THE SOVIETS ENTER A NEW ECONOMIC ERA
Wohl, Paul
The Soviets Enter A New Economic Era by PAUL WOHL THE Soviet Union will move into a new economic era beginning January 1, 1959. On that date, a span of three decades of Five Year Plans draws to a...
...Unusual shifts in important personnel indicate that capital shortage, planning bottlenecks, and productivity problems are far from solved...
...The test of the new course will be the seven-year economic development program starting in 1959 which later is to be succeeded by planning over much longer periods...
...Seven hundred billion rubles exceeds quite substantially the gross national product of an entire year...
...Then agricultural planning was slightly decentralized...
...Shortly afterwards they were denounced as "party-splitters" and exiled from the capital...
...In many respects the outcome was different from what the early planners had expected, but, on the whole, production targets have been reached...
...In the Soviet Union, a much greater proportion of steel is used for railroads and heavy industrial construction...
...It also looks as if group incentives with competitive motivations might operate in a manner vaguely equivalent to the competitive market principle of capitalism...
...One of the first steps was the shifting of tens of thousands of enterprises from the jurisdiction of the central ministries to that of the republics...
...They may not trust party and government—any party or any government—and many a high Soviet official may secretly think that Khrushchev is an adventurer or a fool, but when it comes to choosing between what he stands for and those who appear to be the Soviet Union's enemies, such thoughts are dismissed, with the result that the good-will of the regime is boosted, the readiness to accept retrenchments is increased, and the prospects of fulfilling the new plan rise...
...What matters most if one wants to compare the Soviet Union and the United States economically is the dynamism of the two systems...
...Two — Economic administration had become top heavy...
...To the East, integral state planning has been introduced in China, Outer Mongolia, North Korea, and North Vietnam...
...It has been in many ways uneconomic, and in the beginning of the fifth Five Year Plan (1950 to 1955) the system began to hit some snags...
...When, after Stalin's death, the huge industrial enterprises of the police were added to the already enormous burden of the branch ministries and the personal responsibility of the ministers lost its sting, the quantity of red tape seems to have taken on the quality of an enormous clog which almost brought administrative circulation to a stop...
...A comparison of capacities is perhaps more meaningful...
...In December 1956, Pervukhin, a first deputy premier and member of the Party Presidium, was invested with extraordinary powers...
...A comparison of production figures does not tell the full story, because in capitalist countries production oscillates with the market...
...The slow-down started under Stalin, but the "liberalization" of the post-Stalin years and the impact of the Twentieth Party Congress of February 1956, with its extensive promises of larger social benefits, shorter working hours, better living conditions, and increased aid abroad, worsened the situation...
...Three -— Capital resources had shrunk...
...Although it is too early for crop prospects, there have been no unfavorable weather reports from the new lands whose share in grain deliveries to the state is about one-third of the total...
...He was formerly New York editor of World Report...
...The plans were pushed through with blood and tears...
...But however one looks at it, the dynamism of the Soviets is impressive, and much of it must be attributed to the Soviet method of integral state planning of which the Five Year Plan was characteristic in the past...
...On that date, a span of three decades of Five Year Plans draws to a close—an economic cycle which has skyrocketed Russia from one of the most backward of countries to the number two industrial giant of the world...
...agency, was instructed to present to the party and the government a seven-year program for the years 1959-1965, scrapping the current (sixth) Five Year Plan and merging its last two years, 1959 and I960, with the following five-year period...
...But in addition to comparing output and capacity, it is well to keep in mind that the Soviets today no longer are lacking in minerals and know-how...
...Under Stalin it huffed and puffed along, driven by fear of a sudden intervention of the dictator's personal secretariat...
...In a report to his party's Central Committee May 6, Premier Nikita S. Khrushchev made some striking comparisons for the years 1953 to 1957 showing the great extent to which the rate of Soviet production is outstripping the pace of output in the United States...
...Soviet steel capacity today equals that of West Germany, Britain, Belgium, and Luxembourg combined, while the Communist-directed "people's democracies" of Eastern Europe turn out as much steel as did Hitler's Germany on the eve of World War II...
...And because the disciplinary powers of the central state authorities were curtailed, the party's role as whip, organizer, and instructor had to be strengthened...
...Another factor is the economic and social policy of the capitalist world which, under new inspirations, may develop an unexpected dynamism of its own...
