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Soviet Union

The Twelfth Five-Year Plan, 1986-90

When Gorbachev attained power in 1985, most Western analysts were convinced that Soviet economic performance would not improve significantly during the remainder of the 1980s. "Intensification" alone seemed unlikely to yield important immediate results. Gorbachev tackled the country's economic problems energetically, however, declaring that the economy had entered a "pre-crisis" stage. The leadership and the press acknowledged shortcomings in the economy with a new frankness.

Restating the aims of earlier intensification efforts, the Basic Directions for the Economic and Social Development of the USSR for 1986-1990 and for the Period to the Year 2000 declared the principal tasks of the five-year plan period to be "to enhance the pace and efficiency of economic development by accelerating scientific and technical progress, retooling and adapting production, intensively using existing production potential, and improving the managerial system and accounting mechanism, and, on this basis, to further raise the standard of living of the Soviet people." A major part of the planned increase in output for the 1986-90 period was to result from the introduction of new machinery to replace unskilled labor. New, advanced technologies, such as microprocessors, robots, and various computers, would automate and mechanize production. Obsolete equipment was to be retired at an accelerated rate. Industrial operations requiring high energy inputs would be located close to energy sources, and increasing numbers of workplaces would be in regions with the requisite manpower resources. Economic development of Siberia and the Soviet Far East would continue to receive special attention.

Gorbachev tackled the problem of laxness in the workplace and low worker productivity (or, as he phrased it, the "human factor") with great vigor. This attention to individual productivity and discipline resulted in the demotion or dismissal of influential older officials who had proved to be corrupt or inefficient. Gorbachev called for improved motivation among rank-and-file workers and launched a vigorous antialcohol campaign (also a priority under Andropov).

At the Central Committee plenum in January 1987, Gorbachev demanded a fundamental reassessment of the role of the government in Soviet society. His economic reform program was sweeping, encompassing an array of changes. For example, it created a new finance system through which factories would obtain loans at interest, and it provided for the competitive election of managers (see Reforming the Planning System , this ch.). These changes proceeded from Gorbachev's conviction that a major weakness in the economy was the extreme centralization of economic decision making, inappropriate under modern conditions. According to Abel Aganbegian, an eminent Soviet economist and the principal scholarly spokesman for many of Gorbachev's policies, the Soviet Union was facing a critical decision: "Either we implement radical reform in management and free driving forces, or we follow an evolutionary line of slow evolution and gradual improvement. If we follow the second direction, . . . we will not achieve our goals." The country was entering "a truly new period of restructuring, a period of cardinal breakthroughs," he said, at the same time stressing the leadership's continuing commitment to socialism.

In one of his most controversial policy decisions, Gorbachev moved to encourage private economic activities and cooperative ventures. The action had clear limits, however. It established a progressive tax on profits, and regulations limited participation mainly to students, retired persons, and housewives. Full-time workers could devote only their leisure hours to private activities. Cooperatives that involved at least three people could engage in a broad range of consumer-oriented activities: using private automobiles as taxis, opening private restaurants, offering private medical care, repairing automobiles or appliances, binding books, and tailoring. In addition, the reform encouraged state enterprises to contract with private individuals for certain services. Other regulations gave official approval to the activities of profit-oriented contract brigades. These brigades consisted of groups of workers in an enterprise or collective farm who joined together to make an internal contract with management for performance of specific tasks, receiving compensation in a lump sum that the brigade itself distributed as it saw fit. Additional decrees specified types of activities that remained illegal (those involving "unearned income") and established strict penalties for violators. The new regulations legitimized major portions of the second economy and permitted their expansion. No doubt authorities hoped that the consuming public would reap immediate, tangible benefits from the changes. Authorities also expected these policies to encourage individuals who were still operating illegally to abide by the new, more lenient regulations.

In keeping with Gorbachev's ambitious reform policies, the specific targets of the Twelfth Five-Year Plan (1986-90) were challenging. The targets posited an average growth rate in national income of about 4 percent yearly. To reach this goal, increases in labor productivity were to average 4 percent annually, a rate that had not been sustained on a regular basis since the early 1970s. The ratio of expenditure on material inputs and energy to national income was to decrease by 4 to 5 percent in the plan period. Similar savings were projected for other aspects of the economy.

