monetization and policy in soviet agriculture since 1952

University of Glasgow

Monetization and Policy in Soviet Agriculture since 1952Author(s): Frank A. Durgin, Jnr.Source: Soviet Studies, Vol. 15, No. 4 (Apr., 1964), pp. 375-407Published by: Taylor & Francis, Ltd.Stable URL: http://www.jstor.org/stable/149630 .

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Soviet Studies Vol. XV April 1964 No. 4

MONETIZATION AND POLICY IN SOVIET AGRICULTURE SINCE I952*

I. INTRODUCTION I. The course of monetization

The most striking features of Soviet agricultural policy over the past decade have been the increase in the importance of money in the relations between the State and the kolkhozy, and the increasing reliance, by the State, on value categories as instruments of direction. Whereas ten years ago it would have been difficult to find reference to a possible role in policy for economic and financial levers, today value categories such as prices, costs, profits, credits and taxes are of prime interest to the policy makers and form the main subject of economic discussion. In contrast to the ideas of slightly more than a decade ago, when it was deemed that, under socialism, price could in no way influence output, price now occupies a position of top priority in the arsenal of policy instruments. The concomitant of this has been not only an expansion ofkolkhoz output, but a very significant institutional transformation-the monetization of that sector. On the eve of the I953 price increases a large but unquantifiable part of the transactions1 between the State and the kolkhozy was conducted in

* This article is based on the research material collected while the author was participating in the 1962 Ford Foundation Faculty Research Seminar in Soviet Economics at the University of Syracuse. The comments of the seminar director, ProfessorJoseph Berliner of Brandeis University, and those of Dr. Frank Genovese of Babson Institute, are gratefully acknowledged.

The term 'billion' in this article means thousand million. 1 From available data it does not seem possible to quantify this with any degree of precision.

The most significant transactions in kind were the payments in kind for MTS services which existed for almost every product. These accounted in 1956 for 71 % of the total kolkhoz grain deliveries to the State, and of other deliveries well over (since the following figures represent the percentage of total procurements from all categories of producers) 35 % for oil bearing crops, 30 % for potatoes, 22 % for sugar beet and I8 % for cotton.

Obligatory deliveries were a second type of transaction in kind. Although a price was paid to the kolkhozy on all obligatory deliveries, it was for the most part ludicrously low, failing in many cases even to cover the costs of transport from the farms to the government procurement centres. It does not, therefore, seem unreasonable to treat the obligatory deliveries as a tax in kind on the standing crop, associated with the remission of small sums to the farms to ease the burden of transporting it to procurement centres. Obligatory deliveries of grain accounted for some 15 % of total kolkhoz grain deliveries to the State in I956 and more than 18-22% in the case of milk and meat. Obligatory deliveries existed on all edible crops and livestock products.



MONETIZATION AND POLICY

kind, and kolkhoz labour was paid to the extent of 75% in kind;2 some five years later, in 1958, the relations between the State and kolkhozy had been completely monetized, and by 1961 kolkhoz labour was paid to the extent of less than 30% in kind.3

The increase in money flows through the kolkhoz sector and the enmeshment of that sector into the financial circuits of the economy have been substantial. As a result of an approximate trebling in the prices of kolkhoz output,4 kolkhoz monetary receipts from all sources more than trebled during the period 1952-1961, rising from 4.28 to I3.57 billion rubles.5 Within this overall increase, receipts from sales to the government and consumer co-operatives rose quite significantly from 2.45 billion, or 58% of the total in I952, to II.52 billion, or 86% of the total in 1961,6 reaching go% of the total in I962.7 This increase in

monetary receipts by the kolkhozy has in its turn permitted a more than four-fold increase in the amounts of cash distributed to the kolkhozniki in trudoden (workday) payments, these rising from 1.24 billion in I952 to 5.65 billion in 1961.8

This increase in the flow of cash into the kolkhozy and kolkhoz households has been accompanied by an increase in money flows from the kolkhozy into the other sectors of the economy. Kolkhoz capital investments and expenditures on current production have about trebled during the period, with capital investments rising from I.07 billion in 1952 to 3.I5 billion in I96I,9 indivisible funds rising from 6.31 billion to 20.39 billion in the same period,10 and annual expenditures on current production rising within the shorter period 1953-1960 from an estimated 1.2 billion to an estimated 3.2 billion.1 Purchases of

clothing, furniture and household goods by kolkhoz families have more than doubled during the period,12 and .the amounts held on

2 In 1952 the aggregate of trudoden distributions in cash and kind for the entire Soviet Union was evaluated at 4.75 billion rubles (S. I. Sdobnov, Sotsialisticheskaya sistema selskovo khozyaistva, M., 1959, p. 70). That same year 1.24 billion rubles in cash were distributed on trudoden earnings (Vestnik Leningradskovo Universiteta, 1961, no. II, p. 37).

3 In 1961 cash accounted for 71 % of the aggregate Union value of trudoden distributions (Ekonomika selskokhozyaistvennykh predpriyati, M., 1962, p. 271). 4 With 1952 as the base year, the I96I overall index of procurement prices was 304%: 208 % for crops and 562 % for livestock products (V. Boyev in Voprosy ekonomiki, 1963, no. 5, p. 117). 5 Narodnoye khozyaistvo SSSR v 1961 g., p. 436.

6 Ibid. 7 V. Boyev, loc. cit. 8 1952 figure from A. Nove, The Soviet Economy (N.Y., 1961) p. 50; 1961 figure from editorial

in Ekonomika selskovo khozyaistva, 1962, no. II, p. 9. 9 Narodnoye khozyaistvo SSSR v 1961 g., p. 538. 10 Ibid. p. 418. 1 Figures derived on the basis of the fact that short-term credits to the kolkhozy in 1953 and

1960 were 160 and 1040 million r. respectively (M. M. Usoskin, Organizatsiya i planirovaniye kredita, M., 1960, p. 308) and accounted for 14.8 % and 32.3 % respectively of total kolkhoz production expenditures (Dengi i kredit, 1961, no. 7, p. 33).

12 Overall ruble figures do not seem to be available, but an index of purchases for the years 1940 through 1959 is given in Selskoye khozyaistvo SSSR, Statisticheski sbornik (M., 1960) p. 482.

376



IN SOVIET AGRICULTURE 377

deposit by banks to the accounts of the kolkhozy and kolkhozniki have shown substantial increases.13

An upward trend can also be observed in the volume of credits, both short-term and long-term, extended to the kolkhozy. The volume of outstanding long-term loans to the kolkhozy increased during I953- 1960 from I.I billion r. (47% of the total for the economy) in 1953 to 2.38 billion (63% of the total) in I960.14 New short-term credits extended to the kolkhozy rose some six-fold, from I60 million r. in 1953 to 1040 million in I960.15

Advance payments by the procurement organizations to the kolkhozy on deliveries have shown a more than six-fold increase, rising from 350 million r. in 195316 when the practice was instituted to 2240

million in I960.17 Short-term credits and advances on deliveries combined increased from a total of 510 million r. in 1953,18 or 30% of kolkhoz productive expenses,19 to 3683 million in I96120 or 80% of

TABLE I INDEX OF THE AVERAGE OF PRICES PAID BY THE GOVERNMENT FOR AGRICULTURAL PRODUCTS PROCURED FROM THE KOLKHOZY, KOLKHOZNIKI, WORKERS AND EMPLOYEES

1952 1953 1954 1955 1956 1957 1958 1959 All products ..... .. Ioo 154 207 209 251 266 296 302

Edible crops .. .. oo 132 17i I69 207 209 203 206 Grain .... .. Ioo 236 739 553 634 617 695 743

wheat .. .. 100 245 752 524 647 603 621 656 rye .. .. 100 169 730 668 625 622 I047 I14

Grapes and fruits .. Ioo 119 135 138 192 i88 I79 169 Industrial crops .... oo 122 125 137 163 i66 155 I54

cotton .. .. IO. I05 102 96 114 II5 Io6 107 sunflower seed .. Ioo 528 626 987 928 947 774 88i

Livestock products .. Ioo 214 307 3I9 371 420 546 561 cattle . .. .. Ioo 338 476 464 5o8 604 1147 1226 milk . .. .. Ioo 202 289 303 334 362 404 404 eggs ... .. 100 126 I35 152 155 169 297 3Io

Source: Selskoye khozyaistvo SSSR, Statisticheski sbornik (M., 1960) p. II7.

13 Kolkhoz demand deposits rose from 5.032 billion r. in 1953 to 11.702 billion in 1958 (Narodnoye khozyaistvo SSSR v 1958 g., p. 913). As a result of the purchase of MTS inventories by the kolkhozy these dropped to 6.972 billion in 1959 (Narodnoye khozyaistvo SSSR v 1959 g., p. 808). Since that time the statistical annual Narodnoye khozyaistvo has ceased to furnish data on this point.

Savings accounts of the population in rural areas rose from 131 million r. in 1948 to 2.49 billion in 1961 (Narodnoye khozyaistvo SSSR v 1961 g., p. 607). This represents an increase of some 1800 % as against a comparable increase of some 720% in the volume of savings accounts of the urban population.

14 1953 figures from Narodnoye khozyaistvo v 1959 g., p. 807. 1960 figure from Narodnoye khozyaistvo v 1961 g., p. 765.

15 M. M. Usoskin, loc. cit. 16 Ibid. 17 Ibid. 18 Ibid. 19 Dengi i kredit, 1961, no. 7, p. 33. 20 Dengi i kredit, 1962, no. 4, p. 8.




total kolkhoz production expenditures.21 The potentials from an administrative point of view are clear.

The progressive strengthening of the attempts to influence both the quantity and assortment of agricultural output via the manipulation of prices since 1953 can be seen from Table I.

Between I953 and I959 therewas an approximate trebling in the level of the average of prices paid by the State to the kolkhozy. The shift in the structure of price relatives over the period, however, is of greater significance. As against an index of the average of prices on all products delivered to the State in I959 of 302 (1952 base), the index for crops stood at 206 and for livestock products at 56I. Around the index of the average of prices on crop deliveries of 206, particular indexes stood at: grain 743, industrial crops 154, grapes and fruits I69, potatoes 834. Around the index of 56I for livestock products particular indexes were: cattle 1239, milk 404, eggs 310. Monetization, the prime prerequisite to any efforts at direction via value categories, is itself the product of these very efforts.

2. Outline of Paper It is the object of this paper to describe the gradual shifting, over

the course of the past decade, from direction of agriculture via administrative levers to direction via economic and financial levers. Emphasis is given to the attempts, since I958, to institute a system of free sales-i.e. a system in which the role of administrative sanctions is replaced by the sanctions of financial profits and losses.

