This article was downloaded by: [University of Cambridge]On: 21 December 2014, At: 11:09Publisher: RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House,37-41 Mortimer Street, London W1T 3JH, UK

Soviet StudiesPublication details, including instructions for authors and subscription information:http://www.tandfonline.com/loi/ceas19

The development of soviet location theory before theSecond World War—IIwan S. Koropeckyj aa Temple University , PhiladelphiaPublished online: 06 Nov 2007.

To cite this article: Iwan S. Koropeckyj (1967) The development of soviet location theory before the Second World War—I,Soviet Studies, 19:1, 1-28, DOI: 10.1080/09668136708410564

To link to this article: http://dx.doi.org/10.1080/09668136708410564

PLEASE SCROLL DOWN FOR ARTICLE

Taylor & Francis makes every effort to ensure the accuracy of all the information (the “Content”) containedin the publications on our platform. However, Taylor & Francis, our agents, and our licensors make norepresentations or warranties whatsoever as to the accuracy, completeness, or suitability for any purpose of theContent. Any opinions and views expressed in this publication are the opinions and views of the authors, andare not the views of or endorsed by Taylor & Francis. The accuracy of the Content should not be relied upon andshould be independently verified with primary sources of information. Taylor and Francis shall not be liable forany losses, actions, claims, proceedings, demands, costs, expenses, damages, and other liabilities whatsoeveror howsoever caused arising directly or indirectly in connection with, in relation to or arising out of the use ofthe Content.

This article may be used for research, teaching, and private study purposes. Any substantial or systematicreproduction, redistribution, reselling, loan, sub-licensing, systematic supply, or distribution in anyform to anyone is expressly forbidden. Terms & Conditions of access and use can be found at http://www.tandfonline.com/page/terms-and-conditions

Soviet StudiesVol. XIX July 1967 No. 1

THE DEVELOPMENT OF SOVIET LOCATION THEORYBEFORE THE SECOND WORLD WAR*—I

I. IntroductionIN each economic system investment policy is required to find theanswer to the following three problems: (1) what share of the nationalproduct should be devoted to investment, (2) how should this invest-ment be distributed among various sectors of the economy, and (3) inwhat proportion should capital be combined with other factors ofproduction, most notably, labour.1 To these problems a fourth shouldbe added, which is particularly relevant to the developing countries,namely, which of various alternative locations is the most efficient fora given economic activity.

In connection with the emphasis on rapid industrialization in theUSSR starting in the late 1920s, these problems, including the locationproblem, which is of interest in this paper, became recognized andappreciated by Soviet leaders and economists.2 The efficiency oflocation decisions, i.e., the choice of the most appropriate locationfor an enterprise in relation to the location of its inputs as well as tothe markets for its products, was particularly important in a countryof the size of the USSR where, for each economic activity, manyalternatives were, and are, available. It was realized that, because oftheir irreversibility, location decisions were of paramount importanceto the future economic growth of the USSR as a whole, and of itsindividual regions, and also for the achievement of some non-economicgoals, such as the strengthening of the defence capacity of the country.Because of the planned character of the Soviet economy, certain

* I am most grateful to Professor Alexander Erlich, Columbia University, for his generoushelp during the preparation of earlier drafts of this paper. I also wish to thank Professor HollandHunter, Haverford CoEege, and Professor Stephen Spiegelglas, Temple University, for readingthis paper and for many helpful suggestions.

1 Cf. Maurice Dobb, On Economic Theory and Socialism (New York and London, 1955), p. 260.2 For example, Stalin expressed it in the following way: 'However much we may develop

our national economy, we cannot avoid the question of how properly to distribute industry,which is the leading branch of the national economy' (J. V. Stalin, Works, vol. 12 (M. 1955),p. 334). A Soviet authority on location theory, Ya. G. Feigin, in Razmeshchenie proizvodstva prikapitalizme i sotsializme (M. 1958), p. 204, describes the importance of this theory as follows: 'Inour country many hundreds of enterprises, factories, electricity plants, and new transport lines arebuilt every year. The effectiveness of investment in these enterprises depends largely on how theyarc distributed in economic regions and republics. Therefore, the construction of each enterpriseis preceded by considerable planning and, among other aspects, the choice of the most convenientregion and site for a project is considered on the basis of the socialist principles of distribution ofproductive resources.'

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

2 THE DEVELOPMENT OF

definite criteria were required to guide the planners in their practicalsolutions to the problem of location of various investment projects.As a result, the defining of these criteria became the subject of intensivestudy by Soviet economists, as can be seen from the subsequentreferences in this paper to contemporary Soviet works. These studiesdid not, in turn, remain unnoticed by some Western economists.3

The purpose of this paper is to investigate the development of theSoviet theory of industrial location prior to World War II. The choiceof this period can be explained by the fact that the repercussions oflocation decisions made on the basis of this theory were felt far beyondthese crucial years in the history of the Soviet economy. It is nowobvious that these decisions were of the utmost importance duringthe last war, have strongly influenced the course of economic develop-ment since then, and will certainly continue to influence it for decadesto come. The understanding of location theory during this period willalso facilitate the study of its further development after World War II.

This paper is limited to the analysis of the theoretical aspects of thelocation problem in the USSR, and no attempt is made to analyse theSoviet location practice during the period under investigation.

II. Influence of Weber's Theory on Soviet EconomistsThe study of contemporary Soviet literature on location theory

shows that its authors were most familiar with the theory of AlfredWeber.4 Other Western authors writing in this field are mentionedonly occasionally.5 Examination of the more recent and comprehensiveworks on this subject shows that Weber's theory is still consideredvery important.6 Consequently, only this version of the theory oflocation and its Soviet criticism will be discussed in this paper.

3 Soviet location theory was analysed in H. Chambre, L' Aminagement du territoire en U.R.S.S.(Paris, 1959) and P. J. D. Wiles, The Political Economy of Communism (Cambridge, Mass, andOxford, 1962), chap. 8. It was also discussed with specific reference to the iron and steelindustry, transportation policy, and the construction of the Ural-Kuznetsk Combine, respectively,in M. Gardner Clark, The Economics of Soviet Steel (Cambridge, Mass. 1956), Part Three; HollandHunter, Soviet Transportation Policy (Cambridge, Mass. 1957), chap. 2; and Franklyn D. Holzman,'The Soviet Ural-Kuznetsk Combine', Quarterly Journal of Economics, August 1957.

4 Alfred Weber, Uber den Standort der Industrial, Part I, 'Reine Theorie des Standorts' (Tubin-gen, 1909). All subsequent references are to this work translated into English and edited by CarlJoachim Friedrich as Alfred Weber's Theory of the Location of Industries (Chicago, 1929). Itspopularity in the USSR is probably due to the fact that the book was translated into Russian in1926 and so became accessible to many Soviet economists.

5 e.g. E. Gurari, 'Teoriya shtandorta po O. Englenderu", Sotsialisticheskoe khozyaistvo, 1928,no. 2, and idem, 'Teoriya shtandorta v rabote Richlya', ibid. 1929, no. 5. In order to be ableto understand the present development of location theory in the West, one Soviet economistfound it necessary now to acquaint his fellow economists with the progress achieved in this fieldoutside the USSR in the 1930s, thanks to the writings of such important economists as O.Englãnder, A. Predohl, H. Weigmann and B. Ohlin. See O. S. Pchelintsev, 'Burzhuaznye teoriirazmeshcheniya proizvodstva', in E. I. Popova et al., eds., Voprosy razmeshcheniya proizvoditel' nykhsil i razvitie ekonomicheskikh raionov (M. 1964).

6 R. S. Livshits, Ocherki po razmeshcheniyu promyshlennosti SSSR (M. 1954), pp. 49-55; E. D.Khanukov, Transport i razmeshchenie proizvodstva (M. 1956), pp. 86-94; Feigin, op. cit. (see footnote2), pp. 119-28; I. A. Gladkov, ed., Sotsialisticheskoe khozyaistvo SSSR v 1933-1940 (M. 1960), p. 284.

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

SOVIET LOCATION THEORY 3

Since Weber's theory is •well known, it is sufficient to give only thebriefest outline here as a frame of reference for Soviet criticism.Weber, in his celebrated book, confines his theory to the analysis ofthe location of an industrial enterprise, since he believes that the problemof agriculture was sufficiently worked out by von Thiinen and thatshifts in the location of manufacturing enterprises are responsible forurbanization, population migration and other social changes.7 In orderto simplify his discussion, he analyses the influences on industriallocation of only those cost elements which vary regionally: (i) thecost of materials, power and fuel; (2) the cost of labour; and (3) the costof transportation.8 The regional variation in the cost of materials,power and fuel can be eliminated, since this cost to an individualproducer consists of the average cost of production of these materialsand of transportation costs.9 Since the average cost refers to the wholeeconomy, regionally varying factors are actually transportation andlabour costs, to which Weber adds a third set of locational factors:agglomeration and deglomeration.10

For his discussion Weber introduces the assumptions that the locationsof raw material deposits are given, consumption sites are given andfixed, locations of labour are given, and the supply of labour is perfectlyelastic.11 On the assumption that locational factors, with the exceptionof transportation costs, do not change regionally, he finds the correctlocation of an industrial enterprise at that point where the costs oftransportation between sites of raw materials and of consumption areat a minimum.12 Later on, he introduces the differences in labour costamong locations as another variable and, with the help of isodapanes,determines the least-cost location.13 Finally, the agglomeration anddeglomeration forces are introduced.14 As previously, the enterpriseshould be located where the sum of the cost of the three main locationalfactors—transport, labour and agglomeration-deglomeration—is lowest.These three varying factors, according to their importance in the totalcost of individual branches of industry, will tend to determine theirorientation; i.e., industries will typically be transport-oriented, labour-oriented or agglomeration-deglomeration-oriented, although the lastfactor is least important, according to Weber.

7 Weber, op. cit. (see footnote 4), pp. 5-6.8 Ibid. pp. 32-33.9 Ibid. p. 34.10 Ibid. p. 35. For example, the influence of economies of scale and of proximity to auxiliary

industries or to marketing outlets belongs to the agglomeration forces, •while the influence ofhigher rent is considered as a. deglomeration force.

11 Ibid. pp. 37-40. The last assumption implies the complete mobility of labour within itslocations. See ibid. p. 211, n. 1.

12 Ibid. p . 49.13 Ibid. p. 103. In Weber's terminology an 'isodapane' is a curve of equal deviation in costs

from the point of minimum transport costs.14 Ibid. p. 161.

