Planned Economy in the USSR: Success or Failure?

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I. Achievements and Difficulties of the Soviet Economy

Has the economic work of the Soviet government brought success? Or has it, on the contrary, ended in failure? Behind this question another is hidden: Are the economic methods used by the Soviet state valid in general? The reader would normally expect a monosyllabic answer: yes or no. We refuse to provide such an answer. The building of a new society is not a matter of solving an isolated statistical or technical problem. What is involved is the planful adaptation of all the branches of the economy to one another, and of all of them together to human needs. What needs to be reconciled are not statistical but dynamic quantities. For this kind of task, no single booklet, no single human brain — not even a “brain trust” — can serve for ready made formulas. Creative fantasy alone, even if armed with the best technical estimates of the specialists, is inadequate to this task. What is involved is the life of society as a whole, its most deep-rooted functions and elementary needs. To achieve harmony in the state — even on the basis of collective ownership and planned management encompassing all facets of the economy — is only possible as a result of an indefinitely prolonged period of efforts, experiments, errors, crises, reforms, and reorganizations.

How should the living forces of labor within the nation be distributed among the branches of the economy? What unit of measurement should be used for human needs? What share of the national income should be assigned to consumption and what to expanding production? How should the consumption fund be divided up between town and country, or between the various categories of industrial labor and administration? These basic questions give only a bare hint of the enormous difficulties involved in the system of planning, which in its ideal culmination ought to constitute a vast conveyor involving all the productive functions of society in the infinite complexity of inner relations among them.

In reviewing the tasks of planning one cannot leave aside a question which in the final analysis has decisive importance: the world distribution of labor. To the extent that planning is a job done by government agencies, it is of necessity limited, at least at the present stage, by state boundaries. But the productive forces of humankind long since outgrew the national framework. Within the bounds of a single state it is impossible to plan exports and imports. Raising the economic level of the USSR will not weaken but, on the contrary, will strengthen its ties with the world market. Here the planning system runs up against a choice between two alternatives: autarchy, or an extension of the scope of planning to other states, to the entire planet. The idea of autarchy in all its varieties, including that of a closed-in socialism in a single country, constitutes a reactionary utopia. Humanity will not deny itself the worldwide distribution of labor. There is nothing left, then, but to extend planning beyond the limits of national borders by reconciling and coordinating national plans. A problem of exceptional difficulty and duration!

It would be totally wrong to take our words as an expression of skepticism regarding the principle of planning. No, we see it as the only creative principle in our epoch. But we emphatically reject any dilettantish or light-minded attitude toward the question of organizing socialist economy. This task cannot be carried out in a short time, specified at will: here what is needed is the labor of generations. If there is an element of skepticism in this evaluation, it is directed not against the possibilities and capabilities of humankind, but against the excessive pretensions of bureaucracy.

What we have said thus far should delineate to some degree what our attitude is toward the results of the first five-year plan and the prospects for the second. It is hard to say who violates reality more — those who proclaim the unqualifiedly successful fulfillment of the plan, or those who screech about its total failure. The truth is, there can be no question of the first five-year plan — still an extremely primitive hypothesis for planning the economy for a five-year period, an equation with an enormous number of unknowns — having been “fulfilled” in the literal sense. The real percentage of fulfillment will never be known as a consequence of the total alteration of the plan during the course of its fulfillment and because of the absence of a stable monetary unit as a measure of the value of the results achieved. Partly . under the impact of malevolent criticism by our enemies, and partly through the influence of domestic political needs, the Soviet authorities have made it a matter of prestige to claim that the plan was fulfilled virtually 100 percent. But why, our innumerable enemies retort with glee — and unfortunately, not without justification — why do the living standards of the masses lag so far below the norms specified by the plan? What is the reason for the severe difficulties in food and other areas?

