DEVELOPMENTS IN THE ORGANIZATION AND PLANNING OF SOVIET INDUSTRY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP79R01141A002100070001-9
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 28
• Document Creation Date: December 23, 2016
• Document Release Date: May 30, 2013
• Sequence Number: 1
• Publication Date: August 1, 1961
• Content Type: REPORT

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N? 3
f.:7\
DEVELOPMENTS IN THE ORGANIZATION AND PLANNING
OF SOVIET INDUSTRY
August 1961
NOT TO BE REPRODUCED IN WHOLE OR
IN PART WITHOUT THE PERMISSION OF
THE CENTRAL INTELLIGENCE AGENCY
CENTRAL INTELLIGENCE AGENCY
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NOTICE
This report has been loaned to the recipient by
the Central Intelligence Agency. When it has
served its purpose it should be destroyed or
returned to the:
CIA Librarian
Central Intelligence Agency
Washington 25, D. C.
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DEVELOPMENTS IN THE ORGANIZATION AND PLANNING
OF SOVIET INDUSTRY
CIA/RR ER 61-35
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
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CONTENTS
Summary and Conclusions
Page
1
I. Establishment of the Territorial System of Economic
Organization and Planning (1957) 5
II. Refining the System (1958-59) 6
III. Recent Developments (1960 - Mid-1961) 10
A. Republic Sovnarkhozes 12
B. Gosekonomsovet 13
C. Councils for Coordinating and Planning the Work of
the Sovnarkhozes 14
IV. Proposals for Further Change 16
Appendix
Source References 21
Illustrations
Figure 1. USSR: Administrative Organization of Industry
and Construction, July 1961 (Chart) following
PE-Ea
12
Figure 2. USSR: Major Economic Regions, July 1961
following page 16
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DEVELOPMENTS IN THE ORGANIZATION AND PLANNING OF SOVIET INDUSTRY
Summary and Conclusions
The organization of Soviet industry along territorial lines -- a
radical departure in mid-1957 from the traditional branch-of-industry
pattern of ministries -- remains basically unchanged after nearly 4
years of operation. Small changes introduced since 1957 suggest a
regime restlessly seeking still more effective organizational forms
but reasonably satisfied that the territorial system is a workable basic
administrative arrangement as was the ministerial system before it.
Each system has exhibited obvious shortcomings which have evoked con-
tinuing innovation and refinement, and each has presented some problems
which have defied easy solution.
Either system, in practice, has owed part of its success to the
incorporation within it of basic elements of the other. Under the min-
isterial system, the branch-of-industry principle was supplemented by
territorial divisions both in the ministries and the gosplans. Under
the system of territorial councils of national economy (sovnarkhozes),
the gosplans have expanded their branch-of-industry divisions by assum-
ing many of the functions and 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 through official channels to Moscow to
effect the simplest transactions and obscured the requirements for
unified planning of national and regional economic development. The
regional barriers of the sovnarkhoz system have led to local distor-
tions of the national interest, and campaigns to curb these localist
tendencies probably have inhibited the local initiative that the reor-
ganization sought to promote.
The industrial reorganization of 1957 and subsequent changes in
industrial planning and organization have contained elements of both
centralization and decentralization. A considerable amount of admin-
istrative detail has been decentralized. Republic councils of ministers
now administer enterprises accounting for 94 percent of total industrial
production compared with only 47 percent in 1955, but their control over
these enterprises is far from complete. Control over basic economic
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decisions has been tightened at the all-union level, and many decisions
regarding investment, production, and allocation of materials -- controls
formerly exercised by the ministries -- were 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 the republic gosplans and to the sovnarkhozes in 1958 and 1959, but
decisions bearing on interrepublic supply and other major planning
decisions were retained by the Gosplan. In an attempt to strengthen
central planning, long-term planning was taken from the Gosplan in 1960
and placed in a relatively new agency at the national level, the State
Scientific-Economic Council (Gosekonomsovet).
A similar move was made in 1960 to strengthen planning at the re-
public level by relieving the republic gosplans of the heavy adminis-
trative burden of handling intersovnarkhoz production relationships as
well as problems of supply and sales in those republics containing a
number of sovnarkhozes.** These administrative responsibilities were
shifted to newly created republic-level sovnarkhozes that were super-
imposed over the existing regional sovnarkhoz structure in the first
three of these republics, and the five regional sovnarkhozes in Uzbek
SSR were replaced with a single sovnarkhoz.
