CHAPTER 1: The Abolition of Centralised Economic Planning

Under the socialist system of society which formerly existed in the Soviet Union, production was regulated in a planned way through detailed directives transmitted to enterprises by the central state apparatus in accordance with the current economic plan:

"In the case of socialised production....society distributes labour-power and means of production in the different branches of production".

(K. Marx: "Capital", Volume 2; London; 1974; p.362).

"Our plans are not forecast plans, not guess-work plans, but directive plans, which are binding upon the leading bodies and which determine the trend of our future economic development on a country-wide scale".

(J.V. Stalin: Political Report of the Central Committee to the 15th. Congress of the CPSU (B), in: "Works", Volume 10; Moscow; 1954; p.335).

According to contemporary Soviet propagandists, the aim of the "economic reform" instituted from 1965 on was to "improve" and "consolidate" -- even "perfect" -- centralised economic planning:

"A number of measures are envisaged to raise the scientific standards of state planning of the economy".

(A.N. Kosygin: "On Improving Industrial Management, Perfecting Planning and Enhancing Economic Incentives in Industrial Production", in: "Izvestia" (News), September 28th., 1965, in M.E. Sharpe (Ed.): "Planning, Profit and Incentive in the USSR", Volume 2; New York; 1966; p.15).

"The economic changes signify improvement of national economic planning... The reform consolidates centralised planning". (Editorial: "Economic Policy and Work for Communism", in: "Pravda" (Truth), January 14th., 1966, in: "The Soviet Economic Reform: Main Features and Aims"; Moscow; 1967; p.9).

In fact, as will be shown, centralised economic planning, as it had existed under socialism, has been eliminated from the Soviet economy since the "economic reform".

The first stage in the process leading to its elimination was an intensive propaganda campaign directed at centralised economic planning, which was denounced as "obsolete", "restrictive", "bureaucratic", and, of course, "due to Stalin's distortion of socialism":

"These shortcomings in economic management should be eliminated not by making planning more complicated, more detailed and more centralised, but by developing the economic initiative and independence of enterprises ---Enterprises must be given broader initiative; they must not be bound by petty tutelage and bureaucratic methods of planning from the centre".

(E.G. Liberman: "Cost Accounting and Material Encouragement of Industrial Personnel", in: "Voprosy Ekonomiki" (Problems of Economics), No 6, 1955, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p.7).

"Stalin...substituted naked administration by fiat for economic instruments of directing the economy....

Regulation of the use of financial resources by enterprises, where it is excessive and too detailed, should be eliminated, and enterprises should be given greater opportunity to maneuver with these resources".

(L. Gatovsky: "The Role of Profit in the Socialist Economy", in: "Kommunist" (Communist), No. 18, 1962, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p.95, 104).

"The practice of petty tutelage should be eliminated".

(V.S. Nemchinov: "Making Enterprises Interested in More Intensive Plans", in: "Voprosy ekonomiki" (Problems of Economics), No. 11, 1962, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p.152).

"These norms (fixed by the central state planning authority -- WBB) have largely become obsolete; they have turned into petty tutelage, binding the manager's activities......The time has come to discard the obsolete forms of economic management based on directive norms".

(V. Trapeznikov: "For Flexible Economic Management of Enterprises", in: "Pravda" (Truth), August 17th., 1964, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p. 193-4).

"It will be necessary, above all, to...curb significantly the employment by higher bodies of purely administrative methods of managing enterprises and grant adequate independence to the enterprises".

(R. Belousov: "The Chief Thing is Economic Effectiveness", in: "Pravda" (Truth), November 13th., 1964, in M.E. Sharpe (Ed.): op. cit., Volume 1; p.221).

"Guidance of the enterprises by means of administrative intervention in all the details is a very poor method that cannot yield good results".

(V. Belkin and I. Berman: "The Independence of the Enterprise and Economic Stimuli", in: "Izvestia" (News), December 4th., 1964, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p.225).

"Directors have at their disposal certain material and monetary resources, but the right to use them, to manoeuvre with them, has been quite limited. Excessive tutelage on the part of superior organisations has fettered the initiative of the personnel."

(V. Garbuzov: "Finance and Economic Stimuli", in: "Ekonomicheskaya gazeta" (Economic Gazette), No 41, 1965, in: M.E. Sharpe (Ed.): op. cit., Volume 2; p.48).

