The Great Unsolved Mystery of the 20th Century: Why did the Soviet Union collapse?

Despite its devastating impact on global relations between the proletariat and the bourgeoisie within the world market, the sudden collapse of the Soviet Union remains mostly unexplained. A large body of literature has been produced to explain the collapse, but, to my mind, very little of it provides a satisfactory explanation.

So I took up reading this paper, recommended by someone on ask.fm, A Reassessment of the Soviet Industrial Revolution, by Robert C. Allen, without the expectation it would add much to the subject.

I was wrong. I now think it is a must read.

Central planning was not a failure

The writer comes to several conclusions: first, centralized planning works to accelerate the development of the productive forces. Second, emphasis on the development of the means of production led to rapid growth as would be expected. Third, stagnation developed in the 1960s and 1970s because of what Allen calls a failure of imagination at the top of the Soviet planned management apparatus.

Of the last conclusion, the writer argues, the management authorities underestimated the importance of technological advancement.

“The difference was not on the factory floor, for the history of Soviet factory design suggests considerable substitutability between capital and labour. The difference was organizational, but it was not simply a question of plan versus the market. The real issue was the vision of development that lay behind the plan and which emphasized the preservation of existing capacity and a focus on heavy industry and resource development. The USSR behaved ‘as if’ the aggregate production function had little substitutability between capital and labour, but this appearance reflects massive errors in Soviet investment strategy rather than a real difference in technology. It was not purely happenstance that these errors occurred in the 1970s and 1980s, for the end of the surplus labour economy posed new management problems, and the party leadership bungled them.”

The argument here is interesting for the fact the writer appears to assume that the aim of the Soviet mode of production was constant expansion of the national capital. He is assuming, in other words, that the Soviet Union was a massive capital, managed centrally to achieve endless self-expansion.

The Soviet Union ran into three problems: first, reduced investment in new facilities; second, depletion of resources; and, third, significant diversion of productive resources to the military.

Planning can still become a fetter on development

The observation that central planning initially generated a very high level of development of the productive forces only to become a fetter on production in the long run is unsurprising, as this argument was first introduced into the literature by Marx in his Preface to A Contribution to the Critique of Political Economy.

For those who unfamiliar with Marx’s argument there, let me quote his salient point:

“In the social production of their existence, men inevitably enter into definite relations, which are independent of their will, namely relations of production appropriate to a given stage in the development of their material forces of production. The totality of these relations of production constitutes the economic structure of society. … At a certain stage of development, the material productive forces of society come into conflict with the existing relations of production … From forms of development of the productive forces these relations turn into their fetters. Then begins an era of social revolution. The changes in the economic foundation lead sooner or later to the transformation of the whole immense superstructure.”

Allen’s conclusion that top down management initially facilitated the development of the productive forces, only to turn into a fetter on this development at a later point is a least consistent with Marx’s argument — and this should raise eyebrows among those who tend to treat the Soviet mode of production ahistorically.

Certainly, once encountering stagnation the Soviets toyed with alternative approaches to economic management once central planning ran into problems. But they did not exactly cast a fairly wide net when they went looking for new ways to boost growth. By this, I mean they tried to experiment with various elements of markets, but failed to find means to more fully tap the working class in the conscious self-direction of their combined productive activities.

Where planning failed

The writer concludes from the failures of Soviet planning that it initially rapidly developed the productive forces, but ultimately the central authorities began making bad plans. Interestingly, the writer avoid falling into the trap of assuming we only have a choice between centralized plans and markets. Today, the most common approach to the problem of centralized planning among those radicals writing about so-called post-capitalist economies is to imagine our alternatives are limited to either ‘planning’ or ‘markets’ or, if we are really adventurous, to some hybrid form of a ‘planned-market’ or ‘market-driven planning’.

These are said to be the two poles of how an economy can be managed and completely overlook the third alternative: abolish labor and thus the economy altogether.

At no point did the Soviet Union ever seriously set as its aim the complete abolition of human labor in production, although this was well within their capacities. Moreover, Soviet economic theory had already reached the conclusion that hours of labor needed to decline: as early as the 1950s, Stalin himself wrote that the social labor day should be shortened to six hours. Yet, no practical steps were ever taken in this direction.

