Chris Harman, Simon Terry & Andy Zebrowski

Crisis in Eastern Europe

No turning back

From Socialist Worker Review, No.111, July/August 1988, pp.12-13.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

THE OBSTACLES to reform inside the USSR do not, however, mean that the section of the bureaucracy resistant to reform has any real alternative to offer.

Gorbachev himself did not start off with any commitment to widespread reform. What drove him to endorse such schemes was the realisation that the old methods simply could not solve what is now referred to as the “pre-crisis situation” in the economy.

Rates of economic growth were even lower in 1985, 1986 and 1987 than they had been in 1983 and 1984. Food supplies to important areas of the country began to deteriorate. The fall in the world price of oil, Russia’s most important single export, suddenly did away with the possibility of importing both modern machinery and extra food supplies.

Desperation rather than any pre-existing beliefs led Gorbachev to begin to listen to those economists who insisted massive reforms had to be pushed through. And when it became clear that the mass of conservative bureaucrats were resisting the practical implementation of economic reform he accepted the reformers’ views that there had to be an opening up in the media so as to put pressure on them.

The economic crisis led him to adopt economic perestroika, and the desire to push through economic perestroika led him to press for political perestroika, and this in turn to a certain degree of glasnost.

It is this which has caused a growing difference of emphasis between him and those like the number two in the power structure, Ligachev, who tends to opt for the authoritarian-centralist method of trying to deal with the economic malaise. Ligachev’s approach is much more popular than Gorbachev’s with the mass of apparatchiks, and will also appeal very strongly to the great bulk of enterprise managers who prefer old methods of management to new.

This could lead to a situation at some point in the future in which Gorbachev himself is actually removed by a politburo or Central Committee coup, as was Khrushchev in 1964. But short of Gorbachev making a major blunder compromises between Gorbachev and Ligachev are more likely.

Yet if there is no going back to the Brezhnev era, neither is there a great deal of chance of Gorbachev’s perestroika programme succeeding. It is not just that his compromises with the Ligachevites mean that the economic reforms are not due to come fully into effect until the beginning of the next five year plan period in 1991.

More importantly, the reforms are very unlikely to improve the overall situation of the Russian economy, and meanwhile all reform economists agree that the mass of workers have to endure a phase of “austerity” while they are implemented.

Economic reformers in Russia and Eastern Europe have produced a vast mass of empirical material on the failings of the sort of centrally administered command economy that operates in Russia. Such an economy is plagued by various forms of inefficiency and waste.

Enormous resources are tied down in half finished investment projects, goods are produced which are not needed, goods that are desperately needed are not produced. A high proportion of output is of low quality by world standards and there is lack of attention to the real costs of production by local managers and lack of initiative by workers.

It is such findings which, for reformers explain why even with a higher level of total investment than the United States, the USSR only has 55 percent of the productivity.

But few of the economic reformers have really attempted to explain where all the waste and inefficiency comes from. Just like their Western counterparts, they are impressed by the immediate, superficial aspects of economic life, and do not look beneath them for underlying causes.

Yet it is not that hard to see how the total dynamic of the command economies operates.

All the bureaucratically centralised economies display a drive to embark repeatedly on investment plans on a scale that cannot possibly be accomplished in the planned time with the resources at hand. At the beginning of each five years a series of massive investments are begun. But it soon becomes clear that shortages and bottlenecks are going to prevent them from being finished on time.

The overambitious projects run into what has been called the “raw material barrier”.

The initial period of soaring investments is now followed by a period of stagnating growth rates. Some investment projects are left to rot unfinished while the resources originally intended for them are used elsewhere, allowing a few “priority” projects to be completed. But this causes a degree of economic chaos.

Under these circumstances there can even be cases when massive new investments lead to a total fall in output.

At the same time, the emergency measures taken to supply the “priority” projects destroy any possibility of organising the economy rationally on a long term basis. The abandonment and freezing of some projects means that overall economic development is unbalanced and one sided. Whatever talk there is of “five year planning” nationally, at the factory level the manager hardly knows from one week to the next what he will be expected to produce and in what quantities.

Faced with such uncertainties, it is impossible for the manager to organise the work of his factory in the most efficient way. Instead, he develops a strong interest in making sure he has excess hidden labour and raw material supplies, so as to cope with unforeseen demands on him from the “planners”. It also means he tries to reduce his dependence on outside supplies as much as possible by manufacturing components In the factory .

The overall result is any rational calculation of what resources are available in the economy becomes all but impossible. The situation is made worse as the planners set very high targets in the hope of forcing managers to use all the hidden resources.

