Such a concept demands that for the complex economic
activity of the entire country there be one great all-inclu-
sive Plan, covering all divisions and subdivisions of the
economy and under one vast unitary budget.
activity of the entire country there be one great all-inclu-
sive Plan, covering all divisions and subdivisions of the
economy and under one vast unitary budget.
Soviet Union - 1952 - Soviet Civilization
net/2027/mdp.
39015020686591 Public Domain, Google-digitized / http://www.
hathitrust.
org/access_use#pd-google
? ECOHOMIC AHD CULTURAL PROGRESS
is so basic to the manufacture of armaments. The third
implication, then, is that the country's industrial expan-
sion was a noteworthy success and that the Five-Year
Plans, often ridiculed as "Red Smoke," achieved their
main objectives in industry. Furthermore, these Plans
provided for the erection of vast industrial facilities
behind the Ural Mountains and throughout Siberia
where enemy bombers could not reach them. And this
was a major reason why the Soviets were able to keep on
turning out armaments all through the war, in spite of
the occupation by the invading armies of so much of
western Russia, including the great industrial centers
of the Ukraine.
Fourth, the Soviet defeat of Nazi Germany demon-
strated that the socialist economic system as a whole had
developed in a remarkably successful manner under the
Five-Year Plans and that it continued to function effect-
ively under the terrific stress of an all-out war. The de-
fense industry, and heavy industry in general, of course
had to be closely integrated with the rest of the economy,
including the vital facilities of transportation. The anti-
Soviet critics had frequently called transportation the
"weak link" in the Soviet economic order and had pre-
dicted that it would break down disastrously under the
strain of war conditions. Yet transportation, whether by
railroad or otherwise, made a brilliant record for itself
from 1941 to 1945. The notable defensive and offensive
operations could not possibly have been carried out
unless there had been a transportation system function-
ing fairly efficiently behind the lines. This is not to gain-
say the fact that during the last two years of the war
several hundred thousand American trucks and jeeps
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? sovmr civilization
were of immense assistance to the mobility of the Red
Army.
One of the feats of the Soviet railways was the removal
of whole factories on flat cars from the path of the ad-
vancing Nazi forces to eastern regions beyond the reach
of the enemy. Then the factories in their component
parts were set down, quickly assembled, and harnessed
to production again in short order. Approximately 1300
plants were moved in this manner and 1,000,000 freight
carloads used to do it. The New York Herald Tribune
called it "a miracle. " But behind all such war-time "mir-
acles" in the Soviet Union was a long sequence of eco-
nomic cause and effect stretching back over the years and
always an integral part of the country-wide socialist plan-
ning.
Another sector which performed in outstanding
fashion during the war years was agriculture. The pro-
duction of food would surely have broken down during
this period had it not been for the prior collectivization
of agriculture so that it could operate on a large scale
with modern machinery. What this meant for the war
effort Alexander Werth explains in his book, The Year
of Stalingrad: "It was, indeed, one of the remarkable
achievements of the Soviet war machine that, by contrast
with the war of 1914-18, the Russian Army was, on the
whole, well fed. There were occasional hitches due to
transport difficulties, especially when a unit was more
or less isolated; but in the main the army ate better than
anybody else in the Soviet Union, even in the very dif-
ficult days of 1941 and 1942, when many cities were
hungry. In 1943 the situation became even better, with
the influx of American supplies. "1
The fifth point is that clearly neither the pre-war de-
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? ECOHOMIC AH. D CULTURAL PROGRESS
velopment of the Soviet economy nor its functioning dur-
ing the Nazi invasion nor the victories of the Red Army
could have taken place unless in general the workers had
become well trained in modern industrial techniques and
the soldiers in the effective use and servicing of mechan-
ized war equipment. Mass production of the implements
of war and of countless other things necessary for an in-
dustrialized society meant that millions of Russians must
have learned to operate the complicated machinery so
typical of the twentieth-century world. In order to de-
feat the Nazis, Soviet plane pilots, tank drivers, machine-
gunners, artillery-men, engineers, mechanics and the rest
must have mastered their jobs in both theory and prac-
tice.
Mr. W. Averell Harriman, former Ambassador of the
United States to the U. S. S. R. and head of an American
Mission to that country in 1941, stated in a radio broad-
cast shortly after he left the Soviet Union: "The Russian
has become a first-class mechanic in this last generation.
. . . Out on the airfields, where much has to be done with
little equipment, our American officers report -- and I
quote from one of them -- that they have never seen such
skill, ingenuity, resourcefulness and morale. The Rus-
sian mechanics work without shelter in sleet, rain and
wind an average of fourteen hours a day. Their pilots
learn to fly American aircraft as quickly, as skilfully, as
our own pilots or the British. And so we have our answer
to why Hitler's time schedule has been dislocated. The
clumsy Russian mujik has become a skilled mechanic. "2
Lord Beaverbrook, the English press magnate, testified
at the same time that Soviet "pilots are of the very best,
just as much experienced as any pilots anywhere. And
the mechanics who service their aircraft compare in all
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? SOVIET CIVILIZATION
respects with the mechanics of Great Britain and the
United States. Indeed, the Russians have a genius for
mechanization. "3
The vast extension of education and technical train-
ing in the Soviet Union since 1917 has included all seg-
ments of the population. Women as well as men have
become wise in the ways of the machine. This was of
crucial importance during World War II because hun-
dreds of thousands of women had to take over the skilled
jobs of men who had been called into the army. Especial-
ly was this true in agriculture where in many districts
the women had to shoulder the major part of the respons-
ibility, driving the tractors and mechanical reapers.
Another aspect of the cultural revolution that proved
significant was the improvement in the science of medi-
cine. In contrast to the First World War, the Soviet
doctors were able to prevent any large-scale epidemics
in the armed forces and the population at large. And
the medical services of the Red Army made a spectacular
record in restoring wounded soldiers to full health or
at least in making them available for civilian work. Sur-
gery of all varieties contributed notably to this result.
The sixth implication of the war effort was that
leadership in the army and government was well quali-
fied to cope with the crisis caused by the Nazi invasion.
The reservation must be made here that during the first
few weeks of the war the Soviet forces suffered severe
defeats and enormous losses in prisoners. When Hitler
struck on June 22, 1941, he took the Soviet armies to a
large extent by surprise and was able, for instance, to
destroy many hundreds of Soviet planes before they could
get into the air. Why Premier Stalin and his associates,
explicitly warned of the coming attack through reliable
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? ECONOMIC AN[D CULTURAL PROGRESS
information forwarded by President Roosevelt and Prime
Minister Churchill, were not more on guard against the
approaching storm, is still a mystery.
Nonetheless, on the whole both generals and civilian
administrators carried through with eminent success the
formidable tasks imposed upon them. Events did not
bear out the claim that the Moscow Trials and general
purges of 1937-38 had fatally weakened Soviet leadership.
