Legacies of Soviet Planning

Mel Leiman

MEDIA ACCOUNTS AS WELL AS professional articles over the last several years have trumpeted the failure of economic planning in either the “Communist” or “Social Democrat” form. They have proclaimed the necessity for either a full-fledged market economy or, at the very least, the need to inject the play of market force into the otherwise rigid, centralized Russian-type economies. This approach has not only dovetailed with the obvious political drift to the right in most capitalist countries, but also with the partial abandonment of “socialist” forms in some of Eastern Europe (particularly Hungary and Yugoslavia) and China. Many Western observers see this process as confirmation of the inherent superiority of the market and inherent weakness of a planned system.

It is the purpose of this article to bring some historical and analytical perspective to bear on this important issue, employing an angle of vision which is neither reflexively pro-market nor pro-Soviet.

In viewing the Soviet experience, we must not forget that socialism in Western Europe is in a crisis in most ways as profound as that in Eastern Europe, although it presents itself in different form. Social democracy — representing a left-liberal combination of the welfare state, selective nationalization of industry with considerable variation from one country to the next, and an attempted pragmatic blending of state and private enterprise within the framework of capitalist relations-has been in and out of power in many West European countries.

The limits of social democracy have been explored with respect to the Western European countries in previous issues of Against the Current [see, for example, articles by Daniel Singer on France and James Petras on Greece in issue #4-5, and by Perry Anderson on European social democracy in #6]. We will therefore focus here on an assessment of Soviet industrialization and its legacy, and how this bears on the present debate over the alleged necessity of the market.

It is useful to start the analysis with a brief description of the Soviet economic performance since the first Five Year Plan in 1928, especially for purposes of making a contrast with the United States. It is essential to include agricultural production, where their performance has been much more effective, since the two sectors are intertwined, both historically and operationally.

Soviet industrial production was characterized by exceptionally rapid growth in the 1920s and 1930s — the rate of annual growth between 1928 and 1940 averaged over 12%.(1) There ensued economic devastation, but military victory during World War II (during which 20 million Soviet citizens died, and 24 million homes were destroyed), rapid recovery in the 1950s and 1960s with an average growth of 8.3%,(2) and considerably slackened industrial growth rates since the early-middle ’70s. The average growth declined to 5.1 % from 1971 to 1978.(3)

Despite the slowdown over the last decade, the reasons for which will be explored in the following pages, the Russian industrial performance has not only been a very creditable one but, in addition, has more than doubled that of the United States over almost a forty-year span. During this period Russia has vaulted from a second-rate power to a highly industrialized power.

The Soviet performance in agriculture has been far less successful although it is far from the unmitigated disaster depicted by many Western sources. While 20% of the Soviet labor force remains anchored in agriculture, only 4% of America’s is found in agriculture. The latter, however, produces almost 20 % more than the former. Considerable progress has, however, taken place in the Soviet Union. A joint Commerce Department-CIA study (1979) made the following favorable comment about Soviet performance in agriculture:

“By 1977, Soviet farm output had reached nearly 2½ times the 1950 level. Although progress has been uneven, the average annual rate of growth has been a high respectable 3½ percent per year, nearly double the growth in the United States. Soviet output by 1977 was more than 80 percent of U.S. farm production, compared with the roughly three-fifths in 1950.”(5)

In addition, the gap in per capita food consumption, as well as consumer durables, has narrowed considerably. The heavy Soviet grain imports from the West are primarily a sign of a higher quality meat diet (grain is imported for feeding livestock), although it also suggests the vulnerability of the Soviet Union in the world economy. Anti-Soviet propaganda notwithstanding, it ought to be noted that despite the marked decline in Soviet growth since the early-middle 1970s, industrial production and consumption have both risen, albeit slowly, in contrast to most Western capitalist countries who have, in fact, experienced actual declines. Nevertheless, it has been widely acknowledged that the Soviet annual growth rate in agriculture dropped drastically in the 1970s and that low productivity in agriculture remains the Achilles heel of the Soviet system.(6)

A backward glance at history is essential for providing a perspective on the present political economy. It also provides some insights into several important questions:

(1) To what extent did the early favorable Soviet economic performance reflect political and/ or economic centralization? (2) To what extent has the more recent retardation of growth been due to the same political and economic characteristics? (3) Was Stalinism an effective engine of economic development as well as political oppression? (4) Why have alternatives to Stalinism become increasingly necessary? Are they likely to succeed?

