The Soviet Economy: A Hopeless Cause?

Gorbachev's Challenge: Economic Reform in the Age of High Technology, by Marshall Goldman, New York: Norton, 296 pages, $16.95

The Soviet economy long ago ceased being the wave of the future. Fundamental reform has been the watchword ever since the early 1960s when Soviet economist Evsei Liberman tried to rationalize the system by substituting profits for gross output indicators. Harvard University Sovietologist Marshall Goldman in his book, Gorbachev's Challenge, makes it clear that every conceivable reorganization of Soviet central planning has been tried—all to no avail. Gorbachev's challenge is: how do you reform a system that cannot be reformed?

The answer is that you have to abandon it. Goldman senses this himself, and the longest chapter in his book is about the Chinese economic reforms of Deng Xiaoping. Goldman writes that "it may well be that future historians will proclaim Deng the true revolutionary of the twentieth century." Deng is clearly what used to be called a great man. He is the first to lead a totalitarian coercive economy back to private property, individual incentive, profits, and production for market. China has even reintroduced the capital market. Enterprises are allowed to sell stock to the public and use the proceeds to buy equipment. A bond market was opened in Shenyang in August 1986, and stock markets in Shanghai in September 1986 and in Beijing in January 1987.

Goldman makes it clear that the ideological and vested-interest opposition, which has frustrated previous reform efforts in the Soviet Union, is unlikely to allow Gorbachev to travel the Deng road. Moreover, he doubts that Gorbachev understands that the failures of the Soviet economy do not reduce to human failings but are deeply systemic.

What is likely to happen? Here there is only speculation. Gorbachev might reform himself out of power by pressing harder than others are willing to go. On the other hand, he might achieve, and be satisfied with, marginal improvements that would make him a relative success.

One thing is certain. The Soviets are concerned about falling behind in technology. The United States and its allies could, if the desire existed, make the Soviet Union's massive military investment obsolete and vastly reduce Soviet power on the world stage. That the Soviet rulers worry about a possibility that the West cannot even contemplate is, perhaps, an indication of the different nature of their priorities and goals.

Practically speaking, the Gorbachev reforms might become part of the trappings for acquiring Western technology. Gorbachev can use the fabulous publicity Ronald Reagan gave him to make it socially chic for Western bankers and industrialists to compete in lavishing loans and joint ventures on the Soviet economy. They might never see their money again, but they can boast of their progressiveness in saving Gorby from the Soviet hawks. The mindlessness of the West is one thing Lenin thought the communists could always count on.

Academics such as Goldman have amassed much detailed information about the Soviet system, but they lack a paradigm for interpreting it. Consequently, they can never tell a grand tale. Their books contain interesting details and perceptive observations but are nevertheless boring.

There is a grand tale to be told, but it has to creep out between the lines of every page. The grand tale is the utter superiority of private property. Revolutions that attempted to achieve socialist economic organization that would be superior productively and morally to private property have now demonstrated that no such outcome is possible. The Chinese have understood, if only intuitively, that the absence of private property is an enormous tax on production, a tax that their society with massive population and little capital literally cannot bear. It apparently never occurs to Goldman that his history of the reform efforts points time and again to attempts to achieve the results that flow from private property.

It is possible that Goldman knows this but feels that he cannot say it and be successful. Western Sovietologists have not been without their own antipathy to the market. Moreover, the Soviet Union can influence their relative success by deciding who gets access to its archives. An unfriendly critic is unlikely to receive Soviet help in sharpening his scholarly edge.

I have argued that the Soviet story is one of the interaction of speculative excess or utopian aspirations with refractory reality. But scholars cannot see this as long as they believe that Soviet central planning originated not in an effort to eliminate the market but in a decision to squeeze agriculture in order to rapidly industrialize. Alexander Gerschenkron's dogma "that hardly anything in the momentous story of Soviet economic policies needs, or suffers, explanations in terms of its derivation from Karl Marx's economic theories" has blinded scholars to the meaning of their material.

Paul Craig Roberts holds the William E. Simon Chair at the Center for Strategic and International Studies in Washington, D.C. He is the author of Alienation and the Soviet Economy, Marx's Theory of Exchange, and The Supply-Side Revolution.