Big Business in Russia

FEW people outside the Soviet Union have ever had a clear image of the magnitude of the several branches of Soviet industry or of the power and stature of the largely unknown men who run them.

Thus the news of the radical economic reorganization pushed through by Khrushchev in the early summer of 1957 evoked very little response in the West, which simply did not understand the issues involved. Indeed, at that time all interest was centered on the downfall of Malenkov, Molotov, Kaganovich, and Shepilov, and most people did not realize that Khrushchev’s victory over the Anti-party Group (which meant the anti-Khrushchev group) was inextricably bound up with an economic and administrative revolution which was at that moment, in the grand Russian manner, convulsing the whole country.

More than a year has gone by since that revolution was made. An immense upheaval, full of grief and bitterness for a host of able and formidable individuals, has left scarcely a surface sign. Khrushchev has consolidated his position more thoroughly, although it is still erroneous to see him as an absolute tyrant, or dictator, responsible to himself alone. Soviet industry, moving ponderously and magnificently along its new lines, continues to deliver the goods, as far as can be seen, no more and no less efficiently than before. And now that the shouting has died down, it is a good time to contemplate the operation in retrospect and consider what it tells us of the workings of the Soviet system, of the Soviet leadership, and, in particular, of Khrushchev’s mind.

The outward story is quite simple. In February of 1957 Khrushchev, as first secretary of the Communist Party of the Soviet Union (Bulganin was still Prime Minister), convened a plenum of the party’s Central Committee. He put before the assembly an explosive set of proposals. The development of Soviet industry, he said, was being impeded by an outdated ministerial structure. If production was to continue at the required rate, there must be a radical reform of this structure, and the central bureaucracy must be broken up.

He therefore proposed that most of the gigantic industrial ministries, the chiefs of which sat on the Council of Ministers, should be abolished at a stroke. The necessity of referring everything back to the central ministries in Moscow, the rivalries produced by the conflicting interests of individual ministries, and the absence of close cooperation between concerns working side by side in the various regions, but answerable to separate ministries at the center, were strangling initiative, impeding dispatch, and resulting in excessive waste and duplication. The highly centralized bureaucratic system had been adequate, he said, in the early days of industrial expansion, when drive and close coordination from the center were a vital necessity. But it was no longer the best system.

In place of the all-union and republican industrial ministries, there should be set up a number of regional authorities, to be known as national economic councils (Sovnenkhozy), with the task of coordinating and controlling the total industrial activity of the various regions. The underlying idea was that the various industries in each separate region should be integrated into a harmonious system based on mutual interdependence within each region. In the interests of the national economy, as expressed in the state plans, there would have to be a controlling body to give directives to the Sovnenkhozy in the regions. This body, Khrushchev said, should be the State Planning Commission, strengthened for the purpose; its directives should have the force of law.

These proposals, put forward in February, 1957, were first made public on March 30. From the beginning they were associated exclusively with Khrushchev and were known as the Khrushchev Theses. No other member of the Central Committee or the Council of Ministers put his name to them.

The debate was, nevertheless, sharp, far-ranging, and unusually outspoken. Although the higher leadership said nothing, the debate was reflected in the party press, and there was some fairly drastic criticism of Khrushchev’s proposals from highly placed individuals, usually from the ministers affected and from factories. At the same time, factory directors seemed to enjoy letting off steam about their pet anomalies, and the press was full of ludicrous examples of the muddle and waste behind the imposing industrial façade.

At the May session of the Supreme Soviet the Khrushchev Theses, with certain important modifications, became law, and their author characteristically demanded speed. The whole structure of administration, covering most of the vast industrial machine, slowly built up over the years, was to be torn down and rebuilt by July 1, just seven weeks from the promulgation of the decree. That is to say, some twenty ministries were to be abolished (fewer than Khrushchev had originally demanded), their buildings evacuated, the Sovnar - khozy set up all over the Union, housed and manned, all in seven weeks.

