Abstract
Following the October Revolution in 1917, the Bolsheviks embarked upon a series of economic policies in the attempt to establish a socialist economic order. Commenting on the consequences of the economic policies enacted in the wake of the October Revolution, Maurice Dobb doubted “whether in any previous age so profound a change, affecting so large an area of the world’s surface, has ever occurred within such a narrow span of time.”1 The influence of these radical changes in the political and economic structure of the Soviet Union, however, carried far beyond the border of Russia. Whether one looks at the early intellectual excitement embodied in Sidney and Beatrice Webb’s prediction of a “new civilization” and the heralding of “true democracy” by E.H. Carr, or the later revelation of the totalitarian reality of the Soviet system, the force of this Soviet experiment in socioeconomic reorganization on intellectual discourse is undeniable.2
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Notes
M. Dobb, Soviet Economic Development Since 1917 ( New York: International Publishers, 1948 ), 1.
See Sidney and Beatrice Webb, Soviet Communism: A New Civilisation? (New York: Scribner’s, 1938); E.H. Carr, The Soviet Impact on the Western World (New York: Macmillan, 1947); Aleksandr I. Solzhenitsyn, The Gulag Archipelago, 3 vols. (New York: Harper and Row, 1974).
Mikhail Heller and Aleksandr Nekrich, Utopia in Power: The History of the Soviet Union from 1917 to the Present (New York: Summit Books, 1986), 11.
My concern is not so much with what Marx meant by socialism, though this is obviously a point of importance, but rather what leading European and Russian Marxist thinkers thought Marx meant by socialism, and what policies they should follow. In particular, with regard to Russia, what did Lenin, Bukharin, Trotsky, and others, think a Marxian world should look like?
Alexander Gerschenkron, “History of Economic Doctrines and Economic History,” American Economic Review, Vol. 59, n. 2 (May 1969), 16.
Nove, An Economic History of the U.S.S.R. (New York: Penguin Books, 1984[1969]), 47.
Ludwig von Mises sparked the debate in 1920 with his challenging article “Economic Calculation in the Socialist Commonwealth,” which was later translated and reprinted in ed. F.A. Hayek, Collectivist Economic Planning (New York: Augustus M. Kelley, 1975[1935]). Mises refined his argument in Socialism: An Economic and Sociological Analysis (Indianapolis: Liberty Press, 1981[1922]). Mises’s conclusion that rational economic calculation is impossible under socialism was reinforced by Max Weber, Economy and Society, 2 vols., edited by Guenther Roth and Claus Wittich (Berkeley: University of California Press, 1978 [1922]), I: 63–211, especially 100–113. This triggered responses from German socialist writers such as Karl Polanyi and Eduard Heimann, see Mises, Socialism, 473–478. Also see William Keiz¨¨r, “Two Forgotten Articles by Ludwig von Mises on the Rationality of Socialist Economic Calculation,”Review of Austrian Economics, Vol. 1 (1987), 109–122, for a more extensive discussion of the central European debate of the 1920s.
Mises’s contention was later challenged in the English-language journals during the 1930s and 1940s. The counter argument was made by Oskar Lange, On the Economic Theory of Socialism,ed. Benjamin Lippincott (New York: Augustus M. Kelley, 1970[1939]); and Abba Lerner, The Economics of Control (New York: Macmillan, 1944) among others. Mises’s student and associate, F. A. Hayek, was an active participant in the debate with the market socialist writers. See Hayek’s essays in Collectivist Economic Planning and Individualism and Economic Order (Chicago: University of Chicago Press, 1980[1948D. The debate has been a subject of growing attention among economists, and useful summaries can be found in Trygve J.B. Hoff, Economic Calculation in the Socialist Society (Indianapolis: Liberty Press, 1981[1949D; Murray Rothbard, “Ludwig von Mises and Economic Calculation Under Socialism,” The Economics of Ludwig von Mises, ed. Lawrence Moss, (Kansas City: Sheed and Ward, Inc., 1976), 67–77; Karen Vaughn, “Economic Calculation Under Socialism: the Austrian Contribution,” Economic Inquiry, Vol. 18 (1980), 535–554; Peter Murrell, “Did the Theory of Market Socialism Answer the Challenge of Ludwig von Mises?” History of Political Economy, Vol. 15, n. 1 (Spring 1983), 92–105. The most extensive treatment of the debate, however, is provided by Don Lavoie in Rivalry and Central Planning: The Socialist Calculation Debate Reconsidered (New York: Cambridge University Press, 1985).
Ironically, Hayek might be partially responsible in creating this theory-history split. Collectivist Economic Planning was published as a companion volume to Boris Brutzkus, Economic Planning in Soviet Russia (Westport, CT: Hyperion Press, 1981[1935]), which Hayek also edited, and introduced. The subsequent discussion, however, cared little about what Brutzkus, or anyone for that matter, had to say about the Soviet experience. Rather, the debate was diverted into the realm of pure theory. By conveying the idea that theory and history could be neatly separated in two separate volumes, Hayek might have inadvertently promoted the theory-history split that dominates comparative political economy to this day.
Mikhail Gorbachev, “Revolution’s Road From 1917 to Now,” The New York Times (Tuesday, November 3, 1987), A11.
Gorbachev, Perestroika: New Thinking for Our Country and the World (New York: Harper and Row, 1987), 21.
Gorbachev, Perestroika, 35, 34, 33.
Gorbachev, “Revolution’s Road from 1917 to Now,” A11.
Theodore Draper, “Soviet Reformers: From Lenin to Gorbachev,” Dissent (Summer 1987), 287.
Heller and Nekrich, Utopia in Power, 11.
S. Cohen, Rethinking the Soviet Experience (New York: Oxford University Press, 1985), 71–92; and Cohen’s classic treatment, Bukharin and the Bolshevik Revolution: A Political Biography,1988–1938 (New York: Oxford University Press, 1980[1973]).
