Isaac Deutscher 1948

Russia’s Economic Outlook Today

Source: The Listener, 22 January 1948. Scanned and prepared for the Marxist Internet Archive by Paul Flewers.

Russia has now entered the third year of her postwar Five-Year Plan. The whole economic activity of the country is being developed, coordinated and directed by the Gosplan, that is the State Planning Commission, on the basis of a wide, all-embracing scheme. The production targets for every branch of industry have been worked out for five years ahead; and all those targets have been balanced against one another and integrated in the master plan that covers the whole of the Russian economy. It has not been easy for the Russian government to pick up the threads of their planned economy, disrupted as it was by four years of total war on Russian soil. It was only in March 1946, nearly a year after Germany’s surrender, that the postwar Five-Year Plan was adopted by the Supreme Soviet. Even so, in view of the devastation that Russia had suffered, the Russians have every reason to take some pride in the rapidity with which their country is returning to normal. And normalcy in Russia has come to mean planned economy, industrial expansion and the continuous opening up of wild, or half-wild, lands to modern civilisation.

Output of Steel and Coal: Soviet propaganda often greatly and even ridiculously exaggerates Russian economic achievements. But this should be no reason for us to overlook or to deny those achievements. On the contrary, this is one more reason why we should try to get a balanced and realistic view of the Russian economy. I should hate to overwhelm you with statistics. Let us pick out only a few crucial figures. The closest index of a country’s industrial strength is usually the output of steel and coal. Russia’s production of steel is planned to be more than 25,000,000 tons in two or three years, nearly twice as much as the annual steel output of this country, but still it is less than one-third of the American steel output. This gives an exact indication of the place in the international scale of economic power that Russia hopes soon to attain. If the Plan is fulfilled her steel output will be 7,000,000 tons more than before the war: 7,000,000 tons is the total steel output of France.

Russia’s coal output was about 170,000,000 tons before the war. It is planned to reach 250,000,000 tons by the end of the Five-Year Plan. The prewar level of production was reached by the middle of last year, although many coal pits in the Donets Basin, Russia’s South Wales, were flooded during the war. It is planned to raise the production of electric power from about 50,000,000,000 kilowatt hours before the war to more than 80,000,000,000. This again is about twice as much as the output of electricity in this country, and again less than one-third of the American output. Roughly speaking, Russia’s heavy industry is becoming one and a half or nearly twice as strong as this country’s; but the United States’ basic industries remain three or four times stronger than Russia’s.

However, this comparison is up to a point one-sided. The picture is much less favourable for Russia if the industrial strength of the three countries is viewed in relation to the number of their inhabitants. The population of the USSR is almost four times as large as that of the British Isles. Even if Russia succeeds in producing twice as much steel as this country does, her production per capita will still be only half of this country’s.

This brief excursion into statistics will help us to form an opinion on Stalin’s slogan: ‘Let us catch up with and surpass the advanced capitalist countries’, a slogan on which the present Russian generation has been brought up. In 1930 Russia was still a very primitive, predominantly rural country. Since then she has caught up as an industrial power with the strongest industrial nations of Europe. But she still remains far behind the United States. If industrial wealth per head of population is compared, then the conclusion must be reached that Russia is still industrially behind most Western European nations too. Even so, it is true that within little more than a decade Russia did jump ahead as no other nation has done; and, despite all her recent losses, she has been jumping ahead again since the war.

I should like to add that Russia has been making those mighty jumps almost barefoot. She has been equipping her steel mills, her engineering plants and power stations; she has been straining herself to the utmost to develop and to expand her capital industries; yet, at the same time, she has been denying herself most of the consumer goods that more easy-going nations regard as essentials. Only 140,000,000 pairs of shoes were produced in Russia in 1946, not much more than half a pair for each Russian man, woman and child. In 1950 there are to be 240,000,000 pairs, slightly more than one pair for each person. By the end of the Five-Year Plan, if all goes well, the average Russian will be able to buy three pairs of socks or stockings per year, compared with only one pair in 1946. The target figures for textile goods are lower than the corresponding figures in all the preceding Five-Year Plans.

Some of the old classical economists regarded abstinence from consumption as the main or one of the main sources of wealth. The abstinence of the individual Russian has certainly been of essential importance in the accumulation of Russia’s national wealth. For many years the mass of the Russian people has hoped that after the next hard uphill climb they will get the consumer goods for which they have been craving. That hope was dashed after the First Plan, in 1932. It was partly fulfilled in the Second Plan, which ended in 1937. It was dashed again in the middle of the Third Five-Year Plan, when war broke out. And now the Russian people are looking forward to the end of the present five-year period. They are hoping that no international or domestic trouble will deprive them of that modicum of prosperity which the Plan has promised them and which they feel they have honestly earned.

