The Debate

RESTORATION of CAPITALISM in the USSR

14 The 'Debate'

If a history is ever written of the great hypocrisies of the 20th century, especially those perpetuated in politics, a chapter of it must go to describing the program for "advancing to communism" put forward by Nikita Khrushchev at the Soviet party's October 1961 22nd Congress. 

It was a period of muddle and confusion in the USSR, especially in the economic sphere. The old system, gutted and partly sold off by Khrushchev earlier, no longer functioned as it used to; yet the outlines of what was to replace it had not yet crystallized. As if to give sense and direction to this murky transition, Khrushchev stepped in with the declaration that the USSR would be a fully communist, classless society by the year 1980 and that the period ot building communism had now begun. 

This declaration seemed to lend consistency and legitimacy to Khrushchev's political theses about the abolition of the proletarian dictatorship (in favor of the "state of the whole people") and of the proletarian political character of the Communist party (in favor of a "party of the whole people"). For if communism were just around the corner, if class distinctions had all but disappeared, if everyone was a proletarian, then "in respect to which class can there possibly be a dictatorship? There is no such class," argued Krhushchev. (Documents of the 22nd Congress of the CPSU, New York 1961, Vol. 2, p. 157) 

But, on the other hand, even this shallow appearance of formal consistency disappeared when it came to the matter of Khrushchev's proposals in the realm of political economic reorganization. Those who picked carefully through the soup of Khrushchev's general rhetoric for the meat of specific proposals regarding the economy found a peculiar clash of flavors. 

Under the rhetorical heading, for example, of the need to "draw upon the creative initiative of the masses and give it ever greater scope," there is the explanation that "this calls for a further gradual extension of managerial powers and of the responsibility of local bodies and enterprises." (Documents Vol. 2, p. 98)

This is sheer doubletalk, where "masses" really means managers and directors, and releasing "creative initiative" means increasing the directors' repressive powers. The same logic-chopping marks Khrushchev's approach to the economic categories: 

"In the course of communist construction it is our task to make still greater use of, and to improve, the financial and credit levers, financial control, prices and profits. We must elevate the importance of profit and profitability." (ibid. p. 99) 

The "advance toward communism," in other words, is to be achieved not by downgrading and gradually eliminating profit and profitability as drives that regulate economic behavior, but just the contrary by extending and strengthening them. To illustrate more clearly what he meant, Khrushchev observed: 

"It would do no harm if we were also to learn from the foremost capitalist models how to speed up construction, initiate and run new enterprises. . . . We should not scorn useful foreign experience, and should critically adopt all technically and organizationally valuable points available in the West, including the field of speeding the turnover of funds and getting greater returns from capitai investments." (p. 96, emphasis added) 

Borrow from the West not only technology, Khrushchev was saying, but also the secrets of its economic organization, which allow its corporations to realize maximurm profits with the maximum speed. 

These passages, to be sure, were wrapped up in so many layers of "communist" reassurances and promises that an inattentive reader might altogether miss their significance. That these passages contained the grain of Khrushchev's program, however, while all the rest was chaff, became clear over the course of the great "economic debate" that was launched directly after the congress and lasted until early 1964, shortly before Khrushchev's own ouster. 

The "debate" was in essence a faction fight, conducted -- as far as its visible portion went -- in the pages of economic journals and Pravda (the party organ), between two main camps within the newly emerged bourgeois forces within Soviet society. Very broadly speaking, one side upheld the interests of the economic planning bureaucracy, or what was left of it, over and against the power of the enterprise directors and managers; while the other fought for the supremacy of the enterprises over the remnants of the economic planning structures. 

It is significant that neither side fought -- or was permitted, in the pages of the revisionist party-controlled press, to come out -- for the revival of "counterplanning" or other ways of direct mass participation in the planning process. (For counterplanning, see part 6 of this series.) Insofar as Marxist-Leninist points of view occasionally crept into the debate, they were on the side of the "planners," but this planning machinery had grown so distant from the activity of the working class at the point of production that it represented, at the time of the debate, only another form of bourgeois hegemony. 

The partisans of "planning" pushed a scheme known as the NVP, for Normative Value of Processing, a mildly novel way or keeping the accounts of enterprises and evaluating their performance under the plan. It was basically a minor adaptation of the old machinery; and it was said that it forced managers to be more economical in the use of raw materials and supplies. Because the intent of the new wrinkle was to keep the old planning forms basically intact, the NVPers were dubbed the "conservatives" in the debate. 

