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«Mark Harrison Department of Economics University of Warwick Coventry, England CV4 7AL Tel +44 203 523030 Fax +44 203 523032 Note This is a ...»

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- 14 period", he wrote, "will show that these deliveries amounted to only about 4 per cent of the domestic production during the war economy period". 2 8 (But whether "the same period" meant 1942-43, or "the war economy period" as a whole, was left irritatingly vague. In later writing, east and west, this figure would be extensively misquoted, and was most commonly rendered as the proportion of all Allied deliveries to the total wartime product of the entire Soviet economy, with "only" as an additionally wounding qualifier - "only 4 per cent".) 29 Since "only" 4 per cent did not sound like much at all (and certainly much less than $10,670,000,000), American responses were angry. Alexander Gerschenkron pointed out, correctly, that in 1942-43 Allied deliveries had not yet reached their peak, and that any comparison of nominal values would understate the value of imports relative to Soviet domestic production because of wartime overvaluation of the ruble, and because of double-counting of domestic output in the Soviet production accounts; he also signposted the future course of western historiography by adding: "the tremendous contribution to the Russian war economy made by scarce commodities delivered under lend-lease cannot be significantly measured in terms of a global percentage". 30 N.A. Voznesensky, War Economy of the USSR in the Period 28 of the Patriotic War (Moscow: Foreign Languages Publishing House, 1948), 61.

M.L. Tamarchenko, Sovetskie finansy v period Velikoi 29 Otechestvennoi voiny (Moscow: Finansy, 1967), 54: "The relative weight of [Allied] deliveries compared with domestic output in the period of the war amounted to only 4

per cent". Istoriia sotsialisticheskoi ekonomiki, 5, 546:

"Overall Anglo-American deliveries in comparison with the volume of domestic output amounted in the war-economy period to a total of only 4 per cent". More circumspectly, Istoriia Vtoroi Mirovoi voiny, 12, 187: "... Lend-Lease deliveries to the USSR were highly insignificant - about 4 per cent of the output of industrial products in the USSR" (emphases added).

Alexander Gerschenkron, Review of Voennaia ekonomika 30 SSSR v period otechestvennoi voiny (N.A. Voznesenskii), American Economic Review, 38 (1948), 656.

- 15 For the record, it is worth stating that "only 4 per cent", although probably not an outright lie, certainly presented a misleading view of the real volume of Allied aid to the USSR. Table 4 shows the present author's estimate, which compares volumes of Allied aid with Soviet wartime GDP and defence outlays when all are calculated at peacetime factor costs in the prewar year 1937 (see also figure 3). It shows that by 1943, Allied aid was contributing 14 per cent of the total of resources available to ("absorbed" by) the Soviet economy, and represented 16 per cent of domestic output. This puts a very different complexion on the scale of assistance, of course, although an import ratio to GDP of even 16 per cent was not out of line with the wartime experience of other European countries - for example, Britain in 1940, or Germany in 1942-43. 31 The official Soviet accounting for Allied aid and trade remained secret throughout the period of existence of the Soviet state. Government archives now show that in spirit the Soviet finance ministry treated Lend-Lease in the same way as did the Treasury in the United Kingdom; that is, Lend-Lease goods acquired by the armed forces and industry were treated as expenditure items by the relevant spending departments; the resulting hole in the state budget was filled by treating Allied credits as revenue from a counterpart fund.

A special feature of Soviet practice is that foreign aid was made to work twice over by additionally charging high import duties on the commodities imported; these created further revenues to the budget, additional to Allied aid, which also contributed to the finance of war spending.

Effectively, the charging of duties on lend-leased imports compensated for the overvaluation of the ruble; foreign munitions, for example, were evidently transferred to the defence ministry at the dollar price times the ruble/dollar

Mark Harrison, "Resource Mobilization for World War II:

31

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exchange rate, plus a tariff levied by the foreign trade ministry. Commercial trade, although on a much smaller scale, also contributed to budgetary finance through import duties imposed on incoming goods and effectively paid by the departments which procured western commodities.

