The Transformation Of Communist Systems

Economic Reform Since The 1950s

Bernard Chavance, Charles Hauss, Mark Selden

• Publisher: Routledge
• Year: 2019
• Print ISBN:
  9780367296650
• eBook ISBN:
  9781000306422
• Topic: Didattica
• Subtopic: Didattica nell'arte e nelle discipline umanistiche

In the confrontation between the two main economic systems that has marked the twentieth century, capitalism has been declared the winner–by default– over its adversary, socialism. Today, establishing a market economy has become the primary goal of the formerly socialist countries. The history of economic reform helps explain this remarkable turning point. Attempts to improve the old centralized system by expanding enterprise autonomy (in Poland, the Soviet Union, and East Germany) and more radical reforms that limited the role of central planning (in Yugoslavia, Czechoslovakia, Hungary, and China) encountered social and political obstacles or had unexpected and undesired effects. During the 1980s, the idea of a socialist market economy, which had been seen as a "third way" between capitalism and centralized socialism, was abandoned as economists gradually came to support a free market rather than the dogma of planning. Through a comparative and historical analysis of change in socialist and post-socialist systems, this timely and original book clarifies the policies and pitfalls in this extraordinary transition. Bernard Chavance provides a succinct introduction and analysis of the politics and economics of Eastern Europe from the creation of the Stalinist system in the Soviet Union through what he argues have been three major waves of reform since the 1950s to the dismantling of most socialist governments in the 1990s. Exploring the link between the one-party regime and the growing rigidity of socialist economic systems, the author analyzes the failure of both incremental and radical reforms to adapt to new economic challenges, thus leading to the ultimate collapse of communist regimes in Europe.

Part One

The Traditional System

During the ten years after World War II, the new communist regimes took different paths and moved at different rhythms in implementing radical institutional changes. Nonetheless, they all adopted a system based on what they considered to be the unquestioned model for a socialist economy—the Soviet system, which had developed in the 1930s and which seemed to have been legitimized by the victory over Nazi Germany. Soviet economic organization under Stalin was thought of as the only approach for a country trying to go beyond or bypass altogether the capitalist stage of social development. Collectivized agriculture, state-owned industry and banking, central planning aimed at producing rapid structural changes and accelerated growth—those were the goals. It was this traditional system, copied from the Soviet Union, that the reforms since the 1950s sought to modify. The system was an organic and complex whole, with inner conflicts as well as overall consistency, which the systemic approach tries to explain.

The history of economic reform reveals the great inertia of the traditional system, once it got established. A tendency to reproduce and sustain itself is the key characteristic of the systemic core: state ownership plus single-party control and centralized planning. Experience has shown that the classical structures of collectivized agriculture, monopoly on foreign trade, a limited private sector, and the power of directors within enterprises could be made more flexible and adaptable. These structures can thus be seen as other components of the traditional system.

The development mode associated with Stalin-era organization was determined by a number of interrelated factors. Among the most important was a strategy designed to produce rapid growth through a high investment rate and industrialization concentrated in heavy industry. The adaptive behavior of individuals and corporate groups that were placed in this world of taut planning and frequent shortages, combined with the development strategy itself, produced certain phenomena. The main characteristics of the developmental style that accompanied the traditional system were extensive growth, ever-increasing asymmetry in favor of the production goods sector, residual growth of consumption, lagging agriculture, autarkic tendencies, and regulation through shortages. The rigidities built into these arrangements gradually became the focus of the reformists’ analysis and attention as they came to qualify and criticize Stalinist economic theory in order to create and legitimize new models for the socialist economy.

Figure 1.1 The traditional system

1 The Institutional Base

The originality of the socialist economies as a historical system lies in the combination of two seemingly heterogeneous principles: state ownership and a single party system. Although socialist systems, like Western ones, are characterized by a commodity and monetary economy on the one hand, and by a wage labor system on the other, the former have shown a high specificity in this regard, as well as in the interplay of economic and political factors. The combination of state ownership and rule by a single party can be seen as the foundation, or institutional base, of the socialist systems, not centralized planning, which cannot exist without this institutional base.

Nationalization and State Control

Outside of agriculture, the change from private to state ownership occurred rapidly everywhere (only in China, where it took place in the mid-1950s, was compensation paid to the former owners). The state ended up owning almost all property, not only in industry, but also in the banking, construction, transportation, and commercial sectors. Although cooperatives did remain in some limited sectors, they were de facto state controlled because they were integrated into state hierarchical structures, subject to central planning, and controlled by the Party apparatus, especially through the appointment of their directors.

