Soviet Economic Management Under Khrushchev

The Sovnarkhoz Reform

Nataliya Kibita

• Publisher: Routledge
• Year: 2013
• Print ISBN:
  9780415605687
• eBook ISBN:
  9781135047221
• Topic: Social Sciences
• Subtopic: Ethnic Studies
• Index: Social Sciences

The Sovnarkhoz Reform of 1957 was designed by Khrushchev to improve efficiency in the Soviet economic system by decentralising economic decision making from all-Union branch ministries in Moscow to the governments of the individual republics and regional economic councils. Based on extensive original research, including unpublished archival material, this book examines the reform, discussing the motivations for it, which included Khrushchev's attempt to strengthen his own power base. The book explores how the process of reform was implemented, especially its impact on the republics, and analyses why the reform, which was reversed in 1959, failed. Overall, the book reveals a great deal about the workings, and the shortcomings, of the Soviet economic system at its height.

Part I

The search for a more efficient economic administration

1 1953–1956

Exploring the horizons for administrative reorganization

The March 1953 amalgamation of ministries and the subsequent enhancement of ministerial rights affected the economic bureaucracy. The arrest of Beria a few months later, at first glance, appeared not to. Yet it was the 2–7 July 1953 CC CPSU Plenum that triggered two major interconnected tendencies that started the gradual devolution of the central ministries’ decision-making authority to the republic ministries and led to the Sovnarkhoz reform in 1957. The first tendency was the consolidation of Khrushchev’s personal position in the CC CPSU Presidium and the increased involvement of the Communist Party in state affairs. The second was the revived activity of the republican authorities and their growing involvement in the management of their economies. In combination with the failed reorganizations of the ministerial system, these two tendencies contributed to Khrushchev’s decision to abolish the ministries and transfer their authority to the regional economic councils.

March 1953: reshuffling the ministries

Immediately after Stalin’s death on 5 March 1953, the Soviet leadership started the reorganization of the ministerial system. In spring 1953, Khrushchev did not yet occupy the dominant position in the CC CPSU Presidium. In the list of members of the CC CPSU Presidium he was listed fifth, after G. Malenkov, L. Beria, V. Molotov and K. Voroshilov, which indicated his importance.¹ The reorganization took place on a massive scale and involved ministries and various departments in the capital as well as in the republics. The official purpose of the reorganization was the traditional one, to increase the efficiency of the administrations concerned.² The approach applied was no less traditional, that of amalgamation.³ On 5 March, the day of Stalin’s death, 15 ministries were amalgamated into five; ten days later, another 25 ministries were amalgamated into nine.⁴ With the last merger, the rights of the ministers were enhanced and their responsibilities were extended.⁵

The extension of the managerial flexibility of the ministers was supposed to translate into economic growth. Yet no economic breakthroughs occurred, and a year later the ministries were split back. The spring 1953 reorganization proved to be nothing more than another organizational reshuffle. Nonetheless, the rights granted to the ministers were not revoked, which in the end left the ministries administratively stronger than before Stalin’s death.

Mirroring the March reorganization in Moscow, the republics implemented the analogous amalgamations. In Ukraine, after the merging of the ministries and republican organizations, the total number of the economic agencies was reduced from 66 to 32.⁶ The rights of the republic ministers remained, however, unchanged and the status of the enlarged republican administration remained Union-Republic.

Beria’s arrest and criticism of the ministries in Ukraine

It is unlikely that the industrial ministers expected the arrest of Beria at the CC CPSU Presidium meeting on 26 June 1953 to have an impact on the stability of the system. There were no reasons for such an assumption. Beria was accused of withdrawing the apparat of MVD from Party control, of distorting nationality policy in Western Ukraine, Lithuania and Latvia, and other sins in foreign and domestic policies.⁷ Beria was even accused of intentionally slowing down solutions to agricultural problems and problems of supplying the urban population with agricultural products.⁸ But he was not held responsible for the March amalgamation of the ministries⁹ or any failures in the work of industrial ministries.

