This article is, I think, relevant to the current discussion on the economic viability of central planning.
Originally from Lou Proyect.
>
>From Dollars and Sense Magazine: WHY DID THE USSR FALL?
>
>THE PARTY ELITE, NOT THE MASSES, WANTED CAPITALISM
>
>By David Kotz and Fred Weir
>
>David Kotz teaches economics at the University of Massachusetts-- Amherst.
>Fred Weir is a journalist living in Russia. This article is based on their
>book, REVOLUTION FROM ABOVE: The Demise of the Soviet System (NY:
>Routledge, 1997).
>
>Conventional wisdom tells us that the remarkable demise of the Soviet Union
>in 1991 was propelled by the collapse of its socialist economy, leading the
>citizenry to peacefully sweep aside the nation's Communist leadership and
>their misbegotten socialist system. Yet, if one inquires into the
>whereabouts of the allegedly deposed Communist leaders, one finds most of
>them not languishing in exile, but still in high-level positions in the 15
>new nations that emerged from the USSR. Furthermore, most of them are a
>great deal richer than they were before the Soviet Union's demise. Two
>years after this odd revolution, 11 of these 15 new nations were headed by
>former top Communists.
>
>In contrast to the conventional wisdom, the Soviet revolution of 1991 was
>made, not against the small elite that ran the Soviet Union, but rather by
>that elite. And it was not a collapse of the USSR's planned economy that
>drove this process, because no such collapse took place. While the Soviet
>planned economy encountered serious problems after the mid-197Os, it was
>far from collapsing at the end of the 198Os. Rather, the Soviet elite
>dismantled their own system in pursuit of personal enrichment.
>
>Correctly understood, the USSR's downfall was caused by the undemocratic
>features of its system, not by the failure of economic planning. This
>interpretation provides hope that a democratic form of socialism would
>bring about greatly improved living conditions and economic stability for
>all members of society, not just an elite-- whether capitalist or
>communist.
>
>SOVIET ECONOMIC PLANNING
>
>For a decade after the Russian Revolution of 1917, the Bolsheviks
>experimented with various forms of economic organization. Not until the end
>of the 192Os was what came to be called "the Soviet system" put in place.
>It was characterized by public ownership of nearly all nonagricultural
>businesses and detailed planning from Moscow of productive activity across
>the vast country. Many Western socialists decried the extremely centralized
>and top-down form of economic planning adopted in the Soviet Union and
>condemned the authoritarian, repressive form of government that accompanied
>it.
>
>Income differences were much smaller than those in capitalist countries,
>and every worker was guaranteed a job. But a privileged and insulated
>"party-state elite" of high-level officials in the ruling Communist Party
>and the government ran the system and monopolized the best consumer goods.
>The Soviet system may have had some socialist features, but it was a far
>cry from the democratic system of popular sovereignty in both economy and
>government that socialists around the world had long imagined and worked
>toward. After Soviet dictator Josef Stalin's death in 1953, the brutal and
>murderous regime he had presided over since the early 193Os evolved into a
>more moderate form of authoritarianism, but the basic institutions of the
>system remained unchanged until the Gorbachev reforms of the 198Os.
>
>Despite the crimes perpetrated in its early decades and the continuing
>departures from the socialist ideal, the Soviet system brought rapid
>economic progress for some 50 years after its creation in the late 1920s.
>The transformation from a rural, agricultural economy to an urban,
>industrialized one--a process taking 30 to 50 years in other countries, was
>accomplished in only 12 years, during 1928-40.
>
>Some scholars think that Stalin's forced collectivization of the peasantry,
>the extreme reduction in their living standards, and the brutally
>authoritarian work relations in industry largely account for the rapid
>industrialization of 1928-40. But we believe that Stalin's atrocities,
>rather than speeding economic growth, instead slowed economic progress by
>provoking passive resistance from the population.
>
>It was the Soviet Union's socialist features, not its repressive ones, that
>deserve credit for the nation's rapid industrialization.
>
>Excluding the period of war and recovery associated with World War II, much
>of which was fought on Soviet territory, the Soviet gross national product
>(GNP) grew at a high average rate of 5.1% per year during 1928-75, based on
>Western estimates (see Table 1, p 24). Even during 1950-75, after basic
>industrialization had been completed, the Soviet economy still grew
>rapidly--much more rapidly than the US economy during those years, as Table
>1 shows.
>
>The Soviet system had several economic growth advantages over capitalism.
>These included the ability of economic planners to devote a large part of
>national output to investment in capital goods and in education and
>training of the labor force, absence of the periodic recessions that
>afflict capitalist economies, and the achievement of continuous full
>employment.
