Michael Lebowitz: Some explanations of the fall of ‘real socialism’

Consistent with Marx's methodology, from my examination of particular concrete phenomena like the shortage economy and the apparent behaviour of actors within real socialism, I distilled a simple concept from which to develop logically the inner connections of the system and an understanding of the concrete whole. That logical starting point was the vanguard party, which is central to an understanding of vanguard relations of production (the dominant relation between the vanguard party and the working-class in real socialism). I identified in the book three tenets or doctrines of the characteristic of the logic of the vanguard party:

1. The goal of system change: an absolute commitment to replacing capitalism with socialism and to building a communist society (which has as its premise the appropriate development of productive forces).
2. The need for a political instrument: to achieve this goal requires a political party with the mission and responsibility of organising, guiding and orienting the working class, all working people and social organisations.
3. The necessary character of the vanguard party: the struggle to defeat the enemies of the working class requires a disciplined, centralised and united revolutionary party – our party.

Consider these three points. The goal of system change distinguishes the concept of the vanguard party from a body of self-interested bureaucrats or would-be capitalists. It begins from a clear rejection of capitalism as a system and the belief in the necessity of socialism. Given that essential goal, the question is – what is to be done? Characteristic for the supporters of the vanguard party is the conviction that the achievement of this goal will not happen spontaneously and, accordingly, requires leadership. The orchestra, in short, needs a conductor. And, since that conductor alone can see the whole picture and has the whole score before it, there is no place for spontaneity and improvisation. Discipline and hierarchy are essential. Within the workplace and community, it is only appropriate that all parts, all instruments, follow a predetermined plan determined by the vanguard party. Socialism in this perspective is a gift to those below by the only ones above who know how to create socialism.

But, characteristic of "real socialism" was not simply that logic of the vanguard (a logic we can observe in many would-be conductors). Also key was that the working class accepted the leadership of the vanguard party. And, it did so insofar as it was able to achieve some desired goals from the relation. Within "real socialism", there was a social contract (described by Boris Kagarlitsky as an obligatory or asymmetrical social contract), and an essential part of that contract for workers was protection and security from unemployment, the maintenance of their job rights (which meant that jobs could not be changed in a way that workers regarded as reducing their individual welfare), a low length and intensity of the workday, the expectation of rising income over time, subsidised necessities and relative egalitarianism. In return for these real benefits, workers accepted the rule of the vanguard party and their own powerlessness and subordination in every aspect of society.

Implicit in the logic of the vanguard was the necessity that the vanguard control the state, that the means of production be the property of the state and that the state control the direction of the economy through central planning. These are not abstract characteristics, though. In every dialectical presentation, all later moments are implicit in the starting point. Accordingly, in real socialism, these institutions embodied the hierarchy inherent in this conception of the vanguard. Thus, a vanguard form of the state, a vanguard form of state ownership and a vanguard form of planning and a specifically vanguard mode of production. Further, there were specific tendencies, laws of motion, inherent in this relation. Given the job rights ensured in the social contract, for example, expanded reproduction by intensive development (i.e., introducing new machines and techniques in existing productive centres) was difficult. Accordingly, development tended to take the form of building new centres of production and then attracting workers to these with better working conditions, wages and benefits. Inherent in this tendency for extensive development was the generation, sooner or later, to create resource and labour shortages and thus a potential crisis.

Yet, this was the immediate source of neither the crisis of real socialism nor its dysfunctional and irrational character. There is nothing in the vanguard relation as such that can explain such perverse phenomena as the heavy chandeliers (denounced by Khrushchev) to the thick paper produced by the paper industry, incomplete buildings because construction enterprises were credited with more value added in the early stages of production than later, and the practice of “gold-plating” (where, for example, a clothing factory used material for a coat lining that cost twice as much as the cloth for the outside, thereby substantially increasing the value of the coats produced). Similarly, consider the wasteful practice of "storming" to obtain bonuses and thereby producing useless and indeed dangerous products (such as the vacuum cleaners that electrocuted you), the hoarding of productive materials and labour by individual enterprises, and the distorted reports on productive capacity sent upward from enterprises to the planning authorities – these patterns are not at all consistent with the goals and practices of the vanguard.

