Gosplan

CONTROL FIGURES OF THE ECONOMY, 1926/27

METHODOLOGY

As was pointed out in the text appended to the Control Figures for 1925/26, three principal methods were used in drawing them up: (1) the method of static and dynamic coefficients (extrapolation into the future of the regularities observed in the country’s economic development in past years), (2) the method of expert estimates (concrete evaluation by specialists of possible economic and technological advances in particular branches of the economy in the coming year), and (3) the method of control comparisons of the obtained results with prewar data.

Critical analysis of last year’s experience as well as consideration of the specific characteristics of the new economic period which we are now entering compel us, in drawing up the Control Figures for 1926/27, to make a number of changes in the methodology. These changes are intended, on the one hand, to supplement, refine, and elaborate the techniques of analysis previously employed, and, on the other hand, to make use of several new approaches and criteria for solving problems in perspective planning.

On the whole 1925/26 was still a typical year in the so-called “recovery” period of the Soviet economy, with all the structural features and dynamic regularities characteristic of this period. In the coming year of 1926/27 we shall cross the dividing line between the recovery period and the new era of economic construction which we have named the period of “reconstruction.”

True, even in the year ahead the growth of the physical volume of industrial production will be based mainly on activating idle or under-utilized equipment; however, such resources are now by no means available in all branches, and even where they do exist activating them calls for much greater funds and effort than in former years. To illustrate the change that has taken place, it is sufficient to point out that with outlays exceeding last year’s and with an enlarged plan for imports, the year 1926/27 promises to yield merely a third of the increment of industrial output that we have had in the current year.

The exhaustion of resources for the recovery process necessitates, above all, higher standards of accuracy in the prospective calculation of the country’s economic growth. The point is that as long as enterprises were operating at less than full capacity and rapid expansion of output was therefore possible, disproportions arising as a result of miscalculations in planning could be smoothed out with comparative ease as they came to light. For example, in the course of 1924/25 the programs for many branches of industry were revised upward three or four times; in industry the physical volume of output, which is regulated by the Supreme Council of the National Economy, grew at a rate more than double the rate assumed under the plan, and this gigantic rate of growth, by spontaneous leaps, caused no major interruptions and failed to disturb the smooth course of the economic process as a whole. At present this sort of dynamic is impossible. From now on any expansion of output will require heavy outlays and promptly organized preparatory work; any sudden decline of the rate of growth will mean a serious loss to the national economy, fruitlessly wasting part of society’s productive forces. But an incorrect projection of the general curve of economic advance is not the only thing that bodes grievous consequences for the country’s entire economy. A general disruption, constituting a crisis, can also occur as a result of partial errors in calculating certain of the principal elements on the balance sheet of the national economy. For example, despite ideally precise calculation of the share of national accumulation which must be mobilized by the state in order to expand industry, the production plan will founder if the export-import part of the general balance is out of line with what is actually feasible. The entire economic perspective becomes unrealistic if the particular balance between the town and countryside is not drawn in the proper proportions, and so forth.

The best way of safeguarding the Control Figures against possible distortions of the prospects for development of the national economy as a whole or of its separate parts would have been to work up an economic balance sheet for 1926/27 and for several preceding years. Unfortunately, however, because of the state of statistical data, it was not possible to accomplish this task in its entirety. Hence, in drawing up the present Control Figures, the State Planning Committee gave most of its attention to the most painstaking possible preparation of those partial balance estimates which in broadest outline define the relationship of parts that will ensure uninterrupted development of the whole economy. These estimates cover: the grain and fodder balance, the fuel and power balance, the foreign trade balance, the tentative state budget, the transport balance” the construction balance, the balance of the money and credit system, and the analysis of production costs of manufactured items. In this chapter devoted to general description of the methodology used in drawing up the Control Figures for 1926/27 we cannot go into the particular methodological techniques that were employed in studying the economic perspective in terms of the balances just enumerated. The respective information will be given in special parts of the text. Here we shall merely note that all these balance comparisons were made in far more elaborate and detailed form than last year. Essentially new is the attempt to project the commodity turnover of the peasant sector, and to construct a balance sheet for consumption of and demand for manufactured goods and one for the incomes and outlays of the population. Here we are coming close to uncovering a whole series of major economic indicators, in particular indicators which define the market equilibrium between commodities of industrial and agricultural origin—a problem which is of decisive significance for any economic planning in our country.

