Studies in Socialism


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Stanford University Press, This early volume assesses self-identified African socialist states, their definitions of socialism, and their progress to date. A study of how African radical elements saw in Marxism a morally superior social, political, and economic order, but could not sustain attempts at implementing it due to internal contradictions and the fall of mentor regimes in Eastern Europe.

Markakis, John, and Michael Waller, eds. Military Marxist Regimes in Africa. Originally published as a special issue of the Journal of Communist Studies , these essays explore cases of Marxist states that, through centralized control of the economy and political system and increased militarization from foreign patronage, developed into radical military regimes. Problems in the Transition to Socialism.


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Socialism in Sub-Saharan Africa: Institute of International Studies, University of California, The New Communist Third World: An Essay in Political Economy. London and Canberra, Australia: Ideology and Development in Africa. Yale University Press, Compares a wide variety of postcolonial African states, including socialist and Afro-Marxist states. Outlines six elements of Afro-Marxism: Users without a subscription are not able to see the full content on this page. Please subscribe or login. Oxford Bibliographies Online is available by subscription and perpetual access to institutions.

For more information or to contact an Oxford Sales Representative click here. Sign up for My OBO. Publications Pages Publications Pages. African Socialism Second Wave: Related Articles about About Related Articles close popup. Communism, Marxist-Leninism, and Socialism in Africa. The combination of private property, free enterprise, market coordination of production and exchange, money, and wage labour was enhanced by the creation of joint-stock companies, fractional reserve banking, the state provision of law and order and public infrastructures, the opening of trade and investment relations between states and the development of financial markets.

The standard wage contract 1 can be terminated at short notice; 2 fixes a money wage per unit of time, with effort guaranteed by penalty of termination and of competition by a large labour reserve army, while capital takes all the residual surplus; 3 gives the capitalist complete discretion to organise production, deciding what and how to produce and sell. The capitalist system promoted urbanisation, industrialisation, technical progress, economic growth and prosperity on an unprecedented scale: At the same time Marx viewed capitalism as a form of systematic labour exploitation.

Primitive societies were not exploitative because they exchanged goods roughly embodying the same amount of labour. Feudalism was openly exploitative, for the amount of work performed by labourers for themselves and for their feudal masters was clearly stipulated and visible; whereas capitalism does not look exploitative at all, since all labour is paid for, but workers perform more work than is embodied in their means of consumption and a surplus of unpaid labour is appropriated by capitalists. Marx neglects altogether entrepreneurship, uncertainty and risk and their rewards: The replacement and growth of fixed capital would be necessary in any mode of production including socialism, Pareto Inequality of wealth and incomes was recognised as a defining feature of capitalism.

Its redeeming feature was the financing of investment and growth: Marx modelled intersectoral flows and equilibrium conditions for a stationary and a growing economy in his schemes of simple and enlarged reproduction with two vertically integrated sectors producing consumption and investment goods respectively. However, he exaggerated the instability of a capitalist system by assuming that profits necessarily would have to be reinvested in the same sector in which they originated, while in any capitalist economy re-investment is never subject to such an arbitrary restriction Lange amplified unreasonably this presumed instability of the system maintaining this undue sectoral restriction in a multi-sector model.

Marx regarded capitalism as a totally chaotic and anarchic system, naturally generating unemployed labour and under-utilisation of other resources, as well as costly fluctuations and economic crises. However, he neglected automatic processes of economic adjustment, operating imperfectly, often either too fast or too slowly, but typical of the operation of markets in a capitalist system.

These automatic processes are: In the longer term, when productive capacity can vary, there is a gradual adjustment of the actual capital stock to the level desired by enterprises in consideration of the demand level they experience — an upwards adjustment via investment in new capital or downwards through the non-replacement of excess capital. These adjustment processes are rooted in the maximisation of profit on the part of enterprises operating in a system of markets, whose owners appropriate profit to their own advantage.

Goodwin , a and likens the adjustment mechanisms operated by markets to homeostatic mechanisms, such as for instance a thermostat, that records the actual temperature, compares it to a pre-fixed desired temperature and automatically activates heating or cooling systems in order to reduce the difference between actual and desired temperatures see also Leijonhuvfud This kind of logic is less cogent and much more controversial in the case of financial markets.

Financial intermediation creates value by modifying the size, time horizon and riskiness of assets demand and supply, but their continuous operation is associated to phenomena of both euphoria and panic. Financial markets contribute to economic growth at the cost of a greater vulnerability and potential instability. Keynes believed that financial investment should be indissoluble like marriage or better, we should say that investment divorce should be equally costly and traumatic.

Derivative products, whose value depends on the value of underlying assets, which they amplify and multiply, can contribute to the increase of total risk instead of its distribution among a large number of agents. This is why Buiter proposed to reserve derivatives transactions to agents who could justify them on the basis of an underlying insurable interest.

The alternative to markets seen as automatic thermostats is the manual regulation of temperature or of equivalent processes; manual control — in economic terms — corresponds to central planning. The desirability of self-regulating market mechanisms with respect to central planning depends on the speed of reaction of the system, on its tendency to reduce or to amplify the possible divergence between objectives and reality, from the stability or otherwise of such processes. There can be circumstances in which manual control planning is preferable to the automatic control markets.

