Joseph Stalin’s Economics 

by Julia Mazelev,
March, 1999


In 1922, Joseph Stalin was elected general secretary of the Communist Party (http://site123225.primehost.com ). Because the Communist Party controlled all elements of political and government administration, his rank placed Stalin in a prime position to make major economic, social, and political changes in Russia—that is, if he could muster up enough supporters in the Party. From 1924 (after Lenin’s death) until 1928 Stalin struggled for Party leadership between the "old line middle class intellectuals" and his new proletariat, the illiterate anti-intellectuals who were just recently peasants (http://site123225.primehost.com ...). Stalin was power-hungry and he was determined to fight his way to complete control.


Between 1924 and 1928/9, the Russian economy had many problems; political leadership, miscalculations in the planning process, and the general inexperience of those in charge caused many of the difficulties of these years (Medvedev 37). Inflation and huge shortages, especially of food and raw industrial materials, began to plague the country in 1927-28. Usually the government used grain exports to pay for imported goods needed by industry, but in those years there were not enough grain reserves to spare for the export market (Reiman 42). Consequently, in November 1927, the trade deficit increased by 8 percent over October and kept climbing steadily after that; to remedy the situation, the government reduced imports (Reiman 43). This triggered even more severe shortages, and by the end of January 1928 it was evident that rationing would have to be introduced (Reiman 44). In an attempt to solve the nation-wide crisis, high-level party officials, including members of the top leadership, were sent out to the provinces armed with special powers. Stalin was sent to Siberia (Reiman 45). Michael Reiman wrote, "Stalin...evidently reached the conclusion that it was impossible to solve the economic difficulties that had arisen while remaining within the framework of the existing economic conditions" (45).


Stalin decided that collectivization was the solution. Collectivization was an attempt to modernize industry by nationalizing all firms and businesses, forcing peasants off of private lands and into kolkhozes (agricultural communes run by the government), eliminating the kulaks (the well-off peasants), and fixing prices of all wages and food. On November 7, 1929 Stalin declared that the great movement towards collectivization was under way (McCauley 24). Now that capitalism was left behind, what was being built in Russia had to be socialism; and any measure which advanced Russia towards glorious socialism was justified (McCauley 44).


Stalin devised Five-Year Plans (FYP) to accomplish his economic goals. The first FYP, running from October 1, 1928 to December 31, 1932, initiated collectivization. Each business or factory was assigned a target to meet annually. The targets were set by Gosplan in Moscow— where communist planners refused to base their plans on value and price, but concentrated on material balances instead (McCauley 47). "[FYP] goals were continually increased irrespective of economic rationality, as human will overruled mathematical calculations," wrote McCauley (24). Kulaks were expelled from their lands, and their stock and implements were given to the kolkhoz (McCauley 25). All autonomous labor organizations (i.e. trade unions) were abolished because they wished to share in decision-making, and no independent institutions were allowed to emerge (McCauley 47). The government invested all resources into heavy industry; "the tractor was the symbol of mechanization and modernization of agriculture..." said McCauley (26). According to McCauley, "A great engineering industry was in the making and the rise in the output of machinery, machine tools, turbines and tractors was very impressive" (28).


Unfortunately, Stalin did not anticipate the peasants’ resistance, and was not prepared for the many problems that arose during the first FYP. In response to involuntary collectivization, peasants began slaughtering their livestock, breaking their implements, burning their crops or letting them rot in the fields (http://members.aol.com/...). Since the government continued to invest all their scarce resources in heavy industry, consumption goods (light industry) fell short of the target (McCauley 28). In fact, industry took on many more workers than planned, so there was much money chasing few consumer goods, causing inflation and very low living standards (McCauley 28). Living conditions plummeted even more upon the arrival of a famine in 1933, caused by low yields in 1932 and the government seizing the scarce crops to feed the Red Army (McCauley 30).


