ANDROPOV'S LIKELY STRATEGY FOR ECONOMIC CHANGE (SOV 83-10131)

Created: 7/1/1983

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Andropoy's Likely Strategy for Economic Change'

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Andropov's Likely Sliatcgy for Economic Chang?'

KeyBrezhnev's death, discussion in the USSR of changes in the planning

management of the Soviet economy hasigh-level party

lo^uw'teof options it ondet way, und decisions thai will have to be made on

this matter over the next year or so could hare important implications for Soviet economic growth and for General Secretary Andropov's political future.

Andropov is dissatisfied with the poor performance of the economy. He is aware of the resulting tensions that declining economic growth and inefficiency are generating in Soviet society, and he is cormnccd of the need to combine regime firmness toward the population with significant change in the economic mechanism.

The key constraint upon change in the economic mechanism is that Ajidiopov and the rest of thecompelling cultural,and politicalnot dismantle the command economy and replace it with some kind of market socialism. The necessity of working within tbe limitsasically command planning system, however, creates certain contradictory tendencies both in Soviet thinking about economic change and in actual practice. Soviet policy advisers (unlike many Western economists) broadly agree that the USSR needs better planning as well as greater reliance on certain market-associatedonly more decentralization but also morebetter utilization of material incentives, together with skillful employment of the state's power to command.

These contradictory tendencies are reflected in tbe Brezhnev legacy of programs and proposals for change in the economic mechanism worked out8he Brezhnev measures contain manyand they have encountered varying degrees of rrancoaipliance. sabotage, or neglect on tbe part of the bureaucracy. Some high officialsarc convinced that they are deficient in principle and that more radical initiatives arc required. Nevertheless, they doore inventory of politically feasible measures.

Thus, the central issue noweadership that will not and cannot buy market socialism is to decide what direction it intends to move in carrying out already approved policies, whal to selectenu of fairly well-known alternative ideas, and what convmltrnem it Isundeitukc in attempting to enforce Its will, from the Kremlin's

perspective these questions of emphasis pose critical choices that will have major consequences for the stability of the regime and Soviet power in the decade ahead.

Andropov is likely to support many of the policies inherited from Brezhnev. Beyond (his, however, be apparcntly seek* toore sharply focused action program. In (he labor and incentives field the program thai Andropov is likely to support will emphasize:

Further effort* to improve labor discipline and combat corrupcioo.

A moveimit market forces and strengthen administrative controls in the allocation of labor.

Greater pressure for higher labor productivity through tighter output norms, combirveel with greater wage differentiation to reward tbe industrious.

Reduction of excess demand in selected consumerundermines labor incentives, feeds corruption, and breeds disguisedprice increases for some consumer goods (induding food) and provision of more "luxury" goods and services for the more affluent elements of the population.

Organizationally, Andropov probably will press for:

Reorganiiation of the ministerial apparatus,

Decentralization of some authority to large industrial associations.

A devolution ofin consumer-relatedprovincial and Vower administrative echelons.

Finally, in defining the permissible scope of market-associated practices in ihe economy. Andropov's program is likely to stress;

greater attention than at present to strengthening (he role of self-financing and economic levers in the economy.

An increase in price-profit and market-based relationships withinfarms end between farms and the rest of the economy.

in retail marketing practices designed to force stale trading and consumer fpsods-pcoducing organization* to be more responsive to consumer preferences.

The program will probably exclude targe-scale exiension of private ct(jc-preneuriel aciivity in tba services and utde sectors.

The steps nocetsary to Implement (his agenda would probably lead to greater stress In relations between (he regime and ihe population. They would also provoke resistance within the economic bureaucracy, ihc pany apparatus, and ihe leadership us well.

The set of constituencies from which Andropov could draw supportcombating thii resistance appears to be narrow and rather diffuse At the top level Andropov probably need* lo alter tbe membership of the Politburo, extend hii control over the Secretariat, and build support within tho Central Committee before he can hope to canyrogram of comprehensive economic change.

Although this politicul broakibrouih Isrxcceidiuon for the program described above, Andropov's decisions regarding precisely what to seek ic the program andre likely to affect his power significantly. While bis ocooomic strategy is hostage to the limits of his curreni political strength, it is also potentially the most importani means of overcoming these limits.

To set the stageew economic program, Andropov is already initialing changes in lhc personnel Held, in the policymaking process, and in political-economic doctrine. But lie still must decide whether to try to pushontentious set of measures more or less rapidlyackage, bringing any accompanying political conflict to an immediate bead, or whether to attcrnpt to introduce change piecemeal as be gradually consolidates his power within the leadeiihip

What could happen by do means depends limply on Anclropov's piolilec-tions. The interplay of power and policy in tbe Kremlin could ryecessitaie political compromise and gradualism, but it could also drive Andropov toigh-risk strategy of eeoaornic change

If the steps likely to form Andropov's program of change were in fact implemented, they could have aimpact. Whatever lu economic consequences might eventuallyngoraus coautikmeat by Andropov to change in the economic mechanism would almost certainly have ungibte and immediate political effects, including Intensified factional struggle within thesome probable, if unpredictable, impact on Soviet international behavior.

BLANK PAGE

Conleots

Andropov's likely Strategy lor Economic Change (u)

action

Thii Intelligence Assessment dlscuues GenualYuriylikaly approach to chanted ir. the Soviet economic mechanism over the neat teveral yean. The paper focuses oaAndropov himself hat taid cn tbe subject, on constraints that inhibit action, on the posjtioei hut tveferences and politkal carniLatrona might lead him to take in theiscussion of policy optiotu. and on hit prator instituting policy change. The overall aim of the paper it to discuss policy choices rather than lo predict how effective various measures likely to be adopted mighl be.

Given the tcnuoutnest of much of the evidence on which ii it based, tome judgment! reached in thit paper arc necessarily speculative. Tacticalrelated to contol ids tier hitower must influence Aodropov'i candor oo the politically won live issue of ccoaoauc change Nevertheless,till possible to consider tbe ml in directions ol* movement, bound the range uf possible changes, and provide illiisuative eutnptcs of steps that might be taken.

Background

Nature of tbe Problem

The Soviet leadership has been confrontedharp deceleration since then the rate of growth of GNP.idely reported to consider the economy ha number-one problem.1rowth ia GNP averagederceni.above that attained0 and10well below tothercent average annual rate of growth achieved duringndercent annual rate ol growth plannedn industry, lertovi bottlenecks penisted

. - a. WnKin drOrihuni ind wore,

during the period; shortages of raw metcrieli. fuelt. and power hampered production in almost all branches ofarked decline tn the per-formincc of the railroads caused ditlocatwntthe economy '

With tbe ciccption of agriculture, perfortnaace in all sccton of thr economy was worse7 thanlump in steel production, along with short' falls in building materials, has curtailed growth in constiuciion and delayed tbe introduction of new production capacity. The low rates of growth of civilianercent annually11 and by far the lowest annual increase since World Warwith Soviet effort! io osodernue industry,nergy aad raw materials, and increase productivity Underof productivitywhich tbe regime hat been hcanlybeen striking; the riseindustrial labor produciiviiy. for Instance, averagedear1ar below ihe apercent-pet-year increase called for by the plan

Some of tee difficulty can be accounted for by cilcrnal factors

The thud and fourth erxsecutrve years of harsh weather that have depressed agiicuhutal production

Declining increments to tbe working-age population thai have led io labor shortages.

The rising cost and increasing difficulty of eitract-ing and transporting energy resources and other raw materials, which have intensified the impact of bottleneck! already present in key sectors of lhc

e*_rj^omy

Bul the key towree of economic problemsclearlygrowing inadequacy of cutting meih-odt ol planning and management These methods

Contribute to irrational invesiment decisions

Retard scientific-technological innovation

i courage* high cotti ind motiWc watte ol

resources.

Motivaie producer!Ul cornetinltly and assortment.n many Whet ways fail to meel customer needs.

SiiniLiaie Widespread illegal economic activity.

Need foe Quag*

Most Soviet aalhetnue* agree wilb Waiora obseivers lbsi lasting ijraprovcineni in iheoMorny will be unsensible wiiboui chanfci ia tbe en uie economic laeetaoiiai Since llrcibnev'i death, di*CuBieo of web chances wiihin Sowei bureaucratic andcircles baa ucrcaacd.igh-level pany review of opuoaa, ledew Ccnual CortinuiteeNikolay Ryablov. la cow under way. Tbe Stalelee (GcaplanX ihe Academy of So-encea, and the State Committee foe Science and Technology bave been talked with preparing sprxjfie protaudi Soviet officials bave told Wesierners that major institutions arc bring asked to iubn-.it their views on desirable changes andentralplenum will be held to coufiiin policy in thb area. At tbe) Plenum of the Central Committee, which was devoted to ideological affairs. Andropov declared that chance in mono dement of ihe economy bad becomeThis it not just our with, comrades, this is an objective necessity and iberc is noof avoiding ill*

Wat era analysis believe that what is basically wrong with the Soviet economic lyitcm is ibe itscorroct information it supplies to deciilonmaken at all levels, ill bureatiersination and lUfling of initiative, and its failure to itrvciarc iacctrtivca is athat rewards cfTrcsettcy. From thnomprebenilre transitionarket economy in which prices reflect supply and demand and profitit the Ruia trbieciive of managers Western analyitahowever, overn some improvement canbe squccied out of the existing commandlysiem.

