RECENT DEVELOPMENTS IN THE ADMINISTRATION OF DOMESTIC TRADE IN THE USSR

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01141A002000060002-0
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 30
• Document Creation Date: December 23, 2016
• Document Release Date: August 14, 2013
• Sequence Number: 2
• Publication Date: May 1, 1961
• Content Type: REPORT

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Economic Intelligence Report
N? 1
RECENT DEVELOPMENTS
IN THE ADMINISTRATION OF DOMESTIC TRADE
IN THE USSR
CIA/RR ER 61-20
May 1961
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
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CONFIDENTIAL
Economic Intelligence Report
RECENT DEVELOPMENTS
IN THE ADMINISTRATION OF DOMESTIC TRADE
IN THE USSR
CIA/RR ER 61-20
WARNING
This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
CONFIDENTIAL
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CONTENTS
Page
Summary and Conclusions 1
I. Introduction 5
II. Recent Changes in the Organization of Trade 7
A. Situation in 1956 7
B. State Trade System. 7
1. Trade Ministry System 7
2. Other State Trade Systems 9
C.
Cooperative Trade System
10
D.
Collective Farm Markets -
12
III.
Recent Changes in Administrative Procedures
13
A.
Planning and Allocation
13
B.
Determination of Prices
15
IV.
Recent Changes in Retailing Facilities and Methods
16
A.
Facilities
16
B.
Selling Procedures
17
V.
Appraisal of the Reforms
18
Tables
1. Number of Retail Stores and Restaurants in the USSR,
Selected Years, 1940-59, and 1959-65 Plan
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17
2. State, Cooperative, and Collective Farm Market Retail
Sales in the USSR, Selected Years, 1940-60 19
3. Indexes of the Volume of ,Retail Sales in the USSR,
Selected Years, 1940-60 19
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Figure
Figure
Figure
Figure
Figure
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Charts
1. USSR: Organization of the
try System, January 1956
2. USSR: Organization of the
Trade, October 1954
Trade Minis-
Ministry of
3. USSR: Organization of the Ministry of
Trade, RSFSR, January 1959
4. USSR: Organization of the Trade Ministry
System, January 1961
5. USSR: Organization of the Consumers' Co-
operative System, January 1961
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RECENT DEVELOPMENTS.
IN THE ADMINISTRATION OF DOMESTIC TRADE
IN THE USSR*
Summary and Conclusions
The system for distributing consumer goods in the USSR has long
been underdeveloped and inefficient, suffering seriously from unwieldy
organization, inadequate investment, and shortages of facilities and
equipment. Available goods have been unevenly distributed among re-
tail outlets, and the prevalent retail techniques have been extremely
primitive. Scarcities and gluts have been common. Coordinated action
by production, wholesale, and retail organizations has been rare.
Since 1953 the Soviet regime has devoted much more attention than
in the past to the solution of domestic trade problems. Although
changes effected between 1953 and early 1955 resulted in greater con-
centration of wholesale operations under the Ministry of Trade, USSR,
and in increased republic and local control over retail trade, the
distribution system continued to function unsatisfactorily,- and efforts
at reform were again intensified in 1956: Changes instituted since
then: have been intended to streamline the administrative apparatus, to
decentralize decision-making, to-bring about a more.balanced distribu-
tion of available goods, and to bring supply into closer alignmentwith
demand. Efforts also have been made to improve retailing-techniques,
expand trade facilities, and increase the supply of modern trade equip-
ment.
Organizational changes made during 1956-58 primarily affected the
state trade system. Responsibilities and functions of the Ministry of
Trade, USSR, were gradually shifted to other bodies, and in November
1958 that ministry was abolished. Republic Tinistries of trade were
made responsible for the organization and conduct of Soviet domestic
trade, and the Chief Directorate for Interrepublic Deliveries of Con-
sumer Goods was created in Gosplani USSR, to coordinate trade among
the republics.
The procedures for planning domestic trade, for allocating consumer
goods, and for setting prices were simplified considerably. Gosplan,
USSR; republic gosplans; and the republic ministries of trade now col-
laborate to plan the total retail volume in accordance with general
* The estimates and conclusions in this report represent the best
judgment of this Office as of I March 1961.
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policies of the Council of Ministers, USSR, but the formulation of plan
details is left to republic ministries of trade and organizations sub-
ordinate to them. The number of centrally allocated commodities has
been sharply reduced, and the allocation procedure has been revised to
increase the authority of officials at the republic level over the dis-
tribution of these goods within the various republics. Gosplan, USSR,
has succeeded the Ministry of Trade, USSR, as the agency responsible
for allocating important goods among the republics. Before 1957, vir-
tually all prices in state and cooperative trade were established by
authorities at the union level, but in that year republic ministries of
trade were given a greater voice in pricing, and by 1958 republic offi-
cials controlled the prices of goods comprising 45 percent of retail
volume.
The administration of workers' supply divisions, which conduct about
one-sixth of the total state and cooperative retail trade, was neces-
sarily revised because of the transfer in 1957 of most production enter-
prises from economic ministries to councils of national economy (sov-
narkhozy). Most workers' supply divisions remained with the production
enterprises and are now administered by the councils of national econ-
omy, but some were turned over to local trade officials to be operated
as part of the trade ministry system, and others were liquidated.
Few changes have been made in the administration of the consumers'
cooperative system and the collective farm markets. The former in 1959
accounted for nearly one-third and the latter for about one-twentieth
of the total retail trade. Republic ministries of trade apparently have
inherited from the Ministry of Trade, USSR, most of the responsibility
for integrating cooperative and collective farm retail activities with
state trade.
Intensified efforts to expand and modernize the physical facilities
of domestic trade and to introduce progressive retailing techniques
complemented the recent organizational adjustments. In a decree issued
in August 1960 the already ambitious goals for the construction of
trade facilities during the remainder of the period of the Seven Year
Plan (1959-65) were raised sharply.
Improvement of trade organization, modernization of retailing
methods, and expansion of the trade network are a continuing imperative
because of the rapid growth in retail turnover. The volume of sales
(in constant prices) in state and cooperative trade grew at an average
annual rate of 11-1/2 percent during the 1950's, and the increase in
1960 was about 11 percent. The series of trade reforms begun in 1956
apparently has succeeded in achieving smoother operations and a higher
degree of response to local needs. The authority to make most decisions
has been delegated to republic and local officials. Retail organizations
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have been put in closer contact with producers, and both wholesalers
and retailers now answer to republic ministries of trade. Although
the Soviet trade system has been improved significantly by these
changes, continuing rapid growth of the volume of sales probably will
necessitate still more reforms.
