16  The 'New System'


    "A complete system of measures is being proposed," Soviet Premier Alexi Kosygin said in his September 1965 speech, "in order to expand the economic independence and initiative of enterprises and associations and to enhance the importance of the enterprise as the main economic unit in our economy."

    Presented by Kosygin on behalf of the central committee of the party and the supreme organs of the government, the "proposals" were formally promulgated in short order. Conversion of the then more than 50,000 nonagricultural enterprises to the new system -- a complex and demanding task because of the sweeping nature of the measures -- was accomplished in a series of steps requiring several years. By the end of 1968, the new system embraced industrial enterprises producing about 72 percent of all Industrial output and contributing about 80 percent of the total profits realized in industry. By the end of 1970, the figures stood at about 92 percent and more than 95 percent, respectively; in other words, the measures were implemented in a full and all-round way (N. Y. Drogichinsky, "The Economic Reform in Action," in Soviet Economic Reform: Progress and Problems Moscow, 1972, pp. 200, 202. Drogichinsky is head of the Department of New Planning Methods of the USSR State

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Planning Committee.)

    What exactly were the features of the new system? At the risk of wearying the reader with quotations, here is a brief survey of the main specific proposals in Kosygin's words:

    "In order to expand the economic incentive of the enterprises, it is proposed to reduce the number of indices that are assigned from above," i.e., by the planning bodies.

    "In order to orientate the enterprise toward raising efficiency it is best to use the profit index, the index of profitability. The size of profits characterizes, to a considerable extent, the contribution made by an enterprise to the country's net income."

    In this way, enterprises will be "encouraged" to "search for ways of increasing labor productivity."

    An end must be put to the system whereby virtually all enterprise profits go to the state. Instead, "it is necessary to leave to the enterprises more of their profits . . . in direct proportion to the effectiveness with which it utilizes the fixed assets assigned to it."

    An end must also be put to the state of affairs where "the achievements of the enterprise in increasing profits and the profitability of production do not have any direct effect on the earnings of the staff of the enterprise." To this end, a set of new "funds" must be set up in each enterprise, including a "material incentives fund" and a "fund for the development of production," geared to enterprise profitability.

    Furthermore, "The enterprises will enjoy broader powers in the use of their circulating assets, depreciation allowances and also the money from the sale of surplus equipment and other material values. . . .

    "The enterprises will enjoy wider powers in the use of the money saved in the wage fund during the year. . . ."

    In this connection, a positive example is the Moscow Transport combine, where the new system was introduced by way of pilot experiment in the previous year, it showed sizable gains in productivity after it ". . . sold superfluous trucks and equipment and discontinued the employment of superfluous personnel."

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    In its relations with other enterprises, the "economic responsibility" of each enterprise is to be enhanced. "Direct contacts between manufacturing enterprises and consuming enterprises should be developed more broadly in the sphere of materials supply."

    As for prices, "the transition to new forms and methods of economic stimulation of industrial production demands the improvement of the system of price formation. Prices must increasingly reflect socially necessary outlays of labor and they must cover production and turnover outlays and secure a profit for each normally functioning enterprise."

    Financial relations between enterprises and the state are also to be put on a different footing: "Financial grants made by the state to enterprises for capital investment must be restricted and the use of credits must be expanded."

    Lastly, in place of the regional economic councils (set up by Khrushchev), there will be central ministries again for each major industrial branch; and at the same time, in close conjunction with the ministries, there is to be "a new form of organization: branch amalgamations operating on the cost-accounting principle," to which the ministries are to hand over "many operative functions." The new ministries will "work in entirely different conditions" from the old ones; and to think "that a mere return to the former ministries is being suggested . . .means to disregard a number of new factors and to make a mistake."

    So much for the bare bones of the new measures, insofar as Kosygin's less than lucid formulations let them be seen. (Quotations are from Izvestia, Sept. 28, 1965, translated in the review Problems of Economics, October 1965, pp. 3-28)

    How very fine it would have been if Kosygin, in summing it all up, had had the wit to say, "In short, friends and comrades, what it all means is that we are setting up capitalism; and a proper up-to-date capitalism it will be, with trusts and monopolies and all the trimmings, just as quick as we can get it rigged up." He would have spared all the world's Marxist-Leninists enormous amounts of effort.

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    A vain dream! In place of such a refreshing ending, Kosygin concludes with an air of complete conviction that the new measures are an essential part of the process by which "socialist property in the USSR is developing into communist property." Not only that, but the central feature of the new economic measures allegedly bears the endorsement of the great revolutionary teacher, Lenin himself:

    "V.I. Lenin pointed out," Kosygin declared, "that each enterprise must function on a profitable basis, i.e., it should completely cover its expenditures from its income and should make a profit."

    In short and in sum, anyone who balks at marching in the direction indicated by the Soviet leadership not only blocks the path toward communism -- and is thus an anticommunist in the most literal sense -- but also presumes to try to give Lenin lessons in political economy!

