Economy of the USSR

For the period former to 1928, to see: NEP. For the posterior period with 1991, in particular to see economy of Russia.

The economy of the USSR was based on the official Propriété and centralized planning. If the Russian Empire were the day before the Révolution of October an antiquated economy largely dominated by the foreign assets, the the USSR became at the 20th century a major economic power. From 1928 to 1991, economic development was guided by a series of five-year plans. The USSR became one of the first three producing of a great number of industrial products, but remained late in the fields of the light industry and the consumer goods.

Economy the day before the revolution

In the years preceding the war and the revolution, the Russian economy made important great strides, with a growth rate industrial exceeding the 5% per annum between 1885 and 1913.

Russia is then the first cereal producer country and exporting, in good place for other products (flax, cattle…). However, the production remains poor in comparison with the importance of the population and the surface. The outputs with the hectare are weak, hardly more half of those of the Western countries.

In spite of industrial progress, the economy as a whole remains antiquated, and remains far behind that of the industrialized countries. The value of the industrial production is in 1913 twice and half lower than that of France, six times less than that of Germany, or fourteen times less than that of the USA. The country produces 16 times less coal than the USA, nine times less than Great Britain, six times less than Germany.

The shortage of transport paralyzes any attempt at economic modernization. Percent square kilometers, Germany has 11 km of railways, France of 8 or 9km, Russia (Siberia excluded) of 400m.

The GDP per capita is then lower than that of Hungary or Spain of the time, and approximately a quarter of that of the USA.

Especially, the country is dominated by the foreign assets, which have a third of the actions in Russia. Only capital French has 60% of the Russian production of cast iron, 51% of that of coal, 55% of the banks of Petrograd.

The economic organization

The Soviet economy was managed by the Gosplan (Commission of Planning of State), the Gosbank (the Bank of State) and the Gossnab (Commission of State for the supply out of Materials and Equipment).

Gosplan

Combining the broad objectives given by the Council of Ministers with the abundant data by the lower administrative levels relating to the state running of the economy, the Gosplan gave, by test and errors, a whole of preliminary objectives of the plan. Among more than twenty committees of State, Gosplan was with the head of the apparatus of planning of the government and was by far the most important agency of the economic administration. The task of the planners was to balance the resources and the needs to make sure that the entries necessary were provided for the planned exits. The apparatus of planning alone was a vast organization made up of councils, commissions, official governmental, etc in charge of the execution and monitoring of the economic policy.

The agency of planning of State was subdivided in its own industrial departments, such as coal, Fer or construction of machines. It had also transverse departments such as the Finance. Except for a short experiment with regional planning for the period Khrouchtchev in the Fifties, Soviet planning was made in a way sectoral rather than regional. The departments of the agency of planning of State assisted the development of a complete whole of targets of the plan in agreement with the needs for entry, a process implying a negotiation between the ministries and their superiors.

Ministries

The economic ministries ( fondoderzhateli ) played a key function in the structure of the Soviet organization. Each ministry included the whole of a productive sector, and managed the Entreprise S and the Groupe S of companies of this sector.

Companies

The companies in the USSR were more than simple work places. They were responsible for a broad panel of functions of social protection; they managed the construction and the maintenance of residences for their employees, infrastructures of health, leisures, instruction, etc

Each company had a name, an account with the Gosbank, and a director responsible for the realization of the plan. Its capacity of investment was limited by the plan. The large companies offered generally more welfare benefits and of safety that the smaller companies.

The large company is divided into departments: workshops, administration, research departments, provisioning, planning, gathered under the authority of the managing director.

With the difference in the Western companies, the Soviet companies were in general made up of only one production site. From where relative prevalence, in industrial fabric, of large factories, and the relative weakness of the number of SME.

Forms of property

In addition to the property of State, prevalent, there existed several different legal forms of property of the means of production known as “collective” such as the Kolkhoze and the co-operative.

The most current forms of co-operative property were the co-operative of dwelling (жилищныекооперативы) in the urban areas, the co-operative of consumers (потребительскаякооперация, потребкооперация), and the companies of rural consumers (сельскиепотребительскиеобщества, сельпо).

