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Perestroika: An inquiry into its historical, ideological and intellectual roots

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Perestroika: An inquiry into its historical, ideological and intellectual roots

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Content PERESTROIKA: AN INQUIRY INTO ITS HISTORICAL, IDEOLOGICAL AND INTELLECTUAL ROOTS by Abu Faij Dowlah A Thesis Presented to the FACULTY OF THE GRADUATE SCHOOL UNIVERSITY OF SOUTHERN CALIFORNIA In Partial Fulfillment of the Requirements for the Degree MASTER OF ARTS (Economics) May 1990 Copyright 1990 Abu Faij Dowlah UMI Num ber: E P44930 All rights reserved INFORMATION TO ALL U SERS The quality of this reproduction is d ep e n d en t upon the quality of the copy subm itted. In the unlikely event that the author did not sen d a com plete m anuscript and th ere a re m issing p ag es, th e se will be noted. Also, if m aterial had to be rem oved, a note will indicate the deletion. UMT Dissertation Publishing UMI E P44930 Published by P roQ uest LLC (2014). Copyright in the Dissertation held by th e Author. Microform Edition © P roQ uest LLC. All rights reserved. This work is protected against unauthorized copying u nder Title 17, United S ta te s C ode P roQ uest LLC. 789 E ast E isenhow er Parkw ay P.O . Box 1346 Ann Arbor, Ml 4 8 1 0 6 -1 3 4 6 U N IV E R SITY O F S O U T H E R N C A L IF O R N IA T H E G R A D U A T E S C H O O L U N IV E R S IT Y P A R K L O S A N G E L E S , C A L I F O R N I A 9 0 0 0 7 This thesis, written by Abu Faij Dowlah under the direction of hx . S Thesis Committee, and approved by all its members, has been pre sented to and accepted by the Dean of The Graduate School, in partial fulfillment of the requirements for the degree of Master of Arts Be y o W7 Dean D ate _ _ _ _ _ L a m L a x y - , 22 - , - - 1 3.9 THESIS COMMITTEE Dedicated to my father (in memorium) and my mother. iii Contents List of Figures vi List of Tables vii Acknowledgments ix Chapter I Introduction: Conceptual Debates on Perestroika Meaning, Pace and Scope of Perestroika 2 Reforms or Revolution? 12 Has Socialism Failed? 21 Concluding Remarks and Thesis Statement 26 Chapter II Perestroika and Gorbachev Gorbachev Launches Perestroika 36 Background of Perestroika -Stagnant Economy 39 What Went Wrong? 41 The Grand Slowdown of Economic Growth 41 Industrial Sector 45 Agricultural Sector 47 Low Productivity 49 Failures of Soviet Consumption 53 Slowdown in the Demographic Growth 56 Ineffective Economic Incentive System 59 Prescriptions of Perestroika 62 Policy Objectives of Perestroika 66 Goals of Perestroika 67 Economic Reforms of Perestroika 70 New Economic Mechanism for State Enterprises 72 New Role of Central Planning 73 Changes in Management Structure 77 Reforms of Price, Banking, and Finance 79 Incentive and Wage Reforms 83 Private and Cooperative Activity 84 Foreign Economic Relations 85 Trading Guns for Butter 85 Concluding Remarks 87 Appendix: Chapter II 89 IV Contents Chapter III Historical and Ideological Precursors of Perestroika Introduction 105 NEP and Lenin (1921 - 28) 112 Background of NEP: The Period of War Communism 117 Nationalization of Industry 118 Compulsory Requisition of Food 121 Attempts to Abolish Markets and Money 122 State Control over Economic Resources 124 Evaluation of the War Communism Period 125 NEP and its Prescriptions 128 Mixed Socialist Economy 130 Agriculture as the Foundation 132 Denaticnalization and Decentralization of Industry 133 Currency, Price and Financial Reforms 135 ' Ideological Justifications of NEP 137 Evaluation of NEP 142 Comparisons with Perestroika 144 The Stalinist Revolution (1929-53) 146 Collectivization in Agriculture 149 Industrialization Drive 153 Performance of the Stalinist Model 156 Evaluation of the Stalinist Model 159 Malenkov's New Course (1953-57) 161 Major Reforms of the Khrushchev Era (1957- 64) 166 Repudiation of the Stalinist Cult 167 Triumphant Economic Conditions 170 Emphasis on Consumer Goods 171 Reforms in Economic Administration 173 Agricultural Reforms 175 Reforms in the Incentive System 177 Reforms in Trade Unions 178 Reforms in Prices, Wages, and Finance 180 Evaluations of Khrushchev's Reform Measures 182 Lessons for Gorbachev ' s Perestroika 18.6______ V Contents The Kosygin Reforms (1965) 189 Reforms in Enterprise Management 190 Reforms in Agriculture and Prices 192 Performance of the Economy 193 Kosygin’s Reforms and Lessons for Perestroika 194 Brezhnev's Reform (1964-82) 198 1973 Reforms 200 1979 Reforms 201 Reforms in the Incentive System 204 Agricultural Reforms under Brezhnev 205 Performance of the Economy 207 Andropov (1982-83) and Cherenenko (1983-85) 208 The 1983 Reforms 210 Appendix: Chapter III 213 Chapter IV Intellectual Precursors of Perestroika Introduction '227 Marxian Socialism 229 Marx on Socialism 230 Marx on Plans and Markets 237 Marx on Democracy and Freedom 249 Revisions of Marxism 256 Lenin and Marxism-Leninism 258 Lenin's Reliance on Vanguard Party 262 Lenin on the Dictatorship of the Proletariat 263 The Great Industrialization Debate 269 The Position of the Rightists 270 The Position of the Leftists 278 Stalin (1879-1953) 284 Lessons for Gorbachev's Perestroika 286 Chapter V: Conclusion 292 References and Further Readings 313 vi Chapter II Figure 1: Figure 2: Figure 3: Figure 4: Figure 5: Figure 6: Chapter III Figure 1: Figure 2: List of Figures Growth of GNP and Factor Productivity, 1961- 86 89 Growth rates of national income in the USSR over five-year periods, 1966-2000 90 USSR: Trends in GNP and NMP, 1960-1986 91 USSR: Trends in Industrial Production, 1960- 1986 93 USSR: Trends in Agriculture and GNP, 1960-1986 95 Estimated Soviet Lag Behind the United States in Key Technologies 103 Russian Industrial Growth 1890-1913 224 Organization of Central Soviet Economic Management Agencies as of Early 1964 225 vii Chapter II Table 1: Table 2: Table 3: Table 4: Table 5: Table 6: Table 7: Table 8: Table 9: Table 10: Table 11: Table 12: Table 13: Table 14: Table 15: Table 16: Chapter III Table 1: Table 2: Table 3: Table 4: Table 5: Table 6: Table 7: List of Tables USSR:Growth of GNP, Factor inputs, and Factor Productivity , 1961-86 89 Tempos of Growth of National Income by Five- Year Plans 90 USSR Trends in GNP and NMP, 1960-1986 92 Selected Indicators of Soviet Economic Performance, 1971-85 92 Comparison of GNP Growth in USSR and Western Countries, 1961-85 94 USSR: GNP Growth by Sector of Origin, 1961-86 94 Soviet Grain Harvest, Exports & Imports 96 Soviet Meat & Meat Product Imports 97 Real Gross Product, Factor Inputs, and Productivities 97 Comparative Investment Efforts 98 USSR: Growth of GNP, Factor Inputs, and Factor Productivity 98 Resource Intensity of East European CPEs and Industrialized West European Market Economies: Energy and Steel, 1979-80 99 Estimated Soviet Consumption Per Capita, 1928- 1975 100 Changes in Savings Bank Deposits and Retail Sales 100 Soviet Economic Performance Indicators, 1961- 85, and Plans to 2000 101 Procurement of Selected Weapons Systems by the United States and the Soviet Union, 1974-85 102 Soviet Industrial Production in 1920 213 Worker's Productivity in the Soviet Union 1913- 1920 (in stable rubles) 213 Soviet Employment Pattern in 1925 214 Trends in Small-scale and handicrafts Industry in ! the Soviet Union (1923-27) 214 1 Role of Cooperatives in Soviet Retail Trade (1923-27) 214 Stages of Soviet Collectivization, 1927-1937 215 The Socialized Sector as a Proportion of the Soviet Economy (%) 1924-1928 215 Table Table Table Table Table Table Table Table Table Table Table Table Table Table Table viii 8: Slaughtering of Livestock (1928-1931) Due to Collectivization 215 9: Outcome of the Soviet Industrialization Drive of 1928-37 216 10: Soviet Industrial Production During Malenkov's Interregnum (1952-55) 210 11: House Building in the Soviet Union (1953-1960) 210 12: Urban Housing in Soviet Union by Private and Public Sectors (1955-59) 211 13: Soviet Grain Output, 1958-1962, 1965 Goals 211 14: Trends in State Farms & Collective Farms (1953- 65) 212 15: Soviet Grain Production, 1953-1958 212 16: Performance Indicators for the Fifth Plan of the USSR and Targets for 1960 213 17: Average Income of Soviet Industrial Workers (1950-1961) 214 18: Indexes of Farm Prices Paid by the Soviet Government, 1954-1958 214 19: Annual Soviet Industrial Production Growth Rates, 1958 and 1958-1964 215 20: The Slowdown in Soviet Economic Growth, 1951- 75 215 21: Soviet Economic Indicators, 1961-1970 216 22: Selected Macroeconomic Growth Rates in Soviet Union, 1961-1970 216 i x Acknowledgments Nineteen Hundred Eighty Nine had been a historically momentous year. While peoples of the Soviet Union and Eastern European countries made history, I spent most of the year writing this thesis. In fact, this thesis would not have been written in the absence of the breathtaking events in those countries. I have benefited immensely from the ideas and movements, individuals and institutions, and the flow of events that shaped the year 1989. I wish to thank the participants of those historic events. A very special thanks goes to Mikhael Sergeyevich Gorbachev, whose vision of 'socialism with human face' spurred the political earthquakes of the last decade. In the course of writing this thesis, I have benefited greatly from Professors John E. Elliott, Nake Kamrany and Gary Dymski, of the Economics Department of the University of Southern California. They served as members of my thesis committee. I am grateful to all of them for their constructive suggestions and critical comments. But first and foremost, Professor Elliott was a constant source of intellectual encouragement from the inception of this project to its completion. He advised at different stages of the thesis, edited the manuscript, and guided it through its final stages. I remain grateful to him for his invaluable help. I also wish to thank the authors I have quoted throughout the thesis. Finally, I would like to thank my wife, Shama, for taking pleasure in the involvement of her husband in this project. All these mentioned above, and many others, are responsible for whatever virtues this thesis may possess, but the source of all errors and omissions lies within me. January 5, 1990 Los Angeles Abu F. Dowlah INTRODUCTION: .1 r CHAPTER I CONCEPTUAL DEBATES ON PERESTROIKA Chapter I Introduction: Conceptual Debates on Perestroika i I Meaning, Pace and Scope of Perestroika j Denouncing the burgeoning capitalist system in the I harshest possible terms, and sketching a masterful profile of inevitable and unescapable demise of full-blown i capitalism, Karl Marx proclaimed in 1848 in The Communist Manifesto, 'A specter is haunting Europe -the specter of ! Communism*. During the protracted period of more than one J hundred and forty years since that declaration, a plethora of economic, political, scientific and social revolutions have dramatically reshaped the world. Now at the threshold of the twenty-first century, in a diametrically different contemporary world, the Marxist alternative ideology of Communism itself is being haunted by massive demands for genuine freedom and democracy. As Reagan (1989, 17) succinctly pointed out 'Once it was the (Western) democracies that doubted their own view of freedom and wondered whether utopian systems might not be better. Today, the doubt is on the other side*. In fact, especially since 1950s, the demand for political freedom and economic democracy jolted the whole communist world, from Beijing to Warsaw, by provoking occasional economic reform movements and political eruptions. But with the recent explosions of 'people power' in the communist world; with the launching of perestroika in the 3 Soviet Union, with the humiliating defeat of the communist party and installation of a non-communist government in I Poland, with the introduction of a multi-party political system and tearing down of an impenetrable iron curtain along the borders of Hungary, with the unprecedented exodus I of emigrants from East Germany ('the showpiece of workers paradise') to West Germany and the virtual dismantling of ! the Berlin wall; the demand for western-style freedom and j j democracy has demonstratively strengthened its capability to break down the backbone of communism. Consequently, the Communist ideology has apparently lost its 'religious' appeal that swept the world in the 1950s. Today, writes Nixon (1989, 29), 'no developing nation's government aspires to become a bureaucratic nightmare like that in the Soviet Union, with its jungles of red tape and its stagnant swamp of an economy'. In July 1989, Mozambique, an African country backed out of the Communist bloc by officially dropping Marxism as its state-ideology. The wave of change is more dramatic and fascinating in the Communist bloc itself. After seventy years of Marxist- ideology-based experiments, the communist world apparently learned the costly and lamentable lesson (Fukuyama, 1989; Unger, 1989) that one 'cannot deny the fundamental essence of human nature and expect to succeed' (Thatcher, quoted in Newsweek, Nov. 28, 1988). While some East European countries have long been grappling with the problem of growing demand for political freedom and economic democracy with various degrees of success, the Soviet Union, the first ! and most powerful socialist country of the world, began only j recently to address the problem resolutely. In fact, I perestroika, the tantalizing vision of reformed and freer i | model of Communism' (Painton, 1988, 28) emerged as a unique I | answer of the Soviet Union to the problem that threatens the very ideological, historical and intellectual foundations of Communism and the entire communist world. Perestroika is a brain-child of Mikhail Sergeyevich Gorbachev and his lieutenants. Gorbachev was elected General Secretary of the Communist Party of Soviet Union (CPSU) in March 1985. He inherited an economy in 'shambles' (Friedberg & Heyward, 1987, vii) and a society ravaged by a 'breaking mechanism’ (Gorbachev, 1987, 19). His predecessors, especially Brezhnev, bequeathed to him i) a stagnant and technologically backward economy, which, in Gorbachev's own words, was literally wavering 'at the brink of near-crisis situation1, and ii) a degenerated and apathetic society where 'the great values born of the October Revolution and the heroic struggle for socialism were being trampled underfoot’ (ibid., 24). Recognizing the severity of a stagnant, inefficient and technologically backward economy, Gorbachev and his lieutenants launched perestroika within one month of assuming power. To facilitate the recovery of the economy from 'stagnation and other phenomena alien to socialism’ (ibid., 24), glasnost (openness) and democratizatsiya (democratization) were simultaneously introduced as 'supporting pillars of perestroika’ (Elliott, 1989, 35). For Gorbachev, perestroika, glasnost and democratizatsiya go hand in hand, they are inextricably interlinked and interdependent. Glasnost, as an instrument of perestroika is expected to expose the underlying root causes of dismal performance of the Soviet economy. Democratizatsiya, on the other hand, aims at democratization of the Soviet society and work place, but only to the extent that would create conducive environment for the implementation of perestroika. In April 1985 the main principles of perestroika were enunciated by the Plenary Meeting of the CPSU Central Committee. Inauguration of perestroika was rapid because the whole country 'has long been yearning for it* (Gorbachev, 1987, 17), but, as Aganbegyan (1988, 3) maintains, the reforms of perestroika, the 'new strategy of development by acceleration’ was based on intense work and previous research. In June 1985, the Central Committee Conference of the CPSU vigorously debated ways and means to implement perestroika. In January 1987, the Plenary Meeting of the CPSU Central Committee embarked on a program for all round democratic changes, introduced Glasnost for the first time in Soviet history. And for strengthening the democratic basis of the society, to establish a 'genuine control from below' in all levels and spheres of administration and economic management of the country, Gorbachev unleashed a sweeping reform under the banner of democratizatsiya. Subsequently, perestroika, and its allied components, Glasnost and Democratizatsiya, have been discussed at meetings of the CPSU Central Committee, and the main features of perestroika were incorporated into legislation by the Supreme Soviet by January 1988 (Elliott, 1989, 36). Since Gorbachev, 'a highly intelligent, sophisticated man of the world, and a great communicator' (Nixon, 1989, 26), came to power, revolutionary transformations have been taking place in the Soviet Union almost every day. To Gorbachev and his lieutenants, perestroika's 'new thinking’ goes far beyond structural transformation of the economy and putting the economy back on the right track. As Gorbachev (1988, 420) declares, 'Perestroika implies not only eliminating the stagnation and conservatism of the preceding period, and correcting the mistakes committed, but also overcoming historically limited, outdated features of social organization and work methods'. In fact, Gorbachev has made 'change a value in itself' (Kaiser, 1988, 110). The essence of perestroika, according to Gorbachev, lies in a profound restructuring of the whole economy; in reconstruction of the society's material, spiritual and intellectual base; in acceleration of scientific and technological revolution in all spheres of the country. Gorbachev intends to accomplish all these through what he calls a 'revolution', as the lessons of the past reform efforts clearly demonstrated that 'cosmetic repairs and patching would not do, a major overhaul was required' (Gorbachev, 1987, 27). Detailed programs were therefore designed very soon for a rapid transition of the economy from an overly centralized, outdated command system of management to a more decentralized, more democratically- oriented system of economic management. Along with that a tight and careful schedule for the implementation of the intended 'radical reforms' was designed so that solid foundations for achisving the goals of next five-year-plan could be laid by 1991 (Havlik, 1989, 93). The pace of the sweeping reorganization and restructuring measures taken so far under the banners of perestroika to revitalize the stagnant economy and reenergize the people, 'who have fallen asleep' (Gorbachev, 1987, 29), is undoubtedly 'one of the most transfixing spectacles of modern times' (Isaacson, 1989, 49). Gorbachev has concluded that for rapid implementation of the programs of perestroika, it is essential to evict many bureaucratic hold-overs of the Brezhnev era and replace them with his own people. By July 1987, more than 70 per cent of the members of the Presidium of the Council of Ministers concentrating on economic questions and CPSU's economic Secretariat have been replaced. In all major economic institutions the new faces, the post Stalin generation, 'those born in the late 1920’s and 1930's and came of age after Stalin's death, is finally gaining control of the economy' (Colton, 1987, 145). In fact, since Gorbachev's assumption of power in March 1985, a 'virtual total transformation1 has taken place in the membership of the Politburo, in the membership of the Central Committee Secretariat, and the headships of the powerful departments of the Central Committee of the CPSU. As Ellison (1988, 4) remarks, 'Indeed, no previous Soviet leader has made so many alterations in the leadership of the party and government in so short a time'. As regards broad policy matters, the new leadership has already switched the nation's priority to technological modernization, took decisive steps to redirect industrial productions toward consumer satisfaction, and reactivated the agricultural sector by allowing farms to sell all above-plan grains at market prices. Simultaneously numerous measures, as will be described in the subsequent chapters, have also been taken to stimulate private initiative and cooperative enterprises, to foster foreign economic ties both with Eastern and Western countries, and to allow industrial entities to trade directly with foreign partners; and to gear up incentive systems towards boosting workers' morale 9 and productivity. In the field of glasnost changes are undoubtedly the most exciting and extensive. Gorbachev declared in the 19th Party Conference of the CPSU, 'there is no revolution without glasnost1. What glasnost achieved during the last four years was simply beyond the imagination of anyone. As Kaiser (1988, 109) writes, 'Gorbachev has gone much further, much faster than his countrymen or outsiders ever dreamed possible.1 The degree of freedom newspapers and the media in general enjoy in today's Soviet Union has simply no parallel in the Soviet history. 'Perestroika', writes Falin (1989, 306), 'has already printed once-disgraced books in millions of copies, restored the stature of scores of cultural figures formerly anathematized for different reasons or for no reasons at all.' Gorbachev has effectively repudiated the mythology of Stalin and his command-model of socialism, shattered taboos that dominated the country for generations, reinstated many prominent dissident writers, such as historian Roy Medvedev and many revolutionary thinkers, such as Nikolai Bukharin. And many more hitherto unthinkable changes might be forthcoming as Elliott (1989, 48) remarks, 'Trotsky's program essentially was Bukharinist. Thus, can Trotsky's rehabilitation be far behind Bukharin's?' Gorbachev has not only made glasnost irreversible, he has made it a part of ordinary XjL.fje in the Soviet Union... 10 Manifestations of glasnost are evident in every sphere, every level of the society; in party hierarchies, in the nationalities, in the regions, in the local governments, in the factories and on the street, in the Baltic states, in Azarbaijan and Armenia, and elsewhere. Recent demonstration of a four hundred miles-long and 8-million people strong 'Human Chain' from the Lithuanian capital of Vilnius to Estonian capital of Tallinn, amply, if not woefully, demonstrates how far Gorbachev's glasnost has gone so far. Falin (1989, 305) rightly points out, Conditions are created for everyone to openly and freely express his or her position in respect to the new Soviet revolution, which openly states its credo; to give Socialism back its real human face - so that people will not be born equal, ‘but will stay equal all their lives. In the field of democratizatsiya, changes are tumultuous and far-embracing. From the state machineries to the factory floors, from politics to economics, at every sphere of life, democracy is now clearly emerging. Gorbachev believes that the three prongs of his program are inextricably interlinked. For Gorbachev, democratizatsiya goes hand in hand with the programs of perestroika. All previous reform efforts were doomed to failure, Gorbachev asserts, because they did not undertake bold steps to bolster individual initiative or broad-based public participation in governmental decision-making. Besides using glasnost for removing his political adversaries, 11 Gorbachev has been remarkably successful in creating 'more participation at the lowest levels of Party and stimulate a higher degree of individual motivation' (Brezezinski, 1989, 59) in the society. The reconstituted 2,250-seat Congress of People's Deputies, most of whose delegates were freely elected through secret ballots, and for the first time in the Soviet history, 'constitutes what is arguably the most democratic governmental institution in more than seven decades of Soviet rule' (Doerner, 1989, 30). More important, in terms of power and responsibility, the newly constituted Congress has already buried its conventional 'rubber-stamp' role into oblivion, and instead, has been vigorously pursuing its due share in national and international policy decisions. The new Congress, as a matter of fact, in its very first session, called for drafting a new constitution to provide greater protection of individual rights and clearer limits on the authority of the government and the party (The Los Angeles Times, June 25, 1989). Gorbachev's democratizatsiya has allowed a formal opposition in the nation's parliament under the leadership of radical political leader Boris Yelstin and prominent human rights activist Andrei Sakharov (ibid., July 31, 1989). The formation of Inter-Regional Deputies Group within the Soviet parliament clearly demonstrates a profound break with the very foundations of Soviet socialism. Gorbachev's perestroika not only allows Soviet citizens to 12 think the unthinkable, but also permits them to actually do the things that had been beyond the wildest imagination of anybody during the last seventy years of Soviet socialist history. Gorbachev's fundamental strategy is to utilize the instruments of glasnost and democratizatsiya only to the extent that they foster the implementation of perestroika. Although both pro and anti-perestroika groups are allowed to hold meetings, and even organize demonstrations, no formal opposition political party has yet been allowed, and Gorbachev adroitly opposes any attempt to extend glasnost and democratizatsiya beyond the 'tight rope1 maintained by the CPSU. Reforms or Revolution? All these breathtaking events are taking place on the soil of the Soviet Union, a country which only four years ago, had the external image of 'a brutal, boorish country, ruled by force and possessed by a relentless drive to expand abroad; combining cunning and suspicion, intolerance and xenophobia' (Dallin, 1986, 3). These changes are being effected on a population that had been ruthlessly governed by and perennially accustomed to the centrally planned economy and one-party rule. Therefore, no wonder that the changes initiated by perestroika overwhelm observers. In fact, perestroika's reforms are so enormous and overwhelming, so stunning and far-reaching, that to many 13 observers, western and non-western, perestroika appears to be a revolutionary phenomenon. Usually the concept of revolution is conceived as a sweeping, comprehensive and rapid transformation of a society and polity from one system to another. Scholars debate how comprehensive and sweeping the change must be to be truly revolutionary, one may also debate the question of rapidity. After all, history provides many examples of social, economic and political changes which emerge over a period of several hundred years when taken as a whole may together constitute a revolution. The 'industrial Revolution' and the 'Modern Capitalist Revolution’ provide good examples of such revolutions. In addition, when human beings are in the grip of profound and widespread changes they may well expect or well believe that the end result of the dynamic events which they are witnessing will be revolutionary, even if, strictly speaking, an objective observer at the time is unconvinced. Perhaps for this reason the rhetoric of perestroika, glasnost, and democratizatsiya is ripe with use of the terms 'revolution1 or 'revolutionary1. Gorbachev (1987, 23-28) himself describes the reforms interchangeably as 'radical', 'revolutionary' and 'comprehensive'. Aganbegyan (1987, 6), Gorbachev's chief economic advisor, describes perestroika as 'radical reforms', 'profound qualitative changes' and 'revolutionary transformations'. The rhetoric of Gorbachev and his lieutenants, the astounding pace of the implementation of the reforms and the sweeping character of transformations in the Soviet life and society since 1985, very naturally, have generated considerable controversies about the nature, scope and potentiality of perestroika. A careful study of the writings on Gorbachev and perestroika reveals at least three alternative interpretations. According to the first interpretation, the reform package of perestroika is 'only a palliative, a half-measure' and amounts 'to an impressive-appearing but, in reality, only partially and largely ineffective policy of liberalization' (Zemtsov, 1989, xi)( l As the Soviet Union under previous leaderships largely missed the technological revolution and failed to move from the industrial to the post-industrial phase of modernization, the new leader Gorbachev, by emphasizing accelerated intensification in the economy, is actually trying to reform the economic system by 'changing (national) priorities' and 'making the (economic) system work better’ (Kaufman, 1988, xi). According to this interpretation, Gorbachev neither intends to change the Soviet socialist system, nor endeavors to usher in a revolution for its overall transformation. The goal of perestroika is rather very modest, it is designed to effect changes within the system, to inject some flexibility and dynamism into the stagnant Soviet economy. According to 15 Brezezinski (1989, 59), what Gorbachev plans to accomplish is 'not to overturn the system but to rationalize it, using East Germany, not Hungary or China, as his model'. This strand of thought stresses that Gorbachev's reforms came as another round of reform efforts in the Soviet Union which has experienced similar efforts in the past. According to these writers perestroika is just another bird of the same feather; it hardly envisages a fundamental break with the previous reform efforts in Soviet history. They emphasize that although Gorbachev has been struggling to open-up the Soviet closed society and is making desperate attempts to decentralize highly centralized management of Soviet economy, perestroika's reforms fall far short of a revolution because they 'retain or enhance strong central control over the general structure and direction of economic activity’ (Hewett, 1989, 16). These writers are suspicious about the lasting impact of perestroika, and contend that in the Soviet Union new party and state leaderships were often associated with similar efforts in the past. The previous reform attempts, they argue, 'left behind a sense of frustration and disillusionment' (Jermakowicz, 1988, 111) in the society within three to four years of their initiation. A strict interpretation of this viewpoint would presumably mean that by now perestroika is running out of time, and it's about time for Gorbachev to stop rocking the boat and make a safe exit. 16 According to some writers, let alone a revolution, perestroika even could be found wanting as an attempt at genuine reform aimed at establishing a socialist market economy. Perestroika, according to Hewett (1989, 16), even fails to come close to the concept of market socialism as developed by Oskar Lange. As Hohmann (1987, 31) points out, Gorbachev's concept of reform, as has been elaborated in the 27th Party Congress, sharply differs from the concept of socialist market economy. It rather envisages a 'relaxed and rationalized planned economy which attempts to make more use of market mechanisms'. Gorbachev's economic reforms, writes Issacson (1989, 57), 'while radical, are nonetheless, carefully circumscribed'. Similarly, analyzing perestroika from a Marxian view of revolution, some writers maintain that in Gorbachev's rhetoric, 'revolution' need not be taken literally. Draper (1988, 292) asserts that if perestroika stands for revolution, from a Marxist point of view, its efforts should be directed towards overthrowing the existing ruling class and to replace it by another class. As perestroika does not intend to change the essence of the Soviet social system, as Gorbachev's programs do not manifest any intention of disorganizing the society, or replacing the existing ruling class by another class, such writers argue that perestroika does not constitute a revolution. Of course, if one contends that in the Soviet Union political and bureaucratic elites constitute a social 17 class characterized by centralization and concentration of power and wealth, then its displacement might be regarded as revolutionary phenomenon from a Marxian perspective (Battlehiem, 1976). / A second interpretation of perestroika conceives Gorbachev's three-prong reform package in the context of Soviet history. This view, emphasizing the revolutionary undercurrents implicit in Gorbachev's reforms, affirms perestroika as a revolutionary process of transformation. This strand of thought presumes Gorbachev's reforms as 'substantially more comprehensive' than the earlier reform efforts, concludes that perestroika is 'much more radical' and postulates that perestroika stretches far 'behind economic mechanisms into associated processes of power and participation’ (Elliott, 1989, 35) in the Soviet society. This view contemplates that Soviet society is undergoing a 'serious attempt at surgery to remove the malignancies of mature, even superannuated, socialism: political rigidity, intellectual petrification, and dogmatism' (Zemstov, 1988, xi). The writers of this strand of thought maintain that by any standard, Gorbachev goes much further than any of his predecessors. While Khrushchev challenged Stalin's cult of personality, directed his reforms primarily against the subjective side of the system, perestroika's challenge, as Elliott (1989, 40) puts it, 'extends beyond Stalinist tyranny and totalitarian rule to confront the very 18 foundations of the post-Stalinist system: centrally planned economy and the domination of Party over State1. In sharp contrast to earlier reform efforts, in the words of Menshikov (1988, 52), Gorbachev's reforms are 'far-reaching and deep’, 'really tantamount to sudden revolutionary change and it is building up a new system instead of preserving the old one'. Although this strand of thought firmly believes that perestroika connotes a revolutionary process or at least marks the genesis of a revolutionary transformations, the exponents of this viewpoint do not fail to underscore that perestroika's revolutionary process is aimed at consolidating socialism, not replacing it by capitalism. As Issacson (1989, 57) remarks, 'Gorbachev is not marching headlong to capitalism but is attempting to reinvent Marxism by creating socialist markets, socialist competition and cooperative ventures'. Even Gorbachev (1987, 36) himself asserts, We are looking within socialism, rather than outside it, for the answers to all the questions that arise....Those who hope that we shall move away from the socialist path will be greatly disappointed ....perestroika .. is fully based on the principle of more socialism and more democracy. A third group of thinkers contemplate that Gorbachev's perestroika, as a matter of fact, constitutes nothing less than a counter-revolution. They tend to argue that if perestroika stands for a revolution, then certainly it r i l l negates the October Revolution. Essentially this interpretation presumes that there cannot be another } revolution in the Soviet Union without negating, or at least challenging the October Revolution. These writers, mainly Western non-Marxist writers, especially journalists, anticipate that Gorbachev is moving away from socialism. Unlike the Marxist writers, as indicated above, this strand of thought accepts Gorbachev's claim of revolution at face value, and concludes that it stands for a counter-revolution in the Soviet Union. Swayed by the unprecedented opening up of the Soviet society, unflappable liberalization of the economy, and unflinching dismantling of the centralized- bureaucratized system since the assumption of power by Gorbachev in 1985, these writers believe that socialism as an ideology has 'proven illusory' and that the 'ambitions of socialist world are anachronistic in the modern world' I (Kaiser, 1988, 112). Within this strand of thought, however, one can identify another group of writers who conceive perestroika as a counter-revolution, but build their reasoning on a different foundation. The former group of Sovietologists characterize perestroika as a counter revolution because it is moving away from socialism and towards capitalism. The later group, on the other hand, defend Stalin's command model of socialism, and by equating Stalinism and socialism, accuse Gorbachev of repudiating Stalinism, and therefore socialism itself. These writers postulate that perestroika manifests a negation of socialism, and that by throwing away Stalin's command and centrally controlled model of socialist economy, Gorbachev is actually trying to abandon socialism itself. There is yet another group of So\. iet observers according to whom Gorbachev is not really a reformer at all (Gunlicks, 1987, 14). Denouncing the 'common American view’ of looking at perestroika as a revolution, Kirkpatrick (1989, 49-53) I asserts that 'Gorbachev is no revolutionary within the Soviet tradition' and he 'has given no indication of any intention to forgo the monopoly of power established by Lenin soon after the Bolshevik revolution'. This strand of thought finds 'no sevidence whatsoever that the new leadership's attitude toward the classical, that is Stalinist, economic system and the post-Stalin political system contains criticism of its foundations' (Bialer and Afferica, 1986, 605). These writers, however, acknowledge that Gorbachev is making determined efforts to revitalize the country's stagnant economy, and indeed trying to restructure it. But they surmise that Gorbachev's intention is to achieve that transformation by combining new leadership with more effective policies. These efforts, they assert, do not constitute a reform or a revolution, because these reforms neither intend to overthrow the Stalinist model, nor 'aim at dismantling the basic superstructure of the highly centralized, highly bureaucratized administrative 21 and economic legacy of the country' (Hewett, 1989, 16). Such contrasting views offer challenging insights about perestroika and Soviet society, the present author will summarize his own evaluation in a moment. Has Socialism Failed? A corollary of the controversy involves the debate about i the root cause of the emergence of perestroika - whether the cause lies with the failures of the Soviet system, i.e., I t whether socialism, or for that matter, the Soviet version of socialism failed? Or was it just the failure of some of the Soviet leaders? More important, is perestroika a retreat from Socialism? Some argue that the main reason for the emergence of perestroika is the failure of the socialist system; some argue it is the very success of the socialist system so far that has facilitated the advent of perestroika or made it imperative. A third group, consists of both the Soviet and the Western writers, sharply opposes this success or failure theses, and considers that it is altogether a misplaced debate. According to this view neither the Soviet economy nor socialism failed. But the fact of the matter is, they maintain, in the eighties the growth of the Soviet economy slowed down considerably. Interestingly enough, writers in both camps that consider perestroika either revolutionary or counter-revolutionary defend the failure thesis, but the they put forward 22 diametrically opposite arguments in support of their positions. The Western writers who conceive perestroika as a counter-revolution postulate that socialism has failed and perestroika is marching ahead towards a capitalistic system. I Contrastingly, Gorbachev and his associates also highlight the failures of the Soviet economy, but censure it as a 'pre-crisis' or stagnant situation; they maintain that j economic failures can be attributed to the totalitarian | socialism of Stalin, or the stagnation of the centrally I I planned socialism of the Brezhnev period (Gorbachev, 1987; Galbraith & Menshikov, 1988). Also they made it clear that perestroika is destined to become 'more socialism, not less 1. Those who condemn the failure thesis by championing the premise that perestroika was a response to a dialectical process of development of the Soviet economy direct our attention to the successes of the Stalinist model of Soviet socialism. These writers claim that the very success of that period became an impediment during the next periods for alterations or fundamental transformations of the Stalinist model. According to them, the Stalinist model was carefully designed and competently orchestrated to bring about 'unprecedented prosperity for the workers and peasants1 and 'it did what it was initially expected to do’ and then its overwhelming success made it 'inappropriate' for the later periods (Goldman, 1983, 2). As a matter of fact, the 23 success of Stalin's model in the Soviet Union was so spectacular that in the fifties not only 'many non- Communists in the Third World admired the Soviet model of economic development1 (Nixon, 1989, 29), even many prominent Western writers like Pual N. Rosenstein-Rodan and Walter Rostow did not hesitate to prescribe similar models t I of economic development for the Western and developing world t j (Goldman, 1983, 21). Stalin's model of industrial [ development successfully transformed the most backward i country of Europe into the second largest industrialized and military power of the world in a record time. Therefore, these writers claim, the Soviets now want to replace Stalin's model not for its failures, but for its successes. As Elliott (1989, 37) asserts, The very success of the Stalinist and post-Stalinist development strategies has altered key conditions (of j Soviet society and economy). This, in turn, has made i those strategies increasingly obsolete. This is failure I borne of success - at least partly - and based on a dialectical process of "creative destruction" (Schumpeter, 1950; Lange, 1958). This view, based on the notion of incremental social progression, emphasizes that altered socio-economic and political conditions that owe their origin to the very success of Stalinist model, made the advent of perestroika inevitable. These writers do not see the causes of the troubles of Soviet economy during the eighties as a failure of the system. Even Gorbachev himself apparently endorses this view when he says perestroika would have emerged, 24 whether or not he was there to initiate it {Colton 1987, 149). But, in sharp contradiction with the thesis of these writers, Gorbachev unambiguously rejects the premise that the previous models were also successful in the Soviet Union. Rather he feels that leaderships of Stalin through Brezhnev were substantially responsible f r r the 'gridlock dilemma1 (Goldman, 1987, 43), of today's Soviet society. Gorbachev actually has waged an war against both the subjective and objective traits of the Stalinist model, and he really wants to make sure that the Soviet system lacks the 'ability to generate new Stalins' (Zemstev, 1988, xi). Gorbachev consistently censures Brezhnev's prolonged period of economic stagnation, and categorically condemns Brezhnev for substantially retarding the nation's development potential during his 18-year rule over the Soviet Union (Gorbachev, 1988, 419). The third strand of thought rejects the failure thesis in toto. As Elliott asks (1989, interview) 'failure in terms of what?’ Soviet economy did not 'fail', he asserts, 'it just slowed down’. To him, the recent 'shortcomings' of Soviet economy actually represent 'twists or turns' that could be traced into any economic system. Although the most recent economic performance of the Soviet Union is most certainly not up to the mark, by any reasonable standard it cannot be considered as an economic collapse, a depression or a crisis. As Elliott (1989, 37-38) claims, 25 Like a lumbering and arthritic giant, the Soviet system rises above its deficiencies and somehow manages to get the job done; to employ its resources, to produce and distribute its output, and to provide for reproducing its physical and human capital.Recent Soviet economic performance certainly has been disappointing to both its (Soviet) leaders and its citizens. But it is not, strictly speaking, in a "crisis" - i.e., imminent collapse or economic contraction in overall production. We hear a similar voice from Friedberg and Heyward (1987, ix) who underline that although the Soviet economy faces formidable problems and is expected to muddle through for some years, it does not appear to face imminent economic collapse. Interestingly some of the credit of the viability of a stagnant economy could be attributed to the command model of Stalin. As Kontorovich (quoted in Friedberg, 1987, j ix) notes 'Command economy is a viable system. While it cannot solve its immanent problems, it can prevent them from getting out of hand'. Besides, Elliott (1989, interview) explains, no system is completely successful, neither capitalism nor socialism. Then again, the question of measuring success or failure arises. If we consider full employment, stability, equality, provision of public welfare programs, etc., the Soviet system could be considered far more successful than many capitalist systems. On the other hand, if we consider factors like economic growth, productivity, etc. certainly capitalism would far outshine socialism, especially since the late seventies. Concluding Remarks and Thesis Statement 26 Such divergent views on perestroika undoubtedly represent sharply contrasting political, ideological and intellectual standpoints of Sovietologists. But it could be safely stated that unquestionably each one of these strands of thoughts, in its own special way, enriches our understanding of the Soviet Union and the phenomenon of perestroika. As the preceding analysis makes plain, the conception of perestroika ranges from 'no reform' to 'radical reform1 to 'comprehensive radical reform1; from 'revolutionary process' to 'revolution' to 'counter revolution'. Moreover, we have explained how different, divergent and even sharply opposing arguments often led Sovietologists to surprisingly similar conclusions. The whole controversy, however, revolves around the ambiguities of the meaning of the terms; reform, revolution and counter revolution. No attempt is made here to explore in depth the meaning and significance of these controversial terms. Rather our interest is to distinguish these terms for the purpose of this thesis so that they are not abused by interchangeable uses. Revolution is one of the most prostituted words in social science. Social scientists and political leaders, even the general public, have used the word revolution indiscriminately throughout the human history, although even 27 a layman understands that mankind throughout its entire existence has witnessed only a handful of genuinely revolutionary events. Therefore, very naturally, what constitutes, or what does not constitute, a revolution, remains a hotly and widely debated controversy in social science, and most possibly will remain so precisely because of the fact that 'each revolution reopens and creatively changes the very views that we have previously had on the subject’ (Mazlish, 1971, 3). While the common perception of revolution involves rapid, sweeping and fundamental change in the whole structure of a system, the concept of reform, on the other hand, stands for partial, piecemeal, sporadic effort to change a system, policy, program, structure, etc. Reforms, however, can well be either sweeping or rapid or fundamental, or a combination of all or some of these elements in different degrees. Cohen (1980, 13) maintains that reform is attributable to 'those policies, which seek through measured change to improve the existing order without fundamentally transforming existing social, political and economic foundations or going beyond prevailing ideological values’. As the momentum and magnitude of events unfolding everyday in the Soviet Union, since the advent of Gorbachev in 1985, suggests revolutionary transformations of Soviet society, economy and polity, categorizing perestroika as a reform movement would be simply out of the question. If we ---- 23- contrast the changes with the previous periods, the transformation of Soviet society under perestroika proves to be antithetical to Stalinist totalitarianism and extends i j further the process of political and economic reforms beyond | the changes of the Brezhnev years, as discussed in the | succeeding chapters. The rapid character, widespread dimension and the profound significance of the reforms I ! initiated by perestroika are suggestive of something which I ! goes beyond reforms and touches potential restructuring and j fundamental transformation of entire Soviet society. My I intention is to consider perestroika as essentially a i | powerful revolutionary process - a process with prospective j revolutionary consequences, if not a full-scale revolution itself. Now a legitimate question would be, what exactly does the term, 'a powerful revolutionary process' mean? An attempt is made below to answer this question. Karl Marx, the most radical and outstanding revolutionary writer of all times, interpreted the concept of revolution as 'a comprehensive as well as rapid transformation from one form of economy, society and polity to another’ (Elliott, 1981, 332). According to the Marxist viewpoint, a revolutionary event must bring about the most profound change in the very super-structures and sub structures of the whole society involving its economic, political and cultural foundations. When Sweezy (1980, 114) characterized the twentieth century as a 'century of revolutions', the notion of revolution he had in mind involved 'an act of the exploited class (or an alliance of exploited classes) to seize state power and institute new J property system expropriating the former owners and vesting | ownership in the successful revolutionary class(es) 1 . i j Couched in Marxian terms, a revolution, therefore, I presumably would call for a total disintegration of the i | society, replacement of one class of people in political * power by another class, and a fundamental reorganization of J property relations in the society. Does perestroika pass the test of the Marxist conception of revolution? According to Draper (1988) the answer is categorically negative. Draper (ibid., 287-301) concludes that Gorbachev's perestroika cannot be considered as a revolution. Draper, as noted earlier, maintains that perestroika does not call for replacement of the existing ruling class or abandoning the existing property system, or disintegrating the foundations of the present society. Perestroika, at its best, he maintains, would constitute a transformation not from socialism to capitalism, but from one version to another version of socialism. But Gorbachev (1987) challenges this line of argument by invoking both socialist and non-socialist precedents. By quoting Lenin's remark that 'Never in history has there been t i a revolution in which it was possible to lay down one's arms and rest on one's laurels after the victory' Gorbachev 30 (ibid., 50-51) asserts that; Historical experience has shown that socialist society is not insured against the emergence and accumulation of stagnant tendencies and even against major socio political crises. And it is precisely measures of a revolutionary character that are necessary for overcoming a crisis or pre-crisis situation. The most important thing here is that socialism is capable of revolutionary changes, because it is, by its very nature, dynamic. j Gorbachev also invokes the examples of classical i j bourgeois revolutions in support of his claim that perestroika envisages a phenomenon not less than a revolution. Defending perestroika as a revolutionary process, he specifically mentions the examples of Franch's j 'Great Revolution of 1789-93, Britain's 'Cromwellian Revolution' of 1649, and Germany's 'two bourgeois-democratic revolutions' of 1848 and 1918. He very persuasively argues (ibid., 50) that all these revolutions, the French Revolution, the Cromwellian Revolution and German Revolution, took several other revolutions 'to carry through' their revolutionary aims. Therefore, according to Gorbachev's interpretation of the concept of revolution, revolution does not necessarily mean negation of the previous revolution or revolutions; as a matter of fact, it could take place within a revolution. It could be directed towards further consolidation of the previous revolution, which, according to Gorbachev, is precisely the aim of perestroika. Gorbachev (ibid., 50) claims that perestroika aims at providing 'new dynamism to j 31 I the October Revolution's historical impulse and further ! advance all that was commenced by it' in the Soviet society. I I j Based on this kind of interpretation, among the typologies j | of revolution, perestroika could be approximated to either J I Stone's (1971, 44-56) typology of Jacobin Communist i i i Revolution, or Wallace's (1956, 264-65) notion of 'revitalization movement' or Tucker's (1977, 79-81) concept of 'full-scale socio-political revolution1. The typology of Jacobin Communist Revolution, according to Sigmund Neumann (quoted in Stone, 1971, 47), signifies 'a sweeping fundamental change in political organization, social structure, economic property control and the predominant myth of a social order', thus indicating a major break in the continuity of development. Certainly, one of the dominant goals of perestroika is to demolish the Stalinism and his command-model economy, and as will be discussed in succeeding chapters, the changes contemplated in perestroika could well become sweeping and fundamental, and thereby may overturn the commonly called 'Stalinist Revolution' (Tucker, 1977). Wallace's concept of 'revitalization movement1 or Tucker's notion of 'socio political revolution1 can take place from below by involving the 'masses of ordinary people’ or from above orchestrated by the 'new political leadership which the revolution has brought to power*. Such a revolution, according to Tucker, can take place 'over years or decades' as a 'historically 32 protracted process' instead of a 'short time of spectacular social change'. Such a 'socio-political revolution' furthers radical reconstitution of the socio-political community and an attempted break with the social past, an effort to refashion the society's culture or habitual mode of life - its institutions, symbol systems, behavioral patterns, rituals, art forms, value etc. (Tucker, 1977, 79) . Perestroika, by all means, intend to replace the command model of Soviet socialist economy, initiate a comprehensive radical reform program to bring an end to the dictatorship of Communist Party, genuinely promote people's active roles in governmental decision making processes through the unprecedented policies of glasnost and democratizatsiya, profoundly restructure the economic mechanism of the country to bolster worker’s morale and participation in public enterprises, and take sweeping measures to liberalize the state economy by encouraging a private, individual and a cooperative sector, and allowing multinational joint ventures. Each one of these steps alone constitutes a radical transformation of Soviet society; each of these sweeping measures challenges the fundamental tenets of the Soviet Union of the last seven decades. And together, they constitute a revolution, that fundamentally opposes the established system and has the latent potentiality of replacing it altogether. Of course the Soviet Union under Khrushchev and Brezhnev had already began the process of 33 substituting some elements of pluralism for Stalinist totalitarianism (Hough, 1983; Solomon, 1982), but Gorbachev ! has both widened and deepened this process with glasnost and I democratizatsiya. j Therefore, we conclude that perestroika not only 'envisages a comprehensive radical reform' it rather demonstratively ushers in a genuine revolutionary process of social, economic and political transformation. The reform programs already undertaken by Gorbachev, if i implemented properly will create a robust democracy both in the society and in the work places, and thereby the Stalinist and the post-Stalinist totalitarianism will be replaced by a system in which democratic and participative role of Soviet citizens will be enhanced to suit the needs of a mature socialism. Although Soviet history provides many examples of such attempts at economic and political i reforms in the past, the reforms irLtiated by perestroika are revolutionary in character, and epochal in magnitude. Although historical, ideological and intellectual roots of almost all the reforms envisioned by perestroika could be traced in the past history of the Soviet Union, there is no doubt that in terms of the whole-hearted commitment, vigor, and enthusiasm, and comprehensive and revolutionary character, perestroika has no parallels or precedents in Soviet history. 