She was right all along!

Today I discovered a really excellent article discussing how American and Soviet scientists and intelligence operatives reported on the collapse of the Soviet Economy, at the Texas National Security Review wtf. The basic thrust of the article is to understand whether researchers in the US national security complex, and associated academics, missed the collapse of the Soviet economy that began around 1966, or whether they were actually predicting the fundamental economic challenges that would eventually bring the Soviet Union to revolution and implosion. Apparently in the 1990s there was a bit of a thing where major newspapers and some politicians accused the CIA and the academics in its orbit of having completely missed the fact that the Soviet Union’s economy was failing, and having driven the US to go into debt peonage in order to achieve massive economic growth that wasn’t actually needed. The article cites a few of these critics saying basically that if the CIA had accurately predicted the trajectory of the Soviet Economy then Reagan wouldn’t have had to build up huge deficits to finance a massive military and economic expansion. Putting aside how ludicrous this is on its face – conservatives don’t care about deficits, for starters, and Reagan was building deficits for a wide range of political reasons – the article dismisses this by showing that in fact the CIA and its fellow travelers did in fact predict the collapse of the Soviet economy, in remarkable detail, and this 1990s criticism is all just silly revisionism.

This wasn’t the part of the article that interested me though – in fact I thought the discussion about why this is important was the weakest part of the article. What I enjoyed was the detailed description of the stages of economic growth and collapse of the Soviet Union, and the description of how Soviet theorists and planners saw it coming from the 1970s onward but seemed powerless to stop it. It tells a detailed and interesting tale of an economic program that seemed so successful (to both American and Soviet observers) in the 1950s, falling into stagnation in the 1960s and then into ruin in the 1970s. It’s a detailed and well-researched description of an economic system falling apart, and it shows that actually the economic analysts of the West really had their finger on the pulse here, and their theories about how economies should work and what was wrong with the Soviet economy proved to be correct in the end. This isn’t just American triumphalism that you might expect from the Texas National Security Review wtf, because the author cites a bunch of Soviet theorists who basically saw all the same issues that the Americans saw, and were unable to come up with any solutions that could work. The story of how they failed to come up with solutions is in itself fascinating, and something I will come back to when I discuss the Chinese communist approach to the same problems these researchers identified. But first I want to ask – did Western Marxists of the 1960s to 1980s see any of these issues in the Soviet economy, and if they didn’t, what does that say about their much-vaunted economic analysis skills?

The rise and fall of the Soviet planned economy

The article divides the Soviet economy into two rough stages, the first lasting from I guess the 1930s or the end of the war up until 1959, and the second starting somewhere in the mid 1960s and running to the fall of the Berlin wall. The first period was characterized by what the author calls extensive growth[1], which appears to be the process of throwing bodies at basic problems like building roads and shit. This period was characterized by rapid growth and social engagement(?), and seems like the kind of period when central planning would be no hindrance, or possibly even beneficial to growth. This is the period of increased steel production, more coal in more burners, the kind of basic economic problems being solved by simple and robust methods. But by the 1960s the Soviet Union had solved these basic problems and had moved into a more complex economy characterized by skilled labour working on more difficult problems of distribution and production, and it could no longer function by simply investing in new plant and equipment. At this point both American and Soviet analysts of the economy noticed that it needed to move to a more mixed structure, and it required engaged and committed professionals rather than hard working industrial hands. Central planning failed at this point, and the social and cultural conditions in the Soviet Union began to hold back growth and achievement, because you can’t get skilled professionals to work for just money alone, and the other cultural and social rewards of engaging in the mixed economy just weren’t there. The economy by this point had also become much more complex and had become too complicated for proper central planners to manage, but the lack of monetarization and small scale innovation and markets prevented it from finding local and specific solutions to complex problems. Both American and Soviet theorists noticed this problem, with the Americans wondering if the Soviet leadership would make radical changes to unleash new energy and creativity, and the Soviet thinkers wondering how to do this and complaining that they weren’t able to come up with solutions to match the problems they had identified[2].

At this point the author also describes a bunch of other problems overwhelming Soviet society that were identified in the west and discussed: declining life expectancy, increasing infant mortality, rampant alcoholism, and endemic corruption. The corruption was seen as a response to the challenges of an economy that simply wasn’t working and the cultural and social barriers to progress, and the alcoholism and infant mortality were seen as signs of a deepening social malaise that simply couldn’t be solved by a planned economy. This part of the essay – which to be fair is a long way in – was powerful stuff to read. It’s a fundamental given of modern development economics that when life expectancy or infant mortality go in the wrong direction, you’re getting something very wrong. That should be a sign that you need to get off your arse now and fix whatever mess you’re facing[3].

