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Slouching Towards Utopia?: The Economic History of the Twentieth Century

-XV. Nazis and Soviets-

J. Bradford DeLong
University of California at Berkeley and NBER

February 1997

Germany: The Rise of Adolf Hitler

In 1928 the British publisher Methuen published a book entitled Republican Germany: An Economic and Political Survey (by H. Quigley and R.T. Clark). In the introduction the authors wrote that they were fortunate because they had a single, central, powerful theme: the coming-to-maturity of the post-World War I German republic:

The consolidation of the German [Weimar] Republic is in itself a theme of the most absorbing interest; it lends itself to dramatic presentation with the leading characters active at moments with a real dramatic force.... The fifth and probably last act is now being played, and promises something more heartening than a catastrophic ending. There may be scenes of conflict, world-shaking events, accompanied by the possibility and dangers of war, but the real consumation will probably be reached--namely, the recognition of the German Republic as a permanent feature in German history and its economic and political relations, and, with it, the opening of a new era of international prosperity.

Quigley and Clark's--long--book contains three mentions of Adolf Hitler: a passing reference to the "Hitler incident", a half-page narrative of Hitler's unsuccessful 1923 attempt to take over the Bavarian provincial government via a coup, and a classification of Hitler as one of the leaders of:

...secret societies in morality and mentality far more akin to the worst traditions of medievalism than to those of the twentieth century...

Writing in 1928, five years before Hitler was to take power and destroy the German Republic, and Adolf Hitler is simply not a big deal to two people writing a political and economic survey of Germany. Were Quigley and Clark obtuse? Not at all. Hitler was an unimportant part of the political fringe in Germany in 1928.

In May 1928 Germany held elections for its legislature, the Reichstag. The Nazis won 2.6% of the vote: they were part of a fringe of small parties with more-or-less impractical and nutty programs that together drew off some twelve percent of the vote from the established parties on the right-left spectrum.

1928 Reichstag Election: Distribution of Votes
Party May, 1928
Communists 11.7%
Social Democrats 33.0%
Democrats 5.4%
Center 13.4%
German People 5.2%
German National People 15.8%
Bavarian People 3.4%
Nazi 2.6%
Landbund 0.6%
Economics Party 5.0%
Landvolk 2.2%
Farmers' Party 1.7%

On the far left were the Communists--obedient to Moscow's every whim, dedicated to the overthrow of the democratic Weimar Republic and to the comng social revolution. They polled 11.7% of the vote in May 1928. But their 11.7% of the vote did not shift the center of gravity of German politics to the left, but to the right. The fact that the Communists attracted a sizeble share of the vote terrified the center and right wing parties. And the Communists devoted more of their attention to undermining the Social Democrats to their left--"social fascists," they called them--than to advancing Germany's welfare state or to opposing the right.

Why did the Communists hate the Social Democrats so? One reason was that the Social Democratic government had assassinated the Communists' two best-loved leaders--Karl Leibknecht and Rosa Luxemburg--when they were under arrest in 1919 after the unsuccessful Spartakist uprising. But a second reason was that Stalin and his henchmen in Moscow were more interested in making the Moscow-run Communist International the only political force on the European left than in pushing for liberal and leftist parliamentary victories. Since Communism was to be established by a revolution that would sweep away the old order, why bother to try to make the old order better? The only purpose of parliamentary struggles, to Lenin and Stalin, was to solidify the working clas and teach them that compromise with the capitalists was a mistake. A more brutal and right-wing government did more to advance the cause: "the worse, the better" in Lenin's formulation. So why help the Social Democrats make the Weimar Republic a success?

Moreover, Karl Marx's theory of history guaranteed the victory of socialism. It did not guarantee the victory of Lenin's Bolshevik brand of Marxist socialism rather than, say, German Social Democrat Friedrich Ebert's revisionist brand. So from Stalin's perspective to made sense to spend all your institutional resources trying to discredit the Social Democrats, and to leave the broader task of destroying capitalism and fascism to the Angel of History.

The belief was that if the Nazis should come to power they would not be able to maintain themselves for long. They would quickly alienate the people, radicalize the masses, and set the stage for a Communist revolution in Germany. Or so was the justification for making tactical alliances with the Nazis against the Social Democrats in the hope of bringing down the Weimar Republic. Not until the end of 1934 would Moscow and the Comintern give their blessing to the idea of the "Popular Front"--the general alliance of all forces in the center and on the left against fascism. And by the end of 1937 the Popular Front would be losing support in Moscow once again, although Stalin would not formally ally with Hitler until the middle of 1939.

On the near left were the Social Democrats, with 33% of the vote. The Weimar Republic had been their creation. The Social Democrats, as the major parliamentary opposition to the Imperial regime, had seized power with the fall of the German Imperial government in November 1918. They had quickly reached an agreement with the army: the army would support the Social Democratic provisional government if the Social Democrats would refrain from large-scale expropriations, confiscations, and executions and would set up a genuinely democratic, rather than a socialist, republic. To Friedrich Ebert and his colleagues, this had seemed like a good deal: universal suffrage would lead to large socialist majorities in the Reichstag as workers, peasants, and small shopkeepers realized their common interest in social democracy. Thus they would be the natural party of government.

