When the Soviet central "planners" seek out the reasons for their inability to plan, they point the finger mainly at the instability of prices.
The prices which state enterprises charge one another, under the conditions of the "new economic system" established in 1965, change rather frequently. These are wholesale prices, and the changes may or may not directly affect the price level in retail trade. But whether they do so or not, the frequent wholesale price changes are an essentially "new" phenomenon in the Soviet economy -- a phenomenon which deals the mortal blow to the "planners'" efforts.
"There have also been price revisions in the past, even if they were considerably less frequent," writes V. Kotov, the deputy Gosplan chief, in an article quoted earlier. He refers here to the socialist period of Soviet economy. "But with the comprehensive centralization of management, less developed economic relations, stable prices and a formal attitude toward cost accounting, this problem [of price changes] was less urgent."
This is to say, during the period when there was real central planning and direction of the economy, when commodity-money relations were restricted and subor-
dinated to the political priorities of the proletarian dictatorship and when enterprises were not out for maximum profit for themselves, then prices were stable and rarely had to be changed.
It is different since the "reform," continues Kotov. "Now that more complicated management has been partially decentralized and the role of commodity-monetary relations (including their most important element, prices) has been elevated in the economic incentives, its importance [the importance of the problem of prices changes] has increased considerably."
And this is no wonder. Since the goal or "incentive" for each enterprise or combination of enterprises is to increase its profits, there is a built-in pressure in the system for each enterprise, to push up its selling prices and-or to push down the prices at which it buys from other enterprises. As buyers and sellers of commodities, the state enterprises stand toward each other like contestants in an economic tug of war. Those in a stronger position impose the price on the weaker; but the relative strengths of the combatants are constantly shifting, as the fluctuations in prices testify.
At the outset of the 1965 "reform," Kotov writes, it was envisioned that prices in interenterprise trade would be revised about once every five years. Even this strikes Kotov as too frequent from the standpoint of the central "planners." But in practice, wholesale prices have been "officially" changed annually, and unofficially more often than that, Kotov among others points out.
What happens under such conditions to central "planning"? Kotov, says: "Plans are generally devised in current prices. With the introduction of new prices following the confirmation of the plan, disparities develop between its targets for value indices and the prices that are actually in force. As a result an objective assessment of the fulfillment of the plan is impossible and the level and effectiveness of planned management and economic incentive are lowered." ("Prices: The Instrument of National Economic Planning and the Basis-of the Value Indices of the Plan." Planovoe khoziaistvo, 1972, No. 9, in
Problems of Economics, May 1973, p. 61, emphasis added.)
Another Soviet revisionist economist, the planning specialist I. Usatov, explains apologetically that "under present conditions, at a time when commodity-monetary relations and their most important attribute -- prices -- are being broadly used for the economic stimulation of rapidly growing production, the importance of their influence on the quality of the plan has increased substantially. As a result of the practice of making partial changes in price -- a practice that has become established in the last few years -- higher-echelon economic organs could not correctly plan and exercise effective control over the fulfillment of plans or make higher demands on their enterprises. . ." ("The Elaboration of Plans and the System of Prices," Ekonomicheskie nauki, 1972, No. 9, in Problems of Economics, March 1973, p. 54, emphasis added.)
In plainer words, in an economy where commodity money relations prevail between enterprises, central planning is impossible. Kotov says the same thing in different terms when he complains that the current Soviet central price-setting system "is virtually divorced from the planning of production." (same article, p. 65) His colleague A. Komin, who is deputy chairman of the state committee on prices, writes that "it is practically impossible to compile a five-year plan while simultaneously revising wholesale prices and accounting for changes in wholesale prices." For Komin and others, the problem is no longer how to set prices and to plan their evolution, but how to forecast them. ("Problems in the Methodology and Practice of Planned Price Formation," Planovoe khoziaistvo 1972 No. 9, Problems of Economics May 1973 p. 48)
The USSR possesses, of course, an extensive apparatus that is supposed to control prices of all types, including especially those current in trade between state enterprises. A closer look at the activity of these organs shows, however, that their effectiveness is hardly much higher than was that of the "Cost of Living Council" established under Nixon's New Economic Policy in 1971. All the big capitalist states of the 20th century have resorted at one time or another to price controls; but none have
succeeded for very long in achieving their proclaimed objectives.
What are the Soviet price bodies doing about the instability of prices, a phenomenon whose very existence violates the principles of central planning and control?
