Roads to Socialism

by James West*

The qualities of resiliency and revolutionary patience are integral to communism and Communists. Recovery from setbacks and defeats, overcoming difficulties and obstacles and rising up stronger than ever are characteristic communist features. This is seen in the process underway in the world today, including in the Communist Party, USA.

It is to be seen in Russia and other Eastern European countries. It is clearly evident in the unique roads to building socialism opened up in Vietnam, China, Korea and Cuba.

It is in the course of coping with and solving urgent needs and concerns of the masses that viable ways to travel the roads to socialism are being worked out. In the process, the theory of Marxism-Leninism is further developed and refined.

The draft Political Report to the upcoming 8^th Congress of the Communist Party of Vietnam, places key questions this way:

Vietnam is moving into a new period – that of pressing ahead with the industrialization and modernization of the country. The path to socialism in Vietnam has been ever more clearly defined.

To persist firmly in the goals of national independence and socialism throughout the process of renewal. To handle correctly the relationship between renewal of the political system and economic renewal, and to closely combine economic renewal and political renewal from the start. Economic renewal and the building of a multi-sector commodity economy operating along the market mechanism must be accompanied by the strengthening of the role of state management along the socialist line. Economic growth must go hand in hand with social progress and equity, the preservation and promotion of the national cultural identity and the protection of the environment and the ecological system.

To broaden the all-people great unity and promote the aggregate strength of the entire nation. To constantly expand international cooperation, to win the sympathy, support and assistance of the world people, and combine the strength of the nation with that of the time. To firmly maintain the leading role of the Party and to consider Party building a key task.” (Our emphasis, JW)

The People’s Republic of China has taken the road of intensive, all-round development through establishing what it calls a “socialist market economy,” based on a multi-sector economic policy. It is widely recognized that it has achieved one of the highest growth rates in the world.

Taking advantage of investment offers from a number of capitalist countries, Cuba has begun to move in a comparable direction because of the severe economic blockade by U.S. imperialism.

The Communist Party of the Russian Federation, faced with the devastation and growing poverty that capitalist inroads have made, has declared its readiness to use a mixed economy of private and state owned enterprises to pull Russia out of the “free market” morass.

The Democratic People’s Republic of Korea (DPRK) recently concluded an agreement for a joint venture on its territory with a major South Korean industry and is reported to be considering others.

Do these developments mean that Communists are departing from the principles of scientific socialism? That is what critics and enemies from the phony left, and even some on the extreme right, repeatedly charge.

These malicious attacks have their origin in distortions, misrepresentations and outright lies about socialism, fermenting in the minds of bourgeois pundits.

Socialism and Communism

High on the list of distortions is the confusion sown about the relationship between socialism and communism, a deliberate failure to distinguish between the two stages of one revolutionary process.

Communism is a classless society, one in which antagonistic or incompatible classes no longer exist. Socialism is a society which prepares all the conditions for the emergence of the classless, communist, society. In other words, socialism is a period of transition from capitalism to communism.

It is, in fact, impossible to step directly into communism from capitalism as though in a play when the curtain comes down on act one and, presto, rise! on act two.

To be sure, the capitalist media persistently uses the term “communist countries,” promoting the confusion, eagerly gobbled up by the simple-minded propagandists of both the right and the phony left. No country in the world has reached the plateau of communism.

To confuse socialism with communism serves to obscure the historic significance and special importance and necessity, as well as the inevitability, of socialism. It is a stage of human development without which it is impossible to arrive at the crowning achievement of humankind, communism.

The mission of a socialist society is the most important ever faced by any preceding society. It must consciously and systematically clear the road of all obstacles blocking the advance to communism and plant the seeds of the future communist society.

It must work to remove all sources of exploitation of human by human, oppression of nation by nation, race by race, and of gender, age and national origin discrimination.

It must uncover, destroy and replace the contaminated soil in which war, racism, narrow nationalism, crime, corruption and illiteracy thrive.

It must inculcate such humane qualities as cooperation, concern for the common good and health of all, of humanity as the guardian of the ecological system and nature’s bounty.

And, it must do all this while taking immediate measures to house the homeless, provide jobs for the jobless, food for the hungry and meet other urgent needs which cannot wait until communism. At the same time, it must take all measures essential to defend the new socialist system from the capitalist class and its agents who will do whatever they can to regain power.

As life has shown, the class struggle goes or under socialism with the defining difference that it takes place with the formerly-exploited classes – the workers and farmers – as well as the oppressed minorities, in power, in control of the government.

