Economists and the Reds

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It seems to me that Western economists didn’t do very well in understanding the Soviet economy, or that of other East Bloc countries. According to Paul Krugman, “typical estimates of the GDP of East Germany before the old regime collapsed put its real GDP per capita at 70 or 80 percent of the West German level – meaning that East Germany was actually richer than some regions in the West. Yet after the fall of the Berlin Wall, visiting Westerners found something that looked like a Third World economy, with antiquated factories (and disastrous environmental problems) producing consumer goods of ludicrously low quality (like the notorious East German Trabant, an automobile that makes a Honda or Ford seem like a Mercedes). We used to think that the Soviet Union had an economy about half as large as America’s, that is, bigger than Japan’s; nowadays Russia seems to have less economic power than, say, Italy. ”

I know someone who, as late as 1985, came away from postgraduate work at Cornell convinced that East Germany was more productive and prosperous than West Germany. Someone in Army Intelligence!

By “we”, Kreugman is talking about academic economists in the US and western world generally. Paul Samuelson said, in his standard textbook, ““the Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive.” But it wasn’t just him.

While we’re at it, I’m not sure that that people like Hayek or von Mises or Friedman ever had much coherent to say about the performance of the Soviet economy in 1942.

But I am an observer, an outsider. I would welcome thoughts from readers who are professional economists, have talked with them and hung out with them, gotten stinking drunk with them and woken up naked under a shower in the girls’ dorm, etc.

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235 Responses to Economists and the Reds

  1. Nick Rowe says:

    Academic economist. Though Comparative Economic Systems is not my area.

    Driving across East Germany, then visiting Poland and Czechoslovakia, in 1974, gave me a much better picture of their standard of living and productivity compared to Western Europe than any GDP per capita data would have done. Even if GDP data is reported honestly and accurately (a big if) there are many theoretical problems with using GDP. Eastern Europe was clearly poorer and more economically backward than Western Europe.

    Same with spending 6 months (teaching economics) in Havana in the mid to later 1990’s. Many people had barely enough to eat.

    I had read through the Central Planning debates of Lange and Lerner vs von Mises and Hayek. One thing I didn’t learn from that literature though is that the Soviet Union was only officially a centrally planned economy. I learned from a Russian emigre in 1980 that in practice it functioned through less “formal” channels. I asked him whether he was scared of the police busting his black market business in car parts. “Police have cars. Where do the police get their parts from?” he replied.

    I thought that capitalism was a better economic system than communism. But I thought that capitalism was probably doomed (more from reading Schumpeter than Marx). I was surprised (and happy) when communism collapsed.

    Most (nearly all) academic economists I have met have been generally pro-market (and more pro-market than the population, and much more than other academic social scientists). We argue details about the role of government, and where in practice it can do better or worse than the market.

    • gcochran9 says:

      My question is why professional economists did such a crappy job of understanding the Soviet Union. Doesn’t seem to me that you’ve answered that question.

      • magusjanus says:

        I think it’s a combo of reasons. (full disclosure, I know a lot of very high up guys in that world personally)

        Def a big part is the overwhelming prog nature of academia; I mean we’re talking a world where you find more in your face Marxists than Republicans. Bill Ayers is a professor. etc. While econ depts tend to be little Rivendells against the darkness in some cases, broadly speaking this does have an impact, it can’t help but have one. Samuelson for instance was around when EVERYONE who “mattered” in academia, intelligentsia, culture, cocktail parties (radical chick mau mau stuff) was prog. It would take a heck of a backbone to stand against all that. And they tended to look at SU in 20s/30s/40s as “the future”, and later as “flawed but we’ll find some middle ground convergence”. The identity politics New Left wing later emerged as a sort of weird viral mutation in the 60s with a slightly different dynamic, but they were still broadly sympathetic if we look at it cladistically, who interacted with whom, etc.

        Regarding the specifics of SU, part of it was rent seeking. If everyone has a funding need that requires a strong SU, well, don’t be surprised if research/views that says SU is super strong will get more air time and your career more fast-tracked than views that say otherwise. People respond to incentives. As you so often talk bout regarding W admin and Iraq pseud-WMDs. the voices of truth get ignored.

        But I’d also not underestimate that some well meaning people just genuinely got it WRONG. A lot of times events in history that the conspiratorial put on nefarious cigar smoking men in a back room with a master plan can more easily be ascribed to incompetence. Many economists genuinely just f’d up. Maybe it was the shadow of tremendous performance of SU in WW2 and willingness to tolerate sacrifice, or Sputnik, or US ‘losing’ Vietnam and high inflation in 70s + energy crisis + union woes (Winter of Discontent UK) made SU seem like a behemoth. The conflation of foreign policy ‘successes’ by the commies with potentially domestic econ successes. So many otherwise well meaning economists with limited info just genuinely f’d it up when in hindsight they really should have known better…. the info was there, they just messed up.

        Ultimately, in many cases it was that econ can be more empirical science than academic. Not many econ professors are hedge fund millionaires for instance. If you want guys with excellent predictive track records, go to the markets and see who consistently outperforms. Prob is they tend to specify a bit (cuz the prob theyre tackling, predicting future vis a vis current market pricing in a profitable manner, is REALLY REALLY REALLY hard thence incredibly rewarded). But those guys are guys that are def worth sitting down and listening to. They tend to have a mental framework similar to Tetlock’s “Superforecasters”. I’d be curious what they think of different world probs now, and what their equivalents thought back in the 80s. Who made money off of SU collapse (and how?).

        • spottedtoad says:

          Good post. I’m guessing that economists just didn’t have valid or reliable measures of domestic economic activity available, and impressed by Soviet military and space technology, they and other academics assumed that since the bombs and rockets were (mostly) real, the numbers about domestic production were real rather than propaganda.

          There’s a broader problem where economists tend to be insufficiently critical of bad measures when good ones aren’t available. There were some terrible but much cited papers in the late 90s and early 2000s which claimed Subsaharan Africa was poor because of bad institutions (which might be partly true) but basing this inference on a cross country two-stage-least-squares regression where the independent measure of institutional quality was a convenience sample survey of executives or a consulting company’s number they just pulled out of their wazoo.

          • gcochran9 says:

            East Berlin was full of unpainted and bullet-pockmarked buildings in the 1970s, and people were driving cars with lawnmower engines. If people saw a queue, they would immediately join it, with the hope that something was actually available.

            But it was too hard to figure out that they were poor. I get it.

            • Peter Lund says:

              Those bullet holes in the buildings were still there when I visited in Easter 1990. We could pass the border crossings completely unhindered and walk around in East Berlin anywhere we wanted. One of the best upkept places was the Soviet Embassy (and the garden in front) on Unter den Linden. And even that had a broken sign at the gate.

              • Peter Lund says:

                I misremembered. It must have been in early February 1990 and not Easter, because we saw the Moon being red due to the lunar eclipse the night we saw The Marriage of Figaro.

            • No One says:

              I don’t think you got Spotted toad’s point. To elaborate. There are very few economists who deal with the data collection at all. Nobody goes out and ground truths their data. Especially in macro everybody just uses whatever data a country spits out. There has been a bit of work now questioning Chinese stats, but we mostly take whatever they decide to print this quarter at face value. Look at their carbon output stats, we have no idea how much they are lying. So economists got it wrong becuase we don’t have anybody who will just drive around and no process to verify the government numbers. Like I said, a few people have been working trying to use the various chinese numbers to check each other, but its still hard.

              Economists mostly want to me running regressions from computers, not spending years actually figuring out how markets work and wether numbers are true.

      • pyrrhus says:

        When as a Harvard student I questioned the GDP numbers for the Soviet Union in the basic Economics course, the response was more or less “why would they lie”?. The naivete of academic economists back then was stupefying.

    • Jim says:

      I recall reading of estimates that by thr time of Brezhnev something like 40% of the Soviet economy was black market. Does this sound about right?

  2. James Miller says:

    Academic economist, although I started grad school after the Soviet Union’s collapse. We still don’t really understand the causes of economic growth and it does seem (theoretically) plausible that a dictatorship intent on high economic growth could restrict consumption and mandate long working hours to get a high national savings rate which it could then use to achieve a high growth rate. Stalin did produce a lot of tanks in WWII, and the Soviet Union did seem to be keeping up militarily with the U.S. until the end of the cold war. Plus, of course, U.S. economists (like most academics) don’t want to be seen as siding with the political right, and during the cold war saying that communism was a failed economic system put you on the right.

    • RK says:

      There are multiple ways to do this; even economies currently labeled as ‘capitalist’, such as South Korea, Japan and especially China, have done this, through financial repression, which amounts to a tax on consumption/the household saver, and a subsidy on investment. While this can lead up to huge growth in capital stock, its an open question how economically sustainable this capital stock is, i.e. how well it feeds back to debt-servicing capacity, how well it sustainably addresses the needs of the domestic economy, how well it translates to increased standards of living, et cetera.

      Since Japan had faced, and now China is facing crises in widespread problems with low debt-servicing capacity in the private sector–later this debt got transferred to the government–we know that a lot of this investment is actually malinvestment, debt that will never repay itself, which now is being transferred to taxpayers instead. Attempts at moving away from financial repression and reallocation of incentives to favour the consuming power of workers and savers, such as raising interest rates, as suggested by the BOC, face storms of criticism, as so many ‘zombie enterprises’, many state-backed enterprises, or state-affiliated in the case of Japan, will be crushed under the weight of debt-servicing. So much of economics is actually political economy…

      • steve pearlman says:

        The above commenter is correct. As a professional investor focusing on Asia, I see similar dynamics playing out there as to what transpired in the USSR. China manages its economy to a GDP target and famously hits those target with uncanny regularity. However it is not “good” GDP growth.

        With a modern-era record of almost 50% of GDP being driven by Investment, there is no way there are enough profitable opportunities for this juggernaut not to end in tears. But it can go on for a very long time without a properly functioning finance sector. Chinese banks lend to Chinese SOEs and neither side has an interest in recognizing a loan as bad. Right pocket, left pocket–net no difference to the PLA. As bankers say: Time to “extend and pretend”. GDP targets will be hit come hell or high water.

        So GDP in Russia in the 1920’s-1970’s may have been fairly reported but the malinvestment rot built up over decades as “production targets” drove policy and eventually it collapsed — the Russians were left with uncompetitive or obsolete assets, the same ones that had once driven that impressive GDP growth.

        Anecdote: USSR tractor manufacturers were originally compensated by weight, not by number of vehicles (to help hit steel production targets), soon the tractors sank in the fields and had to be scrapped.

    • gcochran9 says:

      Heilbroner once said: “The farther to the right one looks, the more prescient has been the historical foresight; the farther to the left, the less so. ”

      You know, someone should blame right-wingers for being correct about some things, since that more or less automatically drove left-wingers into being wrong.

      I think that’s less of a problem today.

      • dearieme says:

        My view is that right wingers are very good at spotting the direction of change but tend to overestimate its speed. That’s probably because they forget how conservative people can be, especially the young.

      • spottedtoad says:

        Well, how long was the political right particularly associated with capitalism…100-150 years? Before and after that, I don’t know if the political right’s track record of prediction looks that good.

    • Y. says:

      Those tanks were 100% produced in factories designed and built by General Motors and the like. The only way Soviets were involved in the design and construction was as grunt labor. IIRC, even the foremen were Americans.

      • keypusher says:

        Where did you learn such nonsense? Maybe a wild extrapolation from the fact that the Soviets used a suspension system developed by an American, J. Walter Christie. But that system dates back to the 1920s and was adopted all over the world (though not by the U.S. Army in World War II as far as I know).

        If the Soviets had been using American designs, don’t you think they would have build Stuarts and Grants and Shermans rather than T-34s? Pretty big difference.

  3. Great question. My suggestions
    (1) Believed official statistics too much, because there was a lack of alternative data.
    (2) Lack of inside information on how command economies actually (dys)functioned.
    (3) Lack of a model for how property rights functioned.
    (4) Were mostly busy doing other things, so could be swayed by a few authoritative names.
    (5) Said names were mostly centre-left and tended to see command economies as the New Deal (or equivalent) writ large.

    • EricWilds says:

      This isn’t very convincing. Economists are supposed to understand economics, and they should have a pretty good idea that you need markets to allocate goods and services, and that savings and investments encourage economic growth. It was understood as far back as Aristotle that people tended to be better caretakers of their own property than property owned “in common.” In theory economics is a science, but its practitioners are the usual swindlers and cheats.

  4. jamesd127 says:

    I think you are all grossly underestimating the evil and cynical communist conspiracy. A lot of people were just plain and simple on Stalin’s payroll.

    Recall that when Soviet policy towards Cambodia abruptly and officially changed overnight on Christmas 1978, pretty much all of Academia overnight switched from viewing Pol Pot as a mild mannered saintly agrarian reformer who walked on water to a demon in human form installed by Ronald Raygun and the CIA.

    Therefore, in December 1978 pretty much all of Academia was in the pocket of the Soviet Union.

  5. I think that the economists fell into line with naive observers like the Webbs “we have seen Communism and it work” because they were shown the prestige projects, in the same way that the AK47 conquered the world, and Sputnik impressed the world. A few projects, a big impact, and economists assumed there was a wide base to the pyramid. But it turned out to be th Smart fraction: with a room full of bright guys you can put on a good show, and fool most of the people most of the time.

  6. georgesdelatour says:

    I think a lot of it’s down to a kind of “prestige effect”:

    The USSR was perceived to have defeated Nazi Germany. There’s an argument to be had about how far US and British help made that victory possible. But, at least in terms of blood, the Red Army did most of the fighting which destroyed the Vermacht, and this gave the USSR a kind of prestige.
    After WW2 more and more countries went Communist. Not just the Soviet vassals in eastern Europe, but North Korea, China, Vietnam, Cuba; plus, France and Italy had large home-grown Communist parties. It’s unthinkable these countries would have wanted to emulate Russia’s pre-Communist Romanov system. Today no one wants to try Stalinist economics any more. But in the 1950s and 60s Third World countries thought the Soviet system had achieved rapid industrialisation faster than Capitalism could have.
    The USSR’s early lead in the Space Race really seemed to shock the USA. Without that shock there would have been no Neil Armstrong walking on the moon in 1969. The US seems to have alternated between seeing the USSR as “Upper Volta with ICBMs” and seeing it as America’s near technological equal.
    There may have been a corrupt Cold War motive. If the experts massively over-estimated the size of the Soviet economy, those estimates could be used to justify higher than necessary US anti-Soviet spending.

    • Hippopotamusdrome says:

      But, at least in terms of blood, the Red Army did most of the fighting which destroyed the Vermacht

      Perhaps a better metric of contribution to the destruction of the enemy would be casualties inflicted on the enemy and not casualties suffered. Soviets specialized in cannon fodder tactics. Then you should also include the Pacific theater too. Japan suffered 2.5 million dead, how many of those were killed by Russia?

  7. akarlin says:

    The economists were not wrong. In production terms their estimates were perfectly legitimate. Of course the consistently biggest and most germane critique of central planning is that production was badly matched to consumption, so material living standards (at least in most aspects) were depressed relative to the levels implied by the raw production figures.

    The Russia < Italy comparison is based on nominal GDP. Living standards are much better proxied by PPP-adjusted GDP, on which Russia is similar to Germany (and in per capita terms comparable to countries like Croatia, Poland, or Latvia).

    • benespen says:

      Does PPP adjustment really work when you can’t get anything, or get anything good? For example, Soviet durable goods were notably terrible, yet people still lined up to get them because nothing else was readily available. https://artir.wordpress.com/2016/06/06/the-soviet-union-durable-goods/

      • akarlin says:

        It works pretty well for countries with free markets.

