Post hoc ergo propter hoc - After this therefore because of this
Was Communism the cause of the political and economic problems experienced by the Soviet Union?
Those problems began after the Bolsheviks came to power.
Was that just a coincidence, or was there a connection?
By Jack Barkstrom
Around 65 or 66 million years ago, an asteroid crashed into the sea near what is now the Yucatan Peninsula of Mexico. Following the collision the large dinosaurs died out. Although there are conflicting theories, the evidence suggests that the asteroid impact was the cause of the extinction. The question of causation is a possibility when one event follows another. Did one event cause the other to happen, or did they just happen to occur around the same time - something of a coincidence? The Romans apparently thought about the question, since they used a phrase which summarized the question: Post hoc ergo propter hoc. The translation literally is 'Post hoc' - After this - ergo propter hoc - therefore because of this, similar to another phrase 'Cum hoc, ergo proper hoc' - With this, therefore because of this.[1]
The question might come up in an advertising context, when a food producer advertises for a new food or breakfast cereal. Just after the ad comes out, sales of the advertised product suddenly go up. Was the advertisement responsible for creating the sudden demand? The advertiser would like to think so, after spending money on the marketing campaign. But for future campaigns, it would be helpful to know if other factors did or did not play a part. Possible other causes have to be ruled out before drawing any conclusions. Perhaps the increase had to do with a discount store was offering when the ad came out. Possibly the store had placed the product in a more prominent location.
The logic of 'Post hoc ergo propter hoc' has rarely come up in the context of the Soviet Union and communism. Russia experienced so many economic and political problems following the Russian Revolution, that the connection seemed too obvious to debate. Whether it was obvious or not, it was repeated so many times that it became something of a given. Sometimes there was an additional assertion related to the claim, namely that Russia, having overthrown the Czar and freed its peasants from serfdom, was about to realize its full economic potential - it was on the verge of a progressive breakout - until the Bolsheviks put an end to that dream. It was the start of a debate - a battle or war of ideas. Having emerged from a real civil war, the Communists found themselves fighting a different kind of battle. In some ways, it was a tougher fight, since the opponent was imaginary.
In some ways, it was a familiar political battle. Nearly all politicians and campaigns make the same claim: 'Things would be different, and better, if I were in charge.' Lenin, the consummate politician himself, had made similar claims against the Czarist regime - If Lenin were in charge, people would be treated more fairly and those who had profited from corruption would be out of power. Once in power, the Communists had to defend themselves from a similar line of attack. The Russian economy would have performed differently - and better - if someone else were in charge and different policies implemented. Defending failed policies is always difficult, since the alternative version is something of an imaginary opponent - someone with better, although difficult to prove, ideas. In political terms, it is a never ending cycle. Once politicians gain power, they have to defend their own policies - 'You promised things would be different if you were elected; so why haven't they improved?'
The Time-line of Events - But which time-line applies?
In terms of the 'cause and effect' question, the assumption has been that the economic problems experienced by Russia during the Soviet period were the result of Communist policies. Since they were in charge, they had to take responsibility for what occurred. That argument that economic problems were the result of Communist policies assumes that the time-line begins with the Bolshevik seizure of power and ends, or continues, with the central planning and political repression of Joseph Stalin's time. Time-lines are important - time-lines are more than important - they are essential, to any analysis of whether one event caused another, to causation. While it may seem to be overstating the obvious, all causation questions, all 'cause and effect' assumptions, depend on where events fall on a time-line.
The Russian Revolution of October 1917 was a spectacular event, a violent seizure of power which noticeably stood out from the ordinary events of daily life. At first, it was merely observed in the West, significant to Capitalists more for Lenin's and the Bolsheviks' involvement than for any real threat it posed. It was, nevertheless, significant enough to serve as a starting point of a time-line, since it represented a major change from the government which had existed under the Czar. It offers a logical starting point for a time-line.
