Postwar economic growth under central planning

I am posting here a little graph I plotted using data from Maddison’s standardized data on historical economic growth. The graph compares average regional per capita GDP in what can be considered two poor to middle-income developing regions after World War II, eastern Europe and Latin America. The comparison came up in the process of my analysis of patterns of industrialization in eastern Europe after the war. While comparing intra-regional levels of development (e.g., Czechoslovakia and Bulgaria), I thought of doing a global comparison to see how the region fared in comparison with other, similar developing regions.

Many economic historians and political economists now consider it historically more appropriate to compare the USSR and its east European offshoots with other developing regions than with the rich nations of the West, given more similar historical patterns of development and underdevelopment. When one compares the USSR and eastern Europe to the rich and developed countries of the West, one is always disappointed. But to consider the two regions comparable is to abstract from history a bit too excessively, given that western Europe had the upper political and economic hand over eastern Europe and the USSR/Russia since at least the sixteenth century. A comparison with other developing (what we would today call middle-income, semi-peripheral) regions is a whole lot more appropriate from a developmental standpoint.

Latin America is a perfect fit for a comparison, given the contrasting paths of development the two regions took after the war. In Latin America, states pursued various statist forms of (largely) capitalist development, whereas in eastern Europe, economies came to be run under the model of central planning developed in the Soviet Union in the 1930s. The data covers the early postwar period, 1946-1969.

ee-ussr-la comparison

As one can see from the graph, both the USSR and what became the socialist east European nations were poorer than what were at the time the most developed and relatively resource-rich countries of Latin America (Argentina, Brazil, Chile, Colombia, Mexico, Peru, Uruguay, and Venezuela – here shown as Latin America-8). As one can see, as a group, these countries were wealthier than the USSR and eastern Europe in 1946. They also had the added advantage of not being ravaged by war, as the USSR and much of eastern Europe was.

Although poorer, the USSR catches up with this part of the world by 1950 and by 1969 has placed significant distance between itself and Latin America. The latter period is also one when the USSR is making important advances in space exploration and rocket technology, displaying not only greater material wealth but also important technological advancement.

Important differences do exist, however. At a per capita GDP of $5,225 in 1969, the USSR is wealthier than most of the Latin America-8 group. However, wealthier than the USSR are Argentina ($7,037) and Venezuela ($10,262), while the socialist federation is roughly equal with Chile ($5,220). We are not in the habit of comparing the USSR to Chile but in abstract material terms in 1969 they are at similar levels of development. It is important to bear in mind, however, that Chile started 1946 with a per capita GDP of $3,699, while USSR was at $1,913, so in those terms one can see that Soviet growth was more impressive. Moreover, between 1946 and 1969, Argentina raised its per capita income by one and a half times and Venezuela did so by one and two-thirds. But in the same period, the Soviet Union almost tripled its wealth! Again, the Soviet rate of growth is much more impressive.

The case of eastern Europe (without the USSR) is just as impressive, if not more. Lagging far behind the Latin America-8 group, it not only catches up with the region but by the mid-1960s is able to surpass the Latin American industrializers in per capita terms. And these are countries which are mainly resource-poor and begin the postwar period with a very small capital base.

Eastern Europe and the USSR do just as impressively when compared with the larger group of Latin American countries, which includes the lot of what were poorer and politically more unstable countries such as Bolivia, Guatemala, Panama, Haiti and Honduras. While the levels of development of these countries were on average lower than the USSR and eastern Europe, one needs to bear in mind that in 1946, countries like Bulgaria and Romania were very much underdeveloped agrarian nations, as were many parts of the USSR and Yugoslavia.

It becomes clear that in the immediate postwar era, the states that ended up basing their economies on central planning performed much better than those that relied on the path of (various statist forms of) capitalist development. This should tell us something about the appeal of the Soviet model for many poor and developing nations in the 1950s and 1960s, but also sheds some light on the relative success of central planning in industrializing underdeveloped economies, a fact largely recognized at the time but somehow forgotten by contemporary discussions of histories of state socialism which tend to base their evaluations on the crisis-ridden 1980s to proclaim central planning a failure. Clearly, in purely material terms, early postwar central planning performed quite impressively.

One might retort by saying that the better comparison is with East Asia, rather than Latin America. In fact, East Asia (including Japan) is an extremely impoverished region after World War II. For the 16 nations that Maddison includes in his East Asian group, the average per capita income in 1950 is only $667. Asian growth emerges slowly, and is in fact impressive in only a select group of countries. Most East Asian nations (in Maddison’s broader definition) perform rather unimpressively. Japan, South Korea, Hong Kong and Taiwan are outliers in what is an overwhelmingly poor part of the world. And in 1946-69, with the exception of Japan, even the outliers do not grow at a very impressive rate, or at least not as impressively as the USSR and eastern Europe. With the exception of Japan’s rapid growth, the East Asian “economic growth miracle” only really becomes a story in the 1980s.

I do not have reliable data on hand, but it would also be interesting to compare how the two regions fare on other indicators of development, such as life expectancy, infant death, literacy rates, educational attainment and others. I would venture a guess that no later than the mid- to late-1950s, the USSR and eastern Europe performed better on those criteria as well. The comrades managed postwar development quite adeptly, it seems.

My goal here is of course not to simplify complex histories or score any cheap ideological points. I would certainly not recommend that any country adopt central planning today, and I am not sure that such a thing would even be possible given the unique historical circumstances of postwar Europe. As someone who does comparative historical analysis, I am merely drawing attention to contrasting historical paths of development. The legacies and consequences of such historical paths are certainly still with us today.


About Besnik Pula

Assistant Professor at the Department of Political Science at Virginia Tech. Specializes in political economy, comparative development and postsocialist transformations. All views expressed here are strictly my own.

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