Stalin's Economic Advisors: The Varga Institute and the Making of Soviet Foreign Policy 1784536938, 9781784536930

Soviet foreign policy in the Stalin era is commonly assumed to have been a direct product of either Marxist ideology or

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Stalin's Economic Advisors: The Varga Institute and the Making of Soviet Foreign Policy
 1784536938, 9781784536930

Table of contents :
List of Abbreviations
1 Evolution
2 Operation
3 Theories
4 Discourse
5 An Affair

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Kyung Deok Roh is Assistant Professor of History at the Ewha Womans University, Seoul, South Korea. He taught in the Liberal Arts Division at GIST College, Gwangju, South Korea, after he received his PhD from the University of Chicago. He has contributed to peer-reviewed journals on Stalinism and Cold War history.

‘Although he was the final arbiter of the fate of the Soviet people, Stalin culled information not only from subordinate leaders but also from his own think tank – the Institute of World Economy, popularly known as the Varga Institute. In the first comprehensive study of the chief Soviet economist, Eugene Varga, historian Kyung Deok Roh shows that the moderate and reformist policies advocated by this Institute had a profound influence on the dictator’s foreign policy. Even when their views diverged, Stalin took Varga’s undogmatic analyses of capitalism very seriously. Roh’s deeply textured story demonstrates that even in the darkest days of Stalinist tyranny, divergent views were possible in discrete pockets of the Soviet intellectual apparatus as long as they did not stray from the broad contours of Marxist discourse.’ Ronald Grigor Suny, William H. Sewell, Jr. Distinguished University Professor of History, University of Michigan, author of Red Flag Unfurled: History, Historians, and the Russian Revolution (2017) ‘Nothing was more important to Stalin and his circle than Marxism and nothing was more important to Marxism than global economics and politics. Thanks in part to the resourcefulness of the economist Eugene Varga, the Institute of World Economy and World Politics became the Soviet Union’s go-to “think tank” on a wide range of issues. As this prodigiously researched book by Kyung Deok Roh clearly shows, Varga and his colleagues at the institute produced countless memos and articles that served as the intellectual nuts and bolts for Stalin and others at the highest echelons of power. Part economic history, part institutional history, and part political history, Stalin’s Economic Advisors furthers our understanding of how policy was made in the USSR and how Stalin made sense of what was happening in the world beyond the Soviet Union’s borders.’ Ethan Pollock, Associate Professor of History and Slavic Studies, Brown University ‘In this book, Ken Roh offers a masterclass on how to make intellectual history meaningful to the study of international politics. He dives beyond the surface Marxist rhetoric of Soviet-speak to clarify both the ideological development of Soviet thinking on international relations, and exactly

what kinds of ideas actually guided Stalin’s thinking about the world. He achieves this through a deep institutional study of Varga’s famous institute. The book overturns much received wisdom on Soviet history throughout its narrative, all while providing an exemplary research methodology for understanding how ideas become operationalized in foreign policy.’ Oscar Sanchez-Sibony, Assistant Professor, The University of Hong Kong, author of Red Globalization ‘This clearly written and convincingly argued book is not just about economic advisors, but also foreign policy advisors who in many crucial aspects influenced Stalin’s understanding of and reactions to international problems. During the 1930s and 1940s, Varga’s Institute of World Economics and Politics served as the key “think tank” that provided Soviet leadership with timely analyses of the global economic crisis and its effects in various capitalist countries, the resulting militarization and preparations for the war, fundamental reorganization caused by the wartime economic mobilization and planning, and the possibility of postwar crises. An old and fundamentally misleading academic tradition has interpreted Stalin’s foreign policy as resulting from either long-term geopolitical factors or ideological dogmas. Kyung Deok Roh’s archival research demonstrates that the Soviet leader was relying on up-to-date empirical analyses and statistical monitoring of the global economic and political developments by a close-knit group of academic researchers. The results of this investigation will help revise some antiquated stereotypes about Soviet international policies during and around World War II.’ Alexei Kojevnikov, Associate Professor of History, University of British Columbia

Library of Modern Russia Advisory board – Jeffrey Brooks, Professor at Johns Hopkins University – Michael David-Fox, Professor at Georgetown University – Lucien Frary, Associate Professor at Rider University – James Harris, Senior Lecturer at the University of Leeds – Robert Hornsby, Lecturer at the University of Leeds – Ekaterina Pravilova, Professor of History at Princeton University – Geoffrey Swain, Emeritus Professor of Central and East European Studies at the University of Glasgow – Vera Tolz-Zilitinkevic, Sir William Mather Professor of Russian Studies at the University of Manchester – Vladislav Zubok, Professor of International History at the London School of Economics Building on I.B.Tauris’ established record publishing Russian studies titles for both academic and general readers, the Library of Modern Russia will showcase the work of emerging and established writers who are setting new agendas in the field. At a time when potentially dangerous misconceptions and misunderstandings about Russia abound, titles in the series will shed fresh light and nuance on Russian history. Volumes will take the idea of ‘Russia’ in its broadest, cultural sense and cover the entirety of the multiethnic lands that made up imperial Russia and the Soviet Union. Ranging in chronological scope from the Romanovs to the present day, the books will foster a community of scholars and readers devoted to a sharper understanding of the Russian experience, past and present.

New and forthcoming Building Stalinism: The Moscow Canal and the Creation of Soviet Space, Cynthia A. Ruder Criminal Subculture in the Gulag: Prisoner Society in the Stalinist Labour Camps, Mark Vincent Dissident Histories in the Soviet Union: From De-Stalinization to Perestroika, Barbara Martin Fascism in Manchuria: The Soviet – China Encounter in the 1930s, Susanne Hohler Ideology and the Arts in the Soviet Union: The Establishment of Censorship and Control, Steven Richmond Myth Making in the Soviet Union and Modern Russia: Remembering World War II in Brezhnev’s Hero City, Vicky Davis Nomads and Soviet Rule: Central Asia under Lenin and Stalin, Alun Thomas Power and Conflict in Russia’s Borderlands: The Post-Soviet Geopolitics of Dispute Resolution, Helena Rytövuori-Apunen Power and Politics in Modern Chechnya: Ramzan Kadyrov and the New Digital Authoritarianism, Karena Avedissian Russia in the Time of Cholera: Disease under Romanovs and Soviets, John P. Davis Russian Pilgrimage to the Holy Land: Piety and Travel from the Middle Ages to the Revolution, Nikolaos Chrissidis Science City, Siberia: Akademgorodok and the Late Soviet Politics of Expertise, Ksenia Tartachenko Soviet Americana: The Cultural History of Russian and Ukrainian Americanists, Sergei I. Zhuk Stalin’s Economic Advisors: The Varga Institute and the Making of Soviet Foreign Policy, Kyung Deok Roh The Communist Party in the Russian Civil War: A Political History, Gayle Lonergan The Idea of Russia: The Life and Work of Dmitry Likhachev, Vladislav Zubok The Politics of Football in Soviet Russia: Sport and Society after Stalin, Manfred Zeller The Russian State and the People: Power, Corruption and the Individual in Putin’s Russia, Geir Hønneland et al. (eds) The Tsar’s Armenians: A Minority in Late Imperial Russia, Onur Önol


BLOOMSBURY ACADEMIC Bloomsbury Publishing Plc 50 Bedford Square, London, WC1B 3DP, UK 1385 Broadway, New York, NY 10018, USA BLOOMSBURY, BLOOMSBURY ACADEMIC and the Diana logo are trademarks of Bloomsbury Publishing Plc First published 2018 by I. B. Tauris & Co. Ltd. Paperback edition first published by Bloomsbury Academic 2020 Copyright © Kyung Deok Roh, 2018 Kyung Deok Roh has asserted his right under the Copyright, Designs and Patents Act, 1988, to be identified as Author of this work. For legal purposes the Acknowledgements on p. xv constitute an extension of this copyright page. Cover image: Stalin at the 16th Congress of the Russian Communist Party, 1930. Engraving by A. Gerossimov. (Photo by Photo12/UIG via Getty Images) Design: Positive2 All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or any information storage or retrieval system, without prior permission in writing from the publishers. Bloomsbury Publishing Plc does not have any control over, or responsibility for, any third-party websites referred to or in this book. All internet addresses given in this book were correct at the time of going to press. The author and publisher regret any inconvenience caused if addresses have changed or sites have ceased to exist, but can accept no responsibility for any such changes. A catalogue record for this book is available from the British Library. A catalog record for this book is available from the Library of Congress. ISBN: HB: 978-1-7845-3693-0 PB: 978-1-8386-0213-0 ePDF: 978-1-7867-3317-7 ePub: 978-1-7867-2317-8 Series: Library of Modern Russia, 3 Typeset by Newgen Knowledge Works, Pvt Ltd To find out more about our authors and books visit and sign up for our newsletters.

For my mother

Contents List of Abbreviations Acknowledgements Introduction

xiii xv 1


Evolution Introduction Before Varga, 1925–7 Varga’s Takeover, 1927–9 Surge, 1930–4 Continuous Growth and the Great Purge, 1934–8 Post-Terror, 1939–45 Postwar, 1945–7 Post-dissolution, 1948–53 Conclusion

11 11 12 17 20 27 31 37 41 45


Operation Introduction The Organisation of the Varga Institute From Plan to Publication Relations with the Party Conclusion

47 47 48 56 61 74


Theories Introduction Varga in the Tradition of Marxian Economics The Methodology of Kon’iunktura Conclusion

77 77 81 95 103


Discourse Introduction

105 105 xi



The Great Depression, 1929–33 Subsequent Development in the mid-1930s New ‘Crisis’, 1937–9 War Economy, 1939–45 Postwar Economy, 1945–53 Conclusion

107 118 126 129 134 141

An Affair Introduction Before 1947 1947 After 1947 Conclusion

145 145 148 156 163 173



Notes Bibliography Index

183 215 229


List of Abbreviations Agitprop

Department of Agitation and Propanda in the Central Committee


USSR Academy of Sciences


Main Administration for Literary and Publishing Affairs


Executive Committee of Comintern


Institute of Red Professors


Institute of International Economy and International Relations


Institute of World Economy and World Politics


Institute of the Oriental Studies


Kon’iunktura Department in IMKh


Moscow State Institute of International Relations


Ministry of Foreign Affairs


Commissariat of Foreign Affairs


Commissariat for Internal Affairs


Soviet Information Bureau of the Council of Ministers


Council of People’s Commissars


Central Statistics Administration


Acknowledgements It is my great pleasure to express my gratitude here to those who made this book possible. The book grows out of my dissertation project undertaken at the University of Chicago, where I was privileged to study Soviet history with distinguished scholars. My greatest gratitude belongs to Sheila Fitzpatrick, my PhD supervisor, who has been an unparalleled source of inspiration for me. I also thank Ron Suny, whose keen insights into Soviet politics and Marxism have been greatly helpful for my intellectual development. Bruce Cumings’ top-notch scholarship on international history has never failed to amaze me. I miss the late Richard Hellie, whose incredible work ethic as a historian is something that I wish to emulate. Chicago’s Russian History Workshop was a space of tremendous intellectual rigor, constructive criticism and collegial camaraderie. I thank Charles Hachten, Steve Harris, Mie Nakachi, Ben Zajicek, Ed Cohn, Stacey Manley, Michael Westren, Jennifer Amos, Andy Janco and Andrey Shlyakhter. My special thanks go to Jeongha Lee, who showed me an exemplary attitude as an empirical researcher. Christian Raffensperger’s encouragement and support were essential to my graduate life in Chicago. A friend to whom I owe the greatest thanks for my work is Oscar Sanchez-Sibony, who offered me invaluable criticism and suggestions from its earliest stage. My book has also benefitted from the comments and feedback provided by teachers and colleagues outside Chicago. All or part of my manuscript was read by William Chase, Michael Ellman, Klaus Gestwa, J. Arch Getty, Tsuyoshi Hasegawa, Alexei Kojevnikov, Elizabeth McGuire, Ethan Pollock, Pekka Sutela, Geoffrey Roberts, Katya Vladimirov and David Wolff. I especially thank Ethan Pollock, who generously shared archival documents with me. Archival research for my project has been made possible through the kind help of the staff at RGASPI, ARAN and GARF, and through financial support by the University of Chicago, the Mellon Foundation, the Matsushita Foundation and the Marshall Foundation. xv

Acknowledgements Moving from dissertation to book project, I was assisted by Donghyuk Kim and Kyungtaek Kwon, who provided me with further valuable archival documents. Fujii Takeshi’s and the North Korean History research group’s oft-expressed interest in the project have kept me on track. Its completion would have been inconceivable without financial grants from Gwangju Institute of Science and Technology (GIST) and the Ewha Womans University faculty research fund. I am especially indebted to Thomas Stottor at I.B.Tauris, whose support has been essential for my work to see the light of day. Chapter 5 appeared earlier in an abbreviated version in Europe-Asia Studies. I am grateful for their permission to incorporate it into the book. A special mention should be reserved for my family members: my parents, my wife Sojung Um and my children Ian and Ellie. Sojung, now an expert in modern East Asian history, has been my most important intellectual companion since we met in our college years. Ian and Ellie have been such a constant source of joy for their ‘busy’ dad. My father, who passed away ten years ago, had always been supportive of the idea of my being a scholar. My deepest gratitude goes to my mother, whose patience, belief in me and loving encouragement through the long years have made this book possible. I dedicate this book to her.



In mid-1933, economists and statisticians in the Kon’iunktura department of the Institute of World Economy and World Politics (Institut mirovogo khoziaistva i mirovoi politiki: IMKh) in the Soviet Union were busy at work on a project, titled ‘Comparative Study of the Crisis’. The project, to collect and organise statistical data on the economies of the US, England, Germany, France and Japan for comparison, had been conducted at the behest of the Institute’s director, Eugene Varga,1 and other leading research fellows.2 Later that year, based on the statistical materials that the Kon’iunktura researchers had prepared, Varga drafted an analytical report on the Great Depression in the five major capitalist countries and sent it to Stalin, who was to deliver a speech at the 17th Party Congress in January 1934.3 In the report that was later printed as one of the Institute’s publications, Varga advanced an assessment that was different from those of Comintern theorists who interpreted the economic crisis in terms of constant stagnation. Highlighting both the immanent law of capitalism – the capacity of the economy to bounce back from its lowest point – and the increasing role of the state in intervening in economic affairs and managing the crisis, IMKh’s director stated that the worst year of the Great Depression had already passed and the capitalist economy


Stalin’s Economic Advisors had entered a phrase of revival, even though it was not a completely normal one.4 Stalin’s speech at the 17th Party Congress showed Varga’s tremendous influence on the dictator’s thinking about the capitalist economy and the economic crisis. While Stalin’s tone was much more rhetorical than Varga’s  – the General Secretary spoke for a much larger audience  – the speech followed the logic and content of Varga’s report. Like Varga, Stalin stressed both ‘the internal economic forces of capitalism’ and the ‘warboom’ as the key factors in the current resurgence of the capitalist economy, virtually declaring the end of the Great Depression in his speech.5 Throughout Stalin’s long reign, the General Secretary and other makers of foreign policy in the Party relied on the Varga Institute for its expertise on the capitalist economy. Such practice had been significant to those leaders: first, they, as products of the Marxist intellectual milieu, were disposed to see international affairs through an economic lens and tended to formulate their foreign policies and revolutionary strategies on the basis of economyoriented interpretations. Moreover, economic changes in the West after the Great Depression were so drastic, volatile and complicated that the Party leaders had a pressing need for detailed information, specific explanations and in-depth analyses. Finally, those changes in the economic sphere posed national security problems to the policy makers, as they had direct consequences on international political developments such as the rise of fascism in Europe and the Far East. Not only on special occasions, such as Party Congresses, but also on a regular basis, the Party leadership had summoned the Varga Institute to report the results of its research on the world economy to the top echelons of the Party. Stalin and other foreign policy makers regarded academic expert knowledge produced by IMKh’s economic scientists as highly policy-relevant and constantly sought to be guided by it. My book is a study of the history of this Varga Institute, a Soviet version of Chatham House or Brookings, and its relationship with Party leaders in the Stalin era. Headed by Varga, a Hungarian-born internationally renowned economist, the Institute was a central foreign policy think tank for Stalin and his circle for more than two decades beginning in the late 1920s. The Varga Institute, with more than 200 tenured researchers at its peak, was unrivaled in the academia of Stalin’s Russia, virtually 2

Introduction monopolising the knowledge of the capitalist economy. Its presence was so revered that the Institute and its work were often a subject of political discussions within the Party leadership. Previous studies on Varga and the Institute have created polarised images of them. One group of scholars has highlighted the difference between Stalin and Varga, emphasising that Varga’s economic thoughts were the opposite to or at least an alternative to Stalin’s. In their view, Varga was part of a moderate and reformist trend in the Soviet political and intellectual world, which eventually led to a clash with Stalin’s adherence to Leninist orthodoxy.6 In contrast, another group has stressed the intellectual and personal closeness between Varga and Stalin. Varga was Stalin’s pick to propagate the Party’s ‘official’ line on the capitalist economy after the dictator had purged so many great but less-conformist Soviet Marxist economists in the 1920s. Since the late 1920s, according to this group of scholars, Varga had served as a propagandist or messenger of orthodox Stalinism, the dogmatic application of Leninist principles.7 The most important reason for this divergence of views is that each group was concerned with a different time frame. The first group focused on Varga’s works in the post-World War II period and the notorious Varga Controversy of 1947–9. The second group concentrated on Varga’s theoretical writings in the Comintern years and other rhetorical pieces in the 1930s. While both groups tell a portion of the truth about the relationship between the Varga Institute and Stalin, neither has arrived at a comprehensive understanding of it. Neither group has traced the development of the economic ideas of Varga and IMKh over a longer time frame or explored its institutional history. My book compensates for these limitations by using previously inaccessible archival documents to present a comprehensive account of the Institute and its relationship with Stalin. Following the first group, my study will show that the Varga cohort’s scholarship indeed had a constant effect on forming a moderate and reformist way of thinking in Soviet high politics, especially in relation to foreign policy. However, I argue that this effect was observed not only in the postwar period but also during the entire time of the Varga Institute’s existence. Varga and his economists produced a consistently undogmatic set of knowledge from the late 1920s. While there was certainly a broader 3

Stalin’s Economic Advisors Marxist-Leninist ideological boundary that had framed their thinking, the one that several cultural historians have attempted to reveal in the last two decades,8 the boundary was inclusive enough to allow them to infringe upon principles of the ideology. More importantly, my study will reveal that such a ‘revisionist’ line of thinking promoted by the Varga group’s discourse was largely shared by Stalin and his circle. At this point, I embrace the second group’s idea, which underscores the shared ground between Varga and Stalin. However, I disagree with their thesis that Varga and his economists in the Institute were simple propagandists who had simply followed Stalinist official ideology. My exploration of its institutional dimension and political history strongly suggests that the cohort operated independently from the Party bureaucrats in terms of conceiving ideas and selecting methodologies. Furthermore, their own scholarship played a constructive role in shaping the dictator’s perceptions of the capitalist economy.9 To present a new history of the Varga Institute, my book poses three central questions: (1) What discourses on the conditions and transformations of the capitalist economy, such as the Great Depression, the 1937 economic downfall, the war economy and potential postwar economic crisis, did the Institute produce in the era of Stalin? (2) What were the Institute’s contributions to shaping Stalin’s ideas of the West, and how were the research results of their works, including secret policy papers for Stalin, connected to Soviet foreign policy directions? (3) How did the Varga Institute operate within Stalinist politics and how did their relationship with the Party develop in the context of such political upheavals as the Cultural Revolution, the Great Terror, World War II and the anti-cosmopolitan movement? In answering these questions, my book makes an original contribution to two major historiographies in the Soviet studies: Stalin’s foreign policy and relations between the Stalinist Party and academia. Stalin’s foreign policy has been a popular subject among historians and political scientists. However, very few studies have paid keen attention to 4

Introduction the role of think tanks and other actors in forging that policy. One reason for this lack of interest is that scholars have assumed that Stalin made all decisions. Understandably, many diplomatic history studies on Stalin’s era have been more biographical.10 While it is incontestable that Stalin was the final decision maker, his ideas were affected by others and formulated within the discursive field that they constructed. By examining the scholarly output of Varga and his economists, the dictator’s close advisors, my book locates and reveals this discursive field and deepens the understanding of Stalin’s thinking about the world economy and his diplomacy.11 It is arguably the first systematic exploration of the relationship between academic expertise and foreign policy making in Stalin’s Russia.12 In an actual fact, the role of ‘others’ in shaping Stalin’s ideas and policies was not totally dismissed by previous scholars. However, the names they had in mind were usually limited to Marx, Engels and Lenin.13 Sometimes Russian rulers like Peter the Great and Catherine II joined them as the embodiment of Russian tradition or political culture.14 While this tendency, often called the orthodox school, reminds us that Stalin was a cultural product of Marxism or of Russian imperialism, the school was largely blind to the fact that both ideologies had been modified by the realities and experiences of the Soviet Union15 and, therefore, the discourse set that shaped Stalin’s mind was different from the original teachings of those historical figures. Obviously, some scholars were more sensitive to such modifications. There was a notable attempt to analyse public discourse in the Soviet world, especially newspaper articles and commentaries, rather than Marxist canonical texts, as a key component in reconstructing Stalin’s perceptions of international affairs.16 Recent studies have considered more ‘private’ texts reflecting the contemporary realities, including memoranda, policy papers and even intelligence reports.17 However, they did not present an effective methodology to understand those texts as intellectual sources of Stalin’s ideas and actions. Their focus was on instant analysis and opinions by Soviet authors of certain specific events and moments, not a system of knowledge that had been being built in a longer time frame and in a more systematic way, and they simply claimed or assumed the texts’ constructive impact on policy making. Consequently, while their works became a very nice reconstitution of Soviet views on current world affairs, they did not 5

Stalin’s Economic Advisors reach a point where they could capture the close linkages between those views and the making of Stalin’s diplomacy. My discourse analysis of the Varga group’s texts will markedly differ from previous scholarship in the following ways. First of all, I examine the adapted ideological expressions to the realities of the time; my focus will be on how original Marxist teachings were used, transformed and reformulated by the Varga cohort who had been keenly following the contemporary economic trends. Second, my study explores the formation of the Stalinist world economy discourse over the course of more than 20 years. I trace how IMKh’s research agenda and results evolved into a systematic set of ideas in the conjuncture of the Great Depression, the preparation for war, World War II and the Cold War. Third, to penetrate the conceptual ground that Stalin and the Varga group shared, I borrow the discourse analysis method of cultural history; my study will thus ‘concentrate more on the modes of description than on the objects described’.18 By focusing on the form and style of the texts, rather than the content of their detailed arguments and conclusions, my methodology provides a theoretical strategy for taking on challenging questions. For instance, did Stalin incorporate the views expressed in the Varga group’s reports into his policy making? What did he do when he disagreed with the Institute? Of course, Stalin and the economists had possibly varied opinions on the details. But my study excavates the more significant discursive site in which both had been commonly located through a form-oriented analysis looking to the deeper structures of these policy experts’ texts, more specifically, their core assumptions, theoretical frameworks, conceptual categories, standard schemes, statistical breakdowns and ways to locate evidence and present arguments. In that epistemological domain created by the Varga cohort’s discourse, I argue, Stalin conceived and implemented his foreign policy, and the domain’s boundary limited and structured his options. In short, my book is a culturalist investigation of a Soviet discourse that both reflected the realities of the contemporary situations and shaped Soviet foreign policy makers’ minds. It is certainly part of a cultural diplomatic history that has been burgeoning in the last two decades.19 However, my culturalist approach does not simply follow conventional methodology in the field that explores ‘a variety of anonymous 6

Introduction documents in order to reveal the epistemic nature of the discursive formation within which policy was formulated’.20 My object of analysis is a set of discourses, produced by identifiable policy advisors and frequently delivered to the desks of political leaders including Stalin, with stronger policy implications. Rather than broad cultural factors like popular attitudes, images, memories and prejudices, I focus on a system of modern academic and scientific knowledge, particularly economics, believing that the knowledge set has been closer to policy making. In this vein, my book could be part of the thriving body of literature on how the thinking of economics and social sciences affected international politics in the twentieth century, the scholarship which recently emerges as two related but distinct streams: a body of political economy studies often represented by Timothy Mitchell’s ‘rule of experts’21 and an array of new histories on American modernisation theory in the Cold War.22 Those experts were major producers of knowledge through which political leaders understood situations and issues, from the conditions of international macro-economies to the socio-economic lives of small rural villages, and imagined their policy options. But the new literature also enlightens us that the experts’ world was not just a discursive one but a real one where politics, institutional relations and other interests had always mattered. Many experts were active in the bureaucratic world, which was as crucial as their intellectual capabilities in terms of forging state policy. My book tells a story of Soviet counterparts who had been working in an even more politicised space. Not staying with a pure discourse analysis of the Varga group’s economics, I  also take an institutional and political history approach exploring a myriad of official and unofficial documents hidden in the archives of the former Communist Party and the academy. Through empirical research, my study paints a detailed picture of how the group managed their Institute, operated in Stalinist academia and built a relationship with the political leadership. More specifically, it presents their institutional settings, the political constraints and formal principles structuring their operation, the resources and opportunities available to them, and their actual practices and routines, especially in relation to the Party apparatus.23 In the process, the linkages between the Varga cohort’s economics and policy making will be captured and demonstrated on a more tangible level. 7

Stalin’s Economic Advisors Using methodology that examines both the discourse and institutional dimensions, I contend that, from the late 1920s to Stalin’s death in 1953, the Varga group, supported by the dictator and other policy makers, produced a new set of discourses on the capitalist economy and its crisis that was increasingly separated from Marxist-Leninist economics. First, their works took a form of comparative economics: based on a framework of national economy highly unconventional for Marxism, IMKh’s economists densely described divergent economic developments and manifestations of major individual Western countries and displayed how distinctively those were handled by each capitalist state. In doing so, the Varga group noted a dramatically expanded role of state in managing the economy and even acknowledged the possible unworkings of capitalist economic laws due to its policies. Second, their scholarship fell into the realm of highly concrete statistical studies. Instead of building grand theories on the capitalist economy, as Marxists would, they provided a short-term analysis of the fluctuations of economic factors such as productions, prices and trades in each capitalist state and attempted to capture the immediate changes of Western economies and read their implications for international politics. Finally, their scholarship relied on less logical reasoning of economic science than historical explanations, where the historical specificities and exceptionalities in the contemporary world outweighed the immanent laws of capitalism. Such unique economics, virtually the only system of knowledge on Western economy in Soviet academia at that time due to the Varga group’s dominant position in the field and their special relationship with the Party leadership, swirled around Stalin and other policy makers. Within the intellectual contour created by the system, the world was seen as a finite set of various and uneven individual national economies; as a space in which state’s policies and specific historical conditions often neutralised the structural effects of the capitalist economy; and, consequently, as an arena in which spontaneous political actions and maneuverings of individual states could become a determining force. Based on this understanding of world politics, Stalin designed and implemented his foreign policies, which, albeit sometimes complicated and ambiguous, were power politics-oriented, security-obsessed and, consequently, defensive. In short, he became less and less driven by Marxist-Leninist ideology.24 8

Introduction In what follows, my priority is to reconstitute this discursive field on the world economy in general and especially on the crisis that Varga and his economists had constructed. However, I begin with a more positive dimension, because I believe that a pure intellectual history alone would never be sufficient to show the connections between academic discourse and political actions. In Chapter 1, I describe the institutional development of the Varga Institute, placing special emphasis on the relationship between its ascendency and Stalin’s sponsorship. It will not be described strictly in terms of ‘personal’ relations; I place its development in a broader context of Soviet domestic politics, intellectual trends and international relations. Chapter 2 takes a synchronic approach to the Varga Institute; it examines the organisations, operations and relationship with the Party. The objective of the chapter is to look at the institutional setting, intellectual atmosphere and internal power nexus that produced the Varga cohort’s economics. It also explores the political constraints and practical pressures in which the Varga group conducted its research. In Chapters 3 and 4, I examine the Varga Institute’s discourse on the world economy and its crisis. Chapter 3 concentrates on the theoretical frameworks that imposed limits on the Varga group’s economic discourse. Through an analysis of the theoretical writings by Varga, who had a towering influence on his colleagues in terms of theory building, I reveal the economic tradition to which he belonged and how he combined disparate currents into one. In Chapter 4, focusing on the IMKh’s specific studies on the world economy and its crisis like its policy papers and publications, I conduct a discourse analysis of them. In doing so, I show the discursive contours in which both the economists and the Stalinist leaders were situated, and locate the boundary that structured Stalin’s foreign policy options. In Chapter 5, I return to an area of political and institutional history, closely looking at the final years of the Varga Institute and revisiting the so-called Varga Controversy, one of the most highly publicised events in postwar Soviet academia and politics. By putting the controversy under the microscope, I examine key subjects mentioned in previous chapters in a more focused setting, such as IMKh’s connection with Stalin, the Party’s control over it, relationships within the Varga group and others. 9

Stalin’s Economic Advisors More importantly, my revision of the previous accounts of the controversy will show that the Varga group’s economics were still highly appreciated by Stalin in spite of their public disgrace in the early postwar years and that, even after the dissolution of the Institute, Varga and his group maintained a close relationship with the dictator. The discursive world that the Varga Institute had constructed did not simply disappear from Stalin’s mind with the Institute itself.


1 Evolution

Introduction In the spring of 1943, in the middle of the war with Nazi Germany, Varga gave the first wartime assessment of his Institute’s works in a Board (direktiia) meeting: The thing is that, most of all, we, too long in the condition of war, attempted to work only for publication … As a consequence, the Institute’s works were of a propaganda-agitation nature and not sufficiently of scientific research nature [Emphasis mine].1

He then presented his colleagues in the Institute with a huge research project for the Party leadership: As far as its nature, all the works should be secret – not about themes, but about contents. We will be given source materials corresponding to the realities (deistvitel’nosti), regardless of whether they are favourable for us [the Soviet Union] or not … We need to provide a scientific analysis based on those materials … No propaganda should be in the works [Emphasis mine].2


Stalin’s Economic Advisors Varga’s words indicate that the Institute had been doing two sorts of jobs: scientific research for limited audiences like the Party leadership, and propaganda works for the public. The two presumably belonged to different realms. In this chapter, I will argue that IMKh’s entire history is one of overlaps and tensions between the two related but distinct missions. Before Varga became the director in late 1927, the Institute was predominantly propaganda-oriented. Varga took the Institute in a much more scientific direction and, by the early 1930s, had transformed it into a huge research empire and significant contributor to Soviet policy making with the strong support of the Party leadership, especially Stalin. As the Soviet Union’s only academic institute for world economy and politics at the time, IMKh was a natural propaganda centre. Since then, the fact that the Institute had to conduct the two disparate duties at the same time structured its development. Sometimes the two functions cooperatively promoted the Institute’s progress and growth, but at other times they clashed, constraining the Institute’s operation and setting the stage for its fall. Tracing these institutional fluctuations is the aim of this chapter. In doing so, I will stress the close relationship between the Varga Institute and Stalin. Stalin adopted the Institute as his advisory group, sponsored its growth and, finally, dissolved it. At the same time, I will consider its political and intellectual contexts: the Cultural Revolution in the late 1920s, the volatile international politics of the interwar years, World War II and after 1945, the transformations of the field of Soviet international studies in the 1940s and, finally, the anti-cosmopolitan campaign of the late 1940s. Such watersheds in Soviet politics and society shaped the Institute’s development in addition to the way Stalin and the Party leadership participated in it.

Before Varga, 1925–7 The Institute of World Economy and World Politics was officially established within the system of the Communist Academy on 21 January 1925. Its Presidium announced the creation of a new centre devoted to research on world economy and world politics in December 1924.3 Varga was not the first director of what would become an influential institute. He had 12

Evolution three predecessors who had served as directors of the Institute within three years. The first director was F. A. Rotshtein, who had founded the working group (kabinet) of International Politics in the Communist Academy in 1923. Rotshtein was an active figure in Soviet politics and academia. As a former authoritative Orientalist, he had worked in the Commissariat of Foreign Affairs (NKID) and was still an active member of its Collegium (kollegiia).4 As shown in its founder’s career, the kabinet was not intended to be an exclusively scholarly group. Rather, it defined itself in terms of service to the party-state just as many research sectors or institute in the Communist Academy did.5 What service meant for the Communist Academy at that time can be defined as the production of practical knowledge that could be directly helpful to the Party or the State’s actual policies, propagation of Communist ideas to the masses and the separation from pure academic knowledge that characterised its rival, the Academy of Sciences. Publishing a practical journal was the working group’s most important task in its early years. Its journal was entitled International Annals and its editorial board included such Party notables as E. B. Pashukanis, a jurist best known for his ‘withering away’ theory, E. A. Preobrazhenskii and Rotshtein himself.6 That the kabinet tried to be of service and had big names on its journal’s board did not mean that it was influential in Soviet politics and academia. In fact, it was quite the opposite. Like other institutes or research groups within the Communist Academy, the kabinet did not benefit from the big names’ reputation. They rarely attended the group’s meetings and did not contribute to its specific research. Serious scholarly pieces by Soviet academicians did not appear in its journal, which published only a few original articles during that period. The working group’s main job was propaganda: translating seminal foreign works on world politics and economy and introducing important official documents on international relations to the Soviet audience. Although Rotshtein spent a considerable amount of energy tying the working group with the party-state apparatus, such as the NKID and the Comintern, the group received no significant research requests from those higher institutions in its early years.7 The kabinet was upgraded to the Institute of World Economy and World Politics in early 1926. Rotshtein became its first director and 13

Stalin’s Economic Advisors M. I. Spektator-Nakhimson was appointed academic secretary, a new position created to manage the Institute’s personnel and other organisational matters. The reason for the upgrade, however, was not because the working group had done an impressive job in the past year. It was simply part of the Communist Academy’s efforts in 1925 to elevate its research sectors to institute status.8 Consequently, there was no dramatic improvement from its kabinet days. Although Izvestiia treated the creation of IMKh as a milestone,9 the Institute certainly was not supplied with the manpower and resources to accomplish that sort of mission. It had a small staff of 19, including the ‘big names’ who rarely showed up. Other than the director and secretary, there was just a handful of senior and junior fellows with permanent jobs and a couple of adjunct members. The Institute occupied two rooms of the Communist Academy building on Volkhonka Street 14 in Moscow, and the journal board shared one of those rooms, where only one staff member assisted with publication.10 In addition to such poor conditions, the Institute’s members had not decided what to do in terms of research direction. The fact that the Institute had two sectors – economy and politics – clearly indicates that it did not have a concrete research agenda. Although the title of its journal was changed to World Economy and World Politics in 1926, it is still hard to discern any coherence in the Institute’s works. Many of the articles that appeared were propaganda reports on the contemporary international conferences. The journal articles were predominantly about problems in East Asia and the Pacific without clear theoretical links to the general issues of world economy and politics. Most likely, it was simply because the director and other notable researchers, such as L. N. Ivanov and M. P. Galkovich, were Orientalists and experts in American–Asian relations. In hindsight, it is no wonder that the Institute, as a part of the Communist Academy, was not engaged in serious and long-term research projects but instead was only preoccupied with collecting and compiling documents on international politics. The pre-Varga IMKh was no different from other institutes in the Communist Academy whose primary responsibility was to collect, sort out and propagate knowledge and publishing ‘collective’ works, such as dictionaries, encyclopaedias and other document collections.11 14

Evolution Ironically, and contrary to the Institute’s self-proclaimed aim, its purpose seemed symbolic. In 1924, when the Socialist Academy renamed itself the Communist Academy, it gave itself the mission of building an institution dedicated to studying, teaching and disseminating Leninism.12 Examining world economy and politics in the name of imperialism studies had been the main component of Leninism. The Academy leadership would have found it pointless not to have a single institute devoted to that hallmark of Leninism. Although Rotshtein and others made painstaking efforts to develop the Institute into a body that could perform real services for the party-state based on systematic research, they were unable to reform its symbolic nature. This situation is most vividly illustrated by its journal. Most of the articles published in the journal were neither original nor products of the Institute’s own research. And the topics were so broad that most of them did not have any profound analytical powers of contemporary world economy and politics. Highly indicative was the fact that the opening article in the journal’s flagship issue under its new title was Trotsky’s ‘Europe and America’.13 The names of famous figures like Trotsky were always found in the table of contents in each issue of the journal and, after the journal was renamed, the editorial board also featured big names, including N. Osinskii, Bukharin, Preobrazhenskii and Karl Radek. But none of them were active in the Institute, though they were all on its payroll.14 Radek was the only member of the editorial board to be spotted occasionally at the Institute’s editorial meetings and academic councils. But even he never did so in a consistent manner. The symbolic role of the Institute was also attested by the academic council, which had existed under its Board since March 1926. The council consisted of people whom nobody could imagine being in the same place at that time; among them were Bukharin, Trotsky, Pokrovskii, Rotshtein, V. P. Miliutin, L. M. Kritsman, Radek and Varga.15 As expected, the council never met. IMKh also lacked effective leadership, especially after Rotshtein’s departure from the directorship in early 1926. The appointment of Osinskii as his replacement was of little help. At that time of his appointment, he was still in America. After he came back to Moscow, Osinskii never found 15

Stalin’s Economic Advisors time to serve as director of the Institute, probably because he was also the head of the Central Statistics Administration (TsSU), arguably the busiest agency in the Soviet government responsible for the 1926 national census. Consequently, the Institute came under the direction of Miliutin, who was a deputy head. As another powerful figure in the Communist Academy Presidium and as one of the Troika, with Pokrovskii and Kritsman, however, Miliutin had no time for the Institute.16 Given these circumstances, it is no wonder that the Institute staff decreased from 19 to 16, and its budget for the academic year 1925/6 was lowered from 25,000 to 20,244 rubles.17 Under the absentee directorship of Osinskii and Miliutin, IMKh was moving in an even more symbolic direction, failing to produce its own analyses on world economy and politics. In fact, researchers within the Institute were unable to contribute much to the journal, as much of its space was reserved not only for prominent political figures but also for scholars and officials from institutions such as Gosplan, the Comintern and other Commissariats. Interestingly, Varga was also invited to write for the journal just because of his reputation. Varga was born in Hungary in 1879 and was trained in the tradition of Austro economics, the school of economic thought from which Rudolf Hilferding, Otto Bauer, Emil Lederer and Karl Polanyi came. Varga officially joined the Hungarian Social Democratic Party in 1906, and built his reputation by contributing to the Party’s journals and to the authoritative theoretical organ of the German Social Democratic Party, Die Neue Zeit, where he once led a heated discussion with Karl Kautsky.18 Varga first came to the Soviet Union in 1920 after serving as the Commissar of Finance during the Hungarian Soviet Revolution of 1918, where he was responsible for radical economic reforms. He spent a brief exile in Vienna with other leaders of the Revolution, including Bela Kun,19 before coming to the Soviet Union for the first time. Varga then spent most of the 1920s as a leading economic theorist in the Comintern.20 In 1922, Varga was assigned to Berlin, where he led a small economics institute sponsored by the Comintern, the so-called Varga Bureau, and was reportedly involved in Soviet–German economic relations.21 16


Varga’s Takeover, 1927–9 In summer 1927, Varga’s name became closely connected to the Institute, as its journal allotted all of the space in its bulletins to the reviews on world economy by Varga and his colleagues in the Varga Bureau.22 He was officially appointed director of the Institute in December in the same year. Western and Russian scholars have assumed that this was Stalin’s way of rewarding Varga, who had been ‘actively fighting against Trotskyism’ in the Comintern.23 Stalin had become well acquainted with Varga through several engagements in the Comintern and seemed to admire the Hungarianborn theorist.24 According to Varga’s recollections, Stalin always showed great respect to him when they ran across each other in the Comintern and it was Stalin who stood up first to greet Varga with both hands.25 Newly available archival data do not disprove the ‘reward’ argument, but certainly show another dimension of Varga’s appointment. On 25 August 1927, the Politburo decided to disband the Varga Bureau in Berlin and bring its researchers back to Moscow to reassign them to IMKh and the Western Bureau of the Executive Committee of Comintern (IKKI). It was Molotov who began this project, possibly on Stalin’s order, about two months earlier. When Molotov’s plan was ready to be implemented, the Politburo discussed it only with Stalin and his allies, Kalinin, Molotov, Andreev and Mikoian, without consulting the would-be Right faction.26 Such an exclusive move indicates that Stalin already had a plan to confront Bukharin in late 1927, just after they were allied to defeat the Left. Not coincidently, at that moment, Bukharin was criticised in Comintern meetings by some Bolsheviks who later became key members of Stalin’s administration, such as B.  Lominadze and S.  Lozovskii. They were particularly critical of ‘Bukharin’s description of Western capitalism as state capitalism’.27 Stalin’s recruiting of Varga to a post that could lead a theoretical battle was also no accident. Soon the Varga Institute became central in repudiating the theory of ‘organised capitalism’ that Bukharin presented earlier. Their journal devoted a considerable amount of space to attacking the theory in 1929 and 1930.28 Stalin initially seemed to find Varga useful as a theorist, particularly for his polemical skills, rather than as the head of an organisation. In


Stalin’s Economic Advisors other words, for Stalin, there was not yet an immediate plan to nurture the Institute into the General Secretary’s brain trust on world economy and politics. The theoretical and ideological struggle with the Right seemed to be the vital concern for Stalin at the moment. Because of these more pressing concerns, Varga’s arrival at the Institute was not translated into its immediate expansion. In 1928, the actual first year of Varga’s directorship, the Institute still suffered from a small budget, poor facilities, a lack of personnel and absence of enthusiasm for research. Even when the Communist Academy started to expand in the early part of the Cultural Revolution, particularly due to the merging with other research institutes, IMKh did not directly benefit from the expansion. In 1929, when the Communist Academy greatly increased its manpower, the Institute received only one additional employee. This was actually a net loss of five, according to one researcher’s calculation, as the Institute already had six unpaid workers. The recently established Institute of History in the Communist Academy got the most, 37; other institutes like the Institute of Soviet Construction (26) and the Institute of Philosophy (6) received a considerable amount of reinforcement. In terms of budget, the Varga Institute ranked low. While the total amount of the annual research funding (nauchnoe sredstvo) was 26,000 rubles for the Institute of Soviet Construction and 19,000 for the Institute of History, IMKh received only 9,000. The researchers of the Varga Institute were paid less than those at other institutes in the Communist Academy, such as the Institute of History, where senior fellows’ average monthly salary was 225 rubles. Only the two highest-paid researchers in IMKh received 225 rubles.29 Such poor working conditions, of course, did not produce an enthusiasm for research. The Institute’s fellows were barely doing what had been planned before Varga arrived. The new director simply had to wait for them to finish what they had begun under the previous leadership. In a 1929 Board meeting, Varga vented his frustration with the inertia.30 Depite such tough conditions, Varga spent a great deal of energy rejuvenating and reforming the Institute. The cornerstone of his reform was to make the Institute a research centre that could produce practical knowledge and analysis. To accomplish this, one of Varga’s first tasks was to impose a rigorous routine on his economists. Attendance at the Institute 18

Evolution became mandatory. To strengthen the work ethic and revitalise their study, a two-year research plan was established, instead of the previous threeyear plan that he blamed for the low productivity. He introduced a group study method through formal discussions and cross-checking practices.31 He also made the Institute’s research agenda more practical. At the first Board meeting after taking charge of the Institute in December 1927, Varga stated that the Institute’s previous leadership lacked direction and declared that, under him, the Institute and its journal would have a ‘more politically topical nature’.32 Varga handled the personnel issue in IMKh in the same way. While keeping almost all of the Institute’s junior fellows like Ivanov and Galkovich, Varga removed most of the big names from the editorial board and the academic council, with the exception of S. Lapinskii, the former Menshevik leader and a key NKID informant in Berlin, who had contributed a great deal to the Institute in the pre-Varga years.33 The big names were replaced with Varga’s former colleagues from the Bureau in Berlin, including R. S. Levina, V. Gai, E. S. Gorfinkel’ and I. I. Gol’dshtein, most of whom became core researchers in the Institute in the 1930s and 1940s. They were joined by young economists whom Varga had actively recruited. Probably because of Varga’s background and personal ties, several of these newcomers were foreigners or immigrants who had worked with the Comintern. In scouting young researchers, Varga made a couple of points clear. First, the Institute was open to all nationalities. Varga once told his economists that there would be no barriers in bringing people of other nationalities to the Institute as ‘we don’t have any kind of chauvinism’.34 This open-minded attitude later gave IMKh the reputation for being ‘the headquarters [stavka] for foreigners-immigrants’.35 Second, and more importantly, Varga preferred specialists versed in regional knowledge, languages and statistics to generalists steeped in (Marxist) theoretical ideas. Stressing the importance of recruiting researchers with a command of specialised knowledge, he said to his colleagues, In Moscow, we could find hundreds of people who can write general theoretical articles within weeks by just taking a


Stalin’s Economic Advisors scissors-and-paste approach [peregruppirovat’] to what Marx and Lenin had already written. But there is an extremely small number of people who could link new facts of world economy with Marxism and Leninism and articulate theory with facts.36

Thanks to Varga’s painstaking efforts, the Institute had ‘real’ contributors to its research and evolved into an integral unit with common objectives. The staff doubled, from 16 before Varga came to the Institute in 1927, to 32 in early 1929.37 However, the massive expansion and active recruiting that would happen in the early 1930s was still in the future. At a Board meeting in late 1929, Varga described the year as a transitional period (perekhod); according to him, the Institute still did not have sufficient manpower or a coherent research agenda.38

Surge, 1930–4 The years 1930 and 1931 were breakthrough years for the Varga Institute. The Institute underwent an immense expansion in both facilities and manpower. It also came into its own as the only research centre on world economy and politics in the Soviet Union. It had annexed comparable institutions, most notably the research sector on world economy under Gosplan, the international sectors of the Agrarian Institute and the Institute of Economy in the Communist Academy, and the China Research Institute at Sun Yat-sen University. Additionally, small research groups in Leningrad and Kazan became branches of IMKh.39 The Institute of Red Professors (IKP) on world economy politics, a union of sectors within the system of the IKP, was attached to the Varga Institute as a result of the merger of the Communist Academy and the IKP in August 1931.40 This annexation was accompanied by the recruitment of new researchers, some of whom were soon to form the core group of the Institute. Varga was successful in scouting senior economists who had already established a name for themselves in Soviet academia, including I. A. Trakhtenberg and L. Ia. Eventov, as well as young researchers, many of whom graduated from the IKP and other Party-related institutions like the Sverdlov Communist University. Along with researchers who joined IMKh following 20

Evolution the mergers, these new economists dramatically transformed the size and scale of the Institute. By early 1932, the total number of staff members had quadrupled from 32 in 1929 to 128.41 With this growth, Varga was able to reorganise the Institute.42 He created many new research units specialising in regional subjects. In early 1932, the Institute had five regional sectors, seven topical groups, a Kon’diunktura department and Information Bureau, each of which had between five and ten researchers.43 It is quite remarkable, considering that before Varga arrived, there were only two broadly defined sectors: world economy and world politics. The Institute had evolved from a small group into a huge research empire, actually monopolising the production of knowledge on world economy and politics in the Soviet Union. Right after the famous June Plenum in the Communist Academy, both reflecting and fostering the Institute’s resurgence, the Central Committee issued a resolution stipulating that its aim was to serve as ‘a powerful [moshchnyi] research centre providing concrete assistance for the Comintern and the Central Committee through their work on critical problems of world economy and world politics, as well as the relationship between the Soviet Union and the capitalist world’.44 Two factors should be considered in order to understand this immense expansion. First, a series of economic crises known as the Great Depression, which had swept the United States, Europe and its colonies since the late 1920s, made it possible for Stalin and the Soviet leadership to acknowledge the need for a research centre on world economy. In May 1930, Stalin and Varga had a long conversation in the Kremlin.45 Following that conversation, the Institute was greatly reinforced and its relations with the party-state became closer. Soon, the Institute’s academic council was reorganised and became the place for communications between their key members and representatives from party-state institutions like the Central Committee, Comintern, Profintern, the Institute of Monopoly of Foreign Trade and the Collegium of the NKID.46 It represented a marked contrast to the pre-Varga years when the council consisted of big names who had never been at the Institute. When this new council met on 20 October 1930 to discuss the future direction of the Institute, Varga informed them of the Institute’s primary task: ‘We should provide our leading comrades 21

Stalin’s Economic Advisors like Stalin, Molotov and others with information and analysis about the world economy and world politics’.47 In the 1930s, the number of research requests from the Party leadership visibly increased over what they had been in 1928 and 1929.48 The domestic context of the Cultural Revolution also played a role in the Institute’s expansion. The Communist Academy reached its peak in the early 1930s, as they played one of the protagonists on the scene of the Cultural Revolution.49 The Institute was not an initial beneficiary from this event in the late 1920s, but after the June Plenum in the Communist Academy in 1930 and the Central Committee’s resolutions in March 1931, it began to reap the benefits of the Revolution. Varga was elected to the Presidium in the Communist Academy right after the June Plenum, along with young, new academicians who later became centrepieces of Soviet academia, such as M. Savel’ev and K. V. Ostrovitianov. Although Varga did not have similarities to these cultural revolutionaries in terms of generation and personal and intellectual background, he willingly joined them in attacking the old leadership of the Communist Academy, including Pokrovskii, Miliutin and Kritsman.50 As a result, his Institute emerged as a victor in that generational battle. It is noteworthy that Varga diverged from a number of old Bolsheviks who were removed from the Academy leadership, and found common ground with the younger academicians.51 Meanwhile, during this dramatic growth of the Institute, three phenomena made indelible imprints on its development. First, the Institute increasingly resembled an empire with a core and peripheries. The roughly 20-member core research group around Varga determined the Institute’s research agenda and management. The largest portion of the group consisted of Varga’s former colleagues in the Varga Bureau, including Levina, Gorfinkel’, Gol’dshtein, B. S. Fogarashi and Gai. However, even more important figures could be found among the newly acquired economists in the early 1930s like Trakhtenberg, Eventov, L. A. Mendel’son, S. M. Vishnev, I. M. Faingar, A. M. Gurevich, E. Gurvich, Sh. B. Lif, and I. M. Lemin. Of the researchers who had worked at the Institute in pre-Varga years, V. I. Kaplan and M. I. Rubinshtein were the only members of the core group. These researchers had nothing in common in terms of personal background, generation and nationality, contrary to the assertions 22

Evolution of the people who would denounce them in the late 1930s and the 1940s.52 The only point of convergence was their familiarity with what I call ‘the European discourse on imperialism’, specifically the economics of Lenin, R. Hilferding, H. Grossman, R. Luxemburg, others and the associated controversies. Some, like Varga and his colleagues in Varga Bureau, acquired the knowledge from their participation in European Marxist intellectual circles. Others learned about it by joining Communist Party-related institutions in the 1920s, such as the IKP, where the first generation of Bolshevik revolutionaries set the curriculum. Based on such training, they all believed that the exploration of political economy based on the class principle should be prioritised to explain the workings of international relations and imperialism. These core researchers had held key posts in the Institute such as research sector heads, academic secretaries and supervisors of the Kon’iunktura department (Kon’iunkturnyi otdel, or KO), the most important sector in IMKh that laid the groundwork for its research.53 These people had written the analytical reports for Stalin and the Party leadership, and the main scientific works published by the Institute.54 Although the core group accepted several newcomers, such as V. A. Maslennikov, M. L. Bokshitskii and Ia. A. Pevzner, in later years, they showed remarkable continuity in their membership. Almost all of them survived the terrors and wars of the 1930s and the 1940s and their roster remained largely intact until the dissolution of the Institute in 1947. Even then, some continuity remained when they formed a separate sector within the Institute of Economy. At the same time, there was a group of researchers – senior and junior research fellows – on the Institute’s periphery. Some were big names, such as Pavel Mif, G. I. Safarov, Radek, Lapinskii and Bela Kun; and others were obscure. Some were familiar faces at the Institute’s meetings, frequent contributors to their journals and collections, and sometimes participated in collective research projects; others rarely visited the Institute, only did some kinds of consulting works, if at all, and got paid only putting their names on the Institute’s fellow list. Most of the big names, like Mif, were only loosely affiliated with the Institute; although he was sometimes a consultant for the Institute’s East Asian research sectors, his real home was the Eastern Bureau of the IKKI.55 What these peripheral people all lacked was a say in the direction of the Institute. More importantly, they were not 23

Stalin’s Economic Advisors part of the Institute’s key research projects for the Party leadership’s special requests. They were predictably not a stable group, and often rotated through Party/State-related institutions such as the Central Committee’s departments, Gosplan, the NKID and the Comintern, or educational posts like the Military Academy. The wall between the core and the periphery was fairly high, and was a basis for complaints for those who resented the core group’s exclusivism. Some members of the periphery sent denunciation letters to the authorities in later years.56 The second notable phenomenon was that the Institute’s scientific research went in the direction of comparative economics on Western countries: studies of individual national economies in the capitalist world. This might sound like ‘no further explanation is needed’, but as late as summer 1929 nothing was certain about which of the two related but clearly distinct methodologies to follow: vertical or horizontal. Some researchers still preferred the horizontal approach, believing that orthodox Marxist-Leninists should take world economy as a single analytical unit and go beyond state boundaries to examine fundamental economic factors, such as prices of commodities, industrial productions, credits, international trade and capital exports/imports.57 The sources that had pushed the Institute to adopt the vertical one came from both inside and outside. Varga himself first recognised the usefulness of the vertical methodology after he came to know Western studies on the business cycle, particularly W. E. Mitchell’s, and after he had been working on comparative reviews centred on the major European countries for the Comintern in the 1920s. Realising that a key to understanding Western economy would be to describe the conditions of individual national economies and to trace its development carefully, Varga assigned this ambitious task to his economists in accordance with their regional expertise for a more specialised analysis in autumn 1929.58 He later established the Kon’iunktura department to collect, compile and analyse statistical data on capitalist economies. The department greatly expanded when the Institute was reinforced in the early 1930s and consequently became the most important sector in IMKh. Based on collective research and a comparative economics approach, the Varga Institute embarked upon its first major research project, ‘The Tendency of Each Capitalist State’s Development since the 24

Evolution End of World War I’, and produced its own system of knowledge on the world economy and its crisis.59 Even more influential on the choice was the nature of the research requests from the top. In parallel with the rapid expansion of the Institute, the Party leadership’s demand for research significantly increased. They asked the Institute to prepare not only instant reviews and observations on the contemporary capitalist economy and politics, just like those that Michael David-Fox found in the case of Molotov and Kritsman’s Agrarian Institute,60 but also ‘profoundly theoretical (glubokii teoreticheskii) reports’ and in-depth analyses of its development and prospects,61 both of which shaped the Party leaders’ thinking. Interestingly, what the leadership, particularly, Stalin and Molotov, wanted the Institute to prepare was something that required a comparative analysis of Western economies. Among the research requests were ‘Current economic conditions in each capitalist state’; ‘New stage of the world economic crisis:  the US, the UK, France and Germany’; and ‘New forms of the protectionism in capitalist states’.62 Party leaders were less interested in trans-state topics of Marxist-Leninist economics such as ‘the movement and organisation of monopoly capital’, ‘capital export to colonies’ and ‘natural resources and international trade’. Trying to meet their clients’ expectations, the Institute had to rely on each country’s statistical data and tended to emphasise the unique situation of each national economy and the role of each government in managing it. Especially after the Great Depression became a world-wide phenomenon, IMKh spent the majority of its time tracing the development and handling of the crisis in each capitalist country.63 Consequently, the Institute’s research outcomes were increasingly distinguished from what was written in Lenin’s Imperialism, which adopts the horizontal methodology, though both could still be subsumed under the rubric of the European discourse on imperialism. It would not be an overstatement to argue that the Varga Institute had been under pressure from Stalin and the Party leaders to conduct scientific research that was more pragmatic and less ideological. Meanwhile, the Institute’s physical expansion created some ambivalence with its scientific research. As IMKh came to dominate the field of world economy and politics in Soviet academia after annexing related institutes, it also functioned as a Soviet propaganda centre. In late 1930, 25

