Excerpts from 

“Eastern” Approaches
to a Comparative Evaluation
of Economic Systems

By Alexander Erlich

in Alexander Eckstein
Comparison of Economic Systems




In this paper Alexander Erlich surveys  the "Eastern" (that is Soviet and East European)  Marxist views on capitalism and socialism. He starts by presenting the original views of  Marx and Engels and then traces the modifications and deviations by Lenin, Stalin and post-Stalinist Soviet and East European economists.


The “Classical” Position: A Thumbnail Sketch


2.   According to Erlich the original Marxist concept of socialism included:
1.      " predominantly public ownership of means of production"
2.      " centrally planned allocation of resources"
nd assumed the accomplishment of the following policy goals:
·        fast economic growth based on rapid technological progress resulting in "high and rising levels of economic abundance";
·        elimination of business cycles and achievement of “macroeconomic stability”;
·        “smooth adjustment between the composition of output and the pattern of social wants”;
·        “an end of economic inequality through abolition of class division”;
·        “and a gradual loosening of ties between reward and work performance.” 


Erlich stresses especially the following two points:
“Public ownership is a sine qua non for planning because it makes the whole economy one large decision unit.”
·        Central planning cannot function effectively unless the bulk of the output of various industries comes from a relatively small number of big plants operating on the basis of a fairly standardized and “calculable” modern technology.


Although the second point was not stated explicitly either by Marx or by Engels, Erlich insists that it is implicit in the well known contention expressed by both, namely that “a comparatively high level of development of productive forces is … a precondition for both” central planning and public ownership. This is partly because in large-scale plants production is already “socialized”. “The case for a take-over is assumed to be stronger still whenever not merely labor but also manage­ment has been effectively separated from ownership..”  Erlich also points out, that Marx and Engels saw the next step in ‘socialization of production’ in state control over the process of production together with conversion of private to public property , that is in the “state capitalism”. “Furthermore, a high level of economic development is an indispensable precondition for social equality; otherwise the abolition of classes would result in retrogression. An even higher degree of affluence must be attained in order to sever the connection between the worker’s share in total net product and his labor input…”


According to Marx  “ given the ‘right’ level of development, socialism would be not merely feasible but decisively superior to capitalism…” writes Erlich. “Capitalism … would prove increasingly incapable of mastering the stupendous productive forces it had generated”…while  “central planning could eliminate massive waste of resources in recurrent depressions and the partial imbalance … a product of the ‘anarchy of production’ in an uncontrolled market economy: As a result, growth would be powerfully accelerated. At the same time, the more deep-seated causes of the macroeconomic instability could be successfully attacked. Public ownership will make the economy impervious to the downward trends in the rate of profit (or rather in that of its noncapitalist counterpart), and the egalitarian redistribution of income, coming in the wake of socialization, will do away with the ‘poverty and restricted consumption of the masses’ which is ‘the last cause of all real crises’. “


The previous  according to Erlich does not imply that the “Marxian notion of capitalism’s becoming a fetter on further development of productive forces” … is … “a prophesy of inevitable breakdown or of continual contraction. The dialectics of capitalist development cuts both ways.  ‘There are no permanent crises’. A slump begets an upswing just as an upswing begets a slump, and while the fluctuations of the business cycle are expected to increase in severity, the long-run trend of development is assumed to point upward, largely because of the system’s ability to create powerful inducements for technological progress in times of triumph as well as in times of adversity.”

”Also the prediction of progressive impoverishment of the workers is (except for the early writings) less unqualified than one might gather from the tenor of the usually cited passages; the possibility of an increase in real wages is explicitly acknowledged, and, on a more general plane, the ‘absolute general law of capitalist accumulation’ according to which the ‘industrial reserve army’ steadily grows as a share of the total labor force, is said to be ‘like all other laws, modified in its working by many circumstances, the analysis of which does not concern us here’. “


“Lastly, the position with regard to micro-economic problems is likewise double-edged. Marx had no doubt that ‘wastes of social labor’ as a result of the production of particular commodities in excess of demand would be avoided in a planned economy.’   He was at the same time at pains to stress that the market mechanism is a vehicle, even though a highly imperfect one, for the eventual equilibration; and although he had serious reservations about what present-day economists would call the ‘static efficiency’ of capitalism, he was emphatic about its ‘dynamic efficiency’ “


Finally Erlich  adds “two points of a rather different nature”.
·        Marx and Engels were less dogmatic about the ‘class role’ of the state than is usually assumed. Engels’ wrote “..’when antagonistic classes are stalemated, the state can temporarily acquire a measure of independence and assume the role of a quasi-impartial arbitrator.’….But even the much-quoted and seemingly dogmatic statement of the Manifesto (‘the modern state power is but a committee for managing the common affairs of the whole bourgeoisie’) implicitly points to the state’s function as an integrator of, and mediator between, diverse interests of various groups or individual members of the capitalist class—a point spelled out very clearly in Marx’ earlier writings. As a result, the bourgeois state can every now and then put across policies which go against the grain of its in­dividual constituents although they are in keeping with their long-term collective interests.”

