The Economic Consequences of Mr. Stalin

Review: Robert Allen's Farm to Factory: A Reinterpretation of the Soviet Industrial Revolution

Farm to Factory: A Reinterpretation of the Soviet Industrial Revolution, by Robert Allen. 2003.

I found this a lot more interesting than Allen's more famous book on the British Industrial Revolution, maybe because Allen makes a good case that the Soviet Union was, despite its institutional quirks, a pretty typical developing country. This means it's possible to glean broader lessons about development -- how to get people from the titular farms to factories -- from the Soviet experience. (That, and reading about Stalin and the run-up to World War II is just inherently more interesting than reading about British wool farmers.)

The big framing device is that, at least from 1928-70, the Soviet Union's economic performance was pretty good. Not Japan good, and not enough to close the gap with the West, but better than Latin America, and enough to achieve pretty respectable human development outcomes by the 1980s. (At least, if you were not disappeared by Stalin in the 1930s or killed by the Nazis in the 1940s.) You can argue about the framing but I think this is broadly in line with historical consensus.

Allen then goes on to make several more controversial claims. The first is that, without the Soviet revolution and Stalin's Five Year Plan, Russia was bound to be yet another underdeveloped commodity exporter -- more like India than Western Europe. Since we're extrapolating a growth rate over decades to get a counterfactual, pretty minor shifts in estimated growth can produce wildly different outcomes. Allen thinks growth under the Tsar was more like 1.7%/yr, which would have undershot growth under Stalin; this replication using newer data thinks it was 2.1%/yr, which would have produced similar results. Given the sensitivity of this counterfactual, I don't think Allen's argument is a slam dunk. But I think we can all agree that the Tsarist regime didn't seem particularly promising economically, at least without reform or an industrial push of its own.

The second is that collectivization, despite causing farm output to collapse, actually helped the cause of industrialization by driving former farmers to urban factories. Allen argues that Soviet agriculture had a lot of surplus labor, which meant you could sustain this movement for quite a while and still push up industrial growth. (When the USSR started running out of bodies to push off farms, capital ran into diminishing returns and the Soviet model stalled.) The "soft budget constraints" of state-owned enterprises (i.e. firms could hire s.t. MPL < w) allowed the factories to absorb all these new workers without very much trouble. To prove all of this, Allen runs a big 50-equation model, and shows that running a counterfactual with no collectivization doesn't make much difference to GDP.

The model is something of a black box, and I haven't had the time to dive into the appendices to read it. But my sense is that Allen's collectivization-less counterfactual is too limited -- first, in that targeting GDP alone can be a pretty bad approximation for welfare, and that rural-urban migration can be incredibly dislocating; and second, in that the model's setup is simply wrong. We know that the end of collectivization in China precipitated large increases in agricultural output.¹ It seems possible to imagine a counterfactual path of growth where agriculture kept pace with industry (perhaps even outpacing Allen's chosen counterfactual of North Dakota), farmers lived better lives, and rising commodity exports could have financed a different kind of industrial push.

1. Ed: I wrote this review in 2021. My own PhD research now casts doubt on this hypothesis.