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I. Introduction
Production of consumer goods in the USSR has grown much more slowly
than production of producer goods and military equipment, and the
system for distributing consumer goods has been poorly developed. With
relatively little stress placed on consumer satisfaction, domestic
trade has held a low priority in the allocation of investment funds and
personnel. The trade system has been plagued not only by shortages of
facilities, equipment, and quality merchandise but also by administra-
tive inefficiencies. Persistent organizational shortcomings have con-
tributed greatly to the chronic inefficiency of the domestic, trade
system, and until recently the Soviet regime made little effort to
eliminate these shortcomings.
Reluctance to invest in trade led to an increasing shortage of
stores, dining enterprises, and other facilities during the early
1950's. Between 1950 and the close of 1957, new neighborhoods and
suburbs arose, the "new lands" were settled, industrial communities
east of the Ural Mountains grew rapidly, and turnover in the state and
cooperative retail trade systems increased 134 percent, 1/* yet the
number of stores and public dining enterprises grew only 27 percent. 2/
The number of persons employed in state and cooperative retail trade
increased only 36 percent from 1950 to 1957, V and more efficient re-
tailing methods were introduced on a very small scale. Although
general warehouse space increased more than 60 percent from 1950 to the
beginning of 1957, AV retail turnover and inventories grew much faster.
Lack of cold storage facilities was a major handicap to state and co-
operative trade in meats, fruits, and vegetables. Cash registers and
other types of equipment were in short supply. Because of the com-
plexity of the Soviet organization of trade as well as population
movements, available trade facilities were poorly distributed. Dupli-
cate wholesale bases existed within small cities, and duplicate stores
and dining enterprises could even be found operating side by side. 2/
Because of cumbersome retailing methods, most stores operated very
inefficiently. Customers were often required to wait in three queues --
one for selecting an item, one for purchasing a receipt, and one for ex-
changing the receipt for the item -- for each purchase. Many goods were
kept in closed cases, displays were unimaginative, and perishables were
often not refrigerated. Largely because of a severe shortage of paper
and paper products, many foodstuffs were not packaged: such commodities
as flour, macaroni, groats, vinegar, syrup, and milk were weighed or
measured individually for each purchaser, and frequently customers were
required to furnish their own containers for these products. 16/
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Available goods were erratically distributed among retail organi-
zations. Central authorities allocated important commodities among
political subdivisions and trade systems in proportions that were
sometimes poorly balanced. Trade organizations directly subordinate
to the Ministry of Trade, USSR, were often unduly favored. Wholesale
organizations violated plans in making deliveries. Retail organi-
zations received goods in undesired amounts (some were often over-
supplied while others were short) and in irrational size, style, and
color assortments. Republic and local officials were too often slow
to act to correct imbalances in deliveries. The distribution of
seasonal goods and perishable foods was especially faulty. In the
"new lands," many basic commodities were chronically in short supply,
and sometimes vodka seemed to be the only commodity supplied to these
areas in adequate amounts.
A new symptom of the inefficiency of the Soviet trade system ap-
peared in about 1955, when over-all inventories of bicycles, time-
pieces, radios, cameras, some textile products, and a variety of
other goods began mounting at unplanned and undesired rates. This
rapid accumulation of inventories.reflected imbalances between supply
and demand at a time when the degree of repressed inflation was being
reduced., The accumulation also indicated that as real incomes in-
creased, consumers were displaying a.greater,amount of selectivity and
a growing reluctance to purchase obsolete or substandard merchandise.
Retail organizations preferred to hold overstocked goods rather than
to incur bookkeeping losses by selling such goods at reduced prices.
In spite of numerous criticisms in the press,. Soviet authorities did
not take effective action to arrest the_growth of inventories.
Some efforts to reform the trade 'system were made in 1953, in 1954,
and early in 1955. Before that period, production ministries had per-
formed many wholesale activities, and chief directorates of the Minis-
try of Trade, USSR, had engaged in both.wholesale and retail trade
on a large scale. In order to consolidate authority over wholesale
trade and achieve closer control over the goods. being, fed into the
trade system, the Ministry of Trade .absorbed most wholesale operations
of the production ministries. On the other hand, many retail and
wholesale-retail organizations were transferred frbm union to republic
and local subordination, a, move calculated to make retail trade more
responsive to local needs, to localize decision-making on minor matters,
and to reduce administrative duplication. At the same time, a number of
retail trade and public dining organizations that had been directly sub-
ordinate to republic ministries of trade were transferred to local execu-
tive committees. I/ In the sparsely settled Uzbek and Kazakh SSR's, how-
ever, the administrative structure was tightened by the transfer of trading
and dining organizations from local to republic subordination. y
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These reforms brought new problems. For example, subordination of
wholesale organizations to the Ministry of Trade, USSR, interposed a
barrier between retail organizations, which were under republic and
local authorities, and factories, which were operated by production
ministries. The resultant-insulation of manufacturers from retailers
reduced the influence of the latter on product design and quality.
The Soviet distribution system continued to function very imperfectly,
and further reforms were obviously necessary. Major changes were ac-
complished during 1956-58, a time of general economic reorganization.
II. Recent Changes in the Organization of Trade
A. Situation in 1956
Under the Council of Ministers the Ministry of Trade, USSR, in
1956 held ultimate responsibility for the conduct of all Soviet internal
trade in consumer goods. It passed judgment on plan proposals, allo-
cated important goods, and exercised general supervision over all trade.
The Ministry of Trade directly controlled only a part of. the trade
organizations, however, the remainder being administered by various -
ministries or by cooperative associations. In addition to these."or-
ganized" (state and cooperative) trade systems, there were collective
farm (kolkhoz) markets, which played a major role in :the distribution of
agricultural products.
? The principal recent changes in the over-all organization of
Soviet domestic trade have been the transfer of functions from the Min-
istry of Trade, USSR, to other bodies, notably to republic ministries
of trade and to Gosplan, USSR, and the abolition of the Ministry of
Trade, USSR. These changes are examined below in greater detail.