34 The thesis has been organized as follows: the next chapter examines the background, and then outlines the basic : framework of perestroika. Chapter III investigates Soviet i history to trace the historical and ideological precursors of perestroika. Chapter IV scrutinizes the intellectual i [ roots of perestroika beginning from Karl Marx, and chapter I | V concludes. Chapter II PERESTROIKA AND GORBACHEV Gorbachev Launches Perestroika Background of Perestroika: Stagnant Economy What Went Wrong? The Prescriptions of Perestroika Concluding Remarks Chapter II PERESTROIKA AND GORBACHEV Gorbachev Launches Perestroika Gorbachev was elected General Secretary of the Communist Party of the Soviet Union (CPSU) in March 1985 and only one month later, in April the same year, the campaign of perestroika was inaugurated and its main principles were enunciated by the Plenary Meeting of the CPSU Central Committee. Perestroika, however, was not instantaneous. The Soviet Union, in the words of Gorbachev (1987, 17), 'has long been yearning for it'. Perestroika emerged as an inevitable remedial measure to emancipate a crippled society that 'was asleep’ and to reactivate a sluggish economy that was actually 'verging on crisis’. The whole nation, the economy, the society, the culture, everything of the country was deteriorating alarmingly and demonstratively, and 'the great values born of the October Revolution and the heroic struggle for socialism were being trampled underfoot’ (ibid., 24). Deeply tormented by such an all-pervasive degeneration of Soviet economy and society, Gorbachev launched perestroika to transform the country's economy 'from an overly centralized command system of management to a democratic system based mainly on economic methods and on an optimal combination of centralism and self-management’ (Gorbachev 1988, 420). To reinvigorate the society for the 37 facilitation of the process of restructuring of the whole system, as 'preconditions for successful reshaping of the I j economic model ’ (Lewin, 1988, 137), Gorbachev simultaneously I l i initiated sweeping political reforms, such as glasnost I (openness) and democratizatsiya (democratization). j The principle priority of Gorbachev's perestroika, therefore, lies in a profound structural reorganization of the economy, in redirecting nation's economic and social preferences, in reactivating its human and material resources, and in efforts to inject into the economy the benefits of scientific and technological revolution that apparently bypassed Soviet society during previous regimes. As Gorbachev (1988, ,420) declared on the 70th anniversary of Bolshevik Revolution: Perestroika implies not only eliminating the stagnation and conservatism of the preceding period, and correcting the mistakes committed, but also overcoming historically limited, outdated features of social organization and work methods. Perestroika's aim is most certainly far-reaching. Its character is all embracing and its nature is revolutionary. I ; Perestroika visualizes a thorough and vigorous reconstruction of the whole economy, attempts to effect sweeping transformations in its material base, and struggles to equip the Soviet people with a superior material and spiritual life by ameliorating the scientific and technological foundations of the society. Because the lessons of the past reform efforts taught 'cosmetic repairs 38 and patching would not do, a major overhaul was required' (Gorbachev, 1987, 27), perestroika accentuates 'radical reforms of revolutionary significance’(Elliott, 1989, 39), in contrast to the half-hearted, piece-meal reforms of the past that 'attempted to remedy the symptoms of the disease rather than worry about the causes’ (Goldman, 1987, 46). t Perestroika, in sharp contrast with previous efforts of i reforms in the Soviet history, has emerged as 'an urgent ! necessity' to salvage the Soviet economy from 'stagnation I and other phenomena alien to socialism’ (Gorbachev, 1987, 24); and to replace outdated structure of production with a 'more progressive, efficient and socially oriented’ economic mechanism (Aganbegyan, 1988, 5). The very essence of perestroika, according to Aganbegyan (1987, 6), lies in a 'revolutionary form of change in contrast to an evolutionary form’. As the existing economic infra structures failed to respond to the needs of the society, a fundamental, thorough and revolutionary transformation of every aspect of the Soviet economy became imperative to Gorbachev and his lieutenants. And as 'the whole superstructure’ of the society is 'rooted in the economic base of society’, similar transformations had to be ingrained in other spheres of the society, the prominent spheres being the 'political system, ideology, party work’ (ibid., 1987, 6). To understand the magnitude and character of the radical reforms initiated by perestroika, and to comprehend the underlying causes of its emergence, it will be useful at this point to look back and see what went wrong in the Soviet economy. Why it was at the verge of crisis, why did | the economy that Gorbachev inherited fall short in meeting the demands of new conditions? What are the new conditions that made revolutionary changes inevitable in the Soviet Union? How did the very structure of production that once ! accomplished monumental success became so obsolete? The i next section deals precisely with these questions and the following section outlines the prescriptions of Gorbachev and his lieutenants to remedy the situation. Background of Perestroika: Stagnant Economy Gorbachev literally inherited a 'U.S.S.R. in Crisis' (title of Goldman's 1983 book on Soviet Union), an economy I in 'near shambles' (Issacson, 1989, 51), or in Aganbegyan's (1989, 49) words, 'a situation approaching crisis', and in Gorbachev's (1987, 24) own words an economy seized by a 'pre-crisis' situation. Whatever the terms used to describe the staggering economic conditions of the early eighties, I j there is no doubt that Soviet economy had been experiencing i 'significantly low performance, if not failure' (Elliott, 1989, 35). While in the fifties 'the main arguments tended to centre on when, not whether’ (Miller, 1987, 114) the 40 Soviet economy would overtake that of the United States, in the early eighties the situation took a diagonal turn. Economic stagnation of 1979-82 period has not only virtually shattered the dream of surpassing the capitalist countries, but also perilously punctured the very legitimacy of 'real socialism1 (Ellman, 1986, 530). The economic potential of the Soviet Union, writes Hohmann (1987, 29): came under pressure from all sides of the polygon of economic policy goals - the assurance of adequate capital formation, the stabilization of progress in the standard of living, the guaranteed ability to maintain the aspired military capacities, the provision of an economic basis for Soviet hegemony policy, the restoration of legitimacy to the Soviet system. Indeed, the disappointing economic performance of the Soviet Union signalled alarm around the globe. Many anticipated that if the trends of decline were not reversed soon, 'the USSR will slide down the economic-league table of nations' (Hanson, 1987, 10). Economic destablizers like 'stagnation, low productivity, low morale, and technological backwardness', was 'kicking and screaming' the Soviet economy, 'into the last quarter of the twentieth century' (Friedberg, 1987, ix). Describing the existing economic situation as 'counterproductive', and suggesting that only urgent economic and political reforms could put the system back to work, Goldman (1983, 3) cautioned the Soviet people that 'the longer economic and political change is postponed, the more violent it is likely to be when it eventually comes'. Even Soviet people themselves felt the heat. i Gorbachev (1987,24) himself observed that there was 'a ! | growing awareness’ in the public consciousness that things I | could not go on like this indefinitely. Rather, he wrote i j (1987, 24), 'any delay in beginning perestroika could have j led to exacerbated internal situation’. i What Went Wrong? According to Elliott (1989, 39), three main economic self-indictments could be identified in Soviet Union for the emergence and justification of perestroika: the unprecedented slowdown in the economic growth of the country during late seventies and early eighties; the strikingly low labor productivity in most Soviet industries; and the consistent failure of Soviet consumption and living standards. An extended list of indictments of the Soviet Union could include the slowdown in demographic growth and the conspicuous absence of economical incentive systems. Now a word about each of these indictments. The Grand Slowdown in Economic Growth: According to Menshikov (1988, 33-66) the slowdown in the economic growth of the Soviet Union started in the latter part of the 1970s and was particularly significant in the early 1980s. Aganbegyan (1988, 81) also traces the manifestations of the stagnation and pre-crisis trends in the economy to the beginning of the 1980s. According to Hohmann (1987, 29), the Soviet economy reached 'crisis- scale slowdown in economic growth' at the end of the seventies. Hanson (1987, 10) traces the origin of the stagnation in mid-1970's, while Miller (1987, 114) argues that there has been a marked decline in the rate of growth of the Soviet economy since even the days of Khrushchev. Following Miller's contention, for heuristic purposes at least, we might begin our investigation into Soviet economy since the early sixties. According to the records, between 1960 to 1975, the Soviet Union's economic performance was unquestionably strong, if not outstanding. During this fifteen years' period, the Soviet gross national product (GNP) was doubled and annual rates of increase in GNP averaged over 4 percent. As table 1 and figure 1 demonstrate, growth of the Soviet GNP actually began to decline during the late seventies. Kurtzweg (1987, 26) calculates that during the late seventies the GNP growth fell to an average of 2.3 percent per year, while the decline in the average growth in GNP actually fell to about 2 percent during 1975 to 1986 period. According to Aganbegyan (1988, 2), however, as indicated in figure 2, the rate of growth of Soviet GNP (based on Soviet official statistical data) actually fell nearly 2.5 times during the three five-year plan periods between 1971 and 1985. Worse still, Aganbegyan asserts, more accurate estimation of the I rate of growth would indicate no growth at all during this j period (dotted line). Table 2 shows tempos of growth of ^ national income in the Soviet Union by Five Year Plan (FYP) i 1 periods for the period between 1966 and 1984, covering the | period between the ouster of Khrushchev in 1964 and the l advent of Gorbachev in 1985. Like figure 1 the table i clearly demonstrates the general slowdown in the rate of growth of the economy, especially since the 8th FYP period. A comparison of growth of GNP and net material product (NMP) - the official Soviet measure closest to GNP - shows almost similar patterns over this period. Table 3 shows, quite expectedly, that during the period between 1960 and 1986, the rates of tTMP growth exceeded GNP growth in the Soviet Union. This conforms to Aganbegyan's position mentioned above, and traditional western estimates of Soviet i economic growth, on which we shall focus in a moment. The last column in table 3 shows the differences between adjusted GNP growth and NMP growth. This discrepancy in the estimation of NMP take place primarily because of substantial omission of disguised inflation in the calculation of Soviet NMP. Figure 3 also graphically indicates the trends in GNP and NMP growth for the same period. Table 4 shows selected indicators of Soviet economic performance during the period of 1961-85. As the table indicates, the growth of GNP in the agricultural sector was negative during 1979-82 period, while during the years of 1984 and 1985, the agricultural sector registered no growth at all. It is precisely during this period that the Soviet economy, according to Aganbegyan (1988, 3) plunged into an unprecedented stagnation and crisis situation. Table 4 also demonstrates how growth of Soviet GNP in the fields of consumption and accumulation declined form the annual rate of 5.1 percent during 1971-75 period to only 3.1 percent during the year 1985. However, a modest recovery of the economy in industrial sector could be observed during 1984 and 1985. But as Miller (1987, 114) points out, this improvement was actually made possible at a very high cost. According to Miller, during the late seventies and early eighties, both the level of investment growth and the rate of return per rouble of investment substantially declined. Therefore, during 1984 and 1985, the level of investment was increased exceeding the original FYP targets to prevent further decline in overall productivity. Table 5 presents a comparison of GNP growth in the Soviet Union with several countries of the Organization for Economic Cooperation and Development (OECD). As the table reveals, during the years between 1976 and 1985, the average annual rates of GNP growth in the Soviet Union were smaller than those of the United States. However, the table also indicates that the rates of GNP growth were much higher in USSR during the period of 1961-1975. The table also shows 45 ! that during the periods of slowdown of the Soviet economy, ; between 1976-85, the increase in the growth of GNP in the I I OECD countries were also slower. For example, during the i | period of 1981-85, the Soviet Union's economic growth equalled that of the United Kingdom, each registered at 1.9 percent growth. In the following paragraphs the performance of the Soviet economy in the industrial and agricultural i t sectors have been highlighted. I Industrial Sector Table 6 projects sectoral growth of total GNP in the Soviet economy for the period between 1961-1985. The table vividly demonstrates how economic performance in almost every sector of the Soviet economy declined over the last 25 years. While the industrial sector grew at a rate of 6.5 percent during the 1961-65 period, its growth fell to 1.9 percent during the period 1981-85. However, for most of the post-1960 period, the growth in the industrial sector exceeded the overall growth rate of the economy. The consistent decline of the annual growth of industrial sector has also been manifested in figure 4. Part of the slowdown of industrial growth is explained by a declining growth in labor and capital inputs. The so- called extensive method of production, that calls for putting more and more labor and capital inputs into production processes, eventually resulted in diminishing returns by increasing the cost of extraction of raw materials and fuels, and by causing a decline in labor productivity. Besides, the continued emphasis on heavy industry at the cost of light and consumer industry, led the country towards an agonizingly wrong destination. As an inevitable result of the misplaced priorities based on the Stalinist model, developments in the manufacturing industry and the processing of raw materials had been deplorably slow, and the service sector, according to Aganbegyan (1988, 4), was the worst hit. Moreover, as Goldman (1983, 33) rightly points out, the continued emphasis on heavy industry actually helped the Soviet Union to win ..a 'wrong race’. The Soviet economy, Goldman (ibid., 34) remarks, 'keeps producing steel and basic machinery tools, when what is wanted is food, consumer goods, and more modern technology’. It is indeed ridiculous to even imagine a situation in which desperate Soviet people were forming ever larger queues on the streets for consumer goods, while the Soviet economy unscrupulously continued to produce steel and other industrial goods. No wonder blunders of such magnitudes cost the Soviet Union not only the most distressful consumer dissatisfaction, but also the high cost of bypassing the scientific and technological revolution. 47 Agriculture Sector The performance of the Soviet economy has been most frustrating in the field of agriculture. Despite the fact that for a long time the agricultural sector received almost a fifth or more of the total investment of the country, it had been a drag on both long-term and short-term growth of Soviet GNP. As figure 5 indicates, the contribution of the agricultural sector to the growth of Soviet GNP actually increased by about 40 percent during the period between 1960 and 1986, but, as Kurtzweg (1987, 143) points out, 'most of the gains were achieved before 1970. Since then, advances in some years have been followed by setbacks in others'. In fact, agriculture has consistently been a drag on the Soviet economy. Although the Soviet Union was one of the world's largest grain exporters even in the twenties, since the Stalinist period, it was turned into the world's largest grain importer. More than 20 percent of the Soviet labor force is employed in agriculture (compared to only 3- 5 percent in the United States); yet, according to Goldman (1983, 64), the Soviet Union every year imports as much as 25 percent of its grain requirements. (See table 7). Also, the Soviet Union throughout the 1970's, imported an average of almost 300 million tons of meat a year (table 8). Ironically, one of the largest grazing lands of the world belongs to the Soviet Union. Aganbegyan (1988, 83-84) observes that in the beginning of the eighties the situation in agriculture was really worse than at the beginning of the 1960s. At the end of the eighth plan period (1966-70) agricultural output of the country increased by 21 percent, but during the ninth plan period the output went up only 13 percent. During the tenth plan period (1976-80) agricultural output increased by only 9 percent, while, Aganbegyan deplores, during the 11th plan period (1981-84) the agricultural sector made no headway at all. Such disappointing performance of agriculture, especially during the late seventies and early eighties, presumably could be partially attributed to extremely unfavorable weather conditions. But Kurtzweg (1987, 145) maintains that even the 'Soviet leaders themselves acknowledge that problems besides weather contributed substantially to low growth and poor returns on investment’. Evidently one of the chronic problems of Soviet agriculture is undercapitalization. Relatively less favorable natural conditions in the Soviet Union should call for a higher level of capital intensity in agriculture. But Soviet agriculture, according to Millar (1981, 283), relative to the United States and relative to the specified output targets for the sector, remains undercapitalized. Millar identifies three reasons for the poor performance of agriculture in the Soviet Union; low investment in rural infrastructure, adverse composition of labor, and faulty procurement prices for agricultural goods. We have seen 49 above that agriculture eats up more than 20 percent of Soviet investment annually, Millar maintains that this rate may not sustain for long. The agricultural labor force in the Soviet Union is composed mainly of nonworking age persons and females, and their productivity level is low. Bornstein (1981, 269) points out that output per worker per day on Soviet farms is only 5-10 percent of the US level. Another formidable problem of agriculture emanates from procurement prices for agricultural goods. Besides the legacy of the Stalinist model, the organizational, planning and administrative practices in the agriculture sector could be held substantially responsible for the systemic failure of agricultural sector. According to Bornstein (1981, 270), a second systemic constraint on Soviet agriculture is its very large size: 'they get assignments for the delivery of too many products to permit them to specialize in what they can best produce’. Other major constraints on the agricultural sector include the tendency to overcentralize decision making, to overcommit resources in the planning process, and to restrict private initiatives in agriculture. Low Productivity The Soviet Union's strategy for economic growth traditionally relied heavily on rapid infusion of productive resources, i.e., increased use of labor, fixed capital and 50 raw material inputs. Soviets call this the 'extensive' method of development (Gorbachev, 1987; Aganbegyan, 1988), western writers prefer to call it a 'classical' or 'traditional' strategy for economic growth (Berliner, 1981). Given the context of its enormous resources, this extensive method of production had little difficulty in accelerating the growth rate of the country. In fact, since 1960, the Soviet Union achieved the highest growth of employment, and was only second to Japan in the growth of fixed capital stock. But, very unfortunately, the Soviet Union made too little effort to increase the productivity of its productive resources. As table 9 explicates, the Soviet Union has the lowest rate of increase in both labor and capital productivity among the industrialized economies. Productivity of labor and capital was also low in other socialist countries. Bergson (1987, 342-357), has shown that output per worker in socialist countries in 1975 was 30 percent below that in the western mixed-economy countries. How, then, was the Soviet economy moving faster than any industrialized economy in the world, perhaps except Japan? The secret of the initial overwhelming success of the extensive growth strategy, according to Cohn (1987, 10-19), lies with the Soviet Union's resource endowment and institutional factors. Until the 1960's the Soviet economy could draw upon an unusually large pool of unemployed ■ 51 agricultural labor, so industrial employment of labor could be increased easily. Secondly, the high rate of growth of productive capital stock was made possible by mobilizing an unusually high national savings in the country. Table 10 shows the Soviet investment/GNP ratio (26%), which is second to that of only Japan (32%). The high rates of investment for growth were then reinforced by an investment policy that favored heavy industry over consumer goods producing industries. Moreover, 'the impact of the strenuous investment effort on economic growth was intensified by maximizing the rate of net investment1 (ibid., 13). Aganbegyan (1988, 7) points out that in any typical post war five-year plan period, 'the basic application of funds and capital investment increased 1.5 times, the extraction of fuel and raw materials by 25-30%, and a further 10-11 million people were recruited1 into the Soviet economy. But the extensive growth strategy started to face challenge after 1975, when 'growth in the use of resources began to decline fairly sharply1 (Aganbegyan, 1988, 7). By the late seventies, the Soviet economy actually began to face diminishing returns, and in the early eighties a 'near crisis situation or stagnation1 seemed pervasive. Birth rates declined sharply, exhaustion of surplus rural labor became widely manifest, and a startling drop in the grcwth of plant and equipment dismayed the politicians, (see table 11). By Soviet measurements, the return on investment has 52 fallen by half in the past 30 years and by a third in the past decade. Slowing growth of resources is, however, a typical phenomenon for the industrialization process. What is very peculiar about the Soviet Union is that the level of Soviet 'productivity fell from levels that were below those in market economies at similar stages of economic development' (Cohn, 1987, 13). Another crucial factor is that while the market economies utilized modern technology to improve the productivity of labor and capital, the Soviet Union largely ignored it. In the case of the Soviet economy, as Berliner (1981, 296) observes, 'technological progress has proceeded considerably more slowly' than other advanced industrialized economies. During the period between 1950-62, in none of the major industrialized economies of the world did technological progress account for less than 50 percent of growth of output. But in the Soviet Union, Berliner (1981, 296) points out, technological progress contributed only 42 percent of its growth of output during the same period. As Seliunin (1986, 327-36; quoted in Zaslavsky, 1987, 137) calculates, the Soviet economy in 1983 had to 'spend 2.2 times as much oil, 3.7 times as much cast iron, 3.0 times as much steel, 2.9 times as much cement as the American economy to produce a comparable unit of national income'. The discrepancies in the degree of intensification of resources in Soviet-type economies and of the industrialized 53 West European market economies can be gauged from table 12. Figure 6 displays the estimated Soviet lag behind the United States in key technologies. Failures of Soviet Consumption By the standards of the western industrialized countries, per capita consumption in the Soviet Union remains low and unsatisfactory, and in the words of Aganbegyan (1988, 80), 'out of proportion' to the Soviet Union's industrial, scientific, technological and educational achievements. Gorbachev (1989, 5) put it more convincingly: Our rockets can find Hailey's comet and fly to Venus with amazing accuracy, but side by side with these scientific and technological triumps is an obvious lack of efficiency in using scientific achievements for economic needs, and many Soviet household appliances are of poor quality. Several factors could be responsible for such a inferior standard of living in a country that is only next to the United States in terms of economic and military power. Put more blatantly, the Soviet Union would be much like a Third World country, taking away its '3.7 million men under arras and its 25,000-odd nuclear weapons' (Talbott, 1987, 29). Such a condition of the Soviet economy stems largely from excessively centralized planning, and an industrialization policy that has favored heavy industries over light (consumer) industries, and suppressed the consumption sector. 54 Besides forced diversion of an ever larger share of national resources to heavy industry and defence during the thirties and forties, the lag in the consumer sector can also be traced to 'the negative tendencies in economic development that surfaced during the last fifteen years1 (Aganbegyan, 1988, 81). During the last fifteen years, complains Aganbegyan, by applying the so-called left-over principle, (i.e., preference of industry, defence and agriculture above the consumer sector), 'the previous leadership tried to slow down the aggravation of the economic situation by channelling large resources from the social sphere into industry and agriculture'. Although the consumer sector accounts for 37 percent of national accumulation, because of the residual principle, it receives only 8 percent of capital investment. The steady reduction of the Soviet GNP's share to the consumer sector is clearly visible from the following facts and figures: outlays on housing construction dropped from 23 percent in 1960 to 14-15 percent in the early eighties; expenditures in the educational sector, during the same period, dropped from 10 to 7 percent; and national income allocated to medical services dropped to less than 4 percent (based on Aganbegyan, 1988, 75-88; and Aganbegyan, 1987, 103-107). Besides, low quality of goods, frequent unavailability of necessities, and poor delivery systems often compound the situation further. Deplorable conditions in the consumption 55 sector could be gauged from the following comment of Aganbegyan (1988, 81), 'Some 15 percent of Soviet families are entering the last quarter of the twentieth century without a flat or a house of their own*. In other words, as individual families are not allowed to build their houses, in case government does not construct more housings, these people will own no flat or housing, although they happen to live in one of the most richest countries of the world. Table 13 shows the major consumption series in the Soviet Union for the period from 1930 to 1964. As indicated in the table, per capita consumption in the Soviet Union declined through the 1930’s and then marked an annual increase of 3.1 percent in 1955, and then again registered an annual increase of 4.1 percent from 1958-64. Food problem remains a great concern. Aganbegyan (1988, 80-85) estimates that while in other developed nations per head meat consumption per year is 75-80 kg or even 85 kg, in the Soviet Union it is 62 kg. Moreover, Aganbegyan points out, the Soviet population annually consumes only 33 percent of the medically recommended level of fruit. Because of the low quality of domestically produced goods and scarcity of imported goods, consumers have little to buy, and eventually end up with huge savings. Table 14 shows the increase in savings deposits in Soviet savings banks during the period 1975-80. Such enormous savings in individual hands, very 56 naturally, promotes an enormous private black market (second economy), that according to some estimates could be as big as 25 percent of Soviet GNP (Grossman, 1977, 25). Slowdown in the Demographic Growth The problems discussed above are further compounded, Soviet leaders believe, by a sharp decline in the growth of the labor force in the eighties. Soviet leaders consider the rapid decline in the annual increment of the working- age population (for women 16-55 and for men 16-60) as an 'extremely adverse factor' (Kostakov, 1987, 22) to the growth of the Soviet economy. Aganbegyan (1987, 67), maintains that the process of demographic slump in the Soviet Union in the early seventies occured as a direct consequence of the World War II. According to Ellman (1976), the process of the decline in the working-age population in the Soviet Union began precisely in 1976. Between 1971 and 1978, the Soviet Union's working age population increased by more than two million each year, but, as Ellman (1986, 536) observes, 'since 1976 the annual net increment to the working age population has been steadily falling, from 2.7 million in 1976 to 0.4 million in 1985'. This decline in the working-age population during the late seventies and early eighties, according to Aganbegyan (1988, 68), has been further compounded by a falling birth rate, and a sharp increase in the number of 57 pension-age population. Another dimension of Soviet Union's current labor shortage is that it shows a clear trend to be highly regional specific (Miller, 1987; Aganbegyan, 1988). Recent demographic figures indicate that labor shortage is acute in the traditionally industrialized regions like Ukraine, Russia, Belorussia, and the Baltic republics, where the working-age population is expected to remain constant or decline in the 1980's (Aganbegyan, 1988, 69). On the other hand, increase in the working-age population is expected in the industrially less developed regions. Campbell (1983, 69) estimates that between 1980 to 1990 the working-age population in the Soviet Union will increase by less than 6 million in contrast to 10 to 11 million during the sixties, and most of the increase will take place in the Central Asia and Kazakhstan regions, where industry is relatively underdeveloped. Overall projection of the working-age population growth in the Soviet Union, till the end of the century, however, is particularly alarming. The increase in working-age population during the fifteen year period 1981-95 is expected to be less than during the five- year period 1976-80, which in turn registered less than the 1971-75 period. All these indicate that the traditional abundance of industrial labor in the USSR has ended, and the labor problem is going to affect the growth of the economy very adversely. 58 The thesis of the demographic nature of the labor problem, however, faces an uphill challenge from many Sovietologists. Kostakov (1987, 21), for example, rejects this interpretation as a superficial explanation without foundation'. He maintains that what the Soviet Union is facing now is not a labor shortage, but rather, 'an overabundance of manpower’ resulting from the extremely ineffective utilization of labor power in the economy. Kostakov (ibid., 20-35) maintains that the problem originates from low level of labor productivity. He claims that during the period 1961-70, on an annual average, national income per worker in material production rose by 6.4 percent; while during 1981-85 period the rate dropped to 4.5 percent. In most organizations, Kostakov asserts, often two or even three people are employed to do a job that could be handled by one worker1. Mikul'sky, another Soviet writer, (quoted in Ellman, 1986, 536), also denounces the demographic explanation of labor shortage as an illusion created by the economic mechanism'. He stipulates that superfluous industrial employment in the Soviet Union ranges far above the currently believed rate 20 percent. Mikul'sky believes that with an effective economic mechanism, Soviet 'labor productivity could rise sharply, and much present 'employment' be exposed unnecessary' (ibid., 536). , . 59 Ineffective Economic Incentives Conspicuous absence of economic incentives is almost an universally accepted cause of slow growth of the Soviet economy. Western and non-Western writers, even Soviet leaders, single out this factor to explain the poor performance of the Soviet economy. Of course other factors, like consumer supply conditions, food shortages, corruption, etc. has had very serious effects on workers' morale, discipline and productivity. Under the Stalinist system, the central government agencies were mainly responsible for providing enterprises with necessary inputs and disbursing of their outputs. The administrative machinery very clearly favored sovereignty pf producers over consumers by fixing prices from above and assuring the sale of enterprise outputs. Thus, by ignoring the demand side altogether, the Stalinist system not only 'perpetuated an economy of shortages' but also 'set a tradition whereby the interests of the enterprises and their workers were in conflict with that of the higher authorities' (Aganbegyan, 1988, 159). In addition, Aganbegyan laments, the Stalinist system of economic management, rather than promoting the economic interests of the people, actually, 'pushed a method of operation which was in opposition to the interests of the society itself'. Troubles with the central planning stem from the fact that the whole incentive system was geared to the 60 fulfillment or overfulfillment of government plans. Such an incentive system, according to Winiecki (1986, 330) strongly militated against innovation, by orienting the success indicators and bonus payments to the fulfillment of plan targets. The emphasis on plan targets, according to Miller (1987, 117), led to many 'serious unintended and undesirable consequences’, including production of unwanted consumer goods and continuation of technologically distorted producer goods. Most importantly, as new innovation requires time to attain mastery over new techniques, and involves the risk of delaying production, enterprise managers continued to concentrate on doing things they have learned to do well. The whole economic t structure of the country, remarks Berliner (1981, 382), attached 'maximal encouragement to decision ■ akers, favored established products and processes and discriminated against innovations’. A second major problem of the incentive system in Soviet economy emanates from its price structure. Based on the Marxian labor theory of value, pricing policy is designed according to the principle of cost-plus-standard-profit. Such a pricing policy has exerted a strong discriminatory effect against innovation by ignoring any reward for innovative ideas and products. Thirdly, the incentive structure has proved to be highly discriminatory against innovation, as pressure on enterprises to maximize the _ 61 current rate of output automatically discourages them for any change in their production. In sum, one can surmise that most of the Soviet Union's problems stem, one way or another, from the type of economic and political system that was developed during the Stalinist and Brezhnev eras. Goldman (1983, 3) rightly remarks that 'after several decades of impressive economic growth1 the Stalinist model 'has proven to be unresponsive, if not inappropriate1, to the demands and needs of a more mature economy. Nobody doubts that the Stalinist model was tremendously successful in the early years of its industrialization. Even according to Bergson's (1966, 122) calculation, between 1928 to 1958, the rates of growth of Soviet net national output increased at an average rate of 4.8 percent annually. One of the biggest problem of the Soviet union and other Soviet type economies, according to Winiecki (1986, 329), was that they 'failed to realize the potential advantages of international division of labor'. As he explains: This lack of specialization was manifest in two ways: these countries have an overgrown share of industries turning out intermediate products in GDP; secondly, given the chronic and endemic shortage of everything, enterprises display an extreme do-it-yourself bias, to reduce the uncertainty of supply, they tend to produce as much as possible within their own enterprise. The enterprises tend to do all phases of processing, to make all parts and components of the final product, as a result the scale of the enterprise does not equal the scale of production. Labor is spread over too many activities, while intermediate goods are produced at higher costs than would have been the case in specialized enterprises, (ibid., 329). 62 Another significant factor that could be held responsible for the slowdown of the Soviet economy, according to Menshikov (1988), was the 'stagnation in the Western countries in the 1980's'. Menshikov complains that because of stagnating economic conditions in the western countries including the United States 'it became exceedingly difficult to export* to the western markets, and resultantly, 'a serious deterioration' took place in the trade balances of the Soviet Union. Menshikov, however, believes that the main reason for the grand slowdown of the Soviet economy was the result of the Kondratiev cycle. The Soviet economy, according to Menshikov, has been undergoing a kind of Kondratiev cycle right now 'in its internal operations'. Moreover, he maintains, most of the industrial potential of the Soviet Union was built either in the early thirties or late forties or in the fifties, and by the beginning of the eighties, all these 'are nearing the end of physical life cycle' and need 'substantial reconstruction'. Prescriptions of Perestroika Preceding discussion of the economic conditions of the Soviet Union prior to the assumption of power by Mikhail Gorbachev in March 1985, should be sufficient to sketch a bleak picture of the Soviet economy. This picture, however, undermines the heroic achievements of the Soviet economy since 1917, when a predominantly agricultural and underdeveloped country began to march on the socialist road of economic development. During the last 70 years, the Soviet economy achieved some of the most cherished dreams of any society; it guaranteed employment to everyone willing to work, provided each citizen with high-quality education, free-medical care, relatively inexpensive housing, low-cost public transportation and a pension on which to live after retirement (Naylor, 1988, 21). It succeeded in transforming the most backward economy of Europe into the world's second largest industrial and military power (Elliott, 1989, 37). Besides, the Soviet Union still possesses an abundance of natural resources, an extensive transportation network, a highly dependable industrial infrastructure, and above all a highly educated, skilled and disciplined work force. An appropriate and dexterous blending of all these factors still provides the potential of putting the economy back on the move. Nevertheless, the problems of the pre-Gorbachev period as identified above, were formidable in any standard, and literally brought the country to a near-crisis or stagnant situation, demanding immediate remedial measures. The growth rate sharply declined since the mid 1970's, the potential for putting newer doses of capital and labor inputs into the production process dried up, the productivity of the existing labor and capital stock showed an unmistakably 64 negative tendency, a chronic shortage of consumption goods and drop in the standard of living led to a volatile situation and rampant corruption and wastage of resources were eating up the very vitals of the economy and society. All these together cost the Soviet Union not only an impetuous decline in its world-wide prestige and power, but also threaten the very foundations of the 'legitimacy of its political system* (Schroeder, 1988, 53). By the time Gorbachev came to power, it became clear to the new leadership that the Soviet economy has reached a level of 'deadlock and stagnation' (Gorbachev, 1987, 20) and further deterioration of the situation could be catastrophic for the nation. Above all, the leadership comprehended that the Soviet Union largely missed the scientific and technological revolution that facilitated the smooth transition of other industrialized countries to the post industrial stage of economic development. Therefore, the problem the Soviet leadership confronted was to catch up with the United States, not to overtake it, as previous leaderships often envisaged. As Draper (1986, 295-296) writes: If any one factor may be said to have shaken the leadership out of its accustomed self-satisfaction and inertia, it is this - the failure to meet the competition of what Gorbachev has referred to as " the capitalism of the 1980's, the capitalism of the age of electronics, and the informatics, computers and fobots." It was not simply that the Soviet union had fallen behind the United States or Western Europe in the new technology, it could not produce what Japan, South Korea and even Taiwan were turning out in mass production and with which they were flooding world markets. The new leadership, therefore, found it their prime responsibility to turn the situation around, to put the economy in order, and quite expectedly, they attached the 'most immediate priority’ (Gorbachev, 1987, 27) to the task of reforming the nation's economy. As previous reform efforts showed that tinkering with parts of economy without a comprehensive overhaul of attitudes was doomed, and an effective linkage between social and economic reforms is necessary, Gorbachev’s program, perestroika, envisaged a comprehensive reform covering all spheres of society and economy. Gorbachev (1987, 34) himself outlines perestroika as an effort at: all round intensification of the Soviet economy, the revival and development of the principles of democratic centralism in running the national economy, the universal introduction of economic methods, the renunciation of management by injunction and administrative methods, and the overall encouragement of innovation and social enterprise. In fact, the paragraph quoted above provides a nice summary of the policies and programs Gorbachev and the new leadership of the Soviet Union unleashed under the banners of perestroika to revitalize the Soviet economy and society. Perestroika aims at 'overcoming the stagnation process, breaking down the breaking mechanism’(ibid., 34). An evaluation of the stagnant economic situation of the pre- Gorbachev period makes it clear that to put the economy back 66 to order, nothing less than a revolutionary program is required. What is required is a comprehensive program to accelerate the growth of the economy, to raise the productivity of labor and capital, to replace the existing economic management system based on administrative decisions by one based on economic and material incentives, and to democratize the working environment. Any solution aimed at remedying the existing situation, therefore, must be directed at eliminating the shortages in the economy, replacing producer's sovereignty with consumer's sovereignty. Such a switch over in a closed economy, beyond doubt, is tantamount to a radical and large-scale economic restructuring or transformation of the economy. Policy Objectives of Perestroika Beginning with the April, 1985 Plenary meeting of the CPSU Central Committee, Gorbachev and the new leadership of Soviet Union embarked on a new economic strategy that is really equivalent to a revolutionary transformation of the Soviet economy. The new strategy envisages i) a drastic shift in the priority of the economy towards a more social orientation of economic development; ii) substitution of traditional extensive method of production by an intensive method of production based on expedient use of the scientific and technological revolution; and i i i) replacement of the old administrative management of the 67 economy by a fundamentally new and comprehensive system of management based on economic methods. Aganbegyan (1987, 277-297) identifies these as the 'three basic directions of multi-phased, planned process of perestroika' and asserts that efforts to enhance the social orientation of economic development, commitments to intensify the acceleration of technological progress, and the radical restructuring and democratization of economic management, constitute the primary responsibilities of the present leadership aimed at reversing the stagnation process of the economy. Perestroika assigns topmost priority to the promotion of the social environment so that appropriate sectors of the economy are developed and consumer needs like housing and food are satisfied on a priority basis. It aims at increasing the productivity of labor and capital by taking advantage of scientific and technological progress and rejuvenating the economic system by instituting economic incentives and encouraging democratic practices. Goals of Perestroika Besides these objectives or basic directions of the economy, perestroika aims at fulfilling certain very ambitious goals. In fact Gorbachev's goal and his strategy for achieving them are vividly expressed in three Russian words -uskoreniye (acceleration), intensifiatsiya (intensification), and perestroika (restructuring). 68 Gorbachev and the new Soviet leadership, in Schroeder's (1988, 53) words, 'vowed to turn the situation around, mapped out a strategy for doing so, and proceeded to implement it with vigor1. Gorbachev's perestroika forecasts ambitious growth rates for all major sectors of the economy to catch up with the western countries. Growth rates for the economy are set to be above 4 percent annually during 1986-90 and over 5 percent during the 1990s; that means more than a doubling of Soviet national income before this century ends. As table 15 indicates, achievement of such ambitious goals means doubling the growth rates of the 1976-85 period and returning to the growth rates of the 1960s and early 1970n. Industrial growth during 1986-90 is targeted to reach more than double that in the preceding decade and even higher during the 1990s. Agricultural production is targeted for the 1986-90 period to triple that of the preceding fifteen years. Labor productivity is set to grow at 4.6 percent annually. It grew at 3.1 percent during the 1981-85 period and has never reached this new rate since the early 1970s. The 12th plan envisages a growth rate of 2.7 percent annually in per capita income growth, which is considerably below the growth rates of the early 1970s, but significantly above those in recent years. Real per capita income growth is targeted to move from 2.7 percent during the 12th five year plan to 3.4-4.7 percent in the 1990s. In ' .. ' 69 the field of machine building, which currently matches only 29 percent of world's standard, perestroika's target is to achieve 80-90 percent by 1990. (Based on Hewett, 1988, 307) . Perestroika's goal is not only to boost growth rates in different sectors, it also stands for acceleration of the whole Soviet society and economy. It envisages both a quantitative and qualitative uplift of the whole society. Therefore, along with a heavy emphasis on the acceleration of growth of investment rates, perestroika has also significantly altered the priorities of the economy. The bulk of investment is to go toward restructuring and reequipping existing plants, rather than building new ones. In support of the drive to modernize the nation's antiquated capital stock, the plans call for nearly doubling retirement rates and replacing over one-third of the total capital stock by 1990. This gigantic task is to be made possible by an increase of 80 percent in the amount of investment directed to the civilian machinery industries, compared to a gain of perhaps 20 percent in the preceding five years. With this investment, machinery industries are to double the growth rate of output and radically upgrade their quality and technological level. By 1990, 90 percent of all machinery is supposed to meet world standards, compared to about 20 percent now. 70 Aganbegyan (1988, 74-75) summarizes the policy measures taken so far as the following: A strong social policy oriented towards priority development of the entire social sphere, from agriculture to the house-building and high consumer-based industries. Such a policy must be consistent with the principles of social justice. A scientific-technical policy aimed at large-scale progressive shifts in the structure of the national economy resulting from: a. deeper redistribution of raw materials;b. priority boosting of the engineering industry;c. massive investment in the chemical sector of the economy; d. the development of information technology and other hi-tech branches of industry; e. resource - saving measures; f. a drastic increase in the share of the gross national product relating to consumer goods production and services. A new agrarian policy designed, first, to spread intensive technologies, to redistribute investments in favor of storage facilities and assist comprehensive processing of agricultural raw materials; and secondly, to grant broad autonomy to the collective and State farms, and too implement a change over to family and collective leasing and contractual arrangements on a large scale. An active foreign policy oriented towards boosting foreign trade, increasing the efficiency of export and import arrangements and granting the organizations and enterprises the right to establish direct access to world market and to start joint ventures, as well as going over to a freely convertible rouble. A new financial and banking policy within the framework of comprehensive reform in management spearheaded buy building up the role of fiscal-commodity relationships in economic development as well as expanding and deepening the Socialist market, including that of the commodities and services, securities and currency. Economic Reforms of Perestroika The April 1985 Plenary meeting of the Central Committee of CPSU officially launched perestroika. Since then, 71 numerous laws, decrees and orders have been passed, and many of these were actually put into practice during the last four years. These important landmark documents include: the 'Basic Guidelines for Economic and Social Development1 adopted by the Plenary meeting of the CPSU Central Committee in 1985; the 'Guidelines for the Economic and Social Development of the USSR for 1985-90 and for the Period | Ending in 2000, endorsed by the delegates to the 27 th Congress of CPSU in February 1986; the 'Basic Provisions of Fundamentally Reorganizing Economic Management', approved by the Supreme Soviet in June 1987; the Law on State Enterprise passed in June of 1987; and the resolutions of the CPSU Party Conference held in June 1988. Other important documents include the 'Eleven significant decisions’ made in July 1987, which identified the main areas that stipulated changes beginning with the Gosplan to the Council of Ministers of the USSR. New legislation included the Law on Self-Employment, passed in July 1987; and the Law on Cooperatives, enacted in July 1988. These laws, principles, and guidelines envisage numerous, and quite radical, changes in planning, pricing, organization of material and technical supply, and management of industrial enterprises. Sweeping changes have also been initiated in the cultural and political fields. Economic reform efforts during the 1950s and 1960s failed because 'those reforms weren't coupled with the spread of 72 democracy1. Difficulties arising from the implementation of economic reforms revealed the need for systemic changes in other spheres of the society. Therefore, glasnost and democratizatsiya have been launched to create the necessary societal background for successful implementation of economic reforms. Thus the preparatory stage of the radical reform of the economy have been set and a tight schedule has been made to transform the entire economy to new economic management methods by 1990 so that the 13th FYP begins with a comprehensive new economic system. Now a word about each of the economic reforms: New Economic Mechanism for State Enterprises: Elliott (1989, 40) describes the reforms proposed for the transformation of the state enterprises in the Soviet union as perestroika's 'first organizational change'. As outlined by the Law on State Enterprises, all public enterprise in the Soviet Union will come under its provisions before the year 1989 runs out. This law, which came into effect in January 1988, envisages the conversion of the public enterprises to the principles of complete fiscal autonomy, self-financing and self-administration. The enterprises are expected to work as autonomous bodies with the responsibility to work out and elaborate its annual and five-year plans on the basis of control indicators, long term economic normatives, government contracts and limits. 