My favourite example, which I used to inflict on my students, is taken from Star Wars: But he is justified by exceptional circumstances: The automatic adjustment processes discussed here, built into a market system, in spite of their imperfections have made the capitalist system more flexible, at the same time exposing it to the risk of possible episodes of much greater unemployment, instability and stagnation than would have been the case otherwise.

In the popular tradition as well as in lower grade theoretical writings we find a mythical vision of capitalism as a system of guaranteed efficiency. In such an ideal world everybody maximises their own utility subject to budget constraints, equalising substitution rates in consumption goods to their relative prices; each enterprise maximises profits choosing the output level at which marginal cost equals price and equalising the substitution rates between different inputs to their relative prices.

If we rule out some additional difficulties to be discussed later in this section, there derives a general economic equilibrium which enjoys the properties of Paretian efficiency: Unfortunately this kind of economic system is a utopia, in the literal sense of a system that does not exist and could not possibly exist. First of all markets as we know them are incomplete, with respect to those that would be necessary to validate this vision.

Missing are intertemporal markets for future goods, except for a small number of homogeneous primary products and domestic and foreign currencies, and mostly for relatively short time horizons. Third, in order to guarantee the expected efficiency properties, if all of these markets existed they should open, register transactions for all future periods from now to eternity and for all the possible states of the world, and then close without ever reopening again, leaving the contracted transactions to be implemented without fail from now to Kingdom come.

In the real world as we know it markets open, close and reopen continuously, indeed in the global economy they rarely close, except on the occasion of universal festivities. Expectations rule, not prices. Even if, absurdly, all these markets existed and opened and closed once and for all as soon as transactions were completed, nobody could guarantee the execution of contracts, which would restrict drastically the volume of economic activity.

And in any case these markets could never involve labour services, without submitting labourers to slavery or to feudal conditions of irrevocable subjection to a master or an enterprise, which in turn would be compelled to employ them. In the Keynesian world in which we live savers do not necessarily need to convert their savings into current demand for future goods, and this is the reason why an excess of savings over investment cause unemployment rather than the desired accumulation of wealth. Neoclassical economic theory has sought to overcome these difficulties primarily by introducing ad hoc hypotheses that substantially neglect their existence rather than resolving them:.

These hypotheses were strongly criticised by Cambridge England economists in the controversy on Capital Theory of the s, see Cohen and Harcourt ;. Although discredited for instance, disowned even by Muth who had introduced them rational expectations are instrumental to the thesis that government policy is always ineffective because it is correctly anticipated by the public.

Another by-product of this theory is the principle of Central Bank independence from the government: Soviet planners sometimes maintained that their central planning was always necessarily optimal, for if they had known how to do it better they would have done it.

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Certainly it should be easier to recognise opportunities for a better allocation of resources on the part of multiple economic subjects engaged in repeated bilateral transactions in a market economy, thanks to the division of knowledge shared out by economic subjects Hayek than on the part of a single central planning agency.

But plan construction could be decentralised, as envisaged by Lange and , which is a rebuttal of Hayek on the alleged impossibility of economic calculus under socialism or by the planning procedures modelled by Ward With these decentralised procedures, mimicking markets by trial and error, both Efficient Markets and Optimal Planning would be equally plausible or rather equally implausible. Still, from the viewpoint of general economic equilibrium, the efficiency of markets requires various additional strict conditions: We know with absolute certainty that none of these conditions is satisfied in any corner of the world in which we live.

Socialist economics

Even if all conditions for market efficiency were satisfied, there is no reason whatever to believe that markets are actually fair from the viewpoint of income distribution. In fact such distribution depends from the initial distribution of productive factors i. Therefore there is no reason whatever why the resulting distribution, depending on cumulative random factors, should be regarded as fair, whether by the majority of economic subjects or by a democratically elected government through which a society expresses its collective values, or in the judgement of representative international organisations for instance from the viewpoint of the Sustainable Development Goals for poverty reduction and other distributive objectives adopted by United Nations for On the contrary, markets may be regarded as doubly unfair, because income distribution depends upon an unequal and arbitrary distribution of wealth which is not democratic one dollar one vote, as it were, instead of one head one vote and because this unequal distribution of income is translated into further unequal increments of accumulated wealth.

Finally, precisely from the viewpoint of general economic equilibrium, wages should be considered as equivalent to the value of time devoted to work instead of leisure, and therefore strictly speaking should be excluded altogether from national income accounting at least for the purpose of inequality measurement, instead of being treated like the revenue of those rentiers who enjoy as leisure the entire time at their disposal without being forced to transform it into goods or salary for their subsistence.

The high and growing inequality of the capitalist system is well documented by Popov In the twentieth century the tendency towards increasing inequality in income and wealth distribution was temporarily interrupted in the period In the s we observe a new increase in the inequality of income and wealth distribution. The countries of the socialist bloc begin to stagnate and decline. The ascent to power of Reagan-Thatcher led to neo-conservative and hyperliberal policies, hostile to workers and to re-distributive policies, the welfare state was reduced, unemployment rose to levels unprecedented in the previous 50 years, trade unions weakened and the number of their members fell.

