Military Industry Under Gorbachev

The Eleventh Five-Year Plan (1981-85) was released a year late at the November 1981 meeting of the Central Committee of the Soviet Communist Party. General Secretary Leonid Brezhnev said food was the central problem of the whole Five-Year Plan. Soon after reviewing the traditional Bolshevik Revolution parade in November 1982, Brezhnev died.

Yuri V. Andropov, general secretary from November 1982 to February 1984, sought to rouse Soviet society with his campaign against alcoholism and corruption. Andropov's domestic policy leaned heavily toward restoring discipline and order to Soviet society. He eschewed radical political and economic reforms, promoting instead a small degree of candor in politics and mild economic experiments similar to those that had been associated with Kosygin in the mid-1960s. In tandem with such economic experiments, Andropov launched an anticorruption drive that reached high into the government and party ranks.

Andropov also tried to boost labor discipline. Throughout the country, police stopped and questioned people in parks, public baths, and shops during working hours in an effort to reduce the rate of job absenteeism. On an experimental basis, the government gave a number of enterprises greater flexibility in the use of their profits either for investment purposes or for worker incentives. The experiment was formally expanded to include all of the industrial sector on January 1, 1987, although by that time its limited nature and modest prospects for success had been widely recognized. Andropov replaced more than one-fifth of the Soviet ministers and regional party first secretaries and more than one-third of the department heads within the Central Committee apparatus.

But Andropov's ability to reshape the top leadership was constrained by his poor health and the influence of his rival Chernenko, who had previously supervised personnel matters in the Central Committee. Andropov's reforms targeted at eliminating corruption and cutting privileges in the higher party ranks estranged the party bureaucracy.

In attempt to return to Brezhnevism, the aging Politburo, of which seven members died in advanced age in 1982-1984, supported the conservative Konstantin Ustinovich Chernenko. He was elected general secretary on 13 February 1984, following the death of Andropov on 09 February 1984. On 11 April 1984, Chernenko was elected chairman of the Presidium of the Supreme Soviet. However, deteriorating health of Chernenko made him unfit to govern effectively. The personnel changes and investigations into corruption undertaken by the Andropov regime came to an end. Chernenko advocated more investment in consumer goods and services and in agriculture. Stalin was rehabilitated as a diplomat and a military leader. Chernenko's frequent absences from official functions left little doubt that his election had been an interim measure. He died in office on 10 March 1985.

Mikhail S. Gorbachev, a leading proponent of both reform, made his influence felt, first as adviser on economic policy under Andropov and his successor, Konstantin U. Chernenko. When Gorbachev attained power in March 1985, most Western analysts were convinced that Soviet economic performance would not improve significantly during the remainder of the 1980s. "Intensification" alone seemed unlikely to yield important immediate results. Gorbachev tackled the country's economic problems energetically, however, declaring that the economy had entered a "pre-crisis" stage. The leadership and the press acknowledged shortcomings in the economy with a new frankness.

From 1985 to 1987 seven industrial complexes--organs that were responsible directly to the Council of Ministers and that monitored groups of related activities -- were established: agro- industrial, chemicals and timber, construction, fuel and energy, machine building, light industry, and metallurgy. The ministries remained reluctant to undertake more extensive reforms that would reduce their centralized power and give greater initiative to lower-level economic units. But the conviction was growing that the centralized planning mechanism needed major changes and that simply fine-tuning the economy with minor reforms would not be sufficient.

The Twelfth Five-Year Plan [1986-1990] got off to a promising start, with larger than expected grain harvests and improved labor productivity, following the disappointing performance of Soviet agriculture during the Eleventh Five-Year Plan. Nevertheless, Western analysts viewed as unrealistic most of the Twelfth Five-Year Plan production targets -- both those set forth in the Food Program of 1982 and those subsequently revised downward. Although grain harvests were excellent in 1986 and 1987, output fell to only 195 million tons in 1988, forcing the Soviet Union to import more than 36 million tons that year. The 1988 harvest of potatoes, other vegetables, and fruits also declined as compared with the previous two years. As a result, the availability of food products throughout the country worsened, and in mid-1989 some Western observers believed a severe shortage and possibly famine were impending. Clearly the Twelfth Five-Year Plan's goals for agriculture would not be attained, a severe setback for Gorbachev's perestroika efforts.