Stalin’s Economic Advisors in a meeting of the Institute’s academic council, Varga listed the propaganda effort as one of two top priorities, along with scientific research for the Party leadership.64 In fact, his economists in the core and on the periphery spent a considerable amount of time on propaganda. The Institute hosted regular lectures and forums on international affairs for the public, and Institute speakers frequently visited the provinces. Many were active commentators on foreign affairs in the Soviet press. Varga and Radek wrote for Pravda, and Lapinskii wrote for Izvestiia. Later, economists like Trakhtenberg joined them. The foreign affairs sections in propaganda journals, like Propagandist and Sputnik agitatora, were staffed predominantly by people from the Varga Institute. They also wrote for Comintern and Profintern organs, which, along with the fact that Varga and many other economists came from the Comintern and some of them still had active jobs there, contributed to the creation of an image that IMKh represented a central theoretical outpost of the Comintern.65 According to Varga, the Institute’s propaganda effort should cover three specific topics: ‘General propaganda work, criticism of bourgeois economists and politicians, and criticism of incorrect opinions in our camp (Lager’)’.66 For general propaganda, the Institute spent many hours in working on less economic and more political topics, such as the status of the working class and the peasantry, labour movements and revolutionary struggles in the capitalist and colonial world. IMKh also produced many attacks on bourgeois economics, using inflammatory language and highlighting the differences between the ‘two systems’. Finally, the Institute took responsibility for detecting the ‘incorrect’ metamorphoses of Leninism within the Soviet Union. Sometimes those three duties were perfectly compatible with its scientific research, but at other times obviously not. The latter was particularly vexing for IMKh, as its economics was getting closer to a revision of Leninism but still needed to proclaim that Lenin’s teachings were infallible. New Data on Lenin’s Imperialism, the book that Varga and Mendel’son published in 1934, revealed this tension clearly.67 Though the book declared that Lenin’s findings were still relevant to the contemporary economic situation in the capitalist world, it actually showed that their new data did not perfectly match with Lenin’s theses on imperialism.68



Continuous Growth and the Great Purge, 1934–8 The Varga Institute greatly benefited from the rise of the Communist Academy in the early 1930s. In the middle of the 1930s, however, the future of the Institute sharply diverged from that of the Communist Academy, which had lost influence after the end of the Cultural Revolution. IMKh did not follow the path of the Academy; the Party leadership was more confident in the Institute than ever. The Institute emerged as the only hope for the Academy, along with the Institute of Socialist Construction and Law, in the mid-1930s. When the Academy leadership announced its main priorities for 1934, they actually admitted that they had the only two active institutes: (1) Works and collections on problems of socialist construction, particularly, industrial and kolkhoz; (2) The study of world capitalism and colonialism; (3) Works on general problems of Marxism and Leninism to help party functionaries; (4) The publication of textbooks and other aids for the burgeoning network of party schools, high schools, technical schools and institutions of higher learning; and (5) The publication of brochures on party and industries for popular consumption.69 Of the five tasks, what can be considered part of the serious research agenda was connected to the first and the second only, which respectively corresponded to the work of the Institute of Socialist Construction and Law and the Varga Institute. The other three were general tasks that every institute in the Communist Academy could undertake. IMKh became one of the top two within the Academy, and actually it was the larger one in terms of manpower. In late 1933, the Institute had 90 senior fellows out of a total of 237 within the Academy, and 13 junior fellows out of 53.70 The purges from the post-Kirov murder did not seem to affect IMKh at all, unlike other institutes in the Academy, such as the Institute of History whose membership was decimated.71 Not surprisingly, the Varga Institute


Stalin’s Economic Advisors was one of the two that moved to the USSR Academy of Sciences (AN) intact, when the Communist Academy was dissolved in 1936. The other was, not surprisingly, the Institute of Socialist Construction and Law.72 IMKh grew steadily even though poor health kept Varga away for most of 1935.73 It expanded when the IKP was incorporated into IMKh’s graduate school in 1936. Its research sectors were similarly enlarged. For example, as the possibility of the dual fronts was reified by Japan’s aggression to Northern China, the Pacific Ocean sector examining Japanese imperialism was reinforced in 1934. After the Spanish Civil War broke out in 1936, a new research sector for Spain was created.74 The number of publications also increased in this period. Most notably, they published a three-volume study, World Economic Crisis I, II, III, and The Postwar History of Capitalist States.75 By the middle of the 1930s, the Institute enjoyed having the capacity, resources and reputation to publish three major academic journals: World Economy and World Politics, Conjuncture of World Economy and The Pacific Ocean. The first’s circulation exceeded 20,000, up from 2,500 in 1928.76 The number of Party leadership’s research requests to the Institute continued to rise. The main topic was, predictably, a comparative analysis of Western economies. Varga prepared a report for Stalin on the possible end of the Great Depression in each capitalist state in late 1933 and spoke personally with Stalin on the subject in the Kremlin in 1934.77 Varga also sent the General Secretary an analytical report about economic conditions in the capitalist world at the end of 1934.78 The Institute devoted the whole of 1936 to drafting material about the post-Great Depression economies of the US, Britain, France, Germany, Japan and Italy for the Central Committee and A. Andreev.79 Such contributions had a major impact on Soviet policy; Stalin himself endorsed the theory of Varga and his economists on the Great Depression over those of other prominent Comintern commentators and actually acknowledged that the Great Depression was ending in his famous speech at the the 17th Party Congress in 1934.80 Its reputation grew, as the Institute was widely believed to have laid the theoretical basis for the Comintern’s turn to the Popular Front in 1934.81 The Varga Institute’s responsibility for propaganda work also expanded in the 1930s, as the Nazis took the offensive in Central Europe and key 28

Evolution international conferences were subsequently held with the involvement of the Soviet Union. Varga and other economists in IMKh contributed to nationwide Soviet newspapers like Pravda, Izvestiia, Trud and others about contemporary international conditions. Their main duty was to warn the public of impending wars between the capitalist states and the possible impact on the Soviet Union.82 The Institute published propaganda collections for public consumption such as the Condition of Working Class in Capitalist States and in the Soviet Union for the Last Twenty Years.83 They were also tasked with meeting the public. For example, when Japan invaded the mainland of China in 1937, the Institute’s Pacific Ocean sector held regular public sessions (zasedanie) to report on the war. The Institute also organised public lectures on international affairs in Moscow and sent representatives all over the Soviet Union to speak in the provinces.84 The Varga Institute kept growing in staff, resources, budget and influence up until the Great Terror. The Institute’s researchers might have been expected to be the first target in the socio-political hysteria; like the Comintern, the NKID and TASS, arguably the main victims of the Great Terror, they dealt with foreign issues and materials, and many of the researchers had foreign backgrounds and connections and had lived, worked and studied abroad. Remarkably, however, the Institute was only very tangentially affected by the Terror. Some commentators have exaggerated their losses and claimed that almost half of them were purged, even adding Radek and Bela Kun – nominal members at best – to the list of the Institute’s victims. Archival data show that it was simply not true. Most of the victims were not regular attendees at the Institute and like Radek and Bela Kun had been persecuted because of their other activities and affiliations. One historian emphasised the names of well-known victims of the purge in an effort to exaggerate the effect of the Terror on the Institute: M. Ioel’son, Lapinskii, Ia. Breman, O. Tarkhanov, G. I. Safarov, E. Gromov, Mif and A. Kantorovich.85 Almost none of these people considered the Institute their primary workplace, except Kantorovich, who was mistakenly included among the Terror victims. Ioel’son, Breman and Gromov were active in the Comintern’s Western Bureau, while Mif, Safarov and Tarkhanov were its Eastern Bureau people. Therefore, their fall should be seen as part of the Comintern purge that victimised, on an 29

Stalin’s Economic Advisors extensive scale, foreign communists and those with foreign connections.86 Lapinskii’s case would have been a wonder if he survived with his ‘extraordinary’ career: a former Polish social democrat and Menshevik leader (and a close friend of Yulii Martov), with years of experience in Berlin, where he had been a key informant for the Commissariat of Foreign Affairs during the 1920s. His primary job had been at Izvestiia.87 In short, the reason they were purged was not because of their affiliation with the Varga Institute. As pointed out earlier, the Institute had a core and a periphery. Most of the Terror victims were marginal researchers even in the peripheral group. With the exception of Ioel’son, no one from the list was a regular participant in the Institute’s Board meetings. Between early 1936 and late 1938, almost no change was witnessed in who attended Board meetings and held the Institute’s key posts, including sector leaders. Of the people who were close to the core group and regularly contributed to the Institute’s research, only two academics were identified as victims of the Terror. One was Ioel’son, the former academic secretary who had been responsible for the Institute’s personnel and organisational issues, a post that was a frequent target of the Terror, and the other was D. Korn, a German immigrant and former Comintern worker. Varga had reprimanded Korn in 1936 for ‘individualist’ conduct; Korn had personally received a research request from the Central Committee and sent them an analytical report without first consulting with the Institute leadership.88 Considering the scale of the Great Terror and the kind of work that the Institute had been doing, such marginal losses were truly remarkable. In late 1940, the Institute still had a staff of 117, including 69 senior fellows. What is even more striking was that people who should have been vulnerable because of their political and academic careers survived: L. N. Geller, G. N. Voitinskii and Kantorovich, all of whom had been influential Comintern workers, or the NKID officials who were somehow connected with prominent victims.89 Although the Great Terror failed to have significant impact on the internal development of the Institute, it did so in some external ways. As many people who had been linked to the Comintern disappeared from the Institute’s list of researchers, even though they had had a negligible influence there, the IMKh-Comintern connection weakened. More importantly, the image of the Institute as the Comintern’s theoretical outpost was 30

Evolution greatly blurred, despite the fact that Varga still attended many of their meetings in the IKKI and remained a close advisor for the Comintern leader Georgi Dmitrov.90 Meanwhile, Molotov, one of IMKh’s most important clients since the early 1930s, became the head of the NKID in 1939, reinforcing its relationship with the Varga Institute. Many people, especially outside the Soviet Union, began to see IMKh as a mouthpiece for the Soviet government rather than that of the Comintern. In 1939, one German communist believed that he could find the official Soviet position on world economy and imperialism in the Varga Institute’s works.91

Post-Terror, 1939–45 The post-Terror years and World War II stalled the Institute’s continuous growth for the first time in a decade. Right after the war with Hitler’s Germany broke out, the main portion of the Institute, like other institutes in the Academy of Sciences, was evacuated to Tashkent, while some stayed in Moscow.92 Like all other civil organisations in the Soviet Union, the Institute lost some of its staffers. Some were conscripted into the Red Army. Some of the researchers, notably Geller and Ratner, simply died from the hardship that the war caused. Between 1940 and 1942, the staff of the Institute dropped from 117 to 80.93 Since even people who had not been called into the military had to devote their intellectual powers to the cultural front, namely propaganda, scientific research received less attention than before. In hindsight, the war was less pivotal to the Institute’s history than several political developments from 1939 to 1943: a volatile international political landscape, the Soviet government’s demand for a new type of knowledge and analysis on international relations, indicated by the establishment of the Pacific Ocean Institute and the Moscow State Institute of International Relations (MGIMO), and the rise of Andrei Zhdanov and his followers in the Central Committee. First, Soviet relations with Germany caused the Institute some confusion, especially in relation to propaganda. In the early summer of 1939, before the non-aggression pact between Germany and the Soviet Union, a young expert on Germany named A. Bordadyn planned a propaganda 31

Stalin’s Economic Advisors article on Germany’s economic organisation for war. When he finished his draft and presented it in a meeting of the German sector, he received a favourable review from Varga and Mendel’son. In early 1940, Bordadyn had an opportunity to present the same draft to the NKID, but the officials suggested that he cross out a reference to the relative weakness of the German economy.94 The revision probably reflected the amicable relations between the two regimes after the non-aggression pact. The article was published in August 1940.95 In early May 1941, when the relations with Germany deteriorated and war seemed imminent, the Central Committee suddenly condemned this article, along with three others by different authors,96 for exaggerating the economic power of Germany. Bordadyn was immediately summoned to the Central Committee where he was interrogated by Zhdanov, A. Shcherbakov and G. Aleksandrov, who would later turn on the Varga Institute. Bordadyn’s article was castigated as being ‘ideologically incorrect and political harmful’, and he was fired.97 This was a lesson to Institute economists that their work, particularly propaganda materials, could put them in a very vulnerable situation whenever international political conditions changed. Consequently, the Institute had to keep its products in check more attentively and reduce the number of its publications. In December 1940, Varga described the difficulties that the Institute was facing: Special difficulties arose, when we prepared to publish our works, in relations with the changes in international relations for the past years. For example, some works on German, Italy, France and others were finished but could not be published. Or they became partially outdated due to the transformations in those countries.98

Second, as the stature of the Comintern waned and the NKID became even more influential in directing Soviet foreign policy, the demand for a new kind of information and analysis on international relations was palpable. The NKID, responsible for diplomacy in the Soviet government, sought a perspective to understand international affairs in terms of diplomatic relations between states, not in terms of political economics. As noted earlier, IMKh had been endeavoring to go beyond the Leninist teachings 32

Evolution in explaining the conditions of international economy and politics that had prevailed since the Great Depression, but their basic ideas were still within the framework of the European discourse on imperialism, and they still looked at international affairs through the lens of political economy. Such limitations were suddenly salient in an era when the Soviet Union formally joined the world of diplomacy. It did not go unnoticed by some more pragmatic government officials who believed that IMKh’s research methodology and teaching philosophy were not suited to the pressing needs of the Soviet government. In the summer of 1940, Ia. A. Khavinson, the director of TASS and a future key figure in Sovinformbiuro, sent the Central Committee and the NKID a letter calling for the wholesale reorganisation of the Institute in a more practical way.99 The letter had been discussed, along with other materials, several times in the Central Committee and led to the establishment of the MGIMO under the NKID in 1943. The MGIMO, modelled on international relations institutes in the West, was ready to get out of the political economy-oriented understanding of world affairs and turn its attention to state-to-state relations.100 Given that one of the MGIMO’s founders, E. V. Tarle, was one of the two top foreign affairs commentators (along with Varga) in the Soviet press at that time, IMKh had a competitor for the first time since absorbing similar institutions in the early 1930s. Although the MGIMO had been primarily a teaching institution and was not comparable to the Varga Institute in the scale of its research facilities, the existence of such an academic institution working on similar subjects but with a different approach, and sponsored by a powerful government ministry, threatened IMKh’s dominant position in Soviet academia. Before the establishment of the MGIMO, another institute on world economy and politics emerged. The Pacific Ocean Institute was reorganised in 1942. The original Pacific Ocean Institute was a symbolic entity created in 1934 as a part of the worldwide network of Pacific institutes.101 The initiative came from the US for some international cooperative research on the Pacific region. The Soviet Union participated in this US-sponsored project to show some consistency with their foreign policy line favourable to the West in the middle of the 1930s. In 1940, when the relationship between the Soviet and the West went sour because of the Molotov-Ribbentrop 33

Stalin’s Economic Advisors pact, the original Institute was suddenly dissolved; its director, V. Motylev, reportedly carelessly revealed secret information to other Pacific institutes in the West during some collective work with them.102 Thus, the establishment of the new Pacific Ocean Institute had nothing to do with Varga and his colleagues. In addition, the new one was extremely small and could not defy IMKh. This event, however, proved critical to the Varga Institute. First, several researchers from the Pacific sector and its journal, The Pacific Ocean, were transferred from IMKh. Second, E. M. Zhukov’s appointment as the first director of the Pacific Ocean Institute was not promising for them. Zhukov was not one of the Varga Institute’s core researchers, despite his brief time there as a senior fellow in the mid-1930s. He was not a ‘Varga-type’ economist but a historian of Japan trained in the original Academy of Sciences in Leningrad, a student of a ‘traditional’ scholar, N. I. Conrad. Unlike IMKh’s core researchers, most of whom had been trained in the European discourse on imperialism, Zhukov had started to build his academic career in places where such a system of knowledge and Marxian economics were less pronounced. This young academician, the future dean of Japanese studies in the Soviet Union, survived the difficulties in his Institute’s initial years103 and became a force in the political-academic world, making the Institute a model for future Soviet policy-oriented regional research centres that arose in the late 1950s.104 However, the most ominous sign for IMKh was the rise of Zhdanovites in the Central Committee who were hostile to Varga and his Institute.105 The origins of their hatred were not clear. One possible explanation for their animus is that Zhdanov associated Varga with the faction headed by Malenkov, a fierce rival of Zhdanov in the Central Committee. Although several sources have confirmed the rivalry between these two rising stars, it is not certain that this rivalry escalated into a factional struggle. The archival evidence emphasises the Zhdanovites’ anti-foreign and Russian nationalistic sentiment as the source of their animus toward the Varga group. We do not know when the Zhdanovites developed those sentiments and added them to their political agenda. In the summer of 1940, they did a sort of rehearsal of 1946 by attacking Leningrad writers like Anna Akhmatova and Mikhail Zoshchenko for their ‘Western-oriented’ works.106 The Varga Institute was one of the Zhdanovites’ earliest targets; their first attack on 34

Evolution IMKh came in early 1941. Although the attack was aborted because of the invasion of Hitler’s Wehrmacht, it resumed in early 1943. The Zhdanovites attempted to stigmatise Varga and the Institute as pro-German, using both the rhetoric of the Terror years and what would become the ethnic terminology of the postwar anti-cosmopolitan campaign. They almost succeeded in purging Varga and dissolving his Institute in 1943. At the last moment, Stalin personally intervened in favour of the Varga group. It is important, however, to note that these developments did not deliver a death blow to IMKh. Rather, the Institute was progressing. Its physical losses were small, considering the devastating effects the war made on Soviet society. The Institute filled the void with recruits like A. A. Santalov and V. Aboltin and young researchers like Bokshitskii, Maslennikov and Pevzner. The Institute reorganised its research sectors in response to the war. After the Institute returned to Moscow from Tashkent in late 1942, they combined several sectors on European countries into one on Germany and its occupied countries and one on the other European states. By 1945, they seemed to be in a good shape. IMKh was able to cover the new regions like the Balkan peninsula and Africa and to create a specialised research group on US–UK relations.107 More importantly, the Institute retained its core group throughout the war. Very few core researchers were purged, transferred to the newly established institutes like the MGIMO or killed in the war. Stalin seemed to value Varga and these core economists, as shown in his direct intervention in the Zhdanovite campaign against Varga and IMKh. Immediately thereafter, Stalin asked Varga to set up a huge research project about the war’s impact on capitalist economies for very limited circulation even within the Central Committee.108 Varga himself seemed to feel very close to Stalin. He sent the General Secretary letters touching on the most sensitive issues in the Soviet politics, such as terrors against foreigners and censorship.109 The Institute was the only academic institution which, along with Gosplan and TsSU, participated in the NKID’s project on German reparations, supervised by Ivan Maiskii, a key figure in the NKID and the former ambassador in London, who had chaired the committee on war damage compensation since 1943. Varga’s estimation of Germany’s economic resources and potentials in the Ruhr became the central material for 35

Stalin’s Economic Advisors the project.110 In light of this, the assertion of a Western commentator that the Party leadership had lost confidence in the Institute is not simply true.111 The Varga Institute’s primary research focus during this period was, predictably, the capitalist states’ war economy. As early as 1935, the Institute had begun a comparative research project on Western war economies; even before Japan’s invasion of China’s mainland and Hitler’s aggression in Central Europe.112 A more systematic project was set up in the latter part of 1939, in the middle of the war in Europe and Asia. The research sector on war economies was established in the same year, with the participation of almost all of IMKh’s core scholars. During the course of their research, they highlighted the state’s essential role in organising capitalist national economies and regulating class conflicts, a tendency that was intensified in preparation for and during the war. Those findings pushed the Institute to take the sphere of politics even more seriously; it could critically modify or even negate the operation of the immanent capitalist economic laws.113 The first sign of such a huge departure from Marxist orthodoxy appeared at the end of 1934 in Varga’s analytical report to Stalin.114 The Institute made public the new theoretical position early in 1939, which was further developed in 1943 as it prepared a collective research project for Stalin and the Central Committee, ‘Changes in Capitalist Economies during the War’.115 In 1944, some of the economists in the Institute began working on the ‘Changes’ in each capitalist state in accordance with their specialties.116 Stalin and the Party leadership seemed quite interested in the work, frequently requesting progress reports.117 The Institute proudly started to publish its research around the end of the war. The culminations of this research were Varga’s famous 1946 book, Changes in the Economy of Capitalism Resulting from World War II and the volume edited by Trakhtenberg published in 1947,118 the works that many scholars119 have asserted that Stalin was so angered by their favourable assessment of the capitalist economic system that he closed the Institute. As the war neared its end, Institute researchers turned their attention to Eastern Europe, a region that had not previously interested them a great deal. As the Institute spent its energy on understanding Germany’s wartime economy, however, the economic and political conditions of its occupied 36

Evolution countries emerged as one of its main interests, shown in the name of its largest research sector, ‘Germany and its occupied states’. This interest grew when most of these countries were occupied by the Red Army and the issue of how they would be reformed after Nazi rule came to the fore. Given Varga’s personal interest in his native Hungary, Eastern European studies became a central part of the Institute’s European states sector and it embarked on a project about the region’s possible postwar transformation. After the war, Varga moved to Hungary and participated in its economic reform plan from 1945 to 1947.120

Postwar, 1945–7 The Institute made a promising start in the postwar era. Varga won the Lenin honour for his ‘great contribution to Soviet academia during the war’.121 Varga and other economists accompanied Stalin and Soviet top officials to postwar international conferences and treaty talks, most notably Potsdam in July 1945.122 The Varga Institute’s prestige soared, as its top journal World Economy and World Politics reached a circulation of 30,000 in the Soviet Union in autumn 1945 and found a great number of readers outside the USSR.123 As the Comintern had been dissolved in 1943, many foreign communists who were prepared to come to power in Europe and Asia had to look elsewhere for guidance on questions of world economy and imperialism and regarded the journal as one of the Party’s theoretical organs. In addition, as IMKh started to influence Eastern European economies and showed interests in tightening the connection with regional institutes, it seemed to represent a theoretical centre for Eastern European reform.124 Varga’s activities in Hungary in 1945 reinforced that image, especially after he published some of his works in Hungarian in Eastern European presses and revealed his thoughts on the direction of future economic reform there.125 Meanwhile, the Institute’s research on the possible postwar economic crisis received attention from the United States. In 1946, American Review on the Soviet Union, the only academic journal on Soviet studies in America at that time, asked the Varga Institute to publish its research conclusions on the postwar economy.126 Varga was also invited to write a piece for Foreign Affairs in early 1947.127 37

Stalin’s Economic Advisors The Party leadership continued to make even more research requests. Since the closing days of the war, the German reparations issue had been a big part of the Institute’s research; it had been busy estimating the economic potential of Germany’s industrial centres and regions with natural resources.128 In addition, the Party leaders asked for more specific research on economic conditions in the West, such as food shortages, transportation problems, natural resources and technological transformation in industries.129 However, what the leadership most wanted, consistent with their earlier requests, was a comparative study of the transition from a war economy to a peacetime one in capitalist states. The Institute’s reports centred on the question of whether such transitions created the conditions for economic crises like those of the post-World War I years. The Varga group studied the question on the basis of two distinctive methodologies: their findings on changes in capitalist economies as a result of World War II; and a historical analysis of the situation in the 1920s as an analogy, which had occupied a big part of their research agenda at Stalin’s request. Although they did proclaim the intensification of a general crisis in the capitalist world, particularly in its propaganda, the Institute’s research conclusions actually suggested that there was no impending economic crisis in the postwar capitalist world and it would take Western states more than ten years to have a crisis similar to the Great Depression. The Varga group attributed this delay to the special historical situations that the war had created and the greater role of the capitalist state in managing national economies.130 It is important to note the fact that Stalin and the Party leadership were pleased with the Institute’s research. This was in marked contrast to the frustration that Stalin often expressed about other economics institutes in the Soviet Union. At the end of 1946, M. T. Iovchuk, a top Party official in the Department of Agitation and Propaganda (Agitprop) on the Central Committee, summarised Stalin’s assessment to representatives from IMKh and the Institute of Economy in the Soviet Academy of Sciences:  ‘Economists did a poor job in aiding the State and the Party’, but ‘IMKh’s research has been not bad’.131 Varga’s new book, based on the wartime collective research by IMKh mentioned above, was published promptly at Stalin’s suggestion in late 1946.132 38

Evolution The extent to which the Institute was active and appreciated by the party is apparent in the busy schedule of a core researcher in the Institute, S. M. Vishnev, in 1947. After returning to Moscow in late 1946 from a research trip to Germany that had been supported by the Soviet War Administration in Berlin,133 Vishnev wrote two special analytical reports for the Ministry of Foreign Affairs (MID), one of which was titled ‘Conditions of Economic Development in Postwar Germany and Demilitarisation’. He also sent four reports on the German economy to the Sovinformbiuro. In addition, he contributed four articles on the international economy and politics to major presses, including Izvestiia and Trud. He taught classes and advised three graduate students in the Academy of General Sciences under the Central Committee.134 However, in 1947, the ominous signs that had occasionally bothered the Institute since the post-Terror years became more tangible. First, it no longer appeared odd for the Soviet public to see non-IMKh scholars talking about foreign affairs in the Soviet press, as the MGIMO and the Pacific Ocean Institute were expanding. Tarle and E. M. Zhukov emerged as rivals to Varga, as Pravda’s key commentators on international politics and economy.135 More often than ever, Soviet readers received news and announcements about the publication of books on the international economy and politics by non-Varga people. Although these were not direct signals of a decline of Varga and the Institute as they also continued to have their names before the public, IMKh no longer held the monopoly on generating knowledge about world affairs in the Soviet Union. A graver situation for the Varga Institute was the turbulence of international politics. Entering 1947, tensions between Moscow and Washington were more acute. Although there was still hope for a good relationship even after the announcement of the Truman Doctrine and the Marshall Plan, events in late summer and autumn made a full-scale confrontation irreversible.136 Once again there was a clash between the Institute’s two main duties; scientific research and propaganda. The research direction that they had been taking since the war broke out in 1939 was inconsistent with the propaganda mission that they had to carry out at the dawn of the Cold War era. The Institute’s thesis about capitalist states’ critical role in regulating the national economy and managing crisis and its modest 39

Stalin’s Economic Advisors reform idea for Eastern Europe suddenly became incompatible with the Party’s new propaganda line. Worse yet, the Zhdanovites now dominated the Party’s propaganda machinery as a result of Malenkov’s demotion in 1946.137 IMKh’s works became subject to extraordinary ideological scrutiny just as, ironically, the Institute became so internationally known that its words carried political weight, especially in Eastern Europe. Although it hastily joined the new current of propaganda in the middle of 1947, its written and published words could not be erased and left its researchers vulnerable to ideological attacks. Actually, the situation was very similar to that in the early 1940s, when they fell afoul of Zhdanov and his allies in the Central Committee who tried to stigmatise the Institute’s published works on the Nazis as ideologically harmful and unpatriotic. But this time the Zhdanovites’ attack turned out to be much more damaging in light of the socio-political climate in the Soviet Union, which cast dark clouds over IMKh.138 The year 1947 saw the rise of Russian ultranationalism, the anticosmopolitan campaign and rampant anti-Semitism in Soviet politics and society.139 Initiated in late 1946 by the Zhdanovites by attacking famous Leningrad writers for ‘servility’ to Western culture, the political campaign against ‘Western-oriented’ intellectuals, foreigners and the Jewish population became a social phenomenon. The Soviet people increasingly resented the West that was reportedly trying to devalue their contribution to the war.140 The Varga Institute was placed in a precarious situation as it had hired many foreign scholars whose nationalities were identified with Jews. In addition, its research focus was Western economies and most of the data and materials that it used were from Western countries. Riding this sociopolitical wave, the Zhdanovites resumed their campaign against IMKh in early spring in 1947 and won a majority of Politburo voters in August 1947.141 The Institute still might have been able to weather this crisis as it had in 1943. The difference in 1947 was that Stalin did not intervene to protect the Institute against the Zhdanovites’ attempt to dissolve it. Why did Stalin relegate the decision to Zhdanov this time? The answer remains speculative, even with available archival documents. What Russian archives certainly show us is that Stalin did not stop requesting analytical reports from 40

Evolution Varga and his people even after the Institute’s dissolution was decided. Furthermore, archival data indicates that Stalin arranged to keep the Varga group intact and working as a single unit within the new Institute of Economy.142 Therefore, there is no basis for the argument that Stalin condemned the Institute’s research as heretical to the Party line and purged it for its ideological mistakes. A  more convincing explanation should consider the social context of the anti-cosmopolitan campaign in which foreigners and Jewish people were persecuted. In that hysterical sociopolitical climate, the institution’s reputation as headquarters for foreigners and Jews was simply too much for Stalin. Another explanation for Stalin’s decision is that the General Secretary could not tolerate the image of Varga and the Institute as a theoretical centre for a modest East European reform agenda, when Stalin had just made wholesale Soviet-style nationalisation in Eastern Europe the backbone of its economic reform.143 By removing the Institute from the public scene, Stalin was able to send a warning to the modest reform supporters. In this sense, the Institute’s function as a propaganda agency, not as a scientific research centre, cost it its life.

Post-dissolution, 1948–53 While the Zhdanovites succeeded in dissolving IMKh, however, they could not disperse its members. More than 60 out of 79 paid workers in the Institute moved to the newly established Institute of Economy in the USSR Academy of Sciences, where they formed an exclusive group. In a physical sense, the Institute of Economy moved in to the Varga Institute as they ‘rented’ IMKh’s original space at Volkhonk 14.144 More importantly, the research and service duties of the core researchers in the former IMKh were not affected by the dissolution. The only exceptions were Levina, the academic secretary, who had been repeatedly denunciated over the previous seven years and was finally arrested, and Kaplan who was exiled to the provinces in the midst of the anti-Semitic hysteria in 1948.145 The key research sectors of IMKh operated in the new setting with their structure and personnel almost intact. These sector meetings were convened only with the Varga group. Although Varga did not regularly attend their 41

Stalin’s Economic Advisors meetings, he occasionally led the economists to prepare analytical reports for the Party leadership. When Varga was in Hungary and in poor health, Maslennikov, who had met with the Central Committee people in the Varga Institute as a deputy director, took over as a manager and assigned research commissions and projects for the party-state to the institute members. After Maslennikov moved to the newly created Institute of Oriental Studies in 1950, Rubinshtein, who had worked with Varga since the late 1920s, assumed the position. That the Varga cohort remained intact could be validated by the fact that the Zhdanovites did not end their attacks even after the Institute’s dissolution, referring to the group as the ‘exclusive clique’ within the Institute of Economy.146 Research requests by Stalin and Molotov to the Varga group did not decrease in spite of the Institute’s dissolution. It is amazing that Varga’s economists were being asked to write analytical reports for the party-state even when they were under severe criticism for their published works and were persecuted for their nationality during the anticosmopolitan terror.147 Most of their reports pertained to the Marshall Plan and its economic effects on Western European countries. When the Plan was announced in June 1947, Molotov and Stalin immediately asked Varga to identify the real objectives of the US.148 A year later, he prepared a secret report on the Plan with more data.149 In December 1948, the Varga cohort collectively crafted a major policy paper on the subject, ‘Consequences of the Marshall Plan for the Economy of Western Germany, France, Italy, Belgium and Holland’.150 The leadership’s interest in this topic seemingly did not wane until Stalin’s death in 1953; in 1952, Varga, with the help of his right-hand economists Faingar and Vishnev, drafted a report for Stalin on the outcome of the Plan in the previous five years, titled ‘Marshall Plan and Western Germany’.151 In addition to those special reports on the Marshall Plan, a series of comparative analyses of individual economies in capitalist states, the Varga group’s major service duty for the previous 20 years, was still regularly sent to the Party. The most notable one was a collaborative report prepared for Malenkov and the Central Committee in October 1949, titled ‘About the Conditions of the Economies in Capitalist States’.152 Thus, despite IMKh’s dissolution, the Varga cohort’s expertise was still very much appreciated by the Party leadership and their services to the 42

Evolution party-state continued. Rather, what did harm the Varga group was the establishment of the Institute of the Oriental Studies (IVAN) in 1950, a huge new regional study centre. The entire colonial research staff in the former Varga Institute, including its chair, Maslennikov, was transferred there.153 The Institute of Oriental Studies, the union of the original IVAN in Leningrad, its Moscow group and the Pacific Ocean Institute, was the real beginning of the area studies in the Soviet Union, distinctive from Marxian economics and the European discourse on imperialism. Varga’s former colleagues were not cast as protagonists for this new research empire, although Maslennikov took charge of one of its sectors. The first director of the institute was S.  F. Tolstov, an ethnographer and archeologist who had headed the Institute of Ethnography in the Soviet Academy of Sciences since 1943. He was supported by three deputies: V. I. Avidev, a historian of the ancient world, I. S. Braginskii, a philologist, and E. M. Zhukov. Like the Varga cohort, they were academicians who were more interested in service to the state-party than in pure scholarship. However, none of IVAN’s leaders had been trained in the tradition of Marxian economics and Leninist imperialism studies.154 This tendency was compatible with the growth of the MGIMO, which was willing to understand international affairs through the lens of ‘un-Leninist’ framework, such as state-to-state relations, and to explore the history of diplomacy in a more ‘traditional’ manner. The top three people, who made foundational impacts on the MGIMO’s research direction, were Tarle, A. V. Efimov and L. N. Ivanov.155 Tarle was a renowned historian who specialised in the Napoleon wars and the modern European power politics. Efimov was also a historian specialising in US diplomacy. Ivanov was the only holdover from the Varga Institute of the three. Although he had been with IMKh even longer than Varga, he had never joined its core group; one of his colleagues in IMKh dismissed his work as not ‘serious research’, lacking ‘profound analysis of materials’.156 Varga and the core group had rejected his doctoral (kandidat) thesis in the late 1930s. Understandably, Ivanov had sent vicious denunciations of the group to the Central Committee several times in the late 1930s and 1940s.157 One of the reasons for his isolation within the Institute was that his expertise lay in military and political relations between sea powers. 43

Stalin’s Economic Advisors Thanks to the efforts of these three men, the MGIMO adopted the mechanism and history of diplomatic relations as its research agenda.158 The future direction of the studies on world affairs in the Soviet Union, as indicated in the dispositions of the two new research empires, did not fit that of the former Varga group, whose scholarship did not completely break with the European discourse on imperialism and Marxian economics. Still, as long as Stalin, their main client, valued the expertise of Varga and his colleagues more than he did that of the younger generation of economists,159 they were able to remain active. The Varga group sent its reports to the Kremlin until late 1952, and their main points appeared in key official documents like Malenkov’s assessment of international economy and politics in the 19th Party Congress in 1952.160 The real ending for the Varga group came with Stalin’s death and Molotov’s withdrawal from the political scene. By then, not many people in the Central Committee had the eyes to appreciate the Varga group’s scholarship. A multitude of scholars have attributed the dissolution of the Varga Institute in 1947 to Stalin. They also believe that the creation of the Institute of International Economy and International Relations (IMEMO) in 1956, the successor to IMKh, would have been impossible had Stalin still been alive. The historical truth looks more complicated, however. Although Varga and other several core researchers participated in the IMEMO and it received part of its predecessor’s theoretical legacy, its research focus was a more technical one: to study foreign trade with the Second and Third Worlds, a pressing need for the Soviet government, particularly the Ministry of Foreign Trade.161 The IMEMO was primarily consulted by Mikoian, the head of the Ministry, while the Varga group had been Stalin’s think tank. Stalin had wanted to use its economic expertise for his foreign policy making. What happened after Stalin’s death, including the establishment of the IMEMO, further divergence of the regional study institutes and the expansion of the MGIMO, represented the Soviet state’s growing demand for more specialised knowledge and analysis on world affairs and the new direction of Soviet international studies, which William Zimmerman describes as ‘a striking transformation in Soviet thinking about the influence of international relations’.162 Consequently, 44

Evolution this tendency facilitated the dispersion of the Varga group to these more specialised institutions, and off the historical stage.

Conclusion Before Varga became the director of IMKh in late 1927, it had been a symbolic entity, a space for ‘big name’ figures to express their general thoughts on international affairs. Although Varga’s arrival at the Institute did not make an immediate impact on its expansion, he set out to enact major reforms from inside, particularly in the areas of personnel management, research procedures and organisation, making IMKh an integral academic unit and indispensable contributor to the party-state. When the Great Depression struck and the Cultural Revolution shook Soviet academia, the Varga Institute was able to take centre stage as a research institution with Stalin’s enthusiastic support. Around this period, the core researchers who formed around Varga developed their own version of crisis theory based on the European discourse on imperialism that not only Lenin but also other Marxist theorists had formulated, as well as W. E. Mitchell’s study of the business cycle. Their main scientific research applied the theory to an analysis of the contemporary capitalist economy at the requests of Stalin and other Party leaders who sought to use IMKh’s research results first to understand the world economy and then to devise a foreign policy. As a result of their own intellectual progress, catalysed by developments in the international economy after the Great Depression, and the Party leadership’s insistence to be more pragmatic, the Institute’s scientific research works became concrete descriptions of individual national economies in Western states. In the process, their works often crossed over the boundary of the Leninist orthodoxy. The fundamental limitation of IMKh was its mandate to conduct scientific research along with propaganda duties. Its propaganda pieces, in many cases, exposed Varga and his colleagues to public scrutiny. The more they went public, the greater the chances of political criticism, because IMKh’s main topic, international economy and politics, was the one that the Party found extremely sensitive. In addition, the new challenge to 45

Stalin’s Economic Advisors its political economy-centred methodology in analysing international relations, apparent even before Stalin’s death, undermined its status as a prestigious research empire in the Soviet Union. This atmosphere, along with the anti-cosmopolitan campaign, gave the Zhdanovites an opening to attack IMKh and gain Stalin’s connivance to remove it from the Soviet public space. When Stalin was in power, however, even after the Institute’s dissolution, the Varga group continued to provide services for the partystate with secret analytical reports on capitalist economy and politics. This remarkable thing happened thanks to Stalin’s continuous support for the Varga group. Stalin was the last man in the Party leadership who believed in the analytical power of IMKh’s political economy-centred methodology based on the European discourse on imperialism.


2 Operation

Introduction The previous chapter traced the institutional evolution of the Varga Institute from a macro and diachronic perspective. A more micro and synchronic dimension of IMKh is the subject of this chapter. How was the Institute organised? What were the key principles of its operation? What cultures and attitudes did Varga bring, how were they received by his colleagues and how were their routines established and performed? How did the Party-Institute relationship play out? Both Russian and Western scholars have paid little attention to the internal workings of Soviet academic institutes in Stalin’s era. The biggest reason for such apathy is that they looked only at their external relationships with the Party, believing this to be the central issue in the historiography of Stalin’s academia. We have a great deal of information about how the Party attempted to control the scholarly communities, and how the latter reacted to such pressure and adapted to the new political and ideological conditions.1 Recently, we come to have even more vivid descriptions of the relationship, thanks to a paradigm shift of the historiography that reconceptualises it as bilateral and symbiotic, rather than unilateral and top-down.2 47

Stalin’s Economic Advisors Although this focus is completely legitimate, it has been hampering the effort to recognise the importance of the internal organisations of academic institutes in Stalin’s time and the ways in which they operated. Without indepth knowledge of them, the relations between the Party and academia cannot be fully understood. One of the limitations of the previous studies, because of their commitment to the external relationships, is that they have focused on publicised academic affairs, and tended to jump to an attempt to link it to the political and ideological context. Consequently, it was not rare that specific institutional settings and routines providing a structural frame for the development of the Party-academia relationship have dropped out of their accounts.3 Another problem with the literature on Stalin’s academia is that it has made no distinction between institutes in terms of their members’ backgrounds. In the literature, the Party-academia nexus generally means the relationship between the new Bolshevik political power and the existing academicians who had been under the tradition of the old regime. Logically, the Party and the academia have been always described as two ontologically distinctive entities that stood and faced each other from opposite sides. The key words for the previous studies have been binary: us/them, control/autonomy and offensive/defensive. Even the most recent theoretical concept, symbiosis, still assumes the ‘us and them’ framework. In the new Stalinist regime, however, there was a multitude of academic institutions and groups that did not see the Party as ‘them’. In this chapter, firstly I  describe the organisational setting of IMKh. Then, I  will discuss how the Institute, in that setting, operated in terms of research and administration. Finally, based on my specific findings about its internal workings, I illuminate its external relationship with the Party. I do not claim that IMKh was typical of all academic institutes of the Stalin era. But the Institute represented new ones that did not predate the Communist regime and became a significant part of Stalinist academia.

The Organisation of the Varga Institute Despite some changes, the IMKh’s organisational structure had been the same since 1931, when it made a groundbreaking progress largely due to 48

Operation the Party’s investment and the hierarchical upheaval in Soviet academia during the Cultural Revolution. At the head of the Institute was the Board (direktiia), led by Varga and an academic secretary or deputy directors, who were in charge of organisational and personnel matters, with the participation of research sector leaders and other notable researchers. They usually met once a month, in a meeting chaired by Varga himself, and handled key issues for the Institute’s research and administration; setting and announcing its research agenda, discussing and authorising the individual or collective plans, overseeing their progress, hearing fellows’ presentations when their papers or reports were ready, deciding whether their work was publishable or not and coordinating the publication schedules. The Board also discussed organisational matters, such as hiring and firing, salaries and promotions, research trips (komandirovka) and grants, changes and reforms in the Institute’s structure and non-research matters, like holding public lectures. In the early 1930s, the meetings of the Board expanded to the conferences of the academic council (uchenyi sovet), in which the Board members were joined by representatives and experts from the party-state organs, such as the Central Committee, Gosplan, the NKID and the Comintern.4 Under the Board, the Institute had five main divisions: Working groups (kabinety) on individual states, research units on synthetic problems, Kon’iunktura Department, Information Bureau and the Library Department. In the early 1930s, working groups on individual states had five research sectors: American, Britain, German, Pacific Ocean and Colonial.5 Soon they were joined by other sectors as international political landscape changed; the French sector was the first to be added. After the rise of fascism in Europe in the middle of 1930s, sectors for Italy and Spain were created.6 Each sector had a sector leader, an academic secretary and research fellows whose number varied. The largest sector had more than 14 fellows in its heyday. Each sector had its own version of the Board meeting, usually chaired by the sector’s leader. The meetings were forums for the discussion of individual and collective research projects and reports on their progress. However, not all fellows were permanent members of sectors or regular attendees. As pointed out in Chapter 1, some of them just put their names on the researcher list. These non-contributors moved in and out of the Institute. 49

Stalin’s Economic Advisors The one thing that did not change throughout the years of the Institute’s existence was that the German sector was its kernel. Many scholars belonging to the core group of the Institute that I discussed in the previous chapter were experts on German economy. Varga’s top economists like L. A. Mendel’son, I. M. Faingar and S. M. Vishnev had been main figures in the sector in the 1930s and 1940s and they provided the consistency for the sector’s research direction and level. After World War II broke out in 1939, the German sector, chaired by Varga himself, was expanded to cover Germany and the states that it had occupied. After 1945, the ‘liberated’ states were reconstituted to form the eastern European sector, later called the sector on the New Democratic States. The German sector then became the core of the newly organised sector on European states.7 In the mid-1930s, however, the Pacific Ocean sector became the most crowded and arguably the most active group in the Institute. The sector’s rise had something to with the fact that the dual threat from the two fronts became real as Japan invaded Northern China. That the sector began to publish its own journal, The Pacific Ocean, from 1934 reveals much about its status in the Institute. As indicated in its title, the sector originally studied the relationship between the Japanese empire and the US in the Pacific Ocean and Northeast Asia. After Japan’s expansion into Manchuria, the sector turned to the political economy of the Japanese empire, particularly its colonial management of China. In the late 1930s, this tendency was strengthened when the Pacific Ocean sector became the largest research unit in the Institute, absorbing the Chinese sector, which had been separated from the Colonial working group a few years before and which had suffered during the Great Purges because of its closeness to the Eastern Bureau of the Comintern, one of the main victims of the Terror.8 However, the Pacific Ocean sector had never been the key research unit in the Institute despite its huge size advantage. Most of its researchers were neither from Varga’s network nor his direct recruitees. They tended to come from Moscow Sun Yat Sen University (Communisticheskii universitet trudiashchikhsia Kitaia imeni Cyn’ Iatsena) and from smaller institutes affiliated with the Comintern, in which they had been trained less as economists and more as propagandists. As expected, most of the sector members stayed on the periphery of the Institute. 50

Operation More importantly, many of them never became professional researchers but remained political activists in the Comintern. Pavel Mif and Georgi Safarov were perfect examples of those outsiders. G. N. Voitinskii and Kh. T. Eidus were the most deeply involved figures in the Institute, but they still fell short of becoming one of Varga’s core scholars. Several latecomers, including V. A. Maslennikov and Ia. A. Pevzner, were Varga-type economists and eventually joined the core group, but this happened in the 1940s, by which time the sector had lost its importance in the Institute.9 Not surprisingly, many of the members were transferred either to the Pacific Institute in 1942, or later to the Institute of Oriental Studies, which was a combination of three major institutes of Asian studies in the Soviet Union. In the mid-1940s, the sector was dissolved and incorporated into the sector that studied the Near East and Far East.10 Probably, the British sector was the second important one next to the German. The Institute’s core economists, L. Ia. Eventov and A. A. Poliak, were active in the sector. In the mid-1940s, as political and economic relations between the British empire and its colonies became a key factor in UK–US relations and in the reconfiguration of the international economy, this sector’s status in the Institute rose. It was renamed the Great Britain sector and its purview extended to British colonies in Asia and Africa.11 The American sector was surprisingly weak in terms of its personnel. V. I. Kaplan was the only member who belonged to the core group, though later he was joined by Sh. B. Lif. This sector was incorporated into the British one in the late 1930s until it became the new American sector in 1945, which included Latin American countries.12 However, other experts in Britain and Germany, including Varga, were actively in researching the US economy, having recognised its importance in the world economy. The sector itself was small, but received a disproportionate amount of attention from the Institute’s leadership. Besides these four sectors, others were short-lived because they were too vulnerable to political turbulence to become consistent research units. For example, sectors that had been created during the period of the rise of the European fascism in the 1930s, such as the Italian and Spanish ones, were incorporated into the European sector in the 1940s, which had been established by the combination of the French and other small sectors 51

Stalin’s Economic Advisors like the Swedish.13 The Colonial working group was dissolved when the Chinese part was separated from it in 1937. There were no sectors on India, the Near East and Africa until the mid-1940s, when the first two merged with the waning Pacific Ocean sector to form the Eastern sector and the last was hastily created at the suggestion of the Central Committee. Apart from the research sectors on individual states, there was a more horizontal type of research unit. The Institute called them ‘Research groups on synthetic problems’, which were composed of seven divisions: theoretical, agrarian, labour movement, international relations, credit and finance, fascism and social fascism, and foreign trade. With the exception of the fascism and social fascism group that was dissolved when the Party adopted Popular Front policy in the mid-1930s, all the sectors maintained their identity, despite some titular changes, until the end of the Varga Institute in 1947.14 The key here was, undoubtedly, the theoretical group, later called the crisis group, the Kon’iunktura research group, or the war economy group. The sector was virtually the same as the core group of the Institute in terms of personnel, and it not only had its own fellows but also included other sector leaders and able researchers like Faingar, Mendel’son, M. I. Gertsbakh and A. M. Gurevich. This sector operated in a way that was quite different from the others. Its members did not meet regularly to discuss their research and report on their progress. Instead, the members were called by Varga or an academic secretary, to handle key matters pertaining to the Institute. Sometimes, the sector had its own collective research projects but, more frequently, it was where Varga and the core group discussed the Institute’s research agenda and directions.15 In other words, as the theoretical group’s meeting was able to be more conveniently convened and was composed of ‘the core members only’, it tended to replace the Board, the formal decision making body of the Institute. Accordingly, the Board became nominal in the 1930s. This was comparable to the way in which Stalin managed his ‘inner circle’ in the 1930s and 1940s.16 Another notable sector was the credit and finance group, which was primarily responsible for tracing the currents of world capital and examining inflationary phenomena in Western states. It was headed by the Institute’s second-most important economist, I. A. Trakhtenberg, well-known for his 52

Operation expertise in finance and credit issues in Western academia. Consequently, this sector was quite independent and had a very small number of researchers, whose roster rarely changed. Trakhtenberg was virtually the only academician in the Institute, other than Varga, who Stalin directly contacted.17 The agrarian sector was chaired by another of Varga’s close associates and one-time academic secretary and deputy director, R. S. Levina. She supervised several researchers, especially those who had been transferred from the International Agrarian Institute (MAI), and studied agrarian crisis in Europe and in America, epitomised by the plummet in the price of agricultural products. The foreign trade sector started big, but diminished in importance as the Institute’s research interests turned to the national economies of individual states. In fact, the rapid decrease in the amount of foreign trades among capitalist states – reflecting the rise of the autarky system in the 1930s – was a reason for the sector’s decline. Instead of capital export/import that was a key concept of Leninism on foreign trade, its main research theme increasingly became the movement of raw materials and infrastructures in the capitalist and colonial worlds, such as oil and railroad systems. In the 1940s, the sector adopted a more practical name: the sector on production, raw materials and transportation. The international relations sector had followed the opposite trajectory. Initially, it was a minor research unit within IMKh, given the Institute’s concern with the economic aspect of world affairs. As the state was increasingly treated as an independent category from the capitalist economy system by Institute fellows since the mid-1930s, diplomatic relations between states emerged as an important research topic. Since then, the sector had been directed by one of Varga’s closest colleagues, I. M. Lemin. After 1945, the sector had collaborated with other sectors of the Institute, such as the German and European ones, and conducted major research, including a project for MID in spring 1947.18 One of the largest research units, the sector on labour movement, was more concerned with propaganda than scientific research. As expected, many people affiliated with the Comintern belonged to that sector. Certainly, the sector was prolific in terms of publications, but did not contribute much to the Institute’s economics methodology. As propaganda 53

Stalin’s Economic Advisors remained a key responsibility of the Institute, it survived until the Institute’s dissolution in 1947. The Information Bureau and KO made the Varga Institute unique. These sectors were the ones to which Varga himself paid the most attention to and from which he demanded iron discipline. In 1933, when Varga announced a two-month summer break (15 July to 15 September) during which no academic meetings and lectures would be held, he made it very clear that both departments would be the exceptions so that they could keep abreast of the world economy.19 The Information Bureau collected and organised foreign press materials for the Institute’s researchers. One memoirist claims that the Varga Institute was the first place in the Soviet Union to receive foreign newspapers, journals and statistical books.20 The Bureau classified and edited those materials to make clippings (vyrezki) for research use. In the early years of the Institute, research fellows expressed frustration with the Bureau’s work ethic. Those at the Bureau did not keep up with their work, making it difficult for the researchers to follow topical affairs in the field of world economy. Possible reinforcements for the Bureau were often discussed by the Board and Varga took those suggestions to heart. In the mid-1930s, the situation improved. Some workers, called referent, were even recommended for the Stakhanov award in 1935.21 Naturally, the Bureau worked closely with the library department and the two merged in 1938.22 While the Information Bureau collected and classified ‘raw materials’, KO charted them, found the trends and directions and compiled their own statistical data for further research. KO was a highly technical department, mostly composed of statisticians, who closely observed the current (tekushchii) situation of world markets. Varga’s efforts to develop this department were tremendous and its status within the Institute rose as Varga stressed the importance of precise and accurate statistical data for the Institute’s research. As director, Varga invested a great deal of energy in recruiting statisticians and properly trained economists, whom he called market analysts (kon’iunkturshiki). Each kon’iunkturshik worked on the market situation of a country, studying statistical materials from the press and compiling a reference card-index. They presented KO’s leading economists with Kon’iunktura reports called svodka. In order to improve the 54

Operation quality of svodka, the Institute’s leadership had granted kon’iunkturshiks various prizes.23 Once a month, based on svodkas, KO’s leader or deputy gave a presentation about the contemporary situation of the world economy for that month. These were presented to the Board or at other events that Varga and the core group attended, such as the meetings of the theoretical group. The stenographic records of the presentations were stored in the Library department, so that all the other researchers in the Institute could use them for their research.24 These kon’iunkturshiks not only did just highly technical jobs. They also formed groups of four or five, which performed a higher level of work; they held regular Kon’iunktura conferences in KO, where they offered a synthetic assessment of present and future prospects of the world economy. These reviews, after going through the Institute’s leadership, were usually published in its bulletin, Kon’iunkturnyi biulleten’ zhurnala mirovoe khoziaistvo i mirovaia politika, which was issued separately from its main journal in the 1930s.25 Indeed, the works of kon’iunkturshiks – both svodka and synthesis – seemed to form a basis for all the scientific research of the Varga Institute. Occasionally, they went beyond their own institutional boundary and were directly involved in other sectors’ research. In January 1938, a couple of special kon’iunkturshiks were sent to the Pacific Ocean sector to evaluate Japan’s economic and material basis for the Second Sino–Japanese War and to assess the possibility of an invasion of the Soviet Far East and Siberia.26 At another time, several kon’iunkturshiks were instructed to collaborate with the war economy sector and Trakhtenberg to prepare their major work in 1940, War Economic Measures by Belligerent Capitalist States in the Second Imperialist War.27 Apart from such regular activity, there was an outside-plan task (vneplannye zadaniia) for KO. This task usually took priority over planned ones as it was considered more urgent. They had to prepare special statistical works at the request of key party-state institutions, including the Central Committee’s departments, the NKID, Gosplan and the Comintern. In 1938, KO sent Gosplan ‘indices (pokazateli) of production forces in the capitalist states’ with 16 tables. At other times, the department also had to work exclusively for Varga and other core economists who were working on their 55

Stalin’s Economic Advisors own projects. In 1938, KO spent a considerable amount of time checking the validity of numerical materials for Varga’s new book and generating special reports, statistical materials and tables for other core economists, including Mendel’son, Lif, Gol’dshtein and Maslennikov.28 Such routines were later denounced by people who claimed that the Institute’s leadership appropriated its resources for their personal benefit. Interestingly, the statistical methodology that Varga had imposed upon KO was less Marxist or Leninist and more Western. The classoriented statistics that many Soviet economists had experimented with in the 1920s did not make any impact on KO’s groundwork.29 Varga and KO were strongly influenced by the statistical economics of W. E. Mitchell and his National Bureau of Economic Research. KO’s statistical tables and indexes followed the breakdowns and configurations of Mitchellean business cycle studies, which focused on industrial productions and prices in individual capitalist states to track their instant changes there, mostly quarter by quarter.30 Although the department attempted to develop a MarxistLeninist statistics in some ways,31 KO never came up with statistical tools with a horizontal cross-national or inter-state perspective. In fact, KO’s roster was built for vertical individual state-based statistical research. Its statisticians were regional specialists who dealt exclusively with a certain state. KO had experts on the US, Germany, Britain, Japan and France. The list included Sweden, Norway, Rumania, Hungary, Czechoslovakia, Poland and Belgium.32 KO’s final product resembled the trajectories of each state’s national economy, far from the Marxist generalisations of the capitalist system.