    It is a revealing commentary on the political climate in the land of Lenin in 1965 that the supposedly Leninist press did not run Lenin's actual words and use them to pillory Kosygin and the whole leadership from morning to midnight. (The press, of course, was controlled by that same leadership.) This is what Lenin had had to say about enterprise profits:

    "The conversion of state enterprises to what is called the profit basis is inevitably and inseparably connected with the New Economic Policy; in the near future this is bound to become the predominant, if not the sole, form of state enterprise. Actually, this means that with the free market now permitted and developing, the state enterprises will to a large extent be put on a commercial capitalist basis. This circumstance, in view of the urgent need to increase the productivity of labor and make every state enterprise pay its way and show a profit and in view of the inevitable rise of narrow departmental interests and excessive departmental zeal, is bound to create a certain conflict of interests between the masses of workers and the directors and managers of the state enterprises or the government departments in charge of them. Therefore, it is undoubtedly the duty of the trade unions, in regard to the state enterprises as well, to protect the class interests

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of the proletariat and the working masses against their employers." (Collected Works, Vol. 42, p. 376.)

    Lenin, speaking for a proletarian state that is compelled by ravages of war and famine to resort temporarily and in a limited way to capitalist relations of production, does not hesitate to call these relations by their name. He insists, moreover, on laying bare the "antagonism of class interests between labor and capital" bound up with these relations, and calls on the workers' mass organizations to "openly put in the forefront" the protection of "the class interests of the proletariat in its struggle against capital."

    And Kosygin? This spokesman for a bourgeois state, compelled by the workers' resistance to attempt to impose capitalist relations fully and without time limit, puts out the most ridiculous pretense about the "communist" character of its measures, denies any ground for class antagonisms or even "conflicts of interests," and on top of that has the nerve to invoke Lenin's authority! It would be laughable, except this kind of Big Lie technique commands state power, enjoys an undivided monopoly of the entire legal media, controls the educational system and is backed up by the full apparatus of repression -- police, courts and the like.

    The conditions prevailing at the time Lenin proposed the NEP -- the passage just cited dates from January 1922 -- have been outlined earlier on (parts 2 and 3 of this series) and there is no need to expand on this theme. Once these conditions were overcome and socialist relations of production became predominant, the role of enterprise profits naturally underwent a fundamental change.

    Under socialism, not only certain individual production units but even whole industrial branches were deliberately run, for shorter or longer periods of time, (in some cases permanently) at a "planned loss," that is, in such a way that their account books, even with the best of efforts by workers and staff, could not possibly show an excess of revenue over costs, or any other monetary measure of "profit."

    Thus, to give an illustration from Soviet history, the price of raw cotton could be deliberately set quite high so

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as to encourage collective farmers to produce more cotton; while the price of cotton textiles would be set quite low so as to put clothes on the backs of the workers and farmers. The textile industry, charged with turning the cotton into cloth, necessarily showed a loss in its account books. The difference was made good by transferring to the textile industry a portion of the funds generated in other branches that had a profit.

    Since all profits generated in any part of the state sector (an insignificant fraction excepted) were directly centralized in the state, their redistribution from "profitable" branches and units to "unprofitable" ones, was regulated by the plan. The plan, in turn, reflected the order of priorities decided upon by the political party of the working class, the Bolshevik Party. In this way the goal of immediate profits in the textile industry was subordinated to the higher immediate goal of putting food in the mouths of cotton farmers and clothes on the backs of the working people. Or, to put it another way, the "profits" of the textile industry were realized not in the monetary form, but in the form of the satisfaction of people's needs. Later on, as the textile industry was modernized, it too began to generate revenues for use elsewhere.

    In this way also the longterm goals of the working class could be given their proper weight relative to the short-term ones. The production of means of production, to give the most important example, generally requires a longer period of time and is less immediately urgent -- and far less immediately profitable -- than the production of consumer goods. Yet the latter depends for its expansion on the former. What is more, the longterm goal of easing and shortening labor, of making the physical work process less onerous and reducing the working day. depends very largely on the expansion of the industrial branches producing means of production. (See, for example, Stalin, Works, Vol. 13, p. 195.)

    And what about employment? Should workers be dismissed from plants making socially necessary but unprofitable products, and transferred to more profitable ones producing luxuries, or simply tossed on the street?

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    To these and related questions, the bourgeoisie has since the dawn of its consciousness answered with one set of arguments; proletarian thinkers with another. "Profitableness considered from the standpoint of individual plants or industries is beneath all comparison with that higher form of profitableness which we get from our socialist mode of production, which saves us from crises of overproduction and ensures us a continuous expansion of production" -- this was the Soviet socialist answer. (Stalin, Economic Problems of Socialism, p. 57.) The Liberman view, that "what is good for society is good for each enterprise," embodied in the 1965 measures, is its direct opposite and contradiction. It is merely a more "elegant," really an evasive, way of asserting that "what's good for General Motors is good for the economy."