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

4 THE DEVELOPMENT OF

Weber's theory of industrial location has influenced the thinkingof contemporary Soviet economists. They felt that this theory couldbe very useful for planning under the conditions of economic stabilityassociated with a socialist state. They realized that in order to achieveextremely ambitious output increases, the available resources had tobe utilized most efficiently. This was particularly important in thecase of capital, which was scarce in relation to other resources at thattime. Since its productivity depends greatly on location,15 the questionof the most efficient geographical distribution of new enterprises, andwith it, the question of the applicability of Weber's theory to Soviet con-ditions figured prominently in the contemporary economic literature.

Weber was a non-Marxist economist and his theory could not havebeen officially accepted in the USSR. Nevertheless, one of the mostprominent economists of that time, S. V. Bernshtein-Kogan, daredto accept it. He is reported to have stated the following: 'In choosingthe locations of these new enterprises, we can utilize the basic approachof the Weberian scheme and not waste time on new methodologicalapproaches As a basis for our work on the geographical distributionof industry, the method worked out by German economists andsystematically presented by A. Weber may be used.'16 Also N. N.Baransky, a well-known geographer and the author of the introductionto the Russian translation of Weber's book, while admitting that thistheory was written by a non-Marxist economist, accepted it withoutreservation. Such an authority on location of Soviet industry as A. E.Probst stated enthusiastically in one of his earliest works that 'thelocation theory of A. Weber enjoys quite a general recognition,particularly by us in the USSR, and research based on it is carried onin individual industrial branches', and further: 'The work of A. Weberis of first-class importance to manufacturing industry.'17 However, thispositive attitude towards Weber's theory was rather isolated amongcontemporary Soviet economists.

The intention of those Soviet economists who accepted and ex-pounded Weber's theory in the middle 1920s was to put locationalplanning in the USSR on an economically sound basis. However, atthe end of this decade, within the framework of the general constrictionof intellectual life, the party line rejected this theory on the groundsof its inapplicability and, even more, its hostility to the construction

15 e.g. I. Kheifcts and Ya. A. Ioffe/O raionirovanii promyshlennosti', Puti industrializatsii, 1929,no. 21, p. 27.

16 Quoted by A. Serov, 'K kritike burzhuaznykh teorii razmeshcheniya proizvoditel'nykh sil',Na agramom fionte, 1932, no. 2, p. 83, from S. V. Bernshtein-Kogan's book K voprosu 0 postanovkerabotypo raionirovanii. This passage is quoted by many other Soviet economists. (Unfortunately thisbook was unavailable to the author.)

17 A. E. Probst, 'K voprosu o printsipakh geograficheskogo razmescheniya kamennougol'noipromyshlennosti', Sotsialisticheskoe khozyaistvo, 1929, no. 6, pp. 156, 158. However, Probst latermodified his views on Weber's theory.

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

SOVIET LOCATION THEORY 5

of socialism. Relatively free discussion of its merits and demerits wascompletely abrogated, as were such discussions in all sciences at thattime. Subsequently, the duty of every Soviet economist, writing aboutthe location problem, was to criticize Weber and his exponents inthe USSR, such as Bernshtein-Kogan.18 Many other economists werealso labelled and denounced as followers of Weber.19 From readingthe relevant literature, it becomes abundantly clear that these accusationswere very often unjustified and, one may suspect, were either theresult of personal vendetta or of orders from state organs.20 Theoutcome of this controversy was such that most of the accused, andalso the accusers, disappeared from the scene in the 1930s.21 In thesubsequent discussion of Soviet criticism of Weber and of his so-calledfollowers in the USSR, only those arguments which are based on some,albeit often faulty, economic reasoning will be included. Thosecriticisms which lacked this element, or were limited to invective,are omitted.

Other Soviet economists advocated an approach to the location ofindustry, which was similar to that of Weber, despite the fact thatthey either did not mention his name or explicitly criticized him. Forexample, such important economists of that time as A. M. Ginzburg22

and E. A. Preobrazhensky23 argued that industrial enterprises shouldbe constructed close to the deposits of raw materials if the locationsof these deposits do not coincide with consumer centres. According tothem, such a choice of location is appropriate for the so-called weight-losing industries, i.e., those industries where the weight of a processedproduct is lower than the weight of the raw materials, and will resultin saving on transportation costs. It is evident that these economistswere guided in their proposals by Weber's 'transport orientation'.

The need to consider transportation costs in location policy was

18 Serov, op. cit. (see footnote 16), p . 83 ; L. Ziman, 'Razmeshchenie kapitalisticheskogo proiz-vodstva i teoriya "shtandbr ta" ' , Problemy ekonomiki, 1931, no . 4-5, p . 73 .

19 The following economists were , justly o r unjustly, accused of being the followers of W e b e r :R y b n i k o v (Serov, op. cit. (see footnote 16), p . 76), Varga (Ziman, op. cit. (see footnote 18), p . 73),Ramz in , Ginzburg, Preobrazhensky (D. Pepper, 'K voprosu o razmeshchenii proizvoditel 'nykn silpri monopolisticheskom kapitalizme i pri sotsializme', Planovoe khozyaistvo, 1932, no . I , p . 158),Gol 'denberg, Dashkovsky, Dimanshtein (S. M . Veingarten, Ocherki ekonomiki sovetskoi chernoimetallurgii (L. 1933), p . 175), Morozov .Yunev , Bessonov, Charnovsky (I. Balashov, 'K voprosu oprintsipe razmeshcheniya proizvoditel 'nykh sil SSSR' , Problemy ekonomiki, 1932, n o . 1, p p . 101-2).

20 According to a private communication from a contemporary Soviet economist, n o w livingin the Wes t , being labelled a follower of W e b e r meant automatic long- term imprisonment .

21 T h e fate of those 45 Soviet economists, mentioned in this paper, w h o wro te about locationtheory prior to W o r l d W a r II or were mentioned in this respect b y others during this period is asfollows: Three of them are listed in Bol'shaya Savetskaya Entsiklopediya (1958), wh ich is equivalentto official approval of their w o r k because of its ideological content and professional level. A p p r o x -imately ten others, half of w h o m had already started to publish after the purges, continued t ow o r k in this field after W o r l d W a r II. T h e remaining economists, about 30 of them, disappearedin the 1930s.

22 Ekonomiya promyshlennosti, vol . II (M. 1927), pp . 397-8.23 'Sotsialisticheskie i kommunisticheskie predstavleniya o sotsializme', Vestnik Kommunist-

icheskoi akadetnii, 1925, no. 12, p . 73.

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

6 THE DEVELOPMENT OF

also stressed by another well-known economist, Ya. Dimanshtein.Thisargument was raised in connection with the discussion of whether tocontinue further development of the iron and steel industry in theDonets Basin, or whether to start to develop this industry in theUrals and Western Siberia.24 Dimanshtein argued vigorously that theformer alternative was greatly preferable to the latter at the level ofeconomic development of the USSR in the late 1920s and the early1930s.25 His main argument was that the transportation cost requiredto combine the Magnitogorsk iron ore with the Kuznetsk coal wouldbe so high that it would outweigh the lower mining cost of theseraw materials in the projected Ural-Kuznetsk Combine, as comparedwith the Donbas.26 As a result, the total cost in the iron and steelindustry would be considerably higher in the former than the latter.In his defence of further development of the Donbas, Dimanshteinwas joined by other economists who, like him, also operated implicitlywith Weberian arguments.27 However, as is well known, they losttheir case, despite the fact that they were correct in analysing the costof the alternatives.

The emphasis by the above-mentioned Soviet economists on trans-portation costs clearly resulted from the immense size of the country.But of no lesser importance was the geographical pattern of pre-1917economic development. Before the revolution the structure of freightrates favoured the transportation of raw materials and semi-fabricatesfrom the east and the south of the country to the Moscow and St.Petersburg areas. This led to considerable industrial expansion in thesetwo centres. This development, however, for reasons stated by Ginz-burg and Preobrazhensky, was not the most efficient for the nationaleconomy,28 In order to reveal this inefficiency more clearly and toprevent the repetition of similar errors in the future, an importanttransportation economist, S. A. Bessonov, advocated the elimination ofdifferential freight rates.29 These rates were taken over by the USSR

24 For further discussion sec Clark, op. cit. (see footnote 3), pp. 214-22; Holzman, op. cit. (seefootnote 3), pp. 375-8, and an unpublished dissertation by the present writer, The Economics ofInvestment in Vkrainian Industry, 1928-1037 (Columbia University, 1964), Appendix to chap. VI.

25 Ya. Dimanshtein, 'O raionirovanii metallurgicheskogo proizvodstva SSSR', Planovoe khoz-yaistvo, 1928, no. II , and also his 'Pro deyaki problemy rozvytku ukrains'koi metallurhii', Vistiverkhovnoho tsentral' noho vykonavchoho komitetu, 9 February 1928.

26 D imansh te in , ' O ra ion i rovan i i . . .' (see foo tno te 25), p p . 258-9.27 Clark, op. cit. (see footnote 3), p . 215.28 See also Probst, op. cit. (see footnote 17), for description of the harmful effect o f differential

freight rates on the development of the Russian coal industry before W o r l d W a r I.29 S. A . Bessonov, 'P rob lema prostranstva v pe r spek t ivnom plane ' , Planovoe khozyaistvo, 1928,

no. 6, p. 67, believed that the additional reason for not fully accounting for transportation costin the USSR was the ambiguous attitude of Marxists towards this economic sector: some ofthem did not consider it as material production. On the grounds that transportation cost wasneglected in the planning of the Ural-Kuznetsk Combine, Bessonov opposed this project. Heclaimed that the tariff of 0.38 kopeks per ton/kilometre for coal from Kuznetsk to the Urals wasfar below the real cost of transportation, which amounted to 0.68 kopeks ('Problema raionirov-aniya i transport', Bol'shevik, 1929, no. 8, p. 46).

