ONCE AGAIN, WHY THE PROFIT MOTIVE COULD NOT WORK IN THE USSR.
March 20, 2021 9 Comments
In 1999 when my pamphlet was first published there appeared for the first time an explanation consistent with Marx’s methodology, why the profit motive is tied to market economies. It depends on the presence of “many capitals”. There for the first time appeared an explanation why the profit motive in the USSR had the opposite effect to that intended after it was made prominent in the Kosygin post-1967 reforms. In 2015 I wrote a major article on this question which is referenced in the article. Because much of this analysis has been buried by the large number of articles that appear on this site, I thought it useful to produce a follow up article as part of the series looking back at the USSR from the 1930s onwards.
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What if the transfer of value was happening between different countries and user in global market ? Between Oil company in US and oil company in USSR ?
Foreign trade by the USSR indeed enters the realm of value. Unfortunately, an uncompetitive economy such as the USSR loses by this trade rather than gains. The exception as you point out, being oil after the Yom Kippur War in 1973, when oil prices tripled. It is generally recognised that the high price of oil supported the USSR economically and arguably delayed perestroika.. Sorry for the delay I was completing the post on US profits in 2020.
Thank you for the response
I think the fact that who gains and who dose not is not an issue here
The main issue is : there was a transfer of value into and out of ussr economy but through global market not domestic market
When they were trading with western advanced countries they were loosing and when the trade was happening with backward countries they were gaining
So it brings up profit motive , and they would have tried to invest in new technology and so on to prevent the loss in trade with advanced western countries and increase the gains in trade with backward countries ! But why they didn’t or why they were not effective to do so
This question is not addressed in your article
Both in structure and in content foreign trade until the 1980s was abnormal from the perspective of capital. In terms of structure foreign trade was the monopoly of the state. Individual enterprises could not sell into the world market. In terms of content the bulk of exports were raw materials and oil in return for machinery and grains. Given the level of industrialization found in the USSR, sufficient to defeat Nazi Germany by 1945, very little manufacture goods were exported. In any case, foreign trade never rose above 4% of output of which 0.5% of output was with the Third World. I do not believe the USSR exploited the third world, rather the financial and industrial support given to Cuba, Vietnam, Angola and Afghanistan exceeded any gains from the Third World, which is why the USSR basically began to withdraw from these countries with the exception of Cuba in the 1980s. One of the first sources of resentment in East Germany before the fall of the Wall was the extent of governmental support to the third world particularly around the time South Africa invaded Angola and the USSR deployed the Cuban army across the Atlantic to defeat the South Africans. Also Hillel Ticktin describes the thousands of cases of imported machinery found rusting at ports in Comecon either because they could not be integrated into production without disrupting it or they were incomplete or inappropriate. This waste is incompatible with the preservation of capital. So the reason I do not focus on foreign trade is because it simply was not the tail that wagged the dog. It played, a minor role in the ultimate collapse of the USSR. You should read William Jeffries book on the USSR which I have cited which explains what he calls the expansion of the market boundary into the USSR, not as a result of foreign trade but the conversion of means of production into capital following the political collapse of the state there.
The best explanation of the USSR I have seen to date.
My understanding was that pre Perestroika, the USSR was stagnant but stable. That political discontent at not matching the West triggered the reforms that triggered collapse. So the question is, if the USSR had not begun the reforms could it have survived? Or in more abstract terms, can a politicised bureaucracy controlling a socialised state-economy producing use values sustain itself indefinitely? Much like North Kore and Cuba do.
(Alternatively if the USSR had reformed itself like China, Vietnam, and Laos, it could have also continued but I don’t think this controversial)
On the other hand, could an economy that was so systematically flawed in terms of misallocating labour and capital as the USSR continue? One could argue that North Korea and Cuba only survive because of external aid and tourism monies respectively.
Would welcome your opinion on this?
The best explanation of the USSR I have seen to date.
My understanding was that pre Perestroika, the USSR was stagnant but stable. That political discontent at not matching the West triggered the reforms that triggered collapse. So the question is, if the USSR had not begun the reforms could it have survived? Or in more abstract terms, can a politicised bureaucracy controlling a socialised state-economy producing use values sustain itself indefinitely? Much like North Kore and Cuba seem to.
