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The Fall of the USSR

2017 June 25
tags: ,
by Ian Welsh

The best book on both successes and failures of the Soviet Union is Mancur Olson’s Power and Prosperity. If you haven’t read it, you should. The second best is Randall Collins’ Essay in Macrosociology.

The great problem with most critiques of the USSR is that they do not explain its successes. In the 20s and 30s, it did far better in most respects than the West. In the 40s and 50s–and even into the early 60s, it was still doing very well. They put the first satellite in orbit, produced tanks that were as good as the West’s, and produced the most successful assault rifle in history. As late as the early eighties, there were points at which Russia’s best tanks were better than the West’s.

The USSR was one of the few nations larger than a city state which had industrialized through a process other than the use of mercantilist policies. During the Great Depression, the USSR vastly outperformed the West.

So, why did it fail? There are two perspectives. I believe both have a lot of truth to them. Let’s start with Olson’s: The failure of the USSR was a feedback problem. At the beginning of the USSR, local cliques and power groups had not formed. The central planners knew exactly how much was being produced, as well as exactly how much could be produced, and were thus able to coerce people into producing what they knew was possible to make.

As time went on, this became increasingly impossible. Put simply, the locals controlled the information flow to the center, and lied about what they could produce and what they did produce. Workers worked less than they could have, local bosses appropriated production to themselves, and the secret police couldn’t keep up, or became corrupted themselves. Absent accurate information, the central planners lost control. Everyone slacked off, corruption soared, production dropped, and the products produced were crap, especially the consumer goods. (The USSR remained able to produce some of the best military equipment right to the end.) Food production tumbled.

The second perspective is the geopolitical one. The USSR had less population than the West or even the US. It was faced with enemies on every side, while the US was isolated by sea from any possible assault and Europe only had to worry about attack from one direction. It had a smaller economy than its enemies. To keep up with its enemies militarily, it had to spend a larger percentage of its economic production than the West did. With a central position and a smaller economy, why would you think it wouldn’t crumble under the strain? I will note that Collins made this argument BEFORE it crumbled. By every normal “Great Power” metric, the USSR was weaker than its enemies. Fiscal strain is normal in such a situation, and it is to be expected that the economically weaker power will eventually lose. From a pure power perspective, and ignoring nuclear weapons, the USSR should have launched an all-out attack on Europe no later than the 70s.

This is basic guns-and-butter economics, understood by Adam Smith. The more you spend on your military and your security apparatus, the more your civilian economy suffers, especially as the most brilliant scientists and engineers are hived off from civilian production. The longer this goes on, the more you suffer. If you’re facing economies that are much larger than yours, you’re screwed. And the US economy was the largest in the world starting in the late 19th century, let alone a recovered European one.

As the USSR failed under these twin problems, exacerbated by the bleeding ulcer of the Afghan war, they also suffered ideological decay: They stopped believing in their own form of government, and became less and less willing to kill for it. When push came to shove, rather than use the Red Army to maintain control (something it was still capable of doing), they didn’t believe in the USSR and the Warsaw Pact enough to do so.

Now let us turn to capitalism. The advantage of capitalism v. central planning, is that information is sent through prices, supply and demand. This information feedback, however, is still gameable by power blocs. The exact strategies are different than in a command economy, but the end result is the same. The West and the US are currently undergoing this exact problem. The entire financial crisis was about inaccurate feedback and broken feedback loops–it was about the financial and housing industries deliberately damaging the feedback system. Then, when it finally went off a cliff, they destroyed the capitalistic feedback system (which, when properly operating, forces companies into bankruptcy) by obtaining bailouts due to owning western governments.

There are myriad other problems with feedback in the developed world right now, from massive subsidies of corn and oil, to oligopolistic practices rife through telecom and insurance, to the runaway printing of money by banks, to the concealment of losses by mark to fantasy on bank books, to the complete inability and unwillingness to price in the effects of pollution and climate change.

The great problem with humans is that we lack time perspective. In a hundred years, when historians and whoever deals with economic issues look back (hopefully not economists as we understand them), they aren’t going to be that impressed that Western Capitalism outlasted Soviet Communism by forty or fifty years. Instead, they are going to look back and say that both were doomed, in large part, by their inability to manage the exact same problem. In both cases, the feedback systems which controlled economic production were so perverted by various internal power blocs that the societies were unable to reproduce the material circumstances necessary for their continuance.

(This piece was originally published February 2014. I think it still says some important things, and many new readers will not have seen it, so back to the top. Ian.)

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75 Responses
  1. February 6, 2014

    The feedback issue is indeed the principal problem, both for late-era Soviet Communism and for current-era American Capitalism. But it is exacerbated by the fact that economies have become more complex. The Soviet economy of the 1920’s and 1930’s could perform well (well, compared to its Russian predecessor, not well compared to Western economies) because the inputs to any given product during that era were few and well understood. There is a movie on YouTube of a group of men at a locomotive shop for one of the major railroads building a locomotive from scratch. All they needed, other than a few simple instruments such as steam pressure gauges, was a supply of tubing, a supply of iron bar stock, and a supply of steel bar stock, along with relatively simple machine tools and machining oil. They built the casting molds right there on site using sand and wood, so yeah, they needed some sand and wood also. Their forge was right there on site to hammer bar stock into piston rods. Their blast furnace was right there on site to turn bar stock into liquid iron to pour into the mould to build the side pans of the locomotive. Same thing with the halves of the boiler, and the wheels, and the steel tires that shod the wheels. At the end of a few weeks of work casting and machining and forging and mounting the instruments and valves onto the result, that all got turned into a steam locomotive.

    Compare that to a modern computer, which requires components from virtually every continent on the planet, and a *lot* of them. The level of complexity — and amount of feedback required to successfully construct it — has suddenly increased exponentially. Perhaps modern computers could handle it in the absence of the token system feedback mechanism that capitalism uses, but the Soviet system was late in understanding the possibilities of computers when it came to implementing central planning, and by the time they finally understood, the wheels were already coming off the system and it was too late.

    The military spending issue in the end is a non-starter. The Soviet Union towards its end had a larger population and more natural resources than the United States during WW2, but its industrial output never came anywhere near matching that level. The military spending of the late era Soviet Union was outsized compared to the Soviet economy, but compared to the U.S. economy in, say, 1950, when the US had a similar sized adult population, the amount of military spending was similar to what the US spent during the Vietnam War era. The question is not why the Soviets spent so much on weapons (we know why that is so — virtually every weapon in their arsenal was defensive in nature, the Soviet Union never had the logistical train or projection capabilities to project power far beyond the Eastern bloc’s borders), but, rather, why their economy did not grow as Western economies did in order to make the cost of those weapons acceptable. The feedback problem combined with the increasing complexity of modern technology, which adds exponential complexity to the feedback necessary to build modern technological artifacts, is the only one that makes sense.