        It does tend to overvalue centrally planned economies. The World Bank currently puts Cuba at a rather implausible $20,000 GDP per capita. OTOH, estimations based on using black market currency exchange rates (actually done for the USSR by some economists) gave very low figures which basically put its economy at Sub-Saharan African levels. That is even more ludicrous.

        In short, making good comparisons between economies run by very different mechanisms is very hard. In this case, at least, Cochran’s derision is unwarranted.

        • gcochran9 says:

          It wouldn’t have been all that hard to notice that almost everything made in the USSR, outside of military goods, would have been almost unsaleable in the West. Although I hear Canadians liked their tractors.

          For example, they never bothered to develop high-efficiency jet engines. This meant that all their combat jets had relatively short range, but also that their civilian jets were useless to everyone else – money-losers even if you got them for free. I’m pretty sure that the boys in the Pentagon knew the range of Soviet fighters.

          Primary production, like oil and grain, were saleable. Some intermediate products, like aluminum. Most Soviet manufactured products were, in world markets, worth less than their ingredients.

        • Artir says:

          Regarding Cuban GDP, I did a post trying to elucidate what is the actual GDP (in Spanish)
          https://katalepsisblog.wordpress.com/2016/03/31/la-paradoja-del-pib-de-cuba/
          Turns out it’s more like 7301$ per capita, PPP adjusted.

    • Tokarev says:

      But as GC’s quote above makes clear, they thought the Soviet Union was evidence a command economy could “thrive” which would seem to mean a lot more than just increase their nominal GDP. And beyond the basic steps of economic development, the Soviet economy completely failed to thrive–in spite of having pretty good human capital.

  8. Matt says:

    The so obvious its boring assumption I would make is the underlying problem being GDP is a bad measure to actually target, and is only honest in the absence of targeting by governments. Which targeting you can go further with when the government has more real control over the economy. Particularly, the composition and actual quality of goods and services sold and purchased becomes out of whack with individual choices and thereby standard of living.

    I have no knowledge of actual process that could confirm or reject this hypothesis.

  9. dearieme says:

    Why pay attention to an idiot who can say “an automobile that makes a Honda or Ford seem like a Mercedes”? He clearly has no idea how good a Honda can be. Has he never driven one?

  10. ursiform says:

    It did always seem strange that a country where people had to wait months to buy a refrigerator and years to buy a car was about to overtake us economically, as many an article back then did say.

    Leftist economists wanted it to be true. It was useful for some rightists to believe it, because it justified large defense budgets.

    Leftist economists could point to CIA projections to support their wishful thinking. A convergence of delusions.

    It was common for those on the right to believe that communism had to fall eventually, but to believe it would take a very long time. Internal opponents of the SU thought it would fall sooner, because they saw the rot in the system, which mattered more than any theoretical shortcomings of communism.

    • gcochran9 says:

      Thousands of nuclear-tipped missiles, tens of thousands of main battle tanks, were real: they sold the high defense budgets.

      • ursiform says:

        There was a feedback loop. In my experience we generally overestimated future SU military production, and planned accordingly. This pushed them to routinely produce more than they could afford, but less than we projected.

        We also produced less than we projected (and probably less than they projected we would). But that was because our procurement system was (and is) foolish and wasteful.

        • ursiform says:

          There was a belief that they had to have a large economy to support their military spending. In reality they just starved the rest of their economy to support their military spending. Sort of a really big North Korea.

        • ursiform says:

          By the way, setting the Soviets up to be twelve feet tall contributed to our acquisition problems. We speced our systems to be beyond state-of-the-art in an attempt to keep up with an exaggerated threat. That led to endless technical problems and cost and schedule overruns. If they were really everything we built them up to be we would have been toast.

          • jamesd127 says:

            “By the way, setting the Soviets up to be twelve feet tall contributed to our acquisition problems.”

            It was not the right that depicted the Soviets as twelve feet tall. The right, for example Jerry Pournelle and the movie “Red Dawn”, were pretty close to the truth.

            The left position was that the Soviets could afford to keep up with us in an arms race, therefore spending on military hardware was unwise. The right position was that they could not, therefore spending on military hardware was wise.

            • gcochran9 says:

              I liked Red Dawn: but I never thought it had anything to do with reality.

              Jerry has many ideas: lots of them are wrong, and he can be mighty stubborn about it.

              The descriptions I read (before the Soviet collapse) of Soviet arms, quality and quantity, were, if memory serves, not all that inaccurate. It’s not as if a bunch of their ballistic missiles, or nuclear submarines, or tanks turned out to be imaginary. In fact there were more than there should have been: they turned many of their SS-20s over to their East Bloc allies, rather than withdraw or destroy them as a result of the INF treaty. Of course nobody remembers this.

              The first real sign that something was wrong was when the Israelis, intervening in Lebanon, ran into some Soviet fighters around the Bekaa valley (the Bekaa Valley Turkey Shoot) and shot down 82 of them without losing a single one of their F-15s.

              This led to guys like Ogarkov supporting new blood in the leadership (Gorbachev) – they wanted to “get this country moving again.” Which led to the Fall of the Soviet Union.

              • ursiform says:

                It wasn’t the counting of what they had that was off, it was the projections of what they would have.

                Projections about ICBMs and SLBMs were made by different intel organizations. The ICBM development projections I saw were implausibly high, while the SLBM projections were implausibly low. If you didn’t know the projections came from different organizations you would wonder how they could refer to the same country.

              • jamesd127 says:

                “It wasn’t the counting of what they had that was off, it was the projections of what they would have”

                Exaggerated projections of what the Soviets would have was a left wing error, not a right wing error – it was part of the view that they were growing faster than we were – and pretty much everyone who believed they were growing faster than we were also believed that they were deservedly more popular with the oppressed masses than we were – and if they were not,then the oppressed masses were suffering false consciousness.

              • MikeP says:

                The Russians got in trouble with the Arabs when they blamed the humiliation in the Bekaa on the quality of the Syrians not the hardware. The hardware was inferior, but not that inferior.

              • El Bow says:

                In the specific case of their military hardware not matching up, a lot of their export models were watered-down variants in the mid Cold War period. Their export MiG-23 was especially egregious, as several important electronic systems were either downgraded or absent vs. the domestic model.

                By the end of the Cold War they’d stopped or at least restricted this practice; East German MiG-29s were more or less the same as Soviet ones. But they still kept the best stuff to themselves; the SU-27 wasn’t exported until after the Cold War. SU-27, by the way, had AL-31 engines with specific fuel consumption every bit as low as Western low-bypass turbines (slightly lower than the F100s in the F-15, in fact, and significantly lower than the French M53 in the Mirage 2000), and it had range that was actually far greater than any competing Western design.

                The impression I get is that their engineers and designers were every bit as good as the Western ones, but only occasionally could the really good designs be mass-produced because their industry was not as good.

                The tanks they exported weren’t top-notch either. I have not found any evidence that there were specifically downgraded export models of tanks, but the tanks their allies and clients did have were usually a model number or two behind what the Soviets were fielding. Also, some of the better Soviet tank designs were never exported. The T-64, for example, was the first tank with composite armor, had the most powerful cannon of tank when first fielded, and had a fully automated fire control system similar to what most Western types had. It was never exported, and in fact never managed to equip most of the Soviet army. Only one factory in the USSR could produce the T-64; the others manufactured the apparently simpler T-72. Designers’ ambitions outran actual production capabilities.

                Soviet Cold War tank design and procurement, by the way, was a complete mess. It had previously been thought in the West that it was an essentially rational process, with each successive model being an improvement on the last. Not so; the T-64, T-72 and T-80 are only partially-related designs, all with comparable performance and almost no parts inter-compatibility. They ended up with three parallel designs in service basically as a result of political shenanigans.

            • ursiform says:

              You didn’t read the threat projections I read.

        • Y. says:

          You also sold them high-tech machinery they needed to keep being a threat..

          http://reformed-theology.org/html/books/best_enemy/chapter_07.htm

    • jamesd127 says:

      The argument that Soviet Union was mighty, and therefore we should avoid angering it, came from the left. The argument that the Soviet Union was weak, and should therefore be defeated, came from the right. The Movie “Red Dawn” depicts the Soviet Union successfully invading the US because it is collapsing. In “Red Dawn” they are aggressive out of desperation. They have run out of other people’s money, and need some more other people’s money.

      The proposition that rightists inflated the strength of the Soviet Union is a self serving rewrite of history. Everyone who inflated the economic strength of the Soviet Union either believed that the forces of history gave ultimate inexorable victory to the Soviet Union, as for example the economist Samuelson who wrote all the textbooks economic students were required to read,, or they believed that the US should converge with the Soiviet Union as depicted in those startrek episodes before the fall.

      I predicted the imminently collapse of the Soviet Union in 1985. To the best of my recollection, the view was widespread among well informed rightists and libertarians.

      If you did not believe the Soviet Union was overtaking the US economically, you obviously had not read your Samuelson textbook, and so would be marked down. Anyone who was even slightly in contact with glaringly obvious reality got bad marks and thus failed to become an academic.

      • The press has always, and will always sell to the public fear of whomever is the most popular rival of the time. It has nothing to do with fair and balanced reporting and everything to do with profit. Fear sells, if it bleeds it leads. We as a news consuming public were constantly told how fearsome communist Russia was just like we are told constantly today to fear muslim terrorists. A few informed economists can’t make a dent in the constant barrage of propaganda coming from all news sources that the evil commies of yesterday or the vicious terrorists of today are coming to get us.

        After communist Russia collapsed and before 9-11 you could just tell the press and it’s clever manipulators were looking for a new frightful enemy to sell to the public. The Chinese were looking scary for a while but they never cooperated and stepped to the real cold war posturing that this game requires. It isn’t the left or the right you point your finger at for selling the Russian commies as being far more formidable than they really were, the profit motivated press did this for no other reason than it increased their audience.

        Why the economists followed suit is silly and inexcusable. Anyone who went to communist countries knew the truth. A Polish friend of mine told me that you kept a bucket of sand by your communist made television. Because they frequently shorted out and burst into flames. You then as quick as possible pulled the plug and dumped the
        bucket of sand on to the television. The backwardness of communist countries was incredible. The saying in Poland was “they pretend to pay us and we pretend to work.”

        • ursiform says:

          The Chinese are threatening because they study history and are determined not to replicate the mistakes of the SU and not to come into open conflict with us while we are much stronger.

          That said, the Chinese have no desire to fight a war with us. It would collapse the value of the $2T in our bonds they hold and eliminate their market for cheap, toxic toys.

          They look to the longer term: stability with slow expansion of their sphere of influence. Nine-dash line, anyone?

      • ursiform says:

        Rightists inflated the near-term strength of the SU while saying that our system had to win in the end. Internal dissidents were far more accurate in predicting the near-term fall of the SU due to internal rot.

        • jamesd127 says:

          “Rightists inflated the near-term strength of the SU”

          Rightists accurately claimed that the Soviet Union had a lot of military strength – considerably more military strength than it could afford. This was the implied theory of “Red Dawn” – that the Soviet Union needed continual conquests to fund a military it could not afford.

          • gcochran9 says:

            Did the Soviets make any money out of conquest in the 1950s, 1960s, 1970s, or 1980s?

            No.

            Every dip-shit Third-World country they got involved in was a money-loser. Although not on the scale of US spending in Korea or Vietnam.

            They got some loot in the 1940s (industry in East Germany and Manchuria), but nothing compared to the cost of the war.

            • ursiform says:

              The cost of trying to maintain an empire was part of what brought them down.

              • gcochran9 says:

                It didn’t help, but the cost wasn’t very large. Some of it was due to their screwy accounting: their trade relations with Eastern Europe were intended to be favorable to the Soviet Union, but when the price of oil went up they turned into a subsidy.

            • Jim says:

              Of course they didn’t start war with Germany so their not getting a positive return on the cost of the war from loot is not really a miscalculation. I’ve read that Beria in the time shortly before his death was pushing the idea that the Soviets would offer the West a deal involving Soviet withdrawal form Eastern Europe in return for mucho foreign aid.

          • ursiform says:

            You do understand that “Red Dawn” was fiction, right?

      • Abelard Lindsey says:

        The impending collapse of the USSR became obvious to anyone with room temperature and above IQ in 1986 when the “mighty” red army was unable to prevent Azerbaijan and Armenia, then Soviet provinces, from going to war with each other. This would be like Mississippi and Alabama going to war with each other and the U.S. military being unable to stop it.

      • giovanni says:

        This is a ridiculous caricature of liberal politics in 1985. I read my dad’s Nation and In These Times religiously, but still knew we had a much better economy than they did. And the Nation and In These Times were way out there in terms of liberal politics. TNR was still fairly liberal then. Soft on communism or oblivious to the fact that the Soviet economy wasn’t productive? Ludicrous. Or maybe it was true of the music reviewers.

  11. st says:

    True. Paul Krugman did not understand SU economy back then. And judging by the passage cited, he still does not understand it. Same with the rest. West is still clueless. Not a good sign. It seems that the good book for the rise and the failure of the communism and its command economy will never be written. Lesson unlearned.
    On a side note, did any economist ever successfully predicted any major economic crisis? If not, why would anyone wonder why Krugman never foresaw the crash of soviet economy? Did he ever foresaw any state-scale economic crash? Did any economist ever did, unless he/she caused it personally?

  12. dearieme says:

    Because macroeconomics is rubbish (unlike microeconomics). Why did the rubbish express itself in a pro-communist way? Academia.

  13. biz says:

    The simplest explanation is that it was impossible to get real information out of the Eastern Block. They falsified harvest and production numbers, then falsified the falsifications just to be sure. Westerners who visited were kept under tight scrutiny and not allowed to see regular apartments and stores, so even if they wanted an objective view they couldn’t get it. Outwardly the SU was making fighter jets, putting satellites up, and building opera houses.

  14. Dale says:

    I suspect a big part of it is that few academic economists spent much time studying the Soviet Union. (Which is largely equivalent to “there wasn’t much grant money being handed out to study the Soviet Union.) Economics is a very rough and error-prone field at the best of times; without a lot of people working on a problem, you can’t expect to get good results.

    And the smart people didn’t claim much. Krugman noted, really, that the Soviet Union actually worked, contrary to the expectations of many. And it did work, for 70 years. And I’m sure that some aspects of the S.U. prospered, even. Of course, those were the ones the government liked funding. Then again, academic research was one of the areas that the Soviets liked funding, and under the Soviet system, once you got a position, you pretty much had it for life, and you never had to hustle to find next year’s grant. Supposedly, more scientists went from the West to the Soviets than scientists went the other way, simply because life was so much easier (once you got a position).

  15. Red Pike says:

    Economists are not scientists in the ideal sense. They believe what they want to believe. Like with lots of pseudoscience, the goal posts can be endlessly shifted to rationalise retention of the faith.

  16. “(1) Believed official statistics too much, because there was a lack of alternative data.”

    I believe this is a good point.

    Also properly accounting for differences in quality is a difficult problem. As seen by the constant arguments about how to measure inflation.

    Finally the collapse of much of the Soviet economy when exposed to Western competition might be a little misleading. If you suddenly dropped a 1965 USA into a 2015 world it probably would have problems too.

  17. Patrick Boyle says:

    I’m surprised that if you cite Heilbroner you would not also cite Jerry Pournelle. I remember reading an essay of his in the early seventies where he expressed the most profound skepticism that the Soviet Union was as rich and powerful as was then commonly believed.

