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A case for economic convergence
RICHARD
ROCKINGHAM
GILL
A Case for Economic Convergence N Moscow, a new word has been added to an already abunIis freely dant vocabulary of official abuse. It is Konvergent, and it used to describe men such as Gruchy,’ Buckingham,’ Tinbergen,’ Aron,* Sorokin,6 Galbraith,” and even John Strachey.? No one really knows where it all began, but perhaps it was with James Bumham’s book The MunugeriuZ Revolution. Coexistence between the Soviet and the Western systems has now gone on so long, and the study of each by the opposing economists has been so intensive, that inevitably ideas from the once self-contained structures have begun to be “fed back” to the other side to their mutual benefit. This is what convergence is all about; it is a dynamic process of change in which both economic systems are moving with the glacial slowness of a melting iceberg toward a common middle ground. The strong case for convergence is the belief that new and rational methods of economic planning must eventually replace both the “free market” (which Galbraith has shown to be neither genuinely free nor genuinely a market) and the arbitrary and primitive communist system of allocations. Here the evidence in support is already overwhelming. No fewer than eight govemments in northern and western Europe and four countries in southern Europe already have general economic plans for periods ranging between four and seven years; they are Belgium, France, Ireland, Italy, Netherlands, Norway, Sweden, U.K., Greece, Portugal, Spain, and Turkey. 1Allan G. Gruchy, Comparative Economic Systems (Boston, 1966). *Walter S. Buckingham, Theoretical Economic Systems (New York, 1958). 3Jan Tinbergen, “Do Communist and Free Economies Show a Converging Pattern?,” Soviet Studies, April 1961. ‘Raymond Aron, 18 Lessons on the Industrial Society (Paris, 1962). 5Pitirim A. Sorokin, The Basic Trends of Our Times (New Haven, 1964). 6J. K. Galbraith, The New Industrial State (Boston, 1967). 7J. Strachey, On the Prevention of War (London, 1962). 34
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At the same time the problems facing the centrally planned economies, particularly in Yugoslavia, Hungary and Czechoslovakia, increasingly demand the use of indirect methods of guidance such as those employed in the West. Of course, convergence does not imply the inevitability of permanent coexistence; it may be interrupted for irrational reasons at any tune. But coexistence does contribute to, and is partly concerned with, the rise of convergence, despite the protests from Moscow that this is not the case.8 The Kremlin finds convergence to be one prong of a dangerous trident, the other two being “bridge-building” in politics and “peaceful coexistence” in ideology. Moreover, it distinguishes between two types of convergence, one of which is economic (the less subversive of the two), the other sociological (Aron and Sorokin being the main exponents of this variety). The economic arguments in support of convergence rest largely on the impact of technological progress and the rise of the new industrial society. Eight or ten years ago, the convergence theory tended to be applied mainly to the U.S.A. and the U.S.S.R. Today economic convergence applies at least as much to Western Europe and the U.S.S.R. as to the U.S.A., because, owing to the expansive development of nationalized industries west of the Elbe, the economies of Western Europe and the Soviet Union resemble each other more closely than the economies of the Soviet Union and the United States. A recent example of this was the British government’s nationalization of the entire steel industry, making it a permanent burden on the taxpayer instead of the shareholder. The method was not the same as that of Lenin in 1917, but the economic effect is similar. Moreover, the swing toward a more consumer-oriented society in the U.S.S.R., which was initiated under Khrushchev and has been developed by Brezhnev and Kosygin to a point where the U.S.S.R. now turns out annually as many consumer durables per 8Voprosy Ekonomiki, No. 2, 1968, “The Theory of Convergence and Reality” by V. Cheprakov. Mirovaya Ekonomika i Mezhdunarodnaya Otnosheniya, No. 1, 1968, “The Theory of Convergence of the Two Economic Systems” by E. Bregel. 35
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capita as most West European nations, has made the old-style command economy unworkable. Gosplan found out long ago that it was unable to direct the entire Soviet economy from Moscow, and ever since 1966 the primary successindicator for Soviet managers has been the volume of output sold. That last little word puts them squarely in the hands of their consumers, and Gosplan is slowly having to develop a large-scale market research organization in order to discover what the consumer wants. In the extremely large consumer and light-industry sectors their problems are slowly becoming more like those of Marks and Spencer than those of Karl Marx. Market socialism is thus on the march even in the U.S.S.R. In Yugoslavia it is already f?rmly established, and it looks as though Czechoslovakia was lurching unsteadily toward it, at least until August 1968. When a Soviet economist is confronted by these trends, his stock reaction is that, even granted the similarity in technology (a Fiat works in Togliatti is not so merent from one in Turin) and the similar structure of production, “socialist” production relations are fundamentally dXerent from those obtaining in the nonsocialist countries. “Social ownership of the means of production is the antipode of private ownership; socialist labor for oneself and for society is the opposite of hired labor for exploiters; production in the name of the ever-growing satisfaction of the needs of the members of society is the opposite of production for the sake of profit,” etc.O This type of Soviet thinking, when closely examined, seems to be essentially rhetorical. The major difference between social ownership of the means of production and private ownership is that the former is usually less efficient. But in any case J. K. Galbraith has shown that private ownership is a misleading and inaccurate description. What we have in the West are vast corporations over which the original private owners and almost all the existing shareholders have substantially lost control and which WQuoted from E. Bregel (see footnote 8).
