Be able if necessary to learn from the capitalists. Adopt whatever they have that is sensible and advantageous.-Lenin

THE resurrection of these words of Lenin's by Khrushchev at the November Plenum of the Communist Party in 1962 surprised many Western observers. Against the backdrop of recent Soviet economic growth, it may appear somewhat anomalous to see the Soviets contemplating the adoption of some of our basic economic methods.

Especially intriguing is the suggestion by some Russian economists that profits in Soviet industry should be given a more functional role. Actually, upgrading the significance of profits and acknowledging shortcomings in their system of economic planning is nothing new for Soviet economists; in their candid moments, they often raise both issues. What is new is that some specific proposals related to these matters have been singled out for national consideration.

With Khrushchev's approval, the suggestions of E. Liberman, Professor at the Kharkov Engineering and Economics Institute, have become the focus of one of the most provocative and far-reaching discussions in Soviet economic thought.[i] The current dispute is second in intellectual vigor only to the debates of the 1920s which preceded the decision to industrialize. Unlike other recent economic disagreements, this one is marked by freedom and openness. Absent is the use of doctrinal citation and flag-waving. In contrast to the average Soviet economic discussion, almost no appeal is made to Marx, Lenin or even Khrushchev for ideological justification. Paeans to the superiority of the Soviet Union over the United States, a prerequisite in almost all past debates, have suddenly disappeared. In what appears to be an attempt to probe the essence of the problem, ideas are left to stand or fall on their own merit.

While the tone of the debate is itself significant, of even greater importance are the implications of the proposals being made and the reasons why they are being raised at this time. Before we examine these matters let us outline the general goals of Liberman's economic reforms and his specific proposals.

II

Professor Liberman wants to make more effective use of his country's economic resources. In fact, this is the general theme of the debate. There is virtually unanimous recognition by Soviet economists, including Liberman's principal critics, that improvements must be made in planning efficiency and operating incentives. As with motherhood and virtue, everyone is in favor of a more perfect economic system.

Liberman outlines three specific goals for Soviet economic reform and implies several others.[ii] First, he wants to stimulate Soviet enterprises and firms to seek higher output targets for themselves. At present, plan targets for the firm are sent down from superior administrative organizations. Since the firm and its personnel are rewarded according to the degree of plan fulfillment, every manager battles to have the plan targets set as low as possible. The lower the targets, the greater the likelihood of fulfillment or overfulfillment, which means bonuses and rewards. As Liberman points out, the easiest way to succeed in such a situation is not to work effectively but to seek low targets. In addition, if a manager agrees to higher goals he not only must work hard this year, but next year also. Since the yearly plan is based on previous performance, efficient work leads to higher future targets. Unintentionally, this encourages the manager to hold back and do less than his best.

Liberman's second goal is to encourage the introduction of new technology and new products. At the present time the manager is usually opposed to all changes in his existing pattern of production. Change means uncertainty and a possible hazard to goal fulfillment. Innovation also requires authorization from superior officials who are subject to the same type of pressures.

The third aim of reform as seen by Liberman is to improve the quality of production. Since incentives are tied to quantity of production, there is no material reason for anyone to worry about quality. The establishment of quality standards often hampers plan fulfillment of quantitative targets. This leads to corner-cutting elsewhere. When targets are related to production costs, there are further complications. The use of a better grade of raw materials in order to improve quality is often discouraged because it makes it difficult to meet the plan's production-cost figures.

Although Liberman does not enumerate all his aims in any systematic fashion, he hints at some others. The system of concentrating on gross value of output-now partially replaced by other criteria-should be completely eliminated because it causes factory managers to concentrate exclusively on targets of physical output assigned long in advance of actual production. Not only does this hamper the alteration of output goals and lead to the deterioration of quality, but it may also encourage the waste of inputs. To boost the gross value of their products, some factory managers use needlessly expensive raw materials, just the reverse of what was described in the paragraph above. Where this results in improved quality there is no objection, but expensive parts do not always assure the best product.

