Transcript of Explaining The Economy of The Soviet Union (Responding to Economics Explained)

Hello. I've been seeing this video my recommended nearly every day for the past month. So, I finally bit the bullet and decided to give it a watch. Oh boy. If you're unaware, they do pop econ videos loosely discussing well, economy. I was expecting this to be the usual antis-siet garbage you see regurgitated everywhere, but surprisingly, it's at least a decently non- vitriolic piece. Not the most accurate in content, but not outright hateful like many on the topic. I'll skip through the first half because it's just mostly historical interest stuff you already know. Regardless, let's jump in. Now, another big flaw in this whole system that is often pointed out is the lack of incentive to put any kind of discretionary effort into your work. This is objectively not true. The quality of goods was more or less correlated with sophistication and how established a particular industry was. A good example being the first several generations of Japanese goods were absolute garbage. Likewise with Chinese equivalents. Now though, Japan is associated with technical sophistication and China is well on its way there in several fields as well. Many Soviet made goods exceeded in quality. Others were eh kind of in the middle and some were indeed horrible. There usually made is to compare mass production cheap to buy Soviet goods meant for an incredibly large consumption base and compared with a relatively luxury level product from for example Western Europe. This is then triumphantly followed with a see Soviet goods were super low quality despite the disingenuous comparison. Likewise, the Soviets in their ambitious attempts produced everything. Computer chips, clocks, cars, uranium enrichment labs for nuclear power, planes, pre-fabricated buildings, leather goods, agricultural goods, etc., etc. This was mostly a result of Western's sanctions against the USSR, as well as general prohibitions on certain items. For example, the coordinating committee for multilateral export controls, which after World War II basically banned export of any and all computers, chips or parts to all socialist countries, including the USSR. In the US or Western Europe, you have African raw materials, usually controlled by local tyrants or US backed warlords. Latin American fruit paid for by CIA puppet dictators or military hunters propped up by the US. South Korean radios produced by the fascist dictatorship directly backed by the US. Swiss/German clocks, do I really need to mention all the the Swiss did? Japanese computer parts, Taiwanese labor, etc., etc. My point being, the USSR didn't have the luxury of importing all the best from around the world to stock its stores for a limited consumer base that could afford top shelf. Of course, just because said highquality good existed in the west didn't mean an average person had one. I remember someone comparing the East German Trabun to a Porsche and remarking at the superiority of the Porsche. The question that is never asked is how many everyday people own Porsches? In essence, the Soviet Union is punished in not absolutely excelling in every single thing it ever produced, which I think we can all agree is a silly art stick for this conversation. There are genuine pitfalls of Soviet consumer redirection and quality control, but the genuine conversation is, as usual, so nuanced and boring that it's substituted for hyperbole and the usual anti-communist tropes. There's a lot of literature published on late Soviet consumer culture, but that'll enlarge this video to the point of boredom, so maybe next time. Also, most of this is outdated criticism of planned economies. For most of its existence, the USSR only planned a small group of inputs, 10,000 out of an economy of over 10 million outputs by hand. attempts will be very different because of well computers. Check out my economic calculations problem video for more. A typical limitation of Marxist Leninist social systems is that it doesn't offer much in the way of motivation to be a more productive worker or manager or business. At the end of the day, resources will be allocated upon needs by the state and your own discretionary effort has little to do with what you receive. objectively not true. This is basically a rewarded but under socialism why would anyone work argument. Firstly, from each accord to his ability to each according to his work. Soviet workers are compensated according to the quality and quantity of their work unlike you as an American worker on average who works an extra 9.2 hours a week completely unpaid and uncompensated. Secondly, Soviet worker efficiency and likewise management and allocative efficiency was roughly equivalent to that of industrialized western countries. Though this is simply not true. In the early '90s, Muriel, not a socialist by any regard, published an article in the journal of economic perspectives reviewing empirical studies of efficiency in the socialist planned economies. The results, virtually all of them found that by standard neocclassical measures of efficiency, planned economies performed as well or better than market economies. Thirdly, this is somewhat misunderstanding how planned economies work. Resources aren't allocated to enterprises according to need. They're allocated according to a national economic plan with certain goals in mind. These are also usually politically overseen. So simply doing the bare minimum was a no-go as a manager of an enterprise and could get you in trouble if you did rightfully so. Most people should be able to understand this. But what most people miss is that this problem isn't necessarily exclusive to a socialist system. Most workers in developed countries are salaried employees that receive a base wage and perhaps a bonus on top of that for hitting certain targets. The same as in the Soviet Union, there is little incentive for people to put in any more effort than they need to in order to just not get fired. This just sounds like work anywhere. In fact, this is far more accurate to private enterprise and capitalism than anything else. Some of the hardest working people I've ever met were in public healthcare. And some of the well inverse were mostly found in private tech, advertising, or other related fields. In fact, the comments of this video are full of people saying exactly this much. Now, measures of efficiency are kind of pointless as we're already progressively more efficient yearbyear with absolutely no changes in pay with inflation eating away at our already stagnant wages making this twice as bitter of a pill to swallow. But I'm unaware of any regular job that pays bonuses for hitting certain targets. Have you ever seen this? I know a lot of people in various