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Economic progress in Russia in the years 1981-1982 Essay

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Despite frequent changes in policy, Russian and Soviet governments were spectacularly unsuccessful in securing sustained economic progress in the years 1881-1982’. Assess the validity of this statement.

Between 1981 and 1982, Russia underwent huge changes, particularly the in economy. Russian history is well known for its frequent changes in policy as the country faced revolutions, changes in regime, changes in leadership and not to mention its involvement in various conflicts. As a result, Russia’s economic policy was subject to major change apart from three key areas, industry, agriculture and the tertiary sector. These three areas of the economy remained a constant in its ever changing climate; however, many historians still argue that Russia’s economy was unsuccessful and poorly managed despite its frequent change in policy. Thus begs the question, ‘To what extent is this true?’

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The Tsarist regime, for many Russians, was a period of economic instability as agriculture was seen as a secondary concern. Growth rate was not structured and growth rate fell considerably between the late 1890’s and 1905.[1] Meanwhile, other economies expanded leaving Russia struggling to catch up and some historians see agriculture as a reason for Russia’s economic decline. For example, Carol. S. Leonard argued that Russia’s grain production per capita GDP was lagged far behind that of America in 1913.[2] This argument shows how agriculture in Tsarist Russia wasn’t dealt with effectively and as a result, the economy suffered.

On the other hand, some historians have pointed out that agriculture in Russia during the late Tsarist years were not so destructive. One argument maintains that actually, Russia’s agriculture grew and developed quite substantially pre- revolution. For example; from 1890 to 1913, cereal production per capita increased by 35%[3]. Although this evidence is hard to ignore, it is also difficult to turn a blind eye to the contrasting evidence which suggests that agriculture suffered under the late Tsarist regime and consequently, affected the economy as a whole. For example:

“There was very little investment in agriculture in Imperial Russia and this lead to small yields and economic volatility when prices rose and fell…lack of investment in agriculture frequently caused grain prices to rise which caused famines”[4]

Overall, although agriculture grew slightly during the Tsarist regime, ultimately it suffered greatly as did the Russian people. Looking at agriculture alone, Russia’s economy looked bleak however; industry had slightly more success during this time so perhaps the economy was not so bad after all.

S J Lee puts forward a simple statement: “The periods of most rapid growth were in the reign of Nicholas II (1894-1917) as a result of the economic reforms of Sergei Witte (1892-1903)”[5]. This is easy to see, when one considers that in 1914, Russia produced 35 million tons of coal, ranking Russia fifth amongst the main producers.[6] Building on Lee’s argument, there seems to be a lot of evidence pointing to Sergei Witte as the main reason for Russia’s industrial boom. Upon taking office, Witte raised massive amounts of capital by securing a loan from France and raising taxes and tariffs and interest rates.[7] However, it is the development of Russian railways which Witte is perhaps most remembered for. Under his guidance the railway network grew from around thirty one thousand km to around fifty three km worth of track.[8]

With Witte at the helm, Russia’s industry continued to develop with growth rates comparing well next to those of the United States and Germany. Witte has often been credited with modernizing Russia to such a great extent that its industrial boom continued long after he left his post as Finance Minister in 1903. For example, in 1913, Russia’s steel production stood at 4.9 million metric tons next to France’s 4.7 million, with coal and iron not far behind.[9]

On the other hand, Witte’s industrialization policies were not always so successful. For example, between 1890 and 1899, Russia’s industrial growth stood at 8.0% whereas between 1900-06, it reduced to 1.4%[10]. His aims of modernizing came with a heavy cost and it was consumers who had to pay the price. Taxes were raised but only for the lower classes, indeed the wealthier classes were spared from taxation although their money was needed for private capital. Tariffs also caused problems as, although they protected Russian industry, they added to the cost of living.[11] Whatsmore, although some historians have credited Witte’s decision to seek loans from foreign investors, some remain critical. This is because the interest added to the loans had to be paid in a secure medium meaning, in order to pay off their debts, Russia was forced to export grain regularly, including during the famine of 1891.[12]

Overall, although Witte made huge strides in modernizing the Russian economy, he was not entirely faultless. Industry picked up, but there were still issues and it was the common man who had to pay. The economy still suffered, although, arguably, not as much as it would have done without Witte. However, the tertiary sector also contributed to the economy.