They were wrong, in the 151 months between the first elections for the Reichstag and the fall of the Weimar Republic, a Social Democrat was Chancellor--Prime Minister--for only twenty-one of them. Three things kept the Social Democrats from being the natural center of the Weimar government. First, the Communists would not support them under any circumstances. Second, the farmers, paper-shufflers, and small shopkeepers of Germany were scared by the Marxist class-struggle-and-nationalization rhetoric of the Social Democrats. Third, the Social Democrats had signed the Treaty of Versailles and accepted the reparations burden imposed on Germany by the victorious Allies: they were thus seen as the servants of foreign domination, and were anathema to any interested in German national reassertion.

Further to the right were the Democratic Party, the Catholic Center Party, the German People's Party, the German National People's Party, and the Bavarian People's Party, all with varying degrees of fear of the Social Democrats and the Communists, nostalgia for the old order, desire to reverse the humiliation of the Treaty of Versailles, and--among the rightmost--contempt for a democracy that gave Social Democrats and Communists more than forty percent of the seats in the legislature. For most of the 1920s, these parties to the right of the Social Democrats made up a shifting coalition government, with Gustav Stresemann (of the German People's Party), Wilhelm Marx (of the Center Party), or Hans Luther (who claimed to have no party at all) as the dominant player in the government.

All this changed with the Great Depression. In the March 1930 election the Communists took 13.8% of the vote; the Nazis took 19.2% of the vote. Since neither Communist Ernest Thaelmann nor Nazi Adolf Hitler was interested in anything other than destroying the republic, a government could have the support of a parliamentary majority only with the active support and cooperation of the Social Democrats, the Center, and the "establishment" right wing parties.

And here the Great Depression made such a "grand coalition" impossible. The Social Democrats demanded an expansion of the welfare state: unemployment insurance, public works, and large budget deficits to reduce the impact of the Great Depression. The establishment parties demanded --wrongly--financial orthodoxy: balance the budget, cut spending, and restore confidence in non-socialist parties. Neither block thought that it could afford to compromise with the other and still survive as a political movement. So parliamentary government became impossible.

Subsequent elections in search of a viable parliamentary majority only made things worse. The Nazis took 38.4% of the vote in the elections of July 1932. The Communists and the Nazis together had a majority: no parliamentary majority was possible. The German constitution offered an out: if no parliamentary majority could be assembled, the Chancellor could ask the President--himself directly elected for a seven-year term--to rule by decree.

Heinrich Bruening, the leader of the Catholic Center party who became Chancellor when the Social Democrats and the establishment parties split in March 1930 under pressure from the Great Depression, was chosen Chancellor by the aging President of the Weimar Republic, the war hero Paul Hindenburg. Bruening sought to use this escape hatch to pass a policy of fiscal retrenchment and welfare state cutbacks. For as he promised Hindenburg, Bruening tried "at any price [to] make the government finances safe": balancing the budget--reassuring investors that Germany was committed to financial orthodoxy--was Bruening's first and nearly his only priority.


Thus Bruening spent the first months of his Chancellorship trying to balance the budget, only to find the economic situation outrunning him. The projected deficit tripled during his first three months as tax collections fell and social insurance spending rose.

On July 16, 1930 Bruening's budget-balancing program was defeated in the Reichstag by 256 to 193. Bruening immediately reissued the entire program as a presidential emergency decree. By a very close vote, the Reichstag demanded that the decree be rescinded. In response Bruening dissolved the Reichstag, hoping that new elections would give him a mandate to continue purusing policies of fiscal austerity. The dissolution of the legislature blew up in his face: the Nazis gained 107 seats. The conservative establishment parties from which Bruening drew his base collapsed.

But Bruening still believed in the necessity of a balanced budget and the maintenance of the gold standard. Government expenditures were cut by one-third from 1928 to 1932. But fiscal retrenchment and welfare state cutbacks did no good, and some harm. The German economy slid further into the Great Depression.

Bruening, desperate for some economic policy success, attempted to negotiate a customs union with Austria: the policy move that turned out in the end to block French assistance to Austria's central bank during the financial crises of 1931. The abandonment of the gold standard by Austria led speculation to pull money out of Germany. When the North German Wool Combing Company declared bankruptcy, and worry began to spread about the solvency of its creditor banks, Germany faced a full-fledged speculative attack on the currency. Bruening abandoned the gold standard, creating two different currencies, one for international and one for domestic use.

The speculative attack against the German mark, and Germany's abandonment of the gold standard, finally focused attention on the overhang of reparations obligations. U.S. president Herbert Hoover proposed a one-year suspension of all international debt payments, both war debts owed to the United Staets and reparations owed by Germany. But even if this moratorium had been a factor restoring confidence, it would have come too late to help Heinrich Bruening.

For Bruening did not use the freedom of action created to pursue loose monetary and expansionary fiscal policies, even though urged to do so by once and future central bank president Hjalmar Horace Greeley Schacht. Even after the financial crises of 1931 made expansion possible--because Germany was no longer on the gold standard--Bruening continued to hope that balancing the budget would restore investor confidence. In the end he enforced deflation on the economy: a December 8, 1931 decree ordering the reduction of all fixed prices by ten percent, and a ten to fifteen percent cut in wages.

From our perspective such a fall in prices would not be expected to help the economy. Debts would be a larger burden on the lower-price economy, uncertainty about the stability of the financial system would be greater, and so investment would fall. Bruening's deflationary and budget balancing measures did not help. British attempts to cancel the reparations burden came too late to restore confidence while Bruening was still in office. Unemployment rose.

