Remembering The Fall of Communism 20 Years Ago Today
Did you know for 72 years not a single public enterprise in the USSR closed shop? I guess they were all too big to fail. Well, if it worked for them......
November 9th, 1989
The wall fell. Do you watch the video and feel moved? I still do. Do yourself a favor today. Go to YouTube and watch some of the clips that seem so ancient now. They almost bring a hardened veteran to tears. (It's a good thing I had my tear ducts surgically removed in the Marines.)
In 1989, I understood nothing. I was filled with pride because I thought we won. Who was "we" and what had we "won?" Today perhaps I know only a fraction more. But I know some things.
For starters, I know that Mikhail Gorbachev was no benelovent reformist. He was a mass murderer and political operative of the highest order. His efforts at reform were only efforts to save the ruling class of Moscow from their inevitable doom. It was an attempt to buy some time.
Nor was Gorbachev the typical bumbling State executioner, implementing foolish policies like altering the price of bread, causing shortages and starvation. No, Gorbachev was the cunning warrior, exterminating enemies and peoples he deemed a threat to the State.
To this day, the United States government manages to ignore Gorbachev's bloody legacy or simply engages in willful ignorance. The academicians of American universities can not claim the latter. They know full well how brightly the fires of Hell will burn for Mikhail, yet they have welcomed him with open arms ever since his emigration the U.S.
A while back I posted an essay written by a former Kremlin lackey named Yuri Maltsev. It sent one CAPS blogger named devoish into such a tizzy that I thought his head once going to explode. He called me out by name as a shoveler of B.S. and Maltsev as an agent provacateur of the highest order.
Maltsev's credentials can be found easily enough on Wikipedia.
Yuri Maltsev graduated from Moscow State University with a Master of Arts in History and Social Sciences (1973) and received his Doctorate of Philosophy in Labor Economics from the Institute for Labor Research in Moscow (1980). Dr. Maltsev held, over a fifteen-year period, various teaching and research positions in Moscow, Russia. Before coming to the U.S. in 1989, he was a member of a team of Soviet economists that worked on President Gorbachev's reforms package of perestroika at the Russian Academy of Sciences. He was a Program Director of the International Center and a Peace Fellow at the United States Institute of Peace.
If these credentials are a sham, please let me know. I can not verify them. If I could travel back in time, perhaps I would sneak into the Kremlin and follow Maltsev myself. But that's the thing about Communism. When it implodes, it leaves a black hole of history. The massive secrecy and general paranoia that encompasses the State, combined with the crushing oppression of information and dissenting viewpoints makes historical reconstruction nearly impossible. Decide for yourself who Yuri Maltsev is to you. Certainly, Maltsev is an enemy of Gorbachev but even he concedes that Gorbachev's foreign policy of reducing imperialism was the correct call. This is why I still hold out hope that The Joker will follow through on his campaign promise to promote peace around the world as opposed to his destructive predecessor who should be drawn and quartered. Moving on.
After the fall of the USSR, Maltsev spoke out. The Mises Institute interviewed him. Here is the transcript. (This interview appeared in LvMI's Free Market magazine March 1990 and his reprinted in full with permission from LvMI)
An Interview With Yuri Maltsev
Dr. Yuri Maltsev was a professor at the University of Marxism-Leninism in Moscow, a member of the Soviet Academy of Sciences, and an economic advisor to the Central Committee of the Communist Party of the U.S.S.R. He defected during an academic meeting in Finland last year and now lives in Washington, D.C. He is a consultant to the Jamestown Foundation, an adjunct scholar of the Ludwig von Mises Institute, and this summer, he will be a faculty member at our Mises University.
FreeMarket: You were recently teaching economics in Moscow, yet you are an advocate of private property and the free market. Shouldn't we be surprised?
Maltsev: No. After decades of enslavement, almost no one in the U.S.S.R. is interested, for example, in the views of John Maynard Keynes. People, both in and out of academics, are looking for freedom, not an alternative method of government control. Even if they haven't read
Mises, Hayek, and Rothbard, they are instinctive libertarians.
FM: People see government as the problem?
Maltsev: Everyone knows that the government is responsible for giving them a ThirdWorld eeconomy. We joke that inside the Kremlin walls there is communism (no money, just prosperity); inside the Moscow beltway, there is socialism (money and some goods and services); and outside the beltway, there is feudalism. Three of Marx's stages, of course. A lot of intellectuals in the U. S. think there is some sort of plan behind the Soviet system.And there is, but not what they think: it is simple political power. Imagine the U. S. if the Democratic Party ran everything, and I mean everything, down to the tiniest detail, and everybody was a post office employee. That's the
Soviet Union. As Mises demonstrated so many years ago, such a system cannot work because,
there are no market prices and no profit and loss signals.