The Soviet Droit made the distinction between the private property ( частнаясобственность , chastnaya sobstvennost) and the personal property ( личнаясобственность , lichnaya sobstvennost). The first related to the personal property of means of production, which had been abolished, whereas the second described the personal possession.

Industry

Industry was entirely nationalized since the Révolution of October.

Industry was focused after 1928 and the development of planning on the heavy production: metallurgy, machines, chemical industry, etc In the Soviet terminology, they were the “goods of the group has”, or “means of production”. This strategy was based on the need recognized for an industrialization and a very fast modernization of the USSR. Investment rate was very high.

After the death of Stalin in 1953, the consumer goods (“well of the group B”) accepted more attention.

With the effort of war and intensive industrialization, a very powerful Complexe militaro-industrialist was set up. He included/understood the production of weapons but also the whole of heavy industry. This economic sector was privileged: the workers had more welfare benefits and the leaders had more political influence.

It represented more than 14 million employees with 6.000 companies. The industry of defense itself absorbed 20% of the national revenue, 8% of the Gross domestic product and 47% of the public expenditure for the needs for the Red Army.

The production of Soviet weapons was most important in the world; In 1981: 2.500 tanks, 3.500 guns, 1.700 fighters, 750 helicopters, 9 submarines, 475 ballistic missiles (IRMB, ICBM)

Agriculture

Following the collectivization of the Thirties, agriculture was organized in a system of collective farms ( Kolkhoze S ) and farms of State ( Sovkhoze S ).

The kolkhozes were agricultural companies held and managed by a whole of peasants owners of the production equipments, but not the ground, state-owned property. The ground was placed at the perpetual disposal of the kolkhoz ones. The peasants cultivated the ground jointly, sold the production in the State, and shared the profits. They had moreover an individual small holding (0,25 to 0,5 hectares in 1934).

The sovkhozes were agricultural large companies of State. The workers were farm laborers there. In the kolkhozes and the sovkhozes there was a practice to exchange the individual fields with the collective fields.

There was an extremely small number of remaining individual farms ( khutor , хутор), located in rural areas isolated in the Baltic States, the Ukraine, the Siberia and the areas Cosaques.

Organized with large scales and highly mechanized, the Soviet Union was one of the largest cereal producers in the world, although bad harvests (as in 1972 and 1975) required imports and slowed down the economy. The five-year plan of 1976-1980 transferred from the resources to agriculture and 1978 knew harvests record. The Cotton, the Beet S with Sugar, the potatoes, and the flax were also important cultures.

However, in spite of immense territorial resources, of an extensive mechanization, chemical industries, and of a great rural labor force, Soviet agriculture relatively unproductive, was blocked in many zones by the climate (only 10% of the territory of the USSR were cultivable), and a bad labor productivity. In the Thirties, agriculture, reserves labor and source of surpluses, was with the service of industrialization. The State requisitioned cereals for the export and the provisioning of the cities. That involved the famine in the campaigns in 1932-1933.

Planning

In 1928, under the supervision of Stalin, NEP was abandoned and a complex system of quinquennial planning was developed. Until the end of the Eighties and beginning of the year 90, when the economic reforms supported by Mikhaïl Gorbatchev introduirent material changes in the traditional system (see Perestroïka ), the allowance of the resources was directed by an apparatus of planning rather than by the play of the forces of the market.

The Central committee of the PCUS and more particularly its Political office, gave the general lines of planning. Politburo determined the head office of the economy on the basis of of the indicators of control (objective preliminaries), of the major investment plans, and general economic policy. These directives were subjected like report/ratio of the Central committee to the Congress of the PCUS to be approved there. The periods of the five-year plans coincided with those separating the Congresses from the PCUS.

The list of priorities for the five-year plan was then transmitted to the the Council of Ministers, the government of the USSR. The Council was composed industrial ministers, presidents of various committees of State, and presidents of agencies with ministerial statute. This committee was at the top of a vast economic administration, including/understanding the apparatus of planning of State, the ministries industrial, the trusts (intermediate level between the ministries and the companies), and finally the government enterprises. The Council of Ministers worked out its directives and sent them to the Gosplan , which gathered the data on the Plan.

