Purges and Production: Soviet Economic Growth, 1928–1940

Did preparations for the Second World War account for the precipitous drop in the growth rate of Soviet industrial production from 10–12 percent per annum in the period 1928–1937 to only 2–3 percent per annum in the period 1937–1940? According to some who study the Soviet economy the answer is “yes.” This view has been succinctly expressed by Stanley Cohn: “After 1937, the rising spectre of Hitler forced the Soviet leadership to shift resources into armaments on a massive scale. As a result, the growth rate fell drastically to 3.6 percent per year between 1937 and 1940.” Such a sequence of events, however, has never been empirically demonstrated. The purpose of this paper is to investigate formally the validity of this explanation, via aggregate production functions, particularly of the CES (constant elasticity of substitution) variety, as well as to explore an alternative hypothesis, espoused, among others, by Naum Jasny, Alec Nove and Warren Nutter. This hypothesis stresses a domestic factor as the major contributor to the disruption in industrial production: namely, the impact of Stalin's terror in the form of chaos-producing political purges.