SOVIET PROPOSALS FOR IMPROVING ECONOMIC PLANNING (CB 61-33)

Created: 6/9/1961

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SOVIET PROPOSALS FOR IMPROVING ECONOMIC PLANNING

OFFICE OF RESEARCH AND REPORTS

CENTRAL INTELLIGENCE AGENCY

Thli report represent! the Immediate views of the originating Intelligence components of the Office of Research and Reports. Comments are solicited.

document contains the United states, within the USC,nd bl any manner to an^-dhauthorlsed

Ing the national defense of the espionage laws, Tltiar revelation of which personrohibited by law.

SOVIET PROPOSALS FOR IMPROVING ECONOMIC PLANNING

conference dealing with problems of improving economic planning wasarch under the auspices of the central long-termagency of the USSR, the State Scientific-Economic Council (Gosekonoasovet). 1/ The major proposals advanced at the meeting were concerned with botTer Indicators of industrial achievement, betterof integrated industrial development by major economic region, and greater continuity in tho planning process. 2/

All three of these problems have been under discussion for several years, and each has proved resistant to ready solution. The use of physical units in 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 tendency to discourage economy in the use of materials and the Introduction of more effective types of The use of two value indicators of the volume of industrialfor each onterprise hasonsiderable reporting chore and has not providedully satisfactory measure of the actual volume 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 economic administrative structure which either haa cut across the lines of economic regions, as in the case of the former ministries organized along branch-of-industry linos, or has broken the economic regions into small units, as in the caso of theouncils of National Economy (SovnarkhozesJ organized along political administrative lines. Practical limitations on tho time span for which detailed operational plans can be drawn up has hampered attempts to obtain greater precision in long-range planning, and the discontinuous nature of plans has sometimes been hard to reconcile with tho aim of uninterrupted production.

. heJflrit two of these problemsimprovement of plan indicators and ootter integrated0 plenum of tho Party central committee ordored the Gosokonomsovet, with the help of other planning, scientific, and economic administrative organizations, to work out proposals1 for submission to the USSR Council or Ministers. Hope was expressed at the plenum that better indicators of production achievements would make for more effective use ofand operating funds, closor adherence to plans for variety and quality of product, and closor attention to costs of production; and that Improved regional planning wouldore rationalof industrial specialization and cooperation. 3/

The thirdcontinuity inset forth in detail by Khrushchev7 session of the Supreme Soviet. Although this problem was not specifically included in the0 plenum assignments, one step toward itscontinuously5-yearrecognized as necessary by the USSR Council of Ministers40 meeting, and the-problom was Included in the agenda of the1 planning conference. Greater continuity in planning, according to Khrushchev, would avoid interruptions of work bchedules 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 the developments and commitments ofplan poriods and the anticipated requirements of future periods. 4/

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Industrial Indicators

The conference rocommended that the use of physical indicators of the volume of production be Improvedore selective application of indicators to specific products to reflect more closely the natural and use characteristics of the articles concerned. Thus, indicators of the productivity of machines and equipment produced by the machine-building industry would be used in preference to weight indicators alone, and tho percentage of new items in the total volume of production would be These proposals, if adopted, would shift emphasisoight criterion, wasteful of resources, to one that would tend to encourage new products, an essential element of the current program for raising the level of technology in Industry, Other instances, equally obvious, were citedore appropriate selection of indicators would correct some of the shortcomings of existing practice, such as the usequare meter calculation as well as weight ln paper production, and inner and outer diameters in addition to weight in pipe production. The lack of originality in these proposals makes them no less promising in an area where performance criteria always have been strikingly Inadequate.

The conference directod major attention to the problem of Improving the use of value indicators of the volume of production.* It was rec-coounended that the statistic "gross production" (valovayaharged with causing fundamental defects in the labor productivity ln-dex,hould be retained only In annual reports. For genoral use throughout industry, the statistic "commercial production" (tovarnaya produktslya) was recommended, ln current prices for short-term planning and in constant prices for long-term planning. In fact, "comnercial production" as currently defined differs only in minor fashion from tho statistic "gross

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Other recommendations, if adopted, would work toward greaterefficiency. To keep watch over the use of fixed capital equipment, the use of capital-output ratios was proposed, and to encourage proper care of machinery, it was proposed that any unamortized value of replac items be charged to enterprise current costs and 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, thisis already in use in Poland.