Restating the aims of earlier intensification efforts, the Basic Directions for the Economic and Social Development of the USSR for 1986-1990 and for the Period to the Year 2000 declared the principal tasks of the five-year plan period to be "to enhance the pace and efficiency of economic development by accelerating scientific and technical progress, retooling and adapting production, intensively using existing production potential, and improving the managerial system and accounting mechanism, and, on this basis, to further raise the standard of living of the Soviet people." A major part of the planned increase in output for the 1986-90 period was to result from the introduction of new machinery to replace unskilled labor. New, advanced technologies, such as microprocessors, robots, and various computers, would automate and mechanize production. Obsolete equipment was to be retired at an accelerated rate. Industrial operations requiring high energy inputs would be located close to energy sources, and increasing numbers of workplaces would be in regions with the requisite manpower resources. Economic development of Siberia and the Soviet Far East would continue to receive special attention.

Gorbachev tackled the problem of laxness in the workplace and low worker productivity (or, as he phrased it, the "human factor") with great vigor. This attention to individual productivity and discipline resulted in the demotion or dismissal of influential older officials who had proved to be corrupt or inefficient. Gorbachev called for improved motivation among rank-and-file workers and launched a vigorous antialcohol campaign (also a priority under Andropov).

The plan stressed technical progress. Machine-building output was to increase by 40 to 45 percent during the five-year period. Those sectors involved in high technology were to grow faster than industry as a whole. The production of computers, for example, was to increase 2.4 times during the plan period. Growth in production of primary energy would accelerate during the period, averaging 3.6 percent per year, compared with 2.6 percent actual growth per year for 1981-85. The plan called for major growth in nuclear power capacity. (The Chernobyl' accident of 1986 did not alter these plans.)

Perestroika set a goal of sharply reducing the military share of machine- building and metal-working complex (MBMW) allocations (estimated at 60 percent in 1987) during the Twelfth Five-Year Plan. Civilian MBMW ministries were to receive an 80 percent investment increase by 1992. And emphasis was shifting to technology sharing by military designers with their civilian counterparts -- breaking down the isolation in which the two sectors had traditionally worked.

Overall investment under the Twelfth Five-Year Plan in the machine-industry was to be 80 percent higher than in the Eleventh Five-Year Plan (1981-85). A crucial goal was to shorten the time between research breakthroughs and their industrial application, which had been a chronic bottleneck in the modernization of industry. Another goal of the Twelfth Five-Year Plan was to improve the quality of individual components and spare parts because their short service life was diverting too much metal to making replacement parts. In the mid-1980s, however, severe delivery delays continued for both spare parts and new machines ordered by various industries. Perestroika attempted to simplify the system and to fix responsibility for delays. As the largest consumer of steel in the country, the Machine-Building and Metal-Working Complex [MBMW] had felt the impact of severe production problems in the metallurgy industry. Automation was expected to add speed and precision to production lines. By 1987 nearly half of metal-cutting machine production was done with digital program control. New control complexes stressed microcomputers with high production capacity and low material requirements. Nevertheless, a 1987 Soviet study showed that 40 percent of the robots in machine plants were not working at all, and a 1986 study demonstrated that only 20 percent of the robots were providing the expected production advantages.

At the Central Committee plenum in January 1987, Gorbachev demanded a fundamental reassessment of the role of the government in Soviet society. His economic reform program was sweeping, encompassing an array of changes. For example, it created a new finance system through which factories would obtain loans at interest, and it provided for the competitive election of managers. These changes proceeded from Gorbachev's conviction that a major weakness in the economy was the extreme centralization of economic decision making, inappropriate under modern conditions. According to Abel Aganbegian, an eminent Soviet economist and the principal scholarly spokesman for many of Gorbachev's policies, the Soviet Union was facing a critical decision: "Either we implement radical reform in management and free driving forces, or we follow an evolutionary line of slow evolution and gradual improvement. If we follow the second direction, . . . we will not achieve our goals." The country was entering "a truly new period of restructuring, a period of cardinal breakthroughs," he said, at the same time stressing the leadership's continuing commitment to socialism.

