Red Markets – Opinion

There are reasons“s” Special December issueThis year marks the 30th anniversary the fall of the Soviet Union. We are exploring the legacy of this evil empire around the world and trying to ensure that it does not continue. The terrible consequences of communism cannot be ignored

A member of the Politburo addressed the nation’s legislature in 1952, almost six-and-a half years since the communists took power in Yugoslavia. He announced that the “exploiting parts of society” were now safe. The greater threat was bureaucracy. The country needed to take steps that Marxists would have pushed back.

He said it was the right time to begin “the withering of the state”.

This was not an April Fools’ joke, though he did speak on April 1. And while the Socialist Federal Republic of Yugoslavia did not wither away just then—that happened 40 years later, for rather different reasons—the place really was embarking on a new social system. In fact, it had been trying to move in that direction for some time.

Although Yugoslavia broke with the Soviet Union back in 1948, its government didn’t show any signs of abandoning Stalinist economics. The government began to brutally collectivize the agricultural sector. By 1951, the number of state farms had leaped from 1,318 to 7,012, and in the process the government had not just seized land but demanded absurdly high production quotas—and sent many of the farmers who couldn’t meet them to internment camps. The state’s push led to violent resistance, including the Cazin Rebellion, which saw hundreds take arms against it in May 1950.

But some leaders in the country were beginning to reconsider their economic strategies, particularly as newly-nationalized industries produced products that had little or no regard for quality and cost. Two comrades were sitting in Djilas’ car outside his home when Minister of Propaganda Milovan Djilas presented a plan. Instead of making factories answer to the ministers, how about allowing each plant to be run by its own workers. You could still call that socialist—Djilas invoked a passage in Marx about the free association of producers—but you could avoid the dysfunctions of a centralized Stalinist bureaucracy.

Edvard Karadelj, the deputy prime minister, was already experimenting with similar ideas. Soon, JosipBroz Tito was convinced by the three of them to endorse a more mild version. The federal assembly passed the first bill for reform by the end 1950.

Initial moves were modest: While elected workers’ councils had some control over how industries were managed, real power was reserved for state planners. They intervened if the companies were increasing prices or wage increases when they could have been investing in better planning. The government continued to push for collectivism in agriculture through 1951. All that resistance from armed peasants made it more open to the possibility of loosening its hold. In the years that followed, the planning became easier, prices dropped, peasants were allowed out of collective farms and the farms were encouraged to be self-sufficient.

Between 1951 and 1955, the number agricollectives plummeted from 7,012 – 688. While the number of agricultural collectives fell from 7,012 to 688 between 1951 and 1955, it was clear that the factories and mines became “social property” instead of “state property,” but the precise meaning remains a mystery. Economic controls were further relaxed in the 1960s. Firms were granted more autonomy and tax rates were reduced. Prices were also lower, taxes were flattened, and trade barriers were removed. Dennison Rusinow was clearly joking when he described the results as “laissez-faire socialistism”. But you can still see his point.

In limited circumstances, the government began to permit more civil and personal liberties. That made the culture richer—witness, for example, the so-called Yugoslav Black Wave of anti-authoritarian movies made in the 1960s and early ’70s—and it made the economy freer as well. Djilas noted that there was still an “overwhelming presence” of secret police. This continued up to the Central Committee plenary session in 1966 on Brioni when secret-police chiefs had been dismissed. This change gave firms more autonomy. Even then, the “fear of secret police” hasn’t disappeared. However, their methods and powers are much more milder.

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Yugoslavia isn’t the only communist nation to try reform. Leninist parties realized that economic liberty was essential for survival. Lenin was the one who felt it necessary to change the harsh restrictions of War Communism in favor of the more liberal New Economic Policy. This policy was adopted by Lenin in 1921.

Mao Zedong did something like that too—though it took a famine to induce it, and even then he might not have gone along with the changes if his power hadn’t been at a low ebb. China’s 1960s policies in response to the Great Leap Forward disaster allowed peasants to manage their own plots and smaller companies could buy material on the open market. The market also set prices. It was not because Mao had deep-seated Misesian roots. The country had to survive after millions of people died from starvation. Franz Schurmann, a sociologe wrote that China’s ideology is still orthodox. However, China as a functioning organization was sometimes suspiciously like Yugoslavia.