FM: What about the morality of central planning?
Maltsev: It fails on that ground as well. If you impose a Single Will on the citizenry, everybody who deviates from this Will must be exterminated. Between the 1930s and the 195Os,
40 million people were slaughtered to carry out the Plan. Today, the government seldom shoots
people, but it does deprive them oftheir jobs. And because it is a monopolistic economy, they
cannot get another one.
FM: How are prices set?
Maltsev: This is the most absurd part of the Soviet economy. They pretend to use a cost
plus basis for pricing. But the profit is planned for you. Say you have a planned profit rate of 15%,
and the cost of a good is 1rouble. The price of the good will be 1.15 rou-bles. But if you include the
costs of your own mismanagement in the base, then you can make a higher profit. So the system
favors the maximization of inputs, not outputs, spending not production. There are 22 million prices
in the Soviet Union, most of them are computed on the local level. The State Committee on Prices
issues the "methodological materials," which are rules on what must be included in the price, for
example, the costs of material inputs and labor inputs. These costs are based on other costs.
Then you have to submit the price to the Committee and they will check it and sometimes revise
it. When the price is approved, it is never changed. One of the strongest points of Austrian
economics is the logical theory of the business cycle. You cannot think of a recession as a bad
thing. It cleanses the economy of everything it does not need. Everything that is not wanted by
consumers goes by the wayside. But imagine this: in 72 years, the Soviet Union has never closed
a single enterprise.
FM: But they know they should?
Maltsev: Sure, they know they must. But how do you do it? There are too many vested
interests. The only thing the Soviet government has left to brag about is that they have no
unemployment. Last year, about 40% of all the enterprises could not meet the planned profit
target. Theoretically, that means they operated with losses. Say they introduce so-called market
socialism- a concept which really has no meaning - then these enterprises must be self-supporting.
That means 40% of the enterprises would have to go belly-up. Some good economists say these
enterprises are a burden and should be eliminated. But the point is you can't trust the profit and
loss figures. They don't reflect consumer preferences and they can be miscalculated. There are
plenty of enterprises that are essential, like farming, that always operate at losses. The overall
agricultural productivity is minus 6%. This shows absolute ignorance of economics and social
FM: Who benefits from phony figures?
Maltsev: The managers of the Soviet enterprises. The only measure of your success is how you meet the planned target. The output target is the most important, and sometimes it is even
nice to pretend you are making a profit. It is hilarious to attend the annual meetings of the ministers. They rush to the podium to brag about how much they have produced and how they fulfilled the plan. All the while they are looking at the higher-level minister they answer to. But they are faking it. Ifyou have been ordered to produce 10,000 widgets, but you only produce 9,000, you have a very strong incentive to lie about it. And moreover, to say you produced 11,000. It is very difficult to calculate these things, and nobody really cares. That's why they have to rely on foreign statistics so much. Gorbachev has admitted that he expects agricultural losses to be about 40% in this year's harvest. And people there say, oh, how open and honest he is. But I don't believe these figures. Much of the harvest will never be seen. The numbers are imaginary. When the time comes, they will say the rats ate the harvest, or it was lost in a storm, or fell out on the railway, or whatever.
FM: We've heard only recently that the Soviet GNP is much lower than we-and the Soviets-
Maltsev: Soviet GNP figures are ridiculous. I have a close friend, a very smart economist,
who estimates that the Soviet economy is seventh or eighth in the world. But we can't say for
sure. We do know that the standard of living is Third World. A main problem is double counting. Say someone wants to produce an irrigation tractor. First they excavate the ore for steel and count that. Then they make pig iron and count that. On and on it goes, with steel, spare parts, etc., until the final tractor. At each stage they have counted the product in its entirety, not just the value that is added. I approximated the value-added cost of the tractor to be 870 roubles. But the enterprise was reporting the cost at 11,870 roubles. That is what goes into GNP calculations.
FM: The CIA has used Soviet statistics on production for years.
