How labor hours reduction brought about the collapse of the Soviet Union

by Jehu

Pardon my heavy use of direct quotes in this post. I find it necessary to do this because I want to demonstrate in detail my chain of reasoning that leads to the admittedly controversial conclusion that the Soviet Union was not “dismantled”, as certain Marxists allege, but  collapsed owing directly to the operation of the law of value. –Jehu

This is the final part of a series.

Part one is here.

Part two is here.

*****

What led to what Bronson calls “the tacit abandonment of the Soviet commitment to providing for a continually shorter workday and workweek” and ultimately to a fully developed communist society? And how might this tacit abandonment have contributed to the collapse of the Soviet mode of production?

In his essay, “Lessons from the Demise of State Socialism in the Soviet Union and China”, the writer, David M. Kotz argues that the Soviet Union did not in fact collapse. It was dismantled by a group of persons committed to creating a capitalist society in its place:

“As we show in Kotz and Weir (1997, ch. 5), the Soviet planned economy did not collapse. Despite some disruptions from economic reform legislation that took effect in 1988, real output and real aggregate consumption grew continuously from 1985 through the first half of 1990. … The record shows that the Soviet planned economy did not collapse — it was dismantled through political means, as power shifted from Gorbachev to Boris Yeltsin and the pro-capitalist coalition.”

The argument by Kotz rests on the assumption the reforms of 1988 were not themselves an expression of the collapse, but is this true? I want to suggest that the collapse of the Soviet Union began long before the events of 1989-1991. The collapse of the Soviet Union began with the tacit abandonment by the Soviets to continually shorter labor time and a fully developed communist society.

The collapse of the Soviet Union begins, in other words, long before the attempt to reform the economic mechanism; it begins in the 1960s with the decision by the Soviets to forego reduction of hours of labor in favor of maximizing output.

*****

First, I want to challenge David M. Kotz’s timeline on this subject. The crisis appears to begin not in the 1980s as Kotz and Weir (1997) suggests. It actually looks like this according to the CIA:

1958: The Soviet Union embarks on a bold and unprecedented effort to create a communist society within the then foreseeable future:

In November 1958, Khrushchev presented theses on the 1959 to 1965 economic plan to the Central Committee of the Communist Party. He boasted of past economic progress and said that in the coming period–the period of large-scale building of a communist society–the main tasks would be “creation of the material-technical basis of communism; the further strengthening of the economic and defensive might of the USSR; and simultaneously, the fuller satisfaction of the growing material and spiritual requirements of the Soviet people”. (James Noren, CIA’s Analysis of the Soviet Economy, 1998)

1961: According to the CIA, the initial reduction of hours of labor seems to have had a significant and positive impact on the rate of growth:

Reduction of the workweek during 1956-60 has contributed to the solution of several important problems facing the Soviet leadership in recent years, including the need to reestablish control over wages, to improve economic efficiency, and to adjust to a tightening urban labor market. By means of the program, levels of living have been raised (through increased leisure), and the resistance formerly experienced to upward adjustments in work norms has been quieted. Soviet managers have been forced to make beneficial but formerly neglected changes in methods of operation, thereby sharply raising efficiency in the nonagricultural sector with a minimum amount of new investment. Finally, the shorter workweek, together with the higher hourly pay, has helped to relieve the pinch of the tightening urban labor market by providing a particular inducement for housewives and young people to seek employment. (Central Intelligence Agency, An evaluation of the program for reducing the workweek in the USSR, 1961)

1963: According to economists working for the CIA, however, economic growth in the Soviet Union begins to slow, owing initially to a series of unforeseen economic shocks:

A little more than three years after the Dulles testimony, a major CIA paper, Trends in the Soviet Economy (February 1963), recognized the falloff in the rates of growth in industry and agriculture. In particular, agriculture had been hit by a series of poor or indifferent harvests. As a result of an acceleration in defense spending, resources were over-committed and the consumer suffered. In 1962, meat prices were raised by 30 percent, scheduled reductions in personal income taxes were deferred to restrain consumer demand, and housing construction was cut. The paper questioned whether the Soviet leadership would countenance an “inclusive military buildup” for very long, given the “fundamental” long-term Soviet policy of overtaking the United States economically. Furthermore, consumers were becoming more insistent on having “better quality food, decent housing, and more consumer durables.” Finally, Soviet leaders were increasingly aware that the arms and space races were hurting economic growth much more in the USSR than in the United States. (James Noren, CIA’s Analysis of the Soviet Economy, 1998)

I quote extensively from the analysis of the Central Intelligence Agency in order to emphasize the exact sequence of the events leading to what CIA economist, Bronson (1968), calls the, “the tacit abandonment of a long-standing Soviet tenet providing for a continually shorter workday and work-week.”

