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Economic systems December 28, 2012

Posted by Tomboktu in Capitalism, Communism, Economics.

If you liked Red Plenty, then you may find an essay in the latest Jacobin Magazine of interest.

Around the time of the Soviet collapse, the economist Peter Murrell published an article in the Journal of Economic Perspectives reviewing empirical studies of efficiency in the socialist planned economies. These studies consistently failed to support the neoclassical analysis: virtually all of them found that by standard neoclassical measures of efficiency, the planned economies performed as well or better than market economies.
First he reviewed eighteen studies of technical efficiency: the degree to which a firm produces at its own maximum technological level. Matching studies of centrally planned firms with studies that examined capitalist firms using the same methodologies, he compared the results. One paper, for example, found a 90% level of technical efficiency in capitalist firms; another using the same method found a 93% level in Soviet firms. The results continued in the same way: 84% versus 86%, 87% versus 95%, and so on.

In 1989, the dissident Polish reform economists Włodzimierz Brus and Kazimierz Łaski — both convinced socialists and disciples of the distinguished Marxist-Keynesian Michał Kalecki — published a book examining the prospects for East European reform. Both had been influential proponents of democratic reforms and socialist market mechanisms since the 1950s.

Their conclusion now was that in order to have a rational market socialism, publicly-owned firms would have to be made autonomous — and this would require a socialized capital market. The authors made it clear that this would entail a fundamental reordering of the political economy of East European systems – and indeed of traditional notions of socialism. Writing on the eve of the upheavals that would bring down Communism, they set out their vision: “the role of the owner-state should be separated from the state as an authority in charge of administration….[E]nterprises…have to become separated not only from the state in its wider role but also from each other.”

Parties of the working class, acutely vulnerable to pressure from below, were in government more than 40% of the time in the postwar decades – compared to about 10% in the interwar years, and almost never before that – and “contagion from the Left” forced parties of the right into defensive acquiescence. Schooling, medical treatment, housing, retirement, leisure, child care, subsistence itself, but most importantly, wage-labor: these were to be gradually removed from the sphere of market pressure, transformed from goods requiring money, or articles bought and sold on the basis of supply and demand, into social rights and objects of democratic decision.

This, at least, was the maximal social-democratic program — and in certain times and places in the postwar era its achievements were dramatic.

But the social democratic solution is unstable — and this is where the Marxist conception comes in, with its stress on pursuit of profit as the motor of the capitalist system.


1. LeftAtTheCross - December 28, 2012

Thanks for that Tomboktu, very timely as I just finished Red Plenty about an hour ago. I’ll have a read of that Jacobin article a bit later. Red Plenty is a very interesting book for sure, though as a socialist and an engineer I guess I’m in the target audience from the off. There was a series of articles about it on Crooked Timber earlier this year that got me interested, but my wife got to the book before me, and then gave it to her brother who’s living in Boston, so it only wound its way back to me shortly before christmas. In the meantime some discussion of it on Helena Sheehan’s Facebook page got me interested in the Marxist critiques of the economic systems of the existing socialist states, so I’ll admit to floundering around in that for the past couple of months. Alec Nove’s The Economics of Feasible Socialism has plenty to say about the difficulties, and about the shallowness of some previous critiques, those from an ultra-Left direction in particular. His analysis of the problems associated with the Hungarian, Polish and Jugoslav economic reforms are interesting also, and point the way to subsequent difficulties arising from reforms within the USSR itself in the late 80s. He references to Rudolf Bahro will have me tied up there next, assuming my brain doesn’t fry in the meantime, there’s just so much to try to get one’s head around. Has to be done I suppose.


Tomboktu - December 29, 2012

I see a pattern: It was on Crooked Timber that I saw an article about Jacobin today, which led me to the essay I’ve quoted in my post.


2. FergusD - December 29, 2012

I don’t know how they calculated efficiency in those studies but I visited the USSR and the DDR in the early eighties and they didn’t look like societies delivering efficient production to me. I was shocked by the GDR as I expected it to be the most advanced of those countries but it looked like it had changed little from the immediate postwar period. This impression is probably misleading in many ways, but still economic development appeared to lag way behind West Germany, and even other less advanced capitalist countries. The contrast when you crossed the border was striking. It would be good to see more analysis of those economies, the good, the bad (and the ugly).


Michael Carley - December 30, 2012

I suspect the kicker might be here:

technical efficiency: the degree to which a firm produces at its own maximum technological level.

In other words, a firm with low technology producing close to the level of that technology is taken as being technically efficient.


Tomboktu - January 1, 2013

A fair point, FergusD. In fact, Seth Ackerman also discusses the lower total output in his essay. The shortcoming is my selection of quotations, not Ackerman’s essay.

