Session 17
An examination of the political and economic reasons for
the collapse of central planning in bureaucratic socialist
societies ( especially Soviet Union ), and the problems
faced in the transition from centrally planned to the
market economy.
A discussion of the main economic, social and political
problems faced by Eastern European societies in the process
of transition.
CONCEPTS FOR REVIEW:
Economic efficiency and social efficiency as
relative notions. Welfare and profits. Cold War.
Bureaucratic socialism. Perestroika. The social
role of employment.
Data from the International Monetary Fund:
GROSS DOMESTIC PRODUCT. CONSTANT PRICES. INDEX 1950=100
FREE-MARKET ECONOMIES
1950 1960 1970 1980 1986
----------------------------
Japan 100 185 561 884 1096
Germany 100 233 362 472 514
France 100 164 282 404 436
U.S.A 100 138 200 262 303
United Kingdom 100 131 174 211 235
________________________________________________
The above indexes show a substantial improvement
in standard of living.
________________________________________________
CENTRALLY PLANNED ECONOMIES
1950 1960 1970 1980 1986
----------------------------
China 100 284 421 735 1268
U.S.S.R. 100 265 529 861 1052
________________________________________________
The above indexes show a substantial improvement
in standard of living.
Even more, the gap between United States and the U.S.S.R. in
income per capita was dramatically narrowed:
INCOME PER CAPITA RATIO UNITED STATES/U.S.S.R.
1950 1986
6.8 1.9
Moreover, in accordance with the World Bank conversions to
Parity Purchase Power Dollars, in 1986 the U.S.S.R. income
per capita was higher than in United States.
_____________________________________________________
ANNUAL RATE OF GROWTH
Period U.S.S.R. Industrialised Countries
1951-55 11.6 5.3
1955-65 7.8 4.2
1965-73 7.0 4.6
1973-80 4.7 2.9
1980-89 3.2 2.8
_____________________________________________________
COMPARATIVE OUTPUT PER WORKER
Less Developed Countries U.S.S.R. O.E.C.D.
Agriculture 1 35 33
Industry 1 4 9
Services 1 4 13
_____________________________________________________
source: The World Bank
_____________________________________________________
THE ECONOMIC-POLITICAL-SOCIAL SYSTEM IN THE U.S.S.R.
Since the early times of the Bolshevik revolution the economy was
organised around "central planning". The central government received
information from each unit of production about inputs and output, and
the central government devised a general plan for the economy fixing
targets for each unit of production.
The system meant the following:
First Stage:
ENTERPRISE 1 send information to CENTRAL GOVERNMENT
ENTERPRISE 2 send information to CENTRAL GOVERNMENT
ENTERPRISE 3 send information to CENTRAL GOVERNMENT
Second Stage:
CENTRAL GOVERNMENT send targets of production to ENTERPRISE 1
CENTRAL GOVERNMENT send targets of production to ENTERPRISE 2
CENTRAL GOVERNMENT send targets of production to ENTERPRISE 3
Third Stage:
ENTERPRISE 1 sell/buy intermediate goods to/from ENTERPRISE 2
to produce its output, etc.
Hypothetically this system is excellent, because demand and supply
will be always balanced...IF...the information is accurate.
Why information could be inaccurate? Incompetence, dishonesty,
fear to become unemployed, etc.
Information will be accurate only if there is a high level of
political commitment, the latter possible only if society is fair and
just.
In the Soviet Union, since the 1920s military invasions by Japan,
Canada, United States, Britain, and other capitalist countries trying
to toppled down the soviet government, the central planning had two
features:
a) giving priority to the defence industry, which meant heavy industry,
b) the Communist Party exercising a dictatorship and not a democratic
government. The Communist Party justified that saying that "the war
economy" made it necessary.
The outcome of the above was the creation of
1) bureaucratic socialism;
2) a new ruling class where MANAGEMENT was the main source of power
for this new ruling class.
THE COLD WAR
In 1947, the U.S. president at the time, Harry Truman, delivered his
famous speech unleashing the "cold war". Truman said that for that date
on, the United States economic, political and military main objective
was "to destroy" communism, to "wipe it out".
In the early 1960s, after putting Soviet Union in the lead in the space
race and computer technology for delivering nuclear bombs across
continents, the Soviet secretary general Leonid Brezhnev presented
his "military doctrine" to win the military race. In ten years or so,
Brezhnev said,
-soviet strategic nuclear forces had to reach superiority over the
United States;
-soviet conventional military forces would be built up to reach
superiority over all possible opposing forces;
-nuclear and conventional military superiority would be used to make
military, political and economic gains.