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are now being run by small groups of managers with a much greater interest in the expansion of their empire than in the cre ation of profit for the shareholders. As for the idea that working for oneself and society is different from being hired by an “exploiter,” one must ask what a floor hand at, say, the Skoda works might feel about it. For twenty years he was told that he was working for “society” tist and only secondarily for himself (the earlier, purer form of the modem Soviet version), and now he discovers that the recent managers of his society, such as Novotny, Hendrych and Koucky, represented no one and were exploiters to boot. The real difference is that the exploiters in the West tend to pay better, because they must compete in the labor market, whereas “society” in the East has usually chosen to fix its own wage rates at dismally low levels. Moreover, since in the mixed economies of Westem Europe taxes take about half of private industry’s profits, the Western worker in fact spends half his week working for the government, i.e., society, and only half his week working for his direct employer. Decentralization
Soviet political economists display special alarm about one aspect of the convergence theory, which is that nationalization in the West and decentralization in the East are leading to a notably similar pattern. In the East some important economic functions are being transferred from the state to individual firms, and in some cases even the dogma of the state’s monopoly of foreign trade has already been abandoned for the benefit of the larger and more efficient communist enterprises. Moscow does not deny that in the West the state is playing an increasing part in regulating the economy. The method is said to have been discovered by Lenin, and it is the Western interpretation of it which is said to be fallacious. When a “bourgeois” state intervenes, it does so on behalf of the “monopolist bourgeoisie,” we are told, whereas a socialist state only intervenes on behalf of the masses. Once again, Czechoslovakia is the living refutation of this theory. The volume of its exports to the West 37
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actually fell in 1967, because the country “has been unable to keep pace with the world standard in progressive products.““’ A cynic might well say that this is the result of intervening “on behalf of the masses,” but the fact is that the Czechoslovak party leadership and government had to fall before the country’s economic policy could even begin to be corrected. It is now being forcibly driven some of the way back on to the old line which was such a dismal failure under Novotny. Moscow’s spokesmen refuse to see any evidence of “socialization” in the increasing use of economic levers by capitalist states. They argue that the state regulation of the economy in the West in no way alters the “exploitative” essenceof capitalism, but they never pause to ask why, in that case, the West European worker has a standard of living so much higher than his Eastern counterpart. They also point out that, even though Western states increasingly interfere with their economies, this by no means implies guidance of the whole economy. But neither do communist states, in practice, direct the entire economy. Modern economic management is, or should be, mainly concerned with investment decisions, and in the U.S.S.R. itself (not to speak of Yugoslavia) decentralized decisions in 1967 accounted for about 28 percent of total investments.” These decisions, while subject to the approval of the administrative authorities, are not taken by them. In Britain, the share of decentralized decisions in total investment is now probably less than 50 percent, so the difference is no longer remarkably large. One must also note the increasing role of profit in the communist economies since Libermanism ceased to be a theory and became an operative way of life in early 1966. By 1967 profits in the U.S.S.R. accounted for well over half the country’s total “net income” available for investment and budgetary spending.” Wmena, 20 October 1967, article by Jan Rehak. “Progressive products” refers to items such as plastics, electronics, computers, etc. “Economic Survey of Europe in 1967, U.N. (Geneva, 1968), chapter 11, p. 60 (prepublication text). l*Zbid., p. 61. 38
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Hence the Soviet worker spends at least half his time working for “socialist” profit, and there is no evidence to show that he gets a fairer share of the resultant “cake” than his Western equivalent. Indeed the reverse is true, largely because Soviet trade unions are in reality organs of the party and state. Yet, even here, events in Yugoslavia, where strikes (called “work stoppages”) now abound, and in Czechoslovakia during the post-Novotny era, show that some convergence in union attitudes is at last beginning. This change in the thinking of the Czechoslovak trade unions should not be affected by the Soviet occupation, even though their declared policies may be forced back into a less reformist channel. Moscow’s theorists now admit openly that state intervention in the Western economies since the war has succeeded in alleviating cyclical fluctuations of the old boom-slump variety. As a bow to the rise of Keynesian economics, that is fair enough, but what they do not admit (although their Czechoslovak counterparts do) is that cyclical swings have also affected certain communist countries in recent years, the two major examples being Yugoslavia and Czechoslovakia.‘” J. K. Galbraith has argued that the present wave of decentralization in the U.S.S.R., which arises out of the 1965 economic reforms, is another aspect of convergence in that power is being transferred from the state to the enterprise. Moscow concedes that there has been a transfer of certain functions from the central agencies to the local management, but argues that because all firms are state-owned, what is happening is merely a change within the state sector, not a weakening of it. Yet whether one calls it a change or a weakening, the fact remains that the removal of certain economic powers from Moscow brings the planned economy at least one step nearer to the mixed economies of Western Europe. Moreover, this decentralization of economic power is indirectly but unmistakably transferring some extra political weight to the Soviet managers. As Czechoslovakia has dramatically demTke
Flek.
PIanovane
Hospodarstvi,
No.