    Applicability to current Western economies is decidedly wise to consider, given that it’s clear that current Western feedback mechanisms are also crumbling…

  2. Ian Welsh permalink
    February 6, 2014

    Vietnam war spending was one of the things, combined with the oil shocks, which broke the old American economy. The dollar was hugely devalued, and on a whole spectrum of economic indices, the US has never recovered.

    Logistics is something governments do well when they want to. After 34 years of believing government can’t do anything, and setting out to prove it by fucking government up, well “success”.

    However, I’m not a big believer in central planning of the USSR style, so I’m not all that interested in defending it. One should not, however, deny its successes or fail to understand why it failed, because the lesson is applicable to us, right now.

  3. February 7, 2014

    Lenin and Stalin basically took a third world nation and turned it into a major industrial power. Soviet industry turned out more tanks and planes than German industry turned out during WW2. That despite having to pick up and relocate the majority of their industrial infrastructure to outrun oncoming German panzers, and Germany having access to the resources of virtually all of Europe during 1941-1943.

    That said, they turned the Soviet Union into a major *industrial* power. And even there, their industry had significant inefficiencies that never affected Western economies. For example, I have toured the ruins of the factory that built most of the Soviet Union’s motorcycles, a clone of a WW2-era BMW motorcycle. A very small corner of this factory is currently turning out a modernized version of those motorcycles, and probably produces as many motorcycles per year as during the Soviet era with literally 5% of the floor space and assembly workers. Why was this factory so horrifically inefficient during the Soviet era? It comes down, again, to the feedback problem. They could not assure that they would get the resources to build motorcycles from any of the other state industries, so they substituted, instead, a level of vertical integration that is astounding in its completeness. They literally smelted the iron ore on-site that they used to make their motorcycles, as well as wound their own alternators, cast their own brake cylinders, etc. etc. The problem with this level of vertical integration was that the scale of each part of this vertically integrated enterprise was too small for efficiencies of scale to happen. So it took the Soviets more resources to build a single motorcycle and its sidecar than, say, Ford Motor Company, spent on an entire automobile even if you count the resources that its suppliers used.

    The Soviets could still produce industrial goods in large quantities (until their industrial infrastructure eventually ran down, gutted by lack of resources) because of simple scale — having so many resources to work with to begin with. But was no — zero — hope of the Soviets being able to replicate that approach with technological goods. Even Moscow’s central planners eventually realized that. I know a former Soviet computer scientist who was there when the dictate came down from above — quit trying to develop a Soviet computer and Soviet operating system and instead just reverse-engineer Western goods. It was horrifically demoralizing to them, but eventually they realized that even reverse-engineering Western computers stretched the limits of what the Soviet system was capable of doing.

    One thing I have not seen mentioned thus far, BTW, is ideological rigidity. This computer scientist worked in a position with their space program or ICBM program (they were mostly one and the same, so I’m not sure which). Ideological correctness became paramount in the final years of the Soviet Union. Whenever he interacted with Westerners in any way, he had an ideological monitor present in order to make sure that his behavior was ideologically correct. When he received scientific journals from the West, they were carefully examined to make sure that there was no ideologically incorrect content in them, and he still isn’t sure why so many holes were cut into some of the articles he needed to read in order to do his job. This ideological rigidity was a major reason why the Soviet system was unable to adapt to changing conditions when industrial civilization transitioned to being technological civilization. Compare/contrast to the “Teabaggers” in Congress, and their Fox News ideological monitors that make sure they maintain the proper ideology…

    Finally, interesting comment on the Vietnam war expenses. I’ve mentioned that subject before, when upset Baby Boomers, told they’ve accomplished nothing except dismantling their forefather’s greatest achievement, the Grand Bargain that held through the 40’s, 50’s, and 60’s, whine “but we ended the Vietnam War!”. No, Boomers, you merely made fools of yourself. What ended the Vietnam War was the fact that spending 10% of our GDP on a war against a bunch of pajama-wearing peasants was financially unsustainable in the long term. The war ended when Boomer’s fathers decided the cost of the war was not worth any benefit that could be obtained, not because their children acted like idiots. But to go further on that, I don’t think the expenses of the Vietnam War itself were responsible for what happened economically in the 1970’s. Rather, the U.S. went from being an oil-exporting country to being an oil-importing country. Oil, in other words, had a lot to do with the economic dislocations of the 1970’s in the US. Also had a lot to do with the collapse of the Soviet system, now that I think about it, due to another side effect of the Soviet inability to participate fully in technological civilization… but that’s another story.

    Sorry to go so long. I have a book in here somewhere, but it depresses me every time I sit down and think about writing it, so right now it’s just a mass of unorganized material. Sigh.

  4. David permalink
    February 7, 2014


    I will have to look at those books you mentioned. Another book very well worth
    reading is Francis Spufford’s “Red Plenty” which was about the attempt to
    change the Soviet economy for the very reasons you mentioned. During the 1950’s
    the Soviet economy grew by about 8% per year which was second only to the
    growth experienced by Japan. Then as you mentioned growth slowed down. A
    number of mathematicians, computer scientists led by Leonid Kantorovich who was the only Soviet citizen to get the Nobel memorial prize in economics, saw in the late 1950’s that the growth could not continue because of the lack of feedback loops as you mentioned.

    Their idea was to decentralize the economy and to computerize it using the principles
    of linear optimization where resources, labor and capital would be optimized by software to produce the most output for the least input. Some of them even proposed establishing an internet so that the various economic nodes could communicate with one another and so make the feedback more efficient.

    Khrushchev was quite interested in these ideas and established a number of institutes
    in Siberia partly so that the experts could work on these ideas without outside interference. People usually think that Khrushchev was deposed because of the Cuban Missile crisis. That was only partly true, another reason was that these economic ideas were a direct threat to the existing power structure.

    What allowed the Soviet economy to continue for a while, was the discovery of
    vast oil fields in the 1970’s which made it possible to buy non-military goods.
    So yes, what happened to the USSR in the 60’s and 70’s has an echo to what
    is happening today in the West where fracking is seen as one of the saviors
    to the economy.

  5. February 7, 2014

    David, I would have to discount any book which claims that Khrushchev had any kind of economic insight that was useful. One of the other reasons Khrushchev was deposed was because he had some grand ideas for how to reform Soviet agriculture. The problem is, while a few of those ideas were workable, in the end the whole scheme was unworkable, to the extent that the Soviet Union had to import grain in 1963 to avoid widespread starvation. Khrushchev was smart enough to know there was a problem, and smart enough to understand that centrally planning agriculture from the Kremlin was failing, grain production and livestock production had declined to less than in the Tsar’s time when he came to power. His initial decentralization efforts did succeed in increasing agricultural production. But he let that go to his head and went off on wild schemes that simply were not workable.

    I have an old friend who was in the NSA during that era who has some stories to tell, primarily about what he was telling his higher-ups versus what his higher-ups were telling the American public (missile gap my a**!), but we’re a bit off topic so …

  6. David permalink
    February 7, 2014

    Yes, the author does say agriculture was a disaster.
    Apparently there was a popular joke at the time which was
    “What do you call Khruschev’s hair ? Answer: ” The harvest of ’63’.

