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Five-Year Plan

Five-Year Plan, Soviet economic practice of planning to augment agricultural and industrial output by designated quotas for a limited period of usually five years. Nations other than the former USSR and the Soviet bloc members, especially developing countries, have adopted such plans for four, five, or more years. Joseph Stalin, in 1928, launched the first Five-Year Plan; it was designed to industrialize the USSR in the shortest possible time and, in the process, to expedite the collectivization of farms. The plan, put into action ruthlessly, aimed at making the USSR self-sufficient and emphasized heavy industry at the expense of consumer goods. It covered the period from 1928 to 1933, but was officially considered completed in 1932. The second Five-Year Plan (1933–37) continued and expanded the first. The third plan (1938–42) was interrupted by World War II. The fourth covered the years 1946–50, the fifth 1951–55. The sixth plan (1956–60) was discarded in 1957, primarily because it overcommitted available resources and could not be fulfilled. It was replaced by a Seven-Year Plan (1959–65), which fell far short of estimated increases in agricultural (especially wheat) production. The Seven-Year Plan was considered the start of a longer period (20 years) devoted to the establishment of the material and technical basis of a Communist society. The late 1960s and early 1970s saw increased emphasis placed on consumer goods, and the 9th Five-Year Plan (1971–75) for the first time gave priority to light industry rather than heavy industry. The agricultural sector still grew far less than projected in the 10th (1976–80) and 11th (1981–85) Five-Year Plans, and overall economic performance was poor. The 12th and final Five-Year Plan (1986–90) projected increases in consumer goods and energy savings, but the economy began to slide, shrinking by 4% in 1990. The dissolution of the Soviet Union made the formation of a 13th Five-Year Plan a moot point.

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FYP

FYP Economics Five-Year Plan

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Five-Year Plan

Five-Year Plan

USSR 1927

Synopsis

The Five-Year Plans were programs of economic development instituted in the USSR by Joseph Stalin. The first, announced in 1927, began thorough industrialization under state planning and collectivized agricultural production. Despite successes on paper, the state planning suffered from mismanagement, investment was often squandered on grand projects, and the human cost was immense. In spite of these problems, Stalin managed to transform backward Russia into the modern, industrial power that was the USSR, an achievement that, for many, proves the benefits of planning under a socialist government.

Timeline

  • 1911: In China, revolutionary forces led by Sun Yat-sen bring an end to more than 2,100 years of imperial rule.
  • 1917: On both the Western Front and in the Middle East, the tide of the war begins to turn against the Central Powers. The arrival of U.S. troops, led by General Pershing, in France in June greatly boosts morale and reinforces exhausted Allied forces. Meanwhile, Great Britain scores two major victories against the Ottoman Empire as T. E. Lawrence leads an Arab revolt in Baghdad in March, and troops under Field Marshal Edmund Allenby take Jerusalem in December.
  • 1922: Inspired by the Bolsheviks' example of imposing revolution by means of a coup, Benito Mussolini leads his blackshirts in an October "March on Rome" and forms a new Fascist government.
  • 1924: V. I. Lenin dies, and thus begins a struggle for succession from which Josef Stalin will emerge five years later as the undisputed leader of the Communist Party and of the Soviet Union.
  • 1927: Stalin arranges to have Trotsky expelled from the Communist Party.
  • 1927: Charles A. Lindbergh makes the first successful solo nonstop flight across the Atlantic, and becomes an international hero.
  • 1927: American inventor Philo T. Farnsworth demonstrates a working model of the television, and Belgian astronomer Georges Lemaître proposes the Bang Theory.
  • 1927: The Jazz Singer, starring Al Jolson, is the first major motion picture with sound. Within a few years, silent movies will become a thing of the past.
  • 1927: Babe Ruth hits sixty home runs, establishing a record that will stand until 1961.
  • 1930: Naval disarmament treaty is signed by the United States, Great Britain, France, Italy, and Japan.
  • 1932: When Ukrainians refuse to surrender their grain to his commissars, Stalin seals off supplies to the region, creating a manmade famine that will produce a greater death toll than the entirety of World War I.
  • 1937: Japan attacks China and annexes most of that nation's coastal areas.