What did Western Marxists see in all this?

To their credit it appears that Soviet theorists and planners from the 1970s onward saw the writing on the wall and were at least aware of the need for change, even if the political structures of their economy prevented them from effectively implementing them. But how did western Marxists study their model society and how did they react? While we know a lot of western Marxists went their own way – especially after Hungary and Czechoslovakia – we know that many of the western communist and socialist parties continued to support the Soviet Union for a long time. One of the few remaining claims for which the people of this time get any credit is that while its political prescriptions may have failed, Marxism provided a cogent and insightful analysis of the economic problems facing capitalism, and a definitive description of how economic crises arise and are resolved. Presumably then it would have been able to analyze the problems within the Soviet Union, and presumably at least some of these Marxists would have had better access to information and data coming out of the Soviet Union than did the CIA.

So what did they do with it? Did they see the crisis the way their Soviet colleagues did? I have dug around online and can’t find anything about Marxist critiques of Soviet economic ideas at that time except for this review of a book on Marxist critiques of Soviet economics, that suggests the book is not a comprehensive review of what was said and written in that time. I certainly can’t find any evidence of a famous critical review of the problems facing Soviet industry. One would think that at least in the post-Vietnam era, perhaps in the 1970s, some of the Marxists of the New Left would have been feeling liberated enough to consider critically whether the Soviet Union was going in the right direction. At this time left wing movements in the west had started looking to national liberationist movements in Africa and latin America for inspiration, and these movements were typically less economically and ideologically hidebound than the Soviet Union, though often still dependent on it for economic and military support, so one would think western Marxists would have been able to engage more critically with Soviet economic ideas through these movements. But I can’t see much evidence that they did. What were they doing during this time? Is there a cruel irony where Soviet theorists were applying western market economics to critique Soviet economic systems, while western Marxists were applying rigid Marxist principles and missing the entire point? Were CIA academics more closely engaged with Soviet economic data than the Soviet Union’s supposed allies in the American left? I can’t find any information about this online, and I’m wondering.

How did China learn from Soviet failure?

The article also mentions that Soviet leaders tied economic growth directly to the ideological success of their project. They figured that people would be willing to make political and cultural sacrifices to the revolution provided they saw economic progress, and could look forward to a future utopia, but from 1970 on the economy was stagnating and so they were offering the people decades of austerity and asking them to commit to a political program that offered no future. This fundamental bargain – freedom in exchange for development – seems to me to be at the heart of the Chinese political program, and to have been a huge success for them: basically, so long as everyone’s economic lot continues to improve, the Chinese communist party assumes that the population will tolerate limits on expression, political activity and assembly. It’s a deal that has worked for them so far, and it seems to be at the core of their political program. But it failed in the Soviet Union, so how did Chinese leadership respond to this?

This is another topic that is very hard to assess for a non-expert just using random internet searches. How did China respond to the Soviet Union’s stagnation? Is there a body of work, in Chinese, by Chinese planners and intellectuals, interpreting the Soviet Union’s failure in terms that could be used to improve China’s economic and social performance? Did the 100 Flowers movement or the Cultural Revolution stem from some recognition that Soviet ideological strictness was stopping economic growth and interfering with the basic bargain? I found this critical text from Mao that suggests Mao understood that economic growth cannot be about just industrial development, and that commodity exchange (i.e. free markets of some kind) are essential. But it’s very hard to read – this language is like nothing from standard public health text books! – and it obviously requires a heavy knowledge of pre-existing Maoist and Stalinist theory. For example, Mao repeatedly contrasts the Chinese communist party’s attitude towards peasants with the Soviet party’s, and finds Stalinist thought lacking on this issue that doesn’t make any sense to me.