In the first place, they are hard at work drawing up survey questionnaires, which they send out to the state enterprises in order "to obtain average prices for supplies and items expended on the output of various branches," as the statistician Eidelman reports. In other words, the central bureaus concerned with prices are trying to find out what prices are actually in force throughout the economy. They do not know. Since 1959 (the year after Khrushchev eviscerated central planning) the central statistical bureaus have been sending out questionnaires at the end of each plan period, Eidelman reports, adding proudly that in 1972 for the first time all enterprises in some industrial branches (instead of merely a sample) will receive the questionnaires.
In this way the central statistical administration (where Eidelman holds the post of "chief of the administration of the balance of the national economy") hopes to "elicit the most important interrelations and proportions in the national economy that determine the development of the economy in the Ninth Five-Year plan and that hold great importance for economic analysis and planning." ("The New Ex-Post Interbranch Balance. . ." Vestnik statistiki, 1972, No. 6, in Problems of Economics, May 1973, p. 23)
Of course it would be unreasonable for the central planners to control or even to have current information about the prices and quantities sold of every last little item and service in every corner of so vast an economy as that of the USSR. But the ignorance of the Soviet "planners" is not confined to these marginal matters. The development not only of details, but -- as Eidelman testified -- even of the main proportions in the whole economy proceeds independently of their will and prior knowledge. A necessary result, as will be seen in a moment, is that the main proportions develop "out of proportion."
How can the price-control bodies maintain the pretense that they are controlling prices when they do not even have
enough current price information to determine the main lines of development? The answer is what the Soviet "planners" call the "normative method" of price-setting. As Komin (of the central price committee) explains, because of all the price changes "there is an annual increase in the volume of work involved in confirming prices." The central bureaus cannot keep up.
For this reason, Komin writes, "it is essential to incorporate extensively the normative method of establishing prices . . . . The essence of this method is the centralized confirmation of base prices and their norms, and markups or discounts by price formation organs and the establishment of concrete prices by enterprises or associations themselves." (article cited above, p. 47)
A "fine" method of price control, this! The central organs lay down the theoretical prices and establish prices in the abstract; but as for the concrete prices, the enterprises and combines establish them on their own. This method reduces the price "controllers" to the role of dispensing general formulas to guide enterprises and combines in figuring out how much they ought to be charging.
The content of these formulas, however, could not be more convenient from the viewpoint of the enterprises. For, as Komin explains, "socially necessary expenditures on production are the economic basis of prices in a socialist economy." In other words, "the real content of the process of bringing prices closer to socially necessary expenditures of labor is the coordination of prices with social production costs in money terms. For this reason, in practical terms the economic substantiation of prices amounts to the precise definition of the enterprise cost of production and of the magnitude of the surplus product (profit, turnover tax, rent)." (article cited, pp. 37, 39)
What Komin has actually defined here is nothing else than the elementary theory of prices in a capitalist economy, as set out by Marx in "Capital" and other works. It is the basic method by which capitalist enterprises seeking to maximize their profits establish their selling prices. There is not a shred of socialism in it.
The only modifications of this elementary capitalist
method that have been introduced in the USSR are the monopoly-capitalist methods of setting prices on the basis of the production-cost-plus-profit of the least efficient enterprise in an industry and of raising prices of given commodities to the level of more costly substitutes. As Komin's colleague Kotov reports by way of example, "industry prices on oil and gas are set in order to raise the low prices on these products to the level of the high prices of coal." In addition, he writes, in some branches there is "the need to construct prices on the basis of 'marginal' enterprises and to charge differential rent." (article cited, pp. 52, 58) If these are socialist pricing principles, then General Motors, U.S. Steel and Exxon are also socialist enterprises.
The role of the Soviet price "control" bodies, in short, appears at least in part to be that of enforcing the capitalist monopoly prices prevailing in certain industries, especially in the raw materials extracting branches. That this is not entirely a coincidence may be seen from an observation by the economist Kuligin, who noted as early as 1969 that the price-control bodies were being infiltrated by those whom they were supposed to control. "With increasing frequency," Kuligin writes, "individual economic elements or their representative organs that have a direct interest in the price level are beginning to take part in work connected with centralized price formation." ("Improvement of Price Formation Under the Economic Reform," Ekonomicheskie nauki, 1969, No. 4, Problems of Economics, October 1969, p. 32) The foxes, in other words, are taking an ever greater part in running the chicken coop.
