23 Who Benefits?
Who benefits from this "new economic system?" In view of all that has
been said, the answer will not be surprising. The "new" setup is not, and cannot
be, anything other than a gigantic machinery for generating extremes of wealth
on the one side, in the hands of the few, and extremes of poverty on the other
side, among the many.
In a "testament" written shortly before his death and published abroad
afterward, the prominent Soviet revisionist academician E. Varga deplored "the
contrast between the excessive material well-being of the ruling aristocracy and
the extremely low wages of the majority of the workers, employes and collective
farmers." He sermonized the "bureaucratic aristocracy" for its "arrogance" and
its "conceit," which drive it to "sell off [the French is 'brader' -- literally,
to hold a garage or sidewalk sale] and to appropriate for themselves the
property of the state, to satisfy unbridled passions which sometimes lead them
to crime. . . ."
At the same time Varga observed that "the precarious material situation
of the workers . . . results in all kinds of reprehensible phenomena:
drunkenness, ill-treatment of spouses and children, domestic quarrels, the
work, delinquency and sometimes crimes of desperation." (Le Monde, 12-13,
September 1971, quoted in "Sur la restauration du capitalisme en USSR" by Andre
Pommier in Communisme, Paris, September-October 1974, pp. 56, 77.)
For this revisionist, who on his deathbed is seized by moral scruples,
the working class exists only in the role of victim of the system. He does not
see their resistance, their fighting spirit, the numerous strikes and other acts
of rebellion. Thus he paints an image of the USSR that recalls the bourgeois
novelists' depictions of Old Russia, Russia under the Tsars, with the unbridled
greed and limitless corruption of the big officials at the top and a vast
panorama of suffering, frustration and desperation below. Precisely in this
parallel, however, lies the core of truth in Varga's deathbed confession.
"There are in the USSR about 13,000 millionaires, i.e., top bosses whose
bank accounts amount to seven digit sums," according to an estimate, necessarily
imprecise, by Roy Medvedev, one of the more prominent members of the
petty-bourgeois "dissenter" circles, whose frustrations take a sometimes "left"
form, but more frequently an arch-reactionary form as in the case of
Solzhenitsyn. (Quoted by Zev Katz, "Insights From Emigres and Sociological
Studies on the Soviet Economy," in Soviet Economic Prospects for the Seventies,
Joint Economic Committee of the Congress of the United States)
Is the gap between the rich and the poor in the Soviet Union today
growing, as it is in other capitalist countries, or is it being restricted, as
it is in socialist countries?
On the basis of a study of Soviet sociological surveys as well as
interviews with Soviet emigres, the U.S. bourgeois sociologist Katz arrives at
the following summary:
"The Brezhnev-Kosygin administration . . . provides various high-cost
material incentives to those who can afford them (or gain access to them):
private cars, imported goods, tourist trips abroad, luxurious entertainment
facilities at home, condominium (cooperative) flats, high-cost modern services
(restaurants, hotels). Available now only to a small minority, such items become
a mark of status, a Soviet equivalent of conspicuous
consumption. . . . Some measures such as the economic reform, incentives for
technological progress, the campaign for improved business management, the
creation of trusts and firms, as well as the 'Shchekino experiment,' the new
policies in regard to agriculture, apparently reinforce income differential,
benefiting first and foremost those who already have high incomes and better
work conditions." (Katz, article cited, p. 112.)
A prejudiced assessment perhaps, by a source with an obvious axe to
grind? Perhaps. But the Soviet economists themselves -- to be sure, in more
cautious language -- but tress and confirm this conclusion on every point.
Despite official claims of a "progressive equalization" the evidence points
plainly and overwhelmingly to the rise and the sharpening of polarization
between wealth and poverty.
Take, for example, the matter of conspicuous consumption -- sheer waste
by the rich -- which the economist Thorstein Veblen, decades ago, satirized as a
trait of nouveaux riches. The whole of the Soviet bourgeoisie, as a class, is of
course of this kind. In this regard, the Soviet economist N. Buzliakov writes:
"At the present time, families with maximum per capita incomes are
consuming certain types of food and nonfood commodities at a level recommended
by rational norms or at an even higher level. There is no doubt . . . that with
a further rise in incomes, the consumption of such families will grow
quantitatively and qualitatively in the next 15 years, and with respect to a
number of goods and services will significantly exceed the rational norms. In
such a case can there be a discussion of 'irrational consumption'?" ("Rational
Long-Range Income and Consumption Norms," Planovoe khoziaistvo, 1974, No. 6, in
Problems of Economics, November 1974, p. 84.)