B. State Trade System
1. Trade Ministry System
The trade reforms that began in 1956 and continued through
1958 primarily affected the state trade system, particularly that part
of the system which was directly controlled by ministries of trade.
Until 1958 the trade ministry system was organized at three basic
levels -- union, republic, and local (see the chart, Figure 1*). At
the peak of the pyramid of trade organizations was the Ministry of
Trade, USSR, which not only maintained general supervision over the
conduct and development of all domestic trade but also engaged in
wholesale trade and, to a relatively minor extent, in retail trade
through its chief directorates. The Ministry's wholesaling functions
* Following p. 8.
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were carried out by about a dozen chief directorates organized to deal
in certain product lines or to serve special markets -- for example,
the Chief Directorates of Refrigeration and Wholesale Trade in Meat
and Butter; Wholesale Trade in Clothing; Wholesale Trade in Sugar,
Confectionery Products, Canned Goods, Tobacco Products, and Other Gro-
ceries; and Trade Enterprises for the Military Services. (The struc-
ture of the Ministry of Trade, USSR, is shown in the chart, Figure 2.*)
The ministries of trade at the republic level were dually
subordinate -- to the Ministry of Trade, USSR, and to the councils of
ministers of the republics. These ministries had chief directorates
engaging in retail and wholesale-retail trade. Representative of such
chief directorates were those conducting trade in manufactured goods;
in bread and baked goods; in furniture; in household goods; in haber-
dashery and knitwear; and in textiles, sewn goods, and millinery. The
Ministry of Trade, RSFSR, had a chief directorate dealing with trade in
the Far North and an office for mail order trade. Besides carrying on
extensive trade operations, republic ministries of trade supervised
local trade organizations through ministries of trade of autonomous
republics and through trade departments in oblast, kray, and city ex-
ecutive committees.
Most retail enterprises (stores and dining enterprises) in
the trade ministry system were managed by organizations known as torgs,
which were oganized by product lines and by areas served. Operating
according to the principle of economic accountability (khozraschet),
torgs were directly subordinate to the trade departments of kray,
oblast, or city executive committees; ministries of trade of autonomous-
republics; or -- in the case of republics not having oblast divisions
ministries of trade of republics.
Beginning in 1956, the duties of the Ministry of Trade,
USSR, were gradually reduced. Most retail enterprises of union sub-
ordination were gradually transferred to republic and local trade
authorities. In early 1957 a large part of the ministry's authority
to fix prices was delegated to republic councils of ministers, and by
the close of 1957 the Ministry of Trade also had relinquished most of
its planning functions. Thus for 1958 the Council of Ministers, USSR,
approved only the gross retail turnover plan by republic for the entire
country and directly allocated only about 45 important goods. Detailed
planning and distribution were accomplished at republic and lower levels.
State trade and commodity inspectorates, which are important agencies of
control, were turned over to republic ministries of trade.
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Council of Ministers
USSR
USSR: ORGANIZATION OF THE TRADE MINISTRY SYSTEM
JANUARY 1956
Council of Ministers
Union Republic
Ministry of Trade
USSR
Council of Ministers of ASSR; Oblast
or Kray Executive Committee; City
Executive Committee of Republic
Subordination
Ministry of Trade
Union Republic
Figure 1 50X1
Chief Directorates of Wholesale Trade
State Inspectorate for the Quality of Goods
Chief Directorates for Production of Equipment and
Material and Technical Supply
Directorates and Divisions of the Central
Apparatus *
Scientific Research, Planning, and Educational In-
stitutes and Publishing Houses and Newspapers
INN
City Executive Committee of ASSR;
Oblast, or Kray Subordination; Ray-
on Executive Committee of City Sub-
ordination
Ministry of Trade of ASSR;
Oblast, Kray, or City Trade
Division
29925 4-61
City or Rayon Trade Division
Chief Directorates and Offices of Retail and
Wholesale-Retail Trade
Organs of Administration and Support
Directorates of Local Trading Organizations **
Organs of Administration and Support
Trading Organizations (Torgs) ***
These components are organized along functional lines to accomplish such tasks as planning, pricing, and bookkeeping.
?" In oblasts and cities having no more than seven local trading organizations (torgs), these components are managed directly by
the trade divisions.
".? According to their product lines, trading organizations are classified as miscellaneous, food, manufactured goods, or specialized.
Specialized torgs deal in bread, fruit and vegetables, cultural goods, furniture, and petroleum products.
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USSR: ORGANIZATION OF THE MINISTRY OF TRADE
OCTOBER 1954
Ministry of Trade, USSR
Collegium
Office of the Ministry
Secretariat
Central Bookkeeping
Complaints Bureau
Trade Operations
Chief Directorates:
Refrigeration and Wholesale Trade in Meat
and Butter (Glavmyasomaslotorg)
Wholesale Trade in Fish and Fish Products
(Glavrybtorg)
Wholesale Trade in Sugar, Confectionery
Products, Canned Goods, Tobacco Prod-
ucts, and Other Groceries (Glavbaka-
leya)
Wholesale Trade in Textile Goods (Glav-
tekstil'torg)
Wholesale Trade in Clothing (Glavtor-
godezhda)
Wholesale Trade in Footwear (Glavobine-
torg)
Trade in Timber and Construction Ma-
terials (Glaviesstroytorg)
Wholesale Trade in Household Goods
(Glavkhoztorg)
Wholesale Trade in Cultural and Sport-
ing Goods (Glavkul'ttorg)
Wholesale Trade in Haberdashery, Per-
fumes, Cosmetics, and Toilet Soap (Glav-
galantereya)
Production and Sale of Jewelry (Glavyu-
velirtorg)
Trade Enterprises for the Military Ser-
vices (Glavvoyentorg)
Railroad Restaurants (Glavdorrestoran)
Trade at Health Resorts (Glavkurorttorg)
(Temporary until January 1955)
29926 4-61
1
Inspectorates
Chief Directorates:
State Trade Inspector-
ate
State Inspectorate on
the Quality of Food
Products
State Inspectorate on
the Quality of Manu-
factured Goods
Functional Units of
the Central Apparatus
Directorates:
Planning and Economic
Finance
Trade Organization
Public Dining Enter-
prises
Capital Construction
Fruit and Vegetables
Transport
Labor and Wages
Supervisory Personnel
Wholesale Trade
Economic
Divisions:
Price
Legal
Arbitration
Production Enterprises
and Subsidiary Agri-
cultural Enterprises
Sanitary Services
Other:
Inspection Under the
Minister
1
Equipment, Supplies,
and Facilities
Chief Directorates:
Trade Equipment (Glavtorgo-
borudovaniye)
Material Technical Supply
(Glavsnab)
Construction (Glavtorgstroy)
Figure 2 50X1
1
Other Subordinate Units
Institute of National Economy
imeni Plekhanov
Miscellaneous Institutes
State Publishing House for Trade
Literature
Newspaper Sovetskaya t orgovlya
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Late in 1958 the Ministry of Trade, USSR, was left with
little more than the management of wholesale operations, although it
did continue to conduct retail trade in jewelry and lumber. On
28 November 1958 the Presidium of the Supreme Soviet announced the
abolition of this ministry. 2/ The ministry's wholesale operations
were transferred to republic ministries of trade, and the Chief
Directorate for Interrepublic Deliveries of Consumer Goods in Gosplan,
USSR, was given responsibility for coordinating trade among the 15
republics.
