the Kharkov system
하르키우 체계
The nickname for Yevsei Liberman's model of profit-based enterprise incentives, used by both supporters and critics during the economic debate of 1962–1964. It was named after Liberman's Kharkov Institute of Engineering and Economics, where he developed the proposals. The system consisted of sharply reducing directive plan targets for enterprises, making profit and profitability the key criteria of performance, and tying bonuses to profitability rather than to plan fulfilment.
In depth
Origin of the name
In the early 1960s the Soviet economist Yevsei Liberman developed his enterprise-incentive proposals while working at the Kharkov Institute of Engineering and Economics (KhIEI) and Kharkov State University. From the late 1950s he published articles on economic stimulation of enterprises in the journal Kommunist, and his 9 September 1962 Pravda article 'Plan, Profit, Premium' ignited an all-Union debate. During this debate both supporters and opponents referred to Liberman's proposals as 'the Kharkov system' (Харьковская система) or 'the Kharkov model' (Харьковская модель). The name emphasised the collective work of the Kharkov school of economists rather than Liberman alone.
Core structure of the system
The Kharkov system can be summarised in four proposals. First, reduce the number of directive plan indicators handed down to enterprises from around thirty to a handful. Second, make profit and profitability (the ratio of profit to capital) the sole criteria of enterprise performance. Third, let enterprises draft their own detailed plans with higher bodies confined to approval and adjustment. Fourth, tie bonus funds to profitability so that enterprises are incentivised to maximise performance rather than conceal capacity.
Liberman explicitly stated that macroeconomic levers (prices, finance, capital investment, production proportions) would remain in the hands of the centre, thus defending against the charge of a return to capitalism. Nonetheless, the system was the first systematic proposal to make profit an open indicator within the planned economy.
Debate and legacy
The debate over the Kharkov system ran from 1962 to 1964 across the pages of Pravda and specialist journals. Prominent academics and engineers including Vasily Nemchinov, Vadim Trapeznikov, and aircraft designer Oleg Antonov joined in, and experiments were launched at the Bolshevichka garment factory in Moscow and the Mayak factory in Gorky. The 1965 Kosygin reform institutionalised the system's core ideas, but without accompanying price reform and in the face of political opposition it was effectively abandoned by the early 1970s. The Kharkov system was the first blueprint for institutionalising market principles within a planned economy and was later referenced in Hungary's New Economic Mechanism (1968) and in the debates of perestroika.
Related people
Related historical events
Sources
- Wikipedia (RU) Russian Wikipedia article on the 1965 reform details Liberman's Kharkov institute, the Kharkov school of economists, and the Pravda article that launched the debate.
- Wikipedia (EN) English Wikipedia article confirms Liberman's proposals as the rationale for reform, the Kharkov Institute of Engineering and Economics, and the profit/rentability indicators.
- perspektivy.info Article by Roman Kirsanov (Institute of Russian History, RAS) uses the term 'Харьковская модель' for Liberman's proposals and provides detailed analysis of the model's components.
- encyclopedia.yivo.org YIVO Encyclopedia entry by Gur Ofer confirms Liberman's four-component proposal and his role at the Kharkov Institute of Economics and Engineering.