9,
1967, article by J. Goldmann
and J. 39
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o&rated, the economic reforms cannot be fully effective without concomitant political reform. The three top leaders of the U.S.S.R. today are all engineers by training, and of the eleven full members of the Politburo, only three (Suslov, Shelest and Pelshe) have been ideologues or party apparutchiki throughout their careers. This increasing influence of the technocracy can also be seen in the Secretariat of the Soviet Party Central Committee. When Brezhnev took power in 1964, there were eleven secretaries, of whom four were ideologues or appurutchiki (Suslov, Ponomarev, Shelepin and Andropov), while seven had technocratic backgrounds. Today there are ten secretaries, eight of whom are former technocrats, whereas only two are ideologues (Suslov and Ponomarev). It is no longer true to say that the ideologue is the master; the technocrats have taken over. Western Planning
us Seen by Moscow
The Soviet economic monthlies prefer to describe planning in the West as “programming,” because in this way it can be made to look more remote from what goes on in Gosplan. But they now concede that capitalism does not completely exclude planning, and argue that both Engels and Lenin recognized this to be so, at least at the level of the trusts. At the national level, capitalist “programming” is alleged to be quite different from the Soviet concept of planning, first, because of its different aims (“to strengthen monopoly capitalism”), and second, because the “bourgeois” governments do not control all the decisive links in the economic mechanism. Therefore, the Moscow argument runs, their programs are no more than recommendations and cannot be enforced in the private sector. All this is true enough, but it overlooks the fact that in the U.S.S.R. too the primary indicator of success at the enterprise level is no longer a “command” but is simply stated as the “volume of output sold.” And if the consumer refuses to buy enough of the product, Gosplan’s original target will still have had the character of a recommendation which was not fulfilled. The annual value of retail trade amounts to about half of the total 40
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national income, and since 1958, surplus consumer stocks of one kind after another have pointed to more and more failures in the execution of Gosplan’s “commands’‘-beginning with clothes, kitchen utensils and footwear, and spreading rapidly to watches, cameras, radios and even TV sets. The type of Western planning now being conducted in twelve European countries is not cormned to establishing targets. It also suggests the main lines of policies to be followed and the necessary allocation of resources in the public sector. In France planning has already been extended to money incomes, prices and financial balances, whereas it is only now that pleas are beginning to appear in the Soviet press for the planning of prices on a medium-term (i.e., five-year) basis.” In the past Moscow assumed that prices could remain arbitrarily fixed for decades, a misconception which has had much the same negative results as the West’s error concerning the immutability of the price of gold. Social Relations
It is interesting to recall that only eight years ago Western critics of the convergence theory were arguing that little would come of it because “Sin0-Soviet communism aims eventually to socialize consumption, and has indeed already gone very far in this direction. It produces few cars, and little housing; of that little housing, mainly flats. . . .“I6 Today little evidence remains of any real intention, as opposed to a vague ideological yearning, to “socialize consumption” in the U.S.S.R. On the contrary, the production of consumer durables in proportion to the population has reached West European levels; for the first time in Soviet history, more cars are being built than trucks; plans are forging ahead to produce cars by the million in the 197Os, and in the past ten years the U.S.S.R. has built as many new apartments each year as the rest of Europe put together, even though each unit seems tiny and poorly built by our standards. %ee Economic Gazette, No. 13, March 1968, p. 14. 16Peter Wiles, “Will Capitalism and Communism Converge?,” Eastern Europe, ed. G. R. Urban (London, 1964), p. 236.
in Talking
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Since consumption is not going to be “socialized,” one may reasonably expect that the increasing-though still very modestprosperity of Soviet consumers will make them more selective in their wants and hence less amenable to central planning. For the three years 1965, ‘66 and ‘67 the per capita real income of the population rose in the U.S.S.R. at about six percent p.a.,l’ and over the fifteen-year period 1950-65 real wages in the U.S.S.R. rose appreciably faster than in Britain, although at a much lower level. If and when private cars are really made available to the Soviet middle-income groups, it may not be long before they demand the right to foreign travel similar to that which the Czechoslovaks enjoyed before the occupation. Even at the highest levels of Soviet nuclear physics, thinkers such as Academician Sakharov, in his famous “10,000 Words,” are now advancing the theory of convergence, and recognizing its practical necessity. Sakharov wants no less than the democratization of the U.S.S.R., the suppression of the obsolete shibboleths such as the collective farms, and the abolition of censorship. These things wilI not be soon or easily achieved, but his memorandum is a remarkable sign of the way in which the pressure is building up, even at the apex of Soviet intellectual life. To sum up, communist planning is becoming both more rational and less centralized. In Western Europe twelve countries already have general economic plans, while three (France, Norway, Sweden) have been drawing up medium-term plans for a good many years past. Even long-term “perspective” planning is now beginning to take hold. At this point, it would be well to discuss some of the recent literature on convergence which has been published in the West. Abram Bergson, in a recent article on market socialism,” agrees that in addition to Yugoslavia: “ . . . other socialist states by all accounts are also veering from ‘centralized planning’ toward ‘market socialism,’ though probably not always as sharply as has been reported. . . .” l6Economic Survey of Europe in 1967, U.N. (Geneva, 1968), p. 70 (prepublication text). 1% Journal of Political Economy, October 1967, pp. 655-671. 42
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Having said this, he leaves the question of convergence to argue, with great persuasiveness, that “market socialism, where introduced, will tend to be more efficient than central planning in similar circumstances, but not as much so as is often assumed. “ . . . The proverbial claims of socialists regarding the superiority of their system over capitalism have yet to be vindicated. One wonders whether such claims are apt to be vindicated either under market socialism, though socialist economic performance may well improve under this variant.” Bergson’s article is more a technical discussion of his theories of the weaknesses of market socialism than a contribution to the question of convergence. Those who believe in the latter are not so much concerned with the question of demonstrating the superiority of one system over another as with trying to learn what advantages the rival systems have to offer to each other as they converge. A more directly relevant contribution was made by Max Beloff, of Oxford University, in Neues Forum.18 He points out that U.S. leadership techniques in the Cuban crisis of 1962 and the Middle Eastern war of 1967 were both examples of an American political approach to the Soviet model, which depends on a very great personal concentration of power. Simultaneously he sees signs, beginning even with Khrushchev’s later years, of a division of authority within the Politburo. Beloff then makes great play with Stanislav Andre&i’s important work, Elements of Comparative Sociology,” in which he claims that there has been a certain liberalization in the U.S.S.R. since the days of Stalinist tyranny, but argues that there is no guarantee that this will continue. Almost every supporter of the convergence theory would surely agree with that view, since convergence theorists claim only that it has taken place and is likely to continue to do so, not that it is irreversible or eternal. Andreski’s more important thesis, in Beloff’s eyes, is to suggest that tendencies in the industrial development of Western capital‘*October 1967. lOElements of Comparative
