Created: 7/8/1957

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Office of Current Intelligence CENTRAL INTELLIGENCE AGENCY






II. Problems at the end of

III. Economic Policy: Heavy Industry, The Consumer

and "Catching Op" with the

Before December


December Plenum to February

February Supreme Soviet and7

Supreme Soviet to Khrushchev's Theses

May Supreme

IV. Economic Reorganization: Efforts to Improve

Management and

Before the December Plenum. .


February Supreme


May Supreme

V. Political Implications . .





This study Is an attempt toomewhat detailed analysis of Intelligence on Soviet economic policyo It was written before, and does not consider, the convulsionsuly, but will be useful as background to an analysis of them.

Because it Is relatively current, this analysis is not to be regarded as definitive. It is rather an attempt to pull together available factual information and to drawconclusions on the meaning of the shifts in Sovietpolicy and on the Insights these shifts provide into the problems of the Soviet leaders during this period. This study falls somewhere between the reportorial analyses of Soviet affairs in the regular publications of the Office of Current Intelligence, and the more detailed, less speculative CAESAR series of studies on the Soviet leadership, which are produced only after sufficient time has elapsed toore complete accumulation of factual information. ator date, if new evidenceAESAR study oneconomic policy will be prepared to cover tho yearalf followingh party congress.

This analysisorking paper and represents tho views of the Office of Current Intelligence, CIA.


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I. Summary

Although continuing to growapid pace, the Soviet economy faced severe strains at the endartlythe Sixth Five-Year Plan was overambltious and theof key raw materials, the construction program, andin Improving labor productivity were behind schedule. Added burdons had resulted from new economic commitments to the Satellitesossible halting or slowdown of the USSR's announced reduction of military manpower. Increased pressures for Improved living standards generated by the de-Stallnlzation campaign and unrest in Eastern Europe, bad also arisen Inside the Soviet Union.

From6 through7 two meetings of the Soviet Communist Party's central committee were convened to consider solutions to these problems, two new top current planners were appointed,7 economic plan was approved. In February, party first secretary Khrushchevto act as the regime's public spokesman on economicrole Premier Bulganin had played earller--and by May he had pushedew plan for drastically reorganizing industrial administration.

During this period the regime dealt with two major economic issues. First, it re-examined the question of how much emphasis heavy Industry should receive at the expense of the Soviet consumer in order to maximize the USSR'spotential. In Soviet terms, the regimethe doctrines on the "primacy of heavynd overtaking the West iu per capita outputhort historical time." Second, the regime initiated during this period drastic measures to reorganize economic management and planning, hoping to Increase efficiency and thereby to attain ambitious economic goals in all fields simultaneously.

On the first of these issues, tbe re-examination of economic policy, the resolution of the centralecember plenum admitted that the economy was Most of the speakers at the meeting, however, reportedly agreed that there could be no fundamentalof planned output goals, although some modifications could be permitted. Tbe major measure called for by the December plenum to relieve strains in the economy was ain capital investment and an effort to concentrate investments on construction projects nearlng completion


rather than starting new long-range projects. The committee may also have rejected plans made earlier in December for the consumer, which called for an immediate expansion of the housing program.

7 economic plan, presented to the Supreme Sovietebruary by presidium member and newly appointed chief current planner M. G. Pervukhin, scheduled sharp drops in the growth rates of heavy and light industrial output, output of key basic raw materials, and in the improvement of labor productivity. The rate of growth planned for capitalalso dropped, but the absolute volume of investment was scheduled to beercent greater than 7 plan alsolightly higher proportion of total resources to the consumer than in the two previous years, but this was consistent with the Sixth Five-Year Plan and developmentshen "fringe benefits" granted the consumer were quite substantial. At the same time, however, the need for the continued primacy of heavy industry was heavily emphasized by both Pervukhin and the Soviet press. The discussion of heavy industry in Khrushchev'sublished onarch, suggested that the degree of emphasis to be given heavy industry hadubject of recent debate within the regime.

There are grounds for speculation that7 plan contained larger reductions In current output goals, and possibly smaller reductions In capital expenditures, than envisaged by the regime at the December central committee meeting. Economic administrators had triedear earlier to bring about similar changes in6 plan

Although the7 plan was accepted, it is probable that the leadership did not consider this cutback in planning particularly palatable. Another meeting of the centralwas convened Immediately after the Supreme Soviet meeting in February, and Khrushchev took the lead inradical changes in industrial administration in order to reverse the slowdown in Soviet economic growth. In addition, at the February plenum of the central committee and later, the theme of catching up with the West wasthe Soviet press placed increasingly strong emphasis on "socialist competition" to overfulfill the plan; and the current planning group under Pervukhin first was criticized and then was faced with Khrushchov's recommendation that it be abolished under the new industrial reorganization.

Early in May, Pervukhin was appointed head of the Soviet atomic energyimportant post but ono removed



from over-all economic planning. Khrushchev, ln his speech on the reorganization to the May meeting of the Supremeexplicitly criticized part of7 plan. These events suggested that the party leaders regarded tho lowgoals of7 plan with disfavor, and were unwilling to allow the low one-year goals toownward revision of the higher goals of the five-year plan.

The second complex of economic issues with which the Soviet regime concerned itself from6 through7 was reorganization and decentralization. In its efforts to maintain rapid industrial growth and to achieve all its other ambitious goals simultaneously, the regime had undertaken numerous "efficiency measures" in theand planning field since Stalin's death, but the spate of such measures unveiled from December through May was far more drastic than those undertaken previously, indicating the seriousness with which the regime regarded its problems.

The new measures, which were clearly identified with Khrushchev, calledeorganization of the economy along regional lines. The initial proposal was basedeport by Khrushchev7 meeting of tbe party central committee. In March, Khrushchev's lengthy "theses" on the reorganization were issued for public discussion, and in May Khrushchev presented the planeeting of the Supreme Soviet for approval. Khrushchev's leadership in this field throughout tho spring was part of his increasing pre-eminence in all areas of Soviet foreign and domestic policy. On the other hand, ln the industrial reorganization as on several other subjects, Khrushchev during the spring modified his own previous positions, to take account of practicalas the plan was worked out and also perhaps to obtain general agreement among the collective leadership. The industrial reorganization as approved in May wasless drastic than that proposed in Khrushchev's theses in March.

Under the reorganization, to have been completeduly, overentral Industrial ministries were abolished, but key ministries running the atomic energy program, arms and related industries were retained. egional economic councils are to be formed throughout the country to manage almost all Industrial enterprises. These regional councils are to have fairly wide administrative powers but no policy-making functions, and the central authorities have explicitly been given the power to "suspend" decisions of the regional bodies. After the Initial confusion, thismay result ln some improvement of industrial efficiency.

In the long run, however, regional bureaucracies and "special interests" will tend to replace present ministerial barriers and bureaucracies, minimizing the benefits of the


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II. Problems at end6

At the end6 and ln Soviet economic policy waseriod of flux, and despite efforts of tho Moscow press to prove the contrary, Soviet leadersencountered difficulties ln finding acceptable solutions for their economic problems. Two separate meetings of the Communist Party's central committoo were convoned ln this short period to discuss economic difficulties; tho topplanner, M. Z. Saburov, was removed from his post ln December;7 economic plan was presented to the Supremo Soviet by his replacement, M. G. Pervukhln, in early February. Pervukhln, in turn, after receiving broad powers to supervise implementation of tho plan, in early May had his current planning organization cut out from under bim and most of Its functions transferred to Gosplan, tbe newly reorganized body for both short- and long-range planning.

In addition, first party secretary Khrushchev began to act as the regime's public spokesman in tho field of economic management at the February central committeeand It was he who presented tho plan for drastically reorganizing the economy along regional lines at tbe Supreme Soviet meetingay. 5remier Bulganln had actod as spokesman on economic policy and management at central committee meotings and ath party congress.

These signs of change came only one year after theSixth Five-Year Plan had been presented toh party congress innd were in contrast with the confidence expressed by Soviet leaders at that timethe USSR's future economic growth. The reasons for this change wero partly economic, partly political. By the end6 the output of key raw materials such as coal, iron, steel, cement and lumber was behind plan. Increases In productivity, or output per worker, were also below schedule. Plans for the completion of new Industrialprojects and housing were lagging particularly badly. Serious lags ln the construction of raw production facilities had existedut6 output goals could be and were met by drawing intensively oncapacity. owever, opportunities to expand output from existing capacity had been reducedinimum, and the cumulative effect of the lags ln constructionasic reason behind the unsatisfactory output of raw materials.



Poor performance in theso fields undoubtedly raised serious questions within the regime as to whether tho Sixth Five-Year Planhole was ovorambltious. At least some of the Soviet leaders probably realized that they werethe dilemma of maintaining Stalinist forced-draft rates of growtbystem lacking many of Stalin's coercive controls. Furthermore, many of the most readilynatural resources of the USSR were being fully utilized and Increases in the rate of output would be very difficult. Expansion of raw material output In the easternthe only long-range answer to thisbe aand slow process at best. Also hindering industrial growth was the Increasingly severe impact of low war and postwar birth rates. The low birth rate ofs was limiting growth of the industrial labor force, and the post-Stalin agricultural program precluded further large transfers of peasants to Industry.