Gosplan defined objectives and transmitted them to the economic ministries, which detailed the corresponding parts of the plan and diffused the data with the subordinate companies (manpower needs, out of raw materials, diary of production, all wholesale prices and almost all retail prices). The planners carry out regular investigations to know the needs for the population (In 1967,62 000 probed families).

The companies were to develop more detailed plans, covering all the aspects of their operations, so that they can judge feasibility of the objectives. An intense phase of negotiation followed. The directors of companies and even the workmen often took part in the process of planning on this level. According to Soviet reports/ratios, approximately 110 million Soviet workers took share with the discussions during the final time of the planning of State at the end of the Eighties and to beginning of the year 90 (even that was generally limited to the plugging of declarations prepared during immense preparatory meetings).

The plans of the companies were then returned to the ministries for checking. That implied an intense negotiation, all the parts seeking to make correspond as well as possible the objectives and the resources with their interests.

After this process, Gosplan centralized the revised estimates. The revised plan was then sent to the Council of Ministers, Politburo and the Secretariat of the Central committee for approval. The Council of Ministers subjected the Plan to the Supreme Soviet and the Central committee subjected the plan to the Congress of the Party, for final approval. Consequently, it plane became law.

The final objectives were finally distributed to all the economic sectors concerned. The implementation started at this time. They was the directors of companies which had for it especially the responsibility. The various objectives of the company were often incompatible. It was thus to make choices and to privilege certain priorities. The advance of the director largely depended on his aptitude to carry out the plan.

Employment

The Chômage was non-existent in the USSR. The full employment was guaranteed explicitly by article 40 of the Constitution.

The majority of the workmen and the specialists were recruited either by the companies, or by a central office of employment in the big cities.

Because of absence of unemployment, competition between the companies for the recruiting was strong on the labor market. In years 60-70, the mobility of the workers was important: one on five changed employment each year.

The Grève was prohibited, but the absenteeism was very widespread.

Remunerations

The Committee of State decided scales of remuneration.

Table of the average revenues by social category in 1970: (average revenue = 100)

Moreover, while considering the advantages in kind, the differences between the wages of the director and the workman of same a Entreprise could go from 1 to 50.

The Syndicat S did not have the capacity to negotiate remunerations. Their role was rather of an administrative nature and Culture L. It was occupied inter alia management of the Social security.

Social structure

The proletarianization of the agricultural work force accelerated starting from the end of NEP, because of fast industrialization. The urbanization was very intense in the first decades of the Stalinist time.

Structure of the active population (%):

International business

Largely self-sufficing, the USSR traded little compared to its economic force. However the Commerce with the countries external with the “block Communiste” increased in the Seventies, whereas the government sought to compensate for the weaknesses of the domestic production thanks to the imports.

the Comecon was created on January 25th 1949, in answer to the launching of the Marshall plan, between the USSR and five countries of Eastern Europe (Bulgaria, Hungary, Poland, Romania and Czechoslovakia). The same year, the Albania joined the organization, to leave it in fact in 1961. GDR became member in 1950, after having reached the statute of State; the entry, in 1962, of the Mongolia, in 1972, of Cuba and, in 1978, of the Vietnam opened the Comecon with European members not .

In a general way, the hydrocarbons, metals, and it wood were exported. The machines, the consumer goods and sometimes the cereals were imported. In the Eighties, the trade with the members of the Comecon counted for half of commercial volume.

In the Eighties, the USSR was fully integrated into the worldwide market and into sudden the oscillations. In particular the fall of the courses of the hydrocarbons affected strong the crisis of 1989. The USSR had entered a vicious circle for the system: incompetent to produce suitable consumer goods, it imported them Occident which it was to pay in dollars, currency that it was to get in particular by exporting its oil towards the “capitalist camp”. This dependence was on the other hand very strong for the Eastern-European countries (between 10% and 20% of their total trade).

Trade of the USSR with the countries of the “capitalist camp” (index 100 in 1965):

The monetary policy

The currency of the USSR (the rouble) was not - convertible in 1932 (when the trade in “Tchervonets” convertible in Or, introduced by Lénine into the years of NEP, was suspended) until the end of the Eighties. It was impossible (for the citizens and the companies of State) to buy or sell freely foreign currencies although foreign exchange rate is fixed (on an artificially high level) and is published regularly.