The goals of the second FYP (1933-37) and the third FYP (1938-41) continued to promote the principles of industrialization and modernization of the first FYP. The heavy industry rapidly expanded, while the agriculture industry never achieved its targets (McCauley 31). Between 1928 and 1940 Russian society was transformed as the number of the population working in agriculture fell from 75% to 50% (http://www.emayzine.com/...). Many farmers were saved from starvation only by the possession of a cow; but, the more time and effort they devoted to the private plot, the less energy went into working at the kolkhoz (McCauley 70). In 1940, the government decreed that the free labor market had to end: No worker could change his/her job without permission, absenteeism (as little as twenty minutes) became a crime, and specialists could be directed to work anywhere (McCauley 32). At the same time, many factories forged their production figures, or disregarded the quality of goods produced because numbers were all that mattered (http://members.aol.com/...).


By November 1941, about half of the population and one-third of the productive capacity were lost or threatened by the war—Russia simply went hungry during the war years (McCauley 57-58). Consequently, the main objective of the fourth FYP (1946-50) was to put the country back on its feet. Even though official figures were exaggerated, the plan for the national income (apprx. GNP) was officially fulfilled (McCauley 70). 

McCauley wrote, "The Stalinist economic system was efficient from the point of view of control; it was also very successful in concentrating resources in key sectors so as to fulfill priority goals; but in all other respects it was very inefficient and wasteful" (71). In all, there were two major consequences of Stalin’s strategy to create a socialist command economy: First, soviet agriculture declined catastrophically as the peasants resisted forced collectivization. Second, after drastically shrinking the private consumption share of the GNP, the government directed over 25% of the GNP toward industrial development, and still had money left to invest in science, education and the military (http://www.emayzine.com/...). As millions of people suffered from hunger, were sent to labor camps to die, or were forced to work in terrible conditions, Stalin treaded on. He was the only man in the entire country that saw the entire picture and had complete power over everyone.


Works Cited

  • Dr. E. "Stalin’s Economic Policy 1930-40." Dr. E’s Social Science Webzine (1998). Online. Internet. 27 Feb. 1999. Available http://www.emayzine.com/Lectures/stalin.html

  • Medvedev, Roy A. On Stalin and Stalinism. Oxford: Oxford University, 1979.

  • McCauley, Martin. Stalin and Stalinism. New York: Longman, 1995.

  • Reiman, Michael. The Birth of Stalinism: The USSR on the Eve of the "Second Revolution." Indianapolis: Indiana University, 1987.

Stalin a Man of Many Theories

by Mohammad S Sattar



Much has been said about Stalin and much will be said about in the future. Stalin still continues to intrigue us with his personality, ideology, charm and his brutality. Yet this ''giant'' of a man as some refer to him helped to shape the young Soviet Union from it's founding to a super power. The methods that he used are questionable and tend to undermine his credibility as a Soviet leader. The reason that Stalin invites or rather excites such criticism is because it was and is hard to define him and place him in a category. He was cruel, a power hungry madman, an opportunist, a skilled negotiator, economic planner, a military planner you could call him what you wanted.



Joseph Stalin was born in the Caucasus mountains where he also spent his childhood. His father was a shoemaker and a drunkard. These dwellings created no hindrance for young Stalin, one of the handicaps he did suffer was that he was poor. He went to a religious school from 1888   to 1894 and then went for further studies at the Greek Orthodox Theological Seminary in Tiflis. Within a year he took up Marx and Lenin instead of God and became a member of the underground revolutionary movement. These activities cost him a priesthood and he was forced to take a job with the Tiflis Observatory living in squalid conditions.

Stalin became a noticeable figure in the Bolshevik revolution. He was rising to supremacy by the use of force and his bulldozer personality. In November 1917 the Bolshevik's overthrew the Kerensky regime and established the Soviet Union. Stalin was not as prominent in the revolution as he would have liked it to be. Trotsky took the stage with Lenin whilst Stalin worked in the rear. Lenin transferred Stalin to the Ukrainian front in 1919 to prevent the Trotsky-Stalin feud from getting out of hand.