Event and Its Context

Planning: The Early Stages

The Russia inherited by the Bolsheviks in 1917 was economically backward; industry was underdeveloped and agricultural production was in crisis. These conditions were exacerbated by civil war. If Vladimir Lenin was to establish the socialist state, as he had claimed on 8 November 1917, it had to be done almost literally from nothing with very weak raw materials. The years of famine, when masses had died of starvation and disease and others resorted to cannibalism, had exacted a high cost on the Russian people.

Lenin made some attempts to restructure society. War communism segregated the people into exploiters and exploited with the former becoming the slaves to the new system. Propaganda tried to establish a new "socialist" popular culture, however, both the nation and the Communist Party (CPSU), the new name for the Bolsheviks, were deeply divided. The combination of Marxist economic theory and czarist repression drove the nation forward and defined the character of the USSR.

Lenin's new government attempted economic reforms, based on the state ownership model. Widespread demonstrations that culminated in a revolt at the Kronstadt naval base in March 1921, the center of Bolshevik power in 1917, encouraged Lenin to alter his course. At the Tenth Congress in 1921, the Central Committee of the CPSU endorsed the New Economic Policy (NEP), which was designed to "[build] socialism with capitalist hands." The policy combined the artificial creation of a market economy, nationalization of small-scale enterprises, and integration of these businesses into the market. The reforms and the taxes levied against small holders were instituted unequally across Russia, and a number of unscrupulous local bureaucrats prospered illegally. As Lenin's health deteriorated, however, political progress slowed and the factions within the CPSU battled for power.

Lenin's preferred successor was Leon Trotsky, who seemed more responsive to the effects of policy. Trotsky himself failed, however, to present Lenin's case to the Twelfth Party Congress in April 1923. This allowed Joseph Stalin to become general secretary. This marked the triumph of "socialism in one country" over Trotsky's theory of "permanent revolution." Stalin created a power base for himself prior to reorienting the NEP.

Socialism by Force

Under the NEP, the majority of Russian people were left without interference. The state did little to enforce progress toward socialism. Everyone, it appeared, subscribed to Bukharin's notion that the USSR should "creep at a snail's pace towards socialism"—everyone, that is, except Stalin. He allowed the lack of urgency to continue only until he had secured his position over the CPSU. By the time Stalin inaugurated the First Five-Year Plan in February 1928, he had the mechanisms in place to control both the party and society. A secret police force, OGPU, maintained order by fear. This organization, the largest employer in the USSR, had access to all parts of the USSR and all levels of society. As Stalin unveiled his plans for remolding society, OGPU officers were deployed to ensure compliance. This marked the start of the modernization of Russia and the beginning of Soviet totalitarianism.

The practical aims of Stalin's plans were to increase industrial production, including consumer goods, by 250 percent and to increase agricultural production by 130 percent. The means to achieve this was to convert the entire Russian labor force, both rural and urban, into employees of state-controlled enterprises. There were, however, further and more far-reaching objectives toward which Stalin aimed. The first was modernization, an aspect of which was the removal of all conservative elements from Soviet society. The chief target was the kulaks, the smallholders who clung possessively to land gained from the czarist reforms. Stalin saw these as a reactionary people and a major obstacle to progress. The aim for the USSR to overtake Western Europe and the United States in industrial production and economic growth encompassed Stalin's goals of modernization and growth. Historian Adam Ulam suggested that this reflected Stalin's obsession with personal greatness. Ulam argued that Stalin saw himself as a modern incarnation of Ivan the Terrible or Peter the Great, and he therefore tried to be both architect and manager of the reformation and rebuilding of Soviet Russia.

The major obstacle to success was Stalin's limited knowledge of economics or how to achieve sustainable growth. His response to failure was irrational accusations and brutal repression. This was first evidenced by his destruction of the kulaks. The fact that 96 percent of Russian land was in kulak ownership meant that they were clearly an obstruction to the collectivization of agriculture. Opposition to Stalin's orders was widespread and attacks upon officials, the slaughter of livestock, and burning of crops was common. These tactics were met, however, with severe brutality. Thousands were killed and thousands more were transported to concentration camps. The inefficient management of collective farms, the lack of skilled or enthusiastic labor, and bad harvests in 1931-33, however, led to widespread famine. Estimates of the deaths range from five to 50 million between 1928 and 1933.

