Meltdown: Inside the Soviet Economy.

* Economic collapse forces the Soviet leadership to turn away from Communism and embark on a radical economic restructuring. Sound familiar? But the year is 1921. The man stabbing Karl Marx in the back isn't Gorbachev or Yeltsin: it's Lenin himself

When Paul Craig Roberts's Alienation and the Soviet Economy (The Independent Institute, 148 pp., $14.95) first appeared in 1971, the demise of Communism wasn't even a gleam in an ideologue's eye. Yet this analysis of Lenin's writings and speeches demonstrates persuasively that the father of the Soviet state was himself skeptical that Russia could survive pure Communism.

The so-called "war Communism" of 1917 to 1921 is usually dismissed by Western scholars as an ad-hoc wartime improvisation. It was, in fact, the very quintessence of Communism, according to Roberts. The widespread brutality and property confiscations of those early years were designed to obliterate impersonal economic forces-profit, private property, and especially the production and exchange of commodities for money-all of which "alienate" man from the product of his labor and, ultimately, from other men.

By the spring of 1921 even Lenin realized that the attempt to forcibly replace the market with centralized controls had produced an economic catastrophe. A cover-up of sorts ensued: the goal of Soviet economic planning quietly shifted from abolishing the free market to mimicking it. Money was reintroduced and central planning gave way to what Roberts's intellectual mentor, Michael Polanyi, called "polycentricity." Market prices and profits remained off limits, but the planning "bureaucracies provided a rudimentary form of economic incentives with their quotas and "success indicators."

The ideological backsliding troubled Lenin deeply. For public consumption he maintained that the retreat was only temporary, made necessary by the overwhelming backwardness (i.e., lack of socialist consciousness) of Russia's peasants. Western scholars overlooked Lenin's reservations, however, and viewed the ersatz, post-1921 Communism as the real thing. (Roberts's documentation of the leftist, anti-capitalist ethos of Western intellectuals may be the most useful contribution of these books.)

Central planning was thus liberated from all but the "appearance" of Marxist ideology. Unfortunately, Soviet economic planning is remarkably free of any process which can reasonably be called planning. Output targets are increased annually without regard to whether the products are needed or wanted; incomes are set without regard to output; prices are rigged to hide rather than reflect underlying inflation. The planning bureaucracy directs most efforts "toward overcoming problems created by its own existence."

The result is the economic, ecological, and moral disaster which is the Soviet Union today. In Meltdown: Inside the Soviet Economy (Cato Institute, 152 pp., $9.95) Roberts and Karen LaFollette cull relevant-and often lurid-anecdotes from the pages of Pravda, Izvestia, Trud, and other Soviet publications. It's all here: new roads that collapse and TV sets that implode because of shoddy workmanship; apartment buildings forever unfinished because bonuses are paid according to the number of square feet under construction; office workers asleep at their desks when they're not out food shopping; factory officials charged with uncovering a specified quota of spies and saboteurs; and pollution so intense that life expectancy over the past twenty years has dropped an average of ten years.

Price reform, privatization of state enterprises, and the codification of private property rights are among the prerequisites for economic recovery. But glasnost is equally important. Press reports exposing the gangsters, black marketeers, corrupt officials, and other segments of Soviet society that profit from the current economic turmoil make Gorbachev's massive selling job a bit easier. Meanwhile, Gorbachev's advisors report that "after his first, limited attempts at reforming the system [he] has come to accept that the entire system will have to be dismantled if the Soviet Union is to survive as a world power."

Why was Communism's collapse such a great surprise to the West? In his foreword to Alienation Aaron Wildavsky suggests that non-recurring factors-a sharp increase in the Communist labor force, better technology (much of it, presumably, imported from the West), and, in the 1970s, foreign borrowing-wonspired to obscure and delay the inevitable collapse.

Perhaps more important, most of us in the over-forty generation went through college never having read von Mises or Hayek or Roberts (or, for that matter, Marx). Our opinions were far more likely to have been molded by John Kenneth Galbraith, who as recently as 1984 wrote in The New Yorker of the USSR's "great material progress," or Paul Samuelson, whose ubiquitous textbook proclaimed as recently as 1989 that The Soviet economy is proof that, contrary to what many skeptics had earlier believed, a socialist command economy can function and even thrive."

Although state ownership of the means of production is dead or dying everywhere, in our country the government's power to redistribute the fruits of private enterprise is greater than ever. Milton Friedman has noted that federal, state, and local governments currently spend 40 to 45 per cent of U.S. national income. Roberts's cautionary tales are as relevant for Washington as they are for Moscow.

ED RUBENSTEIN