73 Under the new law, public enterprises are freed from day to day interference by the central apparatus. The control indicators, economic normatives and other devices will no more have their traditional directive character. Public enterprises are expected to cover all expenses, including wages and investments, by their own revenues. The enterprise is expected to stand on its own feet; it is required to attract customers for its products, and to interact with suppliers for its raw materials requirements, in a framework of competition. Government will bear no responsibility for commitments of enterprises, and firms persistently making loss will face liquidation and will be declared bankrupt. Such a self-financing, self-managing mechanism is expected to enhance labor productivity and improve the quality of products. More specifically, this will help public enterprises to attain business-like attitudes, and to be more responsive to produce goods that are demanded in the market. To reverse the traditional practice, whereby the central apparatus had authority, but no responsibility, while enterprises had responsibility, but no authority (Menshikov, 1988, 68), the Law also greatly expands the decision making authority of the enterprise by giving it the right 'to make on its own initiative any decisions provided that they do not run counter to existing legislation1 (Schroeder, 1988, 57). To provide the foundations for the over-arching goal 74 to establish the public enterprises on the principle of 'self-accounting, self-financing and self-managing1, the Law also outlines two different models for the enterprises to pursue. The first model is based on a normative distribution of profit, i.e., the residual profit is distributed into various funds, and taxes and interest payments are paid from profit. The income of the enterprise in this model is made up from the wage fund and residual profits. A second model distributes income remaining after deduction of material costs. Under this model taxes and interests payments are paid from income, after tax income remains at the disposal of the enterprise (as collective income) and then sp]it into work remuneration, production development, and other funds which are formed according to the norms. Havlik (1988, 90) observes that while the first model more or less guarantees wages 'only the second model aims at creating really hard conditions of self-financing1 as all expenses must be paid in the first place, and only the remainder may be distributed in the form of wages and other incentives. That means enterprises will become autonomous bodies, self-financing and self-managing, and would be responsible for the economical use of their own assets. Economically, Gorbachev's drive for democratization is manifested in drawing broad sections of workers into management. Under the new arrangements, the rights of the 75 workers are substantially extended in all sectors of the economy, and public enterprises are required by law to provide for organizing elected enterprise Labor Councils and election of key personnel in their respective enterprises. The Law envisages that top enterprise management is now to be periodically elected for a five year term, by a conference of workers, in multi-candidate elections, and confirmed by the superior organs. The Law entrusts the management with the responsibility of controlling the enterprise, but makes sure that it works in close contact with the workers' council in devising ways to improve enterprise performance. The reform documents make clear that 'The enterprise is obligated to strictly observe plan discipline and meet plans and contractual obligations in full'. The law also emphasizes that 'Fulfillment of orders and contracts serves as the most important criterion for evaluating the activities of enterprise and providing material rewards for its employees' (Schroeder, 1987, 222). Although all these reforms convey 'an aura of markets and competition, it is, in fact, an artificial construct’, remarks Schroeder (ibid., 65). Pointing to the existing price mechanism, that hardly reflects the economic tradeoffs, he argues that 'derivatives of accounting categories of sales, costs, profits and returns on capital (based on existing price system) can be misleading'. He also asserts that, given the existing price 76 mechanism in the Soviet economy, the expectation that self- financing will lead to better efficiency is rather a 'grand illusion' (ibid., 65). Organizational changes will need to be supplemented by reforms in the pricing system. New Role of Central Planning Perestroika does not intend to do away with the central planning which has been described by many Sovietologists as the root cause of all the troubles. Central planning, quite surprisingly, will still be the main instrument for the realization of the economic policy of the party. But to ensure unconstrained functioning of the autonomous enterprises, the 'range and detail of centralized planning ✓ should be reduced considerably’ (Elliott, 1989, 41). Under the new arrangement, direct and detailed management through annual plans will be eliminated. The economic methods of planning will be based on non-binding i) control indicators, (like value of output, profit, foreign currency receipts, etc.); ii) long-term normatives, (like, efficiency and factor productivity, etc.); iii) government contracts (like mandatory bill of state orders of output that represent state's highest priority needs); and iv) limit (like rationed goods and centralized investment allocations). The Gosplan's responsibility will now be more concentrated in long-run strategic planning and development of techniques for managing the economy through economic 77 methods - long-run plans and normatives, finance, credit and prices. With the growing importance of money, credit and prices, Gosplan's role is expected to decline significantly. Gosplan, however, will coordinate the work of all central bodies dealing with the economy and work out five and fifteen year plans. Reform of central planning has definitely been 'continuous, consistent and at the same time better-balanced’, but, remarks Hohman (1987, 36), redefining the functions of Gosplan, Gossnab and Gosbank remains to be problematic and sensitive 'because it touches upon :he very nature of the Soviet economic system and also upon the vested interests of the higher and intermediate-level economic bureaucracy’. Changes in Management structure Perestroika also drastically revamps the existing management structure of the country. Many central and regional bodies have been reorganized structurally and functionally. To eliminate duplication and inefficiency, and to streamline their responsibilities and improve their performance, significant measures were taken in the distribution of authority and responsibility in the economy. The agro-industrial complex has been replaced by a new supreme authority (Gosagoprom); newly created bodies were superimposed upon the Buraux of Machine-Building and of the Fuel and Energy Complex; the construction industry 78 (Gosstroi) has been assigned the supervision of some newly formed ministries; and finally, the 'State Foreign Economy Commission1 was founded as the coordinating supreme authority on international economic affairs (ibid., 35). The State Committee for Science and Technology has been reorganized to work out state programs for development of science and technology, and coordinate the activities of intersectoral scientific and technical complexes. The number of ministries has been reduced and are relieved of day-to-day responsibilities; sectoral subbranches (glavki) are replaced by several thousand large associations and enterprises directly accountable to all-union ministries. Supervision of hugn scientific production enterprises remains with the central bodies, but responsibility for supervising medium and small enterprises producing for local markets are transferred to the republican and local organs. Ministries are expected to become scientific, technical, planning and economic headquarters of individual industries and be responsible for satisfying the country's demands in their respective branch's output. The State Committee for Work and Social Problems (Goskomtrud) has been reorganized for handling labor replacement, released workers and unemployment problems. Along with the structural and organizational reforms, sweeping measures are undertaken to replace, demote or fire key personnel in various key branches of government. Colton (1987, 145-46) shows that in 79 the government and party hierarchies of economic management more than seventy per cent of key personnel have either been replaced, demoted, or fired. According to Colton among 14 March 1985 members of the Presidium of the Council of Ministers concentrating on economic questions, ten (71 per cent) had been retired or replaced by July 1, 1987. Among the rank-and-file heads of economic agencies in the Council of Ministers, 38 of 71, 54 per cent has been the subject of attrition. In the Secretariat of the party's Central Committee, 10 of the 14 economic specialists have been demoted or retired. Reforms of Price, Banking and Finance Perestroika proposes the most sweeping price reforms in Soviet history. According to the proposals, price reforms were scheduled to be completed by 1990, so that the new prices could be used in developing the 1991-95 plan. Price reforms encompass all forms of prices; rholesale, procurement prices for agriculture, retail prices, tariffs, rates and fees for services. Perestroika, according to Aganbegyan (1987, 291), envisages reforms not only in price levels and relative prices, but also in the process of price formation, and aims at reducing reliance on centralized influences on prices, and broadening reliance on contractual and unrestricted prices. Therefore, the share of centrally set prices is expected to go down sharply. These prices are 80 to be determined as part of a five-year plan formulation and fixed on the basis of 'socially necessary expenses of production and sale, utility, quality, and effective demand'. Contract prices, limit prices, and those set by enterprises are to become more common, and are to be set on the same basic principles as state-set prices. The price reforms would be geared to promote the role of the market in the economy, but as Elliott (1989, 41-42) remarks, perestroika does not envisage a capitalistic market, rather it would be a socialist market regulated by the state. Aganbegyan (1988, 132) asserts that if market socialism stands for 'universalization and general spread of the market place", perestroika does not anticipate a direction towards it. Rather under perestroika, 'Many prices will be decentralized, but prices for most essential commodities will be set centrally1 (Elliott, 1989, 42). However, price reforms would be aimed at reducing or eliminating state subsidies and creating an economic environment for promotion of self-financing of public enterprises. Most significantly, perestroika wants to replace the traditional administrative method of price- fixation that was based on producer's cost plus a normal profit or average cost plus standard profit. Perestroika envisages a price structure based on 'social costs’ and due considerations of 'cost effectiveness of production' and world prices (Aganbegyan, 1988, 136). ■ 8! Procurement prices in agriculture, and the prices of natural resources like fuel, energy and other raw materials, have traditionally been kept low by ignoring the cost of rent and under-estimating the value of labor. Perestroika envisages fundamental changes in the price structure of these goods. Procurement prices for agricultural goods have been geared to create conditions for the concentration of agricultural production in main areas and for the profitability of farms; and a more flexible approach to the marketing of surplus agricultural produce have been introduced so that state or collective farms can sell all of their produce harvested over and above the production targets. To bring the level of domestic prices into line with world market prices, during the last four years, wholesale prices of fuel and raw materials have been raised significantly. According to the Basic Provisions (June 27, 1987), mentioned above, the price reforms were anticipated to be in force by 1991, before the next plan begins. But according to a CIA & DIA report (1989, 28), to avoid exacerbating consumer problems, the retail price reform, which was to be implemented in 1991 along with wholesale reform, has been pushed into the indefinite future. Apparently Soviet economists have very different opinions about the prospect of reforms at this moment. Abalkin (ibid., 29) maintains that the reform should be deferred 82 until adequate stability of consumer market has ben achieved, where sufficient large stocks of consumer goods would be able to offset potential negative events. Shemelev (ibid., 29) cautions that no matter how carefully retail price reforms are engineered, the ensuing situation will remain disruptive. Besides, there are considerable divergence of opinions among scholars about the very content of price (Nove, 1987, 452-467). To facilitate fundamental reforms in the price structure, i.e., to do away with the traditional administrative method of price fixing and to switch to a new economic method in price formation, perestroika contemplates a sweeping reformation in the fields of finance and banking. A new banking system has been set up in the Soviet Union. It is made up of five specialized banks: i) the industrial and construction bank, ii) the agricultural bank, iii) the housing, social and communal bank, iv) the savings bank and v) the bank of foreign trade (Aganbegyan, 1988, 98). Besides, the cooperatives are now allowed to set up cooperative banks. These banks, as self-financing institutions, are expected to function as commercial enterprises and compete for their own markets. The enterprises, on the other hand, also will have the opportunity to choose their own banks. The banks are expected to promote their self-development by promoting commercialization of their services, like becoming more 83 cautious in granting credits for business transactions. Perestroika also calls for streamlining the financial administration of the country. Measures are being taken to bring the money supply into balance with existing material resources. The purchasing power of the Rouble will be enhanced, and convertibility will be pursued. The charges paid by enterprises for the use of resources will form the main source of the State Budget. Budget financing of investments in the future will be largely replaced by long term credits. Incentives and Wage Reforms An essential ingredient of the reform package is a major overhaul of the wage and salary structure, to be carried out branch by branch and firm by firm during 1987-1990, whenever they are able to finance the higher wages by cutting the workforce or making other economies. The intent of this reform is to raise the role of job rates in workers earnings, make bonuses harder to get and more closely dependent on the efficiency and quality of performance of both the worker and the firm, tighten work norms, and contribute to more general objectives of enforcing self- finance, eradicating wage-levelling and encouraging work effort and acquisition of skills. ------------------------------------------------------------------------------------ — ---------------------------------------- 84 Private and Cooperative Activity An additional and important change under the reform is the new role for private and cooperative economic activity. Perestroika strongly endorses measures to expand the role of producer cooperatives and private individuals in the economy, particularly in the provision of consumer goods and services. The Law on Cooperatives, passed by the Supreme Soviet in November 1986, spelled out the permissible endeavors and groups that are to be encouraged to engage in them. Under the Law, state employees only outside work hours, pensioners, homemakers, and the handicapped are allowed to undertake private initiatives. The Law took effect in May 1987, along with revisions in the income tax that lowered the extremely high tax rates on income from private work. In August 1986, the Politburo approved the 'Basic Principles for Development of Cooperative Forms of Production* which specify that producer cooperatives are to be organized on a voluntary basis. The basic notion here is that the supply of consumer goods and services, as well as possibly some industrial goods, can be substantially improved by encouraging individuals and small cooperative enterprises to devote their after-hours to working for additional income. Foreign Economic relations Perestroika calls for doing away with the autarkic tendencies in economic development. Now priority attention has been shifted towards improving foreign economic relations, planning for their growth outstripping home market production. In terms of economic ties with the Socialist states, the Soviet Union has been working for an integrated Socialist economy. Internationally, it is moving towards ever greater openness of economic relations. Gorbachev's reforms include an overhaul of the system for conducting foreign trade. It established the State Foreign Economic Commission as a super-ministry overseeing all facets of foreign economic activity, brought an end to the monopoly of the Ministry of Foreign Trade over trade, gave firms extensive rights to engage in joint projects with CMEA countries and firms in capitalist countries. Trading Guns for Butter Another important dimension of perestroika is that it is making an all-out effort to reduce defense spending and increase expenditure in the consumption sector by diverting resources from the defense sector to the consumption sector. Since 1960s and 1970s, the Soviet military might has been built up through massive commitment of the country's best human and technical resources. The share of the GNP devoted to military activities increased in current ruble prices from between 12 and 14 percent in the early 1970s to between 15 and 17 percent in the early 1980s. And the growth in military spending continued to exceed the rate of growth of the overall economy. Table 16 shows the military build up of Soviet Union during the period 1974-85 in comparison with the United States. Gorbachev's intention is to trade guns for butter. Over the past several years, Gorbachev has increasingly called on the defense industries to step up their support. A CIA and DIA (1989, 15) report claims that in 1988, the Soviet defense spending grew roughly by 3 percent - in line with the growth rates of the whole economy. At the 19th Party Congress the leadership characterized the threat from the west as declining. In the United Nations in December 1988, Gorbachev declared specific promises for unilateral cuts in Soviet military manpower and equipment to be carried out during 1989 and 1990. During a meeting with the Trilateral Commission in January 1989, Gorbachev promised that the defense budget would be cut by 14.2 percent and the production of weapons and military equipment by 19.5 percent (CIA & DIA, 16, 1989). Defense spending cuts are mainly carried out in military research, development, testing and evaluation. Easing tensions with the United States and China will allow the Soviet economy to redirect resources from defense to the civilian economy without damaging the USSR's security. The : 87 redirection is being carried out by converting existing military plants from defense to civilian production, rather than transferring manpower and equipment from defense plants to civilian enterprises. Ryzhkov (quoted in CIA and DIA report, 1989, 21) maintains that the share of civilian goods produced by the defense industries would increase from 40 percent currently to 50 percent in 1991 and to some 60 percent by 1995. On the surface, this suggests further efforts to reduce the defense burden during the 13th Five- Year Plan. Concluding Remarks Perestroika, in carrying forward the policies outlined above, has initiated a process of economic development that has the potentiality to do away with the remnants of the Stalinist centralized economic management system. By diversifying the existing forms of property ownership, perestroika might end up with an economy composed of an extensive cooperative and self-employed sector, and a dominant but decentralized public enterprise sector. Such an economy also presumably will have to do away with the traditional state monopoly in many industries, and thus, increasingly a state-regulated economic competitiveness and competition might emerge to rejuvenate the Soviet economy. The policy prescriptions of perestroika clearly indicates that it has embarked on a revolutionary process that intends 88 to transform the traditional, administrative, and authoritarian economy into a democratic, decentralized and competitive but predominantly socialist economy. Given the revolutionary changes that already took place in the Soviet Union under the banners of perestroika, one could optimistically conclude that perestroika might take a turn towards the establishment of a market socialism that would guarantee political democracy for its people and supplement mature socialism by allowing markets to play a much bigger role. By extending the dimension of perestroika far beyond the restructuring of only the economic sector, and by simultaneously introducing glasnost and democratizatsiya, Gorbachev has actually embarked on a vigorous revitalization of the whole Soviet society. Gorbachev's perestroika, along with the ailing socialism and 'world-wide movement for freer economic system' has provoked many to predict a demise of socialism, and to expect a replacement of it by capitalism. This author believes that being challenged by the needs and demands of a mature economy, the ideology of socialism itself is being transformed. Gorbachev has rightly remarked that perestroika is not a movement away from socialism, but rather a movement within socialism, in fact, its a movement towards a more democratic and more market-oriented socialism. Appendix: Chapter II Table 1 89 USSR: GROWTH OF GNP, FACTOR INPUTS, AND FACTOR PRODUCTIVITY. 1 9 6 1 - 8 6 » (k pcnnl} (ad > (nteMf Itti agM A va»*t tftn u al 1951-65_____ 1965-10_____ 1971-75____ _ I 9 7 6 - I 0 ____ 19*1-15_____ AmniiI ftcwtlt 19*1________ 1 9 1 2_____ 19U. 191*. 1915- 1516 pttamiry.. S o u r c e : 4* 07 , 4i 17 U 92 5 .1 7 * 47 2.0 7.4 9 30 — 17 47 17 1.0 OJ 23 — 17 36 12 ft.! -.1 19 -1.0 3.0 .1 C7 - 2 1 .3 - l i 37 .9 (64 -.1 27 -.4 3.2 10 *7 -.1 32 .1 3.0 .7 13 7 1 .5 -1 7 U 7 CJ -.1 i -1.1 26 .4 SI -.7 3* 17 2.5 .4 15 -.1 1 • Kurtzweg (1987) P .135 Figure 1 USSR: GROWTH OF GNP AND FACTOR PRODUCTIVITY. 1 9 6 1 - 8 6 GNP • *— * Factor Productivity *• 95 Annuot growth (p ercen t) 1960 1965 1970 1975 1980 1986 • B^sed on estim a tes of value added ot 1982 foctor co st " K b o ° , ' - t a c « ,1S!k K f c . w * . s Source: Kurtzweg (T987) p.134 Figure 2 G row th rates o f national incom e in the USSR ov er five-vear periods, 1966-2000 1 % Rate of growth Projection V III IX X Xt XII Xlll— x tv " (1966-70) (1971-75) (1975 80) (1981-85) (1986-90) (1991-2000) Five-year periods Source: Aganbegyan (1988a) p.2 Table 2 Tem pos of growth of national income by Five-Year Plans (in % ) (1966 - 701 (1971-75) (1976-80) (1981-84) 8th FYP 9th FYP 10th FYP 11th FYP National income 139 134 124 116 ol which. for consumption 131 134 127 117 for accumulation 142 133 117 113 T_--------------------------------- Source: Miller (1989) p.115 91 Figure 3 USSR: Trends in GNP and NMP, 1960-1986 Index (1 9 6 0 = 1 0 0 ) 1960 1965 1970 1975 '9 8 0 1986 Adjusted GNP • NM° Annual gro*ih (p ercen t) - 5 - 1 0 1960 1965 1970 1975 1980 1986 Covercge cdjusted tp m atch th o t of NMP by removing services th c t do not contribute directly to m oteriol o u tp u t S^ource: Kurtzweg (1987) p. 132 Table 3 USSR: Trends in GNP and NMP, 1960-1986 (la hrttM ) Itrijt wul |m a Mteien anw* CUP Mnr.M CUP' H U P ddvlM CUP peota and SKP pawUi1 1961-65.. ..... . . 1VH-J# ----- 4} 51 SO 5.4 65 71 1.5 2.4 1«7l-» 3.0 3.3 57 2.1 1976-50 23 23 <3 20 IS 1.1 35 1 .1 --------- . 1, « « « . n * r m * ®*.t« » «« cw nw , nt«:o « r OP toy to aa M*M la «Mi x rm M *<ji xtiC uli tcKi'» la l i r a ataut *Ja. B n rsrt la ucuUte |*a«i* # adanlfd G * P n cjmuib BIIUnK M M • eM tolR d * 6 V ^rnoo a itn adw iM C W pw rf* M d * H P re»» fcotaw ••ttlana T t» is araia tM wtt karar H !«l KtBani R ar*» tola tltonmc » it» U i R o d la to k|Vi. O R to iiR f BRiacatow nrt m alM N ton. nff a m » M avi iZr-3 R.K o o tow (1J5I. IKS a* W H . »P "* « « W » ■ •»«-« «»> to *« » « u u i a r a K M R R in SwRt g ra s and casts * HSI to a a O r lale tosa ftars ascd lor SUP. Source: Kurtzweg (1987) p. 133 Table 4 S elected indicators of Soviet economic performance, 1971-85 (in % per annum ) 1971-75 1976-78 1979-82 1983 1984 1985 Growth of GNP 3.7 3.7 1.6 3.2 2.0 _ of which. in Industry 5.9 3.8 2.4 3.4 4.3* 3.9* in Agriculture - 0 .4 5.2 -0 .9 6.3 0 0 (1976-80) (19811 Growth of naiional income used in consumption and accumulation ________ 5J ________3JJ_______ 3.2 3.1 2.6 3.1 Source: Miller (1989) p.115 Figure 4 USSR: Trends in Industrial Production, 1960-1986 400 350 300 250 200 150 100 50 1960 1965 1970 1975 1980 1^86 Industry — — Mochinery •' Basie Materials 15 10 5 0 - 5 “ ,0 1960 1965 1970 1975 1980 1986 Source: Kurtzweg (1987) p. 139 Annuel growth (percent) Index (1 9 6 0 ^ 1 0 0 ) Table 5 •COMPARISON O f GNP GROWTH IN USSR AND WESTERN COUNTRIES, 1 9 6 1 - 8 5 |k ( r t e a j ICT imsui Ota I C 3 P ) * to la ! IK lira w *.f JJt a n n u a ! I'O alh: 1 S E I- 6 5 .......... _. .. 4 8 4 8 4 9 4 8 5 8 5 . 2 3 2 1 S E C- 70 ...... 5 1 3 0 4 8 4 2 5 4 6 2 2 . 5 1 9 7 1 - 7 5 3 0 2 . 2 30 2 1 4 0 2 4 2 . 2 1 9 7 6 - 8 0 _ _ . . 2 3 3 4 2 . 9 33 3 3 3 8 1 . 6 1 9 1 1 -1 5 . .. 1 . 9 2 . 4 1 . 4 1 3 1 . 1 J 1 . 9 A n n u a l (lew th; 1 9 8 1 — — .... IJ 1 . 9 0 J J 2 - 1 . 2 1 9 8 2 ------- ------- 2 7 -25 8 - 6 l i - i 1 . 0 1 9 8 3 ......... 3 2 3 . 8 1 . 6 1 . 5 . 7 -2 3 . 1 1 9 8 8 .......... ...... IS 1 . 4 2 . 4 2 . 7 l i 2 . 1 23 MS. ........ J 2 . 7 2 . 5 2 6 1 . 1 2 J 3 . 2 • Caonatt k m C.SP a m ? g rcn a "Si«*» « < Carol i- w r a ." S rtir-a r l! U * CucaifO k m G D P a IStO p e n . p u n M a OtCD. 'H a lm i t a w «», I9&0-19IS" (Ha* M I) total COP a C* (mpcaa 0 ( 0 » u n u n ^ r — ‘ ovna ricronn d'.ci k onwrt o u la nwiflul cM ilim to U S M n Source: Kurtzweg (1987) p.136 Table 6 -U S S R : Gf{P GROWTH BY SECTOR OF ORIGIN, 1 9 6 1 - 8 6 * fAvtwft jaakjI oles « frrcenfj Sdlo a t <n|a 1 9 (1 -4 $ 1 9 (4 - 7 0 I9 7 I-7 S ii)(-n nit-is I9 U pttnm arf tndm lnr — .. . 65 6 4 5 5 2 . 7 1 . 9 3 1 Cnstncbff. 4 2 5 4 45 2 . 9 2 . 9 3 4 A(ra4 lire . 2 8 3 4 -23 2 1 2 8 5 T ranvortation ........ ................... 1 0 2 7 2 66 3 6 2 . 3 3 9 Coranunrjlens. ............................. 7 3 8 6 6 4 4 . 7 3 . 8 5 . 6 liade_______ . ................ S O 7 . 3 45 2 . 7 1 . 6 —2 Seven*------------------------------ 4 4 4 . 3 3 5 2 . 7 2 . 2 2 . 0 lUrtnr pesonnel» 2 0 3 . 7 2 . 0 1 . 5 J 0 T o ta l GUP______ ________ 4 8 5 1 3 0 2 3 1 . 9 38 Source: Kurtzweg (1987) p . 138 Figure 5 USSR: Trends in Agriculture and GNP, 1960-1986 Index (1960= 100) 400 350 300 250 200 150 100 50 1950 1965 1970 ■1980 1986 GNP Agriculture GNP w /o Agriculture Annual growth (percent) 40 35 30 25 10 - 5 -20 - 2 5 1970 1965 1975 1980 1986 1960 • Based on estim ates of value odded at 1982 foctor cost Source: Kurtzweg (1987) p.144 Table 7 S o v i e t G r a i n H a r v e s t . E x p o r t s & I m p o r t s (million metric tons) Han'est E.\pon Import 1950 81 2.9 .2 1955 104 3.7 .3 1956 125 3.2 .5 1957 103 7.4 .2 1958 135 5.1 .8 1959 120 7.0 .3 I960 126 6.8 .2 1961 131 7.5 .7 1962 140 7.8 — 1963 108 6.3 3.1 1964 152 3.5 7.3 1965 121 4.3 6.4 1966 171 3.6 7.7 1967 148 6 2 2.2 1968 170 5.4 1.6 1969 162 7.2 .6 1970 187 5.7 2.2 1971 181 8.6 3.5 1972 168 4.6 15.5 1973 223 4.9 23.9 1974 196 7.0 7.1 1975 140 3.6 15.9 1976 224 1.5 20.6 1977 196 3 0 J 10.5' 1978 237 1.5* 23.0' 1979 179 3.01 25.5' 1980 189 2.01 30-35' 1981 160* 3 0* 43.0' 1982 170s 2.01 35.0* 'U S. Department of Agriculture csumaies s Author's estimates Source: Goldman (1983) p.65 Table 8 S o v i e t M e a t & M e a t P r o d u c t I m p o r t s (thousand metric tons) Year Imports 1971 225 1972 134 1973 129 1974 515 1975 515 1976 361 1977 617 1978 183 1979 386 1980 576 1981 980 Source: Goldman (1983) p.67 Table 9 -REAL GROSS PRODUCT. FACTOR INPUTS, AND PRODUCTIVITIES (b ffilf aniKiii ru n 4 liM -H wo II73 -II) t t i ' fai pofcci facta miti facta aaouciwm tout 1)50 Caalal fetal u » • c 44 73 [J 4 1 2.1 31 0.3 79 23 15 36 6 14 -.7 ....... . 101 17 9 122 61 99 -14 ________ ___ ______ 38 75 .2 72 13 36 -34 ___ _________ _ __ 79 8 - 9 39 21 38 -10 I 1 -10 47 18 40 -1.7 ...... . . .. . 58 19 - I 51 39 59 .7 _ ___ 30 17 -10 47 18 40 -17 1 ... ... . ...... 48 1.4 -1.1 67 32 58 -16 18 - 1 -74 4.1 1.9 42 -2.3 1 _______ ! ___________ 58 0 -2? 47 56 78 9 1........... 2.1 19 12 33 .2 9 -1.2 1.. . ... ...... - 5.7 16 14 88 15 37 -3.2 1.... _ . „ - 38 31 13 8 1 j 73 -4.5 United S u if i is ;d to t a n 1573 to 1978 )aw » United 8 ..-;» n . 1950 to 1973 1973 to 1978 fiance IS50 to t973 1973 to 1978 .West Coiirjity. 1950 to 1971 I 1973 to 1978 ttatr 1973 to 1978 U SSR.: 18:0 U .. 1973 lo 1978 Source: Cohn(198?) p.12 Table 10 .— COMPARATIVE INVESTMENT EFFORTS C om it h i cjpla W ■ fo rt wmmwu/ Cur t U n i t e d State. . O t many__ - .. ............................ .............................. 8.039 18? f«nce_ . Iip ih_ U n i t e d K mf d om . i., 6.876 6.67} 5.735 4.990 4.667 3.964 736 « 716 370 178 700 7 60 USSR__ ----------- ------------ ---------_ 1 1110 M n * fc>Ct«U*l Source: Cohn (1987) P. 13 Table 11 TABLE 3 .— U .S .S.R . GRO'.VTh OF GNP, FACTOR INPUTS. AND FACTOR PRODUCTIVITY 19SM 0 1171-H 1S7E-I: S 3 3 7 7.7 21 41 4 ? 36 3 ? _ . 7.0 1.7 13 1.1 7 4 1 0 6 9 64 11 - 5 - 1 - 1 0 .... _ 3 ? 7.0 13 1.1 _ ? 0 - 4 .0 - 4 0 - 4 0 Source: Cohn (1987) p.15 99 Table 12 R e s o u r c e in te n s ity o r E a s t E u r o f e a n C P E s a n d i n d u s t r i a l i s e d W e s t E u ro p e a n M a r k e t E c o n o m ie s: e n e r g y a n d s t e e l , 1979-80 Countries East European CPEs* Bulgaria Czechoslovakia H uncary GDR Poland Soviet Union Total, unweighted (6) West European M arket Econom ies A ustria Belgium Denmark Finland France FR G Italy Norway Sw eden Sw itzerland U nited Kingdom Total, unwcig.iied (11) 'E x c e p t R om a ia . bl979 USS Energy intensity in 1979 in kg of coat equivalent consumption per 1000 US dollars" of GDP 1464 1290 1058 1356 1515 1490 1362 603 61K 502 767 502 So5 655 1114 713 371 820 660 Steel intensity in 1980 in kg o f steel consumption per 1000 US dollars" of GDP S7 132 88 88 135 135 111 39 36 30 40 42 52 79 3S 44 26 38 42 Source: Weinecki (1986) p.327 Table 13 Estimated Soviet Consumption per Capita, 1928-1975 Rate of Growth During Intervals 1950 = 100 Interval (%) 1928 88.0 (1928-37) (-0.3) 1937 85.3 (1937-40) (-1.0) m o 82.8 ( m o m ) (-10.0) m o 56.7 ( m o - 50) 9.9 1950 100.0 (1950-55) 5.3 1955 129.3 (1955-60) 0.2 1960 159.2 (1960-65) 2.5 1965 180.5 (1965-70) 0.6 1970 226.8 (1970-75) 3.2 1975 26<>.9 Source: Aboucher (1979) p.29 Table 14 CiiAM .ts in S a v i n g s B a n k D i . i h s i i s a n d R i i a i i S a i . i . n (billions of rubles) Year Total Saunas Increase Retail Trade Volume Increase 1975 91.0 215.6 1976 103.0 12.0 225.9 10.3 1977 116.7 13.7 236.4 10 5 1978 \ 131.1 14.4 247.8 1 1.4 1979 M6.2 15.1 260.7 12.9 1980 156.6 10.3 277.8 17.1 Source: Goldman (1983) p.55 Table 15 Soviet Economic Performance Indicators, 1961-85, and Plans to 2000 Average annual growth rale (percent) 1961-65 1966-70 1971-75 1976-80 1981-85 1986-90. FYPI2 1990-2000. Plan Item FYP7 Actual FYP8 Actual FYP9 Actual FYP10 Actual FYPII Actual Macroeconomic activity National income produced n.a. 6.5 n.a. 7.8 n.a. 5.7 n.a. 4.4 n.a. 3.5 4.5 n.a. National income utilized 7.3 6.0 6.9 7.1 6.7 5.1 4.7 3.9 3.4 2.7* 4.1 5.0 GNP (Western estimate) n.a. 4.7 n.a. 5.0 n.a. 3.0 n.a. 2.3 n.a. 2.0 n.a. n.a. Sectoral output Industrial production 8.6 8.8 8.2 8.3 8.0 7.4 6.3 4.5 4.7 3.7 4.6 4.8 Machinebuilding and metalworking n.a. 12.4 n.a. 11.8 11.4 11.6 n.a. 8.2 7.0 6.2 7.4 n.a. Agricultural production 7.9 2.4 4.6 4.3 4.0 0.6 3.0 1.5 2.5 2.1 2.7 n.a. Labor productivity In all material production n.a. 5.5 n.a. 6.8 n.a. 4.6 n.a. 3 3 n.a. 3.1 4.2 6.5-7.4 In industry 5.7 4.5 6.0 5.6 6.8 6 0 5.5 3.1 3.6 3.2 4.6 n.a. In agriculture n.a. 3.3 7.3 6.2 6.7 1.4 n.a. 2.8 n.a. 2.7 4.1* n.a. In construction n.a. 5.2 n.a. 4.1 6.5 5.2 n.a. 1.5 n.a. 2.7 3.9 n.a. Capital formation Gross total investment n.a. 6.3 8.0 7.5 6.7 7.0 n.a. 3.3 n.a. 3.5 4.3 n.a. Gross state investment* 8.8 7.3 n.a. 7.2 6.2* 7.1 2.8 3.7 1.1 3.5 2.9* n.a. Real per capita income 4.9 3.9 5.4 5.9 5.5 4.4 3.9 3.3 3.1 2.1 2.7 3.4-4.7 Source: Hewett (1988) p.52 i 02 Table 16 Procurement o f Selected Weapons Systems by the United States and the Soviet Union, 1974-85‘ ( VS USSR ICBMs and SLBMs 1,050 3,500 Surface-to-air missiles' 11,700 105,000 Long- and intermediate-range bombers 8 400 Fighters 4,050 7,800 Helicopters 2,050 6,500 Submarines 44 110 Major surface combatants 98 90 Tanks 8,400 27,000 Artillery 2,200 22,000 Source: Naylor (1988) p.18 Figure 6 Estimated Soviet Lag Behind the United States in Key Technologies Approximate length of US lead In years 0 2 4 6 . 8 10 Advanced Microcircuits Minicomputers Mainframe Computers Supercomputers Fiber— optic Equipment Computer-operated Machine Tools Flexible Manufacturing Systems 12 14 16 - r - ■ ■ r mm US lead is based on projections of the time required for the USSR to achieve series production of technologies like those In series production in the United States. Source: CIA 8DIA Report (1989) 104 Chapter III Historical and Ideological Precursors of Perestorika Introduction NEP Period & Lenin (1921-28) Stalin's Revolution From Above (1929-53) Malenkov's New Course (1953-57) Major Reforms of the Khrushchev Era (1957-64) Kosygin's Reform (1965) Brezhnev's Reforms (1973-74, 1978-79) Andropov's Reforms (1983-84) : r o 5 — Chapter III Historical and Ideological Precursor's of Perestroika Introduction Gorbachev is not the first Soviet leader to attempt radical reform in the Soviet Union. Soviet history, beginning from the early twenty's, provides a number of notable examples of reform attempts. Therefore, examination of past reform attempts in the Soviet Union will be useful in our efforts to understand the reforms initiated under the banners of perestroika. This chapter traces the roots of Gorbachev's reforms into the past reform efforts in Soviet history, and scrutinizes the causes and consequences of those reform efforts from the perspective of Gorbachev's perestroika. Throughout the seven decades since the October Revolution of 1917, the Soviet Union passed through a number of distinct periods of genuine social, economic and political transformations. Moreover, the economic and political reforms that were either attempted or actually carried out in different periods, had often been manifestly dramatic and far-reaching in character. Each of these periods, however, responded to the 'particular demands of political and economic realities of the day1, and endeavored in its special way, 'to reconcile the idealistic and humanistic goals of the ideology with the centralized 106 and authoritarian elements of Leninism' (Zemtsov, 1988, ix). It is precisely this process of reconciliation between 'idealistic and humanistic goals' of Marxist socialism and 'the centralized and authoritarian elements of Leninism', that so distinctly differentiated each of these periods of Soviet history. According to Elliott (1985, 373-74), the different periods of Soviet economic development not only represent 'distinguishable institutional characteristics', but also provide 'alternative versions of Soviet communism’ having 'analogues in contemporary practice’. According to Elliott, Soviet Union's 'war communism' period has 'contemporary parallels in Cuba and Maoist China; the NEP period has 'greater institutional similarities' with 'Eurocommunism' and decentralized economic systems of Hungary, Yugoslavia and Czechoslovakia; the Stalinist model, on the other hand, 'was applied virtually intact in the Eastern European countries' after the Second World War. Contemporary reforms or the modifications of the Stalinist model of socialism that have been manifested all-over the communist world, especially since 1950s, basically represent the post-Stalinism period of the Soviet Union. Among all these periods, however, the regime of Stalin undoubtedly marks the watershed in Soviet history. Stalin forcefully repudiated the New Economic Policy (NEP) of Lenin with a command model of socialist economy that 107 virtually reshaped almost every aspect of the Soviet economy and society. After Stalin's death, especially since the early 1950s, two clearly identifiable and diametrically opposed social, political and economic forces, namely, the reformists and the conservatives, polarized Soviet society. Soviet conservatives, as usual in any society, defended the 'existing institutions, routines and orthodoxies which live on from the past1; and the reformists, on the other hand, believed in change, but argued that 'the potential of existing system and the promise of established ideology, have not been realized and they can, and must be fulfilled1 (Cohen, 1980, 13). While the conservatives s fear change 'as the harbinger of disorder1 and insisted on continuation of the status-quo, Soviet reformism 'finds its discontent and its program, and seeks its political legitimacy and success, within the parameters of the existing order'. The conflict between reformism and conservatism in Soviet Union, however, as Cohen (ibid., 11-32) explains, 'derives its scope and intensity from the fact that it is simultaneously a quarrel about the past, the present and the future'. While the conservatives defend causes like orthodox Marxism-Leninism, the Stalin-cult, hegemony in the communist world; the reformists demonstrate their commitment to a bigger role of 'the market, decentralized initiative, efficiency, consumer goods and innovations in ; ------------------------------------ : — 108- order to encourage privace initiative'. In Gorbachev's perestroika an unmistakable thread of reformist thought is crystal clear and, hence, it could be argued that Gorbachev represents an extension of the reformist movement. But Gorbachev's perestroika, by any standard, is not a simple extension of the reformist movement in the Soviet Union. What makes Gorbachev exceptional as a reformer is the fact that perestroika is undoubtedly much more comprehensive, and comes with a heavy dose of radicalism. Like previous reformers, Gorbachev also seeks 'political legitimacy and success within the parameters of the existing order' (ibid., 13), but the scope, dimension and magnitude of reforms envisaged by perestroika places Gorbachev far beyond a simple reformer, and actually well fixes him in the category of radical reformers, if not true revolutionaries. Before we embark on the critical details of tracing the roots of Gorbachev's reforms, a word on the debate concerning the continuity theory of Soviet history is in order. There are Sovietologists who believe that since the 1917 October Revolution, although different periods or regimes in Soviet Union pursued apparently different models, in fact, each of these models readily fits 'the framework of single systemic continuum1 (Zemtsov, 1988, ix). These writers, known as continuity theorists, find no meaningful difference or discontinuity between Leninism and ---------------------------------------------------------: — 109 Stalinism. They rather believe that Stalinism 'was the logical, rightful, triumphant, and even inevitable continuation of Bolshevism’ (Cohen, 1977, 4). Leninism, as Lovell (1984, 188) remarks, 'was not the only causal factor, it was certainly the chief cause of the origins of Soviet authoritarianism’ . They allege that, althougn successive models in the Soviet Union moved away from the Stalinist authoritarianism, and allowed a far greater role to market processes, they 'basically left intact the basic superstructure of highly centralized and highly bureaucratized socialist system’ (Hewett, 1989, 16). The thesis of the continuity theorists- that the Soviet Union is basically a 'frozen totalitarian system’ (Cohen, 1980, 12), -that the Soviet political system is a part of 'an unbroken historical continuum’ (Remington, 1989, 1), - that it intrinsically continues the single tradition of authoritarian economy - has come under fire, especially since the early sixties. The challengers assert that the continuity thesis fails to understand Stalinism 'as a distinct phenomenon with its own history, political dynamics, and social consequences' (Cohen, 1977, 4). They maintain that by interpreting the Bolshevik and Stalinist traditions 'as a single undifferentiated tradition, many scholars have minimized the system's capacity for reform in the post-Stalin years' (ibid., 4). According to the challengers, in fact, there lies a 'whole river of blood’ -----------------------------------------------:-------- - -.............................— n o (Trotsky, 1972, 15) between the Stalinist and the Bolshevik traditions. The challengers maintain that the triviality of the static and consensual conception of the Soviet society, articulated by the continuity theorists, is being exposed every day. Especially after the death of Stalin in 1953, the challengers stipulate, dozens of reform efforts were made to escape from the 'nightmare of Stalinism' (Draper 1987, 287), and to accommodate 'social pressures, and factional conflicts in the party’ (Getty, 1985, 6). Some Sovietologists tend to argue that the Soviet Union actually presents a dialectical process of economic development. They maintain that -different periods of Soviet history represent sharply different institutional characteristics because the very success of one period made it imperative for the successive leadership to reverse the trend. Viewed from the dialectical perspective, one could surmise that, based on its own parameters, Stalin's period was actually not 'a nightmare’ as Draper claimed above, it was rather overwhelmingly successful as it accomplished 'what it was initially expected to do’, (Goldman, 1983, 2). Therefore, Elliott (1989, 37) legitimately remarks that failures of Soviet economy which resulted from Stalinist or post- Stalinist political and economic strategies, were basically 'failures borne of success'. -111 Most Sovietologists, however, agree that most of the reform efforts made since Stalin's death in 1953 and until the assumption of power by Gorbachev in 1985, were either half-hearted, ill-conceived, or both. One of the crucial I criticisms labelled against those efforts is that most of those reforms either failed to succeed for long or were easily reversed. 'Each of those reforms', writes Jermakowicz (1988, 111), 'left behind a sense of frustration and disillusionment within three or four years.’ But the reforms envisioned by Gorbachev (who is well into power for more than four years) have already gone far beyond the level of political rhetoric and lofty optimism. Although uany of the economic reforms envisaged by perestroika so far fall short of the towering expectations of the Soviet people, the achievements, especially in respect of glasnost and democratizatsiya, are widely considered to be unprecedented and irreversible. Few dispute Gorbachev's claim that perestroika is far more comprehensive in character, and goes far beyond the previous efforts of reform in the Soviet history. Moreover, many believe that the seeds of freedom or openness that Gorbachev has already sown in the Soviet mind and the irreversible changes he has already brought about in the Soviet society, have no parallels in Soviet history. Gorbachev himself remarked, 'At any rate things will never be the same again in Soviet Union’. The irreversibility of : — 112 the actually implemented reforms of perestroika, however, in the words of Kissinger, 'would be a modest result for so Herculean a task that Gorbachev has embarked upon1 (quoted in Time Magazine, April 10, 1989). According to Issacsion (1989, 58), Gorbachev's perestroika has already altered Soviet society to the extent of 'monumental historic significance'. NEP Period and Lenin (1923-28) The genesis of this reform of 'monumental historic significance’, however, lies, as Gorbachev repeatedly states in his speeches and in Perestroika (1987), with Vladimir Ilich Lenin (1870-1924) and in the prescriptions of his New Economic Policy (NEP) period (1918-23). Elliott (1989, 46) correctly remarks that Gorbachev's perestroika rejects 'both Stalinist and post-Stalinist perspectives' and derives its 'ideological succor and inspiration' indisputably from Lenin and the NEP period. Episodes of invoking Lenin, relating reform programs with Lenin's policies, and claiming ideological inspirations in the Bolshevik revolution, however, have always been an unmistakable fashion for Soviet reformers. Even Stalin, who aggressively repudiated Lenin’s NEP programs, claimed to be 'Lenin's comrade in arms and inspired continuator of his work' (TASS, 1953). Moreover, the Stalinist programs ---------------------------------------------- — 113 like collectivization of agriculture, rapid industrialization at the cost of consumer's welfare, and others were 'officially described as Marxism-Leninism in action - the natural and logical unfolding of the original Leninist revolutionary impulse and program’ (Tucker, 1977, 77) . The question intuitively arises, why such an obsession with Lenin? Why do diametrically opposed programs seek their source of 'ideological succor and inspiration1 in Lenin and Bolshevism? Stalin, who replaced NEP by a 'Revolution from Above’, and Gorbachev, who challenges both Stalinist and post-Stalinist models by perestroika, both claim to draw theii ideological impulse from the same treasure-house. Therefore, one could presumably ask, which one of these contradictory claims is well-placed? Who actually derives 'ideological succor and inspiration’ from Lenin? The answers are as controversial as the questions. However, Tucker's explanation as to why Stalin invoked Leninism to justify his 'Revolution from above’ seems to be well-founded. According to him (ibid., 77-110), Stalin derived inspirations for his programs from 'the still very influential revolutionary Lenin of the War Communism and the heritage of Bolshevik revolutionism’. To Stalin, Tucker maintains, Leninism meant 'seizure of power followed by a dictatorial rule by violence against the internal bourgeoisie and associated social forces'. Stalin derived 114 his inspiration, according to Tucker, from Leninism of 1918-21, specifically from the period of War Communism. As Tucker (ibid., 91) explains: for forcible food requisitioning from the peasant (prodrazverstka), for stirring up of class war in the villages by means of the committees of poor {kombedy), for the belief that the proletarian dictatorship should mean "iron rule" and not a "jellyfish proletarian government," and for the ruthless resort to terror as an instrument of dictatorial rule. Quite contrastingly, Gorbachev, and for that matter, other reformers who stand for de-Stalinization of Soviet society, also find 'an inexhaustible source' (Gorbachev, 1987, 25) of inspiration in Lenin and Bolshevism. But unlike the Stalinist and conservative strand of thought, who look back at the War Communism period of Leninism, the post-Stalinist reformers, including Gorbachev and his lieutenants, search their 'ideological succor and inspiration’ in the NEP (1923-28) period of Leninism. Gorbachev's perestroika hinges on the programs of the NEP period not just to save its skin from accusations of 'ideological nakedness’ (Draper, 1987, 287). Rather, Draper observes, 'return to a NEP-type reform is particularly characteristic of the unfolding Gorbachev period1. Besides the political and ideological gain linked with the name of Lenin, the founder of the Soviet Socialist state, Draper (ibid., 287-88) maintains that a key reason 115 for the preeminence of the NEP period in Gorbachev's perestroika is that perestroika's economic reforms 'almost wholly emulate the economic policies of NEP period1. Gorbachev's appeal to NEP policies constitutes no novelty in the history of the Soviet Union or the other socialist countries. Rather, as Cohen (1980, 19) points out, 'with its dual economy, concepts of market and plan, cultural diversity, more liberal politics, and Leninist legitimacy', NEP has exercised, especially since the 1950s, a powerful appeal to reformists both in the Soviet Union and other socialist countries. Viewed from this perspective, one could convincingly argue that Gorbachev's perestroika is in fact a continuation of the 'reformism' movement in Soviet society. Therefore, like past reformers, Gorbachev also stands for denunciation of the Stalinist cult, and reinstatement and promotion of a NEP type dual economy. But again, to consider Gorbachev's perestroika as a mere continuation of the previous reform efforts, would constitute a grossly flawed argument. Because, while pre-Gorbachev reformers found the 'fundamental' (Elliott, 1989), or 'Peter the Great* (Tucker 1977) part of Stalinism as 'indispensable*, and discarded only the 'non-fundamental' (Elliott, 1989) or 'Ivan-the- terrible’ (Tucker, 1977), part of Stalinist legacy, perestroika's challenge 'extends beyond Stalinist tyranny 116 and totalitarian rule to confront the very foundations of the post-Stalinist system: a centrally planned economy and the domination of the Party over the state1 (ibid., 40). Besides establishing themselves as able administrators, Soviet leaders must also demonstrate their intellectual ingenuity, they must justify their policy and programs from an ideological standpoint. Thus, it is not surprising that for 'ideological succor and inspiration’, Stalin appealed to Leninism of War Communism, while Gorbachev invokes the NEP period of Lenin. The choice essentially boils down to the two contending models of socialism as have been outlined by Elliott (1976, 151-184): the centralized command model and a more decentralized model. The Stalinist command model of socialism, according to Elliott, has its origin in War Communism period of Soviet Union, and in the 'centralized, authoritarian, and hierarchical side’ of Marxist philosophy. The decentralized model of socialism, as envisaged by Gorbachev and other reformers, could well be traced to NEP policies and to the 'decentralized, democratic, anarcho-syndicalist side’ of Marx's writings. Gorbachev's repeated and consistent claims that perestroika's ideological source lies with Leninism, especially with the NEP period, is aptly manifested in his address to the seventieth anniversary of Bolshevik Revolution in 1987: 117 These days we turn over more often to the last works of Lenin, to Lenin's New Economic Policy, and strive to extract all the valuable elements that we require today. ... New Economic Policy (wanted to build) ... the new society "not directly relying on enthusiasm" , as Lenin wrote, "but aided by the enthusiasm engendered by the great revolution, and on the basis of personal interests, personal incentives and business principles. (Gorbachev, 1988, 410). Background of NEP: The Period of War Communism Therefore, a careful examination of the NEP programs and their backgrounds will be in order at this point. Like perestroika, the NEP also came as an immediate response to a crisis or near crisis situation. The pre-NEP crisis of the Soviet economy originated from the inevitable consequences of the coercive policies and programs undertaken during the War Communism period (1918-21). The War Communism period was characterized by 'a tightly organized Communist party and extension of its control over the economy and society' (Elliott, 1985, 362). Besides, this period, marked by revolutionary zeal and expectations of immediate establishment of socialism, attempted to promote egalitarian government policies and programs. Nevertheless, this newly born and the only worker-run country in the world, had to fight against external aggression and internal civil war simultaneously. Given such a desperate situation, i.e., being 'surrounded by unfriendly powers abroad and confronted with 118 discord and civil war at home' (ibid., 362) the Communist Party of the Soviet Union adopted a number of drastic measures to organize the country's pre-industrial economy according to the principles that Marx previously envisaged for establishing scientific communism in a highly industrialized society. The measures included: a) wholesale nationalization of industry, trade and land, b) forced grain requisitioning, c) attempts to abolish markets and liquidate money, and d) establishment of state control over distribution of resources. Each of these steps are discussed separately below. Nationalization of Industry War Communism stood for wholesale nationalization of the country's industry, trade and land. Immediately after the October Revolution, in order to establish state control over the means of production, the CPSU resorted to sweeping nationalization measures. Within one month of the Revolution, in November 1917, all Soviet land was brought under state control, and the owners of industrial enterprises were ordered to oblige the decisions of the workers' control organs. As early as January 1918, virtually all means of production were brought under the control of the 'workers and peasants' state' (Nove, 1969, 49-52). Revolutionary measures like these, however, came as an 'urgent necessity, 119 both to combat attempts at sabotage (by bourgeoisie) and to ensure priority for military supplies', (Cliff, 1978, 82). In most cases workers themselves took over the control of the enterprises. According to Cliff (ibid., 83), out of the 1,208 industries nationalized by the end of 1918, 'less than 30 percent were expropriated by state decree, the rest were taken at the initiative of local organizations'. The nationalization spree went so far that, according to Soviet economist Kritzman (quoted in ibid., 83), by the end of 1920, out of the 37,000 enterprises nationalized by the CPSU, almost half were non-mechanical and more than 5,000 employed only one worker. The wholesale nationalization of industries, trade and natural resources, however, contributed little to the revolutionary expectations of the Communist Party. One of the most critical deficiencies of the sweeping nationalization measures of the War Communism period was that it was not backed by a rational planning or an efficient administration. As Elliott (1985, 362) remarks: Nationalization of industry was not accompanied by real planful coordination of production decisions. Urban workers, responding to the egalitarian and syndicalist tone of revolutionary sentiments, often ejected former managers, extended labor union control over much of industry, and tried to run "their" own factories, typically with little thought to coordination with other parts of the economy. Wholesale nationalization measures quite logically necessitated centralization of economic management, while 120 the existing administrative machinery obviously had neither the experience nor the efficiency to handle responsibilities of such a magnitude. Resultantly, in many cases 'Orders from the center were often confused and contradictory1 (Cliff, 1976, 92), and manifested rather 'desperate efforts to cope with confusion and anarchy1 (Nove, 1969, 47). Clearly a thoroughly inefficient and unexperienced administrative system, in the absence of rational economic planning to manage the nationalized industries, further aggravated the already disastrous economic condition of the country. The whole economy, especially the industrial sector, almost totally collapsed. Kritzman (quoted in Cliff, 1976, 92) described the resulting situation as 'the most complete form of proletarian natural-anarchistic economy'. Although the pre-Revolution Soviet Union was basically an underdeveloped economy, during the two and half decades before the World War I, it had been experiencing an extensive industrial development, and was actually emerging as 'an international industrial power’ (Roeder, 1988, 10; see figure 1). The dismal picture of the Soviet economy resulted from the catastrophic decline of industrial production during the War Communism period has been manifested in Table 1. Table 2 shows the decline in labor productivity that resulted from acute shortages of raw materials, fuel and food during the same period. 