Article 1
July 30, 1987




How capitalist press presents the reforms. Market mechanisms vs. state intervention and planned economies. A "free market" in Africa? Pinochet's denationalizations. Bourgeois state intervention in France and Britain. Reagan and Continental Illinois. Centralized planning in the U.S. What makes socialist planning different. Soviet reforms and public ownership. The monopoly of foreign trade.

The projected Soviet economic reforms have aroused worldwide interest and been the subject of discussion in the working-class and progressive movement for a considerable period. Nothing would serve the workers in the U.S. better than to have a clear understanding of what they are and what the Soviet government hopes to do with them. The crucial question they raise is will this radical restructuring follow the pattern of China, or perhaps of Hungary and Yugoslavia? Is it an expedient, a temporary retreat into the use of bourgeois economic policies and market mechanisms in order to take two steps forward? Is it an attempt at a temporary revival of the New Economic Policy so as to be able to intensify the building of socialism? Those are some of the crucial issues which are generating so much interest in the working-class movement.

Of course, modernizing the USSR's plant and equipment, putting it on a higher scientific and technological basis, renovating old plants, discarding some, erecting others, with the use of the most modern, up-to-date high-tech equipment--none of this could scarcely be objectionable from a socialist point of view. The real issue is the social effects of the restructuring process. Certainly, no one in our movement hopes it will have any of the effects of the capitalist restructuring process, which is causing so much havoc in the capitalist world, most conspicuously in the U.S. In later articles we hope to make an independent analysis of these problems.

It is, however, quite impossible to proceed in the U.S. to an independent examination of the reforms without first taking into account how they are presented to the public by the capitalist press. Take, for instance, an article that appeared in the Business section of the July 19, 1987, issue of the New York Times. It encompasses close to three pages and presents the Soviet reforms in the light of what it calls a "global march to the free market economy."

As the world economy becomes more competitive, capitalist and communist countries alike are turning to Adam Smith. . . . It seems that no matter where you look, governments have been turning to market mechanisms . . . to pep up their economies. . . . Economists say there is unusual agreement among capitalist and communist countries about the importance of giving full rein to the market. . . .

Capitalist and communist countries alike have been looking for ways to reinvigorate their economies and to avoid the kind of painful stagnation that marked much of the 1970s. They are straining as well to increase efficiency in reaction to greater worldwide competitive pressures and they are also recognizing that central planning does not work as well once countries have achieved a basic level of industrial development. . . .

In the view of many economists, market-oriented moves like these could slow the growth of the developmental gap between the communist world and the industrialized West and perhaps even close the gap a bit.

Citing U.S. economist Robert Heilbroner as an authority, the Times reiterates what has been said for many decades about the socialist countries:

Complex industrial societies can't be run by central planners.

Economists cite other reasons for the push to market mechanisms. State planning often worked well in the early stages of developing industry or rebuilding from war, but now economies and technologies have grown so complex that central planners just cannot master them. When a country is underdeveloped or decimated by war, for example, it is not hard for central planners to conclude that steel mills are needed and to determine which technology is best, but when that country wants to make computers, say, decision making becomes more complicated. Myriad manufacturing processes are involved and technologies and market conditions change rapidly. Central planners may not be up to the task of managing such projects.

The capitalist market is going great guns, according to this article, in Austria, Britain, China, France, Hungary, Japan, the Soviet Union, the U.S., Vietnam and a great part of the Third World. They say it is all part and parcel of a worldwide trend in which a reinvigorated capitalist market is proving itself to be far superior not only to planning in the socialist countries but to all kinds of state intervention in the capitalist countries. The tendency to give free and unbridled rein to the capitalist market, so it seems from this article and many, many others in the capitalist press, is having a rebirth and is vanquishing any and all tendencies toward state intervention, regulation of industry and above all nationalization or centralization by the state.

This is how the ruling class propagandizes when it discusses the Soviet reforms. This article in particular puts under one umbrella: a) the economies of the USSR and other socialist countries, b) the nationalizations in France, Britain and other imperialist countries (including some in the U.S., of course, that go by the name of regulation), and c) the limited nationalizations in some of the oppressed countries of the world which until recently were either colonies of imperialism or had barely arrived at independence but have tried with the limited resources available to them to chart out an independent economic course. It's an attempt by the bourgeois press to obscure the vast differences that separate them, to put them all under one canopy and hide the inner springs of their growth. This does violence to the dynamics of economic development and tries to erase the class contradictions which divide the capitalist world from the socialist countries.

