Ernest Germain

Soviet Management Reform

(March 1965)

From International Socialist Review, Vol.26 No.3, Summer 1965, pp.77-82.
Transcribed & marked up by Einde O’Callaghan for the Marxists’ Internet Archive.

Ernest Germain is a member of the United Secretariat of the Fourth International. He has written many previous articles for the International Socialist Review

What economic problems does the Soviet Union face today? What is the significance of the management reforms proposed by the Soviet economist Liberman?

In September 1962 Pravda printed an article by Professor Liberman of the University of Kharkov proposing that profits should be made the index of performance for Soviet planning, as well as the basis for bonuses to the personnel and directors of Soviet enterprises. For two years the discussion touched off by this article has continued to widen in the USSR and in other workers states as well as in the capitalist world. A decision of the Supreme Economic Council of the USRR on August 25, 1964 (On improving the system of economic stimulants for enterprises and increasing the material interests of workers in the development and introduction of new techniques) converted some of the conclusions in this discussion into law. And a group of enterprises has begun to function experimentally “on the basis of profits.”

In order to understand the reasons for this discussion and the resulting practical measures, we must start with the pragmatic character which it bore from the beginning. What Liberman and Co. have sought is not an “enrichment” of Marxist theory, nor a modification of the theoretical concepts in vogue under Stalin or advanced under “de-Stalinization.” What they have looked for above all is an improvement in important mechanisms of Soviet economy, which have been functioning more and more haltingly and with increasing breakdowns.

Certainly, even taking into account its serious deficiencies, Soviet industry continues to progress, and to progress at a rate considerably higher than that of the “mature” imperialist countries (USA, Great Britain, West Germany, France). But with the passing years, obstacles which are increasingly hard to surmount have appeared in the road of this progress. Some of these obstacles are, moreover, the result of the very successes previously achieved. Having attained a high level of industrial development, the USSR can less and less afford the luxury of retaining the bureaucratic methods of leadership and planning for its economy that have existed (in various guises) from the first five-year plan up to the present.

Three deficiencies are particularly serious in Soviet economy:

(1) The rate of industrial growth appears to be continuously falling; according to official figures, it was 11.4% in 1959, 9.5% in 1960, 9.1% in 1961, 9.7% in 1962, 8.5% in 1963, and 7.1% in 1964 (figures for 1959-1963 in Pravda of March 14, 1964; figure for 1964 in Pravda of January 30, 1965). In the other industrialized workers states of East Europe – East Germany, Czechoslovakia and Poland – this tendency of the growth rate to decline has taken even more serious forms; industrial production has increased by no more than 3% or 4% (less than in West Germany or France, and even less than in the United States since 1961!), or has even declined (as was the case with Czechoslovakia in 1962).

(2) In a series of consumer goods sectors, the phenomenon of “overproduction” has appeared, sometimes revealing itself as an absolute drop in sales from one year to another, and in any case, as an accumulation of stocks over and above the target figures of the plan. These phenomena have recently assumed extraordinary proportions. Thus, in the case of sewing machines, sales dropped 30% between 1960 and 1963; sales of watches dropped 10% between 1962 and 1963, cotton goods 6%, linen fabrics 10%, ready-made clothing 1% (Economic Survey of Europe in 1963, Economic Commission for Europe, Geneva 1964, pp.45-6.)

At the beginning of 1964, unsaleable stocks of ready-made clothing in Soviet shops exceeded 500 million rubles (Sovietskaia Torgovlia, No.1, 1964). During the first four years of the seven-year plan, unsaleable stocks of textiles, clothing and shoes more than doubled; they increased on the average four times as fast as sales. On January 1, 1964, the total value of unplanned stocks (that is to say, of unsaleable products) had reached 2 billion rubles; and an additional 1.4 billion rubles had been spent by the state up to that date in “sales” of goods below their estimated prices (Voprossi Ekonomiki, No.5, 1964). In Czechoslovakia, a similar drop took place in the sales of textiles, radio and television sets, and washing machines in 1962 and 1963.

(3) Shocking errors in planning appear side by side with a further aggravation of deficiencies that have existed for a long time. Thus the amount of investment funds “ frozen” in unfinished projects assumed increasingly dangerous proportions in the course of the last years of the Khrushchev period. Each year between 1958 and 1963, additional billions of rubles were “frozen” without any kind of “return” whatsoever; their total amount reached 25 billion rubles by 1961 and passed the 27 billion figure by 1963 (these two figures represent 75% of the respective total investment expenditures for the two years in question).