    His methodology was to skip all the published estimates and rely on aerial photographs. He counted up highways, airplane runways, and shipping lanes. He said that the USSR couldn’t possibly have the economic output they claimed because it didn’t have the physical infrastructure. He seems to have been right.

    Sometime later all the Cultural Marxists were outraged about the failure to find the ‘Weapons of Mass Destruction’ that had been the ‘casus belli’ for our intrusion into Iraq. The Democrats claimed we must have known all along. But the whole history of modern warfare is a testament to how easy it is to deceive others.

    The Allies launched a whole phony invasion of France under Patton. How could the Nazis have been so dumb? The Soviets had plenty of warnings about the Nazi invasion of Russia but they too were fooled. Big deceptions seem to usually work. In this case the former USSR ‘cooked the books’ on their economy. If highly trained and motivated military officers couldn’t see through the ruse – what hope is there for fuzzy headed academics.

    • gcochran9 says:

      It’s more how easy it is to deceive yourself. Saddam never tried to deceive us about a weapons program: he said he didn’t have one, and that was the truth. The Bush people deceived themselves – and that rubbed off on the great majority of the Fools at the Top. Not on me, though.

      Similar, Stalin simply refused to listen to all the correct, detailed warnings of Barbarossa.

      The Nazis were not particularly dumb when they believed in Patton’s FUSAG and an attack straight across the Channel. A lot of intelligent effort was put into deception, while the Germans had no spies in England (all had been caught and turned or executed). It had become almost impossible to even get decent photorecon of England. On the other hand, if they had really believed in FUSAG, which implied that the Anglo-Americans had twice as many divisions waiting in Great Britain as they actually did, they should have just surrendered.

      Plenty of tourists visited the Soviet Union I think anyone with a decent understanding, who kept his eyes open, would have had a reasonable accurate picture of life its own self, back in the USSR. But such people are apparently rare.

      • Unladen Swallow says:

        I remember reading a compilation of Robert Heinlen’s non fiction ( with a few fictional short stories included ) work in a single volume that was published sometime around the time of his death. He mentioned visiting Russia with his wife who spoke Russian fluently sometime around the late 1950’s-early 1960’s period.He said they made mighty efforts to shake their official Soviet tour guide during their long vacation there, but only managed twice and both times immediately found poverty stricken slums. He also mentioned thinking that the Soviet infrastructure was nowhere near what they claimed it was, saying he didn’t believe that Moscow was anywhere near as big as New York, London, or Tokyo despite Soviet claims of it being the largest city in Europe, which by the way continues to be claimed to the present day.

        • gcochran9 says:

          Heinlein was wrong. About Moscow, and many other things.

          • Unladen Swallow says:

            What about Moscow? I think he said that the transportation networks that went through the city were simply not large enough to support the claimed population by the government. What did he get wrong? where they larger than he estimated?

            • gcochran9 says:

              Considering that Moscow is the rail hub of the Soviet Union, he was being ridiculous. It is true that Moscow is smaller than a US city of similar population: there are relatively few-single story homes, lots of apartment buildings. Matthew Yglesias would have loved it, especially back in the old days, when you could denounce the family sharing your apartment, have them sent to the Gulag, and no longer have to share the bathroom.

              As I have said before, Heinlein was sometimes extremely insightful, but often crazy: the flavor of crazy influenced by his current nutty wife.

      • spottedtoad says:

        We had lpeople in Iraq in the 90s, as well as good intel, which said what weapons programs existed had been destroyed. And the country was just too poor to be a significant threat- even at Saddam’s height in 1990. Lots of other things the Bush Administration said were absurd on their face to anyone who had picked up a newspaper for the previous decade. I was just a random schoolteacher in 2002 without any particular interest in or knowledge of the Middle East and I knew it was all false, just on the basis of what was common knowledge about Iraq, Al Qaeda, etc.

        It’s hard to know what the Fools at the Top really believed about Iraq, since what they were saying made so little sense.

        The lies told about the Soviet Union seemed more understandable to me, but I wasn’t an adult at the time, so it’s harder for me to judge.

        • gcochran9 says:

          One factor was hat there was a lot of undischarged vengeance after 9-11. Lots of people, including influential people, wanted to kick someone.

          I should finish writing up my all-encompassing theory about the real reasons.

      • Some of this FUSAG deception involved professional magicians and artists as depicted in the movie ghost army
        http://www.imdb.com/title/tt2649274/plotsummary?ref_=tt_ov_pl
        I have a PhD student who is a professional magician and is working on a book about this

      • biz says:

        Tourists were not allowed to go most places. If you had to estimate America’s GDP only from a guided tour led by a government minder which included stops in Wall Street, Tysons Corners, and Santa Monica you would have a hard time estimating it accurately.

        • gcochran9 says:

          “As of early 1955, citizens of either nation [US and USSR] could enter approximately 70 percent of the other’s territory, including 70 percent of cities with populations greater than 100,000.”

          • biz says:

            They could enter cities but could they just wander off to any neighborhood?

            Also even if they could, like you said, most people travel with their eyes closed.

            • gcochran9 says:

              They could go most places, enough to get a reasonable flavor of what was going on. Some people did – but apparently most economists didn’t. Pseudoerasmus says that some Soviets specialists saw signs of trouble – stagnation in TFP – but I don’t think that is the impression that typical professional economists conveyed to the average educated person, or to the Feds.

      • NobodyExpectsThe... says:

        “The place just wears you out after a while. There is not a square angle or a plumb line in all the country. Every bit of concrete is crumbling from too much aggregate in the mix, and everything is made of concrete. I saw buildings with the facades falling off that were still under construction. And everything that’s well built turns out to be built by somebody else. Moscow Airport was built by West Germans, the Grand Hyatt knockoff by the French, the Lada plant by Italians, the very boat was made in Austria.

        The air pollution in the cities is grotesque. No machine seems to run well. And the whole of commerce visible on the Volga consisted of carting sand and phone poles from one port to the next.

        The New Mexicans had a contest: a bottle of champagne to be won by the first person who saw a crane with an operator in it. No one won. Every building site we saw was three-fourths deserted. I asked Orlonsky where the workers were, but he turned sly on me. “Perhaps they are at lunch.” It was 10:30 in the morning.

        What little of the old and charming architecture is left is rotting, sitting neglected, waiting to be torn down for its lack of modernism. Russia stinks of dirty bodies and evil Balkan tobacco and a disinfectant they must distribute by the tank car daily, some chemical with a moldy turned-earth stench as though vandals had been at it in the graveyard or mice had gotten into the mushroom cellar.

        In the end, every little detail starts to get to you—the overwhelming oppressiveness of the place, the plain godawfulness of it.”

        P.J. O´Rourke on a travel to the Soviet Union in the summer of 1982

        Not an economist though.

      • keypusher says:

        It’s funny, when I was a kid in the 70s a friend of an older sibling visited the USSR, came back and said it was horrible: “grey buildings and grey people.” And I wouldn’t believe it, because only far-right idiots thought stuff like that. Even though he’d been there and I hadn’t!

        Russia of course is supposed to have suffered terrible economic collapse after the end of the USSR. Is that true, or did people simply start seeing things as they were?

    • Related to Pournelle’s method. I traveled in Romania in the 1990’s, and the only published road maps I could get my hands on were from before the revolution. I got into some very bad spots believing those maps. Not only were the roads not paved, as the key suggested, they sometimes did not even exist, not even as a gypsy cart-track. My host explained. “Those are the roads that were supposed to be there.” As for akarlin’s point about production vs consumption, I believe the joke was “The existence of a right-boot factory in the the Soviet Union in no way implies the existence of a left-boot factory.”

    • benespen says:

      I think I’ve read that essay too, it is in my library somewhere.

  18. AppSocRes says:

    Many of the commenters here are asserting that the official Soviet economic publications were misleading and published falsified data. I believe that the former is true but not the latter. There was a female economist — IIRC she was a researcher or professor at Wellesley College — who made a career by learning Russian and assiduously studying official Soviet economics publications. Her theory was that a centrally planned economy had to produce and distribute essentially accurate economic data even if these were published in misleading ways for propaganda purposes.

    Even before Reagan became president her analyses suggested that the USSR was sinking under overwhelming inflationary pressures that were restrained only by the fact that people could not spend their supposed savings on anything they wanted. This woman was predicting the economic collapse of the USSR decades before it happened. She was ignored by everyone. I wish I could remember this woman’s name. I can’t and a quick internet search — which usually is successful for me — does not dredge it up.

    So here are my suggestions for why economists did such a poor job predicting the Soviet economic collapse: (1) They were incredibly lazy and preferred pontificating to doing the hard work of learning Russian, obtaining official Soviet economic publications, and subjecting these to intensive and critical analytic study. (2) They recognized that professional careers were not built on doing this kind of intensive specialized work. And the fate of the Wellesley economist, whose name I cannot remember, suggests that this was/is an accurate self-fulfilling prophecy created by academic group-think.

    BTW, I am not an economist. My Ph.D. specialty was demography. One of my dissertation examiners was a newly minted Ph.D. from Princeton, Barbara Anderson, whose specialty was and is Soviet demography. In some informal conversations at the time she basically confirmed the theories of the Wellesley economist regarding official Soviet data. You could get a good picture of Soviet demography from official publications but you had to learn Russian and then spend an enormous amount of effort to extract correct information from data that were essentially correct but presented in misleading ways. It was arduous but rewarding work for true scholars who seem to be few on the ground these days.

    • AppSocRes says:

      I am still trying, without success, to track the name of the woman economist, I reference above. OT, but interesting: IIRC, she became briefly prominent after the Cold War for criticizing the cabal of Harvard JFK School of Government economists who set up Gorbachev’s system of auctioning off Russia’s economic assets. She argued that what the Russian economy and society first needed was a rule of law that recognized, e.g., property rights and contract law. She predicted that in the absence of these the party elite would likely scrabble to grab all they could and further economic and social chaos would result.

      She was right but the Harvard cabal made millions using inside trader information as they auctioned off Russia’s assets to the so-called oligarchs. Just as an aside, fallout from this scandal is the real reason Larry Summers had to resign the presidency of Harvard. One of his friends at Harvard was involved in this scandal up to his eyebrows and wound up being assessed a twenty million dollar fine. Summers worked behind the scenes to have Harvard pay this fine with University money. The faculty senate went ballistic when they learned this. See here for some details: http://www.institutionalinvestor.com/Article/1020662/How-Harvard-lost-Russia.html?ArticleId=1020662&single=true

      One of the cabal’s ringleaders is now a full professor at Wellesley and the woman economist of whom I have been writing has disappeared down the memory hole. There’s a moral here with which I suspect most readers of this blog are all too familiar.

      • PV van der Byl says:

        Might you be thinking of Anne Williamson? She was a journalist (Wall Street Journal, etc al.) rather than an academic economist but otherwise fits your description.

  19. not_an_economist says:

    Professional economists didn’t predict the 2008 global meltdown either. It’s not hyperbole to say that their theories have little predictive power. Your local weatherman is orders of magnitude better at his job.

    • gcochran9 says:

      I saw people flipping houses in my neighborhood and knew that there was a real-estate bubble, at least in California. I didn’t know that it was as widespread as it was.

      • ursiform says:

        I listened to radio ads trying to sell mortgages to people without the income to repay them, and wondered how the lenders could think that was a good business model. I also didn’t realize how widespread it was.

        • jamesd127 says:

          I was at ground zero of the mortgage crisis, Sunnyvale California, and I did realize how widespread it was. “No have English” hispanics with no job, no income, and no assets were buying million dollar homes – in fact if someone purchased a million dollar home, it was a pretty good sign he had nothing to lose. Towards the end, (November 2005) no one with anything to lose was buying property. The boom, however, continued to 2007, with people flipping houses to drunk homeless non english speaking mestizos who had could not read what they were signing, and had absolutely no idea what they were signing. From 2005 to 2007, the boom, at least around Sunnyvale, was entirely driven by underclass blacks and hispanics. Maybe in other parts of America white people in business suits were buying, but where I was, I did not see anyone white buying, nor anyone middle class buying, and not many working class buying. From 2005 to 2007 in the vicinity of Sunnyvale the boom was completely driven by underclass nonwhites with no job, no income, and no assets – who were however signing papers they could not read that were drawn up by white middle class crooks.

          • not_an_economist says:

            It makes sense that economists can’t predict the stock market on a daily basis because there is noise in the system. But to miss an epic debt bubble that took 10 years to build and resulted in the biggest bust since the 1930s says something. That’s like a weatherman not spotting a category 5 Hurricane just before it makes landfall. They outed themselves as close to useless.

            • ursiform says:

              It is easier for economists to predict that something will eventually happen than to predict when it will happen.

              Category 5 hurricanes actually arise pretty quickly, and forecasts about where they will make landfall and at what strength are still pretty iffy.

          • biz says:

            I’ve been to Sunnyvale many times and never saw a single black person. Are you sure those weren’t Indians?

            • jamesd127 says:

              “I’ve been to Sunnyvale many times and never saw a single black person. Are you sure those weren’t Indians?”
              There are black people in two certain small parts of Sunnyvale, but they were not significant as buyers in Sunnyvale. They were significant in the Bay Area, in the sense that between November 2005 and the end of the boom they bought vastly more houses than whites did, but vastly fewer houses than Hispanics did.

        • Tom Bri says:

          I was a realtor at that time. Believe me, we all knew it was a bubble. We were just hoping to score enough to be able to ride the downside. I didn’t, got out and am now a nurse.

      • not_an_economist says:

        Before the “Great Recession” began homes in my neighborhood went up $10,000 per week which was a lot more than my job paid. I don’t remember Harvard Business School warning America that something might be amiss. Economists didn’t understand how bad the Soviet system was because they don’t know a lot about economics. When a theory doesn’t predict an outcome what use is it other than filler material in college textbooks? Evidently careers are built around this stuff.

      • DdR says:

        You should’ve seen the commercial real estate market. Frothy is too light of a word for the lending standards my competitors would use. The worst were Wachovia and WaMu, which both bit the dust pretty quickly after the downturn.

        I unfortunately had little money back then to short stocks, but did realize something was about to give, so I took out whatever money I had in the market. I guess that counts for something.

    • Y. says:

      Bob Shiller did predict it. There was a fair number of end-is-nigh articles before the bubble burst, a lot of them referencing his price index..

  20. another fred says:

    Also not an economist, but I read a fair amount. Since the thread has digressed a bit from the question about the SU:

    I believe that a major failing of mainstream economists is the lack of understanding of innate human behavior and its variations across the various bell curves (intelligence plus the Big Five or HEXACO, or whatever model one uses). If one uses the simple Aesop’s analogy of ants and grasshoppers, they act as though there is no difference between ants and grasshoppers. Having failed to recognize these differences they cannot hope to offer worthwhile analysis across boundaries of various human populations that exhibit various mixes of “social capital”.

    As far as the SU and cross-cultural analysis in general is concerned, I think the work of Daron Acemoglu and James Robinson has a lot to say (although not everything). Like any of the bien pensant they do not wander far into the “social capital” matter, but their focus on the importance of extraction by an elite (not original to them) matters.

    As far as “extraction” goes, I doubt that it has to be an “elite” doing the extraction. If a non-productive group votes themselves access to the proceeds from productive efforts then capital is still being extracted from the system.

  21. Keep in mind that GDP is difficult to measure with any accuracy (plus or minus five percent) even in a private market economy with a real price system and freedom of information. (See Morgenstern on the problem of measurement.) You can imagine the uncertainties in an economy like China’s today, to say nothing of the old Soviet Union.

    • ursiform says:

      We didn’t understand the Soviet economy to +/- 50%. There were vastly conflicting facts, and people believed what they wanted to believe.

