Created: 8/1/1961

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developments in the organization and planning of soviet industry


central intelligence agency office of research and reports


Summary and

1. Establishment or tlie Territorial System of Economic

Organization and)

* II. Refining the

III. Recent Developments

A. Republic

8. 13

C. Councils for Coordinating and Planning the Work of


IV. Proposals for Further Change


Source References


Figure 1. USSR; Administrative Organization ofConstruction,l (Chart)

Figure 2. L'SSM: Major Economic Regions,l


- Ill -

Summary and Conclusions

The organization of Soviet industry along territorial linesadical departure Inrom the traditional branch-of-industry pattern or ministriesremains basically unchanged afterears of operation. Small changes introduced7egime restlessly seeking still irore effective organizational forms but reusonubly satisfied that tbe territorial systemorkable basl administrative arrangement as was tne ministerial system before it. Each system has exhibited obvious shortcomings which have evokedinnovation and refinement, and each has presented tome problems which have defied easy solution.

Either system, in practice, bus owed part of its success U> the incorporation within it of basic elements of the other. Under thesystem, the branch-of-industry principle was supplemented by territorial divisions both in the ministries and the gospi&ns. Under the system of territorial councils of national economyhe gosplans have expanded their branch-of-industry divisions bymany of the functions und acquiring many of the personnel of the former ministries.

Either system, in practice, has owed part of its inadequacy to its inability to encompass simultaneously and with equal effectiveness both departmental and regional considerations. The departmental barriers of the ministerial System often led adjacent enterprises of different ministries on circuitous routes tiirougn official cnannels to Moscow to effectimplest transactions and obscured the requirements for unified planning of national and regional economic development. The regional barriers of tbe sevnarknoz system have led to localof the national interest, ana campaigns to curb these iocalist tendencies probably nave inhibited vhe local initiative "hat thesought to promote.

The industrial reorganization ofand subsequent changes in industrial planning and organization nave contained elements of both centralization and decentralization. onsiderable amount ofdetail has been decentralized. Sup-jolic councilsnow administer enterprises- forercent ofndjstrii production compared with onlypercentut their controlthese enterprises ii far from complete. Control over nasi: economic

decisions has been tightened at the all-union level, and many decisions regarding investment, production, and allocation of materialsontrols formerly exercised by the ministrieswere centralized in the Gosplan* during the first year under the new system. Some of these decisions, particularly those bearing on allocation of materials, were passed down to thc republic gosplans and to the sovnarkhozes8ut decisions bearing on interrepublic supply and other major planning decisions were retained by thc Gosplan. In an attempt to Strengthen central planning, long-term planning was taken from the Gosplan0 and piacedelatively new agency a- the national level, the State Scientific-Economic Council (Gosekoiiomsovet).

A similar move was madec to strengthen planning at thelevel by relieving the republic gosplans of Ihe heavyburden of handling intersovnarkhoz production relationships as well as problems of supply and sales In those republicsumber of sovnarkhozes.** These administrative responsibilities were shifted to newly created republic-level sovnarVJioscs that wereover the existing regional sovnarkhoz structure in the first three of these republics, and the five regional sovnarkhozes in Uzbek SSR were replacedingle sovnarkboz.

Inong-discussed scheme to further an old objectivethc integrated development of natural economic regions broader in areaegional sovnarkhozeswas put into operation with the aivisloris- country intoarge economic regions. Each regioc, except Ka?.akh SSR, was toouncil for coordinating and planning the work of the sovnarkhozes. ?nese councils art- to study basic problems of 'jomplex regional economic development and work out recommendations for presentation to thc republic gosplans, the national Gosplan, and the Gosekonomsovet.

* Unless local organizations are Specified, the 'crras Gosplan and Council of Ministersto organizations a', the

Earlier0 tiic RSFSR; tile Ukrainiarazakh SSR,nd Uzbek SSR, ?.

Most of these changes, both in organization und ir. planning, have involved lateral transfers of functionsittle shifting of authority from one level to another. Those whici. have involved vertical transfers of functions have been directed toward either relieving centre! agencies of administrative details or supplying central agenciesetter basis for planning and control. If Soviet hopes are realized, the sov-nariJiozes will have progressively less freedom to express undesirable locolist tendencies, and opportunities to exercise local Initiative along approved lines, which was one objective of7 reorganization,

will increase very little. In this sense, the changes7 may be viewed as attempts to refine the operation of the new system rather thaneturn to the Old, and the system itself may be viewed simply as centralization along territorial lines compared with the previous centralization along branch-of-Industry lines.

