structural:expansion
Economic role

Up until World War II, the Gulag system expanded dramatically to create a Soviet "camp economy". Right before the war, forced labor provided 46.5% of the nation's nickel, 76% of its tin, 40% of its cobalt, 40.5% of its chrome-iron ore, 60% of its gold, and 25.3% of its timber. And in preparation for war, the NKVD put up many more factories and built highways and railroads.

The Gulag quickly switched to the production of arms and supplies for the army after fighting began. At first, transportation remained a priority. In 1940, the NKVD focused most of its energy on railroad construction. This would prove extremely important when the German advance into the Soviet Union started in 1941. In addition, factories converted to produce ammunition, uniforms, and other supplies. Moreover, the NKVD gathered skilled workers and specialists from throughout the Gulag into 380 special colonies which produced tanks, aircraft, armaments, and ammunition.

Despite its low capital costs, the camp economy suffered from serious flaws. For one, actual productivity almost never matched estimates: the estimates proved far too optimistic. In addition, scarcity of machinery and tools plagued the camps and the tools that the camps did have quickly broke. The Eastern Siberian Trust of the Chief Administration of Camps for Highway Construction destroyed ninety-four trucks in just three years. But the greatest problem was simple – forced labor was less efficient than free labor. In fact, prisoners in the Gulag were, on average, half as productive as free laborers in the USSR at the time, which may be partially explained by malnutrition.

To make up for this disparity, the NKVD worked prisoners harder than ever. To meet rising demand, prisoners worked longer and longer hours, and on lower food-rations than ever before. A camp administrator said in a meeting: "There are cases when a prisoner is given only four or five hours out of twenty-four for rest, which significantly lowers his productivity." In the words of a former Gulag prisoner: "By the spring of 1942, the camp ceased to function. It was difficult to find people who were even able to gather firewood or bury the dead."

The scarcity of food stemmed in part from the general strain on the entire Soviet Union, but also the lack of central aid to the Gulag during the war. The central government focused all its attention on the military and left the camps to their own devices. In 1942, the Gulag set up the Supply Administration to find their own food and industrial goods. During this time, not only did food become scarce, but the NKVD limited rations in an attempt to motivate the prisoners to work harder for more food, a policy that lasted until 1948.

In addition to food shortages, the Gulag suffered from labor scarcity at the beginning of the war. The Great Terror of 1936–1938 had provided a large supply of free labor, but by the start of World War II the purges had slowed down. In order to complete all of their projects, camp administrators moved prisoners from project to project. To improve the situation, laws were implemented in mid-1940 that allowed giving short camp sentences (4 months or a year) to those convicted of petty theft, hooliganism, or labor-discipline infractions. By January 1941, the Gulag workforce had increased by approximately 300,000 prisoners. But in 1942, serious food shortages began, and camp populations dropped again. The camps lost still more prisoners to the war effort as the Soviet Union went into a total war footing in June 1941. Many laborers received early releases so that they could be drafted and sent to the front.

Even as the pool of workers shrank, demand for outputs continued to grow rapidly. As a result, the Soviet government pushed the Gulag to "do more with less". With fewer able-bodied workers and few supplies from outside the camp system, camp administrators had to find a way to maintain production. The solution they found was to push the remaining prisoners still harder. The NKVD employed a system of setting unrealistically high production goals, straining resources in an attempt to encourage higher productivity. As the Axis armies pushed into Soviet territory from June 1941 on, labor resources became further strained, and many of the camps had to evacuate out of Western Russia.

From the beginning of the war to halfway through 1944, 40 camps were set up, and 69 were disbanded. During evacuations, machinery received priority, leaving prisoners to reach safety on foot. The speed of Operation Barbarossa 's advance prevented the evacuation of all prisoners in good time, and the NKVD massacred many to prevent them from falling into German hands. While this practice denied the Germans a source of free labor, it also further restricted the Gulag's capacity to keep up with the Red Army's demands. When the tide of the war turned, however, and the Soviets started pushing the Axis invaders back, fresh batches of laborers replenished the camps. As the Red Army recaptured territories from the Germans, an influx of Soviet ex-POWs greatly increased the Gulag population.