The " New System"

RESTORATION of CAPITALISM in the USSR

Martin Nicolaus

"A complete system of measures is being proposed," Soviet Premier Alexi Kosygin said in his September 1965 speech, "in order to expand the economic independence and initiative of enterprises and associations and to enhance the importance of the enterprise as the main economic unit in our economy." 

Presented by Kosygin on behalf of the central committee of the party and the supreme organs of the government, the "proposals" were formally promulgated in short order. Conversion of the then more than 50,000 nonagricultural enterprises to the new system -- a complex and demanding task because of the sweeping nature of the measures -- was accomplished in a series of steps requiring several years. By the end of 1968, the new system embraced industrial enterprises producing about 72 percent of all Industrial output and contributing about 80 percent of the total profits realized in industry. By the end of 1970, the figures stood at about 92 percent and more than 95 percent, respectively; in other words, the measures were implemented in a full and all-round way (N. Y. Drogichinsky, "The Economic Reform in Action," in Soviet Economic Reform: Progress and Problems Moscow, 1972, pp. 200, 202. Drogichinsky is head of the Department of New Planning Methods of the USSR State Planning Committee.) 

What exactly were the features of the new system? At the risk of wearying the reader with quotations, here is a brief survey of the main specific proposals in Kosygin's words: 

"In order to expand the economic incentive of the enterprises, it is proposed to reduce the number of indices that are assigned from above," i.e., by the planning bodies. 

"In order to orientate the enterprise toward raising efficiency it is best to use the profit index, the index of profitability. The size of profits characterizes, to a considerable extent, the contribution made by an enterprise to the country's net income." 

In this way, enterprises will be "encouraged" to "search for ways of increasing labor productivity." 

An end must be put to the system whereby virtually all enterprise profits go to the state. Instead, "it is necessary to leave to the enterprises more of their profits . . . in direct proportion to the effectiveness with which it utilizes the fixed assets assigned to it." 

An end must also be put to the state of affairs where "the achievements of the enterprise in increasing profits and the profitability of production do not have any direct effect on the earnings of the staff of the enterprise." To this end, a set of new "funds" must be set up in each enterprise, including a "material incentives fund" and a "fund for the development of production," geared to enterprise profitability. 

Furthermore, "The enterprises will enjoy broader powers in the use of their circulating assets, depreciation allowances and also the money from the sale of surplus equipment and other material values. . . . 

"The enterprises will enjoy wider powers in the use of the money saved in the wage fund during the year. . . ." 

In this connection, a positive example is the Moscow Transport combine, where the new system was introduced by way of pilot experiment in the previous year, it showed sizable gains in productivity after it ". . . sold superfluous trucks and equipment and discontinued the employment of superfluous personnel." 

In its relations with other enterprises, the "economic responsibility" of each enterprise is to be enhanced. "Direct contacts between manufacturing enterprises and consuming enterprises should be developed more broadly in the sphere of materials supply." 

As for prices, "the transition to new forms and methods of economic stimulation of industrial production demands the improvement of the system of price formation. Prices must increasingly reflect socially necessary outlays of labor and they must cover production and turnover outlays and secure a profit for each normally functioning enterprise." 

Financial relations between enterprises and the state are also to be put on a different footing: "Financial grants made by the state to enterprises for capital investment must be restricted and the use of credits must be expanded." 

Lastly, in place of the regional economic councils (set up by Khrushchev), there will be central ministries again for each major industrial branch; and at the same time, in close conjunction with the ministries, there is to be "a new form of organization: branch amalgamations operating on the cost-accounting principle," to which the ministries are to hand over "many operative functions." The new ministries will "work in entirely different conditions" from the old ones; and to think "that a mere return to the former ministries is being suggested . . .means to disregard a number of new factors and to make a mistake." 

So much for the bare bones of the new measures, insofar as Kosygin's less than lucid formulations let them be seen. (Quotations are from Izvestia, Sept. 28, 1965, translated in the review Problems of Economics, October 1965, pp. 3-28) 

How very fine it would have been if Kosygin, in summing it all up, had had the wit to say, "In short, friends and comrades, what it all means is that we are setting up capitalism; and a proper up-to-date capitalism it will be, with trusts and monopolies and all the trimmings, just as quick as we can get it rigged up." He would have spared all the world's Marxist-Leninists enormous amounts of effort. 

A vain dream! In place of such a refreshing ending, Kosygin concludes with an air of complete conviction that the new measures are an essential part of the process by which "socialist property in the USSR is developing into communist property." Not only that, but the central feature of the new economic measures allegedly bears the endorsement of the great revolutionary teacher, Lenin himself: 

"V.I. Lenin pointed out," Kosygin declared, "that each enterprise must function on a profitable basis, i.e., it should completely cover its expenditures from its income and should make a profit." 