Appeal to the Workers: In the last few weeks the columns of the Russian press have been filled with appeals to workers, urging them to fulfil the present Five-Year Plan in four, instead of in five, years. This is a new, significant development. The Russian people are asked to intensify their productive effort so as to attain by the end of next year the targets they were originally expected to reach only by the end of 1950. It is difficult to say beforehand whether this appeal is going to be effective. It is easier to see why it has been made. In a number of industries reconstruction has made quicker headway than the planning authorities themselves had anticipated. This is true of coal, electricity, tractors, light metals, etc. These successes have apparently encouraged the planning authorities to revise upwards the targets for the next two years. In other branches, however, progress has not been as smooth. Russia has had to rehouse 25,000,000 people who had been made homeless by the war and had lived in mud huts and dugouts. Reports from Russia say that in the countryside the progress of rehousing has been very rapid. The rebuilding, on the other hand, of such cities as Stalingrad, Rostov on Don, Kharkov, Kiev, the famous battlefields we remember so well, has been slow. The devastation of some of those cities has been far worse than that of the most severely blitzed German towns. No wonder that by the beginning of last year the pulse of their industrial activity was still very weak. The Russians themselves have stated that the whole industrial output of the provinces formerly occupied by the Germans was still less than half the prewar volume. It may, of course, be that even in those parts some of the initial difficulties and hitches have since been overcome.

Another reason for the speeding up of the tempo must be sought in the ‘Cold War’ between East and West. The Russians do look with genuine apprehension at what they believe to be the growth of an aggressive ‘war party’ in the West, especially in the United States. They do not believe that war is inevitable, but they certainly see it as a grim possibility. Hoping for the best, they prepare for the worst, and try to rid themselves as quickly as possible of those elements of economic and military weakness with which the last war has saddled them.

You will remember that a few weeks ago the Russian government issued new rouble banknotes and exchanged them for the old ones, at the rate of one new rouble to ten old ones. This was the remedy devised to cure a familiar malady: too much money chasing too few goods. Nine-tenths of the cash engaged in the chase was simply cancelled out of existence. Having so ruthlessly reduced the effective demand for scarce and now de-rationed consumer goods, the government hopes to keep prices down to a fixed level. Much or perhaps most of that cancelled money had been in the hands of peasants. In Russia, as in all continental countries with a large peasantry, money had, during the war, flown from the towns to the countryside. Peasant traders were free to sell food at the bazaars at prices as high as they could fetch. The result was an important shift in the social balance of the country. The standard of living of the townspeople went down, while peasant-traders profiteered and grew fat on the bazaars. In cancelling nine-tenths of the money in circulation, the government has redressed that balance in favour of the urban working classes. The rates of wages and salaries have not been affected by the currency reform; they have remained the same as before. Thus, of the much smaller volume of money that now circulates, a much higher proportion than before goes to workers and employees.

I do not suggest that the standard of living of the Russian working classes has now become high. It is still very low on the whole. But the recent reform should have brought about a considerable improvement. The Russian government has, in other words, fought the inflation in their country in a manner that has, on balance, favoured the working classes. Therein consists the main difference between the Russian deflation and most deflationary practices elsewhere which resulted in the lowering of real wages and salaries. It remains, of course, to be seen how the well-to-do Russian farmers, who have been hit by the reform, will take it; but this will be seen only after next year’s harvest, when the peasants usually deliver part of their produce to the government. Those of them who resent the currency reform may well be reluctant to make the deliveries. This might undermine the provisioning of the towns and give rise to a new inflationary trend. But this is not of immediate importance. At present the government wants to induce the working classes to make the extra productive effort needed if the Five-Year Plan is to be fulfilled one year ahead of schedule.

People often ask how much importance the Russians attach to foreign trade. Does their Five-Year Plan presuppose any expansion of trade with the Western countries? Before the war the Russian economy was planned for self-sufficiency. In the 1930s, Russia’s share in the world’s total trade was not more than one per cent. Some of the worst economic and political anomalies of that period are epitomised in this astonishing figure. We have no statistical data yet that would show Russia’s present share in the world’s trade. It has certainly been much higher than before the war. However, Russia has done most of her trade with her close neighbours: Sweden, Poland, Czechoslovakia and the Balkan countries. During the war there were some hopes in Moscow for an expansion of business with the West, primarily with the United States. Preliminary agreements about a big American loan to Russia, which was to finance trade, were then discussed, but in view of the present animosity between the United States and the USSR there is not much chance for trade between them.