From Plan to Publication Since Varga came to head the Institute in late 1927, the way in which it was operated never really changed. The most fundamental and routine things that IMKh did were to chart research plans, monitor their progress, review the products and publish the manuscripts. As briefly noted above, the Varga Institute’s general research direction was discussed and decided in the meetings of the director and the core scholars. In its early years, this took place in Board meetings or at the 56

Operation conferences of the academic council. In the mid-1930s, the decision making body became much more focused and informal, and key decisions were made in the gatherings of the core group that Varga had convened. Varga usually ‘announced’ the research agenda for the next year or years in an extended Board meeting, usually in October. Then, each sector was instructed to discuss its own plan under the auspices of the given general one during the next month. At first, sector members had to devise their own individual research plans and set their timetables in accordance with the type of works that they would be engaged in. In most cases, monographs were supposed to be completed within two years, while popular brochures and other materials should be finished within a matter of months.33 In late October or November, sector leaders reported their members’ individual plans and timetables to the Board. The Board would make some suggestions about them and give its final approval in December or January. As discussed in Chapter 1, the Institute’s work consisted of scientific research and propaganda and so did the individual research plans. In many cases, the core group and some senior researchers were working on twoyear scientific research projects, while ‘laymen’, particularly the younger ones, worked short-term propaganda. In addition to providing research directions for fellows to craft their individual plans, Varga and the core group offered topics for collective research projects and assigned them to certain researchers and sectors. Sometimes, one sector assumed an entire project, but Varga tended to appoint people from various sectors into a group or committee, and instruct them to collaborate. Collective research projects followed the division between scientific research and propaganda. The core researchers naturally took on the most important collective research projects, such as comparative analysis of capitalist economies after the Great Depression and comparisons of war economies. In many cases, these projects produced analytical reports and policy papers for the Party leadership, though these reports were also often revised and published later with some revision. Other more propagandaoriented topics were also subjects of collective research; special committees or groups were organised to provide virtually instant reviews on political conditions in international affairs. Even some ritualistic missions, like 57

Stalin’s Economic Advisors an anthology in celebration of the twentieth anniversary of the October Revolution, took the form of collective research. After the Board authorised individual and collective research plans, the Institute’s leadership closely monitored their progress. To ensure that the annual plans of the researchers were on track, a special committee directly responsible to the Board met early each year. As expected, its members consisted of the core group scholars and academic secretaries.34 Mendel’son, Faingar, Gertsbakh and Kaplan were the most frequently invited inspectors. Varga and the committee were especially strict with the timelines, believing that the Institute’s works should be topical. Kaplan recalled that Varga expelled many academicians who did not produce quality works by the deadline. In addition to such annual screenings, a more ordinary monitoring system was in place. As many as four times a year, the Institute’s fellows had to submit a progress report (otchet) to their sector leaders. The leaders then had to compile a quarterly sector progress report and present it to the Board. As soon as a portion of the fellows’ project was completed, it was to be presented in the form of formal talk (doklad) to their own sector first and, if necessary, to the core group in the Board. These internal talks were distinguished from the propaganda lectures that many institutes, particularly originating from the Communist Academy, had been giving to the public. Such talks were usually scheduled for Thursdays in the second and fourth weeks of the month.35 Every researcher who submitted a research plan had to make at least two formal talks to the Institute before the project’s completion. When a plan was completed, it underwent careful examination. A reviewer was chosen from within the sector where the work was produced and directed to send a comprehensive review to sector leaders or, less often, directly to the Board and academic secretary. To prevent nepotism within a sector, Varga and the core group created a process of crosssector review. A final committee for inspecting the work included fellows from other sectors. Especially for major projects, a special review committee was occasionally formed with the intensive participation of most of the core scholars.36 Sometimes, reviewers or committee members were invited from outside of the Institute. In early 1935, when Kaplan prepared 58

Operation the second edition of his Class and Parties in the US, the Board invited A. V. Efimov of Moscow State University, an authority on American history, to be a commentator, along with fellows from different sectors.37 Sometimes, Varga invited outside experts to participate in the Institute’s review process. In spring 1946, S.  G. Strumilin reviewed Mendel’son’s manuscript, Crises of Monopoly Capitalism at Varga’s request.38 The most notable (albeit unofficial) reviewer of the works of the Institute was Stalin, who read and commented on several of Varga’s manuscripts and even lecture notes.39 In reviewing their projects, Varga and his people were more concerned with the accuracy of their statistical data than with ideological conformity. When a draft of a future academic secretary’s manuscript on the agrarian crisis in Europe was presented for an internal review in 1933, Varga told his colleagues, ‘the most important step to review such kind of work is to check the validity of the tables’. Following Varga’s instructions, the inspection of the work was meticulous. After it was checked by statisticians and consultants from KO, it was read by sector leaders with knowledge of the subject, including Gol’dshtein, one of the core scholars. At that point, it was scrutinised by a special committee composed of Gertsbakh, Ioel’son and Mendel’son, appointed by Varga himself. Only after passing these three steps could the work be sent to a publisher.40 After the checking had been completed, the Board made a final decision on publication. The Board often discussed topics like which publishers should be the best fit for them, and which should provide the best chance to be published. There was always a huge time gap between the completion of manuscripts and the actual publications because of various factors, including the bureaucratic procedures and censorship. And it was not rare for manuscripts to be returned to the Institute. The core scholars had privileges in the area of publication as well. In many instances, Varga and other well-known figures like Trakhtenberg, using some personal connections with the authorities, tried to expedite their own publications as well as other key works. The phrase that they typically used was that their works had a topical (aktual’nyi) nature. The Institute’s academic secretaries, for their part, did their job to talk to the concerned people, mostly from Agitprop’s publishing department, but Stalin and Molotov were the authorities to 59

Stalin’s Economic Advisors whom the Institute turned. Varga’s controversial book, Changes, could be published ahead of schedule due to Stalin’s recommendation.41 From drafting research plans to publishing finished works, the Institute’s operation was dominated by Varga and the core group. In fact, Varga made the leadership principle unchallengeable and granted absolute powers to the sector leaders, most of whom belonged to the core group, so that they could direct the works of their sector members. As director, Varga endeavored to establish the principle as a daily practice. In early 1933, when the Institute transformed itself into a research empire after it combined other institutes and research groups, Varga made the principle clear in a meeting of the Board, saying ‘academic-consultant leadership on the works of academic fellows should be firstly accomplished in the everyday research activities of scientific-research sectors and groups’.42 Under the guidance of sector leaders, each group should have a regular and official meeting more than twice a month as well as numerous unofficial gatherings. According to Varga, everything about research and publishing should be strictly controlled by sector leaders who were granted despotic powers. These leaders were, in turn, supposed to be Varga’s agents and informants. He clearly said to the sector leaders about their power and responsibility in one meeting of the Board in the early 1930s: if you come to harbor some serious doubts about your [sector] members’ research; their theoretical level and political correctness in setting up and elaborating themes, you should immediately report it to the Board so that sector leaders and Board members altogether could evaluate such work.43

At a glance, such a picture seems to represent a typical academic institute in a totalitarian regime: no academic freedom, initiative and assertiveness on the part of lay researchers; the leadership, who seemed close to the political authorities, completely controlled its research and administration, and steered them only for the interest of the party-state. A more attentive exploration of archival materials, however, tells a different story. Unlike the top-down relationship between the Institute leadership and ordinary research fellows, the relationship between Varga and other core scholars was more democratic. While the Institute followed Varga’s 60

Operation theory and methodology on the capitalist economy and its crisis as the general framework, the director of IMKh was open-minded about its key researchers’ ideas, findings and assessments, which sometimes contradicted and challenged Varga’s own. At times, he had changed his position based on his colleagues’ conclusions. For example, Varga abandoned his idea of a renewed economic crisis in the capitalist world, especially in the US, in 1937–8, after a series of lengthy discussions with the core scholars, including Trakhtenberg, Eventov and Kaplan in 1939.44 In many cases, important research themes, especially for collective research, were decided in the course of egalitarian discussions between Varga and the core group. There, sometimes, the director’s opinions were overruled by other economists. For instance, Varga wanted to include Poliak’s research project on the UK economy in the Institute’s major plan in 1938, but other core scholars like F. B. Fogarashi blocked the idea and placed another researcher in that slot.45 In fact, the one notable area that Varga reigned supreme was a technical one: he was unchallengeable when he led a rigorous inspection on the validity of statistical materials. In relation to ideas, findings and assessments on the contemporary world economy, however, Varga’s dominance in the Institute had its limits. In short, IMKh was despotically run by a few core scholars, who were privileged to operate in a site where a democratic principle was applied and genuine academic discussion was possible. This is why Kaplan, one of the core scholars, described the Institute as a scholarly community where ‘the democratic tradition of scientific research was always valued’,46 while L. N. Ivanov, an outsider, asserted that it was virtually ‘possessed by the small clique’.47 However, the foregoing account of its internal configuration would not be sufficient to understand the Varga Institute that operated in the Stalinist political, institutional and ideological setting. We must now turn to the relationship between that core group and the Party.

Relations with the Party Like other academic institutes in Stalin’s time, the Varga Institute was governed by the Stalinist political apparatus that was believed to seek for strict control over scholarly communities. As the Institute was a part of the 61

Stalin’s Economic Advisors Communist Academy in its early years, its Presidium initially represented the control agency for IMKh’s research and administration. Contrary to its rival, the Academy of Sciences, whose leadership board was an honorary society lacking real resources to direct its institutes and members, the Communist Academy’s Presidium acted as an actual control apparatus to the subordinates.48 In the first place, it had an institutional system to oversee its institutes’ research plans. Just as other institutes and sectors within the Communist Academy, IMKh had to submit its annual academic plan – together with the previous year’s report – to the Presidium in late January or February. Then, the Presidium members discussed the plan and report, drafted a review on them and handed it to the Institute’s academic secretary, a post that the Presidium had established earlier in every institute under the Communist Academy to ensure better communication between them. The Presidium also had the final voice about the allocation of budget and human resources. Its power peaked during the Cultural Revolution when it was actively involved in its institutes’ research direction and management. Fortunately, for IMKh, Varga became one of the key members in that new Presidium that was elected in the middle of the Cultural Revolution. As a result, to the Institute, the new Presidium leadership was less a controller than a benefactor.49 In the mid-1930s, when the Communist Academy showed some clear signs of decline as the energy of the Cultural Revolution began to wane and the Stalinist political system – where the Central Committee’s departments replaced the function of Commissariats and various governing agencies like the Communist Academy’s presidium – came to the fore, the Varga Institute was placed de facto directly under the control of the Party. Formally, the Communist Academy’s Presidium and, after their merger in 1936, AN’s Presidium still represented the head of the hierarchy to which the Institute belonged. However, real powers came from the Central Committee. While Orgburo and Secretariat were the highest bodies to govern the Institute, the actual controlling and monitoring mechanism was practiced by the Central Committee’s departments primarily dealing with science and ideology. In the early 1930s, the Culture Department (Kultprop) did that job. Soon it was replaced by the Science Department, which was later transformed into the Department of Science and Scientific and 62

Operation Technical Inventions and Discoveries. In the late 1930s, this department became a much more powerful agency under the name of Agitprop, which Zhdanov and his allies established in 1937 to control and discipline Soviet intellectuals.50 Issues related to the Varga Institute were handled by several leading Agitprop workers, including A. I. Makhanov, M. Myznikov and M. T. Iovchuk. Makhanov and Myznikov were faithful Zhdanovites. While the Central Committee’s departments followed the functions of the Communist Academy’s Presidium, the level of intensity greatly increased. Their job was to monitor the Institute’s research plans, personnel shifts and organisational changes. In the first place, the Institute was supposed to discuss with the Central Committee’s departments its annual research plan and send the final version as a report (dokladnaia zapiska) the following January. Apart from this annual plan, just like all the other institutes and industries in the Soviet Union in the 1930s, the Varga Institute had to draft a five-year plan and present it to the Party. For a closer monitoring of the progress of those plans, the Central Committee’s departments required a quarterly report, whereas it previously had to be compiled only once a year for the Communist Academy’s Presidium. Every researcher of the Institute had to submit a quarterly progress report. After their works had been completed and sent to publishers, the monitoring system continued to operate in the form of censorship. The Stalinist censorship program was brutal. IMKh’s works had to go through as many as five stages of review before publication: an editor of a publisher, its main editor, the NKID (later, MID), Agitprop or other departments in the Central Committee and, finally, the Main Administration for Literary and Publishing Affairs (Glavlit).51 In addition, IMKh had to obtain official permission about personnel matters, such as conferring degrees, hiring and firing its fellows, transferring them to other research sectors within the Institute, and sending them to foreign countries or elsewhere in the Soviet Union for research or lectures. Other organisational matters, such as the merging or establishment sectors, the publication of new journals and the expansion of their readership, were things that the Institute had to report to the Central Committee’s departments and gain authorisation.52 Such control mechanisms were also institutionalised through the ‘onsite’ organisations. Like other important institutions in Stalin’s Russia, 63

Stalin’s Economic Advisors IMKh had its own party organisation (partorganizatsiia), composed of Party members among the research fellows and staff, which had existed to monitor or self-monitor the Institute’s toeing of the Party line. The organisation had the standing party committee (partkom) or the party bureau (partbiuro) as its executive body, which was expected to participate in, or oversee, the Board’s decision making process, especially about personnel. Occasionally, the party organisation convened a party meeting (partsobranie), which the Party officials from the Central Committee or local party figures like a secretary of the regional committee (raikom) attended to discuss ideological, academic and administrative issues and to critique the Institute or press its fellows to deliver self-criticism. In the early 1930s, as described earlier, IMKh had an academic council where experts from the Party discussed its research plans with Varga and the core group. However, this formal structure and constitution tells us little about the actual relationship between the Institute and the Party. The Communist Academy’s Presidium and the Central Committee’s departments were not too effective in controlling the Institute’ research. They did not impose specific research topics and agenda on IMKh, and tended to accept those that the Institute had come up with on its own. The Communist Academy’s Presidium did not intervene in the Institute’s planning procedure at all, but only authorised the plans, sometimes offering the most general remarks on them. Obviously, the Central Committee and its departments were more aggressive. In a remarkable 1938 case, the Central Committee had rejected every single annual plan of the RAN Institutes, including IMKh, and ordered a complete revision.53 One might be tempted to cite the event as evidence of the totalitarian state’s complete control of academia. A closer look at the routines between the Central Committee’s departments and the Varga Institute tells a different story. At first, the Institute’s annual and five-year plan documents, which had been sent to the Central Committee on a regular basis, were strikingly sketchy, lacking specific content about its research agenda. They contained minimal information: who would work on what topics, what books and articles to publish and what lectures to hold. Regarding such succinct information, all that the Central Committee’s departments were able to do was just to offer broad written or verbal suggestions, which seldom brought a comprehensive revision 64

Operation of its original research plans. The typical remark made by the Central Committee’s officials was ‘study [certain country] more’. For example, in early 1943, when Levina, the deputy director, met Myznikov to get a review of the year’s research plan at an office of the Central Committee, the leading Agitprop worker told her: ‘It is needed to study the UK more, because our relationship with it might turn out to be uncertain in the future’.54 In a meeting for annual review at Agitprop in late 1946, Maslennikov, secretary of the Institute’s party bureau, was told by Iovchuk, ‘it is unfortunate that topics about Yugoslavia and Czechoslovakia are not included in your Institute’s plan for next year’.55 In short, the authorities’ control of the Institute’s research plan did not penetrate to specific agenda setting. Varga and the Institute’s leadership seemed aware of the meaning of the Central Committee’s instructions. In spring 1938, when IMKh’s annual research plan for 1938, along with other Institutes’ plans in AN, was rejected by the Central Committee as mentioned above and Sovnarkom sent it back to the Institute, Varga told his colleagues about its meaning in an extended Board meeting: Personally, I do not think that the decision of Sovnarkom relates specifically to our research plan for 1938. I understood that it concerns generally about certain changes in the type of work and about the overall purpose of RAN’s work.56

Not only did the Central Committee’s departments have little impact on the Institute’s planning procedure, but they did not closely monitor the progress of the plans. The Institute’s quarterly and annual reports, compiled based on its fellows’ and sectors’ otchet, was were brief and limited to quantitative dimensions. The report was no more than the numbers of publications and lectures that one certain fellow or sector had for the year. It did not even contain an abstract or summary of their works. In fact, the main concern of the Central Committee was if it accomplished its plan in terms of quantity and schedule, if it would be escalated in next year’s plan, and if it was on track for the completion of a certain five-year plan. Qualitative dimensions, such as research suppositions, methodologies, findings and main arguments, were seldom discussed. What mattered most was quantity, just like the plan-checking systems and practices in 65

Stalin’s Economic Advisors other Soviet industries in the era of the five-year plans. When an Agitprop official reviewed the Institute’s works for 1946, he just said ‘in 1946, the Institute produced about ten monographs that were definitely valuable for the Soviet State … Ten is not the sufficient number to study the general crisis of capitalism’.57 The Party’s brutal censorship system did not have a critical impact on the Institute’s research. Varga resolutely sent Stalin a letter complaining about the Soviet censorship system in 1944, but the main problem that the Institute’s director addressed was the delay in publication that the system had caused. Content revisions were not an issue. In fact, no single case in which significant changes were made during the procedure of the censorship had been reported to the Institute’s Board. On one notable occasion the Board discussed a censorship-related issue:  the Institute’s leadership advised several fellows to revise their manuscripts after Zhadnov’s famous speech about the Soviet academia in 1946.58 However, the core of the revisions was in style or ‘ritual’, not content. All that they had to do was add quotations from Zhdanov. As often seen in the relationship between the Party and Soviet intellectuals in Stalin’s era, the Central Committee’s serious engagement in the Institute’s research was not with its works in progress but with what had already been published. On several occasions, the Party issued a specific type of criticism on the Institute’s research directions and results, especially in the 1940s. However, the Central Committee’s criticism had not been directed at the Institute’s scientific works but mostly its propaganda pieces that were impacted by changing political and international situations. When the Central Committee addressed the research conclusions of the Institute’s major scientific works, the criticisms were inconsistent. For example, in 1943, Agitprop pointed out that the biggest theoretical flaw of the Institute’s works was its neglect of the importance of political and diplomatic relations among Western states, while in 1947 they claimed that the Institute should focus on economy.59 Not confused by such inconsistent instructions, IMKh was able to find and maintain consistency, especially in its scientific works. The research direction that the Institute had established in early 1939, epitomised by its strong emphasis on the role of capitalist states in managing their economy and its attempt to conceptualise such 66

Operation role as a planning, did not undergo serious revisions throughout the 1940s. In 1941 the Central Committee criticised the Institute’s conception of planning in the capitalist world for the first time, yet in 1947 its major research works, including Varga’s controversial book, still followed the old theoretical position.60 In fact, even after the Institute’s dissolution in late 1947, its policy papers and analytical reports were drafted in the same line.61 The Party’s system did not directly intervene in the Institute’s personnel and organisational matters. Those matters were almost exclusively in the hands of Varga and the core group. Archival records did not show any notable case of nominees being rejected or having to retain an unwanted researcher because of the pressure of the Central Committee. In order to hire scholars, the Institute had only to send a very brief official request form – along with sketchy biographical data – to the Central Committee departments, typically starting with a sentence like ‘we ask you to send academicians below to certain sector in the Institute…’62 Sometimes, the Central Committee departments required additional data, such as a candidate’s autobiography and a review on his/her previous works, but it mostly accepted the Institute’s recommendations without question. Then, the Communist Academy’s or, later, RAN’s formal authorisation followed, which was the end of the procedure. Occasionally, Varga tried to directly contact more powerful figures or higher agencies, including Orgburo or Secretariat, bypassing the formal procedure, especially when the issues were considered to be big. For example, when the strengthening of the Pacific Ocean sector was urgently needed because of Japan’s expansion into Northern China in the mid-1930s, Varga contacted Kaganovich, Ezhov and Andreev, respectively, and hired seven scholars for that sector alone.63 It is no wonder that, later, one denunciation letter claimed that every new hire by the Institute was from the personal network of Varga and the core group.64 The way in which a new academician was hired was also set up exclusively by the Institute. Some scholars were recruited and instantly posted to a permanent position, while others were brought to the Institute as unpaid researchers and hired after a probationary period. For instance, in 1933, one academician named M. M. Rozman was called to work at the Institute’s labour movement sector without pay for two months.65 When he received 67

Stalin’s Economic Advisors a positive review from the sector after the two months, he was officially appointed as a fellow. An interesting part of the story was that the Institute sent a formal letter to the Central Committee to hire him, only after it internally decided to give him a permanent job, not when he was initially brought to the Institute.66 Of course, changes due to political turmoil, such as purges, were out of Varga’s hands but, as noted in Chapter 1, the Institute was largely protected from the terrors until 1947. Academicians belonging to the core group had led a safe life in the Institute. It was remarkable that Varga was able to keep as many researchers as he wanted, even those who were vulnerable because of their political pasts and personal backgrounds and had actually been under attack several times. After numerous denunciation letters against Levina arrived at the Central Committee, Varga had to remove her from the position of deputy director, but he was still able to retain her as head of the agrarian sector and as a key members of the core group before she was finally arrested for her alleged involvement in the Jewish Anti-fascist Committee in 1948.67 In late 1937, in the middle of the Great Terror, Varga had no difficulty promoting A. I. Kogan, a controversial assistant (referent) in the Information Bureau, to the position of research fellow in the US sector. Her background could easily have made her a primary target of the Terror. As a White Russian national, Kogan had lived in the US before coming to the Soviet Union in 1930. Her parents and relatives were still in the US, and her husband was a former Trotskyist when he was in the American Communist Party.68 Moreover, the Party organisation within the Institute, which was supposed to supervise everything about its administration and research on the spot, did not perform properly and did not have a significant impact on Varga and the core group’s decision making. Many denunciation letters mentioned that it had been appropriated by Varga and his clique. In early 1941, one denunciator claimed: In semblance, party-organisation seems to do what is required but, in an actual fact, it sometimes operates idling, avoids key issues and deliberately covers the core of the Institute through its own authority. Party members of the organisation, who


Operation were not bad previously, now partially get used to such situation and become powerless. It should be noted that the partyorganisation grew, as a rule, at the expense of people who were picked [by the Party]. It did for the Institute’s own work, masterminded by Varga and Levina.69

We cannot fully receive the description of those ‘malicious’ denunciators as given, but they certainly show some aspects of the truth. Indeed, the party organisation and its devices within the Institute did not seem to do a good job to make the fellows listen to the Party. In early January 1941, the Central Committee’s main organ, Bol’shevik, published a review that pointed out the shortcomings of the Institute’s research. A party meeting in the Institute was convened to discuss the review later that month. Following Varga’s and his core group’s evaluation of the review, however, the meeting reached a conclusion that it was not targeting the Institute. They either did not realise or had not been informed that the review had actually addressed their works until June, when the Zhdanovites’ first attack against them came.70 Without the campaign, which originated from a completely different issue,71 Varga and his company might not have ever noticed the intention of the review. There is other evidence of the malfunctioning of the party organisation. Ideally, the secretary of partkom or partbiuro, who was called the party organiser (partorg), was supposed to monitor the Institute’s leadership. However, after the mid-1930s, the post had been held by the Institute’s academic secretaries and deputy directors, including E. L. Khmel’nitskaia, G.  S. Roginskii, Levina, Maslennikov and Eidus in succession, most of whom were at the core of the leadership. Predictably, the party organiser’s major function moved away from a ‘residential’ inspector of the Board toward a messenger who, representing IMKh, delivered its positions to the Central Committee. Thus, the Central Committee’s control of the Varga Institute was not effective. The key reason was that through the communication cultures and routines that the Central Committee and IMKh had been jointly making and practicing since the early 1930s, the Party had very limited information on the Institute and simply left the situation as it was without taking


Stalin’s Economic Advisors action. There were several sporadic attempts to improve such a ‘blackout’ situation, mostly prompted by denunciation letters from the Institute’s periphery. Especially after Agitprop was Zhdanovised in the late 1930s, the Central Committee, possibly with the help of the People’s Commissariat for Internal Affairs (NKVD),72 set out an internal investigation several times, as mentioned in Chapter 1. In addition, the Central Committee allegedly planted a spy in the Institute, who could deliver internal knowledge on it.73 However, things did not seem to improve dramatically. Complaints about the Institute leadership’s independence from the Party line became constant subjects for denunciators and self-criticism performers, one of whom, in the early 1940s, portrayed the leadership as something completely ‘of its own (otsebiatin)’.74 Even after the Institute was dissolved and they were reunited in a new institute, such criticism was still made.75 Seen in this way, it is not hard to conclude that Varga and the core group managed the Institute largely independently from the Party’s bureaucratic intervention in its research and administration. However, it is difficult for us to interpret such independence as genuine academic autonomy. That is because we cannot conceptualise the relationship between the Party and IMKh in terms of the framework of autonomy versus control for a couple of reasons. First, the Institute itself was not in a position to seek (or need) autonomy from the Party. The Varga group was different from older institutes in the AN, which had benefited from the tradition of imperial Russian academic circles and tended to characterise the Bolshevik Party as ‘them’ as opposed to ‘us’. Most of the Varga group were revolutionaries who had extensive experiences in socialist movements in the West and in Russia. In fact, many were foreigners and immigrants who had no previous connection to Russian academia. If a connection or affiliation did exist, it was with European scholarship rather than Russian ones and, for younger Varga people, with Communist institutions formed under the early Bolshevik regime in the 1920s, such as the IKP and the Frunze Academy. In addition, their research field, capitalist/ colonial economy, was a new one in the academia, which was inherited from Lenin and the founders of Communism. More importantly, Varga and his fellows, as self-proclaimed communists, proudly shared with the Party leaders the communist ideals and principles, particularly about the role of 70

Operation intellectuals in building socialism. Varga was ready to join young Stalinist militants during the Cultural Revolution who drove out the old leadership of the Communist Academy and called for a tighter connection between the Party and academia.76 Predictably, they were not hostile to the Party’s attempts to control scholarly communities or the cultures that the Party tried to bring to academia. Many of them were already familiar with the Party cultures through their experiences in revolutionary movements and the Communist higher institutions of the NEP.77 In short, the Party did not represent ‘them’ to most of the Institute’s members The second reason that the autonomy/control framework is irrelevant was that the Institute’s fellows were constantly placed under self-censorship or censorship mechanisms within the Institute. Although the Party’s censorship system was not effective, the researchers knew that they had to be careful with their works in progress. They would be automatically censored through numerous inner-Institute discussions with their colleagues, some of whom had strong connections with the Party officials. Such internal censorship was conducted in a couple of ways. First, it took the form of self-censorship in a general sense. In case of propaganda pieces, the Institute’s fellows always bore in mind that their works might conflict with the Party’s official foreign policy lines due to rapidly changing international political conditions. For example, the number of their research plans, publications and lectures on international affairs plunged after the Nazi-Soviet non-aggression pact in 1939, reflecting the fellows’ extreme caution.78 Second, the Varga group had a tendency to voluntarily embrace the Party’s position because of their own belief in socialism. Despite the differences in their personal, intellectual and educational backgrounds, they all could be categorised as hard-core Marxist-Leninist who believed that the capitalist economy was in decay. They seemed to feel uncomfortable when their research conclusions contradicted the official ideology. Predictably, they tended to censor their own works themselves. In other words, they approached the questions of the world economy under the assumption that the Party’s ideology should be ultimately correct. Varga seemed aware of this tendency and tried to keep it in check. He often told his colleagues that their papers should not be coloured by ideological considerations. For 71

Stalin’s Economic Advisors instance, when the Institute prepared analytical reports on Western economy for the Central Committee in 1936, Varga said to his fellows, ‘we need to conscientiously collect and examine all the [statistical] materials available, whether they contradict with Marxism or not … You should clarify sources … Papers must have statistical data and concrete explanations on them without [Marxist] theoretical discussions’.79 In short, Varga’s colleagues were true believers in the Party’s ideology. However, this does not mean that they were prisoners of the official ideology as some recent Western scholars’ works on Stalin’s Russia suggest. At a glance, the Varga group seems to vindicate the argument of the self-proclaimed Foucauldians like Jochen Hellbeck: the Party discourse or ideology was so powerful, productive and conclusive that no Soviet subject could be freed from it.80 However, a closer look at sources about IMKh would produce a different interpretation: the Soviet ideology was itself so broad, inclusive and unstable that it allowed various infringed ideas. The Varga cohort apparently believed that ‘the Party is always right’, but also thought that the Party would be strengthened only if the ideology itself was constantly supplemented and even revised by new facts and changing realities. In 1930, in a meeting of the Institute’s academic council, Varga said: Now there are new essential changes within the boundary of capitalist economy … There are completely new relations, which would give us possibilities to provide supplements (dopleniia) for Marx’s and Lenin’s theory. That is a theoretical analysis of capitalism in the phrase of its general crisis … I am saying that, if our intellectual powers are sufficient, then we have objective possibilities to give a new chapter to the studies (uchenie) of Marx and Lenin [Emphasis mine].81

While Varga and the core group had promoted the official ideology, they were not dogmatists. They had frequently crossed the boundary of the Party doctrine and produced unorthodox methodologies, findings and syntheses. More interestingly, what allowed them to maneuver within such an inclusive ideological set was the pressure of the Party itself. That is, the Institute was required to show more than the ideological teachings by the


Operation Party that sought to understand what was happening in the capitalist economy for policy making. Kaplan, one of the core economists in the Institute, remembered Varga’s advice to the authors of policy papers for the Party leadership: Our bosses, especially Stalin, underlined by Varga, did not want to take their time away in getting the information not considered as being extremely important. Therefore, the things that confirm the correctness of our (Soviet) point of view and our political beliefs should not be the subject of the Institute’s analytical reports for the bosses. To the contrary, the things that convincingly and substantially illustrate our mistakes or even our stupidity (gluposti), undoubtedly, in Varga’s mind, should bring to the notice of the Party/State leaders.82

The relationship between the Party and IMKh had never been played out around the tensions between dogmatic Communist ideology and conscientious academicism. In fact, from the onset, control and autonomy did not exist in the both parties’ agenda. Rather than seeking tight ideological control of the Institute’s research, the Party’s main interest resided in getting its services, and more specifically in securing more objective analysis of world economy and politics from the researchers. As for IMKh, having originated from the Communist Academy, its reason for existence was service to the party-state. To the Institute’s fellows, the Party was not an external political force that tried to infringe upon their intellectual lives, but an organisation that they were eager to be a part of and contribute to through practical research and propaganda. The hallmarks of the relationship between the Party and IMKh were service and reward, not control and autonomy. The Varga Institute’s concern with the Party centred on how it could impress the Party leadership to provide even more services and receive rewards in the competition with other institutes. This concern evolved into an attitude with strong institutional interests, reminiscent of academic institutes in the post-Stalinist era.83 Varga summarised these mentalities when he talked about the Institute’s situations and future plans to his colleagues in a meeting of the Board right after he became its director: IMKh is a unique institute of all the others that should directly provide service (obsluzhivat’) for high authorities like Stalin,


Stalin’s Economic Advisors Molotov … They continuously turn to us and the Comintern also did that. We should be able to acquire many [resources] if we stress such dimension [Emphasis mine].84

Conclusion Since IMKh became a huge research empire and established its fundamentals in the early 1930s, its organisational structure, operating principles and the routines of its fellows did not change considerably until its dissolution in 1947. The Institute had five divisions and subordinate research sectors, which were a basic unit in which individual and collective projects were designed, monitored and completed. While those units were rigid enough to prevent drastic changes in personnel between sectors, the demarcation became blurry, when non-standing committees were formed across the sectors to conduct special collective research projects or internal inspections. The principle on which the Institute was managed was far from the democratic centralism that was an ideal principle for the operation of Soviet organisations. The Institute was dominated by Varga and the small number of the core scholars. As key members of the Board and the leaders of research sectors, they controlled the laymen’s research and steered the Institute in the direction that they desired. However, inside the core group, free and scholarly discussions were conducted and some democratic procedures of decision making were witnessed. Despite the brutal outlook of the Stalinist control system, the Varga Institute enjoyed academic and administrative freedom from Party control, especially in coming up with its own research directions, methodologies and topics, and in handling personnel and organisational matters. However, it would be not relevant to characterise the relationship between the Party and the Institute in terms of autonomy and control. The Institute shared many ideas, particularly about the role of academics in socialism, with the Party and wished to become one of its insiders. The Party’s major concern with the Institute did not seem to be a tight ideological control over it. The Party fostered the Institute’s revisions of specific teachings of Marxist-Leninist ideology to obtain practical information on the capitalist economy from the Institute. As a result, its relationship was increasingly


Operation defined in terms of service and reward. Probably, IMKh was not the norm of Soviet academic institutes in Stalin’s era, but a harbinger of the postStalinist period, in which institutional interests and competitions for service and reward became the major issue in the relationship between the Party and academia.


3 Theories

Introduction In late 1935, in a meeting for the core scholars of IMKh, Varga summarised the theoretical kernel of their study: Our study should have, as the [theoretical] foundation, the theory of cycle and the theory of capitalism’s crash (krakh). These two elements of Marxist theory are very tightly correlated and it is not possible to take the theory of cycle and reject the theory of capitalism’s crash at the same time and vice versa…1

Varga and his colleagues were not only Marxist economists who sought to build a grand theory on the capitalist system and its evolution based on the teachings of Marxism, but also were practical academicians who were expected to provide an instant analysis of contemporary capitalist economic conditions and changes for Soviet readers as well as the Party leaders. To undertake two theoretically different tasks, the Varga group took two related but distinct approaches. First, they approached the problems of the contemporary capitalist economy in terms of business cycles. Assuming that capitalist economy alternates between expansion and contradiction, Varga and his colleagues carefully traced periodic fluctuations in capitalist


Stalin’s Economic Advisors economy and tried to make a prognosis of their effects on Western politics. At the same time, they saw the development of capitalism from a more long-term perspective, attempting to theorise its secular tendency toward terminal crisis. As intellectuals produced by the socialist revolutions in twentieth-century Europe, they cherished a belief that the capitalism in their time was clearly in decline, fulfilling its historical mission and lurching toward collapse,2 regardless of periodic ebb and flow of the contemporary economy. The combination of these two disparate and sometimes contradicting approaches represented the main theoretical challenge for them. Eventually, they successfully managed to combine the two, producing their own version of economic theory and discourse on capitalism. In the ensuing two chapters, I describe the Varga group’s efforts to do that. In this chapter, I limit myself to discussing the broad theoretical perspectives framing their discourse on the contemporary capitalism. The Varga Institute’s economic theory, founded and developed almost exclusively by Varga himself, has been studied mostly within the Marxist camp. As Varga was one of the most prominent experts on capitalist economy in the former Soviet bloc, it was no wonder that ‘Eastern’ Marxists have paid special attention to his theoretical legacy on Marxian economics. Their studies have centred on Varga’s role in establishing the theories that dominated Soviet studies of Western economy and international politics in the latter half of the twentieth century: theories of state capitalism, state monopoly capitalism and general crisis. They have treated Varga as a founding contributor to those theories. Many studies argue that Varga’s theory was an alternative to Stalinist orthodoxy and characterise it as the Right or revisionist on the spectrum of theories of state capitalism. Focusing on Varga’s later works, which were published post-World War II and became controversial in a series of public discussions (diskussiia), they conclude that Varga had a statist perspective, which highlights capitalist states’ control over economic spheres and actually acknowledges their ability to manage the conflict of interests between classes. In their view, such a position contrasts with that of Stalin who, allegedly, believed that capitalist states were still only a tool of monopoly capitalists.3 In contrast, Western Marxists have not shown as much respect for Varga as have Eastern ones. Many studies, questioning the originality of his 78

Theories theory, have omitted him from the list of the major contributors to Marxian economics and its crisis theory in the early twentieth century. Among these contributors were Lenin, Rudolf Hilferding, Rosa Luxemburg and Henryk Grossman.4 For Western Marxists who were apparently inspired by Trotsky’s characterisation of Varga as ‘the theoretical Polonius of the Comintern’,5 Varga was more an empirical statistician than a creative theorist. Some works that do treat Varga as a theorist remain skeptical of his significance in the development of Marxism. For Richard Day, whose work on Soviet studies on Western economy in Stalin’s era has been highly influential on Western Marxists and non-Marxists, Varga’s theory was no more than a vulgar version of Luxemburg’s.6 While there is some portion of truth in the works of both Eastern and Western Marxists, they fail to reach a systematic understanding of Varga’s theory. The main reason for this is that most of the previous studies in the Marxist camp did not comprehensively review Varga’s oeuvre that spans more than 20 years in Stalin’s era. Instead, the literature has sliced them and concentrated on what he wrote about certain periods or events. As a result, scholars have produced quite different or even opposing characterisations of Varga: as revisionist,7 ‘reluctant conformist’,8 and loyal Stalinist.9 The second reason for the failure was that the previous Marxist studies have not distinguished the Varga cohort’s scientific products from its propaganda pieces, but simply employ them altogether as their source materials. As shown in Chapter 1, Varga and his colleagues saw those two types of works as fundamentally disparate, approached them from a different mindset and sometimes issued contradictory conclusions. It is no wonder that many previous studies, because of such indiscriminate use of sources, claim that Varga was theoretically incoherent and kept changing with the political winds.10 Interestingly, the few non-Marxist studies on Varga have the same limitations as the works from the Marxist world. Focusing on the particular subjects that Varga treated, they have not been interested in evaluating Varga’s theory in its totality: Hough concentrates on Varga’s work on postwar economy and politics; Roberts on his discourse on imperialism; Griffith on his theory of American capitalism; and Marantz on his writings on international politics.11 Some of them, indeed, show a sophisticated 79

Stalin’s Economic Advisors level of analysis of Varga’s particular ideas. Hough corrects the conventional Western description of Varga’s theory on postwar economy and proves that Varga did not envision crisis-free capitalism after 1945. Roberts shows that Varga had theoretically departed from Lenin’s original conception of imperialism since the early 1930s. However, such partial revisions are far from a systematic illumination of Varga’s economic theory. Duda and Mommen take a more comprehensive approach, covering Varga’s whole career as a Soviet academician.12 Unlike previous studies, especially those of Western Marxists who dismiss Varga as a statistician who simply copied Luxemburg, both works laud him as a sophisticated theorist. However, Duda and Mommen still have several notable limitations. The first is that they look only at Varga’s published works and a small number of his unpublished manuscripts. Their sources do not include Varga’s (and his colleagues’) most scientific works, namely, classified analytical reports for the Party leadership stored in Russian archives. Furthermore, like previous scholars, both Duda and Mommen indiscriminately discuss various genres of Varga’s works. Finally, they analyse Varga’s texts in a conventional manner of Marxist intellectual history that focuses strictly on theoretical logics and linkages between Marxist writings. Consequently, their books, despite their strong points, stop short of probing the depths of his economic theory and discourse. The complicated nature of Varga’s works stemmed from two theoretically different projects that Varga and his colleagues had to conduct at the same time: tracking the fluctuations of the capitalist economy and theorising its long-term tendency to crash. No previous studies, either by Marxists or non-Marxists, have ever captured the point. My study, taking this into consideration, arrives at a systematic understanding of his economic theory. Based on Varga’s and his colleagues’ scientific works, both published and stored in archives, I argue that they had attempted to undertake those two daunting tasks by combining theories of Marxian economics – not just Luxemburg’s but also Engels’s and Hilferding’s – and, more importantly, by grafting one ‘bourgeois’ economic theory, W. E. Mitchell’s business cycle one, onto their ideas and methodologies. More specifically, Varga borrowed Hilferding’s insights and Mitchell’s approaches for an analysis of the cycling movement of the capitalist economy, while adopting Luxemburg’s 80

Theories perspective to identify its long-term tendency. The result was a complex hybrid of the different traditions of economic philosophies. Mitchell’s cycle theory, which was highly concrete, statistics-oriented and historical, created a tension with the more generalist and abstract Marxist language in the Varga group’s texts. Despite this tension, the amalgam made by Varga and his economists had served well for their two different roles: Marxist theoretician and practical analyst.

Varga in the Tradition of Marxian Economics The main issue for Marxian economics in the early twentieth century was to understand the evolved capitalist economy after the first major economic crisis in the history of capitalism: that of the 1870s.13 Many Marxist intellectuals had a variety of names for it: the epoch of monopoly capitalism, the stage of imperialism and the era of general crisis. At that juncture, Marxists – especially their economic experts – were given a critical intellectual mission to theorise the capitalist economy and to grasp its new features based on the teachings of Marx and Engels. While Marx himself did not live long enough to leave any systematic analysis of the economic crisis in the 1870s and the subsequent changes in capitalism,14 Engels lived through the crisis long enough to write about it. Engels, watching the crisis in Europe in the 1870s, found its main source in capitalist overproduction. According to him, the fundamental problem of capitalism was ‘the contradiction between socialised production and the private appropriation of the products’. In the capitalist system, production was made in a socialised form by a collectivity of large social groups, like workers and employees, in large workshops and factories. However, the fruits of such collective or social labour were appropriated mostly by a small group of capitalists. These contradictions created the conditions for polarisation in capitalist society between the bourgeoisie and proletariat. On the one hand, capitalists become richer and richer until they have to dispose of their surplus capital accumulated through the appropriation. They generally do so by investing the surplus for their production apparatus. On the other hand, workers and employees are increasingly left destitute, losing their status as the main consumers in the market economy. Engels argued that such a contradictory 81

Stalin’s Economic Advisors operation of capitalism should lead investment or accumulation to constantly outstrip the growth in market demand.15 The so-called mainstream economists, who inherited the neoclassical tradition, believed that the law of supply and demand would solve the problem. But the co-founder of Marxism disagreed with them, positing that production and consumption were not simultaneously determined by the one law, but by different logics that respectively operated for each. Capitalists, under intensive competition with other capitalists, were compelled to develop the forces of production without regard to the limits of the markets. In Engels’s own words, [capitalist production] forces the individual industrial capitalist always to improve his machinery, always to increase its productive force. The bare possibility of extending the field of production is transformed for him into a similar compulsory law. The enormous expansive force of modern industry … appears to us now as a necessity for expansion, both qualitative and quantitative, that laughs at all resistance. Such resistance is offered by consumption, by sales, by the markets for the products of modern industry. But the capacity for extension, extensive and intensive, of the markets is primarily governed by quite different laws that work more or less energetically. The extension of the markets cannot keep pace with the extension of production. The collision becomes inevitable.16

This sort of collision, according to Engels, would cause an economic crisis in capitalism, taking the form of overproduction. Products and commodities, which do not find customers, pile up in warehouses, whereas a significant portion of population is left unemployed and not able to be a healthy consumer. Why then during a certain period of time did capitalism go without crisis and how were crises overcome in capitalist economy? It was simply because capitalism had continuously found new markets for overproduced materials. The absence of crisis was ‘due to the expansion of the world market’. In Engels’s thought, the problem of overproduction did not occur catastrophically, as far as the capitalist market had grown bigger and capital was more widely spread and distributed.17 Engels believed, however, that the world market could not expand forever. In the late 1880s, he noted that since the first major crisis of capitalism 82

Theories broke out in 1876, there had been ‘a chronic state of stagnation in all dominant branches of production … A dull depression, a chronic glut of all markets for all trades, which is what we have been living in for nearly ten years’. To Engels, this was a clear indicator that the world market had reached its limit. While such chronic stagnation did not apparently represent the full crash yet, it would not be followed by the period of prosperity: ‘It would necessarily become the normal condition of modern industry, with only insignificant fluctuations’.18 In a Marxist theoretical sense, Engels left two possibilities. One was that the capitalist crisis came from overproduction in the sphere of production which was governed by quite a different law from the sphere of consumption, namely, the market. When Engels posited that capitalists were forced to produce due to fierce competition with other capitalists, not passively adapting production to the limit of the market, he implied that the overproduction crisis was a purely internal matter of the production sphere. The other was that by acknowledging that the expansion of market had been the major remedy to the overproduction problem, Engels suggested that the crisis in the production sphere could be controlled by the availability of market, that is, situations in the consumption sphere. Thus, Engels’s teachings contained both production-oriented and consumption-centred perspectives on capitalist crisis, and could be interpreted either way. In his texts, there was no clear indication which one was more fundamental to capitalist crisis. Whether to define capitalist economic crisis as a product of ‘the anarchy of production’ or ‘the limit of market’ became a matter of theoretical choice for Marxist scholars in the next generation, who were eventually divided into two groups. In the early twentieth century, under the influence of Engels, a broad set of European Marxist ideas on capitalist crisis and transformation, epitomised by imperialism and monopoly capitalism, was formulated by many theorists, such as Lenin, Bukharin, Hilferding, Luxemburg, Grossman and others. Varga, undoubtedly, was part of this discursive tradition. By the time Varga became active in Soviet academia as well as on its theoretical front and finally came to be the chief of IMKh in the late 1920s, the tradition had produced two distinctive schools of thought, reflecting Engels’s own ambivalence. 83

Stalin’s Economic Advisors Inspired by Engels’s discussion of the limit of market, the first group found the main reason for economic crisis in low demand, compared to high supply, in capitalist society. They argued that capitalism had a chronic tendency of underconsumption, which had been the main factor in the crisis. According to Luxemburg, the theoretical frontrunner of the group, capitalism’s growth – what she termed the accumulation of capital – was made possible only by market stimuli. Capitalism itself would not be able to internally produce sufficient demands for constant economic growth because it sets a structural limitation to society’s overall consumption level. In the capitalist system, the income of workers, as the basis of consuming power, must come out of pockets of capitalists. However, capitalists are placed in a situation to be compelled to limit the pay raise for their employees because it directly relates to their profit-making and survival in competition with other capitalists. In other words, capitalists as individual entrepreneurs have all their interest in lowering or maintaining their workers’ income level, but they were not able to realise that such a ‘private’ interest would hamper the accumulation of ‘overall’ consuming demands in society.19 Consequently, in Luxemburg’s theory, what is necessary for further economic growth is sources of demand lying outside the capitalist system, that is, pre-capitalist societies, the so-called ‘third-party’, as the capitalist system itself could not create enough market stimuli internally. Where had they existed? Initially, they had been situated within Europe, namely, in the rural areas. As they were now all incorporated into the capitalist system, pre-capitalist societies could be found only outside Europe. For Luxemburg, this is the economic basis of the capitalism’s expansionist drive and its imperialist tendencies. To survive, capitalism has no choice but to expand its market by destroying pre-capitalist modes of production in Asia, Africa and South America.20 On the other hand, such expansionist destiny of capitalism defines its own ultimate limit. In the view of Luxumburg, capitalism, having conquered the world market completely, would enter a serious economic crisis and ultimately collapse. ‘The exhaustion of the pre-capitalist periphery leads to growing competition for the remaining markets, which marks the final phase of imperialism’. Imperialism was a political escape from economic crisis and ‘the political expression of the accumulation 84

Theories of capital in its competitive struggle for what remains still open of the noncapitalist environment’. External markets are the engine of capitalism’s continuous growth, providing the sources of a net addition to purchasing power for capitalist economy. If not, the economy would lapse into crisis.21 The second group, pioneered by Tugan-Baranovsky, who, ironically, himself was not an orthodox Marxist, and developed by an Austrian Marxist, Hilferding, rejected the theory of market and consumption as the main stimulus for capitalism’s growth. According to them, capitalism’s internal law could constantly create demand within capitalist society and would not be as desperate for an external market as Luxemburgians argued, as long as some important institutional arrangements in the sphere of production are maintained. For them, economic crisis is not a result of the lack of market stimuli, but stems from the fact that maintaining such arrangements is difficult or almost impossible in the capitalist system. The source of capitalist crisis, they posit, is strictly from the sphere of production, not the sphere of consumption: overinvestment in key industrial branches, a subsequent or simultaneously proceeding disproportional contradictions among them, and a declining rate of profit.22 For the second group of scholars, particularly Hilferding, the driving force of capitalist growth is not consumption but profit. The reason why capitalists invest is not simply because there is demand from society but because they want to reduce their production cost, win the competition with other capitalists in the existing market, and ultimately increase their rate of profit. The limited consumption power of the population, to which the first group attached the most importance for economic setbacks, is only the other side of the growing mass of profit appropriated by the capitalist class. As long as profit is there, capitalists would be ready to invest despite the limit of market. Could profits be continuously made within the existing market, without new external ones? According to the second group of economists, the answer is absolutely positive. Capitalist production could create an internal market; the fact that one capitalist, for example, makes an investment means a rise in demand for other capitalists who are ready to sell their products to the capitalist. In addition, such investment means a hiring of more workers as consumers. Unless all the capitalists invest 85

Stalin’s Economic Advisors simultaneously, namely, as long as some capitalists spend money for their further investments and others do not, or as Hilferding says, as long as the proportion between capitalists in key industrial branches is made, there should be a constant internal market for them. Some capitalists would become consumers for other capitalists. Then, why did periodic crises in the capitalist economy take place? It was because the constant maintenance of such proportion is very hard in capitalist society. In periods of prosperity, many capitalists in key branches tend to overinvest in expectation of even more profits. When the proportion starts to be broken, the difference of profit of rate between branches becomes so great that some go into bankruptcy. Capitalist society’s overall purchasing power suddenly plunges because capitalists, even with more business, start to lose their customers who are other capitalists.23 Hilferding argued that to deal with such crises and avoid competition, capitalists formed gigantic organisations like cartels or trusts, trying their best to maintain the proportion, and invested surplus capital gained from such non-competition into new lands or colonies. For him, this is the economic basis of the origins of monopoly capitalism and imperialism.24 However, according to the Austrian Marxist who later became the financial chief of the Weimar Republic, the ultimate coordination of such proportion would be impossible unless one dominant institution becomes the towering manager for the productions of all cartels and trusts.25 Thus, for the second group, the major issue for capitalist crisis is the maintenance of the proportion in the sphere of production, not market demands in the sphere of consumption. Lenin and other notable Soviet theorists, like Bukharin and Preobrazhenskii, rejected the analysis of the first group and followed Hilferding.26 In contrast, Varga has often been described as a loyal Luxemburgian. However, Varga’s theoretical position was an eclectic one, in which he skillfully combined the theoretical points of both schools, incorporating them into Engels’s original insights. In his first article published in IMKh’s journal after Varga became its head in 1927, he told his readers that Marx’s teachings on economic crisis could not be properly understood through a single theory that highlights one element:


Theories Indeed, there exist many ‘crisis theories’ and its numbers are growing each year. They all, some exclusively, hold elements that have a partial explanatory power and they do not include the whole problems, but pull out only one of those elements and attempt to explain all the problems of crisis through the one … The same can be said about theories from Tugan-Baranovsky, Lederer and others Marxist economists that, in essence, discuss fragmentary parcels of the integral system of Marx’s ideas.27

In a series of theoretical writings on capitalist crisis from the 1920s and early 1930s28 as a Comintern theorist and as a participant in the Soviet theoretical front,29 Varga followed Engels and attributed the crisis to ‘the contradiction between social production and private appropriation of the products’. As the fruits of production made by larger masses in capitalist society are appropriated by smaller capitalists, the contradiction between productive force and purchasing power becomes insurmountable and must ‘necessarily lead to periodically recurring crises of overproduction’. Initially, Varga linked the source of overproduction crisis to the sphere of production. Reminded of Engels’s ‘anarchy of production’, Varga argued that overproduction is not something that could be avoided in the capitalist economy, ‘since the individual capitalists, driven by the necessity of winning in the competitive struggle, develop the productive forces without taking the relative diminution of consuming power into consideration’.30 When Varga stated that such crisis is ‘periodically recurring’, however, his works marked a departure from Engels, who did not consider the question of business cycle in his crisis theory. If overproduction is unavoidable in capitalist economy, why does it not manifest constantly but recur periodically, namely in cycles? Varga apparently thought that Luxemburg’s market-oriented theory was not able to relevantly explain the fluctuations of capitalist economy. In discussing capitalist crisis’ cycling recurrence, just as he did with the source of overproduction crisis, Varga stuck to the sphere of production as the main explanatory element and sought insights from the second group, including Hilferding, whose focus was on the sphere of production. Varga attributed the fluctuations of capitalist economy to the capitalist law of accumulation, writing ‘the accumulation of capital in


Stalin’s Economic Advisors its real form signifies an extension of the purchasing power of capitalist society, an enlargement of the capacity of capitalist markets to absorb commodities’.31 In other words, accumulation means that some capitalists are making investment, which creates markets for other capitalists who are ready to sell their products, in other words, the means of production, to the first. This is a reiteration of Hilferding who pointed out the possibility of the constant expansion of markets through coordinated or ‘proportioned’ transactions between capitalists in different branches. Varga explained the law of accumulation in more detail: ‘Accumulation, the expansion of production by increasing the means of production, denotes not only an expansion of purchasing power, but also entails a certain temporary expansion of the consuming power of society. The expansion of production in Division I (Heavy Industry) is accompanied by an increase in the number of workers employed and in the variable capital in this division; the consuming power of the proletariat is raised. The increase in the number of employed workers  – provided the rate of exploitation remains the same – is accompanied by a growth in the total surplus value, and consequently in the demand for consumers’ goods on the part of the capitalist of Division I.  Hence, larger sales of increased production in Division II (Light Industry), an increase in its variable capital, in its surplus value and in consumption by workers and capitalists in that division. At the same time, Division II renews its fixed capital to an increased degree, and gives orders to Division I, thus raising the latter’s production still further. Revival mounts to the stage of prosperity’.32 How do such good times end? According to Varga, it is because of the two-sided process of the accumulation, which is ‘the immediate motive force behind revival and prosperity, but on a higher plane it is also the immediate cause of crises. Once the process of real accumulation in the prosperity phase has reached a certain stage, a change of quantity into quality occurs. The role of accumulation changes abruptly. Hitherto the basis for the boom, it now becomes the immediate cause of the crisis’.33 At that moment, accumulation is no more than overinvestment, which leads to the surplus of unutilised production apparatus. It is an impediment to further renewal and expansion of fixed capital, namely to the investment of capital in new means of production. Now capitalists could no longer be 88

Theories consumers of other capitalists’ products. Unsold goods and commodities start to pile up in storehouses, the wave of bankruptcies crests and the rate of unemployment soars. Capitalist economy is back to the stage of crisis. Then, when the crisis hits the bottom, in Varga’s logic, the internal law of capitalism begins to operate to overcome its lowest point. After many factories are closed and the production level finally drops to a point at which products’ prices and profits bounce back, there emerges a demand for new investment. The new means of productions, produced in Division I, are in demand for new or renovated factories in Division II and Division I. A condition for the accumulation of capital is made and capitalism is now in an upward swing once again.34 Thus, Varga saw the business cycle in capitalism, oscillating between prosperity and crisis, strictly as a question within the sphere of production just as Hilferding did. The availability of external markets (Luxemburg) is not a factor in the fluctuations of capitalist economy. Varga’s theoretical debt to Hilferding is even more pronounced, when IMKh’s director discusses the power of monopoly and financial capitalists in dealing with crisis. Following Hilferding, Varga acknowledged that they could, albeit temporarily, organise the economy and coordinate production through the internal monitoring of its quantity, by artificially blocking further accumulation that would lead to overinvestment and precipitate a crisis. In an initial appraisal of the Great Depression in 1930, Varga anticipated that the crisis would not destroy monopoly capitalists, relying on Hilferding’s key concept, proportion: ‘Under monopoly capitalism the capitalists can protect themselves from a fall in prices and erase the disproportion with the help of a sharp and prolonged decline in production’.35 Then, a critical theoretical challenge arises here: if the capitalist economy is in a constantly recurring cycle and its crisis could be partially or temporarily managed by the power of monopoly capital, how could one, as a Marxian activist, capture a secular tendency toward the crash of capitalism? Hilferding’s theory would not offer an answer to that, as it just focuses on the fluctuations. To reveal this long-term tendency, not just the cycling waves of capitalism, Varga turned to Luxemburg. For Varga, the main reason that Hilferding’s theory failed to do that was that this Austrian Marxist understood the nature of 89

Stalin’s Economic Advisors accumulation too simply. In Hilferding’s logics, accumulation just signifies the investment of the means of production by capitalists, which in turn indicates the creation of market for other capitalists who are in a heavy industry branch. Contrary to Hilferding, Varga saw that accumulation involves more than just investment:  ‘But at the same time the ultimate effect of accumulation is to accentuate the contradiction between the productive and consuming power of capitalist society, since of necessity it reduces the consuming power of capitalist society still further, relatively speaking. This follows from the nature of accumulation. It signifies a higher organic composition of capital, a rise in the productivity of labour through the application of improved and larger machinery, a decrease in variable capital compared to constant one, the tendency of the rate of profit to sink, and the reduction of the consuming power of society’.36 In other words, for Varga, the accumulation of capital has two major consequences: deepening of the organic composition of capital, meaning that, of the whole capital, the relative weight of production apparatus/ facilities is getting heavier than that of labour; and technological renovation, forced by stiff competition between capitalists to cut production costs, which involves the rationalisation of production and labour process and leads to massive layoffs of workers and employees. Such development means a relative diminution of the overall purchasing power of capitalist society, because workers and employees constitute its key portion. The decrease is relative in the sense that the consuming power is diminishing in relation to the development of capitalist production. Hilferding would see no glaring market problem in it, supposing that major demands would be constantly created by some ‘proportioned’ investments by capitalists, not by individual consumption by the masses. However, Varga saw it differently, relying on Luxemburg’s market-oriented perspective. While the sphere of production itself could produce some internal market stimuli within it as Hilferding showed, the demands that arise from the sphere are eventually limited by the purchasing power of capitalist society, in Varga’s words, ‘the sum available for the purchase of commodities for individual consumption’.37 In an ambitious attempt to establish his own crisis theory, Varga argued: 90

Theories For in the final analysis, as Lenin says, all means of production serve for the production of means of consumption. The extent to which the available industrial plant can be utilised, and hence in the long run, the sale of means of production as well – the course of business in Division I (Heavy Industry) – depends, at bottom, upon the sales volume of means of consumption … The limitation of the consuming power, its continual and inevitable relative diminution, is what decides the fate of capitalism.38

According to Varga, Hilferding’s theory ‘fails to see that the fundamental cause of crisis lies in the contradiction between social production and private appropriation, as expressed in the contradiction between productive power and consuming power’,39 because this Austrian economist’s understanding of accumulation did not theoretically see the impoverishment of the working class, caused by the progress in organic composition of capital and technological renovation, and did not recognise that the subsequent problem of market, the phenomenon of underconsumption, would govern the activities of investment by capitalists. Influenced by Luxemburg, Varga argued that such underconsumption provided capitalism with a chronic market problem and became the source of the secular tendency towards the crash of capitalism. Capitalists had been overcoming this problem by finding the third party as an additional consuming subject: markets outside the capitalist system. In the early days of capitalism, there were many third-party consumers even within Europe: the mass of peasants. When such days were gone, the capitalists went out to colonies. However in the early twentieth century, colonies were becoming scarce and the Soviet Union made the world market available for capitalists even smaller. In Varga’s view, in the current period of capitalism, the sources of consumption were running out, making it ever more difficult for capitalists to dispose of their commodities. Capitalist internal markets were shrunk because of mass unemployment, a necessary product of the accumulation of capital. External markets, colonies, were divided and already exhausted by capitalist powers, as indicated in World War I, which, Varga and many Marxists believed, was their desperate attempt to resolve the issue by repartitioning the colonial worlds. As capitalism could not solve the fundamental problem of market limits at that juncture and would 91

Stalin’s Economic Advisors not do so in the near future, it had, according to Varga, already entered an era of general crisis (obshchii krizis). He formulated this crisis as the chronic idleness of a large part of the productive apparatus, the chronic mass unemployment and the chronic agrarian crisis, as expressed in plunging prices of agricultural prices. In Varga’s scheme, those three chronic phenomena represented the economic part of the general crisis of capitalism, while its political basis was the presence of the Soviet Union and the revolutionary struggles in the capitalist and colonial worlds.40 It should be noted that this does not mean that Varga was a loyal Luxemburgian as many Western scholars claim. As described above, Varga, like Hilferding, explained the cycle of capitalist economy in terms of the contradiction in the sphere of production, not the problem of market. Varga incorporated Luxemburg’s market-oriented perspective – the sphere of consumption sets the boundary of the cycling fluctuation – into his crisis theory because he needed to ensure that the cycle of capitalist economy is not only in a continuously recurring spiral but also under a secular tendency toward the collapse of capitalism. It is more accurate to conclude that Varga’s crisis theory combined the two Marxist schools on capitalist crisis. He made it clear in his major theoretical writing: The accumulation of capital forms the course of cycle, causing both prosperity and crisis. The material basis of the course of cycle is fixed capital. However, the repetition of cycles does not mean that the cycles are a series of identical process. Each new cycle is not a simple recurrence of previous ones:  each cycle, at the same time, represents a step in the history of capitalism, bringing it one step closer to its end. Each crisis destroys a large number of small capitalists, which leads to further centralisation; each prosperity means new enormous investment to fixed capital and drastic increase in the organic composition of capital; due to that, conditions are brewing for new crisis quickly. The contradiction between the unlimited drive by capitalism to expand and narrowly limited consumption of the mass becomes, at a very short interval, so acute that only a new crisis can, forcibly, link production and consumption each other once again. This economic moment – not a technical moment


Theories of more rapid depreciation of fixed capital – causes a tendency to shorten the duration of cycle.41

For Varga, in the condition of general crisis, the duration of cycle is growing shorter. This means that each cycle is not simply repeating at the identical interval but becoming a part of the capitalist economy’s long-term tendency towards its final crash. Varga saw the cyclical nature of capitalism, but anticipated that each shortened cycle would defy its simple reiteration and drove the economy to the end.42 Varga’s eclectic position between Hilferding and Luxemburg had an interesting theoretical consequence. The both economic theories actually opened up the possibility to note the role of politics in economic crisis management. Hilferding’s theory implies that a coordination to erase the key contradiction in the sphere of production, namely disproportion, could possibly be sustained in a longer period if some political arrangement is made in capitalist society. More specifically, he claimed that a longterm proportion would be possible if a universal entity, such as a dominant state apparatus, was in a position to oversee and administer productions in all the important industrial branches. Although, as a revolutionary socialist, Hilferding denied this possibility and insisted upon the inevitability of crisis in capitalist society, he implied that such coordination is not theoretically and economically impossible but only politically so.43 Hilferding’s statement could be interpreted to mean that some changes in the realm of politics of capitalism could affect capitalist crisis. In fact, Hilferding himself became minister of finance in the Weimar Republic in 1923, a key post in the government to oversee the whole German economy. The Luxemburgian perspective even more directly connects politics to crisis management. When Luxemburgians argued that finding colonies and world markets was the only possible solution to economic crisis, they were in fact making a theoretical statement that a political action, namely, imperialist expedition, could be a remedy to capitalist economic problems. Their theoretical scheme suggested that politics could create market demand. If imperialist politics could make it possible to sustain capitalism, would not other political maneuvers, such as rearmament and public undertaking, also create demand?