121 Compulsory Requisition of Food Along with the collapse in industrial production, the War Communism period was also subjected to chronic shortages in food. As initial attempts to procure food from the peasants at official prices failed, the Communist Party introduced forced requisition of grain from the peasants to ensure supply of food for the military forces and the urban population. The policy of forced requisition of grain, known as 'prodrazverstka', made it mandatory for the peasants to deliver their surplus grains to the state. Under the provisions of the 'prodrazverstka', the state confiscated, at a nominal price, 'all that the peasant had over and above an ill-defined minimum requirement for himself and his family' (Nove, 1969, 60). Collected food was then distributed by the state according to a rigid class criteria as follows: The first consisted of manual workers engaged in harmful trades? the second, of workers who are obliged to perform heavy physical labor; the third, of workers in light tasks, employees, housewives; and the fourth, of professional men and women and people living on unearned income or without employment. Such food supplies as were available were doled out to these four categories in the ratio 4:3:2 :1. (Cliff, 1976, 88) But forced requisition of grain did not help to mitigate the problem, instead, food shortages remained at chronic levels throughout the War Communism period. Widespread hunger, even mass starvation, remained a constant threat to the Revolution. As forced requisition policy gave little 122 or no incentive to the peasants to increase their production, grain production fell sharply and it became ever more difficult to find surpluses that could be requisitioned. Indeed, peasants actually 'resented prodrazverstka deeply, and numerous riots broke out' (Nove, 1969, 60). Thus, coupled with the collapse of industrial production, food shortages brought the country to a state of complete chaos. Massacres of the civil war, exodus of people from the urban areas to the countryside, and oooming illegal markets were some of the dangerous indications of chaos in the country's economy. According to Kritzman (Cliff, 1976, 88), out of a total of 136 million pud of cereal that reached *-he consumers in 1919, only 40 percent was distributed by state; a booming black market did the rest. Attempts to Abolish Markets and Money Another notable measure of the War Communism period was that it also sought to do away with the market and monetary system. To the socialist revolutionaries, capitalist market paraphernalia such as private ownership, money, prices, wages, profits etc. appeared to be intolerable enemies of socialist economy. Thus, policies like nationalization of the means of production, centralized planning, abolition of the monetary system 'were largely accepted by all Bolsheviks as sine qua non principles of 123 socialist economic organization' {Lewin, 1974, 80). While Marx called for levelling up of economic inequality during the mature stage of communism, presumably in an industrially and technologically developed country, the Soviet leaders called for immediate practice of such egalitarian principles in the Soviet Union of War Communism period. The logic of such an utopian expectation, according to Lewin (ibid., 81), went like this: 'the more nationalization, the narrower the market, the nearer the advent of socialism, or the larger the socialist market’. Even Bukharin, 'the most intelligent ideologist of left communism1 (Nove, 1969, 66), saw the distribution of rations in kind (instead of wages in terms of money), as the disappearance of wage labor. He, therefore, concluded that as an inevitable consequence, the monetary system and with it the commodity system in general would collapse during the transition period (Bukharin, 1971, 146). Hence, all economic mechanisms and incentives were destroyed in order to eliminate money and abolish the market system; instead, the whole economic system was 'activated by a combination of coercion and an appeal to enthusiasm and moral commitment' (Lewin, 1974, 78). By 1919-20 worker's wages were largely paid in kind, industrial enterprises did not have to pay for their raw materials and other services they used 'since all expenditures took place by book-keeping and took the form 124 of simply of the transfer of working capital allocations from one account to another’ (Venediktov, quoted in Nove, 1969, 64). Consequently money and market mechanisms were eliminated altogether and 'voices came to be raised among the communists that they were even now in the process of establishing a true socialist economy'(ibid., 66). State Control over Economic Resources We have seen above how inefficient and disorganized the state distribution system was during the War Communism period. Food requisitioning from the peasants, and distribution of the grains to the urban and military force, is an example. There was no rational economic plan, no uniformity in administrative decisions, and no coherence in the decrees issued by the government. Lenin himself said, 'such is the sad fate of our decrees: they are signed, and then we ourselves forget about them and fail to carry them out’ (quoted in ibid., 47). The forced requisition of grains, along with efforts to dismantle monetary mechanisms, violently suppressed the foundations for commercial exchange of grain and industrial goods. In May 1921, the Fourth Congress of Trade Unions disclosed that workers in factories were stealing almost fifty percent of the total goods they produced (Cliff, 1976, 128). 125 Evaluation of the War Communism Period An overall evaluation of the War Communism period, however, requires a proper understanding of the existing situation in the Soviet Union at the time. The entire period of War Communism (1918-21) was subject to chaos, anarchy, civil war and foreign aggression. On the other hand, the socialist principles enunciated by the Communist Party were at a rudimentary stage, and expectations of the revolutionary leaders to establish socialism in the Soviet Union were running high. Therefore, policy measures taken during this period resulted in a total breakdown of the economy, and brought inhuman and excruciating suffering for workers and peasants Nevertheless, it is widely believed that the policies of War Communism brought victory for the Soviet state over the devastating civil war and penetrating external aggression. By nationalizing the means of production, centralizing production and distribution processes, and militarizing administrative machinery, the Communist Party succeeded in mobilizing the heroism of the revolutionary masses to win victory over a mighty coalition of domestic and foreign enemies. As Cliff (1978, 99-100) remarks: In three years of struggle the proletariat, first in the conquest of power, then in its consolidation and defence, showed exceptional collective heroism and self- sacrifice amidst unparalleled tortures of hunger, cold and constant peril. Every time there was a threat to the regime thousands of proletarians volunteered for the war front and for voluntary labor behind the front. _ . 126 But there is no doubt that the victory over the civil war was earned at a very high cost. War Communism's policies, like introducing single managers in enterprises to replace the committee system, entrusting ever more power in the hands of the appointed administrators, weakening the position of the trade unions and increasing domination over local party organizations, were considered by many as clear deviations from socialist principles (Lewin, 1974, 78). After the civil war, Lenin admitted that mistakes were committed during the War Communism period, but did not fail to argue that both internal and external situations of the Soviet Union necessitated such measures. While announcing the New Economic Policy (NEP), Lenin (1969, 423-24) asserted: Partly owing to the war problems that overwhelmed us and partly owing to the desperate position in which the republic found itself owing to these circumstances, and a number of others, we made the mistake of deciding to go over directly to communist production and distribution. Evidently, post-civil war Soviet economy was in a state of 'virtual collapse' (Elliott, 1985, 362). Destruction and ruins, miseries and sufferings in the Soviet Union, had simply no parallel in Russian history. National output dropped below pre-War levels, industry and agriculture almost totally collapsed. Thousands of people perished from sickness and starvation, and millions left the starving cities for the countryside. The working class was . r27 'physically and spiritually exhausted, strikes were commonplace' {Medvedev, 1981, 59). Worse still, towards the end of 1920, a crisis of 'increasing disenchantment and growing worker-peasant opposition’ (Elliott, 1985, 363) was threatening the very foundations of the October Revolution. Lenin himself admitted 'the revolution is on the brink of precipice which all previous revolutions reached and recoiled from'. Workers supported industrial mobilization and militarization of labor enthusiastically during the civil war, but now that the civil war ended they became more cautious about their rights and privileges. The peasants, although they resented the policy of forced requisition of grains throughout the civil war period, 'on the whole tolerated the Bolshevik regime as the lesser evil compared with White restoration1 (Cliff, 1978, 101). But immediately after the civil war, waves of peasant uprisings swept across rural Russia, the most serious being the Kronstadt Revolt of March 1921 that made it clear that the Communist Revolution itself was at stake. Besides plunging the country's economy into virtual collapse, and making the Revolution equally vulnerable, the policies and programs of War Communism left behind two other very significant accomplishments. It won victory over the civil war, and it left administrative and political legacies that still dominate life in the Soviet T28 Union. Some of the far-reaching consequences of the period of War Communism include centralized planning, bureaucratic administration, 'widespread coercive mobilization of labor into "labor armies", the coercive requisitioning of peasants produce by armed squads, and the elimination of regular markets' (Lewin, 1974, 77). Striking similarities between the characteristics of War Communism period and those of the Stalinist model can hardly be overlooked. Nove gives an insightful summary of the economic activities carried out during the War Communism period. According to Nove (1969, 74), War Communism stood for: (1) An attempt to ban private manufacture, the nationalization of nearly all industry, the allocation of nearly all material stocks, and of what little output there was, by the state, especially, for war purposes. (2) A ban on private trade, never quite effective anywhere, but spasmodically enforced. (3) Seizure of peasant surpluses (prodrazvestka). (4) The partial elimination of money from the state's dealings with its own organizations and the citizens, when there was anything to ration. (5) All these factors combined with terror and arbitrariness, expropriations, requisitions. Efforts to establish discipline, with party control over trade unions. A siege economy with communist ideology. A partly-organized chaos. Sleepless, leather-jacketed commissars working round the clock in a vain effort to replace the free market. NEP and its Prescriptions The New Economic Policy (NEP), in the words of Lewin (1974, 84), came as a 'surprising negation and complete reversal’ of the policies and programs vigorously pursued --------------------------------------------------------- — r 2 9 ' throughout the period of the War Communism. While the War Communism period was characterized by revolutionary and somewhat utopian expectations of breaking up of 'the old social-economic system completely at one stroke' {Tucker, 1977, 81) and for establishing a socialist system in no time, the NEP envisaged a cautious and evolutionary strategy instead, and called for replacement of the revolutionary approach by a reformist one. In sharp contrast to the socialistic goals and egalitarian principles of the War Communism period, NEP, in the words of Tucker (ibid., 81), sought to 'revive trade, petty proprietorship, capitalism, while cautiously and gradually getting the upper hand over them1. Although a drastic policy shift in the positions of Lenin and the Communist Party was an inevitable result of the disastrous economic conditions of War Communism, emergence of NEP was sudden and a complete about turn. 'Events,1 observes Nove (1969, 83), 'rather than the central committee, provided a potent means of persuasion' to the Communist leadership to change -the course of the country. As the economy was collapsing and the need for immediate rescue measures was felt widely, in March 1921, the Tenth Congress of the Communist Party adopted the NEP almost unanimously. Main features of NEP are: a) mixed socialist economy, b) blending of market and planning, c) agricultural reforms, d) denationalization and decentralization of industry, and e) currency, price and — 130 financial reforms. Now a word about each of these features of NEP. Mixed Socialist Economy Soviet leaders visualized NEP as a 'mixed socialist economy’ which was expected to blend the elements of private and public sectors in a competitive economic environment effectively controlled by a socialist government. Such an economic setting, in turn, was expected to generate lively competition between the private and public sectors, and with active patronage of the government the public sector was expected to flourish while the private sector was expected to disappear eventually. According to Soviet Gosplan chief Preobrazhnsky (quoted in Lewin, 1974, 90), the private sector was expected to be regulated by 'the law of value’, while the state sector was to be regulated mainly by 'the law of primitive socialist accumulation’. With increased competition between these two sectors, the incompatibility of the two regulators would be widely manifested, and gradually with the increased socialist accumulation, the private sector would disappear (ibid., 90). The position of Preobrazhnsky was, however, challenged by Nikolai Bukharin, according to whom, plans and markets should not be seen as mutually exclusive. Rather, Bukharin envisaged mutual co-existence of both the private and ------------------------------------------ ------------------------■ — 131 public sector in Soviet economy. He argued that private sector based on market relations, and the state sector based on government planning, should be seen as complementary to each other. Even for the state-owned enterprises he emphasized that control through the market from below and supervision from above by the state's administrative machinery, would create a conducive environment for the nation's economic development. Leon Trotsky advocated economic incentives as 'indispensable levers' for the economy, and visualized state enterprises as 'component of unified socialist organism, functioning in a planned manner'. This debate eventually conditioned the overall development^ of the Soviet Union, and literally shaped the destiny of its great leaders like Stalin, Trotsky, and Bukharin. We shall take up this debate in the next chapter in greater detail. NEP strategies therefore blended both planning and markets 'though interspersed with tensions and clashes' (ibid., 92), and intended to introduce a socialist version of mixed economy that combined, on the one hand, a large- scale industrial sector owned and managed by the state, and on the other hand, a booming private sector of agriculture, trade and small-scale manufacturing. Moreover, the concept of planning during the NEP period did not envisage tight state control as was later the case during the Stalinist period. NEP planning, instead, confined its role in r32 providing 'control figures', which were 'partly a forecast and partly a guide for strategic investment decisions', and the whole planning mechanism was designed to achieve some kind of 'balance of the national economy* (Nove, 1969, 101) . Agriculture as the Foundation NEP was sparked by a drastic policy-shift towards agriculture. During the War Communism period, as mentioned above, agricultural production dropped alarmingly, and the agricultural surplus to be squeezed for feeding the urban people became slimmer every year. Consequently, the Communist Party found it extremely important to reverse the situation, to make sure an adequate supply of grains. As Lenin (1965, 225) proclaimed, 'we must satisfy the middle peasantry economically and go over to free exchange; otherwise it will be impossible -economically impossible ...to preserve the rule of the proletariat in Russia'. Accordingly, by March 1921, the War Communism period's policy of coercive requisitioning of grains was abolished and a tax in kind was introduced instead. The policies initiated under NEP allowed the peasants to increase their production as much as they wanted without worrying about the possibility of confiscation by the government. However, for the surplus production the farmers had to pay a small tax in kind, and once the tax is paid, the farmers — r33 could 'sell the surplus at the market price and take the profit for themselves' (Cliff, 1976, 97). In order to boost the morale of the farmers and to ensure further increases in agricultural production, NEP, in sharp contrast to the policies of the War Communism period, even encouraged private trade in agriculture, and by 1924, replaced the tax in kind by a monetary tax (Nove, 1969, 84) . Denationalization and Decentralization of Industry Under NEP the whole industrial sector was drastically revamped. Government retained its direct control over only banking, foreign *trade and large-scale industrial enterprises, known as 'commanding heights'; and encouraged private initiatives in everything else. By May 1921, the nationalization order of the War Communism period was officially revoked, and many formerly nationalized enterprises were returned to the private owners or to workers' cooperatives. By July 1921, governmental regulations allowed private initiatives in small-scale industries and handicraft production. However, private enterprises were legally prohibited to hire more than 'ten to twenty workers' (Nove, 1969, 85). Such an about turn in the Communist Party's industrial policy; revoking the decree of nationalization, or allowing the private sector to organize small-scale enterprises, was misconstrued by 134 many as a return to market capitalism. Much like the present perestroika, NEP was conceived by many in the western world as a 'failure of communism' and a return to 'capitalism'. Western observers, as Adams (1972, 7) remarks, hailed NEP 'as the harbinger of communism's failure, and ... reestablishment of private property, capitalism'. According to Elliott (1985, 263), NEP rather intended to 'create a Communist version of "mixed-economy" by partial restoration of capitalism'. Lenin also repeatedly insisted that NEP was merely a 'breathing space1, ' a temporary retreat' in the position of the Communist Party, it did not constitute a return to capitalist market relations. Nove (1969, 85) points out that denationalization measures undertaken by NEP hardly allowed return of the enterprises to their former owners. According to him, by 1923, only 76 enterprises were returned to their former owners at the Union level, and most of the enterprises were leased to private citizens 'on terms of two to five years on payment of ten to fifteen percent of output'. Nove, however, points out that under NEP's denationalization sweep, the number of leased enterprises, rose to 5,698 in October 1923 from 3,800 in 1922. NEP also drastically reformed the economic management of the government owned and managed industrial sector. Most of the administrative methods of management that were X35 forcefully implemented during the War Communism period were thoroughly revamped. Industrial enterprises and the intermediary administrative units (like syndicates, trusts) were granted a significant degree of autonomy. The whole industrial sector was brought under an entirely different economic mechanism, that blended the methods of economic, administrative and production-planning. Nove (ibid., 97) explains how the new NEP economic mechanism for industrial management worked: (a) Methods of an economic character: the financing of industry, the organization of industrial credit, price policy etc. b) Methods of an administrative character: appointment and dismissal of responsible officials of trusts and other trading-and-industrial units, the transfer of material resources from one branch of industry to another, from enterprise to enterprise, and so forth, in conformity with the industrial plan, c) Method of production-planning character: the drafting of production and disposal plans, inspection and checking on their execution, ensuring the conformity of the industrial plan with the general plan, etc. Currency, Price and Financial Reforms NEP reforms went far beyond agriculture and industry, and extended into the arena of foreign trade, joint ventures, prices, money, and banking. With the advent of NEP, more and more monetary transactions, in terms of exchange of commodities and services, began to take place. During the War Communism period, as we have noticed before, attempts were made to do away with money and monetary transactions, and Soviet currency was not backed by gold. 136 Under NEP, measures were taken to put Soviet currency back on a gold standard, and by 1922 several banks were established to extend credits to industry, agriculture, cooperatives, enterprises and other activities. As mentioned above, the state retained monopoly over the large-scale industries, but a limited free trade was legalized and small-scale manufacturing was allowed in the private sector. Lenin openly called for 'state capitalism' and vigorously emphasized both public and private trade (Lewin, 1974, 85). In a speech to the Ninth Congress of Soviets in December 1921, emphasizing trade Lenin said, 'the proletariat state must become cautious, assiduous and shrewd businessman, a punctilious wholesale merchant' and cautioned that otherwise the Soviet economy was destined to remain a backward and agrarian country (Lenin, 1965, 59). Accordingly private traders were allowed gradually to enter into trade deals of almost every kind. According to Nove (1969, 84) private trading under NEP included: selling to peasants, buying from peasants, and selling to state enterprises, selling goods made by state factories as well as those made by resurgent private manufacturing sector. Cooperative trading was encouraged, and was particularly successful in selling consumer’s goods in the countryside, as well as goods of all kinds in towns alongside the state retail network, which was gradually being built up from the ruins of war communism. Nove (ibid., 103) maintains that private trade in the Soviet economy during 1922-23 constituted 78 percent of all 137 retail trade. In the field of wholesale trade, however, private trade controlled 14 percent of purely wholesale trade and 50 percent of mixed wholesale-retail trade, while the cooperative sector controlled 10 percent and the state sector controlled only 7 percent. The figures in table 3 shows the dominance of small-scale industry in the employment sector in 1925. The bulk of the private trade, especially since 1923 and onwards, was however, carried out by cooperatives. Table 4 demonstrates how dominant the share of cooperatives was during the NEP period in the sector of small-scale and handicraft industries. In the field of retail trade, as Table 5 shows, whereas the share of cooperatives was cnly 10 percent in the 1923, during the subsequent years, the role of state-supported cooperatives increased tremendously. Ideological Justification of NEP As demonstrated above, moving away from the War Communism to NEP not only constituted an almost absolute disenchantment with the policies of that period, it also called for a completely new set of governmental policies and programs that required ideological justification. Although the policies of the War Communism period brought victory over the civil war, those policies were also responsible for plunging the country's economy into a disastrous mess. NEP, on the other hand, emerged as a 138 remedial measure for the economy, as a 'strategic retreat* (Elliott, 1985, 363) in the policies of the Communist Party. NEP measures were aimed at granting 'concessions to the petty bourgeoisie and to the peasants* (Nove, 1969, 92), and transforming the Communist rule as a 'liberal dictatorship’ (Lewin, 1974, 96) dedicated to 'heal the wounds of World War I, civil war, and the Bolshevik's first overambitious efforts to achieve communism all at once* (Adams, 1972, 7). The underlying rationale for introducing NEP was, however, to save the October Revolution itself by giving the economy an opportunity to rebuild, and by enabling the Party leadership a breathing space to determine its strategy for the future (Elliott, 1985, 363). Lenin offered two arguments in justifying NEP. First, he admitted that War Communism was a complete mistake, and acknowledged that during this period 'war stringencies erroneously had been mistaken for shortcut to socialism' (Lewin, 1974, 87). Secondly, Lenin argued that the NEP was actually resumption of the policy of 'state capitalism* which he had developed in the spring of 1918, and which had been interrupted by the outbreak of the civil war (Cliff, 1979, 141). This standpoint of Lenin presumably could mean that he would have introduced NEP type policies even in 1918, had there not been threats of internal and external aggression to the Revolution. Moreover, this position also justifies his claim that the authoritarian policies of War 139 Communism period were basically results of anarchistic situations in the country at the time in question. And as Nove (1969, 120) contends, if NEP stood for resumption of the strategy of 1918, that would clearly mean that NEP was actually not a retreat, it was rather return to the 'status quo ante’. Again Lenin's policy of 'state capitalism1 stood for an economy in which, under the dictatorship of the proletariat, a bridge between the petty-bourgeois individualist peasantry and socialism would be established. Beyond cooperation between the state and the private sector of the economy, the Soviet leaders saw an element of dialectical relationship in NEP policies; they envisioned both competition and struggle between the two sectors of the economy. Under such a dialectical relationship, Lenin saw in NEP 'a desperate life and death struggle between capitalism and mmunism’. NEP visioned an ever expanding, ever dominating, planned state sector in the economy in which, the commodity producing private sector, would gradually disappear, as a result of increasing competition from the public sector. As Lenin asserts: inasmuch as we are as yet unable to pass directly from small production to socialism, some capitalism is inevitable as the elemental product of small production and exchange; so that we must utilize capitalism (particularly by directing it into the channels of state capitalism) as the intermediary link between small production and socialism, as a means, a path, and a method of increasing the productive forces, (quoted in Cliff, 1979, 143). , — r40 Therefore, NEP reforms could be considered as a tactical retreat, aimed at cleverly and cautiously utilizing capitalist instruments in order to promote socialistic goals. Growth of large-scale industry was seen as a necessary condition for the establishment of a full-scale communist economy, and the only way, the Soviet leadership visualized, the relatively underdeveloped Soviet state could establish such large-scale industries was through partial restoration of capitalism. In numerous statements and speeches Lenin underscored the theme that the capitalists could be permitted to operate in a socialist economy, but he persistently maintained that capitalists could be allowed only on condition that they should be strictly controlled. As Lenin declares: The proletarian state may, without changing its own nature, permit freedom to trade and the development of capitalism only within certain bounds, and only on condition that the state regulates (supervises, controls, determines the forms and methods of) private trade and capitalism. On another occasion Lenin announced 'We shall make as many concessions as possible within limits, of course, of what the proletarian can concede and yet remain the ruling class1. The meaning is clear: capitalists would be allowed to participate in the economy as long as the state and state-supported public sector remains dominant in the economy. In a speech to the Ninth Congress of Soviets on December 23, 1921, emphasizing trade, Lenin (1965, 59) ---------------------------------------------- ■ ------------1-4-1— said, 'the proletariat state must become cautious, assiduous and shrewd businessman, a punctilious wholesale merchant - otherwise it will never succeed in putting this small-peasant country economically on its feet’. Discarding the contradiction of communism and trade, he said, 'the two seem to be unconnected, incongruous, poles apart. But if we study it from the point of view of economics, we shall find that one is no more remote from the other than communism is from small-peasant, patriarchal farming1 (ibid., 113). For Lenin, Lewin (1974, 85) emphasizes, NEP was a retreat in an 'orderly fashion' and he used his pre-civil war 'state capitalist’ conceptions to prove that cooperation with capitalist forces and a turn to capitalist practices by a Bolshevik government did not constitute 'betrayals but a good strategy with theoretical antecedents1. Lenin was also convinced that NEP policies provided a valid method for reaching socialism not only in Soviet Union but also in other parts of the worlds. According to Tucker (1977, 92), however, the 'linear scheme of development from War Communism to NEP' is simply erroneous to believe. Strongly denouncing the thesis that 'NEP culture displaced the culture of War Communism’, Tucker maintains that rather the 'militant, voluntarist political culture and mystique of War Communism lived on among very many communists'. Evaluation of NEP Economically, NEP succeeded in fulfilling its immediate purpose. It rescued the Bolshevik Revolution from the possibility of ignoble failure, and saved the Soviet economy from the danger of potential disintegration and collapse. Economic incentives for the peasantry did help in improving the agricultural sector. Soon the farmers began to produce grain and food in ever larger amounts. Within a year of the introduction of NEP, the famine situation in the country was reversed and by 1925, agricultural production had approached the prewar level. On the political front, NEPy imposed monolithic political order, although intra-party debates and discussions were allowed. In 1922, Stalin became General Secretary of the Communist Party and began to consolidate his power. While Lenin legitimated the monopoly of power in the Communist Party, Stalin monopolized all power in himself. NEP 's socio-economic and political impacts were no less remarkable. The concessions to and compromise with the peasantry, however, were made at an enormous cost to the industrial workers. Among the industrial workers, unemployment grew enormously, and at the same time, the power of the red managers was massively increased during the NEP period. The red managers, drawn from the traditional managerial sections, were increasingly T43 integrated into the Communist Party hierarchy. As Dobb (1948, 143) observes: Statistics collected from the major trusts and syndicates in the later part of 1923 showed that, whereas in 1922, 65 percent of the managing personnel were officially classified as workers and 35 percent as non-workers, a year later these proportions have been almost exactly reversed. Only 36 percent being workers and 64 percent non-workers of whom nearly one-half were now party members. NEP period was also criticized for opening up the door for a plethora of administrative and political abuses, nepotism and discrimination. According to Carr (1953, 85) although during the NEP period standard of living of the industrial worker was definitely more satisfactory than the harsh years of War Communism, 'there had been no time since the revolution when discrimination was so overtly practiced against him, or when he had so many legitimate causes of bitterness against a regime which claimed to govern in his name’. Under NEP labor unions, too, lost much of their importance. During the War Communism period, labor unions played a coparticipatory role in the management of state- owned industries. NEP, to the contrary, deprived the labor unions the right to intervene in the management of the state-owned industries. Even in privately owned industries the unions had little power to intervene in management. No wonder union membership declined significantly during this period. Sorenson (1969, 201) has shown that between July ----------------------------------------------- , ----------- 1~4'4 1921 and August 1922, over 50 percent of the workers left their unions in the Soviet Union. Another consequence was the outbreak of numerous unofficial strikes all over the country during the NEP period. Carr (1958, 101) has remarked that by the end of 1923, the industrial workers in the Soviet Union, 'dispersed and neglected,...seemed to have touched the nadir of its prestige and influence1. As a matter of fact, NEP was also accused of accelerating a process of class differentiation in the Soviet society. Under the NEP, the egalitarian atmosphere came to an abrupt end. 'inequality became widespread. Wealth and luxury became legitimate. There was no longer any need for concealing opulence’ (Cliff, 1979, 152). Comparison with Perestroika Although the Stalinist drive for rapid industrialization and coercive collectivization of agriculture vividly resembles 'the surviving spirit of War Communism’ (Tucker, 1977, 410), it cannot validly be argued that the Stalinist revolution repeated 1917-21 or that the Stalinist order revived the system of War Communism. In the same way, it could be argued that although Gorbachev (1987, 410) himself claims that perestroika turns 'ever more often to the last works of Lenin, to Lenin's New Economic Policy, and strive to extract from it all the valuable elements', it would be an exaggeration to 'equate the New Economic Policy’ with ------------------------------------------------- = -----------— 145— perestroika. No doubt the reforms envisaged by perestroika have been remarkably reminiscent of the NEP. For example, perestroika has entitled private individuals and families the right to go into private business to manufacture consumer goods like toys and souvenirs and to initiate small enterprises for repairing cars, cab services, gardening or restaurants. This measure of allowing limited private enterprise goes right back to the NEP period. Perestroika also seeks foreign investment and joint ventures which are very definitely and strikingly similar with the urgencies of Lenin's NEP. Again, like NEP, perestroika is definitely asking for at least a partial revival of capitalism. The most important lesson of the reforms of NEP, however, is that they very convincingly demonstrated how much the Soviet system 'could compromise, twist and turn, retreat and advance, without losing its essential character’ (Draper, 1987, 292). Before we proceed to the discussion of the post-World War II reformers of the Soviet Union, as a reference point, an examination of Stalin's period is in order. Indeed, any analysis of Malenkov or any other post-Stalin reformers of Soviet economy would be simply out of place without a reference to the most dominant period of Soviet history, the period of Stalin (1929-1953). 1'46 The Stalinist Revolution (1929-53) Vladimir Ilich Lenin, the undisputed leader and founder of the Soviet Union, died in January 1924. The next Soviet leader, Joseph Vissarionovich Stalin, consolidated his position in 1929, after a five-year long succession struggle. During the five years after Lenin’s death, Stalin faced a tremendous challenge from left-wing opposition (Leon Trotsky) and right-wing opposition (Nikolai Bukharin). A master politician, Stalin succeeded in eliminating both oppositions, and established himself as the unchallenged lec.der of the Soviet Communist Party. Both Trotsky and Bukharin were members of the Communist Party politburo at the time of Lenin's death. Later, Stalin exiled Trotsky and executed Bukharin. The shrewd and shifting positions of Stalin, and the contrasting standpoints of Trotsky and Bukharin, that came down in Soviet history as the great industrialization debate, will be taken up in detail in the following chapter. In brief, in 1924, Trotsky accused the NEP of promoting market relations and denationalizing industries. Strongly denouncing NEP as a retreat from the socialistic values of the October Revolution, Trotsky called for state- sponsored rapid industrialization of the economy and emphasized internationalization of the Revolution. Stalin -------------: ----------------------- T4 7 opposed both the ideas. He defended NEP and insisted on its continuation by arguing that the time was inappropriate for the Soviet Union to embark on a rapid industrialization program. Stalin also insisted on building socialism first in the Soviet Union, the policy that was subsequently labelled as 'socialism in one country'. By 1927, Stalin succeeded in eliminating Trotsky's left opposition as the Communist Party was also in favor of continuation of NEP. After ousting Trotsky, Stalin turned to Bukharin. Defending leftist ideals, he started advocating elimination of NEP, introduction of central planning for rapid industrialization, elimination of kulaks, and collectivization of agriculture. Thus, Stalin confronted the rightist opposition by espousing leftist ideals, and by January 1929, successfully crushed the right opposition led by Bukharin. By the latter half of the twenties, the economic condition of the Soviet Union had substantially improved. While in 1921, Communist Party had to compromise with the peasants for the very survival of the state and Revolution, by 1926, the economy significantly recovered and the opportune time came for stopping 'treading water ..to take hold of the economy and move it forward... to begin the march toward greater industrial production’ (Adams, 1971, 43). Immediately after consolidating power in 1929, Stalin embarked on monumental programs of rapid 14T industrialization, forced collectivization of agriculture, abolition of market and private enterprise system and introduction of central planning. Along with revolutionary f measures for collectivization and industrialization, Stalin also embarked on a massive modernization drive to lift 'a backward peasant society out of the mire of its villages and slothful ways and transform it into an ever-changing modern society in step with the twentieth century1 (ibid., 47). Stalin's drive for rapid industrialization, coercive collectivization of agriculture, radical transformation of the society itself and destruction of old social institutions, under the strictest control of the Communist Party and government, and his totalitarian rule, has come down in history as the 'Second Revolution' or the 'Stalinist Revolution1. Stalin, however, preferred the term 'Revolution from Above1, the rationale being it was 'indeed a state-initiated, state-directed, and state- enforced revolution’ (Tucker, 1977, 83). Most important elements of the Stalinist revolution are: a revolution in agriculture (1929-33), which is interchangeably called 'rural revolution', 'mass-collectivization' or 'agricultural revolution'; and a simultaneously introduced industrial revolution. Of course no description of the Stalinist 'revolution from above' will be complete without a reference to the institutions that burgeoned with the ----------------------------------------------- 149 revolutionary drive for industrialization and collectivization. Therefore, a third essential component of Stalinist revolution will be the state building process which included a 'bureaucratic state apparatus, the huge growth of the system of forced labor, the concomitant growth of the politico-economic police empire . . and the extreme centralization of state power’ (ibid., 84). Now a word about each of the components of Stalinist revolution. Collectivization in Agriculture Revolutionary transformations in the agricultural sector began in 1929 when Stalin called for elimination of kulaks as a class and initiated the coercive process of mass collectivization of Soviet agriculture. Stalin (1945, 305) described the agrarian revolution as a 'a leap from an old qualitative state of society to a new qualitative state, equivalent in its consequences to the revolution of October 1917'. Out of the one million kuiak farms in 1928, the 'dekulakization' drive, according to Bideleux (1985, 121), resulted in the deportation of 240 thousand kulak families, and forced expropriation of another 600 thousand kulak farms. The collectivization of agriculture, which was achieved 'at the cost of untold sufferings and a famine whose toll of lives ran into many millions' (Tucker, 1977, 82), displaced 25 million household farms that had been -------------------------------------------------, -----------— 150- functioning on nationalized land, and forcefully brought them under four new rural institutions; a) state farm (sovkhoz), b) collective farm (Kolkhoz), c) Machine Tractor Station, and d) private plot. Among them the kolkhoz or collective farms were dominant; they 'combined cooperative ownership with tight government control1 and the sovkhoz or state farm was 'reserved for very large or experimental firms1 (Elliott, 1985, 365). The Machine Tractor Station (MTS) pooled farm machinery and was in charge of conducting all heavy machine operations on nearby collective farms. Under the Stalinist agricultural reforms, every household was granted the right to hold approximately one acre of land to work for their own needs or for sale in the local markets. All these changes effectively brought an end to the private ownership of agricultural land and private markets in the countryside that were so earnestly encouraged during the NEP period. As table 6 shows, while in 1928 only 1.7 percent of total cultivated land of Soviet Union was in the collectivized sector, the percentage rose to 93 percent by 1937. Again, as table 7 shows, while the collectivized sector of agricultural product contributed less than 4 percent in 1928 to the Soviet economy, by 1937, the share was increased to 93.5 percent. The success of the forced collectivization drive, however, had astronomical unintended consequences in terms of human and economic 151 costs. The exact human cost of the collectivization campaign is still difficult to determine; British Prime Minister Winston Churchill once put the human cost at ten million lives, while Stalin himself reportedly acknowledged a figure of five millions. The consequences of this brutal transition can be gauged from the following paragraph: The events of the campaign to liquidate the kulak and to achieve full collectivization form an appalling story of the suffering and death of men and women who hardly knew why they were being attacked. It is a story of endless lines of peasants driven away from their homes and carried off like cattle in open freight cars to distant concentration camps. In the unfolding tragedy, men denounced their village neighbors out of spite or because they coveted the neighbors livestock, and the very word kulak quickly lost its original meaning. (Adams, 1972, 55). Non-human costs of the collectivization drive were equally appalling. Peasant resistance to the drive for forced collectivization of agriculture resulted in huge devastation of livestock and other agricultural implements. By January 1931, as table 8 shows, the number of cattle had decreased 30 percent, sheep and goats had decreased 37 percent and the number of hogs had declined 50 percent. This not only manifested bitter peasant hatred towards collectivization of agriculture, but also had disastrous effects on Stalin's regime and the Soviet economy. Resultantly, during the early 1930s, agricultural production dropped alarmingly and a severe food crisis _ _ _ _ _ — r52 crippled the Soviet economy. But viewed from the Stalinist perspective, the collectivization campaign could presumably be considered as a great success. Stalin's determined and ruthless drive for mass collectivization succeeded in accomplishing a sweeping transformation of the backward institutions of Soviet countryside, and therefore, fully attained its avowed objective of setting the foundations for collectivized agriculture in rural areas. Collectivization gave Soviet leaders control over agricultural production, consumption and surplus. Evidently, the primary impetus for Stalin's collectivization campaign came from the demonstrated failure .of the agricultural sector to produce a sufficient surplus to feed the urban population and to provide the raw materials for industries. The philosophy, as prescribed by Preobrazhensky, was that in a largely agrarian economy like Soviet Union, for 'primitive socialist accumulation, the expansion of state sector producer goods should be attained at the expense of the peasants' (Bideleux, 1985, 112). Now that the backbone of the kulaks was broken, and the foundations for collectivization of agriculture laid, the state presumably would be able to utilize modern scientific instruments and innovations to boost agricultural production, and thereby would be able to 'siphon off a high percentage of produce for the market at exceedingly low prices'. 153 Industrialization Drive Along with the brutal collectivization drive, the Soviet economy also underwent rapid and dramatic transformations in the field of industrialization. With a resolute political determination to embark on a massive industrialization program, Stalin declared, 'We are fifty or a hundred years behind the advanced countries. We must make good this distance in ten years. Either we do it or we go under' (Stalin, 1955, 312). The industrialization strategy of Stalin, according to Elliott (1985, 365), had two facets: first, transfer of peasant labor to cities and factories and their transformation there into a disciplined force of industrial labor? second, transformation of the industrial labor force thus created into capital goods. For the system as a whole, the strategy maximized output of capital goods (and thus, wituin strategic limits, minimized output of consumption goods). The Stalinist drive for rapid industrialization of the Soviet economy was strictly coordinated by a central economic planning authority -the Gosplan, the state planning commission, and the Council of People's Commissars. With the enthusiasm to catch up with the west in only ten years, Stalin preferred to build heavy industry first, and speculated that 'by concentrating on heavy industry, in the long run he would be able build up a much larger productive capacity' (Goldman, 1983, 1). Therefore, Stalin's drive for industrialization came to be understood 154 as development of heavy industry, especially machine- building. Stalin anticipated that once the instruments and means of production are produced locally, the economy would be able to produce consumer goods at a record rate. Stalin, as mentioned above, also opted for the policy of 'socialism in one country’, and emphasized that to make Soviet Union economically self-dependent and 'a center of attraction for all other countries which gradually drop out of capitalism and enter the channel of socialist economy’ (Stalin's address at December 1925 Party Congress, quoted in Bideleux, 1985, 117), the Soviet Union must develop large-scale heavy industries at any cost. To Stalin, one of the principle purposes of industrialization campaign was to guarantee Soviet Union's economic and political independence. Stalin believed in the Leninist view that foreign aid signifies colonialism and loss of the nation's independence to creditors. Therefore, accumulation of capital for rapid industrialization of the country remained problematic. One source, understandably was, as Preobrazhensky suggested above, to transfer the agricultural surplus for industrial development. Besides channeling resources from the agricultural sector to the industrial sector, Stalin's strategy for industrial development of an agrarian Soviet economy envisaged heavy emphasis on heavy industry, and a simultaneous less emphasis on the consumption sector. 155 According to Bideleux (1985, 117), Stalinist capital accumulation sources included: the reduction in rental, interest and royalty charges on industry and the state; the profits of state industry and banks; the state monopoly of foreign trade; taxation; public borrowing; retail price reductions; reduction and simplification of the State and cooperative apparatus; a crackdown on absenteeism and mass participation based on shop floor 'production conferences’. Stalin increased capital investment up to 30 percent of the gross national product and set production targets at ever higher levels every year. The Stalinist strategy also involved a transfer of private sector savings to government savings and investment. Under Stalin's iron rule, enterprise managers were transformed into faithful executors of operational plans that specified production levels, supply allotments, delivery schedules and prices. The central planning agencies assigned highest priority to the rapid development of heavy industry, and gave secondary importance to agriculture, housing, and other consumer goods. It has been estimated that 86 percent of all investments in the first plan period went to heavy industry. Increasing emphasis upon the heavy industries meant that light industries, those producing textiles, shoes, and other consumer items, or processing food and making furniture, as well as smaller industries like handicrafts, trades and 156 shops, were hardly encouraged by government. With a firm commitment to achieve virtually instant industrialization, the Communist Party organized numerous mass campaigns, one of the most prominent being the campaign for increased labor productivity, known as 'Stakhanovism'. In 1936 work norms were raised throughout the economy to encourage Stakhanovites in all sectors. To make workers work harder many shock-brigades were encouraged in the enterprises; these brigades would publicly pledge to some extraordinary accomplishment - to fulfill the monthly plan in three weeks, for example. Workers discipline was tightened, absenteeism, tardiness, 'fetting' from job to job, etc. were strictly dealt with. In addition to a variety of economic, administrative and legal measures, 'many techniques were devised for bringing ideological and social pressures to bear upon the laborer in order to get him to work harder and more responsibly* (Adams, 1972, 65). Performance of the Stalinist Model Resultantly, the performance of the Soviet economy under the Stalinist model was extraordinary. As shown in table 9, between 1928 and 1937, Soviet industrial production, labor force and capital stock grew at unusually high rates. Steel output between 1928 and 1940 increased by 326 percent, coal extraction by 367 percent, and hydraulic generation went up by 866 percent. Dependence of 157 the Soviet economy on import from abroad was substantially curtailed. For example, the percentage of machine tools that had to be imported fell from 78 percent in 1932 to less than 10 percent in 1936 and 1937. Overall growth of the economy was among the highest in the world during the first eight years of Stalin's rule. In 1937, however, growth began to slump due to a growing defense burden (which rose from 3.4 percent of the budget in 1933 to 16.1 percent in 1936 and 32.6 percent in 1940) and also due to • the mounting toll of purges in the Communist Party leadership. The Stalinist revolution also brought a transformation of social patterns, most visible being rapid demographic changes. During Stalin's period, the urban population nearly doubled, from 28.7 million at the beginning of 1929 to 56.1 million at the beginning of 1939, jumping from 18 percent to 33 percent of the total population. The proportion of the population represented by workers and their families more than doubled, from 12.4 percent in 1928 to 33.7 percent in 1939. Annual graduation of specialists from higher educational institutions increased 157 percent during 1938-40 compared to the period of 1928 -1932. During the same period specialized secondary institutions rose 210 percent. But negligence of the light industries resulted in large shortages of consumer goods in i the economy. The resultant sufferings and hardships of the ------------------------------------------------------------------------------ - . 