As is well known, Russia at the time of the revolution was overwhelmingly an agrarian society although there were a few important industrial pockets in oil and textiles that were growing fairly rapidly. A large agricultural export surplus was derived from the relatively efficient larger landed estates while subsistence farming prevailed among millions of peasants.

An unplanned effect of the Bolshevik victory was the seizure of the landed estates and its division among a land-hungry peasantry. Consumption standards probably rose modestly among this group, but the marketed share of output plummeted. In addition, the attempts of the kulaks-middle strata peasants-to manipulate the market created food shortages in the urbanizing areas in the 1920s and therefore threatened the industrialization of the new socialist system.

The great industrialization debate of the 1920s was over who would absorb the burdens of development — the peasantry or the emerging working class.(4) The left leaned toward the former and the right towards the latter. The reasoning of the left was that a peasantry based on private property posed a potential threat to the creation of a collectivist society, and that furthermore; this group could manipulate the market in ways that hindered industrialization. Their solution was to use the price system in ways that squeezed a surplus out of agriculture by deliberately pricing agricultural goods relatively lower than industrial and manufactured goods.

The reasoning of the right — their view prevailed until the rapid forced collectivization of 1929 and 1930 — was that free enterprise in agriculture would provide the maximum incentive to expand production. This private interest allegedly coincided with the social interest because the resulting agricultural surplus would facilitate the transfer of labor from the rural to the urban areas. What happened in fact was a reconcentration of land in the hands of the kulaks and food shortages, with rising prices, in the urban areas, as many kulaks held grain off the market in order to drive prices up, and because there was a lack of industrial goods to trade for food.

The question of whether or not forced collectivization was a success or failure is an instructive one. On one hand, collectivization, despite its brutality, aided the thrust toward industrialization by putting more agricultural output under the control of the authorities who could then direct it to the cities to feed the new city proletariat.(7) Although agricultural production declined absolutely under collectivization, the agricultural surplus rose.

Stalin’s agricultural policies were thus a short-run success while, on the other hand, they undermined the framework for long-run solutions. The peasants made clear their resistance to forced collectivization, which was decided for them — not by them, by slaughtering the cattle rather than turning them over to the collective. The resulting low productivity in agriculture helps explain why a larger percentage of the Soviet population remains in that sector rather than being released to higher productivity manufacturing.

It is only with rising efficiency that a diminishing agrarian sector can support a growing industrial sector. Although this percentage has markedly declined in the ensuing decades, to this day the proportion of the Russian labor force engaged in agriculture remains substantially higher than any advanced Western capitalist country. Even though, theoretically, collectivized units can take better advantage of economies of scale, particularly in terms of more intensive utilization of farm machinery, by common consensus Soviet agriculture continues to perform quite inadequately.(8) It has been able to partly overcome low agricultural productivity only by extensive and expensive investment in fixed capital and chemical fertilizers.

The Soviet experience suggests that collectivization without workers’ participation and control is less effective than the free market — witness the comparatively higher productivity per acre on the small individual peasant plots than on the communal production units.

The theoretical advantages of social ownership and social planning in agriculture during the Stalin era were considerably eroded by the centralized and bureaucratized political control system as well as the sheer irrationality of its use of terror.

Despite the existence of similar bureaucratic distortions in industry, Stalinism proved to be much more compatible with rapid industrialization than with agricultural development, since the latter was more difficult to regulate by the planning system.