A long list of economic achievements of the last Ji years has been attributed by.Soviet writers to the sovnarkhoz system, including gains in output, increases in profits, reductions in costs, betterof materials and equipment, reductions in the number of unfinished construction projects, better training and Utilization of manpower, reductions in the average length of haul of rail freight, improvedbetween industry and agriculture, more efficientof technically related enterprises, and reduction in the size of the managerial apparatus. For thc most part, these claims have not been demonstrated conclusively to be products of the Sovnarkhoz system, and some of the claims, themselves, have not been adequately substantiated.

ia any event, Soviet writers also have admitted Important areas where the sovnarkhoz system is In need of further improvement. Serious Shortcomings have been Cited in sovnarkhoz arrangements for introducing new technology, solving problems of industrial specialization andmeeting intersovnarkhoz delivery plans, and planning andUK- total economic requirements within the sovnarkhox. The sovnarkhozes, lacking well-defined legal rights even after years of operation, perhaps have operated too cautiously to realize their full potential inith these problems.

Ir. addition to these admitted shortcomings, whicn are Susceptible of treatment within the general framework cf the existingsystem, is the problem of improving economic efficiency at the enterprise level. The enterprise manager now operates in ansubstantially different from that precedingnd he generally has described the new system as an improvement over the old. His opportunities, however, to select optimum levels and mixtures of output, the most economical combinations of inputs, schedules for introducing new production techniques, and rates of capital investment are llttli: greater than under the old system. As long as higher echelons retain authority over these basic decisions, which are important determinants of economic efficiency, the response of the enterprise manager to recently instituted incentive measures must necessarily be limited, and the prociem of improving the planning and control activities of higher echelons willasic part of the leadership's efficiency drive.

Recommendations for improving central planning and control were presented inI to the Council of Ministers, as requested by

the plenum of the Communist Party of the USSR (CPSU) inhese recommendations were directed toward overcoming the defects of physical and value indicators now used ln the planning and reporting of industrial activity, providing greater continuity in economic plans over longer periods, and improving the quality of regional Some of the recommendations have been discussed for years, but none seems topectacular solution to the problems considered. Nevertheless, greater precision in industrial Indicators might improve the communication between planner and manager that is essential for realistic planning, and greater use of regional planning balances might provide some of the integrated development of local resourcessought in the reorganization. The attempt to obtain greater continuity ln plana, whethercceeds or not, will force planners to look ahead in greater detail and may leadore accurateof the requirements of future planning periods.

I. Establishment of the Territorial System of Economiction and)

Since the adoption of theystemhanges in the organization and planning of industry and construction have been fairly numerous, but these changes have not challenged the basic decision embodied in Khrushchev's reorganization theses of/ Khrushchev advocated abandoning the long-used branch-of-industry principle in favorerritorial approach to the Soviet planners' need for breaking the economy into manageable units. Similarly, the changes have not resulted in an indisputably greater or lesser degree of centralization. The admonition of the CPSU plenum in7 that the reorganization proposals be drawn up ln "strict observance of the basic principle of centralized planning on an all-unionas been rather closely heeded, both in the original changes7 andubsequent actions.

The merging of long-term planning, current planning, and supply control fjnetiens which had been called for in the reorganization theses of7 was accomplished before the sovnarkhoz system was placed ir. operation. The new, enlarged Gospian took over its new functionsay, andovnarkhozes began operatinguly. The dates on which the ministries were dissolved are shown in the following tabulation hj;


pL*ri Kcflll.'ill'7.






Fitter lwht/j

tretmi uaI ifcVfji'-

* For serially numbered source references, see the Appendix.

Throughout the second hairdditional features of thc basic reorganization gradually were introduced, making still more apparent the intention of maintaining firm central authority over the activities of thc new administrative units. ecree ofay granted to chairmen of sovnarkhozes thc general authorityby ministers of the USSR,ecree ofuly "On Further Expanding the Authority of tne Oosbank of the USSR" provided even closer financial monitoring of industrial enterprises than Gosbank had exercised under the ministerial system, ojecreeeptember detailed the strengthened role of tbe Central StatisticalJ/ Sovnarkhoz authority in planning, capital construction, material-technical supply, finance, credit, labor, and wage matters was outlined In statutes ofeptember which clearly reserved to central authorities decisions with respect to major goals and policies. Principal delegations of authority involved matters of localof policies established at thc center. 8/ Onctober, sov-narkhoies and republics were granted author!ly for independenton construction projectselatively minor noture within rather narrow rubleecree of l2 December reserved to the Council of Ministers the distribution of capital investments in ferrous and nonferrous metallurgy; coal, petroleum, gas, and chemical industries; defense branches of industry; and electric power stations. IC/ The defense-oriented ministries of aviation, shipbuilding, radiotech-nical, and defense industries were retained at midyear to coordinate branch-cf-lndustry development ir. these important areas even though some of their enterprises had been transferred to tneut onecember these ministries were replaced by state committees of the Council of By the endearly all of the main features of the territorial system were ln existence.