If one approaches the first five-year plan from the point of view of its technical-industrial achievements — new factories, power plants, etc. — the material results, even aside from statistical indices, can really stagger the imagination. In effect humanity has seen for the first time what enormous possibilities are lodged in modem technology, even for an extremely backward country, if the labor force is utilized in a planned and centralized way. However, if one approaches the matter from the point of view of the everyday needs of the population, it is not hard to reach pessimistic conclusions. This contrast testifies to the profound disproportions within the economy, partly inherited from the past, and partly the result of an incorrect distribution of forces and resources. One cannot forget for a moment that the planned direction of the economy is a two-edged sword: it can overcome disproportions or it can cause them to mount up. Having concentrated all the levers of economic management in its hands, the state may at one extreme achieve mind-spinning results, while, at the other extreme, leaving the most essential needs unsatisfied. This is no argument against the principle of planning. But it is an argument in favor of a critical attitude toward planning.

The degree of success attained by the first five-year plan can be decided in part by the extent to which it laid the groundwork for the next plan. On that score an especially large number of illusions have been sown. The second five-year plan was originally geared to an absolutely fantastic annual rate of increase in national income (30 to 40 percent)! The author of these lines, beginning in 1929, warned publicly in the press that the forced pace of the first five-year plan was sure to build up disproportions that would have to be paid for by sharply reduced growth in the second five-year plan. In 1932 we suggested that the start of the second five-year plan be postponed and that 1933 be devoted to general overall repair of the Soviet economy, that is, making up for omissions, smoothing out disproportions, surmounting contradictions. The proposal was not formally acknowledged by Moscow. But in fact the second five-year plan was not put into effect — it hardly exists today, even on paper! The pace of economic growth has been reduced in the extreme. Serious reforms in the economy and in the methods of planning themselves are needed to make possible a further stable growth at high rates. Only a very superficial or deliberately biased critic could find in these ebbs and flows of the economic process, or in the erroneous calculations of the Soviet bureaucracy, proof of the “bankruptcy” of planned economy. The formation of a new social system cannot be judged as though it were a performance record in sports.

II. The USSR and the USA

The most realistic assessment of the results of the five-year plan, and of the Soviet economy in general, would in our opinion be as follows: the very fact that the first experience of state planning in a backward and isolated country did not end in disaster but, rather, opened up new possibilities, unquestionably represents a historic victory. The significance in principle of this victory will be less subject to dispute, the less we exaggerate the extent of the concrete economic achievements.

Above all it is necessary to remember that the Soviet Union, heir to poverty and barbarism, was forced to struggle by the techniques of planning to achieve the material level that the advanced capitalist countries surpassed as long ago as the period when free competition still prevailed. And even today the Soviets lag far behind the advanced countries, especially the United States, in terms of average national income per capita. There is no need to explain the extent to which economic and cultural backwardness hinders and retards the application of the principle of planning.

The greatest difficulties have proved to be, of course, in the agricultural sphere. Here too the greatest mistakes were made.

The widely dispersed and primitive nature of peasant production left vast scope for administrative experiments and caprice. This phase is far from over even now. The percentage of collectivized peasant farms exceeds the original target figure (20 percent) by at least a factor of three. But no one feels obliged to mention any rise in the extremely low productivity of agricultural labor, in spite of the far-reaching mechanization.

Also remaining unresolved is the question of the distribution of income, which has decisive importance for production in general and for agriculture in particular: it is precisely the distribution of finished products that can provide the stimulus for increasing the productivity of labor. Collectivization as a whole has not yet passed the stage of initial experimentation. One can only regret that far too vast a scale was chosen for this experimenting from the outset.

Consequently, one may say as a general rule that the successes of planning are most apparent in those fields where the decisive role is played by the centralized initiative of the state, supported by the most advanced sections of the working class. The five-year plan has produced the poorest economic results in those fields where the participation of great masses of people is required, especially of peasant masses, and where a systematic raising of the cultural and technical levels is a prerequisite. The contradiction between town and country is the most burdensome part of the heritage from czarism, in whose economy nomadic barbarism stood side by side with the most modem technology. The growth of Soviet industry created the first preconditions for reorganization of agriculture and for improving relations between town and country in the future. But these very successes in industry have been gained at the expense of a strain on relations between town and country in the present. Here it will be necessary to pay not only for the historical past but also for the recent crimes of the Soviet bureaucracy, which too hastily replaced cultural and economic factors with purely administrative ones.