Had this aim ever become the aim of the central plan, there would not have been the under-investment in new technology the writer points to; nor would there have been the stagnation and “diminishing returns as ‘full employment’ of labor [was] achieved.”

Overaccumulation of capital and planning

The question is why the obvious overaccumulation of capital was preferred by the Soviet authorities over the emancipation of Soviet society from labor? This overaccumulation suggests the Soviet Union created not socialism, but a highly centralized form of capital; but this is a matter of some controversy among Marxist scholars.

However, according to the writer, “The capital stock rose without a corresponding rise in GDP because there was no labour to operate the new capacity.” This rise suggests that surplus accumulation still took place, but was not productive. That there was also a lack of workers to employ the new capital suggests the Soviet Union was permanently situated in a boom phase of expansion owing to its advanced methods of managing production.

Although the rapid expansion of the forces of production may seem like an unalloyed good, it carries with it problems that are peculiar to the Soviet mode of production: namely, no natural mechanism existed for a capitalist crisis, because all productive activity was planned.

That is just fine, right? Well, not entirely.

How capitalist crises work

In the capitalist mode of production, crises are the process by which all the imbalances accumulated in a capitalist boom are resolved and conditions are reestablished for normal operation of the mode of production. This means that without the possibility of crises, the Soviet mode of production had no means save the central plan to reestablish conditions for its normal operation. The central authorities would have had to step in and do consciously, what capital does unconsciously through crises. However, it appears, the Soviet authorities never did what they were required to do.

Think of it this way: In a capitalist crisis, two things occur: first, a portion of the existing capital must stand down and cease to operate as capital. The writer shows the urgency for this when he writes, “What the country needed was a policy to close down old factories”. At the same time, in a normal capitalist crisis, a portion of the existing population of workers are set free from industry — they lose their jobs and are cast back into the industrial reserve.

The crisis produces a mass of superfluous capital and an excess mass of workers. Planning prevented this sort of economic disaster from occurring, but it did not relieve the Soviet planning authorities from essentially accomplishing the same thing through the plan! The older, less productive facilities needed to be shut down in a planned fashion and the social labor day needed to be reduced, to avoid a massive eruption of unemployment as occurred when the Soviet Union collapsed.

Because the Soviet mode of production was planned, adjustments necessary to balance the economy did not have to happen through the devastation and pain of a capitalist crisis, but it still had to happen through the plan. So, why didn’t it happen? Why did the Soviet Union go on just frantically trying to squeeze more surplus from the working class as it plunged headlong into collapse?

Did a military threat exist?

For one thing, I am not buying the argument it could not happen because of the cold war. Assume the SU had reduced hours of labor by half. In the first place, this would have had no effect on its national security, since it had the largest single stockpile of nuclear weapons on the planet. Further, especially after Hitler got what was coming to him, and with the vast industrial heartland of Europe vulnerable to the Soviet military, no one in their right mind was going to seriously consider fucking with the Soviet Union militarily.

In the second place, the reduction of hours of labor by half in the 1970s would have completely changed class relations in the world market. Just think of it: while the capitalist world in the 1970s was rocked by rampant stagflation and crisis, the Soviet Union would have been reducing hours of labor and progressively freeing its population from work! The political effect of that reduction on the world market would have equaled, if not exceeded, the impact of the Soviet Union going through the Great Depression with rapid industrial expansion and zero unemployment. It would have solidified the superiority of the Soviet mode of production in everyone’s mind.

Moreover, had the Soviet Union reduced hours of labor in the 1970s, just as the people of Vietnam were defeating the US militarily on the battlefields of Southeast Asia, it would have completely demoralized the entire capitalist class. The implications of those two events side by side are staggering.

Thus, it becomes all the more inexplicable why the Soviet authorities never reduced hours of labor once three factors are taken into account:

First, they already knew hours of labor had to be reduced eventually. Second, they were running into problems that, because of planned management, could not be resolved without reducing hours of labor. And, third, a reduction would completely shake up the world market and produce a political crisis in the West.

Someone needs to explain why they never reduced hours, because my only conclusion is that these facts suggest the Soviet mode of production was not socialist, but a form of capital.