IT IS natural enough that this should be a time when different methods, systems and schemes of economic planning are being broadly discussed, a time, too, when practical steps are actually being taken to realize some schemes which -- in the view of their authors -- are forms of partial social economic planning. Capitalistic countries are immersed in an unprecedented crisis. A cure for overproduction, mass unemployment and other accompanying phenomena is eagerly sought. Planning is the direct antithesis to economic anarchy -- anarchy in investment, in production and in distribution. Hence some people in capitalist countries look to planning as a possible cure for all ills, and its modes and technique attract special interest. To these people it seems something like a brand new system of industrial machinery, a fresh technical invention, which only has to be installed to begin its wonders of salvation. We in the Soviet Union think that the matter is considerably more complicated than that.

In the Soviet Union economic planning is not regarded as a social mechanism by itself, but only as an essential part of a total, which conditionally may be called new economic machinery. Social economic planning, we think, presupposes a specific social background and cannot achieve its purpose when that background is lacking.[i]

The planning system in the U. S. S. R. is based on the socialization of all means of production, mass transportation and distribution, with all the concentration of control implicit in such socialization and the existence of proletarian rule. Abolition of classes, of class distinctions, of the social division of labor, is a natural corollary to these principles. Speculation, waste and parasitic consumption are eliminated. On the other hand, since socialized economy is based on the conscious coöperation of the working masses, one of the prerequisites of socialistic economy is a steady rise, not only in their culture and standard of living, but in their social perception and social activity. This calls for an immense development of education, of cultural work, of scientific research and its technical applications. This is the essential background of social economic planning as it is in operation in the U. S. S. R.

Planning is one of the life functions of socialist economy precisely because socialism is -- to use a classic definition -- conscious control of associated producers over their social production. But this conscious control is not represented by planning only. It also is a permanent, regular checking up of the production process. "Accounting and control by all the people" is the famous formula of Lenin, which he considered to be another definition of socialism. Furthermore, conscious control of the production process finds its expression in an adequate form of economic leadership and industrial management -- concentrated, powerful and flexible enough to direct the whole "mechanism" in full coördination. Conscious control by associated producers implies that the working masses be so organized that the making of plans, the fulfillment of those plans, the checking up of the results, the building up of adequate leadership, etc., result from their own collective work and effort. In short, planning is an essential of socialist economy; but socialist economy is not planned economy only.

Plans are not only stern, exact formulations of economic undertakings based on appraisals of objective data. They are also programs of action, calling into being new potentialities of a new economic system and of a new social class which has come to power. Plans may be -- for one reason or another -- overfulfilled in one section and underfulfilled in another. This may result from a development of the potentialities to an undreamed-of degree, or from special difficulties encountered in a particular field. The deciding measure of a plan's success is the general balance of its fulfillment and whether or not it has realized its fundamental ideas. A plan is no dead fetish. It is a living program, and hence may be partially changed while it is under way. So far these changes in the Soviet plans have been only in the direction of a greater accentuation of the "general line."

I state this in advance in order to clear away some of the current misunderstandings about Soviet planning. These misconceptions include the idea of the Soviet economic system as simply one of "planned economy;" the idea that planning is a purely technical problem; the idea that plans are not real plans unless every detail of fulfillment checks absolutely with the original blue print; and so forth.

And now to the concrete subject of how plans are made in the U. S. S. R. and -- as a characteristic and up-to-date example -- how the second five year plan, or pyatiletka, was worked out.


Each economic plan, considered from the general point of view, is a comparison of what is in existence today and what has to be reached by some specified date or dates. To build up a plan, therefore, the most exact possible summary of the existing situation is a necessary prerequisite. The greater the scope and detail of the plan, the broader has to be its statistical basis. Thus a widely developed and centralized statistical organization is one of the essential formal prerequisites to regular planning, as well as to regular checking up of its fulfillment. This necessity usually is not fully appreciated by foreign observers.

Naturally, then, the development of statistical work kept step with the development of planning in the U. S. S. R., and vice versa. In course of time the statistical and the planning organizations became two corresponding and coöperating bodies, and eventually two parts of the same body. The Central Statistical Administration is now an autonomous section of the State Planning Commission (Gosplan) of the U. S. S. R.

Statistical schedules are adapted to planning schedules and, still more, planning schedules are adapted to statistical schedules. Statistical and accounting schedules are standardized. Statistical reporting on specific dates is made obligatory for each economic unit of the country. Each unit reports to its central directing or regulating body -- all collective farms to the Department of Agriculture, all industrial plants to the Commissariats of Heavy Industries or Light Industries, all coöperative stores to the Central Union of Consumers Coöperative Societies, etc. A general summary of these data is made by the Central Statistical Administration, which is at the same time the central bureau of census and a body which plans, regulates and inspects the statistical work of all departments. Annual reports in standardized form and based upon bookkeeping entries are now deemed the most reliable source of information. They were extensively used as a basis for the working out of the second five year plan (1933-37) and of the annual plans in the most recent years. The first five year plan could not be based on such excellent material; its statistical basis was more modest, although in itself very great.

