Economic Reform in the USSR

the transition that took place in the mid-1960’s—after the March and September 1965 plenums of the Central Committee of the CPSU—to a new system of management based on improved centralized planning, broader use of economic management techniques, greater autonomy in the economic operation of enterprises and economic organizations, and workers’ increased responsibilities, as well as great material incentives, in raising the efficiency of production.

The factors that led to the economic reform were the higher level of development and scale of production and the greater complexity of economic relations caused by the scientific and technological revolution; these circumstances demanded, on the one hand, greater concentration on the long-range problems of improving production and, on the other, a high degree of operational efficiency in day-to-day economic activity. The system of economic management that had evolved was now hindering the effort to increase the productivity of labor and the efficiency of production, thereby reducing the possibility of achieving rapid growth in the material and cultural level of the population and high scores in the economic competition with capitalism.

Fuller utilization of the advantages of socialist production required that improvements in centralized state planning of the economy be combined with a higher degree of economic autonomy, increased operational efficiency, and greater initiative on the part of enterprises, bringing the system of economic management in line with the modern material base established for large-scale mechanized production during the period of socialist construction. The economic reform represented a new stage in the improvement of socialist production relations—particularly the relations between society as a single economic organism and the enterprises as components of that organism—through consistent implementation of the principle of democratic centralism; the principle requires that centrally planned state management of the economy be combined with the development of local initiatives by the broad masses of working people.

The economic reform was marked by the transition to full profit-and-loss accounting and extensive use of such cost factors as price, profit, credit, and bonuses. Profit became a more important indicator in evaluating the performance of enterprises. The new procedure for allocating profit ensured a better match of the social, collective, and personal interests in the socialist economy. Profits were yielding more funds to enterprises for the improvement of production, higher material incentives, and better working and living conditions. The amount of funds left at the disposal of a given enterprise depends on its efficient utilization of the productive assets assigned to it and on the increased volume, better quality, and greater profitability of its products. Enterprises have been assigned greater responsibility in fulfilling their contractual obligations under the profit-and-loss accounting system. The principles of profit-and-loss accounting are also applied to the activity of the higher-level administrative agencies and in some instances even to the ministries.

In the realm of administration, the economic reform relieved the state agencies of responsibility over the detailed operations of enterprises and allowed the centralized leadership to focus on the major long-range questions—namely, the development of production and, in addition, the broader application of economic management techniques that would ensure greater production efficiency by directly affecting the producers’ economic interests. An important part of the economic reform was the restoration and strengthening of branch management and reduction in the number of management units through the establishment of production associations, production research associations, and all-Union (republic) industrial associations. The increased funds placed at the disposal of enterprises have enhanced the economic significance of the trade unions and other workers’ organizations operating within the enterprises. The economic reform served to promote socialist competition.

Centralized planning assumed greater importance in the course of the economic reform. The improvement in the centrally ratified plan indicators of enterprise activity, as well as the reduction in the number of such indicators, enabled the state planning agencies to devote their concentrated efforts to the proportions and rates of development of the national economy, the basic direction of scientific and technological advances, and the rational siting of production. The planning functions of the enterprises (associations) and ministries were expanded, and production units were given greater operational economic autonomy and initiative. The introduction of new indicators and norms—such as the capital charge, fixed (rent) payments, and norms governing the establishment of incentive funds—ensured that planning would be closely linked to economic incentives.

The reform of wholesale prices was an important component of the economic reform. Effective profit-and-loss accounting demanded that prices more fully reflect the socially necessary labor expenditures on production, that unprofitable operations in various branches of the national economy be eliminated, and that prices be more effectively used to improve the quality of products and modify the product mix. The reform of wholesale prices (1967) made it possible to plan prices in terms of the capital-output ratio of production.

With the economic reform, the use of commodity-money relations and cost categories in the national economy was substantially expanded. Bourgeois economists tried to use this circumstance to distort the content of the reform; they interpreted the reform as the abandonment of the foundations of socialism, as a denial of the Marxist-Leninist principles of economic construction of the new society, as an evolutionary step toward capitalism, as a kind of “liberalization” of socialism, or as evidence of the “convergence” of the two systems. Events have shown, however, that the economic reform represents the further development of the specific forms of organization of socialist production and is directed toward the improvement and consistent implementation of the management principles developed by V. I. Lenin and enriched by the practice of economic construction in the USSR and in the other socialist countries.

The economic reform was a factor in the greater efficiency of social production and in the growth of the country’s economic potential in the stage of advanced socialism. On the other hand, improvements in economic relations are not limited to those achieved within the framework of the economic reform. The course of communist construction is marked by continuing efforts to further improve the mechanism and techniques of economic management.