In May 1961 a long-discussed scheme to further an old objective --
the integrated development of natural economic regions broader in area
than the regional sovnarkhozes -- was put into operation with the
division of the country into 17 large economic regions. Each region,
except Kazakh SSR, was to have a council for coordinating and planning
the work of the sovnarkhozes. These councils are to study basic problems
of complex regional economic development and work out recommendations
for presentation to the republic gosplans, the national Gosplan, and
the Gosekonomsovet.
Most of these changes, both in organization and in planning, have
involved lateral transfers of functions with little shifting of authority
from one level to another. Those which have involved vertical transfers
of functions have been directed toward either relieving central agencies
of administrative details or supplying central agencies with a better
basis for planning and control. If Soviet hopes are realized, the sov-
narkhozes will have progressively less freedom to express undesirable
localist tendencies, and opportunities to exercise local initiative
along approved lines, which was one objective of the 1957 reorganization,
* Unless local organizations are specified, the terms Gosplan and
Council of Ministers refer to organizations at the national (USSR)
level.
** Earlier in 1960 the RSFSR contained 67 sovnarkhozes; the Ukrainian
SSR, 14; Kazakh SSR, 9; and Uzbek SSR, 5.
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will increase very little. In this sense, the changes since 1957 may
be viewed as attempts to refine the operation of the new system rather
than as a return 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 4 years has been
attributed by Soviet writers to the sovnarkhoz system, including gains
in output, increases in profits, reductions in costs, better utiliza-
tion of 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, improved re-
lationships between industry and agriculture, more efficient combina-
tions of technically related enterprises, and reduction in the size of
the managerial apparatus. For the 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.
In 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 and coop-
eration, meeting intersovnarkhoz delivery plans, and planning and coor-
dinating the total economic requirements within the sovnarkhoz. The
sovnarkhozes, lacking well-defined legal rights even after 4 years of
operation, perhaps have operated too cautiously to realize their full
potential in coping with these problems.
In addition to these admitted shortcomings, which are susceptible
of treatment within the general framework of the existing organiza-
tional system, is the problem of improving economic efficiency at the
enterprise level. The enterprise manager now operates in an environ-
ment substantially different from that preceding the 1957 reorganiza-
tion, and 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 little 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 problem of improving the planning
and control activities of higher echelons will remain a basic part of
the leadership's efficiency drive.
Recommendations for improving central planning and control were
presented in March 1961 to the Council of Ministers, as requested by
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the plenum of the Communist Party of the USSR (CPSU) in July 1960.
These recommendations were directed toward overcoming the defects of
physical and value indicators now used in the planning and reporting
of industrial activity, providing greater continuity in economic
plans over longer periods, and improving the quality of regional plan-
ning. Some of the recommendations have been discussed for years, but
none seems to promise a spectacular 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 resources origi-
nally sought in the reorganization. The attempt to obtain greater
continuity in plans, whether it succeeds or not, will force planners
to look ahead in greater detail and may lead to a more accurate antici-
pation of the requirements of future planning periods.
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I. Establishment of the Territorial System of Economic Organization
and Planning (1957)
Since the adoption of the sovnarkhoz system on 1 July 1957, 1/*
changes 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
30 March 1957. 2/ Khrushchev advocated abandoning the long-used
branch-of-industry principle in favor of a territorial 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 in February 1957 that the reorganization proposals be
drawn up in "strict observance of the basic principle of centralized
planning on an all-union scale" 2/ has been rather closely heeded,
both in the original changes of 1957 and in subsequent actions.
The merging of long-term planning, current planning, and supply
control functions which had been called for in the reorganization
theses of March 1957 was accomplished before the sovnarkhoz system
was placed in operation. The new, enlarged Gosplan took over its new
functions on 22 May, and the 105 sovnarkhozes began operating on
1 July. The dates on which the ministries were dissolved are shown
in the following tabulation
Date Ministry
4 July 1957
5 July 1957
8 July 1957
13 July 1957
17 July 1957
20 July 1957
22 August 1957
31 August 1957
6 September 1957
9 September 1957
23 September 1957
Machine-Tool Industry
Heavy Machine Building
Transport Machine Building
' Tractor and Agricultural Machine
Food Industry
Construction Materials Industry
Meat and Dairy Industry
Fish Industry
Building
Electrotechnical Industry
Construction and Road-Machine Building
Coal Industry'
Nonferrous Metallurgy
Automobile Industry
Light Industry
Paper and Wood Processing
Machine Building
Instrument Building and Means of Automation
Petroleum Industry
City and Rural Construction
Ferrous Metallurgy
Construction of Coal Industry
Timber Industry
Construction of Metallurgical and Chemical Industry Enterprises
Construction of Petroleum Industry Enterprises
Construction
* For serially numbered source references, see the Appendix.
