EDSU Lesson One

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EDSU Lesson One - Opportunity Cost: The Soviet Choice for Growth

 

Opportunity Cost: The Soviet Choice for Growth

Key Economic Concept:

  • Opportunity Cost

Related concepts:

  • Scarcity
  • Capital Goods
  • Choice
  • Consumer Goods
  • Communism

Content Standards and Benchmarks (1, 3 and 15):

Standard 1: Students will understand that:Productive resources are limited. Therefore, people cannot have all the goods and services they want; as a result, they must choose some things and give up others.

Benchmarks: Students will know that:

  • Whenever a choice is made, something is given up.
  • The opportunity cost of a choice is the value of the best alternative given up.
  • Scarcity is the condition of not being able to have all of the goods and services one wants. It exists because human wants for goods and services exceed the quantity of goods and services that can be produced using all available resources.
  • Like individuals, governments and societies experience scarcity because human wants exceed what can be made from all available resources.
  • Choices involve trading off the expected value of one opportunity against the expected value of its best alternative.
  • The evaluation of choices and opportunity costs is subjective; such evaluations differ across individuals and societies.
  • Choices made by individuals, firms, or government officials often have long-run unintended consequences that can partially or entirely offset the initial effects of their decisions.

Standard 3: Students will understand that:Different methods can be used to allocate goods and services. People, acting individually or collectively through government, must choose which methods to use to allocate different kinds of goods and services.

Benchmarks: Students will know that:

  • No method of distributing goods and services can satisfy all wants.
  • There are different ways to distribute goods and services (by prices, command, majority rule, contests, force, first-come-first-served, sharing equally, lottery, personal characteristics, and others), and there are advantages and disadvantages to each.
  • Scarcity requires the use of some distribution method, whether the method is selected explicitly or not.
  • There are essential differences between a market economy, in which allocations result from individuals making decisions as buyers and sellers, and a command economy in which resources are allocated according to central authority.
  • People in all economies must answer three basic questions: What goods and services will be produced? How will these goods and services be produced? Who will consume them?
  • National economies vary in the extent to which they rely on government directives (central planning) and signals from private markets to allocate scarce goods, services, and productive resources.
  • Comparing the benefits and costs of different allocation methods in order to choose the method that is most appropriate for some specific problem can result in more effective allocations and a more effective overall allocation system.

Standard 15: Students will understand that:Investment in factories, machinery, new technology, and the health, education, and training of people can raise future standards of living.

Benchmarks: Students will know that:

  • Economic growth is a sustained rise in a nation's production of goods and services. It results from investments in human and physical capital, research and development, technological change, and improved institutional arrangements and incentives.
  • Historically, economic growth has been the primary vehicle for alleviating poverty and raising standards of living.
  • Economic growth creates new employment and profit opportunities in some industries, but growth reduces opportunities in others.
  • Investments in physical and human capital can increase productivity, but such investments entail opportunity costs and economic risks.
  • Investing in new physical or human capital involves a trade-off of lower current consumption in anticipation of greater future production and consumption.
  • The rate of productivity increase in an economy is strongly affected by the incentives that reward successful innovation and investments (in research and development, and in physical and human capital).

Lesson Theme: The history of the Soviet Union, like the history of any nation, can be viewed as a series of choices and the opportunity costs that resulted from those choices.

Student Activity: A Journey of Choices
This two part activity will ask students to examine 5 major events in Soviet history (such as signing the Nazi Non-Aggression Pact, for example) to introduce the concept of opportunity cost. They will identify the considered alternatives at the time of decision and the perceived benefits of each alternative, and the corresponding opportunity costs. The second part of the activity asks students to apply their developing understanding of opportunity cost to the "Journey of Choices" they make as they live a typical school day.

Key Points:
  1. Scarcity - All economies face the constraints of scarcity - that there are only limited resources to satisfy unlimited human wants and needs.
    • Available (and limited) natural resources, labor, and capital must be used to produce a mix of consumer goods and producer goods.

  2. All choices, whether they are made by individuals or by groups of individuals such as governments, have a cost associated with them; economists call this an Opportunity Cost.
    • Opportunity cost is the value of the benefits of the foregone alternative, of the next best alternative that could have been chosen, but was not.
      • Another way to look at it is that "choosing is refusing;" one choice can only be accepted by refusing another.

  3. All societies face these choices about use of resources for production and consumption, and as a result, all bear opportunity costs.
    • In market economies, choices about production and consumption are made primarily by individuals interacting in markets.
      • The costs of these choices are borne by individual producers and consumers.
    • In centrally planned economies like that of the Soviet Union, choices about resource use, production and consumption are made by government leaders.
      • However, in these economies, it is generally the citizens, rather than the government leaders / decision-makers, who bear the economic opportunity costs.

  4. It is instructive, for our purposes, to look at the history of the Soviet Union as a series of choices.
    • In examining each historical period, we want to ask:
      • What were the alternatives?
      • What choice was made? and by whom?
      • What benefits / costs resulted from this decision? Who bore the costs of this choice? Who reaped the benefits?
      • Why were those who bore the cost willing to do so? (and/or what happened if they were not willing?)

