G. M. Krzhizhanovskii

INTRODUCTION TO “PROSPECTIVE DEVELOPMENT OF THE NATIONAL ECONOMY OF THE USSR FROM 1926/27 TO 1930/31”

1. The transition to the phase of reconstruction brings to the fore the obvious need for “reproduction on an enlarged scale” in our economic planning work. Control figures, operational annual economic plans, and conjunctural calculations are coming to be inadequate; the concerns of the moment are increasingly dominated by the long-range perspective, in which the five year cycle must inevitably attract our particular attention. There are several reasons for this. In the first place, a five-year period is inclusive enough for construction of large-scale economic works: large main regional supply channels, trunk-line railroads, irrigation projects, etc. In the second place, there is a definite cyclical pattern to be observed in our agriculture, making it possible to base perspective estimates on the average yield, and to do so specifically for a period of five years, for it is a rare case when good years extend beyond a three-year period. In the third place, finally, breaking the General Plan down into five-year cycles has its advantages in that it subdivides general economic tasks into major construction stages, enabling the planners to focus their thinking on the basic, the most important, aspects of economic construction as a whole.

One should not, however, overestimate the extent to which perspective five year plans of this kind can be of assistance, particularly during the next few years of transition from the phase of our economic recovery to projects for the thorough transformation of our entire economy. This period, as one in which the economic organism will be torn asunder, is unquestionably a particularly difficult period for any prognosis, since the very nature of its transitional structure largely precludes extrapolation from the economic dynamics of the past, which in their further course are due to change the basic connections and relationships established earlier. And, on the other hand, to be able to contrast with the laws of the earlier economic structure those laws which we foresee in the fully developed phase of the new relations that are forming, five years is too short a period. The upshot is that the people working on the economic five-year plans that are being projected are at a singular disadvantage: they are sailing away from old shores, while the contours of the new shores ahead are visible to them only in very general and blurred outline. Hence the extremely provisional nature of the five-year prognosis and the particular danger-against which Vladimir Ilich was so careful to warn us in his time-of a bureaucratic attitude to five-year plan material. It is to be anticipated that, by and large, we shall follow the same path in this work as we have followed in putting together our Control Figures and in our work on the General Plan. We started with imperfect attempts; and, by preparing a whole series of variants and learning from our own mistakes, have year by year been feeling our way to superior working methods and selecting superior material as support points in our economic work. If in its individual sections our present Five-Year Plan represents a selection from many, many variants projected earlier, then obviously it is only by this method of gradual, successive approximations that we shall bring the Five-Year Plan as a whole to its typical form. In its initial draft it will inevitably suffer from an abundance of superfluous material and from imprecise dovetailing of its separate parts. Unperturbed by this circumstance, we must give the planning workers of the USSR and our large body of management personnel the fullest possible picture of the material on which the Five-Year Plan is based; we must take them into our laboratory, where the work is in the nature of a rough draft and will inevitably continue to be rough for a considerable period of time. It will be possible to move on from rough-draft material to compact and definitive material, to simple and concise formulations, only if a vast collective is engaged in this work. At the next congress of Gosplans and planning workers we shall only be starting on the first stages in processing the primary data, counting on collective work as the surest path to necessary improvements and refinements.

2. The provisional character of the economic prognosis in the perspective Five-Year Plan is aggravated by the fact that in dealing with plan problems that encompass an artificially isolated calendar period we cannot and should not keep strictly within the limits of this period. The proper handling of our work would require that the drafting of the Five-Year Plan be preceded by a rounded analysis of the basic economic stages projected by the General Plan. Unfortunately, circumstances have so turned out in our work that revision of our first General Plan, the GOELRO Plan, has dragged out, and is lagging behind completion of our work on the Five-Year Plan. The reason for this is not only that the General Plan involves work on a far vaster scale, but that organizing the personnel drawn into General Plan work is a matter that requires eliminating a whole series of defects in the present structure of the planning agencies. And, as was noted at the First Congress of the Gosplans, a particular factor of a most negative character has been our tardiness in reforming the regional economic division of the Union.

