One-company towns, towns where a single company accounts for a significant share of total employment and shapes the livelihoods of the people, are often associated with centrally planned economies.

But in fact they were common elsewhere. One-company towns had grown up in the USA towards the end of the 19th century, particularly in the industrial areas of the Mid-West, and at their peak were over 2,500 in number, accounting for up to 3% of the US population.

In the UK, the Cadbury company town of Bourneville and Lord Lever’s Port Sunlight were the best known examples.

They reflected a paternalistic motivation by their employers towards their workers. But other one-company towns, particularly in the mining industry, were characterized by less benign conditions, being driven primarily by geographic considerations.

They did however became particularly widespread in the Soviet Union. This reflected a combination of the vast land mass, relatively low population density, and significant deposits of various natural resources, often located in areas with a very inhospitable climate. In part, it also reflected the preference of central planners for scale economies and low input (energy) prices.

Finally, a significant number of large industrial enterprises were moved further east from their historical locations during the Second World War. Many of them remained in their new locations — chosen precisely for reasons of poor accessibility.

A recent EBRD working paper tries to look more closely at the phenomenon of one-company towns in Russia and comparative performance of enterprises located there by matching data on performance of Russian firms with the latest Census data on distribution of population.

Decision about what constitutes a one-company town is inevitably subjective. Back-of-envelope estimates, as well as some prominent examples of one-company towns, suggest an employment threshold of around 5 per cent of town population.

On average, the employment-to-population ratio in Russia is around 48 per cent and has been broadly stable over years and across regions. Most people are employed in services. Manufacturing accounts for 16.5 per cent of total employment, and mining for additional 1.5 per cent. Thus, on average manufacturing and mining employ around 8.5 per cent of population.

Services tend to be concentrated in large and coastal cities, and agriculture in rural areas, implying that manufacturing-oriented one-company towns will have a much higher share of population employed in manufacturing and mining. Nonetheless, services (including government and social services, education, health care, real estate, construction) are still likely to account for around two thirds of employment.

Thus an enterprise employing 5 per cent of the population is likely to account for more than a third of employment in core industries (manufacturing and mining) while a manufacturing enterprise employing 10 per cent of the population will almost certainly dominate the economy of the locality and the livelihood of its people.

In Orbis dataset of Russian manufacturing and mining firms one can identify over 850 firms, which account for more than 5% of the population of the town where they are located, with almost 400 of them accounting for more than 10% of the population of their locality. These enterprises are widely dispersed across regions and industries, accounting for over 17% of overall employment in mining and manufacturing.

They are particularly prevalent in the industrial core of Russia—the Urals Federal District—where they employ every third manufacturing and mining worker (Chart 1).

Chart 1. Russian manufacturing and mining employment by region

In terms of industry breakdown, unsurprisingly mining comes first with roughly half of employment concentrated in one-company town enterprises. But one-company town enterprises also account for 31% of employment in vehicle manufacturing; 23% in metals; 17% in petrochemicals and 15% in wood processing and paper manufacturing.

Even in light industry, a non-negligible share of employment is accounted for by one-company towns (up to 10% in the textile sector, Chart 2).

Chart 2. Russian manufacturing and mining employment by industry

Comparison of production functions of enterprises revealed that one-company town firms tend to be characterized by significantly lower marginal products of labour and significantly higher marginal products of capital, suggesting substantial labour hoarding in one-company-town firms.

In addition, productivity differentials appear to have been widening over time, and overall productivity has been substantially lower in one-company-town firms. Finally, the latter also were found to be more indebted, and hence financially vulnerable, than comparable enterprises located elsewhere, although the economic magnitude of differentials in indebtedness was not as high as that of differentials in the marginal products of labour and capital.

In sum, employment concentration, including in its extreme form of one-company towns, presents specific policy challenges. Support to loci of concentrated employment, drawing on natural resource revenues, may achieve some form of employment stability and abatement of social tension but, coupled to the broader re-allocation of resources to public consumption, it undoubtedly imposes costs.

Transfer policies need to be complemented by policies designed to help restructuring and reallocation, such as better policies for entry as well as for retraining and other measures aimed at better labour market performance.

