Economic Conditions in post-World War II Russia
1. Introduction
The Russia in the second half of the 20th century was marked by a series of eventful changes, wars, and political re-arrangements. Starting from the Russian Revolution in 1917 till the eventual collapse of the Soviet Union in 1991, the country underwent several critically important phases. The most comprehensive and wide-scale reform was in the economic sector. The economy in the Soviet Union was based on a system of collectivization, with industrial and agricultural planning and production directed by a centralized authority. After the end of World War II, the Soviet Union, along with the United States, emerged as one of the two major world superpowers. As the world became bipolar with the alignment of these two powerhouses along with their respective political and economic ideologies, the global importance and influence of the Soviet Union became considerable. Nowadays post-World War II Soviet Union is no longer existent. Instead, a number of independent states emerged from the ruins and stepped into the global world with market economies. The significance of the emergence and development of the post-war economy in Russia is beyond calculation. First, there is historical significance of that period which witnesses the rise of a world superpower and the manner it conducted in terms of statehood and development. The epoch of post-World War II Russia serves as a good starting point to frame the subsequent development and events in the country. Secondly, the Soviet Union left us with rich experience and lessons in various aspects of public administration and management. The study in the economic condition of post-World War II Russia provides a precious chance for us to examine the practical outcome of different economic theories and practices from a quite unique and comprehensive perspective. Last but not least, the understanding of the development and operation of a post-war, command economy can shed some light on the current economic integration process and the transition to market economies in many countries. The jobs and challenges the world is facing today may be echoed and reflected to a certain degree from the findings of such a study.
1.1. Background of post-World War II Russia
While the country is no stranger to social and political change, the rapid modernization and industrialization of post-World War II Russia posed an entirely unique set of challenges. The need for quick development in order to catch up with the technological advances of the rest of the world was weighed against the necessity of not overwhelming the existing infrastructure of the region, often causing disagreement among ruling parties as to the direction the new nation should take. As lands such as the United States and Western Europe began to focus more heavily on technological and information-based growth, Russia’s emphasis on heavy industry in the wake of economic depression and devastating war set the stage for a unique geopolitical situation that would persist for the better part of a century. By examining the history of such a critical time for the nation, we gain invaluable insight into the formation of what is often perceived of as the Soviet identity and approach to both domestic policy and international relations. This lays a solid groundwork for examination of the unique transition from what was essentially a wartime economy to the beginnings of a peacetime infrastructure, which will be essential for understanding the various social reforms and broad policy strokes undertaken by the new Soviet government. Furthermore, the study serves as a touchstone for the common practice of utilizing the ideological ‘superstructure’ in order to justify and deliver on desired social or economic progress, i.e. using commonly held mutual traditions or beliefs as the tactical means by which a policy will be implemented and maintained. Even today, understanding the dynamics of planned economy as it was put into practice in post-World War II Russia can give us valuable information about the role of central planning in economic development and political consolations made in order to implement such wide-reaching policy changes.
1.2. Significance of studying economic conditions
Studying post-World War II Russia and its economic conditions is important for two main reasons. Firstly, it provides an opportunity to understand what has happened in Russia since the end of the war. This is significant because throughout the period since 1945 there has been a great deal of uncertainty in the west about the nature of Russian society and its political and economic systems. The end of Communism and the emergence of the so-called “second Russian revolution” have only served to exacerbate the debate about what has been happening over recent years and what sort of society and economy will evolve in Russia in the future. In turn, a proper understanding of the events which have led to the situation as it is today might help to move the debate on and better equip us to anticipate and respond to any further changes that may occur in the future. Secondly, we can use what we know about post-World War II Russia as an example through which we can learn about the nature of different economic perspectives and the factors which help and hinder the process of economic development. Because Russia has taken many different paths with regard to its economic development since 1945, the opportunity is there to consider competing influences on the way in which a country can move from a war-damaged economy to long-term prosperity and stable politics. This is what we shall be doing through this study: both providing a specific account of what turned out to happen in Russia and using that case as a way into the broader issues of economic development, the breakdown of old political systems, and the emergence of new ones.
2. Political and Economic Transition
However, during the years immediately following the war, the features of peacetime economy became more and more marked. High tariffs, which had been set up to restrict the sale of foreign goods, were reduced, and by 1925, they almost reached the prewar level. New industries began to develop to satisfy the demand for goods. And with the introduction of new industrial methods and a raise in the general level of technology, many existing industries undertook a process of modernization. All these made the ‘roaring twenties’ an era of rising output and general prosperity.
On the one hand, the government had to plan the rebuilding of cities and the industrial plants, and the re-employment of people. For example, huge efforts had to be made to restore the production of coal and steel in the Ruhr to provide the basis for the country’s industrial revival. On the other hand, people had to adjust their way of life to the new conditions. In many cases, housing was in short supply, and many people were homeless, so life was difficult.
