of the Soviet Communist Party and State collection of the Hoover Archive. Professor Harrison was one of the first Western economists to work in the Russian archives following the fall of Soviet communism. His work has brought new knowledge about the Russian and Soviet economy into mainstream economics and international economic history.
This article summarizes “Secrecy, Fear, and Transaction Costs: The Business of Soviet Forced Labour in the Early Cold War,” forthcoming in Europe-Asia Studies. A draft of the paper is available here.
Original map image: http://ausstellung-gulag.org