MEASURES BY THE NOVEMBER PLENUM TO IMPROVE SOVIET ECONOMIC MANAGEMENT AND CONTROL

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• Publication Date: December 31, 1962
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Current Support Brief
CIA/RR CB 6 2- 90 No. Pages 7
31 December 1962
MEASURES BY THE NOVEMBER PLENUM TO IMPROVE
SOVIET ECONOMIC MANAGEMENT AND CONTROL
CENTRAL INTELLIGENCE AGENCY
Office of Research and Reports
CONFIDENTIAL
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This material contains information affecting
the National Defense of the United States
within the meaning of the espionage laws,
Title 18, USC, Secs. 793 and 794, the trans-
mission or revelation of which in any manner
to an unauthorized person is prohibited by law.
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C-O-N-F-I-D-E -N- T-I-A-L
MEASURES BY THE NOVEMBER PLENUM TO IMPROVE
SOVIET ECONOMIC MANAGEMENT AND CONTROL
Khrushchev presented proposals for a sweeping reorganization of Soviet
economic management to the plenum of the Central Committee of the Com-
munist Party of the USSR held from 19 to 23 November. 1/ This reorgan-
ization, which affects to some degree all levels of management of both Party
and government, was presented only in outline form. Although most of the
provisions of the reorganization affecting the government were enacted into
law at the Supreme Soviet held from 10 to 14 December, many of the details
of the reorganization have yet to be made public.
I. Main Features of the Reorganization
The reorganization seeks to strengthen Party guidance and control of
economic management.; to tighten control of economic crimes such as mis-
management, embezzlement, and falsification of statistics; and to improve
planning and administration of the economy, particularly in the fields of
new technology and construction. The major provisions of the reorgani-
zation are described below.
1. Division of the Party
To strengthen Party guidance and control of economic management,
the Party at all levels down to the oblast has been divided into two separate
organizations -- one to guide industry and one to guide agriculture. In the
USSR Central Committee, new bureaus have been established for (a) heavy
industry and construction, (b) the chemical industry and light industry, and
(c) agriculture. Khrushchev also proposed in his speech to the plenum
that bureaus for RSFSR industry, for RSFSR agriculture, and for Central
Asia be established in the USSR Central Committee, but as yet these bureaus
do not appear to have been formed. In the central committees of each of
the union republics, separate bureaus for industry and agriculture also have
been established. These bureaus are to function under the presidiums of
the republic central committees, and new presidiums are to be established
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in those republics that do not now have them. At the oblast and kray level,
separate party committees have been established in most oblasts and krays
to control industry and agriculture. In those oblasts and krays where
either industry or agriculture predominates, however, a single committee
will be retained.
2. Joint Party~-State Control
To strengthen control over economic crimes, a new Committee of
Party-State Control under the Central Committee and the USSR Council of
Ministers has been established. The new committee combines under direct
Party control the function of routine checking on the implementation of state
and party directives and the function of investigating economic crime --
functions formerly carried out by governmental bodies. The former func-
tion was performed by the now-abolished State Control Commission of the
Council of Ministers, and the latter function was performed by the Com-
mittee on State Security of the Council of Ministers and by local govern-
mental bodies.
3. Top Planning and Administrative Agencies
The principal change at the top level of planning and administration
provided for by the plenum is the establishment of a new USSR Sovnarkhoz
to take over the functions of Gosplan, the short-term planning agency, to-
gether with some unspecified administrative duties with respect to the re-
public and regional sovnarkhozes previously exercised by the Current
Affairs Commission of the USSR Council of Ministers. Other changes in
top-level planning and administration include (a) a change in the name of
the State Scientific-Economic Council (Gosekonomsovet), the long-term
planning agency, to "Gosplan, " (b) the establishment in the new Gosplan
of a technical-economic council composed in part of the chairmen of the
state branch-of-industry committees (of the USSR Council of Ministers)
for the purpose of planning a coordinated program for the development
and introduction of new technology, and (c) a sharp elevation of the status
of the state branch-of-industry committees and an expansion of their
number to cover the fields of electrical equipment, light industry, food
industry, and domestic trade. Khrushchev in his speech to the plenum
also expressed an intention to transfer to-the republic gosplans and
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sovnarkhozes some of the short-term planning functions now exercised
by Gosplan, but no specific provision for this transfer was included in
the plenum resolutions. 2/
The provisions relating to the state branch-of-industry committees
consist of charging them with full responsibility within their respective
branches for the coordination of production with investment plans, the
introduction of new products and new technology, the elimination of
obsolete products, and the determination of what enterprises are best
suited to produce given products. To facilitate the discharge of these
responsibilities, all research organizations engaged in developing new
products and new technology,- most of which are now subordinate to the
regional sovnarkhozes, are to be transferred to the respective state
committees.
4. Administration of Industry
The plenum provides for an amalgamation of the regional sovnar-
khozes, which reduces their number from 100 to about 40. The over-all
reduction includes a reduction in the RSFSR from 67 to 22 or 24, a reduc-
tion in the Ukrainian SSR from 14 to 7, and the substitution of a single
Central Asian Sovnarkhoz for the present four in the central Asian re-
publics -- Turkmen SSR, Kirgiz SSR, Tadzhik SSR, and Uzbek SSR.
With regard to Kazakh SSR, it was proposed that its seven regional
sovnarkhozes be amalgamated into one.