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

SOVIET LOCATION THEORY 7

government from its predecessor and, according to Bessonov, they in-creased even more the inherited inefficiency of industrial distribution.Bessonov proposed the introduction of a rates structure which wouldbe based on the real cost of transportation. Then the advantage ofdeveloping industry close to the deposits of raw materials wouldbecome evident. Industrialization would then proceed at the lowestreal total cost to the national economy, with real cost of transportationconsidered equal in importance to the costs of production. In addition,Bessonov believed that tariffs reflecting the real cost of transportationwould promote more effective utilization of existing transport facilitiesand, in this way, the demand by this sector for investment would bekept at a low level.30

It is obvious that the economists discussed above used the Weberianapproach to the determination of industrial location. They were pri-marily concerned with the transport-oriented industries, and theirrecommendations had the objective of promoting the choice of locationwith the lowest possible transportation cost. Such location could be.found if the differential freight rates were replaced with tariffs reflectingthe real cost of transportation. Only on the basis of real total cost—production and transportation costs combined—could the advantage ordisadvantage of a certain location be clearly seen. Despite the fact thatthese economists' approach was economically sound, they were de-nounced as followers of Weber and their theories were declared to beharmful to the development of the Soviet economy.31 According to thecritics, the geographical distribution of industry in the USSR couldnot be based on the principle of lowest cost but on some other importantcriteria. These criteria will be discussed in greater detail below.

Another group of economists emphasized the importance of labourcosts on the determination of the geographical distribution of indus-try,32 and this emphasis resembled the Weberian approach to the loca-tion of labour-oriented industries. The argument that labour-intensiveindustries should be located close to concentrations of skilled labour wasused in the discussion of whether to develop the textile industry incotton-producing regions, such as Central Asia or Transcaucasia, or tocontinue its development in the traditional centres near Moscow.33

According to this school of thought, the second alternative would bepreferable, because the costs of production would be low as a result ofthe availability of skilled labour and the possibility of increasing returnsto scale. These advantages would outweigh the resulting increases in

30 Ibid, p.43,31 e.g. Serov, op. cit. (see footnote 16), p . 83; Pepper, op. cit. (see footnote 19), pp . 191-3;

Veingarten, op. cit. (see footnote 19), p . 180; Balashov, op. cit. (see footnote 19), p . 106; E. K h o m -yakov, 'Protiv ravneniya na uzkie mesta', Na planovom fronte, 1930, no . 7 , p . 13.

32 e.g. S. V. Antropov, in Izvestiya tekstil' noi promyshlennosti i torgovli, 1928, no. 7, p. 5; V. S.Zhukovsky, ibid. 1930, no. 8-9, p . 7.

33 This argument was also applied to such labour-intensive industries as knitwear, clothing, etc.

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

8 THE DEVELOPMENT OF

transportation cost. The regions in question should continue to speci-alize in cotton growing and in its primary processing, and thus remainthe suppliers of cotton to Moscow textile factories. Their own outputof textiles should be limited to the extent of local demand. To theopponents of this approach, political reasons were more important thaneconomic. They argued that the formation of an indigenous workingclass was more important than low production costs, because the creationof a working class would create the base for socialism.34 It was alsopointed out that geographical wage and productivity differences arepurely capitalist phenomena. They are only temporary under socialismand eventually will disappear completely.35 This latter argument wouldbe true only under conditions of perfect mobility of labour. Suchmobility can, theoretically, prevail under socialism as well as under aperfectly competitive capitalist economy. In practice, it is probable thatthis condition would never be achieved and that labour cost differenceswould never be eliminated under any economic system.

Some Soviet economists did not refer to any of Weber's principlesspecifically. Instead, they took a more general approach to the appli-cability of this theory to the planning of the Soviet economy. Theybelieved that, as in all other economic systems, production in thesocialist state must be based on the least-cost principle.36 Consequently,Weber's theory, with its analysis of the influence of location on thecost situation of an industrial plant, could be of a certain practical valuefor the Soviet economy. But this principle of the lowest cost is onlyone of many criteria guiding the Soviet economy and, therefore,Weber's theory must be modified for such considerations as the primacyof building socialism, defence, etc.37 However, it was assumed by someof the authors that these corrections, for example, those for defence,would apply only to a limited group of specialized enterprises.38

Furthermore, before the least-cost principle could be used at all, it hadfirst to be criticized from the Marxist point of view,39 and even then,had to be used with caution, because it deals with private, rather thansocial costs, and the latter are decisive in the socialist economy.40 Forexample, the influence of a new plant on costs of existing plants in agiven region should be considered.41

34 S. Gal'braikh, 'Problema geograficheskogo razmeshcheniya tekstil'noi promyshlennosti ' , Putiindustrializatsii, 1929, no. 23-24, p . 31.

35 A . E. Probst, 'K teorii promyshlennogo shtandorta', Khozyaistvo Ukrainy, 1930, no . 7, p . 39.3 6 V . Pishchaev, ' K postanovke problemy geograficheskogo razmeshcheniya promyshlennosti

SSSR.', Problemy ckonomiki, 1931, no . 6, p . 82.37 Ibid. pp . 83-84; Ginzburg, op. cit. (see footnote 22), p . 395; Kheifets and Ioffe, op. cit. (see

footnote 15), p p . 35-36.3 8 V. A. Bazarov, 'Printsipy postroeniya perspektivnykh planov', Planovoe khozyaistvo, 1928,

no . 2, p . 49.39 Probst, 'K teor i i . . . ' (see footnote 35), p . 39.4 0 Ibid. p . 50; Pishchaev, op. cit. (see footnote 36), p . 84.4 1 Kheifets and Ioffe, op. cit. (see footnote 15), pp . 35-36. Incidentally, the attitude towards

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

SOVIET LOCATION THEORY 9

III. Soviet Criticism of Weber's TheoryThe preceding discussion has shown that Weber's theory has been

explicitly, or implicitly, accepted by a few important economists in theUSSR in the late 1920s and in the early 1930s. It is now necessary toestablish the grounds on which this theory was criticized and entirelyrejected by official Soviet economics. Afterwards, no economist daredto support these views.

All Soviet critics of Weber explicitly reject his use of the word'pure' to describe his theory.42 Weber's intention was to construct atheory of industrial location which would be applicable to all economicsystems. Therefore, while analysing the factors which could influencethe choice of location of economic activity, he divides them intotwo groups, one comprising natural and technical factors, andthe other social and cultural ones.43 The first group of factors areindependent of any economic system, and, as such their analysisproperly belongs to pure theory. 'For it is apparent that everyaspect of locational factors which is not of natural or technical but ofsocial character cannot be an object of pure theory, which is to beindependent of particular economic conditions. Such aspects must beleft to empirical theory.'44 If these aspects are not eliminated, then whenthey change (and they do change with different economic systems), thewhole theory has, consequently, to change, too. Weber admits that theabsolute distinction between natural and technical factors on the oneside, and social and cultural factors on the other, is impossible inpractice. No matter how carefully one might try to eliminate the lattergroup, the former will still retain some elements of the existing socialand cultural environment. But Weber believes that this is not harmfulfor the theory, because it will facilitate recognition of the problemmore clearly and, on the other hand, will allow verification of the basicprinciples by reference to actual life.45

According to the Soviet critics of Weber, this 'pure theory' is im-possible and it is, of course, incompatible with Marxism.46 They arguethat Weber, while showing the relationship between the sources of rawmaterials, fuel, transportation, etc. analyses only the influence of materialrelations on industrial location. For these critics, the material conditionsexert their influence only indirectly, through the social conditions.Thus, the latter are actually important for the choice of industrial

Weber ' s theory, described in the above paragraph, seems to be official in the U S S R currently. Itis argued that some of his methodological concepts can be used for the estimation of locationalfactors in the U S S R ; see Feigin, op. cit. (see footnote 2), p . 121, n. 1.

4 2 Weber , op. cit. (see footnote 4), p . io .43 Ibid. p. 21. 44 Ibid. p . 22. 45 Ibid. p. 23.46 Pepper, op. cit. (see footnote 19), p . 159; Serov, op. cit. (see footnote 16), p . 84; Balashoy,

op. cit. (see footnote 19), p . 104; Probst, 'K teor i i . . . ' (see footnote 35), p . 40.

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

io THE DEVELOPMENT OF

location.47 Here, among others, belong labour relations, the ownershipof the means of production,48 development and introduction of tech-nology, and the regional fluctuation of profit rate.49 These factors areresponsible for the distribution of industry within a country. As far asthe international distribution of industry is concerned, the influence ofmonopolistic imperialism has to be considered.50 Since all these factorschange with each stage of economic development, their influence onthe determination of location is different at different historical stages.Consequently, only a historical analysis of the social and culturalconditions of production, according to this school of thought, canexplain locational decisions.51

Moreover, Soviet economists argue that Weber was inconsistent ineliminating social and cultural factors from his theory.52 One of themstates that this inconsistency alone is sufficient for the complete break-down of the theory.53 For example, Weber considers the geographicaldifferences in the level of interest rate, insurance, or taxes, asspecific capitalist characteristics and, therefore, excludes their influenceon the determination of industrial location. However, differences inthe cost of labour are considered to be a pure locational factor. Sovieteconomists rightly claim that factors which determine geographicaldifferences in wages and labour productivity are, according to Weber'sclassification, cultural and social,54 and he should have admitted that, assuch, they vary within different economic systems. By the same token,

47 Ginzburg, op. cit. (see footnote 22), p . 389; P . A. Belov, 'Sotsialisticheskoe razmeshchenieproizvoditel 'nykh sil v SSSR' , Problemy ekonomiki, 1939, n o . 1, p . 54, expresses this v iew in thefollowing -way: 'In contrast to bourgeois economists (Weber , Ritschl , Englander) w h o speaknonsense about eternal laws of locational distribution no t depending on any historical laws o fdevelopment o f society, the founders o f scientific communism have shown that the distributionof economic activity is entirely determined b y social conditions of product ion, i.e., b y thesocio-economic laws. '

48 As a result of the tendency towards vertical integration under capitalism, lower cost to thecompany becomes m o r e important than to one o f its plants.

49 For example, the movemen t o f the textile industry f rom N e w England to the south o f theUni ted States at the beginning of this century cannot be explained b y the lower cost of product ionin the latter, as Weber ' s theory would suggest. T h e l o w product ivi ty in these states would causethe product ion cost to be higher than in N e w England. According to P . A . K h r o m o v , Ocherkiekonomiki tekstil'noi promyshlennosti SSSR (M. -L.1946), p p . 96-97, the higher rate o f profit in thesouth, which resulted f rom such social and cultural conditions as the absence o f labour legislation,a longer work ing day , the absence o f labour unions, lower taxes, etc., is responsible for thismovement .

50 Unde r imperialistic-monopolistic capitalism the tendency towards the concentration o fmanufacturing industries in metropoli tan regions can be observed. T h e colonies are relegated t othe role of suppliers o f raw materials wi thout regard to the cost o f product ion; see Pepper, op. cit.(see footnote 19) p p . 174.-5.