This enormous mass of “frozen” resources is a combined result of excessive decentralization of investments under the regimes of the Sovnarkhozes [1] and serious disproportions in industrial development (in the chemical industry, a lack of machines and equipment caused the volume of uncompleted investments in 1964 to rise to 1½ times the volume of annual investments, that is to say, the plan is a year and a half behind its schedule for bringing the new enterprises into production). In 1963, for example, the USRR produced 206 million tons of crude oil, but the total annual capacity of Soviet oil refineries reached only 50% (!) of this level of production.

There are cases where these delays in completing investment projects reach the proportions of a real scandal. Thus, the chemical combine of Gurjec has been under construction for ten (!) years. Seven large wood and cellulose combines in Siberia have been under construction for thirteen (!) years; machinery imported from Great Britain in 1952 was never used and has by now become obsolete and gone to rust, etc., etc.

In addition, many investments appear to be unprofitable. An analysis of modernization investments in 39 enterprises manufacturing machinery showed that in 10 of these enterprises, the ruble cost of merchandise produced had increased after modernization, while production per ruble of invested funds had decreased (Pravda, March 15, 1964).

The fundamental aim of the discussion which was initiated by the Liberman article, and of the practical measures taken by various Soviet authorities since then, has been to change this state of affairs.

A Bureaucratic Reform of the Bureaucracy

The scope of the proposed reforms, as well as the reforms already introduced, is essentially technical; ideological considerations or a desire to “reform” either the economic infrastructure or the “political” superstructure have nothing whatever to do with it. On the contrary, what is involved here is an attempt to change only some purely technical, or so to speak, “surface” aspects of the functioning of Soviet economy, in order to preserve its social infrastructure and its bureaucratic forms of management and leadership. Just as in the case of the 1955-57 reforms (introduction of the sovnarkhozes, etc.), we are here confronted with a bureaucratic reform of the bureaucracy. The effects of this reform are not hard to foresee; those which we predicted at the time sovnarkhozes were introduced have, in fact, taken place in exact conformity with our forecasts.

Measures of a purely technical nature can undoubtedly overcome some of the most flagrant contradictions in bureaucratic management; but they can only bring this about by simultaneously provoking or exacerbating other contradictions. Thus, introductions of the sovnarkhozes unquestionably eliminated some of the major flaws of extreme centralization; steel was no longer shipped from Leningrad to Vladivostok, while being simultaneously shipped from Vladivostok to Leningrad. But in place of this defect, another appeared; each “autonomous economic region” having a sovnarkhoze tried to “duplicate” enterprises existing in other regions as much as possible. Instead of wasting means on useless transportation, they were wasted on superfluous investments. “Regional egoism” supplanted “ministerial egoism.”

Prior to Professor Liberman’s attempt to “rehabilitate” profits within the managerial mode of Soviet enterprises, these same profits had already acquired an increasingly important place in Soviet economy. During the course of the first five-year plans, industrial investments were in the main financed from the central budget by means of indirect taxes (turnover tax), which mainly hit consumer goods bought by workers and peasants.

But as Soviet industry became consolidated, the profits of the enterprises (that is to say, the difference between cost prices and selling prices fixed by the state) increasingly supplanted the yield from turnover taxes as the main source of Soviet accumulation. Between 1950 and 1955 the total volume of profits in industrial enterprises increased by 330%; from 1955 to 1963, it doubled again; in 1964 alone, this profit should show an increase of 19.5%, and the plan for 1965 forecast an increase in industrial profits of 24% (Ekonomitcheskaia Gazeta, No.14, 1964).

The major part of planned profits (74% for the budget year 1964-5) is paid to the state by the enterprises; the remainder goes to increase their fixed and circulating investment funds, to liquidate debts, or to cover losses from preceding years. As for non-planned profits (profits over and above the planned figure), which is obviously much less than planned profits, from 60% to 90% remains with the enterprise and, in particular, furnishes the basis for the “enterprise fund,” bonus fund, etc.

All in all, Soviet enterprises retained possession of 5.8 billion rubles of profit in 1955, 9.9 billion in 1960, and should be able to keep 12 billion rubles in 1965. These funds are ear-marked for economic investment objectives as well as for social investment and distribution in various forms. But the relatively modest sum which is distributed from this amount is indicated by the fact that the “enterprise funds,” which issue individual bonus, vacation and medical care checks, etc., reached a total of only 134 million rubles in 1950 and 644 million rubles in 1962, and that only one-half is used for individual distribution (shared, obviously, by the bureaucrats as much as by the workers, if not disproportionately by the bureaucrats).

