Centrally Planned Economy In The Former Ussr

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The Centrally Planned Economy in the former Soviet Union

Introduction

In October of 1917, the world saw Lenin and the Bolsheviks take power in Russia, Lenin did not however have exact economic plans for Russia since Marx never provided a blueprint for a communist state and its economy. Marx saw society progress naturally through various stages of development (i.e. primitive society, slavery, feudalism, capitalism, socialism and eventually communism). Marx essentially provided a critique of capitalism, but socialism was only vaguely defined. According to Marx there was to be the conscious social regulation of production (opposed to the anarchy of a free market), the common ownership of the means of production, distribution according to work (as opposed to need under communism).

Soon after Lenin and the Bolsheviks seized power, they proceeded to take over banks, foreign trade, and industries like iron and steel that were essential to industrialize the state. All land became state owned and the market system was substituted with a centrally planned economy (CPE) or a command economy. The Soviet Union planned on catching up and surpassing capitalist states, since it was the only socialist country in an area where capitalism was very present (that is to say that the White Army was being supplied by capitalist countries during 1918-1919). Stalin was well aware of the need to catch up to capitalists. In 1931, Stalin made a speech where he was quoted as saying: We are fifty or a hundred years behind the advanced countries. We must make good this distance in ten years. Either we do it, or we shall go under

Stalin s goals were to be reached by implementing a planned strategy and managing it within an institutional framework. Stalin believed that it was possible to achieve socialism in one country, even though Marx had stated that socialism could only work if all states were to become socialist, then, according to Marx, could the world move towards communism.

During the 1930 s the state used its allocative powers to devote the historically high figure of around a quarter of national output to investment. The government maintained a minimum of consumption to help maintain political stability and work incentives. Heavy industry received priority. Among heavy industry, top priority went to iron, steel, heavy engineering, mining, electric power generation and armaments. Foreign trade was not a priority but the Soviet Union was still able to import important capital goods that were a necessity to the mass industrialization planned for the future.

Command Planning

A problem that faces all economies in the world is who or what will receive what resources. This is difficult because resources are always limited. In the case of a CPE, the questions of who gets what, where and how much of it, is answered by the state. There is however a more complicated system present. A pyramid can be used to explain this system of how resources are allocated (Figure 1).

P

Ian Jeffries

State Planning Commission

The State Planning Commission (Gosplan,SPC for the sake of brevity) received instructions about basic economic goals from the Communist Party (CP) and the Politburo had been set. The instructions would then be relayed through the state bureaucracy downwards and information would then flow back up to the Politburo. The purpose was to create a plan that would achieve the Politburos goals. Dobb summarizes the above: Within the limits of directives and targets handed down to them, they had discretion as to what to produce and how much, and were free to enter into contracts with other bodies for sale and delivery of their output and for purchase and supply of various materials, fuels and components as inputs, as also for the employment of staff and personnel.

When the Politburo had its portfolio it would set goals for industries to meet. This system was the cause of much corruption in the Soviet Union. Since the goals would become more detailed as it moved down the pyramid, ministers, chief administers and enterprises would try to bargain for an easier goal. If a goal were reached by one factory for example, its staff would receive bonuses, if a factory would not reach its goals, its managers were in danger of losing their positions and their status in the CP. Since they had been placed there by Nomenklatura, they may very well be banished from the CP for incompetence.

Distribution of Consumer Goods and Rationing

The Russian people did have a choice of consumer goods. However the quality of such goods were often poor and food was often scarce. The state even allowed rationing and queues (lines of waiting) for food. The state did this so that they could distribute scarce food supplies evenly. The 1930 s for example, saw a great period of rationing. The end of the Soviet Union also saw a great period of rationing. In the late 1980 s, coupons were used to distribute meat, milk, butter and sugar among other goods.

Labor

Characteristics of the free market were present in how Russians were employed. Like in capitalist states, Russians would essentially look for a job. Through media however, the state would use propaganda to allocate Russians to industries that were in need of manpower. Russian pay was simply divided into two parts; the first bein

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