II. Refining the

Major attention89 was turned to the problem of making the system function more smoothly,rough changes ir.and material-tc?lir.lJul supply arrangements,ew other changes in organizational structure not directly related to thisalso were irtroduced.

tate coreiltteef special treatment, given earlier to defense-oriented activities, was extended lni to the chemicalnd in Kovenber to tae proc-jrement ofhc Ministry of Trade, wh;ch6 steadily had beenunction:t 'osplac and toepublic ministries of trade, was abolished in Kovcnber.

In an attemptoth planning and xatcrial-technlcal supplyhe sjpplyi.icn hod ;een Inherited ay the Gosplan fron

the abolished ministries were turned over to the republic gosplans Innd in April theupply and marketing administrations under the Gosplan were re-formed Intoalo Administrations for Inter-rcpubllc The April decree alsoew system for planning material-technical supply beginning9 in which the republics, sovnarkhozes, and enterprises were to work out detailed supply requirements for more0 commodities within the limits of preliminary supply patterns worked out by the Gosplun. lfl/ On the one hand, this system gave republic organs greater responsibility for detailing the interrepubllc delivery pattern implied by the state plan and presumably left the Gosplan more time to engage in other aspects of planning. On the other hand, it expanded considerably the list of commodities included in the central plan for material-technical supply. The systemS encompassed onlylannedunded commodities. 0 tbe number of centrally planned commodities bad grownnd1 plan includes moreff/ Another approach in8 to the material-technical supply problem was directed toward reducing the temptation or regional officiaLa to attend to local requirements at the neglect of lntersovnarkhoz anddelivery plans. Nonfulfillment of such plane without vulid reason henceforth could Involve severe disciplinary penalties or the levy of monetary fines uponths' pay. Repeated nonfulfillment would make the officials liable to prosecution on criminal

Two further censures ln6 were directed toward improvingof production and Investment. The decision onstipulated continuity of annual plans within the frameworkpLans. It also formalized the system by which plans baseddetermined control figures could be developed locally,Instructed the Gosplan to report to tbe Council of Ministers onof curtailing the number of indexes specified both infigures and in the national Considerabledevoted to the treatment of supply planning, wits emphasis onof regular and direct tics between producer andand the allowance of acple leadn supplyinvestment decision stipulated separation of productive andinvestments in planning andeparate categoryfor tlie construction and construction .materials industries.principal delegation of authority was Limitca to thewere to be responsible for detailing Investments for aof housing, cormunal, and industrial construction whichbe allocated to them, ir. aggregate only, by the stateof Investment, novever, waa to be in strict

seconianre wit.': standards and norms established ty the central autltorl-ties, and tne Gosplan and the Oosstroy (State Conr.if.eee USSR Council ol" Ministers for Conitmetion Affaire) were charged -ita ttie close Monitoring of the work of the republics. To supplement this

control, ln an area which apparently proved to be of particulara decree of October lOSS specified the policies to be followed by subordinate authorities in the expenditure of money and materials for constructing administrative, sports, and other public buildings. 2k/

New procedures for establishing prices, revealed inelegated considerable authority to republics, sovnarkhozes, andto detail specific prices appropriate to their scope ofand responsibility, but, as in the matter of planning, the basic questions of price policy were reserved to the centralhe Central Statistical Administration and the Gosplan were charged with monitoring price movements and assuring that price actions of subordinate authorities were within the limits of all-union price policy.

The heightened emphasis on technology as an element of industrial growth in the Seven Yearas backed up. in9 by the creationtate Committee of the Council of Ministers for Automation and Machine The state committees previously organized had been based on temporarily retained ministries, but in automation and machine building, where apparentlyransition had not been contemplated, none of the ministries existing at the time of the reorganization inud been retained. The scope of the technology effort was to become more apparent with the major CPS'J plenums primarily devoted to this subjec; in9 and

Also ir.ew State Scientific-Economic Councilwas formed. 2jj 9 the only observedthis council were related to the coordination of the work of r.:

Was assigned its present role as the central long-term planning agency.