Professor Liberman’s article, and even more so the August 17, 1964 article by Professor Trapeznikov, director of the Institute of Automation of the Academy of Soviet Sciences, proposes to make profit the principal index of planning performance for Soviet enterprises. In other words, he proposes that a Soviet enterprise should not be considered to have exceeded the target goals of the plan simply because it produces greater quantities than those projected by the plan, but that the costs of production, and the relationship between the achieved production and the resources employed by the enterprise (to take only these two examples), should also be taken into account.

Avoiding Waste

What is really involved here is a technique of avoiding the abuses and waste which have proliferated under bureaucratic management in the Soviet economy and which Marxist critics of this management have pointed out many times. Thus, in the previous system of management, directors of enterprises had an interest in systematically under-evaluating the productive capacity of “their” plants, because target goals of the plan were set in accordance with declared capacities, and the bonuses received by the directors were proportional to the amounts by which they surpassed these target goals; the lower the capacities set, the easier it was to earn larger bonuses.

Similarly, under this old system of management, factory directors had an interest in stockpiling raw materials and equipment (the famous “hidden stocks”) as an insurance against difficulties in securing supplies in time or the unavailability of spare parts for making essential repairs; since

investment expenses had no bearing on planning performances (the enterprises did not figure interest on invested funds as part of their cost price), an increase in production of 2 or 3%, secured even at an exorbitant cost, would earn bonuses! This same system of management was also a hindrance to technical progress, for the introduction, especially in large enterprises, of new manufacturing processes, with the inevitable concomitant of a period of experimentation and adjustment, resulted in a temporary quantitative decline in production, and consequently in a loss of bonuses. Liberman and Trapeznikov would eliminate this waste and disorder by making one factor, profit, (which constitutes a kind of synthesis or common denominator of all economic relations closely or remotely involved in the considered production) the measure of planning performance. For Trapezniov, however, the question is not so much that of a single index, but rather one in which the system of “indexes” is replaced with a system of economic levers; by means of such a set of economic levers, the Soviet authorities will be able to count on inducing the managers of enterprises to act for the common good through their own private interest. The scope of the Liberman-Trapeznikov reforms (as well as those introduced in other European workers states) boils down to this: to replace planning based on administrative directives by planning founded on the use of economic levers.

The use of profits as the basic index for planning performance does not, however, give a complete picture of the Liberman-Trapeznikov reforms. We have already stated that it implies a calculation of interest on invested capital (!) (the term is Trapeznikov’s), major objective of which is to reduce excessive immobilizations (hidden reserves) and the time lag for those immobilizations which are yielding no “return” (unfinished investment projects). It also implies a certain flexibility in prices (we will return to this later).

Implicit evidently in these reforms is greater independence for the enterprises in the use of state funds placed at their disposal; also in setting prices; and, at least in the consumer goods sector, they result in new relations between the customer and supplier, enabling the enterprises producing consumer goods to adapt more readily to customers’ tastes and thereby to arrest the mounting trend to accumulate unsaleable stocks.

Actually this has been the direction of the practical reforms introduced into Soviet economic management since August 1964.

In a letter to the British weekly The Economist (October 31, 1964), Liberman himself cites the example of a group of enterprises in the garment industry in Moscow and Gorki, for whom the plan goals are now established by the competent sovnarkhozes in the form of the over-all turnover figure to be reached. The enterprise is free to select the styles and sizes of the garments to manufacture in order to achieve this figure, and it concludes contracts with the stores along these lines, adapting to the tastes of the public. In this way, the enterprise has an interest in increasing its effective sales; and since the stores, too, no longer have quantitative goals to achieve but a sales figure to increase (bonuses are paid on profit, especially on “unplanned” profit, that is to say, on a greater turnover than the goal fixed by the plan), they, too, have an interest in buying with discernment, so as to promote maximum sales. It is easy to see how strictly pragmatic this reform is, that is to say, how it serves to overcome a practical deficiency which appeared in Soviet economy long ago.

Prices set in the contracts between the factories and stores in the garment industry are flexible, that is to say, they fluctuate around the average prices set by the government but can go slightly above or stay somewhat below the indicated prices.

The Soviet press has devoted many articles to this new independence for enterprises, which, let us repeat, has been introduced so far only on an experimental basis and on a rather modest scale. Thus Izvestia of December 26, 1964 tells us that in a group of enterprises in the Lvov (Eastern Ukraine) sovnarkhoze, planning performance will henceforth be measured by two indexes: the quantity of production in its usual meaning, and profit.