As industries were demilitarized, they shifted from production for war to production for other needs. This kind of shift in economy is called a transition from a wartime to a peacetime economy. Industries suffered from a shortage of raw materials, so they faced a time lag adapting to peacetime needs. In addition, they also had to find new markets for their products. The process of adjustment was difficult and slow. The war had caused a lot of damage, and many problems had to be solved before the country could return to a normal life.
2.1. Shift from wartime to peacetime economy
As the war efforts tapered off, the focus of the wartime economy on producing military and other goods for the war became less and less viable. The drop in necessity for war materials and the increased necessity for consumer goods caused a significant shift in the economic focus of the country. The problem of the sudden and significantly decreased demand for goods was addressed with the implementation of various social welfare programs, which aimed at making the transition to peacetime production easier, as well as improving the standard of living for all people in the Soviet Union. One of the first of these programs was the issuance of free housing for all. This not only served to immediately better the lives of many of the citizens, but also spurred a construction-based economic revolution that continued for the length of the program’s existence, giving the economy additional time to shift away from the war focus. In addition, many former soldiers returned from the fronts of the war and were in need of work and housing. The new social programs, such as the one offering free housing, absorbed many of these people and helped to avoid a growth in unemployment levels. By a combination of the programs and the lasting effects of the economic boom that they produced, the shift from the wartime economy to the peacetime economy was relatively smooth and painless. This period of time, in which the economy was transitioning and the social programs were facilitating this shift, is regarded by many to be the greatest statistical period of economic growth in the history of the Soviet Union. This era of hope and prosperity spawned the rise of many new industries and technological developments. However, while the shift was easier than many experts had predicted, it did not occur without some collateral damage to certain sectors of the workplace. The demand for labor in certain industries was lowered, and steps were taken to retrain the workers and move the factories over to a new focus. Overall, the effective use of carefully planned and implemented social programs made the shift from wartime to peacetime production both viable and significantly prosperous in terms of economic gain.
2.2. Implementation of planned economy
Following the end of the war, Soviet Russia continued its phase of economic and political transition. The government began to implement the idea of a “planned” economy – that is, an economic system that is primarily controlled by the state. Under a planned system, the state has the power to determine what the country should produce, how much should be produced, and the distribution of the produced goods. This is unique from a “free market” economy, in which individuals and private companies are the primary decision-makers on what is produced and when. The implementation of a planned economy involved rapid and significant transformation. In the years following the war, all industrial, agricultural and resource development was put under the general oversight of the State, with a series of central five-year plans launched to set national production targets. 1947 saw the introduction of ‘Reform on management of the national economy’ which began the transference of economic authority from regional sovnarkhozy to a series of industrial ministries. However, even though the idea of this liberalisation went some way into practice, the reality was that as planners and managers were established in their power bases and they found it more and more difficult to move resources and they and the people under them saw fit to the central targets. The nation found the changes tumultuous. Industrial output, particularly of heavy industry and investment in new technology, was prioritised, with many factories receiving substantial financial backing to either begin or expand their operations. However, this allocation of limited resources led to shortages – consumer industries, such as clothing, saw themselves receive only small amounts of investment which meant that, even with an increase in production over the years, shops often had bare shelves where popular items were stored. By 1949, 78% of industrial investment was put into the heavy industries, with 54% of this being directly associated with the military. The increasing demand of rearmament and reconstruction in the succeeding years meant that this trend did not change and the continuity of a labor-intensive industry to the detriment of consumer production saw Russia increasingly fail to meet the needs of the people. By 1950, 92% of the entire workforce was under state management through labor books issued by the Ministry of Labor, and the Soviet economy had indeed become a realized planned economy, and remained so until the dissolution of the Union in 1991.
2.3. Role of central planning in economic development
In a planned economy, all the decisions relating to the production of goods and their quantity are taken by the government or the central authority. The main role of central planning in such an economy is to coordinate the productive activities of all the different sectors and make sure that the available resources are used in the best possible way. In Russia, the government established a State Planning Committee – Gosplan – in 1921, which was in charge of creating a detailed plan and direction for the whole economy. This meant that all the major decisions made by the firms and the consumers were based on some form of the government plan. For example, because the central authority assigned materials to be used by the firms in the plan, it would mean that there was only one source for obtaining the production goods. The decisions made by the firms were limited to the actual physical production and according to economic theory, the firms were not supposed to make any decision on changing the way on producing a good in a certain period, that is, when to increase the quantity that the firm wishes to supply to the market and when to decrease. The role of the firm was to decide and adjust its production on the basis of the consumer demand and the production goods given by the government authority. This type of power abuse can be seen in the Russian economy at that time. Although the workers had a legal right to form a trade union, but the decision, such as strike, could be controlled by a small group of people who had the power, let alone changing the whole political structure of the country. And the result will be, the government will have more excuses to crack down even harsher on the people, exchanging peace for what is given, the freedom of the masses.