51I. T . Smilga, 'Osnovnye linii razmeshchcniya proizvoditel 'nykh sil v o vtoroi pyatiletke' ,Planovoe khozyaistvo, 1932, n o . 1, p . 15; Balashov, op. cit. (see footnote 19), p . 102.

52 Probst , ' K t e o r i i . . .' (see footnote 35), p p . 41-42; Z iman , op. cit. (see footnote 18), p . 85 ;Ginzburg, op. cit. (see footnote 22), p . 387. This was already pointed ou t b y W e r n e r Sombar t ,'Einige Anmerkungen zur Lehre v o m Standort der Industrien', Archiv JUT Sozialwissenschaft undSozialpolitik, vol . X X X (1910), p . 748, in his otherwise sympathetic review o f Weber ' s theory .Sombart limits its applicability to Hochkapitalismus for the above reason.

53 Serov, op. cit. (see footnote 16), p . 85.54 Probst , ' K t e o r i i . . .' (see footnote 35), p . 49 .

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

SOVIET LOCATION THEORY n

Weber wrongly includes agglomeration-deglomeration among purelylocational factors, while these factors are obviously the result of histor-ical forces.55

Furthermore, Soviet economists argue that Weber's use of physicalindicators for the measurement of transportation, labour and agglomer-ation-deglomeration, in order to give his theory a more general char-acter, is wrong.56 His great emphasis on mechanical and mathematicalsolutions is also wrong. Such methods tend to obscure economic rela-tions which should properly be expressed in value terms.57 Thesecritics, being followers of Marx, seem unwilling to accept the opinionof the majority of Western economists that the relationships betweenquantitative concepts in economics can be very appropriately subject tomathematical treatment.58

Another proof of the failure of Weber's theory is considered to beits inability to explain the existing pattern of industrial location undercapitalism. This is because he assumes that to the individual firm priceis given and demand is infinite, relative to what the firm can supply.Under such conditions, profit can be maximized if cost of productionis kept as low as possible. Soviet critics contend that this assumption iscompletely unrealistic for the analysis of capitalist markets, wheremonopolies prevail. In such a case, the variables to be considered by anentrepreneur are not only cost, but also demand and price. The entre-preneur's objective would then be to locate his plant not where costsare lowest, but where profits are highest,59 and where he can be con-fident of their safety and continuity in the future.60 In other words,Weber's theory is totally inapplicable to the real conditions of a capital-ist economy.61 Soviet economists were wrong in accusing Weber ofmisrepresenting the optimum position of a capitalist entrepreneur inregard to the location of his plant. They overlooked the point that underhis restricted assumptions—given demand and price—Weber's proced-ures 'represented attempts to find this optimum point. For whenreceipts, say, are given, the location of the greatest profit coincides withthat for the lowest c.i.f. [cost, insurance, freight] costs'.62

55 Ziman, op. tit. (see footnote 18), p . 80.56 Probst , ' K t e o r i i . . . ' (see footnote 35), p p . 42-43 ; Livshits, op. cit. (see footnote (5), p . 51 . This

seems t o contradict the statement b y Wi les , op. cit. (see footnote 3), p . 151 , that W e b e r , becausehe w r o t e in physical t e rms , was attractive to Soviet economists, despite t h e fact that t hey oftencondemned h im.

57 Pepper, op. cit. (see footnote 19), p . 159; Ginzburg, op. cit. (see footnote 22), p . 387.58 Incidentally, this criticism would no t be raised by the present-day Soviet economist.59 I . G. Blyumin , 'K voprosu o r avnomernom razmeshchenii proizvodi tel 'nykh sil ' , Problemy

ekonomiki, 1935, no . 3, p . 46 ; Smilga, op. cit. (see footnote 51), p . 19; Z iman , op. cit. (see footnote18), p . 78.

60 Ibid.61 Ibid. p . 82 ; V . Gr igor ' ev , ' P rob lema razmeshcheniya proizvoditel 'nykh. sil', Na planovom

fronte, 1931, n o . 3-4, p . 4 2 ; E. Granovsky , ' O sotsialisticheskom razmeshchenii p romyshlennos t iv o v to ro i pyati letke ' , Bol'shevik, 1934, n o . 9-10, p . 50.

62 Augus t Loesch, The Economics of Location ( N e w Haven , 1954), p . 27.

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

12 THE DEVELOPMENT OF

Weber's theory is also criticized by Soviet writers for its abstract-ness.63 This is due to the fact that he restricts the number of variablesunder consideration to three. His critics argue that there is a multitudeof factors determining plant location. The influence of other industrialenterprises, of agriculture, and of the national economy as a wholecannot be ignored when making such a decision. For them, to treatthis problem in isolation from the rest of the economy is simply toounrealistic.64 According to this school of thought, Weber not only failsto include all the relevant factors in his theory, but even his analysis ofthe relationship between the factors he does consider and plant locationis unsatisfactory. His assumption that the location of labour and theagglomerative-deglomerative forces are given indicates a causal rela-tionship between these latter and the location of a plant. Actually,Soviet critics correctly say that there is a mutual relationship: the loca-tion of labour and agglomerative-deglomerative forces exert an in-fluence on the choice of industrial location, but the new enterprise, inturn, influences these forces also.65 As far as this last point is concerned,Weber might have been right in the case of a small plant, but it wouldhave been more illuminating if he had included in his analysis the in-fluence of locating a large plant, or the whole industry, on his locationalfactors.

This criticism implies that Soviet economists did not approve Weber'smethodological approach of partial equilibrium for the solution of thelocation problem. It is obvious that the application of general equi-librium, taking into account all factors and the mutual relationshipbetween them, would be preferable.66 It is also possible that the theoryin this form would be more applicable to specific problems. However,Weber's objective was much more limited. He formulated a rigorousand normative theory which, under his very restrictive assumptions,67

should explain what the most rational location ought to be. Weber'scritics in the USSR apparently expected more from his theory thanthe author intended.68

Since Weber is concerned with an individual firm, with the intention6 3 Ginzburg, op. cit. (see footnote 22), p . 387; Ziman, op. cit. (see footnote 18), p . 77; Probst,

'K teor i i . . .' (see footnote 35), p . 41 .64 Ibid. p . 40; Balashov, op. cit. (see footnote 19), p . 111; Blyumin, op. cit. (see footnote 59),

p . 5 1 ; Pepper, op. cit. (see footnote 19), pp . 182-3.65 Ziman, op. cit. (see footnote 18), pp. 78-80; Serov, op. cit. (see footnote 16), p . 85.66 This was already pointed out immediately after the appearance of Weber 's book; see the

review by Joseph Schumpeter in Schmollersjahrbuch (1910), p . 1359. However, the recent attemptsto formulate the general equilibrium theory o f location would b e unthinkable if it were not forthe pioneering work by Weber (for example, Loesch, op. cit. (see footnote 62); Walter Isard,Location and Space-Economy ( N e w York, 1956); Melvin L. Greenhut , Plant Location in Theory andin Practice (Chapel Hil l , 1956).

6 7 For example, h e omit ted from his analysis such impor tan t factors as climate or availabilityof water .

6 8 In the introduction to the Russian translation of Weber ' s book , N . N . Baransky already

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

SOVIET LOCATION THEORY 13

of maximizing profits at a given location, his interest is naturallylimited to the analysis of costs and returns to this firm, i.e., he analysesonly private costs and returns. Soviet economists argue correctly thatsocial costs and returns accruing to the national economy as a whole aremuch more important to the welfare of the entire nation than privatecosts and returns.69 In other words, the decisive consideration for thechoice of plant location should not be the lowest cost to this particularplant, as is argued by Weber, but the lowest cost to the national econ-omy as a whole. In arguing thus, Soviet economists do not advance anynew ideas. The problem of private versus social concepts in economicshad been recognized and discussed under what is known in the West as'welfare economies'. The difference between Soviet and Western econ-omists lies in the belief of the former that social costs and returns can beaccounted for under socialism, and for this purpose Weber's theory,with its limitation to private costs and returns, is useless.70 However,this alleged superiority of socialism has hitherto remained theoreticalbecause no one could discover how to measure social costs and returns,or how to introduce these corrections in practice.71

According to Weber's critics, the restriction of his theory to themotivation of an individual entrepreneur gives the theory a short-term.character.72 The capitalist entrepreneur will be unwilling to constructa plant in those locations where profits (which, in order to simplify thepresent discussion, may be assumed to coincide with social returns) canbe realized only in the long run. As a result, the long-run growth rateof the whole economy will be influenced downwards. This criticismcan be explained in the following way. In regard to investment, capital-ism and socialism are faced with the same alternatives, and their goal isthe same: to maximize returns over the expected life of a given enter-prise. However, their concepts of maximum returns are different. Theevaluation of returns depends greatly on the time preference. Here theSoviet economists are correct when they imply that the private entre-preneur, because of the greater uncertainty of his expectations, is im-patient in regard to profits realization. Therefore, early returns aremore important for him than more distant ones. On the other hand, thesocialist state, because of the planned character of its economy, has,

warned that the objective of this theory is not to give a ready prescription for each specificproblem in the field of geographical distribution of industry. Consequently, no objections shouldbe raised against it if it does not apply to certain individual problems. See the quotation fromBaransky's introduction in Balashov, op. cit. (see footnote 19), p. 102. However, it looks as thoughmost of the Soviet economists did not heed this wise warning.

69 G inzburg , op. cit. (see footnote 22), p . 4 0 9 ; Kheifets and Ioffe, op. cit. (see foo tno te 15),p . 3 4 ; Pepper , op. cit. (see footnote 19), p p . 196-7.

70 Probst , ' K t e o r i i . . .' (see footnote 35), p p . 40-41.71 Accord ing t o ' the father' o f welfare economics, A. C . Pigou, 'A central p lanning au thor i ty

would find it n o more easy than the government of a capitalist state to obtain the data requiredfor these calculations'. See his Socialism versus Capitalism (London, 1954), pp . 43-44.

7 2 Ziman, op. cit. (see footnote 18), p . 82; Blyumin, op. cit. (see footnote 39), p . 47.