It is difficult to say which is more striking in this testimony: the coy
inquiry whether or to what extent the hoggish living of the rich may be
discussed in legal publications or the admission that consumption of food and
nonfood commodities "at a level recommended by rational norms" is possible in
the present-day USSR only for "families with maximum per capita incomes." The
evidently are restricted to consumption at sub-"rational" levels.
The growing extremes of poverty and wealth make a touchy subject for the
Soviet revisionist writers, for obvious reasons. Like unemployment and anarchy
of production, this is not supposed to exist, and therefore cannot be legally
discussed in a direct, straightforward way. At the same time, however, the
practical work of certain institutions cannot proceed unless the existence of
this reality is recognized and taken into account. This is the case in
particular with the management of the quantity and speed of monetary circulation
in the national economy, which in the USSR as in the Western countries is a
responsibility of the state bank. Poor people spend money as quickly as they get
it; they have no choice. The wealthier strata tend to spend only part of their
income immediately and to put the rest in the bank as savings to be spent later.
The speed of monetary circulation is slower in their case than with the poor.
Thus, in any economy where the polarization of incomes reaches any considerable
extent, the banking authorities charged with management of the quantity of money
in circulation must take this fact into account, no matter what the official
ideology may say.
And in fact this is what the Soviet money managers have had to begin
doing. As early as 1964, a number of articles appeared stressing the need to
know the differentiation of incomes in order to carry out central bank
functions. (For example: O. Rogova, "The Effect of the Level and Differentiation
of the Population's Incomes on Money Circulation," Dengi i kredit, 1964, No. 11,
in Problems of Economics, May 1965; A. Remmenik, "The Material Conditions of
Family Life," Ekonomicheskie nauki, 1964, No. 5, in the same; and others.)
Upon full implementation of the "reform," the problem became more urgent.
Thus, in a list of "improvements" called for in the "planning" system, the
economists P. Koylov and M. Chistiakov write: "Up until recently, the living
standard was planned for two basic groups: for workers, employees and collective
farmers. Today it is also necessary to calculate the rise in the standard of
living for population groups with different income levels."
("Problems in Improving the Methods of National Economic Planning," Planovoe
khoziaistvo, 1972, No. 1, in Problems of Economics, Aug. 1972, p. 33.) This is a
cautious admission, or pale reflection, of the increasing polarization of
incomes, a necessary consequence of the restoration of capitalism.
Here is a direct admission -- though from an oblique angle -- of the
widening gap between the higher and lower classes: "The analysis showed that in
population groups that differ in terms of income level, the savings norms
(vis-a-vis income) are not uniform. As a rule this norm is more important in the
more affluent population groups. Analysis of trends in the development of
Soviet economy indicates a gradual change in the character of the
differentiation of the population with respect to income level. Inevitably there
is a rise in the share of those groups that have relatively high incomes. At the
same time there is a reduction in the share of families for which a
comparatively low savings norm is characteristic." (T. Ivensen, "Problems in
Forecasting the Monetary Savings of the Population," Ekonomicheskie nauki, 1973,
No. 11, in Problems of Economics, June 1974, p. 66, emphasis added.)
In other words, inequality is growing; rich and poor have emerged and the
rich are becoming richer and the poor poorer.
Here are some supplementary facts about the economic situation of Soviet
workers, compiled from Soviet sources by a recent issue of Peking Review:
"The revisionist chieftains and their journals have to admit that there
are a considerable number of 'families in economic difficulties' in the Soviet
Union today. The Soviet journal Socialist Labor interprets the term 'families in
economic difficulties' as those whose per capita incomes are below the level
required to 'ensure the minimum standard of living.' These 'families in economic
difficulties' 'involved 25 million people,' Tass disclosed last November. It can
be assumed that the figure is greatly watered down and that, in fact, the
situation is far more serious. Soviet press reports estimate that such families
make up some one-fifth of the urban population. The
standard of living of a large number of 'collective farm' members is far
below that of low income urban workers and staff. . . .