·        “Marx had a major non-economic goal—end of human alienation … Marx described the communist society of the future as a ‘community of free individuals (Verein freier Menschen) carrying on their work with the means of production in common’  or ‘an association in which a free development of each is the condition for the free development of all.’ ….. freedom ranked highest in Marx’ system of values … It was this attitude of Marx which made some of his orthodox and unorthodox followers unwilling to see in public ownership and central planning a sufficient condition for considering an economy socialist”


3. Lenin: the Old and the New


Erlich starts his evaluation of Lenin’s contribution as follows: “It is generally known that interpretation of Marxian fundamentals by Lenin underwent major changes over the 30-odd years of his political life and resulted in substantial departures from the original. However, it is not always realized that the incidence of innovations was quite uneven; and also in the areas in which amendments were most pronounced, there was an evident determination to link the new and the old as closely as possible.”


 Erlich maintains that Lenin did not depart much from Marx and Engels in the evaluation of capitalism. “ He repeatedly characterized capitalism as ‘a contradiction between the drive towards unlimited expansion of production and limited consumption.’ … Moreover … Lenin insisted that Marx did not propound a theory of absolute immiseration: ‘he spoke of the growth of poverty, degradation, etc., indicating at the same time the counteracting tendency, and the social forces that could give rise to this tendency.’ “  

Erlich then points out that even Lenin’s pamphlet on Imperialism, …” reaches its climax in the statement that although imperialism should be viewed as a parasitic or decaying capitalism, ‘it would be a mistake to believe that this tendency to decay precludes the rapid growth of capitalism. … on the whole, capitalism is growing far more rapidly than before’.”   


Another Erlich’s argument for relative similarity of Lenin’s and Marx’s views: “Lenin claimed that as a result of the transition from competition to monopoly ‘the motive force of technical and consequently of all other progress disappears to a certain extent,’ but was quick to add that ‘the possibility of reducing the cost of production and increasing profits from introducing technical improvements operates in the direction of change’ and that the ‘process of technical invention and improvement becomes socialized,’ which clearly implied that it can develop on a much large scale and hence be more effective than ever… genuine respect for the economic dynamism of the system is very much in evidence.

As far as the role of the capitalist state is concerned Erlich found Lenin’s views more simplistic than those of Marx and Engels but that in spite of that Lenin did appreciate states ability  to mobilize and control the productive resource of their societies in times of war.”  



A really large discrepancy between Lenin and Marx can be found according to Erlich in the Lenin’s attitude to the classical Marxist proposition “that a highly developed economy is a necessary precondition for planning and public ownership”. Before 1917 Lenin very clearly supported that proposition, but after the Bolshevik revolution he began to change his mind.  Another quote from Erlich: “The most succinct statement of the changed position is contained in the following paragraph of one of his last articles: ‘if a definite level of culture is required for the building of socialism … why cannot we begin by first achieving the prerequisites for that definite level of culture in a revolutionary way, and then, with the aid of the workers' and peasants' government and the Soviet system, proceed to catch up with other nations?"  



But even here Erlich sees Lenin to be careful and reluctant to completely depart from classical Marxism. Lenin was repeatedly addressing two crucial questions: “Is there a level of economic development that could be regarded as a minimum prerequisite for a move toward socialism? What extent of socialization, scope of planning, and speed of economic growth are called for in order to bring the economy closer to the desired conformity between the relations of production and the character of productive forces?  “

“a) Lenin clearly replied in the affirmative to the first question when he observed (in a comment jotted down on the margins of Bukharin's Economy of the Period of Transition) that ‘without a certain level of capitalist development we would not have gotten anywhere….’ “  


“b)  Regarding the pace of the socialization in conditions of relative underdevelopment it was Marx and Engels of the Manifesto who first flashed the "go-slow" signal…..Lenin was, if anything, even more circumspect. On the eve of November 1917 he intended to nationalize only the banks and industrial cartels; moreover, it seems reasonable to assume that he had in mind tight controls rather than seizure of privately owned savings deposits and productive assets… Lenin was outspoken in urging restraint. To his left-wing critics who called for ‘a most determined socialization policy  …’ he retorted that ‘today only a blind man could fail to see that we have nationalized, confiscated, beaten down and put down more than we have had time to count ‘ … in the last years of his life while explaining the transition from ‘War Communism’ to the ‘New Economic Policy’ (NEP) which involved, among others, a measure of denationalization and a strong bid for foreign investment. … Lenin was clearly prepared to loosen the reins of state control over the private sector and to put up with capitalism pure and simple both as a short run device for reversing the process of economic disintegration and as a valuable, if expensive, training program in modern economic management. “  