Political problems unforeseen early6 Increased the burdens on an economy already strained by the five-year plan. In order to maintain its position in Eastern Europe following the outbreak of Satellite unrest during the autumn the USSR was forced to expand Its economic aid to these areas, provide foreign currency and gold for needed purchases in the West, cancel prior debts of variousand reduce its own Imports from Eastern Europe of certain Important products, such as Polish coal. While the magnitude of this added burden was small in terms of total Soviet output, the Soviet leaders probably recognized lt at least as an aggravation of existing strains. From6 through the USSR granted loans ofillion dollars to Eastern Europe, and canceled prior debts of Rumania, Poland and Hungaryotal4 billion.

The need to maintain high military expenditures because of the increasing cost and complexity of modern weapons and increased East-Rest tension after Hungary and Suez alsoaggravated Soviet economic strains. The actual costs of tho military intervention in Hungary and the more generalmilitary alerts connected both with Hungary andin the Near East were small, but the USSR may inhave halted tho Implementation of previously announced demobilization plans. To the extent that thean force reduction has not been carried out, the growth of the industrial labor force, and In turn Industrial output, will be hampered accordingly.


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Another hindrance to rapid economic growth which could not have been clearly foreseen by the regime In6 was the boost which tbe de-Stallnizatlon campaign gave to pressures from the population in general, and the managerial technical and intellectual elite In particular, for more personal freedom, an easing of the constant pressures for high rates of Industrial growth, and higher living standards. These pressures had been rising ever since Stalin's death, with the gradual moderation of police and coercive controls. The Impact of de-Stallnizatioa and tho doubts it raised about inherent defects in the Soviet system, however,these forces. Of more Iraraodlate importance, and also connected with de-Stallnizatlon, the unrest in Poland and Hungary probably made the Soviot regime more sensitive to discontent within the USSR, and more acutely aware of the need for economic concessions to alleviate the discontent and improve worker productivity. An increase of suchhowever, would also reduce heavy industrial growth.

The following analysis attempts to show the Sovietto these economic problems from6 throughnd point out certain Inconsistencies in thesewhich suggest confusion or disagreement within the leadership over economic policy. There are two major Issues with which most economic developments during this period can be linked, and which will be discussed separately in this analysis. The first concerns economicuted revival of the heavy-veraus-llght Industrynd aof the relative emphasis which should be given to the expansion of Industrial and military potential. To use the Soviet slogan, thise-examination of how rapidly the rnglme should attempt to "catch up" with the Vest in per capita output, and to what extent improvements in living standards should be subordinated to this end. The second major Issue concerns economic reorganization; efforts to Improve management and planning in order to reverse the downward trend of economic growth. Throughout the period under review, there was apparently some controversy over how much authority could be decentralized in the Soviet economy in order to increase efficiency, without losing the state control necessary to assure fulfillment ofmade plans.



III. Economic Policy: Heavy Industry, The Consumer,Up" With tho

A. Developments Before December Plenum

Although several of tbe new Soviet-Satellite economic aid agreements were concludod beforeho first sign that Soviet internal economic plans were beingIn light of the above problems appeared in the field of housingthe saddest aspect of the So-vlot consumer's drab lot.

Tbe first public sign thatrogram was in the mill appeared in an Izvestla article of6 which Btated tbat measures were "now being taken to Increase significantly" the figurequare meters of housing floor space originally scheduled for construction by the state during the Sixth Five-Year Plan.3 About this time, western news correspondents ln Moscow sent out several stories reporting rumorsarty central committee meeting was to begin onecember andajor increase in housing and consumer goods output was planned. Onecember,ravda editorial quoted thequare-meterBousing figure as still valid, thus implicitlyIzvestla's statement four days earlier.4

Some evidence also appeared in mid-Decemberroader question was at issue, at least among Soviet economists, whether or not the USSR could continue indefinitely its very high rate of economic growth. The continuance of this rapid growth, ln order to overtake and surpass the leading Western nationshort time in per capita output, was built into the original schedules of the Sixth Five-Year Plan. The drive to overtake the West bad alwaysasic cornerstone of Soviet economic policy, and had received particularly frequent attention ln Soviet propaganda sinceh party congress. In an issue of tbe Soviet journal Planned Economy (Planovoye Khozyaistvo)

which was published In mid-December, tbe economist Ya. Joffe stated that It was necessary to reject the propositions of some authors that as the size of the economy increased, the "tempo of growth" must be reduced.*

The practical significance of the doctrine that quickly catching up with the West in per capita output was the "main economic task" of the USSR was probably that it provided the rationale for the continued preferential development of heavy industry. Equaling the West In per capita output would be, even In terms of the most optimistic Sovietseveral five-year plans off. Continued primacy for heavy Industry, however, was apparently regarded as absolutely necessary for maintaining rates of growth far enough above those of the West to keep the goal of catching up within decades rather than within half centuries. The narrower question of housing was also related to the broader question of over-all industrial growth, since diversion of resources to housing, at least in the already strainedeconomy, would adversely affect heavy industrial growth.

At the same time, events elsewhere in the Slno-Soviet bloc were probably exerting some Influence on the thinking of Soviet leaders on these problems. It was probablyto them as early as October that Just about all of the East European Satellites would have to revise7 economic plans in favor of consumer interests, and reduce heavy industrial investment, in order to alleviate some of the basic causes of unrest In those areas. In China during the same period, several articles appeared In the press and economic Journals suggesting that the ratio of investment in heavy Industry to Investment In light industry be reduced from the eight- or soven-to-one which applied in China's First Five-Year Plan to slx-to-one for the Second Five-Year. Although Soviet statistics may not be strictly comparable, the corresponding ratio in the USSR had been about ten-to-one throughout the postwar period, except for the "new course" yearhen the Soviet ratio dropped to around seven-and-ooe-half-to-one.

The reasoning In one Chineso article was that an Increase in consumer goods production would promote higher agricultural output by providing better incentives to the peasants. In turn, the people's livelihood would bo enhanced, "the alliance of workers and peasants" would be consolidated, the state'sof capital increased, and the rate of development of heavy Industry further accelerated. This tendency toheavy industrial growth as at least partially dependent on agricultural and consumer goods output differed from both


the Soviet and official Chinese dogma on primacy of heavy industry, under which the growth of agriculture, consumer goods, and the country's military power depended wholly on heavy Industry. Another Chinese article stated that "somefter seeing the "mistakes" of certain East European countries, had raised questions regarding thebetween the preferential development of heavy Industry and the care for the people's livelihood. The article,rejected these questions as not applicable to China.6

These developments elsewhere in the bloc probably had no more than an Indirect impact on the Soviet regime'sconcerning its own economic policy. Any explicitChina had would likely have gone in favor of heavy Industry, since lt was In this field that China neededassistance. Some influential people in the USSR,were perhaps swayed by tbe same type of thinking. Furthermore, In the case of the East European Satellites, Soviet approval of their plan changes was probably required.

The central committee meeting called to dlBcussbegan onecember, notecember, asThe reason for the postponement la not

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ThisJ [said the plans had called for arenwuivOT iu increase housing construction andoutput, some reduction in output ofutback in construction of cultural andfacilities, and inrr^awqrtin of consumerheavy industrial plants.7

B. The December Plenum

The central committee plenum, which met fromoecember In Moscow, did not make any significant changes in plans for the Soviet consumer. The Moscow press published two "decisions" of this meeting. One, on the need to improve the guidance of the economy, will be discussed below in the section on reorganization of the Soviet economy. The other, on "drawing up more specific control figures" for the nation's economic plans, essentiallyecision on how much of an increase in resources could be devoted to housing and consumer needs, and at the same admitted that heavy Industry was suffering severe strains from overambltlous planning.


The order was Issued that the individual goals of the five-year plan and7 plan be made "morend that the five-year plan be presented in final form to the Supreme Soviet by The orders on how the Individual goals were to be revised were broken down into two parts, one on Industry ln general, and one on housing:

educe the volume of capital investmentsake the list ofprojects more specific,iewreducing tho number of them, primarily at the expense of new constructionevise the plan goals for individualwhich have not been supplied

eek out opportunities foradditional funds for

Thus the regime apparently could not agree on the immediate implementation of plans, which earlier evidence suggests hadbeen formulated,ew division of resources between the consumer and an already overstrained Industry, but callede-examlnation of how resources were to be divided.8

Tbe contral committee resolution on revising the plans reiterated that the basic policy pronouncements ofh party congress should remain as the guidelines for the plan. Tbe need for continuing tbe primacy of heavy industry wasas was the line on catching up with the Vestistorically short time. As on previousall was issued "to develop constantly socialist competitionowerful means of struggling for fulfillment andof economic plans." While admitting that industrial and construction plans mightligbt downwardand that opportunities should be sought for Increased housing construction, the resolution asserted that such changes were to have no impact on the basic doctrinesthe original five-year plan.

muicaiea cnat capital Investment

mainly responsible for the plenum.9 6 many ministries had reportedly put in strong bids for morefunds, arguing that their goals could not be achieved without higher investments. The difficulties of increasing investment, compounded by pressure for more housing, resulted

ln "sharp" discussions at the plenum, I-

Most of the speakers reportedlycouia do "modifications" but no fundamental revision of the five-year plan output goals, and that capacity for accomplishing them must be found within existing factories.


