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Thursday, February 1, 1990

Soviet Admissions: Communism Doesn’t Work

There are annoying misprints in history, but the truth will prevail! ~ Nikolai Ivanovich Bukharin (1937)

The civic rehabilitation of Nikolai Bukharin (1888-1938) in February 1988 was an event of tremendous significance in Soviet history. The historical resurrection of Bukharin, who in the 1920s was arguably the most important Marxist theorist in the world and considered by Lenin to be “not only a most valuable and major theorist of the Party; . . . [but] he is also rightly considered the favourite of the whole party,” offers a direct challenge to orthodox Stalinism. Not only in political terms, but also on economic grounds, Bukharin represents the key opposition to traditional Stalinist planning. As Thomas Sherlock has argued:

Bukharin’s rehabilitation has placed his conciliatory rural program, as well as his advocacy of moderate cultural and political lines, in direct opposition not only to the Stalinist “revolution from above,” which dramatically expanded the bureaucratic reach of the state, but also to the terror of the 1930s, which destroyed the party as an autonomous political institution. The resurrected image of Bukharin is seen as a powerful antidote to the prevailing “Stalinist” relationship between the Soviet party-state and society and to “bureaucratic centralism” in the party.

Bukharin, however, is not without ambiguity himself. Recognized as the author of the New Economic Policy (NEP) (1921-1928), which tried to reconcile market relations with government planning, he also was the architect of the Bolsheviks’ attempt to implement pure Communism within Soviet Russia during the “War Communism” period of 1918-1921. He represented the official position of the Party throughout the 1920s. Bukharin, as Alexander Erlich put it, “was undoubtedly the best educated economist not only of his group, but of the whole party as well, with a truly outstanding facility for the rationalization, in terms of theory, of any political viewpoint he happened to embrace, and for pushing them toward the full logical consequences.” His books, The ABC of Communism and The Economics of the Transition Period, were regarded as the theoretical manifestos of the war communism period. These books defended the extreme centralization policies, as well as the use of non-economic coercion, that the Bolsheviks had implemented from 1918 to 1921.

The failure of war communism by 1921, however, changed Bukharin’s ideas about the construction of socialism and economic rationality. As he wrote in 1924, “The adoption of NEP was a collapse of our illusions . . . we thought then that our peacetime policy would be a continuation of the centralized planning system of that period. In other words war communism was seen by us not as a military, i.e., as needed at a given stage of civil war, but as a universal, general, so to speak ‘normal’ form of economic policy of a victorious proletariat.”Bukharin, though, possessed a paradigm for interpreting the collapse of the Soviet system under war communism—the economic theory of the Austrian school of economics.

Bukharin’s work on NEP which argued for the necessity of market relations of production for economic development, are found in such volumes as Building up Socialism (1926) and in the collection of essays edited by Richard Day, Selected Writings on the State and the Transition to Socialism (1982). In his work on NEP Bukharin force-fully argued against the bureaucratization of the economy and for the importance of incentives in economic activity. In fact, in perhaps his most famous essay of this period, “Concerning the New Economic Policy and Our Tasks,” written in 1925, besides encouraging the peasants to “enrich themselves,” Bukharin explicitly acknowledged Ludwig von Mises’s criticism of socialist planning and argued that Mises was “one of the most learned critics of communism.” Bukharin went so far as to admit that Mises’s criticism of Communism was correct—at least for the historical epoch in which he wrote.

“A Bureaucratic Utopia”

Amazing as this admission is, Bukharin was not the only Bolshevik to recognize the problem confronting economic planning. Even Lenin had to admit the serious problems the Bolsheviks encountered in their attempt to implement socialism. In a speech to the Political Education Department on October 17, 1921, for example, Lenin admitted that “In attempting to go over straight to communism we, in the spring of 1921, sustained a more serious defeat on the economic front than any defeat inflicted upon us by Kolchak, Deniken or Pilsudski. This defeat was much more serious, significant and dangerous. It was expressed in the isolation of the higher administrators of our economic policy from the lower and their failure to produce that development of the productive forces which the Programme of our Party regards as vital and urgent.” Moreover, in a secret letter on February 19, 1921, he wrote, “The greatest danger is that the work of planning the state economy may be bureaucratized . . . . A complete, integrated, real plan for us at present equals ‘a bureaucratic utopia.’ Don’t chase it.” Trotsky also would write, in his stinging criticism of Stalinist planning, The Revolution Betrayed (1937), that while “the obedient professors managed to create an entire theory according to which the Soviet price, in contrast to the market price, has an exclusively planning or directive character . . . . The professors forgot to explain how you can ‘guide’ a price without knowing real costs, and how you can estimate real costs if all prices express the will of the bureaucracy . . . .”