On the other side, calling themselves "liberals," was a loose coalition of economists whose best-known spokesman was Yevsei Liberman, professor at a business-management institute in the Ukrainian city of Kharkov. Though there were many differences among them, and they frequently shifted their emphasis as the winds of the debate blew, the main points in their case were to strengthen the role of profits and to enhance the autonomy of the enterprises from the plan. 

As regards profits, the "liberal" school denied, a la Khrushchev, that there was anything contradictory between socialism and an enhanced role for profit-maximization in the conduct of enterprises. After all, Liberman argued, society as a whole must show a "profit" -- and excess of production over consumption -- and "what is good for society is good for every enterprise." (See E. Zaleski, Planning Reforms in the Soviet Union, Chapel Hill 1967, p. 79) 

But while the role of profit was a key storm center in the debate, Liberman and many of his partisans emphasized that this was not the fundamental issue for them. "We find it strange," Liberman wrote, "when people argue: what is better -- the normative processing cost [NVP], for example, or profit?" What they were proposing, Liberman underlined, was not merely a "revision of indices, but . . . a reform of the enterprise's relations with the national cconomy." It was, he said, the "whole system of relations" that required change. (Felker, Soviet Economic Controversies, Cambridge, 1966, p. 87) 

There is little doubt that the Liberman-school proposals echoed the views primarily of the enterprise directors and managers who wanted to gather into their hands not only more power over the workers -- on this both camps agreed -- but also more power relative to the planners. What was variously hinted at or spelled out by the "liberal" ideologists was that the enterprise management, in order to be able to pursue maximum profit, must be made free of restrictions imposed from above and allowed to decide more or less where to buy supplies and where to sell their output and at what price. Since Khrushchev's 1957-58 "reforms," they had been doing so to a great extent already, but in the shadow of illegality. (See part 12 of this series.) The catch-phrase "new relations between enterprises and the national economy" meant to make it legal. Basically, these managers and directors wanted to set themselves up as classic capitalist entrepreneurs. Liberman, with his sophisms borrowed from Adam Smith -- "what's good for society is good for every enterprise" is almost verbatim Adam Smith -- was their prophet. 

Through the first two years of the debate, however, according to several accounts, the "liberals" had very much the worst of it in the press. The NVP-partisans, with their emphasis on the old machinery, had the force of habit and familiarity on their side; and their new wrinkle, the NVP index itself, had been tested experimentally in the Tatar, Donetsk and Lithuanian regions. Good results had been claimed for it. What the liberals advocated, by contrast, was pure, untested theoretical speculation; and even as theory it was dubious to many, because its emphasis on profits smelled of capitalism and it meant an obvious downgrading of the plan. As 1964 began, the "liberals" went on the defensive and grew increasingly silent. A note of triumph crept into the pronouncements of the NVP-partisans. It was then, in early 1964, that Khrushchev personally intervened, making strong official statement in favor of profits, which threw the weight of the party leadership behind the Liberman school. 

In summer came the coup de grace against the NVPers. In a series of articles appearing in Pravda, prominent Khrushchevites led by the academician L. Leontyiev (not to be confused with the older, Marxist-Leninist A. Leontiev) accused the "antiprofits" school of "Stalinism." 

"The problem which we face now in determining if profit should be the basic index in judging the work of the enterprise," Leontyiev wrote, "can be attributed in no small way to the lack of regard for the immutable law of economic construction during the Stalin era. This immutable law, regardless of the system under which it operates, is universal; an economy must produce more than is expended on production; and it is this principle, however unheeded it has been in the past, that theoretically provides the foundation for the acceptance of profits today in the Soviet Union." (Quoted in Felker, pp. 77-78) 

This breathtaking piece of brazenness -- as if there had been no economic growth in the USSR under Stalin's leadership! -- and of metaphysics ("immutable law") served as a warning signal to the NVP-advocates that, if they persisted, they would go the way of the so-called "antiparty group" into oblivion. Under these circumstances the "liberals" emerged triumphant. They were granted an experimental trial of some of their ideas in a series of light-industrial enterprises producing for the consumer market (the Bolshevichka-Mayak experiments), while the experiments of their opponents were discontinued. 