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At tho same time, the plenum clearlyeduction

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In capitalthat Khrushchev

alsoj.*pjui. industry"

and Molotov were leading speakers ai; the plenum, although the published decisions of the meetipjo-on report' of Saburov, Baibakov, and Bulganin. gestedevival of the "heavy-

controversy occurred at the plenum, remarking that the party has always had to fightright-wing tendency" to lower the tempo of heavy Industrial production In favor of the consumer.

The seriousness with which the Soviet leaders regarded their economic problems became clearer two days after the plenum ended. The Soviet press onecemberecree appointing M. G. Pervukhin, member of the partyand first deputy premier, head of the Statefor Current Planning, and removing M.aburov from this post. The reorganization of the Current Planningwill be discussed in more detail below as itto other measures for economic reorganization. In terms of pressures to change the division of availableamong various branches of the economy, however, it is important to note that the six top administrators who were named as Pervukhin's deputies represented almost all major economic sectors. As first deputies to Pervukhin were

N. Kosygin, whose background isin light industry,

A. Malyshev,ackground in heavy industrial technology, atomic energy and shipbuilding.

As deputies to Pervukhin were

V. Khrunlchev, with an armaments industry background,

A. Kucherenko, identified with the construction industry,

V. Matskevich, minister ofand long connected with this field,

A. Benediktov, minister of state farms and foreadingofficial.

All six of these men were given the rank of minister (the first four headed no specific ministries, while Matskevich and Benedlktov retained their portfolios). The first five had previously been deputy premiers of the government, and were relieved of these posts.

There are several possible reasons foremoval from the top current planning post. The admission by the plenum of excessive strains ln economic plans was very similar to criticisms of the Sixth Five-Tear Plan made ath party congress by Minister of Ferrous Metallurgy A. G. Sheremetev and Minister of the Coal Industry A. N. Zademidko. At that time Saburov censured these ministries, saying they had proposed "reducednd had requested morefunds than they needed. Saburov said "the party and the government had to intervene in thisaise the plans, and cut down on the investment requests. Theof the ferrous metals, coal and several other industries6 showed that Saburov had erred in raising the goals, and perhaps in encouraging an overly optimistic view of the rapidity with which the USSR could catch up with the West.

At the same time, however, the December plenum ordered investment reduced and repeated ln milder form Saburov's earlier condemnation of efforts "by some executives" to have their economic plans reduced and thereby "to conceal their unsatisfactory work." According to the resolution, plans should be "realistic, but not too low." The surprisingly low goals announced In7ittleonth later suggested that Pervukhln's committee went further than the central committee had Intended. Overambltious planning perhapsactor in Saburov's ouster, but the wording of the December plenum suggested that lesseduction in goals was foreseen than actually occurred.

Another possible reason for Saburov's removal wasCurrent Planning Commission presumably drew up the the immediate implementation of which wasplenum.

Opposition to the program, which probably centered on the fact that industrial construction would suffer and that cuts in industrial investment were already being forced by material shortages, could well have become opposition to the formulator of the program.

In another personnel change which occurred immediately after the plenum, I. F. Tevosyan was relieved of his duties


as deputy premier and appointed ambassador to Japan onecember. No evidenceeason for this apparent demotion, but Tevosyan, apparently the deputy premier with over-all responsibility for the metallurgical industry, might have been blamed for the poor showing of tbat Industry Re could also have opposed some of tbe proposals at the December plenum on economic reorganization. (See Section IV, following.)

C. From December Plenum to February Supreme Soviet

While tbe reorganized Current Planning Commission was revising7 plan in the six weeks following the December plenum, tbe Soviet Union continued the process of negotiating new aid and trade agreements with the Satellites, whichat least marginally the strains on home resources. East Germany's Premier Orotewohl, returning from Moscow at the end of Januaryew aid agreement, explicitly commented on tbe USSR's added burdens. He said lt was "not easy" for the USSR to give the aid agreed upon, since the Soviet Union had to "shoulder the great economic tasks which have arisen from the convulsions ln some socialistrobably because of Satellite needs for hard currency, and also because the USSRizable adverse balance ln6 foreign trade, Soviet gold exports Increasedevel which, if continuedould be considerably ln excess of gold sales in the previous peakhen the USSR had exported0 ln gold.

Soviet aid programs to the free world during this period continued at roughly the level of the last halfthe USSR did not come uparge counteroffer of economic aid for the Near East in reaction to tbe newprogram. Arms shipments continued to Syria, andfor re-equlpping Egypt's armed forces were under way. The Soviet Union in the last half of January did telltbat implementation of Its aid agreement with tbat country could not be carried out immediately, and in February the USSR postponed1 the East German-Soviet project to help Yugoslavia build an aluminum combine.11 These moves were almost certainly politically motivated, and Intended to exert pressure on Yugoslavia ln Its dispute with tbe Soviet Union, but they alsolight reduction in Soviet and East German economic commitments.

Within this framework tbe Current Planning Committee under Pervukhln worked during January to revise7 plan. The Communist Party newspaper Pravda ln mid-January reacted to Western press reports which had seized on the implication




In tho December plenum resolution that Soviot industrial growth would slow down. Tbe Soviet press during this period also shot off the first salvos callingassive campaign of "socialist competition" to overfulfill7 plan and later the Sixth Five-Year Plan, in honor ofhof7 revolution. Pravda's editorial onanuary accused "hostile bourgeois propaganda" of "trying to portray the decisions of the (December) plenumeflection of some special difficulties facing our country,ejection of earlier planned higher rates of industrialfter labeling these viewsravda said that the question was notejection of higher tempos of industrial construction,ransitionew stage of economic development in which high tempos are guaranteed not only, and not so much, by large capital Investments as by more correct utilisation of available resources." The editorial further argued that it was possible to lower capital Investment in industry, thus providing more resources for housing, and at the same time Increase "tempos of new industrial construction."

The fact that7 plan announced the following month didubstantially reduced growth rate foroutput suggests first that Pravda's blast was aimed at Internal pressureseduced growth rate as well as at "hostile bourgeois propaganda," and second, that the regime acquiesced to these pressures, at least temporarily. The corresponding Izvestia editorial ofanuary reiterated the December plenum's criticism of economic administrators who attempted to get plans approved which were lower than necessary.

The speeches made by the Soviet leaders on their tours through the provinces during the last half of January differed in their emphasis on various points. Only the speeches ofaganovich and N. I. Belayev explicitly repeated the goal of catching up with the Vest in the shortest time, but all the others discussed In general terms tho alleged superiority of "socialism" over capitalism and the inevitable victory of the former. The leaders all restated the primacy of heavy industry, but their speeches contained some Interesting variations concerning benefits for the consumer. Bulganin, speaking in the Tadzhlk SSH, admitted shortcomings in housing and supplies of consumer goods and said that efforts were being made to end these shortcomings. He emphasized, however, that "everything cannot be done at once." Kaganovich, speaking In Krasnoyarsk, said that under the directives of the December central committee meeting, the five-year plan was being "worked out" to ensure the preponderant development of heavy Industry, but at the same time "toharp rise in the material



f the Soviet people." A. B. Arlstov, In Chelyabinsk, stated that measures implemented6 to raise living standards were one of the reasons why "some amendments" in the Sixth Five-Year Plan were required.

Also bearing on future economic policy was the way in which the leaders regarded the USSR's military strength in these speeches. The thesis calling for continued primacy of heavy industry has always been based in part on the country's need for military strength, and Bulganln, speaking in the Tadzhik SSR, reiterated this point strongly. Khrushchev, in Tashkent, said that the "mad arms race" being carried on by the United States demanded "increased vigilance and strengthening of our armed forces." However, Malenkov, speaking in Chkalov,ore moderate view:

"Our party teaches, and the whole experience of the struggle against tho internal andenemies of Communism shows, that one must not underestimate the enemy. But at the same time one should not overrate his strength oralse picture of the strength of the capitalist world."


tneeaaers, in tneir speeches

throughout the country, were pointing to the December plenum's cautious promise to seek more resources for housing as evidence of the party's concern with this problem. In addition, both Pravda and Izvestla frequently devoted editorial space to the subject, generally repeating the words of the December plenum and urging that better use be made of local resources, rather than state funds, to Increase the supply of housing.