Liberman also seeks to eliminate what he calls "petty tutelage." This is taken to mean undue and excessive interference in the firm's operations by superior agencies. The senior authorities spell out everything in detail and in advance so there is no room for man?uvre by factory officials. Liberman cites an instance in which some metal parts had been mixed in with some scrap. A request was made for extra women workers to sort the scrap in order to recover the parts. The request was denied because the wage fund "would not stand it."[iii] As a result, 2,000 rubles in wages was saved but 10,000 rubles in metal parts was lost.

Also of concern at present is the absence of effective control over capital construction and investment. Khrushchev himself indicated his awareness of the problem at the 22nd Party Congress when he suggested with some seriousness that a moratorium on all new capital construction be called for a year. Enterprises and organizations were over-spending and over- committing themselves. As a consequence, too many projects were being undertaken at one time. There are many who feel it is imperative that capital investment be controlled and that more effective criteria for capital allocation be developed.[iv]

Before elaborating the various arguments in the debate, it is necessary to warn the reader that some aspects of the controversy will appear rather unsophisticated. There is a tendency among some Soviet economists, Liberman included, to denounce shortcomings and suggest remedies without tracing through all the ramifications of the various suggestions. For the most part, this is because Soviet economists have had little experience with equilibrium economics. Equilibrium analysis requires consideration of not just the immediate effect of certain actions, but the secondary and tertiary effects as well. As the debate evolves, it will be seen that only a few of the participants have this over-all view. Liberman may have it, but he seems to temper it with what may be the political facts of life.

III

Liberman's proposals represent the response of the more liberal faction of economists to shortcomings in the Soviet economy. Basically, these economists call for less reliance on planned targets and greater use of the profit incentive. Their hope is that in this way there will be more freedom for the plant manager, more intelligent use of resources and accordingly more efficiency.

Specifically, Liberman's plan would eliminate all existing goals that are centrally planned except for targets of quantitative production, product assortment and destination and date of delivery. To a Westerner, this may hardly seem like much of an improvement. What kind of flexibility is this? It should be pointed out, however, that Liberman does propose to eliminate seven or more other targets which heretofore have also been handed down from above. He particularly mentions the plans for labor productivity, number of workers, wages, production costs, capital saving, capital investment and new technology. Although these targets will still be assigned to the regional economic council (sovnarkhoz), they will no longer be subdivided and passed down the chain of command to the individual factory. He considers these seven targets to be subordinate to the factory's main goal of production of quality goods. These indices were originally imposed as a means to the end, that is, production. Liberman, however, feels that the plant managers frequently confuse the means and the ends. In order to fulfill these subordinate targets, the factory manager is often unable to fulfill the main goal of production as well as he might have. He argues that the simplification of the tasks assigned the plant manager will reduce the likelihood of contradictory targets. The plant manager, he suggests, should be permitted to draw up his own targets for these seven or more activities, relying on his own knowledge of the plant's capabilities. This will prevent outsiders from telling the insiders what to do. Consequently, although the sovnarkhoz will continue to receive targets for all the indices of efficiency and production, the plant manager will be assigned only the three planning targets related to physical production itself.

Through such a reform, Liberman hopes to simplify the planning and producing tasks. In the process, he has removed some of the forces which have compelled the factory manager to follow the dictates of the central government. To provide a more positive stimulus, Liberman wants to introduce a new measure, the "profitability rate." This is something more than the concept of profit (revenue minus costs) which the Russians have long used. The "profitability rate" he defines as the total profit of the firm in relation to its stock of fixed and working capital. Its importance to the manager will be assured since the "profitability rate" will be the sole determinant of the size of the bonus fund awarded the firm and its employees.

The plant manager can earn a higher "profitability rate" by affecting either or both of the two elements of the ratio. First, he can increase absolute profits. This can be done by using current inputs like labor, raw materials and other resources more efficiently. Second, he can reduce his fixed and working-capital base. He can do this by requesting less capital and conserving what he already has.