Yet in their discussions of the crimes of Beria at the plenums of obkomy and town committees of the Communist Party (gorkomy), Ukrainian communists found it relevant to talk about shortcomings in the work of the all-Union ministries in the republic. At the plenum of the Dnepropetrovsk gorkom, the speakers criticized the USSR Ministry of the Metallurgical Industry¹⁰ for not financing and supplying equipment to the Dzerzhinskii metallurgical plant. N.M. Fomenko, the director of the plant, also complained that

in our oblast’, we mine the ore, but we [the plant] do not have ore. In our oblast’, we produce coke, but we have no coke. The plant needs six thousand tonnes of coke every day, but now we do not have a gram.¹¹

At the plenum of the Zhdanov gorkom, it was stated that the agglomerate factory in Kerch was supplying the metallurgical mill Azovstal’ with agglomerate of bad quality. I.F.(T.) Tevosyan¹² had been informed but his ministry had not taken any action.¹³ The Party organization of the Yasinovat machine-building plant complained that the Ministry of Coal Mining had delayed the commissioning of the plant. An electrician at the Slavyansk acid-proof plant criticized the Minister of Construction Materials Industry P.A. Yudin for not talking to the workers when he visited the plant: ‘there are considerable shortcomings in the work of the plant and the workers could have helped to analyse the reasons for this’.¹⁴ The Ministry of Power Plants and Electronic Industry did not provide the necessary assistance for launching new production and left a lot of technical questions unsolved, causing the plant to systematically disrupt the plan.¹⁵

Nothing in the criticism of the ministries implicated Beria. The problems that were described at the regional plenums characterized the system and were not new. Moreover, if criticism of the relations between the industrial ministries and Party organizations was expected, by analogy, to echo the criticism heard in Moscow regarding relations (or rather the lack of them) between the Party and the MVD, no such remarks were made either.¹⁶ None of the speakers claimed that the Party should get involved with industrial administration. Instead, they implied that they understood their own economic problems better than the ministries in Moscow. The CC CPUk Plenum (29–30 July 1953), in its turn, did not develop any issues beyond the agenda set in Moscow and focused on discussing the need to consolidate Party control over the MVD organs in Ukraine,¹⁷ to continue the fight against Ukrainian and Jewish bourgeois nationalists that had been disorganized by Beria’s assistants P.Ya. Meshik and S. Mil’shtein in the Western regions, and to consolidate the work of Party organizations in industry and particularly in agriculture.¹⁸ Later the same year, during the discussions of Malenkov’s speech at the Fifth session of the USSR Supreme Soviet, Ukrainians got another opportunity to criticize the ministries. Information on these discussions was submitted to Moscow as well.¹⁹

So, if these complaints about the work of the ministries were heard only in the provinces, and were irrelevant to the Beria affair, why did the CC CPUk secretary A.I. Kirichenko report to Khrushchev about these discussions? Was it Party discipline that made Kirichenko report this criticism of the all-Union ministries? Or was it his personal initiative? It was probably both. Kirichenko did follow Party discipline, but he must have also realized that he had information that had potential value for Khrushchev in the power game between the Party and the governmental apparat. After all, Kirichenko participated in the CC CPSU Plenum and heard Khrushchev’s indignation about Beria’s views on the Party, assigning a secondary role to it in state affairs and limiting its activity to personnel and propaganda.²⁰ The mistakes of the all-Union ministries in the republics could justify the necessity to increase the involvement of the Party with the industrial administration. They could equally justify the necessity to transfer some authority from the central administrative apparat to the republics. In the latter case, the examples of poor management on the part of the all-Union ministries from Ukraine and other republics could be of use to a special commission that had been created some time before August 1953 to work on enhancing republican rights.

Khrushchev: setting a republican vector

Indeed, although the republican vector in the central leadership’s economic policy was outlined in 1954, the preparation work started soon after Stalin died. It is difficult to say whether the idea of enhancing economic rights of the republican governments was prompted by the republics or whether Khrushchev came to it independently – according to Khrushchev himself he had thought and even shared his ideas about the devolution of economic decision making with Malenkov about ten years earlier²¹ – but in August 1953, at the meeting of the specially formed commission, Khrushchev explained that ‘some sort of decentralization’ was necessary. Remaining rather vague about the specifics, he nonetheless outlined certain points and made it clear that he believed that local cadres were capable of performing certain functions of the central apparat. After all, people who were sitting in the all-Union ministries in Moscow did come from the periphery.