D. The February Suproae Soviet and7 Plan

7 plan presented by Pervukhin to the Supreme Sovietebruary scheduled sharp reductions in rates of growth for most branches of the economy. Heavy Industry was planned toercentompared withpercent growth announced as achievednd lightwas toercent, against last Growth of industrial labor productivity, scheduledercentomparedercent growth achieved In the field of capital investment, the figures may not be strictly comparable, but7 plan called forercent Increase, comparedpercent increase

In industry, Pervukhin emphasised particularly the need to Increase the capacities of the fuel, metals and building materials industries, and scheduled much larger Increases of capacity than of production. Military allocations In the budget were scheduled at practically the same high level as actual expenditures Although the growth of light industry was planned to be below that of heavy Industry, allocations to light industry from the budget increased far more in percentage terms (and slightly more in absolute torms) than did allocations to heavy Industry.

7 housing plan called for construction0 square meters of dwelling space from both state and private funds, compared with0 square meters actually built last year. Thisery substantialand was consistent with the schedule of the original five-year plan,7 goals In most other categories were below levels necessary to achieve the five-year plan. On the other hand, the housing increase did not represent an upward revision of the original five-year plan goal, aa some earlier evidence had suggested would be the case.

In foreign trade, Pervukhinpercentin total trade with other countries of the bloc. He said that the doubling of Soviet trade6 with the Near East and Asia "should beut omitted any reference to future trade with this area.*

report is not Intended toetailed analysis of7 Soviet economic plan, except as it affects the main lines of Soviet policy.



In Pervukhln's speech, snd throughout the publishedon the plan at tbe Supreme Soviet, there was noto the doctrine of catching up with the Vest ln per capita output ln a historically abort tine. The complete silence on this point possibly reflected unhappiness within tbe leadership over the sharply cut rates of growth In the plan. Lessonth earlier the Pravda editorial ofanuary had attacked as "hostile bourgeois slander" any speculation that the rate of growth would in fact drop, and yet precisely this happened.

The leadership may not have envisaged at the December plenum the drastic revision of current output goals ln7 plan. The wording of the December plenum's resolution bad Indicated some downward revision, but not sone as appeared in tbe plan. Furthermore, the December plenum bad explicitly ordered "the volume of capital Investment" to be reduced, and ln fact the absolute volumelower rate than ln the preceding year. The plenum's instruction may haveeduction below the7 plan,eduction below the absolute volume In any event, it seems likely that in working out7 plan, Pervukhln allowed larger reductions in current output goals, and perhaps smaller reductions in capitalthan were envisaged by the December plonum.

Plan changes of precisely this type would bo favored primarily by economic administrators, from ministers and their deputies down to individual plant managers. Ath partyear earlier lt was such individuals who had been squelched by Saburov ln his successful efforts to revise6 output goals upward, while cutting back the investment funds requested by ministries. Since Pervukhln and his deputies were primarily experienced in industrial administration, rather than in planning or ln tbe party apparatus, they might have had more sympathy than their predecessors for arguments ln favor of reduced output goals.

The likelihood that7 plan was not exactly the one ordered by the December plenum was strengthened by the fact that Pervukhln emphasized throughout his speech on the plan tbat the goals should be overfulfilled. His frequent references to the ease with which the plan could befar outweigh his one reference to the plan being realistic, but not too easy. Pervukhln probably foundln an unenviable position, pressured by industrial to lower plans, and faced by displeasure from other members of the party leadership when he did.



On the subject of heavy industry,7 plan alsoossible departure fron the propaganda line and the policy5 As noted previously, totalfrom the state budget to light Industry increasedthan did allocations to heavy Industry (these budgetary allocations cover certain operating expenses as veil asand figures for Investment alone are nothis happened last Furthermore, the lead editorial In an Issue of the party Journal Kommunist vhlch vas published later in February stated that in7 plan the proportion of total allocations devoted to production of consumer goods, housing, schools and hospitals vas higher than InTbe Pravda editorialebruary, after reaffirming at great length the preferential development of heavy industry, and emphasizing that heavy Industry vas "the solid foundation of the national nd Its defensetated that "the distinguishing feature" of7 plan vas that it envisaged "higher tempos than hitherto for the production of consumer goods."

Thus, in practice, the plans7 apparently called for giving theittle larger piece of the total pie this year. This probably resulted in part from the fact that housing plans, although not increased above tbe original schedule, vere at least not cut back this year; in part from last year's good harvest, vhlch should Increase food suppliesnd In part from the Increased budgetary allocations to light Industry. Increased emphasis on improving living standards had actually begun to develop earlier. The Sixth Five-Year Plan approved byh party congress hadthat the consumer vouldradually Increasing share of total resources In the later years of the plan. ubstantial "fringeuch as higher pensions and increased minimum vages, vere granted the consumer.

Although an Increased proportion of total resources could be devoted to the consumer in any one year vlthout raising the grovtb rato of output for the consumer above the heavy industrial output, it may actually be somewhat difficult for the OSSR to keep light Industry's rate of growth belov that of heavy Agriculture provides more than half of the rav materials for light Industry in the Soviet Union, and last year's large harvest vill tend to Increase light industrial output this year. Unless present problems In the fuel, metals and building materialsare solved, on the other hand, heavy industry may face continued raw materials shortages. (Rousing, of course, is not included in the Soviet accounting categories for eithor heavy or light Industrial output.)



The pressures faced by the planners both to give more to the consumer and to allow industry more investment funds appeared very clearly ln the speeches of local deputies at the Supreme Soviet meeting. epresentative from the Estonian SSR complained tbat an industrial plant ln bis region was to have been modernised under tbe directives ofh party congress on the Sixth Five-Tear Plan, and said thiswhich was to have begunas being postponed and now "was not even included ln tho Sixth Five-Tear Plan." eputy from Leningrad complained tbat under tbe five-year plan directives two long-distance gas pipelines were scheduled for construction to Leningradut that now only one was envisioned. emale deputy from the Latvian SSRecree of the Council of ministers which ordered allemploying moreomen to have their ownInstitutions, and criticized various ministries for not obeying this decree. She pointed out that the Ministry of Light Industry0 women In Latvia, but had kindergartens and nurseries for lesshildren.

The speeches at the Supreme Soviet also provided further evidence that housing plans, exceptew large cities like Moscow or vital Industrial areas like tbe Donbas, were not being revised upward. oscow delegate did announce tbat the five-year housing plan for the capital was being Increased0 square meters. eputy from the Karelian Autonomous Republic said thatof bis area subordinate to tbe Ministry of tbe Timber Industry badquare meters of prefabricated bousingut were ordered to reduce output sharply0 square meters. Representatives of the Azerbaldzhan SSR, Chuvash Autonomous Republic, and Kemerovo Oblast also complained that housing plans for their areas were either the same as last yoar or lower,

E. From the Supreme Soviet to Khrushchev's Theses

After the Supreme Soviet, the spotlight shifted fron economic policy to economic reorganization in the USSR (the latter problem will be discussed ln tbe nextmmediately following the Supremoew centralplenum met onndebruary, and issued abased on proposals of Khrushchevrasticof economic administration along regional lines. This proposal, to be worked out in detail and presented to the next meeting of tbe Supreme Soviet by the party presidium and Council of Ministers, was describedater speech by Khrushchev as an effort toreat new upsurge ofoutput, comparable to tbat achieved ln agriculture by the similarly grandiose "new lands" program.


Some parts of the February plenum's resolution, hovever, do concern economic policy, and may represent the reaction of the partydominant elements ofthe7 plan, which was perhaps not precisely what they had ordered two months earlier at the December plenum. While accepting tbe plan, the party leaders tbrough their own forum, the resolution of the plenum, issued severalinconsistent with those made at the Supreme Soviet. The optimistic tone of the plenum's resolution was similar to that ofh partyear earlier, and the pledge to "overtake and outstrip the most developed capitalist countries in per capita production" was restated. Theemphasized that the most important condition forthis aim was rapid growth of labor productivity, and stated, "We have every possibility to achieve this task successfully." As mentioned earlier, Pervukhin ignored the theme of catching the West in his presentation of the plan to the Supreme Soviet, and the plan scheduledercent Increase in industrial labor productivity.

In addition, the plenumriticism at the Current Planning Commission, which was not mentioned init was probably aimed at Pervukhin'e commission, rather than at Saburov*s. The commission was ordered not to "duplicate the work" of Gosplan (long-rangend not to interfere with "functions ofinally, the February plenum's resolution contained no reference to7 plan which had just been approved,it did have praise for the rapid economic growth

The accusation that the commission was duplicating the work of Gosplan might indicate that the party leaders regarded the7 plan goals as Incompatible with higher goals, which,they perhaps insisted, had to be incorporated in the revised five-year plan. At any rate, the campaign to develop "socialist competition" for overfulfilling7 plan in honor ofh anniversary of7 revolution picked up steam after mid-February. Pravda editorials betweenebruary and the end of March mentioned this subject onays, and Izvestia followed suit, although less frequently. Pfavdaarch called for fulfillment ahead of time of the Sixth Five-Year Plan goals, as well as7 plan, and an editorial of the trade-union paper Trud repeated this line early in March. OnentraTTcommltteewas issued concerning preparations forhof the revolution, which explicitly called for overful-fillmcnt only of7 plan, and also repeated the goal of overtaking the West in a historically short time.


