This book provides an informed historical narrative on the postwar development of the Soviet economic system. The focus is on crucial aspects of macroeconomic policy such as monetary policy, taxation, public spending, redistribution and social security through the lens of socialist economic organization. As a scholar that considers interdisciplinary approaches connecting history and economics to be in the forefront of both disciplines, I welcome this book as a crucial intellectual contribution that in several aspects advances the understanding not only of historians but also of economists regarding the works of Soviet central planning and the iterated strategic interactions between planners and managers. Furthermore, the book challenges Soviet achievements in citizen prosperity and resources in the Khrushchev years, in the period that has been considered by many the golden era of central planning and the period, when capitalism faced its most severe existential threat by communism as a political-economic system.

In her introduction, Ironside sets the temporal framework for her analysis, which spans between the two currency reforms of 1947 and 1961 and suggests the concept of “full value ruble” that embodies not only the image of a strong currency that was expected to drive Soviet economic growth, but also the material proof for Soviet prosperity. In the five chapters of the book, she shows why this was not the case. While she recognizes that Khrushchev policies came much closer than Stalinist policies in stabilizing the Soviet economy and offering a standard of living that was comparable with economies in the West, it fell short of setting the foundations for full-scale communism with a moneyless economy and a standard of prosperity higher than in capitalist societies. Furthermore, Ironside reveals amazing skill in making historical research central for economists and that way enlightening the economics discipline with the role of actors, institutions, and political maneuvering toward the explanation of discrepancies and contradictions in the political economy of communism.

In chapter 1, the author explains the transition from wartime rationing to consecutive price cuts by exploring the effects of the two currency reforms on retail price and trade. She argues that the redenomination of the ruble in 1947 did not bring the expected positive benefits for consumption, while it bolstered the hoarding of demand and massive slacks in products and preserved the purchasing power gap between cities and the countryside. However, consumption and slacks improved since the mid-1950s, when it became clear that retail price cuts could not resolve shortages and the persistent urban-rural divide. Price increases in inelastic products with a steep demand such as meat and butter posed a direct challenge to Khrushchev’s legitimacy, accelerated shortages and fueled popular discontent. Overall, Ironside shows the inherent contradictions in the creation of a socialist marketplace, which was open not only to administrative elites, but also to low-skilled workers and farmers.

In chapter 2, the author deals with the feasibility of redistribution under central planning, while pointing out at the Soviet abstinence from leveling, i.e. the universal equality of wages for everybody. The tradeoff between wage equality and productivity was pursued through an increase of lower wages and a readjustment of higher wages. Nevertheless, this policy did not prevent the rise of a multi-class society and structural imbalances, which originated in the Stalin era. Widespread deficits between consumption and money in circulation due to exacerbated shortages undermined the stabilization efforts of the Soviet government.

In chapter 3, Ironside elaborates on the positive externalities of the 1956 pension reform, which contributed to the improvement of Soviet living standards, but at the same time it offered incentives for labor market exit to significant numbers of workers. This reform was received particularly well by disabled veterans of the Second World War, while it did not make any provisions for workers with lifelong health problems or collective farmers. Beyond that, the successful focus on pensions left the more productive members of society with a less attractive set of incentives toward current performance rather than expectation of a comfortable elderly life.

The linkages between taxation and wage policy are discussed in detail by Ironside in chapter 4. The logic of mass subscription bond campaigns as a means to increase governmental liquidity led to a weakening of domestic demand and it created a vicious circle of poverty and decreased living standards. Its discontinuation revealed further deficiencies in the structure of Soviet taxation; the author provides an insightful analysis of the debate to abolish income tax in the Soviet Union altogether, an abolition that never materialized. The legitimacy of the Khrushchev administration appears to have suffered a major blow as a result of its denial to reform the adverse system of fiscal incentives.

In chapter 5, Ironside reviews the policies of Gostrudsberkass, the Soviet administration of savings banks, and credit and identifies the high rate of savings as the strongest indication for shortages and wage inequality. The introduction of lotteries as a new way to raise income did not solve the problem of demand hoarding or the mismatches between skills and living standards. As the author points out, the rise of retail prices in 1962 was the last straw in a series of partial failures to reform central planning and render the achievement of communism by the beginning of 1980s a tangible reality.

This monograph is a brilliant piece of research, equally useful for historians and economists. Without compromising in the originality and diversity of archival sources, it offers a path-breaking narrative that expands on established economic models of central planning such as soft budget constraints, shortages and slacks, worker behavior under socialism and economic coordination. The inability of the Khrushchev administration to make the full-value ruble a decisive factor of Soviet prosperity revealed informational asymmetries between planners and managers, the urban-rural divide, and a multi-tier wage system, which according to Ironside remained in the core of Soviet distributive policies in the aftermath of Stalin’s rule. Khrushchev’s economic policies corrected several aspects of Stalinist central planning; however, in the end, they were not sufficient in overcoming the chronic and structural deficiencies of socialism as a political-economic system, as these were delineated by Janos Kornai and Martin Weitzman.1 This book is a must read for economists ready to take risks in interdisciplinary research and for historians willing to undertake cutting-edge research interactions with quantitative social science.

Note:
1 Janos Kornai, The Socialist System. The Political Economy of Communism, Princeton 1992; Martin L. Weitzman, The New Soviet Incentive Model, Bell Journal of Economics 7 (1976), 1, pp. 251–257.