At Gorbachev's urging, on June 30, 1987, the Supreme Soviet approved a set of measures contained in the Basic Provisions for Fundamentally Reorganizing Economic Management. The Supreme Soviet subsequently adopted an additional ten decrees, as well as the Law on State Enterprises (Associations). The new measures also called for a redefinition and curtailment of the role of Gosplan. Beginning in 1991, Gosplan would no longer draw up annual plans. It would continue to develop five- and fifteen-year plans, specify state orders (involving about 25 percent of total output), and determine material balances for products considered to be critically important to the economy and national defense. Gosplan's development of "non-binding control figures" would suggest overall output, profit targets, and various indicators of technical and social progress. Long-term norms would regulate ongoing development, such as total wage payments and payments to various state-sponsored funds, for example, bonus funds, resources for social services, and research and development resources. Once enterprises had filled the designated state orders, however, they would have considerable freedom in deciding what to produce with the remainder of their resources and how to dispose of the products.

The new Law on State Enterprises (Associations) called for khozraschet. By the end of 1989, all enterprises in the economy were to make the transition to self-financing ( samofin-ansirovanie ), taking full responsibility for the financial outcome of their actions. The state budget would pay only for major investment projects. A principal criterion for judging enterprise and management performance would be the fulfillment of contracts. Enterprises would be free to reduce the size of their work force or to dismiss workers for poor performance. The law also provided for the bankruptcy and dissolution of enterprises that consistently operated at a loss.

In January 1988, the new Law on State Enterprises went into effect, allowing enterprises to set many of their own prices and wages. Results were disappointing, however, because workers demanded steep wage increases. As the government printed more money, products fetched higher prices outside the official economy. Thus, goods usually sold in state stores at fixed prices quickly disappeared as speculators snatched them up or producers ceased making deliveries. By September 1988, many staple products could not be found even in Moscow. During 1988-89 Gorbachev also issued orders to the oblast party committees to cease interfering in the economy, and he cut the staffs of state committees and ministries involved in the economy in order to prevent them from further tampering with it. Without the state and the party to hold it together and guide it, the economy went into free-fall.

In January 1991, Gorbachev replaced Prime Minister Nikolay Ryzhkov, who had become identified with the regime's economic failures, with Valentin Pavlov, an opponent of radical reform. Pavlov immediately created a mass panic by withdrawing large-denomination banknotes from circulation and limiting the public's ability to convert them to lower-denomination notes. The move, designed to reduce the vast sums of money circulating and to punish "black marketeers" hoarding large banknotes, only intensified the people's mistrust of the Soviet government. The economy continued to spiral downward. In 1991 the Soviet GDP had declined 17 percent and was declining at an accelerating rate. Overt inflation was becoming a major problem. Between 1990 and 1991, retail prices in the Soviet Union increased 140 percent.

On 19 August 1991, a group calling itself the State Emergency Committee attempted to seize power in Moscow. Soviet Union vice president Gennadiy Yanayev was named acting president. The committee's eight members included KGB chairman Vladimir Kryuchkov, Internal Affairs Minister Pugo, Defense Minister Dmitriy Yazov, and Prime Minister Pavlov, all of whom had risen to their posts under Gorbachev. Large public demonstrations against the coup leaders took place in Moscow and Leningrad, and divided loyalties in the defense and security establishments prevented the armed forces from crushing the resistance that Boris Yeltsin led from Russia's parliament building. On 21 August 1991, the coup collapsed, and Gorbachev returned to Moscow.

The Thirteenth Five-Year Plan (1991-1995) had protagonists of the "radical economic reform" suggesting the thirteenth Five-Year Plan to be a plan of implementation of reform. The Basic Provisions passed by the Supreme Soviet in 1987 called for thorough reform of the price structure by 1990, in time for use in the Thirteenth Five-Year Plan (1991-95). This price reform was more extensive than previous reforms, affecting both wholesale and retail prices. In the future, central authorities would establish far fewer prices, although all prices would still be closely monitored. Plans for reform provoked public controversy because the changes would end subsidies for many common items, such as meat, milk, fuel, and housing. Authorities promised a thorough public discussion of retail price changes and gave assurances that the living standards of workers would not decline.

On 08 December 1991, Yeltsin and the leaders of Belarus and Ukraine met at Minsk, the capital of Belarus, where they created the Commonwealth of Independent States and annulled the 1922 union treaty that had established the Soviet Union. The Thirteenth Five-Year Plan was not completed, as the Soviet Union was dissolved on 25 December 1991.