To start with, Khrushchev insisted that the republics should organize and be responsible for the supplies of food products and consumer goods to the population, that they should ‘show some initiative’. ‘Why should the Union minister provide salt and matches to the population of Kobelyaki, which is 100–120 kilometres from Poltava?’ asked Khrushchev. If there are no matches or salt in Kobelyaki, then the CC CPUk has the right to complain to the CC CPSU. ‘Is this right? [This is] nonsense. There is no canned food in Kobelyaki. Why should I, sitting here in Moscow, be responsible for your Kobelyaki[?]’.²²

Khrushchev was against the practice of fixing centralized prices on agricultural production and distributing all agricultural production, without exception:

We sell watermelons in Kherson and Irkutsk for the same price. We sell cabbage in October and in March for the same price. … Is this correct? Or let us take Uzbekistan [for example]. Fruits in Moscow and Uzbekistan cost the same; this is also wrong.²³

Meat, milk, potatoes, wheat, rye, corn and cucumbers were produced locally and Khrushchev saw no need to distribute them in Moscow. Furthermore, continued Khrushchev, ‘when we divide them between the republics “incorrectly”, the republics reproach us’:

Potato is grown in Byelorussia, but they [Byelorussians] cannot distribute it. For the deficit of potato in Byelorussian stores, we are responsible. This is a folly. … We should say, dear leaders of the republics, develop your economy, trade, if you please, and be responsible to the Union government. So now you are responsible for the interruptions [of food supplies].²⁴

Of course, Khrushchev allowed that the production in which the republics specialized, such as sugar in Ukraine or cotton and fruits in Uzbekistan, could not be distributed by local authorities. Thus some cities and regions should be supplied centrally, such as Moscow, Leningrad, Donbas and Ural. Canned food should be distributed by the centre for the army and for export, and by the local authorities for local consumption.²⁵ He further argued that administration of the machine-building and instrument-making industries, military industry, aviation industry, construction of automobiles and tractors, or chemical industry should remain centralized. However, he argued that railways, commerce, coal, metallurgy and certainly construction should be administered by the republics and that all light industry factories should be subordinated to the republic Councils of Ministers. Finally, though the army ought to be centralized, in economic administration centralization ‘is our weakness’ that causes incredible bureaucracy.²⁶ Partial decentralization of decision making in industry and agriculture, according to Khrushchev, would not only improve economic administration, but would increase the responsibility of the republics for the fulfilment of the plans and allow the central apparat to better control the fulfilment of production plans. ‘Now we [the centre] are adopting the plan and the republic controls us, whereas in the future we will control [the republic]’,²⁷ reasoned Khrushchev.

Thereby, in 1953, the central leadership started to explore the idea of devolution of the economic administration from central to republic apparat. It remained focused, nonetheless, on enhancing managerial rights of the ministers in Moscow and the by now traditional strategy of merging administrative units and reducing the size of the apparat.

Reorganizing the ministries

After Beria’s arrest, the Chairman of the Soviet government G. Malenkov proposed slowing down the growth of heavy industry and channelling the freed investments into housing construction, public health care, trade, light industry and agriculture.²⁸ Starting on 1 July, the taxes for peasants were reduced,²⁹ and after the revision of tax policy, responsibility for the development of agriculture was transferred from the state apparat to the Party.³⁰

In his August 1953 speech devoted to the forthcoming September 1953 CC CPSU Plenum, the First Party Secretary Khrushchev tackled the agricultural problem with zeal. He approved the already implemented tax policy and new stimulus policies, such as the annulment of the debts of collective farms (kolkhozy) and collective farm members (kolkhozniki), the reduction in the volume of state deliveries and the increase in state procurement prices. At the same time, with utmost disdain, Khrushchev attacked the agricultural bureaucracy. ‘We have 308 thou...

Table of contents

• Cover
• Half Title
• Title Page
• Copyright Page
• Dedication
• Contents
• List of tables
• Foreword
• Preface
• Acknowledgements
• List of abbreviations
• Introduction
• PART I The search for a more efficient economic administration
• PART II Decentralization of decision making: hopes and disillusionment
• PART III Recentralizing economic administration
• Epilogue
• Conclusions
• Notes
• Bibliography
• Index