Stalinism represented the triumph of a bureaucratic privileged caste (and eventually a virtual one-man dictatorship) as well as a highly centralized planning system on the basis of socially owned resources. It also represented a near complete break with the market system, although quite obviously even a planned economy was somewhat affected by the deteriorating terms of external trade during the first Five Year Plan, coinciding as it did with the Great Depression. The price of Soviet exports (mainly wheat) went down twice as rapidly as the price of Soviet imports (mainly machinery). While this put a strain on the achievement of the planned goals, it did not result in unemployment.

Stalinism involved an extraordinary rate of capital accumulation-investment was maintained at an incredible level of 25% to 35% of national income,– while consumer goods production lagged far behind in terms of both quantity and quality. Higher growth rates were deliberately planned for certain high-priority sectors, particularly heavy industry. When overall planned goals could not be achieved for various internal or external reasons, the low-priority, consumer-goods sector plans were deliberately underfulfilled. Indeed, severe austerity standards for the vast majority of the population prevailed during the period of “primitive socialist accumulation.”

There is no doubt that optimistic planners-in the Stalin era optimism in setting economic plans was close to being an official edict — often set overly ambitious but unfeasible plans. There also is little doubt that waste in Stalin’s planning system stemmed in part from the infighting of the technical intelligentsia, managers and political bureaucrats when failure might well mean a stretch in the gulag or worse.

A centralized planning system, without any semblance of workers’ control, was used to carry out this high­growth strategy. Those economists who claim that there was a more optimum available mix of consumption and investment miss the point that one must specify “optimum” with respect to some desired end and that the goal reflects a value judgment. This is not to deny that a more balanced mix — this was the policy advocated by the Trotskyist opposition in the middle 1920s — would have produced less opposition and social disruption and perhaps as much growth over the long haul.

In any case the historical record reveals that the Stalinist strategy achieved high growth at the price of deliberately holding back consumer-goods production as well as fostering a considerable increase in income inequality. Growth of the productive forces was rapid and more or less regular despite growing social contradictions. This economic growth was ground out of the hides of the peasants and urban working class.

In a more profound sense, one can speak of industrialization as being the proletarianization of the peasants. The uncomfortable question that radicals must face is this: Should Stalinism be seen as a cruel but effective historical agent of economic development, or is it a planned economy that deserves prime credit? Did the absence of workers’ control aid or impede the functioning of the Soviet economy?

The exceptionally high Soviet growth rates, even during the world-wide depression of the 1930s, would indicate that their allocational inefficiency stem­ming from many reasons — one of which is assuredly the absence of workers’ control-was in large measure overcome, at least until the early-middle seventies. This strongly suggests that the inefficiency at the plant level was countered by efficiency at the national planning level.

In other words, micro-allocational inefficiency (allocating resources between alternative uses and maximizing the value of output per unit of input) was overcome by the high degree to which resources were employed and accumulated. The latter is in effect a macro measure of efficiency. It is also a level at which a planned economy is far more efficient than the best market-directed economy, since the latter is prone to business cycles and therefore typically underutilizes its physical and human resources, particularly women and minority groups. The power of the market to promote steady growth is, therefore, quite limited, however “efficiently” it allocates those resources that are employed.(9)

In effect, plant-level efficiency in a market economy is under usual conditions overcome by systemic (macro) inefficiency. Concentrated political power in a state­planned economy is compatible up to a point with high­growth performance, but not with micro-level efficiency. Therefore, growth can be achieved only as long as the micro effects are dwarfed by the macro effects.

The preceding analysis does not, of course, provide an explanation for the lower level of efficiency, relative to a typical capitalist economy, for the Soviet-style planned economy at the micro level. Such an explanation lies elsewhere. First, the competitive pressure of survival in the capitalist economy makes firms stress the importance of minimizing the cost of inputs of labor services and resources per unit of output. Second, the emphasis of the Soviet bureaucracy on output maximization rather than cost minimization has filtered down to the managerial level and undoubtedly affects the efficiency of plant-level operations. In addition, the resistance of workers to managerial-bureaucratic rule often takes the form of low productivity.

