Slave Labor and Big Business—
a State Within a State

From my own investigations of the Fisheries Section and, as time went on, from conversations with prisoners in other sections and in the central administration of the camp, its complicated structure and its operations as a productive commercial enterprise were becoming clear to me. Let me describe them.

In 1931 the Solovetzki camp reached the height of its development. It contained fourteen sections. The river Swir and Lake Ladoga formed its southern boundary; its northern limit was the Arctic Ocean. The enterprises of this so-called camp extended approximately 1500 kilometers along the Murmansk railroad, taking in also the whole of Karelia. It was still growing and tending to expand beyond these limits. To the east this was checked by another enormous enterprise owned by the GPU—the Northern Camps of Special Designation—and to the west by the closeness of the Finnish frontier. Therefore the camp was reaching out to the islands of the Arctic Ocean, Kolgoueff and Vaigash, and to the southern shore of the Kola Peninsula (Kandalaksha and Terek shores of the White Sea). The number of prisoners was increasing daily. Enormous projects were being carried out and plans for even wider activities were under way.

Operating independently on the territory of the so-called autonomous Republic of Karelia the Solovetzki camp established there, on a large scale, its own commercial enterprises, duplicating all the enterprises of that state. The camp had its own fisheries and lumber camps, its own brick-yards, road construction, agricultural and cattle farms—all of which were completely stifling Karelian industry. Besides these activities of a permanent nature the camp also undertook work of temporary character on a still larger scale. Some of this work had a definitely strategic purpose; for example, the construction of the White Sea-Baltic Canal (actually the joining of the Onega Bay of the White Sea with Lake Onega) , the building of highways to the Finnish frontier, the reclaiming and leveling of large expanses of swamps and woods for military airports, the erection in the most important strategic points (Kem, Kandalaksha, Loukhi and others) of whole towns for quartering troops, with barracks to accommodate thousands of men, hospitals, warehouses, bathhouses, bakeries and so on. Besides this, in 1930-31 the camp also engaged in activities of an economic nature: the clearing of marsh land to be used for camp farms, preliminary work for the construction of a Soroka-Kotlas railroad which was to join the Siberian trunk line with the Murmansk railroad (this work was abandoned in 1931), the preparation of firewood for Moscow and Leningrad, and other activities.

In 1932 the GPU evidently decided that the Solovetzki camp had grown too big and it was, therefore, reorganized. After many changes, two new independent camps—the White Sea-Baltic camp (for the construction of the canal) and the Swir camp (for preparation of firewood for Moscow and Leningrad)—were finally formed and were no longer a part of Solovetzki.

Each camp had many sections. Every section was a complete commercial entity, similar to those which in the U.S.S.R. are called "trusts," designed to make profits by productive commercial operations. Each section had its own budget, its invested and working capitals. The administration of the section, as in all Soviet "trusts," included the following departments: planning, production, technical, commercial, book-keeping and executive. The higher officers were usually three in number: the section chief and his two assistants. The section was composed of production and commercial units—the nature of which depended on the section's activity: factories, trades, agricultural farms, lumber camps and so on. Each section worked in a definite production field and had its own distinct territory. The marketing of its product was effected either independently in the Soviet market or through intermediaries. Goods produced by sections using forced labor and sold in the home market were often stamped with their trademark. As I have said, the trademark of the Solovetzki camp was an elephant. Dealings with foreign markets were, of course, handled through the Gostorg  (State Trade Commissariat) and sometimes even through a second intermediary, in order better to conceal the origin of the goods. The Section of Fisheries, the Ribprom, in which I worked, had a canning factory, a fish-smoking factory, a shop for construction and repair of ships, a net factory and over twenty fisheries scattered along the shores of Onega and Kandalaksha bays of the White Sea, on the Solovetzki Islands and on the Murman coast of the Arctic Ocean.

The sections were unified by and subordinated to the administration of the camp which regulated, combined and controlled their activity. The result was a very unwieldy and complicated bureaucratic body entirely unnecessary from the point of view of production efficiency. Furthermore, in Moscow there was a central organization independent of the camp administrations, for the combining, regulating and controlling of the activities of camp sections, composed of specialists in various fields of industry. Each specialist was in charge of one branch of industrial activity in all  the camps. Thus, for instance, a certain Bikson was managing the fishing industry at the Moscow GPU. He was a former fish merchant, had been deported to the Solovetzki camp and finally had entered the service of the GPU.

In this way the section had two masters: the administration of the camp and the council of specialists in Moscow. Both took every opportunity to meddle in the economic life of the section, although all the responsibility for the work remained with the section itself. Such a system of dual subordination is characteristic of all Soviet enterprises and those of the GPU were no exception.

Like all other Soviet enterprises the camp sections formulated yearly and five-year plans, which were combined, along one line, into the general plan of the particular camp, and along another line, into the general plan for the given branch of industry by the GPU. There is no doubt that these plans were finally included in the Piatiletka. The industrial enterprises of the GPU, based on slave labor of prisoners, are growing from year to year and becoming a factor of decisive importance in the general economic activity of the U.S.S.R.