The crushing by the Soviet Republic of an extensive
conspiracy to overthrow it -- a conspiracy having definite
links with Nazi Germany -- resulted in strengthening
Soviet leadership and morale.
This brings us to the seventh and final point: that
the economic developments of the Five-Year Plans, the
first-class fighting equipment of the Red Army and the
educational progress of the population would have
availed but little if the people had been lacking in morale.
Here again the actual course of the Nazi-Soviet conflict
disproved any number of misconceptions. Although a
certain number of traitors, Hitler collaborators, or
slackers appeared among them, the people as a whole
rallied to the defense of their country with ardor and
determination. This was proved daily by the fighting
spirit of the armies, the widespread activity of the guerril-
las, the civilian defenders of Leningrad and other cities,
and the relentless execution of the scorched earth policy.
Joseph Goebbels and the Nazi propagandists expected
that the peasants, particularly in the Ukraine, would
revolt against the Government and welcome the invading
forces as liberators. On the contrary, with few exceptions
the peasants in the enemy-occupied regions remained
loyal to the regime and joined the guerrilla bands by the
scores of thousands. And those guerrilla fighters, coming
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? SOVIET CIVILIZATION
from a population whose individual initiative had sup-
posedly been stamped out by the Communist dictator-
ship, displayed remarkable initiative. The Nazis also
hoped that discord would break out among the different
minorities. This did not happen either, though five
minor groups did not fulfil their patriotic obligations.
All but a fraction of the more than 170 minority peoples,
constituting almost one-half of the total population, gave
their utmost in the nation's supreme ordeal and played
an indispensable role in the final debacle of Hitler's
legions.
Despite the tons of newsprint expended in America
and other lands to show that they were the slaves of a
bloodthirsty tyranny and seething with hatred for the
Stalin regime, the people evidently thought from 1941
to 1945 that their new socialist system was worth fighting
and dying for. We cannot afford to forget that socialism
is more than an economic system and a political affilia-
tion; it is an inclusive way of life capable of arousing the
most intense devotion in those who give it allegiance.
## *
To recapitulate my review of the implications which
we can draw from the Soviet achievement in the Second
World War, I believe that it showed, first, that the armies
possessed up-to-date and mechanized equipment, in large
quantity and of excellent quality; second, that the bulk
of this war materiel was efficiently produced in Soviet
factories; third, that the industrial program in general
had been a conspicuous success; fourth, that the country's
socialist system as a whole functioned most effectively
under the terrific impact of the Nazi invasion; fifth, that
the population had made impressive advances in educa-
tion and technical training; sixth, that the leadership
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? ECOHOMIC AKD CULTURAL PROGRESS
lived up fully to its responsibilities during the war crisis;
and, seventh, that the people displayed splendid morale
throughout the entire titanic struggle with Hitler.
It seems to me that any objective student, conservative
as he may be in outlook or antagonistic as he may be to
the Soviets, must arrive at similar conclusions if he faith-
fully follows through the logic of the showing against
the Nazis. That logic demonstrates, through pragmatic
reference to the incontestable records of history, that
Soviet socialism possesses formidable and deeply rooted
powers of resistance and endurance. It does not demon-
strate that Soviet socialism is superior to capitalism, since
both the United States and Britain put on their own
magnificent performances during the war. Nor can suc-
cess in war, which has frequently been achieved by gov-
ernments of a reactionary character, prove in itself that
the Soviet system is a good or progressive form of society.
Even before World War II, I had decided that Soviet
socialism was succeeding in the large. In my judgment
that system works in peace as well as war. It was no
choice of the Russians that their country was made the
testing ground of how a socialist commonwealth stands up
in the fury and horror of world Armageddon. But since
that did happen, I have tried to unfold its full meaning,
which is quite relevant to the peacetime accomplishments
of the U. S. S. R.
2. The Role of Socialist Planning
In our discussion of the Soviet Constitution we saw
that one of its most important Articles concerned social-
ist planning. * I shall repeat that Article here: "The
economic life of the U. S. S. R. is determined and directed
* See p. 56.
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? SOVIET CIVILIZATION
by the state national economic plan with the aim of
increasing the public wealth, of steadily improving the
material conditions of the working people and raising
their cultural level, of consolidating the independence of
the U. S. S. R. and strengthening its defensive capacity. "
In my opinion social-economic planning is, together with
the public ownership and operation of the main means
of production and distribution, the most basic factor in
the economic life of the country.
The great Five-Year Plans have aroused interest,
skepticism, hope and fury throughout the world. The
First Five-Year Plan (or Piatiletka in the Russian) went
into effect in the fall of 1928 and made such rapid head-
way that it was completed in four and a quarter years, at
the end of 1932. The Second Five-Year Plan lasted from
1933 through 1937. The Third Five-Year Plan was
scheduled from 1938 through 1942. It was proceeding
most successfully when unexpectedly interrupted by the
Nazi onslaught in the middle of 1941. Shortly after the
conclusion of the Second World War, the Soviet Union
launched its Fourth Five-Year Plan, for the period from
January 1, 1946, through December 31, 1950.
The fundamental principle of planning is fairly
simple. Whether operative on a small or large scale it
consists of trying to coordinate future activities in the
light of the external environment, especially its economic
aspects, and of capacities, desires and potentialities. The
individual himself, if he is to lead an integrated and satis-
factory life, must continually plan from year to year and
even from day to day. Planning is in fact an indispens-
able factor in the functioning of human reason for the
solution of individual and social problems. Whenever
any person or organization or government draws up an
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? ECOHOMIC AHD CULTURAL PROGRESS
annual budget, that is financial planning of the most
essential sort for twelve months in advance.
The intelligent family adopts some measure of plan-
ning. It looks into the future so far as is possible and
plans, according to its resources, for the needs of its
various members. If it is wise, it makes a yearly budget,
allocating definite sums from its income to food, housing,
clothing, recreation, baby carriages and the like. The
next level of planning occurs in relation to individual
business enterprises. Every business has to plan carefully
if it is to be successful and make a profit. The larger and
more complex it is, the more carefully it must plan. A
huge corporation like the American Telephone and Tele-
graph Company, U. S. Steel or R. H. Macy & Co. must
have central planning in order to coordinate its many
different departments and its far-flung business opera-
tions. In the capitalist world today we occasionally find
government economic planning in effect for large-scale
enterprises such as the Tennessee Valley Authority and
sometimes for a whole industry, as when the state owns
and operates the railroads. However, the greatest degree
of government planning under capitalism takes place dur-
ing the crisis of international conflict, as it did during the
First and Second World Wars.
Now the planning that has been going on in Soviet
Russia since 1928 is the most extensive in history. The
Soviets believe that the limited, piecemeal, crisis plan-
ning under capitalism cannot solve permanently the eco-
nomic problems that face mankind. They are convinced
that just as the different departments in a big business
must be consciously correlated, so must the different
departments of a nation's economy as a whole. Coal must
be integrated with steel, steel with transportation, trans-
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? SOVIET CIVILIZATIOH
portation with agriculture, agriculture with wholesale
and retail distribution, distribution with finance, finance
with production in general, and so on down the line.
