The Soviet Union and physical planning

[robbo203]

Hi

I’m having another dispute with Paul Cockshott over on Revleft – this time on the thread “the economic nature of the Soviet Union”.  Cockshott , who some of you will know, maintains that the  Soviet Union was a socialist economy and that the rapid growth under Stalin was attributable to its system of physical planning with the overall pattern of investment being determined by a  material balancing procedure using input output tables etc,  in a way that it is not possible to do in what he calls capitalism  (meaning private capitalism). . In capitalism he says firms formulate their own investment plans independently of each other in the expectation of realising a profit.  In what he calls socialism , state enterprises do not formulate investment plans .  The planning is done by the central  planners (GOSPLAN)  and this is what  enables balanced economic growth – the ability of the central planners to take a much wider-  in fact society wide – perspecive. Because investment is proportionate or balanced there is full employment of all available resources in the economy and this is what enable the Soviet Union to grow so rapidly. According to Cockshott  the only capitalist country to rival the Soviet Union was Japan which was also heavily into planning

 

He cites von Neumann’s dynamic equilibrium growth but it strikes me that this model is fundamentally incompatible with the classic model of society wide central planning which is essentially a static one and needs to be for the  plan to be implemented , as a coherent whole. I dunno know if anyone here knows something of Von Neumann’s model but it would be useful if they could provide a brief summary

Anyway here is Cockshott’s post if anyone is interested

quote:

The “overall structure of physical accumulation” as you call it was not settled by political decisions in some sort of vacuum with figures being plucked out thin air so to speak. It had to be budgeted for in financial terms – in terms of the revenue available to thr state which came from various sources. You yourself pointed out the need for the state to levy taxes – notably turnover taxes (which actually accounted for about 70% of state revenue) – to enable means of production to be produced. Like any other capitalist country the prevailing system was geared pumping out surplus value from the workforce which was extracted in various ways – turnover taxes , retained profits etc etc – and part of that surplus was then ploughed back as capital investment.

Any society that is expanding its productive base has to produce a physical surplus product. If you value this in terms of labour or any other scalar unit, you can express this surplus as surplus value irrespective of the mode of production or the system of property relations.

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.

The role of tax in a socialist state is the same as it is in any state. It is simply there to prevent inflation. All sovereign states issue money to cover their real appropriation of part of the surplus product. They then have to use various mechanisms to withdraw money from circulation to prevent the build up of inflationary pressures. Keynes explains it very clearly in his article ‘How to Pay for the War’. The mechanisms can include taxation, voluntary saving, involuntary saving, price controls and rationing etc. But these tax mechanisms are not the real appropriation of the surplus product. The real appropriation comes when labour is performed for the state, the taxes are a purely symbolic appropriation that is one of the mechanisms the state has available to it to control the amount of money in circulation.

Quote:

In Russia, the subordination of consumption to the needs of accumulation took an extreme form. From the beginning of the first Five-Year Plan capital accumulation absorbed more than 20 per cent of national income, and it increased in subsequent Plans. This was higher than any of the developed capitalist countries outside Russia (but about the same as the USA and Japan in their equivalent periods of development), and shows clearly that this most characteristic symptom of capitalism – the domination of society by capital accumulation – was fully developed in Russia.

This quote from Cliff shows his ignorance of normal capitalist development. The norm in capitalist society is for most of the surplus to be spent unproductively by the ruling class on luxuries, bank buildings etc. One of the things which really struck me back in the 70s when we constructed time series of capital accumulation in the UK going back to the mid 19th century was what a low proportion of the surplus value was actually accumulated – it rarely rose above 10% of surplus value and a much smaller proportion of total output. It was only in the 1960s when there was large scale state directed investment that a majority of surplus value started to be reinvested.

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.

5. Failure to properly apply labour value costing which meant that labour saving techniques and fuel saving techniques would not appear to individual plants to be economically rational. Heavily subsidised domestic heating also encouraged a more profligate use of fuel.

[ALB]

Isn’t this dealt with, for instance, in Raya Dunaveskaya’s 1946 article on The Nature of the Russian Economy, based on how it actually functioned not how it was supposed to function in theory?It’s also dealt with in the chapter on “The Capitalist Dynamic of State Capitalist Economies”, written by John Crump, in State Capitalism: The Wages system under New Management

[robbo203]

ALB wrote:

Isn’t this dealt with, for instance, in Raya Dunaveskaya’s 1946 article on The Nature of the Russian Economy, based on how it actually functioned not how it was supposed to function in theory?It’s also dealt with in the chapter on “The Capitalist Dynamic of State Capitalist Economies”, written by John Crump, in State Capitalism: The Wages system under New Management

