Despite the central role played by State-controlled central banks and financial institutions in bringing about the conditions which led to the global credit crunch of 2008, free markets and capitalism rather than government failure have taken all the blame for that complex crisis, and Marxism and other varieties of socialism are once again attracting the enthusiastic support of many young people in our universities and colleges.
Unfortunately, however well-intentioned, this renewed interest in hard-core socialism, and the belief that it offers relevant solutions to our existing problems, ignores the lessons taught by the many failed socialist experiments of the 20th century, some of which are described by two American economists: Kevin D. Williamson, in his recent paperback The Politically Incorrect Guide to Socialism, and Thomas J. D. Lorenzo, in his equally informative and well-documented new study The Problem with Socialism.
What—in this context, but on a narrower front—I wish to do in this article, is to draw the attention of open-minded Left-wing readers to the significant but little-known and highly-relevant fact that for decades, Western capitalist technology sustained the failed economic experiment of Soviet Communism, rescuing it from the full consequences of its inherent systemic weaknesses, until its final collapse in 1991.
“She claimed that it had ‘never had the chance to develop’ because of interference from the West.”
This failure of the Marxist model in post-1917 revolutionary Russia, and its subsequent parasitical dependence on Western capitalism, was set out in detail in my paper, Capitalist Technology for Soviet Survival, published in 1981 by the Institute of Economic Affairs. All I have room for here, a generation later, is to provide a brief summary of some of the relevant arguments and evidence presented in that paper. That this should be necessary nearly 30 years after the fall of the Berlin Wall was recently underlined by the views expressed by Fiona Lali, president of the Marxist Society at London University’s School of Oriental and African Studies (SOAS), during a recent interview on Radio 4’s Today program.
Asked about the failure of Soviet Communism following her previous comment that capitalism had outlived its usefulness, “she claimed that it had ‘never had the chance to develop’ because of interference from the West.”
Not surprisingly, the British historian Dominic Sandbrook, from whose article in the Daily Mail this quotation is taken, commented: “My real thoughts about Ms. Lali’s version of history are not fit for publication,” and one can easily understand his incredulity.
To begin with, the widespread belief on the Left that Soviet Communism took over an oppressive society and a backward rural economy that it subsequently and heroically transformed into an advanced and powerful industrial state, improving workers’ rights and the living standards of the mass of the population in the process, is the very opposite of the truth.
While pre-revolutionary Russia was backward compared to Britain, Germany, and the United States, her economy was developing rapidly and her society was undergoing significant liberalization in the last decades of Tsarist rule. During 18 of the last 25 years before the outbreak of the First World War in 1914, Tsarist Russia enjoyed the highest rate of industrial growth in the world, and by 1913 was overtaking France as the world’s fourth industrial power.
As for the progress of liberalization, here below is a summary of what had been achieved that will startle many readers, coming as it does from the pen of a great Russian historian and political scientist of Hungarian origin, the late Professor Tibor Szamuely, a former Red Army veteran imprisoned by Stalin, and a former Vice-Rector of Budapest University and Lecturer in Politics at Reading University until his untimely death in 1971.
To quote from his pamphlet, Communism and Freedom, published by the Conservative Political Centre in September 1969:
“Few people in the West realise to what extent before the Revolution, in the early years of the 20th century, Tsarist Russia had full freedom of the press—no censorship: even Bolshevik papers and books were freely printed—full freedom of foreign travel, independent trade unions, independent courts, trial by jury, a fairly advanced system of social legislation, etc. Tsarist Russia had a parliament, a Duma, with MPs elected from various parties, including the Bolsheviks. This was not a full parliament in the English sense of the word (the executive was not responsible to parliament), but today, on the whole, pre-revolutionary Russia would be regarded as a model democracy, and compared to most of the hundred and twenty-odd countries inhabiting the United Nations Organisation, one of the fifteen or twenty most liberal states in the world.”
After decades of Communist rule, by contrast, with its concentration of all power, ownership, and resources in the hands of the omnipotent Marxist State, tens of millions of people had died in internal repression under Lenin and his successors, the seeds of liberty and democracy had been totally stamped out, trade unions had become the passive and subservient organs of the Communist Party, corruption had become universal, and the mass of the population had been reduced to a condition of penury, misery, and serfdom.
Here are just a few key facts about the material conditions of life under Soviet Communism.
Soviet citizens had to endure the daily misery of constant shortages of the most basic necessities.