The "profitability rate" of the particular firm will then be measured against a "profitability norm" which will be established for different industries and firms. The bonuses awarded to the firm will be determined by its "profitability rate" in relation to its particular "norm." An attempt will be made to match comparable firms against one another. "Norms" will also be varied according to the proportion of new products the firm is trying to introduce. Since the introduction of new products usually entails initial costs and unforeseen problems, the "profitability norms" against which the firm is being measured will be lowered when new products are being introduced. If no new products are being introduced, the "norms" will be raised. The presumption is that this will induce firms to develop new products and methods. To prevent poor quality and the overstocking of warehouses, profits will be calculated only on goods actually consumed. Returned and stored merchandise will be subtracted from total revenues received.

Liberman's aim is to create a system that will induce all units of the factory to exert themselves and raise their level of aspiration. If the firm plans for a higher "profitability rate" than that actually achieved, there will be no penalty. The firm's "profitability rate" will be that which is actually earned. However, if the firm sets its targets too low, then the "profitability rate" will only be the average between the lower goal originally conceived and the higher "profitability rate" actually earned. It is also anticipated that the relevant "profitability norm" against which the firm is being judged will be spelled out for a considerable time in advance. By establishing "profitability norms" for two, three or five years in the future, there need be no fear that the targets will be ratcheted upward if the firm does unusually well in one year. Since good work will not be penalized with higher "profitability norms" the following year, the firm will have every incentive to raise its sights and no reason to hold back on its productive efforts.

To insure a united effort in the profit drive, Liberman proposes to make the firm's bonuses solely dependent on the level of the "profitability rate." Presently there are many bonus funds for various categories of work. Liberman feels this leads to conflict and contradiction. He wants to give as much power as possible to the plant manager and allow him to use the bonus fund to stimulate production in the most expedient manner. It may be used for salary bonuses, new housing or new machinery. Liberman's only reservation is that the three planned targets must be fulfilled before the bonus is determined.

While Liberman acknowledges that there may be some flaws in his plan, his main concern is with the reforms he hopes his proposals will make possible. Factory managers will no longer have any reason to battle for lower plan targets. At the same time, they will have every stimulus to reduce costs and conserve capital. Since the "profitability rate" will be dependent on both costs and capital, the factory for the first time will have a definite interest in economizing on both elements.

IV

As might be expected, there was something less than unanimous endorsement of a plan that promised to undermine the basic nature of the Soviet economy. Most of the criticisms were concerned with the implications of Liberman's greater reliance on profits. Other critics concentrated on the internal inconsistencies in Liberman's proposals. The great debate centered on these two issues.

While exercising remarkable restraint, many argued that Liberman's suggestions were too radical and that his reliance on profit in relation to capital would be tantamount to capitalism. The statement by Liberman and some of his supporters that "What is good for the Soviet firm is good for the Soviet Union" was perhaps too reminiscent of Charles E. Wilson for good Communists to endure.[v] To some, this meant that the economy would be placed at the mercy of the market and the planned operation of the society would be abandoned and turned over to plant officials. Furthermore, they feared the economy would be exposed to unemployment of manpower and resources and cyclical fluctuations in prices.[vi]

From the traditionalist's interpretation of Liberman's plan, it was inevitable that there would be such dire consequences. They warned that the factory managers would begin to think of nothing but the maximization of profits (something even American factory managers do not always do). This would cause plant directors to shift wherever possible to the production of goods with higher profit margins. Simultaneously they would squabble to see who could push up their prices fastest. Prices on consumer goods and heavy industrial products would shift radically. Even if a satisfactory price reform of the magnitude necessary could be designed, it could not be carried out overnight. The result would be confusion and profiteering by certain sectors of industry, at least during the interim. In all probability, there would be sudden inflation and psychological if not actual chaos.

The emphasis on profitable operations, the critics pointed out, would put an end to government subsidy for heavy industry. In the past, profit was not an important determinant of capital investment and development. If the government felt something was socially or economically necessary for the long-term welfare of the Soviet Union, that was enough. An insistence on profit would affect not only the future allocation of resources, but also present operations. For example, subsidized projects such as dam construction or the development of Siberian resources would be abandoned. Consequently, future needs would be forsaken for projects that promised immediate profit. Since over 20 percent of Soviet industry presently requires a subsidy to maintain its operations, there would be considerable dislocation and many "worthy" projects would have to be scrapped. Instead, plant managers would switch to the production of consumer goods wherever possible to satisfy the pent-up demand of more than four decades of abstinence. This would mean resources would move to the consumption sectors and out of heavy industry, heretofore the keystone of Soviet economic growth. This would indeed spell the end of the planned centralized economy.