Tariffs appear to have been set on the basis of an arbitrary levy - arbitrary because "domestic market prices are not applicable to the given commodities" (equipment and munitions). At the end of 1941 it was proposed to set the tariff on aid commodities at 100 per cent; thus the 5,514 million rubles of foreign revenue arising from the current lines of US and British credit ($1 billion and £10 million respectively), would be doubled in terms of total revenues accruing to the budget. 32 In the upshot, a higher tariff was initially adopted. Thus, considering 1942 in prospect, the people's commissariat of foreign trade, Narkomvneshtorg, forecast revenues of 5.3 billion rubles ($1 billion) from Lend-Lease credits, plus import duties from associated imports estimated at 7.95 billion rubles - an average ad valorem tariff of 150 per cent. 33 In the 1942 outturn, this plan was nearly achieved: Narkomvneshtorg revenues were reported as loans (4.45 billion rubles) plus import duties (7.2 billion rubles, a levy of roughly 160 per cent), and virtually all of this was a net contribution to the budget. 34 (However, the high tariffs of 1942 would apparently prove temporary, as will be shown below.) Rossiiskii Gosudarstvennyi Arkhiv Ekonomiki (RGAE), 32 formerly Tsentral'nyi Gosudarstvennyi Arkhiv Narodnogo Khoziaistva SSSR (TsGANKh SSSR), f. 7733, op. 27, d. 714, 1.





11.

RGAE, f. 7733, op. 27, d. 714, 1. 10. The forecast additionally listed commodities imported against foreign currency reserves, put at 1.7 billion rubles, making a total expected revenue for Narkomvneshtorg of 14.95 billion rubles.

RGAE, f. 7733, op. 27, d. 196, 11. 1-3.

- 17 Table 5 shows a more detailed pattern. In 1942 and the first half of 1943 the cumulative total of budget revenues from Lend-Lease credits and import duties reached 20,830 million rubles, of which just over half (11,263 million rubles) constituted original dollar aid. The planned figures for the first quarter of 1942 illustrate the anticipated gains from aid (cruelly disappointed, at least to begin with), augmented by an import levy at 150 per cent. Not all import duties were raised on lend-leased goods, of course.

Particularly in 1942 the Lend-Lease operation encountered immense logistical difficulties, which constricted the inflow of aid; on the other hand, there was still some commercial importing for Narkomvneshtorg to tax. Levies on commercial imports undoubtedly confuse the picture shown in

the table. By 1943, however, two changes had taken effect:

aid flows had reached a far larger scale than commercial trade, which was still shrinking; and the charges levied on imports, both actual and planned, had shrunk to much more modest levels. While the trend suggested by the table is deceptive (because not all the import charges were levied on lend-leased goods, and this was especially the case in 1942), the actual decline in duties collected is so clear that a change of policy must be assumed; the planned figures also show clearly the intended downward trend.

One possibility is that the high import duties imposed on aid commodities in 1942 were determined under peacetime rules, which set higher, penal rates for unplanned imports compared with planned imports. Why else, at the end of 1942, did foreign trade minister A.I. Mikoian sign a decree exempting wartime imports (virtually all of which were "unplanned") from these penal duties? 35 As a result, the overall budget contribution arising from Allied aid substantially exceeded the 63 billion rubles obtainable by means of a straightforward exchange-rate conversion of $11.93 billion, although certainly not by 150

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According to table 6, when charged to the defence budget at current prices and taxes, items for Army use alone amounted to 31 billion rubles over 1942-45, and 10 per cent of all Army procurement at the peak in 1944; in that year imported products accounted for one quarter by value of the food and fuel consumed by the Army, and one eighth of Army equipment.