It should be apparent that none of the Herculean tasks facing socialism can be accomplished at one fell swoop anywhere, let alone evenly, at one time by all countries. In other words, it takes place unevenly on a world scale.

In some countries, as in Socialist China, poverty still remains a problem to this day, although a diminishing one as the government successfully struggles to make appreciable headway from year to year. In other countries, such as the U.S.A., socialism would take much less time to eliminate poverty and all its attendant ills due to our more advanced and widely developed productive capacities.

One must take into account the world context in which the socialist countries contend with the immense tasks before them. Imperialism, like a tiger on the prowl, keeps a sharp eye out for any and every opportunity to turn them away from socialism, into prey for voracious capitalism. Armed with the world’s largest arsenals of mass destruction weapons and armed forces stationed worldwide, U.S. imperialism uses intimidating powers to exploit openings for trade and investment in order to push and shove socialist countries onto the capitalist road.

It takes courage, deep understanding of the Marxist-Leninist laws of social development, boundless faith and reliance in the people and a strong, mass-based Communist Party to steer a course that advances socialism towards that communist goal. It is a road of struggle, of class struggle under new and different conditions. And it is not an easy road.

The socialist countries today need the understanding, the help and supportive solidarity of Communists and peace-minded, progressive people everywhere.

It is of no help to the struggles of the socialist countries for its friends to take a wait-and-see attitude to their efforts and problems. Because some socialist countries have a mixed economic situation, a multi-sector economy to cope with their problems, there are some who say, “It’s too soon to say it’s socialism. We first have to see which sector comes out on top.” A few even see it as out-and-out capitulation to capitalism.

Such “purists” have a flat, static, lifeless and non-struggle approach to socialism and social development. The element of struggle, of masses in motion, is absent in such thinking. It is simplistic to an extreme to reduce socialism to a one-dimensional state ownership of everything.

The draft report of the Communist Party of Vietnam is a fitting response to the fears and qualms of the poorly informed and those who underestimate the working class and overestimate capitalism. Reading it gives one the feeling that the theoretical and practical mistakes of Gorbachev are precisely the negative, destructive experiences against which the CPV is building safeguards.

Those who think that socialism means excluding forms other than state ownership of the entire economy should ponder the meaning not only of the well-known, short-lived New Economic Policy (NEP) introduced by Lenin, but also the policy of collective farms, as well as state farms, under Stalin. The long established existence of cooperative farming in Czechoslovakia incorporated into the socialist economy and the existence for many years of privately-owned stores and even enterprises of up to 300 workers in the German Democratic Republic are further examples.

What then would be the common essential for socialism in all countries?

The Essentials of Socialism

It is essential that the “commanding heights” of the economy – the basic means of production, communications and transportation, the armed forces and security – be in the hands of the workers’ and farmers’ socialist government and that there be a strong, mass Marxist-Leninist party with a scientifically sound cadre close to the people.

The socialist government must, by law, have its hands on all levers that control the overall direction of the economy and that safeguard the interests of all the producers in society.

This is in direct contrast to such capitalist levers of control as the Federal Reserve Bank in the U.S.A and the International Monetary Fund, the World Bank and other levers of manipulation on behalf of corporate wealth at the expense of the people. That, of course, is the difference between a socialist government of workers and farmers and a government of, by and for corporate monopoly.

Given the control of the basic sectors of the economy in the socialist government’s hands, along with the power of overall regulation, there is room for other forms of ownership in the economy. That Vietnam and China chose to allow some forms of private ownership, including foreign ownership along with state ownership, cooperative ownership and some joint ownership, does not mean they have given up the fight to regulate and use all levers available to keep their countries moving persistently and resolutely to more and more socialism, on the way to communism.

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* - James West is a member of the National Board of the Communist Party of the U.S.A. This article is taken from a longer article he wrote in the May 1996 issue of Political Affairs.

Spark! #8 – p. 28-32

Market reforms in the socialist countries of Central and Eastern Europe

by Ziad Ghanem

Following the Gorbachev era, it has become common to blame the failures of the socialist economies on the rigidities of the central planning system. Thus, it is often claimed that due to the absence of the disciplinary role of market relations, these economies lacked the incentives to integrate technological innovations at the enterprise level and therefore failed to effect a transition from extensive to intensive economic development¹. This view, however, conveniently ignores the negative economic consequences of the introduction of market mechanisms in Central and Eastern European Countries² (CEECs), which resulted from very early political challenges to central planning.