What prompted me to post that particular quote from an 7000-word essay was the fact that he points out that the communist economies were not total failures on all key indicators. Of course, the failure of our current capitalist systems — the mass unemployment, emigration, etc., — are not take by those in the mainstream (media, politics) as signs that it is a failed system… sauce for goose, etc.

I probably posted too hastely in that all I did was just put up a handful of quotes, with the message “you might be interested”, without explaining why. And, in fact, it it those who have not read Red Plenty who probably might find it more interesting, depending what informationt they already have about economic systems.

The value of the essay is that Ackerman pulls together for a non-specialist a number of pieces of information which suggest that viable alternatives to capitalism can be conceived and designed.

For me, it is important to see the discussion for the Left in Ireland open up beyond the two prongs of revolution, on the one hand, or more tax on the rich and no (or smaller) cuts for those who rely on social protection and state-provided services, on the other hand.

While Jacobin magazine is hardly mainstream, one thing I notice is how little I see ideas for alternatives presented and analysed in the media — print and online — that I read or hear about (other than those two of revolution and no cuts).

As it happens, Ackerman discussses, but doesn’t come behind, the ideas of the last activist I saw in Dublin presenting alternatives: Michael Albert (in October 2011). That was on “parecon” — participatory economics. (As it happens, I am reading in an unsystematic way the academic exposition of that by Robin Hahnel.)

I am sure — the comments on this post prove it — that the ideas and issues raised in Seth Ackerman in his Jacobin essay are known to some on the Left in Ireland, and have been studied by academics — and again there is evidence of that, this time in the references not only in the extracts I quoted, but throughout the essay. But I would love ot see these ideas being more widely discussed and examined — not necessarily on Pat Kenny or over beers (God, that would be a fun night), but not confined to a handful of Left-econo-nerds and their blogs or theses either.

And all that said, there is a specific dimension of economic justice that I haven’t seen in the material that I have read so far: what would ecomomic inequality in a new system look like? Certainly, if we moved to a system with the characteristics that Ackerman describes, we would see the removal of one element: the returns to capital. However, the other major source of inequality at the moment — in the teenies? — is, technically, in the inequality in returns to labour. Two groups account for this: CEOs and workers in the financial sector. Can we be sure in any of the alterntives that the crazy salaries senior executives and those in working in the financial sector will not continue? I don’t know if I haven’t yet found the discussion of that issue or if it hasn’t been explicitly addressed, but it is a gap in what I have seen so far.


FergusD - January 2, 2013

Sadly I haven’t read anything about the “real existing socialist countries”, as tey were claimed to be, for a very long time. I would have hoped there would have been intense analysis of their economies, and why in the end those systems fell apart, from the left – especially the Marxist left. If there has point me towards it!


LeftAtTheCross - January 2, 2013

Fergus, that Alec Nove book was revised in 1991 or thereabouts to cover some of that ground. But even the earlier edition, from ’84 I think, took a close look at the on-going difficulties which beset the economies from the 60s onwards, including the reform attempts in Hungary, Jugoslavia, Poland etc., and how they also were incomplete in their scope.


LeftAtTheCross - January 2, 2013

The notion that the vanguard party necessarily degenrates into a capitalist elite tends to overlook the processes of real economic reforms which were rolled out in various economies within the really existing socialist states, reforms which were motivated not by a desire to transtion to oligarchic capitalism but by a desire to solve real problems in the supply of consumer goods in particular, including basic everyday commodities (yes) which were recognised as a weak point in the centrally planned economies. Whether it was the partial market socialism of Hungary or the workers’ self-managed enterprises in Jugoslavia, the intention was to manage the introduction of more flexibility into the economy, but flexibility based on socialist principles. Nove makes sound agruments against the workers’ self-management approach implemented by the Jugoslavs and looks at the limiting factors which prevented the working of the types of feedback systems that operate within a capitalist economy. On the specific aspect of workers’ autonomy, he looks at the conflicting motivations for workers, their enterprises, and the managed economy as a whole, conflicts which were ultimately mismanaged for political reasons, doing whatever it took to keep the show on the road. The really interesting thing in Nove’s book is that one gets the sense that the economies of the really existing socialist states were in one respect very similar to our own capitalist economies, in that there existed ideologically perfect models of how the economy should operate, a hugely imperfect apparatus which managed to keep the show on the road with successes and failures, and a ruling elite which balanced the stresses between the model and the reality and kept most of the people happy most of the time. There’s a lot to be gained from an honest appraisal of those successes and failures, and the processes by which the economies moved through the decades as they attempted to build modern consumer-oriented sectors on top of the largely successful producer-oriented industries created before, during and after WWII.