  7. someofparts permalink
    February 7, 2014

    “when upset Baby Boomers, told they’ve accomplished nothing except dismantling their forefather’s greatest achievement, the Grand Bargain that held through the 40′s, 50′s, and 60′s, whine “but we ended the Vietnam War!”. No, Boomers, you merely made fools of yourself.”

    Tux, with all due respect, you are disappearing women in that passage. I’ve said before and I will say again that women of my generation did accomplish big, important things and don’t owe you an apology.

    While I’m following and thinking about the things you and Ian address so well on your websites, I’m digging about elsewhere to find my way back to wherever the front line of organized women’s politics is these days. It seems to me that any resilient, sustainable, decentralized future we can imagine will call for new ways of organizing ourselves culturally. The Abrahamic religious traditions of dominance over the natural and cultural worlds are at the center of the problem. Real economic and cultural presence for women is the natural antidote to that.

  8. Celsius 233 permalink
    February 7, 2014

    February 7, 2014
    Wow, what an arrogant SOB you are! While you are likely correct on what ended the Vietnam war; your utter disdain of those of us who knew long before, it was an immoral venture and spoke truth to power, is telling. A big fuck you, to you and your ignorance of assumed position!

  9. February 7, 2014

    If I had to pick one aspect that I think that a lot of people neglect about the whole communist thing, it’s not just central planning, it’s consumer demand and the ability to satisfy not just needs, but wants. Just looking at e.g. the GDR’s attempt at responding to the demand for Western fashion by creating its own fashion industry…well, it’s kind of painful to look at even by 70s standards.

    Some wants are created wants because people are creative at making wants. Lefties sneer at “bread and circuses” but actually a little circus is important.

  10. February 7, 2014

    Oh, and some of those wants are not nice wants, but they’re real wants anyway. Status, keeping up with the Joneses, feeling like you have access to something that your neighbour does not. These are things with a psychological importance you can’t ignore.

  11. Ian Welsh permalink
    February 7, 2014


    actually, what we see in village economies, is that status wants destroy happiness and do it fast.

  12. Ian Welsh permalink
    February 7, 2014

    Too much vertical integration is a sign of an inability of central planners to keep up.

  13. Tim permalink
    February 7, 2014

    Kantorovich is an interesting fellow. It is my understanding that the linear programming work he did is the basis for modern logistics and planning, as used by entities such as WalMart, Target, Amazon etc. They certainly seem to get the feedback necessary to run globe spanning internal economies, and deliver consumer products to the right places at the right time.

  14. Ian Welsh permalink
    February 7, 2014

    The application of modern just in time logistics to the problem of planned economies is an interesting one. It may be that the problem which defeated the USSR is now possible to tackle.

    We’re going to have to move to more active control over prices than we’ve been willing to do for a long time anyway. People act as if it’s either or, but all prices and profits have a huge social/government determinent as is. And the best performing western economies of the 50s and 60s had a TON of price management.

  15. February 7, 2014

    The Soviet Union “failed” because its ruling elite switched sides after having been pressured into doing so by the G-8. This is explained in Boris Kagarlitsky’s “The Disintegration of the Monolith.”

    Now, it’s fair to assume that the Soviet economy was in decline when its ruling elite switched sides, and that’s how I understand a lot of the critical comments here. But if we really want to understand why it “failed,” we need to factor in this matter of ideological collapse at the highest echelons of Soviet power.

  16. February 7, 2014


    Who said anything about happiness, let alone in village economies? Making wants for yourself is, at minimum, going to make yourself less happy, and yet many (most?) people in industrial societies are doing it constantly. A complex industrial system that does not take into account people’s creativity of want-making and the consequences of their awareness of where they sit in the social hierarchy is going to develop its own pathologies just for that very reason.

  17. Ian Welsh permalink
    February 7, 2014

    The introduction of status symbols into villages where everyone had about the same (visibly) causes a collapse in happiness. This fact is germane.

    Broad-spectrum increases in inequality, especially visible inequality, decrease happiness. This is robust, and well proved, it is one of the strongest correlations in social science. As much as people have wants, if there is little actual inequality, it does not decrease happiness nearly as much, it becomes markers of sub-group identity.

    Dress like a Goth, it doesn’t decrease other people’s happiness. Wear a rolex, and it does.

  18. February 7, 2014

    Yes, but my point was never that status wants make people happy. I’m not at all claiming that they do—and I still don’t understand where happiness came into the discussion at all, I don’t think I mentioned it. I’m saying that given the larger context of industrialized societies, people create wants and desires that need satisfying even if the creation of said wants, in fact, increases unhappiness. ie, whether it creates happiness or not is a different issue—there are needs, wants, desires that modern, “post-village” people seem to keep replicating, things that make you “unhappy” that you still want anyway.

    People create status wants dynamically anyway, and that the communist bloc underestimated this and were ill equipped to deal with its consequences. You see it in e.g. the way that some of the Russian nouveau riche comport themselves—now that they have access to the status symbols that they always craved. Western industrialized societies, even at their most egalitarian, create a sort of cultural “playground” where the petty viciousnesses can be dissipated. How much more happiness did a pair of Levi’s bring?

  19. February 7, 2014

    I know an elderly woman who fled communism in southeastern Europe decades ago and ended up in Canada, whereafter she became quite wealthy. Naturally she will never vote for the NDP, that’s obvious. And I am given to understand that she is never without honest-to-goodness real jewelry, and a good deal of it—almost a matter of principle for her. Did it make her happier? Well, leaving for Canada sure did, but that’s not only because she couldn’t have bling. But having a right to wield the bling, to create a status want for herself, is to her a moral triumph.

  20. David permalink
    February 8, 2014


    What Kantorovich and his fellow reformers had in mind in the early 60’s was pretty much what you described.

    “Crooked Timber” had a seminar on Spufford’s book which was collected in a free ebook available at


    The essay by Cosma Shalizi in the above ebook discusses how hard
    it is to truly optimize a real economy, or as he puts it, computational
    resources need to be both cheap and immense. If quantum computers
    ever become a reality, I suspect one of their biggest impacts
    will be in economic analysis and planning.

  21. Jonathan permalink
    February 8, 2014

    Mandos, status is an economy, and status symbols are its tender. Unlike most financial economies, participants in that economy are not legally bound to anyone else’s notion of the value of any and every putative form of tender. I have every right to think of her as a lesser person for wearing the blood of seals or Africans or what have you, and to express that displeasure peaceably. [Cut to: critical analysis of King Arthur in Monty Python’s Search for the Holy Grail]

    Any economy is merely a set of rules for distribution, and like any set of rules for distribution, they are a matter of social consensus. Status symbols do not have to be material trinkets. Remember the potlatches?

  22. Massinissa permalink
    February 8, 2014

    Mandos: Its a moral triumph for that woman to have excess conspicuous wealth at the expense of laborers?

