The Soviet Economy after the New Economic Policy
The following article is taken from the third edition of ThinkLeft, the Workers’ Party’s theoretical magazine, which focused on the October Socialist Revolution, to coincide with its 100th anniversary late last year. Get your copy of ThinkLeft 3 here.
The Great October Revolution remains a unique event in world history. Despite the many progressive revolutions in history, no other revolution has prompted so great a transformation in material equality and the mode of production itself, and with such negligible aid from external sources. It is not unfair, therefore, to say that the USSR is in fact the unique example of a social revolution carried to completion, where private property as a mechanism of self-enrichment was completely abolished.
This process of transformation was tumultuous, chaotic, and sometimes brutal. And while it was rooted in and indeed configured by the revolution of 1917 and the subsequent civil war, it did not begin in earnest until 1928. The aspirations of the Bolsheviks to transform their society from one reliant on the market to one based on socialist planning did not become reality until a decade after the political revolution.
The lag between the political revolution of 1917 and the economic transformation initiated in 1928 throws up a series of questions for those hoping to understand the process of the October revolution. Why was it that the transformation had to wait a decade? And since it waited for a full decade, why was it enacted in so punctuated a fashion? What were the social and economic consequences? And perhaps most importantly: what does planning in the USSR have to teach us about our own future?
The Travails of the New Economic Policy
After the close of the civil war in 1921, the Bolsheviks attempted to resuscitate the flagging economy with a regime of state capitalism, known as the New Economic Policy (NEP). This period coupled state directed finance and industrialisation with both private and cooperative enterprise. Though it was indeed ambitious in scale, it was not a difference in kind from the dirigisme undertaken by any number of states but perhaps most iconically by the French state, which made extensive use of indicative planning and state monopoly infrastructural development, particularly after the Second World War. The real transformation of the mode of production occurred with the advent of the first five-year plan, which started in 1928.
In 1917 the Bolsheviks were prepared for a political revolution, which would be followed by a later socialist transformation — at a time left underdetermined — under the tutelage of the proletariat and in partnership with the peasantry. However, they were unquestionably over-optimistic about their prospects for this transformation. Lenin came to his own over-exuberant predictions about the simplicity with which the proletariat would rise to command their economic destiny in The State and Revolution:
“All that is required is that they should work equally, do their proper share of work, and get equal pay; the accounting and control necessary for this have been simplified by capitalism to the utmost and reduced to the extraordinarily simple operations –which any literate person can perform– of supervising and recording, knowledge of the four rules of arithmetic, and issuing appropriate receipts.”
Planning appeared a mere trifle, something which that could be easily sorted with the conquest of political power. Both Lenin and Bukharin were quickly disabused of this confusion. Already in 1918, faced with the immense practical difficulties facing the economy, Lenin made plain his reappraisal of the situation to the All-Russian Central Executive Committee:
“We know about socialism, but knowledge of organisation on a scale of millions, knowledge of the organisation and distribution of goods, etc., – this we do not have. The old Bolshevik leaders did not teach us this … there has not been anything about it yet in Bolshevik pamphlets, and nothing is said about it in Menshevik pamphlets either.”
Clearly the rose-tinted glasses had broken and the sheer enormity of the task had set in. Bukharin was drawn to similar conclusions by the end of the civil war and would recall:
“The experience of the Russian Revolution has proved that our former notions of the revolutionary process were rather naive. Even the orthodox Marxian section thought that all the proletariat had to do to take over the technical apparatus after ejecting the upper layers of the bourgeoisie was to capture the reins of power.”
Bukharin could now see that the rather pessimistic prognostications of the Mensheviks, and the right-wing of the Bolsheviks, were not conservative enough!
Of course, with any experiment which has never been tried, hypotheses are likely to be crushed under the weight of reality, and for such an unusual social experiment it is not surprising that so many of the presuppositions should be contradicted. It is therefore hard to blame the revolutionary enthusiasm which drove forward the cadres of the Bolshevik party.
