Russian Economics
Russian Economics
The development of economic theory in Russia is most conveniently divided into a number of separate periods that are bounded by various dramatic changes in the social and political life of the country. Before the emancipation of the serfs in 1861, Russian economics was in many ways imitative of currents of economic theory that were prevalent in the West. Peter the Great (1672–1725) has been interpreted as drawing inspiration from mercantilism for his program of industrial development focused on Saint Petersburg, while physiocracy found expression in the Russian context through the works of Dmitri A. Golitsyn (1734–1803). Classical economics was a major presence across the nineteenth century through the influence of Adam Smith (1723–1790) and his pupils, the first Russian translation of The Wealth of Nations (1776) being published in four parts between 1802 and 1806. Heinrich F. Storch (1766–1835) was a noteworthy commentator on Smith’s work within Russian borders. Other important Russian economists from the first half of the nineteenth century were Nikolai S. Mordvinov (1754–1845), a supporter of protectionism, and Nikolai I. Turgenev (1789–1871), an advocate of free trade.
After 1861 the originality of Russian economics began to increase dramatically, although Western currents like historical political economy still had a significant influence through Russian representatives such as Ivan K. Babst (1823–1881). Marxists such as Georgii V. Plekhanov (1856–1918) articulated the position that, already in the 1880s, capitalism was successfully developing in Russia, against the populist view that there could never be enough domestic demand for a “mature” form of capitalism to become firmly established. A key issue for Russian economists of this period was the resilience of the peasant commune (or village community), an indigenous institution that practiced the periodic redistribution of arable land. Some argued that such primitive forms of communism were already obsolete, while others maintained that they could be the springboard for future socialist success. Vladimir I. Lenin (1870–1924) argued in favor of the former position, and documented in detail how capitalist industry was rapidly developing within Russian borders. Ironically, given Lenin’s assumption of state power in 1917, Karl Marx (1818–1883) came to believe late in his life that the Russian peasant commune could provide a basis for bypassing much of the capitalist phase of historical development, if certain conditions were met. Marx’s economic ideas were disseminated in Russia by sympathetic advocates such as Nikolai I. Sieber (1844–1888).
THE GOLDEN ERA
The most inventive and influential “golden era” of Russian economics can be given as occurring between 1890 and 1929, this period being subdivided into prerevolutionary and postrevolutionary segments. In the prerev-olutionary golden era, the most significant names in Russian economics were Mikhail I. Tugan-Baranovsky (1865–1919), Vladimir K. Dmitriev (1868–1913), Petr B. Struve (1870–1944), Aleksandr I. Chuprov (1842–1908), Sergei N. Bulgakov (1871–1944), and Dmitri I. Mendeleev (1834–1907). In the postrevolutionary golden era, the most significant names in Soviet economics were Nikolai D. Kondratiev (1892–1938), Eugen E. Slutsky (1880–1948), Alexander V. Chayanov (1888–1939), Evgeny A. Preobrazhensky (1886–1937), Leonid N. Yurovsky (1884–1938), Vladimir G. Groman (1874–1937), Vladimir A. Bazarov (1874–1939), and Grigorii A. Feldman (1884–1958). For reasons of space, the work of only the main aspects of some of the most significant of these economists can be discussed here.
Tugan-Baranovsky’s most important contribution to economic theory was Industrial Crises in Contemporary England (1894). This book pioneered the empirical description of business cycles by documenting the interrelated movements in gold bullion reserves, interest rates, and exchange rates, plotted alongside shifts in governmental policy regimes. It also presented a theoretical explanation of cycles based upon the accumulation and exhaustion of free loanable capital that fed into debates between economists like John Maynard Keynes (1883–1946) and Dennis H. Robertson (1890–1963) in the United Kingdom in the interwar period. Tugan-Baranovsky’s other influential work in economic history was The Russian Factory in the Nineteenth Century (1898), which documented various changes in industrial structure, such as the development of possessional factories and the rise and fall of cottage industry. Originally a legal Marxist, Tugan-Baranovsky’s economic methodology changed significantly after 1900, favoring an ethical basis to his socialism rather than a class-based approach, to the extent that by 1917 he was employing marginalist ideas in hypothetical planning models. During World War I (1914–1918), Tugan-Baranovsky analyzed the effects of various forms of war finance on future development prospects, and after Russia’s exit from the war he assisted in forming the Academy of Sciences in Kiev.
Dmitriev’s major work was his Economic Essays on Value, Competition, and Utility, first published separately in 1898 and 1902. One of the most well-known elements in these essays was the argument that unrestricted free competition tended to raise production costs above their essential level, that is, above the lowest possible level for any given state of technique. According to Dmitriev, in the competitive battle for sales, accumulating stocks of commodities played the same role as a military arms race did between opposing powers during peacetime. Under free competition, the nonproductive expenditure on commodity storage was higher than under monopoly, due to the need for competing producers to maintain significant levels of dead stock, in fear of others stepping in and gaining market share. Hence free competition had additional economic costs in terms of wasted output, excess inventories, and redundant advertising. Dmitriev was Russia’s first mathematical economist, and he was also one of the most significant interpreters of the ideas of David Ricardo (1772–1823) within Russian borders.
