Economic Welfare Under Central Planning

Economic Welfare Under Central Planning

Two facts documented in the previous section are the rapid growth in total and per-capita output in the Soviet Union since the era of five-year plans was launched in 1928 and the high portion of output devoted to capital formation during this period. These two magnitudes determine a third, namely what was left over for private consumpton and how per-capita con­sumption varied over time. Economic growth can thus be seen as partly a question of the division of the bounty of economic activity between the present generation of consumers and a receding horizon of future genera­tions; the "sacrifices" made now to allow a high rate of capital formation expand potential output in the future. In a market economy the choice be­tween present and future consumption results indirectly from the voluntary savings generated by individuals anticipating the future needs of themselves and their heirs. Centrally planned economic systems make the same choice directly and arbitrarily when the planned rate of capital formation is spe­cified.

Living Standards, Soviet Standart Of Living

When attention is focused on Russian consumption since 1928, the abrupt­ness and totality of the Soviet industrialization effort becomes evident. Recognizing all of the measurement difficulties that were discussed in rela­tion to the growth of output, the evidence leads one to the initial conclusion that the real per-capita consumption of the typical Russian citizen did not increase significantly during the quarter-century preceding Stalin's death in 1953.13 In other words, Russian workers were enlisted in a massive, frantic rush to industrialize, which more than doubled per-capita output without any of the benefits showing up in per-capita consumption. It can be argued that every historical example of successful industrialization probably in­volved some temporary lag of consumption standards behind the rate of output growth, but it is doubtful whether any other country can match the duration and severity of restricted consumption that occurred in the Soviet Union.

It is idle to speculate about how much longer these conditions could have continued unaltered beyond 1953. The succession of political leaders were all committed to some degree of emphasis on increasing the standard of living. The broadest generalizations that can safely be made about recent living standards in the Soviet Union are the following: (1) They rose sub­stantially from 1950 to the early 1960s. (2) The impact of the adverse trend in the rate of economic growth in the early 1960s was permitted to fall principally on consumer-goods rather than producer-goods industries, causing a pause in the rate of increase. (3) The level of welfare of the Soviet population has improved conspicuously in recent years. (4) Overall average living standards are at about one-quarter to one-third of the prevailing average in the United States. (5) Standards vary in degree from housing, where their average is far below one-quarter of ours, to food and clothing, where it may be nearly half of ours, to medical services, education, and certain public services, such as urban transportation, where it may approx­imately equal ours. (6) The Soviet standard of living encompasses extreme degrees of inequality, extending from the most comfortable or even luxuri­ous living standard of the popular writer, artist, musician, actor, outstand­ing professor, scientist, engineer, or Party leader to the dire poverty of many members of poor collective farms. (7) Soviet average living stand­ards, barring severe recession in the United States or a major reversal of the Soviet priority on planned allocation of productive resources, will lag far behind ours for the foreseeable future.

Any attempt to generalize about comparative living standards between the Soviet Union and the United States is made at considerable peril. It is extremely easy to draw generalizations from too restricted or irrelevant sets of facts. Several illustrations of this will suffice. The paucity of pri­vately owned automobiles, by American standards, might well be taken to reflect poor national living standards. The fact is that Party policy mak­ers and planners, at least until recently, have held that urban populations will be better served by channeling resources into the improvement of bus and subway urban transportation. They point with derision to what they regard as a misdirection of productive resources resulting in a scourge of traffic jams and accidents in urban communities in the United States and Western Europe.

Similarly, the logic of another frequently cited criterion of living standards could be challenged. It is sometimes noted that, comparing aver­age workers in Moscow and New York City, the former works 4 times as long as the latter to be able to buy a pound of beef, 1 Vi times as long for a loaf of bread, 11 times as long for a man's wool suit, 4 times as long for a quart of milk or a package of cigarettes, and so on. Such references disregard established basic differences in patterns of consumer desires in the two countries. Also, many comparisons of living standards make the false assumption that the Soviet citizen looks to public agencies for the same portion and the same elements of his living standards as does the citizen of the United States. The fact is that the Soviet citizen acquires a larger portion of his total consumption from public sources, thereby sup­plementing his expenditure of personal income.

Though this cannot be quantified accurately, it is illustrated by certain facts. Whereas the American industrial worker spends about 25 percent of his income for living quarters, the Soviet worker spends 4 or 5 percent for this purpose because worker housing is very heavily subsidized from public funds in the Soviet Union. The Soviet citizen faces no bills for medical services—even for hospitalization and surgery, of a quality near the Amer­ican level—because these costs are met entirely from government funds. The same is true for education at all levels. In the Soviet Union, fares on public transportation far from cover the costs of rendering this service, and the citizen contributes nothing to the cost of his old-age pension and sick­ness and disability insurance. Nursery services for children of working parents are made available at a nominal charge. This larger area of com­munal consumption by the Soviet citizen is a factor that should not be neglected when living standards are judged on the basis of private con­sumption expenditures.

