Chris Miller, 2016. The Struggle to Save the Soviet Economy: Mikhail Gorbachev and the Collapse of the USSR, The University of North Carolina Press: Chapel Hill, 914 pages (ebook), about 19.00 EUR.
Chris
Miller depicts the last years of the Soviet Union as a story of capture and
interest groups opposing economic reform. The main interest groups were the agrarian
lobby, the military-industrial complex, and the security services. They continuously
and mostly successfully opposed introducing market incentives into the central
planning economy. Gorbachev was able to introduce some market elements, e.g. the
autonomous link system in agriculture (p. 419ff.), or special economic zones
(December 1988, p. 388ff.) Gorbachev’s dilemma in a nutshell was “to reform the
economy without angering the energy industries, or the farm bosses, or – most of
all – the security services.” (p. 609).
If
inefficiency in the mid-80ies was obvious to almost everybody, why reform did
not happen? Chris Miller provides two main explanations. The first one is regulatory
capture. “The Soviet system gave power to a new ruling class, generals,
collective farm managers, and industrial bosses all of whom benefitted from
waste and inefficiency. They dominated the Communist Party […]” (p. 608). “[The]
key factor in the polarization of Soviet politics and the collapse of the
country’s economy was the vast power of the Soviet Union’s economic interest
groups – clinging to their privileges, obstructing efficiency” (p. 599).
The second
one is a lack of common understanding for a need for reform, or strategic
consensus. “[T]he USSR was stuck in a politically induced middle-income trap:
many Soviet citizens, especially among the elite, lived decent lives that were
threatened by change.” (p. 605). In other words, not everybody agreed with the
statement, that the Soviet economy was highly inefficient and at the edge of
bankruptcy. From that perspective, opposition to market incentives was motivated
by self-interest and not ideological beliefs (which emphasize collective and
state ownership of the means of production as the essential difference between
socialism and capitalism).
The main
plot of the book is how Soviet scholars and decision makers watched and
perceived China’s economic reforms since Deng Xiaoping took power in the late
1970s. Why China, and not, say, the United States? One reasons was that “[i]n
the early 1980s America’s unemployment rate surpassed 10 percent, the highest
value level since the Great Depression” (Miller 2016, p. 106). “Soviet scholars
– like many analysts in America and across the worlds – thought that other
countries, and other models of economic policy, were catching up.” (p. 99). “From
the late 1970s through the mid-1980s […] it was far from clear that Westrn
capitalism was actually working. During the 1970s and 1980s, Soviet analysts
had many reasons to think that Western capitalism in general – and America in
particular – was on the decline.” (pp. 96-97) And despite ideological turf wars
between Maoism and post-Stalinism, economic policy making in China was also ideologically
more trustworthy compared to that in western countries. “[D]uring the 1980s,
Soviet economists and scholars treated lessons from Western economies
skeptically. Many Soviet scholars and policy makers, even those who recognized
their country’s deep flaws, nonetheless believed in socialism as an ideal, and
feared that emulating Western capitalism would introduce inequality and poverty
to the Soviet Union.” “International success suggested that centrally planned
communism was on the right side of history. It was not until Soviet economic
growth declined sharply in the late 1970s and 1980s that Soviet scholars and
policymakers began questioning the country’s economic model and started to look
abroad for advice on how to get back on track.” (p. 89)
So did the
Chinese economic reforms serve as a potential blueprint for economic reform in
the USSR? Chris Miller demonstrates that the answer is Yes, and No. Before
1989, i.e. the Tiananmen Square incident, advocates of market incentives pointed
to China where market reforms unleashed a boost in productivity. In turn, after
1989 advocates of central role of the Communist Party pointed to China. So the
perception of China rapidly changed over time, its role as a potential
blueprint for economic reform is ambiguous.
The book is
highly readable. I have two main remarks on the book: As Chris Miller points
out Soviet Russia saw several rounds of economic reform experiments, from Lenin’s
new economic policy on the 1920s over Prime Minister Alexei Kosygin’s
enterprise restructuring during the 1960s to M. Gorbachev’s agricultural experiments
when the served a party secretary in Stavropol Region. Chris Miller also repeatedly
mentions Hungary and Czechoslovakia as examples of attempts of economic reform
within the Eastern bloc. But both countries faced declining productivity and
rising budget deficits since the 1970s. What is completely missing in the book
is a reference to the former GDR. The GDR ranked 11th in terms of global
economic output, according to some estimates; productivity was highest among
eastern economies. The GDR’s economic experience contrasts with the poor
performance elsewhere to some extent. Why Chris Miller does not mention that
case?
Chris
Miller demonstrates that Soviet scholars and decision makers closely followed
Chinas economic reform experiments; they were deeply impressed by the boost in
productivity. Eventually some of those market incentives were introduced in the
Soviet economy, e. g. special economic zone. Now, unlike in China, those market
instruments failed to boost productivity and GDP growth in the USSR; Chris
Miller enumerates convincing economic arguments why they did. I wonder whether Soviet
economists did not discuss those unintended effects beforehand, i.e. before
special economic zones were set up. The arguments are easy to follow, so it is
hard to believe, that the bulk of economic advisers missed to predict them.
What role
for bureaucracy in Chris Miller’s account of Gorbachev’s economic reforms?
Essentially a negative one: “Excessive bureaucracy prevented [economic]
progress.” (p. 464) Public servants and their particular roles are not explicitly
mentioned throughout the book. “Sizable sections of the government bureaucracy,
the Communist party, and industrial managers opposed Gorbachev’s attempts to
nurture a private sector in the Soviet Union. They succeeded in delaying
change, extracting payoffs in return for their acquiescence when reforms were
eventually introduced.” (p. 508). And, “Compared to China, economic interest groups
in the Soviet Union were more powerful and more opposed to change” (p. 599). Officials
at Gosplan, the state planning agency, and “[m]inistry officials knew that
decentralization would reduce their influence”, and thus vigorously opposed
change (p. 433) Resistance from enterprise managers and officials in the
planning bureaucracy to decentralized decision making about production targets
and prices accordingly was very strong.
Another contribution of the book is that is
points to the important role of patronage networks, and impact of social and
political ties on (economic) decision making, a pattern that continues to
influence contemporary policy making.