It is important to note that this tacit abandonment is not a response to the initial reduction of hours of labor, which, according to the CIA’s own analysts, raised the standard of living of Soviet citizens, increased output, forced beneficial changes in methods of production, improved the efficiency of employment of labor and increased participation in the labor force. On the other hand, short-lived shocks like poor harvests are an insufficient cause to explain the forces that ultimately led to the collapse of the SU.

To explain that event, we probably need to link these short-lived shocks to the actual defects in the Soviet model.

*****

As Kotz explains, the Soviet model had contradictory characteristics. Although a form of social production based on public ownership of the means of production, the society was dominated by a relatively small clique of individuals who enjoyed a life-style uncharacteristic of that of the majority of the working class:

The Soviet state was run by a privileged group of officials, who not only received high money incomes but also had substantial perquisites that included special stores stocked with high-quality goods made in special enterprises (and lacking the long lines found in ordinary stores), homes built by special construction enterprises, and so on. Whether or not one can consider this group to be a surplus-appropriating ruling class, they clearly were a privileged ruling group that would have no place in a fully socialist system.

However, no matter how contrary to communist management, this privileged group was essential to the Soviet top down development model:

While socialism requires economic planning, the Soviet system utilized an extremely centralized form of planning, in which the attempt was made to direct, in a very detailed way, the entire Soviet economy from the center in Moscow. This left enterprises with little role to play but that of carrying out orders from above. Within enterprises, the general director was the absolute authority, and work relations were strictly hierarchical. This feature was the only important one that bears a strong resemblance to the relevant capitalist institution, although the substantive power relations were different in certain respects. Soviet workers lacked unions that sought to actively defend their rights, but, as was noted above, full employment gave the workers significant informal bargaining power, both individually and collectively.

Kotz treats the privileged strata basically as little more than a nuisance factor in the Soviet mode of production, but was it just that? Let me suggest the antagonism between the form of management and the so-called “informal bargaining power” of the workers was an explosive combination looking for a trigger. This explosive contradiction found that trigger in the reduction of hours of labor begun in 1958.

*****

In his argument that the working class enjoyed significant informal bargaining power within the Soviet mode of production, Kotz is simply borrowing from Kalecki (1943), who used this idea to explain the resistance of the capitalists to the full employment policies of the fascist state:

“We have considered the political reasons for the opposition to the policy of creating employment by government spending. But even if this opposition were overcome—as it may well be under the pressure of the masses—the maintenance of full employment would cause social and political changes which would give a new impetus to the opposition of the business leaders. Indeed, under a regime of permanent full employment, the ‘sack’ would cease to play its role as a disciplinary measure. The social position of the boss would be undermined, and the self-assurance and class-consciousness of the working class would grow. Strikes for wage increases and improvements in conditions of work would create political tension. It is true that profits would be higher under a regime of full employment than they are on the average under laissez-faire; and even the rise in wage rates resulting from the stronger bargaining power of the workers is less likely to reduce profits than to increase prices, and thus adversely affects only the rentier interests. But ‘discipline in the factories’ and ‘political stability’ are more appreciated than profits by business leaders. Their class instinct tells them that lasting full employment is unsound from their point of view, and that unemployment is an integral part of the ‘normal’ capitalist system.”

You probably can see where I am going with Kalecki’s argument here, right?

Assume that, in place of a policy of full employment as characterizes a post-war fascist economy, we have a centrally planned economy committed to full employment of all resources to maximize what Khrushchev called, “creation of the material-technical basis of communism; the further strengthening of the economic and defensive might of the USSR; and simultaneously, the fuller satisfaction of the growing material and spiritual requirements of the Soviet people”.

