Commentary Magazine

Soviet Economic Developments

This is the second in a series of three articles by Oscar Gass dealing with the changes that have taken place in the Soviet Union under the rule of Nikita Khrushchev and the further transformations that may reasonably be anticipated in the coming years. The first piece in this series (on Russian government) appeared in our November 1963 issue. Mr. Gass is a consulting economist in private practice in Washington, D.C., and a frequent contributor to these pages.



In the current decade (1961-70) the Soviet Union . . . will surpass the strongest and richest capitalist country, the U.S.A., in production per head of population . . . [Later] by the end of the second decade (1971-80) . . . Soviet society will come close to a stage where it can introduce the principle of distribution according to needs . . . The construction of Communist society will be fully completed in the subsequent period.

—Program of the Communist Party
of the Soviet Union, 1961.



Quantity and Qualities

Among Russian contributions to Western nightmares, the image of the innumerable Scythian horde has its place. So T. S. Eliot, in 1922:

Who are those hooded hordes swarming
Over endless plains, stumbling in cracked earth
Ringed by the flat horizon only

And perhaps even more revealing is Eliot’s quotation, in elucidation of these lines, where the restraint of his own English gives way to the Romantic self-indulgence of another’s German: “Schon ist halb Europa, schon ist zumindest der halbe Osten Europas auf dem Wege zum Chaos, fährt betrunken im heiligen Wahn am Abgrund entlang und singt dazu, singt betrunken und hymnisch wie Dmitri Karamasoff sang. Ueber diese Lieder lacht der Bürger beleidigt, der Heilige und Seher hört sie mit Tränen.1

The Eurasian horde—however swarming and stumbling, drunken and deluded—happens not to be innumerable. Indeed, some time in the next twenty years, it may become less numerous than the people of the United States. The shift has been going on for five decades. In 1913 the population of the present territory of the USSR was about 159 million and of the U.S.A. 97 million—61 per cent. At the beginning of 1963, the respective populations were 223 million and 188 million—U.S.A. 84 per cent. If fertility persists unchanged in both countries, their 1980 populations will be about 278 million and 260 million—U.S.A. 94 per cent. Should there, however, be a modest decline in the fertility of Soviet women, as some demographers think likely,2 the American population total might rise above the Russian around 1980. The trans-Atlantic horde would become more numerous than the horde of the endless Eurasian plains.

In this shift, Russian catastrophe was a major factor. In 1914 through 1923, Russia “lost”—including the deficit of births—some 30 million people. For the years of the consolidation of Stalin’s power, 1927 to 1939, demographers find an unexplained “excess mortality” of about 5 million. But the catastrophe which imagination cannot contain was the experience of World War II. On January 1, 1959, there were 14½ million fewer children aged 8 to 17 in the USSR than there had been on the same territory twenty years earlier. Where the losses of life were some 30 million in 1914-23, they were about 50 million (including the birth deficit) in 1941 through 1945.

The losses of World War II are reflected in the huge majority of women and the shortage of urban labor. In January 1959 the USSR took census and recorded its population as 209 million. There were then 122 females to every 100 males. Everybody who planned to do some work, however marginal or part-time, seems to have been registered as gainfully occupied. A huge total was accordingly derived—109 million persons (52 per cent of the population, where the U.S. share with civilian or military “work experience” would be about 45 per cent). By the beginning of 1964 the total Russian population will be about 225 million. The corresponding number of persons who do some work is likely to be in the range of 115 million.

Women carry the load of the world’s work in the USSR far more than in the U.S.A. At the 1959 census, Russian women were 52 per cent of the gainfully occupied (U.S. then 36 per cent). Women were absent from only one category—the armed forces. The schools and hospitals of the USSR are staffed overwhelmingly by women, and farming is dominantly a woman’s occupation. Young or old, unmarried or married or widowed, women are the agricultural workers; in 1959, women in agriculture outnumbered men three to two.

Industrialization and the related intensification of agriculture are usually pictured as emptying the rural farm areas of people. Not so in the USSR. Russian urban population outnumbered rural for the first time in 1962. In 1917 the rural population of Russia was 118 million and at the beginning of 1962 still 108 million. In between, it is true, Russia had annexed western territories which added about 16 million to her rural population (and 4 million to the urban). But the broad picture remains. The rural countryside is not depopulated. Russian farms remain crowded—though largely with underemployed women—women who are also, in substantial part, widowed or unmarried.



Labor Training and Job Assignment

Under full Communism, there will no doubt be free choice of education and employment—as of all other things. But the present transition to Communism bears quite another character. While the Party leads, the function of education is to train the labor force for tasks assigned by the State. Primary education (now eight years) is to produce trained and willing hands; secondary education (usually three years) for semi-specialists; advanced education (an additional four to six years or more) for high-grade specialists. How revealing it is that American speech has only the amorphous words “college graduates” and “holders of graduate degrees” where the Russians have the precise word specialists!

Russian education is not gropingly academic; it is decisively polytechnic. From the earliest school experience, the student is made aware of the importance of labor skills and of the critical significance to “the new Soviet man” of “fulfilling and over-fulfilling” his work quota. School is no idyl separate from work. Education is largely training for a specific job. For this reason, it is difficult, even at the secondary level, to compare a Russian school with an American one. Mr. Nicholas De Witt, perhaps our best authority on this matter, concludes that, at the secondary technical level:

The overall Soviet program requirement . . . cannot be meaningfully compared with any counterpart in the United States because of the strong functional emphasis in Soviet training. Better American technical institutes . . . are much more diversified in content than Soviet technicums. The American schools combine under the same auspices several types of technician training programs which in the USSR would be offered separately in individual technicums.

In higher education, the government planner specifies his requirements in meticulous detail. The planner asks that the higher institutions supply him not a Geologist but a geologist code 0104 (a specialist in “exploration and training for exploitation of peat deposits”), not an Electrical Engineer but an electrical engineer code 0603 (a specialist in “electroinsulation and cable technics”). In 1961, there were 303 such code classes of higher-education specialists! It was these that higher education was to turn out—each in the planned number. So Moscow speaks, defining the role of higher education, in 1961:

The plan of training and the plan of distribution of specialists are an organic part of the national economic plan . . . The indexes of plans for the training and distribution of specialists are unified and obligatory for all regional councils of the national economy, ministries and offices . . . The plans of training and distribution of specialists are as directed; that is, every plan gives the quota for councils of national economy, ministries, and offices having educational institutions of students admitted and of specialists graduated in accordance with the planning period . . .

No liberal arts nonsense. The Soviet State spends money for education. It wants value for money. And what it values are specialists.



At every level, the Russian graduate is unburdened of looking for a job. He is directed where to go. The elementary school graduate, however, is in principle free to quit after giving two weeks notice. The kolkhoznik remains frozen: he is not possessed of an internal passport and will not normally get one unless he is leaving to go to an officially-approved job.3 Graduates of secondary, vocational, and college-level schools are not free to quit. They are obligated to stay where they are assigned, for three or four years. In September 1963, control over college graduates was tightened by providing that no diplomas would be issued on completion of academic studies but only after a further year of successful work experience in the assigned job.

Every person who works for a wage or salary must possess both an internal passport and a workbook. Wages and hours of work are fixed by law Penalties for breaches of labor discipline—including withholdings of pay—remain the sole province of management. No worker or trade union may dispute them. Yet there can be no question that the severity of labor discipline is greatly relaxed from Stalin’s day. Since January 1957, workers may dispute with management, and eventually appeal to a court, on a variety of important issues, such as demotions, wage classifications, dismissals, sick leave, and severance pay. Moreover, in 1958-60, a 41-hour week was gradually introduced throughout wage employment. A 35-hour or 36-hour week is promised. It is not impossible that the USSR leadership may decide, during the present decade, to lead all industrialized countries in establishing the shortest general urban work week. The domestic and world-wide appeal of such an achievement might be valued above its cost.



Living Standards, Promises and Prospects

Consumption is measured, in the USSR, to include both things bought by individuals and government-financed “communal services” (educational, medical, and many other). The government-financed share accounts for about 15 per cent of the Russian total. Khrushchev has announced that by 1980, when “. . . a Communist society will in the main be built in the USSR,” the government-financed share of consumption will be about 50 per cent.