At a crucial point in his narrative on Bukharin’s switch from extreme left to the extreme right of the Bolshevik party, Cohen relies upon Oskar Lange’s model of market socialism to answer Bukharin’s (in his leftist days) own characterization of the socialist economy as an economy where “relations between people are not expressed in relations between things, and social economy is regulated not by blind forces of the market and competition, but consciously by a plan” and Bukharin’s further claim that with the introduction of socialist economic relations political economy ceases as a subject of studi: “there can be no place for a science studying the `blind laws of the market’ since there will be no market.” Cohen cites Lange as providing in the 1930s the scientific search for “the political economy of socialism.” See Bukharin and the Bolshevik Revolution, 93, and fn. 133. Lange argues that economics is a universal science, applying to socialist as well as capitalist economies, and I can agree with him here. But the Lange framework transforms economics into the study of the static allocation problem and, in fact, assumes away the importance of institutions in economic interaction. I do not want to suggest that Cohen follows Lange here, but rather, that Lange is irrelevant for the problem at hand. He did not provide any foundation for the scientific search for a political economy of socialism; Lange merely provided a proof that if one assumes everything is known and given, then there is no economic problem to solve. Needless to say this had nothing to do with the problems with which Bukharin was coping.
The notable exceptions are Boris Brutzkus, Economic Planning in Russia (Westport, CT.: Hyperion Press, 1982[1935]); Trygve Hoff, Economic Calculation in the Socialist Society (Indianapolis: Liberty Press, 1981[1949)); Michael Polanyi, The Contempt of Freedom: The Russian Experiment and After (London: Watts and Co., 1940); The Logic of Liberty (Chicago: University of Chicago Press, 1980[1951]); Elisabeth Tamedly, Socialism and International Economic Order (Caldwell, ID: Caxton Printers, 1969); Paul Craig Roberts, Alienation and the Soviet Economy (Albuquerque: University of New Mexico Press, 1971); Paul Craig Roberts and Matthew Stephenson, Marx’s Theory of Exchange, Alienation, and Crisis (New York: Praeger, 1983[1973]); Don Lavoie, Rivalry and Central Planning (New York: Cambridge University Press, 1985a); National Economic Planning: What Is Left? (Cambridge, MA: Ballinger Press, 1985b); and Peter Rutland, The Myth of the Plan (LaSalle, IL: Open Court, 1985). These writers all view comprehensive central planning as impossible. Polanyi, Roberts, and Lavoie refer to the Soviet system as a polycentric bureaucratic economic system. Some recent theorists of the Soviet system have also begun to realize the difficulty of viewing the Soviet system as a centrally planned economy, and prefer to classify the system as a centrally managed economic system, cf. Eugene Zaleski, Planning for Economic Growth in the Soviet Union,1918–1932 (Chapel Hill: University of North Carolina Press, 1971); Stalinist Planning for Economic Growth (London: Macmillan, 1980). Also see Alec Nove, The Economics of Feasible Socialism (London: George Allen and Unwin, 1983), 79–81.
See Alec Nove, An Economic History of the U.S.S.R., 46–187 and G. Warren Nutter, The Growth of Industrial Production in the Soviet Union (Princeton: Princeton University Press, 1962), 3–10. As Nutter points out, “Most specialists on the Soviet economy start their studies with the year 1928, when comprehensive centralized planning was introduced” (5). The fact that most studies within comparative political economy begin their analysis of central planning with the five-year planning system represents the fundamental misunderstanding of the Soviet experience which I am trying to correct in my study.
Robert Ekelund and Robert Tollison, Economics, 2nd ed. (Boston: Scott, Fores-man and Co., 1988), 914–915; emphasis added. It should be emphasized that this interpretation, that is, the standard interpretation, is greatly influenced by what the authors consider to be socialism, which in turn is influenced by the theoretical debate. As will be argued throughout, the theoretical debate had the consequence of obscuring the meaning of socialism and tearing it from its historical context.
See Paul Gregory and Robert Stuart, Soviet Economic Structure and Performance, 2nd ed. (New York: Harper and Row, 1981), 15–110.
Ofer, “Soviet Economic Growth: 1928–1985,” Journal of Economic Literature, Vol. 25 (December 1987), 1768; emphasis added.
Bottomore, “Is Rivalry Rational?” Critical Review, Vol. 1, n. 1 (Winter 1986–87), 45; emphasis added.
Dobb, Soviet Economic Development Since 1917; Carr, The Bolshevik Revolution,3 vols. (New York: Norton, 1980[1952]); and Nove, An Economic History of the U.S.S.R..
Dobb, Soviet Economic Development Since 1917, 122.
Dobb, 122.
Dobb, 101.
Dobb, 101.
Dobb, 100.
Although it is not my purpose here to outline a Marxian theory of alienation and exploitation, it is necessary to realize that the decision-making cadre of the Soviet government were revolutionary Marxists who sought to rid Russian society of the evils of capitalism. The Marxian theory of alienation is intimately connected to commodity production and, in particular, the monetary exchange economy. Alienation to Marx was an objective condition coexistent with commodity production,that is, the separation of production from use. It is not a psychological or subjective condition felt by frustrated man. The transcendence of alienation means to Marx the transcendence of market relations. Viewing Marx as an organizational theorist enables the student of Marx to see a tremendous unity in Marx’s life-work that is denied by those who want to split Marx into a young Marx and a mature Marx. The young Marx, just as the mature Marx, was concerned with transcending the organizational form of alienation, that is, the commodity production of capitalist social relations. As Marx argued himself in the Economic and Philosophical Manuscripts of 1844 (Moscow: Progress Press, 1977), 78–79: “Just as we have derived the concept of private property from the concept of estranged, alienated labor by analysis, so we can develop every category of political economy with the help of these two factors; and we shall find again in each category, e.g., trade, competition, capital, money, only a particular and developed expression of these first elements.” Also see Marx’s discussion of the power of money as the “alienated ability of mankind” (127–132). On Marx ‘s theory of alienation and central planning, see Paul Craig Roberts, Alienation and the Soviet Economy; Roberts and Stephenson, Marx’ s Theory of Exchange, Alienation and Crisis; and Lavoie, Rivalry and Central Planning, 28–47.