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Throughout the second half of 1957, additional features of the
basic reorganization gradually were introduced, making still more
apparent the intention of maintaining firm central authority over the
activities of the new administrative units. Although a decree of
22 May granted to chairmen of sovnarkhozes the general authority en-
joyed by ministers of the USSR, .51 a decree of 27 July "On Further
Expanding the Authority of the Gosbank of the USSR" provided even
closer financial monitoring of industrial enterprises than Gosbank had
exercised under the ministerial system, and a decree of 6 September
detailed the strengthened role of the Central Statistical Administra-
tion. // Sovnarkhoz authority in planning, capital construction,
material-technical supply, finance, credit, labor, and wage matters
was outlined in statutes of 26 September which clearly reserved to
central authorities decisions with respect to major goals and policies.
Principal delegations of authority involved matters of local implemen-
tation of policies established at the center. 21/ On 16 October, sov-
narkhozes and republics were granted authority for independent deci-
sions on construction projects of a relatively minor nature within
rather narrow ruble limits, but a decree of 12 December reserved to
the Council of Ministers the distribution of capital investments in
ferrous and nonferrous metallurgy; coal, petroleum, gas, and chemical
indutries; defense branches of industry; and electric power stations. Li
The defense-oriented ministries of aviation, shipbuilding, radiotech-
nical, and defense industries were retained at midyear to coordinate
branch-of-industry development in these important areas even though some
of their enterprises had been transferred to the sovnarkhozes, 11/ but
on 15 December these ministries were replaced by state committees of
the Council of Ministers. 121 By the end of 1957, nearly all of the
main features of the territorial system were in existence.
Refining the System (1958-59)
Major attention in 1958 and 1959 was turned to the problem of making
the system function more smoothly, principally through changes in plan-
ning and material-technical supply arrangements, although a few other
changes in organizational structure not directly related to this objec-
tive also were introduced.
The state committee form of special treatment, given earlier to
defense-oriented activities, was extended in June 1958 to the chemical
industry 13 and in November to the procurement of agricultural prod-
ucts. 14 The Ministry of Trade, which since 1956 steadily had been
losing functions to the Gosplan and to the republic ministries of
trade, was abolished in November. 12/
In an attempt to improve both planning and material-technical supply
in 1958, the supply bases which had been inherited by the Gosplan from
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the abolished ministries were turned over to the republic gosplans in
January, 16/ and in April the 20 supply and marketing administrations
under the Gosplan were re-formed into 14 Main Administrations for Inter-
republic Deliveries. 17/ The April decree also outlined a new system
for planning material-technical supply beginning in 1959 in which the
republics, sovnarkhozes, and enterprises were to work out detailed
supply requirements for more than 10,000 commodities within the limits
of preliminary supply patterns worked out by the Gosplan. 1L3/ On the
one hand, this system gave republic organs greater responsibility for
detailing the interrepublic 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 system in 1958 encompassed only about 5,000 planned and 1,000 funded
commodities. By 1960 the number of centrally planned commodities had
grown to 12,800, and the 1961 plan includes more than 14,000. 12/
Another approach in April 1958 to the material-technical supply problem
was directed toward reducing the temptation of regional officials to
attend to local requirements at the neglect of intersovnarkhoz and inter-
republic delivery plans. Nonfulfillment of such plans without valid
reason henceforth could involve severe disciplinary penalties or the
levy of monetary fines up to 3 months' pay. Repeated nonfulfillment
would make the officials liable to prosecution on criminal charges. 22/
Two further measures in May 1958 were directed toward improving the
planning of production and investment. The decision on production
planning stipulated continuity of annual plans within the framework of
long-term plans. It also formalized the system by which plans based on
centrally determined control figures could be developed locally, and
it instructed the Gosplan to report to the Council of Ministers on the
possibility of curtailing the number of indexes specified both in the
control figures and in the national plans. 2l/ Considerable attention
was devoted to the treatment of supply planning, with emphasis on the
development of regular and direct ties between producer and consumer
enterprises and the allowance of ample lead time in supply planning.