  5. To begin, we look first at one of the legs of our 3-legged table, the moral-cultural system of the Russian people.
    • Even before the Communist Revolution, Russia was expansive and Russian rulers - and the Russian people themselves - shared a sense of pride in being the center of an empire, of ruling over surrounding countries and cultural groups.
      • The expansionism of the czarist regimes melded nicely with the prevailing post-Revolutionary world view in both the Leninist and Stalinist periods - that the Soviet Union would be the epicenter of an enlarging communist world.
      • It is important not to underestimate how important this cultural perspective was in gaining and maintaining citizen support for communist policies.
      • The strength of the moral-cultural leg and the willingness of Russian people to believe the system would eventually deliver on its promises helped to sustain the system even when the economy faltered.

  6. Communist revolutionaries could not escape the constraints of scarcity, and despite their ideals, were immediately and continually faced with the necessity of making choices about production and consumption. Inevitably, these choices bore opportunity costs. In many cases these costs were much higher than even the communist leaders anticipated.
    • Ideals of socialism, as developed by Marx and Engels, contained few specifics.
      • They focused on a utopian state where everyone was equal and satisfied.
      • Marx assumed that only labor could produce value, not land or capital. Since owners of land and capital received part of the value of output it followed that they must be stealing it from labor.
      • Marxism was a theory of stages; socialism was to succeed the most developed stages of capitalism.
    • Lenin was immediately faced with the reality of socialism.
      • The Communist Party came to power in underdeveloped and backward Russia, rather than in an advanced western capitalist economy.
      • The constraints of scarcity were glaringly apparent and demanded immediate decisions.
      • Lenin's Bolshevik's were a small group that seized power due to the disruption of World War I, they chose to rely on force and violence to consolidate their power.
    • As history clearly records, Lenin's choice was to emphasize two priorities:
      • to promote rapid economic development by stressing heavy industry, and
      • to produce the military might necessary to consolidate power.
      • The method chosen by Lenin was to control prices (particularly in agriculture) and to control foreign trade.
    • The benefits of this choice were reaped by Lenin and the leadership of the party, in that they were further able to consolidate their power.
    • The opportunity cost of this choice was primarily borne by the peasantry.
      • Government forced reductions of agricultural prices and restrictions on foreign trade reduced agricultural income and the buying power of the peasantry.
      • Also, availability of consumer goods was drastically reduced.
      • Agricultural production fell significantly.
        • Between 1860 and 1913, Russia was one of the largest exporters of agricultural goods and was called "the granary of Europe;" by the 1970s, the Soviets were heavily dependent on imported wheat.
      • Their willingness to bear this cost rested on a combination of
        • fear or unwillingness to resist coercion,
        • suppressed consumer expectations and limited choices,
        • inability to perceive other choices,
        • the opportunity to see progress around them in the industrial sector,
        • persistence of the dream of empire, and
        • acceptance of the goals and philosophy of the Revolution.
        • (It would be a mistake to underestimate the power of the last 2.)
    • To return to the 3-legged table analogy: The political and economic backwardness of pre-Revolution czarist life for most peasants meant that the political-legal and economic legs of Lenin's "3-legged table" held comparative promise for many.
      • The communist dream and the legacy of empire, rejuvenated by government proclamations, provided a moral - cultural strength that allowed the Communists to triumph.

  7. The Stalinist period found governing officials facing the same economic constraints of scarcity. Stalin, like Lenin, had to make choices about the use of resources for production and consumption.
    • Stalin chose to force the collectivization of agriculture and to drastically increase investment in heavy industry.
      • Stalin waged a brutal and bloody campaign to herd the peasants onto cooperatives and requisition their harvests.
      • More and more of the economy was brought under government planning, prices were set, and private property was abolished.
      • The government enforced mass movement of people and other resources to specific projects.
    • The benefit of this forced investment in industry was a rapid (but unbalanced) economic growth in the late 1920s.
      • During the First Five Year Plan (1928-33), the economy grew 48%.
      • Producer goods grew 113%.
      • Electric power grew 227%.
    • The opportunity costs were, again, borne by the citizens, especially the peasantry.
      • Consumer goods production grew only 1%.
      • Livestock production declined 58%.
      • Government became increasingly secretive, coercive and unresponsive to Soviet citizens. Millions of people were either killed or imprisoned during Stalin's purges.
      • Personal and economic freedom were increasingly curtailed.
    • High growth rates held through the 1930s and 1940s, and Stalin maintained his choices in the economic sphere, placing heavy emphasis on capital goods and military production, with the resultant benefits and costs:
      • The Soviet Union was able to withstand the onslaught of Nazi Germany in W.W.II and continue a heavy military emphasis during the 1950s and 60s.
        • Important benefits were to reinforce the dream of empire and the willingness of the populace to bear costs.
        • Gratitude to the government for defeating the Nazis lifted spirits even higher.
        • Forced emphasis on specific sectors of the economy was well suited for accelerated growth of those sectors at the expense of others (often agriculture).
        • This provided the opportunity for heavy investment in space exploration and military innovation.
        • The emphasis on capital and military goods necessitated a producer goods / consumer goods choice that all but ignored the consumer.
      • The willingness of citizenry to bear costs continued, sustained by a combination of fear and belief.