Dobb, 102–103.
For an excellent discussion of these events, see Paul Avrich, Kronstadt 1921 (New York: W. W. Norton and Co., 1974). Also see Robert Vincent Daniels, The Conscience of the Revolution (Cambridge: Harvard University Press, 1960), 137153 and Israel Getzler, Kronstadt, 1917–1921 (New York: Cambridge University Press, 1983).
Dobb, 123. However, Richard Sakwa argues contrary to Dobb that: In the chaotic conditions of late 1917, however, the development of direct democracy and decentralization in both political and economic spheres, was not so much a policy implemented by the Bolshevik party as one that emerged largely regardless of its wishes and out of circumstances. The institutions of the dictator-ship of the proletariat were only consolidated by June 1918. The practical implementation of commune ideas before then has given rise to a highly idealized if barely credible vision of a golden age of Bolshevism that came to end in spring 1918. See Sakwa, “The Commune State in Moscow in 1918,”Slavic Review (Fall/Winter, 1987), 431. Also notice the use of the term New Economic Policy; if these policies did constitute the policies that were followed directly after the revolution and represent the “normal economic policy of the proletariat,” then why refer to the policies as “New”?
Dobb, 120.
Carr, The Bolshevik Revolution,2: 270.
Ironically, many other commentators point out the same connection between war communism and war socialism as evidencing the theoretical nature of war communism as an experiment with Marxian central planning. See Laszlo Szamuely, First Models of the Socialist Economic Systems: Principles and Theories, (Budapest: Akademiai Kiado, 1974); Vladimir Treml, “Interaction of Economic Thought and Economic Policy in the Soviet Union,” History of Political Economy, Vol. 1, n. 1 (Spring 1969), 187–216. For a discussion of the German ideas of planning that had a direct influence upon the Bolshevik’s see Judith Merkle, Management and Ideology (Berkeley: University of California Press, 1980), 172–207; WalterRathenau, In Days to Come (New York: Alfred A. Knopf, 1921), 63–128; Nicholas Balabkins, “Der Zukunftsstaat: Carl Ballod’s vision of a leisure-oriented socialism,” History of Political Economy, Vol. 10, n. 2 (Summer 1978), 213–32. Also see Mises’s discussion of war socialism in Nation, State and Economy, translated by Leland B. Yeager (New York: New York University Press, 1983[1919]), 141–147.
Carr, 2: 271.
Carr, 2: 273. 3s Carr, 2: 273.
Carr, 2: 207.
Carr, 2: 162.
Carr, 2: 175.
Carr, 2: 157.
Carr, 2: 151.
Carr, 2: 157.
Carr, 2: 172.
Carr, 2: 173.
Carr, 2: 198.
Compare this with the recent twist on the standard interpretation by Thomas Remington, Building Socialism (Pittsburgh: University of Pittsburgh Press, 1984), who, in discussing the nationalization and central control of cottage industries, states that “after military emergencies declined to the point where they no longer interfered with the Bolshevik preference for centralization, ” new attempts to nationalize craftsmen were undertaken in late 1920 (170; emphasis added).
Carr, 2: 197. But see Can’s discussion of the beginnings of planning on 2: 360 ff., which seems to state that both ideology and emergency played a role. Can, however, argues that planning was not possible until 1920 because of the demands of civil war. The institutions of planning were established in 1918 and 1919, but they took on an ad hoc character because of the emergencies of civil war. Thus, centralized economic planning could not be properly instituted until 1920, according to Can. He gives a rather strange argument, however, for the planning policy. “The experience of civil war,” Can states, “revealed the practical necessity of a central department strong enough to impose its authority on the existing economic organs of government and to direct economic policy in light of a single plan of campaign (2: 368; emphasis added). But wasn’t this the policy objective, that is, centralized economic planning, which the standard account argues did not receive attention until 1928? Yet Can, at least here, admits explicitly that the economic policy of central planning was instituted in 1920. The collapse occurs in 1921, during the regime of economic planning and not civil war.
Carr, 2: 205–206.
Can, 2: 205.
Can, 2: 216.
Can, 2: 228.
Can, 2: 271.
Carr, 2: 246.
Carr, 2: 260–261.
Carr, 2: 275.
See Szamuely, First Models, 84–91, for a discussion of the debate among Bolshevik decision-makers over the introduction of NEP and the defense of war communism by Yuri Larin.
Carr, 2: 275.
Carr, 2: 276. Here again Can does not maintain a consistent position. The confusion over war communism was even represented within official Soviet publications. Consider the following statement from an article in Bol’shaya Sovetskaya Entsiklopediya, XII, 1928: It would be a great error not to see, behind the obvious economic utopianism of the attempt of war communism to realize an immediate marketless-centralized reorganization of our economy, the fact that fundamentally the economic policy of the period of war communism was imposed by the embittered struggle for victory¡.The historical sense of war communism consisted in the need to take possession of the economic base by relying on military and political force. But it would be incorrect to see in war communism only measures of mobilization imposed by war conditions. In working to adapt the whole economy to the needs of the civil war, in building a consistent system of war communism, the working class was at the same time laying the foundation for further socialist reconstruction (as quoted in Carr, 2: 275, fn. 1, emphasis added). One is left wondering what was the purpose of war communism. Was it an attempt to realize a Marxian utopia or was it mobilization for war? While Can can argue that Marxian language was an ex post justification for policies that were unavoidable, it seems just as possible that war emergency language is an ex-post excuse for a dream that was left unfulfilled.
Nove, An Economic History of the U.S.S.R., 47.
Nove, 47.
Nove, 81.
These techniques of planning cannot even be considered part of the Marxian aspiration to transcend the market¡ªthey have nothing in common with Marxism. These models are not representations of the “association of producers” developing a general plan, but rather are theoretical attempts to develop technical mechanisms to gather the data deemed necessary for planning. They represent technocratic attempts to provide a theoretical vision of how it might be possible to establish a network of information within the planning bureaucracy to achieve ex-ante coordination of economic activity. Not much of the emancipatory aspect of Marxism is left. See David L. Prychitko, “The Political Economy of Workers’ Self-Management: A Market Process Critique” (unpublished Ph.D. thesis, Department of Economics, George Mason University, 1989), for the essential tension between Marx’s praxis philosophy and models of economic planning.