Although some historians critique Russia’s dependence of Western investors, these ties had corresponding benefits in the shape of trade. [13] Business also boomed within Russia with eight large banks emerging in 1899 which owned more than half the total bank capital. This provided free access for foreign capital, controlling important branches of the Russian economy, including the fuel and metallurgical industries. [14] Moreover, according to Robert Service, domestic industrialists and banks were thriving too.[15] This argument can be supported by the growth in towns and cities between 1897 and 1914. For example; the population in St Petersburg grew from 1’300 thousand (1987) to 2’100 thousand (1914)[16]. This shows that the economic growth had a positive impact on society and the country was doing well under the Tsarist regime.

However, although to the naked eye Russia seemed to be doing well, their growth wasn’t so great. Compared to the other Great powers of the period, Russia was lagging far behind. Between 1894 and 1913, Austria-Hungary had a 79% increase in national income whereas Russia was lagging far behind with only a 50% increase[17]. This clearly demonstrates that Russia’s overall situation was not so great and actually, Russian people did suffer.

When Lenin came to power in 1917, he brought with him a change in regime and economic policy including the introduction of war communism. War communism aimed to socialize the economy through state involvement. Rural areas were subjected to grain requisition which was forcibly removed by the military.[18] This inevitably was unpopular and caused much suffering and peasants who stored their crops were often wrongfully prosecuted.

It was not just agriculture which suffered. Factories were nationalized by November 1920 and were geared towards war production.[19] Additionally, private trade was banned and rationing was introduced on consumer goods including food and clothing.

War communism was, effectively a self destructive policy. Grain requisitioning meant more than three million people died of starvation by late 1922.[20] Moreover, money lost its value and people got by through a system of barter. Inflation shot up and multiplied 1917 costs by four million in 1922. Additionally, in comparison to the growth in city population during the Tsarist regime, people fled the cities. For example; in December 1920 the population in Petrograd fell by 57.5%[21]

Lenin knew that it was time for a change. War communism caused more harm then good so Lenin came up with an alternative, the ‘New Economic Policy’ (NEP). Peasants were allowed to sell grain for profit and they paid tax on what they produced rather than giving it up[22].

Things also changed industrially and in the tertiary sector. Businessmen could own small or medium sized businesses however large firms were still state owned.[23] The NEP basically gave the people of Russia freedom and Lenin hoped that it would boost economic growth as well. However, in 1924, Lenin died and Stalin came to power. Stalin also brought new ideas and his own ways of modernizing the economy.

In November 1927, Stalin introduced his policies of industrialisation and collectivisation with the aim of modernising the economy. They were supported by a series of five year plans, the first (1928-32) aimed to improve living standards and the second (1933-37) and third (1938-41) aimed to highlight and thus, amend, Russia’s weaknesses[24].

Industrialisation was relatively successful as by the late 1930’s many workers conditions had improved and they had acquired better paid jobs and unemployment was almost non-existent. Accounts from the time support this view:

“Good progress was made…4’500 new factories, plants, mines and power stations were commissioned, three times as many as the first Five-Year period’[25].

On the other hand, industrialisation was harsh and lateness for work often led to employees getting the sack. Many prisoners also paid the price by working on the grand engineering projects and working in appalling and dangerous conditions. For example; around 100’000 workers died building the Belmor Canal[26].

Collectivisation was ultimately unsuccessful and peasants were in a worse position than ever before. The concept of sharing farms and thus, sharing salary meant there wasn’t enough money to go around and crop production fell too. For example: “…Grain shortages, combined with continued forced procurements, led to rural famine…”[27] However, some people benefitted from collectivisation such as Bertha Malnick: “We have more than 600 hectares…our farmers have built 70 new houses for themselves during the last few years…”[28]. However, it is reasonable to conclude overall that collectivisation was unsuccessful given the various sources which provide figures of those who died or badly suffered during Stalin’s reign. Stalin died in 1953 and Khrushchev took over. Khrushchev focused on DeStalinisation, distancing the USSR as far away from Stalin as possible.

Khrushchev was keen to adopt a different economic policy with the aim of building on the country’s previous economic growth and amending its weaknesses and one way he did this was by abandoning the five year plans and starting a new, seven year plan (1959-65) which aimed to take advantage of newly discovered mineral resources and fit in with industry[29]. Khrushchev pumped a lot of money into agriculture and overall 40% of investment was put into the neglected eastern regions of the USSR[30].

