The tension between the demands of defence and heavy industrial production on the one side, and consumption on the other, had been a central question of Soviet economic policy, and politics more generally, since the 1920s. Even in the harshest period of Stalinist industrialisation in the early 1930s, the state was forced to balance the requirements of industrial development with the interests of the Soviet consumer. If the consumer was squeezed too much, there might be unrest; also the absence of material incentives, which depended on the availability of consumer goods, would damage labour productivity.
Even so, the Stalinist system favoured production at the expense of consumption, and Stalin regularly denounced any attempts to redress the balance as 'rightist’ and 'capitalist’ deviations. The Stalinist economic system was designed to reduce consumption and extract resources from agriculture, 'pumping’ them into heavy (Group A) industries and defence, and the absence of material incentives ensured that the regime had to rely on high levels of coercion. This strategy reached its climax during the war, when over half of national expenditure was spent on defence and military industry; meanwhile, investment in light (Group B) industry was only 60 per cent of pre-war levels and personal consumption fell by 35-40 per cent. The regime relied on patriotism to overcome discontent but, even so, it was forced to enhance material incentives to some extent, and reduced restrictions on peasants’ private plots and the markets where their produce was traded.
After the war, there was agreement within the leadership that spending on defence and military-industrial products be scaled down dramatically; the population had to be rewarded for its sacrifices. But, at the same time, Stalin insisted that investment be poured into the reconstruction of heavy industry, which would establish the Soviet Union’s industrial and defence base in the longer term. The Fourth Five-Year Plan (1946-50) was a compromise document: the first priority was to build up the industrial base, and the second was to develop agriculture and consumer-goods industries, while defence came
Only fifth in the list; Group A and B industries were to grow at more or less the same rate. Although these contrasted with pre-war plans, which gave heavy industry many more resources than consumer industries, they amounted to a severe squeeze on consumption, because living standards in 1945 were already at lower levels than before the war.710
A poor harvest in 1946 led to a serious famine, and standards of living deteriorated further. Estimates suggest that in 1948 real wages were 80% of their level in 1940, which were in turn between 25% and 40% lower than their level in 1928. Yet, despite this poverty, the leadership refused to cut its plans for heavy industrial investment. The international situation was in large part responsible, and in November 1947 the regime increased plans for the production of military hardware substantially.
At about the same time, however, the economy began to turn the corner, largely because better harvests improved food supply. The leadership decided that conditions allowed it to abolish rationing in December 1947, and from 1948-49 there was some economic recovery. Production began to reach prewar levels, and living standards rose (although they remained very low) - in 1952 real wages were 25 per cent higher than in 1940. And this improvement allowed the regime to use slightly less coercion in its treatment of the Soviet working class fTom 1950 (even though, as will be seen, the regime was launching repressive campaigns against elite groups at the same time). 711 Hence, although the beginning of the Korean War seems to have led to an increase in spending on the military, this did not have such a severe effect on the living standards of the population. 712
In the years after 1945, therefore, competition with the West encouraged the leadership to retain the emphasis on heavy industry and defence of the 1930s, although it did not feel able to invest such a high proportion of the national product in industry and the military as it had in the early Stalinist period. While low living standards did not cause much open, organised discontent, they gave the population very few incentives to work, and the leadership as a whole recognised that there had to be limits to industrial and military investment.
Yet subterranean disagreements about where those limits lay are apparent. In 1952, for instance, Stalin admitted that a crisis in beef production was caused by poor incentives, and he established a commission headed by Khrushchev to investigate. Khrushchev proposed that procurement prices for meat be raised, but Stalin was willing to accept this only if it was financed by increasing the already very high taxes on agriculture as a whole; he was unwilling to sacrifice his heavy industrial programme. Tensions within the leadership were also evident on the question of labour in the prison camp system (Gulag). Beriia and Malenkov, both leaders involved in the management of the economy, were aware of the inefficiencies of a system that relied on force and discipline rather than material incentives. Beriia, who was in charge ofthe Gulag system and was expected to ensure that the camps fulfilled high plan targets, seems to have become convinced that forced labour was more inefficient than free labour, and was worried about the frequent unrest within the camps. He surreptitiously tried to introduce material incentives into the system and to release prisoners. Malenkov seems to have sympathised with his view, although neither criticised forced labour openly for fear ofantagonising Stalin.
When Stalin died, an influential part of the successor leadership was convinced that the Stalinist model of heavy defence spending, a squeeze on consumption, and a reliance on force and discipline at the expense of material incentives had to change. The evidence suggests that domestic rather than international considerations were the driving force for change, but there obviously was a link between domestic and foreign policy, as the best way to increase consumption was to cut back on defence commitments and lower tensions with the West. Events outside the USSR also seemed to suggest that Stalinist rigidity in international relations and repression at home were not working. Unrest in Eastern Europe in 1953 forced the leadership to accept that reforms were needed in the satellite states; at the same time, there were genuine concerns that Stalin had pursued too risky a foreign policy, and that international tensions would escalate dangerously, leading to the use of nuclear weapons in Korea by the United States.
Initially, this consensus on the need for change extended even to more orthodox Stalinist figures such as Viacheslav Molotov. However, differences over the nature and extent of reform are evident throughout the post-Stalin period. These were largely generated by personal rivalries at the top, but, as was always the case in Soviet politics, leaders had to use ideology to advance their personal ambitions, and as a result programmatic differences did play a role. Additionally, leaders had to appeal to broader institutional interests, such as those in the military, the party apparatus, and heavy industrial ministries.
More generally, though, these conflicts were driven by the difficulty of solving the problem of how the USSR could maintain its role as a superpower while at the same time developing its economy and shoring up its legitimacy at home.
