Encyclopedia of Anti-Revisionism On-Line

Bill Silverstone

Soviet economy – a system of exploitation

First Published: Unity, Vol. 6, No. 15, October 7-20, 1983.
Transcription, Editing and Markup: Paul Saba
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The Soviet Union and its supporters in the U.S. endlessly repeat the claim that the U.S.S.R. is a socialist country. The facts tell a different story, however. The Soviet Union was socialist in the period from the 1920’s through the early 1950’s, but today a new ruling class holds state power, and the Soviet economy has degenerated into a system of exploitation.

Following the 1917 October revolution, the working class came to own and control the basic means of production. Most factories and banks were nationalized and put under the control of the working class, through the mechanism of the central government. In the 1930’s and 1940’s, agriculture, too, was increasingly brought under direct control by the Soviet state. Unlike the capitalist system, enterprises did not make their own decisions about what to produce, where to get materials, or how to dispose of their products. Instead, these decisions were made in the central economic ministries in Moscow as part of a legally binding plan.

When the working class held state power, central planning made it possible to channel the economic resources of the U.S.S.R. in the interests of the masses. From a backward, underdeveloped country, the Soviet Union rapidly became a modern, industrialized country with vast improvements in the people’s living standards.

But in the mid-1950’s, a new ruling class seized power and began using centralized control of the economy to advance its own interests. During the 1960’s, this elite stratum consolidated its position within the state and party bureaucracy and transformed the Soviet economy into a system of exploitation. Today, the Soviet exploiting class uses its control over the state to enrich itself at the expense of the masses of Soviet working people who labor in the factories, fields and mines to create the wealth of the U.S.S.R.

Exploitation restored

The Soviet ruling elite exploits working people in two ways: first, through “official,” legally sanctioned privileges for the ruling class, and second, by means of the “illegal economy,” a vast network of bribery, extortion and influence peddling. Despite superficial differences between these two forms of exploitation, in essence they are the same. In both cases, exploitation is based on control over the country’s economic planning bureaucracy by a small elite. And in both cases this elite relies directly on the repressive apparatus of the state (such as the KGB secret police) to get its way. Government party bureaucrats ultimately use the threat of imprisonment to get subordinates to conform to their wishes, whether “legal” or “illegal.”

The system of official privileges must be understood in relation to the conditions of life for the broad masses of people in the U.S.S.R. Food and other necessities are in such short supply that the average Soviet married woman spends two hours in line each day in order to feed and clothe her family. Housing is so hard to find that divorced couples must often continue living together for years after they have been legally separated. Health care is bad and getting worse: life expectancy is actually declining in the U.S.S.R. today.[1]

But the exploiting class enjoys a wide range of official privileges. The Soviet government is legally empowered to decide the quantity of resources devoted to construction, to consumer goods, to the military and to privileges for the elite. Because members of this elite control the government, they make sure not to skimp on the benefits they give themselves.

Members of the ruling class are admitted to special shops where ordinary Soviet citizens are not allowed. A Soviet worn a recently told a Western reporter, “One day I had to visit Tashkent Party head quarters and saw their special food store .... Amazing fresh produce, from egg to meat to smoked fish – delivered ever morning – while everyone else is frantic for usable potatoes.”[2]

Despite the housing shortage, members of the Soviet ruling class own private mansions and summer homes, some built by the old Czarist aristocracy. Ordinary citizens must wait years to buy a car but many Soviet leaders personally own imported luxury cars, including Roll Royces, Porsches, Mercedes and Cadillacs, to name a few.

When they fall ill, doors are opened for this ruling clique at the “Kremlin clinic,” a network of special clinics and hospitals from which the masses are excluded.

Illegal economy

But official privileges are only one part of the Soviet system of exploitation. An even more important source of private wealth is the so-called “illegal economy.” Almost every business transaction that takes place outside the dictates of the central plan violates Soviet law. Even the government-controlled Soviet press admits that extortion and kickbacks are major problems. Western experts estimate that the Soviet illegal economy may equal or even surpass the size of the “legitimate” economy.

One reason the illegal economy is so large is that it is often the only way to get anything done. The Soviet system of central planning is highly inefficient in guiding the U.S.S.R.’s advanced economy because there is no room for decisionmaking at the enterprise level.

If a factory does not receive a shipment of raw materials on schedule, for example, the factory director can’t just call up other suppliers and ask them to send a shipment. Instead, the director must ultimately go to the head of one of the ministries in Moscow and plead for some raw materials. Unless the needed materials can be obtained, production will cease and the plan cannot be fulfilled. If this happens, the factory director may lose his or her job or even go to prison.

Thus, concentration of economic power in their hands permits Soviet bureaucrats to demand hefty kickbacks from their subordinates. In order to stay out of trouble, a factory director often has little choice but to pay off his or her superior. To come up with the cash for these kickbacks, factory directors must frequently resort to embezzling funds from their enterprises (or embezzling more funds in cases where their hand is already in the till). Another widespread practice involves setting up illegal, underground workshops, using materials stolen from the “above ground” legal economy.

Unfortunately, government corruption can be found everywhere in the world, including socialist countries. The Soviet Union is different from socialist countries like China, however, because corruption and official privileges are far more widespread and form part of a system of exploitation.

Studying the history of attempts to reform this system of exploitation reveals how deeply entrenched it is. Despite several efforts at making the Soviet economic system more efficient, leading party and state bureaucrats have effectively sabotaged these moves. They have done so because the source of inefficiency is also what permits the exploiting class to appropriate a surplus: the concentration of all major economic decision-making power at the central level.

Economic reforms don’t work

Soon after the new ruling class seized power in the mid-1950’s, it recognized that the Soviet economic planning system was becoming increasingly inefficient. The Soviet economy had become so advanced, industrialized and complex that the lack of decision-making power at the enterprise level was holding back more rapid development of the country’s productive forces.