“c) Although Lenin favored gradualism in matters of nationalization, he was categorical in stressing the need for an extensive system of direct controls as one of the first orders of business. There can be no doubt that in the fateful years l9l7-l92l Lenin viewed economic planning first and foremost as a huge emergency operation aimed at arresting the process of shrinkage and dislocation generated by World War I and later by the civil war 

... Lenin conceded this with utmost candor: ‘Borne along on the crest of the wave of enthusiasm . . . we expected…to be able to organize the state production and the state distribution of products on communist lines in a small-peasant country directly as ordered by the proletarian state. Experience has proved that we were wrong…’ …’State production and state distribution of products on communist lines’ clearly remained a goal for the future.…"  


“d)     Concerning the rate of economic growth under the Soviet system, Lenin was reticent. He firmly upheld the fundamental Marxian proposition that the ‘expropriation [of capitalists] will make it possible for the productive forces to develop to a tremendous extent.’ And in one of his last articles he expressed the belief that if the civil war had not interfered, the Soviet economy would have been able right from the start ‘to develop the productive forces with enormous speed [and] to develop all the potentialities which, taken together, would have produced socialism.’ But whenever he went beyond generalities and discussed the Soviet situation as it actually was and not as it might have been, he struck a different note. In the fall of 1917, as we have seen, he was primarily concerned about averting collapse. … when Lenin outlined in bold strokes his vision of the modernized and indus­trialized Russia of the future, he remained silent about the pace at which he expected to advance toward this goal; but the few remarks he did make about the preconditions of such advance … clearly pointed toward moderation”  


Erlich concludes his evaluation of Lenin’s position as follows:” One might summarize Lenin's overall appraisal of Soviet economic performance by recalling Marx' often-quoted observation that the communist society would be, in its initial stage, ‘stamped in every respect, economically, morally and intellectually, with' the birthmarks of the old society from whose womb it emerges.’ The Soviet system, as Lenin saw it, was stamped, in addition, with marks of its economically premature birth. The classical Marxian package in which the appropriately high level of technology would firmly sustain the socialist economic structure and make for a smooth interaction of the component parts of the latter as well as for their wholesome feedback effects on the base had to be untied in the Soviet case. As the performer of the operation candidly admitted, its economic cost was high. The product that emerged was not only inferior to the Marxian ‘ideal type’ of socialism; it lagged in efficiency behind its capitalist predecessor and could survive only at a price of uneasy accom­modation with its remnants. Besides, the chances within the foreseeable future of breaking out of this position of relative weakness and thereby overcoming the instability inherent in the ‘in-between’ situation were dim.  for all his flexibility and his readiness to learn by doing, there was behind every turn and twist of the policy the same emphasis on the ‘absolute and strict unity of will,’ to be ensured by ‘thousands subordinating their will to the will of one,’ and the unbending resolve ‘to fight barbarism with barbarous means.’ It is therefore not surprising that Lenin could, and did, mean different things to different people at different times although some of these interpretations have been definitely less justified than others ...”


4 . Stalin


Accordinfg to Erlich “Stalin did not simply take over where Lenin left off. He was definitely not one of the leading figures in the great debate of the mid - 1920s in which basic issues of Soviet economic policy were submitted to searching scrutiny, and whenever he did speak up, he showed little originality. His distinctive position emerged around 1928 and was stated most fully in his Economic Problems of Socialism in the U.S.S.R. a quarter of a century later.”

 “ With regard to capitalism, the pronouncements by Stalin and his followers contain several unmistakable departures from received views, all ritualistic genuflections notwithstanding:  


a)    The underconsumptionist component is definitely stronger than in Lenin's early writings and more articulated than in Imperialism. The causes of economic crises are seen in the contradiction between the colossal growth in the productive potentialities of capitalism . . and the relative decline in the effective demand on the part of the millions of the working people.  If anything, the reference to a relative decline in effective demand seems like an understatement in view of the unreserved acceptance of the ‘immiseration’ thesis: ‘securing the maximum capitalist profit through the exploitation, ruin, and impoverishment of the majority of the population of the given country, through the enslavement and systematic robbery of the peoples of other countries, especially backward countries’ is elevated to the rank of the ‘basic economic law of modern capitalism.’

