BACKGROUND

Russia faces the threat of creeping capitalism

A. DAVID LEVY December 15 1962
BACKGROUND

Russia faces the threat of creeping capitalism

A. DAVID LEVY December 15 1962

Russia faces the threat of creeping capitalism

BACKGROUND

FOR YEARS THE SOVIET UNION has been plagued and stimulated by intense internal arguments over everything from Stalinism to co-existence. Now it has a new Great Debate on its hands. This one centres on a word that is still alien to most communists — “profit.”

One crucial issue faces the current meeting of the Soviet Communist Party’s central committee. The committee is asking itself whether “profit” — in something close to the capitalist sense of the word — should become the main yardstick for judging industrial performance, and the key incentive for workers and management in state-owned corporations.

This is the latest manifestation in the Soviet Union of something that western observers have taken to calling “creeping capitalism.” In the recent past there have been two other factors which have indicated that capitalist-style economic life has its appeal for some leading communists:

• Some state-owned enterprises in the Soviet

Union are being organized into so-called “firms” (the Russian word for them) which bring together, under one management, a number of different enterprises. By integrating various operations into one powerful bloc, the “firms” can speak with stronger voices when negotiating with regional bureaucrats on production targets for each year. They enjoy some of the same kind of independence that large corporations have in western countries.

• Advertising is occupying a more and more important place in Soviet economic life. Soviet merchandisers are spending between $30 and $40 million in advertising this year. This is peanuts by western standards, but enough to worry the Ministry of Culture, which has set rigid standards for consumer advertising. Still, housewives across the Soviet Union can now — by reading leaflets and the local papers and listening to radio plugs — consider the merits of such rival products as the Tula and the Rzhev sewing machines.

The new debate over profits started on Sept. 9, when a Kharkov economics professor, Y. G. lieberman, published a long article in Pravda, titled Plan, Profit and Incentive Bonus. As Lieberman was to say later when defending himself against various attacks, the article was a plea “for changing the relationships between enterprises and the national economy in the realm of planning and rating of labor, which means also in the realm of material incentives.”

Now, the “realm of material incentives” is the most promising breeding ground of creeping capitalism. It is a very sensitive realm indeed, and Lieberman has proposed that it be changed radically.

His article suggested that each state enterprise build its incentive bonus fund — the money provided for bonuses to individual workers and managers — out of the over-all profit which the enterprise makes on the state’s investment in it. Workers and managers throughout the Soviet Union would then take part in thousands of individual profit-sharing plans, much like those in western countries. Thus profit would be the main yardstick of achievement, replacing the traditional yardsticks the Soviets have used to judge the performance of their enterprises — quantity output, labor productivity, cost per unit, and many others.

The Lieberman proposal has sharply divided conservative and liberal communists in the Soviet Union. The conservatives want to choke off quickly any tendency toward capitalist ideas. They believe this profit-based system would create independence among the various state enterprises, and they prefer to stick to centralized bureaucratic planning of every industrial detail. The liberals are tired of textbook and slide-rule supervision of industry (“down to the last nail,” as Lieberman puts it). They want the state to get out of the details of each enterprise’s production plans and give individual managements both more incentive and more elbow room.

The articles which appeared in Pravda immediately after Lieberman’s contribution made the whole thing look like one of those staged debates which the Kremlin frequently uses to confirm decisions that have already been made. While appearing to discuss Lieberman’s ideas, they actually ended up supporting him. But in early November, as the central committee meeting drew near, the conservative view began to appear stronger, not only in Pravda but also in official weeklies. The conservatives emphasized that Lieberman’s ideas, instead of cutting the Gordian knot around state enterprises, would cut the lifelines of the central planning system. The liberals, in their defense, emphasized that socialist profit is really very different from capitalist profit, which all agree

is an abomination to be avoided at any cost. They also have emphasized that they don't want to jettison all the other yardsticks of performance; they merely want to let these find their own levels while profit becomes paramount.

So far this has been a surprisingly public debate; few issues which cut so close to essential Marxist theory have ever been discussed so openly. Soviet magazine editors have been introducing the economic articles with statements like “the clash of opinions bears witness to the adult level of our economic science” and “in disputation resides truth.” The extent to which the passions of both sides have been revealed indicates that a form of democracy is also creeping over the Soviet Union.

Certainly the conservative reactions have appeared to be entirely sincere, and even if Liebcrman’s ideas are generally accepted the conservative faction will undoubtedly continue to oppose them. Last July Nikita Khrushchov, in discussing co-existence, compared capitalism to a smelly goat which communists had to learn to live with. What the USSR’s old guard economists appear to believe is that this may involve learning how to smell like the goat as well as bve with it.

A. DAVID LEVY