Theoretical catalyst of the 1965 Soviet economic reform
'What is profitable for society should be profitable for every enterprise' — the central proposition of his 1962 Pravda article
Soviet economist. His article 'Plan, Profit, Premium' in Pravda (September 1962) triggered the all-union economic discussion that led to the 1965 Kosygin reform, the most significant Soviet attempt to introduce profitability and enterprise autonomy into the planned economy. He argued that what is profitable for society must also be profitable for each enterprise. In the 1920s he created the USSR's first machine-accounting station. Arrested on fabricated charges in 1938, he was rehabilitated in late 1939. His wife Regina Horowitz was the sister of pianist Vladimir Horowitz.
Career Timeline
- 1897Born in Slavuta, Volhynia Governorate, son of a forest-estate clerk
- 1920Graduated from the Law Faculty of Kiev University
- 1923–1929Practitioner at the Institute of Labour, Kharkov; created first Soviet machine-accounting station at 'Sickle and Hammer' plant
- 1930–1941Head of Dept. of Organization and Planning of Machine-Building, Kharkov Engineering-Economics Institute
- 1938–1939Arrested by NKVD on fabricated charges; sentenced to 15 years; rehabilitated late 1939
- 1941–1943Official at the Ministry of Finance of the Kirghiz SSR
- 1947–1962Professor at Kharkov Engineering-Economics Institute; founded research lab for machine-building economics
- 1956Doctor of Economic Sciences: 'Ways to Raise the Profitability of Socialist Enterprises'
- 1962Published 'Plan, Profit, Premium' in Pravda, sparking the all-union reform debate
- 1962–1981Professor of Statistics and Accounting, Kharkov State University
- 1981Died of a heart attack in Kharkov
Related historical events
- 1928–1937The Five-Year Plans and the Soviet TransformationIndustrial planning economist
- 1937–1938The Great PurgeEconomist arrested in 1938Arrested by the NKVD on 17 April 1938 on fabricated charges of espionage and terrorism. Tried in a closed session on 21 April 1939 without prosecution, defense, or witnesses; sentenced to 15 years in corrective labor camps. He did not admit guilt. Rehabilitated and released in late 1939. As the economist who later provided the theoretical foundation for the 1965 reform, he is a rare case of a Great Terror target who survived and returned to shape Soviet policy.
- 1965–1970The Kosygin ReformTheoretical catalystHis proposal to introduce profit indicators was the theoretical catalyst of the reform.
The Liberman Reform: Profit, Incentives, and Enterprise Autonomy
Liberman's September 1962 Pravda article 'Plan, Profit, Premium' took aim at a core contradiction in Soviet industrial management. Enterprises were evaluated by dozens of indicators (gross output, material consumption, labor productivity). Yet no one measured whether they were producing efficiently at all. Liberman proposed a radical simplification: evaluate each enterprise by a single synthetic indicator: profitability (the rate of profit). Let enterprises retain a share of profits for worker and management bonuses, and use another share for self-financed investment. The organizing principle was that 'what is profitable for society should be profitable for every enterprise.'
Liberman was not proposing to abolish the planned economy. Central planning would still set national output targets and prices; enterprises would gain the discretion to meet those targets in the most profitable way. By linking plan, profit, and premium, he sought a new equilibrium between centralization and decentralization: a third path, distinct both from Bukharinite market socialism of the 1920s and from the Stalinist administrative-command system.
The article triggered an immediate all-union debate. Hundreds of commentaries poured into Pravda, Izvestia, and the journal Voprosy Ekonomiki. Khrushchev authorized large-scale experiments with Liberman-style incentive systems at two major factories in 1964. After Khrushchev's ouster that autumn, the discussion continued. In September 1965 the Central Committee plenum adopted the Kosygin reform, which incorporated profitability indicators and enterprise autonomy on a wide scale, a decision Khrushchev had hesitated to take, but which his successors enacted. After the 1968 Prague Spring, however, market-oriented elements were recast as political risks and the reform's scope was steadily narrowed. Liberman's proposals nonetheless remain one of the rare moments in Soviet history when a socialism driven by prices and interests, rather than administrative commands, was seriously designed.