SOVIET ECONOMIC POLICY IN TRANSITION: LESSONS OF THE 1981-85 PLAN

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• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP83T00853R000200160002-6
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 31
• Document Creation Date: December 21, 2016
• Document Release Date: September 25, 2008
• Sequence Number: 2
• Publication Date: January 23, 1982
• Content Type: REPORT

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State Dept. review
completed
Intelligence 25X1
the 1981-85 Plan
Soviet Economic Policy
in Transition: Lessons of
Secret
SOV 82-10203X
December 1982
Copy 4 4 5
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Directorate of Secret
Intelligence
Soviet Economic Policy
in Transition: Lessons of
the 1981-85 Plan
This paper was prepared b
Office of Soviet Analysis. Comments and queries are
welcome and may be addressed to th Chief. Policy
Analysis Division, SOVA
Secret
SOV 82-10203X
December 1982
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Secret
Key Judgments
Information available
as of 31 December 1982
was used in this report.
the 1981-85 Plan
Soviet Economic Policy
in Transition: Lessons of
The overall policies embodied in the 11th Five-Year Plan (1981-85) remain
the current Soviet guideline for wrestling with the unique economic
problems of the 1980s. These policies are not bold and innovative but
represent the tenacious plodding that was the hallmark of the late
Brezhnev era. Some divergence of opinion has been apparent within the
leadership over these policies-to some extent the result of succession
maneuvering. 25X1
Seven policy areas capture the essence of the 1981-85 Plan and reveal the
major sources of contention within the Soviet leadership:
? Resource Allocation. Investment will be a relative loser apparently
because there were persuasive reasons for not cutting the planned growth
of defense or consumption. The wisdom of allowing investment growth to
slide has become a major issue.
? Investment Priorities. Industry will receive the largest increase in
investment with the fuel and power industries taking two-thirds of this in-
crease. Dividing an only slightly larger investment pie has exacerbated
regional disputes and the traditional rivalry between patrons of heavy
and consumer goods industries.
? Consumer Welfare. The plan's commitment to the consumer requires
taking resources from traditionally higher priority sectors. Leadership
support for the consumer has varied widely, ranging from blatant
consumer advocacy to the view that "consumerism" is ideological
anathema.
? Economic Reform. The plan is long on reform rhetoric but short on
concrete solutions, in effect, encouraging public discussion of reform
proposals without adopting a reformist course. Currently, the leadership
is arguing the relative merits of a regional versus sectoral organization of
the economy and the proper role of the party in economic management.
? Agriculture. The plan shifts the major focus away from boosting farm
productivity to increasing efficiency of the entire food production and
marketing chain. The new Food Program introduced in May features a
change in organization, shift in investment, and improved incentives.
Half measures taken in this program, however, indicate still unresolved
issues over power sharing between Moscow and regional authorities.
Secret
SOV 82-10203X
December 1982
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? Manpower. The plan continues current efforts to remedy immediate
problems but does little to tackle areas with a potential for larger
eventual payoffs including automation, regional investment and manpow-
er shifts, and raising the birth rate. Regional sensitivities, traditionally
given more weight in a succession period, are largely to blame for the
postponement of decisions on these issues.
? East-West Trade. Bearish prospects for East-West trade are indicated by
the modest growth planned for the volume of trade with non-Communist
countries-only 2.5 percent annually compared with 5 percent during
1976-80. High-level differences over the importance and strategy of
East-West trade are still evident, as they were at the inception of
Brezhnev's detente policy.
These policies suggest that the Brezhnev leadership favored:
? Short-term gains that emphasize results now with little regard for long-
run consequences.
? Administrative solutions rather than basic systemic change.
? Incrementalism-piecemeal or experimental introduction of major new
policies.
? An evenhanded but restrained use of the carrot and stick for getting
results.
? The preservation of untouchable areas, largely immune to budget cuts or
significant revision.
Brezhnev's passing has altered the power balance, and the new leadership
might have a different perception of the economic dilemma that could
eventually change its approach to economic decisionmaking:
? Possessing a longer time horizon, the new leaders may place a greater
emphasis on policies with a longer term impact.
? Harsher economic circumstances might justify tightened discipline and
control to effect economic policy rather than reliance on new economic
levers or incentives.
? The power transfer could be a propitious time to modify particularly
burdensome policies.
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Such changes in approach may lead to these policy shifts:
? A modest cut in the growth of defense spending.
? A larger share of investment funds channeled to machine building and
such bottleneck areas as transportation and metals.
? In the consumer area, a sharper differentiation of material rewards based
on individual performance.
? Some shift in investment and manpower among regions to ease the
growing geographic imbalance in the labor force. 25X1
The new leaders probably would not expect these new policies to be a
panacea to the economy's basic ills but would anticipate marginal improve-
ments that would allow them to continue muddling through. Of primary
importance to the new leaders would be the knowledge that such policies
would not diminish their power and would still allow them to marshal
resources quickly to overcome external or internal threats to their security
or stability 25X1
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The Major Resource Claimants-Investment the Loser 2
Investment Policy-Dividing Only a Slightly Larger Pie 4
Consumer Welfare-Protecting Hard-Won Gains 6
Economic Reform-Good Intentions but ... 8
Agriculture-Focus on Food 10
Manpower-Making Do With Less 11
East-West Trade-Reduced Expectations 12
The Brezhnev Leadership's Approach to Economic Decisionmaking 14
Preference for Administrative Solutions 14
Balanced but Restrained Use of the Carrot and Stick 15
A New Leadership's Impact on Principles and Policies 16
Change in Approach to Economic Decisionmaking 16
Short-Term Perspective 16
Change in Policies 18
Labor 21
East-West Trade 22
Impact of Changes 22
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1. USSR: Major Economic Targets of the 10th and
11th Five-Year Plans
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Soviet Economic Policy
in Transition: Lessons of
the 1981-85 Plan
The 1980s present the Soviet leaders with a unique set
of economic problems-old ones, such as declining
productivity growth and a lagging agricultural sector,
combined with more recent phenomena such as stag-
nating oil output and reduced growth in the labor
force. They acknowledge the scope and intensity of
their economic problems and realize that, as a result,
growth during this decade will slow substantially.' But
do they have a grand strategy to counter the expected
slowdown or at least have they formulated ways to
cushion its inevitable impact?
The beginning of a new planning period (for 1981-85)
gave the Brezhnev leadership an opportunity to take
stock and to reach long-term decisions about econom-
ic policy. The draft directives presented to the 26th
Party Congress in March 1981 and the final plan
delivered to the Supreme Soviet session in November
1981 provide some insights into the decisions reached.
Supplemented with leadership speeches, conversations
between Soviet officials and Westerners, and key
press articles, answers to three broad questions can be
discerned:
? What are the major policies of the 11th Five-Year
Plan?
? Why were these particular options chosen?
25X1 ? Is there evidence of broad consensus among the
leadership for these policies?
Soviet economic policies are made within a political
context. The leaders decide such questions not only on
economic merits but also according to their own
ideological predispositions, individual party-govern-
ment responsibilities, and relative political power. The
inverse is also true. The types and success of economic
decisions can affect institutional and bureaucratic
interests as well as the political balance within the
leadership. The importance of the political aspect
increases prior to and during a succession because
economic policy choices inevitably become inter-
twined with political maneuvering.~~ 25X1
This paper discusses the major policies of the plan and
treats these choices within the political context. It also
speculates about possible changes that the post-
Brezhnev leaderships might introduce during the re-
mainder of the 1980s in the economic policy areas
outlined for the 1981-85 Plan. This period probably
will witness two successions. The Andropov-led lead-
ership, composed of men in their late sixties or early
seventies, might last only three to five years, with a
considerably younger group emerging toward the end
of the decade. The "first succession," however, proba-
bly will determine the main directions of economic
policy for the rest of the 1980s. In an attempt to
narrow the policy options that the new leaders might
choose, the paper first examines the mind-set of the
Brezhnev leadership-certain precepts that guided
the leaders in making economic decisions. It then
explores how this mind-set might change with the new
leadership and how this change, combined with other
factors, could bring about policy shifts. It also specu-
lates, in some instances, about whether the changed
mind-set would apply to those in the "second succes-
Soviet economic policy encompasses a myriad of
topics but its essence can be captured by examining
seven major areas:
? Basic resource allocation.
? Investment priorities.
? Consumer welfare.
? Proposals for economic reform.
? Agricultural policy.
? Manpower and demographic policy.
? East-West trade policy.
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This first section analyzes the 1981-85 Plan to deter-
mine current Soviet economic policy in each of these
areas, followed by a discussion of how each differs
from previous policy and whether it has generated
political controversy. Most Politburo members have
written or spoken on the economy enough to allow
some judgments about their respective positions on
the major issues. New General Party Secretary
Andropov, however, has spoken only rarely and with-
out distinction in recent years, forcing us to rely
largely on statements from his pre-KGB days (before
1967). 25X1
The Major Resource Claimants-Investment the
Loser
The 1981-85 Plan indicates that of the three major
resource claimants-investment, consumption, and
defense-investment was a relative loser. It seems
likely from other evidence that defense and perhaps
personal consumption 2 managed to claim a larger
share. The shift away from the traditional emphasis
on investment began in the 1976-80 Plan when invest-
ment growth was set at historically low levels-
26 percent over 1975-and for the first time did not
exceed planned growth in national income (see
table 1). Chairman of the Council of Ministers
Kosygin, in a 1979 Kommunist article, called atten-
tion to this shift and noted that this was "a positive
trend .... It must be enshrined in plans for the
future." 25X1
Accordingly, investment growth in the draft plan
directives for the period 1981-85 was low (12 to 15
percent), and even fell below the planned growth in
national income (18 to 20 percent)'-indicating a
relative loss in investment's claim on resources com-
pared with the 1976-80 Plan. By the time the final
targets were published in November 1981, the gap
between investment and national income growth had
widened even further-the goals were set at 10.4
percent and 18 percent, respectively.