3. Challenges and Reforms
3.1. Impact of war devastation on the economy
3.2. Introduction of economic reforms
3.3. Agricultural collectivization and industrialization
4. Economic Achievements and Consequences
Steel and iron were needed for rearmament above everything else but many other industries grew as a consequence. For example, chemicals increased and so did the production of things like rubber and oil. Also, because many people were moving to industrial areas to get work, towns and cities grew too and this led to greater demand for houses and consumer goods like furniture. So this shows that the second plan was a success in a number of different ways. The third five year plan showed how effective such plans could be. By 1940, the production of steel had increased to 717 million tonnes. Coal went up to over 500 million tonnes, iron to over 57 million tonnes and machinery and other production such as copper and aluminium more than doubled their production figures from 1937. However, this plan was cut short because of the German invasion in 1941. The effect of this invasion however, was to start the greatest change of the 5 year plans that came about through the war and post-war period. The Soviet Union was the most affected country by the war after Great Britain. The western areas of the USSR had been destroyed by the retreating Germans. Moscow had been allowed to celebrate so as to raise the spirits of the general public. However, the treatment of the eastern USSR under the terms of the agreement did not allow for lengthy celebrations in the capitals of the Ukraine and Belorussia. Also, any port on the Baltic or Black Sea or any city within 50 kilometers of the border were not allowed liberation celebrations. These and other events and the stark statistics of the human cost of the war show the USSR as a country that sacrificed a great deal to defeat fascist expansion. 10 million soldiers ha
The 2nd five year plan concentrated on consumer goods. By 1940, coal had increased to 165 million tonnes, oil 35 million tonnes, iron nearly 19 million tonnes and steel 17 million tonnes. Railway tracks and locomotives had both increased by over 80%. Also, 1,500 new important industrial plants were built in this time and over 1000 more were modernised.
The plan for the transformation of the economy from an essentially agrarian base to a powerful industrial economy was incredibly ambitious. The speed of change was also extremely ambitious. The Five Year Plans worked to the timescale of just that, five years. The first plan was from 1928-1932 and it concentrated on improving those industries that were to help with rearmament. The second plan from 1933-1937 concentrated more on consumer goods. And the third plan from 1938-41 took account of the international political situation and concentrated on expanding heavy industry to make the country ready for war. The actual results were very impressive but there were costs involved that affected the people who lived in Russia. For instance, in order to achieve the vast targets that were set, many workers were put on longer working hours and less holidays. Also, because the state was determined to pay for the plans itself, the money could not be spent on improving the living standards of the people; wages were kept low and so was spending on important necessities like healthcare and improvements of conditions in towns and cities. The first plan made a huge difference. The production of coal in 1933 was 35 million tonnes – by 1937, it had increased to 64 million tonnes. Oil went from 9.5 million tonnes to 31 million tonnes.
4.1. Growth of heavy industry and military power
When the war started, the volume of heavy industry in Russia was tiny, just over 10% of industry in the USA. However, by the end of the war, the capacity of the Russian heavy industry was now the greatest in the world, surpassing Germany, and far exceeding that of the USA. The war demanded the greatest mobilization of resources in the shortest time possible from a low starting point, and the Russian industrial machine rose to the challenge, thanks to significant injections of foreign technology and assistance. Heavy industries such as coal, iron and steel, and armaments were massively expanded to provide the machinery and weapons needed to fight the war. What was known as the ‘first five-year plan’ for the period 1928-1932 had begun this transformation, and this process had begun to establish a base for future growth. However, it was the so-called ‘second five-year plan’ for 1933-1937 that really kick-started the vast expansion of the heavy industries that brought the Soviet Union abreast of, and in some areas, ahead of the most advanced industrial nations by 1945. This 2nd Plan boosted the production of iron, coal, and steel and then built on that by further expanding steel and increasing production of petrochemicals by 1942. When the economic potential of areas such as Ukraine and the natural resources in the eastern territories were released, this expansion gathered even more pace. Finally, the war years themselves required a further massive increase in production to supply the materials needed to fend off the Nazi onslaught. Economic historian Stephen Broadberry claims that output grew at 13.2% per year between 1940 and 1945. The division of German-occupied land and its subsequent industrialization after the war and the re-appropriation of German industrial efforts worked to Russia’s advantage, allowing for a further concentration of effort and expansion. By 1950, Khrushchev was able to announce that Russia was ahead of the USA in the production of heavy machinery, and this industrial boom laid the foundation for future power and economic influence of the USSR around the globe. 90% of all iron produced was turned into steel, and the machine tools and equipment produced for the industrial effort helped fuel a post-war expansion of what is known as the ‘civil’ economy. This is where the production of goods and services is focused on the development of the average standard of living rather than the improvement of the state’s power or prestige. However, at the time, the Russian economists and planners began to shift the economy towards a focus on heavy chemicals and armaments because the Cold War was beginning to pick up. This is why the last of the ‘five-year plans’ for production was so notable in that it almost exclusively focused on the production of armaments in order to secure the Russian defense and continued flexibility in world politics. This was the ‘6th Plan,’ and it ran from 1956 to 1961. In a closing address, the then leader of the USSR, Khrushchev, commented that the amount the Russian people had achieved in such a short space of time and asserted to the capitalist West that the Soviet Union was gravely serious about providing for both the defense of its peoples and the global spread of the Marxist-Leninist cause.
