Was the USSR under Stalin a variant of state capitalism? Stalin's 'Great Turn' of 1929 allegedly ended market dominance and replaced the NEP (Lenin's partial return to capitalism in 1924) with the era of Five Year Plans, the so-called command-administrative system. In reality, Stalin never overcame the workings of the law of value, and economic activity turned into a peculiar marriage between centralised, indicative planning, and informal (grey-to-black) markets for all production factors: capital as well as labour and raw materials. No matter how much they tried, the planners and the Party never stamped out 'grey' capital markets. This is discussed by Gregory, Paul R., and Tikhonov, Aleksei, "Central Planning and Unintended Consequences: creating the Soviet financial system, 1930-39", Journal of Economic History, 60(4), December 2000 http://www.warwick.ac.uk/staff/Mark.Harrison/sovietarchives/financial.pdf from which the following excerpt is the conclusion (I have an idea that Aleksei Tikhonov is a grandson of a former Soviet prime minister, which adds piquancy to the paper): Much, but not all, of the informal side of the Soviet financial system and its abuses would have been missed in a study that used only the official literature. This literature provides examples of bad debts, slow payments, and struggles with illegal indebtedness,77 but it implies that such problems were caused by poor decrees or intentional wrecking rather than by systemic factors such as soft budget constraints. Arnolds authoritative survey of the Soviet literature barely mentions commercial credits, arrears, and money surrogates after 1931, matters of great concern to financial authorities, the archives now show. They reveal that the work of the Ministry of Finance was dominated by the battle against surrogates in 1935, and that futile clearing operations dominated Gosbanks agenda in the late 1930s. The published literature captures some of the official disappointment at the opportunistic behavior of enterprises following the offer of unlimited credit in 1930, but this was explained as an error of idealistic people who lacked necessary banking experience. Why Soviet enterprises misbehaved is well known from the classic works of Joseph Berliner and David Granick: managers were judged on the basis of plan fulfillment, and they could insure themselves against failure by minimizing their output targets and maximizing their resources, including money and credit resources.78 The demand for resources, including financial resources, was not restrained by hard budget constraints because the state or one of its agents stood by as a lender of last resort. This article has revealed the surprising fact that economic agents faced soft budget constraints already in the NEP period, although we do not yet understand why. It appears to have been a characteristic of the entire Soviet era. The framers of the Soviet system experienced yet another disappointment: their failure to create a center for monitoring financial transactions. The administrative burden of handling all financial transactions at the center proved excessive, especially as enterprises had an incentive to provide false information or to avoid central scrutiny by granting each other commercial credits, or by posting bills late. Even centralized clearing of arrears proved elusive, as it required knowledge of local circumstances. It was not difficult for a Stalin to interpret such massive opportunism as deliberate sabotage, rather than as endemic behavior in a system of soft budget constraints, and to conclude that terror was the proper instrument to combat it. _______________________________________________ CrashList website: http://website.lineone.net/~resource_base