However, the seven year plan had similar flaws to the previous five year plans such as mistakes in resource distribution. Living standards got worse, the opposite to what Khrushchev had hoped to achieve. For example; only five in one thousand citizens owned a car and in 1963, the USSR was forced to import grain from the capitalist west to compensate shortages.[31]

There were successes during this time such as the rise in foreign trade however this can’t compensate for the huge failures experienced during this time. Khrushchev made an honest attempt to improve the economy however his plans backfired and once again the country was left to clean up an economic mess. Eventually, Khrushchev was removed from power and in his place came Brezhnev who did little to change the economy.

The era of Brezhnev has often been described as ‘a period of economic stagnation’ but some historians believe that this is not fair. Like Khrushchev, Brezhnev wanted to focus on improving agriculture and living standards in Russia. Historians Gwyneth Hughes and Simon Welfare support this view saying:

“…After the terror of Stalin’s reign and the chaos of Khrushchev’s, the Soviet Union was in for a period of stability, and that meant everyone kept their job and their perks for life.”[32] Brezhnev allowed farmers to work on state own plots which motivated them to produce as much as possible in order to sell the surplus[33]. This, in theory, should have been beneficial and shows that Brezhnev was trying to improve the economy through new methods however, he was not so lucky.

In 1975, the USSR suffered another poor harvest meaning Brezhnev had to increase foreign exports to keep everyone fed. This was just another disaster in Russia but Brezhnev did little to help. His aim to improve agriculture and living standards meant he neglected industry and production rates continued to rapidly fall[34]. However, arguably his biggest flaw was his inability to change the already ridged economy. Brezhnev had new ideas but couldn’t fight the system and by the end of his reign, Russia had made little improvement. Historian Dmitri Volkognov best sums up the Brezhnev period saying:

“If Lenin and Stalin, and to some extent even Khrushchev, were able to enliven the moribund ideology of Communism, it was quite beyond Brezhnev…”[35].

In conclusion, between 1881 and 1982, Russia experienced much hardship especially surrounding the economy. After analyzing this one hundred year period it is hard to deny that the statement ‘Despite frequent changes in policy, Russian and Soviet governments were spectacularly unsuccessful in securing sustained economic progress in the years 1881-1992’. The economy under the Tsarist regime had its faults and during and after the 1917 revolution, it was widely believed that the country’s economic situation would improve. However, from Lenin to Stalin and Khrushchev to Brezhnev, it seemed that no leader was able to sustain a long-lasting and successful economic policy. The economy grew as quickly as it declined and it has taken many years to make any significant progress since. Therefore, this statement is valid.

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[1] Heinemann Advanced History: The Modernisation of Russia 1856-1985

[2] Agricultural Productivity Growth in Russia 1861-1913. From Inertia to Ferment by Carol. S. Leonard

[3] The Penguin History of Modern Russia by Robert Service

[4] www.historymadefun.co.uk/Tsarism

[5] Overview from Russia and the USSR: Autocracy and Dictatorship (questions and answers in History) by Stephen. J. Lee

[6] Stephen J Lee

[7] http://www.slideshare.net/russeltarr/tsar-nicholas-ii-and-industry

[8] The Industrialisation of Russia by M. Falkus

[9] http://www.portalus.ru/modules/english_russia

[10] M. Falkus

[11] A2 History OCR: A Russia and its Rulers 1855-1964

[12] A2 History OCR

[13] S. J Lee

[14] A History of the USSR

[15] Penguin History of Modern Russia

[16] M. Falkus

[17] The Making of the Revolution, 1881-1905

[18] From Years of Russia and the USSR, 1851-1991 by Evans and Jenkins

[19] Evans and Jenkins

[20] The Russian Revolutions 1914-1924

[21] Evans and Jenkins

[22] The USSR, Germany and the USA between the wars

[23] Russia and the USSR 1905-1941

[24] The USSR, Germany and Russia between the wars

[25] A Soviet view of the second five year plan from History of the USSR by Y. Kukushkin

[26] Stalin and the Soviet Economy

[27] European History 1848-1945 by T.A Morris

[28] Everyday Life in Russia by Bertha Malnick

[29] AQA A2 History Triumph and Collapse: Russia and the USSR 1941-1991 by John Laver & Sally Waller

[30] Russia 1855- 1964 Flagship History by D. Murray and T. Morris

[31] The Soviet Economy 1917-80 by S J Lee

[32] Red Empire. The Forbidden History of the USSR by G. Hughes and S. Welfare

[33] www.ibguides.com/history/notes.ccom

[34] Years of Russia and the USSR, 1851-1991

[35] The Rise and Fall of the Soviet Empire by D.Volkognov

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