By 1985, the soviet military machine was the largest and most powerful
in the world, as follows:
U.S.S.R U.S.A. NATO
Military personnel (million) 5.3 1.9 2.8
Military reserves 5.4 - -
Internal security 0.7 - -
TOTAL 10.7 4.7
INTERCONTINENTAL BALLISTIC MISSILES
1,398 1,037
SUBMARINE-LAUNCHED BALLISTIC MISSILES
981 592
STRATEGIC BOMBERS 380 300
NUCLEAR SUBMARINES 79 35
________________________________________________________
Source: Stockholm International Peace Research Institute
_________________________________________________________
The long-term economic and social costs of achieving military
superiority over the United States and its allies were dramatic.
MILITARY EXPENDITURE. YEAR 1988
AS % OF GNP US$ MILLIONS PER CAPITA GNP/capita
United States 6.3 306,412 1,246 19,780
U.S.S.R 11.9 297,500 1,035 8,700
_____________________________________________________________________
MILITARY EXPENDITURE PER CAPITA AS PERCENT OF INCOME PER CAPITA
United States 6.3
U.S.S.R 11.9
_____________________________________________________________________
During the Brezhnev era 25-35% of GNP was dedicated to military
construction.
________________________________________________________________________
See: Military expenditure. 186 countries. 1988 (The Róbinson Rojas Archive)
________________________________________________________________________
By the end of the 1980s, the soviet system lost credibility in the
Soviet Union, specially because the level of social, political and
economic corruption was beyond control.
The ruling of the new ruling class was creating bottlenecks in the
economy, and, in accordance with Gorbachev (1987),
-a gradual erosion of the ideological and moral values of our people
began;
-creative thinking was driven out from the social sciences;
-there emerged a disrespect for the law and encouragement for eyewash
and bribery, servility and glorification;
-the social sphere began to lag behind other spheres in terms of
technological development, personnel, know-how and, most importantly,
quality of work.
By 1986 Gorbachev was proposing a restructuring (perestroika) of the
communist party because, he said:
-we face a serious social, economic and political crisis;
-in the late 1970s economic failures became more frequent;
-difficulties began to accumulate and deteriorate, and unresolved
problems to multiply;
-a kind of "braking mechanism" affecting social and economic development
formed slowing economic growth, efficiency of production, quality of
products, scientific and technological development, the production of
advanced technology, and the use of advanced techniques.
He added,
"the worker of the enterprise that had expended the greatest amount of
labour, material and money was considered the best"..."with us,
however, the consumer found himself totally at the mercy of the
producer and had to make do with what the latter chose to give him"...
Gorbachev proposed the building of a "new" communist party, and the
introduction of "accountability". That is, the civil servants, specially
members of the communist party, responsible before the public scrutiny.
The bureaucratic ruling class, of course, opposed Gorbachev's proposals
and even tried a military coup d'etat against his government. In the
process, the anti-communist forces gathered strength, and the whole
soviet system collapsed.
Today, the former Soviet Union and Eastern Europe are imposing
private ownership of means of production.
After 1989 a shock treatment to install a market economy has created
high unemployment, extremely polarized distribution of income, extreme
low level of wages, on the one hand, and extreme wealth for a small
numbers of citizens, the majority of them former members of the
communist party.
By and large, the former Soviet Union and former bureaucratic socialist
countries in Eastern Europe are in a long and painful process for the
creation of a legal and financial infrastructure to stimulate private
industry. Massive unemployment, as "the right price" to pay for
producing at "competitive" prices will be the outcome.
________________________________________________________________________
BOX 1___________________________________________________________________
A society becomes a class stratified society, where particular social
groups have more access to economic and political resources than others,
i. e., when the following conditions are met:
1.- a social group decide WHAT to produce, HOW to produce and FOR WHOM
to produce.
-The individuals belonging to this social group have particular
relations with factors of production (means of production and
labour).
-They are able to decide how these means of production are going
to enter in a productive relation with labour.
-They can be:
1) individual owners of means of production;
2) cooperative owners of means of production;
3) individual managers of systems of production;
4) cooperative managers of systems of production.
-A system of this type will have a range that goes from:
a) total private ownership of means of production to
b) total state ownership of means of production.
In the case of a), private owners of means of production
will organize themselves to have that
type of system meeting their individual
and collective needs;
In the case of b), civil servants will organize themselves
to have that type of system meeting
their individual and collective needs.