LeftAtTheCross - January 2, 2013

That last comment should have appeared after CMK’s comment below in relation to Michael Lebowitz. My bad.


ejh - January 2, 2013

There’s not a moderation fairy that can do “and so you shall”?


CMK - January 2, 2013

I haven’t read Nove’s work (yet) so I can’t really say that much about it. That’s a good point about assessing economic performance against ideologically defined ideals. Lebowitz engages with Janos Kornai’s work on the Hungarian communist economy and is not really sympathetic to the latter’s views.

Lebowitz’s point about the vanguard party is that where there is no countervailing power – such as autonomous workers’ organisations able to engage in what he terms ‘protagonistic activity’ – then the degree to which it is the vanguard party who control the economy – not the working class – makes it very possible to re-instate capitalist relations of production, and then capitalism itself, because only the vanguard party alone needs to be convinced, as they hold the monopoly of power; Soviet citizens’ and their views didn’t matter and couldn’t matter as the political system was structured on excluding them from decision making.

What I found really interesting about Lebowitz’s book is that neo-liberal economic nostrums gained increasing acceptance within the Soviet economics profession from the early 1970’s onwards (they were using the same textbooks as economists in the West, for instance). So, neo-liberalism, as a conceptual approach to economics, was well established in the Soviet Union long before its end. So, when the CP tried to introduce economic reforms they turned to an economics professions itching to implement neo-liberal ideas.

Their two principal targets were the ‘soft constraints’ on Soviet enterprises (where they couldn’t go bankrupt) and the ‘right to a job’ which was perhaps the only area where individual Soviets citizens held any leverage. The CP couldn’t, for instance, allow any unemployment as they knew well that economic security – of a sort – was the only basis for the ordinary Soviet citizen’s loyalty to the state. Mass unemployment was not compatible with the ‘asymmetrical social contract’ of the Soviet Union where liberal political rights were ceded in exchange for inalienable and indestructible economic rights.

Lebowitz is explicit in his view that ‘Perestroika’ was an unequivocal attack on the ‘Soviet social wage and the Soviet working class’. What I find interesting about all of this is that it would suggest that the attack on workers’ in the West that began in the early 1970’s, and intensified in the 1980’s, had its analogue in the Soviet Union, if not the rest of the then Eastern Bloc.

What Lebowitz seems to be suggesting is that its not workers self-management that is the way to go to have a viable socialist economy but an underlying political system which permits autonomous workers’ organisation and where workers’ are free to engage in antagonistic relations with the State over their terms and conditions. That and not have a plan that is too rigid and pre-determined. Indeed, Lebowitz was explicit that the class divide in the Soviet Union was between the ‘planners’ who were members of the vanguard party and the ‘workers’ who were not.


CMK - January 2, 2013

‘The Contradictions of Real Socialism’ by Michael Lebowitz is an excellent, surprisingly readable, critique of the economic system that prevailed in the Soviet Union. His thesis, in a sentence, is that the vanguard party, where there is no scope for workers organising autonomously, will evolve into an ersatz capitalist elite which, over time, will chafe at those restrictions imposed by the right to a job (which Lebowitz argues was the sine qua non of the Soviet social contract) and will then push for a capitalist restoration. More or less what happened in the Soviet Union. He does seem to be arguing from Trotskyist premises as I couldn’t find any references to Trotsky in either the index or bibliography.


CMK - January 2, 2013

That should read ‘he doesn’t seem to be arguing from Trotskyist premises’ – the perils of commenting by mobile phone!


3. Garibaldy - December 30, 2012

I did start reading Red Plenty, realised it was a novel, and stopped. That Nove thing sounds interesting but. Cheers for that LATC.


Tomboktu - January 1, 2013

It is not entirely a noval, and may be worth reading through. Yes, there is plenty of fiction in it, but the footnotes show that there is plenty of history and theory in it, and those footnotes do tell you what is fiction and what is not.


Garibaldy - January 2, 2013

The first page or two just turned me off completely, partly because I had such high expectations and was looking forward to it so much. It was a great thing to write about. I gave it away, so probably will never read it. The KKE has been engaged in a study of the political economy of the USSR.


WorldbyStorm - January 2, 2013

I really enjoyed Red Plenty and I’d very highly recommend it (indeed I still have your copy Tomboktu). Thought it was well written and raised some interesting ideas. It also was useful in that it humanised individuals, Kruschev comes to mind, in a way I hadn’t seen before, and I guess it was honest about both the flaws and the strengths of the system during a period of considerable change.

BTW, slightly off topic, what do people think of Jacobin more generally


Tomboktu - January 3, 2013

Haven’t read Jacobin more generally yet. What are your thoughts?


