The autobiography of A. G. Zverev, who served as Finance Minister both under Stalin and after him, provides a good illustration of this self-image. He barely mentions the party: membership of it is taken for granted as an obvious formality. For this to have occurred, the party, as we saw in Parts One and Two, had to have undergone a transformation. Having itself become an administrative apparatus and a hierarchy, it not only found itself in a position of utter dependency, but ended up being absorbed by the class of top state officials we just mentioned. This allowed the latter to take a further step in their ‘emancipation’: although formally subject to all sorts of rules, they now existed as an uncontrollable bureaucracy, free of all curbs. They began to attack the sacrosanct principle of state ownership of the economy. The spontaneous processes at work emptied a series of ideological and political principles of any content. The most important of them – state ownership of assets and the means of production – was slowly eroded, initially issuing in the formation of veritable fiefdoms inside ministries, and then in the de facto privatization of enterprises by their managers. This process must be called by its real name: the crystallization of a proto-capitalism within the state-owned economy.
This point has been very aptly highlighted by Menshikov, an economist whom we have already cited in connection with the shadow economy.[5] He pays particular attention to the illegal sectors within the state economy that he calls the ‘internal shadow economy’, and which exercised strong influence on the official economy. This powerful sector became possible because of the division between the functions of ownership and those of management. What was evolving was, on the one hand, private management of the social capital of state enterprises; on the other, private appropriation of the products of that capital. It involved not only those who operated in the shadow economy, but also the official managers of enterprises in league with the highest reaches of the nomenklatura. All these figures, Menshikov argues, played an important role when the capitalism that emerged through the pores of central planning matured, in due course, into a decisive and potent force that shattered the system. Thus it was that the nomenklatura metamorphosed from covert owner of state property into its overt owner.
This interpretation foregrounds the inevitable consequences of a prior social reality: the takeover by the upper strata of the bureaucracy of the totality of state power and hence of the economy. The principle of state ownership – the system’s main pillar – was progressively subverted, preparing the ground for the transition from quasi-privatization to the fully-fledged variety.
Readers will now probably appreciate why we needed to deal with the snaby-sbyty in some detaiclass="underline" they were the ‘termites’ that helped to accomplish this task. No wonder that with the advent of perestroika these supply offices–depots–warehouses were the very first Soviet agencies to declare themselves ‘private firms’ and adopt an openly commercial status. This looked like a step in the right direction. But they were privatizing something that did not belong them, whereas the first principle of the market economy is that if one wants to acquire assets, they have to be paid for. Otherwise, it is a matter for the criminal law. And the intimate connection in the course of the post-Soviet reforms between ‘privatization’ and criminal activity is now widely known.
But we have not yet reached the phase of perestroika. We are examining the era of so-called ‘stagnation’, when the system’s chief pillars were crumbling. Not only had the economy lost steam, but the main thing it generated was waste. So what was Gosplan up to? Its collegium (the assembly of top officials) seemed to be in agreement with the conclusions of its research institute, which had diagnosed a fatal tendency in the economy: extensive trends were outstripping intensive trends. In 1970 it issued a statement, serene in its tone (it contained not a single alarmist word), in which it formulated a quite chilling diagnosis cum-prognosis: the projections of the eighth five-year plan (1966–70) contained inbuilt disproportions. As a result, ‘all basic indicators will decelerate, deteriorate or stagnate’.[6] The reason was that the very low efficiency indicators on which the calculations were based were leading to a dual imbalance: on the one hand, between the state’s resources and the needs of the national economy; on the other, between the population’s monetary income and the output of consumer goods and services (this remark implies that some previous version of the plan did contain the requisite proportions and balances). Hence the fear of a looming deterioration in the circulation of money and marketable goods in the course of the ninth five-year plan: a decline in the incentivizing role of wages in raising labour productivity and other ways of managing production was to be anticipated. It was as if the report was actually claiming that the eighth plan had programmed a deterioration of the economy in the course of the subsequent plan. In other words, Soviet economists were perfectly well aware of the downward slope the economy was set on.
‘Stagnation’ was marked by the impossibility of extracting anything from the bureaucracy and a lack of will and ideas at the top about how to stop the rot. All attempts to reduce the size of the bureaucracy, or force it to change its habits, were so many losing battles. Post-Stalin, the new rules of the game – the ‘bargaining’ between government agencies and central government (the Politburo and Council of Ministers) – allowed the bureaucracy to become a colossus that was not only the real master of the state, but also formed bureaucratic fiefdoms under the eyes of the party apparatus, which was reduced to a mere spectator and gradually yielded to the inevitable.
The diagnosis was simple: the system was sick while the bureaucracy was in fine fettle. Reforming the system entailed reforming the bureaucracy: no one was in a position to impose this and why should it undertake the task itself? This meant that the writing was on the wall – of the Kremlin this time.
It was imperative to resolve the problem of growing labour shortages and arrest economic decline by a dramatic rise in labour productivity. But this implied nothing less than a revolution. It could not be done without switching to a mixed economy, which was only conceivable on certain political conditions – and these too amounted to a revolution. Technological and economic reforms were inextricably bound up with political reforms. The party machine had to be divested of its last power: the power to prevent change. A mass uprising against state institutions would have accomplished this, but it did not occur. The alternative was reform from within, directed in the first instance at the party. Only a revitalized political force could compel the bureaucracy to make the transition to a mixed economy, bringing pressure to bear on it from above and from below, and threatening it with full-scale expropriation. The establishment of a transitional system would make it possible to preserve minimum living standards, avoid economic collapse, and open the way to individual and group economic initiative. The next task would be to begin to empower the population politically. Since none of this happened, what (it might be asked) is the point of mentioning it? I do so for a simple methodological reason – namely, in order to arrive at a better understanding of what actually did happen.