Stalin’s Economic Advisors While Varga was active in Soviet academia, the landscape of Western politics underwent significant changes. Mostly due to the war economy experiences in World War I, the capitalist state increasingly emerged as the dominant institution to manage the whole national economy. This tendency was intensified in the 1930s, when economies needed to be more tightly administered given the Great Depression and the rearmament projects. Varga’s theory, a combination of Hilferding’s and Luxemburg’s, certainly had sufficient theoretical room to recognise the importance of the state, more precisely, its economic management in times of crisis. As will be discussed in the next chapter, as early as 1934, Varga had begun to discuss the state-capitalism tendencies, or the planning activities of the capitalist states.44 And, while he stuck to the idea of Luxemburg that there would no longer be external market available for capitalists, the Luxemburgian framework made him readily recognise the new possibilities of the New Deal and Fascism: the capitalist state could create new internal markets through its fiscal and monetary policies, the so-called Keynesian experiment. Through drastically increased state expenditures, in Varga’s eyes, the state had become a creator, manager and manipulator of aggregate demands.45 As a lifelong Marxist, Varga believed that such politics had their limits in resolving economic crises. The state’s coordination should not be possible over an extended period because of contradicting interests between monopoly capitalists. Keynesian policies would only be a short-term remedy, given the situation in which the world market could not physically expand any further. Throughout the 1930s and 1940s, Varga repeatedly stressed that the rise in state expenditures, after some sparkling for a moment, would lead to another form of overproduction and underconsumption crisis. In other words, in Varga’s belief, capitalism could not overcome its fundamental contradiction between socialised production and private appropriation of products, as expressed in the limit of market. Despite this belief, however, Varga’s eclectic theoretical framework did not blind him to the achievement of the capitalist state in the 1930s and 1940s. He acknowledged that the state had softened the economic crisis, especially since 1932, the lowest point of the Great Depression. Later, right after World War II, Varga characterised the role of the state in managing the national economy as ‘expanded’ and ‘decisive’.46 In his scientific texts, 94

Theories as will be shown in Chapter 4, the category of state had been increasingly separated from the contradiction of capitalist economy. Furthermore, the state had been often described as antagonistic to the inner logics of capitalist economy that had been the focus of the Marxian economics.

The Methodology of Kon’iunktura As shown above, Hilferding’s version of Marxism provided Varga with a broad theoretical framework through which he explored the cycle of the capitalist economy and was able to find the main source of such fluctuation in the accumulation of capital. However, Hilferding’s insights allowed Varga to discuss capitalist crisis’ origins, developments and perspectives only at a general level, mostly because they were not based on empricial analyses of statistical data but on theoretical reasoning. Highly abstract Marxist discourse did not turn out to be sufficient to Varga, who could not stay at the level of pure Marxist theory while being in charge of a practical state-sponsored institute and as an economic advisor for the Soviet Party leaders. Varga and his economists in IMKh were placed in a position where they had to pay the closest attention to the detailed current conditions of the capitalist economy, its immediate changes and the directions in the near future. The Varga group was not able to find useful tips for that within the boundaries of Marxism. Marxism as a body of socio-economic thought had been weak in developing a methodology to examine statistical facts. Although Marxist intellectuals like Lenin highly valued the importance of statistics, their focus was on general theory-building, not a detailed statistical description. Varga and the company needed to import a methodology to trace what was really happening in the capitalist economy, particularly in its sphere of production, which was directly related to the business cycle. In Varga’s time, there were numerous business cycle theories, or explanations on swinging between boom and bust, in mainstream Western economy. Interestingly, most of them seemed to have the same limitation as Marxian theories on the cycle: they were general theories that made broad assumptions and deductive reasoning, lacking systematic and close observation of statistical facts. 95

Stalin’s Economic Advisors Varga found an alternative in the ‘unorthodox’ American economic scientist Wesley E. Mitchell’s business cycle theory, naming it as a Kon’iunktura study. Mitchell had earned a PhD degree in economics under Thorstein Veblen and J. L. Laughlin at the University of Chicago in 1899. His permanent academic home became Columbia University and the National Bureau of Economic Research (NBER), which he directed until 1945.47 In 1913, he published a monograph, Business Cycles, which according to one commentator had as strong an influence on Western economy in the early part of the twentieth century as other classics like Alfred Marshall’s Principles and J. M. Keynes’ General Theory.48 Varga seemed to have been greatly influenced by this monumental work. In fact, Mitchell’s theory had some fundamental commonalities with Marxian economics about the cycle of capitalist economy, which might have provided Varga with some theoretical familiarity. Like Marxism, Mitchell had an endogenous perspective of the causes of the cycle, stressing the internal dynamics of capitalism, and rejected external shocks, like wars and natural disasters, as being primary. Also, like Marxism, particularly, Hilferding’s version, Mitchell posited that profits, not the equilibrium of supply and demand as neoclassical economists suppose, are the most critical factor in determining production and investment. In addition, while Mitchell was not as radical as the Marxists, he was also a reformer who supported strong state intervention to buffer the harmful effects of market.49 The main objective of Mitchell’s business cycle theory is to explain a process whereby each cycle phase turns into the next one. His phases are cycled around revival, full prosperity, crisis, depression and a fresh revival. Each phase of the cycle has its own internal seeds for the next one. For Mitchell, the decisive factor in the transition is profit. Consequently, Mitchell’s works are organised around the analysis of economic activities related with profit. In his scheme, profit is revenue (or total price) minus costs. Revenue (price) consists of consumption, investment, government spending, and net exports. And cost includes labour costs, depreciation, raw material costs, interest costs and taxes. In Mitchell’s calculation, ‘since profit determines production and investment, and since profit is determined by those factors of revenues and costs, all of his empirical work consists of tracing and explaining the behavior of those over the cycle’. Mitchell 96

Theories ‘believes that one does not have a complete cycle theory until each of these variables is examined and explained over the course of the cycle’. Howard Sherman summarises Mitchell’s profit-centred theory as follows: Mitchell’s own way of expressing the model is as a process. He explains the downward turning point (the crisis) by limited demand and rising costs, inevitable results of prosperity. The limited demand is explained by the limits on consumer demand (falling C/Y and falling W/Y), as demand rises more and more slowly toward the peak. At the same time, raw material costs and loan costs are rising rapidly. Thus profits are squeezed and this results, with a lag, in falling investment. Once started downward, there is a cumulative process called today the multiplier and accelerator, causing depression. Depression eventually leads to revival because there is floor to demand, while at the same time there are rapidly falling costs. Consumer demand flattens out because C/Y and W/Y are rising. Unit costs fall because raw material costs and interest rates are falling more rapidly than prices of finished goods. This causes profits to stop falling and expected profits to rise, leading eventually to rising investment. The revival leads to a cumulative process of multiplier and accelerator, which causes rampant expansion and prosperity. The new prosperity eventually leads to a new crisis for the reasons given above.50

Such a general theorization of a business cycle, however, was not one that impressed Varga much. Rather, Varga was attracted by the Columbia professor’s concrete methodology to approach statistical data. In Mitchell’s view, many Western theories on the cycle picked one or two outstanding factors to explain ‘the recurrent ebb and flow of economic activity’. For Beveridge, the source of economic decline is industrial competition, May attributes it to ‘the disproportion between the increase in wages and in productivity’, Hobson to over-saving, Veblen to ‘a discrepancy between anticipated profits and current capitalisation’ and Sombart to ‘the unlike rhythm of production in the organic and inorganic realms’.51 And the list could go on and on, including Marxist economists such as Hilferding who picked disproportion between major industrial branches and Luxemburg who selected underconsumption. When Mitchell 97

Stalin’s Economic Advisors posited that the rise and fall of profits determines economic fluctuations, his theory, at first glance, did not seem different. However, unlike previous economists who started their theoretical analysis with assumptions that are not based on the study of statistical facts, Mitchell’s formulation was derived from ‘systematic observations of experience’. Occasionally, of course, the existing literature ‘employed statistical records, but as a rule their function, when called upon at all, was merely to support a particular stage of an argument’.52 For Mitchell, to understand the business cycle, economists should be ‘attacking the facts’ first. He stated that explanations or theories of the business cycle had to be tested by the study of statistical facts. Instead of going through a logical process to theoretically advance an outstanding factor as the cause of the business cycle, in Mitchell’s own words: to observe, analyze, and systematise the phenomena of prosperity, crisis, and depression is the chief task. And there is better prospect of rendering service if we attack this task directly, than if we take the round about way of considering the phenomena with reference to the [previous] theories.53

The most important materials for such an ‘attack’ are the statistical records of business activities, including goods’ prices, the quantity of productions and trade volumes. In the first edition of Business Cycles, Mitchell gathered, systematised and interpreted a huge amount of statistical data from 1890–1911, drawn from four major capitalist countries, including the US, Britain, France and Germany. The reason that he set focus on this 20-year span and the four countries was because of his obsession with ‘accurate’ facts. Mitchell believed that a ‘minute examination’ of a shorter period and a limited number of states in which more full and precise statistical records are available could bear more fruits than a general survey of a longer period and an expanded number of states which might include incomplete data. Through such rigorous empiricism, according to one commentator, Mitchell’s work had turned ‘the investigation of cycles from speculative to quantitative analysis’. Since Business Cycles, ‘business cycle theory became, or at least approached, a tested explanation of experience instead of an exercise in logic’.54 98

Theories Exploring a myriad of data, in Business Cycles, Mitchell located numerous cycles in the four countries in the previous 20 years. What he primarily did was to present a quantitative ‘analytic description’55 of fluctuations, rather than qualitative and general discussions on their cause at an abstract and theoretical level. More specifically, Mitchell explained specific ‘sequences or relationships [between economic factors] which his statistics showed to recur more or less regularly’ during the period.56 He did so, for example, by answering specific questions like ‘does the demand for consumers’ goods actually grow more slowly than the supply in the years preceding a crisis?’; ‘do the costs of constructing new industrial equipment actually rise so fast as to discourage investment?’; ‘do the prices of farm products actually fluctuate in a different fashion from the prices of coal, iron, and copper?’; ‘do interest rates actually lag behind prices on the rise and fall?’57 In doing so, Mitchell found some patterns of business cycles in the four countries and offered people who were interested in business an opportunity to predict the course of the economy in its next cycles. Interestingly, his findings revealed some great diversities and uneven developments in economic fluctuations in the US, England, Germany and France from 1890–1911. Differences, discrepancies and dissimilarities became the keywords when Mitchell discussed the degree, direction and timing of the business cycles in those countries. Kon’iunktura review on the world economy, the critical part of the works that Varga and his colleagues had done in IMKh, directly followed Mitchell’s teaching. From the mid-1920s to the early 1950s, the Varga group, especially its Kon’iunktura department, collected, compiled and ordered statistical records on the development of the contemporary Western economy, and identified sequences or relationships in the data. Varga was the first Marxian economist who had taken Mitchell’s statistical methodology to explore the fluctuations of the capitalist economy, while other contemporary Marxists, most notably Preobrazhenskii and Grossman, were still building a general theory.58 There were numerous instances that showed the influence of the Mitchellean ‘facts-oriented’ methodology on the Kon’iunktura department’s research. One of them happened in a meeting of the department in IMKh in spring 1938, in which Varga admonished one researcher who allotted many pages 99

Stalin’s Economic Advisors of his report on the contemporary capitalist economy for theoretical discussions: We do not need to deliver a general report on the condition of the world capitalism in our Kon’iunktura department meetings. For that, we sometimes have public lectures, which are a completely different matter. For our internal use, it is fully sufficient to present diagrams and figures precisely. In my mind, [Marxist] theoretical explanations of them are not needed here.59

Of course, Varga, as a Marxist, did not embrace Mitchell’s theory without reservation. For example, while, of all the types of his statistical data, Mitchell attached the highest importance to the price index of goods, the Soviet leading economist still believed that records on the sphere of production, namely the physical volume of productions, are more important than those on the sphere of circulation. Mitchell’s statistics in Business Cycles and other monographs always start with ‘data to measure variations in prices and variations in the volume of trade’, because he believed that ‘the money economy subordinates the industrial process of making goods and the commercial process of distributing them to the business process of making money’. Mitchell posited that the fluctuation of economic activity depends on the profits of business enterprises. And ‘profits, in their turn, depend upon the margins between buying and selling prices, and upon the volume of transactions’, not the physical volume of goods. He summarised, ‘for where money economy prevails there economic activity is animated and guided by the prospects of winning pecuniary profits. To understand the rhythmical alternations of expansion and contradiction to which this activity is subject, we must therefore look at affairs from the business viewpoint. And from this viewpoint, changes in the volume of goods made available for use are by no means the most important phenomena of prosperity, crisis and depression’.60 In short, in Mitchell’s works, price indexes, which are calculated relatively in relation to costs, are always central. What is interesting is that Varga’s criticism of Mitchell’s price-centred position largely stayed at a rhetorical level. Varga stated that such a position reflected the bourgeois economics’ propensity to stress the sphere of 100

Theories circulation more than that of production. Additionally, although Varga acknowledged that Mitchell was an ardent supporter of reform of the US economy, the leading Soviet economist maintained that the Columbia professor’s theory only followed the ‘business perspective’ and his works were ‘under the sponsorship of capitalists’.61 Other than such rhetorical attacks, however, Varga did not challenge Mitchell’s methodology. More specifically, Varga and his colleagues in the Institute did not depart from Mitchell’s statistical devices. They had imported Mitchell’s statistical tables and breakdowns without modifications, except for changing some formats or layouts, especially for comparison between the data on 1929, the year before the Great Depression, and the records on later years. Usually, Varga and his economists took 1929 as the benchmark; in their statistical devices, 1929 always represents 100. In many cases, in their published quarterly reviews on the world economy and in their classified analytical reports for the Party leaders, they had extensively used and directly cited bourgeois statistics from the National Bureau of Economic Research where Mitchell had been the chief and from the German Kon’iunktura Institute that had adopted Mitchell’s theory. The most outstanding revision that they had made was a simple position switch between production and price indexes, reflecting their Marxist production-oriented perspective. In their reviews and reports, contrary to Mitchell’s works, statistical data about the physical volume of production usually appeared first, followed by price indexes. This revision in style, however, made little difference in their analysis of the capitalist economy and crisis. In fact, for Varga, making a fundamental revision of Mitchell’s methods was apparently never his objective. In an extensive review of Mitchell’s business cycle study, after he delivered some criticism at a rhetorical level, Varga estimated it as being productive in ‘quantitatively measuring economic phenomena through direct observations’.62 And Varga had never attempted to distinguish between his Kon’iunktura study and Mitchell’s at a theoretical level. In November 1935, when Varga returned to the Institute after nearly a year of sick leave, he stressed the vital importance of the Kon’iunktura study and revealed his thoughts on the difference between his study and Mitchell’s: 101

Stalin’s Economic Advisors Comrades, the aim of Kon’iunktura observation is, undoubtedly, not just simply to provide and interpret statistical data. A better Kon’iunktura research should provide an accurate prognosis. This is the task that both the bourgeois Kon’iunktura works and ours should have. Bourgeois needs this because, based on their works, they take some economic or other measures that are individual; we need this because the course of the development of capitalist economy determines political conditions in capitalist states and the possibilities of their economic activities.63

For Varga, the biggest problem of Mitchell’s study was its service function for businessmen, not its methodologies. Such a problem could be overcome depending on who was using the methodologies. Varga argues, ‘only the close tie of Marxian theory with such mathematical-statistical methods of Kon’iunktura study, namely, the subordination of such academic institutes to Marxist leadership, could provide effectively useful results’.64 If data could be used and interpreted under the leadership, the bourgeois Kon’iunktura study would be fruitful even for socialists. In short, for Varga, the difference between his study and Mitchell’s was who they were serving. That Varga imported Mitchell’s methodologies without any fundamental revision made significant theoretical effects on Soviet understanding of Western economy. Mitchell’s strictly empirical and positive approach had pushed Varga out of the generalist tendency of Marxism. Following Mitchell, who meticulously traced the economic development of the four major capitalist countries based on statistical data of the business activities, made a comparative or ‘relative’65 analysis and showed great diversity in the business cycles, Varga and his company’s works became sensitive to volatile economic conditions in which individual states had been placed and their unequal development, rather than set their focus on the universal laws of capitalist economy and its general phenomena. In the process, individual capitalist states’ specific situations, governed by their own economic structures and the historical conjunctures in which they were situated, emerged as the key explanatory factor to the fluctuations and transformation of the capitalist economy. Although Varga and his colleagues had never separated themselves completely from the orthodox Marxian economics’ generalist 102

Theories tendency, the momentum was certainly on the side of the Mitchellean approach, as will be seen in a detailed manner in Chapter 4. Many contemporary Marxists did not fail to notice the tendency that the Varga cohort had been making at a theoretical level. Bukharin once pejoratively called Varga ‘a man always writing comments on statistics he had collected elsewhere’. His opponents disparaged Varga as a ‘typical German’ professor, which means a boring bookkeeper, not a creative theorist. More recent scholars maintain a similar image of Varga. Day simply reproduced the image by saying ‘Soviet economists turned in the mid1930s to partial problems that might more easily be understood in the light of empirical evidence. The difference between national policies [Emphasis mine]’.66 Duda, in a more balanced manner, assessed the change in Varga’s methodology, terming it ‘empirical Marxism’.67 From the perspective of the orthodox Marxism, Varga’s reliance on Mitchell could be seen as ‘degeneration’ and taken as evidence for Stalin’s economists’ inability to produce a first-rate theoretical work.68 However, the non-existence of such theoretical work in the era of Stalin was not because the dictator purged every able Marxist economist in the 1920s, as some Western scholars had asserted.69 It was rather because the Marxian economics’ methodologies were simply inadequate to produce immediate analytical results on the volatile changes of the capitalist economy in Stalin’s time. Varga’s ‘bourgeois’ or non-Leninist tendency was, in fact, directly from the requests of the Party leaders, including Stalin, who were more concerned with specific economic developments in individual capitalist states than with broad generalisations of contemporary capitalism.

Conclusion Varga’s theory on the crisis of capitalism was built by a combination of various economic ideas and methodologies. From Hilferding, Varga learned the mechanism of the immanent laws of capitalism to make the economy fluctuate between boom and bust. Luxemburg provided a theoretical framework to capture the long-term tendency of capitalism and to define the limit of its market expansion and growth. W. E. Mitchell’s statistical economics was concerned with the same area as Hilferding’s theory, 103

Stalin’s Economic Advisors the cycle of economy, but the American economist offered more concrete methodologies to Varga, who was in a position to need to closely trace the instant changes of the contemporary capitalism and anticipate the immediate prospects of the economy. Varga combined the three into an eclectic but consistent economic theory on the capitalist economy. Based on such a theoretical framework, Varga and his economists produced a system of discourse on a series of crises of the capitalist economy in the era of Stalin. The system, the subject of next chapter, was unique in the sense that it was distinguished from other Soviet texts on the capitalist economy as well as other European Marxian economics in the early twentieth century.


4 Discourse

Introduction Based on the theoretical frameworks discussed in Chapter 3, Varga and his colleagues had produced a discourse on the transformation and crisis of the capitalist economy from the late 1920s to the early 1950s. My intention here is not to answer the questions that had been addressed by Marxian economics. For example, I do not explore such highly ‘theoretical’ issues as what Varga’s theory of state-capitalism or state monopoly capitalism is and how it is distinctive from that of other Marxists, including Bukharin,1 or whether Varga’s crisis discourse is a creative application or distortion of Marx’s,2 or what Varga’s legacy on Marxism is.3 Rather, the present chapter shows the broad discursive contour that Varga and his economists painted on the capitalist economy in the era of Stalin by asking questions related to their texts’ form and effects: What organisational structures did their texts follow? What categories, variables and terminologies were used and how they were configured in their texts? How did the economists break down statistical materials? What image or impression did they make in doing so? This ‘formalist’ analysis will reveal the discursive field in which both the Varga group and Soviet Party leaders naturally operated.


Stalin’s Economic Advisors As pointed out in Chapter 1, IMKh’s works consisted of two fundamentally disparate types: scientific research products and propaganda materials. These economists were aware of the difference between them and took differential approaches for each even before they reached the writing stage. As a result, they produced texts that can be clearly distinguished from each other. The most scientific and least propagandistic works were, undoubtedly, their secret policy papers for the Party leaders and institutions such as the Central Committee’s departments, the Comintern and the NKID. Predictably, there was no propaganda in their content. Varga reiterated this to the authors of policy papers, as shown in previous chapters. Of the Varga cohort’s published works, in the same category was their quarterly report on the world economy, based on their own Kon’iunktura department’s research and Western statistical data. In fact, in many cases, the policy papers and the quarterly reports shared primary materials and methodologies, and arrived at almost identical conclusions. Other texts that could be classified strictly as science were syntheses of those quarterly reports, which were published as journal articles, monographs and collections. Such scientific works were closely linked. For example, in 1936, Varga and the core economists of IMKh published a series of quarterly reports on the capitalist economy in 1936, under the heading of ‘Economy and Market Situation of Capitalist States’, in their journal and its bulletin.4 Then, in very early 1937, based on those reports, Varga published a synthesis article, titled ‘1936: Sums and Perspectives.5 Both came out of their project on the comparative development of capitalist economies for Andreev, one of the Politburo leaders, in late 1936. During the same time frame, a myriad of propaganda-oriented materials was published by the Institute’s core economists as well as those in the periphery, most of which reiterated the tone of the Soviet main press like Pravda, Bolshevik and others. In this chapter, unlike previous studies that indiscriminately use both types of works, I examine the Institute’s scientific research products only. I focus on their policy papers for the Party leaders and related publications. Although sometimes scientific works, particularly published ones, had to allot some space for propaganda remarks and employ certain strategies to meet the standard of publication of the time, such as quoting leaders and citing Party and Comintern resolutions, they were clearly distinctive from 106

Discourse propaganda materials in terms of the way they located data as evidence, organised the structure of text and drew conclusions. More importantly, the Varga group’s scientific texts were distinguished by their tension between the generalist tendency of Marxian economics and the Michellean approach, which was concrete, historical and statistical. How this tension was revealed, developed and resolved in their texts is the focus of this chapter. I argue that Varga and his economists had moved away from orthodox Marxist-Leninist ideological teachings on capitalist economic crisis towards a new discursive world in which the crisis was reinterpreted, redefined and reassessed. In other words, they had painted the capitalist economy as being largely bounded by politics and history. Universal economic laws of capitalism and its general phenomena were increasingly de-emphasised in their texts, while specific historical events and conjunctures, differences of individual national economies and the political and policy-level actions by states were consistently highlighted.

The Great Depression, 1929–33 As noted in Chapter 1, before the Great Depression, Varga was in the mix of the politically loaded controversy on Bukharin’s thesis. At that time, the socalled Left was also still alive on the theoretical front, particularly in regard to capitalist economy and its adaptability to crisis, as Preobrazhenskii had followers in Comintern and Soviet academia. In such circumstances, many of Varga’s works became polemical ones with highly rhetorical languages. And the Varga Institute had not yet taken shape in a proper sense and was not ready to produce their own collective and scientific research results, as would be the case in the 1930s and 1940s. Around the time when the news about the Great Depression reached the Soviet Union, Varga was still actively engaged in the controversy. It is no wonder that his first reaction to the news was to bring his polemical skills to the table again and to advance a rhetorical argument. In the month after the Black Tuesday, he wrote in a Comintern organ, ‘The Communist admirers of the theory of organised capitalism, namely, the theory of “a lessening of internal economic contradictions” (Comrade Bukharin), will be given pause by what is occurring on the American exchanges’.6 107

Stalin’s Economic Advisors A less politically loaded description of the event had to wait another three months. In February 1930, Varga began to discuss the origins of the Great Depression in more scientific terms. In an article published in IMKh’s journal, he revealed the theoretical basis on which he understood the crisis in terms of the contradiction between production and consumption.7 However, the article was still rhetorical, lacking a relevant body of evidence, sufficient statistical data and sophisticated analyses. It should be noted that Varga at that point was not only an economic scientist but also a commentator on world economy and politics in major Soviet newspapers. The article strongly underscored his second duty. More importantly, it was drafted before Varga’s Institute was given adequate resources or was in a position to conduct serious scientific and statistical research. All Varga and the Institute could do was to speculate on the origins of the Great Depression. While the crisis deepened, IMKh was finally transformed into a research empire, equipped with capable economists, statisticians and historians. Notably, Varga recruited his former opponents on the 1920s’ theoretical front, including Mendel’son, Eventov and Trakthenberg, to get a deeper understanding of the Great Depression. In addition, the Varga Institute prepared for comparative and empirical research projects on the capitalist economy, as the establishment of the regional sectors and Kon’iunktura department was completed in 1931.8 In the ensuing two years, Varga and IMKh produced two critical documents on the Great Depression, which became the cornerstone of their research on the capitalist economy and shaped the ideas of Soviet political leaders, including Stalin. The first document was drafted in late 1931, when Molotov requested that the Varga Institute draw a synthesis of the current economic condition in the capitalist world.9 Molotov needed the report before his scheduled speech on international situations at the upcoming Party Conference in January 1932. The Institute prepared the analytical report for about three months. The report was discussed within IMKh first, and then sent to Molotov in December 1931. After the conference was adjourned, a portion of the report was published in the Varga Institute’s journal in February 1932.10 And, around the same time, Varga presented a paper on the subject at one of the IMKh-sponsored academic discussions, in which IMKh economists and those from other institutions participated. Finally, the whole 108

Discourse stenographic record of the diskussiia was published.11 Although the article was attributed solely to Varga, it was a joint product of the Institute’s core economists and Kon’iunktura department. The second document was prepared by Varga and his colleagues two years after the first one. Although currently available archival materials do not clearly show why they began to craft the document, evidence strongly suggests that Stalin had requested the project. A finished version of the report was sent to Stalin in late 1933; Stalin summoned Varga to the Kremlin and discussed it with him before the dictator gave a speech in the Party Congress in January 1934;12 Varga’s colleagues remembered the project as being for Stalin, and other contemporaries also thought that Varga’s influence on Stalin’s speech was tremendous.13 This 1933 document was an analytical review of the capitalist economy between 1929 and 1933. In this sense, it can be seen as the second edition of the 1931 document that focused on 1929–31; while they shared the main ideas, a theoretical framework and many statistical data about the origins and development of the Great Depression, the report for Stalin contained information reflecting the changes that the capitalist economy had undergone in 1932–3, most notably, the fact that the crisis hit the bottom in summer 1932. Just as in 1932, a revised version of the 1933 document was published in the IMKh journal as an article in spring 1934 after the congress was adjourned.14 Soon Varga delivered a lecture based on the document and the lecture notes were published in the form of a monograph, titled New Phenomena in the World Economy Crisis, at Stalin’s recommendation.15 Finally, the document became the backbone of Varga’s well-known pamphlet, Great Crisis and Political Consequences, the keynote text for the Comintern Congress in 1934.16 The original versions of the documents for Molotov and Stalin, unfortunately, are not available in Russian archives. Here I analyse New Phenomena and Great Crisis as they show us the essence of those two secret documents: both pamphlets are believed to have virtually identical content with the original document that was prepared for Stalin, other than some added propagandistic remarks and sections. Both texts showed the tension between the generalist tendency of Marxian economics and the concrete economic analysis reminiscent of 109

Stalin’s Economic Advisors Mitchell’s business cycle discussion. Marxian economics theorised the universal and immanent laws of the whole capitalist economy system and discussed their application and realisation at an abstract level, while Mitchell’s economics were based on detailed statistical data, paying attention to the individual states’ particularities, such as their specific economic situations and settings as well as historical conditions, and consequently highlighting the unevenness in their economic development. Interestingly, such tension was increasingly handled in favour of Mitchell’s perspective in New Phenomena and Great Crisis, as would be more the case in the later works of Varga and his colleagues in the 1930s and 1940s. Implicitly revealing Varga’s theoretical debt to Hilferding, New Phenomena started as follows: Ever since the capitalist force of production fully arose, its movement has operated in a cyclical form. Every phase is finished by violent explosion of all the contradiction of capitalist force of production in a cyclical crisis of overproduction, which at the same time represents temporary violent destruction of such contradiction. Hence, cycle follows cycle, and crisis follows crisis.

After the opening paragraph that ‘declared’ the cyclical nature of capitalist economic crisis at an abstract level, Varga began a general discussion of the depth and breadth of the current crisis, the Great Depression, by describing its three main aspects. Reflecting his Marxist productionoriented perspective, Varga regarded the drastic decline of industrial production as the most significant phenomenon in the crisis. In his view, the decrease of industrial production, in case of some branches, amounted to 50 per cent of the 1928 level. Especially, the production of the means of production in Division I had dropped more than half, whereas the production of consumers’ goods in Division II had declined much less. Decisive for such exceptional depth of the crisis, Varga believed, was the chronic surplus of the means of production, which had hit heavy industry particularly hard on a world scale. The second outstanding feature of the current crisis, according to Varga, was the price decline and the subsequent reduction of profits. 110

Discourse Varga calculated that the decline was incomparably greater than during any previous crisis in the capitalist world. The third was the credit crisis, which occurred after a delay of two to three years after the Great Depression struck in 1929 but had catastrophic effects on capitalist economies.17 As noted in Chapter 3, Varga was not in a position to be content with showing the cycling mechanism of economic crisis, but needed to place it under the secular tendency toward the ultimate crash of capitalism. Varga believed that the current crisis was the worst in the entire history of capitalism. In his view, it was also the most pervasive in that it affected almost every country and industrial branch in the capitalist world, also the deepest, considering the rate of production and price decline, and the longest, as it had lasted more than four years. The primary reason for the worst catastrophe was the general crisis of capitalism. Borrowing the Luxemburgian market-oriented perspective, Varga showed that the current crisis was not just in a normal cycle. While previous crises in the capitalist world took place in the era in which capitalism was expanding its market at a rapid pace, intensively and extensively, the current one had developed within the general crisis, meaning that capitalism entered a conjuncture in which no more external market expansion was possible and several intractable problems had persisted: the chronic agrarian crisis, which permanently reduced the agricultural population’s purchasing power for industrial commodities; the chronic surplus of capital, especially of industrial capital, which caused the permanent idleness of large portions of the production apparatus; and finally, chronic mass unemployment, which constantly shrank the size of the internal market. In short, in Varga’s logic, the general crisis precluded the quick-recovery function of capitalist economy from the crisis.18 Up to this point, Varga’s description of the current crisis largely stayed within the boundary of the conventional Marxian economics. Following Hilferding, he defined it within a broad category of cycling crisis. At the same time, Varga subsumed its major phenomena under the notion of the general crisis and, in a move reminiscent of Luxemburg, formulated the current crisis as a final blow to the already decaying capitalism. Such a position was one that could be adequately situated in the tradition of 111

Stalin’s Economic Advisors Marxian economics and was in parallel with Preobrazhenskii’s work at that time,19 which advanced the theory of eternal crisis. However, soon Varga’s discourse revealed the fact that it was not only informed by the Marxist tradition but also related to another current of economics. The introduction of New Phenomena indicated that Varga’s discussion would be highly specific and historical: Every cycle and every crisis is distinguished from its concrete historical peculiarities. Every cycle and every crisis occupies a specific historical place in the development of capitalism.20

In the opening paragraph of Great Crisis’ chapter on the Great Depression, in which almost identical phrases were used, Varga even suggested that the present analysis could go beyond the original teachings of Marx to understand the historical specificities of the crisis: Each cyclic crisis occupies a particular place in the history of capitalism. Each crisis possesses its own features which differ from those of all previous crises. Therefore, the outline of the general foundations of the cyclic course of the process of capitalist production given in the previous chapter is by no means sufficient for an understanding of the great crisis of 1929–33 in its manifold concrete aspects. In making a concrete analysis, it is necessary to omit some of the methodological simplifications which Marx made in order to render the general causes of the crisis more understandable, and on the other hand to introduce the new circumstances created by the development of capitalism [Emphases original].21

When Varga moved to a discussion of the origins of the current crisis, his interest in historical analysis was even more explicit. Initially, Varga, of course, advanced one of the Marxist theoretical formulations, namely, the contradiction between production and consumption, as the fundamental source of the crisis. However, then Varga divulged that the more immediate cause was the specific historical conjuncture in the postwar and in the 1920s. In his view, World War I produced ‘extraordinary circumstances’ that some Marxist teachings could not properly explain. During the war, the demand for goods exceeded the supply to such an extent that


Discourse the prices of almost all commodities rose considerably above their value. By the end of the war, consequently, prices in goods soared, most notably, the price in gold had risen to more than twice the 1913 level.22 Such a phenomenon contradicted one of the main theoretical theses of Marxism, according to which the price of commodities is determined by their value. Varga believed, under a special historical condition, namely, when demand exceeds supply for a prolonged period like during World War I, prices can and must rise above value.23 For Varga, such excessively high prices, witnessed in the postwar period and sustained throughout the most of the 1920s, brought extraordinary overinvestment to the sphere of production and subsequent overproduction, which led to the constant surplus of fixed capital, the hallmark of the Great Depression. In short, in Varga’s picture, one phenomenon (high prices) that was caused by one historical event (World War I) was the immediate origins of the current economic crisis. By historicising the origins of a crisis like above, Varga moved away from the notion of crisis as being completely governed by the immanent capitalist economic law and the general crisis tendency that Marxism had theorised. In two years, he and his colleagues finalised their project of historicising the crisis by publishing a huge book titled World Economic Crises, 1848–1935, in which the 1929–33 crisis was explained through its special historical conjuncture and was simply juxtaposed with previous major crises in the history of capitalism.24 Such a historical perspective made it possible for Varga to look at another dimension to which the Marxian economics had not paid much attention. While he discussed the universal effects of the crisis on the world, Varga came to more strongly emphasise its various manifestations in individual capitalist countries. Words like unevenness, inequality, irregularity and disproportion were extensively deployed throughout both texts.25 Employing various statistical data about production, price and credit mostly broken down by state, Varga built his argument in a way reminiscent of Mitchell’s Business Cycles. For example, the index of industrial production throughout the period of the crisis revealed, great inequalities among the different countries. The decline in the output of means of production was greatest in the US


Stalin’s Economic Advisors and Germany, the two countries where the industrial production apparatus, as a result of rationalisation, was the most modern and the most strongly developed prior to the crisis. France occupies an exceptional position throughout the entire crisis; its decline in Division I was always less than in Division II … In England, the decline in production was generally less because production was already at a very low level in 1928, which is taken as a basis. In Japan, the lowest point of the crisis was reached [already] as early as 1931.26

In Varga’s thought, an analysis of each industrial branch of Western economy would reveal the ‘antagonistic and uneven nature’ of the development of the crisis. For example, in case of the shipbuilding industry, one of the major industries in Division I, Germany’s loss was over 600 per cent less than England and over 300 per cent less than the US. In addition, Varga noted that situations in the colonies were even more different from those in the capitalist world. Taking the example of the textile and cotton industry, he contrasted certain expansion of both industries in the colonial world with a sharp decline in England, Germany and the US, and described the different effects of such inequalities on various metropoles and colonies in a detailed manner. The two most notable phenomena, according to Varga, were the revival of the native methods of production in the colonial world and the abandonment of a worldwide division of labour.27 In short, in Varga’s picture, the descriptions of divergent manifestations in the crisis simply overwhelmed any attempt to make a general synthesis of it. Such discourse of uneven development in New Phenomena and Great Crisis was not confined to the sphere of production. The wave of inflation, a product of the production decrease and the subsequent depreciation policy adopted by capitalist states, also revealed great inequalities in Western countries. One paragraph describing the cause of such inflation showed Varga’s typical way of expressing his ideas and organising the text. He started with a brief general remark about the crisis, then spent most of the remaining space describing the inequalities of its development and finished a paragraph or section by stressing the significance of the latter. It is worth quoting the whole:


Discourse The general economic basis for the wave of inflation is the fact that the burden of domestic and foreign debts had become intolerable owing to the heavy price decline. [However], the immediate cause was different in various countries. In agrarian countries with foreign indebtedness [like Eastern European and Latin American] the balance of payments is negative as a result of the heavy decline in the prices of agricultural produce, so that the net export surplus no longer meets interest and sinking funds payments on the foreign indebtedness. In England, the balance of payments was negative for the moment and there was a large outflow of gold owing to the sudden withdrawal of a considerable part of the foreign short-term capital invested in London. In the USA, despite a favourable balance of trade, the currency was depreciated by governmental measures deliberately instituted to lighten the burden of debt, which had brought the entire credit and banking system to the verge of destruction.28

Then, he summarised, Thus, we see that although the sharp drop in prices was the general economic basis for the depreciation of currencies, the concrete economic mechanism that led to inflation differed in various countries (or types of country).29

Varga’s discourse of unevenness between states, along with his extensive use of Mitchellean comparative statistical data on major Western economies, led him to closely observe the different economic conditions and aspects of individual economies and the various ways that those were being dealt with by states in the time of the Great Depression. In the process, Varga took another approach that was unfamiliar to the Marxian economics in the 1920s and the early 1930s: to employ national economy (narodnoe khoziaistvo) as a main unit to analyse the Western economy. In conventional Marxist texts, the notion of national economy was rarely used and, even if used, it was positioned as being strictly subject to the interest of the ruling class and the workings of the world capitalist system. Varga’s current texts, however, conceptualised national economy as being managed and operated distantly from the structural system of capitalism,


Stalin’s Economic Advisors and often portrayed its interest as being antagonistic to that of monopoly capital. Such a tendency is clearly revealed when Varga discussed the credit crisis. In the first place, Varga started his discussion by describing the credit crisis’s impact on various agencies in the national economy. He blamed the credit crisis on the steep reduction of prices that made the real burden of indebtedness rise at almost 40 per cent in some capitalist countries. It meant a vast shift in the distribution of real income in favour of creditors living on wage incomes at the expense of debtors, who were businessmen, peasants, house owners, artisans and others. This was because debtors should pay the same amounts as before in interest and amortisation even if all other prices sharply fell. Such transformation had a catastrophic consequence on the current financial system of the capitalist economy.30 Such a description of the credit crisis might sound highly conventional for Marxian economists. The interesting part, however, began when Varga presented his readers with three possible countermeasures out of the credit crisis: elementary cancellation of debts through bankruptcy; depreciating the currency; and direct governmental intervention reducing the interest rate and prohibiting sales at auction. While Varga was aware that the first option should be the normal method under capitalism and serve the interest of monopoly capitalists well because it would cause a wave of small bankruptcy, a very lucrative event for big business enterprises like monopoly capitalists’ companies, he concluded that it was not allowed to run its course during the current crisis. Why not? It was because the capitalist state was more worried about the whole credit system of the national economy than just about the interest of the ruling class. Then, why did they go to the second and third options, which seemed quite ‘artificial’: the raising of price by depreciating the currency and the reduction of the interest? For Varga, this was also mostly because of the state’s concern about the national economy’s survival and possible revival. He strongly disagreed with some contemporary Comintern Marxists and Soviet scholars who argued that inflation produced by those artificial policies31 was always good for monopoly capitalists. In fact, according to Varga, only a very small portion of the monopoly capitalist class would earn something from such measures. The lowering of the interest rate was a direct blow to many monopoly capitalists who actually 116

Discourse ran giant banks and other financial institutions. And the depreciation policy was a two-edged sword: it did not always serve monopoly capitalists well because of the possibility of the fall of the petit bourgeois whose deposits were one of the key sources of financial capital. In short, according to Varga’s current texts, the capitalist state adopted policies that were actually against its ruling class for the interest of the whole national economy.32 Thus, to get to a specific understanding of the Great Depression, Varga incorporated into his texts such ideas and approaches unfamiliar to the contemporary Marxian economics as the historical/concrete-oriented perspective, the discourse of unevenness and the treatment of national economy as an independent category. Those had co-existed with the more orthodox Marxian tendencies to seek for an economic law and generalisation, constantly creating a tension in New Phenomena and Great Crisis. Interestingly, Varga handled the tension in favour of his ‘imports’ in those texts, as indicated by the fact that he tried to minimise theoretical discussions and openly pointed out the limitation of the abstract theory for a concrete analysis of the current crisis there. Such an ‘undogmatic’ attitude, fused with his version of crisis theory, allowed Varga to correctly evaluate one of the most outstanding phenomena in the interwar period in the Western world, the rise of the state, more specifically, its extensive intervention in the sphere of market economy as a way to manage the economic crises. As pointed out in Chapter 3, Varga’s crisis theory, which was inherited from both Hilferding and Luxemburg, had already secured a theoretical space that saw state and politics as a key driving force to economic changes. In Varga’s view, what was remarkably witnessed since the breakout of the Great Depression was ‘an uneven strengthening of the role of the state in the economic affairs of the capitalist countries’. Its chief outlines were as the following: first, the government budget’s relative weight of the national income drastically increased; second, the state strictly regulated foreign trade; third, the state strongly controlled banks and other financial institutions; fourth, the state had ‘acquired increasing control over the distribution of labour power’; and finally, the prices of many goods were determined by the state. In short, Varga conceptualised the capitalist state as the most important planner, organiser and coordinator of economic affairs in the national economy.33 117

Stalin’s Economic Advisors Later in the text of New Phenomena, Varga sharpened this ‘new’ image of the capitalist state in terms of the rise of the state bureaucracy as the key decision maker on economic issues:  ‘The struggle of the different strata of the ruling classes for the distribution of the diminishing sum of surplus value is transferred from parliament to the state apparatus, to the bureaucracy itself. The profit of each individual enterprise, sometimes even of an individual deal, depends on the decision of the state bureaucracy. Although the domination of monopoly capital over the state and its apparatus in general defines the line of economic policy, the authority of the state bureaucracy grows as a consequence of the complex and rapid change of governmental regulations (ustanovleniia)’.34

Subsequent Development in the mid-1930s Varga’s new conceptualisation of the capitalist state provided him with a theoretical space in which he could accurately assess its potentials to manage and overcome the crisis and anticipate that the current phase would be soon turned into a kind of new revival. Already, at the end of New Phenomena, Varga talked about some ‘favourable’ signs in Western economy. According to him, summer 1932 was the lowest point of the crisis and now – in late 1933 – it was certainly in an upward swing. Varga discussed the reasons in a chapter titled ‘Dynamics of the Crisis’. Just as in the earlier part of the text on the origins and development of the crisis, the chapter displayed the tension between the generalist tendency of Marxian economics and the concrete and historical-oriented explanations. Initially, Varga put up front the ‘old’ Marxist style of discussions that looked for the causes at a highly abstract theoretical level. He declared that the general cause of the improvement was fundamentally because of ‘the immanent laws of capitalism’s movement’, which, regardless of historical context and the will of political-economic actors, has an automatic recovery function at the bottom of economic cycles. Relying on Hilferding’s insights on the cycle of capitalist economy, Varga showed how the law was applied to the current crisis as follows: during the long period of the crisis, the surplus of the finished commodities in light industries (Division II) was finally absorbed, which enabled Division II to place some, albeit not 118

Discourse great, orders to factories (Division I), who produced the means of production. Now, Division I was able to be in a position to use raw materials that had been abandoned for the previous four years and start to manufacture industrial goods, which was expressed by some growth in various production statistics.35 In Varga’s view, this growth could be probably seen as a green light on the capitalist economy, but was still not sufficient. The renewal of fixed capital was too small in quantity to elevate the whole economy to a normal cycle expansion. Factories in Division I were now just consuming the previously unused raw materials and did not venture to make much new investment. Capitalism’s struggles to get back to a normal expansion phase were because it was situated within the framework of the general crisis. As a result, according to Varga, the current phase of capitalism defied the normal procedure of business cycle: it was a depression as the stage next to crisis but it did not represent a prelude to prosperity. In other words, it was a ‘depression of a special kind (depressiia osobogo roda)’.36 The inner mechanism of capitalism was effective enough to overcome the lowest point of the crisis, to bring about the transition to a depression, and in some countries to create a limited revival; but it does not prove to be effective enough to produce a real boom, a prosperity phase … The current ‘depression’ in no way represents one in a normal/usual sense. However, in spite of this, we think that we should purposefully distinguish the current phase of industrial cycle from the phase up to the middle of 1932, when the crisis was still deepened in a worldwide scale.37

However, Varga did not stay with such a general analysis. His discursive strategy and configuration remained the same as in the earlier part of the text. After he dealt with ‘the internal law of capitalism’, he quickly moved to a discussion about the immediate and historically specific factors and to a description of their uneven development in individual countries. In explaining the upturn of the capitalist economy witnessed since summer 1932, Varga, while acknowledging ‘the inner force of capitalism’ played a significant role in that, also detailed its immediate sources that were peculiar to the current historical conjuncture. According to him, one of the key 119

Stalin’s Economic Advisors sources for the ‘revival’, albeit limited, was the sharp increase of capitalist state expenditures, most of which were associated with the war preparation already underway in many Western countries at that time, and various governmental inflation – fiscal and monetary – policies, epitomised by Roosevelt’s New Deal, which artificially boosted the current market situation in the capitalist world.38 Certainly being aware of the tension between the generalist and specific explanations in his text, then, Varga prepared a way to relieve it through the Michellean concrete analysis of the current ‘recovery’ phase: ‘It is very difficult to conclude to what degree the increase of production is a result of inflation policies; to what degree it is a result of war preparation and to what degree the improvement represents a result of immanent capitalist tendency to overcome the crisis of overproduction. The answer to the question should be given only based on a concrete analysis, to which we now turn’.39 The method that Varga took for the ‘concrete analysis’ was, first, to trace changes in wholesale prices in major capitalist states from 1929 to the third quarter of 1933 to define which countries were actually in an inflation stage and, second, to calculate individual states’ productions related with war preparation in price value; more exactly, in gold ruble, to determine the relative importance of war expenditures in their GDP. The data employed by Varga were raw statistical materials from the League of Nations and various tables that were compiled by IMKh’s own Kon’iunktura department and other Western institutes, such as Mitchell’s National Bureau of Economic Research and the Institute for Business Cycle Research in Berlin (Institut für Konjunkturforschung). Using the data, what Varga first found was familiar terrain to him, namely uneven development and divergent manifestations among states. Regarding the question of inflation, he concluded that ‘in Japan and the US, certain inflationary situations exist; there is no inflationary state in France and Germany (and in other countries) in which currency was confirmed in gold standard; limited inflationary state of market was witnessed in the UK and other sterling block countries’. About the role of war preparation in the recent upturn of the capitalist economy as well, Varga employed the same logic: ‘In the US, the increase in war expenditures played a minimal role in the rise of industrial products. 120

Discourse In Germany, it caused approximately 40 per cent of the improvement; in France, over 50 per cent; in England, about 40 per cent’. And, he added, Japan was a country that benefited most from their war expenditure.40 Then, which was more critical for the ‘recovery’, the internal law of capitalism or artificial governmental measures to boost the economy? Varga’s answer sounded somewhat eclectic, leaving the tension between them in the text unresolved: ‘The improvement of industrial production, which started since summer 1932 and extended to autumn 1933, should not be fully attributed to the strengthening of war preparation and inflation, with the exception of Japan. Undoubtedly, it is also partly because of the influence of the internal mechanism, intrinsic to capitalism, to overcome cycling crisis’.41 However, an attentive reader would notice where Varga’s position was leaning between them. In the very next section, Varga provided a comparative ‘observation on the course of the crisis in major capitalist states’, including the UK, France, Germany, the US and Japan. Here, his intention is not hard to tell from the way in which he organised the section. Each sub-section, which was about each country’s economic condition, started with an account of its particularity (osobennost’). For example, the sub-sections for Germany, France and Japan began with the following: ‘the most important peculiarity of the current crisis in Germany is as follows’; ‘the course of the current crisis in France is distinguished by the following peculiarities’; and ‘the crisis occurs and proceeds in Japan in forms distinct from other capitalist countries: early inflation, war in Manchuria and feverish war preparation radically make an impact on the characteristic of their crisis’. What came next was a lengthy and detailed description of each state’s uneven economic condition in terms of production, price and credit. Then, Varga immediately moved to his account of the bourgeois states’ reactions to those peculiar situations, in which he highlighted their different policies and strategies, and the different results. The chapter – actually, the whole text – ended with this section, without attempting to generalise those peculiarities in the context of the world capitalist crisis.42 By conveying a discourse of unevenness, the text’s focal point moved away from the universal internal laws of capitalism towards state policy. In Varga’s big-picture view, the distance between the various policy-level 121

