Business: Pitfalls In the Planning

  • Share
  • Read Later

(2 of 3)

But Soviet leaders today are having to struggle with new and difficult problems. At the heart of the trouble lies the inability of the system to make better and more efficient use of its plants, factories and technologies. Says Professor Alexander Erlich of Columbia University's Russian Institute: "The Soviet system of overcentralized planning was clearly helpful in the past, when it was just a matter of marshaling large amounts of labor and capital. But now that the situation calls for using what they have more efficiently, the system is simply not working well at all." In the five-year growth plans, production targets are as often as not chosen because they look impressive. The Soviets have, in effect, created an economic system that values the production of 100 clunking, breakdown-prone trucks more highly than that of ten smoothly running ones, simply because the plan demands higher unit production and makes no allowance for quality.

Unlike the capitalist economies of the West, which reward successful risk taking, the Soviet system rewards caution and conformity. Any plant manager who might be interested in experimenting with new ways of doing things runs the risk of failing to meet his assigned production or delivery quota, as traumatic a worry to a Soviet manager as the fear of red ink is to an American corporate executive. Observes Haverford College Sovietologist Holland Hunter: "Everyone finds the traditional way of doing things—no innovation—the most congenial. The supreme challenge is not to rock the boat. New styling or technology would require change, and that would inevitably mean at least some faltering in production."

Examples of Soviet-style conservatism are widespread. The Soviet chemical industry was reportedly unable to replace corrosion-prone cast iron pipes with more up-to-date plastic piping because no factory could be persuaded to make the lighter product. Reason: pipe production quotas are set by GOSPLAN in tons, and any factory that switched from cast iron to plastic pipe output would immediately fall behind in its production quotas.

Though Soviet leaders periodically urge managers and workers to be more efficient, little if anything ever seems to come from such pleas. In 1965 Premier Alexei Kosygin endorsed administrative changes that would have given state firms more authority to initiate plans on their own, enter into direct contracts with their customers, and retain a larger proportion of their profits for investment purposes. But the reforms were eventually watered down so much that they became meaningless. Economic reforms always run into problems because they ultimately involve forbidden political reforms.

Despite an investment of more than $500 billion, agriculture remains the most troubled sector of the Soviet economy. The nation employs eight times as many farm workers as does the U.S., or about 23% of the entire Soviet work force. The farm sector soaks up about one-quarter of all investment capital, five times more than that spent in the U.S. Yet for all this, actual farm output remains only 80% of the U.S.'s. Says Soviet Economic Expert Gregory Grossman of the University of California at Berkeley: "The organization is wrong, the prices are wrong, the tools are wrong. Basically, everything is wrong."

  1. 1
  2. 2
  3. 3