How Did Stalinism Work?

Stalinism is famous for two main things, namely the mass incarceration and slaughter of millions of people for minor or imaginary offences and the rapid industrialisation of Russia. Both characteristics -- the extreme oppression and the industrial capacity -- also played an important part in helping Russia survive the Nazi onslaught (1941-43) and end up on the winning side (1944-45), but here I am mainly interested in Stalinism without the distortions of the War.

Unlike Naziism, which only killed large numbers of people during the war, Stalinism managed to do this both in peacetime and wartime. 

There was of course a transitional phase, during which Stalin took over the Russian government and moved from the New Economic Policy of the early and mid 1920s to pure Stalinism, but I want to focus on Stalinism as a fully formed system. How exactly did it work, especially in the late 1920s and 1930s before WWII impacted it? 

The key goal of Stalinism was to boost industrial production rather then consumer production or agricultural output. Although it also wished to boost these to some degree, all was subservient to its chief goal. 

The Stalinist obsession with industrial production rather than improving the lives of the average Russian was driven by the failure of the international Communist revolution, which did not materialise, as Marxists had hoped. According to Marxist theory, the rise of Communism in just one country was precarious, because it would trigger an international "class war" as the capitalist nations sought to crush the "workers' state." It was believed that only the spread of Communist revolution to all developed nations could prevent this, but Stalin tightened his hold on power by advocating the theory of "Socialism in One Country," in short freeing Russian Communism from its dependence on the Western proletariats acting out Marx's predictions. Stalin insisted that Marxism could in fact survive in Russia alone if Russia "caught up" in heavy industry and war-making potential with the advanced Western economies. After that, global revolution might occur at some later, unspecified time. 

But the key to Communist survival in Russia was heavy industry. Without that there would be no Communism, so these industries became synonymous with Communism.

In order to achieve this goal, Stalinism had to create a state in which the workers worked hard without actually producing much that they themselves wanted. It also meant creating large factories with ambitious goals that needed to attract massive labour forces. Yes, even under Stalinism, you couldn't just tell workers to work in this or that job. Workers could choose to some degree. 

So, how did this play out economically? Firstly wages trended upwards as various Soviet enterprises, driven by ambitious production targets, competed with one another to acquire the available labour. This had a number of effects. Wages rose higher than productivity, but even if productivity had risen with wages, there was still little to spend one's wages on as most state investment was in heavy industries.

This created an inevitable inflationary tendency, which the government attempted to hold in check through three methods:

(1) Price controls, so that the government could claim that wages were rising but prices were not.

(2) Savings, so that instead of attempting to buy consumer goods that were not on the shelves, workers would hang on to their wages in the belief that they could "later" spend them when Communism brought a flood of consumer goods onto the market.

(3) The black market or unofficial markets, so that people could take the hit of inflation but would disassociate it from the government, as they personally were the ones engaged in illegal or "un-Socialist" activity. 

The patchy data that is available shows these strong inflationary effects, suppressed and partially hidden as they are.

Source: Holzman, “Soviet Inflationary Pressures,” 168-169.

Between 1928 and 1940, industrial production increased 231%, while wages shot up by 597% but the things that people wanted to buy in state/ co-operative stores increased by between 1000%. Out in the country it was worse, with a 1780% increase. What these numbers don't reveal are the waiting in queues and the staring at empty shelves. If you didn't want to do that, then, there was always the black market, whose prices tended to be even higher than those in the state stores or remote rural markets. 

Essentially the gap of desire between effort and acquisition was stretched as far as it could go, while also protecting the myth that living standards were rising and that "tomorrow" everything would be better.

As pointed out above, wages rose even more than heavy industrial productivity. This was because state enterprises tended to over-recruit labour and suffer from terrible overmanning levels. They were often competing with each other to attract workers in a kind of bidding war. This process also drew labour, especially more intelligent labour, from the country. From 1926 to 1939, the urban population rose from 17% to 34%. This brain drain on the provinces, combined with the suppression of the so-called "kulak" class were major factors in the terrible famines that characterised the early 1930s.

The kulaks were not really a class. They were more a tendency, common in every peasant, to demand equal goods or services for agricultural produce. Naturally this tendency was more pronounced in successful individuals. Unlike urban populations who could be more easily controlled and propagandised (especially if they were "rubes" off the farm enjoying their first experiences of city life), the peasants in the country wanted more than worthless paper money, enforced savings, and promises of tomorrow for their agricultural produce. This led to hoarding, turning grain into vodka, or simply destroying surpluses. The fact that rural populations had less access to the black market exacerbated this response. 

The creation of the "kulak" myth was therefore a combined punishment and propaganda response to the problem of rural resistance to Soviet anti-inflationary techniques that had been created by and for urbanites. The collectivization of farms that accompanied the kulak crackdown was an attempt to prevent the private response of withholding agricultural goods due to the low incentives for agricultural producers.

Another group much victimised by the Stalinist regime were so-called "industrial saboteurs" or "counter revolutionaries," a convenient catch-all term.

This, when viewed in the broader economic picture, was intimately related to the overmanning crisis and the refusal of some workers to be controlled by the government's suppression of the inflationary pressures it had created.

Overmanning lowered productivity, but firing workers because they could not be used productively was also a problem in the "workers' paradise" of the Soviet Union.

The problem, therefore, was simply this: how to get rid of excess or incompetent workers without firing them. The answer was to arrest them on often trumped up charges.

What Stalinism was effectively doing was creating a kind of coercive Apartheid. Those workers too rebellious or unmotivated to slog their guts out for fake wage rises and propagandistic promises of consumer rewards "tomorrow" were separated out from the rest of the population and forced to do their slogging at the point of a gun or the crack of the whip in the gulag system.

This also had some other effects useful to the regime. It served both as an example to the main group of workers, who accepted sharply falling living standards buoyed by the lie of "jam tomorrow" and it also relieved inflationary pressures to some degree by removing a large group of would-be consumers from the market. In fact, it could be switched on and off like a valve when these pressures built up -- and indeed it was.