S. G. Strumilin

PERSPECTIVE GUIDE LINES FOR 1926/27-1930/31

FIVE-YEAR PLAN DRAFTING; ITS TASKS AND METHODS

The task to be accomplished in drafting the perspective plan for the national economy of the USSR may at present be formulated, in the most general terms, as: the redistribution of society’s available productive forces, including both the manpower and material resources of the country, in such a way as to ensure optimum, crisis-free expansion of these productive forces at the fastest possible pace, for the purpose of maximizing satisfaction of the current needs of the working masses and advancing them as rapidly as possible toward a society completely reconstructed on the foundations of socialism and communism.

Can a problem of this nature be solved with complete accuracy and certainty, as the most elementary problems are solved in geometry, algebra, mechanics, astronomy, and other exact sciences? We think not. Planning can be done well, in our opinion, only if we draw on the sum total of the technical and economic knowledge and methods evolved by science; we must accordingly do so. But still, planned construction, like the far more elementary art of building, should be viewed as a kind of engineering, not as science proper. A problem in the sphere of social engineering-which is called upon to reconstruct all the foundations of society-like a problem in any other engineering project, can be solved only on the basis of a whole set of calculations. But no one of its solutions is the only one possible, absolutely accurate, or unquestionably optimal. There may always be another engineer who comes along with a new design that offers an even tidier and more efficient solution to the same problem.

For that matter, not even the so-called exact sciences always possess methods adequate for the strictly scientific solution of some of their more difficult problems. We know, for example, that astronomy has to date failed to solve, even in general terms, the seemingly most elementary problem of the mutual influence of only three free bodies gravitating toward each other. The problems in planned construction, however, involve not three bodies but thousands of intercrossing forces and influences the laws of whose interaction are still a long way from having been fathomed, and, in any case, cannot be expressed in exact measurements and weights for every situation. However, while the enemies of socialism are prepared to conclude from this that the very problem of a planned economy, like, say, the problem of trisecting an angle or squaring a circle, is irrational, we are not a bit inclined to reach such a conclusion.

We know that in theory it is impossible, with a pair of compasses and a ruler, to divide an angle into exactly three equal parts. But it can be divided approximately enough for practical purposes into any number of parts. An experienced architect will often lay out an ornamental pattern without compasses altogether, simply by eye. The same can be said about the squaring of a circle and many analogous “difficulties.” Theoretically they are insuperable, but practically they are overcome at every turn, and without any particularly great effort, even, simply because the accuracy to which strict science pretends is not at all necessary for practical purposes.

By no means does this imply, of course, that in practical construction or in a planned economy one should not aim for the greatest possible accuracy of calculation. Sooner or later every inaccuracy has to be paid for. And certainly a present-day architect, by drawing on the theory of strength of materials and a number of other sciences, will be able to erect a building at incomparably smaller cost and greater speed than could the builders of earlier ages, who possessed far less knowledge. Still, these old builders, without benefit of any Hütte manuals and though ignorant of the theory of strength of materials and a great deal else, did build the Acropolis of Athens, the Cathedral of St. Sophia in Constantinople, Notre Dame in Paris, St. Basil’s in Moscow, and many other noble edifices. True, they were usually forced to allow a far larger factor of safety in their designing than the theory of strength of materials would have required of them. But even though at the cost of a certain overexpenditure of labor and materials, they did accomplish their purpose.

It is our belief that in the first attempts at perspective planning we, too, shall have to allow an overlarge “factor of safety.” Our projections have no claim to the epithet optimal. We are convinced that only the method of successive approximation will enable us to approach optimal decisions in the perspective plan.

This idea of successive approximations holds probably the central place among the methodological ideas and techniques that have been thoroughly assimilated in our actual planning work.

As we know, there are three types of planning in progress: there is the general economic plan for a period of ten to fifteen years; there are the perspective five-year plans that refine the general plan; and, finally, there are the “control figures” for the national economy, which are still more concrete and are for only one year ahead. The idea of drafting economic plans through successive approximations to concrete decisions embodied in operative plans is dominant even in this most general of schemes. But this idea of successive approximations takes on still greater importance in the actual techniques used in all our plan-making. The fact is that when we get down to drafting the perspective economic plan for any period ahead, the difficulty we always run up against first is this: it is impossible to lay down rational perspective plans for development in any branch of the economy taken separately unless we know beforehand what the rates of development are going to be in allied areas and what over-all rate of development has been scheduled for the national economy as a whole. On the other hand, projecting over-all rates of development for the national economy as a whole is impossible unless we have a basis for it in estimates of possible rates of development in the economy’s individual branches. Only the method of successive approximations can extricate us from this vicious circle.

