by Will Podmore
Khrushchev
After Stalin died, the government led by the new General Secretary Nikita Khrushchev weakened state control of the economy, instead favouring the Yugoslav model of ‘market socialism’. It extended commodity production and commodity circulation under the slogan of ‘expanding Soviet trade’. In 1957, it created organisations to sell industry’s products. It replaced central directive planning by ‘coordinative’ planning. It cut the numbers of directive norms for the use of materials and labour. This allowed ministries to cut the production of goods which were not profitable in the short term, without regard for the needs of the wider economy. This slowed scientific and technical progress and reduced efficiency.
Khrushchev ended management of branches of industries as wholes and imposed a territorial system which led to localism and blocked the spread of innovations. Khanin pointed out, “This redirection was entirely in the interests of the economic nomenklatura, a considerable part of which wanted a lack of supervision so they could both paint a favourable picture of the situation and enrich themselves.”46 Khrushchev also divided the party into industrial and agricultural wings.
Khrushchev’s scheme to farm previously uncultivated ‘virgin lands’ in central Asia and western Siberia failed, because rainfalls there were unreliable and inadequate and because the methods imposed by government decree turned vast areas into dustbowls. Millions of tons of topsoil were blown away. Climate scientists Nikolai Dronin and Edward Bellinger summed up, “In the mid-1950s, Nikita Khrushchev launched a grandiose plan for the ploughing up of 42 million hectares of the ‘virgin lands’ in Kazakhstan and Western Siberia. The plan turned out to be a fiasco. None of the planned targets were achieved. The ‘virgin lands’ suffered from wind erosion and supported low, unstable, and economically unprofitable (for new grain sovkhoses [state farms]) cereal production.” They observed, “The virgin lands campaign had brought neither the expected increases in grain harvests nor an abundance of fodder for the country.” They noted “a serious deterioration in the living standards of the Soviet people, caused by Khrushchev’s reforms.”47
Khrushchev abolished the Machine Tractor Stations [MTSs], forcing farms to buy machines they could neither use nor maintain, with money they had not got, so they were saddled with debts they could not pay. Selling off the MTSs plunged the rural population into poverty and caused long-term damage to the economy. Stalin had warned that selling the MTSs to the collective farms would ruin the farms.48
Economists have noted that, as Hanson wrote, “the origins of Soviet relative economic decline can be found in the liberalisation of the Soviet social order that followed the death of Stalin in 1953.”49 Joseph Ball argued, “after 1953, the means of production in the Soviet Union were sold at their prices of production, like capitalist commodities. This was in opposition to Stalin’s line. Stalin was clear that the means of production should not be regarded as capitalist commodities. Stalin stated that the means of production should be distributed according to decisions made in the course of economic planning and they should be sold at subsidised prices to facilitate this. Consumer goods, unlike means of production, were sold as commodities in the Soviet Union, prior to 1953, but Stalin understood the importance of this practice being brought to an end as socialism developed. Soviet leaders after Stalin, however, changed this system as they favoured the distribution of the means of production among the various branches of the economy by means of semi-spontaneous market forces. In effect, capitalist profit criteria rather than central planning decisions were to determine the way in which the Soviet economy developed. Rather than struggling to restrict commodity production, the new leaders of the Soviet Union deliberately expanded it to the entire economy. These leaders wanted to create a market socialist system where state owned enterprises would behave just like capitalist enterprises. However, what emerged was a dysfunctional hybrid system, neither effectively planned from the center nor regulated by economic competition. Subsidies for purchasing new means of production had been used to facilitate the planned introduction of innovation up to 1953. Once this system of planning and subsidies was swept away, the incentive to innovate was largely eliminated, as economic competition did not exist to provide an alternative system of incentives. Progressive economic stagnation set in and there was the rapid growth of rent-seeking behaviour (seeking rewards unrelated to effort or quality of work) by enterprise managers and industrial ministries.”50
Khrushchev also criticised Stalin for waging class struggle: “Stalin, on the other hand, used extreme methods and mass repression at a time when the revolution was already victorious, when the Soviet state was strengthened, when the exploiting classes were already liquidated and socialist relations were rooted solidly in all phases of national economy.” But Khrushchev, as First Secretary in Moscow, then later in the Ukraine, had used extreme methods, executing more people than any other First Secretary in the Soviet Union.51 Nor was it true that “socialist relations were rooted solidly in all phases of national economy.” The billionaire oligarchs of the 1990s did not come from nowhere. Khrushchev was wrong to say that there was no danger of capitalism’s return.
