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Soviet Entrepreneurs in the Late Socialist Shadow Economy: The Case of the Kyrgyz Affair

Published online by Cambridge University Press:  18 November 2020

James Heinzen
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Abstract

Supported by new archival material, this article delves deeply into one landmark criminal case to explore key aspects of the social, economic, and cultural history of illegal production and markets in the Soviet 1950s–60s. The goal of the article (and the larger project from which it draws) is to use archival research to shed light on major themes in Soviet history. It touches on three important and promising fields: everyday life under late Soviet socialism; the vibrant history of crime and law in this period; and the history of entrepreneurial activities within the hyper-centralized state-planned economy, focusing on the dynamics of the shadow economy. The so-called Kyrgyz Affair, a famous and expansive shadow economy operation centered in clothing factories in Frunze (Bishkek), Kyrgyz Republic, is at the center of the article. I argue that the scope, sophistication, ambition, and success of this and similar operations helps us understand a significant reason why Nikita Khrushchev decided to introduce the death penalty for aggravated cases of theft of state property and bribery in 1961–62. Associated with and fully permeating the shadow economy, one sees many varieties of practices, attitudes, informal institutions and agreements, and relationships.

Type
Articles
Information
Slavic Review , Volume 79 , Issue 3 , Fall 2020 , pp. 544 - 565
Copyright
Copyright © The Author(s) 2020. Published by Cambridge University Press on behalf of the Association for Slavic, East European, and Eurasian Studies

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Footnotes

For their helpful comments, I would like to thank the reviewers for this journal. I would also like to thank Lisa Kirschenbaum, Adele Lindenmeyr, Robert Weinberg, Benjamin Nathans, and the participants in the Ohio State University Seminar in Russian, East European, and Eurasian History. Research for this project has been supported by the National Endowment for the Humanities, the American Council for Learned Societies, the Kennan Institute of the Woodrow Wilson Center, and L’École des Hautes Études des Sciences Sociales (EHESS).

References

1 The sentence in the first case can be found in the fond of the USSR Supreme Soviet: Gosudarstvennyi arkhiv Rossiiskoi Federatsii (GARF), fond (f.) 7523, opis΄ (op.) 95s, delo (d.) 266, list (ll.) 175–241.

2 The death penalties in this case were all assigned retroactively. The second two trials, mainly of police, procuracy, and judicial officials, were closed and never mentioned in the press.

3 GARF, f. 9492, op. 6, d. 122, ll. 70–71. (Statistics on death penalty compiled by USSR Ministry of Justice.)

4 Gregory Grossman focused his published research on the late 1970s and 1980s. Among the most important of his numerous articles are: “The ‘Second Economy’ of the USSR,” Problems of Communism 26, no. 5 (September–October 1977): 25–40; and “Notes on the Illegal Private Economy and Corruption,” in The Soviet Economy in a Time of Change, by US Congress, Joint Economic Committee (Washington, DC, 1979), 834–55.

5 For example, see, among others, Gregory, Paul, The Political Economy of Stalinism (Cambridge, Eng., 2003)CrossRefGoogle Scholar; Gregory, Paul and Harrison, Mark, “Allocation under Dictatorship: Research in Stalin’s Archives,” Journal of Economic Literature 43, no. 3 (September 2005): 721–61CrossRefGoogle Scholar; Bergson, Abram, The Economics of Soviet Planning (New Haven, 1964)Google Scholar; Berliner, Joseph, Factory and Manager in the USSR (Cambridge, Mass., 1957)Google Scholar; Zaleski, Eugene, Stalinist Planning for Economic Growth, 1933–52 (Chapel Hill, 1980)CrossRefGoogle Scholar; Kornai, Janos, Economics of Shortage (Amsterdam, 1980)Google Scholar; Alec Nove, An Economic History of the USSR, 3rd edition (London, 1992); Harrison, Mark, “Prices, Planners, and Producers: An Agency Problem in Soviet Industry, 1928–1950,” Journal of Economic History 58, no. 4 (1998): 1032–62CrossRefGoogle Scholar; Markevich, Andrei, “Byla li sovetskaia ekonomika planovoi? Planirovanie v narkomatakh v 1930-e gg,” in Ekonomicheskaia istoriia: Ezhegodnik, 2003 (Moscow, 2004)Google Scholar. For a survey of the literature, see Ellman, Michael, “The Political Economy of Stalinism in Light of the Archival Revolution,” Journal of Institutional Economics 4, no. 1 (2008), 99–125Google Scholar.

