Perestroika and the Working Class

Against the Current, No. 20, May/June 1989

David Mandel

“THE STATE OF our economy satisfies no one.”(1) With this undoubtedly true statement Nikolai Shmelev, an economist at the U.S.A. and Canada Institute, begins his analysis of the sickness that besets the Soviet economy and the medicine that is needed to cure it.

More open to question, however, is Shmelev’s claim that the introduction of a market reform of the nature he advocates “has no hidden social or class underpinning. There is not even a hint of ideology here. It is a purely economic, even technico-economic, problem.”(2) This is also the official point of view: Mikhail Gorbachev himself praised Shmelev’s analysis, while distancing himself from some of Shmelev’s more extreme recommendations, especially that unemployment be tolerated and even encouraged.(3)

This article will examine the claim of class neutrality for the reform now being implemented in the Soviet Union. While this reform falls short of the extensive marketization advocated by economists like Shmelev, it is, nevertheless, inspired by that model and regarded as a step in that direction.

Thus, A Aganbegyan, a close economic adviser to Gorbachev, has admitted that in his view the reform endorsed at the June 1987 Central Committee plenum is not fully adequate to the economy’s needs. It is a compromise between those who want rapid, radical change and those favoring evolutionary improvement of the economic system. But if “today’s measures are not as radical as one would like, we will be able later to refine, correct and deepen our course.”(4)

Specifically, this article will attempt to answer the following questions: 1) To what degree does the reform correspond to working-class interests and concerns? 2) To the extent that it does not, what sort of reform would? 3) And to what extent are working-class interests reflected in the public debates around the reform? A number of interrelated arguments are put forward in favor of the present reform, in its current as well as its more consistent, “radical” version. The shift from administrative methods of management and vertical coordination to reliance on economic methods, the market mechanism and horizontal coordination among autonomous and competing enterprises is described as a victory for economic rationality, social justice and democracy. As such, all workers are interested in it. If some are skeptical or even hostile, it is, according to the economist G. Lisichkin, because of ingrained “dependent attitudes” (izhdivenchestvo) fostered by the old system and an “archaic leveling position.”(5)

Shmelev hints that mistrust of the reform is a sign of the “almost physical degradation of a significant part of the people on the basis of drunkenness and idleness.”(6) Such attitudes are one of the fundamental “braking mechanisms” of social progress, and it is often repeated that the restructuring of the economy requires a corresponding restructuring of people’s consciousness.

In this view, the old “command system” worked poorly because it was run without concern for the objective laws of economic rationality. Shmelev writes:

“It seems as if we have forgotten: there really was a time [under the New Economic Policy in the 1920s] when the ruble and not the administrative order ruled in our economy, i.e. common sense and not bureaucratic, no-nothing arbitrariness .. . [The system that replaced NEP] sought the required quantity … not in accord with objective economic laws but despite them. The stubborn, longstanding attempts to override the objective laws of economic life, to suppress the incentives to work that were formed over the ages and which correspond to human nature, in the end led to the opposite of the hoped for results. Today we have a shortage-ridden, in fact completely unbalanced, and in many respects unmanaged, and, if we are to be honest to the bitter end, almost unplannable economy that still resists scientific-technical progress We have to look at matters realistically. For many centuries humanity has been unable to find any other criterion for effective work than profit. Only it allows the objective and precise comparison of the costs and results of production.”(7)

Similarly, Lisichkin rails against the voluntarism of the proponents of egalitarian redistributive policies as wanting to “blindly jump over, skip over the necessity of distributing material goods in our society in our time according to labor with the help of widely developed commodity-money relations. This is the same leveling from which our society is already suffering.”(8)

The reform is also widely described as the restoration of social justice.(9) In this view, the old system, with its leveling tendencies, was unjust because it weakly, if at all, linked reward to the labor furnished and to its results. This is unjust insofar as it gives the same remuneration to the hard-working, conscientious worker as to his or her lazy, slothful colleague. The latter is a parasite living at the expense of those who work honestly and who have made the effort to acquire a skill.

“People of genuinely skilled labor (i.e. not according to their diploma but in its very essence) do not want to reconcile themselves with this. They appeal for social justice, which they see in the equivalent exchange of the products of their labor on the basis of Marx’s labor theory of value, i.e. they call to use in our economic life the law of value, the market, commodity-money relations, cost-accounting.”(10)

Finally, the reform is seen as a democratizing measure since it does away with bureaucratic arbitrariness in favor of objective economic criteria and eliminates the monopoly situation of the producer in favor of the consumer. According to Aganbegyan, the “general tasks of the economy in the new conditions can and should be resolved with the help of economic methods, and that means in a more democratic way.”(11)

Similarly, the economist V. Pavlov argues that “the new system of prices and price formation provides for the profound democratization of the practice of establishing prices, a broadening of the practice of maximum prices and prices set by contract.”(12) “Free trade in excess and over-plan production,” notes Shmelev, “will immediately fill the contract with vital significance. This will be the first, but very important, step in the democratization of planning.”(13)

To judge by these claims, the reform really would seem to be technical and apolitical, except insofar as it affects the arbitrary power of the bureaucrats (whose resistance is cited openly by some as the reason for its not being radical enough).(14) In order to properly evaluate this, it is necessary first to describe briefly the workers’ situation under the unreformed “command” system and then to assess the impact of the reform.(15)

A central feature of this situation is the absence of democratic rights, including the right to organize independent trade unions and to strike (although informal independent organization does exist and strikes do occur, both on the shop level). Formally the workers have broad powers in the enterprise, but these are not put into practice and most workers have not even heard of them.