Share on Facebook

In Soviet times, it was the rails that facilitated breakneck industrialisation, military victory and the proverbial “over-fulfilment” of five-year plans – not to mention the ideological frenzy under Brezhnev which accompanied construction of the BAM, a second, parallel spur of the Trans-Siberian Railroad*.

And today, in a transformed, market-driven Russia, rail transport binds and services the world’s largest country as no other national system does – an indispensable colossus with over a million employees hauling 1.3 billion tonnes of freight and transporting the same number of passengers annually.

That said, there is a romantic image in the west of Russia and it too is inevitably tied to rail travel. It is an image born in popular literature and films like Dr. Zhivago, images of Lenin’s return to Finland Station to spearhead Bolshevik revolution, of Trotsky’s crisscrossing the country in a battle for the hearts and minds of the masses, indelible images of the romance of rail travel across an endless steppe, of trains making their way through snowy birch forests and across the Urals, of vast expanses conquerable only by rail.

In 1975, as a college student of Russian, I took my first trip on a Russian train from Yaroslavl Station to Zagorsk, site of a mediaeval Russian orthodox monastery which would later revert to its former name of Sergiev Posad. It is a short, two-hour trip I would make three more times, in 1978, 1991 and 2009. If taken in the dead of winter, it is a trip which inevitably incorporates the romantic images I have nurtured of this fascinating country. At the same time, it is a trip which encapsulates the massive social and economic change as the Soviet Union ended and Russia emerged.

Thirty years ago, unless organised by the Soviet travel agency Intourist, it was technically illegal for foreigners to make this short journey, for it lay outside the 25 kilometre zone in which westerners were permitted to travel freely. The trip then was in an unheated train car which had seen better days, a faded elegance which included dark wooden interiors and unpadded wooden benches. Though it was far warmer inside the carriage than outside, the cold seeped through the windows and doors, mixing with the heat and moisture emanating from passengers in overcoats and fur hats to form a thin layer of frost on the inside of the windows.

The Soviet city of Zagorsk was a primitive affair – its back streets of sad, run-down wooden houses and joyless apartment blocks unpaved, frozen in winter, muddy in the thaw, dusty in the summer. Its pride and joy, the magnificent Trinity Monastery, founded in 1337, was also run down, some of it in ruins, with Soviet tour groups and guides milling about unkempt grounds. Outside of foreign tourists, there were few people about, and only the elderly were at worship in what must be some of Russia’s most magnificent churches. In what was the final indignity for this hauntingly beautiful place, surrounding streets seemed to exhibit an oversupply of red banners extolling the seminal role of the Communist Party as the ultimate conscience and moral authority of the land.

Fast forward from the unravelling of the Soviet Union in the early 1990s to today’s Russian Federation. The rail network remains key to industrial growth but has assumed an additional, no less vital role. Still arteries of supply and trade, passenger trains are now promoters of small business of every description, facilitating economic activity and individual enterprise across the country from the ground up – literally.

Russia’s train stations have become veritable beehives of small business, offering an amazing array of goods and services – as have the trains themselves. In days past, I might have ensured that I had adequate food and water for my recent trip, departing Moscow’s Yaroslavl Station punctually at 12.56 on a Wednesday for Sergiev Posad. No need any longer! A minute or two out of the station, and what was to become a parade of small vendors began. First came the refreshments (ice cream, drinks, snacks) and then came a salesman (or woman) of (in order): magazines and newspapers; detective novels; plastic reading glasses; self-sharpening knives; household goods; plastic raincoats; potato peelers; ladies wallets; shopping bags; sponges; classical and historical novels (including Maria Stuart); maps and tourist guides; brooms; oriental fans; kids stickers; and, finally, butterfly collections. Each salesman had a practiced speech and sales were surprisingly brisk. (As an added treat, the return trip included the day’s single entertainer: a talented female violinist with her rendition of the Beatles’ “Yesterday” on a pink, electric violin.

The on-time arrival in Sergiev Posad brought other surprises. The sleepy train station that was a dull, dirty and depressing Soviet backwater has been transformed into a series of kiosks, shops and restaurants. It has also served as a catalyst for economic development bringing numerous stores, a modern shopping mall and supermarket to the streets surrounding the station. An orderly, attractive complex of souvenir stands and craft stores is now across the street from the monastery.

