Private Enterprise in Russia

When all the arguments for the existence of Socialism in Russia have been exhausted by Communist Party members and their sympathisers, they usually conclude with the idea that “At least Russia has, in abolishing private enterprise, taken a great step towards Socialism.” Even if Russia had nationalised everything, this would not mean that they have got Socialism but only State capitalism. Avowedly capitalist countries have never hesitated to nationalise industries when it suited them. But has Russia abolished private enterprise?

Readers Digest for May, 1954, condenses an article from the Wall Street Journal by Tom Whitney who has recently returned to the United States after nine years in Russia, first as chief of the economic section of the U.S. Embassy in Moscow, and later as correspondent for the Associated Press. He wrote “If you dial a certain telephone number in Moscow you can arrange to buy a TV set within 24 hours—instead of the two or three months it takes to get one from the State run electrical appliance store. Calls to other Moscow numbers will summon such people as washing machine salesmen, doctors, repair-men, and house builders—all private enterprise ready to provide speedier or higher quality service than the Soviet Government offers.”

Many traders, asserts Whitney, wait (or more likely get the tip) of a new delivery of goods arriving at a store where there has been a shortage for a long time, and buy a huge quantity and resell them for a handsome profit to those not willing to wait or stand for hours in queues. Rosa Martynova, a member of the Moscow branch of the Komsomol (Communist national youth organisation), is now serving five years for this practice. Another eminent party member, M. Kogan, obtained several thousands of watch movements from the government, assembled them and netted £89,000 profit before the government woke up! There were two brothers who sold leeches to the government (they are still widely used there and were applied to Stalin before he died), made 400,000 roubles profit a year on the sales.

Everywhere in Russia, and in every branch of activity, according to Whitney, there is some private enterprise and it can successfully compete with the inefficient state enterprises. Of course if the goods are just stolen, as they frequently are, or if the raw material has been wangled from a government store, then competition should not be too difficult. Whitney claims that even landlords can get rents above controlled prices, and he witnessed that a friend of his in Moscow signed a lease for a room priced at 265 roubles a month; but on top of that the landlord demanded extra cash to boost the total rent 450 per cent, claiming that he would go bankrupt if he only charged the official rent!

How can the police prevent the buyer of a television set from selling it to a “friend” for a profit? Whitney claims that only 100,000 TV sets are at present coming on to the market annually, yet the demand is for at least ten times that quantity.

He points out that not all private enterprise is illegal in the U.S.S.R. Soviet law permits individuals to work privately under licence at any of about 20 trades and professions, including medicine, hair-dressing, book-binding, house-repairing, etc. Russians can work full time at such jobs and part-time at many others. House repair must cover a multitude of occupations, and with a few friends (or business partners in state warehouses) can be very lucrative. Taxes on private incomes are levied as a recognised thing.

Stealing from government factories keeps private enterprise going very profitably according to Whitney. In most of the large towns medical, dental and even teaching is done privately. State-run clinics are inefficient and always overcrowded. One Russian doctor maintains a private practice in Moscow as a homeopath and earns over 16,000 roubles a month. His income from official work could never approach that mark.

Whitney concludes his article by saying that “You can get private help in practically any service field in Moscow—if you can pay the price.”

Private enterprise is hard to stamp out, even with secret police, who are sometimes as corrupt as the private traders. So long as the workers don’t understand or want anything else, the profit motives of society will survive. There is no socialism in Russia. State capitalism is the dominate form, with private enterprise, according to Whitney, as a flourishing subsidiary.