While reckoning with this basic shortcoming, we must nevertheless take everything we possibly can from the extensive material of the General Plan, in order to safeguard our Five-Year Plan against future lack of coordination with the General Plan. However difficult a task this may be, we shall have to give it special attention, for this is the only way in which the Five-Year Plans framed by Gosplan can come to represent work of a higher order than that of the departments, as they must in conformity with the assignments that justify Gosplan’s very existence.

Let us dwell on this matter. What we shall have to borrow from the General Plan first of all, and to treat as largely transcending the bounds of a five-year survey, is the material that constitutes the backbone of both the General Plan and the entire reconstruction program-the whole of the fuel and power problem. We shall be able to do this all the more easily in that we have been moving at a much faster pace in this particular field, and, as experience has shown, our prognosis for construction in the field of electric power and for fuel supply and consumption is every bit as accurate as desired. This circumstance, incidentally, enabled us to come up with assumptions regarding the five-year electrification plan without even waiting for the actual Five-Year Plan to be drafted. All the Five-Year Plan material does is once more confirm the soundness of the fundamental general conclusions reached in the GOELRO Plan. Comparing the key indices for the economic structure of the USSR, Germany, and the United States, the personnel of our sector of world economy come to the following general conclusions:

“(1) The development projected by the perspective plan unquestionably brings our economic structure closer to the structures of Germany and the United States.

(2) This is evidenced above all in the rapid reduction of the weight of the labor force (as motive power) and of the population (as consumer) relative to the dimensions of the national economy as a whole.

(3) The increasing relative weight of electric power production is especially conspicuous. Still, attention should be called to the fact that by 1930/31 we shall be producing considerably more power per worker than Germany in 1926, which indicates the fundamental and highly auspicious difference between our development and the way Germany and the United States have developed in the past.

(4) The fact that the increase in the (relative) weight of electric power production is occurring without an increase in the (relative) weight of coal consumption indicates that the increase in electric power output will come primarily from the utilization of hydraulic power and local fuels. At this stage in the reconstruction of our economy we are most expediently deviating from the ratios in Germany and the United States.”

We have taken the liberty of quoting this rough-draft material from one of the sections of our Five-Year Plan because it superbly illustrates the soundness of our whole power-reconstruction policy, and because it represents an independent conclusion reached by the new group of Gosplan workers in the world economy sector which we recently established.

But there is more to the fuel and power sphere than energy resources that we take from inanimate nature. In the final analysis, all our accomplishments in this direction are merely contributory to the equipping of human labor. The fact that in all our economic thinking we are concerned with the building of a socialist society thrusts the factor of human labor even more dramatically to the forefront. Thus the gigantic problem of organizing human labor, the determination of proper socialist perspectives for organizing that labor, represents for us the commanding height in the fuel and power sphere, and it is here that we feel a special need for the respective landmarks of the General Plan. It should be noted that the general demographic data provided us by the all-Union population census that has just been taken can in this instance stand us in very good stead. Even in the partial form in which these data are usable at the present time, they lay bare for us the basic factors in the present disproportions in this area, and enable us to map general policy with respect to crucialproblems: unemployment, agrarian overpopulation, and housing; the problem of the ratios between extensive and intensive farming, between large-and small-scale production, between seasonal and public works, etc.

The second section postulated in the Five-Year Plan on the basis of the General Plan is the whole section devoted to major construction projects in industry, agriculture, and, in particular, transport. The fact alone that a five-year period seems to be the time normally required for building large installations and that bringing them into actual operation, into current economic use, falls outside a five-year span, is sufficient validation of this proposition.

A third section, extending beyond the scope of a five-year period in the play of its crucial factors, was to have been introduced from the part of the General Plan in which we establish the relationships of integral economic regions-their relative economic weights and their specific roles in the social division of labor. Here, unfortunately, we feel a particular lack of preparedness, for reasons noted earlier, and shall have to confine ourselves to fragmentary material. However, the existence of whole series of republic and province planning agencies will mean help for us, at least in the projection of preliminary guide lines.

3. In most of the Five-Year Plan drafts that have been prepared thus far, we observe a predominant tendency to base all the work on the method of extrapolation from the economic dynamics of the past. What largely accounts for this is that an extended-order, departmentalized front exists to this day in our planning work, the need for this kind of work flowing primarily from the conjunctural circumstances of the moment and from the requirements of actual economic operations.

