Pitfalls In the Planning

Industry develops, but growth does not

One joke that Muscovites tell about their economic system involves Stalin, Khrushchev and Brezhnev, who are riding a special train. When the engine breaks down, Stalin has the crew shot. Nothing happens. After a while, Khrushchev rehabilitates the engineers. Still no movement. Finally, Brezhnev pulls down the shades and sighs, "Well, let's pretend we are moving."

In recent months Soviet leaders have had a hard time pretending they were moving. After more than half a century of often spectacular progress in building heavy industry, the Soviet economy has slipped into a serious slump. While growth zipped along at 5.3% annually from 1966 to 1970 and was a strong 7.2% as late as 1973, it fell to an almost invisible .7% last year. Steel production, always regarded as a major sign of a healthy Soviet economy, declined by 1.6% last year -- the first drop since World War II.

Instead of delivering on its promise to create a workers' paradise with ample material goods for all, Marxism-Leninism as practiced by Moscow has fashioned something of an inertia-bound bureaucracy that limits incentive and suppresses inventiveness. Says Economist Judith Thornton of the University of Washington: "Imagine a whole economy organized and run like the Department of Energy or the Pentagon. Of course, there is a problem. Public organizations work less efficiently than do private ones, which are eliminated if they are not competitive." The law of the land for the Soviet economy is the national Five-Year Plan. The State Planning Committee (GOSPLAN) allocates all investment capital, sets every price and production goal and determines all foreign trade. The plan, which sets policy for some 350,000 enterprises, affects every Soviet citizen. Lawyers must try their quota of cases, barbers must shear so many heads and taxi drivers must log so many miles. The plan determines the amount of raw materials a plant will receive and the number of workers it is assigned; fulfilling the plan's quotas is the only economic measuring stick.

Soviet economists would argue that it was only by following government dictates that the country was able to recover from the devastation of World War II. Following massive investments of both capital and labor, agricultural output has risen by an average of 3% annually since 1953. Even though the diet remains starchy and the nation's overburdened and inefficient distribution system produces periodic shortages of everything from pork to potatoes, per capita food consumption has nonetheless more than doubled since 1951, a feat unmatched by any other advanced nation. Industrial growth has also been heady; the Soviet gross national product, a mere 40% of the U.S.'s in 1955, is 60% today.

But Soviet leaders today are having to struggle with new and difficult problems. At the heart of the trouble lies the inability of the system to make better and more efficient use of its plants, factories and technologies. Says Professor Alexander Erlich of Columbia University's Russian Institute: "The Soviet system of overcentralized planning was clearly helpful in the past, when it was just a matter of marshaling large amounts of labor and capital. But now that the situation calls for using what they have more efficiently, the system is simply not working well at all." In the five-year growth plans, production targets are as often as not chosen because they look impressive. The Soviets have, in effect, created an economic system that values the production of 100 clunking, breakdown-prone trucks more highly than that of ten smoothly running ones, simply because the plan demands higher unit production and makes no allowance for quality.

Unlike the capitalist economies of the West, which reward successful risk taking, the Soviet system rewards caution and conformity. Any plant manager who might be interested in experimenting with new ways of doing things runs the risk of failing to meet his assigned production or delivery quota, as traumatic a worry to a Soviet manager as the fear of red ink is to an American corporate executive. Observes Haverford College Sovietologist Holland Hunter: "Everyone finds the traditional way of doing things--no innovation--the most congenial. The supreme challenge is not to rock the boat. New styling or technology would require change, and that would inevitably mean at least some faltering in production."

Examples of Soviet-style conservatism are widespread. The Soviet chemical industry was reportedly unable to replace corrosion-prone cast iron pipes with more up-to-date plastic piping because no factory could be persuaded to make the lighter product. Reason: pipe production quotas are set by GOSPLAN in tons, and any factory that switched from cast iron to plastic pipe output would immediately fall behind in its production quotas.

Though Soviet leaders periodically urge managers and workers to be more efficient, little if anything ever seems to come from such pleas. In 1965 Premier Alexei Kosygin endorsed administrative changes that would have given state firms more authority to initiate plans on their own, enter into direct contracts with their customers, and retain a larger proportion of their profits for investment purposes. But the reforms were eventually watered down so much that they became meaningless. Economic reforms always run into problems because they ultimately involve forbidden political reforms.

Despite an investment of more than $500 billion, agriculture remains the most troubled sector of the Soviet economy. The nation employs eight times as many farm workers as does the U.S., or about 23% of the entire Soviet work force. The farm sector soaks up about one-quarter of all investment capital, five times more than that spent in the U.S. Yet for all this, actual farm output remains only 80% of the U.S.'s. Says Soviet Economic Expert Gregory Grossman of the University of California at Berkeley: "The organization is wrong, the prices are wrong, the tools are wrong. Basically, everything is wrong."

True, Soviet agriculture is plagued by climatic problems beyond the control of any government. Though the lush fields of the Ukraine produce grain in abundance, much of the country's arable land lies in far northern latitudes, where enormous swings in seasonal temperatures and erratic rainfall can lead to variations of as much as 40% in annual harvest yields. The geographical and climatic problems are compounded by the system's self-inflicted wounds of rule by decree.

Though collectivization is sometimes compared with the spread of so-called agribusiness conglomerates in the U.S., the differences are enormous because workers have little concern about production results on a state farm. Proof: the 2% to 3% of the Soviet Union's farm land that is privately owned produces about 25% of all Soviet agricultural output, primarily vegetables, fruit, milk and meat.

Farm efficiency is further crimped by the scarcity of trained manpower. With more and more young people leaving the farms and heading for factory work in the nation's cities, agricultural output is being left increasingly in the hands of the elderly and the less skilled.

Indeed, shortage of labor is a serious problem for all sectors of the Soviet economy. Employment in industry is now growing at only .7% annually, as compared with 1.8% per year in 1976-78.

When small problems in agriculture or industry fester into large ones, the Soviet bureaucracy revs up huge counterattacks that become economic overkill. Whenever Soviet grain harvests exceed expectations, for example, officials scour the countryside commandeering manpower and trucks from projects that they have to temporarily abandon.

The result is a continuous and inefficient scramble for scarce resources, as planners lurch uncertainly from one high-priority project to the next. One such enterprise is the 2,000-mile-long Baikal-Amur Mainline railway across Siberia. This has become an engineer's nightmare, as any study would have shown. Huge stretches freeze solid in the winter and then become quagmires during summer.

Though the Soviets hunger for Western technological imports like computers and machinery, they have problems marketing their own products to the West in return. The only Soviet exports sold easily abroad, in addition to vodka, are raw materials such as petroleum and gold. Despite attractive prices for Yak-40 passenger jets or Lada cars, Western countries have shown little interest in low-quality, dowdy Soviet merchandise. The Soviets usually are forced to dump their exports on the soft-currency countries of Eastern Europe or the Third World.

After seeing his standard of living rise steadily since World War II and having been promised more to come, the average Soviet citizen now faces the prospect of declining prosperity. Says Abram Bergson, director of Harvard's Russian Research Center: "Over the coming decade, the Soviets will be lucky if the increase in consumer goods is half what it has been lately." The central planning that helped achieve rapid industrialization has become the roadblock to further economic development.

This file is automatically generated by a robot program, so viewer discretion is required.