Economic History of the Soviet Union - Guinevere Liberty Nell

The Soviet Union: An experiment of Marxism

Marx’s Goal – to centralise all instruments of production in the hands of the state

Some people argue that Marxist system would have been much less centralised and more
democratic. NOT power to the state.

Socialists believed that public ownership of property could offer a better solution than private
ownership.

Stages of Central Planning and Marxism in the Soviet Union

- The choice of the planner affects its outcome – eg Stalin taking up a large number of
infrastructural projects

If the theory can explain it all: Was the entire sequence of stages inevitable? Eg war communism,
NEP, Stalin’s rise to power, five year plans and prestroka

How would it look if we implemented Marx today in US economy

Why?

Worst get on top with Power

Priorities: which rights are paramount, not just priorities in a production

Some people still may argue

- Why not looked at a mixed or capitalist economy rather than just communism
- Nobody is advocating full central economic planning on a national scale anymore

Marx’s Labour Theory of Value

- All values come from labour time, not from subjective preferences and scarcity

Property right of Labour

- When some one claims a property right, they are reducing the liberty of others and asserting
to use violence against them (state enforced property rights)
- Labour- extension of yourself
- Labour is seen as the root of the value

Marx answered the criticism by suggesting that labour could produce unwanted goods by defining
‘socially useful labour’

- The value of something was not simply the time it took for an individual to make it BUT the
time it would take an individual with average level of skill and technology

Capital is ‘dead labour’ – capitalist suggest that capital as well as goods produce labour so it would
only be fair if the capital receives a share of the final sum. Every factor of production has to get its
reward.

BUT Marxist suggest that capital ITSELF was created by labour.

Marx’s exploitation theory is rooted in his LTV – workers do not receive the full value of theory labour
because capitalist earn profit rather than only the replacement rate to pay for costs of capital.
 - LTV was also necessary to show that market prices would not be necessary for economic
calculation because the true value of the goods was based on the amount of labour used to
produce the goods

Prices reflect economies of scale and automatation

Price, Wages and Planning

- Extension of production requires capital

- The relative amount of profit should be set by the market -not by planners hoping to even
out wages

Planners often suffer from a shortages of information and the knowledge that they do have is useless
for making those crucial choices.

Should LTV set prices across the economy?

- Prices wont reflect supply and demand and all knowledge about what needs to be produced
is lost; planners are left groping in the dark

Dictatorship of the proletariat

Marx argued that it would be necessary in the transition period between capitalism and communism.
He also suggest that when communism would be realised the state would wither away. What type of
state?

Marx believed that competition was unsustainable in capitalism – it would lead to concentration –
production would fall to fewer and larger firms – the state changes into monopoly.

Corporatism – firms tightly linked with bourgeois state

- Bourgeois state protects capital’s interest and wages war on its behalf.
- Levithan capitalist state described by Trostky, Bukharin and Lenin #

Marxist Utopianism

Bolshevik vision- not production for the market, but production for its own needs. Individual does
not produce for themselves but rather gigantic cooperative produces for all. These products shall not
be exchanged nor bought or sold. Money will no longer be required.

Marx says for a higher society:

- Labour must become joy

- An end to division of labour (goes against Adam Smith)
- Productivity has increased
- There is an all round development of the individual

So market forces STILL need to exist until the final step? No. Marx called people for a revolution
to reach socialism witch the lower phase. ‘ too each full product of its labour’

Transformation

Rational production and working class rule would fulfil Marx’s pereqisites. As it would allow
people to:

- To learn to govern and to develop as individuals

Alienation and the Spiritual Outcome

Marx argued that a man was a social being, but that property alienated men. Common ownership
would allow humans to transcend this alienation. Erase antagonism between individuals (end all
suffering). Man can transcend all the boundires between them.

‘Communism is the riddle of history solved, and it knows itself to be this solution’ Marx

The actual events of the Revolution

- Feb revolt put provisional govt in a difficult position due to not wanting to participate in
World War
- Bolsheviks seemed to be the only party offering peace
- Their slogans such as ‘all power to the soviets’ and ‘peace, land, bread’ became quickly
popular

War Communism

First and honest attempt at Marxist’s communism, which was affected by wars and famine.

PLANNED ECONOMY

- Nationalization of large scale industry was primary – allowed the formation of unions
- The nationalisation continued after hostilities ended
- 1920 – 45% of firms were nationalised and a total of 66% were heavily subsidised.

Money and Banking

- Abolition of the bank and its transformation into a book keeping department
- Abolition of money – isntitued rationing and number of free goods

Austrian predictions about Russian economy

Barbara Wootton – they are operating in the dark

Lessons learned

 Setting the Wages to the level of ordinary workers resulted in the lack of skilled labour and
ability to induce workers in the areas they were needed
 Democracy within state enterprise was impossible – forced to introduce one man
management
 Democracy made it difficult to plan the economy
 Inflation was followed due to money shortage
 Direct restribution and barter direct replaced money exchange
 Inequality can persist without money

Retreating from War Communism and shifting into NEP

-natural resources and larger scale industrial plants in the hands of the dictatorship of the proletariat

- railroad, water system and credit system in the Hands of dictatorship

- Soviets took charge of cities, buildings and agricultural land

-peasants allowed to sell surplus of their own produce in the open market after paying the tax.

The Scissors Crisis

Extreme difference the high prcies of the industrial goods and the low prices of agricultural goods.

Oct 1923- industrial pirces were 290% of their level of 1913, agricultural goods were only 89%.

State firms demanded high prices for industrial goods which farmers needed, whilst they bought
grain for low prices. Thus peasants stopped selling and reverted to subsistence farming.

In response to the Scissors Crisis Bukharin introduced the rationalisation of economy

 Price controls on farm equipment led to a rise in prices and food shortages
 Government introduced retail price controls
 Due to lack control over the prices, govt took out large loans which led to new inflationary
pressures and yet to higher grain prices.

Led to shortages of machinery and manufactured goods ( ppl had less purchasing power) thus
had problems with the supply chain.