b)The role of capitalism as promoter of technological progress is distinctly downgraded. (‘Capitalism is in favor of new techniques when they promise it the highest profit. Capitalism is against the new techniques, and for resort to hand labor when the new techniques do not promise the highest profit.’)


c)The treatment of the impact of Western capitalism on underdeveloped countries shows a similar departure from the original version. The notion that capital exports contribute to growth of capitalism in dependent areas is not abandoned, but toned down and rendered virtually meaningless by the insistence that ‘imperialist operations in the colonies retard the growth of productive forces and deprive these countries of necessary pre­conditions for an independent economic development.’ At the same time the characterization of developed capitalist countries as increasingly parasitic and rentier-like is fully upheld.  


d) If Lenin's rendition of Marxian analysis of the bourgeois state was oversimplified, Stalin's version is coarseness compounded. The notion of  coalescence of monopolies with the state machine’ was, in his view, too lame; ‘subjugation of the state machine to the monopolies’ would be a more appropriate description of the prevailing situation. Moreover, although the capitalist state was considered a near-perfect vehicle for the despoiling of the vast majority of the population, its ability to influence the stability and growth of the economy was rated virtually nil: ‘. . all attempts at state 'regulation' of the economy under capitalism are powerless with regard to the elemental laws of economic life.’”


“It is therefore hardly surprising that the overall evaluation of the economic prospects of capitalism was more bleak than in the inherited doctrine. Stalin made this plain when he openly repudiated Lenin's statement that capitalism in its imperialist stage would be expected ‘on the whole’ to grow more rapidly than ever before. Instead, he now predicted an actual contraction, with the alleged ‘disintegration of the single world market after the Second World War,’ as the most important single cause, and angrily insisted that within the capitalist segment of the world market, tensions were also mounting. (At this point he injected a note of unintended humor by describing Western Germany and Japan of the early 1950s as countries ‘languishing in misery under the jackboot of American imperialism.’) “  


“At the same time as capitalism is thus scaled down several notches, the evaluation of the Soviet system is revised dramatically upward, with its superior rate of growth viewed as the decisive criterion. Diverse sources of this superiority are cited:



a)         The ability of the Soviet economy to sustain a comparatively high rate of investment and to raise it steadily is emphasized. This is the meaning of the renowned ‘law of the preponderant growth of the output of means of production’ viewed as a necessary precondition of continuous economic growth and traced to the two-sector model in the second volume of Capital. … On the institutional side, the whole operation is presumed to be greatly helped by nationalization of industry and banking ‘which made it possible to quickly get together resources and to transfer them to heavy industry’ and by the collectivization which permitted, ‘within several years,’ to re-equip agriculture along the lines of modern technology and to increase its marketable share.  


b) ‘Superior technology’ must be promoted also when capitalist criteria would have dictated different factor choices. .. To Stalin … this proposition repeated by several Soviet economists in the early l950s did not go far enough: ‘Machines in the U.S.S.R. always save labor; we do not know of instances when they wouldn't be saving labor in the conditions of the U.S.S.R.’  


c) The ‘learning by doing’ on the part of the new entrants into the rapidly growing industrial labor force was viewed as a potent factor of Soviet growth, in spite of the heavy toll which it exacted (and which a capitalist economy presumably could not take upon itself).  

d) The last characteristic    is grim determination to attain the objectives listed above and to wring from them further growth, at a rate of speed set in flagrant defiance of the limits of human endurance, organizational skills, and capacity of physical plant, with ultimate disaster asserted to be the only possible alternative. ‘Perish or forge full speed ahead’; ‘there are no fortresses which the Bolsheviks couldn't take’-these slogans of the late 1920s and the early 1930s epitomize the spirit of the man and of his creation.”


“The departure from the "old books" was never admitted. Indeed, a determined attempt was made to paper over the gap between the post-1928 "general line" and Lenin's position by a long string of carefully doctored quotations culled from the master's writings and purporting to prove 

1.      that Lenin believed in the possibility of successful socialist transformation of Russia without assistance from revolutions in the industrialized West as early as in 1915;

2.      that in September 1917 Lenin regarded the "overtaking" of the capitalist countries as the most urgent task;

3.      that in one of his last pronouncements he insisted on high priority for heavy industry, and

4.      that his "cooperative plan" of 1923 was nothing but a blueprint for collectiviza­tion.  


