Why did the USSR's economy stagnate? Is this a problem of central planning?

[Jacob Cliff]

I don't consider the USSRs economy to be socialist, only transitional, but regardless why did the economy "fail?" Why where there bread queues, stagnation, and ineffeciency in agriculture? What are the alternatives to this?

[Q]

Much of the spectacular growth of the USSR economy in the 1930's was accomplished by the migration of the peasant population to the cities. In contrast to capitalist though, which is in an eternal drive to innovate so as to bring the socially necessary labour time down, the USSR had no such drive. So once the migration was over and there began a real shortage of workers in the late 1960's, things began to slip. Jack Conrad (http://cpgb.org.uk/home/videos/the-ussr) has an excellent way of explaining many more details and the mechanics behind this. I recommend the video.

So no, it was not inherent to the 'central' part of the planning. I would agree with Conrad that it could hardly be called planning at all as the 'plan' was constantly being changed to meet bureaucratic goals of the moment, which tended to zig zag all around. A target economy would fit better as it expresses the thoroughly bureaucratic nature of this system.

[RedWorker]

How was it "transitional" at all? How and to what was it transitioning? There obviously was no change at all for decades.

While things like queues and shortages existed, they were exaggerated and erroneously portrayed by Western propaganda.

It stagnated because the economic model of the USSR was inefficient and simply should be thrown out of the window.

[RedKobra]

I don't agree with that. Were Kruschev's economic policies the same as Stalin's? Were Brezhnev's the same as Kruschev? From Andropov onwards things undoubtedly changed very little but before that there were definitely ideological struggles.

[tuwix]

I don't consider the USSRs economy to be socialist, only transitional, but regardless why did the economy "fail?" Why where there bread queues, stagnation, and ineffeciency in agriculture? What are the alternatives to this?

Central planning is main part of that. Generally bureaucratic economy didn't have sufficient causes to grow. A salary of the factory's director wasn't in the slightest way connected to its economic performance.

[parallax]

THe Khrushchevites restored capitalism and created the conditions of economic stagnation. When the USSR was socialist the economy was growing at explosive rates.

[cyu]

The were food lines during the Great Depression too, and one might argue right now, considering the percentage of people on food assistance programs.

I'm starting to think the more power that is concentrated in fewer hands, the more of a disaster that society becomes. In many cases, those in charge know their society is getting worse, but they react to it by thinking, "I know I can fix all this if only I had more power" - so they attempt to bring even more of society under their control, which just makes things worse, regardless of whether the society is controlled by the Politburo or by capitalists.

Traditionally when people see leaders that make a lot of good decisions, they think, "Hey, here's a guy who could benefit us all. He'd make a good benevolent dictator." Then after that, everything goes to hell. It's actually being able to judge for themselves whether those decisions are good that protects them. As soon as they give that up - "Well, we follow him because he's the leader. Well, we follow him because he has our trust. Well, we follow him because we agreed to." - that's when it breaks down. The more people that delegate important decisions to others, while keeping only trivial decision making to themselves, the more they make their own brain vestigial.

[Tim Cornelis]

Plausible explanation here:
http://marxistpedia.mwzip.com/wiki/Soviet_Union#Collapse_and_dissolution

[Fourth Internationalist]

The type of planning done in the Soviet Union had little to do with the central planning that a workers' state would need to employ. Thus, it is erroneous to blame the concept of central planning for the Soviet Union's economic problems: doing so is often done by those who seek to prove that socialism cannot work.

From the book The Life and Death of Stalinism (http://lrp-cofi.org/book/index.html) in chapter 5 "Stalinist Capitalsm":


The Soviet bureaucracy employs a panoply of plans to direct its economy: the Five-Year Plans which summarize overall goals, and the more or less operational yearly and quarterly plans. The word “plan” is deceptive. It indicates the underlying socializing trend of capitalism that Engels and Lenin spoke of, not the conscious organization of production by the associated producers characteristic of socialism. It is bureaucratic management from the top, a mechanism of exploitation.