At the same time, the Russian Revolution is not the only possible starting point for a time-line of events in Russia. An alternative beginning is not necessarily a specific point in time or an historical event. Instead it may be a set of conditions, or a period of time, existing before the Russian Revolution. It may be those conditions which led to, or contributed to the Revolution itself, as well as to the policies which followed.
It may be that the economic policies of Joseph Stalin were a response to economic conditions as they existed, rather than a cause of the problems which followed. If the number of people who died in the Great Purges of 1937 and 1938 was on an unprecedented scale, a never-before-seen chain of events. Yet political repression and the existence of a secret police were not new in Russia. The Okhrana, the secret police organization, had been formed in Czarist times. Internal exile and imprisonment for expressing political views had been practiced under the Czar. If industrial and agricultural output during Joseph Stalin's time were criticized for their dismal performance record, they had not been spectacular performers when the Czar had been in control. Six months into World War I, the Russians had run through their existing supply of ammunition reserves.
Somewhat related to the time-line question, is the comparison between real events in Russia and a what-might-have been scenario. Criticism of the Soviet Union for its economic output is based on a comparison between what Russia achieved and what it would have achieved if Lenin and the Communist leadership had not stopped its progress. Russia was about to emerge on the economic stage following the backward progress it had made during the Czars. The argument is that Russia was 'on the verge' of achieving its potential when the Bolsheviks took power. Comparisons are made between the real Russia and the imaginary one which would have achieved so much more.
Real experimental results
The hypothesis capitalists in the West came up with about Russia after 1918 was straightforward: Had it not been for Communist economic policies - forced collectivizations and Stalin's Five-Year Plans - Russia would have become an economic powerhouse. In the 1990s, with the Communists and their economic policies gone, there was an opportunity to test that 70-year old hypothesis. This time free market theorists, instead of their theoretical assumptions and virtual predictions, would have real data to work with. It was a chance to see how Russia would have turned out had it chosen a capitalist path in the 1920s.
The experiment began with Yegor Gaidar's removal of price controls on January 2, 1992. A few weeks later he lifted restrictions on trade.[2] In the summer, the government discontinued all subsidies of consumer goods, including bread, milk, and alcohol.[3] This was followed in October 1992 by the issuance of 'privatization shares' and the sale of government assets to individuals.[4] The capitalist experiment was off to a rocky start, but the results were mixed. Unemployment increased as unneeded and unproductive factories were shut down. At the same time, the lifting of price controls did provide an incentive to produce or sell goods, and if initial price increases were inflationary, they stabilized at a level below hyperinflation.[5]
The privatization voucher scheme which began in October 1992, resulted, by June 1994, in the auctioning off of some 15,000 state-owned enterprises, employing 17 million people - about two-thirds of the industrial workforce.[6] Although the shares were intended to benefit individuals, in many cases, factory managers used their power to acquire shares from their workers, or, in other cases, workers simply sold them at a fraction of their face value, for cash. Others invested them in 'voucher funds' - mutual funds which promised to invest them.[7]
Another form of privatization, which began in mid-1992, was the sale or transfer of major state-owned natural resource holdings, such as Gazprom, the oil companies, Yukos, Lukoil, and Surgutneftegaz, and the coal company, Rosugol, to private hands through an executive order of the Yeltsin government. Many of the new owners were simply the former managers of the state-run enterprises.[8]
Less obvious than the sales of enterprises or natural resources, were the payments or transfers of funds from the national budget into the hands of private individuals, who set up dummy companies, ostensibly to handle legitimate transactions. Regional and city governments handed out lucrative construction contracts, using state funds.[9]
The transfer did result in a new class of rich individuals - the oligarchs - while leading to a wide disparity in wealth. At the same time, this was hardly a phenomenon unique to former Communist economies. The U.S. had had its own class of super-rich individuals - the robber barons of the Gilded Age - such as Carnegie, Rockefeller, and Gould.
