Russia

THE PROBLEM OF POVERTY in Russia is not new. It was a taboo to discuss it under communism, when poverty was pervasive but officially did not exist. The Bolshevik Revolution of 1917 was not an isolated event in Russian history: tzarist economic policies, especially during World War I, were characterized by rigid bureaucratic regulations and an imperialistic and militaristic agenda, and led to widespread poverty, income inequality, and further pauperization of both peasants and industrial workers.

It set the stage for the Bolshevik coup d'état and establishment of the deadliest dictatorship in human history. Lenin's government produced an endless stream of economic decrees and policies that resulted in mass starvation, epidemics, and consequent depopulation of the cities. During the first five years after the revolution, Russia experienced a population decrease of 18 to 20 percent through mass starvation, civil war, and Bolshevik repression, as well as emigration and very low fertility combined with the highest mortality rates ever experienced by Russia.

Bolshevik economic policies in 1918–21, also known as war communism, were an attempt to introduce full-blown communism based upon the orthodox Marxist utopian vision of a new society. They tried to introduce the direct power of the workers at all levels of management and to construct a whole pyramid of organs of worker control, from the individual enterprise to the entire economy, as institutions of centralized management. This experiment with orthodox Marxism led the country to complete disaster: workers were interested in consumption rather than production and the advancement of communism.

Vladimir Lenin had chosen the only possible way of managing the economy under socialism: direct government terror and coercion. The absolute command economy (the Leninist pattern of socialism) was created. Solely the central government performed the management of production and distribution. There was a period, as in 1919–20, when communists seriously discussed the imminent abolition of money and transition to distribution purely in kind. Both the actions and the talk of communist leaders put the country on the verge of complete economic catastrophe within three years of the beginning of the socialist experiment.

Lenin introduced the first series of reforms, known as the New Economic Policy (NEP), in March 1921, a temporary retreat from orthodox Marxist methods of advance toward communism. These reforms would be introduced as a last resort for saving communism, not abandoning it. Liberalization of economic life under NEP, coupled with the introduction of the gold standard, revived economic activity and led to the fastest rates of economic growth and rising living standards in Russian history.

It could not last for long: the rapid growth of the private sector in those sectors of the economy in which it was permitted, and its evident competitive advantages, represented a political threat to the regime. Realization of this threat by Joseph Stalin and other communist leaders led to the abandonment of NEP in the late 1920s, and creation of the command system of Soviet socialism as it did survive (with minor modifications) until Mikhail Gorbachev's perestroika (liberalization) in the 1980s.

This system was based on liquidation of the market and government rationing of both means of production and consumer goods. The Soviet government created horrific noneconomic institutions of compulsion to work: mass repression, providing millions of slave laborers in the Gulag system, and a ban on peasants leaving collective farms, supplemented later by a similar ban on jobs and residency changes for urban residents that completed the enslavement of the whole population.

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