Economic Experiment (1983)

Background and course

The joint decree of 14 July 1983 (No. 659) expanded enterprises' planning and managerial rights, reduced the number of centrally assigned plan indicators and raised the role of economic norms. The experiment began on 1 January 1984. The Politburo decision of August 1984 followed Tikhonov's note on preliminary results, and from 1 January 1985 the experiment's conditions were extended to 26 all-Union and republican ministries, 1,850 industrial enterprises and over 3,000 consumer-services enterprises. Russian-language literature calls it the large-scale economic experiment and dates it both as the experiment of 1983–1985 and as that of 1984–1985.

Design

Participating enterprises could use the production-development fund independently, direct foreign-currency earnings from exports to expanding export production, and their wage fund was tied to net profit. They made payments to the state budget themselves and allocated remaining profit to development, employee bonuses or social needs. At the same time strict central planning control continued: declared autonomy coexisted with dependence on plan indicators.

Results

According to 1984 data, key macroeconomic indicators of participating enterprises rose by 1.5–2 per cent and their profit by 5–10 per cent, and the experiment narrowed the gap between lagging and leading enterprises and reduced the number of unprofitable organisations. Results nevertheless varied by industry. The Ministry of Local Industry of the Lithuanian SSR succeeded through new technology, while the Ministry of Light Industry of the Belorussian SSR accumulated unsellable stocks. The experiment aggravated monetary imbalance: in all five ministries the ratio between wage growth and a 1 per cent rise in labour productivity deteriorated, and the USSR State Bank reported to the Council of Ministers that the wage-productivity relation at participating enterprises was significantly worse than in industry as a whole. Material-supply problems also complicated expansion: in the first five months of 1984 the plan for commissioning fixed production assets was fulfilled only 43 per cent in the food industry ministry of the Ukrainian SSR and 66 per cent in the light industry ministry of the Belorussian SSR.

Distinctions

Scholars describe the experiment as an extended variant of khozraschyot. Wage dependence on profit was introduced, and enterprises could set prices themselves and develop product samples. What Andropov promoted were mild economic experiments similar to Kosygin's mid-1960s initiatives rather than radical political and economic reform. Part of the academic literature holds that the experiment demonstrated the limits of partial reform and became an argument for moving to radical change. Its negative consequences, including material shortages, falling budget revenues and growth of unfinished construction, formed the background to the adoption of the 1987 Law on the State Enterprise.

Examples

The experiment ran in five ministries: heavy and transport machine building, the electrical equipment industry, the food industry of the Ukrainian SSR, light industry of the Belorussian SSR and local industry of the Lithuanian SSR. In heavy industry contradictions appeared: rising profitability at Minelektrotekhprom coexisted with continued dependence on state subsidies, frequent changes of plan targets destabilised production, and cost reduction per ruble of output at Mintyazhmash was achieved mainly by administrative methods rather than technological breakthroughs. In fund-building, the Lviv production association Svetoch planned to raise its planned capital investment volume by 61.9 per cent in 1984, and in the food industry ministry of the Ukrainian SSR the share of the socio-cultural measures fund grew fourfold.