More Cheaper Products

An article in Pravda October 4, 1964 about the Moscow garment firm mentioned by Liberman includes an initial balance sheet, drawn up by the assistant director, covering the first four months of the experiment. We find, on the one hand, that radical changes have been made in order to conform to customers’ tastes. But there is also an indication that the practical effect has been a drop in the average selling price, that is to say, that the firm produced more low-priced garments and fewer expensive garments than before.

This sheds a revealing light on the real social structure of the Soviet “market,” as compared with the “ideal” structure anticipated by the planners, and this revelation is not without interest. It relates closely to the conclusions of a sociological study carried out in some typical Leningrad factories: out of 11,000 workers queried by means of questionnaires, about 30% expressed discontent with their living conditions and housing, about 24% expressed discontent with wage levels (Trud, Dec. 2, 1964). The prolonged wage freeze before the end of Khrushchev’s rule is not unrelated to this dissatisfaction. Not unrelated to the dissatisfaction, too, was the haste with which Khrushchev’s successors put an end to the wage freeze.

This example demonstrates how these “technical” reforms are by themselves incapable of solving the real problems posed at the present state of development of Soviet economy. For it is obvious that the presence of enormous stocks of unsaleable merchandise in the stores is not due solely to the poor quality of many of these products, but also to the inadequate level of purchasing power of wide layers of the population. If this were not so, it would be impossible to understand the new policy of holding special “bargain sales” in order to dump these stocks periodically! And the Liberman-Trapeznikov reforms do not change much for this particular level of purchasing power.

Another aspect of the reforms is the reintroduction of the “firm” into Soviet economy, that is, the reorganization of a certain number of similar or closely related enterprises into a unit, thereby effecting certain rationalizations (especially in administration). Products of these firms are sold under a “registered brand name” (for example, the firm “Majak” in the ready-made garment industry at Gorki). In the Leningrad-Pskov region, six plants making electrical equipment have been reorganized into the firm “Elektrosila” and this has made it possible to achieve considerable economies through rationalization and specialization.

Finally, the reforms also imply a growth in the rights of factory managers and an improvement in the bonus system for managerial personnel. A “major material incentive” in favor of the bureaucracy will help it regain the efficiency which it lost in recent years – at least that is what the ideologists of the bureaucracy think! Beginning with 1964, the new bonus system for “managerial personnel” ties the bonus amounts to the degree of utilization of installed capacity, and to the percentage of growth in this utilization from one year to another. These bonuses are often of very great value: they amount to 23.5% of salaries in the machine-building plant “Krasni Proletarii” in Moscow, 26% of the salaries of highly skilled technicians in the “Voikov” foundry in Moscow, 30% of salaries for the managerial personnel of the fine cloth factory in Kupavino, etc. (Trud of Dec. 1, 1964).

What the Liberman-Trapeznikov Reform Does Not Mean

In a great many places, the Liberman-Trapeznikov reforms provoked sensational comments which are not in the least bit justified. Commentators in the capitalist world have interpreted the reforms as an initial step in the USSR on the road leading back to capitalism. Others in the working-class movement have viewed them as an initial step towards the introduction of workers’ control in Soviet industry, and towards a return to Soviet democracy, at least in the economic sphere. These interpretations are devoid of all foundation.

The fact that profit is used as an index of planning performance has nothing to do with the restoration of capitalism in the USSR. As we have said, what is involved is a simple technical measure from which, by itself, no institutional conclusions whatever can be drawn. The funds invested in Soviet enterprises do not belong to the enterprises but to the state. The profit earned by these enterprises returns to this same state to the extent of 75%. The remainder can only be invested in the enterprises in conformity with targets of the plan.

The low or high level of this profit depends to a very large extent on the prices of raw materials and of the finished articles – once again fixed by the state. Under these conditions, the nationalized character of the means of production and the planned character of the economy are not fundamentally changed by using profit as an index of the efficiency of enterprises.

It is true that the fundamental formal difference between capitalist profit and Soviet profit now disappears: henceforth, one like the other will flow from a calculation which includes interest for utilizing invested funds as an element in “cost.” But this identity is purely formal. The capitalist enterprise which ends up without profits is compelled to close its doors and dismiss its personnel. The Liberman-Trapeznikov reforms do not imply (or should we say: do not yet imply?) a return to these delightful by-products of market economy.