Nove, 120; emphasis added.
Nove, 120; emphasis added.
Cohen, “In Praise of War Communism,” in Revolution and Politics in Russia, ed. Alexander and Janet Rabinowitch, (Bloomington: Indiana University Press, 1972), 193. For a more recent statement of Cohen’s views on war communism see Cohen, Rethinking the Soviet Experience, 38–70.
Bukharin, The Path to Socialism in Russia (New York: Omicron Books, 1967[19241), 178, as quoted in Szamuely, First Models, 108, fn. 57; emphasis added. Also see Nove, “Some Observations on Bukharin and His Ideas,” in Political Economy and Soviet Socialism (London: Allen and Unwin, 1979), 81–99.
Bukharin, Pravda (December 3, 1922), 3, as quoted in Cohen, Bukharin and the Bolshevik Revolution, 146.
Mises, Socialism, 101.
Mises, “Economic Calculation,” 102.
This is the view of the market process that is characteristic of Austrian economics. Lavoie has argued that the failure on the part of the neoclassical market socialists to understand, let alone appreciate, this aspect of the Mises-Hayek argument led to the confusion in the debate. See Rivalry and Central Planning, 78–116.
See Hayek, Individualism and Economic Order and The Counter-Revolution of Science: Studies on the Abuse of Reason (Indianapolis: Liberty Press, 1979[1952]).
In contrast, Joseph Farrell argues that Hayek ignored the problem of how to get people, when private information is important, to reveal their true preferences. If the central authority, therefore, can insure that people will reveal their true preferences through an appropriate mechanism design, then Hayek’s argument may not be as strong as it first appears. The point is that in regard to certain goods, that is, public goods, the market is a “poor” mechanism to give people an incentive to reveal their private information. In such an instance the market will produce suboptimal results, while even a “stumbling bureaucrat” might produce “better” results. See Farrell, “Information and the Coase Theorem,” Journal of Economic Perspectives, Vol. 1, n. 2 (Fall 1987), 113–129. For a critique of standard public goods theory see Tyler Cowen, “A Public Goods Definition and Their Institutional Context: A Critique of Public Goods Theory,” Review of Social Economy, Vol. 43, n. 1 (April 1985), 5363. Also see Roy Cordato, “An Analysis of Externalities in Austrian Economics” (unpublished PhD thesis, Department of Economics, George Mason University, 1986). Beyond the point about market problems when goods possess certain “publicness” aspects to them, Farrell misunderstands Hayek’s argument against planning and the use of knowledge in society. Hayek never ignored the demand revealing processes of the market. In fact, that is essentially Hayek’s point of criticism. The competitive market process serves as a vehicle for the discovery and conveyance of “private information.” In the absence of the competitive process, according to Hayek, there is no practical way to insure that individuals will reveal their preferences for goods and services. See Hayek, “The Meaning of Competition,” Individualism and Economic Order, 92–106; and “Competition as a Discovery Procedure,” New Studies in Philosophy, Politics, Economics and the History of Ideas (Chicago: University of Chicago, 1978), 179–190. Also see Boettke, “Comment on `Information and the Coase Theorem,’ ”Journal of Economic Perspectives,Vol. 3, n. 2 (Spring 1989), 195–197.
For a recent statement of this point see Israel M. Kirzner, Perception, Opportunity and Profit (Chicago: University of Chicago Press, 1979), 137–153. Also see Lavoie, National Economic Planning, 52–65.
Hayek, “The Use of Knowledge in Society,” Individualism and Economic Order, 78.
Kirzner, Competition and Entrepreneurship (Chicago: University of Chicago Press, 1973), 214.
Lavoie, Rivalry and Central Planning; National Economic Planning; “The Market as a Procedure for Discovery and Conveyance of Inarticulate Knowledge,” Comparative Economic Studies (Spring 1986), 1–19; “Political and Economic Illusions of Socialism,” Critical Review, Vol. 1, n. 1 (Winter 1986–87), 1–35; and “The Accounting of Interpretations and the Interpretation of Accounts: The Communicative Function of `The Language of Business,¡ª Accounting,Organizations, and Society, Vol. 12, n. 6 (1987), 579–604.
See Polanyi, The Logic of Liberty (Chicago: University of Chicago Press, 1980[1951]); The Study of Man (Chicago: University of Chicago Press, 1959); Personal Knowledge: Toward a Post-Critical Philosophy (Chicago: University of Chicago Press, 1962[1958]); Knowing and Being: Essays by Michael Polanyi, ed. Marjorie Green, (Chicago: University of Chicago Press, 1969).
See Polanyi, The Logic of Liberty; The Contempt of Freedom; and Science, Faith and Society (Chicago: University of Chicago Press, 1964[1946]); Knowing and Being; “The Foolishness of History,” Encounter (November 1957); and “Toward a Theory of Conspicuous Production,” Soviet Survey (October/December 1960). Also see John Baker, Science and the Planned State (New York: Macmillan, 1945).
Polanyi, The Logic of Liberty, 115.
Polanyi, The Logic of Liberty, 111. Polanyi is here directly challenging the claim made by traditional Marxists that the Marxian system would, because it did away with the irrationalities of capitalist production, lead to great increases in material well-being. If one assumes the end or goal of his opponent, and demonstrates that the means employed are inconsistent with the end sought, the opponent’s argument can said to be wanting or, at least, incomplete. Of course, there is no a priori reason why material well-being should be the highest of all social values, and the fact that most economists accept efficiency and wealth as their standards reveals the utilitarian bias of most modern economics, which represents a hidden value judgment within their analysis of “social welfare.” For a discussion of these issues see Murray N. Rothbard, “Value Implications of Economic Theory,” The American Economist, Vol. 17 (Spring 1973), 35–39, and Jack High, “Is Economics Independent of Ethics?,” Reason Papers, No. 10 (Spring 1985), 3–16.