And as unemployment rose, the Nazi Party vote rose as well.


Why did higher unemployment raise the Nazi Party share of the vote? As the Great Depression deepened, old party allegiances were shaken and the formerly apathetic began to go to the polls. Voters were unlikely to move to the establishment parties: they had ruled the country and thus presumably bore some responsibility for the Depression.

Voters outside the industrial working class were unlikely to move to the Social Democrats: the Social Democrats were an explicitly "class" based party, their rhetoric and their form of organization making belonging somewhat uncomfortable for the middle class; and the Social Democrats carried the twin burdens in a strongly nationalist country of being officially "internationalist" and of having been the collaborators of the allies who had imposed the Versailles peace settlement. Indeed, Social Democratic voters tended to move to the Communists.

Disaffected voters were interested in a party that promised to do something about the Depression: that had a theory of who was responsible, a program, and a bias toward action rather than parliamentary talk. the Nazis had a theory of who was responsible: the Jews, the financiers, foreign capitalists, and the "November criminals"--the Social Democrats who had signed the Treaty of Versailles. They had a bias toward action. And they had a program, confused as it was: the overthrow of the Treaty of Versailles, German rearmament and national reassertion, and the drafting of industry into the service of the nation to provide unemployment.

The "socialist" in National Socialism was taken very seriously: it was the opposite of liberalism and individualism, it was the submission of the individual to the collective interest, and it was a national--a German--socialism, as opposed to what they called the Marxist-Jewish-internationalist-unGerman socialism. As Hitler once said:

I had only to develop logically what social democracy failed.... National Socialism is what Marxism might have been if it could have broken its absurd ties with a democratic order.... Why need we trouble to socialize banks and factories? We socialize human beings....

The growth of such authoritarian-fascist movements in (or at other times) the Great Depression was not at all unusual. Think of Father Coughlin or Huey Long in the United States during the Great Depression; think of the French interwar right with its emphasis on national discipline; or think of Patrick Buchanan's calls for a culture war, and ascription of blame to immigrants and to foreign trade in the contemporary United States.

What was unusual was the virulence of the National Socialist strain of fascism: their love of war even at unfavorable odds, their murderous anti-semitism (and anti-gypsyism, anti-slavism, anti-disabledism), their eagerness to resort to not just retail but wholesale murder, and the speed with which they seized control of Germany.

Germany: The Nazi Regime

On January 30, 1933, in accord with the German constitution, President Hindenburg named Adolf Hitler Chancellor of Germany. The Nazis held only three of eleven cabinet posts. Their government rested on a coalition with the Nationalists. On February 27, 1933, someone--probably the Nazis--burned down the Reichstag building. On February 28 President Hindenburg proclaimed martial law. On March 23 the Reichstag passed a "Law for Removing the Distress of the People and the Reich" which centralized all legislative powers in the cabinet for four years. By July 14 the Nazi Party was the only political party in Germany.

As a political venture, Nazism was a smashing success in its first few years. The political correspondent William Shirer was posted to Berlin in the late summer of 1934, a year and a half after Hitler took power. He found:

much that impressed, puzzled, and troubled a foreign observer about [Hitler's] Germany. The overwhelming majority of Germans did not seem to mind that their personal freedom had been taken away, that so much of their culture had been destroyed and replaced with a mindless barbarism, or that their life and work had become regimented....

In the background, to be sure, there lurked the terror of the Gestapo.... Yet the Nazi terror in the early years affected the lives of relatively few Germans, and a newly arrived observer was somewhat surprised to see that hte people... did not... feel that they were being cowed and held down by an unscrupulou and brutal dictatorship. On the contrary, they supported it with genuine enthusiasm....

Hitler was... confounding the victorious Allies and making Germany militarily strong again. This was what most Germans wanted.... By the autumn of 1936 the problem of unemployment had been largely licked, almost everyone had a job again, and one heard workers who had been deprived of their trade-union rights joking, over their full dinner pails, that at least under Hitler there was no more freedom to starve.... "The Common Interest before Self-Interest!" was a popular Nazi slogan in those days... the masses were taken in by the new "national socialism" which ostensibly put the welfare of the community above one's personal gain.

The racial laws which excluded the Jews... seemed... to be a shocking throwback...but since the Nazi racial theories exalted the Germans as the salt of the earth... they were far from being unpopular...

The image of Hitler's ideology can be seen in the Nazi program for the German agricultural sector. The Hereditary Farm Law of September 1933 transformed all farms of less than 300 acres into hereditary estates that must be passed down undivided to the next male heir. Only an Aryan German who could prove "purity" of blood back to 1800 could own such a farm. Such a farmer's estate could not be sold or seized for debt or bankruptcy. And farm prices were raised an average of twenty percent.

The industrial policies of the Third Reich were in the beginning the brainchildren of Hjalmar H.G. Schacht, who assumed office as president of the central bank under Hitler in 1933, and because finance minister in the following year. Schacht was one of the few finance ministers to take advantage of the freedom provided by the end of the gold standard to keep interest rates low and government budget deficits high: massive public works funded by large budget deficits. The consequence was an extremely rapid decline in unemployment--the most rapid decline in unemployment in any country during the Great Depression. Eventually this Keynes-like policy was to be supplemented by the boost to demand provided by rearmament and swelling military spending.

