INDUSTRIALIZATION, RAPID

Soviet growth strategy was focused on fast growth through intensive industrialization. It involved the self-development of an industrial base, concentrated in capital goods or "means of production," also dubbed "Sector A" according to Marxian jargon. It became the official strategy of the Soviet leadership as a resolution of the Soviet Industrialization debate that occupied communist thinkers and politicians during the mid-1920s. The industrialization debate considered two growth strategies. One, supported by moderates and led by Nikolai Bukharin, advocated an extension of the New Economic Policy (NEP), centered on industrialization but based on the initial development of agriculture, mostly by individual and independent farmers. A prospering agricultural sector would create demand on the part of both consumers and producers for industrial goods, as well as surplus resources in terms of savings, to finance this industrialization. While all sectors of manufacturing would be developed, surplus agricultural products would be used as exports in order to import machinery and technology from the West. Advocates of the alternative strategy, including leaders of the left such as Leon Trotsky, preferred a more rapid state-led industrialization drive, concentrated in large state-owned heavy industrial enterprises financed by forced savings, extracted from collectivized (thus supposedly more productive) agriculture and from the population. While machinery and technology would be imported, the main thrust would be to build an indigenous heavy industrial base and early self-sufficiency in all industrial goods, and more autarky. The high level of forced savings would minimize consumption and hence provide for higher rate of investment, faster growth, and a relatively smaller "Sector B" of consumer goods and light industry; in contrast with a normal path of early development of light and consumer goods industries, followed by gradual move toward the production of machinery and capital goods. The more radical variant was also more consistent with Marxian doctrine and teaching.

Josef Stalin used the industrialization debate as a leverage to gain control, first by siding with the moderates to oust Trotsky and his followers, and then by ousting the moderates and adopting an even more extreme variant of forced industrialization. Other motivations for his choice of the heavy industrialization route were the Soviet Union's rich endowment of natural resources (coal, iron ores, oil, and gas), and the need (facing external threats), or desire, to develop a strong military capability.

This strategy guided the industrialization drive throughout, with only some easing off toward the end of the Soviet period. The 1930s were characterized by the construction of a large number of giant industrial, power, and transportation projects that involved moving millions of people to new and old cities and regions. This was also the period when collectivized agriculture was expected to provide surplus products and resources to feed the growing industrial labor force and to export in exchange for modern technology. Students of the period differ on the extent to which this really happened, and some claim that most of the extracted surplus through food procurements had to be reinvested in machinery and other inputs needed to make the new collective and state farms work. With the increasing threat of war toward the end of the 1930s, manufacturing became more oriented toward military production. Much of the industrial effort during the war years was directed toward the production of arms, but it was also characterized by a gigantic transfer of many hundreds of enterprises from the western parts of the USSR eastward to Siberia and the Far East in order to protect them from the advancing German army. This transfer happened to be consistent with an explicit goal of the regime to develop the east and northeast, the main concentration of natural resources, an effort that was facilitated over the years through the exploitation of millions of forced labor workers.

The rate of industrial growth in the Soviet Union was higher than that of agriculture and services, and the share of industry in total output and in the labor force increased over time as in any developing country. Except that in the Soviet Union these trends were stronger: The gaps in favor of industry were wider, also due to the deliberate constraint on the development of the service sector, considered nonproductive according to Marxian doctrine. Thus the share of industrial output in GNP climbed to more than 40 percent in the 1980s, significantly above the share in other countries of similar levels of economic development. The share of industrial labor was not exceptionally high due to the concentration of capital and of labor-saving technology. This over-industrialization, including noncompetitive industries, even some creating negative value, was recognized in the 1990s as a drag on the ability of former Communist states to adjust to a normal market structure and an open economy during the transition. The autarkic policy of industrialization pursued over most of the Soviet period contributed to a technological noncompatibility with the West, which further hurt the competitiveness of Soviet industry.

The bias of Soviet industrialization toward Sector A of investment and capital, as well as military goods, is apparent in the internal structure of industry. The share of Sector A industry grew fast to almost half of total industry and stayed at approximately that level throughout the entire period. It was also estimated that during the 1970s and 1980s military-related production occupied a substantial share of the output of the machine-building and metalworking sector as well as more than half the entire activities of research and development. The development of consumer and light industry ("Sector B," under Marxian parlance) was not only limited in volume; it also suffered from a low priority in the planning process and thus from low quality and technological level. "Sector A" industries, including the major military sector, enjoyed preferential treatment in the allocation of capital and technology, of high-quality labor resources and materials, and of more orderly and timely supplies. Hence some of the technological achievements in the spheres of defense and space. Hence also the very high costs of these achievements to the economy at large and to Sector B consumer industries in particular, which were characterized by low-quality and lagging technology, limited assortment, and perennial shortages. This policy of priorities also explains the very limited construction resources allocated to housing and to urban development, causing housing shortages, as well as the very low production of private cars and (to a lesser extent) household appliances. The biased structure of industry became also a serious barrier for restructuring under the transition.

See also: collectivization of agriculture; economic growth, soviet; industrialization

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Gur Ofer