Russia: Borrowing from the Capitalists

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Eighteen months later, it had plainly become "necessary." Moving the debate off the pages of Pravda and into the industrial arena, Khrushchev gave the reformers a place to test their theories. Two clothing factories—Moscow's Bolshevichka and Gorky's Mayak—were cut loose to negotiate prices and sell their suits and dresses directly to 22 retail stores. The stores told the two factories what kinds of goods the consumers wanted, and the factories were judged by the profits made on what goods were actually sold.

Bolshevichka and Mayak showed such a resounding improvement in efficiency—and such "deviationism"—that many Kremlinologists assumed they had contributed to Nikita's downfall.

Not at all. One of the first acts of Premier Kosygin's new leadership was to extend the experiments. Kosygin announced that in gradual stages the new system would be spread throughout the whole of the consumer-goods industry. Last month the first 400 clothing and shoe firms scattered across Russia were authorized for the changeover—together, significantly, with 78 of their raw-material suppliers, who also had to be freed from the restrictions of the planners if the Kremlin really meant business in the reforms. Kosygin went even farther, asserting that eventually the reforms would be extended to all of Soviet industry.

The Car Urge. What the reforms seek to do is liberate the Soviet economy from the stifling economic dictatorship that Stalin imposed on it as a mirror image of his political tyranny. Determined to rush the transition to industrial power that had taken the U.S. and Britain 200 years to accomplish, he turned Russia into a gigantic state corporation that ruthlessly seized every bit of excess capital it produced in order to feed it back into its heavy industries—above all, steel—which are the sinews of a modern economy. With such a single-minded goal, planning was relatively easy.

But by the time Stalin died, the economy had grown so complex that no army of planners, however large, could possibly keep up with Russia's exploding technology. And for the first time, the Soviet consumer began to have enough money, and enough of shoddily made goods, to refuse to buy what failed to please him—and to want more of everything from hand cream and weekly hairdos to haute couture. As Izvestia unabashedly admitted fortnight ago: "The urge to have one's own car is as compelling as technical progress itself." This was a kind of consumer pressure that the Kremlin planners had never before encountered.

Hydra-Foiled. In his pursuit of "Goulash Communism," Khrushchev tried to cope with it, and with all his economy's mounting problems, by replanning the planners. No fewer than six times in ten years, he scrambled the organization table, veering from decentralization back to recentralization in the vain hope of finding the magic mix for what he called "better utilization of the country's industrial potential." It eluded him each time—and his constant shufflings left the Russian economy at the mercy of the monster planning Hydra, with its multiple overlapping bureaus on the national, regional and local level, even more than before.