The concentration camps, therefore, are actually enormous enterprises operating in the same field with similar "free" Soviet State institutions. The management of the former is concentrated in the GPU, of the latter, in various commissariats. In many cases the scale of the work carried on by the GPU is larger than that of the corresponding Soviet institutions; it is quite probable, for instance, that the GPU lumber operations exceed those of free lumber "trusts." Communication construction has almost entirely passed into the hands of the GPU, and entire camps with hundreds of thousands of slaves are engaged in these works—the White Sea-Baltic Canal, the Moscow- Volga Rivers Canal, the Sizran and Koungour railroads and the gigantic Bamlag, Baikal-Amour railroad development. It would seem that the planned economy, proclaimed by the Soviets, would have precluded the existence on such a grand scale, of an industrial organization paralleling the state industry, but the point is that the GPU in the U.S.S.R. is not simply a state institution, it is actually a state within a state. The GPU has its own troops, its own navy, millions of its own subjects (the prisoners in camps), its own territory where Soviet authority and laws do not function. The GPU issues its own currency, forbids its subjects to use Soviet currency and does not accept it in its stores. The GPU proclaims its own laws for its subjects, has its own jurisdiction and prisons. It is not surprising, therefore, that it maintains its own industry, parallel to Soviet industry.

There can be no exact comparison between GPU and State enterprises because the former have peculiar features differentiating them from all other business ventures, whether Soviet or not. They deserve the attention of economists.

As I continued my studies of the Fisheries Section I was struck by several of these unique features which it revealed. The invested capital was negligible, the cost of production unusually low, and the profits enormous. With a catch of 700 tons, and the purchase of a similar quantity from fishermen,—a total of 1400 tons—the Ribprom  had earned in 1930 a net profit of one million roubles. Compare this with the record of the North State Fishing Trust which in 1928, with a catch of 48,000 tons, earned a profit of less than one million roubles.

All the production buildings of this enterprise—considered as part of the invested capital—were nothing but barracks of a temporary type. The largest establishments—the canning, fish-smoking and net factories—were housed in large barns on the verge of collapse. The equipment was primitive; at the canning factory, for instance, there was neither running water nor fresh water; sea water was used. At most of the fisheries the salting was carried on in the open as no buildings were available. There was no refrigeration of any kind—not even ice-cellars. Mechanization of work was entirely absent—everything was done by hand.

In consequence, depreciation of invested capital plays almost no part in the computation of costs. In this respect all enterprises of camps, even those engaged in such complicated works as the construction of the White Sea-Baltic Canal, present an extraordinary similarity. All work is carried on by hand, not a single building of real capital type is erected, all service buildings are constructed as cheaply as possible. This is a feature unknown in Soviet enterprises, where enormous sums are being spent for capital construction and mechanization, often without any rhyme or reason except that of "overtaking and outstripping."

Why this difference? First, the camp enterprises are not intended for "show," and second—this is the chief reason—the camps have slave labor. This personnel is actually the invested capital of the GPU enterprises; it takes the place of expensive equipment and machinery. Machines require buildings, care, and fuel of a certain quality and in fixed quantity. Not so with these prisoner-slaves. They need no care, they can exist in unheated barracks which they build themselves. Their fuel ration—food—can be regulated according to circumstances: one kilogram of bread can be reduced to 400 grams, sugar can be omitted entirely; they work equally well on rotten salted horse or camel meat. Finally, the slave is a universal machine; today he digs a canal, tomorrow he fells trees, and the next day he catches fish. The only requisite is an efficient organization for compelling him to work—that is the "specialty" of the GPU.

But that is not all. This invested capital costs nothing to obtain as slaves did in capitalistic countries when slavery existed; the supply is limitless and there is neither interest to pay on funded debts nor any depreciation reserve to be set up when the balance sheet is made out.

And then there is the matter of wages, salaries, social insurance, union dues, and so on, all of which may be grouped as "labor costs," of vital importance to Soviet business. The GPU does not have to worry about these. Among the thousands of workmen in a camp section not more than a few free-hired employees get salaries; the remainder work without pay. It is true that the GPU pays out premiums to those prisoners who work irreproachably, but this represents not more than 3 or 4 percent of what the GPU would have to pay a free worker. And even this miserly pay is not in Soviet money, but in GPU scrip. The prisoner can buy for it (only in GPU stores) an insignificant quantity of food which is the waste that otherwise could not be sold. Here again the GPU makes money.

Thus, labor costs cannot be said to influence seriously the cost of production in the GPU. The absence of these two items of expense—depreciation and wages—gives the GPU a saving of not less than 35 per cent in such a venture as the fisheries, and a considerably greater saving in works like the construction of the White Sea Canal.