Stalin’s Economic Advisors actions and the recent upward turn of the capitalist economy was getting closer, creating a strong image that capitalist states’ political maneuverings could bring fundamental changes to the economy. In fact, in the mid1930s, the Institute set its sights on the effects of politics on the economic sphere in major capitalist states. In summer 1934, Varga openly started to use the term ‘state capitalism’, which had been actually taboo in the Soviet public sphere because of its association with Bukharin, to help to discern the increasing intervention of the state in the capitalist national economy. In a closed lecture at IMKh around that time, Varga declared, ‘it is evident that the rise of the current state-capitalist tendency is directly linked with the war preparation of capitalism’.43 Soon, the Varga Institute gathered most of its core economists to establish the war economy department as its main research sector, in which they concentrated on the linkages between ‘state capitalism’ and war economy. The Institute published a major collection edited by Eventov in 1936, which openly used the term ‘planning’ of the capitalist states in its title to emphasise the significance of their ‘artificial’ policies and political actions in managing the capitalist economy.44 This image was intensified in Varga’s secret report for Stalin in 1935 and IMKh’s joint paper for the Central Committee in 1936, titled ‘Economic Development in Capitalist World since the Crisis’. Stalin seemed curious about the subsequent economic development of major capitalist states since his speech in the Party Congress in early 1934, so he personally asked Varga to prepare the report. Varga, with the help of several economists and the Kon’iunktura department in his Institute, drafted it in late 1935.45 As for the second report, it was Andreev who had commissioned it from Varga. IMKh’s director delegated the task to his best economists in September 1936, and combined their findings into a draft that he sent to the Central Committee later that year.46 The original copy of the report for Stalin is housed in a Russian archive, while the one for Andreev is not available. Other archival materials indicate that the essence of the paper for Andreev was published in IMKh’s journal in early 1937,47 which I use for my analysis here. Both texts showed more clearly than the 1934 version that the tension between the generalist tendency and the concrete explanation was being resolved in favour of the latter in Varga’s mind. Like Varga’s other analytical 122

Discourse reports, both works started with a broad discussion of the current situation about industrial production in the capitalist economy. In the report for Stalin, citing the ‘bourgeois’ data from the Institute for Business Cycle Research in Berlin and other data further developed by his own Institute’s Kon’iunktura department, in the first instance, Varga displayed the continuous upward tendency of the capitalist industrial production since summer 1932.48 In the 1937 text for Andreev, drafted a year later than that, Varga and his economists more explicitly underscored the upturn of the production in the cycle of business by defining the current phase as ‘transition from the phase of revival to that of prosperity’. Employing raw statistical materials, most notably those of the League of Nations, and the analysed data published by Western journals, including Annalists, Wirtschaft und Statistik, Vierteljahreshefte für Konjunkturforschung and others, the Varga group showed that the 1936 production level had finally returned to the pre-Depression years and concluded that the current phase was clearly in the dynamic of growth.49 Interestingly, Varga and his colleagues did not make any notable attempt this time to explain the dynamic of growth through generalist Marxist language. Varga even instructed his economists not to address any theoretical issue while they were preparing the paper for Andreev.50 In the report for Stalin as well, Varga seemed to deliberately avoid theoretical discussions. Although in the text he mentioned the most controversial theoretical issue at that time, whether ‘ “depression of a special kind” was a modification of the prolonged crisis or the beginning of a new phase of industrial cycle, namely, the end of the crisis’, Varga avoided the question and simply tried to assign responsibility for answering it to the dictator: ‘This question is clearly greatly complicated and its decision should take great political responsibility. Therefore, you should make a decision’.51 Instead, throughout the texts, Varga and his economists spent most of their energy depicting the specific situations in the contemporary capitalist economy, which had been showing marked differences in the Western countries. While the current dynamic was in a rising part of industrial cycle, in Varga’s view, ‘the increase of industrial production was made in an exclusively uneven manner to state-by-state’. For Stalin’s convenience, Varga divided the capitalist states into three groups in the text. The first 123

Stalin’s Economic Advisors one consisted of states that had already passed the pre-Depression level in 1928–9 after leaving the nadir of the Depression in early 1932 behind. According to Varga, this group, consisting of Japan, Italy, Britain and small agrarian countries, like Denmark, Chile, Rumania and Greece, accounted for about 20 per cent of the total production of the capitalist world. The second group comprised states whose industrial productions were still 13–20 per cent less than the pre-Depression level but exceeded their lowest point in summer 1932 at most by 59 per cent. Those countries making such ‘enormous progress’ were the US and Germany whose production was 45–50 per cent of the Western economy. Finally, some countries, most notably, France, belonged to the third group, those that had not yet made remarkable progress. Their production level was even lower than it had been at the lowest point of production for most capitalist states in summer 1932. Their economic weight was about 10 per cent of the capitalist world economy.52 In the 1937 text prepared for Andreev, the Varga cohort’s discourse of unevenness was even more apparent. In their assessment, the uneven tendency was intensified after the start of the Great Depression in 1929: ‘Enormous inequalities in the development of industrial production in individual capitalist states in comparison with 1929’ were witnessed. Interestingly, Varga and his economists did not seem to offer any general explanation about such tendency. They argued, the reasons of such unevenness for different states were varied … The general reason for all the capitalist states simply does not exist; what exists is an array of different concrete and historical reasons, which define such uneven development… The phase, in which capitalist states are situated, are different: some just passed the beginning of revival, others already made a transition from revival to prosperity, and others already entered the phase of prosperity.53

In Varga’s report for Stalin in 1935, just as in New Phenomena, his discourse of unevenness was closely associated with his orientation for the Mitchellean analysis: ‘The reasons for such exclusively uneven development to state-by-state would be revealed only by a concrete analysis of each individual state’s national economy’. When Varga provided a summary of his


Discourse Institute’s research for Stalin, he attributed the uneven development solely to the variety of individual states’ policies. The artificial depreciation of the currency was the determining factor in the certain revival of some small agrarian countries, which had obtained competitive power in the world market thanks to such a policy. As for Japan and Italy, war preparation and inflation were most significant in their economies’ upturn. Finally, the case of Britain was closest to the normal revival under the internal law of capitalism: it was the renewal of fixed capital, most notably, the boom of construction, which had galvanised the British economy recently. However, Varga pointed that protectionism, a political or policy-level action, was more important for that. ‘Under the umbrella of the strengthened protectionism, the extension of fixed industrial capital, including cast-iron, steel, engines, planes, and hydro-coals, was possible’. The same logic was applied to the second group. Germany’s recovery was largely due to war preparation, while the US’s repeated recessions, despite being on the rebound, were explained by the government’s somewhat limited capital investment in main industries. The final group’s struggling was because of the timing of the crisis; as the crisis arrived late in countries like France, their government had not yet reacted to it. Thus, in Varga’s world of discourse, the role of the state in economic affairs in the capitalist world was highlighted. Varga reported to Stalin: ‘State intervention in the sphere of economic activities was further intensified … In certain countries, economy takes a form of war-monopoly capitalism. In Germany, we are witnessing the centralised distribution of the majority of raw materials, the compulsory sales of agricultural goods to the government, the further control of labour movement and others’.54 In the last paragraph of the key section of the text, Varga resolved the old tension between the general and the historical by elevating the capitalist states’ policy, including their war-related expenditures, into a position that could make the immanent law of capitalism’s movement inoperable: War preparations, which, partially pushing and partially braking, actually deform the path of the industrial cycle, take shape of the present peculiar and contradictory condition of world economy [Emphasis mine.].55


Stalin’s Economic Advisors

New ‘Crisis’, 1937–9 When a new economic crisis struck the US in the middle of 1937, Varga was tempted to revert to the generalist tendency of Marxism to explain its origins and development, reigniting the tension with the Mitchellean perspectives. First, the crisis seemed to come as a surprise to him. Though Varga kept arguing in his propaganda materials that the next crisis was imminent, he had stressed the ‘revival’ of the capitalist economy for three years as discussed above. Secondly, the 1937 crisis initially looked serious enough to encourage Varga to categorise it as another worldwide major crisis, operated by the immanent law of capitalism and the general crisis. Briefly, his zeal as an orthodox Marxian economist seemed to be revived.56 In January 1938, Varga was invited to discuss the crisis with Dimitrov in ‘a commission meeting on American question’ in the Comintern. In the meeting, Varga reported to the head of the Comintern and ‘proudly’ compared it to the 1929 crisis, and attributed its cause to the capitalism’s internal law, namely, the contradiction between the organisational composition of capital and the surplus of fixed capital.57 After Varga’s oral presentation, however, Dmitrov admonished the director of IMKh and warned him against a hasty generalisation. You know that the [Comintern’] Secretariat highly values the works of Comrade Varga and that is why we constantly draw Comrade Varga in to the work of the Secretariat, and shall continue to do so in the future. But at the same time I must point out that Comrade Varga sometimes hinders us, certainly he does this unintentionally, guided by the best of intentions. Scientists often tend towards a certain amount of dogmatism and scientific schematism … Comrade Varga sees not only the beginning of an economic crisis but the crisis itself already exits and according to his scheme, [it] is already spreading to other countries and is transforming into a world crisis. I am not in agreement with this.58

Soon a series of academic discussions within the Varga Institute took place in 1938. On those occasions, some of Varga’s colleagues openly questioned his characterisation of the current crisis as a major one reflecting the inner force of the capitalist cycle and the general crisis tendencies.59


Discourse Over the next two years, the crisis faded, mostly as a result of war preparation and increased state expenditures in Europe. It was restricted to some areas of the US. Witnessing such an early exit of the crisis, Varga seemed to decide that the generalist explanations should be de-emphasised in his picture. His decision was revealed in an analytical report for Stalin in 1939, which was later published as article titled ‘The Peculiarity of New Economic Crisis’.60 Once again, Stalin seemed to ask Varga to prepare a report on the capitalist economy for a speech that the General Secretary was to deliver at the 18th Party Congress in March 1939.61 In this report, Varga made sure that his economic theory was historical and specific in explaining the origins and development of the crisis, and did not put the generalist perspective on his main agenda. Although the fundamental cause of all the cycling crises is overproduction … specific characteristics of crisis in different periods are various. In every period, each crisis had its own concrete and special characteristic, which defines the aggregate (sovokupnoct’) of historically concrete factors. Of course, the cycle and course of crisis is generally defined by the internal law of capitalism, but those concrete factors provide their impact on, and modify, them.62

Then, what were the specificities of the current crisis? Showing the continuity of his position that had been established in 1934, Varga argued that they were war preparation and the resultant drastic increase in state spending. Historically given and concrete capitalism has never been ‘pure’ capitalism and the current one is not exception … The fundamental peculiarity of the current economic crisis is that it developed in the context of the second imperialist war … In various countries, rearmament became all the more decisive factor of the economic life, which is the most important peculiarity of the current crisis.63

As indicated in his 1935 report to Stalin, the capitalist states’ war preparation actually effaced the effects of the immanent law of capitalism. In this article based on the report to Stalin in 1939, Varga made a


Stalin’s Economic Advisors declaration that shocked communist intellectuals, particularly those outside the Soviet Union.64 Such circumstance leads to the fact that in present there is no single – inclusive of all the capitalist states – cycle of reproduction. Depending on the degree to which capitalist economy is transformed into war economy, complete different economic developments take place in various countries. It is clear that internal law of the movement of capitalist cycle does not exert forces to belligerent states or states whose economy was already transformed for the operation (conduct) of war.65

Varga’s description of the uneven development in the capitalist economy was central to the text. The degree and nature (kharakter) of the impact of war preparation differed from state to state. Varga warned his readers, including Stalin: ‘In such condition, we need to take extreme caution to use flowing data that seem to correspond to all the capitalist world economy in general. In order not to fall into a flawed generalisation, we need to differentiate, much more carefully than usual, such general figures in accordance with states and branches’.66 In Varga’s view, the war-related economic activities divided the capitalist world largely into two groups: neutral states like the US, Canada, Britain and France, and belligerent states like Germany, Italy and Japan. The first group had seen the rise of production in the second half of 1938 due to rearmament. The second group was more complicated. Germany was enjoying prosperity, but it was not a normal prosperity because it lacked the renewal and extension of fixed capital and only relied on the increase of production for the purpose of war. Here, Varga advanced a new economics concept – even to Marxist economics – impoverishment (obnishchanie) of a country. When increases in production did not match the expansion of consumption, as was happening with Germany’s war economy, the country would become impoverished. Varga anticipated that Germany would soon fall to this stage, as indicated by the fact that the tempo of the increment of industrial production had already slowed in 1938, and concluded that they would not find any other solution than to aggressively seek another source of raw materials through war. Varga believed that Italy was also 128

Discourse getting very close to impoverishment, while Japan, which had grown faster than any other capitalist states in the current cycle, had already entered the phase of impoverishment because of its prolonged war in China. In the second half of 1938 Japan had seen a sharp decline of production.67 Varga showed how these three belligerent states’ gold reserves had been depleted, directly and indirectly associated with the impoverishment. The combination of the three states’ gold reserves equaled that of Sweden in 1938. Most of the reserve in the world (almost 60 per cent) went to the US. More importantly, according to Varga, such inequalities of the gold reserve paralleled the unevenness in the capital market.68 On the one hand, a great amount of surplus of loan capital was available in the US and some other Western European countries. On the other hand, the belligerent countries were facing extreme shortages of capital. The world capitalist economy was becoming divided; one side wanted to dispose of surplus capital and the other side desperately needed it. In Varga’s thought, an economic condition for a massive capital export from the US to the three belligerent states had already matured. Only a political condition, namely, the ideological antagonism between them, had precluded this.69 At this historical juncture, Varga, Soviet economists and Stalin who read their texts, knew that a Marshall Plan-type aid could be possible if certain political conditions were met. Varga’s dichotomy between the economic situations in North America and in belligerent countries of continental Europe, which had evolved from his discourse of unevenness, would be refined in his wartime and postwar writings.

War Economy, 1939–45 As the 1939 text, written earlier in the year, anticipated that there would be no way short of war for Germany to end impoverishment, World War II broke out in Europe that September. The Varga Institute’s research placed even more emphasis on the war economy and the role of the state in managing it. In a review on the capitalist economy in the first year of the war, Varga stated, ‘with the breakout of the war, economic conditions in capitalist countries are completely dependent on whether they are engaged in the war or they remain neutral, or how far or near their economies are 129

Stalin’s Economic Advisors situated from the theater of the war. War is the decisive factor to economy in all the capitalist states’.70 As the war ‘deformed’ the normal cycle of the capitalist economy and it became obvious that the individual states were taking an even stronger role in operating their national economy, the Varga group’s main research concern during the war was moving further away from the generalist description of the capitalist economy. Instead, they came to devote their energy to two questions whose importance they had recognised even before the war: impoverishment in belligerent states, especially Germany, and the organisational and institutional changes that the capitalist states had made to prepare for, and conduct, the war. Methodologically, the dichotomy of the capitalist economy between the neutral and belligerent states, which Varga had first used in the 1939 text, had been more explicitly stressed in his and his economists’ wartime works and continuously served as their framework. Various labels were employed: neutral versus belligerent, the US (and, partly, the UK) versus continental Europe, growth versus impoverishment, overflow of capital versus shortage of capital and, finally, overproduction versus underproduction. The divergent development and organisation between the two economies became the main research topic for the Varga cohort. In the process, the world capitalist economy was increasingly portrayed in a bipolar manner and the relationship between the two emerged as a dominant theme. As noted above, in the 1939 text, Varga indicated that impoverishment had either been about to start or had already started in the belligerent states before World War II. Now, the key question for the Varga Institute was how much they, especially Germany, were overcoming the impoverishment by securing raw materials and human resources from the occupied states. This question constituted the subject of a couple of analytical reports for Stalin, prepared by the Institute in 1940 and 1943. The 1940 report, written by one of the Institute’s core economists, V. Gai, was ‘an attempt to assess how much revenue Germany has received from its occupied territories’ by autumn, 1940. While Gai mentioned the possibility of economic exhaustion in those regions due to Germany’s excessive exploitations and the resultant social disturbances, the impression that his text was making was that Nazi Germany had done an impressive job in getting aids from them and was overcoming its prewar impoverishment. In Gai’s view, although Germany 130

Discourse had failed to secure gold reserves from Norway, Holland, Belgium and France because most of them had been already rushed to New York, it had obtained great amounts of raw materials, particularly, metals and irons, and secured industrial and transportation facilities, especially war factories, from France. Gai devoted most of his pages to describing how much Germany extracted from those countries and to calculating the effects of the extraction on the German war economy. Besides the raw materials and facilities, Germany had received credits from the occupied states and had greatly benefited by taking over their foreign trade: ‘Aided by exports from the occupied states, Germany could buy goods from neutral states, which had been evidently used for the war economy’.71 The 1943 report was also drafted under the same theoretical framework: impoverishment and mobilisation of the occupied states. This time, after the battle of Stalingrad, however, Varga and his colleagues offered a very different assessment. While Germany still had power to supply more labour– up to 2 million – to the war economy by mobilising women, adolescents, artisans and foreigners, the necessary condition for reproduction, raw materials, had been exhausted in Germany and its occupied states. This situation, along with the extreme shortage of food supply and consumer goods, made the German economy in autumn 1943 extremely fragile. According to Varga, the economy had entered the crisis of impoverishment even though war-related productions continued, as the country had an extreme shortage of the means of productions. He predicted that postwar Germany would end up with a crisis of underproduction.72 The Varga group’s description of the other side of the capitalist world was quite a contrast. In a 1943 Board meeting of IMKh, E. Gurvich, one of its core economists and Bukharin’s former wife, was assigned the task of writing an analytical paper in which she was supposed to characterise the US war economy. It was part of a grand research project that A. Shcherbakov, apparently under orders from Stalin, asked Varga to assess the changes of the capitalist economy in wartime in summer 1943.73 After being reviewed by several economists within the Institute, Gurvich’s paper was published in its own journal in 1944.74 The main image that her text created was the US war economy’s abundance of the means of production. In Gurvich’s view, the US had quickly transformed its peacetime economy to a war economy. 131

Stalin’s Economic Advisors This had been done with the construction of completely new enterprises with new facilities; the expansion of peacetime production; and finally the adaptation of old enterprises and factories for new types of production. Of the three, the new construction was so overwhelmingly significant that it defined the nature of the US war economy. The construction of the new enterprises in 1942 rose 90 per cent compared to 1941. Gurvich, following Varga’s works, emphasised that such an economic ‘success’ originated from a policy-level action: the state’s great expenditures. She concluded, ‘war-related construction in the US is mainly and in growing measure made by the state. The scale of the government’s investment in new production construction is incomparably greater than private investment’.75 The rise in the construction meant that fixed capital had grown significantly. In other words, the US economy had a great amount of the means of production, which could and would be reinvested and renewed for construction and production, as long as the market, namely war demand, was maintained. This abundance of fixed capital and the constant growth of production in the US, in Gurvich’s thought, was a stark contrast to Germany’s war economy, in which, despite the continued war demand, production decreased due to the shortage of the fixed capital: ‘In order to assess the condition of the war economy in the US, a couple of the features are decisively significant. First, the war production of the US is still in a rising line, at the same time, in Germany and its occupied states, it is rolling downward. Second, American productions possess an extraordinary purchasing power for further expansion and creation of production’.76 This dichotomy was applied to other analytical papers prepared under the Shcherbakov project. L.  Ia. Eventov, M.  Bokshitskii, Sh. Lif, S.  M. Vishnev and others, using the same theoretical framework as Gurvich’s but reflecting their own specialties, produced a similar type of report. Those works started to be published as journal articles and monographs from mid-1944.77 Varga made a synthesis of them and drafted a separate piece for Stalin, titled ‘Changes of capitalism during the four years of the war’ in 1944. Varga himself defined the report as ‘a preliminary sum’ of the project works done by his colleagues. While a copy of the report is not available in Russian archives, Varga published the core part of it as ‘Decisive Role of State in the War Economy of the Capitalist States’ in his Institute’s journal in early 1945. 132

Discourse The article became the first chapter of his famous and, later, controversial book on the war and postwar economy published in late 1946.78 Varga started the text with a declaration, ‘one of the most important results of World War II is the fact that, in all bourgeois countries, whether it is belligerent or neutral, the state acquired a decisive significance in the war economy. In connection to that, the whole economy underwent profound changes’.79 In his view, such a decisive role by the state in managing national economy stemmed from the nature of total war. To conduct the war, the state needed to regulate production, control prices, distribute raw materials and fixed capital and locate workforces in a comprehensive manner. In the process, the state became a new entity in the capitalist world, which Varga presented as follows: (1) the state became a decisive purchaser of commodities in the market; (2) the governmental possessions greatly increased during the war; (3) the state gained a much greater amount of national income from its citizens than in peacetime as taxes and war bonds; (4) the state used all of the population as a work force; (5) the state regulated the usage of the means of production; (6) the state limited the consumption of its population; and (7) the state checked the inflationary spiral of commodity prices, caused by high demands during wartime.80 Such changes were treated, in Varga’s text, as extremely critical. They made World War II an epoch that had an independent theoretical meaning in itself, just as the era of industrial capitalism, monopoly capitalism and war-monopoly capitalism. By juxtaposing World War II with those three watersheds in the history of capitalism, and not subsuming it under the old label of war-monopoly capitalism, Varga implied that the phase constructed by the war would constitute a separate analytical category for the Soviet and Marxian economics in the future.81 What made Varga think that World War II was unique? It was because the role of the state not only expanded but also transformed one essential feature of the era of (war) monopoly capitalism: the monopoly capitalists ruled the capitalist state and tailored it to their own private interests. In 133

Stalin’s Economic Advisors Varga’s view, the war changed this feature: ‘bourgeois state as an organiser of all the bourgeois as a whole is forced to attempt to subordinate private interests of individual enterprises and capitalists to the interest of the war conduct’.82 Of course, as a Marxian economist, Varga could not imagine a theoretical formulation in which the state was completely independent from the control of monopoly capital. This was why he mentioned some considerable influences of monopoly capitalists on the state bureaucracy and the multiple benefits that the enhanced state’s power had brought to them throughout the text. However, the focus of his text was certainly on the contrast of the interest of state with that of monopoly capitalists. By employing various dichotomies, such as government versus enterprise, control versus initiative and the whole versus the private, the text was actually intensifying an image that Varga had sculpted since the early 1930s; the state became increasingly detached from the ruling class, namely monopoly capitalists, and emerged as an overarching entity that could coordinate the various, sometimes conflicting, interests of the capitalist classes.

Postwar Economy, 1945–53 In early 1945, Varga presented a paper on the prognosis on the postwar economy in his Institute.83 The central question was about the cycle of the capitalist economy in the postwar conjuncture. As discussed earlier, during and even before the war, the cycle was ‘deformed’ because the special demands for the war preparation remained high and the capitalist states were willing to spend an enormous amount to bolster the market. With the war over, the main question became whether or not the capitalist economy was back to its prewar cycle of fluctuations mixed with the general crisis. In other words, would the capitalist economy again become subject to the immanent law of capitalism once it was freed from the historically specific political condition of World War II? This question revived the theoretical tension between the generalist and the concrete perspectives that had governed Varga’s texts in the 1930s. The paper followed the example of Varga’s prewar texts. It started with a general and theoretical description of the postwar economy, but soon moved 134

Discourse to its more specific dimension. According to Varga, to understand the postwar capitalist cycle, three methodologies had to be used: Marxist-Leninist theory; a historical approach to the capitalist cycle after World War I; and finally, a comparative analysis of the war economy of the capitalist states. Interestingly but predictably, after a brief ‘generalist’ remark that the postwar capitalist economy would not eventually get away from the capitalist economy’s crisis trap, Varga jumped to a detailed discussion about the specificity of the war economy based on his findings on the contemporary economic situations in belligerent states and the history of post-World War I.84 Varga’s picture was as follows. During the war, the capitalist government became a basically limitless purchaser for war-related products. However, on the war footing, it had to limit the consumption of civilians whose income rose to an unprecedented level due to the war boom and full employment. As civilians could not spend their money at will because of the government’s strict regulation during the war, there should be a great amount of unused money accumulated in banks and other financial institutions, which was ready to explode after the war. Varga termed it as ‘postponed demand (otlozhennyi spros)’, which should manifest in the postwar capitalist world, leading to the steep rise of market demand. Such a special situation would cause, in his estimation, an initial boom of the capitalist economy right after the war, regardless of who would be the victor or loser.85 The historical specificity, highlighted by Varga’s text in the same way as his prewar works, was connected to the unevenness in various states or, more accurately this time, in two opposing camps:  ‘The manifestation of such tendencies in various states will be profoundly distinguished in accordance with the concrete form of the development of the war economy in the countries. In this respect, the fundamental line is drawn between the US and the states in continental Europe’. In the US, during the war, production kept rising due to the abundant supply of raw materials and fixed capital, and constant investment on the means of production was made. However, in continental Europe, particularly, in Germany, while production was still high in the early period of the war, it was not maintained for long because of the shortage of raw materials and fixed capital and because of the distorted operation of the wartime economy. As the Varga Institute’s wartime works consistently showed, Germany’s economy was impoverished. 135

Stalin’s Economic Advisors Because of such different wartime economic conditions, in Varga’s view, the initial boom would result in two uneven situations, namely, two opposite types of crisis. In the US, the boom led to a crisis of overproduction, as investment activities would not be suspended because of the initial expectation that the boom would continue, and eventually cause the overflow of fixed capital. When the initial boom ended, products would not be sold and factories with the overinvested fixed capital would close. Varga called this ‘the crisis of overproduction’. In Germany, because of the shortage of fixed capital, capitalists could not catch up with the ‘postponed demand’. Simply put, they could not construct factories and produce enough goods to meet consumers’ demand. The result would be a steep rise of prices, namely, a hyperinflation, in which market demand was still high but products were extremely scanty. Varga termed this a ‘crisis of underproduction’.86 According to Varga, the course of both crises, in great measure, depended on the degree to which the US would be inclined to make capital export, as well as the aid of the means of productions, to European states. As noted earlier, in the late 1930s, the US and Germany were in a similar situation. At that time, the possibility was blocked by their political and ideological confrontation. After 1945, when such constraints no longer existed, the only obstacle would be inflation in the European states, which would make private capital loans extremely risky. While Varga did not mention this in his paper, he implied that, for capital export to be a real possibility, the US government should be an initiator. Varga and the Soviet leaders who read his paper could envision a sort of Marshall Plan.87 The paper became a major part of Varga’s famous work, Changes, published in late 1946, earlier than expected, at Stalin’s suggestion. While the 1945 paper almost completely dismissed the old Marxist theoretical discussion on the postwar economy, Changes, like his 1930s writings, revealed the traditional tension between the generalist and the concrete explanations. It was probably because the book was for a larger audience in the Soviet Union and in other countries where socialists were politically active. Such a tension was dealt with very skillfully throughout the pages of Changes, where Varga made sure the generalist description and the concrete analysis did not contradict each other. In its preface, Varga defined its key question as follows: ‘of new economic phenomena [since the outbreak of World 136

Discourse War II,] what would have short-term/transient (perekhodiashii) natures and what would have long-term ones?’88 The tension would be resolved in the text, where the long-term and the short-term were clearly divided and corresponded, respectively, to the generalist and the concrete. Varga argued, Changes in the capitalist economy during the war assume partly a steady, long-term form and partly a transient/shortterm one … The transient changes will define, in a decisive way, the feature of the capitalist economy in the immediate future, approximately, during the next decade. On the other hand, the changes that have a long-term nature will manifest itself in full, only after the transition from war economy to peacetime economy is completed: The world market which collapsed during the war should be resurrected, destroyed factories, railroads and bridges in some degree should be newly established and the pre-war level of production should be restored everywhere. All of these require no less than ten years [emphases mine].89

The first ten years after the war, in Varga’s scheme, would see the shortterm effects of the war prevail. The capitalist economy would unfold in a way that Varga had described in the 1945 text. A brief boom, caused by ‘postponed demand’, would be witnessed in the capitalist world. Immediately thereafter, ‘the unevenness of the economic development that took place during the war will have a decisive impact on the course of the capitalist economy’.90 The impoverished countries of continental Europe, China and Japan would face crises of underproduction and inflation, whereas the countries that came out of the war with expanded and improved productive apparatus and with significantly increased production, such as the US and Canada, would enter the crisis of overproduction in two or three years after the war. Most importantly, those crises, Varga insisted, were not normal cycle crises governed by the immanent law of capitalist economy, but by special conditions that the huge historical and political event, World War II, had produced. Therefore, only concrete and historical-oriented considerations, Varga thought, could be used to understand the capitalist economy in the period of the ten years.91 Then, Varga moved to the generalist discussion of the law of capitalism to explain the economic situations ten years after the war. According to 137

Stalin’s Economic Advisors him, ‘only after that the production capabilities of the impoverished countries are – ten years after – once again elevated to the level of the pre-war (partly American credits should be needed), namely, only when the “final (okonchatel’nyi)” changes of capitalism that were caused by the war are fully exposed, and only after the postwar crisis and stabilisation, albeit partially, of European currency were overcome, a new normal industrial cycle will begin’.92 This crisis would be a full one, meaning that it would be fully governed by the immanent law of the capitalist system and the general crisis tendencies, epitomised as chronic mass unemployment, a chronic agrarian crisis and a chronic surplus of fixed capital. Reminiscent of his Luxemburgian orientation, Varga discussed the war’s long-term effects on the capitalist economy. From a long-term perspective, the changes brought by World War II did not resolve the ultimate contradiction of the capitalist economy, the problem of realisation, namely, the limit of the market. If anything, the changes deepened the contradiction. The war brought an unprecedented level of concentration and centralisation of capital. Numerous small business enterprises went bankrupt, while gigantic monopoly capitalists simply absorbed the remaining ones. Such concentration and centralisation of capital caused polarisation between workers/servicemen and big bourgeoisie, consequently, even lowering the purchasing power. In addition, the great leap in technological progress, which the capitalist states had sponsored during the war, exacerbated the market problem. Now, due to technological innovations, labour productivity greatly rose, causing the relative decrease of labour time. Accordingly, fewer workers would be employed and the society would have less purchasing power. While bourgeois would continue to spend their surplus money in acquiring new means of production, which could bolster the market in some ways, the market ultimately depended on the consumption by the masses in Varga’s theoretical scheme. Therefore, the long-term result of World War II would be a continuation or exacerbation of the hallmark of the general crisis: chronic mass unemployment. The fundamental problem of the capitalist economy, ‘the sharp contradiction between socialised production and private appropriation’, Varga declared, would be revealed in further growth of chronic mass unemployment in the postwar world.93 138

Discourse Of the two types of discussions, it was apparent that Varga and Soviet politicians, including Stalin, paid more attention to the concrete one, which predicted what would happen in the next ten years, simply because it had more topical significance. On the one hand, by painting the long-term picture of the capitalist economy through his Luxemburgian terminologies, Varga maintained his identity as a Marxist economist. On the other hand, however, by providing an analysis of possible economic conditions in the very near future, he served as an advisor to Party leaders whose job was to draft foreign policy. In Varga’s text, the ten years after the war was a section in which the Marxist generalist theory of crisis, composed by the immanent law of capitalism and the general crisis, could not be applied. World War II, which had already deformed the capitalist cycle during the war, presented Marxist economists with special situations inexplicable through abstract notions. In summer 1947, as Varga anticipated, a massive capital export or aid plan from the US to the states in continental Europe, the Marshall Plan, was announced. When Molotov requested Varga to clarify its essence and objectives before the Soviet foreign minister departed for Paris, IMKh’s director drafted a report based on his ideas presented in Changes a year before. In Varga’s view, the Plan was a ‘tool to alleviate obvious economic crisis, the existence of which already no one in the US would deny’. It was part of the crisis of overproduction. Therefore, Americans needed to sell their goods abroad because their own internal market was already showing the shrinkage of consumption. The problem, according to Varga, was that in continental Europe that had already finished a very brief prosperity after the war and was now experiencing the crisis of underproduction, there was a dire shortage of dollars or gold to buy American goods. In addition, a massive inflation in Europe made such purchases even harder. In this sense, to overcome the crises on both sides of the Atlantic Ocean, the US needed to extend a great amount of credit to European states until the surplus of goods in the US was ‘freed’, even if the US knew that part of the credit would not be paid back.94 In the text for Molotov as well, Varga interestingly hinted at and actually stressed the specificity of the postwar economic condition. From the perspective of abstract economic thinking in general, according to Varga, 139

Stalin’s Economic Advisors the Marshall Plan was ‘completely irrational. But from the perspective of the current concrete situation of the American capitalist economy, it was very useful’.95 Varga’s predilection for concrete explanations was even more clearly expressed in his later analytical report on the US economic crisis, prepared for the Central Committee in late July 1949,96 and in a collective work of Varga’s colleagues, now based in the foreign economies division of the Institute of Economy since the dissolution of IMKh in late 1947.97 The latter, drafted for Malenkov in autumn 1949, was an expanded version of the Varga’s 1949 text. In this report, Varga held that the US economy had finally entered into the crisis of overproduction in spring 1949 after a three-year prosperity phase.98 As in all of Varga’s texts, in this report, the production index was the main indicator. According to him, in October 1948, the total value of goods and products in the US was more than 50 per cent higher than the average of 1945. At the same time, US official data showed that the actual purchase of products/goods was 5 per cent lower than in 1945. Beginning in October 1948, the purchasing power of society lagged behind the value of produced commodities, which finally found its clear expression in the steep decrease in the sale of heavy industry products – the means of production – in spring 1949. ‘The beginning of the crisis in the heavy industry’, Varga anticipated, ‘will inevitably instigate its further deepening in the production of the means of consumption’.99 By summer 1949, in the view of Varga as well as his colleagues who prepared the report for Malenkov, the crisis showed some signs of spreading worldwide. Here, not surprisingly, they stressed the uneven development of the crisis in various countries, consistent with Varga’s prewar discourse of inequalities. The overproduction crisis in the US coexisted with the underproduction crisis and inflation in West Germany, Austria, Italy and Japan, and with an agrarian crisis in Latin America. It was expressed, according to them, in the growth of the reserves of grains and cottons and the subsequent price declines starting in May 1949.100 However, Varga insisted that the current crisis was not a normal one that was governed by the immanent law of capitalism and the general crisis tendencies but a product of the special conditions of the postwar years. Very unconventionally for a policy paper, Varga allotted some space to criticising the work of other Soviet economists, especially I. Kuz’minov’s, 140

Discourse published in Bol’shevik in December 1948. In doing so, Varga’s text more explicitly revealed his strong belief in the validity of the concrete/historical analysis of the first ten postwar years. Applying the Marxist studies on the crisis mechanism without a concrete-historical analysis, some works in our press express an idea that the crisis already started in 1946, as the production sharply fell, compared to the war years of 1943–1944. In my view, this is not correct! The years of the fully developed war economy could not be a ‘normal’ component part of industrial cycle … The steep decrease of production in the immediate postwar reflects the following fact that war-related productions discontinued at one stroke and that the transition to a peacetime production required some amount of time. Comrade Kuz’minov confuses the phenomena of the general crisis of capitalism, which do not currently exist in the US economy, with the crisis of overproduction [Emphasis mine].101

For Varga, the crisis originated from a specific historical conjuncture. A new normal crisis cycle would begin only after that conjuncture no longer affected the capitalist economy. It would take the capitalist world ten years or so to return to normal, in which the Marxist theory of industrial cycle and the general crisis theory would regain significant analytical power. The latest analytical report that Varga had sent to Stalin was drafted in 1952, with the help of his longtime colleagues, Vishnev and Faingar. While the report acknowledged that the phase of the overproduction/underproduction crisis in the world was being stabilised, largely due to America’s massive capital export to Europe, it implied that the current capitalist economic condition was still within the ten years that Varga had worked out in Changes.102 It is not surprising that Stalin’s last theoretical work, published in 1952, also saw the contemporary capitalist economy based on the dichotomy between the current conjuncture and the long future.103

Conclusion In the discursive field that Varga and his colleagues in IMKh had built, the capitalist economic crisis was understood as a phenomenon constrained


Stalin’s Economic Advisors by historical events and conjunctures and, in some measures, regulated by the policies and political actions of capitalist states. It had never been described purely in terms of capitalist economic laws and tendencies that orthodox Marxian economics had theorised. In other words, its origins, development and prospects were always embedded in the sphere of politics and history in the Varga group’s scientific texts. In addition, in their works, a concrete description of the uneven manifestations between national economies was in a higher position than a generalisation of the development of the world capitalist economic system. Although there had been a theoretical attempt for the Varga cohort to find the sources of the Great Depression and its recovery in the immanent laws of capitalism and the general crisis tendencies, their emphasis was placed on the historical situations that World War I had created and on the policies adopted by the capitalist states in response. As since the mid-1930s the war preparation was intensified and state expenditures augmented to a degree that a new concept of state might be needed, Varga and his economists actually dropped the generalist explanations about the transformation of capitalism out of their picture and concentrated on the historical-concrete ones. The end of the war offered them theoretical leeway to get back to the laws of capitalism and the general crisis as the main explanatory factor for the capitalist economy. However, Varga opted to postpone the possibility for the next ten years. In doing so, the Varga group guided Stalin and other policy makers to the discursive world governed less by the principles of Marxian economics than by historical specificity, unevenness and politics. In that world, the Soviet leaders perceived international affairs and conceived their foreign policies. At an epistemological and theoretical level, however, the Varga cohort, as economists or economic historians, did not completely discard the key teachings of Marxian economics on the international economy or, more specifically, the ‘old’ European discourse on imperialism, as indicated by the fact that the tension between the general explanations and the historical-concrete ones had continuously resurfaced in their text. Already in the early 1940s, a demand for an even more political-oriented approach that analyses international relations mostly in terms of power politics and diplomacy was witnessed in the Soviet Party and government. Although Varga 142

Discourse and his economists had done a pioneering job with this approach in Stalin’s academia by de-emphasising the economic laws and general tendencies of capitalism and by emphasising its historical contexts, they were not able to fully meet the new demand because of their ‘inherent’ economic-oriented perspective. In other words, IMKh was an early contributor to the foundation of a Soviet version of international relations studies, but their theoretical frameworks were not able to completely embrace that. This was the intellectual context for the Varga Institute’s ‘real’ withdrawal from the historical stage.104


5 An Affair

Introduction In late 1947, when the Cold War started in its fullest sense, Varga seemed to suddenly vanish from academic life. IMKh was disbanded and the Institute’s authoritative journal, which had enjoyed a circulation of 30,000 throughout the Soviet Union, ceased publication. Soon thereafter, Westerners began to suggest explanations for the unexpected disappearance of this prominent Hungarian-born economist and his Institute based on accounts in Soviet newspapers and journals. Their reports noted that the Institute’s publications about the postwar capitalist economy, including Varga’s recent book,1 had been castigated in a series of special conferences held in Moscow in 1947 and 1948. Varga’s book contained, according to one Western observer, Will Lissner, the following objectionable statements for Soviet ideologues: No economic reasons now exist for a struggle between Soviet socialism and Western capitalism; there is no likelihood of a capitalist crisis before 1955; and capitalist states can, in times of emergency, control profits and regulate monopolies in the national interest. Such ‘heretical’ ideas were reportedly recanted in public by Varga himself and his former colleagues in early 1949.2


Stalin’s Economic Advisors Since the fall of Varga and his Institute, the Varga Controversy has received much attention in both Soviet and Cold War studies and been interpreted in two ways. First, some scholars have placed the controversy in the context of late Stalinism in which the Party suppressed reformist and Western-oriented ideas that were extant in Soviet intellectual circles to establish a Stalinist orthodoxy in culture and science.3 In their view, Varga was excoriated by dogmatic and anti-Western Stalinist academicians and then purged by Stalin who seemed to believe that Varga’s book had revisionist, pro-Western and reformist perspectives on the postwar capitalist economy. Despite some specific differences between these writers, they shared the conclusion that with the start of the Cold War the controversy and its consequences demonstrated the dictator’s will to impose strict ideological control upon the scholarly community. In this regard, the Varga case was seen as comparable to other scandals that occurred in Soviet academia around that time, most notably the Lysenko affair. While one recent study enhances our understanding of late Stalinism by linking anti-Semitism to postwar cultural and ideological repression, including the attack on Varga’s book, it still shares the framework of Stalin’s repression of Soviet intellectuals that was the theme of the previous studies.4 Second, other scholars, mostly diplomatic historians and international relations specialists, have linked the Varga Controversy with the course of Stalin’s foreign policy and the origins of the Cold War,5 following the insights of the contemporary journalists and diplomats.6 For them, the severe nature of criticism against Varga’s work reflected the reach of Stalin’s own ideas on the postwar Western economy and his foreign policy directions. Varga’s work, which implied stability in the postwar capitalist economy, largely represented a soft and reformist stream of Soviet foreign policy towards the West. The fact that it was subject to harsh criticism in spring 1947 indicates that Stalin had already prepared to take a hard line against the West even before the announcement of the Marshall Plan. These scholars have understood the controversy as part of a series of interrelated events that included the celebration of N. A. Voznesenskii’s War Economy of the USSR in the Period of the Patriotic War in early 1948, meetings for drafting a new political economy textbook in 1951 and the publication of Stalin’s own theoretical pamphlet, Economic Problems of Socialism 146

An Affair in the USSR, in 1952, through which Stalin reestablished as the theoretical basis for Soviet foreign policy the Leninist formulation of the character of the capitalist economy, epitomised by chronic economic crises and the inevitability of war in the capitalist world. Based on such orthodox Leninist beliefs, some scholars argue, ‘the dictator waited impatiently for catastrophe to strike the West’,7 conceived an aggressive foreign policy towards the United States and adopted revolutionary strategies in Europe and Asia in the postwar period. While more balanced accounts have been advanced by scholars like Taubman and Hough,8 they did not manage to replace the now standard interpretation of the controversy that the diplomatic historians and international relations specialists have established. In effect, the controversy is still frequently cited in Cold War historiography as evidence of Stalin’s aggressive mindset in his foreign policy making. With newly available Russian archival documents, this chapter revisits those interpretations by historians of the Soviet Union and Cold War. Their works, which are mostly based on published sources, have focused on the academic and theoretical discussions of 1947–8 that surrounded Varga’s 1946 book. They have stressed the sudden emergence of the criticism against Varga, linked it to the Cold War atmosphere and highlighted theoretical and ideological discrepancies between the Varga group and its critics, including Stalin. However, archival materials that reveal the inside story of such theoretical battle suggest that the Varga Controversy and the subsequent dissolution of IMKh should be reinterpreted over a longer time frame and through a broader perspective. A marked attack on Varga and his institute had already occurred in early 1941, six years before the Cold War began, and it reemerged in 1943 and 1947. None of these three attacks had stemmed from ideological and theoretical differences between orthodox Leninism and ‘reformism’. The Varga group’s economic ideas and research conclusions had never been a key reason for the campaigns. As I will show, the end of IMKh was only marginally related to the theory on postwar Western economy of Varga’s 1946 book. Rather, the attacks originated from the broader political and cultural factors in Soviet society, including Russian nationalism/Soviet patriotism, anti-foreign sentiments and generational conflicts. The most important was the personal, ethnic and generational hostility to Varga and his colleagues of A. Zhdanov and 147

Stalin’s Economic Advisors his followers.9 The Zhdanovites, as Russian nationalists, were deeply suspicious of the Varga group, most of whom were foreign-born or had lived and worked outside of the Soviet Union for extensive periods. Moreover, the Zhdanovites, who rose to the top of the Party during Stalin’s revolution in the 1930s, distrusted older intellectuals like Varga and his economists who had finished their higher education and started their professional careers before the October Revolution. My archival research suggests that Stalin did not always see eye to eye with the Zhdanovites on IMKh. The foregoing account presented in previous Chapters shows that he seemed to highly respect the Varga group’s expertise on capitalist economy. In fact, the dictator continued to use them for drafting his foreign policy, even while their printed works were being publicly criticised. Stalin was far from an instigator of the attacks. The initiative always came from Zhdanov and his followers, and Stalin intervened only at critical moments. My case supports J. Arch Getty’s thesis about the relationship between Stalin and his bureaucrats, in which he characterises the latter as ‘powerful actors’ in Soviet high politics, not as ‘slaves’.10 This chapter begins with an analysis of the Zhdanovites’ first charges against the Institute in 1941 and 1943. It focuses on how and why they singled out the Varga group and what the bases of the two attacks were. The next section is devoted to the May Conference of 1947, the Zhdanovites’ campaign to close the IMKh, and the outcome. Rather than focusing on the theoretical discussions between Varga’s supporters and critics, I concentrate on the Party’s inside story of the Institute’s demise. The final section traces the critics’ theoretical offensives after 1947 and reassesses their meaning for the whole campaign against Varga. It also describes the Zhdanovites’ continued harassment of the Varga group to show that there was remarkable consistency in their charges from 1941 until 1949.

Before 1947 In June 1941, A. Zhdanov and Shcherbakov, Zhdanov’s closest ally in the Central Committee, discussed a plan to reorganise the nation’s most preeminent academic institute, IMKh. In a meeting of the Secretariat in the Central Committee, these top Party leaders decided to charge Agitprop, the 148

An Affair ideological outpost of the Central Committee supervised by Zhdanov himself since late 1938, with drafting a comprehensive plan for the Institute’s reorganisation.11 In fact, since February 1941 Agitprop had been collecting materials in preparation for the plan to reorganise the Institute. One of the Agitprop Department’s first steps was to request Iakov Khavinson to provide a copy of the letter he had originally sent to the Central Committee and the NKID in summer 1940.12 Khavinson was the principal director of TASS and later a key member of the Soviet Information Bureau of the Council of Ministers (Sovinformbiuro) and head of the foreign department of Pravda. In this letter, a report on Western research institutes of international affairs, Khavinson had condemned the Varga Institute. According to him, its research direction and methodologies had not kept up with rapidly changing conditions in international relations because of the Institute’s insistence on outdated analytical categories like ‘world economy and world politics’ and its dismissal of new ones, such as ‘diplomatic and state-to-state relations’. His argument implied that the contemporary world should be understood through the lens of Realpolitik between individual states rather than the framework of the movement of monopoly capital and class struggles. Khavinson argued that, instead of IMKh’s periodicals, which were bound by their use of those old categories, the Soviet Union needed more praxis-oriented publications like the American journal Foreign Affairs. Furthermore, he asserted that the Varga Institute had failed to produce capable young international experts who could serve as academicians and practical officials for the party-state. In Khavinson’s opinion, graduates of IMKh were incompetent; their knowledge was limited to economic theories and they lacked a sense of issues in international politics. As an alternative, Khavinson proposed a new Institute under the NKID that could work on more practical issues of the contemporary world. Following Western examples, particularly those of the US and Germany, he argued, this new Institute should focus on such questions as the history of diplomatic relations, the economy and politics of individual states, international law and the activities of international organisations. In short, what Khavinson envisioned was the introduction of a new Western-style institute, such as the Royal Institute of International Affairs (Chatham House) in London, in the Soviet Union.13 149

Stalin’s Economic Advisors Although Khavinson did not explicitly use the term ‘Leninist’ in the report when he referred to the old categories, his intention was clear. What he suggested was that a move away from the Leninist methodology and towards a Western style of international relations studies. Considering the political atmosphere at the time, Khavinson’s report was strikingly proWestern and anti-Leninist. What was more striking, however, was that such a document was appropriated to attack the Varga Institute by Agitprop, the Party’s department for ideological vigilance, in early summer of 1941. Interestingly enough, six years later, in 1947, the same group would assail IMKh for being pro-Western, anti-Leninist and revisionist. Khavinson’s letter was not the only document that was available to Agitprop, which was painstakingly looking for faults in the Varga Institute in early 1941. They also collected two letters from inside IMKh, which can be characterised as typical denunciation letters, reminiscent of the Great Terror years.14 One was written by one of its two deputy directors, Bordadyn, who originally sent it to Stalin in February 1941. This disgruntled young economist questioned the reliability of the Institute’s leaders, labelling them ‘ex-Trotskyists’, ‘ex-non-Bolshevik Party members’, ‘bourgeois-gentry family descendants with class enemy backgrounds’ and ‘people who were born in, or connected with, foreign countries’.15 The other letter, initially sent to Beria, the head of the NKVD, in early 1941, had been written by one of the Institute’s graduate students. The author, A. N. Turmilov, who obviously belonged to the vydvizhentsy generation16 and was transferred to IMKh on the Party’s recommendation, focused on the patronage practices (pokrovitel’stvo) and the nepotism of the leadership clique and its ‘unfair’ treatment of the students like him who were from a proletarian background. According to this vydvizhenets, the Institute leadership privileged their ‘own people (svoi liudi)’ who had been research fellows from the late 1920s and early 1930s, at the expense of new and young graduate students like himself. Turmilov claimed moreover that these insiders formed an artel’, or ‘nest (gnezdo)’, providing ‘mutual guarantees’ of tolerance for each other’s deviations and monopolising the Institute’s research and administration.17 In addition to collecting such ‘useful’ documents, Agitprop prepared its own criticism of the Varga Institute. In Bol’shevik, the major theoretical 150

An Affair organ of the Central Committee, a review article appeared in March 1941, in which some research products by IMKh were implicitly but harshly criticised. According to the review, some recent publications of the Institute violated a key principle of Leninism by acknowledging the planning aspects of the German wartime economy. Such a theoretical ‘mistake’, it claimed, led to an overstatement of the economic and military power of Hitler’s regime.18 Relying on the denunciations and its own theoretical review of IMKh, Agitprop drafted a report on the problems of the Institute and sent it to Zhdanov and Shcherbakov in early May 1941.19 These two Party leaders took this document twice to the Secretariat of the Central Committee in June 1941 and following discussions the Secretariat concluded that some of the Institute’s works had serious mistakes and were, consequently, politically harmful. On 16 June 1941, Zhdanov and Shcherbakov instructed Agitprop to prepare a comprehensive plan for the reorganisation of IMKh within ten days.20 It is apparent the Varga Institute’s economic ideas and theoretical positions were not the main issue for Zhdanov and his protégés, as shown by the fact that they had used the two ideologically and theoretically contrasting documents for the campaign: Khavinson’s report and Agitprop’s own review. The glaring problem for them was, rather, that IMKh’s cadres were old, foreign and, consequently, politically unreliable. Agitprop’s June report presented the issue in an explicit and schematic way by offering detailed information about the ratio of Russians to foreigners among the IMKh fellows: ‘In the Institute, as a rule, only insignificant posts, secondtier ones, are filled with Russian people. Of 68 senior research fellows, only 20 are Russian, of 16 referees, 5 Russian and of 13 graduate students, 4 Russian … Of 15 leading cadres … only 2 people are Russian’. The report singled out several ‘particularly unreliable’ members of the Institute and described their personal history and background in detail: R. S. Levina, I. S. Leonov, L. N. Geller, I. M. Lemin, L. A. Mendel’son, S. M. Mel’man, I. A. Var’iash, P. S. Gel’bras and B. S. Fogarashi. Interestingly, Agitprop’s picks had either clearly non-Russian or Jewish-sounding names, though they were not labeled as foreigners and Jews in the report. Based on this ‘statistical’ data, Agitprop concluded that ‘the Institute’s cadres are filled 151

Stalin’s Economic Advisors with politically unreliable people’.21 This cadre problem, which seemed to bother the Zhdanovites, would reemerge in subsequent attacks against the Varga group for the next seven years, mixed with a great variety of sources that were not tightly interconnected. In fact, the concern of Zhdanov and his allies about IMKh’s cadres was close to paranoia. Most of the Varga people had been loyal to the Party and Stalin, as previous Chapters showed. Varga and his colleagues in IMKh sided with Stalin and served as a theoretical outpost for him to attack Bukharin’s organisational capitalism theory in the time of power struggle in the late 1920s. Throughout the 1930s, they had been important economic consultants for Stalin and other Party leaders. The Varga group survived the Great Terror virtually intact and some even played a ‘collaborator’ role for the purge of ‘enemies of the people’.22 In other words, they proved themselves as politically reliable. However, the Zhdanovites’ ‘paranoia’ did not completely come out of nowhere. Many of the Institute’s leaders were born in the late 1870s and the 1880s, certainly belonging to a different generation from the young Central Committee leaders, most of whom were born after 190023 and experienced the Revolution, the Civil War and the Cultural Revolution as a youngster and saw their political careers rising with the expansion of the Party bureaucracy in the early 1930s and with the result of the Great Terror in the late 1930s.24 And many senior fellows of the Institute were actually foreign-born and still had close ties with foreign countries. Some of them had worked with Varga in his Berlin office, a Comintern research institute in the 1920s, and followed him to immigrate to the Soviet Union when he became head of IMKh in late 1927. Anyway, this remarkable first campaign had to end abruptly when Hitler’s army crossed the Soviet Western border just six days after the Secretariat meeting on 16 June 1941. In spring 1943, when the war situation looked promising for the Soviet side, the project was resumed mostly by Shcherbakov. He was joined by G. F. Aleksandrov, the young director of Agitprop, who had been a longtime Zhdanov protégé, a renowned philosopher and a young rising star in the political scene. They took advantage of Vyshinskii’s denunciation of Varga’s public lecture in October 1942.25 Vyshinskii, Molotov’s deputy in the NKID and the notorious former prosecutor in the Zinoviev and Kamenev trial in 1937, asserted that Varga 152

An Affair revealed his pro-German sentiment in the lecture. According to Vyshinskii, Varga argued that Germany as a nation was not unique when it came to committing atrocities. Historically other nations had committed similar atrocities and, therefore, Germany as a nation was not at fault, although Hitler’s regime was to be blamed for the brutal war. Vyshinskii apparently interpreted Varga’s words ‘maliciously’ as a justification of German crimes against the Soviet people.26 Soon Vyshinskii’s accusations were soon followed by a more systematic campaign against Varga by the Zhdanovites in March 1943. Agitprop, following the example of 1941, again collected denunciation letters against Varga and IMKh and prepared its own critical review of the Institute’s works that had recently suggested the ‘exhaustion’ and ‘impoverishment’ of German economy.27 Interestingly, this time, contrary to the 1941 case, Agitprop attacked the works for underestimating the economic and military capabilities of Germany, which, according to them, led to an understatement of the heroic struggles of the Soviet people against Hitler’s army. As for denunciations, while Agitprop recycled Khavinson’s report, they found some new ones: Vyshinskii’s report and a letter to the Central Committee from a former Institute member, L. N. Ivanov. Ivanov, who Varga later called an ‘inveterate scoundrel’,28 made similar points as Bogdadyn and Turmilov in 1941 with a more aggressive tone. Employing the terminologies that had been commonly used during the Terror years, such as state criminals, traitors and ex-Trotskyists, Ivanov, who came out of IMKh right after his candidate thesis was criticised by its leadership earlier in the 1940s, located the major problem of the Institute in its old and foreign-born cadres. He complained that ‘the leadership clique’ selected only ‘their own people’ for important academic and administrative posts and stifled the promotion of young scholars; he added that there were almost no Russians, particularly in the Institute leadership, to which Russians were basically not admitted.29 Aleksandrov skillfully consolidated the points of these documents into a letter for Stalin in mid-March, in which he condemned Varga’s lecture and his subsequent related article as a justification of ‘the aggressive policy of Hitler’s Germany’. IMKh’s ‘impoverishment’ thesis was also censured. The point that Aleksandrov highlighted most, however, was that 153

Stalin’s Economic Advisors the Institute hired too many foreigners. According to him, its Board filled its staff with research fellows who were ‘politically unreliable foreigners’ and there was ‘not a single Russian scholar among the leading cadres’. Just like Agitprop’s June report in 1941, he provided the Russian/non-Russian ratio: ‘At present, of 44 senior fellows, only 6 are Russian’. He further complained that ‘IMKh preferably employs people of German-language background – Germans, Hungarians, German Jews and Hungarian Jews who speak well only in German’ and they did ‘not pay attention to the works by Russian scholars’.30 Before Aleksandrov sent the letter to Stalin, he showed the draft to Shcherbakov, who did not change it much except providing the revised ratio: ‘Of 58 senior fellows, only 13 are Russian’.31 While Shcherbakov and Aleksandrov awaited Stalin’s reply, Agitprop workers finished a draft resolution based on their chief ’s letter. The draft claimed that, ‘in light of the incorrect line of the Institute’s works and the cadre selection’, IMKh should be disbanded and its journal cease publication. In its place, it called for the establishment of the ‘Institute of Economics and Politics of Foreign States’ directed by V. P. Potemkin, a diplomat and a former deputy of Litvinov and Molotov in the NKID. Its journal would be titiled as Economy and Politics of Foreign States, and its editorial board would be dominated by people with links to the NKID.32 As shown in the selection of the personnel and the titles, this plan was strongly influenced by the report of Khavinson who resent a copy to Agitprop in early April 1943 when he was informed that the campaign against IMKh had been resumed.33 Once again, as in 1941, Agitprop which was supposed to the Party’s ideological outpost, extensively used Khavinson’s ‘anti-Leninist’ ideas to remove Varga and his people. At a time when anti-German sentiment in the Soviet Union was at its peak, Shcherbakov and Agitprop workers almost succeeded in denouncing Varga as a pro-German and his Institute as a base for politically unreliable foreigners. Varga was summoned to the Central Committee for an inquisition, where, according to Varga, ‘Aleksandrov impudently asserted that the Institute is filled with Germans and Hungarians, and that the German language became an “official language”’. When Varga asked Shcherbakov if he had really read the lecture material, ‘the fattened swine with small malicious glasses’ replied, ‘what for, if everyone gave it a hostile reception?’34 154

An Affair Following the meeting, Varga wrote a desperate letter with the attachment of the lecture’s stenographic record to Stalin.35 According to Varga’s memory, Stalin, who did not know who had launched the campaign and what purpose it was supposed to serve, simply saved Varga and his Institute after reading the lecture notes. Stalin reportedly said the lecture was a very good Marxist analysis and reprimanded those who slandered Varga.36 Varga, however, did not know the whole truth; Stalin knew exactly what had been going on. There is evidence that Stalin had read Aleksandrov’s report carefully, and later, the draft resolution of his department. A substantial portion of Agitprop’s draft was implemented, as in 1944 the Council of Commissariats passed a resolution for the establishment of the MGIMO, under the NKID, devoted to the study of state-to-state relations. The resolution followed almost all of Agitprop’s 1943 recommendations, including the selection of the personnel, with the exception of its plan to dissolve IMKh.37 A year later, V. S. Zakharov, a young Russian academician who had worked in the Department of Cadres in the Central Committee and had no previous connection with the Varga group, was planted in IMKh as its first deputy director, obviously, to keep an eye on them. Although Stalin seriously considered Agitprop’s plan, he eventually blocked his young bureaucrats’ attempt to disband IMKh and opted to save Varga. The main reason seems to be that the dictator valued the Institute’s expertise on international economy. Only a few days after the campaign was aborted in the summer of 1943, the campaign’s main instigator, Shcherbakov, followed Stalin’s instructions to ask Varga to prepare secret analytical reports about capitalist war economies for the Party leadership.38 Moreover, when the war was nearing its end, the Varga Institute was summoned to undertake even more critical research for the party-state, for example, projects on German reparations39 and the postwar international monetary system.40 IMKh expanded for studying economies and politics in Eastern Europe, Asia and Africa, that is, regions on which the Party demanded specialised knowledge at that time. As for Varga himself, his academic career seemed to continue to flourish. He was awarded a Lenin honour in 1944.41 At the same time, Varga and several of his colleagues were chosen to accompany Stalin and other leaders to major postwar international conferences, including the Potsdam Conference in July 1945.42 155

Stalin’s Economic Advisors Regardless of Stalin’s confidence in the Institute, Zhdanov and his protégés remained suspicious of its cadre. In early 1945, Zakharov, the Central Committee’s spy in IMKh, sent Zhdanov a report about conditions in the Institute. Just as in Agitprop’s 1943 resolution, Zakharov’s report stressed the problem of the Institute’s members, most of whom were old and foreign-born. He argued that ‘the national composition of the cadre is seriously unsatisfactory. For many years Comrade Varga has served as headquarters for foreigners-immigrants, not for Russian people’. In addition, he contended that the Institute ‘desperately needed young research fellows’.43 Fortunately for Varga and his colleagues, Zakharov’s report was not developed into a systematic campaign as in 1941 and 1943. This more subdued approach was probably due to Zhdanov being in Leningrad and Shcherbakov’s grave illness.