With the transfer of functions to republic ministries of
trade, certain organizational adjustments were required. The chief
task for the republic ministries was the creation of new chief direc-
torates around the nuclei provided by the remnants of the union chief
directorates. In some instances, however, republic ministers of trade
also accomplished significant consolidations. In the RSFSR, for ex-
ample, the Manufactured Goods Trade Organization (Rospromtorg) and the
Sporting Goods Trade Organization (Rossporttorg) were abolished, and
their functions were transferred to "suitable republic wholesale
offices." Important retail organizations were transferred from re-
public to local subordination. The chart, Figure 3,* shows the struc-
ture of the Ministry of Trade, RSFSR, after the adjustments which
followed the demise of the union ministry. On the final day of Novem-
ber 1958 the last Minister of Trade, USSR, D.V. Pavlov, was appointed
Minister of Trade, RSFSR, an appointment that gave testimony to the
elevated status of the republic ministries of trade. 121./ The trade
ministry system as it is currently organized is shown in the chart,
Figure 4.*
2. Other State Trade Systems
A sizable share of state retail trade is conducted by
organizations outside the trade ministry system. The most important
of these organizations are the workers' supply divisions (ORS's),
which are directly attached to enterprises (principally industrial) to
operate stores and dining facilities serving the employees of these
enterprises. Each workers' supply division operates as an independent
branch of an enterprise under a deputy director. This internal dis-
tribution system has been most important in supplying favored em-
ployees in wartime, in attracting new employees to priority industries,
and in serving employees at new and remote industrial or construction
sites. Sales of workers' supply divisions comprised more than 18 per-
cent of total state and cooperative retail sales in 1955. 12/
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,
Workers' supply operations were supervised by_chief direc-
torates.of workers,' supply (glavursy) under the economic ministries
until mid-1957, when the management of most industrial enterprises, was
transferred to regional councils of national economy. Workers' Supply
operations of industrial enterprises are now directed by these Councils,
sometimes through a single directorate of workers' supply but more often
indirectly through a multiplicity of supply divisions subordinate to
branch directorates of the council. A continuing consolidation of these
divisions seems probable. To eliminate duplication, workers' supply
facilities have been turned over to the trade departments of local ex-
ecutive committees in at least 30 cities to be operated as part of the
trade ministry system, and many small supply divisions have been abol-
ished. 12/
Some goods are sold to the general public by organizations
subordinate to ministries other than the ministries of trade. Drug
products are distributed by the Ministry. of Health, newspapers and maga-
zines by. the Ministry of .CommuniCations, and books by the Ministry of
Culture. Under the republic ministries of local industry are stores
selling mixed assortments of. goods produced by local industrial enter-
prises. ,Trade by such organizations, which accounted for about 3 per-
cent of total state and cooperative sales in 1955, was not significantly
affected by the reorganizations of the late 1950's. 1.V
As late as May 1957, 35 economic ministries performed some
wholesale functions..1V Although some of these functions may have been
tranSferred to the:trade ministry system since then, it is likely that
most of them are still performed by industrial enterprises under the
supervision of councils of national economy.
C. Cooperative Trade System
Nearly one-third of. organized domestic trade in the USSR is
conducted not by state organizations but by consumers' cooperatives that
hold primary responsibility for the distribution of consumer goods in
rural areas and also conduct some trade in cities. Consumers' coopera-
tive enterprises are operated by local cooperative societies, which are
united by a hierarchy of federations organized within governmental sub-
divisions. The federation at the union level, the CentralUnion of
Consumers' Cooperatives; oversees all consumers' cooperative operations.
(The consumers' cooperative system is outlined in the 'chart, Figure 5.*)
Federations of Cooperative societies supervise the work of
their members, organize the procurement of agricultural products for the
* Following p. 10.
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RSFSR: ORGANIZATION OF THE MINISTRY OF TRADE
JANUARY 1959
Ministry of Trade, RSFSR
Office of the Ministry
Support Administration (Housekeeping)
Central Bookkeeping Division
Personnel Administration
Complaints Bureau
Wholesale Trade
Offices:
Meat, Butter, and Fish (Ros-
myasorybtorg)
Sugar, Confectionery Products,
Canned Goods, Tobacco Prod-
ucts, Salt, and Other
Groceries (Rosbakaieya)
Textile Goods (Rostekstilitorg)
Clothing (Rostorgodezhda)
Footwear (Rosobuvitorg)
Household Goods (Roskhoztorg)
Cultural and Sporting Goods
(Roskul'ttorg)
Haberdashery, Perfumes, Cos-
metics, and Toilet Soap (Ros-
galantereya)
Bases:
Purchasing bases for the sup-
ply and sorting of commod-
ities for department stores
(Moscow and Leningrad)
29927 4-61
Wholesale and Retail
Trade
Chief Directorates:
Trade at Health Resorts (Glav-
kurorttorg)
Railroad Restaurants (Glavdor-
restoran)
Trade in the Far North and Re-
mote Areas (Glavseverotorg)
Directorates:
Foodstuffs
Bread and Baked Goods
Public Catering
Fruits and Vegetables
Offices:
Timber and Construction
Materials (Roslesstroytorg)
Production and Sale of Jewelry
(Rosyuvelirtorg)
Mail Order (Posyltorg)
Functional Units of the Central Apparatus
Chief Directorates:
State Inspectorate for the Quality of Goods and
Trade in the RSFSR (Gosinspektsiya)
Material and Technical Supply (Glavsnab)
Directorates:
Economic Planning
Trade Organization
Equipment and Capital Construction
Divisions:
Labor and Wages
Price
Industrial Enterprises
Transportation
Finance
Juridical-Arbitration
Offices:
Trade Mediation (Torgposredkontora)
Trusts:
Construction and Installation (Rostorgstroy)
Installation of Refrigeration and Trade
Figure 3 50X1
Other Subordinate Units
Directorates:
Educational Institutions
Research, Design, and Planning Institutes
Scientific Research Institute for Trade and Public
Catering (NIITOP)
Central Design Office for Trade Machine Building
(Moscow), including the Perovo and Leningrad
trade machine building plants
State Institute for Planned Trade and Public Ca-
tering Enterprises (Giprotorg) and its branches
State Institute for Planning Refrigeration Plants,
Ice Cream Factories, Dry Ice Plants, and Liquid
Carbonic Acid Plants (Giprokholod)
Educational Institutes
Moscow Institute of National Economy imeni G. V.