A second characteristic is job security-workers are almost never laid off for reasons of redundancy. This is mainly due to the chronic scarcity of labor that the “command economy” generates (despite regional pockets of surplus). Moreover, for various reasons, management’s interest, on balance, is not to economize on labor costs but to maximize them. Thus, although not consecrated by the law (unlike the right to work), job security has come to be seen by workers as a de facto right. In this way, despite the absence of political rights, the seller’s market in labor creates a relationship of forces on the shop floor that favors the workers.

In the enterprise under the 11 command economy,” workers’ relations with management are to a large extent based upon collusion to circumvent the spirit and often the letter of the law in order to meet performance targets set by the higher levels of the economic hierarchy. A significant part of the workers’ wage, therefore, takes the form of corruption, in particular fictitious work. As a result of this, as well as the tight labor market, the workers are able to exert a constant upward pressure on wages, despite the efforts of the central authorities to make wages follow behind productivity gains. At the same time, and for similar reasons, real wage differentials in the same industry are relatively small, despite official policy that strongly opposes “leveling.”

The manager, thus, really has little by way of either carrot or stick to motivate workers to more conscientious and intense efforts. (Nor is the manager really motivated to demand this). The incentive role of the individual wage is further weakened by the relatively large size of the social wage-that is, free or subsidized food products and services-which is distributed with little or no relationship to the labor furnished. According to one estimate, for every ruble earned in wages in 1984, 69 kopeks were distributed from public consumption funds [100 kopeks equals one ruble].(16)

Gorbachev offered the following assessment of labor’s situation:

“[The ‘command economy’] has undermined the material basis of incentives and prevented the attainment of superior results. It has led to the decline of the economic and social activity of the population, to the decline of labor discipline … A mentality of dependence has developed. The psychology of leveling has taken root in people’s consciousness. The break in the link between the measure of labor and the measure of consumption not only distort; the attitude toward labor but leads also to the distortion of the principle of social justice …. “(17)

The workers, no less than Gorbachev and Shmelev, are dissatisfied with this situation, though they do not necessarily share their analysis of it. Their standard of living is low and has been stagnating since the late seventies. Through their daily experience, workers are perhaps more aware than anyone of the terrible wastefulness and Kafkaesque irrationality of the “command” system, which does not let them work well even when they want to. Moreover, that part of their wage that is based upon collusion with management not only degrades their sense of dignity but often prevents them from asserting their interests against management, since it takes the form of a “favor,” and is illegal to boot.

In the last analysis, the workers have no established recourse against the arbitrary decisions of management (except in the courts, but these are often subject to the political influence of the director}(18) and they are painfully aware of their fundamental lack political and trade-union rights.

At the same time, it is important to stress that from the workers’ point of view these arrangements are a defensive adaptation to a system that has deprived them of their political rights and above all the right to manage and control the nationalized economy. They have given workers an important measure of basic economic security as well as the means to defend themselves on the shop-floor against attempts to intensify their exploitation beyond what they consider tolerable.

A worker is, therefore, interested in a restructured economy, but not necessarily of the type that Shmelev wants or that Gorbachev is trying to introduce.

Just as the workers’ present situation is a defensive adaptation to their political expropriation, so too their support for a reform of the economic system hinges on the restoration of democracy. To understand this, we must see how the present reform will affect them.(19)

One major change will be the loss of job security. This has already begun. It is officially estimated that “no fewer than 16 million” workers and employees will be made redundant over the next 12 years.(20) “Everywhere in the enterprises,” wrote Pravda in January 1988, “in the farms and organizations, redundancies, reductions of staff are occurring or their preparation has begun.”(21) The journalist F. Burlatskii reports that many factory directors would be prepared to fire from one-quarter to one-third of their workers, if they were allowed to distribute among the others the wages of those dismissed.(22)

On January 20, a joint party-government-trade-union resolution was published: “On Ensuring the Effective Employment of the Population, Improving the System of Job Placement and Increasing Social Guarantees for the Working People.” It calls for redundancies to be decided with the participation of labor collectives in an atmosphere of openness. The workers must be given two months’ notice and if they cannot be found jobs in the same enterprise, or if they refuse them, they are eligible for two and possibly three months’ pay. In accordance with the decisions of the June 1987 Central Committee plenum, the resolution makes provision for the creation of a nationwide system of job placement, retraining and vocational guidance.(23)

The prospect of being made redundant is disturbing to the Soviet population as a whole, and no doubt the principal motive behind the publication of the resolution, which really adds little that is new, was to calm the public concern. In part, workers simply do not like the idea of being forced to leave their enterprise (voluntary turnover, of course, is very high) and possibly having to move and to retrain. Commenting on the letters he received in reaction to an article on employment the director of the State Planning Commission’s Scientific Research Institute concluded sadly that “we have a simplified understanding of guarantees: to get work in the same profession and same enterprise.”(24)

People fear that the director’s newly-found right to make workers redundant will be used unjustly. Sovetskaya Byelorussiya carried a letter from a woman with nine years’ experience at a factory, who claims she was dismissed because she has young children who are often sick, requiring that she stay home with them. Newspapers have been reporting a sharp increase in complaints of haste and bias in state reductions.(25)

But people are also afraid of unemployment itself. A few days after the publication of the resolution, Pravda printed an interview with the vice-chairman of the USSR Council of Ministers’ Bureau of Social Development. “Of late,” observed the interviewer, “letters have begun to reach Pravda, the authors of which express fears of remaining without work.” One Muscovite wrote that “it looks as if long-forgotten times are repeating themselves.”