One of the high-profile targets of free-market critics had been the agricultural sector and collective farming, symbolic of the central planning of the Soviet era. Yeltsin had decreed the full privatization of land in 1993, yet many of the large farms remained intact, under the same management as before. Relatively few independent farms grew up.[10] Perhaps there was something of a parallel to the experience in the U.S., where there have been complaints that small farms are being displaced by corporate farming. To be profitable in today's market, companies must look to economies of scale and only large enterprises are in a position to make them work.
There were other signs that the transition had not produced spectacular results, or even average results. Russian industrial production between 1990-98 fell 42.9 percent while GDP fell 45 percent. During World War II, from 1940-46, industrial production had fallen 24 percent.[11] Poverty, measured by a $2 a day standard, went from 2 percent in 1989 to 23.8 percent in late 1998.[12]
The Russian state, if it had rushed into privatization in the 1990s, decided it might be better to expand the role of government in the employment area. The state payroll, which employed 1.1 million in 2000, was expanded to 1.7 million in 2010. Most of the hiring was at the federal level. Federal and local government agencies, in smaller cities or regions unable to benefit from resource-related jobs, were often the main sources of employment.[13] If the government had been complicit in creating a class of super-rich, it did make an effort to ease the discrepancy in income. Pensioners, who had not even received their small pensions in the 1990s, found in the 2000s, that they were receiving their pensions on time, and that the state was even granting increases.[14] Partly as a result of the surge in oil prices, Russia even developed a middle class. GDP per capita income increased from $5,951 in 1999 to $20,276 in 1998.[15]
High Expectations, Instant Gratification
When Russia began its privatization campaign, Western reporters visiting Russian cities showed pictures of people trying to sell household possessions on city streets. They were learning the lessons of Capitalism. The end of Communism was certainly a big story at the time, and there was a mixture of excitement and curiosity. Privatization would mean change, but if there was an expectation of immediate results, it was a little premature - as if people forced to sell their household possessions to survive one day would, overnight, find the means to start buying refrigerators, creating a mass market for household goods.
The stalls and street sellers made for interesting headlines, particularly in the context of the larger story of the 'Collapse of Communism.' At the same time, it was hard to maintain an interest in a story about economic changes. The Western economists and consultants wanted to get in on the action, eager to tutor their new pupils in the details of Capitalism, eager to participate or oversee the sale of state assets, but not all that interested in seeing the poverty and squalor all around, let alone improving the condition of ordinary Russians. There may have been, as Professor Stephen F. Cohen observed, an assumption in the US that capitalism would transform Russia into 'some replica of America.'[16]
With such high expectations, it is no wonder that capitalist theorists had little to show for their efforts - or little to show when compared to what they had expected. They had asked for a reversal of central planning and the command economy, the core Communist economic policy, and had gotten what they asked for - a privatized, non-governmental - capitalist economic system. The empty store shelves, long the focus of Western criticism of Soviet Communism, were now filled - with imported luxury goods - providing an enhanced shopping experience for those lucky enough to have become wealthy from the changes.[17] At the same time, what they had always argued was that the centrally planned economy did little for the average Russian. What they promised, if private property and capitalism were given free reign, was widespread prosperity. What they got, when capitalism had replaced Soviet-era policies, was a system which didn't benefit ordinary Russians either. Western advisers were a little too eager to push their policies as fast and as far as possible, even a little afraid that they might miss out on a sure bet. They expected an instantaneous return for their efforts, hoped to be in on the ground-floor of a new era, and were perhaps a little too eager and optimistic about the results.
The basic problem with performance and expectations was that they treated economics as some kind of battle or war of ideas, which produced clear winners and losers. There was always the possibility that economic systems, rather than conquering economic obstacles, were adaptations to differing economic conditions. Economic systems were less a tribute to man's ability to shape his destiny - a heroic struggle to overcome overwhelming odds - and more a response to conditions as they were encountered. Free markets and capitalism were not necessarily the final answer to the economic problems of Russia, they were just the last in a series of attempted approaches. Whether the Czars had formally declared an economic policy, their policies encountered the harsh realities of the problem. Economic problems were not that easily solved and the solutions were more often dictated by circumstances. If Lenin, and later Stalin, took a more structured approach, and declared what their economic policies were, those policies, like those of the Czar, were as much an adaptation to economic circumstances, as they were shapers of economic destiny. The would-be market reformers of the 1990s were convinced their approach was different, but found themselves facing the same economic problems the Czar, Lenin, and Joseph Stalin had faced. The outcome was somewhat different, but not necessarily more successful than those tried before.