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

H THE DEVELOPMENT OF

theoretically, greater foresight and greater opportunity for the coordin-ation of investment decisions, with the result that early returns are notvalued as highly as by a private entrepreneur. Despite these disadvan-tages, a recent writer agrees reluctantly that this short-term approachto the location decision for an individual plant may be applicable undercertain conditions under socialism too. However, it is completelyuseless for the long-term perspective planning of the national economyas a whole, "where such qualitative changes as geographical shifts offixed assets, structural changes in the labour force, or relative changes inthe composition of demand are of primary importance. In view of theselong-term goals, the location of a plant can be decided only in con-junction with the planning of the whole national economy.73

This criticism applies particularly to the problem of the industrial-ization of underdeveloped regions of a country. In many cases, newenterprises could not be constructed in such locations by a privateentrepreneur under capitalism, because the initial costs per unit ofoutput are usually higher than in other regions of the country. Theconsequence of such a situation is the idleness of resources in theseregions. In contrast, according to Soviet economists, the socialist statecan proceed with the construction of new enterprises in backwardregions, because the losses, or relatively low returns in these plants, willbe more than compensated by the future gains for the national economyas a -whole.74 New enterprises will facilitate the employment of idle localresources with the effect that the long-run rate of growth of the wholenational economy will be raised.75 Western economists are generallyin agreement with their Soviet counterparts that the centrally plannedeconomy could be more effective in this regard than the market econ-omy. However, they would restrict the role of the state in such cases tothe construction of social overheads, while the rest of the developmentwould be left to private initiative.76

The objections of Soviet economists to Weber's theory, primarilybecause of its principles of least cost to an individual plant and of itsimplied short-run character, should provide the justification for thesocialist state deviating from these principles and making location

73 Pchelintsev, op. cit. (see footnote 5), p p . 191-2.74 B l y u m i n , op. cit. (see footnote 59), p . 35.75 Ibid. p . 5 0 ; Probst , ' K t e o r i i . . . ' (see footnote 35), p . 50. Th is is expressed b y Itogi vypolneniya

pervogo pyatiletnego plana razvitiya narodnogo khozyaistva Soyuza SSR, vol . 2 ( M . 1933), p . 92 , inthe following way: 'The decisions concerning the geographical distribution of industry should notbe determined solely by the principle of the cost of production. They should be based on politicaland cultural considerations as well as on considerations pertaining to the national economy as awhole. Thus, the location of enterprises in Central As ia . . . will bring into the sphere of socialistconstruction women wakening from long slavery. Railroads and electric power stations caninitially be inferior in regard to productivity, cost of production and profitability as comparedwith the old regions, but they are of great importance for the economic life of the country, andthey represent the outposts of socialist culture, the basis of proletarian cadres.'

76 See, for example , Bela A . Balassa, The Hungarian Experience in Economic Planning ( N e wHaven, 1959), p. 12.

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

SOVIET LOCATION THEORY 15

choices which would not be permissible under capitalism, but which,in the planners' judgement, are beneficial to the national economy as awhole in the long run. If this judgement is correct, it might be truethat, in the long run, the economy would grow faster than if it followedthe Weberian principle indiscriminately. Furthermore, although therapid rate of economic growth is of the highest priority in the socialiststate, it may consider other objectives, often external to economics,more valuable.77 The change in the economic structure in order tobuild socialism and, eventually, communism is a supreme goal in theUSSR, according to Soviet writers. Therefore, all factors which ad-vance this goal have precedence over purely economic considerations.These factors are: consolidation of the dictatorship of the proletariat,defence considerations, the elimination of contradictions between cityand village, and the shifting of the centre of gravity of industry fromthe west to the east of the USSR.78 On the other hand, it is alwaysemphasized by the Soviet leaders that economic strength and theattainment of political goals are complementary. Therefore, the econ-omic factor cannot be constantly disregarded.

In order to give the planners a free hand in pursuing the precedingobjectives—economic and non-economic as well—it was necessary todiscard the Weberian constraints. However, the Soviet economists, intheir eagerness, discarded Weber's whole theory and did not see that itcannot be accepted in its pure form by any economic system. It wasrecognised long ago that governmental intervention in respect ofindustrial location is necessary and beneficial under capitalism as well—for example, in the zoning problem, or because of defence consider-ations, and, in more recent times, in respect of the development ofbackward regions. Under both systems a compromise must prevailbetween Weber's purely economic considerations and non-economicobjectives. The difference is only one of degree. However, Sovieteconomists seemed to be unaware of this during the period underdiscussion.

IV. Origins of Soviet Location TheorySoviet economists, rejecting the Weberian approach and all its sub-

sequent improvements and ramifications, constructed their own theory

77 Lenin's famous expression has an application here: 'Politics must have precedence overeconomics. To think differently means to forget the alphabet of Marxism.'

78 Pishchaev, op. cit, (see footnote 36), pp. 87-88; Balashov, op. cit. (see footnote 19), pp. 112-14;Belov, op. cit. (see footnote 47), p. 54; Itogi vypolneniya . . . (see footnote 75), pp. 91, 93; L.Ziman, 'Razmeshchenie proizvoditel'nykh sil v SSSR. i burzhuaznye ekonomisty', Problemyekonomiki, 1934, no. 4, pp. 95-96; Kheifets and Ioffe, op. cit. (see footnote 15), pp. 35-36; Pepper,op. cit. (see footnote 19), p. 178; M. Bogdanchikov, 'Sotsialisticheskoe razmeshchenieproizvoditel'nykh sil i raionirovanie SSSR', Bol'shevik, 1940, no. 8, p. 14; Grigor'ev, op. cit. (seefootnote 61), p. 43; V. F. Vasyutin, 'K voprosu o razmeshchenii proizvoditel'nykh sil sotsializma vtret'ei pyatiletke', Bol'shevik, 1937, no. 4, p. 65; The Second Five-Year Plan for the Development ofthe National Economy of the USSR, 1933-37 (London [n.d.]), pp. 373-4.

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

16 THE DEVELOPMENT OF

of the distribution of industry, which is believed to be applicable to thesocialist economy. This theory is based, according to recent Sovietauthors,79 on the objective 'laws' of socialist production80 and on theexistence in the economy of such objective phenomena as links betweenwidely distributed enterprises throughout the country, the geograph-ical distribution of labour, specialization and comprehensiveness inthe development of individual economic regions, etc.81 The discoveryof the relationships between them serves as a basis for the formulation ofa theory which should be utilized in planning the spatial distribution ofindustry.82

Some of the origins of this theory are attributed to the few remarksmade by Marx, Engels and Lenin on the subject. In addition, theofficial pronouncements of various congresses of the Communist Partyof the Soviet Union have served as a basis for the formulation of officiallocation theory. Since these pronouncements were meant as practicalguides for current economic policy, they emphasized different aspectsof location policy, depending on the needs of the given stage ofeconomic development.83 The resulting doctrine, which embraces allthese diverse elements, suffers, therefore, from certain inconsistenciesand ambiguities, if not of outright contradictions. These inconsistenciesand ambiguities led one Polish specialist in this field to remark candidlythat the current location theory in the USSR is not a completelyrounded-out theory but rather a body of fragmentary works based onsome theoretical assumptions.84

In the Communist Manifesto, its authors already foresaw as measureNo. 9, to be undertaken by the victorious proletariat after the successfulrevolution: 'Combination of agriculture with manufacturing indus-tries; gradual abolition of the distinction between country and town, bya more equable distribution of population over the country.'85 Thispoint was subsequently worked out in more detail by Frederick Engels.In his discussion of production, he comes to the conclusion that, owingto the division of labour under capitalism, the population becomes so

79 Fe ig in , op. cit. (see f o o t n o t e 2) , p p . 2 0 4 - 6 ; A . E . P r o b s t , Razmeshchenie sotsialisticheskoipromyshlennostiQA. 1962), p . 1 5 ; A . D . D a n t t o v a n d G. I. M u k h i n , Razmeshchenie otraslei natoinogokhozyaistva SSSR (M. i960), p p . 12-13.

80 These ' laws' are so vague that they do n o t offer any guidance to the authorities bu t ratherassure them freedom of action in any situation. Cf. Alec N o v e , The Soviet Economy ( N e w York ,1961), pp . 284-6.

81 Feigin, op. cit. (see footnote 2), p . 205.82 Probst, Razmeshchenie . . . (see footnote 79), p . 13.83 Despite this, Z iman , Razmeshchenie proizvoditel'nykh sil. . . (see footnote 78), p . 99, refuses

to admit that the Soviet attitude towards industrial location is pragmatic and steadfastly insiststhat it is steeped in Marxist-Leninist theory.

84 Kazimierz Secomski, ' Z zagadnien teorii rozmieszczenia sil wytwórczych w gospodarcesocjalistycznej', Ekonomista, 1956, no . 2, p . 4 . , n . 1.

85 According to Preobrazhensky, op. cit. (see footnote 23), p p . 27, 36, the elimination o fantagonism between city and village was already postulated b y some earlier socialists such asCharles Fourier and R o b e r t O w e n .

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

SOVIET LOCATION THEORY 17

specialized that progress is crippled. The schism between town andcountry becomes particularly harmful. 'The rural population' is con-demned 'to thousands of years of mental torpidity and the people ofthe towns' are tied too much 'to their individual trade'. This not only'destroyed the basis of intellectual development of the latter' but alsogave rise to the antagonism between town and country.86 To eliminatethis conflict, to permit the full mental and physical development of thepopulation, and finally to make labour more pleasant, it is necessary toeliminate the difference between town and country. This is expected byEngels to result in a substantial increase in productivity in the wholenational economy.

This objective is indirectly, rather than directly, related to theproblems of location of industry. According to Engels, abolition of thecontradictions between cities and rural areas, as well as the eliminationof the distinction between manufacturing and agricultural activities andthe discouragement of the growth of large cities, can be achieved pri-marily by proportional distribution of industry throughout the country.The implementation of this principle has been made possible by thetremendous advance in technology, which makes it feasible forindustrial location to be increasingly independent of deposits of rawmaterials and fuel.87 Under capitalism this trend leads towards theconcentration of industry in large cities. 'At the beginning it [theindependence of industrial locations of raw materials and fuel] maybenefit the cities, but eventually this should become the key factor inthe elimination of the antagonism between city and village.'88 Thisgoal, according to Engels, can be realized only under socialism, wherethe economy will be centrally planned. Capitalism, because of spon-taneous decisions by individual entrepreneurs, will never be able toachieve it.89

Lenin's main contributions to the development of Soviet locationtheory are contained in his 'Draft Plan of Scientific and TechnicalWork, written in April 1918.90 They are as follows:

The Supreme Economic Council should immediately give its instructions to theAcademy of Sciences, which has launched a systematic study and investigation ofthe natural productive forces of Russia, to set up a number of expert commissionsfor the speediest possible compilation of a plan for the reorganization of industryand the economic progress of Russia.