The vice-chairman denied this, but what he had to say was not very comforting. He admitted that the national retraining and placement system was still in the future. But in any case, a good manager would never let a good worker go but would rather find him or her another job in the enterprise perhaps by expanding production or creating second and third shifts. But even if a worker were to end up outside the gates of her or his “native” enterprise, many workers are urgently needed elsewhere. He mentioned the Baikal-Amur mainline region (in the far east) and the service sector (which suffers from low wages and even lower prestige, due in part to endemic corruption).(26)

Of course, it does not help matters that some “radical” pro-marketeers, like Shmelev, have openly called for “a small reserve army of labor,” hastening to add “that the state, of course, would not leave [them) to the whims of fate.”

“Let us not close our eyes to the economic harm caused by our parasitical certainty in guaranteed work. Today, it seems that everyone understands that we owe our lack of discipline, drunkenness and slipshod work very much to excessively full employment …. The real threat of losing one’s job is not at all a bad medicine for laziness, drunkenness, irresponsibility.”(27)

One reader observed that such ideas could have the opposite of the hoped-for effect. Workers, fearing redundancies, would not want to work at their full capacity.(28) “What are we, the thirty- and forty-year-olds, to do?” asked one worker. “Our education is poor, and we have no ‘survival’ skills; and so we have no certainty in tomorrow. It is not in my interest now to work well; as a result of such ‘zeal’, superfluous people will appear, and that means there will be layoffs …. And then where?”(29)

Soviet enterprises are, of course, overstaffed, and few would disagree that a certain amount of redistribution of the labor force is justified. At the same time, the Joss of accustomed job security is unsettling to workers. Soviet authorities readily admit there will be” emotional turmoil and disappointment” and that a “serious psychological restructuring is necessary and unavoidable.”(30)

The reactions so far from workers indicate that from their point of view the lifting of so vital an acquired right as job security, whatever the economic arguments put forward to justify it, is acceptable only if compensated by the restoration of their political rights: the workers themselves must decide, on the level of national policy as well as on the level of the enterprise, when redundancies are justified, how they are to be carried out and what arrangements must be made to ensure the rights and welfare of those made redundant. Only in this way can they be assured that the lifting of job security will be a progressive measure and not a whip to enable intensified exploitation of the workers.

The regime itself has recognized this, though it is unwilling or unable (no doubt, both) to act consistently on this understanding. Thus the aforementioned resolution points out:

“Questions related to the release, retraining and job placement of employees are to be resolved in strict accordance with labor legislation and the USSR Law on State Enterprises (Association), on a democratic basis, in an atmosphere of openness, and with the direct and active participation of labor collectives.(31)

Whatever the intention the complaints published in the press leave little doubt that on the enterprise level, it is not the workers who are deciding. Nor do they seem to have much recourse against these decisions. Certainly, there has been no sign that the trade unions are being democratized.

Matters are even worse on the level of national policy. There has been no public discussion on any concrete, practical basis of the issue of redundancy and of the measures for retraining and placement and for sustaining the worker between jobs. In an interview, the first vice-chairman of the State Committee on Labor and Social Questions could only report that the drafters of the resolution drew upon scholars’ recommendations and domestic and foreign experience, and that they discussed the draft with 350 labor collectives in different cities.(32)

This is how the reform as a whole is being fashioned and introduced. Gorbachev may well repeat that democratization is the very essence of the restructuring, but the restructuring is being handed down and carried out very much from above, albeit with a certain sounding out of popular opinion. It is characteristic that redundancies have already begun, yet the promised nationwide system of job placement, retraining and vocational guidance mentioned in the resolution of January1988 is still apparently far off, although the original decision to establish it was taken at the June 1987 plenum of the party Central Committee.

In another interview in late January 1988, the chairman of the USSR State Committee on Labor and Social Questions admitted that effective forms of record-keeping on the unoccupied population is only in the process of being devised, that labor-resource management is often done by guesswork, and that his committee is “racking its brains” over the problems facing workers who are forced to move to other cities.(33)

Another aspect of the reform that will affect the workers in a major way is the large reduction in the relative size of the social wage. This involves raising the retail prices of subsidized basic food products and of services and introducing user fees for services that are presently free.

The government has promised that living standards will not suffer, that it is merely a question of changing the way in which these values are distributed: what the state saves in subsidies, it will pay out in higher wages, while raising the allocations for those who do not have wage income. The idea, of course, is to further enhance the incentive role of the individual wage, which itself will be more closely linked to performance on the job.