Plekhanov
Leningrad Institute of Soviet Trade imeni F.
Engel's
Correspondence Institute of Soviet Trade (ZIST)
with its branches and educational consultation
centers
State Publishing House for Trade Literature (Gostor-
gizdat), including the editorial offices of trade
journals and newspapers
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Figure 4
USSR: ORGANIZATION OF THE TRADE MINISTRY SYSTEM
JANUARY 1961
Council of Ministers
USSR
Council of Ministers
Union Republic
Gosplan
USSR
;MI NNW
INIMI?1???? I=NMI
Council of Ministers of ASSR; Oblast
or Kray Executive Committee; City
Executive Committee of Republic
Subordination
Ministry of Trade
Union Republic
City Executive Committee of ASSR;
Oblast, or Kray Subordination; Ray-
on Executive Committee of City Sub-
ordination
Ministry of Trade of ASSR;
Oblast, Kray, or City Trade
Division
Chief Directorates and Offices of
Retail, Wholesale, and Wholesale-
Retail Trade *
Organs of Administration and Support
Directorates of Local Trading Organizations **
29928 4-61
City or Rayon Trade
Division
Organs of Administration and Support
Trading Organizations (Torgs) ***
? These components have increased in size and number to absorb functions formerly performed by the Ministry of Trade, USSR,
although some have been eliminated and their functions transferred to local or other republic bodies.
?? In oblast and cities having no more than seven local trading organizations (torgs), these components are managed directly
by the trade divisions.
??? According to their product lines, trading organizations are classified as miscellaneous, food, manufactured goods, or specialized.
Specialized torgs deal in bread, fruit and vegetables, cultural goods, furniture, and petroleum products.
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USSR: ORGANIZATION OF THE CONSUMERS' COOPERATIVE SYSTEM
JANUARY 1961
Central Union of Consumers'
Cooperatives (Tsentrosoyuz)
RSFSR Federation
(Rospotrebsoyuz)
Republic Federation
Oblast, Kray, and ASSR
Federations of the RSFSR
I
Autonomous
Sections of
Fishermen's
Oblast and ASSR
Federations
Cooperatives
Autonomous
Rayon Federations of
I
Rayon Federations of
Sections of
Consumers' Societies
Fishermen's
(Raypotrebsoyuzes)
Intermediate
Consumers' Societies
Cooperatives
Federations
of Fishermen's
(Raypotrebsoyuzes)
I
I
I
Societies
Intermediate
Village
Urban
Rayon
I
I
Federations
Societies
Societies
Societies
I
Village
Urban
of Fishermen's
(Sel'pos)
(Gorpos)
(Raypos)
Fishermen's
Societies
Societies
Societies
Societies
(Sel'pos)
(Gorpos)
(Rybkoops)
I
I
Fishermen's
State Farm
Other
I
Societies
Workers'
Workers'
State Farm
Other
Rayon
(Rybkoops)
Societies
Societies
Workers'
Workers'
Societies
(Sovkhoz-
(Rabkoops)
Societies
Societies
(Raypos)
rabkoops)
(Sovkhoz-
(Rabkoops)
rabkoops)
29929 4-61
Republic Federation
1
Figure 5 50X1
Rayon Federations of
Consumers' Societies
(Raypotrebsoyuzes)
Village
Societies
(Sel'pos)
I
Urban
Societies
(Gorpos)
State Farm
Workers'
Societies
(Sovkhoz-
rabkoops)
I
Other
Workers'
Societies
(Rabkoops)
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(Raypos)
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state,* and conduct wholesale operations. Rayon federations often
operate large retail enterprises in the rayon centers. In the past
the task of coordinating consumers' cooperative operations with other
trade activities was mainly performed by the Ministry of Trade, USSR.
Since this ministry was eliminated, coordination apparently has been
accomplished primarily by republic ministries of trade.
Trade by consumers' cooperatives has increased more rapidly
than state trade in recent years, largely because of the expansion
of cooperative activity in urban centers. Cooperatives are selling
on commission a growing volume of farm products consigned to them by
individuals and collective farms and also are selling an expanding
amount of farm produce purchased outright at or below state procurement
prices. Commodities that have been purchased by the cooperatives are
sold at state prices, and those being sold on commission are sold at
prices that are slightly higher than state prices but still below
collective farm market prices. With this price advantage and strong
impetus from the government, commission trade and purchase trade, be-
gun in 1953 and 1959, respectively, are seriously encroaching on the
operations of collective farm markets.
The period of trade reorganization has seen no great changes
in the organizational structure of consumers' cooperatives. Trade
ministry spokesmen have urged that cooperative wholesale activities
be absorbed by the trade ministry system, but there is nothing to
indicate that this advice will be heeded. Although the two systems
do operate some duplicate wholesale facilities, state operations are
usually specialized and are concentrated in the cities, whereas co-
operative facilities are usually of a general nature and are widely
dispersed to serve rural areas. The current Seven Year Plan (1959-65)
calls for further expansion of wholesale trade by the consumers' co-
operatives.
