How the argument of one economist helped kill the Soviet Union

by Jehu

(Continued from part one)

Obviously the Soviet Union never made it to a fully communist society, but what is unclear is why the SU failed to achieve its goal and why it subsequently collapsed. Moishe Postone has suggested that the collapse of the Soviet Union has to be seen in the context of the global failure of the workers movement after 1970 or so. This makes sense, but it is only a suggestion, not an explanation. It suggests that the same forces leading to neoliberalism in the West were at work within the Soviet Union as well, although perhaps in a different form.

What we know are the historical facts: first, Khrushchev was replaced by Brezhnev and the goal of communism by 1980 seems to have disappeared from the literature sometime after this. Second, between 1961, when the CIA wrote its report, and 1968, when the SU was scheduled to have reduced hours of labor to 30-35 hours per week, no further substantial reduction of hours of labor took place. A number of targets for labor hour reduction were proposed, but between 1961 and 1989 it appears working hours in the Soviet Union remained more or less at 40 hours. The work week was reduced from 6 days to 5 days, but the working day was increased from 7 to 8.5 hours. This change in the pattern of labor hours seems to reflect a desire on the part of the Soviets to maximize output, not to reduce overall hours of labor for the working class.

The story of how this change may have led to the collapse of the Soviet Union likely has never been told until now.

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Part Two

In 1989, before a meeting of the United Nations Conference on Trade and Development Abel G. Aganbegyan, an important economic adviser to Gorbachev and one of the architects of Perestroika spoke on efforts to reform the Soviet economy. The economic and political situation in the Soviet Union was dire, within months the SU would disappear forever. The gravity of the situation was fully evident in the speech Aganbegyan delivered that night:

“We must sadly recognize that the standard of living of our people does not correspond to the position of our country in the world, its industrial might, the level of development of its science and technology, and the generally high level of education of its population. Our people are living worse than they could be. The last 15 to 20 years before perestroika, the years of stagnation, were particularly unfavourable. During that period, more than half of the gross national product went into capital investment – which is excessive for our country – investment used for bringing into production more and more resources, for greater and greater expansion of production. In addition, there were large military inputs. On the other hand, only a small part of the gross national product went for consumption by the population, particularly personal consumption.”

In just thirty short years, the Soviet Union had gone from imagining a fully developed communist society to lying on its death-bed. How had things taken such a dire turn for the Soviet people? To hear Abel G. Aganbegyan tell it, the dire situation was the result of two decades of over-investment in the capital sector of the economy:

“In the past, our economy was developed primarily by extensive means, through the application of additional production resources, and attention was mostly directed towards the dimension of production, towards expanding the sphere of production, whereas now we want to turn to intensive methods and develop by improving efficiency and quality, making the technological revolution the key source of development. Our standard of living will ultimately depend on how well we can increase the effectiveness and productivity of labour.”

Aganbegyan’s description of the problems of the Soviet economy sounds very similar to the problems CIA analysts predicted the SU would face as it continued to reduce hours of labor. In the first and second period of the reduction of hours of labor, the CIA analysts wrote, the Soviet economy had exploited the low hanging fruit in the form of labor reserves that could be mobilized — excess workers hoarded in the enterprises and women and youth who were not as yet entering the labor force.

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In the third period, however, analysts predicted the Soviets could no longer rely on its labor reserves to maintain or increase planned output targets. To maintain the pace of expansion of production while reducing hours of labor, the Soviets would have to increase the employment of improved machines in place of living labor:

“Although the increased leisure obtained by the Soviet worker-consumer during 1956-60 may have been “free” or “low-cost” in terms of foregone potential output, this result appears to have been a unique one, occasioned by the existence of substantial “internal reserves” in many Soviet enterprises and by the short-run difficulties (costs) of converting these reserves into increased physical output. The cost of further reductions in hours during 1964-68, in terms of foregone output, probably will be much higher and could represent either the costs of fulfilling a long-term Communist goal or, alternatively, the costs of maintaining a planned “mix” of physical output in which consumption goods are accorded a relatively low priority. The further reduction in hours without a consequent reduction in real weekly earnings, therefore, may depend heavily on the successful introduction of new technology and on the ability of the Soviet planning-management system to install new equipment and to use the new techniques efficiently.”

This is consistent with Marx’s prediction in Capital, volume one, chapter 15 that at a certain point squeezing more output from the labor force required introduction of new technologies. Reducing of hours of labor from 41 hours in 1961 to 30 or 35 hours in 1968 called for accelerating the development of the productive forces: speeding up automation; and substituting living labor with machines in the production of commodities. To sustain the pace of labor hours reduction as the 1961 schedule called for, the Soviet economic mechanism would have to actually accelerate, not decrease, capital investment.

According to Aganbegyan, much of the disaster that threatened the very existence of the Soviet Union resulted from a planned economy that emphasized constant expansion of means of production at the expense of social consumption. What Aganbegyan failed to note in his lecture that night was the role he had personally played in forcing the Soviet Union’s development in that direction.

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In 1960, the Soviets embarked on a plan that if successful would have reduced hours of labor from 41 hours a week to 30-35 hours a week by 1968, even as the minimum wage would be more than doubled from 250 rubles to 600 rubles. Soviet leaders like Khrushchev openly spoke of a work day of no more than 3-4 hours by 1980 — more than five decades ahead of Keynes prediction of a three hours day by 2030.