There was clearly something more than Khrushchev’s impatient ebullience behind this demand for speed at all costs. The obvious deduction was that he had met with heavy opposition behind the scenes, that he was now hustling his opponents, and that he could afford to give them no time to regroup themselves. Within a month Molotov, Malenkov, Kaganovich, and Shepilov were dismissed from office, banished to remote regions, accused of anti-party activity, and, in the case of Malenkov, charged with a capital crime: complicity in the Leningrad “plot.”

So MUCH for the outward story; expanding Soviet industry was being freed from red tape and bureaucratic centralization carried to the point of lunacy. The great Moscow hives of unproductive and often obstructive officials battening on the active producers were overturned. The officials were scattered to all points of the compass. The ministerial overlords, men of formidable caliber and heavily entrenched vested interests, some of them as powerful as the president of General Motors, were suddenly out of their jobs. The directors of industrial trusts, the individual factory managers, the chief engineers would no longer have to wait on Moscow’s decisions before varying their appointed routine in the smallest degree. Thousands of lesser officials would be freed from paper work for productive labor. The ceaseless and time-consuming journeys between Moscow and the distant provinces would be cut down. It all sounded wonderful.

A dozen or more great industrial ministries — steel, oil, chemicals, heavy machines, and so on — had, over the years, taken to manufacturing for themselves and in their own factories everything that might conceivably be needed in their work. They had done this partly in the ordinary way of empire building, partly according to the Soviet version of Parkinson’s Law, but more particularly in a very natural and, indeed, necessary effort to make sure that their own plans were fulfilled and their own production schedules carefully insulated from the effects of failures and bottlenecks outside their control. Thus the ministry of coal, for example, would build its own cement works, set up its own building trusts (there were numerous separate building trusts run by different Moscow ministries in a single small provincial town), manufacture its own bulldozers and excavators and electrical machinery.

These ministerial empires, run by men who were born tycoons, were also beginning to represent centers of power which seriously threatened the one permissible center of power, the Communist Party.

Khrushchev did not mention this. Nor did he mention another aspect of the system which must also have been giving him grave cause lor concern: the development of what amounted to a private enterprise network within the elephantine and rigidly controlled state network — the development and proliferation of a new kind of Soviet man not prescribed in the textbooks, the tolkach, or fixer.

Khrushchev had a good deal to say about the worst anomalies, with examples from real life. “The existing structure of the industrial and construction ministries,” he said in Section II of his Theses, “is a multi-stage and complicated one. Ministries and departments exercising leadership from the center over enterprises situated throughout the country inevitably accumulate round themselves numerous parallel organizations —various offices for sale and supply, depots, trusts, and so forth. The ministries have many different central administrations, departments, divisions. . . . The territorial central administrations in charge of enterprises in Siberia, Central Asia, the Far East, and other remote regions are, as a rule, situated in Moscow. . . . The workers of the ministries are forced to spend much time on interdepartmental correspondence . . . reports and memoranda. . . . The huge streams of paper coming from the ministries divert a large number of workers at enterprises from practical work. Many specialists are called to the center from the localities . . . and spend months at the ministries.”

And so on. All this is a pale image of the situation vividly reflected in Dudintsev’s novel, Not by Bread Alone. Khrushchev was correct in concluding that the “200,000 industrial establishments and 100,000 construction sites” scattered over the face of the Soviet Union could not be efficiently guided and controlled from Moscow. What he did not say, or even hint at, was how this ludicrous system had managed to work as well as it did.

THE answer, very largely, lay with the fixer. It was this merry soul who made the wheels go round. He inhabited a sort of shadowland between the law and the labor camp — that shadowland which is the true reality of the Soviet Union, where people show their real faces and behave like human beings and where everything gets done. The state bureaucracy left to itself, left to develop unhindered to its logical conclusion, would long ago have ground to a virtual standstill. But the Russians, for all their love of theorizing, are a practical race with a heavy dash of cynicism; and they are also brilliant improvisers. Thus it was that hard-pressed factory directors spontaneously developed a system to keep the wheels turning, a system which amounted to a private enterprise network operating under cover of the state enterprise network and short-circuiting it at all points.

