Created: 7/1/1957

OCR scan of the original document, errors are possible






I. Industrial Organization Under War Communism,

II. Industrial Organisation Under the Kew Economic Policy,

III. Industrial Organization in the Transition Period,

IV. Industrial Organization in the Period of Comprehensive

A- The Technically Specialized Administrative




V. The Economic General Staff: Cosplan


Economy-Wide Planning Group

(Coordinating Departments)

Group for Technically Specialized

I>. Staff

rl. The Planning

F. Supervisory Functions

VI. The Economic

A. Industry and

13. System of


at the Plant

VII. Frictions in the Soviet System of Industrial

Administration and


Centralization Of Decision

Position of the Industrial

Interagency Relationships

k. Problems of Supply for


- V -


Problems of

Problems of

VIII- Search for New Forms of Industrial Organization in

the Post-Stalin Period

in Status of Industrial Ministries



7 Plenum


Source References


figure 1- USSR: Structure of the Supreme Council of national Economy Under War CovEnuniso,

Figure 2. USSR: Structure of vie Supreme Council or

Hational Economy Ur.dcr theolicy,

Figure 3. USSR: Structure of the Suprtaze Council Of national Economy on the'ne First

Five year Plan,

Figure k. Structureypical Soviet Industrial


Figure 5. USSR: Structure of the state Planning Committee


Figure 6- USSR: Economic Adnir.lf-tration and Planning,

Evolution of the Central Administrative

Structure Of the

Back Cover


The organizational forms of Soviet industrial lauiageocnt have undergone almost continuous change. With the exception of the Hcv Economic Policyowever, uhlchemporaryof certain economic policlen and some radical deviations rroo the Soviet trend of Industrial organization, Sovietchange hn been evolutionary.

Starting out1 with widely fragmented management and large sugmento of industry privatelyattern has emerged of Increasingly broad control by the state over Industrial andactivities. Simultaneously with this tendency toward strengthening its central control, the Soviet governmentolicy of dividing its large administrative units along technically specialized lines, thus Increasing tbe number of specializedcirilctrles ot the top level of the administrative hierarchy.esult of these two tendenciesconcentration of control and proliferation of agenciesthere emerged bypecialized Industrial organizationight pyramidal structure and an intricate chain of command.

The elaborate attain!strativc network radiated from "the center" (Motcow) tnrougft the constituent republics and/or through groups of Industries to the individual producing units. At the top or thlu administrative hierarchy was the Council of Mi-iictera of the USSR, which, in addition to its other functions, supervised the vastmachine concistlng ofpecialized industrial andEinistrlesost of comcittecs performing special tasks assigned to then by the Council of Ministers.

The top policymaking body vas the Prealdiun of the Central Coratittee cf the Conmtnlst Farty (known as the Politburo. The Council of Hinlnters carried out the directives of the Presidium.

Industrial activities, depending upon their significance and the pattern of their production activity, were divided into three All-Union, union-republic, mod republic. These categories generally corresponded to the three main types of industry: heavy light; nnd local,ale industry.

Technically specialized industrial adnlnistration was mainly erned with the transmission downward or all infomation, directives

allocation* essential for Uie fulfillment of the stato economic plan by the producing units. At each stage of this transmission proccBE the tunku and the available resources were broken down axons units of the hierarchical order, through ministries, mainand trusts to plunts.

The State Planning Committee (Cosplan) functioned as the "general staff" of the Soviet economy. This agency pervaded the entirestructum of the USSH by meansomplex and extended chain of relationships running through subordinate planning committees in every republic, kray, and oblast and through planning departments In every economic ministry, sain administration, and plant. ma'.r. function of Conplan was the preparation of comprehensive plans by which to direct the economic activities of the nation. These plans prescribed production targets for every sector of the national economy and determined bow resources were to be allocated to serve particular-endsarticular way.

Viewed against the background of its accomplishments In the field of industrial production, the Soviet system of centralized planning and specialized ministerial control worked with considerable It placed in the hands of the Sovietowerful Instrument to promote industrialization and to establish the economic basis for support of Soviet objectives both at home and abroad. This system, however, was not frtctionlesa; as the Soviot economy became increasingly complex, problems developed in production and dlntribution, and there were strains ln its complicated machinery. Some strains could be traced to the dependence of planning on this highly complicated and tightly centralized machinery of administration, whereasere the consequence of malfunctioning of the planning

Stalin's successorsumber of remedies to cure these ills in the Soviet economy. They reduced the economic bureaucracy byillion sen. Some Industrial ministries were changed In status from All-Union to union republic bo bring management closer to production and thus increase efficiency. Another reform measure was to reorganize Cosplan and topecial short-term planning agency OosekonOBkoaisslyacharged also with the responsibility for monitoring industrial production.

But by the end6 the Soviet leaders apparently recognized that the Sixth Five Yearad not been basedealistic assessment of available resources and the investmentfor their exploitation- They began to encounterwith the industrial production program And the Supreme Soviet, meeting early inpproved theplan7 which calledery modest rate of growth of industrial production. The Supreoe Soviet adjourned on Two days later the Plenum of the Central Committeeesolution to revamp the entire planning and administrative structure of Soviet industry and construction.

I- Industrial Organization Under-War.

When, as the resultuccessful coup d'etat, the Rushlan Bolsheviks assumed political control over Russia Inheir principal aim was the immediate and compulsory establishmentocialist economic order* Their concepts of the new forms which economic activities ought to assume were rather vague and general, largely derived from the writings of Karl Marx.