Unfortunately for subsequent generations, Lenin did not live to see the period of planning and, due to his extensive party and governmental responsibilities, he was never in a position to write a retrospective appraisal of the revolution. This has retarded a clear understanding of socialist revolutionary strategy for later generations. We can only hope to piece together clues after a careful examination of the course of events and from subsequent fragmentary arguments made by himself and others.
The Civil War turned out to be far more difficult and protracted than the Bolsheviks had anticipated. Though they had, during this period, implemented what was called “war communism”, the process was one of regimented labour by coercion and forced grain requisitions. All in all it was very disorganised and haphazard and driven by immediate need and existential threat. It was a series of attempts to put out fires, and had little in common with the planned war economies of, for instance, Britain in the Second World War. The economic choreography had more in common with a slam-dance than a ballet.
This period was catastrophic for the economy. The disorganisation was much more profound than the impact of the First World War itself. In 1917, GDP was still around 80% of 1913 levels but by 1922, it had collapsed to between 40% and 50% of the 1913 figure. The numbers are even worse when we look specifically at industry. In 1920, production in 1913 terms was 1.6% for iron and 5.8% for sugar. Money as a medium of exchange had deteriorated so badly that only 7% of income was paid in money wages, with most income being given in kind.
The Civil War hardened the victorious Bolshevik party, cementing internal loyalty and coherence, and finally it did result in a workable state. Yet the strategy summed up in the slogan “Turn imperialist war into civil war” created a host of problems, economic and political, whose consequences would configure the options available to the Bolsheviks in the 1920s.1
By 1922, emerging from the terrible famine which was partly precipitated by civil war conditions, the Bolsheviks, and indeed much of the population, were eager for a return to normalcy. This meant immediately embarking on the process of rebuilding the economy.
The New Economic Programme was the approach that was adopted to stem the economic haemorrhaging. It was characterised by the centralisation of finance, and a range of small and medium-sized enterprises and peasant farming. The period was fondly remembered and even mythologised by many in the later Soviet Union, partly because it had an open character and was attended with a vivid and flourishing culture of arts and literature. When reformers looked back, it was often the NEP which they recalled. This was as true in the period of Khrushchev’s thaw as in Gorbachev’s reforms. Yet, the NEP was riven with internal contradictions which threatened crisis, much as the later period of reforms in the 1980s would turn out to be.
The original Bolshevik goal was to carry through a democratic revolution, using the proletarians as the active driving force, with the view that the bourgeoisie would prove too docile and ineffectual to complete the transition. In this the Marxist prognostications were proven correct. The Provisional Government hoped to little more than a constitutional monarchy and was so unstable that it lasted less than a year.
After the democratic conquest of power, the proletariat would then embark on a period of transition, over some period of time towards socialism. However it should be remembered that when the Bolsheviks embarked on this road of democratic conquest, they were also hoping that a German revolution, and perhaps other European proletarian revolutions, would follow. This would serve to keep the Soviet revolution from isolation, and greatly improve their latitude in the transition to socialism.
Unfortunately for the Bolsheviks, the other revolutions of Europe did not result in stable, friendly regimes. The complete absence of any allies — Mongolia excepted — was not the most auspicious conditions with which to embark on a socialist programme.
Prior to implementing the NEP, the Bolsheviks found themselves faced with the difficult task of rebuilding the state virtually ex nihilo. This meant many false starts in both the form and content of institutions as well as a severe staffing problem. The numbers of reliable and capable Bolshevik cadre were limited, making it difficult to find appropriate candidates for the state apparatus. Though recognition of this difficulty among the Bolsheviks was already present by 1918, the scale of the problem increased as the situation stabilised after the Civil War and the work could begin in earnest.
Eventually this staffing problem led not only to the reconstruction many of the same bodies as had existed before the revolution but the need to staff these bodies with many of the same people! This included organs of regulation, finance, the military, and even the secret police. In retrospect, it’s worth wondering if a judicious purge of selected individuals in industry and in the bureaucracy could not have reached the same end, with far less trouble, than the creation of new institutions from scratch.
