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How the Soviet Union Developed During 1925-52 From Agrarian to a Top Industrial Power Under Stalin

MG is a senior air warrior who is an alumnus of the Staff College and a notable writer on military history.

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Introduction

It is interesting to note that Joseph Stalin came to power in 1924 and continued as the leader of the USSR until 1953 when he died of a brain hemorrhage. When Stalin took over the direction of the USSR, it was battling a Civil War and an attempt by the western powers to reinstall the Tsar. The economy was in a rudimentary state and yet within 2 decades he converted the agrarian economy to a highly industrialized and developed economy. Many are of the view that Stalin made use of the communist theory as created by Karl Marx in this transformation but the fact is that Communism had nothing to do with the development of the USSR.

The USSR was not a communist society though it's fashionable to dub it one. It was not even a completely socialist state at that time: In fact, it only absorbed and put into effect a few socialist concepts. Stalin only incorporated a few basic concepts of socialism and in 1938 declared that the USSR would use some of “the basic elements of socialism”. Not socialism per se but its basic elements.

The USSR demonstrated spectacular growth. This is a fact of history and no amount of propaganda from America and England can obliterate this fact. What is the fact? Economic figures are now available that the USSR in the period 1917–1989 showed the fastest growth of GDP. This is in contrast to all other economies of whatever size and despite the Civil War engineered by the Anglo-Saxon powers as well as a life and death struggle with Nazi Germany in WW II.

Even before World War II, the period up to 1928 was especially disastrous as over 60% of GDP and about 85% of industry were lost, mainly due to the intervention of foreign powers and the physical dismantling of equipment by them. The situation was alarming as by 1928 the Soviet republics were even more agrarian than the Russian empire. the Russian economy remained relatively big simply because the country was very large, the largest in the world.


The change

The period during 1928-1930 is very significant. This was the period when Stalin turned his attention to industry and increased products. He took two significant steps.

First, he adopted the Kombinat approach. Readers may well ask what is the Kombinat approach. Kombinat means an Industrial cluster. This concept means a manufacturing hub with interdependent facilities and links. Stalin adopted a comprehensive economic development tool.

The Cluster concept has gained recognition since the 1990s. It is however an old idea promoted by economists as early as the end of the XIX century. The Russian Academy of Sciences and Empire’s Geographical Society accepted the cluster theory and laid down where and how such clusters can be located. The Russian-German-Latvian economist Karl Ballad is an authority on the subject. His theories had a profound effect on Lenin and other Bolshevik leaders, like Krasin, Krzhizhanovsky, Strumilin, and Stalin

As already mentioned Kombinat is a geographical concentration of enterprises closely linked in technology and infrastructure. Stalin authorized many such Kombinats during the first two 5 year plans. These gave astounding results and in about ten years the USSR became the second biggest economy in the world, second only to the US. Everything was created out of ruins.

The second problem was the availability of capital. The problem was more acute as the USSR was an agrarian society and almost all the technology and equipment had to be imported from abroad. Though the Rouble was fully convertible in the 1920s the economy was small and no money was available to buy items from abroad as the country could barely feed itself.

The USSR exported oil and oil by-products but in 1929 the Great Depression hit, and proceeds from exports shrank.

Stalin aided by economists struck a new way to tide over the crisis. The economy was bifurcated into two financial independent sectors.

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The first was the cash-based market economy. For obvious reasons, this was small as capital was at a premium. The second was a network of state-run enterprises which used only limited capital or no money. This network used book-entry settlements, it worked like a giant financial clearing system. Such a system had a consequence and that was that commercial banks were abolished and the entire system became loan free. This had a beneficial effect.

The result of this was that at a time when the world was going through the greatest economic crisis of the 20th century, Russia suddenly was able to finance extremely ambitious industrial projects.

Another very important aspect that is often overlooked is that as the public sector belongs to the people and part of the monies received from the profit of the companies belongs to all people, the money was redistributed among the whole population and the real disposable income grew roughly 3 fold between 1930-38.

That was what Stalin called basic elements of socialism: when the economy started to share its wealth with the people. This still didn’t make the Soviet citizen a rich person but put him or her on a decent level (nothing spectacular actually), but in real terms free education and health services, it gave people hope and prospects of a better life.

Result

In accounts of the period during this time which had the great depression and onset of terror states, for Russians is considered happy,

Nikita Khrushchev in the second half of the 1950s abandoned the Kombinat concept and later Brezhnev dismantled the financial policy in the second half of the 1960s.

The USSR lost its competitive advantages and slowly a political and ideological crisis developed in the second half of the 1980s.

One will recollect or the present generation can read that Americans, and many others, immigrated to the USSR because of two critical considerations.

a) The Soviet Constitution allowed till 1936 any worker from any country to immigrate without permission.

b) Secondly the pay in the USSR was better as the Great Depression hit the USA. In fact, in the US only one out of twenty applications to immigrate were approved in 1930. There were hundreds of thousands mainly from Europe and Asia who during the same period migrated to USSR.. They, came mainly in the 1920s and early 1930s.

So one can see that Karl Marx had little effect on economic revival of Russia and all credit to Stalin who led the economic miracle by his own genius. He deserves the epithet "The Great".


Last word

What is Stalin's contribution to the world? Many developing countries, including Nehru’s India and Mao’s China, took inspiration from Stalin's industrialization policy. Li and Yang (2005) have commented that Soviet economic policies were the major inspiration for Mao’s economic policy in the 1950s and the Great Leap Forward in 1958. India’s first Five-Year Plan (1951-56) was based on the Harrod-Domar model, which was inspired by the Soviet experience (Domar, 1957). Its second Five-Year Plan was based on the plan developed by the Soviet economist Grigory Feldman which was the theoretical basis for Stalin’s policies. So no one can condemn Stalin's greatness.

© 2022 MG Singh emge

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