Once again on socialist market economies

The subject of a socialist market economy is a contentious one, with Vietnam’s recent economic history bringing questions about it into sharp relief, as the response to the “People Before Profits” columns of July 12 and 19 illustrates. I will attempt here to address some concerns raised in readers’ comments, realizing that our discussion of these matters here is necessarily limited for reasons of space.

I made the point that the socialist countries found it necessary, as they developed their economies, for their products to compete on the world market. Several readers argue that socialist countries could have set their own pace for technological development independently of the capitalist world. I maintain that this independence was not possible, because the imperialist counties were able to use their economic superiority to force the pace of development. The escalation of the arms race by the United States was openly designed to force the socialist countries, the Soviet Union in particular, to maintain a level of military technology and production that burdened their economies severely. Such economic pressures, without a comparable technological infrastructure, were among the factors contributing to the collapse of the socialist countries.

Economic expansion required increasing imports of anything that could not be produced domestically. To obtain convertible currencies for these imports, the socialist countries had to export to the world market. In the mid-1970s, the European socialist countries began to borrow heavily to buy technology for exporting products to the capitalist market. They were unable to keep these technologies up to date, however, because their economic model lacked incentives for trading on the capitalist world market. They then could only trade much of this new production among themselves, and the resulting nonconvertible rubles were useless in servicing their debts.

The constant propagandistic display of Western consumer goods in film and television generated the demand for comparable products among the populations of the socialist countries. Counterpropaganda proved ineffective. The contradiction between the rising cultural/educational level of the people and the lack of material access to the achievements of modern technology had severe ideological consequences; people in the socialist countries saw the gap between themselves and the West growing instead of narrowing. In 1987, when I was a guest researcher in the Physics Department at Humboldt University (Berlin, German Democratic Republic), the only desktop computers in the laboratory of my research group were the two that I brought and left there.

Demoralization with and alienation from the socialist cause grew uncontrollably; one manifestation was the growth of an underground economy to satisfy the demand for consumer products. Support for abandoning socialist development grew. The consumerist orientation grew particularly strong in Hungary, Czechoslovakia, Poland, and the GDR, while in the USSR and other European countries the economic dislocations led to periodic shortages even of basic necessities and social services. The latter first became evident to me in the case of the Soviet Union in the mid-1970s when data on infant mortality (which had begun to rise) mysteriously vanished from its statistical yearbooks. During subsequent stays in the Soviet Union in the 1980s, I observed first-hand the shortage of meat products, for instance, and even items of clothing like socks and gloves, again stimulating the underground economy.

Some ask whether, if market forces come to dominate, this would not lead to periodic crises similar to those experienced in all capitalist countries. Possibly so, but probably less severe, since a socialist market economy is not completely unplanned. The state stimulates investments on the basis of its long-range goals of development. Considerable leverage is obtained through state control of the basic infrastructures, credit, and taxation policies. For example, the Chinese authorities have just warned auto manufacturers that the industry is threatened by possible overproduction and are enacting measures to curtail investments in this industry, such as raising the tax on the assembly of a car to equal the tax on production of the entire car. Moreover, speculative activities are greatly restricted, which is why the Asian financial crisis at the end of the 1990s did not hit China or Vietnam.

Several responses express the valid concern that future growth of the capitalist sector can undermine the socialist course of development. The socialist direction can be maintained only if state power rests in the hands of a Marxist-oriented working class. A strong state sector is not enough. After all, heavy industry in Austria is largely in the state sector, but the country remains capitalist. The issues around class struggle in a socialist-oriented mixed economy are complex. The Communist parties must heed Lenin’s call to serve as the conscience of the nation to guarantee adherence to the goal of socialist transformation.

The author can be reached at marqu002@umn.edu