Soviet aulhofltlsa agree with much of lhcf ibe ilia of the Soviet economy, and some of them may tocteily believe thai the Westernit also correct.will be arguedprudent calculation of any Soviei policy

advtier tit iixculut mult be that market socialism it" politicallyive option and therefore simply cannot be' "Reform" from ibis lUndpovnt must thus email improvement in, and preservation ol. the basic features of the cooioand economy

Resistance to Change

Historically, altempu to effect feadamental changes in planaing and nunsgement of ibe economics of Communist countries have usually encountered uroog resistance wherever Ihey have been iried. Opposition hai arisen because of:

Aoften later proved codedroiftcd change will create marc new economic problem* than it solves.

Awarcneatbange will burl ibe material or crreer interests of different groups of officsali

Siivce of the iisoe of chaagc in factional struggle* wiibin the top leadership

- Fear that change could lead to Lou of control over tbe intelligentsia or population at large and provoke poliiical initnbtlily.

llcliefourse of proposed action docs indeed violate basic precepts. .. ,

Plain institutional bcttia in the buicnucracies cLaiged witb introducing cbiegcs.

All of these factors are likely to prove tourcra of resistance lo any propcaah fot drastic cbange ia tbe Soviet Un>oo la parueuiai. Aadropov nasi lake into account tbe nth (but also Cfrportanitica) thai changes to which he commits himself may create for political maneuver in ilic Politburo and the inevitable attempt by lower bureaucratic echelons to deflect or not implement unwanted changes.

Malatraaorc of Ibe Commandey Coat train!

From the standpoint of Aod'opo* as well as other members of ibc Sovietismantling of the commandtmou certainly oui of ibe

iv aktk

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oimidibto atrny o' cultural, economic, and political (actor, coniirain iheir choice* tothin-system" change

A planned economy ii alln den have ever known. They do not undentand the purely economic rationale for markeu and believe lhat, however elTr cienily markets may operate at the enterprise level, they necessarily produce chaotic resultsacrc-econcrnic scale PUrSing. byot ooly mandatedarxism-Lentrobably seenritical factor responsible for victory ia Wot la Wund the elersuon of the USSR io work! superpower status,urely ecooocnic stand point, the caisiing ryiiem has the outstandingcomparison with hypotheticalof being known Inowever inefficiently. Thescale and trowing complexity of the Soviei economy and its need for more rapid technological innovationtheirneed lor better overal! placnia* rither than market forces

The readership aho has in Blind aa agenda of change* in branch and territorial proportions of the cooaomy (for example, accelerated Siberian development' thai it perceives as essential aod that it almost certainly believe* woulde implemented in tbe absenceommand mecbaniim. Theully aware that in real life tbe economic cues to wbicb manager! and workers respond create multiple and fundamental divergencie* between their Interests and those of the Hate at large (ai defined by the Communistecause these divergencies cannot be bridged in the near term, the leadership correctly hold!trong tysicm Of bureaucratic transmission and enforcement oft indispensable

Moreover,onWdcrable degree the substance of pcv;cy eanne be separated 'roast lhc proem af sauanf. ing the economy Resource allocation priorities of high political impoit (luch as mililary prelection, inveatmcnt in agriculture, assistance to the Non-Black-Earth /one. or Bnykal-Amur Mainline devcV opmeni) can be adherednd implemented largely because purely economic calculations do notpolicy or its implementation. The capacity to piovidc staple food items, shelter, and servicesubtidijed lo- COti ii probably thought to contribute

significantly to regime stability and legitimacy eadcnhipprobably believes- -thatisting economic rnecfaaaUm provides the possibiliiy ca* assuring full tmplorroent and avoiding the political instability lhat might arise froen decentralizingrkvmc decision making

lorentury Soviet authorities have insistedommand economyecessary means for maintaining and csercising the Communist Party's monopoly of political power. Its experience in the Bio: baa almost certainly reinforced the leadership'!to believe that there is indeed anotbetween relating centralof the economy and political pluralization. The leadership is aware that the command mechanism oroides jobsole in society for milliom of party and government officials who serve as political ballast for the system, and who otherwise might well prove dispensable Not of least significance, the leadership realizes that the connotate command structurerucial means of combating "localism" wiibin ihe maltioatioail Soviet catpiic and tskey ieotru-meat for assuring Moacowt eeonomk bea-emony Over Eastern En rope.

tenpUeatiucriaogr

Perm in it f> Chaige. Tbe cultural, economic, and political realities cuscussed above dictate thai ihe problem the Andropov leadcnhip must add less is how to improve Ihe existing planned economy, not whether to introduce couiptehentive matkei socialism. Tbe inner would imply revolution, not reform, and is simply not on tbe Soviet agenda. Thui. Western discussions that equate reform of the economy with market socialism or even free enterprise arc irrelevant from the standpoint of Soviet leadership lotcntioei* and Current pome-lilies Ir. this Western sense there can be non the foreseeable future.

The ttaagerlea AfWef. Andropov's Hangsriaaiocs and reports lhat be ran interference tn the Politburo lor Radar's reformist "New Economic Mechanism- have stimulated speculation thai ihe Soviets might opi for the "llungananuclinc

such speculation bai been ibe promotion in tbe Soviet press of Hungarian and Other East European cspcri-enceseputed Andropov client. Oleg Bogomolov. the' Director of the Institute of Economics of the World Socialist System, and by members of his institute ts well as other academics and officials. In addition, there has recentlylurry of visits to Hungaryvici delegations investigating tilof tbe Hungarian economic system for possible adaptation to Soviet conditions.'

Tbe Hungarian model deprives the central planning authorities of the power to issue directive targets to enterprises, and it involves the dismantling of the centrally directed supply system, the establishment of profit as the key performance criterion, and the abandonment of centralized price setting (although not prices the American economist Joseph Berliner has argued, its attempted introduction in the USSRomprehensive, system-wide basis would entail convulsive changes and provoke concerted resistance from most quarters of Soviet society.the unacoepubility of anything smacking of market socialism would appear to rule out adoption of the "Hungarian model" on an economy-wide scale, it by no means excludes partial introduction ofor other market-associated mechanisms in indrriduitof (he economy Conversations of high-level Sonet policy advisers with Westernersadditionally, that the Soviets have beennot only ia piecemeal application of Hungarian market mechanisms but also in the less intrusive rale iq daily management of the economy assigned to the central party apparatus in Hungary

Imcmmisiemcla. Having to work within the limitsomma cd system leads to opposing tendencies in Soviet discussions of change in the system ofocganixauoe and management. Soviet policy(unlike many Western economists) broadly agtcc thst tbe USSR needs better planning as well as greater reliance on certain markct-associstcdnot only more decentidilation, bul also more centralixniiom and better utilisation of materialwith skillful employment of the state'i power to command. Many Soviet ctpctts, for rumple, strongly favor granting production manag-ers much greater operHtional autonomy, while al lhc tame time they believe there must be more effective.

cent rallied direction of science and technology policy, long-term capital investment, regional development strategy, financial policy, labor policy, and integration of the Soviet ecceiocny with that of Eastern Europe. These aminomie* are clearly reflocied in changes in the economic mechanism approved"

Tbe Breebner Legncy

Western discussions of the reform issue often convey an impression tha: Soviet leaders and policy advisers are waiting for somebody to advance radically new proposals for change. Is fact, an inventory ofand proposals Is already available in the formapge of meat irea worked out'These measures, which we shall call the "Brezhnevover many aspects of the economic mechanism-central planning, success criteria, pricing, finances, wholesale supply, ministerial structure, agricultural administration, operation of production units, and organiratton of labor and wages, for esampte

The Breahnev legacy attempts to combine broader employment of some market-associated mechanjemt with measures aimed at achieving more effective planning. Thus, it:

eneral intention to extend lelf-ftnanc-mg practices in the economy further than at present.

Approves higher wholesale prices on the output of sectors of the economy runninglanned lost and dependent on direct subsidies from the state budget

Insists on fuller payment for resources (land, mstcri-all, finance, and labor) through higher prices.

Increases the role of bank credit and enterprise funds in financing capital investment and inventory accumulation as compared with grant financing from the state budget.

Emphasizes direct ties and contractual obligation! between enterprises.

Encourages Individual production and sale ofproduce.