      • gcochran9 says:

        Facts never conflict.

      • st says:

        Enjoyed all your posts on the topic. Few extra things that no one here seem to notice. SU bloc’s internal economy was indeed “command”; but when it comes to export, of course it was not. And while internal statistics might or might not have been misleading (it was – who needs left shoe only?What good does it make if the production of left shoes grows with 20% early -adding to the GDP -when they are all left and are all the same size?), anyway,the export statistics were very,very real. SU placed second (behind the USA only) on the world arms market. The revenue from arm export only was trillions. On the international market SU & the bloc were market player as everyone else. The export of oil, gas and oil products, was very real (SU was in top 10 – and still is) and was, along with military export, the base of the SU “economy”. If you check the export numbers from the 70-es,the eastern block was exporting everything – from canned tomatoes to electric power. And yes, the revenue from the export was relocated to the military industry.

        Two jokes from back then that would give a clue what Krugman and the likes missed:

        “No underpayment can match my underperformance” (workplace was guaranteed. You can’t be fired no matter how bad you perform. Why bother working hard if you still get payed at the end of the month? But the salaries were same top to bottom – the manager, the scientist or the engineer will get exactly the same salary as the entry level service worker; or, in many cases – slightly less – at the end, it was worker’s class state, so, the workers had to get better salaries than the rest of the society, which resulted in academy professors abandoning academia and finding jobs as taxi drivers and car mechanics -slightly better salaries and opportunities for non- taxable income). So, why grow in the career if this does not help your salary at all? But if this salary is guaranteed and the same no matter if you perform better or worst than the rest, why work at work at all? Hence, “No underpayment can match my underperformance”. Command economy was doomed from the moment Stalin stopped hanging people or sending them to prison (workers and managers alike) for not fulfilling the daily production plan for left shoes and for not fulfilling the 5 years economic development plans. Command economy needs a Stalin. And lots of oil, gas and arms export to cover the loses from the internal command economy. And if the price of oil on the world market drops sharply and the military markets become limited, the command economy dies immediately to Krugman’s shock and disbelief.

        Second joke: “An eastern block airplane flies over europe at night.
        “hey, what’s that electricity-lighted place on our left?” “It is Greece, they import cheap electric power from our country and keep the lamps on all night”; “hey,and what’s this electricity lighted place on our right?” “it is turkey, they buy cheap electric power from our state and keep their lamps on all night”. “And what is this completely dark place ust under our plane?” “O, it is our country. We export all cheap electricity we produce in our nuclear plants to Greece and Turkey and stay in the dark, so we can save money to support our military complex.” Not really a joke.
        Not surprisingly the people eventually got tired of this nonsense and let the “economy” fall completely with all its left shoes yearly increases and stuff. (and even if you had a higher salary, what to do with it? In order not to allow class stratification, besides keeping all salaries basically the same, the commies had forbidden for anyone to buy anything that would distinguish him or her from the rest – be it a second house – you buy it,you go to prison – that’s the law- or a better car – you buy mercedes – you get investigated – that’s the law again, so you buy trabant and you keep low profile.
        The back side of it – tons of leisure time (yearly vacations up to 3 months), food and housing are abundant and filthy cheap, free education (plenty of left-shoes only there too), you do not need to work when you go to work – the SU will cover the loses anyway, with its cheap export of oil and arms, in order to keep you as a political ally). It was all gone overnight when Gorbachev announced that SU will no longer cover the loses of left shoes production of its eastern allies (and its own left shoe manufacturers) with the revenue from oil, gas and arms, since the oil price on the market fell sharply and he could not meet the demands of the arms race with the USA and the ever increasing spendings of the military complex.

        Did Krugman and all the krugmans from the western academia ever knew a bit about SU “command economy”? If Krugman thinks that command economy ever worked in SU, he knows nothing about it – not back then, not now.

        • gcochran9 says:

          Something worked in 1942, 1943, 1944, and 1945.

          If you think Soviet arms sales added up to “trillions”, we begin to doubt your numerical sense.

          • st says:

            You are right, the arm sales added up to “billions”, not to “trillions”. No economy can produce “trillions” of anything except US economy and only in terms of national debt.

            Anyway, read here: “The Soviet Union accounted for roughly 40 per cent of international transfers (deliveries) for major conventional arms in the late 1980s. By 1991 this share had been reduced to less than 20 per cent. By 1994 Russia accounted for less than 10 per cent of international transfers (deliveries) of major conventional arms. By 1996–97, Russia accounted for roughly 15 per cent of international transfers (deliveries).
            According to the Office of the President, in 1996 military–technical cooperation generated $2.5 billion in revenue of which $2.1 billion was in convertible currency and the rest in currencies that could not be freely converted. Russia also delivered arms and military equipment against debts owed to several foreign countries.” -http://books.sipri.org/product_info?c_product_id=162 – so you have a drop from 40% share of the conventional arms market in the late 80-es to less than 20% in 1991, respectively to 15% in 1996. So in the 80-es SU actually hold the 1st place in conventional weapons transfer (ahead of USA, I did not know that untill today) generating between 6 and 10 billions of reveniue from conventional weapons only.

            Or you can check here: https://www.jstor.org/stable/1174128?seq=1#page_scan_tab_contents – in 1980 SU is responcible for 34% of the total world arm sales, perhaps again placing it again first in the world as arm exporter. No clue what the total amount of the world arms trade was back in 1980, always believed that it exceed one trillion but obviously I was wrong, so we are talking about billions. Still, the SU acted as a market player on the world market, not as “command economy”.

            Now, about 1942-1945 (or any other year shortly predating or postdating 1942-1945). Of course it was SU command economy finest hour. The biggest defect of a command economy is the total lack of motivation of the workforce on all levels to perform its duties. But this time the motivation was there, they were under deadly attack, they did not had to be brainwashed or motivated additionally in order to work – their sons were dying on the fields in big numbers (millions, surely not trillions), the enemy was taking no prisoners or so were they told, there was no room for soviets had Germany has won – they would have had exterminated most of the population and enslave the rest – or so the soviets believed. So, the biggest defect of the command economy was nonexistent at this point, and only the advantages showed – the economy can relocate whatever it wants anywhere it wants – both as workforce and financing – in a quick and swift manner.

            There is something else – i do not expect you to agree with me on this or even to understand what i am saying.

            The emancipation of women happened a lot earlier in the SU than in the West. When I say everyone was guaranteed a job and was obliged to work I mean these women as well. Women were part of the workforce – by this i mean every woman – since 1920-es; so 1941 about half of the SU workforce was made of women. Women were skilled…. well, they were skilled everything; When men went to war with Germans, women continued to work in the factories as they had been before the war; the transition was smooth, there was no lack of workforce due to men going to war. They were enormous reserve, SU women, and they kept economy going as if nothing was happening. No need of training, retraining or motivating them – they kept doing what they have been doing anyway, just better than before, since their sons and husbands were dying on the western front. Again, I do not expect you to agree with me. Nor I expect that Krugman would ever understand the particularities of command economy. Good day.

          • ursiform says:

            The Nazis were great motivators! Especially if you thought they were planning to kill you.

  22. John Galt says:

    4-5 decades ago, when I studied econ under Princeton’s “B” team (lots of profs with that initial who have a habit of publishing nonsense) there was an academic flip between the importance of micro v macro economics, as seen e.g. in editions of the Samuelson text. I think macro had better opportunities for grants and grad students, much like the more recent lib art wave of “Studies” departments. The viability of the SU economy was important for the viability of macroeconomics — the idea that there could even be a mathematical way to analyze (model, these days) let alone plan an economy. But macroeconomics like “Studies” tends to have a lot of BS. Too many assumptions and simplifications about collective human behaviors. With micro under competition, you really can just compare current money values of physical goods, and profit margins, and see which businesses succeed and fail, so theories can be tested. BTW, I traveled in the SU in the late 60s, and public consumption (showy projects) were A+ whereas private consumption was D+.

  23. not_an_economist says:

    If you don’t understand the past, aren’t able to accurately describe the present and can’t predict the future you might be an economist.

  24. Economic Sophisms says:

    Samuelson was an equation guy. It’s not all that surprising that given his mathematical approach, he’d favor planning. Get enough smart math guys in a room, and they can organize the whole world. Someone like him would have done really well in a communist USA, I say the pinko econ professors of the 60s and 70s let that cloud their judgement.

    • et.cetera says:

      This seems the most plausible explanation to me.

      You’d be surprised how many honest to God communists still exist in some circles (at least mine, which is mostly made up of mathematicians, engineers and an assortment of other academics). Their preferred explanation for the collapse is that the Soviet Union did not have powerful enough computers to accurately model and manage the economy.

  25. Gauss says:

    The pathetic economic state of the USSR was detailed in Hedrick Smith’s book, The Russians, which was published in 1975. Maybe economists should have read Smith’s book.

    • gcochran9 says:

      Back in the day I was interested in a young lady who was aiming for a Fulbright scholarship and some sort of State Department job. She was taking a Soviet current affairs class, and I sat in. They were discussing that book – were supposed to have been, anyhow, but not one student had read it.

      I had, though, so I spent the entire hour talking it over with the professor. Always the charmer.

  26. orsomethingwhatever says:

    Most economists do not understand the Soviet Union because they do not understand the economy. They understand their models of how the economy should function (in their eyes), which are themselves contestable.

    Steve Keen has written on the latter issue. I wouldn’t be surprised if the Soviet Union worked far better than commonly believed in the West, but would oppose such a system regardless.

    • not_an_economist says:

      Like all command economies the Soviet economy was nonviable. When politicians remove the market driven price tags from products/services it becomes impossible to organize efficiently. Its roughly equivalent to a pilot that removes all of the gauges from the cockpit of his 747 and tapes over the windows. I don’t care how brilliant the pilot is without information that plane is going to crash. Guaranteed.

      BTW Steve Keen is one of the few brilliant men that predicted the 2008 meltdown. He is a hero. But I disagree with his debt jubilee solution. Its just more interference that will prolong the pain. It’s time for the 1st world to take it’s medicine. Or alternately become Japan and have a 30 year downturn.

      • Greying Wanderer says:

        “But I disagree with his debt jubilee solution.”

        To make a profit, money lenders have to take out more than they put in.

        So unless a loan somehow increases the size of the cake the interest must come out of the existing cake.

        example: dude with $200 a month spare spending cash; same dude later with $100 a month loan repayments on previous consumption now only has $100 spending cash for current consumption

        Unconstrained usury – which has more or less taken over in the West since the collapse of the SU – will always cause the economy to grind to a halt over time as loan repayments eat into discretionary income.

        One way out of that is debt jubilees – which was the ancient solution.

        (The Parsis in India used charity to create the same effect – by putting back some of the money they extracted through usury they prevented periodic economic collapse.)

        The other way out is to recognize how harmful usury is and regulate it properly.

        #

        Usury can be constrained to be positive. For example mortgages needing a 10% deposit generates a lot of savings which under the right regulatory framework (i.e. the one USUK used to have in the past) gets pumped into investment capital for SMEs.

        The mortgage part itself is still extractive but the positive effect of the savings generated being pumped into productivity investment can outweigh the negative extractive effect.

        • not_an_economist says:

          If Congress was given the power to pass out money not backed by debt to write off loans it’s game over. They’ll just keep doing it over and over until we become Venezuela.

        • Bob says:

          A dollar promised to be delivered a year from now is worth less than a dollar today. Moneylenders need to recoup more than the outlay just to break even.

          Ancient economies were agricultural and debts were denominated in fixed commodities while output fluctuated yearly within relatively fixed limits.

  27. maciano says:

    After the Soviet collapse, didn’t Western economists study the meltdown? That could’ve given a few insights on the size of the collapse and a retrospective estimation of the size before collapse.

  28. London Observer says:

    I visited East Germany in the mid-1980s. Living standards obviously were not nearly as high as those in West Germany, but were hardly of Third World levels either. They were similar to what I’d experienced during childhood about twenty years earlier in a working-class neighbourhood in England: unglamorous, drab and functional.

  29. AllenM says:

    LoL- I was a professional economist here in Arizona, and I predicted the crash. And was I ever punished for being a cassandra. The alignment of incentives with economics has distorted almost anything produced by the profession. A few without the need to make a living at it can afford to bite the hand that feeds them. Greg is also forgetting that if you were a prominent economist that was predicting the collapse of the Soviet Union in 1982 you would have been cast as prominently against the Reagan defense buildup, so you would have been a pariah on the right, and given the money spent to support much of the watermelon left in that time period (from the Soviet Union, ironically), you would have been a pariah on the left.

    Economics is a social science, and as a social science a priori thinking that reinforces the status quo is always the source of maximum returns on a career basis. Outliers are routinely punished, and being correct is no defense.

    In any society, the systems can be modeled, but when you make it so risks of pointing out the emperor has no clothes can be dire. Another salient point to consider in looking at the collapse of the Soviet Union was the inability of the elites to unleash repression sufficient to control the economy. Even Greg in the above comments points out that under Stalin it was brutally efficient. Now, look at Communist China and tell me Communism can’t deliver consumer goods. But it must divorce the production of consumer goods from communism. On the other hand, it is still run by the communist party, as they are now making apparent to the new rich.

    • Greg is also forgetting that if you were a prominent economist that was predicting the collapse of the Soviet Union in 1982 you would have been cast as prominently against the Reagan defense buildup, so you would have been a pariah on the right….

      Not true.

      Reagan was obviously no economist and I’m not claiming any special prescience or intelligence on his part, but he always claimed that his defense buildup was predicated on the likelihood that the Soviet economy could not sustain an arms race with the U.S. So I don’t see why economists would have been turned into pariahs by right wingers for predicting, if not the collapse of the Soviet economy, then its inherent weakness vis a vis the U.S economy.

      One of Reagan’s criticisms in the nineteen-seventies of Nixon/Ford/Kissinger’s policy of containment/détente was that it did not challenge the Soviet system sufficiently enough for this to happen.

      • jamesd127 says:

        “Reagan was obviously no economist and I’m not claiming any special prescience or intelligence on his part, ”

        I have read “In his own hand” a transcription of the handwritten notes Reagan made for various speeches. It is apparent that he was familiar with the Hayekian and Misean criticisms of central planning and the command economy, though he nowhere explicitly states his plans for an arms race were premised on the inherent weakness of command economies.

      • Anna says:

        You’re making stuff up. Reagan was a trained economist. He even kept well-used economics and legal texts handy behind his desk.

    • jamesd127 says:

      ” Greg is also forgetting that if you were a prominent economist that was predicting the collapse of the Soviet Union in 1982 you would have been cast as prominently against the Reagan defense buildup”

      Recall the word “Rollback” used extensively in the primaries, though it suddenly disappeared from the Reagan campaign when he entered the main election. Pretty much everyone who said the word “rollback” in the primary Reagan campaign was both predicting the imminent collapse of the Soviet Union, and urging a massive defense buildup.

      Recall also that 110% of everyone that mattered agreed that Reagan Raygun was a chimp, and could not possibly win the election, therefore it would hardly be bad for an economists career to oppose the Reagan defense buildup.

  30. Pincher Martin says:

    I hope Pseudoerasmus responds to this question. He’s a trained economist who specializes in international macroeconomic matters, and he speaks and reads Russian. Unlike most economists, he’s also quite knowledgeable about both world and Soviet history.