Unfortunately, Marxists have focused very little attention on the fact that as far back as the 1950s, in the midst of spectacular economic growth, arguments over a planned economic system versus market–based relationships had circulated among economists and policy makers in most CEECs, clearly indicating an underlying social contradiction. For example, in 1956, less than six years after a planned economy had been introduced in Poland, the official Economic Council argued in favour of a “decentralized model”³. Similarly, in Hungary, during the 1950s, the Economic Commission’s recommendations for market reforms were simply rejected by the Central Committee of the Communist Party as contrary to the basic principles of socialism⁴.

In fact, throughout the 1960s and 1970s, most CEECs experimented with reforms in the economic sphere that decentralized many decision-making powers to the level of the enterprise. These were mainly based on replacing directive “physical” commands with financial instruments and on introducing limited market mechanisms. The stated objective was to increase the efficiency and technological innovation of state-owned enterprises (SOEs) and to make them responsive to prices, costs, and consumer demand.

The most consistent application of these reforms was the Hungarian “New Economic Mechanism”. Introduced in 1968, it represented the most significant break from the classical planning system by replacing the system of compulsory plans with indirect controls over SOEs based on financial indicators and incentives. By the early 1980s, despite persistent economic difficulties and perceptible declines in efficiency levels, the Hungarians (unlike the Czechoslovaks and East Germans, who had recoiled from similar experiments) persisted in the implementation of enterprise self-management in most medium and large SOEs⁵, in effect, handing power over key economic decisions to enterprise managers⁶.

In general, the role of markets was the most extensive in Hungary and Poland, and the lowest in Czechoslovakia (after 1969) and Romania. However, the reforms, wherever and whenever they were implemented, only attempted to introduce a socialist market system, and despite allowing a larger role for the private sector, they stopped short of replacing state ownership of the main means of production with private property-based relations.

The Hungarian example demonstrated that the immediate impact of the introduction of market relations among enterprises and its concomitant strengthening of the position of SOE managers relative to the higher levels of state administration is a decline in economic efficiency. However, the effects of the economic deterioration proved to be almost negligible compared to the long term (social, political, and economic) consequences of unshackling enterprise managers from the constraint of complying with parameters administratively set by the plan. Increasing the freedom of economic activity of managers meant, in fact, increasing their ability to redirect enterprise activities toward furthering their personal interests. In search of possibilities of improving their economic and social status, enterprise managers were inevitably drawn toward the world market which offered them the possibility of storing wealth in hard currencies, access to a wide variety of consumer and luxury goods, and travel to the West.

Thus, economic decentralization has led trade with the West, since the 1960s, to grow at a faster rate than intra-CMEA trade. This provided the economic basis for the political decision in the 1970s by the countries of the region to reject the conception of two world markets and to opt for integrating into the international division of labour.

The new policies adopted were based on an attempt to integrate into the world economy via retooling local industries to the demands of the Western markets, financed through heavy borrowing from the main imperialist countries. Western licenses were purchased, and Western machinery and equipment were imported. As could be expected, Hungary and Poland were the most significant importers of capital-embodied Western technology.

A prominent example of this policy was Poland’s “New Development Strategy”; introduced in 1971, it relied on extensive foreign borrowing and the importation of Western technology. The rate of growth of fixed capital investment skyrocketed to an average of 21.3 percent per year during 1972-75 as compared to an average annual rate of about 7.6 percent during the preceding 15 years⁷. The share of imports of machinery and equipment from non-socialist countries in total machinery and equipment imports rose from an average of 21.2 percent during 1961-71 to an average of 43.3 percent during 1972-76, reaching a peak of 52 percent in 1975⁸.

To finance these imports, Poland received from Western banks $38.6 billion in long and medium–term credit during the 1971-80 period⁹. However, the transfer of Western technology during the 1970s failed to achieve the intended goals of increasing industrial exports to the West¹⁰. As a result, the debt servicing burden became so severe that the strategy was abandoned by 1976 – it was replaced by the “New Economic Manoeuvre”. The new policy imposed drastic reductions in the rate of investment and in the growth of hard currency imports. The rate of growth in investment in 1976-78 plummeted to 2 percent¹¹. Despite these draconian cuts, however, it was not until 1980 that the trade deficit with non-socialist countries was reduced substantially, from $3.0 billion in 1975 to $70 million in 1989¹². By 1980, Poland’s external debt had skyrocketed to $24 billion, and some 96% of the country’s total export earnings were being used for debt servicing¹³.

The world economic crisis of the late 1970s and early 1980s drastically aggravated the position of the CEECs as principal and interest payments on debt became a major drain on export earnings. Manipulation of the international financial markets by the G-7 countries, particularly through large increases in interest rates and restrictions on the availability of funds, further aggravated their situation.

