Brezhnev's Economic Policy

We have already covered agricultural and social policy under Brezhnev, now we shall look at his other economic policy and industrial reform. This ties nicely into his doctrine of Developed Socialism as well.

Brezhnev’s Economic Policy

Following his death in 1982, people criticised Brezhnev for leading a regime of complacency and mismanagement, allowing the economy to stagnate, some claiming this even made collapse inevitable.

However, he did not invent the flaws that already existed in the Stalinist command model:

·         Poor quality goods

·         Neglect of industries

-          Agriculture

-          Consumer

·         Excess of waste

·         Reluctance to innovate new technology or methods of economic administration

Despite such faults, this economy had succeeded in helping the USSR recover from the GPW, making it hard to criticise.

Furthermore, Khrushchev’s dismissal reminded Brezhnev of the danger of tinkering economic reform without immediate positive results.

Although there was not a complete ban on reform, the regime hoped to address defects within a state-controlled and directed economy.

Kosygin Reforms

Kosygin was a reactionary whose reform was introduced in 1965, which tried to:

·         Encourage innovation and responsibility

-          Gave enterprise managers more incentives and independence

·         Encourage taking costs and profits into account

-          Asked managers to set sales targets

-          Reduce red tape by cutting number of plan indicators

This tinkering wasn’t effective because the dead weight of the centrally-planned economy remained.

·         Inevitable clashes/compromises between the managers prepared to innovate and conservative bureaucrats whose responsibility was to ensure targets were met

·         Many administrators/managers unenthusiastic or afraid to innovate

-          Managers didn’t want to halt production for technological changes to be introduced if they were penalised for failing to meet a short-term target

-          Work bonuses still linked to fulfilment of targets based on quantity, not quality

-          Consumer wishes still low on list of priorities

·         Central authorities refused to give up power

·         Prices decided centrally & bore no relation to relevant indicators (costs and profits, demand or need)

-          No incentive for enterprises to reduce costs

-          Prices for coal arbitrarily set too low, this and similar industries operating at a loss

-          Oil and gas more profitable

-          Light industry generally ran at a loss

·         Poorly-performing enterprises rarely penalised.

-          Workers weren’t sacked, had little incentive to work hard

-          Employers often kept more workers on their books than they could use, if they were needed in the future

-          “We pretend to work and they pretend to pay us.”

-          Attempts to reduce employees or boost productivity might result in enterprise being set higher targets

Kosygin’s reforms were abandoned in 1970, but it wasn’t just his ideas that didn’t take root:

·         Idea of enterprises being able to set own plans and negotiate them with Gosplan

·         Evsey Liberman – advocated decentralised planning and taking profit motive into account and laws of supply and demand

Such ideas were treated as heresy and too radical for the 1960s, but came into fashion under Gorbachev.

Industrial Reform and Developed Socialism

While Khrushchev had made grossly exaggerated claims that the Soviet economy was overtaking the West and that the USSR would have reached Communism by 1980, Brezhnev proclaimed his doctrine of “Developed Socialism” in 1977. This said:

·         It was not yet possible to launch “the direct transition to Communism”

·         This was despite the fact that the Soviet economy rested “on a powerful, advanced industry” and on “a large-scale, highly mechanised agriculture”

·         There had been “the gradual obliteration of any essential distinctions between town and country, between mental and physical labour, and adoption by all working people of the ideological and political positions of the working class”

Brezhnev didn’t feel a need to advocate major industrial reform, but in any case there were limits on what reform could be discussed.

1972 – the regime accepted the concept of a 15-year programme with specific scientific and technological goals, linked to economic progress

But despite increasing recognition that old Five Year Plans were a blunt instrument in developing an advanced economy, Gosplan wouldn’t acknowledge a rival planning agency. Furthermore, there was the official refusal to accept the possibility of an economy based on market forces rather than goals determined by the State.

Economic Progress? (No, obviously)

The indications of industrial and technological advance weren’t more promising.

1964 – Oil discovered in western Siberia with huge deposits of other mineral resources. The issue was accessing this inhospitable area, BUT

By 1983 – 357 million tonnes of oil had been extracted = 60% of annual Soviet oil production

10^th & 11^th Five Year Plans (1976-80 & 1981-85) put high priority on developing vast reserves of gas and coal

1974-1984 – 30 billion roubles spent on over 3000km of Baikal Amur Railway (BAM) to exploit reserves + 3500-mile pipeline built to Siberia to carry gas west.

Investment in southern & Asian regions of USSR (Turkestan) – no account taken of environmental concerns!

E.g. diversion of rivers through irrigation systems led to drying up of Aral Sea.

Continued disparity between rates of growth in Republics. Russian Federation invested less per head of population than most other Republics.

Scientific progress confined to defence & space industries, deemed necessary by defence and political establishment but a great drain on resources.

·         Civilian sectors (computer technology) largely neglected

·         Basic technology (typewriters, computers, photocopying) regarded with suspicion as they threatened State’s control over spread of information

Targets set by 9^th five year plan not met, including consumer goods that were supposed to overtake industrial output. Insufficient resources were diverted from other projects.

Meanwhile the 10^th and 11^th plans recognised the problems and reduced emphasis on productive capacity, rather on efficiency and quality.

BUT – GNP continued to decline (growth at its lowest in early 1980s), the economy was suffering the same issues as under Khrushchev, but were intensified.

-          Production costs rose without increases in output or efficiency

-          Ministries continued tinkering but never considered major restructuring – couldn’t move economy away from Stalinist model under which they had grown up

-          1979 – Deputy PM Kirillin called for radical industrial restructuring to avert economic crisis, he was immediately sacked and copies of the speech were suppressed

To summarise this section, nothing changes economically after Kosygin is abandoned, and because of the inconsistency and ideological paradoxes Brezhnev’s policies became, the economy stagnates and nothing is done to stop this. Boring? Yes, but necessary for your exam if Brezhnev comes up? Absolutely (unfortunately)