    I do hope youre not endorsing that viewpoint, because its rather odious.

  23. Pelham permalink
    February 8, 2014

    I picked up Olson’s book at the library and am reading it now.

    Please consider offering in a future post a list of recommended reads. Thanks.

  24. fosforos permalink
    February 8, 2014

    This article is unspeakably ignorant. There was no central planning in the Soviet Economy until 1929 when Stalin, having purged the original Bolshevik leaders (Trotsky, Bukharin, Rykov, Preobrazhensky, Piatakov, Smirnov et. al.,) “sent NEP to the devil” and began the 5-year plans with his enormously destructive forced collectivization. And the USSR’s economic performance under Stalin “looked good” compared to its rivals only if one ignores the vast slave-labor prison system and the perpetual disaster of collectivized agriculture. Bureaucratic incompetence was central to Stalinist “planning” from its very beginning in 1929. The self-conversion of this bureaucratic monstrosity into the present capitalism presided over by a Stalinist KGB colonel took place essentially in the way predicted by Trotsky (“The Revolution Betrayed”) in the 1930’s!

  25. nihil obstet permalink
    February 8, 2014

    I’m not convinced that people in industrialized economies are as active creating wants as Mandos is. Industrialized economies depend on demand. Certainly from the beginning of the 20th c. a very active propaganda industry developed and flourished to create demand or, in other words, wants. The human need is for communication and agreement with others. This can be channeled into all kinds of beliefs and feelings. Consumer societies are created when it’s channeled into desire for commodities.

  26. lew2048 permalink
    February 8, 2014

    It is not possible to make good investments without prices. What is wrong with the economies all around the world is the many layers of price management by the governments : subsidies, taxes, crony capitalism. The huge levels of debt are ultimately due to management of interest rates.

    That is true for investments by govs, companies and individuals. Centrally-planned economies by definition set prices: they set plans, allocate capital and budget. Complex logistics are a result of long-term contracts, represent an efficient economy, and are only possible with a long-term understanding of REAL prices.

  27. February 8, 2014

    Mandos: Its a moral triumph for that woman to have excess conspicuous wealth at the expense of laborers?

    I do hope youre not endorsing that viewpoint, because its rather odious.

    To her, and not only to her—I know a few people who left communist countries and they concur with one version of that thought or another. Not all. But many. And, apparently, a heck of a lot of the post-communist nouveaux riches!

    Of course I’m not endorsing that viewpoint, but I am willing to have an open enough mind to try to understand where they’re coming from at an emotional level. And how it can be ultimately destabilizing for a society to be so publicly ideologically focused on eliminating the dark side of human wants.

  28. February 8, 2014

    Mandos, status is an economy, and status symbols are its tender. Unlike most financial economies, participants in that economy are not legally bound to anyone else’s notion of the value of any and every putative form of tender. I have every right to think of her as a lesser person for wearing the blood of seals or Africans or what have you, and to express that displeasure peaceably.

    You can do this, like anyone else, but you’ve somehow ended up in the minority. There is still a diamond industry. If someone ever manages, finally to do something about it, maybe there’ll be something else.

    I’m not saying that you shouldn’t do anything about bad status wants. I am saying that modern industrial societies require an outlet for a certain aspect of our psychology. One of the things communism was bad at was acknowledging the power of these wants. American capitalism, however, copes with it by letting you buy blood diamonds.

    Any economy is merely a set of rules for distribution, and like any set of rules for distribution, they are a matter of social consensus. Status symbols do not have to be material trinkets. Remember the potlatches?

    My limited understanding of the system is that you gained esteem by giving away material goods.

    But it’s true. It doesn’t have to be a material good. It can be a title too, like getting named Baron von Squigglypuff or something in a nice ceremony. It just has to be somewhat flexible and respond to changing human whim and fashion.

  29. February 8, 2014

    I’m not convinced that people in industrialized economies are as active creating wants as Mandos is. Industrialized economies depend on demand. Certainly from the beginning of the 20th c. a very active propaganda industry developed and flourished to create demand or, in other words, wants. The human need is for communication and agreement with others. This can be channeled into all kinds of beliefs and feelings. Consumer societies are created when it’s channeled into desire for commodities.

    That advertisers direct demand is hardly surprising. They spend a LOT of time and money researching, in fact, how to do this—developing psychological “hacks” that as I have said multiple times before, progressives would do well to actually take seriously.

    They are taking advantage of something already in people. Now, perhaps its the case that if human societies had developed along a different branch, we may never have encountered marketing, created wants, etc. Perhaps it is simply the case that at some point, we became Fallen. But whatever it is, under our capitalist production, the genie is out of the bottle. People want to toss out last year’s perfectly good wardrobe and buy new, seasonal clothing. In some cultures, women of reasonable means must have a new dress tailored for every wedding, and there are a LOT of weddings. The movie Nebraska (great movie, by the way) highlighted how deeply important it was for some American men to be seen in a new truck—and I can believe it.

  30. Ian Welsh permalink
    February 8, 2014

    The history of Bolshevik economic policies in the 20s is also a bit more complicated than “no central planning”. But whatever, MOST of Soviet history takes place under central planning. Almost all of it.

    Status/Power/Wealth are three different axes. You can usually use one to get the other 2, though. We tend to conflate status with wealth or power; but 19th century societies understood that the two weren’t necessarily the same.

    (Think Mr. Rogers. Think someone with a bronze star, who is poor after military life. Think certain Indian gurus who actually do live a life of poverty (many don’t, some do.)) Think nuns, and in the old days, priests.

    There will always be people who want status, and as already observed, if that means burning their material wealth in bonfires, or giving it away, they’ll do that.

    Channeling status desire towards generosity more than we do (we already do some, which is one reason why rich people give to charity), might be wise. This is deep in the most basic human societies: where generosity was one of the cardinal virtues.

  31. Tim permalink
    February 8, 2014

    Re: planning, I’m not talking about eliminating the market economy for consumer goods etc.

    However, when looking at energy and water policy, I can’t see any other way to do it. In fact, the US has done it in the past, witness the Federal Highway System which was obviously planned. Before that was rail, which John R. Stilgoe writes about in his book, Train Time. That’s a particularly interesting topic because a lot of it was done privately– Stilgoe goes into detail about the long term private/public plan to remove manufacturing from Manhattan etc. What’s also notable is that the NYC transit was built privately (in large part) but then publicized when it started being loss making. Notably, Grand Central is still privately owned:

    There’s also water distribution, again, which is primarily done via public utility. This is the case in CA where, ironically enough, some of the agriculture areas that are the most conservative are also dependent on the state water project, a multi-decade, multibillion dollar undertaking.

    If we’re actually going to survive climate change and rising oil prices, it means changing fundamental things about the way we organize our political economy, and doing it successfully means planning of some sort. It’s probably a revolution in the same way that the industrial revolution was.

    Or you know, fuck it, warlordism, which seems to be the right’s preference.

  32. February 9, 2014

    “In the 20s and 30s it did far better in most respects than the West.”