Take the case of some of the oppressed countries of Africa, where there have been varying degrees of nationalizing and centralizing the economy. Revolutionary Angola and Mozambique, as well as countries like Ghana, Zambia and Tanzania, are all said to be going back in one form or another to embrace elements of the free enterprise system and to be stretching out their hands to the capitalist market. What truth is there in any of this?

First of all, it is necessary to understand that the ravages of the 1981-82 capitalist crisis have not ended for the underdeveloped countries, particularly those most dependent on the sale of raw materials. Furthermore, it was the havoc created by the world capitalist market that made it necessary for these governments to take over the development of many industries in the first place. But they could not thereby free themselves from the market, which brought on devastating results in the production and sale of raw materials, especially in monocultural countries (those reduced under imperialist rule to producing one or two commodities).

What is the truth about Angola and Mozambique, for instance? Are they permitted to have free choice in relation to the capitalist market? Are the anarchic, automatic processes of the capitalist market the principal factor determining their decisions? Or are they left little choice by the merciless, ruthless, piratical military pressures of Washington and Pretoria, which are trying to undermine if not destroy their economic, political and military structure? How easily the propagandists for the capitalist free market overlook this! The fact that such countries may have to resort to maintaining elements of the capitalist market is more a reflection of the cruel military pressure of imperialism as a political system than the virtues of the capitalist market.

The bourgeois thesis that there is a worldwide stampede toward free market economies does the greatest violence to the truth when dealing with the oppressed countries. For instance, an article in the New York Times of July 20, 1987, gives a glowing report of how Chile has developed a new stockholders' culture and how the abandonment of nationalization is doing wonders for this most brutal of fascist dictatorships.

As is well known, the Popular Unity government of Salvador Allende, in an effort to overthrow the yoke of U.S. imperialism, took over many of the imperialist enterprises in Chile, including some of the holdings of ITT. These nationalizations, which were very cautiously approached by the Allende government precisely because it feared reprisals from the U.S., constituted an economic cornerstone to begin an independent development free of the U.S. monopolies. They were not expropriations, but nationalizations with compensation. The violent counter-revolutionary takeover by the Pinochet regime in 1973 signaled the end of these nationalizations. However, they weren't able to do it all in one swoop but had to make it a gradual process, in the meantime utilizing the income from these nationalized enterprises to prop up the fascist regime.

While it is now plain that the days of the Pinochet dictatorship are numbered, they have begun to sell off and by various means and methods divest the government of the industries nationalized during the Allende period. Denationalization is proceeding rapidly in steel and iron ore, electricity generation, telephone service, coal, sugar, medicine and chemicals, airlines and nitrate deposits. In iron ore and electricity distribution, 100 percent of the state enterprises have already been sold. Does this show the magic of the capitalist market, as Reagan would phrase it? Is it an example of the superiority of capitalist free enterprise over centralized planning? What sophistry! What this illustrates is the lengths to which imperialism will go in pursuit of profit. It is not the free market but the iron heel of a U.S.-sponsored dictatorship which has prevailed in Chile and which has frustrated the Chilean people's attempt to retake the vast wealth stolen from them by the imperialist exploiters.

However, it will be said that matters are different when it comes to the rejection of the planning principle and nationalizations in Britain, France and Spain. The example of these countries is cited again and again. What the bourgeois economists call socialist planning in these countries has been rejected as either unworkable or uneconomic. This is said to be merely a variation of what is happening in the Soviet Union. Here again, the bourgeois economists lump together the socialist planned economy in the USSR with nationalizations in capitalist countries. But the expropriations without compensation carried out after socialist revolutions are very different from bourgeois nationalizations. What kind of nationalizations were carried out in France, for instance, under the Mitterrand regime?

Nowhere in the West European arena were there expropriations--that is, the takeover of private property by the state without compensation. All the former owners of nationalized enterprises received compensation, without exception. The element of compensation reveals that these nationalizations were for the most part a capitalist technique aimed at reviving a sagging industry; in some circumstances the government acted under the pressure of the masses, who hoped to get limited gains as a result of dealing with a central government rather than with individual capitalist entrepreneurs. For brief periods in Western Europe, the working-class movement was strong enough to exercise considerable control over the industries, but not ownership. The nationalizations carried out after the election of the Socialist Party government of Mitterrand were actually the third wave of takeovers in France. The first wave of nationalizations with compensation took place back in 1936 during the Popular Front. A second wave occurred shortly after the Second World War. In all three cases, the industries were taken over in times of economic crisis and were returned from the custody of the capitalist government to individual owners as soon as possible.