All this, however, does not suggest that the relative inefficiency of the Soviet economy at the micro level is inherent in the nature of all planned economies. Quite the contrary. There are several historical reasons behind the phenomena.

The positive economic effects associated with Stalinism spring from the nature of a planned economy directing socially owned resources. Stalinism involved a veritable uprooting and transformation of social relations, in the course of which an entire economic infrastructure was constructed and a massive working class was forged. The shift from private to collectivized agriculture, although incredibly costly in human terms, symbolized the victory of planning over the disruptive market forces.

This massive industrial transformation of Russia was achieved, moreover, in a fraction of the time that it took today’s advanced capitalist countries. The wastes inevitably associated with capitalism — duplication of facilities, planned obsolescence, unused capacity, socially useless occupations like sales promotion, Wall Street operations, advertising, part of the production and service sector that caters to the ultra-rich, and much of law work — do not exist in a planned economy, even a poorly run one. The elimination of this sort of waste through a redirection of society’s resources into more socially useful channels, admittedly defined by a hierarchical elite, and maintaining full employment, is likely to raise the standard of living in the long run, even though it will not necessarily reveal itself in a comparison of gross national products since the value of useless as well as useful commodities are counted.

It has become commonplace (at least among orthodox theoreticians) in comparing the contrasting dynamics of capitalist and state-socialized economies, to claim that market pressure on capitalists to create and respond to consumer demand generates a powerful tendency under most circumstances to raise general living standards, while the absence of such demand pressure on managers and bureaucrats — their pressure comes essentially from supply constraints, that is, meeting output quotas — weakens any such tendency under Soviet-style systems. Surely no reasonable observer can seriously doubt, in view of the striking increase in a whole range of consumer durables in the last decade, that the Soviet standard of living has dramatically improved. The vast majority of Soviet homes now possess TVs, refrigerators, stoves and washing machines.

It seems equally clear that it is in the political interests of the bureaucracy to raise the workers’ standard of living since this helps to legitimate their own continued hegemony. In fact, the growing shift of emphasis toward consumer goods in recent time explains a part — but only a part — of the reason for the decline of Soviet economic growth rates.

In no sense should the emphasis on the economic “success” associated with Stalinism be construed as saying that there were no superior political and economic options open to the ruling Bolsheviks in the 1920s and 1930s, or that the waste and repression were inevitable. What is being asserted is that for a considerable period of time the costs of the Stalinist economic strategy were outweighed by the benefits.

This is not a lame excuse, historically or otherwise, for Stalinism. What Stalinism indirectly proves-and in the long run this may well be its most important, albeit unintended, lesson-is that the establishment of socialist relations of production entails far more than increases in physical production. The long-run, negative economic effects of Stalinism are assuredly rooted in the repressive political apparatus. On a political and cultural level all but the true believers recognize that Stalinism meant repression, gulags and severe cultural conformity.

The question of the economic disadvantages of centralized planning, which has been put forth in recent times by many western Sovietologists, is one of second­ order importance that cannot be decided a priori. The absence of workers’ control, which affects workers’ incentives to operate the planned economy in a socially efficient manner, is rooted in the Stalinist heritage and returns again and again to plague the Soviet economy.

Workers’ control by itself does not guarantee high economic growth. It may, in fact, divert some resources to consumption that might have gone to higher growth investment projects. There may indeed be some politically backward workers during the growing-in phase who adopt a take-it-easy attitude toward work and thus act as a drag on productivity. However, by eventually raising overall long-run productivity, workers’ control does enable the system to more effectively attain either capital­goods production or consumer-goods production (or military production).

By workers’ control, I do not mean only social relations at the plant level, although that is indeed important.(10) Genuine workers’ control means above all a participatory, self-governing, non-hierarchical form of society in which all power resides at the point of production, including the right to recall one’s democratically chosen representatives. The essence of the contemporary debate over plan vs. market within democratic-socialist circles hinges on the degree of compatibility of workers’ democracy and central planning.