Other factors concurred to inequality increase: Qualitatively similar trends, though less pronounced, are recorded in other advanced countries such as France, Germany and the United Kingdom. In the Eurozone the richest decile commands on average over half of net wealth, with Gini coefficients for wealth distribution highest in Latvia and Germany, respectively at At the global level income distribution recorded a small reduction in inequality due to the higher income growth in countries on average poorer like India, China and Brazil, but principally because of the under-representation of the richest in household surveys samples and the concealment of their wealth in fiscal paradises.

Lackner and Milanovic note a global Gini coefficient for wealth of about Between and in Europe the income Gini coefficient rose from Milanovic illustrates clearly the inequality in the distribution of income increases, much more marked than inequality of incomes. If one lines up the citizens of the world along the abscissae axis in terms of incomes in increasing order from the lowest to the highest, and along the ordinates the increment they obtained in with the corresponding figures from to available on World Inequality Lab , Fig.

E4 , one obtains a figure that resembles the profile of an elephant: Causa and Hermansen show the effects of measures of income redistribution to working age population in OECD countries over the last two decades, on the basis of family budgets.

However this reduction has been considerably weakened on average in the greater part of the countries in the period considered, especially since the mid s — especially for the reduction of monetary transfers, both directly and through redistributive insurance, which are the most important in all OECD countries naturally if transfers in kind are included the transfer decline is more contained. Income taxes appear to have had a smaller and heterogeneous role relatively more important only in countries that do little redistribution, like Japan, Israel, Korea, and the USA while social security contributions have had a weak but non-negligible role in several countries.

Sometimes the impact of redistribution reduction was contained by more targeted interventions but this had not offset the adverse effects of redistribution decline on inequality. Such decline in redistribution stopped with the beginning of the crisis that triggered off redistribution mechanisms. In particular, inequality tends to perpetuate itself, raising the probability that individual incomes will depend closely on those of parents what Krueger called the Great Gatsby curve , with consequent rigidities in the social and political structure of society.

This is due to several mechanisms: Concern about inequality as a typical feature of capitalism has been tempered over time by several considerations. These catastrophes hit to a greater extent the rich, who have more to lose than the others, thus re-establishing the balance between rich and poor until privilege and abuse re-take their course together with the newly found peace and stability. The trouble is that the rich save proportionally more than the poor, and inequality sooner or later leads to a mismatch between savings and investment and to secular stagnation.

This thesis was formulated first by Hobson , and ri-proposed by Hansen to explain US stagnation in the s; it was represented by neo-Keynesian economists such as Steindl and Marxists like Baran and Sweezy in the s; Summers revived it as an explanation of the phenomena that accompanied the global Great Recession that started in and is still rampaging.

Another example of economic fluctuations typical of capitalism is the political cycle that compromises fiscal policies of full employment whenever they are attempted Kalecki ; and the double impact of unemployment on wage growth relatively to labour productivity and therefore on the profit share, is always fully employed Goodwin Excessive optimism leads to expectations of continuous growing increases in the value of assets, which create speculative bubbles that are non-sustainable and doomed to explode [8].

Kornai regards the surplus of productive capacity and labour typical of capitalism as a major engine of technical progress and innovation, a necessary price to pay in order to avoid the excess demand and therefore the shortages typical of socialism, aggravated by the lack of incentives rewarding innovation in case of success.

He recognises the more serious incidence of corruption in a capitalist economy with a large state budget, but considers the market as a necessary though not sufficient pre-condition for democracy. However, Kornai seems to under-estimate the role of the state in the generation of technical progress Mazzucato , , also because he neglects the role of the military sector and the adverse consequences of excessive protection of patents and intellectual property as a factor retarding innovation. Finally, it is highly questionable whether current high rates of unemployment, worsened by the austerity policies enforced by the IMF and the EU with the tight constraints of the Maastrict Treaty, the so-called Growth and Stability Pact, and the Fiscal Compact and concentrated on the younger generations, are really necessary to promote capitalist dynamism and innovation.

On the contrary Kleinknecht finds that wage stagnation due to unemployment actually discourages investment in labour-saving technologies and therefore slows down innovation and productivity increases: Naturally over time capitalism has changed radically, but current trends have been variously interpreted, as evidence of its being doomed Mason , or tamed Kay , or corrupted Standing Many consumption goods — all the media, literature, musical scores and recordings, photographs, films, television programmes, reproductions of works of art — and production goods such as software, are digital products, whose price cannot exceed their cost of reproduction which is zero or near-zero.

Walras, for example, was categoric: In theory financing the production of digital goods could be achieved by advertising or by strict enforcement of legal protection of intellectual property, but both methods have limited effectiveness, the first because of its limited size and the second because of widespread piracy. Gillies argues that, if groups of workers are going to be paid to produce digital goods, they cannot be paid by the private sector and therefore would have to be paid a wage by the state: But there is a more trivial, brutal solution to the effects of the digital economy, namely one in which digital goods, constrained by a zero reproduction cost and price, will only be produced in a much reduced scale within the bounds of voluntary selfless generosity, limited advertising income and ineffective protection of intellectual property.