    My own non-expert opinion is that economic growth in the Soviet Union was not uniformly bad, and that one should be careful not to extrapolate from the awful latter decades to the earlier years. In both China and the USSR, economic growth was decent – not great, not dragon-like, but decent – immediately after territorial integrity (and acquisition) was secured from wars and civil chaos. In the USSR, especially, this was most likely due to resource extraction, infrastructure development, and more widespread compulsory education. (As for China, take away the years when Mao was solely in charge during the Great Leap Forward [1958-1961] and the Cultural Revolution [1966-1976], and China grew quite respectfully from 1949 to 1979. As bad as communism was for a national economy, civil war was much worse.)

    The Soviet economy may not have been good at providing consumer goods, but it was very good at enforcing public safety, extracting resources, building basic infrastructure like dams, railroads, and airports, and educating its citizens. And this was reflected in its solid economic growth during the nineteen-fifties and nineteen-sixties.

    The problem for the Soviets was that most of these benefits were one-offers. You can only extract so many resources, build so many dams and railroads, and give your citizens so much education before you start to run into problems. Productivity dropped dramatically in the nineteen-seventies and nineteen-eighties. I’ve read that in many Soviet industries, the value-added was actually value-subtracted, meaning the Soviets would have been better off selling the resources they extracted on the international market instead of using those resources to build products which were worth less than the value of the resources and labor which went into them.

    Why is this timeline important? Because it helps to explain Paul Samuelson’s remark about the Soviet economy. He first made it, I believe, in the 1950s or 1960s. At the time, his comment was not nearly as bad as it would later become. Samuelson’s problem is that he never revised or revisited it, even when it became quite clear that something was seriously wrong with the Soviet economy.

    • jamesd127 says:

      “The Soviet economy may not have been good at providing consumer goods, but it was very good at enforcing public safety, extracting resources, building basic infrastructure like dams, railroads, and airports, and educating its citizens.”

      And yet, strange to report, the best way to conclude that the Soviet Union was far poorer than was believed was to look at the lack of roads and railroads, which failed to improve substantially from the time of the Czars.

      Those people who correctly concluded that the Soviet Union was growing very slowly did so precisely by looking at easily visible and measurable infrastructure, such as roads.

      We know the Soviet Union grew slowly, because roads and railroads grew slowly. No other measurement is reliable, because most forms of GDP, such as whether your shoes fit or your fighter aircraft are deadly, are hard to assess.

      We can measure roads and railroads, we can measure goods that are privately traded at arms length between countries at market prices, and the rest of GDP, PPP, and CPI is pretty much pulled out of economist’s asses. And those people that measured roads and railroads concluded that the Soviet Union failed to grow much.

      • James,

        We know the Soviet Union grew slowly, because roads and railroads grew slowly.

        I’m not an expert in the Soviet Union’s infrastructure growth, but I’m pretty sure you’re wrong.

        Railroads doubled during the Soviet era, and they were many many more times intensively used than they were at the end of the Czarist period. The USSR had more railroads and transported more goods by rail than any other country in the world, by far.

        The distance of roads trebled during the Soviet period, even though roads were not frequently used in the Soviet Union for transporting goods over long distances.

        In addition, the number of ports and merchant ships grew exponentially in the Soviet Union.

        Air travel also grew rapidly during the Soviet era. Aeroflot, which was founded in the early nineteen-twenties, flew to 3,500 destinations by the late nineteen-sixties.

        Yes, the quality of all this infrastructure growth was dilapidated and not up to world standards. But growth is growth.

        We can measure roads and railroads, we can measure goods that are privately traded at arms length between countries at market prices, and the rest of GDP, PPP, and CPI is pretty much pulled out of economist’s asses. And those people that measured roads and railroads concluded that the Soviet Union failed to grow much.

        Let me repeat: Growth is growth. GDP measures what it is supposed to measure. It doesn’t care whether that growth is efficiently created or inefficiently created (that metric would be measured by productivity). It doesn’t care whether the growth can be seen in the lives of ordinary people (i.e., consumer goods) or in projects which are mostly tangential to the people’s welfare (i.e., defense projects). It doesn’t care whether the quality of the projects being measured is first-rate or barely third rate.

        • jamesd127 says:

          “Railroads doubled during the Soviet era,”

          Given that the region was seriously short of transport when the Czar was overthrown, and is seriously sort of transport now, that would indicate that GDP doubled or tripled during the Soviet Era, doubled or tripled over seventy years.

          Indicating a growth rate of 1.56% or less per year from 1918 to 1988.

          Which is a slow rate of growth.

          • magusjanus says:

            I’ve read Czarist Russia from 1890s through to WWI under Witte/Stolypin reforms grew as fast as during forced industrialization of the lates 20s/30s period under Stalin. Without, you know, killing over 5 mio people. In fact, Russian industrialization and growth pre-WWI seems to have played a hand at German decision-making, when they decided to roll the die sooner rather than later when they might not be able to catch up.

          • gcochran9 says:

            You’re wrong. It’s getting boring.

            • jamesd127 says:

              “you are wrong”. Without explanation or argument.

              As a general rule, roads and railways grow slightly faster than the volume of stuff being transported – rich countries have less crowded roads than poor countries. The volume of stuff is not necessarily the value of stuff, but we have no reason to expect that Tsarist stuff had a markedly different ratio of volume to value as Soviet stuff. If the value of Soviet stuff grew no faster than the roads and railways, the Soviet Union had an excruciatingly slow growth rate.

              • gcochran9 says:

                The transportation network in the Soviet Union was very different from that in the United States or western Europe, but stuff got moved. Mostly railroads, more like the US in 1900. Their railroads were much busier than ours: freight traffic density was 6-7 times higher than in the US. That’s the key number, right there.

                Some rivers. relatively little truck-carried, very few private automobiles. So how did Russians commute from the suburbs? Simple answer: no suburbs. Subways.

                Russia could have used better farm roads, but they A, would have cost more than in the US – high maintenance from Russian winters – and B. They would have had a lower payoff, since the farm productivity was lower. It would have been lower even if the Soviets had had modern and efficient farmers, which they didn’t – too far north. Roads o make more sense when also used by cars, but the Russians had few of those.

                Freight volume expanded by something like a factor of 50 over the the course of the Soviet Union.

    • st says:

      Pincher Martin, Krugman’s remark was full of extreme hypocrisy. Not sure about Samuelson’s. His note that “..Yet after the fall of the Berlin Wall, visiting Westerners found something that looked like a Third World economy, with antiquated factories (and disastrous environmental problems) producing consumer goods of ludicrously low quality (like the notorious East German Trabant, an automobile that makes a Honda or Ford seem like a Mercedes)” – lacks decency. I suppose a US reader would take Krugman’s remark at its face value – it would seem that because of the iron curtain no westerner really knew what was really going on behind the curtain and only after the fall of berlin wall, when westerners started visiting East Germany, the economists realised that they were making trabants, which were crappy cars – as if the western economists did not know that before the fall of berlin wall and were thinking that east german factories were manufacturing mercedeses and hondas in superbly equipped setting.

      But. The Curtain was Iron only its eastern side – this is what the western reader of Crugman’s BS would not realise. Its western side was more like veil. For example Checz Republic was visited by 10 millions western tourists back 1980; A small country like Bulgaria accommodated something like 6 million visitors in its summer and winter resorts back in the same year, about half of them – westerners. I do not know about eastern germany, but i would be surprised if the number of visiting westerners were much different -we are talking about millions of visits early. Let suppose all these millions of visiting westerners were blind – how about that? Would you believe that 10 million blind westerners visited Czech Republic back in 1980? If you do, then go and believe Krugman that before the fall of Berlin wall no one knew what Eastern Germany looked liked and what its factories made.

      Now, the reality. Will give you an example: The biggest eastern european manufacturer of tv sets had a trade contract with Siemens, the giant from West Germany. As part of the contract the economists and engineers from Siemens were supposed to visit east european factory in order to provide training courses on a regular, early basis to factory management and regular employees – they needed that because the factory was using Siemens equipment and Siemens know-how for its technology. So western engineer and economists were hanging there all the time on yearly basis, for 10 years before the fall of berlin wall. They knew everything about the factory. They knew everything about the daily life of the regular east european employee in the factory. They were investing money, resources and education in this factory and they were collecting profits for it.

      Do you realise now how hypocritical Krugman’s remark is? He is lying, lying cold facedly to the naive western reader. Of course they knew all about SU bloc’s economy, they were deeply involved in it; they were part of it.

      • gcochran9 says:

        It is true that there were a lot of tourists visiting the East Bloc, and of course those visits could have been used to get a fair appreciation of the real state of East Bloc economies. as could engineering contacts/

        But they weren’t. And it’s not that Western economists secretly knew the real story, anymore than they secretly understood the real-estate situation in 2008.

        • jamesd127 says:

          ” And it’s not that Western economists secretly knew the real story, anymore than they secretly understood the real-estate situation in 2008.”

          Lots of people did understand the real-estate situation well before 2008. There was a mad rush for the exits in November 2005. From November 2005 to 2008 the market in mortgage based securities largely froze up – almost everyone knew they were worth far less than face value because the underlying mortgages were made to people with no income, no job, and no assets, most of them non asian minorities, but no one wanted to sell them at less than face value because that would reveal the horrible truth. From November 2005 onwards the market was levitated above market forces by fraud and denial.

          From 2005 November to 2008 the market in mortgage backed securities was fake, for fear that the truth would be revealed. It was very difficult to find suckers ignorant enough to buy them at face value, and had they been sold at fair market value, it would have been suddenly and horrifyingly revealed that they were nearly worthless. This is what Goldman Sachs did that was morally wrong – unload mortgage backed securities to a rapidly diminishing pool of suckers at near face value.

      • st,

        I made no comment about Paul Krugman’s remarks on the Soviet Union, but your commentary on him sounds intemperate and off base.

        You also focus too much on consumer goods, when you should focus on the deployment of people and resources to the USSR’s basic capital investment projects. That deployment was largely successful, which was why the Soviets were so scary for a time. In the end, though, they couldn’t sustain it.

        Pseudoerasmus tried to post this comment to West Hunter, but it failed to go through for some reason.

        • st says:

          Pincher Martin, the unsubstantiated belief that a communist model of economy could sustain any society is a dangerous delusion. Krugman is a person of great authority in macroeconomics and as such should have been more responsible and selective in his phrasing, since people tend to take the words coming from a person of authority at their face value. If Krugman learned that Mercedes was made in W. Germany and Trabant was being manufactured in Eastern Germany only after the Fall of Berlin Wall (I do not believe it), then Krugman does not have the minimum qualification to articulate anything meaningful on the subject of communist (planned) economy. He should select the topics he writes on more carefully. But he leans left, does not he?
          I am not familiar with the works of Samuelson but I can bet his familiarity with marxism predicates his familiarity with soviet economy which affects his point of view on the topic (as well). But I am familiar with details about the substantial economic support that Wall Street gave to the emerging soviet economy in the 1920-es, which I think not many readers of this blog are aware of. Are you? This would make Samuelson just another Wall Street guy fancying soviet economy before it had been even established, becaused it was based on Marx, so nothing could go wrong.
          So my guess for the left leaning economists from the west is that they must have prefered to believe Marx instead of believe their eyes. So they stuck to their Marx and not to their eyes.

          Going to tell you another joke from commie times. Marx was a religious figure there and his writings were considered sacred; if one tried to question the validity of anything that marx had ever written, it was considered blasphemy so the inquisition would knock on the door at night to ask some tough questions about your personal relationships with marx and marxism. At the same time everyone knew that Marx had written countless number of meaningless suggestions which had the commies followed literally the society would have had fallen apart overnight. (like annulling all marriages as “capitalist’s obscurity” and pronouncing all women free for use by any willing man, as social services were supposed to rear the children in the suggested bastardization of the society – that would make all people really even, wrote Marx, since they would not know their parents, brothers or sisters and could not benefit from their social -or financial – capital. Actually the commies tried to implement that with a decree issued back in 1920 in the city of Saratov, I think. There was a rebellion in Saratov overnight and the commies decided that they should not follow marxist scripts that strictly and that they could afford to skip some parts of marxism.
          I think “command economy” was just another awkward, misantropic idea of Karl Marx with no more societal value that the concept of liberation of women by pronouncing them common. Why would guys like Krugman or Samuelson would find this misantropic concept attractive? No clue. I could eventually understand if they liked Marx because of that other marxist concept that I just mentioned, but the planned economy?

          • st,

            I’m beginning to suspect you aren’t quite clear on the difference between economic growth and economic productivity … or the difference between economic growth and the provision of consumer goods. They’re not at all synonymous.

            …the unsubstantiated belief that a communist model of economy could sustain any society is a dangerous delusion.

            You have an ideological fixation on the belief that a state-controlled economic system can’t possibly work, which is preventing you from seeing that in fact the Soviet Union did work for much of its history. The USSR existed for nearly seventy years, and for most of that time it grew economically. And for some of that time, it grew quite rapidly.

            So you’re wrong. The Soviet Union did grow. It didn’t produce much that most people wanted, and almost nothing that free people wanted, but it grew. It couldn’t in the end compete with the more productive market-based systems in the West and East Asia, but it still grew. It sometimes couldn’t produce enough food for its people, but it still grew.

            • st says:

              Sure it grew. A tumor can grow sometimes as well, which does not make the tumor growth sustainable to the body. This is the kind of growth that kills and sucks up the body. This is not healthy growth.Once all the resources are gone the body dies no matter how big the tumor has grown. It was a dysfunctional growth. Once the external resources from oil and arms revenue became limited, the SU economy was gone with all its growth. All that was left from the marxist economy was mountains of left shoes only, that no one ever wanted.
              Of course, you realise that the base of the infrastructural projects were the the slave army of 10 million political prisoners, that Stalin kept available for the hardest projects of SU, as the Baikal-Amur railroad/highway for example.
              So you have a slave force + external financing from the export of oil and arms + bank credits from the western banks. When in the 60-es one part of the equation was gone – the political prisoners (and another slave force – 700 000 german military captives) in the SU were released, the economic growth stalled.
              Did Samuelson knew that the “growth” of commie economy was based and dependant on the availability of 10 millions big slave force, that were being sent to the hottest infrastructural projects? I think that even if he knew, he would not care. All marxists are the same in this regard, regardless on which side of the ocean they live.
              Good day and good luck. And best regards to that pseudoerasmus of yours, whatever he is.

              • st says:

                P.S. I am trying to figure Krugman and Samuelson being supportive to the slave economy of the american south and getting a nobel prize for their views that US society should implement at least part of it, since it showed some promise in the past. Or some prominent american leftist, say HC, suggesting convergence between the free market economy of the north with the slave economy of the south since the southerners were capable to build a sustainable economy and even build some major infrastructural projects in the marshes of Louisiana that the north could never ever have done with its free market economy. And drawing conclusion that the southern economy could sustain and even thrive, especially if hiring Joseph Stalin as frontman and chief manager. Do you think that would give them some extra popularity among the masses?

              • st,

                You’re moralizing, not analyzing. I told you, growth is growth.

                Many environmentalists might argue that capitalist economies are filled with “dysfunctional growth” that is not sustainable. And who knows, in the end they might be right. But until that time, the modern free market system will likely continue to grow.

                This discussion reminds me of the argument that slavery in the Confederacy was not sustainable economically. Except that some economists who analyzed it in some detail came to a much different set of conclusions. Slavery was a thriving concern in the old South, economically, right up until it was ended by war. And the authors believed that slavery would have continued to be a strong basis for economic growth in the south for the foreseeable future had the Confederacy not been defeated.

                Many people were outraged by such scholarship. Why? Because, like you, they are people who prefer the world operate according to their moral presumptions. When proof is provided that it doesn’t, they are outraged or confused.

