As planned under Stalin
An atmospheric photo showing the atmosphere and mood of the early industrialization era: workers marching in formation and with a banner on a construction site. Most likely, this is the Kompressor plant in the Vyborg district of Leningrad.
Sometimes I come across articles in which the authors touch on the Soviet planning system. They would like to note its significance, to emphasize the importance of planning experience. However, their specific knowledge of the subject turns out to be so meager that they are immediately thrown into some kind of abstraction.
Because in the course of my research stories Stalin's industrialization I specifically paid a lot of attention to planning as the least researched topic, then under the influence of such empty articles I decided to write something like a short essay about what was and how the pre-war planning model was used, that is, the 1920s and 1930s, that is, the first three five-year plans. In my opinion, the most effective, in contrast to the post-war models, which have already changed their methodology.
Calculation of tasks for state industry
Planning. For what purpose? You can hear a lot of high-flown nonsense about this, partly rooted in the propaganda of those years. However, we are not interested in phraseology, but in the specific practical purpose of planning.
Planning is the calculation of tasks for state industry, managed by economic people's commissariats. If the compilers of the first five-year plan still sinned by leaning towards a statistical description of the national economy, then in the third five-year plan (not the widely published draft, but the final version, not subject to disclosure) each economic people's commissariat was told what it had to produce and what capital investments it was entitled to.
For example, in 1942, the USSR People's Commissariat of Internal Affairs had to extract 7,1 million tons of coal, 400 thousand tons of oil and process 299 thousand tons of them, harvest 65 million cubic meters of timber and produce 100 thousand tons of paper, manufacture 2,5 thousand metal-cutting machines, and also produce 860 thousand beds so that the still free Soviet citizens could sleep soundly. "Everyone understands everything," L.P. Beria must have said at the People's Commissariat board meeting, presenting the five-year plan assignments to the heads of the main departments.
The NKVD of the USSR is just one example. It was the same for the other people's commissariats: a list of products and their production volumes.
State industry had dominated the Soviet economy since V. I. Lenin declared general nationalization in May 1918. Accordingly, a task arose that Soviet planning solved: managing state industry, in particular, defining its tasks. At first, there was no separate planning; it dissolved in the depths of the huge apparatus of the Supreme Council of the National Economy of the USSR, but after the bureaucratic madness of the "Glavkism" era, it was decided that planning should be in a separate body, separated from economic routine, that is, in the USSR State Planning Committee.
The USSR State Planning Committee, based on various statistics, developed a plan as a system of assignments for economic people's commissariats. The plan was approved by the government or even legislative bodies and, approved, was sent down to the people's commissariats, which themselves then distributed assignments among their main departments, subordinate trusts, and so on, right down to individual enterprises, workshops, and even sections.
Planned will
Here are the methods of calculating tasks - this is already very interesting. For such calculation, a starting level is needed, described in detail by statistical materials: gross, cost indicators, various technical and economic coefficients. Therefore, good statistics are needed for planning.
In principle, it is possible to plan with bad statistics. Moreover, the need for this has arisen periodically. But, firstly, planners have developed special methods for producing some figures from others, such as extrapolation estimates based on sample data. Secondly, in such a situation, it is necessary to understand that planning becomes more orienting than indicating and prescribing, and one must be prepared for surprises from the statistically undescribed part of the economy.
So it is better to plan with detailed statistics. It is more convenient and easier.
How were economic tasks set? One can talk as much as one wants about some objective laws, as was done in old literature, and is often done now. However, setting planning tasks is almost pure voluntarism.
Yes, the core of the plan depends on the will of the planners and the political leadership for whom they work. A plan is worth something when it contains a volitional principle that forces the economy to grow and change qualitatively. The political leadership can move the force of law or repression in support of it, but without will nothing can be done in the plan.
In pre-war times, the USSR State Planning Committee understood this well, and therefore the plans of the first three five-year plans spurred the economy so much that it achieved a lot. The planners of that time also understood that development is far from a smooth and gradual flow of economic life. Development is a man-made crisis, a sharp distortion of all previously existing proportions, an acute conflict, turning out pockets and forced labor. This is the only way to do something that was never possible before, and in the shortest possible time.
In fact, in industrialization, economic management faced two interconnected tasks: how to force people to work more and how to channel as much of the people’s labor as possible into capital investments.