Onarch Khrushchev's "theses" on the proposedreorganization were issued, and again the goal of catching the West was strongly reaffirmed. The theses also called for the transfer of most of Current Planning functions to Gosplan, and the abolition of the former. The failure of Pervukhln to be appointed as head of this combined current and long-range planning group tends to confirm speculation that his conservative approach to7 plan was not satisfactory. Subsequent reports that both Malenkov and Khrushchev told Westerners that Saburov had drafted Khrushchev's theses on the reorganizationeturn to more ambitious planning after7 plan was formulated.

Khrushchev's theses alsoengthy analysis of why continued primacy for heavy industry was necessary, and the wordinghat the degree of emphasis to be given heavy Industry had recently been under debate within the regimehat Khrushchev may have compromised slightly his earlier hard position. On one hand, he

"If we accept an incorrect and falseand direct the basic means toward the developmentight industry, we can butemblance of success and ensure tbe satisfaction of certain demandshort time only. And this will be at the expense ofhe development of our economy in then order to outstrip the most developed capitalist countries in per capita output, it iso ensure the priorityof heavy industry."

On the other hand, Khrushchev made several statementsfrom any he had made previously, at least since

t Is impermissible to tolerate theinterpretation of the role andof heavy and light industry, the harmful contrasting of thesehe matter should not be pushed to the verge of absurdityone-sided development of heavy Industry ignoring the development of lightwhich inevitably would cause difficulties in the development of the national economy and delay the further improvement of the living standards of the people."




peech to agricultural workers on the same day,arch, Khrushchev formulated his position as follows:

hile further consolidating heavywhich is the basis of the national economy, we must at the same time produce more clothing, variousnot simply foodstuffs, but goodmore houses, and also satisfy other needs of the people. Our Soviet people must have the highest living standard in the world, and we shall achieve this great aim."

This is reminiscent of the position taken by Malenkov innd probably reflects Khrushchev's desire to have his cake and eat it too.

Whether or not Khrushchev has modified his stand, two articles published in the party journal Kommunist shortly after the February plenum illustrated the type of thinking which could leadhange, and the Intellectual pressureshange. One of the articles, entitled "Survivals of Capitalism in Men's Mentality Under Socialism and How toThem,"i7 implied quite clearly that the recent increase of intellectual nonconformity and of vocal opposition to defects in the Communist system was caused in part by low living standards. The author noted that often the only means suggested to combat the "relics of alien ideology" weremeasures. This "one-sidedas seen in too many articles and pamphlets, which "assert that backward viewsocialist society exist only because men's consciousness lags behind the new conditions of life." According to the author, this did not "fully explain the survivals of backward views, and especially the fact that they grow even stronger at times." The author emphasized that improved living standard as well as educational measures were necessary to combat those tendencies, and

"Insofar as socialism and the socialistof distribution still cannot secure the full elimination of differences (between classes) and the satisfaction of material needs, or of other "birthmarks" of the old society, these "birthmarks" may under certain conditions nourish backward views to one or another extent, and actually do so."

The lead article in the same issue of Kommunistiscussion on the Supreme Soviet meeting and the


lan, with several paragraphs at the end on the February plenum.18 This editorial did not repeat the lines on primacy of heavy Industry or catching tbe Vest. It devoted much of its attention to explaining why the Supreme Soviet had approved legislation decentralizing certain powers for Moscow to the union republics (this will be discussed in the section onfollowing). The rationale given for thisln "democracy" could very easily apply, although the authors did not explicitly make lt apply, to the slowing down of growth rates and slightly Increased emphasis on consumption In7 plan. The article pointed out that the steady Increases ln "democratization" during recent years wereconnected wholly with the need to eliminate effects of the personality cult, but stated tbat the basic reason for more democracy lay "ln the objective changes which havein the economic, cultural and political development of the Soviet peoples."

Among these "objectivehe article emphasizedumber of "socialist" countries had sprung up around the USSR since the war, and the existence of these countries had substantially weakened the bonds of "hostile capitalist encirclement." Therefore, "Communist construction ln the USSR during the postwar period has beennder more favorable external conditions." Since there wae "firm confidence" ln the invincible might of the "socialist" the existence of the "socialist" bloc raisesow light questions of economic, social and political "He who does not understandemonstrates bis inability to conceive of socialist development in anyarrow national framework." This seems to be atuggestion tbat "capitalist encirclement" of tbe USSR has been weakened tooint as toew look at basic Soviet policies ln all fields.

F. Tho May Supreme Soviet

In the month between tho issuance of Khrushchev's theses and the Supreme Soviet mootingoay, Soviet internal propaganda concentrated on the nationwide and allegedly "free" discussions of the proposed industrial reorganization almost to the exclusion of other economic themes. The economic planners presumably continued their efforts during thisto make0 industrial output goals of the five-year plan "moreo "eliminate excessive strains" by slight reductions in these goals, and to cut back planned capital investments. There was no public reference ln April or May, however, to the December plenum's instruction that the plan's final version be worked out by midyear. The




sharp reductions in the output goals of7 annual plan probably made difficult the attempts of the long-range planners to maintain basically unchanged the original goals of the five-year plan.

An event occurred Just before the Supreme Soviet convened which tended to confirm that the regime was dissatisfied with the magnitude of reductions in7 plan. Pervukhin, though the logical candidate for the chairmanship of Gosplan, was appointeday minister of medium machine building. This appointment as chief of the Soviet atomic energy program gaveery important job, but one removed from over-all economic planning. As head of Gosplan, which under the reorganization was made responsible for both long-range and current planning, the regimeay appointed I. I.reviously obscure party apparatus man within the industrial field but with little political standing. He wasember of the party central committee, although he was on its auditing commission.

There is no evidence which explains Kuzmin's He couldrotege1 of Khrushchev from the party apparatus. As an equal possibility, however, he couldompromise choice by the party presidiumower-level individual who did not have an independent power position and who would therefore be responsive to the collective leadership In formulating and implementing the five-year plan. In view of Khrushchev's increasingly evident dominance over the Soviet leadership during April andhe first of these alternatives seems more likely.

Khrushchev's lengthy speech at the Supreme Sovietin May was devoted primarily to the Industrialbut also contained some clues concerning economic policy. The propaganda lines on primacy of heavy Industry andup with the West In per capita output were again In addition, Khrushchev explicitly criticized the Current Planning Commission under Pervukhin for the way in which7 plan for tho coal industry was formulated. According tolan had been worked out6 to improve coal mining in the Donbas, butew months later It was arbitrarily violated during the draftingew plan" Khrushchev also criticized the planning organs, though not specifically In connection with7 plan, for "agreeing tooo superfluous capitalhese criticisms are the best evidence to date that theregards at least some elements of7 plan with disfavor.

The Hay Supreme Soviet meeting gave no consideration to the five-year plan, although last December the party central committee instructed that the final version of the plan be presented to the Supreme Soviet by The7 plan makes the0 goal for Industrial output almost Impossible to fulfill, but evidence as of7onflicting picture on whether or not the five-year plan output goals will be substantially reduced.

On the one hand, ln addition to showing signs ofwith the7 annual plan, several Soviet leaders have recently made very optimistic statements on the USSR's prospects for overtaking the United States* economy. Bulganln, speakingroup of visiting American womenay, made an off-the-cuff comment that tbe Soviet Union could catch up with the United States ln anotherears. Khrushchev, speaking onay to agricultural workers ln Leningrad, boasted the USSR could overtake the United States in the output of meat and dairy products0espite predictions of "some economists" in the USSR that this goal could only be reached This willingness to flout the views of experts ln one field suggests that Khrushchev would also oppose offorts ln other fields to reduce plan goals. Soviet newspapers ln recent months have also restated many of the0 goals, including those for coal, pig iron, state bousing, Internal trade, petroleum and light Industry.

On the other hand, according to an early Hay report

ndustrial production target'had

been cutercent5ew target In addition, the Soviet press revealed reductions ofoercent ln five-year plan Industrial goals of two individualandApril and mid-Hay respectively. In late April, an article in the party journal Kommunlst,enior economist of the State Planning Commission, also Implied that the capital investment target of the Sixth Five-Year Plan had been cut. Centrally planned investment was originally scheduled toillion rubles during the plan. Calculations based on data ln the Kommunlst article indicate that such investment has beenercentillion rubles. This probablyeal reduction ln plannod investment, but not conclusively so, since centralized(those scheduled by the central planning bodies and carried as part of the national economic plan) maymaller proportion of total investment under the reorganized administrative structure of Industry.