The free market experiment performed on the Russian economy during the 1990s was more a state of mind than anything else. Westerners set out to prove their ideas superior, determined to prove the success of their approach, where the Soviet planners and economists had been a failure. Unfortunately, success and failure, in the context of economics, was more of a political contest - and a highly explosive one, at that. Economics had been designed as an academic exercise, intended more to analyze and explain things as they were or as they happened, than to predict success or failure. Taking sides in an ideological struggle may have been too exciting and tempting an opportunity to resist, but it also may have been a contest for which economics was not entirely suited.
Russian politicians, such as Boris Yeltsin may have been convinced by the economic arguments. The Russian economy itself was not so easily persuaded. If the results had failed to meet expectations, the introduction of privatization and market reforms nevertheless did have an impact.
Mikhail Khodorkovsky, the Oligarch who would later run afoul of Vladimir Putin and spend time in prison, took efficiency and reform to heart. Although he clearly liked making money, putting on ostentatious displays of wealth, and a little unwisely, throwing his weight around and butting heads with the political establishment, he did take the job of running Yukos, the oil company he acquired, seriously. He brought in Western technology and specialists, and set up a computer system to control the flow of oil and revenue. If he later ran as a popular alternative to Vladimir Putin, he was not entirely sympathetic to his own workers. He had a closed-circuit TV secretly installed at Yukos headquarters to secretly monitor workers and fired a third who failed to take their jobs seriously. He did view the welfare of his workers as the responsibility of Yukos, refusing to have the company provide services such as housing, hospitals, and schools.[18]
The efficiencies paid off. By the end of 2000 Yukos was holding $2.8 billion in cash.[19] Not everything had to do with Khodorkovsky's efficiencies, since oil prices had begun to recover, but the cost reductions had increased company's earnings. On October 25, 2003, Khodorkovsky's private plane made a refueling stop in Novosibirsk. Instead of being re-fueled, the plane was boarded by masked men carrying automatic weapons, members of the Alpha Brigade. Khodorkovsky was arrested and flown to Moscow.[20] He would be charged with tax evasion, fraud, and embezzlement, found guilty, and sentenced to eight years in prison, serving time at a prison near the Chinese border, the location the site of uranium mine.[21]
Just what led to his downfall is unclear. His relationship with Putin was not good. He is said to have been dismissive, even insulting, in his dealings with Putin. It was also said that he attempted to negotiate a private sale or merger of Yukos with Chevron, without informing the government.[22] Perhaps there was a sense within the government that it had let a private company become too powerful - powerful enough to effectively compete against state interests - only the state should wield such power. Perhaps the success and cash reserves of Yukos were just too tempting a target, particularly when the state, with control of the military, held the ultimate power. Perhaps Khodorkovsky considered himself untouchable - rich and powerful enough to defy the state. In the end, it may have been internal Russian politics which did him in. He had the reputation as a ruthless political operative, which had explained his rise, but Russian politics could be a rough game, and there were others no less ruthless, who were biding their time, building connections, and looking for the right time to act.[23]