    Well, it’s true I suppose that they murdered far more of their citizens than Hitler managed to do!

  33. Jessica permalink
    February 9, 2014

    Thank you for this fascinating post + comments. I am reading Red Plenty, which I had never heard of.
    @David Duff
    It must be wonderful to come from a country that does not have the blood of millions on its hands. I, on the other hand, am from the United States.

  34. EGrise permalink
    February 10, 2014

    Does anyone suppose we’ll *ever* be able to discuss any aspect of communism without someone coming along to remind us that Stalin was a murdering bastard?

  35. February 10, 2014

    @ Jessica
    Heavens to Betsy (as you say ‘over there) you mean *your* government murdered millions of *your* citizens? Just like good ol’ uncle Joe?

    No, because, when you think about it for the three seconds which is all I can manage, you realise that millions of slaughtered men, women and children are more important than the finer points of economic Marxist-Leninism!

  36. February 10, 2014

    I enjoy Dimitry Orlov’s style and his books “Reinventing Collapse” and “The Five Stages of Collapse”. The similarities between the U.S. and the U.S.S.R. are striking. The Soviets finally technologically failed at “food production, consumer goods, and information technology….It is uncanny that the United States seems poised to fail in these same categories as well.” He said what the Soviet leadership didn’t understand was how clothing helped morale. When I was hanging out in the early mid 1980s and doing some comedy down at Lew Black’s club on 42nd and 9th, he used to say in his comedy act that the way to defeat the Soviets was not with a Star Wars nuke program, but to simply fly bombers over Russia and drop designer blue jeans. He was right.

  37. Jessica permalink
    February 10, 2014

    @David Duff
    So its OK as long as we only kill foreigners?

  38. Ian Welsh permalink
    February 10, 2014

    Or Indians.

  39. Celsius 233 permalink
    February 10, 2014

    Ian Welsh
    February 10, 2014
    Or Indians.
    Thanks, you beat me to that. Probably in the tens of millions, actually.

  40. EGrise permalink
    February 11, 2014

    @David Duff:
    “when you think about it for the three seconds which is all I can manage”

    …well there’s your problem.

    But seriously, thanks again for pointing out that water is wet. Perhaps I’ll write a WordPress plugin for Ian that will auto-insert “David Duff wishes to remind us that Stalin was a murdering bastard.” into the first comment of each of his posts. Should save you some time and trouble.

    Take care,

  41. February 11, 2014

    I do apologise. I realise how frightfully ‘infra dig’ it is for someone to start kicking at those monstrous piles of bones that not only good ol’ Uncle Joe left around but which were started by that, er, lover of the working class, Lenin, and then by every other leader of *communist* Russia until that bloke with the birthmark on his forehead who was deeply in love with Maggie Thatcher decided to call it a day!

    So moving on, perhaps we could discuss the pros and cons of Marxist theology at work in China under Mao because . . . ooops, hang on, the piles of bodies there are even bigger than in Russia!

    Oh, I dunno, what is it with this Marxism lark that makes it keep on and on murdering ‘people’ all in the name of the ‘People’?

  42. Brian M permalink
    February 11, 2014

    What is it about this Capitalism lark that makes it keep on poisoning and exploiting (and killing, if they are too stubborn about it) people with labor and resources needed, all in the name of the “Free Market”?

  43. February 11, 2014

    He said what the Soviet leadership didn’t understand was how clothing helped morale. When I was hanging out in the early mid 1980s and doing some comedy down at Lew Black’s club on 42nd and 9th, he used to say in his comedy act that the way to defeat the Soviets was not with a Star Wars nuke program, but to simply fly bombers over Russia and drop designer blue jeans. He was right.

    Yep. That is capitalism’s strength. Going to any length, ANY length, to flexibly satisfy some of the little wants.

  44. The Tragically Flip permalink
    February 12, 2014

    David, I doubt many would disagree that Stalin & Mao were terrible people. Do you have a point beyond that, or are we not allowed to look at why the Soviet Union WAS able to compete with the West for decades?

    Obviously something was working to some degree worth examing and understanding.

  45. Dan H permalink
    February 12, 2014

    Stop feeding the troll.

  46. February 12, 2014

    @ Flip
    Quite right and forgive me for, er, raising the dead! However, the Russian ‘communist’ system did not compete with the west in the slightest degree. The advances they made were not due to Marxist-Leninism but occurred *despite* Marxist-Leninism. In fact such advances as they did make were entirely due to advances in industrial technology and techniques (pioneered by the likes of Henry Ford – the capitalist swine!) which they begged, borrowed or mostly stole. Of course, in certain key areas, and under government diktat, they would advance rapidly but only at a huge cost elsewhere. The standard of living in Russia never reached anywhere near American levels even during the depression. I would remind you, gently, that the Party made a big mistake in allowing the film of “The Grapes of Wrath” to be shown in cinemas because ‘the People’ (damned nuisance that they are!) were astounded that in America the ‘poor and destitute’ actually *owned cars* with which they moved freely from one place to another. It was rapidly taken off screens!

    Perhaps you and your fellow economic measurers would do better to look at the all too *real* advances of China once state communism was replaced with state capitalism. Do you remember the China of Mao Tse Tung and how the people lived then? If so compare it to today and that will tell you the difference between socialism and capitalism. Mind you, they have *state-controlled* capitalism so their troubles are yet to be felt although the warning signs are already there. No doubt their collapse will come as just as much of a surprise to your vaunted CIA as the Russian one did, despite it being obvious to anyone with an ounce of common-sense that in the end socialism doesn’t work!

  47. Kaleberg permalink
    February 13, 2014

    The USSR didn’t do that well in the 1920s. Contemporary apologists noted that there was a shooting war going on well into the decade. It definitely did better in the 1930s, and its 1940s war machine was most impressive.

    What destroyed the USSR was the same thing that destroyed the old English, French and so on empires. Industrialization, decreased transportation costs, better communications, rising agricultural productivity, urbanization and other forces of modernity have made it increasingly difficult to operate an empire profitably. The English empire was already losing steam before WWI, and was losing money in the 1930s as George Orwell noted. The Soviet empire was profitable into the 1970s as noted in “The Costs of the Soviet Empire” [Science 29 Nov 1985 Vol 230 No 4729], but it moved into the red and stayed there.

    I always felt that Ronald Reagan was the last true believer in the Communist system. I had been watching the USSR through the 70s and figured it was ripe for collapse, but Reagan truly believed, unlike the commissars who nattered on about the invincible might of the Soviet army and so on. Reagan borrowed and spent hundreds of billions of dollars figuring that our capitalist system had a slight edge, but could only crush the communists if we both pushed our economies and war machines to an extreme. Then, the 0.01% edge would play out and the USSR would collapse. I think he bought the USSR an extra five or ten years, and George Kennan, the infamous X who codified the whole idea of the Cold War, concurs as he noted in The New York Times, Oct. 28, 1992, “…the general effect of cold war extremism was to delay rather than hasten the great change that overtook the Soviet Union by the end of the 1980s.”

