#11: Economic History of the USSR (I) - Introduction

Posted: April 3, 2025

For a socialist economics project, so far we have not discussed any real world attempts to build a socialist economy. That all changes starting today. Over the coming months, we will be exploring the economic history of the Union of Soviet Socialist Republics (USSR), the world’s first socialist state. What is the value of examining the many adaptations, strategies, and evolutions of the USSR’s economy? A better understanding of what worked, what didn’t, and (to the best of our abilities) why, in the first attempt to build a socialist economy in human history.  

As socialists, we understand that the economy is the base of any society. From this base sprouts the society’s political, legal, and cultural aspects. The economy does not determine these other aspects, as each constantly flows back to affect the economic base, in dialectical materialism’s beautifully rich spirals. Historical materialism studies the expansion and maturation of these dialectical relationships in a concrete historical context. While impossible to predict, history is essential study material for every socialist. We can best understand the turbulent and transformative 20th century in the heartlands of Eurasia by beginning from a focus on the history of the economic motor that USSR leadership themselves prioritized. 

If you were raised in the West, you probably primarily know the USSR as the ‘Evil Enemy That Proves Socialism Doesn’t Work.’ As is typical of junk economic claims against socialist countries, the most widespread criticisms (such as the factoids we’re fed in history class) are the least rigorous. The purpose of this series is not to unpack every piece of imperialist propaganda against the USSR; nor to minutely analyze every single complicated and massive political movement that makes up the history of the USSR. Many other excellent socialist and non-socialist academic and media projects have admirably taken up these goals. In a previous post, we outlined the driving economic principle under socialism: the maximum satisfaction of everyone’s constantly rising material and cultural needs, secured through the continuous expansion and perfection of socialist production, on the basis of higher scientific techniques. This series’ purpose is to see how effectively the USSR’s people, guided by the Communist Party of the Soviet Union, built an economy that aligns with this goal. 

The USSR’s economy had many amazing successes, but also many chronic problems. If we truly believe in a scientific approach to building a liberatory society for the world’s workers, we must view the USSR not as a failure, but an immense experiment. USSR history spills out, even to the present, with contradictions between practice and theory, confidence and confusion, triumph and tragedy. We should expect this from humanity’s first scientific socialist experiment. Beware anyone insisting on steamrolling this rich history into a total failure for Soviet socialism, universal and eternal failure for socialism generally, and zero-sum victory for capitalism. 

This isn’t only because the loudest, most rabid, and most prominent capitalist apologists are our enemies. They have no intention of allowing us to understand the USSR’s real history of socialist economics. It’s also because this claim ‘since the USSR no longer exists, socialism doesn’t work,” is useless on its own terms. To show how misguided this conclusion is, let’s analyze an example from capitalism’s earliest days, as a historical materialist counterpoint. 

Perhaps the first attempt at what we would today call capitalism occurred in the Italian city-state of Genoa, from ~13-14th century onwards. The Republic of Genoa was a naval trading power (similar to Venice). Genoese merchants made incredible returns through their control of maritime trade routes connecting Europe and the vast wealth of medieval Asia, including through coastal colonies around the Mediterranean and Black Seas. Possibly more important (for the history of capitalism) was Genoa’s role in developing the foundations of modern banking. This includes one of the first recognizably modern commercial banks, the Casa di San Giorgio. As trade got less profitable, the Genoese elite shifted their capital to finance. This peaked in the mid-16th century, when they took over as the primary financiers of the dominant Spanish Hapsburg empire. Through this relationship, the Genoese pioneered the kind of ‘venture capitalism’ that would accelerate with joint stock companies like the Dutch East Indies and British East India Companies, all the way to today’s incredibly powerful Silicon Valley VC funds. Columbus himself was Genoese, although his financing was from the Spanish crown. Waning as global trade and finance were usurped by the Dutch and then the British, the Republic of Genoa was conquered by Napoleon in 1797, and is today part of Italy. 

It would be foolish to claim that, since the Genoese city-state no longer exists, capitalism is impossible, or a failure. Yet this is exactly what we’re taught as regards the USSR and socialism. Capitalism was an economic experiment in Genoa, and it remains one today. Contradictions built up between the Genoese capitalist economic model and contemporary political circumstances, just as they did in the USSR. Genoa never became a capitalist power like the British or American empires for many reasons. They lacked industrial production, had to pay imperial Spain for military protection, and controlled minimal territory. Imagine a future socialist project, benefitting from widespread advanced computing and machine learning, limitless renewable or cold fusion energy capabilities, and cooperation, rather than conflict, with geopolitical neighbours. These are the kinds of evolutionary steps that took capitalism from a twinkle in Genoese eyes to the immense American empire we’ve analyzed previously. Additionally, those living in today’s capitalist economies should be interested in the dire social consequences of unresolved, seemingly unresolvable, economic problems piling up, as they currently are across North America and Europe. 

This series will focus on three key outcomes of the USSR’s economic policy and development, in line with the driving economic principle of socialism outlined above: How effectively did the USSR 1) raise people’s standard of living, 2) combat exploitation of workers, and 3) build national sovereignty through economic power? Combining these factors gives a comprehensive view of the economic successes and failures of socialist construction in the USSR.  

Our next post in this series will cover the Russian economy (since the dissolution of the Russian Empire laid the groundwork for the USSR) in the years leading up to the October 1917 Revolution, to show what led up to socialism’s initial eruption onto the world stage. 

If you're interested in these ideas, don't hesitate to reach out. This project is a conversation, not a lecture, so all good faith feedback is encouraged, especially from trained economists.