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Soviet Union [USSR] ECONOMIC PLANNING AND CONTROL
In the Soviet Union of the 1980s, the basic economic task of
allocating scarce resources to competing objectives was
accomplished primarily through a centrally directed planning
apparatus rather than through the interplay of market forces.
During the decades following the Bolshevik Revolution and
especially under Stalin, a complex system of planning and control
had developed, in which the state managed virtually all production
activity. In the mid- and late 1980s, however, economic reforms
sponsored by Gorbachev were introducing significant changes in the
traditional system.
Planning Process
Economic planning, according to Marxist-Leninist doctrine, was
a form of economic management by the state, indispensable both
during the transition from capitalism to
socialism (see Glossary)
and in a socialist society. Soviet economic theorists maintained
that planning was based on a profound knowledge and application of
objective socialist economic laws and that it was independent of
the personal will and desires of individuals. The most general of
these laws, commonly referred to as the basic law of socialism,
defined the aim of economic production as the fullest satisfaction
of the constantly rising material and cultural requirements of the
population, using advanced technology to achieve continued growth
and improvement of production. Centralized planning was presented
by its proponents as the conscious application of economic laws to
benefit the people through effective use of all natural resources
and productive forces.
The regime established production targets and prices and
allocated resources, codifying these decisions in a comprehensive
plan or set of plans. Using CPSU directives concerning major
economic goals, planning authorities formulated short-term and
long-term plans for meeting specific targets in virtually all
spheres of economic activity. These production plans were
supplemented by comprehensive plans for the supply of materials,
equipment, labor, and finances to the producing sector; for the
procurement of agricultural products by the government; and for the
distribution of food and manufactured products to the population.
Economic plans had the force of law. Traditionally, they had been
worked out down to the level of the individual economic enterprise,
where they were reflected in a set of output goals and performance
indicators that management was expected to maintain.
Operationally, short-range planning was the most important
aspect of the planning process for production and resource
allocation. Annual plans underlay the basic operation of the
system. They covered one calendar year and encompassed the entire
economy. Targets were set at the central level for the overall rate
of growth of the economy, the volume and structure of the domestic
product, the use of raw materials and labor and their distribution
by sector and region, and the volume and structure of exports and
imports. Annual plans were broken down into quarterly and monthly
plans, which served as commands and blueprints for the day-to-day
operation of industrial and other economic enterprises and
organizations.
The five-year plan provided continuity and direction by
integrating the yearly plans into a longer time frame. Although the
five-year plan was duly enacted into law, it contained a series of
guidelines rather than a set of direct orders. Periods covered by
the five-year plans coincided with those covered by the party
congresses
(see Soviet Union USSR - Party Congress
, ch. 7;
table 30, Appendix A). At
each congress, the party leadership presented the targets for the
next five-year plan. Thus each plan had the approval of the most
authoritative body of the country's leading political institution.
Long-term planning covered fifteen years or more. It delineated
principal directions of economic development and specified the way
the economy could meet the desired goals.
As in other areas of leadership, so in economic policy matters
it was the Central Committee of the CPSU and, more specifically,
its Politburo that set basic guidelines for planning
(see Soviet Union USSR -
Central Committee;
Soviet Union USSR - Politburo
, ch. 7). The planning apparatus of the
government was headed by the Council of Ministers and, under it,
the State Planning Committee (Gosudarstvennyi planovyi komitet--
Gosplan). This agency, made up of a large number of councils,
commissions, governmental officials, and specialists, was assisted
by the State Committee for Statistics (Gosudarstvennyi komitet po
statistikoi--Goskomstat). It took plans developed by the city
councils, republic legislatures, and regional conferences and
incorporated them into a master plan for the nation. It also
supervised the operation of all the plans. Gosplan combined the
broad economic goals set forth by the Council of Ministers with
data supplied by lower administrative levels regarding the current
state of the economy in order to work out, through trial and error,
a set of control figures. The plan stipulated the major aspects of
economic activity in each economic sector and in each republic or
region of the country. Gosplan was also responsible for ensuring a
correct balance among the different branches of the economy,
speeding the growth of the national income, and raising the level
of efficiency in production.