Factory directors, the heads of trusts and combines, even the heads of ministries are not interested in the state plan as a whole. They are interested in their own careers and in making a success of their jobs. Each and every one of them is bound by his appointed plan, imposed by Moscow with the force of law and stretching his capacities to the limit. Heavy bonuses are earned by exceeding the plan; on the other hand, if the excess is too marked, planned production is increased for the following year: today’s surplus becomes tomorrow’s norm. To fulfill the plan at all, each concern depends on the punctual delivery of raw materials and components or machines from other factories; but in the vast civil service network, smothered in red tape and abounding in bottlenecks, punctual delivery was rare. To provide against emergencies, the directors and managers made sure that they had adequate reserves of everything they needed; but this sort of hoarding was frowned on by the center.

The answer was to circumvent the center; and this was where the fixer came in. Often he was a highly respectable and trustworthy individual, although, naturally, the profession attracted its spivs. He was the contact man in excelsis. He was usually paid a salary and commission, but the interesting thing is that he was often paid by two or more concerns. On the books of an electrical components factory in Kharkov, he would appear as “our representative in Ivanovno”; but on the books of a textile mill in Ivanovno, he would appear as “our Kharkov representative.” His job was to ensure that the electrical factory received direct consignments of insulating cotton from Ivanovno and that the textile mill received direct supplies of electrical equipment from Kharkov — the relevant ministries being bypassed and the central planners confounded.

This is a very simple case of the fantastic and complicated barter system which flourished within the rigid framework of the state plan. On top of all this, the tolkach, the fixer, was often an expert at rigging books, at concealing reserves, at influencing important officials, at ministerial lobbying. He was, in effect, the unsung hero of the Soviet economic system. And he made the system work by the simple expedient of ignoring it. Khrushchev undoubtedly had the fixers in mind when he put forward his celebrated Theses. For the fixer, proliferating, was making nonsense of the planned economy. More seriously, he was making a mockery of party control.

In one way and another, and from top to bottom, the Soviet industrial system had for years been developing an autonomous life of its own and moving ever further away from party control. If the party was to reassert itself after Stalin’s death, it had to take action against the new managerial class, as in 1953 it had taken action against Beria’s police empire. The man who had decided to stake everything on controlling and reactivating the party machine was Khrushchev. The man who was most closely associated with the new managerial class was Malenkov.

MANY failed to perceive this fundamental opposition, because Malenkov himself had risen to power, no less than Khrushchev, inside the party apparatus: for years he was regarded as the arch apparatchik. Further, most of the leading figures of the managerial class were themselves party members, some of them standing quite high in the hierarchy. But there is all the difference in the world between being a party member, even a senior party member, for reasons of convenience, and being a professional party functionary, or apparatchik.

As for Malenkov, at some time during, or soon after, the war, he seems to have decided that the future lay not with the party secretaries but with the new industrial bosses and technocrats, who were beginning to consolidate themselves into the fourth center of power — the other three being the party, the police, and the army — all held in check by Stalin personally. At any rate, he was seen to be ever more closely associated with the outstanding figures of this new class, who, in the first years after the war, during the tremendous drive for reconstruction, began to invade the higher echelons of government, quite manifestly to the disgust of the professional party functionaries. I am referring to people like Tevosyan, the man who created Russia’s steel industry and who was regarded with limitless admiration by old Krupp, and Malyshev, who before his death was in charge of the automation drive. There were many more. They formed a great new class, which had suffered much and won. They were less interested in politics and ideology than in managing and making and in securing a better life for their children than they had themselves enjoyed. They had been created by Stalin’s industrial revolution, and, having survived all the purges, they had built up the great industrial machine, which they alone knew how to run. They considered themselves indispensable. And they were the spearhead of what amounted to a new bourgeoisie, a brandnew middle class such as Russia had never known before, with a vested interest in stability.

Malenkov, perhaps as a result of his especially close contact with these men during the war, had evidently decided that they formed the future ruling class of the Soviet Union, a class which had moved Right, away from Leninism. Khrushchev, whether from conviction or ambition or a combination of both, took his stand on the party apparatus — on the cadres, that is to say, of a revitalized party (the party, in Stalin’s last years, had lost its coherence, its drive, and its authority, and was good for nothing; there was no other authority than Stalin).

