San José State University
Department of Economics
Thayer Watkins
Silicon Valley
& Tornado Alley

The Economics of the GULAG

Alexandr Solzhenitsyn gives the following example of how insanely the decisions of the central authorities worked out in practice. The GULAG Archipelago was the chain of prison camps in the Soviet Union. On a map the area under prison camp authority, the GULAG, looked like a chain of islands, an archipelago.

Prisoners in work camps were assigned production quotas and food allotments for fulfilling those quotas. The food provided was not sufficient for the caloric requirements of the prisoners, particularly for those working at hard labor in a cold climate. The system however provided for a food bonus for production in excess of the quota. With the food bonus the prisoners could survive, without it they were doomed.

In a logging camp of the Ust-Vum one prisoner, Vasily Vlasov, who acted as supervisor for the other prisoners began crediting workers with timber they had not cut down. The timber was in a nearly inaccessible area so the shortfall in timber- cutting was not immediately observed. When the crews responsible for hauling out the logs began to report problems in finding all of the timber that was supposed to be felled a survey was made that revealed that some timber was missing. Vlasov convinced his supervisor that the problem was the laziness of the survey crew and kept the lid on the problem for a while. Later Vlasov wrote a report arguing that the missing timber was there but it was located where it would be necessary to build corduroy roads to bring it out and the amount of timber required for the roads would be greater than the amount of timber to be recovered and hence it should be left where it was. The report was so well done its recommendations were accepted. As Solzhenitsyn states so beautifully,

And so it was that the trees were felled, and eaten up, and written off--and stood once again erect and proud in their green coniferous garb.

But the administration was determined to end the problem of falsified work reports. The solution they came up with in 1947 for the logging camp was that the lumberjacks and teamsters would get credit for production only when the logs were received at the slide at the river. Likewise the log-rafting operation was tied to the operation downriver where the logs were transported by ships to the sawmill.

What the administrators did not realize is that the entire operation; log-rafting, shipping, and the sawmilling, needed the fictitious output of the lumberjacks to inflate their production enough to get the extra rations they needed to survive. The end of the chain of falsified production reports was at the sawmill. The sawmill found a way to also participate in the falsified production reports.

At the sawmills incompletely filled train cars of lumber were shipped out. The recipient of a partially filled box car of lumber was faced with a dilemma. If the railroad car was rejected there was the uncertainty of when, or if ever, a new shipment would come. Most recipients accepted the fact that a half a carload was better than no carload of lumber at all.

The system worked so well that there was a surplus of logs in the water at the shipping point at the end of the summer. The shipping operation personnel did not want to leave the logs in the water over the winter because there would be a frozen logjam that would require calling in a plane in the spring to bomb it. So in the late autumn the shipping personnel let the logs float out into the White Sea. Thus the attempt to end the falsification of work reports did not increase production, it decreased actual production.

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