This aspect of the reform has caused great concern throughout Soviet society. People are deeply mistrustful of the retail-price reform and do not believe the repeated assurances that it will not lead to a decline in their living standards. In October 1987, Izvestiya published official statistics on the average family budget. An avalanche of letters followed, which saw the “Family Budget” as an attempt to prepare public opinion for the coming price reform. Typical was this letter from Leningrad:

“The data presented here are intended to show the Soviet people’s high standard of living…. But from there it is easy to conclude that our family budget is capable of surviving any increase in retail prices. What an awful mistake, a mistake fraught with very unfortunate consequences.”(34)

Summarizing the reasons for opposition to the retail-price reform cited in letters to the party journal Kommunist, economist P. Aven noted that there is a fear that there will not be compensatory rises in wages and allocation payments, fear of inflation from the “liberation of prices,” fear that prices for the same goods will be un­ even across the country and even in the same area. “There is fear that under the banner of the struggle for social justice measures can be promulgated that are directed at reducing the real income of the population.” The retail price rise, wrote a resident of Kiev, “will provoke dissatisfaction in the population and undermine the faith of the people in the plans of the party and in the restructuring.”(35)

Popular opposition to the price reform has two main bases. The first is distrust of the government’s assurances that living standards will not suffer. This dis­ trust is based upon past experience and upon the secret and fundamentally undemocratic way in which the reform is being prepared. A journalist reported in Pravda a conversation he overheard on the bus, one rider warning that the “higher ups” have already drawn up a document to triple rents. To this the other replied: “They promised that the people would not be hurt.” The journalist remarked:

“It was, needless to say, a typical myth, an idle fabrication…. But this is precisely the smoke that, as we know, is never present unless there is fire All these matters are being discussed, resolved and eliminated in various offices ….They are being resolved without the testimony or active, mass participation of ordinary people — the very people for whose sake the entire initiative was conceived — and without sufficiently extensive knowledge of their thoughts, wishes and hopes. Meanwhile, our readers are recalling the law passed last summer according to which major issues of state are subject to public discussion.”(36)

The undemocratic way in which the retail-price reform is being drawn up is, of course, par for the course. But the secrecy, the failure so far to produce a draft document on the reform and to open it to public discussion is special in this case and reflects the regime’s fears in the face of East European, and especially Polish, experience with price rises. (While the dates and modalities of the price reform in wholesale trade have been spelled out in official documents, neither of these have been announced for retail prices.)

But opposition to the reform does not stem only from fears of a decline in living standards. There is also opposition in principle to the elimination of arrangements that are widely seen as guaranteeing basic economic security, something that is regarded as a crucial right “The claim often slips in,” noted Aven, “as if some evil fate is taking from the people a right that belongs to them.” Citing the argument of a resident of Semipalatinsk-“What then will we advocate in the soviet way of life if we give up completely our free medical care and low prices for communal services?”– Aven concluded sadly that this indicates “an identification of the existing imperfect system of distribution and payment for housing with the principles of socialism.”(37)

This principled opposition to the reduction of the relative size of the social wage (that is, opposition based not merely upon fear that the loss will not be covered by a wage rise) leaves unanswered the problem of work incentives, which the price reform is intended to strengthen. But this problem, too, leads directly to the issue of democracy, in particular to its role as a key motivating mechanism under socialism. We will treat this issue presently in our discussion of yet another aspect of the reform, one also aimed at strengthening the incentive role of wages: the elimination of leveling tendencies in the payment of wages.

In the name of social justice and economic rationality, income differentials within and among enterprises, sectors and occupations are to increase significantly, in accord with the June 1987 plenum’s call to “remove the wages ceiling” and to make wages depend closely on “individual as well as enterprise performance.”(38)

The reform establishes new skill-grade structures and base rates, the latter to be raised on average 20 to 25 percent. It provides for a review of assignments of jobs to skill grades and of individuals to jobs. It also establishes a review of work norms and piece rate in order to make them more “progressive” (at present norms are regularly exceeded by wide margins). Finally, the reform gives enterprise managers various options for adjusting job rates, awarding bonuses and generally ensuring that wages correspond to the worker’s performance.

It provides for two models of distributing enterprise profits. In the first, after fulfilling basic financial obligations-budget costs, wages and bills, credit charges and debt payment-the enterprise can divide what is left as premiums and bonuses. Thus, the basic part of the workers’ earnings are still not linked directly to enterprise performance, but the size and payment of bonuses and premiums are not guaranteed, as was generally the case in practice under the old system. The second model is even more radical, as it completely abolishes fixed wages: after meeting debts and cost obligations, the enterprise uses what is left to pay workers and management.(39)

Thus, base rates are to increase but work norms will be tightened accordingly and bonuses will be harder to get. Moreover, although the average wage is to increase by 15 percent over the current five-year plan (1986-90), the greatest increases will go to the more skilled, and especially to technical and other white-collar staff (their base rates are to rise 50 percent more than the workers’), whose average salary relative to the workers’ wage has declined quite drastically over the years since Stalin’s death. The aim is to encourage people to acquire and upgrade skills.(40)

Workers are naturally suspicious of changes in wage policy, and these are truly fundamental ones. As the authors of one article, an economics professor and enterprise director, observed, workers, “as a rule, have a guarded attitude toward innovations in the payment of wages, since their longstanding experience of many years shows that behind the noise about innovation, management tightened norms and cut wage rates.”(41) Again, this is a question of democracy: the workers themselves need to formulate and control the execution of the reform to ensure it does not become just another attempt to increase their exploitation.

