Paul Gregory and Robert Stuart, SOVIET AND POST-SOVIET ECONOMIC STRUCTURE AND PERFORMANCE, HarperCollins, 5th edition, 1994 From Chapter Four, THE SOVIET INDUSTRIALIZATION DEBATE, 1924-1928 An extraordinary debate on economic development took place in the Soviet Union between 1924 and 1928. Its audience included almost everyone of political and intellectual importance in the Soviet Union. The debate raised a multitude of questions concerning development strategy, many of which are still widely debated. The debate focused on the alternative development strategies open to the Soviet economy in the late 1920s. Stalin, who actually made the eventual choices of central planning and collectivization in 1928 and 1929, respectively, was an observer of and a participant in this debate. THE SETTINGS OF THE SOVIET INDUSTRIALIZATION DEBATE The economic recovery of NEP probably reached its peak in 1926. The rapid NEP recovery had brought the economy to its capacity limits. With the loss of industrial capital stock and the limited net investment of the 1920s, the fact that industrial output had regained prewar levels indicates that industrial capacity was probably already being overtaxed by the recovery of the mid-1920s. If, in this situation, an investment drive was undertaken to raise industrial capacity, severe inflationary pressures could result. This was the Soviet inflationary imbalance in a nutshell: industrial investment was required to raise industrial capacity, yet the capacity creating effect of investment would be felt only after a period of time. The income-generating effect of investment, however, would be felt almost immediately, thus creating an inflationary problem. If this inflation were to occur, the peasant would again be alienated by the increasing prices of manufactured goods. The terms of trade would again move against agriculture. An industrialization drive would redistribute wealth away from the peasant (through declining terms of trade), and such a redistribution could have disastrous effects on political stability and grain marketings. The Smychka basis of NEP would be jeopardized, and some alternative system would have to be substituted to feed the industrial workers. The second alternative, a slow rate of capital accumulation, would avoid excessive inflation and preserve the alliance with the peasant. On the other hand, the basic problem-the low capacity of the economy would not be addressed. The economy would remain on the brink of inflation without achieving long-run objectives. The political background of the debate should be outlined as well. After Lenin's death in January 1924, the leadership of the Communist Party was split by a bitter factional debate. The "united opposition" of the left, led by Leon Trotsky, Grigory Zinoviev, and Lev Kamenev, opposed the NEP concessions to the peasant and to private trade and was a persistent critic of the foreign policies of the party leadership. The left opposition advocated "superindustrialization" and harsh discriminatory measures against the more prosperous peasants and resisted the notion of "building socialism in one country." The party leadership consisted of a coalition between the Bolshevik "moderates"-Nikolai Bukharin, the editor of Pravda, who was a recognized Marxist theoretician and a popular revolutionary figure; Mikhail Tomsky, the trade union leader; and Aleksei Rykov, the head of the government bureaucracy-and Joseph Stalin, the general secretary of the Communist Party. This ruling coalition favored the continuation of NEP, the avoidance of a superindustrialization drive, the preservation of the Smychka, and efforts toward rapprochement with the capitalist world. The leadership coalition had a vested interest in the success of the NEP experiment and the policy of rapprochement with the West. They hoped to attract foreign credits to bolster the NEP recovery. Serious setbacks occurred on both fronts in 1927: voluntary grain marketings fell well below government targets, and the government suffered serious foreign policy setbacks-the British broke off diplomatic relations, there were troubles in Poland, and Chiang Kai-shek turned on the Chinese Communists. The Soviet Union was gripped by a war scare, and it was felt that a major war with the capitalist West was imminent. Sensing a weakening in the political base of the ruling coalition, Trotsky and the left opposition chose to challenge the leadership, a challenge that was successfully repulsed and resulted in the expulsion of Trotsky from the party in December 1927. THE MARXIST-LENINIST LEGACY The Soviet Industrialization Debate centered largely on sectorial growth strategies, that is, on whether industry (the "state sector") or agriculture (the "private sector") should be favored or whether sectorial growth should be balanced. The Soviet Industrialization Debate drew upon the theoretical legacies of Marx and Lenin. All participants had as their goal the "building of socialism," all agreed the state (society) should own the means of production at least in industry, and all used appropriate quotations from Marx and Lenin to support their programs. MARX The Marxist legacy consists of Marx's (and Friedrich Engel's) limited instructions concerning the shape of the future socialist society and of Marx's model of expanded reproduction, a model that states