To achieve greater comparability, I add to the usual U.S.A. measure of “personal consumption expendition” some $30 billion of American government spending for education and health. Then the present annual level of American consumption, on a basis more comparable with the Russian, is in the neighborhood of $410 billion. For a U.S. population of about 191 million, per capita consumption is substantially over $2100, in the prices now prevailing. In the same prices, U.S. per capita consumption in 1929 would be over $1,200, in 1913 well over $800.

In relation to American experience, the USSR lives simultaneously in three worlds. In the first world, some 75 per cent of consumption (food, clothing, housing, utilities) continues below the standard of the United States 50 years ago.4 In the second, the characteristic contemporary consumer durables—nonexistent also in the United States fifty years ago—are indeed present, but in very small quantities. In the third, education and health services are supplied to an extent which permits argument about their equality with United States levels today. Faced with these three worlds, one is tempted to retreat into the sane skepticism expressed long ago by J. M. Keynes, when he said that the results achieved by statisticians, in comparing economies remote in time or space, have the same order of precision as the judgment of a little girl who, having assiduously studied both Queen Victoria and Queen Elizabeth, concluded: “Queen Victoria was more virtuous, but Queen Elizabeth was more happy.”

Still, we may add something to our understanding if we compare directly first not the USSR and the U.S.A. but the USSR and Norway.5 There are striking similarities. Norway has, since 1950, been investing about 30 per cent of her gross national product in fixed capital. (This is probably a larger share than the USSR.) Norwegian personal consumption expenditures in 1962 amounted to only $840 per capita (at exchange-rate values and 1962 prices). Adjustment to add in public spending on health and education would bring total consumption only into the range of $900 per capita. Yet, with $900 per capita, Norwegian standards seem higher, in every branch of consumption except education, than those of the USSR. In regard to food, clothing, and utilities, the Norwegian edge is clear. In housing, it is drastic: Norway reported a room for each person already in 1950, while the USSR still has 2½ persons per room. Per thousand of population, Norway has about fifteen times as many telephones, half again as many radios, and one passenger automobile for each three families—where the USSR has practically none. In health services, the issue is less clear; Norway has a distinctly lower doctor ratio, but infant mortality is below 19 per thousand to the USSR’s 35. In higher education the USSR has a decided edge—not perhaps qualitatively but quantitatively.

All in all, it would seem difficult to value the present USSR standard of consumption as high as the one Norwegians were able to secure in 1962 for a per capita expenditure of about $900. Perhaps indeed, so long as one does not take such a figure too seriously, one might set an upper limit for the present per capita value of Soviet consumption somewhere around $850 per annum. A reasonable lower limit might be $650 per annum. The $200 gap does not exaggerate the problem of measurement and uncertainty.



Even the present modest Russian standard of living has only been achieved quite recently. In 1928, Soviet per capita consumption was about $160, in U.S. prices of 1929.6 (This would mean perhaps $275 to $300 in our present prices.) The relationship of this 1928 consumption level to supply at the Czarist peak, in 1913, is disputed. Some students believe the two levels were about equal; others are of the opinion that 1928 was perhaps 10 per cent above 1913. What is clear is that the relatively small Russian urban population (26 million in December 1926) was far better off than the greatly larger (147 million) rural population. The average urban household had a consumption level in 1928 about 1.7 times the rural.

The first Five Year Plan knocked the urban worker from his perch, and the second hardly raised him above the peasant. At the low point, in 1932, real urban wages may well have been below half the level of 1928. Janet Chapman estimates that, even in 1937, when there had been great improvement, real wages (valued in 1937 prices) were only 58 per cent of the wages of 1928. Abram Bergson argues that, in 1937, the average urban factory worker received only about the same real income, per man-year of labor, as did the collective farmer. (“Primitive capital accumulation” in the USSR came out of the hide of the urban worker as surely as from the peasant!) War destruction again pushed real urban wages down to the level of 1932—or perhaps lower. Even for 1948 Janet Chapman estimates real wages at only about 45 per cent of 1928! But by 1960 the real wage level of 1928 had apparently been regained—and the urban population of 1960 was 80 million larger than in 1928.

Consumption rose faster than real urban wage rates. A population heavily rural in 1928—and with the representative rural household consuming about 60 per cent as much as an urban one—gradually shifted its weight to the urban side. Wages being so low, more people—particularly more wives with children—had to work. “Labor force participation” increased from about 54 per cent of all people age sixteen and over in 1928 to about 67 per cent in 1937; in the 1950 shortage of husbands, it even approached 70 per cent. Per family or per capita consumption consequently rose much faster than per worker. The following is the rough outline, where Abram Bergson’s laborious computations for 1928-55 are joined with my own improvised guess for the present position.

Real Consumption Per Capita in the USSR (computed on 1937 adjusted prices)
1928 1937 1950 1955 Opening 1964
100 110 130 175 240-260



Promises and Prospects

The Khrushchev leadership has now promised, with utmost formality, that the USSR will achieve a drastic transformation in its relative economic position, in part by 1970 and sweepingly by 1980.

The C.P.S.U. [Communist Party of the Soviet Union] will concentrate its efforts on ensuring a rapid increase in the output of consumer goods. The growing resources of industry must be used more and more . . . to build and equip enterprises and establishments catering to the household and cultural needs of the population . . . The C.P.S.U. sets the historically important task of achieving in the Soviet Union a living standard higher than that of any of the capitalist countries.

This higher standard is to come partly in greater real wages but more in services which the consumer will not buy: “. . . as the country advances toward Communism, personal needs will be increasingly met out of public consumption funds, whose rate of growth will exceed the rate of growth of payments for labor.” The Utopian rejection of money is made an instrument of authoritarian control. The worker will not get a full money wage and the ability to influence supply through monetary demand. And, of course, there is no significant “free appropriation”: the free appropriation of goods and services, in accordance with one’s own conceptions of need, is the ultimate Utopian fantasy. Instead the State will retain a steadily increasing share of what could be paid out as wages. The State will use this share to produce what it thinks best. And the produce will be allocated—without monetary payment. When half of all consumption is allocated by the State, a Communist society has “in the main been built.” When the whole cash wage is withheld, we have arrived at full Communism. Then the worker gets—without any payment—whatever the State chooses to give him.

Authoritarian distribution is gilded with the attractions of equality:

As the living standard of the entire population rises, low income levels will approach the higher, and the disparity between the incomes of peasants and workers, low-paid and high-paid personnel . . . will gradually shrink . . . . The real income per head of population will increase by more than 250 per cent in twenty years. In the first decade already the real incomes of all factory, professional and office workers . . . will, on the average, be almost doubled, and the incomes of the low-paid brackets of factory and office workers will increase approximately 3-fold . . . . By virtue of higher rates of growth of the labor productivity of collective farmers, their real incomes will . . ., on an average per employed person, more than double in the next ten years and increase more than fourfold in twenty years.

Let us see what this means. The “twenty years” in question are the years 1960 to 1980. The key promise is that Russian “real income” per capita will increase by “more than 250 per cent.” The words “real income” are clearly intended to mean per capita consumption—both of purchased and communal goods. But Soviet per capita consumption in 1960 cannot have been evaluated greatly above $600. An increase by 250 per cent would then be an increase to something like $2100 per capita. This was approximately the American level at the beginning of 1963!