86 Frederick Engels, Anti-Dühring, Heir Eugen Duhring's Revolution in Science, 2nd ed. ( M . 1959).p p . 403-4.

87 Engels had in mind primarily the development of technology, permitting the transmissionof electric power over long distances.

88 Engels as quoted b y Preobrazhensky, op. cit. (see footnote 23), p . 55.89 ' O n l y a society w h i c h makes it possible for its p roduc t ive forces t o dovetai l ha rmonious ly

into each other on the basis of one single vast plan can allow industry to be distributed over thewhole country in the way best adapted to its own development and to maintenance and develop-ment of other elements of production'. See Engels, op. cit. (see footnote 86), p. 409.

90 V . I. Lenin, Collected Works, vol . 27 (M. 1955), p p . 320-1 .

B

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

18 THE DEVELOPMENT OF

The plan should include:

the rational distribution of industry in Russia from the standpoint of proximity toraw materials and the lowest consumption of labour-power in the transition fromthe processing of the raw materials to all subsequent stages in the processing ofsemi-manufactured goods, up to and including the output of the finished product;

the rational merging and concentration of industry in a few big enterprises fromthe standpoint of the most up-to-date large-scale industry, especially trusts;

enabling the present Russian Soviet Republic (excluding the Ukraine and theregions occupied by the Germans) as far as possible to provide itself independentlywith all the chief items of raw materials and organize main branches of industry;

special attention to the electrification of industry and transport and the applicationof electricity to farming, and the use of lower grades of fuel (peat, low-grade coal)for the production of electricity, with the lowest possible expenditure on extractionand transport;

water power and wind motors in general and in their application to farming.

As can be seen from this quotation, Lenin proposed that industry shouldbe located close to the sources of raw materials; that industrial enter-prises should be vertically integrated and organized on a large scale;and that the development of electricity should be emphasized. Theseproposals resulted from the concern which Lenin, like other socialists,91

had for the fact that, owing to the irrational geographical location ofindustry, much of the country's productive forces are wasted ondistribution and transportation instead of production. According tothis line of thinking, this tendency is reinforced by the splitting ofproductive processes into many intermediary stages which take placeat different locations. The dependence of industrial locations on thesource of fuel, which would be eliminated when electric power becamethe chief source of energy, also acts in this direction. These proposals,and also the remaining ones, namely, the requirement of self-sufficiencyin regard to raw materials and the emphasis on mechanization, exerted,directly or indirectly, a great influence on the formulation of Sovietlocation theory. This becomes apparent from the subsequent discussionin this paper.

The views of Engels and Lenin seem contradictory, since the formeradvocated the even distribution of all industry throughout the country,while the latter wanted to bring it close to the sources of raw materialsand fuel. These views will coincide only when the raw materials andfuel are also proportionally distributed, which is often not the case.92

91 Fourier and O w e n had already been concerned wi th the h igh cost of distribution in thecapitalist economy, as a result of different locations of product ion and consumpt ion; see Preobra-zhensky, op. tit. (see footnote 23), pp . 27, 36. Also Marx , according to Probst, Razmeshchenie . . .(see footnote 79), p . 11, believed that too great a share of social labour is devoted to transportationinstead of to production.

92 However , there was a measure of coincidence between these t w o postulates in the con tem-porary U S S R , because m a n y unopened sources o f raw materials and fuel we re scattered t h rough-out the country. This factor was emphasized b y Blyumin, op. c i t . (see footnote 59), p p . 52-54;Belov, op. c i t . (see footnote 47), pp . 58-59; Granovsky, op. c i t . (see footnote 61), p . 51.

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

SOVIET LOCATION THEORY 19

This contradiction was explicitly recognized by many Soviet econ-omists. Some of them defended the right of Lenin to adjust the generalpropositions of Engels to the specific conditions in the USSR inheritedfrom the past.93 Others, like Ginzburg, backed the views of Lenin andargued convincingly that the national economy will benefit more whenindustry is located close to raw materials than when it is distributed pro-portionately throughout the country.94 His views, and also Lenin's, arecorrect in regard to those industries, which because of cost advantageshave to be located close to the deposits of raw materials. Ginzburgfailed to mention that those industrial branches which can be locatedalmost anywhere could facilitate the even distribution of industrythroughout the country, as postulated by Engels. In this sense, the viewsof Engels and Lenin were correctly synthesized by Preobrazhensky.95

He believed that the dispersion of industry is very important, and inthis he agreed with Engels. However, only some industrial branchescan be distributed evenly throughout the country. The location of otherindustrial branches is influenced greatly by the location of raw materials.Therefore, they should be located close to these deposits, as advocatedby Lenin.

Another source of Soviet location theory is the resolutions of Com-munist Party Congresses, primarily those of the X, XII, XIV, XV,XVI, XVII and XVIII Congresses. Since the last three were formulatedunder the influence of Stalin and were approved by him, they canrightly be considered at the same time as reflections of his views onthe location problem.

The X Congress, which met in 1921, was partly devoted to thediscussion of relations between different nationalities within the country.The Congress noted the fact that before 1917 considerable social andcultural inequality had existed between Russians and other nationalities.This was based mainly on prevailing economic conditions. The bulk ofindustry was located in the European part of the country, while otherregions, primarily those in Asia and the Caucasus, were only suppliers

93 Smilga, op. cit. (see footnote 51) p. 21; Khomyakov, op. cit. (see footnote 31), p. 12.94 G i n z b u r g , op. cit. (see f o o t n o t e 22), p . 398 ; Granovsky , op. cit. (see f o o t n o t e 61) , p p . 50 -51 .95 Preobrazhensky, op. cit. (see footnote 23), p. 73. Also, some other economists tried with less

success to reconcile the views of Engels and Lenin in this respect, e.g. Pepper, op. cit. (see footnote19), pp. 181-3; Balashov, op. cit. (see footnote 19), p. 116. More recently, Preobrazhensky, andwith him also Dimanshtein, have been criticized because of this position; see Probst, Razmeshch-enie ... (see footnote 79), p. 132. According to him, Preobrazhensky misunderstood the principleof even distribution of industry, because he analysed industry without differentiating it bybranches. Whether a plant should be located dose to deposits of raw materials or to consumptioncentres depends on the branch, says Probst. This criticism is very strange in view of the fact thatPreobrazhensky's whole argument depends on the necessity of differentiating industry by branches.Probst's accusation of Dimanshtein is also unjustified. It may be recalled that Dimanshtein wasnot concerned with the whole of industry, but only the iron and steel branch. There is no doubtin anybody's mind that in this branch plants should be constructed close to the locations of rawmaterials. Dimanshtein only took a position on which of many available deposits of raw materialsto exploit in order to keep production and transportation cost together at the minimum.

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

20 THE DEVELOPMENT OF

of raw materials.96 Their relationship can be defined as the relationshipbetween a metropolis and its colonies.97 As a result, the former enjoyeda much higher standard of living and experienced much faster socialand cultural progress than the latter. Therefore, 'the primary goal' ofthe proletarian revolution 'is the consistent attempt to liquidate allremnants of national inequality in all sectors of social life (first of all, ineconomic life), through the planned distribution of industry in remoteareas, by moving plants towards the sources of raw materials (Turkes-tan, Bashkiria, Kirgizia, Caucasus—textile, wool, leather and otherindustries)'.98 The XII Congress (1923) again considered this problem,and urged its solution by means of rapid economic development ofunderdeveloped national minority regions. The Russian nation, as themost developed one, was required to supply help in this endeavour.99

The XIV Congress (1925), in its resolutions, stressed one element ofSoviet locational doctrine, namely, the requirement of proportionaldistribution of industry throughout the country. The resolutionencouraged initiative at the lower levels of government in developingindustries of local importance, thus facilitating the implementation ofthis requirement.100 The XV Congress (1927), charging the plannerswith the preparation of a perspective economic plan, asked them totake into account the possibility of an armed attack by capitalist stateson the Soviet Union. Such a plan should pay the greatest attention tothe rapid growth of those branches of the national economy and ofindustry, in particular, which would be responsible for the defence ofthe country and for economic stability during the eventual war.101 Theresolution of this congress also called for the development of territoriessettled by national minorities, but, in contrast to the resolutions of theprevious two congresses, the XV Congress qualified it in the sense thatthis development should proceed only in accordance with the needs andrequirements of the national economy as a whole.102 Since this time,the faster growth of output in these regions ceased to be an absolutedesideratum in Soviet locational doctrine and became subordinated toother locational objectives such as defence considerations or economicgrowth.103

96 Kommunisticheskaya Partiya Sovetskogo Soyuza v rezolyutsiyakh i resheniyakh s"ezdov, konferentsiii plenumov Tsentral'nogo Komiteta (M. 1954), Vol. 1, pp. 5 5 9 - 6 0 .

97 As o n e wr i t e r pu t i t : ' T h e Caucasus, Turkes t an , Siberia, and o ther regions possessed all t h echaracteristics o f colonies in t h e economic and political sense . . . t he pol icy o f the tsarist e m p i r eand the Russian bourgeoisie was directed to delaying the development of industry in the coloniesof Russia, and retaining them in the role of appendages with agriculture and raw materials.' SeeYa. G. Feigin, 'Industrial' noe razvitie natsional'nykh respublik i oblastei', Problemy ekonomiki,1937, no. 5-6, p. 143.

98 Kommunisticheskaya Partiya . . . (see f o o t n o t e 96) , v o l . I , p . 560.99 Ibid. v o l . I, p . 714. 100 Ibid. vo l . II, p . 197. 101 Ibid. v o l . II, p . 452. 102 Ibid. v o l . II, p . 4 6 3 .103 Pishchaev, op. cit. (see footnote 3 6), p. 102. These qualifications have been recently formulated

as follows: '[the growth of national regions] depends on the overall objectives of socialist con-struction, taking into account socio-economic, natural, historical and national characteristics, andpeculiarities of the division of labour among republics'. See Gladkov, op. cit. (see footnote 6), p. 287.