NoIf a single one of these assertions was true. The distortions were by no means confined to the realm of quotationsmanship; closely inter­twined with them were eloquent silences. Stalin never admitted that the beating-the-clock type of industrialization pursued by him involved trade-offs between rapidity of growth and other ostensibly accepted policy objectives on a scale which was totally inconceivable from the viewpoint of the classical Marxian scheme of things and which would have been rejected as excessive during the pre-1928. Soviet debate by all its participants, including himself. The staggering sacrifices in living standards were glossed over; massive inefficiencies were played down or blamed on avoidable mistakes in the lower echelons if not on outright treason; sharply rising wage differentials were presented not as an enforced temporary retreat from socialist principles (as Lenin had done in early 1918 while defending the raise in managerial salaries), but as their supreme affirmation. Another problem-dodging device consisted in promoting controversial policy decisions to the rank of a ‘law’ which is an emphatic, if awkward, way of saying that harsh as these decisions may have been, they were inevitable. This approach comes through already in the often-quoted article which appeared in the Soviet Union during World War 11 and which described both the Stalin-style industrialization and the collectivization of agriculture as ‘laws of development.’  But Economic Problems of Socialism in the U. S.S.R. are its locus classicus.”


“In letting the planners' acts of choice appear as economic laws, the Stalinist apologetic has reached its peak…. it did too undoubtedly show a visible crack. Bringing in the notion of law served not merely the purpose of legitimizing the unpalatable; it also meant to serve notice that the sky was not the limit and that arbitrariness in economic decision-making on all levels must be somehow restrained. This was clearly the meaning of the acceptance of the validity of the "law of value" under socialism in spite of all qualifications and equivocations attached to it. A Czechoslovak economist writing in 1968 was entirely correct in observing that "paradoxically enough, new disputes and new developments started with the publication of Stalin's Economic Problems of Socialism in the U.S.S.R."To these "new disputes and new developments" we shall now turn.”


5 After 1953: Back to Lenin and then Beyond


“We are coming to what is perhaps the most exciting and definitely the most complex chapter of our story. The dead weight of Stalinist ideology was lifted not at once but gradually and none-too-consistently, advances were followed by stops or partial retreats. Moreover, the process has varied in intensity from one Eastern country to another.”

“1. There has been an unmistakable tendency to recover Marx' and Lenin’s sense of realism in identifying elements both of weakness and strength in capitalist economies and to come to grips with developments which the "classics" had not anticipated:


a)    The most arrant nonsense of late-vintage Stalinism has been cleared away. The doctrine of "absolute impoverishment" which had its staunch defenders still in the late 1950s and early 1960s has been abandoned by now. ( Cf. E. Varga, "Vopros ob absoliutnom obnishchanii," in his Ocherki po problemam politekonomii kapitalizma, Moscow, 1965, pp.117-131) Its modified version, postulating a decline in the workers' relative share in national income, still enjoys general acceptance or at least has not thus far been openly challenged.


b)         The underconsumptionist strand has …. developed into a much more coherent line of thought in writings of those Eastern European economists who were willing to strengthen the received doctrine by generous transfusions from Keynes or Kalecki and by paying more attention to Rosa Luxemburg…”,


c)    The technological dynamism of modern capitalism is no longer put in doubt: " . . . we live in the period of a veritable scientific technological revolution when the sphere of application of technological progress has tremendously increased and its rate of diffusion has accelerated  manifold." (N. Inozemtsev, "Zhivaia dusha marksizma-tochnost' analiza, sila predvideniia imperializm nashikh dnei," MEMO 1968, no.6, p.9.)


d) A rapid pace of technological change is regarded neither as a purely coincidental factor nor as a mere by-product of the fierce rivalry among monopolist giants. A quasi-official explanation most frequently offered consists in pointing to the impact of the "competition between the two systems." ... An eminent Czechoslovak economist articulated these doubts when he observed that "it is impossible to explain the scientific technological revolution merely by the fact that the world is split into two social systems. . . Capitalism was able to open the path for the scientific-technological revolution because it had adapted in advance its internal economic mechanism for that purpose." ( L. Urban, "Izmeneniia v ekonomicheskom mekhanizme sovremennogo kapitalizma," MEMO, 1967, no.6, p.84.)


“i) The partial planning done by individual monopolies is no longer brushed off as irrelevant or worse, particularly when it is intertwined with the economic activities of the state: "It is imperative to bear in mind Lenin's proposition that work in response to state orders for the treasury is not a work for an unknown market but for a known or at. least largely known market."(S. Men'shikov in A. A. Arzumanian and A.M. Rumiantsev, eds., Problemy sovremennogo kapitalizma i rabochii kiass, Prague, 1963, p.177)  “ 