Maltsev: That's sheer irresponsibility. But it is not as if the CIA knew the truth. Nobody, including the Soviets, knows the truth. I know people in Washington think-tanks that think the Soviets are tampering with the figures just to fool Americans. They think the Soviets know the true figures. The truth is, they don't know themselves. Today the CIA and several think-tanks are recalculating Soviet statistics, but they are doing so on the basis of other phony Soviet statistics.
FM: Much concern over the Soviet military threat was based on these figures.
Maltsev: Sure. T'here are groups in the U.S. with a vested interest in showing the Soviet
economy as larger than it really is. And some people think you can compare U. S. output with
Soviet output on a dollar for dollar basis. You can certainly make up some quotient, but it is absurd.
FM: Our government has long said the Soviet economy doesn't produce consumer goods because all resources are poured into the military, a sector which is pretty efficient. Socialism can't produce margarine and soap, but it can make planes and tanks. What do you think?
Maltsev: Socialism cannot produce anything efficiently. The reason they can't produce
margarine and soap is not because the resources aren't there, but because the socialist system
doesn't work. Plenty of Soviet military officials fabricate figures themselves, as I know from my
own army experience. Gorbachev is trying to reduce military spending this year by 15%. When I was in the Soviet Union, I headed the project on the civil service. The final goal is conversion of 40% of the military to the civilian sector by 1993. Gorbachev thinks this will free resources, and prosperity will bloom in the consumer sector. But it will not, thanks to socialism.
FM: What about the state of economics in the U. S. S. R. ?
Maltsev: Most economiststhere are trained in practical, not theoretical, economics. But
Mises is far more respected in the Soviet Union than Paul Samuelson or J,K. Galbraith. The government's official propaganda treats libertarians as Enemy Number One because they openly condemn the socialist system. But the more the government criticizes them, the more they appear interesting. Moreover, ideas condemning the Soviet authorities carry more weight than the official pronouncements themselves. That is why Boris Yeltsin is so popular. It is not his charm and charisma. He was singled out as an enemy by the official propaganda and it backfired.
FM: Does the public believe what the Soviet authorities say about America?
Maltsev: If I went back to the Soviet Union today and said, "I live in Washington, D.C., and
there is widespread street crime, corruption, crack wars, and people without homes," everybody
would assume I was a KGB agent. No one believes the authorities. If a Soviet official says, the economic plan has achieved and exceeded its goals, people know it has failed as usual. There
is a joke that if the government forecasts warm weather, people assume it will be cold.
FM: What do you think about America?
Maltsev: I love the American people and American society. Americans are unbelievably
good-hearted and generous. This is the most wonderful country in the world. On the other hand, I
don't love government, any place, Moscow or D.C. ,Thanks to democracy, your government is
much less extensive, and much less corrupt, but with a very few exceptions, all politicians and bureaucrats are engaged in the same protection of vested interests through economic and political
manipulation. And they issue the same sort of ridiculous orders. One of the first things I encountered in the U. S. was a Soviet system of newspaper pickup. Here is a newspaper which I have bought and paid for. Under the Constitution, I thought I had the right to eat it, burn it, or dispose ofit in any way. In the condominiums where I live, we received an order from the D.C. government. Each week you must surrender this newspaper in special bags, which you must get from the local supermarket. If you do not obey, you can be fined $400. In other words, I am told to surrender my property free of charge to the government according to their irrational standards. And I thought I was escaping socialism!
FM: What do you predict for perestroika?
Maltsev: It will be a failure. The overwhelming problem is the monopoly of the Communist
Party. They are running the reforms. There are a myriad of vested interests. That is why I am more optimistic about Eastern Europe. They have all but eliminated their Communists. For years, the people living under socialism didn't know how bad they had it. Only with glasnost did people realize that socialism is built on lies.
FM: Does Gorbachev deserve any credit?
Maltsev: Yes, for glasnost. And he went all over Eastern Europe telling the people that the
U. S. S. R. would not intervene militarily. That was the signal to throw the governments out. And they did. His foreign policy has been right on target. In fact, many people in the Soviet Union believe Gorbachev is an anti-communist. If you are General Secretary of the Communist Party, you cannot just say, "This system is baloney." You must go about it slowly and covertly. If he is not an anti-communist, then he is a fool.
FM: How can the U.S. help the capitalist revolution?
Maltsev: Not through foreign aid! It will actually hurt by entrenching bureaucrats. The more money they get, the less eager they are to reform. And diplomatic missions to murderous regimes are disastrous too, both practically and morally. The best thing the U. S. can do is to export good economic thought, as the Mises Institute does, and set a good example by reducing the size of government here.