Command economy, Administrative-command system

The administrative-command (or command-administrative) system (ACS) is a term denoting a way of organizing social relations characterized by: the use of socialist methods of management; the dominance of the party-state bureaucracy in the absence of economic freedom.

The economy of the USSR was administrative-command throughout its entire history. Only in 1990 was private ownership of the means of production legally permitted and a precipitous transition to a Western-type market economy began. However, such a crucial element of the administrative-command system as price regulation in state stores survived until the very collapse of the USSR.

The term appeared during perestroika and was introduced by Professor G. Kh. Popov of the Faculty of Economics of Moscow State University to designate the essence of the Soviet system of management, and it quickly became popular. It was first mentioned in G. Kh. Popov's article "From an Economist's Point of View" ("Nauka i Zhizn" No. 4 / 1987). In it he examined the state and development of the planned economy of the USSR on the basis of an analysis of Alexander Bek's novel "The New Appointment".

• Directive planning. The administrative-command system is based on the principle of directive planning. The plan drawn up by the center (the State Planning Committee of the Council of Ministers of the USSR) is the fundamental law of the administrative system. On the basis of the plan, the branch ministries develop targets for sectors of the economy, and then for enterprises, construction projects and collective farms, and material resources are allocated.
• All output produced by enterprises is transferred to the disposal of higher-level bodies of material and technical supply or of trade (the State Committee for Material and Technical Supply), which pass it on to consumers.
• Economic levers in the management mechanism (prices, wages, bank interest) play a formal role. Prices of goods and workers' wages are set by the center (the State Committee on Prices under the Council of Ministers of the USSR). The bulk of enterprises' accumulations is withdrawn into the budget (the Ministry of Finance of the USSR).
• Worker motivation. For each category of worker, the official salary is determined centrally in the same way throughout the country (the State Committee of the USSR for Labor and Social Affairs). Additional bonuses are paid for fulfilling the center's plans, out of a limited bonus fund, only at the direction of superiors. A substantial role in worker motivation is played by administrative encouragement and coercion. Encouragement takes the form of promotion; coercion takes the form of reprimands and punishments.

• The center is unable to encompass the entire economy and every enterprise with its leadership.
• The upper tiers of the administrative system are overloaded with day-to-day work.
• The problem of economic assessment of the decisions taken. To evaluate a decision, one must compare the resources expended with the output ultimately produced. But this comparison requires objective prices corresponding to socially necessary costs, which only the market, and not an administrator, can determine.
• The quality of the decisions taken depends personally on the personality of the managers, especially on that of the top official.
• The retardation of scientific and technological progress is caused by the fact that all rights to the principal decisions are concentrated on the upper tiers of the management system and the decisions themselves are taken by willful, subjective methods
• The criterion for promoting managerial personnel is not creative ability and competence, but diligence and the ability to carry out superiors' orders without question, and personal acquaintance with the manager. Preference in promotion is given to those who by their professional qualities cannot compete with those promoting them. As a result, the quality of managerial cadres steadily deteriorates.
• In decision-making, peculiar cycles arise, in which lower-level bodies try to guess the decisions of higher ones, while the higher ones decide what the lower ones in effect prompt them to decide.
• The intuitive decisions taken by such a system are to a considerable degree random and deviate from optimal ones.
• Its decisions are unacceptably delayed and the amount of information in them is reduced — they come to consist of self-evident truths and platitudes.

• The creation of heavy industry and the military-industrial complex.
• The achievement of universal literacy of the population, the development of science.
• The elimination of unemployment in the cities.
• Victory in the Great Patriotic War, largely owing to the command-administrative system's capacity for supercentralization and the concentration of efforts on the most important directions of society's development.
• A significant decline in harvests and livestock numbers in the first years of collectivization.
• Gigantic losses of human resources as a result of repression and famine.
• The emergence of monetary savings of the population not backed by the output of consumer goods.
• Enterprises' lack of interest in scientific and technological progress.
• The extremely limited participation of the USSR economy in the international division of labor, as a raw-materials appendage of the developed countries.