According to Marx, the principal faults of capitalist economy lay in private ownership of the means of production, In the alleged economic wastefulness resulting from the existence of thousands of institutionally isolated although technically related production units, and ln the mechanism of money exchange, which he thoughtthe essence and purpose of economic activity. In contrast, Marx advocated social ownership of the means of production and the setting upogically planned und integrated aystom ofand distribution in place of the "anarchic" mechanism of money and markets. The economic policy of the Soviet government during the period of War Communism was an effort to give concrete meaning to this general program.

In Its first legislative acts the Soviet government took over the material means of production and proclaimed itself the sole organizer of economic activity. he end of the first year of Soviet rule, nil large-scale raw material and manufacturingwere in the hands of the state or Its agents, if* and by the end0 even small-scale establishments had been taken over by the Soviet government. To all intents and purposes, therefore, the whole of lnduutry in Soviet Russia was subjected either directly or through local agencies to tlie control of Moscow.

For the management of socialized Industries, an elaborate goverrunentii! network of administration was established radiating fTCa "the center" (Moscow) to the provinces, thence to groups of industries, and finally to the individual producing units. The functions formerly exercised by the entreprem-ur were now in the hands of various etate agencies, with the Supreae Council of RationalVerkhovnyy Sovet Harodnogo KhozyaystvaVSNKh) at the top, and aboutomplete systers of production control combined under It. ommission of the Supreme Council ofonony, the Central Production Commission, bad the specific duly of framing schedules for the various branches of production in order totheir activitiesnified ecor.os.le plan (see

* ?or serially numbered source references, see the Appendix. ** Following

In addition to the Supreme Council of National Economy, uof National Economy was established for eachNarodnogo KhozyoystvaGubsovnarkhoz) and Tor eachact as local representatives of the Supreme Council of These bodies, however, soon became centers oflocal Interests against those of the center,nda prolonged struggle to subordinate the periphery tothr- endovement to develop an organizationalindustry had begun that would reconcile local nnd stateNinth Congress of the Russian Coranunlst Furty (Bolshevik),the endesolution on industrialfollows: "The present task is to retain and develop the^of industry^ along the lines of main committeesIt) combine itorizontal coordination of enterpriseslines of economic regions, where enterprises ofave to feed on the same sources of local rawand labordevelopments, however,

ifferent turn, as the Tenth Party Congress repudiated in1 the economic policies of War Communism andewpolicy.

II. Industrial Organization Under tho New Economic.

conomic Policy (Novayn rvkonomicheskayuas essentially an admission of inability to ispleoent the original plan for almost Immediate socialization of the whole national ccOr.or.y. denunciation of the original plan implied the limitation of state enterprisearrower sphere and tlie enlisting of the services of private Initiative and private capital Inrens of activity which the state abandoned. The first 'ind most Important among the economic activities freed from conpulr.ory socialization was peasant arxicullurw. Iheii small-scale handicraft, or kustar'. Industries,

:- . involvingeel

controlecree which proclaimci the right of every citizen to engage freely in fcuajjar* industry and to disposo freely of the products, and commodities of his manufacture. Kj

industry waset apart from the socialized sector Of the economy and turned over to private individuals and cooperatives, on lease, with theccept orders from private

Pomona and to produce goods for the -oiripetitiro market.

" Guberniya and uyezd are territorial -administrative units of the ifur.siati Empire corresponding to the later Soviet oblast and rayon. ** Although nothing came of the taovccient, itf interest in that it included proposalsouk? smbodlLcd inhrushchev's plan for the territorial administration of industry adopted by the Supreme Soviet of tho USfiii on








. Main Adm-iuUiUun lorOM

Htttxel CmUi

MiIb MmtnUtialfceMilclra

Main TNatco

onsiderable part ol" Soviet economic activity was removed from direct uLate control. At the sane time, even those large-ccale industrial enterprises to which the state still clung underwent extensive reorganization. By decree of, Russian industryit upumber of trusts which were to be run on economic accountability, or cost accountingrinciples. These trusts cocblncd groups of similar enterprises located In the same region. They were authorized to administer the activity of their plants and to make thoir own plans of production. At first the output had to be turned over to the "common fund of theuteu months this requirement was so modified as to leave the trust unhampered to dispose of its output in the market (Decree of Thus, although large-scalecd industry continued technically to be in the hands of the state and under direct authority of the Supreme Council of Kat.or.al Economy, its administration was deleguted to territorial government trusts whicharge measure af autonomy. The opposition to control from the center in the early years of the New Economic Policy can best be illustrated by the fact that2 proposals were current to replace the Supremeutional Economyoose organization to be known as the Soviet of Congressesnd the trusts were to be reorganizedtock companies. 6/ Actually, however, the trusts came groduully under more effective control of the Supreme Council of National Economy through the medium ol" syndicates and later through combines.

3 the relationships between the trusts and the Supreme Council of Nutional Economy were formalizedovnarkom* decree ofpril, according to which the "Supreme Council of National Economy does not Interfere ir. the current administrative and operational work of the truili;.* ?ne functions of the Supremeof Rational Economy wer-to be primarilyegulative and controlling nature. It established the production programs of the trusts und had the authority to appoint and tlUmiSE the directing personnel of the

following tho formation of the UnlOt of Soviet Socialist Republics (UGSH)he Supreme Council of Littonal Economy became an All-Union Commissariat.** All industrial prises were divided into thro- fT^upsAll-Union, union-republic,ocal enterpriseso be surordI rated, respectively, to the Supreme Council of National Economy, to the Supreme Councils of Hatlcr-ul Economy of union republics, and to local Councils Of .