WorldbyStorm - January 3, 2013

I think it looks good but I’d worry I’m in error. 🙂


LeftAtTheCross - January 3, 2013

Just about Khrushchev, the notes at the back of Red Plenty point to a recent edition of his memoir, Khrushchev Remembers, The Glasnost Tapes, which apparently contain much dictated material which didn’t make it into the first edition of the book. It’s years since I read the original but my lingering memory is of exactly what you mention above, a humanised individual.

Red Plenty has some gems in it for sure. The chapter describing how lung cancer happens should be on the school curriculum. I’m not sure what the chapter was doing in the book, but as an aside it was masterful. The book itself sort of ends in a bit of a rush. I don’t know if it was intentional, or whether he ran out of steam, but it sort of disappeared down a plughole all of a sudden. Not unlike the end of Dr. Zhivago really.

Jacobin is interesting for sure. They have lots of really well written articles, though I’m struggling to figure out where the overall narrative is coming from, or going to. As a printed magazine it’s very flash altogether, visually in a different league to say Red Pepper or LookLeft. I sort of get the impression it wants to be the 21C successor to Monthly Review or such heavyweights of the Left, but whether it has the momentum or the compass I guess only time will tell.


4. Jim Monaghan - January 2, 2013

http://www.marxists.org/archive/mandel/1991/xx/sovecon.html Mandel wrote a lot on the USSR. I tend to think he accepted at face value the stats which turned out to be somewhat exaggerated.
On a footnote I like the old joke about the ordinary workers. “They pretend to pay us and we pretend to work”
I am also a fan of Hillel Ticktin, the Glasgow based economist/Marxist


Tomboktu - January 2, 2013

On your footnote, there is a scene in the book where Leonid Kantorovich is at a meeting with, um, somebody in the politburom as an external expert when they want to apply his expertise. He gets frutstrated when they don’t apply his insights directly and speaks bluntly to the leader. In addition to being told to mind his manners, he it also explained to him that they cannot apply his central planning technique directly because they know the factory managers have over-stated the quantities of raw materials they need to achieve their output targets, so the central plannerss need to cut them before they use those data.


Jim Monaghan - January 3, 2013

Many moons ago someone gave me stats that teh pay gap between the top and the bottom was much higher than in the West. Mind you the end of the fear of Russian tanks has unleashed a more aggressive capitalism. I suppose if a significant part of our poor looked like they were converting to a certain religion, then we might see an end of austerity


Loveyou longtime - January 3, 2013

Yip Jim, you can get given documents stating just about anything in ultra-trot circles


5. CL - January 3, 2013

Just started reading Red Plenty. Good stuff.

‘But here he was where the sky was scraped; in the enemy’s headquarters, in the nerve-centre of capital, in the place where all its splendour and misery were concentrated to their very highest degree’-Khushchev in Manhattan.

And poor Kantorovich plodding along with a hole in his shoe working out in his mind how to allocate resources in a plastics factory; he was in the process of inventing linear programming which would win him the Nobel in economics.

‘where human beings had seized the power to shape events according to reason’
Brought to mind Zamiatin’s ‘We’, and also Musil’ statement, ‘the dream of reason is a monster’.


6. Eugene - January 3, 2013

Here is an interesting article “How to visit a socialist country: by Richard Levins in Monthly Review 2010.


Its about Cuba but could equally apply to visitors to former Socialist Countries. Worth looking at to see if any of the ideological baggage fits.

Whatever short coming there may have been and they where many. The economic and social development that did take place was most certainly vast. Did so in very difficult conditions and under great pressures.

Unlike the West European countries they received little or nothing to rebuild their devastated economies after the total destruction of the Second World War. It was all done from their own internal resources.

Unlike the west they did not suck in vasts amount of capital from colonies and benefit from the supper exploitation of the mass of people’s of the world.

But in actual fact they opened their doors to tens of thousands of people from former colonies of the Western imperialism to be trained as engineers, doctors, teachers,mechanics etc at no cost. Just as Cuba does today with thousands of doctors.

They spent and used a lot of scarce capital supporting, training and arming almost all national liberation forces fighting imperialism.

I supposed if they had not then they may have developed more. But the Soviet Union in 1989 was a vastly different place to the Czarist Russia of 1917 and is different from Russia today, with its growing poverty, social collapse, huge wealth disparities etc.

You need to measure where it came from and where it end up as a possible yard stick to measure if it had profoundly changed the material, social and cultural conditions of the people. Warts an all.

As someone once said. We need to make “a concrete analysis of a concrete situation”.


7. Tomboktu - January 18, 2013

John Quiggin has published a reply to Ackerman’s essay in Jacobin


CL - January 18, 2013

Both Quiggin and Ackerman rightly see the social democratic project as decommodification but they fail to give an adequate explanation why that project has failed.


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