6 Two recent articles have examined individual cases of major shadow economy activity in the late Stalin period. Juliette Cadiot has written on the Khain Affair, tried in 1952, which, while smaller, bore similarities to the Kyrgyz Affair, including an intricate web of relationships with local elites, suppliers, and law enforcement. Both operations focused on the theft of textile production. The Khain case, which centered on embezzlement of clothing at an operation run out of a fabric warehouse, featured five people on trial (though many others were implicated), rather than more than 80 in the three main Kyrgyz Affair trials. Unlike the Kyrgyz Affair, the Khain case was tried in a military court and the defendants were convicted of “counter-revolutionary sabotage.” Juliette Cadiot, “L’affaire Hain, Kyiv, hiver 1952,” Cahiers du monde russe 59, no. 2–3 (2018): 255–88. Oleg Khlevniuk has written about the case of N. M. Pavlenko, who created a sprawling private construction enterprise that operated between 1948 and 1952. “The Pavlenko Construction Enterprise: Large-scale Private Entrepreneurialism in Stalin’s USSR,” Europe-Asia Studies 71, no. 6 (July 2019): 892–906. See also Heinzen, Art of the Bribe.

7 This study draws from a number of archival collections, especially those located in the State Archive of the Russian Federation (GARF), including the USSR Procuracy, the USSR Ministry of Justice, the Supreme Court of the USSR, the USSR Supreme Soviet, and the Ministry of Internal Affairs’ police force responsible for rooting out economic crimes (OBKhSS). Other material is located among communist party documents in the Russian State Archive of Contemporary History (RGANI), including the collections of several departments of the Central Committee of the CPSU.

8 Heinzen, James, The Art of the Bribe: Corruption under Stalin (New Haven, 2016)CrossRefGoogle Scholar.

9 Millar, James, “The Little Deal: Brezhnev’s Contribution to ‘Acquisitive Socialism,’” Slavic Review 44, no. 4 (Winter 1985): 694–706Google Scholar.

10 On the massive fraud in meat production statistics at the heart of the Riazan Affair, see Oleg Khlevniuk, “The Economy of Illusions: The Phenomenon of Data-Inflation in the Khrushchev Era,” in Melanie Ilič and Jeremy Smith, eds., Khrushchev in the Kremlin: Policy and Government in the Soviet Union, 1956–1964 (London, 2011), 171–89; Gorlizki, Yoram, “Scandal in Riazan: Networks of Trust and the Social Dynamics of Deception,” Kritika 14, no. 2 (Spring 2013): 243–78CrossRefGoogle Scholar.

11 Dubravčić, Dinko, “Entrepreneurial Aspects of Privatisation in Transition Economies,” Europe-Asia Studies 47, no. 2 (March, 1995): 305Google Scholar.