In the first approximation, the perspective plans for individual branches of the economy were drafted by specialists in these branches on the strength of their realistic stocktaking of internal resources in the branches and of their very general expert assessments of the general economic situation in allied areas and in the country as a whole. But the very first compilation of these drafts also provided us with an over-all picture of the country’s economic development. Profiting from this picture, we made the necessary adjustments in the initial plans for the separate branches of the economy and recompiled these partial plans into a general perspective plan, which thus represents a second approximation to the integral and internally consistent solution of the problem; and so on. The respective sections of Gosplan, following this procedure of successive refinements, drafted and reworked at least three or four plan variants for almost every branch of the economy, and for several branches, even more. It must be pointed out, however, that these refinements have not thus far wrought any very basic changes in the over-all picture of our economic future.

Big difficulties in our work have stemmed from the fact that the general economic plan drawn up by GOELRO six whole years ago is now largely obsolete, while the new general plan is not yet finished.

We are setting for the General Plan the task of producing a pattern of the most general economic targets and thereby constructing a schematic structural model of our immediate future, a model which we can and must approach at the present stage of our economic development on the road to socialism. The General Plan provides our nearest landmark on that road. This landmark should be set far enough from the present moment to be firmly staked at a new and higher level of society’s productive forces, but not too far, lest it be dissociated from the material base on which we already stand. Specifically, this plan is being drawn up for a period of ten to fifteen years, in which time we are tentatively intending to double our productive forces and capacity.

This General Plan is not yet finished. But its broad contours are already quite clear in terms both of scale and of the sequence of key reconstruction projects in the electrification of the country, the industrialization of the national economy, the establishment of trunk-line transportation routes, and in the area of other of the plan’s basic goals. So that we were, after all, able to take the respective General Plan targets into consideration in drawing up the Five-Year Plan.

We regard the perspective Five-Year Plan as the first time-segment of the General Plan, representing the first refinement of the rates of development in the principal branches of the economy, and their coordination with each other as well as with the over-all rate of actual socialist accumulation within the given segment of time. Five years was viewed as the minimum period for the solid accomplishment of any serious reconstruction programs in electrification, industrial and railroad construction, the engineering of new arterial waterways, reclamation and irrigation, etc.

From what has been said it is now clear that the main function of the Five-Year Plan is, in general, to indicate the possible scale of capital investment over the next five years and, in particular, to provide a concrete basis on which to frame operative programs for financing the long-range construction work scheduled for this five-year period. If our reconstruction program is to be accomplished without interruption, it must be assured financing on a calendar schedule for a number of years in advance. Only then can we render the program secure both with properly timed imports on orders for two or three years ahead and with future-delivery orders from domestic plants, these plants often requiring prolonged reconstruction before they can fill such orders. However, the task of framing operative programs for financing imports, domestic orders, etc., a task feasible only on the basis of a perspective Five-Year Plan, is, needless to say, the very special concern of the operational departments: it is outside the scope of this work.

Another vital purpose of the Five-Year Plan is to furnish a basis on which to draft Control Figures for the year-by-year development of the national economy.

Once the Five-Year Plan has been drawn up, Control Figures for the coming year will be planned as a one-year segment of the perspective Five-Year Plan, and will, of course, represent the plan’s further refinement and concretization. At the same time they should, in our judgment, become the basis for the drafting of operative production programs, which will thus represent the final refinement and elaboration of the annual plan within the individual branches of the economy and departments.

Subsequent quarterly or even monthly adjustments of these programs, necessitated by the current conjuncture and by the economic situation of the moment, fall into the sphere of economic maneuvering within the framework of the General Plan targets. These targets are never intended as more than a general guide for the operational departments as to aims and methods in their economic activity and have no claim, therefore, to hundred-per-cent accomplishment; on the other hand they do not excuse the operational agencies from responsibility both for unsuccessful maneuvering and for failure to maneuver in cases where the economic situation warrants that.