Polanyi, The Logic of Liberty, 126.
See Polanyi, Personal Knowledge, 49–65. For a contemporary application of Polanyi’ s arguments to organization within the firm, see Richard Nelson and Sidney Winter, An Evolutionary Theory of Economic Change (Cambridge: Harvard University Press, 1982), 72–95.
Lavoie, Rivalry and Central Planning, 102.
Mises, Socialism, 190–191.
See Menger, Principles of Economics (New York: New York University Press, 1981[1871]), 63–67; 149–152.
See Menger, Principles, 67–71.
See Mises, Human Action: A Treatise on Economics, 3rd rev. ed. (Chicago: Henry Regnery, 1966[1949]), 99–104.
O’Driscoll and Rizzo, The Economics of Time and Ignorance (New York: Basil Blackwell, 1985), 52–70. Also see Roger Garrison, “Time and Money: The Universals of Macroeconomic Theorizing,” Journal of Macroeconomics, Vol. 6, n. 2 (Spring 1984), 197–213.
Mises, Socialism, 186.
Mises, The Theory of Money and Credit (Indianapolis: Liberty Classics, 1980[1912]), 153.
Mises, Socialism, 101.
Mises, The Theory of Money and Credit,62.
Mises, Liberalism (San Francisco: Cobden Press, 1985[1927]), 75; emphasis added.
Hayek, “The Use of Knowledge in Society,” 80.
Wieser, Social Economics (New York: Augustus M. Kelley, 1967[1927]), 396397.
See Lavoie, National Economic Planning, 51–92; 247–265.
See Boettke, “Understanding Market Processes: An Austrian View of `Knowing,”’ Marketing Theory (Chicago: American Marketing Association, 1987), 195–199, and “Austrian Institutionalism: A Reply,” Research in the History of Economic Thought and Methodology, Vol. 6 (1989), 181–202. The central tenets of Austrian economics can be summarized as follows. The task of an economist is twofold: (1) he must render economic events intelligible in terms of the purposes and plans of the actors involved; and (2) he must trace out the unintended consequences, both desirable and undesirable, of those actions. To accomplish this task, Austrian economists rely on three methodological tenets: (1) methodological individualism, (2) methodological subjectivism, and (3) recognition of spontaneous order. In other words, market phenomena are best understood as the result of the interaction of purposeful human beings.
Lachmann, The Market as an Economic Process (New York: Basil ckwell, 1986), 165.
See Lange, On the Economic Theory of Socialism; and Lavoie, Rivalry and Central Planning, 78–116.
Polanyi, The Logic of Liberty, 123.
Polanyi, The Logic of Liberty, 125. That this abandonment of the cardinal claim of socialism continues to go unnoticed is borne out in current events within the Soviet Union. Compare the analysis of two of the Soviet Union’s leading economists on this subject of market and plan; see Abel Aganbegyan, The Economic Challenge of Perestroika (Bloomington: University of Indiana Press, 1988), 125139, and Leonid Abalkin, The Strategy of Economic Development in the USSR (Moscow: Progress Publishers, 1987), 145 ff. Aganbegyan argues that commodity production and market relations are consistent with socialism, both in theory and practice. Abalkin, on the other hand, points out that the goal of socialist planning is to eliminate the contradictions in the capitalist mode of production by eliminating private ownership in the means of production and substituting a settled plan for the anarchy of the market, that is, production for direct use as opposed to production for exchange. “Socialism,” Abalkin writes, “eliminates this contradiction due to the public ownership of the means of production. It promotes unity between the final and direct goal of production¡.Hence the need to develop planning and the system of economic links so that the producer knows what the consumer wants” (154–155). Organizationally, Abalkin’ s proposal requires the elimination of the social relations of production associated with capitalism. Aganbegyan’s, on the other hand, maintains the social relations of production of capitalism but calls for a high degree of government regulation of the market¡ªin fact, he defines a socialist market as “a government-regulated market” (127). To Abalkin, perestroika means more efficient central planning; to Aganbegyan, it means a more efficient economy. Needless to say, there is a world of difference between these economic proposals in terms of the organizational form of the social relations of production, even disregarding the more interesting issue of Karl Marx’s possible opinion of mixing market with plan.
See Lavoie, “Between Institutionalism and Formalism,” Center for the Study of Market Processes, Working Paper #21, 1986; Israel M. Kirzner, “The Economic Calculation Debate: Lessons for Austrians,” Review of Austrian Economics, Vol. 2 (1988); and Bruce Caldwell, “Austrians and Institutionalists: The Historical Origins of their Shared Characteristics,” Research in the History of Economic Thought and Methodology, Vol. 6 (1989).
Socialism, op. cit.,p. 121.
See Mises, Human Action,210. Also see 206–211 and 689 ff.
See Boettke, Steve Horwitz, and David Prychitko, “Beyond Equilibrium Economics: Reflections on the Uniqueness of the Austrian Tradition,” Market Process,Vol. 4, n. 2 (Fall 1986), 6–9, 20–25, for a discussion of these issues.