Building up the broad statistical basis and summarizing the analytical comments on it are important preparatory steps. But the decisive steps are taken later by the central political organizations and the central government. These have at their disposal not only all the information collected by the statistical system and by the Gosplan, but also the vast information and day-to-day experience that come from controlling and managing the whole economic mechanism. It must be borne in mind that the Soviet Government is, so to speak, an economic government par excellence. Economic problems in general attract the chief attention of the press and the people in the U. S. S. R. In addition to all other material, then, the government constantly has at hand the proposals, suggestions, and opinions of a score of local political, municipal, professional, scientific and other organizations concerning the scope and content of the future plan.

Thus when the preparatory work is finished and the materials for the five year plan are reported by the Gosplan, the government is fully prepared to make its decisions on the plan's leading aims and general limit figures. "Leading aims" are the general ideas and fundamental purposes to be realized in the planned period. "General limit figures" are the same expressed in the form of a few data.

The leading aims of the first five year plan could be briefly expressed as having been to lay the foundations of a socialistic economy through the industrialization of the country (implying its electrification and especially the development of an industry producing the means of production), to reëquip agriculture, to socialize industry and agriculture, and to raise the standards of living of the workers.

The leading aims of the second five year plan are: development to complete socialist economy through a continuation of the technical reconstruction of industry and agriculture, the full socialization of the latter, the extensive development of light industries and socialized commerce, with a resultant broad elevation of the workers' standard of living, the development of industries in remote sections of the Union, and the reëducation of the people to socialist habits and ideas.

The general limit figures of the second five year plan (in their final form adopted by the XVII Congress of the Communist Party of the U. S. S. R.) include: 1. General amount of capital investments during the second five year period, 133 billions of rubles (1.6 times more than in the first plan; but investments in light industries have to increase 3.6 times). 2. Increase of industrial production from 1932 to 1937 by 114 percent (in Group A, heavy industries, by 97 percent; and in Group B, light industries, by 134 percent). 3. Annual ratio of increase in industrial production, 16.5 percent, but for Group A 14.5 percent and for Group B 18.5 percent; this rate of increase was deliberately fixed under the level of the first five year plan (23.5 percent per annum) in order to make easier the fulfillment of the plan and create reserve capacities. 4. Increase of production of consumers goods by up to as much as twice, and doubling of the per capita consumption. 5. Increase of the productivity of labor in large-scale industry by 63 percent, reduction of retail prices by 35 percent, etc.


After the government had adopted leading aims and general limit figures for the second pyatiletka in March 1932, the Gosplan could work out and publish, just a month later, the "General Directives for Drawing Up the Second Five Year Plan." Later in 1932 were published four issues of a special instruction book, "System of Indices and Schedule Forms for Drawing Up the Second Five Year Plan." This was chiefly prepared by statistical workers.

According to the "General Directives," the plan on the one hand had to be developed by the planning bodies of the various departments and organizations. And on the other hand it had to be discussed and worked out in detail by geographic units; this was the job of the regional or provincial planning commissions attached to the corresponding administrative bodies. The Directives provided that by July 10, 1932, detailed plans had to be delivered to the Gosplan by the departments concerned. And by July 20 detailed regional plans had to be delivered by the local planning commissions. After that, the Gosplan had to convoke 24 special conferences, in which representatives of scientific institutions, economic and cultural departments, local planning bodies and the most important single plants had to take part. The subjects at some of the conferences were: the geographic relocation of productive forces; electrification; the fuel problem; the chemical industry; geologic and geodetic surveys; specialization and coöperation in machine building; railroad transportation; water transportation; etc. These conferences had to finish their work by the end of August 1932, and before January 1933 the Gosplan had to submit the final draft of the second five year plan for the approbation of the government. This procedure was carried out with some changes in the original program and with some delay in time schedules. For example, the period assigned for working out detailed plans by regions and branches proved to be too short, in as much as the "directives" prescribed that all sorts of social organizations and the organized workers at the plants were to participate in the discussions.

A broad practical discussion and redrafting of local and unit plans was the result. Millions of people -- literally -- took part in the discussion and working out of plans. Each single plant, with practically no exception, drew up its own pyatiletka. Plants, farms, etc., worked out counter-plans proposing changes in the schedules drafted by the central planning bodies; in an overwhelming majority of cases these changes were in the direction of an increase of the schedules.

