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Soviet Union


The economy of the Soviet Union differs significantly from market economies; the country's massive and diverse economic resources are largely state owned. The central government controls directly or indirectly many aspects of the labor force, the retail and wholesale distribution system, and the financial system.

Nature of the National Economy

The Constitution of 1977 declares that the foundation of the economy is "socialist ownership of the means of production" (see The 1977 Constitution , ch. 8). The Constitution recognizes two forms of socialist ownership: state ownership, in which all members of society are said to participate, and various types of collective or cooperative ownership. According to Marxist-Leninist (see Glossary) theory, the former is more advanced, and the Constitution calls for its expansion. It is the most extensive form of ownership in the economy, incorporating all major industrial entities: the banking, transportation, and communication systems; a majority of trade and public services; and much of the agricultural sector. In the late 1980s, collective ownership was found primarily in agriculture, the small workshops of crafts people, and some retail trade and services. In 1989 a law was passed allowing an increase in the number and kinds of cooperatives.

The Communist Party of the Soviet Union (CPSU) and, as an adjunct of it, the government set goals and choose priorities for the economy. Traditionally, the government has determined economic policy in considerable detail through its planning agencies at various levels and has issued specific instructions to individual economic units concerning quantity and type of production expected of them, wage levels and incentive funds permitted, and, to a large extent, investment policies. Control of the economy has been exerted through a hierarchy of planning agencies that interact with appropriate government and party organs to devise and implement policy to achieve these goals. Various past reform efforts have altered the specific functions and assignments of the components of the economy, but the basic hierarchical structure has remained intact since its inception during the 1920s (see Planning Process , this ch.).

All-union (see Glossary) planning and control for each major sector of the economy is handled by relevant branch ministries, subordinate to the Council of Ministers and aided by a variety of planning agencies (see Administrative Organs , ch. 8). Between the ministries and the functioning enterprises (see Glossary), a variety of bodies, such as combines (see Glossary), trusts (see Glossary), and production associations (groups of formerly separate enterprises) join together entities representing aspects of production in a given area of the economy. On this level, periodic restructurings have been attempted to achieve greater efficiency (see Reforming the Planning System , this ch.).

In 1985 industry, composed of about 45,000 enterprises and production associations, accounted for 45.6 percent of net material product (see Glossary), according to official statistics. The agricultural sector, organized into collective farms (see Glossary) and state farms (see Glossary), produced 19.4 percent of net material product. Transportation and communications accounted for 10.7 percent, and the distribution system accounted for 18.2 percent (see Retail and Wholesale Distribution System , this ch.).

The 1977 Constitution permits individuals to be self-employed, with certain restrictions. Until the late 1980s, however, the authorities strongly discouraged the practice. Citizens may own personal property, such as a dwelling or an automobile, and may sell this property as "used" merchandise or bequeath it as they choose. They may also sell products they have themselves made. Traditionally, they have not been permitted to act as middlemen for profit or to hire the labor of other citizens for personal gain, i.e., to engage in private enterprise as it is understood in the West. Nevertheless, alongside the official economy a "second economy" has long flourished, made up of private individuals offering goods and services to consumers, who have traditionally been inadequately served by the state services sector. Such activities have included those that were simply private, illegal, or of questionable legality.

The existence of many illicit business activities, operating outside state controls, was freely admitted and deplored by authorities and the official press of the 1980s. Upon assuming power in March 1985, Gorbachev adopted a new approach to the problem. In a major departure from past policies, on May 1, 1987, it became legal for individuals to go into a variety of business activities on their own or in cooperation with others (see The Twelfth Five-Year Plan, 1986-90 , this ch.).

Data as of May 1989

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