"Inflation and soaring prices have brought more difficulties to working
people in the lower income category. According to the obviously understated
figures in the yearbooks of Soviet national economic statistics, state retail
prices of meat and poultry rose 29% in the 1960-73 period, animal oils 28% and
vegetables 23%. In this period, the retail price of flour went up 48% in
Moscow's state-run shops, beef 33% and cabbage 66%. There are also concealed
increases in prices of many goods. . . .
"Prices on the free market rocketed even faster. Free market retail food
prices were 35% higher than in the state-run market in 1960 and 63% higher in
"Living standards among the non-Russian working people in the Soviet
Union are still lower owing to the Great-Russian chauvinist policy of national
oppression pursued by the Soviet revisionist renegade clique. [The publication
titled] "The Soviet Union and the Union Republics in 1973" disclosed that the
average monthly wage of the workers and staff in most non-Russian republics is
lower than that in the Russian Federated Republic. For instance, it is lower by
16% in Byelorussia, 20% in Georgia and 21% in Moldavia. The non-Russian
republics are also discriminated against in consumer goods supply, housing,
culture and education and medical and health services. The 1973 "Yearbook of
Soviet National Economic Statistics" revealed that the 1973 per capita retail
sales of consumer goods in Uzbek, Azerbaizhan and Tajik Republics were less than
60% of those in the Russian Federated Republic. The number of doctors for every
10,000 people in the central Asian republics was one-third less than in the
Russian Federated Republic." ("Soviet Working People's Plight Under Revisionist
Clique's Rule," Peking Review, May 16, 1975, p. 19.)
This data is entirely consistent with the general trend of growing
polarization. Following the old maxim of "divide and rule," the Soviet
bourgeoisie has done everything in its power to try to break the unity of the
different nationalities, particularly between the Great-Russian plurality and
the minorities and has concentrated its forces of oppression and exploitation
with special force against the latter so as to try to deprive the Russian
workers of their nearest allies.
The tactic of "divide and rule," of setting one worker against another,
in fact, is applied rather consciously, in all the "new" management methods.
This is not only implicit in the enterprise director's arbitrary power to hire,
fire, promote and demote workers, which opens every opportunity for playing
favorites and practicing discrimination. It is raised to the explicit level of
theory in the Soviet policy for distributing the petty "bonuses" which workers
receive al the director's whim. The "efficiency specialist" Gubin gives the
whole philosophy away by writing:
"The efficiency of any system of incentives largely depends on
differentiation between the workers encouraged. Therefore, the decisive factor
is not the absolute size of incentives funds but the relative size per worker."
(Raising the Efficiency . . . , p. 79.)
In other words, "efficiency" is achieved not by paying all workers
equally a ruble more, but by dispensing 10 kopeks (cents) as a "bonus" to this
individual, seven kopeks to another, 12 kopeks to a third and no kopeks to the
rest, hoping in this way to arouse mutual jealousies and to prevent the workers
from uniting in common resistance. This is the essence of "efficiency" -- from
the capitalist standpoint.
It would be an error to imagine that the growing polarization between
wealth and poverty in the USSR mainly arises from this sort of "bonuses" or from
inequality of wages between different grades or skill levels of workers. Its
chief source, rather, lies in the gap between the wages of the workers, on the
one side, and income received by nonworkers -- income which is not wages -- on
the other side. This is disguised in the form, also, of "bonuses," but at least
the Soviet revisionist writers no longer pretend that the bonuses paid to the
directors and their immediate underlings are a form of wages. The fact
that they are a share of the profits is routinely admitted; indeed, it was
proclaimed as a principle in Kosygin's 1965 speech.
Who gets the "bonuses"? From the earliest beginnings of the 1965
"reforms," the lion's share of this income, all sources agree, has gone to the
handful of top personnel in each enterprise or combine. Already, in the Moscow
Transport experiment, the pilot project mentioned earlier, it was admitted that
"inequitable differentials" in payments arose, with "large increases for top
management." (Kaledinova & Tomsky, in Voprosy ekonomiki, 1965, No. 12, quoted by
Feiwel, The Soviet Quest . . . , p. 243.) So large were the increases for the
directors that something of a scandal was raised and the authorities had to
promise to exercise restraint, as Feiwel reports.