Is it possible to retain real decision-making power in the hands of the rank and file within the framework of a centralized planning system? Some lean in the direction of market socialism in which managers and workers, in some proportion, make basic economic decisions over prices, wages, bonuses and investment funds while the power of the central planning board is delimited. They are convinced that the operation of a centralized economic mechanism entails the high risk of concentrating political power in the hands of an elite, thus recreating the possibility of an exploitive society, although abandoning private ownership of basic resources.

It is my opinion that modern-day socialists have much to learn on this issue from the works of the early American Marxist, Daniel De Leon. In brief, De Leon developed the concept of a “Socialist Industrial Union” as the crucial organ of real workers’ power. This Union would unite all workers in a given industry, and an elected council or management committee would supervise operations in each plant. In addition, workers would express their power by voting for representatives at a regional and national level. At the latter level the present Congress would be replaced by an all-industry council composed of elected representatives from broad sectors of the economy like agriculture, mining, manufacturing, education and transportation. Since all power would be centered in the rank and file, it could therefore be revoked from any representative they have chosen.

My position is that as long as this foundation of socialist democracy is in place, central planning or decentralized planning are simply alternative techniques for allocation of resources that the workers will choose between on the basis of practical experience. In the Soviet system, it is the absence of this democratic base that has not only impoverished the society (and to a lesser extent, its culture), but has also enabled the Soviet bureaucracy to exercise its control over economic resources through a centralized planning system.

While the introduction of a decentralized planning sys­ tem in Russia would lessen the direct control over economic resources by the bureaucracy, it would not democratize the political base. Hence, decentralized planning should be seen as simply another technical instrument­ perhaps a superior one under certain conditions-for controlling the labor force. The heart of the Soviet economic malaise is the absence of workers’ democracy and not centralized economic control over resources.

If this is not understood, the left will continue to con­ fuse the current trend toward decentralization in much of Eastern Europe and China (and some lessening of repression) as a step towards socialist democracy. In reality, the debate over economic centralization or decentralization is a mere side show in the more basic conflict over extending or contracting workers’ democracy.

Post-Stalin leaders have allowed more debate and criticism but retain centralized bureaucratic control. Although they frankly acknowledge a wide variety of defects in the economic system, such as hoarding of materials and wasteful use of resources by plant managers, poor quality and low quantity of consumer goods, production bottlenecks, poor flow of information, technological backwardness and low labor productivity, they are blocked at seeing the interconnection between these defects and the absence of workers’ control.

The simple truth is that state ownership of the means of production in the Soviet Union does not mean that alienation among its working class is per se terminated. It may in fact be more acute. The effects on the economy are profound. Alienated workers are simply less productive than unalienated workers. While alienation-of which two extreme forms are racism and sexism-is a necessary feature of even a politically democratic capitalist system, it is only a possible feature of a socialist system. By distorting these basic aspects of socialist life Stalin distorted the workings of the economy. The vast disproportions between the different sectors, rural-urban and consumption-investment, held back an all-sided economic development even though it did not take the form of open unemployment and idle resources.

These negative effects, however, were like a time bomb. They were not as obvious during the Stalin era since the low initial stage of development (before the mass of the modem Russian proletariat was created out of the peasantry) meant that the economy was far from its production possibility frontier. Merely putting idle or unproductive resources to work, for example, ending disguised unemployment by shifting people from agriculture to industry, even when used in a sub-optimal way, promoted economic development. With all its limitations Stalinism was, nevertheless, a more effective engine of development than the method pursued by any capitalist society of the same period.

The day of reckoning for the Soviet system came when nearly all resources were fully employed and further growth depended largely on increasing the productivity of given resources. In effect this meant the exhaustion of possibilities for effective growth through Stalinist methods. Stalin put in motion the forces of a modern economy, but his successors could not bring them to full fruition by continuing to employ a Stalinist approach since it is this approach that discourages mass participation.

The vast educational resources, hastened hothouse fashion by Stalin as a linchpin to modernization, also eventually weakened the political and cultural underpinnings of the system and had a spin-off effect on the economy. Education is the birthplace of the skeptical mind, and it is the skeptical mind that is the parent of both technological and social change. This is in no sense a mechanistic process, mediated as it is by class struggle and external factors. The Soviet ruling stratum wants technological change without more than cosmetic social change.

