From International Socialism (1st series), No.25, Summer 1966, pp.2-3.
Thanks to Ted Crawford & the late Will Fancy.
Transcribed & marked up by Einde O’Callaghan for ETOL.
The Soviet Communist Party’s 23rd Congress was a tame affair in comparison to Khrushchev’s ebullient exposures of the stresses in Soviet society at the previous three Congresses. Yet, this Congress did reveal quite clearly the severity of the current crisis in Russian society.
The immense industrialisation drive under Stalin drew on reserves that at that time seemed limitless. The first was rural manpower, but this was increasingly limited by agricultural stagnation. Again, ‘the advantages of backwardness’ (Gerschenkron) lasted only while Soviet industry caught up with Western. The denial of capital resources to housing and transport in order to maximise industrial investment could also not be continued indefinitely. Finally, the privations of the Russian people, rigidly enforced by the State, could not go far for any period of time, particularly as they were increasingly contrasted with Western standards.
Blitz-krieg economic development mobilises immense resources, but also wastes immense resources, and as limits on the supply of resources rise increased economy is needed to raise the efficiency of investment use, to raise output per man hour. The structural changes already begun towards the end of the Stalin era were all the more important given America’s great lead in labour productivity – in December 1957, there were 12 per cent more industrial workers and twice as many engineers in the USSR as in the USA, but on Soviet estimates, the product was only half as large.
The problem is more easily stated than solved, particularly given that a mature complex economy is very much more resistant to the characteristic form of Soviet rule, bureaucratic fiat. But the problem is no less urgent – official Soviet statistics admit the rapid decline in the growth rate of national income: in 1950-55 national income increased annually by 11.4 per cent; in 1955-60 by 8.8 per cent; in 1960-63, by 5.9 per cent. (The 1960-63 figure is certainly an exaggeration, and the actual growth rate was probably under 4 per cent, although not as low as the CIA claim, 2½ per cent. This is a rate far below Japan, the Common Market, and even the recent performance of the USA.)
After a decade of zig-zags, half-hearted reforms, from decentralisation (the 1957 Regional Economic Councils) to recentralisation (1962), the problem remained, and now a new panacea is offered, the so-called Liberman Plan. Liberman’s initial scheme (Plan, Profit, Premium, Pravda, 9 September 1962) sought to link the individual factory’s reward (managers and workers) and investment not, as hitherto, to gross output, but to profits earned on its capital assets. This would give managers an incentive to maximise their profits, to save materials and minimise labour costs. Managers would also have to pay the equivalent of a rate of interest for new plant and equipment, instead of receiving them as free gifts from the State. It has taken some time for Libermanism to become widespread, but a highlight of Kosygin’s report to the 23rd Congress was the statement that the Government intended to speed up the adoption of the new profit-linked system of industrial management, a precondition, Kosygin said, of achieving success in the 1966-70 Five Year Plan targets.
‘A number of large enterprises,’ he went on, ‘employing a total of more than 300,000 industrial and office workers, are already working under the new system. During the second quarter, another large group of enterprises, employing almost 700,000 men, is being transferred to the system. This will be followed by the introduction of the new system into certain branches of engineering, the food industry and the textile industry. In early 1967, the total number of industrial and office workers at enterprises operating under the new system is to be almost one third of the total labour force in industry.’
However, the obstacles to Libermanism are great, for example in pricing. Rationality in profit-linked production depends completely on the rationality of the price mechanism, but this has been distorted in Russia for decades. Thus, at official prices, wages were 10.9 per cent of total costs in heavy engineering; but the share of wages in real costs, one Soviet economist estimates, was 39.2 per cent (Ya Kronrod, Foundations of Economic Accounting, Moscow, 1956, p.186). The radical reforms introduced from July 1955 have still only affected industrial raw material and freight rates, not the much more complicated question of machine prices. The basic method of setting industrial material wholesale prices remains unchanged: cost of production as hitherto (i.e. including inherited distortions), plus a profit mark-up, plus, in some cases, a turnover tax. Hence, the new prices are much the same as the old. Even if Libermanism could overcome this basic difficulty, it is difficult to see what profit linked to production has to do with socialism or communism, as Kosygin bravely claimed.
Agriculture remains even more problematic. Essentially stagnant as Stalin left it, the land is no longer able to supply labour to the towns without cutting agricultural production, nor can it supply capital resources for industrial growth, nor can it raise its own productivity without massive new investment diverted from industry. Despite Khrushchev’s experiments (including the Virgin Lands and maize campaigns, and the creation of gigantic State farms), the 1964 gross agricultural output was only 10 per cent above that for 1958, and 60 per cent below the original target for 1965; in per capita terms, the output index never exceeded the 1958 level in the last six years of Khrushchev’s rule, and fell below that level in 1959, 1960, and the disaster year of 1963. The new reforms of Kosygin and Brezhnev (cutting procurement targets, increasing agricultural investment, removing many restrictions in private farming) still did not permit Kosygin in his report to the 23rd Congress to postulate anything but targets much more modest than Khrushchev’s. In 1956, Khrushchev’s target for grain production in 1960 was 180 million tons, and for meat production in 1961, 20 million tons; Kosygin now promises in 1970, 167 million tons of grain and 11 million tons of meat.
The central crisis of bureaucratic rule remains, worse in the countryside than in industry, but in both progressively inhibiting the expansion of the economy. The 23rd Congress had nothing to offer; it tinkered with the defects of bureaucratic state capitalism. It was a Congress for marking time.
Last updated on 24 April 2010