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Soviet Union [USSR] Reforming the Planning System
Soviet economists and planners have long been aware of the
alleged strengths and weaknesses of the centralized planning
system. Numerous changes in the structure, scope of
responsibilities, and authority of the various planning and
administrative organizations have been made over the years.
Nevertheless, the fundamental planning process remained virtually
unchanged after the inception of full-scale central planning in
1928 until the late 1980s, when some radical changes were
discussed.
In the decades that followed its introduction, the planning
process became increasingly complex and detailed. Planners
specified not only quantitative production of goods but also their
cost, how they would be distributed, and what resources in labor,
materials, and energy they would require. The complexity of the
apparatus administering the plans also increased. Ministries
(called people's commissariats until 1946) proliferated, reaching
fifty by 1957 and reflecting the increasing variety of industrial
production. By 1982 the number of ministries, state committees, and
other important committees at the all-union level approached 100.
Planning had become immensely complex; in the 1980s planners had to
contend with more than 20 million types, varieties, and sizes of
products, which were produced by 45,000 industrial, 60,000
agricultural, and 33,000 construction enterprises.
Western analysts have viewed reform attempts of Soviet leaders
prior to the late 1980s as mere tinkering. From 1957 to 1965,
however, a radical change was made, when Nikita S. Khrushchev
sponsored a shift from the predominantly sectoral approach to a
regional system
(see Soviet Union USSR - The Khrushchev Era
, ch. 2). The reform
abolished most industrial ministries and transferred planning and
administrative authority to about 100 newly created regional
economic councils. The regime hoped to end unsatisfactory
coordination among the industrial ministries and ineffective
regional planning. Khrushchev apparently hoped to end the
traditional concentration of administrative power in Moscow, reduce
departmentalism, and make more efficient use of specific economic
resources of the various regions. Other changes under Khrushchev
included extension of the usual five-year cycle to seven years,
from 1959 to 1965, which was subsequently reduced to five years.
When the regional system proved to be even less effective than the
organizational structure it had replaced, and the weaknesses of the
ministerial system reappeared in a regional context, Khrushchev
sponsored an additional series of minor changes. But in 1965, after
when Leonid I. Brezhnev and Aleksei N. Kosygin had replaced
Khrushchev as head of party and head of government, respectively,
the regime abolished the regional economic councils and
reinstituted the industrial ministerial system, although with
greater participation of regional bodies in the planning process,
at least in theory.
Several reforms of the mid- and late 1960s represented efforts
to decentralize decision-making processes, transferring some
authority from central planning authorities and ministries to
lower-level entities and enterprises. A series of minor reforms in
1965 modified the incentive system by shifting emphasis from gross
output to sales and profits, a reform associated with the name of
the eminent economist Evsei Liberman. The reforms attempted to
provide a more precise measure of labor and materials productivity.
They also granted enterprise managers slightly greater latitude in
making operating decisions by reducing the number of plan
indicators assigned by higher authorities. In addition, the reforms
introduced charges for interest and rent. Attention focused
particularly on experiments with
khozraschet (see Glossary),
which, the late 1980s, required enterprises to cover many expenses
from their own revenues, thereby encouraging efficient use of
resources. In the agricultural sector, state farms and collective
farms received greater latitude in organizing their work activities
and in establishing subsidiary industrial enterprises such as
canning and food processing, timber and textile production,
production of building materials, and actual construction projects.
In practice, the amount of decentralization involved in the
reforms of the mid-1960s was minimal. For a variety of reasons,
including uneasiness about the unrest associated with reforms in
Czechoslovakia in 1967 and 1968, planning officials judged the
reforms to be failures. By the early 1970s, efforts at further
reforms had ceased, although the government never repealed the new
regulations. As the only noteworthy, lasting change, the government
began to use measures of net output rather than gross output as a
success indicator for enterprises.
During the last years of Brezhnev's rule, the leadership
remained relatively complacent about the system despite the
economy's slowing growth rates. Increases in world oil and gold
prices contributed to this attitude because they enhanced
hard-currency (see Glossary) purchasing power in the early 1970s and
made it possible to import increasing amounts of Western
technology.