    It might not have been about what blew the USSR apart, but rather what was holding it together for decades past the age of empires.

  48. Celsius 233 permalink
    February 13, 2014

    @ Kaleberg
    February 13, 2014
    “It might not have been about what blew the USSR apart, but rather what was holding it together for decades past the age of empires.”
    Indeed. For those curious souls, there was information well available in the 70’s and before, that showed the U.S. lie regarding the Soviet army’s effectiveness. Too many and too diverse ethnic minorities reduced the number of troops who could be trusted. With a quick search, the earliest article I could find was written in 1980. But, I read similar in the early 70’s or late 60’s.
    Anyhoo, here’s a link;

  49. February 13, 2014

    One other thought on this subject. I can’t quote a source but I have read in many books on European and Russian history that a period of very *real* economic progress took place under the Czar at the turn of the 19th/20th centuries. Indeed, this rapid advance into industrialisation was one of the causes of genuine German fear at growing Russian strength which provoked them into a war in 1914, much earlier than they expected. After the revolution, of course, it was mostly downhill!

  50. Jessica permalink
    February 13, 2014

    Badtux ”
    The feedback issue is indeed the principal problem, both for late-era Soviet Communism and for current-era American Capitalism.”

    I think the feedback issue itself results from the failure to disperse power adequately. A complex highly differentiated economy functions better with highly dispersed power, but both social structures and cultural customs cling to power concentration, both in the USSR and the US.

  51. Celsius 233 permalink
    June 26, 2017

    Tis indeed interesting that more than 3 years later; people have to include that Putin is a murdering thug as a lead-in to speaking or writing of him.
    And, none of them know this for a “fact”; just conjecture and a belief in their non-first person knowledge; which is not knowledge by any standard I hold.
    What I do think is that no person of true power is lily white; but to endlessly repeat this propagandistic garbage is just bullshit…

  52. June 26, 2017

    As several of the comments allude, good old capitalist propaganda presaged & parlayed the valid points made in this entry.

  53. June 26, 2017

    Also, the picking from Nazi Germany: the capitalist West got the designer and scientist, the communist East got the engineers and fabricators.

  54. Ian Welsh permalink*
    June 26, 2017

    You can praise a man for some things, while condemning him for others. Google Chechen war atrocities before you fall over yourself praising Putin without acknowledging his issues.

    Oh, and journalists covering such crimes tend to get murdered. Often.

  55. Celsius 233 permalink
    June 26, 2017

    Ian Welsh

    Oh, and just where did I praise Putin?
    I just found the qualifiers to be disingenuious; not based on “known” facts. But rather western propaganda; and the Chechen action?
    Just how does that compare to the U.S.’s last 57 years?
    Millions dead at U.S. hands; and more importantly the present; Syria and Iraq.
    Putin and Lavrov have demonstrated statesmanship, world class I may add; the U.S.?
    Not so much…

  56. Celsius 233 permalink
    June 26, 2017

    Oh, and journalists covering such crimes tend to get murdered. Often.

    Yep, and Putin ordered each and every one to be killed, yeah, right.
    Yeah, I’m falling all over myself; come on Ian, give it a rest; you soud like an Obama bot, Trumpophile, Clintonite, Bush groupy.
    I give credit where it’s due, and attack that which is wrong by my set of values; I didn’t move to “mother” Russia; but keep a real view of the world.
    Oh, and journalists; you think the U.S. doesn’t kill journalists?
    I think you are just spoofing here to gain hits…

  57. Celsius 233 permalink
    June 26, 2017

    Oh, and: The Watts riots, sometimes referred to as the Watts Rebellion, took place in the Watts neighborhood of Los Angeles from August 11 to 16, 1965.

    Chechen is rather a moot point given the U.S. precident with the army in the streets with jeep mounted 50 cal. machine guns in L.A. neighborhoods!
    Ian, get a fucking grip!
    The U.S. is far and above all but the worst despot dictatorships on the planet; Russia ain’t one of them.

  58. Jib Halyard permalink
    June 26, 2017

    The piles of corpses that David Duff so impolitely keeps mentioning are not incidental to the subject of Marxism or Soviet economics.
    It is simply not possible to foist a programme of radical redistribution upon a society that clings to such quaint ideas as due process, rule of law, individual rights, etc. These things all must be removed before utopia can be achieved. The omelette absolutely requires many, many broken eggs.

  59. June 26, 2017

    How about biology? When the USSR ramped up, it followed the cutting edge of science everywhere possible–except for biology, which it turned over to that fraud Lysenko. The results were crop failures and medical stagnation, leading to a falling average life expectancy in the 70s, if not earlier. And once a nation’s life expectancy falls, that’s serious.

  60. bruce wilder permalink
    June 26, 2017

    centralized decision-making — can’t live with it, can’t live without it

    the economic ideology of the west — as officially prescribed in neoliberalism, the intellectual foundation of which is neoclassical economics — tries to make public authority disappear, or at least fade into the background of the political economy. by talking up an imaginary “market economy” coordinated by market prices, it largely ignores the pervasive use of administrative hierarchies to organize advanced economies.

    I thought Red Plenty, although well-written, was basically unsound, precisely because it tried to make the Soviet Union’s planning problems into a resource allocation problem in line with conventional economics thinking (aka stupidity). Linear programming would supply shadow prices as a planner’s substitute for market prices and voila! But, the problems of the Soviet economy were far more complex (including social and motivational) than that, as other commenters have noted. Efficient resource allocation — the economist’s chosen problem — is an unjustified abstraction from a more complex problem of pervasive uncertainty and strategic behavior (including, of course, “cheating” and resistance to authority and authority’s resistance to complexity).

    On some basic and fundamental level, all human political systems are bound to fail, and to require periodic re-founding or re-organization. Because we just don’t know enough, though we are going to find out that we are mistaken and we are always mistaken (did I mention that we don’t know enough?). There’s no end of history. As others have pointed out, the U.S. has re-invented its political economy several times: in the Revolutionary era, culminating in the Constitution; in the mid-19th century, marked by the Civil War; in the Great Depression and WWII. If the U.S. is headed toward collapse now, it is because we did such a punk job of responding to the collapse of the Bush2-Obama years. These re-inventions of the U.S. political economy are pretty neatly spaced, as if a sine wave was rolling thru our politics, with inflection points every 36 years, a new cycle starting every 72 years. If you look at the history of the Soviet Union with that standard, then its development conformed perfectly: 1917 (overthrow of the Czar) to 1989 (fall of the Berlin Wall) is exactly 72 years, with Stalin’s death marking the 36-year mid-point.