The structure of the Supreme Council of national Economy by thin tleu had Becomeplificd (ooc Flcure 5 It

Council of PeoplesJo vet Usrodnykh Komissarcv'.,

t .'cedent of the present Council j* Ministers Of the USSR.

equivalentresent ministry ofR.llowing p. 6.

consisted of tuo major divisions. One division, called the Main Econonic Administration, was concerned with problems relating to industry an a. whole, such as industrial legislation, questions of Industrial policy, und general production plans for industry. The other division, called the Central Administration of State Industry, was primarily concerned with capital investment in state enterprises of All-Union significance,of managerial personnel, and general supervision of All-union trusts. Republic Councils of National economy as well as local councils were patterned along the organizational lines of the Supreme Council of National Economy. 8/

III. Industrial Organization in the Transition

7 the Soviet economy had largely recuperated from the wounds inrilcted by World War I, the Russian Civil War, and the experimentation of War Cotnsunism. Especially was this true of industry, which by that time had recovered approximately to the output level To the Soviet leaders, conditions seemed ripeew Socialist offensiveew effort to build the Socialist economic order, which meant theof centralized planning and control to more ureas of economic activity. Under the existing conditions, planned regulation extended only to industry ofignificance. Union-republic industry and local Industryplanned control. To remedy thiseneral reorganization of the Supreiae Council of National Econory was undertaken The Central Administration or State Industry and ite directorates were abolished Their place was taken by Main Administrations and Committees in charge of the various branches of Industry, with the task of planning and regulating the entire outputarticular orar.cn of industry preparatory tothe First Five Year. (See} Through the corresponding departments of the Supreme Councils of National Economy of union republics, oblosts, and guborniyas, the Main Administrations of the Supreme Council of National Economy extended thoir influence and controlnion-republic and local industries, thus covering by planned central regulation all enterprisesiven Industry.

AlM abolished was the Main Economic Administration. TMb was replaced, by the Economic Planningratlon, whose function was to coord;rate the work of the Main Adriri.IratIons and Committees and prepare annual plans of industrial production and investment as well

j.peeti.ve" plans for longer periods.

'.ijpreroe Council of National Zconomy also bad the responsibility for Improving technology, establishing prices, and confirming reports;es of plants and trusts. ?in-Uly, the Supreme Council ofEconomy was the Inspecting ai-.sr.cy of Industry, checking the rocopi of fulfillment by various industrial organizations of the mostree tires of the Bovlmtamd tcMupreew Council of national Economy,

At the same time that tne reorganization of the top echelon of Soviet Industrial management vas going &n, changes were also takiti-;

* wl ng p. 6.








UlnlnR IndustryChvmkal InaUilr)

M*'pon n( MeUvlluienal IndiutryAdmliiutraUor. oC BlrfUlcal Industry -Ttmbtr Industry -

T**tU* IMT3-J7

cason Industryrind Indutuy -Hah Industry

OnliaJ Boofeknpinf

KlnaiKe-Budgei -



hn>ml Ednraliom

Rnlloaallialion ol Flirt and Pownr PruJiKliiwi

trrmomte XHaUoru

RAikMEBUai al InSMhy

ruunciai Polity

Transportation Polky


NUMJlUa Paixy

Trade Pohcy

Cmtral Bookknpinx

TertwicaJ Ctatatrur tlon

Industrial OrcamuUm

place on the lower levels of the Industrial hierarchy. Trusts were being consolidated Into syndicates and combines. When an industry reached the goal of complete syndication. It became evident that there was unnecessary duplication of functions by the corresponding production pain administrations of the Supreme Council of National Economy- This ledew reorganization of the Supreme Council of national Economy9 In which the production main administrations were replaced by syndicates and This state of affairs, however, did not lost long. The syndicates and combines proved too unwlcdly, and Stalin, who by that time had gained ascendancy over his political rivals,peech delivered on1onference of economicadvocated policies which in part anticipated Khrushchev's "theses" "Our present unwieldytalin said, "must be splitumber of smaller ones, and the combine headquarters nuat be broughtontact with the. The DOfjltlOB. at present is that there are from ten to fifteen persons on the boardombine drawing up documents and currying on discussions. We musttop to paper management and switch to businesslike Bolshevik work. Let one chairman and several deputy chairmen remain at the head.he other members of the board should be sent to the factories and plants. That will be far more useful both for the work and for

In the coursecute syndicates and combines were reduced to smaller proportions, and others were reorganized into trusts directly ln charge of the production activities of industrial undertakings. At the mum- time the production main administrations of the Supreme Council of national Economy, abolishedere reestablished and were given the function of planning and coordinating the work of Individual12/ This arrangement lastedew months. Thereorganization of2ew pattern ofmanagement.

IV. Industrial Organization lnf Comprehensive Planning,

he pattern of Soviet industrial management moved Ir. the direction of splitting large administrative units intospecialized units and of Increasing the number of economic agencies at the top level of the administrative hierarchy. ? the Supreme Council of Rational Economy, which administered the entire Soviet industry, was abolished. Its place- vas taken byor heavyor light industry,or the timber industry.

CosBDcnting on this reorganization, an editorial ln Izvestiya2 observed: "In this significant organizational reform is clearly seen the policy of dividing up and specializing the highest organs of economic administration. The reasons for thisare the following: the need for bringing the directing bodies in oloscr contact with the actual work that is being done in the factories;he need for enabling the chief of each branch of activity

to aaster technology on the basis or specialization; the needareful economic control of every branch of thenatter to which ever greater importance attaches the

more the economic lifeocialized country expands nnd becomes more complicated and differentiated. This reorganization will endow economic life with greater elasticity and leadore rational and moreoutlook."

A. The TcchnlcaJ-ly Specialized Administrative Pattern.

Following the reorganization2 the process ofproceededapid pace.* Tbe only exceptions to this process were the years of World War II und the few months following the death of Stalin in f an elaborate, centralized, and highly specialized administrative network wns In existence. This networkfrom Moiicow to the constituent republics, to groups or industries, and to individual producing unite. At the top of this administrative hierarchy vas the All-Union Council of Ministers, which among its other duties supervised the vast industrial machine consisting ofndustrial and construction ministriesost of ccrar.itnd mainperforming special tasks assigned to then.