What Aganbegyan neglected to tell his audience listening to his lecture is that he had personally authored an important economic paper that helped to justify breaking this commitment to free time in favor of an economic program that committed the Soviet economy to maximizing output, rather than communism. The disaster of which Dr. Aganbegyan spoke that night was one to which he had helped contribute and for which he prescribed more of the same medicine:

“Our standard of living will ultimately depend on how well we can increase the effectiveness and productivity of labour.”

Fortunately, Aganbegyan’s role in the disaster that ultimately led to the collapse of the Soviet Union is detailed and preserved in a paper by David W. Bronson written in 1968, “Soviet Experience with Shortening the Workweek”. In that paper, Bronson returns to the original subject of the CIA analysis of 1961, reduction of hours of labor in the Soviet Union and the idea floated by Khrushchev that communism could be realized by 1980.

The paper found that efforts to reduce hours of labor had faltered and halted completely after 1961. Some effort had been made to reduce the number of days worked per week from six to five, but this change was accomplished without a reduction of hours of labor. In place of a 6 day, 41 hours work week, the SU moved to a 5 day, 8 hours work week — leaving total hours almost unchanged. Bronson perceptively pointed out that this change reflected “the tacit abandonment of a long-standing Soviet tenet providing for a continually shorter workday and workweek.”

While the Soviet Union never actually admitted that reducing hours of labor was no longer the aim of its development plan, this fundamental change in course had in fact occurred.

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According to Bronson (1968), the rationale for moving to a five days work week without changing total number of hours was simply that the sixth day of labor was generally of lower quality in terms of output:

“Lower productivity with the 6-day workweek was caused, in part, by a 15 to 20 percent loss in working time due to machine stoppages, worker absence, etc. The new schedule, which reportedly has reduced these losses by half, attacks the problem by reducing the number of work periods when lost time is the greatest—start-up and shut-down, Saturday and night shifts.

“The first and last hours of the workday tend to be the least productive, according to the Soviets. At one machine shop in the Urals, for example, more than 40 percent of all lost time during the normal 7-hour shift occurred during the start-up and shut-down period. Some workers arrived late, others left early, machines needed supplies, some time was required for the production process to reach full speed, and during the last hour some workers kept one eye on the clock. Under the new schedule, start-up and shut-down time is reduced by 1/6 (through the reduction from 6 to 5 workdays per week) without affecting total work time.”

The Soviets planners found that Saturday and night shifts contributed to a number of labor problems, including absenteeism, fatigue, work slowdowns or stoppages, scheduling problems related to certain prohibitions on when women and youth could work, waste owing to machine idle time, and worker preferences for more consecutive days off. Economists concluded that if total hours of labor were held approximately constant (40 hours over 5 days, as opposed to 41 hours over 6 days), more labor could be squeezed out of the worker during the fewer days of work.

However, framed this way, the aim of labor time reduction was also being subtly redefined: no more was the SU aiming for the shortest labor hours in the world; instead, labor hours reduction was being considered primarily from the view of raising output and labor productivity. Thus, according to Bronson fewer days of work per week was not aimed at freeing the workers from labor, but increasing their productivity:

“Khrushchev’s Seven-Year Plan specified that an additional hour would be cut from the workweek in 1962. The Plan also stated that the shift to a 35-hour workweek would be achieved “in the coming 10 years,” and that the workweek would be reduced even further during the following decade. In spite of these promises, no reductions in scheduled work time have occurred since 1960. Instead of putting their emphasis on shortening hours of work, Soviet economists, in the early 1960’s, directed their writings more to the optimal length of the workday and the optimal scheduling of work time.”

According to the original schedule of labor hours reduction the work week should have been 5-10 hours shorter by 1968 than it actually was. Instead, planners busied themselves trying to establish the “optimum” length of the working day, which, not surprising, was pretty much the same as the actual hours. The soviet economists came up with a number of spurious theories for why an 8 hours, 5 days work week was the optimal duration for production.

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Abel G. Aganbegyan wrote a paper in which he argued the 8 hours, five day work week was the ideal schedule to maximize output:

“Professor Abel G. Aganbegyan, one of the new generation of Soviet economists, makes an argument for the optimality of an 8-hour workday solely on the grounds of its productivity and welfare advantages. He argues that the additional output obtained by working more than 8 hours per day is very small, while the reduction in output in workdays of 6 or 7 hours in length is quite substantial. Thus, curtailment in the length of the workday will inevitably involve sacrificing real income for increased leisure. In 1966, another Soviet economist stated that at the current level it is hardly expedient to seek a shortening of the workday.. .in the future the normal workday will be 6-8 hours and shortening of work time probably will come in the form of more holidays and longer vacations.”

A general and subtle shift in emphasis had occurred in how hours of labor were assessed by Soviet planners:

“Soviet economists became concerned with the costliness in terms of foregone output of further reductions in work time per man. Undoubtedly, this concern was reflected in the leader-ship decision to shelve the scheduled reduction in work time and to abandon, at least temporarily, the goal of instituting the world’s shortest workday. The economists’ concern with output was also reflected in the effort to choose a schedule which would maximize output for a given length of the workweek. This effort is based on Soviet analysis of experiments with the 5-day workweek which have been underway for ten years.”

Labor hours were being chosen not in order to maximize the free time of the social producers and as a path to a fully communist society as had been argued at least previously, but in order to maximize the production of a surplus product over the needs of the producers.

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If Bronson is correct in his 1968 assessment that this was “the tacit abandonment of a long-standing Soviet tenet providing for a continually shorter workday and workweek”, its abandonment may just explain why the Soviet Union collapsed two decades later.

I will turn to this idea in the last part of this series.