The historical function of Mikhael Gorbachev may well be that of bringing this contradiction to a head. Gorbachev attaches crucial importance to the arms control agreements precisely in order to reduce the strains on the Soviet economy(11) and to permit a more balanced development of industrial and consumer goods. This would alleviate, but not overcome, the contradictions arising from a bureaucratically deformed society. Although the drive he has engineered against managerial corruption and inefficiency, as well as that against absenteeism and drunkenness, has already yielded short-run positive effects on worker productivity within the parameters of the existing Soviet “socialist” society, only the restoration of workers’ democracy can bring about a genuine revitalization of the economy.

Gorbachev wants to unleash a fuller potential for the economy, but the hand of the past still hangs heavily over him and Russian society. Although his comments indicate his awareness that the excessive size of the Soviet bureaucratic management represents an extreme waste of the social surplus, proceeding too vigorously or too rapidly against this stratum of the population could pose major political dangers. His brand of tentative economic liberalism has thus far taken the form of encouraging increased workers’ participation, that is, management-worker consultation, but has not increased workers’ control. That strategy remains in the high-risk category since it presupposes, or at least implies, workers’ political power.

While the Soviet and East European leaders search for a magical combination of centralization and decentralization of decision-making to overcome their economic malaise, they are missing the obvious reality that this malaise is rooted in the bureaucratic party structure itself. While top-level technocrats can be motivated to act efficiently, they cannot motivate an unwilling mass.(12)

Gorbachev realizes that he cannot wait for a betterment of East-West relations before he embarks on much­needed social reforms. Changes in the domestic economy are essential if the slowdown in the rate of economic growth is to be arrested and reversed. Although Gorbachev has assuredly not embraced the free market, he has begun the process of inserting what Martin Walker, the Moscow correspondent of the Manchester Guardian, calls the “thin end of the entrepreneurial wedge”(13) into the lumbering Soviet behemoth in order to energize the economic system. Small family firms and private­worker co-ops of up to fifty people are to be permitted to start up according to a new law passed by the Supreme Soviet in November 1986, although hiring wage labor is not yet allowed.

Apparently the state is offering tax incentives to ease the entry into the new entrepreneurial ventures. Walker describes the position of the co-ops within the command economy structure of a parent ministry:

“All factories have been given the right to sell off their surplus raw materials, or the by-products from their manufacturing process, to other factories or to the public-or to the new co-ops. The factories now also have the right to sell anything they produce above the output demanded by the plan, to anyone they choose,”(14)

It is ironic that the “liberal” opposition to the hierarchic societies of Eastern Europe and China favor a decentralized economy that will inevitably generate still less egalitarianism, although permitting the exercise of more personal freedom. As the experience of Hungary reveals, economic inequality will inevitably accelerate as market elements enter a growing portion of a state socialized economy, whereas under a preponderantly planned economy inequality is only a possible rather than inevitable result. In describing the “antagonistic combination of the plan and market,” Ernest Mandel hit the proverbial nail on the head:

“The Soviet economy is marked by the contradictory combination of a non-capitalist mode of production and a still basically bourgeois mode of distribution … [It is] an economic system which has already gone beyond capitalism but which has not reached Socialism. “(15)

From the perspective I have argued here, the movement for genuine socialism in East and West Europe — and America-is linked, yet different. It can be summed up in this way. Whereas the workers in Eastern Europe need a political revolution against the Communist Party bureaucracy, and the state operating in its behalf, their counterpart in Western Europe and America first require a social revolution against the capitalist class even in the cases when the social democrats are running the state.

What is becoming increasingly clear is that not only is the Soviet state socialized system at its own decisive crossroad of history, but this crossroad intersects with the equally important one faced by the world capitalist sys­ tem. The basic question is whether they advance to a more rational planned world without privilege, that is, democratic socialism, or whether they continue on the path to a mutually destructive Armageddon that, at a minimum, will substantially alter the evolutionary path of both the Soviet Union and the United States.