"Purely administrative methods of economic guidance.... have become widespread. The same is true of detailed regimentation of the work of the enterprise and of petty tutelage over it".

(L. Gatovsky: "Unity of Plan and Cost Acccounting", in: "Kommnist" (Communist), No. 15, 1965, in: M.E. Sharpe (Ed.): op. cit., Volume 2; p.80).

"Centralised planning cannot be identified with instructions on the quantity and assortment of produce to be manufactured by each enterprise... Attempts of this kind only clog the planning channels".

(E.G. Liberman: "The Plan, Direct Ties and Profitability", in: "Pravda" (Truth), November 21st., 1965, in: M.E. Sharpe (Ed.) op. cit., Volume 2; p.172).

"The centralised plan..must not be turned into a fetish, into an absolute, and regarded as a plan that must be carried out in every detail".

(A.M. Rumyantsev: "Management of the Soviet Economy Today: Basic Principles", in: "Soviet Economic Reform: Progress and Problems"; Moscow; 1972; p.20).

In line with the theme that the propaganda campaign was aimed, not at the abolition of centralised planning but at its "improvement", the demands put forward in the campaign were that the number of central economic directives to enterprises should be "reduced" to a few "key indices":

"Only the key indices, the decisive indices, should be handed down to enterprises, whose directors should be given greater rights and opportunities for economic manoevring within their scope".

(E.G. Liberman: "Planning Production and Standards of Long-term Operation", in: "Voprosy ekonomiki" (Problems of Economics), No. 8, 1962, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p.65-6).

"The state plan should be freed of unnecessary indices"

Zverev: "Against Over-simplification in Solving Complex Problems", in: "Voprosy ekonomiki" (Problems of Economics), No. 11, 1962, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p.142).

"We must free the enterprises from the excessive number of obligatory indicators".

(E.G. Liberman: "Are We Flirting with Capitalism? Profits and 'Profits' ", in: "Soviet Life", July 1965, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p.309).

It was in this form that the "economic reform" was officially adopted by the Central Committee of the Communist Party of the Soviet Union in September 1965:

"A serious shortcoming of industrial management is that administrative methods have superseded economic necessity... The powers of enterprises with regard to their economic activity are restricted.

The work of enterprises is regulated by numerous indices which restrict the independence and initiative of the personnel of enterprises, diminish their sense of responsibility for improving the organisation of production...

It has been found expedient to put a stop to excessive regulation of the activity of enterprises, to reduce the number of plan indices required of enterprises from above."

(CC, CPSU: Decision "On Improving Management of Industry, Perfecting Planning and Enhancing Economic Incentives in Industrial Production", in: "The Soviet Economic Reform: Main Features and Aims", Moscow; 1967; p.147).

The "key indices" which, it was proposed, should alone be handed down to enterprises were outlined by Prime Minister Aleksei Kosygin:

"In the future.. an enterprise will have the following indices established from above: the volume of goods to be sold; the main assortment of goods; the wage fund; the sum of profits and the profitability payments into the budget and allocations from the budget;.. the volume of centralised capital investments and commissioning of production capacities and fixed assets; the main targets for introducing new technology; the indices for supplying materials and equipment.

All other indices of economic activity will be planned by the enterprise independently, without endorsement from a higher organisation".

(A.N. Kosygin: "On Improving Industrial Management, Perfecting Planning and Enhancing Economic Incentives in Industrial Production", in: "Izvestia" (News), September 28th., 1965, in: M.E. Sharpe (Ed.): op. cit., Voume 2; p. 18-19).

Soviet propagandists endorsed the impression given in the Central Committee and by Kosygin:

"The state plan merely endorses the most essential indicators, ensuring balanced economic development, on the basis of which the enterprises independently organise economic activity".

(S. Khavina: "In the Crooked Mirror of Bourgeois Theories", in: "Ekonomicheskaya gazeta" (Economic Gazette), No 44, 1965, in: "The Soviet Economic Reform: Main Features and Aims"; Moscowl 1967; p.141).

"The essence of the reform consists in concentrating centralised planning on formulating the most general indicators of national economic development, extending the independence of enterprises".