' Personal consumption here is distinguished from the broad con-
sumption category used in Soviet national accounts, which includes
"material purchases of institutions serving the population [and] of
science and administrptinn" -nd also some items of defense spend-
ing. 25X1
' Official Soviet measures of economic growth are largely used in
this paper in order to get the Soviet perspective. National income,
for example, is used instead of the Western-derived indicator, gross
national product 25X1
The rhetoric accompanying the release of the plans
indicated that the leadership was under no illusions
that the path chosen would be an easy one. Both
President Brezhnev and Gosplan Chairman Baybakov
admitted that expanding output on such a small
growth in the investment base seemed ambitious but
would be made possible by:
? A reduction in the large amount of unfinished
construction.
? A planned improvement in the "technological struc-
ture" of investment (a larger ratio of equipment to
construction).
The leadership's decision to cut investment growth,
however, could not be attributed solely to confidence
in a large boost in capital productivity. Similar strate-
gies had been tried in the past with very limited
success.' Neither could the decision be entirely ex-
plained by the general decline in growth that caused a
shortage of materials essential for construction and
machinery production, such as metals. If this had
been the case, all claimants might have been expected
to share equally in the cutback.' It seems more likely
that the slowdown in investment growth was linked to
a conscious decision by the leadership not to reduce
defense and consumption growth. Investment, of ne-
cessity, became the residual resource claimant, and
poor growth prospects-particularly as hopes for a
good harvest faded in the summer of 1981-forced
disproportionate cuts.
The military apparently was successful in retaining
the primacy of defense spending for 1981-85. In late
May 1981 a deputy chairman of Gosplan, N. P.
Lebedinsky, told a former US Government official
that the Soviets were making eleventh-hour changes
in their 1981-85 economic plan to accommodate
A campaign to reduce the amount of unfinished construction, for
example, was attempted during the period 1976-80. The plan
directives pledged that the amount of unfinished construction as a
percentage of total fixed capital investment would fall from 76
percent in 1975 to 65 percent by 1980. Instead, it rose to 80
percent
' A metals shortage, for example, could result in cutbacks in
passenger car output (consumption), tank production (defense), or
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Table 1
USSR: Major Economic Targets of the
10th and 11th Five-Year Plans a
National income
24-28
26
20
18-20
18
Industrial output
35-39
36
25
26-28
26
Group A (producers goods)
38-42
38
26
26-28
25.5
Group B (consumer goods)
30-32
32
20
27-29
26.2
Industrial labor productivity
30-34
31
17
23-25
23
Capital investment
24-26
26
18
12-15
10.4
Real per capita income
20-22
21
18
16-18
16.5
Wages of blue- and white-collar workers
16-18
17
16
13-16
14.5
Payments to collective farmers
24-27
26
26
20-22
20
Total new housing construction
(million square meters)
Growth rate over
preceding plan period
in percent
1976-80
1981-85 Plan
Actual
Directives
Final
Directives
Final
(Dec 75)
(Nov 76)
(Dec 80)
(Nov 81)
There is some evidence that the leadership may also
have been persuaded that consumption growth should
fall no further even at the expense of investment
growth. Articles in Soviet economic journals had
pressed hard the line that at this stage of development
the demands of consumption were more important
than those of investment. For example, S. S. Shatalin,
an economist, said in the fall of 1981, that:
... accumulation [that is, investment] should not be a
self-sufficing economic variable ... but its amount
should be determined as a result of the finding of the
optimum ratio of consumption and accumulation in
the national income, of which the assurance of the
highest possible growth rate of the well-being of the
people-is the criterion.
would have been particularly persuasive. The rising
power of the Polish worker and consumer raised the
specter of similar developments elsewhere in the Bloc
and even in the Soviet Union. In April Politburo
member Konstantin Chernenko had warned, probably
with Polish developments in mind, that if popular 25X1
only the people, but production too, would suffer
The slowdown in investment growth was undoubtedly
a highly contentious issue within the leadership. His-
torically, the sectors such as heavy industry, with
strong support on the Politburo, have had gargantuan
appetites for new plant and equipment. Moreover,
leaders with long experience probably realized that
the boost in capital productivity would not be large
enough to compensate for the smaller increments in
investment resources. Brezhnev seemed to acknowl-
edge the controversial nature of the policy in the
choice of words he used to announce the further
investment growth cutback in November. Instead of a
By mid-1981 when dismal economic prospects would
have forced downward revisions in the five-year plan,
the argument for maintaining consumption growth
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straightforward statement of fact, as is usual, he tried
to project a united front for the policy while also
implying that the Politburo did not originate the idea:
"The Politburo of the CPSU Central Committee has
supported the government's proposal for reducing ...
the volume of capital investment originally planned
The major controversy probably centered on con-
sumption's rightful place in the pecking order. Those
who favored priority for expansion of new plant and
equipment probably were pitted against those who
believed that increased productivity and domestic
tranquillity were directly dependent upon meeting
consumer expectations.' Since at that presuccession
juncture, few would have chanced alienating the
powerful defense establishment, serious opposition to
the demands of the defense sector would have been
25X1 unlikely.
25X1
25X1
The strongest and most direct public criticism of the
policy to reduce investment growth appeared in the
March 1982 issue of The Economics and Organiza-
tion of Industrial Production (EKO).' Striking at the
heart of the issue, the authors argued that rapid
investment growth was essential for increased capital
productivity and the success of an intensive develop-
ment strategy. The cut in investment growth has also
been strongly opposed by local leaders. Speeches by
regional leaders at the Supreme Soviet in November,
as well as at their own plenums following the national
session, reflected a deep concern over the shortage of
investment capital and its effect on meeting produc-
tion goals. Representatives of the manpower-short
European regions worried that a lack of capital to
modernize facilities would make growth in their areas
even more difficult. Delegates from the Central Asian
republics, on the other hand, argued the need for
additional investment to provide jobs for their rapidly
growing populations.
Politburo member positions on this issue.
' This is the house organ of the Institute of Economics nd
Organization of Industrial Production (Siberian Department of the
Academy of Sciences), headed by the influential economist
Investment Policy-Dividing Only a Slightly Larger
Pie
The draft guidelines in March 1981 revealed the
general philosophy that would guide the allocation of
investment funds among the competing sectors, those
that were already familiar from the previous plan.
Investment would be concentrated in those sectors
that:
? "Guarantee progressive changes in the structure of
the economy."
? "Bring fuel, energy, mineral, and raw materials
resources of the eastern and northern regions of the
country into national economic use." A corollary
was a "severe restriction" on new projects in the
industrialized areas of European Russia.
In November, speeches by planning officials elaborat-
ed on these broad investment goals. Industry would
receive the largest increase in investment during
1981-85-a 23-percent boost compared with 1976-80
(table 2). Within industry, the largest increases would
go to fuels and power and ferrous metallurgy-up 50
and 30 percent, respectively. Investment in machine
building would "significantly exceed" the level of
1976-80. Assuming the latter means an increase of at
least 10 percent, these three sectors alone would
account for over four-fifths of the increment in indus-
trial investment during 1981-85.'
Consumer-related investment decisions were mixed.
The pluses were:
? Agricultural investment was to retain its share of
the total-27 percent-as promised in the draft
guidelines and urged by Brezhnev as early as 1978.
? Investment in the food processing industry and
storage facilities would grow faster than that in the
agricultural sector.
? "Large sums" would be channeled "to create addi-
tional capacities for the production of consumer
goods in the heavy and defense industry sectors."
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Table 2
USSR: Investment in the 11th Five-Year Plan
Percent Billion Percent
of rubles of
total total
a Narodnoye Khozyaystvo SSSR v 1980g, p. 337.
b Various Soviet sources.
c Investment in facilities that produce military goods is classified
with the sector that produces the goods, primarily the machinery
sector. Expenditures for the procurement of military hardware are
not considered investment as defined in this table.
d Estimated.
Other consumer areas were not so fortunate:
? Although housing construction would grow, its
share of total investment would fall compared with
that of the previous five-year plan.
? Limits would be placed on the construction of
administrative buildings, places of entertainment,
and sports buildings.
? Capital investment in the retail trade sector would
fall.
The increases in new fixed investment scheduled for
the two major sectors of the economy-industry and
agriculture-coupled with increases planned for the
railroads and for housing construction more than
consume the total targeted increment to overall in-
vestment. Consequently, investment allocations to se-
lected industries and some sectors of the economy
must have been cut. Among the possibilities are the
chemicals, construction, and consumer goods
e Based on a statement by a Soviet official that capital investment in
machine building will significantly exceed the level of the previous
five-year period.
f This expanded Soviet concept of agricultural investment includes
direct investment in state and collective farms for productive
purposes-construction, electrification, and acquisition of equip-
ment-in addition to "nonproductive" investment such as rural
housing and services.
branches of industry as well as the so-called nonpro-
ductive sectors of the economy-science, education,
health, and the like.~ 25X1
Three investment categories in the 1981-85 Plan have
become particularly contentious issues:
? Producers versus consumer goods industries.
? Regional priorities.
? The machinery sector's share.
Controversy over the relative growth of producers
goods and consumer goods (Groups A and B, respec-
tively, in Soviet parlance) is as old as the Soviet state.