The plan stressed technical progress. Machine-building output was to increase by 40 to 45 percent during the five-year period. Those sectors involved in high technology were to grow faster than industry as a whole. The production of computers, for example, was to increase 2.4 times during the plan period. Growth in production of primary energy would accelerate during the period, averaging 3.6 percent per year, compared with 2.6 percent actual growth per year for 1981-85. The plan called for major growth in nuclear power capacity. (The Chernobyl' accident of 1986 did not alter these plans.)

Capital investment was to grow by 23.6 percent, whereas under the Eleventh Five-Year Plan the growth rate had been only 15.4 percent. Roughly half of the funds would be used for the retooling necessary for intensification. The previous plan had earmarked 38 percent for this purpose. Agriculture would receive large investments as well.

The plan called for a relatively modest improvement in the standard of living. The share of total investment in services was to rise only slightly, although the proportion of the labor force employed in services would continue to grow.

The regime also outlined very ambitious guidelines for the fifteen-year period beginning in 1986. The guidelines called for a 5 percent yearly growth in national income; national income was projected to double by the year 2000. Labor productivity would grow by 6.5 to 7.4 percent per year during the 1990s. Projected modernization of the workplace would release 20 million people from unskilled work by the year 2000. Plans called for increasingly efficient use of fuels, energy, raw materials, metal, and other materials. The guidelines singled out the provision of "practically every Soviet family" with separate housing by the beginning of the twenty-first century as a special, high-priority task.

Results of the first year of the Twelfth Five-Year Plan, 1986, were encouraging in many respects. The industrial growth rate was below target but still respectable at just above 3 percent. Agriculture made a good showing. During 1987, however, GNP grew by less than 1 percent, according to Western calculations, and industrial production grew a mere 1.5 percent. Some problems were the result of harsh weather and traditional supply bottlenecks. In addition, improvements in quality called for by Gorbachev proved difficult to realize; in 1987, when the government introduced a new inspection system for output at a number of industrial enterprises, rejection rates were high, especially for machinery.

Many of Gorbachev's reforms that immediately affected the ordinary working person--such as demands for harder work, more rigid quality controls, better discipline, and restraints on traditionally high alcohol consumption--were unlikely to please the public, particularly since the rewards and payoffs of most changes were likely to be several years away. As the Nineteenth Party Conference of 1988 demonstrated, party leaders continued to debate the pace and the degree of change. Uncertainty about the extent and permanence of reform was bound to create some disarray within the economy, at least for the short term. Western analysts did not expect Gorbachev's entire program to succeed, particularly given the lackluster performance of the economy during the second year of the Twelfth Five-Year Plan. The meager results of past reform attempts offered few grounds for optimism. But most observers believed that at least a portion of the reforms would be effective. The result was almost certain to benefit the economy.

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The economic reforms of the mid-1980s have attracted the attention of many Western observers. As a result, English-language sources of information about the new measures are plentiful. An especially useful compendium of reports about the changes is Gorbachev's Economic Plans, produced by the United States Congress. An earlier collection of reports submitted to the United States Congress, entitled The Soviet Economy in the 1980s, remains useful. Valuable analyses of the "traditional," pre-reform Soviet economy, still essential for an understanding of the nature and extent of the reforms of the mid- and late 1980s, may be found in The Soviet Economy, edited by Abram Bergson and Herbert S. Levine, and in Modern Soviet Economic Performance by Trevor Buck and John Cole. For ongoing observation and commentary on the changing economic scene, the interested reader may consult current issues of the periodicals Soviet Studies and Soviet Economy as well as relevant issues of the Joint Publications Research Service. For earlier development of the Soviet economy, standard works such as Maurice Dobb's Soviet Economic Development since 1917 and Alec Nove's An Economic History of the U.S.S.R. remain indispensable. (For further information and complete citations, see Bibliography.)

Data as of May 1989

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