In9 the network of Soviet long-term investmentr-ju., P, r, nvcr Liu

investment activities that had been extended to republic authorities The agricultural bank, tue bars, for financing communal una housing construction, and the communal'. were abolished, and their functions were taken over by the Stater Sens and the Industrialhe Industrial Bank was renamed the All-Union Sank for Financing Capital Investment (Stroybank, USSR).

Except for the response to specific problems which led to the formation of the Automations Oosekonomsovet, and the new Stroybnnk, tne formal structure of administration of industry and construction remainedble The year -as marked, however, by considerable discussion of problems of planning techniques, material-technical supply, investment, industrial pricing,

and coordination of research. The CPSU plenum of9 stressed the continuing existence of organizational and managerial, as well as technical, barriers to rapid improvement in the level of industrial The plenum instructions for working out proposals for Coping with problems such as improved interregional and intra-raglonal specialization and cooperation and setter organization of scientific research and design planning organizations seemed to invite changes ln the existing structure. But if the proposals were ever submitted they were not reported, and no organizational cnanges came out of thc June plenum

Some further measures were taken, however, to improve tne planning process, to tighten control over investment, and to Increase the effectiveness of material-technical supply arrangements. . Kosygin, Chief of thc Gosplan, noted at the June plenum that enterprises still were getting their approvedonths late, and be Indicated, both at the plenum and at the jnveiling of0 planession of the Supreme Soviet in October, that in the future the Gosplan would submit control figures by May of the current year for use bysovnarkhoz* a, and republics In preparing their plans for the coming year. This step was an Important one, bat it still left room for improvement, Judgingeorgian deputy's comments at the session of the Supreme Soviet ln0 that planning work now begins in April or May and continues up to December and that theshould entrust the republics with the solution of more of the problems of little Importance to the all-union economy. Kosygin also noted tnat economic administrators still were divertingresources from priority projects. The approacr. to the problem of controlling investment this time was to drawistG top priority projects for the Seven Year Plan with the Implication that any diversion of resources froa tner. would not be tolerated. difficulties with material-technical supply arrangements werein Khrushchev's comment at tne June plenum that thc existing pattern of deliveries between enterprises was much the same as it had been beforeeorganization and that the supply system should-be reconstructed to minimize deliveries between far distant enterprises. This defect and the more frequently observed tendency of localto neglect delivery coraml'.merits to other administrative areas apparently promoted tbe Introduction9ew statute governing supply 1'he provisions of this statute were aimed both at improving thefplyand atc enforcement of supply commitments,throug.'* more detailed andre rigidly observed supply contracts druwn in stricter observance of aipply plans.

Although tne measures ta^er.39 were designedke the system function more smoothly, as perhaps tncy did, they by no means

solved to everyone's satisfaction all of the acknowledged deficiencies of the new system. The economy had demonstrated its ability to prosperthe territorial arrangement, but remaining imperfections and the new emphasis of the Seven Tear Plan on greater economic efficiency seemed to assure further attempts at refinement, even if new problems

I. Recent Developments)

Many of the changes In the organization of industrial planning, coordination, and controlad their origin in the cautious initial strengthening of these functions at the centereadership concerned at the outset with problems of localism. This concern, reinforced by the fear of disrupting the flow of supplies to industrial enterprises,onsiderable expansion of the duties of the Gosplan7ome transferred from the abolished ministries, some newly arisen with the creation of the numerous sovnarkhozes. The subsequent delegation89 of some of these duties togosplans, and to the sovnarkhozes themselves, relieved ancentral Gosplan but apparently did little to ease the supply planning, coordination, and control problems which remained the subject of much criticism in the Soviet press in the first halfo-

A now attack was made on these problems in June and0 in theultisovnarkhoz republics (RSFSR, Ukrainian SSR, Kazakh SSR, and Uzbekhere the burden of bundling iritersovnarkhoz relations apparently was overtaxing the abilities of existing republic The problems were simply removed in tne Jzbek LiSB,egional sovnarkhozes, by mergingingle sovnarkhoz, thereby raising tohe number of single-sovnarkhoz republics. In the remaining three republics, wnicharger number of regionaln she RSFSR,n the Ukrainian SSn,n the Kazakhne problems were approached by the estaal.isr.ment of super-sovnarkhozes at the republic level, under the

: . u: 6 SUppl. ,

trcl tasks presented by the regional sovnarkhoz system. Inovi, tne republic gosplans were freed to returnivided attention to more traditional, basic republic planning tasks as they had done before7 reorganization.