Stalin was given the position of General Secretary of the Communist Party, a position of menial power. But Stalin understood that in a highly centralized state controlled by the party the General Secretary would be a key man after Lenin's death. He continued to work in the dark, acquiring a loyal followers of henchmen who took orders from him and whom he could fire if he wanted.

Trotsky underestimated Stalin for he was a man who did not really understand party organizations. Lenin feared Stalin would misuse the power given to him and devised ways to ouster him, also he feared that the Stalin-Trotsky feud would tear the party apart. Stalin recognized that to succeed Lenin he would have to remove Trotsky and remold Russia. He managed to do this and would Soviet policies in the coming decades.

The national congress of the party in May 1924 voted for Stalin without a single vote going to Trotsky. Thus ends a brief background to Stalin's rise to power and we will now take a look at his policies of economics during his reign.


Stalin was now free to embark upon the creation of a paranoiac state, in which millions of slaves and functionaries would toil to celebrate it's glory. A state that was the fullest realization of the hierarchical pyramid structure that already dominated the party organization.

Stalin proposed his own theory, "Socialism in one country", which maintained that although the cooperation of the proletariat of several countries is necessary to guard against the restoration of a bourgeois order, it was possible to build socialism in one country. To trained Marxists this was utter nonsense and they disregarded it.

The first problem faced by Soviet planners was food shortages due to old planning techniques in agriculture. Agriculture had to be collectivized and harvesting methods improved to avoid wastage. Before the revolution large agriculture estates had produced the crops. The real problem facing Soviet planners was how to induce peasants to market their surplus, while maintaining control over prices. Food shortages were becoming a problem for the central government.


The problem with agriculture was overlaid by demonology, this put the peasants in to three categories the good and poor peasant or the bednyak. The neutral or the seredynak peasant and the bad, rich peasant or the kulak. According to this outlook the landowning kulak exploited the landless bednyak while the seredynak had just enough land to work himself and thus exploited no one. It was ideologically unacceptable to encourage the rich farmer but the food shortages left no choice. It was the party's hostility in general towards peasants that bought forth the theory of primitive socialist accumulation, which assumed that industrialization could take place at the expense of the peasants.

Planning became the magic word that would solve all the problems in the Soviet Union. A planned economy is described as an economy that is conditioned by a close connection between all branches of the national economy and their integration in to an economic order of the State, together with a similar adaptation of the State's economy to that of the world at large.The chief argument against capitalism was that since it was founded upon a free market economy and the principles of laissez-faire it made for a wasteful and uncoordinated use of economic resources.


After Trotsky's departure Stalin recognized the need to win over erstwhile followers of Trotsky who had been in opposition to the New Economic Plan. Which had been a radical policy of industrialization at the peasants' expense, a call for national sacrifice and a leap forward. The above plan was to provide a final solution to the peasant problem which had become quite acute. The peasants were not marketing their produce and appeared to be beyond the control of party officials. Historians have written that collectivization was Stalin's struggle against the hostile kulaks who had sought to blackmail his government by withholding produce from the marketplace. Even though the kulaks produced only three percent of the total grain harvested in the Soviet Union according to Molotov at the Fifteenth Congress. This was because they enjoyed a degree of freedom and prestige in the village and which was becoming a problem for the central government. There was also a marked religious revival as well in 1927.

But all theses reasons aside the decision to move against the peasants was also triggered by an economic crisis. The grain harvest in 1927 was the same amount collected in 1913. But a smaller proportion was marketed because the official price was lower then the market price. Farmers were also using grain to feed livestock as that was cheaper then buying feed at the government price. The apparent solution at the time was to increase the official price. Thus came the move against the farmers. Any method was deemed necessaryas long as it produced results. This era in Soviet history marks the beginning when a market economy was replaced by administrative violence.