Khrushchev’s attack on Stalin led to attacks on Lenin and on Marx. As American historian Mike Davidow pointed out, “the overestimation of the level of socialist development in the USSR led to the underestimation of the role of the working class. If the ‘complete victory of socialism’ had been secured, if the USSR was in the stage of ‘developed socialism’, if antagonistic classes had disappeared, if there already existed an all-people’s state, then it would follow that the need for the working class as the leading class in society is considerably diminished, if not eliminated. … The unacknowledged antagonistic class, existing particularly in the form of the black market forces, played an increasingly active role in the Soviet economy. … They began to exert increasing pressure for ‘legitimate’ expression, in keeping with the powerful world position of capitalism. They were sustained and encouraged by the moral and material support they received from this source. The channels of democratization, glasnost and political pluralism provided these black market forces with their first real political opening and they rushed to make the most of it.”52
American historian Grover Furr concluded, “Khrushchev was not trying to ‘right the ship of communism’. A total trashing of the truth like the ‘Secret Speech’ is incompatible with Marxism, or with idealistic motives of any kind. Nothing positive, democratic, or liberating can be built on a foundation of falsehood. Instead of reviving a communist movement, and Bolshevik Party, that had strayed from its true course through grievous errors, Khrushchev was killing it off. Khrushchev himself is ‘revealed’ not as an honest communist but instead as a political leader seeking personal advantage while hiding behind an official persona of idealism and probity, a type familiar in capitalist countries. Taking into account his murder of Beria and the men executed as ‘Beria’s gang’ in 1953, he seems worse still – a political thug. Khrushchev was guilty in reality of the kinds of crimes he deliberately and falsely accused Stalin of in the ‘Secret Speech’.”53 American historian John Lewis Gaddis agreed, “Khrushchev’s strategy of reforming Marxism-Leninism instead diminished its legitimacy and shattered its unity.”54 Khrushchev’s reforms fuelled counter-revolution.
His policies failed to reinvigorate Soviet industry and agriculture. Similarly, in foreign policy, his impulsive and erratic policies towards Eastern Europe, China, Cuba and the USA weakened the Soviet Union. In 1960, just before talks with the US government on nuclear disarmament, a US spy plane crashed in the Soviet Union. Khrushchev used the incident to wreck the talks, overriding the need for nuclear disarmament. As a result, the USA and the Soviet Union conducted a damaging and costly arms race, building huge numbers of nuclear weapons. In 1960, each had just 10 nuclear warheads; by 1986, they had 9,000.55 All these failures led to Khrushchev’s ouster in 1964.