Nothing in our knowledge permits us to conclude that it is quite impossible that the Soviet Union will achieve the promised “more than 250 per cent” improvement in per capita consumption during 1960 to 1980. And nothing in our knowledge justifies us in concluding that this promised achievement is at all likely. A per capita increase by over 250 per cent in twenty years is an increase at a compound annual rate of over 6.4 per cent. Only once has the USSR achieved something approaching such an advance, for a sustained period. That was in the decade 1948-58, when—due to war destruction—the starting (1948) real urban wage was under half that of twenty years earlier (1928). When this decade of rapid advance was over, the urban real wage was still below what it had been in 1928! In the period 1958-61, the Russian rate of advance seems to have slowed to, very roughly, two-thirds of the rate sustained in the decade preceding. In the twelve years 1928-40, the USSR achieved an increase in consumption per worker—urban and rural together—under 0.5 per cent per annum (according to Abram Bergson’s measurements). Soviet families cannot now look for an improvement in their consumption through having still more members of the family go to work: that means is already utilized. For the year 1962, the USSR reported to the UN an increase in “real per capita income” of 3 per cent.7 An even smaller increase may have been achieved in 1963. At the rate of 1962, per capita real income would increase by about 80 per cent in twenty years, not 250 per cent. Moreover, the Party Program promises a reduction in weekly hours of about 15 per cent by 1970. Under these circumstances, nothing in our experience suggests that it is at all likely that the USSR will achieve an increase in per capita consumption of over 6.4 per cent per annum for the twenty year period 1960 to 1980.

Conjectural Movement of USSR and U.S.A. Consumption (per capita, in prices of beginning of 1964)
Time of reference USSR consumption U.S.A. consumption
1913 $250 to $300 over $800
1928 $275 to $300 over $12008
1950 $350 to $400 about $1700
Beginning 1964 $650 to $850 over $2100
Toward 1980 perhaps $1500 perhaps $2800

The preceding table provides a foolhardy sketch of how I think Soviet consumption might rise by 1980. It is not a forecast. The USSR value of $1500 “toward 1980” is, in my judgment, maximal. The corresponding U.S.A. value of $2800 is merely the arithmetical consequence of assuming continuance, during the next sixteen years, of the indifferent rate of improvement that prevailed in the previous sixteen; it could be made better. In this image, the USSR toward 1980 stands well below the U.S.A. in 1950. But where the gap today may be expressed, with great crudity, as about fifty years, it would then be within arguing distance of thirty years.

The facts are too gross to be blinked. Strain our eyes forward to the limit, we cannot see the shape of a time when the USSR will be first in the world in the standard of living of its consumers.



Agriculture: A Lagging Sector

In the Party Program of 1961, agriculture occupies a position crucial to all else:

. . . the task is to increase the aggregate volume of agricultural production in 10 years by about 150 per cent and in 20 years by 250 per cent . . . . In the first decade the Soviet Union will outstrip the United States in output of the key agricultural products per head of population . . . . Productivity of labor in agriculture will rise not less than 150 per cent in ten years, and five to sixfold in twenty years.

All this breathes the enthusiasms of 1958. That was the year of bountiful weather, when the USSR harvested the greatest crop of its history, and all Molotovs and mockers stood refuted. High targets were set—a 70 per cent increase in farm output in the Seven Year Plan 1959-65, a 150 per cent increase in the decade 1961-70, and more later. Why not? A 150 per cent increase would leave the U.S.A. behind. But why not bury the capitalist world doubly, beneath a deluge of food? Who would have said that 1965 might come without any increase in USSR farm output beyond the level of 1958? And yet, at the beginning of 1964, just that seems not unlikely.

No great volume of labor was scheduled to be withdrawn from agriculture in the decade 1961-70. Output was to rise “about 150 per cent” and labor productivity “not less than” 150 per cent: the farms were to keep their workers. Only in the second decade would urban employments draw heavily from agriculture. Then the agricultural labor force was to be reduced by 40 to 50 per cent.

If it were so, it would indeed be high time. Actual USSR average monthly farm employment is computed9 as 38.2 million in 1959. Comparable U. S. farm employment totaled 5.8 million in 1959 and it is now about 5.0 million. We may think of the actually working USSR farm labor force as perhaps six or seven times the size of the farm labor force of the U.S.A.

In the bumper year 1958, this enormous Soviet labor force produced something like 10 per cent of world agricultural output. The U.S.A. produced about 16 per cent.10 At U.S. compensations of 1958, the American farm output was valued at $37.7 billion. Some $14.7 billion of intermediate products were used up in producing this output. That left under $4,000 of gross product per American employed in agriculture. In the Soviet farm structure, intermediate product costs are far less weighty. Still it was a very small contribution to the Soviet economy that was made, even in the bumper year 1958, by the 38 million person USSR farm labor force.

In the past decade, agricultural output in the USSR has developed somewhat as follows:

USSR Agricultural Output
Year Total Output Per Capita Output
1953/55 100 100
1958/59 142 131
1960/61 135 121
1961/62 138 122
1962/63 141 123
estimate 135 116

The purpose of the above table is to illumine the probability of an increase by 150 per cent in USSR agricultural output in 1961-70. As 1964 opens, no part of that increase has yet been achieved. No year of the past five has reached the level of 1958. An increase of 150 per cent in a decade requires a gain of some 9½ per cent annually. For the years 1960 and 1961 and 1962, the USSR reported to the UN increases in “gross agricultural output” of 2.3 per cent, 3.0 per cent, and 1.3 per cent. With such increases, the USSR might again come to a gain of 30 to 35 per cent in a decade. But these increments bear no affirmative relation to the target of a 150 per cent increase in agricultural output in one decade, 250 per cent in two.

It is a great error to believe that the USSR has relied only on dictation, coercion, and propagandist “storming” to achieve its plan of agricultural expansion. On the contrary, the forces of the market have been utilized vigorously. By 1963, the USSR was offering prices, in official procurement, which would have delighted the hearts of American farmers.11 At an exchange rate of $1.11 per ruble, the government of the USSR paid lower than U.S. farm prices in 1963 for only one important product—sugarbeets. The Soviet government paid approximately 25 per cent higher than U.S. farm prices for wheat; 35 per cent higher for barley; 35 per cent higher for corn; 50 per cent higher for cotton; from 50 to over 100 per cent higher for milk; double for cattle; triple for hogs; triple for wool; nearly triple for eggs. And these were official procurement prices. The prices received on the free market, for the produce of private plots, were greatly higher. Our information is meager. Yet it is not clear that the farm population of the USSR uniformly came off badly in this year when the Soviet government went abroad to buy some ten million metric tons of grain.



Social and Natural Uncertainties

The USSR has many urban employments in which the value of output is to be appraised at $4,000 per worker, in our prices. But in agriculture the USSR has not been able to sustain an output worth $1,000 per worker, in our prices. In the years 1959-63, the USSR would have been greatly more prosperous if she had bought a large part of her agricultural products with expanded production and export of diversified manufactures, rather than producing these same agricultural commodities with her own labor.

The gravity of the uncertainties affecting the future of agriculture in the USSR is, I think, commonly underweighted, through thoughtlessness or partisan advocacy or animosity. Three propositions seem controlling. First, the shortcomings of recent accomplishment are not to be explained by a neglectful attitude toward farm investment. Second, perhaps even the unsatisfactory social organization of Russian farming—measured by failure to elicit effort and care—will not prove, in the long run, to be the most serious limiting factor. Third, in time it may emerge that nature—acting through climate and water supply—has set the severest limits on what can be accomplished economically in Russian agriculture, within the framework of agronomies and cost relationships known in 1964.

Even strong minds in the West have been beguiled by the tale that the poverty of Russian agriculture is due to neglect of investment on farms. This is error. The USSR has been placing a greatly larger share of its investments on farms than the U.S.A. has done in the 20th century. At the beginning of 1960, Soviet investment on farms, apart from housing, amounted to about 42 billion heavy rubles, some 14 per cent of the total national capital of reproducible fixed facilities and livestock; the U.S. farm share was about 6 per cent. In 1952-58, the USSR placed about 25 billion rubles, some 21 per cent of its total national investment, in the production capital of farms; the U.S. is now placing about 5 per cent. For the Seven Year Plan 1959-65, the USSR again projected about a 21 per cent share for farms. This was to be 49.5 billion rubles. At exchange rate values, this is roughly $55 billion—perhaps nine-tenths of the total present capital valuation of all reproducible production facilities and livestock on American farms! One may suspect the ruble is overvalued at $1.11, in agricultural investment. (Construction and livestock may be expensive, though machinery is cheap.) One may doubt that the 49.5 billion ruble plan will be achieved. Yet the magnitude of USSR investment effort on farms remains impressive.