The demographics of these state organs impacted the course of discussion and state actions in the 1920s. Various schools of thought began to arise on the pressing questions of economic development and these schools were often concentrated in specific state bodies. Virtually all remaining groups after the war were in agreement that some form of economic development and growth were necessary, including liberals and those with a more nationalist predilection. As each state organ was responsible for specific tasks, they would tend to be staffed with specific political tendencies. These tendencies sometimes also reflected broader constituencies which it was necessary to tie into the project. Yet it also yielded them influence over the course of events and choice of policy. Broadly speaking, the various political currents gave rise to different feelings on how the state should intervene in the economy.
We can only describe these groups somewhat schematically as they were of course not homogeneous. Nonetheless, there was a certain regularity. We can divide the intended economic approach of these groups into three schools: the anti-planners, the genetic, and the planners.
The anti-planners were often comprised of “bourgeois economists”, liberals and former Mensheviks. The NarKomFin, the state body which was responsible for setting policy on finance and money supply, was often staffed with people of this persuasion. Anti-planners tended to follow a more orthodox approach to industrial development, one not too dissimilar to those which might have been promoted by the finance minister under the last tsars, Sergei Witte. The concrete policies would revolve around increasing exports of grain, inviting foreign investment and maintaining currency stability with a gold backed ruble which would enable trade on the international market.
Those who were pushing a genetic approach generally saw more of a scope for planning, but wanted a more organic development, where industry would grow to eclipse the importance of agriculture gradually through directed investment programmes. Agriculture would be used to generate surplus through the state use of cooperatives which themselves could avail of state subsidised mechanisation. The majority of the Bolsheviks, and especially the Politburo, supported some variant of this approach.
Lenin pushed strongly for the electrification programme (GOELRO) which required only indicative planning and sufficient allocation of finance. His campaign was neatly summed up in the famous slogan: “Communism is Soviet power plus the electrification of the whole country”. This programme was undertaken by VSNKh (Vesenkha), the body then responsible for economic planning, which was only later to be eclipsed by Gosplan.
The genetic group was bolstered by former Socialist Revolutionaries (SRs) and the so-called right-wing of the Bolsheviks. The SRs had always had deeper roots — and therefore influence — in the peasantry and this was recognised in the numbers with which they staffed the Soviet body responsible for agriculture, NarKomZem. The “go slowly” approach appealed, due to the fears that some of the more radical proposals for the reconfiguration of agriculture would prove disruptive and dangerous.
The feelings on agricultural development in the genetic wing are captured in the words of Joseph Stalin, as he reflected on the problem of the small surpluses arising from the small peasant land holdings:
“The way out is to unite small and minute peasant holdings, gradually but surely, not by pressure, but by example and persuasion, into large holdings based on common, cooperative collective cultivation of the land.”
Finally, there was another tendency: the planners. Planners wanted to diminish or wholly remove the market from the process of industrial development. They tended to privilege a fast industrial development which would necessitate a sharp change in relation to the peasantry. Gosplan and Vesenkha were attractive posts for the planners, and the tendency was represented by the “left wing” of the Bolsheviks, including, most notably, Trotsky. The “left wing” of the Bolsheviks also tended to be antagonistic to the peasantry, and were sometimes openly hostile. Trotsky, writing his appraisal of the 1905 revolution in 1922, stated:
“Precisely in order to guarantee its victory, the proletarian vanguard in the very earliest stages of its rule would have to make extremely deep inroads not only into feudal but also into bourgeois property relations. While doing so it would enter into hostile conflict not only with all those bourgeois groups which had supported it during the first stage of the revolutionary struggle but also with the broad masses of the peasantry with whose collaboration it – the proletariat – had come into power.”
Trotsky would push, throughout the NEP period, for the identification of the peasants who had significant land holdings, that is Kulaks, as the primary enemy. This was a bid to gain the support of farm labourers and small peasants in a programme of expropriations or collectivisation of their larger “exploitative” neighbours. Rykov and Bukharin opposed this and Rykov claimed that the peasant would not view the distinction as meaningful and would see it as an attack on peasants tout court.
