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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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phase of the war, rather than risk immediate defeat for lack of sufficient mobilization, they followed a course of taking everything available for the war effort - "All for the front!". In the process the civilian economy collapsed, the minimum tolerance limits of society were breached, overworking and malnourishment became widespread, civilian mortality rose, and the infrastructure of war production was undermined. Postwar perspectives played no role in this first period, since the only priority was to stave off defeat and ensure the ability to continue fighting. During 1942 there took place a transition to a second phase in which the narrowly military mobilization ceased to be all important. 40 The civilian economy rose in priority, and ceased to decline. From now on, defence outlays were allowed to rise only on the basis of newly available resources. This was also a period in which, with the prospect of eventual victory, postwar perspectives reasserted themselves, and were expressed in a series of plans for reconstruction of industry and the capital stock. 41 Of course, no minuted decision tells us in what proportions Stalin's war cabinet proposed to allocate the incremental resources represented by aid, year by year. The actual allocation of resources in 1942-44, however, is shown in table 8, part (A). Here are estimated series for total absorption (GDP, plus net imports), defence outlays, and gross investment at prewar constant factor costs. Real defence outlays rose rapidly from year to year, but less rapidly than the increase in the total of available resources. Of the 78.6 billion ruble increase in resources available ("absorption", at 1937 factor cost) in 1943 and 1944 over 1942, no more than half was allocated to 40 A much milder ricochet from excess to restraint can be observed in the British case, in the cabinet decision of 1941 to place a ceiling on the size of the armed forces (W.K. Hancock, Margaret Cowing, British War Economy (London:

HMSO, 1949), 289).

Harrison, Soviet Plannina, 192-97.

41

- 22 additional defence outlays, the remainder being available for civilian use.

Civilian uses are shown as gross investment and consumption. Gross investment collapsed with the outbreak of war, and was slightly negative in 1942, with small amounts of fixed capital formation more than offset by inventory disinvestment; to set these figures in context, nearly 12 billion rubles of fixed investment were necessary just to replace annual depreciation of the fixed capital stock in Soviet hands. 42 Investment recovery after 1942 was guided first by requirements of the defence industry, but as the chances of victory improved the Soviet government also began rapidly to restore its peacetime industries, raising the priority of housebuilding and civilian capital construction.

Civilian consumption (including nondefence government consumption) is a residual in table 8, and may be understated by neglect of nonfarm households' subsistence activity on the output side. The meaning of the figures shown for total consumption per head is not easy to ascertain in the absence of good population figures, but consumption per worker can be derived from figures for total employment in the nondefence sector. A note to the table indicates that by 1942 consumption per worker had already fallen to 60 per cent of 1940. The further sharp decline in 1943, despite stability in the total of resources available for civilian use, is attributable partly to recovery of numbers in nondefence employment, and partly to the renewed pressure of investment. (The composition of civilian consumption also varied, with consumer industries and services recovering, but per capita food supplies probably deteriorating through 1944.) In table 8 this further information is used to estimate the annual breakdown of total civilian consumption between the amount required to 42 Calculated from Richard Moorsteen, Raymond P. Powell, The Soviet Capital Stock, 1928-1962 (Homewood, Ill.: Irwin, 1966), 622-23.

- 23 maintain consumption per worker at the minimum level registered in 1943 (when starvation deaths were already widespread), and the amount surplus to this requirement in each year.

The above tells us just barely enough about government preferences and the policy context to allow a rough simulation of "what might have happened" to the overall Soviet resource balance in the absence of aid. For this purpose (table 8, part (B)), net imports must be set at zero; under the hypothesis of no foreign aid, total absorption cannot rise above GDP. Under the given assumptions, it is suggested that defence outlays would have fallen short in each year by about 50 per cent of the cutback in total resources available.

The other 50 per cent shows up in a decline in resources annually available for civilian use. The implications of this shortfall for investment and consumption appear to be different in each year. In 1942, gross investment was already slightly negative and could scarcely have fallen further; the impact of reduced resources for civilian use is assumed to have been felt by consumption, since consumption per employee in the nondefence sector still had some way to fall. In 1943, in contrast, I assume that consumption standards had reached a minimum; the reduction in civilian resources would therefore have mainly affected investment activity, which was beginning to recover. By 1944, even without foreign aid, there were sufficient resources for both investment and consumption to rise above their respective floors, and the burden is shared between them according to the procedure described in notes to the table.





The gains from aid, compared with the results of its hypothetical absence, are indicated in the table's right hand column as an increase in overall resources available (69.1 billion rubles), divided between defence outlays (33.7 billion rubles), gross investment (17.3 billion rubles), and civilian consumption (18.1 billion rubles).

- 24 This analysis is undeniably crude. The numbers, though apparently precise, do no more than illustrate the argument.

Moreover they rest on significant assumptions of the ceteris paribus kind. They presume that, in the absence of aid, the Soviet domestic product would have remained the same; in fact, one of the major determinants of Soviet wartime GDP was the loss and gain of territory, so anything detracting from the quantity and quality of the Soviet war effort would certainly have also reduced the total output of the domestic economy. Quality, as well as quantity: the military effectiveness of a billion rubles laid out on Soviet defence was surely higher if the package included lend-leased means of transport, communication, and soldiers' kit. The absence of aid also implied substantial cutbacks of civilian consumption and investment. Without aid, gross investment would have remained negligible, resulting in a steady contraction of the capital stock available for use; this too would have forced Soviet GDP below actually achieved levels in 1942-44, with fewer resources then available for defence.