This is the issue over which, during the last few years, deep differences have appeared between the so-called Opposition, to which the author belongs, and the present ruling faction.

It is our firm conviction that the new social system cannot be built by following the ready-made blueprints of the bureaucracy. The plan is only a working hypothesis. The fulfillment of the plan inevitably means its radical alteration by the masses whose vital interests are reflected in the plan. The uncontrolled bureaucracy inevitably creates disproportions and contradictions and allows them to build up. Only the organized working population, actively participating in the elaboration and implementation of the plan, can give the necessary signals in time if there are shortcomings, and can see to it that they are corrected. The planning mechanism, without a really active and flexible Soviet democracy, in town and country, bears within itself the greatest dangers of administrative adventurism. The severe difficulties with food and other things should be seen as the direct result of the bureaucratization of the Soviet regime that has taken place over the past few years. But that is a big subject in which economics is intimately bound up with politics, and falls outside the immediate range of the present article.

To expect economic harmony to be established in the coming months and years within the territory of former czarist Russia would be the most naive utopianism. To assert that “socialism has been achieved” in the USSR is to make a mockery of the facts, and of ideas. The main work still lies ahead. Contradictions and crises are still inevitable. In order not to lose heart and fall into despondency, one must analyze the successes and failures of planned production in the long-term historical perspective, guaging oneself not by years but by multiple decades.

Liberal capitalism, during its rise and at its height, solved the problem of economic proportion through the free play of supply and demand and of periodic conjunctural cycles. Modern monopoly capitalism, with all its mighty technical resources, stands helpless before the problem of proportions, which confronts it in the form of the problem of “sales.” The nationalization of the means of production and exchange created the preconditions in the USSR for a planned solution to the problem of proportions. The automatic play of supply and demand is replaced by calculation, statistical foresight, and administrative direction. Material and psychological difficulties did not thereby disappear but were translated into the language of planned management. If capitalism took shape and grew over the course of centuries, the new planned economy requires at least several decades to work out and test its basic methods and to train the necessary managerial and executive cadres. This is a totally solvable problem — the only thing is not to proclaim that it has already been solved.

Least of all can the problem be considered solved when one realizes that in spite of the nationalization of the means of production and the monopoly on foreign trade, the Soviet Union is not separated from the rest of the world by any impenetrable barrier. The course of economic construction in the USSR depends to a great extent on what happens in the next few decades to the economy of Europe and that of the whole world, which at present is thrashing about, in the convulsions of a terrible crisis. Here we come directly to the question of the possible economic relations between the Soviet Union and the United States.

With all the fundamental differences between their social systems, the American and Soviet economies have two features in common: vast scale, and high concentration of the means of production, at least in industry. With daring and perspicacity on both sides, economic cooperation on these foundations could assume proportions unprecedented in history.

The new economic methods being applied in the United States today are based on the concept of government planning with private ownership being maintained in the means of production. This is not the place to go into an evaluation of these methods. Experience will provide the test. One thing is clear, however, that even with the most favorable results in practice, domestic planning runs up against the problem of foreign trade. Can it be brought under the control of reason? the [international economic] conference in London [June 1933] has given an eloquent answer on that score. For the United States to abandon exports would be to abandon economic advancement altogether. Meanwhile, on the map of world trade there is a sector that is already amenable to planning. That is trade with the USSR. It is possible to take pencil in hand and sketch an outline of the relations between the two giant states, a hypothetical plan of exchange that would develop in an upward spiral.

Despite all its deficiencies and contradictions, the Soviet economy allows one to see ahead much better than, say, the thoroughly sick economy of Germany does. With the establishment of normal diplomatic relations, the American government, which by the nature of things has now come to stand much closer to economic questions than any transoceanic republic’s government ever did, would have ample opportunity to get fully and systematically acquainted with all the processes of the Soviet economy, and consequently, to ascertain the “element of risk” involved in Soviet-American economic relations. If upon our planet, shaken with disorders, in an atmosphere of new threats of war and of bloody convulsions, there still remains an economic experiment worth carrying through all the way, it is the experiment of Soviet-American cooperation.