2.- the social group that decide what, how, and for whom develop
interests, points of view, political behaviour and social
behaviour which meet the economic, political and social needs
of the group.
3.- the individuals belonging to the above group behave like a
subset of the whole society and device means to prepare
successors, and reproduce the organisation of the system over
time. Special access to education, and economic and political
resources, becomes a component part of this type of class
stratified society.
4.- in a society were private ownership of means of production
prevails, the private owners of means of production will become
the core of the ruling class;
in a society were civil servants manage means of production without
being accountable to the rest of society, the civil servants will
become the core of the new ruling class.
________________________________________________________________________
END OF BOX 1____________________________________________________________
________________________________________________________________________
BOX2____________________________________________________________________
From A. Kossof, "Persistence and Change", included in A. Kossof (ed.),
"Prospects for Soviet Society", Pall Mall Press,
London, 1967, p.9)
..."Meanwhile, the accumulation of problems entails high costs in the
form of wasted human resources and implies defects in social
planning that are a potent source of trouble"...and created "the
peculiar unevenness of social and economic development"...
..."Among the examples are the mixture of highly advanced technologies
in some sectors with virtually primitive techniques in others;
"the disproportionately large rural population relative to the
Soviet Union's rank among world industrial powers;
"the striking differences in cultural level between the European
peoples of the U.S.S.R. and many of its non-Slavic populations
elsewhere (especially in Central Asia);
"the gap between the relative affluence of a substantial segment of
the technical and bureaucratic intelligentsia and the hardships
experienced by ordinary workers and peasants;
"the sharp discontinuities between the welfare and educational
facilities of the cities and the backwardness of the village.
"The existence of such contrasts means that a mode of solution that
may be appropriate at one level will only lead to trouble when
applied to others. In this respect, Soviet policy-makers are required
to cope not with a single, homogeneous society, but in effect with a
series of sub-societies requiring sometimes distinct, and even
mutually contradictory, treatment".
________________________________________________________________________
END OF BOX 2____________________________________________________________
________________________________________________________________________
BOX3____________________________________________________________________
From M. Gorbachev, "Perestroika. New Thinking for our Country and the
World", Collins, 1987, pp. 21-23.
..."An absurd situation was developing. The Soviet Union, the world's
biggest producer of steel, raw materials, fuel and energy, has
shortfalls in them due to wasteful or inefficient use.
"(The U.S.S.R.) one of the biggest producers of grain for food, it
nevertheless has to buy millions of tons of grain a year for fodder.
"We have the largest number of doctors and hospital beds per thousand
of the population and, at the same time, there are glaring
shortcomings in our health services.
"Our rockets can find Halley's comet and fly to Venus with amazing
accuracy, but side by side with these scientific and technological
triumphs is an obvious lack of efficiency in using scientific
achievements for economic needs, and many households appliances are
of poor quality.
..."This, unfortunately, is not all. A gradual erosion of the
ideological and moral values of our people began..."
..."a breach had formed between word and deed, which bred public
passivity and disbelief in the slogans being proclaimed.
..."Political flirtation and mass distribution of awards, titles and
bonuses often replaced genuine concern for the people, for their
living and working conditions, for a favourable social atmosphere.
..."An atmosphere emerged of 'everything goes', and fewer and fewer
demands were made on discipline and responsibility.
..."Working people were justly indignant at the behaviour of people
who, enjoying trust and responsibility, abused power, suppressed
criticism, made fortunes and, in some cases, even became accomplices
in-if not organizers of- criminal acts."
________________________________________________________________________
END OF BOX 3____________________________________________________________
________________________________________________________________________
BOX4____________________________________________________________________
TABLE 1
________________________________________________________________________
MONTHLY WAGES OF SELECTED OCCUPATIONAL GROUPS. LENINGRAD 1970
Occupational groups Monthly wages in roubles
------------------------------------------------------------------------
Directors of 'large industrial enterprises' 450-500
Managerial personnel 191
Skilled manual workers 141
Unskilled manual workers 106
Clerical, office employees 90
Cleaning staff 60
________________________________________________________________________
source: M. Yanowitch, "Social and Economic Inequality in the Soviet
Union", Martin Robertson, 1977
________________________________________________________________________
TABLE 2
PARTY MEMBERSHIP BY LEVEL OF EDUCATION, U.S.S.R. AROUND 1970
------------------------------------------------------------------------
Percentage who are
Education attained Party members
------------------------------------------------------------------------
Eighth grade* or less 7
Incomplete Secondary education 11
Completed Secondary education 18
Incomplete Higher education 22
Completed Higher education 31
Completed Postgraduate education 46
------------------------------------------------------------------------
NOTE: * Age 14 approximately.