But the initial tendency to “over-investment” is not some accidental quirk of the central planners. It follows from something which all those who run the Eastern economies take for granted – international competition.

In the midst of all the articles extolling perestroika in Russia and the occasional piece defending a return to Stalinist methods, one article has appeared (in Sotsialisticheskaya Industria, 5 January) which begins to point to some of the real problems.

Vasily Selyunin begins with figures given by Gorbachev’s advisor, Aganbegyan, which show 25 percent of the USSR’s national income as going to “saving”, 75 percent to consumption. But, Selyunin argues, if you recompute to take account of price distortion “the consumption fund accounts for 60 percent of income and the savings fund for 40 percent per cent. Such a high composition of savings is, essentially, a wartime standard”.

But even these figures, he suggests, probably overstate the real proportion of the output going to consumption. For they stand in contrast to the picture you get if you look at the distribution of industrial output made up of consumer goods:

in 1928

consumer goods were

60.5 percent

of output

in 1940


39.0 percent


in 1960


27.5 percent


in 1985


25.2 percent


“Is it really conceivable that, according to official figures, three quarters of net income goes to consumption while consumer goods are only one quarter of industrial output? You can’t help wondering what goods are being bought with the consumption fund.

“The shift towards the manufacture of producer goods have put us in the paradoxical situation where accelerated rates of development and more rapid growth in national income have very little effect on the standard of living. The economy is working more and more for itself, rather than for man.”

This, he implies, makes it very unlikely that perestroika can achieve its goal of solving the crisis. Even if the optimistic forecasts of its proponents are proved correct, the increased level of consumer output will only be enough, he calculates, to raise average incomes by 1.5 roubles a month for each employee – that is, by about 25p a week.

But things are unlikely to be as good as this. The proponents of restructuring aim to modernise the country’s means of production by large scale investments in advanced technology. At the same time, however, they have to invest considerable amounts in maintaining and repairing old industrial plant and equipment.

The two forms of investment combined can be such a burden on the rest of the economy as to reduce rather than increase the amount available for consumption. Instead of relieving the symptoms of crisis produced by the old centrally administered economic structure, restructuring would merely intensify them.

Even if things go according to the optimistic forecasts of the proponents of perestroika and to the pessimistic scenario of Selyunin, his figures indicate how little room for manoeuvre there is for Russia’s rulers.

Selyunin’s own alternative is to call for an end to accumulation. Stop striving after economic growth, he argues, and we can produce a massively greater number of goods to satisfy the needs of the population.

It is the blind drive to accumulate characteristic of state capitalism just as much as of “private” capitalism which has led to the present crisis, and the easiest way out of the crisis is to end that drive. What he ignores, however, is that drive is pan of the very being of Russia’s bureaucratic ruling class.

Before you can get the production for need not for competitive accumulation that he wants, you first have to have a social revolution.

The crisis in Russia has caused a degree of confusion on the Western left. On the one hand there are those who see Gorbachev as almost single-handedly fighting to create a new, democratic socialism. On the other, there are those who recognise that economic restructuring means austerity for Russian workers, don’t like all the talk about markets, and so sympathise with Gorbachev’s conservative opponents.

Revolutionary socialists should not place themselves in either camp. It is not a question of being for or against Gorbachev’s reforms, but rather of seeing them as an expression of the deep seated crisis of state capitalism. The answer to such a crisis does not lie in reform of any sort, but in revolutionary transformation. The first step in moving towards such a transformation is the argument for working class politics, independent of both wings of the bureaucracy.

This cannot mean abstentionism on the question of openness in society. Socialists are for glasnost on as great a scale as possible, for that makes it much easier for workers and oppressed minorities to see what society is really like and to begin to build independent organisation. By contrast, those like Gorbachev who talk today about glasnost simply in order to clear the ground for economic rationalisation will soon turn their backs on it. Socialists should respond by turning their own slogan against them and insisting on the further spread of glasnost.

The point is particularly important because not all those enthused by glasnost at present are reform bureaucrats. Other considerations motivate the people demonstrating on the streets of Moscow day after day, those joining the vast array of informal groups, even some of the journalists, writers and historians writing in the official press.

They all feel resentment of the various sorts of oppression experienced for the last 60 years and are trying to work out ways to fight back. At the moment they identify with Gorbachev against Ligachev. But the experience of fighting can teach many of them to look to action independent of both.

Socialists have to make it clear we are on their side against the old order, but that we don’t see Gorbachev as the answer. Glasnost from above has provided an opportunity for building glasnost from below and combining it with a fight against austerity, the productivity drive and national oppression.

Last updated on 15 April 2010