The top policymaking body was the Presidium of the Central Coemlttee of the Communist Party (known as the Politburo. The Council of Ministers carried out the directives of the Presidium.

In additionerritorial subordination, governmentadministrationeries of technically specialized, ministerial link* reaching down to guide the producing units of the economy. This ministerial structure, often cutting across territorial boundaries toeneral Industrial activity, reflected in large measure the importance attached to the various branches of the econccry as well as their patterns of production. Industrial ministries were divided into three categories: All-Union Industries, which involved nationwide operations of Importance to the statehole; union-republic industries, with operations which were susceptible of being administered territorially and were looked upon as of particular significance to the constituent republics; and republic industries, which consisted mostly of small-scale enterprises whose output was intended primarily for local consumption, lg/

The hierarchical apparatus of administration was mainlywith the transmission downward of Information, directives, and allocations essential to the fulfillment of the economic plans by the producing units. At each stage or transmission the tasks and available resources were subdivided among units according to the hierarchical order descending through ministries, main administrations, and. trusts to

* For the evolution or the central administrative structure of the USSR, see the chart inside back cover.

The Ministry (mlnistcrstvo) directed and coordinated theof either one or several tranche* of Industry,function, as preparations with Gosplan of over-allor Industries under its supervision; approval o? planschecking plan fuinilJsent throughout Itsproblem of supply, technology, disposition of output,

labor and wages; determination of coefficients of Input andof personnel and appoint^ of plant directors: andschools and scientific research

AC*umber of duputy ministers In charge of definite functions within theroup oflc,aH if tne ministry functioned as an advisory oily, of coUeglumf

tn S ?ctmncU8- "ructSe of u'r^al

Ul-Unlon industrial ministry Is shown in

Muln Administration.

Enterprises under the jurisdictioninistry wereone or another main administration (glavnoye upravlenlve orcam admiustratlons operated either along territorialof Electric Power Plants of the Center, of the East,li*e) or along commodity lines (Main Administration of theoi the Ceramics Industry, und the like). The glavka general way the production patterns of the industry.

Industrieshree-stage udministrative setup descending

-rox ministry to main adolnistratlon and finally to plant. In sow, case? -arge industrial complexes or several Integrated plants were directly ubordinate to the ministry, as in the case of the Magnitogorsk andmetallurgical combines, which were directly In contact with the

*tBllUrgy- 0Umr -inlstriesour-stage chain

of command. This type or command was particularly characteristic of cxtructlve industries.


. (Tne,bR,ic Producing unit of an Industry was the enterpriseegal entity which was allowed fixed and workinp

ltsn the principle of economic

accountability, or cost accountingn accordance with

ltS ccootmic Plnn- The degree of its compliance

with the plan was the yardstick by which the efficiency of an enter-

v' Tltc Economic General Staff: Cosplan.

One outs landing characteristic of the Soviet economic system has cone to be the central direction of economic activity accordingomprehensive plan. Justrivate corporation makes up anbudgetertain period of time, so the Soviet state layschedule of the economic activity of the nation onong-termhort-term basis. The plan prescribes production targets for every sector of the national economy and specifies how resources are to be allocated to serve particular endsarticular wayarticular time.

Until about the middle5 the agency responsible forplanning of Soviet economic activities was the State Planning Committee (Cosudurstvennaya Plar.ovayavery important proposal as to economic policy or practical ndmlni-ntration of state enterprises was examined by Cosplan. Suggeutlons ror the development of the various sectors of the notional economy were under continuous study, and the activities of Btato enterprises were coordinated. Cosplan was the economic general atarf of the USSH. It was directly attached to the Council of Ministers, andember of that body.

A. Organization of Gosplan.

Organizationally, Cosplaniniature representation of the whole range of Soviet economic functions. It was highlyin its structure, with its sany departments divided Into three groups: roup for aggregative economy-wideroup for the planning of technically specialized activities, and staff organizations. (For the structure of Cosplan, see Pigure

B- Aggregative Economy-Wide Planning Grous

The group ror uggregative planning included the departments for coordination or synthetic planning. Their aim was toomprehensive picture of the economyhole In terms of such general concepts us national income and product, finance, prices and costs, manpower, and geographical distribution or productive resources. Included In this group were two departments for over-all planning: c concerned with long-range plans and with prohlems of coordinationhu Five Year Plan and the annual plans; the other dealing with annual Mann and,pecial branch of national economicith Mthod* of establishing consistent relationships amor* industry, agriculture, and transport activities and among consumption, investment, and defense allocations.

Needless to say, the history of Cosplan is itsclr complex, precluding all butmost sumaary treatveent here. ** Following











ministry OF














H freductian

- I

The group for aggregative planning alsoinancial department which was concerned with the flow of monetary resources, with collating the financial requirements of the economy with soutccg of financing, and with balancing the flow of money expenditures against the value of currentabor deportment concerned with theof the labor force among the various sectors of production and the economic regions of the country aa well as with laborand training of engineers and skilledroduction department to coordinate plans of Industrial productionepartment of regional planning in charge of the geographical distribution of productive resources with branches for every constituent republic of the USSR;echnology department concerned with the technological aspects of the plan, studying such problcno as the introduction of new technological processes and the determination of coefficients of input und output, of production costs, and of standards for utilization of equipment.

Group for Technically Specialized Activity.

