Thank you Comrade Harpal, and I’d like to thank the CPGB-ML for organising this great event.
People have stopped celebrating October it seems to me, and I think it very important to do so. And the best way to do so is to try and understand what socialism is about.
You hear this over and over again: Marxism is ‘economic reductionism’, Marxism is ‘economic determinism’, but actually, Marxism points to the one thing that is extremely important, which is that the economy really does determine and condition a lot of what goes on in society. Which is why today, to celebrate October, I’ve decided to talk a little bit about socialist economics in comparison with capitalist economics.
Now, the minute you mention socialism, you hear this tape running in your mind like Joti said, especially for our generation: socialism is equal to government, which is equal to lack of incentive, which is equal to inefficient; capitalism is equal to greed, profit motive, selfish motive and therefore it creates incentives for growth and it is equal to innovation.
This is the standard formula you get when you begin to study economics in O-levels and A-levels and it continues through university on to your PhD and so on and so forth. But in fact this is a load of, pardon the expression, BS. [Laughter]
The fact of the matter is that innovation, which is the bedrock of what drives the economy, does not occur because somebody or other sitting in their backyard decides to split an atom; clearly, you’d recognise that an atom cannot be split in your backyard!
Scientific innovation is really the product of research and development organisations, and the dominant research and development organisations in the world today, whether you look at the most advanced capitalist society or you look in the Soviet Union or anywhere else, you will discover that they are all funded by the government. None of them are under private control, whether you look at Nasa or anything else.
And the enormous spin-off of what we call the second scientific and technical revolution, the second industrial revolution, the creation of satellite technology, fibre-optics, [micro]chips, etc, etc that are used in computers and so many other things that we use in consumer electronics and so on today – those are all spin-offs of science technology that was created through Nasa and through other government-sponsored research and development organisations.
So this great worship at the altar of innovation is actually all occurring through government spending anyway. And this is something that is just obscured from everyone’s view.
The thing about socialist and capitalist economics is that there’s an interesting paradox. Everyone knows that the Soviet Union managed to defeat the largest army assembled in its day, which had the combined economic power of all of continental Europe behind it; that is, the fascist armies Germany, Italy and so many other countries. They defeated them all – one single country, one socialist economy with several republics within it – and then after that, and the devastation caused, in which 20-25 million people lost their lives in the Soviet Union and something like 70 percent of industry was wiped out, they rebuilt it all and became another superpower.
If I go back into history, they went through World War I, they went through a civil war, and each time, that society was entirely destroyed and then once again they were a superpower. How did they accomplish these fabulous miracles?
And then, suddenly we discover, in the 1970s and 80s, Gorbachev comes along and says ‘The Soviet Union is in crisis’. Why was the Soviet Union in crisis? Because, according to Gorbachev, it was no longer catching up with the West at the same rate as it was doing. It’s still catching up with the West, but it’s just not catching up with the West as fast as it was catching up with the West before. That was the big crisis.
Let’s accept Gorbachev for now. Why did the Soviet Union gradually slow down in terms of its economic development and growth?
For this, we have to go back to the reason why it grew so rapidly.
There was a time when the bourgeoisie required the mobilisation of workers and peasants; they made everything quite simple and said: ‘This is what we need; we need to get rid of that king, so come join us, we’ll get freedom, we’ll get democracy, come join us.’
Now is not that time. Now is the time that the bourgeoisie wants to make everything complicated. They don’t want to explain things to workers and peasants because they don’t want workers and peasants to be mobilised, and I can find no better example of this than in the field of economics, in which every little thing is completely obscured, abstracted into various mathematical formulas from which you can’t get your head out of [Laughter], so you don’t understand anything that’s going on.
Actual economics is really simple, and people just like making it very complicated. Even Marx’s Capital is actually very easy to understand. The language is difficult; he writes in German, his sentences go on for three pages [Laughter] – that’s what makes it hard! – but the concepts themselves are actually not hard at all to understand.
What drives growth? That’s the central thing that I want to get at today. What drives growth, ie, productivity, the capacity of society to produce more and more, is the fact that humanity creates, through social labour (all labour is social) implements, tools and machines that help humanity mobilise nature in a manner that is beneficial to humanity. That’s economic growth in a nutshell.