Rather, these tendencies emanated from a source outside the social contract between vanguard and working class. In particular, they were the result of the bonus-maximising behaviour of the enterprise managers who embody a logic quite different from that of the vanguard. The logic of the vanguard focuses upon the whole – upon the interconnection and harmony of the parts. It is the logic of the orchestra conductor, which the vanguard views as essential to ensure harmonious cooperation. In contrast, for the managers there is no focus upon the whole. Rather, this logic emphasises maximisation for each individual unit, and its implicit argument is that by acting in accordance with individual self-interest, each unit is led as if by an invisible hand to act in the interest of the whole.

Thus, for the managers, it was quite rational to understate the productive potential of their enterprises in order to obtain lower quotas which enhanced the potential for achieving bonuses – even though this deprived the planners of accurate information on the economy. It was rational to stockpile inventories of resources and excess labour even though this produced shortages, and it was rational to produce inputs that might be inaccessible because of shortages even though this introduced irrational duplication in the economy. Further, it was rational to interpret quotas in such a way as increase recorded output (as in the case of gold-plated products where the quotas were stated in value terms and the heavy chandeliers where weight was the criterion for achieving bonuses). The sum of individual rational decisions obviously does not necessarily yield social rationality.

What was that alternative logic? Although these managers didn't own the means of production, didn't have the power to compel workers to perform surplus labour, and didn't own commodities (as a result of the labour process) that could be exchanged to realise surplus value, they did contain within them the logic of capital – just as merchant and money-lending capitalists did before capital was successful in seizing possession of production.

Although the constraints placed upon the managers by the regulations of the vanguard prevented them from functioning as capitalists, the drive, impulse, the logic of these managers is a different matter. If these income-maximising managers, these constrained capitalists, struggled to remove the constraints placed upon them – for example, specific output targets, designated suppliers and customers, the appropriation of enterprise profits, the inability to discipline or fire workers, or to introduce freely new methods of production, what was this drive if not the logic of capital? Expressing that logic is the mantra – Free capital!

Thus, two different logics – the logic of the vanguard and the logic of capital. And, the result of their interaction is what we observe in looking at the phenomena characteristic of "real socialism". As Preobrazhensky pointed out in the 1920s, when there is contested reproduction between differing sets of productive relations, the interaction of the systems can generate crises, inefficiencies and irrationality that wouldn't be found in either system in its purity.This is the unarticulated story of "real socialism' – that its particular characteristics were the result of neither the logic of the vanguard nor the logic of capital. Rather, it was the particular combination of the two which yielded the dysfunction and deformation identified with real socialism. Two systems and two logics do not simply exist side by side. They interact. They interpenetrate. And they deform each other.

In the book, I explore the effect of contested reproduction in "real socialism". The combination of the behaviour of managers attempting to income-maximise in their own enterprises under the constraints of the plan and the efforts of the planners to compel the managers to produce as much as possible (and to dismiss what they saw as the "bogus difficulties" that the managers invented) produced the particular pattern of shortages characteristic of "real socialism". Yet, this only one aspect of the relation: there was more than just a struggle of opposites. As well as the serious dysfunctions (indeed, the crisis) in the economy as a whole which result from the struggle between these two logics, each side was deformed as they interpenetrated. Thus, on the one side, we see managers who in practice preferred to seek out and lobby allies in ministries and planning bodies rather than take their chances on the market. And, on the other side, there were planners and ministers who (much like Hegel's Lord in his Phenomenology) recognised their dependence upon the managers for the success of the plan within their particular jurisdiction and accordingly ignored the perverse effects of managerial behaviour on the economy as a whole.