But ii the tame time it teaks to Irnptove liability end balance In tho economy byear instead of annualt also extendi interaee-(oral and regional program planning, rmphasire* plan rim of scientific and technological innovation, and Ixoadcna Ibe aoope of financial peann.ni'

Even diehard adiocate* cf central ptanrtina areware lhal Mcrjeow tnuit giveertain amount of authority to lower level iniiiiuliont to be able to cscrcttc itratcgie control over tbc economy. Thus, the Bieihnev legacy:

hich will conitraln choices open toand the creation of adon^ionaicentralited. Inter-branch organ* for managing to-called territorial-pro. duetlonnd It aim* at increasing the use of direct command mechanisms to force conservation of rawuel, and energy and to limit the use of otber scar

In the area of incentives, the Brc'hncv legacy implies:

A revision of incentive systems, with an emphasis on somewhat greater wage differentiation.

illingness to assign more authority tp republic and local soviet* in planning andespecially in tbe areas of consumer goods production, trade, and servicesecent Central Committee CPSU and USSR Council of Ministers rtsoiutio' on consumer goods production hat al readymall step jo this direction)

- Emphaiiiea the creation (or restructuring) of large industrial "associations"ith tht elimination of intervening bureaucratic layersthem and the ministries, and the granting to them of greater operational independence

However, tb: Brezhnev legacy also provules fot an increased role fot centrally set plan "norma lira and

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rrdtctnn la etin la'tcli tieoi Sua inmliU)ibi

eadyaar Iftableu enii

thaaast tot |rruK> flulHIli)t tn *ufu il.bm et

aryiwaaraiui tataa aaeea ilaaaarag

aa* ta ulead. It* eaantTn laruraa

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etaaaaaa famt a* man Inn-Sit thm an* il* iWw et saula CinaxMIil

elia luodlnit io mfyl4I* iMil art (etinj Iht pBllitealhn -

wmiial nvtlIi iwjaiiad

Coniinued introduction of organ!rational structures designed to link rewards and final output (eipecially tbc "brig* de" organirataoo of labor ia both industry and agriculture)

A heightening of incentives for both management and labor to reduce the number of worker* on paaicular jobs by emphasizing, for tMcnpte. the "Shchekinonder which funds laved by releasing rod und am workers are used lo increase the wages, of remaining persornsei

The decrees on rxtjrjonwc crgiairation and cuoage-memon theincorporate theimpulses of tbe Brethnev legacy notedencountered varying degreesr neglect on the port of Ihe

' la eoauaji sa aalalkal lit uiu) ui|iu whwti to)oelia Hi ifeClBrseltWtjwaelr. hai ei ked aiudaoMa. mIc* atl "aaraaimi" aa* *Swmi' anh thai arelar roA*UBBB] at ilw taint nan) auto* hHhm laiinaiui ihIioi Om ruti in ilumwl (nan lalul caleatioeaa ai traaa aa iitwiii'. pmd at aaawpaWa. Snanwmtrt

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men tune*,at worMntaUlmion atmonltaUon Oedvaloni. renmioa at praTiS. fonniuon atlawea. aa*mw twtsaat. run aiiwiHaaaaai*lar laauaili. (Wi ifa rwMa aitjaiaaaw* al rated aad

uaplasacahraaCSa a* etc ea*ma>n

inMun aaiaaa anaaf Sn-tn poBC)taa uraailmlimtu wamif (haria>lliia and (uwnbty

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iureaucricy. The opposition io the decree* itemi rtKKtty from the fad that they conflict with short-icrm coalshich Ibe regime alio attaches high, peioriiy oe would introduce standards ihai would reduce ibe income and career proipecii of (heresponsible for lheir implementation. Al kail lome high official! reportedly are convinced thai these measure* ere deficient and that more radicalare required. 1

Nevertheless, lhc key issue noweadership that will not and cannot buy market socialism it to decide whai direction it intends to move in carrying out already approved policies, -bat to selectenu of fairly wdl-known alternative ideas, and what ooectnitrncot it isundertake io atlemptiag to enfc-rCr. its will Front the Kremlin's perspective, these questions ofcritical chokes that will have majorfor the stability of ibe regime and Soviet power tn the decade ahead. The out-wme of ihese cboicca will depend partly upon Andropov'spartly upon poliiical constraints and ceirjonuni-ties, and partly upon Aridropov's tactical skill. '

vllook

I Us Assessment of the Present Sltuatluo Inear in office. Andropov hasumber of ttatements that provide the bursreliminary analysis of his views on the state of the Soviet economy and of hil probable itrategy for improving iu performance. The tutayorftatcment in ffommurusr. the party's idoological journal,peech at the June Central Committeeof which almost certainly reflect divid. ed opinion and political conflia within ihe Kremlin The content of the article indicated ihat il wai designed to set ihe itagc for intensified doctrinal and policy debate, leading to an etiborntion ofeviied parly program for which Andropov appealed si ihe June Plenum. The debate and the doctrine would (unify policy

innovation and reinforce Andropov's personal power by strengthening hit claim toeading'Mars in-Leninist

A numbci of reports and his own publicsuggesi ihat Andropov it even mote dissatisfied wiih the poor condition of the Soviei economy than Brezhnev was. Enormous investmcnu have not paid of! as capeeted. and sCkntifieMechnoJogicalIsnegative consequenoes. bebelieves, for Soviet military power. Performance, he states, is Isggtng behind plan targets fotth Five-Year Plan; costs are too high; there arc large overHpendiiures of material and financial asseu: and labor productivity is noi rising rapidly enough.serious, he says, is the gap between the eipand-ing money income of the population and ihe availabil-ity of consumer goods This disequilibrium not only undercuts incentives, bul has the politically harmfuleiacerbating publicof inflation and shortages. He notes lhal Ibe economy so far has responded very sluggishly to remedial steps, and ibe thrust of his comments itrong-ly sugiesis that he believes the prognosis is for very slow improvement at besi

Like his predecessor. Andropov identifies several obvi-oui constraints upon ecoriomic growth;Poor managers hinder improvement to econoertic efficiency.

Investment is aaueered. on ihe one hand, by military spending necessitated byrnperialbtnd. on ibc other, by ihe need to maintain tolerable levels of consumption.

Shortfalls in agricultural produr^son and rising costs fot eattacting. processing, and distributing fuels and raw materials have reduced growth.

i, pretrua KH twiti ihrIsdr, and bnt potktri Ol

itw turn Kr ihe tntaW tUim Acceauao: of Iuonsnia- ettxnhio. tntrwa and mpteinO In

Ihrolew are lallartfl i,fToeate, Urn ptn,e been WttlUholU w

IvOl i> 'tl*.in IH1 ai-Str KWvshUie.

Bui the critical factor, according to Andropov in KontmithSst, hat been the failure to implement chance in the management of the economy:

Why donot gel iht proper effect now from the huge capital Investments? Why are theof science and technology being Introduced In production at rates which do not satisfy ust Many reasons may be mentioned, of course. In the first place, we cannot fail to see lhai our work, aimed at Improving and rrorganltlng ihe economic mechanism and the forms and methods ofIs falling short of the demands made by the present level of Ihe material, technical, social, and spiritual development of Soviet society. And that Is the most Importani thing.

Obsolete doctrines and tradition-boundclearlyinhibited the development ol solutions to economic problems and blocked necessary policy adjustments

Social DisclpDoe'ceedltloa of Change With the Polish rumple freshly in mind. Soviet leaders are -ell aware of the potential linkage*poor economic performance, public malaise, and politicalthough they may dilTcr over Ibeir assessment of the seriousness nf the current situation end how to deal with it. In discussing potential political instability. Communist ideologues prefer to couch their discussion incode talk abouto bis k'ommu-nisi article. Andropovosition in an ongoing heated but esoteric debate on contradictions that has mayor implications for dealing with sociopoliticalIn the contest of this debate, he emphosiies the remoteness of Soviet society from the Communist ideal, the existence in it of substantial litem and potentially dangerous social tension, and theneed for regime firmnct.'

Central to Andropov's assessment of the present situationerception that social alienation among the Soviet population is widespread. This is anot reflected in Bierhnev's speeches. Manifested in lack of discipline, shoddy workmanship, lack of commitment to enterprise goals, theft, laborourishing "tccCnditd widcspicedsocial Alienation uns productivity and fuelt

resentment againstihose seen to proGt illegitimate:and otherWithin intellectual circles, frustration over the near-stagnant economy and an absence of effective reformiccep-tivity to democratic socialism. The outlookissipation of such feelings ofnot favorable in the foreseeable future fudging by hit public statements. Andropov, like other members of his class, evidentlyaundiced opinion of the ideological commitment of Sovietpeople aod little faith in the political reliability of the intelligentsia. Although social alienation presents no immediate danger to the system, it could, if unchecked, lead to political instability

Thus, for Andropov, the first step that must be taken isonsistent consolidation in all spheres of the national economy of what Man described asand Order.'" This Is Andropov's response to canting levels of alienation and possibly foreshadows belt tightening to come. One facet of ibisis the highly visible campaign already under way to use coercive "administrative measures" to enforce labor discipline: "Although everything cannot be reduced to discipline, it is with discipline (hat we must begin,iscipline. Andropovis en essential prerequisite for other measuresiep that "does not require any capitalyet produces an enormous saving."