In addition to the major problems, there were also some idealists who questioned the whole stress on bonuses. These "puritans" complained that everyone seemed to be interested only in higher incentives. No one speaks about "obligations" any more.[vii] Today nobody asks what he can do for the state-only what the state can do for him!

Such complaints did not deter Liberman and his supporters. The existence of artificial supports in the economy only emphasized the need for corrective changes. They frankly admitted that Liberman's proposals would require a fundamental price reform. While there were hazards involved, they insisted that the risks were not as important as the advantages to be gained from bringing prices into line with actual costs. Furthermore, the consequences of price reform had been exaggerated. Prices of consumer goods have always been high because of the imposition of a large turnover or sales tax. To some extent, demand pressures would now substitute for the tax and there would not be that much over-all change in consumer prices. If the withdrawal of subsidies from large industry tended to raise industrial prices, this would be resisted by factory purchasers who needed low prices on materials in order to make their own profits. And if certain firms have a higher than average "profitability rate," so much the better. This means they are efficient or produce goods desired by consumers and therefore they deserve to expand. If other producers are unable to make a profit, this probably indicates some shortcoming. They should either quit or raise the price of their goods.

Some of the more outspoken economists went even further. They asserted that if prices were ever to approach more realistic levels, an outright charge must be made for the use of capital. Although they did not call it interest, that is what they seemed to be seeking. Most of them recognized that Liberman's "profitability rate" was an implicit capital charge because it had the effect of discouraging the use of capital. But this was not enough. There were a few who demanded a direct capital charge. At the extreme, V. Kotkin and E. Slastenko asked for a flat 10 percent charge on all capital.[viii]

The response of Liberman's defenders only confirmed the worst fears of the conservatives, who were simply not prepared to decentralize the allocation of capital and allow prices to move freely. If capital resources were being used ineffectively, tighter controls were needed. As the Soviet economist, K. Plotnikov, put it, if the decision-making powers were turned over to the plant manager, capital would inevitably be further squandered regardless of Liberman's denials and promises of continued investment control. Capital can be conserved only by rationing it carefully from the center.[ix] Shortcomings in planning and pricing could be overcome more effectively with increased use of input-output and linear programming methods rather than through basic changes in the Soviet economy. Although such critics conceded that there may be too many indices for even the computer to handle, they suggested that the planners should simply be more selective. In short, they urged a more moderate approach.

There was another category of criticisms which arose not because of the impact of the Liberman plan on the present nature of the Soviet economy, but because of some internal inconsistencies in the proposals themselves. First, there were flaws in the mechanical operation of the "profitability norms." It turned out that it was possible for a firm to expand its capital stock and win an unintended increase in its bonus fund even if its profits remained the same.[x] The most serious inconsistency, however, stemmed from Liberman's decision that state-assigned planning targets for quantity of production, assortment of product and date of delivery should continue to be handed down to the firm from above. Fulfillment of these targets by the firm would make it difficult to earn the highest "profitability rate" possible. This would mean the continuance of contradictions and conflicts. Furthermore, unless the planned targets were fulfilled, no bonuses would be paid, regardless of the magnitude of the "profitability rate." Naturally, this dual standard diminished the role of profits. It also suggested that the input quotas would not in fact be abandoned, as it was initially thought. The existence of delivery and production targets for the industrial producer implied the use of input and consumption schedules by the industrial consumer.

The assignment to the firm of the three physical planning targets was also inconsistent for another reason. It will be remembered that Liberman argued that insiders were better equipped than outsiders to determine the firm's potentialities. Yet, Gosplan or some other planning agency would continue to have the power to determine the three most basic decisions the firm has to make. This hardly eliminated the role of the outsider. Further, it would be unrealistic to assume that the regional sovnarkhoz would refrain from interfering in the firm's activities even if the other seven targets were not directly spelled out. Although no specific assignments were to be made on a firm-by-firm basis, the sovnarkhoz would still, as before, have assigned to it the seven specific indices for the whole area. While it would supposedly be prohibited from interfering with the firm, it is logical to assume that some sovnarkhozy would violate this rule, especially if their regions failed to meet the targets.

