HOW FAR DID ECONOMIC POLICY CHANGE BETWEEN 1953 and 1985?

Question 1

What were the challenges Khrushchev faced when taking over the Soviet economy?

Answer 1

A vast bureaucratic system of administrators based in Moscow stifled initiative. It was difficult for local innovations to take place for fear of upsetting the Plan. The atmosphere of terror under Stalin had done little to encourage initiative. The workforce was subject to harsh labour laws, including fines for absenteeism.
The system was clumsy and wasteful, particularly difficult to deal with new trends and unforseen events. Administrators worked out the likely demand for goods and then set targets to ensure demand was met. If demand increased, say for heavy coats due to a particularly hard winter, the system was too infexible to respond.

Question 2

What did Khrushchev attempt to do to deal with these issues?

Answer 2

In 1957, Khrushchev set up 105 Regional Economic Councils (Sovnarkhozy) to supervise enterprises. It was an attempt to move some decision-making from the centre to regional-bases.
Harsh labour laws of the Stalin years removed and working week reduced from 48 hrs to 41 by 1960. Incentives replaced coercion.
Managers of industrial enterprises given more influence in factories. K disliked that they were ‘robots of Moscow’ To encourage initiative they were allowed to keep 40% of the profits made by their factory to invest as they wished in their business.
Greater emphasis on vocational education to support industrial developments. Specialist technical school set up and vocational education expanded.

Question 3

What was the Liberman Plan?

Answer 3

Drawn up by economist Evsei Liberman, to address the issues of under-performance in the Soviet economy. It called for greater autonomy for local managers and for the market to replace the state as the decider of prices. He recommended greater decentralisation of decision-making and greater use of the economics of supply and demand to set prices.

Question 4

How significant was the Liberman Plan?

Answer 4

Despite being resisted by conservatives in the Politburo and Party officials who feared a loss of influence in economic planning, his ideas were influential in reformist circles in the USSR, and they formed the basis of Kosygin’s reforms of 1965 and further reforms under Brezhnev. The conservatives were always strong enough to ensure Liberman’s ideas only had a limited impact and they were constantly watered down when applied.

Question 5

What were the priorities of ‘The Seven-Year Plan’?

Answer 5

To transform the fuel and chemical industries in light of recent discoveries of new mineral resources, especially in the Volga-Urals fields. This would involve a shift of emphasis from coal to oil and gas. Natural gas was cheap and available in abundant quantities, but it was little used. The focus on the chemical industry was linked to the increased targets of consumer goods. The production of synthetic fibres was to increase from 166,000 tons (1958) to a target of 666,000 tons (1965). Substantial increases were also targeted in footwear, natural fabrics and housing. Regional development was also to be promoted, with areas east of the Urals receiving over 40% of the available investment.

Question 6

What evidence is there of success of the 7YP?

Answer 6

Oil increased from 113 million tons (1958) to 242.9 million tons (1965). Gas production increased from 235 milliard kWhs (1958) to 507 (1965). Consumer goods were more abundant and this raised living standards for many. The launching of Sputnik, the first space satellite, in 1957 worried many Western commentators. These were increased when the USSR sent the first dog into space and, in 1961, made Yuri Gagarin the first man in space. The annual growth rate of the Soviet economy was 7.1% in the 1950s compared to the US growth rate of 2.9%.

Question 7

What evidence is there of failure of the 7YP?

Answer 7

The headline successes masked the reality of Soviet economic performance. Although there was more choice for consumers, the quality of the goods was often poor. Incidents of targets met, despite producing useless products, were common: for example, the shoe factory that produced its target of shoes, all had the heel nailed to the toe. Problems remained, with poor labour productivity, inefficiency and waste. The Sovnarkhozy experiment made national planning more difficult because the requirements of local enterprises were hard to foresee.

Question 8

What was the economy like in 1964?

Answer 8

Economic growth had slowed. Spending on consumer goods was reduced and the housing programme was cut back. K’s reforms had come up against stiff resistance of Party bureaucrats who had become strongly attached to Stalin’s approach of focusing on heavy industry. The influence of the military-industrial complex proved too strong for Khrushchev and his reforms were watered down or simply ignored.

Question 9

SUMMARISE – Did Khrushchev successfully transform the Soviet economy?