The investment decision stipulated separation of productive and non-
productive investments in planning and provided a separate category of
investment for the construction and construction materials industries. 22/
The principal delegation of authority was limited to the republics,
which were to be responsible for detailing investments for a large
proportion of housing, communal, and industrial construction which was
to be allocated to them, in aggregate only, by the state economic
plan. 21/ The detailing of investment, however, was to be in strict
accordance with standards and norms established by the central authori-
ties, and the Gosplan and the Gosstroy (State Committee of the USSR
Council of Ministers for Construction Affairs) were charged with the
close monitoring of the work of the republics. To supplement this
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control, in an area which apparently proved to be of particular tempta-
tion, a decree of October 1958 specified the policies to be followed by
subordinate authorities in the expenditure of money and materials for
constructing administrative, sports, and other public buildings.211/
New procedures for establishing prices, revealed in June 1958,
delegated considerable authority to republics, sovnarkhozes, and enter-
prises to detail specific prices appropriate to their scope of opera-
tion and responsibility, but, as in the matter of planning, the basic
questions of price policy were reserved to the central government. 22/
The 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 Year Plan (1959-65) was backed up in February 1959
by the creation of a State Committee of the Council of Ministers for
Automation and Machine Building. 2:_& The state committees previously
organized had been based on temporarily retained ministries, but in
automation and machine building, where apparently such a transition
had not been contemplated, none of the ministries existing at the time
of the reorganization in mid-1957 had been retained. The scope of the
technology effort was to become more apparent with the major CPSU
plenums primarily devoted to this subject in June 1959 and July 1960.
Also in February 1959 a new State Scientific-Economic Council (Gos--
ekonomsovet) was formed. 21/ Through 1959 the only observed functions
of this council were related to the coordination of the work of various
research organizations. It was not until April 1960 that this agency
was assigned its present role as the central long-term planning agency.
In April 1959 the network of Soviet long-tern investment banks
was reorganized, apparently to provide more effective control over the
investment activities that had been extended to republic authorities
in 1958. The agricultural bank, the bank for financing communal and
housing construction, and the communal bank were abolished, and their
functions were taken over by the State Bank and the Industrial Bank. 2!lipi
The Industrial Bank was renamed the All-Union Bank for Financing Capital
Investment (Stroybank, USSR).
Except for the response to specific problems which led to the
formation of the Automation Committee, the Gosekonomsovet, and the
new Stroybank,.the formal structure of administration of industry
and construction remained basically stable in 1959. The year was
marked, however, by considerable discussion of problems of planning
techniques, material-technical supply, investment, industrial pricing,
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and coordination of research. The CPSU plenum of June 1959 stressed
the continuing existence of organizational and managerial, as well as
technical, barriers to rapid improvement in the level of industrial
technology. 22/ The plenum instructions for working out proposals
for coping with problems such as improved interregional and intra-
regional specialization and cooperation and better organization of
scientific research and design planning organizations seemed to invite
changes in the existing structure. But if the proposals were ever
submitted they were not reported, and no organizational changes came
out of the June plenum in 1959.
Some further measures were taken, however, to improve the planning
process, to tighten control over investment, and to increase the
effectiveness of material-technical supply arrangements. A.N. Kosygin,
Chief of the Gosplan, noted at the June plenum that enterprises still
were getting their approved plans 3 or 4 months late, and he indicated,
both at the plenum and at the unveiling of the 1960 plan at a session
of the Supreme Soviet in October, that in the future the Gosplan would
submit control figures by May of the current year for use by enter-
prises, sovnarkhozes, and republics in preparing their plans for the
coming year. This step was an important one, but it still left room
for improvement, judging from a Georgian deputy's comments at the
session of the Supreme Soviet in December 1960 that planning work now
begins in April or May and continues up to December and that the Gos-
plan should entrust the republics with the solution of more of the
problems of little importance to the all-union economy. 3.12/ Kosygin
also noted that economic administrators still were diverting invest-
ment resources from priority projects. The approach to the problem of
controlling investment this time was to draw up a list of 250 top
priority projects for the Seven Year Plan with the implication that
any diversion of resources from them would not be tolerated. Continu-
ing difficulties with material-technical supply arrangements were indi-
cated in Khrushchev's comment at the June plenum that the existing
pattern of deliveries between enterprises was much the same as it had
been before the 1957 reorganization and that the supply system should
be reconstructed to minimize deliveries between far distant enterprises.
This defect and the more frequently observed tendency of local authori-
ties to neglect delivery commitments to other administrative areas
apparently promoted the introduction on 1 July 1959 of a new statute
governing supply procedures. 21 The provisions of this statute were
aimed both at improving the quality of material-technical supply plan-
ning and at strengthening the enforcement of supply commitments, pri-
marily through more detailed and more rigidly observed supply contracts
drawn in stricter observance of supply plans.