Such a concept demands that for the complex economic
activity of the entire country there be one great all-inclu-
sive Plan, covering all divisions and subdivisions of the
economy and under one vast unitary budget. This is
precisely what a Five-Year Plan entails.
The socialist planning of the U. S. S. R. differs from
any planning that takes place in capitalist lands in that
it is continuous and nation-wide and not confined to
special localities, industries or critical situations; in that
it is based on the public ownership and operation of all
the main means of production and distribution; and in
that its guiding aim is use, not profit. The welfare of the
whole community is the direct end and not secondary or
incidental to the making of profits.
Soviet and Marxist economists claim that only social-
ist planning can overcome the contradictions inherent in
the capitalist order and eliminate recurring depression,
financial crisis and mass unemployment. In general
terms it achieves economic stability by maintaining a
proper balance between production and consumption,
between supply and demand. Of primary importance
here is the central control over wages, prices, hours of
work and currency. As more and more goods are pro-
duced in field and factory, wages go up throughout the
entire nation; or prices decrease. (From 1946 through
the middle of 1952 there occurred five general reductions
in prices. ) To take care of an increasing turnover in
goods, currency may be expanded, depending on its rate
of circulation.
The fundamental point is that the Soviet people al-
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? ECOHOMIC AMD CULTURAL PROGRESS
ways have sufficient wealth to buy back the goods which
they produce. This means that there can be no such
thing as overproduction, which is simply under-consump-
tion under a different name; and that unemployment,
except while workers are shifting from one job to another,
and depressions become extremely unlikely. If on some
distant day absolute overproduction, in some foodstuff,
for instance, does threaten the U. S. S. R. , it will be simple
to solve the problem by reducing hours of work and giv-
ing people more time for leisure and recreation.
The harmony between production and purchasing
power in Soviet Russia means in actuality that the coun-
try is always as rich as its productive capacity during any
given period. The United States and other capitalist
nations, however, are only as rich as the amount of goods
that can be sold for a profit during any given period. In
times of depression anywhere from one-third to one-half
of their productive capacity is idle; and even during pros-
perity a considerable proportion of their plant capacity
may be unutilized. The national wealth and standard
of living in the Soviet Union are of course not nearly
as high as those of America, but they would have re-
mained far lower had it not been for the Five-Year Plans.
How, exactly, does socialist planning operate in the
U. S. S. R. ? This is a large question indeed and I can do
no more than sketch in the main outlines of an answer.
The key organizations in this field are the State Planning
Committee* or Gosplan and the State Committee for
Material and Technical Supplies to the National Econ-
omy t or Gosnab. Gosplan works out the programs for
over-all production, new capital investment and financial
? Until 1948 this was called the State Planning Commission.
? )? This Committee was created in 1948.
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? SOVIET CIVILIZATION
arrangements between the different sectors of industry
and agriculture. Gosnab plans for the distribution of ma-
terials and capital equipment, determining the exact
quantity of raw materials and machinery that are to go
to each branch of the economy for the carrying out of
Gosplan's blueprints.
The Soviet Government approves the eleven-member
Presidium or Governing Board of Gosplan as well as its
Advisory Council of ninety. The Chairman of this Plan-
ning Committee is automatically a member of the Soviet
Cabinet and a Vice-Premier of the U. S. S. R. It is this
Planning Committee, employing over a thousand experts,
which welds together into one vast, integrated, long-
range Plan all the minor plans and reports of all the
various republics, districts, industries, factories, farms,
distribution units and cultural organizations throughout
the Soviet Union. It is this Committee that from week to
week, from month to month, from year to year, casts its
all-seeing eye over the economic activities of the nation
and shifts the schedules within the Plan to keep pace
with new and unforeseen developments.
The work of the Planning Committee is divided into
over fifty different specialized departments, correspond-
ing to the different Ministries of the Soviet Govern-
ment. * Prominent among the Committee Departments
are those concerned with Agriculture, Automobile and
Tractor Industry, Building Materials Industry, Coal,
Electrical Industry, Foreign Trade, Machine-Tool Build-
ing Industry, Public Health, Railroads, Ship-Building
Industry, River Fleet and the Synthetic Plan. This last
section has the crucial task of constructing the final Plan
from the projects submitted by the various departments.
? See pp. 60-63.
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? ECOHOMIC AND CULTURAL PROGRESS
There are also the Organization Section, which runs an
Academy to train experts for the Committee and handles
the selecting and managing of the personnel; and the
Central Administration for National Economic Account-
ing, which is in charge of the census and the highly rami-
fied accounting system that socialist business activities
require.
Until 1949 the Central Statistical Administration was
a subsidiary of the State Planning Committee. In that
year, however, its work had assumed such importance
that it was made a separate agency under the Federal
Government, continuing to function, of course, closely
with the Planning Committee. The activities of the
Statistical Administration are indispensable to planning.
This bureau has the duty of obtaining the basic statistical
information concerning the complex Soviet economy.
It is not possible even to start planning on a broad scale
without a considerable amount of such data; yet it is not
possible to get complete and reliable data until planning
has made considerable progress. Since in the old Russia
accurate statistical procedures were honored more in the
breach than in the observance, Soviet statisticians had
a hard row to hoe. As social-economic planning has made
more and more headway, the reliability of statistics has
steadily improved and has brought about what has been
aptly called adequate economic visibility.
Planning Committees similar to the federal Commit-
tee function in each of the sixteen federated Republics
and in the numerous Autonomous Republics, Autono-
mous Region and National Districts. In fact, there is
some planning agency in every community having a
population of 20,000 or more. Likewise, planning organs
operate in all the Ministries of the constituent Republics.
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? SOVIET CIVILIZATION
These various planning bodies all work under the general
direction of the State Planning Committee; and they
present frequent reports to the planning organization
to which they are immediately subordinate. There are
also planning divisions in each federal Ministry and in
the different subdivisions of each Ministry. For instance,
the Automobile and Tractor Industry as a whole has its
planning division; the various regional trusts in this in-
dustry also have theirs; and finally there are planning
committees in each factory of each trust and in each shop
of each factory.
Thus all the workers in an automobile or tractor
factory combine to carry out a plan for that unit; all the
factories in a certain district combine to carry out a
central plan for the trust of which they are part; all the
trusts combine to carry out a plan for the entire Auto-
mobile and Tractor Industry; and then this industry
combines with every other branch of the economy to
carry out a balanced plan for the country as a whole.
The geographical planning units operate on the same
principle as the functional: The cities' plans fit into that
of the regions, the regions' into that of the Republics and
the Republics' into that of the U. S. S. R. in toto. And
these two planning procedures, the functional and the
geographic, serve to stimulate and check on each other
in their mutual cooperation on behalf of the over-all
Plan.