Section II is a brief discussion of the origins of this trend in both theory and practice.

Section III is an explanation of how the effectiveness of the first movement in the direction of decentralization (the I955 reform of agricultural planning) was contingent upon further reforms, which, given the need for financial controls to take up the resultant administrative slack, led to the abolition of the MTS in 1958.

Section IV is an explanation of how the abolition of the MTS, in its turn, entailed the procurements and pricing reforms of I958. The long run goal in the establishment of the new procurements system was the eventual institution of a system of free sales of agricultural products to the State.

Section V is a description of the many difficulties encountered over the past five years in the efforts to institute a system of free sales. We have confined ourselves to the following areas: cost accounting, labour costs, pricing, rent, land costs.

21 Ibid.

378



Section VI is an explanation of what can be considered the crux of the entire range of endeavours to change from administrative to economic and financial levers-i.e. the efforts to shift the remuneration of kolkhoz labour from a residual to a fixed monetary basis.

Section VII is a description of the efforts to integrate the level and structure of agricultural prices into that of the overall economy.

Section VIII is devoted to conclusions.

II. THE ORIGINS On the theoretical plane, the sine qua non of the current trend

towards 'utilizing' the law of value 'in the interests of society' was the recognition of the universality of the law of value. And the origins of this recognition date from Stalin's time. The role of value (price) in the disturbing discrepancies between plans and results (particularly with respect to product-mix) had, long before Stalin's death, made it apparent that the Soviets had indeed not succeeded in 'liquidating' the law of value. The first indication of an official recognition of this fact, however, came only in 1943 in the form of the famous editorial in Pod znamenem marksizma, which stated:

The proposition that the law of value plays no role under socialism contradicts, by its very nature, the whole spirit of Marxist-Leninist political economy . . . [it] has barred the way to a correct understanding of those problems which are so acutely posed before us, not only questions of a theoretical nature, but also the practical problems of our economic policy.22

Stalin, some nine years later in his Economic Problems of Socialism, pursued the question somewhat more vigorously. The editorial had pointed out that, because of the institutions of socialism ('distribution on the basis of the quantity and quality of labour'), the law of value operated 'in a transformed form'.23 Stalin, however, not only rejected the idea that the law of value had been liquidated, but attacked even the notion that it had been transformed. 'This is ... untrue. Laws can not be "transformed".... If they can be transformed then they can be abolished and replaced by other laws.'24

For Stalin, the operation of the law of value was contingent, not on the form of socio-economic organization, but rather on the existence of commodity production.

Wherever commodities and commodity production exist, there the law of value must also exist.25 . . . Commodity production is older than capitalist production.

22 Pod znamenem marksizma, 1943, nos. 7-8, pp. 70 and 72. 23 Ibid. p. 75. 24 J. Stalin, Economic problems of socialism in the USSR (Foreign Languages Publishing House,

M., 1952) pp. 11-12. 25 Ibid. p. 23.





It existed in slave owning society and served it ... It existed in feudal society and served it... Why, then, cannot commodity production similarly serve our socialist society for a certain period . . .?26

Having demonstrated the apolitical nature of commodity production and the law of value, he went on to lay out both the doctrinal and the political paths to positive pricing policies in the short run.

In the sphere of commodity circulation (trade between town and village) the law of value preserves, within certain limits . . . the function of regulator . . . The operation of the law of value ... also extends to production... it influences production and this fact cannot be ignored when directing production.27

The trouble is not that production in our country is influenced by the law of value. The trouble is that our business executives and planners, with few exceptions, are poorly acquainted with the operations of the law of value, do not study them, and are unable to take account of them ... This fact explains the confusion that still reigns in the sphere of price-fixing policy.28

As to policies for the long run, however, he called for an eventual elimination of the sphere of influence of the law of value.

[It] is quite untrue ... [that] the law of value is a permanent law.... Value, like the law of value, is a historical category connected with the existence of commodity production. With the disappearance of commodity production, value and its forms and the law of value will also disappear.29

In order to raise collective-farm property to the level of public property ... 'products-exchange' must be introduced unswervingly and unhesitatingly, step by step contracting the sphere of operation of commodity circulation and widening the sphere of operation of products-exchange.30

While the course of events since 1953 (monetization vs. demonetiza- tion; extension of commodity production and circulation vs. their contraction) has been diametrically opposed to that foreseen by Stalin, it does not seem unreasonable to ask whether the initial acts (the price and fiscal reforms of 1953) of the current trend had not been in the developmental stage during Stalin's lifetime. The largest single extension of commodity circulation had occurred as a result of his decisions on the private plots and the kolkhoz market. And as has been seen, the theoretical justification for the reforms are to be found in his Economic Problems. In the light of the considerable time necessary for the im- plementation of policy shifts in the USSR, the relative complexity of the reforms of 1953, and the fact that only five months had elapsed between the time of Stalin's death and the unveiling of the 'New

26 Ibid. pp. 18-19. 27 Ibid. p. 23. 28 Ibid. p. 24. 29 Ibid. p. 26. 30 Ibid. p. I04.

380



Look' by Malenkov in August 1953, the hypothesis acquires an air of plausibility.31

The origins of the rapid decentralization which occurred between 1953 and 1958 (described in Section III) are more difficult to pinpoint, as blundering in the realm of agricultural planning had long been a target of criticism within the Soviet Union. There was, however, a shift in the context of this criticism some time between the XIX Party Congress in October 1952 and the September 1953 Plenum. Malenkov, in speaking to the XIX Congress was criticizing the planning bureaucracy, its incompetence and its failure to mould plans to local conditions. Khrushchev, speaking to the September 1953 Plenum, however, criticized not the failings of men but the system-i.e. the planning and controlling of innumerable minutiae from above. It was 'folly', according to him, to attempt to plan and control some '200-250

production indexes' for each of some 92,000 farms, each with its own particular conditions of soil, climate and terrain.

This expression of doubts concerning the feasibility of central control, coupled with the admission of the law of value, mirrors the shifts in policy which occurred over the course of the following decade. Very shortly after the price and fiscal reforms of 1953, the Party Plenum ordered that new methods of planning, permitting more local initiative in both the state and collective farms, be prepared.32 The result was the decree of 9 March I95533 which, in part, paralleled the decentralization which had occurred one year earlier in the sovkhozy.34 It stated, in essence, that henceforth the kolkhozy would be set plans only with respect to the amounts to be produced and delivered to the government, but that the plans as to how these amounts would be produced (formerly prepared at the centre) would be worked out at the kolkhoz- MTS level.

This initial act in the dissemination of decision-making powers, however, engendered impelling centrifugal forces which swept the policy makers up in a rapid movement of decentralization. Its effectiveness was contingent on the granting of a greater degree of local

31 The political purpose of the Malenkov reform (i.e. a larger share of national income for the kolkhozniki) could well have been served by uncomplicated rate and price changes. Instead, there was tax reform, discrimination along product lines in the percentage of price increases, and discrimination as to both product and category of producer in the percentages of change in obligatory delivery norms, with an increase in these norms for the kolkhozy for meat, wool and milk. Is it feasible, technically or administratively, for the economic objectives of the tax cut and reform of August 1953 (stimulation of output, particularly livestock, from the private plots) to have been formulated, the research necessary for setting regionally differentiated rates conducted, the budgetary estimates completed and the tax law drafted and published in the span of five months ?

32 Party Decree of 2 March I954 0 dalneishem uvelichenii proizvodstva zerna v strane i ob osvoyenii tselinnykh i zalezhnykh zemel, Section IV, paragraph A-3.

33 Ob izmenenii praktiki planirovaniya selskovo khozyaistva. 34 Decree of 15 April I954 0 dalneishem razvitii sovkhozov ministerstva sovkhozov SSSR i

povyshenii ikh rentabelnosti (see paragraph 48-C).





autonomy to the MTS, which in its turn precipitated the sweeping reforms of 1958. While the measures of I955-I958 have been described in ample detail elsewhere, the interrelations of the whole complex of acts over the period bear description.

III. THE ELIMINATION OF THE MTS For the decree of 9 March 1955 to be more than a scrap of paper,

some degree of decentralization in the planning and control of MTS work was required in order that these institutions be enabled to dovetail their work plans into those of the kolkhozy. Thus during 1955 new techniques of planning were developed by which each MTS was in effect given an overall work plan but had considerable latitude as to detail.35 The new system, however, had many flaws, the main one being that the financial status of the MTS bore little relation to the volume of agricultural output, but stood rather in a very direct relationship to the volume of inputs. This resulted in the MTS directors' flagrantly wasteful practice of what became known as the chase after 'soft ploughing'-i.e. forcing, by means of their monopoly of machinery, unnecessary work on the kolkhozy.

A cure to the problem was sought on the financial plane, when the XX Party Congress ordered that steps be taken toward eventually removing the MTS from the central Budget and placing them on a financially autonomous profit and loss basis. It soon came to light, however, that the effectiveness of a regime of financial autonomy would be contingent on the restoration of a system of payments scaled to yields such as had been in effect prior to I953. But because of the impossibility of imputing what part of any increment in yields was due to kolkhoz efforts, and what part due to MTS efforts, the scaled payment principle had proved to have harmful effects on kolkhoz initiative, and for this reason, at Khrushchev's insistence, had been abandoned in October 1953.36

Blocked in this avenue of approach, and propelled by a host of problems arising out of the dichotomy of units operating on the same farm fields, which were beginning to make themselves felt about this

35 All tasks were equated to hectares of'soft ploughing'. The MTS were handed a plan expressed in terms of 'soft ploughing' and given the liberty to fulfil it in the manner provided for in the MTS-kolkhoz contract. Conversion of any given task, e.g. harrowing, to hectares of 'soft ploughing' was done by ascertaining the fuel consumed in one hectare of harrowing and in ploughing up one hectare of fallow land at a depth of 22-23 centimetres. If the first was .22 times the second, one hectare of harrowing was the equivalent of .22 hectares of 'soft ploughing'. The technique, however, was extremely faulty as soil conditions and equipment vary considerably from region to region. Thus the unit of measure was a variable. In addition, the concept failed to reflect the important element of time. (See Ekonomika selskovo khozyaistva, 1957, no. 4, p. 84.)

36 A decree of I October 1953 abolished the scaling of payments to yields for work in potato and vegetable production, and a decree of 4 July 1954 abolished the sliding scale principle for grain crops and oil bearing seed (Sotsialisticheskoye selskoye khozyaistvo, 1954, no. 8, p. 66).

