Gosplan

CONTROL FIGURES OF THE ECONOMY, 1925/26

Basic Conclusions of the Commission for the Drafting of Control Figures

STATEMENT OF THE PROBLEM

The Commission for the Drafting of Control Figures saw its task as being: to present, for the coming year, the basic contours of the most important elements of the national economy, to establish their interconnection, and to sketch the state of the economy as a whole which would in all probability be attained in the year to come, i.e., to draw up a tentative balance sheet for the economy a year and half in advance. The commission thought it necessary, simultaneously with the establishment of the Control Figures, to outline the system of economic measures needed to realize the tendencies and plan targets underlying the prospective national economic balance.

The system of Control Figures thus formulated and the system of economic measures organically connected with it constitute the plan for the national economy and contain the tasks which the state authority must set in the sphere of the national economy....

METHODOLOGICAL PART

For clarifying the basic lines of our economic development and the quantitative relationships that link the separate elements of the economy into a single organic whole, the Commission employed three chief methods: (1) the method of dynamic coefficients, these coefficients being obtained through analysis of the actual evolution of our economy in recent years; (2) the method of expert determination of advances economically and technically feasible in the separate branches of the economy in the coming year; (3) the method of control comparison of the results obtained with each other and with the corresponding prewar data.

I. The Method of Dynamic Coefficients

In extrapolating time series, in ascertaining trends of development and finding coefficients describing the dynamics of the present and near future, the Commission used as regulative principles for its formulations a number of regularities which have begun to emerge in our postrevolutionary economy. The most important of these regularities are the following:

(1) In the period of economic dislocation, the forms of economic activity that were hardest hit were those which were the most complex in their organization and had the highest technological level (metallurgy and metal working), while the organizationally and technologically primitive branches (agriculture and certain handicrafts) held their own best. On the other hand the least disorganized were the branches that serve primary needs (food, fuel, clothing), while the production of means of production was stricken with all but total paralysis.

(2) Accordingly, the more urgent the need gratified by a given branch, the sooner that branch is embraced by the recovery process, and, all other things being equal, the greater had been the disorganization in the period of economic dislocation, the faster recovery proceeds.

Thus agriculture, which had undergone the least deformation, is the first to take the path of rebirth and growth, but the rate of its growth is slower than the rate of industry’s growth. The branches of the latter are drawn into the process of economic rebirth in the following sequence: food industry, clothing and footwear, fuel, and finally, last in turn, metallurgy and metal working. In 1922/1923 and in 1923/24 light industry producing articles of direct consumption was predominant in the over-all scheme of economic recovery, whereas in the current year, and in the coming year especially, the production of means of production is in the forefront, running well ahead of all other branches in the rate of its development. The era of War Communism made a shambles of the monetary system in particular. Credit was eliminated altogether. Naturally, in the era of the New Economic Policy the supply of money has been growing, and should continue to grow, considerably faster than the commodity turnover, and credit faster than the supply of money. There is nothing menacing in this sharp shift of the center of gravity, this extremely rapid change in rates of growth, or in their seeming disproportionality. On the contrary, an immanent regularity of the recovery process is manifesting itself here; the economy is passing through, and must get over, these temporary disproportions so that those relationships of its parts may be established which are essential for further normal development.

(3) However, even in the present phase of development, abnormal in its structure and the immensity of its scope, empirical investigation reveals a number of rather stable quantitative coefficients (e.g., the ratio between the value of the agricultural and industrial outputs fluctuates within narrow limits around37:63)¹ which makes it possible to establish, not only for the present but for the immediate future as well, a dynamic system of equilibrium, i.e., the kind of quantitative ratio between the separate segments of the national economy as a whole that must be established if the coming development is to be accomplished as painlessly as possible and yield optimum results with the least expenditure of effort.