This centrally planned economy already has to deal with the political problem of a working class whose bargaining power is significant owing to full employment; in fact it begins with this, which makes even day to day management of an enterprise difficult. Now, Khrushchev was proposing that hours of labor be dramatically reduced to 30 or 35 hours by 1968 and hopefully to 15 or 20 hours by 1980. How does this affect the bargaining power of the working class against the centrally managed plan?

Reduction of hours of labor, i.e., the creation of the material-technical basis of communism, would run headlong into extremely centralized top-down soviet relations of production. Khrushchev (perhaps unknowingly) was proposing that the informal bargaining power of the workers be given a massive shot of steroids; that the mode of production double down on the already significant bargaining power of the working class.

How does the contradiction between the extremely centralized top-down management of the soviet mode of production and this highly enhanced bargaining power of the working class express itself in the face of the sort of short-lived shocks the Soviet mode of production encountered in 1962-63?

*****

In the idealized narrative of most socialists, socialism does not suffer the contradictions of the capitalist mode of production arising from the law of value.

Stalin, at least, did not hold this view.

According to Stalin, so long as labor power was being bought and sold as a commodity, the law of value played a role in the economy:

“In our country, the sphere of operation of the law of value extends, first of all, to commodity circulation, to the ex-change of commodities through purchase and sale, the ex-change, chiefly, of articles of personal consumption. Here, in this sphere, the law of value preserves, within certain limits, of course, the function of a regulator.

But the operation of the law of value is not confined to the sphere of commodity circulation. It also extends to production. True, the law of value has no regulating function in our socialist production, but it nevertheless influences production, and this fact cannot be ignored when directing production. As a matter of fact, consumer goods, which arc needed to compensate the labour power expended in the process of production, are produced and realized in our country as commodities coming under the operation of the law of value. It is precisely here that the law of value exercises its influence on production. In this connection, such things as cost accounting and profitableness, production costs, prices, etc., are of actual importance in our enterprises. Consequently, our enterprises cannot, and must not, function without taking the law of value into account.”

To restate Stalin’s argument in the simplest possible terms, so long as labor power was bought and sold in the Soviet mode of production, the conflict between the soviet state central plan mechanism and the working class was the expression of the law of value. This conflict over the division of the social product arose directly from the continuation of wage slavery within ostensibly socialist relations of production.

*****

If Stalin is correct, when transitory economic shocks like poor or indifferent harvests hit the soviet economy, who would bear the burden of these shocks became a matter of political conflict between the state and the working class. By attempting simultaneous expansion of investment, consumption and the military, on the one hand, and reduced hours of labor, on the other hand, Khrushchev was leaving very little room for maneuver in event of unforeseen economic shocks.

This is important to recognize precisely because production (in the form of the managers of enterprises) and defense (in the form of the military) had seats at the table where decisions on how to respond to unforeseen shocks were being made. Because of the top-down character of the soviet mode of production, the working class had no seat where decisions were taking place, but owing to full employment the working class did still possess significant bargaining power which they could demonstrate both individually and collectively.

How this conflict would work out was likely telegraphed, at least initially, by the decision in 1962 to reduce the consumption of the working class by raising prices and taxes. The Soviet Union was turning its back on the effort to realize the material-technical basis of communism precisely because realization of the material-technical basis of communism, i.e., reduction of hours of labor, threatened the top-down centralized management of the society that had proved so impressive in the earlier phases of development of the productive forces.

*****

In theory at least, in order to maintain its grip on production, the privileged group of officials, who functioned essentially as “a surplus-appropriating ruling class”, had to back off the reduction of hours of labor and ultimately of communism itself, because this effectively implied increasing control over production in the hands of the working class. Further, let me emphasize that this ruling stratum had to go beyond simply maintaining its privileged position in production. To really maintain it grip on production, this stratum had to actually become a ruling class; had to become exploiters of the working class in its own right.

Yeltsin and his crew did not challenge Gorbachev’s reforms. Those reforms were aimed essentially at intensifying the exploitation of the soviet workers. What Yeltsin and his crew did was to carry Gorbachev’s reforms to their ultimate conclusion: the collapse of the Soviet mode of production.