Moreover, the operating independence of the enterprises hardly represents a step backward by Soviet economy towards capitalist economy; it serves only to correct the tumor of over-centralization dating back to the Stalinist period, when the desire to dictate every detail from a single “decision-making center” existed. The real danger begins when one passes from this operating independence to independence in decisions about prices, investments and employment; but the Liberman reforms do not imply this either (at least not for the moment).

Adaptation in the variety, quality and price of consumer goods is in and of itself a positive reform, so long as it does not end up by hiding social inequality behind a spread in prices, tailored to a spread in incomes (“something for every purse” ). This “adaptation” exists in the capitalist system, too, but it can hardly be considered as a stage on the road to socialism ...

In general, a certain use of the “laws of the market” is undoubtedly inevitable in the period of transition from capitalism to socialism; but in using these “laws,” the leaders of a planned economy must understand that there is a basic and unavoidable conflict between the “law of value” and the principle of planning. The former tends to direct investments, and consequently production itself, in accordance with “effective demand” (that is to say, in accordance with the law of supply and demand), which would give a structure to this production identical with that of capitalism; whereas the latter tends to direct investments, and consequently production, in accordance with the criteria of social priority determined by the interests of the proletariat.

Just as the evaluation of the Liberman-Trapeznikov reforms as “steps towards capitalism” is erroneous, so also is their evaluation as “steps towards Soviet democracy.”

Far from being instruments of struggle against the bureaucracy, they really constitute methods of materially interesting the bureaucracy in a more efficient organization of management in the enterprises, are consequently methods of raising the bureaucracy’s share in the distribution of the national income; they therefore fundamentally favor the bureaucracy.

This demonstrates once again how simplistic it is to equate “centralization” with “bureaucracy,” since the bureaucracy really constitutes a privileged caste, which gets its privileges by virtue of the fact that it controls the social surplus product, consequently, as the economy grows, develops and becomes increasingly complex, this control may be exercised more effectively in a decentralized way than in a centralized way. [2]

The reforms which have been put into practice in the USSR, as a result of the Liberman-Trapeznikov proposals, are not limited in their consequences solely to a considerable increase in the incomes of the bureaucrats; they are often accompanied by an increase in their powers and prerogatives within the enterprises as well. Thus, according to an article which appeared in Ekonomitcheskaia Gazeta (No.39, 1964), directors will henceforth have the right to change certain of the workers’ wage norms and forms of payment without prior approval by the central agencies; it is true that they will have to obtain the consent of “social organizations at the enterprise level” (that is to say, mainly of the trade union leaders); but the independence of the latter relative to the directors is well known ... It is true that the director, who until recently had the habit of speaking of “my plant,” now prudently says “our enterprise”; but as a Soviet journalist herself writes, at bottom “nothing has changed” (Literatournaya Gazeta of March 5, 1963).

The Dangers of the Liberman-Trapeznikov Reforms

If these reforms are essentially of a technical character and do not change in any way the fundamental nature of Soviet economy, or its system of bureaucratic management, does this mean that they represent no danger to the normal functioning of the economy? We believe that the dangers are real ones. Today it is still a matter of potential dangers; but the logic of these reforms themselves will operate in the direction of reinforcing the dangers, rather than of overcoming them.

In this connection, moreover, it is significant that the economic reforms which were carried out in Czechoslovakia and which go much further than the reforms so far introduced in the USSR, clearly reveal this logic and exhibit a tendency which clearly points up these dangers.

On the purely social level, a “share in earnings” by the bureaucrats – and in the final analysis, this is what the new system of managerial bonuses “as a function of profit” boils down to – will tend to increase social inequality, not to reduce it. Even in Yugoslavia, despite the fact that the “share in earnings” is widened to include the workers collectives and is controlled by workers self-management, the result has been an increase in social inequality, not a decrease. [3] In the USSR, where such control through workers self-management does not exist, the chances are that this tendency will be all the more pronounced.

Whenever acute shortages exist, the use of “economic stimulants” is no more democratic, nor do consumers find them any “more just,” than the use of “administrative measures”; this is a well-known fact in capitalist economy itself. Working-class militants have a habit of calling it “rationing by the pocket book” and criticizing it as more unjust than egalitarian rationing. What is true in capitalist economy does not in the least cease to be so in Soviet economy. In the sphere of housing, for example, an application of “flexible prices” inspired by the “law of supply and demand” would lead to enormous injustices in the USSR, as it has already in Yugoslavia.