Another notable change in the organisation and planning of industryJo was related less directly to tile process ofe sov-narkcoz system than it was to the iong-contln-ing search for fci -deal planning arrangement. Theov>l, an organizationc-

fittd Llie official long-term planning agency inc. This development, along with other actions which have stripped the uosplan

of alL Its former wide powers except that of short-term planning at the national level and the planning of lntcrrcpublic material-technical supply, is reminiscent of similar attempts ln earlier periods tothe planning process by parcelling out Its various aspects to specialized agencies, notably the assignmentf short-term planningtate Coasoission for Current Planning (Gosekonom-komlssiya). Even the recent shifting about of the material-technical supply function,esponse to problems aggravated by the sov-narkhoz system, la similar to earlier experiments mler the former ministerial system vhlch included tne shifting of this function ln 1 tate Committee for Material-Technical Supplyach to the Gosplannen to Gosckonorakonil sslyand back again to the Gosplan

The continuing search for better pLon.iing arrangements to handle problems antedating the sovnarktioz system also apparently led to the establishment of coordinating and planning councils which currently are being organized in large natural economic regions. 3Ji/ These councils for coordination and planning of the work of the sovnarkhozes will give new emphasis to an old objectiventegrated development of natural econosilc regionshich has been given varying degrees of attention In long-range planningumber of years. The sov-narknoz system, however, with its inherent tendency to encourage locallst views rather than tne broader requirements of the larger natural economic regions, has siade the attainment of this objective more difficult, just aa localist considerations have complicated problems of material-technical supply. The current plan forregional coordinating councils to handle regional planning problems apparently ntems from dissatisfaction with tne effectiveness of earlier measures, which Included the holding of coordinatingof sovnarkhozes within the various natural economic regions snd the establishmento of territorial divisions In tne republic

Tne cumulative impact of the since7 reorganization, and tiic further changes undoubtedly will oe made, can not avoid altering the conduct of sovnarkhoz affairs, realignment of territorial boundaries of some of tneovnarkhozes has occurred. Soneve Keen merged, ot.iers divided, altnougn the present systemovnarkhozes preserves the original patternarge number of territorial, ecoiuni:-administrative inlts, nostly coinciding with the ooindarles of political administrative unite, administering nearly tnrec-foirtns of tne total industrial activity of tnelthoughormal administrative cnannel through ths republic and all-union Cornells of ministers remains, tha sovnarkhozes nowdministrative and planning organs presumably better equipped

to plan, coordinate, and monitor sovnarkhoz development. Theorganization of Soviet industry and construction is shown in The individual sovnarKhoz,ransmission belt for directives from above, is now responsible for administering programs devisedarger number of staffs. Such operational decisions as arc mode by the sovnarkhozes in the implementation of these programs are subject to additional review. Planning agencies, now free to devote more attention to basic planning problems, may be more resistant to sovnarkhoz deviations, may even produce plans less susceptible to improvisation from below.

To the extent that greater coordination of activity in adjacent sovarkhozes leads to more specialized patterns of industrialthe individual sovnarkhoz will have fewer opportunities for influencing its own course of development. Investment decisions, however, whicn form the core of long-term development plans, generally have notrerogative Of the sovnarkhozes in the past. To the extent that the planning and monitoring of intersovnarkhoz supply relationships are improved, default on intersovnarkboz deliverymay be reduced. Sovnarkhozes, therefore, would have fewer excuses for Justifying uneconomical development of local resources, less reluctance to shop around in adjacent sovnarkhozes, and less reason for maintaining stockpiles of resources to compensate for erratic flow of supplies.

The regime apparently hopes that these measures win restrict the undesirable exercise of local initiative in the pursuit of local interests without stifling any local initiative that supports the national plan.

A. Republic Sovnarkhozes

The three republic-level sovnarkhozes, established0 (io June in the RSFSR,unehe Kazakh SSR, and fj July in the

: i My - I ,j ',

Soviet of the USSR with the responsibility of coordinating the economic activities of tie regional sovnarkhozes in the The decree stipulated that the regional sovnarkhozes were to beIn tneir activities to both the Union-Republic Council ofand the republic sovnarkhoz and that the republic sovnarkhoz was to be directly subordinate in all Its activities to the Union-Republic Council of Ministers. Both the republic sovnarkhoz and the regional sovnarknozes may, within the bounds of their competence, make decisions and issue directives on the basis of and in execution of the decrees and directives of the council of ministers of the USSR and of


thc republic. The republic sovnarkhoz can suspend tbe decisions and directives of the regional sovnarkhozes, and the republic council of ministers and the USSR council of ministers, as in the past, conor revoke the decisions and directives of all economic councils.