12 On food distribution, shortages, black markets, and “speculation,” from the end of NEP to the start of World War II, see Elena Osokina, “Za fasadom ‘Stalinskogo izobiliia’: Raspredelenie i rynok v snabzhenii naseleniia v gody industrializatsii, 1927–1941 (Moscow, 1998), published in English under the title “Our Daily Bread: Socialist Distribution and the Art of Survival in Stalin’s Russia, 1927–1941, trans. Kate Transchel and Greta Bucher (Armonk, 2001). Osokina also writes about shadow structures in the trade network. On corruption, law, and daily life in late Stalinism, see Heinzen, The Art of the Bribe. On policing the shadow economy, mainly in the Perestroika period, see Gilles Favarel-Garrigues, Policing Economic Crime in Russia: From Planned Economy to Privatization, trans. Roger Leverdier (London, 2011). On the growth of state-sponsored consumerism, see among others Vera Dunham, In Stalin’s Time: Middleclass Values in Soviet Fiction (Cambridge, 1976). For research on Brezhnev-era corruption, based mainly on reports in the Soviet press, see, among others, William Clark, Crime and Punishment in Soviet Officialdom: Combating Corruption in the Political Elite, 1965–1990 (Armonk, NY, 1993); Nick Lampert, “Law and Order in the USSR: The Case of Economic and Official Crime,” Soviet Studies 36, no. 3 (July 1984): 366–85; Aron Katsenelinboigen, “Coloured Markets in the Soviet Union,” Soviet Studies 29, no. 1 (January 1977), 62–85. On other types of crime in the Khrushchev period see, for example, Brian LaPierre, Hooligans in Khrushchev’s Russia (Madison, 2012); and Miriam Dobson, Khrushchev’s Cold Summer: Gulag Returnees, Crime, and the Fate of Reform after Stalin (Ithaca, 2009). On informal bartering in industry in the 1930s, see David Shearer, “Wheeling and Dealing in Soviet Industry: Syndicates, Trade, and Political Economy at the End of the 1920s,” Cahiers du monde russe 36, no. 1–2 (1995): 139–60. On small-time “entrepreneurs” see Shearer, Policing Stalin’s Socialism: Repression and Social Order in the Soviet Union, 1924–1953 (New Haven, 2009). For legal, semi-legal, and illegal markets under Stalin, including arrests of those engaged in shadow trade activities and small-scale private production, see Julie Hessler, A Social History of Soviet Trade: Trade Policy, Retail Practices, and Consumption, 1917–1953 (Princeton, 2004); on pripiski, Mark Harrison “Forging success: Soviet Managers and Accounting Fraud, 1943–1962,” Journal of Comparative Economics 39, no. 1 (November 2010): 43–64.

13 The pursuit of small-scale private profit by individuals and–- to some extent—by economic managers seems to have been widespread and mostly tolerated or only lightly punished by the authorities, especially in the Brezhnev period. See, among many others, James Millar, “The Little Deal.” Aleksei Yurchak has written about young people (mostly), including collectors, buying western goods on the black market from fartsovshchiki—in particular clothing, record albums, and radios. Yurchak, Everything Was Forever Until It Was No More: The Last Soviet Generation (Princeton, 2013).

14 Thomas Eisenmann, “Entrepreneurship: A Working Definition,” Harvard Business Review, January 10, 2013, at hbr.org/2013/01/what-is-entrepreneurship (accessed June 30, 2020).

15 Gabor Rittersporn uses the term “entrepreneurial folkways,” to describe ways in which Soviet people, mainly in the 1930s, reconfigured their environment to create informal networks to help them accomplish many tasks; Rittersporn, Anguish, Anger and Folkways in Soviet Russia (Pittsburgh, 2014), 217. Joseph Berliner used the term entrepreneur to refer to enterprise and collective farm managers who used blat (an exchange of favors) and swapped on “grey” markets to obtain scarce materials. Berliner, Factory and Manager. The present study is about illegal activity undertaken by people acquiring, producing, and distributing goods at least partially for the goal of self-enrichment, not simply to fulfill plan quotas.

16 Eisenmann, “Entrepreneurship: A Working Definition.”

17 On changes in public consciousness with respect to discussions of literature and culture during the thaw, see Denis Kozlov, The Readers of Novyi Mir: Coming to Terms with the Stalinist Past (Cambridge, Mass., 2013). On complicating the myth of the Thaw, see Stephen Bittner, The Many Lives of Khrushchev’s Thaw: Experience and Memory in Moscow’s Arbat (Ithaca, 2008). On atheism and ideology, see Victoria Smolkin, A Sacred Space Is Never Empty: The Spiritual Life of Soviet Atheism (Princeton, 2018). On religion and sectarians, Miriam Dobson, “The Social Scientist Meets the ‘Believer’: Discussions of God, the Afterlife, and Communism in the Mid-1960s,” Slavic Review 74, no. 1 (Spring 2015): 79–103. On University students and intelligentsia identity, see Benjamin Tromly, Making the Soviet Intelligentsia: Universities and Intellectual Life under Stalin and Khrushchev (Cambridge, Eng., 2014). For a collection of articles that reconsider the “stagnation” paradigm, see Dina Fainberg and Artemy M. Kalinovsky, eds., Reconsidering Stagnation in the Brezhnev Era: Ideology and Exchange (Lanham, MD, 2016).