Notes

1. Andrew Zimbalist and Howard Sherman, Comparing Economic Systems: A Political Economic Approach (Academic Press, 1984) 171-2. This figure is the approximate average of five Western studies. The Soviet figure is over 16%. It is worth remembering that the U.S. growth rate was close to zero in this depression-dominated period.
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2. Ibid, 183. These figures are from the CIA as presented to the Joint Economic Committee (Soviet figures were 10.2%). The official U.S. growth figure for the same period was 5.0%.
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3. Ibid. The official U.S. figure was 2.9%. The Soviet rate fell to 3.8% in the 1976-78 period.
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4. NOTE: This is out of numerical order: The most effective study of this debate remains Alexander Ehrlich, Soviet Industrialization Debate (Cambridge: Harvard University Press, 1960).
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5. The authors are Douglas Diamond and W. Lee Davis. See the discussion (and above quotation) in Zimbalist and Sherman, Ibid, 298. This report also notes that over this period Soviet investment in agriculture grew almost four times more rapidly than the U.S. rate.
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6. It is somewhat ironical that farm surpluses in the American capitalist economy are a symptom of the malaise of American agriculture (based as it is on private-profit criteria), whereas lingering shortages of farm output in the Soviet Union is a symptom of the latter’s unsolved problem of meeting consumer demand.
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7. In no sense does this suggest that rapid forced collectivization was an optimal policy. It clearly was inferior, both economically and morally, to the gradual and more democratic brand of collectivization advocated by the Left Opposition in the mid-1920s. This does not negate the fact that Stalin’s policy produced certain positive economic growth effects. Although output of grain remained more or less stable during the first Five Year Plan, government grain collections almost doubled, and even grain exports substantially increased.
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8. It ought to be noted that only a small portion of Soviet land has the same favorable combination of warmth and water that U.S. land possesses.
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9. I leave aside the thorny issue that allocation of resources reflects the distribution of income and wealth, and that the widely accepted orthodox idea that private allocation of resources is most efficient because it more closely reflects consumer demand than does a planned economy of the Soviet type. This obviously involves a considerable amount of circular reasoning. At the very least, one could reasonably say that the tendency of orthodox economists to define efficiency in terms of responsiveness of production to consumer preferences predesignates the conclusion that a profit-motivated private-enterprise system is allocationally efficient.
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10. Yugoslavia, for example, assuredly has more exercise of workers’ power at the plant level than exists in the Soviet Union. Nevertheless the party apparatus (and market relations) remains dominant at the regional and national level.
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11. On balance, high arms expenditures in capitalist countries probably add modestly to overall effective demand and income (although it does aggravate inflationary pressures). The fact that most capitalist countries have been experiencing significant economic difficulties in recent years despite this stimulus suggests that their economic performance would be still worse with a reduction in war expenditures. (Theoretically this could be offset by rising welfare expenditures but this flies in the face of current political realities). On the other hand, the fact that the Soviet economy is advancing despite the slowdown forced by military spending (and other factors previously dealt with) suggests that this economic performance would improve if this spending was reduced.
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12. In countries like Yugoslavia and Hungary, where this bureaucratic structure is less oppressive and market forces have been allowed much more room, the price has been increased unemployment, reduced growth rates and inflation (Yugoslavia) or sharply increased inequality (Hungary). This suggests that economic decentralization of the collectivized economies of Eastern Europe is likely to make them more prone to the economic problems facing any market-directed system.
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13. Martin Walker, “Russian Embrace the Free Market,” Manchester Guardian Weekly, 30 Nov. 1986: 8.
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14. Martin Walker, “Gorbachev Stakes All on Private Enterprise Incentives,” Manchester Guardian Weekly, 30 Nov. 1986: 8.
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15. Ernest Mandel, Marxist Economic Theory, (New York: Monthly Review Press, 1970), 2: 573, 565.
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January-April 1988, ATC 12-13