    I am not going to fetch up statistics to make the point, but it seems to me that the paroxysms of the American Civil War or the Great Depression were on the same rough-scale order of magnitude as the collapse of the Soviet Union in the 1990s. When people say Communism failed by 1990, I suppose that is descriptively accurate, but to have some historical perspective: feudal aristocracy and empire failed catastrophically in the First World War and the knock-on effect was a collapse of classic capitalism in the inter-war years. We re-invented global “capitalism” 1930-45; the post-WWII order had a very different character, materially (technologically), socially and politically. And, like the Soviet Union, that international economic order has passed important inflection points (Nixon, Reagan), decayed and has now run out its useful life.

    Re-invention is never easy, especially if you have to do it with people. People are assholes.

    I was trained as an economist, so I tend to focus more on economic systems and issues, and the thing I keep coming back to in my now advanced years is the extent to which economics is actually a barrier to understanding how the economy works. there is very little in the econ 101 textbooks about how authority and bureaucracy work to organize the economy, which seems to me like a fatal shortcoming in doctrine.

    The feedback loops mentioned above kind of depend on the ability of people to criticize intelligently and with insight the functioning of existing systems and then introduce new designs and new ordering to the system of loosely coupled, somewhat decentralized activity. I don’t know much about the Soviet system in days of yore, but I get the sense that their ideology back in the day insisted that administrative directives and planning could do more than was really possible, but ours insists on the opposite: that “markets” and “market prices” can do more than is realistic.

    Just as one example, which may prove critical to civilization, the notion that tradeable permits in carbon emissions, could address the crisis of global warming seems almost bizarrely stupid to me. But, economics, for ideological reasons insists that prices coordinate all — even if actual prices are mostly fixed by administrative processes and contain little information — so we look to a “market solution”. And, the only alternative is a carbon tax, which isn’t much better. And, economists labor away to estimate how much growth we will give up to reduce carbon emissions, when what we should be calculating is how much of our posterity’s economic life we can salvage.

    We’ve arrived at a point in time when we need to know how to “plan” on a large-scale and we don’t believe in the efficacy of large-scale planning or see its already existing role in the systems on which we depend. not good.

  61. Billikin permalink
    June 26, 2017

    “Runaway printing of money by banks”??? If only they would!

    Or would have, anyway. Europe needs more money, I don’t know about the U.S.

  62. Willy permalink
    June 26, 2017

    Re-invention is never easy, especially if you have to do it with people. People are assholes.

    Back in my corporate contractor days, I worked many jobs, where tribal knowledge was the norm everywhere. I quickly learned that Job 1 for me was to separate the assholes from the mensch. When asked newbie questions the asshole would always try to obfuscate, intimidate, and demoralize. Mensch usually tried to give the clearest answers the best they could. Obviously the former cared more about themselves, the latter cared about those who’d do well for their company.

    Which brings me to yet another story about comrades.

    After the failure of their N-1 moon rocket, Soviet leaders demanded that practically everything associated with that program be destroyed. A few proud little rocket motor makers knew that while the overall N-1 fuel distribution system needed work, their own NK-33 motors were far ahead of their time. Their part of that moon project had been accomplished with their own material science paradigm shift, instead of any technology theft or help from former-Nazi engineers. Nobody anywhere else had achieved such a powerful engine for such a low structural mass. They hid their work in a warehouse, where it sat for decades.

    After the fall of the USSR, American companies heard of the motors, then came calling to examine this revolutionary technology. Today, after over 50 years after inception, close variants of these motors are in use in Atlas, Orbital Sciences, Soyuz and other launch vehicles.

    That story begs many questions:
    Why do some people still perform brilliantly in Communist systems? (I’m not aware that the little rocket motor guys were threatened with being gulag’d for under performance) Why do totalitarians want to smash everything to bits to try and hide some public failure, without even bothering to save the good stuff? Do “free economies” start to suck when totalitarian types (malignant narcissists, etc..) take over? (okay, that one’s obvious, talked about here all the time) What are the lessons to be learned from the experiences of former USSR assholes and mensch which might be beneficial in free economies? And my own personal fave: while putting a system out there to dissuade assholery while encouraging menschery, is it possible to keep that system focused on those two things, instead of just becoming a ruse which rewards one at the expense of the other?

  63. S Brennan permalink
    June 26, 2017

    Good comment Willy

  64. Ben Johannson permalink
    June 27, 2017

    For more on this subject I highly recommend Robert Allen’s “Farm to Factory”.

  65. Kenneth Heathly Simpson permalink
    June 27, 2017

    Thanks Ian,

    Very good post. There was a Soviet worker’s saying in the 1970’s. “We didn’t mind them pretending to rule as long as they didn’t mind us pretending to work.” This shows class division and relations in a failing State Capitalism. After all they never had socialism and only had a decaying workers state for 15 years or so. The failure date being the purges and murder of the old Bolsheviks.



  66. sid_finster permalink
    June 27, 2017

    Two reasons that the Soviet Union collapsed:
    1. “Stability in cadres” – Brezhnev’s slogan when taking power. This was a message to Party members that there would be new leadership, but at the same time no purge in rank and file Party membership, except some of the very top.

    While a purge would have been wasteful, inhumane, cruel and unnecessary, this is also when ideology stopped mattering within the Party, as long as the membership went through the motions.

    Membership became increasingly careerist and cynical. When it became obvious to everyone that the Party members didn’t believe their own slogans but were feathering their own nests, the rot of the Brezhnev years became inevitable.

    2. Too Big to Fail. There was no easy way to remove or resolve Soviet institutions that were not working, that produced goods that noone wanted, or that caused massive externalities.

    Rather than winding up these institutions, they were allowed to drag on.

    Any resemblance to the current American system is purely incidental. 😉

  67. Derek Lutz permalink
    June 27, 2017

    Feedback and geopolitical causes are certainly valid and explain a good portion, but I think there is also a very fundamental difference between the US empire and the empire of the USSR that comes into play. Consider that the model followed by the US empire loots the periphery, sending wealth to the core (The US itself) whereas the USSR looted itself and sent much of it’s wealth to its periphery. By periphery, I of course mean allied nations and trading partners. At any rate, the US (and it’s closest allies), having already had a vast pool of wealth, drained many nations/colonies of resources and wealth and became more powerful over time. Russia, which may have had more resources at it’s disposal initially, shifted those resources toward it’s allies and trading partners, becoming weaker economically as time wore on. This is definitely not the narrative we were fed growing up, but as a well-read middle aged adult, this now seems to be the case to me.

  68. June 27, 2017

    A very interesting piece. Well said.

    Certainly command economies can produce great efficiencies in the short run – but then they tend to stagnate, for reasons you have so clearly stated.

    Churchill once suggested that Russia has suffered two major disasters: the first that Lenin was born, the second that he died when he did. Lenin was nothing if not a pragmatist, and his “New Economic Policy” was similar to what has operated recently in China. Then Stalin took over and went full-on central control, and to heck with the consequences. Perhaps if Lenin had survived, the USSR could have stayed more pragmatic for longer…

    It’s also been suggested that Stalin killed off most of the smart administrators, leaving a ruling clique of second-raters whose major skill was not rocking the boat.

    But of course, capitalism is a system whereby man exploits his fellow man, whereas communism is just the reverse!