In Britain as well as in France, nationalizations after World War II helped to prop up the capitalist government and enable the ruling class to get out of its economic crisis. When an enterprise was taken over by the government, the compensated owners took that money and invested it in other, more thriving enterprises. In that way capitalist expansion and accumulation continued. This has been a practice for as long as capitalism has been in existence. For instance, the 1981 French law on nationalizations clearly states in Article 17: "Property being an inviolable and sacred right, no one may be deprived thereof except where a public necessity, lawfully established, clearly requires it and on condition of just and prior indemnity." It's the condition of "just and prior indemnity" which differentiates nationalizations from expropriations, such as have occurred in the socialist countries.

Nationalization has also been practiced for many years in the U.S. For example, the government has taken over bankrupt railroads, rationalized and modernized them, and then sold them off. One of the biggest projects of the capitalist government in the early 1950s was to develop atomic energy and then turn it over to private interests. Most of the nuclear plants are now privately owned, but all are the product of capitalist state intervention. This is a common capitalist practice and the fact that a once-nationalized industry is returned to private ownership has little to do with proving the superiority of the capitalist market over socialist planning, since true socialist planning never existed in the first place.

It is also false to say that the capitalist economy is going into a prolonged phase of so-called deregulation, that is, complete divestment by the government of its state enterprises. Right in the midst of the Reaganite propaganda about the free market and the phony slogan about "getting the government off the backs of the people," it intervened to prevent the collapse of the Continental Illinois Bank, the seventh largest in the country. The capitalist government didn't just sit on its hands and let this giant banking conglomerate fail. The Federal Reserve Board, together with the comptroller of the currency and other high government officials, decided to bail the bank out and take it over. This is but a repeat of what happened with the Franklin National Bank in the 1970s.1

This was a giant step of statism, of government intervention, of the government controlling what was supposed to be private, entrepreneurial banking. Earlier, it bailed out both Lockheed, at the time the second largest military manufacturer in the country, and the Chrysler Corporation.

The clearest example of the relationship between capitalist government control and so-called private enterprise is the airline industry. Its fares and operations had been regulated by the government in order to develop the aviation industry in general and to establish U.S. airline supremacy on a world scale. The Carter administration started the so-called deregulation of the airlines in 1978, which Reagan then used to open up one of the biggest union-busting drives ever. This was supposed to be for the benefit of the consumers, who allegedly would reap lower fares out of it. Everyone in the business, however, understood that the lower fares were merely a temporary expedient and that the proliferation of small airlines was merely another way for the aircraft corporations to increase their sales of planes. They knew the so-called long-term competition in the airlines would come to an end in another wave of capitalist monopoly--as it has, with a vengeance. Thus the Wall Street Journal of July 20, 1987, carried a front-page story entitled "Growing Giants" which tells us that an "unexpected result of airline decontrol is the return to monopolies." The big carriers are once again "dominating the nation's hub airports" and "higher fares and less service" are on the rise.

The bourgeois press continually contrasts centralized planning to the free market, as though this were the only test of the two opposing economic and social systems. On examination, however, this turns out to be 99 percent fraud and 1 percent confusion.

Is there centralized planning in the U.S.? Of course there is. Take, for instance, the military establishment in war as well as in peace. It is centrally planned by the capitalist government; all the production facilities, all the industrial plant and apparatus of the military-industrial complex, have to conform to the national plan. At the present time, the Pentagon has about 36,000 primary contractors and two or three times as many subcontractors. Aside from the fact that the Pentagon is a major customer of manufacturing in the high-technology industries, there is planning on a variety of scales. The U.S. space program as well as the earlier atomic energy program have all been centrally planned. There is of course also a constant, unending process where the military contractors rip off the government, but this has little to do with the issue.

Each and every industrial unit has to plan to some extent, even if only because of seasonal considerations, as in agriculture and other industries. Planning also exists on a municipal, city, county, state and federal basis by the various governments. Roads and bridges have to be built and maintained, for example. Attempts are being made to set the stage for a Superconducting Super Collider which could cost billions of dollars and take many years to develop. Constant planning by the government exists on a more or less centralized basis, depending on circumstances and the degree of industrial and technological development. The money supply of the U.S. and its foreign exchange relations are all centrally planned. While the U.S. cannot plan in the same way as the Soviet Union, nevertheless there is some central control. The Federal Reserve Board with its 12 regional banks tries to fine-tune the economy by central planning.

Many more examples could be given. In fact, all economic life would cease if planning stopped in the U.S. And most of it is connected to the capitalist government. This type of planning by the capitalist government, however, is an integral part of the anarchy and chaos of capitalist production.