specialized fields. I've never heard once of anyone getting paid a bonus for overperforming. In fact, overperforming usually gets rewarded with more responsibilities and more work, especially in the medical sector in my personal experience, which supposedly I was told was a socialist issue, not a capitalist one. Now, being fair to the guy, he did mention that this isn't exclusive to socialism, but he did also kind of make this a public versus private thing, which is still kind of stupid. This has led to a phenomenon where a lot of workers are idle for a vast majority of their working hours. Like maybe you are right now watching this video. So yeah, lazy, unmotivated workers are a thing in socialist nations, no doubt. But they are also a thing in capitalist nations as well. No major differences there. Nice to point this out. Something that does make a difference though is perhaps something that is more of an oversight for most people assessing socialist states and that is the vast mismanagement of resources that are allocated with the guidance from political ideologies rather than economic theories. Allocation productive as well as efficiency related markers were similar in the USSR to industrialized Western European countries see the aforementioned paper. Furthermore, to the disappointment of those that decry these so-called soft budget constraints of socialist economies, meaning since the social state has an interest in having firms succeed, those same firms have technically no hard budget. And because of a diverse number of reasons, this leads to inefficiencies. The reality is that socialist economies had a pretty high level of allocative efficiency, which is the degree to which inputs are allocated among firms in a way that maximizes the total output. His research found that even at 100% allocative efficiency of inputs, Soviet output would grow only by a meager 2%. Of course, he wouldn't have been published if the point of the research was not to be explicitly anti-communist. So, he tries to explain away his findings by saying the Soviet economy, the same economy that launched humanity into the cosmos and started us as a space fairing species, lack technological growth. of course, conveniently ignoring Soviet technical innovation, as well as directed economic, political, and diplomatic agendas from the capitalist block for the highest possible limitation on Soviet economic and technical development. On this point of capitalism's inherent capacity for innovation, I'm always reminded of Jucer. If you're unaware, Juicer was a basically a $700 mechanical press cosplaying as a juicing machine, which you had to have a Wi-Fi connected subscription to use. Not only this, but it used prepackaged fruit and vegetable pouches that you had to buy from them only and scan through the juicer itself to make sure you're not using illegal third party juice pouches. Wouldn't want you pirating your juice now, would we? The best part, you could squeeze all the juice out yourself like with your hands. You could grasp them and squeeze them and the Yeah, no need for $700. You can just use a bit of elbow grease. This got over $100 million in investment from such giants as Google. Yes, that's the efficiency of the market right there. Don't let anybody tell you that socialism is a system that upholds ventures that would otherwise fail. His next point I'll skip because it's a silly way of saying when a target industry is not met, more resources and staff are allocated, which is basically how all economics work, be they capitalist or socialist. This point is very nuance and I want to make another video on specifically this in the future. So, let's leave it at that for now. If the results were not impressive enough to present to the people of the nation, they would just throw a huge amount of resources and labor at the problem until it got to a point where the desired results were achieved. It's not really good economics, but it does make everyone feel good. This in and of itself meant that a lot of resources were wasted in fields and industries that just would not have existed in a normal competitive market. A point which is difficult to get those who only operate under a capitalist economic paradigm to understand. Just because the all- knowing market determines a field worthy of existence doesn't make it desirable, efficient, or productive for society. Child trafficking, drugs, gambling, all these can be incredibly lucrative, efficient, and productive fields if you so want it. That doesn't mean they should exist. Likewise, mass production of free housing isn't a sensible quote unquote investment from a market perspective, but the benefits are more than clear to us. A lot of medical research falls into the trap of market drive justification. Treating and researching acne is more lucrative than treating and researching malaria, a far more dangerous condition affecting far poorer people. The market choice is clear. The humane choice is clear, too. They are often at odds. But it also went beyond this. Imagine you were an ambitious and morally ownorous Soviet middle management type. You could run your factory very efficiently using the bare minimum of resources to produce the maximum output and maybe be rewarded with a pat on the back. But rest assured, in the next 5-year plan, you are only going to be allocated the bare minimum of resources again. And you are still going to be expected to produce the same, if not more. What is a smarter strategy is just to be really, really inefficient. Waste resources. Let your workers idle below capacity and be proud of falling below quotas. What this will mean is that in the next 5-year plan, you will be given more workers in a bigger factory and more resources, and you will look like a hero when you slightly increase the output from the last underperforming year. This is a dangerous balancing act. You want to get it just right because if it becomes too obvious what you are doing, it's off to the goologs with you. This is a point I'd really like to see an explicit source for. Enterprises performing well that were planned for growth in certain sectors are allocated more resources, not less. Underperforming sister enterprises are studied in relation to your hyperefficient one. And a general drive for raising the average rate of all of these enterprises is attempted based on the things you did different. This even has a name, socialist emulation. To quote, the principle of competition is defeat and death for some and victory and domination for others. The principle of social stimulation is comradly assistance by the foremost to those that lag behind so as to achieve an advance of all. The concept of storming in which at the end of a planning cycle enterprises rush production to meet quotas as well as