the conditions for a growing economy.' Marx's expanded- reproduction scheme is of direct relevance to the Industrialization Debate, for it provided a conceptual model for determining sectorial priorities. A further Marxist legacy was Marx's notion of primitive capitalist accumulation, the process by which capital initially came to be controlled by the capitalist class. Marx's instructions concerning the shape of future socialist societies were quite brief because he believed that the details of the future communist society were unforeseeable. The basic contradiction of capitalism, the class struggle between the worker and the capitalist, would inevitably lead to the violent overthrow of capitalism and the establishment of a socialist society. The first phase of the new socialist society would consist of a transition period that would vary depending upon the legacy of the preceding stage of capitalism. Only when communism, the final stage of social evolution, had been reached would differences among societies be eliminated. Marx had remarkably little to say about the critical period of transition from capitalism to communism. Marx believed that the socialist revolution would occur in the advanced capitalist countries. The new socialist government could, therefore, take charge of this productive apparatus. Thus, the period of transition to communism would not be too long in duration. The transition period would be characterized by the distribution of goods to individuals according to their contribution to the productive process. Workers would receive vouchers from society indicating the amount of work they had performed. The distribution of income would, therefore, remain unequal during the transition period. Marx emphasized the chaos of the market and the fact that market allocation creates economic crises. Planning would allow a socialist society to avoid the disproportions that plagued capitalist societies. Socialist societies would have greater foresight, and he advocated central control over resource allocation. According to Marx, during the transition period, the objective of socialist planners should be to accelerate the rate of economic growth and thus shorten the waiting time for the abundant communist society. In his model of expanded reproduction, Marx described the necessary relationship among economic sectors required to bring about economic growth. It might be noted that these are physical relationships, independent of the society's economic system; therefore, they would hold in socialist as well as capitalist societies. The condition for economic growth (expanded reproduction) can be illustrated by beginning with a stationary economy that is not growing (simple reproduction). Marx divided the economy into two broad sectors: Sector I, in which the means of production are produced, and Sector II, in which consumer goods are produced. Using Marx's labor theory of value, which states that the value of output will equal the value of direct and indirect labor inputs plus surplus value (profits), the value of each sector's output can be written as V1= c1 + v1 + s1 and V2= c2 + v2 + s2 where V = value of sector output c = fixed capital costs or depreciation v = variable costs, primarily labor costs s = surplus value (or profits) of each sector The subscripts 1 and 2 refer to Sector I and Sector II,respectively. In a stationary economy, the output of Sector I (investment goods) equals the depreciation requirements of Sectors I and II, or V1= c1 + c2 and this is Marx's condition of simple reproduction. On the other hand, the economy will grow if the net capital stock of the economy expands, and this occurs when the output of Sector I exceeds the depreciation expenses of I and II or V1>c1 + c2 This is Marx's condition of expanded reproduction. For the economy to be in equilibrium, capital accumulation (saving) equal to VI - Cl - C2 must take place. Marx assumed that, in capitalist societies, workers (the recipients of v) would be at subsistence and would thus not be a source of capital accumulation. The capitalists, the recipients of surplus value S, would, therefore, be the source of capital accumulation. Marx did not expand upon the sources of capital accumulation during the transition period, but he did describe capital accumulation during the early phases of capitalism, called primitive capitalist accumulation. In the Marxian schema, primitive capitalist accumulation is used to explain how capital came to be controlled by a capitalist class in the first place. Marx rejected the argument that capitalists acquired capital through their own abstinence from consumption. Instead, this process occurred primarily through expropriation of the property of the weak (the serfs, the urban workers, etc.) by the strong (the state, the church, robber barons, the merchants). The poor were divorced from the means of production and were forced to offer their labor to the capitalist class. What directions could the Soviet leadership draw from the Marxist legacy in preparing their blueprints from the new socialist society? The first is that during the period of transition, distribution should be according to one's contribution to production. The second is that some form of planning should replace the anarchy of capitalist markets. The third is that growth can be accelerated by giving