These admissions, though, were buried for several decades as the Soviet bureaucracy exercised its power over the Soviet economy and the minds of its people. With the Gorbachev reforms (both glasnost and perestroika) Soviet analysts are now beginning again to admit the fundamental flaw in the Communist ideal. Socialist planning, as Mises demonstrated in his classic Socialism (1922), is logically impossible because of the social system’s inability to provide knowledge about which production projects are feasible and which ones are not. Without private ownership, and specifically private ownership in the means of production, rational economic calculation is untenable.

Nevertheless, economic planners once in power must find some rationale upon which to base their decisions, and since economic rationales are out of the question, decisions are based instead upon political considerations. As a result, those who have a comparative advantage in exercising discretionary power will rise to the top of the planning apparatus. This is, as F. A. Hayek showed in The Road to Serfdom (1944), the basis for the totalitarian tendency within socialist economies. Soviet-style economies, thus, do not conform to the ideal picture of a rationally planned Communist economy because that system is a hopeless and unachievable utopia. Instead, the Soviet-style economy is a vast military bureaucratic system designed to yield profits to those in positions of power. The root of the Stalinist bureaucracy that plagues the Soviet economy, however, lies in the original Marxian aspiration to plan the economic system rationally even if the original goal is unattainable. Stalinism is, whether intended or not, the logical consequence of Marxism.

Criticisms Come to Light

While these criticisms are becoming more and more common in the West, it is fascinating to see them come into print in the Soviet press during the age of glasnost. But appear they have, and with increasing frequency over the past few years. Here are just a few examples.

Nikolai Shmelyev, in his courageous Novy Mir article “Advances and Debts” (June 1987), argued that “economics has its own laws which are just as terrible to violate as the laws of the atomic reactor in Chernobyl.” The following are excerpts from Shmelyev’s article:

We must call things by their proper names: foolishness as foolishness, incompetence as incompetence, Stalinism in action as Stalinism in action . . . . Perhaps we will lose our ideological virginity, but it now exists only in the fairy tale editorials of the newspapers . . . .

We need to permit companies and organizations to sell freely, to buy and borrow funds from their reserves so as to create a powerful and vibrant goods market, to invest their enormous but idle resources, to unleash in practice—not just in words—economic initiative in the country. In place of fruitless efforts at central planning of our entire industrial production (some 24 million items), we should introduce contracts between supplier and consumer.

We need to realize that there is such a thing as natural unemployment among people who are looking for work or changing their place of employment . . . . The real possibility of losing one’s job, of being shifted to a temporary unemployment subsidy, or being forced to move to a new place of employment is not at all bad medicine to cure sloth and drunkenness.

The economic situation of enterprises and cooperatives will have to depend directly on profit, and profit cannot fulfill its function until wholesale prices are liberated from subsidies. Over the centuries, humankind has found no more effective measure of work than profit. Only profit can measure the quantity and quality of economic activity and permit us to relate production costs to results effectively and unambiguously. Our suspicious attitude toward profit is a historical misunderstanding, the result of the economic illiteracy of people who thought that socialism would eliminate profit and loss.

It is time to stop deceiving ourselves and stop believing the office ignoramuses . . . . Direct contractual links and wholesale trade in the means of production are two indivisible sides of the same process. If an enterprise is to market its planned and excess production through the marketplace, the enterprise will have to be interested in the ultimate results, and this will be a level of interest stretching beyond the fondest dreams of those who now specialize in “consciousness raising.” Bottom-line, market stimuli must extend to all stages of the process: re search, development, investment, production, marketing and service. Only the marketplace, and not mere administrative innovations, can subordinate this entire chain to the demands of the consumer.

