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Thursday, September 3, 2015

What If Bukharin Won and Had "Big Data"?

I have been fascinated by economic systems since my college days. At that time, the late sixties, the West was in a very similar funk about itself as it is now. There was a fascination with hybrid economic systems blending laissez faire capitalism with central planning; individual freedom balanced against collective welfare.  Yugoslavia was the “darling” to be studied at this time; its ten year GDP growth (1961 – 1970) was estimated at 5.5% per annum. The “USSR” (Union of Soviet Socialist Republics) was also in the frame of study.

But why the title: “What if Bukharin Won and had “Big Data”? This requires a bit of historical background. As the Russian Revolution was winding down in 1922 after five years of bloodshed and deprivation, Lenin was trying to patch together the communist utopia. Pragmatically, he relaxed the nationalization of production that had occurred in War Communism and introduced a somewhat mixed market system dubbed the NEP (“New Economic Policy”). Reluctantly, Nikolai Bukharin, a rather brilliant theoretician, economist and party luminary, came around to this thinking and became its chief exponent. By 1925, the Russian economy was turning a corner, industrial and agricultural production were back to pre World War I levels – life was improving, albeit from a terrible starting point. However, with Lenin’s death in 1925 a power struggle interfered with governance. Trotsky, Zinoviev and Kamenev wanted to scrap NEP’s decentralization and liberalization with a totally centralized system; Bukharin dug in on the merits of the NEP. Stalin, the savviest and most ruthless of the Central Committee sided with Bukharin in order to defeat Trotsky; afterward abandoning the NEP for centralization.  Eventually through Stalin’s manipulation, Bukharin was discredited, declared disloyal and executed in March 1938 – tossed upon the scrapheap of history.
Beginning in 1928, the economy was re-nationalized. In this year, the first Five Year Plan covering 1929 – 1933 was introduced; there were a total of thirteen Five Year Plans, the last issued in 1990 for the period 1991 – 1995. Alas, the last was never implemented, the USSR was dissolved and Gorbachev resigned as its leader on December 25, 1991. It had lasted as a political entity only 69 years (actually five days short of 69).

I wonder about an alternate history. What if Stalin had been bested by Bukharin and his more right leaning Central Committee members? What if the NEP was renewed every five years and decentralization remained in place? Another query comes to mind. What if computing power was what it is now, or even that of 1980? The Soviets did understand the early power of this; they nationalized the Odhner Factory, an early manufacturer of tabulation equipment quite early on, and they were a large customer of the newly formed IBM in the 1930s.
Computation power has been expanding and its cost dropping relentlessly. MIPS/$ (“Million Instructions per Second”/US Dollar) have been increasing at annual rates from 20% to 52% since 1978. Data storage and retrieval are ubiquitous; if not at times dangerous and invasive. Bukharin couldn’t dream of this power in the planning and implementation of NEP.

This train of thought logically leads one to contemplate The Peoples Republic of China (“PRC”). PRC just might be a reincarnation of this alternate history. Mao and his Cultural Revolution kept China mired in its peasant past until his death in 1976.  Deng Xiaoping reversed course out of adversity, much like Lenin in 1922; he posited that “socialist” and “market” were not mutually exclusive – at a point where IT, computers and peripherals were exploding onto the world scene. There have been many challenges to this mixed market tack, especially after Tiananmen Square in 1989; but the “decentralists” have remained in power.

Now fast forward to Xi Jinping. The PRC was born in 1949 as Chiang Kai-Shek retreated to Taiwan. If Soviet history is to be repeated; will The Peoples Republic of China also disintegrate in 69 or 70 years – that would be around 2020? The recent wobbles with the currency devaluation and stock market free fall has dented the omnipotent image of China’s ruling elite. Xi also is a new breed; replacing the “socialist construction” with what one might call a new “Chinese nationalism,” and is consolidating presidential power at an unprecedented rate. No one still believes the GDP growth rates that are officially published; actual rates might be as low as three percent. How will the world’s second largest economy handle the transition from the factory of the world to a domestic products and services consumer?  What will follow? In the end, will a mixed market strategy and “Big Data” save the regime and let it live past the USSR’s inevitable “sell by date”?

Nils Bohr, Physics Nobel Laureate, perhaps said it best: prediction is very difficult, especially if it's about the future.”  That said, who in 1986 would have predicted that the Soviet Union would be no longer five years hence. My sense is that China will overcome the current turbulence, in no small part because it kept away from total centralization and because of the miracle of computation power.

Still, now that I’m retired and 45 plus years from those college days, I realize I’m (and we) are not as smart and clever as I (we) thought we were. It isn’t easy to plan anything, so a national economy is a bit of a stretch. In my college years I was very much in tune with Bukharin. Today I am more free market, which is inherently more decentralized and flexible. And I’m less enamored with computational power as strictly a force for good. There are dangers lurking everywhere, but I am keeping more of a wary eye on solutions involving central planning and on big data solutions than I am on markets and individual freedom.

In spite of it all, Nikolai Bukharin remains a individual to be admired.