The position of consumers in the Soviet Union has improved consid­erably in the past few years, owing largely to normal wage raises for im­proved skills, higher labor productivity, and greater welfare payments such as pensions, educational stipends, and so on.

More important, however, were wage and welfare reforms begun by Khrushchev in 1964 and continued and embellished by the Brezhnev-Kosygin regime. Welfare measures implemented in 1965 brought 25 to 30 million collective farmers and their families under a state social insurance program, raised by 20 percent the average wage of 18 million workers in the service sector, and increased the minimum monthly wage by more than one third. Further increases in 1967 added approximately 15 percent a month to the incomes of 4.5 million workers in lumbering, consumer goods industries, and certain occu­pations on state farms.

This upward spiral of incomes may well continue as a result of new welfare measures currently being implemented.
In order that such a sizable increase in the rouble incomes of so large a portion of the population may represent a rise in the recipient's real liv­ing standard, it obviously is necessary that the supplies of consumer goods be considerably expanded. The Soviet economy has made significant prog­ress in this direction, including some liberalization in the importation of consumer goods. There is clear evidence that the Soviet retail buyer is now measurably better able to be selective in his shopping for consumer-durable goods and to avoid the poorer qualities and styles he does not like.

Health, Education, and Scientific Progress

Health, education, and scientific progress are especially crucial indicators of future expansion in the Soviet economy. There are said to be over 12 percent more physicians in the Soviet Union per 100,000 people than there are in the United States. About 70 percent of them are women. Each has completed a six-year medical education in one of the country's 80 medical schools. All medical, dental, surgical, diagnostic, hospital, and related serv­ices are free of charge to any Soviet citizen, the patient paying only for medicines he uses at home. In addition to physicians, there are trained physicians' assistants, midwives, pharmacists, and nurses. The medical training program in the Soviet Union is the largest in the world. Medical students pay no tuition, and 85 percent of them receive stipends to meet living costs. Apparently the quality of medical services is high, although the quality of medical training probably is not quite comparable to that available in the United States. Although there are occasional complaints about the limited time a physician has for a patient, the need for more equipment in the polyclinics where out-patient services are rendered, and unsatisfactory services in agricultural or outlying industrial regions, these are relatively minor compared to the impressive achievements in expanding the quantity and quality of medical services under Soviet rule.

In 1959 the basic elementary-school period was made eight years, with courses in fundamentals of science, Russian, mathematics, history, physics, foreign language, and geography. Thereafter all students are ex­pected to engage in some kind of regular productive work, with opportuni­ties afforded to continue their studies in three-year evening secondary schools; those who do well have their regular working hours reduced. Here courses of study include general educational and technical subjects, with the greatest number of hours being allocated to mathematics and physics. While a small number of especially able students continue directly from the eight-year school into full-time high-school academic courses and then into the universities, the main paths to be followed above the eight-year school are (1) to a work-study high school and thence to either a job or a univer­sity (for those who meet the high entrance requirements) or (2) to a tech­nical training school and thence to a job.

Qualified Americans who have studied the Soviet educational system firsthand are impressed with the way they educate and train for the specific manpower and professional needs of their system, whereas in the United States we emphasize much more general aspects of education while giving students leeway to choose majors and courses to fit their individual inter­ests. The zeal of the Soviet population for education and the rapid increase in educational opportunities are highly commended. Also noted are the high quality of equipment, the favorable teacher-student ratio, the emphasis on productive work, the work of the Pioneers (a school-age Communist or­ganization) in keeping discipline and supervising extracurricular activities, and the emphasis on physical education and health. Some of the questions or criticisms pertain to the lack of emphasis on the humanities and the ab­sence of instruction in economic systems and societies other than their own.

So much has been published in popular sources about the Soviet Un­ion's progress in the physical sciences that little need be said here. Their scientific advance comes from precisely the same sources ours must come from—generous allocations of resources to higher education and scientific research and devoted work by students, teachers, and researchers. Scien­tific research, like everything else, is highly organized in the Soviet Union.