Sociology (London,
1964). 43
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ism will make the retention of liberal political institutions and ideas more dificult, and that therefore the latter are in no way inseparub2y linked with a developed industrial society. Beloff then makes use of this thesis to argue that ergo the theory of convergence is wrong. But to do so he has chosen a definition of convergence which is solely that of a Western propagandist. The convergence theory does not argue that the ultimate state of the world must be one of liberal ideals and institutions, merely that communism and capitalism are becoming more and more alike in that communism is becoming less dictatorial in economics as well as politics, while capitalism is becoming less liberal and more centrally influenced though not yet centrally controlled. In this, more precise light, Andre&i’s second thesis is in fact another argument for the view that convergence is on its way. Beloff is much more convincing when he notes that in the U.S.A. most of the news media are controlled (or “managed”), while the private ownership of the means of production has largely lost its meaning due to the concentration of power. It is true that the professions no longer have the political power which they wielded under early capitalism, because they are so much more dependent on either government or industry, and as an Oxford professor he is in a good position to judge whether conformism or radicalism is the best road to the top. He is less persuasive when he examines the trends in Soviet ideology. Here he G.ndsthat: The real differences between the Soviet system and the controlled capitalism of the U.S.A. no longer lie in the realm of planning but in the question of basic priorities, particularly in connection with investments. In the capitalist countries it is accepted that in peacetime the market determines production. . . . Yet in the U.S.S.R., defense and heavy industry have almost always been given priority. . . . It is possible that a leader interested in the support of the public would retard heavy industry in favor of consumer goods. Both 44
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Malenkov and Khrushchev tried to do this, but were compelled to retreat by the established interests of the defense and heavy industries. This experience does not allow one to conclude that in the U.S.S.R. consumer needs will &rally gain priority. In the last full year of Khrushchev’s rule (1963), the total Soviet military budget was reliably estimated (in real terms, covering both overt and concealed spending) as $33 billionzO Should anyone object to this use of an estimate for secret military spending, the overt Soviet defense budget as a percentage of national income came to 8.09 percent, while that of the U.S.A. came to 11.25 percent.21 Turning to the position for 1967, after three full years of Brezhnev’s rule, the same Western source estimated total military spending by the U.S.S.R. (including concealed items) as $30-35 billion a year,22 although the Soviet GNP had considerably increased in the meantime. To illustrate the latter point, in 1963 the Soviet GNP had reached a level of about 47 percent of the U.S. GNP, and by 1967 it had climbed to 48.8 percent of the U.S. GNP.‘” In the meantime the U.S. defense budget had risen from $52 billion to $76 billion. There is therefore little doubt that, pace Beloff, U.S. defense expenditure and, inevitably, heavy-industry expenditure as well, are now running at a higher proportion of GNP than is the case in the U.S.S.R. Clearly this is mainly due to the Vietnam war, but whatever the causes, it is reasonable to see it as another sign of convergence. Nor is the situation likely to change much even if the war should end in 1969 or 1970. Beloff is so vague in his use of the term “heavy industry” that it is difhcult to know precisely what he means by it. But most Western writers who employ the term seem to be thinking of the steel industry (as representing armaments) typically. On the *OThe Military Balance 1962-63 (London: Institute for Strategic Studies), p. 3. Wbid., p. 25. **The Military Balance, 1967-68, ISS, p. 5. Woviet Economic Performance 1966-67, Joint Economic Committee, U.S. Congress, Washington, 1968, p. 16. 45
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risky assumption that the steel industry might be one of the “established interests” which had “compelled both Malenkov and Khrushchev to retreat,” it may be useful to see what really happened : USSR-Indices of Civilian Industrial Productionz4 1960-67 (1960 = 100) IudustrialMaterials Ferrous Metals Civilian Machinery (Incl. electronics)
1960 1961 1962 1963 1964 1965 1966 1967 100 112 126 141 156 172 18.5 200 100 109 118 127 137 147 160 170 100 111 126 140 155 171 187 205
A quick glance at the table will show that both under Khrushchev and under Brezhnev, for at least seven consecutive years, the Soviet output of civilian machinery has risen considerably faster than that of ferrous metals. (Incidentally, it has also grown faster than in any other branch of heavy industry, including electricity, coal, petroleum and natural gas, nonferrous metals, chemicals, construction materials, etc., although the statistics for all these have not been shown in this article.) Thus on this point Beloff is perhaps not fully informed. It is misleading to argue that expenditure on heavy industry and defense is growing in the U.S.S.R., without pausing to notice that the Soviet GNP is growing as well, and faster. The same is happening in the U.S.A., where defense expenditure in 1966 was 9.2. percent of GNP, whereas in the U.S.S.R. it was lower at 8.9 percent of GNP (in market prices for both countries) .*’ These defense comparisons do not alter the fact that the U.S. economy is more than twice as big (in GNP), and that in per capita GNP the U.S. civilian is two and a half times better off. Yet economic convergence still continues at a pace; 1968 was the first year in which the Soviet production of washing machines probably
exceeded the U.S. leve1.2s
Wbid., p. 22. 25The Military Balance, 1967-68, ISS, p. 41. 2eCf. Soviet Economic Performance 1967-68, U.S. Congress, Washington, May 1968, p. 25. 46
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It is therefore no longer enough to argue against economic convergence. The rise of the technocrats in the East and of the managers in the West, the long-term Soviet goal of overtaking the West in living standards, and the increase in governmental interference in the Western economies (often with dubious results, as in Britain or France) have all led to a situation in which our primary task should be to learn what we can from the centrally planned economies, before they disappear in the onward march of indicative planning.