It’s important to note that this doesn’t mean they became countries of free people and free markets. Even Yugoslavia could be highly bureaucratic and repressive in practice—hence Djilas’ comments about the secret police. Djilas, who was a constant critic of the state and the party, was forced from the Central Committee. These critics culminated with The New Class (1957), a book-length assault on the communist system. Djilas claimed that the Marxist-Leninist party bureaucracy was an exploitative ruling elite in Marxist-Leninist nations. In his indictment, Djilas explicitly mentioned Yugoslavia, in spite of those efforts toward democracy on the floor and liberty in the market.

Djilas was jailed and reforms in Yugoslavia slow to a crawl over several years. The balance of power then teetered back and forth between the reformers and the more authoritarian old guard, who derided the changes as “anarcho-liberalism.”

Nonetheless, Yugoslavia was the freest communist country—and when necessity compelled other red regimes to allow more freedom, they sometimes looked to it for ideas. Czechoslovakia was subject to several periods of economic, sometimes political, liberalization. In the middle of the 1960s the largest of these, the Soviet tanks entered Prague in an attempt to end the process. Poland was unable to collectivize the agricultural sector of its country, so its private farmers fed both Poles and their neighbours. After a 1956 strike, march, and occupation, anxious officials granted some degree of management to firms, but the Poles weren’t as willing as the Yugoslavs that the worker-owned enterprises have any autonomy. Bulgaria joined in the reform wagon at the end: Just two years after the fall of Berlin Wall, Bulgaria allowed small-scale private enterprise to flourish, began an incremental process of decentralizing power and showed some signs toward self-management.

Some economic reforms did not work out. The 1980s saw mass protests by Solidarity (an independent trade union), and the Polish government tried to “decentralize the economy” by allowing producers’ resources and choice choices to be left in the hands of the central planners. However, it did not disentangle these producers from government subsidies and controls. Jeffrey Sachs, David Lipton and others wrote that “in effect” the central plan had been replaced by “markets but an endless process of ad-hoc negotiations between government and firms. Although the official prices of Bulgaria were not directly related to demand and supply, its bureaucrats knew that they could be manipulated by markets. They decided to give more attention to the prices of other countries, while still dictating their own price.

Hungary on the other side, however, has liberalized much of its economy. This was possible because of the death of Josef Stalin in 1953. The government granted its economists greater freedoms to talk, conduct empirical research, exchange ideas, and interact with other countries (including Yugoslavia) than before. Imre Nagy, the Prime Minister was forced out of office after two years in which he had been relatively open. But with the revolt of 1956, as thousands of Hungarians marched in the streets, Nagy returned to power and adopted a much more radical program—among other things, he legalized opposition parties, withdrew Hungary from the Soviet military alliance, and allowed workers’ councils to take control of the mines and factories. The councils were also new organizations that had been created at the grassroots and not from the top. They would have enjoyed much greater independence than Yugoslav counterparts if they continued to flourish. However, Soviets invaded Nagy and executed him. The councils then repressed after some time under dual power.

They were afraid of new revolts and so they suppressed the rebellion. They realized that consumers would be more satisfied if they allowed the revolution to continue. In the 1960s Hungary allowed more profit to be made, encouraged foreign investment and gave individual farm and factory production decisions. Peasants who worked in the communal farms were allowed to keep small plots of land. It also allowed small businesses to legally operate in the 1980s. A host of entrepreneurs—builders, brewers, taxi drivers, restaurateurs, dealers in secondhand cars—either launched new projects or moved out of the black market.

These reforms were paired with a generous welfare state and the system was called Goulash communism. Although it wasn’t all the freedom the Hungarians fought for, they did enjoy some of the best living conditions in Eastern Europe. The camp’s happiest prison barrack was, as the joke goes, Hungary.

Even though communist governments were not under pressure by mass rebellions, they still had to rely on the daily disobedience for their survival. Even when reform was not in the cards, illicit exchange kept people fed and clothed. It sometimes even encouraged reform. To be added the table. The table. Finally, the authorities accepted what was rampant and made way for an economic revolution.