Kuligin warns that the continuation of this trend might lead to "Runaway prices," such as have been experienced (he says) in Poland, Czechoslovakia and the German Democratic Republic. He is naive, however, in his belief that the gradual takeover of the control apparatus by the controlees is an aberration in the "new system." The basic design of the 1965 "reforms," as will be shown, is to promote precisely such a takeover, and on the very largest scale.
The thing Kuligin is pointing to has of course its count-
less parallels in U.S. monopoly capitalism today. The antimonopoly
literature in the U.S. shows case after case where federal "regulatory
agencies" are staffed by representatives of the industry they are supposed
to regulate. The bourgeois state with all of its branches is nothing more
than an instrument to serve the most powerful sections among the
capitalists. It is no different in substance in the present-day USSR. To
imagine that the Soviet central state apparatus today genuinely plans and
controls the Soviet economy independently of and even against the
enterprises and combines, is, as facts show, an erroneous notion.
Cyclical crises -- the capitalist pattern of "boom and bust" in the
economy -- is a feature of revisionist rule in the Soviet Union now being
hinted at by Soviet economists themselves.
After surveying the reasons for the absence of genuine planning
behind the so-called Eighth Five-Year "Plan" (1966-70), deputy Gosplan chief
Kotov makes the following glum observation regarding the ninth edition,
which was projected on the basis of 1971 prices:
"Even the new prices will hardly retain their stability during the
new five-year plan. As experience has shown, a broad price revision during
the effective period of a five-year plan is not advisable, since it
causes changes in national economic proportions and norms, disrupts the
interrelationships and continuity of plans and makes the fulfillment
difficult. In such a case, the five-year plan in terms of value indices
essentially loses its meaning . . . . "
As Kotov had foreseen, a new across-the-board price revision was
undertaken at the beginning of 1973, once again scrambling all the initial
Even more long-faced is Kotov's look into the slightly more distant
future, and rightly so. For the "planners'" inability to control the main
proportions and interrelations in the national economy as a whole signifies
an unstable, unbalanced course of economic development. Kotov admits just
that, though in a roundabout way, saying:
"Experience in the elaboration of the prospective development of the
national economy until 1980, and of
five-year plans in existing (at the time of their elaboration) prices,
has shown that subsequent price revisions fail to maintain the continuity of
long-range and current plans not only with respect to targets in terms of
value indices but also with regard to general value proportions." (p.
68, emphasis added)
This is to say, in so many words, that such basic economic properties
as (for example) the ratio of the production of means of production to the
production of consumer goods or the ratio of production of consumer goods to
the effective demand for them, develop the Soviet economy in an erratic,
unplanned, basically uncontrolled way. The development of imbalances in such
general value proportions, however, is precisely the precipitating cause of
general crises in any capitalist economy. The conclusion is inevitable that
the pressures making for the alternation of boom and bust, of so-called
"prosperity" and general depression, are built into the basic structure of
the Soviet economy. It remains to be clearly seen to what extent the Soviet
state, like its Western counterparts, is able temporarily to conceal,
repress or shift abroad the effects of these underlying imbalances.
Soviet economists so far do not speak directly about the subject of
economic cycles in the Soviet economy, any more than they openly refer to
labor power as a commodity. The literature shows a great deal of guarded
concern, however, about fluctuations in the Soviet economic growth rate,
which the revisionists generally blame on the effects of the weather on the
There is a rash of articles also on the theme of economic
"indeterminacy." The economists Babynin and Belousov, for example, explore
methods of predicting the uncertain course of Soviet price trends.
("Forecasting Wholesale Prices," Voprosy ekonomiki, 1972, No. 4, in Problems
of Economics, Sept. 1972) Komin says that "the problems of forecasting
prices have not as yet been resolved in either theoretical or practical
terms" -- a plaint in which the main body of Western bourgeois economists
would join him. (article cited, p. 49) The mathematical economist Veger
tries his hand at constructing a formula for predicting profit rates on the
basis of unknown price trends ("Cal-
culating Economic Effectiveness Under Conditions of Indeterminacy,"
Voprosy ekonomiki, 1972, No. 2, Problems, August 1972).
Academician Rumyantsev, finally, observes, in true academic fashion,
that "centralized planning in conditions of broad independence of
enterprises is also faced with the need of elaborating methods of managing
an economy marked by growing indeterminance, probability (stochastics) of
its processes." ("Management of the Soviet Economy Today -- Basic
Principles," in Soviet Economic Reform. . . . p. 32 .)
Indeterminacy, probability, stochastics -- these are all merely
evasive ways of saying that present-day Soviet economy is characterized by
the anarchy of production.