Although the measures taken in 1958 and 1959 were designed to make
the system function more smoothly, as perhaps they did, they by no means
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solved to everyone's satisfaction all of the acknowledged deficiencies
of the new system. The economy had demonstrated its ability to prosper
under the territorial arrangement, but remaining imperfections and the
new emphasis of the Seven Year Plan on greater economic efficiency
seemed to assure further attempts at refinement, even if new problems
were not to arise.
III. Recent Developments (1960 - Mid-1961)
Many of the changes in the organization of industrial planning,
coordination, and control during 1958-59 had their origin in the
cautious initial strengthening of these functions at the center by a
leadership concerned at the outset with problems of localism. This
concern, reinforced by the fear of disrupting the flow of supplies to
industrial enterprises, prompted a considerable expansion of the duties
of the Gosplan in 1957 -- some transferred from the abolished ministries,
some newly arisen with the creation of the numerous sovnarkhozes. The
subsequent delegation in 1958 and 1959 of some of these duties to re-
public gosplans, and to the sovnarkhozes themselves, relieved an over-
burdened central 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 half of 1960.
A new attack was made on these problems in June and July 1960 in
the four multisovnarkhoz republics (RSFSR, Ukrainian SSR, Kazakh SSR,
and Uzbek SSR), where the burden of handling intersovnarkhoz relations
apparently was overtaxing the abilities of existing republic organiza-
tions. The problems were simply removed in the Uzbek SSR, which con-
tained only 5 regional sovnarkhozes, by merging the 5 into a single
sovnarkhoz, thereby raising to 12 the number of single-sovnarkhoz
republics. In the remaining three republics, which contained a larger
number of regional sovnarkhozes (67 in the RSFSR 14 in the Ukrainian
SSR, and 9 in the Kazakh SSR), the problems were approached by the
establishment of super-sovnarkhozes at the republic level, under the
councils of ministers, to attend to the supply, coordination, and con-
trol tasks presented by the regional sovnarkhoz system. In this move,
the republic gosplans were freed to return their undivided attention
to more traditional, basic republic planning tasks as they had done
before the 1957 reorganization.
Another notable change in the organization and planning of industry
in 1960 was related less directly to the process of refining the sov-
narkhoz system than it was to the long-continuing search for an ideal
planning arrangement. The Gosekonomsovet, an organization whose func-
tions were not openly discussed at its creation in March 1959, was
designated the official long-term planning agency in April 1960. This
development, along with other actions which have stripped the Gosplan
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of all its former wide powers except that of short-term planning at
the national level and the planning of interrepublic material-technical
supply, is reminiscent of similar attempts in earlier periods to im-
prove the planning process by parcelling out its various aspects to
specialized agencies, notably the assignment during 1955-57 of short-
term planning to a State Commission for Current Planning (Gosekonom-
komissiya). Even the recent shifting about of the material-technical
supply function, partly a response to problems aggravated by the sov-
narkhoz system, is similar to earlier experiments ander the former
ministerial system which included the shifting of this function in
1948 to a State Committee for Material-Technical Supply (Gossnab),
back to the Gosplan in 1953, then to Gosekonomkomissiya in 1955, and
back again to the Gosplan in 1957.
The continuing search for better planning arrangements to handle
problems antedating the sovnarkhoz system also apparently led to the
establishment of coordinating and planning councils which currently
are being organized in large natural economic regions. 2/ These
councils for coordination and planning of the work of the sovnarkhozes
will give new emphasis to an old objective -- integrated development
of natural economic regions -- which has been given varying degrees
of attention in long-range planning for a number of years. The sov-
narkhoz system, however, with its inherent tendency to encourage
localist views rather than the broader requirements of the larger
natural economic regions, has made the attainment of this objective
more difficult, just as localist considerations have complicated
problems of material-technical supply. The current plan for estab-
lishing regional coordinating councils to handle regional planning
problems apparently stems from dissatisfaction with the effectiveness
of earlier measures, which included the holding of coordinating con-
ferences of sovnarkhozes within the various natural economic regions
and the establishment in 1958 of territorial divisions in the republic
gosplans.
The cumulative impact of the changes since the 1957 reorganization,
and the further changes which undoubtedly will be made, can not avoid
altering the conduct of sovnarkhoz affairs. Realignment of territorial
boundaries of some of the original 105 sovnarkhozes has occurred. Some
sovnarkhozes have been merged, others divided, although the present
system of 101 sovnarkhozes preserves the original pattern of a large
number of territorial, economic-administrative units, mostly coinciding
with the boundaries of political administrative units, administering
nearly three-fourths of the total industrial activity of the country.