There are at least two good reasons to make the short train journey to Sergiev Posad. The first is a toy museum exhibiting traditional handicrafts from across Russia – with a magnificent collection of toys from noble families, as well as from the family of Russia’s last tsar, Nicholas II. The most moving reason to make the journey though is the monastery complex which has been lovingly and meticulously restored to its past grandeur. The defensive walls of the complex have been freshly painted, the gold-leaf stars on blue cupolas now glisten in the sun, the magnificent frescoes on its chapels and buildings have been fully restored. It is a place rich in history, now filled with worship, the sound of bells and choral song – with orthodox priests serving the spiritual needs of people of all ages.

They say that “one picture is worth a thousand words”. There should be a saying about travelling by train in Russia – something along the lines of “one short journey begets a myriad of stories”. Falling into conversation with people comes easily in Russia and especially on the train. Arriving and departing punctually from 27 suburban stations on a modern commuter train between Moscow and Sergiev Posad, mine ranged from Marshall Zhukov to contemporary politics, from rubbish collection to the state of Russia’s forests, and from the state of the economy (east and west) to the effects of the current financial crisis. Each of them is a story in and of itself.

* The train was so etched upon the national psyche in the U.S.S.R. that it often played a leading role in the true chronicler of Soviet reality, the joke. Here is one of the most telling: Lenin, Stalin, Khrushchev and Brezhnev are all travelling together in a train compartment. Unexpectedly the train stops. Lenin suggests: ‘Let’s call a subbotnik [a voluntary, extra workday], so that workers and peasants can fix the problem.’ Stalin puts his head out of the window and shouts, ‘If this train does not start moving, the driver and a third of all passengers will be executed while another third will have to push the train!’ But the train doesn’t start moving. Khrushchev then shouts, ‘Let’s take the rails behind the train and use them to construct the tracks in the front.’ But it still doesn’t move. Brezhnev then says, ‘Comrades, comrades, let’s draw the curtains, rock back and forth and pretend we’re moving!’

Share on Facebook

It was Russian business executive Alexei Mordashov who put it succinctly, jarring my own memory of the bad old days. At the Bank’s 2007 Business Forum in Kazan, he reminded the audience just how much had changed in Russia in a mere 20 years as he recounted the story of a young “comrade teacher” who had come up to him at his university in 1988. The teacher had apparently been devastated by an article in Izvestia asserting that the collectivisation of agriculture in the USSR had caused tremendous suffering and ultimately damaged the agricultural capacity of the country. “Imagine,” said Mr Mordashov, “having a conversation about this today!”

Imagine, I thought to myself, completing university courses on scientific Marxism-Leninism only to watch the Soviet state unscientifically crumble – and then go on to become a senior executive in a private steel corporation listed on the Russian stock exchange.

The musings of a former Sovietologist

Cast your mind back to another world. I remember it well, not 20, but over 30 years ago when in 1975 I landed in the Union of Soviet Socialist Republics from LA (via Paris) for a semester’s study at Leningrad State University. A university student of Soviet politics and economics, still vaguely sympathetic to the achievements of central planning (free medicine for everyone after all), I was now on my way to dormitory no 6 on Dobrolyubov Street where I would share a small, smelly room with five Soviet roommates and enjoy a Leningrad winter with no hot water, yet full use of scores of dank public bath houses (though the military had priority use of shower facilities, meaning a very cinematic, long wait in the snow).

Lack of freedom, palpable fear, meaningless, pretentious ideological drivel screaming out from banners and newspaper (not to mention the never-silent Orwellian “radiotochka”, or single-channel wired radio, in our dorm room) – all of this weaned me quickly from whatever ideological sympathies I might have had. For a lad from the US at the height of the Cold War, there was the shocking realisation that Soviet might was nothing more than a paper tiger, empty at that. The shortcomings of central planning were there for all to see – the lack of goods, of food, the queues. It’s one thing to read about, quite another to make one’s way on a daily basis, which is why perhaps we really did have the consummate Soviet experience. Having sold my extra pairs of jeans for hard cash, I was reduced to frequenting dollar stores and bars, reselling goods and (forgive me, since I had trouble using torn sheets of Pravda and Izvestia) stealing toilet paper from the fancy tourist hotels (Astoria and Evropeiskaya were my favourites), which I was miraculously allowed to enter thanks to my foreign passport.