18 For a major underground scheme in a Moscow clothing factory uncovered in 1956, see GARF f. 9415, op. 5, d. 135, ll. 136–39 (Report of OBKhSS). On March 29, 1962, the Central Committee sent all regional party organizations a closed letter on “Strengthening the struggle with bribery and theft of the people’s property,” which detailed numerous large-scale theft cases. Oleg Khlevniuk, ed., Regional΄naia politika N. S. Khrushcheva (Moscow, 2009), 199–209.

19 Karelia case: Rossiiskii gosudarstvennyi arkhiv noveishei istorii (RGANI), f. 5, op. 47, d. 429, ll. 41–44 (Report by local party organs to Central Committee, 1962–63: Cases in Uzbekistan: RGANI, f. 2, op. 1, d. 590, 1. 128. Transcript of November 1962 Central Committee Plenum, including sections marked “not for publication”); Georgia cases: GARF, f. 9474, op. 16, d. 719, ll. 1–11 (Joint report by Gorkin, Rudenko, and Denisov, sent to Supreme Court).

20 See Khrushchev’s comments at the November 1962 Party Plenum in RGANI, f. 2, op. 1, d. 590, ll. 128–30; and N. Mironov, “Nasushchnye voprosy dal΄neishchego ukrepleniia sotsialisticheskoi zakonnosti,” Kommunist, no. 1 (1963), 49–59.

21 Gorlizki, “Scandal in Riazan.”

22 Izvestiia, May 7, 1961, 5; Izvestiia, July 2, 1961, 2; Vedomosti Verkhovnogo soveta, no. 8, article 85, February 21, 1962, 221–22. Stalin had abolished the death penalty in May 1947, though it was reintroduced in 1950 for certain anti-state crimes such as treason, espionage, and the murder of Gulag employees. Between 1953 and 1961 the death penalty was gradually reintroduced for a number of crimes, including banditry, counterfeiting, premediated murder, and rape in aggravating circumstances. Jeffrey S. Hardy and Yana Skorobogatov, “‘We Can’t Shoot Everyone’: Supreme Soviet Discussions of Death Row Pardons, 1953–1964,” Cahiers du monde russe 59, no. 4 (2018): 473–98; Ger P. Van den Berg, “The Soviet Union and the Death Penalty,” Soviet Studies 35, no. 2 (April 1983): 154–74.

23 For an overview of the “growing expectations gap,” see Timothy Colton, The Dilemma of Reform in the Soviet Union (New York, 1986), 47–50. See also Moshe Lewin, The Gorbachev Phenomenon: A Historical Interpretation (Berkeley, 1988), 46–52; Jakob Feygin, “Reforming the Cold War State: Economic Thought, Internationalization, and the Politics of Soviet Reform, 1955–1985” (PhD diss., University of Pennsylvania, 2017), 129–30.

24 Dunham, In Stalin’s Time. On consumerism, see among others Susan E. Reid, “This is Tomorrow! Becoming a Consumer in the Soviet Sixties,” in Anne E. Gorsuch and Diane P. Koenker, eds., The Socialist Sixties: Crossing Borders in the Second World (Bloomington, 2013); Natalya Chernyshova, Soviet Consumer Culture in the Brezhnev Era (London, 2013). On the gendering of Soviet consumerism by Soviet and American authorities, see Susan E. Reid, “Cold War in the Kitchen: Gender and the De-Stalinization of Consumer Taste in the Soviet Union under Khrushchev,” Slavic Review 61, no. 6 (Summer 2002): 211–52; and Susan E. Reid and David Crowley, eds., Style and Socialism: Modernity and Material Culture in Post-War Eastern Europe (Oxford, 2000). For the centrality of consumption as a marker of success for both capitalism and socialism, see Kate Brown, Plutopia: Nuclear Families, Atomic Cities, and the Great Soviet and American Plutonium Disasters (Oxford, 2013), 148–49, 255–67. On housing, see: Christine Varga-Harris, “Homemaking and the Aesthetic and Moral Perimeters of the Soviet Home during the Khrushchev Era,” Journal of Social History 41, no. 3 (Spring 2008): 561–89; Steven Harris, Communism on Tomorrow Street: Mass Housing and Everyday Life after Stalin (Baltimore, 2013).

