This educated urban society harboured much more than the encouraging phenomena we have just referred to. Politically, it produced not only enlightened reformers but also reactionaries and hardliners of various hues. But we have chosen to focus here on the novelty and complexity of the urban reality that the regime had to confront, and not on any particular political current – especially given that such currents can readily switch direction.
WHAT DID THE ECONOMY ‘SAY’?
The functioning and performance of the economy was becoming ever more of a problem. A fatal dichotomy seemed to be operative: as the new social structure expanded, economic growth rates went on declining. It suffices to indicate that the rate of growth of national income (according to Western estimates), having reached a respectable 5.7 per cent a year in the 1950s (almost as rapid as during the first five-year plan), dropped to 5.2 per cent in the 1960s, 3.7 in the first half of the 1970s, and 2 per cent in 1980–5.[4]
Robert Davies has confirmed this picture. From the mid-1970s, the Soviet growth rate fell so low that for the first time since the 1920s GNP was increasing less rapidly than in the USA, and much less rapidly than in several newly industrialized countries. Behind such data lay an ever more intricate reality that eluded all economic or political regulation. Economic agencies and scholars knew that the situation was becoming increasingly acute.
No wonder, then, that the man in charge of the whole edifice, Prime Minister Kosygin, had already asked the Academy of Sciences in 1966 to assess things from the standpoint of competitiveness with the USA. The Academy had a section responsible for ‘competition with capitalism’, and thus could be asked to do this without irking Gosplan or the Central Statistical Office, which regularly supplied the government with comparative data on the development of the Western economies. The report in question, commissioned by the Council of Ministers, was probably finished at the end of 1966 and presented to the government at the beginning of 1967. The study, which was wholly in the spirit of Kosygin’s economic reforms (officially launched in 1965 and the focus of heated debate), sought to impart a sense of urgency that might strengthen the reformers’ hand. The picture of the economy offered to the government and Gosplan was stark. Lack of access to Kosygin’s archives means that we cannot tell what he thought of the situation, but the text is the best clue we possess as to his own anxieties about the system’s vitality. Moreover, the report did not breathe a word about the burden of military expenditure, which was blocking economic development. It made do with arguing that higher wages and expanded production of consumer goods were a precondition for the whole economy embarking on a course of accelerated technological progress.[5] But Kosygin certainly knew all this already from other sources.
We know that the Academy’s economists demonstrated that the USSR was lagging behind on all key indicators, except in what were regarded as the leading branches at the end of the nineteenth century. Conservatives hostile to Kosygin’s projects probably claimed that improving economic management would suffice to eliminate waste and increase resources, without interfering with the system. This was a way of suggesting that the waste was attributable to Kosygin… But if Kosygin was absorbed with the problem, he was not responsible for it: waste was the effect – not the cause – of the malady. Investigating its breadth and depth would help to identify the blockages more clearly. The task was entrusted to a Commission for the Elimination of Waste equipped with considerable powers, and certainly with Kosygin’s support, even if his opponents were also interested in such a commission (it might actually have been their initiative).
Appointed in 1966, after having been renamed the Commission for Economizing State Resources, it was composed of the heads of the inter-sectoral ministries and agencies (Gosplan, Finances, Statistics, Labour and Wages, Gossnab). With the help of other agencies, its task was to study the system’s key sectors (we do not know whether its remit extended to the huge military-industrial complex). The Commission’s labours yielded an enormous report examining the work of administrative bodies in most areas (including research, investment, economic branches, culture and public health). It almost resembled the medical examination of a gigantic body that was ailing all over, conducted by a hospital’s staff in its entirety. The facts and figures were surely known to Kosygin, but it may be (as we have suggested) that the initiative was a double-edged sword. Moreover, the ‘doctors’ had nothing to say about how to cure the patient.
Among other data, the commission had used material supplied by the State Control Commission, which detailed, for example, wastage and loss of raw materials; the enormous amount of damage suffered by materials as they were being transported; the waste of fuel and electricity; the accumulation of non-saleable products; the production of goods that were too heavy and/or too primitive on account of obsolescent production techniques and methods; and the costly use of coal from very remote regions when it was readily available nearby at much lower cost.[6]
Here are just a few examples. The importance of pipes and pipelines in the economy was enormous. Yet the Soviet economy was continuing to produce metallic pipes rather than reinforced concrete pipes (e.g. for water mains), even though the latter were between 30 and 40 per cent less expensive even taking account of the investment required to switch to this type of production. In addition, using them would make possible a saving in metal of 80–90 per cent and their lifespan was three times greater. Yet the 1966 plan anticipated the production of only a small quantity of modern pipes, as opposed to the requisite 1 million cubic metres.
Another costly anomaly was factories accumulating reserves of materials (raw materials and finished products) greatly in excess of authorized norms. These were often stored in unsuitable premises, sometimes in the open air, where they were vulnerable to bad weather and pilfering. Enterprises refused to sell them on to others in need of them, even though they had the right to do so. In defiance of the regulations, factories also often used considerable resources to pay wages for exceeding production targets in the case of goods for which there was little demand. Measures had been proposed to compel managers to reduce reserve stocks to an acceptable level.
Another problem was growing distribution costs, which represented 5.31 per cent of retail price sale in 1958 and 6.25 per cent in 1965. Furthermore, the cost of work canteens had risen sharply in the same period, on account of the loss of goods while they were being transported or stored, low-quality packaging, and the overpayment of personnel (and also because of the payment of high fines).
Many enterprises offered wage increases that outstripped improvements in labour productivity. In the first half of 1966, 11 per cent of industrial, commercial and transport enterprises had acted thus, running up a wage overdraft of 200 million roubles.
Because of the illegal dismissal of workers, the government was incurring serious costs. In 1965, in 60 per cent of the cases brought before them, tribunals had ordered the reinstatement of sacked workers; and paying the wages they had lost cost 2 million roubles every year, while the officials responsible for the illegal dismissals went unpunished.
Losses attributable to shortage of stock and misappropriation of goods in commercial organizations and the food industry were estimated at 300 million roubles. The culprits were referred to the courts, but the cases were long-drawn-out and the payment of damages very slow. Many enterprises were in no hurry to sue the culprits.
4
See E. J. Hobsbawm,
5
Academician Yevgeny Fedoseev, who presented the findings of this inquiry into the ‘essential problems and perspectives of the competition between the USSR, the United States, and other important capitalist countries’ on 5 August 1966 (as instructed by the Council of Ministers in April 1966), explained that the study was conducted by the Institute of the World Economy and International Relations of the Academy of Sciences of the USSR, with the collaboration of Gosplan’s director, Baibakov, who received the following instructions from Kosygin on 15 March: (1) discuss the Academy’s report at the session of Gosplan’s collegium, in the presence of representatives of the Academy, so as to include the relevant conclusions and recommendations in the text of the next five-year plan, currently in preparation; and (2) present the relevant texts to the members of the Presidium of the Council of Ministers.