The geographic and planning agencies operate both
from the smaller up through the larger and from the
larger down through the smaller, providing a constant
two-way flow of ideas, initiative, plans and counter-plans.
The higher bodies of course have more authority, but
they encourage local responsibility and are on guard
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? ECONOMIC AHD CULTURAL PROGRESS
against the red tape and hardening of the ideational
arteries which have handicapped many a centralized
bureaucracy.
Another cross-check occurs in the all-embracing Fi-
nancial Plan or State budget, which includes all the sub-
budgets of governmental and economic units throughout
the U. S. S. R. This Financial Plan, which is the counter-
part of the Material Plan (drawn up in terms of concrete
goods), translates all production and distribution sched-
ules into ruble figures. The ruble, worth twenty-five
cents at the official Soviet exchange rate, is the common
denominator in which the thousand and one different
aspects of the National Plan can be accurately expressed
and clearly related to one another. The Financial Plan
and the Material Plan are simply two different versions
of the same thing.
The State Bank and its more than 3,000 branches act
as a great central pool for the national income. They
achieve this role through the direct taxation of individ-
uals, which provides about 6 percent of the national
income, and especially through the turnover tax on each
economic enterprise throughout the land and an addi-
tional tax on its profits. The Government also raises a
certain amount of capital through savings banks and the
flotation of public loans. A significant feature of financial
planning is that it makes possible the distribution and re-
distribution of the total capital resources according to
the needs of the national economy as a whole. Some busi-
nesses, such as the railroads or the oil industry, will run
up handsome surpluses, part of which can be invested
in other less developed fields of industrial activity or in
the sphere of culture and education. A considerable
portion of such surpluses, however, are retained locally
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? SOVIET CIVILIZATION
by the unit earning them and used collectively for ex-
pansion, improvements or social benefits connected with
the same enterprise.
Planned investment, then, is a fundamental aspect
of Soviet socialist planning. Instead of over-investment
in some directions and under-investment in others, cen-
tral economic planning ensures an even flow of capital
into the channels most useful and important. It would
be inconceivable for manufacturing plants to be con-
tinually duplicating one another, ruining one another
through cut-throat competition, spending huge fortunes
in misleading advertising and glutting a locality or even
the entire country with an over-supply of practically
identical goods. Planned investment also prevents the
flow of capital into the production of things for which
there might be some demand, but which would be clearly
harmful to the well-being of the people.
This strict supervision of investment, however, by no
means implies that so-called luxuries are taboo or that
a flat conformity of standardized goods must prevail.
One of the chief aims of Soviet planning is that everyone
should have an abundance of all sorts of personal posses-
sions, including luxuries. These consumption goods,
moreover, are to be as different in quality and design as
can reasonably be expected. With its informational ap-
paratus carefully attuned to the needs and desires of con-
sumers, the National Planning Committee presents the
citizens with a wide range of choices in commodities.
It is true that up till now Soviet clothes, shoes, hats and
so on have frequently been of an inferior grade; this is
not due, however, to socialist planning, but to the fact
that the handicaps of the past have not yet been over-
come.
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? ECOHOMIC AHD CULTURAL PROGRESS
It is essential to note that the surpluses or "profits"
built up by economic enterprises play a very different
role from what we have been accustomed to expect under
capitalism. They are, in effect, mainly a bookkeeping
device. Socialist business is run, as I have said, not for
profits, but in order to provide goods and services to the
community at large. The most convenient process of
accounting and distribution, however, demands the mech-
anism of buying and selling, of money and prices. Fur-
thermore, identifiable "profits" are necessary so that a
certain proportion of the nation's income can be set aside
to take care of depreciation and obsolescence and, above
all, to expand the means of production, particularly
heavy industry. Soviet Russia, for instance, put into
social savings for such purposes an annual average of one-
third its total income during the first two Five-Year
Plans.
Under the financial system 1 have been outlining,
every producing and distributing unit in the country has
an account in the central State Bank or one of its
branches. And it is the duty of each bank to check fre-
quently on the use of the credits, long-term, short-term
or emergency, issued from time to time. It must make
certain, for example, that the automobile factory to which
it has advanced credit actually turns out the cars called for
by the Plan and supposedly made possible by the credit.
The factory has the obligation of giving the bank reports
on definite dates showing how it is fulfilling its program.
If the bank discovers that the credit is being used ineffi-
ciently, it will at once stop further credits until the mat-
ter is cleared up, even instituting a special investigation
if necessary. As a brilliant student of Soviet economics,
Vladimir D. Kazakevich, writes: "The mechanism of
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? SOVIET CIVILIZATION
banking is used as a rudder to direct, through extension
and withholding of credit allocations, the fulfilment of
the Plan in production and distribution. "4
Thus, socialist planning makes the banks even more
important than they are in a capitalist country. For the
banks become the watchdogs of the whole economy by
carrying on what amounts to a constant audit of business
enterprise. They act as the vital link between the various
sets of plans drawn up on paper and the fulfilment of
those plans in terms of concrete goods and services. Their
vigilance means that there can be no let-down on the part
of management or workers in a concern without those
responsible being called to task. In this function the
banks are aided by a system of detailed accounting that
penetrates into every nook and cranny of economic activ-
ity. Soviet accounting, organized on the strictest basis,
aims to cut production costs and to attain the greatest
possible results for the least possible expenditures. Here
again book profits enter into the picture as a partial test
of whether or not a plant is being operated efficiently.
Let us consider some of the established procedures
in drawing up and putting into effect a Soviet Five-Year
Plan. After consultation with key Soviet and Communist
Party bodies, the State Planning Committee works out
general goals for the economic, social and cultural devel-
opment of the country during the next five-year period.
They are realistically based on the experience of the past
and the requirements and possibilities of the future.
With these goals as the objective, the State Planning
Committee, several months before the Plan is to go into
effect, sends out preliminary and tentative figures to all
the subordinate planning committees.
These planning agencies, and the various factories
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? ECOHOMIC AHD CULTURAL PROGRESS
and collective farms throughout the land, carefully con-
sider the proposed estimates with special attention to
those figures that concern them. Then, in the light of
their own experience, they make fresh suggestions and
counter-plans, returning the revised drafts to the central
Planning Committee. After receiving all available in-
formation and criticism regarding the preliminary sched-
ules, including the reactions of the various government
Ministries, the Planning Committee proceeds to draw up
the final Plan for presentation to the Council of Minis-
ters (or Cabinet), to the Communist Party and to the
Supreme Soviet. These three bodies must all pass on the
Five-Year Plan. It is to be remembered that the State
Planning Committee, in spite of its enormous importance
and influence, remains in the last analysis an expert ad-
visory board whose recommendations must be ratified by
the higher political authorities.