382




time,37 efforts were made to circumvent the problem of financial relationships by administrative reforms. Hence the series of experiments during 1956 with unified MTS-kolkhoz brigades,38 which, not sweeping enough, led to experiments with unified MTS-kolkhoz directorships.39

While this latter form of relationship seemed to provide at least a partial cure for some of the problems on the administrative plane, it left untouched the basic financial antagonism of the two institutions. Thus, during 1957, in a new attempt to find a common solution to all classes of problems, efforts reverted to the financial plane with a series of experiments conducted with the outright rental of machinery to farms in Latvia and Lithuania.40

Although even today specialized equipment for which the kolkhozy have only an occasional need is provided by the RTS on a rental basis, the high ratio of depreciation to total operating costs was a great obstacle to rental as a general basis for MTS-kolkhoz relations. Administrative problems apart, rental would have no doubt resulted in increasing the effective input per hour of machine utilization. By the same token, however, it would have converted depreciation costs, variable from a social and governmental point of view, into a fixed cost for the kolkhozy. With the marginal cost of depreciation zero, only fuel and wages would have remained as the restraining determinants of machine utilization.41 Thus the point of maximum profitableness on machine utilization for each kolkhoz would have been well beyond the point of any marginal return to society on the use of machinery in that kolkhoz. This social waste, in part, would have been financially reflected in the accounts of the MTS as the amount by which actual depreciation exceeded allocations to depreciation out of rental fees. To avoid this financial impact, the government would have been forced to base fees on highly accelerated depreciation schedules, which in its turn would have discouraged mechanization. The level of machine usage in each farm would have been well below the social optimum.

The formula finally adopted was that of the outright sale of agricultural machinery and equipment to the kolkhozy. This idea, which had been proposed in the early fifties but attacked by Stalin as being not only a ruinous proposition for the kolkhozy but a step away from Communism because of the resultant extension of commodity circulation, was again proposed several times in 1957 and experi-

37 Primarily double overheads and the problem of integrating and coordinating the work forces of the two institutions.

38 Ekonomika selskovo khozyaistva, 1957, no. 3, p. 97. 39 Ibid. I957, no. 8, p. 94. 40 Voprosy ekonomiki, 1958, no. 5, p. 39. 41 Given the shortage of farm machinery in the USSR, obsolescence as a compelling deter-

minant is negligible.



mented with in Lithuania. It seemed to provide not only a way out of the financial dilemma, but the solution to the whole gamut of problems arising out of the dichotomy of administrative hierarchies. Thus Khrushchev gave the signal to go ahead in January 1958 and the decision was formalized in a Decree of 20 April 1958.

With the ownership and control of machinery placed in the hands of those whose sole interest in the utilization of machinery is its effect on yields, the way was opened to an improvement in the efficiency of machine utilization within the confines of each farm. According to what one Soviet economist termed a 'most conservative' estimate, it paved the way for a 30 to 40% reduction in the production cost of the more important crops.42 Further reforms, however, were required in the regional allocation and distribution of machinery. Up to 1958 the regional allocation of farm equipment was done at the centre, more often than not without any consultation with the MTS directors, so that some MTS had vast accumulations of unwanted machinery while others were experiencing critical shortages.43 The result of free sales of machinery to the farms in this respect was to shift the problem of storing unwanted equipment back to the Agricultural Supply Administration. The only solution to the problem was the institution of a mechanism for transmitting farm demand back to industry: so in 1961 an all-Union Technical Supply Agency, operating on a profit and loss basis as a middle man between factories and farmers, was established. Its function, as was stressed, is not merely one of distribution but, more importantly, one of transmitting kolkhoz demand back into industry.44

The completion of this ensemble of reforms provided an institutional framework in which decisions regarding material and machine inputs could be made at the farm level on the basis of costs. The social, or macro, rationality of these decisions, however, would be entirely dependent on the rationality of the structure of prices on both industrial and agricultural outputs. A discussion of the search for a rational system of prices on industrial outputs lies outside the scope of this paper. The attempts to establish the required rational level and structure of prices on agricultural outputs are described in Section V, and the efforts to establish the conditions necessary for a rational allocation of labour inputs are described in Section VI.

42 Sh. Ya. Turetski, Ocherki planovovo tsenoobrazovaniya v SSSR (M., I959) p. 235. 43 A survey conducted in 2Io MTS in 1956 revealed that they had unused machinery and equipment valued at 280 million r. (Pravda 25.iv.57). Applying this figure proportionately to the 8,500 MTS in existence in 1956 we arrive at the fantastic figure of over ii billion r. of unutilized equipment, whereas the value of all MTS equipment in 1958 was placed at only 20 billion r. The Io % figure for useless machinery in Leningrad Province given by Pravda (I2.iii.58) seems more reasonable.

44 See Khrushchev's speech of 17.i.6I (Pravda, 2I.i.6I) and the decree of 2I.ii.6I.

384 MONETIZATION AND POLICY



IN SOVIET AGRICULTURE

IV. TOWARD A SYSTEM OF FREE SALES The abolition of the MTS, in its turn, dictated reforms in the

realms of agricultural procurements and kolkhoz finances. With the growth of the machine parks over the years, and the concomitant rise in the level of mechanization, payments in kind had acquired considerable importance as a source of agricultural procurements. In 1955, for example, payments in kind constituted some 60% of total grain procurements and 3 5%, 20%, 220%, and 18% respectively of the total procurements of oil bearing crops, potatoes, sugar beet, and cotton.45 Not only did replacement sources have to be found for these amounts, but with the kolkhozy now buying and operating their own machines, kolkhoz revenues had to be increased to a level sufficient to cover, over and above former production needs, the depreciation and operating costs of the newly acquired equipment.

Both of these problems, it is true, could have been resolved within the framework of the then existing system of procurements via an upward revision of the whole structure of quotas and prices. The then existing system, however, with its multiplicity of procurement channels and its steeply graded multiplicity of prices (all designed in response to the conditions of an earlier era) had many disadvantages which, in the setting of the middle fifties, were beginning to make themselves felt. It was cumbersome to administer and it made cost accounting-essential for rational allocation of capital and labour-

virtually impossible. Its quota and multiple price schedules produced an environment in which backwardness bred backwardness and success engendered success. With quotas based on sown area, those farms with a higher ratio of capital to land and labour (often the product of historical accident)46 were enabled to realize a higher percentage of their output at the higher above-quota prices, thereby receiving a higher average price for their output than did their 'backyard' counterparts. The result in the backward kolkhozy was a vicious circle of low productivity of land and labour and insufficient revenues for the acquisition of capital.

Thus, by a decree of 30 June 1958,47 all previous forms of procurement, together with the system of bonus prices and reciprocal sales, were scrapped and replaced by a unified system of purchases at single zonal prices for each crop. The new prices were set on a cost-plus basis, utilizing both an aggregate and individual approach. The target for the aggregate of prices was that, during 1958, they would produce

45 Vpomoshch izuchayushchim ekonomiku kolkhozov (M., 1956) p. 361. 46 See Yu. M. Tolypin in Vestnik Moskovskovo Universiteta, 1960, no. 4, pp. 9-10. 47 'Ob otmene obyazatelnykh postavok i naturoplaty za raboty MTS, o novom poryadke,

tsenakh i usloviyakh zagotovok selskokhozyaistvennykh produktov' Pravda, i.vii.58.

385



MONE TIZA TION AND POLICY

revenues to the kolkhozy equalling the total of government expenditures on procurements in the kolkhozy in I957-i.e. direct payments to the kolkhozy for deliveries and sales, plus the government's expenditures on the MTS and its losses on reciprocal sales.48 Within this overall limiting aggregate, prices for individual products were established by zones on the basis of the average cost of production in the zone over a 4-5 year period, with the inclusion of a margin sufficient to cover investments and distributions to the kolkhozniki.49 Some weight was also given to the structure of price relatives prevailing in Russia in 1913 and to the structure of prices prevailing abroad in I958.50 In view of the lack of reliable cost data at the time of setting the new prices, and the error of underpricing which occurred in the case of livestock products (described below), it seems that this weight was considerable.51

The significance of this abolition of obligatory deliveries and the concomitant overhaul of procurement methods and prices at the farm level lay, not in the lifting of the obligation to deliver as the title of the decree of 30.vi.58 seems to infer, but rather in the unification and increase in prices paid. Farms are still assigned delivery plans (now called sales plans) on a per hectare of arable land basis, in which the element of compulsion still exists.52 The important fact for the kolkhozy is that the government now pays one and the same price for all it receives of a given product from the kolkhozy of a given region, and that this price is intended to cover costs and leave a margin of profit. With the abolition of basic quotas and premium prices for above- quota deliveries, there is no longer a pressure on the farms to conceal resources in order to receive lower basic quotas.53 The income of a kolkhoz depends no longer on the form in which it realizes its output

48 Khrushchev's speech of I7.vi.58 (Pravda, 2I.vi.58). It is surprising how close this came out. In 1957 the government spent 34.1 billion r. on the MTS (Budget Report for 1958), 91.3 billion in direct payments to the kolkhozy and kolkhozniki (Narodnoye khozyaistvo SSSR v 1958 g., p. 367) and lost 3 billion on reciprocal sales (G. Gaponenko and M. Gorodski, 0 novoi sisteme zagotovok selskhokhozyaistvennykh produktov v kolkhozakh, M., 1959, p. 27), a total of I28.4 billion old r. This is only .3 billion less than was paid out to producers in i958 (Narodnoye khozyaistvo SSSR v 1958g., p. 367).

49 G. Gaponenko and M. Gorodski, op. cit. p. 57. 50 S. G. Stolyarov, 0 tsenakh i tsenoobrazovanii v SSSR (M., i960) p. 20. 51 If the relation of labour expenditures in livestock production and crop raising in I913 is

taken as I to I, as a result of more rapid mechanization in crop raising it stood at 2.6 to I in 1958. However, if the relationship of procurement prices in 1913 is taken as I to I, this relationship in 1959 stood at only I.8 to I. See A. Kormin, Planovoye khozyaistvo, 1962, no. 7, p. 62.

52 Witness the widespread practice of kolkhozy buying products in shops to meet delivery plans. (Khrushchev, Pravda, 5.ii.6i, p. 2.) See the editorial in Pravda, I8.iii.6i, condemning the practice of buying up delivery receipts. See also portions of the decree of I8.i.6i condemning the fact that procurement officials in their zeal to meet sales plans in many instances leave the farms without seed. It is also interesting to note that whereas production plans in many republics have not been met during the past few years, sales plans in many instances have been overfulfilled. See figures given by Kunayev in Pravda, 7.iii.62, p. 5.