Coercive means, Andropov evidently thinks, can help to improve efficiency. But he obviously believes that these means alone cannot produce economic salvation. Andropov tecognttes that worker and managerial behavior will continue to be determined by material interests andposiiion thai he recently iccmphasiaed at the lunc Central Committee Plenum He acknowledges, for eiample. that new technology is not being introduced in produclion in Urge part because this puts managers who do soisadvantage' Effective solutions to Soviet economic

1fniwrlaw/ fennamU a) Enersy

USSR: Litwpiun

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problemi must harness such interests rather lhan suppress (hern Thus ibc roto ol coercion Initrale;y. while significant, it limited; reinforce-meni of order, noi social mobiliiat ion in ihe tense of (ho eductwnast amount of unpaid andlabor, ia its aim. However, if ii became dear thii economic Incentives were not joins to do (he trick. Andropov mi (hi well employ coercion for mobUira-lion cuiposea- -as he did in Karelia Sunns (he Second World War. I

Tbe other facet oftrategy for ttrengtben-inj social order involves public relations. Through his speeches, appearances, and writings, Andropovseeks to:

Create an impression thai tbe retime is icsponstvc to popular resentment Over unearned income, free roadies, aod corruption.

Deflate any expectations of rapid improvement in the standard of u'ving.

Ceo vino: the population that tbe leadership iswith it about eccnocaic problems.

- Demonstrate that there isill to act. and follow through oacc decisions arc taken.

thai the regime, if tested, can and will defend the political system with whatever means arc necessary.

Andropov'i purpose is essentially to shape political attitudes, which Indirectly may influence laborHe evidently doe* not believe that work habits arc likely to respond much to director moral suasion. Tbe General Secretary cynically dismisses"persuasion andod "fussiog andnd generally downplays the orgaoiling of "socialist competition" among enter-ptjsca undercutting tbe role of thousands of party, trade union, and Komsomol officials who are engaged tweciscly in such activities. The tone of his referenceshese Uaditicnal "agitational" functions ton traits markedly wilb tbc way in which they were treated by Central Committee Secretary Konstantin Cherncnko at the June Central Committee Plenum

Andropov's likely Policy Preferences Andropovs ipeeches and his Xommunisr articlethe general direction in which he hopesurn the disctiitioo of economic change

Umiti to Cnaage. First, his statements tei thewithin which change in themuil occur. These include:

Maintenance of monopolistic political power, even if ciercised in new. more flettible ways.

Maintenance of public ownership of the means of production.

Tbc unacccplabilily of any Yugoslav-typeowned and cooperatively managed production units.

Adherence to "democratic centralism."

Retention ofingle system of scientific guidance, planning, and

Andropov does stipulate that change must not be precipitous but should be "carefully prepared andto run ahead means to putet. within wdl-understood limits, the Kommuniti article and speech at tbe June Central Committee Plenum by implication call for broad innovation in tbe economy

Neither serious democratization, nor comprehensive reliance on markets in which central authorities do not dictate quantities supplied by individual sellers and prices, nor transfer of tbe basic meant ofto private ownership seems toive issue today among Soviet policymakers or top-leveleven though certain advisers and academics with past lies to Andropov or hit subordinates are empheiirang the relevance of East European experiments with partial restoration of markets by allowing enterprises to set some pi ice* and exercise iicater managerial autonomy generally. In this contest, Andropovto inrite rather than foreclose discussion of real-world issues, such as the degree of centra ligation of planning and administration, the role of financial mechanisms, the organiutional structure of industry and agncatiurc. and the permissible bounds ofentrepreneurial activity.

Andropov, by encouraging creativity and relevance under contemporary conditions, takes dead aim at dogmatism nnd mindless defense of the status quo.

s mot Hope (oro at lli< (tannineifcio ihe ant favord ay unaewrralcahleh ntdiim "mmlirrd [taeniae"beiwang-OTeh tuhe So-in mmoni

-

His west on intellectual analysis rathci than tlogan-cering serves the mme purpose. The Generalepealed support toe Ihe study of Bloc countries, which follows the lead given by Brerbncv at the loth Party Congress, is unquestionably change oriented. Finally, he implies lhat "politicaldoctrine lhat circumscribes change in the principle* underlying the economicnow be updated

Resource Allocation and Wage Differentiation. His remarks on resource allocation suggest considerable continuity with Brethnev's pcrsitions. For eiample. he would probably prcfci to:

Increase investment in mcchimention ol labor (and therefore in the machine-building industry) end the steel industry and raise somewhat the proportion of investment going into the production of energy, saving equipment as against the share going into primary energy production.

Maintain the Pood Program, but wiih an eye to possible savings of investment funds

Keep wagetherefore consumerline wiib growth in labor productivity even though powerful pressures in the economy have encouraged outsize wagegeneral labor shortage, the availability to enterprise management of state budget subsidies to supplement the wage fund, working conditions in Sovietissivc labor laws, and long cultural conditioning

Raise some priceslep in reducing subsidies and dealing with shortages in particular consumer markets

Anof Andiopov'sto reestablish tabor discipline is his strong suppori for linking remuneration to Ihe contribution of the individual worker. In his public statements Andropov has harshly attacked leveling because il conflicts wiih ihe priority the regime hot assigned to raising labor productivity. His tactic is to ploy to popular resentment of wage abuses, while calling for systemic changes that will in fact heighten wage differentia lion In so doing, he Openly lusiilictpolicy of greater tocial inequality in the USSR

Economic OttanltMliom. In Hie area of economic * -nrganirailon. Andropov hasperhapsihe creation of-the agro-indusiri-al associations miniated by lhc2 Plenum of the CPSU Central Oxnmtiiee. He has 1U0 lent some support lo the intuition throughout the economyhe so-called brigadem ion of labor. And be has attacked 'dessartaneouhtm- and parochialism. Dialed at the desirability of general reorganisation, aad implied the needeorganisation of the consiruetioa industry

On several occatioot Andropov hat tpoken ioo* gicatcr "decent ralira lion" of dee it ion mi king in the economy. Thus, in hit7 speech, he declared:

a tood deal hot been laid lately about iht need iq extend the independence of associations,and collective and iiatr farms The rime Stemsave come to tackle this problem In practice The Politburo has Insirvtltd the Council a* Ministers and ihe Stale flanmng Committee on skis score. Ii Is necessary ia act with caution here, ioer Imt mi if need be. ia makeand to lake account of the esptrience of

fraicrnol countries. .

He also called forihifl in docnnwimiliing related to consumer goods production from central to local authorities. In his article on Milium, he cmphaiired the enhanced managerial role of local authorities in connection with the formation of the agro-industrial associations and referred to "widening the framework of independence of industrial enterprises and state and collective

"Hiaaifcaw- t* [nlinlnhaul >a4 atwwbuni iwwiotMr.iv a s-

cutntIk* Una irw alno

iiiWiIhtiw In UM milionveiioatttvi. anniopntr.will wfcn aaacaariacaaiaaewiiawaimw touKiat aad aomiional itiCtotiHlcaa an*vbwOuiwiw-bit OalK naaavtd mHHMry o* asawajaajaldmimiiiaitv* foi OiKd .up. unionil tniaWwa iMam-iaiionArdm-ai- "Hi atnai> laanci -uhOnifiil(llO>l

ion Irn Hard Options How Andropov will translate general preferences inio specific choices among difficult options will depend heavily ran howarei over (he neat few yean aod on the strength of nil political position Anof these pros pec li mint therefore be more speculative [

tSoviet authori-

ties agree generally that the Brethnev line ctfaa es tension of "self-financing" {kkotraiehei) practices and eeonornic levers in the economy is correxJ and should be pursued. (JfAoi rase Art refers to the responsibility of aa enterprise to cover current Opcritinj expenses out of revenues, while economic levers refershe use of luch instrumenis as prices, bini Stunting, and contractual telaiionships toenterprise behavior. Doth terms,ore general sense, arc understood by Soviet audiences to refer lo indirect methods of control as opposed to direct commands regarding what to produce and bo* tout sharp differences of opinion ests! over rsKlboda of accomplisbiflg this aim

Within the policy ad-isofy tomawniiymong lower level specialists the question of how io at end telf-fsni ncinq and increase the imjotanoe oflevers while rtlaining central pljn.iir; is probeb'} viewed as the paramount reform issue This ceniinly is tbc area of policy In which the question of the viabilityoviet-type economic system ia raised most persistently, and the manner in which tensions between these two objective* arc resolved strongly affects the resolution of moat other questions In the long run. this iiafcc-or-break matter.