Thus we see here a definite tendency for the line between the two opposites to become blurred in practice – that is, a tendency for an identity of opposites to emerge. On the one hand, managers who focus upon lobbying those above for support; on the other, planners who support the actions of self-oriented managers. Though the coming together of these opposites can provide mutual security for a time and can generate an apparent stabilisation within "real socialism", that unity is only apparent. What prevailed was the now hidden, now open struggle between the two logics – a struggle in particular over property, that is, the ownership of the means of production.

To whom did the bundle of property rights over the means of production belong within "real socialism"? We need to distinguish between juridical ownership and real ownership, between juridical power and real power over the means of production. Who had the right to direct people, to use and distribute the surplus product and residual income, the right to control the means of production (including the power to delegate that control)? Under vanguard relations of production, the vanguard party has all the attributes of the owner of the means of production with the exception of the ability to sell, bequeath or alienate that property. Demonstrating its ownership, too, was the vanguard's ability under the social contract to grant job rights to workers, a right which ensured their link in practice to specific means of production.

The vanguard as vanguard, though, did not possess the means of production. Following Charles Bettelheim, we note that specific units of production in fact are possessed by those who have the technical capacity to direct and utilise the means of production in a labour process. As long as the proprietor of the means of production is able to control those who possess, that possession can not be transformed into property. In the case of "real socialism", the more that the vanguard brings the means of production under its control and coordinates a priori the different units of production through the central plan, the more that those who possess the means of production are subordinated to the vanguard as proprietor.

On the other hand, if those who possess the means of production are able to escape control under the plan and to make their own decisions about the use of the means of production that they possess, then this is a process of the transfer of real (as opposed to juridical) property rights. The agents of possession then become agents of property. In short, if it is effective, the central plan prevents enterprises from transforming their possession into property. According to Bettelheim, the state acts as owner “on the one hand when state property effectively enables the governmental authorities to ‘reappropriate’ all or part of what each enterprise possesses; on the other hand, when the state effectively dominates the use that the enterprises make of their means of production and products”. Within "real socialism", then, the struggle over property takes the form of a struggle between plan and market, and replacement of the plan by the market represented a transfer of property rights to the enterprise managers.

In the end, the logic of capital defeated the logic of the vanguard in "real socialism". There were several reasons. In part, it was due to the failure to make the shift to an intensive development path under the existing structure and the very clear signs that the Soviet Union's economy was deteriorating in the absence of such a shift (as Gosplan predicted in 1970). Under these conditions, the vanguard became more receptive to the arguments of the market reformers.

Ideas can be a material force, indeed, when they seize the minds of the vanguard. And, in the battle of ideas, the constrained capitalists had strong weapons. They had economists as their ideological representatives. Those economists were not themselves would-be capitalists or necessarily conscious representatives of capital. However, as Marx commented about the spokespersons of the petit-bourgeoisie (in Eighteenth Brumaire of Louis Bonaparte):

In this case, too, the economists tended to be stuck within class limits. In particular, their blind spot was the working-class. The alternative they offered to the hierarchical rule of the vanguard did not challenge the domination of workers within the workplace and society. Instead, the economists stressed the constraints upon the managers. They did not talk about dynamic inefficiency as the effect of the separation of thinking and doing upon the capacities of workers. Instead, the economists began and ended with the inefficiencies that managers confronted on a daily basis as the result of their domination from above.

“Free the manager” was their solution, and that was the direction that reforms within "real socialism" took. It shifted from viewing the economy as a whole to looking at the enterprise as the basic unit of the economy. The managers in this respect were successful in wresting clear property rights over the enterprises from the vanguard. But acceptance of the enterprises as the “basic unit” of the economy was only one part of the struggle to free the managers. The other aspect of the battle of ideas for the managers and their ideological representatives was the necessity to attack the social contract – in particular, the job rights of workers, a property right which linked them to particular means of production. In short, the second side of the Battle of Ideas for the economists was the assault on the working class.