53 A decree of 2I.ii.47 empowered local officials to vary delivery norms within a region on1 the basis of availability of manpower and capital. S. A. Ilin, Gosudarstvenniye zagotovki zerna v SSSR (M., 1957) p. 25.

386



(an element largely outside its control), but rather on the productivity of its labour and capital and other factors within its control.

At the national level the reform makes the transition from 'a policy of achieving increases in output at any cost', to a 'policy of securing the maximum of output for a minimum of labour expenditures'.54 The procurement agencies have ceased to be fiscal instruments, and the way thereby opened to regional specialization.55 The relations between the farms and the State have been put on a monetary basis and the way partially paved for the transition from policies based on administrative compulsion to policies relying on the powers inherent in the government's position as a monopsonist or sole buyer. As evidenced by the official pronouncements, as well as by subsequent acts, there can be no doubt that this is the current orientation of Soviet policy. In speaking to the December 1958 Plenum, Khrushchev said:

The period has now come when the economic relationships between the government and the kolkhozy are undergoing a basic change. As the level of agricultural output increases, the necessity of compulsory deliveries decreases, and the role of the tax is being taken up by the free sale and purchase of products at prices reflecting the level of production and the productivity of labour.

The historical significance of the decisions of the Party on the questions of the reorganization of the MTS, the new system of procurements and single prices, resides in the fact that they mark the beginning of a new stage in the mutual economic relationships between the government and the kolkhozy. The principle of the free sale of products will gradually be extended to all sectors of the economy. Take, for example, grain. This year the government procured 3.5 billion poods. If next year the kolkhozy and the sovkhozy raise a good crop and the government buys the same quantity, thereby further increasing reserves, then in 1960 it will be necessary to buy only 3 billion poods or perhaps less.

Where will the govenment then buy the grain? Where it is cheapest. According to the results of last year the cost of grain in kolkhozy of Western Siberia came to 37 rubles per quintal, in Ukraine 43 rubles, in Kazakhstan 53 rubles but in the harvest of 1956 32 rubles, in the North Caucasus 37 rubles. But in Smolensk province a quintal of grain cost 172 rubles, in Kalinin province I66, in Belorussia II9 rubles. If in Smolensk, Kalinin or Minsk they want to treat themselves to a pancake prepared from their own flour, then please, before they put this pancake in their mouths, they should ask themselves how much that pancake costs and do they have enough money to splurge on that pancake. It is clear that the government will buy grain in Siberia, Kazakhstan, Ukraine, the Volga region and the North Caucasus where it costs the least. The same applies to other types of agricultural products.

From what has been said, serious conclusions must be drawn....

While it would seem that with the reforms of 1958 the stage has been set for directing agriculture via the manipulation of prices, it soon

54 Khrushchev in Pravda, I7.ii.59. 55 Section 6 of the Decree of 30.vi.58 gives the Republic Councils of Ministers and the

Provincial Executive Committees the prerogative of not assigning procurement plans for individual products in districts and kolkhozy where their production is obviously uneconomical and definitely not in accord with the farm's line of specialization.




transpired that before Khrushchev's principle of free sales could become operative many other reforms would be required.

V. PROBLEMS ENCOUNTERED TO DATE

I. Cost Accounting The primary source of all the difficulties which have become apparent

to date in the effort to shift from the administrative to economic direction of agriculture stems from the lack of any well developed theoretical approach to cost accounting as well as the lack of any well defined procedures. This is particularly true with respect to the treat- ment of labour costs and rents, which is examined below. This, however, is not surprising, because in contrast to the capitalistic milieu of the west, where enterprise survival dictates a mastery of the techniques of cost accounting, thus providing an impetus to the development of theory, the institutional environment of the kolkhozy, prior to I958, was such that it generated no pressures along these lines. With the question of not only what to produce, but also the question of how to produce, being decided at the centre, the element of cost played only a minor role in decisions on these matters at the farm level. At the national level, given the system of obligatory deliveries, apart from the question of overall outlays on MTS operations, there was no interest in costs along crop lines. In fact, it has been suggested that, because of the exceedingly heavy burden of obligatory deliveries, the government preferred the farms not to know the actual costs involved. Finally, it must be pointed out that, given the multiplicity of prices and the fact that they in no way reflected marginal rates of transformation, but were rather. in the words of one Soviet economist,56 a product of historical accident, it is doubtful that cost data-however calculated -would have had any meaning.

With the planning reform of 1955 and the new scope for decision within the kolkhozy, the question of costs began to take on a degree of importance at the farm level. The habits ingrained over two decades could not be ended overnight, and it was only in response to Party and governmental pressures that the practitioners and theoreticians of the regime began to give some attention to the subject. At the national level, as a preparatory step to the proposed removal of the MTS from the budget, it was ordered that the MTS begin calculating the cost per centner to the government of the most important crops procured via

56 Sh. Ya. Turetski, op. cit. p. 231.

MONETIZATION AND POLICY 388



payments in kind.57 And it was only in reaction to criticisms expressed at the XX Party Congress that the academics began to apply themselves to the problem. The degree of this application is reflected in the number of articles and brochures devoted to the subject which, almost zero in 1953, has shown a rapid increase,58 as well as in the number of conferences held.

It was, however, only in 1958 that the farms began to calculate costs,59 but not until 1962 that a valuation of kolkhoz capital inventories for the purpose of costing depreciation was completed.60 Despite over five years of debate, by 1960 there was still no agreement as to how to handle the question of insurance premiums and other 'non-productive' expenses, or whether taxes are to be considered a cost or a residue of income.61 Seven years later, in 1963, the problem of labour costs remains to a large degree unsolved, and the basic problem-if not the manifestations-of rent scantily recognized.

2. The Problem of Labour Costs The question of land costs apart (a problem of which the Soviets

to date are not aware) the biggest problem apparent in the search for workable methods of agricultural cost accounting has been in the realm of labour costs. The difficulties in this area stem from the residual nature of the trudoden or workday, and it is on the grounds of this

peculiarity that many Soviet economists have argued that it is im-

possible to calculate production costs in agriculture.62 The problem however is of prime importance, not only because of the siglificance which Marxist economics attaches to labour, but more because of the

high ratio of labour costs to total costs. In the case of grain production, where the degree of mechanization is highest, labour costs account for an estimated 50-65% of total costs; the proportion is 56-69% for cotton, more than 80% for flax and 40-50% for milk.63

With respect to methodology, the two leading Institutes engaged in the study of this problem have taken diametrically opposing stands,

57 Decree of 9.iii.55, paragraph 9. 58 With the exception of two or three studies devoted to the problem of costs in the sovkhozy,

there was nothing published on the subject of agricultural cost accounting from the time of collectivization to I95I. In 1951 one article on the subject appeared, in 1953 three articles, in 1955 twenty-eight, and in I956 126 articles and brochures (V. G. Venzher and E. C. Karnaukhova, Voprosy ischisleniya sebestoimosti produktsii v kolkhozakh M., I959, pp. 12-13). 59 V. Boyev, op. cit. p. II9.

60 See Voprosy ekonomiki, 1959, no. 5, pp. 21-33 for a brief discussion of the problem and Planovoye khozyaistvo, 1962, no. II, pp. 48-53 for the results.

61 See Vestnik Moskovskovo Universiteta, 1960, no. 6, p. 14. 62 V. Korochkin, Khozyaistvenny raschet v kolkhozakh (M., 1960) p. 7. 63 Voprosy ischisleniya sebestoimosti produktsii v kolkhozakh (M., I959) p. 24. These figures are

based on 'actual trudoden' distributions.




thus forming nuclei for the two opposing schools of thought which have developed. The all-Union Academy of Sciences' Institute of Economics, on the one hand, has taken the stand that labour should be costed on the basis of the value of the actual trudoden distributions in cash and kind. The all-Union Scientific Research Institute of Agri- cultural Economics, on the other hand, in view of the fact that the value of the trudoden varies from year to year within the confines of a single kolkhoz, as well as from farm to farm within the confines of a single year, has taken the stand that labour must be costed at a uniform and normativevalue based on rates prevailing in the sovkhozy.64

The basis for the conflict seems to reside in which view (micro or macro) one takes of the problem. The proponents of the 'actual distributions' approach are taking a micro view and utilizing the very narrow 'accounting cost' concept. In arguing that the cost to the enterprise depends not on what a sovkhoz would have to pay out for an equivalent labour input, but rather on the amounts actually distributed to the membership, they are viewing the kolkhoz as an entity apart from its membership, ignoring its cooperative nature and the fact that trudoden distributions are, in part, a distribution of'profits'. While this approach has merits for the purpose of internal inter-branch accounting, it leads to many gross inconsistencies, the main one being that costs in each enterprise become a function both of prices on output and of profits. The marginal cost of labour on this basis is, ex ante, always zero, and ex post, always less than marginal revenue, and consequently provides no guide to a correct allocation of labour. On this basis, all phases of farm output are profitable, and there is no such thing as a kolkhoz with losses.

The proponents of the 'normative' approach are taking a macro view and utilizing the broader 'economic cost' concept. Their view is, in effect, that the cost to society (amount of socially necessary labour) in the expenditure of a unit of a given degree of skill and assiduity of labour is the same wherever this unit be expended, and that it is this cost which must be reflected in kolkhoz accounts. This school argues that, for cost purposes, trudoden distributions should be divided into two parts, profits and costs, with the cost portion determined by the rates of pay prevailing in the neighbouring sovkhozy. They have in effect recognized a special case of the general concepts of both opportunity costs and differential rents-a point to whichwe shall return.

After a period of some three years of calculating costs on a normative basis, production costs in the annual reports of the kolkhozy are, as

64 Vestnik Moskovskovo Universiteta, I960, no. 6, p. 14.





from 1963, to be calculated on the basis of actual distributions.65 While this gives a false picture as to the absolute level of costs in a given kolkhoz, the normative approach complicates the accounting process and gives a distorted picture of cost relationships within the confines of each farm. Despite this distortion of the internal relationship of costs, and the fact that profits and losses resulting from the 'normative'

approach are only paper ones, it should be pointed out that it is only on a 'normative' basis that the government can establish prices if it

persists in its policy of zonal pricing. Pricing on the basis of actual distributions runs counter to the policy of skimming rent and the creation of equal conditions for all farms. It results in the inclusion of

profits and rents in costs, hence lower prices in the regions of low

yields and higher prices in the regions of high yields. It is for this reason that the 'advanced' farms favour the 'actual' distributions

approach.66 With the passage of time, however, as the level of wage payments in the kolkhozy approach that prevailing in the sovkhozy, and as the current trend to abandon the trudoden and shift to fixed

guaranteed rates of pay at sovkhoz levels gains momentum,67 the

controversy becomes increasingly academic.