The methods used to draft the General Plan, the Five-Year Plan, and the yearly Control Figures must of necessity differ in quite a number of points at each of these levels. Of the three, the annual plan is most circumscribed by objective circumstances not subject to our control through planning. The economic activities of the coming year in the spheres of production, goods turnover, imports and exports, budget, credit, etc., are almost totally predetermined by the capital investments of preceding years and by the last harvest. Within a single year the possibilities for redistributing available productive forces to secure their more efficient arrangement are extremely limited. Over a span of five years these possibilities are far broader; and over ten to fifteen years, given substantial accumulation, they are enormous. Consequently, the opportunities for the free play of the social organizer’s creative ideas on reconstruction are especially great in the drafting of the General Plan; they are less great in the case of the Five-Year Plan; and when it comes to the annual plans, they are altogether negligible. So that while every plan represents a certain combination of elements of prediction of what is objectively inevitable and projection of what is advisable from the standpoint of our subjective social and class aspirations, in the yearly plans it is prediction that has the paramount role, while in the long-term plans, it is prescription.

In view of this, it is easy to understand why, say, in the drafting of the control figures, such an important part is played by methods involving extrapolation on the basis of a study of the objective laws expressed in the empirically observed stability of a number of the so-called static and dynamic coefficients. It is perfectly obvious that when it comes to forecasting the action of elemental forces not subject to our control, the method of static and dynamic coefficients is quite in order and may yield highly satisfactory results. But where we deliberately set out to overcome the inertia of elemental economic forces and direct them into a different channel, it would be ridiculous to premise our forecasting on the immutability of the respective coefficients. Hence, in our general and perspective planning, we are in principle setting extremely narrow limits to the applicability of extrapolation methods. If we were merely to extrapolate from the past, we could at best extend that past, in a revised and enlarged version, by another five to fifteen years. But you won’t build a new social order that way. Where it is a question of deliberately creating a new future, other methods are far more appropriate-methods involving the engineering of new social patterns on the basis of particular plan targets.

We thus deny that extrapolation methods are in any significant degree applicable in the realm of perspective planning, and do so not only because these methods are in general most unreliable for extending observed development curves several years into the future, but because of another factor that is far more important for us. We are entering a new phase of development, with the creative will of the revolutionary proletariat irresistibly driving a wedge between our past and our future. In this period of the reconstruction of all social relationships, we can least afford to model our perspective plans on medieval horoscopes, to have our destiny foretold from the course of celestial bodies or even from the no less objective periodicity of terrestrial capitalist cycles. Our purpose in drafting plans is not to speculate idly and prophesy about what will happen in five or ten years, but first and foremost to frame a definite set of economic assignments in the sphere of socialist construction.

These assignments must, of course, be very specific, for which reason they are given in numerical coefficients; and they must be sufficiently realistic, which is why they have to be coordinated with each other, in all their parts-linked like a chain in their interdependence-and brought strictly into line with the country’s available resources and the real potentials for its development. But all the same these are only targets, not forecasts. As construction proceeds we shall at any time be able, if need be, to alter tactics to meet the situation at the particular moment, and to change certain parts of the assignments. That is why in forecasting we by no means guarantee hundred-per-cent fulfillment of our perspective plans according to a set calendar schedule. And yet in spite of this, these plans are not a bit less realistic than other, less important, construction plans in which all the technical and financial calculations have been accurately performed and are adequately backed up with resources.

The drafting of the perspective plan is feasible only on the basis of prior elucidation of a number of the plan’s premises and regulative ideas which in their aggregate constitute an integral pattern of economic policy. Gosplan’s work is enormously simplified in this respect, in that a perfectly definite, integral pattern of economic policy has been provided us ready-made in the decrees of the country’s directive agencies; all that remains for us to do is properly amplify and concretize these decrees.

