Soviet Planning

on the World Today

IF Soviet experience is any guide, total centralization of the economy simply does not work. The Russians believed in it, tried it‚ and had to abandon it. It was the original idea of the Bolsheviks that under socialism the economy would be run by the State Planning Commission, a board of experts who would decide what was to be produced and how it was to be distributed and used. What has happened in fact, however, is that the State Planning Committee — as it is now called — has been subordinated to the Council of Ministers, which has grown to include some forty economic ministries, each in charge of a particular branch of the economy.

Each of these ministries — such as the Ministry of Automobiles, Ministry of Light Industry, Ministry of Railways, Ministry of Foreign Trade, Ministry of Finance, and so forth — has considerable independence. The State Planning Committee provides technical assistance—it integrates data —but it is the Council of Ministers and the individual ministries which issue the plans and which are responsible for their fulfillment.

Moreover, within each ministry the various socalled Chief Administrations and the individual factories and enterprises have been given a considerable degree of autonomy. Each state business enterprise operates on a profif-nnd-loss basis; it accounts for its own liabilities. Its profits provide large bonuses for managerial personnel and some benefits for workers. Important rights of possession, use, and disposition of state property are exercised by the individual managers entrusted with operational responsibilities.

On the whole the Soviets have moved in the past fifteen years toward greater decentralization of operations and toward increased personal incentives. Two illustrations of this movement may shed light on how a planned economy works.

Contract disputes

While certain important and scarce materials are directly allocated, for the most part goods are transferred from one Soviet enterprise to another by means of contracts specifying the price, quality, time of delivery, and so forth. The terms of the contracts must be based upon plans and regulations; there is often considerable leeway for negotiation.

A very large number of contract disputes between stale business enterprises are litigated in the Soviet tribunals every year, and although some of them turn on the interpretation of plans issued by higher authority, others are adjudicated on orthodox principles of commercial law. Indeed, even where there has been a definite deviation from the plans, the contract may in some eases be controlling. Thus where a cartographical factory had ordered 17 million pieces of tin stamp from a producers’ trust but then refused to pay the price, on the ground that its planned task had only called for 8 million pieces, the court held that the contract be performed as agreed.

Soviet cases differ little from American commercial eases. The parties are government corporations, but their disputes rage over offer and acceptance, bills of lading, the insurer s claim to reimbursement from the carrier, the liability of agents acting beyond the scope of their authority, and many of the other matters that vex American businessmen and lawyers.

Why has contract, once condemned by Soviet leaders as a ‟bourgeois" institution destined to “wither away” under a planned economy, been restored as an essential part of the system? The answer which the Soviet writers now give is illuminating: because, they say, “excessive regimentation″ (and that is their own term) freezes the flow of commodities; and because (again in their own words) “the State seeks to create among the managers and workers ol its establishments a direct interest in the results of their efforts.”

Wage incentives

A second illustration of the compromises which the Soviet economic system has made with the original conception of socialism may be found in the system of wages. The Soviet rulers are no longer the least bit interested in equality of remuneration; indeed, “equality-mongering,”as Stalin has called it, is denounced as a “left deviation.” “To each according to his work” is the slogan of Soviet socialism; and in fact inequalities of income arc probably as great in Russia as in the United States.

Now, if everyone is not to be paid equally, the problem of central control of wages becomes very difficult. The central authorities can, of course, and do enact certain rates, certain norms. They can and do provide for wide variations, in different localities and industries. But suppose two workers operate drill presses in the same plant, and one machine is old and decrepit while the other is new and efficient. On a piece-rate system, one worker will be very unhappy unless some allowance is made for the condition of the machines.

The Soviets allow for adjustments to be made by the individual managements of enterprises on the basis of special conditions. These adjustments are authorized in so-called “notes” to the norms. For example, in ditchdigging the norm for filling a ditch is about 12 cubic meters in eight hours. But by use of the notes relating to whether the soil is sandy, stony, rocky, whether it is level or on a slope, and the like, the norm can be reduced to about 3 cubic meters. Because labor is scarce, there is a strong tendency to apply the notes liberally, and it appears that in many types of work the notes have in fact replaced the norms.

As a result, enterprises consistently overexpend the wage fund assigned to them. In 1931, for example, the planned average annual wage per worker was 941 rubles; the actual wage was 1127 rubles— a discrepancy of some 20 per cent for 1 he whole country. In the First Five-Year Plan of 1928, it was planned that the average annual wage in 1932 would be around 900 rubles; actually in 1932 the average annual wage was 1427 rubles. This phenomenon has recurred regularly although productivity plans have in general been underfulfilled. It is not hard to imagine the enormous inflationary effect it has had on prices, taxes, and costs, and the difficulties it has created for the planners.