Yet it was the smell that really did it. The smell of my roommate, reading his volume of Marx in his synthetic black jumpsuit made in Vietnam, sporting one of his two pairs of unwashed socks. The smell of socialism, the smell of public buildings, of university cafeteria no 2 (Академическая столовая) – that indescribable mixture of grease, cabbage, dust and bodily odours emanating from the basement, the kitchen, the nineteen layers of cracking paint and moist plaster, and your neighbour. And the crass smell of social inequity at every step in a society that screamed the opposite. “The American delegation is coming!” Nina Petrovna the cook would bellow, commanding us to jump the queue in front of hordes of hungry rural tourists, to be served a bowl of congealed soup out of a Solzhenitsyn novel, with an especially large lump of lard in it “…especially for our American friends”.

What did you do in the war, Daddy?

Not that war, the Cold War. Having recovered from my student experience, on my return to the US I went from one political extreme to the other, becoming a champion of the free market, changing my political views to rabid anti-Sovietism, strolling the aisles of my local supermarket, gazing at the wonder that is the banana in winter, and proclaiming the lie and pretence that was the USSR to anyone who would listen.

It was the height of “zastoi” (the period of stagnation under Brezhnev) and, as the two superpowers tangoed delicately away from a period of détente, I went off under the auspices of the State Department for a year to Kiev, Tselinograd (now Astana) and Dushanbe, on the last American cultural exhibit in the Soviet Union. “Agriculture USA” was its name and, as fate would have it, I landed in front of a mock-up of an Iowa pig stall (really), at a stand with a colourful plastic sow (свиноматка!) and eight calico piglets, responding to questions from the proletarian masses about everything but pork production. The horrors of capitalism and the inequities of life in the USA were the subject of most questions – the fate of minorities (lynching, concentration camps), the unemployed (starvation), the elderly (eating dog food), the sick (no medical care) and the homeless, every possible cliché that the Soviet media served up to the public was discussed ad nauseum, mostly ad absurdum. I was honest, often critical of my own society, yet most people were convinced that I was lying – and most would walk away muttering loudly that life in the USSR was in any case much, much better: “У нас, молодой человек, лучше.”

1989 and the defeat of the ideological adversary

After Leningrad came Munich and Radio Free Europe/Radio Liberty, an American-funded, anti-Soviet radio station. My knowledge of Russian and two master’s degrees in politics landed me first in what was called the “Red Archive”, where I had the pleasure of reading every article in Pravda and Izvestia daily (here is a good point to recall what I did with these publications as a student – see paragraph 4). Articles were cut out by hand and Xeroxed (no computers!), then classified by subject for the archive. More important was the Sisyphus-like activity of my colleagues who were underlining and filing the surnames of Communist Party officials that appeared in these illustrious publications (and there were lots), the better to be able to track their careers over the years. This was, you see, the science of Kremlinology: the progression of an agricultural worker from heroine-milkmaid (знатная доярка) to minor Party official to Omsk Party Secretary to the Central Committee of the CPSU was documented for posterity.

Over just a few years, after the deaths of Brezhnev, Andropov and Chernenko and the advent of Gorbachev, glasnost and perestroika, things unravelled across the empire and across eastern Europe and Yugoslavia with increasing speed. No one had foreseen the depth and breadth of the dramatic change that was coming – and once it began no one thought that it would proceed as quickly as it did. 20 years ago exactly, I was working in the Russian Broadcasting Department of an anti-Soviet American radio station in West Germany when, in short order, time and politics accelerated and the course of history was altered.

1989-2009: A mere 20 years

It helps to look back to see how unimaginably, impossibly far we have come. Back in old, crumbling Tselinograd, KazSSR of the 1980s, the idea of young bankers, lawyers and economists from independent Kazakhstan, Ukraine, Russia, Poland, Germany and France working in an international financial institution in London would have been greeted with incredulity and disbelief. Whatever the shortcomings of transition have been, however painful the current crisis is, it is worth remembering and pondering the point from which this unbelievable journey began.

Share on Facebook