Reported shortages of farm machinery are not therefore to be denied. They are rather to be understood in the perspective of deficiencies below target “norms” pervasive throughout the Soviet economy. Estimates exist of how inadequate the present USSR stock of farm machinery is to perform required work at the best times. Apparently, by now, the USSR has the necessary tractor-drawn plows and perhaps four-fifths the grain combines, but barely three-fifths the tractors and trucks. In this, however, agriculture is not unique.

Where agriculture suffers comparatively greater neglect is in production supplies originating in industry and in utilities. The USSR now (1962) sows about 534 million acres to the U.S.A.’s 300 million. But USSR farming then got only about one-third the U.S.A. quantity of fertilizers. Insecticides and weed killers are apparently so scarce they are not even adequately applied in seed preparation. Russian farms get less than a third the electric power of American farms. They have miserable roads.



But inadequacies in industrial supply to farms are not unrecognized. After the crop failures of 1963, Khrushchev seems even to have begun to worship the god of chemicals and the god’s children—fertilizers, insecticides, and herbicides. From 15 million tons in 1962, fertilizer production should be raised to 80 million tons—no, to 100 million tons!—by 1970. Fertilizer would then suffice to apply twice or three times the quantity used in the United States. Where this god of fertilizers is faithfully served, Khrushchev promises, bad crop years like 1963 will not come again. Withering drought and killing frost and burning sun will shrink away!

Less measurable deficiencies—in society rather than in supply—may prove more permanently constricting. The USSR may even now be stumbling into substituting the untried worse for the not-entirely-satisfactory better. For example, today the farm family on the kolkhoz (collective farm) or sovkhoz (state farm) is usually entitled, on condition of performing its work quota in the socialized sector, to a family plot, representatively under three-quarters of an acre. Industrial workers get up to three-eighths of an acre. Naturally, these tiny areas are intensively cultivated. On some 3.3 per cent of the land, private farming produces something like 30 per cent of USSR farm output.12 In 1961, the private sector produced 46 per cent of all meat, 45 per cent of all milk, 78 per cent of all eggs, 64 per cent of all vegetables, and two-thirds of all fruit. Where large land areas are essential, socialized agriculture dominates; where care and attention are decisive, the private sector comes to the fore. Yet the very survival of private agriculture is commonly regarded as more than a little shameful by simple-minded Communists. Private farming has lived in the shade of the kolkhoz. Now that shade may be withdrawn.

Thirty-five years after the beginning of forced collectivization, there is no longer any reason to regard the failure of the Russian kolkhoz as anything less than definitive. Its peasant members of the first generation hated it. Its members of the second generation do not like it: they would gladly abandon it for wage employment on the sovkhoz—if they could also preserve their private plots! For the government of the USSR, too, the kolkhoz today seems to have become only a second-class sovkhoz. Particularly since November 1962, State and Party organization denies the kolkhoz any autonomy. Khrushchev personally stigmatized it an abuse that the members of some kolkhozi have been allowed to earn more than sovkhoz workers. The kolkhoznik has been restricted to playing the game, “Heads I lose; tails you win.”

The USSR is moving toward an agriculture based straightforwardly on wage labor. The sovkhoz is the dominant instrument. The kolkhoz imitates and approximates. In 1961 already, the sovkhozi employed 6½ million workers and sowed 216 million acres. The sovkhoz is a giant farm, averaging 800 workers and 24,000 sown acres. Sovkhoz managements are reportedly impatient of private plots for their workers. Let them work harder for the company and less for themselves! Politically, the sovkhoz is surely a satisfactory embodiment of authoritarian Communism. But, as an agricultural system, the sovkhoz cannot be said to have been tested adequately by five years of upsurge (1954-58) followed by five years of stagnation (1959-63). Socially and economically, the sovkhoz is unproven.



Khrushchev now says, “Give me the chemicals, and I will give you an agricultural output equal to the American—and greater.” The American farm spokesmen say to the USSR, “Establish family farms, and these will give you an agricultural output sufficient—as ours is.” Both tacitly assume the USSR is the U.S.A.—only bigger. They are mistaken.

It is not at all clear that the USSR can, by any economical means, become a country of agricultural surpluses and exports, under advanced industrialization. The experience of Holy Russia is nothing to the point. Certainly the USSR cannot become a country of agricultural abundance by copying the U.S.A. Khrushchev tried the copying. In 1962, he achieved USSR planting of 91.5 million acres of corn—a much larger area than the U.S.A. has planted in corn since World War II. But in 1962 the U.S.A. harvested 3,644 million bushels of corn grain, while the USSR harvested disaster—about 450 million bushels of grain and the rest a mess of silage and green fodder. The corn would not ripen. The USSR is too cold—not just in 1962 but generally.

The USSR is a northern, cold country. Its southland Crimea is as far south as Minneapolis. In the north and west, where there is water, there is little sun. In the south and east, where there is warm sun, there is little water. Those Asian provinces which may be mistaken for southland have bitterly cold winters and a short growing season. Akmolinsk in Kazakhstan has an average growing season of only 129 days. Even Kharkov, in the Ukraine, has a frost-free growing season of only 151 days. Almost everywhere, farm work must be compressed into a few months. The areas to the south and east are particularly prone to dangerous May-June drought. All the “virgin and disused” lands have rainfall of great irregularity, averaging under 16 inches.

The USSR gets yields of grain, per acre, about half those of the U.S.A. But Professor D. Gale Johnson has shown that these USSR yields are equal to those of the U.S.A. for areas of comparable climate (parts of the Dakotas, Wyoming, Montana, and Nebraska). These are areas where U.S. agriculture has also achieved no increase in grain yields, at least since the 1920’s. Three decades ago, C. F. Marbut concluded:

Russia has nothing corresponding to three of the most productive regions of the United States—the Mid-Latitude Region [south of the Great Lakes region], the Corn Belt, and the Cotton Belt, all of which have been of tremendous importance in the production of the agricultural wealth of the United States.

To achieve agricultural abundance, the USSR must carve out a new agronomic path, quite distinct from that of the U.S.A.

In general, economic studies do not yield understanding of great value in scheduling macroscopic economic changes, extending over decades and involving increases of 150 per cent or 250 per cent. No reasonable man—whether steeped in economic studies or contentedly ignorant of them—would repose any great confidence in a judgment regarding when, if ever, the USSR will achieve that 250 per cent increase in agricultural output which the Party Program of 1961 apparently regards as indispensable to attaining the 1980 threshold of Communism.



Energy Industries: A Leading Sector

Priority for energy development is a central tenet of Soviet policy. In 1952-58, nearly 21 billion new rubles are officially reported to have been invested in the energy industries. In 1959-65, energy is to get 38 billion rubles—some 34 per cent of all industrial investment. The Party Program of 1961 announces:

Electrification . . . is the pivot of the economic construction of Communist society . . . [and again] . . . the Party is guided by Lenin’s great formula: ‘Communism is Soviet Power plus the electrification of the whole country.

One may demur. For libertarian Communisms, with their principles of freedom from coercion and free appropriation, electrification would be only another piece of machinery. But in the authoritarian Communism that emerged from the Russian revolution, the worship of some piece of machinery became a needed refuge. The god must come out of the machine; he certainly had not come from Bolshevist political action! Electrification then became a cherished symbol for the transition from the human past (continuing as mere present) to the Utopian future (beyond human scarcity and conflict). When electrification was complete, the future would be present.