                The Soviet Union grew economically for much of its seventy-year existence. It won wars with military power, created the sinews for a continental superpower with a high degree of autarky, and produced endless reams of ideological tracts that no one wanted to read, but which, ironically, were still helpful in exporting revolution all around the world. The Soviets would not have been able to do this without economic growth.

            • ursiform says:

              I assume, by your standards, that North Korea and Zimbabwe “work”, as their governments haven’t fallen. Staggering low bar.

              An economy that “didn’t produce much that most people wanted” and “sometimes couldn’t produce enough food for its people” doesn’t, by most the standards of most people, “work”.

              The Soviet economy grew in the sense that it had some form of activity that could be enumerated and increased with time.

              Imagine an economy that produced more and more non-functional goods that it immediately dumped in landfills. It would exhibit economic growth and would, by your standards, “work”. But it would, in reality, be an utter failure.

              • ursiform,

                I assume, by your standards, that North Korea and Zimbabwe “work”, as their governments haven’t fallen. Staggering low bar.

                You’re not looking at this empirically. The question was about economic growth. I have no idea if North Korea or Zimbabwe’s economies have been growing at all. I’d have to look it up. But my guess is that they have both been stagnant for long periods over the last thirty years.

                I do know that the USSR grew economically for many decades before running into problems. But the Soviet Union was a continental-sized nation with a huge reserve of natural resources and a forward-looking and global ideology that forced it to try and compete with the West – something which is not true of insular mini-countries like North Korea or Zimbabwe.

                An economy that “didn’t produce much that most people wanted” and “sometimes couldn’t produce enough food for its people” doesn’t, by most the standards of most people, “work”.

                Yet another moral preener.

                The Soviet Union’s economy worked well for quite a while. It grew.

                It may not have provided things that you, ursiform, cared to purchase – and we can all agree that communism (like slavery) is better off left in the dustbin of history – but that’s neither here nor there. The empirical question is, did the Soviet economy grow? And the answer is, yes.

                Imagine an economy that produced more and more non-functional goods that it immediately dumped in landfills. It would exhibit economic growth and would, by your standards, “work”. But it would, in reality, be an utter failure.

                Yes, but that’s not what happened in the Soviet Union. How could it be when the Soviets created a superpower that competed quite effectively with the West for several decades.

              • ursiform says:

                It appears that you have chosen to define an economy as “working” if output increases, without regard to whether the goods produced are useful or even if people have enough to eat, and you have chosen to define a country as successful if, by your definition, its economy “works”.

                By your definitions the SU worked. But I think your definitions are bonkers.

  31. st says:

    And there is even more. SU block was financed (credited) by the western banks. They were taking $ billions of credits from the west – on a yearly basis. First time a commy state defaulted and stopped servicing its debt to the western banking system was as far prior to the Fall of Berlin Wall as in 1960 – only 15 years after the end of WWII and the imposition of command economy some eastern european states were toast – not a good recommendation for the command economy that pretended to by thriving and growing. Of course, it was SU that took over the debt and cover it – in order to keep the face of the command economy clean; it was done secretly, but that gave in insurance to the western banking system that they can keep giving loans to the commy states; the second default was only another 15 years later, in the mid 70-es; again, SU intervened and repaid the debts (the oil crisis from 1974 in the west must have come handy to the soviets). Now, the situation in the end of 1980-es was unsalvageable. The national debts of the commy states to the west were huge (Romania was, I believe, the champion in terms of debt to the west in the beginning on 1980-ies, with something like 40 billion national debt to mostly french banks; they had to start paying it, but how? Romanian currency was not convertible, they had to pay in french franks or us dollars – but all they had was their national currency, Lea; so they started collecting us dollars and french franks by the only way possible – export of everything they could possibly export, at any price, on a symbolic price, if they had to. Everything – food, clothing, cars, oil, crops, electricity – by this i mean really everything at any price was going out. The internal supply was kept at a minimum. That is how you get empty grocery stores although you are in top 10 in europe as manufacturer of agricultural goods. It took them 10 years or severe internal economic restrictions to repay their debt – but they did. At the end they were so mad that they killed Chaushesku live on CNN and if he had 10 lives instead of one they would have killed him 10 times.

    Same with everyone else, this time SU included and Gorbachev wanted out of the game. There was no eastern european state that had not generated at least 10 billions of $ on national debts to the western banking system – but the west kept giving the commie governments loans, sinking them deeper and deeper.

    Now, would any bankster give someone a loan of 10 billion USD without doing a deep background check first and pretend he never knew what is going on with that particular economy and learned only after the fall of berlin wall, since the berlin wall fell because of the inability of the respective state to serve its loan, given him by the same bankster?
    And I bet they did; they also got their money back, after several defaults, negotiations with the commie government officials, abandoning of planning or command economy, switching sides forth and back, anything that the commies and their western bankers could think of and could possibly work.

    And after this, to say that western economists had no clue what was going on behind the iron curtain and they only found out after the Fall of Berlin Wall that command economy was not such a great thing, as Krugman said, is an incredible lack of decency from Krugman’s side.

  32. Greying Wanderer says:

    The SU lied. Both the Left and Right wanted to believe it for different reasons until Reagan came along and decided to put it to the test.

    Also GDP is conceptually simple but not a good measure on its own – bad combination.

    • jamesd127 says:

      “The SU lied. Both the Left and Right wanted to believe it for different reasons”

      As I recall the primaries in which Reagan was seeking the Republican nomination, the right in those primaries did not believe it.

      Accepting the high estimates of Soviet growth was part of moving to the center and being presidential. Much as Trump will shortly be telling us that Islam is the religion of peace and he has recently installed tranny bathrooms in the Trump towers.

  33. ohwilleke says:

    The author of this blog https://artir.wordpress.com/2016/04/25/no-great-technological-stagnation/ does a lot a careful analysis of the reality of the strength of the Soviet economy.

  34. Some Troll's Serious Discussion Alt says:

    It is tempting for economists to believe that The Problem With Command Economics is a ground level motivation issue. They themselves are idle academics who understand the economy, after all. Generalizing from this self example, they reason that most people are lazy but understanding the economy isn’t that hard. They see that the Soviets manage to motivate their workers, and presume that the hard part is over. The soviets have only to put those who understand in charge and the economy should roar.

    The truth is quite the opposite. People with work ethic are a dime a dozen, but the economy is beyond mortal comprehension. Without a market to cut away dead weight, waste, and bad ideas at the top/planning level really asinine things will happen. Like exporting cars to the west which are then melted down because melting down a shitty Soviet car is the cheapest way to get good Soviet steel.

    • not_an_economist says:

      Without market price tags efficient planning is impossible. It’s exactly that simple.
      Command economies have 100 other weaknesses but that first one is fatal.

  35. Gabriel Martindale says:

    “While we’re at it, I’m not sure that that people like Hayek or von Mises or Friedman ever had much coherent to say about the performance of the Soviet economy in 1942.”

    What was this remarkable achievement of the Soviet economy in 1942 that Von Mises failed to explain? That Russian winters are really cold? That Russia is really big? That there were more Russians for cannon fodder than Germans? Lend Lease?

    Overall, the Misesian critique of central planning seems pretty well borne out by the Soviet Union. The exception is that the economic calculation problem wasn’t so important in practice, because the SU could just use prices from other countries to calculate with.

    • not_an_economist says:

      Knowing the price of oil extraction in Texas doesn’t tell the central planners in the USSR what it should cost near Volograd. In any case market prices change by the minute. All command economies are doomed for the simple reason that they don’t know the cost of anything which makes efficient planning an impossibility.

      What is happening today in Venezuela was unavoidable once the government got its hooks deep into the economy.

      • gcochran9 says:

        That’s why the same thing happened in Cuba a long time ago, except that it didn’t. Cuba is screwed up, sure: and under a better system, it would do better. Not all that well, being full of Cubans. But it hasn’t experienced the sort of chaos we’re seeing in Venezuela – so how did lots of Communist countries avoid the unavoidable?

        • not_an_economist says:

          The fall of the Iron Curtain was essentially an epic currency collapse and mega-default all in one. Cuba has held on a little longer but the same thing will happen to them. They do not have a stable economy. Here is a note on their currency.

          “Historically, the Cuban Peso reached an all time high of 23 in May of 1997 and a record low of 0.92 in January of 2001.”

          • not_an_economist says:

            I just googled and evidently Cuba has linked one of its currencies (I believe they have 2 which probably helps hide corruption) to the Great Satan United States currency. Haha!

            “The major legal currency for Cuba is the Cuban Convertible Peso, CUC. It’s what you exchange your foreign currency for and make all your purchases with in Cuba. Most tourists will only ever deal with CUC. For international exchange purposes 1.00 Cuban Convertible Peso = $1.00 USD.”

          • gcochran9 says:

            No, it wasn’t. I don’t think anyone really understands it. I think you might want to compare it to the collapse of the Classic Maya.

            • not_an_economist says:

              The economies behind the Iron Curtain were hopelessly misallocated, they couldn’t balance their books and they went bust. As soon as somebody gets the bright idea to remove all of the market price tags “to fix the economy” real planning becomes impossible and the economy turns into dead man walking.

              It’s like trying to drive a car with all of the gauges removed and the windshield has been replaced with cardboard. I don’t care if the driver makes it past the first couple of corners. He doesn’t have enough information. He is going to crash.

          • giovanni says:

            In the long run, it may be inevitable. But Galbraith had at least this one right – in the long run we’re all dead anyway.

            Communist Cuba has already lasted a Cuban generation. What does it mean to say it will inevitably fall. Fidel was a young man, and died an old man, without it’s falling. It sucks. But it did indeed have lasting power.

    • gcochran9 says:

      It’s always fun, talking to a Martian. They give themselves away by not knowing jack about the most important points of Earth history, but they have lots of interesting stories to tell us about various colors of Martians.

      In 1942, without having yet received much aid from the Western allies, after having essentially their entire army destroyed in 1941, with the Nazis occupying much of the country and controlling ~40% of the population –
      the Soviet Union out-produced Germany in key weapons, stopped the Wehrmacht at Stalingrad, and turned the tide of the war.

      Lots of idiots in the West became followers or sympathizers with Communism. it wasn’t just as result of the Depression: many were impressed by the success of the Red Army in WWII.

      • not_an_economist says:

        Germany had a high tech economy but it had no oil. That is the singular reason that they lost WW2. There is no reason to look further. Google, “The Role of Synthetic Fuel In World War II Germany” It’s a great read.

        Oil Consumption in 1938:

        Germany: 44 million barrels
        Great Britain: 76 million barrels
        Russia: 183 million barrels
        USA: 1 Billion barrels

        Now you know why the USA had the 8th Air Force and the Germans didn’t.

        Unless Germany scored an early knockout blow there is no way on Earth they could have won that war. They had no oil and they got rolled. Even if they had built more Panzers and Messerschmidts they couldn’t have fueled them. It’s that simple.

      • not_an_economist says:

        Lets compare another relevant number.
        Germany population 1938: 78 Million
        USSR population 1937: 162.5 Million

        Yes the USSR outproduced Germany but it had more than twice the population and more than four times the oil. It was a massively larger organization than Germany.

        Both countries had rigid, command economies.

        • gcochran9 says:

          It’s probably worth mentioning that the war started in 1941, and I’m talking about 1942.

          Germany had greater industrial production than the Soviet Union before the war; their advantage grew, as they conquered most of Europe and a big chunk of the Soviet Union.

          By 1941, they had annexed Austria and the Sudetenland. They could steal from and get at least some work our of Norway, Denmark, France, Belgium, Holland, Greece, and Yugoslavia. Hungary, Finland, and Italy were allies.

          About 40% of the USSR’s population was under German occupation, at the beginning of 1942. Much of their industrial plant had been destroyed or captured as well. In 1942, the Soviet Union (with the loss of the Donbass) produced only a quarter as much steel and coal as Germany. But even so, they built more weapons.

          The Germany economy was not rigidly controlled or centrally planned before the war – after the war started, it was more or less shaped by whim.

          The Soviet economy was centrally directed, but somehow I don’t think that’s really the whole story in 1942. When an entire factory was moved to the Urals, I hardly think they were following detailed orders. More a flurry of desperation and patriotism, influenced by engineers that actually knew something, backed up by the NKVD. Not carrots and sticks – German sticks( the threat of extermination and slavery) s and Soviet sticks (NKVD with submachine guns).

          • not_an_economist says:

            I’m not sure if an oil poor nation like Germany gained much advantage over the USSR by occupying most of Europe. That is an enormous cost and I doubt it was a net positive just a couple of years in.

            While it’s true that Germany occupied the Ukraine, Belarus, Estonia, Lithuania and Lativa the USSR had most of its production east of the Urals and they never lost their oil.

            If the oil situation was flipped and Germany had been running on 183 million barrels of oil per year and the USSR had only 44 it would have been lights out for the Reds. No doubt about it.

            • Y. says:

              Umm.. Germany annexed Bohemia, Moravia and Silesia in the spring of 1939. That same region was no.1 in weapons exports in 1938, and was immensely valuable to Nazi Germany when it came to armaments production. IIRC, a quarter or a third of their industrial production.

              The armaments gained from the annexation were also numerous. ~500 tanks, 2200 field guns, a million rifles(luckily, almost exactly the same as K98k) etc..

          • not_an_economist says:

            “The Germany economy was not rigidly controlled or centrally planned before the war”

            Where did that idea come from? Not even close to true.

            From a paper on Nazi Economy Policy by Larry Liu

            In his first year in office, Hitler appointed Hjalmar Schacht as president of the reichsbank (central bank), and in 1934 as minister of economics.62 Under Schacht’s auspices, the consequences of the Great Depression were fought by Keynesian deficit spending policies63 in the form of large public works programs. Under the “Reinhardt Program” of June 1933, infrastructure development financed by tax reductions, public investments in waterways, railroads, highways and construction industry were carried out.64 The unemployment rate was reduced significantly during the first years of the Nazi regime. By the late-1930s, Germany had full employment at relatively stable prices.65 Prices were no longer regulated by the market, but by political directive.66 Economic growth was almost exclusively based on public investment and spending policies

        • Hippopotamusdrome says:

          I would add to your list:
          Britain population: 4.8m
          USA population: 134.8m

          A portion of the industrial production of this population was being shipped to the USSR.
          Also, Germany was fighting a two-front war, and could not send all it’s production against the USSR. Much of it was diverted against Britain.

      • st says:

        Asabya. It did not have to express itself on the war front only, it could express itself on the economy front as well during war times – and not only. And it surely did. The western economists took the war-time performance of the economy for an economy phenomenon. But it was asabya. BTW, they still have it in them. Many of them.

      • Gabriel Martindale says:

        First of all, I have no idea what you mean by ‘without having yet received much aid’, Lend Lease was applied to Russia from day one of the Nazi invasion and you can find out the figures involved for yourself quite easily.

        Secondly, again I don’t know what von Mises is supposed to have explained. You have already admitted tacitly that Russia’s military performance in 1941 was terrible, much worse than that of Tsarist Russia and from a starting position of much greater strength. And this was despite pursuing an economic strategy focused on military build-up to the extent that literally millions of Russia starved to death and the average standard of living was far worse than in 1917 let alone 1914. More or less any other country that had performed so badly would have simply surrendered. In that sense you can say this was a success of the Soviet political system, which was willing to tolerate limitless amounts of casualties as well as a string of completely humiliating defeats. On the other side of the coin, you might point out that with a different political system, Russia wouldn’t have been invaded in the first place.

        But you seem to be arguing that von Mises failed to explain the Russian’s ability to build lots of weapons in 1942. What’s to explain? Whoever said that a command economy couldn’t build a lot of weapons?