II. The Method of Expert Estimates

The results of studying dynamic curves, and their extrapolation on the basis of stable relationships and coefficients observed in the course of our economic development, have been compared with the expert estimates of specialists, who in formulating developmental prospects started from a concrete calculation of the economic and technical capabilities of a particular branch of the economy. In the vast majority of cases, both the preliminary calculations of the Commission and the estimates of the experts were in agreement that the rate of economic growth in the coming year would be determined, by and large, by whether there is hundred-per-cent utilization of all available material resources, and all the fixed capital inherited from prerevolutionary times is brought into use in the economy. However, in particular branches, the estimates of the experts have qualified this general requirement with some special restrictions, or, as the Chairman of the Supreme Council of the National Economy [SCNE] put it in his report, “limits.” In the opinion of the SCNE rapporteur these limits may be rooted not only in the state of technological equipment, but in one of the following factors: (1) market capacity; (2) availability of domestic raw materials; (3) import possibilities; (4) financial possibilities.

He found the development of the salt and metal industries limited by the capacity of the market. Definite limits are placed on the development of the paper, starch-and-molasses, and agricultural machinery industries by the state of mechanical equipment. Domestic raw materials place a limit on the development of the tobacco and wool industries. The possibility of imports determines the limits to the development of the rubber industry and the tanning industry.

Representatives of the People’s Commissariat of Labor have pointed to the shortage of skilled workers in certain categories as a limiting factor. The representatives of the People’s Commissariat of Finance have cited still another: the availability of foreign exchange, which determines the degree of monetary coverage of the chervonets and hence of the whole supply of money, and determines the volume of credit. In agriculture the limit may be set by the availability of draft animals, which determines the possible extent of the cultivated areas, and by the possible output and import of mechanical prime movers to replace horses. Transport operations are limited by the availability of rolling stock and the condition of the roadways. In their grand totals, the experts’ concrete estimates of the prospects for economic development were expressed in approximately the same figures as those which the Commission had arrived at by operating with the method of dynamic coefficients, though the Commission could not admit that particular limiting factors pointed out by the experts were of independent significance. Thus the capacity of the market for particular products is not a given entity, fixed, so to speak, in the natural order of things, i.e., in some absolute units of measurement, but in an enormous majority of instances is a function of price policy; and the possibilities in the sphere of price policy turn, in the final analysis, on the general level of the country’s productive forces. The same must be said, mutatis mutandis, in regard to export and import possibilities. The condition of available equipment is a limiting factor only to the extent to which financial resources, i.e., the magnitude of national accumulation, exclude the possibility of re-equipment on a large scale. And even the shortage of skilled workers, given the impossibility of training them domestically within a short period of time, is an insurmountable barrier to the expansion of production only insofar as it concerns large numbers of the proletariat: the few particular categories of indispensable specialists can be replenished by hiring workers of the respective skills from abroad.

In a word, the significance of the separate factors limiting the possible rate of the national economy’s development can be gauged not through their isolated analysis but only in the general context of the economy’s development taken as a whole From this point of view, what must be regarded as the over-all limit to the possible rate of the national economy’s development, a limit determining all the partial limiting factors, is the magnitude of national accumulation in its material form, i.e., the aggregate of all newly produced wealth which is left over after the needs of simple reproduction have been met, and thus constitutes the material basis for reproduction on an enlarged scale and for reconstruction.

Unfortunately, the resources for calculating the magnitude of national accumulation are especially scanty and unreliable. The modicum of direct data that does exist in this area, and the indirect indicators which have made possible the formulation of a more or less plausible hypothesis, have led the Commission to conclude that in the coming years capital projects to be managed out of accumulation can and must take on much broader scope than was the case in the preceding year, that the task that can and must be set in 1925/26 is to stop the squandering of fixed capital in all those branches of the economy in which this destructive process still continues. As for new construction, for the time being it is feasible only within very narrow limits: only where it is necessary for activating means of production in being or where low points that are beginning to appear in particular segments of the economy threaten to be a drag on the growth of the national production as a whole.

The level of world prices may be considered another “limit” having independent and general significance. As long as our economy, by virtue of the circumstances which arose in the early years of the revolution, represented the purest example of “autarky,” the system of dynamic equilibrium of our internal economic relationships was not appreciably influenced by the world market. At present, with export-import operations intensively expanding and amounting to a respectable figure of the order of two billion rubles on the prospective balance sheet for the coming year, the world market is far from being a matter of indifference to us and in our domestic price policy we must henceforth reckon most seriously with world price levels.