The “plan” refers above all to what and how much a firm will produce, and in some cases which enterprises it will buy from and sell to. The plans are bargained over by firms and ministries before adoption and constantly modified afterward, according to the power relations among them and what works out during production. As a result, the Five-Year Plans always postdate the period of their applicability (sometimes the short-term plans do too); they are hardly determined in advance of production by scientific methods. An extreme case is China during the Cultural Revolution, when the statistical bureaus needed for any pretense of central planning or administration were reduced to less than a handful of people. Not only has no Stalinist plan ever genuinely planned or predicted the economy, but the failures have diverged from the plans in foreseeable directions.

The lesson here is that the pseudo-planning in the statified capitalist Soviet Union would be wholly different from central planning in an actual workers' state. In fact, the two are not even near the same thing.

Edit: the entire book is a pretty good read about Stalinism. Certain chapters are more relevant than others on how the economy worked (chapter 5) while others focus on it's breakdown (chapter 8) or how Stalinism operated after WWII (chapter 6). I'd definitely recommend it even if you're not a Trotskyist.

[Vladimir Innit Lenin]

Central planning was grossly inefficient. Political support is often strongly related to (macro)economic performance and, with the benefit of hindsight, one can conclude on the absolute madness of agencies like GOSPLAN, which attempted to plan quantities on the production side in advance.

Think about it like this. There are millions, perhaps billions of different types of marketable and saleable good in current economies. Back in the post-war years perhaps slightly less, and in the inter-way years even less, but still goods would have numbered in the tens of thousands or more. To try and calculate, for an entire year, for a country that spans a significant minority of the entire planet, the production of each good - it's quantity, location, distribution etc. - with any type of accuracy is an adventure bound to fail, and we can see with hindsight that it did fail.

Whilst the benefits of centralised control over the economy were noticed in the possibility to shift production to areas of greatest need (and so helped the USSR militarise extraordinarily quickly in the case of WW2), it became clear that, in the long-run, the inefficiency of central planning became to great for a sizeable economy like that of the USSR to bear, even if it did have a focus on social welfare and not mass consumerism (where it would be even more likely to fail due to the sheer number of different but identical branded goods produced).

[Mr. Piccolo]

Central planning worked relatively well when it came to quick industrialization but had problems with promoting intensive growth. The bureaucratic central planning system proved too cumbersome and many bad investments were made (for example, putting too much money into retooling old, outdated factories instead of building new, more efficient ones) while good ideas (such as the introduction of cybernetic planning methods) were never taken up, often for political and not economic reasons.

[Sperm-Doll Setsuna]

https://libcom.org/history/labor-discipline-decline-soviet-system-don-filtzer

I recommend this article for interesting reflections on the problems of the "planning" that emerged during the Stalin years.

Gosplan by the 1970's only issued prices for 200,000 out of 24 million products or so on the Soviet market.

[RedKobra]

Central planning worked relatively well when it came to quick industrialization but had problems with promoting intensive growth. The bureaucratic central planning system proved too cumbersome and many bad investments were made (for example, putting too much money into retooling old, outdated factories instead of building new, more efficient ones) while good ideas (such as the introduction of cybernetic planning methods) were never taken up, often for political and not economic reasons.

Actually the complete opposite is true. There's a really good Jack Conrad talk somewhere on the CPGB site where he talks about this. The USSR was constantly building throughout the 60's and 70's. They'd literally finish building one factory, the workers would go in and a couple of miles down the road work would start on its replacement. It was the only way that innovation was possible because the management would never use the new technology in their existing factory for fear of not meeting their targets. New tech would sit and gather dust. The only way the government could implement new tech was to literally build a new factory with the stuff already installed.

[Mr. Piccolo]

Actually the complete opposite is true. There's a really good Jack Conrad talk somewhere on the CPGB site where he talks about this. The USSR was constantly building throughout the 60's and 70's. They'd literally finish building one factory, the workers would go in and a couple of miles down the road work would start on its replacement. It was the only way that innovation was possible because the management would never use the new technology in their existing factory for fear of not meeting their targets. New tech would sit and gather dust. The only way the government could implement new tech was to literally build a new factory with the stuff already installed.

That may very well be. I have only read a few books/papers on the collapse of the Soviet Union and they sometimes conflict as to the reasons for the growth slowdown (especially on the impact of military expenditures).

