Chris Harman

Thinking it through

A tale of two countries

(July 1991)

From Socialist Worker Review, No.144, July/August 1991, p.8.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

IN ALL the hullabaloo about Gorbachev’s visit to the G7 meeting this month, one thing has been taken for granted on all sides: that the crisis in the USSR can be solved if only the move to the market takes place quickly enough.

So you read the same sorts of comments in the papers of the Soviet democratic opposition like Moscow News as you do in the Financial Times. Both see the way ahead through reforms like those undertaken on the advice of the Harvard economist Jeffrey Sachs in Poland.

Samuel Brittain of the Financial Times expresses the current orthodoxy when he writes that, ‘Jeffrey Sachs has contributed so much to the Polish economic revival.’

It all goes to show how people can be so blinded by the pro-market ideology as to ignore facts. For there are no signs of an economic revival in Poland. The reforms took effect at the beginning of last year. In their first ten months industrial output fell by 26 percent, real wages by 32.5 percent and old age pensions 10.4 percent.

The fall in output and workers’ incomes has accelerated since. The main statistical office in Warsaw reports that ‘the Polish economy fell deeper into recession during April ... Industrial output fell by 9.1 percent during the month’.

After improving at first, the country’s balance of payments has deteriorated sharply this year, with hard currency imports doubling while exports have risen only 28.5 percent.

Meanwhile, the price rises continue. The reforms were meant to bring inflation down to single figures by the end of last year. Now that target has been postponed until the end of this year.

If unemployment has not yet risen as much as expected, it is, as the Guardian’s correspondent Christopher Bobinski points out, because ‘it is often cheaper to keep staff on at half or even quarter pay than to make them redundant.’

No wonder that there have been a growing number of strikes against the government, with Solidarity – which brought the government to power – calling a protest day of action.

The point is not that the old command economy was a better way of running things. Anyone with a lingering nostalgia for the past should just look at Albania, where the then prime minister, a lifelong Stalinist, said in mid-May that the country had been in ‘absolute recession’ for the previous two years, with a fall in the social product of 10 percent in 1990.

But the market cannot solve the crises which the command economy gives rise to.

The command economy has never been something different to capitalism, but a variant of it, sharing with ‘free market’ capitalism the drive by the controllers of the means of production to accumulate as fast as possible under competitive pressure from each other.

Such accumulation invariably leads to crisis. Production expands faster than the resources needed to sustain it, cutting into profits. Under free market capitalism the rival owners of the means of production begin to sack workers and shut factories. Under state capitalism the state used to be able to keep production in heavy industry going – but only by forgetting all about ‘planning’ and diverting to heavy industry resources originally intended for light industry and agriculture.

In the last decade, however, the rate of growth in all the state capitalist countries has been declining, until the economies’ resources are too limited to carry through such measures to aid accumulation at the expense of living standards.

State capitalism began to experience recessionary pressures every bit as serious as those of ‘free market’ capitalism.

The turn to the market cannot eliminate those pressures. People like Sachs claim the market will ‘free enterprise’ from ‘the grip of the state’ and allow new forces to arise which produce economic recovery.

This really amounts to saying that they expected an old fashioned slump to be followed by an old fashioned boom.

What they forget is that there has often been a very long lag between slump and boom under 20th century capitalism. For, to compete internationally, enterprises have to be big rather than small, and every time an unprofitable big enterprise is driven out of business by a slump, the market for the output of a host of other profitable enterprises (big and small) is damaged.

Instead of recession giving birth automatically to recovery, it often gives birth to still deeper recession.

Things can be especially difficult in countries that have undergone relatively late industrialisation. The few firms that dominate the internal market will simply raise prices if state controls are dropped while protective measures continue to keep out foreign goods. But if borders are open to direct foreign competition, then goods from the more advanced multinationals will scoop the local market. The slump shuts down one factory after another. Imports rise more rapidly than exports and the government begs for foreign aid to bail itself out.

That’s exactly what is happening in Poland and it will happen in the USSR too if either Gorbachev or Yeltsin have their way. This means there will continue to be deep splits among the USSR’s rulers.

It also means workers in the USSR will eventually learn what workers in Poland are already beginning to learn – their interests are no more served by the liberal marketeers than by the conservative nomenklaturists.

Last updated on 11 June 2010