Andropov's ttaiementi bearing on this issue bave left his position ambiguous Hit airesa on material ioccn-ttvea and greater local authority, his calculated failure toentra li red" pUaning a* the backbone of the Soviet economic internbit criticism at the Jane Central Committee Plenum of exit bag princi-plea of price formation could be taken as indicating lupponore active role for indirect rather than direct mctboda of controlling enterprise behavior. On the other band, he firmly endorses Man's "surplus valuehich creates major obstacles to rational pitting, and nrvngly criticiicshabiu. the itriving to gain profit ul Ihc espense of olher people *

Westerneri have heard veiled_hint* fiom lontt Soviets that Andropov might la lime try ta upgrade the role of economic leveri In tho Soviet economy -ff taken seriously, ihis approach would reduce Ihe scope of directive planning from above, increase the role of profitsuide to enterprises, and pteveat minis tries from reallocating prof ill from the more effective to tbe leu effectivetlto give managers more authority over production derisions, introduce sanciiona serious enough lo compelto meel contract obligations, provide managers with real incentives to release redundant labor, and require much greater attention to supply and demand in idlinguch an approach by Andropov would square with hts appreciation of the need to harness material interest* io regime objeclives and might be seets by him a* the one meaat of drarmtical-ly improviag coonoauc rstefrartnancc

Nevertheless, there are strong reasoni wfay Artdropov might not make economic levers the mifoi clementrogram lo improve Soviet economic performance

failedmplement an economic reform geared lo economic levels.

support for it in the Politburo would probably be tenuous, and there appean lo be little

enthusiasm for il within brnaiW ri.tr rirrlrt

of Soviet st*paalasts are quite divided on that itswe

kind of partial moves most likely to be involved would probably not prodoce large rr lulls in Ibe short term and could produce confusion

levcn issue probably doe* not aiouse much popular interest aod is difficult lo dramatirr

Thus, even though be might view the tonv-lrimrom upgrading economic levers as potentially great. Andropov may well defer serious action unless he is convinced (bat immediale steps can nor safety be postponed ,

ihgi.ltmii'mal Gauges. The large number oftpeot lircd ccDoemie rnmninririme target for rcoi ganiration. This topic bas been widely ditcutacd by specialists, wbo have advanced cogentin fornd has been under con tide ration by Ihc leadership (or years. Ministerial rtairviciurins

-Secret..

rcnoitodly may be Included Innucleic of proposals ibat will bo recommended apparently within the nextonth* orto the leadership by NiVolay Rytnkov and hi* Cenlial Commlllee Isoonomics

Andropov's option! here, of course, would depend on the support be could mutter io the Politburo and on the political risk bo would be prepared to accept in challenging seated bureaucratic interests Rcotgani-ration might take the formoeootidation ofabord nation of functional or prof ram-related ministries to luperminittcn fas may already be inr both At thei-ne. ministries might be compelled to integrate incu- activities more CSCacfy with technological programs generateel by Cosplan, the State Committee for Science andand the Academy of Scsencca Such aif il were major, would provide Aisdropovnique oppocunily to purge the ministerial bureaucracy, initall clients beholden to him, and Increase uis influence over tlte Presidium of the Council of Mi oilgetting rid ol Tikhooov and others nl ihe inmc time '

This reorganisation might be combined with aof lubuuaiitenat echelons and an all-out drive io further concentrate operational authority in large prcducsion assoctalions If he followi this path. Andropov would accentuate Ihe line tet by Brezhnev ath Party Congress, which has encountered obstruction and delay in tome ministries. Pin sp proacb would be tees asevolution, of scene pUnnini taiki. improving occoetuaiucs for tech nologieal charge, andelter eomorjoem forAt the same lime, il promisesof scale in the performance of auxiliary and staff lunctioot and wcaild make it easier to establish long-term direct contractual ties between suppliers and purchasers--thiii railing the responsiveness ofto consumer requirements The relative success of the Easl Germans with their similars an additional argument raised by policy advisers foi moving faster in ihis direction Although this kind of ministerial reorganiration would retain -and perhapscapacity for effective centralin economic management wheic this was desired, ii would also offer Ihe prospecteduction in the

buidcn of detail on central planners, greaterin production, aod better coordination with regional scientific and technological institutions '

Major organisational difficulties may arise if the leadership decides that it should take more radical steps to improve horizontal coordination of theat the regional level. The regime has responded to the regional coordination problem so lar by:

Creating territorial production complexes, mainly in eastern developing regions of the country."

Upgrading the regional dimension of central planning.

Increasing the consultative voice of regionalin reviewing tbe plans of enterprises that arc located on their territory but arc soboidinate to higher bureaucratic echelons.

Devolving some power in consumer-related soetors to local Soviets.

Calling for local planning organs toore active role.

Encouraging caperi mentation by local party organs in horizontal coordination of science, technology, and industrial

Fuither slept can be taken along ihese paths, but there arc severe limits to the returns that can be squeezed from each. Tlte question of whether or not to shift substantial control over tbe allocation of at least some resources from Moscow to ibe local level cannot long be deferred. Al this point, thenow contains fivearty barons among its full and candidatehave lo reconcileregional, ethnic, and Central interests. In bis speech ath Anniversary of the formation of the USSRf the unsatisfactory experience of the ill-fated localcouncils {tovnarkkoiy) under Khrushchev and aware of latent nationalist sentiment in the non-Russianfair warning that his highest priority would noi be regionaliranstead, he stressed the protection of all-union economic interests and the defense of the political integrity of the Soviet multinational empire

Sa*Tit

ndropov will anon have Co speak more directly oa the ailieat tuue ol* agricultural organira -lion. Hb freedom of maneuver it constrained by thecreation of to-ealtodfro-induitrial ossocia-taaant at the rayon (rural district) aad all higher administrativedecttioa taken at tbe May IM1 Piaoum of (ha Central Committee at pan of Brezhnev't Foodho centerpiece of this peosram is the rayon agro industrial association, or RAPO, which brines together leaden from tberungs of all the agriculture-tela ted serviceand beads of collective and state farms under tbe leadcnhipeputy chairman of the rayon soviet eaeeaitrvehis reor gam ration hasmuch resistance from the agencies and pa real -rirusiriei. who fear that they will lose control of their oaa bureaucracies, and tbe shape it will take tn practice remains to be determined

Tbe RAPOs create serious difTiculties for economic policy that Ajfdropov must address.hange of course, RAPOs are likely to diminish still further tbe operational and financial autonomy of the farms This will further undercut Ihe ability of farms to make rational decisions. Although ibe RAPOs were mi op to bring order to chaotic ad mi nisi rati vc rela-ticetshipt in tbe rural districts, they may actually intensify problem of authority by placing many agenda under dual subordination both to the RAPO and to their own ministerial or regionalove backward through liquidation of Ihe RAPOsreestablish the lack of responsibility ot the service ageatciea for final results insove forward to subordinate all agencies and farms to the RAPO would createittlevuorefcozylajor question ofhese bodies would relate to Ibe rest of tbe Soviet economy, and burcaucralizc farm management even more thoroughly

Andropov's options appear to be limited, in part because he probably cannot openly abandon the RAPOs They en.oy tonndertb'e support wttbia the party appartlvi and doeeded framework for iniegratiag tbe farms, aervsee agencies, andprocessing food and raw rsatcrials. At the same

lime he probably cannot lake the politically safest course of doing nothing, since faim efficiency mutt be raised to improve tbe food supply and reduce the burden of agricultural spending. In some quartcn within the political elite, there is itrong support fo* the ideologically orthodox strategy of simply moving ahead with the creation of more intcrfarmand callingtep towardlher officials are probably counseling Andropov toolution to the agricultural problem byentrepreneurial activity under tbe RAPO '

Andropov has not yetlear signal of how he wishes to proceed. Clearly he approved the decision of tbe Politburo In early3 to give full backing to the so-called collective contract system of organ iz-ing and paying farm labor. This arrangement dependsroadening of self-financing practices in farms andignificant step toward involving smaller groups of rank-and-filerigades" orn profitmaking activity. Yet, at the June Central Committee Plenum, be emphasized the future amalgamation of collective farms with the slate sector

Andropov may well be compelled by reality tothat progress in agriculture is only pouibie through an extension of market practices. Should he come to this conclusion, additional measures that he could support might include:

Reducing obligatory farm deliveries to the state at fixed procurement prices and allowing farms to sell more of their produce in collective farm markets."

Relying more on the price mechanism and less on directive measures to influence fatm decisions on what to raise.

Systematically increasing commercial relationships among RAPO member organizations.

If Andropov were to turn to Hungary for ideas to improve any sector of tbe economy, agriculture would probably be one such area The Soviels are impressed

" Ihr Siuhnev1 out cuiMm*mii laaroi Ii aSSr-ed (inr* totell up tocrocnl of ihra* cJimvrd arocwiWMrrt of (mil aad vterlaMa a* coUeetiw faim

auiteU aid IS leuniihrlr of livrrica

il*.

by Hungarian egricuiiural tucccssei. ind thtspeaking throughh Pany Congress -his already specifically commended Hsn-;ary in thii rcgitd (although not. it ihoutd be noted, for doing away witheurcment quotas) It* Andropov docidodi tend market lie* inbe would needfie* doctrine to piovidc politiesl covcj and at the tame time prevent an undesired eiietwion of market Influence elsewhere

Indmitriil fate* Rilaiitts. Andropov might beto rely more on market force* in agriculture, bat be probably will go in the opposite direction in industrialhich he has most dearlyeadiness to act. Tbe regime's objectives are to gel workers to cirrimore, to improve the Quality of work, to releasereallocate surplus workers, and to prevent unde-sired labor turnover. The root ol the difficulties in each of these areas is probably perceived by Andropov and bis advisers as ibe existence ufteller'i market for labor and too little planning and legal control The combination ofactors kadi management to neglect labor discipline, ignore the connectbe-I* ecu malii) of Ubor effort and remuneration, board tabor, and stimulate turnover by what amountsompetitive bidding for labor.

believe that

Soviet experts concerned wiiht is necessary to:

Increase economic incentives for management lo release redundant Ubor (for example, by more vigorously implementing the labor -saving "Sbchekjno" method!