My understanding of the retooling argument comes from Robert C. Allen and his work Farm to Factory: A Reinterpretation of the Soviet Industrial Revolution. Allen specifically mentioned retooling old plants, immense military expenditure, too much emphasis on expanding energy production instead of economizing, and the expense of developing Siberia as wasteful investments that hurt the Soviet economy.

https://homepages.warwick.ac.uk/~syrbe/pubs/FarmtoFactory.pdf

[Dire Helix]

The central planning in the Soviet Union never underwent serious reform past its original implementation in the 30s with many of its "birth injuries" surviving well into the 80s. While effective during the industrialization and post-war reconstruction efforts, it quickly became grossly inefficient as the economists went from planning for the heavy industry to having to micromanage ten of thousands of consumer goods.

The plans of Soviet cyberneticians to restructure the economy and put it on computer rails, of which academician Glushkov's Nation-wide Automated Economics Control System or OGAS had by far the biggest promise, never received much if any political support. By mid-60s ideas of "convergence", which implied the introduction of market control methods to the planned economy, already gained serious traction among the Soviet political leadership with Kosygin notably favoring the so-called Yugoslav model.

More on Glushkov and OGAS:
http://uacomputing.com/stories/ogas/

[Sharia Lawn]

From page 59 of Why Perestroika Failed by Peter Boettke:
The Soviet system was best characterized as a market economy dominated by monopoly producers and subject to vast and arbitrary government interference.

[#FF0000]

THe Khrushchevites restored capitalism and created the conditions of economic stagnation. When the USSR was socialist the economy was growing at explosive rates.

Of course it was -- that is what happens in all economies when they start through industrialization. And when was the USSR "socialist", exactly? Would you call the NEP "socialism"?

[Tim Cornelis]

THe Khrushchevites restored capitalism and created the conditions of economic stagnation. When the USSR was socialist the economy was growing at explosive rates.

This is empirically inaccurate. Economic growth slowdowns began under Stalin. The 'Khrushchevites' were compelled to make policy changes to reverse these economic growth slowdowns, which ultimately failed.

[Workers-Control-Over-Prod]

The central planning in the Soviet Union never underwent serious reform past its original implementation in the 30s with many of its "birth injuries" surviving well into the 80s. While effective during the industrialization and post-war reconstruction efforts, it quickly became grossly inefficient as the economists went from planning for the heavy industry to having to micromanage ten of thousands of consumer goods.

The plans of Soviet cyberneticians to restructure the economy and put it on computer rails, of which academician Glushkov's Nation-wide Automated Economics Control System or OGAS had by far the biggest promise, never received much if any political support. By mid-60s ideas of "convergence", which implied the introduction of market control methods to the planned economy, already gained serious traction among the Soviet political leadership with Kosygin notably favoring the so-called Yugoslav model.

More on Glushkov and OGAS:
http://uacomputing.com/stories/ogas/

Very interesting! Comrade Paul Cockshott writes about the OGAS being in use by the Allende government, in Chile before the fascist coup, in his book "Towards a New Socialism."

[Invader Zim]

As others have noted, the Soviet Union poured vast swathes of its GDP into fighting futile arms races.

[Rafiq]

As others have noted, the Soviet Union poured vast swathes of its GDP into fighting futile arms races.

This is a weak explanation. One could say the same for the United States.

[RedKobra]

The same goes for the space race and the implementation of welfarism/social democracy.

[ComradeOm]

This is a weak explanation. One could say the same for the United States.Except that it can't. Estimates vary, of course, but in the second half of the 1980s Soviet defence spending (ie the 'dfence burden') was approximately 15% of GDP. in the same period US defence spending (http://www.usgovernmentspending.com/defense_spending) hit a post-Vietnam peak of 6-7% of GDP. That is, the Soviet defence burden was over twice as much as that of the US. And this with a lower economic base to start with.

Which is not to say that this was the only reason of course, there were a multitude. Some of these are inherent in non-market economies (eg planner ignorance and inflation management) while others are specific to the USSR (eg suffocating bureaucracy*, poor labour productivity, shortages of all kinds, chronic lack of quality, competing economic interests, lack of shop floor control, etc). All were features of the 1930s economy; the difference forty years later was that the economy was many times more complex (being expected to do more than 'build tractors') and it required resources to be effectively deployed, rather than just mobilised en masse.

