Just finished reading vol 2 of Solzhenitsyn's Gulag Archipelago. He notes that the basis of the Labour Camp was established very early (largely inherited from Czarist Russia) and so, although it may be fashionable to blame Stalin for it all, it started before he became influential.
He also says that the labour camps became a vital part of the economy, doing work that the government couldn't afford to pay for. As a result, it was necessary to keep the camps full - so that if noone was actually commiting crimes they had to make them up (the alternative, to ameliorate conditions in the camps so that not so many died, wasn't apparently considered).
He explains why it was that Communist Russia was always short of stuff (razor blades, toilet paper, bread). Each camp and prisoner was given a "work norm" of output for the year that they should reach (so many trees felled, etc.); failure to fufil the norm would lead to loss of rations, for everybody. I'm not sure whether the norms were theoretically realsitic or not, but certainly given extreme wether and the poor health of workers, they certainly were often unachievable. This left the camp bureacracy with a dilemma: tell the truth, and get less food, or lie. So they lied, and claimed to have met the norm.
The workers responsible for sending the timber down to the sawmills were left in a similar situation: either accept a smaller consigment of timber as being complete, or starve. So they said they got the timber and sent it on.
The saw mill was in a quandary: how could they fulfill their norm for the various wood products if they didn't recieve enough raw timber? Well, they could say that they had recieved it and cut it up and sent it on...
So this fictitious timber worked its way through the economy. The norms were met, the 5 Year Plan's targets were achieved, but there was no wood.
Strangest of all, it turned out that some timber had been felled but never shipped. Because the norm had already been met (on paper), nobody actually wanted real wood and the work it would entail. So the real wood was left to rot, while shops were empty of furniture.