>
>Growth in GNP is an imperfect indicator of economic improvement over time,
>but other measures confirm the USSR's rapid progress. By 1975 the formerly
>backward Soviet Union had surpassed the United States in output of crude
>and rolled steel, cement, metal cutting and metal forming machines,
>tractors and combines, wheat, hogs, milk, and cotton. In 1960 about half of
>Soviet families owned a radio, one out of 10 a television, and one out of
>25 a refrigerator; by 1985 there was an average of one of each per family.
>By 1980 twenty million Soviet citizens had college degrees. That same year
>the USSR had more doctors and hospital beds per capita than the United
>States, and life expectancy had risen to 69 years, only five years below
>life expectancy in the United States. By the 1970s Soviet prowess in
>science, technology, and economic growth had Western governments worried.
>Many feared that the future might belong to the Soviet model by virtue of
>its economic successes, despite its many undesirable features.
>
>After 1975 Soviet economic growth slowed markedly and its rate of
>technological advance also declined. By 1985 Soviet leaders knew they had a
>problem. The US economy had been advancing more rapidly than the Soviet for
>a decade, a reversal of the past trend. Furthermore, competing with the
>Reagan administration's military buildup that began in 1981 placed a large
>burden on the Soviet economy.
>
>Soviet leader Mikhail Gorbachev came to power in 1985 partly due to the
>Soviet leadership's realization that serious economic reform was required.
>But Gorbachev's reforms failed to significantly improve the GNP growth
>rate, which rose only to 2.2% per year during 1985-89 from the previous
>decade's 1.8% rate (see Table 2, p 24).
>
>The GNP growth rate in 1975-89, while disappointing compared to the Soviet
>economy's past performance, was a far cry from economic collapse. The
>Soviet economy did not experience a single year of falling GNP during
>1975-89, while the United States had three such years.
>
>Worsening shortages arose for some consumer goods in the late 1980s,
>producing long lines at stores. Western observers assumed at the time that
>this reflected a collapse of production. But the shortages actually
>resulted from household income rising faster than consumer goods output.
>The culprit was economic reforms that decentralized control over wages to
>the individual enterprise level.
>
>In response, household money income, which had been rising by only 3% to 4%
>per year in the mid 198Os, suddenly rose by 9.1% in 1988 and 12.8% in 1989.
>With prices fixed by the central planners, cash-flush consumers quickly
>emptied store shelves, yet real consumption kept rising. While economic
>performance was lackluster in the 1980s, it was not consistent with the
>popular view that the Soviet planned economy collapsed.
>
>In 1990 and 1991, however, conditions changed. During those years Gorbachev
>and the Soviet government gradually lost power to the political movement
>led by opposition figure Boris Yeltsin. In May 1990 Yeltsin gained control
>over the Russian Federation, which was then a republic of the Soviet Union.
>As chief executive of the Russian Republic, Yeltsin was able to gradually
>seize political and financial power from the Soviet government. In June
>1990 Yeltsin persuaded the Russian republic's legislature to declare its
>sovereignty over all economic resources within the Russian republic.
>Economic planning was dismantled during this process, and the highly
>integrated Soviet economy then indeed began to rapidly contract (see Table
>2). This contraction, however, was not due to any inevitable
>"unworkability" of a planned economy; it occurred because economic planning
>was discontinued, leaving the economy with no effective means of
>coordination.
>
>THE ELITE EMBRACES CAPITALISM
>
>How was an opposition political movement able to peacefully dismantle the
>Soviet system, which had faced no effective internal opposition since the
>1920s? The answer to this question is found in Gorbachev's efforts to
>reform the Soviet system, and his efforts' unexpected effects on Soviet
>society.
>
>Gorbachev and his associates believed that the key flaw in the Soviet
>system was lack of democracy. They held this responsible both for the
>serious social and economic problems that had afflicted the Soviet system
>since the late 1920s and for the relative economic stagnation which had set
>in after 1975. Restructuring the Soviet system to allow real popular
>participation, both in the government and in economic decisionmaking would,
>they argued, finally bring out the true potential of a socialist system.
>
>Accordingly, Gorbachev's reform program, known as "perestroika"
>(reconstruction), had three components. "Glasnost," which meant lifting
>restrictions on public debate and political organizing, would free the
>citizenry to participate in public affairs. Democratization of the
>government, through instituting free elections and eliminating strict
>Communist Party control over the state, would permit the people to assert
>sovereignty in the political realm. Economic reforms were aimed at
>democratizing and decentralizing economic planning. New legislation shifted
>some power down to the individual enterprise level, where workers were
>accorded the right to select the enterprise director. The reforms also
>introduced a limited degree of market control, giving consumers more
>choices and more was produced.