In the long term, the record of collectivization is mixed. Crop production increased: in 1940 it was 80 percent greater than in 1913. The collective farms, which employed and housed up to 75 million people, were also able to feed the population of the USSR throughout World War II, which was crucial to the war effort. Furthermore the increased production allowed substantial amounts to be exported, which provided extra capital for industrial development. On the negative side of the balance sheet, apart from the human cost, collectivization was detrimental to Russian agriculture. Livestock production decreased as husbandry skills became marginalized, which made meat a luxury item. The size of the collective farms caused inefficiency, and the fact that the workers owned none of their output was a disincentive to hard work and to attentiveness to tasks. Although collectivization solved some of the problems of Russian agriculture, largely these successes were only achieved in an atmosphere of fear and disenchantment.

Industrial development required massive investment. The targets set were too high and therefore unrealistic, but industries such as machine production and the manufacture of electrical goods showed great successes. The chief problems were caused by Stalin's desire to outstrip the West. Grand projects, such as the metallurgical center at Magnitogorsk, were costly and detracted investment from more needy areas. Therefore in attempting to build the "socialist utopia" as an example to the nonsocialist world, Stalin caused a decline in the standard of living, maintained food shortages, and pursued his economic aims regardless of the cost in hardship.

Industry was transformed and by 1932-33 the unskilled laborers that had been drafted into the urban production centers were skilled craftsmen. The USSR achieved growth in manufacture and engineering, without massive human cost, and was soon self-sufficient. By 1933, in response to Hitler's ascendance in Germany, Soviet industry made an easy transition to arms production. This was facilitated by massive increases in the production and quality of coal, pig iron, and steel under the second and third five-year plans. The goal of transforming backward Russia into a great industrial nation had been achieved.

Planning, Successes, and Failures

The transition in Soviet industry did, however, result in social problems, though the number of workers purged as wreckers in the wake of unmet goals often obscures the social disturbances. The high turnover of labor between the collective farms and industry led thousands of people to become rootless within the new USSR, and workers often moved from city to collective in search of better wages. Stalin introduced incentives for effort by recasting wage scales and he turned a coal miner named Stakhanov, who had achieved 14 times the output of his peers, into a cultural icon: a shining example of the "new Soviet man." This led to greater stability as workers competed against each other for higher wages and so remained in one place and established a good range of skills instead of drifting between different trades. Fear, rather than Stalin's incentives, however, was the primary motivation that made workers remain in one trade and work harder.

Despite the repressive nature of the USSR under Stalin, the plans were applauded by a variety of commentators from Western nations. As the Wall Street Crash caused economic depression to sweep the United States and Europe, the USSR stood prosperous and immune from danger. Agitprop, the Soviet propaganda department, organized guided tours to introduce Soviet planning techniques to the world. Two British economists and social theorists, John Maynard Keynes and G. D. H. Cole, both extolled the benefits of planning for Western Europe. Thus the Soviet example gained an influential audience of sympathizers. Nazi Germany and the European Economic Community both benefited from the influence of those who had analyzed the Soviet model, though their versions were heavily adapted and Stalin was seldom given credit for the ideas. Had the transformation of the USSR not involved such a high human cost, Stalinism arguably would have stood as an example to the world. Unfortunately, because of the tactics employed, planning and state control became discredited as synonymous with totalitarianism and repression. That is perhaps the lasting legacy of Stalinism.

Key Players

Bukharin, Nikolai (1888-1938): An ally of Lenin but seen to be on the right of the Communist Party under Stalin, Bukharin heavily criticized Stalin's planning and was eventually dismissed from the party. As a focal point for opposition to Stalin, Bukarin was arrested, charged with treason and executed.

Djugashvili, Iosif Visarionovich (Stalin; 1879-1953): A revolutionary guerrilla (1905-1917), Stalin became a trusted servant of the Bolshevik leaders. He succeeded Lenin as leader of the Soviet Union and redesigned Marxist-Leninism as socialism in a single country.

See also: Forced Labor: Soviet Union; Russian Revolutions.

Bibliography

Books

Carr, E. H. A History of Soviet Russia, 1917-1929.Harmondsworth: Penguin, 1966.

Conquest, Robert. The Great Terror: A Reassessment.London: Pimlico, 1992.