The grain collections were organized by young loyal party workers eager to please Stalin and implement communist ideology. The collectors went to towns and the countryside "explaining" the need for grain andsubsequent collectivization. Sometimes they were nice and civil usually violence was used against the peasants. For the first time in history fighter planes and tanks were used in agricultural life. The peasants reacted with violence but they were no match for the state war and propaganda machine. But by this time politics was driving this economic policy as Stalin made up his mind to liquidate the kulaks as a class. The kulaks which included children as well, were shipped to Siberia to concentration camps.

The collectivization drives were not having the desired effect. The peasantry was becoming alienated from the central government, who had sent thousands of activists who set about their task with vengeance and diligence. The peasants started to commit suicide and slaughter their livestock en masse. Now there was shortage of both grain, meat and milk.


The new collective farms were not that efficient either. Most ofthem were under the management of party members form the towns. There  were more then three million of them by the 1930's. 1 The collective farm offered little reward for performance and hard work. A lazy farmer and a hard working one received the same amount at harvest. These attitudes were bound to lead to failure.

The destruction of the livestock during the collectivization process and the forced collection of grain soon brought about a famine in southern Russia. In February and March of 1930 some 14 million head of cattle were killed, as well as a third of the pigs and a quarter of the sheep and goats.

The question is why did Stalin take such drastic measures againsta segment of the population that were healthy and worked the land. Why ship them where they can grow nothing. Economically it made no sense but to Stalin it made all the sense. Stalin always thought of his political survival first and then about economic policies. This was at great peril to the economic system. Stalin always believed that the peasantry would hold the government ransom by withholding food from the market. Also thepeasantry fell outside the Soviet rule and could pose a threat via the red army. Stalin saw collectivization as a means of consolidating and extending the authority of the party by purging an opposition.  


The horror and bloodshed created by this policy as well as dissent in the Central Committee and the Red Army persuaded Stalin to putan end to the collectivization process. Also the world opinion and the Church were also against him. It was time to call back his henchmen and find someone to put the blame on for the whole affair. Another way byw hich Stalin denied any personal responsibility for the acts he ordered .

Next he turned to the industrial sector of the economy. The first question that begs to be asked is why industrialization at break neck speed. The most repeated reason given by historians is that it was necessary to prepare the country for war which the leadership saw as inevitable. One wonders whether collectivization and industrialization were really necessary to prepare the country for war when looking at how much man power and resources that they entailed.

In Stalin's view war was inevitable since capitalism had entered its so called third phase which would bring economic and political cataclysm. Also war was more appealing to the radical wing of the party and committed those who were skeptical on a one way path.

Aside from theses considerations one has to consider Stalin's personality as well. Probably collectivization would not have been so bloody had it not been for Stalin.


Form 1929 until his death Stalin formulated gradually, a certain conception of the Soviet state and of the extent of Soviet power. This surely can qualify as a uniqu eachievements in modern times. Even though looking back and judging through the lenses of history this might seem a folly. Stalin had a sense of Russian history and his actions can understood only when studied in the historical perspective. Stalin was attempting to regain Russian honor and prestige and a place amongst the nations of the world. Stalin was also conscious of the past achievements of Peter the Great. Stalin alsohad love for grandiose projects like Peter the Great. Stalin's sense of Russian history dictated and shaped his political vision which affected his political decisions.

In the 1920's Soviet economists had began work on the mathematical analysis of large-scale state-run economic development under the leadership of Kondratiev. Kondratiev is now regarded as a pioneer in the field of mathematical economics. In the beginning the State PlanningCommission or Gosplan drew plans that determined Soviet needs and realities. Stalin did not like mathematical abstraction and labeled it as "idealist" not Marxist. His refusal to understand or inability to understand mathematical concepts will have serious consequences later on. Stalin refused to allow the development of computers in the 1940's as well calculators and cash registers.


Stalin also did not like statistics,  which he alleged were not politically neutral. Stalin required Gosplan to set targets based on crude calculations, which he would change at his discretion. The peasants had been destroyed and industrialization was not yet ready to replace him.This resulted in shortages of basic goods such as domestic utensils, shoes, baskets and simple agricultural implements.