It has taken on a new sense of urgency, however,
because of the Polish experience and the possible
adverse effect on productivity of failing to meet
consumer demands. Several journal articles published
during 1981 took the position that not enough re-
sources were being dedicated to consumer goods
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industries. For example, Academician P. N. Fedo-
seyev, in a Kommunist article, lamented the still
prevalent view that "the production of capital goods
must outstrip that of consumer goods at all times and
throughout all stages of the Communist system."
Politburo member Chernenko, in his Lenin Day
speech in April 1981, argued that the priority growth
rate assigned to consumer goods output (Group B
industry) in 1981-85 should be considered just a
beginning.
Continued reductions in investment growth are inten-
sifying regional competition. The investment squeeze
requires more stringent profitability tests as justifica-
tion for new projects, leaving few opportunities for
pork barrel allocations. The directives specifically
favor development of the eastern and northern regions
of the country at the expense of the European part-
the Russian heartland. Although not mentioned in the
plan documents, this focus probably will also reduce
investment growth in new projects in Central Asia.
Brezhnev's Tashkent speech last March, which criti-
cized the use of investment funds by local officials,
might be interpreted as a move to head off regional
pleas for additional funds. These regional conflicts
have been evident in the Politburo. Succession politics
typically has given regional leaders more influence on
national policy, and contending factions attempt to
exploit this situation.
Thirdly, investment growth for the machinery sector
is at issue. The plan pledged that this sector would
receive "preferential development," but a specific
target was not announced. In February 1982 Aganbe-
gyan implied in Pravda that the amount was not
enough and that planners had failed to comprehend
the importance of this sector for growth. He argued
that a higher rate of return in the long term would be
achieved by shifting investment into machine building
and away from such areas as chemicals, metallurgy,
timber, coal, and land reclamation.
Consumer Welfare-Protecting Hard-Won Gains
Soviet rhetoric on consumer policy appears encourag-
ing to the consumer:
? The new plan continues the claim of its two prede-
cessors that "ensuring the further growth of the
well-being of the Soviet people" is its chief task.
? Brezhnev proclaimed that implementing the Food
Program is the "central problem of the whole five-
year plan." 9
? Unlike the previous plan, the output growth of
Group B industries (consumer goods) is planned at a
slightly faster rate than Group A (producers
goods)."
Actual resources allocated to the consumer effort are
uncertain. The available evidence indicates, however,
that the leadership has set what might be called a
consumption threshold: triggered by circumstances
that threaten to push consumption below a certain
level or rate of growth, the leadership will take
corrective action even if resources for traditionally
higher priority sectors must be sacrificed. For exam-
ple, foreign exchange has been diverted from machin-
ery purchases to agricultural imports in order to keep
meat consumption from falling precipitously. Also, as
indicated above, investment growth, previously sacro-
sanct, appears to have taken a backseat this time to
consumption in the battle between major resource
claimants. The obvious rationale behind this policy is
the purported effect of consumer morale on labor
productivity and domestic tranquillity. The regime
can ill afford to alienate the consumer further at a
time when economic growth is already near stagna-
tion and future plans require extraordinarily high
rates of labor productivity growth.
The plan directives and related materials indicate that
the regime intends to employ a wide range of tactics
to keep consumption above this threshold. This course
is necessary in order to maintain the delicate balance
between boosting consumption enough to stimulate
the Food Program.
10 The preferential growth of Group B industry should be viewed
largely as a symbolic gesture toward the consumer. Continued
strong growth of Group A industry, after all, is essential to meeting
consumer demands because this sector produces the machinery for
the industries that make consumer goods. It must also be remem-
bered that the actual growth rates recorded by Group A and Group
B during a five-year planning period more often reflect the fortunes
of agriculture than leadership intentions. For example, the faster
growth of Group B output relative to that of Group A planned for
1971-75 was reversed in midstream as a direct result of the poor
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productivity and minimize discontent and keeping
consumer expectations from outpacing the economy's
potential. The main points of this program are:
? Heaviest expenditures on improving the food sup-
ply. Recognition that the food supply has a major
impact on the individual's sense of well-being has
resulted in almost all of the favored consumer areas
during 1981-85 falling under the rubric of improv-
ing the quality of the diet. Rubles and hard curren-
cy alike will be dedicated to this effort.
? Organizational and management changes in the
consumer sector. Where possible, the leadership
hopes that improvements in organization and man-
agement can substitute for resource expenditures,
exemplified by the new organizational structure
proposed in the Food Program. Special food distri-
bution systems also qualify as an organizational
solution. The directives specifically call for an ex-
pansion of the "network of direct-sales shops" as
well as school and workplace lunch programs.
? Stimulation of the private sector." The directives
promise assistance to the private farm from the
socialized sector, reinforcing a decree of 1977. In
the private housing area, they endorse the construc-
tion of co-op apartments and private rural housing
and even pledge financial assistance.
? Campaign to improve morale and communication
with the masses. Although not specifically endorsed
in the plan documents, this campaign is an impor-
tant adjunct to consumer policy during this plan
period. It includes increased attention to public
opinion polls, sociological research, and letters of
complaint to the party bureaucracy as well as
tougher actions against crime and corruption.
? Measures to restrain demand. Growth in wages and
transfer payments during 1981-85 is planned to be
the lowest since the advent of the Brezhnev regime.
Also, periodic price increases will help absorb excess
purchasing power. The directives guarantee only
that "the policy toward ensuring the stability of
" Private activity is permitted in the agricultural, housing, and
service sectors. The private agricultural sector has the most impact,
supplying more than 25 percent of the country's total farm output,
state retail prices for basic [emphasis added] food-
stuffs and nonfood products will be consistently
pursued." F__~ 25X1
Leadership support for the consumer varies widely.
Chernenko has emerged as the Politburo's leading
consumer advocate. In addition to strongly supporting
the preferential growth of the output of Group B
industry and warning of the consequences of ignoring
popular demands, he has taken numerous steps to
cultivate a "populist" image. He has:
? Launched a broad national campaign for local party
organizations to pay increased attention to the
concern of citizens expressed in letters and founded
a special Central Committee Letters Department.
? Endorsed public opinion polls and sociological re-
search as a tool to enable party leaders to stay in
touch with popular attitudes.
? Advocated a broader role for trade unions and local
soviets as a means of increasing public participation
in government. 25X1
Arrayed in apparent opposition to such a proconsumer
approach are the leadership's traditional supporters of
heavy industry and party ideologues. Kirilenko was
typical of the first group, reportedly opposing the
creation of the new sociological institute and public
opinion research. Party ideologues such as the now
deceased Suslov have been traditionally unsympathet-
ic to this cause. Suslov's speech to a major conference
on ideology in April 1981 specifically called for
fighting "consumerist" attitudes. 25X1
A third point of view, possibly represented by a
majority of the leadership including Andropov, may
not be unsympathetic to the consumer cause but may
contend that Chernenko's stance unduly raises con-
sumer expectations. This group may be labeled "real-
ists" because they recognize the legitimacy of con-
sumer demands but at the same time realize that
there are good reasons for not meeting them. The
military burden is the most frequently cited reason
although this may just be a convenient excuse. Pre-
mier Tikhonov is a leading proponent of this view.
Early this year in a journal article on the five-year
plan he specifically recognized that social progress has
become "a prerequisite for further economic growth"
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but regretted the need to use consumption funds for
defense. Similarly, Deputy Premier V. N. Makayev
stated at the ideology conference in April 1981 that
the "heavy burden of defense expenditures is prevent-
ing us from achieving our goals for the improvement
of the people's welfare." In a July Pravda article,
Central Committee member and Kommunist editor
R. I. Kosalapov called pointedly for "realistic" eco-
nomic policies and claimed that a major factor in the
Polish situation had been "the completely unsubstan-
tiated and utopian nature" of the Polish economic
nrogram.
25X1
Economic Reform-Good Intentions but ...'Z
The draft directives for the 11th Five-Year Plan
signal renewed interest in the general area of improv-
ing planning and management, including the allied
problem of "accelerating technical progress." The
plan endorses the last economic reform (mid-1979)
but mainly acknowledges that new ways must be
found "to perfect the economic mechanism." Official
approval for such a search combined with the contin-
ued decline in economic growth has produced the
most favorable climate in decades for a frank discus-
25X1ion of reform options.
The draft guidelines devoted a section to the theme of
economic reform and to the problem of raising man-
agement effectiveness. Such a section appeared for
the first time in the draft directives for the 1971-75
Plan but was dropped in the 1976-80 Plan directives
as economic reform efforts ran into recurring and
formidable implementation problems. Similarly, the
treatment of science and technology in the new draft
directives indicates that the leadership believes adopt-
ing new technology will be crucial to economic prog-
ress in the 1980s. The science and technology sections
were combined for the first time to reflect the applied
aspect and, significantly, this section was placed
before rather than after the sections devoted to indi-
25X i"idual economic sectors.
" Details on agricultural reform are discussed in the agricultural
policy section. This section concentrates on the issue of reform in
replace the gross value of output indicator ("val") with a net output
concept. The "val" had encouraged the overuse of intermediate
products, especially ones with high prices. Net output may be
25X1
As an aid to better management, the plan will
eventually incorporate special target programs that
aim at solving some 15 top-priority economic and
social problems." This goal-oriented approach seeks to
strengthen the management of key national projects
that cut across ministerial lines; they will be adminis-
tered by a special coordinating unit-probably within
the Presidium of the Council of Ministers. Gosplan
has been reorganized somewhat to enable it to con-
duct more comprehensive planning and better policy
analysis for the national target programs. Thus far
only a few of these programs have gone beyond the
draft stage.