The group of specialized administrations corresponded to the major specialized subdivisions of Soviet economic activity, such as fuel, metallurgy, machine building, transport, communications,and defense industry. Planning in these departments was technically specialized, and account was taken of the plans submitted by individual ministries and main administrations. The division of work in this group, however, was not strictly along ministerial lines. Planning for all branches of machine building, for example, wasin one department. The came was true of the various types of fuel, agricultural production, and transport. Included in this groupobilization department also known as the Defense Administration. This administration was charged with translating mobilization plans into industrial, agricultural, and other requirements. It alsothe scope of production for each plant for wartime and madeIn the capital investment plan for building new capacity for military production.


Staff organizations were in charge of general administration, personnel (including regional Gosplanecurity, publication, and economic and technical Information.

Planning Octopus.

The council of ministers in each of the l6 constituent republicsits own State Planning Committee operating under Gosplan of the USSB, along with lesser planning agencies in all autonomous republics, krays, oblaats, and important cities as well as in each ministry and all agencies and enterprises subordinate to it. Goaplan thus pervaded the entire governmental structure of the USSR.


Cosplan was connected with tho lower levels of the planning systemouble system of contacts, and each system operated on the basisouble chain of communication and administrative authority. In effect, subordinate lo the State Planning Committee of the USSR were the State Planning Committees of the constituent Subordinate ln turn to these republic Cosplans were the planning cccmittees of the autonomous republics, krays, oblasts, and cities. On each level of the planning system there wasouble chain of connunicatlon and administrative authority. In the oblast, for example, the planning committee was under the Executive Committee of the oblast, and at the same time itine Of communication with the planning committee of the union republic, whicb ln turn was subordinate both to the Council of Ministers of the union republic and to Cosplan of the USSR.

Also, Cosplan of the USSR was connected directlyecond chain of command with each of the economic ministries, the planning departments of which were subordinate or. the one hand to the ministry and on the other to Cosplan (see.

P. Supervisory junctions.

Cosplan was also charged with the duties of overseeingof the plan. This function was curried on inwith the Central Statistical Administration, whichwas part of Cosplan but which subsequently functioned asagency directly responsible to the Council ofregional representatives of these agencies could actlocal planning organs and could require any governmental unitdata and explanations relevunt to controlling thethe statethus acted as un expediting us well

erspective planning body.


The basic decisions underlying the economic plan were made by the Party Presidium, which with the asGiiitar.ce of its "conomic staff determined goals for the over-all growth of industry, agriculture, transportation, and trade; the relationship among military outlays, capital Investment, and consumer goods; and the geographical location of new Industries. It also initiated large construction projects and formulated technological policy.

On the basis of these decisions, Cosplan proceeded with the preparationumber of generol economic balunces and of special balances for the various sectors of the economy as well as for the various branches of industry and territorial units. These balances were used for the drafting of the national economic plan, which was then checked with the plans prepared on the lower levels of the economic hierarchy. After approval by the Party Presidium and the Council of Ministers, the annual plan had the force of

* Following




and Construction.

The plan for Industry was looked upon as the most important part of the national economic plan. It contained production targets for every branch of Industry as well uu indexes defining technical and economic conditions of production (quality, technological level, expenditure of raw materials, fuel, labor, and coot). The plan also contained an elaborate construction program providing for theof capital assets and the geographical distribution of new capital

of Allocation.

The allocation of resources to particular uses was effected by meansentrally controlled supply system known as the funded Materials plan. This plan closely resembled the Controlled Materials Plan of the War Production Board or the US during World War II, with the difference, however, that whereas the Controlled Materials Plan was confined to relatively few critical commodities in short supply, in the USSR the liflt of funded materialsarge number of Industrial and agricultural goods. The funded materials plan operated on the basis of direct allocation accordingierarchy of priorities. The highest priority was given to military requirements and state Kext came the needs of heavy industry. The lowest priority was given to industries engaged in the production of consumer goods.

When the program of allocating resources for specific uses was worked out, it had to be implemented through the production plans or every economic ministry and union republic. Soviet pricing policy was one Instrument of allocation used in this Implementation. Gosplan thus directed the distribution of the most Important industrial and agricultural commodities which were essential to the material andsupply of thenot only by determining the ultimate utilizationarticular product but also by specifying the exact quantity and assortment of goods which each ministry and office was to receive.

Production Plan.

The over-all industrial production plan was drawn up in three cross sections: ministerial, commodity, and territorial.Biecross section of the industrial production plan assigned to every industrial ministry the quantity of output which it was supposed to produceiven period. This assignment enabled tbato judge the effectiveness of each ministry in its fulfillment of plan. The ministerial planumber of output indexes, as follows: gross output computed In constant prices, commoditywhich entered exchange computed In current prices, specificexpressed in physical or conventional units, cost of production, one the wage bill.


The commodity cross sec Lion of the production programthe quantity erf goods Of each type which was to be produced during the plan period, regardless of the ministry or economicengaged in the production or these goods. This aspect of production planningade ncceisary by the fact that despite ministerial specializs.tion the total Outputiven coanodlty was not necessarily producedingle ministry. Thus steel was being produced not only byMinistry of Ferrous Metallurgy but also by other ministries. 'Its sane wan true of electric power, timber, coo-su-ner goods, and other commodities.

The territorial cross section of the production program provided data for the economic development of union republics, krays, and oblasts. Targets were laid down for commodity output and for new industrial construction, thus tying ln the industrial development of un area with other aspects of the economy. Territorial cross sections were also features of the transportation, manpower, retail trade, and financial

D. Planninglant Level.

The ministerial cross section of the production plan served as the basis for allocating production programs to subordinate trusts and then to individual plants, which were linked in this way to the national econorlc ploc- Production planninglant usually took two forms: technical economic planning und operational planning. The first was related the general management and coordination of technological, economic, and financial aspects of production; the second wash thef the production process Into Its constituent elements, assigning the tasks involved in each element and timing the flow of the production process. All measures relating to technical and operational planning of an enterprise were consolidated into one document, the Tec rjUcal-Industrial-Financial Plan (Tekhr.icheskiy i [Tomyshlennyy Finamssvyyg/

Vll. Frictions In the Soviet Syiitrin rial Administration and Planning.

