Running a Factory Under Soviet Socialism

 

Bitter Waters: Life and Work in Stalin’s Russia is a fascinating look at the Soviet economic system in the 1930s, as viewed from the front lines of that system. Gennady Andreev-Khomiakov was released from a labor camp in 1935, and was fortunate to find a job as a book-keeper in a sawmill. When the factory manager, Grigory Neposedov (a pseudonym) was assigned to run a larger and more modern factory (also a sawmill), he took Gennady with him.

Although he had almost no formal education, Neposedov was an excellent plant manager. As Gennady describes him:

He was unable to move quietly. Skinny and short, he moved around the plant so quickly that he seemed to be running, not walking. Keeping pace with the director, the fat chief mechanic would be steeped in perspiration…He rarely sat in his office, and if he needed to sign some paper or other, you had to look for him in the mechanic’s office, in the shops, or in the basement under the shops, where the transmission belts and motors that powered the work stations were located…This enthusiasm of his, this ability to lose himself completely in a genuine creative exertion, to give his all selflessly, was contagious. It was impossible to be around Neposedov without being infected by his energy; he roused everyone, set them on fire. And if he did not succeed in shaking someone up, it could unmistakely be said that such a person was dead or a complete blob.

With his enthusiasm and dedication to his factory, Neposedov comes across almost as a Soviet version of Hank Reardon (the steel mill owner in Ayn Rand’s Atlas Shrugged), with this difference–Nepodesov could throw himself as enthusiastically into bureaucratic manipulation as into his technical and leadership work. All of his skills would be needed to make this factory a success.

Although the sawmill had modern equipment, it was producing at only a fraction of its design capacity. One of the problems was energy: the plant was powered by a 200 HP steam engine, and whoever had built the place had spent almost all of the budget on other equipment, leaving very little for the boiler. The original boiler that came with the plant turned out to be useless, and was replaced with a salvaged boiler..this worked, but was not in good shape and produced only about half the steam needed to run the engine–and the plant–at full power.

At this point in history, and in this particular corner of the Soviet economy, the amount that was available to be paid to workers was strongly related to the output of a plant. And workers at this sawmill were becoming increasingly desperate, on the point of actual starvation. Neposedov, aided by Gennady, pursued a three-part program of improvement: (1) fix the boiler, (2) improve the workflow (as we would now call it) within the plant, and (3) put in place an incentive system for the workers.

New “pipes” for the boiler were somehow obtained (I think “pipes” in this context refers to the boiler flues) and the workflow was continuously analyzed and improved. The most interesting part of the story, though, deals with the incentive program. The plant manager apparently had discretion to put such programs in place as long as he could pay for them out of increased output. (As the book describes it, there were extensive accounting systems in place throughout the Soviet economy–indeed, Lenin had once gone so far as to say “Socialism is accounting.” The accounting seems a bit similar to what you would find in a multidivisional American company with extensive intracompany transactions.)  The incentive system that Gennady designed for this sawmill was based on very sharp pay increases for the workers when production exceeded target–so that, for example, you could double your pay by producing only 25% over target. (Actually, the plan paid collectively by group and by shift, rather than on an individual basis.)

The incentive plan, together with the repaired steam boiler, resulted in very high production–140%, then 160% of target–and correspondingly high pay for the workers. Gennady had some nervous moments when he feared he had made a mistake in the calculations and the cost of the additional wages would exceed the amount generated by the new production….a mistake like this could easily have landed him back in Siberia, or worse. But it turned out that the new system was indeed sustainable.

The local Communist Party leadership, while pleased with the increased production, was disturbed that the propaganda buzzwords of the day were not being implemented. “Socialist competition” was hot at the time, and the Party organizer insisted on competition at the individual worker levels, not just the group and shift level.

With a look of incomprehension, I asked the Party organizer: “Why draw up individual agreements, if the whole shift is working to fulfill a single, common norm? Is there any sense in that?”

The Party organizer did not understand: “What do you mean, sense? Let them work more zealously at their own jobs, not hold back the others.”

“They already have no interest in holding back the others. Everyone knows that would only mean depriving themselves of earnings.”

“That’s beside the point!” exclaimed the Party organizer in vexation. “They now hurry subconsciously, but give them a socialist obligation and they will know exactly what’s what. We have the complete picture.”

I smiled to myself, thinking, It isn’t the picture you’re after. What drives you is the need, according to the prescribed Party order, to beat down the impulses of people, to saddle them and make them your dependents by creating the impression that their success is due to “socialist methods of labor.”

High-level Party officials visited, wanting to know the reasons for the factory’s success. They were not satisfied with the simple truth–“we repaired the boiler, put the equipment in order, gave the workers a chance to earn a bit more”–but wanted to recast the success in terms of the catch-phrases of the time–“socialist methods,” or “shock work tactics and competition.” The Party was particularly disturbed that there could be a factory hitting almost 200% of target without any identified Stakhanovites (heroic workers of extraordinary productivity–named after Alexis Stakhanov, a coal miner who once produced 102 tons in a single shift.) Neposedov was told that he’d better find some Stakhanovites and publicize their achievements. This was problematic since the production records were only at the group/shift level. but four workers were duly selected and stories about them were run in the district newspaper–even though there was nothing particularly exceptional about their performance.