Although the plan directives were full of good inten-
tions, they were noncommittal about the specific types
of reforms that would logically follow the July 1979
decree on improving planning and the economic
mechanism. It was obvious from Brezhnev's speech to
the November 1981 plenum, when the plan was
approved, that nothing further had been decided on
this topic in the interim. He soundly criticized the
"slow, halfhearted" implementation of the 1979 de-
cree and admitted that the key had not yet been found
to make it "economically advantageous to take on
intensive plans, to step up scientific and technological
progress, or to improve the quality of output." Ac-
cordingly, the Politburo had concluded that "one of
the next plenary sessions" should be devoted to this
issue.
Policy in this area, then, seems intentionally in the
"let 100 flowers bloom" phase, and in this regard, it
can be considered a success. The Soviet press has been
filled with articles praising reforms in Eastern Europe
and recommending the borrowing of ideas even from
the United States and from Lenin's New Economic
Policy of the early 1920s. The Hungarian reforms in
agriculture, credit and finance, and retail trade are a
particular favorite. A new council chaired by Gosplan
chief Baybakov is to study economic innovations in
other socialist countries in order to determine their
relevance for the Soviet Union.
25X1
25X1
25X1
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The leadership also has become embroiled over the
proper role of the party in economic management.
This debate is particularly relevant during the current
five-year plan because the target-oriented programs
are being pushed by the party, and it appears that the
local party apparatus will have representation on the
RAPOs. Chernenko and former Politburo member
Kirilenko have been the main antagonists on this
issue. Kirilenko argued last April in Kommunist that
the imperatives of technical progress require more
integrated policies and more active party intervention
in modernizing the economy. In the following issue,
however, and in another journal in February,
Chernenko accented the need for the party to address
the social problems of the technological revolution
and pressed for a reduced party managerial role.
Party usurpation of economic management, he said25X1
"only creates the appearance of strengthening the
party's role and, in fact, often does much harm."
The range of leadership opinions on the subject of
reform appears much narrower than the press articles.
The leaders have never indicated a desire for funda-
mental systemic change and, indeed, have demon-
strated a decided preference for improving bureau-
cratic centralism (whether functional or regional) and
seeking organizational solutions. Other than the natu-
ral desire to keep a firm hold on the reins of power,
there are good reasons for this predilection-the ever
watchful eyes of party ideologues, the powerful gov-
ernment bureaucracy, and a genuine fear of serious
disruption to the economy. 25X1
Apparently a backlash is already developing within
ideologically orthodox circles a ainst the 25X1
formist atmosphere.
Soviet hardliners are charging that would-be econom-
ic reformers are "revisionists" in disguise. The minis-
terial and planning organs probably would join forces
with this opposition as Hungarian-type reforms, for
example, would pare their powers considerably. Also,
Soviet officials recognize that massive reform would
be next to impossible for the huge and complex Soviet
economy to absorb without major disruption. As
Kommunist editor Kosolapov told a US Embassy
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Meanwhile, a controversy is building over the virtues
of regional planning, probably spurred by the recent
endorsement of regional agro-industrial associations
in the Brezhnev Food Program. In April 1982 two
well-known Soviet writers on economic topics stated
their unequivocal opposition to a regional organiza-
tion of the economy (such as Khrushchev's regional
economic councils, known as sovnarkhozy). In a
Pravda article, the economist V. Trapeznikov came
out solidly against any disruption of the "branch
method" of economic management and claimed that
the economy had been severely damaged by the evils
of the sovnarkhozy. Instead of an organizational
restructuring, he called for more attention to revising
plan indicators to emphasize quality, the creation of
mechanisms to make producers more answerable to
consumers, and greater autonomy for plant managers.
Sociologist F. Burlatskiy, in a Novy Mir article about
Chinese reforms that have obvious implications for
the Soviet Union, also strongly opposed decentraliza-
tion on a regional basis and quoted Chinese critics of
this position as saying, "This leaves the bureaucratic
nature of the system unchanged." He favored greater
reliance on economic (as opposed to administrative)
measures and greater decentralization in planning
and enterprise management. The fact that Burlatskiy
was once an aide to Andropov may be of some
significance.
Politburo lines are forming on this issue. In a May
1982 Kommunist article, Chernenko praised the
rayon agro-industrial associations (RAPOs) precisely
because they disrupt a ministerial autonomy that in
his words "eats away like rust at the economic
mechanism." He repeated this general theme to a
May party plenum in Krasnoyarsk. In a June Ekono-
micheskaya Gazeta article, Georgian party leader
Shevardnadze called for increased attention to "terri-
torial, regional planning and management" and ar-
gued that the time is ripe for such action. Politburo
members with strong ministerial ties such as TiJc-
honov, on the other hand, could be expected to favor
retaining the present system of organization. Embassy
sources in Moscow claim that Moscow-based minis-
tries are feeling threatened already and are using
their experience with the sovnarkhozy to argue
against the RAPOs.
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officer, the Hungarian experience merits study but it
"may not be applicable to a country as large as the
Soviet Union." Indicative of the leadership's caution
is the Pravda editorial that followed Tikhonov's first
visit to Budapest in 1981. It specifically praised the
Hungarian system of individual initiative in the serv-
ice sector and its mix of private and collective agricul-
ture but shied away from mentioning the decentral-
ization aspect of the reforms.
Agriculture-Focus on Food
The agricultural sector continues to occupy a central
and favored position in the economy, according to the
five-year plan. This sector commands more than one-
fourth of total investment resources, and Brezhnev
described the task of increasing the food supply as
"the most important problem of the five-year plan."
The officially proclaimed Food Program 15 unveiled at
a May plenum in effect shifts the emphasis to the
"agro-industrial complex," which will receive fully
one-third of total investment during the period 1981-
85.16
The relatively consistent support for the agricultural
sector apparent since 1965 has been largely due to
Brezhnev's personal interest and backing. As he had
done in two previous plans (the Eighth and 10th), he
attempted to stake an early claim for resource inputs
for agriculture during 1981-85. At a special plenum
on agriculture in July 1978 he specifically ordered
Gosplan not to allocate a smaller share of total
investment to this sector during the next five-year
plan period, and at another plenum in October 1980
he again pressed for "big capital investments and
material resources for agriculture." The plan indi-
cates that his wish was only partially granted. The
agricultural sector managed to retain the same
share-27 percent-of total investment during 1981-
85 as it had in 1976-80, but because of the severe
cutback in overall investment growth, agricultural
investment is slated to grow by only 2.5 percent
annually during 1981-85 (compared with 3 percent
durin 1976-80 and almost 10 percent during 1971-
75). 25X1
investment both in agriculture and in industrial branches and other
sectors that support its development-for example, the agricultural
chemicals, tractor, truck, and agricultural machinery industries
Because of the smaller growth in plant and equipment
and other inputs and prospects for mediocre weather,"
some change in strategy was required if output and
consumption goals were to be met. In an attempt to
answer this need, the five-year plan reallocates invest-
ment within agriculture and its supporting industries
in order to concentrate on increasing farm productivi-
ty and cutting waste and losses in transportation,
storage, and processing of farm products. The change
in the name of the plan directives section usually
entitled "The Development of Agriculture" to "The
Development of the Agro-Industrial Complex" re-
flects this expanded view of the problem. Accordingly,
priority areas within the agricultural investment cate-
gory are machinery for livestock feed production,
storage facilities for perishable products, facilities for
initial processing of output, and equipment to reduce
manual labor on the farms. In other branches of the
agro-industrial complex, investment in facilities to
produce tractors, animal husbandry equipment, and
other agricultural machinery will double while invest-
ment in industries producing machinery for food
processing will triple. In a move to stem the flow of
skilled labor to the cities, the plan places heavy
emphasis on investment in rural housing, services, and
roads. During 1981-85, growth of such "nonproduc-
tive" agricultural investment will account for practi-
cally
rowth in total agricultural investment.
The Food Program reemphasizes this same theme-
improving the performance of the entire agro-indus-
trial sector-but reinforces it with new organizational
measures and financial incentives and extends it all at
least through 1990. Agro-industrial coordinating bod-
ies will be created at the national and regional levels.
The basic organizational unit, the rayon agro-indus-
trial organization (RAPO), will be governed by a
A major impetus to growth in farm output between the early
1960s and the mid-1970s was unusually favorable weather. A
review of climatic trends indicates that a return during the 1980s to
more normal conditions is likely, which would mean weather less
favorable than that of the earlier period but somewhat better than
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clearly defined authority and its domination by old-
line government bureaucrats indicate that he had to
make significant compromises. Brezhnev's push late
in the debate for the approval of the RAPO concept
may have been an attempt to make an end run around
his opponents' obstruction of such an organization on
the national levelF___1 25X1
The RAPO concept seems to have been approved
primarily because of the lobbying efforts of Georgian
party chief Shevardnadze and the backing of key
party officials in Moscow-Brezhnev, Chernenko,
and Mikhail Gorbachev, the party secretary responsi-
ble for agriculture. Chernenko is the only Politburo
member to have publicly praised the RAPOs before
the plenum, and his activities suggest that he is now
involved in overseeing their implementation. In sharp
contrast, other major leaders have failed even to
mention the reorganization aspects of the program in
speeches delivered since the plenum. Andropov avoid-
ed any mention of the Food Pro ram before he
became General Secretary. 25X1
Manpower-Making Do With Less
The sharp decline in new additions to the labor force
and expected continued low birth rates during- the
1980s make the manpower-demographic issue of
prime concern to the leadership. The plan documents
and accompanying leaders' speeches indicate that the
effort already under way to attack the problem in a
number of conventional areas will continue. The
strategy for 1981-85 includes measures to:
? Entice entrants into the labor force from "margin-
al" groups (such as pensioners)."
