One of My Favorite Pieces from "Slouching Towards Utopia"

A meditation on "central planning" in practice & theory.

From Slouching Towards Utopia: An Economic History of the Twentieth Century <http://bit.ly/3pP3Krk>:

The economic system that the bourgeoisie had created... could, Marx thought, create wealth, but it could not distribute wealth evenly. Alongside prosperity would inevitably come increasing disparities of wealth. The rich would become richer. The poor would become poorer, and they would be kept in a poverty made all the more unbearable for being needless.

The only solution was to utterly destroy the power of the market system to boss people around.... [For:]

The more productive capital grows, the more the division of labor and the application of machinery expands. The more the division of labor and the application of machinery expands, the more competition among the workers expands and the more their wages contract. The forest of uplifted arms demanding work becomes thicker and thicker, while the arms themselves become thinner and thinner…

Marx was also certain that his dystopian vision of late capitalism would not be the end state of human history. For this bleak capitalist system was to be overthrown by one that nationalized and socialized the means of production. The rule of the business class, after creating a truly prosperous society, would “produce… above all... its own gravediggers.”

What would society be like after the revolution? Instead of private property, there would be “individual property based on... cooperation and the possession in common of the land and of the means of production.” And this would happen easily, for socialist revolution would simply require “the expropriation of a few usurpers by the mass of the people,” who would then democratically decide upon a common plan for “extension of factories and instruments of production owned by the State; the bringing into cultivation of waste-lands, and the improvement of the soil generally.” Voilà, utopia...

[…]

Perhaps 10 million out of the 165 million people in the Russian Empire died during the Russian Civil War: roughly 1 million Red soldiers, 2 million White ones, and 7 million civilians. These casualties were on top of the perhaps 7 million dead from the Spanish flu, 2 million dead from World War I, and 100,000 dead from the Russo-Polish War. By 1921, Russian levels of prosperity had fallen by two-thirds, industrial production was down by four-fifths, and life expectancy was down to twenty. Additionally, a large chunk of what had been the western fringe of the czarist empire had broken off. A great many of the czarist generals and officers were dead or in exile. And any liberal democratic or social democratic center had been purged, by both the Whites and the Reds. The bulk of the pre–World War I czarist empire was now Lenin’s, becoming the Union of Soviet Socialist Republics, or USSR.

The relatively small group of socialist agitators that had gathered under Lenin’s banner before the revolution and cut their teeth during the years of civil war now found itself with the problem of running a country, and building a utopia, by way of really-existing socialism.

They began the task with a faith-based expectation of help. Because the Marxist-Engelsian sciences of dialectical and historical materialism had told them so, Lenin and his comrades confidently expected their revolution in Russia to be followed by other, similar communist revolutions in the more advanced, industrial countries of Western Europe. Once they were communist, they believed, these countries would provide aid to poor, agrarian Russia, and so make it possible for Lenin to stay in power as he guided his country to a stage of industrial development where socialism might function the way Marx had promised it would. 

Lenin pinned his hopes on the most industrialized country in Europe, with the largest and most active socialist political party: Germany.

A communist republic briefly held power in Hungary. 

Another one briefly held power in Bavaria, in southern Germany. 

But, in the end, the Russian Revolution was the only one that stuck. 

Really-existing socialism at the end of the Russian Civil War found itself under the leadership of Vladimir Lenin and confined to one country—albeit a very large country—in which few had ever imagined that any form of socialism might be attempted.

Initially, the attempt required stepping back from “war communism” and into a “New Economic Policy,” which required compromise with the market order: letting prices rise and fall, letting people buy and sell and get richer, letting managers of government factories make profits (or be sacked), and letting a class of merchants and middlemen grow, as what Keynes called “tolerated outlaws.” It was an expediency. Capitalism, but subject to state control. Socialized state enterprises, but run on a profit basis. Marketism leashed. And while the leash was rarely tugged, it remained.

Part of the expedience was due to the fact that the centralized Soviet government had limited grasp. Even by the mid–1930s, when the march toward central planning and the elimination of the market system had been resumed for half a decade, the planners could only track material balances for about one hundred commodities. The movements of these were indeed centrally planned. Nationwide, producers of these commodities who did not fulfill their goals according to the plan were sanctioned. Otherwise, commodities were exchanged between businesses and shipped out to users either through standard market cash-on-the-barrelhead transactions or via blat: connections. Who you knew mattered.

When blat, market exchange, or central planning failed to obtain the raw materials an enterprise needed, there was another option: the tolkachi, or barter agents. Tolkachi would find out who had the goods you needed, what they were valued, and what goods you might be able to acquire given what you had to barter with.

If this sounds degrees familiar, it should.

One hidden secret of capitalist business is that most companies’ internal organizations are a lot like the crude material balance calculations of the Soviet planners. Inside the firm, commodities and time are not allocated through any kind of market access process. Individuals want to accomplish the mission of the organization, please their bosses so they get promoted, or at least so they don’t get fired, and assist others. They swap favors, formally or informally.

They note that particular goals and benchmarks are high priorities, and that the top bosses will be displeased if they are not accomplished. They use social engineering and arm-twisting skills. They ask for permission to outsource, or dig into their own pockets for incidentals. Market, barter, blat, and plan, this last understood as the organization’s primary purposes and people’s allegiance to it, always rule, albeit in different proportions.

The key difference, perhaps, is that a standard business firm is embedded in a much larger market economy, and so is always facing the make-or-buy decision: Can this resource be acquired most efficiently from elsewhere within the firm, via social engineering or arm-twisting or blat, or is it better to seek budgetary authority to purchase it from outside? That make-or-buy decision is a powerful factor keeping businesses in capitalist market economies on their toes, and more efficient. And in capitalist market economies, factory-owning firms are surrounded by clouds of middlemen. In the Soviet Union, the broad market interfaces of individual factories and the clouds of middlemen were absent. As a consequence, its economy was grossly wasteful.

Though wasteful, material balance control is an expedient that pretty much all societies adopt during wartime. Then hitting a small number of specific targets for production becomes the highest priority. In times of total mobilization for a limited number of objectives, command-and-control seems the best we can do. But do we wish a society in which all times are times of total mobilization?