After Khrushchev
In 1917
, Russia’s industrial production had been just 12 per cent of the USA’s, by 1967, it was 80 per cent. From 1928 to 1975, Soviet GNP grew 4.5 per cent a year, the USA’s by 3.1 per cent. Between 1950 and 1975, Soviet farm output more than doubled - the world’s fastest growth rate both in volume and per head. Soviet farm output was 61 per cent of the USA’s in 1950, 86 per cent by 1973. After Khrushchev was ousted, “There were also some improvements in agricultural practice in the steppe zone of the USSR. The exploitative nature of Khrushchev’s style of farming (Stalin, by contrast, was an advocate of grasslands, as it proved to be a substitute for chemical fertilizer), with its emphasis on grain and corn growing at the expense of soil conservation practices, was rejected. The bitter lessons of the virgin lands proved to the Soviet authorities that grain crops depleted the soil and actually promoted soil erosion, while grassland farming was soil conserving. … the practice of fallow-land crop rotation was re-established. The [Khrushchev] dogma ‘Fallow land is lost land; erosion is a fiction’ proved to be completely false.”56
In 1950-75, real consumption per head grew 3.8 per cent a year; in the USA, 2 per cent. In the 1970s, Soviet living standards and incomes rose dramatically. No society had ever increased the living standards of all its people so quickly. Only about 0.5 per cent of the people were unemployed, and then only for a short time. Between 1975 and 1985, the economy was still growing, if at a slower rate. Production and consumption also grew every year between 1985 and 1989, and faster than between 1980 and 1985.57 In 1987, food production was up 130 per cent since 1980, meat by 135 per cent, dairy products by 131 per cent, fish production 132 per cent and flour 123 per cent. In the same period, the population grew by 6.7 per cent, while the average wage rose by 19 per cent. The food industry was working at full capacity, with guaranteed supplies of the agricultural products and other raw materials needed.
In 1980, the Soviet Union had 37.4 doctors and 125 hospital beds per 10,000 people; the USA had 18.2 and 58.5. The Soviet Union had free education for all, from kindergarten to university; post-secondary students also received their living costs. In the mid-1970s, workers averaged 21.2 days of holiday a year. The Soviet Union ended huge inequalities in wealth, incomes, education and opportunity. In 1983, the highest incomes were just ten times the average worker’s wages; in the USA, they were 115 times. Trade unions could veto firings and recall managers.
But when Leonid Brezhnev was the Soviet Union’s leader (1964-82), the Soviet working class allowed the illegal private sector to grow and this became the base for capitalism’s return. There were hardly any prosecutions of illegal economic activities. Later, Mikhail Gorbachev’s market reforms further strengthened the private sector. His 1987 Law on Individual Labour Activity legalised co-operatives that were really private enterprises. Another law allowed co-operatives to lease industrial property – a way of privatising state assets while keeping the fiction of public ownership. In 1988, these crime-infested fake co-operatives employed a million workers, a year later, five million. By 1991, former or active criminals ran 60 per cent of the co-operatives.58 Even before the counter-revolution, crime levels soared, encouraged by Gorbachev’s reforms.59 As FBI director Jim Moody noted, “the transition to capitalism provided new opportunities quickly exploited by criminal organizations.”60
Chapter 7
Eastern Europe from 1945 to 1989
Rebuilding
The working classes of Eastern Europe’s countries faced huge difficulties in 1945. They had to rebuild their countries after having been exploited for centuries by the empires to their east and west, then wrecked by the battles of the First World War, then oppressed by home-grown fascist regimes in the 1920s and 1930s, and finally ruined again by Hitler’s genocidal war.
Before World War Two, they had been semi-colonies, serving the needs of foreign capital. In Hungary, foreign capital owned 30 per cent of the banks. In Romania, it owned 90 per cent of the oil industry. In Bulgaria, it owned 50 per cent of the chemical industry, 30 per cent of the textile industry, almost all the sugar and flour-milling industry, and 75 per cent of the power industry. Products, largely raw materials, left the countries, as did profits, and the ruling classes put no money back in to develop their economies. During the Second World War, the British government had supported Eastern Europe’s émigré governments in London, whose failures had led to fascism.
After the war, the US government and Western Europe’s powers wanted to keep Eastern Europe backward, as a source of cheap food and cheap labour, so they tried to restore the prewar governments. They wanted Eastern Europe’s countries to adopt an ‘open door’ policy, allowing the free movement of capital, goods and labour. But, as Molotov warned, “It is surely not so difficult to understand that if American capital were given a free hand in the small states ruined and enfeebled by the war, as the advocates of the principle of ‘equal opportunity’ desire, American capital would buy up the local industries, appropriate the more attractive Romanian, Yugoslav and all other enterprises and would become the masters in these small states. Given such a situation, we would probably live to see the day when in your own country, on switching on the radio, you would be hearing not so much your own language as one American gramophone record after another or some piece or other of British propaganda.”1
Instead, the Soviet victory in the war shifted the balance of power, allowing Eastern Europe’s countries to progress. But when these countries sought to develop in their own interests, the capitalist states tried to stop them. In 1946, the US government cut off all aid and loans.2 In 1948, it forbade all countries signed up to the Marshall Plan to buy Eastern European goods. In 1950, it hardened this blockade by setting up the Co-ordinating Committee for Multilateral Trade Controls (COCOM).