Such admissions by Soviet intellectuals of the failure of socialism and the efficacy of market relations would continue in an article by Soviet historian V. Sirotkin, “Lessons of NEP” Izvestia (March 9, 1989). Sirotkin argued:

It has become a copybook maxim to assert that the policy of “War Communism” was imposed on the Bolsheviks by the Civil War and the foreign intervention. This is completely untrue, if only for the reason that the first decrees on introducing the “socialist ideal” exactly “according to Marx” in Soviet Russia were issued long before the beginning of the Civil War (the decrees of Jan. 26 and Feb. 14, 1918, on the nationalization of the merchant fleet and of all banks), while the last decree on the socialization of all small handicraftsmen and artisans was issued on Nov. 29, 1920, i.e., after the end of the Civil War in European Russia. Of course, the conditions of the Civil War and the intervention left an imprint. But the main thing was something else—the immediate implementation of theory in strict accordance with Marx (from “Critique of the Gotha Program”) and Engels (from “Anti- During”) . . . .

The results of the policy of “War Communism” were catastrophic for the economy: By the beginning of NEP, the country was producing pig iron at only 2% of the prewar (1913) level, sugar at 3%, cotton fabrics at 5% to 6%, etc. So the attempt to introduce “communism from above” had led to a rift between city and countryside, a sharp economic decline, the scattering of the working class, and armed resistance from the peasantry . . . .

A most important aspect of NEP was the economic reform based on decentralization and broad autonomy for enterprises that had been switched to economic accountability (within the framework of the state budget and stable prices) and business accountability (obtaining of a profit at contract and market prices).

Today, from the heights of historical retrospection, one can say that Lenin’s “fundamental change in our entire viewpoint of socialism” went far beyond the bounds of Soviet Russia alone. Essentially [NEP] was a model for restructuring the entire system of economic and social relations in the world, i.e., it was the world revolution, but a peaceful one, achieved by synthesizing the positive aspects of socialism and capitalism, in conditions of economic competition between the two systems.

Despite the interventionist confusion contained within his analysis, Sirotkin’s discussion of the failure of war communism and the “success” of the reintroduction of market mechanisms under NEP is astonishing, especially if we keep in mind that his comments were originally read before the Plenary Session of the Communist Party Central Committee.

The Legacy of NEP

NEPist thinking permeates the Gorbachev reform era. Gorbachev, himself, has invoked the NEP model as an historical precedent for his reforms. In his book, Perestroika (1987), Gorbachev describes his policy of economic restructuring as a return to the teachings of Lenin. Perestroika is the new NEP.

The Gorbachev reforms, while challenging the Stalinist past to an extent, do not go far enough in their criticism of the Stalinist economic system. In fact, Gorbachev and Abel Aganbegyan, his chief economic advisor, argue that Stalin’s economic policies of collectivization were necessary given the state of development of the Soviet Union in the 1930s. Neither Gorbachev nor Aganbegyan address the fundamental problem of the Soviet system; the lessons of history are not learned. Others within Soviet academic and intellectual circles, however, do not shy away from the obvious historical conclusion of the Soviet experience.

The stagnation of the Brezhnev era is a direct result of the Stalinist legacy in economic relations. And at least two writers have gone further and published essays in the Soviet press explicitly linking Marxist-Leninism to Stalinism and the Gulag. The problem with the Soviet system lies in the fundamental political and economic mistakes inherent in the Marxist-Leninist project.

Philosopher A. Tsipko, in a series of four essays published in Nauka i Zhizen between November 1988 and February 1989, entitled “The Roots of Stalinism,” challenged the very idea that Stalin was a peculiarity of Marxian thought:

I personally get the feeling that the presently voguish myth that Stalin’s extreme-leftist “leaps” were of peasant origin was created in order to lay to rest the question of the doctrinal reasons for our failures in socialist construction and of the Party intelligentsia’s and the working class’s responsibility for Stalinism.

Paradoxically, it seems that restructuring makes it more difficult to cleanse Marxism of certain typical blunders of 19th century social thought. Judging from certain journalists’ articles, we have no right to judge Marxism on the basis of our socialist history. Philosopher I. Klyamkin tells us, for example, that the socialism that Stalin built has nothing to do with the socialism of Marx, or even with that of Trotsky, but was the product of the feverish mind of an unbalanced patriarchal peasant. If we accept that view, then we indeed have no right to compare scientific socialism and real socialism. But if we separate scientific socialism from real socialism in this way, we leave the former dangling in the air . . . .