But it seems to me that the Chinese communist party must have done something right. Under Mao they also went through a period of heavy “extensive” growth, but then under Deng Xiaoping they introduced market reforms that enabled their economy to adapt to its growing complexity, and it is now generally accepted that China runs a mixed market economy that has the flexibility to respond to new economic challenges while retaining the central planning that should, I guess, ideally be able to manage potential crises and balance competing interests. China has also not seen any period of stagnation in health markers – quite the opposite! – and seems to be much better at incorporating foreign capital and foreign ideas into its market (the original article makes the point that the Soviet Union found it very hard to import new technologies, and suffered in productivity as a result). So I wonder – was Chinese communism always more open to foreign ideas and to critical reinterpretation of basic principles? Did they see what was happening in the Soviet Union and think about alternatives earlier and more aggressively? In his Critique of Stalin’s Economic Problems of Socialism in the USSR Mao repeatedly returns to the problem of commodity production, and seems to be much more open to market ideas than the Soviets (in his own words), but then at the same time I think he was presenting Stalinism as a betrayal of Marxism for being too westernized or something. So how was China interpreting Soviet struggles? China shows no signs of economic slow down or of economic failure, though of course it is increasingly vulnerable to crashes and crises of a capitalist kind, so it’s not as if it has developed a perfect mixed economy. Did Deng Xiaoping and his successors learn from the Soviet Union, and how? And if so why was their communism open to change but Soviet communism was not? For example, the article presents corruption as a fundamental and unresolved problem of the Soviet Union, possibly connected directly to its economic and political stagnation, but we know that the Chinese government has made fighting corruption an important symbol of progress and has genuinely tried to stamp out the worst of it. Why and how did they make these decisions, and to what extent were their policy ideas driven by reaction to Soviet failure, or to western criticism?

A final note

This has been a blogpost only of questions – I don’t know anything about these issues, but I find them very interesting. I think I have said before on this blog that I think China’s future progress offers a key challenge to capitalist market democracy. Until now the only real challenge to the orthodoxy of western capitalist democracy arose from the Soviet Union, and it was a dismal failure (as is its gangster successor). But if China can make one party non-democratic Chinese communism successful, then it will offer a real alternative to capitalist democracy. In the past I have said that China needs to negotiate a series of complex challenges but that if it does it may prove its system a viable alternative to capitalist democracies. I think it’s safe to say it has shown itself to be a much better alternative development model than Russian communism, which when you’re coming from the background Chinese communism was coming from is a pretty big claim to success. But now it has moved into the intensive development phase identified in the linked article at the Texas National Security Review wtf, the question is whether it will continue to adapt in the way it needs to to show that its political model can deliver the economic boons that its fundamental contract demands. This question is further complicated by the abolition of term limits and the possibility that Xi Jinping is becoming a new Mao[4], which could undo all the gains of the past 10 or 20 years and return China to a period of madness or Soviet scleroticism[5]. I guess also the lessons of Soviet history are less important to Mr. Xi than they were to Mr. Deng, and Mr. Xi faces an environment that is in some ways much less challenging (development is complete), but also much more challenging (Trump!) Are Chinese planners moving on from the lessons of Soviet failure to the lessons of capitalist failure?

I think it’s possible that we are seeing a new era of failure in American capitalist democracy, and there are many countries in Africa that are desperate for political and economic development models at a time when China is becoming increasingly assertive about the rectitude of its own model. By looking at how previous systems have learnt from their mistakes, perhaps we can see how the Chinese government will adapt to future challenges, and also how the American government will – or won’t – learn from its own litany of errors. How will this affect development in Africa, and how will it affect the response of the big economies to the fundamental environmental and economic challenges that threaten to destroy us all? I think we need to look to China for the answers to many of these questions, and in seeing how previous regimes learnt about their own and their enemies’ weaknesses – and how they failed to adapt – perhaps we can see where our current leadership are going to take us, and worse still – how they are going to fail us.

 

fn1: It’s possible that in reporting the author’s work I will significantly dumb it down, so if any descriptions of what the author wrote seem trite or simplistic please blame me, not him

fn2: These theorists were operating in the post-Stalin era, which I guess was freer, but I hadn’t realized so much self-critical work was allowed in the Soviet Union during Khruschev and Brezhnev. But it appears that there was no translation of critical thought into action, even where it was tolerated.

fn3: Modern America is facing a challenging problem along these lines, of declining life expectancy due to middle-aged mortality, increasing maternal mortality, and growing inequality in infant mortality. Is this a sign that America’s economy is going the same way as the Soviet Union?

fn4: I think he’s not, but if he does then I think this shows a fundamental and important instability in these one party systems, that they don’t just produce occasional madmen – they return to them. The madman could be the stable attractor in these systems. But if, for example, Xi goes through three terms, China continues to develop and liberalize and then he retires, what does that tell us?

fn5: Though it’s worth remembering that even under Mao China made huge progress, probably because it was in this extensive phase of development where progress is easy if you have strong central government and central planning