From the other side, participation by scientific and technical institutions and associations exceeded all expectations. The conferences of the Gosplan were attended by thousands of specialists in all branches of knowledge. The proceedings were printed in many volumes (for instance, the proceedings of the conference on electrification embrace twelve volumes of very interesting material). Special studies were started by research institutes. The first volume of the "Second Five-Year Plan" includes as one of its appendices a list of 220 papers and reports submitted by foremost scientists and technicians on different special subjects. The Academy of Sciences took part in this extensive work.

Although a detailed draft of the second five year plan was almost ready by the end of 1932,[ii] it nevertheless was found advisable to postpone the final adoption of the new pyatiletka to the beginning of 1934, by which time it had reached a degree of perfection considerably surpassing that of the first five year plan. By January 1934 almost all economic units had ready their thoroughly discussed, defined and balanced plans. To all practical purposes the second five year plan thus had become an all-embracing pyramid of plans, beginning in single units and crowned by the Gosplan draft. A final discussion, in the press and in conferences, preceded the final adoption of the plan by the Party Congress in January 1934. Then the plan was definitely launched toward realization.


The second five year plan as published by the Gosplan consists of two volumes. The first is devoted to general tables and plans, subdivided according to branches of economic and cultural life. The second contains the plans for different regions, subdivided geographically. The plan further consists of explanatory text and planning tables. The leading ideas are laid down in words; the concrete undertakings are formulated in exact numbers. The tabulation covers the last year preceding the five year period (1932) and each of the subsequent five years separately. Figures are given in volume and in value (prices).

The general subdivisions of the first part of the plan are as follows:

1.~ General summary tables.

2.~ Plan of capital investments.

3.~ Production of industry.

4.~ Agriculture.

5.~ Transportation and communications.

6.~ Basic norms of production technique.

7.~ Population,[iii] labor and trained working forces.

8.~ Plan of reduction in costs of production.

9.~ Goods turnover or trade circulation.

10.~ Municipal development and housing conditions.

11.~ Public health.

12.~ Education.

13.~ Finances.

The list shows, by the way, that public health service and educational work (all the cultural life of the country) are included in the plan, just as they were included in the first five year plan. It must be remembered that in the U. S. S. R. medical and sanitary care is not a matter of private initiative and private patronage. The state, municipal organs and -- to an enormous extent -- the professional organizations of the workers, sponsor and support the various hospitals, sanatoria and other institutions. The health of the people and especially of productive workers is deemed not to be a matter of private concern, in the same sense that education is considered a public and not a private problem.

The plans for municipal development of housing construction represent combined plans of what the municipalities (and so-called housing coöperatives) intend to do and what the central government is helping them to accomplish by special subventions granted on specific conditions.

Similarly, the last section -- finances -- is a plan coördinating the financial activities of the state, of municipalities, of professional organizations (which collect the social insurance fees paid by economic units and subsequently use them for medical institutions, etc.) and, finally, of the banks.

So all phases of economic and cultural life are included in the plan. But not all are directly planned, controlled and regulated by the central government: this work is done also by municipalities, coöperative organizations, trade unions, etc. Their plans participate in the general system as agreements with the central authorities, and in that way get the force of law.

Turning back to the first part of the list, the part which includes the economic plans in the proper sense, we see that after the introductory tabulation a special section is devoted to capital investments. This section is worked out very extensively. A special list, specifying all the most important new projects, is attached to this part of the plan. Costs of construction, capacity of a plant or length of a road, date of the beginning of construction work, finishing date, date of putting in operation, are among the chief points covered in these specifications. No new project of construction will be adopted if necessary technical, economic and financial "foundations" are lacking.

Then follows the section on industrial production, appraised both in 1926-27 prices and in volume, branch by branch. Then comes agriculture (sown area, expected yields, gross production in kind and in value, supply of tractors, fertilizers, plans for agronomic improvements, numbers of livestock, expected yield of milk and of meat per livestock unit, etc.). Next is the plan for transportation and communications, including freight and passenger turnover on railroads, length of new railroads to be built, extent of new equipment of railroads with modern facilities, etc. Corresponding data follow for water and automotive transportation, aviation, telegraph, telephones, etc.

And then comes another most interesting and important section of the plan, entitled "Norms of Production Technique." This is a part which was almost entirely lacking in the first five year plan. Its aim is to define, first, what grade of technical perfection a specific branch has to reach; secondly, to what extent the existing technical apparatus has to be used; third -- connected with the first two -- what the quality of the products should be. For instance, the norms in production technique for the coal industry include: first, norms of mechanization of the different stages of coal production; secondly, norms of the monthly output per worker in different coal-fields; and thirdly, the norms for the contents of ash and sulphur in coaking coals of individual mining regions. Analogous technical norms, worked out by the best specialists, are drawn up for every branch of production.