This opposition was visible even before Stalin’s death, when, at the nineteenth Party Congress in the autumn of 1952, Khrushchev came forward as the champion of party purity and integrity; the party was to be purged of bureaucracy and careerism and restored to its pristine glory. It began to manifest itself in action almost immediately after Stalin’s death, when Malenkov, yielding to pressures which are not yet understood, gave up his great office of first secretary of the party and took his stand as Prime Minister, or chairman of a formidable Council of Ministers. After Beria had been removed in the summer of 1953 the conflict became ever more marked, as Malenkov continued to stress the need for a more prosperous and tranquil Soviet Union and Khrushchev began to invoke the spirit of Leninism and demand that party functionaries all over the country should give more time and thought to the supervision of every aspect of life, especially industry and economics. This was not a conflict between reactionary Stalinism and liberalizing Khrushchevism, although it was made to appear so. It was a conflict between Khrushchev and Malenkov, between the man who was determined to revive the party as the force which would carry him to supreme power and the man who had hitched his wagon to the new apolitical managers, the men who were running Soviet industry on the lines I have roughly sketched.

Thus Khrushchev’s 1957 Theses were by no means exclusively concerned with the promotion of efficiency. They were concerned with the reassertion of the party’s grip on the economy of the U.S.S.R. — and of Khrushchev’s own grip on the party.

KHRUSHCHEV won his second round against Malenkov (the first was when he took the party secretaryship from him) in February, 1955, when Malenkov retired from the premiership in favor of Bulganin, still remaining, however, an active figure and a member of the party Presidium. Almost at once Khrushchev indicated that radical changes were in store for Soviet industry. When the attention of the Western world was concentrated on the Summit Conference at Geneva in July, 1955, he caused to be published a long and detailed report on the state of industry, which, it turned out, had been delivered some weeks earlier by Marshal Bulganin to the Central Committee. This report, which told the world more about certain aspects of Soviet industry than it had ever known before, was overlooked in the West at the time because the Summit obscured it.

For some time, however, things went on as they were, although Bulganin had demanded a radical overhaul of the whole industrial setup. Khrushchev was then very busy improving his own position, developing his foreign policy, packing the party with his supporters, and so on. There was also agriculture. Industry was at least delivering the goods; agriculture was not, and it had to be put right first. It was not until December, 1956, that it became finally clear that Khrushchev was fighting his heaviest and most critical battle on the industrial front and was within an ace of losing it.

Nineteen fifty-six was the year of the de-Stalinization. It was the year in which the Polish rebellion, the Hungarian uprising, and incipient revolt inside the Soviet Union itself brought Khrushchev very close to defeat. And the first major sign that he had lost much ground and that Malenkov was working for a comeback in alliance not so much with his own friends as with Khrushchev’s enemies (Molotov and Kaganovich) was the announcement of a far-reaching reform of the central planning apparatus for industry. It was not the sort of reform which would have appealed to Khrushchev. It left the industrialist ministries intact, reduced in importance and authority the State Planning Commission, and provided for the setting up of a new body with virtually dictatorial powers over the whole industrial front: the State Economic Committee, with the deputy premier, Pervukhin, as its chairman. This reform, which was agreed to at the December plenum of the Central Committee in the closing days of 1956, marked a clear victory for what is loosely called the bureaucracy (Malenkov’s private army) over the party apparatus — thus over Khrushchev himself.

But the new body never got into action. For it was only two months later that Khrushchev, by processes which remain totally obscure (though Marshal Zhukov evidently played a part in them) made his own comeback and surprised everybody and shocked many by convening another Central Committee plenum and confronting it with his revolutionary Theses. Under his plan the newly formed State Economic Committee was to be abolished, the industrial ministries were to be abolished, the bureaucracy was to be scattered, the party was to be supreme. In May, with certain modifications, his Theses became law. In July they were put into effect. And Malenkov, Molotov, Kaganovich were banished. With them went Khrushchev’s own proud protégé, Dmitri Shepilov, who had clearly tried to change sides in the heat of the quarrel and paid for it with his career.