In the longer run the corruption and bureaucracy that the Nazi government imposed on the government would slow Germany's economic progress. Hjalmar H.G. Schacht was replaced in September 1936 by Hitler's lieutenant Hermann Goering, with a mandate to make Germany self-sufficient to fight a war within four years (and to acquire a vast industrial conglomerate from looted Jewish-owned properties for himself. Under Goering imports were slashed. Wages and prices were controlled--under penalty of being sent to the concentration camp. Dividends were restricted to six percent on book capital. And strategic goals to be reached at all costs (much like Soviet planning) were declared: the construction of synthetic rubber plants, more steel plants, automatic textile factories.

The replacement of Schacht by Goering was fortunate for the rest of the world: the German economy during World War II was not as strong, and hence could not give as much support to the military, as it might have.

Real wages in Germany dropped by roughly a quarter between 1933 and 1938. Trade unions were abolished, as was collective bargaining--which would have been of little use with wages frozen by government decree. The right to strike was, of course, abolished. And the right to quit disappeared as well: labor books were introduced in February 1935, and required the consent of the previous employer in order to be hired for another job.

In William Shirer's view, however, German workers were not actively discontented with Hitler's regime: it had, after all, brought the Great Depression to an end in Germany, and removed the fear of unemployment. Loss of the freedom to quit, the freedom to engage in politics, and the freedom to join a union was worth less than the loss of the freedom to starve.

The Soviet Union: The New Economic Policy

It was not foreordained that the Soviet Union would turn into a terror-ridden prison camp. There were strong signs of impending disaster under Lenin: the promotion of the secret police-first called the Cheka, then the OGPU, then the NKVD, and at its end the KGB-to a prominent place. The use of unselective terror to dominate regions during the Russian Civil War. The suppression of discussion and debate within the Communist Party.

But Lenin--ever the pragmatist--had taken a number of steps backward from the central command-driven, terror-using, Communism-now-at-all-costs policies of the Civil War. "War Communism" had been replaced by a "New Economic Policy" placing less emphasis on the elimination of the business class and more emphasis on boosting production to make up for the losses of World War I and the Civil War.

"War Communism" was Lenin's attempt to achieve both the degree of military mobilization of the economy that he believed World War I-era Germany had obtained, and to accomplish the goals of nationalization and income equalization to which he and his Communists were strongly committed. It took place against the desperate background of the Russian Civil War. The first economic consequence was inflation, ending in a 1924 reform of the currency that exchanged fifty million "old" rubles for one "new" ruble. The second economic consequence of War Communism was complete nationalization: all factories were nationalized. All credit institutions were nationalized. International trade was nationalized. All wages were equalized. Instead of employers hiring workers, party functionaries conscripted them.

In agriculture War Communism was a disaster--the first of many agricultural disasters. The do-it-yourself redistribution of land that the peasants accomplished and the Bolshevik Party blessed was very popular. But the government needed food for the towns--and peasant farmers living in the countryside were much less interested in delivering grain in exchange for urban luxuries than had been noble landlords under the Czar.

The government tried to requisition the food it needed for the cities. The peasants hid the grain they had, and cut back on production because they thought that any excess above their own subsistence would be confiscated. Urban workers, short of food, returned to their relatives' family farms in the countryside, where they at least thought that they could get fed. Industrial output fell.

In 1920 agricultural output was perhaps half of what it had been in 1913. And industrial output was perhaps one fifth of what it had been in 1913.

Nikolai Bukharin--one of the big losers in the succession struggle following Lenin's death (he was in the end shot in the late 1930s) and the model for Arthur Koestler's protagonist, Rubashov, in the novel Darkness at Noon--saw the New Economic Policy [NEP] as desirable for perhaps generations: let the Soviet Union build up its productive power and improve its living standards; let progressive income taxes keep the successful entrepreneurs of the NEP--the so-called NEPmen--from getting too rich; slowly build up the backbone of the economy in the form of state-owned and -operated dams, railroads, utilities, and heavy industrial plants; and then at sometime in the relatively distant future attempt to move beyond a market economy in which goods were distributed "to each according to his work" to a Communist economy in which goods would be distributed "to each according to his need."

The New Economic Policy of Lenin restored private enterprise to the distribution sector. Heavy industrial production remained nationalized. Artisans, and small light industry factories, could work on their own account. But distribution was privatized: private traders bought output from state factories, transported it, and then delievered it to private stores that sold it to consumers. Peasants sold grain to private traders as well-and taxes in money replaced the previous requisitions of surplus.

By 1926 Russian industrial production was back to the level of 1913.

The Soviet Union: Stalin and "National Bolshevism"

The dictator who won the struggle for power after Lenin's death--Josef Stalin, born Josef Vissarionovich Djugashvili--was a paranoid psychopath: the lead candidate for the greatest mass-murderer in human history. His bureaucratic triumph over first the left and then the right opposition within the Soviet Communist Party in the late 1920s left him as the unchallenged dictator of the Soviet Union, surrounded by supporters, clients, and yes-men.

Stalin had been born in what would become the Soviet Republic of Georgia, and ventured into revolutionary-politics-with-banditry after being expelled from an Orthodox seminary He was arrested and exiled to Siberia four times; he escaped four times, suspiciously quickly. Trotsky and others thought that Stalin had spent his time before World War I as an agent provocateur, a spy on the Communists for the Okhrana, the Czar's secret political police.