The extent to which'the republic sovnarkhozes were to relieve republic gosplans of the time-consuming tasks of monitoring theOf the numerous regional sovnarkhozes was suggested by theof the duties of the nev bodies. With the establialiment of the republic sovnarkhozes in the RSFSR, it was announced that the nev organization would coordinate the work of the regional sovnarkhozes and decide operative matters arising in connection with the fulfillment of plans. It was entrusted with supervision over the fulfillment of general economic plans for the RSFSR, with maintaining state discipline in fulfilling delivery contracts, and witn ensuring the proper use of materials, monetary funds, and labor.

The pervasiveness of the operation of the new republicis revealed by their internal structure, which was announced in0 for the RSFSR. It was to consist oferritorial sections (apparently corresponding closely with the natural economic regions defined in recent territorial planning'f branch-of-industry main administrations,unctional main administrations, and an unspecified number of supply and sales administrations for all industrial

It may have been hoped that the republic sovnarkhozes,line status, might discharge their assigned duties morethan did the republic gosplans which, as Stuffcould act only through the republic councils ofthe preservation of the direct line of command fromiv 1 : of. ,

the new line of command from the republic sovnarkhozes to the regional sovnarkhozes, has increased the possibilities of operational confusion, Or ot least occasional uncertainty as to which activities arc properly the concern of the new republic sovnarkhozes. alf year after tne creation of the republic sovnarkhozes, the Director of the Institute of Law of the Academy of Sciences, USSR,ore specificof their duties, forms, and methods of workore precise differentiation of their functions and those of the republic councils of ministers. Jo/

B. Gosekor.omscvet

The Gosekonoasovet was legally mode responsible for all long-term planningesolution of the Central Committee (CC) of the

CPGU and the Council of Ministers/ The Goseknom-aovct, with the cooperation of other government organizations, was to elaborate long-range plans for the development of the economy forears as well as plans and material stocksears. Long-term planning at thc republic level apparently is little affected by this change. Similarly, the participation of the remaining ministries in the planning process apparently has not been greatly affected, except as the necessity of dealing with two planning agencies at the all-union level may complicate the process.

The Gosckonomsovet was chaired. Kuzmin, formerlyof the Gosplan, from its establishment in9 until0 when It was officially designated the long-term planning agency, but its role la the planning process during its first year is not known Coincident with tbe0. Zasyadko was shifted from his positioneputy chairman of the Gosplan to replace Kuzmin as Chairman of the Gouekonomsovet, which has steadily gained in size and activity since that time.

The plenum in0 of the CPSU CC, devoted to problems of accelerating technical progress, assigned theumber of problems relating to long-term planning. Various research and project-planning organizations were shifted to Its jurisdiction, Including the Scientific-Economic Research Institute and the Council for the Study or Productive Forces, which formerly were under the Gosplan. ore specialized institute, the Scientific-Research Institute for Planning and Norms, was established in the Gosplan. The Gosplan presumably has retained some "summary" sections, including the one for Aggregative Current National Economic Planning and Republic Problems which, along with its branch-of-economy divisions and its main administrations for interrepublic supply, are adequate for its short-term planning

C. Councils for Coordinating and Planning the Work of the govr.arKl.ozes

One of tbe most obvious gains from7 reorganization was the breaking up of the ministerial autarky which led to Irrationally long hauls between distant plants ln thc same Industrial ministry and an often uneconomical duplication of facilities anong the various ministries. Those gains have beer, offset, however, by the equally obvious losses arising from similar autarkies! tendencies of the more numerous sovnarkhozes which have interrupted rational aa well as irrational hauls and which have encouraged the development of self-sufficiency beyond thc economical opportunities Cot sue. davtlopamnt in small areas. It Is not surprising, therefore, that tne regime continues its search for nore effective planning snd coordination ol economic activity In terms of natural economic regions.

The problem of achieving an optimum degree of specialization and cooperation among the sovnarkhozes of natural economic regions vas actively discussed at the time of7 industrial reorganization and hasrequent topic in the Soviet press since that time. Inetailed plan vas presented in the official Journal of the Gosplan and the Gosekonomsovet for rearranging theasic economic zones formerly employed in regional planning intoew economic regions and for establishing economic councils for the planning andof the work of the sovnarkhozesf these This plan, apparently conceived about the same time the republic-levelvere created, vas prefaced by the statement that the CPSU CC and the Council of Ministers consider it essential to form coordinating and planning councils in the larger economic regions of the country. In presenting the plan it vas stressed that the republic sovnarkhozestep toward solving operational problems but that other organs were needed to coordinate development cf adjacent sovnarkhozes. The new republic sovnarkhozes, oriented toward operational problems of implementing current plans, presumably were not considered Ideally suited to handle problems of long-tern patterns of industrial.