Thus it seems clear that the economic reforms embodied in Liberman's plan would not eliminate administrative interference and red tape. Furthermore, it is safe to assume that there would be juggling to win favorable "profitability norms." If these "norms" were to be flexible so that they would allow for adjustments in size, location, comparability and share of new products, there would be considerable room for administrative discretion and bargaining. Nor would pressures for the reduction of norms be eliminated. As before, it would be in the interest of the plant manager to seek lower assignments. His attention would not be solely on production targets, but also on the "norm of profitability." The bonus fund could be increased not only by expanding production and efficiency, but also by pleading that the firm's capabilities were less than they actually were. By winning a more favorable "norm" schedule, the plant manager could obtain his bonus just as if he earned it by improving production.

V

While undoubtedly Liberman's proposals would mean some improvement in the present system, the net effect of his contradictory proposals is much less than it first appeared and short of his initial aim. In light of this, why has this debate generated such excitement? The answer is that Liberman has obviously touched upon several pressing problems. In brief, the Soviet Union has outgrown its technology of planning and control. What was once eminently suitable for the purposes of Soviet planners and officials is no longer functional. The economy's needs have changed. Quantitative changes have turned into qualitative changes. Techniques which were designed for implementing one set of needs have now become inadequate and outdated in the context of a new set of conditions.

The late 1920s saw a fundamental change in the operation and direction of the Soviet economy. The decision was taken to complete an industrialized base in as short a time as possible. In the full-scale debate that preceded and accompanied this decision, it was decided that something like a capitalist form of primitive accumulation, as Marx would have called it, was necessary. As described by Alexander Erlich, the proponents of industrialization realized that immense quantities of capital would have to be mobilized and that major structural changes would have to be made.[xi] Major readjustments were essential if there were to be the economies of scale deemed so important for industrialization. This would necessitate the diversion of a significant share of the country's resources into heavy industry. It was decided that the only way this could be accomplished was by arbitrary decree and pressure by the state. Reliance solely on market forces would take too much time and would create undesirable profit-making. Therefore, a system of physical planning embodied in a series of yearly and five-year plans was adopted. By administrative decree, periodic campaigns were instituted for priority projects.

Given all this arbitrary planning, the pressures of the market had to be rendered inoperative. In some instances this was impossible, but at least the market forces could be diverted. Prices and profit incentives were reshaped to encourage the creation of heavy industry and discourage the growth of light industry. On the one hand, prices of consumer goods were doubled through the imposition of the turnover tax; this simultaneously curtailed consumer demand and provided a source of revenue for the state. On the other hand, prices of heavy industrial products were held down. This was accomplished by providing operating subsidies and by the absence of an interest rate. Although the abolition of the interest charge was primarily the result of Marxist injunction, it had the important effect of making capital-intensive tasks appear less burdensome financially. While the market pressures were never completely stifled, such measures did foster the reshaping of the economy. To a considerable degree, heavy industry as reflected in the market was encouraged and stimulated at the expense of light industry. This furthered the use of heavy industrial products and the growth of large-scale activity which was the goal of the administrative planners.

Naturally these procedures also led to waste, imbalance, low standards of living and inefficiency in many sectors, especially in the short run. But the Soviets did not have a short-range time horizon and they were not especially concerned with human costs or consumer wants. Even if there were negative returns on some major projects, they could be more than offset by economies of scale elsewhere. The productivity of capital was so high that even if the best project was not selected, a high rate of return was generally assured. If there was not a 30 percent return, there was 20 percent. The main goal was capital accumulation and the generation of internal and external economies of scale.

Such was the economic nature of Stalin's era. Many economists have convincingly argued that other less draconic and traumatic alternatives to industrialization could have been adopted. In any event, by the mid-1950s the basic industrial structure of the Soviet Union had been erected. Subsequently there were signs that in a maturing economy, centralized planning and arbitrary decision-making were no longer as conducive to economic growth.