In 1912 Lenin needed somebody from one of the ethnic minorities of the Russian Empire to stir up agitation at the fringes of the Empire. He chose Stalin. In 1917 Stalin was the first major Bolshevik to return to the then-capital--St. Petersburg or Petrograd--after the fall of the Czar. Lenin gave Stalin the post of editor of the party newspaper, Pravda. During the Civil War he was Commissar for Nationalities--responsible for trying to cement the revolution among the ethnic minorities at the fringes of the Russian Empire. Lenin named him "General Secretary"--responsible for personnel and other bureaucratic matters--of the Communist Party after the Civil War. And Stalin used his post to promote his friends, scatter his opponents, and build up a large faction of clients in the party.

Trotsky thought that Stalin poisoned Lenin.

After Lenin's death, Stalin outmaneuvered his political rivals one by one, allying with one group to expel another from the party before turning on his former allies. Upon Lenin's death the rulers of the Communist Party--the Politburo--established an uneasy truce of "collective leadership." But Trotsky appeared first among equals: Lenin's right hand during the Bolshevik Revolution and the leader of the victorious Red Army. So the other party barons Zinoviev and Kmenev united with Stalin against Trotsky. At the Thirteenth Parthy Congress in 1924 Trotsky's advocacy of rapid industrialization at home and continuous attempts to spark more revolutions abroad was condemned as a "Left" deviation. Trotsky lost his share of power.

Within a year Zinoviev and Kamenev were scared of Stalin--and realized that on the substance of rapid industrialization they agreed with Trotsky. Their "Left Opposition" was condemned by the Party Congress at the end of 1925: Stalin's control of personnel was a more powerful weapon than they had realized. Before 1917 the party had been an underground conspiracy of hunted revolutionaires. In 1917 the hunted revolutionaries emerged above ground after the overthrow of the Czar, and the Communist Party became a more normal political party: a large number of voters and allies among the public following the lead of the party officials. During the Civil War the Communist Party beame a coalition to fight the war. And after the war it became a bureaucracy.

Recruitment drives brought the party membership up to one million in 1929, with the new members selected and screened by the party. The General Secretary--Stalin--was responsible for recruitment, promotion, and personnel, an onerous task that he had agreed to assume at Lenin's plea. The General Secretary appointed the secretaries of subordinate local committees. The local secretaries would appoint those who screened incoming members. And the local secretaries would choose the delegates to the Communist Party Congresses--who would then do as their patron's patron Stalin suggested.

By 1927 Zinoviev and Kamenev were expelled from the Communist Party.

Two years later Stalin turned on his allies--Bukharin, Rykov, and Tomskii--who had helped him expel Kamenev, Zinoviev, and Trotsky. Bukharin and company were a "Right Deviation" that wanted to restore captialism. Thus by the end of the 1920s all of the rest of Lenin's lieutenants--Kamenev, Zinoviev, Bukharin, and Trotsky--were powerless. They were dead by the end of the 1930s.

After the end of the Russian Civil War, Lenin had taken several steps back away from the planned, centralized, and militarized economy. His "New Economic Policy" allowed the return of entrepreneurs, merchants, and middlemen--the so called "NEPmen." It encouraged the growth of a class of relatively rich peasants--the "kulaks"--to produce the agricultural surplus needed to feed the cities. Forced confiscations of grain were replaced by a proportional tax, and peasants received the right to sell their surplus on the market. Lenin exhorted the Party to learn khozraschet--in Martin Malia's translation, "profit and loss business methods."

The Russian economy recovered relatively quickly under the New Economic Policy. Martin Malia believes that ordinary Russians had a higher standard of living in the mid-1920s than at any time since:

the superior living standard of the NEP is eminently plausible with respect to the obvious availability in the earlier years [of NEP] of food, of consumer goods that people actually wanted, and of personal freedom...

As far as material wealth is concerned, Malia is almost surely wrong. Soviet households of the 1980s had radios, and apartments with some consumer appliances rather than cottages with straw floors. But the gain in material living standards was not nearly as much as it should have been. Traditionally-measured real wages in 1952 appear no higher than in 1929, when they were about at the level of 1913; and Soviet urban consumers saw few of the new inventions that enriched consumer choice elsewhere. The grain harvest of 1952 was less than that of 1929, which was less than that of 1913.

And throw into the balance the chance of being arrested, shot, or exiled to Siberia after the end of NEP, and it does look like a golden age.

But NEP did little to equip the Soviet Union to defend itself against attack from abroad. And it did nothing to advance Communist ideals. It is possible to envision a different Soviet Union, in which other leaders had won the succession struggle after Lenin's death, which would have seen economic policy evolve very differently: an extension of the NEP coupled with an ever-postponed long-run plan to resume nationalization, arriving in the end at something like post-World War II Sweden as far as economic organization is concerned.

It is unlikely: practically all of the Bolsheviks who made the Russian Revolution would have been opposed to such an evolution, at least at first. And to all in the Communist Party, the increasing wealth of the NEPmen, the traders and distributors who had prospered under the New Economic Policy, was offensive: they toiled not, neither did they spin; all they did was carry things from place to place; and Communists saw no creation of economic value in distribution; so their profits were pure exploitation of the people, and the Party, by bloodsucking parasites. NEP could not last. To the Bolshevik cadre, NEP was a betrayal of the dream of socialism. When Stalin began his industrialization drive, all elements of the Party--in power or not, expelled or not, exiled or not--rallied to him in support of his policies (if not his rule).