The Soviet leadership has addressed this issue in the new Law on the State Enterprise, which provides for election of key managerial personnel and for the creation of a new institution, the labor council, to be elected by the worker collective. Gorbachev explained the election of managers in the following terms: “The well-being of the worker will depend upon the abilities of the managers [something that was true under the “command economy” only to a very limited extent; hence the leveling]. The workers should, therefore, have real means of influencing the choice of director and controlling his activity.”(42)

But here again the regime’s response is half-hearted and inconsistent. In the first place, the election of enterprise directors is subject to confirmation by the “superior organ” (higher state body) and that of lower managerial personnel, by the director. This is justified on the basis of the arguments that the directors represent both the state and the worker collective and that in the first stages of democracy there can be “excesses.”(43)

The law uses a number of notorious terms that, since the years of Stalin’s rule, have left no doubt where real power is to stay: with the administration. The law states that the enterprise management is to function according to the principles of” democratic centralism” and “one-person management” (edinochalie).

Doubts about the authenticity of the democratization of enterprise management only increase when one examines the responsibilities assigned to the labor councils, which exercise authority in the name of the labor collective between general assemblies: promotion of labor discipline, development of measures to improve enterprise effectiveness and the monitoring of wages and salaries to ensure that they are justified by the work furnished. The law does not mince terms:

“The council concentrates its main attention on the development of the initiative of the working people and increasing the contribution of each worker to the common cause, and carries out measures to achieve high end results of the enterprise’s activity and to earn. The collective’s economically accountable revenue.”

In any case, even if enterprise management were fully democratized, this would not constitute an adequate response to the workers’ concerns, since key conditions determining the relative and absolute size of their wages will still lie outside the control of the enterprise. The wage reform is being carried out in piecemeal fashion, both within and between sectors, based upon the relevant ministry’s judgment as to whether the enterprise has sufficient internal means to finance the new wage scales. The likely result is significant wage differentials for similar jobs in the same sector and region, thus undermining the avowed goal of “social justice.”

More significant is the unequal starting position of the different enterprises due to the unequal quality of their capital stock, itself the result of past investment policy, which was largely out of the enterprise’s hands. Under these unequal conditions, prices based upon average costs will yield very different profit rates within and among sectors. These differentials will obviously have nothing to do with “social justice.”

In sum, from the point of view of the workers’ interests, wage reform, just as the removal of job security, demands that genuine democracy be established on both the enterprise and the national levels.

But there is an even more fundamental sense in which reform of labor incentives requires democracy. For it is not at all clear that the workers’ interests lie with a reform that, in the name of economic rationality and human nature, bases the incentive to work so heavily upon increased income differentiation, not to mention the threat of unemployment. At the same time, no one is disputing the need to retain individual material incentives: the argument is about the size of tolerable income differentials, how they are to be determined and whether this should be the only or main incentive.

It is equally doubtful that workers are interested in a reform that (at least in its more consistent version) would base most investment decisions on criteria of market rationality that tend to increase income disparities among regions and sectors. For the market reform (again, if consistent) challenges inequality based upon bureaucratic privilege only to replace it with market-based inequality, which from the workers’ point of view is not necessarily any more just.

The evidence from the Soviet Union, as well as from the other Soviet-type systems, is that the workers share strong egalitarian values. An egalitarian wage structure is, of course, a means of defense against attempts to intensify exploitation by dividing workers and pitting them against each other. This has always been the material basis of the workers’ egalitarianism as well as of labor’s emphasis on solidarity.

When Literaturnaya gazeta asked the “radical” marketeer Lisichkin to write a piece on the theme “Is It Shameful to Earn a Lot?” he considered the topic extremely “primitive.” Nevertheless, he composed a diatribe against the proponents of redistributive policies, which he entitled “Charity Out of Someone Else’s Pocket.” He argued that it is not only not shameful to earn a lot, it is praiseworthy. “It is much more just to divide income according to labor, inasmuch as the more consistently this principle is carried through, the richer the economy becomes and, as a result, everyone working in it.”(44)

A little over a year later, Lisichkin published another article in which he reported that the majority of letters in response to his article supported the principle of equality in the distribution of income. He cited one from a retired textile worker of Kostroma (the textile workers of this region were probably the Bolsheviks’ strongest supporters before 1917 as well as during the Revolution and civil war) recalling her youth as a Young Communist in the 1920s. Although there were not so many consumer goods as today, there was a collective life and spirit of solidarity that many of today’s youth envy. This left Lisichkin wondering why such “an archaic, egalitarian position is able to instill itself so successfully in the consciousness of certain strata of toilers.”

We have already given his answer: they want to continue living an easy life, benefitting from the efforts of others. It does not bother Lisichkin that a majority of the population share these attitudes. He cites a recently published poem of Yevtushenko (written in 1957) that begins:

Oh, the majority
how many times have you been wrong?
you have executed and ruined
and even now you are not a deity …

And it ends:

In the word “majority” is impotence
but strength is in the word “minority.”(45)

Of course, Yevtushenko was writing about conformism in the period of Stalinist terror, and Lisichkin is writing about the comparatively egalitarian wage policy that was introduced after Stalin’s death, largely as a concession to the working class to buy its political quiescence now that terror had been abolished.