47
ROCKINGHAM
GILL
A Case for Economic Convergence N Moscow, a new word has been added to an already abunIis freely dant vocabulary of official abuse. It is Konvergent, and it used to describe men such as Gruchy,’ Buckingham,’ Tinbergen,’ Aron,* Sorokin,6 Galbraith,” and even John Strachey.? No one really knows where it all began, but perhaps it was with James Bumham’s book The MunugeriuZ Revolution. Coexistence between the Soviet and the Western systems has now gone on so long, and the study of each by the opposing economists has been so intensive, that inevitably ideas from the once self-contained structures have begun to be “fed back” to the other side to their mutual benefit. This is what convergence is all about; it is a dynamic process of change in which both economic systems are moving with the glacial slowness of a melting iceberg toward a common middle ground. The strong case for convergence is the belief that new and rational methods of economic planning must eventually replace both the “free market” (which Galbraith has shown to be neither genuinely free nor genuinely a market) and the arbitrary and primitive communist system of allocations. Here the evidence in support is already overwhelming. No fewer than eight govemments in northern and western Europe and four countries in southern Europe already have general economic plans for periods ranging between four and seven years; they are Belgium, France, Ireland, Italy, Netherlands, Norway, Sweden, U.K., Greece, Portugal, Spain, and Turkey. 1Allan G. Gruchy, Comparative Economic Systems (Boston, 1966). *Walter S. Buckingham, Theoretical Economic Systems (New York, 1958). 3Jan Tinbergen, “Do Communist and Free Economies Show a Converging Pattern?,” Soviet Studies, April 1961. ‘Raymond Aron, 18 Lessons on the Industrial Society (Paris, 1962). 5Pitirim A. Sorokin, The Basic Trends of Our Times (New Haven, 1964). 6J. K. Galbraith, The New Industrial State (Boston, 1967). 7J. Strachey, On the Prevention of War (London, 1962). 34
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At the same time the problems facing the centrally planned economies, particularly in Yugoslavia, Hungary and Czechoslovakia, increasingly demand the use of indirect methods of guidance such as those employed in the West. Of course, convergence does not imply the inevitability of permanent coexistence; it may be interrupted for irrational reasons at any tune. But coexistence does contribute to, and is partly concerned with, the rise of convergence, despite the protests from Moscow that this is not the case.8 The Kremlin finds convergence to be one prong of a dangerous trident, the other two being “bridge-building” in politics and “peaceful coexistence” in ideology. Moreover, it distinguishes between two types of convergence, one of which is economic (the less subversive of the two), the other sociological (Aron and Sorokin being the main exponents of this variety). The economic arguments in support of convergence rest largely on the impact of technological progress and the rise of the new industrial society. Eight or ten years ago, the convergence theory tended to be applied mainly to the U.S.A. and the U.S.S.R. Today economic convergence applies at least as much to Western Europe and the U.S.S.R. as to the U.S.A., because, owing to the expansive development of nationalized industries west of the Elbe, the economies of Western Europe and the Soviet Union resemble each other more closely than the economies of the Soviet Union and the United States. A recent example of this was the British government’s nationalization of the entire steel industry, making it a permanent burden on the taxpayer instead of the shareholder. The method was not the same as that of Lenin in 1917, but the economic effect is similar. Moreover, the swing toward a more consumer-oriented society in the U.S.S.R., which was initiated under Khrushchev and has been developed by Brezhnev and Kosygin to a point where the U.S.S.R. now turns out annually as many consumer durables per 8Voprosy Ekonomiki, No. 2, 1968, “The Theory of Convergence and Reality” by V. Cheprakov. Mirovaya Ekonomika i Mezhdunarodnaya Otnosheniya, No. 1, 1968, “The Theory of Convergence of the Two Economic Systems” by E. Bregel. 35
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capita as most West European nations, has made the old-style command economy unworkable. Gosplan found out long ago that it was unable to direct the entire Soviet economy from Moscow, and ever since 1966 the primary successindicator for Soviet managers has been the volume of output sold. That last little word puts them squarely in the hands of their consumers, and Gosplan is slowly having to develop a large-scale market research organization in order to discover what the consumer wants. In the extremely large consumer and light-industry sectors their problems are slowly becoming more like those of Marks and Spencer than those of Karl Marx. Market socialism is thus on the march even in the U.S.S.R. In Yugoslavia it is already f?rmly established, and it looks as though Czechoslovakia was lurching unsteadily toward it, at least until August 1968. When a Soviet economist is confronted by these trends, his stock reaction is that, even granted the similarity in technology (a Fiat works in Togliatti is not so merent from one in Turin) and the similar structure of production, “socialist” production relations are fundamentally dXerent from those obtaining in the nonsocialist countries. “Social ownership of the means of production is the antipode of private ownership; socialist labor for oneself and for society is the opposite of hired labor for exploiters; production in the name of the ever-growing satisfaction of the needs of the members of society is the opposite of production for the sake of profit,” etc.O This type of Soviet thinking, when closely examined, seems to be essentially rhetorical. The major difference between social ownership of the means of production and private ownership is that the former is usually less efficient. But in any case J. K. Galbraith has shown that private ownership is a misleading and inaccurate description. What we have in the West are vast corporations over which the original private owners and almost all the existing shareholders have substantially lost control and which WQuoted from E. Bregel (see footnote 8).
