Manuel Castells’s Analysis of the Breakdown of Soviet Statism

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Felix Stalder:

"In the 1960s, the existing forces of production (centering around heavy industry and centralized, assembly-line mass production, “industrialism” in Castells terminology) came into a crisis, because after several decades of extensive growth, they reached the upper ceiling of the complexity that be could be organized through them. This happened, it is important to note, to industrialism in general, that is, more or less simultaneously in the capitalist West and the statist East. In both systems, the crisis threatened to undermine its fundamental organizational objective (capital accumulation by private interests under capitalism, power accumulation by state actors under statism). What is different is how the two blocks reacted to the systemic causes that created the crisis.

The basic structure of Castells argument is contained in a quote which Castells took from Abdel Aganbegyan, one of the leading Soviet economists at the time, a close adviser to Gorbachev during Perestroika, and one of the main sources for Castells’s account.

Aganbegyan argued that,

[t]he contradiction which became apparent in the 1950s, between the development of the production forces and the growing needs of society on the one hand, and the increasingly obsolete productive relations of the old system of economic management on the other hand, became sharper with every year.

The argument here is that the crisis which became evident from the late 1960s onward, was “the expression of the structural inability of statism and of the Soviet variant of industrialism to ensure the transition towards the information society”. On the level of the productive forces, the economy had been developing forward through increased quantitative input (more labor, more raw materials, more energy, more land) defined in five year plans which led to the Soviet economy to become “more complex, technologically advanced and organizationally diversified.” However, the central planing was not able to accommodate this increase in complexity, thus introducing ever more friction into the economy. The political system, organized towards maximizing state power, was also unable to introduce more flexibility into the economic system for fear of diminishing its own power, the very essence of the system itself. Thus, while there was significant technical and research expertise, there was no mechanism to translate this into economic innovation, except in case of the military, which led innovation along a trajectory that was of little use to society at large.

There was a further mechanism, contained in the organizing principle of the economy, that discouraged innovation: the accounting system set up by central planning. As Castells explains,

the performance of each unit was measured in the gross value of production measured in rubles. This value of output (or valovaya produktsiya, val) included the value of all inputs. The comparison of val between years determined the level of fulfillment of plan and, eventually, the premium for managers and workers. Thus, there was no interest in reducing the value of inputs in a given product, for instance by using better technology or better management, if the val system could not translate such improvements into higher value added.

In contemporary terminology, the incentive structure for managers in the productive process was misaligned. Inefficiency (high value of inputs) was rewarded, while certain types of innovation, those who might have created higher productivity (creating more output with less input), were discouraged. Thus, different core groups of the system – central planners, political/military leadership and industrial managers – were, for different reasons, discouraged from transforming the system all through the 1970s into the mid 1980s. Politically, the system fell into stasis. Yet, economically, it still developed mainly by expanding the “shadow economy,” indeed, creating a Soviet version of “flexibility and networking as an organizational form”.

There was, of course, significant popular discontent, but relatively little outright opposition. For one, rigid control over the means of communication, building on Lenin’s idea of controlling the paper supply in order to control the press, meant that any articulation of critique was limited to a small, isolated and heavily controlled group of “dissidents” that had very little reach into the general public. Perhaps even more importantly, while the system became to been widely seen as non-sensical it was also believed to be immutable and long-lasting. These were the purely internal reasons why the system fell into a crises. The relations of production held back the further development of the productive forces, trapping them in an exhausted model, that could still grow somewhat by its own means – increasing quantitative inputs – but these means were increasingly irrelevant to the actual challenges."


More information

Why did neoliberalism succeed, where the Soviet system failed ?

See: How Neoliberal Informationalism Succeeded in Increasingly Managing Complexity. By Felix Stalder.