A small part of cooperative trade also was conducted by pro-
ducers' cooperatives, whioh marketed a large share of their products
through their own retail outlets. These organizations were concen-
trated in production of clothing and leather goods; in carpentry; and
in such service trades as household repair work, tailoring, and shoe
mending. Their retail sales amounted to less than 2 percent of the
total for all state and cooperative organizations in 1955 and probably
showed an absolute decline thereafter. 1?_/
* The consumers' cooperative system procured agricultural commodities
worth 26.4 billion rubles in 1958, about one-fourth of the total pro-
curement by all organizations. 12/ (Ruble values in this report are
given in current rubles and may be converted to US dollars at a rate
of exchange of 4 rubles to US Sl. This rate does not necessarily re-
flect the value of rubles in terms of dollars.)
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In 1960, all producers' cooperative enterprises were reorgan-
ized as state enterprises under the direction of republic ministries
or chief directorates of local industry or under the councils of
national economy. 1// This merging of directorates should reduce
conflicts and duplications among local enterprises, but because of the
small volume of trade conducted by producers' cooperatives, such
changes will be of little significance in the general trade picture.
D. Collective Farm Markets
In 1959, about 5 percent of all retail trade was conducted in
collective farm markets, where collective farm produce remaining after
deliveries to the state and produce from collective farmers' private
plots and from other private gardens and farms may be sold. Because
such trade is concentrated in perishable foodstuffs -- meat, fish,
dairy products, eggs, fruits, and vegetables -- it is of greater im-
portance than its small share of the total retail trade would indicate.
Collective farm markets are regulated by Soviet trade authorities. A
Soviet commentator, writing before the abolition of the Ministry of
Trade, USSR, states:
The administration of kolkhoz markets is placed on the
oblast, city, and rayon trade divisions. These divisions are
responsible for the organization and improvement of kolkhoz
trade, increasing the delivery of agricultural products to the
markets, and planning and constructing new markets. Oblast
and city trade divisions issue instructions regulating market
trade. 18/
The duties of supervising collective farm market activities
formerly performed by the Ministry of Trade, USSR, have devolved on
republic ministries of trade operating, of course, within policies
approved by republic and union councils of ministers. As was pre-
viously indicated, recent policy has brought about a contraction of
the share of collective farm markets in total retail sales. From
1950 to 1959, while state and cooperative sales volume in constant
prices rose 168 percent, collective farm market volume fell about
22 percent. 220/ During this period the share of collective farm
markets in total sales fell from 12 percent to 5 percent.* 22/
This share is somewhat understated because Soviet statistics do not
include collective farm market sales in rural villages. These sales
were estimated to be 25 percent of total collective farm market sales
in 1955.
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III. Recent Changes in Administrative Procedures
A. Planning and Allocation
Before 1957 the Ministry of Trade, USSR, and Gosplan, USSR,
were responsible for the preparation of plans for the conduct and
development of state and cooperative trade and for the operation of
collective farm markets. Trade officials of production ministries
and representatives of the consumer cooperatives participated in
planning for their respective systems. Plan formulation required a
large amount of correspondence between, and duplicate effort by,
trade and Gosplan authorities. Planning procedures at the national
level were considerably simplified with the transfer of planning
functions from the Ministry of Trade, USSR,, to Gosplan, USSR, and to
the trade ministries in the republics in 1957 and the elimination of
the Ministry of Trade, USSR, in 1958.
Gosplan, USSR, is the only body at the union level concerned
with the preparation of short-term trade plans. Since April 1960 the
State Scientific-Economic Council (Gosekonomsovet) has been charged
with the development of long-term plans. The Trade Turnover Division
of Gosplan, USSR, subject to approval by the Council of Ministers,
USSR, plans the total volume of retail trade turnover, expressed in
rubles, for the entire country. This total figure is broken down by
republic, largely on the basis of requests submitted to Gosplan by
republic officials.
At the enterprise and torg levels, plan formulation procedures
have changed little, but councils of national economy now participate .
in the development of plans for workers' supply organizations attached
to enterprises under their direction, and republic ministries of trade
have more authority than in the past in planning retail turnover,
commodity stocks, and turnover expenditures. In the RSFSR the Minis-
try of Trade develops a republic plan, which conforms to the all-
union plan and is broken into totals for divisions at the oblast level,
and presents this plan to the Council of Ministers, RSFSR, for ap-
proval. Sales plans for state and cooperative stores and public dining
enterprises are lumped together. Only plans for production or pro-
cessing by public dining enterprises must gain specific approval at
this level. In divisions at the oblast level, plans are developed for
each trade system and must be approved by the executive committees of
the oblasts and krays and by the councils of ministers of the autono-
mous republics. 21/
Authority to formulate plans is more highly centralized in the
smaller republics than in the RSFSR. In the Ukraine the Council of
Ministers of the republic approves turnover plans for each oblast and
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each trade system, with sales by stores, public dining enterprises, and
cooperative commission enterprises indicated separately. The Council
of Ministers of Kazakh SSR also passes judgment on detailed trade
plans, and councils of ministers of the remaining republics presumably
do likewise.
Until 1957, available stocks of the most important goods were
allocated among trade systems and republics by the Ministry of Trade,
USSR, in accordance with the trade plans. These "allocated" or
"funded" commodities were alloted directly to organizations of union
subordination without intervention by republic officials, 2V and re-
public ministries of trade determined the distribution of such commodi-
ties within -- but not among -- the separate trade systems of republic
and local subordination. In 1954, "allocated" goods constituted more
than 60 percent of the volume of marketable commodity stocks, 2i4/ but
2 years later the number of consumer commodities "allocated by cen-
tralized planning" was reduced from 300 to 150. 22/ The distribution
of less important goods -- "regulated" or "controlled" commodities --
was determined by agreements between supplying ministries and the
Ministry of Trade, USSR, or by government decrees. Most of the re-
maining "unplanned," or "nonallocated," commodities Were products of
local industry, producers' cooperatives, trading organizations, or
other relatively small-scale units. These commodities were distributed
in accordance with agreements between sellers and buyers or were sold
by the organizations that produced them. 2?/ Of course, organizations
producing "unplanned" commodities did not operate independently but
rather were managed and guided by ministries or chief directorates of
local industry, by councils of producers' cooperatives, and by various
other bodies. Such organizations had to obtain employees and materials,
pay wages, and distribute products within the framework of the general
economic plans.
