The Russian Economy KHRUSHCHEV PLANS HUGE REORGANISATION

Press, Volume XCV, Issue 28284, 23 May 1957, Page 12

The Russian Economy KHRUSHCHEV PLANS HUGE REORGANISATION

[By ISAAC DEUTSCHER}

London, May 14.—What can the world learn from the mass of technical detail with which Khrushchev introduced to the Supreme Soviet in May his scheme for the overhaul of the entire Soviet industry? The provisions of the scheme must appear somewhat abstruse to the Western public, unaccustomed as it is to think in terms of a nationally owned economy which is planned from a single centre as the Soviet economy has been. Yet, the Supreme Soviet’s decision to adopt Khrushchev’s scheme, with a few modifications, is a momentous event. It is likely to have the most far-reaching consequences for Russia, and therefore in some measure, for the world at large. Khrushchev has set in motion a chain of developments no less important, though less spectacular, than that which last year he started with his exposure of Stalin at the XX Congress. This is indeed another great break with the Stalin era. With one mighty blow Khrushchev attempts to sweep away the whole administrative structure of Soviet industry as it has grown up, taken shape, and become fixed in the course of nearly 30 years. In this endeavour Khrushchev has lacked neither courage nor sweep of initiative. It remains to be seen whether his foresight and capacity for organisation will prove equally great. Will he remain in control of the great change he has initiated? Or will he once again have to shrink in fear from the consequences of his deed as he had to shrink from the consequences of his attack on the Stalin myth? The scale of this new reform should be noted first. Involved in it are no fewer than 200,000 functioning industrial concerns and about 100,000 establishments still under construction. Between themselves these concerns employ a good half of Russia’s adult working population. Waste Of Capital

Obviously, no government undertakes so vast a reform unless it has weighty and urgent reasons for doing so. That the Soviet Government has had reasons for sharp dissatisfaction with the work of its economic agencies is evident. Last February Mr Bulganin, the Prime Minister, admitted to the Supreme Soviet that the current Five Year Plan had not been based on a realistic assessment of resources, that it had led to the waste and freezing of much capital, and that it was in need of a thorough revision. The government has so far not yet been able to produce the revised plan. Within recent months it has repeatedly reorganised the planning agencies, first splitting them up into two separate bodies, one designed for long-term and the other for short-term planning; and then merging them back into a single Gosplan. The two chief planners have been dismissed: Saburov in December and Pervukhin in May. They have been replaced by I. I. Kuzmin, a relatively unknown economist who has been appointed head of the Gosplan and first deputy Vicepremier, though he had not even been a member of the Presidium and held a subordinate place in the party hierarchy. But discontent in the Soviet ruling group with the economicadministrative set-up inherited from the Stalin era can be traced much further back. When Malenkov took power, on March 6, 1953. he abolished, within a few days of Stalin’s death, many Ministries By March 15, 1953, he had cut down their number from 45 to 14. Later, at the time of Malenkov’s eclipse, the Ministries proliferated back into existence. In a way, therefore. Khrushchev has now picked up the idea with which Malenkov first came forward. Khrushchev’s scheme, however, is wider than Malenkov’s. The latter tried merely to simplify the existing economic administration. Khrushchev changes the whole structure from top to bottom. Hitherto Soviet industry has been organised almost exclusively along vertical lines. Thus, a Coal Ministry in Moscow controlled all the coal mines of the country—the Ministry formed the board of a single monopolistic trust. All the steel mills came similarly under a single ministry. A Minister of Heavy Engineering in Moscow was the supreme manager of all the heavy engineering plants; and so on, and so on. There were almost no horizontal links between the various industries. The coal producer in, for instance, the Ukraine, could not deal directly with the steel producer or the machine tool producer in the same town or district. He could buy his mining equipment and sell his coal only through his ministry in Moscow, which dealt with the other industrial ministries. Political Advantages In this way Stalin had reserved for Moscow the power of decision on almost any economic transaction. In the early phases of the Soviet industrialisation, when the whole economy laboured under a continued scarcity of materials and manpower, it was up to a point essential that the centre should be in absolute control of all available resources and absolutely free to distribute and allocate the resources. The resulting over - centralisation had, from Stalin’s viewpoint, great political advantages as well: it did not allow the producers on the spot to come together, to express common interest, to formulate joint policies, and to combine in any degree against the centre. This system has grown progressively absolute with the advance of industrialisation. Technological specialisation brought into being ever new branches of industry and ever-new ministries in Moscow. The administrative machinery at the centre grew incredibly cumbersome. Its various parts constantly overlapped. (Khrushchev revealed, e.g., that no fewer than three ministries managed Moscow’s electrical power plant!) Even the most inflated staffs could not cope in time with the mass of important questions which producers were obliged to refer to Moscow. The correspondence between the ministries and the managements on the spot assumed monstrous proportions. The whole economic life of the country was kept in a state of permanent suspense. It

