The second economies of the Soviet Union and other East European countries derive from structural inadequacies in the socialist planning system and from the cultural and historical evolution of each East European society. This article combines the structural and cultural approaches to the second economy and focuses on four of its most prevalent forms: peasant household production, the shadow economy within socialist enterprises, the underground factories of Soviet Georgia, and the hidden economy within the retail and service sectors. In all cases, social linkages and cultural values provide frameworks for economic activities. The second economy helps to alleviate consumer shortages and bureaucratic bottlenecks in all these societies. It also acts as a social mollifier, channeling dangerous political frustrations into consumerism, swindling, or petty corruption. Yet the overall effect of the second economy is a corrosive one: as a surrogate reform, a second economy tolerated by the authorities only reproduces the fundamental flaws of the formal economy. Moreover, it exacerbates the gap between society and the state, between “us” and “them.”
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References
1.
1. This sentence is paraphrased, by permission, from Gregory Grossman and Vladimir G. Treml, “Measuring Hidden Personal Incomes in the USSR,” in The Unofficial Economy, ed. Sergio Alessandrini and Bruno Dallago (Aldershot: Gower Press, 1987).
2.
Lev Timofeev , Soviet Peasants—or the Peasants' Art of Starving (New York: Telos Books, 1985).
3.
quoted in David Law, “Corruption in Georgia,”Critique (Glasgow), no. 3, p. 103, (Autumn 1974). The current Soviet campaign against persons with “unearned incomes” stresses the particular need for “improving ideological and political work and... molding in each person an attitude of irreconcilability toward the privateownership mentality.”“Alien to Our Morality,” TASS report, 10 Aug. 1986.
4.
Among East Europeans, the Hungarians have particularly emphasized a lubrication approach. Cf. Istvan Gabor, “The Second (Secondary) Economy,”Acta Oeconomica, 22:291-311 (1979).
5.
See also Istvan Kemeny, “The Unregistered Economy in Hungary,”Soviet Studies, 34:364 (July 1982).
6.
idem , “Notes on the Illegal Private Economy and Corruption,” in The Soviet Economy in a Time of Change, by U.S., Congress, Joint Economic Committee (Washington, DC: Government Printing Office, 1979), pp. 834-855.
7.
7. Gregory Grossman, “The Second Economy in the USSR and Eastern Europe: A Bibliography” (Berkeley-Duke Occasional Papers on the Second Economy in the USSR, no. 1, University of California, Berkeley, and Duke University, updated, March, 1987).
8.
Peter Galasi and Gyorgy Sziraczki, eds., Labour Market and Second Economy in Hungary (New York: Campus, 1985).
9.
introduction to Grossman, “Second Economy: A Bibliography.”
10.
and for the other East European countriesRadio Free Europe Research (Munich).
11.
11. These issues are elucidated in Peter Wiles, “What We Still Don't Know about the Soviet Economy,” in The CMEA Five Year Plans (1981-1985) in a New Perspective: Planned and Non-Planned Economies (Brussels: North Atlantic Treaty Organization, Economics and Information Directorates, 1982).
12.
12. Prospects for empirical research, personal fieldwork, or scientific collaboration with East European researchers remain dim, if not nonexistent. Hungary, where second economy research is officially sanctioned, remains the exception.
13.
Peter Galasi , “Peculiarities and Limits.”
14.
This definition is discussed in particular by Brezinski in his “Second Economies in Eastern Europe.”
15.
15. Peter Wiles, using “commonsense and literary evidence,” states that larger objects are harder to steal, divert, or sell; hence trains and planes are not part of the black economy. Similarly, “where audit is easy (banks) or important (weapons) there will be less corruption.” At the other end of the scale, building and car repairs are such that “there seem to be few uncorrupt transactions.” See Peter Wiles, “What We Still Don't Know,”CMEA Five Year Plans, by North Atlantic Treaty Organization.
16.
A final note of caution regarding estimates of the second economy comes from Istvan Gabor, who states that “the widely quoted estimate of 16-19 percent of the entire GNP being created in the second economy draws its credence solely from the prestige of the person who made the estimate.”Gabor, “Second Economy in Socialism,” p. 29.
17.
Allen Kroncher , “CMEA Productive and Service Sector in the 1980's: Plan and Non-Plan,” in The CMEA Five Year Plans, by North Atlantic Treaty Organization, p. 204.
18.
18. Andrzej Bloch, “The Private Sector in Poland,”Telos, no. 66, pp. 129, 131 (Winter 1985-86).
19.
reprinted in Studies in the Second Economy of Communist Countries, ed. Grossman).
20.
20. Gur Ofer and Aaron Vinokur, Private Sources of Income of the Soviet Urban Household (Santa Monica, CA: Rand, 1980), pp. 70, 58.
21.
21. Brezinski and Roos, “Second Economy in Hungary,” pp. 104-105.
22.
22. O'Hearn, “Consumer Second Economy,” p. 225.
23.
23. Ibid.
24.
cited in Dennis O'Hearn, “The Second Economy in Consumer Goods and Services,”Critique (Glasgow), no. 15, p. 103 (1982).
25.
Die Welt, 20 June 1980.
26.
26. Wedel, Private Poland, p. 40.
27.
Bloch , “Private Sector in Poland,” p. 157.
28.
Kroncher , “CMEA Productive and Service Sector,” p. 205, citing Wall Street Journal, 22 Mar. 1982.
29.
Mars and Altman, Private Enterprise in the USSR.
30.
30. Ofer and Vinokur, Private Sources of Income, p. 51.
31.
31. Ibid., p. 33. This would also include income derived from pilferage or sale of pilfered items, but not private wages, such as from moonlighting. Grossman's “Notes on the Illegal Private Economy” provides an excellent summary of such income sources.
