generated. For example, because the size of the innovation
bonus fund was limited by the wage bill of a firm, this
immediately reduced the incentive to produce or adopt any
innovation that might have economized on labor.
Focusing on the different rules and bonus schemes tends
to mask the inherent problems of the system. As long as
political authority and power rested with the Communist
Party, it was impossible to fundamentally change the basic
incentives that people faced, bonuses or no bonuses.
Since its inception, the Communist Party had used not just
carrots but also sticks, big sticks, to get its way.
Productivity in the economy was no different. A whole set of
laws created criminal offenses for workers who were
perceived to be shirking. In June 1940, for example, a law
made absenteeism, defined as any twenty minutes
unauthorized absence or even idling on the job, a criminal
offense that could be punished by six months’ hard labor
and a 25 percent cut in pay. All sorts of similar punishments
were introduced, and were implemented with astonishing
frequency. Between 1940 and 1955, 36 million people,
about one-third of the adult population, were found guilty of
such offenses. Of these, 15 million were sent to prison and
250,000 were shot. In any year, there would be 1 million
adults in prison for labor violations; this is not to mention the
2.5 million people Stalin exiled to the gulags of Siberia.
Still, it didn’t work. Though you can move someone to a
factory, you cannot force people to think and have good
ideas by threatening to shoot them. Coercion like this might
have generated a high output of sugar in Barbados or
Jamaica, but it could not compensate for the lack of
incentives in a modern industrial economy.
The fact that truly effective incentives could not be
introduced in the centrally planned economy was not due to
technical mistakes in the design of the bonus schemes. It
was intrinsic to the whole method by which extractive
growth had been achieved. It had been done by
government command, which could solve some basic
economic problems. But stimulating sustained economic
growth required that individuals use their talent and ideas,
and this could never be done with a Soviet-style economic
system. The rulers of the Soviet Union would have had to
abandon extractive economic institutions, but such a move