Although the formal administrative channel through the republic and
all-union councils of ministers remains, the sovnarkhozes now are deal-
ing with administrative and planning organs presumably better equipped
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to plan, coordinate, and monitor sovnarkhoz development. The adminis-
trative organization of Soviet industry and construction is shown in
Figure 1.* The individual sovnarkhoz, largely a transmission belt for
directives from above, is now responsible for administering programs
devised by a larger number of staffs. Such operational decisions as
are made 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 industrial develop-
ment, the individual sovnarkhoz will have fewer opportunities for
influencing its own course of development. Investment decisions,
however, which form the core of long-term development plans, generally
have not been a prerogative of the sovnarkhozes in the past. To the
extent that the planning and monitoring of intersovnarkhoz supply
relationships are improved, default on intersovnarkhoz delivery con-
tracts may 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 will 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, established in 1960
(18 June in the RSFSR, 23 June in the Kazakh SSR, and 6 July in the
Ukrainian SSR) are charged by decree of the Presidium of the Supreme
Soviet of theUSSR with the responsibility of coordinating the economic
activities of the regional sovnarkhozes in the republic. 12/ The
decree stipulated that the regional sovnarkhozes were to be subordi-
nate in their activities to both the Union-Republic Council of Minis-
ters and 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 sovnarkhozes 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
* Following p. 12.
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ALL-UNION
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ADMINISTRATIVE ORGANIZATION OF INDUSTRY AND CONSTRUCTION
JULY 1961
SUBORDINATION PLANNING
COUNCIL OF MINISTERS
USSR
GOSEKONOMSOVET
15 UNION-REPUBLICS
USSR..SPL A N
INDUSTRIAL MINISTRIES
AND COMMITTEES ?
REP BLIC
COUNCILS OF MINISTERS
SPECIAL COMMITTEES
LABOR AND WAGES
CONSTRUCTION
COORDINATION OF
SCIENTIFIC-RESEARCH WOE
REPUBLIC
GOT PLAN
/ 01 ECONOMIC-ADMINISTRATIVE REGIONS
ALL-UNION
INDUSTRIAL MINISTRIES,
COMMITTEES, AND DIRECTORATES
REPUBLIC COUNCILS
OF NATIONAL ECONOMY ?.
REGIONAL COUNCILS
OF NATIONAL ECONO
SPECIALIZED IRECTORATES,
COMBINES, TRUSTS ???
INDUSTRIAL ENTERPRISES AND
CONSTRUCTION SITE*****
ALL-UNION
COUNCIL OF MINISTERS
USSR
GOSEKONOMSOVET
15 UNION-REPUBLICS
17 LARGE
ECONOMIC
REGIONS
SR
GOSPLAN
HINDUSTRIAL MINISTRIES .,
AND COMMITTEES ?
RE BLIC
COUNCILS OF MINISTERS
SPECIAL COMMITTEES
LABOR AND WAGES
CONSTRUCTION
COORDINATION OF
SCIENTIFIC-RESEARCH WORK
REPUBLIC
GOSPLAN
INDUSTRIAL MINISTRIES,
COMMITTEES, AND DIRECTORATES'
REPUBLIC COUNCILS
OF NATIONAL ECONOMY **
OUNCILS FOR COORDINATING
AND PLANNING THE WORK OF
THE REGIONAL COUNCILS
101 ECONOMIC-ADMINISTRATIVE REGIONS
REGIONAL COUNCILS
OF NATIONAL ECONOMY
SPECIALIZED DIRECTORATES,
COMBINES, TRUSTS ?-?`
INDUSTRIAL ENTERPRISES AND
CONSTRUCTION SITE*****
CONTROL TECHNICAL MATTERS
COUNCIL OF MINISTERS
USSR
GOSEKONOMSOVET
15 UNION-REPUBLICS
USSR
GOSPLA
INDUSTRIAL MINISTRIES
AND COMMITTEES ?
CENTRAL STATISTICAL
ADMINISTRATION
COMMISSION OF STATE
CONTROL
MINISTRY OF FINANCE
GOSBANK
STROTBANK
REPUBLIC
COUNCILS OF MINISTERS
SPECIAL COMMITTEES
LABOR AND WAGES
CONSTRUCTION
COORDINATION OF
SCIENTIFIC-RESEARCH WOR
REPUBLIC
GOS PLAN
INDUSTRIAL MINISTRIES,
COMMITTEES, AND DIRECTORATES
I
CENTRAL STATISTICAL ADMINISTRATION
COMMISSION OF STATE CONTROL
MINISTRY OF FINANCE
BRANCH BANKS
101 ECONOMIC-ADMINISTRATIVE REGIONS
35275 7.61
REPUBLIC COUNCILS
OF NATIONAL ECONOMY ?