The method used by Gosplan to achieve internally consistent
plans, both in a sectoral and in a regional context, was called the
system of material balances. No clear exposition of this method had
been published. The system essentially consisted of preparing
balance sheets in which available material, labor, and financial
resources were listed as assets and plan requirements as
liabilities. The task of planners was to balance resources and
requirements to ensure that the necessary inputs were provided for
the planned output. To reduce this task to manageable proportions,
central authorities specified detailed output goals, investment
projects, and supply plans for only key branches of the economy.
The rest of the plan was developed only to the extent needed to
ensure achievement of the main goals.
Among operational organizations participating in the planning
process, a major role belonged to the State Committee for Material
and Technical Supply. This agency shared with Gosplan the controls
over the allocation of essential materials and equipment. Other
operational agencies included the State Committee for Construction,
which played an important part in industrial investment planning
and housing construction; the State Committee for Labor and Social
Problems; and the State Committee for Science and Technology, which
prepared proposals for the introduction of new technology. Finally,
the
Academy of Sciences (see Glossary) helped to develop a
scientific basis for optimal planning and accounting methods.
When the control figures had been established by Gosplan,
economic ministries drafted plans within their jurisdictions and
directed the planning by subordinate enterprises. The control
figures were sent in disaggregated form downward through the
planning hierarchy to production and industrial associations
(various groupings of related enterprises) or the
territorial production complex (see Glossary) for progressively
more detailed
elaboration. Individual enterprises at the base of the planning
pyramid were called upon to develop the most detailed plans
covering all aspects of their operations. In agriculture,
individual collective farms and state farms worked under the
supervision of local party committees. The role of the farms in
planning, however, was more circumscribed.
At this point, as the individual enterprise formulated its
detailed draft production plans, the flow of information was
reversed. Rank-and-file workers as well as managers could
participate in the planning process on the enterprise level;
according to Soviet reports, approximately 110 million citizens
took part in discussions of the draft guidelines for the 1986-90
period and long-term planning for the 1986-2000 period. The draft
plans of the enterprises were sent back up through the planning
hierarchy for review, adjustment, and integration. This process
entailed intensive bargaining, with top authorities pressing for
maximum and, at times, unrealizable targets and enterprises seeking
assignments that they could reasonably expect to fulfill or even
overfulfill. Ultimate review and revision of the draft plans by
Gosplan and approval of a final all-union plan by the Council of
Ministers, the CPSU, and the Supreme Soviet were followed by
another downward flow of information, this time with amended and
approved plans containing specific targets for each economic entity
to the level of the enterprise.
A parallel system for planning existed in each union republic
and each
autonomous republic (see Glossary). The state planning
committees in the union republics were subject to the jurisdiction
of both the councils of ministers in the union republics and
Gosplan. They drafted plans for all enterprises under the
jurisdiction of the union republics and recommended plans for
enterprises subordinated to
union-republic ministries (see Glossary) and located on their
territory. The regional system also
included planning agencies created for several major economic
regions, which were responsible either to Gosplan or to a state
planning committee in a union republic.
Autonomous republics had planning systems similar to those of
union republics. Advocates of the centrally planned economy (CPE)
argued that it had four important advantages. First, the regime
could harness the economy to serve its political and economic
objectives. Satisfaction of consumer demand, for example, could be
limited in favor of greater investment in basic industry or
channeled into desired patterns, e.g., reliance on public
transportation rather than on private automobiles. Centralized
management could take into account long-term needs for development
and disregard consumer desires for items that it considered
frivolous. With a centralized system, it was possible to implement
programs for the common good, such as pollution controls,
construction of industrial infrastructure, and preservation of
parkland. Second, in theory CPEs could make continuous, optimal use
of all available resources, both human and material. Neither
unemployment nor idle plant capacity would exist beyond minimal
levels, and the economy would develop in a stable manner, unimpeded
by inflation or recession. Industry would benefit from economies of
scale and avoid duplication of capacity. Third, CPEs could serve
social rather than individual ends; under such a system, the
leadership could distribute rewards, whether wages or perquisites,
according to the social value of the service performed, not
according to the vagaries of supply and demand on an open market.