? Decrease the demand for labor (such as placing
arbitrary ceilings on the number of workers in
certain sectors).
? Improve the efficiency and allocation of labor (such
as tying wages closer to productivity and making
better use of trained specialists).
" There is also a campaign to further raise the labor force
participation rate of able-bodied females (age 16 to 54). Because the
current rate is at an alltime high and nearly the same as for males,
little expansion is possibleF I 25X1
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council that has some authority to allocate credit,
investment, and other inputs among farms and set
output plans and prices-but still within the limits set
by the central authorities.
An incentive package will also be implemented during
1981-85. Farm wages will continue to increase at
higher rates than those of other workers, and profes-
sionals and specialists will receive additional pay
raises and bonuses. Higher procurement prices for
most agricultural commodities will go into effect on
1 January 1983. The financial position of farms will
also be improved by grants from the state budget to
finance investment projects and by writeoffs and
deferments of farm debt.
The policy over the past 15 years of pouring money
into the agricultural sector has been controversial. In
his plenum speech of October 1976 outlining the new
1976-80 Plan, Brezhnev acknowledged that the sum
allotted for agricultural investment was "frankly ...
not easy to find ... we had to somewhat curtail the
demands of other branches of the economy." Indicat-
ing that the task of fighting off competing claimants
was just as difficult in the 1980s,,Brezhnev, in his
May 1982 plenum speech, felt the need to reassure
the military lobby that the new Food Program would
not affect current Soviet defense and foreign policies.
He even used national security as a justification for
the agricultural appropriations, promising that the
program will put the Soviet Union "beyond the reach
of chance" and reduce future dependence on food
imports from "capitalist states."
The issue of agricultural organization has proved
particularly contentious. Since 1972 Brezhnev had
advocated agro-industrial reorganization through the
establishment of superministerial coordinating bodies
to overcome branch (ministerial) departmentalism.
When announcing the Politburo's decision to draw up
the Food Program in October 1980, he emphasized
that the agro-industrial complex "must be planned,
financed, and managed as a single whole." His pro-
posals clearly ran into resistance since debate over
what form the reorganization should take and general
foot-dragging by the branch ministries delayed unveil-
ing the program for more than a year. While Bre-
zhnev did get his coordinating center, its lack of
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Only a limited number of measures will be taken in
three policy areas that would have a longer run
impact but potentially bigger payoffs:
? Automation and mechanization.
? Regional shifts of investment and/or labor.
? Increasing the birth rate in the European parts of
the country
Brezhnev himself noted at the Party Congress in 1981
that the contemplated actions in the labor field were
"clearly not enough. The root of the evil is the slow
reduction of manual labor." He ordered Gosplan and
the State Committee for Science and Technology to
speed up the drafting of the target-oriented program
for reducing manual labor. Implementing this direc-
tive, however, is not likely to bear much fruit within
the current planning period. Increased automation
would require an acceleration in investment in mod-
ern machinery and equipment. As noted in the invest-
ment section of this paper, the prominent economist
Aganbegyan apparently has doubts about the adequa-
cy of this sector's investment allocation during 1981-
85. Moreover, the shortage of hard currency during
the plan period and the unsettled state of East-West
relations will diminish the USSR's ability to obtain
the latest machinery and technology from the West.
Expanded investment in Central Asia and other labor-
surplus areas would result in a better use of the
existing distribution of the work force. The 1981-85
Plan does schedule several labor-intensive projects for
Central Asia, primarily in the light and food indus-
tries. Brezhnev, in his March speech in Tashkent, also
noted the correctness of the policy of constructing new
industries in Central Asia and drawing upon the rural
labor surplus. The specific priority given by the plan
directives to investment in the eastern and northern
parts of the country and the generally tight competi-
tion for investment funds during the 1980s, however,
guarantee that all-out implementation of this solution
to the labor shortage is not contemplated. The leader-
ship has decided, moreover, largely to ignore the
politically charged issue of migration from Central
Asia to labor-deficit areas during this plan period.
Migration will continue to be encouraged but not
forced. This passive approach was evident in Bre-
zhnev's remarks to the Uzbek party faithful as he
merely juxtaposed the two ideas: "It is no secret that
in the republic there is still a labor surplus" and "a
shortage of manpower is being felt in our country with
special urgenc in all parts of western Siberia and the
Far East...." 25X1
The plan directives promise that "an effective demo-
graphic policy is to be implemented" and suggest that
this means measures to increase the birth rate. Ac-
cording to the plan, however, implementation will be
slow-first because of the enormous costs of develop-
ing the necessary infrastructure " and secondly be-
cause of political sensitivity over whether to adopt a
uniform policy or one differentiated by region. The
reports by Brezhnev and Tikhonov at the 26th Party
Congress seem to endorse the regional approach.
Their proposals-which call for lump-sum grants for
first, second, and third births and yearlong partially
paid maternity leave granted working mothers for
each birth-will be introduced gradually, first in the
Soviet Far East and Siberia. These are predominantly
impact on the economy until the end of the century.
Slavic regions characterized by low fertility and high
female employment. A desire to rush into this new
policy will be tempered by the knowledge that a
successful pronatalist campaign would mean at least
the temporary withdrawal of more women from the
labor force. Even if successful, moreover, such efforts
to increase the birth rate will not have the intended
The leadership's views on most of these labor issues,
even the controversial demographic decision to follow
a differentiated pronatalist policy, are not known. On
the issue of regional investment priorities, Chernenko
might be expected to side with his Central Asian
friends in arguing the need for channeling more
resources to this area. Tikhonov probably would focus
on Siberia's priority needs.
East-West Trade-Reduced Expectations
The small role accorded East-West trade in the plan
directives of December 1980 reflected the fact that
Western economic sanctions were entering their sec-
ond year. The lack of a target for foreign trade
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turnover-a departure from previous practice-un-
derlined the uncertainty. among Soviet planners and
policymakers about what role to assign to the West.
In their speeches, the leaders blamed the ebb in East-
West trade on others and left the door cautiously open
25X1 for improved relations.
25X1
The draft guidelines anticipated trade only "with
those developed capitalist countries that show an
interest in cooperation with the Soviet Union." Such
language echoed the subdued expectations of the
1971-75 Plan directives that also recognized that not
all Western countries displayed a "readiness" to trade
extensively with the USSR. This was in sharp con-
trast with the bullish trade prospects contained in the
1976-80 plan draft guidelines.
The pessimistic language in the draft directives was
aimed primarily at trade with the United States. At
the October 1980 meeting of the Supreme Soviet,
Gosplan Chairman Baybakov deliberately omitted the
United States from a list of Western countries target-
ed for product buy-back agreements. Premier
Tikhonov in his speech at the 1981 Party Congress
specifically argued that it was not the Soviet Union's
fault that trade with the United States had decreased
but rather that of the United States because it was
using trade for improper political purposes. He con-
cluded, however, that Moscow stood ready to develop
economic relations with the United States "on an
equitable and mutually advantageous basis." Bayba-
kov repeated this formulation at the Supreme Soviet
session in November 1981. He also announced the
previously missing five-year goal for trade turnover,
signaling that the Soviets had decided that there
would be a decline in East-West trade. During 1981-
85 the USSR would concentrate a greater share of its
total trade volume on socialist countries; the volume
of trade with non-Communist countries would grow
only about 2.5 percent a year compared with just over
5 percent in 1976-80.
The change in Western, mainly United States, atti-
tudes to East-West trade may not have been the only
factor in the Kremlin's more subdued attitude. After
Western trade sanctions were implemented, Soviet
officials began to express a new determination to
wean their economy away from major dependence on
the West for technology or grain. Moreover, in con-
versations with Westerners, Soviets have frequently
registered disappointment over the contribution of
imported technology to industrial output. Some sec-
tors have experienced difficulties in absorbing the new
technology, and, even in those areas where Western
technology clearly helped, the diffusion to Soviet-
designed and equipped plants has been minimal. The
leadership seems increasingly aware that importing
foreign technology is not a panacea for the economy;
the plan directives give renewed emphasis to improv-
ing the performance of the domestic R&D sector and
strengthening its ties with the producing sectors. F_
25X1
There have been noticeable differences among the
leaders both in the extent of their support for Bre-
zhnev's detente policy and their reaction to the cool-
ing of East-West trade relations. Brezhnev made
detente a cornerstone of his foreign policy. Chernenko
has been an enthusiastic supporter. Andropov also has
been supportive of Brezhnev's detente strategy. Indic-
ative of some Politburo resistance, Kirilenko had
always been equivocal on this issue, coupling even his
most positive statements on detente with warnings
about the unchanging nature of US "imperialism."F
25X1
In general, Politburo enthusiasm for the pursuit of
improved Soviet-US relations waned after the US
Congress passed the Jackson-Vanik amendment in
1974 and even more so after Washington's reaction to
the Soviet invasion of Afghanistan. Although most in
the leadership probably believe that the five-year
plan's deemphasis on East-West trade is justified,
various shades of opinion over the chances for im-
proved Soviet-US relations are still discernible.
Brezhnev adopted a pessimistic tone in his speech to
the party congress last year, and First Deputy De-
fense Minister Ogarkov followed suit in his recent
book, opining that the United States will pursue a
policy of confrontation for the foreseeable future.
Kirilenko's recent statements are representative of
one faction that believes Moscow should be shifting
its focus to Western Europe "where by no means
everyone is disposed to take the path of Washington's
imposed adventure." Chernenko has been far more
enthusiastic in his support of improved relations with
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the West, particularly the United States. In a round
of.leadership speeches in 1980, he seemed to be the
leader most concerned about the freeze in relations
with the West following the invasion of Afghanistan.