What great irony! The Communist leadership demands a more individually-based incentive system, and the plant manager–who would probably have been very much at home running a Western, capitalist plant…reluctantly complies.  It’s a great example of Centralizing logic–everything must be put onto the Procrustean Bed, whether or not it makes any sense in a given local set of circumstances.

The most difficult problems faced by this factory involved the acquisition of supplies. Equipment and spare parts were always difficult to get, because of the rigidity of the planning process, and personal relationships were key, along with off-the-books trading and outright bribery. The plant was entirely dependent on the supply of raw lumber, and allocation decisions were arbitrary and very political. Gennady, whose father had been in the lumber trade before the revolution, was contemptuous of the chaos into which the industry had been reduced by the Soviets:

The free and “unplanned” and therefore ostensibly chaotic character of lumber production before the revolution in reality possessed a definite order. As the season approached, hundreds of thousands of forest workers gathered in small artels of loggers, rafters, and floaters, hired themselves out to entrepreneurs through their foremen, and got all the work done. The Bolsheviks, concerned with “putting order” into life and organizing it according to their single scheme, destroyed that order and introduced their own–and arrived at complete chaos in lumbering.

As Gennady says:

Such is the immutable law. The forceful subordination of life’s variety into a single mold will be avenged by that variety’s becoming nothing but chaos and disorder.

The above is really well-stated, and there are far too many people in our own society who fail to understand this point. The idea of centralized planning as a panacea is very seductive, and seemingly can be overcome only by either an unusually brilliant mind or by bitter experience, either personal or (ideally) historical.

The factory was gradually strangled by supply problems. Neposedov responded by getting approval to conduct his own lumbering operations, sending white-collar as well as blue-collar workers into the forests to cut down trees, but was unable to get either power equipment or sufficient horses to conduct this operation effectively. A trickle of lumber still flowed into the mill, but not enough to run at more than a small fraction of capacity. All of Neposedov’s creativity, cunning, and drive could not save the situation. Gennady, with Neposedov’s permission, left to take a new job in Moscow with a planning organization.

While at the sawmill, Gennady had had little involvement in politics:

The events of the Yezhovhchina and the Moscow trials found almost no echo in our plant. We attended meetings where propagandists from the district Party committee spoke about the “search for enemies of the people.” According to the prescribed order, we dutifully voted for the death sentence, but we almost never discussed such things among ourselves. The violence was occurring far away somewhere, at some inaccessible height, and people sensed that it was better not to talk about such things.

American businesses in 2021, in far too many cases, seem to be implicitly modeling their own behavior on this Soviet precedent.

In Moscow, he became involved with a group of friends who were critical of the regime, but had little in the way of specific ideas about what should be done:

Although many similar thoughts and desires “were floating in the air,” without a free exchange of opinions it was impossible to gather them together and reduce them to a system that could be put into effect. Apart from our dissatisfaction, criticism, and negation, we had no ideas that could become a driving force with which to oppose the authorities.

Gennady and his friends were especially confused by visitors from the West who spoke in glowing terms of the Soviet Union’s accomplishments:

Romain Rolland, Lion Feuchtwanger, the two Webbs, and many others frequently made enthusiastic comments about what they saw. We were puzzled as to what evoked such raptures. Was this captivation the result of n inexplicable blindness, or was there actually something bad in the West that was unknown to us, an evil that eclipsed even our own ugliness?

When the Germans attacked in 1941, there was some hope that the fall of the regime might result in something better–but Nazi barbarity very quickly put an end to that notion. As the enemy forces near Moscow, whole factories were dismantled and moved east. Hundreds of thousands of people, with and without order, fled the city. Women from Gennady’s workplace were among those sent to dig trenches:

They took us just outside Rzhev, to a forest where there were no barracks or houses. You make yourself comfortable on the ground, under the firs! The authorities put up a tent for themselves, but we were under the sky…Rain poured through the branches; we were all wet–what a nightmare! They gave us shovels, sent us into a field, told us to dig! And we were in pumps and sheer stockings. Where I work I wear dress shoes. If I wear only dress shoes to work, why would I have a pair of everyday shoes? And if all I know is how to cook a meal and pound on a typewriter, how am I supposed to suddenly dig trenches? Well, we dug..The food situation was desperate, they gave us slop. We lived on bread. Imagine two thousand women from Moscow, in the rain, becoming so raggedy, sickly, and tormented that they cannot even be recognized. A real menagerie!

Eventually, Gennady decided to join the exodus to the east:

The train moved slowly, as if threading its way with difficulty through the darkness. Switch signal lights again swam pat–on to Tovarnoy and Kkruzhony Stations, then again pitch-blackness. We suddenly stopped and stood still for a long while. It seemed that the entire train, even the cars and the steam engine, were listening, surely in alarm, extending a slim, smokestack ear to the sky…”Don’t be sad, old man,” remarked Vasyukov quietly, without his usual bantering tone. “Tears. as they say, won’t help. Ah, Moscow, yes what shall we do for Moscow?…Let us drink to her health, may she have better days ahead.”