1947 In May 1947, a huge economics conference took place in Moscow, cosponsored by Moscow State University and the Institute of Economy of the Academy of Sciences. The purpose of the meeting, chaired by K.  V. Ostrovitianov, the director of the institute, was to discuss Varga’s Changes, published in late 1946. More than twenty prominent Soviet economists commented on the book in front of a large audience during the three sessions held on 7, 14 and 21 May. As noted earlier, most scholars have described this conference as an occasion at which Varga’s rivals, reading Stalin’s mind, denounced and stigmatised Varga’s ideas on the postwar capitalist economy as heretical to Leninist orthodoxy. While some recent works correctly point out that the atmosphere in the sessions was not particularly hostile, they concur with the older studies by maintaining that the conference had been staged because Stalin was dissatisfied with Varga’s economic ideas and that its results brought the fall of Varga and the dissolution of the IMKh.44 Cherkasov goes one step further, concluding that the event was part of a series of carefully designed plans by Stalin to humiliate Varga in public.45 My archival findings, however, question these arguments. The evidence suggests that the gathering did not originate from Stalin’s displeasure with 156

An Affair Varga and his book. Rather, it was organised as a part of Zhdanov’s latest campaign against Varga and IMKh, the motive of which was personal, ethnic and generational just as the previous ones had been.46 In fact, well before the May Conference, Zhdanov’s campaign had already been in full swing. In early 1947, right after Zhdanov launched a massive offensive that would become known as the Zhdanovshchina against Leningrad-based intellectuals, he turned his attention back to his old target, Varga and IMKh. Things seemed to be going favourably for Zhdanov, as Malenkov, his fierce rival in the Central Committee, who was reportedly close to Varga, had been demoted in the previous year, whereas a key Zhdanovite, Voznesenskii, who was the chief of Gosplan and the youngest full member of the Politburo, became one of Stalin’s favourites. Voznesenskii was a supporter of placing the economics institutes in the Academy of Sciences under Gosplan. The new campaign against IMKh began with Aleksandrov sending a letter to Voznesenskii in early spring.47 The letter suggested that both IMKh and the Institute of Economy should be subordinated to Gosplan, in very broad terms criticising the institutes’ abstract research tendencies and their lack of productivity. In fact, very similar phrases were used when Agitprop reprimanded the Institute of Economy during its annual review just several months before. To IMKh, however, these accusations were new. What was not new was that Aleksandrov highlighted the issue with the Varga Institute’s cadre, their nationalities, ages and political pasts. While the rhetoric of the 1943 attack had been anti-German, this time, it was anti-Jewish. Aleksandrov used the word ‘Jewish’ rather than the terms ‘non-Russian’ or ‘foreign’ that had been used in the previous campaigns, reflecting the rising anti-Semitism and anti-cosmopolitan campaign in Soviet politics at that time. In the Varga Institute, he schematised, ‘while Russians are only 14 of 51 senior researchers, Jews are 33’. Also, Aleksandrov tackled the point that their cadre was old: ‘The very few [of them] were under 40 years old’.48 He considered anyone younger than 40 years of age in 1947 as part of the new generation; they would have started their higher education after Stalin had come to power in the late 1920s, and would have built their belief in socialism and their bureaucratic/academic careers during Stalin’s revolution in the 1930s. In contrast, the majority of the Varga cohort was 157

Stalin’s Economic Advisors categorised as being old for Aleksandrov, as their careers, as revolutionaries and students of Marxist theories, began before the late 1920s, when they had been exposed to the different sects of socialism. Remarkably, in his letter Aleksandrov made no specific criticism of IMKh’s ideas and research products, particularly Varga’s latest book. While the plan of the two young Zhdanovites was under preparation that spring, Zhdanov sponsored the organisation of the May Conference as a part of his campaign to purge Varga and IMKh. Although Zhdanov hoped that this event would discredit Varga, he did not seem to have specific ideas or an agenda for attacking Varga’s book, nor did he give any preliminary instructions to the conference participants including its chair, Ostrovitianov. Rather, Zhdanov intended the event as a diskussiia. According to Kojevnikov, diskussiia represents a rule-governed ritual in which ‘participants were to demonstrate polemical skills in a theoretical matter which had not yet been decided by authorities’. It was also complemented by another rule-governed public behavior, kritika i samokritika (criticism and self-criticism), which meant that the losing parties in diskussiia were to subordinate their ‘views to those of the collective, accepting criticism and delivering self-criticism in the proper way’. In doing so, they were either incorporated into the collective or purged from it. The two rituals were interrelated; diskussiia ‘could not be considered completed without a solo performance of self-criticism’.49 Probably, to Zhdanov, the specific content of the discussion did not matter very much as long as it was against Varga. The particularities of the book’s shortcomings, whatever they were, would be revealed during the sessions. The key would be Varga’s self-criticism as a way to complete diskussiia. What Zhdanov apparently had in mind, therefore, was that active criticism of the book in the panels would be followed by Varga’s subordination to them in the closing session of the conference, which would help to legitimise Zhdanov’s campaign to purge Varga and his Institute. However, the May Conference did not turn out to be a humiliating diskussiia for Varga. One reason was that almost half of the discussants were from IMKh. Varga’s colleagues, many of whom recommended the book for the Stalin prize just several months before,50 stood by their boss and supported him so enthusiastically that one of the participants complained 158

An Affair that ‘some comrades wish to transform this tribune from a scientific tribune into an advocate’s tribune’.51 Moreover, almost all of the commentators started their reviews by praising the book and many, including S. G. Strumilin, an internationally renowned economist, spent most of their floor time complimenting the book, which made Varga conclude that ‘even the very sharp critics gave the book a positive evaluation in general’. In his closing remarks, Varga admitted that some theoretical concepts should have been clarified and that his methodological approach was limited to analysing the political dimension of capitalist world, but he did not accept any criticism when it came to his key ideas.52 Several problems with Varga’s book were indeed revealed during the conference, including his views on ‘the decisive role of capitalist states in war economy’, ‘capitalist planning’, ‘new democracies in Eastern Europe’ and new ‘colonial relations’.53 But the critiques were not intense enough to satisfy Zhdanov and push Varga to self-criticism. When Ostrovitianov reported to Zhdanov about the conference in early June 1947, he characterised its atmosphere as ‘comradely’.54 In other words, the conference did not bring a decisive victory for the Varga critics but rather a stalemate. To have a clear winner, another round seemed necessary, and indeed, this new round began with I. Dvorkin’s critical review, published in Bol’shevik in July, on the work of Eventov, one of the core economists in IMKh. This review was followed by the reply that Varga and Eventov sent to the Secretariat in August, and continued in various forms that I will discuss in the next section. Thus, the May Conference was not turned into a symbolic stage for Varga’s disgrace. However, Zhdanov had no reason to panic. By the summer of 1947, Agitprop had drafted a resolution based on its own assessment of the Varga Institute independent of any criticism presented in the conference. It appears that this draft had been written before the results of the conference were known to them! The resolution sought nothing short of the merger of IMKh with the Institute of Economy. While the new institute would be under the auspices of the Academy of Sciences, it was to be subordinated to Gosplan and its research-organisational leadership would be placed under the direction of Voznesenskii. Furthermore, the draft recommended a complete purge of the leadership of both institutes. 159

Stalin’s Economic Advisors Both directors were to be removed and V. S. Nemchinov of the Agricultural Economy Institute (the Timiriazev Institute) was named as the director of the new institute. The sector of economies of foreign states, which would presumably replace the Varga Institute would be headed by L. N. Ivanov, the academician who had sent the malicious denunciation letter against the Varga group to the Central Committee in 1943.55 At that time, Ivanov was one of leaders in the MGIMO, an institute recently established as a byproduct of the previous years’ attacks on IMKh. The theoretical grounds of Agitprop’s draft for the dissolution of the Varga Institute can be epitomised by the disciplinary separation of economics from international politics studies, based on the idea that an economics institute should be strictly engaged in the problems of economy under the guidance of Gosplan. Aleksandrov used the same rationale when he explained to Varga the conceptual basis for the Central Committee’s plan to merge the two institutes.56 Agitprop’s new theoretical position was just the opposite of the one that it had taken in 1943, when, as described above, it attacked IMKh’s concentration on economy. It also contradicted one of the key criticisms advanced in the May Conference, where some discussants disapproved of Varga’s focus on the economies of capitalist states and suggested he combine economics with politics. In any case, this draft resolution was endorsed by Zhdanov and the Secretariat already on 9 June, when Ostrovitianov’s report on the May Conference had just barely reached Zhdanov. Thus, Zhdanov’s campaign in spring and summer 1947 to disband the Varga Institute, the third attempt in less than seven years, was not based on Varga’s ideas on the postwar capitalist economy and the May Conference results. The 1947 attack was of the same nature as the previous ones; regardless of the theoretical positions, while the Zhdanovites collected various sources to charge IMKh, their bone of contention still was that the Institute was the headquarters of unreliable, old and foreign-born academicians who had failed to promote Russian scholars to meet the demands of the new era. When Varga was informed of the Zhdanovites’ plan in early July 1947, he immediately sent a plea to Stalin for the survival of his Institute as in 1943. Varga particularly criticised Agitprop’s theoretical ground of the plan: The separation of economics from politics. He argued, ‘to separate 160

An Affair the study of capitalist politics from the one of its economy and vice-versa would be theoretically anti-Leninist and practically completely unattainable. Economy and politics of capitalist states are now so interlaced that it is impossible to examine economy without politics and it is even more impossible to explore politics without studying economics’.57 But Stalin did not move this time. In late August 1947, Aleksandrov reported to Zhdanov that Varga had reluctantly accepted the plan.58 Then, Zhdanov gained Stalin’s consent or rather his connivance to disband IMKh in early September 1947. On 12 September 1947, the Politburo made it official.59 It is notable that, at that moment, the discussions around Varga’s book had not yet produced a consensus victor. Why did Stalin not save the Institute in 1947, as he had in 1943? The answer remains speculative, even with currently available archival documents. What is conclusive from the documentary sources, however, is that Varga’s economic ideas on postwar capitalism, expressed in his 1946 book, did not cause the different outcome. There is no archival evidence that Stalin abhorred either the book as a whole or specifically Varga’s theory on the suspension of a major economic crisis in the postwar capitalist world. Rather, archival documents indicate the opposite. A letter from Stalin to Varga in spring 1946 shows that the dictator even encouraged the book’s prompt publication.60 As noted earlier, the book originated from the analytical reports for the Party leadership in 1943 and 1944, meaning that Stalin was familiar with Varga’s ‘heretical’ ideas at least two years before the publication. Moreover, the book’s most controversial chapters were published in 1945,61 when Varga, as an advisor, accompanied Stalin to Potsdam. Even in 1947, Stalin was still consulting Varga and other economists in IMKh whose works were modeled after their director’s book. Currently available archival materials suggest that the difference in outcome arose from something else. Since 1945, Varga had been extensively involved in Eastern European, particularly Hungarian, economic reform. By the time Zhdanov sent Stalin his request to dissolve IMKh in August 1947, he had collected some documents that linked Varga and his Institute to a modest Eastern European reform agenda. In July 1947, P. Fedoseev, the Bol’shevik editor and a longtime Zhdanovite, forwarded Zhdanov a letter written by the workers of the International Department (Otdel vneshnei 161

Stalin’s Economic Advisors politiki) in the Central Committee. The letter harshly criticised Varga and his Institute’s ‘erroneous positions’ that supported establishing an NEPstyle economic system in Eastern Europe and formulated the system as a special transitional form from capitalism to socialism.62 Another document was the report that Agitprop had sent Zhdanov the previous year about Varga’s activities in Hungary in 1945 and their possible effects on Eastern European problems. According to the report, during 1945 Varga had participated in the preparation of the economic reform plan of the Hungarian Communist Party and published articles in Eastern European journals, where he was ‘against the nationalisation of the means of production, against reducing profits of capitalists, and against “excessive” governmental regulations’.63 In 1946, this had not looked like a serious scandalous topic. However, things were drastically different in August 1947, at which time Stalin was leaning toward the idea of the massive Sovietisation of Eastern Europe after he had concluded the Marshall Plan as the manifestation of the US expansion. Stalin probably meant the dissolution of IMKh to be the end of further discussion on the modest East European reform agenda. However, the dissolution of IMKh was neither a complete dispersion of the Varga people nor an ultimate victory for the Zhdanovites. Agitprop’s original draft resolution to seek the Institute’s complete overhaul, endorsed by Zhdanov earlier, was significantly revised into its final version in September. Most importantly, the Varga group was granted an institutional basis on which it could survive as an independent entity within the new institute. First, the revised resolution made it clear that Varga would not be eliminated by unusually highlighting his role in the new institute, which was described as ‘research-consultant work about the problems of economies of foreign countries’. Second, the resolution ensured that Varga would remain as the chief editor of his journal, though Agitprop finally succeeded in ceasing its publication in December 1947.64 Third, the foreign economies division would be led not by L. N. Ivanov, Varga’s personal opponent, but by V. A. Maslennikov, Varga’s deputy director, who had been staunchly loyal to him during the May Conference. Consequently, when the merger happened in late December 1947, the former Varga people were transferred to the new Institute basically intact, instead of being absorbed by the Institute of Economy. The great majority of them65 could work in the 162

An Affair same sub-divisional research sectors in their former workplace and did so even in the same rooms in the same building.66 Given that only Stalin could make such a remarkable revision of Zhdanov’s original plan, it would be logical to suppose that the General Secretary did not want a purge of the Varga people and intended to keep using their collective research results by providing them with some institutional stability. Evidently, Stalin and other Party leaders did not question their expertise in world economy and politics, even when Zhdanov’s campaign to dissolve IMKh was about to succeed in the summer of 1947. Right before Molotov departed for the Paris Conference to discuss the Marshall Plan in late June 1947, the foreign minister, mostly likely following Stalin’s order, asked Varga to draft one of the most important analytical reports that he had ever written.67 Varga’s colleagues as well, even after the Institute’s dissolution was confirmed in September 1947, were still asked to send analytical reports on world economy and politics to the Central Committee and the NKID, just as they had for the previous 20 years. For example, in December 1947, I. A. Trakhtenberg, the second-best economist in IMKh, was asked by Stalin himself to write a report on postwar inflation in Britain, France and Germany and their currency stabilisation programs.68 Varga remained a prestigious member of the Academy of Sciences, a status that was held by only 14 Soviet academicians at that time,69 and still served as a key commentator on foreign affairs in Soviet newspapers, such as Pravda and Novoe vremiia. Most of his former colleagues also survived the dissolution of IMKh, found a home in a new institutional setting and continued to work an exclusive research unit. The Zhdanovites were presumably dissatisfied with such results.

After 1947 The post-IMKh history demonstrates well that the Zhdanovites’ attack on the Institute had not centred on its theoretical works about the postwar capitalist economy but on its cadre. Previous studies have outlined the history in terms of the critics’ full-scale attack on the former IMKh economists, allegedly masterminded by Stalin, and the latter’s 163

Stalin’s Economic Advisors unconditional surrender. They argue that, since the May Conference, the works of Varga and his colleagues had been harshly criticised in academic journals and at conferences held in 1948. On those occasions, many of the economists were forced to recant their revisionism on the postwar capitalist economy in favour of the Party’s official line. The wave of the theoretical harassment was ended when Varga finally confessed his mistakes in public in a repentant article published in Voprosy ekonomiki in April 1949. However, a closer reading of archival and published documents shows that such an account based on the content analysis of the published sources misses two critical points. First, just as Zhdanov’s 1947 campaign to disband IMKh was planned, conducted and completed largely regardless of Varga’s economic ideas, the objective of the conferences and publications in 1947–8 was not to discuss the content of the Institute’s works from the perspective of economic theory. Those discussions were symbolic acts to properly complete diskussiia, a cultural ritual that Zhdanov had been promoting in science and in the Party for years, rather than theoretical engagements between Varga’s revisionism and orthodox Stalinism. Second, despite their public disgrace, the former IMKh economists were institutionally in good shape, so the Zhdanovites did not adjourn their campaign against them. As noted earlier, Zhdanov intended the May Conference as a combination of two rituals: diskussiia and kritika i samokritika. Despite its inconclusive ending, Zhdanov somehow managed to dissolve IMKh through relentless attacks on its cadre problems. Such a success, on the other hand, made the Varga diskussiia a glaring exception to the norm of other major academic ones at that time of which Zhdanov himself had been a chief promoter. The decision of the winner and loser in a diskussiia should come first – after which no further discussion on the subject would be allowed – and institutional changes or consolidations would then follow, not vice versa. From the perspective of outsiders, no more diskussiia would be needed in the case of Varga and IMKh, as the end of their institutional basis was already decided. In the mind of the Bolsheviks, specifically, the Zhdanovites, however, it was still important to complete the diskussiia in a proper way. In other words, the winner and loser had to be symbolically 164

An Affair confirmed within the setting of diskussiia by the latter’s acceptance of criticism and performance of self-criticism. Only then could the loser prove to have fully received the views of the collective and become an insider to the Bolshevik culture, and the winner could have the unquestioned legitimacy of the victory.70 It was this cultural force of the two rituals, diskussiia and kritika i samokritika, that pushed for further theoretical exchanges between the Varga cohort and their critics even after the Politburo decided to dissolve IMKh. About a month after the Politburo’s decision, an article by one rankand-file Soviet economist named I. Gladkov was published in Bol’shevik. It was essentially a summary report of the May Conference, which he described as successfully having exposed the ‘serious shortcomings’ of Varga’s 1946 book. The article would have been very similar to Zhdanov’s own report on the Philosophy Dispute in 1947, published earlier in Voprosy filosofii and Bol’shevik, in which he summarised the results of the diskussiia and declared its completion by including the loser’s self-criticism. However, unlike Zhdanov’s article, Gladkov’s could not include Varga’s selfcriticism, simply because IMKh’s director did not conduct a self-criticism in the Conference. In the article, Gladkov addressed this point clearly and accused Varga and his economists of a ‘weak display of self-criticism’.71 The intent of the Zhdanovites was obvious. By publishing an article in the key organ of the Central Committee that reenacted the May Conference as the scene of Varga’s defeat and his lack of self-criticism, they were calling for Varga to perform self-criticism as a proper way to finish the diskussiia. Instead of delivering self-criticism, however, Varga immediately made a counterattack in the same month by sending Stalin a letter accusing the Bol’shevik editors of making a ‘serious theoretical and political mistake’ in publishing the article with ‘inaccurate positions’. Varga even claimed that the editors should correct their own mistake in any form.72 The Zhdanovites also reacted promptly. Agitprop’s top workers, D. Shepilov and M. Myznikov, the architects of its draft resolution against IMKh in 1943, reviewed the letter for their new chief, M. Suslov. While they outlined the criticisms presented in the May Conference and in Gladkov’s piece, the point that they stressed the most was Varga’s lack of self-criticism and its meaning to the Bolshevik culture. In their view, Varga had an ‘un-Bolshevik 165

Stalin’s Economic Advisors attitude towards criticism and self-criticism’ and ‘treated the criticism of the mistakes in an un-Bolshevik way’.73 Still, Varga and IMKh refused to play a supporting role in the cultural ritual directed by the Zhdanovites. In November, they even published the whole stenographic record of the May Conference in the second-to-last issue of their journal as a way to refute Gladkov and Agitprop’s representation of it.74 When neither party achieved a clear victory in a postwar Soviet academic diskussia, usually a high-profile political figure directly intervened to break the stalemate. In the case of the Varga diskussiia, the role was taken by Voznesenskii, who published his major work in early 1948. His book focused on the Soviet economy during the war and, therefore, there was no reason for him to discuss the works of IMKh that specialised in foreign economies. Yet, Voznesenskii went through the trouble of devoting a few pages to an attack on Varga. Voznesenskii declared that ‘the discussions of certain theoreticians who consider themselves Marxists about the decisive role of the state in the war economy of capitalist countries are nonsense, not worthy of attention … Just as naïve are the discussions about planning of the war economy by the state in the USA’ [emphasis mine].75 Relying on the authority of Voznesenskii, the Varga critics launched a full-scale attack against the Varga group to win a final victory in that symbolic battle. Soon two major diskussiias were staged, so that the performances of self-criticism would be made possible. In a meeting of the Learned Council of the Institute of Economy on 27 January 1948, Ostrovitianov and other economists declared that Varga had made anti-Marxist mistakes in his 1946 book. Along with their former director, Eventov, Bokshitskii and Vishnev were blistered in that closed meeting.76 At a special conference of the Institute of Economy in March, Trakhtenberg was assailed for his edited volume, War Economy of Capitalist States and Transformation to Economy in Peacetime. Although several former IMKh economists repented their ‘mistakes’ on those occasions to complete the diskussiia on their own work, Varga and others, including Eventov, still refused to subordinate their positions to those of the critics.77 According to Kojevnikov’s thick description of Soviet academic diskussiia, it was not possible to end in that way. The public debate had to go on until a loser accepted criticism and performed 166

An Affair self-criticism. The force of the cultural ritual was so strong that it did not stop even after A. Zhdanov’s unexpected death in August 1948. The remaining Zhdanovites kept the ritual alive. Iu. Zhdanov, a son of A. Zhdanov, and A. Kuznetsov, a leading worker in Agitprop and a longtime Zhdanovite, sponsored another diskussiia to draw out Varga’s self-criticism. In October 1948, in an expanded session of the Learned Council of the Institute of Economy, the Varga opponents launched an all-out offensive against Varga and his former colleagues. Although the level of criticism had to be intensified mostly because of Varga’s stubbornness, the critics simply recycled the old arguments presented in the May Conference,78 and did not incorporate the theoretical point that the Zhdanovites and Agitprop had used for the dissolution of the Institute a year before: the separation of economics from politics. Moreover, when the Varga opponents condemned Varga’s article about the Marshall Plan published a year before, they had no idea that the article was based on his secret report for the Party leaders including Stalin, who had valued it. Be that as it may, such discord between the Varga critics and the Zhdanovites on the actual note of the criticism did not matter. What mattered was whether they would force Varga to deliver selfcriticism or not. Although many of Varga’s colleagues, including Eventov who had been resisting, finally went through with self-criticism in the meeting, Varga insisted on vigourously defending his original position about the postwar capitalist economy and especially the states’ role in regulating the interests of monopolies. Witnessing Varga adhere to the validity of his theoretical formulations, Ostrovitianov, the chair of the meeting, tried to educate Varga about its ‘real’ objective. He raised the theme of Bolshevik/un-Bolshevik, and explained the meaning of his self-criticism performance in the Party culture, quoting A. Zhdanov. Comrade Varga does not want to recognise his errors honestly, which is not characteristic of a Bolshevik. This demonstrates that Comrade Varga does not assimilate the fundamentals of the Bolshevik partisanship (partiinost’) in science, and does not fully understand that self-criticism represents ‘the genuine motive force of our development, the powerful instrument in the hands of the Party (A. A. Zhdanov)’.79


Stalin’s Economic Advisors While Varga remained obdurate, Stalin purged Voznesenskii early in 1949 for his involvement in the Gosplan and Leningrad affairs.80 This unexpected event presented the Varga critics with a dilemma: the Gosplan chief had been the referential figure for the theoretical attacks against Varga. His elimination meant that they could no longer rely on Voznesenskii’s authority for their criticism. Furthermore, some key Varga critics, including Ostrovitianov, were placed in a precarious situation because of their relationship with Voznesenskii. Hence no more major diskussiia were expected to take place for a while. Surprisingly, it was such a favourable situation for Varga that he agreed to deliver his self-criticism. In mid-April 1949, when the theoretical harassment of him abated, he published a repentant article in Voprosy ekonomiki. Seen in this context, it is difficult to endorse the interpretation of many previous studies, that Varga surrendered ‘unconditionally’ because his critics, whom Stalin supported, had been attacking his theory for more than a year. The source of this repentance apparently lay elsewhere. Varga wrote his penitent article when he realised that he had been portrayed as a Westernoriented scholar and his intransigence was described as a revisionist resistance to the official Party line by Western media. As noted earlier, major Western journals and newspapers had followed the Varga Controversy attentively, through which they attempted to read the direction of Stalin’s policy towards the West. Characterising Varga as a moderate, they interpreted his fall as evidence of the rise of a hard-line policy in Moscow. Such ‘falsification’ caused Varga, an inveterate communist revolutionary, to reconsider his theory’s usefulness: at that historical moment, the validity of the theory itself would not matter much. What did matter, however, were the politically harmful effects on the Party that the theory could have. Now the issue became much simpler for him. At a Party meeting in early 1949, Varga was asked whose side he was on – the imperialist camp’s or the Party’s.81 Varga’s initial reaction was to write to Molotov, and probably also to Malenkov, on 3 March 1949. In his letter, he requested their help in publishing a piece in Novoe vremia to express his indignation about the Western media. On 15 March 1949, it was published as an open letter to Pravda’s editors. Next, Varga wrote his repentant article. His final step was to pen 168

An Affair another letter of indignation and to wire it to the Times in London in late April. What Varga stressed in those materials was the Western press’ distortion of himself and his works and its damaging effects on the Party and the world communism movement.82 At that same time, he still refrained from fully acknowledging the theoretical flaw in his ideas. His repentant article hints at this ambivalence: Any kind of reformist mistake, any infringement of the purity of Marx-Leninist teaching would be, in the current historical conjuncture, especially dangerous … The prolonged delay in recognising the revealed critical mistakes, undoubtedly, did damage, [and] made our economists return to the questions recently and correctly solved by Marx-Leninism. What was even worse, however, was that it [the delay] provided the war instigators in the imperialist camp with a possibility to spread a falsehood that I am a person with Western-orientation, which would have meant the counterrevolutionary traitor of working class.83

Certainly, his repentant article was not the sincere and humble selfcriticism that the Zhdanovites demanded from anyone who did not recognise his or her mistake immediately and violated the rule of diskussiia for as long as Varga did. When Varga contacted Ostrovitianov to publish the article in Voprosy ekonomiki, the editor expressed doubts and suggested corrections. However, the content turned out to be enough to close the Varga diskussiia. When Varga forwarded the letter to Molotov, it was approved by Stalin and other Politburo members to be published without any revision.84 Thus, the Varga diskussiia was completed by his symbolic self-criticism performance. Ironically, it took place in a situation in which the critics’ pressure had diminished and the semblance of remorse was only intended to satisfy the ritual’s formal rule. After that, Varga was once again an insider to the Party and Soviet academia. However, the Zhdanovites’ campaign against the Varga people did not end. While the theoretical disputes, which had lasted just over a year, ended abruptly with Voznesenskii’s purge, the personal, ethnic and generational disputes did not disappear as easily, despite the critical events of A. Zhdanov’s death in the summer of 1948 and Varga’s self-criticism 169

Stalin’s Economic Advisors performance in the spring of 1949. The economists from IMKh were still targeted and placed under close supervision by the remaining Zhdanovites, as the anti-Semitic and anti-cosmopolitan sentiment intensified in Soviet politics. In late 1948, when the theoretical offensive against Varga and his followers reached its peak, Iu. Zhdanov and Kuznetsov sent a report to Malenkov, who, replacing A. Zhdanov, was now in charge of matters on culture, ideology and science in the Central Committee. The document was supposed to devote most of its space to reporting the result of the diskussiia on Varga in the Institute of Economy described above. But the Agitprop leaders also addressed the general problems of that newly established institute. In doing so, interestingly, they singled out the former Varga people and claimed that the Institute of Economy’s research on capitalist states and economies had serious problems because it was still dominated by people who had ‘deeply distorted Lenin and Stalin’s theory of imperialism’.85 Agitprop developed the report into a draft resolution titled ‘Serious shortcomings at the Institute of Economy’ for Malenkov in March 1949. It was drafted by Iu. Zhdanov and Shepilov, a deputy director in Agitprop who had been one of A. Zhdanov’s faithful agents in the peak days of the Zhdanovshchina. While the document started with a description of the theoretical shortcomings of the Institute of Economy, it soon moved to the institute’s cadre problem. Implicitly but unquestionably referring to the former Varga group, they argued that many research workers who were either second-tier scholars or politically unreliable had monopolised the studies of the economies of capitalist states and new democracies, and blocked promotions for young researchers. According to Shepilov and Iu. Zhdanov, a clique of academicians was not yet liquidated, as the Institute of Economy’s director and leadership did not pay enough attention to the situation.86 Such sustained concern about the former IMKh economists by the Zhdanovites was fueled by some fellow academicians’ denunciation letters that were streaming into the Central Committee’s offices. In fall 1949, Ivanov, the denunciator in 1943, again sent a letter describing the problems of the Institute of Economy to Malenkov and Suslov, the chief of Agitprop. According to Ivanov, key academic posts of the new Institute of Economy 170

An Affair were occupied by the former Varga people. They were deemed politically unreliable, and the leadership was simply indifferent to this important issue. Highlighting the fact that the two researchers from IMKh, Levina and Gol’dshtein, had already been arrested as enemies of the people, Ivanov maintained that sectors and departments filled with former Varga people were problematic.87 More remarkable was a kind of self-criticism report by the Institute of Economy’s director, Ostrovitianov, often described as the victor in the theoretical battle against the Varga group with the support of the Party leadership. By the middle of 1949, however, Ostrovitianov himself had been reprimanded already several times for the lack of leadership, was on the verge of being removed from his post and desperately wanted to find a scapegoat to increase his own chances of survival.88 In his report for Malenkov, ‘Shortcomings at the Institute of Economy and Measures to Correct Them’ in July 1949, Ostrovitianov admitted the existence of the Varga school in his institute and noted that its members were old and Jewish. According to him, within the institute there was still a ‘dangerous monopoly of old cadre, especially those working on questions of modern capitalism, who prevent the advancement of talented younger people’. Then, he provided the type of information on them that the Zhdanovites had offered for the last eight years: ‘Of the 83, 44 were Russian, 34 Jewish and 5 were of other nationalities’. The national composition of the Institute’s leading scholars, he argued, was even more unsatisfactory: ‘Of the 34 academicians, corresponding members, and doctorates at the institute there are 20 Jews, 12 Russians and 2 other nationalities’.89 While the Central Committee was mindful of those denunciations, in the summer of 1949, it reportedly asked Ostrovitianov and the institute’s leadership to provide a list of names of ex-IMKh academicians to be fired and, later, instructed them to add more names.90 Moreover, in the same year, Agitprop picked out some former Varga people – Lemin, Rubinshtein, Vishnev and Vygodskii – when the Institute of Economy asked its permission to publish collections of articles. Those academicians’ works were only allowed to be on those volumes without their family names.91 As such, even after their Institute was disbanded and they were freed from theoretical criticism, Varga and his former colleagues were still targeted by 171

Stalin’s Economic Advisors Agitprop and the former Zhdanov protégés because of their nationalities, ages, personal backgrounds and political pasts. To the Zhdanovites, many of the former Varga colleagues were still an exclusive group and dominated the scholarship on the capitalist economy within the setting of the new institute. Fortunately for the Varga group, however, the Zhdanovites’ moves in 1949 did not grow into a systematic charge as they had in 1941, 1943 and 1947. One reason was that the key instigators were no longer in a position to carry it out. Zhdanov and Shcherbakov were dead; Aleksandrov and Voznesenskii, along with other little Zhdanovites, had been purged. The person who handled this sort of problem was Malenkov who, although he was also bothered by the cadre problem in some sense, did not have as great an interest in the project as his former rival, A. Zhdanov, had. Malenkov reportedly had been close to Varga to the extent that some scholars saw Varga as a key member of the Malenkov faction.92 A more important reason was that the anti-cosmopolitan campaign and anti-Semitism had considerably lost its momentum in the Soviet political scene after mid-1949. After 1950, the former Soviet archives show only one attempt of Agitprop to attack the Varga group, with a much less blatantly ethnic tone. This move did not seem to attract the attention of high-ranking Party leaders.93 Despite the vicious but short-lived criticism of their economic theory and the more sustained attacks on their cadre problem, Varga and many of his former colleagues were still active. In January 1948, when the verbal onslaught against them started from the newly established Institute of Economy, Varga delivered an important lecture, ‘The Deepening Crisis in the US’ to the Moscow Communist Party members in the prestigious Bol’shoi theatre.94 Besides the fact that Varga served as a key commentator in the Soviet press about international politics and economy for years, he also sent critical analytical reports on the capitalist economy to the Central Committee and MID, sometimes by himself or sometimes with the help of his former colleagues. It seems that he continued to do this job before Stalin’s death in 1953.95 These reports were important in shaping the leaders’ thinking on the issues of capitalist economy and international politics, as indicated in the official documents presented at the 19th Party Congress and Stalin’s last theoretical work. With the Politburo’s approval, 172

An Affair Varga accepted a position as an economic counsellor for the new socialist Hungary, his homeland, and participated in drafting its economic plans when he lived there for two months in 1951.96 When Stalin died in March 1953, Varga was still a member of the Academy of Sciences and a lecturer at the Higher Party School within the Central Committee.97 His colleagues also did not give up the jobs that they had held for the previous 20 years. Within the Institute of Economy, as members of the research sector on the Economies of Capitalism, they drafted analytical reports and delivered lectures on the international economy and politics for the party-state. It is quite illuminating that Vishnev, a former Varga colleague who had been under attack for his theoretical ‘mistakes’ and one of several academicians who were forbidden by Agitprop to publish articles under their family name in 1949, as described above, was the author of an important analytical report sent to the Central Committee and MID in the same year.98 In this light, the Zhdanovites’ campaign against the Varga group was not successful in the end. Their paranoia about the former IMKh’s cadres was overshadowed by Stalin’s and other Party leaders’ confidence in, and need for, the economists’ insights on world economy and politics.

Conclusion The campaign against Varga and his Institute started in early 1941 by A. Zhdanov and his allies. It resumed in 1943, and again in 1947. The publicised May Conference in 1947 was just a part of its third systematic campaign in six years. The theoretical attacks after the Institute’s dissolution – which many scholars have interpreted as a process in which Stalinist orthodoxy was reestablished in Soviet international economics against Varga’s revisionism – were mere symbolic acts to complete the diskussiia as a cultural ritual in the proper way. In each campaign, the Zhdanovites came up with new themes – sometimes contradictory – to criticise the work of Varga and his colleagues. The only consistent theme of all three attacks was about neither their economic ideas nor theoretical positions, but their cadre problem: they were so old and foreign that they were unreliable to hold the important academic/policy-related posts and posed an obstacle to the development of Russian scholars of the younger Stalinist generation. 173

Stalin’s Economic Advisors The main source of the campaigns can be characterised as personal, ethnic and generational hatred. Certainly, Stalin’s and other non-Zhdanovite Party leaders’ assessments of IMKh did not coincide with those of Zhdanov and his allies. Stalin opposed them in the 1943 campaign, and although he agreed with the dissolution of the Institute in 1947, he blocked the complete dispersal of the Varga group and continued to use its expertise. This disagreement was validated by the fact that, after the Zhdanovites exited Soviet high politics, there was no systematic attack on the Varga group. The Varga Institute was the first in Soviet academia to come under attack for its cadre problem, or, precisely, its non-Russian presence. This type of assault became more common in the time of Zhdanovshchina, the anticosmopolitan campaign and anti-Semitism. Zhdanov and his allies’ charge against the Varga group that started in 1941, along with its cultural offensive on the Leningrad writers Anna Akhmatova and Mikhail Zoshchenko in the late summer of 1940,99 was a harbinger of the political, social and cultural campaign that would come six years after, and it faded away as Soviet society’s enthusiasm for the campaign abated in the early 1950s. In this regard, it could be argued that the Varga Controversy had much more to do with the dynamics of Soviet domestic politics than with international politics and Stalin’s foreign policy, on which most previous studies have concentrated. The beginning of the Cold War in 1947 certainly had an impact, particularly on the dissolution of IMKh, but not in the sense that it directly led Stalin to disagree with Varga’s ideas on the Western economy. However, my interpretation of the Varga Controversy can also shed some light on international historians and the Cold War specialists who have shown a keen interest in Stalin’s thinking on the postwar capitalist economy and foreign policy direction. As noted earlier, scholars have used the result of the controversy to fathom the mind of Stalin. The discrepancy of the ideas between Stalin and Varga has been highlighted. However my archival findings support one idiosyncratic view advanced by a leading Western scholar decades ago: ‘The dictator seems to have shared Varga’s sophisticated and quite undogmatic view of capitalism’s immediate prospects’.100 There was no basis for the conclusion that Stalin agreed to dissolve


An Affair IMKh to return to orthodox Leninism to establish the ideological foundation for the dictator’s ‘aggressive’ foreign policy and the Cold War. It is true that Stalin’s 1952 pamphlet, more precisely, his comments on materials for a political economy textbook,101 criticised Varga’s revision, made in one report that the former IMKh director wrote for the Central Committee,102 of the Leninist thesis about the inevitability of war between capitalist states. However, scholars have overlooked the even more important point that, in that 1952 work, Stalin followed Varga’s formulations on the core problems of the contemporary capitalist economy, epitomised by the two types of crisis (overproduction and underproduction) and the schism of world market.103 On each subject, Varga sent analytical reports to the Central Committee several times from 1948 to 1952.104 The only difference between Stalin and Varga seems to have been in their assessment of the political arena, not economy. While Stalin soon expected US hegemony to go into decline as some fundamental contradictions between Western states would emerge, Varga did not see this happening in the near future. Even here, however, their views did not diverge greatly. In fact, Stalin also seemed aware of the present supremacy of US hegemony within the capitalist camp. What Stalin’s pamphlet asked of people was to envision a ‘development of international condition’ from a long-term perspective. The dictator gave his economists a piece of advice: ‘It would be a mistake to think that things can continue to “go well” for all eternity, that these countries (Western Germany, Britain, France, Italy and Japan) will tolerate the domination and oppression of the United States endlessly… [Emphasis mine]’.105 To many people, especially Westerners, the difference between Stalin and Varga on international politics could seem so glaring that the two positions seem incompatible. However, they were not incompatible to the Soviets. The most important Soviet document about international politics and economy in the era was arguably Malenkov’s report to the 19th Party Congress, which Stalin personally revised and corrected in detail.106 The document contains two disparate, seemingly incompatible assessments of international affairs: the division within the capitalist camp and the supremacy of US hegemony.107



When Eugene Varga became the head of the Institute of World Economy and World Politics under the Communist Academy in December 1927, the Institute was just a small working group without an original research agenda, mostly reproducing propaganda materials and occasionally inviting big names to fill the list of contributors to its journal. By the end of 1931, Varga had transformed this powerless Institute into the Soviet Union’s sole – and probably the world’s largest – research empire on Western economy. The rigorous discipline that Varga imposed on the Institute’s fellows played an important role in the growth of the Institute. In addition, the institutional reshuffling in Soviet academia, caused by the Cultural Revolution, helped the Institute to gain a massive frame and add an enormous weight in a short time. Even more crucial to such an amazing turnaround was Stalin’s active sponsorship of the Institute, which began after the Great Depression struck the capitalist world. The dictator’s support kept the Institute growing in the 1930s, when it had been supplied with both human and material resources incomparable to other institutes in Soviet academia. IMKh survived a wave of terrors in the late 1930s virtually intact whose major targets were people very similar to its members in terms of personal and intellectual background, such as foreigners, intellectuals who had lived in


Stalin’s Economic Advisors or still had a contact with a foreign country, and professionals who dealt with foreign materials. Stalin also saved the Varga Institute from ethnic harassment by Andrei Zhdanov and Russian nationalists in Soviet high politics in the early 1940s. Most significantly since the early 1930s, Stalin himself was the most important client for the Institute’s research on the world economy. The Varga Institute had existed for Stalin and it was the dictator’s think tank. Such a close relationship was not translated into the Party’s ideological obsession with the Varga Institute. The Institute’s research and organisational matters were handled almost exclusively by Varga and the core scholars, who provided consistency to its roster throughout the Varga era. Within the group, lively discussions were allowed and even encouraged to the extent that they sometimes crossed the boundary of Marxist-Leninist orthodoxy. Although Varga and his colleagues were of course not completely free from the domestic political atmosphere and the international turbulence of Stalin’s time, particularly when they had to produce propaganda, their scientific research showed remarkable consistency and coherence since the early 1930s. The Party’s ideological instructions which were sporadic and inconsistent did not have a decisive impact on the Institute’s fellows when they were coming up with ideas and methodologies, selecting statistical data and pieces of evidence, and drawing conclusions. If there was any real pressure on them, ironically, it was Stalin’s and other leaders’ demands for more practical knowledge and analysis. The Varga group, especially when they worked on scientific works, had been rather under the constant pressure to get away from the ideological rigidity. Meanwhile, the Varga group did not see the Party as ‘them’ as opposed to ‘us’. Rather than perceiving the Party as the controller from the outside, they thought that the Party was their milieu. The Party was not an external entity that sought to infringe upon their own intellectual world. Unlike academicians who inherited the traditions of the Imperial Russian Academy of Sciences, the Varga group did not need to come up with a variety of strategies to cope with such infringement, because they, having been trained in the revolutionary atmosphere, largely shared the Party’s ideas on the relationship between politics and academia. Securing autonomy from the Party’s ideological control had never been an issue for them. The real 178

Conclusion issue for them was institutional competition with other academic institutes to render service for the Party and earn rewards from it. In this intellectual and institutional setting, Varga and his economists crafted their theory and produced a set of discourses on the world economy and its crisis. As for the theoretical framework, they combined the two distinctive trends of Marxism, respectively represented by R. Hilferding and R. Luxemburg, with W. E. Mitchell’s statistical economics. Through an amalgam of the three schools of economic thought, they captured not only a long-term tendency of capitalism but also analysed its cycles and traced the instant changes. The discourse that they produced and disseminated was epitomised as comparative, historical and concrete. First, their economic discourse was comparative, in that it was more vertical than horizontal, extensively using national economy as its key concept, closely monitoring the uneven development of individual countries’ economies and highlighting the different ways in which each state had handled its situation. Second, their discourse was historical in the sense that they found the origins of the Great Depression and its subsequent unfolding in the specific historical conjuncture that World War I had created, rather than defining them as a logical manifestation of the universal economic laws of capitalism. They also emphasised the historical specificities of the economic condition of the post-World War II years, in which the longterm tendency of capitalism was temporarily halted and its economic laws did not completely operate. Finally, their discourse was concrete, as their main interest resided in neither an abstract generalisation of the capitalist economy nor in a highly theoretical exploration of its system. What they did concentrate on was tracking the changes in individual national economies through statistical materials, making detailed comments on them, and attempting to predict their future directions. Especially, their most scientific works, such as analytical reports and policy papers sent to Stalin and other Party leaders, revealed those tendencies. In the discursive world that the Varga cohort constructed, economic factors were always constrained by political and state policy-level actions and ‘embedded’ in given historical situations.1 Individual states’ particular economic situations and the measures that they took to deal with them took precedence over the common problems of the whole capitalist economy. In 179

Stalin’s Economic Advisors their texts, the distance between the state and the capitalist economic system was noticeably widened. The state was recognised as an unrestricted agency which, less regulated by economic laws and class principles, could imagine and implement a variety of political maneuverings and flexibilities in the area of diplomacy. While their scholarship did not represent a complete version of IR theory formulating state-to-state relations almost exclusively in political terms and still stayed within the boundary of the European discourse on imperialism, they certainly opened a theoretical way to examine the behaviors of the state as largely free of economic constraints. In addition, as they rested on a historical approach and a concrete statistical methodology to note the volatility of the economic sphere, in their texts the contemporary situations were frequently treated as historically specific and even exceptive, and defined as a stage separated from the law of historical development that Marxism had attempted to theorise. A sharp dichotomy between the ‘current’ and the ‘eventual’ was extensively employed in their scientific works. Consequently, their discourse set tended to undermine a rigid system of thought based on orthodox Marxist-Leninist ideology, while it raised the possibility of producing highly situational ideas and practices specific to certain conditions. This was the discursive world in which Stalin and other policy makers had conceived his foreign policies toward the capitalist world. One might argue that the Varga Controversy and the subsequent dissolution of the Institute indicated that Stalin lost confidence in the Varga Institute’s works in the postwar period and decided not to tolerate its ‘revisionist’ ideas on the Western economy any longer. However, a closer reading of the final years of the Institute did not validate such an account. Archival evidence suggests that the Varga Controversy and the disbanding originated from a completely different context, namely the ultra-nationalism of some top Party bureaucrats, and they were not related to the Institute’s economic ideas. Further, Stalin continued to rely on Varga and his economists after the Institute was closed in September 1947. The dictator still valued the Varga group’s expertise on world economy and kept using it for policy purposes until his death in 1953. The Varga group’s discourse on the world economy and its crisis painted the world as a space in which political actions were not completely 180

Conclusion governed by capitalist economic constraints. It also described the contemporary Western economy as historically specific ones to which the general laws of capitalist economy did not properly apply. Within this discursive field, Stalin and other policy makers did not find it hard to imagine political negotiations, compromises and concessions in world politics, all of which suggested co-existence between the two systems. Meanwhile, the Varga Institute based its relationship with the Party on the principle of service and rewards, and its main concern was horizontal competition with other Soviet academic institutes to maximise its chance of receiving resources from the Party. These two key concepts, co-existence and institutional interest, have characterised the Khrushchev era. However, my findings on the history of the Varga Institute suggest that both are also applicable to Stalin’s time, defying the stereotypical image of Stalinist politics created by many historians and social scientists.


Notes Introduction 1. Varga’s first name is spelled ‘Eugen’ in the German-speaking world, ‘Evgenii’ in Russia and ‘Jenö’ in Hungary. 2. ARAN, f. 354, op. 1, d. 77, l. 19. 3. Ia. A.  Pevzner, ‘Zhizn’ i trudy E.  S. Vargi v svete soveremennosti’, Mirovaia ekonomika i mezhdnaronye otnoshenii, no. 10 (1989). 4. E. Varga, Novye iavleniia v mirovom ekonomicheskom krizise (Moscow, 1934). 5. I. V. Stalin, Sochineniia, vol. 13 (Moscow, 1951): 289–90. 6. Frederick Barghoorn, ‘The Varga Discussion and Its Significance’. American Slavic and East European Review 7, no. 3 (1948); Paul Marantz, ‘Soviet Foreign Policy Factionalism under Stalin? A Case Study of the Inevitability of War Controversy’, Soviet Union 3, no. 1 (1976); Werner Hahn, Postwar Soviet Politics: The Fall of Zhdanov and the Defeat of Moderation, 1946–1953 (Ithaca, 1982); Gavriel Ra’anan, International Policy Formation in the USSR: Factional ‘Debates’ during the Zhdanovschina (Hamden, 1983); V. E. Manevich, ‘Stalinizm i politicheskaia ekonomiia’, in M. G. Iaroshevskii, ed. Repressirovannaia nauka (Leningrad, 1991); William C. Wohlforth, The Elusive Balance: Power and Perceptions during the Cold War (Ithaca, 1993); Richard Day, Cold War Capitalism: The View from Moscow, 1945–1975 (New York, 1995); P. Cherkasov, IMEMO: Portret na fone epokhi (Moscow, 2004); Ethan Pollock, Stalin and the Soviet Science Wars (Princeton, 2006); A notable exception to the tendency was Jerry Hough who did not define Varga’ s economics as ‘heretical’. Jerry Hough, The Struggle for the Third World: Soviet Debates and American Options (Washington, DC, 1986). 7. This tendency is largely shared by Soviet diplomatic historians specialising on the interwar period. Notably Jonathan Haslam, The Soviet Union and the Threat from the East:  Moscow, Tokyo, and the Prelude to the Pacific War (London, 1992); idem, Soviet Foreign Policy:  The Impact of the Depression, 1930–33 (London, 1983). Also, see Isaac Deutscher, Stalin: A Political Biography (Oxford, 1967); Niels Erik Rosenfeldt, Knowledge and Power:  The Role of Stalin’s Secret Chancellery in the Soviet System of Government (Copenhagen, 1978); Oded Eran, Mezhdunarodniki:  An Assessment of Professional Expertise


Notes to Pages 3–5



10. 11. 12.


in the Making of Soviet Foreign Policy (Ramat Gan, 1979). On the other hand, Duda and Mommen, dealing with Varga’s whole career, recognise the difference between the periods. Gerhard Duda, Jenö Varga und die Geschichte des Instituts für Weltwirtschaft und Weltpolitik in Moskau 1921–1970 (Berlin, 1994). André Mommen, Stalin’s Economist: The Economic Contribution of Jenö Varga (London, 2011). Most notably, Jochen Hellbeck, Revolution on My Mind:  Writing a Diary under Stalin (Cambridge, 2006) and Igal Halfin, Terror in my Soul: Communist Autobiographies on Trial (Cambridge, 2003). Some studies did recognise the Institute’s constructive role, but they did not develop the idea and paint a comprehensive picture on the relationship between IMKh and the Party leaders including Stalin. What they did was to include several lines that ‘mention’ the Varga Institute’s importance in their studies. Notably, Deutscher and Hough described Varga as an economic adviser or a ‘regular consultant to Stalin for two decades’. Isaac Deutscher, Stalin, 501. Jerry F. Hough, The Struggle for the Third World, 107. Eran called IMKh ‘an expertise tank’. Oded Eran, Mezhdunarodniki, 33. Haslam used the term ‘think tank’ to characterise the Institute, though elsewhere he also claimed that Varga’s influence over policy was relatively small. Jonathan Haslam, The Soviet Union and the Threat from the East: 58; idem, Soviet Foreign Policy, 127. None of these remarks, however, are validated yet by a significant amount of archival documents. A notable example is Adam Ulam, Stalin: The Man and His Era (New York, 1973). For a theoretical discussion on ideas and foreign policy making, see Judith Goldstein and Robert Keohane, Ideas and Foreign Policy (Ithaca, 1993). Such relationship has been explored for other periods than Stalin’s, especially, for the era of Gorbachev. Jeff Checkel, Ideas and International Political Change: Soviet/Russian Behavior and the End of the Cold War (New Haven, 1997); Robert D. English, Russia and the Idea of the West: Gorbachev, Intellectuals, and the End of the Cold War (New York, 2000). For the earlier period, see James Hershberg, Sergey Radchenko, Péter Vámos and David Wolff, ‘The Interkit Story: A Window into the Final Decades of the Sino-Soviet Relationship’, Cold War International History Project Working Paper no. 63 (2011). This trend began from Kennan’s classic. X, ‘The Sources of Soviet Conduct’, Foreign Affairs (pre-1986) 25, no. 4 (1947); Philip Mosley, The Kremlin and World Politics: Studies in Soviet Policy and Action (New York, 1960); Robert Tucker, ‘The Emergence of Stalin’s Foreign Policy’, Slavic Review 36, no. 4 (1977); Jiri Hochman, The Soviet Union and the Failure of Collective Security, 1934–1938 (Ithaca, 1984). L. N. Nezhinskii and I. A. Chelyshev, ‘O dotktrinal’nykh osnovakh ovestskoi vneshenei politiki v gody “kholodnoi


Notes to Pages 5–6


15. 16. 17.