The Brezhnev Leadership's Approach to Economic
Decisionmaking
The economic policies embodied in the five-year plan
reveal much about the Brezhnev leadership's ap-
proach to solving economic problems. They suggest
that the leadership made its economic decisions ac-
cording to a certain mind-set-a set of precepts that
in effect circumscribed its policy options. Some were
the natural outgrowth of consensus-style politics; oth-
ers flowed from the backgrounds and expertise of this
particular mix of policymakers; still others reflected
the leadership's perceptions of the peculiar combina-
tion of economic problems to be faced in the 1980s.
Short-Term Perspective
The Brezhnev leadership seemed strongly inclined to
mortgage the future for results today. The most
central decisions of the five-year plan-those that are
related to investment-reveal this bias. The sharp
slowdown in investment growth was taken despite the
leaders' certain knowledge that their efforts to im-
prove capital productivity had little chance for suc-
cess. Their primary concern seemed to be the satisfac-
tion of the immediate demands of the defense sector
and possibly of consumption. Even long-term effects
on these preferred claimants were given secondary
consideration; a continued decline in investment
growth would ultimately affect growth potential in
both areas.
Within the investment sector, the apparent decision to
boost investment growth more in machinery-using
sectors than in machine-building sectors, as implied
by Aganbegyan's recent Pravda article, also reflects
this preference for immediate gain. He proposed
shifting investment into expanding capacity for new
machinery and away from continued boosts in outlays
for dated equipment in such sectors as chemicals,
metallurgy, timber, coal, and land reclamation. This
strategy in effect would postpone short-term gains in
order to achieve a higher rate of return in the long
An almost too obvious explanation for this mind-set
lay in the advanced age of the leaders. They preferred
immediate results and were anxious to halt the contin-
ued decline in economic growth in the remaining
years of their tenure. They also may have thought
that some major economic problems of the 1980s
would be temporary. Soviet economic spokesmen have
admitted to Westerners that this decade will be
difficult but have asserted that the 1990s promise
some relief. The decline in increments to the labor
force, in fact, will bottom out by then, and in the
energy sector, the Soviets probably are counting on
large new discoveries of oil as well as alternative
energy sources coming on stream. The leaders might
have believed, therefore, that they or their successors
could eventually make up for the policies that focused
on short-term gains that they chose to pursue in this
decade.
Preference for Administrative Solutions
Because of the obvious implications for the retention
of central control, Soviet leaders have always had a
deep distrust of relying on the invisible hand of the
marketplace to motivate the basic economic unit-the
factory or farm. They have preferred to retain the
power to influence directly the smallest economic
decision. As a result, attempts to improve economic
efficiency have often taken the form of redrawing
organizational lines and "perfecting management"
rather than allowing more freedom at the enterprise
level. The Brezhnev leadership was no exception. The
plan directives illustrate that such administrative
solutions were favored in almost every policy area,
typified by the bureaucratic approach of the target-
oriented programs.
The most recent example of this tendency is the Food
Program. During its drafting, press articles by some
Soviet economists indicated that it might incorporate
reforms in planning and pricing that would give
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greater autonomy to the farms. They cited the exam-
ple of Hungary where the procurement system has
been scrapped and market prices guide the output
plans in both the large collective farms and the small
private holdings. Instead, the program took quite
another course. The rigid system of state-controlled
procurement prices was maintained, and what
amounts to a new administrative layer was added at
every level from the ministry down to the rayon to
"coordinate" the work of the agro-industrial complex.
Historically, increased party participation in econom-
ic affairs has often been a corollary to the principle of
dependence on administrative solutions. Indeed, the
party is taking the lead in promoting the target-
oriented approach to managing key national projects,
and party representatives will serve on the agro-
industrial associations. The Politburo, however, as
discussed earlier in this paper, appeared divided in its
support for increased party intervention at this junc-
ture of economic development.
Incrementalism
Sharp departures from past experience with little or
no warning were rare occurrences in the formulation
of economic policy under Brezhnev. Prospective
changes were usually discussed at length in the press,
talked about by members of the leadership, and in
many cases, tried experimentally before being en-
dorsed for general use. This procedure had the advan-
tage of making such policies appear as the considered
result of a consensus and making individual leaders
who pushed them less susceptible to charges of sup-
porting "harebrained" proposals of the Khrushchev
variety. Also, gradual implementation was less likely
to be disruptive to production schedules, a persuasive
reason for caution when growth was already so low.
Reforms under way in both the industrial and agricul-
tural sectors conform to this process. One of the main
features of the mid-1979 reform in planning and
management was to be the replacement of the gross
value of output indicator with net output. It had been
debated for years prior to that and is now being
implemented only gradually. In fact, Brezhnev com-
plained at the November 1981 plenum that the pace
has been too slow. The new management structure
created as part of the Food Program can also be
viewed as part of a continuum. Agro-industrial coor-
dinating bodies at the rayon and republic levels have
been tried experimentally in several republics since
the mid-1970s. 25X1
Balanced but Restrained Use of the Carrot and Stick
The policies chosen for the current planning period
are a narrow but fairly even mix of those that offer a
"carrot" and those that threaten the use of the
"stick." The even mix probably reflected the complex-
ion of the Brezhnev leadership, a fairly divergent
group despite the narrow range of acceptable views
that ordinarily define a Soviet leader. The conserva-
tive nature of the leadership, as well as the economic
milieu of recent years, however, ensured that the
actual range of policies chosen would be narrow. That
is, previous allocation decisions and poor economic
prospects largely prevented the lavish use of the carrot
while the leadership's tendency to eschew, for whatev-
er reasons, the harsh tactics of the Stalin era held a
rein on the stick.F____1 25X1
The leadership also apparently believed that the aver-
age citizen could still be motivated by nonmaterial
means to work harder. Perhaps the fact that most of
the aged leaders could recall true revolutionary zeal
from firsthand experience prevented their seeing the
pervasive cynicism of the current generation of work-
ers. 25X1
Consumer policy illustrates these points. The range of
leadership views on the subject was wide-represent-
ed at one end of the spectrum by the now deceased
Suslov, the hard-nosed ideologue ever vigilant against
"consumerism," and at the other end by Chernenko,
an active lobbyist for consumer interests. Neither of
these extremes is reflected in actual policy, however.
The collective decision has been to try to strike a
happy medium-strive to meet the most important
consumer demands but at the same time tie rewards
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more closely to performance. Meanwhile, various
efforts have been made to improve worker-consumer
morale and motivation: These include the Chernenko-
inspired programs for more public opinion polls and
closer attention to letters of complaint. A new wave of
anti-Americanism combined with alarmism over the
military threat posed by the West has also been used
to convince the.consumer that sacrifices must be
made.
Untouchables
The Brezhnev leadership apparently regarded some
policy areas as largely immune to budget cuts or
revision. This resulted from protection by strong
vested interests and/or the fear of dire domestic or
foreign consequences if changes were made. In effect,
the preservation of untouchable areas limited policy
options considerably and guaranteed that future
changes in these areas would be even more traumatic.
Three major areas fall under this category: defense
spending, consumer prices, and agricultural invest-
ment.
The Brezhnev regime was consistent in its commit-
ment to the Soviet defense effort. Since 1965 the
growth in defense spending has averaged about
4 percent a year even as overall economic growth has
declined. Moreover, on the basis of observed military
activity, Soviet defense spending will continue to grow
through at least 1985.
The price level of basic foodstuffs-for example,
bread, milk, and meat in state stores-remained
stable throughout the Brezhnev years supported by a
rapid growth of subsidies. The 1981-85 plan directives
called for a 30-percent increase in subsidies, and the
new Food Program piles additional increases of 10 to
15 percent on top of that. The plan directives' pledge
to continue this retail price policy has been reinforced
by repeated assurances from planning officials.
The commitment to agriculture has also remained
fairly steady since 1965, despite the admitted difficul-
ties of finding the necessary resources. Although
Brezhnev was its main supporter, the majority of the
leadership apparently was convinced that the share of
resources allocated to agriculture, despite the heavy
burden, could not be reduced without risking the
gains already achieved.
A New Leadership's Impact on
Principles and Policies
Change in Approach to Economic Decisionmaking
The approach to decisionmaking apparent in.the
1981-85 Plan reflected the Brezhnev regime's particu-
lar style as well as its basic belief in the manageability
of the economy's problems. Both of these factors are
subject to major change now with the end of the
Brezhnev era. The power balance within the Politburo
is substantially altered with Brezhnev gone. The
transition period, in addition, will create a highly
charged political environment that will enliven the
political process and may open the way for change.
The new leaders' perception of the Soviet economic
predicament may also change if, as we believe likely,
their efforts to increase productivity are ineffective.
The combination of these factors argues for the
following changes in the decisionmaking process.) 25X1
Short-Term Perspective. Brezhnev's immediate heirs
have already been important participants in the eco-
nomic decisionmaking process, but they may acquire
a somewhat longer time horizon now that they are in
charge. First, their chronological age is somewhat
younger,20 and their collective mental vigor has im-
proved substantially because they no longer have to
allow for Brezhnev's impaired cognitive abilities.
These factors combined with a distinct sense of the
beginning of a new leadership may result in a willing-
ness to be more forward looking. Secondly, it may
become apparent that there are relatively few oppor-
tunities for quick fixes and, indeed, the shortsighted
policies of the Brezhnev era may begin to compound
the already serious economic problems. Lastly, it
seems likely that they will foresee that the economic
difficulties of the current decade will spill over into
the 1990s, making it increasingly difficult to postpone
hard decisions of the 1980s.F___1 25X1
The group that will follow the Andropov leadership
should have an even greater incentive to take the long
view. Because they will be younger still, they could'
m The average age of the leadership group that would have been the
major force behind the 1981-85 Plan-Brezhnev, Kosygin, Suslov,
Chernenko, Ustinov, and Kirilenko-was 74 in 1980. The new
group-Andropov, Chernenko, Tikhonov, Ustinov, Gorbachev, and
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expect to reap the benefits of policies that have longer
payoff periods and, conversely, the whirlwind of poli-
cies that concentrate only on short-term results.