Very soon planning lost it's significance as an attempt to coordinate the nation's economy. Soviet industry developed in an atmosphere of chaos and urgent campaigning at the peril of planning, as each industry tried to reach it's targets at all costs, even at the expense of each other.

Much of the frenzy was for display to the world and the reached targets existed only on paper. Everything had to be on a grand a scale with no regard to efficiency or quality. The Soviet Union was in a competition with America and it could not loose.

Another curious aspect of the Gosplan was the abolition of Sunday as a holiday. This meant that six-seventh of the labor force was working at any given time. The workers in the meantime were underpaid and the standard of living was declining steadily. In 1932 a skilled man's standard of living had fallen to that of a quarter of 1928. 


The response of the Russian worker was drunkenness and wandering. Also the labor force was swelled by the migration of peasants who had moved in to the towns looking for work. As a result in 1930 free movement of workers was forbidden and factories were not allowed to hire anyone who had moved without permission.

Of all paradoxes unemployment insurance was canceled as there was no unemployment. In 1932 internal passports were introduced a reminder of tsarist times which made freedom of movement and change of address impossible. This was done to keep starving peasants out of towns as peasants were not given passports to travel. For the peasants this  was return to serfdom.

This rapid industrialization did have some positive aspects as well, one was the emergence of a new managerial cast. They were often the sons of workers or peasants who owed their survival to the party and ultimately to Stalin himself. They were the beneficiaries of a regime that required them to develop unusual managerial skills at remarkable speed. The rapid process of the plan and it's obligations made it impossible to stick to orthodox channels. The skills developed by Soviet managers served the nation in good stead during WWII.

The managers learnt how to acquire skilled workers by any means. He had to be able to manipulate an elaborate system of unofficial bribes, and to obtain the favors essential to fulfillment of the norm. This system became known asthe blat or the unofficial black-market.


Along with the blat there was the another practice or sector the tufta or otherwise the creative misrepresentation of socialist achievements. It was due to tufta that impossible output targets were seemingly achieved. The process was even made more easier by the complex bureaucratic evaluation procedures  such as time-and-motion techniques  for job rating. It was designed by white-collar workers who had never done a hard days work.

The party had removed the old manager class and replaced it with it's own trained young managers who although having the education did not have the experience necessary for such high positions.

The Russian peasants werenot very machine sophisticated and this lead to lower productivity. They were skilled in working with wood and not metal. There were thousands of deaths because the workers were working beyond their ability and skill levels. The number of industrial accidents increased dramatically. Agriculture machinery broke down quickly from abuse and neglect.


The Soviet leadership not one to acknowledge mistakes blamed the accidents on saboteurs who were bent   to destroy the Soviet Union. These paranoia lead to thousands of arrests who later formed the gulag or a slave labor force. Stalin used forced labor from the beginning of its inception. The use of gulag prisoners as a labor force was proposed to Stalin by a Turk, N.A Frenkel who was an ex-millionaire. The workers were worked until they dropped and then were permitted to starve to death. The formula for forced labor was based on a sliding scale of rations which were determined by the labor's work rate and not on their physical capacity to carry out the assigned task. A Chief Administration of Camps was created under the economics department to administer the gulag. Stalin developedTrotsky's idea of a "labor army" in to an entire subcontinent of slaves.The timing could not have been better because the plan for industrialization called for abundant labor force and Stalin had this at a command.

These gulag camps also solved the problem of unemployment in the 1920's. Millions of deported peasants were put to work on labor intensive projects such as the White Sea Canal. Though some historians deny this fact slave labor force played a vital part in the calculations of the First Five-Year Plan and from 1931 onwards the gulag was expected to be self-financing.


This practice was going against Marxist ideology, Marx had written that slavery was uneconomic, because slaves had to be fed whether they worked or not andhad no incentive to work. In this case how ever the cost of acquiring slaves was low and the supply was limitless and little money was spent on keeping them alive. The use of slave labor was extensive, because now new expensive machinery that had to be bought with hard currency was no longer necessary.