It is difficult to accept the fact that the reasons for the failures of a movement with which our entire life is bound up lie in the movement itself, its own blunders and mistakes. It is comforting to believe enemies and external causes are to blame . . . . The temptation to separate Stalinism from our socialist construction is great, but one must consider what such a separation might lead to. What’s more, one must proceed from the real historical facts.

It is common practice today to criticize the deformed, barracks-style, egalitarian socialism built in the 1930s. But that criticism diligently sidesteps the structural reasons for our barracks-style approach. And it avoids the central question: Can a nonbarracks-type, democratic socialism be built on a noncommodity, nonmarket foundation? That question is central not only for those who are thinking about the future but also for those seeking to understand the past. Why is it that in all cases without exception and in all countries . . . efforts to combat the market and commodity-money relations have always led to authoritarianism, to encroachments on the rights and dignity of the individual, and to an all-powerful administration and bureaucratic apparatus?

Marx never saw that difficult question, since he lacked appropriate historical experience. Lenin sensed it at the end of his life All this bespeaks an urgent need for a serious and open “self-audit” of Marx’s teachings on the economic bases of the future society, on how the theoretical forecast relates to the real results of its implementation in real life.

Whether we want to or not, we have an obligation, in the name of our future, to take a more sober look at the nature and motives of leftist radicalism. And there will be no getting away without at least some reassessment of values and without clarifying what represents the greatest danger to us today. Criticism of Stalinism that is not carried to the point of principles will be of little benefit.

The truth is our sole guarantee against a restoration of Stalinism; it alone can protect us. Perhaps our whole problem, including the horrors of Stalinism, is precisely the result of having dissembled for so long, of not having learned to honor the truth per se, the truth of our history and its lessons.

Perhaps the most important essay to appear in the Soviet press, however, was written by the economist Vasily Selyunin. Selyunin’s essay, “Sources,” which appeared in the May 1988 issue of Novy Mir, argued that political and economic freedoms are inexorably connected and that the Soviet political terror under Stalin was a result of the Bolsheviks’ economic policies under Lenin. Selyunin maintained that state interference with the economic system disrupts the natural workings of supply and demand and stifles economic incentives. Soviet economic problems, stated Selyunin, are the legacy of Leninist policies. As he pointed out with reference to Lenin’s early policies, “It was not famine that occasioned the grain requisition-ing, but just the other way around: The mass requisitions caused the famine.”

The Failure of Central Planning

Selyunin also challenged the concept of rational central planning. “It can be argued,” he stated, “that historical experience has failed to demonstrate any particular advantages of directive planning. To the contrary, we all know the disastrous losses society has sustained in strict accordance with the plan.” The problem is a lack of any means to aid the planners in rational economic calculation from above; in the absence of market prices for the means of production, how do planners know which production projects are feasible and which ones are not? Economic planners, rather than formulate ex ante plans as was expected in Marxian theory, are forced to rely upon the world market to generate knowledge about resource allocation. As Selyunin wrote:

The problem here lies not in individual mistakes but in the mistaken idea that you can prescribe from above, more or less in detail, the proportions and priorities of economic development and the scale of production of even the most important products. Our planners themselves belie this idea when they carefully study world trends, which are determined by market forces, in order to plan what we should produce. Thus they tacitly admit that there is a better means than ours for the regulation, or rather self-regulation, of the economy.

Perhaps Selyunin’s most important insight into Soviet history and the current reform movement concerns the classical liberal argument about the interconnection of political and economic freedoms. In a very eloquent fashion he stated the connection:

Under market-based capitalist production, a person has complete freedom to either get rich or freeze to death. Individual rights are the obverse side of merciless economic liberties. Conversely, under total state ownership, the temptation arises to expropriate the individual himself, his physical and spiritual energies, in order to organize work according to a single plan and uniform procedures. Under such conditions, the individual can be viewed as merely a cog in a gigantic machine . . . . It would be strange to speak of the individual rights or civil liberties of a cog.

