IDEAS home Printed from https://ideas.repec.org/p/cfr/cefirw/w0152.html
   My bibliography  Save this paper

Life Cycle of the Centrally Planned Economy: Why Soviet Growth Rates Peaked in the 1950s

Author

Listed:
  • Vladimir Popov

    (New Economic School, Moscow)

Abstract

The highest rates of growth of labor productivity in the Soviet Union were observed not in the 1930s (3% annually), but in the 1950s (6%). The TFP growth rates by decades increased from 0.6% annually in the 1930s to 2.8% in the 1950s and then fell monotonously becoming negative in the 1980s. The decade of 1950s was thus the “golden period” of Soviet economic growth. The patterns of Soviet growth of the 1950s in terms of growth accounting were very similar to the Japanese growth of the 1950s-70s and to Korean and Taiwanese growth in the 1960-80s – fast increases in labor productivity counterweighted the decline in capital productivity, so that the TFP increased markedly. However, high Soviet economic growth lasted only for a decade, whereas in East Asia it continued for three to four decades, propelling Japan, South Korea and Taiwan into the ranks of developed countries. This paper offers an explanation for the inverted U-shaped trajectory of labor productivity and TFP in centrally planned economies (CPEs). It is argued that CPEs under-invested into the replacement of the retiring elements of the fixed capital stock and over-invested into the expansion of production capacities. The task of renovating physical capital contradicted the short-run goal of fulfilling plan targets, and therefore Soviet planners preferred to invest in new capacities instead of upgrading the old ones. Hence, after the massive investment of the 1930s in the USSR, the highest productivity was achieved after the period equal to the average service life of fixed capital stock (about 20 years) – before there emerged a need for the massive investment into replacing retirement. Afterwards, the capital stock started to age rapidly reducing sharply capital productivity and lowering labor productivity and TFP growth rates.

Suggested Citation

  • Vladimir Popov, 2010. "Life Cycle of the Centrally Planned Economy: Why Soviet Growth Rates Peaked in the 1950s," Working Papers w0152, Center for Economic and Financial Research (CEFIR).
  • Handle: RePEc:cfr:cefirw:w0152
    as