Ultimately, however, virtually all of the Bolsheviks saw the aim of the revolution to be the institution of socialist planning. The internal arguments tended to revolve around the pace and the strategy for getting there. The question of an evolution, rather than a revolution, into a system of full planning was by no means closed off simply by the fact of the October Revolution, despite the official propaganda against evolutionist variants of socialism present in the West. In fact, charges of “social democracy” were levelled against Stalin and others on the Politburo by Trotsky, as the Politburo tended towards the conservative centre, preferring to continue with the progressive reform orientated genetic approach which Lenin had endorsed.
The End of the NEP
By 1927, however, a number of crises began to unravel support for this approach. The NEP had never been entirely smooth sailing. In 1923, the economy experienced what was labelled by Trotsky as the “Scissors Crisis”. The term was drawn from the scissors-like graph which depicted the rising price of industrial products and the falling price of grain.
The Bolsheviks understood how dangerous this trend was. Peasants could easily revert to subsistence farming rather than sell their grain on the market for goods they would not be able to buy because they were too expensive. A decrease in the surplus grain could easily result in famine conditions.
In order to avert the problem, the state instituted price controls on the products of industry in order to encourage the marketing of grain by peasants. However, due to the very limited distributional capacities of the state, the infamous NEP-men – petty speculators – would often purchase the goods at urban stores under price-controls and then re-market them at inflated prices in the countryside, meaning that the effective prices experienced by the peasants did not always change very significantly.
The NEP had also been plagued by high urban unemployment, a condition that helped to remind the Bolsheviks that they were far from achieving their goal of a socialist society. While initially, at the close of the Civil War, the cause of unemployment was the collapse of industry, subsequently it was driven by the increasing number of peasants entering the cities. The levers available to the Bolsheviks for overcoming this problem under the NEP were limited, as credit was in short supply.
In 1926, the grain harvest was very good, and by the beginning of 1927, industry was nearly back to 1913 levels. The Bolsheviks had crossed the chasm and this meant a continuation of the NEP seemed the obvious path. However, the grain harvests of 1927 collapsed to half of the 1926 levels, leading to a political crisis. The Bolsheviks felt compelled to return to the forced requisitions of the civil war period to avert an urban famine.
Bringing these structural economic problems to the breaking point was a series of foreign crises, known as the Soviet War Scare. These changes produced a near paranoiac state in the Bolshevik leadership and made the argument for crash industrialisation much more palatable, on the understanding that an increased military preparedness might be an existential imperative.
In 1926, the government of Poland, which was not openly hostile to the Soviets, was overthrown in a military coup by Piłsudski, who was implacably opposed to Soviet power. The Bolsheviks suspected that the move was with tacit or explicit support of the British and that there were further designs on Eastern Europe, perhaps a conquest of Lithuania, recapitulating the Polish-Lithuanian war. The Soviets were running their own reactionary groups in Poland in order to catch wind of plots (Operation Trust) so these fears may even have had concrete foundation. To inflame matters further, in May of 1927, the Soviet envoy to Warsaw was assassinated.
Meanwhile, NarKomFin found itself desperately in need of credit to purchase technical machinery for industrialisation. In order to do this, the Soviets were attempting to persuade the French that the USSR would take responsibility for Tsarists debts, in return for access to credit. However, France was undergoing an increasingly unstable political situation, which the government blamed on communist agitation, and the Soviet ambassador to France at the time, Rakovsky, was caught in the crossfire. In 1927, the French government demanded the recall of Rakovsky and negotiations broke down. This not only damaged Franco-Russian relations, but put into question the very possibility of obtaining credit from abroad.
The Shift in Strategy
The war scare, combined with the poor grain harvest and the impossibility of obtaining credit, put planning back at the forefront. The question now was not whether to have a planning-centred industrial policy but which one.
Gosplan had for several years been publishing control figures, which could be used to predict economic indicators. It was, however, eager to be given a much greater role and had already laid out draft plans for crash industrialisation with a focus on heavy industry.
The purpose of industrialising with preference to heavy industry was clearly given in the fifteenth party conference resolution which adopted the implementation of the first five-year plan:
“Taking into account the possible military attack on the proletarian state by capitalist states against the proletarian state, the Five-Year Plan should be worked out devoting a maximum attention to the fastest possible development of those sectors of the economy and of industry which play the main role in supplying defense and in the economic stability in wartime.”
