Soviet economic reforms
Nove, Alec & Howe, Irving
The following interview with Alec Nove, the distinguished economist and author of The Economics of Feasible Socialism, was conducted by Dissent editor Irving Howe in late October 1990.—EDs. IH:...
...Gorbachev is still the general secretary of the Communist party: he cannot say that he is restoring capitalism...
...Having very largely eliminated the power of the local party secretaries, where can he find a substitute...
...People can buy or lease small workshops or service agencies in the Soviet Union, but what about the big stuff...
...and, as soon as possible, convertibility is to be achieved...
...10 • DISSENT Comments and Opinions AN: I looked at the latest document, and I looked for the word socialism in it...
...Most people think it isn't, but nobody excludes the possibility...
...so we must somehow bring order to the financial system before we release prices...
...and if they succeed in doing all the things they hope to do in two years, it will be a miracle...
...But for this you need a currency that means something, and so the decisive, immediate step is to restore the health of the ruble...
...Local soviets are now genuinely elected: they have new standing, and therefore they have some power...
...Indeed he did not...
...auctions of foreign currency, which already exist, would be extended...
...Here Gorbachev is sadly at fault...
...Unless they substantially increase prices, they don't have a hope in hell of reducing the budget deficit or of bringing supply and demand into balance...
...But how can this be done...
...Who controls it...
...in the last five years we've ruined the economy...
...Meanwhile, could you give us an overview of what this entails, what is being proposed, and what seems likely to happen in the next few years...
...When I was in Kiev in December 1989 I spoke with Ukrainian nationalist leaders, and they were quite conscious of the fact that if they tried to simply cut themselves off, it would do them a great deal of economic harm...
...With this as a preamble, one then looks at the plan itself...
...The situation was summed up well recently by the Soviet economic journalist Selyunin...
...What do you think...
...AN: Let me try and answer in bits and pieces...
...A nice ironic remark was made by Gerasimov, the foreign office spokesman, who said ruefully that Gorbachev did not get the Nobel Prize for economics...
...But among the ideologists surrounding Gorbachev, some of them (though not Gorbachev himself) are saying that the Russian Revolution was a dreadful mistake that cost millions of lives for no purpose...
...Gorbachev speaks of a mixed economy, of a "humane and democratic socialism," and at least some of what he proposes seems similar to what you called for in your book The Economics of Feasible Socialism...
...Where will the capital come from...
...But this of course raises two questions: the desirable proportions within this mixed economy and the possible proportions...
...This is not the majority opinion as yet, but it's much stronger than it was, and among these people are some who go much too far...
...The Ukrainians have become quite radical in recent months, saying that they should control everything in the Ukraine, including the army...
...Foreign capitalists would be welcomed...
...One is that the idea of keeping the word socialist can be seen as a face-saving formula...
...The nationalities are not the only problem here...
...I think that Gorbachev is honest in saying that he is aiming for a mixed economy—a mixed economy with a human face, in the form of social guarantees...
...As a headline from a Soviet journal put it recently, "Socialism is capitalism with a human face...
...In any case, in the history of the world there have been many nationalisms that have damaged the interests of their nations...
...so trust us to lead you through inflation and unemployment to a radiant future...
...They don't represent the central government: they use their power in such a way as to strengthen the centrifugal tendencies in the USSR...
...This could only be financed by money creation...
...They have no way of subsisting on their own...
...My objection to Kornai is that he seems to favor capitalism with an inhuman face...
...So they're saying that they can't free prices until they have the finances in order—but they can't get the finances in order if they don't immediately make a radical change in prices...
...A recent article titled "Social Democracy and Us" attacked Western social democracy from a standpoint that could have come straight from Milton Friedman...
...He must be deeply aware of these difficulties, AN: In the Soviet press these days, there are quite frank discussions of all kinds of alarming possibilities...
...Some republics are refusing even to join discussions about the rules of the game for a free, all-Soviet market...
...In principle, Gorbachev recognizes that to have a free market, you need prices that are free to fluctuate in accordance with supply and demand...
...So they wanted to renegotiate relations with Russia rather than break them off...
...But this is a contradiction...
...but I don't think he deserves it for politics either...
...They wish to legalize private trade—which is very important, because previously, if you bought and sold for a profit, you were a criminal speculator...
...Abalkin, the economist and vice premier, commenting on the previous economic program, which resembled this new one fairly closely, expressed the view that it couldn't possibly work...
...The final collapse of the political center means that no reform plan has any chance of being implemented by it...
...What is falling apart is not just the empire, but also the ideology that held it together...
...But even apart from this, there are also a number of serious internal contradictions in the program...
...I don't think that's impossible...
...The new program means instant catastrophe...
...Stocks and shares would be traded...
...This is cheating the people...
...In other words, in Gorbachev's mind, the plan points to some sort of "socialist market" economy...
...Do you think this plan has any prospect of success...
...What seems to me more probable— it's the only thing I can think of that can possibly help—is that Gorbachev and Yeltsin (who really must stop his sniping, although no doubt it takes two to tango), along with some of the radicals, will form a new government of national unity and declare a state of emergency, a kind of short-term martial law, to establish some kind of order, as a stopgap measure...
