The Political Economy of Stalinism: Evidence from the Soviet Secret Archives by Paul R. s> Gregory (review)

Abstract

REVIEWS 539 possible mistakes of their leaderships. To do so while underestimating the broadercontext is, however, highlyuncritical.The overwhelmingresponsibility for their fate has to be sought in Stalin's policies and in Britain and America'sfailureeitherto understandor to oppose them. PoliticsDepartment GEORGE SANFORD University ofBristol Gregory, Paul R. ThePoliticalEconomy ofStalinism. Evidence fromtheSoviet Secret Archives. Cambridge University Press, Cambridge, 2004. xi+ 308 pp. Tables. Figures. Notes. Appendices. Bibliographical references. Index. ?2 I.99: $3 I.99 (paperback). THE Soviet Union represented the most ambitious economic experiment of the twentieth century. Its creation dramatically altered the course of world history and its repercussions, political, social and humanitarian as well as economic, were enormous both for the countryitselfand for the wider world. Economically the key change occurredin the early I930S when Stalin and his supporters created, in a rather ad hoc fashion, the economic system that would endure until the collapse of the Soviet Union in I99I. This was an administrative-commandeconomy based on the tripartitepillarsof planning, stateownershipand primitiveaccumulation. Until I99I Western scholars had to rely on published sources for their analysisof the Soviet administrative-commandeconomy. However, since then scholarsfrom both the West and the former Soviet Union have been able to graduallyutilize the unpublishedsourcesof the former Soviet administration. Paul Gregory is one of the leading economic historians of the Soviet Union and has been at the forefront of this new research programme. His book focuses on the first two decades of the administrative-command economy system,when Stalinruled.However, it is Gregory'scontention thatthe system exhibited a greatdeal of inertiaand did not change radicallyuntil its collapse. Thus, the book in effectdealswith the whole period of the Soviet administrative -command economy and it includesa chapteron why the systemultimately failed. After setting out its main themes and explaining how the system came about, the main part of the book (chaptersfour to nine) provides an analysis of how the Soviet economy operated. Gregoryutilizes the work of Olson and Hayek and Arrow'sImpossibilityTheorem to argue that a Stalin-likedictator is inevitable in an administrative-commandeconomy. In practice, following Mancur Olson, he also thinks that dictator Stalin operated like a stationary bandit who, in pursuit of his own self-interest, must maximize growth and development. However, the system that evolved had more than just Stalin's imprinton it. Forexample, one characterwho emergesstronglyin the book is Sergo Ordzhonikidze,head oftheHeavy IndustryMinistryuntilhe committed suicide in February 1937: 'it is difficult to separate the creation of Soviet industryfrom Ordzhonikidze' (p. I56). Also, Gregorystressesthat the system can be characterized as a 'nested dictatorship',in which layer after layer of the system replicated the administrativeand control structuresof the layer 540 SEER, 83, 3, 2005 above itself,with each layer consisting of a superior(in effect, a dictator)and their subordinates. Hence, the system was populated by hundreds, possibly thousands, of 'smaller Stalins'. Endemic to such a system is the principalagent problem, based on the information imbalance between dictator and subordinates.According to Gregory, an important reason for the survivalof the Stalinist system after his death was that his successors could not find a solution to this problem. The result was that the system operated at a lowlevel equilibrium,characterizedby 'planningfromthe achieved level'. Among otherinnovationsin the book, GregoryadaptsAkerloff'sfairwageeffort model to try to explain the investment cycle paradox: that whilst the Soviet system was dedicated to industrialcapital accumulation, periodically investment plans were cut back and, in effect, investment was sacrificedfor consumption. The model predictsthat workerswill reduce their effortif they feel that they are being paid a wage below the fair wage. Thus 'the Soviet leadership chose optimal investment by weighing investment against the loss of workereffort'(p. iIo). He also emphasizes that among the many different forms of rent that opportunisticagents could extract in the systemwere rents derived from illegal, or unauthorized, horizontal transactions.Such transactions were common but they threatened the system by removing the control of transactionsfrom the hands of the planner and by encouraging enterprises to createtheirown unofficialmoney, in theformof surrogatesand commercial credit,which fuelledinflation. This is an importantbook as it presents the firstsystematicaccount of the Soviet economic system using these unpublished sources, drawing together the new researchby Gregory and others, in a form that is easily accessible to the...