158' toiling masses of Soviet Union, the dark side of Stalin's industrialization policy, is best described by Adams (ibid., 67): Without many of the necessities of life -adequate housing, food, health services, and good clothing - the hardpressed Soviet people were compelled simply to tighten their belts, patch their rags, and work ever harder in the factories and on the farms. Moreover, the Stalinist revolution 'buried the egalitarian aspirations of the Leninist period and erected in its place a new hierarchy of prestige and privilege with a steeply stratified scale of rewards' (ibid., 69). In June 1931, Stalin legitimized wage differentials describing wage equality as 'Petty-bourgeois egalitarianism’. Introduction of closed shops and the system of 'authorizations' to ensure supplies of scarce goods to a selected few made the situation worse. Yet another dark precedent set by the Stalinist model is the extensi re use of terror. Stalin's extensive terror network was extended from uprooting the kulaks to hounding dissident Communist Party leaders. The cost to the Soviet economy of the Second World War was overwhelmingly. Its military casualties were estimated to be have exceeded 7 million, and civilian deaths were almost twice this number. Material losses included 1710 cities, 70,000 villages, 32,000 factories, 98,000 collective farms and 1876 state farms. The War caused 159 Stalin to retreat from many of his revolutionary programs. At the end of the War, Stalin committed himself to the task of reconstructing the system he had built earlier. Dropping many social and economic programs, in the Fourth plan (1946-50) Stalin placed primary emphasis upon building heavy industry, with particular attention to those strategic sectors of the economy essential to Soviet military power. Once again, the consumer goods sector received only secondary importance. Moreover, after the War, efforts were further intensified to prevent any criticism and retreat from the Stalinist revolution. In his Economic Problems of Socialism in the USSR (1952), Stalin anathematized proposals for reform, particularly for greater consumer goods production at the expense of growth in producer's goods or for slowing the transition from kolkhoz to sovkhoz. Evaluation of the Stalinist Model The Stalinist model, at least in its own terms, was overwhelmingly successful. It 'did what it was initially expected to do' (Goldman, 1983, 2). Under Stalin's ruthless leadership, a backward and agrarian Soviet economy was swiftly transformed into an industrial and military giant within a matter of a decade. No country in history can parallel this record. (Modern Japan took four decades to become an economic superpower.) Industrialization of a 160 nation normally requires 'from fifty to hundred years or more* and with Stalin, only 'a decade sufficed to transform a relatively underdeveloped nation into a great industrial power’ (Adams, 1972, vii). But after Stalin's death, it was soon discovered that the Stalinist model was hopelessly out of joint with realities and a misfit to the changed needs of the society. The Stalinist model, according to Goldman (1983, 2): began to take on a life of its own. It developed a momentum that seems to have prevented the system from evolving into an economy that is more responsive to popular wants and sophisticated industrial needs. This system keeps producing steel and basic machine tools, when what is wanted is food, consumer goods, and more modern technology. Therefore, after the death of Stalin, as Tucker (1971, 173) points out, the question was not 'Who shall replace him?’ but 'What' shall take the place of Stalinism as a mode of rule and pattern of policy and ideas?' There is no doubt that subsequently the Stalinist model lost most of its usefulness, but this uselessness was the inevitable result of its unprecedented success. The Stalinist system, according to Meyer (1967, 51), 'Having built an industrial society, it was poorly equipped by its own structure and operating methods to maintain, manage and improve' the fundamentally changed Soviet society. Stalin replaced the previous oligarchic dictatorship of the party with a personal dictatorship and totalitarian rule. He reduced 161 the Communist Party into a ruling bureaucracy and made it (like other bureaucracies, such as the secret police, army and state apparatuses) directly accountable to him. Because of its overwhelming emphasis on target fulfillment, the Stalinist model repressed creativity, innovation and initiative, and most certainly lacked the 'flexibility to adjust plans and decisions to rapidly changing domestic and international conditions and to unanticipated opportunities and problems' (Hoffman & Laird, 1982, 26). Therefore, after the death of Stalin, very naturally, Stalin's policies and programs increasingly faced thorough scrutiny, and in many cases, formidable challenges and drastic attempts of reversal. Attempts of economic reforms, immediately after Stalin's death, were first manifested in the efforts of Malenkov, Chairman of the Council of Ministers of the Soviet government. Malenkov's New Course (1953-57) Premier Malenkov's announcement of a 'New Course' came immediately after Stalin's death, in fact in the same month, in March 1953. Malenkov's New Course emphasized a rise in the standard of living of the people by improving the supply condition of consumer goods, even at the expense of heavy industry. That puts the Stalinist strategy of building heavy industry at the expense of consumer sector, , -------------- — r62_ literally upside down. In April of the same year Malenkov announced a comprehensive series of price cuts in consumer goods and food: '10 percent on bread, 15 percent on meat, 50 percent on vegetables, sauerkraut and grapes, 14 percent on dresses, 8 percent on shoes, and even 10 percent on perfumes' (Schwartz, 1965, 57). Malenkov also sought to achieve an abundance of food within a couple of years, and wanted to improve the quality of goods. He even deplored the fact that 'an acute shortage of housing is felt everywhere’ and announced that 'a large number of machinery plants have been converted to the production of mass consumer goods' (ibid., 59). Another important measure taken during Malenkov's premiership was a fifty percent cut in the amount of compulsory state bonds that Soviet people were required to purchase annually. As a result, according to Nove (1969, 324), bond sales were reduced to 15.3 milliards in 1953 from 35.7 milliards in 1952. Malenkov also supplemented the reduction in bond-purchase requirements with a 3 percent increase in average wages. These moves contributed to an 8 percent (ibid., 324) increase in the purchasing power of the Soviet population. Ironically, the situation in the consumer market worsened further as the supply of goods available for sale hardly matched the increased purchasing power of the people. --------- — ---------— : 163 Malenkov also spelled out drastic changes in the government's agricultural policy. The new policy, announced in August 1953, envisaged a decrease in the agricultural tax, an increase in procurement prices for agricultural goods and a substantial reduction in quotas for compulsory deliveries of garden produce to the state. Besides these material incentives to boost the agricultural production, Malenkov also promised the farmers increased supplies of farm machineries and other accessories. Malenkov even openly supported the private enterprise activities of Soviet peasants who were allowed to concentrate more energies on their private gardens even at the cost of neglect of their duties in collective farms. Malenkov was so optimistic about the prospect of these new policies that he saw little difficulty in achieving 'an abundance of food for the people and of raw materials for consumer goods industry in the next two or three years' (ibid., 59). In the industrial sector, Malenkov's attempts were also noteworthy. The disparity between 'the assortment of goods produced and the profiles of the population's demand' was publicly recognized by Malenkov's regime, and for the first time official acknowledgment was given to the fact that the economy was producing many unwanted goods (Katz, 1972, 46). Malenkov attached greater priority to the production of consumer goods, over and above the provisions of the plan, 164 and even announced ambitious targets for 1954 and 1955. According to Nove (1969, 326), in 1953, consumers' goods production actually increased faster than that of producers' goods (13 percent against 12 percent). Table 10 shows the plan targets and the actual achievements during this period. All actuals were, nevertheless, less than targets, except in the production of motorcycles. According to Bergson (1961, 237-45), between 1952 and 1954 consumption's share of the Soviet GNP rose from 44.4 percent to 51.2 percent, which was the largest gain in consumer's sector since 1941. But Malenkov's reforms did not constitute a break with the Stalinist model. Neither did he propose any measure to change the course of the Soviet political economy. His reform measures are largely considered to be derivatives of Stalin's thought. The bottom line of his reform measures, i.e., increased emphasis on consumer goods, was based on the argument that heavy industry had been built up sufficiently making the economy capable of producing more consumer goods for the population. Indeed Malenkov promised continued expansion of heavy industry too, he described heavy industry as 'the foundation of foundations' of socialist economy. Later the issue of heavy versus light industry was one of the main reasons for his downfall (Khrushchev labelled his policies as 'Bukharinite' in his January 25, 1955 address to the Central Committee of the 165 Communist Party and secured Malenkov's removal from the Party). Jermakowicz (1988, 111-46) described Malenkov's 'New Course' as 'defensive reforms' which according to him, are usually initiated 'after a period of relative political stability'. According to Jermakowicz (ibid., 123) the reforms of Malenkov had their theoretical inspirations from Stain's 1952 book Economic Problems of Socialism in the USSR, in which Stalin emphasized increased supply of consumer goods and recommended permanent changes to the whole economic system of the country. But Felker (1966, 41) maintains that Malenkov's directives was further highlighted by the fact that in 1937 -for the first time since 1928 - when consumer goods were beginning to appear on the market in sizable quantities, the ratio of heavy to light industry had been three to two; in 1953, the ratio was seven to three, even though the post-war recovery plan had been completed by then. The short-lived Malenkov period definitely bears historical significance, at least for making a few new and remarkable beginnings. Never before Malenkov did the poor living standards of the vast masses of the Soviet people come up so prominently in the agenda of the Soviet leadership. Never before did the Soviet leadership admit the debacle in Soviet agriculture and stress need for its reform. Most importantly, Malenkov' s purge of KGB chief N. Beria came as a great relief from the absolute power and -------------------------- — — ■ Jgg terror of secret police. But by 1957, Nikita Khrushchev was successful in ousting Malenkov. The downfall of Malenkov came, according to Katz (1965, 49), because he argued for a massive increase in consumer goods plus a consistent rise in the price of agricultural products, while Khrushchev also sought to increase grain production, but agreed to a smaller diversion of resources from heavy industry and defense than Malenkov's strategy would imply. Major Reforms of the Khrushchev Era (1957-64) During Stalin's period Khrushchev was the Secretary of the Moscow Regional Tarty, while Malenkov was the Chairman of Council of Ministers and a Secretary of the Communist Party. As mentioned above, while Malenkov pressed for greater supply of consumer goods at the expense of heavy industries, and decentralization of authorities in favor of the state administrators; Khrushchev emphasized that heavy industry must retain its primacy in the economy and that consumer goods production could be expanded, but not at the cost of heavy industry. In January 1955, Khrushchev took side with the conservatives in the Party, and branded proposals for giving priority to light industry as a 'right deviation' and forced Malenkov to resign from the position of Chairman of Council of Ministers in favor of Bulganin. ■ 167 Although Malenkov's resignation was secured in 1955, it took two more years for Nikita Khrushchev to consolidate his position in the Communist Party, and finally emerge as the new leader of the Soviet Union, in 1957. The consolidation of power, however, involved a remarkable shift in Khrushchev's policy orientations. After successful elimination of Malenkov, his chief contender for power, following the footsteps of Stalin, Khrushchev himself became a reformer by embracing the policies of reform originally initiated by Malenkov. But, whatever the initial position is, it could be safely argued that Khrushchev outdistanced Malenkov in the efforts to reform the Soviet economy. The Khrushchevian period brought about the sharpest break with the Stalinist model by undertaking 'the most radical reorganization of Soviet economic administration since before World War II’ (Schwartz, 1965, 89). Khrushchev's 'harebrained' schemes, and other 'immature' innovations and experiments, attained limited successes, and subsequently were easily reversed by himself and his successors; nevertheless they made a significant contribution towards de-Stalinization of the Soviet economy and society. Repudiation of the Stalinist cult Khrushchev's de-Stalinization campaign reached a climax when, in February 1956, he delivered a secret speech to the 168 20th Party Congress. Strongly denouncing the Stalinist personality cult, Khrushchev, in his address, dramatically revealed the extent of the Stalinist purges and costs of Stalin's repression. Khrushchev accused Stalin of 'rude violations of internal party and Soviet democracy, s-erile administration, deviations of all sorts, covering up the shortcomings and vanishing of reality1. He stated that during the Stalinist period, the Soviet nation 'gave birth to many flatterers and specialists in false optimism and deceit’ (quoted in ibid., 75-76). Many of Malenkov's reforms envisaged a movement away from the Stalinist model, but with this speech Khrushchev stepped up the pace of change significantly. Khrushchev pointedly criticized the extent of statistical distortions during Stalin's period and vividly sketched the bleak picture of the state of collective farming in the Soviet Union. According to Nove (1969, 327), during the Stalinist period productivity in agriculture (per hectare, per cow, per peasant) was much less than satisfactory, but the truth was hidden by statistical distortions. According to Schwartz (1965, 77), Khrushchev's bold 'assault on Stalin's authority and the decision to make public key statistical data' came as a bombshell to usher in an 'era of fresh thinking, and even of possible major institutional innovations'. Thirty years later, Gorbachev (1988, 418) appreciated the moment by declaring at the 70th 169 anniversary of Bolshevik Revolution, 'it required no small courage of the party and its leadership, headed by Khrushchev, to criticize the personality cult and its consequences, and to reestablish socialist legality’. In fact Khrushchev's period was also marked by the flowering of a plethora of very promising economic ideas and thoughts in the Soviet Union. Khrushchev's repudiation of the Stalinist cult was seen by the economists and economic administrators as a new beginning for tremendous potential changes in the Soviet economic system. Evidently, Khrushchev's period signified a distinctive qualitative change and a sharp discontinuity with the Stalinist model. The most important changes manifested during Khrushchev's regime, in contrast to that of Stalin's period were, a) elimination of the use of terror and b) rejection of the notion of an inevitable war between capitalism and socialism. By eliminating the extensive use of terror, Khrushchev was able to provide a more congenial environment for unconstrained surfacing of new thoughts and ideas. Manifestations of such ideas and thoughts, especially concerning economic issues, was particularly significant in Khrushchev's period. Even the very personality of Khrushchev was more welcome to people both at home and abroad. While Stalin manifested a totalitarian leadership, Khrushchev provided a more open and less authoritarian environment. Unlike Stalin and Lenin, 170 Khrushchev also rejected the notion of an inevitable World War between capitalism and socialism. Khrushchev shifted the war to the economic front, and boasted that the Soviet Union would overtake the United States economically by 1980. He also called for relaxation of foreign policy tensions, and championed a detente. This shift in fundamental notion meant a diversion of funds from defense spending to the task of rapid expansion of the economy. None can overlook the striking similarity between Khrushchev's policies and what Gorbachev is trying to do now. Triumphant economic Conditions Before we embark on the critical details of the reform measures undertaken by Khrushchev to 'alter the Stalin's model' (Goldman, 1987, 49), a look at the conditions of the Soviet Union of his time will be in order. Khrushchev's consolidation of power coincided with one of the brightest chapters in Soviet economic history when 'hopes ran high and accomplishments were not very far behind', when the sixth plan (1956-60) boasted 'to overtake and surpass the most highly developed capitalist countries in per capita output' (Schwartz, 1965, 85). It was a period of rapid and impressive economic growth; both industrial and agricultural sector growth increased by almost 50 percent during the period of 1955-58. This was the period when ------------------------— ---------------------------- ------------- : — 171~ the Soviet Union was developing at twice the rate of advanced capitalist countries and 'the gap in the level of economic and social development between the Soviet Union and the USA was rapidly closing' (Aganbegyan, 1988, 53). Coupled with an overwhelming increase in Soviet nuclear and rocket strength, the Soviet Union appeared to be 'stronger, wealthier and more influential' than ever before. To Soviet leaders and the Soviet people, nothing seemed impossible. The mood of this period is aptly described by Gorbachev (1988, 418) 'a wind of change swept the country, the people's spirit rose, they took heart, became bolder and more confident'. The policies and reforms Khrushchev initiated during his,seven year rule, therefore, naturally reflected this period's high optimism. Here follows a brief discussion of the major institutional and policy reforms that accompanied the mounting economic growth during Khrushchev's period. Emphasis on Consumer Goods Khrushchev abandoned and reversed many of the major policies of the Stalinist era. While Stalin strongly emphasized the preeminence of heavy industries over light industries, Khrushchev sought to reverse the priorities by attaching top priority to the production of consumer goods. Even though he initially opposed Malenkov's New Course for its heavy emphasis on consumer goods, with the consolidation of power, Khrushchev increasingly emphasized more housing construction and food production, and called for greater investment in the chemical industry to produce more fertilizer and consumer goods. The emphasis on housing construction during Khrushchev's period was particularly significant. A decree of July 1957, acknowledging an enormous growth in the country's urban population, ordered a large increase in housing construction. The decree admitted that even with a stepped up program of construction the housing shortage could not be eliminated for ten or twelve years. Khrushchev's government took up a massive program for production of construction materials and greater efficiency in house building. Moreover, the 1957 decree encouraged construction of housing by loans and by more generous provision of materials by the government. In October, 1958, by reversing Stalin's policy, Khrushchev ordered that plans to build expensive administrative buildings, stadiums, palaces of culture, etc., be suspended wherever possible and the funds should be diverted to building of houses, schools, hospitals and children's institutions. The resultant development of housing construction could be visualized in table 11. The figures show that while urban housing completed in 1953 was 30.8 millions of square meters, in 1957 it rose to 52 millions, and in 1960, it jumped to 82.8 million square 173 meters. Table 12 shows that private housing received rather more financial and material support. Reforms in Economic Administration Khrushchev undertook extensive measures to alter the entire system of industrial organization. Following the capital investment crisis of December 1956- May 1957, when with the slowdown of the economy (as manifested in table 13), it became evident that targets of the sixth plan were not accomplishable, Khrushchev realized that centralized ministries were mainly responsible for the problems of the economy. In a mid-February 1957 Central Committee meeting, Khrushchev accused the central ministries of taking a narrow departmental view of economic activity; and 'competing with each other for investment resources, and in effect, bite off more than they could chew" (quoted in Nove, 1969, 342). He criticized the central ministries producing: great waste of resources, the build-up of parallel bureaucratic structures, incomplete utilization of existing productive facilities, irrational hauling and cross-hauling of freight, and a series of other economic losses. To eliminate these weaknesses, the Central Committee ordered a major reorganization to bring economic administration closer to the grass roots in each major area of the country through a partial decentralization of authority. (Schwartz, 1965, 87-88) In May 1957, Khrushchev 'drastically reorganized both state and party machinery in the field of economic administration' (Katz, 1972, 54), by initiating the sovnarkhozy reform. The sovnarkhozy reform replaced some 25 major economic ministries, established instead 105 regional economic units, and placed them under the direction of newly created Councils of the National Economy or sovnarkhozy. In most cases a separate sovnarkhozy was created for each province. In each of the 15 republics in the Soviet Union, the regional sovnarkhozy were made subordinate to the republic authorities and each republic's Council of Ministers supervised its sovnarkhozy. At the national level coordination was placed in the hands of the Gosplan, the State Planning Committee. The sovnarkhoz ^ reforms also helped Khrushchev politically. The decentralization measures stripped power from the central ministries in the state apparatus, where many of his opponents had their greatest strength, and transferred much of the responsibility for coordination of the economy to local party secretaries, among whom Khrushchev apparently had built his political base. Such geographical decentralization, however, was not quite new for the Soviet Union. Even at the time of Malenkov, attempts were made for both geographical and functional decentralization. During Malenkov's short period, as Katz (1972, 54-55) remarks: on the one hand a large number of enterprises moved from the jurisdiction of the centralized all-union industrial ministries and were put under the jurisdiction of the 175 more-decentralized union-republic and republic ministries. Within the industrial ministries, there was an attempt to move more decision-making down to the glavki level. Furthermore, more latitude for decision making in planning and investment was given to the branch ministries in terms of the number of items and details that had to be approved at government level. Agricultural Reforms Khrushchev's primary emphasis was, however, reform in the agricultural field. Immediately after the death of Stalin, as mentioned above, the new leadership lowered the tax burden and delivery quotas for peasants, and raised the procurement prices for agricultural products. During succeeding years campaigns were intensified to manufacture chemical fertilizers and expand agricultural production in the virgin lands. In March 1955, the government entrusted the Kolkhozes with the powers to decide their production targets and restricted the role of planning to only specifying the delivery obligations of the kolkhozes. Another important development of this period was the amalgamation of kolkhozes into state-farms. As a result, the numbers of kolkhozes dropped to 69,100 in 1958 from 125,000 in 1950 (Nove, 1969, 336). The number of state farms, on the other hand, grew from 4,857 at the end of 1953 to 6002 in 1958. Table 14 shows the magnitude of change in kolkhozy and state farms productions during the years 1953, 1956 and 1965. — ■ 176 Despite these initiatives and despite a massive campaign to send over 200 thousand workers to the countryside to boost agricultural production, the harvest of 1960 was disastrous. By 1964, Khrushchev's seven year crash program of agricultural development came to an end, but agricultural production had risen only 14 percent over its 1958 level, falling almost a third below its target level. Table 15 shows the grain production for the period between 1953 to 1958; it shows that bumper production was recorded in 1956 and 1958, but otherwise the production remained low as before. Table 16 shows Soviet grain output . for the years 1958 to 1962, and also shows the overambitious goal of Khrushchev's government for the year 1965. As the table indicates, 1958's record harvest was followed by several years of decline in agricultural production, and only subsequently, in 1962, the record of 1958 was actually surpassed. Another notable institutional change in agriculture during this period came in early 1958, when one of the basic features of the Stalinist farm system, the Machine Tractor Stations (MTS), was completely wiped out. Under Stalin, government owned MTSes controlled services of tractors, grain combines, and similar heavy equipments, for which kolkhozes were dependent. Khrushchev also ordered complete elimination of required compulsory deliveries from the private gardens of the peasants. 177 Reforms in the Incentive System Khrushchev had a constant preoccupation with raising labor productivity. Already in 1956, the Stalinist laws providing criminal penalties to freeze workers in their jobs were revoked, minimum wages and pensions were raised and a beginning was made in shortening the work week. Although the basic six-day work-week was retained, during 1957-58, a seven-hour work-day was introduced generally and a six hour day was introduced basically for underground, or especially hazardous occupations. Khrushchev also promised a 40-hour work-week by 1962, claimed that the Soviet Union had 'the shortest work day and the shortest work-week in the world, while at the same time there is a rise in the welfare of the people' (quoted in Schwartz, 1965, 123). Khrushchev also undertook a massive reform program in the wage-system in the economy. During Stalin's period, thousands of pay-scales were in vogue in factories, industries, ministries and departments. The new wage system sought to simplify the complex wage structure by replacing it with a small number of scales so that workers of a given occupation could receive the same wages regardless of where they are employed. The whole policy package was aimed at raising the wages of the lowest paid workers; making the wage system more effective in providing the needed incentives for higher worker productivity; and ensuring a steady rise in labor productivity (ibid., 101). 178 Table 17 shows the steady rise in wages during the period between 1950-1961. While the industrial worker's average annual income was 925 rubles in 1950, in 1961 it stood at 1240 rubles. Simultaneously, as early as 1959, Khrushchev set up Communist Party control commissions in industrial and trade enterprises to check on the punctual fulfillment of delivery schedules and production quotas by enterprises. These commissions watched management decisions and illegal actions within the enterprises and reported to outside authorities. Khrushchev also initiated a number of measures to motivate workers and management for increasing efficiency, reducing production cost and efficient use of productive resources. By the early sixties, the success indicators for determining managerial bonuses in non priority industries were changed. Instead of considering the manager's success in reaching or exceeding his output targets, bonuses were made dependent primarily upon a manager's ability to produce at lower costs. Attention was also focused upon managerial ability to turn out high quality goods, to deliver commodities on time, and other similar qualitative aspects of his work (ibid., 141). Reforms in Trade Onions Trade union prestige and power was substantially increased during Khrushchev's period. With the sovnarkhozy 179 and elimination of central ministries, restructuring of the trade unions along with the sovnarkhozy in each area became an immediate necessity. In the pasr, a large number of trade unions were replaced by a small number of trade unions with emphasis shifted to local, territorial trade union bodies. Khrushchev expanded the power of the local union factory committees and established a permanent production conference in each enterprise with the power to exert worker influence upon the management of the plant. The factory trade union committees were even empowered to review, and if necessary to revoke or change, decisions on disputes between individual workers and management. Under the new provisions, all important decisions of the State Committee on Labor and Wages, which was responsible for basic labor policy, had to be approved by the national trade union leadership. Enterprise management was prohibited from firing any worker, and appointing any new worker, without the union's consent. The trade union had the right to call for removal or punishment of production executives who failed to carry out obligations under collective agreements. Trade unions were also consulted over a wide range of other matters, from distribution of bonuses to the establishment of wage categories for different jobs (ibid., 102). Trade union members representing workers were elected at general meetings of the work force. Perestroika's reforms in trade union 180 ' rights and enterprise management are strikingly similar to the reforms that Khrushchev carried out thirty years ago. Reforms in Prices, Wages and Finance In the field of agriculture, Khrushchev wanted to eliminate arbitrary bureucratic control and stressed scientific calculation of costs for agricultural production and economic incentives to the farmers. He proposed a wage system that would permit collective farmers to receive monthly monetary payments. Previously, the same agricultural product could have three different prices; one for selling it to the state as a part of the compulsory j delivery quota; another if it is an above-quota sale; and still another price if it was delivered to the MTS as a payment in kind. Khrushchev replaced this system by a principle of the same price for the same product grown in the same area. Thus different agricultural products in different zones had different prices. Table 18 shows the indexes of average state prices paid for procurement from collective farms, collective farmers and other workers and employees. Khrushchev, however, instituted the same wholesale prices for both state and collective farms for purchasing farm machinery and other production essentials. Previously collective farms had been charged much higher prices than state farms for agricultural production essentials. 181 Average wages moved up during Khrushchev’s period, from 715 roubles a month in 1955 to 778 rubles in 1958. Increase in workers' income very naturally threatened the market price; to keep the price level steady, price increases in food and drink items were balanced by cuts in manufactured goods which were relatively abundant. The changes in price structure did help in improving the overall situation, but not very appreciably, as many anomalies were not eliminated. Moreover, the process of price-fixing was not altered. As Nove (1969, 348) remarks, 'there was still insufficient inducement to produce goods in demand or of high quality, or modern types of machinery’. Khrushchev also tried to reform the credit system in the economy. The State Bank was separated from the Ministry of Finance, and was entrusted with increased powers to extend credits to financially efficient enterprises and to take appropriate measures to penalize those enterprises that incurred debts. Khrushchev also took drastic measures to reorganize the banking system in the country. In April 1959, the investment banking system which had existed since 1932 was replaced by an all-union bank, Stroibank, which took over most of its functions. The Stroibank, the All- Union Bank for Financing Capital Investment, was also entrusted with the responsibility to disburse state grants for capital investment in state enterprises as well as the 182 issuance of credits to collective farms, cooperatives and other borrowers. Evaluation of Khrushchev's Reform Measures Evidently, Khrushchev, during his seven years of momentous rule, made very decisive and bold attempts to reform the Stalinist economy. But most Sovietologists conclude that Khrushchevian policies were often erratic. After the fall of Khrushchev in October 1964, a Pravda editorial described Khrushchev's reforms as: 'harebrained scheming, immature conclusions and hasty decisions and actions divorced from reality... unwillingness to take into account the achievements of science and practical experience*. A careful examination of the policies and programs of Khrushchev, indeed, reveals that most of his reforms were 'inconsistent and self-contradictory' (Draper, 1988, 292), 'mercurial, impulsive and change-prone1 (Connor, 1986, 262), or in the words of Aganbegyan (1988, 53-56) 'voluntaristic’, 'insufficiently thought-out’ and simply 'unrealistic'. Khrushchev, as a matter of fact, more than once announced a bold policy innovation from which he later retreated. For example his dramatic reform of Soviet education in 1958 was repealed before he left power in 1964. Anticipating a labor shortage, Khrushchev in 1958, replaced the existing goal of universal ten-year secondary 183 education for all Soviets, with a goal of universal education through the eighth grade. In 1964 the decision was reversed. Again, the much celebrated decentralization of economic administration, the sovnarkhoz reform of 1957, was abandoned in 1961. Khrushchev soon discovered that the sovnarkhozy was too small for efficient operation of the economy and merged the former 100 or so sovnarkhozy into less than 50. In 1961, seventeen Councils of Coordination and Planning were set up, each given wider powers over a 'large economic region1 consisting on the average, of six or seven ordinary sovnarkhozy. Thus the transfer of sonarkhozy's power to the bureaucratic system, which Khrushchev so bitterly hated, was completed. Figure 2 shows how Khrushchev's effort of reducing bureaucratization ended up in a complex administrative machinery for the economic management of Soviet economy by 1964. Politically, Khrushchev initiated the most sweeping reform so far in the Soviet Union. The whole Communist Party, at all levels, local, provincial and republican, was vertically divided into two separate sections: an industrial communist party, exclusively dealing with industry; an agricultural communist party, absolutely concerned with agricultural issues. Such a break-up actually resulted in three economic bureaus, remarks Schwartz (1965, 152), 'one for industry and construction, one for agriculture, and one for the chemical and light 184 industries'. But soon Khrushchev had to eliminate the bifurcation of the Communist Party in order to quell widespread dissatisfaction among party workers. The most troublesome inconsistencies of Khrushchev's reforms, however, were manifested in his economic policies. For example, officially government gave priority on light industries over heavy industries, and promised that in two to three years time Soviet industry would annually produce a million television sets, a half-million vacuum cleaners, and over three hundred thousand refrigerators, and so forth. Yet the actual economic indicators demonstrated an unmistakable priority to the producers' goods sector. In 1963, observes Schwartz (1965, 125) Soviet heavy industry accounted for almost 75 percent of all Soviet's industrial production while in 1952, Stalin's last full year of power, the corresponding share of heavy industry was less t.ian 70 percent. In the field of capital investment, Stroibank's authority was further consolidated by November 1959. Again in 1963, Khrushchev abandoned the seventh five year plan, two years before the period's end, and redrew plans for 1964 and 1965. Moreover most of the sweeping promises made by Khrushchev remained largely unfulfilled. The promise of a shorter work-week, the guarantee of a minimum wage, an increased supply of consumer goods: all these proved to be misleading. 185 Consequently, growth of Soviet economy actually began to fall and numerous imbalances in the development of the country began to surface. For example, the rate of capital return in industry declined, reserves began to grow faster than production, and enterprises were having difficulty in getting necessary inputs. While during the 1954-59 period the annual growth of agricultural production was more than 7%, it fell to 1.5%-2% during 1960-64. In the agricultural sector per capita production remained the same. In the industrial sector, however, the picture was a little different, although not very encouraging. As table 19 shows output in heavy industries was more than 50 percent higher in 1963 than in 1958. But while the annual growth rate was 12% in 1958, it fell to 4% in 1963 and 6% in 1964. According to Aganbegyan (1988, 57) if one takes into consideration the hidden price rises of this period, it could be tantamount to an 'actual stagnation1. Internationally, Khrushchev's de-Stalinization policy backfired, it fed the East European unrest that culminated in revolts in Poland and Hungary. The conservatives used the revolts to press their demands for moderation of the de-Stalinization campaign and to curb Khrushchev’s power. Eventually Khrushchev was ousted from power in 1964. With the sad end of his turbulent, momentous and highly optimistic era, the dream of the Soviets to overtake the United States in a short time also came to a grinding halt. 186 Lessons for Gorbachev's Perestroika Indisputably, many of the reforms attempted by Khrushchev were not coherent or well-designed. Therefore, few were surprised to see them fail. Nevertheless, the fact remains that Khrushchev was the first Soviet leader who attempted, in the words of Aganbegyan (1988, 50), 'the first about-turn in economic and social policy' of the Soviet Union; and in the words of Gorbachev (1988, 419), brought about 'changes for the better in Soviet society and in international relations1. According to Gorbachev (1988, 419) the main reason for the failure of Khrushchev's reforms was that they 'were not backed up by a broad development of democratization process’. Economically, Aganbegyan (1988, 50-55) asserts, the qualitative aspects of the reforms were not considered adequately, indices of cost-effectiveness such as the use of raw materials, employment of capital investment, and construction time, were not well thought-out. Instead, Aganbegyan maintains, extrapolations were based on calculations of extensive development and due consideration was not given to the possibilities of decline in the growth of resources. Most importantly, Aganbegyan complains, attempted decentralization in economic administration was not accompanied by elimination of the 'command administrative style of management'. Khrushchev's reforms, Aganbegyan maintains, made no progress whatever' for introducing economic methods of management. Leung (1985, 233), however, maintains that Khrushchev's failure lies in his record as 'a blemished reformer for the inconsistent, ill-conceived and rush manner in which he pursued changes'. Khrushchev's 'volatility and variability', he maintains, 'antagonized nearly every powerful constituency’ in the Soviet Union. Within a year, virtually every reform that was initiated by Khrushchev was either 'reversed or seriously modified'. Draper (1988, 292) maintains that the real lesson of Khrushchev's reforms for Gorbachev lies right here. According to him, 'Khrushchev contributed one invaluable precedent for the benefit of Gorbachev effort - Khrushchev showed that it was possible to repudiate at least the worst excesses of the Stalinist heritage and die in bed’. But the fact remains, as Katz (1972, 72) maintains: The Khrushchev era ended with unopposed affirmation of the need for reform on the enterprise level and an expression of confidence that the problem of planning and managing the national economy would be taken care of, but without a clear picture of exactly how this would come about. As we have seen above, several of the reforms initiated by Gorbachev's perestroika resemble Khrushchev's reforms. For example, perestroika's emphasis on decentralization of authority to the enterprise level, strengthening of the role of the trade unions, efforts to provide economic 188 incentives for improving the quality of the products, efforts to establish economical methods of production, promotion of incentives for agricultural production, allowing private initiatives, reforms in wage, extension of price and money systems, all these vividly resemble the reforms of Khrushchev's period. However, the most important difference between Khrushchev's reform efforts and those of Gorbachev, is that perestroika attempts at de- Stalinization by promoting democratization and openness in the Soviet society, while Khrushchev wanted to accomplish his goals by administrative orders from above. Moreover, according to Elliott (1989), Khrushchev did not intend to repudiate Stalinism completely. Rather, he differentiated between disposable and indispensable elements of Stalinism, and tried to do away with only the disposable part of Stalinism, i.e., the personality cult of Stalin and totalitarian rule, but wanted to continue the indispensable part of Stalin's model: domination by the Communist Party over the state and continuation of central planning as opposed to market processes. By contrast, Elliott (1989) rightly points out that perestroika denounces all of Stalinism, both totalitarian rule and the command model of economy maintained by post-Stalinism. -------------------— — ■ ---------------------- : is'9~ The Kosygin Reforms (1965) The third wave of reforms, or in the words of Aganbegyan (1988, 57), 'a new turning point in the economic policy' of the Soviet Union, came in 1965, almost immediately after the removal of Khrushchev. Khrushchev was replaced by a collective leadership in the Communist Party, headed by Leonid Ilich Brezhnev as General Secretary of the Party and Alexi N. Kosygin as the Chairman of the Council of Ministers. Declining overall growth rates of the economy, and an especially stagnating situation in the field of agriculture, were the main concerns for the new leadership. However, Khrushchevian reforms, such as weakening central control over the economy, a decline in the power of bureaucracy and scattering of planning activities among regional authorities, etc. were visualized by the new leadership as 'real or imagined' (Hewett, 1988, 230) chaos. Therefore, in less than a year after Khrushchev was unseated, writes Katz (1972, 74), Kosygin put forth a comprehensive and far-reaching proposal for reform of the economy. One of the first tasks the new leadership undertook was to reverse some of Khrushchev's institutional changes. While Khrushchev attempted to decentralize authorities, the new leadership made a concerted effort to recentralize power. They undertook measures to dismantle regional planning authorities and vested those responsibilities in — ------------ — — 190 newly constituted industrial ministries. Prior to that, in November 1964, the new leadership got rid of Khrushchev's bifurcation of the Communist Party, reunited the local party organizations, and recreated single party committees. By October 1965, they eliminated Khrushchev's sovnarkhozy reform, reestablished the central ministries, and set the stage for further economic reforms as follows. Reforms in Enterprise Management Kosygin announced his plans for economic reforms in 1965 while addressing the plenary session of the . Central Committee of the Communist Party. Other than the structural changes aimed at recentralizing authority, as mentioned above, Kosygin's reforms focused primarily on changes in planning and management at the enterprise level. Kosygin intended to increase power and responsibility of the enterprise management by curbing the power of the supervisory authorities and redesigning the incentive structure. Enterprise managers were granted more latitude in deciding how to utilize resources, and the number of success indicators were reduced. Under the Kosygin reforms, the only indicator that was handed down to the enterprises was the total wage fund. Kosygin, as Katz (1972, 136) maintains, also made it clear that it, too, would be discontinued once the supply of consumers goods was adequately increased. The enterprise manager was also 191 granted the right to determine the type of pay, i.e., whether time rates or piece rates are to be used. On the output side of the enterprises's operations, Kosygin brought about a major reform. Mainly, two success indicators came to the forefront: profitability (defined as the ratio of profits to fixed and working capital) and sales. While the sales indicator was expected to prevent profitability from rising at the expense of the quality of products, the profitability indicator was assumed to prevent production at any costs. These success indicators, in turn, governed the rate of deductions from enterprise profits into three funds: a material incentive fund meant for the payment of bonuses; a development fund, which the enterprise invested at its own will; and a social-cultural fund for housing and welfare of workers. The distribution was done as follows; after meeting the first claims on enterprise profits, payment of the capital charge, differential rent, and interest on bank credits, deductions from the remaining profit into the three funds was made in accordance with the norms (ibid., 139). Hewett (1988, 231) points out that while previously 35 to 40 obligatory targets were handed down from above to the individual enterprises, Kosygin lowered the targets to only 8. According to Hewett the new targets were: output of principal products (in physical units), sales volume, total profits, and the rate of profit on capital, total wage 192 fund, the level of payments into the state budget, capital investments from centrally provided funds, specific tasks linked to introduction of new technology, and allocation for the most important material supplies. Moreover, Kosygin's reforms also made a minor breakthrough in introducing cost accountability in the state enterprises by levying about a 6 percent charge on the undepreciated value of assets. By making enterprise bonuses subject to achievement of target profits, state enterprises were enticed to undertake more ambitious production plans. The use of sales and profits as success indicators, along with the emphasis on reduction or elimination of subsidies, forced the enterprises to be more responsible in terms of financial accountability. The 1965 reforms also called for amalgamation of enterprises into large associations. Besides promoting research and development, amalgamation of enterprises was expected to promote khozraschet (financial accountability) in the whole industrial sector. Reforms in Agriculture and Prices Although the primary emphasis of Kosygin's reforms was on enterprise management, he also tried to reform the agricultural sector. Following Malenkov and Khrushchev, he also raised purchasing prices for agricultural products, lowered tax obligations of the farmers, and initiated measures to broaden the development of farming on family 193 plots. Kosygin also sought to introduce a new form of agricultural planning in order to reduce detailed administrative interference on collective and state farms. He fixed purchase prices for planned agricultural output for five years, and for many products the prices remained unchanged throughout the whole of this period. Moreover, agricultural products deliver 3d in excess of the plan target were sold for one and a half times the ordinary price. Kosygin's reforms also extended to sweeping reforms in prices. He centralized the price setting functions in Goskomtsen, and revised most of the industrial prices. The formation of Goskomtsen, 'centralized the hitherto fragmented control of prices among many bodies throughout the system* (ibid, 233). Goskomtsen emphasized profitability of the enterprises by emphasiziag full accounting for costs and attempted to link the price system to the goals of the reforms. However, Kosygin's price reforms ignored the possibility of contradiction between central plan directives and smooth functioning of prices. Performance of the Economy Kosygin's reforms received favorable evaluation from most of students of Soviet society. As Aganbegyan (1988, 58) remarks, as a result of the agricultural reforms of Kosygin, the rate of growth in agricultural production almost doubled. In the period form 1966 to 1970, the volume of agricultural output increased at a rate of 21% above that of the previous five-year period. Such accelerated growth of agricultural production, in turn, allowed a substantial increase in the rate of production in light industries based on agricultural raw materials. As a result, production of consumer goods grew faster in 1966- 70 the production in the heavy industry sector. All these significantly affected the growth of national income. As table 20 shows, during the eighth plan (1966-70) period, the rate of overall Soviet GNP growth increased to 5.5 percent while during the last plan period the growth was 5.0 percent. In the agricultural sector, the growth rate was 4.2 percent, while it was 2.4 during the preceding period. During the same period consumption rose to 5.1 percent, while it was 4.0 during the previous plan period (1961-65). But obviously, the growth in the industrial sector declined from 6.6 percent of 1961-65 period to 6.2 percent during the plan period in question. Overall, as Table 21 shows, in terms of national income, labor productivity and real per capita income, the performance of Soviet economy during this period was somewhat better than the immediate past. Kosygin's Reforms and Lessons for Perestroika In Gorbachev's (1988, 419) words, most of the reforms 195 envisaged by Kosygin, 'remained on paper, was left suspended in mid-air1. Few deny this allegation. Some, however, supplement it by claiming that the organization of Kosygin's economic reform efforts were not even fully thought out. Although the Kosygin's reforms were initiated in 1965, most of the reforms were not operational until the late 1960s. Moreover, Kosygin's reform efforts in fact became, in Hewett's (1988, 237) words, 'an impressive, ultimately successful, effort by the system as a whole to reject reforms'. Aganbegyan (1988, 61-62) nicely explains how the bureaucracy that was created to promote the reforms actually caused the failure of the reforms: After the acceptance of the main reform proposals by the Central Committee and the Council of Ministers, the matter of its execution, the interpretation of the relevant clauses and the issuing of instructions were transferred to an Interinstitutional Commission, set up by the Central Planning Council. This council approved the Commission and included in its members representatives from the Ministry of Finance, from the State Supplies Board, from the Price Committee, Labor Committee and other institutions. This commission could then decide issues only through compromise, since each commission member had to receive approval for his moves from his own institutional chief. These compromises always leaned towards administrative methods of management since all the institutions attempted to strengthen their influence over the