It’s not very complicated, is it? It’s just tools. It’s just machines. The development of tools and machines is economic development.
Now the thing about capitalism is that the very process that develops tools and machines and introduces them into the economy simultaneously displaces scores and scores, sometimes millions of workers from the economy, because machines take the place of workers, and unless new investment comes in, more and more workers will be displaced by machines.
So this means that the very process which increases the capacity of society to grow simultaneously decreases the capacity of society to purchase on the market what has been produced. And this causes a recurrent economic crisis.
Every time you go through the introduction of new machines into society, new technology into society, and you displace hundreds and thousands of people from the market, what is the result? There is a slump in demand and capitalists can’t sell their commodities, and as a result, you see economic crisis such as the one you’re witnessing today.
So how does socialism work? In socialism, in fact in every society, whether it’s capitalism or socialism, a certain percentage of your revenue or your ability to work (which is one and the same thing), is reserved for reinvestment into the creation of machines.
So, for instance, if we were one society [indicates audience in hall], we could say that these 10 people will be responsible for producing new machines that the other 90 people will be using.
In capitalism, the way that we determine whether it’s going to be 10 people or 20 or 50 that are going to be producing these machines is through the market mechanism of profit. And that is, that all the capitalists want to earn as much profit as they want to, so they will only build machines, and they will only build the type of machines, which earn them profit. That’s the bottom line. They will not build machines that will help people; they will build machines that will earn them profit.
So it is what Marx called the normalisation of the rate of profit (the equalisation of the rate of profit Adam Smith also talked about), which determines where that savings and reinvestment is going to go.
But in socialism, you don’t have to do it through the market; you can do it through a central plan. We can all get together and we can decide: ‘Ok, what we want to do, friends, in order to develop our society, is to increase the number of enterprises that are producing machines that are going to boost the productivity of our society.’
This is what Stalin called, very briefly and simply, the production of the means of production.
So the purpose of a planned economy is to increase the production of the means of production. Just think about it, it’s actually quite intuitive. Let’s say that these 10 people here were producing tractors and the rest of us were all peasants and were working the fields. Now, in a capitalist economy those 10 people would only produce enough tractors that they can sell them at a profit and that is what is going to determine how many tractors are going to be produced, when they are produced and how they are sold.
If we now suddenly overthrow the capitalist government and we have a socialist society, we can decide it’s not going to be 10 people that are going to be producing tractors, why not get all these 50 people on this side of the room to produce tractors. In fact, let’s forget about producing these tractors for a profit, for a profit we could maybe produce 50 tractors a year, now we are going to produce 150 tractors a year. Moreover, we are just going to give them out for free. Anyone that organises a collective farm can get a tractor.
Now, for all the capitalist economists, that doesn’t make any sense, they’re asking: ‘Why are you running all your tractor factories at a loss? You’re not making a profit! There’s no incentive, it’s all coming apart! Ah, the world is falling!’ [Laughter]
But think about it from the view of the entire economy. When there were only 50 tractors produced, or whatever the number it was that I spoke about earlier, the growth out of 50 tractors was going to be, say, 100 percent. Now that there are going to be 150 or 200 tractors, the growth is going to be three or four times that amount. Because the tractors are going into the fields and they are going to produce that much more. It’s really that simple.
So, what may be an economic loss to the individual enterprise producing the means of production is in fact of enormous economic benefit to the economy as a whole. That is why, during times of war, even capitalist governments decide to take industries, nationalise them, run them at a loss and ensure that thing is produced, that the thing that is required is produced in sufficient quantity. Mostly I am referring to the war industry, which is never run at a profit but run under a planned economy.
So, this is how the Soviet Union managed to perform its economic miracles. If you read Stalin’s great book Economic Problems of Socialism in the USSR, he says that the way to build socialism is to take those industries that are producing consumer items, take the extra revenue from those and cross-subsidise those industries that are producing machines, producing the means of production. And when those means of production go back to the consumer industries, everything is just going to grow.
And that is exactly how it performed their economic miracles.
In other words, sector A industries, the ones that are producing consumer goods, cross-subsidise the sector B industries, the ones that are producing the means of production. It’s just that simple, comrades.
With respect to China, Vietnam, Pakistan, India, the third world, there is a consistent problem of underdevelopment. It could be just that simple as well, if we could understand that we need to cross-subsidise those industries that have positive growth. In order to do that, you need a planned economy.
