Date: Sat, 11 Jan 1997 14:06:02 -0500 (EST)
From: Justin Schwartz <jschwart-AT-freenet.columbus.oh.us>
Subject: Re: M-I: The former Soviet Union: what went wrong?



Louis likes to pretend I have made my mind up about everything. This is in
in keeping with his style ad homimen attacks in the place of argument.
It's true that I have been a bit repetitive. That's because I have been
reminding you all that my specific objections have not been answered. I
re-summarized them briefly a couple of times hoping that someone would
address them. All I got was (a) Louis' "answer" that the Cubans pretty
much solved these problems (no details), although the US blockade
prevented this from really showing up and his assurance that programmers
could handle an objection of Nove's that I started by conceding was no
good. (b) Carrol Cox's statement, with which Louis concurs, taht we don't
need to have a good faith rationally based belief that socialism would be
better as long as we hate capitalism enough, and (c) Yoshi's worry that
market socialism would lead to stratification (which is reasonable, and
which I replied to), but which doesn't show that planning wouldn't.

I repeat that I am not crazy about markets, being well aware of their
limitations and defects, and would be happy to be persuaded away from
them, if only someone would make a serious try. The best shot I have seen
is Albert and Hahnel's and perhaps I will try to take some time to explain
their model and why I think it does not work, but not today. I did ask
Louis,a ns will once more, for five essentiall readings on Cuba, so that I
can learn what I should know at least by way of starting.

Louis objects that my account of the problems of the Soviet economy is not
Marxist because it largely ignores class struggle. I agree that the USSR
was an exploitative system and, depending on one's definition of class,
arguably a class system. However unlike Louis I do not think that goes to
the root of why the Soviet economy got into trouble. In fact, Marxist
economics is a theory of capitalism, and therefore, unless we buy into the
state cap theory of the USSR, does not apply in any direct way to the
USSR. (ALthough it applies indirectly in terms of Soviet interactions in a
capitalist world economy.) We do not have a non-state-cap Marxist theory
of the nature of the Soviet economy. The best theory we have is the
nonMarxist Hayekian one, which, however, is, as Chris Sciabarra has
argues, _is_ a dialectical theory. I'd love to have a Marxist theory, but
I'm apparently not smart enough to come up with one. This puts me in good
company, as a lot of Marxists who have thought about it have also failed
to come up with one.

Louis refers to Lewin's profound historical account of Stalinism.
(Incidentally I do not think that the USSR in the 60s and after was post
Stalinist: au contraire I argued in a post a fe days ago that the system
in all the Soviet bloc countries was Stalinist to the end, which Louis
bridled at, saying that ignored national and period differences.) Lewin's
description of Stalinism corresponded pretty closely to my account of the
Hayekian problems with planning, but Louis says it weas planning because
it wasn't democratic. Apparently it's utopian of me to argue that market
systems would be better if they were socialist and global, but not utopian
of Louis to point of hypothetical democratic planning systems that will
somehow (how? we needn't be too specific) solve the problems of an actual
command economy. 

I don't say that all would have been well in the USSR had they gone with
Bukharin or stuck with the NEP. I think things might have been better, but
the prospects for any sort of socialism in a relatively underdeveloped
country without democratic traditions do not strike me as very good. I
agree with Marx that the optimal conditions for socialism are developed
capitalism in a bourgeois democracy. 

Let's look at what lessons Louis draws from Lewin:   

> In his chapter 6 "On Soviet Industrialization", Lewin makes a very
> important point that is lost on market socialists. Setting numerical
> quotas is *not* planning. If a government sets a goal of 10,000 tons of
> steel, it has not really met the goal if the steel is of such poor quality
> that it cracks under heavy use. 

Well, you can _define_ planning as centralized nonmarket decisionmaking that
actually satisfies demand and produces real use-values, but this is a
verbal gimmick that does not answer the Hayekian crticism. Hayek would
reformulate his objection to say that if that's what you mean by planning,
planning is impossible because centralized nonmarket decisionmaking that
satisfies demand and produces real use-values is impossible. This is in
fact more or less the way Mises puts it.