Mobilize worker interest in the results of joint UoOi and in reducing the number of workersah (for example, by forcing manngefi to organize labor brigades lhat operate in fact on the basis nf self-financing and payment for their collective production)

Promote rodrsinbuiion of Ubor by expanding ihe role ol local government otgtm In retraining end reallocating Ubor and by paying foi yob iritiinlng

* Increate wage differentiation .

Rely more on administrativenforce labor discipline *

Several measures taken by Andropov sGggest that he believe* the slakes are high enough to justify the risks of temporary unemployment and potential political instability enuiled by bearing down on the workers ihe discipline campaign initiated after bis accession to office, the pitting of his client. KGB chairman rede-ehak. at bead of the Miomry of Internal Affairs with ao apparent mendatc to strengthen law enforcement, and the stepped-up repression of dissidents Thus, for example, he is quite likely to support harsh new laws regulating discipline and labormf'

ndropov has personallymroposed new It* on employee conduct that woulderson who wat fired from being reemployed again (or tit raontbs the fusi time and prsstibtyear Ihe second lime.

Tbe practical problem with sucb lawsight labor market (as with the imposition of higher output norms and greater wage differentiation) lies as much in getting managers and local party officii It to enforce them as io abuimog obedience by workers If tough new Ubot legistsnacted. aimIiopov may be templedssure Ubor quiescence and managerial compliance by expanding the informer netuoiV and monitoring role of tbe KGB in enterprises.

With regard to positivehe Supremercoendyew draft law on theof workers" eollcctiie* ia the management of enterprises While the lawbetake effectseem essentiallyFor example, the liw gives labor very little authority in making plant-level decisions such as ihe te led ton of management personnel or the setting of worker taUries. Tbe Uv'i firu article io fact sitpo Ulcs thai the workers' ceatecuvea mast faoctmnthe leadership of the otfuoiration of tbe CPSU" and thai the doty of the collectiveselocution of the psriy'i decisions."'

higher nuipiii normt that require mote work lot the same pay

Smtiagi and Conimmer Goods Supply.ihe Supply of consumer goodsbsorb Iherising monetary income hasoolihai is thought by the Soviets andobservers to be large enough toincentives, feed corruption, increaseSecond Economyprioritiesrecently told by

a high Caspianthe

gap between purchasing power and (he availability of consumer goods isillion. Some Westernare substantially higher."

The matter deeply concerns the Soviet authorities, and. as noted above, Andropov himidf hai repeatedly expressed anxiety. In dealing with this important issue. Andropov must balance regime economicagainst social stability and In the process guard his own poliiical flanks. The high political sensitivity of Ibe issue arises from (he feci that potentially effective responses to ii tend toeduction in the apparent standard of living, shifts in income distribution and greater social class differentiation that contradict popular notions of progtcsi towardend an ideologically luipoctof private entrepreneurial activity

On Ihc demand side, tbc leadership could trynfluence tbc situation through changes allcciing wage policy, retail prices, savings, and taxation. Thus, for example,rtplan official cited above has suggested in (heackage of proposals. He would clamp down on minimum1 wage hikes for various categories of employees, use planning norma lives io hold wage fund increases below productivity growih. andraduated income tax. He alio advocaies an active pti'jcise in retail prim {presumably including food prices) to bring them more into line with costs; Introduction of flexible retail prices lo equilibrate supply and demand; Intro-ductieui of payment* forheretofore free social services: higher rem for better housing (existingtub* Idi ted renu are differentiated only for apart-meats above the legal minimum sire, and then only by

' la tInW'-pmrSSP.n

fni.mi ft-wjni.ni.in ihn theT leeoi'iiftnsIk IK* Qvritlll rtlAiunur4mlat conmmiitiU"

Qualii) (cnCi.l tfemiivdnline flOn hen squarenot by quality orand increased icnl am! lax paymentsland he lime Gnsplan'he prnsibility.

although uiideairability.urrency revaluation that would reduce ihc savings overhang

On the supply tide, the leadership bas options Ihat could affect the quantity and quality of goods as well ui marketing meehariismsC roposesfor private corisurncn over producers ia (he allocs, lion of fuel, building materials, meiat products, and iiansporution services^ expanded production ofdurables; more privately financed housingan increase in tourism: and an ethnically sensitive policy of regional allocation of consumer goods according to levels of income. Other experts suggest an espansion of direct retail sales outlets for firms producing consumer goods, and tome have even broached ibe delicate subjectreater role for private enterprise by individuals In lhc service sector.

Andropov's wordi and behaviorfar supply some clues as to the direction in which he would like to move. In general, he probably would go along with . iis Ihat have the cflcct of increasing social inequality and catering to the more affluent elements in ihe population One of the first pubhciicd Politburo agenda items under Andropov's leadership, fowas the provision of repair service and spare parts for private autotnobilei Food price increases inl) sugiesi ihat be will probably try to past on more of the iwn of food produciion to tbc consume! He will, however, handle Ibis volatile basilars* wuhmee- Western ar.alysu bel-tve that Andropov will not be able tonoftetary icuolaalMroue on Ihe useing> Although he would probably esiimatr that ihc regime could handle any threat of disorder lhal sack an cacroacb-neni on wvingi might trigger, he would alto have lo (bink Vortg and hard aKml whether |ychsirp would in fact induce peopleotl harder.

Andropov could eauly accept direct retail marketing by enterprises menufactuiini consumei goods, and he mighi accept greater flexibility in retail piices At the

June Central Committee Planum, be urged that more attention be paid lo cooperative housing eoniuucsion. lut Ihe expansion of private butineu activity in ibe trade and serviceslet al tome ctcmenu of the Secondra be more duTicuii Questions Tbiaoca appear lo be cat Ike political agenda for divcuision, and tborc are toed arein favor of poailivc action, ll could bring Quick relief io many coniumer complalnia at low economic cost io ihe tiale. up up excess purchasing power, indlabor productivity. However. It would alio violate existing doctrine and could increase AndropovsIn the Politburo. Andropov't campaisn ejainil corruption, bis SUong public endorse me-it of public ownership of the means of piodocitoo aad attack oecoauidcruliooi" aod profiteer ine. and bis b'kely leading of poicntiafly hostile public reactions probably will leadlean for the timereject pTOpOtab lhat would significantly envied piivate entrepreneurial activity in the service and trade lectors along "Hungarian- line*

Aadropori "Bottom Line"

Andropov, thus, is likely to support many of ibe policies inherited fromeyond this,he apparently seeks tonosc iharpty focused eat-in program. In the labor and incentive! field, the program thatikely to support fill emphasize;

Further efforts to improve laboi discipline and combat corruption

A move to limit market force* and strengthen admimsirativc controls in the allocation of labor

Greater pressure for higher labor productivity through lighter Oulpul norms, combined with greet ei wage differentiaiion to rewatd the ind turnout

Reduction of the personal savings "overhang" through selective price increases foi consumer(including food)and prcrvision of "luiury" goods and tervioei for the more aflluent elemenii of the population

Organizationally. Andropov probably will presseorganization of the ministerial apparaiut

Decenitshiaiieei of tome auibeeity to largeI aisociaiions.

A devolution ofin consumet-tclotedpiovinclil ind lower adminItlrstive echelons

I anally, in defining the permissible icope of induecv controls over production and resource allocstioa in the economy. Andropov'i ptograaa ia bkfjy lo SlteiiSomewhat greater attention ihaa at present to tticngtbening the role of self-financing andlevers

An Increase in price profit and market-baaedwithin individual farms and between faimt and ihe rest of lhc economy.

Innovation! in retail marketing practices designed to force slate trading and consumer goods-producing organizations to be more responsive to consumer preference*.

Ihe program will probablyatgc-tcalcof private enirepreneuiic! activity ia the services aod nade sectors **

Prospects

Although there arc few sharp discontinuities between lhc set of measures outlined above and the Brezhnev legacy, there arc new dements and important shifts of eifiptiiinthey were to bewould testpolitical skslb to the etniost.

SapawrtaadOMailllaa

Andtopoi't likdy agenda involves action ia area" ibai in Communitt systems have proved hasioraoally to be Fertile ground lor conflict within the regime orihe regime and society: industrial laboronsumer welfare, corruption, entrepreneurial activity tn agriculture and agricultural organisation, and lhc allocation of power among the main bureaucritic hicraichica

lhc possible strategy just described it at crosswith tbe interests of both management astd ths populatioa From ibe staadhsotM of wottuag people. Andropov'i strategy might have certain positiveIt

- Re*pondiuirently tell need foi order and discipline andtruggle againtt cotiuplian

Provides an image of lake-charge leadcnhip.Ofen leu rhetoric andandor."