  8. By the late 1950's, the economic gap between the USSR and the West had begun to widen; Soviet leadership for investment over consumption continued to impose heavy opportunity costs on consumers.
    • Continued emphasis on industrial and military production perpetuated low living standards for the masses of the people.
      • Immediately following W.W.II, life for the average Soviet citizen was so miserable that any improvement seemed significant. Rapid growth during the 1950s and 60s allowed for some increases in consumption levels from those of the 1930s and 40s and these increases purchased years of legitimacy and genuine support for the system.
      • By the 1970s and 80s, consumption production was virtually flat; the standard of living of the average Soviet citizen did not change and prospects for future wealth seemed less promising.
    • In addition, advances - technological, economic, and military - were smaller than in the past.
      • After 1957, the Soviet economy began to slow down.
      • Average 6% annual growth rates in the 1950s slowed to under 2% in the 80s.
        • This slow down is put into perspective when we realize that investment spending remained extremely high and that it was fueled by the huge oil revenues the Soviet Union received as a result of high world petroleum prices.

  9. In hindsight, the beginning of the end is apparent by the early 1980s. Despite strictly enforced central planning, the Soviet system began to look as if it were out of control.
    • The costs of negotiating and monitoring transactions among firms and regions became extraordinarily high.
    • While innovation in production techniques and new product development was providing much of the rest of the world with higher quality products at lower prices, and was producing a virtual revolution in computer and information technology, the Soviet Union was stalled with out-dated production techniques, decades-old machinery, and inefficient communication.
    • The system that had borrowed western technology to fuel its industrial growth seemed incapable of entering the new information age.
    • Agricultural output, in spite of heavy investments by Khrushchev and Brezhnev, was declining annually.
    • The western free world was moving farther and farther ahead, not only in much desired consumer goods, but also in the showcase areas of military strength and space technology.
      • Afghanistan defeat
      • Reagan's "Star Wars" defense.

  10. Perestroika was a last attempt to shore up a failing system, but by the mid 80s, too many legs of the 3-legged table were wobbling.
    • Economic reforms and renewed attempts to increase the growth rate couldn't head off continued problems:
      • The time and expense of negotiating exchanges continued to soar.
      • Continued high investment in the military and heavy industry sustained limited gains in consumer goods;
        • Investment means resources were directed to industrial and military growth, and thus taken away from consumer production. Investment in industry may promise consumer production in the future, but for the present, it causes standards of living to erode or stagnate.
      • Agricultural problems became acute;
      • Distributions from farms to cities were sporadic; and
      • Oil revenues declined dramatically.
    • Under Gorbachev, Perestroika lowered the cost and raised the benefit of diverting resources from the official sector to the informal economy.
      • In the political-legal area, political control was used to deliver the privileges to the elite and rule of law was absent.
        • The prosecuting attorney was also the judge.
      • In the moral-cultural sphere, there was a loss of moral principals that worked in the economic system.
        • Citizens believed that theft from the state was necessary and justified.
    • These economic problems were aggravated by the Soviet people beginning to reject the secrecy of their history and to question the communist plan and the dream that accompanied it.
    • With two legs of the 3-legged table seriously weakened, all the strength and force of the 3rd leg could not save the whole, and the structure collapsed.

Conclusion: The cost of decades of choices to invest in industry and the military, to restrict individual freedoms, and to remain isolated from western cultures and economies finally became more than the Communist Party and the people of the Soviet Union were willing to pay.

Activity Lesson #1

A Journey of Choices

Lesson Overview: In the first part of this 2-tiered activity, students learn to identify alternatives and opportunity costs by looking at the journey of choices they make as they go through a typical school day. The second part of the activity asks them to apply their developing understanding to the historical journey of choices made by the leadership of the Soviet Union. While considering significant historical events, students identify the perceived alternatives at the time, the perceived benefits of each alternative, and the opportunity costs of the decision that was ultimately made. Students also learn to distinguish opportunity costs from consequences. In the process, they begin to recognize that all decisions involve costs, and that economic reasoning is therefore applicable in all situations, even those which may, at first glance, seem not to be "economic" decisions.

Economic Concept: Opportunity cost

Economics Content Standards:

Standard 1: Students will understand that:Productive resources are limited. Therefore, people cannot have all the goods and services they want; as a result, they must choose some things and give up others.

