Kondratiev and the Dynamics of Economic Development

Nikolai Dmitrievich Kondratiev must rank as one of Russia’s greatest economists. He resides in a very select group of economic theorists of Russian/Ukrainian/Soviet origin — other members being M.I. Tugan-Baranovskii, E.E. Slutskii and L.V. Kantorovich — whose names and ideas are well-known to economists the world over.² These scholars are recognised not only for their connection to the economics of Soviet-style planning, but as original contributors to areas of economic theory only tangentially related to the USSR; it is this which gives them their ultimate importance and durability. As a first instalment in a thorough re-examination of the history of Russian economic thought, Kondratiev has been chosen as a convenient starting-point.

Kondratiev was not the only participant in Russian revolutionary events to be turned rightwards by the experience. Lenin himself was the initiator of the New Economic Policy (NEP) in 1921, in which the freedom to trade was partially restored and the canons of financial orthodoxy were partially reinstated as official doctrine, albeit only temporarily. The first element of NEP was the replacement of the grain requisitioning of War Communism by a tax in kind, which was adopted in a government decree of 21 March 1921, and this led to further liberalisation in related areas.¹ For example concessions to foreign firms were allowed in certain areas of raw materials production such as mines, forestry and oilfields.² Lenin directed that communists should ‘learn to trade’ and proclaimed that the socialist elements of the Soviet economy should defeat the ‘bourgeois’ elements through victory in economic competition, not by political or military force. In the following chapter the consequences of this general move rightwards in Bolshevik policy for Kondratiev are examined.

As befits a scholar of international standing, Kondratiev went on a long journey overseas during 1924-25 to visit institutions and individuals with similar interests as NKZem and the Conjuncture Institute. The idea of this trip was first proposed at a meeting of the Presidium of Zemplan on 15 November 1922, and final permission was granted by the People’s Commissar of Agriculture A.P. Smirnov on 8 March 1924. Kondratiev was allocated 4000 rubles in order to spend one month in Germany, two months in the UK, and two months in the USA.¹ This trip was important to Kondratiev’s intellectual development as it gave him direct contact with those economists who he had previously encountered only in print, such as Irving Fisher and John Maynard Keynes, and enabled him to study relevant institutions such as the US Department of Agriculture directly. This trip also gave Kondratiev’s theoretical work an important boost by enabling him to discuss the idea of long cycles with the world’s leading business cycle economist, Wesley Mitchell. In personal terms the trip must have been significant, enabling Kondratiev to see first-hand the economic systems of some of the most advanced countries in the world and to use his knowledge of English and German. According to Efimkin, during the trip several American universities offered Kondratiev the opportunity to stay in the USA and take up professorships.² Since Kondratiev rejected these offers it can only be assumed that he believed, at least in 1924, that NEP was indeed meant seriously and for a long time.

Kondratiev first mentioned the idea of long cycles in print in the mono-graph The World Economy and its Conjuncture During and After the War (Mirovoe khozyaistvo i ego kon”yunktury vo vremya i posle voiny) published in 1922, and an account of this pioneering presentation is given below. Kondratiev’s first paper devoted specifically to long cycles was published in Questions of Conjuncture (Voprosy kon”yunktury) in 1925, and a version of this paper was translated and published in The Review of Economic Statistics in 1935. On 6 February 1926 Kondratiev read an expanded and revised version of his account of long cycles in the Institute of Economics in Moscow. This was a grand affair as the paper was discussed and criticised by many eminent economists such as V.A. Bazarov, S.A. Pervushin and M.V. Ignatiev, and the meeting was chaired by S.A. Fal’kner. On 13 February 1926 D.I. Oparin presented his very detailed critique of Kondratiev’s analysis of long cycles, the most rigorous critique produced during NEP, and this encounter was the high-point of the debate on long cycles which occurred in the USSR in the 1920s.¹ An account of this meeting was published in book form in 1928, and Kondratiev and Oparin also published some aspects of their critical exchange in Planned Economy (Planovoe khozyaistva) in 1926. Many other theorists entered the fray against Kondratiev in this period, for example Trotsky attacked Kondratiev for arguing that the long cycle was strictly periodic in nature.² Finally in 1928 Kondratiev published a detailed application of long cycle analysis to the interrelation of international agricultural and industrial prices, which was in many ways the pièce de résistance of his output on long cycles, and this paper was the last which he wrote on long cycles. Thus the key years for Kondratiev long cycle publications were 1922, 1925, 1926 and 1928.

This chapter examines both Kondratiev’s views on the methodology and principles of planning, and his work on the creation of a concrete plan for agriculture and forestry for 1924–28. As always with Kondratiev, a concern with the interrelation of theory and policy is something which emerges as very important in this area. The plan for agriculture and forestry was composed together with other members of the People’s Commissariat of Agriculture such as N.P. Makarov, not with other members of the Conjuncture Institute, which was part of the Commissariat of Finance. Even so, the methodology which underlay Kondratiev’s approach to planning was clearly indebted to his work on forecasting cyclical movements pursued in the Conjuncture Institute.

There is a whole school of ‘liberal’ economists in the industrial countries who urge upon the agricultural countries ... that they should concentrate upon agriculture, and do nothing to advance their industry. The same school also extols the virtues of exporting ... The follies of this school have their match in Marxist and nationalist dogmas, according to which the road to economic progress lies through concentrating upon industrialisation. In the heat of the passions aroused by these controversies it seems almost cowardly to take the line that the truth is that all sectors should be expanded simultaneously ...¹

(W. Arthur Lewis, 1955)

While analyses of various aspects of Kondratiev’s industrialisation strategy have been given in previous chapters, it is now appropriate to focus primarily on this issue. Kondratiev wrote specifically about Soviet industrialisation on a number of occasions; in an article on the interrelation of industry and agriculture published in 1928, in a report on his trip to America written in 1925, and in a paper on the need for capital improvements in agriculture. The work of other Conjuncture Institute members such as N.N. Shaposhnikov and A.L. Vainshtein was also relevant, but these cannot be examined in full here. In what follows the appropriate Kondratiev works are reviewed, together with a more general comparison of his approach with later writers on this topic such as W.W. Rostow and Alexander Gerschenkron. A short indication of the relevance of Shaposhnikov’s work on net present value is also given.

Prison ... has put an end to my scientific work, and put a stop to it at the most critical and interesting time; the years are passing and my scientific plans are disintegrating and being scattered like sand.

(Kondratiev, 26 May 1932)¹

The following chapter examines the demise of the Conjuncture Institute between 1928 and 1930, the campaign against Kondrat’evshchina at the end of the 1920s, Kondratiev’s arrest and interrogation in 1930— 31, the Menshevik trial, Kondratiev’s writings while in jail between 1930 and 1938 (including the letters to his wife), and the fate of other Conjuncture Institute members after Kondratiev’s arrest. Sources are still somewhat restricted in this area, so further revelations may change some of the details of this account, although are unlikely to alter the basic outline of the narrative. The story of Kondratiev’s imprisonment and eventual fate is certainly a sad tale to tell. However, the fact that Kondratiev still continued working in such terrible conditions is a testament to the power of his vision of what Russian conjunctural economics might become. Alexander Solzhenitsyn described the campaign waged against Kondratiev by the Soviet regime as painting him as a ‘future Prime Minister’.² Kondratiev was certainly a key player in any opposition that might have developed after 1928, one that Stalin felt was absolutely necessary to discredit.

What has been argued throughout this book is that Kondratiev’s work was important both in a theory and policy sense, moreover that these different aspects of economics were for Kondratiev two sides of the same coin. This can be seen (for example) in Kondratiev’s concern with applying the long cycle to the analysis of grain export prospects for the USSR and to forecasts of changes in the international grain markets; in his concern to stress that economic planning was beset with fundamental flaws which limited the accuracy of any possible planning methodology, what was called the Kondratiev uncertainty principle; and in his view that transfers of capital between industrial branches was determined by the relative dynamics of conjuncture of the particular branches in question. This pioneering concern to integrate theory with policy can be seen as part of a larger movement in economics after 1900, which sought to move away from the ‘grand theory’ tendency of multi-volume accounts of the principles of economics, to more detailed analyses of specific empirical problems in economics such as business cycles and economic growth. The fact that Kondratiev was pursuing this approach from within the USSR suggests that the development of Soviet economics after 1929 could have been very different to that actually witnessed.