The Soviet Economic System

Nove details the pre-reform and reform process of the Soviet economy, mostly focusing on 1950s-1970s. It isn't an economic analysis in the sense of theory and mathematical proof, but it is instead a straightforward discussion of (in detail) why the attempts at reform were not fixing the underlying problems of the Soviet approach. The planning agencies and the hierarchy of centralization are discussed a length (though I would have liked more details on the internal workings of the Gosplan myself), "centralized pluralism" and problems of decentralization are discussed, you'll learn about normed net profit and other approaches to tracking planned output, also investment, wages and differences between industry and agriculture, inflation, choice and of course incentives and calculation problems in each of these areas are all discussed at great length. Finally future options are discussed - as this was pre-collapse. The best thing about this text is the detailed analysis of why incentive structures have failed in socialist experimentation and why all myriad of reforms undertaken did not help. The data and anecdote from the real world experience is compelling. This unbiased accounting of the issues is priceless. To give one quick gem from the book: one of the earliest reforms was a slight decentralization, since central planners could not determine exactly what each firm could produce. Ministries were set up with local level planners and what amounted to big public firms which could decide exactly how to fulfill a more general plan or target. Planning, rather than profit-maximization, means that Soviet firms must reach a target, and incentives put in place so that workers and managers will work toward fulfillment (be they monetary or otherwise) will encourage those who make decisions on how to reach the target attempt to produce the most at the least cost to themselves (in terms of labor, for example). So, planners provide a target - and it tends not to be in money terms (since prices of inputs will be set by planners and may not be cost effective for the other firm to use, etc, but you'll see it doesn't matter). So, they will choose a target such as 100 tons of boots. The firm will then have to choose how to reach this target. So, they find the most heavy material to use for boots. They produce much less than expected, often making a horrible final product, but follow the letter of the plan and cannot be punished. So, the planners change the target. Instead they ask for a certain number of boots. The next batch are made from the flimsiest of materials, made appreciably smaller or all in the same size, run through the machine at the least cost, making it faster and cheaper to produce in hopes of squeezing some extra funds out of savings or shortening the work-day. So, then the planners to to combine requests, but the process continues. You cannot tell them exactly the size, color, weight, dimensions, materials -- because the cen