A moment's reflection suggests that in fact this may have been the main factor behind the current debate. As already noted, it is the first full- blown economic debate since the industrialization discussions of the 1920s, and it offers a fascinating historical parallel. Then the debate was precipitated by the need to alter the existing methods of guiding the economy. Now there seems to be a somewhat similar stimulus.

The Soviet economy again appears to be at a turning point. It is clear, as the debate shows, that it is becoming more and more difficult to plan everything centrally. The Soviet economy has grown not only in size, but in sophistication and concern for the consumer. As a result, campaigns and storming can no longer solve all the problems that arise. There are simply too many sectors which need attention. They cannot all be manipulated from the center. It has been estimated that, if the economy continues its present growth, by 1980 the planning force will have to be 36 times its present size.[xii] Furthermore, a campaign to correct one imbalance inevitably denies attention to other matters and is likely to create other problems in its wake.

Khrushchev himself has recognized that the sophistication of certain sectors of the economy, like chemicals, electronics and consumer goods, are not conducive to centralized planning. When told to expand the economy, the planners simply add another open hearth furnace and increase the output of steel. If it so happens that not steel, but specialized plastic and electronic products are needed, the planners still concentrate on steel because it is easiest for central planners to plan increases in the production of steel. As Khrushchev put it:

The production of steel is like a well-traveled road with deep ruts; here even blind horses will not turn off because the wheels will break. Similarly some officials have put on steel blinkers; they do everything as they were taught in their day. A material appears which is superior to steel and is cheaper but they keep on shouting "Steel, steel."[xiii]

It may also be that today administrative decision-making no longer assures the greatest growth. Throughout Liberman's exposition, there is the implication that decision-making should rely more on economic and less on administrative criteria. This seems to be valid for decisions taken both at the center which involve major projects and at the fringes which affect some experimental and smaller operations.

As the economy has grown, the marginal productivity of capital has diminished. This means the return on new investment is not as high as it once was. Now if the rate of economic growth is to be maintained, major projects must be undertaken with more care by the center. Therefore, decision-making tools must be improved so that resources can be utilized with the most effectiveness. This means increasing output with existing capacity and selecting the most efficient capital investments. This inevitably leads to the use of scarcity prices and interest, the economic criteria referred to above.

The problems at the fringes of the economy (light industry, some electronics, services, new products) are even more complex. These sectors are the least amenable to centralized planning and yet they are becoming increasingly important in Soviet life. Here flexibility is required. If conditions change or new opportunities develop, the manager of the fringe industries must be able to respond without checking with Moscow. Normally the planners in Moscow are aware only of problems that have attained proportions large enough to warrant their attention. Minor difficulties and pregnant opportunities sometimes pass unnoticed. This hampers innovation at the fringe and on other non-priority activities. Spontaneous and experimental projects are generally frustrated by the Soviet system. Unless officially sponsored by a planner, funds, materials and labor are unobtainable. While this does not by any means put a stop to innovation in large industry and in the technical institutes, it virtually precludes the situation in which a man with an idea and a garage suddenly finds himself with a successful product and a going concern. This can be an important added source of growth in a sophisticated economy.

The centralized planning system is also poorly suited to handle the consumer sector. As long as the consumer was neglected and confined to something resembling the subsistence level, there were few problems. Goods were in short supply and whatever was produced was immediately grabbed off the shelves. Now, as the standard of living has improved, conditions have radically changed and the consumer is much choosier. Much to the shock of Soviet planners, some goods are piling up on the warehouse shelves. While there are still major shortages and the standard of living is far below that of most West European countries, inventories of consumer goods now total 20 billion rubles (over $20 billion). Of this sum, almost 3 billion rubles are considered to be excessive.[xiv] The aircraft designer, O. Antonov, in analyzing this spectacle, says that it is caused by an absence of "feedback," or give and take between producers and consumers.[xv] Since most Soviet producers must answer to the plan, not to the consumer, the factory and store managers have long disregarded consumer tastes. The results are mounting surpluses and inadequate quality alongside unfulfilled demands. Clearly the magnitude of the problem will grow unless some improvements in planning production and rewarding performance are made.