 Well I’ve mentioned and quoted from the above book in one or two of my responses to Cockshott in this ongoing debate on the Revleft forum  – “the economic nature of the Soviet Union” – and it would be quite useful if more WSMers could  climb on board on contribute to the debate as well. It is quite instructive and heartening to lean that 42 % of Revlefters polled think the Soviet Union was state capitalist or capitalist. Here is the linkhttp://www.revleft.com/vb/economic-nature-soviet-t169000/index11.html The gist of Cockshott’s case is that internal relationships of the Soviet Union were not  capitalist and that the buying and selling of means of production between state enterprises were  not real sales but merely internal  “transfers” of resources between enterprises.  In short that it made no sense for the state to sell to itself and that therefore these exchange  transations were fictional. or merely for “accounting purposes” (“accounting” for what , though?) This, of course, is based on the assumption that the Soviet Union was in effect one single gigantic enterprise subject to a single planning process. It is that assumption that I have been hammering away at – taking the line that the Soviet Union was compelled to reproduce a situation of “many competing capitals” to faciliate the flow of surplus value into the coffers of the central state and that the relationship between state enterprises were not equivalent to the relationship between, say ,different branches of a western cooperation.  There are a number of commentators who seem to take up this position too – including Bettelheim, Sapir, Chattopadhyay and Fernandez .  My favourite is Chattopadhyay who seems to be a real scourge of the Leninist Left and has made some devastingly powerful and impressive critiques of the whole Bolshevik scene – another is Simon Pirani – and I wonder if the Party has made any contact with Chattopadhyay.  He could prove a very useful ally. That apart, I wonder if anyone has any useful links that deal specifically with this argument of Cockshotts about state enterprises being like just branches of a single giant enterprise.  That was the view also held by Tony Cliff,  incidentally but,  in Cliff’s case, this led him to the conclusion that the Soviet Union was necessarily capitalist because of its embeddedness in the wider global capitalist economy.  Foreign trade, in short, including ironically trade with other pseudo socialist countries,  was the tail that wagged the dog and turned it into a capitalist rottweiler.  In my latest post – this morning – I wondered why Cockshott had not himself reached the same conclusion

[Hic Rhodas]

I think the main argument it’s very simple and it’s a question of basical insctint of class. The URSS was without doubt a society of opresion, where the surplus value produced by proletariat was at control of a burocracy. Such a thing like “objective needs” of society doesn’t exist, production were plannified according interests of burocracy that not were tha same as common people. For instance, the high inversion in military industry and the few on goods of consume for the people. And as a whole the superstructure as a totalitarian state can’t be independent of the tipus of society.Maybe, if we are comparing USSR with “normal” capitalism there are peculiarities. But, even in the most extreme resolution may be consider the “bureaucratic colectivism” hipothesis. But thats implies another case of State of opresion and explotetion, thus no “critical support” can be given by an authentical socialist organizacions.I conceed we have to examine the positions of Cockshott in order to clarify the situation and thus have a better understanding as marxists of the details of the situations. Theoretical fight is a way of study and to get a better socialist formation.But the position of principles, like I have argued, is very simple.

[robbo203]

Well,  the debate with Cockshott & co continues over on Revleft.  If people want to join in and put the boot in they are welcome.  I can’t thnk of anything that has done more to discredit the good name of socialism than its misassociation with Soviet state capitalism.  Here’s the link:-http://www.revleft.com/vb/economic-nature-soviet-t169000/index17.html Apropos that,  I posted on Revleft a link to Fleming and Micklewright’s paper published by UNICEF some years ago on inequality in the Soviet Union.  Its really quite good as a source of information and I would recommend that the WSM takes note of it for future reference.

[ALB]

robbo203 wrote:

My favourite is Chattopadhyay who seems to be a real scourge of the Leninist Left and has made some devastingly powerful and impressive critiques of the whole Bolshevik scene – another is Simon Pirani – and I wonder if the Party has made any contact with Chattopadhyay.  He could prove a very useful ally.

Here’s another good article on The Myth of Twentieth-Century Socialism and the Continuing Relevance of Karl Marx by Paresh Chattopadhyay, as can be judged from its opening pages:

Quote:

First, a word on the confusion about the term “socialism.” There is a widespread idea that socialism and communism are two successive societies, that socialism is the transition to communism and hence precedes communism. Later in this essay we will say more about the origin of this thesis and the consequences of its acceptance. For Marx this distinction is non-existent. For Marx, socialism is neither the transition to communism, nor the lower phase of communism. It is communism tout court. In fact Marx calls capitalism itself the “transitional point” or “transitional phase” to communism (Marx 1953: 438; 1962a: 425–26; in Most 1989: 783). For him socialism and communism are simply equivalent and alternative terms for the same society that he envisages for the post-capitalist epoch which he calls, indifferent texts, equivalently: communism, socialism, Republic of Labour, society of free and associated producers or simply Association, Cooperative Society, (re)union of free individuals. Hence what Marxsays in one of his famous texts – Critique of the Gotha Programme (Marx 1964c; hereafter Gothacritique) – about the two stages of communism 2 could as well apply to socialism having the same two stages.

He goes on to show how the “socialism” of Lenin, Stalin and Mao had nothing at all in common with what Marx and Engels understood by the word but was a form of state capitalist dictatorship over the working class. Brilliant stuff!He also digs out a couple of quotes which I didn’t know about before where Marx refers to post-capitalist society as “socialism” rather his more usual “communism”.Yes, we have been in touch with him and he knows about us.

[Hic Rhodas]

If you want to read a more complete analysis:
http://libcom.org/files/Chattopadhyay,%20Paresh%20-%20The%20Marxian%20Concept%20of%20Capital%20and%20the%20Soviet%20Experience.pdf
Chattopadhyay seems me very interesting, an this book have a rigourous analysis of the item.

[alanjjohnstone]

I blogged about him a few years backhttp://mailstrom.blogspot.com/2007/05/paresh-chattopadhyay.html The party library has his book The Marxian Concept of Capital and the Soviet Experience  It is well worth a read, i still paraphrase an example of his that if the Soviet Union was socialist because of central planning of the economy then 2nd World War America can justifiable be described as  a socialist society too. In regards of whether he is aware of us, I know it maybe spamming of sorts but shouldn’t we have an e-mail list of academics and scholars (Chattopadhyay, Chomsky), political actvists (Derek Wall),  journalists (John Pilger) who are on our wave-length even if not in complete 100% agreement and every month send the link to the new month’s Standard (and each new pamphlet or any Party statement when these arise)

[Author]

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