The next section of the plan includes all the planned data about the number of workers (by branches), their training, their working conditions, their living conditions, their consumption (in kind), their wages, the productivity of their labor, and other data.

Then comes a basic part of the plan, analogous to the section setting forth the technical norms, namely the plan for the reduction of production costs. This section, closely connected with the preceding two, is subdivided by costs and by branches of economic life (construction, transportation and commerce are included).

The plan covering turnover of goods received particular attention and is extensively developed. This is a consequence of the importance laid upon improving the workers' standards of life (involving the doubling of consumption), which implies the development of trade -- socialized trade -- and improvement of service in commerce and in the system of public restaurants. A score of tables defines the different steps to be taken in these directions.


The contents of a plan are not fully visible on the surface. The various tables dealing with capital investments, production, goods turnover, consumption, etc., do not directly reveal the consciously determined coördination which exists between them. Yet that coördination is the "soul" of a plan. A social economic plan is good if production is made proportionate to consumption, if capital investments are made proportionate to the production of capital goods, the supply of labor, the mechanical equipment, etc. An increase in wages in socialist economy has to be balanced with an increase of the productivity of labor. A reduction in costs has to be balanced with a rise in labor productivity. And so on, and so on.

So the system of tables, which is the external and practical expression of a social economic plan, has a backbone hidden under the surface. These are the different "balances" and "synthetic indices," which may remain in the files of the Gosplan, which do not have to be published and do not become law, but without which the plan cannot reach real perfection.

Following are the most important "balances" made by the Gosplan while the second pyatiletka was in course of preparation:

1.~ Balance of consumption and accumulation.

2.~ Balance of the productive equipment (production and imports of different equipment, and distribution, by branches of economic life).

3.~ Electro-energetic balance (production of electric power, and distribution, by consumers).

4.~ Fuel balance (output of coal, oil, peat and wood fuel, and distribution, by consumers and regions).

5.~ Balance of metals.

6.~ Balance of construction materials.

7.~ Balance of raw materials for light and food industries.

8.~ Balance of driving power in agriculture (apportionment of the plans for the development of agriculture to the amount of live and mechanical power).

9.~ Balance of labor and trained workers (and their apportionment to the needs of different branches of production; of course this is the expected distribution of labor forces, which will be economically stimulated and not prescribed to individual workers).

10.~ Plan of increase of real wages.

11.~ The unified financial plan (balance of the incomes and expenses of institutions and organizations involved in the plan).

These are the so-called "balances," that is to say, calculations of the income-expense type. But in addition so-called "synthetic indices" are used, which establish a specific coördination between two moving indices; for instance, the correlation of increase in wages and in productivity of labor, the correlation of increase in productivity of labor and the decrease in costs of production, and others.

The Gosplan is not alone in drawing up its general balances. Single branches of industry also draw up special balances, dealing in detail with single products. All this work has undergone wide development since the days when the first five year plan was prepared. Balancing has become the general method of shaping the internal structure of plans, of apportioning their component parts.

On the other hand, balances cannot become the embodiment of a social economic plan. The exaggerated idea that social economic plans should be transformed into synthetic balances of national economy, into summarizing balance sheets of all economic factors, met with no success. It not only is useless practically, but might have a confusing effect on the formulation of plans and cause numerous misunderstandings.


Such are, in brief, the ways and means by which social economic plans are worked out in the U. S. S. R. at the present time.

I hope that this short review has sufficiently demonstrated to the reader that the introduction of social economic planning is a far more complicated proposition than many people in Europe and the United States imagine. Only what the first pyatiletka was, and still more what the second one is, and what each separate annual Soviet plan is, can really be called a social economic plan. Only plans like these, taken in their proper social background and in connection with machinery for appliance, can become -- as in the Soviet Union they really have become -- the factors of a speedy technical and economic progress and the guarantee of success.

Study of the experience with social economic planning in the U. S. S. R. may be of importance to foreign observers. But this importance does not relate to a possible utilization of Soviet planning methods in countries having a heterogeneous economic system. The real interest of any such study, I think, consists in getting an idea of the features, development and prospects of an entirely different economic and social system.

[i] In our report to the World Economic Congress held in Amsterdam in 1931 by the Industrial Relations Association we have set forth this background in detail. It may be found in the American edition of the proceedings, entitled "Social Economic Planning in the U. S. S. R."

[ii] The annual plan for 1933 was worked out in coördination with this draft.

[iii] The figures of population, are, of course, estimates of its expected growth.

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