In response to the stagnation of the late Brezhnev era, a new
reform attempt began under Iurii V. Andropov, who succeeded
Brezhnev as general secretary in 1982. On an experimental basis,
the government gave a number of enterprises greater flexibility in
the use of their profits either for investment purposes or for
worker incentives. The experiment was formally expanded to include
all of the industrial sector on January 1, 1987, although by that
time its limited nature and modest prospects for success had been
widely recognized.
In the meantime, however, Gorbachev, a leading proponent of
both these reforms and more extensive changes, was making his
influence felt, first as adviser on economic policy under Andropov
and his successor, Konstantin U. Chernenko, and then as general
secretary beginning in 1985. Some of Gorbachev's early initiatives
involved mere reorganization, similar to previous reform efforts.
For example, from 1985 to 1987 seven industrial complexes--organs
that were responsible directly to the Council of Ministers and that
monitored groups of related activities--were established: agro-
industrial, chemicals and timber, construction, fuel and energy,
machine building, light industry, and metallurgy
(see Soviet Union USSR - The Complexes and the Ministries
, ch. 12). The ministries
remained reluctant to
undertake more extensive reforms that would reduce their
centralized power and give greater initiative to lower-level
economic units. But the conviction was growing that the centralized
planning mechanism needed major changes and that simply fine-tuning
the economy with minor reforms would not be sufficient.
At Gorbachev's urging, on June 30, 1987, the Supreme Soviet
approved a set of measures contained in the Basic Provisions for
Fundamentally Reorganizing Economic Management. The Supreme
Soviet subsequently adopted an additional ten decrees, as well as
the Law on State Enterprises (Associations). Taken as a whole, the
actions of the Supreme Soviet signaled a substantial change in the
system of centralized planning, with significant amounts of
authority devolving upon middle and lower levels of the
administrative hierarchy. Gorbachev named the economic
restructuring program
perestroika (see Glossary).
The Basic Provisions clearly stated that the economy
would continue to function as "a unified national economic
complex," carrying out the policies of the party. The regime
obviously intended to retain great influence in the management and
development of enterprises. The new measures also called for a
redefinition and curtailment of the role of Gosplan. Beginning in
1991, Gosplan would no longer draw up annual plans. It would
continue to develop five- and fifteen-year plans, specify state
orders (involving about 25 percent of total output), and determine
material balances for products considered to be critically
important to the economy and national defense. Gosplan's
development of "non-binding control figures" would suggest overall
output, profit targets, and various indicators of technical and
social progress. Long-term norms would regulate ongoing
development, such as total wage payments and payments to various
state-sponsored funds, for example, bonus funds, resources for
social services, and research and development resources. Once
enterprises had filled the designated state orders, however, they
would have considerable freedom in deciding what to produce with
the remainder of their resources and how to dispose of the
products.
The new Law on State Enterprises (Associations) called for
khozraschet. By the end of 1989, all enterprises in the
economy were to make the transition to self-financing
(
samofin-ansirovanie--see Glossary), taking full
responsibility for the
financial outcome of their actions. The state budget would pay only
for major investment projects. A principal criterion for judging
enterprise and management performance would be the fulfillment of
contracts. Enterprises would be free to reduce the size of their
work force or to dismiss workers for poor performance. The law also
provided for the bankruptcy and dissolution of enterprises that
consistently operated at a loss. Their workers would receive
severance pay and assistance in job placement from the state. In
addition, the law called for the election of management personnel
in enterprises, subject to approval by the next-higher authority.
Finally, the law called for the election of labor councils to
resolve matters of pay, discipline, training, and use of incentive
funds. Only one-fourth of the membership could represent the
interests of management, and the councils' decisions would be
binding on the entire work force of the enterprise.
The reforms attempted to decentralize distribution. The law
enabled enterprises to deal with the suppliers of their choice,
either producers or wholesale outlets. Rationing would continue for
only the scarcest producer goods, less than 4 percent of total
industrial output in 1988. For the remainder, producers would be
free to sell directly to users. Finally, the law permitted some
enterprises to engage in foreign trade directly, on their own
account, and to retain some of the foreign currency gains.
Data as of May 1989
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