priority to the investment goods sector. Insofar as capitalists initially gained control of capital by expropriation (primitive capitalist accumulation), the socialist state may adopt the same method to expropriate capital from the remaining capitalists (primitive socialist accumulation). LENIN Lenin had to reconcile the socialist revolution in Russia with Marx's clear prediction that it would occur in the advanced capitalist countries. Lenin argued that the socialist revolution would occur, for a variety of reasons, in the "weakest link" in the capitalist chain, Russia. Lenin claimed that the backward nature of the Russian economy required a transition period between capitalism and socialism, which he called state capitalism. A strong Soviet state would be required to capture the commanding heights of the economy. By having the state nationalize and control banking, transportation, utilities, and heavy industry, the state would be in a position to exercise control over the nonstate sector (light industry and agriculture), which would remain temporarily in private hands. With this strategy, the Soviet government would obtain the many benefits capitalism had to offer while exercising overall control over economic affairs. Lenin pointed to the high concentration ratios of Russia s heavy industries and emphasized the role of foreign capital in promoting this concentration. The Bolshevik state inherited pockets of advanced capitalism, which would spawn the revolutionary proletariat and would provide the heavy-industry base for building socialism. The enormous productive potential of capitalism, admired by Marx, would thus be put to the benefit of the working classes. The failure of the Russian socialist revolution to spark a world revolution presented Lenin with further doctrinal difficulties. Was it possible to "build socialism in one country" (in relatively backward Russia), or would socialism in Russia have to wait for a successful socialist revolution in the advanced capitalist countries? This doctrinal issue split the Bolshevik leadership. On the one side, Leon Trotsky argued for a "permanent revolution," maintaining that Russia could not hope to build socialism successfully without the assistance of more advanced socialist nations. Nikoial Bukharin (and later Stalin) argued that the Soviet Union's resource base was sufficiently strong to build socialism in Russia, isolated from the outside capitalist world. Lenin argued that "breathing spells" would be required to allow consolidation before the permanent revolution could continue. Lenin did not believe that the world socialist revolution would be a continuous process. The Soviet Industrialization Debate began in earnest shortly after the death of Lenin. To a great extent, the debate was about the type of economic system-NEP or a War Communism-like system-that would be best suited to building socialism. When NEP was abandoned in 1928, the outcome of the debate was clear. PREOBRAZHENSKY-UNBALANCED GROWTH E.A. Preobrazhensky, the vocal spokesman of the left wing of the Bolshevik party, took up where Marxian expanded reproduction left off and argued that a discontinuous spurt in the output of investment goods was required to attain rapid industrialization." Preobrazhensky envisioned two possible courses of action at the end of the 1920s: the Soviet economy could either continue to stagnate or even retrogress to lower levels of capacity, or a "big push" to expand capacity could be undertaken. In taking this latter step, which he supported, halfway measures would not be advisable, for a spurt below the crucial minimum effort of investment would be self-defeating. Preobrazhensky based this conclusion on several factors. He thought that the inflationary imbalance had two causes: the low capacity of the industrial sector, and a loss of saving ability-the latter being a consequence of institutional change in agriculture. Before the October Revolution, the peasants had been forced to "save" in real terms a substantial portion of their output, which was delivered either to the state or to the landlord. This forced saving limited their capacity to purchase industrial products. The October Revolution, however, established them as free proprietors. Rent payments were eliminated and agriculture taxes (in 1924-1925) were less than one-third of prewar obligations." The peasants became accustomed to receiving industrial commodities in return for the sale of their agricultural surplus. According to Preobrazhensky, this caused a "drastic disturbance of the equilibrium between the effective demand of the village and the marketable output of the town."" The effective demand of the peasant had increased substantially without a substantial increase in industrial capacity, creating an inflationary gap. Preobrazhensky suggested that net investment in industry must be raised significantly to close the gap between effective demand and capacity and that the inflationary effects of this action must be neutralized by altering the structure of demand significantly away from consumption and toward saving. Once the new industrial capacity has been created, private consumption could again be free to approach its previous position. As far as the sectoral allocation of this net investment was concerned, Preobrazhensky argued for unbalanced growth to favor