The Single Party

Despite the different ways communists came to power in the bloc countries, the Stalinist political model was adopted in all of them. Once in place, a single party dominated. Nonsocialist parties were normally eliminated, and sometimes the social democrats “fused” with the communists. In a few cases, microparties “allied” with the Communist Party continued to exist but had no real influence. The Communist Party’s monopoly on power should be understood as that of the apparatus, not of all its members. The “leading role of the Party,” as specified in the socialist countries’ constitutions, was especially important in economic matters. Based on state ownership and the hierarchical organization of

State Control of Housing in Eastern Europe in the Early 1950s

Against a background of a generally low level of new construction, agencies of central or local government took over control of most of the housing stock in large and medium towns, with or without formal expropriation. The allocation of housing was already strictly in the hands of housing offices by 1950; rents were kept at a very low, sometimes purely nominal, level (save in the GDR), New dwellings in the towns were almost totally limited to the state sector and were distributed virtually free of charge, according to political and occupational criteria; the share of private construction was determined mainly by conditions in the countryside, which were unfavourable both because of the general economic situation and because of an acute shortage of building materials

Source: Wlodzimierz Brus, Institutional Change Within a Planned Economy, in M. Kaser, ed., The Economic History of Eastern Europe, vol. 3 (Oxford: Clarendon House, 1986), p. 36

Table 1.1 Socialized Share of Industrial Output and Total Retail Turnover: 1952

	Industry	Trade
Albania (1950)	98	88
Bulgaria	100	98
Czechoslovakia	98	97
East Germany	77	54
Hungary	97	82
Poland	99	93
Romania	97	76

Note: In 1948, Yugoslavia had reached a level roughly equal to that of Bulgaria in 1952. Source: Wlodzimierz Brus, Institutional Change Within a Planned Economy, in M. Kaser, ed., The Economic History of Eastern Europe, vol. 3 (Oxford: Clarendon House, 1986), p. 8.

economic administration, the Party’s leading role was expressed in the nomenklatura system, allowing it to control hiring and firing for all positions of responsibility at the various economic levels. The Party structure paralleled that of the state administration. Every level of the economic hierarchy was under the dual control of the Party organization at the same level and of the administrative level above it (itself controlled by the Party according to a similar setup, all the way to the top levels of the state, which were subject to the authority of the Politburo and of the Central Committee Secretariat). The dual aspect—political and administrative—of centralized economic decision making was obviously an essential ingredient in directive planning, since administrative orders could combine with mobilization campaigns and “political” control. However, the multiplication of lines of authority proved also to be a source of conflicts of interests and responsibilities.

The subordination of trade unions to the Party apparatus profoundly altered their nature. They became “transmission belts” for centrally made decisions, organs for monitoring and mobilizing a work force that was deprived of autonomous organizations for articulating its views, negotiating on its behalf, and putting forward claims.

Some Characteristics of the Nomenklatura System

The Party’s nomenklatura applies to all positions of responsibility, whether they involve “elected” or appointed officials. This arrangement covers all parts of the apparatus: Party, state, unions, as well as all the so-called social organizations.

The practical impact of this system is considerable as far as the state organs are concerned. Neither national government ministries (in which personnel are appointed) nor the soviets in the USSR and the city governments in the other countries (composed of elected officials) should be thought of as institutions independent of the Party hierarchy. Appointed or elected, state officials have to go along with the Party authorities.

Moreover, the Party nomenklatura makes no distinction between Party members and “non-Party” officials….

Contrary to what one might think at first, the nomenklatura does not constitute a bureaucratic system in the classical sense of the term. According to one Polish text, a “superior” Party organ can always intervene directly in the decision making of one “inferior” to it, that is, without following normal hierarchical procedures. Thus, one of the classic rules of the bureaucratic system has been abolished. The same holds for the rule permitting the immediate firing of administrative officials, apparently without appeal….

A number of functions in several sectors of the apparatus (administration, economy, security, etc.) are subject to a double nomenklatura: of the Party and of higher levels of the state hierarchy. The Party organs’ decisions have priority over those of other organs. One can thus say that state functions are subject to a double control, unlike responsible positions in the Party itself.

Source: T. Lowit, “Y a-t-il des Etats en Europe de l’Est?” Revue française de sociologie 20, no. 2 (1979): 443-444.

2 Central Planning

Economic planning was formally put into place when an interconnected set of institutions and procedures, first developed in the Soviet Union, was copied by the East European countries during the late 1940s and early 1950s (mid-1950s for China). At the heart of that planning system was the state-owned industrial sector. As had been the case in the Soviet Union since the 1930s, the planning system was supposed to carry out an ambitious strategy for development and structural change. Doing that became possible because of the unified system of ownership and the high centralization of political and economic power.

The Comprehensive Control Hierarchy

All of state industry was part of a single hierarchy organized along sectoral lines, that is, according to production branch. At the top, the government and Party leadership constituted the center, of which the C...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Table of Contents
• List of Tables and Figures
• Introduction
• Part One: The Traditional System
• Part Two: Systemic Adjustments
• Part Three: Radical Reform
• Part Four: Toward the Dismantling of the System
• Selected Bibliography
• About the Book and Author
• Index