Along with the Five-Year Plan as a whole the Plan-
ning Committee also submits for ratification the control
figures for the first year of the Plan. In fact, every Jan-
uary the Committee submits a one-year plan to cover
the current year. This must of course fit into the general
outlines of the Five-Year Plan, but need not agree exactly
with the original figures of the Plan.
? ECOHOMIC AHD CULTURAL PROGRESS
is so basic to the manufacture of armaments. The third
implication, then, is that the country's industrial expan-
sion was a noteworthy success and that the Five-Year
Plans, often ridiculed as "Red Smoke," achieved their
main objectives in industry. Furthermore, these Plans
provided for the erection of vast industrial facilities
behind the Ural Mountains and throughout Siberia
where enemy bombers could not reach them. And this
was a major reason why the Soviets were able to keep on
turning out armaments all through the war, in spite of
the occupation by the invading armies of so much of
western Russia, including the great industrial centers
of the Ukraine.
Fourth, the Soviet defeat of Nazi Germany demon-
strated that the socialist economic system as a whole had
developed in a remarkably successful manner under the
Five-Year Plans and that it continued to function effect-
ively under the terrific stress of an all-out war. The de-
fense industry, and heavy industry in general, of course
had to be closely integrated with the rest of the economy,
including the vital facilities of transportation. The anti-
Soviet critics had frequently called transportation the
"weak link" in the Soviet economic order and had pre-
dicted that it would break down disastrously under the
strain of war conditions. Yet transportation, whether by
railroad or otherwise, made a brilliant record for itself
from 1941 to 1945. The notable defensive and offensive
operations could not possibly have been carried out
unless there had been a transportation system function-
ing fairly efficiently behind the lines. This is not to gain-
say the fact that during the last two years of the war
several hundred thousand American trucks and jeeps
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? sovmr civilization
were of immense assistance to the mobility of the Red
Army.
One of the feats of the Soviet railways was the removal
of whole factories on flat cars from the path of the ad-
vancing Nazi forces to eastern regions beyond the reach
of the enemy. Then the factories in their component
parts were set down, quickly assembled, and harnessed
to production again in short order. Approximately 1300
plants were moved in this manner and 1,000,000 freight
carloads used to do it. The New York Herald Tribune
called it "a miracle. " But behind all such war-time "mir-
acles" in the Soviet Union was a long sequence of eco-
nomic cause and effect stretching back over the years and
always an integral part of the country-wide socialist plan-
ning.
Another sector which performed in outstanding
fashion during the war years was agriculture. The pro-
duction of food would surely have broken down during
this period had it not been for the prior collectivization
of agriculture so that it could operate on a large scale
with modern machinery. What this meant for the war
effort Alexander Werth explains in his book, The Year
of Stalingrad: "It was, indeed, one of the remarkable
achievements of the Soviet war machine that, by contrast
with the war of 1914-18, the Russian Army was, on the
whole, well fed. There were occasional hitches due to
transport difficulties, especially when a unit was more
or less isolated; but in the main the army ate better than
anybody else in the Soviet Union, even in the very dif-
ficult days of 1941 and 1942, when many cities were
hungry. In 1943 the situation became even better, with
the influx of American supplies. "1
The fifth point is that clearly neither the pre-war de-
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? ECOHOMIC AH. D CULTURAL PROGRESS
velopment of the Soviet economy nor its functioning dur-
ing the Nazi invasion nor the victories of the Red Army
could have taken place unless in general the workers had
become well trained in modern industrial techniques and
the soldiers in the effective use and servicing of mechan-
ized war equipment. Mass production of the implements
of war and of countless other things necessary for an in-
dustrialized society meant that millions of Russians must
have learned to operate the complicated machinery so
typical of the twentieth-century world. In order to de-
feat the Nazis, Soviet plane pilots, tank drivers, machine-
gunners, artillery-men, engineers, mechanics and the rest
must have mastered their jobs in both theory and prac-
tice.
Mr. W. Averell Harriman, former Ambassador of the
United States to the U. S. S. R. and head of an American
Mission to that country in 1941, stated in a radio broad-
cast shortly after he left the Soviet Union: "The Russian
has become a first-class mechanic in this last generation.
. . . Out on the airfields, where much has to be done with
little equipment, our American officers report -- and I
quote from one of them -- that they have never seen such
skill, ingenuity, resourcefulness and morale. The Rus-
sian mechanics work without shelter in sleet, rain and
wind an average of fourteen hours a day. Their pilots
learn to fly American aircraft as quickly, as skilfully, as
our own pilots or the British. And so we have our answer
to why Hitler's time schedule has been dislocated. The
clumsy Russian mujik has become a skilled mechanic. "2
Lord Beaverbrook, the English press magnate, testified
at the same time that Soviet "pilots are of the very best,
just as much experienced as any pilots anywhere. And
the mechanics who service their aircraft compare in all
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? SOVIET CIVILIZATION
respects with the mechanics of Great Britain and the
United States. Indeed, the Russians have a genius for
mechanization. "3
The vast extension of education and technical train-
ing in the Soviet Union since 1917 has included all seg-
ments of the population. Women as well as men have
become wise in the ways of the machine. This was of
crucial importance during World War II because hun-
dreds of thousands of women had to take over the skilled
jobs of men who had been called into the army. Especial-
ly was this true in agriculture where in many districts
the women had to shoulder the major part of the respons-
ibility, driving the tractors and mechanical reapers.
Another aspect of the cultural revolution that proved
significant was the improvement in the science of medi-
cine. In contrast to the First World War, the Soviet
doctors were able to prevent any large-scale epidemics
in the armed forces and the population at large. And
the medical services of the Red Army made a spectacular
record in restoring wounded soldiers to full health or
at least in making them available for civilian work. Sur-
gery of all varieties contributed notably to this result.
The sixth implication of the war effort was that
leadership in the army and government was well quali-
fied to cope with the crisis caused by the Nazi invasion.
The reservation must be made here that during the first
few weeks of the war the Soviet forces suffered severe
defeats and enormous losses in prisoners. When Hitler
struck on June 22, 1941, he took the Soviet armies to a
large extent by surprise and was able, for instance, to
destroy many hundreds of Soviet planes before they could
get into the air. Why Premier Stalin and his associates,
explicitly warned of the coming attack through reliable
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? ECONOMIC AN[D CULTURAL PROGRESS
information forwarded by President Roosevelt and Prime
Minister Churchill, were not more on guard against the
approaching storm, is still a mystery.
Nonetheless, on the whole both generals and civilian
administrators carried through with eminent success the
formidable tasks imposed upon them. Events did not
bear out the claim that the Moscow Trials and general
purges of 1937-38 had fatally weakened Soviet leadership.
The crushing by the Soviet Republic of an extensive
conspiracy to overthrow it -- a conspiracy having definite
links with Nazi Germany -- resulted in strengthening
Soviet leadership and morale.