In 1927/28, the gross industrial output was 22,3 billion rubles. The first five-year plan assumed that 47,1 to 54,6 billion rubles would be spent on capital investments over the five-year period, but it turned out to be 52,5 billion. On average, this is half of the production of 1927/28 per year. The second five-year plan spent 137,5 billion rubles on capital investments, or an average of 27,5 billion rubles. The third five-year plan - 192 billion rubles, or 38,4 billion rubles per year.
This is the expression of that planned will that in the 1930s drove the national economy along the path of development.
Personally, I have encountered two methods of determining planned targets. The first is a percentage markup. This is the simplest method, applicable to existing production. A task like "increase production by 10-15-20%" is easily recalculated from the starting level into a planned target for a certain period. The second is a "piecework plan", that is, an assumption to produce a certain number of units of a certain equipment by a certain date. This more complex method was more often used when creating new production facilities, but was often imposed on existing plants as well.
Piecework plan, balances and finances
I have a strong suspicion that the first five-year plan was essentially a "piecework plan" and was calculated based on the production assignment for certain types of equipment: automobiles, tractors, locomotives, wagons, machine tools and other equipment. For example, the production of tractors was supposed to jump from 3 thousand in 1928/29 to 55 thousand in 1931, automobiles - from 840 units to 20 thousand, machine tools - from 1,9 thousand to 18 thousand, and so on.
Then the step-by-step calculation began. To produce cars, tractors, and machine tools, material resources are needed, primarily cast iron and steel. These are all additional resources that the economy does not yet have. The second stage is that to produce these resources needed to solve the plan problem, their own material costs are needed. They are also calculated. Finally, the carrying capacity of the railways is needed to transport all of this, which requires material costs, which, in turn, must be produced. They are also calculated. As a result of these multi-step calculations, in 7-8 or more “turns,” a certain list of material resources is obtained that is needed, but is not provided by the current production.
This is where the construction program comes from, in which this non-existent volume of resources is distributed by type among some supposed factories located throughout the country depending on the availability of the necessary raw materials and fuel. It is estimated how much such a factory might cost, how much and what is needed for construction, and assignments are given to the people's commissariats in the form of title lists.
From the plan to the title lists, and from them to the maps.
The system is complex, and it is easy to make mistakes. Thousands of people were involved in the calculations, and someone could forget something, either accidentally or deliberately. It was in this part of the planning that the most persistent sabotage took place, because it was the disruption of construction and its supply that caused the greatest damage in the least noticeable way.
The sabotage was felt constantly, but Stalin's planners seemed to be only inflamed.
Now the following. Needs and possibilities were reduced using material balances. This is the simplest balance, in which on the left is the income, i.e. the production of some resource, and on the right is the expenditure, i.e. its consumption. Such a balance can be drawn up for a month, quarter, year or five years. For a five-year period, the material balance will be dynamic, because it will need to take into account both the not yet existing, but emerging production and consumption of this resource.
Material balances were used to check the correctness of decisions, and they were also used to develop a plan for the material supply of people's commissariats, known as funding (this plan was approved by the Economic Council under the Council of People's Commissars of the USSR).
There were many material balances, dozens and hundreds, and they were interconnected, since production in one was connected with consumption in another. For example, coke was needed to smelt steel, that is, the receipt of steel on the balance required expenditure on the balance of coal.
It was possible to plan based on consumption requests, but the USSR State Planning Committee was not so simple and, understanding that needs could be overstated and illegal trade in resources could be started, it was guided by the coefficients of specific consumption of raw materials, fuel and materials for the production of a unit of output as economically justified needs. This expressed the technical level of industry, since these coefficients were lower in advanced industries, and in general in industry they were gradually adjusted downwards.
Finally, it was necessary to add labor to coal and steel, which was done using a financial balance. In the Soviet system, cost was calculated, as it seems to me, from the price of labor. Each industrial product had its own labor costs, and they were very carefully calculated. The labor of all professions was carefully classified and estimated in rubles according to the tariff scale. Accordingly, the cost of, say, a bolt is the labor of a turner, plus the labor of a metallurgist, plus the labor of a railroad worker, plus the labor of a storekeeper, which determined the cost of a blank, and the same with smaller shares, such as depreciation, energy consumption, tools, various overhead costs. The labor of all people directly or indirectly involved in the creation of a bolt was merged together, then a planned profit was accrued to it, and this very cost was obtained.