Other Oligarchs had gotten the message. In June 1994 Boris Berezovsky had survived an assassination attempt in Moscow, when a parked car exploded next to his Mercedes. The Mercedes was demolished and his driver killed.[24] In October 2000 he decided, for his own safety, to go into exile, eventually ending up in England.[25] Vladimir Gusinsky had gone into exile in July 2000, but only after agreeing to sell his shares in the national television station, NTV, to Gazprom.[26]
If the Western drive to turn Russia into a model capitalist state came off as arrogant to Russians, it was matched by foreign policy decisions which were clumsy and came off to Russians as no less arrogant. In March 2004, seven former Soviet Bloc nations were admitted to NATO.[27] It was only the latest event designed to embarrass, even belittle Russia, to drive home the point that Russia had lost its great-power status. Poland, the Czech Republic, and Hungary had already joined NATO in 1999.[28] In March 1999 Evgeny Primakov, newly appointed prime minister of Russia, had been on a plane headed for Washington, when he learned that NATO, without consulting Russia, was about to begin bombing the Serbian city of Belgrade. He ordered the plane to turn around over the Atlantic and return to Moscow.[29]
Some worried that pushing while Russia was in a weakened state might, in the long run, provoke a backlash.[30] Others felt that it was better to wring every advantage from a weakened adversary.[31] There was a sense that the US, the only remaining superpower, was now in a position to remake the international order.[32] Yet there was an assumption that such arrangements were permanent, that the foundation of political and economic power would never shift. Yet after 2001, the US would find itself engaged, even tied down, by wars in Afghanistan and Iraq and would be challenged by the economic rise of China. If Russia had been unable to prevent the expansion of NATO, the West found itself unable to do anything about the annexation of Crimea by Russia in March 2014.[33]
Footnotes
(1) David Booth and Corey Koberg,"Display Advertising: An Hour a Day," (John Wiley & Sons:Indianapolis, IN) (2012), p. 324.
(2) Arkady Ostrovsky, "The Invention of Russia: From Gorbachev's Freedom to Putin's War" (Viking: New York) (2015), p.131
(3) Masha Gessen, "The Future is History: How Totalitarianism Reclaimed Russia" (Riverhead Books: New York) (2017), p.109
(4) Tony Wood, "Russia Without Putin: Money, Power and the Myths of the New Cold War" (Verso: Brooklyn, NY) (2018), p. 36
(5) Gesen, op.cit., p. 109
(6) Wood, op.cit., p. 36
(7) Wood, ibid, p. 36
(8) Wood, ibid, pp. 36-37
(9) Wood, ibid, pp. 38-39
(10) Wood, ibid, pp. 66-67
(11) Joseph E. Stiglitz, "Globalization and Its Discontents Revisited: Anti-Globalization in the Era of Trump" (W. W. Norton & Company, Inc.: New York) (2018), p. 235
(12) Stiglitz, Ibid, p. 244
(13) Wood, op.cit., p. 79
(14) Wood, ibid, p. 78
(15) Richard Lourie, "Putin: His Downfall and Russia's Coming Crash" (Thomas Dunne Books: New York) (2017), p. 120
(16) Angus Roxburgh, "The Strongman: Vladimir Putin and the Struggle for Russia" (I.B Tauris & Co. Ltd: New York) (2012), p. 13, from Stephen F. Cohen, "Failed Crusade: America and the Tragedy of Post-Communist Russia" (New York: W.W.Norton & Co, 2000) p.xii
(17) Stiglitz, op.cit., pp.244-245
(18) Lourie, op.cit., pp. 114-115
(19) Lourie, ibid, p. 115
(20) Lourie, ibid, p. 118
(21) Lourie, ibid, p. 119
(22) Lourie, ibid, p. 118
(23) Wood, op.cit., p. 47
(24) Ben Mezrich, "Once Upon a Time in Russia: The Rise of the Oligarchs - A True Story of Ambition, Wealth, Betrayal, and Murder" (Atria Books: New York) (2015), pp. 16-17
(25) Lourie, op.cit., p. 101
(26) Ostrovsky, op.cit., p.275
(27) Lourie, op.cit., p. 144
(28) Roxburgh, op.cit., p. 89
(29) Ostrovsky, op.cit., p.232;Wood, op.cit. p.24
(30) Wood, op.cit., p. 122
(31) Wood, ibid, p. 124
(32) Wood, ibid, p. 120
(33) Wood, ibid, p. 137