There is no doubt that the low labor productivity in the Soviet Union is in some important part attributable to the “command” system’s inability to motivate workers. But this does not mean that the only alternative to increased inequality is “equality in poverty.” In his book on” actually existing socialism,” Rudolf Bahro characterized labor motivation under the “command economy” as a case of “no longer” and “not yet.”(46)

This expressed the contradictory nature of the “command economy.” It relies on an essentially capitalist type of incentive system-premised upon the liberal view of human nature as inherently indolent, disliking responsibility, self-centered and greedy-but in conditions that, overall, are very different from those of capitalism, in particular full employment, job security and a basically guaranteed minimum subsistence quite unrelated to actual work.

The present reform wants to break through this contradiction by making the general conditions conform to a revamped capitalist-type system of incentives.

From the workers’ viewpoint, this is not progress but a step backward from “no longer” to “once again.”

The contradiction could be resolved in another way: by moving forward from “not yet” to” already,” that is, by changing the incentive system to make it conform with the overall conditions-by creating a genuinely free association of conscious producers through democratization at all levels of management.

Despite all the rhetoric about democracy, this is an alternative that the Soviet leadership and the “radical” pro-marketeers have ruled out. Lisichkin recalls that in the first years of collectivization all the farm’s revenue was divided equally “according to mouths.” This seemed just but it could not motivate the peasants to work. “Experience showed that it was much more just to distribute the income according to labor.” And so payment according to work-day units was introduced.(47)

Lisichkin fails to consider the fact that the peasants were working against their will and had absolutely no say in the major decisions of their farm economy and very often practically no income from the “collective” economy.

In the Israeli kibbutz, where income is distributed “according to mouths,” without connection to the quality or quantity of the individual labor furnished, the members are highly motivated and productive in their work. (This was true even before they began to use hired labor.) The difference is that kibbutz members are there of their own free will. The kibbutz is run democratically, and therefore there is a real commitment to the collective interest.

Members are motivated by a sense of solidarity and collective responsibility. They know, because they participate in all the major decisions affecting their farm economy, that by working conscientiously and showing initiative they increase the collective wealth, thereby improving their own well-being. The material link between labor and reward is very much there, but it is a collective link, and, therefore, also has a moral quality: one works to expand the collective pie so that everyone can have a larger slice.

That such a system can work (even if the example is of a small-scale economy within an overall capitalist economy) shows that this type of incentive system does not at all violate the “laws of human nature” when other conditions, notably democratic management, are present.

This point of view is represented in the public discussion of the reform, but it is a distinctly minority point of view that does not have the ear of the political leadership. In a recent article, Yu. Sukhotin and V. Dementev, economists at the Central Mathematical Economics Institute of the USSR Academy of Sciences, presented the thesis that the fundamental problem of the “command economy” is its inability to motivate managers to act in accordance with the overall interests of the economy. The reason for this is the absence of democracy, the concentration of power in the hands of the bureaucracy. The authors specifically reject the view that the problem stems from violation of the objective law of value or the absence of money-commodity criteria and incentives.(48)

Sukhotin and Dementev begin their analysis by noting the tendency among managers at all levels of the economic hierarchy to conceal the real possibilities at their disposal in order to keep at an easily manageable low level the demands placed upon them. Managers do this in order not to complicate their lives, since their careers depend upon doing a good job in the eyes of their superiors.

Since the superiors are subordinates at their own level, they tend to behave in the same way and they benefit from their subordinates’ defensive behavior. There are similar horizontal pressures since people do not want their colleagues to show them up. Throughout the hierarchy, then, the watchword is “don’t stick out.”

Experience shows that no amount of exhortation and campaigning can eliminate these negative tendencies, which stern from the very logic of the system. It is therefore necessary that there be within the system it­ self a factor that can neutralize the negative behavior of managers and channel their desire to improve their personal position in a direction beneficial to the economy.

The authors argue that such a factor is the real presence of the owner The view is widespread in the Soviet Union that the economy suffers because “there is no owner” (except the very highest levels, essentially the Politbureau, responsible for the overall health of the economy): no one really feels responsible for it.(49) But few understand the essence of the owner’s beneficial influence. The owner’s social situation, unlike that of the manager, is fully dependent upon the health and fate of the economy, and so only he or she can put it in order and must therefore have more power than the manager at all levels of the economy.

In a nationalized economy where there are no functioning democratic procedures, the managerial hierarchy runs the economy independently of its nominal owners. The negative managerial behavior is therefore given full scope.

Socialist property … requires highly developed democratic mechanisms that can ensure the participation of all workers in the economic decisions that determine the fate of the economy. The lengthy delay in forming such mechanisms is the central feature of the period of station with its strongly marked administrative drift.(50)

The authors specifically reject the view, which is that of the leadership and dominates the debate, that democratization should be limited to the enterprise, leaving the higher administration untouched. The absence of responsibility before the people at these higher levels allows major decisions to be taken that do great harm to the economy and undermine the prestige of the socialist system of management.

Sukhotin and Dementev call for real democratization: branch soviets, referenda on all major questions, the election of all officials and the right of recall, and much else.