    Download full text from publisher

    File URL: http://www.cefir.ru/papers/WP152.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Weitzman, Martin L, 1970. "Soviet Postwar Economic Growth and Capital-Labor Substitution," American Economic Review, American Economic Association, vol. 60(4), pages 676-692, September.
    2. Yan Wang & Yudong Yao, 2001. "Sources of China's economic growth, 1952-99 : incorporating human capital accumulation," Policy Research Working Paper Series 2650, The World Bank.
    3. Young, Alwyn, 1994. "Lessons from the East Asian NICS: A contrarian view," European Economic Review, Elsevier, vol. 38(3-4), pages 964-973, April.
    4. Desai, Padma, 1976. "The Production Function and Technical Change in Postwar Soviet Industry: A Reexamination," American Economic Review, American Economic Association, vol. 66(3), pages 372-381, June.
    5. Gomulka, Stanislow, 1977. "Slowdown in Soviet industrial growth : 1947-1975 reconsidered," European Economic Review, Elsevier, vol. 10(1), pages 37-49.
    6. Sergei Guriev & Barry W. Ickes, 2000. "Microeconomic Aspects of Economic Growth in Eastern Europe and the Former Soviet Union, 1950-2000," William Davidson Institute Working Papers Series 348, William Davidson Institute at the University of Michigan.
    7. Sherry A. Greenberg, 2012. "Analysis of Measurement Tools of Fear of Falling for High-Risk, Community-Dwelling Older Adults," Clinical Nursing Research, , vol. 21(1), pages 113-130, February.
    8. Easterly, William & Fischer, Stanley, 1995. "The Soviet Economic Decline," World Bank Economic Review, World Bank Group, vol. 9(3), pages 341-371, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Popov, Vladimir, 2014. "Сохранит Ли Экономика Узбекистана Высокие Темпы Роста? Сценарии Развития В 2015-30гг [Can Uzbekistan Economy Retain Its High Growth Rate? Scenarios Of Economic Development In 2015-30]," MPRA Paper 59785, University Library of Munich, Germany, revised 15 Oct 2014.
    2. Popov, Vladimir, 2014. "Can Uzbekistan Economy Retain Its High Growth Rates? Scenarios of Economic Development in 2015-30," MPRA Paper 59735, University Library of Munich, Germany, revised 20 Oct 2014.
    3. Vladimir Popov, 2010. "Development theories and development experience: half a century journey," Working Papers w0153, New Economic School (NES).
    4. Vladimir Popov, 2009. "Why the West Became Rich before China and Why China Has Been Catching Up with the West since 1949: nother Explanation of the “Great Divergence” and “Great Convergence” Stories," Working Papers w0132, New Economic School (NES).
    5. Popov, Vladimir, 2014. "Socialism is dead, long live socialism!," MPRA Paper 54294, University Library of Munich, Germany.
    6. Numa Mazat, 2016. "Structural Analysis Of The Economic Decline And Collapse Of The Soviet Union," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 029, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    7. Popov, Vladimir, 2015. "Catching Up: Developing Countries in Pursuit of Growth," MPRA Paper 65878, University Library of Munich, Germany.
    8. Popov, Vladimir, 2014. "Puzzles of public opinion: Why Soviet population supports the transition to capitalism since the 1980S," MPRA Paper 60915, University Library of Munich, Germany.
    9. Popov, Vladimir, 2015. "Разрыв Между Югом И Западом По Уровню Экономического Развития Сокращается? [Catching up: Developing countries in pursuit of growth]," MPRA Paper 65893, University Library of Munich, Germany.
    10. Popov, Vladimir, 2010. "The Long Road to Normalcy," WIDER Working Paper Series 013, World Institute for Development Economic Research (UNU-WIDER).
    11. Popov, Vladimir, 2014. "Загадки Общественного Мнения: Почему Советское Население Поддерживает Переход К Капитализму С Конца 80-Х Годов [Puzzles Of Public Opinion: Why Soviet Population Supports The Transition To Capitalis," MPRA Paper 57842, University Library of Munich, Germany.
    12. Fidel Aroche Reyes, 2014. "The Greek Economic Structure in the 2000's: A Road to Crisis?," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 12(1), pages 35-64.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Leonard Kukić, 2021. "The Nature Of Technological Failure: Patterns Of Biased Technical Change In Socialist Europe," Journal of Economic Surveys, Wiley Blackwell, vol. 35(3), pages 895-925, July.
    2. Leonard Kukić, 2018. "Socialist growth revisited: insights from Yugoslavia," European Review of Economic History, Oxford University Press, vol. 22(4), pages 403-429.
    3. Kukic, Leonard, 2021. "Technical change and the postwar slowdown in Soviet economic growth," IFCS - Working Papers in Economic History.WH 33259, Universidad Carlos III de Madrid. Instituto Figuerola.
    4. Richard L. Carson, 2009. "The Effect of Rent Seeking on Economics Growth," Carleton Economic Papers 09-10, Carleton University, Department of Economics, revised 19 Dec 2016.
    5. Kukić, Leonard, 2017. "Regional development under socialism: evidence from Yugoslavia," Economic History Working Papers 85078, London School of Economics and Political Science, Department of Economic History.
    6. Richard Carson, 0. "Inclusiveness, Growth, and Political Support," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 0, pages 1-19.
    7. Easterly, William & Fischer, Stanley & DEC, 1994. "The Soviet economic decline : historical and republican data," Policy Research Working Paper Series 1284, The World Bank.
    8. Bloom, David E. & Canning, David & Hu, Linlin & Liu, Yuanli & Mahal, Ajay & Yip, Winnie, 2010. "The contribution of population health and demographic change to economic growth in China and India," Journal of Comparative Economics, Elsevier, vol. 38(1), pages 17-33, March.
    9. Michael Knoblach & Fabian Stöckl, 2020. "What Determines The Elasticity Of Substitution Between Capital And Labor? A Literature Review," Journal of Economic Surveys, Wiley Blackwell, vol. 34(4), pages 847-875, September.
    10. Koopman, Robert B., 1989. "Efficiency and Growth in Agriculture: A Comparative Study of the Soviet Union, United States, Canada, and Finland," Staff Reports 278252, United States Department of Agriculture, Economic Research Service.
    11. Richard Carson, 2020. "Inclusiveness, Growth, and Political Support," Eastern Economic Journal, Palgrave Macmillan;Eastern Economic Association, vol. 46(4), pages 557-575, October.
    12. Tamás Vonyó & Alexander Klein, 2019. "Why did socialist economies fail? The role of factor inputs reconsidered," Economic History Review, Economic History Society, vol. 72(1), pages 317-345, February.
    13. Zuzana Brixiov?? & Ale?? Bul??r, 2002. "Growth Slowdown Under Central Planning: A Model of Poor Incentives," William Davidson Institute Working Papers Series 448, William Davidson Institute at the University of Michigan.
    14. Leandro Prados de la Escosura & Tamás Vonyó & Ilya B. Voskoboynikov, 2021. "Accounting For Growth In History," Journal of Economic Surveys, Wiley Blackwell, vol. 35(3), pages 655-669, July.
    15. Sergei Guriev & Barry W. Ickes, 2000. "Microeconomic Aspects of Economic Growth in Eastern Europe and the Former Soviet Union, 1950-2000," William Davidson Institute Working Papers Series 348, William Davidson Institute at the University of Michigan.
    16. Minsoo Lee & MoonJoong Tcha, 2004. "The color of money: The effects of foreign direct investment on economic growth in transition economies," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 140(2), pages 211-229, June.
    17. Peter Drysdale & Yiping Huang, 1997. "Technological Catch‐Up and Economic Growth in East Asia and the Pacific," The Economic Record, The Economic Society of Australia, vol. 73(222), pages 201-211, September.
    18. Herbert Brücker & Wolfram Schrettl, 1996. "Transformation, Investitionen und Wachstum: eine theoretische Perspektive," Vierteljahrshefte zur Wirtschaftsforschung / Quarterly Journal of Economic Research, DIW Berlin, German Institute for Economic Research, vol. 65(1), pages 5-13.
    19. Nauro F. Campos & Abrizio Coricelli, 2002. "Growth in Transition: What We Know, What We Don't, and What We Should," Journal of Economic Literature, American Economic Association, vol. 40(3), pages 793-836, September.
    20. Brixiova, Zuzana & Bulir, Ales, 2003. "Output performance under central planning: a model of poor incentives," Economic Systems, Elsevier, vol. 27(1), pages 27-39, March.

    More about this item

    JEL classification:

    • P17 - Economic Systems - - Capitalist Systems - - - Performance and Prospects
    • P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General
    • O4 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cfr:cefirw:w0152. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/cefirru.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Julia Babich (email available below). General contact details of provider: https://edirc.repec.org/data/cefirru.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.