A somewhat impoverished world and a largely unchanged system would be the unattractive but more probable outcome. Reports of capitalist collapse have been much exaggerated. Kay goes as far as writing: He reminds us that, in nineteenth century capitalism, enterprises and large companies were in the hands of owners-entrepreneurs; in the twentieth century in the UK and the United States the role of entrepreneurs was delegated to professional managers, already in family enterprises and especially on behalf of a multitude of shareholders.

More recently the role of shareholders was taken over mostly by pension funds, by insurance companies and mutual funds, whose investments are handled by professionals specialized in managing their portfolios.

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After the last War firms become international and multinational, manage many plants in different countries and operate in a global economy that frees them of many domestic constraints, giving access to mobility of capital and labour, of goods and services. Coase had asked why production was organised in firms instead of being conducted by self-employed individuals entering market relations, and why was production not organised in a single giant firm.

He found the answer in the transaction costs of market relations versus those of centralised direction by an entrepreneur. The capitalization of a large company depends on the value of these relationships, which is particularly illiquid: For this reason the shares of these companies tend to end up in the hands of their managers, as well as of their employees.

These companies need a stock exchange listing initially to allow the founders to realize the value they added to their capital, and to reassure shareholders on the value and above all the liquidity of their shares, but otherwise are not financed by the capital market but mostly through reinvesting their profits. A certain fragility derives from this set up, but also a certain resilience, i. The theory that shareholders are not the owners of their company is a Kay hobby horse, oblivious to considerations that: As for the model of the modern enterprise as a network of relationships mediated by markets instead of a centralised command hierarchy, it is easy to understand its greater fragility but not its alleged more inclusive and less confrontational character.

On the contrary, the fragmentation of the productive process and the fierce competition among global workers can only intensify conflicts between capital and labour, as confirmed by the continuous decrease of the labour share in national income worldwide. Standing produces an even worse scenario. With the coming to power of Reagan and Thatcher in the late s and in the s modern capitalism has taken a hyperliberalroute whereby the pretence of promoting competition and free markets has led to the diffusion worldwide of a rentiers-dominated, monopolistic and oligopolistic system totally corrupted by the elimination of competition and free markets.

This hyperliberalmodel was developed by the Chicago School of Law and Economics and by the economists of the Mont Pelerin Society, founded in by Friederich Hayek, Milton Friedman, and five other economists all subsequently honoured by a Nobel Prize for economics, as well as 32 other conservative economists such as Eucken, Mises, Roepke. Their agenda proposed — as a reaction to Keynesian, re-distributive and social democratic policies — the promotion of a market economy and an open society, i. All of these institutions controlled generous research funds and therefore could influence and direct research projects, academic publications, university curricula and teaching appointments, affect government policies and the appointments of national and international officials.

This multi-pronged project of promoting the market economy was accompanied by the realisation of a system that on the contrary limited and hindered the operation of free markets. For Marx, labour acting over nature leads to the development of production forces natural resources, accumulation of physical and human capital, the state of technical knowledge. This development leads to the emergence of contradictions between the productive potential of society and the prevailing production relations e. Further contradictions arise between the economic basis or production relations and the superstructure of society, understood as the social relations and social consciousness religion, ideology, culture, etc.

Productive forces and production relations define a mode of production, though at any time a mode of production coexists with residuals of former modes and embrios of the superstructure of future societies Lange, Thus, monarchy tends to degenerate in tyranny, which in turn tends to degenerate into aristocracy, which tends to transform itself into oligarchy, usually brought down by popular movements that establish a democracy.

Out of oclocracy there emerges a stronger leader who re-establishes order with monarchy, and the cycle anakyklosis repeats itself. In his original approach to the evolution of economic systems, in any case, Marx made three major errors: On the contrary we know today that full communism has always remained an objective never realised; that in the s socialism was re-transformed back into capitalism, and moreover into an extreme form of hyperliberalcapitalism; and that economic factors are only a part, though important, of the multiple causes of system transformations. To treat this as a law of socialism is only a propaganda attempt at legitimising the policies actually followed.

There were, however, at least two serious attempts at formulating genuine laws of motion of a socialist society, by Wlodzimierz Brus , , , in Poland, and by the already cited Rudolf Bahro in Germany. Brus , especially in ch. Bahro considers the reform attempts of the previous quarter of a century as an expression of the internal conflict between the two components of socialist bureaucracy, i. His class analysis of Soviet-type societies part III, ch. Interestingly, Bahro noted that in the experience of evolution the new species that emerges and establishes itself is never a mutation of the most developed species in existence, but rather a manifestation originally less developed and therefore more flexible, a side-shoot, bearer of mutations more appropriate to new circumstances.

The permanence of conflicts and contradictions in the socialist economy is also investigated by Nuti , , who presumes a positive correlation between economic and political centralisation; economic centralisation involves inefficiencies and instability and therefore pressures towards reforms, but at the same time leads to an acceleration of capital accumulation, leading to economic growth and full employment but also, given the systemic commitment to price stability, generates a systematic excess demand and shortages.