Other significant Russian economists from the pre-revolutionary era included Struve, a leading member of the legal Marxists who (after emigration to the United States) became a trenchant critic of Stalinist economic policies; Mendeleev, the inventor of the periodic table of elements, a passionate advocate of industrial protectionism within Russian borders, and creator of the 1891 tariff; Chuprov, the leading representative of historical political economy in Moscow who emphasized the importance of knowledge and scientific invention to understanding economic progress; Bulgakov, a legal Marxist who stressed the international nature of capitalist development; Ivan K. Ozerov, a specialist in public finance and an expert on the structure of taxation in the United Kingdom and Germany; and Petr P. Migulin, a financial theorist who documented the history of currency policy within Russian borders, and also advocated monetary reforms designed to increase the stability of the ruble.
Perhaps the most famous and influential Russian/ Ukrainian economist of all was Slutsky, who was also a noted mathematical statistician. He published two articles that had a great and lasting effect on the development of mainstream economics in the West. The first of these articles was “On the Theory of the Budget of the Consumer” (1915) and the second was “The Summation of Random Causes as the Source of Cyclical Processes” (1927). In the former, Slutsky divided the result of a change in demand induced by price changes into income and substitution effects, creating what is called the Slutsky equation as a basic tool of microeconomic analysis. In the latter article, Slutsky hypothesized that the summation of mutually independent chance events could generate sinusoidal periodicity, which might imitate the approximate regularity of business cycles, a process that became known in its statistical formulation as the Slutsky-Yule effect. Both of these significant contributions are still in use in economics textbooks today. Slutsky also wrote on the praxeological foundations of economics, analyzed the income received by the Soviet state from currency emission, and invented the concept of the stochastic limit. In the mid-1920s Slutsky transferred from Kiev to become a consultant in the Moscow Conjuncture Institute, which was a pioneering center for the study of business cycles and forecasting headed by Kondratiev.
Kondratiev himself is famous today as the originator of the idea of long cycles of economic development, that is, approximately fifty-year business cycles that are generated by both capital accumulation and technological change. In Kondratiev’s account, long cycles coexisted with medium-length economic cycles and also short cycles, within a three-cycle scheme of long-run capitalist development later adopted by Joseph Schumpeter (1883–1950). Kondratiev was initially an agricultural economist who worked on topics such as the effects of war and revolution on the functioning of Russian grain markets. During the New Economic Policy (NEP, 1921–1929) he developed a market-led industrialization strategy for the USSR based on the notion of encouraging the export of primary produce in order to fund capital imports, in direct opposition to Joseph Stalin’s (1879–1953) centrally planned strategy of import substitution. Kondratiev also developed a detailed planning methodology based on an indicative rather than an imperative approach that was fully realized in his plan for agriculture and forestry (1924–1928). Some of Kondratiev’s colleagues in the Conjuncture Institute, such as Albert L. Vainshtein (1882–1970) and Alexander A. Konyus (1895–1982), survived the political purges of the mid-1930s and became well-known economists in their own right, Vainshtein for work on national wealth estimation and Konyus for work on index number theory.
Other significant Russian economists from the NEP period included Chayanov, an agricultural economist who worked on the structure and motivating drive of peasant farms; Preobrazhensky, a Marxist who developed the notion of primitive socialist accumulation and analyzed the tributary relation between the peasant and the state sectors of the Soviet economy; Yurovsky, a neoclassical economist who masterminded the 1922–1924 currency reform that successfully replaced the depreciating sovznak with the stable gold-backed chervonets ; Groman and Bazarov, two leading members of the State Planning Agency (Gosplan) who documented the restoration processes occurring in the Soviet economy after the end of the Civil War and theorized various planning regularities that were significant to Soviet development policies; and Feldman, who developed an innovative two-sector model of economic growth that was disseminated in the West.
There is some noticeable continuity in the main themes and preoccupations of Russian/Soviet economics between the two golden periods identified above. Before 1917 both business cycles and national development were major topics that were addressed by many Russian economists, in particular in terms of documenting the links between the domestic economy and international capitalism. For example, a significant dispute arose over whether and to what extent Russian business cycles synchronized with those of western Europe, which was related to the degree of penetration of French, German, and British capital within Russian enterprises. After 1917 these general topics were still very significant, although the manner in which they were pursued within the framework of the development of the Soviet centrally planned economy was modified dramatically. National development was fostered not through international cooperation, but through centralized state planning. Another significant issue in discussing the development of Russian economics is its relation to economics being pursued in closely proximate countries such as Ukraine. Some of the most famous names in Russian economics, such as Tugan-Baranovsky and Slutsky, were born in Ukraine, only moving to Russia later in their lives. This dual identity makes the entity identified as “Russian economics” an amorphous grouping, especially when the influence of Western currents is added to the mix.