Benchmarks: Students will know that:

  • Whenever a choice is made, something is given up.
  • The opportunity cost of a choice is the value of the best alternative given up.
  • Choices involve trading off the expected value of one opportunity against the expected value of its best alternative.
  • The evaluation of choices and opportunity costs is subjective; such evaluations differ across individuals and societies.
  • Choices made by individuals, firms, or government officials often have long-run unintended consequences that can partially or entirely offset the initial effects of their decisions.

Materials:

Student handouts

Time required: 2 class periods

 

Assessment:

Space Race

As the Cold War developed and escalated into the 1960s, leaders of the Soviet Union continued to face the choice of how to use resources to promote their goals. The initial choice to invest heavily in capital goods and military strength was coupled with a desire to wage a propaganda war - to show the rest of the world the prowess of the communist system. The Soviets wanted a showcase, both for their own citizens - to show them that the system was producing advancement and glory, and for the rest of the world. In the late 1950s and early 1960s, the Soviet Union faced the choice of making a huge investment in space technology, space exploration and science, diverting even more investment from the production of housing and consumer goods. This choice to pursue applied science in the area of space technology was apparently motivated by both the hope of using space superiority for military purposes and the desire to showcase the scientific genius of the Soviet Union by defeating the West in the space race. While military prowess could produce the same result, superiority would only be apparent in war, something the USSR wanted to avoid. Space exploration offered them the opportunity to be an undisputed international "winner," without the debilitating costs of war.

1. Consider the alternatives:

  • invest in space technology or
  • increase investment in housing and consumer goods

2. What were the benefits of each choice?

3. What was the opportunity cost of the choice made to pursue space exploration?

 

Results of the Choice to Explore Space:

The Sputniks, the shot at the moon, the photographing of the far side of the moon, and Soviet astronauts orbiting of the earth, together with atomic and hydrogen explosions, emphasized the achievements of Soviet applied science, and in particular Soviet rockets, missiles, and atomic and space technology. In these fields, as in others, the Soviet Union profited from contributions of espionage and of German scientists brought to the USSR after World War II. The state financed and promoted these extremely expensive technological programs and also organized and paid for the search for new natural resources necessary for the scientific endeavors.

In terms of the military / industrial investment we know that the Soviet Union tested an atomic bomb in 1949, signed a military alliance with China in 1950, and assisted the Chinese in the 1953-54 Korean conflict. In 1955, they established the Warsaw Pact; in 1956 successfully suppressed a revolt in Hungary; in 1957 successfully tested an Intercontinental Ballistic Missile, and in 1961 challenged the western powers by building the Berlin Wall. In addition, during the 1960s, the Soviet Union was the world leader in steel production.

During the same period, they compiled an impressive list of firsts in space, including the first satellite, the first satellite with an animal aboard, the first moon rocket, the first photo of the far side of the moon, the first man in space, the first woman in space, the first man to walk in space, the first flight around the moon and return, the first experimental space station. Soviet "firsts" in space would continue into the 70s.

 

4. Evaluate the Soviets' choice in terms of costs and benefits: was it the best choice at the time?

  • Did the choice to divert investment into space technology seem to have serious military and/or industrial consequences?

5. Did they accurately assess the costs and benefits?

6. Who benefited and who bore the costs?

 

Procedures:

Part 1

  1. Introduce the concept of opportunity cost to students by developing the following example in a large-group, interactive lecture-discussion.
    • When your alarm went off, or your mother called you, what choice did you face this morning?
      • Accept a variety of answers and list them on the board. Then, ask students to reduce the choice to the two best alternatives. Essentially, these are: to get up or not get up . (Note that not getting up doesn't mean "never";" it means not getting up right then.)
    • Why did you have to make this choice?
      • You are limited in the ways that you can use your time. You can't get up and stay in bed at the same time.
    • Let's list your two best alternatives on the board, and discuss the benefits of each.

    Get Up Now Get Up Later
    don't have to hurry sleep longer
    time to stop for coffee and bagel on way to school stay warm
    time to look over notes before test

    • Suppose you decide to get up now. What benefits do you give up?
      • the benefits of getting up later - more sleep and staying warm
    • Suppose you decide to sleep longer. What benefits do you give up?
      • the benefits of getting up now - not having to hurry, review time, coffee and a bagel
      • Opportunity cost is what you give up (the benefits of the next best alternative) when you make a choice.
    • Another way to look at it is that the benefit of making a choice becomes the opportunity cost of not making the choice.
    • Note: Students will try to bring consequences into the discussion. For example, it may be true that because you decide to sleep in, you drive faster to get to school and get in an accident. While accepting the increased risk of an accident is a part of the decision process and therefore an opportunity cost, an actual accident is a consequence rather than an opportunity cost. In identifying opportunity costs, encourage students to focus on the choice itself and the benefits of the alternative, not on things that might come into play later.