Excess demand is made worse by wage drift in conditions of full and overfull employment, but is influenced also by exogenous factors that might alleviate or aggravate it. Shortages force the authorities to increase economic centralisation. The net effect of pressure to reform, due to systemic inefficiency and shortages, and to centralise in order to prevent the emergence of shortages, is ambivalent: The impact of protest, again, has an ambivalent impact: This model is based on the experience of the Soviet Union and the east-European countries of the last postWar; in the following sections we shall consider the evolution of the Soviet-type system, from War Communism to the New Economic Policy, to the centralised planning and the failed attempts at reform, and we will try to exemplify the conflicts of contradictions involved, without adopting or justifying a reductive and deterministic approach to the economic factors behind this evolution.

Socialism was expected to arise in the most mature, developed, and industrialised economies though apparently Marx, in his correspondence with his influential Russian follower Vera Zasulich, required only a large industrial proletariat and believed that socialism could develop in Russia from the peasant commune. Instead socialism first arose in an underdeveloped economy, labour abundant, with an autocratic, despotic tradition, moreover very large, ravaged by a world war and civil war and operating in a hostile international environment.

The population grew rapidly but capital was scarce; one third of enterprises were in foreign ownership. Foreign trade had the typical characteristics of a backward country: Russian dependence from Western countries and especially Germany with which it conducted half of its trade was such that during the First Warld War Russia continued to import from Germany chemical products, metals and machinery, specifically exempting them from the prohibitions to trade with enemy countries Dobb , p. The war effort and war destructions, aggravated by transport difficulties, led to serious shortages of fuel, materials, and foodstuffs.

In these conditions the system established immediately after the October Revolution was principally that of a War Economy: War Communism was partly dictated by emergency, partly the deliberate implementation of a previous design.

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Szamuely shows that a centralised subsistence economy, managed with commands, based on egalitarian principles like War Communism, was the image and operational concept of a socialist economy in the writings of Kautsky, Hilferding, Bukharin, Preobrazhensky, Strumilin, many of the protagonists of the Soviet state administration, and certainly Trotsky and Lenin himself, not only before War Communism but throughout the time of its development Nuti, That system achieved its own survival but could not deliver post-war reconstruction, let alone industrialisation and growth; it was destroyed by its own contradictions.

Bertrand Russell, who in visited Moscow and met Lenin with an English delegation, realised immediately that the ideals of freedom and equality had been set aside. Nevertheless, War Communism left an important mark on the evolution of socialism because it was the first socialist model, though established in conditions far from ideal, because it provided a guidance for the Stalinist model of another war, the war against backwardness, and because it anticipated several of the economic and political problems of the Stalinist model.

A tax in kind in agriculture, with the remaining output allowed to be used and traded freely, was directed at saving the smychka , the alliance between workers and peasants, and raise the supply of foodstuffs. The emergence of local trade demanded the re-creation of monetary means of payments and credit, leading to reopening of the Central Bank Gosbank in October A process of de-nationalisation began, with leasing of publicly owned plants to national and foreign entrepreneurs, often including former owners dispossessed during War Communism; new private enterprises were allowed to employ up to 20 wage-employees besides family members.

Ordinary monetary flows were re-established, the budget was balanced, the currency was stabilised and made convertible; foreign capital was granted concessions; foreign trade increased and the economy recovered see Dobb, ; Nove, ; Carr, , , The superstructure rapidly adjusted to this new economic basis: This leading role will survive until the post-socialist transition of the s.

A further adjustment to system superstructure took place with what Szamuely , ch. It delivered reconstruction, which depending on the criteria adopted was completed at some point between and Growth however was based mostly on the reactivation of existing unused capacity and the re-absorption of available factory labour; but gross investment was barely above depreciation levels Nove The Soviet Union had accumulated a substantial external debt, whose cost of interest and amortisation was mounting; terms of trade were unfavourable; agricultural exports were languishing.

The expropriation of peasants and thriving Nepmen would have undermined the very foundations of the NEP; while the use of price incentives to obtain a higher marketed surplus would have led to the further development of a kulak class of rich peasants and the abandonment of the idea of using agriculture to finance primitive socialist accumulation. Either the living standards of workers in the socialised sector had to be compressed; or accumulation would have had to proceed at a slow pace, which would have caused the permanence if not the increase of labour unemployment, that had arisen and fluctuated already during the NEP.

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Ultimately there arose a contradiction between the maintenance of the NEP mixed economy and the simultaneous achievement of economic growth, of GDP and of the socialised sector, and minimum standards of socialist distribution. Therefore, NEP was discarded in favour of state ownership and central planning, and collectivisation of agriculture. Land collectivisation involved immense economic and human costs. One hundred million of Russian peasants were deprived of the land that they had acquired in the previous century and lost their independence becoming state employees.

The mass expropriation was bitterly resisted, causing the destruction of harvests and the butchering of animals of the order of half the horses, cattle and pigs in existence , causing the death by starvation of a number of people estimated at around 5. There was also a resulting drastic fall in natality, involving by the beginning of a demografic loss of about 18 million of which two thirds consisted of unborn children.