VI

This, then, is the dilemma of the Soviet economy and of an economic reformer like Liberman. There are urgent reasons for altering the existing system of Soviet planning and control. However, any basic reform that would require complete reliance on profits as a source of incentives, and necessitate a fundamental price reform, would produce such serious shocks and shifts that it is hard to predict what would follow. Because of almost 45 years of imbalance, the pressures and price adjustments that the unleashing of pent-up demand would create could have dire psychological if not political effects. For this reason alone it seems unlikely that the Soviet Union will rely completely on Liberman's "profitability rate."

Furthermore, the adoption of something like the "profitability rate" might merely substitute one set of difficulties for another. Liberman's recognition of this may explain why his proposals contain so many inconsistencies. He has two contradictory purposes in mind: (1) to improve efficiency; (2) to insure production of specific goods arbitrarily assigned according to a centrally issued plan. At this stage of Soviet economic development, the first without the second would be politically unacceptable. The Soviet government is not ready to allow profit alone to provide what is needed for the economy. Greater emphasis on profits might improve efficiency, but it most likely would mean the sacrifice both of administrative control and of the production of certain socially necessary goods. While there is a need to stimulate activity at the fringe of the economy, there are still major tasks, such as dam building, completion of the transportation network and expansion into Siberia, which can be undertaken only at the center. The challenge is to retain power enough at the center to undertake the major projects which still promise economies of scale without sacrificing the flexibility needed at the fringe. Professor Liberman has made a valiant attempt to satisfy what appear to be mutually inconsistent aims. None the less, it is likely that there will be many other reformers, reforms and debates before this present Soviet dilemma is resolved.

[i] Pravda, November 20, 1962, p. 5.

[ii] Liberman's first article on the subject appeared as early as July 1956 in "O Planirovanii Promyshlennogo Proizvodstva i Material'nykh Stimulakh ego Razvitüa," Kommunist, no. 10, July 1956, p. 75. His most famous article appeared in Pravda, September 9, 1962, p. 3. Reprinted in the Current Digest of the Soviet Press (hereafter C.D.), November 3, 1962, p. 13. His other articles include "Planirovanie Proizvodstva i Normativy Dlitel'ogo Deistviia," Voprosy Ekonomiki, August 1962, p. 104; Ekonomicheskaia Gazeta (hereafter E.G.), November 10, 1962, p. 11 (reprinted in C.D., December 5, 1962, p. 17).

[iii] E.G., November 10, 1962, p. 10; C.D., December 5, 1962, p. 17.

[iv] L. Gatovskii, E.G., November 3, 1962, p. 36.

[v] The Russian original reads: "To chto vygodno predpriiatiiu, dolzhno byt' vygodno i obshchestvu v tselom." (Pravda, September 9, 1962, p. 3; September 21, 1962, p. 3.) See also M. Bor, E.G., November 10, 1962, p. 12.

[vi] Sh. Turetskii, E.G., November 3, 1962, p. 43; N. Spiridonova, "Istochniki i Sistemy Premirovaniia," Voprosy Ekonomiki, November 1962, p. 123.

[vii] L. A'lter, "Sviazat' Stimulirovanie s Perspektivnym Planirovaniem Predpriiatiia," Voprosy Ekonomiki, November 1962, p. 116.

[viii] Pravda, September 21, 1962, p. 3; October 12, 1962, p. 3.

[ix] E.G., November 3, 1962, p. 37-38.

[x] Pravda, September 18, 1962, p. 3; October 19, 1962, p. 4.

[xi] "The Soviet Industrialization Debate: 1924-1928." Cambridge: Harvard University Press, 1960.

[xii] M. Fedorovich, E.G., November 3, 1962, p. 39.

[xiii] Pravda, November 20, 1962, p. 4; New York Times, November 21, 1962, p. 13.

[xiv] Narodnoe Khoziastvo SSSR v 1961 godu. Gosstatizdat, Moscow, 1962, p. 629; E.G., October 10, 1962, p. 33.

[xv] Izvestiia, May 25, 1962, p. 3; C.D., June 20, 1962, p. 14-15.

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