A significant by-product of the early Soviet period was the emigration of a number of important economists to Europe and the United States. Examples of such émigré economists were Sergei N. Prokopovich (1871–1955), Wasily W. Leontief (1906–1999), and also Struve. Leontief in particular had a significant impact on Western economics through his input-output approach to constructing a balance of the entire national economy. In another category of émigré was Roman Rosdolsky (1898–1967), a leading Marxian scholar and Ukrainian socialist. For a while, Rosdolsky was associated with the Marx-Engels Institute in Moscow. In his writings he was one of the first to highlight the relation between Marx’s published work in economics and G. W. F. Hegel’s Science of Logic (1812–1816) by comparing Marx’s Capital (1867–1894) with the Grundrisse (1857–1858). Rosdolsky also provided a reinterpretation of the Marxian reproduction schemes in which they were seen as only an abstraction of capitalist logic, not a concrete model of actual historical development.
THE STALIN ERA AND AFTER
After 1929 Stalin’s ascent to power led to the destruction of the cadre of brilliant Russian economists that had prospered so notably in the golden era. Some, like Kondratiev and Yurovsky, were jailed on fictitious charges and eventually executed, while others, like Slutsky, were forced to leave the subject of economics completely for more neutral areas of research such as statistics. Even so, by the end of the 1930s a new school of mathematical economists led by Leonid V. Kantorovich (1912–1986), Vasilii S. Nemchinov (1894–1964), and Viktor V. Novozhilov (1892–1970) had reintroduced neoclassical ideas in a camouflaged form through the notion of an optimal plan and the idea of a system of optimally functioning economy (SOFE). This mathematical school provided the basis for many of the reform efforts directed at improving the performance of the Soviet economy that occurred sporadically throughout the 1950s and 1960s, but entrenched bureaucratic impediments often hindered the implementation of these attempted reforms. Although Kantorovich was awarded the Nobel Prize for economics in 1975, the 1970s are often described as a period of stagnation in the Soviet economy and also in Soviet economics.
In the Mikhail Gorbachev era (1985–1991), economic reformers like Abel Aganbegyan began to win ascendancy, but were quickly outflanked by a more radical group of pro-market thinkers who desired the dismantling of the Soviet economy and the creation of an entirely new market-based system. This group was triumphant after 1989, leading to full-scale privatization and price liberalization in the early 1990s. The pro-market reform program that was adopted was heavily influenced by Western economists such as Jeffrey Sachs and Richard Layard, and also by Eastern European converts to market economics such as Janos Kornai. Transforming property ownership and achieving free prices were given immediate priority, leaving the legal and institutional environment to fend for itself. Macroeconomic stabilization took some time to achieve, with a significant banking crisis occurring in Russia in 1998. In addition, organized crime grew to occupy a more central position in many post-Soviet economies than it did in the “mature” capitalist economies of the West.
Consequently, whether the transition to a market economy undertaken in Russia after 1989 is regarded as a complete success depends at least in part upon the perspective adopted. Dramatic changes and many improvements have undoubtedly taken place, with some definite winners and also some noticeable losers, but whether the post-Soviet form of mafia capitalism is (all things considered) superior in every respect to the previously existing version of bureaucratic socialism is a debatable point. In terms of the influence of market reform on Russian economics as a discipline, mainstream Western economic theory came to occupy a similar position in Russian universities as it does in the West. The Soviet variety of Marxist economics was totally discredited in the process, but this only had a tenuous relation to the actual ideas of Karl Marx in the first place.
SEE ALSO Gorbachev, Mikhail; Leontief, Wassily
BIBLIOGRAPHY
Aganbegyan, Abel. 1988. The Challenge: Economics of Perestroika. Trans. Pauline Tiffin. London: Hutchinson.
Barnett, Vincent. 1998. Kondratiev and the Dynamics of Economic Development: Long Cycles and Industrial Growth in Historical Context. London: Macmillan.
Barnett, Vincent. 2005. A History of Russian Economic Thought. London: Routledge.
Brus, Włodzimierz, and Kazimierz Laski. 1989. From Marx to the Market: Socialism in Search of an Economic System. Oxford: Clarendon.
Ellman, Michael. 1973. Planning Problems in the USSR: The Contribution of Mathematical Economics to their Solution, 1960–1971. Cambridge, U.K.: Cambridge University Press.
Nove, Alec, and D. M. Nuti, eds. 1972. Socialist Economics: Selected Readings. Harmondsworth, U.K.: Penguin.
Sutela, Pekka. 1991. Economic Thought and Economic Reform in the Soviet Union. Cambridge, U.K.: Cambridge University Press.
Walicki, Andrzej. 1980. A History of Russian Thought from the Enlightenment to Marxism. Trans. Hilda Andrews-Rusiecka. Oxford: Oxford University Press.
White, James. 1996. Karl Marx and the Intellectual Origins of Dialectical Materialism. London: Macmillan.
Vincent Barnett