Mark Harrison: Current Research
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Work in Progress
This project is about the political economy of Soviet secrecy. The Soviet Union had one of the most secretive systems of government that the world has known. Secrecy was one of the mechanisms of power in the Soviet dictatorship. Soviet leaders used secrecy, apparently, to shelter decisions from popular pressure, gain strategic advantages at home and abroad, and protect their reputations. There are clear reasons why people at the top gained from secrecy. To understand how they got away with it, we also have to work out why secrecy was respected by people in the middle and accepted by people at the bottom. Everyone's motivations had to be aligned to uphold secrecy, whether by self-interest or force. Directly and indirectly, secrecy is costly, and everyone had to be willing to pay the opportunity costs. Otherwise, Moscow's secrets would have been sold or shared all the time, as happens so often in London and Washington. This makes secrecy an economic problem. I have been collecting the empirical materials for historical investigation of this problem over a number of years, and am continuing to do so. Current Papers
Wars are increasingly frequent, and the trend has been steadily upward since 1870. The main tradition of Western political and philosophical thought suggests that extensive economic globalization and democratization over this period should have reduced appetites for war far below their current level. This view is clearly incomplete: at best, confounding factors are at work. Here, we explore the capacity to wage war. Most fundamentally, the growing number of sovereign states has been closely associated with the spread of democracy and increasing commercial openness, as well as the number of bilateral conflicts. Trade and democracy are traditionally thought of as goods, both in themselves, and because they reduce the willingness to go to war, conditional on the national capacity to do so. But the same factors may also have been increasing the capacity for war, and so its frequency. We need better understanding of how to promote these goods without incurring adverse side-effects on world peace.
Attempting to satisfy their political masters in a target-driven culture, Soviet managers had to optimize on many margins simultaneously. One of these was the margin of truthfulness. False accounting for the value of production appears to have been widespread in some branches of the economy and some periods of time. A feature of cases of false accounting was that they commonly involved the aggravating element of conspiracy. The paper provides new evidence on the nature and extent of false accounting; the scale and optimal size of underlying conspiracies; the authorities’ difficulty in committing to penalize it and the importance of political connections in securing leniency; and the importance of herd effects, leading to correlated risk taking and an asset price bubble in the socialist market where interpersonal trust was traded.
The paper provides a rare case study of terrorism and counter-terrorism within a closed society, carried out under a blanket of official secrecy. This case is unexpectedly revealing in what it tells us about terrorism, counter-terrorism, and the relative strengths of open and closed societies. Documents from the archive of the Lithuania KGB show how the Soviet authorities managed the hunt for the perpetrators of bombing attacks carried out in Moscow in January 1977. Lithuania, a sensitive border region with a troubled history, was far distant from the epicenter of the conspiracy in Soviet Armenia, but the authorities did not know this beforehand, and made considerable efforts to establish or rule out a Lithuanian connection. It was a problem that the KGB, like other Soviet organizations, was vulnerable to box-checking and other kinds of perfunctory working to the plan. The career concerns of regional KGB leaders appear to have countered this tendency. The paper evaluates the strengths and weaknesses of a counter-terrorist operation carried out under conditions of the intense secrecy that was normal in the Soviet police state.
We are working towards filling the last remaining gap in the historical national accounts of Russia and the USSR in the twentieth century. The gap includes the Great War (1914 to 1917), the Bolshevik Revolution, the Civil War and War Communism (1918 to 1921), and postwar recovery under the New Economic Policy of a mixed economy (1921 to 1928). Our work builds on our predecessors and also returns to a number of original sources. We find that the economic performance of the Russian Empire in wartime was somewhat better than previously thought; that of War Communism was correspondingly worse. We confirm the persistence of losses associated with the Civil War into the postwar period, or the failure of the New Economic Policy to achieve full recovery, or some mixture of both. We conclude that the Great War and Civil War produced the deepest economic trauma of Russia’s troubled twentieth century.
Salient features of the Soviet Union after World War II include rapid economic recovery and consolidation of Stalin’s rule. Both economic recovery and political consolidation are explained in large part by temporary factors arising from the war. Rapid postwar growth is attributed to the scope arising from a combination of preceding shocks including the war itself, and also stretching back into the prewar years. Political-economy considerations link the quality of repression and Stalin’s capacity to delay reforms to his experience of the war as a source of new information about the citizens over whom he ruled.
This paper tells the story of a pensioner’s fight against a local mafia of Soviet party and government officials and farm managers in a remote rural locality in the 1950s. To Moscow, he was a whistleblower. To the leaders of his local community, he was a troublemaker. Working together, the local people went to extraordinary lengths to suppress his criticisms. Eventually, Moscow intervened to vindicate him. The story illustrates vividly the political and economic issues that arose when a centralized dictatorship that relied on mass mobilization over a vast territory with sometimes poor communications tried to contain local rent seeking while moving away from mass terror as its chief instrument of control.