WITH this background, it is not surprising that the Khrushchev reorganization, as finally put into practice, left a good deal to be desired when seen from the blinkered point of view of the professional efficiency expert. The idea of breaking up the Moscow ministries was good, up to a point. There was no doubt a great deal to be said for establishing, or developing, regional complexes of industry grouped around local centers enjoying some autonomy and cutting across all departmental lines. I am not qualified to discuss such matters, except in very general terms. The task facing any individual desirous of rationalizing Soviet production is complex in the extreme. In the first instance he is confronted with the problems involved in making modern large-scale organizations work, of energizing them without allowing them to get out of hand, of directing them centrally without bringing them to a standstill — problems faced and only partly solved by the huge capitalist combines of Britain and America and the nationalized industries of Britain. In the second place any solution he arrives at must fit, or appear to fit, into the theoretical framework of the Soviet system as a whole.

But the solution imposed on the Soviet Union by Khrushchev and his friends is so patently bad, and so irrelevant to the real problems it purports to tackle, that it is permissible to doubt whether it was ever intended as a serious contribution to the rationalization of industry and to ask whether the whole reorganization, or revolution, was not distorted out of recognition for political ends.

The task of the Sovnarkhozy is to exploit and develop the industries of their separate regions as a balanced whole. Obviously it would be impossible to make each region entirely self-supporting, and in any scheme there would have to be export and import trading between regions, particularly in the matter of raw materials. But if the regional division of the vast territory of the Soviet Union were to make any sense at all from the economic point of view, the regions themselves would have to be large, and every effort would have to be made to draw the dividing lines between regions with economic considerations heavily emphasized. For example, some regions would be contrived to offer every opportunity for something approaching self-sufficiency. Where this was impossible — for instance, in the great oil, coal, iron, and timber producing areas — the region would be contrived to concentrate, for easy export, the greatest possible aggregate of individual raw materials. There would be specialist regions, with economic councils staffed by specialists, and mixed regions.

But do we find anything like this? We do not. VVe find in the first place a hundred and five separate regions; we find that the map of these regions has little or no relevance to the map of the industrial economy — instead, in almost all cases the economic regional boundaries coincide with the existing local government boundaries: in the case of small republics, the republican boundaries; in the case of large ones, the oblast, or provincial boundaries.

Why this total disregard for economic geography? Why this rigid adherence to the local government territorial divisions which largely date back to Imperial Russia? The answer, surely, is that the virtual ruler of each region is the party secretary, appointed and controlled by the first secretary in Moscow, Khrushchev himself. The chairman of each Sovnarkhoz must be appointed or approved by Moscow. Either he is a local industrialist bureaucrat, already used to working under the local party secretary, or he is sent out from one of the dissolved Moscow ministries, a stranger to his region and entirely dependent for support and guidance on the established party organization. At a single blow, Khrushchev took control of industry away from the new managerial class and put it into the hands of his own party functionaries in a hundred and five separate regions.

The Sovnarkhozy, scarcely more than a year old, are now, we are told, working smoothly. Certainly, according to the official figures, production has not suffered from the revolution. Equally certainly the creation of the Sovnarkhozy has not made an end of anomalies and waste in Soviet production.

It is very hard to find out exactly what is happening. In the first place, Moscow is full of senior bureaucrats who should by rights have gone off to the regions, far or near, to take up posts in the Sovnarkhozy. They have blandly refused to leave Moscow, and most of them have found other jobs — many in the inflated Gasplan organization, the sepatate departments of which are, in many cases, already disguised ministries. The great industrial ministries have been abolished, it is true; but innumerable trusts and combines have kept their Moscow offices, and, on top of that, each of the hundred and five Sovnarkhozy seems to have its own Moscow office for liaison with the State Planning Commission, innumerable government departments, the defense and transport ministries (which were excluded from last year’s reorganization, and remain intact), and each other. There are already Springing up in Moscow new bureaucratic agglomerations. These have absorbed many of the displaced bureaucrats, and they perform many of the coordinating functions of the old ministries.