36
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are now being run by small groups of managers with a much greater interest in the expansion of their empire than in the cre ation of profit for the shareholders. As for the idea that working for oneself and society is different from being hired by an “exploiter,” one must ask what a floor hand at, say, the Skoda works might feel about it. For twenty years he was told that he was working for “society” tist and only secondarily for himself (the earlier, purer form of the modem Soviet version), and now he discovers that the recent managers of his society, such as Novotny, Hendrych and Koucky, represented no one and were exploiters to boot. The real difference is that the exploiters in the West tend to pay better, because they must compete in the labor market, whereas “society” in the East has usually chosen to fix its own wage rates at dismally low levels. Moreover, since in the mixed economies of Westem Europe taxes take about half of private industry’s profits, the Western worker in fact spends half his week working for the government, i.e., society, and only half his week working for his direct employer. Decentralization
Soviet political economists display special alarm about one aspect of the convergence theory, which is that nationalization in the West and decentralization in the East are leading to a notably similar pattern. In the East some important economic functions are being transferred from the state to individual firms, and in some cases even the dogma of the state’s monopoly of foreign trade has already been abandoned for the benefit of the larger and more efficient communist enterprises. Moscow does not deny that in the West the state is playing an increasing part in regulating the economy. The method is said to have been discovered by Lenin, and it is the Western interpretation of it which is said to be fallacious. When a “bourgeois” state intervenes, it does so on behalf of the “monopolist bourgeoisie,” we are told, whereas a socialist state only intervenes on behalf of the masses. Once again, Czechoslovakia is the living refutation of this theory. The volume of its exports to the West 37
STUDIES
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actually fell in 1967, because the country “has been unable to keep pace with the world standard in progressive products.““’ A cynic might well say that this is the result of intervening “on behalf of the masses,” but the fact is that the Czechoslovak party leadership and government had to fall before the country’s economic policy could even begin to be corrected. It is now being forcibly driven some of the way back on to the old line which was such a dismal failure under Novotny. Moscow’s spokesmen refuse to see any evidence of “socialization” in the increasing use of economic levers by capitalist states. They argue that the state regulation of the economy in the West in no way alters the “exploitative” essenceof capitalism, but they never pause to ask why, in that case, the West European worker has a standard of living so much higher than his Eastern counterpart. They also point out that, even though Western states increasingly interfere with their economies, this by no means implies guidance of the whole economy. But neither do communist states, in practice, direct the entire economy. Modern economic management is, or should be, mainly concerned with investment decisions, and in the U.S.S.R. itself (not to speak of Yugoslavia) decentralized decisions in 1967 accounted for about 28 percent of total investments.” These decisions, while subject to the approval of the administrative authorities, are not taken by them. In Britain, the share of decentralized decisions in total investment is now probably less than 50 percent, so the difference is no longer remarkably large. One must also note the increasing role of profit in the communist economies since Libermanism ceased to be a theory and became an operative way of life in early 1966. By 1967 profits in the U.S.S.R. accounted for well over half the country’s total “net income” available for investment and budgetary spending.” Wmena, 20 October 1967, article by Jan Rehak. “Progressive products” refers to items such as plastics, electronics, computers, etc. “Economic Survey of Europe in 1967, U.N. (Geneva, 1968), chapter 11, p. 60 (prepublication text). l*Zbid., p. 61. 38
A CASE
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CONVERGENCE
Hence the Soviet worker spends at least half his time working for “socialist” profit, and there is no evidence to show that he gets a fairer share of the resultant “cake” than his Western equivalent. Indeed the reverse is true, largely because Soviet trade unions are in reality organs of the party and state. Yet, even here, events in Yugoslavia, where strikes (called “work stoppages”) now abound, and in Czechoslovakia during the post-Novotny era, show that some convergence in union attitudes is at last beginning. This change in the thinking of the Czechoslovak trade unions should not be affected by the Soviet occupation, even though their declared policies may be forced back into a less reformist channel. Moscow’s theorists now admit openly that state intervention in the Western economies since the war has succeeded in alleviating cyclical fluctuations of the old boom-slump variety. As a bow to the rise of Keynesian economics, that is fair enough, but what they do not admit (although their Czechoslovak counterparts do) is that cyclical swings have also affected certain communist countries in recent years, the two major examples being Yugoslavia and Czechoslovakia.‘” J. K. Galbraith has argued that the present wave of decentralization in the U.S.S.R., which arises out of the 1965 economic reforms, is another aspect of convergence in that power is being transferred from the state to the enterprise. Moscow concedes that there has been a transfer of certain functions from the central agencies to the local management, but argues that because all firms are state-owned, what is happening is merely a change within the state sector, not a weakening of it. Yet whether one calls it a change or a weakening, the fact remains that the removal of certain economic powers from Moscow brings the planned economy at least one step nearer to the mixed economies of Western Europe. Moreover, this decentralization of economic power is indirectly but unmistakably transferring some extra political weight to the Soviet managers. As Czechoslovakia has dramatically demTke
Flek.
PIanovane
Hospodarstvi,
No.