...After a dramatic session of the Central Committee, it was announced July 4, 1957, that the "anti-party group" of Malenkov, Molotov, Kaganovich, and Shepilov had been ousted from their party posts...
...At home, wages were raised, prices cut...
...Many of the Soviet people remember that past...
...As a result of poor management more and more industrial enterprises had to be subsidized...
...Pervukhin lost his job as planning chief, the State Economic Commission was dissolved, all planning—long-term and short-term—was concentrated in Baibakov's hands, the industrial ministries were abolished, and management decentralized...
...The Soviets make relatively few passenger cars, turn out a handful of gadgets, and increasingly use more pre-shaped concrete in building...
...For the first time Soviet gold production this year is ahead of that of South Africa, hitherto the world's leading producer...
...Only the Soviet state economy was infinitely larger than any corporation and became more and more complex as industry expanded...
...a new and revolutionary idea entered and excited the economic thinking of the world...
...In this respect the Soviets are ahead of us...
...The economy, apparently, was out of breath...
...Whether his plan can be carried out depends upon many factors...
...that their processed raw materials such as aluminum, zinc, and even pig iron exceed their finishing capacities...
...In agriculture, Khrushchev's first field of economic experimentation, it was clear that incentives of a sweeping nature would be needed if the goals were to be met...
...The management of the Soviet Union's large collective farm units has been effectively simplified through the abolition of the government's machine and tractor stations which used to rent their equipment to the farms against payment in kind...
...Up to now, fortune has smiled on Khrushchev who, in turn, has missed no opportunity to radiate optimism over his country's economic future...
...Under Stalin this profit—although never officially recorded—is believed to have been equal to between one-sixth or one-eighth of the gross national product...
...Another important fact is that proved reserves of oil, coal, and iron ore are the largest in the world and that the location of newly discovered raw material deposits is much more favorable than in the past...
...It was natural that there should have been differences of opinion about how this should be done, and in this discussion Khrushchev became the spokesman of the economically more radical wing of the officialdom, which under Soviet conditions appeared to be politically more liberal...
...All that can be said is that no nation is likely to make such sacrifices voluntarily...
...Inter-ministerial communications and deliberations at times could take up the better part of a five-year cycle...
...With the start of the sixth Five Year Plan in 1956 the rate of growth in many important industries began to drop behind schedule...
...Khrushchev was the apparent initiator of this policy...
...But the reform movement had already gone too far, the opposition lacked a common policy, and Khrushchev proved himself to be a better tactician...
...What had happened was this: One—The technique of state planning had become so complex that vast amounts of investment capital had been spent on projects which were never completed...
...At the same time, economic and social incentives were increased...
...Yet even the rate of growth is not quite so easy to measure as it may seem...
...But the careful preparation of the seven year program and the thoroughness with which it has been coordinated with the plans of the entire Soviet bloc, show that Khrushchev and his associates are tackling those obstacles which in the past few years have slowed down the Soviet Union's phenomenal economic growth...
...Discarded was the individual producer and the market...
...Decentralization of management was to be continued, but only for enterprises of lesser importance and within the framework of the existing set-up...
...Its "liberalism" consisted of giving more leeway to the producers, which could be achieved only at the expense of the central administration...
...Yet there is evidence that genuine economic criteria are gradually becoming recognized...
...westward to Poland, East Germany, Czechoslovakia, Hungary, and most of Southeastern Europe—seven countries with about 90,000,000 inhabitants, now in the midst of their third Five Year Plans...
...China's industrial development had to be financed...
...Planning has become more flexible, the regional economy has been given some leeway, and the role of the central planning agency has become one of adjusting, balancing, and connecting plans worked out by regional producers...
...Now the farms own the machinery, all payments are made in money, and a new system of prices for deliveries— henceforth to be called purchases— is intended to induce farm management to produce more, and more efficiently...
...Some of them are of a psychological nature, especially in agriculture, where it is not yet certain how the peasants will respond to Communism's collective productivity inducements...
...Gos-plan, the central planning agency, was cut in two, with one agency for so-called perspective or long range planning which continued to be called Gosplan, and the other one, called State Economic Commission, in charge of working out and supervising the fulfillment of the annual plan...
...This system always had been cumbersome, although proportionally probably not much more so than the administrative confusion which can occur in large private corporations...