REGIONAL COUNCILS
OF NATIONAL ECONOMY
SPECIALIZED IRECTORATES,
COMBINES, TRUSTS" ?
INDUSTRIAL ENTERPRISES
AND CONSTRUCTION SITES ?'?
ALL-UNION
COUNCIL OF MINISTERS
USSR
GOSEKONOMSOVET
15 UNION-REPUBLICS
USSR
GOSPLA
INDUSTRIAL MINISTRIES
AND COMMITTEES ?
RE MAC
COUNCILS OF MINISTERS
SPECIAL COMMITTEES
LABOR AND WAGES
CONSTRUCTION
COORDINATION OF
SCIENTIFIC-RESEARCH WORK
REPUBLIC
GOSPLAN
EDT ECONOMIC-ADMINISTRATIVE REGIONS
Ministries of Medium Machine Building, Tronsport Construction, and Construc-
tion of Eclric Power Stations.
State Cornmillees on Aviation Technology, Chemistry, Radio Technology. Ship-
building, Defense Technology, and Aulomplion and Machine Building.
Republic somarkhozes in 3 republics only (RSFSR, Ukraine, and KozakhOan).
?*? These echelons do not exist in all activities of the sovnorkhoz.
?.?? About 72 percent of oil industrial output is produced by enterprises MIL.
sovnarkhozes. Another 22 percent, largely local industry, is under republic
ministries, committees. or directorates, and ablest or Fray ezebutive committees.
The rernainMg 6 percent is under ministries and committees al Ihe all-mion level.
INDUSTRIAL MINISTRIES,
COMMITTEES, AND DIRECTORATES
REPUBLIC COUNCILS
OF NATIONAL ECONOMY
REGION L COUNCILS
OF NATIONAL ECONOMY
SPECIALIZE DIRECTORATES,
COMBINES TRUSTS ???
INDUSTRIAL ENTERPRISES
AND CONSTRUCTION SITE.....
TECHNICAL-ECONOMIC
COUNCILS
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the republic. The republic sovnarkhoz can suspend the decisions and
directives of the regional sovnarkhozes, and the republic council of
ministers and the USSR council of ministers, as in the past, can sus-
pend or 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 the opera-
tions of the numerous regional sovnarkhozes was suggested by the enumera-
tion of the duties of the new bodies. With the establishment of the
republic sovnarkhozes in the RSFSR, it was announced that the new
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 with ensuring the proper use of
Materials, monetary funds, and labor. ji/
The pervasiveness of the operation of the new republic sov-
narkhozes is revealed by their internal structure, which was announced
in October 1960 for the RSFSR. It was to consist of 10 te?ritorial
sections (apparently corresponding closely with the natural economic
regions defined in recent territorial planning schemes), 17 branch-
of-industry main administrations, 13 functional main administrations,
and an unspecified number of supply and sales administrations for all
industrial branches. 12/
It may have been hoped that the republic sovnarkhozes, endowed
with line status, might discharge their assigned duties more effec-
tively than did the republic gosplans which) as staff organizations,
formally could act only through the republic councils of ministers.
Nevertheless, the preservation of the direct line of command from the
republic councils of ministers to the regional sovnarkhozes, alongside
the new line of command from the republic sovnarkhozes to the regional
sovnarkhozes, has increased the possibilities of operational confusion,
or at least occasional uncertainty as to which activities are properly
the concern of the new republic sovnarkhozes. Nearly a half year after
the creation of the republic sovnarkhozes, the Director of the Institute
of Law of the Academy of Sciences, USSR, urged a more specific defini-
tion of their duties, forms, and methods of work and a more precise
differentiation of their functions and those of the republic councils,
of ministers. 1Y
B. Gosekonomsovet
The Gosekonomsovet was legally made responsible for all long-
term planning by a resolution of the Central Committee (CC) of the
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CPSU and the Council of Ministers on 7 April 1960. E/ The Goseknom-
sovet, with the cooperation of other government organizations, was to
elaborate long-range plans for the development of the economy for 20
years as well as plans and material stocks for 5 to 7 years. Long-
term planning at the 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 Gosekonomsovet was chaired by I.I. Kuzmin, formerly Chair-
man of the Gosplan, from its establishment in March 1959 until April
1960 when it was officially designated the long-term planning agency,
but its role in the planning process during its first year is not known.
Coincident with the April 1960 resolution, A.F. Zasyadko was shifted
from his position as a deputy chairman of the Gosplan to replace
Kuzmin as Chairman of the Gosekonomsovet, which has steadily gained
in size and activity since that time.