Repeated attempts at adding to these costs the political victims of Stalinism have met extremely complex methodological problems, divergences between archival sources and partial episodic evidence, the common treatment of simple criminals and political dissidents, the classification of famines and the liberation of prisoners no longer capable of productive work. Rather than attempting here a debatable synthesis we refer to the treatment of these problems by Ellman a.

In German communists, diverting onto their own losing third candidate sufficient votes to prevent the victory of the centre-social democratic party, had been instrumental in the presidential election of the monarchist Paul von Hindenburg, who in appointed Hitler as Chancellor. And in Comintern adopted an extreme left-wing policy that treated the social democrats as their worst enemy, thus weakening the anti-Nazi forces in Germany. Finally, news of mass deportations and famines in the Soviet Union during the collectivisation of agriculture undoubtedly shifted votes from the German left towards the Nazis as reliable anti-communists.

In the second half of the s there was an intense discussion on the nature of planning and on investment policy Erlich, ; Spulber, ; Carr-Davies, ; Dobb, , , On economic planning two schools emerged, genetic and teleological Charemza e Kiraly, The genetic school e. Groman, Kondratieff, Bazarov viewed planning as an extrapolation of past trends, subject to objective constraints including pre-War productive capacity; they viewed the plan as a forecast and attached importance to balanced growth. The teleological or purposeful school e.

Shanin maintained the necessity of a development sequence in which priority should have gone first to agriculture, then to light industry following the expansion of demand in the agricultural sector, then to heavy industry only after the growth of the first two sectors had given rise to a sufficient demand for capital goods. The left opposition, represented above all by Preobrazhensky, instead assigned priority to heavy industry, whose growth would have led by itself to demand for capital goods see Preobrazhensky and the collection of the most important contemporary contributions in Spulber The key to growth acceleration was the choice of which investment fraction stipulated as constant should be devoted to the sector producing capital goods.

A zero fraction would correspond to a constant absolute increase of the production of consumption goods [11] under the simplifying assumption of infinite lifetime and constant productivity of those capital goods. A positive fraction would have reduced the production capacity of consumption in the short period, but making it grow faster in the course of time; both the temporary reduction and the successive acceleration would have been greater the larger the fraction allocated to the production of capital goods. For a maximum investment share i.

The longer investment was reserved to capital goods production, the larger the consumption increase. The Feldman model was simplified and improved by Domar ; a similar model was developed by Mahalanobis to explore the implications of growth acceleration in the Indian economy in equivalent circumstances, and supplied the theoretical foundations of the Indian second five-year plan that began in , was modified in due to inflationary pressures and external imbalances with monetary reserve losses, abandoned and replaced in Just as Feldman argued the virtually unlimited growth capacity of a socialist economy that wanted to implement it, in the last post-War period Michal Kalecki theorised, on the contrary, the limits to the feasibility and effectiveness of such a policy.

The continued acceleration of growth through capital accumulation required a practically unlimited labour availability. But sooner or later, for growth rates that exceeded the natural growth rate of population increase plus labour productivity increase rates full employment of labour would be reached. At that point growth would require necessarily a greater increase of capital per unit of additional product: Similar cost increases limit sustainable growth because of the need to cultivate less productive land or exploit less accessible mines, and the necessity to balance foreign trade with less competitive exports or at increasing transport costs for more distant destinations.

At some point the burden of higher investment required to keep growth above the natural rate becomes heavier than its positive impact on growth: In that period there were a number of plans, but no overall consolidated macro-economic planning of the whole economy. Land collectivisation also raised labour supply and generated opportunities for both import substitution and greater agricultural exports Ellman Their departments glavki take on functional aspects finances, deliveries, investiment. The number of Ministries at the republican level and for the whole Union and their subdivisions, the specific tasks of the Planning Commission Gosplan for instance between short versus long period, vary greatly over the course of time, but their structure will remain unchanged until the regional de-centralisation of with Sovnarkhozy or regional councils.

The number of Ministries is usually taken as a good proxy for the current degree of centralisation. Lenin had always regarded banks as major institutions for the management of the socialist economy; in the Central Bank Gosbank acquired also the monopoly of short-term lending, enforced with the prohibition of direct financing of firms by suppliers and clients.

Thus, money and credit were to provide the payment flows corresponding to planned physical flows. Financial flows belonged to two separate circuits, one of cash for the payments of wages and the purchase of consumption goods on the part of the population and naturally for the transactions among households and in private sector trade , the other of bank money for purchases and deliveries of goods between enterprises Nuti c. Any additional profit would be syphoned off into the state budget by a turnover tax practically a tax by difference, indistinguishable from profit ; investment funds and most of the working capital were obtained either from retained profits or as free of charge allocations from the state budget subject to the observance of official rules concerning the choice of techniques and amounting to a shadow capital charge.

The retention of profit by enterprises was governed by, and did not govern, the rate of accumulation. Normally persistent and endemic shortages of consumption goods developed, leading to retrading if technically feasible, at higher, black market prices. Shortages were due to overambitious targets difficult to realise and often unrealisable, to priority given to heavy industry or to the production and import of investment goods; but principally shortages were simply due to official prices being fixed at levels lower than those which would have cleared markets, matching demand and supply. The director and other managerial officers received not only a salary but also performance-related progressive bonuses for the fulfilment and over-fulfilment of various indicators, mostly expressed in physical units, in terms of gross output kult vala , except for the use of constant rather than actual current prices for the aggregation of heterogeneous products of the same enterprise.