In short and in sum, anyone who balks at marching in the direction indicated by the Soviet leadership not only blocks the path toward communism -- and is thus an anticommunist in the most literal sense -- but also presumes to try to give Lenin lessons in political economy! 

It is a revealing commentary on the political climate in the land of Lenin in 1965 that the supposedly Leninist press did not run Lenin's actual words and use them to pillory Kosygin and the whole leadership from morning to midnight. (The press, of course, was controlled by that same leadership.) This is what Lenin had had to say about enterprise profits: 

"The conversion of state enterprises to what is called the profit basis is inevitably and inseparably connected with the New Economic Policy; in the near future this is bound to become the predominant, if not the sole, form of state enterprise. Actually, this means that with the free market now permitted and developing, the state enterprises will to a large extent be put on a commercial capitalist basis. This circumstance, in view of the urgent need to increase the productivity of labor and make every state enterprise pay its way and show a profit and in view of the inevitable rise of narrow departmental interests and excessive departmental zeal, is bound to create a certain conflict of interests between the masses of workers and the directors and managers of the state enterprises or the government departments in charge of them. Therefore, it is undoubtedly the duty of the trade unions, in regard to the state enterprises as well, to protect the class interests of the proletariat and the working masses against their employers." (Collected Works, Vol. 42, p. 376.) 

Lenin, speaking for a proletarian state that is compelled by ravages of war and famine to resort temporarily and in a limited way to capitalist relations of production, does not hesitate to call these relations by their name. He insists, moreover, on laying bare the "antagonism of class interests between labor and capital" bound up with these relations, and calls on the workers' mass organizations to "openly put in the forefront" the protection of "the class interests of the proletariat in its struggle against capital." 

And Kosygin? This spokesman for a bourgeois state, compelled by the workers' resistance to attempt to impose capitalist relations fully and without time limit, puts out the most ridiculous pretense about the "communist" character of its measures, denies any ground for class antagonisms or even "conflicts of interests," and on top of that has the nerve to invoke Lenin's authority! It would be laughable, except this kind of Big Lie technique commands state power, enjoys an undivided monopoly of the entire legal media, controls the educational system and is backed up by the full apparatus of repression -- police, courts and the like. 

The conditions prevailing at the time Lenin proposed the NEP -- the passage just cited dates from January 1922 -- have been outlined earlier on (parts 2 and 3 of this series) and there is no need to expand on this theme. Once these conditions were overcome and socialist relations of production became predominant, the role of enterprise profits naturally underwent a fundamental change. 

Under socialism, not only certain individual production units but even whole industrial branches were deliberately run, for shorter or longer periods of time, (in some cases permanently) at a "planned loss," that is, in such a way that their account books, even with the best of efforts by workers and staff, could not possibly show an excess of revenue over costs, or any other monetary measure of "profit." 

Thus, to give an illustration from Soviet history, the price of raw cotton could be deliberately set quite high so as to encourage collective farmers to produce more cotton; while the price of cotton textiles would be set quite low so as to put clothes on the backs of the workers and farmers. The textile industry, charged with turning the cotton into cloth, necessarily showed a loss in its account books. The difference was made good by transferring to the textile industry a portion of the funds generated in other branches that had a profit. 

Since all profits generated in any part of the state sector (an insignificant fraction excepted) were directly centralized in the state, their redistribution from "profitable" branches and units to "unprofitable" ones, was regulated by the plan. The plan, in turn, reflected the order of priorities decided upon by the political party of the working class, the Bolshevik Party. In this way the goal of immediate profits in the textile industry was subordinated to the higher immediate goal of putting food in the mouths of cotton farmers and clothes on the backs of the working people. Or, to put it another way, the "profits" of the textile industry were realized not in the monetary form, but in the form of the satisfaction of people's needs. Later on, as the textile industry was modernized, it too began to generate revenues for use elsewhere. 

In this way also the longterm goals of the working class could be given their proper weight relative to the short-term ones. The production of means of production, to give the most important example, generally requires a longer period of time and is less immediately urgent -- and far less immediately profitable -- than the production of consumer goods. Yet the latter depends for its expansion on the former. What is more, the longterm goal of easing and shortening labor, of making the physical work process less onerous and reducing the working day. depends very largely on the expansion of the industrial branches producing means of production. (See, for example, Stalin, Works, Vol. 13, p. 195.) 