  2. Direct students to work with a partner. Post the following list of choices on the board or overhead:
    • eat breakfast
    • ride the bus
    • walk your homecoming date to class and arrive tardy to your own
    • go out to lunch
    • cut your last class
    • go in after school for help in physics
    • Directions to student pairs: Choose 3 entries from the list. For each entry:
      • identify the next-best choice
      • list the benefits of each of your two alternatives
        • for example, what are the benefits of eating breakfast? what are the benefits of skipping breakfast?
      • compare notes with your partner on which choice you would make
      • discuss how you and your partner valued the costs and benefits differently
        • did you and your partner make the same choice? why? why not?
        • did you and your partner make the same choice in a situation, but for different reasons?

  3. Allow students to share their responses with the large group. Ask them to generate some generalizations about cost. Post these on the board. Emphasize:
    • Choosing is Refusing - what are the benefits you are refusing by making the choice? The benefits you refuse are the opportunity cost of your choice.
    • People's values differ. Individuals will place different value on the relative benefits of a set of alternatives and will thus make different choices.
      • (Note: Benchmarks for Economics Content Standard 1 include: The evaluation of choices and opportunity costs is subjective; such evaluations differ across individuals and societies.)
    • People can't escape opportunity costs - they are an inherent part of all decision- making.
    • Is it ever really true that you "don't have a choice"? Suggest an alternative saying that more accurately reflects reality.

  4. What happens when we change the benefits and costs of a situation?
    • Suppose the alarm rings on a Saturday morning when you hope to go skiing with friends.
    • Are the alternatives the same ? (yes - get up, or sleep more)
    • Are the costs and benefits the same? (no - start with benefits, so that students get into the habit of seeing that opportunity cost is the benefits foregone)

  5. Go back to your list with your partner. Choose one of the items from the list.
    • What circumstance(s) might change the benefits and/or costs of that situation?
    • How would they change?
    • Would your choice change? Why or why not?

  6. Share team examples with large group. Debrief.

  7. (optional) Extension for economics classes or students interested in pursuing investigation of the value of the concept of opportunity cost as a tool for analysis of human behavior.
    • Briefly list the journey of choices you made today and identify the opportunity costs you've chosen to bear.
    • For each decision you made, rate the opportunity cost as high or low.
    • Rate your day so far - good day or bad day?
    • What's the relationship between good day / bad day and high vs. low opportunity cost? (Do good days have high or low opportunity costs?)
    • (Careful thought reveals that, although it is counter-intuitive, good days have high opportunity costs. The thinking is this. If you were willing to bear high costs, the benefits you received were even higher, in your estimation, or you would have made a different choice.)
    • Is there an exception to this relationship rule?
    • (Yes, the rule breaks down when your initial assessment of the costs and benefits - your assessment at the time of decision - is faulty, either because you make a mistake or because you have insufficient information.)
    • Note: Some students may find this type of analysis useful in considering the historical choices of the Soviet Union, especially in helping them to see that faulty information or the mental filter of dedication to revolutionary zeal may cause people to perceive costs and benefits inaccurately.

    Part 2

  8. Part 2 asks students to discover the characteristics of cost by examining key decisions in the history of the Soviet Union. This segment of the activity can be pursued as a research project, requiring more time and student involvement in collecting information, or it can be conducted as a small group discussion of more limited scope, in which you provide summaries of historical situations.

    Note: If students use the teacher-provided summaries, they can probably discuss 2 or 3 of the historical decisions. If students are doing the research themselves, it may make sense to assign one topic to each group.

  9. Using either the summaries provided in the student materials that accompany this lesson or the information collected through previously assigned student research, small groups are to answer the following questions with regard to the decisions made by leadership of the Soviet Union:
    • What were the considered alternatives at the time of choice?
    • What were the perceived benefits of each considered alternative at the time of choice?
    • What action was taken; what choice was made?
    • What was the opportunity cost of that choice? (Remember that the opportunity cost of one alternative is the perceived benefits of the other alternative - the benefits that are given up. The benefit of doing something becomes the cost of not doing it.)

  10. Assign teams, or let them choose, one issue to present to the class. Student presentations should identify opportunity cost, as per the discussion questions. In addition, however, the presentation team should answer the following questions for their presentation:
    • All costs lie in the future. With the benefit of hindsight (your knowledge of history), do you think the Soviet leaders made the best choice?
    • Did the leaders accurately perceive the benefits and costs?
    • Were the benefits worth the costs?
    • Who reaped the benefits of the choice that was made?
    • Who bore the costs?

  11. Debrief: Emphasize the 3 characteristics of opportunity cost:
    • All costs are to someone; people bear costs.
    • All costs are the result of actions. (Objects have no cost.)
    • All costs lie in the future.

Overhead Transparency or Student Handout (In-class exercise)

Directions:
  1. Read the summary of the following events or decisions in Soviet history:
    • The Five Year Plans
    • The Nazi Non-Aggression Pact
    • Consciously emphasizing university education and increasing numbers of educated citizens

  2. For each event or decision, answer the following questions:
    • What were the considered alternatives at the time of choice?
    • What were the perceived benefits of each considered alternative at the time of choice?
    • What action was taken; what choice was made?
    • What was the opportunity cost of that choice? (Remember that the opportunity cost of one alternative is the perceived benefits of the other alternative - the benefits that are given up. The benefit of doing something becomes the cost of not doing it.)

