Economics of One-Party State: Promotion Incentives and Support for the Soviet Regime
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Economics of One-Party State: Promotion Incentives and Support for the Soviet Regime1 VALERY LAZAREV University of Houston – Clear Lake, USA. E-mail: [email protected] or [email protected]
This paper analyses the relationships between the dynamics of political support for the Soviet regime, as revealed in party membership, and economic policy. The Soviet regime is considered as the rule of bureaucracy that captures rents through collective control over state property and job assignment. Activists support the regime in exchange for deferred promotion into rent-paying positions. Analysis of the implicit contract between the party bureaucracy and activists (party candidates) shows that the stability of the Soviet regime was consistent with high-income inequality and high rate of investment in the economy. Under certain conditions, a rational bureaucracy chooses not to renew the contract. Incentive compatibility and time consistency problems inherent in the implicit contract accelerate the movement toward regime change. The long-run trends in the communist party recruitment in the USSR and the end of the Soviet regime in 1991 are consistent with this explanation. Comparative Economic Studies (2005) 47, 346–363. doi:10.1057/palgrave.ces.8100099
Keywords: Soviet Union, one-party state, rule of bureaucracy, implicit contracts JEL Classifications: D73, N44, P26
INTRODUCTION Non-democratic regimes die hard. They are swept away by popular revolutions, often followed by years of civil wars, or forcefully removed by 1 I am grateful to Steve Craig, Marshall Goldman, Paul Gregory, Mark Harrison, and Gavin Wright for helpful comments and to the Hoover Institution for financial and intellectual support.
V Lazarev Economics of One-Party State
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foreign powers. The rapid and peaceful demise of the Soviet regime in 1991 is a rare and surprising exception to the rule. A popular view holds that the end of the Soviet system was predetermined by its poor economic performance in the last two decades of its existence. Although the series of studies initiated by Abram Bergson establishes a decelerating trend in the post-war Soviet economy beyond reasonable doubt, this is only a part of the answer. A low rate of economic growth is neither a necessary nor sufficient condition for transition to democracy. To the contrary, non-democracies are generally associated with lower rates of economic growth (Barro, 1999) while the probability of transition to democracy is positively correlated, ceteris paribus, with higher levels of GDP per capita (Feng and Zak, 1999). Moreover, rational rulers may deliberately block technological and institutional modernisation if ensuing change threatens to eliminate their political rents (Acemoglu and Robinson, 2002). An explanation of the demise of the Soviet system is therefore to be placed in a broader political-economic context. An enticing option is to assign to Gorbachev’s misguided reforms the role of the major trigger of collapse as, for example, in Ellman and Kontoro
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