According to such scholars as Professor Sergei Propokovich, Dr. Naum Jasny, and Mrs. Janet Chapman, for instance, the real wages of Soviet industrial workers in 1970 were hardly higher than in 1913. Similarly, the Swiss economist Jovan Pavlevski calculated in 1969 that the real wages of Soviet industrial workers attained the level of 1913 only in 1963. Pavlevski also found that the real incomes of Soviet agricultural workers in 1969 were only 1.2 percent higher than in 1913.
In addition, let it be remembered—unlike the pampered Communist elite, with their posh apartments, countryside villas, and privileged access to imported luxury goods—Soviet citizens had to endure the daily misery of constant shortages of the most basic necessities like washing powder, razor blades, meat and vegetables, and many other items we take for granted in the West.
The most telling fact revealing the economic bankruptcy of Soviet Communism was the spectacular failure of its collectivized agricultural sector.
This picture of the generally low living standards suffered under Soviet Communism between 1917 and 1991 darkens further when one includes the evidence of the widespread poverty that existed among old people and the inhabitants of some of the most backward former Soviet republics. Thus, according to Ilja Zemstov, a former professor of sociology at the Lenin Institute of Baku (Azerbaijan), writing in 1976, one in two retired persons in the Soviet Union lived in poverty, and in the Soviet republic of Azerbaijan, 75 percent of the population lived below the poverty line and there were more homes without water, electricity, and toilets than in the whole of Western Europe. Other scholars, also writing in the 1970s, calculated that about half of all housing in the Soviet Union was without running water or sewerage, and living space per person was only about half that available in Western Europe.
But perhaps the most telling single fact revealing the economic bankruptcy of Soviet Communism was the spectacular failure of its inefficient and unproductive collectivized agricultural sector. Despite only representing about 3 percent of the total agricultural area of the Soviet Union, the tiny private holdings cultivated in their spare time by Soviet collective farmers provided one-third of the country’s total agricultural output.
The "Brain Drain" and the Problem with Central Planning
Far from Soviet Communism never having “had the chance to develop” because of interference from the West as Fiona Lali believes, the endemic economic failure and oppressive character of the Soviet Union flowed inevitably from its Marxist model of economic and social development. A society in which the State owns and controls every sector of the economy, and is the sole landlord, employer, doctor, educator, and welfare provider, cannot fail to be destructive of freedom, personal incentives, creativity, and entrepreneurship, while monopolistic government central planning, reflecting the limited knowledge and political priorities of the ruling bureaucracy, inevitably stifles innovation and technical progress. That is why the negative experience of Soviet Communism was repeated in every other Communist revolution and country during the last century.
Given these truths, the idea that Western interference hindered the outworking and therefore the success of the Communist experiment in the Soviet Union is absurd. As will be shown below, the exact opposite was the case. In one form or another, Western capital, “know-how,” and technology actually pulled Soviet Communism’s chestnuts out of the fire in nearly every decade of the Soviet Union’s existence, principally by compensating it for its above-mentioned systemic inability to generate significant levels of indigenous technological innovation.
Economic activity in the Soviet Union was narrowly constrained by its Communist rulers; hence the need to import skilled personnel, know-how, and technology.
While there was nothing inherently lacking in the quality of Soviet scientific research, the limitations of central planning and the absence of market mechanisms and incentives prevented the systematic testing of the fruits of research against competing alternatives. Instead of allowing the dispersed knowledge, opinions, and talents of millions of individuals freely co-operating in the marketplace to determine the success or failure of new ideas and discoveries, nearly all economic activity in the Soviet Union was narrowly constrained within the developmental straitjacket imposed by its all-powerful Communist rulers; hence the need to import skilled personnel, know-how, and technology from the freer and more dynamic societies of Western Europe and North America.
And this need, moreover, was all the greater given the entrepreneurial and skills gap created by the physical liquidation of so many of pre-revolutionary Russia’s most productive and educated citizens, and by the “brain drain” of all those who, by fleeing abroad, managed to escape imprisonment and execution at the hands of Lenin’s killer squads and secret police.
The incredible but little-known story of the manner and extent to which Western Capitalism came to the rescue of Soviet Communism was told in abundant and fascinating detail half a century ago by American scholar Dr. Anthony Sutton, a former Research Fellow of the prestigious Hoover Institution in California, in his massive three-volume study, Western Technology and Soviet Economic Development 1917-1965.
Technological Nursing by the West
The key finding of this exhaustively documented historical survey, based on literally hundreds of official and unofficial Western and Soviet sources and abounding in statistical charts, tables, footnotes, and appendices was that 90 percent of all Soviet technology was of Western origin.