The procedure for allocating goods was greatly revised in 1957.
The Trade Turnover Division of Gosplan, USSR, now specifies the quan-
tities of about 45 important goods -- including expensive household
durables as well as staple items of food and clothing -- which will be
centrally allocated. The Chief Directorate for Interrepublic Deliveries
of Consumer Goods of Gosplan, USSR, considers requests from and the
needs of the 15 republics and the cities of Moscow and Leningrad and
does the actual allocating of these goods. Allocations are made only
among republics and to the two largest cities without distinctions among
trade systems or between stores and public dining enterprises. .7./
Republic councils of ministers are allowed a large amount of
discretion in formulating the distribution patterns for goods allocated
to them. In the,RSFSR, proposals for the allocation of flour, groats,
macaroni products, sugar, cotton and woolen fabrics, ready-to-wear
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clothing, and footwear among divisions at the oblast level are devel-
oped by the republic Gosplan and Ministry of Trade but must be ap-
proved by the Council of Ministers, RSFSR. The distribution among
oblasts of 10 other food products and 30 types of manufactured goods
is determined by the republic Ministry of Trade. Eleven additional
manufactured items are allocated to urban trade organizations of
oblast divisions by the republic Ministry of Trade and to rural or-
ganizations by the Union of Consumers' Cooperatives, RSFSR. Within
the RSFSR the executive committees of the cities of Moscow and Lenin-
grad and their trade departments apparently enjoy a great deal of
independence. It is probable that in the 14 smaller republics the
authority for allocating important commodities is even more highly
concentrated at the republic level than in the RSFSR.
The distribution of less important goods is regulated by
local production officials in the factories and councils of national
economy and by trade officials in the enterprises, torgs, cooperative
societies, wholesale organizations, and trade departments of local
governing bodies. Regibnal and national trade fairs are becoming
more important in the distribution of those goods of secondary impor-
tance that are not universally produced.
Since 1957, responsibility for the determination of consumer
goods assortments and of details of design and quality has been dele-
gated to factory managers and local councils of national economy
working in conjunction with trade representatives. Goods are ordered
by wholesale and retail organizations on a contract basis, with de-
tails of assortment and delivery specified in the contracts. Pro-
gressively greater emphasis is being placed on businesslike relations
between organizations, including strict observance of contract terms.
In a trade decree issued in August 1960, trade organizations were
forbidden to accept merchandise that does not meet the standards
specified in contracts. If universally observed, this precept would
bring tremendous pressure to bear on producers to improve the quality
of their output and their delivery procedures. Similar admonitions
in the past generally have been ignored, and only time will reveal
the impact of this recent order. Direct contracting between produc-
tion enterprises and the larger retailers is becoming more common, but
it is often restricted to firms within one republic, oblast, or even
city.
B. Determination of Prices
Before the reorganization, union authorities -- the Council of
Ministers, Gosplan, and the ministries -- wielded almost unlimited
authority over prices in state and cooperative trade. Although some
of this authority has been transferred to republic councils of
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ministers, organs at the union level still determine general price
policy and regulate most agricultural procurement prices and the
prices of many important foods and fabricated consumer goods. Since
1958, republic councils of ministers have had the right to approve
prices -- set within limits determined by Gosplan -- of goods com-
prising approximately 45 percent of retail volume. The right to set
prices on products of local industry and on certain foodstuffs and
manufactured goods is delegated by republic councils of ministers to
gosplans or to various local authorities. .2W Oblast and city trade
administrations, for example, fix prices on vegetables and fruit. 22/
Early in 1960, retail organizations of the RSFSR were authorized to
create a fund to absorb accounting losses caused by price reductions
on slow-moving merchandise. This device, presumably in use in the
other republics, is effective in reducing stocks of overpriced goods,
but many managers prefer to hold such merchandise in anticipation of
regular price reductions by state authorities. 19/
IV. Recent Changes in Retailing Facilities and Methods
A. Facilities
Soviet authorities have continued to expand trade facilities
at a relatively slow rate (see Table 1*). The number of stores and
dining enterprises grew only about 14 percent between the close of
1955 and the close of 1959, although retail volume in 1959 was 42 per-
cent above that in 1955. L/ At the end of 1955, 43 percent of state
stores and 7 percent of cooperative stores dealing in perishable foods
were equipped with cold storage facilities, and 4 years later these
percentages had been raised to only 56 and 13, respectively. 12/
In the trade decree of August 1960, goals for the expansion
of trade facilities during 1961-65 were raised. The new 5-year
target includes 105,000 state and cooperative stores and 9 million
square meters of new general warehouse space. L./ The former figure
equals that originally planned for the entire period 1959-65, and the
latter exceeds its counterpart in the Seven Year Plan by about 20 per-
cent. Stores and dining enterprises are to be established on the
ground floors of new apartment buildings and in sephrate buildings and
shopping centers. An important incentive for the construction of
stores and dining enterprises is the provision by this decree that con-
struction organizations are not to be paid bonuses for fulfillment or
overfulfillment of housing construction goals until stores and dining
enterprises have been commissioned in or near the new apartment
buildings. Achievement of the investment and construction goals speci-
fied in the decree will mean considerable overfulfillment of the Seven
Year Plan for trade construction, even though the goals for 1959 and
1960 were not met.
* Table 1 follows on p. 17.
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Table 1
Number of Retail Stores and Restaurants
in the USSR
Selected Years, 1940-59, and 1959-65 Plan
Thousand Units
Year
Retail Stores 12/
Restaurants
Total
Urban
Rural
Total
Urban
Rural
19140
307.1
90.7
216.4
87.6
59.2
28.4
1950
298.4
108.7
189.7
95.4
69.8
25.6
1955
352.5
134.7
217.8
118.1
83.1
35.0
1956
359.9
137.7
222.2
126.2
88.6
37.6
1957
370.3
146.0
224.3
128.7
93.0
35.7
1958
383.1
154.0
229.1
130.9
96.7
34.2
1959
397.3
162.3
235.0
137.5
102.1
35.4
1959-65 (Planned
new construction)
105.0
N.A.
N.A.
64.3
45.3
19.0
a. End-of-year data. L/
b. Excluding stalls and booths (palatki). Stalls and booths
amounted in 1959 to 100,100 in urban areas and 44,900 in rural
areas.