Viewed against the background of accomplishments in the field of Industrial production, the Soviet syst-an of centralized planning and control worked withss. It placed ln the liandn or the Sovietowerful instrument by which to industrialize thr country and toolid base In support of Sovietboth at home smd abroad. Tin: Soviet system, however, vacrlctlonless way of -rganlzing production andme time thereicr.ee of strain Ir. its administrative and planning machinery. Many of thend frictions in the operations of Soviet industry have long been evident to Western students of Che Soviet economy, butiscussions in ire Soviet press accompanying th<-publication of Khrushchev'sn7 brought theinto the open.

- lfi

A. Problems of Administration.

Soviet planning, which goes Into minute detail, has aproblem of administration and coordination. The elaboration of plans, the coordination of sectional programs, tbe application of planned allocations and priorities, the enforcements of planned input ratios and planned prices, and the insuring of plan fulfillment have fostered the growth of an enormous administrative apparatus and haveiseumber of baalc problems facing the operators of this machinery. One of these problems related to the process of decision making; another concerned the position of the Industrial manager; still another involved the problem of interagency relationships. Even more serious than these problems, however, were shortcomings In the supply system.

1- Centralisation of Decision Making.

In the evolution of the Soviet system of planning and control, especially under Stalin, the decision-making process became highly centralized. Such centralization has the advantage that single decisions of great scope can be made rapidly, hut these may be the very decisions which ought not to be made abruptly, for an error Inecision is likely to sethair, reaction that maywide areas of the economy. ighly centralizedorganization, moreover, is greatly handicapped In making minor decisions promptly. The reluctance of minor bureaucrats to take on responsibility under Stalin meant that thousands of problems piled up on the desks of higher officials, where it was physically impossible to handle them with dispatch. The cumulative effect of te of affairsrip, on productionaste

this atoimanpower

2. Position of the Industrial Manager.

Tbe position of theager In the USSR, especially in the lower echelons of the economic hierarchy,ifficult one. ills responsibilities were staggering. He had to : i' ill predetermined productionxercise appropriate initiative, give binding orders, follow strict principles of economic accounting, and get alongredetermined allocation of factors of jroduction withouti"Mwis of acquiring critically needed materials, lie was exposed to criticism for underfulflllxaont of tU' plan even when the prescribed <joals were unrealistic, withpossible consequence of transfer jr seven punishment. Also,tte of the officially stated principle of "one-manh* nets and desisions of the economic administrator were frequently challenged ins and l'^tO's particularly by the local Party organization, State Controlnd Ministry of Internal Aj"fairs (MVD) agents. In addition, the Soviet Industrial manager war. circumscribedonstant flow of Instructions and regulations from-higher echelons of Industrial administration.


Under the circumstances, the recourse Ol' the Sovietmanager touestionable legality was quite understandable- There Is sufficient evidence, particularly in the Soviet press during the month ofo indicate that theadministrator of the USSR was us.ing various devices for self-protection against unreasonablend unrealistic planne Of these devices was known as "insurance" (strakhovka). Everyone concerned with the performance of an enterprise tended torotective cushion by attempting to have Lhe planned output of the enterprise set low enough to permitlack. Another practice was concentration on the outputny items. Because the manageroviet plant measured his success only partly in money terms, thereidespread practice to overproduce easyigh-cost or high-profit In some instances, managers even resorted to outright falsification of production reports. To the extent that these practices were successful, they tended to disrupt the current plan and tic planning process for subsequent perlods-

Interagency Relationship^.

The creation of an organizational structure docs notunify thend individuals involved. The rigidity of Lhe specialized ministerial structure of Soviet industrial organization, with Its vertical, lines of authority and inadequately developed horizontal lines of communication, made lateral cooperation between plants, trusts, and even ministries difficult and was responsible for Jurisdictionaland bureaucratic barriers. The difficulty was perennial, and the lack of cooperation, especially in the distribution process,ery frequently discussed topic in lhe Soviet press.

Problems of Supply for Industry.

Prior planning for the allocation Of industrial Output to Its various uses is only one side of tlie problem of allocation. The other side is the actual flow of supplies from industry to industry, or the allocations which take place at the operational level. Procedures In this field were complicated and tended frequently to disrupt the officially approved blueprints of centralized allocation.

One difficulty was the cumbersome character of the supply organization. There was first Gosplan, which was in general charge of the supply problem. On the next level, many ministriesainof supplyetwork of offices, branches, and warehouses throughout the country. Similar networks existed in practically every other main administration of the sane ministry. According to Khrushchev, the number of workers engaged in supply and related services ofand construction ministries amountedRd the annual payroll was aboutillion rubles. These figures did not cover the industrial cooperatives and local industry establishment:;.


Another difficulty was the proceoo of distribution Use I. f. The output of any given industrial rain in try was distributed to other ministries, which in turn distributed their share among their major subdivisions. These subdivisions reallocated their shares further until the factors of production reached the enterprises which used them. Enterprises had to accept the goods assigned to them, despite their qua) ity, and frequently they had to do without essential goods and services. Plants which did not get needed parts faced the alternative of either producing them themselves, probablyigh cost, or re -sorting to blat (irregular procedures of bartering orecause of the necessity and pressure to fulfill the production plan.