The Party Program of 1961 placed the decisive moment high: “The annual output of electricity must be brought up to about 900,000-1,000,000 million kwh by the end of the first decade [1970], and to 2,700,000-3,000,000 million kwh by the end of the second decade.” The American competition promptly played up. In January 1962, the Federal Power Commission issued a new electricity forecast (its fourth and highest in four years) indicating that American consumption in 1980 would be “nearly 3 trillion kwh.” The implicit 1961-80 investment in American electric power (including generation and transmission, but not distribution) is in the general area of $90 billion. The Russian program is physically about a third larger.13

Electricity: Actual and Officially Forecast, USSR and U.S.A.
    Installed Capacity (millions of KW) Supply Total (billions of kwh) Supply per Capita (kwh)
  1961 actual 74 310 1,420
  1970 forecast 200 900-1000 3,900
  1980 forecast 600 2700-3000 10,300
  1961 actual 198 879 4,780
  1970 forecast 351 1,670 7,800
  1980 forecast 597 2,994 11,500

The above table—and especially the USSR entries for 1970—must, however, immediately give pause. The key economic assertion of the Party Program of 1961 is: “In the current decade (1961-70) the Soviet Union . . . will surpass the strongest and richest capitalist country, the U.S.A., in production per head of population . . . .” How is this possible? There is no major area of production—unless it be weapons—to which the USSR gives higher priority than to electric power. Yet the USSR does not even propose for 1970 to equal the per capita employment of electric power that the U.S.A. had achieved already—and which every newspaper reader could know the U.S.A. had achieved already—in 1961, when the Party Program was published. It is therefore quite impossible that the slogan of surpassing the United States, by 1970, in per capita production, could have been believed, by any qualified person, when it was first enunciated. Nevertheless Khrushchev was still repeating this slogan vociferously in November 1963. With what disrespect the Russian Communists treat their own people and their own Party Program!

Soviet progress in electric power installations and output continues to be impressive. In the twelve months ending June 30, 1963, Russian output was about 370 billion kwh (net), while American was 971 billion kwh (net). There is nothing in this experience incompatible with the USSR achieving an output of electricity in 1970 somewhere in the range of 55 to 65 per cent’ of the U.S.A. But there is also nothing in it that bears an affirmative relation to surpassing the United States in per capita production by the 1970 target date.



Coal, Natural Gas, and Petroleum

Coal mining is the least advanced of Soviet energy industries. In 1961, the official “production cost” of the average metric ton of Standard Coal14 in the USSR was equivalent to about $12.40; the corresponding U.S. mine-head value was about $4.85. Yet the USSR plans to expand coal mining greatly, while relocating it to the east and substituting open-pit and hydraulic extraction extensively for underground shafts. Where output was equivalent to 373 million metric tons of Standard Coal in 1961, it is to be 928 million in 1980.

For 1962, output per man-month in Soviet coal mining was officially reported as 45.6 metric tons of fuel—bituminous, anthracite, and lignite, as occurring. For 1980, productivity is planned to reach 140 metric tons. But United States coal mining output is now about 300 metric tons per man-month of 21 working days. USSR productivity is now not so much as a sixth of the American, and even for 1980 the Russian miner’s output is not planned to be so much as half the American’s at present. (Moreover, the USSR plans that some 500 million tons of her coal in 1980, of a total of 1,200 million, will be the low heating value lignite.) How then is the Soviet Union to pay the highest real wage?

Despite large proclamations, coal output has grown only about one per cent per year during the present Seven Year Plan. In the Soviet economy, certain sectors—agriculture, consumers’ industries, housing—have traditionally been the ones where the impact of underperformance is concentrated. An over-scheduling of potential—a shortage of labor, of materials, of management skills, etc.—must work itself out in deficits in some places. These have been the chosen places. Even in a priority sector, like energy, there may be subdivisions where failures are allowed to pile up. For the present Seven Year Plan (1959-65), perhaps also for later time, coal mining seems to have been designated a dumping ground of failures.

The greater emphasis being placed on oil and gas is indicated by the investment Plan.

USSR Investment in Energy Industries, 1952-65 (in billions of new rubles)
  Officially reported actual investment 1952-58 Planned investment 1959-65
Coal 6.1 7.8
Electric power stations 7.5 12.9
Oil and gas 7.2 17.3
                      Total 20.8 38.0



Natural gas may well be the fuel through which the Soviet authorities hope to compensate for their underperformance in coal—by 1980. Natural gas “production cost” is officially reported under 50¢ for the thermal equivalent of a metric ton of Standard Coal. Even if we adjust Russian accounting to our own (adding in geophysical and exploratory costs and a return on capital), this cost is unlikely to pass $1.50. This is a differential to conjure with, in relation to coal at $12.40.

Shortage of natural gas (or of oil) in the ground will not hold up Russian development. The American oil industry, speaking through its National Petroleum Council, has stated15:

Considering that the favorable [oil and gas] area for the USSR is considerably greater than that of the U.S. . . ., petroleum production levels in the USSR will not be limited by geological factors for many years. [And with respect to the official 1980 goals] . . . such goals appear consistent with the announced plans for prospecting and drilling and are not unreasonable in view of the probable oil reserves of the USSR.

Transportation will be the limiting factor for Soviet use of natural gas. Transportation means capital. Russian accounting (for instance on the Stavropol-Moscow 32-inch line) would suggest a cost under $3.00 for a movement of 2000 miles of a quantity of gas equal in thermal value to a metric ton of Standard Coal. Gas would then arrive cheaper than coal over an enormous area. But to attain this cheapness, one must first invest great amounts of capital in pipelines.

Russian natural gas production in 1962 of about 2.65 trillion cubic feet (U.S. 13.88 trillion) is now less than that of the U.S. two decades ago. Nevertheless, the Russian natural gas production target for 1970 is about 80 per cent of U.S. production in 1962, and for 1980 it is even some 75 per cent more than U.S. production in 1962! Moving these quantities of gas would require huge pipeline investments. Between 1942 and 1962, the U.S. built more than 100,000 miles of interstate gas pipelines (20 inch to 36 inch) at a cost of about $9 billion. By a strange coincidence, the USSR does plan to lay just some 100,000 miles of gas transmission lines in 1961-80, and one third in diameters much larger than the U.S.A.—40 inch, 48 inch, and 56 inch! From analogy with the Gazli-Sverdlovsk line, scheduled to be completed in 1965 at a cost of over 500 million new rubles, the Russian gas transmission program for 1961-80 might be guessed to cost something in the range of $15 billion to $20 billion.

No doubt, the USSR can achieve such a natural gas program. No doubt, it can also make satisfactory big pipe and big compressors—though it has not yet done so. The problem is not qualitative. A great country can, in time, accomplish any limited technical goal to which it gives sufficient priority. The problem is quantitative. Can the natural gas program be accomplished together with all the other things planned to be done? That is still quite unproven.



Petroleum is a favored child in the present Seven Year Plan. Crude production is to be doubled; refining capacity is to be doubled; oil pipeline length is to be tripled. Further, after the attempted U.S. economic blockade of Cuba, something was added: self-sufficiency is to be achieved in tankers. In this seven years, oil gets three-quarters of the investment in oil and gas. Oil investment comes to over $2 billion a year.

A dollar invested in Russian crude production yields far more oil today than a dollar invested in the same activity in the United States (though not more than in the Middle East) . By Soviet accounting, which omits all the costs of finding the oil and all return to invested capital., the “production cost” of crude oil in the USSR now averages 50¢ per barrel; moreover, the cost is declining. By Western accounting, Russian crude oil would cost substantially more. Nevertheless, we may calculate from the physical facts that, in comparison with the U.S.A., crude oil is cheaply won in the USSR.

In refining, the shoe is on the other foot. No one in the U.S. oil industry is quite able to understand how the USSR can spend so much on refineries and get so little. Refining capacity is to be increased from 2,400,000 barrels per day in 1958 to 5,000,000 in 1965. (U.S.A. 1963 capacity 10,100,000.) The USSR has budgeted 3.6 billion rubles, roughly $4 billion, for this expansion. But the USSR builds refineries that are relatively primitive in equipment and product range, such as have been constructed recently in Western Europe at costs not over $600 per barrel of daily throughput capacity. For new refineries of this character, the USSR has budgeted about $1,750 per barrel! Apparently, even within a leading sector, there are still large areas of backwardness in Russian industry.

