planning2 - Notes of Soviet Economic Planning(continued...

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Unformatted text preview: Notes of Soviet Economic Planning (continued) Enterprises were the basic units of production in industry. An enterprise was headed by a manager, who was assisted by a professional staff (chief engineer, chief accountant, chief economist etc). The manager was responsible for fulfilling plan objectives, and the staff was there to assist him or her. Enterprise Management While Five Year Plans specified broad objectives, annual and quarterly plans had real operational significance. A shorter term enterprise plan included physical targets such as output levels, output assortment, labor productivity as well as monetary specifications such as wage bills. Of course, planners could not specify all the details, and plans were not perfect. It was the responsibility of managers to make the plan operational (translate it into daily enterprise tasks, bargain for input and output targets etc). Much like firm managers in a capitalist economy, Soviet managers faced trade-offs: sacrifices had to be made if all targets could not be simultaneously achieved. A primary target for a Soviet enterprise was total output, an emphasis on which posed some problems. For instance, if output for a cloth-making enterprise was specified in terms of square meters, product assortment could be pushed aside to make room for larger scale production. Along with output targets, enterprises received a plan for input usage. Input plans of course had inherent uncertainties. Will an enterprise receive the planned quantity? When can delivery be expected? Faced with questions like these, enterprise managers spent a significant amount of time dealing with supply problems - swapping materials with other enterprises, bargaining with reluctant suppliers and so forth. Plan fulfillment and overfulfillment produced rewards for enterprise managers, which came in both monetary and nonmonetary form (e.g. a summer house, automobile etc). Planners, however, constantly increased output targets. Hence, from the point of view of a manager, plan fulfillment meant his or her job will be more difficult on the future. Since targets were based partly on information received from enterprises, this created a potential information asymmetry problem: a manager had incentive to understate production capacity and overfulfill by a small margin. This way, he/she would receive a bonus and at the same time avoid hard work in the future. Of course, such problems disappeared if goals of managers aligned with those of Soviet planners. Indeed, as Suny writes on Page 354, by 1940s, The social ideology of the Soviet system had been long internalized in many ordinary Soviet citizens, and popular attitudes were often not that far from those of the official ideology....
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This note was uploaded on 12/29/2010 for the course ECON 4313 taught by Professor Staff during the Fall '08 term at Minnesota.

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planning2 - Notes of Soviet Economic Planning(continued...

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