And, with echoes of Margaret Thatcher and Ronald Reagan when capital moved to reverse inroads made by the working class, the ideological spokespeople of capital within "real socialism" went into full attack mode. “Socialism is not philanthropy automatically guaranteeing everyone employment irrespective of his or her ability to do the job”, declared Stanislav Shatalin, who was chosen by Gorbachev to prepare his 500-day plan for reform. Similarly joining in the attack on job rights in the Soviet Union, Nikolai Shmeliov complained about the “economic damage caused by a parasitic confidence in guaranteed job” and he urged the government to consider the advantages that “comparatively small reserve army of labour” could bring to a socialist political economy. The problem was that “excessive full employment” produced “a host of social ills”; accordingly, he argued, “the real danger of losing a job ... is a good cure for laziness, drunkenness and irresponsibility.”

Why, ultimately, did the vanguard party yield to a class perspective that challenged vanguard relations and attacked the working class (which the vanguard had supported with the social contract)? Aside from a growing loss of confidence given the crisis and their weakness in the face of the weapon of "science" (the science of neoclassical economics) wielded by capital, the choice was not made by a vanguard party pure in its commitment to the logic of the vanguard but rather by one infected in the course of its interaction with logic of capital. That disease spread throughout the party – affecting both existing members and the nature of new recruits. Capital ultimately won the battle of ideas in "real socialism" because it successfully invaded the vanguard party.

Was there no alternative to vanguard relations other than the restoration of capitalism? In the book, I identified a third logic – the logic of the working class. That logic was repressed both in reality (insofar as only social organisations which functioned as transmission belts for the vanguard were allowed to exist) and ideologically (insofar as the distortion of Marxism which I have called Vanguard Marxism disarmed the working class). However, in the behaviour and interactions of the working class, there was a particular moral economy of the working class – a sense of what was right and just. And, in that moral economy of the working class of "real socialism", the seeds of a socialist alternative are implicit. In their orientation toward egalitarianism, we can see glimpses of one such characteristic – the focus upon the common ownership of the means of production (which implies the right to share equally as owners).

Similarly, from the individual workplace came a particular common sense – a sense of their own collective power as workers and latent support for workers’ control. Of course, no organised campaign for workers' power was possible in normal circumstances under the conditions imposed by the vanguard. But, workers protected each other in the workplace. There was a broad consensus among workers and support for resistance to domination and exploitation from above, and the spontaneous eruption of workers’ councils at points of weakness in the system (e.g., Hungary in 1956 and Poland in 1980) allows us to infer the existence of an underlying consensus among workers in support of worker management.

In short, we can see two elements latent in the moral economy of the working class in "real socialism" – social ownership of the means of production and social production organised by workers, two sides of what I described in my book, The Socialist Alternative, as socialism as an organic system, two sides of what President Chavez called “the socialist triangle”. Together they imply the concept of “the cooperative society based on the common ownership of the means of production”. Yet, cooperation within a society involves more than cooperation within the sphere of production. It also encompasses cooperation with respect to the determination of the purpose of productive activity. Fully developed, such a society focuses directly upon social needs, that is, on production for communal needs and purposes – the third side of the socialist triangle. That side, too, is latent in the moral economy of the working class within “real socialism”.

For that third side, the key concept is solidarity. In the solidarian society, people do not relate as owners, demanding a quid pro quo for parting with their property or their labour. Their starting point is not that of self-oriented owners, but rather the concept of a community. The germ of such relations was revealed within "real socialism" when people helped one another without demanding an equivalent in return. In contrast to a relation in which alienated, mutually indifferent individuals exchange alienated things, there was a gift relation within networks among people who have a bond, people who have a past and hope to have a future, and its product is the enhancement of solidarity. The solidarian society is precisely a "gift economy" – one in which those who give are rewarded not by the anticipation of what they may receive at some point in return but rather because not to give violates one's own sense of virtue and honour.