3. Pricing Although the cost-plus approach to pricing was a theoretically sound

one, the cost concept utilized was too narrow in that it ignored the

opportunity costs of land usage-a problem to which we shall return. Even within the narrow cost concept used, however, data (for reasons which have been explained in the section on cost accounting) were

extremely unreliable, the result being an extremely faulty schedule of

price relatives. Perhaps the best indication of the degree of distortion

arising out of the lack of dependable cost data is furnished by the wide differentials in margins of profit which have appeared along crop lines.

Despite some piecemeal adjustments made after an avalanche of

65 0. Vladimirov and L. Viktorov, Voprosy ekonomiki, 1963, no. 4, p. 148. This is a culmination of a rapid reversal of the consensus which had been formed earlier in favour of the 'normative' approach. In its closing decree the December I959 Plenum had stated that 'the best measure of labour costs in the kolkhozy is the average level of payments in the neighbouring sovkhozy', and that same year the Ministry of Agriculture recommended that the kolkhozy should cost labour on a normative basis for a two-year period. In recognition of the fact that sovkhoz rates themselves might not provide a correct measure of the amount of 'socially necessary labour', some time towards the end of 1960 the Collegium of the Minister of Agriculture presented a recommendation that the kolkhozy calculate labour costs separately by both methods (E. Korol, Ekonomika selskovo khozyaistva, I96i, no. 8, p. ios). In a watered-down version of this proposal, some time in 1960, the Ministry of Agriculture and the Central Statistical Administration had ordered that the cost of production be calculated on the basis of actual trudoden distributions, provided that these did not differ from sovkhoz rates by more than 15% (S. Kladchikov, Ekonomika selskovo khozyaistva, 1961, no. 3, p. 96).

66 L. Kassirov, Voprosy ekonomiki, 1960, no. 3, p. 76. 67 See Section VI of this paper.

B



MONEIZTIZATION AND POLICY

criticism expressed at the December I959 Plenum,68 average levels of profitability for the whole Union in 1960 ranged as follows: sunflower seed 340%, flax 88%, grain 68%, potatoes 21%, vegetables I8%, and minus 7%, 23%, 3I%, and 33% respectively for milk, poultry, pork and cattle.69 These are not merely deviations of a short-run nature, explicable by vagaries of climate or demand, but are rather representative of a long-run pattern.70 This extreme divergence in rates of profit is an indication of either a gross misallocation of resources, an extremely faulty measure (price) of allocation, or some combination of both. While there is unquestionably a great deal of the first involved, when prices persistently fail to cover the production costs of items which are in short supply with respect to the plan, it is clear they are not rational in Wiles' sense of the term.

4. Rent While a considerable amount of attention has been paid to the

problem of price relatives, the main concern to date has been with the wide regional differentials in levels of profit. The rationale of the zonal price principle was embedded in the fact that it provided an instrument for skimming differential rents, thereby creating equal conditions (i.e. equal levels of profitability) for farms with varying natural conditions and permitting observance of the oft cited socialist principle of 'equal pay for equal work'. The extent to which the planners erred in this respect, however, is illustrated by the wide differences in the rates of profit among the various regions of the country on both a per crop and overall output basis.

Over the three years 1957-59 the costs of producing a centner of grain in the Urals, the Volga Basin, Western Siberia and the North Caucasus were 75, 68, 34, and 29 rubles respectively. The 1958 purchase prices in these regions, however, were 64, 73, 56, and 58 r. respectively per centner, giving profits rates of minus 150% and plus 7%, 35% and 50% respectively.71 The same situation could be shown for almost all other products with the zonal variation in prices throughout the Union

68 The criticisms, interestingly enough, were confined to the fact that prices in many instances were too high. Thus at the end of I959 the prices on melon crops, grapes, fruits, wool, cotton and tea leaves were lowered (M. M. Sokolov, Ekonomika sotsialisticheskovo selskovo khozyaistva, M., i962, p. 175). 69 V. Venzher, Ekonomika selskovo khozyaistva, I962, no. 9, p. 43.

70 No data seem to have been published on the average levels of profit over the period 1958- I962. The persistence with which Soviet economists have dwelt on the problem, as well as piecemeal data available for other years, however, indicates its long-term nature. In 1958, for example, levels of profit on some of the crops listed above ran as follows: sunflower seed-363 %, grain-52 %, potatoes-24%, while for livestock production prices failed to cover costs (T. Zaslavskaya, Voprosy ekonomiki, I959, no. 11, pp. 58-70). Livestock production was carried on at a loss in most areas of the country until the approximately 30 % price rise on livestock products in I962 (V. Boyev, op. cit. p. I20).

71 V. Boyev, Voprosy ekonomiki, I96I, no. 3, p. 99.

392



in 1959 running 30%, 37%, 62% and 42% respectively for grain, sunflower seed, pork, and poultry, while the variations in costs ran 450%, 400%, 170%, and 270% respectively.72 As to regional variations in the level of profitability on overall output, these ranged over the three-year period 9I59-61 from 42% in Krasnodar Krai and 35% in Altai Krai, to persistent losses in the Provinces of Kirov, Smolensk and Volgograd, as well as in a series of other districts in the non-black earth region.73

It is true that given a rational structure and level of prices, together with a system of free sales, it is these very differentials which would furnish the means to attain an economically equilibrated regional specialization. These conditions, however, are not met. Given the inadequacy of storage and transport facilities, both refrigerated and non-refrigerated, and the present capacity of the processing and packaging industries-in a word, the inadequacy of the whole dis- tributive apparatus-the government at present both needs and compels deliveries from high-cost areas,74 and the above noted differentials are posing obstacles rather than providing the incentives necessary to foster fulfilment of plans.

These extreme regional variations are explained not by the lack of available cost data alone, but to an equally large degree by an under- estimation of the magnitude and effectiveness of the differentials which had existed in obligatory delivery quotas and payment in kind rates. In the case of grain, regional variations in the rates for payment in kind for MTS services reached 400-500% depending on the type of grain.75 Obligatory delivery norms on grain varied by 6oo00-800o%76 and prices by 41-75 %77. It is clear that to compensate for the elimination of payments in kind and obligatory deliveries a more pronounced zonal divergence of prices was necessary. The regional spread of prices, however, was reduced from 41-75% to 3 -54%78.

The problem of intra-zone differentials has also been a cause of considerable concern. Although the number of pricing zones was increased at the time of the 1958 reforms (in the case of grain from

72 Ibid. 73 V. Boyev, Voprosy ekonomiki, 1963, no. 5, p. 2zo. It should be pointed out that these losses

are not financial losses, but rather paper losses resulting from costing on a normative basis as was explained in section 2. (See E. Tyapkina's footnote in Voprosy ekonomiki, 1961, no. 7, p. 144.)

74 See the collection Voprosy razmeshcheniya i spetsializatsii selskovo khozyaistva SSSR (M., 1962) p. I5. Also A. Soroka, Ekonomika selskovo khozyaistva, I962, no. 9, p. 38. In 1961 the government imposed grain and livestock delivery plans on a series of districts which had formerly been freed from the obligation to deliver (V. Boyev, Voprosy ekonomiki, I96I, no. 3, p. 98).

75 See rates given in Vpomoshch predsedatelyu kolkhoza (M., 1955) p. 380. 76 Obligatory delivery norms for grain ranged from 7.5 to 10.4 kg. per hectare in Archangel

Province to 46-80 kg. per hectare in Belogorod Province (S. A. Ilin, op. cit. p. 24). 77 See data given by Sh. Ya. Turetski, op. cit. p. 26I. 78 Ibid. p. 24.




4-5,79 depending on the type of grain, to II-I4) 80many of the zones are excessively large, with the result that in addition to the inter-zone differentials which have been described, wide intra-zone differentials have appeared.81 While the first pricing zone for grain comprises only Krasnodar Krai, the fourth stretches from the shores of the Arctic into Southern Siberia,82 comprising an area 10.3 times that of France,83 with extreme variations not only in soil conditions but in rainfall, temperature and length of the vegetational period. Average levels of profitability over the two years I958-59 in the Altai Territory and the Omsk and Tyumen Provinces, all of which are located in this fourth zone, ran 49.7%, 24.8% and 3.8% respectively.84 Omsk Province alone stretches some 550 km. from north to south, with variations of 30-40 days in the vegetational period, and has percentages of profit on grain deliveries running from minus 33.5% to plus 104%.85 (The Tyumen Province is 2000 km. from north to south.)

While there is still no unanimity of opinion as to the techniques of eliminating these inter- and intra-zone differentials (some economists still deny the existence of economic rent under socialism)86 the general consensus at the 1960 and 1962 conferences on agricultural prices (as could well be surmised) seems to have been that there is a need for an increase in the number of price zones coupled with a widening of inter-zonal spread of prices.Within this broad consensus, however, there is a wide diversity of opinion as to the manner and degree in which these rents should be skimmed. Strumilin, at one extreme for example, in view of the fact that natural conditions in two bordering kolkhozy, or for that matter within a single kolkhoz, can differ tremendously, has offered the theoretically sound but administratively preposterous idea of setting prices on an individual basis for each farm. Others recognizing the same problem have proposed that as an adjunct to pricing and zoning reforms, an element of progression be introduced into the system of taxation.87

79 V. L. Shtipelman, Tsenoobrazovaniye kolkhoznykh produktov v SSSR (L., I959) p. 37. 80 G. Gaponenko, M. Gorodski, O novoi sisteme zagotovok selskokhozyaistvennykh produktov v

kolkhozakh (M., 1959) p. 69. There is a separate pattern of zones for each product. In the RSFSR, for example: grain--o zones, sunflower seed-6, sugar beet-4, cattle and poultry-7, milk-8 (ibid. p. 70).