The negative side to this arrangement of our work has been described above. But it has its strong point, too. Since in the General Plan we focus our attention on the main economic landmarks, on the broadest generalizations, on the ultimate goals of construction, we are obliged in the five-year economic plans to attend above all to the immediate economic needs dictated by economic experience. It should be added that there is an immense sphere of economic activity, namely, the entire sphere of our agriculture, in which our ability to set goals is most severely limited, and in which the law of large numbers and the method of extrapolation win far greater rights for themselves. While we thus have far less freedom of action here, on the other hand we have in this particular area-given proper handling of economic statistics-a whole series of factors insuring us against a whole series of errors of the kind that are easy to make when there is a plan goal. Comrade Vishnevskii correctly notes that in our work in the fields of industry and transport we must necessarily take the position of prescribing–and have sound enough arguments for taking this position–whereas in agricultural planning we must for the most part limit ourselves to forecasting, which we can do to the extent that relevant scientific statistics are available. The inadequacy of such statistics will at once be reflected in a correspondingly defective prognosis, but this is defectiveness of quite a different sort and takes us into the realm of mistakes that really should be put in quotes, at least insofar as the actual working method on the whole retains the character of scientific analysis even in the face of these mistakes. An indisputable conclusion follows from this: the section of the perspective Five-Year Plan that deals with agriculture is of particularly vital interest to us not only because of the relative weight of agriculture in our economy as a whole, but because the sound drafting of this section can be a most essential safeguard for us against underestimation and overestimation in all goal-setting in our perspective economic plans.

4. We have tried above to show just how provisional our draft of the Five-Year Plan is, the reasons for this being, besides general circumstances in a period of economic transition, that the Plan is tied to the General Plan and that it entails economic forecasting in which the validity of the entire prognosis is limited by the fact that we have only a relatively scientific grasp of the developments being observed. But there is still another factor which in this case compels special caution in weighing the resources for Five-Year Plan prognosis. If reconstruction boils down to an effort to give our new economic structure a socialist character, then a special role will be played in our progress in this direction by the organizational forms which the working agencies of our economic and state organism assume in this next period. There is a good reason why the drive on bureaucracy and the quest for ways of reorganizing our most important economic departments and institutions should have acquired so spirited a character at this particular time. Cause and effect are changing place here in a most apparent manner. The basis for the stability of the Soviet economie and social organization—which even in its present form can be sharply and favorably contrasted with the corresponding front of the capitalist encirclement-is, of course, the gains that have been registered over the whole of the recovery period in our whole broad material base. The time is now coming for a kind of exchange of services: determined organizational reshaping of this operative general Soviet line so as to take further advantage of the emphasis on the vast collective of working people may, in its turn, play an enormous role in bringing at out a corresponding advanee in the material base of production. Precisely this emphasis accounts for a whole series of improvements in the functioning of our state and economy. It will suffice here to cite the interesting statement by Professor M. I. Bogolepov contrasting the basic economic orientation of our budget with that of the state budget in tsarist times, when outlays on the same economic needs came to barely 18 per cent of the total for all items, and when even in the prewar years that were economically the most progressive the balance of annual investments in industry failed to exceed the meager figure of 80 million prewar rubles.

However, this appeal to the organizational factor makes unmistakably clear just how relative is the significance of illustrations in which we use figures. On the other hand, it can hardly be disputed that this particular emphasis on the work of a vast labor collective and on the huge economic complexes of the socialist economy can be assessed in terms of concrete Five-Year Plan figures only with the greatest relativity. Hence the compelling necessity for this Five-Year Plan to have invoked the strategy of social engineering, i.e, its appeal not only to science, but to art as well.