9,
1967, article by J. Goldmann
and J. 39
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o&rated, the economic reforms cannot be fully effective without concomitant political reform. The three top leaders of the U.S.S.R. today are all engineers by training, and of the eleven full members of the Politburo, only three (Suslov, Shelest and Pelshe) have been ideologues or party apparutchiki throughout their careers. This increasing influence of the technocracy can also be seen in the Secretariat of the Soviet Party Central Committee. When Brezhnev took power in 1964, there were eleven secretaries, of whom four were ideologues or appurutchiki (Suslov, Ponomarev, Shelepin and Andropov), while seven had technocratic backgrounds. Today there are ten secretaries, eight of whom are former technocrats, whereas only two are ideologues (Suslov and Ponomarev). It is no longer true to say that the ideologue is the master; the technocrats have taken over. Western Planning
us Seen by Moscow
The Soviet economic monthlies prefer to describe planning in the West as “programming,” because in this way it can be made to look more remote from what goes on in Gosplan. But they now concede that capitalism does not completely exclude planning, and argue that both Engels and Lenin recognized this to be so, at least at the level of the trusts. At the national level, capitalist “programming” is alleged to be quite different from the Soviet concept of planning, first, because of its different aims (“to strengthen monopoly capitalism”), and second, because the “bourgeois” governments do not control all the decisive links in the economic mechanism. Therefore, the Moscow argument runs, their programs are no more than recommendations and cannot be enforced in the private sector. All this is true enough, but it overlooks the fact that in the U.S.S.R. too the primary indicator of success at the enterprise level is no longer a “command” but is simply stated as the “volume of output sold.” And if the consumer refuses to buy enough of the product, Gosplan’s original target will still have had the character of a recommendation which was not fulfilled. The annual value of retail trade amounts to about half of the total 40
A CASE FOR ECONOMIC‘
CONVERGENCE
national income, and since 1958, surplus consumer stocks of one kind after another have pointed to more and more failures in the execution of Gosplan’s “commands’‘-beginning with clothes, kitchen utensils and footwear, and spreading rapidly to watches, cameras, radios and even TV sets. The type of Western planning now being conducted in twelve European countries is not cormned to establishing targets. It also suggests the main lines of policies to be followed and the necessary allocation of resources in the public sector. In France planning has already been extended to money incomes, prices and financial balances, whereas it is only now that pleas are beginning to appear in the Soviet press for the planning of prices on a medium-term (i.e., five-year) basis.” In the past Moscow assumed that prices could remain arbitrarily fixed for decades, a misconception which has had much the same negative results as the West’s error concerning the immutability of the price of gold. Social Relations
It is interesting to recall that only eight years ago Western critics of the convergence theory were arguing that little would come of it because “Sin0-Soviet communism aims eventually to socialize consumption, and has indeed already gone very far in this direction. It produces few cars, and little housing; of that little housing, mainly flats. . . .“I6 Today little evidence remains of any real intention, as opposed to a vague ideological yearning, to “socialize consumption” in the U.S.S.R. On the contrary, the production of consumer durables in proportion to the population has reached West European levels; for the first time in Soviet history, more cars are being built than trucks; plans are forging ahead to produce cars by the million in the 197Os, and in the past ten years the U.S.S.R. has built as many new apartments each year as the rest of Europe put together, even though each unit seems tiny and poorly built by our standards. %ee Economic Gazette, No. 13, March 1968, p. 14. 16Peter Wiles, “Will Capitalism and Communism Converge?,” Eastern Europe, ed. G. R. Urban (London, 1964), p. 236.
in Talking
to 41
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Since consumption is not going to be “socialized,” one may reasonably expect that the increasing-though still very modestprosperity of Soviet consumers will make them more selective in their wants and hence less amenable to central planning. For the three years 1965, ‘66 and ‘67 the per capita real income of the population rose in the U.S.S.R. at about six percent p.a.,l’ and over the fifteen-year period 1950-65 real wages in the U.S.S.R. rose appreciably faster than in Britain, although at a much lower level. If and when private cars are really made available to the Soviet middle-income groups, it may not be long before they demand the right to foreign travel similar to that which the Czechoslovaks enjoyed before the occupation. Even at the highest levels of Soviet nuclear physics, thinkers such as Academician Sakharov, in his famous “10,000 Words,” are now advancing the theory of convergence, and recognizing its practical necessity. Sakharov wants no less than the democratization of the U.S.S.R., the suppression of the obsolete shibboleths such as the collective farms, and the abolition of censorship. These things wilI not be soon or easily achieved, but his memorandum is a remarkable sign of the way in which the pressure is building up, even at the apex of Soviet intellectual life. To sum up, communist planning is becoming both more rational and less centralized. In Western Europe twelve countries already have general economic plans, while three (France, Norway, Sweden) have been drawing up medium-term plans for a good many years past. Even long-term “perspective” planning is now beginning to take hold. At this point, it would be well to discuss some of the recent literature on convergence which has been published in the West. Abram Bergson, in a recent article on market socialism,” agrees that in addition to Yugoslavia: “ . . . other socialist states by all accounts are also veering from ‘centralized planning’ toward ‘market socialism,’ though probably not always as sharply as has been reported. . . .” l6Economic Survey of Europe in 1967, U.N. (Geneva, 1968), p. 70 (prepublication text). 1% Journal of Political Economy, October 1967, pp. 655-671. 42
A CASE FOR ECONOMli
CONVERGENCE
Having said this, he leaves the question of convergence to argue, with great persuasiveness, that “market socialism, where introduced, will tend to be more efficient than central planning in similar circumstances, but not as much so as is often assumed. “ . . . The proverbial claims of socialists regarding the superiority of their system over capitalism have yet to be vindicated. One wonders whether such claims are apt to be vindicated either under market socialism, though socialist economic performance may well improve under this variant.” Bergson’s article is more a technical discussion of his theories of the weaknesses of market socialism than a contribution to the question of convergence. Those who believe in the latter are not so much concerned with the question of demonstrating the superiority of one system over another as with trying to learn what advantages the rival systems have to offer to each other as they converge. A more directly relevant contribution was made by Max Beloff, of Oxford University, in Neues Forum.18 He points out that U.S. leadership techniques in the Cuban crisis of 1962 and the Middle Eastern war of 1967 were both examples of an American political approach to the Soviet model, which depends on a very great personal concentration of power. Simultaneously he sees signs, beginning even with Khrushchev’s later years, of a division of authority within the Politburo. Beloff then makes great play with Stanislav Andre&i’s important work, Elements of Comparative Sociology,” in which he claims that there has been a certain liberalization in the U.S.S.R. since the days of Stalinist tyranny, but argues that there is no guarantee that this will continue. Almost every supporter of the convergence theory would surely agree with that view, since convergence theorists claim only that it has taken place and is likely to continue to do so, not that it is irreversible or eternal. Andreski’s more important thesis, in Beloff’s eyes, is to suggest that tendencies in the industrial development of Western capital‘*October 1967. lOElements of Comparative