Answer 9

Overall, Khrushchev succeeded with his aim of increasing consumer goods and raising living standards as well as shifting the focus onto investing in oil, gas and chemical industries. Therefore, the targets set for these reforms were implemented successfully and Khrushchev flourished in this aspect. However, these improvements were a mask for the consequences that occurred as a result of poor economic planning. Poor labour productivity, inefficiency and wastefulness remained which undermine the economic successes that Khrushchev achieved, rendering him, arguably, unsuccessful in transforming the Soviet economy.

Question 10

What evidence is there to suggest Khrushchev was more sympathetic to the peasants than Stalin?

Answer 10

Khrushchev was from a peasant background and recognised that the slow growth in food production was holding up further growth in industry, and also keeping living standards unacceptably low. He made genuine attempts to meet peasants on collectives and listen to their views. K considered himself to be an agricultural expert and, although he overstated his own abilities in this area, he was genuinely committed to raising the priority of agriculture in the Soviet economy. Whereby, under Stalin, agriculture was sacrificed for the needs of industry.

Question 11

How did Khrushchev attempt to ‘win the peasants over to collectivisation and stimulate initiative?’

Answer 11

In 1955, individual collectives given greater powers to make decisions at local level. Flexibility over how directions from Ministry of Agriculture were implemented was allowed.
MTS were abolished. Peasants hated them as instruments of central and political interference. Unfortunately, they were replaced with a system that expected each collective to buy its own machinery which turned out to be a naive view.
Collectives increased in size, many becoming large agro-industrial villages (Agrogoroda) that linked food production with food processing. There was a rapid increase in mechanisation, fertilisers and irrigation. Nonetheless, they proved unpopular with the peasants who felt more divorced from the land they worked.
Prices given for state procurements were increased and the system of compulsory seizure of food was replaced by planned state purchases. This was designed to encourage greater productivity.
Greater concessions given to peasants as to how they could use their produce from private plots. They were now allowed to sell such produce at private markets - encouraged peasants to grow more food and ensured more regular food supplies for the population. Productivity often much higher on private plots - nearly all eggs produced came from private plots.
Virgin Lands Scheme introduced in 1954, encouraged the opening up of new areas to agricultural production. Volunteers, often members of the communist league (Komsomol), put to work in areas such as Siberia and Kazakhstan. Six million acres of land brought under cultivation with considerable investment. Over 120,000 tractors were provided for the scheme.

Question 12

What evidence is there of success of Khrushchev’s agricultural reforms?

Answer 12

K succeeded in raising the status of agriculture in the Soviet economy: it was now back in the centre of economic planning. The incomes of farmers doubled between 1952 and 1958, despite remaining far below those of industrial workers. Between 1953-58, food production increased by 51%.

Question 13

What evidence is there of failure of Khrushchev’s agricultural reforms?

Answer 13

Raising status of agricultural status was no mean achievement in the context of a powerful military-industrial complex that argued strongly within the Politburo for its sector to receive preferential treatment.
Productivity remained low with too many people engaged in farming.
In 1959, the target for grain production in Kazakhstan failed to be met - first sign the scheme was failing. Land was dry and suitable only for grazing. Successful cash crops, such as cotton, were replaced by food crops in a ‘maize mania’, but without irrigation the plants died.
Investment was increased, but not enough to remedy problems caused by years of under-investment. Poor roads and inadequate storage facilities didn’t help many areas cope with the poor harvest of 1963. Shortage from crop harvests had an impact on supplies of animal fodder, and millions of livestock were slaughtered as a consequence. As the ultimate sign of failure, the USSR had to import grain from North America and Australia.

Question 14

What evidence is there that demonstrates Khrushchev’s reforms were abandoned?

Answer 14

In 1965, the new leadership abolished the Regional Economic Councils set up by K and placed more power back into the centre of the planning apparatus. Gosplan was given greater powers of co-ordination. This system echoed that used by Stalin and showed that influence lay with conservatives like Brezhnev.

Question 15

What were the Kosygin Reforms?

Answer 15

He aimed to unleash creativity within the decision-making process and improve productivity. Like K, he gave incentives to enterprise mangers to use their resources more productively. He also attempted to make central planning take more notice of cost and profit rather than the Stalinist approach of using quantity produced as the main indicator of economic success.

Question 16

Why did the Kosygin Reforms fail?