enterprises, while there was nobody on the Commission to represent the interests of the enterprises. As a result the Commission which was set up to promote reform actually caused it to fail. Other spheres of the society were equally circumscribed by bureaucratization. According to Aganbegyan, the whole 196 reform movement was carried out without incorporating the activities of the ministries of planning and the financial authorities. Administrative methods remained predominant, even intensified, among the central economic institutions and branch ministries. With the progress of reforms, bureaucracy proliferated, new sections and departments, and institutions expanded the size of bureaucracy. No genuine effort was made to accelerate scientific and technological progress, and to increase efficiency or restructure the capital investment programs. Above all, Kosygin's reforms were not reinforced by corresponding measures in social life: No effort was made to democratize industrial management or to open up society. As Aganbegyan remarks, 'working people and farmers had no role in working out the plans of their enterprises, or the ways that funds for incentives were to be used1. Therefore, Kosygin's reforms remained, as Aganbegyan (1989, 63) remarks, 'a foreign body in the existing system of economic and social relations’ and was 'ultimately suppressed by the environment and assimilated by prevailing attitudes1. Still, Gorbachev (1988, 419) maintains that in the first few years Kosygin’s reforms 'changed the situation in the country for better'. The economic and scientific potential of the Soviet Union was increasing, the defense capacity was being strengthened, and standard of living of the people was improving. But untimely suspension of Kosygin's reforms, 197 Gorbachev regrets, 'substantially retarded1 the growth of Soviet economy. Let us turn now to Western writers. Writing in 1967, two years after Kosygin's speech, in which he proposed the reforms, Campbell (1968, 550) argued that Kosygin's reforms constituted 'neither a coherent system, nor a sufficient departure from the norms and behavior of the command economy to really solve the ills that prompted the reforms'. Nove (1972, 23) maintains that price revisions carried out under Kosygin's reform failed to 'provide the scarcity signals, or the cash flow to enterprises, required to achieve the intended autonomy of industrial enterprises'. Instead, he complains, the 'comfortable practice of centrally allocating goods in chronic excess demand had been maintained and even strengthened'. Hewett (1988, 240-44) identifies three specific causes for the failure of 1965 reforms. All of them boil down to the simple fact that the leadership sought to control more variables than was feasible. First, he finds that the Kosygin reform program gave the ministries contradictory responsibilities. It entrusted the enterprises with greater autonomy and restricted ministries' control to 8 indicators, and at the same time held the ministries responsible for gross output. Second, Hewett maintains that expected enterprise performance was clearly unrealistic. Under the provisions of Kosygin's reforms, ■ r g -8 - bonus payments were determined out of profits, but the formula was so faulty that if an enterprise economizes on labor and lowers wages, that will automatically reduce available bonuses. Third, Hewett maintains that with the price system remaining crippled, the planning system is left to coordinate the economy. Because the ministries did not have the authority to interfere in the activities of the enterprises, the planning system failed to coordinate nation's economic activities adequately. Prescription for limited indicators, therefore, did not work, and subsequently the number of indicators were substantially increased. Brezhnev's Reforms (1964-82) In sharp contrast to the turbulent period of Khrushchev, Brezhnev's two decades of rule over the Soviet Union brought fewer institutional changes, and demonstrated more commitment to proceduralism, institutional continuity and gradual transformation of the society. Brezhnev's conservative strategy emphasized, as Leung (1985, 235) remarks, 'primacy of planning and centralism, the preservation and reinforcement of traditional administrative control through the party-ministerial apparatuses, and an accent on tightening planning and management discipline'. Brezhnev, therefore, actually 199 retreated from the Kosygin's reforms for economic decentralization. To Brezhnev, Leung believes, 'economic reform did not qualify as an issue area’. Therefore, it is not at all surprising that the Brezhnev era did not constitute a significant chapter in the effort for economic reforms, and indeed ended up with the worst economic stagnation in the Soviet history. Apart from restoration of the central ministries and elimination of bifurcation in the Communist Party, the most important reforms of the Brezhnev era included production associations at the enterprise level, and the formation of agroindustrial complexes. Besides, sporadic efforts were made to make existing institutions, work better. While Khrushchev’s plans were often described as 'boastful1, 'hair-brained1 and 'wishful thinking’, the ruling clique during the Brezhnev era stressed 'realism' in planned growth targets of the economy. In the seventh plan Khrushchev projected annual growth rates in national income above seven percent, while the 8th (1966-70) and the 9th (1971-75) plans of Brezhnev's period projected growth rates below seven percent. The 10th Plan (1976-80) projected growth rates of the economy even below five percent. Other measures undertaken during Brezhnev's period can be identified as follows: 200 The 1973 Reform In March 1973 Brezhnev came up with two important decrees that sought to reorganize the central administrative apparatus by streamlining the decision making hierarchy in the ministries, and by promoting mergers of enterprises into production associations. Measures were taken to merge industrial enterprises under one decision making authority apparently with the objective to promote administrative efficiency and to redirect resources from the least productive enterprises to the most productive ones. Moreover, Brezhnev replaced Glavki, a division that supervised all enterprises involved in closely related product within each ministry, with All- Union industrial associations (VPOs), whose authority generally covered similar enterprises throughout the country. Newly created VPOs, which also included research and design organizations and technical institutes, had to work on a khozrashet basis. The merger movement, according to Hewett (1988, 245), gathered momentum in the mid 1970s. While in 1970 ! the all-Union production associations (VPOs) accounted for 6.7 percent of total industrial output, by 1975 the share was increased to almost a quarter (24.4 percent) of total industrial output of the economy. Those figures, Hewett maintains, continued to climb in the second half of the 1970s. By the early 1980s, VPOs represented almost one- 201 half of total industrial outputs. The non-member enterprises contributed the other half of the industrial output and in most cases, were directly supervised by VPOs. The VPOs, however, lacked the authority and incentive for effective management of the enterprises, and ironically, ended up with exercising administrative control over the enterprises as glavki did before. According to Goldman (1987, 57), VPOs turned out to be 'nothing more than a disguised version of the old, pre-reform administrative units1, and in most cases, 'the change involved nothing more than calling in a painter to put a new title on the old door1. Hewett (1988, 249) finds it simply 'naive to give to ministries the duty of designing and implementing a reform that would reduce their powers'. Moreover, Hewett maintains that merger attempts actually represented the tendency of the Soviet leaders to look to supply-side solutions, instead of the demand side consequences of their problems. Hewett also points out that merger initiated by 1973 decrees, was actually a vain, faulty and bureaucratic attempt to imitate financially successful mergers in the United States. The 1979 Reforms In 1979, Brezhnev's relatively stereotyped administration initiated another reform apparently with the objective to bolster efficiency and effectiveness in state 202 enterprises. Although many of the proposed reforms were not implemented, and the initiative clearly lacked commitment and support from the central administration, for heuristic purposes we briefly describe them in the following paragraphs. Brezhnev's 1979 reforms, which Bornstein (1985) described as the Program to Improve the Economic Mechanism (PIEM), came in response to the dismal performance of Soviet economy. Apparently, Brezhnev’s administration was also disturbed by the slowdown of the economy, low level of labor productivity, and shortages of productive inputs resulting from extensive methods of production; and made attempts to correct the situation by improving the economic mechanism of the country, i.e., by introducing PIEM. PIEM emphasized planning and supply elements, and performance indicators of the enterprises. The enterprises were induced to utilize their full productive potential by efficient use of their raw materials, manpower and other productive resources. PIEM also called for improvement in product quality and timely delivery of the products. PIEM1s call for improving planning, as Bornstein (1985, 2- 8) explains, mainly emphasized: collection of more accurate information on factor inputs; application of a larger number of more precise input-output norms; closer approximation to 'optimal tautness' in the planning of supply, production, and investment; better coordination of 203 plans across time and space; and a greater role for enterprise contracts. In addition, every enterprise was asked to prepare every year a passport providing detailed information on almost every aspect of its life, ranging from production capacity to financial flows. PIEM, as mentioned above, also sought to revise performance indicators of the enterprises. The new measures, according to Bornstein (ibid., 8-14), envisaged efficient use of human resources, fuel and other inputs and designated labor productivity (calculated as net, rather than gross output per worker) as a key indicator. Use of technology for improving product quality or producing new products was recognized as an important performance indicator. In addition, fulfillment of contract delivery obligations (covering volume, assortment, quality and timeliness) constituted another important performance indicator for enterprises. Besides these, other indicators, such as total cost, profit, and gross or marketable output, remained significant. Normative net output (NNO) and quality indicators are widely considered to be the most important changes envisaged by Brezhnev's 1979 reforms. (The normative net output (NNO) of an enterprise is calculated as the product of the quantity of output and the net output normative per unit of each item.) Replacement of traditional gross or marketable output, by NNO as an indicator of enterprise 204 performance, was apparently aimed at encouraging enterprises to switch to intensive methods from the extensive method of production. Since greater extensive method involves greater use of factor inputs, it contributes to gross and marketable output, but not to net output. Hence, NNO presumably would discourage the enterprise from using greater inputs of material, fuels and energy. But NNO had its demerits. As Bornstein maintains, NNO is calculated in net output normatives (NONs) constructed from planned branch average costs (per unit of output) of labor and social insurance plus a profit related to total costs minus direct material expenses. Labor costs were deficient, because NNO began in 1982, but NONs were based on 1980 labor costs. Moreover, according to Bornstein, enterprise and ministries often overstated their labor costs, in an effort to get higher NONs and industrial wholesale prices. Goldman (1987, 57) also maintains that in the absence of meaningful prices, NNO hardly stimulated product innovation in the enterprises, as managers 'had little reason to risk the production of new or improved goods 1. Reforms in the Incentives Systems PIEM attempted to strengthen incentives for achievement of plan assignments primarily by altering arrangements for 205 enterprise material incentive funds and by promoting the use of the brigade as a form of work organization. PIEM's biggest change was the designation of the increase in labor productivity and the share of highest-quality output in total output as the "main fund-forming indicators" in many industries. By making the size of the enterprise's material incentive fund for personal bonuses tied to top- quality-grade output, a linkage was established between growth of labor productivity and growth of output. Besides, promotion of the brigade as a form of work organization was expected to provide incentives to production workers. Bornstein points out that by the beginning of 1983, the percentage share of workers organized in brigades reached 75.1 in construction and 59 percent in the field of industry. PIEM also envisaged efficiency in investment and promotion of self-financing and financial responsibility among the ministries and enterprises. Agricultural Reforms under Brezhnev Agricultural policy changes during Brezhnev era were particularly significant. Brezhnev's preoccupation with agriculture is reflected in the fact that of the eight Central Committee plenary sessions devoted to specific economic issues since 1965, six were concerned with agriculture. Brezhnev initiated a number of capital 206 intensive strategies for revitalization of the agricultural field. Consequently, investment in the agricultural sector steadily increased. From 1961-65, on average some 19 percent of total investment of the entire economy was devoted to agriculture. This figure rose to 27 percent for the five years between 1976 and 1980, and could be even over 33 percent if investment in related industrial fields were also taken into consideration (Johnson, 1983, 196). This huge influx of capital very naturally allowed Brezhnev to pursue massive programs aimed at upgrading agricultural production and mending previously neglected infrastructures. No wonder ambitious programs were undertaken to increase the supply of fertilizers, tractors, electricity, water etc. to the rural areas. In addition, Brezhnev's administration also promoted individual household plots, extended regular monthly payments and provided better pension benefits to the kolkhozniki. Also efforts were made to reduce urban-rural income gaps. But like other reform attempts, Brezhnev's agricultural program involved only policy changes, no substantive structural modification was initiated. No attempt was made to drastically revamp overcentralized and truncated agricultural administration, or do away with the huge food subsidies. The Brezhnev regime also failed to stamp out the serious 'rural exodus', the drain of badly needed 207 youth and talents from the rural areas to the urban centers. Performance of the Economy From the above discussion, one could surmise how timid Brezhnev's reform efforts were, and how modestly those were implemented. The decrees of 1973 and 1979 were not even adequately backed by governmental administrative and political support. Why, then, were those efforts made? According to Hewett (1988, 255), these attempts indicated 'the leaders continued concern about the performance of the system and their inability to conceive of new approaches to dealing with the system'. In the agricultural sector, for example, Brezhnev hardly attempted to resolve structural defects in planning and management. As a result, capital intensive agricultural programs started to show signs of diminishing returns by the mid-1970s. Compounded by unfavorable weather conditions, the average annual growth of gross agricultural output plummeted from a respectable 3.9 percent for 1964-70 to only 1.2 percent in the 1970s and to an even lower rate after the mid-1970s. In other sectors, for that matter for the whole economy, the consequences of Brezhnev's conservatism, bureaucratic management and commitment to proceduralism, was simply disastrous. The most visible manifestation of this disaster was the economic stagnation, the catastrophic 208 I decline in actual aconomic growth of the Soviet Union in i the late seventies and early eighties. The economic growth ■ declined to an annual rate of perhaps one percent by 1979 and 1980. Economic performance of the Brezhnev era can be seen in taole 22. Compared to the eighth plan, during the ninth plan, industrial and agricultural output sharply declined; national income fell alarmingly and efficiency reduced to one-third of the previous plan level; all these called for serious and immediate action for the whole economy. ! Andropov (1982-83) and Chernenko (1983-85) i I i » I Brezhnev's death, according to Goldman (1987, 69), was overdue by four years. Under Brezhnev's eighteen years of conservative leadership the Soviet economy reached a near crisis situation. Although Brezhnev channeled almost one- fifth of the nation's total investment to agriculture, in 1979 Soviet Union experienced the largest drop in its grain harvest in its entire history. Consequently, in the early eighties formal food rationing was introduced in several i major cities. In the industrial sector the situation was I equally puzzling. Industrial production declined terribly, • moreover, shortage of human resources, fuel and other industrial inputs reached chronic levels. Drunkenness, alcoholism, absenteeism, corruption etc. had very decisive 209 effect on worker's morale and productivity. Because of Brezhnev's two-decade long 'live-and let-live' policy, by ; the late 1970s' 'corruption seemed to have gotten out of i hand, and no one seemed to care' ;ibid., 67). To the Soviet people, an end to Brezhnev's regime of perpetuated corruption, stagnant economy and sterile leadership, indeed came as a relief. Brezhnev's death, as Hewett (1988, 257) observes, 'created a long-awaited opportunity for the Soviet elite to rethink their approach to the economy, and to introduce new reforms in an effort... to get the country moving again.' During the two and a half years period between the death I ! of Brezhnev in November 1982, and the appointment of Gorbachev as General Secretary of Soviet Communist Party in March 1985, the Soviet Union had two leaders: Yuri Vladimirovich Andropov (November 12, 1982-June 16, 1983), and Konstantin Ustinovich Cherenenko (February 13, 1984 - March 10, 1985). Both Andropov and Cherenenko were old when they assumed power, and their short tenures were not p , marked by any profound changes in the Soviet economy and society. Andropov’s rule lasted only for 15 months, and his successor Cherenenko was in power for a year only. We shall discuss Andropov's regime first, and then the short period of Chrenenko will be taken up. After Brezhnev's death, former KG3 chief Andropov's assumption of power was welcomed with great expectations. 210 His crackdown on corruption among party and government officials and vigorous attack on indiscipline and alcoholism in the factories, aroused tremendous hope among the members of the population. Immediately after assuming power, he also turned to the nation's economic problems, in fact, his first public speech as General Secretary of the Communist Party was devoted mostly to the country's economic problems. Andropov, from the very outset of his regime, admitted the troubles of the economy and expressed 'openness to innovative solutions and his desire for public debate' (ibid., 258). Hewett maintains that Andropov in fact appointed a high level committee under the chairmanship of Gosplan's chief Nikolai Baibakov to study the nation's economic problems, to study the experience of other socialist countries and to recommend necessary reforms for the Soviet economy. The 1983 Reforms The result was a 1983 decree which was basically concerned with a management and incentive system for state enterprises. The reforms called for a new experiment on enterprises with a new set of plan indicators and incentives. The new experiment that Andropov emphasized, however, did not constitute a radical departure from the past, but was 'more a reaffirmation of the need to address the implementation of past approaches more vigorously1 211 (ibid., 261). Under the reforms the sales indicators introduced by 1965 reforms were tightened up to scop production and selling of goods that customers did not want, and a rather strict rule was made to count only those sales that actually fulfilled contracts. Moreover, to encourage production of wanted goods, Andropov's reforms promised to increase Material Incentive Funds (MIF) by 15 percent upon fulfillment of contracted sales. Similarly, provision was made for reduction of 3 percent in MIF for every 1 percent shortfall in contracted sales. Also bonuses were eliminated for enterprise managers unless i contracted sales were up to 100 percent. The experiments of Andropov also linked the workers' reward system with increased efficiency and labor productivity. Under the provisions of the 1983 decree, Social-Cultural Measures and Housing Construction Fund (SCHF) was tied directly to the growth of labor productivity. These two provisions signaled to workers that improved housing and bonus income would come directly 1 from productivity increases and other cost decreases. To prevent vested attempts of the enterprises to fulfill i contracts by cutting output, the growth rate of enterprise output and the enterprise wage fund were locked together. , A direct link between bonuses and enterprise performance I was established to leave enterprises with no viable alternatives except to increase efficiency and satisfy 212 customers. In addition, ministries were authorized to set obligatory targets for introduction of new technology in the enterprises. Andropov run out of time before all his experiments could be implemented. His experiments were basically stopgap measures and represented a serious effort to put into action many reforms that received inadequate attention from the previous leaderships. Cherenenko was head of a caretaker government, that basically took care of transition of the government to the new leadership. During his one year rule, he hardly initiated any measure that could jeopardize the debate that was emerging to put the economy in order. In his speeches, he stressed sustained political support for economic debate, and emphasized consumer welfare issues, particularly the shortage of housing. He was also very critical of the inefficiencies in administration, economic management and worker's morale and discipline in industries. 213 Appendix: Chapter III Table 1 : S o v i e t I n d u s t r i a l P rodu ction in 1920 (1913 = 1 0 0 ) Petroleum 42-7 Electric bulbs IO -I Tobacco 4 2-s Sugar 67 Leather 38 Electrical engineering Linen yam 38 machinery and power Salt 30 current apparatus 5-4 Wool yam 2 7 Cotton yam goods 5-i Coal 27 Railway carriage Paper and pulp 2S construction 4 2 Hemp spun yam 23 Vegetable oils 3 0 Locomotive Cement 3 0 construction ;4-8 Pig iron 2-4 Matches 14 Bricks 21 Ploughs 13-3 Iron ore i-7 Accumulators I2-£ Copper 0 0 * S o u r c e : C l i f f . T ony ( 1 9 7 8 ) , p. 8 6 T a b le 2 : Worker's P r o d u c t i v i t y in S o v i e t Union, 1913-1920 (in s t a b l e r u b le s ) 1913 too 1917 8S TOO 1918 44 52 1919 22 25 1920 26 30*8 Source: Cliff, Tony (1978), p. 85 214 Table 3: Soviet Employment Pattern in 1925 S ta te in d u stry 30,644 C o o p e ra tiv e s 137,162 P riv a te craftsm en * 2,285,161 P riv a te em p lo y m en tf 270,823 T o ta l, sm all-scale 2,713,790 * N o t em p lo y in g la b o u r outside fam ily, t E m p lo y in g la b o u r, o r em ployed. Source: Nove (1969), p. 104 Trends ^ “ “ -j^lejn^handicraft. Industry in !92S~ 4 ”24-5 W25-6 , 9 i6 - 7 S ta te (Percentage o f to ta l o u tp u t) Cooperative 2 2 2 6 2 5 51 Privat* 8®i 204 198 jo, ------------------------------------------- _ 89 7 77 0 77 7 77 ; Source: Nove, Alec (1969), p.104 ^ble 5: RoU of cooperatives i„ Soviet Retan Trade (1923-1927) 1922-3 ,926-7 (millions of roubles) r ‘a ' e 512 1817 368 , 2680 5063 3560 J37I8 Source: Nove, Alec (1969), p. 105 215 Table 6: Stages of Soviet Collectivization, 1927-1937 Number of Kolkhoxy Collectivize*) F a n u a* % of Total Percentage of v Total Cultivated Area Occupied by Kolkhoxy 1927 (July) 14.800 0.8 — 1928 (July) ' 33,300 1.7 2.3 1929 (July) 57.000 3.9 4.9 1930 (May) 85,950 23.6 33.6 1931 (July) — 52.7 67.8 1932 (July) 211,100 61.5 77.7 1937 240.000 93.0 — Source: Elliott, John (1985), p. 367 Table 7; The Socialized Sector as a Proportion of the Soviet Economy (%), 1924-1928 1924 1928 1937 Of the national income 3 5 0 44 0 99 1 Of the gross industrial product 76.3 82 4 99.8 Of the grots agricultural product 1.6 3.3 98 5 Of retail trade turnover 4 ' 3 " ’6 4 100 0 Source: Elliott, John (1985), p. 368 Table 8: Slaughtering of Livestock (1928-1931) Due to Collectivization L I\ ESTOCK (m illions o f head) (I January) 1928 1931 1934 C a ttle 60.1 42.5 33.5 H o g s 22.0 11.7 11.5 \ S h e e p and G o ats 107.0 08.1 36.5 H o rses 33.1 - 15.4 Source; Adams , Arthur (1972), p.60 216 Table 9: Outcome of the Soviet Industrialization Drive of 1928-37 1928 1937 A. CHANCES IN MANUFACTURING 1. Heavy manufacturing -r overall manufacturing Net product share <1928 prices) Labor force share 2. Light m anufacturing -f- overall m anufacturing Net product share (1928 prices) Labor force share a. CHANCES IN MAJOR ECONOMIC SECTORS. STRUCTURE OF OUTPUT 1. Share in net national product (1937 prices) Agriculture Industry Services 2. Share in labor force Agriculture Industry Services C. RATLS OF GROWTH ( 19 2 8 - 3 7 ) AND CAPITAL STOCK 1. G N P (I93~ prices) 2. Labor force Nonagricultural Agricultural ' 3. Industrial production (1937 prices) 4. Agricultural production <1938 prices) Livestock 5. Gross industrial capital stock (193* prices, billion rubies) D CHANGES IN TH E STRUCT!. R! Ot C N P BY END USE ( 1 9 3 7 PRICES) 1. Household consumption -f G N P Annual growth rate (1928-37) 2. Communal services — G N P Annual growth rate (1928-37) 3. Government administration and defense -r G N P Annual growth rate (1928-37) 4. Gross capital investment — G N P Annual growth rate (1928-37) E. FOREIGN TRADE PROPORTIONS I. Ex pons + imports -r G N P F. PRICES 1. Consumer goods prices (state an^ cooperative stores, 1928 — 100) 2. Average realized prices of farm products (1928 - 100) C . URBANIZATION 1. Rural population (mill.) Percent of total 2. Urban population (mill.) Percent of total 31 28 68 71 49 28 23 71 18 12 34 8 80 5 3 13 6% 100 100 147.0 (t926) 82% 26.3 (1926) 18% 63 43 (1933) 36 56 (1933) 31 45 24 SI (1940) 29 (1940) 20 (1940) 4 8% 8 7% -2.5% 11.3% 1. 1% - 1. 2% 119 53 08% II 15.'% I I 15 6% 26 14 4% 1% 700 539 114 4 (1939) 67% 56.1 (1939) 33% Source: Elliott (1985), p.369 217 Table 1 Table : Soviet Industrial Production During Malenkov's Interregnum (1952-55) 1952 1955 1955 (actual) (Malenkov) (actual) C o tto n tex tiles (m illio n m etres) 5044 6,267 5,905 W o o l tex tiles (m illio n metres) 190 5 271 252-3 S ilk tex tiles (m illio n m e tre s ) 224-6 573 525-8 L in e n tex tiles (m illio n m e tre s) 256 5 406 305-5 K n itte d u n d e rw e a r (m illio n u n its) 234 9 382 346-5 K n itte d o u te rw e a r (m illio n u n its) 63-5 88 85-1 H o s ie ry (m illio n p a irs) 584-9 777 772-2 L e a th e r fo o tw e a r (m illio n p a irs) 237-7 318 2 74 3 S e w in g m a c h in e s ( th o u s a n d u n its) 804-5 2,615 1,610-9 B icy cles (th o u s a n d u n its ) 1,650-4 3 ,4 4 5 2.8S3-8 M o to rc y c le s (th o u s a n d u n its) 104-4 225 244-5 W a tc h e s & c lo c k s ( th o u s a n d u n its) 10,486 22,000 19,705 R a d io s a n d T V s ( th o u s a n d u n its) 1,331-9 4 ,5 2 7 4 ,0 2 4 6 D o m e stic re frig e ra to rs (th o u s a n d u n its) - 330 1514 F u r n itu r e (m illio n ro u b le s) 2,883* 6,958* 4,911* * 1952 a n d 1955 (a c tu a l) a re in 1 Ju ly 1955 e n te rp ris e w h o lesale p rices. T h e 1955 p la n n e d fig u re w as p re su m a b ly in p rc-1 9 5 5 p rices. Source: Nove (1965), p. 325 11: House Building in the Soviet Union (1953-1960) Y e a r H o u s in g B u ilt Y e a r H o u s in g B u ilt 1953 30.S 1957 52.0 1954 32.6 195S 71.2 1955 33.4 1959 80.7 1956 41.0 . 1960 82.8 Source: Schwartz (1965), p.82 Table 1 2: Urban Housing in Soviet Union by P r i v a t e and Public Sectors (1955-59) (m illion square m etres to ta l space, new construction) S ta le a n d cooperative Private 1955 2 5 0 8 4 1956 29 5 11 5 1957 38 5 13 5 1953 46 7 24 5 1959 53 5 2 7 2 Source:'Nove (1969), p.347 Table J31 SO V IE T GRAIN’ O U T PU T , 19JS-1962. A N D 196J GOAL T o ta l Grain Basic Virgin R est of Year H trvest Lands Areas* C ou ntry (millions of metric tons) 1958 141.2 58.4 82.8 , 1959 125.9 55.3 70.6 1960 134.4 59.2 75.2 1961 138.0 51.3 86.7 1962 \ 148.2 56.4 91.8 1965 goal 164-180 t A I * Kazakhstan, Siberia, the U rals and part of the V oIcj re"ion. + N ot available, ' s Source: Schwartz (1965), p. 219 Table 1l4: Trends in State Farms and Collective Farms 1* 4: Trends in State Farms and Coll ective (1953-65) State farms* 1953 1956 1965 T o ta l a r e a s o w n (m illio n h a .) 18 2 35 -3 " 97-43 T o ta l l a b o u r e m p lo y e d (m illio n s ) 2-6 2-9 8 6 L o ss to c o lle c tiv e fa rm s (m illio n h a .) (1 9 5 6 -6 5 ) - - (47 l ) f L o ss t o c o lle c tiv e fa rm s ( m illio n h o u s e h o ld s ) (1 9 5 6 -6 5 ) - - (4 5 ) f * I n c lu d in g o th e r f o r m s o f s ta te e n te rp ris e . t T h e s e fig u re s g iv e th e d e c lin e in th e p e r io d , re g a rd le s s o f c a u se . Source: Nove (1969), p.336 Table 15: Soviet Grain Production, 1953-1958 T o ta l G rain Basic V irgin R est o f Y ear ' H a rv e st L ands A re a s' C ou n try {m illions o f m e tric to n s) 55.6 48.3 79.1 64.3 66.9 82.S 1953 82.5 26.9 1954 85.6 s 37.3 1955 106.8 27.7 1956 127.6 63.3 1957 105.0 3S.1 1958 141.2 58.4 • In clu d es K a za k h sta n , th e U rals, S ib eria, a n d p a r t o f th e V nl<r, reg io n . Source: Schwartz (1965), p.107 Table 16: Performance Indicators for the Fifth Plan of the USSR and | Targets for 1960. 1950 195S 1955 I960 punt actual plan N ational income (1950 = 100) 100 160 171 160| G ross industrial production 100 170 185 165 f Producers’ goods 100 ISO 191 170f C onsum ers’ goods 100 165 176 !60f C oal (million tons) 261 1 373-4 3S9-9 592 Oil (million tons) 37-9 7 0 9 7(f-8 135 Electricity (m illiard Kwhs) 91 2 164 2 170-2 320 Pig iron (m illion tons) 19 2 33 8 33-3 53 Steel (million tons) 27-3 44 2 45-3 68 3 T ractors (15 h.p. units) 246 1 292 9 31 4 0 - M ineral fertilizer (million tons) 5 5 10 3 9 7 20 Cement (m illion tons) 102 2 2 4 22-5 55 Com m ercial tim ber (million cubic metres) 161 0 251 2 212 I 301 C otton fabrics (million metres) 3S99 6277 5905 - W ool fabrics (million metres) 155 2 2390 252-3 - Leather footw ear (million pairs) 203 315 271 - Sugar (thousand tons) 2523 4491 3419 - Fish (thousand tons) 1755 2773 2737 - T o ta l workers and employees 1 (millions) 4 0 4 46 5 50 3 - (Housing (m illion square m etres) 7£-4* 105* 112 9* 205* •Retail trade turn-over (Index) 100 170 1S9 150f • In the five years ending in 1950, 1955 and 1960 respectively, t 1955 = 100. Source: Move (1969), p. 340. Table Table 18: 17: Average Income of Soviet Industrial Workers (1950-1961, annual) Year Earnings ( r u b le s ) Year Earnings ( r u b le s ) 1950 925 1957 1100 1953 971 1958 1130 1954 1010 1959 1160 1955 1020 1960 1190 1956 s 1040 1961 1240 Source: Schwartz (1965), p. 101 Indexes of Farm Prices Paid by The Soviet Government, 1954-1958 Product 1954 (1 9 5 2 = 100) 1956 1958 All farm products 207 251 296 All crops 171 207 203 W heat 752 647 621 Rye 730 62 5 1047 Com 564 572 8 1 9 Rice 243 887 957 Cotton 102 114 106 Flax fiber 166 213 2 3 9 Sugar beets 111 229 2 1 9 Sunfiower 626 928 774 Potatoes 369 814 789 All livestock products 307 371 546 Cattle 476 508 1147 Hogs 786 976 1156 Milk and milk products 289 334 404 E gg* 135 155 297 W ool 146 246 352 Source: Schwartz (1965), p. 120 222 Table 19: Annual Soviet Industrial Production Growth Rates, 1954 and 1958-1964 A ll Heavy Consumer Year industry industry goods (annual percentage increases) 1954 13 14 13 1958 10 U « 8 1959 U 12 10 1960 10 11 7 1961 9 10 7 1962 9.5 11 7 1963 8.5 10 5 1964, 1st half 7.5 over 10 2 Source: Schwartz (1965), p. 124 Table 20: The Slowdown in Soviet Economic Growth, 1951-75 A. Soviet G N P by Sector of Origin (Factor Cost), if-o Prices* •9St-5S 1 9 9 6 - 6 0 1 9 6 1 - 6 ; 1 9 6 6 - - ,0 •971-7S Industry ■ 10.) 8.9 6 .6 6 .1 5-9 Gvilian machinery 9 9 11.4 7-9 6.9 8.9 Light industry tt.z 7-o >•4 8.0 2.6 Acricuirure 4-> 4 ' l -4 4-i — 2.0 G N P j.8 5-8 4 9 5 3 3-7 B. Soviet G N P by End Use (Factor Cost), i?~o Prices** '9SI-SS 1 9$6 - 6 0 1 9 6 1 - 6 ; 1 9 6 6 - 1 0 >97»~7S Consumption 5-9 5-4 4.0 5-« 3-8 Fixed investment 12.2 >o-3 7« 6.3 5-4 G N P 6.0 5-8 S-o 5-5 3-8 •Excludes weapons ••Includes weapons Source: Wright (1980), p. 126 223 Table 21 : Soviet Economic Performance Indicator;' 1961-1970 V a ria b les 1961-65 1966-72 i National income produced 6.5 6.9 I Industrial output 8.6 S.! 1 Labor productivity in industry 4.6 5.S ! Real per capital income 3.5 5.5 Source: Hewett (1988), 308 Table 22: Selected Macroeconomic Growth Rates in Soviet Union, 1961 -70 1961-65 1966-70 Item FYP7 Actual FTPS Actual Macroeconomic activity National income produced n.a. 6.5 n.a. 7.8 National income utilized 7.3 6.0 6.9 7.1 GNP (Western estimate) ' n.a. 4.7 n.a. 5.0 Sectoral output Industrial production 8.6 8.8 8.2 8.3 Machinebuilding and metalworking n.a. 12.4 n.a. 11.8 Agricultural production 7.9 2.4 4.6 4.3 Labor productivity In all material production n.a. 5.5 n.a. 6.8 In industry 5.7 4.5 6.0 5.6 In agriculture n.a. 3.3 7.3 6.2 In construction n.a. 5.2 n.a. 4.1 Capital formation Gross total investment n.a. 6 3 8.0 7.5 Gross state investment1 8.8 7.3 n.a. ~ ■ > Real per capita income 4.9 3 9 5 4 5.9 Source: Hewett (1988), P- 239 (IB O O 100) 224 Figure 1: Russian Industrial Growth 1890-1913 700 600 Coal see Iron 400 300 r ic: * c;<> i ~ 900 Source: Roeder (1988), p*. 11 Figure Organization of Central Soviet Economic Management Agencies as of Early 1964 U.S.5JL STATE SAMK Chief Cud Ai t Fleet Administration Chid Central Asia* Mai*, for bhpln State feta Coutr. U.SSJL Central Statistical Administra tion Jute Production Coma, for Irritated Ftrmm| t Meter Resourcei Stitt Ceaailtee (or Centrel Alien Cotton Croarmt USA*. COUNCIL MINISTERS Foreipi Trade,- Here hint Marine; liiuportitiad; ComuaicatioBSi Ajricnltat; Finance State Committees ol tie UXSJL Coacil of Ministers labor end Wa|ei; Foceijn (corrode Tiet; Procurement!; Trade USSR. Cconcil ot tbe Natcj.ii! Cccnonrf State Cana, for the Fish Industri SUPREME KlACIl OF THE NAtlONAl ECONCMT ___ -— US S R. State Frodrction Committees Gas Industry; Medium Mac erne Buildm-t Pontt and Electntcatian U.S.S.R. State Committees All Union Fern Ml Chun Association U 5.S.R. State Corn Itrwlcon tent State Cc.--:-.:::i tor Re series tl Useful Mcnereli CoordiRatmi Scientist Research Mat; Arietta* TecanoiofS; Dt- lense Technotoo; Reoicetec- tronics; Cleclroaicj leconoicn; StrcOtwiltftnt, Atomc Enerp; Af- lairi el Inrentioa and Oistorerj; Standards. Measures and Meaner- in| InstrvnenUc C»occ£j State Committee for Vocational and technical tdcicaiion U S S R. State Ccm. US S R. State fer Construe t<en Afirs Plain. n| Comet lee State Committees USSR. State Procat- trcn Coamrttiei luildmi Materials la- dustry; Ccrcl Construe- tcon and Architecture; Construction, Road and Comnurjl Me- chine !ai!d-n| Transport Construction; Installation and Soecul- iced Constructi:.* Mori; Const/action in tte Central Asian Eco nomic Refcon State Branch Ci~~ :t*»; Keary, Re»tr and truicjn Ma chine Build.r|: Chem>ei: and Petroleum Macon* Bi iJJ'l. Trace and tractor and Farm Ma chine taildmt; Machine B<nldin|; Instrument Matrn(. M em ol Aoto- mition and Control Srs'ems; Electrical teumaeal; Ferren sod Nonfitroat Metallaro; Fail to- dostiT; Che meal and Petrateam Industrj: Intnoer. Pal* and- Ripec and Wood Fcocm-n I* drrstry and fvtllry, lipt Industry; Food Indvstry Source: Schwartz (1965), p. 157 Chapter IV INTELLECTUAL PRECURSORS OF PERESTROIKA Introduction Marxian Socialism Lenin and Leninism Great Industrialization Debate Concluding Remarks 227 Chapter IV INTELLECTUAL PRECURSORS OF PERESTROIKA Introduction This chapter investigates the intellectual roots of perestroika. As previously discussed, Gorbachev's program of perestroika aims at revolutionary transformation of the country's economy 'from an overly centralized command system of management to a democratic system based mainly on economic methods and on an optimal combination of centralism and self-management1 (Gorbachev, 1988, 420). To facilitate the restructuring process, Gorbachev simultaneously initiated two sweeping political reforms? a) glasnost (no 'radical change is possible without it'), and b) democratizatsiya ('there is no present-day socialism, nor can there be, without democracy') (Gorbachev, 1987, 79). To inject into the economy the benefits of scientific and technological revolution that apparently bypassed Soviet society during previous regimes, Gorbachev (1987, 1988) intends to switch from extensive to intensive method of production. Furthermore, Gorbachev (1987, 57) claims that 'a distinctive feature and strength' of perestroika is that it is both a revolution 'from above' and 'from below'. Therefore preponderant features envisaged by Gorbachev's perestroika would presumably include: a) an 'optimal combination' between centralism and self-management, that would imply decentralization in the economic management of 228 the country; b) replacement of administrative methods by economic methods, that would emphasize economic incentives and market forces more than machineries of central planning; c) democratization and openness in the Soviet society, aimed at guaranteeing greater democratic rights for citizens, and 'pluralism' in governmental and political processes; d) greater emphasis on scientific and technological progress of the economy, through intensification of production processes. Gorbachev (1979, 26) claims that Lenin, the founder of the Soviet socialist system, provides him with an 'exhaustible source of dialectical creative thought, theoretical wealth and political sagacity' to guide perestroika. Also" he claims that 'the essence of perestroika lies in the fact that it unites socialism with democracy and revives the Leninist concept of socialist construction both in theory and in practice* (ibid., 35). Gorbachev also claims that 'for every part of the program of perestroika’, 'for the answers to all the questions that arise* he is 'looking within socialism, rather than outside j it* (ibid., 36). Our investigation therefore begins with ] Marx and Engels, as Soviet socialism claims to be the first practical demonstration of the project these scholars envisioned in the nineteenth century. The next section examines Lenin's intellectual contribution to the development of socialism. The following section considers the great industrialization debate of the early twenties. 229 Marxian Socialism Karl Marx (1818-83) was the 'archetypical nineteenth century polymath who could contribute to philosophy in the morning, history in the afternoon, and radical sociology after dinner' (Terrell, 9, 1982). Diametrically opposed opinions about Marx are 'hardly surprising in view of the acute ideological issues involved in both the positive and the polemical sides of his doctrines1 (Dobb, 1973, 141). The appeal and influence of this radical thinker remains 'prodigious', and the effectuation of Marxism in practice has dramatically redesigned the world's political map and j f reshaped the world's economic and cultural destiny. Mazlish (1984, 7) aptly states that Marxism dominates 'the ; ideologies of those in power in proportionately more parts ! of the world than any one of the major historical religions'. While in the twentieth century Marxism's 'bold attempt' (Meyer, 1984, 18) to build a radically new form of society has enticed millions of people around the globe to break the chains of bondage, ironically the same century has also witnessed powerful counter-revolutions of frustration claimed to be instigated by socialism's materialization. Literature on Marx and Marxism is monumental. It is i impossible in the space at our disposal to give a thorough account of Marx and Marxism. Marxism is undoubtedly more intricate than is often realized, but it becomes further 230 complicated when we take into consideration 'the states and policies inspired by or attributed to' (Lovell, 1984, ix) Marx's or Marxian prescriptions. Our focus here is limited to specific aspects of Marxism that are pertinent from the perspective of the programs envisaged by perestroika. Especially we shall investigate the Marxian vision of socialism as a post capitalist society; Marxian prescriptions on market and plan; Marxian concepts of political freedom and democracy. Then, reforms of perestroika will be scrutinized from those perspectives. Marx on Socialism Marx is undoubtedly the central figure in the history of socialist thought, he is, in fact, the 'towering figure which casts a giant shadow over all lesser actors in the socialist drama’ (Berki, 1975, 56). Marx's intellectual system is commonly believed to be a fusion of Hegelian dialectics, English classical political economy and French revolutionary socialism (Lenin, 1938, 70-73; Engels, 1938, 140-189). But Berki claims that Marx's doctrine of socialism can be better understood as a culmination of the following trends of thought and social movements: (1) the French revolutionary egalitarian-communist tradition; (2) the bourgeois rationalism of the Enlightenment which reached its highest point in Saint- Simonism; (3) utopian socialist visions of a radical alternative to bourgeois-capitalist civilization; (4) German idealist thought, especially Hegel's dialectical understanding of historical development; (5) the militant 2 31 atheistic humanism and anti-authoritarianism of the romantically inclined 'Left Hegelian1 thinkers; (6) the bourgeois science of political economy with particular reference to the Ricardian 'labor theory of value'; and lastly (7) the rising dissatisfaction with capitalism as concretely manifested by the growth of working class movements. (Ibid., 57). Undoubtedly Marx was the first radical philosopher to decisively and powerfully challenge the traditional belief system by placing man and his struggles at the center of the world agenda. He virtually revolutionized the foundations of mankind by enticing the proletariat to stand against its 'masters' and conduct socialist revolutions around the globe. By advancing the 'most penetrating and provocative critique' (Elliott, 1985, 130) of capitalism, Marx provided 1 the emerging socialist movement of the nineteenth century with an ideology that powerfully challenged the liberal assumptions of the day. Marx confronted liberalism, as Burkitt (1984, 36) observes, 'not only over individual issues but as an all embracing vision of society'. In fact history tells us vividly that socialism gained its momentum when 'the workers lot was contrasted with liberal rhetoric t 1 l prevailing at that time’, and when 'political rights devoid of social and economic equality' (Meyer, 1984, 9) lost its appeal to the toiling masses. Marx, however, was not the first intellectual thinker who articulated the ideology of socialism. Socialist --------------------------- , . , , , 2 3 2~~ thinking and socialist movements were sporadic but persistent on the European continent, especially after the advent of the Industrial Revolution in the eighteenth century. Political thinkers and philosophers such as Robert Owen (1771-1859), Charles Fourier (1772-1837), Peirre- Joseph Prouduon (1809-65), Jean-Jacques Rousseau (1712-78), Saint-Simon (1760-1825), August Comte (1798-1857), John Stuart Mill (1806-73), Louis Blanc (1811-82) promulgated socialist doctrines prior to Marx and Engels. Moreover, historical records aptly show that movements like those of the weavers in Silesia, the Chartists in England, and other not-so-prominent working class uprisings often jolted the continent of Europe throughout the eighteenth and the nineteenth century. In fact, it was the industrial revolution that set the stage for socialist movements and j j helped workers to raise the level of their consciousness, i and strategically enabled them to contrast their economic and political condition with that of the growing industrial capitalist class. Karl Marx and Frederick Engels (1820-95) characterized earlier socialist doctrines as 'unscientific', and 'utopian1. By contrast, they claimed, their version of socialism was practical and 'scientific'. Their precursors were utopian because, Engels claimed in 'Socialism: Utopian and Scientific' (1935, 140-189), they perceived society as i merely evolutionary, rested their arguments on reason or 233 ideas, not on facts, and not on actual workers' movements. The Utopians, Engels asserted, 'appealed to reason as the sole judge of all that existed' and 'everything that ran counter to eternal reason was to be relentlessly set aside'. Eternal reason, he claimed, in turn, 'was no more than the idealized intellect of the middle class'. The Marxist conception of society is also evolutionary in nature. But Marx, as Cameron (1985, ix) observes, 'attributed this evolution not primarily to ideas but to social processes'. Moreover, unlike many of his precursors such as Fourier, who encouraged rural cooperatives, hated industrialism, and wished its demise; Proudhon, who despised property as.theft, and believed in an extreme form of egalitarian individualism and anarchism; and Rousseau, who condemned the rich and envisaged republican virtues; Marx did not reject the industrial revolution. Instead, he eulogized its powerful creative abilities to accumulate capital, increase wealth, and industrialize, which he believed could lay the foundations for Communism. Acceptance of the industrial revolution alone does not constitute 'scientific' socialism. The Saint-Simonians, for example, accepted the industrial revolution, and believed that the 'nineteenth century would be an era of science and industry from which human unity and universal prosperity would follow’ (Crick, 1987, 32). But as Mazlish (1984, 13) remarks, 'like their fellow Comteans, they placed their ----- --------, ---------------------------------------------23"4 emphasis on the power of ideas, of conversion (religion of humanity), rather than of economic forces to bring about change'. Marx also departed from his socialist predecessors on the issue of the mode of social transformation. The Saint-Simonians emphasized harmony or solidarity for a transformation to socialism. Fourier 'advertized for rich philanthropists to finance the establishment of phalansteries’ (Horvat, 1982, 114) and expected that the 'lion would lie down with lamb if spoken to nicely' (Crick, 1987, 38). Owen sought to establish federations of cooperative communities governed by producers. Blanc thought that the state could be an agency for social reforms. And John Stuart Mill emphasized peaceful transformation of capitalism to socialism through a vigorous workers' cooperative movement. But Karl Marx turned to the workers directly, and designated them as the universal class destined to replace the capitalist class. Elliott (1985, 235) nicely summarizes the main arguments of Marx and Engels against their 'utopian' precursors: i) they gave no systematic, scientific analysis of how or why their ideals could be established and (2) although their visions and proposals often specified details of proposed socialist economic organization, they had no contact with or support from a socioeconomic class as a base of economic power. Marx also drew a clear line of distinction between crude communism and post-capitalist socialism or communism. According to Marx, the former emerges in an underdeveloped, , 2 -3 -5 - pre-industrialized economy, where, although ownership of the means of production is vested in the community, capitalist vices like workers alienation and exploitation remain. By contrast, Marx believed that socialism would emerge in a relatively developed country where workers would establish their control over the means of production and alienation and exploitation will be done away with. In Critique of the Gotha Program, Marx (1950, 13-45)) also differentiated between lower versus higher phases of communism. While the lower phase (later called socialism) retains many 'birth- pangs from the capitalist’ past, the higher phase of communism is expected to emerge in a distant future when a tremendous expansion of production and productivity will bring affluence and a dramatic alteration in individual and social psychology. During the first phase, inequalities of income, inequalities between higher and lower paid workers, and other 'deficiencies are unavoidable’ when the society 'is just emerging after prolonged birthpangs from capitalist society’. At this stage of socialist development, 'no one can give anything except his labor’ and 'nothing can pass to ownership of individuals except individual means of consumption’, and 'a given amount of labor in one form is exchanged for an equal amount of labor in another form’. Although this stage 'tacitly recognizes unequal individual endowment’, where 'equal right is still constantly 236 stigmatized by a bourgeois limitation', it, however, 'recognizes no class differences’. Marx believed that at this stage of communism such defects would be inevitable as 'Right can never be higher than the economic structure of society and its cultural development conditioned thereby'. Marx (ibid., 21) wrote: What we have to deal with here is a communist society, not as it has developed on its own foundations, but, on the contrary, just as it emerges from capitalist society; which is thus in every respect, economically, morally and intellectually, still stamped with the birthmarks of the old society from whose womb it emerges. But in the higher phase, during the post-capitalist socialism, such 'bourgeois' rights and inequalities will disappear. At this stage, Marx envisioned a communist society, where with enormous increases in productive forces and 'all-round development of the individual1, 'the enslaving subordination of the individual to the division of labor’, and 'the antithesis between mental and physical labor’ will vanish. 