Piomiset eventual economic progress

But it alio bas serioust would:

Impose more coercion in the workplace.

Mean that people would have io work harder loenrn the same inooroe

Jcopardire tho opportunity (orstliiy that provides Soviet worker* with lomegainst management.

Probably increase prices (or al lead some consumer Binds, including food

Increase wage and social inequality.

Oa balance, Andropov's *tr*tety would appear to lead in tbe near-to-medium term to greater tension in relations between ibe regime and tbc population

Managerial personnel probably welcome Andropov's reneral ecenrnitment to discipline, the work ethic, and mote rational incentive tywems. They would certainlyine that justifies greater privilege* for themlass. But many of then?may feel anxiety for iheir own.ither because ihey arc especiallyto charges of corruption or because they see they may be replaced by youftgci and better irained penoartcl.

In attempting to implement the changes noted above in the Soviet economic mechanism. Andropov would probably encounter widespread noncompliance and bureaucratic obstruction. The uonstituencies upon which he could draw in combating this resistance appear to be narrow and rather diffuse. Some younger and more icchiwerai Kelly inclined cadre* probablysee cwrscwurutiea (or policy movement and career ad.ancemenl. while other officials, irrespective of generation andfiliation, wouldestoration of firm social discipline. Elements within the miliury-induitrial-scicntific sector might see the changes a* promoting more rapid economic modernization aod technological innovation. Perhaps some terriicsrial officials and production association-level manager* would be attracted by the ideaevolution of economic decision making powerindividual institutes and policy advisers would perveive advantage in seeking Andropov's patronage. Finally, various individuals in the media and. insiitu ttonally. the KGB and Ihe armed forces might support an Andropov program of economic change.

The parly apparatusritical element in the power equation. Yet Andropov'i enthusiasm for the apparatus, of which he is the titular bead,o be remarkably retrained. In his pubtuhed statements before June, he largely avoided mentioning Ibe patty apparaiusunctioning institution. During his well-publicUed visit Inoscow machine-building plant, he ignored Iberimary pony organizationOrishin, ibe Politburo member and Moacow City "arty Committee first secretary accompanying him, Ihc oppcriunity to score political points by calling attention to iu role. Aridiopov also selected Nikolaycrsptan official and former factoryaltogether lacking in any prior experience in tbc party apparatus, for tbe key job In the Central Committee Secretariat responsible for overseeing change in the economic mcchanisro. This posting may say something about hi*of the talent available in Ibe partyfactional eiplanations of this unprecedented appointment are possible. Al lhc June Central Committee Plenum. Andropov spoke in favor of less day-to-dayby the pany apparatus in the government's running of the economy

The party apparatus itself would probably be divided over Andropov's strategy. Some party offtctsli al all levels would no doubt gravitate naturally imoorbit, drawn by direct ties withy connections with patrons who are hisThe large number of party officials concerned with agriculture would probably not enthusiast really support Andropov until hereater concern for their interests than be has apparently done SO far. Many party officials probably fear the anticorruption campaign and are anxious about KGB intrusion on theirhose concerned with propaganda must tense Andropov's contempt and resentsome may welcome the promised revii*ligation of ideological activity. And any serious change* in the

"Oa

role of lhc party npparatuiis lhc government economic bureaucracy and in lhc cole of lhc Central Committee btaneh eeonomie depart menu wouldMill further controversy in tbe party apparatus.

While Andropov's fellow Politburo members may have voted for htm in the liopc that he would get the country moving, tome of them at least probably would be troubled by tbe tliategy outlined above The confroautiooal nature of Andropov's posture toward the wot tins class, the likely thakcup of the Council of Ministers, the toleration of more market activity in sericulture, the possibly enhanced role of lhc KGB. tbe uncertain status of the partywould provoke unease ainong the likes of Iikhonov aod Chernenko. and probably others ts well. Gaining support tn tbe Politburo foi passage and consistent implementation olrogram of chtngc would not be tatv for Andropov

Andropov's Po"ci

Andropov enjoyed sufficient backing within theto gain nomination as Geneiat Secretary innd lie probably can continue to rely on the cooperation of such key figures at Ustinov and Uromyko Andropov probably sought, and stands to benefit from, the transfer of Grigoriy Komanov from Leningrad to the Central Committeemove that does, however, now place an eligiblecontender within linking distance of ihe General Secretaryship Through the Secretarial. Andropov can strongly influence the Politburo's agenda and lake the initiative in proposing pcrtonoel. policy, tod oege-niis "tonal changes. His access lo compromising KGB informal wr. about bis colleagues probably givesoteclisily powerful, if ruky. weapon for eliciting compliance with his withes in Ibe Politbuio. And ha nomination at the June Ivll testion of the Supreme Sonet to parallel occupancythe pott of Chairman of the Presidium of the Seprerfte Soviet notisible demons! ration to the Stwiei elite of his political momentum, but alto enhanced bis ability to influence activities in tlte governmental apparatus.

Ne*ertbcless. Andropovs power loinititutc Chang'm the economic mechanism it still limned by.

relative Lack of clients within the Politburo.

The tlrong personal stake of Potuburo members in restricting his autonomy In order to mainitia colrule.

oveilappiag membership of ihree other figures beside himsrIf Chernenko. Gorbachev, andboth the Secretariat and thewhich prevents him from serving at tbe tole spokesman en* each body to the other

- The presence of people wedded to Ihe status quo in key economic policy making potis in ibe Secretariat. Council of Ministers, and Gosplan

lelativt lick ol support within many sectors of the party and governmental buieaucricy lesponsible for eonnnmic affairs '

Apparently, Andropov did cniei olfiee with aof sorts io "get thingshis permitted him to make several lop level appoialtnenll.ro-mole some personnel shifts it lower leveU, and to unleash the campaign aimed at combating corrupt-on and strengthening labor discipline.ather fast start, however, the pace of movement appeared to slow down in the first months) Grcanyko's appointment lo Ihe post of Fust Deputy Cbairmaa of the Corneal of Ministers inollowing the earner pronsotioa of the Arc.-tiidrhan party first secretary aod foi met KGB offGiydar Alio, to another First Deputy Chtiimtn posttion. suggested that Andropov mighl be leaking full io establish hit influence in the Preaidium of the Council of Ministers before tickling the Secretariat and Politburo Hit octupincy of the Oiairminthip ol thr Preaidium of the Suprtme Soviet, probihle tupport foi theof Vitally Voromikov to ihe pott of Chairman of the Council of Ministers of the Russian Republic, and

emphasisemarcation of role* be:ween ihe wily apparatus and mte bodies lice belowl alsogovernmental" element lo hit maneuver foe power So fir. however, he hai not manaied io icoro any major policy iriurnpha cilber aproad or al home, and he has not been ableUndamenially improve hii power politico, within theChernenko and Other! remain Strong enoughesin hii initiatives. Deipile incremental gains at Ihe June Central Committee Plenum. Andropov did not man-age to effect anychange among full members of the Politburo.

Cherncnko's position appeared to have been weak coedet hii delivery of lhc report el ihe June Central Committeen which be ignored Andropov's callew pany program aod defended tbe Breahnev policy line, while confirming ihe existenceplit in the Politburo by bis excessive peotcstation of leadershipthai be (ctaiocd substantial support among hii peers. Thus. Andropov still needs lo alter the membership of ihe Potilburo. further extend his control over the Secretarial, build support within ihe Central Commit tec, and undercut bureaucraticlo policy initiatives

While Ibii political breakthrough is probably aforew comprehensiveprogram. Aridrnpov'i choices about whateek inrogram are likelytrongly affect his prospecu for radically improving his power position. In short, hii economic strategy is. on the oneostage to the limits of hb current poliiical strength buL on ihe other, potentially Ihe rnost imponani means of overcoming these limits.olitician. Andropov is probably asihe power aspect of this equation as he it in the puiely economic

actic*

Andropov't word* and actions indicate lhal heIbat io carryignificant program of change in the economic mechanism, he must alio initiate change* in the penonnel field. In lhcprocess, and in poliiical-economic doctrine He alio Obviously mutthoice ti lo wheiher totrategy of phased or tll-ef-oncc change

of Managerial Personnel. Prom ihe-ouisei of his tenure a* General Secretary. Andropov made clear his intention to carryersonnel thakeup. Hit objective ha* been toomewhat younget. belter qualified, mote innovative, and, above all. more disciplined tei or officials lo power in the economic lector. While tome movement is already visible in shifts of pcitonnc! in lhc central economic bureaucracy (and even more movement at lowerAndropov's pursuit of this aim has been inhibited by Poliiburo restraints on his discretion in personnel appointment* The thifu Ihat bave been made so far do noi appeare as dramatic as some Soviet officials privately anticipated. Andropov, however, appcart io have tigaificantly increased bis leverage in the personnel field in laice relieved the longtimey for personnel matters. Ivan Kspilonov. from control of lhc nerve Center of lhc party's cadre appointmentCentralOrganiiaiional Pany Workand arranged lo have lhc new head of this depanment report directly to him