The relative success of NEP Selyunin maintained, was due to the establishment of the rule of law. “The economic successes of NEP went hand in hand with democratization: Coercion was sharply curtailed, the rule of law was strengthened, and personal liberties were greatly expanded.” Therefore, if perestroika is to succeed similar action must be taken. And action must be immediate. The bureaucracy will resist change, but this obstacle must be overcome if there is to be any chance of real restructuring of the Soviet economy:

That is where the chief danger for restructuring lies. Losing time means losing everything. Any economic- management possesses tremendous inertia and will reject alien elements, no matter how progressive they might be. That is why it is useless to gradually introduce new rules into the existing system. The only thing that can be accomplished that way is to discredit restructuring: “You see, years have been wasted on talk, and one can’t see any changes.” History will not forgive us if we miss our chance. An abyss must be crossed in a single leap—you can’t make it in two.

These brave admissions by Shmelyev, Sirotkin, Tsipko, and Selyunin challenge to the core a government that derives its justification from Marxist-Leninist ideology. This legitimation crisis is perhaps most apparent in the growing political unrest within the Baltic nationalities. If glasnost exposes the Stalin-Hitler pact (1939) as immoral and illegitimate, then what does that mean for the status of Estonia, Latvia, and Lithuania?

But the legitimation crisis is felt even within such mundane affairs as day-to-day economic existence. Perestroika and glasnost evoke both hope and dismay, as Serge Schmemann has argued, “hope that at last the millions who have lived through the tyrannies and chronic shortages endemic to Communist states find some relief; dismay that so much of the terrible sacrifice, struggle and deprivation they have endured for so long must now be acknowledged to have been in vain, that the secular faith that once promised so much now stands revealed to its own adherents as a failure.”

Reforms Fail to Bring Change

The Gorbachev economic reforms, slow in introduction and inconsistent in application, have not produced any significant change in the Soviet economy. Long lines and shortages of basic food items are still the norm. This is occurring at the same time that more and more of the Soviet people are becoming aware of the reason for their misery—the Soviet system of economic administration.

Within this grand drama, however, there is another story unfolding. The death of Communism as a legitimating ideology is the ultimate vindication of several classical liberal scholars who were ridiculed for exposing the truth of the socialist system of economic planning. History has borne witness to the intellectual triumph of individuals like Ludwig von Mises, F. A. Hayek, Michael Polanyi, and Paul Craig Roberts. As Stephen Bohm writes with regard to Mises, “it is really scandalous to observe how decades of ridicule poured upon Mises’s ‘impossibility thesis’ suddenly give way to an appreciation of his views as if they had been part of the conventional wisdom all along . . . . Surely, the belated appreciation of what was once widely thought to be his greatest blunder is Mises’s ultimate intellectual triumph.”

Communism, plain and simple, has revealed itself for the whole world to see as an unfortunate and terrible historical mistake. Zbigniew Brzezinski, in his controversial book, The Grand Failure: The Birth and Death of Communism in the Twentieth Century, concludes:

The Communist phenomenon represents a historical tragedy. Born out of an impatient idealism that rejected the injustice of the status quo, it sought a better and more humane soci-ety-but produced mass oppression. It optimistically reflected faith in the power of reason to construct a perfect community. It mobilized the most powerful emotions of love for humanity and of hatred for oppression on behalf of morally motivated social engineering. It thus captivated some of the brightest minds and some of the most idealistic hearts—yet it prompted some of the worst crimes of this or any century . . . .

Communism’s grand failure has thus involved, in summary form, the wasteful destruction of much social talent and the suppression of society’s creative political life; excessively high human costs for the economic gains actually achieved and an eventual decline in economic productivity because of statist overcentralization; a progressive deterioration in the overly bureaucratized social welfare system which represented initially the principal benefit of Communist rule; and the stunting through dogmatic controls of society’s scientific and artistic growth.

That historic failure, now explicitly’ acknowledged by the Communist leaders advocating reforms, has deeper roots than the “errors and excesses” finally regretted. It stemmed from the operational, institutional, and philosophical shortcomings of the communist experiment. Indeed, it was deeply embedded in the very nature of the Marxist-Leninist praxis.

If, as Voltaire argued, history is philosophy that teaches us by example, then the lesson of the Soviet experience should challenge our basic preconceptions concerning government interference with free market processes. Not only socialist policies, but interventionist policies which derive their justification from the same pretense of knowledge must be challenged. Perhaps we have finally learned the lesson that the history of the SovietUnion has to offer us. If not, I fear, as Selyunin wrote, “history will not forgive us.”