And what about employment? Should workers be dismissed from plants making socially necessary but unprofitable products, and transferred to more profitable ones producing luxuries, or simply tossed on the street? 

To these and related questions, the bourgeoisie has since the dawn of its consciousness answered with one set of arguments; proletarian thinkers with another. "Profitableness considered from the standpoint of individual plants or industries is beneath all comparison with that higher form of profitableness which we get from our socialist mode of production, which saves us from crises of overproduction and ensures us a continuous expansion of production" -- this was the Soviet socialist answer. (Stalin, Economic Problems of Socialism, p. 57.) The Liberman view, that "what is good for society is good for each enterprise," embodied in the 1965 measures, is its direct opposite and contradiction. It is merely a more "elegant," really an evasive, way of asserting that "what's good for General Motors is good for the economy." 

17 Labor Power

Like certain tribes in the Old Testament who trembled to speak the name of the Omnipotent, the advocates of the new Soviet system recoil from naming labor power a commodity. 

Other economic categories and relations, such as profits, interest and rent among others, are freely spoken of in the official Soviet literature; in fact it speaks of little else. It is quite permissible also, even obligatory, to praise in general terms the virtues of commodity-money relationships in the "socialist" economy. But when it comes to the category labor power (and also means of production, of which more later), the Soviet economists become strangely tongue-tied; and the rhetoric of the political spokesmen, usually so flatfooted, goes on its tiptoes to skirt the Unmentionable. 

There is no plank in the Kosygin platform of 1965, for example, which calls for transforming labor power into a commodity. There is not even so much as the explicit demand that enterprise directors be given the power to hire and fire workers for economic reasons. There is just the sideways reference to giving enterprises "wider powers in the use of the money saved in the wage fund during the year." For those in his audience too dense to grasp how money can be saved from the wage fund, 

Kosygin draws a picture: the pilot project of the five transport enterprises, who prospered when they "sold superfluous trucks and equipment and discontinued the employment of superfluous personnel." 

A more detailed account of this pilot project in the review Voprosy Ekonomiki (Nov. 12, 1965) gives the itemized breakdown. "Costs were reduced by discharging a number of employees. At the Motor Vehicle Combine No. 1 the central garage and construction group was eliminated and its functions transferred . . . , discharging 100 employees. At Department No. 5, the maintenance and repair of vehicles was centralized, reducing the number of repairmen and mechanics. . . . Department No. 9 discharged 101 workers . . ." and so on. 

In a similar way, as the new economic system radiated out from the pilot plants in Moscow and Leningrad to fasten itself across the length and breadth of the vast territory of the USSR, the Soviet workers' security of employment -- all that remained to them of the socialist relations of production -- was broken up. They were reduced once again to the status of hired laborers, wage slaves with nothing to sell but their labor power, like their colleagues in the capitalist West. 

"The new system of planning and economic stimulation," Kosygin cynically remarked in his sum-up of the pilot results, "increased the workers interest in the results of their work" (emphasis added). A 31 percent increase in output per worker was achieved, he noted with satisfaction, and enterprise profits more than doubled. The longer-term results on a countrywide scale, when the data had been gathered a few years later, did not quite live up to these first figures, but the basic trend was the same. 

The "investment efficiency" specialist, Academician Khachaturov, observed in 1973 that the widening gap between increases in capital per worker and output per worker during the 1955-65 period narrowed again to a tight 2% during the five-year period after the introduction of the new system. (See part 15 of this series.) The lash of the capitalist relations of production had broken the workers' passive resistance. The slowdown was over. The speedup had taken hold. 

As the early results became known, a section of the Soviet bourgeoisie found its appetite only whetted and began experimenting with methods of supercharging the new economic engine. The most important of these experiments was initiated in 1967 at the Shchekino Chemical Combine. 

"The intensive release of personnel is planned at enterprises engaged in the Shchekino experiment," the economist T. Baranenkova writes in a general description of the Shchekino design. On the average, each of the enterprises participating "released" 10-15% of its work force. Between one-fifth and two-thirds of the layoffs, depending on the enterprise, were made possible, she reports, by the methods of "combining occupations" or increasing the "volume of work performed" by the remaining workers. 