was only because of its great inherent momentum that the Soviet industrial machine did not grind itself to a standstill under this stupendous load of red tape. The underlying principle of Khrushchev’s reform is, in contrast to Stalin’s principle, that of horizontal organisation. The whole of the Soviet Union is now being divided into 92 regions, each with an economic council, or sovnarkhoz, of its own. AU State-owned concerns of any given area (with the exception of smaller factories run by the municipalities) come under the management of the regional council. The coal producer, the steel maker, the engineer, and the textile manufacturer on the spot will at last be able to deal directly with one another, or, if need be, through their regional council. Most of the economic Ministries in Moscow are abolished. Even those that are left—the Ministries in charge of defence industry—are divested of the functions of management. It should be recalled that regional economic councils had existed during the early years of the Soviet regime. Stalin then abolished them because he * was afraid of them as of potential organs of economic autonomy. It is as such that they are now being revived. Direction of Economy Horizontal organisation does not exclude a measure of vertical control and direction from above. In any case, ’without these an economy planned on the national scale would be inconceivable. In what way then does Khrushchev propose to safeguard the single direction of the economy? The 92 economic councils are, of course, to be integrated with the general administrative machinery of the Soviet Union. But in the process of this integration Moscow is losing its preponderance. The 16 republican Governments of the Union, and not the All-Union Government in Moscow, are to appoint the regional councils. Moscow reserves for itself the right to veto the appointments and also to veto decisions of national importance which may be taken by the regional councils. But by abdicating the right to manage and command and substituting for it the power of veto only, Moscow definitely places itself in a much weaker position vis-a-vis the provincial centres. The Premiers of the republican Governments will be members of the central (the all-union) Government in Moscow. In this way the republican, or .provincial, governments are to participate much more closely than hitherto in shaping Moscow’s policy, while Moscow hopes through the provincial Premiers to exercise influence and control over the /regional economic administration. But influence and control acquire a new meaning. The central government may guide, exercise pressure, and in extreme cases use the veto; but it loses the right tp pianage, to hire , ■ and fire, to promote and demote, and to take practical decisions concerning the work of industry. Thus in .the economic sphere Moscow ceases to be master of life and death over many millions of State employees. The political significance of this —if the reform is carried out according to its letter and spirit—is obvious. Under the new dispensation the role of the Gosplan, the supreme planning authority, assumes new weight. ' Gosplan is to co-ordinate the work of 92 economic councils and to ensure that the right proportions are maintained in the production of the various regions and branches of industry. Since Gosplan must continue to plan vertically, for entire national industries, it will absorb some of the personnel and of the functions of the ministries which are now disbanded- But Gosplan also is to plan, not to administer; to guide, not to enforce.

The method of planning is also to be radically reformed. Until now—this practice too has been in force for nearly 30 years—Gosplan fixed the over-all quinquennial and annual targets for every industry. These were broken • down into smaller targets for the various sections of the industry, down to the basic productive unit. The Gosplan’s target was the law. The manager of a factory or of a mine could not in practice declare that any target was unattainable, even if it was. He could not refuse to accept the target for fulfilment. The whole process of planning proceeded from above downwards.

Regional Initiative This practice is now to be abandoned. Planning from below upwards is to take its place. The basic units of production are first to declare how much they expect to be able to produce within a year or a five-year-period. On this basis the regional councils are to fix their targets; and only then is *Gosplan to integrate the 92 regional plans into a single national plan. Again, if the reform is carried out in letter and spirit, the plan should, for the first time in Soviet history, represent not the imposition by the Government of its policy upon the nation, but the national sum total of a multitude of genuine acts of social initiative.

Gosplan retains an important instrument of economic pressure: credit policy. Through the State Bank, it should channel the central financial resources throughout the 92 regions in such a way as to ensure balance of production and investment. But the bulk of industrial profits will no • longer have to be transferred to Moscow as it was hitherto—it will, as a rule be distributed and invested by the regional economic councils. Moscow is to channel directly only surplus resources from regions with an excess of investment capital to regions with a deficit, in practice from the highly industrialised to the still underdeveloped areas. Finally, the central government gives up direct control over industrial manpower. This, too, comes under the regional councils. Moscow will no longer be able, as it was in Stalin’s days, to shift masses of, say, Ukrainian workers to industrial centres in Soviet Asia. These are only some of the outstanding features of the reform. But it is enough to list them to realise what unheaval they must cause and on what an ambitious and colossal gamble Khrushchev has embarked. (World Copyright Reserved.) (To be concluded.)