The top scientific organizations are the USSR Academy of Sciences, re­sponsible to and reporting annually to the Council of Ministers, and 15 other Academies of Sciences, each responsible to the Council of Ministers of its republic. The USSR Academy of Sciences consists of many institutes for the respective scientific fields; an example is the Institute of Economics. The actual research activity occurs in an array of research institutions. The Academy, which is financed wholly from the government budget, constructs both annual and longer-term research plans. To be elected an Academy member is the highest professional honor for a scientist, and all of the lead­ing scientists are among its 500 members.

The Individual and the State

When one examines the Soviet system from the viewpoint of the traditional values of the Western world, considerable doubts about its ultimate merit arise. Western traditions hold the individual to be the end toward which political and economic activity is directed. The individual's freedom and ability to develop personal potentialities to the full is the final criterion by which our institutions, processes, and historical trends are judged. Al­though activities are limited by law, these limitations are grounded on the necessity to restrict one individual's actions in order to assure others their inherent rights. We have a concept of the common good—the necessity for group or communal action in certain limited spheres—in order that indi­viduals, as such, may enjoy full lives. The great force protecting the in­dividual is pluralism: in a multiparty political system; in relatively free eco­nomic enterprise and competition; in independent newspapers, books, and magazines; in religious freedom and tolerance; in varied state and private educational systems and institutions; and in unrestrained activities in the sciences and the arts.

The absence of pluralism in the Soviet system opposes it to Western philosophies and ideals. As noted in our brief study of political institutions, sovereignty in the Soviet Union resides in the Communist Party—the single legal party—and not in the government with its ostensibly popularly elected assemblies (Soviets). Within the Party, sovereignty centers in a small circle of Party officials, which, while the personages change, remains a self-selected, self-perpetuating, all-dominating power bloc. This is not to say that this self-selected power elite does or can do whatever it personally may prefer; there is an outside limit in the tolerance of the masses. In the Soviet Union this outside limit is kept inactive by the ubiquity of government as an agent of the Party. The government owns and operates practically all industrial enterprises and a constantly enlarging portion of agricultural units; government or Party appointees edit and government presses publish all newspapers and journals, and government presses publish all books; religion in any traditional sense is experiencing a planned withering away; and education is exclusively a function of government. Only in the arts and sciences does pluralism have some reality, and in the arts this is well con­fined by Party influence.

The persistence of restrictions on the free flow of artistic and intellec­tual ideas long after they represent any immediate threat to political sta­bility may indicate an ingrained bureaucratic distrust of creative expression in nonpluralistic societies. Although the methods of repressing dissent have become more subtle, the possibility of loss of privileges, bans on publica­tion, or even involuntary incarceration in "mental" hospitals exerts a chill­ing effect on intellectual activity. Life for most Russian citizens goes on in a bland, routine way; any society imposes sanctions on rebellious or deviant behavior, but in Russia the detection mechanism is omnipresent and the price of misbehaving greater than in the West.

Our interest centers in the economic aspects of this monolithic soci­ety. Its detailed organizational and operational phases have been discussed. It remains for us to take a sweeping look at their implications from the viewpoint of our own Western scale of values. First, the individual con­sumer has little, if any, of the sovereignty that exists in very substantial measure in Western nations. Decisions involving the division of productive resources between building capital facilities and producing goods for con­sumption are made by top-level Party bodies. The subdivision of resource use within these broad categories is made by a centralized economic-plan­ning hierarchy reaching into every crevice of the economy. Admittedly, many detailed plan goals are related to the quantities of goods the populace buys in retail stores. However, the prices at which consumers make their choices are aggregates of many and important arbitrary cost elements, the turnover tax being a visible example (many are invisible to the public eye). Even if one accepts as accurate the most severe estimates of the power in the United States of misleading advertising and sales promotions, the in­ability of the consumer to judge quality, durability, and usability of con­sumer goods, and the consumer's failure to initiate counterforces to these, consumer sovereignty remains a vital pluralistic aspect of our economy.

In the Soviet Union all industrial employees work for the government, either directly in state-owned and operated enterprises or in closely con­trolled producers' cooperatives. The peasant farmer either works directly for the government on a state farm or, aside from time spent on his private plot, in collective-farm activities. The skill or type of ability the industrial worker achieves and the attainments of the professional worker are related directly to the amount and type of education or training the government makes available. In addition, an enormous number of people are employed by the hierarchy of governmental administrative, planning, and manage­ment agencies, and by the Communist Party apparatus.