81 V. Boyev, Voprosy ekonomiki, 1963, no. 5, p. 120. 82 L. Lisichkin, Voprosy ekonomiki, I960, no. 7, p. 64. 83 A. Soroka, Ekonomika selskovo khozyaistva, 1961, no. 9, p. I7. 84 V. Boyev, Voprosy ekonomiki, 1961, no. 3, p. Ioo. 85 P. Bashkin, Voprosy ekonomiki, 1961, no. 6, p. 112. 86 M. M. Sokolov, in Zemelnaya renta v sotsialisticheskom selskom khozyaistve (M., 1959) p. 48,

says, for example: 'Under socialism there is no such thing as poor conditions for production- only good work and poor work' (cited by P. Bashkin, loc. cit.). For others see G. Khudokormov in Voprosy ekonomiki, 1960, no. o0, p. io6; Strumilin in Voprosy ekonomiki, 1960, no. 7.

87 See for example V. Boyev, Voprosy ekonomiki, 1961, no. 3, p. 102. The present system of proportionality only serves to aggravate the present inequalities.

MONETIZA TION AND POLICY 394



A legal mechanism for attenuating these inequalities, it should be pointed out, does exist. The Republic Councils of Ministers have the right to vary prices according to district by up to 15% within a given price zone in order to compensate for differences in natural conditions.88 They also have the right, in the case of the kolkhoz income tax, to vary rates by district (and in exceptional cases by kolkhoz) in accordance with each district's economic peculiarities, provided that the overall rate of 12.5% is observed for the region as a whole.89 But because of the lack of any objective criteria on which to base differentials, they have not to date taken advantage of these provisions.

With respect to the whole problem of price and cost differentials a great deal of interest has been evoked by the idea of a Union-wide economic evaluation of kolkhoz lands. One of the first to have seized upon the idea seems to have been S. Cheremushkin90 who, in 1958, seemed to have had in mind only its. possibilities as an aid in comparing the relative efficiency of farms, for parcelling out regional plans to the farms, and as an aid in setting wages. Its potentialities as a tool in solving the problems of zonal pricing, however, soon came to light. In I960 G. Lisichkin likened the concept to that of the tekhnicheski pasport (technical description and evaluation document) for machinery in the industrial sector, and proposed an evaluation of all lands based on an index of o00. According to him this has been done in East Germany where it provides the basis for many facets of agricultural policy.91

Without delving into the technicalities of the discussion now going on,92 the problems involved turn on the large number of physical variables determining land values, which provokes recourse to value categories. In the flight toward value categories (costs, profits, revenues, etc.), however, they tumble into a pit of functional circularity-i.e. the evaluation becomes a function of the very relation and level of prices which it is to determine.

5. Problem of Land Costs The problem of differential rent, with which the Soviets have been

wrestling, is merely the obverse and income facet of the failure to levy an explicit and rationally founded charge on land rights-the

88 V. Boyev, Ekonomika selskovo khozyaistva, I96I, no. 5, p. 107. 89 Ukaz Presidiuma Verkhovnovo Soveta SSSR, z2.ix.57, paragraph 4 as amended by the Ukaz of I8.xii.58, Vedomosti Verkhovnovo Soveta SSSR, I.i.59.

90 Planovoye khozyaistvo, 1958, no. 7, pp. 57-64. 91 L. Lisichkin, op. cit. pp. 6I-69. 92 A conference on the problems and techniques of the economic evaluation of land was held

at Moscow University in the spring of 1960 and, from the numerous notes on land evaluation published in the March I963 issue of Ekonomika selskovo khozyaistva, it seems that this journal has opened a debate on the subject.




396 MONETIZATION AND POLICY

reverse facet of this omission being the opportunity costs of land usage and the problem of land allocation. Their concern for the income aspect only is explained by the overtness of its symptoms, but in focusing on the more conspicuous income differentials, they have failed to perceive even the existence of a cost facet.

The nature of the problem is similar to that encountered in the realm of labour (i.e. opportunity cost of labour and the differentials in labour productivity). In the case of labour, however, the optics of ideology (labour being seen as the sole source of value) assisted them in discerning a special case of opportunity cost and in recognizing the necessity of reflecting this in accounting costs (the normative approach). But in the case of land, it is these very optics of ideology (denial of the productivity of land and capital) which have precluded even an awareness of a problem. It was much the same in the case of capital until the facts of life forced a recognition of the role of capital charges in any rational allocation of investments. But in the case of land, given its abundance (to date) relative to capital and labour, the pressures of scarcity are still weak. With the continuing expansion of the population and the economy (the closing of the frontier, so to speak) the problem of land allocation, not only among its many agricultural uses but among a multitude of competing uses throughout the economy, will some day make itself felt.

The problem of differentials in the amount of rental income accruing to farms as a result of the lack of any charge on land rights, can, without doubt, be eliminated by the current efforts to refine the techniques of zoning, pricing and taxation. But if the present trend of aligning prices more closely with value is to be carried to its logical conclusion (in order that prices may be used not only as instruments of control, as they have been so far, but also as instruments of planning and resource allocation), an explicit charge (land tax) based on relative land values will eventually have to be levied on all land rights. This charge would, in a single coup, resolve both the problem of income distribution and land allocation. A charge on land rights would in its turn, however, entail abandoning the practice of zonal pricing and shifting to all-Union prices based on marginal costs. Since, in view of the doctrinal and constitutional barriers, the Soviets are reluctant to impose a land tax, the present price structure could be vastly improved by a shift to marginal cost pricing with a partial skimming of rent by means of progressive taxation. This would result in prices at least reflecting overall land costs, albeit not explicitly charged to the kolkhozy. The present system of excluding land costs artificially depresses the level of agricultural prices, deflates the value of inputs for light industry and distorts the output end of the price structure. The problem here, although less pronounced in its




effects because it occurs on the output end, is similar to that engendered by the failure to apportion a part of the 'surplus value' to the price of output from heavy industry.

Given the recent Soviet advances in economic science, a recognition of the cost aspects of the rent problem should not be long in forth- coming. The concept of opportunity costs was introduced into the Soviet Union by Novozhilov back in I956, and in the course of wrestling with the problem of agricultural prices and differential rents a realization is inevitable that the source of the problem is the failure to cost land. Evidence of gropings in this direction can be found in the proposals of several economists during the 1956-57 debate on prices in general to include rents and quasi rents in prices,93 as did Tyutin at the 1960 conference on agricultural prices.94 Several others have made the same proposals in a different form, suggesting that pricing be done on the basis of marginal costs.95 And Lisichkin, unaware of the cost aspects, but nevertheless striking at the heart of the matter, has proposed a per hectare tax based on relative land values.96

The above problems apart, if for some reason the recent and continuing Soviet advances in the field of economics come to a halt, the very rationale and goals of the current decentralization trend are in themselves impelling enough to force a shift to all-Union marginal cost pricing. The rationale of the free sales principle is that it shifts the locus of decision-making with respect to the 'where' question, from the centre which has only a statistical acquaintance with potentials, to the farm level with its intimate knowledge of resources and costs. But with a system of zonal pricing and government attempts to set prices at levels which cover costs and insure set profit margins, even under a system of free sales, the 'where' and 'what' questions are, in the final analysis, decided at the centre.

VI. TOWARD THE ABOLITION OF THE TRUDODEN Mention has already been made of the approximate quadrupling

(1.24 to 5.65 billion r.) in cash distributions to the kolkhozniki between I952 and 1961. If in 1952 there was a substantial percentage ofkolkhozy throughout the Union which distributed no cash. whatsoever on trudoden earnings,97 and only 25% of the aggregate Union value of

93 Nicolas Spulber, The Soviet Economy (N.Y., 1962) p. 234. 94 Ekonomika selskovo khozyaistva, 1960, no. 8, p. II7. 95 Ibid. p. I I6. 96 Voprosy ekonomiki, 1960, no. 7, p. 69. 97 In 1953 13 % of the kolkhozy of the Tajik SSR distributed no cash whatsoever on trudoden

earnings. Speech of Ist Secretary of Tajik Party Central Committee to December 1959 Plenum (Pravda, 24.xii.59). In 1953 more than oo00 out of the 1404 kolkhozy in Moscow Province did not distribute any cash (V. V. Korochkin, Perekhod kolkhozov na sistemu denezhnoi oplaty, M., 1960, p. 13).




trudoden distributions was in cash, by 1961 it seems that all kolkhozy were giving at least some cash on trudoden earnings, and cash accounted for 71% of the total. The percentage runs much higher in some regions, having reached 75% in Moscow Province in I95898 and 90% in the Uzbek Republic and Leningrad Province in 1959.99 Within these overall averages there are many farms which have shifted to a Io0% cash basis, with produce necessary for personal consumption sold to the membership.l00 By 1961 some 5 % of all kolkhozy were on a Ioo% cash basis, and by early 1963 more than 20%.101

This monetization of the relations between the kolkhozy and their membership has also been accompanied by an acceleration in the timing of trudoden distributions. Back in the early fifties almost the entire kolkhoz wage fund was paid out only at the end of the year,102 whereas now some 60-70% of this fund is paid out over the course of the year in monthly and quarterly advances.103 This is, for the most part, a result of the government's policy of advance payments on deliveries (amounting at the present time to 30% of the value of the

contract)104 and its recommendations that the kolkhozy set aside 50% of cash receipts from advance payments and 25% of the cash receipts from all other sources in order to make advance payments on the trudodni.105 The irregularity of kolkhoz receipts, however, is such that by I96I while one-third of kolkhozy were giving regular quarterly advances106 and more than 40% (at a conservative estimate)107 were giving quarterly advances, a substantial percentage were giving no advances.108

This monetization and acceleration of payments to labour have been of considerable significance for the two cardinal and long-standing problems of Soviet agriculture-i.e. attracting kolkhoz labour from the unmechanized private sector to the mechanized communal sector

98 V. V. Korochkin, loc. cit. 99 Figure for Leningrad Province from Vestnik Leningradskovo Universiteta, 1961, no. ii, pp.

35-46. Figure for the Uzbek Republic-Sotsialisticheski trud, 1960, no. II, p. 24. 100 The arrangements on amounts and price vary from kolkohz to kolkhoz depending on the

proximity of the kolkhoz market. In some kolkhozy only limited amounts are sold. Some sell at the government purchase price, some at retail price and some at cost. The advantage of oo00 % cash basis over an 80 or 90 % basis is that the distribution of produce can be tailored to individual consumption patterns. See L. Suvorova, Voprosy ekonomiki, 1960, no. I, p. 143.

101 As at I January 1963 more than 8000 kolkhozy had shifted to guaranteed cash payments (M. Napolski, Ekon. sel. khoz., 1963, no. 4, p. 109).