Contrary to the positivistic and formalistic philosophical foundation of modern neoclassical economics, familiarity with the Austrian tradition of economic analysis reveals philosophical roots in the continental philosophies of phenomenology and hermeneutics. The philosophical grounds for theory (conception) is the phenomenological tradition of Franz Brentano, Edmund Husserl and Alfred Schutz. See Barry Smith and Wolfgang Grassl, edited, Austrian Economics: Historical and Philosophical Background (New York: New York University Press, 1986); Richard Ebeling, “A Phenomenological Foundation for Dynamic Subjectivism,” paper presented at a Liberty Fund Conference on The Economics of Time and Ignorance, November 3–6, 1984; “Cooperation in Anonymity,” Critical Review, Vol. 1, n. 4 (Fall 1987), 50–61; “The Roots of Austrian Economics,” Market Process, Vol. 5, n. 2 (Fall 1987), 20–22; “Expectations and Expectations Formation in Mises’s Theory of the Market Process,” Market Process, Vol. 6, n. 1 (Spring 1988), 12–18; Christopher Prendergast, “Alfred Schutz and the Austrian School of Economics,” American Journal of Sociology, Vol. 92, n. 1 (July 1986), 1–26; and Ludwig von Mises, “The Treatment of `Irrationality’ in the Social Sciences,” Philosophy and Phenomenological Research, Vol. 4 (June 1944), 527–545, where he states: “The importance of phenomenology for the solution of the epistemological problems of praxeology has not been noticed at all” (530).The philosophical grounds for economic history, and historical study (understanding) in general, within the Austrian school is the hermeneutics of Dilthey, Weber, and Collingwood, see Mises, Theory and History: An Interpretation of Social and Economic Evolution (Auburn, AL: Ludwig von Mises Institute, 1985[19571), 303–320. Once these philosophical roots are understood, it is quite understandable why some modern Austrians have paid particular attention to the work of Hans-Georg Gadamer. Gadamer sees his work as an attempt to understand human understanding and provide a “phenomenological hermeneutics.” In this regard, he has made some of the most articulate statements concerning the philosophical underpinning of the Austrian school, see Don Lavoie, “The Interpretive Dimension of Economics: Science, Hermeneutics, and Praxeology,” Center for the Study of Market Processes Working Paper No. 15, 1985. Also see G. B. Madison, “Hermeneutical Integrity: A Guide for the Perplexed,” Market Process, Vol. 6, n. 1 (Spring 1988), 2–8, and “Hayek and the Interpretive Turn,” Critical Review, Vol. 3, n. 2 (Spring 1989), 169–185.
As Don Lavoie argues: “The fact that the point of departure for praxeology is reflection upon the essence of action recalls Dilthey’s, Weber’s and Schutz’s points of departure for their `interpretative sociology’ far more than Russell’s or Hildreth’s formalizations of mathematics or, for that matter, Debreu’s of economics. And Mises’ intertwining of theory with history in such a way as to view theory not as an elegant construction of formal, intellectual beauty, like mathematics, but as a practical device through which the facts of history are to be interpreted, sounds much more like the hermeneutical than the Euclidean variety of a priorism.” See Lavoie, “Euclideanism versus Hermeneutics: A Reinterpretation of Misesian A Priorism,”Subjectivism,Intelligibility,andEconomic Understanding, ed. Israel M. Kirzner (New York: New York University Press, 1986), 205–206.
See Menger, Investigations into the Methods of the Social Sciences with Special Reference to Economics (New York: New York University Press, 1985[1883]). According to Menger, the discipline of economics can be subdivided into pure or exact theory, applied theory, and economic history and public policy.
Bergson, “Socialist Economics,” A Survey of Contemporary Economics,ed. Howard Ellis (Philadelphia: Blakiston Company, 1948), 446, 412.
Mises, Socialism, 120; emphasis added. Also see Mises, “Economic Calculation,” 109, where he states: “The static state can dispense with economic calculation. For here the same events in economic life are ever recurring; and if we assume that the first disposition of the static socialist economy follows on the basis of the final state of the competitive economy, we might at all events conceive of a socialist production system which rationally controlled from an economic point of view. But this is only conceptually possible.”
Lavoie, Rivalry and Central Planning, 102.
Roberts, Alienation and the Soviet Economy, 90.
Hayek, “Foreword,” in Boris Brutzkus, Economic Planning in Soviet Russia,ix.
Berliner, “Marxism and the Soviet Economy,” Problems of Communism, Vol. 12, n. 5 (September/October, 1964), 1–11.
Nove, The Economics of Feasible Socialism, 58.
Many modern proponents of Marxism realize that they cannot escape the Soviet experience, but instead must face it head on. As Svetozar Stojanovic argues: “We no longer have the right to judge Marx in utter isolation from the many miscarried attempts to achieve his ideas, no matter how unacceptable these attempts may be to humanist marxists.” See Stojanovic, “Marx and the Bolshevization of Marxism,” Praxis International, Vol. 6, n. 4 (January 1987), 450. Stojanovic goes further and argues that Marxists need to come to grips with the repression of the proletariat by the dictatorship in its name. “A theory which deliberately takes upon itself the responsibility for changing the world, must not in principle avoid the (co-) responsibility for its own fate in the world” (451). Certainly if Marxian social theorists recognize the influence of Marx on the Soviet experience, even in those aspects that no one wants to take credit for, then economists should recognize the influence that Marx had on the positive formulation of policy within the Bolshevik regime.
Roberts and Stephenson, Marx’s Theory of Exchange, Alienation and Crisis, xv.
Polanyi, The Logic of Liberty, 132, fn. 1.
Thus, the importance placed throughout this study on the history of ideas (doctrines). Doctrines not only guide human actions, but allow us, as social theorists, to interpret these actions in a manner that renders them intelligible.
Brutzkus, Economic Planning in Soviet Russia, xv.
Brutzkus, Economic Planning in Soviet Russia,6.
Brutzkus, Economic Planning in Soviet Russia, 7; emphasis added.
Brutzkus, Economic Planning in Soviet Russia, 14. This problem persists today in Gorbachev ‘s reforms. Gorbachev insists that perestroika “is fully based on the principle of more socialism and more democracy.” See Gorbachev, Perestroika, 36. But see Nikolay Shmelyov, “Advances and Debts,”Novy Mir, n. 6 (1987), reprinted in Problems of Economics (February 1988), 7–43, for an excellent discussion of the “free-market” socialism necessary for reforming the Soviet economy. In addition, see Vasil Selyunin, “Sources,”Novy Mir, n. 5 (May 1988), reprinted in The Current Digest of the Soviet Press, Vol. 40, n. 40 (1988), 14–17. Selyunin argues that Lenin was mistaken when he attempted to abolish private property in the period following the revolution [war communism], and that NEP represents a proper change of mind.
Brutzkus, Economic Planning in Soviet Russia, 31.
Brutzkus, Economic Planning in Soviet Russia, 97.