Petroleum transportation is another such area. In 1958, some 68 per cent of all Soviet oil still moved by rail. There were only 8,900 miles of petroleum pipelines. (U.S. had 95,000 miles trunk lines plus 50,000 gathering.) By 1965, the USSR proposes to have built another 19,700 miles of oil lines, including several very large ones. The show-piece is the great Comecon line of some 3300 miles, the largest in the world, running from the rich Volga-Ural oil fields to the Baltic and to Poland, Hungary, Czechoslovakia, and East Germany. Both its total network and its initial 40-inch section, taking off some 740,000 barrels per day, will be a spectacular First for the Communist world. It means more than shooting for the moon.

Given friendly export markets, the USSR may well surpass the U.S.A. in crude oil. production after perhaps another ten years. The table below indicates the substantial—but not pre-eminent—growth the USSR has already achieved.

World Production of Crude Oil, 1949-63 (in thousands of barrels per day)
  1949 September 1963
USSR 660 4,200
Other Communist 130 400
U.S.A. 5,040 7,51016
Middle East 1,440 6,880
Other 2,040 7,310
                Total 9,310 26,300

By the standards of the great world oil trade, the USSR is not yet an exporter of the first rank. In 1962, her net exports were less than 850,000 barrels per day, of which less than 495,000 went to countries outside the Communist bloc. USSR exports to all non-Communist countries were less than one-fourth of the imports of the U.S.A. alone. In its most saturated non-Communist market, Western Europe, the USSR accounted for only 8 per cent of net imports. In Japan, the USSR accounted for only 6 per cent. Four countries—Venezuela, Kuwait, Saudi Arabia, and Iran—together exported seven times as great a quantity of oil as the USSR exported to all countries, Communist and non-Communist.



Probe as one may, it is not possible to find even one major division of this leading sector—the energy industries of the USSR—which seems likely to meet the standard of the Party Program of 1961: to surpass the U.S.A. in per capita production by 1970. In later times, some individual surpassings are not unlikely, for example in petroleum, where U.S. supply already includes 20 per cent of imports. Every man of good will must hope for such surpassings in some products. The USSR is so far behind in its lagging sectors.



Trade and Economic Warfare

Whoever studies, for the first time, the commodities that make up present Soviet exports to the industrial West (now approaching a total value of $1¼ billion annually) is in danger of reaching two quick conclusions: first, he has happened, by mistake, on the exports of the Russia of the Czars; second, the Russian economic planners are insane. The first conclusion is easily found to be in error. The second lingers.

The exports of the USSR to the industrial West are almost entirely raw materials, fuels, foods, and semi-manufactures (such as cotton fibres). Fuels are about 25 per cent; forest products 16 per cent; foods (principally grain) 14 per cent; ores and metals also 14 per cent; then come textile materials, furs, and lesser products. Some of the metal specifications would have been unfamiliar in the days of the Czar; otherwise these exports could have been sold by Holy Russia. And, in exchange, the USSR purchases from the West: more than 40 per cent machinery and equipment; 9 per cent steel pipes (for those long oil and gas lines); 12 per cent other finished steels; also copper, wool, and synthetic fibres. The USSR’s imports, from the industrial West, are just what a less-developed country characteristically buys, when it is hot on the road of industrialization; the USSR’s exports are the kinds of things such a less-advanced country characteristically sells.

In business channels close to Russian trade, the responsibility for this peculiar composition of Russian exports is argued both ways. On one side it is said that the Russians know nothing about how to sell exports. “They are hit-and-run sellers.” They have good machinery, good equipment, very cheap, undoubtedly competitive. But they have never begun to do a selling job remotely comparable, for example, to what the Japanese do. They are unwilling to advertise, to establish continuing local agencies for service, to take responsibility for supplying parts. “They want to sell a boat-load of lumber, a tanker-load of oil, a consignment of raw skins or furs, take their money and run.” But, on the other side, it is argued that the Russians must sell anonymous commodities. Nobody in the West, it is contended, will outfit his shop with Russian lathes or Russian microscopes, however good and cheap. Wheat and wood and oil carry no names. Of course the Russians sell crude materials—even those in which they have no comparative advantage. They are selling in unfriendly markets. Even petroleum, which is among their most advantageous exports, encounters trumped-up hostility.

But the hunch that the Russian choice of commodities for export may be largely traditional, passive, and irrational is not easily suppressed. Nothing we know of Soviet pricing or planning serves to allay this hunch. Instead it gains reinforcement from examination of the continuing weight of agricultural commodities in Russian exports.17 We are not now in the Russia of the Czars, with a four-fifths rural population. We are in a dominantly urban society, proven in industry and unsuccessful in agriculture, where food is so expensive that it absorbs half the total value of consumption. Is it rational that the USSR has, in 1955-62, derived about a fifth of the total value of its exports from sales of agricultural products? These are indeed products which were comparatively abundant and cheap in Holy Russia, but they are scarce and dear in the USSR which today exports them. About 45 per cent of the value of these agricultural exports has been grain, flour, and bran; about 30 per cent cotton, wool, flax, and other textile materials; about 9 per cent animals, meat, and dairy products. Nothing of what we know generally of Soviet pricing and planning suffices to set aside the hypothesis that, in continuing to buy imports with her agricultural exports, the USSR is securing these imported commodities by one of the most expensive of alternative routes.

Even more striking, perhaps, is the comparatively trivial role of machinery and equipment in Soviet exports, both to the Communist bloc and to the rest of the world. In 1961, total USSR exports of machinery and equipment were $965 million, while imports were $1,739 million. The U.S.A. exported roughly eight times as great a value of machinery and equipment, Western Germany six times, the United Kingdom five times. The USSR did not even supply machinery for the industrialization of the East European bloc; on the contrary, she imported from Communist Eastern Europe some $1,245 million of such goods and supplied only $459 million worth. They were furnishing investment goods to industrialize the USSR; she was selling them fuels, raw materials, and foods! Such capital goods as the USSR has sent abroad have gone largely under political arrangements, to supply “complete plants.” In 1957-60, while the China aid program continued, fully 45 per cent of all machinery and equipment exported by the USSR went to China alone. Capital goods supply to China is now insignificant. “Complete plants,” shipped under political arrangements, still occupy a large share of the small volume of capital goods exports of the USSR. Now, however, these few plants go to Cuba, Egypt, India, and Eastern Europe.



Prominent among policy obstacles to the expansion of Soviet trade with the Western industrialized countries is the program of economic warfare sponsored, most determinedly, by the government of the United States. Already in March 1948 the cold war had become sufficiently hot for the U.S.A. to institute export licensing on the sale to the Communist bloc of commodities or services “strategic” to industrial development, as well as to warfare. Generally speaking, an effective embargo is now exerted on shipments from the U.S.A. to the USSR of special metals and materials, machinery, and equipment for metal working, for chemical production, petroleum refining, electrical control, power generation, transportation, precision instrumentation, rolling mills, large compressors, large diameter pipe, etc., etc. If preventing commodity trade between the U.S.A. and the USSR is the measure of success, this program of economic warfare has been brilliantly successful. In 1962 (by U.S. figures), exports to the Soviet Union were only $15.3 million and imports $16.2 million. The U.S.A. had two per cent of the weight of Western Europe in USSR trade!

USSR Trade with Non-Communist Areas, 1962 (in millions of dollars)
Area USSR Imports USSR Exports
U.S.A. and Canada $23 $20
Western Europe 834 867
Finland 196 167
Latin America 375 475
Middle East 116 202
Asia and Far East 428 365
Total (including others) $2,087 $2,220

Appreciating that an American embargo would have little strangulation power if the Soviet bloc could continue to buy elsewhere with comparative freedom, the U.S.A. took early initiative to draw its NATO allies and Japan into cooperation. In January 1950, in Paris, the Consultative Coordinating Committee (COCOM) was created to act as an instrument of economic warfare. COCOM has no treaty basis. Its determinations create no legal obligation—except to the extent any state chooses to embody such determinations in its own legislation or administrative practice. Even a cooperative member, the United Kingdom, which had itself an extremely long list of commodities prohibited for export to the Communist bloc,18 regularly refused to enforce COCOM views in which it had not concurred. Nevertheless, from 1950 to 1953, while Marshall Plan funds were flowing and as the Korean war continued, exports to the Communist bloc were successfully held down. After the death of Stalin and with the truce in Korea, this economic warfare gradually lost determination. The COCOM embargo lists were shortened in 1954, and they have been shortened again repeatedly. Mr. Frederic L. Pryor has constructed a volume index of supply to the Soviet bloc by the non-Communist world. While, as he suggests, some contraband probably escapes recording, his index does reflect the effective holding action through 1953 and the subsequent reversal.19 By 1959, European controls denied comparatively little. Only the United States continued the embargo without substantial relaxation.