Answer 16

Reformers may have had influence at the top of the government, but reforms were implemented by officials who were not just unenthusiastic about them, but often hostile. Central planners disliked reforms that made them accountable for policies they had less control over. Brezhnev sympathised with the conservatives in the Party and sabotaged the reforms. The reforms were watered down to the point where they were ineffective. Bonuses for output were higher than bonuses for ‘innovation’, so managers preferred to stay with safe and tried methods. The focus on bonuses for profit encouraged some enterprises to make fewer, more expensively-priced items rather than mass produce cheaper, often much needed, items. Kosygin was sidelined by B in 1968 and given a role in foreign affairs.

Question 17

ANALYSIS: What does this suggest about the attempts to reform the economy?

Answer 17

That limited attempts were made after Khrushchev’s death as many Politburo members were conservatives that preferred to limit change and revert back to a system similar to that used by Stalin. Any changes made were in the interest of staying with safe and tried methods rather than attempt changes that might stimulate the economy.

Question 18

What evidence is there reformers retained some influence under Brezhnev?

Answer 18

Some reforms were tried during B’s time as leader:
1873, major industrial complexes were joined with scientific research institutions in an attempt to ensure that the latest technology was applied to production. B talked of ‘an alliance of the working class with science’.
The system of targets was further centralised in 1974. These new targets attempted to move away from using merely output figures to focus more on cost and profit.

Question 19

Why were these reforms so limited?

Answer 19

Attempts to adopt new technology were limited by the rigid nature of the command economy. Managers feared losing production while new machinery was installed in factories . The result was that the new equipment was often left to rust as the factory continued to achieve its output target with old machinery. The use of cost and profit indicators to judge performance was not always helpful in an economic system where prices were set by the government with little reference to supply and demand.

Question 20

What evidence is there to suggest Brezhnev continued Khrushchev’s push for consumer goods?

Answer 20

Rate of growth in the production of consumer goods was higher than that of heavy industry - goals were not fulfilled, but growth achieved was impressive and living standards rose. By 1980, 85% of families had televisions and 70% had washing machines. Only 9% of families had a car, although investment in public transport was high.

Question 21

What evidence is there that Brezhnev reversed Khrushchev’s agricultural schemes?

Answer 21

Power was returned to the Ministry of Agriculture and there was a deliberate move away from K’s approach of trying to find quick solutions using pet schemes. The Virgin Lands Scheme was dropped.

Question 22

What evidence is there that Brezhnev still saw the importance in investment in agriculture?

Answer 22

By 1976, 26% of all investment was in agriculture. Fertilisers received particular attention. B was also prepared to allow a bigger role for production on peasants’ private plots.

Question 23

What evidence is there that collective farming and agricultural policies had failed under Brezhnev?

Answer 23

The agricultural workforce was large and unskilled, equipment and machinery was prone to breaking down, roads were often impassable and much of the food production rotted before it reached the market. Food production failed to meet rising demand which lead to a shortage of foodstuffs available in state shops. The gap was made up by private production, as peasants sold their garden produce at private markets for considerably higher prices. In 1978, the price of food at the markets was double that of the food in state shops. Private plots made up 1% of the cultivated area but were producing 25% of all produce. Little was changed to a system of agriculture dominated by high levels of investment and inefficiency. As the historian Nove has stated, it had become ‘The most gigantic agricultural subsidy in human history’ (1992). A key sign of failure was the continued import of US wheat.

Question 24

What was the ‘brigade system’ and what happened to it?

Answer 24

A brigade system was introduced to increase incentives, bringing in an element of payment by results for the brigade and individuals within the brigade, by allowing peasants on collectives to form work brigades that could decide how profits were used and distributed. However, Party officials worried that the scheme was becoming successful and abandoned the experiment for fear of a return to family farming.

Question 25

What evidence is there of Andropov attempting to improve the Soviet economic system through increased discipline?

Answer 25

The focus of his economic policy was the removal of corruption from within the system, whereby production figures were falsified in order to give the impression of targets being fulfilled. Large amounts of materials were literally stolen from state enterprises and diverted into private production for the black market. The Soviet workforce also suffered from widespread absenteeism and alcoholism. Government officials conducted spot checks looking for slackers, not an approach that made Andropov popular. All it achieved was to add to the resentment many felt towards the government. Andropov encouraged people to come forward with new ideas for improving production, but they were reluctant to do this as A was a former head of the KGB.

Question 26

What evidence is there to suggest the Soviet economy was in decline after 1950s?