102 V. Karavayev, Ekonomika selskovo khozyaistva, 1963, no. 4, p. o06. 103 Ibid. 104 Ekonomika selskokhozyaistvennykh predpriyati (M., 1962) p. 403. 105 Decree of 6.iii.56: 'O ezhemesyachnom avansirovanii kolkhoznikov i dopolnitelnoi oplate truda

v kolkhozakh'. 106 0. Vladimirov and L. Viktorov, op. cit. p. 149. 107 K. A. Okhapkin (Ekonomicheskaya effektivnost denezhnoi oplaty truda v kolkhozakh, M.,

1960, p. 47) gives a figure of 'more than 40 %' for as early as 1956. 108 For example, in Minsk Province 14% of the kolkhozy gave no advances on trudoden

earnings in I961 (I. Kachuro and N. Goryachko, Ekonomika sel. khoz., 1963, no. 4, p. 72).

398



where it has a higher marginal productivity, and eliminating the annual wastage of the millions of man days involved in the kolkhozniki's journeys to market to sell the produce they have privately produced or earned in kind. Between 1950 and 1958 the average number of trudodni earned per able-bodied kolkhoznik thoughout the Union rose from 25I to 342,109 and in Moscow Province, where the monetization trend has been faster, from 266 to 376.110 Data for subsequent years does not seem to be available but, as Khrushchev expressed it, in the

'leading' farms we no longer have to 'go knocking on windows to

get them into the fields'.11l As a result of this increased participation in the communal sector,

the kolkhoznik's cash receipts from trudoden earnings rose from 1.24 billion r. or 24.I% of his total cash receipts in I952 to 5.24 billion r. or 66% of his total cash receipts in I959.112 During the same period his receipts from sales on the kolkhoz market fell from 3.9 billion r., or 75 % of his total cash receipts, to 2.62 billion r., or 24.I % of the total.113

The ultimate goal with respect to the remuneration of kolkhoz labour, however, is not merely to place it on a regular monthly oo00% cash basis, but rather the abolition of the trudoden and a shift to guaranteed cash payments along the same lines as in the sovkhozy.114 While remuneration on a fixed basis might seem incompatible with the

cooperative nature of the kolkhoz, it is on this basis that labour is

paid in the industrial cooperatives, with a dividend out of 'profits' distributed at the year's end in proportion to the wages earned.

The first step in this direction occurred in I956 when many of the

kolkhozy began to give fixed cash payments on a piecework basis in livestock production and in the harvesting of cotton and several other

crops.115 During 1957 several kolkhozy, serving as models and testing centres, instituted the practice for all types of work, and their example was followed by others throughout the Union in I958.116 In its closing decree, the December 1958 Plenum urged the government and Party organizations at all levels to accord the practice a wide publicity and endorsement, and by the end of I959 the kolkhozy on a fixed cash basis were numbered in thousands, with at least some operating on this

109 Narodnoye khozyaistvo v 1958g., p. 495. 10 V. V. Korochkin, Perekhod kolkhozov na sistemu denezhnoi oplaty (M., 1960) p. I4. 11l Speech of 27 March I962. 112 A. S. Belorukov and L. M. Dobyatkin, Vestnik Leningradskovo Universiteta, I96I, no. I , p. 37. 113 Ibid. 114 In addition to the advantages of, and the necessity for, fixed cash payments which are

explained below, it should be pointed out that the fixed and guaranteed nature of the payment further enhances the marginal utility of work in the communal sector for the kolkhoznik. See T. Zaslavaskaya, Voprosy ekonomiki, I959, no. 2, p. II5.

115 K. A. Okhapkin, op. cit. p. 51. 116 Ibid. p. 57.





basis in every Province.117 By early 1960 about 4000 farms had made the shift,ll8 and 8000 by early 1963.119

This current effort to shift the remuneration of kolkhoz labour from a residual to a fixed basis is at the crux of the entire range of endeavours to change from the administrative to an economic and financial direction of the agricultural sector. The essential prerequisite to this transition is that the system of administrative directives be replaced by a system of value indicators accurately reflecting social costs and revenues, and that the system of administrative and Party sanctions be replaced by a financial mechanism dealing automatic and inevitable financial and economic sanctions in the event of any misreading of these indicators at the enterprise level. But given the present trudoden system, labour costs provide no financial indication as to a correct allocation of labour, and the profit and loss mechanism provides only flaccid, if any, sanctions. As one Soviet writer has put it, given the residual nature of the trudoden,

no matter how the trudodni are spent, or how many are earned by the kolkhozniki, there is a mechanical equalization of kolkhoz income and expenditures. This leads to an irrational expenditure of labour, the result being a significant wastage of labour.

With payment of labour at pre-determined rates, however, any over-expenditure as a result of errors in the classification and tariff-setting ofjobs can put the kolkhoz in serious financial straits.120

Summing it up in quasi-marginalist terms, the same writer goes on to

point out that under a system of fixed cash payments- running the kolkhoz without a loss can be accomplished only if the monetary evalution of labour corresponds to real income received by the kolkhoz as a result of a given piece of work.

Because of rather serious obstacles on the financial and technical planes it will be many years before even the majority of farms are in a position to shift to a fixed cash remuneration of labour. Financial obstacles are posed by the necessity of having financial reserves sufficient to offset the lack of synchronization of kolkhoz receipts and expenditures. It is for this reason that the system, to date, has been inaugurated only in the 'advanced' farms. For example, in the relatively rich cotton-growing Uzbek Republic 65% of the kolkhozy had made the shift by early I96I,121 while in the relatively poorer Province of North Kazakhstan only one farm had been able to attempt a shift.122

117 Ibid. pp. 57-58. 118 S. Sdobnov, Ekonomika selskovo khozyaistva, I960, no. 8, p. Io6. 119 M. Napolski, loc. cit. 120 T. Zaslavskaya, op. cit. p. 117. 121 V. Efimov and T. Mikhailyuk, Kommunist, I96I, no. 5, p. 45. 122 'La Remuneration des Kolkhoziens' Notes et Etudes Documentaires (la Documentation

Francaise, Paris), no. 2, 763, 23.iii.6I, p. 7.

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It should be pointed out that the 'stable but flexible' feature of the new price system is designed to attenuate financial difficulties stemming, in this respect, from year-to-year fluctuations in yields. The purchase price for certain crops can vary, inversely to the size of the harvest, within a o-I 5% range.123 For example, in view of the excellent grain harvest of 1958, prices on grain were lowered that year by an average of 13%, sunflower seed by I5% and sugar beet from non-irrigated lands, together with potatoes, by Io%.124 Procurement prices in 1959 remained at the I958 level with the exception of prices on potatoes which were raised Io%.125

The technical obstacles stem primarily from the lack of know-how in the realm of job classification and rating. Under the trudoden system no high degree of precision is required. The only limiting requirement is that the rates insure the completion of all necessary tasks, and for this purpose rating 'by ear' is sufficient.126 As there has been no visible need so far for specialists in this field, the kolkhozy engage very few persons in this type of work and the training of the few that are employed is poor.127 It is because of these difficulties that many writers have been cautioning against haste, citing examples of failure resulting from premature attempts to make the shift, and pointing out that any failure due to haste discredits the system in the eyes of the kolkhoznik and can be more harmful in the long run than a very slow pace. In the kolkhozy of the Brukhovetsk district of the Kuban, for example, out of 9 which attempted the shift only one was able to insure regular payments, with the other eight in debt to their membership for 14 million r. by April I960.128

VII. INTEGRATION OF SOVKHOZ AND KOLKHOZ PRICES Maurice Dobb has pointed out that as the level of overall productive

capacity in the Soviet Union increases, the urgency of needs remaining to be satisfied becomes progressively less acute-i.e. the economy moves closer to the point of indifference between an ever increasing number of alternatives.129 While the relative advantages of a number of broader alternatives (defence, investment, consumption) can be seen quite clearly from the centre, the degree of difference in the

123 G. Gaponenko and M. Gorodski, op. cit. p. 77. 124 V. Boyev, Ekonomika selskovo khozyaistva, I96I, no. 5, p. 107. 125 Ibid. 126 L. Suvorova, op. cit. p. I40. 127 'There is no educational Institute in the USSR graduating specialists in the organization

and classification of agricultural jobs. In the agricultural high schools they do not teach even the fundamentals, let alone give a special course in it. In a few Institutes they spend I6-20 hours on the subject, 4-6 of which are on theory' (V. Shadabo, Sotsialisticheski trud, I962, no. 5, p. 77).

128 Sotsialisticheski trud, 196I, no. 4, p. 41. 129 Maurice Dobb, Soviet Economic Development since 1917 (London, 1957) p. 20.





relative advantages of finer alternatives becomes increasingly difficult to distinguish from the centre. Thus pressures for decentralization and an increased role for value categories in the allocation of resources have been generated for some time now, not only within the agricultural sector but throughout the economy. To accommodate this pressure for decentralization, as is stated in the new Party Programme,

it is necessary [in the planning and direction of the national economy] that commodity-money relations be utilized to their fullest extent. ... In this respect an important role will be played by the use of such instruments as: cost accounting, money, prices, costs, profits, trade, credit and finance.

The use of value categories as instruments of direction, however, necessitates a nationally and inter-sectorally integrated structure of prices aligned with value. But until recently the structure of input prices has differed by sector, and within the agricultural sector itself the schedules of prices on both inputs and outputs have differed along institutional lines.

I. Integration of Prices on Agricultural Output Since collectivization the kolkhozy and sovkhozy have each been

confronted with a separate level and structure of prices on their output, the kolkhoz price level being much the higher. While this difference has posed no visible problems to date, as the level of kolkhoz productivity approaches that of the sovkhozy the need for integrating the two price structures becomes increasingly important. If, for example, prices of identical products have been arbitrarily established at a lower level for output from one system than from the other, is this any indication to planners that social costs here are the least and that it is here that a given crop must be procured?

The degree of difference in the level of prices for the two systems was, and remains, quite significant. In Kazakhstan, for example, in 1958 the kolkhozy were paid prices which ran at I80%, 138%, and 230% of the sovkhoz prices, for lamb, beef, and sunflower seed respectively. In the non-black earth region the prices paid to the kolkhozy for grain over the period 1958-61 ran from 133% to 3II.5% of the sovkhoz price, depending on the type of grain.130 Similar differences could be shown for most crops for all regions.