Next perhaps only after Stalin’s mockery of a Peace Movement, with its embellishment by Picasso’s doves, there has been no greater hypocrisy in the recent history of Communism than its invocation of a universally beneficient international trade, free from all taint of economic warfare. When Stalin turned against Yugoslavia, he and his satellites imposed a total economic embargo. When Khrushchev decided to maximize his pressure on China, he precipitately withdrew committed technical services and capital goods. When the USSR decided to give more demonstrative support to Nasser, it broke a petroleum supply contract with Israel and denied compensation for the breach. Very probably, the USSR leadership attributes much Western trading with the Soviet bloc to foolish, short-sighted capitalist money-grubbing and to such disorganization in the non-Communist world as, in Communist eyes, marks a decadent social order. The USSR, for its part, has employed economic warfare wherever this warfare was thought to be of advantage, and the USSR will no doubt continue to do so.

Communist practice is, however, no sure guide to effectiveness, still less to wisdom. Even effectiveness alone is not easily tested. The present economic warfare is no mere pinprick. Yet it probably has only a very limited impact on the immediate Soviet ability to wage war. Its drag is on economic development, and there probably more on general resources than on particular bottlenecks. The Russians, by now, have the technical skills to make almost any particular commodity that is made elsewhere, in time. At this level, general financial constraints may be more inhibiting than specific trade controls. If the USSR could now borrow $20 billion or $30 billion in the West, those added resources would overcome many difficulties. They would substitute for time. And, in a competitive race, that is the great substitution. But particular scarcities are also inhibiting. Clearly the Russians greatly desire free access to the technology of Western chemical industries. Clearly also the USSR wishes to be able to buy freely just those things the international oil industry would deny her: large diameter pipe, rotary drilling rigs, drilling bits, large compressors, etc. Certainly a country that can send manned satellites around the earth can also make good, big steel pipe. After experimentation, in time. The USSR would like to save time. Should it be assisted to develop faster?

Relaxation of Western economic warfare against the USSR, where rationally determined, reflects a recognition, an accommodation, and a wager. The recognition: after economic warfare as before, the USSR will have the capacity to destroy a large fraction of humanity. The accommodation: a Western society of many states and sub-societies has not the conviction of implacable, insurmountable enmity which alone would unite it in total economic warfare, sustained—as it would need to be—decade after decade. The wager: perhaps foregoing economic warfare may induce some marginal good will; perhaps economic collaboration may help challenge the false image of malicious enmity; perhaps greater prosperity may help set the stage for a more peaceful outlook.

When the wager seems implausible, risky, or even foolhardy—and there are many such times—economic warfare comes again into vogue. And then those who have not, all the days of their lives, taught implacable enmity (to Japan, to Germany, to Carthage, to the USSR) are that time’s fools.



The End of Exploitation?

The Khrushchev principate has promised the people of the USSR that they will pass over the threshhold into Communism, by 1980, through the door of abundance. The schedules for the arrival of this abundance were, I suspect, irresponsibly established, in a mood of febrile propagandist self-glorification. The resulting promises of surpassings, rashly dated, will—in all reasonable probability—not be honored. In the current decade, 1961-70, the USSR will not “surpass . . . the U.S.A. in production per head of population.” In the years to 1980, the USSR will not accomplish “. . . the historically important task of achieving in the Soviet Union a living standard higher than that of any of the capitalist countries.”

It would be inane to occupy ourselves now with predicting what may happen after 1980. (Even economic predictions for 1970-80 are generally of little value.) The future is ours to make, not predict. Important to us, however, for the shape of the world in which we will live in these next years, is the fact that the Soviet Union—though heavily armed and heavily investing for tomorrow’s abundance—will apparently continue, for the present, to be a strikingly poor country, in the standard of living of its people, by comparison with Northern and Western Europe, Canada, Australia, New Zealand, and the U.S.A. We in these “Western” countries shall be living already in our comparatively abundant today, they in the USSR still meagerly and always preparing their tomorrow.

And yet, in larger historical perspective, where the arrogance and vainglory of princes and premiers and presidents fades to insignificance, the USSR will be a rich country. Until a half-century ago, no society had ever existed among men which had the capacity to supply all its people a quantity of goods and services which would be valued, in our money, at $1,000 per capita. None had ever been able to supply every family of five persons an annual income which would be valued, in our prices, at $5,000. But the USSR could do this now—in as few years as it would take to accomplish the changeover—by beating some swords into plowshares and by foregoing some investment in tomorrow for a gain in the fullness of life today. By the standard of what all the generations of man have called poverty, the USSR is now in a position to abolish poverty.

Poverty, not scarcity. Gargantua chose, for the Order of Thélème, the rule “Do what thou wilt.” But he endowed the Order lavishly, so that no member had to earn a livelihood, and he rigorously selected those who would be permitted to enter. No general human society can live by such a rule—not a society that can supply each of its members the equivalent of $1,000 or $2,000 or $5,000. For every society which must provide its own economy, goods and services are scarce; they involve cost: to have one thing, it is necessary to forego another. No general society can permit each individual to take according to his own interpretation of his needs; partiality in self-judgment reaches too far for that. Desire outruns supply, and not only in a society infected with a supposed unique ethos of “possessive individualism.” This side of the earthly paradise, God—and not Satan or Thomas Hobbes—first declared the permanent unbalance between human desires and possessions.

For many individuals, in all economies, supply necessarily involves work—the exertion of effort not because it is instinctive or itself pleasurable but out of desire for the goods and services to which work-effort is a means. Here Buddhism is wiser than the materialistic Utopian anarchisms; it pursues the overcoming of scarcity not by increasing supply but by transforming the personality which demands. And Buddhism identifies the adequate transformation with Nirvana. There the unbalance of desire with attainment is corrected by the extinction of the individual human center of consciousness. And an economist must agree: if scarcity is to be done away with, this is the one promising path. Otherwise we must be reconciled to living as mere men—with scarcity and with some tension of unfulfilled desire.

Official doctrine under the Khrushchev principate does not promise that Communism will end scarcity. Here Khrushchev is more reticent than some other Marxists. In politics, he does promise the gradual ending of “the State” because he is willing to rename the coercive apparatus of society “Party.” In economics, he borrows the libertarian anarchist (and Marxist) slogan of distribution “to each according to his needs,” but he then stands the slogan on its head: not each individual but the Party will be the determiner of needs. Nothing else would be reasonable, since the Party is the one possessor of adequate “consciousness.” Indeed “The Party is the brain, the honor and the conscience of our epoch.” Outside this Church too, there is no road to salvation.



But after Khrushchev has subverted the older Marxian positions, both on coercion and distribution, he comes forward boldly to claim their full credits as an enemy of exploitation. Thus, early in the Party Program of 1961: “Communism accomplishes the historic mission of delivering all men from social inequality, from every form of oppression and exploitation. . . .” Later in the text, the Program is so overcome with its own enthusiasm that it even finds no need to wait for Communism; the great deed of ending exploitation has already been done: “Socialism has solved a great social problem—it has abolished the exploiting classes and the causes engendering the exploitation of man by man.” And, lest we misunderstand, the Program repeats didactically and italicizes: “Capitalism is the last exploiting system . . . .

How far this Party bombast is from the sobriety of the aphorism which comes to us from reflections matured in the Poland of the 1950’s: “Capitalism is the exploitation of man by man. Socialism is vice versa.”