This brings us to the seventh and final point: that
the economic developments of the Five-Year Plans, the
first-class fighting equipment of the Red Army and the
educational progress of the population would have
availed but little if the people had been lacking in morale.
Here again the actual course of the Nazi-Soviet conflict
disproved any number of misconceptions. Although a
certain number of traitors, Hitler collaborators, or
slackers appeared among them, the people as a whole
rallied to the defense of their country with ardor and
determination. This was proved daily by the fighting
spirit of the armies, the widespread activity of the guerril-
las, the civilian defenders of Leningrad and other cities,
and the relentless execution of the scorched earth policy.
Joseph Goebbels and the Nazi propagandists expected
that the peasants, particularly in the Ukraine, would
revolt against the Government and welcome the invading
forces as liberators. On the contrary, with few exceptions
the peasants in the enemy-occupied regions remained
loyal to the regime and joined the guerrilla bands by the
scores of thousands. And those guerrilla fighters, coming
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? SOVIET CIVILIZATION
from a population whose individual initiative had sup-
posedly been stamped out by the Communist dictator-
ship, displayed remarkable initiative. The Nazis also
hoped that discord would break out among the different
minorities. This did not happen either, though five
minor groups did not fulfil their patriotic obligations.
All but a fraction of the more than 170 minority peoples,
constituting almost one-half of the total population, gave
their utmost in the nation's supreme ordeal and played
an indispensable role in the final debacle of Hitler's
legions.
Despite the tons of newsprint expended in America
and other lands to show that they were the slaves of a
bloodthirsty tyranny and seething with hatred for the
Stalin regime, the people evidently thought from 1941
to 1945 that their new socialist system was worth fighting
and dying for. We cannot afford to forget that socialism
is more than an economic system and a political affilia-
tion; it is an inclusive way of life capable of arousing the
most intense devotion in those who give it allegiance.
## *
To recapitulate my review of the implications which
we can draw from the Soviet achievement in the Second
World War, I believe that it showed, first, that the armies
possessed up-to-date and mechanized equipment, in large
quantity and of excellent quality; second, that the bulk
of this war materiel was efficiently produced in Soviet
factories; third, that the industrial program in general
had been a conspicuous success; fourth, that the country's
socialist system as a whole functioned most effectively
under the terrific impact of the Nazi invasion; fifth, that
the population had made impressive advances in educa-
tion and technical training; sixth, that the leadership
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? ECOHOMIC AKD CULTURAL PROGRESS
lived up fully to its responsibilities during the war crisis;
and, seventh, that the people displayed splendid morale
throughout the entire titanic struggle with Hitler.
It seems to me that any objective student, conservative
as he may be in outlook or antagonistic as he may be to
the Soviets, must arrive at similar conclusions if he faith-
fully follows through the logic of the showing against
the Nazis. That logic demonstrates, through pragmatic
reference to the incontestable records of history, that
Soviet socialism possesses formidable and deeply rooted
powers of resistance and endurance. It does not demon-
strate that Soviet socialism is superior to capitalism, since
both the United States and Britain put on their own
magnificent performances during the war. Nor can suc-
cess in war, which has frequently been achieved by gov-
ernments of a reactionary character, prove in itself that
the Soviet system is a good or progressive form of society.
Even before World War II, I had decided that Soviet
socialism was succeeding in the large. In my judgment
that system works in peace as well as war. It was no
choice of the Russians that their country was made the
testing ground of how a socialist commonwealth stands up
in the fury and horror of world Armageddon. But since
that did happen, I have tried to unfold its full meaning,
which is quite relevant to the peacetime accomplishments
of the U. S. S. R.
2. The Role of Socialist Planning
In our discussion of the Soviet Constitution we saw
that one of its most important Articles concerned social-
ist planning. * I shall repeat that Article here: "The
economic life of the U. S. S. R. is determined and directed
* See p. 56.
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? SOVIET CIVILIZATION
by the state national economic plan with the aim of
increasing the public wealth, of steadily improving the
material conditions of the working people and raising
their cultural level, of consolidating the independence of
the U. S. S. R. and strengthening its defensive capacity. "
In my opinion social-economic planning is, together with
the public ownership and operation of the main means
of production and distribution, the most basic factor in
the economic life of the country.
The great Five-Year Plans have aroused interest,
skepticism, hope and fury throughout the world. The
First Five-Year Plan (or Piatiletka in the Russian) went
into effect in the fall of 1928 and made such rapid head-
way that it was completed in four and a quarter years, at
the end of 1932. The Second Five-Year Plan lasted from
1933 through 1937. The Third Five-Year Plan was
scheduled from 1938 through 1942. It was proceeding
most successfully when unexpectedly interrupted by the
Nazi onslaught in the middle of 1941. Shortly after the
conclusion of the Second World War, the Soviet Union
launched its Fourth Five-Year Plan, for the period from
January 1, 1946, through December 31, 1950.
The fundamental principle of planning is fairly
simple. Whether operative on a small or large scale it
consists of trying to coordinate future activities in the
light of the external environment, especially its economic
aspects, and of capacities, desires and potentialities. The
individual himself, if he is to lead an integrated and satis-
factory life, must continually plan from year to year and
even from day to day. Planning is in fact an indispens-
able factor in the functioning of human reason for the
solution of individual and social problems. Whenever
any person or organization or government draws up an
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? ECOHOMIC AHD CULTURAL PROGRESS
annual budget, that is financial planning of the most
essential sort for twelve months in advance.
The intelligent family adopts some measure of plan-
ning. It looks into the future so far as is possible and
plans, according to its resources, for the needs of its
various members. If it is wise, it makes a yearly budget,
allocating definite sums from its income to food, housing,
clothing, recreation, baby carriages and the like. The
next level of planning occurs in relation to individual
business enterprises. Every business has to plan carefully
if it is to be successful and make a profit. The larger and
more complex it is, the more carefully it must plan. A
huge corporation like the American Telephone and Tele-
graph Company, U. S. Steel or R. H. Macy & Co. must
have central planning in order to coordinate its many
different departments and its far-flung business opera-
tions. In the capitalist world today we occasionally find
government economic planning in effect for large-scale
enterprises such as the Tennessee Valley Authority and
sometimes for a whole industry, as when the state owns
and operates the railroads. However, the greatest degree
of government planning under capitalism takes place dur-
ing the crisis of international conflict, as it did during the
First and Second World Wars.
Now the planning that has been going on in Soviet
Russia since 1928 is the most extensive in history. The
Soviets believe that the limited, piecemeal, crisis plan-
ning under capitalism cannot solve permanently the eco-
nomic problems that face mankind. They are convinced
that just as the different departments in a big business
must be consciously correlated, so must the different
departments of a nation's economy as a whole. Coal must
be integrated with steel, steel with transportation, trans-
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? SOVIET CIVILIZATIOH
portation with agriculture, agriculture with wholesale
and retail distribution, distribution with finance, finance
with production in general, and so on down the line.