Administrative Solutions. The lifelong accumulation
of power necessary to achieve leadership status seems
to us inconsistent with a willingness to begin a
devolution of economic power once on top. Such a
move would be a fundamental change in the Stalinist
economic order of the last 50 years. Moreover, it is
likely that the new leaders will view the existing
structure of power as a systemic strength. Therefore,
no matter what the political shading of the current
and next generation of Soviet leaders, they probably
will continue to favor bureaucratic centralism and
seek organizational solutions rather than moving vol-
untarily toward fundamental systemic change. In-
deed, they may well believe that stringent economic
circumstances argue for ever tighter administrative
control.
Incrementalism. Because it usually takes some time
for one individual to consolidate power, major new
programs probably will continue to be thoroughly
discussed, debated, and tested before being adopted.
Indeed, Andropov stressed caution in economic re-
form in his recent plenum speech. The new leaders
will be especially sensitive to the fact that severe
disruption of the economic system by the implementa-
tion of ill-conceived policies might be a quick route to
political demise.
Balanced Use of Carrot and Stick. A relatively strong
case can be made that the new leadership will lean
toward harder line, authoritarian measures. These
leaders-because of the economic situation and their
own personalities-will rely more on tightened disci-
pline and control to effect economic policy than on
coaxing the desired behavior through increased incen-
tives. The more urgent nature of the economic dilem-
ma as the decade progresses will prevent the more
lavish use of the carrot and may well be used to justify
harsher actions. The budding anticorruption cam-
paign and the summary firing of the Minister of
Railways in November may be early evidence of such
a policy shift. Moreover, there is considerable evi-
dence that the Soviet people, who are facing unset-
tling economic and social problems, are ready for a
The important points about the new leadership are
that: 25X1
? Andropov's long tenure in the KGB has given him
experience in using administrative measures to mod-
In his statements since becoming General
Secretary, the need for increased discipline has
figured prominently.
? The leader with the most "permissive" image,
Chernenko, appears to hold views somewhat beyond
the current Politburo consensus, and he was unable
to gain sufficient support within the leadership to
claim Brezhnev's job.
? The loss of Brezhnev-who seemed most responsible
for the even mix of policies through his middle-of-
the-road style-may make it easier for the scales to
be tipped toward a harder lineF___1 25X1
This trend, however, would not rule out a mix of
liberal and authoritarian policies. Greater dependence
on the private sector is a distinct possibility-a policy
that could easily be classified as "liberal." Neither
would this general preference for a harder line qualify
as neo-Stalinism. A stricter manpower policy, for
example, might be expected to include harsh nation-
wide penalties directed at both managers and workers
for such offenses as high labor turnover but would
probably not embrace measures such as the forced
transfer of Central Asians to Siberia. 25X1
Untouchables. The untouchables of one leadership are
often the repudiated policies of the next. Brezhnev
and his colleagues, for example, in the mid-1960s
leader who would demand greater discipline.
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dismantled Khrushchev's sovnarkhoz system and
some of his pet farm programs. Policies closely associ-
ated with former leaders are particularly vulnerable
when a new leadership takes power during a time of
economic difficulties. We can expect the new leaders
to try to project an image of a fresh start; in so doing
they might find it propitious to shed some policies that
had become particularly burdensome.
Change in Policies
The new leaders will surely bring changes in economic
policy. But what kind and how extensive? Answers
are necessarily speculative, but the range of policy
options available to them is not limitless. They will
have to chart a course within definite institutional and
political constraints, and the possible changes in their
approach to decisionmaking discussed in the preced-
ing section further narrow these choices. This section
discusses likely changes in the seven major policy
areas outlined for the 1981-85 Plan. The new leaders
may make some midcourse corrections in the current
plan. However, because they have laid particular
stress on continuity and because it may take some
time to develop a strong consensus, it is more likely
that the full impact of the leadership's new policy
25X1lines will await the drafting of the 1986-90 Plan.
Major Claimants. The hardest policy decision for the
Andropov leadership will be resource allocation
among the basic claimants. We estimate that econom-
ic growth through the mid-1980s will average less
than 2 percent per year and will hover near 1 percent
for the remainder of the decade. This growth rate
ensures continued fierce competition for resources,
and this time around there will be fewer options. A
decision to maintain growth in defense spending at the
historic rate would give this claimant an even larger
share of national income, squeezing investment and
consumption further. If investment growth remained
at its present rate, for example, an absolute decline in
25X1 vonsumption might result.
uses in a reasonable period of time.21 Capacity cur-
rently used in armored vehicle and tank production,
for example, could be converted in roughly a year to
support increased production of a broad range of
civilian vehicles-for example, railway rolling stock,
tractors, trucks, and construction equipment.
If the growth of weapons production is reduced, the
leadership must decide whether to direct these re-
leased resources immediately to the consumer or to
the production of new investment goods. Choosing the
investment option would increase economic capacity
so that in later periods more consumer goods (or
possibly defense goods) would be available. Within the
investment category, moreover, the leadership would
have to choose between developing the Soviet industri-
al base (heavy industry) and the consumer-related
sectors-agriculture, processed foods, and soft
goods-another issue of current versus deferred con-
sumption.
The most immediate impact of a resource shift would
be the alleviation of bottlenecks in such critical
economic sectors as energy, agriculture, and transpor-
tation. The resources most readily transferable-
high-quality steels, construction materials, chemicals,
and fuels-are the very ones needed for this purpose.
A resource transfer could stimulate lagging factor
productivity and improve the current slow rate of
innovation and technological change. Modernization
could also be enhanced if released resources went into
exports, which in turn would enable the Soviets to
Western equipment and technology.
Several additional factors argue for a decision by the
new leaders to reduce the growth in defense spending
somewhat. Possessing a longer time horizon, they
would seem to be in a better position to recognize the
consequences of a further slowdown in investment
growth and a possible decline in consumption. While
risky politically for a new leadership, a decision to
The new leadership, therefore, will feel greater pres-
sure to reduce the growth rate of defense expenditures
as the decade progresses. The Soviet economy appears
to have the technical capacity to accommodate a
resource shift from arms production to civilian end
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slow the growth of defense spending would have a
better chance of implementation if the leaders per-
ceive that such a slowdown would have little impact
on military capabilities during this decade. Given the
long leadtimes involved in military programs, Soviet
weapons that will be in the field through the 1980s
will consist primarily of systems already in the forces
as well as those now entering production and the late
stages of development. Even if annual defense outlays
level off (zero growth), the impact would probably be
felt only in the next decade. An added fillip would be
a real rapprochement with China that might lessen
military requirements.
The institutional and political barriers to a decision to
slow the growth in defense spending should not' be
minimized, however. Proposed resource shifts from
the military to the civilian sector would be strongly
debated by the military establishment, which would
be most concerned about the loss of weaponry that
would ensue from the shift. On 27 October 1982
Brezhnev spoke to an extraordinary gathering of top
military officers that suggested concern already about
the adequacy of resource allocations to the defense
sector. The strength of feeling on the part of the
military to "get their due" is exemplified in Marshal
Ogarkov's assertive statements. Defense Minister
Ustinov's apparent strength in the Andropov leader-
ship would also be a restraining factor, at least in the
short run. Moreover, the very structure of Soviet
defense planning and production contributes heavily
to the momentum of defense spending in the USSR
and makes any shift of resources out of the defense
sector more difficult than would be the case in a
market economy. The entire Soviet system-with its
five-year plans, comprehensive resource-allocation
process, and command economy-is designed and
managed by the government to provide a high priority
to defense production.
In any case, such a decision probably could not be
implemented until the next five-year plan (1986-90).
We know from historical precedent that the Soviets
are already well into the next planning cycle; a key
year for defense strategy will be 1983 when a threat
matched with military plans and capabilities.
assessment will be completed to be subsequent
Investment. The new leaders might choose to re-
arrange investment priorities. This would result from
a reshuffling of functional responsibilities and alli-
ances and also their presumably different approach to
economic decisionmaking, in particular their greater
willingness to implement policies that take longer to
bring about results. First of all, energy would seem a
likely area to retain its preeminence because of its
impact on future economic growth and foreign ex-
change earnings. A strong candidate to receive a
larger share of investment funds would be the ma-
chine-building sector-because of the need to replace
dated models.with those embodying the latest technol-
ogy, as Aganbegyan urged, and also because of the
likelihood of continued problems in importing foreign
machinery and technology. Moreover, those who re-
luctantly agreed to a slowdown in the growth of
defense spending might be particularly anxious that
some of these funds be diverted to machine building
as a second-best recipient and as one that might help
reduce industrial bottlenecks and ultimately enhance
military production.~ 25X1
Other sectors-transportation and ferrous and non-
ferrous metallurgy-might also benefit from a reas-
sessment of investment priorities. As Brezhnev told a
military audience in October, these sectors have be-
come serious bottlenecks. A long-term commitment
would be necessary here to expand capacity and
introduce more technologically advanced equipment.
