Russia's Trouble with Reforms

IF Nikita Khrushchev had been an accurate prophet, the Soviet Union would now be starting the year in which its citizens would overtake Americans in material prosperity. Actually, Soviet shoppers still encounter frustration searching for products that U.S. citizens find in abundance. Moscow residents these days find few eggs and little flour in the stores. They may have to try two or three shops to locate as necessary an item as a light bulb. Russia's economic leaders admit that they have fallen far short of reaching not only Khrushchev's Utopian targets for 1970, but even the more modest goals they set for themselves in 1966.

In Khrushchev's day, for example, Moscow predicted a 1970 output of as much as a trillion kilowatt hours of electricity; the goal was later reduced to 850 billion and last month was lowered again to 740 billion. Output per man-hour, which Khrushchev had boasted would surpass the U.S. level by this year, has been growing at a slower rate for the past two years and stands at only 43% of U.S. labor productivity. Soviet industrial production is now expected to rise only 6.3% this year, v. a 7% growth last year.

Radical but Timid. This disappointing performance has set off a fierce debate in the Soviet press over the adequacy and execution of the reforms, introduced with much fanfare in 1965, that were intended to bring more flexibility into the ponderous, centrally controlled Soviet economy. In a secret speech last month, Party Chief Leonid Brezhnev severely criticized the economy's performance. Last week Pravda, reflecting his words, conceded that the Soviet economy is in serious trouble because of widespread waste, bureaucratic mismanagement, buck-passing and loafing workers--despite the reforms.

For a Communist economy, the reforms were radical. As originally proposed by Economist Yevsey Liberman, they amounted to a quarter-turn toward concepts of free enterprise. Factories were to be rated not only on the quantity of goods they produced but also on the capitalist criterion of profit: return on invested capital. Factory managers were to have more freedom to decide what to produce, and to make contracts directly with buyers and suppliers. Managers were to be encouraged to dismiss unneeded workers.

In practice, the reforms have been carried out so timidly that they have resulted in more confusion than flexibility. One major reason is that the Moscow industrial ministries--many of which were criticized by Pravda last week--have been reluctant to surrender their authority. The ministries, in fact, have often "violated the rights granted to enterprises," according to Aleksandr Bachurin, deputy chairman of the U.S.S.R. State Planning Committee. In the first blush of reform during 1966, the "Engine of the Revolution" diesel factory in Gorky reduced the number of its products from 18 to the four that its managers thought could be produced most efficiently. In 1968, on orders from the Ministry of Heavy, Power and Transport Machine Building, it increased the number of products to 23.

Ministries continue to demand that factories meet fixed-quantity production as well as profit goals, and often confuse managers by arbitrarily changing production plans. Georgy Kulagin, manager of the Leningrad Machine Tool Building Combine, complains: "As a result of contradictory demands and recommendations, an enterprise is like a squad of soldiers commanded by a platoon of officers. When one officer shouts 'Run!' another commands 'Lie down!' " The Communist Party has done its bit to thwart the reforms by continuing to insist that industrial managers be selected for political reliability rather than technical competence.

Bigger than Necessary. In many less obvious ways, the goals of the reforms clash with the tradition of central planning that Soviet leaders refuse to abandon. For instance, the new stress on profitability has led some factories to concentrate on making high-profit products that are already plentiful, but neglect more important but lower-profit items. Many producers are turning out machine tools and electric motors that are larger than those their customers need because the larger they are, the higher the price and the profit.

By Western standards, Soviet industry is vastly overstaffed. In machine-building plants, one out of every three workers is engaged in loading and unloading cargo. Attempts to fire superfluous workers collide with some basic realities of life in a planned economy. In the Soviet Union, the social benefits that a worker gets--his apartment, preschool care for his children, privileges at a summer resort--are all keyed to his job. A change of jobs can mean a complete change in lifestyle, and workers strongly resist the prospect. Then too, many industrial managers want to keep a reserve force of workers on hand in case a sudden change in production targets requires more manpower. As a result, most workers who theoretically have been "fired" are retrained and rehired by the same enterprises that dismissed them. Factories that really do dismiss workers are penalized by reductions in the funds allotted by Moscow for wage payments.

One model factory, the Shchekino fertilizer plant, did cut its work force from almost 7,000 two years ago to about 6,000 now, while raising production 80%. This highly touted success occurred under very special conditions. The Shchekino Chemical Combine happened to be building a synthetic-fiber plant to which it could transfer nearly all the workers dropped from the fertilizer factory. Moreover, Shchekino's managers were permitted to keep their entire wage fund and use it to raise the pay of the fertilizer workers they kept --a practice forbidden to most Soviet plant bosses.

Price of Real Reform. Soviet leaders show signs of realizing that their reforms have not gone nearly far enough. Vladimir Sitnin, chairman of the State Committee for Prices, talks of a "timely revision of the pricing system." Under his plan, the Moscow ministries that now set specific prices would set only upper and lower price limits. Factory managers would decide the exact price --and their customers would have some leeway to haggle.

Whether the men who run the Soviet Union will loosen their control of the economy enough to make the reforms succeed is doubtful. Throughout Soviet discussion of economic reform runs an unstated but central theme: liberalization of the economy might lead to political heresy. In the view of some Western experts, the combination of economic reform and disintegration of Communist Party control in Czechoslovakia in 1968 weighs on the minds of Soviet leaders as they consider how far to go with reforms at home.

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