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26 Probs. Communism 25 (1977)
The Second Economy of the USSR

handle is hein.journals/probscmu26 and id is 371 raw text is: The Second of the USSR By Gregory Grossman T he standard Western image of the Soviet cornmmand economy is one of a state-owned, !ierarchically orga ized, centrally planned and maraged, price-controlled and otherwse regi- mnted system, rigidly gearcd to the goals and pri orities of the Soviet ,eadership, and operating in compliance with a myriad of state-mposed laws, regu ations, and directives. However valid this image might be-and, while greatly oversimplified, it is not ent rely incorrect-there is another, very sig- nificant side to Soviet economic reality, where pro- duction and exchange often take place for direct private gain and just as often violate state law in some non-trivial respect. This s the so-ca led sec- ond economy, also referred to by Western observ- ers as counter-economy, unofficial economy, para I market, and private enterprise. t com- prehends a vast and varied set of activities that is attracting ever greater attention from Western schol- ars. Closely tied to it is widespread corrupt on of officialdom. Both exist on a arge scale in the Soviet Union and in Eastern Europe and, of course, have many analogies in non-Communist countries, both developed and underdeveloped. Second Economy Defined As some scholars define it, the second ecoonoy coprses all production and exchange activ that fulfills at least one of the two following tests: (a) Mr. Grossman is Professor of Economics at the University of California (Berkeley, CA) and author of books on the Soviet economy. His articles have appeared in a number of compendia and scholarly journals. being directly for private gain; (b) being in some sig- nificant respect in knowing contravention of existing law. So defned the second economy includes much of the perfectly legal private activity which is pos- sible in the USSR. To explain this paradox, it is important to note that legal private activity, though formally sanctioned and ideologically tolerated, is nevertheless ideologically alien to the Soviet system. Its operating principles are sharply different from those of the first economy. Furthermore, in many cases one cannot practically draw a line between legal and illegal private activity, since the former often serves as a front for the latter and both support one another. n ight of this last consideration, and since this artic e wiI deal primarily with the illegal and semi egal' aspects of the second economy, it may be useful at the outset to describe precisely that private economic activity in the USSR which is Iegal. By far the most extensive and best studied part of Soviet legal private economic activity is the private plot-if smaller, the garden plot-in agriculture.2 The private plot can be cultivated by a peasant household that belongs to a collective farm, by a household w Ith primary employment at a state farm, or, as is often the case, even by one with primary employment outside of agriculture altogether. It has been estimated that in 1974 private agriculture ac- counted for almost one third of all man hours ex- pended in agriculture and almost one tenth of all The terms second enomy and parallel market seem to have b'en coned by K. S. Karol, in Conversatons n RussI a, The New Statesman ILondon), Jan. 1, 1971, pp. 8-0 in the ar tie Karol also speak f the thi rd economy, the network of restricted and well- tockd shops in the USSR available only to the privileged. 2 See, especiay, the defnitive work by Karl-Eugen W5dekin, The Private Sector in Sovet Agriculture, Berkeley, CA, University of California Pres 973 I~~~~ Akif Mk 0SOM111111fi

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