  3. Choose one of the 3 issues you studied and prepare a 5 minute presentation for the class. Your presentation should identify alternatives and costs and should make a case for your opinion on the following questions:
    • All costs lie in the future. With the benefit of hindsight (your knowledge of history), do you think the Soviet leaders made the best choice?
    • Did the leaders accurately perceive the benefits and costs?
    • Were the benefits worth the costs?
    • Who reaped the benefits of the choice that was made?
    • Who bore the costs?

Overhead Transparency or Student Handout (research exercise)

Directions:

  1. Read the summary of the following events or decisions in Soviet history:
    • The Five Year Plans
    • The Nazi Non-Aggression Pact
    • Consciously emphasizing university education and increasing numbers of educated citizens

  2. For each event or decision, answer the following questions:
    • What were the considered alternatives at the time of choice?
    • What were the perceived benefits of each considered alternative at the time of choice?
    • What action was taken; what choice was made?
    • What was the opportunity cost of that choice? (Remember that the opportunity cost of one alternative is the perceived benefits of the other alternative - the benefits that are given up. The benefit of doing something becomes the cost of not doing it.)

  3. Research one of the following events or decisions in Soviet history:
    • Berlin Blockade
    • Cuban Missile Crisis
    • Space Race
    • Exile A. Solzhenitzyn to Siberian gulags and then to US
    • Gorbachev - perestroika political reforms

  4. Prepare a 5 minute presentation of your research for the class. Your presentation should identify alternatives and costs and should make a case for your opinion on the following questions:
    • All costs lie in the future. With the benefit of hindsight (your knowledge of history), do you think the Soviet leaders made the best choice?
    • Did the leaders accurately perceive the benefits and costs?
    • Were the benefits worth the costs?
    • Who reaped the benefits of the choice that was made?
    • Who bore the costs?

student handout

The Five Year Plans

In the aftermath of the Russian Revolution and World War I, the weakened condition of the Soviet economy was clearly visible. Output in every economic sector had declined: agricultural output was well below pre-war levels; the availability of consumer goods had fallen dramatically; and industrial output faced a long, slow path to recovery.

During the early to mid-1920s, Soviet leaders engaged in a great deal of internal debate about the relative importance of peasant owned and controlled agriculture on the one hand and state-run industry on the other. The essential question concerned the best path to economic growth: Was economic growth - national wealth and prosperity - best achieved through growth of private farms and the agricultural sector or was it best achieved through state-directed investment in industry? Soviet leaders clearly felt that they could not pursue both and that a choice would have to be made.

The Five Year Plan called for investing in industry by limiting the resources available for the production of consumer goods and the farm sector and directing those resources to the production of such industrial essentials as steel and electricity. For this to be accomplished, the profits from agricultural would have to be used for investment in industry, and satisfying citizens' desires for consumer goods and housing would have to be delayed. The alternative was to encourage the use of resources to satisfy the immediate desires of citizens for food and other agricultural and consumer goods. This would mean delaying investment in the capital necessary for heavy industry and future industrial strength.

Consider the Soviet leaders' choice:

Alternatives:

Five Year Plan:
emphasize investment

No Five Year Plan:
emphasize consumption

Benefits to the USSR

 

    

Action taken (alternative chosen) - check one box

   

Opportunity Cost (alternative NOT chosen) - mark with X

   
Benefits Refused    

Given the alternatives and the benefits of each, as they were considered at the time, do you think the leaders made the right choice? Why?

Results of the choice to adopt the First Five Year Plan

By implementing the first of many Five Year Plans, the Soviet leaders clearly chose to push for high economic growth rates through investment in heavy industry and military production. One immediate result of implementing the plan was the seizing of agricultural harvests for redistribution by the state. Farming was collectivized in state-run cooperatives, and there was little or no emphasis on producing consumer goods. In addition, prices and wages were set by the government, which left few consumers with money for consumer purchases, in any case.

Investment in industry rose to 25% by the late 1920s, meaning that effectively one-fourth of the resources of the Soviet Union were being diverted into building an industrial foundation. During the First Five Year Plan (1928-1933) the Soviet economy grew by 48%. Industrial goods grew by 113% and electric power production by 227%. On the other hand, consumer goods grew by only 1%.

With the knowledge of hindsight, discuss the following questions. Be prepared to defend your answers.

  • All costs lie in the future. With the benefit of hindsight (your knowledge of history), do you think the Soviet leaders made the best choice?

 

  • Did the leaders accurately perceive the benefits and costs?

 

  • Were the benefits worth the costs? (What was the consequence of the choice that was made?)

 

  • Who reaped the benefits of the choice that was made?

