Communist Crack-Up

May 27, 1957

A little less than a year ago, those who take Soviet boasts seriously were warning us that Communism might be about to beat capitalism “at its own game—production.” Since then the evidence has been unmistakable that, far from there being any “miracle” of Communist production, the lands behind the Iron Curtain are going through an economic crisis.

The most revealing recent study of Soviet production was in a paper presented before the American Economic Association by Prof. G. Warren Nutter of the University of Virginia and the National Bureau of Economic Research. Warning that we must depend on Soviet official statistics, “where a government with flexible standards of candor has exercised rigid control over the trickle of information it has allowed to the outside world,” Nutter presents tables to show that even on the basis of these official statistics production in Russia lags farther behind that of the U.S. in most basic industries than it did in 1913. His tables cover 37 industries in three benchmark years. I select comparisons for nine basic or representative industries:

If we take steel ingots as an example, the above table means that the Russian production in 1913 was roughly equal to the production achieved in the United States around 1892, or 21 years earlier; that the lag had risen to 32 years in 1937, and fell somewhat from that point to a level of 29 years in 1955. The comparison is even worse on a per capita than on an overall basis. For the 37 industries in 1955, the median lag in per capita output was 56 years.

A major sign of financial strain in the Soviet Union was the announcement by Khrushchev on April 10 that the Soviet Government had decided to “postpone” for twenty to 25 years the redemption of 260 billion rubles of bonds held by the Russian people. This proved once again not only that the Soviet leaders will repudiate their most solemn pledge, but that they are as contemptuous of their promises to their own people as of their treaties with the “capitalist imperialist” West.

HOW TO DECENTRALIZE

But the most striking evidence of a crisis in Russian production is Khrushchev’s radical plan for decentralizing control. He is planning to abolish most of the giant ministries in Moscow and to shift daily operational control to a separate “economic council” in each of 92 economic regions. This pays capitalism the flattery of partial imitation; but it obviously does not go far enough to be effective.

A far more promising step was taken last year in Poland, when Gomulka declared that “joining of collective farms is voluntary.” As a result, it is now announced, 85 percent, or all but 1,958 of the 12,500 collectives forced together in a decade of Communist rule, have been liquidated.

All that Russia now has to do is to allow such a return to relative economic freedom and quasi-private property not only in farming but in industry. Let the government give the workers and managers shares in their respective industries or plants, say, in proportion to their wages or salaries. Let the new shareholders or partners in each plant elect their own managing partner. Allow everyone to buy or sell shares as he chooses; to change his occupation; to buy or sell or produce or consume what he wishes. Free all wages and prices from government control. Let successful managers reap their reward in profit, and let the burden of losses fall on the unsuccessful managers. Allow and encourage competition. Establish security of private property. Stabilize the currency. Respect obligations and enforce contracts. The result will be an enormous increase in production—of the goods consumers want, and in the proportions they want them.

This, of course, will be capitalism. But the Soviet leaders should find no difficulty in accepting it, provided only they are allowed to call it Modern Socialism.