While there were some indigenous Soviet advances, such advances were temporary and later abandoned in favor of foreign designs and processes.
To explain this finding in more detail, Dr. Sutton examined 75 major technological processes in such crucial and diverse sectors as mining, oil, chemicals, machine building, aircraft, communications, agricultural equipment, etc. and estimated the percentage that originated in Russia. The startling results were: between 1917 and 1930, 0 percent; between 1930 and 1945, only 10 percent; and between 1945 and 1965, a mere 11 percent.
While there were some indigenous Soviet advances between 1930 and 1945 in the development of machine guns (!), synthetic rubber, oil drilling techniques, and boilers, such advances were temporary and later abandoned in favor of foreign designs and processes. Between 1946 and 1965 most of the progress of Soviet innovation depended on the “scaling up” of existing plants and technologies imported and copied from the West. This was particularly the case in iron and steel making, electricity generation and rocket technology.
Western capitalism’s breastfeeding of Soviet Communism began in the 1920s during the period of Lenin’s “New Economic Policy” when more than 350 foreign concessions were employed within all sections of the Russian economy except furniture and fittings. Among the foreign firms that flocked to the Soviet Union with their technicians, machinery, and capital were famous names like General Electric, Westinghouse, Singer, Du Pont, Ford, Standard Oil, Siemens, International Harvester, Alcoa, Singer, Krupp, Otto Wolf, and many others, including important British, French, Swedish, Danish, and Austrian companies. And their beneficial impact on the Soviet economy was dramatic.
Thus, for example, by the end of the 1920s, 80 percent of Soviet oil drilling was conducted by the American rotary technique and all refineries were built by foreign corporations. As a result of this transfusion of Western capital and expertise, there was a recovery of Soviet production from almost zero in 1922 in the wake of the civil war provoked by the Bolshevik seizure of power in October 1917 to pre-First World War figures in 1928.
The technological breastfeeding of Soviet Communism by Western capitalism continued even during the period of the Cold War.
The same pattern carried over into the decade and a half of 1930 to 1945. During these years, the huge industrial plants built for the machine-tool, automobile, aircraft, and tube mill industries were erected by foreign companies, and 300,000 high-quality foreign machine-tools were imported between 1929 and 1940. Throughout the Second World War, moreover, the Soviets (despite their previous treachery in cementing the 1939 Nazi-Soviet Pact) received $11 billion of resources and equipment from the United States under Lend-Lease.
The defeat of Hitler subsequently enabled the Soviet Union to plunder Eastern Europe for her post-war needs. Two-thirds of the German aircraft industry, the major part of her rocket production industry, about two-thirds of her electrical industry, and tons of military equipment were seized by Stalin. The German rocket installations acquired by the Russians, moreover, included the huge underground V-2 plant at Nordhausen, and laid the foundation of the Soviet "Sputnik" program—so even the much-heralded Soviet space effort owed much of its success to the forcible acquisition of Western technology. As an added bonus, the Russians received plants dismantled in the American zone, including such strategic goodies as aircraft plants, ball-bearing facilities, and munition plants.
The technological breastfeeding of Soviet Communism by Western capitalism continued even during the period of the Cold War. From 1959 to 1963, for example, the Soviet Union bought at least 50 complete chemical plants for chemicals not previously produced in the Soviet Union, and Soviet imports increased ten-fold between 1946 and 1966—from 692 million roubles to 7,122 million. In addition to all this, two-thirds of the Soviet merchant fleet had been constructed in the West by 1967.
Not Because, but Despite
The evidence, then, is overwhelming. Soviet Communism did not fail because it wasn’t given enough time to pursue its totalitarian and murderous objectives free of “Western interference.” It failed precisely because of those objectives and despite repeated infusions of Western capital, know-how, and technology, spanning at least five decades.
As always, the central truth of the matter was stated most lucidly and clearly by Russia’s greatest 20th-century writer and dissident, the late Alexander Solzhenitsyn, in a speech in 1975 to American trade unionists:
“The Soviet economy has an extremely low level of efficiency… It cannot deal with every problem at once: war, space (which is part of the war effort), heavy industry, light industry, and at the same time the necessity to feed its own population. The forces of the entire Soviet economy are concentrated on war… everything which is lacking… they get from you. So indirectly you are helping them to rearm. You are helping the Soviet police state.”
Let those embracing Marxism in our colleges and universities ponder these things and ask themselves whether the cause they are now embracing is truly worthy of their energy and idealism.
Reprinted from CapX.