Moreover, the GPU trademark guarantees an assured home market for its goods—a Soviet purchaser never refuses goods offered him by this "firm," which are sold in open violation of trade regulations of the Soviet Government. A mark-up of 100 to 150 percent over cost is the usual GPU figure according to its own "plans," and this mark-up is practically synonymous with "profit"—whereas the Soviet State enterprises are not allowed a profit of more than 8 percent. Actually the GPU is not content with the limit approved in their plans and often sells its goods with a mark-up of 200-300 per cent and sometimes even more.

Here is an example. The Section of Fisheries dealt in fish which it caught or bought from free fishermen, who sold their catch both to the GPU and to other State enterprises (Corporations and Trusts) at fixed prices established by the local executive committee. (The sale of fish to private individuals, or at a price higher than the one established, is strictly prohibited and is done only secretly and in very small quantities.) The Section of Fisheries bought frozen herring from the fishermen at the fixed price of 10 kopeks the kilogram, delivered to the warehouse of the Section, where it would be resold, on the spot, to another GPU organization—called "Dynamo"—for 1 rouble (100 kopeks) the kilogram. The new purchaser would cart it to the State Kem Inn, two blocks away, and sell it there for 3 roubles (300 kopeks) the kilogram. That ended the transaction for the GPU. I might add that the State innkeeper, who had nothing to fear from the authorities, would salt it slightly and retail it in his restaurant at one rouble a fish. The White Sea herring is small—there are fifty to sixty in a kilogram—so that the consumer was buying them at the rate of fifty to sixty roubles the kilogram, which was 500 to 600 times the fixed price of 10 kopeks established by Soviet authorities.

I have already pointed out that the GPU was getting rid of its defective merchandise with the greatest ease. Such merchandise is the bane of all Soviet enterprises. Worthless raw materials, inexperienced labor, complicated machinery which nobody can properly handle, extreme haste, uneducated Communist-managers at the head of enterprises, all these factors bring the amount of defective goods to a colossal percentage which wrecks all plans and estimates. In this respect the GPU "businesses" are in a favored position compared with their Soviet competitors. Rarely would a purchaser dare to claim that the GPU had sent him defective goods; he would simply pass them on to the indulgent Soviet consumer. And if the goods are so defective that even the GPU cannot dispose of them in the open market, they are sold, in GPU stores, to prisoners at prices often higher than those of regular GPU goods in the open market. They are also handed out as a premium for "shock" work. The hungry prisoner is happy to get even this.

Widely developed graft is another distinctive feature of all GPU enterprises, when compared to regular Soviet enterprises. Bribes are taken on every occasion and without any reason by everybody from the highest Moscow GPU officials down to the last hired man of the guard. Graft in the inner life of the GPU and their camps has grown such deep roots that it has come to be regarded as a natural condition and the free hired GPU officials openly give and accept bribes unashamed. Money in the U.S.S.R. has little, or rather only a conventional value. Monetary bribes, as such, figure only in fantastic GPU "cases" in which foreign capitalists are supposedly buying Soviet specialists with "Soviet currency." Actually it is doubtful if anyone in the U.S.S.R. could be tempted by Soviet money. Be that as it may, the GPU accepts bribes only in kind, the quality and quantity depending upon the particular case and the rank and position of the person receiving the bribe.

The Section of Fisheries used its own products—fish—as bribes. The Moscow GPU Comrade Boki (member of the OGPU council, in charge of camps) and his equals were given salmon designated for export to England, and a special kind of Solovetzki herring marked by four zeros. In fact, "four zeros" herring was never placed on the market but was reserved for bribes. The export salmon and the "four zeros" herring were also given to the chief of the camp and to the chiefs of the investigation department. Officials of lesser importance received salmon of inferior quality, a box or two of ordinary smoked White Sea herring; the lower officials a few cans of preserved fish. In some cases these bribes were masked by the sending of a bill for a ridiculously small amount.

Whenever a "plan" or a report was to be submitted to the camp administration or to Moscow, the necessary preparations proceeded along two contrasting lines: in the offices, the prisoner-specialists worked day and night compiling memoranda; in the storeroom, other prisoners packed fish in barrels, boxes and baskets—this was the more important work. The Chief of Section, Simankoff, often with both of his assistants, personally supervised the packing, inspected the "presents" which were being sent to those "higher up," and themselves carefully marked the destination of each package. God forbid that an assistant should get a larger "present" than a chief. And the practice was the same when higher authorities came on an official visit. The main concern was to arrange a good reception and to prepare a pleasing package as a gift. The Section of Fisheries was no exception in this respect. All sections sent "presents" to the chiefs. The Agricultural Section sent hams, butter, and the best vegetables; to local authorities it sent cream and to the ladies, flowers. The shoe and clothing factories, among whose prisoner-workmen were the best tailors and cobblers of Leningrad and Moscow, dressed and shod their chiefs and their families, while the Handicraft Section made elaborately carved boxes for their superiors.

Such a system of universal graft no doubt adds color to the life of GPU officials.