As the American professor Martin Malia notes, the term militarized economy is the most fitting for describing the nature of the system of the Soviet national economy. As Malia writes, the prototype of the command-political economy first appeared in Germany during the First World War, when General E. von Ludendorff, using the organizational talents of W. Rathenau, built a system called "Kriegssozialismus" ("war socialism"), which in his view was merely the economic component of "der totale Krieg" ("total war"). Later, when Hitler carried out the socialization of the German economy in the course of implementing his four-year plan, German émigré refugees called his policy Befehlswirtschaft ("command economy"). As Malia writes, over the following twenty-odd years this apt term was counterposed in the West to the misleading pseudo-rational official concept of the "plan", and only during the period of glasnost did the German term return to the USSR as the "command-administrative system" — a terminological innovation of the democrats who had come to power in Moscow.

Summary and significance of G. Kh. Popov's articles

The article makes extensive reference to "The New Appointment" as a work that well illustrates Stalinist methods of managing the economy. The "administrative" system is contrasted with the "market" one. Whereas in the former decisions are taken by means of orders from above within a bureaucratic pyramid, in the latter they are taken by "mid-level" players (the level of factory directors), above whom there is virtually no longer any management by command.

The assertion is made that the administrative system is too centralized and therefore incapable of responding within a reasonable time to a number of challenges. It is capable of much, but has its typical weak points (shown through an analysis of "The New Appointment" and of that text's protagonist, the Stalinist people's commissar Onisimov — whose prototype is Tevosyan).

The transition to a market system is understood as a benefit, since it improves the management of the economy and the correspondence of the nation's economic infrastructure to people's real needs.

The significance of the article lies, among other things, in the fact that for the first time during perestroika a slogan was explicitly proclaimed calling if not for the restoration of private property (that is, a 100% winding down of communist ideology), then at least for its "desatanization" on the principle of "there is something to it after all".

The article anticipated the activity of the "young reformers" and the privatization of the 1990s.

As S. G. Kara-Murza notes, the intelligentsia regarded the problems of the Soviet order as "the dominance of bureaucrats", "wage leveling", "the incompetence of the bosses", "the legacy of Stalinism". As Kara-Murza writes, relying on these stereotypes, G. Kh. Popov introduced the term "administrative-command system", which had no concrete content but rapidly gained popularity and which was supposed to define something specifically Soviet "predetermining the life of precisely the Soviet person". Kara-Murza objects that any social system has its own "administrative-command" component, yet the proponents of the term imagined that in "civilized" countries the ACS was supposedly absent, and that "there only economic levers are at work".

Further development of S. G. Kara-Murza's idea leads to the conclusion that the "abolition of the administrative system" meant no more than the abolition of its highest echelon, the chain "Politburo — enterprise director". Its lower levels, in S. G. Kara-Murza's view, exist in any economic system.

Thus, in Kara-Murza's view, G. Kh. Popov's ideas logically led to the weakening of unified government management and to an increased role for money as an instrument of settlement between enterprises.

All this, in the opinion of some, logically led (and did lead) to the emergence of oligarchs, wealthy magnates owning entire industries and industrial complexes, managing them as they saw fit and redirecting almost unlimited funds from their enterprises to personal consumption.

Criticism of this situation in society (arising directly from G. Kh. Popov's article, in Kara-Murza's view) constitutes a significant part of the criticism of perestroika.

• A depiction and sharp criticism of the administrative system is given in the novellas of the Soviet science fiction writers the Strugatsky brothers, "Tale of the Troika" and "Snail on the Slope", and in I. Efremov's "The Bull's Hour".

• Planned economy
• Gosplan of the USSR
• Gossnab of the USSR
• Goskomtsen of the USSR
• Gosstroy of the USSR
• Ministry of Finance of the USSR