A leadership with a longer time horizon might be
more prone to launch such an effort. In order for these
sectors to receive a larger share, others must be
sacrificed.~ 25X1
Consumption. Unlike its two predecessors, the new
leadership will not have the luxury of courting popular
support by providing a substantial boost in goods and
services. Faced with possible stagnation in consump-
tion by mid-decade, it must contain consumer discon-
tent while devising a way to motivate the worker to be
more productive. A new leadership prone to authori-
tarian solutions, coupled with stringent economic con-
ditions, is likely to be more coldly pragmatic in its
consumer policy. The leadership probably will remain
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committed to maintaining some forward momentum
in selected areas of consumption-particularly for
food-to keep discontent at a minimum. Beyond this
point, however, material rewards may be highly dif-
ferentiated according to the individual's contribution
to the economy, and individual initiative may be
rewarded in the private as well as the socialized
sector. In this way, the actual boost in productivity
could be much larger than the increment in resources
committed by the state to the consumer effort.
Specific measures might be to:
? Tie wages and "perks" even more closely to produc-
tion results. The most generous food distribution
programs, for example, could be targeted at those
factories that promise the largest boost in productiv-
ity and relief from industrial bottlenecks.
? Raise consumer prices on all but essential goods and
services, thereby ensuring that there would be some-
thing left to buy for those rewarded with higher
wages. Informed Soviets are already saying publicly
that prices on basic foodstuffs (bread, potatoes, and
milk) will remain stable, but "quality improve-
ments" will justify raising prices on all other foods.
? Expand the private sector in consumer services-
allowed by the new Constitution (1978) and a
relatively costless way for the state to relieve a
particularly irksome consumer area. A recent press
article urged that the Riga experience-permitting
privately run restaurants-should be expanded to
"many other personal services and enterprises
(shoes, clothing, appliance repair, and others) in all
regions of the country."
Economic Reform. The new leadership's predilection
for administrative solutions and bureaucratic central-
ism would severely limit the extent and direction of
future economic reforms. Continued attempts to im-
prove management systems and perfect economic
indicators and incentives will clearly be acceptable,
but a radical reform-one that would abolish obliga-
tory plan instructions and administrative supply allo-
cations and rely instead on supply and demand,
operating through flexible domestic prices-would
likely be deemed too risky. Transition to such a
system of "market socialism" probably would result in
serious economic difficulties in the short run, includ-
ing inflation and unemployment, and rupture existing
fabrics of political and economic power." Hungary's
problems with its New Economic Mechanism (NEM)
in the mid-1970s reinforced the Brezhnev regime's
conservative inclinations against internal economic
reform and heightened its misgivings about radical
decentralization. The Andropov leadership no doubt
will closely monitor the results of the resurrected
reform program launched in Hungary over the last
several years.
In his first economic pronouncement since becoming
General Secretary, Andropov adopted a cautious
stance on reform. While he favored extending the
independence of associations, enterprises, and collec-
tive and state farms, he warned that "it is necessary to
act with caution here, to conduct experiments if need
be, to make appraisals, and to take account of the
experience of fraternal countries." In a December
Trud article, economist Aganbegyan was extremely
timid in his prescriptions for improving incentives in
Soviet industry, perhaps indicative of signals he is
getting on the new leadership's future position on this
issue. He proposed the adoption of the "payment by
results" system in industry and the expanded use of
private initiative in the service sector-both previous-
ly discussed and already being tried experimentally.
Yet, he felt it necessary to go out of his way to justify
their use in a socialist country.
Some shift to a more regionally organized economy
might also be safely tried. Such a move would give the
appearance of a bold and sweeping reform but would
actually "leave the bureaucratic nature of the system
unchanged," as Burlatskiy astutely observed (see p. 9).
The leadership might believe, however, that major
benefits would initially flow from the reform's grant-
ing of temporary freedom from the parochialism
rampant in the ministerial bureaucracy. Moreover, a
territorial approach might be thought more suitable to
today's economic problems-for example, exploitation
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of raw materials in Siberia.23 Finally, growing pres-
sure by regional interests in the Politburo might make
the change attractive.
Agriculture. Because allocations to agriculture have
depended on Brezhnev's strong political backing, poli-
cy toward this sector is likely to be one of the first to
come under review. The extension of the Food Pro-
gram through 1990 does not in itself protect this
sector from predators. Indeed, the fact that the
program may take three to four years to show results
makes it particularly vulnerable.
Nevertheless, the new leaders will understand that
continued support of the agricultural sector is essen-
tial to the economic and political health of the
country-to domestic productivity and tranquillity as
well as to the foreign trade balance. They might
decide, however, that results in the long run would be
better if investment inside the farm gate is cut in
favor of the industries that support agriculture. The
Food Program already does this to some degree, but
an actual reduction in the share that Brezhnev worked
so hard to preserve would be a much stronger signal of
the new leaders' intent and would have the added
advantage of distinguishing their agricultural policy
from that of their predecessors. This would have
particular appeal to those in the Politburo who had
always favored heavy industry and would placate
those who believed, like Aganbegyan, that machine
building should receive additional resources. (Aganbe-
gyan suggested, in fact, that investment in land
reclamation was one area that could be sacrificed.)
Cutbacks in the growth of such programs would not
seem to jeopardize near-term food output. Consensus
for this investment shift would be easier to obtain if
the agricultural sector was blessed with good weather
25X1 for the next several years.
The possible move to raise food prices may well
receive strong support from the group that always had
grave reservations about the agricultural burden.
33 Territorial production complexes (TPKs)-major regional devel-
opment projects planned and developed as integrated units-that
cut across ministerial lines are already being pushed. Eight projects
have received TPK status in the 1981-85 Plan.
Higher retail prices would lower the agricultural
subsidy bill,24 which threatens to approach the size of
the defense budget by 1985.1 25X1
Labor. A new leadership weighted more heavily with
hardliners might be expected to endorse the policy
line of the Brezhnev leadership toward short-run labor
problems: that is, favoring tighter discipline for the
individual worker as well as for the enterprise manag-
er. The more crucial question, however, is what steps
the new leadership will take in the three policy areas
that promise longer run and bigger payoffs-automa-
tion, regional shifts of investment and/or labor, and
increasing the birth rate. Possible policy shifts already
mentioned in other areas would seem to promote
greater automation-the larger share of national in-
come dedicated to investment and the larger share of
investment devoted to machine building. Although
still constrained by low investment growth, these
shifts in policy would at least be moving toward
solving what Brezhnev called the root of the labor
problem-"slow reduction of manual labor."F__
25X1
The other two areas touch on regional sensitivities,
and strong decisions here would depend on stringent
economic circumstances providing the justification for
policies that at least temporarily favor the labor-
deficit regions. For example, the continued need for
investment in Siberia would preclude the development
of major industrial centers in Central Asia that could
make use of the labor surplus. More money, however,
might be poured into developing the social and cultur-
al infrastructure in the labor-deficit regions in order
to attract emigrants from labor-surplus areas. Ac-
cording to a recent article by the late demographer
B. Ts. Urlanis and labor economist G. I. Litvinova,
this would not require a fresh injection of funds but
would largely entail a juggling of resources between
regions. They note that in the past, budget and tax
policies transferred resources from labor-deficit re-
gions to labor-surplus areas for the express purpose of
infrastructure development. Now they advocate a
reversal of these transfer payments. They point out, in
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addition, that only a significant improvement in social
infrastructure will increase the birth rate. Their rec-
ommended shift of funds, therefore, would not only
redirect migration but also serve to reinforce the
regionally differentiated pronatalist policy already
begun by the current leadership.
East-West Trade. Possible changes in domestic policy
discussed in this paper and the continued decline in
economic growth seem to argue for a new leadership's
interest in maintaining good relations with the West
in general and East-West trade relations in particular.
First, a decision to reduce the growth of defense
spending would be consistent with efforts to improve
dialogue with the United States and to pursue arms
limitation agreements that might constrain Western
programs. The possible decision to raise investment
growth and to dedicate more capital resources to the
machine-building sector might also boost interest in
importing foreign machinery and technology. Contin-
ued imports of grain and meat seem necessary to
maintain the consumer threshold for food, barring a
miraculous recovery in the agricultural sector. More-
over, since Moscow's current major hard currency
earner, oil exports, probably will not be as lucrative in
the foreseeable future, new hard currency markets or
exports must be cultivated. The success of the new gas
pipeline to Western Europe, for example, depends on
maintaining good relations with these countries.
The implications for US-USSR relations may not be
equally sanguine, however. Although of necessity
Moscow must improve relations with the United
States to come to some agreement on arms control,
the leadership may not believe that the benefits of
US-Soviet trade are that large. The Soviets put great
store in reliability and dependability, and their doubts
about the United States on this score may outweigh
the purely economic and technical benefits that might
accrue. In addition, they may choose to continue
driving a wedge between the United States
and its allies by maintaining a differentiated trade
policy
These changes in approach and policies will not be a
panacea for the Soviet economy's ills. Specifically,
growth rates cannot be expected to return to those of
the 1950s or even the 1970s, nor will there be a
substantial improvement in the ability to master the
requirements of intensive growth. Nevertheless, the
changed policies could bring marginal improvements
in key areas and allow the new leadership to continue
to muddle through even in the face of economic
conditions probably worse than they had expected.) 125X1
Of primary importance to the new leaders, these
policies would not require the surrender of power and
would continue to allow them the freedom to impose
their will on the smallest economic or administrative
unit. In this way, they could feel assured of their
ability to handle such problems as public unrest,
external economic or military threats, or internal
disasters that would require an emergency redistribu-
tion of resources
Approved For Release 2008/09/25: CIA-RDP83T00853R000200160002-6
 Secret
Secret
Approved For Release 2008/09/25: CIA-RDP83T00853R000200160002-6
Approved For Release 2008/09/25: CIA-RDP83T00853R000200160002-6