Centralized planning is in itself no solution to basic economic problems. The planners must face the same fundamental economic realities that exist in a nonsocialist society. Indeed the complexities are overwhelming. In Soviet Russia the bottlenecks have caused a re-emphasis of managerial responsibility and initiative, strong personal incentives both of reward and punishment, “business accountability,” decentralization of operations. With this the old ghosts return.

Crimes against the economy

Soviet planning has produced a vast increase in criminal offenses. Certain standards of economic behavior are required by law. Not merely the contract between the parties, but the law itself, is violated by the manufacture or sale of goods of poor quality, by waste of money or property, by malicious refusal to comply with the terms of a contract, by “abuse of authority” by a manager or other economic official. The dockets of the regular Soviet courts are crowded with cases of these economic and official crimes, including absenteeism by workers, which is punishable by fine.

This extension of criminal law has been accompanied by a greatly increased emphasis on the subjective factor of intent. Departing from their original theory that a criminal intent is not a prerequisite for guilt, and that the courts should simply examine the social danger of the act committed and of the actor, the Soviet courts now stress (except in certain types of cases) “the subjective side” — the actor’s state of mind when he committed the act, his desire or foresight of the consequences, and in many cases his purpose or even motivation.

For example, the official in the tin stamp case mentioned above, who contracted to purchase more than the plans for his enterprise authorized, would be guilty of “abuse of authority” only if he knew or should have known (and in imputing such knowledge a subjective standard would be applied: not whether any “reasonable man” but whether the particular accused man personally should have known) that the act was illegal. Under Soviet Supreme Court decisions he would be guilty of malicious breach of contract only if he directly intended to cause harm to the state.

The accent on knowledge and intent would seem to be related to the economic system. The plans and regulations require legal sanctions; on the other hand, they tend to reflect economic objectives, goals which probably cannot be met 100 per cent. If all deviations were punished indiscriminately there would be chaos. It is the “grossly negligent or “malicious” deviator who is considered dangerous to the system.

To prove or disprove the grossness or wrongful purpose of an act of mismanagement is in general very difficult. In many cases it comes down to the question of the accused’s character or his loyalty; personalities and politics may replace strict standards of legality. Central control of the economy thus tends to endanger the objectivity of law.

Even more serious, perhaps, is the pressure which the system exerts upon managers and other officials to commit these economic and official crimes. Since plans are rarely 100 per cent effective, since there are bound to be weak links in the chain of production and distribution, the manager is apt to find himself in a position where he cannot fulfill his planned tasks without going outside the authorized channels of procurement or supply, or without in some other way violating ihe law.

Initiative may BE dangerous

A former Soviet lawyer, who was general counsel of the Odessa Bread Trust from 1931 to 1941 and who is now in this country, tells the following story: The Odessa Stale Confectionery Plant lacked nails to fasten together the crates in which it shipped confectioneries to all parts of the U.S.S.R. Generally the plant manufactured its own nails from wire, but on this occasion it could not procure the wire. As a result the plant’s warehouses were full of unpacked products and the overflow had to be stored outdoors.

The manager had no right to stop production, since that would have meant nonfulfillment of plan. The plant worked twenly-four hours a day, in three shifts, but the time came when even tarpaulins were lacking to cover the perishable goods lying under the open sky.

The manager therefore sent his procurement agent to Moscow to see if he could obtain wire. The agent succeeded in procuring 80,000 rubles’ worth from the Academy of Sciences. Permission was obtained from the Ukrainian branch of the State Bank to transfer the necessary funds from the Confectionery Plant’s account. The wire was bought and shipped to Odessa: nails were made from it; the crates were fastened; and the perishable goods were saved from spoilage and delivered to the customers of the Confectionery Plant under its various contracts.

Three months later it was learned that the wire, unbeknownst to the procurement agent, had been previously stolen from the Moscow Subway, then under construction. In tracking down the theft, the police uncovered the crime of the illegal procurement of the wire (a so-called “funded product which may be transferred only with authorization of superior administrative organs).

A criminal prosecution was brought against the manager and the procurement agent for “abuse of authority” and against the plan! s chief bookkeeper for “neglect of official duties.”The manager was sentenced to three years’ deprivation of freedom in an agricultural colony, and the procurement agent to ten years in a corrective labor camp. The bookkeeper was lined 25 per cent of his pay each month for a year.

In spite of severe penalties illegal economic activities are highly organized in Soviet Russia. So-called “pushers" represent managers in supply depots to see that materials are expedited. Swapping and borrowing are common. Bribery and black-market operations are carried on very widely—not only by inveterate lawbreakers but by respectable managers who seek thereby to fulfill their planned tasks.

It is the reaction against social anarchy, the urge to unity, which makes dictatorships possible. The Soviet system offers its people discipline, service, sacrifice, authority, and unity. But by a strange paradox, a dictatorship tends to destroy the very unily on which it is founded. By terrorism, secret police activities, denunciations, the totalitarian regime splits society asunder, scares men back into their private corners, atomizes them. Thus specializat ion returns to undermine a unity which is artificial because it is unfree.