Sociology (London,
1964). 43
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ism will make the retention of liberal political institutions and ideas more dificult, and that therefore the latter are in no way inseparub2y linked with a developed industrial society. Beloff then makes use of this thesis to argue that ergo the theory of convergence is wrong. But to do so he has chosen a definition of convergence which is solely that of a Western propagandist. The convergence theory does not argue that the ultimate state of the world must be one of liberal ideals and institutions, merely that communism and capitalism are becoming more and more alike in that communism is becoming less dictatorial in economics as well as politics, while capitalism is becoming less liberal and more centrally influenced though not yet centrally controlled. In this, more precise light, Andre&i’s second thesis is in fact another argument for the view that convergence is on its way. Beloff is much more convincing when he notes that in the U.S.A. most of the news media are controlled (or “managed”), while the private ownership of the means of production has largely lost its meaning due to the concentration of power. It is true that the professions no longer have the political power which they wielded under early capitalism, because they are so much more dependent on either government or industry, and as an Oxford professor he is in a good position to judge whether conformism or radicalism is the best road to the top. He is less persuasive when he examines the trends in Soviet ideology. Here he G.ndsthat: The real differences between the Soviet system and the controlled capitalism of the U.S.A. no longer lie in the realm of planning but in the question of basic priorities, particularly in connection with investments. In the capitalist countries it is accepted that in peacetime the market determines production. . . . Yet in the U.S.S.R., defense and heavy industry have almost always been given priority. . . . It is possible that a leader interested in the support of the public would retard heavy industry in favor of consumer goods. Both 44
A CASE FOR ECONOMIC
CONVERGENCE
Malenkov and Khrushchev tried to do this, but were compelled to retreat by the established interests of the defense and heavy industries. This experience does not allow one to conclude that in the U.S.S.R. consumer needs will &rally gain priority. In the last full year of Khrushchev’s rule (1963), the total Soviet military budget was reliably estimated (in real terms, covering both overt and concealed spending) as $33 billionzO Should anyone object to this use of an estimate for secret military spending, the overt Soviet defense budget as a percentage of national income came to 8.09 percent, while that of the U.S.A. came to 11.25 percent.21 Turning to the position for 1967, after three full years of Brezhnev’s rule, the same Western source estimated total military spending by the U.S.S.R. (including concealed items) as $30-35 billion a year,22 although the Soviet GNP had considerably increased in the meantime. To illustrate the latter point, in 1963 the Soviet GNP had reached a level of about 47 percent of the U.S. GNP, and by 1967 it had climbed to 48.8 percent of the U.S. GNP.‘” In the meantime the U.S. defense budget had risen from $52 billion to $76 billion. There is therefore little doubt that, pace Beloff, U.S. defense expenditure and, inevitably, heavy-industry expenditure as well, are now running at a higher proportion of GNP than is the case in the U.S.S.R. Clearly this is mainly due to the Vietnam war, but whatever the causes, it is reasonable to see it as another sign of convergence. Nor is the situation likely to change much even if the war should end in 1969 or 1970. Beloff is so vague in his use of the term “heavy industry” that it is difhcult to know precisely what he means by it. But most Western writers who employ the term seem to be thinking of the steel industry (as representing armaments) typically. On the *OThe Military Balance 1962-63 (London: Institute for Strategic Studies), p. 3. Wbid., p. 25. **The Military Balance, 1967-68, ISS, p. 5. Woviet Economic Performance 1966-67, Joint Economic Committee, U.S. Congress, Washington, 1968, p. 16. 45
STUDIES
IN COMPARATIVE
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risky assumption that the steel industry might be one of the “established interests” which had “compelled both Malenkov and Khrushchev to retreat,” it may be useful to see what really happened : USSR-Indices of Civilian Industrial Productionz4 1960-67 (1960 = 100) IudustrialMaterials Ferrous Metals Civilian Machinery (Incl. electronics)
1960 1961 1962 1963 1964 1965 1966 1967 100 112 126 141 156 172 18.5 200 100 109 118 127 137 147 160 170 100 111 126 140 155 171 187 205
A quick glance at the table will show that both under Khrushchev and under Brezhnev, for at least seven consecutive years, the Soviet output of civilian machinery has risen considerably faster than that of ferrous metals. (Incidentally, it has also grown faster than in any other branch of heavy industry, including electricity, coal, petroleum and natural gas, nonferrous metals, chemicals, construction materials, etc., although the statistics for all these have not been shown in this article.) Thus on this point Beloff is perhaps not fully informed. It is misleading to argue that expenditure on heavy industry and defense is growing in the U.S.S.R., without pausing to notice that the Soviet GNP is growing as well, and faster. The same is happening in the U.S.A., where defense expenditure in 1966 was 9.2. percent of GNP, whereas in the U.S.S.R. it was lower at 8.9 percent of GNP (in market prices for both countries) .*’ These defense comparisons do not alter the fact that the U.S. economy is more than twice as big (in GNP), and that in per capita GNP the U.S. civilian is two and a half times better off. Yet economic convergence still continues at a pace; 1968 was the first year in which the Soviet production of washing machines probably
exceeded the U.S. leve1.2s
Wbid., p. 22. 25The Military Balance, 1967-68, ISS, p. 41. 2eCf. Soviet Economic Performance 1967-68, U.S. Congress, Washington, May 1968, p. 25. 46
Joint Economic
Committee,
A CASE
FOR ECONOMIC
‘CONVERGENCE
It is therefore no longer enough to argue against economic convergence. The rise of the technocrats in the East and of the managers in the West, the long-term Soviet goal of overtaking the West in living standards, and the increase in governmental interference in the Western economies (often with dubious results, as in Britain or France) have all led to a situation in which our primary task should be to learn what we can from the centrally planned economies, before they disappear in the onward march of indicative planning.
47