Source: J. F. Hough, "Political participation in the Soviet
Union", SOVIET STUDIES, Vol. XXVIII, No. 1, January 1976.
_______________________________________________________________________
________________________________________________________________________
TABLE 3
OCCUPATIONS OF FATHERS AND THEIR CHILDREN, Ufa 1970
Occupations of their children in 1970
--------------------------------------------
Intelligentsia Worker Lower Non Total
Fathers' occupations non-manual Reply
------------------------------------------------------------------------
Intelligentsia 72.5 14.6 11.0 1.9 100
Worker 31.4 59.1 8.6 0.9 100
Lower non-manual employee 55.2 36.2 7.2 0.8 100
------------------------------------------------------------------------
source: M. Yanowitch, "Social and Economic Inequality in the Soviet
Union", Martin Robertson, 1977
________________________________________________________________________
________________________________________________________________________
END OF BOX 4____________________________________________________________
________________________________________________________________________
BOX 5___________________________________________________________________
ABOUT CLASS AND STATE OWNERSHIP OF PROPERTY
Marxist analysis suggests that the concept of property ownership should
be understood in a broader sense than that of pure legal entitlement.
Milovan Djilas, has suggested that those who effectively CONTROL access
to private property and the allocation of its fruits are the effective
"owners" of property (M. Djilas, "The New Class", Thames and Hudson,
1957): what ultimately matters, then, is not who has the legal
proprietorship of factories and offices, but who has the right to hire
and fire the labour employed in them, and the right to determine how the
share of the product is divided. In Djilas' view, a "new class' has
arisen in socialist society comprised of those who control access to
state resources and who thereby stand in an exploitative relationship to
the rest of the community. In this respect, the "new class" under
socialism occupies an analogous place to the bourgeoisie under
capitalism.
The important point is not simply that the exploiting class under
socialism claim for themselves a disproportionate share of goods and
resources; rather it is that they and they alone decide upon and enforce
the rules of production and distribution. It is because they exclude
workers from the decision-making process that they are equivalent to a
capitalist class. In a genuinely classless society the producers
themselves would play a direct role in deciding how production should
be organized and how the "surplus" was to be distributed. In
contemporary socialist society, however, the proletariat is no better
off in this regard than the proletariat under capitalism.
The veteran French Marxist, Charles Bettelheim, claims that the Soviet
Union -and by extension other east European societies- are not socialist
because they have failed to bring about a transition from the capitalist
mode of production to a "communist mode of production".
"The existence of the dictatorship of the proletariat and of state
or collective forms of property is not enough to 'abolish'
capitalist production relations and for the antagonistic classes,
proletariat and bourgeoise, to 'disappear'. The bourgeoisie can
continue to exist in different forms and, in particular, can
assume the form of a state bourgeoisie." (Ch. Bettelheim, "Class
Struggles in the U.S.S.R.", Harvester Press, 1977)
This thesis is well in line with the traditional Marxist understanding
of class in that it does not rest upon the fact of mere social
inequality. Its focus is upon the productive system rather than the
distributive system, and hence upon the political process by which
exploitation takes place.
A somewhat different critique of Soviet-type society is presented by
Trotsky. For Trotsky, the Soviet Union even under Stalin's regime, was
still to be regarded as a "workers' state", albeit one which had become
seriously deformed (L. Trotsky, "The Revolution Betrayed", Faber, 1937).
The proletarian basis of the society remained intact because land and
productive property were still under state ownership. That being so,
there could be no exploiting class akin to that found in bourgeois
society. Trotsky argued that the distortions of Soviet socialism were
largely attributable to the activities of the "bureaucracy" -the top
stratum of the Communist Party and the state apparatus. This was the
group which monopolized political power and stifled all proletarian
initiative. True, however, to the tenets of orthodox Marxism, Trotsky
insisted that the bureaucracy was not a ruling class because it did not
legally own the property which it administered. It could not transfer
the means of production to its own offspring in the manner of the
western bourgeoisie. For Trotsky, it seems, no matter what political
abuses might occur, no matter how savage the repression of workers or
how wide the differences between their incomes and those of Party
bureaucrats, the society remains a classless "proletarian" state so
long as private ownership is not revived.
(from F. Parkin, "Class and Stratification in Socialist Societies",
Study Section 15, Block 2, D207, Open University, 1981)
_______________________________________________________________________
END OX BOX 5____________________________________________________________
|