        This is kind of like if an economist turned up at your blog and saying “if black people are so dumb, how come Obama is so smart? Explain that!” and then patting himself on the back and declaring mission accomplished.

        • gcochran9 says:

          By “without having yet received much aid”, I mean exactly that. I already know the figures: evidently you do not. Russia got very little aid in 1941, not much in 1942.

          France did a lot worse in 1940 than it did in 1914, and it wasn’t because they’d gone Communist. The nature of war had changed.

          If Russia had a political system that was more like that of France – they still would have been invaded, and they would most likely have lost the war. Central planning and coercion (plus patriotism, and German Schrecklichkeit) won the war for Russia. That is an impressive accomplishment.

          • Gabriel Martindale says:

            It’s a side issue, but if Russia had a political system like that of France, neither you or I would ever have heard of this Hitler chap. Secondly, I’m not really sure whether you are trying to defend Russia’s military performance up to Stalingrad, but suffice to say, considering the single minded devotion with which Stalin had built up the Russian military (again, millions of people literally stared to death) it was comically poor.

            Misesian economics (and in fact all economics outside of the “New Economics” tradition) does not purport to explain history, it provides a set of generic and categorical statements about the nature of human societies that, among other things, provide a limiting framework for interpreting historical events. There is nothing in the events of 1942 that provides any sort of problem for Misesian theory. Certainly, no-one has ever argued that central planning would not be more effective if your sole goal is producing a particular set of goods (i.e. armaments), assuming you are willing to tolerate large drops in living standards. That’s why Great Britain, for example, adopted a large measure of central planning and no Misesian has ever scratched his head about it and said “duh, does not compute”.

            Explaining Russian military performance in 1942 is a job for historians. All economics has to say about it is that their explanations can not contradict (true) economic principles, just as they cannot contradict the laws of physics. In my field, many historians routinely break this rule because they don’t know anything, or they subscribe to false economic theories or they just don’t care; perhaps the same is true about historians of WW2, I would imagine so.

            So, again, what is this coherent thing that von Mises is supposed to have said about 1942, but failed to? Perhaps what he failed to do was get you to understand what he said without having read him, but, hey, he wasn’t superman.

          • Hippopotamusdrome says:

            If Russia had a political system that was more like that of France

            But what if France had the geography of Russia? What if France’s land projected 2,000 miles into the Atlantic Ocean and they could retreat a thousand miles until the enemy’s supply lines are stretched so ridiculously long it can barely provide a fraction of it’s army’s needs.

        • st says:

          “Russia’s military performance in 1941 (against the german nazis) was…. much worse than that of Tsarist Russia” (in 1914-1917).
          Rrrright. And the British and French performance against the german nazis in the same 1941 was brilliant – much better than that of the British empire and French republic in 1914-17 (sarkazm mark…)
          It is not like SU, France(which capitulated after two months of resistance, unlike the situation in 1914-1918 when germans never broke through French lines and the tides turned at Verdun after 4 years of severe battles and millions of casualties, suffered by France) or Britain performed worse in 1941 than they performed in 1914 – its just the nazies performed much better in 1941 than germans performed in WWI – against the same enemy.
          Now, about the SU economic performance and the role of lend lease in the defeat of napoleonic army on scorched (by the russian themselves) lands of russian plains, at front of Moscow, back in 1814, just after Napoleon had taken whole Europe much in the same fashion that Hitler did: The role of lend lease for the russian victory over napoleon and russian army entering Paris (it happened, you know? Can you believe that?) following the defeat of the french under Moscow – the role of lend lease for the outcome was decisive.
          Now seriously: Back in 1940, SU Army had 18 000 tanks available – more than half of all tanks existing at this time in the world. They all got destroyed during 1941, but at least SU did not abandon european front as Britain did the same year nor it surrender after 2 months of fighting as France did a bit earlier. Perhaps the 18 000 tanks helped a bit.
          By the end of 1942 SU again had tanks – this time 22 000 of them, which again was more than half of all tanks existing in the world at this time. Roughly, it translate into that with half of its teritory under nazy ocupation, SU economy was capable to produce more tanks than the rest of all national economies of the world combined. Which rightfully caught D-r Cochran’s attention, because it is strange – soviet economy was considered crappy before the war – rightfully so. Now, the Land Lease: out of these 22 000 tanks about 400 were British and USA made – light Valentine’s tanks, if i remember correctly, that were supposed to scout for the heavier t-34s SU made. The problem was, t-34, while heavier and better armed and armored, was also faster than the suppose lend lease road runners valentine tanks, so the SU did not ask for more of them.

          Anyway, I would not play down the role of land lease for the victory of the allies against the nazis – quite the contrary, i do not think SU would have survived without it (food, oil for the t-34s…hope that the fight is not over, since you are not alone against the nazies, so you keep fighting – the USA and the Brits are still alive and might come to help). But even with land lease taken with the consideration, SU economy performed, to put it mildly, better than it should have during 1941-1945. But to me personally, the reasons for this economic performance were not from the world of economy and can’t and should not be attributed to the command character of SU economy.

          “More or less any other country that had performed so badly would have simply surrendered” – now here you are half-right and half wrong – France surrendered. Britain did not.
          OT: I’ve red about Obama’s (long live His name, His legacy and may he lives forever so he can lead us, the rest of the world, a well as the US, forever, as only a man of his rare qualities could do, to the full victory of social justice and democracy in each and every point of this world. amen.), so yea, I’ve heard of his high intelligence and other high human qualities – on many places, many times, NYT, CNN everyone, every time. I don’t doubt it, but you should know that if you ever wonder how exactly a personality cult starts – this is how. It does takes guns or NKVDs – it takes media repeating same things about the same guy over and over and over again and if anyone doubts, he/she is out of the cult so he gets ostracized by all means. I think you guys have a personality cult taking shape lately.

          • Gabriel Martindale says:

            “More or less any other country that had performed so badly would have simply surrendered” – now here you are half-right and half wrong – France surrendered. Britain did not.

            What? Perhaps I should rephrase myself to avoid irrelevant outbursts. “More or less any other country that had endured such a series of repeated military humiliations on its own soil and had lost more territory than most countries had, would have surrendered”. Clearer?

            As to the rest of it, whoever argued that anyone else’s military performance was good? The point is simply that if you want to commend the Soviet system for its WW2 performance then you have to take into account the totality of its performance. If any economic system can come out of WW2 looking good, I suppose it would be Nazism.

            In any case its irrelevant, people who said they admired the USSR because of its performance in WW2 were just liars. In point of fact, the SU was the adored child of Anglo-American progressives from day one, a beautiful creature released into the wild, free from the restraining influence of business interests and the lumpen conservatariat that was tying them up at home. This is why McCarthy couldn’t get through his thick head why he was constantly being obstructed from what anyone would think was a reasonable project of purging foreign spies. Because these foreign spies were just the most idealistic and bold figures on a spectrum that included most of the American establishment. Unfortunately, their baby went nuts and couldn’t stop killing people, so it all got embarrassing. Fortunately for them, the cold warriors came along and invented some “West vs. Communism” thing that everyone could get behind. What’s more, they even won, removing this, by now, terribly embarrassing retarded golem creature. Reagan really was the best thing that happened for the Left, possibly ever.

            • Anonymous says:

              ““More or less any other country that had endured such a series of repeated military humiliations on its own soil and had lost more territory than most countries had, would have surrendered” –would have?
              There are states that surrendered to the nazis – Poland, France, Yugoslavia, Greece, The Netherlands, Belgium et cetera, actually every european country did, and only two did not – SU and British Empire. Now go ask the british or the americans reading this blog if they think their respectives states would have ever surrendered to the nazies no matter what would have happened on the battlefield and how many of its own soil they would have lost in the course of the war with the nazis.
              Now, back to your remark that SU performed in WWII worst militarily than Tsarist Russia performed during WWI. Judging by the way nazi’s army took over Europe – Poland and France for two weeks, Yugoslavia and Greece for a week, the rest of Europe for even less time; and judging by the fact that they enforced the 750 million people populated British Empire to pull its forces out of Europe, nazies were formidable enemy of a strength that Tsarist Russia had never met. They seem to have been able to overcome France easier, than German army did in WWI – actually Germany never overcame France in WWI and even , following the battle of Verdun, after 4 years of military standoff with France and UK, had to pull back and surrender.
              This implies that nazi’s forces must have been stronger than german army that fought Tsarist Russia during WWI; hence we cannot evaluate the performance of the SU army comparing it to that of the Tsarist Russia’s army and say like you did that “even Tsarist Russia performed better during WWI comparing the SU performance during WWII, which was nothing special”, since Tsarist Russia never met and adversary, as formidable as the nazi’s army during WWII and we cannot predict how would Tsarist Russia perform, better or worst.
              Got that?
              Do you want me to write it to you third time?Hope not, I am out of here.

          • gcochran9 says:

            “reasons for this economic performance were not from the world of economy”

            If economists really understood the economy, they would understand 1942 as well. It all counts.

            • Gabriel M says:

              Once again, economics is about making a priori statements about cause and effect within the context of society. For example. economics tells you that if you increase the minimum wage (hello Ron Unz!) more people will be unemployed than if you didn’t. Many people either can’t understand such simple logic or pretend not to and say dumb stuff like “but X country raised the minimum wage and unemployment went down!”. Similarly, many people say dumb stuff like “but I knew a black dude and he was smart as a bull whip!”.

              So, for the record, no legitimate economist has ever said his theories (even if correct) allow anyone to “understand 1942”. They merely state that is provides a set of statements about how reality works in general that must be borne in mind by historians, that is all. You might as well say “if geneticists really understood genetics, they would understand why Steve Jobs was such an effective CEO. It all counts”.

              So that’s why you argument is generically null. It’s also specifically null because its common knowledge that command economies are more effective at short term military mobilization, which is why all the Allied countries adopted them during WW2.

          • Hippopotamusdrome says:

            By the end of 1942 SU again had tanks – this time 22 000 of them, which again was more than half of all tanks existing in the world at this time.

            Keep in mind their tanks had a 6:1 exchange ratio in combat. They would be worth 3,600 german tanks.

      • Hippopotamusdrome says:

        As a counterpoint, how do you think the SU would have fared with USA and Britain convoys supplying Germany with oil and trucks and with air bases in Iran bombing the Baku oil fields?

  36. Scott Locklin says:

    Having visited former Soviet countries, my seat of the pants guess is that they were reasonably accurate in their assessments. I spent a few days wandering around Sevastopol, for example, before it went back to the Rooskies. While the economy there seems to consist mostly of selling sunglasses and cocktails to tourists and visiting Russian sailors, there were huge abandoned factories, steel mills, refineries, giant entertainment complexes; I even wandered around an abandoned commie “Seaworld” kind of thing where presumably communist dolphins performed tricks to the approval of the proletariat. There was also all kinds of security apparatus; guard towers everywhere (economists would count paying a soldier to prevent infiltrators as adding to GDP). All of it abandoned and rusting. Reading the histories of Russia in the 90s; “entrepreneurs” were absconding with giant Los Alamos style research facilities, filled with research scientists. They were obtaining these properties more or less for free, firing everyone, selling the equipment for scrap, and turning it into a disco.
    The fall of the USSR was a real fall, comparable to the fall of Rome, on the physical evidence alone.

    I say all this with no love for economists; I think they’re all full of beans, but whatever they were using as a comparison class: I’d have to guess “half as large as the US economy” was a reasonable guess before it all fell to pieces.

    • jamesd127 says:

      ” there were huge abandoned factories, steel mills, refineries, giant entertainment complexes; I even wandered around an abandoned commie “Seaworld” kind of thing where presumably communist dolphins performed tricks to the approval of the proletariat. ”

      I think you will find that if there were any dolphins, they failed to perform tricks.

      Just as the natives of new guinea built cargo cult imitations of airports, in the expectation that their ancestors would send them planes full of cargo, the Soviets built cargo cult imitations of things that in the west create value, but which somehow failed to create value in Soviet Russia.

      • Scott Locklin says:

        Do you think the commie hotels, rocket factories, chemical plants, steel mills and burger joints were cargo cult imitations as well?
        Their transition to a “free market” was an abject failure which destroyed a lot of tangible wealth and national patrimony. I’m no fan of communism as a system, but it worked better for the Russians and Ukrainians than what came immediately afterwords, which was anarchic gangsterism. And, to the point of the blog above, I’m pretty sure our economists actually got it pretty right. Their GDP/capita was at least 1/4 of what the US was doing; probably more in the Russian/Ukrainian sections of the USSR.

        • gcochran9 says:

          I remember Yakolev complaining that the Soviet Union produced more steel than the US, but less steel products. Overemphasis on intermediate production.

          Very few manufactured goods in the Soviet Union were internationally competitive. How do you price a mediocre TV that also explodes?

          • Scott Locklin says:

            Their military industrial complex took up something like 1/4 of the economy. I’d say their weapons were internationally competitive. If I were a third world generalissimo, I’d rather have a fleet of Mig-21s than f-104s (or Mig-35s versus whatever the latest F-18 is). We are also reliant on them for manned space flight, and heavy launch vehicles. I suspect their radar electronics is probably still better than ours. Definitely better at titanium extraction and manufacture (Alfa subs were pretty neat); I think the CIA had to buy the titanium for the SR-71 from the Soviets.

            Away from military gear, of course, they always were bad. I dunno; watches (America can’t make mechanical clockwork any more; the Russian ones at least exist), high quality razor blades.

            • gcochran9 says:

              Last time there was a confrontation between our fighters and theirs (Israeli incursion into Lebanon, 1982), the score was 82 to zero.

              But their Kilo-class submarines sell, the S-300 system SAM is popular, India is buying T-90s and Mig-35s.

              • Scott Locklin says:

                I’m pretty sure the Israelis using biplanes could beat Arab airforces using F-15s. The Kargil war could have been an interesting test, but alas, they didn’t have much in the way of air battles.

              • gcochran9 says:

                The degree to which proficiency can compensate for differences in hardware quality is an interesting question. Hardware quality varies more than human quality: horses versus tanks never works, no matter how good the hussar.

              • Scott Locklin says:

                According to the Korean war vets and at least the fighter mafia guys who made a study of it, the Mig-15 was just as good or better than the F-86, but the American pilots were much better and had superior tactics.
                My own guess (my only qualification for this is having grown up on an air force base) is that the Su-27 family is as good as the F-15 or better. They’ve never faced each other in combat to my knowledge, or if they have, they’ve never shot one of the other down (as they both have perfect combat records. Anyway, that and rocket engines are something the Rooskies do reasonably well. They also make decent safety razors, but I think they got the tooling when Gillette decided there was more money in 4-razor monstrosities.

              • gcochran9 says:

                “the Mig-15 was just as good”

                Blame Harold Wilson.

  37. ghazisiz says:

    GDP is the market value of all final goods and services produced in a year. The Soviet economies measured output using Net Material Product (NMP), rather than GDP–the measure considered only tangible goods, and included an adjustment for asset depreciation. The goods produced were not exchanged in markets, and had no real market values. Data for the measure were collected from apparatchiki who had every incentive to exaggerate the numbers. The NMP measures were not comparable to GDP, and largely fictitious.

    Yes, academic economists were fooled. But, even more surprising, the CIA, whose prime purpose was to keep a close eye on the USSR, was completely in the dark regarding the true state of the Soviet economy.

  38. Anonymous says:

    like most who have received academic training in economics, i am somewhat contemptuous of the ‘Austrian school’ but …

    actually, Hayek/von Mises provided the best frameworks for understanding Soviet economic (under)performance: the economic calculation problem and the use of knowledge in society.