18. 19.

voiny” ’, Otechestvennaia istoriia, no. 1 (1995); R. C. Raack, Stalin’s Drive to the West, 1938–1945: The Origins of the Cold War (Stanford, 1995). C.  Grove Haines ed., The Threat of Soviet Imperialism (Baltimore, 1954); Hugh Seton-Watson, The New Imperialism (London, 1961). More recently, see Vladimir Zubok and Constantine Pleshakov, Inside the Kremlin’s Cold War (Cambridge, 1996). See Ulam’s critical remarks on the tendency. Adam Ulam, ‘Soviet Ideology and Soviet Foreign Policy’, World Politics 11, no. 2 (1959). Silvio Pons, Stalin and the Inevitable War, 1936–1941 (London, 2002). Geoffrey Roberts, ‘Moscow and the Marshall Plan:  Politics, Ideology and the Onset of the Cold War, 1947’, Europe-Asia Studies 46, no. 8 (1994); idem, ‘Stalin and the Grand Alliance: Public Discourse, Private Dialogues and the Direction of Soviet Foreign Policy, 1941–1947’, Slovo 13, no. 1 (2001); idem, ‘Litvinov’s Lost Peace, 1941–1946’, Journal of Cold War Studies 4, no. 2 (2002); Scott Parrish and M. Narinsky, ‘New Evidence on the Soviet Rejection of the Marshall Plan, 1947:  Two Reports’, Cold War International History Project Working Paper no. 9 (1994); Vladimir Pechatnov, ‘The Big Three after World War II:  New Documents on Soviet Thinking about Post-war Relations with the United States and Great Britain’, Cold War International History Project Working Paper, no.  13 (1995). Natalia Egorova, ‘The “Iran Crisis” of 1945– 46: A View from the Russian Archives’, Cold War International History Project Working Paper no.  15 (1996); A.  Uluanin, ‘Soviet Cold War Perceptions of Turkey and Greece, 1945–58’, Cold War History 2, no. 2 (2003); James Harris, ‘Encircled by Enemies: Stalin’s Perceptions of the Capitalist World, 1918–1941’, Journal of Strategic Studies 30, no. 3 (2007). Zubok and Pleshakov’s work also might belong to this category. Robert Darnton, The Great Cat Massacre and Other Episodes in French Cultural History (New York, 1984), 109. Pioneering works are Akira Iriye, ‘Culture and Power: International Relations as Intercultural Relations’, Diplomatic History 3, no. 2 (1979) and Michael Hunt, Ideology and U.S. Foreign Policy (New Haven, 1987). Notable contributions to the trend are John W. Dower, War without Mercy: Race and Power in the Pacific War (New  York, 1986); Colin Mackerras, Western Images of China (Oxford, 1989); Anders Stephanson, Kennan and the Art of Foreign Policy (Cambridge, 1989); Frank Ninkovich, Modernity and Power:  A  History of the Domino Theory in the Twentieth Century (Chicago, 1994); Bruce Cumings, Parallax Visions:  Making Sense of American-East Asian Relations at the End of the Century (Durham, 1999); Mark Bradley, Imagining Vietnam and America: The Making of Postcolonial Vietnam, 1919–1950 (Chapel Hill, 2000); Andrew Rotter, Comrades at Odds:  The United States and India, 1947–1964 (Ithaca,


Notes to Pages 6–7

20. 21.



2001); Melany McAlister, Epic Encounters:  Culture, Media and U.S. Interests in the Middle East, 1945–2000 (Berkeley, 2001); Douglas Little, American Orientalism:  The United States and the Middle East since 1945 (Chapel Hill, 2002); Christina Klein, Cold War Orientalism:  Asia in the Middlebrow Imagination, 1945–1961 (Berkeley, 2003); Daniel Hucker, Public Opinion and the End of Appeasement in Britain and France (London, 2011); Phoebe Chow, Britain’s Imperial Retreat from China, 1900–1931 (London, 2016). See Stephanson’s criticism of the trend. Anders Stephanson, iii. Timothy Mitchell, Rule of Experts: Egypt, Techno-Politics, Modernity (Berkeley, 2002); idem, Carbon Democracy:  Political Power in the Age of Oil (London, 2011); Michael Bernstein, A Perilous Progress: Economists and Public Purpose in Twentieth-Century America (Princeton, 2004); Johanna Bockman and Michael Bernstein, ‘Scientific Community in a Divided World:  Economists, Planning, and Research Priority during the Cold War’, Comparative Studies in Society and History 50, no. 3 (2008); Johanna Bockman, Markets in the Name of Socialism: The Left-Wing Origins of Neoliberalism (Stanford, 2011); Michael E.  Latham, The Right Kind of Revolution:  Modernization, Development, and U.S. Foreign Policy from the Cold War to the Present (Ithaca, 2010); Nick Cullather, The Hungry World:  America’s Cold War Battle against Poverty in Asia (Cambridge, 2010); David Ekbladh, The Great American Mission:  Modernization and the Construction of an American World Order (Princeton, 2011); Daniel Immerwahr, Thinking Small:  The United States and the Lure of Community Development (Cambridge, 2015). The literature actually comes out of a broader and relatively older scholarly trend exploring the relationship between academia and the Cold War. Some central works are Dorothy Ross, The Origins of American Social Science (Cambridge, 1991); Stuart W. Leslie, The Cold War and American Science: The Military-Industrial-Academic Complex at MIT and Stanford (New  York, 1993); Roger Geiger, Research and Relevant Knowledge:  American Research Universities since World War II (New  York, 1993); Christopher Simpson, Science of Coercion:  Communication Research and Psychological Warfare, 1945–1960 (New  York, 1994); Rebecca S.  Lowen, Creating the Cold War University: Transformation of Stanford (Berkeley, 1997); Christopher Simpson ed., Universities and Empire: Money and Politics in the Social Science during the Cold War (New  York, 1998); Bruce Kuklick, Blind Oracles:  Intellectuals and War from Kennan to Kissinger (Princeton, 2006). More recently, Joy Rohde, Armed with Expertise: The Militarization of American Social Research during the Cold War (Ithaca, 2013). Such institutional and personal dimensions of the Varga Institute had been studied only in a fragmentary way. See Oded Eran, 31–43. Memoirs are more useful; Abdurakhman Avtorkhanov, Stalin and the Soviet Communist


Notes to Pages 7–13 Party:  A  Study in the Technology of Power (New  York, 1959); V.  I. Kaplan, Vazhneishie sobytiia mezhdunarodnoi zhizni i deiatel’nosti Instituta mirovogo khoziaistva i mirovoi politika (Moscow, 1991). 24. Ironically and interestingly, through a discourse analysis mostly employed by the orthodox school, my book reaches almost the same conclusion on the nature of Stalin’s diplomacy with the so-called revisionist school that stresses its defensive, flexible and situational characteristic. William Appleman Williams, The Tragedy of American Diplomacy (Cleveland, 1959). Barton Bernstein, ‘American Foreign Policy and the Origins of the Cold War’, in Politics and Policies of the Truman Administration (Chicago, 1970); Gabriel Kolko and Joyce Kolko, The Limits of Power: The World and the United States Foreign Policy, 1945–1954 (New York, 1972); Thomas Paterson, Soviet-American Confrontation: Postwar Reconstruction and the Origins of the Cold War (Baltimore, 1973). For central works in the Soviet field that can be compared with the revisionist, see Wilfried Loth, The Division of the World, 1941–1955 (New York, 1988); Geoffrey Roberts, The Soviet Union and the Origins of the Second World War: Russo-German Relations and the Road to War (New York, 1995); idem, Stalin’s Wars: From World War to Cold War, 1939–1953 (New Haven, 2006); Gabriel Gorodetsky, ‘The Origins of the Cold War: Stalin, Churchill and the Formation of the Grand Alliance’, Russian Review 47, no. 2 (1988); idem, Grand Delusion: Stalin and the German Invasion of Russia (New Haven, 1999). Michael J. Carley, 1939: The Alliance That Never Was and the Coming of World War II (Chicago, 1999); idem, Silent Conflict: A Hidden History of Early Soviet-Western Relations (Lanham, 2014); T. Volokitina et al., Moskva ivostochnaia Evropa: Stanovlenie politicheskikh rezhimov sovetskogo tipa, 1949–1953 (Moscow, 2002); Vladimir Pechatnov, Stalin, Ruzvel’t, Trumen: SSSR i SShA v 1940-kh gg. (Moscow, 2006). For more a ‘balanced’ or eclectic account, see Jonathan Haslam, Soviet Foreign Policy; idem, The Soviet Union and the Threat from the East; idem, Russia’s Cold War: From the October Revolution to the Fall of the Wall (New Haven, 2011); William Taubman, Stalin’s American Policy: From Entente to Détente to Cold War (New York, 1982); Caroline Kennedy-Pipe, Stalin’s Cold War: Soviet Strategies in Europe, 1946 to 1956 (Manchester, 1995).

Chapter 1: Evolution 1. 2. 3. 4. 5.

ARAN, f. 1993, op. 1, d. 178, l. 45. Ibid. ARAN, f. 354, op. 1, d. 1, l. 2. Oded Eran, 32. Michael David-Fox, Revolution of the Mind: Higher Learning among the Bolsheviks, 1918–1929 (Ithaca, 1997): 210–15. 6. ARAN, f. 354, op. 1. d. 2, ll. 1–2.


Notes to Pages 13–17 7. No discussion about its service tasks for the party-state was found in their Board meetings during 1925. 8. Joel Shapiro, ‘A History of the Communist Academy, 1918–1936’, Unpublished PhD Thesis in Columbia University (1976): 124–39. Also see Michael DavidFox, 206–208. 9. Izvestiia 19 May 1925, 5. 10. V. I. Kaplan, 8–11. 11. Michael David-Fox, 234–9. 12. Joel Shapiro, 123–4; Michael David-Fox, 212. 13. L. Trotsky, ‘Evropa i Amerika’, Mirovoe khoziaistvo i mirovaia politika, no.  1 (1926). 14. Radek was the only one among the group who was still paid after Varga took over IMKh. For instance, Radek was paid a salary of 300 rubles a month in 1933, which represented the average of the IMKh senior fellows’ at that time. ARAN, f. 354, op. 1, d. 76, ll. 15–17. 15. ARAN, f. 354, op. 1, d. 12, l. 1. 16. Miliutin was the second most influential member of the Communist Academy at that time. See Michael David-Fox, 221. 17. ARAN, f. 354 op. 1 d. 3 l. 7. 18. RGASPI, f.  17, op.  117, d.  979, l.  75; ‘Evegenii Samuilovich Varga’, Mirovaia ekonomika i mezhdnaronye otnoshenii, no. 11 (1964): 156–7. 19. Bennett Kovrig, Communism in Hungary:  From Kun to Kadar (Stanford, 1979): 35–45. 20. See André Mommen, Chapter 3. 21. GASPI, f. 17, op. 117, d. 979, l. 75. 22. For example, see Biulletin’ Mirovoe khoziaistvo, no.3 in Mirovoe khoziaistvo i mirovaia politika, no. 7 (1927). 23. Oded Eran, 32. 24. In several discussions in the Comintern, Varga’s positions were closer to those of Stalin, albeit there were some minor differences between them. Richard Day, The ‘Crisis’ and the ‘Crash’: Soviet Studies of the West, 1917–1939 (London, 1981): 73–112, G. Duda, 53–75, André Mommen, 68–78. 25. E. Varga, ‘Vskryt’ cherez 25 let’, Politicheskie issledovaniia, no. 3 (1991): 157. 26. RGASPI, f. 17, op. 163, g. 658, l. 4. 27. Stephen F. Cohen, Bukharin and the Bolshevik Revolution: A Political Biography, 1888–1938 (New York, 1973): 267. 28. I. V. Kaplan, 43. Also see E. Varga, ‘10 let zhurnala (1926 g. – 1936 g.)’, Mirovoe khoziaistvo i mirovaia politika, no. 1 (1936), 9, and Sheila Fitzpatrick, ‘Cultural Revolution as a Class War’, in The Cultural Front:  Power and Culture in Revolutionary Russia (Ithaca, 1992): 124.


Notes to Pages 18–24 29. ARAN, f. 354, op. 1, d. 35, ll. 17–18. Still, these numbers were fairly high. Generally, scholars and professors belonged to well paid professions in the NEP society. See Sheila Fitzpatrick, ‘Professors and Soviet Powers’. 30. ARAN, f. 354, op. 1, d. 38, ll. 1–2. 31. ARAN, f. 354, op. 1, d. 35, ll. 1–14. For the detail, see Chapter 2. 32. ARAN, f. 354, op. 1, d. 20, l. 17. 33. In addition to Lapinskii, Varga accepted Radek in 1930 who came back after having been purged with other Left faction members in 1927. Interestingly, both became main commentators on foreign affairs in Izvestiia and Pravda in the early 1930s. 34. ARAN, f. 354, op. 1, d. 38, l. 1. 35. RGASPI, f. 17, op. 125, d. 340, l. 62. 36. ARAN, f. 354, op. 1, d. 38, l. 3. 37. ARAN, f. 354, op. 1, d. 35, l. 17. 38. ARAN, f. 354, op. 1, d. 38, ll. 4–5. 39. ARAN, f. 354, op. 1, d. 75, l. 2. 40. GARF, f. 5145, op. 1, d. 1, l. 112; ARAN, f. 354, op. 1, d. 58, l. 24. 41. ARAN, f. 354, op. 1, d. 75, l. 6. 42. See Chapter 2. 43. ARAN, f. 354, op. 1, d. 75, ll. 3–10. 44. ARAN, f. 354, op. 1, d. 57, l. 14. 45. Istoricheskii arkhiv no. 6 (1994): 21. 46. ARAN, f. 354, op. 1, d. 47, l. 4. 47. ARAN, f. 354, op. 1, d. 46, l. 1. 48. For example, one Board meeting in IMKh extensively discussed a project for Molotov, in which eight research fellows participated, in spring 1930. ARAN, f. 354, op. 1, d. 46, l. 4. 49. See Sheila Fitzpatrick, ‘Cultural Revolution as a Class War’, 115–48. 50. Joel Shapiro, 266–72. 51. No notable generational conflicts within the Institute were witnessed, probably because the older people including Varga in IMKh sided with the young Cultural Revolutionaries in the Academy leadership. 52. See Chapter 5. 53. See Chapter 2. 54. Various sources from inside and outside of IMKh mentioned the small group (‘malen’kaia gruppa’). See V. I. Kaplan, 30. 55. For Pavel Mif, see Jonathan Haslam, The Soviet Union and the Threat from the East, 58–9. 56. See Chapter 5. 57. ARAN, f. 354, op. 1, d. 34, ll. 10–12. 58. ARAN, f. 354, op. 1, d. 35, ll. 3–4.


Notes to Pages 25–30 59. 60. 61. 62. 63. 64. 65.

66. 67. 68. 69. 70. 71. 72. 73. 74. 75. 76. 77. 78. 79. 80. 81.

82. 83. 84. 85. 86.

ARAN, f. 354, op. 1, d. 34, ll. 9–10. Michael David-Fox, 215. ARAN, f. 354, op. 1, d. 46, l. 3. ARAN, f. 354, op. 1, d. 58, l. 81. ARAN, f. 354, op. 1, d. 53, l. 25. ARAN, f. 354, op. 1, d. 46, l. 2. Varga was also a member of IKKI. Interestingly, still in 1934, the form of the Institute’s official documents was written in German, the Comintern’s official language. ARAN, f. 354, op. 1, d. 46, ll. 1–2. E. Varga and L.  A. Mendel’son, Novye materialy k rabote V.I. Lenina:  novye dannye o zakonakh razvitiia kapitalizma v zemledelii (Moscow, 1934). See James W. Roberts, ‘Lenin’s Theory of Imperialism in Soviet Usage’, Soviet Studies 29, no. 3 (1977). ‘K planu nauchnoi raboty Komakademii na 1934 g.’, Vestnik Kommunisticheskoi Akademii, no. 2 (1934): 131. ARAN, f. 354, op. 1, d. 75, l. 6. Joel Shapiro, 324–6. ‘Khronika’, Vestnik Akademii nauk, no. 2 (1936): 57. Varga missed most of the Board meetings in IMKh in 1935. ARAN, f. 1993, op. 1, d. 6, l. 15. ARAN, f. 1993, op. 1, d. 49, l. 66. E. Varga, ‘10 let zhurnala’, 10. V. I. Kaplan, 34–5. ARAN, f. 1513, op. 1, d. 198, ll. 1–13. ARAN, f. 1993, op. 1, d. 6, l. 12. Ia. A. Pevzner, ‘Zhizn’ i trudy E. S. Vargi v svete soveremennosti’. Also see V. I. Kaplan, 35. The Popular Front was officially endorsed at the 7th Congress of the Comintern, to which Varga and his Institute contributed enormously. Varga authored one of its main reports, titled ‘The Great Crisis and its Political Consequences’, which overviewed the development of world economy and politics since the 6th Congress in 1928. Varga was allegedly involved in Dimitrov’s keynote report in the congress. For an analysis of those press materials, see Silvio Pons, Stalin and the Inevitable War. ARAN, f. 1993, op. 1, d. 49, l. 26, l. 39. ARAN, f. 1993, op. 1, d. 102, l. 69. P. Cherkasov, IMEMO, 30. Kevin McDermott, ‘Stalinist Terror in the Comintern:  New Perspectives’, Journal of Contemporary History 30, no. 1 (1995): 115. Also see Varga’s letter


Notes to Pages 30–36


88. 89. 90. 91.

92. 93. 94. 95. 96.

97. 98. 99. 100. 101. 102. 103. 104. 105. 106. 107. 108. 109. 110.

to Stalin. ‘Muzhestvo protiv bezzkoniia’, Problemy mira i sotssializma, no. 7 (1989): 89–91. For Lapinskii’s career, see Leopold H.  Haimson ed., The Making of Three Russian Revolutionaries:  Voices from the Menshevik Past (Cambridge, 1987): 510. ARAN, f. 1993, op. 1, d. 49, l. 15. ARAN, f. 1993, op. 1, d. 165, ll. 7–8. RGASPI, f. 495, op. 20, d. 528, ll. 1–16. Jürgen Kuczynski, ‘Zur Geschichte der marxistisch-leninistischen Theorie des staatsmonopolistischen Kapitalismus bis zum zweiten Weltkrieg’, in Lotte Zumpe ed., Wirtschaft und Staat im Imperialismus (Berlin, 1976): 10–19. V. I. Kaplan, 121. ARAN, f. 1993, op. 1, d. 177, ll. 77–8. RGASPI, f. 17, op. 117, d. 279, ll. 121–2. A. Bordadyn, ‘Organizatsiia voennogo khoziaistva Germanii’, Mirovoe khoziaistvo i mirovaia politika, no. 8 (1940). Those three articles were authored by B. Fogarashi, S. M. Vishnev and Geller. All of the three belonged to the category of the ‘core’ researchers in the Varga Institute, unlike Bordadyn. Interestingly, only Bordadyn was ultimately purged for the ‘mistakes’, while the other three survived the inquisition. RGASPI, f. 17, op. 116, d. 91, l. 4. ARAN, f. 1993, op. 1, d. 165, l. 1. RGASPI, f. 17, op. 125, d. 25, l. 60. For a detailed analysis of the document, see Chapter 5. See Chapter 5. Sovetsko-amerikanskie otnosheniia, 1934–1939:  Dokumenty (Moscow, 2003): 147–50. RGASPI, f. 17, op. 117, d. 279, ll. 2–20. RGASPI, f. 17, op. 125, d. 455, ll. 38–44. ‘Akademik Evgenii Mikhalovich Zhukov’, Novaia i noveishaia istoriia, no. 6 (1977): 196–202. See Chapter 5. Kees Boterbloem, The Life and Times of Andrei Zhdanov, 1896–1948 (Montreal, 2004): 211–12. ARAN, f. 1993, op. 1, d. 166, ll. 5–6. ARAN, f. 1993, op. 1, d. 178, l. 45. RGASPI, f. 17, op. 125, d. 271, ll. 28–30. The title of the letter was ‘great shortcomings in our publishing business’. SSSR i germanskii vopros. 1941–1949: Dokumenty iz Arkhiva vneshnei politiki Rossiiskoi Federatsii. Tom 2: 9 maia 1945 g. – 3 oktiabria 1946 g. (Moscow, 2000): 53–4, 186.


Notes to Pages 36–39 111. Oded Eran, 51. 112. ARAN, f.  1993, op.  1, d.  6, l.  16. Also, IMKh already published one collection about the change of capitalist economy in that year. L.  Ia. Eventov ed., ‘Planovye’ manevry v kapitalisticheskikh stranakh:  Sbornik materialov (Moscow, 1936). 113. See Chapter 4. 114. ARAN, f. 1513, op. 1, d. 198, l. 10. 115. The first major outcome reflecting such change was one collection about capitalist war economy published in 1940. I. A. Trakhtenberg and S. M. Vishnev eds, Voenno-khoziaistvennye meropriiatiia voiuiushchikh gosudarstv: Angliia, Frantsiia, Germaniia, Iaponiia (Moscow, 1940). 116. ARAN, f. 1993, op. 1, d. 191, ll. 11–57. 117. According to Kaplan’s memoir, ‘the authority of the Institute and its director was very high in the eyes of Stalin during the years of 1944–1945’. V. I. Kaplan, 142. 118. E. Varga, Izmeneniia v ekonomike kapitalizma v itoge vtoroi mirovoi voiny (Moscow, 1946); I.  A. Trakhtenberg ed., Voennoe khoziaistvo kapitalisticheskikh stran i perekhod k mirnoi ekonomike (Moscow, 1947). 119. Most recently, see André Mommen, 5–9. 120. László Borhi, Hungary in the Cold War, 1945–1956: Between the United States and the Soviet Union (Budapest, 2004): 141. André Mommen, 192–200. 121. RGASPI, f. 17, op. 3, d. 1051, l. 45. 122. V. I. Kaplan, 142. 123. ARAN, f. 1993, op. 1, d. 199, l. 52. 124. For example, ARAN, f. 1993, op. 1, d. 225, ll. 28–9. 125. RGASPI, f. 17, op. 125, d. 551, l. 101. 126. ARAN, f. 1993, op. 1, d. 225, ll. 20–1. 127. Eugen Varga, ‘Anglo-American Rivalry and Partnership:  A  Marxist View’, Foreign Affairs 25, no. 4 (1947): 583–92. 128. For example, I. M. Faingar, one of IMKh’s core researchers, sent MID a report titled ‘about economic unity of Germany and reparations’ in early 1947. ARAN, f. 1993, op. 1, d. 240, l. 16. 129. ARAN, f. 1993, op. 1, d. 230, ll. 49–50. 130. See Chapter 5. 131. ARAN, f. 1993, op. 1, d. 225, l. 35, ll. 54–6. 132. RGASPI, f. 558, op. 11. d. 716, l. 69. 133. ARAN, f. 1993, op. 1, d. 225, l. 31. 134. ARAN, f. 1993, op. 1, d. 230, ll. 44–5. 135. Zhukov became the main editor of foreign department of Pravda. RGASPI, f. 17, op. 3, d. 1059, ll. 92–3.


Notes to Pages 39–43 136. For an excellent overview on international politics between the US and the Soviet in this period, see Geoffrey Roberts, Stalin’s Wars, chapter 10. 137. For Malenkov’s demotion, see Yoram Gorlizki and Oleg Khlevniuk, Cold Peace: Stalin and the Soviet Ruling Circle, 1945–1953 (Oxford, 2004): 26–8. 138. See Chapter 5. 139. For an excellent introduction on the postwar anti-Semitism in the Soviet Union, see Sheila Fitzpatrick, ‘The World of Ostap Bender: Soviet Confidence men in the Stalin Period’, Slavic Review 61, no. 3 (2002): 551–5. 140. Geoffrey Roberts, 329–32. 141. RGASPI, f. 17, op. 3, d. 1066, l. 48. 142. Zhdavov’s original resolution in June 1947, which sought a complete dispersion of the Varga group, was significantly revised in the final version in August 1947. See Chapter 5. 143. Russian archival documents indirectly suggest that the Varga group’s ideas on the Eastern European question were the main reason Zhdanov was able to obtain Stalin’s connivance. RGASPI, f.  17, op.  125, d.  527, ll. 137– 49; RGASPI, f. 17, op. 125, d. 552, l. 101. Jerry Hough presented the similar view about the end of the Varga Institute long time ago, despite the fact that it was not archival-based. Jerry Hough, ‘Debates about the Postwar World’, in Susan Linz ed. The Impact of World War II on the Soviet Union (Totowa, 1985): 268–70. 144. Akademiia nauk v resheniiakh Politburo TsK RKP(b) – BKP(b) – KPSS, 1922– 1991 (Moscow, 2000): 362. 145. V. I. Kaplan, 3–7. 146. See Chapter 5. 147. For the public criticism against IMKh’s works, see Richard Day, Cold War Capitalism:  45–8; A.  Mommem, 180–5. For the ‘ethnic’ harassment, see RGASPI, f. 17, op. 132, d. 144, ll. 20–1. 148. Sovetsko–amerikanskie otnosheniia, 1945–1948 (Moscow, 2004): 432–4. 149. ARAN, f. 1513, op. 1, d. 55, ll. 1–47. 150. ARAN, f. 1877, op. 1, d. 219, ll. 1–143. 151. ARAN, f. 1513, op. 1, d. 67, ll. 1–19. 152. ARAN, f. 1877, op. 1, d. 320, ll. 1–59. 153. Oded Eran, 57. 154. Nisha Sahai-Achuthan, ‘Soviet Indologists and the Institute of Oriental Studies: Works on Contemporary India in the Soviet Union’, The Journal of Asian Studies 42, no. 2 (1983): 323–43 155. A. V. Torkunov, MGIMO universitet: Traditsii i sovremennost’ (Moscow, 2004): 116–19, 145–7. 156. V. I. Kaplan, 11.


Notes to Pages 43–51 157. RGASPI, f. 17, op. 132, d. 158, ll. 178–9. 158. A. V. Torkunov, 116, 131. 159. For Stalin’s assessment of economists of the new generation, see Ethan Pollock, Stalin and the Soviet Science Wars, 182. 160. The whole document was published in Pravda, 10 October 1952, 2–9. 161. See Oscar Sanchez-Sibony, Red Globalization: The Political Economy of Soviet Cold War from Stalin to Khrushchev (Cambridge, 2014). 162. William Zimmerman, Soviet Perspective on International Relations 1956– 1967 (Princeton, 1969): 4–5.

Chapter 2: Operation 1. Central works are Loren R. Graham, The Soviet Academy of Sciences and the Communist Party, 1927–1932 (Princeton, 1967); David Joravsky, The Lysenko Affair (Chicago, 1970); Sheila Fitzpatrick, ‘Professors and Power’ in The Cultural Front; Linda L. Bubrano and Susan G. Solomon (eds), The Social Context of Soviet Science (Boulder, 1980); Alexander Vucinich, Empire of Knowledge: The Academy of Sciences of the USSR, 1917–1970 (Berkeley, 1984); Loren R. Graham (ed.), Science and the Soviet Social Order (Cambridge, 1990). 2. Notably, Nikolai Krementsov, Stalinist Science (Princeton, 1997); Slava Gerovitch, From Newspeak to Cyberspeak:  A  History of Soviet Cybernetics (Cambridge, 2002). 3. David Joravsky, The Lysenko Affair; M. G. Iaroshevskii (ed.), Pepressirovannaia nauka; Kiril Rossianov, ‘Editing Nature: Joseph Stalin and the ‘New’ Soviet Biology’, Isis 84, no. 4 (1993); V. D. Esakov, ‘K istorii filosofskoi diskussii 1947 goda’, Voprosoy filosofii no. 2 (1993); Peter Kneen, ‘Physics, Genetics and the Zhdanovshchina’, Europe-Asia Studies 50, no 7 (1998); S. S. Demidov and B.V. Levshin (eds), Delo akademika Nikolaya Nikolaevicha Luzina (St Petersburg, 1999); V. D. Esakov and E. C. Levina, Delo KR: sudy chesti v ideologii i praktike poslevoennogo stalinizma (Moscow, 2001); Nikolai Krementsov, Stalinist Science. 4. ARAN, f. 354, op. 1, d. 46, ll. 1–5. 5. ARAN, f. 354, op. 1, d. 89, l. 1. 6. ARAN, f. 2, op. 1, d. 1, ll. 1–4. 7. ARAN, f. 2, op. 6, d. 54, l. 45. 8. ARAN, f. 1993, op. 1, d. 102, ll. 6–7. 9. Varga invested a great deal of energy in developing the Pacific Ocean sector to the next level. In the 1930s, Varga had been trying to have ‘his’ type of economists and statisticians actively involved in Asian studies. KO’s statisticians


Notes to Pages 51–55

10. 11. 12. 13. 14. 15. 16.



19. 20. 21. 22. 23.

conducted co-research projects with the sector very often. Varga transferred Sh. Lif, one of the core scholars, who was originally an expert in American economy, to the Pacific Ocean sector in the middle of the 1930s. However, the situation did not remarkably improve. Its research tendency was still distinctive from other sectors. The most outstanding monographs, produced by the Pacific Ocean sector, were outside the mainstream methodology of the Institute: A. Ia. Kantorovich’s America in Struggle for China and V. Ia. Avarin’s Struggle for Pacific Ocean:  American-Japanese Contradictions. See Anatolii Iakovlevich Kantorovich, Amerika v bor’be za Kitai (Moscow, 1935); V.  Ia. Avarin, Bor’ba za Tikhii okean: iapono-amerikanskie protivorechiia. (Moscow, 1947). These were about political and diplomatic competitions between (imperialist) Powers in East Asia, not a Varga-style specific and heavy statistical-loaded study on the economy of individual states. In short, the sector’s research fellows had never been fully integrated into the Institute. Varga did reveal his frustration about the sector. When he assessed the year of 1938, the director said ‘as for the Pacific Ocean sector, unfortunately, we did not witness special research projects going on’. ARAN, f. 1993, op. 1, d. 112, l. 4. ARAN, f. 2, op. 6, d. 54, l. 45. ARAN, f. 2, op. 1, d. 196, l. 96. ARAN, f. 2, op. 1, d. 196, l. 50. ARAN, f. 2, op. 1, d. 196, l. 135. ARAN, f. 354, op. 1, d. 75, l. 1. ARAN, f. 354, op. 1, d. 104, ll. 19–20. See O. V. Khlevniuk, Politburo: mekhanizmy politicheskoi vlasti v 1930-e gody (Moscow, 1996). Also see J. Arch Getty, ‘Stalin as Prime Minister: Power and the Politburo’, in Sarah Davies and James Harris (eds), Stalin: A New History (Cambridge, 2005). For example, see ‘Voina i inflatsiia: Zapiska akademika I. A. Trakhtenberga. 1947 g.’, Istoricheskii arkhiv, no.  6 (2001):  7.  Trakhtenberg was one of the very few among IMKh’s fellows whose name had appeared on Stalin’s appointment book. ARAN, f. 1993, op. 1, d. 236, ll. 1–39; ARAN, f. 1993, op. 1, d. 237, ll. 1–21. They presented special reports on German and Austrian economy in MID on 16 April 1947 and 19 May 1947. ARAN, f. 354, op. 1, d. 76, l. 35. Abdurakhman Avtorkhanov, Stalin and the Soviet Communist Party. Also see Niels Erik Rosenfeldt, Knowledge and Power. ARAN, f. 354, op. 1, d. 119, l. 16. ARAN, f. 1993, op. 1, d. 102, l. 15 ARAN, f. 1993, op. 1, d. 153, l. 8.


Notes to Pages 55–64 24. 25. 26. 27. 28. 29. 30. 31. 32. 33. 34.

35. 36. 37. 38. 39.

40. 41. 42. 43. 44. 45. 46. 47. 48. 49. 50. 51. 52.


ARAN, f. 354, op. 1, d. 104, l. 19. For example, ARAN, f. 354, op. 1, d. 119, l. 14. ARAN, f. 1993, op. 1, d. 102, ll. 6–7. ARAN, f. 1993, op. 1, d. 165, ll. 2–3. ARAN, f. 1993, op. 1, d, 153, ll. 6–11. See a series of articles published in Vestnik statistika in the 1920s. See Chapter 3. ARAN, f. 354, op. 1, d. 77, l. 4. They organised a special seminar on MarxLeninism methodology statistics in 1933. ARAN, f. 354, op. 1, d. 77, l. 3. ARAN, f. 354, op. 1, d. 77, l. 66. For example, in 1933, Khmelentskaia (academic secretary), Mendel’son, Lebedeva, Gertsbakh and Eidus formed a committee. ARAN, f.  354, op.  1, d. 76, ll. 1–2. V. I. Kaplan, 30. ARAN, f. 354, op. 1, d. 76, l. 39. ARAN, f. 354, op. 1, d. 104, l. 8. ARAN, f. 1993, op. 1, d. 225, l. 18. In his memoir, Varga mentioned that Stalin read all of his manuscripts before they were sent to publishers. While the claim was not completely confirmed through archival documents, it seemed to have some truth. Archival documents show that Varga sent Stalin a copy of his manuscripts in 1933, 1946 and 1947 and other materials for the dictator’s comments, including Varga’s 1939 lecture notes in RAN. ARAN, f. 354, op. 1, d. 77, ll. 19–20. RGASPI, f. 558, op. 11. d. 716, l. 69. ARAN, f. 354, op. 1. d. 77, l. 67. Ibid. ARAN, f. 1993, op. 1, d. 122, ll. 1–24. ARAN, f. 1993, op. 1, d. 104, l. 10. V. I. Kaplan, 29. RGASPI, f. 17, op. 132, d. 158, l. 178. Nikolai Kremenstov, Stalinist Science, 24 See Chapter 1. Kees Boterbloem, The Life and Times of Andrei Zhdanov, 187–91. RGASPI, f. 17, op. 125, d. 271, ll. 28–30. For example, in 1935, Varga sent an official request to get a permission from Agitprop in the Central Committee to transfer one of IMKh’s fellows to the foreign worker publisher. RGASPI, f. 17, op. 120, d. 211, l. 30. Pravda, 1 May 1938, 1.


Notes to Pages 65–71 54. 55. 56. 57. 58. 59. 60. 61.

62. 63. 64. 65. 66. 67. 68. 69. 70. 71. 72.

73. 74. 75.


RGASPI, f. 17, op. 125, d. 203, l. 80. ARAN, f. 1993, op. 1, d. 225, ll. 54–5. ARAN f. 1993, op. 1, d. 104, l. 2. ARAN, f. 1993, op. 1, d. 225, ll. 54–5. ARAN, f. 1993, op. 1, d. 215, l. 42. See Chapter 5. See Chapter 4. Their major policy paper sent to the Central Committee in 1949, titled ‘About the conditions of the economies in capitalist states’, virtually followed the ‘old’ Varga Institute’s position. ARAN, f. 1877, op. 1, d. 320, ll. 1–59. For example, ARAN, f. 354, op. 1, d. 43, l. 16. RGASPI, f. 17, op. 120, d. 211, l. 16; ARAN, f. 1993, op. 3, d. 4, ll. 3–4. RGASPI, f. 17, op. 125, d. 25, l. 29. ARAN, f. 354, op. 1. d. 77, l. 70. ARAN, f. 1993, op. 3, d. 27, l. 89. G.  V. Kostyrchenko, Tainaia politika Stalina:  Vlast’ i antisemitizm (Moscow, 2001): 385–7. ARAN, f. 1993, op. 3, d. 98, ll. 78–80. RGASPI, f. 17, op. 125, d. 25, l. 34. RGASPI, f. 17, op. 117, d. 279, l. 121. See Chapter 5. There is no direct evidence that the NKVD was involved in the Institute. However, the fact that Beriia forwarded a letter to the Central Committee says a lot. RGASPI, f. 17, op. 125, d. 340, l. 61; V. I. Kaplan, 147. RGASPI, f. 17, op. 117, d. 279, l. 116. For instance, K.  V. Ostrovitiianov criticised the Varga group within the Institute of Economy for the same reason in 1949. RGASPI, f.  17, op.  118, d. 477, ll. 76–7. In the famous June Plenum in the Communist Academy in 1930, Varga argued: ‘What is the difference between the Communist Academy and the bourgeois Academy of Sciences? The difference is that, in the bourgeois Academy of Sciences, there are only separate institutes, and each carries out its own affairs. However, comrades, we are the Communist Academy, which should have a unified world view, a unified Marxist-Leninist methodology; therefore, irrelevant is the approach that the Communist Academy should be just an association of independent institutes and that the presidium of the Academy should stay just within planning work’. ‘Plenum Kommunisticheskoi akademii pri TsIK SSSR 17 iiunia 1930 g. (stenograficheskii otchet)’, Vestnik Kommunistichekoi akademii, no. 39 (1930): 48–9.


Notes to Pages 71–78 77. Michael S. Fox, ‘Political Culture, Purges and Proletarianization at the Institute of Red Professors, 1921–1929’, Russian Review 52, no. 1 (1993): 20–42. 78. See Chapter 1. 79. This was one of the big reasons why he had paid so much attention to the preciseness of statistical data that his fellows had employed. ARAN, f. 1993, op. 1, d. 6, l. 13. 80. Jochen Hellbeck, Revolution on My Mind. 81. ARAN, f. 354, op. 1, d. 46, ll. 4–5. 82. V. I. Kaplan, 29. 83. Jerry Hough and Merle Fainsod, How the Soviet Union Is Governed (Cambridge, 1979): 396–9. 84. ARAN, f. 354, op. 1. d. 35, ll. 18–19.

Chapter 3: Theories 1. ARAN, f. 354, op. 1, d. 110, l. 2. 2. See Chapter 2. 3. This characterisation of his work was first seen in an obituary for Varga published in Pravda, 9 October 1964; Jürgen Kuczynski, ‘Eugen Varga’, Jahrbuch für Wirtschaftsgeschichte, no. 3 (1967); A. Polesskii, ‘O literaturnom nasledii E. S. Vargi’, Mirovaia ekonomika i mezhdnaronye otnoshenii, no. 11 (1974); Jürgen Kuczynski et al., Eugen Varga: Hervorragender Fuktionär der internationalen Arbeiterbewegung und bedeutender marxistisch-leninistischer Wissenschaftler (Leipzig, 1980); V.  A. Martynov ed., Tvorcheskoe nasledie akademika E.  S. Vargi (Moscow, 1981); Peter Hofmann, ‘Die Weiterentwicklung der Theorie der allgemeinen Krise des Kapitalismus in den internationalen Dokumenten der kommunistschen und Arbeiterparteien nach dem Tode Lenins’, in Herbert Meissner ed., Geschichte der politischen Ökonomie: Grundriß, 2nd ed. (Berlin, 1985); I. Osadachaia, ‘Nekotorye sspekty teorii gosudarstva: ot Vargi k sovremennoi burzhuaznoi politekonomii’, Mirovaia ekonomika i mezhdnaronye otnoshenii, no.  3 (1990); E.  Chesin, ‘Problemy internatsionalizatsii ekonomiki v trudax akademika Vargi i sovremennost’’, Mirovaia ekonomika i mezhdnaronye otnoshenii, no. 4, (1990). Interestingly, a similar view was presented by some West German and North American scholars as well. Elmar Altvater ed., Eugen Varga:  Die Krise des Kapitalismus und ihre politischen Folgen (Frankfurt, 1969); Richard Nordahl, ‘Stalinist Ideology:  The Case of the Stalinist Interpretation of Monopoly Capitalist Politics’, Soviet Studies 26, no. 2 (1974); Charlene Gannage, ‘E. S. Varga and the Theory of State Monopoly Capitalism’, Review of Radical Political Economics 12, no. 3 (1980).


Notes to Page 79 4. There is no chapter or section on Varga in John Eatwell, Murray Milgate, Peter Newman (eds), Marxian Economics (London, 1990). M. C. Howard and J. E. King just very briefly mention Varga, while they have a separate chapter on Hilferding, Otto Bauer, Luxemburg and Grossman. See M. C. Howard and J. E. King, A History of Marxian Economics: Vol. II, 1929–1990 (Princeton, 1992). Also see André Mommen, 238. 5. In 1929, Trotsky talked about Varga as follows: ‘I must repeat what I have said once before, that he is the consummate Polonius type of theoretician at the beck and call of any leadership of the Communist International. There is no question that his knowledge and analytical abilities make him a very useful and qualified worker. But there is not the slightest trace of revolutionary will or physical strength in his thinking. In this regard Varga is a miniature edition of a Kautsky. He was a Brandlerist under Brandler, Maslowist under Maslow, Thalmannist under the void that is called Thalmann. Conscientiously and scrupulously, he always serves up the economic arguments for the political line of others. The objective value of his works is entirely limited by the political quality of the instructions upon which he himself has not the slightest influence. He defends the theory of socialism in one country, as I have said elsewhere, by invoking the lack of political culture of the Russian worker, who needs “consoling” perspectives’. Leon Trotsky, ‘Who is Leading the Comintern Today’, The Militant 2 (1929). Also see Ypsilon, Pattern for World Revolution (Chicago, 1947): 159. This book is an account of the Comintern by its former participants, Karl Volk and Jules Humbert-Droz who were a Czech and Swiss Marxist activist, respectively. According to them, ‘Varga, a Hungarian professor of economics, throughout his career as a professional revolutionary, had never delivered himself of an independent political thought. Trotsky had characterized the Hungarian economist as the theoretical Polonius of the Comintern who, as he said, “is always ready to prove theoretically that the clouds in the sky look like a camel’s back, but if you prefer they resemble a fish, and if the Prince desires it, they bear witness to ‘Socialism in one country’. Varga for long years had been the economic weather prophet of the Comintern, always cautious enough to forecast the weather only after assuring himself directly from the executive committee whether it was rain or snow that was desired. His statistics and economic analyses always corresponded precisely to the last political resolutions of the high command” ’. 6. See Richard Day, The ‘Crisis’. 7. André Mommen, 91. 8. Laszlo M.  Tikos, ‘Eugene Varga:  A  Reluctant Conformist’, Problems of Communism 14, no. 1 (1965). 9. Richad Day, The ‘Crisis’, 39.


Notes to Pages 79–88 10. See Richard Day, The ‘Crisis’; idem, Cold War Capitalism. 11. Jerry Hough, The Struggle for the Third World; James W. Roberts, ‘Lenin’s Theory’; Griffiths, Franklyn, ‘Images, Politics and Learning in Soviet Behavior toward the United States’. Unpublished PhD Dissertation of Columbia University (1972); Paul Marantz, ‘The Soviet Union and the Western World: A Study in Doctrinal Change, 1917–1964’, Unpublished PhD Dissertation of Harvard University (1972). 12. G. Duda, Jenö Varga and André Mommen, Stalin’s Economist. 13. Anthony Brewer, Marxist Theories of Imperialism: A Critical Survey, 2nd ed. (London, 1990): 7. 14. For an attempt to reconstruct Marx’s own crisis theory based on his scattered writings, see Simon Clarke, Marx’s Theory of Crisis (New York, 1994). 15. Frederick Engels, Socialism: Utopian and Scientific (1907): 55–9. 16. Engels, Socialism: Utopian and Scientific, 63–4; Simon Clarke, 18. 17. Simon Clarke, 20. 18. Engels, ‘Introduction’, in Karl Marx, The Poverty of Philosophy, 18; Richard Day, The ‘Crisis’, 12. 19. M.  F. Bleaney, Underconsumption Theories:  A  History and Critical Analysis (New York, 1976). 20. M. F. Bleaney, 190; Anthony Brewer, 66–72. 21. Simon Clarke, 55. 22. Simon Clarke, 33–41. 23. Simon Clarke, 45–8. 24. Anthony Brewer, 100–8. 25. Richard Day, The ‘Crisis’, 24–6. 26. Ibid., 28–39. 27. E. Varga, ‘Issledovanie kon’iunktury i teoriia krizisov’, Mirovoe khoziaistvo i mirovaia politika, no. 12 (1927): 7–8. 28. Varga established his own theory of crisis under the tradition of Marxian economics, mostly in the 1920s and early 1930s. Since the mid-1930s, as will be shown in Chapter 4, Varga had largely concentrated on a more empirical research. 29. Key theoretical issues were on the stabilization of the capitalism after the WWI, on Bukharin’s theory of organised capitalism and on the origins, development and prospects of the Great Depression. For a summary of those debates, see G. Duda, 53–79; André Mommen, 61–79. 30. E. Varga, ‘Problemy krizisa’, Mirovoe khoziaistvo i mirovaia politika, no.  2– 3 (1931):  4; idem, Great Crisis and Its Political Consequences (New  York, 1934): 19–20. 31. E. Varga, Great Crisis, 21.


Notes to Pages 88–100 32. 33. 34. 35. 36. 37. 38. 39. 40. 41. 42. 43. 44. 45. 46.


48. 49. 50. 51. 52. 53. 54. 55. 56.

57. 58. 59.

E. Varga, Great Crisis, 22–3; idem, ‘Problemy krizisa’, 5. E. Varga, Great Crisis, 21. E. Varga, ‘Problemy krizisa’, 7–9. Quoted in Richard Day, The ‘Crisis’, 186. Day simply sees this as a product of Varga’s theoretical confusion and inconsistency. E. Varga, Great Crisis, 23; idem, ‘Problemy krizisa’, 4. E. Varga, Great Crisis, 18–19. Ibid., 19; idem, ‘Problemy krizisa’, 9. E. Varga, Great Crisis, 28. E. Varga and L. A. Mendel’son, Obshchii krizis kapitalizma 2 v. (Moscow, 1933–4). E. Varga, ‘Problemy krizisa’, 10. Ibid., 20. Richard Day, The ‘Crisis’, 25. ARAN, f. 354, op. 1, d. 91, ll. 1–35. For a theoretical connection between Luxemburg’s thought and Keynes’, see Simon Clarke, 56–8. Also see M. F. Bleaney, 220–5. E. Varga, ‘Reshaiuaiia rol’ gosudarstva v voennom khoziaistvo kapitalisticheskikh stran’, Mirovoe khoziaistvo i mirovaia politika, no.  1 (1945); idem, Izmeneniia, chapter 1. For Mitchell’s life and professional careers, see Arthur F. Burns, ‘Introductory Sketch’, in Arthur F. Burns ed., Wesley Clair Mitchell: The Economic Scientist (New York, 1952). Arthur F. Burns, 23. Howard Sherman, ‘The Business Cycle Theory of Wesley Mitchell’, Journal of Economic Issues 35, no. 1 (2001): 96–7. Ibid., 88–9. W. E.  Mitchell, Business Cycles (New  York, 1970; originally published in 1913): 19. Arthur F. Burns, 23. W. E. Mitchell, 20. Arthur F. Burns, 24. W. E. Mitchell, Preface. Although his explanations of such sequences or relationship eventually imply that profits were the final cause, as noted above, it is not Mitchell’s main concern. W. E. Mitchell, 91. For Grossman, see Rick Kuhn, Henryk Grossman and the Recovery of Marxism (Urbana, 2007); For Preobrazhenskii, see Richard Day, The ‘Crisis’, 229–47. ARAN, f. 1993, op. 1, d. 124, l. 29.


Notes to Pages 100–107 60. 61. 62. 63. 64. 65. 66. 67. 68.


W. E. Mitchell, 223. E. Varga, ‘Issledovanie kon’iunktury i teoriia krizisov’, 6. Ibid., 14. ARAN, f. 354, op. 1, d. 110, l. 1. E. Varga, ‘Issledovanie kon’iunktury i teoriia krizisov’, 15 This is Mitchell’s own term. Most of his tables are to trace the ‘relative prices’, ‘relative productions’ and ‘relative rates’ of the four national economies. Richard Day, The ‘Crisis’, 267. For various negative estimations of Varga’s works, see André Mommen, 238. G. Duda, 117–19. Richard Day concludes that Preobrazhenskii’s 1931 book, The Decline of Capitalism, was the last serious theoretical Marxist work in Stalin’s Russia: ‘A history of Soviet theory would then better end with Preobrazhensky’s last book. No other work of remotely comparable theoretical quality was produced after 1931’. Richard Day, The ‘Crisis’, 247. See Naum Jasny, Soviet Economists of the Twenties: Names to be Remembered (Cambridge, 1972): 178.

Chapter 4: Discourse 1. See Charlene Gannage, ‘E.  S. Varga and the Theory of State Monopoly Capitalism’. 2. Richard Day, The ‘Crisis’. 3. V. A. Martynov (ed.) Tvorcheskoe nasledie akademika E. S. Vargi (Moscow, 1981). 4. E. Varga and M. Bokshitskii, ‘Ekonomika i kon’iunktura kapitalistcheskikh stran v I kvartale 1936 g.: SShA, Angliia, Germaniia, Frantsiia’, Mirovoe khoziaistvo i mirovaia politika, no. 6 (1936); V. Ershov, Akvila, V. Gai and P. Poliak ‘Ekonomika i kon’iunktura kapitalistcheskikh stran vo II polugodii 1936 g.: SShA, Italiia, Angliia, Germaniia, Bel’giia’, no. 8 and no. 10 (1936); E. Varga, ‘Ekonomika i kon’iunktura kapitalistcheskikh stran v III kvartale 1936 g.: Germaniia, SShA, Angliia, Frantsiia, Italiia’, no. 11 and no. 12 (1936); E. Varga ‘Ekonomika i kon’iunktura kapitalistcheskikh stran v IV kvartale 1936 g.: Angliia, Frantsiia, Germaniia, SShA’, no. 3 (1937). More detailed statistical materials and analysis were published in Kon’iunkturnyi biulleten’ zhurnala Mirovoe khoziaistvo i mirovaia politika during the year of 1936. 5. E. Varga, ‘1936:  Itogi i perspektivy’, Mirovoe khoziaistvo i mirovaia politika, no. 3 (1937). 6. E. Varga, ‘Mezhdunarodnyi birzhevoi krakh  – Predvestnik nadvigaiushchevosiia ekonomicheskovo krizisa’, Kommunisticheskii Internatsional, no.  46–7 (1929): 18; R. The ‘Crisis’, 183.


Notes to Pages 108–114 7. E. Varga, ‘Krizis v SShA – Obshchii ekonomicheskii krizis’, Mirovoe khoziaistvo i mirovaia politika, no. 2 (1930): 5; Richard Day, The ‘Crisis’, 184. 8. See Chapter 2. 9. ARAN, f. 354, op. 1, d. 58, l. 81. 10. E. Varga, ‘Novoe obostrenie mirovogo krizisa i perspektivy’, Mirovoe khoziaistvo i mirovaia politika, no. 1–2 (1932). 11. E. Varga, Problemy mirovogo krizisa; diskussiia v Institute mirovogo khoziaistva i mirovoi politiki Komakademii (Moscow, 1932). 12. Istoricheskii Arkhiv no. 6 (1994). 13. V. I.  Kaplan, 35; Also see Ia. A.  Pevzner, ‘Zhizn’ i trudy E.  S. Vargi v svete soveremennosti’. 14. E. Varga, ‘Problemy sovremennogo etapa mrovogo krizisa’, Mirovoe khoziaistvo i mirovaia politika, no. 3 (1934). 15. E. Varga, Novye iavleniia. In the section of ‘from the author’, Varga stated that ‘this book was published on Stalin’s advice’. 16. E. Varga, Great Crisis and Its Political Consequences (New York, 1934). 17. E. Varga, Novye iavleniia, 8–24. 18. Ibid., 5–6. 19. Right before Varga and his economist drafted the 1931 report for Molotov, Preobrazhenskii published a book containing a theoretical position of an eternal crisis, the so-called theory of stagnation. See E.  Preobrazhenskii, Zakat kapitalizma (Moscow, 1931): 62. 20. E. Varga, Novye iavleniia, 5. 21. E. Varga, Great Crisis, 26. 22. In Varga’s calculation, the gold price index hovered around 150 in 1922–9, taking 1913 as 100, which was clearly above the value. 23. E. Varga, Novye iavleniia, 9–10. 24. E. Varga and IMKh, Mirovye ekonomicheskie krizisy, 1848–1935 (Moscow, 1937). 25. In fact, Lenin did address such a point, albeit briefly, before the October Revolution: ‘On the whole, capitalism is growing far more rapidly than before; but this growth is not only becoming more and more uneven in general, its unevenness also manifests itself, in particular, in the decay of the countries…’. See V. I. Lenin, Imperialism: The Highest Stage of Capitalism (Moscow, 1939):  120. His followers in the Soviet Union and in Europe in the 1920s, including Stalin, had attempted to formulate it as the theory of uneven development. However, the theory largely stayed at a highly abstract level, as they had never fully developed it into a concrete comparative economic study as Varga had done since the early 1930s. 26. E. Varga, Great Crisis, 32. A  similar description was also made in Novye iavleniia, 18.


Notes to Pages 114–125 27. 28. 29. 30. 31. 32. 33.

34. 35. 36.

37. 38. 39. 40. 41. 42. 43.

44. 45. 46. 47. 48. 49. 50. 51. 52. 53. 54. 55.

E. Varga, Novye iavleniia, 30–2. E. Varga, Great Crisis, 40. Ibid., 43. E. Varga, Novye iavleniia, 28–9. Ibid., 27–8. Ibid., 29–30. Although Varga also sometimes reproduced the ‘old’ tradition, which characterised the state as a puppet of monopoly capitalists, in highly propagandaoriented materials, in this 1933 text as well as other scientific works composed by him later, he clearly positioned himself against the tradition. E. Varga, Novye iavleniia, 42. Ibid., 63–4. In fact, it is not clear whether it was Varga or Stalin who used the terminology first. Officially, it was Stalin who named the phase as ‘a depression of a special kind’ in the Party Congress in 1934. However, it is obvious that Varga characterised the phase as such first in the text, which Stalin read for his speech in the congress. I. V. Stalin, Sochineniia, vol. 13 (Moscow, 1951): 291. E. Varga, Novye iavleniia, 72–3. Ibid., 65. Ibid. Ibid., 67–70. Ibid., 70. Ibid., 73–90. ARAN, f. 534, op. 1, d. 91, ll. 1–2. The summary of the lecture, along with some comments on that, is provided by E.  Khmel’nitskaia, ‘Goskapitalisticheskie tendentsii kapitalistichesikh stran’, Mirovoe khoziaistvo i mirovaia politika, no. 8–9 (1934): 145–53. L. Ia. Eventov ed., ‘Planovye’ manevry v kapitalisticheskikh stranakh. ARAN, f. 1513, op. 1, d. 198, ll. 1–14. ARAN, f. 1993, op. 1, d. 6, l. 12. E. Varga, ‘1936 god: Itogi i perspektivy’, Mirovoe khoziaistvo i mirovaia politika, no. 3 (1937). ARAN, f. 1513, op. 1, d. 198, l. 1. E. Varga, ‘1936 god’, 14. ARAN, f. 1993, op. 1, d. 6, l. 13. ARAN, f. 1513, op. 1, d. 198, ll. 12–13. ARAN, f. 1513, op. 1, d. 198, ll. 2–5. E. Varga, ‘1936 god’, 13–14. ARAN, f. 1513, op. 1, d. 198, l. 9. ARAN, f. 1513, op. 1, d. 198, l. 10.