Although many scholars have attempted to play down the idea that the Bolsheviks could have believed in an impending invasion, preferring to think that it was driven by cynical political machinations, party discussions and party minutes present the matter as a genuine fear. Certainly, with the advantage of hindsight, they were right to be paranoid. It was only just over a decade before even the most exaggerated fears would be realised by the Nazis. The Soviets had begun their crash industrialisation with no time to spare.
The idea behind the series of five-year plans took the following rough form, based on ideas from Feldman and Preobrazhinsky. The broad sketch is that hard work and a period of austerity would build up a base of heavy industry. The system would reinvest surplus in even greater productive capacities which meant that workers would need to forgo consumption. This rapid investment strategy would lead to very fast industrial growth and after a period of about a decade, workers would be able to increase their consumption while the industrial base grew even further still.
The density of peasants on arable land in Russia was high, with the smallest landholdings leading to smaller surpluses per hectare. A survey by Postnikov, which Lenin drew upon in deciding agricultural policy, suggested it was typical for a peasant to have one horse on four hectares. Given the expected productivity of grain at 400-700 kg per hectare and the need to feed the horse, the surplus from a single peasant holding could fluctuate from a few hundred kilos to nothing at all, depending on the year.
In Preobrazhinsky’s view, this extremely high peasant density meant that there was an enormous pool of untapped labour. One peasant and one horse could work a significantly larger area than was currently allocated. Indeed, the famous “forty acres and a mule” is roughly an area of land four times as large as the small peasants typically held. With mechanisation, which they planned to devote to the collective farms, these scales could be increased even further.
This vast pool of untapped labour could then be used to increase the labour force in industry. In addition, labour activity would need to be intensified in order to bring productivity up prior to having produced fixed capital. Since the investment strategy was almost entirely endogenous (internal), there was no need to keep gold backing whatsoever, and the currency could move to being purely fiat. This suited the planners best, as they could speculatively expand the money supply according to their own predictions of industrial expansion.
The plans themselves were based on ideas of “material balances”, in which the raw materials required for various stages of the plan were sourced, quotas supplied, and the expected products from those quotas calculated in turn. This was difficult but practicable at a crude level, especially given the small number of products and focus on heavy industry.
The plan which was finally adopted made official targets of the most optimistic figures which Gosplan had supplied. And as time progressed, increasing enthusiasm edged numbers still higher in a kind of aspirational inflation. Eventually, they even adopted the resolution to fulfil the five-year plan in four years. In 1928, around 50% of the economy could be said to be a non-state market economy. Within a couple of years, this number was no more than a few percent.
Soon after the first five-year plan went into operation, the financial crash of 1929 occurred, which lead to widespread unemployment throughout the Western world. The USSR, being as it was detached financially, and newly disentangled from finance constraints imposed by a metal backed currency, experienced virtually no negative impact. This was incredibly useful to the Soviets as propaganda, not only abroad but also for demonstrating the efficacy of socialist planning at home.
Unfortunately, this was only part of the picture. Realising this excess labour in the countryside meant collectivising agriculture, rapidly, and by compulsion. The “Kulak” was finally officially identified as the enemy who was “to be liquidated as a class”, as Trotsky had hoped. However, fully in line with Rykov’s predictions, the distinction between peasants of varying degrees of wealth was both untenable and impracticable except indiscriminately, and both the oppression of the peasants and their resistance to this oppression, was generalised.
The peasant resistance to compulsion resulted in the mass slaughtering of farm animals, including draft animals and indeed some refusal to seed or tend land. This meant the necessity of further grain requisitions to avoid starvation in the cities. A series of forced displacements joined with a system of extreme travel restrictions given by documents which tied peasants to localities. Roads from villages were continually policed by the OGPU (Joint State Political Directorate). Violations by the peasantry helped to swell the GULAG system of prison work camps. The outcome of this was a spiralling conflict with the peasants. Indeed, in many ways it could be said to be a second civil war, this time between the city and the countryside over the social relations of agricultural property.