Moreover, as Alec Nove has pointed out, national security considerations required an emphasis on building up those industries necessary to boost military might and maintain economic independence; steel, coal, and heavy machinery--not consumer goods. But how are you to persuade the peasants to boost agricultural production if you have no factory-made consumer goods to trade them for their grain?

So from the perspective of the Communist Party the problem of agricultural economics was how to extract as much as possible in the way of food from the countryside while giving up as little as possible, in the sense of the share of manufacturing production devoted to producing consumer goods for rural localities, as possible. In the latter stages of the NEP the government raised industrial prices and lowered farm prices--using "the scissors" to improve the government's terms-of-trade vis-a-vis the farmers. This had the expected result: the farmers did not want to sell grain to the cities at the prices the government was willing to pay.

The "goods famine" generated by the start of the first Five Year Plan and the shift of urban production from consumer goods to capital goods, and from light industry to heavy industry, called forth a "grain famine." Peasants shifted to growing industrial crops--cotton and flax--and to raising livestock rather than grain that the could not sell to the state at a reasonable price.

In 1929 urban rationing was reintroduced. The NEP had failed from the government's point of view: the peasants were not willing to deliver to the state the grain that the government wanted at the price that the government wanted to pay.

Thus the government decided that it would have to do something about the "kulak," the relatively rich peasant who was producing a surplus of agricultural products and yet unwilling to deliver it up to the party. Note that a "kulak" was not a landlord; a "kulak" was merely a peasant who had enough land and money to hire a farmhand. The poorest group of peasants were not sources but net purchasers of food, earning from handwork and handicrafts enough to bring their food consumption up from starvation levels. The so-called "middle" peasants were in rough balance, eating what they produced.

Only the "kulaks" produced a surplus.

Marx had claimed--wrongly--that the British industrial revolution had accumulated the capital to build the factories by expropriating the property of the peasants. The "enclosure" movement, Marx claimed, had deprived the peasants of their common property and their land, had turned them into a property-less industrial proletariat, and had concentrated the wealth that the rich then used to invest in factories.

Marx was wrong. The enclosure movement in Britain was not a win-win event: the politically powerful who could reach and influence Parliament did very well indeed. But the industrial working class of nineteenth century Britain was a consequence of population growth: there was no rural depopulation in Britain until the end of the nineteenth century, well after the industrial revolution took hold, when farm workers were pulled into the cities by higher urban wages. And factories were financed by merchants and entrepreneurs on shoestrings, not by landlords fattened by the profits of enclosure: landlords fattened by the profits of enclosure kept their wealth in land or loaned in to the governments that fought the wars that made the British Empire.

But by the end of the 1920s the Communists--not just Stalin, but Trotsky and such figures as Preobrazhensky too--had reached the conclusion that the Soviet Union needed to do what Marx told them the British business class had done two centuries before: "primitive accumulation." Confiscate the land and animals of the kulaks, the Party decided. Bring them into collective farms, along with the poor and middle peasants. Tighten down their standard of living to a little bit more than what the non-kulak average had been beforehand. The middle peasants and the poor peasants will be happy, the Party thought. Only the kulaks will be upset--and their resistance can be handled. Thereafter the entire agricultural surplus can be taken for the cities, with no need to supply the countryside with any consumer goods at all.

John Maynard Keynes wrote that:

The ideas of economists and political philosophers... are more powerful than is commonly understood... the world is ruled by little else. Practical men... believ[ing] themselves... exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, hearing voices in the air, are distilling their frenzy from some academic scribbler...

We have seen this in Hitler: driven to conquer Poland, Czechoslovakia, and Russia by his hearing the voices in the air of the economist Thomas Malthus (along with the racist philosopher Houston Stewart Chamberlain, and the social Darwinist sociologist Herbert Spencer). We have seen this in Lenin, driven to try to destroy the market as a social mechanism by the voices in the air of Marx and Engels. And now we see this in Stalin and his peers, driven to kill and exile fifteen million peasants because Marx had once written five chapters on the "so-called primitive accumulation" of capital in pre-industrial Britain.

Beginning in 1929, Stalin decreed the collectivization of agriculture. Some ninety-four percent of the Soviet Union's's twenty-five million peasant households were gathered into state- and collective farms, averaging some fifty peasants per farm. Peasants were shot, died of famine, and were exiled to Siberian prison labor camps in the millions during the 1930s. Perhaps fifteen million died. Agricultural production dropped by a third. The number of farm animals in the Soviet Union dropped by half.

Certainly the entire surplus was taken, with little or anything being traded back from the cities to the countryside. But resistance was not confined to the kulaks. Peasants everywhere slaughtered and ate their animals, rather than submit calmly to their collectivization.

It is not likely that there were any benefits to the collectivization of agriculture. Food for the cities could have been obtained--more food on better terms--by devoting a share of urban industrial production to consumer goods useful for farmers. The underlying idea of collectivization was the re-enserfment of the peasantry: reduce their standard of living to the bare minimum, take the surplus, and use the surplus to feed the urban workers. But serfdom is not a very efficient way of squeezing food out of the countryside. More efficient to have kept the farm animals and the fifteen million people alive and traded consumer goods for the food to feed the cities.