On the other hand, the regional Sovnarkhozy are staffed, especially in the remoter areas, largely by local men, already strongly imbued with regional pride. I am not suggesting that there have been no transfers from Moscow to the provinces: on the contrary, there have been a great many. But the operation as a whole has produced nothing like the clean sweep that a stranger, unfamiliar with Russian ways, might expect from the terms of the Supreme Soviet’s directive.

Until just over a year ago, waste and duplication arose largely from interdepartmental jealousy and distrust, from ministerial empire building, from lack of cooperation between ministries operating, as it were, in parallel in the same territory. Today waste and duplication are arising from interregional jealousy and distrust, from regional empire building, from lack of cooperation between the new Sovnarkhozy. Already there are telltale indications in the press. The Sovnarkhozy are proving to be reprehensibly selfish and more interested in building up their own regions than in the national economy as a whole. One particular outcome of this is that distribution, always one of the weakest features of the Soviet economy (especially in the matter of consumer goods), has become more chancy than ever before. Certainly the tolkach, the fixer, is still very much in evidence; but now he acts as a contact man between regions instead of between ministries.

KHRUSHCHEV has broken the growing power of the great industrial ministries; he has removed some of the more crippling anomalies of the ministerial system; without really decentralizing the Soviet economy he has given a much-needed impetus to the big provincial centers; he has provided a new framework for industry which could be invaluable in time of war and is susceptible of being modified to form a sensible and flexible adaptation to the economic facts of life. But much remains to be done, particularly in the way of reducing the number of regions and redrawing their boundaries. Meanwhile, the outstanding feature of the reorganization is the political aspect: the reassertion of party power over industry.

What do we mean by “the party?”

The party, first and foremost, is Khrushchev himself. But who are the hundred and five republican and provincial party secretaries who now play so big a part in controlling and guiding, through the Sovnarkhozy, their local industries? Are they Communist fanatics who think of their work exclusively in terms of the greater glory of the Communist revolution? I do not think they are. Do they see themselves, and the great regions they control, and everything they produce in those regions, simply as part of a great ideological design? I do not think they do. Is there in fact a fundamental difference between the preoccupations and aims of the dethroned bureaucrats from the central ministries and the higher party chieftains in the provinces? I do not think there is.

The division, insisted upon by Khrushchev himself, between the bureaucracy and the party is, it seems to me, an artificial one. It has misled many, and continues to do so, in their appreciation of the forces at work inside the Soviet Union today. The late ministerial chieftain, now working in the provinces or creating a new job for himself in Moscow, and the average party functionary, developing his career inside the ruling body of the U.S.S.R., are very like each other: both are ambitious individuals sharing the characteristics of ambitious men everywhere in the world, both are good at managing, both enjoy the exercise of power. There may be differences of emphasis. The typical industrial bureaucrat may have a slightly more concrete approach to life, may be slightly more technically minded; the typical party careerist may be slightly more interested in ideas than in things. But both are nearer in interests, attitude, and attack to able men in the West than they are to the old-fashioned Leninist revolutionary.

In a word, Soviet industry continues to move, in spite of its new labels, in the direction it has followed since the war. The fight between the industrial bureaucracy and the party officials was, in a sense, a phony war. The real struggle was between individuals. And the real issue was whether the party organization, the ruling body, subordinated absolutely to the central secretariat, should allow individuals, splinter organizations — a whole class outside the party hierarchy — to develop into an organized pressure group, or whether, at the cost of some broken heads, some disorganization, some sacrifice of proved and valuable ability, the party organization should seek to absorb into itself the accumulated power and experience of the great industrial network.

Khrushchev chose the latter course. But he must know very well that his party secretaries all over the country will, in consequence, find themselves being pulled ever more strongly into the orbit of the makers and the producers and away from the doctrinaires. Probably he does not mind this so long as he controls the machinery which comprehends them all.