The Eras of Lenin and Stalin
The basic foundation of the Soviet economic system was established after the Bolsheviks (see Glossary) assumed power in November 1917 (see Revolutions and Civil War, ch. 2). The Bolsheviks sought to mold a socialist society from the ruins of post-World War I tsarist Russia by liberally reworking the ideas of political philosophers Karl Marx and Friedrich Engels.
Soon after the revolution, the Bolsheviks published decrees nationalizing land, most industry (all enterprises employing more than five workers), foreign trade, and banking. The peasants took control of the land from the aristocracy and farmed it in small parcels.
Beginning in 1918, the new regime already was fighting for its survival in the Russian Civil War against noncommunist forces known as the Whites. The war forced the regime to organize the economy and place it on a war footing under a stringent policy known as war communism. Under such conditions, the economy performed poorly. In 1920 agricultural output had attained only half of its pre-World War I level, foreign trade had virtually ceased, and industrial production had fallen to only a small fraction of its prewar levels. Beginning in 1921, Lenin led a tactical retreat from state control of the economy in an effort to reignite production. His new program, called the New Economic Policy (Novaya ekonomicheskaya politika--NEP; see Glossary), permitted some private activity, especially in agriculture, light industry, and services (see Lenin's Leadership, ch. 2). However, heavy industry, transportation, foreign trade, and banking remained under state control.
Lenin died in 1924, and by 1927 the government had nearly abandoned the NEP. Stalin sought a rapid transformation from an agricultural, peasant-based country into a modern industrial power and initiated the country's First Five-Year Plan (1928-32). Under the plan, the Soviet government began the nationwide collectivization of agriculture to ensure production and distribution of food supplies to the growing industrial sector and to free labor for industry (see Industrialization and Collectivization, ch. 2). By the end of the five-year period, however, agricultural output had declined by 23 percent, according to official statistics. The chemical, textile, housing, and consumer goods and services industries were also performing poorly. Heavy industry exceeded the plan targets, but only at a great cost to the rest of the economy.
By the Third Five-Year Plan (1938-41), the Soviet economy was once again on a war footing, devoting increasing amounts of resources to the military sector in response to the rise of Nazi Germany. The Nazi invasion in 1941 forced the government to abandon the five-year plan and concentrate all resources on support for the military sector. This period also included the large-scale evacuation of much of the country's industrial production capacity from European Russia to the Urals and Central Asia to prevent further war damage to its economic base. The Fourth Five-Year Plan (1946-50) was one of repairing and rebuilding after the war.
Throughout the Stalin era, the government forced the pace of industrial growth by shifting resources from other sectors to heavy industry. The Soviet consumer received little priority in the planning process. By 1950 real household consumption had climbed to a level only marginally higher than that of 1928. Although Stalin died in 1953, his emphasis on heavy industry and central control over all aspects of economic decision making remained virtually intact well into the 1980s.