In the moral economy of the working class in "real socialism", thus, we can glimpse not only the orientation to social ownership of the means of production and social production organised by workers but also communal needs and purposes as the goal of productive activity – the three sides of the socialist triangle. Latent is the potential for a different type of society – a cooperative society in which people relate consciously as members of a community. It is the society of associated producers, a society based upon the recognition that the free development of each depends upon the free development of all.

No one, though, could ever confuse this impulse with the logic of the vanguard; nor, obviously, is it the logic of capital. This is the logic of the working class, the logic of associated producers. It is a logic that places full human development at its core and insists that people develop through their activity – and thus one that places at its centre protagonism in the workplace and the community because it grasps the importance of "revolutionary practice" – “the coincidence of the changing of circumstances and of human activity or self-change”.

None of that was occurring in "real socialism". Workers were not able to develop their capacities. And that problem – indeed, the fundamental contradiction of "real socialism" – was inherent in vanguard relations of production. Within that productive relation, the domination over workers prevents the development of their capacities, ensures their alienation from the production process and holds back the development of productivity, that is to say, the development of the productive forces of workers. That is one side of the vanguard relation. The other side is the drive of the vanguard to push for growth, for the expanded reproduction of means of production, with the explicit purpose of building socialism.

Given the nature of the workers produced under vanguard relations, however, the vanguard relies upon managers to act on its behalf to ensure the achievement of its goals. Yet, the managers, who have a particular relation to the means of production (that is, possess those means of production), increasingly become conscious of their own particular interests; they act according to a logic of their own that is not identical to the logic of the vanguard. The managers indeed emerge as a class in itself; and their efforts to pursue their own interests interact with the attempts of the vanguard to enforce its property rights.

Thus the struggle between vanguard and managers displaces the relation between vanguard and workers as the contradiction producing the particular movement of "real socialism". That contested reproduction generated a crisis with the result that the logic of capital subordinated the logic of the vanguard.

Are there any possible insights from this consideration of "real socialism" with respect to the experience of self-management in the former Yugoslavia? Certainly we know that there were important differences. Both before and after the war, the concept of the vanguard party in Yugoslavia mirrored that of "real socialism"; however, there was a significant change around 1950. While retaining the belief in the need for a political instrument and a vanguard party which was disciplined, centralised and united, there was a break with the concept of the society being constructed in the Soviet Union. Party leaders charged that state ownership and state management were insufficient for socialist relations of production and that it was essential to introduce workers' management in order to build a new socialist society.

As you know, the immediate steps taken involved the new law on workers' self-management (which made enterprise management responsible to workers' councils) and the law on planned management of the economy (which replaced detailed central planning of production by instructions as to basic proportions of investment). While these initial acts have been viewed as steps to the production of a new whole, I suggest that it is useful to consider whether they latently contained within themselves two different logics – the logic of capital and the logic of the working class. Insofar as these measures involved the creation of workers' councils with power within enterprises, this certainly was a start toward the realisation of the side of the logic of the working class which stresses production organised by workers. Combined with the earlier end to capitalist ownership of the means of production, this pointed toward a process of building two sides of the socialist triangle.

Yet, there was another aspect to these changes. Certainly, the reduced scope of the central plan (away from detailed instructions from above) was the beginning of a shift in property rights from the vanguard, a shift described as one from state ownership (which meant in fact vanguard ownership) to social ownership. The agents of possession in this case were becoming agents of property. There was a shift from state ownership to ownership by groups of workers. However, we always need to distinguish between juridical and real ownership. Who were those emerging owners? It is important to think back about "real socialism" and to recall that the demands for ending detailed central planning and allowing individual enterprises to make their own decisions in the market without interference from planners were the demands of the managers and represented the logic of capital.

So, what was different in Yugoslavia? Obviously, what makes us think differently about this was the role assigned to workers' councils in each enterprise. Implicit was the idea that the workers were now the real owners – with all of the attributes of ownership (i.e., the entire bundle of property rights) with the exception of the ability to sell or bequeath the means of production. The question, though, is whether workers were able to exercise those rights and whether the process was one of their growing capability to do so.