In the functioning of the Soviet supplypcclol group of operators arose whose taste were to expedite the delivery of supplies needed by Industrial establishments. These operators, in their function as "pushers"ad no official status. Their success, of course, depended upon the extent to which they were able to circumvent official regulations and bureaucratic red tape. Although the operations of the tolkachi formally violated the planningt the same time they in fact facilitated the day-to-day operation of centralized

B. Problems of Planning.

The official Soviet picture of an economy completely directedlawless master plan differs considerably from the picturein Khrushchev's "theses" of7 and the variouson these proposals which appeared In the Soviet press during the month of Some of the difficulties arose from tad planning decisions, but othersonsequence of the system itself.


In spite of the frequent claimingle plan integrating the entire economy, Soviet economic development has been unbalanced. Disproportionate development from industry to Industry has led to high rates of output in some fields and to the neglect of other oftenfields. Some Imbalances were deliberate consequences of the Soviet system of priorities (especially the cumulative effectsut others were due to the almost universalto regard each planned target in isolation, to bef possible, often without regard for the effect of such overfulfillment on other branches of industry. One result of this was the tendency for output growth to be restrained by lags in complementary industries. 2j/

of Scheduling.

In order to meet the monthly targets of the plan, thereairly widespread practice of working the planturious pacethe lastays of each month. The Russians called this practice "shock tactics" (shturroovshchlna). UBh economy, lubricated by


3ooths* Inventories of raw materials and semifinished goods, this practice might have little effect except on morale and efficiency at the plant concerned. The Soviet economy, however, was plagued by innumerable bottlenecks. Consequently, poor production scheduling in individual plants baaerious impact on over-all efficiency by forcing dependent plants into partial inactivity.

3- Problems of Allocation.

An important shortcoming in Soviet planning has been the allocation system, whichufficiently sensitive mechanism for registering changes in tho relative scarcity of the factors of production. This difficulty was never officially admitted by Soviet leaders, but it must have exercised an adverse influence on economic planning. As the production of any commodity uses up scarcehange In themix of any production program complicates analysis of the relative scarcity of factors of production.

ree economy the pricing system reflects the relative scarcity of factors of production. hange in relative scarcityhange of factor prices, and changing factor prices lead to changed allocations, even though the aims of production may remain the same. Compared with this market system, pricingubordinate role in the USSR. Allocations arc determined directly by reference to priorities and technical coefficients. The planning mechanism is too cumbersome, however, to register rapid changes in the product mix and to reflect changes in the cost structures of particular products. The system is unwieldy and ill-suited to rapidly shifting the pattern of use of its resources to the most efficient combination.

VIII- Search for New Forms of Industrial Organization in the

The passing of Stalin from the Soviet scene presaged far-reaching changes in the administrative structure of the Soviet state, particularly the administration of Soviet industry. overnment reorganization immediately after Stalin's death In3n charge of machine building, together with the Ministry ofPower Stations,inistries,ndustrial ministries engaged in the output of consumer goods were mergedinistry. Thin general ministerial consolidation was an emergency measure connected with the transfer of powerew group of leaders. When the leaders considered the emergency over, they reverted to the old administrative pattern, so that byU the number or industrial ministries was about equal to what it had been at the death of Stalin.

A- Changetatus of Industrial Ministries.

Earlyew trend in the organization of Sovietactivity began. umber of All-Unlon ministries in the heavy Industry group, such as metallurgy, coal, and petroleum, became union-republic ministries. Ilithorto, the fact lhat these industries were


important to the statehole, rather than the fact of theirrole in the economic development of the constituent republics, had determined their status as All-Union rather than union-republic ministries. This new transfer of certain All-Union ministries to union-republic status was officially ascribed to the need to "rationalize" the administration of industry and by the desire to assign to the union republics greater responsibility in managing industrial production.

This trend continued, and by the end6 aboutercent of Soviet industrial production was in the union-republic category. 2fj7 This percentage, however, differed widely from republic to republic. Thus in the RSFSR industrial production in the union-republic category amounted to kl percent, in the Ukrainian SSRercent, and in Kazakhs Un

This change in the status of industrial ministries apparently failed to achieve the expected amount of improvement of industrial administration. Administrative problems as well us the disproportions of the Sixth Five Year Plan came up for special consideration at the Plenum of the Central Committee of the Communist Party on

3. Reorganization of Gosplan.

Long before the above-mentioned December Plenum, significant

changes had taken place in the economic general staff of the

State Planning Committee (Gosplan). osplan was split into four ugencies. The coordinating departments of labor and technology (seeere set up as independent agencies. One was named the State Committee on labor and Wages, the other the State Committee on Mew The other planning functions of Gosplan were divided between two commissions: one, named the State Planning Committeeas given the responsibility for perspective or long-range planning; the other, named the State Economic Committee (Gosudarstvennaya Ekonomicbeskoyaas placed in charge of current planning. The role of the economic general staff of the USSR had passed predominantly to Gosekcnomkomissiya. Its chairman, M. Saburov, who for many years had headed the consolidated Gosplan,ember of the Party Presidiumrst Deputy Chairman of the Council of Ministers, although the chairman o- the new State Planning Committee, K. 3aybakOV, had served merely as Minister of the Petroleum Industry and wasember of the top" policy-caklng bodies of the USSR. As far as prerogatives were concerned, Goiiekonoiriomisslya was ir, charge Of the annual plan, which in Soviet planning practice was the basic operational plun with the force of law. -he live Year Plan, In contrast, provided only an approximate guide for future Output goalseneral basis for the annual plans.

C The

When the Plenum of the Central Connittee of the Communist Pa-ty met In late6 to review the economic situation of the first.

* Followingbove.

year of tlie Sixth Five Ycur Plan, it was confronted by the fact that the measures taken in the Immediately preceding years to improve industrial administration and planning had not proved adequate. Certain basic industriesmetallurgy, coal, cement, and timberlagged behind the plan, largely because of the cumulative effect of niggardly investment allocations by the planners. The heads of at least two of these ministries (metallurgy und coal) Insisted that greater output depended upon additional investment for which the planners had failed to provide tlie necessary financial and material 'Phis looked like an open rift between theand planning areas of the Soviet economy.