Foreign transactions also explained a large gap in the official wartime national accounts, which arose between national income (NMP) produced and utilized. According to table 7, the total excess of material utilization over production, 1942-45, reached 96 billion rubles. To find the implied official total of net imports at domestic prices, a sum attributable to insurable asset losses (over four years, say 10-20 billion rubles) should be added to this gap, making a grand total of foreign receipts somewhere in the region of 110 billion rubles. This matches roughly the sum of "other sources of income" (108.4 billion rubles) listed by the budget authorities as from Lend-Lease (82.7 billion rubles, 1942-5), "special revenues" (23.4 billion rubles, 1944-5), and reparations (2.3 billion rubles in 1945). 38 A final complication, to be mentioned only in passing, is Soviet reverse Lend-Lease. During the war the Soviet Union provided American transport ships and bomber aircraft with base and repair facilities and supplies, to a value 36 RGAE, f. 7733, op. 36, d. 1847, 11. 1-2.

RGAE, f. 7733, op. 36, d. 1847, 1. 53.

RGAE, f. 7733, op. 36, d. 1847, 1. 53. What were the 38 "special revenues", which began to be collected only in 1944? They were bracketed with Lend-Lease and reparations as though they too were derived from foreign transactions perhaps the seizure of assets in German territories under Soviet occupation prior to the creation of channels for the formal payment of reparations.

- 19

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The character of Allied credits to the USSR is an issue which, unresolved at the time, continues to haunt the writing of World War II history. The issue has two aspects, one international, and one domestic. Aid affected the inter-Ally allocation of resources. Was aid a unilateral subsidy from rich to poor; or was it, rather, one aspect of a broader wartime pooling of resources based on mutual specialization and collaboration of equal partners? Aid also affected the domestic allocation of resources of the recipients. In the Soviet case, was aid essential to the Soviet war effort, to what extent did it support the civilian economy, how much was diverted to postwar economic objectives? Such domestic implications of aid are difficult to analyse, and mutual incomprehension often added to inevitable suspicions.

In terms of the Soviet domestic economy, aid had two aspects. It was an addition to overall resources, and it came in particular material forms. The material form of aid was often that of high-technology, high-grade products, which undoubtedly augmented the effectiveness of Soviet fighting power. It would have been very difficult and costly for the Soviet economy to have matched the military-technical qualities of American vehicles, fuels, communications equipment, and food rations. Nonetheless, if the Soviet armed forces had been denied these western resources, they would have procured replacements. The replacements might well have been inferior in quantity and quality. But military units still had to manoeuvre, communicate, and feed and clothe their troops on the march.

Istoriia sotsialisticheskoi ekonomiki, 5, 540. - 20 -

For given total resources, they would have relied more on horses, despatch riders, dried fish, and stale bread. They would have moved more slowly, with less efficient coordination, and they would have fought more hungrily. The same applies to the American machine tools, generating equipment, and farm machinery imported to meet the needs of the productive economy. If aid had taken the form only of additional Soviet-technology, Soviet-grade products, the needs were still there, and would also have been met, but at higher cost and less well.

Aid was also an addition to overall resources. From this point of view its technical or military-technical form did not matter. What mattered was that aid gave the Soviet government the capacity to allocate more resources of all kinds towards all of its objectives, whether military or civilian, immediate or postwar. How did it, in fact, choose to do so?

The choices made by Soviet leaders in allocating resources between war and nonwar uses varied at different stages of the war. They were the outcome of a process of decision making which operated at two levels of abstraction. Their starting point was the extreme consequences of defeat for national and personal survival; defeat was to be avoided at all costs. At a higher level one may suppose, therefore, that Soviet leaders would have liked to maximize the resources for the war effort, subject to the maintenance of a minimum level of civilian and infrastructural economic activity. In practice, however, the location of the minimum was impossible to discover ex ante. This was for several reasons. For one thing, officials systematically repressed unofficial expression of civilian discontent, and mistrusted the signals of consumer and producer need officially transmitted upward through the administrative system from firms and households. For another, the degree of economic deprivation which could be tolerated by society depended on the period of time over which it had to be endured, and this could not be known in advance.

- 21 At a lower level of abstraction, therefore, in the first



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