Should-Read: Anton Cheremukhin et al. (2013): Was Stalin Necessary for Russia’s Economic Development?

Should-Read: Joachim Voth and I both focused on how Tsarist industrialization was hindered by monopoly power in manufacturing, and on the absence of a special bonus for the Stalinist construction of a heavy industrial sector in Magnitogorsk and elsewhere very far in the interior. The destruction of monopoly power via planning–along with the destruction of the peasant-collective barriers to mobility–was a big plus that largely offset the inefficiencies of central planning. The creation of a heavy industrial complex in Magnitogorsk was a priceless asset for the world come World War II.

Anton Cheremukhin et al. (2013): Was Stalin Necessary for Russia’s Economic Development?: “We construct a large dataset that covers Soviet Russia during 1928-1940 and Tsarist Russia during 1885-1913…

…We use a two-sector growth model to compute sectoral TFPs as well as distortions and wedges in the capital, labor and product markets. We find that most wedges substantially increased in 1928-1935 and then fell in 1936-1940 relative to their 1885-1913 levels, while TFP remained generally below pre-WWI trends. Under the neoclassical growth model, projections of these estimated wedges imply that Stalin’s economic policies led to welfare loss of -24 percent of consumption in 1928-1940, but a +16 percent welfare gain after 1941. A representative consumer born at the start of Stalin’s policies in 1928 experiences a reduction in welfare of -1 percent of consumption, a number that does not take into account additional costs of political repression during this time period. We provide three additional counterfactuals: comparison with Japan, comparison with the New Economic Policy (NEP), and assuming alternative post-1940 growth scenarios….

The country significantly lagged behind advanced capitalist economies, the US and UK. However, Russia’s industrialization proceeded at a speed similar to some other industrializing economies, in particular, Japan…. Most importantly, as noted by Gerschenkron (1962), reallocation of labor to industry was hindered by the prevalence of communal rather than individual ownership of land… the institutions of obschina….

The eminence of cartels (syndikaty), especially post 1899-1902 recession, in the capital goods industries (steel, coal, iron, railroad engineering). These cartels were to a large extent foreign owned. Syndikaty established prices and the market quotas. The cartelization of an important part of the heavy industries likely played an additional role in restricting the size of the manufacturing sector relative to a competitive market….