(Alternatively if the USSR had reformed itself like China, Vietnam, and Laos, it could have also continued but I don’t think this as historically disputed a point)
On the other hand, could an economy that was so systematically flawed in terms of misallocating labour and capital as the USSR continue? One could argue that North Korea and Cuba only survive because of external aid and tourism monies respectively.
Would welcome your opinion on this.
Thank you for your kind words. The failure of the 1965 to 67 reforms which sought to introduce costing and profits set the seal on the fate of the USSR. I am no expert on the final stages of the USSR. You raise a very important point which I am not sure I can fully answer. I think the key element was the lust by the bureaucracy for their own private property given that their privileges were precarious, they could be given and taken away by the party. Here I agree with Trotsky. Against a stagnant economy and a withering surplus there was no longer anything holding back elements of the bureaucracy seeking to transform themselves into capitalists. China went in the same direction but via a different route. Unlike the USSR with its vertical or centralized privatization (Big Bang) which turned it into a failed state with rich pickings for imperialism, China embarked on a more horizontal and gradual decentralized privatization enriching many more layers (regional) of the bureaucracy and therefore preventing it from becoming a failed state vulnerable to imperialism. Here again, the issue of class forces is important, Russia’s relatively more developed and extensive working class could have prevented such a gradual approach, rather than the Big Bang which delivered a hammer blow.
“The USSR was not a capitalist society because it was socialised, nor a socialist society because the labour of workers was forcibly expropriated. Workers were exploited. Indeed, in the end, the contradiction between the socialisation of production and exploitation would end this economy. Such an economy can
have no driving economic incentive unless one includes terror and oppression as economic drivers. More concretely in such an economy prices become fictitious and profits unproductive. Either prices reward profits, as in a capitalist economy, or they reward labour as in a socialist society. When they do neither they become destructive. This is what happened in the USSR. Prices became an
administrative device to regulate exploitation. To disguise the parasitism of the bureaucracy prices were divorced from the expenditure of labour. Prices were designed to under pay labour so as to create the space for the insertion of margins – firstly tax margins and later profit margins as well. Thus, the aggregate price of products in the USSR contained two elements, one to balance the total wages fund and the other to balance the state budget which inter alia provided the bureaucracy with its privileges. Prices were a means to marry the financial side to the physical side of the plan. The core of command planning in the USSR was material balances. Technically GOSPLAN simultaneously matched physical inputs with outputs. Once this was done the wages fund and the state budget was apportioned over this physical output, sometimes unevenly depending on planning priorities. The better word is overlayed. (Before bourgeois critics throw insults at material planning, they should look over their shoulders at just in time supply chains which, Err, simultaneously balances inputs with outputs in real time.)”
So how would the State/Government/Administrative Body/Planners.. fund themselves if not by taking surplus from the workers? how would they expand production, create new factories and jobs, realize foreign trade, compete arms race against warmongering imperialists… without a budget? would they just print the money instead of colecting taxes or taking surplus? i don’t understand this.
Also what differentiates ‘Planners’ from Bureaucracy? you caracterization of the Soviet government as greedy Bureaucrats who exploits the workers for its own benefits is wrong and no different than generic right wing caricature of the USSR. The “Bureaucrats” of the Soviet Union did not live super wealthier lives than the average worker(as it’s in the case of Capitalism), sure corruption did occur, but it was not normalized, and it was mostly caused by the black market. The surplus extracted from the workers were reinvested in what was deemed useful for society as a whole(like healthcare, production, education, security..), not to enrich the State officials.
I like you criticism that tax on costs of production, and profits in general is inefficient in Socialism, but i’m curious what could’ve been the alternative.
In a communist society the surplus is formed by the voluntary DEDUCTIONS from their contributions to production by the producers. This deduction, together with the discussion and agreement to arrive at this collective deduction, constitutes the heart of workers democracy. In the USSR on the other hand tax and profit margins were forcibly ADDED to pay for the budget with no involvement by the producers. Please read Chapter 2 of my pamphlet and we can discuss further. https://theplanningmotive.com/pamphlet-re-published-2021-with-added-graphs/