1. On Bukharin’s rehabilitation see The Current Digest of the Soviet Press, XL, #5 (March 2,1988).

2. V. I. Lenin, “Letter to the Congress, December 25,1922,” Collected Works (Moscow: Progress Publishers, 1977), vol. 36, p. 595.

3. Thomas Sherlock, “Politics and History under Gorbachev,” Problems of Communism (May-August 1988), p. 24.

4. For a discussion of this period of Soviet history see my “The Soviet Experiment with Pure Communism,” Critical Review, vol. 2, #4 (Fall 1988), pp. 149-182, Also see my The Political Economy of Soviet Socialism: The Formative Years, 1918-1928 (Boston: Kluwer Academic Publishers, 1990).

5. Alexander Erlich, The Soviet Industrialization Debate (Cambridge: Harvard University Press, 1960), p. 9.

6. See Alec Nove, “Some observations on Bukharin and His Ideas,” Political Economy and Soviet Socialism (Boston: George Allen and Unwin, 1979), p. 86.

7. It is interesting to keep in mind that during Bukharin’s exile from Russia in 1914, he studied economics in Vienna and attended Boehm-Bawerk’s famous seminar on economic theory. He later embarked upon a serious study of the theories of Walras and Pareto. His studies are found in The Economic Theory of the Leisure Class (New York: Augustus Kelley, 1970 [1919]), which is a criticism of the Austrian school of economics and other non-Marxian schools of economics. Bukharin was well aware of both Boehm-Bawerk’s and later Mises’s criticisms of Marxian economics. In fact, he stated that his reason for concentrating upon the Austrian school was because “it is well known that the most powerful opponent of Marxism is the Austrian school.”

8. Nikolai Bukharin, Selected Writings (New York: M. E. Sharpe, 1982), p. 188.

9. V. I. Lenin, “The New Economic Policy and the Tasks of the Political Education Departments,” Collected Works, vol. 33, pp. 6364.

10. Letter to G. M. Krzhizhanovsky, Collected Works, vol. 35, p. 475.

11. Quoted in Michael Harrington, “Markets and Plans,” Dissent (Winter 1989), p. 60.

12. See Gary M. Anderson, “Profits from Power: The Soviet Economy as a Mercantilist State,” The Freeman (December 1988).

13. For an interesting discussion of how even decentralized and humanistic Marxism leads logically, though unintendedly, to centralized administration of economic and social life see David Prychitko, “Marxism and Decentralized Socialism,” Critical Review, vol. 2, #4 (Fall 1988), pp, 127-148. Also see Prychitko, “The Political Economy of Workers’ Self-Management: A Market Process Critique,” Ph.D. thesis, Department of Economics, George Mason University, 1989.

14. As Theodore Draper argues in “Soviet Reformers: From Lenin to Gorbachev,” Dissent (Summer 1987), p. 287, “This return to a NEP-type reform is particularly characteristic of the unfolding Gorbachev period; Gorbachev himself has invoked the precedent of the NEP, as if it gave him a license to do what he wants to do. Thus, we are not straying too far from the present in paying special attention to the NEP period. Nap-thinking is imbedded in the present.”

15. See Mikhail Gorbachev, Perestroika (New York: Harper and Row, 1987), p. 41, where he argues that the “industrialization and the collectivization of agriculture was indispensable” and Abel Agan-begyah, The Economic Challenge of Perestroika {Bloomington: Indiana University Press, 1988), p. 46, where he argues that the period of industrialization and collectivization allowed a backward Soviet Union to speed its development so that by 1941 the “Soviet Union was already producing 10% of the world’s industrial output and had caught up with the developed European countries.”

16. Serge Schmemann, “In Hope and Dismay: Lenin’s Heirs Speak,” New York Times (January 22,1989).

17. Stephen Bohm, “The Austrian Tradition: Schumpeter and Mises,” in Klaus Hennings and Warren J. Samuels, eds., Neoclassical Economic Theory, 1870-1930 (Boston: Kluwer Academic Publishers, 1989).

18. Zbigniew Brzezinski, The Grand Failure (New York: Charles Scribner’s Sons, 1989), pp. 231,241.

  • Peter Boettke is a Professor of Economics and Philosophy at George Mason University and director of the F.A. Hayek Program for Advanced Study in Philosophy, Politics, and Economics at the Mercatus Center. He is a member of the FEE Faculty Network.