The coordinating and planning councils, according to the plan devised by the Council for the Study and Distribution of Productive Forces and the Scientific-Hesearch Economic Institute of Gosekonomsovet, vere to work out, for planning organs, proposals and recommendations about the basic, long-term direction of development of the largeregions. In working out problems such as the development of complementary industries in adjacent sovnarkhozes within each large region and the correct distribution of capital investment to attain the desired patterns of specialization, the councils presumably were to work closely with the long-term planning agency, the Gosekonomsovet.

Although the problem of complex development of largecontinued to be discussed, the plan presented inittle further publicity until1 when it vasthe plan, slightly modified, was being put into operation.the new version, fielorussia and Moldavia remain independentregions, and the remainder of the countryarge economic regions, ss shown in the map, these regions coincides with the boundaries of the Kazakh SSRnot tooordinating council. The coordinating function. "i

regions, each of which is tooordinating council,re RSr'SP and ,

* Following

- lp -

Ukrainian SSR and containovnarkhozes each,ncompass

moreingle republic (the three Baltic SSR's, the three Transcau-casian SSR's, and the four smaller Central Asian SSR's, respectively).

Under thc former system ofarge economic regions, which was used onlyimited extent in planning, thc regions were ouch less uniform in size. The number of sovnarkhozes in each region varied, and the complaint often was voiced that regional planning usually was nothing moreummary of the various branch-of-industry plans for each region. The present scheme of coordinating councils reportedly is designed for the purpose ofrepublic and central planning organs with independently created plans for the integrated economic development of the severalwithin each large region. Thereeal need, however, for improving the material-technical supply relationships amongsovnarkhozesomething not being accomplished adequately by the present arrangement at the republic level. It is conceivable that this problem, which recently has evoked considerable discussion and sharp arguments among Soviet economic administrators, and other similar problems verging on the operational rather than the planning aspectontrolled economy, may be assigned to the new councils.

IV. Proposals for Further Change

Individual. Soviet economists and economic administrative officials frequently allude to shortcomings in organization and planning which need to be eliminated, most of the commentators limiting theirduring the last year to shortcomings Cited at thc CPSU plenum of Most of the comments have been concerned withwhich might facilitate the planning process, although some, SUCb Os those dealing with shortcomings in the arrangements fornew techniques, inadequacies in-the material-technical supply system,nnecessary duplication of administrative functions, couii involve changes in the formal administrative structure. Some writers Speak of thc gradual consolidation of some sovnarkhozes and theof new ones in the eastern part of the country, but noneajor overhaul of the basic territorial system.

A more collective expression of the probably course of developments, at least in the area of planning, was voiced in the recommendationsonference1 under the auspices of tile central long-term planning agency, the Gosekonomsovet. Up/ The major proposals advanced at the meeting were concerned w'th better indicators ofachievement, better planning of integrated industrial development by major economic region, and greater continuity in the planningkl/




M a

y s: s





entral Chenoze.ii


Norln Caucasus


S Weil Sioenan

Can Siberian

far East

Don Dnearouthwest

Thc recommendations made at the conference arc not altogether original, but the impressive collection of conferees lends new weight to the proposals and Increases their chances of adoption. Thedo not augur spectacular solutions to the problems considered. Nevertheless, even modest gains in the precision of industrialand hence in the quality of statistical data available toofficials, could haBten the introduction of advanced, mathematical techniques in planning and could provide better control over theof incentive awards to workers and managers on the basis of actual achievements. Furthermore, any improvement in thc continuity of plans or in the integration of industrial activity In regionalmight free enterprise managers of some of the material andsupply problems which have diverted attention from other managerial duties since7 Industrial reorganization.

The recommendations of the conference dealt with problems which have been under discussion for several years and which have proved resistant to easy solution. The use of physical units ln planning and reporting Industrial activity has been an indispensable tool of central economic guidance, but no way has been found to compensate fully for its tendancy to discourage economy in the use of materials andalso the introduction of more effective types of products. The value Indicators used to measure the volume of industrial output of enterprises have not providedully satisfactory measure of the actual voluae of work performed in the different branches of Industry. The planning of Integrated Industrial development of major economic regions has been frustrated continually by an economicstructure which either has cut across tbe lines of economic regions, as in the case of the former ministries organized along branch-of-industry lines, or has broken the economic regions into small units, as in the case of thcovnarkhozes organized along political administrative lines. Practical limitations on the time spun for which detailed operational piano can be drawn up have hampered attempts to obtain greater precision in long-range planning, and the discontinuous nature of plans has sometimes been hard to reconcile wltn the aim or uninterrupted production.

