It has become customary on both right and far left to stress the weaknesses of the Soviet economy. The French book market is well stocked with works such as Emmanuel Todd’s La Chute finale, picturing the USSR as a land where nothing works and everything disintegrates. Senator Jackson’s advisers tell him that it is in a state of crisis so acute that the United States can demand major political concessions in exchange for its grain and technology. A variety of neo-Marxist critics point to extremes of inefficiency and waste. Indeed a catalogue of blunders and distortions can be assembled without difficulty from the pages of the Soviet press. Shortages, corruption, confusion, seem endemic, while growth has slowed. But the West too faces acute problems, with zero growth, inflation, unemployment, the prospect of major disruptions through strikes and also in the world trading system. It is legitimate to ask: are they in a worse mess than we are? Have they not some ‘systemic’ advantages as well as weaknesses? Have the latter perhaps been exaggerated? Could they be corrected without major political-social convulsions? Is the Soviet system, relatively speaking, an example of stability in an increasingly unstable world? Finally, what light, if any, can Soviet experience shed on the theory or practice of economics under socialism? These seem to be questions of some importance to the readers of this journal. I am a very irregular reader, who does not share many of its assumptions. But the correct assessment of Soviet strength or weakness does not, or should not, depend on political attitudes. If, as may well be the case, my analysis is erroneous, this would be partly because evidence is mixed or inadequate, but also because the answer depends on the weight which one attaches to those elements of strength and weakness which we identify. There is also the vexed question of political stability: it is probably difficult even for the kgb, let alone an outsider, to assess the intensity of discontent, and we should never forget that there are wide gaps in our information: thus if by any chance there were a strike of metal-workers in Krasnoyarsk at this moment, we may be reasonably sure that it would not be reported in either the Moscow or the local press (which does not, of course, mean that there is a strike in Krasnoyarsk at this moment!).

Let us now try to define the areas of strength and weakness. In my view, there are two factors involved: the degree of priority, and what could be called planability. Both relate to the basic problem of any centrally planned economy: the unmanageably huge number of interrelated decisions to be taken. With market forces absent or severely limited, and with prices unrelated (in theory and practice) to demand, scarcity or need, considerations of profitability can only play a subordinate role in decision-making. The centre plans quantitatively whenever possible. The task of management at all levels is plan fulfilment. Thousands of enterprises produce millions of products, 12 million if fully disaggregated, according to Voprosy ekonomiki.footnote1 The uninitiated seldom appreciate how many varieties there are: a thousand kinds of ball and roller bearings alone, to cite just one example. Each product relates to some distinct use or user, requires a different input of materials and components. According to the logic of the centralized planning model, the central organs know what society needs, and can issue and enforce plan-orders to ensure that these needs are effectively and efficiently met. This requires multi-million instructions as to what to produce, to whom deliveries should be made, from whom inputs should be received, and when. All this must be made to cohere with plans for labour, wages, profits, investment financing, material-utilization norms, quality, productivity, for each of many thousands of productive units. In practice this task can never be completed, plans are repeatedly altered in the period of their currency, supplies and output targets fail to match, there are numerous instances of imbalance and incoherence. This is due not to the lack of commitment of officials, or to stupidity, but to the fact that the magnitude of the task far surpasses the possibility of fulfilling it. The ‘centre’ is inevitably divided into ministries and departments, and these, together (or in conflict) with local interest groups, distort or conceal information and compete for limited investment resources.

However, the system is effective in the imposition of centrally determined priorities. When there is shortage (of materials, rail wagons, labour or whatever), the central party-state apparatus ensures that what it regards as most important gets what it needs. Thus the defence industries appear to be reasonably efficient, as are the steel, oil and electricity generating industries. Electricity can also serve as a good example of ‘planability’. It presents no product-mix problems (kwh are kwh are kwh), power-stations on a grid can be centrally controlled from a single control panel, and the information about need, now and in the future, is best assessed at the centre (and not only in Soviet-type economies!). In the planning of fuel and energy the USSR does well. A long view can be taken of this high-priority sector, and the necessary investments accordingly determined. Our own market-orientated economies accommodate themselves badly to supply shortages for instance of oil. The ussr has responded to its own energy problem by massive efforts to develop oil and gas in Siberia, efforts which have achieved marked success in the face of formidable natural obstacles. The ussr’s irrational prices matter little when decisions are taken which relate to energy supply in (say) 1990; none of us know what will be the prices and costs in 1990, and we must proceed on best estimates of future demand and supply largely in quantitative terms, which the Soviet central planners can estimate at least as well as, probably better than, any Western capitalist oilman. Furthermore, action can be taken without having to bother with the pressure groups, lobbyists, or the need to win the next election.

Further ‘pluses’ for the Soviet system are the absence of serious unemployment—in fact labour is frequently short—and the relative stability of wages and prices, made possible by a centrally-imposed incomes policy (with no independent trade unions); though, as we shall see, there is some partially concealed inflation. These ‘pluses’ are accompanied by formidable deficiencies, which, it is important to appreciate, are also the consequence of the system, and so might be regarded as a cost of the advantages listed above. This is one reason why reform proposals designed to overcome these deficiencies have met with strong opposition, from the beneficiaries of the existing arrangements.

The first and most obvious point is that priorities, to be effective, must relate only to a relatively small part of the totality. Therefore most activities are non-priority, and, under conditions of over-full utilization of resources (‘taut planning’), they frequently run into trouble: failures in deliveries of materials, long delays in construction of new plant, lack of coordination between output and inputs, poor quality, and so on. The central authorities, of course, desire that output should match requirements, that user demand be studied, that buildings be completed on time, that technical progress be encouraged and productivity raised, and repeatedly issue decrees to that effect. But, outside of the top-priority sectors, there is great difficulty not merely of enforcement but of meaningful definition of these doubtless excellent objectives. Let me illustrate. Overworked planners have to aggregate, i.e. to issue plans for such categories as ‘footwear’, ‘spare parts for farm machinery’ or ‘window-glass’, not having either the time or the information to enable them to instruct a given factory to make and deliver two hundred brown shoes of a given size and quality, or piston-rings, or glass of a particular specification. Plan-instructions are therefore, so to speak, non-specific, defining an aggregate total, which may be in tons, roubles, square metres or whatever. This instruction is clear and binding, and so enterprises produce not what the user actually requires, but that assortment which adds up to required aggregate quantity. This long-standing disease has been the subject of innumerable critical articles in the Soviet press. One consequence among many is the unintentional stimulation of waste of materials: if the plan is in tons, the heavier the goods the better; if in rouble-value then the dearer the inputs the better, provided this finds its reflection in the officially-approved prices. Conversely, initiatives leading to less heavy or expensive materials threaten plan-fulfilment in tons or roubles.