Caartge In Ihe Policymaking Methanism.ipoke with Central Commillce

officials and other well-informed figures inoe loW Ihat Ibc new CentralNikolay Ryahkov, had beenurn lhc Centralate for elaboratingfor change in planning and managementecmomv. Once these structural changes hadthe Depanment would substantiallyioIc of Ibe Central Committee apparatusstrategic economic policy. By tbehowever, thelinesbe compelled to disengageintervention in economic affairs becausealteration in the rolepossibly, accordingaccount, even the eliminationeconomic depanmcnii of the CentralTheir monitoring function would beto an upgraded Central Commillceand perhaps to the

In principle,altation might increase the capacity of ihc Politburo and lhc Secretariat Id etamine options end iiecr ihc rarromy more efTec-lively in accordance wilh broad poliiical priorities, rather (ban react to bureau era lieeduction In the lupcrvisory role of ihe cusiing Central CommilJee branch economic departments, however, would inevitably Increase the operational autonomy of ibe Presidium of the Council of Ministers In the fxocevs. this would generate further pressure for ihc replacemeot of such officials as Chairman of the Council of Ministers Tikhonov and Chairman of Gosplan Baybakov by more viforous and innovative leaders

More importantly,hift in lhc role of tbe Centrale neb economic departments could significantly reduce the capacity of the territori-el pany apparatus not onlynterfere, but also to aci as an arbiteroubles booler in economicPany territorial autlionly depends in no small measure upon tbc ability of local pany officials to work through party channels in Moscow to Influence ministerial behavior. Fat more likely than aof the branch economic departments, (bus. wouldompromiseinstance, their rncom-binalion along "program" lines (as suggested by ihe recent combination of responiibitily for agriculture and the food industiyingle department

Docirinel Renewal In Ibe Communist poliiicalpower and policy cannot be divorced from current doctrine rVoposed pottey changes must be rational-tied in terms of docirine to be defended against attacks couched in doctrinal terms. In other words, major policy innovation icquiiea parallel innovation in doctrine. Such innovation occurred io, in Ihe postwar period before Stalin'" de.thenewed major leadership purge nnd economic policy shifts were in ihend during Khrushchev's de-Stalini-ation campaign. This is all part of Andropov's life history. Hit early political eiperience involved potentially deadly struggles over policy issues supported by doctrine, and his career was closely linked for JO years wiih tha' oftop Soviei leader mosi sensitive to doctrinal matters.arty officio! responsible for Bloc affairs. Am besiudo: to Hungrily. and KOtl Chief. Andropm vmodoct'imil mancu-cr in f'-sitrn liuropc ind among ihe cturocommunisis

Thus. Andropov's attack on ideologicalnd call for broatTdoctrinal change irt his major Kommunltl anicse should not be iipderslood as "pragmniism" or dUmitsed at incontequeniial, but rather should be viewed as to integral element in setting ihc siage for the econoniic policy changes and increased power he seeks. What Andropov is urging is abondonmeoi of emotional fixation on doctrine that is irrelevant, not abandonment of doctrinal thinking as such Thehe teesio consideroldblooded, analytic manner how fundamentalpremises ought to be applied under changing tosioeical conditions. The aimomprehensive, modern, more sharply focused doctrine, not an ad hoc "common sense" approachconomic policy making with some admixture of Western ideas. As became clear at the June Central Commillcc Plenum,objective is lo incorporate such doctrineew party program.

fiiifcs aid PelUieal Will. Faced wiih weakness in his constituency base and the likelihood of seriousto Siroog measures from members of theAndropov may noi have tbe(he physicalpushontentious program of change in (he Soviet economic mechanism. If he does, two ta:(ics seem conceivable. The first wouldradual consolidation of power in which Andropov might.

Expand his power over the Span of several years or longer

Look to oltrilion as the main opportunity forthe balance of power in tbe Politburo.

Setllelow developmenl of clientele among the Central Commillee membership.

Introduce phased changes in ibeonsensus'or them developed

- Wail for ihe neti regular pany oongressUv6o) lo push for major personnel changes and authorizationomprehensive program of economic change

Ihe other tactic would striveuick political breakthrough in whieh Andropov might:

crisis in the economy" or international danger nnd competiiinn wiih the West as the reason for rapid adoptioncheme of change embodieda new parly program.

inch issues (supplemented, perhaps, by charges of factkonallim Of corruption) to bolalcnd other possibleopponents in the Politburo and io gain fuller control over personnel appointments.

- Obtain Politburo consent for presentation of the programentral Committee plenum or special (extraordinary) party ccoirtii

Fjploit Ihe pWiom or coogrias ai an opportunity to eliminate opponenls in tbe Politburo and con"inie others throughout the party and government of (he wiidom of (ailing in lino.

the program Ioampaign of comprehensive economic change and to neutraliie tbe opcosition.;

Both of ihese bypotbeijeel scenarios haver*tactic, althoughsafer, would delay action and moitgagt mere ment on the economic front more closely io policy results in non economic areas such as foreign relations. It also would sharply pose the dilemma o( inacmen-uiUim: although pioCcineal change evokes the least initial resistance, it ia most likely to bog down us be teasers lie noaeoraegiaaoa as the fate of vwcioes Brezhnev iaiiMtrvcs demonstrates The "all-out""on ihe other hand, holds out the possibility of more rapid, compickcnstve results but would involve high political risk.

Some straws in the wind suggest that Andropov mighl beto tike the incremental path In hisovember speech, he said that "It it necessary to act witli caution here, to conduct expenawnli if need be, to makehe apparently regular discussionariety of economic problems by the Politburo, the adoption of separate decisions during the first monthsJ. and the failure to onnc.unee innovative steps in agitcultural policy at an Important) meeting of provincial and republic party secretaries or at the Jane Central Committee Plenum point in this direction

Yet Andropov hitilling-tcss to make unonhodos personnel appointment! and to challenge Ihe vested interests and prestige of powerful(such at the Ministry of Internal Affairs) He has also told workers face to face that cgaliiaiiaiiism is bad and thai they must work harder -probably

with the aim conditioning the population forand longer letting medicine.1have been told that, although CentralSecretary Rychkov intends To staffihcDepartment and produce ptoposalsin lhc economic mechanism without haste,has been tasked with formulatingattack on theispublicly called for at the JunePlenum. If Andropov is as intelligentSoviet boosters claim be is. and Is indeedto changes in planning and management, bethat changes must be introduced all atthey are to be effective. And,umberAndropov himself hasalenthis intention to take decisive actionprospective targets that noihlnj muchlo happen.

i': lions of inline economic trends might not be sufficiently alarmist to gelvaniie Assdropov intoaction. However, forecasts of the inability of tbe economy to compete with the United States in fielding sophisticated eniliiaiy hardware and pressureoncerned military cstablishmcnl coulddo the trick. Andropov's assessment or his own life expectancy might also incline him to take greater rbks

What could happen by no means depends simply on Andropov. The interplay of power and policy in the Politburo does not have to lead lo the political stair mate and gradualism evident int coulc drive Andropovore aggressive strategy. For example. Initial pursuiteasured, consensual approach to economic change could lead to little progressolitical crisis. Facedhowdown in the Kremlin. Andtopov might find himselfby circumttances to ihifl into high gear on "reform" Or.ower struggle in ibe leadership arising for reasons noi connected with economic issues could lead Andropov toicak through strategy in Ihe economic arenaeapon for defeating bis opponents.

f ikely SliategJ

Th; Sorictlf aot betievo- ihai they are em axedrotracted trar.ii-lionUrmed ccooornic aystetn fecused on quantity al whatever coil lo one focused on quaint and efficiency.mply (hat this ihlfi will lake several decades lo complolo aad acknowledge many large cbsiacles la (heir path: tho deeply ingrained attachmcai of manager* aod pany officiali to meai-ureraont of success according lo quantity of output. Ibe intricate depcodeoce of ibe success of anychange in managemoni and planning on Ihe simultaneous success of many other changes, and the difficulty of oh erica the economic mechanismime of increasing strain la the ecoaoecj

West.ceo analysis are divided over whether such "witbin-system" cbange would improve economicand whether the .Soviei view of aa economy transiting from "eiieniive" to "intensive" growtb Is limply self-delusion or propajaodi. If one assumesas raaay Western ccoootmsUhalf measures will not work, that tbe oalj medicine lorll the Soviet economy is market socialism or even private enterprise, and that further "tinkering" may only make things worse, then one would conclude that the measures (hat Andropov is likelydopt will be ineffective. But if. as we believe, "reforms" arereatment of Ihc atTlictioos of nosussarkel economic* must include some isoomaikcf remedies,f remediable iisefficKricie* in ibe lyilcm are large, nod one's' definition ol success includes Habituation of ihe situation or marginal improvementime of very low growih and Lugehen Andropov's likely rncararea couVJhardly

Meanwhile, an all-out commitment by Andropov to economic change would almost certainly haveand immediate political *ffecu. In the ihort run. It lean. It probably would Increase social tensions, disrupt tbc caiecil of many economic aad party bureaucrats, and generate conflict within tho leaderw|ih some probable, if unpredictable, Impacl on Soviei international behavior.

Original document.

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