What's the fundamental difference between this centralized planning and what exists in the Soviet Union or any really socialist country? It's that socialist planning is based on the public ownership of the means of production after the expropriation of the bourgeoisie by the working class. The means of production, that is, the basic industries, are in the hands of a government that previously overthrew the ruling class. But in the U.S. the means of production are solidly in the hands of the bourgeoisie, which owns them as a private preserve, even though some sectors are subject to government regulation now and then. The private ownership of the productive forces means that there is in existence a capitalist ruling class, the driving force of which is super profits extracted from the backs of the working class and the oppressed people.

At this stage, the discussions in the Soviet Union about economic reform are not about abandoning overall socialist planning or the state ownership of the means of production. The issue now is whether all the planning, some of it down to minute details, should be done by the central government or whether authority should be delegated among the regions and also whether the heads of industrial units and managers should be given more authority in the planning and execution of their tasks.

If we understand it properly from this perspective, such radical reforms have nothing in common with what the bourgeoisie is boasting about. If production and distribution are to be carried out in accordance with a plan to increase production, to ease distribution problems, to increase consumer goods, if it is all done from the viewpoint of socialist planning in general, then there is nothing in it that the capitalist class can look forward to with optimism.

Also, in relation to what are called capitalist market relations, it should be remembered that, except for the period right after the Russian Revolution called War Communism in Soviet literature, there has always been a degree of so-called free market or commodity production in the USSR. (We deal with this in a later article.) It has never been fully abolished and to some extent it has been helpful. But this is not to be confused with the orientation of a full-scale capitalist market where everything is produced, sold and distributed with regard to its sale or purchase on an individual basis.

The projected reforms have to be analyzed in detail upon the presentation of more data and experience in order to see whether they will accomplish the aims outlined in Gorbachev's political report on behalf of the Central Committee to the 27th Party Congress (February 1986). Certain aspects of the reforms have special attraction for the West. For instance, in late September of 1986 the Ministry of Foreign Trade authorized about 20 individual and 70 industrial enterprises to negotiate their own export and import arrangements directly with foreign buyers and sellers as of January 1987.2 Some bourgeois analysts hope that such a reform will have far-reaching significance from the viewpoint of breaking down the monopoly of foreign trade that is one of the pillars of a socialist government such as the USSR.3

This reform went into effect in January. Since then, there hasn't been much in the English-language press except for an article in the Wall Street Journal of July 17, 1987, which takes a dim view of it, notwithstanding their eagerness for the opening up of a lucrative market to the West. The attitude of the imperialists on trade with the USSR has never been the same as toward the capitalist countries, even the less developed ones. Indeed, ever since the Soviet Union was born, it has faced a virtual blockade of trade, economically if not militarily. Rather than looking on the USSR as a lucrative market, the capitalist governments for the most part have feared that trade with the USSR would strengthen socialism rather than weaken it.

It helps to remember that the Western imperialists maintain what is called the Coordinating Committee on Export Controls (the Paris Committee or COCOM), a 16-nation coordinating committee of NATO which aims to control what they call sensitive exports to the socialist countries. In fact, on July 16, 1987, they ended a two-day session aimed at developing tighter control over exports to the Soviet Union and other socialist countries which they regard as having military use. However, the real purpose of this coordinating committee, which is under the tutelage of the U.S. and in particular the Pentagon, has been not only to ban exports with military use but to limit all trade with the USSR as a means of continuing economic warfare.

Thus a move by the USSR which could be regarded as a breach of the centralized monopoly of trade may not turn out to be what the bourgeois economists think at all, but merely a means for enhancing trade with the rest of the world. It may now be possible, unlike the days when the monopoly of foreign trade was first discussed, to do this without impairing the integrity of the socialist planning principle. The amount of experience, the necessary know-how in dealing with foreign trade is a lot different today than it was in the 1920s, when the Soviet industrial base was very narrow and little of its industry was capable of competing with the capitalist countries, making it possible for them to inundate the Soviet Union with cheap products. The imperialists do this now in the oppressed countries, where they also create offshore industrial facilities to exploit labor and cheap raw materials and export the products elsewhere in order to garner super profits.

It is necessary to continue the discussion on the reforms in the USSR, but we must first dissolve the lies of the capitalist media. Their aim is not to strengthen socialism, but to bring back capitalism.


1. In August 1989, Congress and the Bush administration committed over $160 billion to a bailout of the savings and loan banks, and the final bill is expected to far exceed this amount.

2. New York Times, September 25, 1986.

3. Marshall I. Goldman, Gorbachev's Challenge (New York: W.W. Norton & Co., 1987), p. 84.

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