 

  • Who bore the costs?

student handout

Nazi Non-Aggression Pact

In the years immediately preceding World War II, Joseph Stalin worked hard to keep the Soviet Union isolated from, although not necessarily neutral in, the growing tensions in Europe. He was very much aware that Hitler's Germany posed a threat to the Soviet Union. He was very much concerned that Hitler's powerful army might invade and take the agriculturally rich Ukraine. He also knew that his own army was no match for Hitler's and that, at the very least, he needed time to prepare to defend the Soviet Union from the Nazis. With these concerns very much in mind, in early 1939 Stalin entered into two sets of negotiations: with the French and British on one hand and with Nazi Germany on the other.

Looking at Soviet history in the years before the war, it is apparent that Stalin was a pragmatist, looking for the circumstances that would be most favorable to the USSR. First, the Soviet Union joined the League of Nations - a move that Stalin had previously opposed - presumably to become more friendly with the Western nations. (However, the known atrocities of Stalinist regime and the perceived weakness of the Soviet military kept the Soviet Union from reaching any agreements with western nations working through the League.) As events heated up in Europe, Stalin had to ask himself whether an alliance with Great Britain and France, and their combined military strength, would deter Hitler, or whether it would only mean that the Soviet forces would be exposed to the fury of German attack from the very beginning of an armed conflict.

Stalin's greatest fear was to be dragged into a war against Germany while other countries like France and Great Britain sat on the sidelines and watched, and an alliance with Germany offered other possibilities. The Nazis proposed the division of Poland between Germany and the USSR in return for not having to worry about attack from the east as they dealt with their foes in the west. From Stalin's point of view, Soviet-Polish relations had never been particularly good, and the Soviet Union had no reason to come to Poland's assistance. Perhaps most importantly, such an agreement would provide an opportunity to stay out of the war. Additionally, the Germans seemed likely to agree to recognize the Baltic area as belonging to the Soviet Union's "sphere of influence," advancing Stalin's perennial goal of extending the Soviet empire.

Consider Stalin's choice:

Alternatives:

Five Year Plan:
emphasize investment

No Five Year Plan:
emphasize consumption

Benefits to the USSR

 

    

Action taken (alternative chosen) - check one box

   

Opportunity Cost (alternative NOT chosen) - mark with X

   
Benefits Refused    

Given the alternatives and the benefits of each, as they were considered at the time, do you think Stalin made the right choice? Why?

Results of Stalin's Choice

The signing of the Non-Aggression Pact between the Soviets and the Germans was announced on August 23, 1939, and came as a shock and surprise to the rest of the world. On September 1, German troops invaded Poland, and shortly thereafter, Soviet troops crossed Polan's eastern boundary to claim their share of the spoils. Later the Non-Aggression pact was extended, allowing Stalin to include Lithuania, Estonia, and Latvia within the Soviet "sphere of influence."

With the knowledge of hindsight, discuss the following questions. Be prepared to defend your answers.

  • All costs lie in the future. With the benefit of hindsight (your knowledge of history), do you think the Soviet leaders made the best choice?

 

  • Did the leaders accurately perceive the benefits and costs?

 

  • Were the benefits worth the costs? (What was the consequence of the choice that was made?)

 

  • Who reaped the benefits of the choice that was made?

 

  • Who bore the costs?


student handout

Emphasis On Education*

*Statistics in this scenario were taken from Hedrick Smith, The New Russians, p. 20.

While the rate of change seemed slow in many areas of Soviet society and economy in the years that followed World War II, this was not the case with the area of education, which was targeted early as a priority for investment. At the time of the 1917 Revolution, Russia was primarily an illiterate peasant society with a primitive work force comprised largely of unskilled manual laborers. It is estimated that the illiteracy rate was 75% and that school enrollment was only about ten million in the early 1920's. In part because of a desire to teach about the writings of Lenin and the achievements of communism, but also to help move the country from an agrarian backward economy to a world power, schools and education were areas where the Soviets invested heavily right from the beginning. In addition, school attendance was given high importance in Soviet society.

Consider the Soviet leaders' choice:

Alternatives:

Five Year Plan:
emphasize investment

No Five Year Plan:
emphasize consumption

Benefits to the USSR

 

    

Action taken (alternative chosen) - check one box

   

Opportunity Cost (alternative NOT chosen) - mark with X

   
Benefits Refused    

Given the alternatives and the benefits of each, as they were considered at the time, do you think the Soviet leaders made the right choice? Why?

Results of the Choice:

By 1980 the literacy rate was one of the highest in the world. The increase in the numbers of people enrolled in higher education institutions was also striking. In 1950 there were 1.2 million university-level students in the Soviet Union; by the mid-1980s, that number had increased to over 5.4 million students being taught by half a million professors and instructors. By 1985 the Soviet Union had one of the largest bodies of scientific researchers in the world: 1.5 million scientists doing research work.