The other side of Stalin's economic policy was rapid industrialization. After having condemned his political opponents as unrealistic "super-industrializers," Stalin announced a Five-Year Plan that exceeded even their hopes. During the First and Second Five-Year Plans Soviet statisticians claimed that industrial production--which had stood 11% above its 1913 level in 1928--was some 181 percent higher by 1933, and some 558 percent higher than 1913 by 1938. Heavy industry had the highest priority: coal, steel, chemicals, and electricity. Consumer goods were to come later, if at all.

The "Plan" was not an overall, integrated, achievable strategy for industrial development--what we would call a plan. Instead, it rapidly became a series of selected objectives--finish this dam, build so many blast furnaces, open so many coal mines--to be achieved whatever the cost. When in the mid-1960s Fidel Castro decreed that Cuba was to make a ten-million ton sugar harvest, nearly twice its normal production, and that everything else was to be subordinated to that goal, he was acting in the spirit of Stalin's Five Year Plans.

The aim was to build up heavy metallurgy. The task was to acquire--buying from abroad or making at home--the technology that American heavy industry deployed. A "steel city" was to be built in the Urals, at Magnitogorsk, and supplied with coal from the Chinese border. (And without Magnitogorsk it is hard to see how Stalin could have won World War II, or the factories of western Russia were under German occupation from July 1941 until late in 1943). Dams, automobile factories, tractor (or tank) factories--all located not near the border or where the people were but far to the east of Moscow. General Motors, Ford, and Caterpillar were eager to contribute engineering expertise for a price.

How to get workers to man the new heavy industrial plants--especially since Stalin couldn't pay them much: consumer goods were impossible to find with the shift to heavy industry, and agricultural production was in shambles. The answer was by drafting the population: internal passports destroyed freedom of movement, housing and ration books depended on keeping your job (and thus satisfying your employer), and there was always the threat of Siberian exile in a concentration camp or a bullet in the neck for those whose bosses accused them of "sabotage." Nonfulfillment of quotas led to arrest and imprisonment or execution. In 1932 the government empowered local authorities to dismiss workers and deprive them of their food ration cards and housing for one day's absenteeism. Unemployment was eliminated: if you were unemployed, you might as well be sent to a labor camp.

At the start of the industrialization drive, there were show trials of engineers (accused of being "plan-wreckers"). Squeezing down the rural standard of living further produced a mass exodus: bad and low-paid as the cities were, for an adult male being a semi-serf on the collective farm was worse. More than twenty-five million people moved to the cities and the factories during the 1930s.

On the one hand, the Soviet Union did outproduce Germany and Britain in war weapons during World War II--and many of the weapons were of excellent quality. On the other hand, the claims of nearly sevenfold growth in industrial production from 1913 to 1940 were significantly exaggerated: cut reported industrial production in 1940 in half relative to 1913 to get a better indication of Soviet industrial production growth: perhaps industrial production in 1940 was (measured using standard techniques) 3.5 times industrial production in 1913 (although, once again, Russia was making new goods and new types of goods that it could not have made in 1913). But by the end of the Second Five Year Plan Russia had a strong industrial base, with a greatly increased capacity to produce coal, steel, iron, electricity, airplanes, tractors (and tanks), and locomotives. As best as Bergson could estimate, Soviet real national product grew at some 4.5 percent per year on average from 1928 to 1958.

Factory workers were shot or exiled to Siberian labor camps for failing to meet production targets assigned from above. Intellectuals were shot or exiled to Siberian labor camps for being insufficiently pro-Stalin, or for being in favor of the policies that Stalin had advocated last year and being too slow to switch. Communist activists, bureaucrats, and secret policemen fared no better. More than five million government officials and party members were killed or exiled in the Great Purge of the 1930s as well. All of Stalin's one-time peers as Lenin's lieutenants were gone by the late 1930s--save for Leon Trotsky, in exile in Mexico, who survived until one of Stalin's agents put an icepick through his head in 1940.

Curiously enough, the most dangerous place to be in Russia in the 1930s was among the high cadres of the Communist Party. Of the 1800 delegates to the Communist Party Congress of 1934, less than one in ten were delegates to the Party Congress of 1939. The rest were dead, in prison, or in Siberian exile. The most prominent generals of the Red Army were shot as well. The Communist Party at the start of World War II was more than half made up of those recruited in the late 1930s, and keenly aware that they owed their jobs and their status in Soviet society to Stalin, Stalin's protegees, and Stalin's protegees' protegees.

We really do not know how many people died at the hands of the Communist regime in Russia. We do know that the Siberian concentration camps were filled by the millions at least five times. The Gulag Archipelago grew to encompass millions with the deportation of the "kulaks" during the collectivization of agriculture. It was filled again by the purges of the late 1930s. It was filled yet again by Poles, Lithuanians, Estonians, Latvians, and Moldavians when the Soviet Union annexed those territories on the eve of World War II. Soldiers being disciplined, those critical of Stalin's wartime leadership, and ethnic groups thought to be pro-German were deported during World War II. After World War II perhaps four million Soviet soldiers who had been captured by the Germans and survived Hitler were sent to the Gulag until they rotted and died.

The entire system would not be shut down until the late 1950s, when Nikita Krushchev was General Secretary.