>
>Glasnost led to a flowering of many different political groups holding
>various viewpoints about the best future for the Soviet Union. Three
>positions found the greatest support. One was the leadership's program of
>building a restructured and democratic socialism. The second was a call to
>return to the pre-reform authoritarian system. The third was an
>increasingly open advocacy of abandoning socialism in favor of capitalism.
>Glasnost made it possible to advocate viewpoints in opposition to the
>leadership, and the democratization of Soviet politics made it possible for
>newly formed opposition groups to legally contend for power. The economic
>disruptions occasioned by the economic reform efforts tended to undermine
>public support for Gorbachev and his associates. However, the
>pro-capitalist grouping, led by Boris Yeltsin, emerged victorious mainly
>because it won the support of the overwhelming majority of the party-state
>elite--the most powerful group in Soviet society. That the party-state
>elite would opt for capitalism seems at first glance implausible. It is as
>if the Roman Catholic Church hierarchy suddenly converted to atheism, or
>the US Chamber of Commerce called for the nationalization of private
>business. Yet just such a remarkable turnabout took place in the Soviet
>Union. By the 198Os most members of the Soviet party-state elite--the high
>officials in the Communist Party, the state, and the system of economic
>management--had long since ceased to believe the ideology of the system. As
>studies by Western Soviet specialists such as Alec Nove, Mervyn Matthews,
>and Kenneth Farmer discovered, the post-World War II Soviet elite consisted
>largely of ambitious individuals, lacking any strong personal conviction,
>who had risen into the elite in search of power, prestige, and material
>privilege.
>
>When in July 1991 one of the authors asked Nikolai L., a longtime member of
>the Soviet elite, whether he was a member of the Communist Party, he
>responded, "Of course I am a member of the Communist Party-- but I am not a
>Communist!" As Gorbachev's reforms opened the future direction of the
>system to debate, the members of this opportunistic elite evaluated the
>alternatives based on their own interests. Most of the elite concluded that
>the democratized socialism advocated by Gorbachev offered no advantages for
>them. Democratic socialism threatened to eliminate the arbitrary power they
>had exercised over the citizenry and to reduce their material privileges.
>The Soviet elite included some genuine believers in the ideals of
>socialism, including Gorbachev himself, but they turned out to be a small
>minority.
>
>Some opposition groups called for returning to the pre-reform Soviet
>system. But surprisingly few members of the elite found this a persuasive
>position. While the pre-reform system had promoted them into the elite,
>their material privileges were nevertheless restricted by the socialist
>pretensions of the old system. They were forbidden to own property or
>accumulate wealth, and their privileged lifestyle depended entirely on
>their position in the hierarchy. Displeasing a superior could lead to
>demotion and loss of the luxuries to which they had become accustomed. When
>a dozen high-level supporters of the old system tried to pull off a coup in
>August 1991, it quickly collapsed as the would-be new leaders found almost
>no support within the Soviet elite for their attempt to reinstitute the
>old system.
>
>By contrast, capitalism held great appeal for most of the elite. They
>noticed how much richer their counterparts in the West were than they, not
>only absolutely but relative to the average living standard of their
>country. The Soviet system had enormously valuable assets, and they
>realized that, if the system were converted to capitalism, they would be
>the best positioned to become the new owners of these assets.
>
>Indeed, that is just what happened. Russia's Prime Minister since December
>1992, Viktor Chernomyrdin, was Minister of Natural Gas in the Soviet days.
>Today he is believed to be the largest shareholder of the privatized
>company Gazprom, which controls the Soviet Union's 20% to 35% of the
>world's natural gas reserves, and appears to be one of the world's
>wealthiest individuals. One survey found that 62% of the 100 richest
>businessmen in Russia had previously been members of the Soviet party-state
>elite (most of the other 38% apparently came from organized crime
>backgrounds). It also found that 75% of high-level political leaders in
>President Yeltsin's administration in post-Soviet Russia came from the
>Soviet elite.
>
>The Soviet elite was not defeated by a democratic revolution from below in
>1991. Rather, they remained in power, discarded their Communist identity,
>and proceeded to divide up the wealth of the Soviet system among
>themselves.
>
>A study of the Moscow elite in June 1991 by Judith Kullberg, an American
>political scientist, confirmed that the conversion to capitalism was
>widespread within the top layer of Soviet society. Of the sample of the
>elite studied, 77% supported capitalism, 12% democratic socialism, and 10%
>held a "Communist or Nationalist" position.
>
>The views of ordinary Soviet citizens were vastly different. In May 1991
>the Times-Mirror Center for the People and the Press, an American survey
>research firm, conducted a large-scale public opinion survey in European
>Russia. It found that, as in the above elite survey, only 10% favored the
>pre-reform system. But 36% in the public opinion survey favored democratic
>socialism and another 23% favored the Swedish model of social democracy.