——. The Harvest of Sorrow: Soviet Collectivization and the Terror-famine. London: Hutchinson, 1986.

Nove, Alec. The Soviet Economic System. London: Allen &Unwin, 1977.

——. An Economic History of the USSR, 1917-1991.London: Penguin, 1992.

Radzinsky, Edvard. Stalin. London: Sceptre, 1997.

Shukman, Harold. Stalin. London: Sutton, 2000.

Ulam, Adam. Stalin. London: Allen Lane, 1973.

Periodicals

Millar, James R. and Alec Nove. "A Debate on Collectivization: Was Stalin Really Necessary?" Problems in Communism 25 (July-August 1976): 49-62.

—Darren G. Lilleker

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Five-Year Plan

FIVE-YEAR PLAN.

THE FIRST FIVE-YEAR PLAN
FIVE-YEAR PLANS IN CONTEXT
THE FAILURE OF SOVIET-TYPE PLANNING
BIBLIOGRAPHY

Administrative plans were one of the instruments by which the leaders of the Soviet Union sought to impose their preferences on the economy. The Five-Year Plans for national economic development were the best known of these, but this reflects their important ceremonial functions; other plans and decisions were often more significant from a practical point of view.

In all, there were thirteen Soviet Five-Year Plans. The first ran from the autumn of 1928 to 1933; at that time the accounting year began in October with the end of the harvest. The third plan (1938–1942) was interrupted in mid-1941 by World War II. Five-year planning began again with the fourth (1946–1950). The sixth (1956–1960) was abandoned and replaced by a Seven-Year Plan (1959–1965). After that, everything went in step until the unlucky thirteenth plan (1991–1995), barely adopted when the Soviet Union collapsed at the end of 1991.

Five-year planning was not limited to the Soviet economy. The socialist economies of Eastern Europe copied it after World War II. Joseph Stalin's Five-Year Plans also provided symbolic inspiration for Adolf Hitler's two "four-year plans" (1933–1940) for Germany's self-sufficiency and war preparations, but there was little or no similarity in underlying respects.

THE FIRST FIVE-YEAR PLAN

The first "five-year plan of development of the national economy of the USSR" was adopted in April 1929, although it nominally covered the period from October 1928 to September 1933. It called for the country's real national income to double in five years and investment to treble, while consumption per head was to rise by two-thirds. There were ambitious targets to increase the production of industrial and agricultural commodities. The purpose of the plan was not just to expand the economy but to "build socialism"; associated with it was a vast program of new large-scale capital projects that would embody the new society in steel and cement. Indeed a five-year period was chosen partly in the belief that it would allow time to complete these major projects; another motivation was to permit the smoothing of harvest fluctuations.

The character of the First Five-Year Plan reflects complex underlying political and institutional changes of the time. In the 1920s leading Soviet political and economic officials disputed the nature of economic planning. Some believed that the task of administrative plans was essentially to replicate a market equilibrium without the mistakes to which they believed the market mechanism was prone; hence, a planned economy could balance public and private wants more efficiently, eliminate unemployment, and smooth out cyclical fluctuations. More radical figures regarded planning as an instrument for mobilizing resources into government priorities, breaking with the limitations of a market economy, and transforming the economic and political system as rapidly as possible. The radicals' victory was completed at the end of the 1920s by Stalin's left turn in favor of forced industrialization and the collectivization of peasant agriculture.

It took several years for Gosplan, the USSR's state planning commission, to prepare the First Five-Year Plan; the growing power of the radicals was expressed in increasingly ambitious targets that were set out in successive drafts. The optimism continued to grow even after the plan had been adopted, and this resulted in further upward revisions to particular targets in the course of 1930. The single most ambitious change was the decision to "fulfill the First Five-Year Plan in four years." Halfway through its implementation, the Soviet authorities decided to symbolize the country's transition to an industrial basis by replacing the old, harvest-oriented "economic year" with calendar-year accounts. To accommodate this transition a "special quarter" of extra effort was announced for the last three months of 1930. After that, the targets for 1931/32 and 1932/33 were brought forward to 1931 and 1932, respectively.