The fundamental cause of the economy’s problems, the basic reason why it cannot be effectively planned and managed on the basis of that plan, is not, as Shmelev maintains, because the undertaking itself is unrealistic, even utopian. The reason lies in the contradiction inherent in a planned economy that is managed by a bureaucracy that escapes from popular control, that has arrogated to itself the power that belongs to the society.

“The failure to develop the means to exert ownership rights led to the shifting of people’s interest and activity toward the improvement of their II official situation” (their post, office, job). This greatly weakened the solidarity of workers and managers as members of a socialist society striving to make the economy flourish. This solidarity was replaced by a different kind — a shared interest of the managers and the managed in reducing demands relating to the results of their work Workers frequently do not take seriously their proprietary situation; they treat the public property as ‘no one’s,’ in accordance with the sadly famous formula: ‘You are the owner, not a guest; so haul off every last nail.’ Many find to their liking the arrangements that have been established in production, the leveling, supplying of false information, etc., that leave no room for initiative, for socially beneficial effort, but on the other hand, do not require the obtention of high return on effort and guarantee a tolerable (‘not worse than the others’) existence. The widespread inertness and dependent attitudes in the broad masses, being a direct consequence of the “non-owner distortion,” have become one of the most powerful retarding forces.(51)

Of course, there were always some people who took seriously their formal situation as co-owners and tried to show initiative in improving the economy but they were inevitably beaten back.

Sukhotin and Dementev are not opposed to the introduction of market elements. In particular, they insist on an end to the effective producers’ monopoly: the suppliers should be made to compete and the consumers should have a choice. Only in such a context are cost ac­ counting, self-financing and an orientation toward profit meaningful. At the same time, they reject the position of the “radical” marketeers. An uncontrolled, spontaneous market of independent, dispersed producers, no less than bureaucratic domination, negates so basic a goal of socialism as balanced, systematic planning.

The radical antidote to both administrative as well as market spontaneity is the democratization of all the key economic decisions .. . The principal socially beneficial characteristic [of the market rnechanism] — competition — cannot be applied in an unregulated manner. The market itself needs regulation, guided by the interests and full sovereignty of the socialist society … The removal of artificial limitations on the development of market mechanisms should be combined with centralized regulation…”(52)

The authors conclude with a warning to think through the longer-term consequences of the reform before rushing to carry it out, hoping to deal with consequences after they have arisen.” This style of thinking is itself a clear example of a stereotype that underlay the stagnation and it can lead to practical failures of the restructuring and to its moral discrediting.”

It is only when one looks at the alternative version of the reform that one can see clearly that what is now being introduced does not correspond to working-class interests. But while the present reform intends to radically change the workers’ situation (whether the workers will allow this is, of course, a central issue that space does not allow us to address here), it does not really offer a solution to the central problems that beset the Soviet economy. The reform will not establish a genuine market environment that will determine enterprise strategy. Managers will continue to orient their behavior toward pleasing their superiors and to adopt defensive strategies vis-a-vis the demands coming from above.

The reason for this half-hearted approach to the “radical” market-reform option (which at least has the merit of permitting the consistent pursuit of market rationality) is fundamentally the same reason for the leadership’s rejection of the socialist option: the bureaucratic base of the political regime in the Soviet Union. Both types of reform entail the loss of bureaucratic power. In the socialist option, however, this loss is absolute.

But a much more important political difference distinguishing the two consistent reform options is that the “radical” market option has no chance of gaining enough political support to be introduced: it runs counter to the interests of the great majority of the members of both the bureaucracy and the working class (though for obviously different reasons), and these are the two fundamental political forces of the society.(53)

The socialist option, on the other hand, has a political base in the working class that is potentially strong enough to carry it through against all opposition. It thus offers the only realistic solution to the crisis of Soviet society.


  1. N. Shmelev, “Avansy i dolgi,”{Advances and Debts), Novyi mir, no. 6, June 1987, 142.
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  2. Shmelev 154.
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  3. Pravda, June 22, 1987: 1.
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  4. A.G. Aganbegyan, “Programma korennoi perestroik.i” (The Programme of Radical Restructuring), EKO, no. 11, 1987: 19.
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  5. G. Lisichkin, “C toskoi o ravnenstve/ {With Longing for Equality”), Literatumaya gazeta, June 24, 1987: 11.
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  6. <

  7. Shmelev 145.
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  8. Shmelev 142, 144, 152.
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  9. Lisichkin, “Blagotvoritelnost iz chuzhogo karmana” (Philanthropy Out of Someone Else’s Pocket), Literatumaya gazeta, Feb. 19, 1986: 3.
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  10. See, for example, T. Zaslvaskaya, “Chelovecheskii faktor razvitiya ekonomiki i sotsialnaya spravedlivost”‘ (The Human Factor in the Development of the Economy and Social Justice), Kommunist, no. 13, 1986, 61-73.
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  11. Lisichkin, “S toskoi o ravnenstve.”
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  12. Aganbegyan 18.
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  13. V. Pavlov, “Vazhnaya sostavnaya chastperestroiki” {An Important, Integral Part of the Perestroika), Kommunist, no. 13, 1987: 19.
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  14. Shmelev 148.
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  15. “Vybomost rukovodyashchikh rabotnikov predpriyatii, uchrezhdenii, organizatsii” (Electiveness of Managerial Cadres of Enterprises, Institutions and Organizations), Sovetskoe gosudarstvo i pravo, no.1, 1988, 56.
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  16. For a more detailed discussion of this topic, see my “Economic Reform and Democracy in the Soviet Union, “Socialist Register 1988 (London: Merlin Press, 1988): 132-53.
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  17. V.M. Rutgaizen and Yu. E. Shevnyakov, “Raspresdeleniepo trudu” (Distribution According to Labor), EKO, no. 3, 1987: 5.)
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  18. Pravda, Jan. 28, 1987
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  19. .