...These leaders may well have felt that an emergency had arisen and that it was time to return to an economically more cautious course...
...Little more than 30 years ago when pre-World War I levels had been essentially restored, the Soviet Republic ranked among the backward countries of the world, ahead of China and India, but on a level lower than any other major European nation...
...The new seven-year development program represents a basic departure from the five-year cycle because the nature of planning itself has changed and with it methods of management, financing, and distribution...
...Stalin's Five Year Plans were symbols of the determination of the strange new state in the East to take over the making of history...
...This is how the balance sheet looked in July, one year after the ouster of the "black sheep" from the party Presidium and the Central Committee: • The decentralization of industrial management under 104 regional economic Soviets has begun to function and was accompanied by a remarkable increase of production in several fields...
...The new era will be ushered in with a seven year intermediate range economic development program covering the years 1959-1965, with the avowed aim of toppling the United States from its number one position in the world's economic hierarchy...
...On still another basis, production per capita, however, the Soviets produce little more than half as much as West Germany and only about one-third of the potential per capita output of the United States...
...It signifies a coming of age of an industrial economy too complex and dynamic to require the braces of rigid planning periods...
...Figures vary depending upon which years are compared...
...Such terms can be applied only with considerable reservations to an institutional state economy of the Soviet type...
...But the new economic plan, which will be followed by still longer range plans, is of more significance than merely stretching the five year plans to seven...
...by JOHN LOFTON...
...North Vietnam) which, together with Bulgaria, have a five-year planning cycle extending from 1953 to 1957 and from 1958 to 1962...
...Today the Soviets have become the world's second industrial nation...
...A few months later all this was changed...
...In line with Khrushchev's efforts to prop up agriculture, the stream of labor from the countryside to the cities had been temporarily reversed...
...Each ministry had its own supply and distribution services...
...Discovery of a vast underground fresh water sea under Kazakhstan would, if confirmed, make continued profitable cultivation probable...
...that they have successfully replaced tropical raw materials, like rubber, by synthetics...
...What is true for steel applies in a general way to other materials...
...Like the poet Boris Pasternak, whose great novel Doctor Zhivago poignantly evokes the years of debasement and trial, they stand in awe before what has been achieved...
...As a result of the landing of U. S. Marines in Lebanon, internal differences have abated and the verkhushka—the upper layer of the officialdom—are said to be united...
...What was behind it still is a matter of speculation...
...Khrushchev put Nikolai K. Baibakov, long-time oil minister of the U.S.S.R., in charge of long-range planning...
...It is in this sense that the Soviet Union's abandonment of the rigid five-year planning cycle marks the beginning of a new era...
...When the first Five Year Plan was launched in 1929, a legend was created...
...The idea seems to have been to carry on with the system of integral centralized state planning and management of all major enterprises through ministries in Moscow...
...The decision to discard it came September 24, 1957, when Gosplan, the Soviet Union's central planning PAUL WOHL has covered the Soviet Union and the Soviet bloc for the Christian Science Monitor for many years...
...His State Economic Commission came to resemble an economic government, including in it the most able technicians of the ministerial bureaucracy...
...Measured by European standards, the picture looks different...
...Had Khrushchev, instead of choosing the average rate of growth during the four years 1953 to 1957, compared the average growth of American and Soviet steel production between 1949 and 1955, he would have found that the average annual increase was almost equal: 3,930,000 tons for the United States and 3,960,-000 tons for the Soviet Union...
...The margin between retail prices and the nominal price which the state procurement system paid for more than half of the country's agricultural produce had been narrowed to a point where the state virtually no longer made a profit...
...In the following year short-term planning was taken over by the present Soviet Ambassador to East Germany, Mikhail G. Pervu-khin, one of the most experienced and able younger industrial administrators of recognized technical competence and practical ability...
...For example, although the Soviets at the beginning of this year were producing approximately as much steel as the United States, their capacity is little more than half of ours...
...Like the temple of Solomon which the people built in 20 years of "servitude under a heavy yoke," the Soviet Union's planned economy was a "grievous" enterprise...
...For the time being Western policy has come to Khrushchev's aid...
...The land and the faces of the people were to be pressed into a new mold...
...the population gaps opened by the war began to make themselves felt...