The plenum of the CPSU CC ln0 ordered the Gosekonomsovet, with the help of other planning, scientific, and economicorganizations, to work out proposals for improving plan Indicators and regional planningI for submission to the Council of Ministers. as expressed at tha plenum that better Indicators of production achievements would make for riorc effective use ofand operating funds, closer to plans for variety and quality of product, and closer attention to costs of production and that improved regional planning wouldora rationalof lr.austrial specialization and cooperation.

The need for greater continuity ln planning was set forth in detail by Khrushchev7 session of the Supreme Soviet. Although this problem was not specifically Included in the assignments of the plenum ofne step toward its solutiona continuouslyear plan was recognized as necessary by the Council of Ministerseetingnd the problem was included in the agenda of the planning conference inreater continuity in planning, according to Khrushchev, would prevent interruptions of work schedules in the transition from one plan period to another, make better provision for activities extending over several plan periods, and ensure that new plans incorporate both theand commitments of preceding plan periods and the anticipated requirements of future

The conference recommended that thc use of physical Indicators of the volume of production be improvedore selective application of Indicators to specific products. aU/ Thus, indicators of thcof machines and equipment produced by the machine building industry would be used in preference to weight indicators alone, and the percentage of new items in the total volume of production would be reported. These proposals, if adopted, would shift emphasiseight criterion, wasteful of resources, to one that would encourage-new products, an essential element of the current program for raising the level of technology ln industry. Other instances, equally obvious, were citedore appropriate section of indicators would correct some of the shortcomings of existing practice. The lack of originality in these proposals makes them no less promising in an area wherecriteria always have been strikingly inadequate.

The conference directed major attention to the problem ofthe use Of value indicators of the volume of production. It was recommended that the statistic "gross production" (valovaya produktslya) should be retained only in annual reports,ingle statistica newly defined formreviously used measure of "commercial(torvarnaya produktslya)was recommended for general use throughout industry. It was recommended fartherystem of special indicators, to measure more accurately thc volume of work performed under differing circumstances in the various tranches of industry, beafter considering the results of tests conducted0 at some 5O0 enterprises.

Other recommendations, if adopted, would work toward greaterefficiency. To keep watch over the use of fixed capital equipment, thc use of capital-output ratios was proposed, and to encourage proper care of machinery, it was proposed that any unamortized value ofitems be charged to enterprise costs and that excess amortization be deposited to funds for modernization of equipment. Another proposal

would provide greater material rewards for fulfilling high planthan for overfulfilling lesser ones. Designed to help reduce the tendency of lower echelons to strive for minimum assignments, this device is already in use in Poland.

Some of the arrangements discussed at the conference for providing continuity in the planning process actually have been in operation for several years. The division of the long-range plan into annualwith each segment hopefully requiringew revisions to incorporate new needs and capabilities, was introduced9eature of the Seven Year Plan, and the timing of the planning process was shifted several years ago to provide enterprises with approved plans at the start of the plan period rather than some months later, as frequently happened in the past.

Apparently the task of transforming annual segments of tbe long-range plan into fully operational annual plans has proved toreater chore than envisioned earlier, or perhaps the unrevisedfor forthcoming years have not provided enough guidance to give the desired continuity in annual plans. In any event, theof the conference that adjustments be made at all planning levels two years ahead for thc whole range of plan indexes will force planners toittle farther ahead In elaborating the plan for the coming year. Similarly, the working out each year of the major indexes for production and capital construction for the yearears ahead will force the planners to look beyond the current long-term planning period. This practice, combined with theof work on the next long-term plan midway through the current one, should prevent some of the discontinuities which have dieturbed Soviet leaders, but whether or not it will greatly improve the quality of the plans is debatable. The conferees, apparently with someon this point themselves, otrcised the importance of increasing the size of reserves of material resources snd capital investments, so that unforeseen requirements might be met without disrupting plans.

Thc conference recommendations for improving regionalupon greater use of planning balances, not only in thebut in all economic regions of the country. Thethe necessity of working out an easy methodu titbit, -r.

would reflect the levels of productive specialization and development of each region. Toward this end, it was proposed that the Central Statistical Administration improve its collection of Statisticalso that the number of Summary balances Of major categories of production in oblasts and republics could be raised' tohe conference also pointed out the necessity of strengthening the role

of regional planning commissions and recommended that kray and oblast committees and councils of ministers of autonomous republics beto work out summary plans for the development of locallyproduction. Clearly the price of improving both regional planning and continuity of plans, along the lines suggested at the conference, wouldonsiderable expansion in the work of planning organ!zations.


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Original document.

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