A confusion results if this analogy is taken too literally. During the calculation debate, for example, it became common practice to view Mises and Hayek as arguing that there was no planning within a market system, and therefore that the existence of firms (islands of planning) was an anomaly to the market system. See Ronald Coase, “The Nature of the Firm,” Economica (November 1937), 386–405. Also see Oliver E. Williamson, Markets and Hierarchies (New York: The Free Press, 1975) for a further discussion of the organizational contrast between market mechanisms of price adjustment and resource allocation by planning within a firm. For the confusion that can result from this artificial dichotomy between market and hierarchy, see P. T. Wanless, “The Efficiency of Central Planning: A Perspective from `Markets vs. Hierarchies,”’ Scottish Journal of Political Economy (February 1987), 52–68, and Ralph Rector, “Has Market Coordination Been Replaced?” Critical Review, Vol. 1, n. 4 (Fall 1987), 40–49, for a clarification of some of the issues involved.
Brutzkus, Economic Planning in Soviet Russia, 37.
Brutzkus, Economic Planning in Soviet Russia, 41.
Brutzkus, Economic Planning in Soviet Russia, 48–49.
Brutzkus, Economic Planning in Soviet Russia,93.
Brutzkus, Economic Planning in Soviet Russia,94.
Polanyi, “The Foolishness of History,” 35.
Polanyi, “The Foolishness of History,” 35.
Polanyi, “The Foolishness of History,” 36.
Roberts, Alienation and the Soviet Economy,23.
Roberts, Alienation and the Soviet Economy,24. This policy of introducing ideological justification only to discount it has recently been reiterated in two otherwise extremely informative and important works: see Malle, The Economic Organization of War Communism, and Remington, Building Socialism.
See Roberts and Stephenson, Marx’ s Theory of Exchange, Alienation and Crisis for a further discussion of the oneness of central planning and Marxism. Also see Lavoie, Rivalry and Central Planning, 28–47, and N. Scott Arnold, “Marx and Disequilibrium in Market Socialist Relations of Production,” Economics and Philosophy, Vol. 3 (1987), 23–47.
Roberts, Alienation and the Soviet Economy, 37; emphasis added.
Roberts, Alienation and the Soviet Economy, 39.
Selucky, Marxism, Socialism, Freedom (New York: St. Martin’s Press, 1979).
Polanyi, “The Foolishness of History,” 36. Mises does at times recognize the importance of the shift of policies within the Soviet Union. In Critique of Interventionism, for example, Mises argues that since the shift to NEP all countries followed interventionist policies: “We call such an economic policy interventionism, the system itself the hampered market order.” See Mises Critique of Interventionism (New York: Arlington House, 1977[1929]), 13; emphasis in original). At other times, however, Mises misclassifies the Soviet system. He argues in Omnipotent Government (Spring Mills, PA: Libertarian Press, 1985[1944]), 55 ff., that the Stalinist planning system is socialism, but that its operation depends upon the international price system¡ªunder such conditions socialism is not impossible just inefficient. But really the Soviet system under Stalin is more similar to the Zwangswirtschaft pattern of planning Mises ascribes to Nazi Germany¡ªthe highest form of Etatism. Market relations of production are not eliminated, just dominated by political arbitrariness.
Polanyi, “The Foolishness of History,” 36.
Bergson, “Socialist Economics,” 412–13.
This is the argument raised against Hayek’s The Road to Serfdom (Chicago: University of Chicago Press, 1976[1944]), for example by Barbara Wooton, Freedom under Planning (Chapel Hill: University of North Carolina Press, 1945); Herman Finer, Road to Reaction (Chicago: Quadrangle Books, 1963[1945]); and John M. Keynes, Collected Works, Vol. XXVII (New York: Cambridge University Press, 1980). Keynes, for example, in a letter to Hayek dated June 28, 1944, states:I should say that what we want is not no planning, or even less planning, indeed I should say that we almost certainly want more. But the planning should take place in a community in which as many people as possible, both leaders and followers, wholly share your own moral position. Moderate planning will be safe if those carrying it out are rightly orientated in their own minds and hearts to the moral issue (387, emphasis added).For a collection of various essays in defense of Hayek’s thesis see Hayek’s “Serfdom” Revisited (London: Institute for Economic Affairs, 1984).
Mises, Socialism, 187, 191.
But as Remington, Building Socialism, 202, fn. 6, shows, a survey of the current literature clearly counters Cohen’s claim; the military explanation reigns dominant.
See Cohen, Bukharin and the Bolshevik Revolution, xv-xxiv; and Rethinking the Soviet Experience, 3–92. Others¡ªfor example, Isaac Deutscher and E.H. Carr¡ªhave tried to suggest that it could have been Trotsky.
It would be hard to imagine any serious treatment of the Soviet experience not at least accounting for or dealing with the work of Robert Conquest, The Harvest of Sorrow (New York: Oxford University Press, 1986), Miron Dolot, Execution by Hunger (New York: W. W. Norton and Co., 1985), and Roy Medvedev, Let History Judge, revised and expanded ed. (New York: Columbia University Press, 1989).
Gordon Tullock in The Politics of Bureaucracy (Lantham, MD: University Publications of America, 1987[1965]) states that he is in virtual agreement with Polanyi and Hayek on the very point of knowledge dispersion and the critique of socialist modes of production (124, fn. 3).
Although I am concentrating on the economic arguments against planning, it is interesting to note that the Russian revolutionary anarchist Michael Bakunin raised a similar theoretical criticism to Marx during their battles at the First International and after. Bakunin basically argued that a “dictatorship of the proletariat” would amount to a dictatorship nevertheless. See Bakunin, Bakunin on Anarchism, edited by Sam Dolgoff (Montreal: Black Rose Books, 1980), 286–320, 323–350. In this regard, Emma Goldman reports that on her disillusionment with the Bolsheviks by 1920 she questioned the Russian anarchist Peter Kropotkin on the Bolshevik’s totalitarianism. Kropotkin’s reply is a simple one: “We have always pointed out the effects of Marxism in action. Why be surprised now?” See Goldman, My Disillusionment in Russia (New York: Doubleday, Page and Co., 1923), 55.