In compensation -- and this was said to be the novel side of the Shchekino method -- the workers who were left received as a "bonus," a portion of the funds "saved" in wages by dismissing their colleagues. As a result, absenteeism markedly declined. "Work under the conditions of the experiment has enabled enterprises to achieve positive results in their production activity in a short time." ("Technical Progress and the Movement of Personnel in Industry," Voprosy Ekonomiki, 1970, No. 2, translated in Problems of Economics, September 1970) 

In short, the standard capitalist methods of slave driving (upping the pace, making one worker do the work of two) were supplemented with the cannibalistic touch of throwing the surviving workers some scraps of the "flesh" of their departed comrades. But only scraps; Baranankova says the "bonuses" received by the survivors were an "insignificant amount." Another writer, the fervent Shchekinoite E. Manevich, says the "bonuses" in most plants under the experiment are "very small." ("Ways of Improving the Utilization of Manpower," Voprosy Ekonomiki, 1973, No. 12, Problems of Economics, June 1974, p. 18) The remainder of the "savings" goes as "bonus" to profits. 

The Shchekino system's originality, the evidence tends to indicate, lies not in the sugar coating of the 

"bonuses," but in the stronger dosage of layoffs and speedup. A full 1000 workers were laid off in the original trial at the Shchekino Combine itself, indicating that more than a bit of "pruning" of the work force is involved. The Shchekino principles were endorsed by the CPSU Central Committee in October 1969, and near the end of 1973 had spread to approximately 700 enterprises. (Manevich, ibid.) Additional enterprise directors who believe it to be in their interests can "go Shchekino" at any time. 

Most of the enterprises that resort to the Shchekino system, says Baranenkova, are located in the larger cities, where the skilled grades of workers are in scarce supply. They thus have a good bargaining position. The economic aim of the enterprises in adopting the method, very consciously, is to turn the shortage into an oversupply (reserve). 

Manevich quotes an enterprise director in the city of Kirov, V. Zonov, who reports with a tone of triumph: "Before, we did not have enough drivers, metalworkers, lathe operators, mechanics. . . . Well, we have been working a year and a half under the Shchekino system and you know, we are coming to the conclusion that in many cases the shortage of workers was artificial. Having received the right to pay a worker more if he partially assumes the duties of his neighbor, we are, in a manner of speaking, discoverers of a new manpower reserve. As it turns out, the problem lies not in the shortage of people but in the organization of production and in the ability to use economic levers." (ibid, p. 17) 

It goes without saying that the worker who is at first "paid more" for "partially assuming the duties of his neighbor" may then, once a reserve is created, be replaced by a new hiree who will do the same work for less. As Marx put it, a century before Shchekino, "The overwork of the employed part of the working class swells the ranks of the reserve, whilst conversely the greater pressure that the latter by its competition exerts on the former, forces these to submit to overwork and to subjugation under the dictates of capital. The condemnation of one part of the working class to enforced idleness by the overwork of the other part, and the converse, becomes a means of enriching the individual capitalists" . . . or enterprise directors as the case may be. (Capital, Vol. I, p. 636). 

The new Soviet thinkers, while busy devising further methods of creating a reserve army of labor in the short run, are also not losing sight of the long term perspective. K. Vermishev, among others, advocates the "release of an average of 1 million mothers" from "social production" to allow them to concentrate on producing babies. ("The Stimulation of Population Growth," Planovoe Khoziaistvo, 1972, No. 12, Problems of Economics, June 1973, p. 3) 

Soviet workers who are laid off fall into a category that has no official existence. The bourgeois Sovietologist Marshall Goldman wrote in 1971, in a sarcastic tone: "While rummaging through the capitalist tool bag to find ways of accelerating labor productivity, the Russians have come up with still another device -- unemployment compensation. Until February 1970, the Russians steadfastly denied there was unemployment in the USSR. And since unemployment did not exist, there was no need to have unemployment compensation. This reasoning, however, was little comfort to those who found themselves without jobs. . . ." (Harvard Business Review, July-August 1971, p. 160) 

True enough, but the professor appears to be mistaken about the unemployment compensation. Already in 1969, the Manevich quoted just above wrote: "In order for releases connected with technical progress [the euphemism for speedup] not to affect the living standards of workers and their families, the question must be discussed of establishing some government material support." (ibid.) 

The following year, Baranenkova emphasized that "The Shchekino experiment once more confirms the necessity for practical implementation of the previously advanced proposal on the material support of workers (including the payment of stipends) during the time they are between jobs." But at the end of 1973, three years after unemployment compensation was allegedly instituted, Manevich, again writes, this time insistently: "In order to assure the release of manpower and to achieve the rational utilization of manpower it is essential to execute a number of other economic and legal measures. For example, the solution of an urgent problem of long standing -- the problem of material support for released personnel -- is extremely important." (Voprosy Ekonomiki, 1973, No. 12; emphasis added.) 

It seems clear that the unemployed in the USSR, as in any capitalist country, will not receive unemployment compensation as a gift from the bourgeoisie, not even if a guilt-stricken "liberal" like Manevich pleads for it. The Soviet workers' position is even worse than that of their colleagues in the West in some respects, because of their real position is not officially recognized. 