  69. bruce wilder permalink
    June 27, 2017

    It hard for me to reconcile Derek Lutz’s theory of centrifugal distribution of wealth with the post-communist economic experience of countries like Poland or the extreme hostility to Russia in the Baltic States, Ukrainian Ukraine and so on.

    To the extent that Russia exported population, it had to export wealth, but mostly Russian leadership was a deadweight on the ambitions of its closest “allies” and constituent republics. Consider the trouble a country like Latvia has taken to force the Russian population to leave, or the prosperity of Poland now.

    Ukraine might be the prime example of the paradox, if it is a paradox. Ukraine was the recipient of huge investments in heavy industry, especially in the Russian-speaking east, and vast largess in terms of natural gas supply, to the extent that Ukraine became one of the most profligate users of natural gas in the world. You see anyone in Ukraine celebrating the poverty of eastern Ukraine? Is Russia popular in western Ukraine because of the cheap natural gas?

  70. Derek Lutz permalink
    June 27, 2017

    Well Bruce-fascism is on the march in Eastern Europe these days, and it is authoritarian in nature. The leadership of SOME eastern European nations have a hate hard-on for Russians, but I have seen no sign that this extends to the majority of people on the street. Poll after poll shows that although people in these states enjoy multiparty systems, they also miss communism, because their standard of living has actually declined since the USSR came to an end. It is interesting that you are citing Poland as prosperous- if it is so prosperous, then why has it depopulated? You are also ignoring the result of the referendum on the USSR, which I believe occurred in 1991, where an overwhelming majority of Soviet citizens in all republics voted to keep the USSR intact. (I believe it was something like 74% in favor). Regarding the concentration of industry in Ukraine, going from memory here, but I believe the bulk of the ore deposits were located in eastern Ukraine. Either way, the coup government in western Ukraine has been shelling eastern Ukraine for a year or two straight, so probably things are going to even out, sooner or later.

  71. Kevin P. Chapple permalink
    June 27, 2017

    Thank you, Mr. Welsh.

  72. Ramona permalink
    June 28, 2017

    I know very little about Russia/USSR, but I do know something about living through the post WWII era and into the 21st century while hating capitalism.

    Time will uncover the reason for the Soviet collapse, but claiming that former Soviets loved their jewelry as an excuse for the excesses of capitalism is wrong.

    One of the most ancient tribes on this earth, the !Kung tribe, had lived a communal life for 4o thousand years until the central government introduced money. The simple addition of interest bearing money changed everything about their political economy. Huts used to be open to a center, all could see what was going on in other huts and if someone had extra food or whatever, it was the norm to ask for it. In was the norm to give. Suddenly, in a matter years, the layout of the village changed. Families started hoarding in locked trunks, doorways faced outward, not inward. The simple introduction of what we generally understand as money profoundly changed the desires of this ancient people. — from “Rethinking Money” by Bernard Lietear, co-creator of the Euro, has been writing a series of books on this theme, hoping to get average people to see how we can change our economic structures by inventing new monetary systems capable of handling the needs of the information age.

    The idea that we need to keep beating on the capitalism/socialism/communism debate is sooooo last century.

    Follow the money people, or at least follow the kind of the money, the way money works.

    I was an anti-capitalism; I am now a post-socialist as I see socialism as too dependent on capitalism’s base – interest bearing money. We can still have individual freedom if we just get rid of interest bearing money. That simple/not so simple step will free us up for endless innovation at the local and mid level. Stronger communities will evolve and other communities will want to be like them.

    TV is one huge advertisement, but it doesn’t have to be. The innertoobs were something very, very different at the start.

  73. philip permalink
    June 28, 2017

    One hardly knows where to begin. The industrial output of the USSR before the war was pitiful. Great factories, dams,power plants, etc. were built, but they operated at abysmal levels of capacity. (Upon completion, the Dnepstroi Dam, the largest hydroelectric project in th world, operated at 7% capacity.) The use of slave labor was rampant. Maintenance was an unknown concept. 90% of transistors produced by Soviet factories were deemed unfit for use by military procurement authorities. I could go on and on.

    Some myths on the left refuse to die. Such things hold us back from a clear view of how to move forward.

  74. June 30, 2017

    Philip, the transistor was not invented until 1948, and the first commercially viable transistors were not on the market until the early 1950’s, so clearly there were no pre-war transistors unfit for use by military procurement.

    The Russian economy under the Tsars had been increasing GDP at a steady clip in the pre-revolution period, and matched that rate under Communism after 1925 until around 1970-1975, at which point economic growth started leveling out, then collapsed with the fall of the Soviet Union. I already noted that I believe the complexity of modern technological society overwhelmed the ability of central planners to organize their economy, but what’s clear is that Communism was able to maintain economic growth during the industrial age equal to that of the pre-Communist government, albeit at enormous costs. Only with the transition to the technological age did Communism become unable to maintain growth, and I personally do not believe that to be a coincidence, because the artifacts of the technological age have a complexity that is exponentially greater than the artifacts of the industrial age.

    Willy, capitalism regularly causes the suppression of technologies. It is to my everlasting annoyance that the vast majority of products that I engineered are no longer in production because either their corporate owners collapsed and nobody was interested in buying the product, or because their corporate owners were bought out by wealthier competitors in order to put a potential competitor out of business. One team that I was on developed Docker five years before Docker. There was a couple of ways in which we were even better than Docker. That management couldn’t figure out how to make money with the product, so that company failed, and the product was destroyed. It took three years after we ran out of money and went out of business before anybody else took the same idea and produced a business plan around it that was workable. (The same basic business plan I presented to my CEO three years prior, but my CEO didn’t understand it because he was new to the software industry, so, sigh). Then there was the company that produced a filesystem for Linux that had snapshots and resizable volumes as part of a high end NAS. They went out of business, and the current Linux BTRFS efforts over ten years after we did it first, *still* don’t match what we did in 2005. And so on and so forth. My current company recently sold some technology it bought from a dead predecessor to yet another company, but what that dead predecessor was doing in 2005 isn’t being done by anybody today and can’t be done by anybody today because everybody who understood that dead predecessor’s technology is retired or is owned by a competitor (owned in the sense of, that competitor already has an inferior product and doesn’t want to transition to a superior one because they can compete better by buying out potential rivals with superior products before said rivals become big enough to be a threat). And so forth.

    So it’s not just Communism that destroys its failures and suppresses successes that are inconvenient, capitalism does so too. So this isn’t a difference that can explain why economic output in the Soviet Union leveled off after 1975 but economic output in the US did not. I believe my previous hypothesis from three years ago — the problem of iffy feedback mechanisms combined with the transition from an industrial economy to a far more complex technological economy — still seems the most viable answer. Granted, correlation is not causation, but in the late 1970’s and especially in the early 1980’s the United States was increasingly transitioning to being a technological society, while the same largely did not happen to the Soviet economy, which became increasingly reliant upon imports for its technological artifacts due to its inability to transition its economy.

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