Summary of JOIE articles (Part I – 3 October 2022, Part II – 22 October 2022) by Michael Ellman, Faculty of Economics and Business, University of Amsterdam, Amsterdam, The Netherlands. The full two-part article is available on theJOIE website: Part I and Part II
The factors contributing to the current Russia-Ukraine war can be better understood through an engagement with the historical and institutional context. In particular, Russia’s transformation from a predominantly agricultural country to an industrialised one, and the many wars it has been involved in. It is these matters which are discussed in Parts I and II of the article in the Journal of Institutional Economics. For example, Part I points out that the Crimea, which the Russian Federation annexed in 2014, an annexation which is often treated as the first stage in the current war, was first conquered by Russia in 1783. It was then the home of the Crimean Tatars who had repeatedly raided Muscovy (the core of the subsequent Russian Empire) and other East-Slavic territories. Its annexation in 1783 was a defensive measure which ended these raids. It remained part of the Russian Empire till its end. It subsequently became part of Soviet Russia until 1954 when it was transferred to Soviet Ukraine. This change had little effect since both Soviet Russia and Soviet Ukraine were part of the USSR, so Crimea remained part of the USSR. Crimea was important in Soviet times as an attractive holiday destination, and as the location of the Black Sea Fleet’s base. Russia’s annexation of Crimea in 2014 reflected this history. As a result of this history many Russians thought that the Crimea was really part of Russia and the end of its link with Russia in 1991‒2 when the USSR broke up was unjust and should be put right. Russia was able to annex the Crimea in 2014 without any adverse consequences from other countries because of its status as a great power.
As Part I also points out, Russia became a recognised great power at the Congress of Vienna in 1814‒15. This was a result of Russia’s defeat of Napoleon’s (1812) invasion of Russia and the resulting advance of Russia’s army as far west as Paris. Russia at that time had three country-specific institutions: autocracy, serfdom, and the cooperatives formed by soldiers in the army. The term ‘autocrat’ was derived from the Byzantine Empire and described its emperor. It meant literally a ruler who was not subject to a superior ruler. It also came to mean a ruler who was not limited by institutional constraints. Although the autocratic system led to some disastrous decisions and required the autocrat to ensure that all their ministers implemented the autocrat’s policies, which was not always easy, it was useful in preparing for war and mobilising the resources of the country for fighting wars. This can be seen by comparing Russia’s autocratic system and its outcome with the very different system in neighbouring Poland, which limited the power of the monarch, gave a lot of power to the nobility, and led to Poland’s division among Russia, Prussia and Austria in the late 18th century. Another Russian institution at the beginning of the 19th century (considered backward by West European standards) was serfdom. However, serfdom was important to the autocracy in ensuring the loyalty of the nobility, the social basis of the autocracy. It also provided the officers (from the serf-owning nobility) and the rank-and-file soldiers (from the serfs) for the army. The soldiers’ cooperatives in the army reduced desertion and strengthened esprit de corps.
The Russian Empire collapsed as a result of the combination of pressure from its external and internal enemies. Externally, it played an important part in the First World War. Its armies did well against Turkey and Austria-Hungary. Initially they fought Germany to a draw, but in 1915 they did badly against Germany and had to withdraw from Poland. Internally, in 1915‒16 the opposition in the Duma (the Russian parliament, an institution which the tsar had been forced in 1905 to introduce) strongly attacked the government. Furthermore, in the second half of 1916 there was substantial inflation and also food shortages. In early 1917 bread riots, demonstrations and strikes in St Petersburg, and the refusal of some military units to suppress them by force, led to the end of the Romanov dynasty. The Empire disintegrated and was succeeded by a number of successor states (USSR, Poland, Finland, Lithuania, Latvia and Estonia), of which the biggest and most important was the USSR, founded in 1922.
The USSR had three distinctive institutions. They were: the Communist Party; national economic planning; and the state security service. The Communist Party created the USSR, played the decisive role in determining and implementing state policy, formulated the state ideology, carried out official propaganda, controlled personnel policy, and had a large membership. Membership assisted in getting jobs and promotion and in obtaining scarce consumer goods.
National economic planning was implemented from 1930 onwards. Its public face was the much-advertised Five Year Plans. An aspect of Soviet soft power was that variants of these plans spread to many other countries. Soviet planning from the beginning was largely concerned with preparing the country for war. This it did by developing those branches of the economy, for example, heavy industry (e.g. steel, coal-mining, manufacturing tanks and aeroplanes) necessary for fighting industrialised wars, and building dual purpose factories that initially produced civilian goods but were designed in such a way they could easily be switched to military production when necessary.
Soviet industry in the 1930s grew rapidly. It has been estimated that in 1928‒41 industrial production grew at 10.9% p.a. This growth was an example of import-led growth. It was based on the import of technology, mainly from the USA but partly from Germany. Many of the key industrial plants of the First Five Year Plan were designed by US engineers. For example, the Magnitogorsk steel plant was modelled on the US Steel plant in Gary Indiana. In the First Five Year Plan period (1928‒32) about three-quarters of the machinery installed in Soviet industry was imported. Imports of machinery and ideas and designs for new products remained important for many years. Technical education was expanded and numerous technicians and engineers trained. Science, and its civilian and military applications, was also supported, although scientific progress was limited by constraints on international travel, the arrest of some scientists, and support for pseudo-scientists such as the quack agronomist Lysenko who had official support despite criticism from real scientists.
The state security service (successively named Cheka-OGPU-NKVD-MGB-MVD-KGB) was a key Soviet institution. It played a major role in implementing the collectivisation of agriculture whch required a bitter struggle with the peasantry and led to a major famine. It also provided the leadership with information about what was going on in the country. (As a result of the censorship the media were unable to present an honest picture.) It also provided (forced) labour for many economic projects. Its activities ensured socio-political stability despite the difficulties of everyday life and state terror. Fear of it increased acceptance of the Soviet system.
Part II of the article concerns developments from the outbreak (22 June 1941) of the German-Soviet War, known in Russia as the Great Patriotic War, to the present day (2022). The Soviet victory in the Great Patriotic War had various causes, but perhaps the most important was the phenomenal Soviet output of armaments during the war. During the war the USSR greatly out-produced Germany in the main categories of armaments. This indicates the effectiveness of Soviet economic and political institutions and the enormous efforts of the labour force, both men and women. Part II also covers post-war reconstruction, the increase in living standards from the 1950s onwards, the reasons for the long-run decline in Soviet economic growth and for the collapse of the USSR in 1991. On the whole Russia has been, in the geopolitical sense, a successful country. It has survived invasions by Tatars, Swedes, France and Germany and expanded from a small principality in a far corner of north-east Europe to be the largest country in the world, stretching from Kaliningrad to Kamchatka and from the Arctic Ocean to the Black Sea.