This consideration, in conjunction with domestic market sales conditions deriving from specific characteristics of the year ahead (large harvest, abatement of the goods famine given attainment of the expected rate of development for industry), has impelled the Commission to adopt a rather significantly lowered general index of commodity prices, in its tentative formulations.

III. The Method of Control Comparisons with Prewar Data

The prospective figures obtained through investigation of dynamic series and collated with the experts’ calculations were subjected to comparison with prewar data-an operation which has played the role of the final control stage, as it were, in the Commission’s work.

It is self-evident that the Commission did not in any way regard the prewar relationships as ideal norms which must at all costs be given embodiment by the contemporary process of economic recovery. The prewar figures as such, without any corrections, served as the control stage only in those particular instances where the actual mechanics of the Soviet Union’s economic resurgence assures the re-establishment of the old proportions and relationships. Especially is this true where the economic resurgence amounts to the activation, to the involvement in the productive process, of hitherto unutilized fixed capital. Indeed, it is perfectly obvious that inasmuch as we are putting the old equipment to work and using the old mechanical methods to operate it, we are getting the old, or very close to the old, production results and their quantitative ratios. The Commission introduced an appropriate correction factor in its control comparisons of prospective with prewar figures whenever the deviations from the prerevolutionary economic structure could be given a more or less definite quantitative expression. Examples of this are the output of those few branches in which more or less substantial reconstruction has already been accomplished and, in particular, a good many phenomena in the sphere of commodity and monetary circulation, which at present has an organizational structure basically different from what it was in the tsarist empire. Finally, in some instances, the deviations from the prewar norms and patterns were such that there was no possibility of expressing them in numerical coefficients. This was true, for example, of the contemporary relationships between the wage levels of skilled worker s in various occupations. The aforementioned dynamic regularities of the recovery process manifest themselves here too, and no less distinctly than in other spheres of the economy, but we can already say confidently that the system of equilibrium toward which this dynamic is gravitating will have very little in common with the prewar wage differentiation: those categories of workers who by virtue of specific characteristics of the old regime came in for more than their share, so to speak, of enslaving exploitation, will never return, in the sphere of labor payment, to the position they occupied relative to other workers in the old days.

Thus the prewar relationships, as the Commission saw it, were not a norm, not a model for prospective thinking, but merely an arbitrary measuring scale which, for all its imperfections, could not be discarded and in very many cases performed indispensable services. For example, the Commission was able to determine the prospective growth of output and labor productivity using the method of dynamic coefficients and expert estimates only in the most important labor fields, which are under systematic observation. Mechanical application of coefficients from the fields in which they are being calculated to others in which they are not leads to implausibly exaggerated indices not only for these secondary industries for which calculations are not being made, but for industry as a whole. And yet without comparison with the prewar data, this implausibility might easily have escaped the Commission’s notice just as it has thus far escaped the notice of quite a few analysts who have used the figures obtained through the unwarrantable extrapolation just mentioned. Comparison with prewar data not only uncovered this serious error but also provided the Commission with a yardstick-though a rough one to be sure-for making the necessary rectifications.

Besides the tremendous methodological value-the value of a control technique which makes it possible to establish the admissibility or inadmissibility of particular indirect calculations-comparison with prewar relationships is of great interest even in those cases where the concrete data being compared have been obtained by direct calculation and do not in themselves raise any doubts, for it is this sort of comparison that strikingly reveals the specific features and changes characterizing the structure of the economy at the level which it has today attained in its development. Guided by this consideration, the Commission has not only employed comparison with the prewar period as a methodological technique of investigation but has also used the percentage relationship to prewar levels as one of its basic gauges in formulating the conclusions grouped in the summary table....

Kontrol’nye tsifry narodnogo khoziaistva na 1925/1926 god. USSR Gosplan. Published by Planovoe khoziaistvo, Moscow, 1925, pp. 7-15.

1. This prewar ratio of the value of agricultural and industrial outputs, computed by Groman and alleged by him to “represent objectively a regulative norm of our current economic progress,” constitutes one of the key “empirical regularities” on which he built his planning analyses of the mid-1920’s. This alleged norm was soon discarded by the “teleologists” whose influence started to grow in the late 1920’s.—Ed.