Slave labor was also used in the mining industry and in hazardous areas. The Soviet Union was always short of hard currency with which to finance its industrial development. It's chief exports were commodities such as timber and grain which fetched low prices on the depressed world market. The gold mines were not at full productivity yet so Stalin went on a gold hunt.

The gold extraction campaign was the most terrible of Stalin's campaigns. Everyone had to contribute gold and failure to do so resulted in death. Thus Stalin beat a whole nation in handing over their gold to the government for the greater good of society.


Stalin had officially tried to maintain an equality of income in his policies. This also meant that there was a ceiling to the pay of party members as well. But all this was just for appearance sake only. There was a wide gap between the living standards of the poor and the party elite. In 1931 he abolished the principle of equal pay for the principle of privilege which had already played it's part in earlier years. This uneven distribution of income had successful results. Stalin used it as a means of acquiring ambition, developing vigilance and loyalty to the regime. In this state of affairs no one owed anything and any privilege could be taken away at any moment. Also such a system did not encourage beneficiaries from reflecting too much upon the fate of falling colleagues.

Stalin created a system that despite all criticism worked because people worked it. Some worked for privileges others willingly, some out of  idealism, out of hatred of their neighbors and sometimes out of love.

In conclusion I will write that Stalin was not a theorist of economy, he was a realist and opportunist. He built and destroyed according to a plan of  which we will never see. He was truly a dictator of the people and people followed him because he promised but many did not survive to see what he delivered.

Stalin's Economic Theory

By Akihiro Nakamura


According to Alexander Erlich, "coalescence of monopolies with the state machine"(1) was Stalin's view. He also described Stalin's view as, "subjugation of the state machine to the monopolies".(2) In addition, even though, the capitalist state was a factor of taking away the majority of the population, its ability to influence growth of economy was meaningless.


Stalin refused Lenin's statement that "capitalism in its imperialist stage would be expected 'on the whole' to grow more rapidly than ever before."(3) Stalin emphasized that "law of the preponderant growth of the output of means of production."(4) This was meant as a necessary precondition of continuous economic growth. This law showed that in capitalism, priority was given to the production of having least capital and maximizing the profit in consumer goods in the process of industrialization, but socialism favoring the capital goods right from the start. This difference was made through allocating resources. Having this theory, not as capitalism approaching to short-run private profits, socialism approached to long-run social benefits to have the investment decisions. This operation was considered to be supported by "nationalization of industry and banking."(5) It helped gathering resources and transferring them to heavy industry. In addition, the collectivization was permitted to re-equip agriculture to increase its market share.


Stalin thought that commodity production must not be identified with capitalist production because they are two different things. He thought that "capitalist production was the highest form of commodity production."(6) On the other side, commodity production leads to capitalism only if production by private ownership exist, labor power is in the market and considered as a commodity that being bought by the capitalist and exploited, and the system of exploitation exists. Stalin thought that his commodity production was a special kind which was without capitalists, and was mainly concerned with the goods of socialist producers, such as the state, the collective farms, the cooperatives. In addition, this special kind of commodity production was confined to items of personal consumption, and can not develop into capitalist production. He emphasized that his idea of commodity production was totally different from commodity production under capitalism.



(1)Alexander Erlich, "Eastern" Approaches to a Comparative Evaluation of Economic Systems p317.

(2)Erlich, p317.

(3)Erlich, p317.

(4)Erlich, p317.

(5)Erlich, p318.

(6)Joseph Stalin, Socialist economics: Selected Quotations from Marxist Sources p40.



  • Comparison of Economic Systems Edited by Alexander Eckstein Printed by University of California Press. Berkeley, Los Angels, London, 1971.

  • Socialist economics Edited by Alec Nove and D.M.Nuti Printed by Penguin Books Ltd. Harmondsworth, Middlesex, England, 1972.





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