5. To prevent our Five-Year Plan from turning into a sort of legalized graveyard of figures, we must subject it to further simplifying, systematizing, and rationalizing analysis. First of all, we must clearly recognize the relative importance of the calendar division by years in this Five-Year Plan. Though the Plan is based on a number of assumptions involving concrete figures for separate economic years, this is nothing more than an auxiliary method of illustration, for actually we do not by any means claim that this calendar framework is rigid. Given certain definite conjunctural conditions in our economy and the world economy, it may happen that the cycle of economic events charted by our Five-Year Plan will be completed in a period of some three years, whereas given an opposite trend, our Five-Year Plan may take six or even more years to complete. We must regard this Five-Year Plan not as a calendar program, not as a projection of the economic events of 1927/28-1928/29, etc., but as one of the variants in an economic series, [the variant] which assumes the existence of a so-called average economic trend. We know, however, that in the case of any scientific observation of a complex phenomenon which is a function of many variables, the generalized average curve is merely an abstraction from a reality that in fact deviates from-zigzags above and below-the smooth course of this ideal curve of average magnitudes. The practical applicability of an ideal average curve of this kind is always complicated, therefore, by the need to make allowance for a whole series of conjunctural features. This is why the notorious law of the chain linkage of economic factors is so relative when applied to practical administration of the economy, as we have had repeated occasion to mention.

In recommending our Five-Year Plan as a sort of economic series we are centering our attention on the possibilities as regards the tempo of our economic development, knowing beforehand that we shall progress in our searchings along these lines only by using the method which we have noted previously-the method of successive variant approximations. Thus with this Five-Year Plan draft we are merely opening a discussion of paramount economic problems, and the applicability of this Five-Year Plan and of the whole arsenal of its methods to actual economic operations should be treated only in this light.

Our previous work in the area of perspective planning clearly shows what difficulties are in store for us here. Examining the nature of the mistakes that we have made with perspective plans in the period of our economic recovery, we come to the conclusion that, by and large, the plans have suffered from substantial underestimation of our recovery capabilities. Appropriate adjustment of these plans has created among planning personnel a frame of mind in which with hindsight, so to speak, we are now palpably beginning to suffer from a kind of overestimation. Because we are nearing the end of the recovery period, we tend to believe that the perturbations which these underestimated potentialities of the recovery phase at one time caused in our plan drafting will be abruptly eliminated with our entry into the reconstruction phase. Hence the exaggerated pressure to reduce the pace being scheduled for our further economic development. I am very much afraid that the period of reconstruction is fraught with new surprises for us, of the same kind as those reflected in our underestimations during the recovery phase. It must not be forgotten that this recovery activity in the various areas of our economy confronts us squarely with the functioning of a highly imperfect economic mechanism that still awaits the events of its own economic October. Elementary rationalization of our basic economic units may be attended by such an upsurge in our over-all economic growth rate as to make its correct projection at the present time extremely difficult, particularly since natural cautiousness inclines us to underestimate, rather than overestimate, our reconstruction possibilities. In consideration of these circumstances, we suggest that in the further elaboration of the Five-Year Plan we concentrate on projecting two new economic series-a minimum series and a maximum.¹ These series should rest on the basic material in the initial rough draft of the Five-Year Plan but should isolate from its multipartite organism the basic economic indices-as few of them as possible. Our world economy sector, for example, has its fifteen or sixteen basic indices to suggest, and we shall have to give due heed to this suggestion as well as take account of the limitations that will inevitably underlie the final summaries of our general Five-Year Plan. Correct isolation of these basic indices is the hardest part of the whole economic analysis underlying this project. We shall also have to consider here the fuel and power aspect of our economic construction and all the bottlenecks in our current economic operations, bottlenecks which find such striking reflection in the prescriptions of our governmental and directive agencies. The viability of our Five-Year Plan depends entirely on our progress in this analysis.²

The minimum five-year economic series will graphically outline for us the economic bounds whose transgression will at once entail some functional upset in our economic organism. Actually approaching the index figures of this minimum series will be a clear signal to us of dangers ahead and duly forewarn us in our economic maneuvering. Herein lies the enormous ancillary importance of this minimum economic series.

In projecting our maximum five-year economic series we must boldly count on a number of favorable economic factors. Here, by the way, we can allow for the possibility of foreign credit, and for such a coefficient of added growth within our entire organizational framework, such an upsurge of our over-all Soviet efficiency, as would naturally be rejected if we were considering medium capabilities. This work of drafting a maximum five-year economic plan has its difficulties: the exertion required to accomplish the plan must under no circumstances develop into overstrain which could in turn cause unhealthy developments in the economy. The index figures of this maximum economic series will serve as a useful scale for assessing our progress in socialist construction.