Against this background the recently signed, short-term trade agreement between Britain and Russia should be regarded as a promising development. Russia is sending to Britain 750,000 tons of fodder grain badly needed here. This is almost six times the total quantity of animal feeding-stuffs that Great Britain was able to import from all sources in 1946 and nearly half the total British imports in any normal year before the war. The Russians are to buy British mechanical equipment of all sorts, wool, rubber and other goods. In their trade the two countries are complementary. In spite of her industrialisation, Russia is still exporting mainly her primary produce, foodstuffs and raw materials, and not her manufactured goods. She is anxious to buy the capital goods of which this country has been a specialised exporter.

The complementary character of Russo-British trade can be most clearly seen in the case of timber. Everybody knows how acutely Great Britain is feeling the shortage of timber. Unfortunately, the Russians, whose own demand for timber has been tremendous, have been rather slow in developing their timber industry since the war. They could produce much more than they do if they could modernise that industry, equip it with mechanical timber-felling machinery and speed up the transport of timber over the vast distances from their forests to their ports. In other words, in order to increase their export of timber they need the mechanical equipment and the rails that this country is producing. This is the most striking, but not the only, instance in which there is room for long-term planning and expansion of trade, by which both countries can greatly benefit. And, who knows, perhaps trade can do something to narrow the gap between the two countries that diplomacy has so far only widened.

The following letter in response from FB Czarnomski appeared in The Listener, 5 February 1948.

Russia’s Economic Outlook Today

Many of the difficulties which beset British policy towards Russia arise from a fundamentally wrong conception, which public opinion in this country was goaded into forming about Russia during the war. It is regrettable, therefore, that in his talk on ‘Russia’s Economic Outlook Today’ Mr Deutscher should have so amply contributed towards a greater public ignorance of things Russian. A few random instances will indicate the fictional nature of his presentation of Russia.

1: Housing: Mr Deutscher said that ‘Russia has had to rehouse 25,000,000 people who had been made homeless by the war’. An unwary listener would think that Russia successfully accomplished this gigantic task. Whereas the truth – even according to the Soviet State Planning Commission (as published in the official Soviet News last week) – is that during 1947 ‘9,000,000 square metres of living floor space were newly built or restored by the state and the local Soviets’. The corresponding total for 1946 was 6,000,000 square metres of ‘living floor space’. This means that during 1947 Russia built or restored the equivalent of 75,000 houses of the four- or five-room type familiar to Western Europe and that during 1946 she built the equivalent of 50,000 such houses (taking the floor space of one such house to be 120 square metres). This, in a country of 170,000,000 people, is an unmitigated disaster and in no way justifies Mr Deutscher’s statement that ‘reports from Russia say that in the countryside the progress of rehousing has been very rapid’.

2: In trying to justify the flagrantly confiscatory manipulation of currency, recently carried out in Russia, Mr Deutscher presumes that thereby the government has redressed the social balance ‘in favour of the urban working classes’ at the expense of the peasants ‘who profiteered and grew fat on the bazaars’. This fantastic picture is a ridiculous distortion of reality when applied to Russia today. For one thing, there are no longer any ‘peasants’ in Russia in the accepted sense of the term. Since collectivisation the social status of peasants has been reduced to that of agricultural labourers, employed either by state or cooperative collective farms. In both cases, what these labourers produce is sold to the government at prices fixed by the government itself. No one could grow fat on that. In addition, most labourers on collective farms are allowed to work for their own use small allotments of one or two acres, the produce of which they are also allowed to sell in the ‘free market’. Anyone familiar with peasant economy will laugh at the idea of a family ‘growing fat’ on a dwarf holding of one or two acres.

3: Mr Deutscher stated approvingly that ‘the Russian government has fought the inflation in their country in a manner that has, on balance, favoured the working classes’. ‘Therein’ – he applauds – ‘consists the main difference between the Russian deflation and most deflationary practices elsewhere which resulted in the lowering of real wages and salaries’. Elsewhere, meaning presumably the world outside Soviet Russia. These are indeed surprising statements, considering that Russia boasts to be a classless society-nation.

4: Mr Deutscher reached the height of absurdity in quoting ‘old classical economists’, who ‘regard abstinence from consumption as the main or one of the main sources of wealth’. Disregarding the plain English meaning of the word ‘abstinence’, which implies a deliberate and voluntary self-deprivation, he naively states that ‘the abstinence of the individual Russian has certainly been of essential importance in the accumulation of Russia’s national wealth’. As if the sum total of indescribable penury of 170,000,000 wretches could be dubbed ‘national wealth'!