industry in general and heavy industry in particular on the grounds that the short-run benefits of investment in agriculture and light industry would be well outweighed by the long-run benefits of investment in capacity-expanding heavy industry. Thus, he emphasized that investment goods and consumer goods industries must be arranged in "marching combat order," in keeping with the Marxian theory of economic dynamics. In arguing in favor of a big push, Preobrazhensky stressed that moderate increases in the capacity of the capital goods sector would be selfdefeating: the technological gap between the USSR and the advanced capitalist powers had become so wide that it was now impossible to adopt advanced technology gradually. Second, he echoed a view widely held at the time that the replacement requirements of the Soviet economy had become so immense that a significant increase in investment was required just to keep industrial capacity from falling. According to Preobrazhensky, foreign trade could, to some extent, substitute for domestic capital production by importing foreign capital. However, the Soviets' capacity to import was limited by the lack of foreign credits (which would probably nor be offered by capitalist foes) and by the small size of the exportable agricultural surplus. A foreign trade monopoly would be essential to ensure that machinery and not luxuries would be imported. In any case, considering the massive capital requirements of the Soviet economy in the 1920s, Preobrazhensky felt that the foreign sector could only play a limited role in the Soviet capacity buildup. The long-run payoff of Preobrazhensky's policy of one-sided reinvestment in the capital goods sector would be an enhanced capacity to produce manufactured consumer goods and industrial farm machinery. Yet he recognized that it would take years for this to happen: ... a discontinuous reconstruction of fixed capital involves a shift of so much means of production toward the production of means of production, which will yield output only after a few years, that thereby the increase of the consumption funds of the society will be stopped." To dampen the interim inflationary pressures, Preobrazhensky pro- posed the system of primitive socialist accumulation, which was to replace the market so as to force the economy to save more for capital investment than it would have had the market prevailed. Instead of the market, state trade monopolies would set prices. By purchasing at low delivery prices and then selling at higher retail prices, the state would be able to generate a form of profit or forced saving that would reduce inflationary pressures. Preobrazhensky further suggested that during the period of primitive socialist accumulation, the main burden of industrialization should be placed on the peasantry in the form of low state purchase prices and high manufactured consumer goods prices, thereby extracting forced saving through a reduced peasant living standard. In addition to his ideological preference for state industry, Preobrazhensky chose to burden the peasants because of the high potential of their saving capacity as exhibited prior to the revolution and because of peasant agriculture's ability to be independent of industry. The overall purpose of primitive socialist accumulation was to let the state, not private individuals, decide how much would be saved. In doing so, the state would try to equate real saving (composed of both voluntary and involuntary savings) with the output of the capital goods sector (real investment). Preobrazhensky's primitive socialist accumulation contained ideological motives. On the ideological front, the battle would be waged between the state sector (nationalized heavy industry) and the private sector (agriculture and handicraft manufacturing), and Preobrazhensky believed that the state must ensure the victory of the socialist sector. Primitive socialist accumulation would transfer resources out of the private sector (primarily agriculture) and into the state sector by imposing "nonequivalent exchanges" between the city and countryside. Once the state had eliminated the private sector as a viable threat, the socialized sector would become the source of capital accumulation. Preobrazhensky recognized the dangers of primitive socialist accumulation. With a large volume of savings to be extracted from agriculture, extremely low agricultural purchase prices would have to be set. The peasant would withdraw from the market, alienated from the Soviet regime. In Bukharin's words, primitive socialist accumulation would "kill the goose [agriculture] that laid the golden eggs." This was the weakest point of his program and proved the focus for strong attacks by his opponents. How was the industrialization drive to be sustained if agricultural supplies were not available? BUKHARIN-BALANCED GROWTH Nikolal Bukharin was the official spokesman of the right wing of the Bolshevik party. A close associate of Lenin with credentials as a leading Marxist theoretician, Bukharin remained a potent individual force in Soviet politics until the Stalin purges of the 193 OS.17 Prior to NEP, Bukharin's ideas were closely attuned to those of the left wing of the party, and he even co-authored a standard textbook on communism with Preobrazhensky. But NEP brought about a significant change