As Basil Kerblay write in his Modern Soviet Society, we know more about how many cows and sheep died in the 1930s than about how many of Stalin's opponents, imagined enemies, and bystanders were killed. R.J. Rummel estimates 62 million dead from the Soviet regime. Other estimates tend to be somewhat but not orders of magnitude lower.

The reality of the Soviet Union in the 1930s was in strong contrast to the image that many outside had of it. Outsiders focused on three things. First, the Soviet Union had eliminated unemployment--in a decade in which unemployment was bitter and pervasive outside of Russia. Second, Soviet production was expanding rapidly--in a decade in which production stagnated elsewhere in the world. Third, shortcomings in the Soviet Union could be blamed on the past: the country's backwardness, the heritage of the Czars, the necessity of doing everything as fast as possible to strengthen the country and catchup to the advanced industrial powers. "You can't make an omelette without breaking eggs."

Yet it exerted a definite attraction on leftists and non-leftists alike. An effete intellectual upper-class snob like John Maynard Keynes--at the heart of the High British Decadence of the Bloomsbury group--had many reasons to dislike Leninism and the Soviet Union. As he wrote:

For me, brought up in a free air... Red Russia holds too much which is detestable. Comfort and habits let us be ready to forgo, but I am not ready for a creed that does not care how much it destroys the liberty and security of everyday life, which uses deliberately the weapons of persecution, destruction, and intenational strife... spending millions to suborn spies in every group and family at home.... How can I acept a doctrine which sets up as its bible, above and beyond criticism, an obsolete econmic textbook [Marx's Capital] which I know to be not only scientifically erroneous but without interest or application for the modern world? How can I adopt a creed which, preferring the mud above the fish, exalts the boorish proletariat above the bourgeois and the intelligentsia who... are the quality of life and surely carry the seeds of all human advanement? Even if we need a [new] religion, how can we find it in the turbid rubbish of the Red bookshops?

Yet even he wrote:

Now that the [Bolshevik Revolution] is done and there is no chance of going back, I should like to give Russia her chance; to help and not to hinder. For how much rather... if I were a Russian, would I contribute my quota of activity to Soviet Russia than to Tsarist Russia!... I should detest the actions of the new tyrants....But I should feel that my eyes were turned towards, and no longer away from, the possibilities of things...

The writer Lincoln Steffens ruined his reputation with the bon mot, on his return from Stalin's Russia: "I have seen the future, and it works." Yet even John Maynard Keynes is prepared to say that Soviet Russia may have some germ of the future in it, and may work.


from "Requiem"

by Anna Akhmatova

No, not under the vault of another sky, not under the shelter of other wings. I was with my people then, there where my people were doomed to be.


Instead of a Forward

During the years of Yezhov's terror, I spent seventeen months standing outside the prison in Leningrad, waiting for news. One day someone recognized me. Then a woman with lips blue from the cold, who was standing behind me, and of course had never heard of my name, came out of the numbness which affected us all. She whispered in my ear (for we all spoke in whispers there): "Can you describe this?"

I said, "I can."

Then something resembling a smile slipped over what had once been her face.



It was a time when only the dead
smiled, happy in their peace.

And Leningrad dangled like a useless pendant
at the side of its prisons.

A time when, tortured out of their minds,
the convicted walked in regiments,
and the train whistles sang
their short parting song.

Stars of death stood over us.

Innocent Russia squirmed
under the bloody boots,
under the wheels of the prisoner transport vans....

* * * * *

They took you away at dawn,
I walked after you as though you were being borne out,
the children were crying in the dark room,
the candle swam by the icon stand.

The cold of the icon on your lips.

Death sweat on your brow... Do not forget!

I will howl by the Kremlin towers...

* * * * *


I found out how faces droop,
how terror looks out from under the eyelids,
how suffering carves on cheeks
hard pages of cuneiform,
how curls ash-blonde and black
turn silver overnight,
a smile fades on submissive lips,
fear trembles in a dry laugh.

I pray not for myself alone,
but for everyone who stood with me,
in the cruel cold, in the July heat,
under the blind, red, prison wall.

The hour of remembrance has drawn close again.

I see you, hear you, feel you.

The one they hardly dragged to the window,
the one who no longer treads this earth,

the one who shook her beautiful head,
and said: "Coming to this place is like coming home."

I would like to call them all by name.
But the list was taken away, and I cannot remember.

For them I have woven a wide shroud
from the humble words I heard among them.

I remember them always, everywhere,
I will never forget them, whatever comes.

And if they gag my tormented mouth,
with which one hundred million people cry,
then let them also remember me
on the eve of my remembrance day.

If they ever think of building
a memorial to me in this country,
I solemnly give my consent,
only with this condition: not to build it
near the sea where I was born;
my last tie with the sea is broken;
nor in Tsarsky Sad by the hallowed stump
where an inconsolable shadow seeks me,
but here, outside the prison, where I stood three hundred hours,
and they never unbolted the door for me.

Build it here because even in blessed death I am terrified
that I will forget--forget the thundering of the prisoner transport vans,
forget how the hateful door slammed,
forget how the old woman howled like a wounded beast.

Let the melting snow stream
like tears from my motionless, bronze eyelids,
let the prison dove call in the distance,
and the boats go quietly on the Neva.

Next Chapter

20 Century

Created 2/3/1997
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Associate Professor of Economics Brad DeLong, 601 Evans
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