Nikita Khrushchev, however, did not remain in power long enough to tend the fruits of what he had sown. In October 1964 he was out-maneuvered and deposed by his colleagues, headed by Leonid Brezhnev and Alexei Kosygin. A harvest failure due largely to Khrushchev's "virgin lands" scheme, the unworkability of some of his tactics such as splitting the party into agricultural and industrial regions, his blunders in foreign policy vis-a-vis Yugoslavia, Cuba, China and Albania, and to a large extent the vulgarity of his style -- notably banging his shoe on the podium at the United Nations -- had made Khrushchev into a figure of scorn and ridicule who threatened to bring discredit on the class he represented. 

His successors criticized him for "subjectivism" and for "going ahead too fast;" and made a number of minor adjustments of substance and style in Soviet policy, domestic and foreign. But they were quick to announce, in early November, that his economic reorganization would continue and spread along the same basic lines. (Linden, Khrushchev and the Soviet Leadership, Baltimore 1966, p. 225) At the end of the year they extended the scope of the Bolshevichka-Mayak experiments, injecting the new system for the first time also into heavy industry. (Felker, p.51) 

Things then began to move very quickly. In March, a plenary meeting of the Central Committee of the party declared it was time to "begin devising measures to improve the rationality of the system." In June, an important conference was held in Moscow, bringing together economists, enterprise directors and planners from all parts of the USSR, to actually "devise measures." The consensus of the meeting, according to Pravda's report, was that "the time had come . . . to decrease detailed planning from above and to reduce the quantity of indices assigned to the enterprises, and, in so doing, to provide conditions for operational independence and for developing healthy economic initiative on the part of the enterprise." 

The time had come also "when the role of profits in appraising enterprise operations could be elevated to a more prominent position among the set of indicators and that profits themselves should provide the principal sources for the formation of enterprise funds. . . ." There was also agreement that the time had come to tackle what was called "the market problem," which, Pravda said, "exists not only for consumer goods but also for the means of production. There is no end of work in this sphere." (Quoted in Felker, pp. 91-92) 

Toward the end of September 1965 the Central Committee met again. At the end of it, Premier Kosygin, in a lengthy speech, announced a series of economic "reforms," which one writer rightly termed "certainly the most prominent [measures] in the economic sphere since Stalin's . . . reforms in 1928 that terminated NEP." (Felker, p.93) These measures, however, went plainly and clearly in the opposite direction. Instead of subjecting the enterprises to planning, they virtually (and eventually, completely) subjected planning to the enterprises; instead of eliminating the market in means of production and labor power, they expanded, legalized and strengthened it; instead of eliminating profiteering, they raised it to a principle -- in short, instead of constructing socialism, the Kosygin reforms restored capitalism. 

15 Slowdown

The speed with which the Soviet party leadership moved in 1965 to reorganize the economy was dictated mainly by a worrisome slowdown in industrial productivity. 

In presenting the party's proposals in September that year, Premier Alexei Kosygin was careful to lay the accent on the bright side. He recited a score of statistics showing output increases during the seven-year plan period just ended. 

But there was also a cloud to the silver lining, he added; and it was this which brought him to the subject proper of the proposals: 

"It should be said that in recent years the volume of national income and industrial output per ruble of fixed assets has declined somewhat. The rates of growth of labor productivity in industry, which constitute an important index of the efficiency of social production, have slowed down somewhat in recent years." 

Beyond these vague indications he would not go; and he did not probe more deeply into the probable causes of the slowdown. Fairly detailed statistics were finally made public more than five years afterward, however; and before Kosygin's proposals are looked at it is worth examining this data to gain a clearer idea of the predicament in which the Soviet leadership found itself. 

The USSR's foremost specialist in matters of what is called "investment efficiency" is academician Tigran Khachaturov. "The most general indicator of efficiency of investments in the national economy as a whole," according to Khachaturov, is the ratio between national income and the sum of fixed and circulating assets in the national economy. This ratio is expressed as a certain number of kopecks of income per ruble of assets. (100 kopecks = 1 ruble.) If the number of kopecks of income realized per ruble of assets is rising, then "efficiency" in the economy is rising and this is good; and, in Khachaturov's view, the inverse is also true. Thus in a single ratio it was possible to estimate "how rationally the plan is formulated and how fully the available resources are utilized." 