>Only 17% wanted "capitalism such as found in the United States or Germany"
>(14% had no opinion). Thus, a large majority (69%) of the public apparently
>wanted some kind of socialism or social democracy, and few wanted
>Western-style capitalism. Other public opinion surveys conducted at the
>time found even less support for capitalism than did the Times-Mirror poll.
>
>But despite the significant democratization of the Soviet system during
>1985-91, most ordinary citizens remained politically inactive. The
>party-state elite, positioned at the pinnacle of the social pyramid, had
>the power to overcome the resistance of Gorbachev and his associates,
>despite the public support for Gorbachev's aims, and turn the Soviet Union
>toward capitalism. Because the leader of the pro- capitalist movement,
>Boris Yeltsin, won institutional power within the Russian republic, while
>Gorbachev retained control of the central Soviet state, the pro-capitalist
>movement's achievement of full state power required dismantling the Soviet
>state. Such a move had no legal or constitutional basis, and a 1991
>referendum found that more than three-fourths of Soviet voters opposed it.
>Separating Russia from the Soviet Union was the only feasible way for
>Yeltsin and his movement to pursue a capitalist transformation.
>
>THE FUTURE OF SOCIALISM
>
>The demise of the Soviet system does not show that a system based on public
>property and economic planning is unworkable. It does show that a
>relatively egalitarian planned economy run by a privileged elite is, in the
>long run, an unstable system. Once the founding generation of revolutionary
>believers passes away, the ruling elite will eventually realize that
>maintaining the socialist elements of such a system is not in their
>interests. In the Soviet Union, this process occurred amidst the turmoil of
>an attempt to transform the system into a democratic form of socialism.
>
>In China, the party-state elite is also pursuing their economic self-
>interest, but by a different path. Instead of jettisoning Communist Party
>rule, they are using it to build a rapidly growing capitalist sector of the
>economy, which will eventually displace the planned, publicly owned sector.
>The children of top Chinese party officials are using their connections to
>establish themselves in lucrative positions in the new private businesses
>that have emerged.
>
>Only a democratic form of socialism, based on popular sovereignty in the
>economy as well as in the state, would be viable over the long run. An
>empowered population in such a system would resist any attempt by a
>minority to gain control of the wealth created by the people. We believe
>that democratic socialism, lacking the distortions that ultimately weakened
>the Soviet system and left it open to capitalist transformation, would be
>superior in economic performance, as well as social justice, to either a
>Soviet-type system or capitalism.
>
>Through economic planning, democratic socialism can assure full employment,
>avoid recessions, and invest heavily in developing human capacities as well
>as new technologies. Having no class of wealthy property owners, income
>would be distributed much more equally than under capitalism. In contrast
>to capitalism's blind drive for profits, democratic socialism would
>empower people to guide economic development along a path of sustainable
>economic progress. Such a path would increase living standards, reduce the
>time devoted to undesirable forms of labor, avoid degrading the natural
>environment, and fairly share the fruits of economic improvement.
>
>Soviet history does show that economic planning and public enterprise, even
>in the distorted Soviet form, can bring rapid economic progress. The belief
>that democratic socialism would do even better cannot be proved by
>reference to any historical example, since it has not yet existed on a
>large scale anywhere. But nothing in the Soviet experience, accurately
>understood, undermines the promise of democratic socialism.
>
>Resources: The Economy of the Former USSR in 1991, International Monetary
>Fund, 1991; "Is There a Ruling Class in the USSR?", Alec Nove, Soviet
>Studies, 1975; The Soviet Administrative Elite, Kenneth C. Farmer, 1992.
>
>TABLE 1: AVERAGE ANNUAL GROWTH RATES OF GROSS
>NATIONAL PRODUCT, 1928-75
>
>Period USSR USA
>
>1928-40 5.8% 1.7%
>1940-50 2.2% 4.5%
>1950-75 4.8% 3.3%
>1975-85 1.8% 2.9%
>
>Source: Revolution from Above: The Demise of the Soviet System, Kotz with
>Weir, Figures 3.1 and 3.2. Original sources: The Real National Income of
>Soviet Russia since 1928, Abram Bergson, 1961; Measures of Soviet Gross
>National Product in 1982 Prices, Joint Economic
>Committee, US Congress; others.
>
>TABLE 2: SOVIET GNP GROWTH 1986-91
>
>Year GNP Growth Rate
>1986 4.1%
>1987 1.3%
>1988 2.1%
>1989 1.5%
>1990 -2.4%
>1991 -12.8%
>
>Source: Kotz with Weir, Table 5.1. Original
>sources: Measures of Soviet Gross National
>Product in 1982 Prices, Joint Economic
>Committee, U.S. Congress; others.
>
>
>Louis Proyect
>
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