During the discussion which preceded the establishment of the new 1958 prices, several economists proposed that they be set on the basis of prices in the sovkhozy.131 The arguments which have prevailed against a unification of kolkhoz and sovkhoz prices, however, are that

130 Z. A. Sagaidak, Vestnik Moskovskovo Universiteta, I962, no. 3, p. 36. 131 Voprosy ekonomiki, I958, no. 9, p. 8.

402



given the higher ratio of capital to land and labour, and consequently the higher productivity of land and labour within the sovkhoz system, production costs here are less.132 In addition, it is pointed out that investments in the kolkhozy come out of profits, while in the sovkhozy they are financed out of the national budget.133 Also, as a result of a re- distribution of profits and losses within the confines of the sovkhoz system, the losses of one sovkhoz are covered by the profits of another.134 While these arguments have an apparently valid justification, given the absence of a rationally founded charge on sovkhoz capital and the failure to cost losses of individual sovkhozy, the cost data developed provide no basis for comparison.135

These differences have long been criticized and a movement has been under way since 1961 to bring the two price structures into line. In January 1961 sovkhoz prices on many types of grain and on cattle, sheep, wool and poultry were raised to kolkhoz levels.136 In the same year the Republic Councils of Ministers were given the right to establish uniform kolkhoz-sovkhoz prices on those categories of output over which they had pricing jurisdiction,137 and in June 1962 sovkhoz delivery prices on meat were raised to go% of the kolkhoz level.138

2. Integration of the Structure of Prices on Agricultural Inputs Another justification commonly given for the higher level of prices

on kolkhoz output was the fact that the kolkhozy were confronted with a schedule of prices on input which, labour excepted, was considerably higher than that which faced the sovkhozy. Until 1958, for example, farm equipment, fuel and spare parts were available to the kolkhozy on a retail basis only, while the sovkhozy were able to acquire these supplies at wholesale prices. The differences in price were significant, amounting to 300% in the case of trucks, 200% in the case of fuel and about 30% in the case of spare parts.139 With the reforms of 1958 these items became available to the kolkhozy at wholesale prices, but construction materials, hardware, etc. were available only at retail prices until 1962. In March of that year it became possible for the kolkhozy to acquire these at wholesale prices on the same basis as the sovkhozy and other government enterprises.140 Differences in wage

132 V. Boyev, Voprosy ekonomiki, I963, no. 5, pp. 124-I25. 133 Ibid. 134 Ibid. 135 The effect is to compare kolkhoz marginal costs, including interest, with sovkhoz average

costs, excluding interest. 136 Vysshaya Partinya Shkola, Ekonomika selskokhozyaistvennykh predpriyati (M., 1962) p. 318. 137 Ibid. 138 V. Boyev, Voprosy ekonomiki, I963, no. 5, p. I24. 139 Sh. Ya. Turetski, op. cit. p. 239. 140 Ekonomika selskokhozyaistvennykh predpriyati, op. cit. pp. 320-321.





rates have been discussed, and the efforts to align these in both sectors have been described.

3. Integration of the Prices of Agricultural and Industrial Inputs In line with the directives of the XXII Party Congress, progress is

also being made toward an integration of the agricultural and industrial price structures. As has been noted, prices on material inputs into the two sectors were brought into line in March 1962. Differences, however, remain in the levels of prices on labour inputs. At the same time efforts are being made to bring the kolkhoz wages up to sovkhoz levels, a 1961 reform brought sovkhoz wages up to the level of wages in the industrial sector. For the first time in history, basic rates of pay for workers performing the same tasks are uniform throughout the governmental sector.141 Further integration of the structure of rural prices into that of the overall economy occurred during the course of 1961 and 1962 with the ending of differences in urban and rural retail

prices of cloth, footwear, sugar and a series of other products, the equalization of retail prices of local industry with government retail prices, and the ending of regional differences in the prices of consumer goods.142

VIII. CONCLUSION As evidenced by both the declarations and the actions, it is clear that

the whole pattern of agricultural policy over the past decade converges on the intermediate-term goal of replacing the present administrative guidance and control of agriculture by a system of automatic economic and financial guides and controls-i.e. the institution of a system of free sales at government-determined prices. A hasty examination of the I960-62 administrative reforms in agriculture might seem to belie this thesis; but let us first examine some of the difficulties yet to be overcome in making the transition.

The primary obstacle, at present, to any rapid transition to the direction of agriculture through the profit motive via the manipulation of prices, is a human one. While the present generation of kolkhoz managers, developed by the institutional milieu of the past three decades, is a hardy one, their instincts and reflexes are not attuned to the new institutional environment into which the Party and government are pushing them. If political craftmanship in securing lower output quotas and higher quotas of scarce inputs, and force and dex- terity of personality in mobilizing manpower and resources, irrespective of cost, were sufficient to ensure success up to the present, they are not

141 V. Kudrin, Sotsialisticheski trud, 1961, no. 3, p. 37. 142 D. Kondrashev, Ekonomika selskovo khozyaistva 1962, no. 9, p. 31.

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sufficient in an era when success depends on efficiency. Nor is the education and training of the present generation of kolkhoz managers sufficient to assist them in an environment where their instincts are of no avail. As at I April 1959, for example, out of a total of 58,704 kolkhoz managers, only 22,635 had a specialized secondary education and only 6,945 a higher education. In other words, more than 45% of the kolkhozy-large scale enterprises averaging some 5,538 hectares, 475,000 r. of capital and some 343 families-were headed by men who had not completed a specialized secondary education.143

The educational level of staff and production-line personnel is also surprisingly low. As at I April I959 only 25% of the assistant managers, 5% of the field brigade leaders and 5% of the livestock section managers had a specialized secondary education or better. As to the educational level of the farm manual workers, as at early 1961 some 77% had not completed a secondary education of any type as against a comparable figure of 53% for the industrial sector. While this lack of formal education and training can be, and no doubt has been, offset to a large extent by training on the job and experience, there are certain areas where there has been no accumulation of experience with which to offset the lack of formal training. In the case of book-keepers, for example, whose role is becoming increasingly important, the following situation exists: in I960 only o1.5% of the chief book-keepers in the

kolkhozy had a secondary specialized accounting education or better, and in 1962 only one-half of the 335,000 kolkhoz assistant book-keepers and accountants had finished even a short accounting course and the other half had no training whatsoever in accounting.144

As to economists, whose function is destined to become increasingly vital in the formulation of managerial decisions, very few kolkhozy have qualified men. This is largely due to academic inertia in adapting curricula to the changing needs of an evolving environment. While the question of determining the economic effectiveness of investment has been discussed in the Soviet Union since 1953,145 the economic institutes have so far done little to develop methods of determining the effectiveness of capital investments, new machinery and techniques in agriculture.'46 As a consequence the economists coming to work in the farms are incapable of advising management on these questions. Management's attitude toward the economists, consequently, has been

143 Data in this paragraph are from Selskoye khozyaistvo SSSR-statisticheski sbornik (M., 1960) pp. 470-476.

144 V. Rozin, Pravda, 3.iii.6I, p. 3. 145 See Z. M. Fallenbuchl, 'Investment Policy for Economic Development. Some lessons of the

Communist Experience' in CanadianJournal of Economics and Political Science, Feb. 1963, pp. 26-39. 146 See report of the June 1962 conference on the training of economists by V. Nemtsov in

Ekonomika selskovo khozyaistva, 1962, no. 8, pp. 116-117.




a disdainful one, summed up in the words of one agricultural economist as: 'Any little girl with no economic training at all could handle the job'.147 Thus in the majority of the farms the role of the economist is reduced to that of gathering data and preparing the numerous reports required from the kolkhozy.148

Given this low level of technical, economic and financial training of kolkhoz management and labour, there can be little question that the kolkhozy 'need help'.149 And it is in the light of this need for technical assistance that the administrative apparatus underwent two successive remodellings in the course of I96I and 1962. In February 1961 the Ministry of Agriculture was reorganized, from an apparatus of administrative direction into an agency for 'introducing advanced experience' and the latest scientific achievements into the kolkhozy.150 Its prime functions since have been research and education, for which purpose a network of experimental and model farms are available, and the agricultural educational institutes and publishing houses have been transferred to this Ministry.

To provide more channels for infusing the knowledge generated by the Ministry into the farms, the procurement system was overhauled and procurements placed on a contract basis early in I96I.151 The objective was to have the procurement agent as an intermediary between the research farms and the kolkhozy and, in consultation with the research institutes, help the farm managers to make improve- ments so as to facilitate fulfilment of delivery plans. These improvement measures, drawn up jointly, were to be written into the procurement contract and enforced via the withholding of advances. The procurement agents' remuneration, however, was tied, to the extent of 30%, to fulfilment of the annual procurement plan for an entire region. His interest thus was only in the extraction of produce: hence the reform of 1962.

The decree of March I962152 set up regional sovkhoz-kolkhoz production boards composed of the most experienced kolkhoz and sovkhoz managers and specialists, with a corps of inspectors to observe, advise and assist the farms in problems of methods, technology and finance. The boards' function, it was stressed, was to provide technical assistance, not to replace the farm manager. In the event of disagreement between the inspector and the farm manager the final word is reserved

147 See letter of V. Klipikov, Ekonomika selskovo khozyaistva, 1963, no. I, p. 112. 148 See A. Rybalchenko, Ekonomika selskovo khozyaistva, 1962, no. 3, p. 109. 149 Term used by L. Suvorova with respect to job rating-op. cit. p. I4I. 150 Decree of20.ii.6I 'O reorganizatsii ministerstva selskovo khozyaistva SSSR', Pravda, 2I.ii.6I. 151 '0 perestroike i uluchshenii organizatsii gosudarstvennykh zakupok selskokhozyaistvennykh

produktov', Pravda, 26.ii.6I. 152 Decree of 22.iii.62 '0 perestroike upravleniya selskim khozyaistvom', Pravda, 24.iii.62.




to the manager. While some might legitimately doubt the intent of the decree in this respect, it should be pointed out that one of the reasons cited by Khrushchev153 for the Party reorganization of Nov- ember 1962 was the desire to eliminate excessive Party interference with the prerogatives of farm management.

Lastly, it should be pointed out, the increased role accorded to the formerly heretical concepts of value, prices and profits, in no way implies a recognition of the superiority of a market socialism over planned socialism. The reforms of the past decade have been confined to the realm of administrative techniques, with very little transgression of doctrine. Attempts are being made to develop an institutional environment in which centrally planned directives and controls can be transmitted to the periphery via financial and economic levers rather than via a bureaucratic administrative hierachy. It is, in a word, a search for a more efficient and less costly way of direction and control from the centre.

FRANK A. DURGIN, JNR. Holliston, Mass.

153 See his speech of I9.xi.62 (Pravda, 20.xi.62).

C




monetization and policy in soviet agriculture since 1952

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