Finally, our evaluation of the Soviet system must not be concluded without noting the reply of Soviet Marxism to these questions. The con­temporary domination of government and Party, they declare, is simply a way station along the path to full communism; it is only in this latter stage of human living that complete consumer sovereignty can prevail. Only then will a person be really free, the hard and disagreeable work having been taken over by machinery and some measure of socially useful effort having become an inherent ingredient of individual happiness; only then will class divisions and distinctions have disappeared, and no symbols of class remain; and only then will true pluralism in its full meaning prevail, with its benefits freely available to all. This surely has the ring of the highest idealism. The present Soviet Communist Party leaders admit that entry into such a stage of human society first requires proliferation of society's economic productive power—now sought through powerful government and Party use of planned scientific development and industrial automation. The leaders also contend that the beginnings of ultimate full communism and the attendant absence of restrictive government are now visible in the Soviet Union.

This, of course, raises the question of the goals and motivations of present and future political leaders in the Soviet Union. Is affluence a goal in itself, or is it also a means of increasing the freedom and dignity of the individual? Will the levers of economic and social control be relinquished now that the initial rationale for them—rapid modernization of the econ­omy—has largely been achieved? Will a pent-up mass demand for greater civil liberties emerge the way the demand for consumer-durable goods has recently required the attention of economic planners? Indications are that a further loosening of individual choice will occur, but like all processes of social change it will occur unevenly and with unforeseen side effects and political ramifications.

Past Accomplishments And Future Prospects

In November 1967, Monthly Review, the leading journal of socialist eco­nomics in the United States, devoted an entire issue to commemorating 50 years of Soviet power. It included essays by many of the best-known Western proponents of socialism. To a surprising extent the overall ap­praisal of the current Soviet economy was that in the process of acquiring material comforts it had somehow lost its "soul." The following quotation exemplifies this consensus view.

The Revolution brought industrialization, urbanization, a rise in living standards, and the achievement of universal literacy along with other basic elements of human culture. Formerly, these advances were achieved under capitalist auspices, but for well-known reasons this is no longer possible in backward countries today. No less significant is the fact that while the capitalist nations required two and three cen­turies for their accomplishment, the Russian Revolution, using a socialist framework, required only 30 years. (In this connection, we must not forget that it took a decade to recover from the First World War and the civil war, and that a second decade was consumed by the Second World War and its aftermath.)

Thus in the performance of "capitalist" tasks, the Russian Revolution has achieved great successes. But, compared to the aims and aspira­tions of the inspirers of the Revolution, the story is different. The Russian Revolution, like the French, was a climactic event for a world­wide body of idealists. They aspired to a true communal life, genuine equality, the abolition of classes, rank, and distinction, the emancipation of women and sexual freedom, the liberation of the arts, the birth of a cooperative commonwealth in which men would at last find harmony among themselves and with their environment. . . .
But the direction of Soviet society today is such that there seems to be little will to move toward socialism, now that it is at last becoming possible. In the years of the hard ascent, the Revolution seems to have lost its way. Everything was sacrificed so that the Revolution might survive and industrialize; and now the very instruments created for survival, the modes of rule, the habits of thought, the institutions, the ideological crudities seem to form a solid barrier across the road to socialism. . ..
This is why the Soviet experiment has, with remarkable suddenness, lost the center of the international stage.

Has the idealized "new socialist man" become simply another wage worker responding to material inducements in a "bourgeois" environment? Are Russian political leaders just another group of bureaucrats, techno­crats, and manipulators of public opinion? Has the Russian economic sys­tem grown fat and complacent now that the tremendous challenges of achieving political stability and economic modernization in a hostile world have been largely accomplished? It becomes obvious that even the most fervid admirers of past Soviet economic accomplishments are not content to let the growth rate stand as the sole criterion for evaluating the costs and benefits of the experiment that has been going on in Russia for the past 50 years. Economics is ill-suited for judging monumental accomplishments brought about through monumental sacrifices in human lives and efforts and under the most adverse of conditions. Rapidly raising the Soviet eco­nomic system to a position among the industrial leaders of the world is a tremendous success story judged by narrow economic criteria alone. How these factors compare to those desired by sympathetic critics—"more equal­ity and fewer privileges to the bureaucracy, more confidence and trust in the masses, greater inner party democracy"18—must be left to the value judgments of the individual evaluator. We might add, however, that a utopia without laughter and flowers doesn't seem to us to be much of a Utopia.


If the Soviet experiment has indeed lost the center of the international stage, as the passage just cited indicates, it is because experiments aimed at creating a socialist economy while using alternate incentive systems have appeared to break down the image of socialism as a monolithic entity slavishly imitating the Russian pattern. The next chapter treats the incen­tive systems of Yugoslavia, China, and Cuba—the three most widely dis­cussed variations of the Soviet prototype.