Re: Incentives in the USSR

[Ken Hanly <khanly@xxxxxxxxxxxxxxx>]

I like Zoschenko's short story about planning. The plan targets
for electric bulbs was set in total watts. Near the end of the
month only 200 to 500 watt bulbs were available. To meet the
quota only higher wattage bulbs were made. This caused all sorts
of problems in the collective apartment. For one thing the bright
bulbs showed up all the cracks and dirt in the building. For
another the resident student insisted on burning his 200 watt
bulb far into the night sending up the collective power bill etc.
Everyone began to argue about these things disturbing natural
socialist harmony.
Added to this the higher wattage bulbs were higher priced as well
as inefficient.
   Cheers, Ken Hanly

Louis Proyect wrote:
>
> As I mentioned a while back, there was a complete absence of planning in
> the USSR during the time that Mises and Hayek were busy writing their
> critiques of socialist planning. In general these sorts of critics deal
> with socialism at such a high level of abstraction that it makes an
> intelligent discussion almost impossible. It makes no sense to discuss the
> "calculation problem" while ignoring the fact that statisticians, engineers
> and economists were being shot, tortured, and jailed. Of course there are
> going to be bureaucratic inefficiencies when major decisions were being
> made on the basis of whether they conformed to Stalin's mood when he woke
> up on a given morning.
>
> Since that post, I have done a little bit more reading that adds some new
> information. For my money, Ernest Mandel is the greatest Marxist economist
> of the 20th century. While most of his work deals with capitalist economy,
> he was also quite sharp when it comes to socialist economies. In the
> chapter on "The Soviet Economy" in "Marxist Economic Theory", he points out
> that starting in 1935 measures were introduced in the Soviet Union to
> counteract tendencies toward irresponsibility by individual bureaucrats.
> These measures complied with one aspect of market socialist theory--they
> stressed the principle of the 'individual profitability of enterprises'
> (khozaschet).
>
> Ironically such incentives often undermined the overall goals of the Soviet
> economy, as bureaucrats produced some goods rather than others, solely on
> the basis of whether they met the 'bottom line'. On October 5th, 1954
> Pravda reported that numerous textile and footwear factories were refusing
> to make children's clothers because this line was not 'profitable'.
>
> Urged by the state to continually reduce the cost of their products, plant
> managers fulfilled their goals by reducing the quality of the products. A
> kind of cockeyed 'supply and demand' mechanism operated as well. In order
> to make sure that they met their incentive-based quotas, they also
> stockpiled raw materials in excess of what the plan dictated. They wanted
> to make absolutely sure that they received their bonus.
>
> Needless to say, all of this was a work-around for a deeply rooted problem
> in Soviet society, which was the bureaucratic differentiation between those
> in power and those being ruled. A more fluid political environment like
> Cuba's would have gone a long way toward resolving these difficulties, but
> they would have also risked opening up the system to abolition of the
> bureaucratic caste.
>
> Louis Proyect
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