4.2. Social and economic disparities
After the death of Lenin in 1924, Joseph Stalin came into power and led the Soviet Union. A key part of his doctrine was the creation of a socialist state in Russia. A socialist state can be defined as a political entity in which the government controls the society’s means of production. The theory goes that by doing so, the government would be able to provide for everyone and resources would be distributed equally. This stood in direct contrast to the capitalist society in America, the main global superpower and political rival of Russia. In a capitalist society, it is believed that competition is necessary and fosters innovation and development. On the other hand, a socialist society emphasizes cooperation and, according to Stalin’s doctrine, this cooperation would develop from a sense of deprivation which would be alleviated by the government taking control. After Stalin became the leader, and particularly after the Second World War, a series of five-year plans were enacted. The Second Five-Year Plan saw the introduction of ‘centrally planned’ modern production methods introduced in heavy industry, particularly in the iron and steel industries and chemicals. However, these new, more efficient methods led to significant job losses and wage reductions for workers. The textile industry, for instance, saw an increase in output by over 60% from 1932 when the plan began to 1941, the final year of the plan. This was a direct result of the intense, mechanized production methods that were introduced. However, in real terms, wages fell from 36.7 billion rubles in 1932 to 28 billion in 1941 and as working hours increased due to a higher demand for production, living conditions for workers deteriorated. As well as the rise in industrialization and the move to a more ‘centrally planned’ society, a significant step was taken in 1937 when Stalin allowed the Soviet government to seize all privately owned land and property and decide what was to be produced, where and when. This policy of ‘collectivization’ led to the.
4.3. Long-term consequences of post-war economic policies
Socio-political controls imposed in Soviet-controlled Eastern Europe curtailed many human rights and freedoms. All independent labour unions and parties were abolished, and the activities and policies of citizens’ groups were regulated and controlled. The political and social systems of Soviet satellite countries were restricted to conform to the Soviet model, and the Soviet Union retained direct control over the military and internal security forces of the satellite countries. The nation’s desire for modernisation meant that the economy focused on the production of large-scale consumer goods and war machinery. The concept of expanded reproduction could now be seen in practice. Most of the country’s profits would be pumped back into the economy for reinvestment, ensuring a continuous cycle of economic growth. The economy soon adapted to the rise of military power, providing a sense of security and technological advancement. From then on, the power of the working class and ordinary citizens increased, and human welfare, such as free health care and education, became the focus. Profits went into keeping the economy strong and creating better living standards, ultimately leading to the eradication of the social class system. This permanency of transforming the economic system and ensuring the continuous growth of the industry allowed the Soviet leaders to consolidate their power. For the people of Russia, a consumer goods market was opened up that had never existed before, satisfying the needs and wants of the people – something that had never been achieved under previous Tsarist or Provisional Government rules. The nation was well on its way to becoming a ‘global superpower’. However, it becomes clear that such modernisation would leave a lasting mark on the country and its people. Economic conditions in post-war Russia have left a legacy of challenges for ‘newly emergent’ or successor states to face. Rapid and extensive modernisation focused on heavy industry and internal cities, leaving rural areas as undeveloped, primitive spaces. This has resulted in vast movement of people and a demographic pattern that will take decades to try and resolve. Cultural landscapes that once epitomised the national identity and historical legacies were systematically destroyed and replaced with features that mirrored Soviet ideology and organisation, and subsequent changing economic transitions have caused widespread unemployment. Every section of society has been affected by the long-term consequences of the policy. Museums, schools, and places of recreation, which serve to teach and remember historical elements of the human story, have been abolished, while houses and social meeting places in villages that have stood for centuries have been dismantled in the wake of modernisation. A complete disregard for historical, cultural, and environmental preservation has resulted in the loss of wildlife habitats and endangered species, creating widespread environmental damage. With this symphony of destruction and myopic emphasis on industrial growth, it is clear as to how significant the long-term consequences of such extreme measures have been upon the people of Russia and their land. These legacies shall continue to shape the future for many years. Essay.
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