Exploitation is, of course, not an economic concept—except in the limited sense of use. In every society men necessarily use one another, though minds may be too inert to be self-conscious regarding the process. (There have also been Liberals who imagined they were defining exploitation as an economic concept because they held that a factor in production is exploited only when it is paid less than it would receive under “perfect competition.” Here the institutional arrangements of perfect competition are posited as natural, and only departure from this natural model is then characterized as exploitative. But to place one’s major institutional premises beyond question does not advance understanding.) Exploitation is inherently an ethical concept. To exploit is to use unjustly. A society which describes itself as having passed beyond exploitation is claiming to stand beyond injustice. Where Party or State are taken, in the Hegelian idiom, to reflect the march of God in the world, moral insensitivity may become so great as to permit such a claim to be advanced. Then we are in the world of Khrushchev.

The older Marxisms would have found it a bitter irony that, having already done away with exploitation, Khrushchev has still to deal with inequality! The USSR remains a society of great differences in income, as can be seen from its sharply tilted wage and salary scales and from observation of divergences in modes of living. But that strangely obscurantist country does not publish comprehensive information on the distribution of individual and family incomes by size, and this is the kind of question in which impressionism will not carry one far. Specialists in the Soviet economy may have opinions on whether Soviet income is more unequally distributed than American. I do not. In any case, Americans generally have no serious idea of how unequally income is distributed in their own country. Popular equalitarian blarney substitutes for knowledge. In fact, the richest fifth of American families have incomes about ten times as high as the poorest fifth.

Distribution of Family Income in the U.S.A., 1961
  Mean Income Comparative Size
Poorest Fifth $1,603 100
Second Fifth 3,805 237
Median Fifth 5,665 353
Next-Highest Fifth 7,829 488
Richest Fifth 15,678 978

I do not know whether the Soviet distribution is more equal than this. But it is clear that much which is said in substantiation of the idea that the Soviet system has achieved greater equality is quite unsound.

For instance, the USSR has not overcome unemployment; it has merely, since 1931, abolished unemployment compensation. Tens of millions of rural persons, whom the USSR census lists as “gainfully occupied,” are in fact unemployed for many months each year. The Soviet economy neither brings industry into the kolkhozi nor pays unemployment compensation when it is impossible to do farm work. Similar disregard for the poorest is suggested by the low level of the Soviet minimum monthly wage, 27 rubles in the countryside, and 35 rubles in urban employments. The dollar value of this monthly wage of $30 to $39 compares unfavorably with relief payments in more solicitous societies. In medical care, the poorer Soviet citizen certainly fares better than his counterpart in the U.S.A. But the USSR is not more generous in social security outlays. For 1958, Abram Bergson has computed total USSR social security benefit payments at about 10.4 per cent of all Russian household consumption expenditures. But in 1958, in the U.S.A., government transfers to persons plus employers’ contributions to pension and welfare funds were 10.8 per cent of U.S. personal consumption expenditures. Due to the fact that the USSR does not pay unemployment compensation, “social security” does not weigh more heavily in the Russian economy than in the American. These are matters in which subjectivism is hard to overcome, but I do not think that either the USSR or the U.S.A. can fairly be described, in the 1960’s, as societies bent with concern for their poor.



Class is another headache for the Khrushchev ideologists. They cannot even make up their minds concerning how many classes are to be acknowledged officially in the USSR! In general, they opt for two classes—workers and peasants—and these two “friendly,” in distinction to the unfriendly classes that characterize all previous human history. But to insist that the USSR has only workers and peasants is just too silly. What of Comrade Khrushchev, his Party lieutenants, Army officers, police chiefs, and bureaucrats? What of doctors, professors, factory managers, directors of railroads, and heads of department stores? All these are taken care of. They are not a class. They are “intellectuals,” and then not a class but something less reprehensible, a “stratum.” This stratum has emerged temporarily from the workers and peasants, and it is destined soon to be submerged again in one great non-class, under Communism, when all work “with hand or brain” will become indistinguishable!

But the official Soviet cant of class, stratum, and non-class does not conceal genuine popular concern. Class is an important aspect of Soviet society, and not only as reflecting differences in work, authority, and income. Class exists also in its more disturbing facet—where the position of parents bears great weight in determining the position of children. Troubled concern over this class phenomenon of the generations seems sincere, deep, and widespread in the USSR. It is not being suppressed. And the presence of this concern works as a leaven—one of the most heartening features of contemporary society in the Soviet Union.

Soviet high policy has been formulated hitherto under the inspiration of a melodramatic imagery of history and human responsibility. For such melodrama, what happens in between is of little consequence. The people of the USSR may starve under Lenin; they may be worked to death in Stalin’s concentration camps; they may live cramped and meager lives even under the milder principate of Khrushchev. These in-between things hardly matter—so long as all comes right in the end. “The achievement of Communism in the USSR,” says the Party Program, “will be the greatest victory mankind has ever won throughout its long history.” History as experienced up to now—history with conflicts—will come to an end. The felicity of mankind will be assured.

These modes of thought have not yet progressed beyond self-important historical melodrama to the more rational perspective which Leopold von Ranke expressed in the simple phrase, “Every period is immediate to God.” An older book says it better: “Behold, all souls are mine; as the soul of the father, so also the soul of the son is mine . . . .” What was grasped firmly by an ancient theism, should not—in a different imagery—be beyond the reach of a modern naturalism. No generation is given the power or responsibility to insure felicity to all who come after, though ours may be able to blight the earth for many of its successors. A mark of the growth of a rational temper of mind in the USSR will be increased concern for determinable presents and less concern for remote futures—remote beyond constructive reach and correspondingly beyond responsibility.




1 Quotation in The Waste Land notes, lines 368-370, from Herman Hesse, Blick ins Chaos. “Already is half Europe, already is at least half of Eastern Europe on the road to chaos, rides drunk in holy delusion along the abyss and sings moreover, sings in drunken hymnal, as Dmitri Karamazov sang. At these songs the burgher laughs offended; the Saint and Seer hears them with tears.”

2 See James W. Brackett, Demographic Trends . . . in Dimensions of Soviet Economic Power, Joint Economic Committee of U.S. Congress, 1962. Brackett's is a solid, informative study.

3 See the poignant story of “Peter the Bulldozer,” excused by being spoken under the influence of alcohol, in Chapter XII of Fyodor Abramov's One Day in the “New Life.” This book is not much as a novel, but it is valuable as description of practice and sentiment.

4 See the rich chapter of Janet J. Chapman in Economic Trends in the Soviet Union, edited by Abram Bergson and Simon Kuznets, 1963, and also her own basic volume, Real Wages in the Soviet Union, 1963.

5 For a well-organized sketch of the Norwegian economy, see the OECD pamphlet on Norway, issued in July 1963.

6 For this and related information, see the fundamental study of Abram Bergson, Real National Income of Soviet Russia, 1961. In some measurements, especially those relating to defense, I think this study too confident, but it is always helpful.

7 United Nations, World Economic Survey 1962, Vol. II, Current Economic Developments, 1963.

8 1929.

9 U.S. Census computations designed for comparability with U.S.A.

10 These are American estimates. A Russian authority, V. Starovskii, estimated Russian gross farm output in 1959 at 77 to 80 per cent of American. But 1959 was already a year of badly inflated Russian farm output data—some believe inflated in the order of 10 to 15 per cent.

11 Prices given in Soviet Agriculture Today, U.S. Department of Agriculture, December 1963.

12 See the excellent summation of the facts by A. N. Sakoff in the Food and Agriculture Organization's Monthly bulletin, September 1962.

13 See the valuable report, Recent Electric Power Development in the USSR, U.S. Department of the Interior, 1962.

14 Standard Coal: 7,000 kilocalories or 27,780,000 btu per metric ton.

15 Impact Of Oil Exports from the Soviet Bloc, 2 volumes, 1962. This is a partisan brief but carefully done and richly informative.

16 Additional domestic supply: 1,090,000 barrels per day of natural gas liquids.

17 A convenient assembly of the facts is Soviet Agricultural Trade, 1955-61, by the U.S. Department of Agriculture, ERS—Foreign—47, June 1963.

18 See Board of Trade Journal, Aug. 11, 1961, Consolidated List of Goods Subject to Embargo for Soviet Bloc and China.

19 See his penetrating study, The Communist Foreign Trade System, 1963, which however hardly goes beyond 1960.

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