Let me suggest that, in fact, there was contested reproduction between the logic of capital and the logic of the working class in each enterprise and that the focus upon self-interest and the maximisation of income within each individual enterprise strengthened the logic of capital and weakened the realisation of the logic of the working class. How else do we explain why despite Tito's insistence in 1950 that workers would “be able to master the complicated techniques of management of factories and other enterprises through the very process of management” and that “only through practice will workers be able to learn” that 25 years later Joze Goricar could describe the gap between workers and the managers, noting that the worker had “only meagre opportunity for developing, in performing his duties, any substantial measure of freedom of thought, imagination and inventiveness”?

How else can we explain the growing inequality between workers in the same industry, between workers in different industries, between workers in different regions, between urban and rural workers? Can we speak of social ownership of the means of production when so much depended upon differential access to particular means of production – and, indeed, when so many were separated from all means of production because they were either unemployed or had left Yugoslavia to be guest workers? Further, with respect to the third side of the socialist triangle, rather than solidarity and a sense of community, there was separation and indifference among workers of different enterprises. Indeed, Che Guevara worried in 1959 about the competition among workers that he observed, noting that it could “introduce factors that distort what the socialist spirit should presumably be". It would be rather difficult to argue that the logic of the working class was being realised.

On the contrary, the logic of capital was increasingly hegemonic as demonstrated by the successful struggle to remove still-existing regulations instituted by the vanguard and to reduce taxation of enterprises (the revenues of which were used by the vanguard state to establish new enterprises and to equalise regions). More of the revenue now was left in the individual enterprises to decide upon its distribution, and those decisions were proposed by managers and their technical experts and rubberstamped by the workers' councils. The essence of this trajectory was revealed completely by the constitutional amendments of 1968 – in particular, the removal of regulations that ensured the participation of manual workers in workers' councils with the juridical power to manage the enterprises. This period, in short, was one in which advances in the direction of both social ownership of the means of production and production organised by workers were reversed. Rather than workers being real owners, those who turned possession of the means of production into property were increasingly the managers.

Add to this picture the growing invitations to foreign investors to set up firms in mergers together with the Yugoslav enterprises and also the changing nature of the League of Communists, which was less and less composed of manual workers and more and more dominated by managers and experts. Those who ruled over expanded reproduction were the bearers of the logic of capital, and they were removing all obstacles to the realisation of that logic.

And yet, the logic of the vanguard and the logic of the working class were not entirely defeated. It is well known that there was a strong reaction against the trajectory of the 1950s and 1960s. As Yugoslavia entered the early 1970s, there were growing protests – protests among manual workers, protests from the poor republics. They said we don't have power anymore; inequality is growing, unemployment is growing. And in response to these movements, the vanguard changed course. Over and over in the party literature, you see the argument, “Look, we're fighting a battle on two fronts. On one front we're fighting against the state bureaucracy, that bureaucratic class that wants to run everything from the top. But the other battle, the other front, is a battle against capitalism. But we forgot about the second front.”

In order to attack the power of capital (presented as a "techno-bureaucracy"), there were a series of initiatives introduced in the 1970s. These included new legislative changes, the "workers' amendments" to the constitution, regulations intended to compress wage differentials by determination of socially warranted wages as well as a new law on planning which focused upon planning from below through self-managing agreements between the workers of different enterprises.

Without question, the new regulations and laws introduced constraints upon the managers; they introduced a check upon the logic of capital which reflected to some extent the logic of the vanguard and the logic of the working class. There was contested reproduction in Yugoslavia. In short, I propose that is wrong to look at self-management as a single system with particular characteristics. Rather, I think it is essential to consider the experience of self-management in Yugoslavia as a particular concrete phenomenon which is the product of the interaction of differing productive relations in a process of contested reproduction.