As the regularities ascertained for the recovery period become less and less applicable to the new conditions of economic development, the elaboration and refinement of perspective economic plans by means of a system of balance estimates emerges more and more compelling* as our immediate task. Scientific statistical theory does not give us the formal right, from the mathematical standpoint, to extrapolate into the future the dynamic trends of the past. Any such extrapolation can be justified only by substantive economic analysis showing that the motive forces that gave rise to a current developmental trend will not cease to operate in the future. Exhaustion of the motive forces of the recovery process makes highly problematic prognoses that are based on dynamic coefficients characteristic of past years. But it is self-evident that those dynamic indicators which are functionally or correlatively tied to factors of which we have precise knowledge, and which lend themselves to quantitative calculation, retain their importance.

The static coefficients, i.e., constant quantitative relationships between variable elements of the economic whole, continue to be a more dependable tool for forecasting. In every branch of the economy there is a whole series of relationships which maintain their stability for many years, despite the sharpest changes in the rate of over-all development. Without using those static coefficients (to fill in the gaps in the actual book-keeping with appropriate interpolations and extrapolations) one cannot conceivably draw up a single one of the above-mentioned balance estimates. Naturally, the balance formulations themselves take on a provisional, approximate character because of this, and to determine how accurate they are one needs in each particular case to know the degree of stability of the coefficient used. Even if this object is unattainable, however, the coefficient may, under certain circumstances, have orientational significance. Actually, since in spite of the transition to a new period of economic construction we do not anticipate, at any rate do not plan, changes of a crisis nature in the relationship of key segments of the economy as a whole, the static coefficients, which embrace a massive and structurally complex body of economic phenomena, should remain rather stable over short intervals.

Thus the nature of the problem of economic planning, as it relates to the particular characteristics of the period we are living through, obliges us to consider the system of balance estimates as the basic method for drawing up and justifying the Control Figures; as they are expanded and perfected, and provided the gaps in our statistical knowledge of reality are filled in, these estimates should eventually combine to form an integral balance of the economy of the USSR.

The static coefficients of whose stability there is no question are used both as a technical tool in the formulation of the balance estimates themselves and later on as a control. The dynamic series of the recovery period can no longer be relied upon as prospective guidelines unless their applicability under new conditions is specially proven for each particular case.

In the past year a major role in drafting the Control Figures was played by the method of expert estimates. Having made their prognosis of economic development on the basis of partial balances and consideration of the consistent dynamics of past years, the Gosplan workers verified individual elements of their projection by querying specialists-representatives of government departments-who, on the basis of all the information available to them, estimated the resources and the potentials of each branch of the economy.

This somewhat primitive way of operating was inevitable as a first attempt at a time when not only the methodology and techniques for drawing up the Control Figures, but the very idea behind them, were not yet fully understood. In the current year the Gosplan of the USSR has taken a number of preparatory measures with the object of securing more orderly and productive collaboration among the planning personnel of the Union in the drafting of Control Figures. In March and May 1926 the Conference of Planning Workers, in which heads of republic and district planning commissions as well as representatives of government departments were active participants, thoroughly discussed the tasks entailed and the methods to be employed in drafting the Control Figures and worked out the form for a summary table. The intention was, furthermore, to plan subsequent work so that the Control Figures could be broken down by the major territorial divisions of the Soviet economy for the next year.

As it turned out, this aim was not fully attainable this year but the ground has now been adequately prepared for its achievement next year.

After having participated in the preliminary methodology conferences arranged by Gosplan, the central government departments have shown far more initiative and energy in the concrete drafting of the Control Figures for 1926/27 than they did last year. They have now presented Gosplan not with separate expert estimates, but with a harmonious, internally coordinated system of such estimates. This should be said in particular for the Supreme Council of the National Economy (SCNE), which submitted to Gosplan the results of an attempt to draft Control Figures that take in not only state industry but all other sections of the Soviet national economy, results which are exemplary in their detail and in the great care with which they were worked out....