B. Selling Procedures
Self-service and other progressive retailing methods have been
introduced on too small a scale to relieve the growing pressure on
retail facilities. 12/ By mid-1960, only 2,500 self-service grocery
stores had been organized in the USSR. _3_6/ The principal obstacle to
this innovation continues to be the scarcity of factory-packaged
goods -- self-service stores are obliged to have their own packaging
sections. Steps are being taken, however, to expand paper-producing
and factory-packaging operations. Open and attractive display of mer-
chandise, acceptance of payment at display counters, sale by sample,
and home delivery are slowly becoming more common, and multiple queueing
is on the wane. Installment selling has met with a high degree of popu-
lar approval and is spreading rapidly. The cash register is gradually
replacing the abacus. In spite of these improvements, the best Soviet
stores are 20 years behind most of those of the US, the average new
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store is even more primitive, and the great majority of Soviet retail
stores continue to operate in a very crude manner. The pace of
modernization is increasing, but the goal is distant.
V. Appraisal of the Reforms
The transfer of functions from the Ministry of Trade, USSR, to
other bodies and the elimination of that ministry have resulted in the
formation of a more streamlined administrative structure. Republic
ministries of trade now make many decisions that formerly were referred
to the Ministry of Trade, USSR. Thus decisions are now made more
quickly and with more detailed knowledge of local or regional situa-
tions, particularly outside the RSFSR. Coordination of interrepublic
operations apparently is being successfully accomplished by Gosplan,
USSR. Planning procedures have been simplified by the elimination of
the Ministry of Trade, USSR, but there is some duplication of effort by
republic gosplans and ministries of trade. The responsibility for
allocating important goods has been partly shifted to republic minis-
tries of trade, and Soviet authorities foresee further shifts in this
direction. The number of allocated consumer goods has been sharply
reduced, and thus Soviet trade moves a bit more freely. Wholesale
operations under the ministries of trade are no longer divided between
organizations of union subordination and organizations of republic sub-
ordination. Nearly all wholesale and retail organizations in each
republic are now under the authority of the republic ministry of trade,
and their operations are more easily coordinated. Trade organizations
under the republic ministries of trade have more direct contact with
producing organizations, for the two are no longer separated by whole-
sale organizations of union subordination. The elimination of retail
stores of union subordination apparently has led to a more balanced
distribution of scarce commodities, for in the past these stores were
often favored over stores of republic and local subordination.
The transfer of workers' supply enterprises to local trade au-
thorities has resulted in the elimination of redundant facilities and
administrative offices in a number of cities, but such transfers have
been accomplished on only a small scale. Similar gains have been made
since 1959 by shifting railroad dining enterprises from the Ministry of
Trade, RSFSR, to authorities at the oblast level. E./ Because such
transfers reportedly have been successful, more probably will be made
from time to time.
The brightest aspect of state and cooperative retail trade in re-
cent years has been the increasing volume of turnover (see Tables 2 and
3*). From 1950 through 1959, increases in state and cooperative sales
* Tables 2 and 3 follow on p. 19.
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Table 2
State, Cooperative, and Collective Farm Market Retail Sales
in the USSR 2/
Selected Years, 1940-60
Billion Current Rubles
Year
Total
Sales
State and Cooperative Sales
Collective Farm
Market Sales 12/
Total
State
Cooperative
1940
204.2
175.1
128.1
47.0
29.1
1950
408.8
359.6
261.1
98.5
49.2
1955
549.7
501.9
347.3
154.6
47.8
1956
589.5
547.4
380.6
166.8
42.1
1957
664.6
625.0
432.9
192.1
39.6
1958
717.7
677.2
467.9
209.3
40.5
1959
754.7
719.2
498.1
221.1
35.5
1960
N.A.
784.5
N. A.
N. A.
N. A.
a. II
b. Excluding sales in rural villages, which in 1955 amounted to 25
percent of the total collective farm market sales.
Table 3
Indexes of the Volume of Retail Sales
in the USSR 2/
Selected Years, 1940-60
Indexes in Constant Prices (1950 = 100)
Year
State and Cooperative Sales
Collective Farm
Market Sales
Total
Food
Nonfood
Items
1940
91
106
71
62
1950
100
100
100
100
1955
189
189
188
94
1956
205
203
207
92
1957
234
229
241
89
1958
248
240
257
88
1959
268
258
279
78
1960
297
N.A.
N.A.
N.A.
a. Di
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(in constant prices) averaged more than 11.5 percent per year for a
total growth of nearly 170 percent.* L21/ During the Seven Year Plan
period (1959-65), state and cooperative sales are to increase by 62
to 65 percent, an average annual rate of 7.1 to 7.4 percent. The
growth of sales in 1959 above those in 1958 was 8 percent,Liq and
sales during 1960 were about 11 percent above those in 1959. _2/ Con-
tinued increases of such magnitude will result in substantial overful-
fillment of 1965 goals.
This rapidly mounting volume of sales makes imperative the tasks
of improving the administrative structure and selling methods and of
expanding the network of facilities, for the trade system must be con-
stantly improved just to keep pace with growing turnover. In at least
one struggle, however -- that against accumulation of inventories --
Soviet trade is losing ground. Inventories of nonfood goods stood at
102,752 million rubles at the close of 1956 and were described as ex-
cessive. During the succeeding 3 years, nonfood inventories rose more
than 40 percent in spite of increasing emphasis on installment selling,
redistribution among retail organizations, and price cutting.12A/ The
volume of nonfood sales increased only 35 percent during this inter-
val./22/ Excessive accumulation of inventories will not be arrested
until trade organizations become more accurate at gauging consumer
demand and more liberal in reducing prices on slowly moving merchan-
dise and until producers make shipments conform more closely to
orders from trade organizations.
In general, the recent organizational changes in Soviet trade have
been steps in the right direction, and Soviet trade operations should
continue to improve. Minor refinements and changes in organization
will be introduced from time to time, but solutions to many problems
are elusive and painful. The organization of trade will remain in
flux during the foreseeable future as new problems are generated and
as old ones are aggravated by the swelling output of consumer goods.
* It should be noted, however, that a portion of the increase in
state and cooperative sales was at the expense of collective farm
market trade, which declined 22 percent during 1950-59 and now
accounts for about one-twentieth of the total sales volume. LT/
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