Systems Matter Part 6: A Productive Nation

In retrospect, the economic part of the Marxist/Leninist plan of total revolution in 1917 was pathetic . . . almost laughable. They knew nothing of economics or running a business, let alone a nation, or more ludicrous, the world. If you have been reading just these posted weekly articles over the past four years, you already know at least ten times more about economics and business than did Marx, Engles, Trotsky, and Lenin put together!

The communist coterie was so concerned with the total revolution and the smashing of all Russian systems that no serious thought at all was given to the basic systems of managing the economics of a nation. . What shall the dog that is chasing the car do with the car should he catch it?

The junta was desperately preoccupied with killing the czars and their families and grabbing the uncalculated wealth of the Czar’s golden egg. They just knew that if they could capture the treasure chest of the wealth that was stored somewhere, they could spend their time and creativity in distributing the booty and controlling everything and everybody forever. They never gave a worry about the question fromwhence cometh the golden egg? They figured that the golden egg was stored in the banks and they would own the banks. They just presumed that business would simply run itself as it always did, only they would own it and there would be no bourgeoisie involved. Obviously, the businesses were too big to just fail!

Karl Marx’s theory was that someday soon all proletariat workers around the world would angrily rise up en masse and kill the bourgeoisie bosses. They would get sick and tired of the bosses exploiting them because they were cheating every worker. The claim was that the bosses always kept the surplus value of a commodity that was created by the worker. That was theft.

That generalization was based on Marx’s misunderstanding of how the real world works. He touted that the value of a product should be determined only by the value of the labor that went into producing it. Only the laborer was entitled to receive the proceeds from the commodity or product produced, and there should be no such thing as surplus value for the bourgeoisie bosses to steal.

The conclusive answer for Marx was to let the proletariat own everything, and then it would not be necessary or possible for the rich bosses to get their hands in the middle of the process and steal the money rightly deserved by the workers. There would no longer be any expenses such as rents, costs of raw materials, utilities, or anything else, because the workers would own everything themselves, and everyone could keep and divide the entire value generated by all efforts. There would only betrue value. There would be no such thing as surplus value.

Of course, it would never work. But with the frenzy, the emotion, and the very idea that all the people would be wealthy and all their wants supplied, they were moved to action. No one else would have anything more than what someone else personally possessed. That line of emotionally charged promises bought out the very souls and brains of the proletariat peasants. Because of their personal desire to receive something for nothing, and the hope that the government would take care of them from the cradle to the grave, they were convinced to pick up guns and kill those who would dare keep them from receiving their promised dream.

Neither Marx nor Lenin understood that it wasn’t just the hours of labor of the proletariat workers that determined the value of a commodity or product. Perhaps they did not wish to understand, if understanding limited the possibility of their dreams of total revolution coming true. The leader’s wild rhetoric implied that after the revolution the proletariat would be in total control of the new world. But the politburo never entertained another thought different from Marx’s own words that The class struggle necessarily leads to the dictatorship of the proletariat. Vladimir Lenin would be that ruthless dictator at any cost. The resulting power and spoils would be his personally, if only the revolution could be successfully accomplished.

Even when it dawned on Lenin and the revolutionaries that there would be some management required after their successful and bloody revolution, Lenin calculated it to be no problem at all. They were the revolutionary leaders, and the politburo consisted of the elite thinkers when it came to all things concerned. Their intelligence would figure out the answers to such simple and bothersome matters as business and economics.

The all-wise comrades finally formulated a plan of economic management called theGosplanGos was an abbreviation for the Russian word for government: thus, the Government Plan. Gosplan figured out the strategy. Gosten figured out and set prices. Gosnab decided the allocation of the supplies, and Gostude handled issues of wages and labor assignments. It seemed to be a right-tidy management package.

Gosplan was designed and written for a five year model. The plans never worked! They tried to modify them to one year. That never worked. The truth is that communism and resultant socialism has never figured it out.

Can you even imagine the egoism and arrogance necessary to believe that you personally, or even your appointed Gosplan group, could successfully coordinate such an assignment? The complexities of trillions of necessary decisions to be centrally made would be an administrative nightmare.. You could never get it right.

In the country of Armenia, I stood in a very large building that had been formerly used as a leather processing plant and a facility for manufacturing of shoes. The old Soviet Communist forces that had occupied the country and run the shoe operation had long since pulled out and returned to Russia. But some of the old workers had subsequently gone back into the old building and started up a leather processing plant and a shoe factory on a free market basis where they owned and operated the business.

Through my translator I engaged the successful owners in a long and revealing conversation. I wanted to know how the Gosplan functioned under the communists. They laughed aloud. It didn’t! They told me that a large number of people were assigned to the shoe manufacturing part of the operation. Some people were assigned to stamp a pattern on the leather, others cut out the leather pieces, others sewed the upper part of the shoes together, and others were in charge of stitching the bottom soles onto the uppers and pounding an appropriate heel on the shoe. Other people were assigned to dying the entire shoe, drying them and packaging them in large crates, which were shipped off to somewhere and stored in warehouses. Everyone had a quota to meet.

But the constant problem was that, more times than not, all the workers just sat around and sipped vodka. Something would break down in the leather curing and tanning operation and there would be no leather available for making shoes. Many times the leather operation would never receive the horse or cow hides because the butchering plants never had enough animals to kill and skin out.

They explained that the reason for the shortage of the animals was because they had miscalculated in the Gosplan how much hay and grain it was going to take to feed the animals, and even if the animals had produced babies, the offspring would die, which would affect the proper number of animals that were needed for the years to come. If they didn’t have enough feed for the animals, or the weather was not cooperating with the Gosplan, then everybody involved in the whole leather and shoe production could only sit and wait for someone to figure out how to revise the Gosplan.

No one really cared whether they produced the number of tons of shoes or the number of animal hides required, or for that matter, the amount of hay required each day to feed the animals. It wasn’t their fault or concern if someone down the line or up the line messed up. They received the same kind of housing, the same quality of clothing, the same allotment card for the same kind of bread and the same measured handful of vegetables whether there were any shoes produced or not.

One of the new entrepreneurs was laughing and slapping his knee as he recalled for me an incident that had taken place right there in that old facility under the management of the Soviets and their Gosplan. Their shoe operation had been assigned a quota to produce a given number of tons of military boots for the Soviet army. They were to be manufactured by a certain date, placed into huge crates, and shipped to a central warehouse. The orders from the Gosnab planning group of theGosplan central committee had not stipulated what size the shoes should be, the style, or the color . . . just so many tons of military boots.

“Guess what we did,” my new friend howled. “We found the heaviest leather we could find and made every one of the pairs of boots size fifteen with no dying of the leather, placed them in huge crates, and let the Soviets pick them up and deliver them to their destination! They could figure out who else they wanted to make the smaller sizes. When the loads arrived at the central warehouse, the Gosplan people actually sent us a commendation and some vodka for having met our quota of tons, but no army could have ever worn those huge boots.”

Next Week: Systems Matter: Part 7: Self Interest

(Research ideas from Dr. Jackson’s new writing project on Cultural Economics)

© Dr. James W. Jackson

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