“ ii)  Partial nationalization in the Western countries is no longer dismissed …. Professor Horvat of Yugoslavia goes very much further when he envisages a possibility that "various countries will be able to preserve the precarious equilibrium between two antagonistic social forces travelling slowly along the road of gradual nationalization one way or another. . . Every new 'labor' government will have to make another step in the direction of extending public ownership, and so private capitalism will be gradually replaced by state capitalism. (B. Horvat, Toward a Theory of Planned Economy,Belgrade 1964, p.82.}  


iii)    The notion that Keynesian policies could have a positive influence on stability and growth of Western economies has been bitterly resisted in the Soviet Union until quite recently: …Yet, here too, things are changing. In the authoritative article cited above it is alleged that the Great Depression, on the one hand, and achievements of Soviet planning, on the other, "have pushed capitalism to the extensive utilization of Keynesian devices," (N. Inozemtsev, op. cit. (n. 80), p.11.). with the clear implication that the operation was at least partly successful…. It may be worth noting, moreover, that Eastern Euro­pean economists (in the first place the post-1956 Poles and Hungarians, and the post-1965 Czechoslovaks) were, by and large, much quicker and less inhibited in reaching such conclusions than their Soviet opposite numbers.


All this, obviously enough, adds up to a very different overall view of the situation. Incontrovertible facts are no longer denied, it is openly acknowledged that the rate of industrial growth in the West during the postwar period has been higher than during the preceding six decades; (Cf. N. Inozemtsev, op. cit., p. 10) and there is general agreement that another downturn on the scale of the Great Depression is unlikely.


... the already quoted Czechoslovak economist ... concluded; "We must reject the notion that capitalism will disappear as a result of an economic breakdown or of a revolutionary war of some kind. Only in process of (internal) development (of capitalism) can the requisite structural shifts and changes in relation of class forces conceivably occur; and only as a result of such development will the transition to full socialist take-over be presumably completed at long last." (L. Urban, "Izmeniia," op. cit. (n. 83), pp.85-86.) This is, no doubt, the most far-reaching re­evaluation of socialist perspectives in the West that has ever occurred within the Leninist tradition. And yet it is overshadowed by the intensity and depth of the soul-searching that has gone on among the Eastern economists with regard to their own system after Stalin's departure from the scene.


2.    It has been widely recognized that in the Soviet Union and in East European countries the maximization of growth had been relentlessly pressed forward as a paramount objective at the expense of all others; and there has been considerable agreement i) that this policy has been, up to a point, inevitable in the early stages of the industrialization drive; but ii) that the trade-offs were even then pushed much too far from the viewpoint of even their declared purpose; and iii) that by now this policy has lost most of its justification.  Concretely:


a)    The overwhelming emphasis on the achievement of most ambitious output targets has been criticized as "voluntarist" and largely counter­productive. ..  A Soviet economist ... after calling Stalin's demand for a 45 per-cent increase in industrial output within a single year, and Khrushchev's ill-fated plans for overtaking the United States in the output of livestock products, concluded that "infatuation with super-high tempos. . . leads to a dislocation in economic life." (S. P.  Pervushin, "Proizvodstvo i protreblenie na novom etape" in V. G. Venzher et al., Proizvodstvo, nakoplenie, potreblenie, Moscow, 1965, p.20.)

... rigorous criticism advanced by a prominent Czechoslovak economist drew attention to the quasi-cyclical fluctuations in the rate of industrial growth of Czechoslovakia, Poland, Hungary, and Eastern Germany ... ( J Goldmann, 'Short- and Long-run Variations in the Growth Rate and the Model of Functioning of a Socialist Economy," Czechoslovak Economic Papers, V (1965), 35-46.)


b) The "law of the preponderant growth of the output of the means of production" came in for a good deal of questioning. ... it was demonstrated that the "law" is valid,  only when the capital-output ratio is increasing and/or when economic growth is accelerating ... and that changes in the composition of imports can help to bring about the desired upward adjustment in either of the two without a corresponding intersectoral shifts - (Cf. M. Kalecki, "Dynamika inwestycji i dochodu narodnowego w gospod­arce socjalistycznej," Ekonomista, 1956, no.5, pp. 61-70, and K. Laski, Zarys teoni reprodukcji socjalistycznej, Warsaw, 1965, pp.336-337.)

.... the notion that there was something inherently superior and peculiarly socialist about preponderant growth of the capital goods' sector in all places and at all times was severely qualified. The correct decision in this respect was shown to depend on such specifics as the country's endowment with suitable natural resources and basic social overheads, its opportunities to trade with, and to import capital from, the rest of the world, as well as its place in the historical sequence of the worldwide industrialization process. It was agreed the latecomers can borrow up-to-date technology from the older members of the club and hence start some of the most modern branches of the capital-goods sector at a much earlier stage of development. (In this context, the crucial importance of the fact that the Soviet Union in 1928 was not a typical underdeveloped country and did not have to start "from scratch" was made very explicit.) (Cf. speeches by V. Tiagunenko, B. Solov'ev, and V. Loginova at the research conference on problems of industrialization of developing countries, MEMO, 1967, no.4, pp.108-109; no.5, pp.99 and 103.)


 it was felt that the Stalin formula .... contained a considerable potential for trouble particularly when used in the "damn-the-torpedoes, full-steam-ahead" spirit that dominated the whole attitude toward growth in the past ... The dangers consisted in overcompression of consumption and its deleterious effects on the quality of the work force, ...and ... in driving the economy into a host of bottlenecks ...