Since there was a limit to the resources freed by cutting investment, living standards would also have been depressed below the levels actually encountered, which were already associated with widespread deaths from starvation. More starvation deaths amongst the working population would have forced an additional decline in domestic output.

These problems arise from the one-dimensional character of the counterfactual hypothesis employed, and define the numerical values shown as purely heuristic in character. But they do not modify the core proposition that the impact of western aid can only be understood in light of the overall objectives and constraints of the Soviet economy; aid did not simply add additional blocks of imported resources to a predetermined domestic allocation, but also influenced this allocation. Aid freed resources for civilian use, both for investment and consumption; however, it seems likely that the effect of these civilian uses was no more than to mitigate undernourishment of the population and depreciation of the capital stock. This was necessary and inevitable

- 25 given the high degree of domestic economic mobilization, the extreme deprivation of the civilian sector, and the consequent blurring of the distinction between front and rear.

–  –  –

The proposition illustrated in table 8 makes no concession to the view that the material form of lend-leased commodities was significant for the outcome of the aid process. Western aid consisted of equipment in a broad sense (including weapons, machinery, vehicles, ships, means of communications, materials, and fuels), some for military and some for civilian use, and processed foodstuffs intended only for military use. To understand its impact, consider the Soviet workforce divided among soldiers, industrial workers, and farmworkers. All of these were equipment users, but only industrial workers were equipment producers.

Everyone was a food consumer, but only farmworkers produced food. Moreover, while in the long run the Soviet economy could theoretically be organized to produce any kind of food product or equipment, the innovation of some kinds of high-technology processes and high-grade products would certainly have been very expensive given the Soviet economy's skill, technology, and management deficits, and was not an option in the short run.

Probably, western equipment for military use unambiguously increased the Soviet capacity to devote resources to the war effort at all stages of the war, and was directly reflected in enlarged defence outlays. There was no immediately available domestic capacity for serial production of reliable motor vehicles, communications equipment, and so on. The replacement of high-grade imports would have required large quantities of domestically produced low-grade horsepower and equipment; this would always represent an inferior option. For example, railway transport could not solve the problem of dispersal of supplies across a front line of combat from the railhead. Domestic horse-drawn

- 26 equipment and manpower could not create an offensive logistical capacity equivalent to motorized transport, partly because of slowness, partly because of the large supply multiplier attached to the requirements of horse and supply troops when advancing. 43 Imported American trucks, jeeps, field telephone systems, and portable radio sets were also complementary to Soviet equipment. Thus the import of western equipment for military use had a compound effect: it added to the quality of Soviet fighting power, made existing Soviet resources already committed to the war much more effective, and released at least some resources for civilian use.

It was important that aid resources arrived in a complementary package. High-quality imported vehicles without the high-grade imported fuels and fuel additives for their efficient operation, without the communication systems to enable coordination of highly mobile motorized infantry, without the ration packs to enable troops to subsist independently for days on the march, would have resulted in unused capacity and waste.

Other considerations probably applied also to imported western munitions, despite their poor reputation among Soviet fighting personnel. This poor reputation arose because western weapons were typically unsuited to combat conditions on the eastern front. British tanks were insufficiently rugged for climate, terrain, and the character of German opposition; British and American aircraft tended to be excessively sophisticated for ill-educated and untrained Soviet operators. Such weapons added little to Soviet fighting power, and for that reason were no substitute for Soviet-produced weaponry. (Having no civilian use, they were also no substitute for

On the increase in speed of movement with motorization 43

of the Red Army when advancing, see Jones, The Roads to Russia, 233-34; on the railway burden of supplying the food and fodder requirements of horse troops, see Martin van Creveld, Supplying War: Locristics from Wallenstein to Patten (Cambridge: Cambridge University Press, 1977), 111-13.

- 27 Soviet-produced civilian equipment or consumer goods.) Probably imported weapons were reflected in increased ruble outlays on the war, and did not release Soviet domestic resources from the war effort. But they did not making Soviet fighting power more effective.

A different range of effects can be attributed to imported equipment for use in the economy. Industrial, power, and farm machinery imports released Soviet workers from equipment-making, and allowed their transfer to other equipment-using activities. Equipment-using here has a broad sense - soldiers used military equipment, munitions workers used industrial equipment to make weapons, and agricultural workers used farm equipment to make food. In principle, therefore, imported equipment released resources in any of these directions. What decided the outcome was the policy context in which, from 1942 onwards, additional resources were shared out first to the equipment users in the defence sector, then to food producers whose task was to secure minimum consumption levels. To the extent that both military priorities and minimum food norms had been achieved (which may only have meant that no one of great significance was starving), however, Soviet workers could be retained in equipment-making to the benefit of civilian investment objectives, including for the postwar period.

In the first stages of the Lend-Lease operation, a relevant constraint was the rate at which resources could be released from equipment making to equipment using. Since overall labour resources were limited, it was possible in the short run to import too many machines. Western observers commented fretfully on the often neglectful attitude of Soviet handlers of western equipment, sometimes left to rot on sidings and in marshalling yards. But the underlying reason was probably not ungrateful or careless indifference;

instead, there was a lack of absorptive capacity. It was rational to allow imported machinery to rust if there was no factory accommodation available in which to install it, or workers to use it once installed. At this stage of the war,

- 28 contrary to common perceptions, the Soviet economy needed overall resources more than it needed Lend-Lease dollars, which could not be utilized effectively under the circumstances. 44 Imported processed foodstuffs, largely in tinned or concentrated forms, were intended solely for military use.



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