in Bukharin's thinking. Throughout the NEP period, he remained an influential supporter of the NEP economic system. Whereas Preobrazhensky felt that the victory of socialist ownership over private property had to be engineered by the state through unequal exchanges between the city and countryside, Bukharin felt that this outcome would be ensured by the natural superiority of socialist ownership." Market relations between the city and countryside would ensure that harmony between the peasant and the industrial worker (the Smychka) would be maintained. Any effort to introduce nonequivalent exchanges would destroy the foundation of economic development. Unlike the left wing, Bukharin and his followers felt that socialized industry did not require discriminatory government action. Rather, state industry would naturally grow more rapidly than the rest of the economy, and its share would inevitably increase. The superiority of socialist ownership would be demonstrated to those outside the state sector, and they would join the state sector voluntarily. The peasants would increasingly join consumer and producer cooperatives, and the state would encourage agricultural cooperation through favorable credit terms granted by the State Bank. It would be counterproductive to impose collectivization on the peasantry before the peasants themselves were convinced of the superiority of the socialist form. So much for the political side of the Bukharin program. On economic grounds, he argued in favor of the balanced growth of industry and agriculture, granting that socialized industry would grow more rapidly than the economy as a whole. Any investment policy that one-sidedly favors agriculture over industry or vice versa, or one branch of industry over another, will fall because of the interdependence of economic sectors.'9 Industry cannot function without agricultural supplies. Industrial capacity will be reduced if agricultural raw materials are not available. Industry requires sophisticated capital equipment, which it initially cannot produce domestically and which cannot be purchased abroad if agricultural surpluses are not exported. Agricultural producers, on the other hand, depend on industry for hand tools, agricultural machinery, and manufactured consumer goods. If these goods are not forthcoming, the peasants will retaliate by not supplying agricultural products for industry. Bukharin recognized the need for capital accumulation but argued that it should be kept within manageable proportions. The overextension of one sector or subsector of the economy at the expense of other sectors would create critical bottlenecks-steel shortages, deficits of vital agricultural raw materials, insufficient foreign exchange earnings-that would retard overall economic development. Any formula calling for maximum investment in heavy industry without a corresponding expansion of light industry would not only aggravate the goods famine, owing to the channeling of investment resources into time-consuming capital goods industries, but would also threaten to undermine the NEP recovery. Bukharin's program called for the gradual expansion of all sectors simultaneously. The critical link between agriculture and industry would be maintained by creating a favorable atmosphere for peasant agriculture. Instead of setting low agricultural delivery prices and high industrial prices, the state should do the opposite: first, to provide an incentive for the peasant to produce and market a larger output, and second, to pressure state enterprises to lower costs. It would not be necessary to force saving from agriculture as Preobrazhensky proposed; instead, only a stable economic environment free of the uncertainties of War Communism and NEP would be needed. In such a situation, the peasants would return to their traditional frugality, creating the savings to finance further expansion of capacity. Bukharin's advice to the peasant was to "get rich," a slogan from which Stalin carefully disassociated himself. To resolve the incongruence between limited industrial capacity and his call for moderate capital investment to be spread evenly among economic sectors, Bukharin proposed a series of measures to economize and utilize the available capital more fully. Small- scale manufacturing and handicrafts were to undergo a technological "rationalization" and be transformed into supposedly more efficient producers' cooperatives. Large-scale investment projects were to be made more cost-effective by better planning and more efficient construction work. Maximum attention was to be accorded to the speedy completion of investment projects. The available capital equipment was to be used more exhaustively by employing multiple shifts. Attention was to be given to appropriate factor pro- portions; that is, capital was not to be invested in areas where labor could do the job as efficiently. The state pricing policy was to stimulate cost economies and more efficient use of available resources by eliminating monopoly profits." Nevertheless, Bukharin was forced to admit that balanced growth meant steady but slow progress toward socialism. His own expression was "progress at a snail's pace," a phrase that was used against him in his struggles against the left wing and then later with Stalin Although Trotsky had criticized the foreign trade