In the Soviet Union the rapid increase in investment began in and continued up to with only one year of relaxation in The measurement of Soviet growth has been the object of lengthy debates but, even setting aside official statistics, independent Western estimates indicate an impressive threefold increase of industrial production in to of which a doubling from to and a further increase of about two and a half times from to Bergson ; Nutter et al.

This rapid industrialisation was accompanied by unprecedented urbanisation, the increase in active population of both genders and the achievement of high standards of education. In the process of plan construction first the necessary import requirements of planned levels of gross output were estimated by commodity groups, then export plans were adapted to foreign currency requirements of the import plan. If a deficit emerged, over what could be financed out of reserves or fresh borrowing, and if import substitution could not fill the gap, output plans were scaled down.

Planned trade is undertaken through large import-export state enterprises, specialised by commodity groups, thus enjoying very strong market power, act on their own account and not on behalf of producers, who remain fairly insulated from the objective stimuli of international markets. The economic achievements indicated above, to which one should add victory in war and survival in a hostile international environment, were accompanied by increasing problems, rooted in the centralised structure described above.

To some extent these problems were the same as those encountered during War Communism, but others derived from the permanence of central planning over time, because of opportunistic behaviour patterns acquired by the participants in the planning process, and because of the cumulative nature over time of some of the problems involved. In order to alleviate these problems Bulganin in his report suggested the introduction of greater material incentives, greater managerial autonomy, and greater reliance on foreign technologies.

But there were also other problems, reported in the press and debated more and more frequentlly by economist and engineers: Labour productivity fell as a result. This is a plausible explanation, but it clearly depends on failure both to minimise costs by equalising operating costs on old plant and full costs on new plants and to raise prices to market-clearing levels which would have reduced shortages without postponing replacements.

Investment was also wasted in the production of excess inventories of unwanted goods surplus to requirements, such as bycicles, sewing machines and traditional cameras. In addition, the central planning drawbacks mentioned among others by Bulganin were becoming more serious because of both their cumulative nature and by opportunistic behaviour spreading among actors of the planning process. Basically the policies that had served well Soviet conditions of the ss became inappropriate to the more mature and complex Soviet economy of the s.

In spite of all the defects illustrated above, the basic Soviet model of central planning was exported, without significant modifications, to other countries that took the road to socialism after the last World War, in Central-Eastern Europe and in Latin America, Asia and Africa, encompassing up to one third of world income and population in the s.

In many ways the conditions of the new socialist countries were similar to those of the Soviet Union that had benefited from the centralised planning model. Many of the new members of the socialist bloc were underdeveloped, mostly agricultural and with abundant labour. The only exceptions were Moravia in Czechoslovakia, the Silesia region in Poland and East Germany, that had already reached a significant degree of industrialisation; however they were less developed than Western Europe and all had suffered war devastations and had to undertake post-War reconstruction.

With the exception of Czechoslovakia they did not have much experience of parliamentary democracy; in the period between the two World Wars most east European countries had been subjected to national or foreign dictatorships. Like the Soviet Union the new members of the bloc operated in a hostile international environment: In several other respects, however, these new socialist countries did not conform to the conditions of the Soviet mode of production or to its Stalinist superstructure.

Brus lists several of these specific conditions: The same accumulation policy was followed by the new members of the bloc: Initially economic integration was very limited, except for the practically free circulation of intellectual property among CMEA members. There were complaints of Soviet exploitation of satellite countries, for instance by the importation of Polish coal; subsequent studies have found that terms of trade within the bloc were very close to those of world trade, but that exploitation may have taken the form of the imposition of products and quantities being traded, which were different from those that satellite countries would have voluntarily decided to trade.

Until the end of the s the emphasis was on cooperation , only later did it shift to integration. In Khrushchev proposed a joint planning organ but met the opposition of Czechoslovakia, Poland and Hungary and above all of Romania, that resisted its proposed specialisation in agricultural products.

Within CMEA trade flows tended to be compensated bilaterally moreover also within commodity groups considered hard and soft in world markets. Exchange rates had a purely accounting role, variable taxes and subsidies were used to make all planned exports equally profitable like national sales for producers, and imports competitive with domestic substitutes if they were available. Intra-CMEA prices were generally indexed to an average of international prices in convertible currencies, first to a moving average calculated every five years the Bucharest formula , then on a yearly basis the Budapest formula.

The rise in the price of oil and raw materials that took place in the s from therefore applied to Soviet exports to the other CMEA countries with a significant delay, though one decreasing over time. The same delay in the transmission of price trends to intra-CMEA trade towards the end of the s was reversed to raise the price of Soviet supplies above international prices on foreign trade issues see Lavigne On the whole, foreign trade transactions of CMEA countries were determined administratively and there was no automatic mechanism able to transmit to national producers the signals and stimuli of commercial opportunities and to induce them to profit from such opportunities.