The resolution of the Central Committee blamed both the nini and Gosekonosuumlsslya for the failure, but it left no doubt that the ministers hodoint. The resolutionrevision of planned targets for those branches of industry which were not allotted sufficient material Thiseview of the Sixth Five Year Plan as well as of such plans bp already existedhich the Central Committee ordered Gosekonomkomlnsiya to undertake.

Tho Plenum also shifted leading personnel of Cosekonomkomlsslyn and Increused its prerogatives Id the domain of planning and coordlnatlor The new chairman of Gosekonomkomissiya, M. Pervukhln,ember of the Party Presidium and First Deputy Chairman of the Council of Minister? of the 'JSSR.

Ofere Deputy Chairmen of the Council of Ministers (Kosygin, Mulyshev, Kucherenko, Klirunlchev, and Hatskevich) andenedlktov, was Minister of State I'amj. CosekOnOmkonisslyi war. given responsibility for the "operational solution of current problems connected with the fulfillment of the State Thus Gosek-onnnkomiiisiya was granted powers of intervention to break bottlenecks and to revise targets whenever such revisLon was made necessary ty new dev<-lopmrnLB.

ense the December Plenumritical Incident In theetween the administrative and planning arms of the Soviet economy. Some of tho legitimatef the administratorsreeowii/ed, and Saburov, ln tlie center of the controversy with theas reraoved from tlie chairmanship of Goiiokonomkomissiya. At the ,tame time, GoseKonomhomlssiya itself acquired additional preutijfl through the appointment of hliyi-runkinj; Officialsitsnr.el and through the tyrant ofrs. But the tasks v'nlch tho Centr-il Committee Imposed upon the planners and the criticisms leveled upon the adralni^tralor* foroslxulowed more drastic things to

The planners were ordered to make tlx: "control figures" of the Slxlfi Five Year Plan "mori:ith un Implication ofdownward revisionbut, at Che same time, the principal

the Sixth five Year Plan, as outlined at the Twentieth Party Congress, were to remain econd assignment,MM to make sure that the production programs of industrial ministries were supported by requisite capital investment. Yet tho total amount of capital investment originally provided for -in the Plan was to be reduced. Out of this reduced amount of capital investment, adequate provisions were to be made for industrial stockpiles, and additional resources wore to be found to expand the housing

The administrators were sharply criticized for attempting to set their production.program too low, for concentrating on theof items whose output required the least effort, for hoarding supplies and equipment, and Tor failing to utilize "internal reserves" of subordinate enterprises. 3j/ arty leadership continued to stress verbally the desirability of increasing the economic prerogatives of the union republics but failed to take action to accomplish this aim.

D. The7 Plenum.

An annual plan7 was presented to the Sixth Session of the Supremo Soviet early In7 by the Chairman of Gosekonom-komlcsiya, Pervukhln. The plan calledelatively modest Increase in gross industrial production,ate of growth substantially below the average annual rate required to meet0 goals provided for in the Original directives or the Sixth Five Year Plan.

Tbe Supreme Soviet adjourned on Oo'owing day the Central CornUttee met in plenum toeport by Khrushchev,aytesolution was adopted which inaugurated rar-reaching changes in tho administration of Soviet industry and in the organization of planning. The resolution made it clear that the man to be identified with the changes was the First Secretary of the Central Committee or the Communist Party, Khrushchev, who by this time had acquired the backing or the Central Conoiltto*.

Tlie so-called "popular discussion" preceding the reorganization of industrial administration contained much eriticiso of the ministerial system that filled In many details of its functioning. An appreciation of tills functioning, such as outlined In the foregoing discussion,analysis of Sovietnvolving economic policyor example, the reorganization itself, tim purge of the "ant1-Party" group Inhe decision toong-term economic plan foreriod, and tho modest plans7.



translated texts or economic decrees of the Soviet Government

, ncc Bunyan, James, and fisher,he BolHhevlk, Stanford, Stanford Universitynd Bunyan, James, Intervention, Civil War and Communlsp inQ, Baltimore, The Johns Hopkins University Note especially the former,

-Sotsialistlchcskoye stroltel'stvo, no

e7.dov, Gospolltlzdut, "vol, P- wl.

U. Sobranlyeasporyazhcnly pravitel'stva,

USSR, Gosudarntvennyy Nauchnyy Institut. Bol'shaya sovetukaya

eotslklopedLya, 1st ed,-

asporyazhcnly pravitcl'stva,

Gosudarntvennyy Rauchnyy Institut. Bol'shaya sovetakaya

entslklopedlya, 1st ed,-

storiya narodnogo hhozyaystva SSSR, pt III,


Lyashehenko,. ilk.

Miroshnlchcnko, B. "Planlrovanlyc promyshlennogo prolzvodstva,"

Pianovoye khozyaystvo, nob. Ioffe, Ya. Haiiiroyanlyego prolzvodstva, Gosplanizdat

19W, p.

B. "Plantrovaniye rabotyorodskikh

inspektur TsSUestnik statlstlM, no

nd- Organizatslva planlrovaniyu

narodnoeu khozyatfltva SSSR,h,



. Anal is khozyay^tvennoy deyatel'noi.tl promy&hlcnr.ykfc


V. Sovershcnstvovnt' planirovaniye prolzvodstva,

KDccunlst, noa. . Igvestiya,

2lf. Pianovoye khozyaystvoo. Nekotoryye voprouy plunirovaniya ruzvltlya narodnogooprosy ekonomiki, no- 8.


L.incvo i.

Original document.

Comment about this article or add new information about this topic: