THE SOVIET ECONOMY 1

So much for history. How does the Soviet Union get the three basic problems of every economy decided: What shall be produced. How, and For Whom?

In broad outline, the picture is this. The state owns almost all factors of production: factories, mines, and land. Workers generally earn their living by wages; they do have some limited choice of occupation, but a Soviet citizen does not have the right to seek employment in any region and industry that happens to capture his fancy.

What. A political decision is made that defense and capital formation are to be pushed hard; what is left over permitted to go to consumer's goods. While a Russian can indicate his preferences among different goods by the way he spends his income, any resulting shortages or gluts do not generally result in the bidding up or down of consumer-goods prices, thereby automatically producing the positive or negative returns that will serve to rechannel resources. So long as goods were very scarce, central planners could decide that people would want so much of food, so much of shoes, and so much of various other necessities of life. Any and all of these were eagerly bought as they became available: if the local store or commisary had shoes not exactly your size, you were glad to take them a little large rather than do without. Now that some of the comforts -and even luxuries- of life are beginning to become available, it is no longer enough to think of giving people what they need, and planning has become a little more difficult. These days certain goods do not get bought at all, and the planners gradually realize that they ought to cut back on them. It is harder to learn what people do want than what they do not want, and marketing surveys are still in their infancy. The Soviet Commisars are not so skilled in determining what people would want most if they had the choice; but they do find it useful to watch what Americans and others abroad like to consume and then belatedly introduce such products: thus that rare comrade who gets a car -and he is very rare indeed- will find it resembling our cars of the past; and experts tell us this imitative pattern, which is not all irrational, since it assumes that what one human being will like will also be sought by another, is becoming more common.

With respect to capital goods and military expenditure, direct state decisions are made. Industrialization is pushed hard: electrification, transportation, mining development, collectivization of agriculture and crop patterns -the emphasis on all such matters is determined in broad outline by conscious political decision.

How. Private enterprise is negligible in importance. Instead the typical Soviet factory will be a state-owned enterprise: just as the president of General Motors owns little of its total stock, the manager or head of this state-owned enterprise has no ownership of its capital; but he does get better than average pay for his work, plus various travel expenses, auto transport, and other special privileges. He may even get bonuses, and his chance of promotion to a bigger entreprise will depend upon how well his enterprose meets its quota. He gives orders much like any boss and expects his subordinates to obey them, just as he obeys orders from above. (To avoid penalties for failing to meet his quota, he may hoard steel and other materials rather than give them to some other enterprise; and many cases have been observed where bureaucrats will contrive to make it appear that their plant has been very productive, even if that means they must conceal its true potential efficiency.

Examples:

Entreprises may malinger so as to get a low quota that can be easily achieved or surpassed; stories have been well told where, for example, a transportation entreprise would move carloads of water back and forth in order to be able to say it had accomplished the target of so many ton-miles.)

The decision of how to combine various productive factors -land and labor, degree of mechanization- appears to depend on a mixture of purely technical considerations and adaptations to the scarcities of various economic resources. A continual process of trial and error goes on. The observer finds operations curiously uneven: on the one hand, he may see a military ballistic plant which has achieved a precision of ball bearings and gyroscopes rivaling the best in the world ; on the other hand, he may find things being done in an almost unbelievably primitive way, with the quality of output practically worthless.