In order to avoid making such rather complicated calculations every time, a price list was compiled and approved, which included the cost of all industrial products without exception. This was the price at which the product passed from hand to hand, for example, the People's Commissariat of Ferrous Metals shipped steel to the People's Commissariat of Shipbuilding Industry. The price list rarely changed. Enterprises, trusts and people's commissariats had the opportunity to reduce labor costs for products and thus receive additional profits above the planned ones. The Soviet pricing system was a mirror image of the capitalist system.
According to the price list, all products were recalculated into rubles and kopecks, and this entire impersonal mass was compiled into separate and consolidated financial balances, both current and provisional, that is, expected. A five-year plan in the financial sense is a provisional financial balance for the next five years, taking into account all planned changes.
In the Soviet system, finances controlled labor first and foremost, while material resources went through the funding system. There was no freedom to buy anything for money back then.
Exceeding plans
Control of the plan was not particularly difficult. Gosplan distributed everything among the people's commissariats. The people's commissariats then sent their detailed plans to Gosplan. A stream of various reporting statistics went to the Central Statistical Office under Gosplan of the USSR. It was possible to see whether the plan was being fulfilled by any people's commissariat, industry, trust, enterprise.
Now about the implementation of the plan. The planners of the 1930s, as a rule, with experience of the economic chaos of the Civil War and the early 1920s, understood perfectly well, firstly, that statistics and the plan do not reflect all economic phenomena without exception, and therefore its accuracy has a certain error. Secondly, the plan is based on a volitional principle, and its underfulfillment, as can be judged from a number of publications that reflected this conviction of the planners, is primarily due to insufficient will.
In principle, that's how it is. If your company can't make a plan that is technically sound and feasible, then it's you, the manager, who can't organize the workers, can't set up the technology, and so on and so forth, which means you're a weakling and a candidate for replacement.
Strong managers were the ones who turned a corner, overfulfilling the plan. Usually, they either put a previously messy enterprise in order, or found a way to radically improve the technology. Their achievements were treated very well. Firstly, overfulfilling the current plan means free resources that can be directed to something important now. Secondly, changing the technology with a reduction in the consumption of raw materials and labor frees up resources in a number of industries at once. If someone at a large plant figured out how to make the same products with 15% less steel consumption, this means that he took part of the task off the metallurgists, ore and coal miners, and railroad workers. That is, the plan can be revised in the direction of improving the final results.
During the first five-year period, so many unused reserves were discovered that they decided to shorten the five-year period
However, too much overfulfillment of plans inevitably led to their revision, since the planners clearly overlooked and did not take into account the available reserves. This happened often, since it is impossible to survey the entire economy from one office.
A simple but demanding system
In general, such a planning system was simple in its basic principles, starting from the desire to get something and calculating how much this desired thing would cost. The planning calculations were also very simple and, as a rule, did not use sophisticated mathematical methods. Sometimes I even said that for the planners of the Stalin era, arithmetic plus percentages was enough - the most frequently used mathematical operations. A good planner could draw it up with a pencil on paper, without any computers.
However, such a planning system required, firstly, an excellent understanding of the technical essence of production, that is, knowledge of how one product is transformed into another and what the ratio of input to output is. Therefore, at that time, planners came mainly from industries, technologists or economists from enterprises or trusts.
Secondly, such a system required accuracy and precision, because an error or omission, when something was forgotten, made at the early stages, was then multiplied in all other calculations. Finding the ends of the balance discrepancy was not easy.
Thirdly, although the calculations themselves were simple, the amount of work for manual calculations was enormous and often overwhelming, which affected the quality of planning. With today's technology, such calculations would be done easily and simply.
Finally, what I like most about this planning system is the complete absence of the word “optimization.” The Stalin-era planners did not have such a concept; moreover, they consciously rejected it. The only time there was an “optimal option” was in the first five-year plan, and even that meant a plan option for especially favorable conditions. They did not adapt to shortages, or to “bottlenecks,” or to the lack of necessary equipment, and in general they considered any and all economic problems solvable.
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