Identifying the ultimate aim of all our planning theories-the establishment of an economy consistently socialist in all its elements, and the incarnation of communism-would clearly not be enough for us. We must also determine, as accurately as possible, the far more concrete targets for the very next stage of our development. What should we aim at: the strengthening of economic ties with the outside world, or their restriction in the name of autarky: the country’s industrialization, or concentration on agricultural development; economic centralism, or separatism among the individual provinces and republics of the Union in the area of national electrification and other reconstruction undertakings; the organizational structuring of industry in accordance with me principle of all-embracing regional combines, or on the model of all-embracing regional combines, or on the model of all-Union trusts and syndicates integrating separate industries; and so forth. But of course no problems of this kind are settled with a one-syllable yes or no. The only clear and wholly concrete answer to them will be the magnitude of our imports and exports, of our capital outlays for industry and agriculture, etc., in the perspective plan.

As regards the technique of drafting the individual parts of the Five-Year Plan, two separate stages of the work must be distinguished: first, the drafting of special plans for individual branches of the economy on the basis of particular targets; and second, the coordination of these special plans, by means of balances, into the over-all plan for the national economy.

As for the methods used in drafting the special plans for the development of individual branches of the economy, they are in no basic respect different from the engineering methods employed in designing new factories, mines, plants, or other enterprises. The scale of the planned development is generally restricted by the scale of feasible investments, the anticipated capacity of the market, and a good many other “bottlenecks” and limits which, in the first approximation, are designated rather crudely on the basis of expert estimates and guesses. However, since the scale of development has been predetermined, we are for the rest dealing merely with a complex of technical and financial calculations that are within the capability of any engineer-designer and hold no methodological difficulties for him. The difference between the various designers in this field will now lie not in the volume and accuracy of their calculations, but in their varying capacities for creatively combining possible elements of the planned structure as simply, cheaply, handsomely, and efficiently as possible.

As to the coordination of the special plans for individual industries and branches of the economy by means of balances, the following should be noted. To make this coordination as easy as possible, in preparing the very first rough draft of the over-all plan we adopted a certain sequence for drawing up and reviewing the special plans, our intention being that succeeding plans should rest upon the preceding ones. In view of the interdependent character of the over-all plan’s individual elements, we decided that under our circumstances the following was the most rational sequence for drafting and reviewing the special plans for individual branches of the national economy: (1) industry, (2) agriculture, (3) transportation, (4) construction, (5) trade, (6) credit, (7) budget, and (8) manpower.

The electrification plan, deriving as it does from the goals of the General Plan, we consider preset for us on a definite scale; hence we had but to incorporate it into the general framework of the perspective Five-Year Plan as the first basic link.

In framing the Five-Year Plan it is easiest to start with industry, for the simple reason that it is industry-given our policy of industrializing the country-that is due to become the advanced, key link in our economy, the link whose movement will determine the dynamics of all the other links, which are connected with it.

The tempo of our industrial expansion in the coming five-year period is governed by a whole series of objectives and material factors. That tempo must be faster than the rate of our agricultural development, or we shall never eliminate the dangerous disproportion between our industry and agriculture. It must also surpass the rate of development in capitalist countries, for unless we were able to show the advantages of the collectivist over the capitalist economy in this respect, there would be no chance of victory for the socialist revolution on a world scale. But since the tempo of industrial expansion is at present determined almost entirely by the scale of capital investment, this financial factor represents for it still another limit, restricting it from above. We cannot aim at a rate of capital investment exceeding [what] our available resources [allow].

The perspective plan for industry as a whole constitutes, of course, a more or less coordinated compilation of the plans for individual industries and branches of industry. For this coordination to be feasible, it is logically imperative, in this case, too, that the plans be drafted in a certain order: first consumer goods industries and then producer goods industries-machine building, metals and other building materials, and the fuel industry; as far as possible it must be an order in which, by virtue of the internal chain linkage of these industries, the links that follow provide output for an ever greater number of preceding ones.

For the former industries the factor which-besides recovery needs-determines the rate of capital investment is, of course, merely the expected increase in the capacity of the consumer market, whereas for the latter industries the market is primarily industry itself. But while the consumer market does lend itself under our conditions to a degree of current adjustment through regulation of the wage level, of tax policy, and other such measures, the estimated capacity of the market for the output of enterprises engaged in the reproduction of working capital and especially fixed capital must, in the interest of industry’s crisis-free expansion, be given in advance, on the basis of rather accurate calculation, and must be fully consistent with the calculated resources for capital investment.