'Only then’, Marx proclaimed, 'can the narrow horizon of bourgeois right be crossed in its entirety and society inscribe on its banners: From each according to his ability, to each according to his needs'. The transition period, between capitalism and the lower phase of communism (socialism), would be one of 'civil wars and national wars’. Marx (ibid., 30) wrote: Between capitalist and communist society lies the period of the revolutionary transformation of the one into the other. There corresponds to this also a political . _ _ _ _ _ _ _ _ _ 2 37' transition period in which the state can be nothing but the revolutionary dictatorship of the proletariat. During the transition period, between capitalism and the lower phase of communism, the proletariat, under the dictatorship of the proletariat, is expected to change the society so that the higher phase of communism, a 'classless society1; eventually could be established. In such a society, Engels claimed in Anti-Duhring (1878), 'State interference in social relations becomes, in one domain after another, superfluous, and then dies out by itself; the government of persons is replaced by the administration of things'. Such a society, according to Engels,'oroanizes production anew on the basis of a free and equal association of the producers1, and places the 'whole state machine 'in the museum of antiquities, side by side with the spinning wheel and the bronze axe’ (quoted in Lenin, 1969, 15). Marx on Plans and Markets Plans and markets are neither dichotomous, nor mutually exclusive. Besides, the market is neither 'unique to capitalism' (Elliott, 1989, 41), nor a 'product either of private ownership of the means of production1' (Selucky 1979, 14). Although market relations have been regularized and given universal character by capitalism, as a matter of fact, markets did exist in pre-capitalist systems especially since the 'origin and development of the social division of 238 labor’ (Selucky, 1975, 39). Planning, on the other hand, is not necessarily a substitute for market relations. There is no denying the fact that a great deal of planning indeed takes the form of either guiding (Japan) or regulating (USA), or modifying (France) the free market system instead of attempting to replace it (Galbraith, 1979; Zysman, 1983). Markets are not therefore automatically to be identified with capitalist markets, similarly plans may not be automatically associated with socialist economy (Miller & Estrin, 1939). But Marx apparently 'equated markets with capitalism and socialism with their abolition* (Harrington, 1989, 57). Holding capitalist economic system responsible for spreading market relations over the entire society, Marx associated his critique of capitalism with that of market relations. Marx's indictment of market relations, according to Selucky (1979, 7-11)) took several forms; moral, economic, and philosophical. Marx found the fetish of money -the universal form of capital, responsible for human misery, and saw in it 'an expression of the dominance of things over people, of the objectification and reification of human relations'. Marx's philosophic condemnation of money and market relations found ample expression in his concept of alienated labor. Alienation of labor caused by commodity and market relations lies in the fact that the actual 239 producers, the workers, cease to focus on the use values which they have created. The producers are substantially concerned with exchange value. Thus human labor is reduced to a mere abstraction reflected in exchange value. Workers' alienation grows even deeper as the division of labor transforms the producer into a detail-worker who no longer creates a whole thing. The worker thus loses all interest in what he produces; his interest is in his job, and in his livelihood. Thus Selucky maintains, 'social division of labor and market relations dehumanize labor which used to be the basic mark distinguishing man from other animals'. Another dimension of alienation is that the worker creates values not for himself but for the capitalist who has purchased his labor power and exploits the surplus- ' alue from the product of the alienated worker. A capitalist class stands between workers in their capacities as producers and consumers. Workers sell labor power to capitalists and buy consumer goods from them. Thus, Meyer (1984, 17) observes that 'if alienation is a consequence of the division of labor, the class struggle, and the unequal distribution of the means of production, then it follows that alienation might be cured once private property and the class struggle have been abolished*. Marx precisely prescribes this, he suggested that this capitalist class that stands between workers as producers and as consumers, should be overturned. Thereby, workers will be able to sell 240 their 'labor to each other in a cooperative association as producers in exchange for 'labor certificates', and as consumers obtain consumer goods from each other in exchange for the certificates' (Elliott, 1985, 243). Marx also criticized markets for an uneconomical allocation of factors of production. He maintained chat by creating disproportions in supply and demand, market allocation of economic resources often results in wastage of social labor. Therefore, Marx predicted that under capitalistic market conditions periodical economic crises are unavoidable. Weisskopf (1979, 341-378) identifies three such crisis tendencies in Marxian analysis of capitalistic market relations. According to him, Marxian crises may originate from the long-run capitalist process of accumulation that tend to generate a rise in the technical composition of capital, i.e., from a rise in the real capital/labor ratio, which may be called a crisis of the Rising Organic Composition of Capital. Or crisis may result from the interrelated behavior of wages, productivity and prices, where an increase in labor cost raises labor share and squeezes profit, that in turn causes a decline in investment and economic growth. Such a crisis is known as the crisis of Ris ng Strength of Labor, or Crisis of Profit Squeeze. Or crises in market relations may emanate from the imbalances resulting from the lag in the demand for commodities from the capacity of the economy to produce commodities, or from the imbalances between different sectors, which is known as Realization crisis. Marx therefore wanted to do away with market relations altogether. Abolition of the market system, as Selucky (1979, 10-14) remarks, however, would require abolition of its prerequisites such as social division of labor, scarcity and autonomy of producers. Marx and Engels, Selucky maintains, never formulated the concept of division of labor clearly. According to him, their conceptions of division j of labor was identified with different things ranging from private property to 'direct domination of laborer by the instrument of labor’. The Marxist notion of abolition of division of labor, however, was 'based on a kind of polytechnic education which would enable the workers freely to change their place within the industries' (ibid., 11). As to supersession of scarcity, Selucky maintained that Marx's answer was not very encouraging either, except that Marx believed that man would some day achieve mastery over nature, free himself from his role as the principal agent of the production process and 'put himself alongside of it rather than within it’ (ibid., 11). On both counts, as regards Marx's position on the social division of labor and supersession of scarcity, Elliott (1980) maintains a different standpoint. According to him, Marx clearly stipulated abolition of scarcity, but he couched the concept of scarcity as 'resource limitation relative to specified standards in particular socio- historical circumstances', not in terms of Robbinsonian scarcity which would mean 'limited resources relative to all conceivable wants’. Elliott maintains that Marx envisaged 'the potentiality of supersession of scarcity in terms of basics or necessities, that will be capable of realization at normal or sufficient levels for all members of the society', and stipulated the principle, from each according to his ability and to each according to his needs only for i a distant future society of full-blown communism. j i I t Elliott also points out that in contrast to the general j conception of division of labor as 'distribution of people among tasks, occupations and regions', the Marxian concept comprises 'a class division of society, a pattern of labor distribution which for the individual workman is forcibly imposed through a combination of impersonal market forces and employers decisions and essentially a life time imprisonment to one job or task*. Marx, he maintains, unambiguously condemned such division of labor as a i 'crippled monstrosity' and postulated 'abolition of the division of labor in general under communism'. While Engels called for revolutionizing the production process from 'top to bottom' and emphasized that 'the former division of labor must disappear’, Marx in fact emphasized a 'life and death struggle’ to replace the highly specialized workers of capitalism by the 'fully developed individual capable of adopting easily to different tasks'. The next prerequisite of market relations was the abolition of the autonomy of the producers. The Marxist prescription for this problem is straightforward; abolish the autonomy of producers by expropriating private ownership of the means of production by wholesale nationalization. With the nationalization of the means of production, with the subsequent workers'-controlled state-management of economic resources, capitalist market relations will soon prove to be redundant for all practical purposes. Therefore, Engels (1939, 37-38) concluded, 'no society can for any length of time remain master of its own production and continue to control the social effects of its own process of production unless it abolishes exchange among i individuals*. As market is unpredictable and market relations are anarchic, it should be replaced by planning, to create 'a community of free individuals, carrying on their wor;< with the means of production in common, in which the labor-power of all different individuals is consciously applied as the combined labor -power of the community' and exchange among individuals is abolished altogether. But Marx and Engels' analysis on planning is ambiguous, as with socialism itself. They, as we have seen above, bitterly criticized market relations as anarchy, but did not elaborate their prescriptions as to how to allocate resources in a socialist economy. As a result, their position on plan and market remains to be controversial. At least three strands of thought can be identified in this context. The first strand of thought, clearly envisaged and propagated by the exponents of the Stalinist Model of socialism, maintains that Marx clearly excoriated market relations and preferred planning over market. As Marx and Engels provided penetrating critique of capitalist market relations on numerous occasions, speeches and writings, the advocates of central planning obviously found no dearth in their writings to quote in support of their claims.' The proponents of this strand of thought maintain that Marx doubtlessly rejected market exchange as an effective guide to resource allocation, and heavily emphasized planning in a socialistic economy. In support of their thesis that 'centralized economic management is fully compatible with the association of free producers, and that the form of ownership of socialized means of production must be defined in terms of state property1 (Selucky, 1 75, 47) the defenders of this strand of thought usually cite quotations as the following from the writings of Marx and Engels: Only when production will be under the conscious and prearranged control of society, will society establish a direct relation between the quantity of social labor time employed in the production of definite articles and the quantity of the demand of society for them. (Marx, 1909, 221) 245 The national centralization of the means of production will become the natural base for a society which will consist of an association of free and equal producers acting consciously according to a general and rational plan. (Marx, quoted in Selucky, 1975, 47). the proletariat seizes political power and turns means of production in the first instance into state property. (Engels, quoted in ibid., 47). The exponents of a second strand of thought maintain that 'the only legitimate Marxian concept of socialist economy must consist of the self-government of the producers' not the 'command planning system' (ibid., 47) as envisaged by the group mentioned above. For example, Selucky (ibid., 55- j i 59) maintains that Marx and Engels clearly differentiated 'between state ownership and the actual socialization of production1, and asserts that for Marx state ownership of property was 'a mere legal, format act’. According to Marx, Selucky asserts, real emancipation of men can be possible only when the nature of labor itself transforms 'from a mere wage-earning activity into a creative one’ under 'a self- managing socialist economy' in which the capabilities of each individual will be fully realized. Selucky maintains that rejection of the market will be incompatible in a self managed socialist economic system. He maintains that there is an inherent cleavage between Marx's perception of the economic and political liberation of man. According to him: 246 While Marx's economic concept of socialism consists of a single social-wide factory based on vertical (hierarchical) relations of superiority and subordination, his political concept of socialism consists of a free association of self-managed work and social communities based on horizontal relations of equality. Whoever accepts in full Marx's first concept has to give up the latter, and vice versa: they are mutually exclusive. (ibid., 1979, ix). Cogently arguing that abolition of market will mean making demand side information irrelevant for the producers, and establishing absolute reliance on the central plan for i i supply-side information, Selucky also asserts that self- i management and central plan cannot operate simultaneously. He (1975, 57-58) writes: Self-managing system, even if formally introduced, is a foreign body within any non-market, vertical and centralized economic structure. Even if self-managing organs are formally granted authority to make decisions, the only source of their information is the central plan since the market has been eliminated. Secondly, Selucky maintains, according to Engels, the state will wither away once the proletariat seizes political ! power and eliminates all class relationships from society. He (ibid., 59-61) suggests that in that classless, stateless society 'the only type of social organization which could replace the state both in its economic and political functions is a self-government of producers', where instead of state-ownership the economy will be socially-owned, and means of production will be vested under common ownership, and both allocation and distribution of resources will be -■ " * ------------- — 1 2"47~ managed by the direct producers themselves. Selucky claims that such a concept is 'implicitly present’ in the Marxist thesis of the emancipation of the working class, and asserts that the proletariat cannot emerge as a ruling class under a centrally planned and run economy, and it is only the economic self-management and political self-government that alone can guarantee effective participation of the working people in the economic and political processes in a society. Therefore he concludes that the 'state socialism’ should be followed by 'self-managing socialist economy and self- governing socialist politics'. j I The third strand of thought finds the so-called j 'centrali ation-decentralization polarity’ as a misplaced debate (Elliott, 1985; Mandel, 1971). As a matter of fact, asserts Elliott (ibid., 241) Marx saw no conflict between centralization (which stood for social ownership and overall economic planning, and which Selucky described as central plan), and decentralization (meaning worker control over production and public policy, which Selucky called self management by working people). Describing 'overall planning and worker control dimensions of Marxian socialism’ as compatible, Mandel argues that a feasible compromise could be the 'possibility of democratically centralized planning, the outcome of a congress of worker's council managing the enterprises' (quoted in Elliott, 1985, 241). 248“ Elliott (ibid., 242), points out that Marx insisted on plans formulated by associated workers themselves, 'not by a dictatorial political elite or centralized state bureaucracy1. Marx indeed emphasized that a socialist economy would distribute 'social labor in definite proportions’ and would maintain bookkeeping for the purpose of 'control and ideal survey’, but never intended that central planning will substitute planners sovereignty for consumers sovereignty (Elliott, 1980). Rather, a post capitalist socialist society, as envisioned by Marx, maintains Elliott (1985, 240), would presumably, have central planning for macro management and 'democratization' i or worker control of industry' at the micro level. ! According to him, Marx's socialism stood for integration of both the principles of economic organization 'around the theme of worker control, both in production, at the level of individual enterprises, and in government, concerning policy direction for the economy as a whole’ (ibid., 240). While the first strand of thought claims centrally planned socialist economy as the legitimate concept of the Marxian socialism, the second strand of thought maintains that the legitimacy lies implicitly with economic self management and political self-government by the working people. Although they conceive central plan and self management as contradictory concepts, the advocates of the second strand of thought, however, concede that state- ...... 2” 49 ownership of economy can be a prior step in the process of the establishment of self-managed socialist economy. In between this two strands of thought, a third interpretation champions a compromising formula for harmonious co-existence of the apparently contradictory roles of market and plan in the Marxian socialism. This strand of thought seems to be more representative of the Marxian perspective of socialism. As there are no 'consistent chain of authentic evidences' (Selucky, 1975, 47) indicating Marx's willingness to subscribe exclusively either the central plan or worker's self-management, the third strand of thought that prescribes a compromise between workers' controlled micro-management and central plan controlled macro-management of a socialist I economy, appears to be a more acceptable extrapolation of I Marxian socialist economic system. Indeed Marx, in the j t Critique of the Gotha Program, elaborated on allocation and distribution of resources between micro and macro sectors of a socialist economy. Marx on Democracy and Freedom It is indeed ironic that Karl Marx devotedly wanted to free society from all kinds of inequality, exploitations, and miseries, but that 'his teachings are embraced by states whose commitment to personal freedoms is merely formal1 (Lovell, 1984, ix). Much confusion which exists on the Marxian stand on freedom and democracy has its roots in the 250 practices of the so-called socialist states. Our concern here is not with the practices of so-called Marxian states. Rather, we shall concentrate on the Marxian concept of freedom and democracy. Marx was undoubtedly a great champion of human freedom. His stand for political, economic and social emancipation of human beings is unquestionably pro-democratic and anti-totalitarian. He dreamed of a society in which man will attain mastery over nature, where conditions in which people are administered will be replaced by an administration of things, and an environment will be created to enable human beings to achieve the full potential of their self-actualization. Young Marx, as a radical democrat, was enthusiastic about human liberation. He wrote: Man, who would be a spiritual being, a free man - a republican. Petty bourgeoisie will not be one or the other .... What they want is to live and multiply .... that's what animals want.... Man's feeling of his own values, freedom, should be awakened in the breast of these people. Only this feeling ... can again make of society a community of men for the realization of their greatest aim: a democratic state. (Quoted in Horvat, 1982, 125). Young Marx also showed genuine enthusiasm about freedom of the press. Mounting 'sweeping opposition to any and every control over opinions' he condemned censorship for punishing not 'offence but opinions’; and declared that human freedom 'involves not only what but just as much how I live, not only that I perform a free act but that I 251 perform it freely' (quoted in Draper, 1977, 42). But Marx strongly denounced the bourgeois approach to democracy and cautioned that democratic freedom 'must not be degraded1 into a mere instrument of advancing the interests of the bourgeoisie1 (ibid., 41). To Marx, bourgeois democracy masked a society of exploitation, that promotes 'exploitation of workers and consumers alike, exploitation at home and through foreign colonies, exploitation of religious and cultural instincts by the artificialities of manipulated consciousness1 (Cohen, 1965, 6). Marx also censured bourgeois representative assemblies and emphasized democratic control from below. Marx asserts, 'A truly political assembly blossoms out only under the great protectorate of the public spirit, just as living things do only under the protectorate of the open air'. To Marx, 'the uncompromising democratic extremist1 (Draper, 1977, 57), freedom meant democratic control from below having consequences not only in political life but for the whole civil society. While his precursors were 'proponents of socialism from above’ and in some cases, depended on the benevolence of elites for socialist transformation, Marx accepted the doctrine of democratic control from below and actually was the first socialist thinker who fused 'the struggle for consistent political democracy with the struggle for a socialist transformation’ (ibid., 59). 252 Marx's belief in democratic control from below remained unshaken. For example, in the Communist Manifesto (1848), Marx asserted 'In place of the old bourgeois society, with its classes and class antagonisms, we shall have an association in which the free development of each is the condition for the free development of all'. Also in the Critique of the Gotha Program (1875), Marx declared 'freedom is when the state is transformed from an organ that is dominant over society into an organ that is completely subordinate'. And in 1878 in Anti-Duhring, Engels wrote: The first act by virtue of which the state really constitutes itself the representative of the whole society -the taking possession of the means of production in the name of society - that is, at the same time, its last independent act as state. Marx's concept of freedom in the economic sphere contains the core of his concept of man's political emancipation. Marx maintained that as long as man is an economic being, he cannot be freed at all. 'The realm of freedom', Marx writes, 'actually begins only where labor which is determined by necessity and mundane considerations ceases' (quoted in Selucky, 1979, 49). For Marx, Selucky maintains, both personal power (derived from the possession of money) and social power (derived from investment of capital by individuals) must disappear to guarantee economic freedom to the associated workers in a strictly non-market and planned economy. Therefore, the demand for socialism 253 would be tantamount to demand for 'democratization of economic power1, because, according to Marx, 'full human dignity can be established only through abolition of private property' (Cohen, 1965, 7). Since the state is by definition a coercive force that establishes class rule, and since the economic power of the ruling class is a precondition for its political power, with the elimination of private property, the ruling class will be eliminated, and thus the need for a state's existence will cease. Marx's political theory of the state basically supplements his theory of historical materialism and class struggles. Discarding the contemporary theories of the state that emphasized the state as a necessary organization that represented the general interest of the society, Marx conceived the state as an 'organized Instrument of force by means of which the ruling class keeps the producers in subjection and protects its property' (Slaughter, 1985, 56). Contradicting the common belief that Marx's political theory of state is a by-product of his economic theory, Selucky (1977, 57-67) maintains that Marx's political theory has three dimensions; economic, sociological and political. According to Selucky while the economic approach is based on the concept of base and superstructure, (the base being the economic structure of the society and the superstructure being politics, ideology, culture etc.), the sociological approach is based on the concept of the social division of 254 labor and of classes, the political approach 'stems from his concept of politics as the power reflecting and regulating conflicts in civil society’. For Marx every state has its class content and its governmental form, and to him the forms of state makes little difference, what is important is its content. A state may impose class rule over society, or in the presence of antagonistic social classes, the ruling class might attempt to present 'its specific class interest as the general interest and its specific class ideology as the universal ideology', or the state's management may be entrusted to a professional meritocracy, 'alienated and separated from the ci.vil society1, whatever the forr is, the basic character of the bourgeois state remains the same. It remains bourgeois, which the proletariat must overthrow to establish the 'dictatorship of the proletariat’, that is, proletarian democracy. The dictatorship of the proletariat, however, would remain a state, because its objective is 'to suppress the defeated exploiting class', but it is destined to lose statehood as soon as it establishes a class-less society, as soon as it ensures 'co-operative participation in the subordination of all mankind's acquired wealth and power to production for need, according to a common plan' (Slaughter, 1985, 57). In sum, for Marx the ultimate purpose of economic activity is the realization of human freedom and dignity. 255 Marx's freedom is essentially couched in sharp contrast to the generally accepted liberal definition which refers to an absence of constraints on individual behavior. Marx was critical of this negative concept of freedom, because for him the distinctive character of humanity lies in its ability to plan conscious activity directed towards satisfying needs. The democracy Marx championed was aimed at establishment of a classless society, where democracy would mean 'effective exercise of power by the mass of the people in the interest of the mass’, where the people, 'having no interest in injustice’ will have 'no real interest in deception’ (Aptheker, 1965, 18-23). In contrast to the bourgeois conception of democracy, Marxian democracy stands for 'an attempt to make democracy genuine, to make it fruitful of human goods, to take inequalities from human existence’ (Cohen, 1965, 15). For Marx, men are 'free to that extent that they consciously control both nature and their social conditions of existence to suit their needs and abilities’ (Burkitt, 1984, 38). Marxian socialism emphasized 'the destruction of authoritarian state, communal decentralization, and producer's self-management' (Horvat, 1982, 126). There is no denying the fact that Marx and Engels stressed or implied eventual elimination of markets, money and commodity relations, but they conceived that as integral to achieving self-governing socialism. By pinpointing the inhuman 256 alienation of capitalist commodity relations, and entrusting the workers as the universal class for the emancipation of the whole mankind, Marx brought the issue of human freedom and dignity to the center of the world agenda. Revisions of Marxism Marxism is claimed to be a science, a science of human emancipation that explores and envisions man's effective control over both the natural and social environments within which he lives. At Marx's graveside in 1883 Engels proudly declared 'just as Darwin discovered the law of development of organic nature, so Marx discovered the law of development of human history'. Marx's investigations into the science of political economics, his scientific analysis of the capitalist mode of production, and his rigorous inquiry into historical materialism, brought him both admirers and critical opponents. While to his admirers Marxism is almost a 'secular religion' (Mazlish, 1984), to his critics Marxism is 'against logic, against Science and against the activity of thought itself' (Ludwig Von Mises, 1936), and actually constituted a 'road to serfdom' (Friedman, 1962). And Marx himself has been described as 'minor Post- Ricardian* (Samuelson, 1957), with 'the same mixture of positive and negative merits as his prototype Hegel' (Bohm-Bawerk, 1936). Consequently, both dogmatism (that tries to freeze Marxism) 257 and revisionism (that tries to water it down) 'have grown to monstrous proportions’ (Cameron, 1985, x). Both Marxists and non-Marxists, however, agree that Marxism is basically a critical 'theory o£ capitalism and its destruction, not a theory of socialism1 and maintain that Marx 'wrote on socialism only rarely and unwillingly - mostly when pressed to do so’ (Horvat, 1982, 124). Therefore, it is small wonder that there would be so much controversy about the Marxian vision of socialism. Both Marx and Engels, Sweezy (1980, 10) points out, 'carefully refrained from offering any blueprints of the socialist society of the future, and in fact where they discussed its characteristics at all they treated it as a transitional society between capitalism and communism’. Resultantly, socialism remains an alluring subject for generations to come. Some of the blame for such confusion can presumably be attributed to the fact that although Marxism has never 'at any one time managed to take over, conquer the entire spectrum of socialism’, attempts have persistently been made 'to stretch Marx so as to accommodate new concerns and new departures’ of the twentieth century (Berki, 1975, 71). As Gorbachev claims to have derived 'ideological succor and inspiration’ in the inexhaustible source of Leninism, (rather than in revisions by Edward Bernstein or Karl Kautsky or Yugoslav or other versions of socialism), our inquiry here is confined to the Leninist revisions of socialism. Before we embark on the critical details of | Leninist revisions, a conceptual clarification between the words 'revisionism' and 'revisions' is in order. The concept revisionism is generally employed to identify those reformers who believed in a gradual transformation of ; capitalist society. On the other hand, the concept of j 'revisions' is applied here to mean modifications and : I adjustments in Marxism which are claimed to be authentically j I Leninist. To be more specific/ alterations in Marxian i prescriptions of socialism as advocated by Edward Bornstein and Karl Kautsky came down conventionally as 'revisionism', that stressed the liberal aspects of Marx's project; while the modifications in. Marxism that was enunciated by Lenin, who vehemently stressed the non-liberal aspects of Marxist doctrine, conventionally came down as 'the authentic Marxism' or 'revisions'. We shall see in a moment how , authentic was the Leninist revision of Marxism. 1 i I Lenin and Marxism-Leninism ! S The Union of Soviet Socialist Republics (USSR) is the | first country in the history of the mankind that was officially claimed to be governed by the workers. Its ; founder Vladimir Ilich Lenin (1870-1924), was widely claimed to be the true interpreter of Marx and Marxism, who actually built and defended the Marxist project of : socialism. Leninism itself, however, became subject to diverse interpretations. The Soviet official position claims that Marxism and Leninism are synonymous and that Lenin is to practice what Marx is to theory. Others, (for j I example, Selucky, 1979; Rosa Luxemburg, 1961), claim that 1 Leninism and Marxism are two different things, and that ' actually Leninism is sharply different from Marx's project of socialism, indeed that what Lenin established in Soviet j i Union actually constitutes a travesty of the Marxist project ; (Lovell, 1984). | According to the official Soviet view, Lenin was mainly ; i a popularizer and interpreter of Marxism; he merely put into practice the doctrine propounded by Marx and Engels. Lenin, the 'heir to the teachings of Marx and Engels', anonymous ' writers of The Basics of Marxist-Leninist Theory (1982, 9) ■ claim, developed Marxism-Leninism under new conditions, 'in the age of imperialism and proletarian revolutions’ to aid j the working people 'in their struggle against the domination [ i I of bourgeoisie, against the exploitation of man by man and j social inequality’. Another strand of thought challenges the notion that Lenin was a mere 'practitioner of the working class movement’, and, discarding such an 'under-evaluation1 of Lenin's intellectual ingenuity, claims that Lenin was also j a 'genius in the realm of history’. As Soviet historian Roy Medvedev (1981, 14) observes: Lenin alone had to come up with first solutions to all problems of proletarian revolution, theoretical and practical - the Soviets as a new form of power, the union between the proletariat and the peasantry, the building of new society in post-revolutionary Russia, the new economy and the new state itself. Medvedev (ibid., 17) maintains that numerous examples could be cited where Lenin 'abandoned many of the dogmas of Marxism’, and while confronting theoretical and practical problems of proletariat revolution he actually 'reconsidered certain premises that Marx and Engels had believed to be vital for their doctrines'. No doubt Lenin leaned heavily on Marx and Engels in developing his own ideas, nevertheless, almost all Sovietologists agree that he was also much influenced by other sources. Lenin's 'feat was to remain within the Marxist tradition... to make himself accepted as Marxism's legitimate interpreter' (Lovell, 1984, 196), but that hardly substantiates the belief that Marxism constituted the sole source of Leninism. Even to a layman such a claim sounds naive. What then are the other sources that contributed to Leninism? Lenin's writings, and the strategic and tactical positions throughout his revolutionary career convincingly indicate that the other prominent sources of Leninism would presumably include the ideological legacy from the Russian revolutionary tradition, especially the lively debates and disputes on social democracy that sprung up in Tsarist Russia during the late nineteenth century. Besides, revolutionary writings of Herzen, Chernyshevsky, and others j that contributed to the core of the Narodnik movement of 1870's (which called for the revolutionary transformation : of Russian society), had very definite influence on Lenin's life and work. Lenin’s important works included The Development of • Capitalism in Russia (1899), Where to Begin (1901), What ; is to be Done? (1902), One Step Forward, Two Steps Back ; (1904), Imperialism, the Highest Stage of Capitalism (1916), , and The State and Revolution (1917). All these and many J other works and speeches demonstrated Lenin's unequivocal * allegiance to the revolutionary teachings of Marx and Engels; nevertheless,* at the same time they did not fail to show Lenin's preoccupation with the Russian revolutionary tradition. Therefore, Leninism can legitimately be understood as a powerful blend of the Russian revolutionary- democratic tradition of the latter half of nineteenth i ' century, the revolutionary teachings of Marx and Engels, and j Lenin's own analysis of the revolutionary transformation of i an underdeveloped economy to socialism. The Marxian vision j of socialism was one of many sources, maybe the most [ important, of Leninism, but certainly not the only source : for Lenin's revolutionary ideas and praxis. i This leads us to the next logical question: How far did Lenin actually deviate from Marx? Lovell (1984), for example, maintains that Leninism, as a matter of fact, constituted a travesty of Marxian project of socialism, ' while Selucky (1979) very powerfully argues that instead ' of fulfilling Marxian vision, Lenin 'does represent a revision of Marxism'. And Rosa Luxemburg's criticism is aptly manifested in the title of her book The Russian ; i Revolution: Leninism or Marxism? Literature on Leninist j | revisions is robust and we do not repeat or review these in j this limited space. Rather our attention focuses on the ! ! major criticisms against Lenin in respect to deviations from Marxian view of socialism. Most such criticisms tend to I revolve around: a) Lenin's reliance on a vanguard party; and b) Lenin's understanding of the concept of the 'dictatorship of the proletariat'.t Now a few words about each of these criticisms. Lenin's Reliance on Vanguard Party Marx indisputably designated the working people as the universal class, and clearly stipulated that emancipation will come 'by the working class itself' and that the working class 'will itself become the ruling class'. Lenin found these prescriptions impracticable. Lenin argued that social change led by the proletariat itself would end up as a trade union movement. To give workers movement a revolutionary character and to lead them to their logical destination is the task of a revolutionary vanguard party consisting of professional revolutionaries. In What is to Be Done?, Lenin (1960, 5:384) asserts 'socialist consciousness is something introduced into the proletarian class struggle from without and not something that arose spontaneously’. In both What is to Be Done, and One Step Forward and Two Steps Back, Lenin elaborately explained organizational and strategic tactics for the revolutionary vanguard party. Lenin emphasized that 'the party is organized strongly along the principles of hierarchy and iron discipline; that it relies on centralism rather than on autonomism, on bureaucracy rather than on democracy’ (Selucky, 1979, 98-99). Underscoring centralization and secrecy in the party, Lenin condemned democracy as 'nothing more than a useless and harmful toy’ 'amidst the gloom of the autocracy and the domination of the gendarmerie’ (1960, 5:479). Luxemburg (1961, 84) condemned Lenin's One Step Forward, Two Steps Backward, as a 'methodical exposition of the ideas of the ultra-centralist tendency in the Russian movement’ and excoriated Lenin's strict centralism as 'a mechanical transposition of the organizational principles of Blanquism into the mass movement of the socialist working class'. Lenin on the Dictatorship of the Proletariat A second major argument that the exponents of the second strand of thought enthusiastically highlight refers to Lenin's interpretation of the concept of the dictatorship of the proletariat. Selucky (1979, 62-63) maintains that 264 Marx used this term 'no more than five times' in his works: in 1850 in The Class Struggles in France, in 1852 in Marx's famous letter to Weydemeyer, in 1875 in The Critique of the Gotha Program, in a declaration made jointly with Engels and others, and in a speech in 1971 in London. Much like his writings on socialism, Marx's analysis of this concept which came up so prominently in socialist transformation, is rare and inadequate. Consequently, like the Marxian interpretation of socialism, the Marxian meaning of the concept of the dictatorship of the proletariat remains a matter of dispute. Most Marxian scholars, however, agree that by the concept of the dictatorship of the proletariat Marx referred to the transitional stage between the proletarian revolution and the establishment of the communist society. Indeed Marx remarked in the Gotha Program (1970: 331): Between capitalist and communist society lies the period of the revolutionary transformation of the one into the other. Corresponding to this is also a political transition period in which the state can be nothing but revolutionary dictatorship of the proletariat. The controversy, however, arises from the fact that Marx’s emphasis on the 'content' and the 'form' of the dictatorship of the proletariat remains ambiguous. Although Marx made his position adequately clear that during the transition period the dictatorship of the proletariat will remain a state where the ruling class, the proletariat, will smash the defeated exploiting class, his position about the content of the dictatorship of the proletariat remained less than clear. In the Communist Manifesto Marx and Engels prescribed three steps in the transition process: first, 'win the battle of democracy1, second, 'make despotic inroads on the rights of property1, and third, 'transfer the physical means of production, by degrees, to worker- state control' (Elliott, 1985, 236). Marx's emphasis on the winning of the battle of democracy very clearly indicates his concern for the 'content' of the dictatorship of the proletariat, that 'suggests that the dictatorship of the proletariat is to be rule of the majority, by the majority and for the majority’ (Selucky, 1979, 63). Lenin, on the other hand, interpreted the dictatorship of the proletariat as 'nothing more or less than authority untrammelled by any laws, absolutely unrestricted by any rules whatever, and based directly on force'. Kautsky, in his Dictatorship of the Proletariat (1974), pointedly attacked Lenin for misunderstanding the Marxian prescription of the dictatorship of the proletariat. He maintained that by the concept of dictatorship Marx did not literally mean despotic rule; his meaning was rather a majority rule by the proletariat. Kautsky emphasized that the Leninist demand for dictatorship of the proletariat 'had little in common with Marx' project' (Lovell, 1984, 167). Kautsky believed that socialism must be achieved gradually, democratically, 266 and through active participation of the masses. His strategy for socialist transformation would be: Where the proletariat represents the majority, democracy will be the machinery of its rule. Where it is in the minority, democracy constitutes its most suitable fighting arena in which to assert itself, win concessions, and develop. {Kautsky, 1974, 133). Lenin, in The Proletarian Revolution and the Renegade Kautsky (1965), as the title indicates, harshly criticized Kautsky. Lenin maintained, as opposed to Marx's position, that the important thing to look at is not the content, but the form of the state. To Lenin the character of the state is determined not by its representative institutions, but by its machine , the people who work in it and the interests it serves’ (Lovell, 1984, 170). Lenin (1965, 222-248) claimed that the dictatorship of the proletariat constitutes 'the very essence' of the proletarian revolution, 'the very essence of Marx's doctrine' and proletarian democracy is a million times more democratic' than the most democratic bourgeois state. However, in The State and Revolution,(1965) Lenin somewhat softened his stand on the concept of the dictatorship of the proletariat. Still maintaining his firm stand on the state as 'the product and expression of irreconcilable class contradictions', he admitted that transition to socialism could be possible through peaceful means, through active participation of the masses as 267 suggested by Kautsky, but cautioned that 'nowhere has the bourgeoisie ever voluntarily ceded its power and privileges' and 'such peaceful possibilities have so far presented themselves very rarely in the course of history’. The next important revision of Lenin came with the introduction of the NEP in 1921. For Lenin, according to many scholars, NEP came as a temporary retreat, merely as 'a breathing spell1 (Ulam, 1974), as 'a strategic retreat' (Adams, 1972), from the practices of the War Communism period. As mentioned before, during the NEP period efforts were made to denationalize industries, deconcentrate and decentralize economic management, reintroduce trade and market relations, price, money and credit systems. Although widely considered to be a temporary or strategic retreat, or as a forced compromise to the peasants, or as a breathing space for further offensive towards socialism, NEP period has also been envisaged by many scholars as a long-term strategy for establishing socialism in the Soviet Union. The proponents of the later view put forward mainly twofold arguments. First, they maintain that even Lenin himself proclaimed on numerous occasions that NEP had been established 'seriously and for long time’, that the NEP policy 'is being adopted in earnest1, and that NEP policies will continue 'until we fully restore large-scale industry' (quoted in Cliff, 1979, 155-157). This strand of thought 268 maintains that Lenin never attempted to reverse the NEP policies during his lifetime. Instead, they maintain, Lenin 'defended it to his last breath, and died in January 1924, while the NEP was still untouchable’ (Draper, 1987, 287). Cohen (1977, 21-22) maintains that even during the momentous industrialization debate of the late 1920s, 'NEP was for the Bukharinists a viable development (not static) model’. He argues that even the economic proposals of Trotsky was based on NEP and its continuation. Cohen (ibid., 22) claims that although there were other differences, like Bukharin, Trotsky was also a 'reformist in economic policy, looking to the evolution of NEP Russia toward industrialism and socialism’. Secondly, the supporters of the later view maintain that NEP envisaged more than a package of economic policies, it was also extended to the 'social and political order’ of the Soviet Union (Cohen, 1974; Lewin, 1974). Both Cohen and Lewin maintain that 'the social and political order’ of NEP .'officially tolerated social pluralism in economic, cultural-intellectual, even (in local soviets and high state agencies) political life’ (Cohen, 1977, 21). As a matter of fact, NEP 'acquired a general legitimacy among Bolshevik leaders’ and allowed intense policy debates within the Communist party. Tucker (1977, 92) maintains that the NEP culture found expressions 'in institutions, ideas, habits of mind, and conduct’ of the Soviet life and in the 'primacy of persuasion and educative methods in the regime's approach to the people'. According to Lewin (1977, 114), the NEP policies ‘produced a remarkable set of compromises, between plan and market, political monopoly and social and cultural diversity, state and society, ideology and expedient'. The next important episode that would have direct bearing on the prescriptions of perestroika would be the momentous industrialization debate of the twenties in which the struggle of leadership among Bukharin, Trotsky and Stalin found sharpest expressions in their economic prescriptions for the Soviet Union's industrialization. In the next section we shall discuss the major issues of the great industrialization debate that still very rightfully commands serious attention of the Sovietologists. The Great Industrialization Debate The great industrialization debate staged in the aftermath of Lenin's death constitutes not only an ideological milestone but also an intellectually dramatic episode of ‘unprecedented eruption of creativity' in the Soviet history. This highly articulate, stimulating and genuinely thought-provoking debate unfolded at a time when NEP's mixed economy brought the Soviet Union with full recovery from the ravages of the Civil War and the country was, in principle, ready for industrialization aimed at establishing socialism. This 'momentous industrialization , I debate1, remarks Bideleux (1985, 84) not only helped in. identifying the so-called rightists and leftists in the j Soviet leadership, but also 'encompassed an exceptionally ' wide spectrum of industrialization strategies and so many : crucial issues (that) it merits careful study by anyone * interested in development problems’. The principal participants of the debate were Nikolai Bukharin and Leon Trotsky. While the right wing, led by Bukharin, defended the NEP policies, the left wing, led by Trotsky, stood for ; rapid and forceful industrialization of the country. The other principal player, Joseph Stalin, conveniently switched his positions between these polar points and masterfully manipulated opportune political moments for consolidating his position. The contending positions of Trotsky, Bukharin * and Stalin are examined below. The Position of the Rightists The rightists, led by Bukharin, who had been variously called 'the favorite of the whole party’ and 'the Pushkin of NEP’ and 'the agent of kulaks’, pleaded for continuation , of NEP for socialist transformation of the Soviet economy, j While Lenin repeatedly emphasized NEP as a tactical retreat, a respite preparing the Bolsheviks for the next offensive, | I the rightists, especially Bukharin, conceived NEP as a long term evolutionary process of transformation to socialism. , Although there is a 'world of difference between social j change by evolution, as envisaged by Bukharin, and social J change by successive assaults, interspersed by tactical j retreats, as practiced by Lenin1 (Bideleux, 1984, 94), j Bukharin and his followers enthusiastically claimed that ' tney were upholding Lenin's conception of NEP. However, the 'institutional forms of the economy' that Bukharin and his ' followers underscored, 'consisted essentially a continuation ; of the NEP1. As Elliott (1985, 363) observes, much like ! Lenin's NEP programs, the rightists also envisaged: | a socialized public sector, a governmentally controlled . private sector, private enterprise coupled with free agricultural markets for the peasantry and NEP tradesmen, and liberal wage policies, shorter hours, improved working conditions, and support of labor unions and their demands for some degree of worker control over industry. Mounting an effective opposition to the Left campaign for rapid industrialization at the cost of the peasantry, i Bukharin envisaged more congenial and more cooperative relationships between the industrial proletariat and the j peasantry. Bukharin insisted that a 'dictatorship of ‘ i industrialization' would once again put the 'dictatorship ! of the proletariat' on a collision course with the peasantry r which NEP had solved by creating 'an economic smychka between socialist state industry and millions of peasant economies' (Cohen, 1974, 165). To the rightists the i 'indispensability of the peasantry support' was the ' 'cardinal lesson of Russia's revolutionary history'. They i very cogently argued that even from a pure economic point of view cooperation of the peasantry was necessary for the nation's rapid industrialization, as 'mass consumption' j constituted the 'real lever of development’ and accumulation ' in 'socialist industry cannot occur for long without I accumulation in the peasant economy* (ibid., 175). The rightists powerfully argued that instead of creating a society of two antagonistic classes, it would be politically and economically more expedient to integrate the peasants as allies of the proletarian revolution. Unlike Lenin, according to whom, prosperous peasants would pose a : threat to the socialist state, the rightists argued that the increased prosperity of the peasantry would contribute to the consolidation of socialism itself. Bukharin maintained that a smychka, a tarde link between the urban and rural population, would contribute to an expanding consumer's market, and eloquently argued that 'the greater the buying powers of the peasantry, the faster our industry develops’ j (ibid., 175). Describing the Bolsheviks' 'deeply ingrained j j mistrust, contempt, condescension and class prejudice’ (Bideleux, 1985, 93), against the peasantry as 'incompatible i with proletarian duty’ Bukharin urged the Bolsheviks to realize that they no longer belonged to the Communist Party 'of civil war’, rather they belonged to the Communist Party that stood for 'civil peace’(Cohen, 1974, 201). ! While for economic growth and capital accumulation, the j Left's strategy relied on rapid and heavy industrialization, the rightists emphasized mutually supportive evolution of both agricultural and industrial sectors for transformation of the Soviet economy towards the establishment of socialism. The left strategy, as couched by Preobrazhensky, emphasized that the new capital required for rapid industrialization be accumulated 'through non-equivalent exchange’ in market relations between agriculture and industry, and that 'state industry shculd use its unique supermonopolistic position* to pursue 'a price consciously aimed at the exploitation of the private economy in all its forms' and also aggressively endorsed the 'scissors crisis' as 'a key device of social accumulation'. Apparently inspired by Marxian concept of 'primitive capital accumulation’ in which 'conquest, enslavement, robbery, murder, in short, force play the greatest part' (Marx, 1976, 374), the leftists searched for the 'original sin' for the Soviet Union' extensive industrialization in the agricultural sector. The rightists, on the other hand, maintained that the arguments forwarded by the leftists for industrialization at the cost of peasants or overall consumption in the economy, were short-sighted. Bukharin stipulated that for any economy there would be a 'ceiling for the share of accumulation and investments at the expense of consumption' and that whenever that ceiling was surpassed 'diminishing 274 returns in terms of growth of industry and of national income' would set in, and as a result, the economy would be subject to 'a great deal of waste and dislocations' (Lewin, 1974, 55-56). Bukharin also energetically developed a clear line of distinction between capitalist and socialist processes of industrialization. He maintained that although the capitalist industrialization process involves, as Marx emphasized, 'merciless expropriation of noncapitalist producers' as an essential characteristic, the socialist industrialization process would be fundamentally different. Socialist industrialization, Bukharin insists, need not involve that 'original sin' or 'bloodsucking process' of capitalist industrialization, rather it 'is carried out by the proletariat, for the goals of socialism... [and] is not a parasitic process in relation to the countryside . . . but the means of its greatest transformation and uplifting' (quoted in Cohen, 1974, 171). The rightists therefore stressed a more cooperative, more humane approach to industrialization of the country. To them, the goal of industrialization was never a point of dispute; they disagreed with the Left over the process of industrialization in a socialist setting. They emphasized a robust continuation of NEP-type policies, expansion of trade-oriented relationships between agriculture and industry, between urban and rural areas, and expected that 275 interdependence between agriculture and industry would bring mutual development for both sectors without major disruptions in the economy or society. Bukharin argued that under such a framework the industrial sector would provide industrial goods in exchange for grain and industrial corps from the agricultural sector. With the process of economic development of the country, and with technological improvements in industry, costs of production would go down, industrial profits would rise, and that in turn would enhance investment in industry. In the agricultural sector, on the other hand, maintains Bukharin, peasants would initially demand consumer goods and simple agricultural goods, but at a subsequent stage when the agricultural sector would be developed sufficiently, the peasants would demand complex producer's goods, like tractors, fertilizers and machinery, which presumably would be supplied by the industrial sector. Thus mutual cooperation and interdependence of both sectors would contribute to the rapid but autarkic development of the Soviet economy. The rightists strongly opposed centralization of economic management and cautioned about the inevitable proliferation of bureaucratization of the society and associated dominance of administrative machinery as unavoidable offshoots of state-imposed rapid industrialization program. Rather, the rightists stressed a gradual process of industrialization and economic development of the country. Bukharin 276 anticipated that such an evolutionary process would eventually provide as 'a natural mechanism, the economic, political, social and psychological preconditions for socialism' (Elliott, 1985, 364). In sharp contrast to the centrally planned economy envisaged by the Left, Bukharin called for a careful balance between 'the private interests of the small producers and the general interests of socialist reconstruction*. Like Lenin, Bukharin envisaged 'overcoming the market through the market', and maintained that the state sector 'through its greater market competitiveness, efficiency, and resources' would gradually displace private capital. Whereas Lenin repeatedly described the NEP-type mixed economy as a transitional arrangement, or 'breathing space',, Bukharin not only strongly advocated its continuation, but also emphasized its vigorous expansion for decades (Cohen, 1974, 180-81). Bukharin, however, did not oppose planning altogether. He rather believed that planning should be a 'special applied science’ and cautioned about 'the result of sloppy and inaccurate planning and of unbridled growth of mindless cost'. By pointing out the limitations of even a 'well- reasoned plan and the deleterious results of an ill- conceived one’ he warned that with an 'incorrect policy the cost of the process as a whole might be no less than the cost of capitalist anarchy' (Lewin, 1974, 56- 57). Planning, for Bukharin, meant the maintenance of 277 proportionality 'between various branches of production within industry on the one hand, and the correct relations between industry and agriculture on the other', not one that would call for 'systematically breaking socially necessary proportions' (Cohen, 1974, 182). Bukharin, however, strongly denounced centralized planning as advocated by the Left, and maintained that such a planning, orchestrated by the state, would tend to establish a 'strong-willed government imposed on a backward society'. Its self-perpetuating bureaucracy would 'engage in an overall drive to crush Russia's 'small people* - the craftsman, small merchants, small industrialists, and small agricultural producers (Lewin, 1974, 62). Instead Bukharin asserted 'our economy exists for the'consumer, not consumer for the economy’ and stressed pragmatic policies that would allow the private sector to prosper and 'to grow into socialism' through market relations in an environment enveloped by workers' controlled state. He pleaded for a pattern of development based on 'socialist humanism’ and defended a cultural intellectual life based on the 'principle of free, anarchistic competition, rather than squeezing everybody into one fist' (Cohen, 1974, xii). Bukharin emphasized, as did Lenin before him, the cooperatives as the vehicle for socialist transformation of the Soviet economy. He wanted an evolutionary process of development and emphasized economic policies 'based on 278 social harmony, class collaboration, voluntary performances and reformist measures' (ibid., 201). In contrast to the obsession of the Leftists for rapid growth of the economy, he pleaded for reasonable rates of growth. Opposing the centralized planning advocated by the leftists, he called for flexible and careful methods of planning. Instead of approving the leftists' strategy to exploit the peasants for capital accumulation and investment, Bukharin stressed mutually supportive industrialization strategies between industry and agriculture. The prescriptions of the Rightists are nicely summarized by Lewin (1974, 66) as 'less centralization, more party democracy, more rationality and scientific approach to problems, no mass coercion, less reliance on strictly administrative state measures, priority to gradualism and persuasion’. The Position of the Leftists In sharp contrast to the rightist evolutionary prescriptions, the leftists, led mainly by Leon Trotsky (1879-1940) and Evgeny Preobrazhensky (1886-1937), called for sweeping measures for rapid industrialization and were more ‘concerned with the need for industrialization than with the precise character of the processes to accomplish it' (Elliott, 1985, 364). The leftists insisted that in order to create the necessary foundations for socialist transformation, the Soviet economy desperately needed rapid 279 industrialization based on the Marxist principle of 'primitive capitalist accumulation’. As the Soviet Union lacked colonies to exploit for its 'primitive accumulation *, the leftists called for achieving rapid industrialization at the expense of the private sector, specifically at the cost of the peasantry. Realizing that 'necessary capital would not be provided by savings’, the leftists urged the state 'to pump resources out of the private sector and.so finance the state's investments into the expanding socialist industrial sector' (Nove, 1969, 126). Denouncing the rightist's thesis of mutual development of both agriculture and industry, the Leftists asserted that 'it would indeed be impossible simultaneously to fight the kulaks, raise prices charged to peasants, increase*off-farm surpluses and greatly to raise the levels of capital accumulation' (ibid., 127) . Secondly, while the rightists, including the short-lived Bukharin-Stalin alliance, sought to promote the principle of 'Socialism in one country', emphasized interdependence of socialized industry and dominant private agriculture in an 'isolated economy', the leftists, especially Trotsky and his followers, called for an 'integrationist approach' to socialist development. Trotsky believed that independent development of socialism would be simply 'impermissible1, even 'inconsistent with scientific socialism1. Emphasizing the need for taking advantage of an international division 280 of labor for rapid industrialization, he proclaimed, 'instead of requiring domestic industry to produce the diverse varieties of necessary equipment, Russia should concentrate on the items in greatest demand, importing the more complex and expensive1 (quoted in Day, 1973, 137). He condemned Bukharin's suggestion for development at a 'snail's pace' as a 'reactionary philosophy' and asserted, 'for us a decrease in the rate of development is infinitely more dangerous than the import of foreign machinery and of the foreign goods we require in general* (ibid., 136). Trotsky firmly maintained that for achieving the goal of rapid industrialization Soviet Union should engage in international trade with any country. To him whether a country is socialist or capitalist *made 'little practical significance in economic terms' for international trade, as the 'same division of labor would prevail if the revolution came tomorrow' in those countries (ibid., 139). Emphasizing the overwhelming importance of foreign trade during the transition period, Trotsky proclaimed that every 'foreign product that can fill a gap in our economic system -raw material, intermediate goods and consumer goods -can under certain conditions accelerate our reconstruction’ (quoted in Bideleux, 1974, 107). He asserted that the Soviet 'order rests not only on the struggle of socialism against capitalists, but also, within limits, on cooperation between socialism and capitalism ’ (ibid., 107). Trotsky also 281 insisted that to promote industrialization Soviet Union must keep up-to-date in terms of technological development in the world economy. He maintained that socialism could only triumph if 'we measure up not only to our own discoveries and inventions, but also to the progress of world technology' (Day, 1973, 170). As preceding discussion shows, Trotsky envisaged rapid industrialization, a high rate of economic growth, diversion of resources from the private sector for the development of the state sector, planned international trade. All these policies very clearly stipulated conscious planning on behalf of the socialist state. He insisted that decisions pertaining to questions like what to import, what to export, and what to produce locally, etc.