The notions about the nature of constraints ... show a good deal of variety. They comprise i) Branko Horvat's broad-gauged "absorption capacity for investment" encompassing health and consumption standards, the level of know-how and the institutional set-up of the economy;(B. Horvat, op. cit. (n. 91), pp.181-184.)


ii) Michael Kalecki's "ceilings" ... are due to limitations in natural resources and managerial skills, long construction periods and time needed for assimilating new technologies; whenever the rate of investment is raised in disregard of these barriers, further lengthening of the construction period and hence "freezing of capital rather than expansion of the industry in question" (M. Kalecki,, Zarys teorii wzrostu gospodarki socjalistyczne] Warsaw, 1963, p. 53.)  is the inevitable result; and


iii) There was a general consensus that all these dangers did in fact materialize, to a degree varying over time as well as from country to country, in the course of economic development of the post-1928 Soviet Union and post-1948 Eastern Europe.

c) There has been a major reorientation with regard to the criteria of technological choice. No one seems to dissent from the proposition that relatively backward countries are, by definition, facing wide gaps between the best-knowledge technology and the one that actually prevails.


 ... this was what the Stalinist planners had failed to do when they had tried to follow the quest for “superior” technology all around, and had spurned the use of rationing devices—approximating the rate of interest—which some Soviet economists had suggested already in the late 1920s [ “Had the coefficient of efficiency of investment been introduced in our economic practice not in 1959 but about 30 years earlier (when its use was already advocated in the Soviet press), the investments which were made during the last three decades would be giving a much higher effect than they actually do.” (V. V. Novozhilov, “Matematicheskii analiz sotsialisticheskoi ekonomiki kak vazhneishii faktor rosta proizvoditel’nykh sil” in Planirovanie i ekonomiko­matematicheskie metody, Moscow, 1964, p. 319.)]


The difficulties were regarded in part, as side-effects of the attempts to expand the economy at a rate heavily overtaxing its physical and organizational capacity; the sellers’ market, the rush after quick production increases at the expense of the expansion of research facilities as well as time consuming changes in processes or products; and sub­standard quality of the “above-planned” increment in labor force were cast in the role of major villains. (Cf. W. Sadowski, “Optimum techniczno-renowacyjne,” Ekonomista, 1967, no. 3, pp. 551, 578, and K. Ryc, “Problemy wzrostu dochodu narodowego i spozycia w warunkach napiecia inwestycyjneg ibid., p. 658.)

Yet this was not the whole story, as will be seen presently.


d) Perhaps the most momentous change occurred in the attitude toward problems of economic organization. ... The old system was accused of lacking meaningful criteria for optimal allocation of resources—a recognition which inspired the attempts to reformulate Marxian theory of value in terms compatible with marginal analysis, and brought about a phenomenal upsurge of Eastern mathematical economics.

The centralized apparatus of economic administration was depicted as unable to cope adequately with the stupendous multitude and complexity of the decisions to be made and with the staggering volume of information to be collected, sorted out, and processed for that purpose.


Attention was drawn to the managers’ propensity to press for excessively large capital allocations to hoard materials and, last but not least, to be sluggish in introducing innovations .... As a result, many Eastern economists are now leaning to the view that a Western market mechanism, for all its imperfections, is superior to the overcentralized planning in terms of static as well as dynamic efficiency; and some of them feel no compunction about stating that Marx did not anticipate such a situation, and that he may have tended to exaggerate the shortsightedness and the “expost” nature of market-oriented decisions. (Cf. O. Kyn, “Marx and the Mechanism of Functioning of a Socialist Economy,” Oeconomica, 111:1 (1968), p. 41. Dr. Kyn emphasizes that “the quality of coordination provided by the market mechanism is not the same under various circumstances,” and that it is less than adequate in case of long gestation periods and under conditions of discontinuous change; but this can, in his view, be remedied by improvement in channels of information.)


 The solution is generally sought in combining, in a variety of ways, firm central control of macroeconomic decisions and wide latitude for market-oriented behavior on the microeconomic level—an attitude strongly reminiscent of the position held by Lenin in the last years of his life, and defended by Bukharin and Bazarov during the Soviet debate of the 1920s. (The enthusiastic rediscovery of this debate, incidentally, has been one of the remarkable features of the Polish and Czechoslovak discussions of the last years.)

