How Planning was done in the Soviet Union

The Bolsheviks under the leadership of Lenin came to power in Russia with the October revolution of 1917. The Bolsheviks, however, were opposed by the white Russians and civil war ensued. During this period of War Communisms, the market economy was abolished. Industry shops were nationalized: workers were told what jobs to do: there were forced requisitions of food from peasants to feed the towns; the money economy collapsed as rampant inflation made money worthless; workers were allocated goods from distribution depots. With the ending of the civil war in 1921, the economy was in bad shape. Lenin embarked in a New Economic Policy. This involved a return to the use of markets. Smaller businesses were returned to private hands, and peasants were able to sell their food rather than having its requisitioned. The economy began to recover. Lenin died in 1924 and Stalin came to power. The soviet economy underwent a radical transformation from 1928 onwards. The key features of the Stalinist approach were collectivisation, industrialization and central planning. Peasant farms were abolished and replaced by large-scale collective farms where land was collectively owned and worked. Collectivisation initially caused massive disruption and famine, with peasants slaughtering their animals rather than giving them up to the collective. People died in their thousands. Despite an initial fall in output, more food was provided for the towns, and many workers left the land to work in the new industries. In addition to the collective farms, state farms were established. There were owned by state and were run by managers appointed by state. Workers were paid a wage rather than having a share in farm income. Both collective and state farms were given quotas of output that they were supposed to deliver, for which the state would pay a fixed price. A massive drive to industrialization took place. To achieve this is a vast planning apparatus was developed. At the top was Gosplan, the central planning agency. This prepared five-year plans specified the general direction in which the economy was to move. The annual plans gave details of just what was to be produced and with what resources for some 200 or so key products. Various industrial ministries or regional authorities. The effect was that all factories were given targets that had to be achieved. It was the task of the planning authorities to ensure that the target were realistic: that there were sufficient resources to meet the targets. The system operated without the aid of the price mechanism and the profit motive. The main incentive was the bonus: bonuses were paid to managers and workers if targets were achieved. Stalin died in 1953. The planning system, however, remained largely unchanged until the late 1980s. in the early years, very high growth rates were achieved; but this was at a cost of low efficiency. The poor flow of information from firms to the planners led to many inconsistencies in the plans. The targets were often totally unrealistic, and as a result there were frequent shortages and sometimes surpluses. With incentives purely geared to meeting targets, there was a little product innovation and goods were frequently of poor quality and finish. Although most resources were allocated through planning, there were never nevertheless some goods that were sold in markets. Any surpluses above their quota that were sold in markets. Any surpluses above their quota that were in markets in the towns. In addition, the workers on collective farms were allowed to own their own small private plots of land, and they too could sell their produce in the collective farm markets. A large underground economy flourished in which goods were sold on the black market and in which people did second unofficial jobs