32.
32. See Mars and Altman, Private Enterprise in the USSR. Non-Russian ethnic groups also rank high on Peter Wiles's “continuum of dishonesty.” Wiles, “What We Still Don't Know,” app. II.
33.
idem , “Second Economy in the GDR.” Czech data are sparse, though see Leonard Silk, “The Mystery of Czech Affluence,”New York Times, 20 June 1986.
34.
Philip Hanson , “ `Nonlabor Incomes' in the USSR,”Radio Liberty Research, 172/86, 24 Apr. 1986. As several observers have noted, campaigns against economic crime seem to concentrate disproportionately on the non-Russian republics and on non-Russian nationalities, thus appealing to Russian nationalist sentiments as well. During the early 1960s, for example, most of the black marketeers who were executed had Jewish surnames.
35.
translated from Polityka (Warsaw), 30 Aug. 1986. Romania, Bulgaria, and Poland, where the bribes are often in dollars or dollar coupons, are similar in this respect, as they suffer from extreme shortages in virtually all spheres of social, economic, and cultural life, from procuring social services and consumer goods to obtaining cultural products such as books.
36.
see in particular John Cole, “Family, Farm and Factory: Rural Workers in Contemporary Romania,”in Romania in the 1980's, ed. Daniel N. Nelson (Boulder, CO: Westview Press, 1981), pp. 71-116.
37.
and the review symposium on this book in Telos, no. 68, pp. 109-127 (Summer 1986).
38.
My use of “shadow economy” comes from Gregory Grossman, “The `Shadow Economy' in the Socialist Sectors of the USSR,” in CMEA Five Year Plans, by North Atlantic Treaty Organization, pp. 99-115.
39.
39. Grossman, “ `Shadow Economy' in the Socialist Sectors,” p. 108.
40.
idem , “The Informal Organization of the Soviet Firm,”Quarterly Journal of Economics, 66(3):342-363 (Aug. 1952).
41.
41. Grossman, “ `Shadow Economy' in the Socialist Sectors,” p. 115.
42.
42. Peter Wiles discusses the difference between “benign” and “malign plan fulfillment.” The terms are his. Wiles, “What We Still Don't Know.”
43.
43. Simis, USSR: The Corrupt Society, p. 157.
44.
44. Ibid., p. 147.
45.
45. Ibid., p. 153.
46.
See also “The `Black' Millions,”Radio Liberty Research, 179/177, 27 July 1977.
47.
47. Simis, USSR: The Corrupt Society, p. 166.
48.
48. Mars and Altman, Private Enterprise in the USSR, chap. 6.
49.
49. Åslund, “Private Enterprise in Poland, the GDR and Hungary,” p. 28.
50.
cited in Åslund, “Private Enterprise in Poland, the GDR and Hungary.” The difference between the Polish and East German private traders' problems is summarized by Åslund when he says that the Polish trader must pay a bribe to the supplier, whereas his East German counterpart need only give a tip—Iapowki versus Trinkgeld. Ibid., p. 29.
51.
idem , “Informal Sector in Eastern Europe.”
52.
Vladimir Shlapentokh , Love, Marriage and Friendship in the Soviet Union (New York: Praeger, 1985).
53.
East European Quarterly, 18(4), Special Issue on Alcohol in Eastern Europe (1985).
54.
54. A preliminary attempt to deal with the ethnic nature of the second economy in Yugoslavia has been carried out by Vjeran Katunaric, “The Socioethnic Nature of the Hidden Economy” (Manuscript, Department of Sociology, University of Zagreb, 1984).
55.
55. Kenedi, Do It Yourself, p. 57.
56.
idem , “Cultural Bases of Soviet Central Asia's.”
57.
Wedel , Private Poland.
58.
This same continuity argument is stressed as well in Wedel, Private Poland.
59.
59. Shlapentokh, Love, Marriage and Friendship, p. 213.
60.
Dieter Cassel and E. Ulrich Cichy, “Explaining the Growing Shadow Economy in East and West: A Comparative Systems Approach,”Comparative Economic Studies, 28(1):34 (Spring 1968).
61.
61. Janos Kenedi summarizes this trend: “It's not enough to know how to read between the lines—one has to squeeze through them.”Kenedi, Do It Yourself, p. 97.
62.
62. This statement is supported not only by virtually all Western journalistic accounts but by East European émigrés in the West who are amazed at the intensity of labor in most Western factories. Istvan Gabor has stressed “labor withholding” as the key to understanding the second economy. Moreover, he cites several Hungarian studies where between 75 and 98 percent of the workers stated that they could be working harder. Moreover, low work intensity also leads to “negligent and indolent work, `notorious' absenteeism, being late, frequent changing of workplaces, arbitrary shortening of worktime,” and so forth. With labor withholding as the norm, workers earn extra money either by working overtime or in the second economy. See Gabor, “Second (Secondary) Economy,” p. 296.
63.
63. O'Hearn, “Consumer Second Economy,” p. 231. As Grossman, Brezinski, Gabor, and Cassel and Cichy have all stated, the second economy is itself a kind of surrogate reform, insofar as what was once illegal is now tolerated.
64.
64. The term “social mollifier” is used by Cassel and Cichy, “Explaining the Growing of the Shadow Economy,” p. 34.
65.
Ole Norgaard and Steven Sampson, “Poland's Crisis and East European Socialism,”Theory and Society, 13(4):773-799 (1984).
66.
See also Elemer Hankiss, “The Second Society” (Manuscript, Institute of Sociology, Hungarian Academy of Sciences, 1986).
67.
67. See my review of Timofeev's Soviet Peasants in Telos, no. 68, pp. 114-117 (Summer 1986), for a fuller exposition of “personal plot socialism.”