Khachaturov presents the following trend in this general index:

1959: 1960: 1961:

62.6 61.6 60.5

1962: 1963: 1964: 1965:

58.2 55.0 54.7 53.2

(T. Khachaturov, "The Economic Reform and Efficiency of Investments," in Soviet Economic Reform: Progress and Problems, Moscow 1972, p. 159) 

Thus the overall indicator of "economic efficiency" showed a consistent year-to-year decline, finishing the period nearly 10 kopecks per ruble down from the starting point. As Khachaturov put it: "A decline of this indicator during the seven-year period (1959-1965) speaks about the existence of unfavorable phenomena in the Soviet economy. . . ." 

What were these phenomena, more precisely? In the paper just cited, Khachaturov lays the emphasis on "subjective reasons which depended on shortcomings in planning and management." This is a guarded but clear reference to the Khrushchev system of planning via regional economic councils (see part 13 of this series), which, under the 1965 reforms, was scrapped as unsound. 

But in a later paper that goes into the matter somewhat more deeply, Khachaturov tacitly withdraws this line of explanation, without however offering a substitute. Here he compares the rate of increase in the amount of capital per industrial worker with the rate of increase in the amount of output per industrial worker.

	Increase 1950-1955	Increase 1955-1960	Increase 1960-1965
Capital per worker	50%	44%	43%
Output per worker	49%	37%	26%
Difference	-1%	-7%	-17%

(T. Khachaturov, "Improving the Methods of Determining the Effectiveness of Capital Investments," Voprosy Ekonomiki 1973, No. 3; translated in Problems of Economics, September 1973, p. 21.) 

Thus, as is shown in the top line of the table, there was a slowdown in the growth rate of capital per worker. Shortcomings in planning and in the coordination of production might very well explain this. Hampered as it was by the localism inherent in regional planning -- one could plausibly argue -- management was unable to put additional means of production and materials into the factories at the stormy rates of the previous period. The same reasoning could be invoked to explain why the output per worker (line 2 of the table) also decelerated. 

The sticky point however comes in explaining why the latter decelerated so much more steeply than the former. 

During the 1950-1955 period, a 50 percent increase in capital per worker produced a practically equivalent (49 percent) increase in output per worker. This is what one would expect: give the worker more machinery, get correspondingly more output. But in the next five-year period, the output per worker increased 7 percent less than the capital per worker; and during 1960-65, the years immediately leading up to the Kosygin "reform" plan, the gap between capital growth and output growth widened to a rather alarming 17 percent. 

More and more means of production were being thrown at the workers, yet proportionately less and less were coming out! 

Khachaturov does not even try to interpret this thought-provoking data and this is not surprising. For apart from the refutable hypothesis that the new machinery was grossly less efficient than the old, the data points straight to the uncomfortable conclusion that the Soviet industrial working class no longer gave a damn about productivity -- and was getting away with it. 

Despite the fact that Khrushchev had ordered a countrywide retiming of industrial jobs, which set significantly higher output targets for machine operatives, the workers were simply not putting into their work the same measure of energy and enthusiasm they had displayed, often with dazzling and heroic results, during the period of socialist construction. (See part 6 of this series.) (On Khrushchev's job retiming, see Mary McAuley, Labour Disputes in Soviet Russia 1957-65, Oxford. 1969, p. 89) 

Instead of going all out to produce more, better, and faster, the industrial workers shifted their strategy in the battle for production to passive resistance. The potency of the means of production confronting the workers on the shop floor continued to rise. But the workers applied their energy and ingenuity now not to the realization and development of that potential, but to its frustration. 

The new, negative attitude toward labor which reflects itself in the statistics of the Khrushchev period stemmed chiefly from the development discussed at the outset of part 13 of this series, namely the expropriation of the working class upon the revisionist seizure of state power in 1956-57. Perhaps rather few workers summed up the situation at the time in terms of expropriation and drew the parallel with the "expropriation of the mass of the people by a few usurpers" at the dawn of the capitalist order which Marx described so vividly in Capital. (Vol. I, p. 764) Yet the change, however they might formulate it, could hardly escape even the moderately conscious worker. 