The official position remains firm: there are no unemployed as such, because under "socialism" labor power is not a commodity. Thus the unemployed are made to pay materially for the official hypocrisy. An even more bitter aspect of their situation is that all the layoffs undertaken by the enterprise directors for economic reasons are strictly against Soviet law, as embodied in the Constitution of 1936, the Stalin Constitution. The enterprises have no legal foundation for the regime of speedup and economic terrorism they have imposed on the workers. But the leadership of the revisionist party and of the state treats the Soviet Constitution with contempt. To write a new one, as they have said for nearly a decade they would do, however, appears to present some problems; the revised constitution has been put off several times, and is now due to be unveiled in 1976. Meanwhile the workers' law is a dead letter. 

The average worker spends between 25-30 days between jobs, says Manevich in the 1973 article cited above. That average, however, is composed of both the skilled, who are in relatively high demand and have an easier time finding a new place, and the unskilled, of whom there is a much larger "reserve." Their number is swelled by an influx from the countryside, where the parallel restoration of capitalism has made them "superfluous." Between 1959 and 1970, more than 16 million people moved to cities from the Soviet countryside, 13 million of them of working age. One of the other reasons for this, the scholar Iu. Eusiukov observes, is that "some enterprises and organizations recruit manpower in rural areas," i.e., the cities raid the countryside of its people, much as in the Tsarist times described by Lenin in his Development of Capitalism in Russia (1899). ("Migration of the Population From the Countryside to the City," Planovoe Khoziaistvo, 1972, No 12, in Problems of Economics June 1973, p. 14) 

Moreover, this migration does not necessarily end in a stable settled pattern; on the contrary, there are continuous, seemingly unpredictable population movements between different points. The Soviet writers call this "variable migration." "Of late the scale of variable migration has increased with ever greater intensity in the USSR," says the demographer L. Lugovskaia (Planovoe Khoziaistvo, 1972, No. 8, in Problems of Economics, May 1973, p. 96) 

This testifies that the workers and collective farmers, recognizing that their labor power has become a commodity, are actively moving from place to place in search for better, or at least less oppressive, terms for its sale. If they must take their hides to market at least they intend to get the best price. Needless to say, from the standpoint of production lost by this roaming and floating, the social cost of this instability is high. The time lost by "floating" workers in industry during 1972, according to an estimate in Planovoe Khoziaistvo (quoted by Peking Review Sept. 24. 1974), amounted to about 4 billion rubles. 

The conversion of labor power into a commodity has thus brought about a large-scale labor market from one end of the country to the other, with a high rate of "exchanges." The first published study that has attempted to get an estimate of how many workers change their employment how often has found that in the course of one year 59.1% of all personnel in the national economy change their position. The average length of time a worker spends at the same enterprise is only 3.3 years, and every 12-15 years on the average a worker migrates from one region to another. "Every year in the national economy several tens of millions of persons make transfers," the author of this study estimates; "their overall number exceeds 100 million. Approximate calculations show that not more than half of this movement is associated with the interests of the development of production and of the work force." (V.S. Nemchenko, "Mobility of Labor Resources," Vestnik Moskovskogo universiteta, Ekonomika, 1974, No. 1; in Problems of Economics, October 1974, pp. 80-88) 

In short, while neither the economists nor the political spokespersons will admit that labor power in the USSR has become a commodity, the reality is clear enough. The workers themselves, to judge by recent Soviet sociological surveys, have no illusions about being the "masters of society" that the official propaganda paints them. 

In a 1974 survey in Yaroslavl, 78% of the working-class parents who were questioned said they did not want their children to be factory workers. In families where only one parent was a factory worker, 96% did not want their children to go into that life. A survey of high school students ranked the occupation of steelworker in 28th place in their preference; lathe-operator, 39th place; tractor driver, 51st place and carpenter, 68th place. (Quoted in Christian Science Monitor, Sept. 11, 1974). 

Another survey of workers, 18-25 year-olds at a large locomotive plant in Voroshilovgrad in the Ukraine, found that 66% said they were dissatisfied with their pay, 71% were dissatisfied with the equipment and 70% with the plant's sanitary conditions. The rate of dissatisfaction was 18% higher, by the survey index, than five years earlier. The workers were particularly critical of the so-called "socialist emulation" system. "It exists only on paper;" one worker said. "It's just fiction," said arother. What emulation, asked a third: "There is simply a quota that you have to meet." (Quoted in New York Times, Dec. 2, 1973).