Depression Stalinism: The Great Break Reconsidered

Karl Polanyi’s Great Transformation, written in 1944, concentrated on the international underpinning of capitalism and explained how one of its pillars, the gold standard, had fallen apart, thus releasing the forces of economic nationalism that led to the disintegration of Europe’s political order. He deemed Bolshevism one of these radical forces but categorized Russia as a special case in the short passage in which he discussed that country. As many historians would later do, he counted two Russian revolutions: the first, in 1917, “embodied traditional Western European ideals, while the second formed part of the utterly new development of the thirties.”¹ The first, he argued, was merely a Russian event, while the second “formed part of a simultaneous universal transformation.”² The pressures of a dysfunctional gold standard were felt throughout the globe, homogenizing many of the outcomes:

By 1924 “War Communism” was a forgotten incident and Russia had reestablished a free domestic grain market, while maintaining state control of foreign trade and key industries. She was now bent on increasing her foreign trade, which depended mainly on exports of grain, timber, furs, and some other organic raw materials, the prices of which were slumping heavily in the course of the agrarian depression which preceded the general break in trade. Russia’s inability to develop an export trade on favorable terms restricted her imports of machinery and hence the establishment of a national industry; this, again, affected the terms of barter between town and countryside—the so-called “scissors”—unfavorably, thus increasing the antagonism of the peasantry to the rule of the urban workers. In this way the disintegration of world economy increased the strain on the makeshift solutions of the agrarian question in Russia and hastened the coming of the kolkhoz. The failure of the traditional political system of Europe to provide safety and security worked in the same direction since it induced the need for armaments, thus enhancing the burdens of high-pressure industrialization. The absence of the nineteenth-century balance-of-power system, as well as the inability of the world market to absorb Russia’s agricultural produce, forced her reluctantly into the paths of self-sufficiency. Socialism in one country was brought about by the incapacity of market economy to provide a link between all countries; what appeared as Russian autarchy was merely the passing of capitalist internationalism.³

Later explanations for Soviet autarky would imagine a purposeful effort to build an import substitution strategy that quickly succeeded.⁴ On the face of it, this seemed a logical conclusion. Soviet trade volume increased rapidly during the period of the First Five-Year Plan, only to drop dramatically thereafter. Initial imports of Western technology seemed to have paid off through productivity gains and general economic growth, and import substitution was a leitmotif in Soviet propaganda during the second half of the 1930s. This argument does not, however, take into account the specific and fast-changing international developments linked to the global Great Depression that Polanyi and later students of international political economy underscore as seminal.

In fact, Polanyi’s analysis has roughly held up to the scrutiny of later economic analysts of the Soviet Union. In the 1920s, the world began to experience the mechanization and modernization of agriculture.⁵ Although mechanization did not increase yields, it raised worker productivity, reducing the need for farm labor, swelling urban populations, and allowing for the settlement of productive, arable plains in Argentina, Australia, and other regions of recent European out-migration. Improvements in transport also brought these new, higher-yielding grain-producing regions into the world market. The overall effect was to depress the world price of grain and, in Europe, to cripple the agricultural sector, which now required protection and subsidies from European governments. As Charles Kindleberger noted, it was the grain-exporting countries, among them the Soviet Union, which first felt the cold grip of what would become the Great Depression.

In the Soviet Union, by and large, Soviet grain prices fluctuated in relation to two developments. While greater domestic demand increased prices within the Soviet Union, Soviet...