(A.M. Rumyantsev: "Management of the Soviet Economy Today: Basic Principles", in: "Soviet Economic Reform: Progress and Problems"; Moscow; 1972; p.16).

"To extend the economic independence and initiative of enterprises the number of plan assignments set to enterprises by ministries and departments has been reduced to a minimum".

(A.N. Yefimov: "Long-term Plans and Scientific Forecasts", in: ibid.; p.72).

What was not made clear in these statements was that the "economic reform" did not merely reduce the number of "indices" handed down to enterprises by the state "planning authority": it transformed the remaining "indices" from directives, binding on the enterprises, to "guidelines" which the enterprises could follow or not, as they chose.

Evsei Liberman, Professor of Engineering Economics at the University of Kharkov and the principal architect of the "economic reform" expressed the true position with characteristic blunteness:

"From the centre each enterprise should be given an aim"

(E.G. Liberman: "Planning Industrial Management and Material Stimuli for its Development", in: "Kommunist" (Communist), No. 10, 1956, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p.32).

"Control figures will be drawn up.... in a generalised, value form, to be given to sectors of the economy. In the same form these control figures will be handed down to the enterprises, not as precise directives, but rather as guidelines for drawing up their plans".

(E.G. Liberman: "Plan, Direct Ties and Profitability", in: "Pravda" (Truth), November 21st., 1965, in: "The Soviet Economic Reform: Main Features and Aims"; Moscow; 1967; p.51).

Thus, as enterprises were transferred to the "reformed" system of operation, they proceeded in practice to plan their own production -- even as to the types and qualities of commodities they they would produce:

"These enterprises (i.e., those working under the "reformed" system -- WBB) now draw up their production plans themselves"

(V. Sokolov, M. Nazarov and N. Kozlov: "The Firm and the Customer", in: "Ekonomicheskaya gazeta" (Economic Gazette), January 6th., 1965, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p251).

"The result society needs is achieved by expanding the rights of enterprises in specifying the assortment,...and so on... The new management system... extends the rights of enterprises in... studying the demand and changing assortment".

(A.M. Rumyantsev: "Management of the Soviet Economy Today: Basic Principles", in: "Soviet Economic Reform: Progress and Problems" Moscow; 1972; p. 21, 24).

"The single approach to managing the economy is displayed.. in granting enterprises equal rights to concretise the assortment of goods they produce...

It is the enterprises themselves that can and must draw (i.e., economic plans -- WBB) up originally. Moreover these must be high and well-substantiated plans".

(P.B. Bunich: "Methods of Planning and Stimulation", in: ibid.; p.36,49).

"Five-year plans of enterprises and associations have become the basis for planning their activity"

(L.M. Gatovsky: "The Economic Reforms and the Stimulation of Technological Progress", in: ibid.; p.171).

"Enterprises decide what range of goods to produce in terms of physical quantities and total value of sales.. and other economic indicators"

(B.I. Braginsky: "Planning and Managment in the Soviet Economy", in: "The Soviet Planned Economy"; Moscow; 1974; p. 125-6).

Soviet economists refer to this "reformed" system of "economic planning" as "planning from below":

"The enterprise should actually become the basic organ for planning from below".

(E.G. Liberman: "Economic Levers for Fulfilling the Plan for Soviet Industry", in: "Kommunist" (Communist), No. 1, 1959, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p. 48).

"The other way (of "economic planning" -- WBB) is to encourage the initiative of the production collectives (i.e., the personnel of productive enterprises -- WBB) in every possible way, to execute in deed and not in words planning from below' "

(R. Belousov: "The Chief Thing is Economic Effectiveness", in: "Pravda" (Truth), November 13th., 1964, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p.220).

Since the "economic reform", therefore, the detailed central "economic plan" can only take the form of totalisation of the individual economic plans of all the enterprises.

But since the enterprises frequently change their economic plans during the course of a "planning period", prices fluctuate, and so on, the central "economic plan" produced at the beginning of this period bears little relation to the final economic result:

"The work of drawing up five-year plans from the enterprises up to the USSR Gosplan (State Planning Committee -- WBB) was not completed in the past five years". (N. Y. Grogichinsky: "The Economic Reform in Action", in: "Soviet Economic Reform: Progress and Problems", Moscow; 1072; p.211).

"It is practically impossible to compile a Five-Year Plan".