Stalin’s successors argued for different solutions to this problem. Beriia and Malenkov, as was to be expected given their involvement in economic management, adopted a more technocratic approach, emphasising more effective material incentives and, in the case of Malenkov, significantly greater investment in consumer industries. Malenkov also seems to have been particularly willing to make concessions on defence and foreign policy. Meanwhile, Khrushchev favoured, at least initially, an eclectic approach that combined commitment to heavy industry and defence with improvements in consumer industry, and he was less willing to dilute collectivism in the name of individualist, capitalist incentives. Molotov seems to have been more conservative on economic issues than the younger leaders, and was generally less prepared to make compromises in the Cold War.713
Immediately after the death of Stalin, Beriia initiated a series of reforms that sought to end the reliance ofthe economy on forced labour, and to circumscribe the powers of the secret police in the economy - policies that are better seen as technocratic than liberal. He was also outspoken on the need to address difficulties in Eastern Europe, and particularly the German Democratic Republic (GDR), by making concessions and retreating from harsh Stalinist economic policies - although in this period there was a considerable degree of consensus, and all Soviet leaders recognised the need for change.
Policy differences were less important than personal rivalries in precipitating the coup against Beriia in 1953: his colleagues clearly feared that he would start to move against them unless they launched a pre-emptive strike. Even so, Molotov, in particular, made attempts to blame Beriia for excessive compromise with the West, which, it was alleged, had contributed to the East German uprising. And a similar fate befell Malenkov, who again tried to press for a radical departure from the Stalinist orthodoxy. In March 1954, he was calling for a redirection of resources away from heavy to consumer industries and arguing for an end to the confrontation with the West on the grounds that a war in the nuclear age would destroy world civilisation. But Malenkov, like Beriia, found himselfoutmanoeuvred by his rival Khrushchev, in alliance with Molotov, and condemned for an excessively consumerist and pro-detente position. He was removed from the premiership in January 1955.
Yet Khrushchev’s condemnation of Malenkov for 'rightism’ did not amount to a defence of the Stalinist orthodoxy. Rather, he sought his own version of reformism, which avoided Malenkov’s radicalism and Molotov’s more orthodox Stalinism, while squaring the circle: reforming the Soviet economy and enhancing the legitimacy of the regime at home by increasing consumption, without undermining the position of heavy industry and the USSR’s international role. He did so by emphasising the role of the party and of ideology, arguing that the Soviet Union could solve its problems if the leadership remained true to its Leninist ideals and used them to inspire the population to achieve great feats. Thus, at least initially, he refused to accept that there was any need to reduce investment in heavy industry in the interests of consumption because mass mobilisation campaigns organised by the party, such as the introduction of wheat to the 'Virgin Lands’ of Kazakhstan, could increase agricultural production cheaply. In foreign policy, he argued that the Soviet Union’s role as a global power and promoter of socialism could be sustained at the same time as military expenditures were reduced by investing in cheaper nuclear technologies and transferring the competition with the West from the military to the ideological and economic spheres.
Predictably, Molotov criticised several of these initiatives from a more orthodox Stalinist position, condemning the Virgin Lands campaign as unrealistic, and objecting to Khrushchev’s attempts to make peace with Josip Broz Tito, the Yugoslav leader. Relations between the two became increasingly tense, culminating in a final breach when Khrushchev denounced Stalin (and implicitly Molotov and others close to him) in 1956, and when Molotov participated in the attempt to remove Khrushchev in 1957.
Initially, Khrushchev’s policy programme seemed to succeed in resolving the conflict between the demands of defence and consumption, and it was attractive to a significant section of the Soviet elite. Yet, it was ultimately impossible to sustain. Party mobilisation campaigns, while frequently attracting a good deal of support, often caused chaos and failed to provide a magic formula for the solution of economic problems. Moreover, Khrushchev found that his brand of aggressive ideological competition with the West was expensive and required military expansion. Therefore, once Khrushchev had emerged as primus inter pares, he found that serious choices on investment priorities had to be made. While he was consolidating his position within the leadership, Khrushchev supported cuts in consumer industries and increases in investment in heavy industry. However, as he became stronger in 1956 and 1957, he reversed his position and adopted a much more reformist programme, closer to that of Malenkov. He cut heavy industrial investment
And proposed that the Soviet Union compete with the United States in the production of food; he also promised that the USSR would overtake American production of meat, milk, and butter in three to four years. From 1959 to 1961, when Khrushchev’s authority was at its highest, he redirected resources from heavy to consumer industries and agriculture. At the same time, he felt that he had the political strength to challenge the military establishment, and in January 1960 he announced a continuation of the substantial unilateral troop reductions begun in 1957.
Predictably, Khrushchev began to attract serious opposition from heavy industrial and military interests. His attempts at agricultural reform continued to be ineffective, and his efforts to shake up industry by increasing party control were disruptive. In foreign policy, his ambition to promote Communism outside Europe and his willingness to pursue a highly risky strategy in pursuit of these revolutionary goals conflicted with his hope that he could achieve detente and military cutbacks. In 1961, the 1960 defence cuts were reversed, and actual defence spending rose by 24.6 per cent.714 Heavy industry’s priority was affirmed in 1961, and in May 1962 retail food prices on meat, sausage, and butter were substantially increased, while wages were reduced. The result was serious unrest throughout the industrial areas of the Soviet Union, most notably in Novocherkassk, where riots had to be put down by Red Army tanks.
The events of 1962 showed that Khrushchev had failed to resolve the problem ofguns and butter. His ambitious attempts to enhance the legitimacy of the regime, while at the same time expanding the international influence of the USSR, exacerbated the problems of reconciling defence and consumption, and led to crisis.
World History