The system described above was expected to offer ex-ante coordination of economic decisions i. As we have already noted economic growth was very impressive in the USSR from until about , and in East-Europe from the completion of post-war reconstruction around to the mid-sixties, at a cost of large and rising shares of capital accumulation in national income. However economic growth later slowed down significantly, fluctuations and actual falls of income appeared in spite of the continuation and even the acceleration of capital accumulation, increasingly financed by foreign loans.

According to Maurice Dobb, compound interest i. Internal and external imbalances have been typical phenomena of the system. During NEP prices were stabilised, but from onwards inflation was never eliminated, except for a short period after the last War in the s, characterised by price stability and slight deflation. Beside official inflation there were widespread phenomena of hidden inflation in the form of officially underestimated or unrecorded price increases and repressed inflation in the form of persistent and endemic excess demand and accompanying shortages both of consumption and production goods.

It was estimated that towards the end of the s in the Soviet Union every year some 35mn man-years were lost in queueing for purchases.

Socialism and Life.

Full employment was realised in the Soviet Union by through mass mobilisation of labour and its redistribution independently of competences and status of the employed. Labour was often underemployed, or hoarded within enterprises in case of need, but the universal picture in the Soviet Union and in Eastern Europe has been one of labour shortage and not of unemployment apart from seasonal or frictional unemployment especially in the Asian republics.

Presumably full employment continued to be an important objective for planners, but it was obtained as a byproduct of ambitious capital accumulation and growth policies, without having to sacrifice other objectives, by default or — according to Phil Hanson — by serendipity i. Equality was effectively higher than that typical of capitalist systems, in spite of its overestimate in the presence of privileged access to deficit goods at artificially low prices — like meat, caviar, motorcars, durable goods, medicines, and medical care, education, foreign currency and foreign travel.

We can actually argue that sometimes equality of monetary incomes was excessive, in view of the disincentive to invest in human capital and to take risks. Until the late s observers of this system spoke of microeconomic inefficiency being offset by macroeconomic rationality. Inefficiency soon became recognised, by native economists and politicians even more clearly and forcefully than by Western critics.

Basically, the system, ignoring or distorting prices and production costs, neglected all opportunities for substitutability in the structure of consumption and in the choice of production techniques, as well as in the structure of foreign trade. For instance, material intensity and especially energy, that was reduced significantly in capitalist economies following their price increase in the world market, in the socialist economies continued to increase, completely wasting their relative richness in this area.

Investment gestation periods were excessive by Western standards. Many investments, including costly imported machinery, were already obsolete by the time of their installation or remained idle for shortages of labour or other inputs. There were absurd biases in the quality and assortment of output due to indicators expressed in physical units or gross value instead of net value. Hare and Hughes showed that, on the eve of transition in Czechoslovakia, Hungary and Poland, between a fifth and a quarter of manufacturing production exported exhibited negative value added at world prices using input-output data and exchange rates.

Japan used to buy Soviet machinery for scrap, and aluminium from the socialist bloc was sold internationally at less than the international price of the energy it embodied. Health and environmental standards were high but unobserved. The system that had emerged as victor in the Second World War, conquered space, shortened its distance from advanced capitalist countries, became incapable to provide for the basic needs of the population for food, clothes and shoes, elementary products like pizza, hamburgers, jeans, and soft drinks, let alone motorcars, consumer durables or high technology products.

The growing inadequacy of the Soviet model of central planning to the USSR conditions at the turn of the s, and even more so to the conditions of Central-Eastern Europe after post-War reconstructions, generated growing pressures for political and economic change. Other reform attempts abound: In addition there were countless experiments: Substantial resources would have been needed to restore market-clearing prices, reduce external debt and finance capacity restructuring.

The old system suffered from the lack of democratic verification, even more important in a planned economy where the public of consumers and workers cannot transmit to the leadership signals through market prices, for instance pushing for more consumption and less investment than planned. Therefore here there can be a certain descriptive system on the one hand, a system of norms on the other. Moreover Hilferding appeared to believe that economic laws can be already suspended in the political struggle for socialism. It turns out that this took no account of the nature of capitalist ownership.

Magdoff asks whether there exist economic laws under socialism, and underlines that the idea that objective economic laws are not present in a socialist economy was, in fact, orthodox doctrine in the Soviet Union up to the early s, when Stalin , of all people, maintained that planning must respect economic laws. Aiming at overambitious, even impossible targets one might occasionally achieve better results than obtainable otherwise, but defying the laws of physics is by and large a losing strategy: Here, too, is the foundation of the system of priorities of investment over consumption, industry over agriculture, investment in heavy over light industry, so as to produce steel to produce more steel and ever more steel, regardless of the needs of the population.

Priorities in the plural are a pernicious oxymoron: In its most spectacular and damaging form, the violation of economic laws in the socialist system consists in adopting the target of maintaining low and stable prices, impossible while goods are available in quantities lower than those necessary to validate such prices given the liquidity of households and enterprises and their demand at those prices.

Hence the inevitability of shortages, queues, waiting lists, black and variously-coloured markets — which impeded the introduction of market elements in the numerous reform projects of the socialist bloc.

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