The Riddle of Post-war Russian Economic Growth: Statistics Lied and Were Misconstrued

Abstract

IDEAL MARKET ECONOMIES, including social democracies,1 are supposed to generate optimal 'golden age' growth, driven by best technological progress.2 Any government which suppresses consumer sovereignty or impairs economic efficiency by substituting the 'rule of men' for the 'rule of law' essential for general competition will be Pareto inferior (non-consumer utility-maximising).3 It will diminish social welfare, and tend to grow more slowly than its generally competitive twin.4 It might seem to follow that non-Western societies deviating significantly from the generally competitive norm (and the Western second best) should conspicuously underperform. Yet this has not always been statistically so. Stalin's successors, and most Western analysts, claim that post-war Russian (Soviet) economic growth kept pace with the West, driven by civilian technological progress long after the advantages of resource mobilisation were exhausted,5 despite a low elasticity of capitallabour substitution.6 Could Soviet Russia's notoriously inefficient post-war central planning system have been as dynamic as the West's economies? This article explains why communist Russian growth was more anaemic than the data indicate, and why contemporary Russian growth is likely to be similarly impaired.