Khrushchev spoke with favor on the trend toward combination
of small and medium-sized enterprises into production associations, or
"firms, " and it is probable that this trend will continue. The plenum
also provides for the transfer of all enterprises engaged in manufactur-
ing that are now subordinate to local soviets to be transferred to the
sovnarkhozes, leaving only enterprises such as public utilities and those
providing personal services subordinate to local soviets.
5. Administration of Agriculture
The plenum made only minor changes in the administrative
structure of agriculture that was established at the plenum of March 1962.
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These changes are (a) abolishment of the rural rayon Party committees
and the assumption of their duties by newly formed Party committees of
the territorial production directorates and (b) a reduction in the extent
of the area supervised by the territorial production directorates -- the
governmental bodies supervising agriculture -- established by the March
plenum, which increases their number from 961 to about 1, 500. The re-
duction in the extent of the area supervised by the territorial production
directorates is designed to reduce their cumbersomeness and does not
alter their responsibility for administering agriculture. The plenum
did not discuss the fate of the joint Party-governmental agricultural
committees that were established last March on the oblast, republic,
and national levels.
6. Construction
In the field of construction, the November plenum has acted
generally to tighten central control. The role of USSR Gosstroy has
been strengthened, and building organizations formerly subordinate to
the regional sovnarkhozes have been removed from sovnarkhoz control.
To centralize control of standards for building design, institutes and
other organizations engaged in building design work -- many of which
formerly were subordinate to the regional sovnarkhozes -- have been
made subordinate to Gosstroy. Other provisions relating to Gosstroy,
which have not been made clear by the plenum, appear to give Gosstroy
an increased role in the setting of over-all levels of construction activity
in line with the capabilities of construction organizations and to increase
its authority to determine priorities for individual project.
II. Evaluation of Changes in Administration
The reorganization contains no single guiding principal but rather
several motifs. A theme that underlies much of Khrushchev's speech
is that government bureaucrats cannot do the job alone -- that they are
slow to accept new ideas and are prone to illegality and fraud -- and
therefore must be guided by the "creative initiative" that can be sup-
plied only by the Communist Party. Accordingly, Khrushchev has
strengthened Party involvement in economic management and at the
same time has injected the Party into the investigation of economic
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crimes. Although for the most part the shift of the Party organization
simply elevates the status of existing departments and personnel, it
could result in some increase in the amount of Party participation in
resolving planning disputes, breaking supply bottlenecks, and correct-
ing managerial deficiencies. The changes hold little prospect for an
improvement in the quality of this participation, however, and thus may
increase the extent of both arbitrary intervention in economic affairs and
"petty tutelage" of economic enterprises. The measure to establish the
Committee of Party-State Control by placing the control functions directly
in the hands of the Party is designed to strengthen the apparently unsuc-
cessful measure of 1961 that established the State Control Commission.
A second theme basic to Khrushchev's speech is that present Soviet
difficulties in the fields of technological progress and construction, al-
though attributable in part to inadequate Party supervision, are primarily
the result of too little centralized governmental control. Khrushchev
argues that the "superior" form of Communist economic organization
surely ought to be able to obtain by increased centralization what he be-
lieves to be one of the benefits of the "destructiveness" of capitalist com-
petition -- rapid technological progress. To correct the difficulties in
these fields, therefore, Khrushchev proposes a sharp increase in the
centralization of top-level procedures for conceiving and introducing new
technology and, to a lesser extent, for construction. This shift restores
to a substantial extent the degree of centralization in these fields that pre-
vailed before the reorganization of 1957 and thus tends to alleviate present
problems at the cost of returning to pre-1957 problems.
Although the territorial principle on which the earlier reorganization
was based is retained, the present reorganization, by its sharp elevation
of the status of the state branch-of-industry committees, provides some
shift in the direction of the functional principal of organization underlying
the pre-1957 structure.
The proposals for changes in Gosekonomsovet and Gosplan are con-
fusing and fail to display a coherent theme. The stated objective of these
changes is to obtain a more precise differentiation of function and to elimi-
nate conflicts and duplication between long-term and short-term planning.
Neither Khrushchev's speech or the plenum resolution, however, reveal
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much information on how the announced changes in the two planning
organizations could be expected to accomplish these objectives.
III. Prospects
The provisions of the reorganization fail to deal with the numerous
problems of parallelism and duplication in the economic administrative
structure and of poor coordination of supply with production planning
about which there has been much complaint in the Soviet press, More-
over, the plenum deferred a decision on various proposals currently
being made in the Soviet press that call for reduced centralization of
economic management of enterprises, more rational price setting, and
improved material incentives. Two proposals -- those made by econo-
mists Liberman and Berg -- were referred by Khrushchev to the planning
organizations and to the Academy of Sciences for further consideration.
The Liberman proposal advocated that detailed central regulation of en-
terprises be reduced and that central control be exercised by imposing on
enterprises a single success criterion of profitability (the ratio of profits
to total capital employed in the enterprise). The Berg proposal advocated
that wholesale prices be set "scientifically" on the basis of true costs of
production as determined by linear programing methods.
The preoccupation of the plenum with strengthening Party control
and with a governmental reorganization limited mainly to top-level
changes, together with its failure to face the basic problems of strength-
ening material incentives and clearing administrative confusion, suggests
that the present reorganization will not be of much help in improving over-
all Soviet economic performance.
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Analyst:
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1. FBIS. Datly Report (USSR and East Europe), Supplement,
no 12, 21 Nov 62. U.
2. FBIS. Daily Report (USSR and East Europe), no 229,
p. CC 5-13, 26 Nov 62. U.
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Date Of Do u ent 31 December 1962
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