Notes to Pages 126–132 56. E. Varga, ‘Nachalo novogo ekonomicheskogo krizisa v stranakh kapitala’, Bol’shevik, no. 23–4 (1937). 57. RGASPI, f. 495, op. 20, d. 528, ll. 4–12. 58. RGASPI, f. 495, op. 20, d. 528, ll. 13–15. 59. For example, in a meeting of Kon’iunktura department held in 27 September 1938, V. Gai criticised Varga’s assessment as exaggeration. ARAN, f. 1993, op. 1, d. 127, ll. 15–16. 60. E. Varga, ‘Osobennosti novogo ekonomicheskogo krizisa’, Mirovoe khoziaistvo i mirovaia politika, no. 2 (1939). 61. There is no archival document to directly show the correspondence between Varga and Stalin at that time. However, some indirect evidence certainly does so. For example, Stalin’s speech contained the same statistical tables that Varga’s article had published for the first time. The article went to print in early February 1939 and was published in mid-March in the year. Stalin delivered his speech to the congress on 10 March 1939. 62. E. Varga, ‘Osobennosti’, 30. 63. Ibid. 64. According to J. Kuczynski, Varga’s article in February 1939 had ‘burst like a bomb’. Jürgen Kuczynski, ‘Zur Geschichte’, 12. Obviously, Kuczynski had no idea about the fact that Varga had made such theoretical declaration to Stalin already almost four years earlier. 65. E. Varga, ‘Osobennosti’, 34. 66. Ibid., 33. 67. Ibid., 35–8. 68. Ibid., 39. 69. Ibid., 40–1. 70. E. Varga, ‘Vliianie imperialistichekoi voiny v Evrope na khoziaistvo kapitalisticheskogo mira v 1939 g.’, Mirovoe khoziaistvo i mirovaia politika, no. 3 (1940): 54–5. 71. RGASPI, f. 558, op. 11, d. 716, ll. 29–40. 72. RGASPI, f. 17, op. 125, d. 207, ll. 25–46. 73. ARAN, f. 1993, op. 1, d. 185, ll. 45–6. 74. Gurvich’s paper was completed under the guidance and supervision of I. Trakhtenberg, the second-most influential economist in IMKh. ARAN, f. 1993, op. 1, d. 191, ll. 11–21. E. Gurvich, ‘Voennaia ekonomika SShA’, Mirovoe khoziaistvo i mirovaia politika, no. 10–1 (1944). 75. E. Gurvich, 37–40. 76. Ibid., 45. 77. L. Eventov, ‘Voina i uroven’ proizvodstva v Anglii’, Mirovoe khoziaistov i mirovaia politika, no. 3–4 (1944); idem, Voennaia ekonomika Anglii (Moscow,


Notes to Pages 132–140

78. 79. 80. 81. 82. 83.

84. 85. 86. 87.

88. 89. 90. 91. 92. 93. 94. 95. 96. 97. 98.

1946); V. Karra, ‘Promyshlennost’ fashistskoi Germanii’, Mirovoe khoziaistov i mirovaia politika, no. 3–4 (1944); Sh. Lif, ‘Gosudarstvennye kapitalovlozheniia v amerikanskuiu promyshlennost’ vo vtoroi mirovoi voine’, Mirovoe khoziaistov i mirovaia politika, no. 11–12 (1944); M. Bokshitskii, ‘Vtoraia mirovaia voina i techno-ekonomicheskie izmeneniia v promyshlennosti SShA’, Mirovoe khoziaistov i mirovaia politika no. 3 (1945); idem, Tekhnikoekonomicheskie izmeneniia v promyshlennosti SShA vo vremia vtoroi mirovoi voiny (Moscow, 1947); S. M. Vishnev and I. A. Trakhtenberg, Voennaia ekonomika fashistskoi Italii (Moscow, 1946); A. Iu. Shpirt, Izmeneniia v ekonomike Syr’ia i topliva vo Vtoroi Mirovoi voine (Moscow, 1946). Most of these works were discussed and monitored in the Institute’s Board meetings, chaired by Varga himself, in spring and summer 1944. ARAN, f. 1993, op. 1, d. 191, ll. 29–54. E. Varga, ‘Reshaiuaiia rol’ gosudarstva v voennom khoziaistvo kapitalisticheskikh stran’, Mirovoe khoziaistvo i mirovaia politika, no. 1 (1945). E. Varga, ‘Reshaiuaiia rol’, 11. Ibid., 14–18. Ibid., 11–12. Ibid., 13. ARAN, f. 1513, op. 1, d. 11, ll. 1–14. This is the original manuscript that Varga had written in German. A  summary of the paper was published in IMKh’s journal. E. Varga, ‘Problemy promyshlennogo tsikla posle voiny’, Mirovoe khoziaistvo i mirovaia politika, no. 2–3 (1945). E. Varga, ‘Problemy promyshlennogo tsikla’, 79. Ibid. E. Varga, ‘Problemy promyshlennogo tsikla’, 80. Ibid., 80–1. Interestingly, Trakhtenberg and Gorfinkel’, one of the core economists in IMKh, who commented on Varga’s paper in the occasion, had suggested their director take an even more historically specific approach. E. Varga, Izmeneniia, 7. Ibid., 11. Ibid., 12. Ibid., 293–4. Ibid., 12. Ibid., 296–305. Sovetsko-amerikanskie otnosheniia, 1945–1948 (Moscow, 2004): 432–4. Ibid. ARAN, f. 1513, op. 1, d. 59, ll. 28–59. ARAN, f. 1877, op. 1, d. 316, ll. 27–35. He named it the prosperity of a special kind.


Notes to Pages 140–147 99. 100. 101. 102.

ARAN, f. 1513, op. 1, d. 59, ll. 29–34. ARAN, f. 1513, op. 1, d. 59, ll. 52–4; ARAN, f. 1877, op. 1, d. 316, ll. 27–35. ARAN, f. 1513, op. 1, d. 59, ll. 35–6. ARAN, f. 1513, op. 1, d. 67, ll. 1–20. The report was titled ‘The Marshall Plan and West Germany’. 103. I. V. Stalin, Ekonomicheskie problemy sotsializma v SSSR (Moscow, 1952): 30–2. 104. See Chapter 5.

Chapter 5: An Affair 1. E. Varga, Izmeneniia. 2. The New York Times, 25 January 1948. 3. Werner Hahn, Postwar Soviet Politics; V.  E. Manevich, ‘Stalinizm i politicheskaia ekonomiia’; Richard Day, Cold War Capitalism; Ethan Pollock, ‘The Politics of Knowledge: Party Ideology and Soviet Science, 1945–1953’, Unpublished PhD Dissertation of University of California at Berkeley (2000); P. Cherkasov, IMEMO; André Mommen, Stalin’s Economist. 4. G. V. Kostyrchenko, Tainaia politika Stalina. 5. Frederick C. Barghoorn, ‘The Varga Discussion and Its Significance’; Marshall D. Shulman, Stalin’s Foreign Policy Reappraised (Cambridge, 1963); Franklyn Griffiths, ‘Images, Politics and Learning in Soviet Behavior toward the United States’; William Zimmerman, ‘Choices in the Postwar World: Containment and the Soviet Union’, in Charles Gati (ed.), Caging the Bear: Containment and the Cold War (Indianapolis, 1974); Paul Marantz, ‘Soviet Foreign Policy Factionalism under Stalin?’; William O. McCagg, Stalin Embattled, 1943–1948 (Detroit, 1978); Gavriel Ra’anan, International Policy Formation in the USSR; Vojtech Mastny, ‘Stalin and the Militarization of the Cold War’, International Security 9, no. 3 (1984–5); William C. Wohlforth, The Elusive Balance. Vladimir Pechatnov, Stalin, Ruzvel’t, Trumen: SSSR i SShA v 1940-kh gg. 6. For instance, W. Bedell-Smith, an American diplomat who was in Moscow at that time, reported to Washington, that the ultimate fate of the Varga group ‘may therefore well serve as a weathercock of party attitudes toward [the] western world’ Quoted in Jonathan Haslam, ‘The Making of Foreign Policy under Stalin’, in Empire and Society: New Approaches to Russian History, edited by T. Hara and K. Matsuzato (Sapporo, 1997): 178. 7. Warren I. Cohen, The Cambridge History of American Foreign Relations: Vol. 4, America in the Age of Soviet Power, 1945–1991 (London, 1993): 82. 8. William Taubman, Stalin’s American Policy; Jerry Hough, The Struggle for the Third World. Hough holds that the reason for Varga’s fall was not his theory


Notes to Pages 147–153


10. 11. 12. 13. 14.

15. 16. 17. 18. 19. 20. 21. 22.


24. 25. 26. 27.

on postwar economic crisis in the capitalist world, but his idea about Eastern European reform. Taubman argues that Stalin concurred with Varga’s points about the postwar Western economy were. A similar argument made long ago by an emigrant scholar, which, unfortunately, has been forgotten in the academic world. See Aron Katsenelinboigen, ‘Jews in Soviet Economic Science’, Soviet Jewish Affairs 11, no. 1 (1981). See J. Arch Getty, ‘Stalin as Prime Minister: Power and the Politburo’. RGASPI, f. 17, op. 116, d. 96, l. 2. RGASPI, f. 17, op. 125, d. 25, l. 60. RGASPI, f. 17, op. 125, d. 25, ll. 61–7. See Sheila Fitzpatrick, ‘Signals from Below: Soviet Letters of Denunciation of the 1930s’, in Sheila Fitzpatrick and Robert Gellately (eds), Accusatory Practices: Denunciation in Modern European History, 1789–1989 (Chicago, 1997). RGASPI, f. 17, op. 117, d. 279, ll. 103–20. See Sheila Fitzpatrick, ‘Stalin and the Making of a New Elite’, in The Cultural Front. RGASPI, f. 17, op. 125, d. 25, ll. 24–46. RGASPI, f. 17, op. 116, d. 91, l. 4; d. 96, ll. 1–2. RGASPI, f. 17, op. 125, d. 25, ll. 48–56. RGASPI, f. 17, op. 116, d. 96, ll. 1–2. Gosudarstvennyii antisemitizm v SSSR, 1938–1953 (Moscow, 2005): 24–6. Also see G. V. Kostyrchenko, 215–17. Varga reportedly testified against Béla Kun, the former leader of the Hungarian Bolshevik Revolution, in a show trial held before the Executive Committee of the Comintern chaired by Georgi Dimitrov. Bennett Kovrig, 128. For Hungarian Communists in the Great Terror years, see William J.  Chase, ‘Micro-history and Mass Repression:  Politics, Personalities, and Revenge in the Fall of Béla Kun’, Russian Review 67, no. 3 (2008). Only Zhdanov was born in the 1890s (1896), but he belonged to a young group in the Politburo leadership. See Golitzki and Oleg Khlevniuk, Cold Peace, chapter 2. See Sheila Fitzpatrick, ‘Stalin and the Making of a New Elite’, in The Cultural Front, 149–82. RGASPI, f. 558, op. 11, d. 716, ll. 49. E. Varga, ‘Vskryt’ cherez 25 let’, 157. E. Varga, ‘Umenyshenie narodnogo bogatsvta Germanii za vremia voiny’, Mirovoe khoziaistvo i mirovaia politika, no.  3–4 (1942):  8–12; idem, ‘Istoshchenie prodovol’stvennykh resursov Germanii’, Mirovoe khoziaistvo i mirovaia politika, no. 5–6 (1942): 30–42.


Notes to Pages 153–157 28. E. Varga, ‘Vskryt’ cherez 25 let’, 157. 29. Ivanov’s letter in 1943 was not stored in Russian archives. This paragraph is based on his memory in 1949 of the 1943 letter. RGASPI, f. 17, op. 132, d. 158, ll. 178–84. 30. RGASPI, f. 17, op. 125, d. 203, ll. 58–67. 31. RGASPI, f. 17, op. 125, d. 203, ll. 73. 32. In addition to some big names including Potemkin and E. V. Tarle, a renowned historian, some current and future Varga critics, like L. N. Ivanov and V. S. Zakharov, were recommended. 33. RGASPI, f. 17, op. 125, d. 203, l. 50. 34. E. Varga, ‘Vskryt’ cherez 25 let’, 157. 35. RGASPI, f. 558, op. 11, d. 716, ll. 46–7. 36. E. Varga, ‘Vskryt’ cherez 25 let’, 157–8. 37. Iu. A.  Bulatova, Fakul’tetu mezhdunarodnykh otnoshenii MGIMO (u)  60 let (Moscow, 2003): 5–8, 142–4. 38. ARAN, f. 1993, op. 1, d. 185, l. 45. 39. ARAN, f. 1513, op. 1, d. 215, ll. 4–7. In 1944, Varga was awarded a Lenin honour. RGASPI, f. 17, op. 3, d. 1051, l. 45. 40. Seth J. Axelrod, ‘The Soviet Union and the Bretton Woods: A Re-Examination of Soviet Post-War Intentions’, Slovo 8, no. 1 (1995). 41. RGASPI, f. 17, op. 3, d. 1051, l. 45. 42. V. I. Kaplan, 142. 43. RGASPI, f. 17, op. 125, d. 340, ll. 61–5. 44. Richard Day, Cold War Capitalism, 45–8; Ethan Pollock, ‘The Politics of Knowledge’, 396–8. 45. P. Cherkasov, IMEMO, 43. 46. Recent literature, most notably, Golitzki and Khlevniuk’s work, stresses the point that Zhdanov just faithfully followed Stalin’s order in launching the Zhdanovshchina and played only a minor role there. See Yoram Golitzki and Oleg Khlevniuk, Cold Peace, 31–8. But my archival findings on the Varga Controversy certainly question their argument. It is noteworthy that their section on the Zhdanovshchina was the least archival-based part in Cold Peace, by far the most thorough archival-researched work on the postwar Soviet politics ever. 47. Kolotov, a former Voznesenskii’s assistant and biographer, claims that the Gosplan chief was an initiator of the new attack against Varga. V. V. Kolotov, ‘Ustremlennyi v budushchee, dokumental’naia povest’, Znamia, no. 6 (1974): 133–4. 48. RGASPI, f. 17, op. 125, d. 552, ll. 213–17; Ethan Pollock, ‘The Politics of Knowledge’, 400.


Notes to Pages 158–161 49. Alexei Kojevnikov, ‘Games of Stalinist Democracy: Ideological discussions in Soviet sciences, 1947–52’, in Sheila Fitzpatrick (ed.), Stalinism: New Directions (London, 2000): 150. Also see J. Arch Getty, ‘Samokritika Rituals in the Stalinist Central Committee, 1933–38’, Russian Review 58, no. 1 (1999). 50. ARAN, f. 1993, op. 1, d. 216, ll. 3–7. 51. E. Varga et al., Soviet Views on the Post-war World Economy: An Official Critique of Eugene Varga’s ‘Changes in the Economy of Capitalism Resulting from the Second World War’, translated by Leo Gruliow (Washington, DC, 1948): 74. 52. E. Varga et al., Soviet Views on the Post-war World Economy, 117–25. 53. Varga’s formulations on the ‘decisive role of capitalist states in war economy’ and ‘capitalist planning’ were particularly under heated discussions. The conference participants argued that Varga had not paid enough attention to the subordination of capitalist states to monopolists but imagined the state as an arbitrator of class relations, and they declared that any kind of planning in capitalist economies was not plausible. Also, they discussed Varga’s treatment of ‘new democracies in Eastern Europe’, and ‘colonial problems’ in a detailed manner. The critics disapproved of Varga’s theoretical attempt to understand the new democracies as state capitalism, and they maintained that theses states were already getting out of a capitalism phase. The fact that many former colonies had become creditors to their metropoles during the war, the discussants contended, did not seriously transform the existing colonial relations as Varga thought it did. As for the book’s methodology, many of the economists stated that Varga touched on the changes of the economies of capitalist states only and downplayed the impacts of politics on them. See Richard Day, Cold War Capitalism, 45–8; André Mommen, Stalin’s Economist, 173–80. 54. RGASPI, f. 17, op. 125, d. 551, ll. 90–7; Richard Day, Cold War Capitalism, 45; Ethan Pollock, ‘The Politics of Knowledge’, 398. 55. Akademiia nauk v resheniiakh Politburo TsK RKP(b)  – BKP(b)  – KPSS, 1922–1991, 361. 56. ARAN, f. 1513, op. 1, d. 198, l. 17. 57. ARAN, f. 1513, op. 1, d. 198, ll. 17–18. 58. Akademiia nauk v resheniiakh Politburo TsK RKP(b)  – BKP(b)  – KPSS, 1922–1991, 361. 59. RGASPI, f. 17, op. 3, d. 1066, l. 48. 60. RGASPI, f. 558, op. 11. d. 716, l. 69. 61. According to Pevzner, one of Varga’s colleagues, the first and second chapters in Varga’s 1946 book were particularly criticised in 1947. Both chapters were already published in IMKh’s journal in 1945. Ia. A. Pevzner, ‘Zhizn’ i trudy E. S. Vargi v svete soveremennosti’.


Notes to Pages 162–169 62. 63. 64. 65.

66. 67. 68. 69. 70. 71. 72. 73. 74.

75. 76. 77. 78.

79. 80.

81. 82. 83. 84.

RGASPI, f. 17, op. 125, d. 527, ll. 137–49. RGASPI, f. 17, op. 125, d. 552, l. 101. RGASPI, f. 17, op. 117, d. 979, l. 71. Even Levina, by far the most viciously targeted Varga’s colleague, initially survived before she got arrested for her involvement in the Jewish Anti-fascist Committee in 1948. The only notable exception was Kaplan, who lost his job soon after the merger. This made him believe that his analytical reports for Stalin, which consistently recommended a conciliatory policy towards America after the war, were one of reasons for the disbandment of IMKh. V. I. Kaplan, 145–6. The new Institute found their ‘new’ home on the fourth floor on Volkhonka, 14, which IMKh had occupied for many years. Sovetsko-amerikanskie otnosheniia, 1945–1948 (Moscow, 2004): 432–4. ‘Voina i inflatsiia: Zapiska akademika I. A. Trakhtenberga. 1947 g.’, Istoricheskii arkhiv, no. 6 (2001): 7–40. RGASPI, f. 17, op. 3, g. 1076, l. 32. Alexei Kojevnikov, 150–1. I. Gladkov, ‘Ob izmeneniiakh v ekonomike kapitalizma v rezul’tate vtoroi mirovoi voiny’, Bol’shevik, no. 17 (1947): 57–64. ARAN, f. 1513, op. 1, d. 198, l. 19. RGASPI, f. 17, op. 125, d. 552, ll. 98–101. ‘Diskussiia po knige E.  Varga ‘Izmeneniia v ekonomike kapitalizma v itoge vtoroi mirovoi voiny’, 7, 14, 21 maia 1947 g., Stenograficheskii otchet’, Mirovoe khoziaistovo i mirovaia politika, no. 11 (1947). N. A. Voznesenskii, Voennaia ekonomika SSSR v period Otechestvennoi voiny (Moscow, 1948): 31. Voprosy ekonomiki, no. 1 (1948): 86–92; Richard Day, 52–3; P. Cherkasov, 63–4. Voprosy ekonomiki, no. 2 (1948): 107–16; Richard Day, 53–4; P. Cherkasov, 65–6. RGASPI, f.  17, op.  132, d.  33, ll. 40–4; Voprosy ekonomiki, no.8 (1948):  66– 110; Voprosy ekonomiki, no.  9 (1940):  52–116; Richard Day, 54–5; William C. Wohlforth, 82–3; P. Cherkasov, 67–8. Voprosy ekonomiki, no. 9 (1948): 96. See Gorlizki and Khlevniuk, Cold Peace, 79–89. For the Leningrad affair, also see Benjamin Tromly, ‘The Leningrad Affair and Soviet Patronage Politics, 1949–1950’, Europe-Asia Studies 56, no. 5 (2004). ARAN, f. 615, op. 1, d. 5, l. 24. I thank Ethan Pollock for sharing the document with me. P. Cherkasov, 70–2. Voprosy ekonomiki, no. 3 (1949): 77, 87–8. RGASPI, f. 17. op. 132, d. 158, ll. 1–22; ARAN, f. 615, op. 1, d. 5, l. 24.


Notes to Pages 170–175 85. RGASPI, f. 17, op. 132, d. 33, ll. 40–4. For a different interpretation of the document, see D. Nadzhafov, ‘Stalinskii Agitprop v kholodnoi voine’, in I. V. Gaiduk et al., Stalin i kholodnaya voina (Moscow, 1997): 208. 86. RGASPI, f.  17, op.  118, d.  352, ll. 1–17; Ethan Pollock, ‘The Politics of Knowledge’, 414; G. V. Kostyrchenko, 573–4. 87. RGASPI, f. 17, op. 132, d. 158, ll. 178–84; G. V. Kostyrchenko, 574. 88. Ethan Pollock, ‘The Politics of Knowledge’, 413–19. 89. RGASPI, f.  17, op.  118, d.  477, ll. 76–7; Ethan Pollock, ‘The Politics of Knowledge’, 413; G. V. Kostyrchenko, 574–5. Here I used Pollock’s translation. 90. ARAN, f. 615, op. 1, d. 5, ll. 23–6. 91. Stalin i kosmopolitizm, 1945–1953 (Moscow, 2004): 418–19. 92. See Ra’anan, McCagg and Hahn cited in footnote 5 in this Chapter. 93. RGASPI, f. 17, op. 118, d. 610, ll. 176–81. 94. The lecture’s stenographic record is in ARAN, f. 1513, op. 1, d. 54, ll. 1–11. 95. The Varga file in ARAN shows that he sent the Central Committee an analytical report titled ‘Marshall Plan and Western Germany’ that contained 1951 statistical data. ARAN, f. 1513, op. 1, d. 67, ll. 1–19. 96. RGASPI, f. 17, op. 3, d. 1081, l. 23. 97. Akademiia nauk v resheniiakh Politburo TsK RKP(b)  – BKP(b)  – KPSS, 1922–1991, 432. 98. ARAN, f. 1877, op. 1, d. 313, ll. 1–68. Ironically and interestingly, Agitprop document ‘graded’ Vishnev as a second-tier scholar. RGASPI, f. 17, op. 132, d. 144, l. 21. 99. Kees Boterbloem, 211–12. 100. William Taubman, Stalin’s American Policy 135. 101. I. V. Stalin, Ekonomicheskie problem, 32–5. 102. ARAN, f. 1513, op. 1. d. 61, ll. 1–9. 103. I. V. Stalin, Ekonomicheskie problemy, 30–2. 104. In 1949, Varga sent the Central Committee a report titled ‘Overproduction Crisis in the US and Its Effects on the World Economy’. In 1950 he drafted analytical reports respectively titled ‘Peculiarity of Current Economic Crisis’, and ‘The Schism of One World Market:  The Formation of Two World Markets, Socialist and Capitalist’. ARAN, f. 1513, op. 1, d. 59, 60, and 64. 105. I. V. Stalin, Ekonomicheskie problemy, 33. 106. Geoffrey Roberts, Stalin’s Wars, 345. 107. In the report, Malenkov argues that the US imperialism ‘is bound to aggravate the contradictions between the US and the other capitalist countries. The core of them remains the contradictions between the US and Britain. These contradictions would emerge in the form of the open struggle between the American and British monopolies of sources of oil, rubber, nonferrous metals,


Notes to Pages 175–179 rare metals, and wool and for the markets for their goods. To this should be added the very serious contradictions between the US and Japan, Italy and Western Germany … It would be naïve to think that these vanquished countries will consent to live forever under the heel of American occupiers. It would be foolish to think that they will not try in one way or another to wrest themselves from US oppression in order to lead a free, independent life’. In the same report, however, he also declares that ‘the US is actually subjugating and robbing the old, long-established bourgeois states and their colonies… Once-free capitalist states – Britain, France, the Netherlands, Belgium, and Norway – are now factually abandoning the national policy and pursuing a policy dictated by the American imperialists … In deference to the US, they are entering into alliances and blocs directed against the national interests of their own states’. Pravda, 10 October 1952, 2–9.

Conclusion 1. This indicates that Varga came out of the same school of economics with his contemporary fellow Hungarian economist, Karl Polanyi. See Karl Polanyi, The Great Transformation: The Political and Economic Origins of Our Time (Boston, 1957).


Bibliography I. Archives 1. Russian State Archive of Socio-Political History (Rossiiskii gosudarstvennyi arkhiv sotsial’no-politicheskoi istorii: RGASPI) fond 17 Central Committee of the Communist Party fond 77 A. A. Zhdanov fond 88 A. S. Shcherbakov fond 495 Executive Committee of Comintern (IKKI) fond 504 Statistical-Informational Institute IKKI (Varga Bureau) (1921–8) fond 558 I. V. Stalin

2. Archive of Russian Academy of Sciences (Arkhiv Rossiiskoi akademii nauk: ARAN) fond 354 Institute of World Economy and World Politics, the Communist Academy (1925–36) fond 1513 E. S. Varga fond 1877 Institute of Economy, the Soviet Academy of Sciences fond 1993 Institute of World Economy and World Politics, the Soviet Academy of Sciences (1936–47)

3. State Archive of Russian Federation (Gosudarstvennyi arkhiv Rossiiskoi Federatsii: GARF) fond 5145 Institute of Red Professors, World Economy and World Politics



II. Published Primary Sources Akademiia nauk v resheniiakh Politburo TsK RKP(b) – BKP(b) – KPSS, 1922–1991 (Moscow, 2000). Gosudarstvennyii antisemitizm v SSSR, 1938–1953 (Moscow, 2005). Sovetsko-amerikanskie otnosheniia, 1934–1939 (Moscow, 2003). Sovetsko-amerikanskie otnosheniia, 1945–1948 (Moscow, 2004). SSSR i germanskii vopros. 1941–1949:  Dokumenty iz Arkhiva vneshnei politiki Rossiiskoi Federatsii. Tom 2:  9 maia 1945 g.  – 3 oktiabria 1946 g. (Moscow, 2000). Stalin i kosmopolitizm, 1945–1953 (Moscow, 2004). Vlast’ i khudozhestvennaia intelligentsiia: Dokumenty TsK RKP(b)-VKP(b), VChKOGPU-NKVD o kul’turnoi politike, 1917–1953 gg. (Moscow, 1999). Chase, William J. (ed.), Enemies within the Gates?: The Comintern and the Stalinist Repression, 1934–1939 (New Haven, 2001). Chuev, F. I. (ed.), Sto sorok besed s Molotovym: iz dnevnika F. Chueva. (Moscow, 1991). Dallin, Alexander and F. I. Firsov (ed.), Dimitrov and Stalin, 1934–1943: Letters from the Soviet Archives. (New Haven, 2000). Degras, Jane (ed.), The Communist International, 1919–1943: Documents (London, 1956). Getty, J. Arch and Oleg V. Naumov (eds), The Road to Terror: Stalin and the SelfDestruction of the Bolsheviks, 1932–1939 (New Haven, 1999). Kaplan, V.  I., Vazhneishie sobytiia mezhdunarodnoi zhizni i deiatel’nosti Instituta mirovogo khoziaistva i mirovoi politika (Moscow, 1991). Lebedeva, N. S. and M. M. Narinskii (eds), Komintern i vtoraia mirovaia voina (Moscow, 1994). Mikoian, Anastas Ivanovich, Tak bylo:  razmyshleniia o minuvshem (Moscow, 1999). Shepilov, D. T., The Kremlin’s Scholar: A Memoir of Soviet Politics under Stalin and Krushchev, edited by Stephen V. Bittner; translated by Anthony Austin (New Haven, 2007). Stalin, I. V., Sochineniia, 15 vols (Moscow: Gosudarstvennoe izdatel’stvo politicheskoi literatury, 1949–). Titarenko, M. L. and Heng-yu Kuo (eds), VKP(B), Komintern i sovetskoe dvizhenie v Kitae: 1920–1937. Vol. 1–4. (Moscow, 1994–2004). Trakhtenberg, I.  A., ‘Voina i inflatsiia:  Zapiska akademika I.  A. Trakhtenberga. 1947 g.’, Istoricheskii arkhiv, no. 6 (2001). Varga, E.  S., ‘Muzhestvo protiv bezzkoniia’, Problemy mira i sotssializma, no.  7 (1989). ———, ‘Vskryt’ cherez 25 let’, Politicheskie issledovaniia, no. 3 (1991).



III. Contemporary Publications 1. Journals and Newspapers Agrarnye problemy Bol’shevik Izvestiia Kommunist internatsional Kon’iunkturnyi biulleten’ zhurnala Mirovoe khoziaistvo i mirovaia politika Materialy po natsionalo-kolonial’nym problemam Mirovoe khoziaistvo i mirovaiia politika Novoe vremia Plannoe khoziaistvo Pravda Tikhii okean Vestnik Akademii nauk Vestnik Kommunisticheskoi Akademii Voprosy ekonomiki

2. Contemporary Monographs and Pamphlets Avarin, V. Ia., Imperializm v Manchzhurii (Moscow, 1934). ———, Bor’ba za Tikhii okean: iapono-amerikanskie protivorechiia (Moscow, 1947). Bokshitskii, M. L., Tekhniko-ekonomicheskie izmeneniia v promyshlennosti SShA vo vremia vtoroi mirovoi voiny (Moscow, 1947). Dalin, S. A., Ekonomicheskaia politika Ruzvel’ta (Moscow, 1936). Engels, Frederick, Socialism: Utopian and Scientific (Chicago, 1907). ———, ‘Introduction’, in Karl Marx, The Poverty of Philosophy (Chicago, 1910). Eventov, L. Ia (ed.), “Planovye” manevry v kapitalisticheskikh stranakh: Sbornik materialov (Moscow, 1936). Eventov, L. Ia., Voennaia ekonomika Anglii (Moscow: 1946). L. Ia. and L. A. Mendel’son eds, Krizis v Severo-Amerikanskikih Soedinennykh Shtatakh (Moscow, 1930). ——— (eds), Problemy mirovogo khoziaistvo (Moscow, 1930). Faingar, Isakhar Moiseevich., Problemy germanskoi promyshlennosti: monopolii I noveishie protsessy zagnivaniia (Moscow, 1934). Gertsbakh, M., Mezhdunarodnye monopolii (Moscow, 1930). Gorfinkel’, E. S., SSSR v sisteme mirovogo khoziaistva (Moscow, 1929). Gurvich, E. I., Poslevoennaia Amerika: zagnivanie amerikanskogo kapitalizma (Moscow, 1937).


Bibliography Kantorovich, Anatolii Iakovlevich, Amerika v bor’be za Kitai (Moscow, 1935). Lan, V., Angliia i Amerika: glavnyi uzel mezhdunarodnykh protivorechii imperializma (Moscow, 1934). ———, SShA ot pervoi do vtoroi mirovoi voiny (Moscow, 1947). Lemin, I. M., Fashistskaia Germaniia – ochag voiny (Moscow, 1936). ———, Vtoraia imperialisticheskaia voina nachalas’ (Moscow, 1939). Lenin, V. I., Imperialism: The Highest Stage of Capitalism (New York, 1939). Mif, P. and Voitinskii, G. (eds), Sovremennaia Iaponiia: Sbornik 1–2 (Moscow, 1934). Mitchell, W. E., Business Cycles (New York, 1913). Popov, K. A., Ekonomika Iaponii (Moscow, 1936). Preobrazhenskii, E., Zakat kapitalizma (Moscow, 1931). Shpirt, A.  Iu., Izmeneniia v ekonomike syr’ia i topliva vo Vtoroi Mirovoi voine (Moscow, 1946). Stalin, I. V., Ekonomicheskie problemy sotsializma v SSSR (Moscow, 1952). Trakhtenberg, I. A. (ed.), Voennoe khoziaistvo kapitalisticheskikh stran i perekhod k mirnoi ekonomike (Moscow, 1947). Trakhtenberg, I. A. and S. M. Vishnev (eds), Voenno-khoziaistvennye meropriiatiia voiuiushchikh gosudarstv: Angliia, Frantsiia, Germaniia, Iaponiia (Moscow, 1940). Varga, E.  S., Ekonomika kapitalizma v period zakata posle stabilizatsii (Moscow, 1928). ———, Problemy mirovogo khoziaistva i mirovoi politiki (Moscow, 1929). ———, Mirovoi ekonomicheskii krizis: ocherki po stranam (Moscow, 1932). ———, Problemy mirovogo krizisa; diskussiia v Institute mirovogo khoziaistva i mirovoi politiki Komakademii (Moscow, 1932). ———, Novye iavleniia v mirovom ekonomicheskom krizise. (Moscow, 1934). ———, Great Crisis and Its Political Consequences (New York, 1934). ———, Vooruzheniia kapitalisticheskikh stran (Moscow, 1938). ———, Izmeneniia v ekonomike kapitalizma v itoge vtoroi mirovoi voiny. (Moscow, 1946). Varga, E. S. and Iu. V. Gol’dshtein, Obshchii krizis kapitalizma. (Moscow, 1933–4). Varga, E. S. and IMKh, Mirovye ekonomicheskie krizisy, 1848–1935 (Moscow, 1937). Varga, E. S., A. M. Itkina and E. L. Khmel’nitskaia, Lenin i problemy sovremennogo imperializma (Moscow, 1934). Varga, E. S. and Sh. B. Lif, Voina i ekonomika Iaponii (Moscow, 1940). Varga, E. S. and L. A. Mendel’son, Obshchii krizis kapitalizma 2 v. (Moscow, 1933–4). Varga, E. S. et al., Soviet Views on the Post-war World Economy: An Official Critique of Eugene Varga’s Changes in the Economy of Capitalism Resulting from the Second World War, translated by Leo Gruliow (Washington, DC, 1948). Var’iash, I. and Iu. Gol’dshteina, Mirovoi krizis v tsifrakh (Moscow, 1931). Vishnev, S. M., Voennaia ekonomika fashistskoi Italii (Moscow, 1946).


Bibliography ———, Promyshlennost’ kapitalisticheskikh stran vo vtorovoi mirovoi voine Tekhnoekonomicheskie sdvigi (Moscow, 1947). Voznesenskii, N.  A., Voennaia ekonomika SSSR v period Otechestvennoi voiny (Moscow, 1948).

IV. Secondary Literature ‘Evegenii Samuilovich Varga’, Mirovaia ekonomika i mezhdnaronye otnoshenii, no. 11 (1964). ‘Akademik Evgenii Mikhalovich Zhukov’, Novaia i noveishaia istoriia, no.  6 (1977). Abalkin, L. I. et al., Akademiki- ekonomisty Rossii. 2-e izd. (Moscow, 1999). Altvater, Elmar (ed.), Eugen Varga: Die Krise des Kapitalismus und ihre politischen Folgen (Frankfurt, 1969). Avtorkhanov, Abdurakhman, Stalin and the Soviet Communist Party: A Study in the Technology of Power (New York, 1959). Axelrod, Seth J., ‘The Soviet Union and the Bretton Woods: A Re-Examination of Soviet Post-War Intentions’, Slovo 8, no. 1 (1995). Barghoorn, Frederick, ‘The Varga Discussion and Its Significance’, American Slavic and East European Review 7, no. 3 (1948). Bernstein, Barton, ‘American Foreign Policy and the Origins of the Cold War’, in Barton Berstein (ed.), Politics and Policies of the Truman Administration (Chicago, 1970). Bernstein, Michael, A Perilous Progress: Economists and Public Purpose in TwentiethCentury America (Princeton, 2004). Bleaney, M.  F., Underconsumption Theories:  A  History and Critical Analysis (New York, 1976). Bockman, Johanna and Michael Bernstein, ‘Scientific Community in a Divided World:  Economists, Planning, and Research Priority during the Cold War’, Comparative Studies in Society and History 50, no. 3 (2008). Bockman, Johanna, Markets in the Name of Socialism:  The Left-Wing Origins of Neoliberalism (Stanford, 2011). Borhi, László, Hungary in the Cold War, 1945–1956: Between the United States and the Soviet Union (Budapest, 2004). Boterbloem, Kees, The Life and Times of Andrei Zhdanov, 1896–1948 (Montreal, 2004). Bradley, Mark P., Imagining Vietnam and America:  The Making of Postcolonial Vietnam, 1919–1950 (Chapel Hill, 2000). Brewer, Anthony, Marxist Theories of Imperialism:  A  Critical Survey, 2nd ed. (London, 1990).


Bibliography Bulatova, Iu. A., Fakul’tetu mezhdunarodnykh otnoshenii MGIMO (u)  60 let (Moscow, 2003). Burns, Arthur F., ‘Introductory Sketch’, in Arthur F. Burns (ed.), Wesley Clair Mitchell: The Economic Scientist (New York, 1952). Carley, Michael J., 1939: The Alliance That Never Was and the Coming of World War II (Chicago, 1999). ———, Silent Conflict: A Hidden History of Early Soviet-Western Relations (Lanham, 2014). Carr, E. H., Socialism in One Country 1924–1926, vol. 1 (London, 1958). Chase, William J., ‘Micro-history and Mass Repression: Politics, Personalities, and Revenge in the Fall of Béla Kun’, Russian Review 67, no. 3 (2008). Checkel, Jeff, Ideas and International Political Change: Soviet/Russian Behavior and the End of the Cold War (New Haven, 1997). Cherkasov, Petr., IMEMO: Portret na fone epokhi (Moscow, 2004). Chesin, E., ‘Problemy internatsionalizatsii ekonomiki v trudax akademika Vargi i sovremennost’’, Mirovaia ekonomika i mezhdnaronye otnoshenii, no. 4 (1990). Chow, Phoebe, Britain’s Imperial Retreat from China, 1900–1931 (London, 2016). Chubarian, Aleksandr O., Ilia V. Gaiduk and Nataliia I. Egorova (eds), Stalin i kholodnaia voina (Moscow, 1997). Clarke, Simon, Marx’s Theory of Crisis (New York, 1994). Cohen, Stephen F., Bukharin and the Bolshevik Revolution: A Political Biography, 1888–1938 (New York, 1973). Cohen, Warren I., The Cambridge History of American Foreign Relations:  Vol. 4, America in the Age of Soviet Power, 1945–1991 (London, 1993). Cullather, Nick, The Hungry World: America’s Cold War Battle against Poverty in Asia (Cambridge, 2010). Cumings, Bruce, Parallax Visions: Making Sense of American-East Asian Relations at the End of the Century (Durham, 1999). Dallin, David, Soviet Russia and the Far East (New Haven, 1948). David-Fox, Michael, Revolution of the Mind: Higher Learning among the Bolsheviks, 1918–1929 (Ithaca, 1997). Davies, Sarah and James Harris (eds), Stalin: A New History (Cambridge, 2005). Day, Richard, The ‘Crisis’ and the ‘Crash’:  Soviet Studies of the West (1917–1939) (London, 1981). ———, Cold War Capitalism: The View from Moscow, 1945–1975 (New York, 1995). Deutscher, Isaac, Stalin: A Political Biography (London, 1949). Dimitrov, Vesselin, Stalin’s Cold War:  Soviet Foreign Policy, Democracy and Communism in Bulgaria, 1941–48 (New York, 2008). Dower, John W., War without Mercy: Race and Power in the Pacific War (New York, 1986).


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Index Aboltin (Avarin), V. 35, 195n.9 Academy of General Sciences 39 Academy of Sciences, pre-1936 13, 34, 62, 178, 197n.76 Agrarian Institute 20, 25 Agricultural Economy Institute (the Timiriazev Institute) 160 Akhmatova, Anna 34, 174 Aleksandrov, G. 32, 152–5, 157–8, 160–1, 172 American Review on the Soviet Union 37 Andreev, A. 17, 28, 67, 106, 122–4 Annalists 123 anti-cosmopolitanism 4, 12, 35, 40–2, 46, 157, 170, 172, 174 anti-foreign sentiment 34, 40–1, 147, 151, 154, 156, 177–8 anti-Leninist; non-Leninist; un-Leninist 43, 103, 150, 154, 161 anti-Semitism 40, 41, 68, 146, 151–2, 154, 157, 170–2, 174, 193n.139, 208n.9, 211n.65 Avidev, V. I. 43 Bauer, Otto 16, 199n.4 Bokshitskii, M. L. 23, 35, 132, 166 Bol’shevik 69, 141, 150, 159, 161, 165 Bordadyn, A. 31–2, 150, 191n.96 Braginskii, I. S. 43 Breman, Ia. 29

Brookings 2 Bukharin, N. 15, 17, 83, 86, 103, 105, 107, 122, 131, 152 business cycle, theories on 77, 78, 86–9, 92–3, 95–7 Catherine II 5 censorship 35, 59, 63, 66, 71 Central Committee in the Communist Party Department of Agitation and Propanda (Agitprop) 38, 59, 63, 65–6, 70, 148–57, 159–62, 165–7, 170–3, 196n.52, 212n.98 Department of Cadres 155 International Department 161–2 Orgburo 62, 67 Politburo 17, 40, 106, 157, 161, 165, 169, 172, 208n.23 Secretariat 62, 67, 126, 148, 151, 152, 159, 160 Central Statistics Administration (TsSU) 16, 35 Changes in the Economy of Capitalism Resulting from World War II 36, 60, 132–3, 136–9, 141, 145, 156, 158–9, 161, 165–6 Chatham House 2, 149 China Research Institute at Sun Yat-sen University 20 Cold War 6, 7, 39, 145–7, 174–5


Index Comintern 1, 3, 13, 16–17, 19, 21, 24, 26, 28–32, 37, 49–51, 53, 55, 74, 79, 87, 106–7, 109, 116, 126 7th Congress 190n.81 Eastern Bureau of the Executive Committee of Comintern (IKKI) 23 Western Bureau of the Executive Committee of Comintern (IKKI) 17, 29, 50 Commissariat for Internal Affairs (NKVD) 70, 150, 197n.72 Commissariat of Foreign Affairs (NKID); Ministry of Foreign Affairs (MID) 13, 19, 21, 24, 29–33, 35, 39, 49, 53, 55, 63, 106, 149, 152, 154–5, 163, 172–3 Communist Academy (Socialist Academy) 12–16, 18, 20, 22, 27–8, 62–4, 67, 71, 177 June Plenum 21–2, 197n.76 Conrad, N. I. 34 constant stagnation 1, 82–3, 203n.19 Council of People’s Commissars (Sovnarkom) 65 crash of capitalism 77, 78, 89–93, 111 crisis, 1937 4, 61, 126–7 cultural (diplomatic) history 6 Cultural Revolution 4, 12, 18, 22, 27, 45, 49, 62, 71, 152, 177, 189n.51 Culture Department(Kultprop) 62 Day, Richard 79, 103, 201n.35, 202n.68 denunciation 24, 41, 43, 67–70, 150–3, 160, 170–1 Department of Science and Scientific and Technical Inventions and Discoveries 62, 63

depression of a special kind 119, 123 Die Neue Zeit 16 diskussiia, 78, 109, 158–9, 164–70 see also May Conference of 1947 Dmitrov, Georgi 31, 126 Duda, Gerhard 80, 103, 184n.7 Dvorkin, I. 159 East European reform 37, 40–1, 161–22, 193n.143, 208n.8 economonic crisis in the 1870s 81 Efimov, A. V. 43, 59 Engels, Friedrich 5, 80–4, 86–7 European discourse on imperialism 23, 25, 33–4, 43–6, 142, 180 Eventov, L. Ia. 20, 22, 51, 61, 108, 122, 132, 159, 166–7 Ezhov 67 Faingar, I. M. 22, 42, 50, 52, 58, 141, 192n.128 Fascism 2, 49, 51 Fedoseev, P. 161 Fogarashi, B. S. 22, 61, 151, 191n.96 Foreign Affairs 37, 149 Foucauldian 72 Frunze Academy 70 Gai, V. 19, 22, 130–1 Galkovich, M. P. 14, 19 Gel’bras, P. S. 151 Geller, L. N. 30, 151, 191n.96 general crisis 78, 81, 92–3, 111, 113, 119, 126, 134, 138–42 definition 92 German reparation 6, 35, 38 German Social Democratic Party 16 Gertsbakh, M. I. 51–2, 59


Index Gladkov, I. 165–6 Gol’dshtein, I. I. 19, 22, 56, 59, 171 Gorfinkel’, E. S. 19, 22, 206n.87 Gosplan 16, 20, 24, 35, 49, 55, 157, 159–60, 168 Great Crisis and Political Consequences 109–18 Great Depression 1–2, 4, 6, 21, 25, 28, 33, 38, 45, 57, 89, 94–5, 101, 107–18, 124, 142, 177, 179, 200n.29 Great Terror /Great Purges 4, 27, 29–30, 50, 68, 150, 152, 208n.22 Griffith, F. 79 Gromov, E. 29 Grossman, Henryk 23, 79, 83, 99, 199n.4 Gurevich, A. M. 22, 52 Gurvich, E. 22, 131–2, 205n.74 Hellbeck, Jochen 72 Hilferding, Rudolf 16, 23, 79–80, 83, 85–94, 98, 103–4, 110–11, 117–18, 179, 199n.4 Hough, Jerry 79–80, 147, 184n.9, 193n.143, 207n.8 Hungarian Communist Party 162 Hungarian Social Democratic Party 16 Hungarian Soviet Revolution 16 Institute for Business Cycle Research in Berlin (Institut für Konjunkturforschung) 120, 123 Institute of Economy 20, 23, 38, 41–2, 140, 156–7, 159, 162, 166–7, 170–3, 197n.75 Institute of Ethnography 43 Institute of History 18, 27

Institute of International Economy and International Relations (IMEMO) 44 Institute of Monopoly of Foreign Trade 21 Institute of Philosophy 18 Institute of Red Professors (IKP) 20, 23, 28, 70 Institute of Soviet Construction 18 Institute of the Oriental Studies (IVAN) 42–3, 51 Institute of World Economy and World Politics (IMKh) academic council 15, 19, 21, 26, 49, 57, 64, 72 academic secretary 14, 30, 41, 49, 52, 53, 58, 59, 62 advising the Party 1, 4, 28, 36, 39, 40–2, 46, 57, 67, 72–3, 106, 108, 127, 130, 140–1, 155, 163, 172–3, 175, 197n.61, 211n.65, 212n.95, 212n.104 Board (direktiia) 52 budget 16, 18 cadres problem 151–4, 156 censorship 63, 66, 71 core group; Institute leadership 22, 23, 35, 44–6, 52, 56–7, 60–1 dissolution 40–1, 160–3 idea on the Party’s control 70–2 independence; autonomy from Party 64–70 International Politics 12, 13 journal circulation 28, 37, 145 merger with the Institute of Economy 41–2, 162–3 methodological flexibilities 72–3 organisational structure 48–56


Index Kogan, A. I. 68 Kojevnikov, A. 158, 166 Kon’iunktura 52, 55, 95–6, 99, 101–2 department (KO) 1, 23–4, 49, 99–100, 106, 108–9, 120, 122–3, 205n.59 Kon’iunktura researchers; kon’iunkturshiki 1, 54 Kon’iunktura reports; svodka 54–5 Korn, D. 30 Kritsman, L. M. 15, 16, 22, 25 Kun, Bela 16, 23, 29, 208n.22 Kuz’minov, I 140–1 Kuznetsov, A. 167, 170

Institute of World Economy and World Politics (IMKh) (cont.) planning research projects 57, 58 personnel matters 19, 49, 63–4, 67, 74 precedent; the working group of pre-Varga years 13, 14 publication 59, 60 research sectors 49–56 referent 54, 68 reviewing research projects 58, 59 reward; institutional interests 73–5 science and propaganda 11–2, 39–41, 45–6, 57, 66, 79–80, 106–7 service and reward 73–5, 179–81 size 2–3, 14, 16, 18, 20–1, 27, 29–31, 41 International Agrarian Institute (MAI) 53 International Annals 13 Ioel’son, M. 29, 30, 59 Iovchuk, M. T. 38, 63, 65 Ivanov, L. N. 14, 19, 43, 61, 153, 160, 162, 170–1, 209n.29 Izvestiia 14, 26, 29, 30, 39, 189n.33 Jewish Anti-fascist Committee 68, 211n.65 Kaganovich 67 Kalinin 17 Kantorovich, A. 29, 30 Kaplan, V. I. 22, 41, 51, 58, 61, 73, 211n.65 Kautsky, Karl 16, 199n.5 Keynes, J. M. 96 Keynesian economic policies 94 Khavinson, Ia. A. 33, 149–51, 153–4 Khmel’nitskaia, E. L. 69, 196n.34

Lapinskii, S. 19, 23, 26, 29–30 Laughlin, J. L. 96 law of accumulation 84, 88–93 law (logic, force) of capitalism, immanent (internal, inner) 1, 8, 85, 89, 95, 102–4, 110, 118–19, 121, 125–8, 134, 137–40 League of Nations 120, 123 Lederer, Emil 16, 87 Lemin, I. M. 22, 53, 151, 171 Lenin honour 37, 155, 209n.39 Lenin, Vladimir 5, 20, 23, 25, 45, 70, 72, 79–80, 83, 86, 91, 95, 170, 203n.25 Leningrad affair 168, 211n.80 Leninism; Leninist orthodoxy; Leninist principles 3, 15, 20, 26–7, 32, 43, 53, 56, 147, 150–1, 156, 175 Leonov, I. S. 151 Levina, R. S. 19, 22, 41, 53, 65, 68–9, 151, 171, 211n65 Lif, Sh. B. 22, 51, 56, 195n.9 Lissner, Will 145 Lominadze, B. 17 Lozovskii, S. 17


Index Luxemburg, Rosa 23, 79–80, 84–94, 98, 104, 111, 117, 138–9, 179, 199n.4, 201n.45 Main Administration for Literary and Publishing Affairs (Glavlit) 63 Maiskii, Ivan 35 Makhanov, A. I. 63 Malenkov 34, 40, 42, 44, 140, 157, 168, 170–2, 175, 212n.107 Marantz, Paul 79 Marshall Plan 39, 42, 136, 139–40, 146, 162–3, 167 Marshall, Alfred 96 Martov, Yulii 30 Marx, Karl 5, 20, 72, 81, 86–7, 105, 112, 200n.14 Marxism; Marxist economics; economic theory; economists 8, 19, 36, 45, 56, 72, 77, 81–95, 98–101, 110, 112, 115–16, 118, 123, 128, 136, 139, 141, 166, 202n.68 faith as revolutionaries 94, 96, 100, 102, 158, 199n.5 ideology 2, 5–6, 23, 56, 78, 80–1, 103, 155 Marxist-Leninist 4, 8, 24–25, 56, 71, 74, 107, 135, 178, 180, 197n.76 Maslennikov, V. A. 23, 35, 42–3, 51, 56, 65, 69, 162 May Conference of 1947 156–60, 164–7, 173 Mel’man, S. M. 151 Mendel’son, L. A. 22, 26, 32, 50, 52, 56, 58–9, 108, 151 Mif, Pavel 23, 29, 51

Mikoan 17, 44 Military Academy 24 Miliutin, V. P. 15, 16, 22, 188n.16 Ministry of Foreign Trade 44 Mitchell, Timothy 7 Mitchell, W. E. 24, 45, 56, 80–1, 103–4, 110, 113, 115, 120, 124, 126, 179 career 96 crisis theory 96–7, 100 methodology 98–9 Varga’s reception 101–2 modernization theory 7 Molotov 17, 22, 25, 31, 42, 44, 59, 74, 108–9, 139, 152, 154, 163, 168–9, 189n.48, 203n.19 Mommen, A. 80, 184n.7 monopoly capitalism; monopoly capitalists 78, 81, 83, 86, 89, 94, 105, 116–18, 133–4 Moscow State Institute of International Relations (MGIMO) 31, 33, 35, 39, 43–4, 155, 160 Motylev, V. 34 Myznikov, M. 63, 65, 165 National Bureau of Economic Research 56, 96, 101, 120 Nazi-Soviet non-aggression pact; Molotov-Ribbentrop pact 31, 33–4, 71 Nemchinov , V. S. 160 neoclassical economics 82, 96 New Deal 94, 120 New Phenomena in the World Economy Crisis 109–22 Novoe vremia 163, 168


Index orthodox school 5, 187n.24 organised capitalism; 17, 107, 152, 200n.29 see also Bukharin Osinskii, N. 15, 16 Ostrovitianov, K. V. 22, 156, 158–60, 166–9, 171, 197n.75 Pacific Ocean Institute 31, 33–4, 39, 43 Paris Conference, 1947 163 party bureau (partbiuro) 64, 69 party committee (partkom) 64, 69 Party Congress 17th 1, 2, 28 18th 127 19th 44, 172, 175 party meeting (partsobranie) 64 party organisation (partorganizatsiia) 64 party organiser (partorg) 69 Pashukanis, E. B. 13 Peter the Great 5 Pevzner, Ia. A. 23, 35, 51 Pokrovskii, M. 15, 16, 22 Polanyi, Karl 16, 213n.1 Poliak, A. A. 51, 61 Popular Front 28 Potsdam conference 37, 155, 161 Pravda 26, 29, 39, 106, 149, 163, 168, 189n33, 192n.135 Preobrazhenskii, E. A. 13, 15, 86, 99, 107, 112, 202n.68, 203n.19 Profintern 21, 26 Radek, Karl 15, 23, 26, 29, 188n.14, 189n.33 Ratner 31 regional committee (raikom) 64

revisionist school 187n.24 Right faction or tendency 17–18, 78 Roberts, James 79, 80 Roginskii, G. S. 69 Rotshtein, F. A. 13, 15 Rozman, M. M. 67 Rubinshtein, M. I. 22, 42, 171 Russian imperialism 5 Russian nationalism 34, 40, 147–8, 178, 180 Safarov, G. I. 23, 29, 51 Santalov, A. A. 35 Savel’ev, M. 22 Science Department 62 second Sino-Japanese War 55, 129 self-criticism, 64, 158–9, 165–9, 171 Shcherbakov, A. 32, 131–2, 148, 151–2, 154–6, 172 Shepilov, D 165, 170 Sherman, Howard 97 Soviet academia, during Stalin 7, 22, 33, 47–8, 66, 94, 143, 146, 169, 174 Soviet academia, pre-Stalin 7, 45, 49, 83, 177 Soviet Information Bureau of the Council of Ministers (Sovinformbiuro) 33, 39, 149 Spanish Civil War 28 Spektator-Nakhimson, M. I. 14 Stalin 1–10, 12, 17–18, 21–3, 25, 28, 35–8, 40–2, 44–6, 52–53, 59–60, 66, 73, 78, 103, 108–9, 122–5, 127–32, 136, 139, 141–2, 146–8, 150, 152–8, 160–3, 165, 167–70, 172–5, 177–81


Index Stalinism; Stalinist orthodoxy; Stalinist system 3–4, 6, 61–3, 71, 74, 78–9, 146, 164, 173, 181 state monopoly capitalism 78, 105 Strumilin, S. G. 59, 159 Suslov, M. 165, 170 Sverdlov Communist University 20 Tarkhanov, O. 29 Tarle, E. V. 33, 39, 43 Tashkent 31, 35 TASS 29, 33, 149 Taubman, William 147, 174, 208n.8 think tank 2, 4, 44, 178 Tolstov, S. F. 43 Trakhtenberg, I. A. 20, 22, 26, 32, 52–3, 55, 59, 61, 163, 166, 195n.17, 205n.74 Trotsky, L. 15, 79, 199n.5 Trotskyism; Trotskyist 17, 68, 150, 153 Trud 29, 39 Tugan-Baranovsky 85, 87 Turmilov, A. N. 150 USSR Academy of Sciences (AN) 28, 31, 38, 41, 43, 156–7, 159, 163, 167 Varga Bureau 16, 17, 19, 22–3, 152

Varga, Eugene S. activities in Hungary 37, 162, 173 biography before he took IMKh 16 crisis theory 86–95 discourse on the 1937 crisis 126–7 discourse on the Great Depression 107–18 discourse of unevenness 8, 110, 113–15, 119–21, 123–5, 128–9, 135–6, 140–2 discourse on war economies 2, 112–13, 135–7 discourse on the postwar economy 134–41 impoverishment thesis 128–131, 135, 153 others’ characterisation of Varga 79, 103, 199n.5 relations with Stalin 1–2, 17–8, 21, 35, 44, 60, 66, 109, 160–1 reorganisation of IMKh 18, 19 repentance 168–9 state-capitalism tendency; capitalist planning; the enhanced role of state 1, 8, 38, 68–7, 93–5, 117–18, 120–2, 125, 129–34, 159, 166, 210n.53 understanding of the Marshall Plan 129, 136, 139–40 Varga Controversy, The 3, 9–10, 146–7, 156–69