*ore complete discussion of these value indicators seaTCB

Until recently, commercial production has consisted of marketablemarketable services, and capital repair work on own equipment and means of transport. By recent redefinition, as revealed at the conference, it now includes any change In the value of unfinishedin industries with long production cycles such as machine-building, and in some of the food and light industries, the value of semi-fabricates produced for own. raw sugar. Thus, thoproduction statistic recommended by the conference differs from gross production only la that the latter also includes the value of materials usod in work done for others on materials supplied by others and, in some industries, the amount of chango in stocks ofproducts and special instrumentation.

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Continuity of Plans

con sever

Some of the arrangements discussed at the conference for providing tlnulty in tho planning process actually have been in operation for .eral yoars. The division of the long-range plan into detailed annual sogments, with 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 annual plans at tho start of the plan period rather than some months later, as frequently happened in tho past.

Apparently tho task of transforming annual segments of the long-range plan into fully operational annual plans has proved toreater chore than envisioned earlier, or porhaps the unrevlsed segments foryears have not provided enough guidance to glvo the desiredin annual plans. In any event, the recommendation of the confer-once that adjustments be made at all planning levels two years ahead for the whole range of plan Indexes will force planners toittle farther ahead in elaborating tho plan for the coming year. Similarly, the working out each year of the major .indexos for production and capital construction for the year lying fivo years ahead will force the planners to look boyond the current planning period. This practice, combined with the commencement of work on the next long-term plan midway through the current one, should avoid some of tho discontinuities which haveSoviet leaders, but whether or not it will greatly improve the quality of the plans ls debatable. The conferees, apparently with somo reservations on this point themselves, stressed the importance ofthe size of reserves of material resources and capitalso that unforeseen requirements might be met without disrupting plans.

Roglonal Planning

The conference stressed the present lack of coordination inamong both thearge economic regions andconomicregions, but pointed out that coordinating economicfor the largo economic regions, would be able to preparefor integrating tho development of these regions and forthe pattern of specialization and cooperation of enterprises in contiguous sovnarkhozes. The conference mado no further comment on this aspect of coordinating economic development boyond revealing theintention of creating the coordinating councils. Detailed plans for their OStablishmont wero published in/ and onay1 tho Soviet press disclosed that thearge economic regions have beon re-divided intond that councils were being created for each with tho exception of Kazakhstan where the existing agencios are to suffice. B/

Tho conference recommendations for improving regional planning contered upon greater use of planning balances, not only in the union-republics but in all economic regions of the country. 9/ The conference stressed the necessity of working out an easy method oT constructing regional tables of inter-industry balancesystem of indexes which would refloct the lovels of productive specialization and development of each region. Toward this end, it was proposed that the CentralAdministration improve its collection of statistical materials so that the number of summary balances of major categories of production in oblasts and republics could be raised from. The conference

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also pointed out the necessity of strengthening the role of regional planning commissions and recommended that krai and oblast councils and councils of ministers of autonomous republics be permitted to work out summary plans for the dovelopmont of locally subordinated production, Clearly tho price of improving regional planning, as suggested by the conference proposals, wouldonsiderable expansion in the work of planning organizations.

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The recommendations made at the conference are not altogether new, but the impressive collection of conferees lends new wolght to theand Increases their chances of adoption. The proposals do not augur of spectacular solutions to the problems considered, but even modest gains in the precision of industrial indicators could improve tho success criteria which are essential to the oporation of recent workor and managerial incentive measures and could hasten tbe Introduction of newor techniques in planning. Furthermore, any improvement in theof plans or in the integration of industrial activity in regional planning might free enterprise managers of some of the material and equipment supply problems which have diverted attention from other agerial duties since7 industrial reorganization.

Coord: Sources

1.

2.

3.

4.

s. 6.

0.

Ekonomlcheskaya Gazeta..

Ekonomlcheskaya Gazeta,.

FBIS Daily Report,p.. OUO.

Current Digest of the Soviet Press/ Vol. IX,2

Current Digest of tho Soviet Pr^ss, Vol. XIII,2 Apr 61

n

. FDD,Summaryeport on Labor.in the1. OUOT"

Planovoye Khozyaystvo, no/7,. 0.

gkononlcheskaya..

. U.

Juno1

8

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