The Cost of Keeping Secrets
THE COST OF KEEPING SECRETS
An article by Professor Mark Harrison, Department of Economics
Although some dictatorships might seem to have an advantage in reaching decisions, the true cost of the decisions they make is difficult to gauge when they work under conditions of secrecy. Taking Stalin’s Russia as an example, Professor Mark Harrison reveals how fear of disclosing state secrets hindered the business of forced labour camps. Since Stalin was directly responsible, we also learn about the quality of his decision making.
My research uncovers a story that took place in 1949. After World War II, the Soviet state entered its most secretive phase. One of the Soviet state’s most important secrets was the location of its labour camps. Today, we read that two members of the rock band Pussy Riot convicted of hooliganism will be sent to prisons far from Moscow in Mordovia and Perm. This kind of information was once protected by an elaborate wall of state secrets, the details of which are only now beginning to surface. The identity and whereabouts of Soviet labour camps was one of the most tightly protected secrets of the twentieth century, and my research underscores the price the Soviets paid to keep them hidden.
The true costs of dictatorship are usually invisible because they are secret
One anecdote illustrates the depth of the secrecy covering Soviet forced labour at the time. In March 1953, after Joseph Stalin’s death, the Gulag (administration of forced labour camps) was transferred from one ministry to another. For this transition to take place, officials needed to know the names and locations of the camps. Maps were needed. Though the government had long had the capacity and money to print maps, none was available. New maps of the camps were drawn in pen and pencil. The inference was clear. When it came to the Gulag, there were no maps.
In 1947, on Stalin’s initiative, a law enacted long prison terms for disclosing secrets even accidentally. His target was officials and researchers who were, in his view, too ready to share government information and scientific findings with the public and with foreigners. New, more inclusive lists of secrets were promulgated. The new regulations were so secret that many of those responsible under them could not be told officially about them. As a result a wave of fear swept through the Soviet administration.
The labour camps operated as government owned businesses, so they had to receive supplies, deliver products, and manage their financial accounts, as written down in secret government plans. As their secrecy was guarded more and more closely, camp bosses found it increasingly difficult to do this everyday business. In order to turn over goods and money, even within the planned economy, they had to risk severe punishments for disclosing a state secret: the fact that they existed. This crippled their business.
Ultra-secrecy led to breakdowns of Kafkaesque proportions. Orders for food, clothing, and building materials, began to fail. The camp commanders were victims of the Catch-22 of keeping secrets. Suppliers required full addresses to fill orders. Giving suppliers full addresses meant breaking the law on secrets. They could not pay for supplies, using their accounts in the state bank, without confirming their account details, which contained state secrets.
Ultra-secrecy led to breakdowns of Kafkaesque proportions
Historical files, made available in the wake of the collapse of the Soviet Union, show how Gulag officials tried to manage their mounting anxiety. The problem of how to conduct basic business while keeping the camps and their locations secret played itself out over four years. Officials worked around their dilemmas, expending considerable efforts to come up with alternatives. The efforts of camp commanders went into spreading responsibility and securing the collusion of higher official in workarounds. The efforts of higher officials went into endless committees and drafts of alternative solutions, none of which was ever adopted. In the end, rather than solve the problem, they got used to it and learned to live with it. Their fears subsided.
The irony is this: the contractual parties and counterparties involved were not independent buyers and sellers in a real market. They were owned by the state, were commissioned by the state to operate in an internal market the state had created, and were trying to make or complete contracts that the state had pre-authorized. But the state’s own laws prevented them from identifying themselves to each other in a way that would let this happen. Or, as it happened, it was at a higher cost than would have been necessary in the absence of these laws. The cost was paid, ultimately, by the state that made the internal market and the laws that regulate it.
The case study throws light on the quality of Stalin’s decision making. The process of growing secrecy was driven by Stalin himself. The story shows the lengths to which he was willing to go to cover his system of rule under the blanket of secrecy. Stalin’s motivation is clear. He launched the intensification of secrecy because he wanted to reduce perceived losses from the leaking and sharing of government information and scientific research. It is not clear whether he considered the resulting increase in transactions costs and nevertheless considered it worthwhile, or whether he failed to consider the consequences and miscalculated. We do not know. This gives us a sense of the distance we have to go before we fully understand the purposes of Soviet secrecy in its full scope and complexity.
The research for this paper was carried out in the Archives of the Soviet Communist Party and State collection of the Hoover Archive. Professor Harrison was one of the first Western economists to work in the Russian archives following the fall of Soviet communism. His work has brought new knowledge about the Russian and Soviet economy into mainstream economics and international economic history.
You can follow Mark Harrison on Twitter @mark4harrison
This article first appeared in the Autumn 2012 Economics Bulletin
Image of 1931 USSR map showing the Five Year Plan taken from http://ausstellung-gulag.org
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Related WRAP articles
Markevich, Andreĭ, 1976- and Harrison, Mark, 1949-. (2011)Great War, Civil War, and recovery : Russia's national income, 1913 to 1928. Journal of Economic History, Vol.71 (No.3). pp. 672-703. ISSN 0022-0507
Harrison, Mark, 1949-(2009)Forging success: Soviet managers and false accounting, 1943 to 1962. Working Paper. University of Warwick, Department of Economics, Coventry.
Gregory, Paul and Harrison, Mark, 1949-. (2005) Allocation under dictatorship : research in Stalin’s archives. Journal of Economic Literature, Vol.43 (No.3). pp. 721-761. ISSN 0022-0515