What happened in the Soviet Union with the rise of opportunism, what Mao Zedong calls modern revisionism, was that, somehow or other, these really important aspects of a socialist planned economy were thrown overboard. Instead, in their place was introduced the notion that every individual enterprise, not the economy as a whole but every individual enterprise, must run at a profit.
These were called the Lieberman reforms in 1965. Ninety thousand industrial units of the Soviet Union from the main industrial units, with the exception of the military, were under this plan reorganised. They were separated from the central plan, and the principles upon which they were reorganised were that the enterprise, instead of the plan, which was the case previously, would be the basic unit of the socialist economy.
In this, they said, in the new economy, the increased the role of profits increased the ‘real incentives’, which basically amounted to nothing other than increasing the incentives of mangers, middle men and technical managerial intelligentsia.
They said that development funds would no longer be supplied by the Gosplan, by the central bank, by this method of cross-subsidisation, but should be supplied either through loans, credit, or should be generated by the enterprises themselves. They thought that by increasing the rights of factory managers, they could somehow incentivise these factories to produce more.
In fact, they did the very opposite. They slowed down their own economic growth, gradually, even though the Soviet Union still grew at a phenomenal rate, but they slowed it down. They fractured up their social revenue into 90,000 little parts instead of centralising it all and utilising economies of scale, centralising all that scientific knowledge, centralising that revenue, utilising economies of scale to build bigger and better things.
They fractured their social revenue into 90,000 units, which is the number of enterprises that they had at that time, and, as a result, the economy slowed down. And when the economy slowed down, that slowing down of the economy ironically was used by what I would call liquidationists within the party, trying to destroy the party, to further justify the break-up of the Soviet Union, the break-up of socialism, the destruction of the planned economy and the eventual destruction of the soviet state.
The lesson to be learnt is, well, first of all, let’s call things by their right names. The Lieberman reforms were a step back toward capitalism, although they were at the time called a step toward socialism.
Every single step back from socialism since the 1950s has been covered up as a step forward towards socialism. Whether that is the new left, the Frankfurt school of thought, whether that is within the communist party, whether it is post-modernism, post-structuralism, all these things, all this ‘great advance’ is actually a step backwards. It’s always undertaken, because of the dominance of Marxism over the entire intellectual world, it’s always been justified as an ‘advance’.
This retreat, which caused the slow-down in the economy, was used as further justification for the complete break-up of the Soviet Union in 1991.
We must learn from this history and we must conduct a ruthless ideological war against those people, those trends, those political ideas that pretend to be part of the working-class movement, but are actually representatives of ruling-class ideas within the working class.
Thank you very much. [Applause]
Reply to Taimur’s speech by Harpal Brar (CPGB-ML)
Precisely because these reforms were a step backwards to capitalism, rather than a step forward in the direction of what Khrushchev used to call the ‘higher stage of communism’, which they were going to achieve within 15 years, that’s why they malign the central planning during Stalin’s period of time by some lured stories.
If you read those stories, it sounded as though Stalin had steel for breakfast, more steel for lunch and even more steel for evening meals. And this because he was the evil-minded dictator who wanted to starve Soviet people of articles of consumption.
What people don’t realise is, as Taimur has told us, you can’t even actually expand on a large scale the production of the articles of consumption unless you’ve got the means of production to produce it. What’s more, the machines that produce those means of production, particularly machine-building industry, metallurgical industries, chemical industries, etc. You need all those.
Everything was on track in the Soviet Union, which is precisely why, between 1928 and 1941, June 1941, when the Soviet Union was attacked, her economy has actually gone up by ten times. After the devastating war, the Soviet Union rehabilitated its economy by 1948. From the middle of 1945 to the end of 1948 they had rehabilitated production to the pre-war level.
Then from 1948-51, the Soviet Economy had doubled in size again. Now, the stupid idea is that innovation took place in the Soviet Union because Stalin took a gun and said to their scientist: ‘You will produce this.’ Try and take a gun elsewhere! Everyone knows that Tsarist Russia was not bad at using guns. Why did innovation not come to Tsarist Russia and why to Soviet Russia? Precisely because of the collective efforts where people helped each other in solving the problems.