When a small band of Bolsheviks overthrew the first post-Czarist government and established their Communist regime in October 1917, most Western commentators predicted that the new order would not long survive. Fifty years later, the Communist world has grown spectacularly in territory, population, science and technology, education, industrial plant, and military strength. To be sure, Russia was industrializing at a respectable rate in pre-revolutionary days (although the Soviets now try to make it appear otherwise), but it was not a first-rate power early in the twentieth century and the Russo-Japanese War suggested that it was a colossus on mudbrick feet. Today, Russia still ranks far behind the United States in many or most fields. But its progress has become a challenge to the United States and what it stands for. Soviet actions or likely counter actions are now a prime consideration in many of our major policy decisions. China, which was controlled by a few companies of Western soldiers a few decades ago is now, eighteen years after the Communist takeover, the dominant force on much of the Asian continent. What enabled the Communist countries to rise to their new power was rapid growth in economic strength. It is ironic, in retrospect, that industrial and general economic expansion is a goal for which Western observers had given Communist regimes the least chance for success. Steeped in classical economics, they regarded the superior capacity of. the capitalist free market system to produce national wealth to be self-evident. An economy run according to Communist principles, they thought, could not possibly equal the growth record of an_ enterprise economy. They appeared to be proven right when, within a few years of the revolution, the Russian economy seemed about to collapse. City residents were starving, famine stalked the countryside and a major catastrophe appeared imminent. Only massive food shipments from the West saved millions of Russian people—and the Bolshevik regime. Its leaders even found it necessary to abandon some of the precepts of the Communist economic and _= social structure which they had so loudly proclaimed. The government decreed a “New Economic Policy” (NEP) which reintroduced various forms of private enterprise and offered concessions and franchises to Western capitalists willing to construct industrial plants on Russian soil and staff them with their own technicians. That seemed to prove to the satisfaction of many Western observers that a Communist economic system could not work, and that the Soviet political leaders were now ready to forsake Marxian dogma and gradually adjust to a system closer to a free economy.
There being more joy in Heaven over one repentant sinner than over 99 just men, Western capitalists were jubilant. Hundreds of German, British, French and American industrialists and financiers applied for permission to invest their money and technical know-how in the Soviet economy. Within a few years they accomplished what the Soviets had been unable to achieve on their own: to lift production back to a level approximating that of 1913 (though still below the level at the time of the revolution). At that point, when huge Western aid had provided the prototype plants which could be copied, the initial capital and the technical know-how, the Soviet government let foreign concessions and franchises lapse, repealed NEP and established, in 1928, a highly centralized, strictly state-owned and state-run economic system: the first Five-Year Plan, which was followed by a succession of similar plans which have governed the Russian economy for almost forty years. At the start of the first Five-Year Plan in 1928, Russia’s Gross National Product (GNP) was about one-fifth that of the United States. By the early 1950s it had risen to one-third, and in recent years has been running close to one-half. (By Soviet reckoning it stands at 63 per cent.) The Soviet Union achieved a much faster rate of economic growth than the United States despite the major disaster that meanwhile struck it: World War II, which destroyed a large share of its industrial plant, residential areas and transportation, and killed millions of its most productive workers. Soviet economists and_ political leaders cite the record of the past forty years, of the relative rates of growth, as tangible proof that socialist methods of “production for use” are more effective in propelling an economy rapidly upward than the unplanned capitalist system which depends on private investment and serves the individual profits of a tiny group of exploiters. The Russian claim to the superior efficiency of their ways helps not only to assure the loyalty and cooperation of their own citizens, but also aims to persuade the people of other countries, particularly of the new and “uncommitted” nations, that they can realize their dreams faster and with greater certainty by following the Soviet rather than the American pattern. But the results of Soviet-style central planning and government direction in most of the new and some of older nations since World War II have been less than impressive. A nation’s rate of economic growth seems to be positively related to the degree to which it pursues its aims through a market economy rather than a command economy. Such free enterprise countries as Japan, Malaya, Thailand and Taiwan are prospering while lands under four-year or five-year (or eight-year) plans under tight government control, e.g., Indonesia, India, Burma