Komin: "Problems in the Methodology and Practice of Planned Price Formation", in:

"Planovoe khoziaistvo" (Planned Economy). No. 9, 1972, in: "Problems of Economics", Volume 16, No. 1; May 1973; p.48).

"An objective assessment of the fulfilment of the plan is impossible... In fact, the planning of distribution never attains completed form.. It is completed only with the end of the planning period... It is impossible to compile a national economic plan that is substantiated and balanced for all value indices.. on the baisis of physical indices and prices... The five-year plan in terms of value indices essentially loses its meaning".

(V. Kotov: "Prices: The Instrument of National Economic Planning and the Basis of the Value Indices of the Plan". in: "Planovoe khoziaistvo" (Planned Economy), No. 9, 1972, in: "Problems of Economics", Volume 16, No. 1; May 1973; p. 61, 62, 69).

Contemporary Soviet economists thus admit that the Soviet economy since the "economic reform" is characterised by "indeterminacy", i.e., anarchy:

"The indeterminacy that is manifested in the probabilistic nature of the anticipated economic result does exist and is objectively inherent even in socialist society".

(L. Veger: "Calculating Economic Effectiveness under Conditions of Indeterminacy", in: "Voprosy ekonomiki" (Prolems of Economics), No. 2, 1972, in: "Problems of Economics", Volume 15, No. 4; August 1972; p. 41)

"Centralised planning in conditions of broad independence of enterprise is also faced with the need of elaborating methods of managing the economy marked by growing indeterminacy, probability (stochastics) of its processes".

(A.M. Rumyantsev: "Management of the Soviet Economy Today: Basic Principles", in: "Soviet Economic Reform: Progress and Problems"; Moscow; 1972; p.23).

All this is not meant to suggest that the contemporary Soviet state has no "economic plans", or that it no longer influences the direction of development of the Soviet economy. Like most orthodox capitalist states today, it draws up, from time to time, broad "economic plans". These are, however, not imposed upon enterprises by means of directives. The Soviet state endeavours to influence enterprises to follow, broadly, the lines of its current "economic plan" by the use of the same kind of "economic levers" that are used by the state in orthodox capitalist countries:

"One of these far reaching measures should be the increased use of economic levers in influencing production".

(E.G. Liberman: "Economic Levers for Fulfilling the Plan for Soviet Industry", in: "Kommunist" (Communist), No. 1, 1959, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p.55).

"The attempt to make broader use of economic levers and economic stimuli in planning is a healthy reaction against the administrative conception of a plan"

(L. Alter: "Incentives Must be Linked with the Long-term Planning of an Enterprise", in: "Voprosy eknomiki" (Problems of Economics), No. 11, 1962, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p.167).

"The time has come to discard the obsolete forms of economic management based on directive norms.....Economic influence is successfully employed even in capitalist countries.....In our conditions, when all the financial and economic levers are in the hands of the state, measures of economic influence will prove still more effective....

The general aim of the above proposals is to substitute a sum of economic influences, which would channel the enterprise's activity, for control of each step of the enterprise executive through directives".

(V. Trapeznikov: "For Flexible Economic Management of Enterprises" in: "Pravda" (Truth), August 17th., 1964, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p.194, 195, 199).

"The putting into operation of flexible economic methods... presupposes that the centre of gravity be shifted from administration by injunction to economic methods of guiding enterprises".

(L. Leontiev: "The Plan and Methods of Economic Management", in: "Pravda" (Truth), September 7th., 1964, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p.208).

"The mastering of commodity-money relations in the planned socialist economy... means the establishment of a basically new mechanism, in which the system of economic levers connected with commodity-money relations functions as a tool of national economic planning...

The socialist state... guides the national economy and every enterprise with the help of a system of economic levers".

(G. Kosiachenko: "The Plan and Cost Accounting", in: "Finansy SSSR" (USSR Finances), No. 12, 1964, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p.232, 238).

"The main levers, which determine the development of the country's economy, remain in the hands of the state".

(N.K. Baibakov: "Tasks of Economic Planning in the New Conditions", in: "Pravda" (Truth), October 29th., 1965, in: M.E. Sharpe (Ed.): op. cit., Volume 2; p. 100).

The precise mechanism of these "economic levers" will be discussed in later sections.

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