> value. Therefore, to characterize this economic model as "planning" is a
> misuse of language.
> 
> Another thing to keep in mind is that this striving after the satisfaction
> of numerical quotas took place in the conditions of economic isolation in
> the 1930s. The Soviet Union was not only pressured to compete with the
> West in terms of commercial trade, it was also forced to direct much of
> its wealth and labor toward the production of munitions since the fascist
> handwriting was on the wall. Under these circumstances, "quality" hardly
> ever entered into the equation. 

As I said, in the 1930s and during the reconstruction after the war,
Stalinist planning or whatever it was was reasonably effective. The kind
of quality that matters for intensive development were less important, not
only for a mid-century war economy, but also for a devel;oping industrial
economy. On the turf it claimed for itself in the 30s and 1945-60, Soviet
planning was quite effective outside agriculture.

> 
> Lewin describes the situation as follows: 
> 
> "Grounded in dysfunctions, the command system was a dysfunctional factor
> itself. The history of the five-year plans was one of the deep-seated
> arhythmia, of 'storming' at the end of each quarter, of spasmodic
> campaigning, of constant jolting of individuals and masses of people, of
> cascades of individuals and masses of people, of cascades of emergencies
> dealt with by 'shock methods.' No wonder that the system tended to be
> characterized as 'mobilizational' by some, as a 'command economy' by
> others. But obviously it was also a system plagued by perpetual
> imbalances. Bottlenecks were treated by shock methods, and shock methods
> created imbalances: production was surging ahead, but transportation was
> lagging; workers were massed on a building site, but there was no housing
> for them and not enough engineers; heavy industry was promoted, but
> agriculture was in terrible shape; labor productivity was demanded, but
> not enough food, spare parts, or material ever arrived on time, causing
> endless production stoppages." 

As I said.

> 
> Was there an alternative to this crude, uncoordinated, slap-dash numbers
> oriented approach? I suppose that if people had listened to Trotsky, there
> might have been a more rational approach to development. 

Do youmean the Trotsky who in 1932 said that the market was indisoensible
for thye foreseeable future, taht it was mad to think that an economy
could be planned down down the last acre of whaet and the number of
buttons on a vest? (The Crisis in the Soviet Economy, Leon Trorsky,
Writings 1932).

The problem is
> that the state of class relations in the USSR did not permit this to
> happen. The reason that Trotsky's industrialization model was not adopted
> is that the socialist-minded component of the working-class had been
> killed in civil war or swamped by new arrivals from the countryside into
> the factories and Communist Party of the 1930s. The combination of an
> aggressive development-minded bureaucracy--and it *was*--and a
> depoliticized working-class caused the Soviet economy to have the
> character it did, and nothing else. 
> 

OK, excerpt for that "and nothing else." That's not substantiated by
anything except a groundless faith that if the Party had been run by
socialist-minded workers they could have done everything right.

> The closest thing we had to an equivalent of market socialism in the USSR
> of the 1930s were the Bukharinites. They met the same fate as the
> Trotskyites and virtually for the same reason. They lacked a class backing
> powerful enough to thwart Stalin. As I and Carrol Cox and other Marxists
> keep pointing out, economic policy is dictated by the relationship of
> class forces and not clever ideas. 

No doubt. ANd so? What this means that we will not get market socialism
or democratic planning without a fortunate alignment of forces. It tells
us noithing about whether democratic planning would be better than market
socialism or vice versa.
> 
> Another question has to be dealt with and that is why there was so much
> waste, subterfuge and bogus production. Everybody has heard many, many
> times about how Soviet managers didn't care about the overall finished
> product but just how their plant performed. If their job was to turn out
> spark-plugs for tractor engines, why did they worry above all else about
> completing their work on time even if it was shoddy. It was somebody
> else's job to make the engine run, even if the spark plugs kept misfiring.
> 
An important question. I am gald Louis thinks it is finally worth addressing.