use as much resources and money as possible as to secure more in the future is incredibly common in capitalist countries particularly in military sectors be they private or public. This takes on an additional form too with for example private prisons lobbying for tighter laws so they can have more arrests and as a result more prisoners which means more prisons etc etc. Oh boy isn't the profit motive great. Furthermore the being really inefficient point again is not what the stats show. This was literally cold war era propaganda that stuck. It's not true. If the USSR was inefficient it wouldn't have become the second largest economy on earth from a starting position as low as India, Brazil or the Mina region. Lastly, this off to the Gulogs point is so tired because well, the country with the largest prison population on Earth that was forced to work for pennies against their will is the very capitalist United States. Meanwhile, the Gulak system in the USSR, which was rehabilitative labor, not death camps or any other silly mythology, were shut down during the ' 50s. I get that he's comedically referring to getting in trouble with authorities, but it's so overplay that it gets kind of annoying. This whole issue of deliberate underperformance or budget overuse is actually a huge issue in the public sector today. It is extremely common for government agencies to find any way to spend up the last little bits of their budget because they know if they don't use it this year, it will be taken off them next year. So, you are almost forced to use it. Some thinly ve the private sector is objectively better. Nonsense aside, please take a look at the finance and banking sectors. Failing again and again and are awarded with massive amounts of tax money, meaning your money, which is used in nebulous ways with no accountability. When they inevitably crash again, all that money they were originally given has magically disappeared somewhere again. Going further, ask any business type. The company card is needlessly used for restaurants, trips, and whatever else they can get away with as budgetary allocation for the project, especially at the end of a project when you're almost done and have way more than you need to complete set project. Out comes the frivolous spending to prevent a lower aotment the next project cycle. Anyone who has worked corporate can attest to this. The Soviet Union allocated a vast majority of their productive capacity into producing more tools to increase their productive capacity, which basically put meant that they would rather produce drill presses rather than kettles. The former increased potential economic output, but the latter increases quality of life and standards of living for the residents. Finally, a semi-accurate point. The large emphasis on heavy industry definitely had its reasons and could definitely be argued to have been necessary early on, but the point on consumer goods is misplaced. Firstly, the reason the Nazis were defeated was exactly because of the Soviet emphasis. Even admits this later on in the video. But what it did mean was that they could turn around and produce a lot of industryintensive goods if they needed to, which they needed to during World War II. Consumer goods are easy to focus on when you're not in as precarious a situation as the USSR was during its entire existence. Yugoslavia, which played both sides of the Cold War for their own benefit, managed to develop an extensive consumer society. Although I have many disagreements with both this aspect as well as their attempts at socialism. He goes on to basically repeat the point and then also make silly claims on war industry, particularly related to tanks, but excuses himself for the lack of proper knowledge on the subject. So fine. After the death of Stalin, a series of Soviet leaders began to enact increasingly liberal economic policies. Ah yes, the beginning of the decline that lent more towards seeing the citizens of the nation as consumers rather than just workers. The production of awful factory equipment was replaced with the production of awful cars in an attempt to increase living standards. But the Soviet Union was still the poster child for a Marxist Leninist economic system and it was difficult for them to depart too far from these roots. Again, the trope Soviet goods, like most nations goods, come on a spectrum. The Soviet automobile meme is also just that, mostly a meme. The Soviet Union exported tens of thousands of cars every year to markets as diverse as Western Europe, Asia, and Latin America. If they really were no good, they wouldn't have been able to still export them. The thing is, you have to keep them in their price point. You can't buy something intentionally made to be a utilitarian economic choice and then complain when it's not like a high-end BMW or something. Furthermore, Soviet emphasis on cheap, widely available, and reliable public transportation at home made cars a needless luxury for most people. And as a result, diverted investment from the automobile industry towards more socially useful ends. Interestingly, aside from propagandistic nonsense, the boring research into this topic is surprisingly honest to the size, scale, and technical development of the rather infant Soviet automobile industry. That's not to say there weren't deficiencies, but it isn't the character it's painted as. Nevertheless, I have a video on the pitfalls of cars and car culture here. As a result of this and an increasingly expensive cold war, the citizens of the Union saw very little in the way of economic growth and prosperity. inefficiencies continued to mar the nation and the select group of other nations that the union could trade with kind of all had the same issues. The Soviet economy was the second largest in the world. The so-called stagnation era of growth was a level most industrial nations would tear their eyes out hoping to achieve blah blah blah. You've heard all this before already. Refer to the relevant videos of quality of life here. Also, the various social systems had actually incredibly diverse and unique issues relevant to their particular conditions, but I understand that this is a very summarized video. It didn't make much distinction between various areas of the USSR. So, I'm definitely expecting more than the intended scope of this video. After this, he just wraps up. All in all, a lot better than I was expecting it to be. Incredibly superficial and often wrong as a result of simplification, but there was an attempt that was at least genuine. Great work to them in that regard. Huh. I don't hate myself after a reaction for once. Makes me feel kind of empty. And that's all for this time. If you enjoy what I do, then please consider supporting me on Patreon. It really does help.