Post-Soviet enterprise allocation was determined by centralized ministry archives and political negotiation
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Historical and economic evidence demonstrates that the Soviet economic model relied on central planning agencies and ministries to set production quotas and distribute enterprise inputs, while the formulation of plans involved extensive bargaining and negotiations between ministries and enterprises.
was relayed from enterprises to planning ministries. Aside from the Soviet Union and Eastern Bloc economies, this economic model was also utilized by
Socialist economics comprises the economic theories, practices and norms of hypothetical and existing socialist economic systems. A socialist economic system is characterized by social ownership and operation of the means of production that may take the form of autonomous cooperatives or direct public ownership wherein production is carried out directly for use rather than for profit. Socialist sy
Economic planning is a mechanism for the allocation of economic inputs and decision-making based on direct allocation, in contrast to the market mechanism, which is based on indirect allocation.
Economic planning is not synonymous with the concept of a command economy, which existed in the Soviet Union, and was based on a highly bureaucratic administration of the entire economy in accordance to a comprehensive plan formulated by a central planning agency, which specified output requirements for productive units and tried to micromanage the decisions and policies of enterprises. The command economy is based on the organizational model of a capitalist firm, but applies it to the entire economy.
Various advocates of economic planning have been staunch critics of command economies and centralized planning. For example, Leon Trotsky believed that central planners, regardless of their intellectual capacity, operated without the input and participation of the millions of people who participate in the economy and understand the local conditions and rapid changes in the economy. Therefore, central planners would be unable to effectively coordinate all economic activity because they lacked this informal information.
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Economic planning is not synonymous with the concept of a command economy, which existed in the Soviet Union, and was based on a highly bureaucratic administration of the entire economy in accordance to a comprehensive plan formulated by a central planning agency, which specified output requirements for productive units and tried to micromanage the decisions and policies of enterprises. The command economy is based on the organizational model of a capitalist firm, but applies it to the entire economy. Various advocates of economic planning have been staunch critics of command economies and centralized planning.
Many different proposals for socialist economic systems call for a type of mixed economy, where multiple forms of ownership over the means of production co-exist with one another. Alternatively, a mixed economy may also be a socialist economy that allows a substantial role for private enterprise and contracting within a dominant economic framework of public ownership. This can extend to Soviet-type planned economies that have been reformed to incorporate a greater role for markets in the allocation of factors of production.
Some believe that according to Marxist theory this should have been a step towards a genuine workers' state. However, some Marxists consider this a misunderstanding of Marx's views on historical materialism and of his views on the process of socialization. Characteristics of the Soviet economic model included: production quotas for every productive unit. A farm, mine or factory was judged on the basis of whether its production met the quota. It would be provided with a quota of the inputs it needed to start production, and then its quota of output would be taken away and given to downstream production units or distributed to consumers. allocation through political control.
In contrast with systems where prices determined allocation of resources, the Soviet bureaucracy determined allocation, particularly of the means of production. The prices that were constructed were determined after the formulation of the economy plan, and such prices did not factor into choices about what was produced and how it was produced in the first place. full employment. Every worker was ensured employment. However workers were generally not directed to jobs. The central-planning administration adjusted relative wages rates to influence job choice in accordance with the outlines of the current plan.
After the end of the Second World War in 1945, the seven countries with communist governments in Central and Eastern Europe introduced central planning with five- (or six-) year plans on the Soviet model by 1951. The common features included the nationalization of industry, transport and trade, compulsory procurement in farming (but not collectivization) and government monopolies on foreign trade. Prices were largely determined on the basis of the costs of inputs, a method derived from the labour theory of value. Prices did not therefore incentivize production enterprises, whose inputs were instead purposely rationed by the central plan.
Germany appointed union representatives at high levels in all corporations and had much less industrial strife than the United Kingdom, whose laws encouraged strikes rather than negotiation. National planning for industrial development. Demand management in a Keynesian fashion to help ensure economic growth and employment. ==== State capitalism ==== Various social democratic mixed economies are state capitalist, consisting of large commercial state enterprises that operate according to the laws of capitalism and pursue profits, that have evolved in countries which have been influenced by various elected socialist political parties and their economic reforms.