The plenum in July 1960 of the CPSU CC, devoted to problems
of accelerating technical progress, assigned the council a number 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
of Productive Forces, which formerly were under the Gosplan. A more
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 func-
tions.
C. Councils for Coordinating and Planning the Work of the
Sovnarkhozes
One of the most obvious gains from the 1957 reorganization was
the breaking up of the ministerial autarky which led to irrationally
long hauls between distant plants in the same industrial ministry and
an often uneconomical duplication of facilities among the various
ministries. These gains have been offset, however, by the equally
obvious losses arising from similar autarkical tendencies of the more
numerous sovnarkhozes which have interrupted rational as well as
irrational hauls and which have encouraged the development of self-
sufficiency beyond the economical opportunities for such development
in small areas. It is not surprising, therefore, that the regime
continues its search for more effective planning and coordination of
economic activity in terms of natural economic regions.
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The problem of achieving an optimum degree of specialization
and cooperation among the sovnarkhozes of natural economic regions was
actively discussed at the time of the 1957 industrial reorganization
and has been a frequent topic in the Soviet press since that time. In
mid-1960 a detailed plan was presented in the official journal of the
Gosplan and the Gosekonomsovet for rearranging the 13 basic economic
zones formerly employed in regional planning into 16 new economic regions
and for establishing economic councils for the planning and coordina-
tion of the work of the sovnarkhozes in 14 of these regions. 1g/ This
plan, apparently conceived about the same time the republic-level sov-
narkhozes were created, was 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 was stressed that the republic sovnarkhozes
were a step toward solving operational problems but that other organs
were needed to coordinate development of 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-term patterns of industrial develop-
ment.
The coordinating and planning councils, according to the plan
devised by the Council for the Study and Distribution of Productive
Forces and the Scientific-Research Economic Institute of Gosekonomsovet,
were to work out, for planning organs, proposals and recommendations
about the basic, long-term direction of development of the large eco-
nomic regions. 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 large economic
regions continued to be discussed, the plan presented in mid-1960 was
given little further publicity until May 1961 when it was reported
that the plan, slightly modified, was being put into operation. 15./
In the new version, Belorussia and Moldavia remain independent economic
administrative regions, and the remainder of the country is divided
into 17 large economic regions, as shown in the map, Figure 2.* One
of these regions coincides with the boundaries of the Kazakh SSR and
is not to have a coordinating council. The coordinating function will
be performed by Kazakh Gosplan. Of the remaining 16 large economic
regions, each of which is to have a coordinating council, 10 are in
the RSFSR and contain from 5 to 12 sovnarkhozes each, 3 are in the
Ukrainian SSR and contain from 3 to 6 sovnarkhozes each, and 3 encompass
* Following p. 16.
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more than a single republic (the three Baltic SSR's, the three Transcau-
casian SSR's, and the four smaller Central Asian SSR's, respectively).
Under the former system of 13 large economic regions, which
was used only to a limited extent in planning, the regions were much
less uniform in size. The number of sovnarkhozes in each region
varied from 3 to 24, and the complaint often was voiced that regional
planning usually was nothing more than a summary of the various
branch-of-industry plans for each region. The present scheme of
coordinating councils reportedly is designed for the purpose of pro-
viding republic and central planning organs with independently created
plans for the integrated economic development of the several sov-
narkhozes within each large region. There is a real need, however,
for improving the material-technical supply relationships among adja-
cent sovnarkhozes -- something 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
aspect of a controlled 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 their observa-
tions during the last year to shortcomings cited at the CPSU plenum
of July 1960. Most of the comments have been concerned with improve-
ments which might facilitate the planning process, although some,
such as those dealing with shortcomings in the arrangements for assimi-
lating new techniques, inadequacies in-the material-technical supply
system, and unnecessary duplication of administrative functions, could
involve changes in the formal administrative structure. Some writers
speak of the gradual consolidation of some sovnarkhozes and the crea-
tion of new ones in the eastern part of the country, but none suggests a
major overhaul of the basic territorial system.
A more collective expression of the probable course of developments,
at least in the area of planning, was voiced in the recommendations of
a conference held 14-18 March 1961 under the auspices of the central
long-term planning agency, the Gosekonomsovet.)12/ The major proposals
advanced at the meeting were concerned with better indicators of indus-
trial achievement, better planning of integrated industrial development
by major economic region, and greater continuity in the planning proc-
ess. )11/
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USSR: MAJOR ECONOMIC REGIONS, JULY 1961
Figure 2
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