25 Khrushchev made these remarks at the 22nd Party Congress, on October 17, 1961. Documents of the 22nd Congress of the CPSU, vol. 2. Report on the Programme of the Communist Party of the Soviet Union (New York, 1961), 85.

26 Khrushchev quoted in Choi Chatterjee, Lisa Kirschenbaum, and Deborah Field, Russia’s Long Twentieth Century: V oices, Memories, Contested Perspectives (Abingdon, UK, 2016). On the Third Party Platform, see Alexander Titov, “The 1961 Party Programme and the Fate of Khrushchev’s Reforms,” in Melanie Ilic and Jeremy Smith, eds., Soviet State and Society under Nikita Khrushchev (London, 2008), 8–26.

27 Kristy Ironside, “The Value of a Ruble: A Social History of Money in Postwar Soviet Russia, 1945–1964” (PhD diss., University of Chicago, 2014), chapter 2.

28 On the Kosygin and Liberman reforms, see Feygin, “Reforming the Cold War State,” 100–262; Philip Hanson, The Rise and Fall of the Soviet Economy: An Economic History of the USSR since 1945 (New York, 2003), 98–108; Colton, The Dilemma of Reform, 57. See Feygin on debates over the unexpected consequences of shifting investment priorities and economic reform in the Khrushchev period, as well as inflationary pressures and price increases. See also Ironside, “The Value of a Ruble.”

29 Transcript of trial of Mor΄dko Kh. Gol΄dman, et al., tom. 4, 1. 32.

30 Transcript of trial of Mor΄dko Kh. Gol΄dman, et al., tom. 2, ll. 84–5.

31 Moritz Florin, “Becoming Soviet through War: The Kyrgyz and the GreatFatherland War,” Kritika 17, no. 3 (Summer 2016): 495–516; Florin, “What is Russia to Us? Making Sense of Stalinism, Colonialism and Soviet Modernity in Kyrgyzstan, 1956–1965,” Ab Imperio, no. 3 (2016): 165–89.

32 Anna Kushkova, “Navigating the Planned Economy: Accommodation and Survival in Moscow’s Post-War ‘Soviet Jewish Pale’” (PhD diss., University of North Carolina, 2017).

33 Artemy Kalinovsky, Laboratory of Socialist Development: Cold War Politics and Decolonization in Soviet Tajikistan (Ithaca, 2018), 75–76. Kalinovsky’s work demonstrates that Khrushchev’s drive to “catch and overtake” the western economies created incentives for authorities in Central Asian republics (among other areas) to cheat and pad statistics, Kalinovsky, Laboratory of Socialism, 38. Officials claimed to have fulfilled targets, and in exchange they received investment for local projects from Moscow.

34 GARF, f. 7523, op. 109, d. 288, l. 123. (Report on the struggle against theft of state property, authored by Karpets, sent to Presidium of the USSR Supreme Soviet.)

35 GARF, f. 7523, op. 95s, d. 266, l. 184.

36 GARF, f. 9415, op. 5, d. 135, l. 140 (Report of OBKhSS.)

37 On the 1958 case of Sarkisian, Chmbtian, and Mnatsakanian, see GARF, f. 9415, op. 5, d. 178, ll. 50–52 (May 15, 1959 report sent to the Central Committee from Dudorov, head of MVD). For the case of the operation led by Shatashvili and Dzorelashvili, see GARF, f. 9474, op. 16, d. 719, ll. 2–3.

38 For an example of how shadow economy operators in the leather and shoemaking industry in Ukraine and Georgia took advantage of new machinery to economize on raw material in light of outdated norms, see GARF, f. 9415, op. 5, d. 178, ll. 36–41.

