Economics of One-Party State: Promotion Incentives and Support for the Soviet Regime

Abstract

This paper analyses the relationships between the dynamics of political support for the Soviet regime, as revealed in party membership, and economic policy. The Soviet regime is considered as the rule of bureaucracy that captures rents through collective control over state property and job assignment. Activists support the regime in exchange for deferred promotion into rent-paying positions. Analysis of the implicit contract between the party bureaucracy and activists (party candidates) shows that the stability of the Soviet regime was consistent with high-income inequality and high rate of investment in the economy. Under certain conditions, a rational bureaucracy chooses not to renew the contract. Incentive compatibility and time consistency problems inherent in the implicit contract accelerate the movement toward regime change. The long-run trends in the communist party recruitment in the USSR and the end of the Soviet regime in 1991 are consistent with this explanation.