...British and West German observers, who had opportunities in the following months to converse with high Soviet officials, feel that the deeper reason was the absolute need to make industrial management and planning more flexible, raise productivity, offer incentives and cut costs— an interpretation confirmed by the parliamentary delegation of the French Socialists, several of whom spoke Russian fluently...
...According to some observers, the reform represented a victory of the party apparatus over the state bureaucracy...
...There was an expanding technical assistance program for underdeveloped countries...
...More than one-fifth of these projects had been temporarily abandoned or were otherwise in abeyance...
...The five-year planning cycle of the Stalin era is said to have become too short...
...Since then Khrushchev's political leadership seems to have been uncontested...
...The people too seem to be rallying around their leaders...
...Because of the new streamlined and (in a state-socialist sense) more business-like organization of agriculture, and of new developments in industrial financing such as a more rational approach to depreciation, investment, and cost-price calculations, some observers speak of the beginning of a "socialist market economy...
...This coordination was achieved through a set of laboriously negotiated long-term trade agreements extending to 1965...
...Tens of thousands of high ministerial officials were sent into the provinces, and the party rather than the state administration was the prime mover of the reform...
...This is believed to have led an initial majority of the Party Presidium to demand Khrushchev's resignation...
...Integral state planning of almost all economic activities has spread from the U.S.S.R...
...The average annual increase in steel production, for instance, looks much more favorable for the United States if we compare average American and Soviet steel output in the postwar years, between 1945 and 1957 when the American average increase came to 2,300,000 and the Soviet average to 2,970,000 tons...
...It seems to have been generally agreed that major reforms were needed, and after a year or two of internal differences and hesitations, the dynamic Khrushchev became the spark-plug of the new course...
...The seven year plan is designed to bridge Russia's phenomenal economic growth from adolescence to maturity, and to coordinate planning with that of the other countries of the Soviet bloc...
...The Soviet Union's East European associates and dependencies ceased to be sources of revenue...
...As an enterprise it has succeeded...
...Credits were necessary to ease political tensions in the people's democracies...
...Such a loosening of strictures and curtailment of government revenues must have struck most of the older leaders as a great gamble...
...The overall economic potential of this immense realm is formidable...
...See table on this page...
...The share of consumption in the gross national product increased, Five—The expected sharp rise in labor productivity as a result of improved technology, greater material inducements, and intensive propaganda lagged behind expectations (although the rise was still sharp compared to most capitalist countries because initial productivity in most industries was low...
...Between one-third and one-half of American steel goes into automobiles, gadgets, and construction...
...In the fall of 1956, I. A. Kuliev, a deputy chairman of the State Economic Commission, disclosed that there were 4,000 large unfinished projects representing a planned investment of 700 billion rubles...
...By the end of this intermediate program, Moscow believes that Communism will have become so deeply rooted that the entire "Commonwealth of Socialist States" will then plan jointly in decades and multiple decades...
...The method of planning industrial production in five year cycles also has had disadvantages...
...But this may be too facile an explanation, too much in line with the worn-out myth of a power struggle between individuals or gangs in frontier style...
...China has set her sights on surpassing England in 1962...
...The most spectacular incentive, suggested by Khrushchev himself, was the abolition of compulsory deliveries from the private plots of the collective farm peasants...
...The Soviet premier may well have been sincere when he intimated that war was the one thing which might upset his long-term plan to surpass the American capitalist system economically...
...But per capita comparisons make sense only when Soviet and American steel consumption patterns are understood...
...Industrial management was centralized in some 50 ministries in the Soviet capital and many more in the capitals of the various Soviet republics...
...Today it is futile to ask whether what has been achieved was worth the price or could have been achieved differently...
...Four—Expenditures increased...
...Actually, the ponderous over-centralized machine had hit a snag...
...Another novel aspect is the coordinating of the U.S.S.R.'s long-term development program with the existing plans of the European "people's democracies" which still follow the old "decimal" five-year cycle (1956 to 1960, 1961 to 1965) and with the plans of China and the three Asian people's democracies (Outer Mongolia, North Korea, and...
...The slow rise in labor productivity no longer could be made up by putting additional millions of people to work...
...It may be years before we can fully unravel what happened between the fall of 1955 and the summer of 1957 when the new course was officially ushered in...
Vol. 22 • September 1958 • No. 9