The truth is that the Russian people are starving, that Russian manhood is being decimated by the severity of the Soviet system, that in a population of 170,000,000 there are 95,000,000 women to 75,000,000 men, that nearly 70 per cent of Soviet labour force is female labour, that Russia is consuming her own substance. Were it not for the enormous loot which Russia has been taking, for nearly three years now, out of Germany, Poland, Romania, Hungary, Austria, Bulgaria and Finland, Russian economy would have utterly collapsed by now. One can only wonder at the degree of ignorance of Russia in this country, if a speaker in the Third Programme can get away with such a story.

The following letter in response from Isaac Deutscher appeared in The Listener, 12 February 1948.

Russia’s Economic Outlook Today

I find it very difficult to argue with the mass of nonsense, distortion and personal abuse which Mr Czarnomski has managed to cram into a single letter on my recent talk on the Russian economy. Let me reply to only a few of his ‘criticisms’.

1: Referring to what I said about housing in Russia, he writes: ‘An unwary listener would think that Russia successfully accomplished this gigantic task.’ My critic must have been a very absent-minded listener not to notice that I pointed to housing as one of those ‘other branches where progress has not been as smooth’. I described how slowly the devastated cities were being rebuilt. But I contrasted this with the very rapid progress of rehousing in the countryside, referring to ‘reports from Russia’. I had in mind reports of very responsible and competent UNRRA officials who spoke from personal observation. To refute my statements, Mr Czarnomski quotes the Soviet State Planning Commission to show that planned reconstruction of houses has been extremely slow. What he does not know is that the rebuilding of houses and cottages in the countryside is done by the farmers themselves, independently of any central planning. The figures of the State Planning Commission are therefore irrelevant to the subject.

2: My critic does not believe that Russian peasant traders could grow rich on bazaars, because the collective farms allegedly sell their produce only to the government, at fixed prices. This is not so. They are free to sell quite a lot of their produce at the bazaars, and to do so at uncontrolled prices.

3: My suggestion that the recent Russian currency reform favoured the urban working classes and hit the peasants is said to be very surprising ‘considering that Russia boasts to be a classless society-nation’. Well, I do not consider Russia to be a classless society; and I therefore take the liberty, which perhaps nobody in Russia could take, of analysing the impact of the currency reform on various classes. I even know in which class of Russian society I would count my critic, if he were a Russian: in the intellectual proletariat.

Mr Czarnomski’s ideas about Russia seem to be very much like those which made, for instance, the Polish Intelligence Services predict in 1941 that Russia ‘must’ collapse after six weeks or three months, at the most, of the war against Germany. I still remember a senior Polish officer telling me in 1942 that at the end of the war, after the Soviets had crumbled to pieces: ‘We [the Poles] would hoist our victorious flags in Minsk, Kiev and Odessa as well as Stettin and Breslau.’ I am afraid my analyses of the Russian economy are not meant to appeal to people in such a frame of mind.

The following letter in response from FB Czarnomski appeared in The Listener, 19 February 1948.

Russia’s Economic Outlook Today

Mr Deutscher has chosen to regard my factual criticism of his misleading presentation of the Russian economic scene as personal abuse. As the evidence is published in your columns, I am satisfied to leave it at that.

In replying to my statement on the calamitous failure of the Soviet authorities to provide housing for the people, Mr Deutscher claims superior knowledge. But we all know that in primitive societies men will contrive somehow or other to construct anything, shacks, log cabins, shanties, huts or cottages as protection against the rigours of climate. However, the fact that this is going on in the Russian countryside does not invalidate my argument that the Soviet authorities have utterly failed to deal with the problem of housing and that with all their vaunted planning they have not made their country fit – if not for heroes – for ordinary common folk to live in.

As for his legendary peasants ‘growing fat on the bazaars’, I can only repeat that today there are no peasants in Russia in the accepted sense of the term. As for the rest, the harvest in 1946 was the worst for fifty years and the collective farms, already ravaged by the war, were passing through near-famine. The harvest of 1947 is said to have been good – how good, no one knows and no figures are available – but whatever ‘wealth’ the agricultural labourers were able to accumulate by sales in the free market since that harvest, has been effectively confiscated by the subsequent manipulation of currency.

Mr Deutscher also claims to know in which class of Russian society I should be counted, if I were a Russian. But his guess is wrong again, for in that, fortunately hypothetical, case I would no doubt belong to the classless legions of the departed. I have a suspicion that this would suit my temperament better than any practical alternative.