Market Laws

The effectiveness of the “laws of the market” should not be exaggerated; otherwise what becomes of the whole Marxist criticism of capitalism, not only of monopoly capitalism but also of “free competitive” capitalism, which is the application of the “laws of the market” par excellence? Adapting production to the tastes of the consumer can most assuredly eliminate the unsaleable stocks which are the result of stupid planning; but it is precisely the determination of production (of its range, variety, quality) by the market, under the conditions of “healthy competition,” which winds up in periodic overproduction and equally scandalous waste. Driven out through the door, the “unsaleable stocks” return by the window.

It will be said that the whole problem is precisely that of combining a production which is, in the final analysis, determined by the plan (especially in the investment sphere), with a freer functioning of the market as a guide and inspiration to the planners. That is completely correct. Only, in the Liberman-Trapeznikov reform, the market inspires the plan (and is the remote control of production) through the intermediary of the material interests of the bureaucrat. This cannot be otherwise in a regime based on the bureaucratic management of industry. But this particular channel, in its turn, reacts on the basic elements of the problem and becomes a source of serious new contradictions.

When the bonus of the bureaucrat depends on the profit of “his” enterprise, he will have a natural tendency to seek out those conditions which will produce a maximum profit. This particularly implies a free search for suppliers (in the case of the previously cited Moscow firm making ready-made garments, the assistant director complained that the expected profit could not be fully realized because fabric suppliers did not make deliveries on time), and a free discussion of prices with them (without which such a search does not make much sense).

From that point on, directors will endeavor to establish the same relations between supplier enterprises and client enterprises that exist between enterprises and stores, or, in other terms, they will try to carry into the sphere of the means of production, the same “flexibility” (in the matter of prices as well) as is already allowed in the sphere of consumer goods.

The amount of profit does not solely depend on the flow of merchandise and on securing adequate supplies of tools and raw materials; it also depends on efficiency and on the scale of investments. From the moment that the scale of investments “materially interests” the bureaucrats, they will seek to control and determine it along with the aim of the investments more and more directly. From then on, the Liberman-Trapeznikov reforms will create a continuously growing pressure on the part of the bureaucrats in favor of a free determination of the quantity and quality of goods to produce, their prices, and of the amount of investment in each enterprise. The logic of “bonuses as a function of profit, the common denominator of all the economic processes of the enterprise,” must exert its force in this direction.

But what is rational from the point of view of each enterprise taken separately is not at all so from the point of view of the economy taken as a whole. And the formula of the academician Nemchinov, according to which “the general return is the sum total of the individual returns of each enterprise” (Kommounist No.5, 1964), constitutes too flagrant an error to be explained simply as a lapse in understanding on the part of this famous scholar; what is involved is a typically ideological error, that is to say, one arising from a “bad conscience” and reflecting an obvious social interest.

Far from increasing the rationality of Soviet economy, the principle of autonomy for the enterprises, and of profit as the inspiration and guide to economic behavior, simply replaces one irrationality by another, that of a Pharaonic hyper-centralization by that of particular egoism (of enterprises or of individuals).

The solution should not be sought in the technical side of management (although the matter of technique does have its importance! ) but in its social content. What the apparatus was never able to avoid (“hidden reserves,” waste, unproductive immobilizations, lost time), can only be progressively solved by workers self-management, mass control, free public discussion, the competition of different Soviet tendencies and parties for the right to direct economic policy. It is not a substitution of the market for the plan, but a combination of both with soviet democracy, at the plant level and the political level, which will restore order to the economy and give it a new start with unequaled verve.

March 1, 1965


1. All in all there were no less than 195,000 (!) uncompleted industrial objectives in the Soviet Union at the end of 1963 and beginning of 1964.

2. We must not forget that in The Revolution Betrayed Trotsky foresaw that in the event of a victory by the counterrevolution, neither planning nor nationalization of the means of production would be eliminated all at once, but that this would be accomplished in stages and essentially by way of “decentralization.”

3. In Socialism and Worker-Management – The Yugoslav Experiment (Editions de Seuil, 1964), Albert Meister cites Yugoslav sources which indicate that between 1951 and 1961, the spread in salaries and wages widened greatly; in 1961 it was 10 to 1 (pp.112-113); Tito speaks of a spread as great as 20 to 1 (pp.358-359). And the author adds: “The widening spread in salaries has been accompanied by greatly increased ‘fringe benefits’ for the cadres.” (p.359).


Last updated on 30.12.2005