From: cher@ksr.com (Mike Cherepov)
Newsgroups: ne.politics
Subject: Re: State Socialism
Date: 27 Dec 92 15:52:31 EST
Organization: Kendall Square Research Corp.

In response to Mr. Yodaiken:

I seem to have failed yet again to get across the difference between
saying that Soviet economic growth was meager compared to the West's
(my claim), and that growth was nonexistent (what you would
have me claim).  The current order-of-magnitude difference in GNP
per person between Russia and OECD countries about nails it.
You also labor under the delusion that I offered some fulsome
endorsement of the Romanovs, whereas the best I could say about
the Romanovs was that they looked OK compared to the monstrosity
which replaced them.

As for the main proof of Soviet economic success, I am not at all
impressed with Nove's figures, and even less with his conclusions.
Pre-Gorbachev Soviet stats have to be treated with great doubt.  The
CIA claimed as late as mid-80s that Soviet GNP per person was nearly
$10k, whereas now it now looks at best like one tenth that (here is
another stick for you to beat CIA with).  The Russian national stats
for Sep 92 show the GNP of 15 trillion roubles; at the September
exchange rate that works out to about $600 per person per annum.  The
economy contracted about 40% since 1989, which gives us $1000 per
person per year at the peak.  The US is in mid-$20K.

Crude as this measure is, it leaves no doubt Nove's conclusion that
Soviet economic growth was in the same league as Japan's through 1982
is absolutely indefensible in light of the new information.  Amalrik's
"Will the USSR Survive Until 1984?" was more perceptive.  More on this
below.

> As with many of your arguments, the logic in this claim is elusive. You
> began by asserting that Soviet communism was unable to "create wealth".
> Is it your contention that the economic collapse of the  post-communist
> xUSSR supports your claim? If so, how?

Here is how the economic collapse supports my claim about the
inadequacy of the Communist economy: note that the plummeting
rouble failed to cause any surge in Russian exports (a more
favorable exchange rate should, you know)  The reason is that a
large portion of Comecon industry is uncompetitive at any exchange
rate, and a sizeable segment of enterprises are value-subtractors,
ie, the value of their products is less than the energy and raw
materials that go into their making.  One study put these two
categories at 35% and 8%, respectively for Russia.  The value of
raw materials that went into Russian economy is almost twice the
GNP, which suggest value-subtraction on grand scale, however flawed
the stats are.  Anecdotal evidence also abounds: from Karl Zeiss,
Jena, a showpiece of East German economy (itself a star pupil of
Comecon) which turned out to be uncompetitive, to a Russian manager
visiting a trade show in the US who admitted to a relative of mine
that he had no hope of selling his wares in the free market.
Outside of raw materials, I can think of precious few categories
of Russian exports: weapons, vodka, arts and crafts, pro athletes,
and academic types come to mind.  That human capital can be exported
testifies to its competitiveness (so your point about literacy, human
capital, etc is plausible) but does the exporting economy little good
(remittances, perhaps).  

Oh, I like the cute phrasing "post-communist collapse" which pushes
the blame away from the guilty.  The stagnation set in at least in
the early eighties, while the collapse was evident with Gorbachev
still in place and contributed to his downfall.

> [ stats on machine tools, etc ]

It is useless to quote Nove's figures on the prodigious increase
in the production of machine tools.  TVs went from nil to tens of
millions - what else would one expect in half-century?  Odd you
did not quote the favorite communist statistic - steel production.
It is almost double the US's (but enormously wasteful).  And raw
stats do not translate into well-being of population.  Per unit of
GDP Russia's economy uses 15 times as much steel, 9 times as much
rubber, and 6 times as much energy as the US.  One curious stat
was that an average Soviet was less likely to own a car than a
black South African.

It is more interesting that per-person grain production in 1913
(~0.7 metric tons) was higher than in some years during the 1970s.
That, before one considers that the Soviet crop figures were probably
inflated and that the waste in the chain to the consumer was legendary,
certainly overstating the well-being of the consumer.  That, after
gigantic efforts and investment under Khrushchev and Brezhnev to
achieve agricultural self-sufficiency.  The result was that the USSR
was dependent on grain imports, paid for by raw material exports.
Russia's mineral and energy wealth is enormous.  The country should
be rich.  Then again, by late 1917 Russia's choice was not between
the Romanovs and Bolsheviks, but between Bolsheviks and Provisional
Government.  As Churchill said: the Russian ship has sunk within
the view of the harbor.

> Nove and other reputable historians stress the uneven and unstable nature of
> pre-soviet russian economic growth --- noting for example that the policies
> of Witte in protecting Russian industry impoverished peasants.

On the other hand, the Stolypin reforms were a partial success, creating
a few million small land owners.  They later made NEP a success (recall
Bukharin's slogan "prosper!") and paid for this with their lives under
Stalin.  One epithetical correction from me: a check with a dictionary
convinced me that "burgeoning" was too strong a word in describing the
pre-WW1 Russian capitalism, "fledgling" seems more appropriate.

>                                                       ... I contend that if
> you managed to look at economic history as on object of study and not as raw
> material for your ideology, you might find that the alliance of the state
> against the peasantry and for industry is a common feature of all
> industrializations.

If the state is anti-peasant, how do we explain farmer subsidies
introduced by FDR and the subsidies to small farmers by the French
and the Japanese?  You might be right here, I don't want to open another
can of worms, I am just puzzled that this bold generalization comes from
somebody who opposes calling communist economic model laggardly as too
broad a claim.

> As I do not share your faith in some all explaining dogma, the vast
> complexity of human history does confuse me. How comforting it must be to
> imagine that one owns a simple key which can reduce all the intricacy of
> human cultural and economic history to a straightforward conflict of good
> and evil.

Well, the Communist economic model has failed everywhere it had been
tried.  The differences between South and North Koreas or West and East
Germanies are quite stark.  No all-explaining dogma, simple key, or
battle between good and evil here, just a specific empirical observation:
free-market economies vastly outperformed the communist kind.  I think of
them as of a better kind of mousetrap for now.  Cheers.

	Mike Cherepov
		done with the homework, free to play tennis