The Stalinist command economy was designed to overcome weaknesses that had destroyed the Russian economy in World War I: a shortage of industrial capacity combined with the peasant farmers' withdrawal from the urban-rural market into autarky. Industrialization created the specialized mass production facilities that ensured the supply of the Red Army with weapons in World War II. There were only two major economies that mastered mass production in the war, and the Soviet Union was one of them. By converting the peasants into residual claimants on the available food, collectivized agriculture ensured that, when war broke out, the soldiers and war workers were fed first in line. So, the Stalinist command system was a case of intelligent design - but not all that intelligent. Stalin's war preparations, while purposeful, were associated with severe costs and capital losses. Collectivization was a peacetime disaster: it destroyed the human and social capital of the Soviet countryside and impoverished and alienated the majority of the population. The general rearmament in the late 1930s, including the mass production of weapons, was unnecessarily costly, and also failed to deter aggression. Stalinist industrial policies failed to appreciate the significance of new information and communication technologies for military as well as civilian uses; without Stalin noticing, the information revolution was already under way. Stalinist terror attempted to eliminate potential traitors before the war broke out. Despite killing a million people, it failed to do so; indeed it may have created more real traitors than it killed.
In the mid 1980s Soviet leaders began to regret the price they were paying in the international arena for extreme secrecy in military affairs. New evidence shows that in the autumn of 1986 they decided in principle to release more information about military force levels and defense outlays. They went on to agonize over this commitment over the next two and a half years. Senior military and other officials resisted and delayed implementation. The new figures that Gorbachev announced in 1989 may not have the whole truth, but were probably better than a half-truth. The episode throws more light on the burdens of secrecy than on the supposed burdens of military spending.
Military procurement in the Soviet economy under Stalin provides a novel historical context for a standard problem of market organization, that of contracting for quality. The Soviet ministry of defense was engaged in the procurement of military goods from Soviet industry. An internal market was formed and contracts were made. In the market, the contractor had power over the buyer and typically used this power to default on quality. In the background loomed a dictator, imperfectly informed, but with the power to tear up any contract and impose unlimited penalties on the contractor. The buyer’s counter-action took the form of deploying agents through industry with the authority to verify quality and reject substandard goods. The final compromise restored quality at the expense of quantity. Being illicit, it had to be hidden from the dictator. Our case provides an historical illustration of the limits of dictatorship.
This is a draft chapter for Unifying the European Experience: An Economic History of Modern Europe, edited by Stephen Broadberry and Kevin O’Rourke, in preparation for publication by Cambridge University Press.
Richer countries had an advantage in both world wars, because they were able to mobilize the greatest quantity of military resources. To investigate the impact of income on mobilization statistically, we analyzed pre-war income, as well as structural (persistence of agriculture) and institutional (financial and political) mechanisms. In mobilization of total economic resources, pre-war income had a positive impact. Neither income nor institutions played a substantial role in mobilizing troops, but fiscal mobilization was explained well by all the mechanisms. Income had a positive impact, as did various financial and political institutions. The richer countries possessed an advantage in fiscal mobilization due to their superior institutions. Inactive (papers that I am not currently trying to publish)
We draw on the experience of the major combatant countries in World War I to analyse the role of economic factors in determining the outcome of the war and the effects of the war on subsequent economic performance. We demonstrate that the degree of mobilisation for war can be explained largely by differences in the level of development of each country, leaving little room for other factors that feature prominently in narrative accounts, such as national differences in war preparations, war leadership, military organisation and morale. We analyse the effects of the war on subsequent economic performance in terms of the scale of destruction of physical and human capital. Although the growth rate between 1918 and 1929 was highest in the economies which experienced the worst destruction, over the period 1913-1929 as a whole, per capita income growth in Europe was reduced. Thus there was some rebound, but not enough to undo the negative effects of the capital destruction and the damage to the international institutional framework caused by the war.
In Stalin’s command system secrecy was used to conceal information and decisions. We look at the uses of secrecy in a hierarchical system of the Soviet type in the context of the fundamental problem of command. Secrecy was a conditional choice. Principals gained by making economic information secret when the agent’s expected profit opportunities in private trade were tempting, horizontal trust was fragile, and secrecy itself was cheap. It paid them to make decisions in secret when unexploited opportunities, and the wage that the principal could afford to pay the agent, were both low. Under some circumstances secrecy benefited both principal and agent. Secrecy was one element in an equilibrium that enabled principals and agents to participate in the command system and enabled the system itself to persist.
The collapse of the Soviet economy that began in 1989 was not a "transformational" recession; there was a recession, but little transformation. The economy collapsed when the stability conditions required for a successful command system, that had been present in the Soviet Union for seventy years, ceased to hold. These conditions can be defined by the equilibrium of a game of strategy played by a dictator and a producer. The available output must be able to cover the producer’s effort costs and the dictator’s monitoring costs. Adverse trends in production and monitoring costs eventually rendered the command system unsustainable.
The paper considers the influence of the budget for military spending in the Soviet command economy. A specific problem is that the Soviet strategy of concealment left us without good measures of the military burden on Soviet resources. The paper surveys previous western attempts to fill this gap alongside post–Brezhnev revelations. A new documentary source from 1982 that appears authoritative suggests much higher figures than anything proposed or revealed so far, and supports these higher figures in detail. However, the figures contain many puzzles and the authenticity of the document itself cannot be fully assured. Postscript. Following circulation of this paper, and the "Konoplev Report" that provided the occasion for it, I received helpful advice and comments from many colleagues. My paper also aroused comment on the Russian internet, for example on Boris L'vin's Journal. The arguments and other evidence that were put forward inclined me more strongly to the conclusion that the "Konoplev Report" is a forgery. Thus my paper has proved to be more useful in terms of the authentication of historical documents than for historical economics. I thank in particular Julian Cooper, R. W. Davies, James Noren, and Lennart Samuelson for their advice. |
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