At another early group of enterprises transferred to the "new system,"
according to the same source, it was found that 46.6% of the "material
incentives fund" went for monthly managerial premiums, 15.5% for monthly
workers' premiums and the rest was distributed as end-of-year "bonuses." The
directors and their immediate staff received bonuses from the "material
incentives fund" amounting to 22.7% of their base salaries.
The same source notes also that the size of the bonuses from this fund is
keyed directly to base salaries; the higher the base pay, the bigger the bonus.
Thus in sum, the average income of industrial workers at a sample of the
first enterprises under the "new system" increased by the pittance of 4.7%,
considerably less than their productivity rise under the impact of the new
speedup methods. Managerial bonuses from the "material incentives fund"
increased by 35%. (Feiwel, pp. 298, 300, 313.)
The following figures are given by Drogichinsky for all enterprises
shifted to the "new system" in 1966. The material incentive fund was split
almost exactly "evenly" between workers and those classified as "engineers,
technicians and other employees," with the former getting 50.7% and the latter
49.3% of this fund. The workers, however, made up at least 85% of the total
the enterprises. An "even" split of the material incentives fund is thus
already a gross inequity.
If the scope is narrowed to the category of "current bonuses," i.e.,
extra payments on a weekly and monthly basis, the breakdown is this: 15.7
million rubles went to the workers and 72.7 million rubles to the engineers,
technicians and "others." Of the bonuses proper, in other words, 18% went to the
85% majority of the workers, while the 15% minority of the top personnel took
82% of the money. ("Economic Reform in Action," in Soviet Economic Reform . . .
, p. 194.)
To round out the discussion of the role of bonuses, however, it must be
noted that the material incentives fund at each enterprise is merely one among
scores of sources of bonuses which, as a result of the 1965 "Kosygin reforms,"
is controlled by the directors.
According to Manevich, who as a Shchekinoite has a special interest in
the subject, the material incentives fund is not even the most important of the
bonus sources. In a 1973 article, he writes:
"At the majority of enterprises, the material incentives fund has not yet
become the basic source of bonuses for personnel, since there are more than 30
bonus systems in operation simultaneously. Frequently the so-called special
bonuses are considerably higher than the total bonuses that personnel receive on
the overall performance of the enterprise, i.e., from the material incentive
fund." (Ways of Improving . . . ," p. 13.)
Unfortunately, after the early stages of transfer to the "new system,"
the legal Soviet economic literature simply clams up on the matter of more or
less exact statistics of who appropriates how much of the profits left at the
enterprises and combines. Even general hints, such as Manevich's, are
infrequent. It is as if a lid of censorship had been clamped on the question,
perhaps for reasons of state security. With the successive waves of
concentration of capital and of trustification, the "bonuses" pocketed at the
very top by the chiefs of the various industrial-financial empires must have
risen to truly obscene dimensions, whose publication might well constitute
incitement to riot.
To round out this brief survey of the distribution of
incomes under the "new economic system," it is necessary to look at the main
trends in the sphere of social services, inasmuch as these can represent a form
of income which is consumed collectively rather than individually.
Static comparisons on this question, for example comparison of the
availability of medical care in the USSR and in the U.S. today, prove nothing.
The existing level and scope of public services in the USSR is very largely an
inheritance taken over by the Soviet bourgeoisie from the previous, socialist
era, during which the Soviet working class, led by the Bolshevik Party, built
itself the finest and most comprehensive public service system in the world at
Static comparisons also have a way of backfiring on those who press them.
Those who argue, for example, that the existence of a comprehensive free medical
care system is proof that a country is socialist thereby shoulder the burden of
proving that contemporary England for example is a socialist country. It is
obviously nothing of the sort, despite the vast superiority of the British
public medical care system to that of the U.S. The level and scope of public
services in a capitalist country reflects chiefly the history of organized
working-class struggle in that country and is a fruit of that struggle -- albeit
not always the fruit that was aimed at, but more often a "bone" tossed to the
movement to delay its advance toward political power.