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

SOVIET LOCATION THEORY ziThe XVI Party Congress (1930) took place after the decision had

been made by the Central Committee to start construction of theUral-Kuznetsk Combine and not to limit the development of the ironand steel industry to the Donbas. The resolution echoed Stalin's state-ment at the congress 'that the industrialization of the country cannot bebased in the future on a single southern coal-metallurgical base. In orderto facilitate the speedy industrialization of the country, it is imperativeto establish in the east the second basic coal-metallurgical centre of theUSSR, utilizing the rich coal and iron ore deposits of the Urals andSiberia'.104 This resolution gave the impulse for the subsequent shift ofthe centre of gravity of some industrial branches, mainly extractive andsemi-fabricated products, from the west of the country to the regionseast of the Urals. The XVTI Party Congress (1934) approved the pro-posal that a large share of total industrial investment during the secondfive-year plan be directed to the development of the eastern part of theUSSR, with the lion's share going to the rapidly expanding Ural-Kuznetsk Combine. In addition, the resolution emphasized again theimportance of constructing light and food industry processing plantsclose to the source of their ubiquitous raw materials, in order to facili-tate some industrialization in those regions where the development ofheavy industry was not feasible.105

Of great importance for the development of Soviet location theorywas the XVIII Party Congress in 1939, the last one to take place beforethe outbreak of World War II. Its decisions reflected the reaction ofSoviet leaders against certain phenomena which characterized theindustrialization drive during the preceding ten years, specifically, the'giantism', i.e., the tendency to construct mainly large-scale and highlyspecialized enterprises, with consequent strain on the transport system.Another important factor for these decisions was the concern of theleadership with the imminent outbreak of war.106 The resolutionsaccepted by this congress, particularly point 3, sought to adjust locationplanning to the new internal and external situation.107 The easing of thestrain on transport through the elimination of uneconomic shipments,and also shipments over excessive distances, was to be achieved with thehelp of the following three measures: (1) the construction of enterprisesclose to sources of raw materials and to the districts consuming then-output; (2) the comprehensive development of individual regions andtheir attainment of economic self-sufficiency; and (3) discounting the'mania for building giant factories and works' and instead constructing

104 Kommunistkheskaya Partiya .. . (see f o o t n o t e 96) , v o l . III, p . 4 5 .105 Ibid. v o l . III, p . 216.106 Both factors will be discussed in detail below.107 The Land of Socialism Today and Tommorrow, Reports and Speeches at the Eighteenth Party

Congress of the Communist Party of the Soviet Union (Bolsheviks) ( M . 1939), p p . 433 -4 .

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

22 THE DEVELOPMENT OF

medium and small-scale establishments.108 Taking into account thegraver international situation, resolutions called for the further expan-sion of heavy, as well as consumer, industries in the eastern regions ofthe USSR. To facilitate it, the old prohibition on building new plantsin Moscow and Leningrad109 was extended to five other importantindustrial cities in the west of the USSR. In cases where a certaincommodity was only supplied by one producer, the resolutions postu-lated the construction of a duplicate plant in the east 'in order to elimi-nate the elements of chance' in the supply of this commodity. Obvious-ly, 'the elements of chance' refer to the possible effects of war. Therequirement of economic self-sufficiency for large regions was also verymuch in conformity with strategic considerations. To achieve all thesegoals quickly, accelerated construction of new plants was stronglydemanded.110

The resolutions of the XVIII Congress gave rise to subsequent dis-cussions of the relevant issues by different writers. Some of them sawin the fight against giantism and in the requirements of comprehen-sive development of individual regions the means for the final elimina-tion of contradiction between town and country111 and, indeed, thepanacea for the solution of all location problems.112 The implementa-tion of these goals required a radical change in existing planningmethods: greater attention to regional planning instead of the exclusiveconcentration on branch planning. This was understood by someeconomists who urged this shift and already at this stage demanded thepreparation of material balances for the planning of relations betweenindividual regions.113 However, some basic prerequisites for thesereforms were lacking, not to speak of the unwillingness of the planningbureaucracy to initiate and execute these measures. For example, thecriteria for the determination of regions were not established, regionalplanning offices were not organized, etc.114 The authority in this fieldputs the blame for such a situation on the indiscriminate interest in thedevelopment of eastern regions of the USSR.115 As can be seen from

108 Ibid. p . 440.109 This decision was already taken by the June plenum of the central committee of the CPSU

in 1931; see Kommunisticheskaya Partiya . . . (see footnote 96), vol. III, p. 128.110 The Land of Socialism . . . (see footnote 107), p. 440.111 I. N. Dvorkin,'Likvidatsiya protivopolozhnosti mezhdu gorodom i derevnei', Planovoe

khozyaistuo, 1940, no. 8, p. 58.112 'Ekonomicheskoe raionirovanie SSSR i zadachi sovetskoi nauki', editorial in Ptobtemy

ekonomiki, 1939, no. 4, p. 6.113 A. V. Korobov, 'Zadachi kompleksnogo territorial'nogo planirovaniya', Planovoe khoz-

yaistvo, 1940, no. 11, p. 41.114 This despite the fact that the first and second five-year plans were prepared on the basis of

24 and 32 large regions respectively; see P. M. Alampiev, Ekonomicheskoe raionirovanie SSSR(M. 1959), p. 167.

115 N. N. Kolosovsky, 'K voprosu ob ekonomicheskom raionirovanii', Problemy ekonomiki,1941, no. 1, pp. 40-41.

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

SOVIET LOCATION THEORY 23

the foregoing, not all the resolutions of this congress could have beenachieved in the foreseeable future.

From this discussion it can be seen that Soviet location theory consistsof a few diverse elements. The contribution of Marx and Engels was toemphasize the need for proportional distribution of industry in order toeliminate the alleged contradiction between town and country. Lenin'sconcern was with immediate problems facing the new Soviet regime,namely, minimizing transportation costs in a country the size of theUSSR, which he proposed to achieve through the construction oflarge-scale enterprises close to deposits of raw materials. Party con-gresses added some other principles to location theory, which wererelated mainly to the current problems of the USSR. They were: theprofessed necessity to industrialize backward regions, inhabited by non-Russian minorities and, first of all, defence considerations. The latterprinciple had to be implemented through the eastward shift of thecentre of gravity of Soviet heavy industry. Analysis of party resolutionsshows that, in the course of Soviet economic development, the locationprinciples concerned with the pragmatic problems of the USSR tendedto push into the background those principles which were related tomore general and theoretical issues.

V. Soviet Locational PrinciplesOn the basis of remarks made by Marx, Engels, Lenin and directly

or indirectly, through party resolutions, by Stalin, and on the basis ofvarious articles appearing in economic periodicals in the late 1920s and1930s, as discussed in the previous sections, Soviet economists afterWorld War II formalized these diverse elements into a set of locationprinciples which are constantly repeated with insignificant variations.116

According to these authors, these principles should be applicable toeconomic development under socialism, and the implementation of all,or more realistically of some, of them, as the case may be, should assurethe largest increase in output at the lowest cost in the long run. Theyare as follows:

1. Move industrial enterprises closer to sources of raw materials andto final consumers in order to reduce freight costs.

2. Plan the distribution of plants among economic regions in such away that they can develop special industries utilizing available naturalresources most efficiently. This will facilitate the territorial divisionof labour. On the other hand, each region should strive to becomeeconomically self-sufficient.

116 e.g. Livshits, op. cit. (see footnote 6), p. 13; Feigin, Razmeshclienie proizvodstva . . . (seefootnote 2), pp. 208-9; Khanukov, op. cit. (see footnote 6), pp. 97-98; Danilov and Mukhin, op. cit.(see footnote 79), pp. 14-21; L. Ya. Berri, Spetsializatsiya i kooperatsiya v promphlennosti SSSR(M. 1954), p. 207.

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

24 THE DEVELOPMENT OF

3. Distribute industrial production evenly throughout the country inorder to utilize all human and natural resources in all regions.

4. Abolish the contradiction between cities and rural areas which isbased on the difference between industrial and agricultural production.

5. Secure the industrialization and cultural development of all regionsinhabited by national minorities.

6. Strengthen the defence capacity of the country.7. Facilitate the international division of labour among the countries

of the socialist bloc.117

Soviet location principles, taken one by one, are in most cases self-explanatory, except points 1 and 2.118 The former—requiring the prox-imity of industrial locations to raw materials and consumption centres—stems, as was shown above, from the view prevailing among thesocialist economists that too much social labour is wasted on distri-bution, or more specifically, on transportation. Clearly, its idea is tochoose locations where such transportation costs would be the lowest.However, its implementation would seem to be difficult, because underSoviet conditions the coincidence of location of consumers and rawmaterials is the exception rather than the rule. This requirement must beunderstood to mean that some plants, primarily heavy industry, i.e.,producer goods industries, should be located close to the source of rawmaterials and fuel, and consumer goods should be produced close toconsumption centres.119 This interpretation is confirmed by the factthat in more recent works and is replaced by or; and the phrase, 'close toraw materials or consumers',120 depending on the branch, conforms tothe concept of optimization of industrial location.

The goal of point 2—comprehensiveness or self-sufficiency andspecialization of economic regions—at a first glance looks like a contra-diction. However, it should be interpreted as a requirement to indus-trialize all regions of the country,121 which, obviously, is motivated byideological considerations. No further development of a society ispossible without industrialization, says the official doctrine. The indus-trialization of all regions does not mean that they should possess allbranches of industry regardless of the availability of appropriate econ-omic conditions. Such important branches for the national economyas the iron and steel, machine-building or chemical industries should bedeveloped only in those regions where necessary raw materials and

117 This point is not applicable to the pre-World War II period because, in addition to theUSSR, only one other country had a Soviet-type economy, namely, Outer Mongolia.

118 Wiles, op. cit. (see footnote 3), p. 150, while discussing some of these contradictions, expressesthe belief that for the Marxist—and indeed for the Russian—mind and temperament, the conceptof optimization does not exist—only the concept of maximization. If there is a choice betweentwo goals, both of them have to be maximized.

119 Hunter, op. cit. (see footnote 3), pp. 28-29.120 Probst , Razmeshchenie . . . (see footnote 79), for example, p p . 8 or 16.121 A . D . Kursky and S. Slavin, 'Ra ionny i razrez narodno-khozyais tvennogo plana' , Planovce

khozyaistvo, 1936, no . 3, p . 140.

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

SO VIE TLOCA TION THEOR Y 25

human resources are available.122 The presence of these industries willgive the regions a specialized character within the framework of thenational economy as a whole. In addition, all regions should strive todevelop those industrial branches for which the resources are availablealmost everywhere, such as the light, food processing and buildingmaterials industries, i.e., industries which primarily satisfy the demandof local consumers.123 Comprehensive development should also meanthe output of the most important agricultural raw materials.124 Thegrowth of ubiquitous industries will be stimulated not only by thedemand of local consumers, but also by large enterprises of nation-wideimportance, because of their demand for inputs which could be pro-duced locally.125

As can be seen from the foregoing, the contradictions within theindividual points of Soviet location theory are more apparent than realwhen analysed within the framework of Soviet literature on thissubject. The same seems to be true in regard to some of the contra-dictions between individual points of this doctrine. For example, as ourprevious discussion showed, Engels's postulate of even distribution ofindustry throughout the country can be reconciled with Lenin's viewson the necessity to locate plants close to sources of raw materials andfuel when applied to the specific conditions in the USSR and whenrestricted to heavy industry.