In short, the structural basis of the Soviet economy, from the shop floor up, was grossly inefficient. It's a technocratic fantasy to suggest, as some have done above, that this could have been solved by 'better planning' or a new IT system. Wholesale modernisation was required, something that would have brought with it profound political shifts.

*Let's illustrate this with a first-hand account from Donald Filtzer's Soviet Workers & Stalinist Industrialisation:


One day we had to repair a German-made lathe. First the brigade or gang took the machine apart and placed the various parts in boxes and barrels. Then I notified the office secretary and an official known as the 'specificator' was sent to the office. In this case the specificator was a young girl of twenty two, with some slight training in the Soviet technical schools...

First she listed the name and number of all the parts and the repair that had to be made in each case. This took three full days and a great many sheets of paper. Then the specificator took her paper to the 'calculator' in the office. After taking all the parts out again and after examining them for two more days, this funcationary set a price on the entire [repair] job, having in mind his budget and the wage scale of the workers...

We found on investigation that the calculator had figured five minutes on a boring that should have taken an hour and a half, and fifteen minutes that should have taken three minutes. As a result the calculator's estimate of 150 roubles for the entire job was thrown in the waste-basket and we were paid on a per diem basis according to the factory scale.

In almost every case we had to go through useless calculator and labour by specificators and calculators in their effort to establish a piece basis, only to have the figures discarded later, when the workers protested and demanded pay according to the scale.And this was in Moscow in 1932: the period that some would have us believe was a golden era of the Soviet economy. Such disorganisation, bureaucratic ineptitude and fudging were typical of the Soviet economy. They're also partly why it was never 'planned' in more than name'

[Rafiq]

It would appear I was misinformed about the similarities of defense budget ratios about the Soviet Union and the United States. I had always been under the meek impression they were almost the same.



In short, the structural basis of the Soviet economy, from the shop floor up, was grossly inefficient. It's a technocratic fantasy to suggest, as some have done above, that this could have been solved by 'better planning' or a new IT system. Wholesale modernisation was required, something that would have brought with it profound political shifts.


Well certainly, you have mentioned that which was characteristic of the Soviet economy: But the point isn't to elaborate on the details of what was effectively the process of its failure but why this occurred in the first place. In other words, why was the Soviet economy unable to revolutionize the means of production, or: Why were soviet authorities unable to establish an efficient means of organizing production? Why were these all features of the Soviet economy is the question. How would it even have been possible to establish wholesale modernization, if there were no political obstacles?

[RedKobra]

Except that it can't. Estimates vary, of course, but in the second half of the 1980s Soviet defence spending (ie the 'dfence burden') was approximately 15% of GDP. in the same period US defence spending (http://www.usgovernmentspending.com/defense_spending) hit a post-Vietnam peak of 6-7% of GDP. That is, the Soviet defence burden was over twice as much as that of the US. And this with a lower economic base to start with.

Which is not to say that this was the only reason of course, there were a multitude. Some of these are inherent in non-market economies (eg planner ignorance and inflation management) while others are specific to the USSR (eg suffocating bureaucracy*, poor labour productivity, shortages of all kinds, chronic lack of quality, competing economic interests, lack of shop floor control, etc). All were features of the 1930s economy; the difference forty years later was that the economy was many times more complex (being expected to do more than 'build tractors') and it required resources to be effectively deployed, rather than just mobilised en masse.

In short, the structural basis of the Soviet economy, from the shop floor up, was grossly inefficient. It's a technocratic fantasy to suggest, as some have done above, that this could have been solved by 'better planning' or a new IT system. Wholesale modernisation was required, something that would have brought with it profound political shifts.