The People’s Commissariat of Trade presented a domestic and foreign trade balance worked out in detail. The People’s Commissariat of Finance came up with a number of detailed reports in which it sought to prove in thoroughgoing fashion the impossibility of scientifically forecasting the dynamics of monetary and credit circulation for a year ahead, and the impossibility, therefore, of drafting a perspective plan for the national economy, for without a balance of the money and credit system such a plan is, of course, unthinkable. This is a negative conception, but no less consistent and coherent in its negativeness than the positive constructs of the other people’s commissariats. Though guided by the whole body of these preparatory works, Gosplan used the control figures of the SCNE, as the most complete and best thought out of all the positive conceptions submitted to it, for its basic material in framing the concrete plans for the year ahead. The critical verification of that projection consisted mainly of assessing the tangibility of the resources required for the rate of industrial expansion which SCNE had assumed. For the current period the point of greatest danger in this respect is the export-import plan. After the unfavorable trade balance last year and over a number of months this year, it has become imperative that a favorable balance of trade be planned for and achieved next year, in particular, a favorable balance of payments, which would permit replenishment of the foreign exchange reserves in the state treasury. Having subjected SCNE’s export-import assumptions to detailed analysis from this standpoint, the Gosplan came to the conclusion that they did not guarantee the achievement of as large a favorable balance as is required for the stability of the economy’s equilibrium in the coming year. As a result, the contemplated volume of imports was reduced somewhat, which in turn necessitated cutting down the rate of economic construction to a corresponding degree and tracing the effects of that reduction through the entire system of economic interrelationships expressed by the Control Figures.

In this revision, Gosplan was above all mindful of two weak spots that had already emerged, aggravation of which had to be avoided at all cost or the economy of the USSR would find itself in a most trying situation in the coming year or the one after that. In the first place, when the import quotas were cut, every effort was made to see to it that the textile industry, and other branches of light industry in which the rate of output growth could not be reduced without aggravating the goods famine, were supplied with adequate quantities of raw materials. In the second place the Commission on Control Figures tried as far as possible not to cut back those capital construction projects whose completion in the coming year is essential for production to proceed normally in the next few years.

We have managed to accomplish this double task only approximately. There is apparently no reason to expect a general aggravation of the goods famine under the scheduled program. Bui the possibility is not excluded that particular popular commodities that are in “short” supply at the present time will be in even shorter supply in 1926/27.

As for the rate of output growth in 1927/28, owing to the unavoidable contraction of capital construction projects in the metals industry, it must undoubtedly decline somewhat as compared with what the situation would be if the SCNE’s Control Figures were fully realized.

Given the limited extent of domestic accumulation and the absence of adequate foreign credits, the urgent need for large capital construction projects is inevitably leading to a substantial slowdown of the rate of growth in the output of direct consumption goods; even so, in the coming year of 1926/27, the increment of gross output in industry registered with SCNE will still reach a most impressive figure of over 15percent(as against the original SCNE projection of 18 per cent).

The task of halting the erosion of fixed capital in all the branches of the economy of the USSR-a task also set by previous Control Figures-will not be finally accomplished next year either. In railroad transportation big improvements have been made, but all the same so-called “neglect” (particularly in ties and rails) will come no closer to being ended in the year ahead, and is even likely to increase somewhat. As in the current year, housing construction will be held to a minimum. In the 1926/27 Control Figures, Gosplan sees no possibility of going beyond the maintenance of present housing per capita at a stationary level, while the average housing conditions of the working class still continue to worsen.

To the extent that the potentialities of the recovery process have not yet been exhausted, comparison with prewar data retains its orientational significance for the dynamics of economic phenomena.

With the exhaustion of these potentialities, the forces which have automatically been heading the dynamics of the economic process toward the restoration of prewar relationships are disappearing. In this sense, for the year 1926/27 the prewar data are no longer of particularly great importance as a control and check....

The entry of the Soviet economy into a new phase, the basic directive for which is “reconstruction,” creates the necessity, on the one hand, of comparing the Control Figures for each year with the long-range perspective and general plans for economic construction, and on the other hand, of paying particular attention to our ties with the outside capitalist world, which take on especially great importance in this period. We were unable to make the first comparison this year, since the drafting of the perspective and general plans had not yet been completed; we are including the second comparison in the program of the Control Figures starting with the current year.

Kontrol’nye tsifry iiarodñogo khoziaistva na 1926/1927 god. USSR Gosplan. Published by Planovoe khoziaistvo, Moscow, 1926, pp. 10-18.