The Socialist System: The Political Economy of Communism (Clarendon Paperbacks)

## Abstract This book presents a comprehensive analysis of socialist economics. It addresses the reasons for the early successes of socialist systems, and the reasons for their gradual breakdown. There are twenty‐eight chapters, of which the first two (in Part One of the book) are introductory. The remaining chapters are arranged in two further parts. Part Two, (chapters 3–15), deals with classical socialism, defined as the political structure and economy that developed in the Soviet Union under Stalin and in China under Mao Zedong, and emerged in the smaller countries of Eastern Europe and in several Asian, African, and Latin American countries. Part Three, (chapters 16–24), deals with the processes of reform, such as the changes started in Hungary under Kádár in 1968 or in the Soviet Union under Gorbachev in 1985, which were designed to renew the socialist system. The final, political conclusion is that Stalinist classical socialism is repressive and inefficient, but nevertheless constitutes a coherent system which slackens and contradicts itself when it starts to reform; hence reform is doomed to fail. An appendix provides a bibliography on the post‐socialist transition. Contents List of Figures List of Tables Preface PART ONE: POINTS OF DEPARTURE 1. The Subject and Method 1.1 Specific Lines of Historical Development and General Features 1.2 Socialist Countries 1.3 Interpretation of the Term "Socialism" 1.4 Political Economy 1.5 Positive Analysis 1.6 Models 1.7 Evaluation 2. Antecedents and Prototypes of the System 2.1 Marx's Image of Socialism 2.2 System Prototypes 2.3 The System before the Socialist Revolution 2.4 The Revolutionary Transition toward the Classical System PART TWO: THE ANATOMY OF THE CLASSICAL SYSTEM 3. Power 3.1 The Party 3.2 The State 3.3 The Mass Organizations 3.4 Cohesive Forces 3.5 Internal Conflicts 3.6 Repression and the Totalitarian Nature of Power 4. Ideology 4.1 The Official Ideology 4.2 The Socialist System's Sense of Superiority 4.3 The Basic Promises 4.4 The Self-Legitimation and Paternalistic Nature of Power 4.5 Discipline, Willing Sacrifice, and Vigilance 4.6 Power and Ideology 5. Property 5.1 Explanation of the Concepts 5.2 Some Characteristic Property Forms before the Advent of the Socialist System 5.3 The State-Owned Firm 5.4 Other State Property Forms 5.5 The Cooperative 5.6 Private Property and Production Activity of a Private Nature 5.7 Capitalism, Socialism, and Property 6. Coordination Mechanisms 6.1 Main Types 6.2 Some Observations on the Main Types 6.3 Bureaucratic Coordination 6.4 Market Coordination 6.5 Self-Governing Coordination 6.6 Ethical Coordination 6.7 Family Coordination 6.8 Spontaneous and Artificial Changes 7. Planning and Direct Bureaucratic Control 7.1 The Precursors of Socialism on the Subject of Planning 7.2 Initial Approach: Elaboration of the Plan 7.3 Initial Approach: Plan Implementation and Management 7.4 The Motivation of Leaders in the Economic .Bureaucracy 7.5 Bargaining and Inner Conflict 7.6 Planning, Management, and Politics 7.7 The Problem of Information 8. Money and Price 8.1 Banking 8.2 The State Budget 8.3 Survey of Money Flows 8.4 Soft and Hard Budget Constraint 8.5 Income and Price Responsiveness 8.6 Administrative Producer Prices 8.7 Administrative Consumer Prices 8.8 Market Prices 8.9 Nonprice Signals 9. Investment and Growth 9.1 Expansion Drive and Investment Hunger 9.2 Central Allocation and Investment Tension 9.3 Investment and Consumption 9.4 Priorities 9.5 Extensive and Intensive Methods 9.6 Fluctuations in Growth; Cycles 9.7 Measurement of Aggregate Output 9.8 The System-Specific Growth Type: Forced Growth 9.9 Growth Performance 10. Employment and Wages 10.1 The Road to Full Employment 10.2 The Development of Chronic Labor Shortage 10.3 Direct Bureaucratic Control of Employment and Wages 10.4 Employer-Employee Relations in the Factory 10.5 Bureaucratic and Market Influences on Wages 11. Shortage and Inflation: The Phenomena 11.1 Shortage Phenomena and the Shortage Economy 11.2 The Process of Demand Adjustment 11.3 Horizontal and Vertical Shortage 11.4 Shortage and Surplus 11.5 Market Regimes: The Buyers' and the Sellers' Market 11.6 Normal Shortage and Normal Surplus 11.7 Open, Declared, and Hidden Inflation 12. Shortage and Inflation: The Causes 12.1 The Behavior of the Firm: Short-Term Decisions 12.2 The Behavior of the Firm: Long-Term Decisions 12.3 The Behavior of the Bureaucracy Managing Production 12.4 Relative Prices 12.5 Repressed Inflation in Interfirm Relations 12.6 Repressed Inflation in the Consumer Sphere 12.7 Excess Demand on the Macro Level 12.8 The Propensity to Inflation; the Relationship between Shortage and Inflation 12.9 The Self-Inducement and Reproduction of Shortage 12.10 The System-Specific Nature of the Causes 12.11 Economic Efficiency and Technical Progress 13. Consumption and Distribution 13.1 The Growth of Consumption 13.2 Other Factors in Material Welfare 13.3 Economic Security 13.4 First Approach: Distribution of Money Income 13.5 The Distribution of Material Welfare: Other Manifestations 13.6 The Explanation for the Distribution 13.7 Tendencies toward Equalization and Differentiation 14. External Economic Relations 14.1 The External