Judged by its targets, the First Five-Year Plan must be counted a ridiculous failure. The value of national income in 1932 was nearly twice that of 1928, but unacknowledged price increases and other statistical biases accounted for most of the increase. Many of the big projects that had been started remained unfinished. Instead of rising by two-thirds, consumption collapsed; by the end of 1932 the country was in the grip of a catastrophic famine. One reason for the famine was that the efforts to industrialize as rapidly as possible had stripped the countryside of food.

On other criteria, however, the same plan was a great success. Real investment had doubled and, under the Second Five-Year Plan (1933–1937), the unfinished projects would be completed and pay off. Although many specific targets were not met, industry's results for 1932 still showed remarkable progress over the starting point. Rapid industrialization was under way; it was the temporary collapse of agriculture that was to blame for the disappointing growth of national income and the severe decline in living standards.

Resources were now directed by administrative decrees, not markets and prices. Just as importantly, the critics of planning as all-out economic mobilization had been silenced. As much as anything Stalin used the First Five-Year Plan as a political instrument to flush out moderate opinion, expose critics, taint them with guilt by association with the political opposition to Stalin, and subject them to censorship, dismissal, and arrest. The underfulfillment of detailed targets was important only to the extent that it gave him a weapon with which to beat the oppositionists and fainthearts alike.

FIVE-YEAR PLANS IN CONTEXT

In the mid-1930s the Soviet economy overcame the crisis and settled down to a more "normal" style of economic planning. The Second and Third Five-Year Plans were enacted, and by the end of the decade leading officials were thinking in terms of plans with an even longer fifteen- or twenty-year horizon. But these "perspective" plans did not have much practical significance for management of the economy; Eugène Zaleski later described them as no more than "visions of growth" (1971, p. 291). The plans through which the authorities exerted "operational" control over resources were for shorter periods: yearly, quarterly, and monthly.

How did the operational plans work? In theory there was a process of breaking the perspective plans down into shorter time periods and distributing them across production ministries so that the annual and quarterly branch plans were nested arithmetically within the perspective plans for the economy as a whole. In practice, however, operational plans tended to creep away from perspective targets as the economy evolved. Investigations in the Soviet archives of the 1930s have also shown that, even at the "operational" level, the planners' control over day-to-day transactions was much less than might be expected. Gosplan projected supply and demand for a few broad commodity groups in the aggregate, but left it to the ministries in charge of each industry to plan the detailed assortment and distribution of commodities and to link up particular producer and user factories. When there were tens, then hundreds of thousands, and eventually millions of commodities, and tens of thousands of producers, these tasks could not be centralized. Planning was also much less "physical" than the stereotype; planners set targets for the value of industry output using plan prices that were supposedly fixed, but in fact the factories themselves exerted considerable influence over the prices, and could push them up under certain conditions to make the plan easier to fulfill. Finally, the plans themselves were relatively fluid; they were subject to continual revision, and secondary targets were often agreed upon during or after the event, when results were predictable or already known. Most detailed plans existed only in draft form and were never finalized.

It is not surprising, therefore, to find that the Soviet record of fulfillment of five-year and other plans tended to improve over time. There were three reasons for this. First, planners adjusted their expectations to results, and became less likely to set targets that were beyond the capacity or desire of the producers to fulfill them. Second, plans remained negotiable, and producers could often bargain inconveniently demanding targets downward during the plan period. Third, producers could also fulfill plans for output by manipulating prices upward, and "hidden" inflation became a persistent phenomenon.

Administrative plans never covered the whole Soviet economy. The labor market was planned, if at all, only on the demand side. For much of the Stalin period the supply of labor was fairly harshly regimented, but these controls had nothing to do with economic planning, even in the loose sense described here. Food supplies were partly planned and partly left to a legal unregulated market in which collective farmers sold their sideline private produce directly to households. Many goods and services were diverted out of the planned economy and retraded in illegal markets.

The planning system on its own does not fully explain the success of the Soviet state in allocating resources to investment and defense. This is reflected in the fact that, as is now known, Stalin and his immediate colleagues paid relatively little attention to five-year or annual plan figures other than for grain. They gave much closer consideration to the billions of rubles allocated to investment and defense through the state budget. Plan targets for output helped to ensure that output would be produced and resources would be available for use in the aggregate, but did not determine how these products would be used or by whom. Given this, the cash made available to military procurement departments and construction organizations through the budget was critically important in fixing the pattern of final uses. In short, money was more important in the Soviet economy than has sometimes been recognized, and in this sense the role of plans was more to influence the context than to decide outcomes.