Gennady enlisted in the army in 1942 and was captured by the Germans in the Crimea. He spent the remainder of the war as a prisoner, remaining in Germany after the war and eventually moving to the United States.

A fascinating and well-written book, especially recommended for those who are interested in the history of Russia, Communism, and industrial organization.

An earlier version of this post was published at Chicago Boyz in 2009.  See also Francis Spufford’s great book about Soviet economic planning–it’s part novel, part nonfiction: Red Plenty.

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  1. Ekosj Member
    Ekosj
    @Ekosj

    David Foster: The most difficult problems faced by this factory involved the acquistion of supplies. Equipment and spare parts were always difficult to get, becaue of the rigidity of the planning process, and personal relationships were key, along with off-the-books trading and outright bribery.

    I went to graduate school in the early 80’s with some escapees from behind the Iron Curtain.   They said that part of the job of every factory manager was to know people who could ‘fix’ the manager’s supply problems.   These people could ‘influence’ the suppliers to provide what was needed.    If that took money, or women or threats or violence … by any means necessary.  After the collapse of Communism when the Oligarchs emerged the Western press was flummoxed.   Where had this network of organized crime come from so suddenly?    They had always been there…off the books, not on any org chart.   But they had been an integral part of the economy.   And when the State evaporated, they seized the opportunity.

    • #1
  2. David Foster Member
    David Foster
    @DavidFoster

    Ekosj (View Comment):

    David Foster: The most difficult problems faced by this factory involved the acquistion of supplies. Equipment and spare parts were always difficult to get, becaue of the rigidity of the planning process, and personal relationships were key, along with off-the-books trading and outright bribery.

    I went to graduate school in the early 80’s with some escapees from behind the Iron Curtain. They said that part of the job of every factory manager was to know people who could ‘fix’ the manager’s supply problems. These people could ‘influence’ the suppliers to provide what was needed. If that took money, or women or threats or violence … by any means necessary. After the collapse of Communism when the Oligarchs emerged the Western press was flummoxed. Where had this network of organized crime come from so suddenly? They had always been there…off the books, not on any org chart. But they had been an integral part of the economy. And when the State evaporated, they seized the opportunity.

    One of the characters in ‘Red Plenty’ is a guy who was a salesman prior to the Revolution.  There are no true salesmen in the Socialist world; only people who might take an order occasionally if you’re nice to them.  So this guy now works the other side of the street: instead of persuading people to *buy* stuff, he now uses his talents to persuade people to *sell* stuff.

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  3. Gumby Mark (R-Meth Lab of Democracy) Thatcher
    Gumby Mark (R-Meth Lab of Democracy)
    @GumbyMark

    Red Plenty is one of the finest books I’ve ever read.  Brilliant concept by the author.

    I think the reason so many Western intellectuals were impressed by Soviet factories in the 20s and 30s is they had never been inside a factory before, had no idea what they were really seeing, and could not recognize the incredible inefficiencies.

    In the mid-80s one of our plant managers went on a government-sponsored exchange visit to a Soviet factory making the same product his plant in the U.S. made.  On his return he told us of the mind-boggling craziness of the production system.  He had an embarrassing moment when at a meeting he drew something up on paper to explain a concept and asked if copies could be made for all the Soviet attendees.  There was silence in the room and then someone took him aside to explain that they were not allowed to have copy machines.

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  4. HankRhody Freelance Philosopher Contributor
    HankRhody Freelance Philosopher
    @HankRhody

    Gumby Mark (R-Meth Lab of Demo… (View Comment):
    There was silence in the room and then someone took him aside to explain that they were not allowed to have copy machines.

    Can’t have your shock workers spreading Fake News now can you?

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  5. Taras Coolidge
    Taras
    @Taras

    “Gennady enlisted in the army in 1942 and was captured by the Germans in the Crimea. He spent the remainder of the war as a prisoner, remaining in Germany after the war and eventually moving to the United States.”

    After the war, how did he avoid getting sent back to the Soviet Union against his will, as per Operation Keelhaul?

    Labor had replaced the Tories in the UK, and the Labor Party lurved Stalin.

     

     

     

    • #5
  6. Percival Thatcher
    Percival
    @Percival

    Ekosj (View Comment):

    David Foster: The most difficult problems faced by this factory involved the acquistion of supplies. Equipment and spare parts were always difficult to get, becaue of the rigidity of the planning process, and personal relationships were key, along with off-the-books trading and outright bribery.

    I went to graduate school in the early 80’s with some escapees from behind the Iron Curtain. They said that part of the job of every factory manager was to know people who could ‘fix’ the manager’s supply problems. These people could ‘influence’ the suppliers to provide what was needed. If that took money, or women or threats or violence … by any means necessary. After the collapse of Communism when the Oligarchs emerged the Western press was flummoxed. Where had this network of organized crime come from so suddenly? They had always been there…off the books, not on any org chart. But they had been an integral part of the economy. And when the State evaporated, they seized the opportunity.

    The Western press is generally flummoxed. You’d think that they would be used to it by now.

    • #6