This conflict was compounded by drought and lower harvests from the dearth of draft animals and culminated in the Soviet Famine of 1932-33. The strategy of development merely moved labour off of the farms and into the cities, and, as such, could not increase the total surplus. As a consequence of this, relatively small fluctuations in the harvest could lead to hunger and a large fluctuation, in this case probably around 30%, could lead to mass starvation.
The costs were truly terrible, with deaths in the millions. However, the catastrophe was relatively short lived and was the last such famine in the USSR. After the famine, the mortality rate fell to its lowest level in history, while birth-rates enjoyed a modest recovery. Improvements in life expectancy were interrupted only by the Second World War.
By 1937, the agricultural sector had expanded in every major product, exceeding both 1913 and 1928 levels. Consumption by peasants had also increased in every category save meats. Likewise the industrial growth had been fantastic, though it had not met the over-zealous figures which had been adopted.
And yet, the consequences were not yet played out. Forced collectivisations had turned the OGPU into a veteran organ of mass repression. As the resistance from peasants subsided, sights turned towards criminality, sabotage and political crimes. The vast and rapid swelling of the ranks of urban workers and the break-neck pace of industrialisation provided fertile grounds for discontent. This discontent could easily transform into political crimes in the minds of the OGPU investigators. Insufficient enthusiasm could easily be mistaken for treason.
By 1933, the paranoia of invasion in the minds of the Politburo, which was even more pervasive within the NKVD and OGPU, now seemed entirely justified with the rise of the Nazis to power. By 1936, the first people sentenced to the GULAG began to be released sparking renewed fears of discontent. In the same year, the 1936 constitution was adopted, which granted universal direct suffrage, moving away from the system of the franchise which was weighted in favour of workers.
The pressure of rising threats real and imagined, domestic and foreign, were ironically inflamed by an increased potential for democratic input. This set the stage for one of the darkest chapters in Soviet history: the purges. Though many have tried to make sense of this period by ascribing the purges to cunning and cynical political machinations by Stalin in his attempts to consolidate power, this explanation is sorely lacking. Stalin had already managed to consolidate power quite effectively by 1928. The targets of the purges were too pervasive, too indiscriminate and the repression exercised too organically throughout the body politic for it to be a mere device for power. An incredible number of the old Bolsheviks were eliminated. Political enemies of Stalin who were already neutralised were eliminated. Artists, writers, mathematicians, philosophers, poets, engineers, and many who posed no political threat whatsoever were eliminated.
It is probably more accurate to think of it as a severe autoimmune disorder, where the body politic’s attempt to suppress pathogens began to attack and destroy healthy cells. Eventually, this dysfunctional political climate was diverted when a genuine pathogen, the Nazis, invaded. After the Second World War, and following the death of Stalin and the Khrushchev thaw, the political climate was significantly relaxed.
The famine and the purges are what Slavoj Žižek has termed a “genuine tragedy”. We can say that the Nazis set out to cause human tragedy and achieved great success. Yet the Bolsheviks set out to fully emancipate humanity from oppression and were met with some terrible consequences.
But what can we say about the success of the industrialisation in economic terms? It has become fashionable to state that planning was shown by the USSR to be inefficient and ineffective for any purpose. And yet the only countries in history who started from such a low economic base and managed to industrialise with similar rapidity are Japan and South Korea. Both of these countries did so with ready access to financial, political and military support, as well as credit and trade under the tutelage of the US. This was not the rule for US development assistance abroad either, but was done in these cases specifically for geostrategic reasons to present a bulwark against the growth of communism in East Asia. The conditions they experienced are in stark contrast to the almost complete isolation of the USSR.
While the toll of the collectivisations on the peasants was terrible, it was also not a completely unusual experiences for Western countries at similar levels of development. The Soviet famine was proportionally less intense than the Irish famine. There were tremendous costs to the population of the industrialisation in the UK with its enclosure and “satanic mills”. This is not to even speak of the accumulation which the UK obtained from barbaric colonial subjugation. The economic development of the US was likewise built on the mass kidnap and slavery of Africans, which ended only after a civil war. It also benefited from a continental expansion that led to near extermination of the native population. The death tolls of these events in sum are unknown but certainly in the many millions. In some ways the failures of the USSR’s development are not in being exceptionally brutal but rather are more typical of state development than the architects had intended.