This emphasis on education produced both a blessing and a curse for the Soviet Union. It was a blessing in that the level of literacy, the quality of the labor force and the knowledge of the leadership increased dramatically. It was a curse in the fact that it was much easier for Soviet citizens to learn and read about life in the West, (if they could obtain banned books and newspapers). The university educated, or intelligentsia as they were called in the Soviet Union, became well-read in history and western thought. For this group blindness to the lies of the past and unquestioning loyalty to the Marxist and Leninist ideals were no longer acceptable. After all, the Soviet universities had taught them to think.

Questioning by the intelligentsia was perceived by Soviet leaders as a threat; critics were branded disloyal. Stalin conducted purges that sent many of the intelligentsia to concentration camps in Siberia, or in some cases even to death sentences. While the education system continued to increase the level of literacy and the size of the intelligentsia, it was only in the last years of the Soviet Union that the questioning of the past and present policies of the communist leadership came out in the open. Many observers of the Soviet Union believe that this force of education and the millions of individuals who were literally trained to question the past helped to break the hold that the communist party had on the loyalties of Soviet citizens. Gorbachev, the architect of perestroika, was part of this growing educated middle class, the first university-educated Soviet leader since Lenin.

With the knowledge of hindsight, discuss the following questions. Be prepared to defend your answers.

  • All costs lie in the future. With the benefit of hindsight (your knowledge of history), do you think the Soviet leaders made the best choice?

 

  • Did the leaders accurately perceive the benefits and costs?

 

  • Were the benefits worth the costs? (What was the consequence of the choice that was made?)

 

  • Who reaped the benefits of the choice that was made?

 

  • Who bore the costs?

teacher guide - Investment v. Consumption: The Five Year Plans

Alternatives:

Five Year Plan:

emphasize investment

No Five Year Plan:

emphasize consumption

Benefits to the USSR

 

 
  • greater future industrial growth
  • increased future military strength
  • increased ability to produce manufactured goods for consumers
  • fewer resources diverted from agriculture
  • greater production of consumer goods (like food)

Action taken (Choice made) - check one box

XXXX

 

Opportunity Cost

 

XXXX
Benefits Refused

Lose benefits of emphasizing consumption:

  • fewer resources diverted from agriculture
  • greater production of consumer goods (like food)
 

Given the alternatives and the benefits of each, as they were considered at the time, do you think the leaders made the right choice? Why?

Encourage students to include consideration of point-of-view and short-term v. long-term in their answers. People frequently make choices for investment over consumption. If a student saves for college instead of spending everything she earns immediately, she is choosing investment over consumption, and is expecting that her investment will increase her ability to consume in the future. Similar choices are made by people saving to buy a new car or a house. The crucial difference here is that individuals are making the choices and they bear the costs. In the Soviet Union, leadership made the choice and consumers bore the costs. (Certainly, citizens were promised a better future standard of living in return for current sacrifices, but for the most part those promises failed to materialize.)

teacher guide - The Non-Aggression Pact:

Alternatives Considered by Stalin

Sign the Non-Aggression Pact

Sign an Agreement with the Allies

Benefits to the USSR

 
  • Hitler won't invade (at least not immediately) and the Ukraine is protected
  • avoid war - buy time to build both economy and military
  • expand Soviet empire (with Hitler's help)
  • strength of the Allies (both military and economic)will support USSR if Hitler does attack

Action taken (Choice made) - check one box

XXXX

 

Opportunity Cost

 
XXXX
Benefits Refused

Lose benefits of agreement with Allies:

  • strength of the Allies (both military and economic)will support USSR if Hitler does attack
 

Given the alternatives and the benefits of each, as they were considered at the time, do you think the leaders made the right choice? Why?

Don't let students go too far into the future with the analysis. Yes, we now know that the Nazis invaded the USSR, but in 1939 it seemed reasonable to suppose that their greatest concern was with the West. It was also reasonable for Stalin to try to protect the Ukraine through treaty, or at least buy time to build up his army against a later invasion. Unless you can identify a direct cause-effect connection, don't let students bring future events into the equation.

teacher guide - Investing in Education

Alternatives Considered by Stalin

Invest in education

Invest more in military and heavy industry

Benefits to the USSR

 

 

 

 
  • increase literacy rate
  • create a skilled labor force to provide workers for industrial and technological age
  • increase invention and innovation in the future - with both practical and propaganda value
  • faster immediate growth of industrial and military strength
  • less dissent (both as a result of military presence and because dissent increases with education)

Action taken (Choice made) - check one box

XXXX

 

Opportunity Cost

 

XXXX
Benefits Refused

Lose benefits of investing in military and heavy industry:

  • faster immediate growth of industrial and military strength
  • less dissent (both as a result of military presence and because dissent increases with education)
 

Space Race

  • This is essentially the same problem as the scenario problem on whether or not to emphasize education, in that it's a choice between two alternative investments.
  • Students may suppose that one choice would be to produce more consumer goods. While they might see that as a reasonable choice, they need to be reminded that the Soviet leadership did not. Throughout Soviet history, we see leaders promising future consumer gains in return for sacrifices made by citizens in the present - that is, investment in exchange for current consumption.