All Commentary
Saturday, June 1, 1991

Book Review: The Political Economy of Soviet Socialism: The Formative Years, 1918-1928 by Peter J. Boettke

Kluwer Academic Publishers, 101 Philip Drive, Assinippi Park, Norwell, MA 02061 • 1990 • 246 pages • 549.95 cloth

It has generally been thought that the Communist command economy that Joseph Stalin . introduced into the Soviet Union in the early 1930s, with its nationalized industries, multi-year plans, and administered prices, was the epitome of socialism. Not so. The only effort to implement socialism-cum-communism (as it was understood by Karl Marx and the foremost socialist thinkers of the last quarter of the 19th century) was the ear lier abolition of monetary exchange for commodities in favor of production for use, i.e., bypassing markets and money in favor of direct exchange of goods. For Marx believed that it was the process of exchange through money and markets that polluted human relationships by alienating workers from the products they produced.

Following the pioneering ideas of Michael Polanyi, Paul Craig Roberts, and Boris Brutzkus, Peter Boettke has written what must now be the major introduction to the ideas animating Communist economies. His first proposition is that Marx and his followers did indeed wish to substitute direct for monetary exchange. His second is that Lenin and his followers, taking Marx seriously, did indeed attempt to abolish resource allocation via market prices in favor of central direction by intellectual calculation via direct exchanges of commodities. His third proposition, the obverse of the second, is that the deliberate introduction of a Communist economic system wasn’t forced on Lenin by the exigencies of civil war, but that he did what he and his followers always intended to do.

Why does this seemingly abstruse historical point matter? If Boettke and the tiny band of his predecessors are right in holding that socialist-cum-communist economics was actually tried, then they can also show that it failed, for all students of this period agree that war communism was a disaster. There is a great difference in claiming that the Stalinist political economy that failed was a deviation from true socialism and acknowledging that the real thing was a disaster. What about the evidence?

“The policies of war communism, I hope to demonstrate,” Boettke writes, “were not born ‘in the crucible of military expediency,’ [as the major Western historians argue] but were born instead in the political economy of Karl Marx and were transformed into praxis [that funny word Marxists use to show they are serious] by Vladimir Ilyich Lenin from 1918 to 1921 in Soviet Russia.”

Among the many pieces of evidence Boettke cites are these: banks were nationalized during the last days of 1917, foreign trade monopolized in April 1918, and large-scale industry nationalized in June. Private trading was forbidden and a monopoly on exchange granted to the Commissariat of Supply in November. The Supreme Economic Council declared in August 1918 that accounting had to be carried out without use of monetary measures. A vast expansion of the money supply cut the purchasing power of the ruble by 99 percent between October 1917 and October 1920, thereby demonstrating the low regard in which money was held. Everything that was then circulating as a form of money, at least among State enterprises, had to be handed over to the Peoples’ Bank in May 1918. In August 1918, according to the Supreme Economic Council, receipts of goods and settlements (one hardly dare say “payments”) for deliveries were to consist of accounting entries.

In this way was made good the common belief of Marx, his followers, and radical socialists that money would no longer be required once producers made goods directly for users. Hence, in the Marxist image, the fall of mankind, the split between private and public selves, would be made whole by workers not merely metaphorically but physically, by directly giving the work of their hands, minds, and bodies to other workers for the things they needed.

What, by Contrast, is the Stalinist command economy? It is an effort to mimic the operation of markets by providing from central direction the same sorts of commands that a market system might were it allowed to operate. Money is there (albeit reduced somewhat in importance but by no means entirely); so is the price system. What is missing are only those things that make capitalism work and worthwhile—private property, the market price system, interest rates to ration capital, and capital markets. The devices of market exchange that simultaneously operate to elucidate preferences, to calculate marginal exchanges, to get rid of the worst products as resources are bid away to more productive uses and users, are abolished. With what result? There emerges an economy of shortages characterized by negative selection in which the least valued products, produced by the most politically powerful factories, get the most resources. Some call this state capitalism. A better way to express what has happened is that Stalin’s misunderstanding of capitalism as a system that exploits workers by decreasing their consumption while coercing them to increase production, thus freeing up investments for economic growth, led him and his allies to use Communist collectivist forms to imitate individualist operations.

The Political Economy of Soviet Socialism is so good that it deserves a new chapter specifying in detail the operations of war communism, it is not enough to know that production decreased by anywhere from two-thirds to four-fifths; it is also important to understand the ways in which this proved unsatisfactory. It is true that Marx never had an opportunity to observe a Communist econ-only; one of the few benefits of the Bolshevik revolution is that it left behind a historical legacy of what such an economy was like. This fine book whets our appetite for more.

Dr. Wildavsky is Professor of Political Science and Public Policy, University of California at Berkeley.