Such a concept demands that for the complex economic
activity of the entire country there be one great all-inclu-
sive Plan, covering all divisions and subdivisions of the
economy and under one vast unitary budget. This is
precisely what a Five-Year Plan entails.
The socialist planning of the U. S. S. R. differs from
any planning that takes place in capitalist lands in that
it is continuous and nation-wide and not confined to
special localities, industries or critical situations; in that
it is based on the public ownership and operation of all
the main means of production and distribution; and in
that its guiding aim is use, not profit. The welfare of the
whole community is the direct end and not secondary or
incidental to the making of profits.
Soviet and Marxist economists claim that only social-
ist planning can overcome the contradictions inherent in
the capitalist order and eliminate recurring depression,
financial crisis and mass unemployment. In general
terms it achieves economic stability by maintaining a
proper balance between production and consumption,
between supply and demand. Of primary importance
here is the central control over wages, prices, hours of
work and currency. As more and more goods are pro-
duced in field and factory, wages go up throughout the
entire nation; or prices decrease. (From 1946 through
the middle of 1952 there occurred five general reductions
in prices. ) To take care of an increasing turnover in
goods, currency may be expanded, depending on its rate
of circulation.
The fundamental point is that the Soviet people al-
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? ECOHOMIC AMD CULTURAL PROGRESS
ways have sufficient wealth to buy back the goods which
they produce. This means that there can be no such
thing as overproduction, which is simply under-consump-
tion under a different name; and that unemployment,
except while workers are shifting from one job to another,
and depressions become extremely unlikely. If on some
distant day absolute overproduction, in some foodstuff,
for instance, does threaten the U. S. S. R. , it will be simple
to solve the problem by reducing hours of work and giv-
ing people more time for leisure and recreation.
The harmony between production and purchasing
power in Soviet Russia means in actuality that the coun-
try is always as rich as its productive capacity during any
given period. The United States and other capitalist
nations, however, are only as rich as the amount of goods
that can be sold for a profit during any given period. In
times of depression anywhere from one-third to one-half
of their productive capacity is idle; and even during pros-
perity a considerable proportion of their plant capacity
may be unutilized. The national wealth and standard
of living in the Soviet Union are of course not nearly
as high as those of America, but they would have re-
mained far lower had it not been for the Five-Year Plans.
How, exactly, does socialist planning operate in the
U. S. S. R. ? This is a large question indeed and I can do
no more than sketch in the main outlines of an answer.
The key organizations in this field are the State Planning
Committee* or Gosplan and the State Committee for
Material and Technical Supplies to the National Econ-
omy t or Gosnab. Gosplan works out the programs for
over-all production, new capital investment and financial
? Until 1948 this was called the State Planning Commission.
? )? This Committee was created in 1948.
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? SOVIET CIVILIZATION
arrangements between the different sectors of industry
and agriculture. Gosnab plans for the distribution of ma-
terials and capital equipment, determining the exact
quantity of raw materials and machinery that are to go
to each branch of the economy for the carrying out of
Gosplan's blueprints.
The Soviet Government approves the eleven-member
Presidium or Governing Board of Gosplan as well as its
Advisory Council of ninety. The Chairman of this Plan-
ning Committee is automatically a member of the Soviet
Cabinet and a Vice-Premier of the U. S. S. R. It is this
Planning Committee, employing over a thousand experts,
which welds together into one vast, integrated, long-
range Plan all the minor plans and reports of all the
various republics, districts, industries, factories, farms,
distribution units and cultural organizations throughout
the Soviet Union. It is this Committee that from week to
week, from month to month, from year to year, casts its
all-seeing eye over the economic activities of the nation
and shifts the schedules within the Plan to keep pace
with new and unforeseen developments.
The work of the Planning Committee is divided into
over fifty different specialized departments, correspond-
ing to the different Ministries of the Soviet Govern-
ment. * Prominent among the Committee Departments
are those concerned with Agriculture, Automobile and
Tractor Industry, Building Materials Industry, Coal,
Electrical Industry, Foreign Trade, Machine-Tool Build-
ing Industry, Public Health, Railroads, Ship-Building
Industry, River Fleet and the Synthetic Plan. This last
section has the crucial task of constructing the final Plan
from the projects submitted by the various departments.
? See pp. 60-63.
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? ECOHOMIC AND CULTURAL PROGRESS
There are also the Organization Section, which runs an
Academy to train experts for the Committee and handles
the selecting and managing of the personnel; and the
Central Administration for National Economic Account-
ing, which is in charge of the census and the highly rami-
fied accounting system that socialist business activities
require.
Until 1949 the Central Statistical Administration was
a subsidiary of the State Planning Committee. In that
year, however, its work had assumed such importance
that it was made a separate agency under the Federal
Government, continuing to function, of course, closely
with the Planning Committee. The activities of the
Statistical Administration are indispensable to planning.
This bureau has the duty of obtaining the basic statistical
information concerning the complex Soviet economy.
It is not possible even to start planning on a broad scale
without a considerable amount of such data; yet it is not
possible to get complete and reliable data until planning
has made considerable progress. Since in the old Russia
accurate statistical procedures were honored more in the
breach than in the observance, Soviet statisticians had
a hard row to hoe. As social-economic planning has made
more and more headway, the reliability of statistics has
steadily improved and has brought about what has been
aptly called adequate economic visibility.
Planning Committees similar to the federal Commit-
tee function in each of the sixteen federated Republics
and in the numerous Autonomous Republics, Autono-
mous Region and National Districts. In fact, there is
some planning agency in every community having a
population of 20,000 or more. Likewise, planning organs
operate in all the Ministries of the constituent Republics.
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? SOVIET CIVILIZATION
These various planning bodies all work under the general
direction of the State Planning Committee; and they
present frequent reports to the planning organization
to which they are immediately subordinate. There are
also planning divisions in each federal Ministry and in
the different subdivisions of each Ministry. For instance,
the Automobile and Tractor Industry as a whole has its
planning division; the various regional trusts in this in-
dustry also have theirs; and finally there are planning
committees in each factory of each trust and in each shop
of each factory.
Thus all the workers in an automobile or tractor
factory combine to carry out a plan for that unit; all the
factories in a certain district combine to carry out a
central plan for the trust of which they are part; all the
trusts combine to carry out a plan for the entire Auto-
mobile and Tractor Industry; and then this industry
combines with every other branch of the economy to
carry out a balanced plan for the country as a whole.
The geographical planning units operate on the same
principle as the functional: The cities' plans fit into that
of the regions, the regions' into that of the Republics and
the Republics' into that of the U. S. S. R. in toto. And
these two planning procedures, the functional and the
geographic, serve to stimulate and check on each other
in their mutual cooperation on behalf of the over-all
Plan.
The geographic and planning agencies operate both
from the smaller up through the larger and from the
larger down through the smaller, providing a constant
two-way flow of ideas, initiative, plans and counter-plans.
