Chapter 2: Criticism of the Soviet-style planned economy
2.4. Policy deficiencies
The Soviet Union's economy achieved high economic growth during the Stalin administration after World War II. It can be said that the heyday of the Soviet-style planned economy was the era of dictator Stalin. The secret behind this policy was a policy that thoroughly focused on heavy industry and military industries.
In the Soviet Union, the industrial classification of the first sector for the production of producer goods and the second sector for the production of consumer goods, which Marx used to analyze capitalism in his Capital, was used as a basis for classifying production goods as Group A goods and consumer goods as Group B goods - a rough classification in itself-. Of these, the first priority was placed on the production of Group A goods. This, along with the military-first policy aimed at becoming a military superpower in opposition to the United States, led to the growth of the military industry.
This secret to early success has manifested itself in policy deficiencies in the later stages. The production of consumer goods, which had been placed in a subordinate position in the priority policy, was the most important sector in the lives of the masses and was supposed to be the key to achieving the affluence commensurate with economic growth, but the Soviet Union finally began to leverage it after Stalin's death in 1953.
However, even in these sectors, state-owned enterprises became the main producers, and as was often ridiculed in the West, even shoes were manufactured in state-run factories, and the quality was relatively poor.
In addition, as mentioned in the previous section, the demand-supply imbalance caused by sloppy planning and corruption such as embezzlement of goods led to stagnation and confusion in distribution, resulting in a constant shortage of goods at the state-run stores at the end of the line, which has been dubbed an "economy of shortage" by critical commentators.
In the latter stages of the Soviet economy, the Soviet Union had no choice but to supplement high-quality consumer goods with imports from Western capitalist countries, using foreign currency obtained by taking advantage of the oil price hikes caused by the oil crisis.
On the other hand, for Group A goods, which should have been one of the strengths of the Soviet economy because of its priority policy, the planned economy focused mainly on quantitative expansion of production, so technological innovation did not progress, and aging factory equipment continued to be used without being renewed, resulting in deteriorating production efficiency.
As a result, although the Soviet economy as a whole did not fall into a capitalist state of overproduction, it did have built-in defects: an imbalance between industries due to a priority policy and a decline in productivity due to a policy of quantitative expansion that neglected qualitative innovation.
During the Cold War, the Soviet Union sought to catch up with and surpass its rival market economy, the United States, but in the end, it was only in the area of military industry, symbolized by nuclear development and space exploration, that it somehow managed to match the United States.
The "reforms" of the Gorbachev administration in the final years of the Soviet Union exacerbated the intrinsic deficiencies of the Soviet-style planned economy by introducing market economic principles in a half-hearted policy manner, further spurring the economy of shortages and accelerating the collapse of the system itself.
This was also the point of difference between Communist China, which began by imitating the Soviet-style planned economy and then ambitiously moved ahead of the Soviet Union in adopting a market economy, eventually effectively breaking with the planned economy.
👉The papers published on this blog are meant to expand upon my On Communism.