*Let's illustrate this with a first-hand account from Donald Filtzer's Soviet Workers & Stalinist Industrialisation:

And this was in Moscow in 1932: the period that some would have us believe was a golden era of the Soviet economy. Such disorganisation, bureaucratic ineptitude and fudging were typical of the Soviet economy. They're also partly why it was never 'planned' in more than name'

Call me pedantic but surely that is precisely what those saying 'better planning was needed' are suggesting. That the "planning" aspect in the USSR was was woefully inadequate at keeping up with the Capitalist states of the world economy over the USSR's lifetime (depending on how you measure "keeping up")

[ComradeOm]

Call me pedantic but surely that is precisely what those saying 'better planning was needed' are suggesting. That the "planning" aspect in the USSR was was woefully inadequate at keeping up with the Capitalist states of the world economy over the USSR's lifetime (depending on how you measure "keeping up")Ah but this is planning as a miracle cure. It's also essentially a bureaucratic solution: if only we could crunch those numbers better then all would be fine! And no doubt, in the 1960s, some academics and reformers did genuinely believe that.

The reality is that the rot extended far beyond the planning bureau. Gosplan couldn't plan efficiently because (amongst other reasons) the entire system was 'unplannable' from the factory floor up. The point of the 'repairing the lathe' story above isn't just that the system was bureaucratic, it's that the system was bureaucratic, inefficient and regularly subverted at shop-floor level. At this most basic level, workers and managers regularly colluded to subvert the system because the system itself was broken.

The solution to this wasn't new IT systems or better 'specificators' and computer 'calculators' (ie improving planning) but a fundamental overhaul of the entire socio-economic order. Which was obviously an impossibility.

Hence the pie-in-the-sky nature of those who talk about cybernetics or other missed avenues. They're essentially talking about improving the planning process, making it easier for the men in shirts to crunch their data, still chasing the chimera of complete control. It's ivory tower thinking that bore little relation to the realities of the Soviet world.

Would a well-planned socialist economy have out-performed the West? In theory, no doubt. But at no point in its history can the Soviet economy be considered to be either well-planned or socialist. It wasn't in the 1930s and it wasn't going to become one in the 1970s.

[Dire Helix]

In short, the structural basis of the Soviet economy, from the shop floor up, was grossly inefficient. It's a technocratic fantasy to suggest, as some have done above, that this could have been solved by 'better planning' or a new IT system. Wholesale modernisation was required, something that would have brought with it profound political shifts.

Except, of course, the implementation of OGAS already predisposed a major structural reform. For starters, it required low-level participation, full transparency of economic operation and free access to information - all unthinkable in the political climate of the Cold War-era Soviet Union. Glushkov did, after all, have years of first-hand experience with Soviet economy and knew of its ills better than anyone else. OGAS was, in essence, a wholesale modenisation of the "real-existing socialism".


It wasn't in the 1930s and it wasn't going to become one in the 1970s.

This is unfounded idealistic nonsense implying the linearity of history and one true path towards socialism.

[Sperm-Doll Setsuna]

Except, of course, the implementation of OGAS already predisposed a major structural reform. For starters, it required low-level participation, full transparency of economic operation and free access to information - all unthinkable in the political climate of the Cold War-era Soviet Union. Glushkov did, after all, have years of first-hand experience with Soviet economy and knew of its ills better than anyone else. OGAS was, in essence, a wholesale modenisation of the "real-existing socialism".

The thing is though, that at the juncture, there was no saving the Soviet Union. These problems were deeply structural/social and cultural as well as they were economical, and they could not possibly be reversed by any plan such as that. The disintegration was very tangible. The very faintest of hope would be the resurgence of a genuine revolutionary spirit in Soviet society, but this would undoubtedly be repressed by the ruling class, much as it would be should something like this emerge (for the sake of argument) in present-day China. The alternative to what happened would have been something along the lines of the Chinese experience, which was probably what Gorby was aiming for, but this transformation to overt/conventional capitalist logic would only have been possible if the leadership remained more stalwart authoritarian (and this was why some at Gosplan anticipated a 'neo-stalinist' period where direct repressions would re-emerge from the economic turmoil)


This is unfounded idealistic nonsense implying the linearity of history and one true path towards socialism.

What? All it implies that, moving to socialism requires certain things... things which never emerged in the Soviet Union because they could not, it was still a capitalist world, and capitalism is a totalising system. All that interact with it will invariably be tainted by its logic, no matter how hermetic they might attempt to remain.