KHRUSHCHEV’S ADMINISTRATIVE OVERHAUL (1957–64)
The aim was to replace the massive pyramid of economic ministries (mostly linked to industry), which were over-centralized and oblivious to local interests, by local economic administrative bodies. Their mission was to manage and coordinate the economy with a much clearer sense and knowledge of local conditions than remote bureaucrats based in Moscow could muster. Given that the bulk of economic activity occurred at local level, the move was intended to facilitate initiative and release new resources, remedying the failures of the previous pyramid structure. A joke captures the problem. Two economic agencies located opposite each other in a street in Kazan both possess merchandise in their warehouses needed by the other agency. But they cannot negotiate a transaction without calling their ministry in Moscow. When the latter gives its agreement, trains leave Moscow for Kazan loaded with the material already stocked in sufficient quantities in the local warehouses. This contained more than a grain of truth.
The unwieldiness of ministries made it imperative to bring management closer to production, by adopting a territorial rather than a branch principle. On 10 May 1957, the Central Committee decided that it was no longer possible to manage 200,000 enterprises and 100,000 construction sites spread across the country from ministerial offices in Moscow. The moment had come to enhance republican and local powers, and to dispatch management directly to the economic-administrative regions.
Mainly intended for industry and construction, the programme was also implemented in other sectors. In May—June 1957, the Supreme Soviet created 105 economic regions (70 in the Russian Federation, 11 in the Ukraine, and in some instances just one per republic). All in all, 141 economic ministries were abolished at central, central-republican and republic levels, shedding 56,000 officials, which represented a saving of 600 million roubles. They were replaced by economic councils (sovnarkhozy), which were responsible for several branches on their territory. Initially, their personnel was small – just 11–15 officials. In due course – 1960 – the managers of major enterprises and construction sites were co-opted and additional departments were created, containing sections responsible for branch management. Subsequently, technical councils were established bringing together experts, engineering staff, and so-called economic rationalizers.
In 1959 and 1960 the economic successes were beyond dispute, with annual growth rates of 8 per cent. In the largest republics, ‘republican councils of the national economy’ were instituted to coordinate the smaller local councils and handle material-technical supply issues. At the end of 1962 various sovnarkhozy were amalgamated and their number fell from 105 to 43. On 24 November 1962 an All-Union Council of the National Economy was set up in Moscow. Its task was to compile a national plan and a general supply system for raw materials and technology, and it managed things through the republican governments, sovnarkhozy, and individual ministries. Central government – i.e. the Council of Ministers of the USSR – dealt only with what was not included in the plan. Thus, even if it remained somewhat fragmented, a central level was being recreated. On 13 March 1963 the USSR Council of the National Economy was invested with dual union-republican status: a central body, it was now to have homologues in the republics. During 1963–5 it was assigned jurisdiction over Gosplan, the State Construction Committee, and the branch committees of the Council of Ministers in key sectors. Following the good results of 1957–60, the next four years were marked by a slowdown in economic growth, and the defects of the new system became apparent. The intention to decentralize and democratize management of the economy was a good one, but the sovnarkhozy proved incapable of ensuring the indispensable branch-level specialization where essential technological development occurs. They prioritized relations with the enterprises in their regions, neglecting the transverse problems peculiar to branches.[1]
Many had understood from the outset in 1957 that the territorial and branch principles needed to be combined. State production committees, under the Council of Ministers in Moscow, began to emerge for this purpose. Another anomaly in need of correction was that scientific research and development offices were cut off from production units. They did not come under the sovnarkhozy; and the state production committees that supervised them were not empowered to introduce their inventions into production – they could only make recommendations.
In addition, sovnarkhozy tended to prioritize local interests, aiming at a form of economic autarky where everything would be produced locally. This generated a certain ‘localism’ whereby everyone tended to their own business in the first instance. In these circumstances, the central government’s branch committees (as their head, Kosygin, explained to the Central Committee in 1965) could not have any impact on technological progress: they were merely consultative bodies. Poorly conceived, Khrushchev’s reform was coming apart at the seams.
The failure of the sovnarkhozy prompted a new wave of criticism of ‘voluntarism’ and a propensity to ‘administer’, which came down to issuing instructions. Such criticism had frequently been directed at the previous system. After Khrushchev’s fall, however, the status quo ante was restored: the sovnarkhozy were disbanded and the vertical ministerial system re-established.
The restoration of vertical ministries in 1965, almost immediately after Khrushchev had been ousted, was no accident. The regime felt more confident about its ability to control centralized administrative pyramids than to deal with a system that combined both principles, but which had never been seriously worked out. The Central Committee plenum in 1965 drew the lessons of seven years of development and in a single stroke eliminated the different central, republican and local bodies of the ‘sovnarkhoz’ variety. At the end of 1965, thirty-five economic ministries were back at work, operating as before. As for Gosplan, which had had to endure an unhappy cohabitation with the National Economic Council, it recovered its previous powers, as did the powerful but notorious Gossnab (State Committee for Material and Technical Supplies).
This reorganization was not to represent a happy outcome, even if Kosygin had declared in favour of a return to the vertical pyramids of centralized ministries. Unlike other leaders, he did not idealize them and in the same year – 1965 – without fanfare he launched a new economic experiment – the regime’s last – aimed at changing the system of economic incentives, but not directly the command-administrative system.
The rapidity of the reversion to the enormous complex of pre-Khrushchevite economic administration looked like a miracle. In fact, however, the old system had never really disappeared. Very soon after the creation of the sovnarkhozy, a system of substitutes had been established in the form of the industrial branch committees attached to the Council of Ministers, whose design actually corresponded to the former ministries. The number of officials in the various central industrial agencies reached 123,000 at the end of 1964, surpassing the figure for 1956. Moreover – something we have not yet mentioned – numerous branch supply committees, supplanting the disbanded supply super-ministry, sprang up quite incongruously in Gosplan. They employed many of the former cadres from the ministries, preserving their know-how, which meant that they were ready to restore the previous structures at short notice.
Some ministerial officialdom had been disadvantaged by Khrushchev’s overhaul and even obliged to quit Moscow for the provinces, but this was no purge of any kind. It was well known in bureaucratic circles that administrators took care of their own: no sooner had they been removed from one post than they found another elsewhere – usually at the same level. The Moscow megacentre was a master in the art of this ‘bureaucratic security system’, even if those in the know were well aware that it was not necessarily the most effective personnel who were retained, but the best connected and most socially skilful – something, to reiterate the point, that is not peculiar to the USSR.
1
See T. P. Korzhikhina,