strategy of the right wing as too autarkic, the trade policies advocated by Bukharin and his associates recognized the Soviet Union's initial dependence on the advanced capitalist powers. Bukharin argued that during the early stages of industrialization, the USSR must import large quantities of industrial equipment from abroad and pay for those commodities with agricultural exports. Yet the long-term goal must be independence from the capitalist world and the "building of socialism in one country." Thus, the Soviet Union's dependence on foreign imports should be of limited duration, lasting only until domestic industry would be capable of producing the necessary capital equipment at home. STALIN'S CONSOLIDATION OF POWER In a series of adroit political maneuvers, Stalin consolidated his power within four years after Lenin's death in 1924. First, he allied himself with the right wing of the party (Bukharin, Rykov, and Tomsky) to purge the leftist opposition led by Trotsky from positions of power-a phase completed in late 1927. Then, Stalin turned his attention to the "right deviationist" Bukharinites, who were denounced by the Central Committee of the Communist Party in November of 1928. This occurred almost one month after Stalin's adoption of the more ambitious alternative draft of the first Five Year Plan, which supported the original left-wing industrialization program. The variant of the first Five Year Plan adopted in 1928 and formally approved in April 1929 staggered the imagination of even the superindustrialists. The low capacity of the Soviet industrial sector was to be subjected to an all-out attack: the Soviet fixed capital stock was to double within five years to provide the industrial base for building socialism. The first Five Year Plan also called for a 70 percent expansion of light industry, which was quite unrealistic in view of the limited industrial capacity in 1928 .During the Industrialization Debate, Stalin was clearly aligned with the Bukharin position. Stalin emphasized the achievements of NEP and ridiculed the left's superindustrialization proposals and demand that "tribute" (primitive socialist accumulation) be paid by the peasants . Although Stalin underscored the advantage of large-scale farming, he made it clear that any movement in the direction of collective farming would be gradual and voluntary. The foreign policy setbacks and the grain collection problem of 1927 emboldened Trotsky and the left opposition to challenge the ruling coalition. Stalin, allied with the moderates, was able to repulse the attack, but he came to believe that the left had correctly foreseen the crises encountered in 1927, in particular the problem of state grain collections from a reluctant peasantry. To increase grain collections, Stalin came to rely more and more on coercion and emergency measures, personally directing state grain collections in Siberia. The coalition with Bukharin was kept intact by carefully timed concessions to the right wing concerning the lifting of force in the countryside. Stalin came away from his experiences in 1927 with the conviction that force was the answer to the agrarian problem, for primitive socialist accumulation without the power to force peasant deliveries would not work. From this point on, Stalin ceased to serve as defender of the NEP system and began instead to criticize lagging NEP performance and to call for a superindustrialization drive. Moreover, he began to reiterate Trotsky's call for tribute from the peasants and to warn of kulak sabotage of grain collections. Encouraged by Stalin's move to the left, former Trotskyltes such as Preobrazhensky returned to the party fold, only to perish later in the purges. The first Five Year Plan was adopted in October 1928, amidst a new grain collection crisis. According to Stalin, the success of the industrialization program was clearly jeopardized. As long as the peasants refused to turn over such deliveries to the city, they held the power to halt the entire industrialization program. The peasants' reluctance to sell their output to the state was understandable in light of the low purchase prices paid by the state and the increasing use of coercion to collect grain. Stalin's answer to the crisis he perceived was to mount a counteroffensive designed to break once and for all the peasants' hold over the pace of industrialization. In the autumn of 1929, he ordered the wholesale collectivization of agriculture. Peasant landholdings and livestock were forcibly amalgamated into collective farms, which were obligated to deliver to the state planned quotas of farm products at terms dictated by the state. The ensuing turmoil was great not only in the countryside, which burst into open rebellion, but also in Soviet cities, which received a vast influx of workers from the countryside and saw a significant redistribution of labor among industrial branches as enterprises attempted to fulfill their taut production targets. THE OUTCOME OF THE SOVIET INDUSTRIALIZATION DEBATE The actual Soviet industrialization pattern that emerged after 1928 (Table 4.1) bears a close resemblance to Preobrazhensky's industrialization program: Soviet economic growth between 1928 and 1940 was heavily biased in favor of industry in general and of heavy industry in particular. Industrial production grew at an annual