  39. Greying Wanderer says:

    In 1917 Russia was a long way behind Western Europe/USA.

    If you rate an economic system on a scale of 1-10
    and
    If you rate a political system’s ability to force modernisation on a scale of 1-10
    then
    Communism might be an effective system for countries that are lagging far behind their competitors because the benefit from the forced modernisation could outweigh the negative effect of the general suckage.

    If correct then the net advantage would gradually become a net disadvantage as modernisation neared completion.

    • jamesd127 says:

      “Communism might be an effective system for countries that are lagging far behind their competitors because the benefit from the forced modernisation could outweigh the negative effect of the general suckage.”

      China demonstrates otherwise. Stayed dirt poor (despite economists piously believing otherwise) until capitalism.

      The supposed backwardness of Russia under the Tsars got more and more backward, to explain the fact that despite supposed rapid growth under communism, Russia stayed poor. Economists’ estimates of Tsarist GDP went steadily downwards, despite the fact that there were no obstacles to accurate estimating Russian GDP under the tsars.

      Infamously, later editions of Samuelson’s textbook had Samuelson’s graph of Russian of rapid Soviet growth showing the starting point getting worse and worse in later editions, rather than the state of the Russian economy at the time of printing getting better and better in later editions.

      • James,

        China demonstrates otherwise. Stayed dirt poor (despite economists piously believing otherwise) until capitalism.

        I suppose it’s pointless to ask this, but which economists were claiming – piously or not – that China was NOT poor before economic reforms? Saying that China grew economically under the communists between 1949 and 1976 is not the same thing as saying it ever became rich during that period – or that reforms were not a better way to go.

        If there’s one thing which makes me far more tolerant of economists, it’s listening to non-economists talk about the economy. It’s all goldbuggery and the magic of the marketplace.

        • gcochran9 says:

          That’s not a reason to be more tolerant of economists. The gold standard is how their predictions come out, whether there is much understanding of major trends and events – not whether someone out there is even nuttier.

          Although I understand the feeling.

        • jamesd127 says:

          “I suppose it’s pointless to ask this, but which economists were claiming – piously or not – that China was NOT poor before economic reforms? ”

          John Kenneth Galbraith, who during the famine of the great leap forward implied that the kitchen of his luxury hotel was representative of conditions that the ordinary Chinese enjoyed.

          • Well, there you have it. John Kenneth Galbraith was not an economist. He was a public intellectual who spoke on economic matters. You were reading the wrong sources.

            Paul Krugman in 1996:

            The revelation one gets from reading John Kenneth Galbraith’s The Good Society is that Galbraith–who is one of the world’s most celebrated intellectuals, and whom one would expect to have a deeper appreciation of the complexity of the human condition than a mere technical economist would–lacks this tragic sense. Galbraith’s vision of the economy is one without shadows, in which what is good for social justice always turns out to have no unfavorable side effects. If this vision is typical of liberal intellectuals, the ineffectuality of the tribe is not an accident: It stems from a deep-seated unwillingness to face up to uncomfortable reality….

            One key example among many: In the chapter on inflation he mentions the “clear choice–the trade-off–between high employment and inflation as against unemployment and relatively stable prices,” then adds, “This trade-off is present in all accepted thought.” The fact is that it has been a long time since any substantial number of economists believed in a significant long-run trade-off between unemployment and inflation.

            This archaism matters, because Galbraith’s continuing adherence to the primitive macroeconomics of his youth leaves him unprepared to confront the real dilemmas facing modern liberalism. Consider, for example, what he has to say about the interlinked issues of monetary policy, saving, and budget deficits. Galbraith, remarkably, regards the Federal Reserve as a largely powerless institution; he dismisses the idea that the Fed can end a recession by cutting interest rates as a “[q]uasi-religious conviction” that “triumphs over conflicting experience.” Really? Skepticism about the effectiveness of monetary policy was common 40 years ago, but the Fed’s role in sparking recoveries in 1971, 1975, 1982, and 1992–together with impressive demonstrations of the power of monetary policy in many other countries–has put such doubts to rest. Because Galbraith believes monetary policy cannot increase demand, however, he has a sort of Depression-era vision of an economy[cont. on p.58] in which anything that increases spending is good. Should we worry about America’s low savings rate or its government deficits? Of course not: These are good things, because they increase demand.

            And so Galbraith is oblivious to the most serious problem facing modern liberalism: reconciling social justice with full employment. In the real world this is a terrible dilemma; even Sweden, with its powerful sense of community and overwhelming consensus for the welfare state, has found itself suffering from an acute case of Eurosclerosis. But in Galbraith’s world there is no dilemma at all: Unemployment is merely a problem of inadequate demand, to be cured by New Deal-type public works programs and redistribution of income away from rich people who save too much.

            And Krugman again, two years earlier, in 1994:

            Paul Krugman, who later won the Nobel Memorial Prize in Economic Science, in 1994 downplayed Galbraith’s stature as an academic economist. In Peddling Prosperity, he places Galbraith as one among many “policy entrepreneurs” – either economists, or think tank writers, left and right – who write solely for the public, as opposed to one who writes for other academics, and who is, therefore, liable to make unwarranted diagnoses and offer over-simplistic answers to complex economic problems. Krugman asserts that Galbraith was never taken seriously by fellow academics, instead viewing him as more of a “media personality”. For example, Krugman believes that Galbraith’s work, The New Industrial State, is not considered to be “real economic theory”, and that Economics in Perspective is “remarkably ill-informed”.

  40. cassander says:

    A huge part of the problem was the difficulty of measuring the actual value of goods in a command economy. For example, the USSR produced more shoes per capita than any other country in history. Despite this production, though, there were still massive lines around the block to buy imported shoes whenever they were available. Why? Because western shoes were more comfortable, better looking etc. Each of those pairs of shoes got booked as part of soviet GDP, however, probably at pretty close to what an average western shoe was despite being no where near as valuable. By the end of the USSR, huge segments of the economy were actually value negative, using expensive capital and labor to turn perfectly good raw materials into products worth less than the material would have been.

    @Greying Wanderer

    Russia’s backwardness in 1917 is often overstated. Russia in 1913 was the fastest industrializing country in the world. The civil war destroyed much of what progress had been made and communism prevented it from resuming. If anything, the USSR was, anywhere other than a few military industries, further behind in 1940 than in 1913.

    • Greying Wanderer says:

      “f anything, the USSR was, anywhere other than a few military industries, further behind in 1940 than in 1913.”

      Yes, the military production is the point though – under the Tsar would they have been further ahead generally but further behind militarily?

      guns vs butter

      It’s partly a strategy game question because that’s generally how authoritarian regimes are treated – they can produce more guns because social control partially replaces the butter – and correct or not that generally feels right in strategy games.

      So if it feels right in strategy games maybe there’s a psychological reason people who haven’t lived in an authoritarian regime expect them to be much more efficient than they are?

      • cassander says:

        Soviet military production was caught up in a few areas, notably tanks and aircraft, but they were behind in most others. Had there been no revolution Russia probably would have been militarily further ahead overall than they were simply due to much more industrial capacity. You also wouldn’t have had all the experienced officers shot in the 30s. The more important point though is that in a functional capitalist economy, you don’t have to choose between guns and butter, the US overwhelmingly chose butter between the wars and still had an overwhelming capacity to make guns.

        maybe there’s a psychological reason people who haven’t lived in an authoritarian regime expect them to be much more efficient than they are?

        People are familiar with their own systems’ inefficiencies, look at other systems, see that they lack many of them, and assume that means they are more efficient. They forget, or fail to imagine, that the other systems might have inefficiencies that their systems don’t. The seen vs. the unseen.

    • ghazisiz says:

      ” the USSR produced more shoes per capita than any other country in history. Despite this production, though, there were still massive lines around the block to buy imported shoes whenever they were available. Why?”

      The apocryphal story is of a shoe factory that is required to produce 100,000 pairs of shoes but only receives enough raw materials to produce half that amount. Efforts to cadge more raw materials from other factories having failed, the managers do the only thing that will keep them out of the Gulag: make 100,000 pairs of children’s shoes. Small people were apparently well-served by the Soviet economy, large people less so.

  41. melendwyr says:

    Why didn’t people realize that the Aristotelian model of gravity, in which heavier objects fell faster, was incorrect? Why didn’t they notice the conceptual errors that Galileo eventually pointed out, much less the observable data which contradicts the model?

    Because they never looked.

    Why are there so many stupid, incorrect, and conceptually incoherent models about how things work in the world? Because most people aren’t interested in checking them.

    • Jim says:

      A Byzantine scientist whose name escapes me now actually carried out experiments with falling objects in the first millennium AD and found no significant difference in speed by weight.

      • melendwyr says:

        I’m told that research disproving ‘old chestnuts’ has a tendency to pile up long before people finally acknowledge it. That’s a neat example of the phenomenon, Jim.

  42. The question this interesting blog thread pushes to the front of my brain is how in the world did that horribly inept USSR government actually stand up to the world beating Germans in World War Two virtually all by themselves. It wasn’t guts or heart that stopped the Germans it was a larger quantity of superior weapons improbably built by the same guys that made exploding TV’s and god awful consumer goods.

    Russia has some world class brains and the idiotic communist system could now and then engineer top quality weapons at rock bottom prices, especially when the workers motivation is survival from an attacking killer rather than retarded communist propaganda.

    It is some amazing history how the German war machine was ground to a fraction of their might versus the USSR in World War Two. Now go out there and read some of the good books that explain the complex reasons as to why.

    • ursiform says:

      During WWII the SU didn’t operate according to a five year plan drawn up by Marxist economists. That went out the window. They just built as many tanks and planes and guns and artillery as they could with no regard for long term development plans.

      The motivations for working were different under Nazi siege than under Soviet blight.

  43. Bourbon-Soaked says:

    Old joke about economists:

    Q: “An economist is walking down the street, and sees a $100 bill lying on the sidewalk. What does he do?”
    A: “Nothing. If there were a $100 bill on the sidewalk, somebody would have already picked it up”.

    There’s another good one you can look up on your own, with the punchline “Gentlemen, I have a much simpler and more elegant solution: first, ASSUME we have a can-opener”.

    In general, a lot of people who are very interested in economics strike me as being prone to the same mental disease that afflicted Plato and the Platonists. They’re admirable for taking abstract ideas seriously, but quickly forget that the behavior of real-world humans often only very loosely corresponds to those ideas. Economic theories may be perfectly true “ceteris paribus”, but rarely is “ceteris” actually “paribus” here on planet Earth. Every economist should have the phrase “The Map is Not the Territory” stapled to his desk.

    I recall reading an old column by Andy Rooney, who opined that he was not terribly afraid of the USSR “because I’ve been to the bathroom in Russia”. He reasoned that the state of their indoor plumbing was probably a rough proxy for the quality of their aircraft and tanks. Clearly, there was evidence enough for the “experts” to know what was up, but they ignored it. “Ignored” might even be a polite word- the KGB were fairly aggressive in trying to recruit Russophile American academics. Bruce Allyn has an interesting tale about the KGB unsuccessfully trying to turn him while he was a grad student studying in the USSR; one wonders how many other grad students were quietly given the same offer and didn’t refuse. That may explain a lot about the way academia reported on the Soviet system.

    • Jim says:

      I doubt that inferring the quality of Soviet tanks from the quality of Soviet bathroom plumbing is a very reliable method.

      It is true that economists seem hardly to realize that they are using very simplistic models to try to understand a very complicated reality. Humans are very complicated biological organisms not ideal self-optimizing economic agents.

  44. John Galt says:

    The red zone stand has come down to evaluating 1942 wartime production. Even the employed spend only about 25% of their time working in western societies. Measures of production don’t value what isn’t produced and purchased. Production by any measure rises when on average a country’s workforce trades off leisure for work (e.g., war, peacetime forced labor, cultural shift). So look at productivity instead, but don’t expect macroeconomic theory to explain the performance of very different societies under extreme circumstances in a narrow time frame.

  45. IC says:

    FYI

    How China is rewriting the book on human origins

    Fossil finds in China are challenging ideas about the evolution of modern humans and our closest relatives.

    http://www.nature.com/news/how-china-is-rewriting-the-book-on-human-origins-1.20231

  46. Pingback: Dismal Quackery | The Z Blog

  47. JoachimStrobel says:

    East Germany 1:
    They made the Practica Cameras. 1975: M42 lens adapter, Selen photodiode. Canikon had a bayonette mount with spring aperture and Cd sensor, light years better. But the Practica sold at 500 DM while CaNiPeOlMi ranged from 700 to 900 DM. Many people in West-Germany bought a Practica, it was also re-branded by “Quelle” (THE mail order company in FRG) as its own label. The East block could only buy Practica and thought that this was the greatest camera on earth. Economists in 1989 extrapolated that sucess and believed that Pratica would be doing good. Nobody bought that camera after it became as expensive as Canikon after the west integration, and the outher Eastblock countries run away from it towards Canikon cameras. (Similar thing happened to Orwachrome, a GDR producer for Kodak alike films).

    GDR 2
    They also made a decent car, the Wartburg. Kind of station car with 2 stroke engine. They exported it to Denmark. They bought it there, because they have a 100% (or so) surcharge on cars. A western “Golf” would then cost 30K DMequ while a Wartburg would sell at 18K. Some Danes bought that car, and some eastern countries too, and smart economists extroplated a great export sucess for that Wartburg after 1989. That never worked because high cost VW took over, unlike Renault and Dacia.

    And so on. GDR products were only competitive within the east block where nobody could buy western stuff. That was falsely translated into real economic strength.

    Tanks: I remember that well. 40000 eastern tanks versus 6000 NATO tanks. How horrible, the east will conquer us in days. The experts classed every vehicle which had more than a 30 mm cannon as tank. The east mounted 70mm+ cannons on every troop transporter, voila, a tank (that cannon was almost pre-WW2 technology). The western troop transporter had mostly 20-30 mm automatic, fully hydraulic operated guns, some with uranium tipped bullets to penetrate the T62 side armor. But they were classed as non-tanks.

    • gcochran9 says:

      The Warsaw Pact would have conquered you in days. I remember it even better.

    • gcochran9 says:

      In many cases, East German Kombinats bought lots of of parts from West Germany and then sold their gear for less than cost – the difference made up by soft loans from West Germany (= tribute), the part that wasn’t sent straight to a Swiss bank account.

  48. atp says:

    Apparently Soviet economists were starting to figure it out, but it took them too long:
    http://infoproc.blogspot.com/2016/07/perestroika-and-discovery-of-price.html

  49. Richard Harper says:

    Over-emphasis on USSR. Go slightly further back. Even now there isn’t a very good understanding of how the American Economy took off around 1942. John Kenneth Galbraith running the Office of Price Administration had some strong arguments that at least some intelligent application of command-control economy elements might be the main ingredient for the take-off. Then the military logistics developments during WWII in the US military underwent tremendous elaboration through real-world practice. Coming out of that was the input-output economic models, central to the thinking of command-control economies. The victory of the allies led to a strong adoption in management consulting circles (famous companies to this day) of input-output models. So the economists getting their Phd’s in teh 1950’s were pretty much getting hit on all sides — military success, Office of Price Administration success, and the trend toward professional consulting services to the largest corporations — to think in terms of centrally planned economies. Then that cohort of Phd’s forms a somewhat limited but not insignificant filter bubble. The fact that academics in the US were thinking so strongly in these terms probably influenced the USSR and others to go with and stay with at least the rhetoric of centrally planned economies more than might have happened otherwise.

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