Political Environment 14.2 The Institutional System of External Economic Relations 14.3 Capitalist Relations; Import Hunger, Export Aversion, and Propensity to Indebtedness 14.4 Socialist Relations: Tie-Ins, Export Preferences, and the Pursuit of a Zero Balance 14.5 An Attempt at Integration: The Council of Mutual Economic Assistance 15. The Coherence of the Classical System 15.1 The Main Line of Causality 15.2 The Affinity among Elements of the System 15.3 The Prototype and the National Variations 15.4 The Soviet Effect 15.5 Verification 15.6 The Viability of the Classical System PART THREE: SHIFTING FROM THE CLASSICAL SYSTEM 16. The Dynamics of the Changes 16.1 The Inducements for Change 16.2 The Depth and Radicalism of the Changes 16.3 Reform and Revolution 16.4 A Chronological Survey of Reforms and Revolutions 17. The "Perfection" of Control 17.1 General Description of the Tendency 17.2 Reorganizations on the Upper Level 17.3 Merger of Firms 17.4 The Development of Planning and Direct Control 17.5 Preview: The Organizational Structure under the Postsocialist System 18. Political Liberalization 18.1 The Monopoly of Power 18.2 The Easing of Repression 18.3 The Constant and Variable Elements in the Official Ideology 18.4 The Seeds of Pluralism 18.5 Opening toward the Capitalist World 18.6 Change in the Scale of Publicity and Candor 18.7 The Limits to Political Reform 18.8 Preview: The Political Structure of the Postsocialist System 19. The Rise of the Private Sector 19.1 The Inducements behind the Development of the Private Sector 19.2 A Survey of the Private Sector 19.3 The Private Sector and the Official Ideology 19.4 The Affinity of Private Ownership and Market Coordination 19.5 The Private Sector and the Bureaucracy 19.6 The Economic Role of the Family 19.7 Preview; The Private Sector under the Postsocialist System 20. Self-Management 20.1 Self-Management as an Intellectual and Political Trend 20.2 Political Relations 20.3 Economic Effects 20.4 Relations between Manager and Workers 20.5 Ethical Coordination 20.6 Preview: Self-Management under the Postsocialist System 21. Market Socialism 21.1 Ideological Antecedents 21.2 Generalization from the Historical Applications 21.3 Classification of Alternative Strategies for Deregulation 21.4 The Firm's Vertical Dependence 21.5 The Softness and Hardness of the Budget Constraint, and the Firm's Responsivenes to Prices 21.6 The Affinity between Public Ownership and Bureaucratic Coordination 21.7 Horizontal Relations of Firms in Public Ownership 21.8 Proportions of the Two Kinds of Dependence 21.9 The Relation between Publicly Owned Firms and the Private Sector 21.10 Interaction between the Mechanisms: Assessment of the Changes 21.11 Preview: The State Sector under the Postsocialist System 22. Price Reforms 22.1 Determination of Product Prices 22.2 Determination of the Prices of Production Factors 22.3 The Principles and Practice of State Price Determination and Fiscal Redistribution 22.4 The Scope and Limits of Price Reforms 22.5 Preview: Prices under the Postsocialist System 23. Macro Tensions 23.1 Employment and Wages 23.2 Growth and Investment 23.3 The State Budget and Fiscal Policy 23.4 The Credit System and Monetary Policy 23.5 Shortage and Inflation: Internal Economic Relations 23.6 Foreign Trade and Foreign Debt 23.7 Shortage, Inflation, and Indebtedness 23.8 The Standard of Living 23.9 Preview: Macro Tensions in the Postsocialist System 24. Concluding Remarks 24.1 The Depth and Radicalism of the Changes, and the Main Line of Causality 24.2 The Incoherence of the Tendencies to Reform 24.3 Reforms and Public Sentiment 24.4 Preview: The Socialist System's Legacy and Postsocialism References Appendix: Bibliography on Postsocialist Transition Author Index A B C D E F G H I J K L M N O P Q R S T U V W X Y Z Subject Index A B C D E F G H I K L M N O P Q R S T U V W This book provides a comprehensive account of the structure, conduct, and performance of the centrally planned economies of Eastern Europe, the USSR, Communist China and the Marxist LDCs, looking at 26 nations in all. The author focuses on reform, perhaps the most important issue facing countries such as the USSR, Poland, Hungary, and China. Bureaucracy, soft budget constraints, markets, and the nature of the socialist state are the central issues that arise in the course of reforming a socialist economy. The first half of the book deals with'classical socialism'and provides a theoretical summary of the main features of a now closed period of history. The second half deals with the processes of reform and concludes that the reform of classical socialist systems is doomed to failure as they are unable to renew themselves internally. This book provides a comprehensive account of the structure, conduct, and performance of the centrally planned economies of Eastern Europe, the USSR, Communist China and the Marxist LDCs, looking at 26 nations in all. The author focuses on reform, perhaps the most important issue facing countries such as the USSR, Poland, Hungary, and China. Bureaucracy, soft budget constraints, markets, and the nature of the socialist state are the central issues that arise in the course of reforming a socialist economy. The first half of the book deals with 'classical socialism' and provides a theoretical summ