rate of 11 percent, whereas agricultural production grew at an annual rate of only 1 percent between 1928 and 1937. The negative rate of growth of livestock graphically indicates the impact of collectivization upon agricultural performance. The same trends are apparent in the differential rates of growth of the agricultural and nonagricultural labor forces between 1928 and 1937: the former declined, while the latter expanded rapidly at an annual rate of almost 9 percent. The structural transformations resulting from these differential sector growth rates are impressive. Agriculture's shares of net national product and labor force declined from 49 percent and 71 percent, respectively, in 1928 to 29 and 51 percent, respectively, in 1940, whereas the increase in industry's product and labor force shares was from 28 and 18 percent, respectively, to 45 and 29 percent, respectively, during the same period. The most remarkable feature of the 1930s was the extent to which the pro-heavy industry bias asserted itself (as Preobrazhensky said it should). Between 1928 and 1937, heavy manufacturing's net product share of total manufacturing more than doubled, from 31 percent to 63 percent, whereas light manufacturing's product share fell from 68 percent to 36 percent. The impact of this production program on real consumption levels in the absence of significant foreign trade (the ratio of imports plus exports to GNP sank to I percent by 1937) had already been foreseen by Preobrazhensky. Between 1928 and 1937, household consumption scarcely grew (at an annual rate of 0.8 percent), and the share of consumption in GNP (in 1937 prices) declined markedly, from 80 percent to 53 percent. During the same period, gross capital investment grew at an annual rate of 14 percent, and the ratio of gross investment to GNP doubled, from 13 percent to 26 percent. If we define total consumption expenditures to include both private consumption and communal services, and nonconsumption expenditures to include investment, government administration, and defense, then total consumption fell between 1928 and 1937 from 85 percent of GNP to 64 percent of GNP. The changing institutional setting within which these transformations were occurring should also be noted: between 1928 and 1937, the socialist sector share of total capital stock, industry, agriculture, and trade expanded sharply, so that by 1937 the socialist sector totally dominated all economic activity. Consumer prices rose by 700 percent between 1928 and 1937 and probably would have risen even faster without the extensive rationing of the period. Average realized prices of farm products, which are weighted averages of the extremely low state procurement prices, the above-quota state delivery prices, and collective farm market prices, on the other hand, rose by 539 percent, which indicates a reopening of the price scissors against agriculture between 1928 and 1937. An examination of some partial data (Figure 4.1) suggests that, in fact, the scissors did reopen and were not closed again until the mid-1950s, with a resultant squeeze on the agricultural sector in terms of low procurement prices. REHABILITATIONS AND REEVALUATIONS The Soviet industrialization debate was about two interrelated issues: sectorial priorities, and the economic system. The party's right wing offered one view of the future; the left wing offered an alternate view. Stalin followed the program of the left wing-only in a form more extreme than that envisioned by its designers-and instituted the Stalinist economic model, later called the administrative-command system. The sacrifices that the Stalinist model extracted from the Soviet population were immense. Living standards stagnated at a time when real economic growth was rapid. Although there have been endless debates over magnitude, the loss of life associated with the catastrophes of Stalinism - forced collectivization, famine, purges - was in the millions. The late Soviet leadership was not willing to dismiss the accomplishments of the Stalinist model out of hand. They noted the incredibly rapid transformation of the Soviet industry and of property relations. But they also spoke more openly about the immense costs of Stalinism and strictly differentiated Stalinism from socialism. The official Soviet reevaluation of the industrialization debate credited Bukharin with a better sense of the appropriate pace of transformation. Bukharin's emphasis on allowing the natural cooperative tendencies of the peasantry to develop without being forced by "extraordinary measures" also found a sympathetic response, as did Bukharin's point that resource allocation cannot be permanently based on commands, administrative interference, and extraordinary measures. On the other hand, current Soviet ideology was not prepared to say that collectivization was a mistake . Rather collectivization was carried out prematurely and Stalin's extraordinary measures were costly, extreme, and antidemocratic. Soviet ideology held to the belief that private peasant agriculture was incompatible with rapid industrialization and that the emergencies perceived by Stalin were real, not imagined. In this sense, Bukharin's faith in peasant agriculture was viewed as misguided, even though Bukharin's long-run solution called for socialization of property rights in agriculture.