*’ should be consciously planned and coordinated by a central planning agency. Trotsky, however, emphasized that while devising international trade plans, Soviet planners should base their analysis on 'a system of comparative coefficients’, in order to establish linkages between Soviet's production and world standards of price and quality, and to 'preserve the trade monopoly the coefficients were also to serve as a guide for investment decisions' (ibid., 140-141). Trotsky also condemned bureaucratic proliferation. In The New Course (1923) Trotsky provided his seminal critique of Soviet 'bureaucratic degeneracy' which he thought could be remedied by increasing 'intra-party democracy' and by 'promoting more proletarians into bureaucratic posts' (Bideleux, 1974, 106). He was also a pioneer of worker's self-government. In his 'search for guarantees against bureaucratization and opportunist deviations of mass working class organizations' Trotsky sought to establish worker's councils as a form of 'direct democracy’ in which bourgeois democracy's 'barriers between passive voters and active participants in the business of government1 would wither away with the elimination of the division of labor between the governor and the governed (Mandel, 1979, 53-62). Describing the workers' self-organizations as 'the new wave of the future', Trotsky anticipated that a democratically elected worker's council, by handling its own 'finances, self-defence, food supply, information, solidarity, public relations' would constitute 'in embryonic form' 'a future workers state' in which the 'workers (or socialist) democracy1 would be 'higher even than the most advanced form of bourgeois democracy' (ibid., 57-58). Unlike Preobrazhensky, Trotsky maintained that the proletarian state must aid the peasantry 'by instituting credits and agronomic assistance .. . must furnish the countryside with farm implements and machines at accessible prices' (Bideleux, 1974, 106). He emphasized that planners should manipulate the coefficients to secure the domestic market and 'to provide the peasantry with low cost consumer jgoods of an acceptable quality' (Day, 1973, 141). But 283 unfortunately Trotsky 'was shrewdly -misrepresented as a super industrializer who would recklessly force the pace of industrialization and collectivization, given a chance' (Bideleux, 1985, 103). Bideleux maintains that although Trotsky's activities during the war communism period were 'ruthless and brutal', in the subsequent periods he 'consistently advocated relatively sober, circumspect and humane policies' (ibid., 103). He therefore very strongly denounced the policies labeled as Trotskyist as something 'artificially manufactured - against my will, against my convictions, against my real views' and maintained that those policies were actually propounded by Preobrazhensky (Bidelux, 1985, 103), recklessly distorted and cleverly misinterpreted by Bukharin (Day, 1973, 148). Trotsky was undeniably in favor of central planning; but he simultaneously underscored the necessity for continuation of market processes. Undoubtedly Trotsky was less enthusiastic than Bukharin in defending a harmonious relationship between industry and agriculture, but unlike Preobrazhensky he strongly denounced the idea of suppressing agriculture for the promotion of industry. In The New Course (1923), Trotsky categorically asserted: proletarian state must aid the peasantry by instituting credits and agronomic assistance.... It must furnish the countryside with farm implements and machines at accessible prices.... industry's costs should be reduced through systematic planned organization, in conformity with agricultural development .... not by suppressing the market, but on the basis of the market.... success in 284 economic organization will largely depend on how far we succeed, through precise knowledge of market conditions and correct economic forecasts, in harmonizing State industry with agriculture in accordance with plan, {quoted in Bideleux, 1985, 106). Stalin (1879- 1953) The other and the most important participant in the great industrialization debate was Stalin. During his more than two decade long iron rule over the Soviet Union, Stalin amply demonstrated his theories, beliefs, and strategies for industrialization of the Soviet economy. In the preceding chapter we have elaborated his plans and programs, and evaluated the performance of Soviet economy during his regime. Sovietologists commonly believe that Stalin was 'incapable of independent thought’ and widely accused him of merely borrowing Bukharin's ideas 'during his witch-hunt against Trotskyism* and after elimination of Trotsky by 1.927, appropriating 'the Trotskyists program in order to ditch Bukharin and steal a march on the disarrayed Trotskyists1 (Bideleux, 115). But this traditional view, according to Bideleux (1985), grossly misinterprets the platforms adopted by Stalin. According to him, by 1926 Stalin had his own developmental strategy, he just 'found it expedient to play down his fundamental divergence from Bukharin’ until 1929. Stalin, Bideleux asserts, 'displayed 285 a frighteningly literal belief in his own ideology and demonology, and ruthless logic {or fanaticism) in translating them into practical policy. He never adopted Trotsky's programme' (ibid., 115). Bideleux claims that Stalin in his 'The Party's Task in the Countryside' (1924) warned how the peasants as a 'new, free and active class' , was overwhelmingly concerned to receive 'cheap commodities 1 and to sell its grain at the highest possible price’. Also in his Foundations of Leninism (1924), Stalin stressed economic self-reliance and insisted that the Bolsheviks rally around the principle of 'socialism in one country' (ibid., 116). Both during the Stalinist and post-Stalinist periods, numerous voices were raised for economic reforms. Among them the contributions of S. Strumilin, Bazarov, Gorman, i Leontief, and Evsei Liberman were profoundly significant in shaping the reformist movements within the Soviet Union. As most of these contributions had their genesis in the | historical debates of the twenties, and more importantly, ( I as most of these contributions actually guided the reform ! efforts in the post-Stalin period, and as we have discussed I I in details those reforms in the previous chapter, a review of those contributions seems unnecessary here. I Lessons for Gorbachev's Perestroika 286 As the preceding discussion shows, Marx emphasized central planning and denounced capitalist market relations in a post-capitalist socialist economy. As a practical matter, Marx's vision of communism included a more or less indefinite use of market-like relations, at least in the provision of worker's consumption goods. Moreover, the associated producer's are expected to manage the enterprises themselves while the macro-management of the economy would be carried out by their representatives, not by a centralized bureaucracy. Gorbachev's calls for greater decentralization in the overall management of the economy, fuller and more effective participation of workers in the management of public enterprises, and stubborn resistance to totally dismantling the central planning apparatus, clearly supports his claim that he is looking into socialism, not outside it, for solutions to the Soviet Union's problems. Although central planning still remains a bureaucratically managed giant, and still largely upholds 'sovereignty of the producers', Gorbachev's perestroika calls for substantially reorienting its approach towards 'sovereignty of the consumers'. Moreover, perestroika's revolutionary program for restructuring the economy clearly upholds Marxian doctrine that economics determines politics. Gorbachev's insistence 287 to find the roots of the problems of contemporary Soviet Union in the economic sphere of the country clearly reflects his adherence to Marxian teachings. Of course Gorbachev goes beyond economic restructuring. He simultaneously initiated political reforms, glasnost and democratizatsiya. But Gorbachev consistently maintains that such political reforms are intended to supplement nis program for economic restructuring of the country. Marx also very clearly emphasized democracy. But as discussed above, he excoriated bourgeois democracy for both its class biases and its passive participation of the masses in the operation of the state. Contrastingly, Marx advocated positive participation of the workers in both their industrial and collective lives. This involves conscious and planned activity directed towards satisfying human needs and the promotion of human dignity, on the one hand, and a classless society, not one that promotes class differentiation or stratification, on the other. Gorbachev claims that he derives 'ideological succor and inspiration' form Lenin, especially from the NEP period of Lenin. Gorbachev's emphasis on the promotion of market relations such as profits, prices, economic incentives, greater role of the private sector and private initiatives, increasing emphasis on international trade and openness to the outside world, approval of foreign investments, etc. are clearly reminiscent of Lenin's NEP's economic programs. 288 ! Politically, through glasnost Gorbachev's perestroika revives a kind of 'political and social order of NEP'. Just as NEP allowed intense policy debates, robust discussions and remarkable compromises, Gorbachev's glasnost also allows r dissent, discussion and debate within the Communist Party, i not outside it. Of course, glasnost's dimension and magnitude is much wider than those of NEP's political and social order. Most certainly Gorbachev's perestroika does not fully conform to ; the political practices of NEP period. As we have seen in j the previous chapter, politically NEP was also accused of imposing 'a full totalitarian, monolithic political order by officially wiping out all types and degrees of political i opposition or driving it underground' (Draper, 1987, 289). i Gorbachev is doing just the opposite. Glasnost not only ' allows dissent and political opposition, but also gives such opposition legal parliamentary status. Gorbachev is not ! < driving opposition to the underground; rather he is making 1 it conducive and safe for the underground opposition to come j to the surface and take part in an unfolding political debate. Even he agrees to revise the Soviet Union's i i constitution to remove a clause proclaiming the Communist Party as the leading force in the country (The New York ! Times, December 10, 1989). Secondly, the background , that compelled Lenin to resort to NEP-type policies was quite different from that which inspired Gorbachev to embark 289 upon perestroika. Like NEP, perestroika was also initiated to save the Soviet Union from imminent economic crisis. Except for the crisis situation of the economy, the backgrounds for NEP and perestroika are opposed. Gorbachev most certainly had not inherited the least developed agrarian economy of Europe, he did not have a hostile capitalist class in the country, he did not find it necessary to give the Communist Party a 'breathing space’, and internationally he did not confront the situation that Lenin confronted during and in the aftermath of the Civil I 1 War. In these crucial respects, the background that prompted Gorbachev to initiate perestroika was different from the Soviet Union of Lenin's period. I Then comes the 'historical' industrialization debates of t the twenties. Lewin (1974, 300) has described these as : 'historical debates' because 'they have dealt with major I themes that have recurred throughout the recent Soviet past and present, sometimes subsiding and going underground, at i ! other times flaring up with considerable vigor, even fury, 1 i when circumstances have made it possible1. Among the major I participants of the debates, Gorbachev plainly repudiates Stalin's model. Although reinstatement of Trotsky's still ! remains unimplemented, he has already officially reinstated ’ Bukharin. Major programs of Gorbachev that are clearly reminiscent of Bukharin's prescriptions include: a balanced development approach that emphasizes mutual growth of both 290 industrial and agricultural sectors; simultaneous emphasis on market relations and private initiatives, on the one hand, and rational and careful central planning, on the other hand. Among the lessons from Trotsky, the most important one for Gorbachev is the opening up of the economy for international trade and foreign investment. As the preceding discussion shows, Trotsky strongly denounced the principle of 'socialism in one country' and advocated taking advantage of the international division of labor. Trotsky emphasized international trade with any country, be it socialist or capitalist, and called for importing goods, whether they are raw materials, intermediate goods, investment goods or consumer goods. He asserted that for rapid acceleration of the industrial development the Soviet Union must within limits cooperate with capitalist countries. Gorbachev's call for international trade, foreign joint ventures, import of consumer goods from foreign countries, etc. resembles Trotsky's prescriptions. Both Trotsky and Bukharin strongly denounced bureaucratization, and even before them Lenin warned against bureaucratic proliferations in a socialist society. Gorbachev's effort to curb bureaucratic power and proliferations has many precedents throughout Soviet history. The great industrialization debate has decisively influenced the post-Stalinist reform efforts. The indelible mark of Bukharin's prescriptions are evident 291 on all reform efforts in the Soviet Union that emphasize de- Stalinization. While the clear preference of Bukharin's prescriptions over and above Stalinist programs represent a promising movement towards democratization of Soviet society and liberalization of the Soviet economy, a bolder approach could be to look further back in the history, to the strategies of Edward Bernstein, Karl Kautsky and Rosa Luxemburg, in contrast to Lenin's authoritarian tradition of one-party rule. The future of socialism may well lie with the 'revisions' of Edward Bernstien than with those of Leninism. 292 Chapter V Conclusion i Throughout most of the nineteenth and twentieth centuries, the specter of the communism haunted capitalism. Now, at the threshold of the twenty-first century, communist societies are being transformed by the pressures of political and economic democracy. Recent 'ideological earthquakes' (Smolowe, 1989, 48), and the massive explosions of 'people power’ throughout the communist countries have shuddered the whole world like a global outbreak of volcanic eruptions. In the Soviet Union Gorbachev launched perestroika. In China, despite the massacre at Tiananmen square, orthodox Marxism has been officially condemned as inadequate for providing answers to many problems. In Poland the Communist Party has been ousted from power. In Hungary, the iron curtain along borders has been torn down, and the Communist Party itself has been officially abolished. In East Germany, the communist government is making desperate efforts to stop thousands of its disenchanted citizens from fleeing to West Germany. In Mozambique, Marxism has been dropped as an official ideology. As a boon to these developments, the Soviet Union has recently given a green light to its Eastern European allies to find their own way. All these breathtaking and momentous events of the late eighties heavily contributed 293 to the apparent lost of socialism's 'religious appeal' that swept the world even in the fifties. The amazing speed of the unfolding events convincingly indicate that after seventy years of authoritarian rule, communist leaders have apparently learned the costly lesson that no doctrine or system can survive indefinitely by suppressing fundamental human freedoms. Perestroika, a freer and more humane vision of socialism, has emerged as a unique answer of the Soviet Onion to save communism from the pressures of political and economic democracy that currently threatens the foundations of the entire communist world. Instead of replacing socialism with capitalism, the author believes, Gorbachev intends to provide socialism with a 'human face'. He envisions a socialist system in which the demands for economic and political democracy will be effectively accommodated, in which market and private initiative will play a far greater role, and in which the changed needs of a mature and developed socialism will be reflected in greater individual freedom and less domination of the state. Perestroika as a concept has generated considerable debate among experts and the intelligentsia in general. The conception of perestroika ranges from 'no reform' to 'radical reform* to 'comprehensive radical reform'; from 'revolutionary process' to 'revolution' to even 'counter revolution'. Interestingly, divergent and even sharply 294 opposing arguments have often led observers to surprisingly similar conclusions. Such debate surrounding the nature and character of the perestroika is not unusual. Even in the early twenties when Lenin abruptly replaced War Communism policies with the New Economic Policy (NEP), the western media characterized that as 'harbinger of communism's failure' (Adams, 1972, 7) and as a transition from communism to capitalism. Similarly Khrushchev's de-Stalinization policies were often reported in the western media as a movement away from socialism. Therefore claims like the communist countries are now undergoing 'an unprecedented transformation’ towards the establishment of 'pluralistic democracies with market economies' (President Bush, quoted in Time Magazine, Nov. 6, 1989), has a familiar ring. Gorbachev's perestroika no doubt has initiated a vigorous process of transformation that genuinely carries the potentiality to do away with the remnants of the Stalinist and the post-Stalinist political system and centralized economic management of the country. By diversifying the existing forms of property ownership, perestroika might end up with an economy composed of an extensive cooperative and self-employed sector, and a dominant but decentralized state enterprise sector. The policy prescriptions of perestroika clearly indicate that the USSR has embarked on a revolutionary process that can transform a traditional, administrative, and authoritarian economy into a democratic, decentralized and competitive, market-oriented socialist economy. Given the revolutionary changes that have already taken place in the Soviet Union under the banners of perestroika, one may conclude that perestroika might take a turn towards the establishment of a full-scale market socialism, that would guarantee political democracy for its people, and supplement mature socialism by allowing markets to play a much bigger role. By extending the dimension of perestroika far beyond the restructuring of only the economic sector, and by simultaneously introducing glasnost and democratizatsiya, Gorbachev actually embarked on a massive program of revitalization of the whole Soviet society. t While exactly what model Gorbachev and his lieutenants are following needs to be investigated further, Goldman (1987, 148-173) claims that Gorbachev dislikes the Hungarian model of market socialism. His insistence on not dismantling central planning machineries reflects his preference for something like the East German model. Gorbachev's strategy also seem to be very different from the Chinese model. While China enthusiastically implemented economic reforms and forcefully crushed demands for democratic reforms, Gorbachev has already attained monumental achievements in terms of political reforms and has hardly made a headway in terms of economic reforms. In some ways, Gorbachev's vision resembles the Swedish model, 296 in which the post-war Keynesian prescription of an inevitable trade-off between full-employment and inflation has been effectively nullified. Whereas Hungary's market socialism resulted in increase in inflation, inequality and unemployment, and even showed discouraging economic growth in the eighties, Swedish 'exceptionalism' provides 'rich example of how socialists can combine elements of democratic planning and market efficiency1, and attain full employment by establishing an economic structure in which 'the plan decommodifies the labor market and treats workers as human beings but it does so in response to signals from that labor market1 (Harrington, 1989, 64-70). Whatever model Gorbachev follows, it seems clear that he is endeavoring to transform the ideology of socialism itself to tune it to the changed needs and demands of late twentieth century mature socialism. Gorbachev inherited a Soviet Union on the verge of crisis. The crisis manifested itself in every sphere of the country's economy, culture, politics and administration. In the fifties, the Soviets expected to overtake the United States in economic production. The stagnation of 1979-82 has shattered that dream, and perilously punctured the I legitimacy of socialist doctrine. The economic potential ! of the Soviet Union came under severe pressure from all sides, and the disappointing economic performance of the country has triggered alarm around the globe. As economic 297 destabilizers like stagnation, low productivity, and technological backwardness surfaced, many anticipated that such a crippled economy was a ripe for disaster. Any delay in reform efforts was deemed to be economically, socially and politically suicidal for the Soviet Union. Gorbachev launched perestroika to save the Soviet economy from the crisis situation. The main priority of perestroika is a profound structural reorganization of the economy, a redirection of the nation's economic and social preferences, a reactivation of its human and material resources, and an effort to inject into the economy the benefits of scientific and technological revolutions that bypassed Soviet society during previous regimes. Gorbachev, however, is not the first Soviet leader to attempt radical reforms in the Soviet Union, rather Soviet history provides a number of notable examples of reform attempts. Although perestroika is revolutionary in character and epochal and far-reaching in magnitude, many of the ideological and intellectual roots of perestroika's reforms can be traced in the past history of the Soviet Union. But in terms of vigor, whole-hearted commitment and enthusiasm, and comprehensive and revolutionary character, perestroika has no parallel or precedent in Soviet history. In contrast to the half-hearted and ill-conceived piece meal reforms of the past, perestroika attempts to replace old obsolete structures of production with a more up-to- 298 date, scientifically-tuned, and socially oriented version of socialism. Throughout the last seventy years since the October Revolution, the Soviet Union has passed through several distinct periods of social, economic and political transformation. The economic and political reforms that were either attempted or actually carried out in different periods essentially responded to the political and economic realities of the day. Among all these periods, however, the regime of Stalin marked the watershed in Soviet history. Stalin's forced replacement of NEP with a command model of socialist economy sparked two clearly identifiable social, political and economic forces in the Soviet Union. As usual in any society, those who defended the existing institutions were known as the conservatives, while those who challenged ! the existing institutions and believed in change came to be known as reformists. The conflict between reformism and conservatism in the Soviet Union, however, links the past, the present and the future of the country. While the conservatives usually defend orthodox Marxism-Leninism, the Stalin-cult and hegemony in the communist world, the reformists stand for a greater role of the market and private initiative, decentralization of economic management, and production of more consumer goods. In Gorbachev's perestroika, reformist thought is clearly discernible and hence, it could be argued 299 that Gorbachev represents an extension of the reformist movement. But Gorbachev's perestroika is not a simple extension of the reformist movement in the Soviet Union. What makes Gorbachev exceptional as a reformer is the fact that perestroika is undoubtedly much more comprehensive, and secondly, comes with a heavier dose of radicalism than earlier reform efforts. The scope, dimension and magnitude of reforms envisaged by perestroika places Gorbachev far beyond a simple reformer, and fixes him in the category of radical reformers, if not true revolutionaries. Some Sovietologists believe that since the October Revolution, although different periods or regimes in Soviet Union pursued apparently different models, actually these models hardly differed from each other. These writers, known as continuity theorists, find no meaningful difference or discontinuity between Leninism and Stalinism. To them the present is the replica of the past, they tend to argue that Stalinism was actually a continuation of the authoritarian strand of Bolshevism. Even in the post- Stalin period, although successive models in the Soviet Union moved away from Stalinist totalitarianism and allowed a greater role for the market processes, the continuity theorists allege that hardly any meaningful change took place in the basic superstructures of the country. Their thesis of 'an unbroken historical continuum', however, came under fire, especially since the early sixties. The 300 challengers assert that the Bolshevik and Stalinist traditions are not only different, but substantially so. Another group of writers argues that the Soviet Union actually presents a dialectic process of economic development. They maintain that different periods of Soviet history represent sharply different institutional characteristics, each period successful in terms of its own parameters. According to them, the very success of one period made it an imperative for the successive leadership to reverse the trend. Form this perspective, Stalin's period was actually not 'a nightmare', it was rather overwhelmingly successful as it accomplished its own objectives. Poor performance of the Soviet economy during the subsequent periods, therefore, was basically 'failures borne of success 1. Many scholars agree that most of the reform efforts made since Stalin's death in 1953 until the assumption of power by Gorbachev in 1985, were either half-hearted or ill- conceived, or both. One of the crucial criticism laveled against those reform efforts is that most of them either j failed to succeed for long or were easily reversed. But the J t reforms envisioned by Gorbachev have already gone far beyond the level of political rhetoric and lofty optimism. ! Although many of the economic reforms envisaged by perestroika, so far, fall short of the towering expectations 301 of the Soviet people, the achievements, especially in respect to glasnost and democratizatsiya, are widely considered to be unprecedented and probably irreversible. Few dispute Gorbachev's claim that perestroika is far more comprehensive in character and goes far beyond the previous efforts of reform in Soviet history. Moreover, many believe that the seeds of freedom or openness that Gorbachev has already sown in the Soviet mind and the changes he has already brought about in the Soviet society has no parallels in the Soviet history. The genesis of Gorbachev's perestroika lies with Lenin and in the prescriptions of NEP. Gorbachev rejects both the Stalinist and the post-Stalinist perspectives and consistently invokes Lenin to relate his reform programs with Lenin's policies. Invoking of Lenin, of course, is not novel in Soviet history. Stalin, who repudiated Lenin's NEP programs, claimed to be following Lenin's principles. Such Stalinist programs as collectivization of agriculture, rapid industrialization, and others were described officially as 'Marxism-Leninism in action1. Although these programs of Stalin resembled 'the surviving spirit of War Communism1, it cannot therefore be argued that Stalin simply revived the system of War Communism. Similarly although Gorbachev himself claims that perestroika draws from NEP, it would be an exaggeration to equate NEP with perestroika. We shall come back to this point in a moment. 302 The Stalinist model, having fulfilled its objectives, eventually soon became dysfunctional for the fundamentally changed Soviet society. Because of its overwhelming emphasis on target fulfillment, Stalinist model repressed creativity, innovation and initiative, and lacked the flexibility to adjust to rapidly changing domestic and international conditions. After Stalin's death, his policies and programs faced thorough scrutiny and, in many cases, reversals. Among the first to take initiatives for change was Malenkov. Within a month after Stalin's death, Malenkov announced his 'New Course'. Although his reform measures constituted only a modest break with the Stalinist period, and were largely considered to be derivatives of Stalin's thought, Malenkov made a remarkable effort to put consumer demand on the agenda of the Soviet leadership and purged KGB chief Beria and substantially secret police terror. i During his seven years of rule, Khrushchev made several | bold attempts to reform the Soviet economy. But the Khrushchevian policies were often erratic and incoherent, and his programs were often contradictory and ill-conceived. After his fall, in October 1964, Soviet media officially described Khrushchev's reforms as: 'harebrained scheming*. Khrushchev more than once announced a bold policy innovation from which he later retreated. Politically he divided the Communist Party vertically, economically he gave priority 303 to light industries over heavy industries but economic indicators latter demonstrated an unmistakable priority to the producers’ goods sector. Internationally, Khrushchev's de-Stalinization policy backfired, it fed the East European unrest that culminated in revolts in Poland and Hungary, which eventually led to his downfall. The sad end of his turbulent and highly optimistic era not only shattered the dream for overtaking the United States rapidly, but also brought the de-Stalinization campaign to a grinding halt. j Many of tt reforms initiated by Gorbachev's perestroika resemble Khrushchev's reforms. For example, perestroika's emphasis on decentralization of authority to the enterprise level, strengthening of the role of the trade unions, i efforts to provide economic incentives for improving the quality of the products, economic methods of production, and incentives to agricultural production; allowing private initiatives; reforms in wage, price and money systems; all these vividly resemble the reforms of Khrushchev's period. However, there are crucial differences between Khrushchev's reform efforts and those of Gorbachev. Perestroika attempts at de-Stalinization by promoting democratization and openness in the Soviet society, while Khrushchev wanted to accomplish that by administrative order from above. While Khrushchev did not repudiate Stalinism completely, but rather found some elements of Stalinism 'indispensable', perestroika denounces Stalinism, both for his personality 304 cult and his command model of economy, and even post- Stalinism as well. Most of the reforms envisaged by Kosygin remained unimplemented. The bureaucracy, instead of promoting the reforms, actually worked for their failure. Kosygin's reforms was carried out without effective coordination among the activities of various branches of government, and in the economic sphere administrative methods remained predominant. Resultantly, bureaucracy proliferated, and no genuine success was made in accelerating scientific and technological progress and f 1 increasing economic efficiency. Above all, Kosygin also failed to reinforce his reform efforts by taking corresponding measures to democratize industrial management or to open up the society. Brezhnev's period was mainly characterized for maintenance of the status-quo. His reform efforts were timid and their actual implementation was not significant. Brezhnev replaced Khrushchev's boast to attain full-scale communism by the early eighties by a claim that the economy of 'developed socialism1 is 'great enough' to provide for expansion of the 'previously neglected areas of the economy' (Evans, Jr., 1986, 2-3). Even so, performance of the Soviet economy during his regime was dismal. Brezhnev also stressed 'structural adaptations of the Soviet polity, economy and society’ (Hoffman & Laird, 1982, 62-63) to attain a scientific and technological revolution, but 305 nothing worked as planned. Brezhnev's conservatism, bureaucratic management and commitment to proceduralism resulted in a catastrophic decline in actual economic growth of the Soviet Union in the late seventies and early eighties. The decrees of 1973 and 1979 were not even adequately backed by governmental administrative and political support. Although he showed considerable concern for improvement in the agricultural sector he hardly attempted to resolve structural defects in planning and j management. Resultantly, capital intensive agricultural programs showed signs of diminishing returns since the mid seventies. Overall economic growth declined to an annual rate of perhaps one ^percent by the end of the eighties. Andropov's experiments were basically stopgap measures, although they represented a serious effort to put into action many reforms that had received inadequate attention from previous leaderships. Cherenenko was head of a I caretaker government that basically took care of transition of the government to the new leadership. During his one year rule, he hardly initiated any measure. However, he did permit the debate on putting the Soviet economy in order. Now a word about perestroika's intellectual roots. Preponderant features envisaged by Gorbachev’s perestroika include: an 'optimal combination' between centralism and self-management; replacement of administrative methods by 306 economic methods; democratization and openness in the Soviet society; and greater emphasis on scientific and technological progress. Gorbachev claims that Lenin, the founder of the Soviet socialist system, provides him with an 'inexhaustible source* for his perestroika. He also claims that the essence of perestroika lies in the fact that it 'unites socialism with democracy*. For answers to questions on perestroika, Gorbachev looks 'within socialism, rather than outside it*. We therefore began our investigation with Marx and Engels, as Soviet socialism is claimed to be the first practical demonstration of the project that these scholars envisioned in the nineteenth century. Marx clearly emphasized overall planning and denounced capitalist market relations in unambiguous terms in a post capitalist socialist economy. However, 'his methodology allows room for the assumption that the markets of a socialist future need not to be anything like the markets of the capitalist past' (Harrington, 1989, 58). If one chooses 'the libertarian Marx over the centralist Marx and then confront reality instead of texts', explains Harrington, the apparent contradiction between plan and market will disappear in Marxian doctrine. In the economic system that Marx visualized the associated producers are expected to manage the enterprise themselves while the macro-management of the economy would be carried out by 307 their representatives, not by a centralized bureaucracy. The Marxian interpretation of history also emphasizes that base will powerfully effect the superstructure and economics will decide the politics of a society. Marx also clearly emphasized democracy, although he rejected the bourgeois democracy which involves passive participation of the masses in the operation of the state, and creates inequality in society. He rather advocated for a democracy where positive participation of the masses will promote human dignity, and conscious planning of the people will enhance the establishment of a classless society. Gorbachev and his lieutenants also reject the idea that 'Marx equated markets with capitalism and socialism with their abolition1 and maintain that markets are a pre capitalist phenomenon. Gorbachev's calls for greater j i decentralization in the management of the economy, effective participation of the workers in the management of the public enterprises and state affairs, and at the same time his stubborn resistance to totally dismantle the central planning apparatus, clearly supports his claim that for ' solutions of the Soviet Union's problems he is looking into socialism, not outside it. Soviet central planning still retains bureaucratic problems, and still largely upholds 'sovereignty of the producers'. But Gorbachev's perestroika strives hard for reorienting its approach towards sovereignty of the consumers. Moreover, perestroika's 308 revolutionary program for restructuring the economy clearly upholds Marxian doctrine that economics determines politics. Gorbachev's insistence to find the roots of the problems of contemporary Soviet Union in the economic sphere of the country clearly reflects his genuine adherence to Marxian teachings. Of course, Gorbachev also goes farther. He simultaneously initiated political reforms, glasnost and democratizatsiya. Gorbachev consistently maintains that without political reforms and freedom of thought and expression, his program for economic restructuring would be a futile exercise. Gorbachev's emphasis on the promotion of market relations such as profits, pricer, economic incentives, a greater role for the private sector and private initiatives, an increasing emphasis on international trade and openness to the outside world, encouragement to foreign investments, etc. clearly resemble Lenin's NEP programs. But most certainly Gorbachev's perestroika does not conform to the political practices of NEP period. NEP has been accused politically of imposing 'political order by officially wiping out all types and degrees of political opposition or driving it underground' (Draper, 1987, 289). Gorbachev, by any means, is doing just the opposite. His glasnost not only allows dissent and political opposition, but also gives such opposition legal parliamentary status. He is not driving opposition to the underground, but rather making, it- 309 safe for the opposition to come to the surface and take part in the unfolding political debates. Secondly, the background that compelled Lenin to resort to NEP-type policies was quite different from the background that inspired Gorbachev to embark upon the massive program of perestroika. Like NEP, perestroika was also initiated to save the Soviet Union from imminent economic crisis. However, the Soviet Union that Gorbachev inherited was not an agrarian underdeveloped economy. He did not have a hostile capitalist class in the country, he did not find it necessary to give the Communist Party a 'breathing space', and, internationally, he did not confront the situation that Lenin confronted during and in the aftermath of the Civil War. Perestroika has much to owe to the 'historical' industrialization debates of the twenties. This comprehensive debate that was staged during the power- struggle among Stalin, Trotsky and Bukharin, dealt with major themes that have recurred throughout Soviet history since the debate. Among the major participants of the debates, Gorbachev repudiates Stalin's model, officially reinstated Bukharin, and so far has remained uncritical of Trotsky. Major programs of Gorbachev that are clearly reminiscent of Bukharin's prescriptions include: a balanced development approach that emphasizes mutual growth of both industrial and agricultural sectors; simultaneous emphasis 310 on market relations and private initiatives, on the one hand, and rational and careful central planning, on the other hand. In fact, similarities of Bukharin's prescriptions with the reform efforts in the subsequent periods in the Soviet Union is so striking that Lewin (1974, xiii) writes: 'it was astonishing to discover how many ideas of Bukharin's anti-Stalinist program of 1928-29 were adopted by current reformers as their own and how much of their critique of past practices followed his strictures and prophecies even in their expression'. Among the lessons of Trotsky, Gorbachev's emphasis to open up the Soviet economy for international trade and foreign investment seems most relevant. Trotsky strongly denounced the principle of 'socialism in one country' and advocated for taking advantage of the international division of labor. Trotsky emphasized international tarde with any country, be it socialist or capitalist, and called for importing goods, whether they are raw materials, immediate goods, or consumer goods. He asserted that for rapid acceleration of industrial development the Soviet Union, within limits, must cooperate with capitalist countries. Gorbachev's call for international trade, foreign joint ventures, import of consumer goods from foreign countries, etc. resembles Trotsky's prescriptions. Both Trotsky and Bukharin denounced bureaucratization, and even before them Lenin warned against bureaucratic proliferation in a 311 socialist society. Gorbachev's effort to curb bureaucratic power and proliferation has many precedents throughout Soviet history. Besides the two World Wars, independence of the former colonies and the consequent decline of the traditional colonial powers, and monumental scientific and technological revolutions, one of the most transfixing phenomena of the twentieth century presumably will be the rise and fall of the Soviet socialist empire. The Second World War contributed to the independence of scores of former colonies, but at the same time helped Stalin to erect an 'Iron Curtain1 around the borders of the countries that constituted the so-called Soviet bloc. Thus World War II moved mankind one giant step ahead in terms of facilitating universal human rights for freedom and democracy, but at the same time forced it to move a step backward by creating opportunities for the Soviet Union to deny similar rights from its closest allies, the socialist countries. Gorbachev, 'the pied piper of democracy' (Goldman, 1989) and his perestroika, 'the tantalizing vision of freer communism1 attempt to salvage the Soviet Union and mankind in general from this painful wound. But the unfolding contemporary events, both in the Soviet Union and in the Eastern European countries, do indicate that the solution should be bolder than what is being currently emphasized. While Gorbachev's programs of 312 perestroika, glasnost, and democratizatsiya already have made monumental and irreversible changes in Soviet life and society, still the 'central role of the Communist Party in political, economic, and social affairs has not diminished* (Pipes, 1989, 14) and a one-party dictatorship continues, in the sense that no formal opposition party has been allowed to operate. Therefore, clear preference of Bukharin's prescriptions over Stalins model, the author believes, should be supplemented by a bolder preference of Edward Bernstein over Lenin. While Lenin's political doctrine was 'he who is not with us is against us’ and who constituted an act of 'falsification1 by castigating all l i opposition to the Communist Party as counterrevolutionaryj (Shapiro, 1966, 354-361), Bernstein emphasized a gradualj evolutionary approach to socialist development in which democractic means could be used 'to prevent class antagonism, for progressive recognition that proletarian class interest coincides with collective interest of the society' (Lovell, 1984, 165). It is about time to accept the fact that orthodox Marxism is not implementable, that among the revisions of Marxism, the Soviet Union and the Eastern European countries exprimented on a wrong one, and also the reformers should enquire into all available revisions of Marxism and if necessary should create a new one before making further steps to implement the Marxian project of human emancipation.___________________________________ 313 References and Further Readings Abouchar, Alan (1979) Economic Evaluation of Soviet Socialism. New York: Pergamon Press. Adams, Arthur E. (1972) Stalin and His Times. New York: Holt, Rinehart and Winston, Inc. Adoratsky, V. (ed.) (1935), Karl Marx: Selected Works in Two Volumes. Moscow: Cooperative Publishing Society. Aganbegyan, Abel (1988) The Economic Challenge of Perestroika. Bloomington: Indiana University Press.. (1988) 'Phased Acceleration (Notes of Soviet Economist1. World Marxism Today. 103-13. _______ (1984) 'important Positive Changes in The Country's Economic Life'. Soviet Review. 3-16. (1987) 'Basic Directions of Perestroika’. Soviet Economy, 3:277-97. _______ (ed.) (1988) Perestroika 1989. New York: Charles Scribner's Sons. ______ (1988) 'Economic Reforms’. In Aganbegyan (ed.) (1988) Perestroika 1989. 73-108. Ambartsumov, Yevgeny (1988) 'Reviving The Leninist Values of Socialism’. Marxism Today. 111-20. Almond, Gabriel A. & Laura Roselle (1989) 'Model Fitting in Communism Studies'. In Thomas Remington (ed.) (1989)Politics and the Soviet System. New York: St. Martin's Press. 170-224. Aptheker, Herbert (ed.) (1965) Marxism and Democracy: A Symposium. New York: Humanities Press. ________ (1965) 'Marxism, Democracy and Science’. In Aptheker (ed.) (1965) Marxism and Democracy: A Symposium. 18-26. 314 Baker, James A. (1989) US-Soviet Relations: A Discussion of Perestroika and Economic Reform. Washington D.C. : Department of State, Bureau of Public Affairs, Current Paper no 1209. Ball, Alan (1985) 'NEP's Second Wind:' The New Trade Practice'. Soviet Studies. 37:371-85. Baran, Paul A.(1980) Post-Revolutionary Society. New York: Monthly Review Press. Basiuk, Victor (1987) 'Soviet Systemic Change, Technology Transfer and U.S.-Soviet Relations'. Hearing before the Committee on Foreign Affairs, House of Representatives. One Hundredth Congress, First Session, December 16, 1987. Washington: U.S. Government Printing Press. 51-72. Baum, Richard (1989) 'Beyond Leninism? Economic Reform and Political Development in Post-Mao China’. Studies in j Comparative Communism. Summer/Autumn 111-123. j I Bauer, Tamas (1987) 'Economic Reforms Within and Beyond the State Sector'. AEA Papers and Proceedings. 452-56. j Berki, R. N. (1975) Socialism. New York: St. Martin's Press. Berliner, Joseph, S. (1981) 'The Prospects for Technological Progress'. In Morris Bornstein (ed.) The Soviet Economy: j Continuity and Change. 293-312. j _______ (1987) 'Organizational Restructuring of the Soviet' Economy'. In Joint Economic Committee (1987) Gorbachev's j Economic Plans, Vol 1 . Washington: U.S. Government Printing Office. 70-83. Bernstein, Edward (1967) Evolutionary Socialism: A Criticism and Affirmation. Translated by E.C. Harvey. New York: Schocken Books. Bettleheim, Charles (1976) Class Struggles in the USSR. New York: Monthly Review Press. Bialer, Seweryn (ed.) (1989) Politics, Society, a n d Nationality Inside Gorbachev's Russia. Boulder: Westview Press. Bideleux, Robert (1985) Communism and Development. New York: Methuen 315 Bornstien, Morris (1985) 'improving The Soviet Economic Mechanism1. Soviet Studies. 37:1-30. ______(ed.) (1981) The Soviet Economy: Continuity and Change. Boulder: Westview Press (1987) 'Soviet Price Policies1. Soviet Economy, 3:96- 134. 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Creator Dowlah, Abu F. (author)

Core Title Perestroika: An inquiry into its historical, ideological and intellectual roots

Degree Master of Arts

Degree Program Economics

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag economics, general,OAI-PMH Harvest

Language English

Contributor Digitized by ProQuest (provenance)

Advisor Elliott, John E. (committee chair), Dymski, Gary A. (committee member), Kamrany, Nake M. (committee member)

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c20-465295

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Identifier EP44930.pdf (filename),usctheses-c20-465295 (legacy record id)

Legacy Identifier EP44930.pdf

Dmrecord 465295

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Rights Dowlah, Abu F.

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the au...

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