Some who champion Trotsky as alternative leader contend that 1928 is the final departure in which the USSR went wrong. However, how Trotsky would have averted the problems they experienced is hard to surmise. Trotsky himself advocated the very same policies which were finally enacted in 1928. It was the unintended consequences of these same policies of crash industrialisation and the war against the Kulak which provided the motive engine for the tragic outcomes.
Though Trotsky and the Politburo which succeeded him may have been right in advocating these policies, as evidenced by the Soviet success in the Second World War, it’s hard to see how the human costs of the policy can be disavowed while its fruits are enjoyed. And though the costs were largely exacted on the Soviet people themselves, the fruits were enjoyed by all of Europe. It would take a very creative mind to imagine how the war against the Nazis would have been won without Soviet industrial capacities. And if the Nazis had won? The human costs of a Nazi victory are hard to quantify, but they would have been terrible indeed.
It remains an interesting question whether these tragedies could have been averted by some other approach. It is often contended that the NEP could have taken a slower approach to collectivisation and thereby avoided the results of the famine. However, the difficult circumstances that lead to the acceptance of the crash industrialisation policy might lead one to conclude that the phase of the NEP ended because it could not go on. In retrospect, the Second World War proved the necessity of developing heavy industry by providing proof of the existential threat the Soviets had feared. There is little question that the ability to produce thousands of high quality tanks, along with other military equipment, was a major factor in their success.
After the Second World War, the consumption end of planning expanded, and the Soviet people saw a renewed investment in an egalitarian society as inequality decreased yet again. Millions found themselves with increasing living standards including better housing conditions. Within a little more than a generation, this utterly backward peasant country was beginning to creep up to the living standards of Southern Europe.
Salvaging the Lessons
The planning system worked extremely well at industrialisation, but as the complexity of the economy increased the system began to experience diminishing returns. This was noticed by some Soviet dissidents, acknowledged quietly in the bureaucracy, and commented on by the CIA. Nearing the end of the 1960s, there was even a brief flirtation with the idea of embarking on a new transformation utilising advanced computer equipment, a gigantic Soviet internet development programme and cybernetic techniques.
Unfortunately, this further experiment was never attempted. Instead, the system continued with shrinking growth rates as military expenditures increased to keep up with the US expenditures in the cold war. While Soviet expenditures were often similar to US expenditures in dollar terms, proportional to the economy they were much greater; by 1980, military expenditures comprised as much as 30% of GDP, whereas US spending was below 5%.
Popular consumption stagnated in the 1970s and was never to see real improvements again. Eventually, in 1991 the entire system was dismantled as the former states spun off and Russia descended into a new social catastrophe which itself lead to millions of deaths.
And what lessons should we draw from the experience of planning in the USSR? The experiment showed conclusively that planning is indeed possible, contra the claims of the Austrian economists. It has also demonstrated that, for developing countries at least, it performs extremely well. This fact should still be relevant to large sections of the global south. In addition, the USSR remained materially extremely equal through the its entire lifespan while inequality expanded elsewhere, interrupted only by world wars, giving impressive credence to Marx’s analysis of the self-expansive nature of capital and how this was the key to creating an egalitarian economic system.
For advanced consumer societies however, the question is still more open, but there is reason to be hopeful. The kinds of planning which would be responsive to consumer needs, while also being capable of managing millions of commodities, were far beyond the capabilities developed in the USSR. Such sophistication would be necessary to keep Western levels of development. Yet, computers have advanced to levels unimaginable to the Soviets in the 1960s, and are literally 100s of billions of times more powerful. Such calculation problems are no longer insurmountable.
Some of the most important questions are not merely calculational. They involve more mundane social elements of production and distribution. The human side of cybernetics is in providing institutions and social rules which enable and encourage good behaviour and which lead to positive social outcomes. Some of the most important things we can learn from the planning system are not the positive examples but the negative ones. The USSR has a wealth of examples of where planning can go wrong. Planning in the USSR can still teach us much about what not to do.