See James Buchanan and Gordon Tullock, The Calculus of Consent (Ann Arbor: University of Michigan Press, 1962) and Tullock, The Politics of Bureaucracy. Also see Geoffrey Brennan and James Buchanan, The Reason of Rules (New York: Cambridge University Press, 1985), especially 33–45.
This is essentially Hayek’s argument in The Road to Serfdom, 134–153.
The result of this political monopolization is described by Isaac Deutscher, Stalin (New York: Oxford University Press, 1970[1949]).The sensitiveness of the party had to be blunted, its sight dimmed, and its hearing dulled in order to make its mind immune from undesirable influences. The need for all this seemed to become even more urgent in connexion with the reforms of the N.E.P. Capitalist groups and interests were allowed new scope in the economic domain; but no party was left to represent them in the political field. It was only natural that they should seek channels of expression, and that they should seek them amid the only political party left in existence¡.To save the revolution’s conquests it [the party] had to suppress the spontaneous rhythm of the country’s political life. But in doing so, the party was mutilating its own body and mind. From now on its members would fear to express opinions which might, on analysis, be found to reflect “the pressure of alien classes” (226; emphasis added).
The best works on the relationship between political and economic freedom are: Mises, Liberalism, Human Action; Hayek, The Road to Serfdom, The Constitution of Liberty (Chicago: University of Chicago Press, 1960) and Law, Legislation and Liberty, 3 vols. (Chicago: University of Chicago Press, 1973–1979); and Milton Friedman, Capitalism and Freedom (Chicago: University of Chicago Press, 1982[1962]). Also see Murray Rothbard, Man, Economy and State, 2 vols. (Los Angeles: Nash Publishing, 1970[1962D; Power and Market (Kansas City: Sheed, Andrews and McMeel, 1977[1970]); For a New Liberty (New York: Collier, 1978[1973D; and The Ethics of Liberty (Atlantic Highlands, NJ: Humanities Press, 1982).
Hayek, The Road to Serfdom, 91–92. Hayek’s argument, it should be pointed out, is not that economic freedom ensures political freedom, but rather that the loss of economic freedom entails the loss of political freedom. Also Hayek’s use of the word control may be misleading, but in the passage quoted he is only tracing out the logical relationship that evolves under central planning and is making no real world empirical claim as to the existence of actual control over the economy. The Mises-Hayek argument implies that control over the economic system is impossible. Planning bureaus can (and do), however, exercise power over the economic system and its citizens.
Sowell, Knowledge and Decisions (New York: Basic Books, 1980), 132.
Besançon, “Anatomy of a Spectre,” Survey, Vol. 25, n. 4 (Autumn 1980), 156158, emphasis added.
Draper, “Soviet Reformers,” 289.
See A. J. Polan, Lenin and the End of Politics (Berkeley: University of California Press, 1984), 128, where he states:The problem of the simple state of Lenin’s model, simply put, is that the fewer institutions there are that make up the body politic, the greater the proportion of the total sum of power that will be lodged in each institution. If these institutions are reduced to one, or to a set of institutions that are not significantly separated, power is unitary, not distributed. This, then, is the negation of the field of democratic politics.
Harrison, “Why Did NEP Fail?,” Soviet Industrialization and Soviet Maturity, ed. Keith Smith (London: Routledge and Kegan Paul, 1986), 21.
Alexander Gerschenkron in Economic Backwardness in Historical Perspective (Cambridge: Harvard University Press, 1962), 143 ff.), while he gives some economic reasons that I do not support, he argues that it was predominantly a political crisis that led to forced collectivization and industrialization. Also see 188 ff.
Though Cohen’s misinterpretation of the war communism period, in my opinion, seriously distorts the meaning of the Soviet experience, he presents a cogent and persuasive discussion of Stalin’s militarization of Soviet life. Cohen states:Military rather than traditionally Marxist in inspiration, Stalin’s intensification theory was perhaps his only original contribution to Bolshevik thought; it became a sine qua non of his twenty-five-year rule. In 1928, applied to kulaks, “Shakhtyites,” and anonymous “counter-revolutionaries,” it rationalized his vision of powerful enemies within and his “extraordinary” civil-war politics. By the thirties, he had translated it into a conspiratorial theory of “enemies of the people,” and the ideology of mass terror.See Cohen, Bukharin and the Bolshevik Revolution, 314–315. What Cohen misses in his analysis, however, is any discussion of how this militarization of social life could be the unintended undesirable outcome of the attempt to realize the Marxian ideal of social unity through scientific planning of the economy.
Polanyi, “The Foolishness of History,” 33; emphasis added.
For an interesting discussion of the challenge Gorbachev faces see Marshall Goldman, Gorbachev’s Challenge (New York: Norton, 1987); Gorbachev’s Economic Plans, 2 vols. (Washington, DC: Joint Economic Committee, 1987); Ed Hewett, Reforming the Soviet Economy (Washington, DC: Brookings Institute, 1988); Gertrude Shroeder, “Anatomy of Gorbachev’s Economic Reform,” Soviet Economy, Vol. 3, n. 3 (July-September 1987), 219–241; and Padma Desai, Perestroika in Perspective (Princeton: Princeton University Press, 1989). Also see the contrasting assessments of the meaning of reform found in Abram Bergson, “Perestroika Before and After,” New York Times Book Review (May 29, 1988), 3 ff., and Paul Craig Roberts, “The Soviet Economy: A Hopeless Cause ?” Reason (July 1988), 56–57. In addition, see Boettke, “The Political and Economic Challenges of Perestroika,” Market Process, Vol. 8 (1990) and the references cited therein.
As quoted in David Remnick, “Gorbachev Proposes President System,” The Washington Post (June 28, 1988), A22.
As quoted in Gary Lee, “Soviet Delegate Calls for Gromyko’s Ouster,” The Washington Post (July 1, 1988), A18.
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Boettke, P.J. (1990). The Meaning of the First Decade of Soviet Socialism. In: The Political Economy of Soviet Socialism: The Formative Years, 1918–1928. Springer, Dordrecht. https://doi.org/10.1007/978-94-017-3433-2_2
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