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While the conflicting evidence on the five-year plan allows no conclusion as to the plan's final form, lt suggests that pressures in favorubstantially reduced plan and pressures for optimistic, exceedingly ambitious plansto exist side by side. Since Khrushchev, an apparent protagonist of ambitious plans, has modified his own previous positions on the industrial reorganisation and on several other subjects this spring, he could do the same on the five-year plan, probably without loss of face or influence, If he feltove necessary in order to obtain agreement among the collective leadership.



IV. Economic Reorganizatloo: Efforts to Improve

The second complex of economic issues with which the Soviet regime concerned itself from6 through7 was reorganization and decentralization. Unwilling to face the prospect of slower heavy Industrial growth, or perhaps unable totable agreement that this was the only feasible way to eliminate serious strains in the economy, the leaders had been striving since Stalin's death to increase economic efficiency and improve management so as to achieve all their ambitious goals simultaneously.

An earlier spate of "efficiency measures" appeared, for example, in In May of that year, the State Planning Commission (Gosplan) was split Into separate bodies for long-range and current planning, and now, high-level government committees for wages and labor and for introducing newinto the economy were established. At the5 meeting of the centralajor program was launched to modernize Soviet Industry and increase its efficiency.

In addition, variousluuiBii'iub were spilt into more specialized ones4 through6 to improve management and increase efficiency. imilar spate of more drastic measures, some even reversing several of those listed above, were adopted or proposed from6 through

The "efficiency measures" of the recent period weretoeal degree of decentralization, along geographic lines, of authority and responsibility foreconomic plans,emblance of decentralization of the responsibility for formulating economic plans. At the same time, all public statements during this period emphasized that central control was to be retained over both the formulation and implementation of basic economic policies. The mere statement of these aims shows the dilemma which faces the regime and which none of the measures adopted during this period answered very precisely: how much realcan be allowed without reducing the ability of theauthority to implement national policy?

Present information on Soviet efforts toward economicfrom December through March indicates that the regime faced two specific problems:




eorganization of Industrial management be carried out wholly along geographic lines, or should the authority and Independence of individual but centralized ministries be strengthened? Once this question bad beenln favor of geographic decentralization, should economic regions be organized according to existing political divisions-republics, krais andshould the regions be set up according to economic logic, incorporating fairly wellindustries and services in one region?

How should the planning bodies, state control trade unions and financial organs be reorganized so as to assure central control? What role should the Communist Party apparatus play?

A. Background: Before the Decembor Plenum

One of tbe methods by which the regime attempted toIndustrial efficiency4 through6 was to split up existing Industrial and construction ministries, forming new and more specialized central ministries. The most recent example of this was tbe Soviet press announcement of6 that tbe Ministry of Machinery andwas being dividedinistry of Instruments and Automationinistry of Machine Building.18 During tbe same period, thereountertrend of transferring some details of planning and administration to the union republics and their ministerial apparatus, overnment decreeor example, transferred to the republics numerous detailed questions of planning ln the budgetary andfields.19 In addition, 45 several all-Unlon ministries were changed to Union-Republic ones, and counterpart ministries set up ln certain republics.

After6 the second of these trends began to win out over the first. overnment decree ofayfrom USSR ministries to the corresponding republicarge number of enterprises ln the food, light, textile, building materials, paper and other industries, and also the retail trade network. At the same time the USSRof Highway Transport and Inland Shipping were abolished, and the Ministries of Light Industry and Textile Industry were merged.20 The latter two industries bad been divided into two ministries lessear earlier. The bead of tho newly combined Ministry of Light Industry was N. S. Ryzhov, who was later, inent out as ambassador to Turkey.21


0 plants had been shifted from central government to republic Jurisdiction and that the proportion of Industri-output produced by plants subordinate to the republics rathor than the USSR government had Increased fromercent3 toercent Much of this transfer of power was only nominal, however, and ln many instances meant merely the addition of republic ministries as another link in the chain of command between USSR ministries ln Moscow and the Individual enterprises.

Some emphasis on the geographic or regional approach to economic organization bad been evident in the original draft of the Sixth Five-Year Plan. The draft orderedong-range plan be drawn up "for specialization and co-operation in industry in conformity with the economic regions of the country." in the construction field, the draft plan called for the merging of small building organizations intobuilding agencies, like those establishedn Moscow, Leningrad and Kiev.

In6 several events occurred which indicatedregime was devoting increased attention to thecentral control over the economy and economic regionsbasis for administering Industry. Onovember,premier and former foreign minister V. M. Molotovminister of state control. In tbe precedingministry bad lost most of Its earlier powers, exceptauditing the financial records of enterprises. Molotov took over, however,

JSoviet press statementsuui mni tnewas re-emergingowerful Instrument of centralized authority. The ministry appeared to be extending its powers from thoseinancial watchdog to inspecting thoof government orders ln other fields. One press article suggests that the ministry also began to levy penalties on enterprises and order the dismissal of certain officials-powers which the ministry had lost as early


-eo tne need to form economic regionsscientific" basis, and contained only brief references to the need for considering "the Leninist nationality tbe existing political-administrative divisions. The author stated that two basic criteria for an economic region should be




arge-scale specializationertain type or typos of production,economicn adequate base of fuels, machine building, agriculture, consumer goods and transport to support tbe large-scale output of thosein which the region specialized. The article noted that at present the administration of the economy must be based on existing political administrative units, but expressed the hope that in the future, changes of administrative-territorial divisions would bo possible.

Up to thiB time, although the planning bodies had split the Soviet Union Into economic regions (there weret the end, these regions were used only for planning purposes. This article did not imply that the present system of economic administration through ministerial or existing political-territorial divisions would be changed In the near future. Some prossures in this direction, however, were revealed In the Soviet press during the fall Tho director of the Ural machine Building Plant In Sverdlovsk suggested in October that "the time had finally come to create in economic regions organs which would study production ties" of enterprises within the region and attempt to induce more specialization and co-operation among enterprises.2* Onecretary of the party committeeeningrad industrial plant wrote: "Perhaps it would be expedient to combine the various branches of Industryinglet would also be well to consider territorial combinationiven economic

B. The December Plenum

The decision of the December plenum on Improving economic management admitted that "substantial shortcomings" existed in Soviet economic planning, particularly current planning. The planning bodies wero accused of inadequately studying conditions In Individual industries and of "maintaining poor contact" with republics, arals, oblasts and economic enterprises. The planners permitted "serious omissions and errors" in drafting



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plans, and did not "copo vith their duties in checking on fulfillment." As its formula for improving central control and at the same time decentralizing authority to increase efficiency In implementing plans, the plenum Issued the following orders:

The Current Planning Commission (vhlch vas reorganized under Pervukhin on the following day) vas to receive more pover and be given nev "operative"to assure fulfillment of state plans and the correct distribution of material supplies. The party apparatus and tbe trade unions vere ordered toarger role in improving economic management, with the party, as alvays, to befor the "selection, promotion, and correct placement of personnel."

The economic povers of republics were to be extended "considerably" to "eliminate excessive centralization" and give the republics more control overstate plans. Efforts vere to be made to bring agencies of the central managerial apparatus into tho regions vhere corresponding branches of the economy vere located, and the co-ordination of activity vlthln economic regions vas to be improved.

At the same time, hovever, the plenum calledfurther extension of the povers of

It should be noted that the instructions of the central committee wero wholly unclear in the matter ofine betveen central authority on one hand and tbe powor of republics and individual ministries on the other. Both vere to be Increased. Furthermore, these directives did not resolve the Inherent conflict between further widening the power of republics and increasing the authority of individual central ministries.


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TOP 3ecrex.

aBility of the party, through planning,

centrate resources for the purpose of attaining anyobjective was claimed to be tbe major reason forof the socialist system over thosince the Soviet

press several time earxy xnreiterated the superiority of socialist planning over capitalism in similar words.29

|reported that at the plenumr tbe bureaucraticbetween ministries which severely hinderedand co-operation among individual plants. This resulted in duplication of production, cross-hauling of freight bo-tween different regions, and wastage of capital investment funds. Khrushchev himself reportedlyharp attack on this problem, and the central committee ordered tion of ways to reduce the barriers. According to

tbe merging of related ministries was considered ana rejectedolution in tbe weeks following the plenum. Tbe answer which was increasingly favored waseriousin theinisterial, chain of command,reater emphasis on regional co-operation and specialization.