Answer 26

The 1950s saw growth rates of 7%, the 1960s saw growth rates of 5% and the 1970s saw a decline to just 3%.

Question 27

Why did the ‘fixation on output’ mask the underlying problems?

Answer 27

Quality was sacrificed in a push for quantity and shoddy goods were a constant complaint of the Soviet population. Many goods produced were of such poor quality that they were left to rot in storage.

Question 28

What productivity issues were there by the 1980s?

Answer 28

Soviet agriculture used over 25% of the workforce, 26% of investment, and cultivated an area larger than that cultivated in the USA, yet it produced only one-sixth of the US output. Waste was a serious problem in industry, as was environmental damage. Neither was a major concern as long as production targets were met.

Question 29

How did the legacy of the Stalinist system contribute to the decline of the economy?

Answer 29

The Stalinist approach had been geared towards rapid growth in industrial output to bring about rapid industrialisation in the 1930s and reconstruction after the Second World War. The move towards efficiency and quality was more difficult to achieve in the highly centralised system of planning laid down in the Stalin period. Bureaucrats, whose careers had blossomed during this time, were resistant to change.

Question 30

How did the problems inherent in a command economy contribute to the decline of the economy?

Answer 30

Central control did not encourage initiative and creativity in the system. Experimentation at local level by individual managers was perceived as a threat to the power of central planners and any reforms to encourage decentralisation were thwarted by Party structures. The use of government-set prices and costs when planning and measuring economic performance did not help identify or solve issues of inefficiency. Central planning proved too rigid and inflexible for a complex modern economy - central planners decided the production of everything but could not cope with changes in circumstances or trends in fashion.

Question 31

How did the ‘scoial contract’ contribute to the decline of the economy?

Answer 31

There was an unstated but understood contract that the government would provide employment and reasonable standards of living in return for workers’ compliance. This made the government unwilling to use the ultimate sanction of economic failure, the closure of factories and unemployment. This resulted in large numbers of workers doing very little of real productive use. Hence the Soviet workers’ saying, ‘We retend to work and they pretend to pay us’.

Question 32

How did the lack of investment contribute to the decline of the economy?

Answer 32

Investment in agriculture increased during the Khrushchev and Brezhnev years but it was not enough to address the chronic underfunding it had recieved under Stalin. Storage facilities, rural transport and reliable machinery were in very short supply throughout the Soviet period.

Question 33

How did outdated technology contribute to the decline of the economy?

Answer 33

Soviet production of steel, cement, oil and pig iron exceeded that of the USA by the end of the 1970s, but these were vital elements of an industrial power that were giving way to the requirements of a post-ndustrial society based on microchips and computers. By the 1980s, the USSR was struggling to keep up to date with technological advances made in the West. B’ policy of coupling industries with scientific research institutions in the 1970s helped, but it could not solve the increasing use of outdated methods. In recognition with this, the Soviet government signed deals with the West in order to gain access to new technologies. Agreements were made with Fiat and Renault to import car-making technology into the USSR, but the impact rarely extended byond the plant in which it were used. By 1980, most Soviet technology was old and physically worn out.

Question 34

How did the dominance of the military-industrial complex contribute to the decline of the economy?

Answer 34

This soaked up at least 18% of Soviet resources and employed 30 million people out of a working population of 150 million. B’s foreign policy involved increasing intervention in the developing world and this made expenditure on arms and defence neccessary. These resources could have been switched, at least in part, to consumer industry and agriculture.

Question 35

What evidence is there to suggest that Stalin’s changes led to the failure of the Soviet economy?

Answer 35

Although Stalin established an economic system that successfully modernised the Soviet Union’s economy and was able to meet the demands of WW2 and post-war reconstruction, it also contained more negative feautures. Forexample, it was a command economy that contained alarming rigidity, a lack of focus on consumer goods, prioritised industry at the expense of agriculture and lacked enterprise and initiative.

Question 36

Is it fair to blame Brezhnev?

Answer 36

The reforms attempted during the period 1953-85 were designed to address the problems Stalin had created. The fact that these reforms were to have ony limited access showed that the economic system established under Stalin was too entrenched to allow more fundamental change without challenging the political power of the Party. This as the central dilemma of the Soviet economy. Therefore, despite the stagnation that occurred under Brezhnev, the problems that he was faced with were mostly inherent and inevitable.