About three years ago I attended a panel at the Socialist Scholars
Conference on markets in socialist economies. It was chaired by Al
Campbell, an ex-Trotskyist who now teaches economics at the University of
Utah, which is quite an anomaly. The economics department there is reputed
to be one of the most Marxist-friendly in the country, while the state of
Utah is also the home base of the notorious anticommunist and racist Mormon
sect.
Dave Kotz spoke first on markets in the former Soviet Union. Kotz is the
co-author of "Revolution from Above," with journalist Fred Weir, which is
about the capitalist transformation taking place there. Kotz's main point
was that a market economy is not the same thing as a capitalist economy.
When the first term is used, the whole question of PRODUCTION tends to get
lost in the shuffle. When Soviet economists first began to become recruited
to neo-classical economics in the 1960s, they lost track of this
distinction and the results were catastrophic for the Russian people. He
added, however, that this might not have made a difference to them because
the top Soviet officials never saw capitalism as a way of lifting up the
Russian people, but only as something that would benefit them exclusively.
By all objective measurements, the Soviet economy was functioning quite
well up until the mid-70s. What this upper crust of the officialdom was
reacting to was not poor performance, but their own class interests.
It is certainly correct that markets have "worked" in the former Soviet
Union based on the proliferation of small banana stands in the early years
of the Yeltsin regime. Small entrepreneurs made contact with foreign
wholesalers and bananas flooded into the country. As the supply increased,
the price went down. Unfortunately, the true measure of an economy is what
is being PRODUCED and by this measure the fSU was about to collapse.
The most dramatic proof of this is that fully one-half of all households
are self-provisioning. They grow food in their own backyard in the same
manner that peasants did in precapitalist Europe. The problem is that one
can simply not supply one's daily nutritional needs through a tiny cabbage
and potato patch in the backyard and millions of Russians go to bed hungry
each night.
Production in the fSU collapsed because Soviet enterprises were geared to
central planning and when central planning disappeared, they lacked the
survival mechanisms necessary to make the transition to capitalism. These
firms were generally monopolistic. They also were the economic hubs of the
towns and cities that they were built in. Social supports such as
healthcare, childcare and education were intimately linked to the plant.
When the plant died, nothing came along to replace them.
Very few of these plants were profitable or meant to be. Financing was
automatic, as was marketing. Each had a steady supply of both raw materials
and purchasers. By the criterion established in 1917, they were successful.
By capitalist criteria, they were failures and shut down. Foreign companies
have filled the gap and mass unemployment has set in. Kotz remarked that
the Chinese have observed the fSU's troubles and are reluctant to privatize
right now, because of the social and political costs.
Kotz argues that the Soviet economy was closing the gap with the west
through the 70s until it went into a slump around 1975. That year the
Soviet economy was rated at 50% of the west's from the standpoint of
productivity. This slump WAS possible to overcome within the parameters of
socialism, but the ruling bodies had already begun considering dumping the
system for capitalism.
The most interesting points were made around the question of innovation.
Kotz makes a convincing case that competition such as the kind that exists
in the Adam Smith model is HOSTILE to technical innovation. Capitalist
firms would under-invest normally because their competitors can easily
mimic the new improvements without undergoing the same expenditures. In
reality, monopolistic firms are generally the ones that promote R&D,
especially those that receive tax subsidies or have ties to the military.
Bell Labs was a major innovator for many decades, but as soon as the phone
companies were broken up, Bell Labs switched to market research from pure
science or engineering. The implication for socialists is clear. Socialism,
rather than capitalism, is potentially a source of rapid modernization and
progress rather than capitalism. Kotz mentioned that the most extensive
development of these ideas is contained in Pat Devine's articles and books.
Some professor named Frank Thompson, whose work I was not familiar with,
spoke next on the completely opposite approach to markets taken in Cuba. He
was really quite impressive.
He described the context in which Cuba has introduced market elements, but
not capitalism. When the USSR collapsed, 85% of Cuba's trade disappeared.
The response of the Cuban government to this calamity was first off not to
liberalize the economy, but to actually tighten it up. Rationing was
introduced to make sure that everybody had equal access to food and other
consumer necessities.
Steps were then taken to introduce elements of private enterprise, but they
were done with great caution. State ownership of production was maintained,
while joint ventures with foreign companies was done in a manner that was
relatively disadvantageous to the capitalist investors. They have to deal
with state labor contractors, who ensure that Cuban workers are not
super-exploited as they are in places like El Salvador or the Dominican
Republic. As far as Cuban state firms are concerned, they now have the
right to buy freely from capitalist firms and sell on the open market.
The sugar industry has not performed well in recent years, but this is more
a function of declining commodity prices worldwide than Cuban
mismanagement. The pharmaceutical industry is one of the most innovative in
the hemisphere and enjoys the kind of support that the American oligopolies
enjoy. The produce goods for the third world market and try not to compete
with imperialist giants such as Pfizer.
Agriculture has been privatized extensively but has taken the form of
cooperatives rather than individually-owned farms. Furthermore, since
tobacco and coffee production lend themselves best to smaller, more
labor-intensive, operations, they have meshed well with the forms of
property ownership encouraged by the Cuban government.
Cuba has recovered from the disaster that befell it when the USSR
collapsed, but its per capita income is still only 1/3 of what it was that
year, around $2000. Cuban economists believe that it will take another
decade to recover and one can only hope that a successful revolution in a
more advanced country might relieve pressure on the island.
Unfortunately, another invited speaker, Luis Aguilera of the University of
Holguin in Cuba, had been prevented from entering the US. He would have
spoken about his major research topic, the impact of markets on the Cuban
working class.
The final speaker was Al Campbell, who presented some highly revealing
statistics some from the Gallup Poll based in Miami. It reported that 69%
of Cubans considered themselves revolutionaries. This was during the lowest
point of the economic collapse. 58% thought the Cuban revolution had
produced more achievements than failure, while 31% held the opposite view.
He discussed what a double-edged sword tourism is. While it has produced
material benefits to the island in terms of employment and as a supply of
foreign currency, it has had negative ideological effects. The message that
tourism conveys is that other countries have money to spend in poor Cuba
because they have capitalism.
Al made a convincing case that the market has a much narrower base in Cuba
than is commonly perceived. Only 3 percent of firms operating in Cuba are
joint ventures. Less than 2% of Cuban workers are employed in the tourist
industry. Less than 5 percent of Cubans are self-employed. 300 thousand
Cubans belong to co-ops, out of an agrarian workforce of 4.5 million.
Furthermore, the presence of the dollar has not automatically been at the
detriment of Cuban production. If you visit dollar stores in Cuba, you will
discover that nearly half the goods for sale are made in Cuba.
During the discussion period, Rafael Causa from the Cuban Mission to the UN
made the case that Cuba introduced markets because it had no choice. He
also explained that the embargo has been tightened in recent years, despite
the perception that trade with Cuba has been relaxed.
Louis Proyect
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