What has the new Soviet bourgeoisie done with the magnificent inheritance
of social services which it usurped?
Two main trends clearly stand out from the Soviet literature on the
subject. They are:
One: the "services" which make a profit are being strongly developed.
Two: free services, those which do not show a profit, are being neglected and
The Soviet revisionist writers always distinguish between the "paid"
services and the "free," i.e., those for which the user does not pay directly.
Among the "free" services are education and culture -- which however serves the
Soviet bourgeoisie as a weapon of
indoctrination in reactionary ideas -- as well as health, medical and
physical services, and subsidies for housing construction and maintenance.
The relative importance assigned to the "free" services by the Soviet
bourgeoisie may be clearly read from the following figures on the growth of
enterprise funds 1966-70, supplied by Drogichinsky:
The enterprise funds "for the development of production" -- i.e., funds
for capital investment, for increasing the intensity and expanding the scope of
the exploitation of the working class -- increased sixfold. The "material
incentives fund" -- i.e., the elementary fund for personal enrichment of the
directors and their cohorts -- rose fourfold. The fund for free services, titled
"socio-cultural measures and housing construction" (which includes factory-built
hospitals, child care facilities and other such services increased only
two-fold.) ("The Economic Reform in Action," in Soviet Economic Reform . . . ,
The distribution of enterprise revenues, in other words, shows a marked
uneven development to the detriment of the free services. An ever greater
proportion of enterprise profits is being diverted for padding the personal
pockets of the director and top staff, and for ensuring an expanded flow of
profits into their pockets in future years. An ever smaller proportion of
enterprise profits serves the needs of the workers.
The lag in the development of the free services is clearly recognized in
the Soviet literature and is expected to continue. (B. Khomelianskii, "The
Sphere of Social and Economic Services and the Reproduction of Aggregate Labor
Power," Ekonomicheskie nauki, 1972, No. 4, Problems of Economics, June 1973, p.
55.) The 1972-75 "plan" in the euphemistic words of the economist Komarov "calls
for the relatively more rapid growth rate of paid services."
The paid services include passenger transport and communications,
entertainment, organized recreation, tourism and others. The reason why their
"development" is proceeding at a brisk clip may be easily deduced from Komarov's
observation that "as a rule, all basic branches
of paid services . . . are highly profitable and there is an early return on
investment in their development." They are for the state, and for their
directors, "an additional source of accumulations." ("The Service Sphere and Its
Structure," Voprosy ekonomiki, 1973, No. 3, in Problems of Economics, July 1973,
In other words: Profits in command! -- including in the sphere of
"services." Such "services," however, are plainly nothing more than additional
means for pressing surplus value out of the workers. They are "services" that
most of all serve the bourgeoisie to get richer.
A significant new development within the sphere of services in general is
the appearance of new "paid" facilities parallel to the lagging free sector. The
economist Rutgaizer, in this regard, points to the growth of "paid polyclinics
operating on a cost-accounting basis," i.e., hospitals that charge fees and on
this basis make a profit. Rutgaizer does not go into details; but these can only
be hospitals that serve bourgeois patients. Workers could not afford them. ("A
Comprehensive Plan for the Development of the Service Sector." Planovoe
khoziaistvo, 1973, No. 2, in Problems of Economics, Sept. 1973, p. 49.)
There is thus a definite emergence in the USSR of "class medicine," of
one health care system for the bourgeoisie and another for the workers. Since
the number of doctors and other medical personnel and equipment is limited, the
establishment of a hospital to serve the bourgeoisie is tantamount to a relative
reduction in medical services for the people. It is another form of robbing the
Viewing this trend, which characterizes the development of services in
the USSR as a whole under the "new system," Rutgaizer is struck, however dimly,
by the inequity it represents:
"The reduction of the sphere of free services and the satisfaction of the
expanding range of the needs of people in paid form are possible only up to a
certain limit, beyond which the undesirable differentiation of the enjoyment of
services by individual groups of the population with a different level of per
capital income in the family may take place." (p. 49.)
This pale, sickly anxiety about "the undesirable
differentiation" which "may take place" -- when it has taken place and is
increasingly glaring -- is all that remains, within the authorized thinking of
the USSR, of the great principles of scientific socialism.