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The road to a command economy

A newly found verbatim transcript of a Politburo meeting in January 1927 reveals the Bolsheviks on the brink of abandoning market incentives – and Stalin persuading his comrades that this was the only option for the future of the Soviet Union. Mark Harrison recounts the story of a debate that would have far-reaching consequences.

stalin.jpgThirty-one verbatim transcripts of meetings of the Politburo, the highest decision-making body of the Soviet communist party, held between 1923 and 1938, were found recently in the Russian archives. These formerly secret documents show a narrow circle of top leaders of the Soviet Union locked in debate about the key political and economic issues of the time.

My research focuses on a particular discussion held in January 1927 about progress towards cutting the retail prices of industrial commodities – an apparently dry, technical subject that in practice laid bare the underlying tensions in Bolshevik economic policy.

The Soviet economy, poor and largely agrarian, was now ruled by a narrow political elite (though not yet a personal dictatorship), which was committed to state-led modernisation. The policy of cutting industrial retail prices was intended to harmonise the interests of urban and rural consumers with those of the state, and keep peasant farmers motivated to supply food – in return for cheap industrial goods – on a scale sufficient to meet the needs of state-led industrialisation.

By 1927, the Bolsheviks were moving to the view that if market incentives did not work, force would do instead

This policy was difficult to implement because it ran counter to the requirements of market equilibrium. Industry could not supply enough consumer goods to meet market demand at lower prices, so shortages were developing. The implied squeeze on industry's trading costs and profits also generated widespread resistance. The Bolshevik leaders faced a choice between allowing the market to return to equilibrium and imposing the desired prices and quantities by force. The verbatim minutes of their discussion, available for the first time, show us how they perceived this choice before they made it.

To some extent, this is a story of unintended consequences. The Bolsheviks had thought that price cuts would harmonise the interests of the regime and the peasantry. This had worked in 1922/23, but by 1927 the context had changed. As a result, the policy was actually driving the peasants and the regime apart because it was destroying the urban-rural market equilibrium.

The Soviet Union was on the way to making self-interested market behaviour a criminal offence

At the same time, in so far as they were becoming aware of the unintended consequences, the Bolsheviks did not really care – that is, if their measures were driving the market out of balance, then so much the worse for the market. If market incentives did not work, force would do instead. This was a step on the road to the command economy and the criminalisation of self-interested market behaviour.

Two years later Stalin launched the Soviet economic and political system into forced-march industrialisation, the five-year plans, and the mass collectivisation of peasant farming. The lives of a hundred million people were turned upside down; a significant proportion of them were tragically curtailed by famine and terror. Stalin himself gathered up the personal power of an absolute ruler.

The transcript shows Stalin clearly leading the others down this road and, with calculated brutality of expression, educating his comrades in the vision and language that would make this seem the only possible path to survival of the regime. In my account of the meeting, I propose the analogy of a classroom. I call Stalin "the teacher" – and that is not a chance expression.

Publication Details
The Author
  • Mark Harrison is professor of economics at the University of Warwick, senior fellow of the Centre for Russian and East European Studies at the University of Birmingham, and distinguished visiting fellow of the Hoover Institution at Stanford University.
Further Reading
  • Paul Gregory describes the Politburo transcripts in "Watching Stalin Win," published in 2007 in issue no. 4 of the The Hoover Digest.