In drawing up our annual Control Figures we shall rely on precisely these two economic series, for they will constitute series of special control figures projected by the Five-Year Plan. With our planning work set up in this fashion, the drafting of Control Figures will by no means amount to merely copying relevant indices out of the draft Five-Year Plan, but will demand of us specific analysis of the concrete annual economic trends; this analysis will represent further normal refining of the planning assumptions which are of a more general character, the necessary refining that is prescribed when we move on to economic practice. Everything in its proper place.

6. As we go deeper in the field of our economic work, we multiply the number of front-line areas in which retreat would be synonymous with defeat. We started with the elementary notion that the technical equipment of our labor force should correspond in degree with that of labor in the capitalist countries. In accordance with the counsels of F. Engels and Comrade Lenin, we especially singled out projects in the field of electrification, which allow of accomplishing this re-equipment of labor with minimum outlays and maximum economic and social effect. A study of the postwar economic structure in the West and a stock-taking of the circumstances of our postwar crisis made it necessary for us to lay special stress on electrification as both motive element and crowning element in the reconstruction of the country’s whole power base, and as the very best method of heightening the country’s general efficiency.

A study of the disproportions in our economy compels us to endorse with particular insistence the emphasis on the economy’s industrialization at maximum speed, without which we see no possibility of an upsurge in the whole power sphere.

We cannot accomplish this industrialization in our country by the usual imperialist method, i.e., through expropriation of the peasant masses and the plunder of colonial countries. Hence the compelling necessity of planned economic development and of friendly alliance between the proletariat and the peasantry and between the Soviet republics and the colonial and semicolonial countries freeing themselves from imperialist coercion.

The unavoidable implacability of the whole capitalist encirclement toward us obliges us to give special attention to organizing our own internal market and building the kind of economic complex that will ensure both our defensive capability and further economic progress “on our own”: hence the unavoidable emphasis on both heavy industry and the production of means of production as central to our general economic efficiency and defense capacity.

The very first attempts at setting up a smooth-running economic mechanism show us the difficulties in store for us on this path under these specific circumstances in which our economy is half isolated from the world consumer and capital markets.

Shortages in the supply of raw materials and shortages resulting from the underdevelopment of transport are making themselves felt more and more acutely. But at the same time, the projects getting under way in the power field already give clear promise of happily resolving those difficulties in our economy which, all during the past, have been linked with our fuel budget.

The raw material problem is once again bringing us face to face with the huge and complicated question of rationalizing the whole pattern of our agriculture, of dividing it into specific regions, while transport problems are confronting us point-blank with the whole question of our commodity circulation and of our inter-district ties as a whole.

Inquiry into the circulation of goods and into the general problem of our economic ties, along with the problems involved in the economic appraisal of the entire mechanism of growth, have posed for us highly acute questions relating to our domestic and foreign trade, and problems in the area of prices and currency. Side by side with very great accomplishments, there are both new difficulties developing and new stages unfolding in our economic work in this sphere, too.

The very first attempts made by our Central Commission for Perspective Planning, with Five-Year Plan data as its guide, to illustrate, concretize detail, and summarize our requirements in these areas involving directives show us that the respective estimates for the variant series of this Five-Year Plan can be of vast practical importance. Comrade Strumilin’s calculations raise quite a number of new points for our economic discussion and provide rich illustrative material on the pre-eminent problem of further consolidating the union with the peasantry and further resolving the age-old contradictions between town and country. They indicate, incidentally, that the series of great capital construction projects that has been scheduled for the next few years by our directive agencies represents for us a kind of historic necessity for ensuring the most expedient utilization of our enormous resources of human and animal power. They face us with a whole series of specific difficulties in the phase of our economic reconstruction: there will be a particular concentration of these difficulties in the next five years....

S. G. Strumilin, ed., Perspektivy razvertyvaniia narodnogo khoziaistva SSSR na 1926/27-1930/31 Materialy Tsentralnoi Komissii po Piatilet-nemu Planu (Materials of the Central Commission on the Five-Year Plan), Moscow, 1927, pp. xv-xxii.

1. To avoid misinterpretation, we stress that by “series” we mean a series in the mathematical sense, i.e., a series coordinated by an internal law. Such a series is the demonstration of a system of numbers.

2. The generalized articles by S. G. Strumilin are a superb beginning in this respect.