and Ghana, have not only fallen short of their ambitious goals but are increasingly troubled by scarcity, poverty and inflation. This is of course no proof that the success of some countries is causally related to their reliance on free enterprise and the failure of others to government domination and economic affairs. Other, less apparent, factors may be at the root of the divergent trends. But it does suggest the possibility that government multi-year planning of a command economy may not be an unfailing, or even an effective, means of lifting a backward economy rapidly to higher levels. It leaves us to _ speculate whether the free enterprise principle which characterized the industrial revolution in the major western countries may not still be sound public policy in the latter part of the twentieth century. But if these conclusions are correct, how can we explain the undeniable success of the Soviet Union, which has for forty years had the most tightly planned and centrally controlled economy in history? It is a painful fact that GNP grew twice as fast in the Soviet Union as in the United States during the 1950s and that only in the past few years have the two countries shown more nearly comparable growth rates. Western economists who have studied the rapid growth of the USSR’s economy tend to attribute it largely to one aspect of official policy: greater emphasis on capital formation. The Soviets invest in industrial plant and other productive facilities a larger share of their national product than the United States. Through most of the period from 1928 on—and especially through the Seven-Year Plan of 1959-65—they steadily increased the percentage of GNP allotted to investment while reducing the percentage (though not the amount) allocated to consumer goods. This explains why the quality of most consumer goods is below Western and particularly American standards, selections are _ limited, searcities are frequent and the Russian people are, on the average, more poorly clothed, housed and fed than Americans. This is not necessarily a sign of weakness, as tourists frequently assume, but the result of a deliberate policy to build up the country’s productive capacity before -allowing consumers to enjoy more lavish standards. Economists have long known that capital formation is the most effective way to increase productivity and expand a country’s economy. Whether this is accomplished by independent voluntary action of individuals in a capitalist system or by government fiat in a socialist system is irrelevant for the growth impetus. Thus one reason for the differential growth rates over the past forty years probably is the simple fact that Soviet policy has consistently strengthened productive industrial investment. Tax and welfare policies in the United States and in some other Western countries, meanwhile, have aimed to promote greater consumer spending and the expansion of public services in the expectation that enlarged spending by government and consumers would eventually cause investment to grow. While increasing stress on investment rather than consumption may well explain much of the rapid growth in the Soviet Union, it does not explain all of it. Economic history has given us countless examples of investments that did not bear fruit because another element, equally essential to economic growth, was lacking: a force of competent workers and managers who labor with dedication and enthusiasm. Most Western economists believe that the rewards and punishments of a free market to entrepreneurs and workers are the carrot and the stick that cause people to do their best—that they accomplish the national good while the people are striving for their own betterment. Soviet economists hold that most of capitalism’s rewards are monopolized by a tiny group of exploiters who leave only crumbs to the workers, and that this explains the workers’ lack of enthusiasm and weak efforts. It is Communist dogma that laborers in the socialist society know that they work for themselves and for their co-workers rather than for capitalist profits, and that they therefore toil harder. Undoubtedly there are some dedicated individuals in the Soviet Union, but the proposition that a hundred million workers perpetually exert themselves to the limit for ideological reasons without material incentives is hardly persuasive. Many Americans believe that Russian workers are forced to work hard by punitive methods and under steady threats. This is not borne out by the facts of life, or labor law and labor practice in the Soviet Union of the 1960s. Moreover, disciplinary methods and force have distinct limitations: slaves have never been efficient workers. Also, a management and professional class and its inventiveness and dedication cannot be commandeered, at least not very effectively or for very long. Why then do Soviet managers and workers labor as hard as they evidently do? What can be their motivation in a Communist, “classless,” society which Americans .tend to visualize as an egalitarian society? Will many strain their efforts and imagination and take chances on risky innovations under a government that applies the Marxist motto: “From each according to his capacity, to each according to his need’? Under the sponsorship of the Hoover Institution I spent several months in the Soviet Union and some of its neighboring countries, largely interviewing people in all walks of life—in universities, offices, factories.
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