  20. N. Lampert, “Job Security and the Law,” Labor and Employment in the USSR. Ed. D. Lane. (New York: New York University Press, 1986) 265-72.
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  21. The key documents are: “Basic Provision for Fundamentally Reorganizing Economic Management,” Pravda,June 27,1987, and Okorenno1 perestroike upravelniya ekonomiki: sbornik dokumentov (On the Fundamental Reorganization of Economic Management: A Collection of Documents) (Moscow: Gospolidzdat, 1987).
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  22. Interview with L.A. Kostin, first vice chairman USSR State Committee on Labor and Social Questions, Sovetskaya Rossiya, Jan. 21, 1988.
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  23. Interview with I. Prostyakov, vice chairman of the Council of Ministers’ Bureau on Social Development, Pravda, Jan. 21, 1988.
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  24. F. Burlatskii, “Uchitsya demokratii” (To Learn Democracy) Pravda, July 18, 1987, 3.
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  25. Pravda, Jan. 20, 1988.
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  26. V. Kostakov, “Polnaya zanyatost: kakmyeyoponimaem”(Full Employment: How We Understand It), Kommunist, no. 14, 1987: 24.
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  27. See Sovetskaya Byelorussiya, Jan. 19, 1988, and Komosomolskaya pravda, Feb. 9, 1988.
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  28. Interview with Prostyakov, Pravda, Jan. 21, 1988.
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  29. Shmelev 149.
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  30. Kostakov 23.
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  31. Kostakov. This is not idle talk. Workers in Hungary responded to the1%8 reform with a widespread slowdown that reduced the growth of labor productivity to zero over the following two years. As a result, the leadership had to retreat from its more “radical” version of the reform. In particular it moved to reduce wage differentials and to subsidizeweakerenterprises. C.Sabel and D. Stark, “Planning, Politics and Shop-floor Power: Hidden Forms of Bargaining in Soviet-imposed State-socialist Societies,” Politics and Society, vol. 11, no. 4 (1984): 469- 70.
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  32. Interview with I.I. Gladsky, chairman of the USSR State Committee on Labor and Social Questions, Trud,, Jan. 28, 1988.
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  33. Pravda, Jan. 19, 1988.
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  34. Interview with Kostin, Sovetskaya Rossiya, Jan. 21, 1988: 2.
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  35. Interview with Gladkyi, Trud, Jan. 28, 1988: 1-2.
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  36. Izvestiya, Dec. 19, 1988.
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  37. P. Aven, “Mekhanizm raspredeleniya i sotsialnaya spravedlivost” (The Distributive Mechanism and Social Justice), Kommunist, no. 15, 1987: 115-22.
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  38. M. Buzkevich, “My uchi.msya demokratii” (We Learn Democracy), Pravda, Jan. 3, 1988.
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  39. Aven 118.
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  40. Pravda,, June 26, 1987.
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  41. Pravda, June 27, 1987; Sotsialisticheskii trud, no. 2,, 1987: 57-96, and no. 3, 1987: 54-66.
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  42. U. Shcherbakov, “Kardinalnaya perestroika oplaty truda” {Fundamental Restructuring of the Payment of Labor), EKO, no.1,1987: 37-52.
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  43. V. Zadorozhnyi and I. Vlasenko, “Brigadnoedvizhenie:opyt, problemy, resheniya” (The Brigade Movement: Experience, Problems and Solutions), EKO, no. 12, 1987: 25.
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  44. Pravda, Jan. 28, 1987.
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  45. “Vybomost rukovodyashchikh rabotnikov …” 58.
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  46. Literaturnaya gazeta, Feb. 19, 1986.
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  47. Literaturnaya gazeta, June 24, 1987.
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  48. R.Bahro, The Alternative in Eastern Europe (London: New Left Books, 1978): 210. See also 21J7-9.
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  49. Lisichkin, Literaturnaya gazeta, Feb. 19, 1986.
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  50. Yu. Sukhotin and V. Dementev, “Ekonomicheskaya reforma i sily torrnozheniya” (The Economic Reform and the Braking Forces), Ekonomicheskaya gazeta, no. 7, 1987: 14.
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  51. The late satirist Arkadii Raikin had a skit in which he played a manager whom an employee has just awakened in the middle of the night to tell that his factory has burnt down. The manager is extremely irritated at being disturbed for such an apparently insignificant reason, until he remembers that he left his new 300-ruble coat in his office, at which point he has a heart attack.
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  52. Sukhotin and Dementev, op cit.
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  53. Ibid.
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  54. Ibid.
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  55. I have argued this at greater length in my “Economic Reform and Democracy in the Soviet Union.”
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May-June 1989, ATC 20

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