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While this type of thing is primarily the result of pragmaticity, it can also be a reflection of an ideology. Yugoslavs who advocated a market-syndicalist model of socialism certainly believed they were creating a better version. Djilas scorned the Djilas apparatchiks, but there was sufficient enthusiasm for the Yugoslav system to send advisors to countries from Peru to Algeria. Although some may just have been Tito’s curiosity about expanding the influence of his country abroad, their advice was likely sincere.

Even more important, it gave the dissidents something they could point to as they advocated for greater freedoms. Paul Lendvai in Europe wrote in 1969 that Yugoslavia’s leaders “offered to the people working within the economy the illusion power.” This set off changes which “transformed the illusion power into a power o illusion” and this in turn, “became an important mover of development, animating them below.”

However, the connection between socialist ideology & market reform was most striking in Yugoslavia. It appeared in China during the first phase of the Cultural Revolution—the period, beginning in 1966, when Mao decided to fight his rivals in the country’s power structure by declaring them counterrevolutionaries and urging his subjects to rebel against them. Soon, there was a chaotic mix of forces fighting for control. Some were merely pawns of officials who wanted to bring their power struggles from the back rooms. Others were students who were sincerely committed and others were just ordinary citizens trying to make their point.

One faction was the Shengwulian, a self-declared “ultraleft,” of the Cultural Revolution. Yang Xiguang, a teenage named Yang Xiguang wrote “Whither is China?” in 1968. It was the most popular piece of Shengwulian writing. Yang was not the leader of this movement. Leader—Shengwulian was a loose conglomeration that drew on different sectors of society, and not everyone in it adhered to the exact same political line—but his manifesto found hundreds of thousands of readers. Yang, unconsciously echoing Djilas’ argument that China was not only a problem of reactionary elements in the Communist Party, argued that it wasn’t just those within the party. Self was a privileged class. It must be overthrown and replaced with a democracy based on the Paris Commune, he stated.

Every faction involved in the Cultural Revolution claimed that it was acting under the leadership of Chairman Mao. Shengwulian, however, did not differ from the rest. The essay contained tedious sections trying to prove that the ideas in Shengwulian were those of Mao. Really wanted. Unsurprisingly, Mao disagreed. (Shanghai had notionally adopted a Paris Commune–style system in early 1967. The chairman ended it after less than one month. It was the nation’s leaders who played a significant role in “Whither China?” It was widely distributed, however it is not because the country’s rulers were “material to criticize.” Those criticisms weren’t exactly measured—Hunan Daily declared Shengwulian “even more stinking than dog excrement.” Yang was imprisoned in several prison camps for the following ten years.

Yang’s manifesto had a strange side effect: It was kept being read by people. The one essay continued to be shared even after Mao’s death and the Cultural Revolution. In the democracy movement of the 1970s and ’80s—not a world overflowing with nostalgia for the Mao years—”Whither China?” was accepted. The Chinese dissident Liu Guokai published An Overview of the Cultural Revolution in 1980, he was caustic about Mao and his allies but praised Yang’s essay as a “penetrating work.”

Yang was released from prison with the final irony. Yang emerged from prison after he had been imprisoned. The former Maoist had studied economics while he was in jail. He became a fan of Adam Smith and Milton Friedman over time. Yang Xiaokai now works under his name. James Buchanan, a libertarian American scholar, praised him for writing “the best and most interesting research in economics anywhere in the world.”

Yang advocated for both civil liberties and democracy in both his academic writing and popular writing. He argued, in fact, that without the other two the first would be doomed. His 2001 final paper argued that economic development was held hostage by the interests of the wealthy class because of Communist Party’s political dominance and state-owned companies’ dominant position.

As far as “Whither China?” is concerned, It did not have an economic agenda. Instead, it argued for self management. You may spot something more if you reread it with Yang’s future path in mind. According to the Shanghai Commune manifesto, productivity would be significantly increased “without bureaucrats or bureaucratic organs”. Production of coal continued as normal after the Ministry of the Coal Industry collapsed. Transportation continued as before, although the Ministry of Railways collapsed. The provincial Party Committees’ departments all fell but their various work branches continued as normal. There was another revolution lurking somewhere within those revolutionary old ideas.