As the failure of the development strategy based on Western credits became apparent, the regimes followed two divergent paths of development. The two most centralized economies were successful in reducing their international debt burden: Czechoslovakia and Romania followed a policy of slow growth and repaying international debts for the 1980s; GDP growth rates averaged 2.7 percent and 4 percent respectively for the 1977-86 period¹⁴. Both entered the period of transition to capitalism with very little foreign debt.

In the remaining countries, where market reforms were most advanced, international debt kept accumulating out of control. For example, Poland, in the late 1980s, suffered from huge inflation, widespread shortages, and a very large and unserviceable external debt. During the 1977 to 1986 period, Poland managed to achieve a 1.4 percent average GDP growth rate, the lowest level among all CEECs¹⁵.

In Hungary, the accumulation of foreign debt had led to negotiations with the International Monetary Fund (IMF) and the implementation of a stabilization program in 1982-83¹⁶. Implementation of the program, however, further aggravated the debt burden, which again increased at the beginning of 1985¹⁷. Hungary managed to surpass Poland and to achieve the second lowest average GDP growth rate – 2.5 percent – of all CEECs between 1977-86¹⁸, however, with the added proviso that this was achieved at the cost of attaining the highest level of debt in per capita terms of all CEECs¹⁹.

In short, the experience of the CEECs has demonstrated the existence of a contradiction within the socialist mode of production between the scientifically and democratically elaborated economic interests of society, as expressed through the planning of the publicly-owned economy, and the inherent striving of the managerial strata to increase its control over the assets which the state has entrusted to it.

But for this managerial stratum, the accumulation of wealth (in a form of “primitive accumulation of capital”) depended not only on their private control over the means of production (as a step toward full property rights) but also on the availability of conditions of commodity production and exchange. This being the fundamental reason underlying the constant striving by enterprise managers to gain the freedom to trade in the world and domestic markets.

Notes:

1. Aganbeguian, A. G. (1987), Perestroïka: le double défi soviétique, Economica, Paris.

2. My references to Central and Eastern Europe will primarily encompass, Czechoslovakia, Hungary, Poland, and Romania. Despite limiting the scope of the analysis, it is my opinion that these countries provide enough varied historical experiences to justify some basic generalizations.

3. Kaminski, B. (1995), “The legacy of communism”, in Hardt, J. P. and Kaufman, R. F. (eds.) East-Central European Economies in Transition, Joint Economic Committee, Congress of the United States, M. E. Sharpe, Armonk, New York, pp. 9-24.

4. Csaba, L. (1995), ‘Hungary and the IMF: The experience of a Cordial Discord”, Journal of Comparative Economics, vol. 20, pp. 211-234.

5. Lee, B. and Nellis, J. (1990), Enterprise Reform and Privatization in Socialist Economies, World Bank Discussion Papers, The World Bank, Washington, D. C., p. 10.

6. Voszka, E. (1993), “Spontaneous privatization in Hungary”, in Earle, J. S., Frydman, R. and Rapaczynski, A. (eds.) Privatization in the Transition to a Market Economy: Studies of Preconditions and Policies in Eastern Europe, St. Martin’s Press, New York.

7. Fallenbuchl, Z. M. (1983), East-West Technology Transfer: Study of Poland 1971-1980, OECD, Paris, p.105.

8. Ibid.

9. Terrell, K. (1992), “International Technology Transfer and Efficiency in Socialist Enterprises: The Polish Failure of the 1970s”, in Hillman, A. And Milanovic, B. (eds.) The Transition from Socialism in Eastern Europe: Domestic restructuring and Foreign Trade, Regional and Sectoral Studies, World Bank, Washington, D. C, p. 265.

10. Ibid., p. 266.

11. Ibid., p. 265.

12. Fallenbuchl, Z. M., op cit., p. 104.

13. 13. Bjork, J. (1995), “The uses of conditionality: Poland and the IMF”, East European Quarterly, vol. 29, no. 1, p. 91.

14. International Monetary Fund (1995), World Economic Outlook, May, Washington, D. C., p. 131.

15. Ibid.

16. The stabilization program aimed at ensuring debt repayment through surpluses in the current account. Thus, investment and capital goods imports were cut and successive devaluations of the forint were coupled with export promotion policies.

17. Lavigne, M. (1993), A comparative view on economic reform in Poland, Hungary, and Czechoslovakia, Economic Commission for Europe, Discussion Papers, vol. 3, no. 2, New York, p. 4.

18. IMF, op cit.

19. Lavigne, M., op cit.

Spark! #8 – p.24-27