From the December plenum to the Supreme Soviet meeting in early February, discussions in the Soviet press onplanning and economic administration were generally consistent with the information presented above on the December plenum. At the beginning ofeasure was Introduced increasing the authority of republics over the distribution of meat and dairy products produced within their territories^ and editorials in both Pravda and Izvestia during the month commented on the need to increase the powers of republics and local Soviets. Khrushchev, perhaps alluding to tho Industrial reorganization then being planned behind the scenes, stated3 January speech in the Uzbek SSR that shortcomings in economic management should be exposed and removed "more He emphasized the need to "acturgeon whoharp knife and operatesan's body to cut out malignant

In mid-January, F. R. Kozlov, first secretary of the Leningrad Oblast party committee who wasandidate member of the party presidium in Moscow one montharty mooting tho lack of co-operation between ministries and the need for the planning bodies to consider more fully the potentialities of economic regions inplans.32 At the end of January, an article appeared in the State Planning Commission's monthly journal calling for

improvement in republican planning bodies. This article also advocated that more authority be granted to the central government's planning bodies, both Gosplan (long-range) and Gosokonomkommlssia (currentn order to eliminate

At the end of January, Pervukhln,eeting of the party organization of the current planning body, pointed out that there was too much parallel and purposeless work in the republics, the ministries and in the current planning group, andeorganization of the current planning group was undor way to expand its rights in resolving these problems.34

C. The February Supreme Soviet

Pervukhln, in his speech on7 plan to the Supreme Soviet, again reiterated that his current planning organ had been given new "operative" powers to assure the fulfillment of plans, and there was no hint in the discussions at the Supreme Soviet of the later proposal in Khrushchev's theses to abolish the current planning body and transfer itsto Gosplan. In other fields, the Supreme Soviet adopted new measures expanding the rights of republics and local Soviets, and individual deputies proposed still others; the discussions revealed Innumerable examples of red tape, poor planning and "departmentalism" in the present structure of industrial administration.

This was the first time an annual economic plan wasby the Supremeact probably Intended to provide evidence of greater democracy. The Supreme Soviet also approved new legislation transferring to republics the power to make changes in the boundaries of krais and oblasts within their territories, perhaps in anticipation of the reorganization to be proposed later by the February plenum. Khrushchev's theses, Issued at the end of March, recommended some ohanges in existing administrative-territorial boundaries.

On the local level, several deputies praised the law passed several years ago giving local Soviets the right to spend tax revenues received above the amount earmarked for the central government and urged that the proportion of tax revenueslocally be further increased. Deputies also requested that the authority of local Soviets over housing construction be increased, and one asked that management of local building materials enterprises be concentrated In the hands of local sovlets.JO

The complaints of deputies concerning existing defects ln industrial administration and planningatalogue of things vhich have gone wrong ln the Soviet bureauc racy.. Accordingpeaker from the Ukrainian SSR, for example, the Soviet government1 and again2 decreed the reconstruction and enlargement of the Odessa water supply system, the cost to be shared by "interested ministries This Job was only half finished by7 because many of the ministries did not do their parts of the work. epresentative from Moscow described tho activities of tho Ministry of Chemical Industry, which had spent seven yoare andubleslastics factory. This plant was not yet finished, and lt now appeared there was no need for lt. Nearbyimilar, already functioning plant,great reserve" of unused production capacity. This situation had arisen because tbe two plants belonged to different ministries, which obviously were not co-operating with one another fully. inaleputy fron the Georgian SSR revealed that the USSR Ministry of Building Materials badement production plan for the Rustavi cementear before the enterprise was even completed and ready to start production.38

D. The February Plenum

The decision of the February plenum was the firstattempt to organize economic managementoglonal basis. As noted above, however, the regional concept had been used previously to some extent for planning purposes, and ln tho weeks before and following the December plenum apparently received increasing study and support. Theorganization of managementictory for the regional concept over the specialized ministerialand was by far the most radical "efficiency measure" for the Soviet economy since Stalin's death. The confusion and temporary reduction of output which could result showed that tbe regime felt drastic, and risky, measures were needed in its effort to attain the very ambitious industrial goals on which progress was already lagging, and, at the same time, to meet added burdens from abroad and, ln somo degree, from the consumer.

The resolution contained the following main provisions:

(1) Industrial management should be basedombination of centralizedadministrationreater role for local economic, party, and trade union bodies." The center of administration

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"must be shifted to the localnd management should be organized "according to the main economic areas." Since the existing ministerial structure had led to increasing departmental barriers as the economy became more complex, "new forms must beased on theprinciple."

In order to strengthen central control, the role of Gosplan (long-range planning) must bend Gose-konorakommlssla (current planning) should be reorganized so as not to "duplicate"ork or Interfere infunctions."

A new organ of the Sovietmust be formed to assure moreintroduction of new technology Into the economy.

The reorganization will create "still greater possibilities for tho really creative participation" of "party, local government, trade union, and Komsomolin economic management." Work of state control bodies should be Improved, both "in the center and on the spot."

The party presidium and theCouncil of Ministers wereto prepare detailed proposals on the reorganization and to present them to the next meeting of the Supreme Soviet.

Although the kind of decentralization called for by this resolution was foreshadowed with reasonable accuracy by Soviet press statements and other evidence accumulated since theplenum, the changes made in the central planning and control bodies were not. As noted above, all evidence through January, and at the Supreme Soviet meeting in early February, indicated that Gosekonomkommissia, the current planning body underwas to be strengthened and given operationalfor the implementation of plans. At the February plenum, however, the current planning group was ordered not to duplicate the work of Gosplan and not to interfere in the actual administration of the economy.

The instruction of the plenum to setew government organ to assure the introduction of new technology into the economy also fits this pattern of reducing the current planning body's role. Inhen tho original State Planning Commission was split into long-range and current planninga State Commit Use for New Technology was also set up. By the end6 It was apparently felt that this committee was not adequately fulfilling its functions, since theplenum stated thatajor task" of the current planning group was to assure the Introduction into the economy of new technology. At the February plenum, the formationew body was ordered Instead.

Immediately following the February plenum, it became increasingly clear that the proposed reorganization would basically follow the territorial boundaries of existingkrals and oblasts, withew mergers of oblasts whose economies were poorly developed. Pravda and Izvestla editorials both emphasized the need to strengthen tho rights of republics during this period, praising ln this connection the correctness of tbe "Leninist nationality policy." Onebruary, another article on economic regions was published in tbe Journal of the State Planningabeled "fors was the article in December published by the same Journal (see above). The new article emphasized much moro strongly than tho Docember one the need to preserve the present national lines ln the USSR, and said, "It Is impossible to regard ashe establishment of economic regions ln the USSR ln which several republics are Included." The December article had recommended merging Into larger economic regions some of the smaller republics.

E. Khrushchev's Theses

Onandidate member of the presidium v. A. Furtseva statedpeech ln Moscow on the proposed reorganization tbat "before this question comes up before the Supreme Soviet, the theses of the report will be published and submitted for wideonth later, onarch, tbe Soviet press published for public discussion"theses" on the reorganization, and several days later announcedupreme Soviet meeting would beginay to act on the proposals. Publication of such theses on important subjects is unusual but not unique ln Soviet history, and Is lntendod to give the appearance of democracy as well as to solicit suggestions for carrying out major changes of policy or methods of organization and Similar "theses" preceded the adoption of revised statutes of the Communist Party byh party congross

imilar "wide, public" discussion was heldthe USSR constitution was approved The drafts of five-year plans also have normally been published foronth or so before formal adoption by the party.

As mentioned above, there have been reports that Saburov actually drafted Khrushchev's "theses." If this was the case, Saburov may have proposed tbe reorganisation plan In early Februaryeasible way of eliminating bureaucraticdeficiencies" which he may have contended in December wero the real reasons why realization of the Sixth Fivo-Year Plan was in Jeopardy.

The theses called for the abolition of central industrial and construction ministries and the formation of new "national economic councils" which would be responsible for administering industry within geographic areas. The areas would be basically the same as existing political-territorial divisions, such as the Bashkir autonomous republic, Sverdlovsk Oblast and Chelyabinsk Oblast. The povers of the various republicwould be increased markedly under the reorganization, and the republics, together with the subordinate "national economicould have much greater responsibility than previously for tho implementation of the national economic plan vhlch had been approved by Moscow. The national economic councils (called Sovnarkhozes) vould exercise operationalover individual enterprises in their areas.

The proposals also called for major changes In thegovernment and planning apparatus. Gosplan,5 responsible only for long-range planning, vould be given most of the planning and operational responsibilities of theplanning body, and the latter would be abolished. This proposal went beyond the instructions of the February plenum that the current planning group not duplicateork, and was the final step in cutting down Pervukhln's committee. In Integrating the economic plans of the various republics, Gosplan should "nip in the bud" all attempts to use resources for local purposes "to the detrlmont of the interests of the statohole."

The theses also recommended that the USSR Council ofbe reorganized to Include the chairman of each republic's Council of Ministers. In addition, the roles of the partyand trade union organs in assuring the implementation of state plans vere to be Increased under the reorganization. The local party organs vould benefit particularlyegional form of management, since the existing structure, under vhlch




individual plants often had direct lines of command toin Moscow, had "deprived" local party organs "of exercising more active influence upon the work of

Some parts of Khrushchev's theses indicated thathad occurred in their formulation. According to the theses, "some comrades" were proposing the formation of special committees under the USSR Council of Ministers to have responsibility over key branches of heavy industry. Earlier in March an officer of the/

iirst Btep" in the reorganization might be the formation of broader central ministries, for example, one ministry for the whole of heavy industry.39 Whether named committees or ministries, such organs would, according to Khrushchev, "inevitably set up apparatuses" similar to those of existing ministries. The State Planning Commission, now to befor both current and long-range planning, should be given any functions which such organs might perform.