The higher bodies of course have more authority, but
they encourage local responsibility and are on guard
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? ECONOMIC AHD CULTURAL PROGRESS
against the red tape and hardening of the ideational
arteries which have handicapped many a centralized
bureaucracy.
Another cross-check occurs in the all-embracing Fi-
nancial Plan or State budget, which includes all the sub-
budgets of governmental and economic units throughout
the U. S. S. R. This Financial Plan, which is the counter-
part of the Material Plan (drawn up in terms of concrete
goods), translates all production and distribution sched-
ules into ruble figures. The ruble, worth twenty-five
cents at the official Soviet exchange rate, is the common
denominator in which the thousand and one different
aspects of the National Plan can be accurately expressed
and clearly related to one another. The Financial Plan
and the Material Plan are simply two different versions
of the same thing.
The State Bank and its more than 3,000 branches act
as a great central pool for the national income. They
achieve this role through the direct taxation of individ-
uals, which provides about 6 percent of the national
income, and especially through the turnover tax on each
economic enterprise throughout the land and an addi-
tional tax on its profits. The Government also raises a
certain amount of capital through savings banks and the
flotation of public loans. A significant feature of financial
planning is that it makes possible the distribution and re-
distribution of the total capital resources according to
the needs of the national economy as a whole. Some busi-
nesses, such as the railroads or the oil industry, will run
up handsome surpluses, part of which can be invested
in other less developed fields of industrial activity or in
the sphere of culture and education. A considerable
portion of such surpluses, however, are retained locally
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? SOVIET CIVILIZATION
by the unit earning them and used collectively for ex-
pansion, improvements or social benefits connected with
the same enterprise.
Planned investment, then, is a fundamental aspect
of Soviet socialist planning. Instead of over-investment
in some directions and under-investment in others, cen-
tral economic planning ensures an even flow of capital
into the channels most useful and important. It would
be inconceivable for manufacturing plants to be con-
tinually duplicating one another, ruining one another
through cut-throat competition, spending huge fortunes
in misleading advertising and glutting a locality or even
the entire country with an over-supply of practically
identical goods. Planned investment also prevents the
flow of capital into the production of things for which
there might be some demand, but which would be clearly
harmful to the well-being of the people.
This strict supervision of investment, however, by no
means implies that so-called luxuries are taboo or that
a flat conformity of standardized goods must prevail.
One of the chief aims of Soviet planning is that everyone
should have an abundance of all sorts of personal posses-
sions, including luxuries. These consumption goods,
moreover, are to be as different in quality and design as
can reasonably be expected. With its informational ap-
paratus carefully attuned to the needs and desires of con-
sumers, the National Planning Committee presents the
citizens with a wide range of choices in commodities.
It is true that up till now Soviet clothes, shoes, hats and
so on have frequently been of an inferior grade; this is
not due, however, to socialist planning, but to the fact
that the handicaps of the past have not yet been over-
come.
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? ECOHOMIC AHD CULTURAL PROGRESS
It is essential to note that the surpluses or "profits"
built up by economic enterprises play a very different
role from what we have been accustomed to expect under
capitalism. They are, in effect, mainly a bookkeeping
device. Socialist business is run, as I have said, not for
profits, but in order to provide goods and services to the
community at large. The most convenient process of
accounting and distribution, however, demands the mech-
anism of buying and selling, of money and prices. Fur-
thermore, identifiable "profits" are necessary so that a
certain proportion of the nation's income can be set aside
to take care of depreciation and obsolescence and, above
all, to expand the means of production, particularly
heavy industry. Soviet Russia, for instance, put into
social savings for such purposes an annual average of one-
third its total income during the first two Five-Year
Plans.
Under the financial system 1 have been outlining,
every producing and distributing unit in the country has
an account in the central State Bank or one of its
branches. And it is the duty of each bank to check fre-
quently on the use of the credits, long-term, short-term
or emergency, issued from time to time. It must make
certain, for example, that the automobile factory to which
it has advanced credit actually turns out the cars called for
by the Plan and supposedly made possible by the credit.
The factory has the obligation of giving the bank reports
on definite dates showing how it is fulfilling its program.
If the bank discovers that the credit is being used ineffi-
ciently, it will at once stop further credits until the mat-
ter is cleared up, even instituting a special investigation
if necessary. As a brilliant student of Soviet economics,
Vladimir D. Kazakevich, writes: "The mechanism of
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? SOVIET CIVILIZATION
banking is used as a rudder to direct, through extension
and withholding of credit allocations, the fulfilment of
the Plan in production and distribution. "4
Thus, socialist planning makes the banks even more
important than they are in a capitalist country. For the
banks become the watchdogs of the whole economy by
carrying on what amounts to a constant audit of business
enterprise. They act as the vital link between the various
sets of plans drawn up on paper and the fulfilment of
those plans in terms of concrete goods and services. Their
vigilance means that there can be no let-down on the part
of management or workers in a concern without those
responsible being called to task. In this function the
banks are aided by a system of detailed accounting that
penetrates into every nook and cranny of economic activ-
ity. Soviet accounting, organized on the strictest basis,
aims to cut production costs and to attain the greatest
possible results for the least possible expenditures. Here
again book profits enter into the picture as a partial test
of whether or not a plant is being operated efficiently.
Let us consider some of the established procedures
in drawing up and putting into effect a Soviet Five-Year
Plan. After consultation with key Soviet and Communist
Party bodies, the State Planning Committee works out
general goals for the economic, social and cultural devel-
opment of the country during the next five-year period.
They are realistically based on the experience of the past
and the requirements and possibilities of the future.
With these goals as the objective, the State Planning
Committee, several months before the Plan is to go into
effect, sends out preliminary and tentative figures to all
the subordinate planning committees.
These planning agencies, and the various factories
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? ECOHOMIC AHD CULTURAL PROGRESS
and collective farms throughout the land, carefully con-
sider the proposed estimates with special attention to
those figures that concern them. Then, in the light of
their own experience, they make fresh suggestions and
counter-plans, returning the revised drafts to the central
Planning Committee. After receiving all available in-
formation and criticism regarding the preliminary sched-
ules, including the reactions of the various government
Ministries, the Planning Committee proceeds to draw up
the final Plan for presentation to the Council of Minis-
ters (or Cabinet), to the Communist Party and to the
Supreme Soviet. These three bodies must all pass on the
Five-Year Plan. It is to be remembered that the State
Planning Committee, in spite of its enormous importance
and influence, remains in the last analysis an expert ad-
visory board whose recommendations must be ratified by
the higher political authorities.
Along with the Five-Year Plan as a whole the Plan-
ning Committee also submits for ratification the control
figures for the first year of the Plan. In fact, every Jan-
uary the Committee submits a one-year plan to cover
the current year. This must of course fit into the general
outlines of the Five-Year Plan, but need not agree exactly
with the original figures of the Plan.