THE FAILURE OF SOVIET-TYPE PLANNING

A fundamental problem of planning was the volume of detailed information that it required the planners to acquire and use. To plan the economy efficiently in theory required planners to have accurate knowledge of the specific needs and resources of every firm and household. In decentralized market economies this information does not have to be transmitted or shared directly because it is carried by price signals. In the command system, in contrast, the authorities aimed to direct resources in a comprehensive way despite very limited information and an even more limited capacity to process it.

As a result the planners evolved rules of thumb to take the place of the information they lacked. One such was to plan "from the achieved level." This rule solved the following problem: planners had to set targets for output, not knowing what industry was really capable of producing. In fact, producers took care to conceal their true resources from the planners in the hope that they would be given an "easy" plan. In turn, the planners knew that every factory was probably capable of more than it would admit, but they did not know by how much more. The standard solution was to set the next target on the basis of the most recent results, that is, the "achieved level," plus an increment. The benefit of this rule was that it resulted in plans that were likely to be feasible while also "stretching" the producers a little. But there were also drawbacks. One was that the rule tended to make plans conservative; planning "from the achieved level" inhibited structural change, especially the downsizing of industries that should have been allowed to decline. Another was that the same rule gave the producers an instrument to manage planners' expectations; by keeping down the "achieved level" today, they could ensure a still easier plan tomorrow.

In the 1960s and 1970s the Soviet Union, like other socialist economies, experimented with planning reforms. These reforms typically aimed to motivate producers to tell the truth about their capabilities and to cut costs by working harder without being watched all the time. In practice the experience of reform was almost entirely fruitless. To get incentives right the planners needed to set prices for outputs and inputs that reflected their social value, but this depended on information that producers controlled. But the producers did not trust planners with this information because it could also be used to make them work harder. Therefore, producers continued to work at concealing the truth from the planners rather than at being more efficient. In turn the planners had to continue to watch and control them with plans.

In the end the failure of this type of planning is symbolized by the declining growth rates of the Soviet-type economies. The lag of productivity and living standards behind Western Europe and the United States, which closed somewhat in the 1950s and 1960s, widened steadily thereafter. While the immediate causes of the collapse of socialism in Europe at the end of the 1980s are debatable, it seems beyond doubt that Soviet planning failed to adapt to changing tastes and technologies at the end of the twentieth century.

See alsoCollectivization; Industrial Capitalism; New Economic Policy (NEP); Soviet Union; Stakhanovites; Stalin, Joseph.

BIBLIOGRAPHY

Birman, Igor. "From the Achieved Level." Soviet Studies 30, no. 2 (1978): 153–172.

Davies, R. W., Melanie Ilic, and Oleg Khlevnyuk. "The Politburo and Economic Policy-Making." In The Nature of Stalin's Dictatorship: The Politburo, 1924–1953, edited by E. A. Rees, 108–133. Houndmills, Basingstoke, U.K., 2004.

Ellman, Michael. Socialist Planning. 2nd ed. Cambridge, U.K., 1989.

Gregory, Paul R. The Political Economy of Stalinism: Evidence From the Soviet Secret Archives. Cambridge, U.K., 2004.

Gregory, Paul R., and Robert C. Stuart. Soviet Economic Structure and Performance. New York, 1974. Rev. ed. as Soviet and Post-Soviet Economic Structure and Performance. New York, 1994.

Hanson, Philip. The Rise and Fall of the Soviet Economy: An Economic History of the USSR from 1945. London, 2003.

Harrison, Mark. Soviet Planning in Peace and War, 1938–1945. Cambridge, U.K., 1985.

Kontorovich, Vladimir. "Lessons of the 1965 Soviet Economic Reform." Soviet Studies 40, no. 2 (1988): 308–316.

Zaleski, Eugène. Planning for Economic Growth in the Soviet Union, 1918–1932. Translated by Marie-Christine MacAndrew and G. Warren Nutter. Chapel Hill, N.C., 1971.

——. Stalinist Planning for Economic Growth, 1933–1952. Translated and edited by Marie-Christine MacAndrew and John H. Moore. Chapel Hill, N.C., 1980.

Mark Harrison

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