It will be more convenient to reserve to a special section a more detailed description of how we went about determining the capacity of the consumer market, basing ourselves on the coefficients of the anticipated population growth, the increase in the per capita income of the working classes, and the corresponding change in the structure of their consumption budget.

The very existence of a plan for industry in a measure predetermines the perspective plan for agriculture. Industry is the largest consumer of agricultural raw materials-cotton, flax, beets (for the sugar industry), potatoes (for the distillation of alcohol), etc. Consequently, once we have the plan for industry, we know how much the output of these crops-which require the biggest labor outlays-is going to increase. As far as the staple cereal crops and animal husbandry are concerned, owing to the extremely slow growth of the foreign and domestic consumer markets, and given extraordinarily backward farming techniques and a plowland area held within natural bounds, forecasting development in this area cannot be too difficult a matter. And as far as the effect of reconstruction measures is concerned, it will be wholly determined by the scale on which we earmark capital for this purpose.

For drafting the perspective transportation plan it is quite enough to know the expected annual increase in freight turnover, and Lt is a predetermined magnitude once we have the perspective plans for industry and agriculture.

The scale of the construction of production facilities in industry, agriculture, and transportation is determined by the extent of planned capital investment in these branches of the economy. As to the rate of city housing construction, and of all other municipal construction, insofar as that rate is not limited by the technical facilities for producing building materials and by financial resources, it is entirely determined by the anticipated growth of the nonagricultural labor force in general and of the urban population in particular.

The scale of commodity output in industry and agriculture determines the perspective plan for domestic trade. As to foreign trade, its volume depends on: (1) the prospective export of grain and agricultural raw materials-which is set at the level at which expected domestic production exceeds domestic consumption under the plan for agriculture-and the industrial plan for oil and several other products-which sets the scale of exports for these products; (2) prospective imports, which are determined by the scale of planned investments in industry, transportation, and agriculture, and by the extent to which appropriate equipment for these investments cannot be produced inside the country. The foreign trade plan will have the independent task of bringing these imports into balance with our country’s perspective export plan, its foreign exchange resources, and its credit prospects.

The rate of bank credit and emission operations is pretty much determined-objectively-by the scale of expansion in the turnover of goods, and is determined teleologically by the policy we set in the sphere of money circulation, accumulation of foreign exchange, discount rate, etc.

As regards the budget, the perspective income plan is wholly determined by the expansion projected for the national economy as a whole by all the plans enumerated above. As for the perspective expenditure plan, that is the concern of our budget policy, and that policy must find its commercial expression in the budget plan.

The perspective plan for manpower can be clarified only through correlation of all preceding plans including the budget (the scale of the budget determining the labor army employed in the civil service).

The sequence laid down for drafting the special plans facilitates their internal coordination and harmonization, but is certainly no guarantee as yet that the economic plan as a whole will be realistic and rational. If, for instance, we were to set too high a pace for the expansion of industry, this would be reflected similarly in each of the other plans and, consequently, in their totality as well. A mistake of this kind can be avoided only through subsequent coordination of all the plans by means of balances.

Coordination by means of balances should in the first instance satisfy us that the grand total of the capital investments planned does not exceed the actual resources accumulated in the country over the corresponding segment of time. But this coordinating should be done from many other standpoints, too. For example, the perspective labor balance will give us confidence that the scheduled program is not going to be wrecked by inadequacy of reserves of free manpower, both skilled and unskilled; the fuel balance will show us the amount of mechanical power that is assured for our program; the balance of trade and the balance of payments will show the amount of foreign exchange and, consequently, the imports of foreign equipment, that are assured for that same program; and so on.

The methodological conclusions and techniques set forth above by no means exhaust the subject of planning methodology. There are a great many more of them already being brought to bear in actual planning work than we have been able to enumerate here. But not even in their totality could they constitute a science of planning. Planning, by and large, will long continue at the stage of a practical art; still, a scientific approach to the solution of all the partial problems that already allow of such an approach is absolutely imperative for it.

“Perspektivnaia orientirovka na 1926/27-1930/31,” Report to the Second Congress of Planning Agencies of the USSR, March 25, 1927, in Strumilin, S. G., Ocherki sovetskoi ekonomiki. Resursy i perspektivy (Essays on Soviet economics. Resources and perspectives), Moscow-Leningrad, published by USSR Gosplan, 1928, pp. 422-439.