Raw material supplies, wages, production quotas and the installation of new equipment for each factory and state farm were decided in Moscow, not by the enterprise itself. Furthermore, in the atmosphere of careerism and cynicism following the overthrow of socialism, enterprise directors were more and more just looking out for their own personal interests, not those of the country as a whole.

The result was that enterprise directors took very little responsibility for producing high-quality goods as efficiently as possible. Instead, they would try to get by with a minimal effort. For example, huge inventories of shoddy consumer goods piled up in warehouses because nobody wanted to buy them, but the factories would keep turning them out anyway. Factory directors would conceal the actual productive capacity of their enterprises from their superiors in order to prevent an increase in their production quotas. Enormous quantities of raw materials were wasted or stolen.

In response to these problems, Soviet authorities introduced certain “market reforms” in 1965. These reforms expanded the role of profits and of “material incentives” for management and workers as a way to get enterprises to organize production more efficiently.

At the same time, however, authorities in Moscow continued to interfere in the day-to-day operations of most enterprises, in one case altering the plan of a factory 16 times in a nine-month period.[3] Allocation of supplies, materials and new equipment remained under the control of the central government.

The reform was far too limited in scope to significantly reduce inefficiency and waste. And because of opposition by high-ranking officials, many parts of the reform were simply not introduced. But leading party and state bureaucrats began pointing to continuing inefficiency and deepening stagnation as indications that the reforms had failed. In the 1970’s, Soviet authorities began a process of “reforming the reforms,” re-centralizing economic power and reducing the degree of autonomy of the enterprises.

Today, the Soviet Union is mired in the worst economic crisis in its history. Industrial production fell 10% short of the target level in 1980.[4] The annual rate of economic growth fell from 4% in 1976-80 to 1% in 1982.[5] Yet the last 20 years show that Soviet leaders won’t introduce reforms that effectively address these problems. The only conclusion we can draw is that the ruling class refuses to go along with any change that would undermine its position in the system of exploitation.

Bureaucratic control is draining the lifeblood of the Soviet economy. But the Soviet ruling class cannot get to the root of economic stagnation and inefficiency without eliminating its own position in the exploitation process. This is an important reason why the Soviet leaders pursue a foreign policy of aggression and expansion. Economic stagnation at home has cut into the surplus the ruling class can expropriate from Soviet working people.

This has forced Soviet leaders to carry out a policy of hegemonism and foreign aggression as a way to gain control of the economic resources of other countries.

The U.S.S.R. continues to exploit the economies of Eastern Europe and Soviet client states in the third world, but trade with these countries is becoming less profitable for the social-imperialists. Soviet-style “socialism” is undermining the vitality of these countries, too, constantly forcing Soviet leaders to search for new lands they can subjugate and exploit.

As part of their plan for world domination, the Soviet imperialists are engaged in a massive military buildup unmatched in speed and proportions since Nazi Germany. In the past decade, Soviet military expenditures have consistently exceeded those of the U.S. economy. As military spending takes up an increasing share of total Soviet economic resources, production elsewhere in the economy is inevitably reduced. Scheduled shipments of parts and materials are often abruptly canceled and diverted to the already bloated Soviet war machine. Soviet rulers maintain a 3.7 million-man army despite a nationwide labor shortage. The Soviet war preparations disrupt production and undermine the long-term productive capacity of the Soviet economy.

Soviet militarism and the stagnation of economic reform cannot be understood in isolation from the system of exploitation in the U.S.S.R.

The Soviet Union is not a socialist country. Under socialism, there is no exploitation because the working people, and not a small group of parasites, control the economic resources of the country. The Soviets claim, “The absence of private ownership of the means of production rules out the possibility of exploitation.”[6] This is simply not true. We have seen that despite the absence of private ownership, the Soviet ruling class uses its control over the state apparatus to exploit the masses of working people.

Capitalist restoration thesis

Following the overthrow of socialism in the U.S.S.R., some comrades took the view that Soviet leaders were restoring capitalism. While the capitalist restoration thesis helped alert the people of the world to the fact that the Soviet economy had degenerated into a system of exploitation, I do not think that the U.S.S.R. is a capitalist country. The Soviet economy is not a system of production for profit: the wealthiest individuals are often in charge of some of the least efficient and least profitable enterprises. In the capitalist mode of production, labor power is a commodity and the law of value holds (i.e., commodities exchange at their values). These fundamental features of capitalism are not present in the U.S.S.R.

The fact that the U.S.S.R. is not capitalist does not make it any less dangerous than the U.S. Like the U.S., the Soviet Union is a superpower bent on world domination. But the Soviet Union poses as a socialist country, which makes it more difficult for people to grasp its true features. We must redouble our efforts to expose both the U.S. and the U.S.S.R. as systems of exploitation at home and aggression abroad in order to help build the international united front against the two superpowers.


[1] Nick Eberstadt, “The Health Crisis in the USSR,” New York Review of Books, Vol. 38, No. 2 (February 19, 1981), p. 23.

[2] George Feifer, “Moscow’s Angry Silence,” Bangkok Post, July 27, 1980.

[3] Gertrude Schroeder, “Soviet Economic ’Reforms’: A Case Study in Contradictions,” Soviet Studies, Vol. 20, No. 1 (July 1968), p. 4.

[4] Alec Nove, An Economic History of the U.S.S.R. (Harmondsworth: Penguin Books, Ltd., 1982), p. 377.

[5] Oakland Tribune, July 4, 1983.

[6] Yuri Popov, Political Economy and African-Problems (Moscow: Novosti Press Agency Publishing House, 1982), p. 123.