The Soviet Union and physical planning

But your argument is based on a sleight of hand between surplus value in this sense, which is an invariant necessity of any growing industrial economy and surplus value in the narrower sense analysed by Marx in volume I of capital which is the surplus monetary value accruing to an individual firm or employer in a market economy.

The actual ability of an economy to expand is set by the structure of the input output table which sets the maximal rate of expansion of the system in physical terms – this was established by Von Neumann about 1928, I dont know the Russian literature of the period, but I suspect it was know there as well. Feldman’s growth model on which the soviet plan for industrialisation is built certainly implies a similar result.
What von Neumann showed was that an economy could in principle expand at this maximal rate and that under these circumstances the rate of growth and the rate of profit would be same thing – assuming that the economy was a capitalist one.

To achieve this rapid rate of growth there has to be a rapid expansion of the production of means of production before there is actually a use for the means of production and this rapid rate of growth presupposes an apriori balance between the different sectors so that the coal industry, the railway industry, the iron ore industry and the steel industry all grow in the correct proportions to support one another.

But in practice this can not happen in a capitalist economy since each firm invests in order to make a private profit from sales and will not invest unless there is a high probability of there being a market for its product. The coherent balanced expansion can not be achieved by the operation of the law of value and the movement of capital between branches in response to different rates of profit.

But it can be achieved in a socialist economy because in such an economy individual state factories do not make investment plans based on their private expectations of profit. Instead the planning authorities prepare a balanced plan, limited by the data available to them of course, but one that involves the preconstruction of new plant and equipment before there is any market signal to indicate that it is needed.

What Cliff takes as evidence that the USSR was capitalist – its high rate of reinvestment was actually something that no capitalist economy other than Japan was able to sustain in the long run and it is no coincidence that in Japan MITI played a planning role that is absent in a typical capitalist economy.

But beyond this even on its own terms Cliff’s argument was facile since he does not challenge the basic validity of the Feldmann growth model – that in order to grow consumption you first have to have a rapid rate of growth of sector I. This is true whatever the mode of production.

You ask why the socialist economy slowed down, and this is obviously a real and serious political question. I would give a number of factors:

1. The exhaustion of oil and mineral reserves West of Urals forcing the development of energy and mineral reserves in Siberia which were much more costly in terms of labour than the old sources in Europe and the Caspian basin.

2. The extreme demographic transition of the socialist countries associated with the high level of female education and participation in the workforce. This meant that from the 1970s on the available labour supply became very tight and many industries were up to 10% of workers short on key shifts.

3, High levels of armaments expenditure in the final stages of the cold war diverted scientific and engineering talent out of the improvement of civilian industry.

4. An unwillingness to close down existing first generation industrial plant an replace it with new greenfield sites since this would have involved dismissing workers from the old sites, redeploying workers from the old plants to the new sites when a basic feature of the workers state was that workers were protected against being fired.