...Does it belong to the Soviet Union or to the Ukraine...
...The biggest by far has to do with prices...
...IH: But these local republics and local units are economically totally unfeasible, it seems to me...
...The consumer market will be deluged with paper money, prices will rise tenfold and more...
...One I have already indicated: the power to implement them doesn't really exist...
...As for Western help, it is highly problematical in the face of simultaneous crises in the economic, social and political spheres...
...Look at what they're saying: we must free prices, but to do it now would mean that prices would go through the roof because of the vast excess of money...
...He said that if the party were to put its case to the people WINTER • 1991 • 11 Comments and Opinions today, it might have to come up with a program like this: "Comrades, we've led you down the wrong road for seventy-three years...
...firms with 100 percent foreign ownership would be allowed, as would the "letting" for foreign exploration of whole areas (the central government would retain control over exports of, and the proceeds from exports of, oil, gas, gold, diamonds, and so on...
...Soviet sources reveal a great pessimism on the second question...
...Within Russia itself there are many different groups, and all are saying that they want to be sovereign...
...In Izvestia a short time ago, Migranyan, a very intelligent commentator, said this: "The political crisis has reached its apogee...
...They wish to create a free market across all the republics, so that the sovereign republics would in effect form a customs union with a common customs tariff and a stable ruble currency (which of course doesn't exist at the moment...
...Even if the reforms were desirable, they simply may not be possible...
...Meanwhile the political authority has continued to disintegrate...
...Your question admits of two answers...
...They've been asking people: Do you think a military coup is likely...
...They're quite WINTER • 1991 • 9 Comments and Opinions far-reaching...
...But now I hear they're much more radical, and the reason is that the growing chaos in Russia itself has reduced the loss involved in breaking off...
...And it does occur .. . once...
...That's not typical, but it's having an influence...
...They wish to move to a real market economy, based on the principle of competition, and to bring about large-scale privatization (not of the very big stuff, but of small workshops and small factories, services, trade, family farming in agriculture, and so on...
...I found this striking because these are the last words, virtually, of an essay that I've written for my revised version of The Economics of Feasible Socialism, which will be published this year, in my reply to the Hungarian economist Janos Kornai...
...There is the question of whether the plan has its own internal logic: and then there is the question of whether there exists a mechanism for implementing the plan—or indeed any other plan...
...It's very ambitious—they no longer speak of 500 days, they speak of two years...
...The Russian republic itself is falling apart...
...AN: No, they haven't, but the problem is this...
...IH: It seems likely that there will be many changes and modifications of the economic reform plan introduced by Gorbachev in the Supreme Soviet...
...There is another way to look at the program...
...But how do they use that power...
...At least insofar as one reads Gorbachev's statements, my own impression is that this is a misstatement or at the very least an exaggeration...
...What would a reasonable measure of success be in the difficult circumstances of the Soviet economy...
...Now, Yeltsin is a bit of a demagogue, and he exaggerates—I think he's exaggerating the size of the deficit, though God knows it's really big—but the point is that without his collaboration it will be extremely difficult to introduce anything, because he does have some popular following...
...Yeltsin is right about this: there's still a huge deficit, rubles are being printed all over the place, wages are out of control, the local authorities are out of control, supply breakdowns are occurring because the existing supply obligations are regarded as part of the old command system and are only occasionally being observed—and there is the anticipation of a general breakdown...
...It's more probable than the generals' taking over...
...Suppose, say, that a state enterprise is located in Kiev...
...IN: In your judgment what will Gorbachev do...
...q 12 • DISSENT...
...Right at the beginning, it is said, "The marketization of the economy does not conflict with the socialist choice or commitment of our people...
...But there are two problems...
...They plan to privatize part of the housing stock...
...So Gorbachev says that until the end of 1991, certain basics of the centralized system should be retained—especially supply obligations— in order to prevent a breakdown...
...A British newspaper put the question well: how can you have capitalism with no capital and no capitalists...
...Clearly, in these circumstances, political and social chaos will grow...
...Internationally, of course, he deserves recognition for many things, including democratization in the USSR...
...It is by no means clear...
...If the economy were operating acceptably, the cost of going off on their own would be so self-evident that they wouldn't be pressing for it...
...Two of my Soviet colleagues have recently written to me to say that Sweden is much too radical and that the German Social Democrats are a bunch of dangerous reds...
...And Boris Yeltsin, commenting on this latest program, said this: "Preliminary calculations based upon this new reform program suggest a budget deficit of nearly 300 billion rubles, exceeding total budget revenue...
...To describe all this as a modest set of timid proposals would seem to me wrong...
...The President and the Supreme Soviet are trying to introduce the market in the USSR, a state that no longer exists...
...But in order to run a country, you need a decision-making structure and some way of implementing those decisions...
...IH: The American press is describing the new economic program as a step toward or even a triumph of capitalism...
...You can now see in print arguments that the horrors of Stalinism were the responsibility not only of Bolshevism but of Marxism-Leninism itself...
Vol. 38 • January 1991 • No. 1