Eastern Europe’s old pro-capitalist parties were all compromised by their collaboration with the Nazi occupiers and they had no programmes for rebuilding these shattered countries. So there was great popular support for socialism.
In Czechoslovakia’s May 1946 elections, the Communist Party won 38 percent of the votes, the most of any party, and their leader, Klement Gottwald, became prime minister of a coalition government with the Socialists. But, as Suny explained, “in February 1948 the National Socialists, suspicious that the Communists were preparing a coup d’état, tried to bring down the government and force new elections by resigning. Mass meetings were held in the Old Town Square, where crowds cheered Gottwald, who accused the departing ministers of having formed a ‘reactionary bloc’ to obstruct further reforms. Given the popularity of the Communists and the growing dependence of Czechoslovakia on Soviet aid and good will, [President] Beneš had little choice but to agree to appoint a new coalition government that was more firmly in Communist hands. These events, which were soon characterized as ‘the Czech coup’, in fact were legal and constitutional.”3 British historians Geoffrey Swain and Nigel Swain agreed that “the constitution had not been violated.”4
In Hungary’s 1947 elections, the Communist Party won most seats. With its allies, it won 45 per cent of the vote; the Smallholders party won 15 per cent. In response, the USA’s Central Intelligence Agency (CIA) recruited Smallholder MPs.5 The US and British governments criticised these elections, ignoring the fact that their fascist allies Spain and Portugal held no elections at all.
In eastern Germany, the Soviet Military Administration (SVAG) achieved ‘remarkable’ ‘successes in reconstructing the zone’, especially in setting up a food rationing system that was far better than the British occupiers’ system.6 In the most recent study, Filip Slaveski commented, “SVAG’s Herculean efforts to feed the German population so soon after German occupation forces starved millions of Soviet citizens to death remains an enduring testimony to the intelligence and humanity of its officers.”7
But, as American historian Anne Applebaum pointed out, “the proximity of West Germany and the relative openness of Berlin in the 1940s and 1950s meant that the new East German state real
ly was surrounded, and infiltrated, by large numbers of Westerners.”8 The Woodrow Wilson International Center for Scholars, of Washington, DC, agreed, “The open border in Berlin exposed the GDR to massive espionage and subversion and … its closure gave the Communist state greater security.”9
Indeed, the US and British governments did all they could to disrupt Eastern Europe’s countries. Britain’s MI6 conducted sabotage and subversion, including an attempt to overthrow Albania’s socialist government in 1948-49.10 The US government organised ‘Project X’, of which US News and World Report wrote, “strong-arm squads would be formed under American guidance. Assassination of key Communists would be encouraged. American agents, parachuted into Eastern Europe … would be used to co-ordinate anti-Communist action.”11 A US committee advised by the Joint Chiefs of Staff recommended, “we must counter-attack by political warfare activities directed against the USSR itself and against the Soviet satellites of Eastern Europe with the objective of increasing the discontent, tension and divisions known to exist in the Soviet orbit ... In addition, such activities are designed to form the political bases and operational nuclei for resistance groups which, we hope, would weaken the Soviet regime in case of armed conflict.”12
As Newsweek pointed out, “Observers on both sides of the Iron Curtain are fully aware that Russia is not suffering from ‘spy hysteria’ in declaring that the United States has undercover agents working inside the Curtain. The United States, like most other powers, of course, has such intelligence and psychological warfare groups at work. The ‘spy hysteria’ charge had to be made for the record and for the benefit of the neutral nations.”13