To buy or sell currencies on the black-market was a serious crime until the Eighties. The paid individuals from abroad were normally to spend their currencies in a store chain of State (“Beryezka”) where the foreign currencies were accepted. When the free conversion of the rouble was authorized, foreign exchange rate tumbled down its official value of a factor 10.

On the world money market, the rouble forever competed with the Dollar. The weakness of the rouble was the reflection of the relative economic weakness of the USSR.

As a whole, the banking system highly was centralized and controlled by a single bank of State, the Gosbank, person in charge of the achievement of the economic plans of the government. The Soviet banking system provided appropriations of short term to the government enterprises and took part in control necessary to planning.

Evolution of the Soviet economy

In 1928, the Soviet economy had not found yet the level of richness of imperial Russia of 1913.

From 1928, at the price of an effort of colossal investment, the five-year plans built quickly a base of heavy Industrie in a mainly agrarian economy without awaiting the accumulation of the Capital through the expansion of light industry, and without depending on the external financing. The country becomes industrialized at extremely fast intervals, perhaps exceeding the rate/rhythm of the Germany at the XIXe century and the Japan at the beginning of the XXe century.

After the rebuilding of the economy (after the destruction caused by the Civil war), and after the success of the initial plans, the growth slows down, but generally exceeded still the majority of the other countries in term of total material production (GNP) until the period of the stagnation brejnévienne in second half of the Seventies. Industrialization arrived with the extension of the medical services , which increased the productivity of the work. Care campaigns were carried out against the Typhus, the Choléra, and the Malaria. The number of doctors increased as quickly as the infrastructures and the instruction allowed it. General death rate and infant mortality decreased regularly, until the beginning of the year 1970.

Economic planning led to a high growth of the production during the Thirties, the mobilization of the period of the Second world war, and during the two first decades of the post-war period. The Soviet economy became largest in terms of volume of production after that of the the United States. The USSR became the largest world producer of Pétrole, coal, ore of Fer, Ciment, and Acier. It was one of the largest producers of Manganèse, Or, natural Gaz and other ores. The growth declined in the years 1960. The proletarianization of the Paysan S finished. The discovery of new raw material layers was rarer. However the ministries of planning did not slacken their control on the level of the companies whereas the economy knew a stagnation prolonged in the Seventies and Eighties.

The new line Politique was directed towards a “intensive growth”, i.e. an increase in the labor productivity, but never reaching convincing result in this field.

The impressive statistics of production never reflected a comparable improvement of the standard of living of the population, because of the shortages, the sector of the Consommation remaining always secondary. Indeed, it is necessary to await ten years to receive a car which one ordered, when one has the means of buying one of them. The political and economic weight of the complex militaro-industrialist made that this sector remained priority.

Once exhausted the profits of production made possible by the mobilization of the resources, the Soviet planned economy was not capable to fulfill the requirements of a modern and complex economy.

Whereas the economy grew, the volume of decisions to be taken by the planners of Moscow became enormous. The heavy procedures of the bureaucratic administration did not allow a free communication and a flexible answer necessary to the level them undertaken to manage the salary demands, the Innovation, the customers and the suppliers.

The economic problems of the USSR were one of the factors which caused its bursting, in 1991.

Since the dissolution of the USSR, almost all the 15 former Soviet republics abolished centralized planning and the property of State, with mitigated results.

Five-year plans

five-year plan Ier in the USSR: 1928-1932
five-year plan IIe in the USSR: 1933-1937
five-year plan IIIe in the USSR: 1938-1941, stopped by the war
five-year plan IVe in the USSR: 1946-1950
five-year plan Ve in the USSR: 1951-1955
Life five-year plan in the USSR: 1956-1960
five-year plan VIIe in the USSR: 1959-1965, only septennial plan
five-year plan VIIIe in the USSR: 1966-1970
five-year plan IXe in the USSR: 1971-1975
five-year plan Xe in the USSR: 1976-1980

Appendices

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