Finally, proponents argued that abolition of most forms of property
income, coupled with public ownership of the means of production,
promoted work attitudes that enhanced team effort and conscientious
attention to tasks at hand; laborers could feel that they were
working for their own benefit and would not need strict
disciplinary supervision.
Critics of CPEs identified several characteristic problems.
First, because economic processes were so complex, the plan had to
be a simplification of reality. Individuals and producing units
could be given directives or targets, but in executing the plan
they might select courses of action that conflicted with the
overall interests of society as determined by the planners. Such
courses of action might include, for example, ignoring quality
standards, producing an improper product mix, or using resources
wastefully.
Second, critics contended that CPEs had built-in obstacles to
innovation and efficiency in production. No appropriate mechanism
existed to ensure the prompt, effective transfer of new technical
advances to actual practice in enterprises. Managers of producing
units, frequently having limited discretionary authority, saw as
their first priority a strict fulfillment of the plan targets
rather than the application of the insights gained through research
and development or the diversification of products. Plant managers
might be reluctant to shut down their production lines for
modernization because the attendant delays could jeopardize the
fulfillment of targets.
Third, CPEs were said to lack a system of appropriate
incentives to encourage higher productivity by managers and
workers. Future mandatory targets were frequently based on past
performance. Planners often established targets for the next plan
period by adding a certain percentage to the achieved output while
reducing authorized inputs to force greater productivity (sometimes
called the "ratchet" system by Western analysts). The ratchet
system discouraged enterprises from revealing their full potential.
Managers actually might be reluctant to report exceptional levels
of output.
Fourth, the system of allocating goods and services in CPEs was
inefficient. Most of the total mix of products was distributed
according to the plan, with the aid of the system of material
balances. But because no one could predict perfectly the actual
needs of each production unit, some units received too many goods
and others too few. The managers with surpluses, either in
materials or in human resources, were hesitant to admit they had
them, for CPEs were typically "taut." Managers preferred to hoard
whatever they had and then to make informal trades for materials
they needed. The scarcity of supplies resulting from a taut economy
and the unpredictability of their availability were persistent
problems for enterprises, forcing them to adopt erratic work
schedules such as "storming." This was a phenomenon whereby many
enterprises fulfilled a major portion of their monthly plan through
frenzied activity during the final third of the month, by which
time they had mustered the necessary supplies. The uncertainty of
supply was also responsible for a general tendency among industrial
ministries to become self-sufficient by developing their own
internal supply bases and to give priority to the needs of
enterprises under their own jurisdiction over the requirements,
even though more urgent, of enterprises in other ministries (a
practice sometimes referred to as "departmentalism").
Finally, detractors argued that in CPEs prices did not reflect
the value of available resources, goods, or services. In market
economies, prices, which are based on cost and utility
considerations, permit the determination of value, even if
imperfectly. In CPEs, prices were determined administratively, and
the criteria the government used to establish them sometimes bore
little relation to costs. The influence of consumers was weak (the
exception being the Ministry of Defense, which was in a position to
make explicit demands of its suppliers). Prices often varied
significantly from the actual social or economic value of the
products for which they had been set and were not a valid basis for
comparing the relative value of two or more products. The system's
almost total insulation from foreign trade competition exacerbated
this problem
(see Soviet Union USSR - Development of the State Monopoly on Foreign Trade
, ch. 15).
Data as of May 1989
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