Cuts from Rediscovering Fire (#2)
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The socialist ideal was to direct investment centrally and to aim it at social ends rather than according to profitability. By inviting workers to suggest projects the Bolsheviks expected to facilitate a high level of innovation. Workers could suggest projects that they would not have enough capital to undertake in the old capitalist system.
Lenin put this ideal into practice almost immediately. Inventors from all over the Soviet Union came to Lenin with their ideas. However, evaluating the profitability and advisability of these projects now rested with the state. In the market system, an inventor must convince a private investor to risk his own money. If it is a poor project, the private money is lost and the project dies. With the Soviet government, investing worked a little differently. The inventor had to convince the Party to invest, and this was often decided on political grounds.
Reliable Party members were more likely to have their inventions funded, and if top Party officials liked an idea dissenting voices were shushed. Simon Liberman, director of the Russian timber industry under Lenin, described an incident like this in his memoirs. Sitting in his office three blocks away from the Cheka (the secret police), Liberman received a call from Felix Dzerzhinsky, head of the Cheka. Liberman was to receive a young man with an invention that would help in fuel acquisition:
In a few minutes an extremely well-built young man appeared in my office. His military uniform was all leather, from cap to boots. There was a fire in his eyes as he turned the key in my door behind him and stepped toward my desk. He stared at me, then asked: “Are you a member of the party?”
Upon hearing from me that I was not a Communist, he threw the key upon my desk before him, drew a revolver out of his pocket, and put it down beside the key. He then pulled out an oilskin-bound notebook. This, too, he placed on the desk.
In the notebook, Liberman found pages and pages of equations. He asked the visitor what they meant. The man had “invented” a perpetual motion machine. “I had no doubts as to its fantastic futility,” Liberman recounts, “but there was that revolver on the desk.” Liberman also knew the potential dangers of honesty. He called Dzerzhinsky and told him what he thought, the head of the secret police replied, “That’s strange. Our technical committee has examined this proposal and found it worthwhile.” This, Liberman knew, could mean his own arrest.
In this case, Liberman was lucky to have a contact with the Scientific Committee and so was able to “pass the buck” to them. However, it was clear that political, not economic, factors were driving the investment choices.
Another invention came to Liberman around the same time. The man proposed that the vast pine forests of the nation be exploited for their energy reserves because they “burn remarkably well.” Liberman was skeptical. The man explained that the Central Fuel Committee and Lenin himself were already interested in the plan and wanted to put it into effect. Liberman again deferred to the Scientific Committee, but then went abroad before hearing more about the project.
By the time he returned, the Chief Pine Cone Administration had been created. Liberman was called in to a meeting of the administration, which included Lenin, a representative of the Central Fuel Committee, and a representative of the Cheka. The fire was lit with pinecones. The meeting began, and Liberman was denounced for his skepticism. Then, the Cheka representative began to recite a formal indictment of Liberman, accusing him of sabotage. The Cheka man was sure that Liberman was diverting the pinecones away from their destination.
Trainloads of pinecones were being sent from the forests by train to a mill for pressing, but none had arrived: The trains always arrived empty. Liberman knew immediately what was really happening. “The reason was simple: the locomotive consumed all the cones on its way to the mill; the cars arrived empty because of the locomotive’s natural appetite for fuel.”
Liberman explained to the men that the journey was too far to be economical. The enormous distances from the forest ate up more fuel than the cones could produce. Liberman also argued that if pinecones were a very good fuel idea, some businessman in another country probably would have thought of doing this before. Sweden was full of pine forests. Fortunately for Liberman, Lenin accepted this explanation, although he did not admit it in the meeting.
These are examples of investment decisions made for political—because the inventor was a Party member or a top politician liked the idea—rather than economic reasons. The Party and the state had little choice but to make the decisions politically. Even if the Party wanted to avoid waste, the regular signals of profit and loss were not available because the state owned all of the resources, and set all of the prices, in the economy.
Labels: planning, politics, Rediscovering Fire