The system of planning in the USSR was exceptionally taut, meaning that it was assumed that each stage of the production chain would meet its targets. When this failed to obtain, failure would cascade through the entire production chain, leading to shortages. Each firm was responsible for meeting its targets. Politically, this was often treated irrespective of the failures of those further up the chain.
This lead to a number of negative institutional responses. Firms would over-state needs and understate capacities systematically. They would similarly horde inputs in the event of later shortages. The planners would then assume that the firms were lying about capacities and negotiation would proceed, haggling, somewhat blindly, towards a target number, often based on the previous planning round. This meant that keeping outputs low was useful so as not to make the planners optimistic about future results.
Firms would also keep spare capacity to make the inputs that they could not obtain. Since material balances often did not take sufficient account of the suitability and quality of inputs, there was a widespread quality problem as well. Some of these problems were overcome by an illegal but tolerated grey-market of “fixers” (tolkachi), who would arrange complex barters to ensure the quotas could be met. The more extensive this network became, the more meaningless became the figures of the plan.
In addition the planning periods were rather long, due to the complexity of working out the various input-output strategies. Production delays in inputs within the period would lead to “storming” or intense work periods near the end of a planning period. Storming lead to both stressed workforces and difficulty in recognising and correcting deviations from expected results until the end of a period. Again, this could lead to cascading failure down the supply chain.
By 1970, mathematical economists in the USSR had become much more sophisticated. They had recognised that the plan had no objective function. This is essentially mathematical jargon for a goal. Without clearly defined goals it was impossible to seriously employ mathematical optimisation techniques. On top of this, the horizon problem had been clearly outlined: should investment be set at a low level and geared towards relatively decent consumption now, but with the proviso of low growth into the medium term, or should investment be set at a high level in order to reap the rewards in the future, even if it meant consumption in the immediate future was going to be restricted. There was no technical manner in which to decide between the two: it was a decision inherently political in nature. In addition, these goals provided a potentially excellent source of democratic input and a way to make the economy more responsive to public demand. This possibility was never exploited, but points to very exciting future avenues in the hope to place the economy in human hands.
In the final analysis, the USSR was an important and unique experiment with mixed results. While the deficiencies and tragedies are well known, we should also recognise the success which were often realised under extreme duress and with great difficulty. The defeat of the Nazis alone was of incredible importance to all of Europe and indeed the world; it is the reason that liberal democracies still exist there at all. The material equality and complete elimination of private accumulation is an amazing feat which we should study carefully. While it had clear shortcomings, it also was ability to feed, clothe, employ and house everyone, something not repeated by capitalist states.
The debt that post-war social democracy owes to the USSR is deeply underappreciated as well. Western elites felt compelled to compromise with labour in order to stave off the threat of communism. A realisable socialism, one given form and not merely an idea, was the legacy of the October Revolution. This was a driving motivation behind the communist parties in Western Europe that helped to win concessions and even helped to secure democracy itself in places such as Italy, Spain, Portugal, and Greece.
In chess, there is a concept known as Zugzwang, which means “compulsion to move”. It refers to scenarios in which the player is faced with only bad moves, but a move must be chosen nonetheless. As we peer back in time looking carefully at the choices made by the Bolsheviks at various points, we find that many of the choices are just such a situation of Zugzwang. When we eschew a purely moral framework but instead choose to think carefully about what each alternative choice might have been, the correct choices look far from obvious.
Strategic clarity demands we keep a careful eye not only on the goal of socialism, not only on our past revolutionary triumphs, but perhaps even more importantly on the lessons of our past difficulties. The first step is to recognise that these difficulties experienced in the USSR are in fact the difficulties of the movement for socialism itself. We must resist the urge to imagine holy saviours who could have somehow annulled the complex balance of material forces, whether these saviours be Trotsky, Bukharin, or even Emma Goldman. An analytical attitude that is both sympathetic to the difficulties our movement faced but critical enough to learn the important consequences of specific actions and strategic goals is the approach most likely to lead to future success.
Gavin Mendel-Gleason is a member of the Workers’ Party Ard Comhairle and Party Director of Research.