the Soviet Union been a competitive market economy, characterized by rapid technological progress and state wage fixing, strong deflationary pressures would have caused prices to fall continuously.
However, many prominent Soviet economists such as Grigoriy Khanin contend that it was inflation, not deflation that was repressed by the Soviet brand of price fixing. They argue that while prices were supposed to be fixed, enterprise managers driven by a desire to maximize bonuses tied to profits, circumvented the authorities, causing intermediate input prices and therefore unit costs to rise. Had the Soviet Union been a competitive market economy, strong cost-push inflationary pressures would have forced prices to steadily rise.
Some Soviet economists, such as Igor Birman, have claimed that repressed inflation was exacerbated by weak monetary discipline and soft budgetary constraints, which allowed firms to spend more than they were authorized. The purchasing power of these offending enterprises, and of the public, therefore exceeded the cost of goods supplied. This created inflationary excess demand that was easily observed in empty shop shelves, rapidly increasing savings deposits, and the public conviction that money was worthless because there weren’t enough things to buy.
The evidence for this position is inconclusive, because goods were often distributed in worker canteens instead of shops, and there could have been many alternative reasons why bank savings rose. Nonetheless, the consensus holds that the USSR was, in some important sense, an economy of shortage, in a state of monetary disequilibrium that subverted effective planning and contributed to the system’s undoing. Although repressed inflation may have seemed innocuous because Soviet growth between 1950 and 1989 was always positive, most specialists consider it to have been an insidious source of destabilization.
Repressed inflation was specific to the Soviet period, and has not carried over into the post-communist epoch, because prices are no longer
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fixed or controlled. Price liberalization produced a bout of hyper-inflation in 1992, only partly explained by the so-called Soviet “ruble overhang,” but the problem subsequently subsided. See also: ECONOMIC GROWTH, SOVIET; HARD BUDGET CONSTRAINTS; MONETARY OVERHANG; RATCHET EFFECT
Bornstein, Morris. (October 1978). “The Administration of the Soviet Price System,” Soviet Studies 30(4): 466-490. Grossman, Gregory. (1977). “Price Controls, Incentives and Innovation in the Soviet Economy.” In The Socialist Price Mechanism, ed. Alan Abouchar. Durham, NC: Duke University Press.
The immediate background to the first Russian revolution, which, despite its designation as the “Revolution of 1905,” actually began in 1904 and ended in 1907, was the unexpected and humiliating defeat of Russia by the Japanese. The defeat emboldened the liberals, who in the fall and winter of 1904-1905 unleashed the so-called banquet campaign for constitutional change. Meeting in twenty-six cities, the liberals called for civil liberties, amnesty for political prisoners, and a democratically elected constituent assembly. The banquets were a prelude to the dramatic events of Bloody Sunday (January 9, 1905), when government troops fired on peaceful marchers (organized by Father Gapon, founder of the Assembly of the Russian Factory and Mill Workers of the City of St. Petersburg) who wished to present Tsar Nicholas II (r. 1894-1917) with a petition for political and social reforms similar to those advocated by liberals (significantly, without any demand for abolition of the monarchy or introduction of socialism).
In light of the peaceful tactics and reformist platform of the marchers, it is not surprising that the massacre of 130 people and the wounding of some three hundred provoked widespread outrage. Within a few weeks, many industrial workers throughout the empire went on strike to protest the government’s conduct, assuming the role of a viable political force for the first time. Students at universities and high schools followed suit soon afterward, disorders broke out among minorities seeking cultural autonomy and political rights, peasants attacked landlords’ estates, members of the middle class defied governmental restrictions on public meetings and the press, and on several occasions soldiers and sailors mutinied. The entire structure of society appeared on the verge of collapse.
Incapable of coping with the growing unrest, the government alternated between strident assertions of the autocratic principle and vague promises of reform, satisfying no one. The revolution peaked in October, when a general strike, spontaneous and unorganized, brought the government to its knees. Once workers in Moscow walked off their jobs, the strike spread quickly throughout the country, even drawing support from various middle- class groups. Numerous cities came to a standstill. After about ten days, in mid-October, Tsar Nicholas, fearing total collapse of his regime, reluctantly issued the October Manifesto, which promised civil liberties and the establishment of a legislature (duma) with substantial powers. Most significantly, the tsar agreed not to enact any law without the approval of the legislature. In conceding that he was no longer the sole repository of political power, Nicholas did what he had vowed never to do: He abandoned the principle of autocracy.
During the Days of Liberty, the period immediately succeeding the issuance of the October Manifesto, the press could publish whatever it pleased, workers could form trade unions, and political parties could operate freely. It was a great victory for the opposition, but in a matter of days it became evident that the revolutionary crisis had not been overcome. The tsar made every effort to undo his concessions. Large numbers of supporters of the monarchy, enraged at the government’s concessions, violently and indiscriminately attacked Jews and anyone else deemed hostile to the old regime. In the opposition, the St. Petersburg Soviet (council of workers’ deputies) grew increasingly militant. The upshot was that the Days of Liberty came to an end within two months in a torrent of government repression provoked by the uprising of Moscow workers. Led by Bolsheviks and other revolutionaries, this uprising was brutally quashed by the authorities within ten days.
Nevertheless, the elections to the duma took place. On the whole they proceeded fairly, with some twenty to twenty-five million participant voters. To the government’s surprise, the over1286
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Massacre at Tiflis Municipal Council, October 1905. THE ART ARCHIVE/DOMENICA DEL CORRIERE/DAGLI ORTI (A) whelming majority of the elected deputies belonged to opposition parties. The newly formed Octobrist Party, satisfied with the political changes introduced by the October Manifesto, held only thirteen seats; the extreme pro-tsarist right held none. On the other hand, the Kadets, or Constitutional Democrats, who favored a parliamentary system of government, held 185 seats, more than any other
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party, and dominated the proceedings of the legislature. Predictably, relations between the Duma and the government quickly soured because of the legislature’s demands for a constitutional order and for agrarian measures involving compulsory distribution of privately owned land to land-hungry peasants. On July 1906 the government dissolved the Duma. The deputies protested the action at a meeting in Vyborg, Finland, and called for passive resistance, but to no avail. The Second Duma, which met on February 20, 1907, and was more radical than the first, met a similar fate on June 3 of that year. This marked the end of the Revolution of 1905. At this point the authorities changed the electoral law by depriving many peasants and minorities of the vote, ensuring the election of a conservative Duma.
Never before had any European revolution been spearheaded by four popular movements: the middle class, the industrial proletariat, the peasantry, and national minorities (who demanded autonomy or, in a few cases, independence). But because of the disagreements and lack of coordination among the various sectors of the opposition, and because the government could still rely on the military and on financial support from abroad, the tsarist regime survived. Nevertheless, Russia had changed significantly between 1904 and 1907. The very existence of an elected Duma, whose approval was necessary for the enactment of most laws, diminished the power of the tsar and the bureaucracy. The landed gentry, the business class, and the upper stratum of the peasantry, all of whom continued to participate in the elections of the Duma, now exercised some influence in public affairs. Moreover, trade unions and various associations of cooperatives that had been allowed to form during the revolutionary turbulence remained active, and censorship over the press and other publications was much less