Before other contradictions between individual locational principlescan be discussed, it is necessary to consider first one characteristic ofSoviet industrialization which, although not mentioned explicitly inthe set of location principles, was nevertheless closely related to them.This characteristic, known as giantism, is, as was shown previously, thetendency to construct industrial establishments predominantly on alarge scale.126 This refers primarily to heavy industry, but is by nomeans limited to it. Soviet giantism runs counter to two explicit pointsof location doctrine: namely, counter to the more proportional distri-bution of industry throughout the country and to economising ontransportation.

Let us first consider the relation between giantism and the more pro-portional distribution of industry throughout the country. The word

122 Feigin, Razmeshchenie proizvodstva . .. (see footnote 2), p . 217.123 The Lani of Socialism . . . (see footnote 107), p p . 433-4. Livshits, op. cit. (see footnote 6),

p . 39, defines this p rob lem in the following w a y : 'The industrial comprehensiveness o f particulareconomic regions consists o f branches which determine the industrial specialization of this o rthat region o n a nat ion-wide scale. Simultaneously wi th the leading branches, the industrialcomplexes of particular regions consist of branches which are of local (or regional) impor tanceand are responsible for the comprehensiveness o f the economic development of these regions. '

124 Thus , L. M . Kaganovich in his speech at the XVIII Congress w e n t so far as to call forcot ton cultivation in the Ukra ine , planting of sugar beet and construction o f sugar plants along theTurkestan-Siberian and T o m s k railways, which for climatic and natural reasons seem to be veryunrealistic. See The Land of Socialism . . . (see footnote 107), p . 340.

125 B lyumin , op. cit. (see footnote 59), p . 56.126 T h e reasons for this tendency can be summarized as fol lows: Marxist ideology wi th its

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

26 THE DEVELOPMENT OF

proportional can be interpreted in two ways. On the one hand, theproportionality may mean the density of industrial enterprises over thearea. Of course, giantism is by definition contradictory to this interpre-tation; the construction of predominantly small-scale enterprises for agiven amount of capital to be invested can serve the advancement ofindustrial density per area better. As was discussed previously, theresponsibility for the achievement of this goal was assigned by variousparty resolutions to the consumer goods industries. For example, inview of the importance of other considerations in deciding the locationof heavy industry, the second five-year plan required that 'The geo-graphic distribution of light and food industry mapped out by theSecond Five-Year Plan supplements the planned geographic distri-bution of heavy industry'.127 It is interesting to note that at the sametime the scale of plants of main consumer goods industries rose pro-nouncedly less than that of heavy industry plants.128 This fact wouldimply that some attention was being paid to this location principle.

On the other hand, in view of the fact that the Soviet concept ofindustrialization means first of all the development of heavy industry,the proportionality of industrial distribution throughout the country isinterpreted by Soviet economists simply as the construction of addi-tional centres of heavy industry in various regions.129 The implementa-tion of this type of proportionality may be indeed facilitated by theconstruction of predominantly large-scale enterprises, so that theSoviet argument that there is no contradiction between these twoprinciples sounds more plausible. This lack of contradiction is explainedby Soviet economists in the following way. An advanced technology canbe introduced only in large-scale establishments. As a result, it is morefeasible to utilize raw materials and fuel of inferior quality and tointroduce various substitutions among the inputs in these than in small-scale establishments. Moreover, a large plant usually produces morethan one product and for this reason it utilizes the raw materials more

emphasis on returns to scale, administrative convenience (it is easier to plan with few units), thepeculiarity of Soviet accounting (lack of charges on capital and land), and emulation of Americanmethods of production. See Leon Smolinski, 'The Scale of Soviet Industrial Establishments',American Economic Review, May 1962, p. 140. Moreover, under Soviet conditions it might havebeen easier to receive investment appropriation for larger than for smaller projects, and in viewof the limited number of managers and skilled personnel it might have been more rational to usethem in a limited number of large plants than to scatter them among a large number of smallenterprises. See the comments of Alexander Erlich on Smolinski's paper, ibid. pp. 163-4.

127 The Second Five-Year Plan . . . (see footnote 78), p p . 409-10.128 Smolinski , op. tit. (see footnote 126), p . 138.129 K h o m y a k o v , op. cit. (see footnote 31), p . 10, expresses Lenin's views o n the subject in t h e

fol lowing w a y : 'Lenin considered i t indispensable t o concentrate p roduc t ion in a f ew large-scaleenterprises w h i c h , o f course, should be located in few regions, since few large enterprises cannot b escattered t h r o u g h o u t m a n y regions. ' The Second Five-Year Plan . . . (see footnote 78) , p p . 401-2 ,considers as its basic objective i n regard t o the geographical dis t r ibut ion o f indus t ry : ' t o establish anumber of auxiliary centres for the production of coal, iron and machinery founded on theconsolidation and the further development of the main coal-and-iron and machine-manufacturingbases in the Soviet Union'.

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

SOVIET LOCATION THEORY 27

fully. It is then profitable for such a plant to transport its inputs overlong distances.130 These factors allow a great deal of freedom in thechoice of location of large-scale plants, with the result that the centres ofheavy industry can be constructed proportionally, i.e., in differentregions of the country, without being completely dependent on thelocation of resources.131 According to Soviet economists, this freedomof choice in the location of large-scale plants facilitates industrializationof regions with poor natural resources which are inhabited by nationalminorities, or construction of plants in similar regions, where defenceconsiderations are important.132

However, it would be a mistake to generalize these advantages oflarge-scale establishments and try to implement them indiscriminatelyin all branches of industry, as was frequently the case in the USSR,during the first and second five-year plans.133 The argument that onlylarge-scale plants can be independent of the location of their raw mate-rial sources is inapplicable, for example, to the food and light industries.Their plants can be located almost anywhere. Being of medium or smallscale, they can very well conform not only to the requirement oflocation policy—even distribution of the industry throughout thecountry, but also they would be efficient from the point of view ofother economic considerations such as returns to scale or economizingon transportation services.

The tendency to construct predominantly large-scale enterprises andthe requirement to economize on transportation also seem to be contra-dictory. Obviously, the larger the enterprise the larger the area it has toserve and the greater is its demand for transportation services. However,Soviet economists were convinced that the demand need not rise pro-portionately with the growth of production from newly-built large-scale plants. This was due to their belief in the superiority of socialismover capitalism in regard to the use of transportation. They admittedthat under capitalism, because of the pressure of competition, the costsper unit of haulage are kept low. But they insisted that under socialismnot only the unit costs of transportation, but also the volume of trans-portation for the whole national economy, would be minimized becausecentral planning would replace the uncoordinated and spontaneousdecisions made by individual entrepreneurs on the capitalist markets.134

For example, the location of new plants would be centrally plannednear the sources of raw materials and fuel with the result that the

130 Granovsky, op. cit. (see footnote 61), p p . 58-59; Blyumin , op. cit. (see footnote 59), p . 55.131 According to B . I. W e i t z , ed., Electric Power Development in the USSR (M. 1936), p . 358,

'Concentra t ion o f product ion, b y introducing new factors in location, weakens the localizingeffect of each factor. It decreases the probability of their coinciding and makes possible greaterflexibility in location. '

132 Granovsky, op. cit. (see footnote 61), p . 58 ; Pepper, op. cit. (see footnote 19), p . 183.133 Smolinski, op. cit. (see footnote 126).134 Bessonov, 'Problema raionirovaniya . . .' (see footnote 29), p . 4 1 .

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014

28 THE DEVELOPMENT OF SOVIET LOCATION THEORY

demand for transportation services would rise at a lower rate thanoutput.135 The unit costs of haulage would stay low or even decline,not only because of the same, or even greater, efficiency under socialismthan under capitalism, but also because of increasing returns, whichwould accompany the general rise in economic activity. The continouusintroduction of cost-saving technology would also act in the samedirection.136

The optimism of Soviet economists—that die construction of large-scale enterprises need not require considerable increases in transporta-tion—was by and large justified during the late 1920s and during thefirst half of the 1930s. The possibility of increasing returns in the late1920s lay in the fact that the Soviet regime was fortunate to inheritfrom its tsarist predecessor a railroad network which was built aheadof the requirements of the national economy prior to World War I.The increased demand in certain areas of the USSR for transportationservices could have indeed resulted in a lower cost per unit of haulage.137

The inefficient use of the existing capacities in the Soviet railroadsystem can also be seen from the fact that, after its neglect at the expenseof the development of industry during this period of time, the break-down threatening in the early 1930s was averted by relatively smallinvestment in key equipment.138 However, during the second part ofthe 1930s, the limit of effectiveness of Soviet railroads seems to havebeen approached.139 Further economic development required eitherconsiderable investment in transportation or the reversal of all thosepractices which resulted in the increased demand for transportation.The main culprit among the latter was obviously giantism with theaccompanying specialization of individual regions. The alternative wasthe construction of small- and medium-scale enterprises with the result-ing increase in regional self-sufficiency. Because of the approaching war,investment funds could not have been diverted for the expansion oftransportation. The choice of the second alternative was announced bythe XVm Party Congress.140

IWAN S. KOROPECKYJTemple University, Philadelphia

(To be concluded)135 See the quotat ions from Soviet economists in H u n t e r , op. cit. (see footnote 3) , p . 4 5 .136 N . F . Berezov, 'Magni togorsk i i metallurgicheskii zavod ' , Planovoe khozyaistvo, 1928, n o . 11,

p . 287.137 For example, the railroad connecting Magnitogorsk wi th Kuznetsk, which was of crucial

importance for the development of the Ural-Kuznetsk Combine , was reported to be able tocarry an additional million tons of freight in 1928 wi thout any increase in its facilities. See ibid.p. 292.

138 Hunte r , op. cit. (see footnote 3), p . 77, states it as fol lows: 'Clearly these additions [locomotivesand freight cars] t o railroad facilities improved their capacity to carry traffic. B u t equally clearly,the rise in output was m o r e than proport ional to the expansion in facilities, in fact, strikingly so. '

139 Ibid. p . 8 1 .140 See p . 21 above.

Dow

nloa

ded

by [

Uni

vers

ity o

f C

ambr

idge

] at

11:

09 2

1 D

ecem

ber

2014