-- Under Stalin, the party had been the workers' weapon against factory directors who overstepped their authority. (See part 8 of this series.) Could it escape the attention of the workers that, after Khrushchev's seizure of power, the party switched its class stand and called for strengthening the directors against the workers? (See parts 13 and 14). 

-- Could it escape the workers' attention that directors who failed to live up to the plan, and who violated the rules regarding the speed, organization and conditions of work, were -- under Khrushchev -- almost never punished or removed from their posts? (McAuley, p. 83) 

-- Could the workers fail to be aware of the fact that such directors were not only members but often also officers of the trade unions in the plant? (McAuley, p. 67) 

These and similar shifts in power, perceptible to a great many workers at least, were quite sufficient to communicate the essence of the new relationship of property and to breed in response the new attitude toward productivity described by Marx a century ago: Since "the workman finds the instruments of labor existing independently of him as another man's property, economy in their use . . . does not concern him." (Capital, Vol. I, p. 325) 

The really striking fact about the Soviet workers' slowdown, however, and undoubtedly the most worrisome aspect of it from the party leadership's viewpoint in 1965, was that the workers were getting away with it. 

This was due to the freakish transitional situation in Soviet society at the time. The workers had been expropriated. They no longer held state power or owned the means of production. Hence they resisted at the point of production by slowing down. 

But the bourgeoisie, while it owned the means of production and held state power, still had its hands tied by many of the old, socialist relations of production. It did not yet have in its hands the full arsenal of weapons for making the workers speed up. 

The ultimate among these weapons, as was mentioned earlier (part 8 of this series) is the power to fire workers, to lay them off for "economic reasons." This power implies that labor power is a commodity to be bought and sold like any other; or, to put it the other way around, wherever labor power has the character of a commodity, there the owner of the means of production has the right to throw the workers out onto the street. 

The necessary mate and companion to this right is the owner's right to sell (or buy) means of production also like any other commodity, e.g., by shutting down unprofitable divisions, discontinuing one type of production in favor of another, etc. 

A moment's thought will show these two powers cannot survive separately from one another. The exercise of the one necessitates the exercise of the other. 

It is precisely the exercise of these two powers however -- as was pointed out at the conclusion of part 5 of this series -- that convert the owner of the means of production into a capitalist and convert a society's relations of production into relations of production of a capltalist character. (See Guardian, March 19) 

In a fully capitalist society, the Soviet workers could not have carried on their slowdown for as long and as effectively as they did. Long before the gap between investment and productivity had reach the dimensions it did under Khrushchev, investment would have come to a halt and a spiral of layoffs would have "stimulated" those remaming within the factories to put out greater efforts. 

The "stlmulating" effect of the capitalist relations of productlon can be observed in the advanced stages of each economic crisis, such as the current one. As the lines of the unemployed stretch outside the factories toward the horizon, the regime of speedup, sweating and humiliation on the inside reaches its most brutal extremes. 

In this way are produced the "investment efficiencies" and the close correlations and short lags between capital per worker and output per worker which academician Khachaturov, and Khrushchev before him, eyed with so much envy. 

It is a fallacy to suppose that the transition backward from soclahsm to capitalism in the basic, determinant relations of production can occupy a very long period of time. The seizure of state power by a bourgeoisie and hence, the expropriation of the working class, necessarily provokes among the working class a movement of resistance to increased production. The advance of this movement rather quickly throws the expropriators into an untenable economic position, a crisis of general 

underproduction which is no less real for being covered up. 

The more active forms of resistance -- strikes, rebellions, riots -- may be put down and dealt with at gunpoint. Several were, as mentioned earlier. But the bayonet is a notoriously ineffective and impractical prod in the everyday grind of industrial production. The bourgeoisie cannot station a soldier behind every three workers in every factory without provoking open war. To break the workers' passive resistance at the point of production the bourgeoisie requires weapons of a different order. These are the weapons inherent in the capitalist relations of production. The bourgeoisie cannot dally to apply them. However much it might hesitate to turn means of production and labor power into commodities with all the consequences thereof, it must conquer its scruples, if it has any, and march full steam ahead into the capitalist order. 

This was the background behind Alexei Kosygin's declaration, keynoting the September 1965 "reform" proposals, that "the existing forms of management, planning and stimuli in industry are no longer in conformity with modern technico-economic conditions and the present level of the productive forces."