India proceeded by nationalizing various large privately run firms, creating state-owned enterprises and redistributing income through progressive taxation in a manner similar to social democratic Western European nations than to planned economies such as the Soviet Union or China. Today, India is often characterized as having a free-market economy that combines economic planning with the free market. However, it did adopt a very firm focus
the responsibility of enterprise managers. The national state budget was prepared by the Ministry of Finance of the Soviet Union by negotiating with its
The economy of the Soviet Union was based on state ownership of the means of production, collective farming, and industrial manufacturing. An administrative-command system managed a distinctive form of central planning. The Soviet economy was second only to the United States and was characterized by state control of investment, prices, a dependence on natural resources, lack of consumer goods, sho
Combining the broad objectives set by the Council of Ministers with data from lower administrative levels about the current state of the economy, Gosplan developed preliminary plan targets through a process of trial and error. Among the more than twenty state committees, Gosplan was the most important agency in the economic administration, heading the government’s planning apparatus. The planners’ primary task was to balance resources and requirements, ensuring that the necessary inputs were available for the planned output. The planning system itself was a vast organizational structure, consisting of councils, commissions, government officials, and specialists responsible for implementing and monitoring economic policy.
Gosplan was internally divided into industrial departments—such as coal, iron, and machine building—as well as summary departments, like finance, which addressed cross-sectoral issues. Except for a brief experiment with regional planning…
Until the late 1980s and early 1990s, when economic reforms backed by Soviet leader Mikhail Gorbachev introduced significant changes in the traditional system (see perestroika), the allocation of resources was directed by a planning apparatus rather than through the interplay of market forces. ==== Time frame ==== From the Stalin era through the late 1980s, the five-year plan integrated short-range planning into a longer time frame. It delineated the chief thrust of the country's economic development and specified the way the economy could meet the desired goals of the Communist Party of the Soviet Union (CPSU).
The Politburo determined the general direction of the economy via control figures (preliminary plan targets), major investment projects (capacity creation) and general economic policies. These guidelines were submitted as a report of the Central Committee to the Congress of the CPSU to be approved there. After the approval at the Congress, the list of priorities for the five-year plan was processed by the Council of Ministers, which constituted the government of the Soviet Union. The Council of Ministers was composed of industrial ministers, chairmen of various state committees and chairmen of agencies with ministerial status.
Except for a brief experiment with regional planning during the Khrushchev era in the 1950s, Soviet planning remained sector-based rather than regional. The departments within Gosplan contributed to the development of comprehensive plan targets and input requirements, a process that involved negotiation between ministries and their superiors. Economic ministries played a central role in the Soviet administrative system. Once Gosplan finalized the planning goals, these ministries prepared plans within their specific jurisdictions and distributed planning data to subordinate enterprises. This data moved downward through the planning hierarchy, becoming increasingly detailed.
Each ministry received control targets, which were then broken down by branches and further subdivided by lower units, until each enterprise was assigned its own production targets. Enterprises were called upon to develop in the final period of state planning in the late 1980s and early 1990s (even though such participation was mostly limited to a rubber-stamping of prepared statements during huge pre-staged meetings). The enterprises' draft plans were then sent back up through the planning ministries for review. This process entailed intensive bargaining, with all parties seeking the target levels and input figures that best suited their interests.
The review, revision and approval of the five-year plan were followed by another downward flow of information, this time with the amended and final plans containing the specific targets for each sector of the economy. Implementation began at this point and was largely the responsibility of enterprise managers. The national state budget was prepared by the Ministry of Finance of the Soviet Union by negotiating with its all-Union local organizations. If the state budget was accepted by the Soviet Union, it was then adopted.
Buying or selling foreign currency on a black market was a serious crime until the late 1980s. Individuals who were paid from abroad (for example writers whose books were published abroad) normally had to spend their currency in a foreign-currency-only chain of state-owned Beryozka ("Birch-tree") stores. Once a free conversion of currency was allowed, the exchange rate plummeted from its official values by almost a factor of 10. Overall, the banking system was highly centralized and fully controlled by a single state-owned Gosbank, responsive to the fulfillment of the government's economic plans. Soviet banks furnished short-term credit to state-owned enterprises.
The Soviet Union became the world's leading producer of oil, coal, iron ore and cement; manganese, gold, natural gas and other minerals were also of major importance. However, the Soviet authorities suppressed information about the Soviet famine of 1932–1933 until perestroika. To some estimations, in 1933 workers' real earnings sank on more than 11.4% from 1926 level, though it needs an adjustment due to elimination of unemployment and perks at work (such as inexpensive meals). Common and political prisoners in labor camps (Gulag) were forced to do unpaid labor and communists and Komsomol members were frequently "mobilized" for various construction projects.
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