An important difference must not be overlooked. To Lenin and to most of his followers (as well as to quite a few early non-Communist Marxists) it seemed axiomatic that centralized planning would become more comprehensive and all-embracing, as socialist society moved to higher levels of economic development. The leading Eastern economists of the late 1950s and the 1960s hold an opposite view. To them overcentralization is a relic of the backward past...


This was what Oskar Lange had in mind when he described Stalinist planning as a war economy sui generis in which a powerful central authority by its commands is able to revamp, much more rapidly than an ordinary market mechanism possibly could, the whole productive pattern of the country in line with drastically changed priorities.  (Lange, Political Economy of Socialism (Warsaw, 1957), pp. 15—16. A Czechoslovak writer put it very succinctly several years later: “The directive model for the operation of the economy.. . is suited to abnormal conditions of economic development, brought about by technical and economic backwardness, by the need to accelerate structural transformations or by a war economy and the priority of national defense considerations.” (Karel Kouba, “The Plan and Economic Growth,” Czechoslovak Economic Papers, VI, (1966), 11.)

...an eminent Soviet economist reproaches Lange for downgrading efficiency considerations in the early stages of planned development: " . . . in the socio-economic nature of the planned economy there is nothing that would contradict, on principle, making use of the positive properties of the market mechanism right from the start,” [F. Shmelev, “Razvivaiushchiesia strany: formirovanie khoziaistvennogo mechanizma,” MEMO, August 1968, no. 8, P. 54-55.


Our tour d’horizon would be seriously incomplete if we were to stop at this point. As indicated at the beginning of this section, the ranking of the planning objectives has changed radically; but in many cases (although surely not in all) these changes reflected a much more basic reorientation. When two Czechoslovak economists writing on the eve of the Soviet invasion declared that “economic growth serves no purpose unless it is reflected in living standards of people,” this did sound novel, but less so than the passage that immediately followed: “At this stage, in connection with the renaissance of Marxist ideas, a belief is beginning to assert itself, that the true sense of development of society cannot be seen only in further increase of consumption. The principal aim must be liquidation of alienation, abolition of exploitation of man by man, and true democratization and humanization of society... Because the focal point of democratization and humanization of society rests in this phase, only such methods of pursuing economic growth (i.e., such forms of economic management and planning) should be chosen, which would not conflict with these aims. (L. Rychetnik and O. Kyn, “Optimal Central Planning in ‘Competitive Solution’,” Czechoslovak Economic Papers, X (1968), p. 31.) The already cited East German economist moved in the same direction when he stated that a “socialist economy can only become more rational if socialist democracy is widened.” (Kohlmey, op. cit., p. 30.)


The Poles, led by Oskar Lange, made a similar point ten years earlier when they raised the possibility of a re-emerging alienation in a socialist society whenever the bureaucracy puts itself in full control, and noted the negative effects of such a situation on economic and moral incentives. (O. Lange, Pisma ekonomiczne i spoleczne Warsaw, 1961, p. 135.)


     The Soviet avant-garde economists did not put it quite so strongly; but they, too, insisted with varying degrees of emphasis that the impending economic reforms meant a step toward democratization. (V. V. Novozhilov, op. cit. (n. 112), pp. 33 and 39.) The Yugoslavs pulled far away from the rest when they extended Engels’ concept of state capitalism to any economy in which the means of production are owned by the state rather than by workers actually operating them, and drew from this the obvious conclusion that the Soviet-type economies were not socialist. (B. Horvat, op. cit. (n. 91), pp. 78—80.)


But for all these and similar varieties there can be no mistake about the overall direction of the trend. It is indeed a renaissance of Marxist ideas about the ultimate interdependence between economic dynamism, consumers’ welfare, efficiency, and freedom—a harmony which has been conspicuously absent in the past but is believed to be attainable at present. ...

Th The wheel seems to have gone full circle. However, the comparison might be extended in a less cheerful direction. Classical Marxism which proclaimed this harmony as the hallmark of the socialist society of the future produced a movement which helped to civilize a wasteful and inequitable economic system without changing its fundamentals. Will the re-emergence of these ideas in the Eastern post-Stalinist environment accomplish more—or much less?





OK Economics was designed and it is maintained by Oldrich Kyn.
To send me a message, please use one of the following addresses:

okyn@bu.edu --- okyn@verizon.net

This website contains the following sections:

General  Economics:


Economic Systems:  


Money and Banking:


Past students:


Czech Republic


Kyn’s Publications


 American education


free hit counters
Nutrisystem Diet Coupons