39 GARF, f. 7523, op. 95s, d. 266, l. 186.

40 GARF, f. 7523, op. 95s, d. 266, l. 184.

41 Transcript of trial of Mor΄dko Kh. Gol΄dman, et al., vol. 4, l. 29. Testimony of Narodnitskii.

42 A January 1959 report from OBKhSS chief Koveshnikov to the Central Committee complained that it was quite easy to mislabel items. GARF, f. 9415, op. 5, d. 178, ll. 5–11.

43 GARF, f. 9474, op. 16, d. 760, l. 24. (Report of USSR Supreme Court on theft of state property, January 19, 1962, by G. Anashkin.)

44 GARF, f. 9474, op. 16, d. 760, l. 14.

45 Transcript of trial of Mor΄dko Kh. Gol΄dman, et al., tom. 5. Testimony of Shtramvaser.

46 GARF, f. 9474, op. 16, d. 760, l. 55.

47 Trial of Gol΄dman et al., tom 2, l. 112.

48 Ibid., l. 95.

49 Trial of Gol΄dman et al., tom 4, l. 78.

50 Trial of Gol΄dman et al., tom 2, l. 78.

51 Ibid., l. 118.

52 Ibid., l. 107.

53 Trial of Gol΄dman et al., tom 5, l. 6.

54 As a police report from 1959 put it, intermediaries traveled to Moscow from all over the country and paid bribes to obtain supply orders for raw materials, including rayon, wool, and other material. GARF, f. 9474, op. 16, d. 744, ll. 23–4. (Supreme Court survey of court practice in cases of bribery.) See also the letter from the USSR Minister of Internal Affairs to Sovmin, in GARF, f. 9415, op. 5, d. 178, ll. 99–103, 107–8.

55 See for example, GARF, f. 7523, op. 109, d. 22, ll. 37.

56 The former defense lawyer and émigré Evgenia Evel΄son made the strongest case that Jews were overrepresented in the imposition of the death penalty for economic crimes. She did this by counting names in newspaper coverage of death penalty cases. Evgeniia Evel΄son, Sudebnye protsessy po ekonomicheskim delam v SSSR (London, 1986). Evel΄son could not have accounted for the fact that the names of law enforcement and high party people convicted of economic crimes (very few of whom were Jewish) were nearly always kept out of the newspapers to try to preserve popular trust in the police and party leaders. In the Kyrgyz Affair, for example, only one of seven people sentenced to death in the two closed trials of law enforcement personnel was Jewish. In his study of “the Jewish question” under Khrushchev, Gennadyi V. Kostyrchenko concludes that antisemitism was not the fundamental motive for the anti-corruption campaign and corresponding arrests. Khrushchev launched the 1961–62 campaign against economic crime and party corruption because he believed that corruption would erode popular faith in the party and damage the economy and social cohesion by diverting public resources, which would slow society’s inexorable advance toward communism. Kostyrchenko argues that Khrushchev went on the attack to get rid of the final remnants of capitalism and those who practiced any kind of illegal profit-making activity (and other socially dangerous actions like “parasitism”). Kostyrchenko argues that this campaign was not aimed at certain ethnic groups, even if the result was a disproportionate number of Jews being prosecuted. Kostyrchenko, G. V., Tainaia politika Khrushcheva: vlast΄, intelligentsiia, evreiskyi vopros (Moscow, 2012), 434–35Google Scholar. See also Pinkus, Benjamin, The Soviet Government and the Jews, 1948–1967 (Cambridge, Eng., 1984), 201–8Google Scholar; Levin, Nora, The Jews in the Soviet Union since 1917: Paradox of Survival, vol. 2 (London, 1988), 615–18Google Scholar; Ro’i, Ya’acov, “Economic Trials,” in Hundert, Gershon D., ed., The YIVO Encyclopedia of Jews in Eastern Europe, vol. 1 (New Haven, 2008), 454Google Scholar; Kushkova, “Navigating the Planned Economy,” 340.

57 The closed letter of March 1962 sent by the Central Committee to ranking party leaders all over the USSR instructing them to fight the theft of state property and bribery named dozens of alleged criminals of multiple ethnicities, including Russians, Ukrainians, and others. Oleg Khlevniuk, ed., Regional΄naia politika, 199–209.

58 Kotkin, Stephen, Magnetic Mountain: Stalinism as Civilization (Berkeley, 1995), 254Google Scholar.