These apprehensions of "some comrades" that themight weaken central control over the economyto concern heavy industry particularly. discuss in some detail the need to guardtoward local autarchy and against tendencieslocal welfare above the needs of the state, andclaim that Improved central planning and controlprotect the state from these pressures. transfers, however, may have resulted fromrumor was

current in Moucow at tne ena ox marca that. Tevosyan and A. M. Puzanov, both members of the central committee, had been assigned as ambassadors to Japan and North Korea, respectively, because of opposition to tbe reorganization. Tevosyan, whose appointment was announced in the Soviet press onad previously held the post of deputy premier and probably had general responsibility for the metallurgical industry. As noted earlier, an equally logical reason for his transfer was the poor performance Of that industry Puzanov's appointment to North Korea was announced on He had previously held the post of first deputy premier of the RSFSR.

Another personnel reassignment which occurred at the same time, and therefore may be connected with theis that of N. S. Ryzhov, whose release as minister of light industry and appointment as ambassador to Turkey was announced onebruary.

Ryzhov's Ministry of Light Industrynyiit iu iwv ifl5 as part of the trend towardspecialized ministries, and the two parts bad been mergedear later, when many consumer goods and textile plants under the two ministries wore transferred to republic jurisdiction.

Another possible source of opposition to theis suggested by tbe sharp criticism of Molotov'sof State Control ln Khrushchev's theses. Theof the February plenum contained no such criticism, and earlier evidence bad Indicated an increase in the ministry's power since Molotov became its chief ln The theses, however, attacked the ministry for maintainingumbersome apparatus," "usurping the functions of economicnd trying to "embrace literally all matters." The theses call for all state control organs to bring their work into line with "Leninist" directives on control work, which probably means making their work moro responsive toby the collective leadership. This criticism of Molotov may mean that he bad failed to run tbe ministry efficiently, that he was trying to use the state control post as ato recoup bis falling political Influence, or tbat he opposed the reorganization. Since Molotov reportedly was one of those who criticized Soviet economic defects most strongly at the Decembere probably did not oppose the need for some form of reorganization. As an "old Bolshevik, however, he may have opposed the radical proposal ofIndustrial ministries and going overegional form of management.

In addition to revealing some disagreement over theKhrushchev's theses showed that the regime anticipated confusion ln management and dlsgruntlement among displaced administrators when the proposals were implemented. The tbeses emphasized that due care should be taken to provide released employees with suitable jobs and expressed confidence that these employees would see the reorganization ln its "true light." Madame Furtseva hadarty gathering ln Moscow onebruary that the party organs of ministries "must explain matters well" to employees released from ministries, and help them "correctly understand" tbe measures.38

Apparently these explanatory efforts were not tooat least ln their initial phase, because an article published onarch ln Partyournal of tbeParty, quoted statements of speakers at various local party meetings that the efficiency of ministries and other central authorities had already declined because of the


envisaged administrative changes. The article concluded by urging that the projected economic changes not be used as excuses for poor Inlowdown ln planning work was suggested by the fact that, as of late March, tbe state planning commission of the Kazakh SSR had not yet been Informed by Moscow of all data on7 plan for those enterprises subordinate to central

F. Tbe May Supreme Soviet

Duringreat show was made throughout the USSR of public discussions concerning the proposed industrial At the Supreme Soviet meeting lnengthy speechomewhat revisedof the reorganization, and was appointed chairmanubcommittee of the Supreme Soviet which was to consider "addenda" to the official law on the reorganization. After two days of discussion, the Supreme Soviet approved the law, with aeveral minor amendments, and ordered that thebe implemented

The reorganization approved by the Supreme Soviet ln May was appreciably less drastic than that envisaged lntheses at the end of March. The theses ln March had clearly called for the abolition of all central industrial ministries, while in May the ministries responsible for atomic energy, arms and related industries were retained. himself said at the May Supreme Soviet meeting that thinhange of view.) In March, the theses had also called for the abolition of industrial and construction ministries ln Individual republics, while ln May Khrushchev said there were differing views on this question, and admitted that some ministries should perhaps be retained ln tbe larger ropubllcs. The Supreme Sovietecision on this problem by turning responsibility for it over to tbe individual republics. In addition, in March the theses had sharplythe Ministry of State Control under Molotov and had calleddrastic reorganization" of this ministry. In May,after one of tbe deputies at the Supremo Soviet hadconcentrating all state control functions in Moscow,said that the solution of this Ibsus would be postponed and tbe question studied "more profoundly."

The reorganization as finally approved by tbe Supreme however, atill constitutes the most drastic change in the structure of the government since World War II. According to published Information concerning the USSR Supreme Soviet and the meetings of various republic Supreme Sovietsegional economicn the RSFSR,

d the Ukraine, niae la Kazakhstan, four in Uzbekistan, and one each in the remaining republics) are to be established to manage most of tbe USSR's industrial enterprises. Although, as mentioned above, some ministries are retained, overentral Industrial ministries are to be abolished. The regional councils have been given fairly vide administrative powers, but do not have policy-making functions. Central authorities nave explicitly been given power to "suspend" decisions of the regional bodies.

what are the prospects for success of thisin increasing Soviet Industrial efficiency? After tbe initial confusion, some improvement of Industrial efficiency will probably result. Co-operation between related Industries ln the same geographic area should be improved, and irrational "cross-hauling" of Industrial goods should be reduced. In the long run, however, regional bureaucracies and specialwill tend to replace the" present ministerial barriers, minimising the benefits of the reorganization.

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V. Political Implications

The above analysis of developments In the Soviet economy from6 through7 has two important political implications.

<1) Since replacing Bulganin as the regime's public spokesman in the field of industrial adrainistration last February, Khrushchev has been the dominant Soviet leader in the economic field. From start to finish he has publicly assumed leadership over the Industrial reorganization. In many speeches to agricultural workers throughout the spring, he has continued to act as the principal formulator of Soviet farm policy. (Actually, Khrushchev has become increasingly pre-eminent In the Soviet leadership in all areas ofand domestic policy this spring, and has received more publicity than any leader since Stalin's death. Allshows quite conclusively that Khrushchev has more than regained whatever Influence and prestige he may have lost during the Satellite crises last October and November.)

During this same period, however, Khrushchev seems to have modified or compromised his own previous position on economic problems on several occasions. The industrialturned out to be less drastic than he had originally proposed. His statements on the primacy of heavy industry in thearch theses of the reorganization alsoess dogmatic view than he had formerly propounded on this subject. Though not discussed in this analysis, the retrenchment in the spring7 of the grandiose corn program advocated by Khrushchev5 represents another change in his previous views.

On each of these occasions, Khrushchev himself announced the change in plans or policy, and thereompleteof public criticism in the USSR over the changes. It cannot be determined whether Khrushchev was forced by the collective leadership to modify aspects of his programs which came to be regarded as unrealistic or unacceptable, or whether he personally became convinced that such changes were necessary. In either case, Khrushchev publiclynot at all, and his personal announcement of changes has contributed to his prestige.

(2) This analysis suggests that the economic or so-called managerial class, is exerting increasing Influence over SovietthusThe low goals of7 plan, which represent the Interests of this group, were approved as the law of the land at the



February meeting of the Supreme Soviet. Despite latersuggesting that the regime hopes to avoid reductions of similar magnitude in the goals of the five-year plan, and despite criticism by Khrushchev of at least part of7 plan, the low goals of7 plan have not been repudiated.

It seems unlikely that thereohesive group ln the USSR, or one with any form of unified political alms, which could be labeled as the economic bureaucracy or the managerial class. The concept of an economic or managerial class is itself an abstraction. patterns of thought from vhich valid generalizations can be Inferred existroup, the views of specific individuals ln the group undoubtedly range the gamut betveen conservatism and optimism. There are ln additionvitblnroup, such as economic planners or practical business administrators. Those vho have gained most of their experience ln tbe planning field, despite individual differences, probably tend tovard the view that ambitious plans are necessary for maximum economic growth. Those in the field of practical administration, on the other band, may tend to emphasize more strongly theof economic efficiencyesirable objective, and feel that increased efficiency can best be achieved with realistic, rather than overaabltlous plans.

It Is the practical administrators who seem to haveole of Increased importance in from this group, however, are largely unorganized, probably at the present Influence state policy only through the economic field, and probably appear mainly ln the form of individual ministers and officials pressing for special rights and Interests. It may be incorrect to regard any of tbe present party leadors as "representatives" of this group before the presidium,arty leader, such as Pervukhln, who has himself risen from this group,may tend to espouse or at least sympathize with the views of this group. In any event, since the road to personal gain and influence ln the USSR Is through the party, any further increase in the power of this group, and any efforts to give lt cobeslveness, will occur within party channels, and could result in increased factionalism within the party.




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