The Turning Point by Shmelev & Popov

Incentives matter.

It is one the basic tenets of economics. It is also the painful lesson of the Soviet economy: if people can’t keep the fruits of their labor, they are not going to work as hard, they are not going to innovate, and their standard of living will stagnate.

The severity of this lesson is detailed in The Turning Point: Revitalizing The Soviet Economy, a book published as the Berlin Wall was coming down. The economic structuring of the Soviet Union represented socialism to its most extreme: agricultural collectivization, industrial planning from various government ministries, the inability of industry and farms to disburse with assets without approval from above, and the “leveled” distribution of wages.

Bureaucracy suppressed innovation. “Leveled” wages prevented good workers from making more money (“we pretend to work, you pretend to pay us”). Food and money was confiscated. Some of the results of these policies?

-It was estimated 3-4 million people starved to death in 1933 during the Soviet Union’s “industrialization” phase.

-Per capita USSR national income was about 50% of the American level while average per capital consumption of goods and services was estimated at 30-40% of the American level.

-The World Health Organization concluded the average national child mortality level was about twice as high as the United States.

-102 cities with a combined population of 50 million people contained air pollution 10 times beyond the permissible norm.

The book, by Nikolai Shmelev and Vladimir Popov, serves as a solid history of the USSR’s dismal command economy. Strongly recommended for serious economic policy wonks, although I wouldn’t recommend a layman read this, as the book is steeped with a lot of economic jargon.

Hopefully American policymakers can take heed of these lessons as our economy slips further down the freedom scale.

Tags: capitalism vs. communism, Nikolai Shmelev, The Turning Point book review, Vladimir Popov