> This is pretty obvious and it should be obvious that the cure is not
> necessarily the lash of the market-place. Look, the USSR was a
> dictatorship in the 1930s and a pretty fierce one at that. People who were
> running factories had to placate Stalin. This meant completing a quota no
> matter what. You were on the spot and the results could be painful if you
> missed a goal. 

Sure, that was a factor. But even if you don't have to worry about being
shipped off to the camps, a command economy provides at least two other
internal, nonpolitical incentives to lie or miscalculate. One is that
whatever rewards and sanctions are in place, they are directed towards
meeting plan targets. Even if these could be calculated accurately and
corresponded to demand, enterprise managers would be inclined to set their
abilities to meet those targets artificially low and set their demands for
resources to meet those low estimates artificially high. The second is
that planners and enterprise managers are inclined to set their targets in
terms of things that can be easily monitored and measured, as well as in
term that are easy for them to meet, whether or not these correspond with
any actual demand or use values. This will lead to systematic deviations
>from meeting actual demand.

> The responsibility for quality control kept being displaced to the next
> party and in the end nobody was responsible. That is why Soviet
> manufactured goods were so second-rate. Nobody had the freedom to tell the
> top ranks of the bureaucracy that something couldn't be done in the
> allotted time. Work got completed but it fell apart as soon as it was
> finished. 

This is a bit of an exaggeration if stated as a universal truth. Soviet
military technology was first rate. Much Soviet industrial technology was
pretty good by mid-century standards. It was mainly in consumer goodws
that Soviet planning fell down. 

In any case, while it would certainly help to relieve managers of the
threat of death or imprisonment for bringing unwelcome news, that does not
address the issue of what in the system even thus relieved of repressive
negative incentives counteracts the positive systematic incentives to lie
and misrepresent and miscalculate. Louis thinks we do not need the lash to
the market to get public spirited and socialist-minded managers to do
this, but that's idealist. It ignores the material structure of the system
and the incentives it creates. It also ignores two other things:

	* there is a cost to policing the system itself and making sure
that the information it is working with is accurate and reliable: it would
require a veritable army of accountants, auditors, supervisors, etc. whose
energies would not go into production directly, and

	* there are planning rigidities. Once the plan is in place, it's
hard to get it to change because it's disruptive to everything anything is
connected with to change it. An auditor discovers that enterprise X is
hoarding labor and understating its capacities. So, the excress labor
must be reassigned. X now needs more resources to produce up to the level
that it can produce. The need for those resourcves changes the targets in
the upstream enterprises U, V, and W. In the downstream enterprises Y and
Z X's output has to be accomodated. The planners will be inclined not
avoid readjustments of this sort. The managers in U, V, and W and Y and Z
will resist these changes. 

> 
> This has nothing to do with an incapacity to plan. It is rather the result
> of trying to run an economy in a climate of fear. This fear did disappear
> from the scene many years later when the worst abuses of Stalin were over,
> but a deep malaise remained. Justin thinks that the 1970s and 1980s were
> post-Stalinist but that was true only up to a point. You may have not had
> to worry about being sent to a labor camp if you didn't make your goals.

But what? In the period when Soviet society was most free, planning was
deteriorating rapidly. 


> Planning can only work in a free society and it is ridiculous, as Justin
> does, to advance a critique of "planning" in an unfree society.

No, I don't. I advance a critique of planning in a free and democratic
society. I use theevidence of planning in an unfree society because it's
some of the evidence we have. It correspondods to the evidence we have
about comparatively comprehensive planning insulated from market forces in
the comparatively free and democratic societies of the west, as with lathe
corporate bureaucracies like GM or large government bureaucarcies like the
Pentagon. 

 The freest
> society to try planning has been Cuba and it has *not* failed. This is an
> intellectual and political challenge and I have yet to see a thorough
> examination of the Cuban model from anybody in this school.

I really woulkd like to see some discussion of the successes and limits of
Cuban planning presented in as much detail as we have discussed those of
Soviet planning,. If you feel competent to do this, as I do not, please
do so. But I still doubt that Cuba has much to teach us about industrial
planning. Show that I'm wrong.

> 
--Justin




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