Economic_History_anim.gif (3797 bytes)    

 

 

Economic performance under Khrushchev in power.

By  Byung-Woo Kim

After the death of Stalin, for a short time Malenkov became the party secretary and Prime minister.  Within weeks, he relinquished his party to Khrushchev, who then used this position to secure full power.

As soon as Khrushchev seize the power, he was to put more emphasis on consumption in the economy of which an increase in food supply was the most essential aspect.  However, his interest in agriculture went beyond the question of food supply.  He had a real concern for the peasantry.  Because he had witnessed their miserable condition at first hand.  Increase in farm prices and reductions in taxes on private plots marked exchange in political attitude to the peasantry and agricultural sector in the economy.

His early years were generally successful in dealing with the economy and gave rise to unduly optimistic expectations.  When the Sixth Five year plan was approved its forecast was very high and the plan was unfulfilled.  However, between 1953 and 1958 GNP grew by 6.7% per annum, a rate exceeded only by Japan and Western Germany among industrial countries.(Munting 132)  The industrial economy was continuing to make progress as it had in previous years, with particular success in the producer-goods sector, but consumer-goods output increased also.  Real incomes had been boosted retail price reductions, though this was partially offset by the virtual doubling of compulsory bond sales to make up for falls in turnover tax revenue.  Although higher money incomes were not fully matched by increases in the availability of consumer-goods, there was a substantial increase in the volume of retail trade turnover, including food purchases. (Munting 132)

However, the economy had to face some problems.  Technological innovation and the development of new products were slow.  More generally there was evident inefficiency in production.  Thus in 1957, a fundamental reform to reorganize the administrative basis of the economy was initiated, with the object of reducing waste and generating greater efficiency in production.  Khrushchev attacked the ministerial structure of the economy and ministerial power.  He abolished the ministries and replace them with a regional organization.  In effect this meant that the industrial enterprise would no longer be responsible to the appropriate ministry but to the appropriate regional economic council.  The allocation and supply system was shifted from the ministry to the regional economic councils.

   While his serious organizational reform remained unanswered whether it was proper, ambitious seven economic plan was scheduled from1959 to 1965.  It aimed for a growth rate 8.6% per annum; overall industrial growth of 80% over 1958 levels.  National income was to rise by 62.5% and all real incomes by 40%  this demanded high levels of  investment.  Not surprisingly, the plan proved to be unduly optimistic.  An index of growth industrial production reached 184 in 1965(1958=100), thus exceeding plan, and national income grew by 59%, little short of the planned figure.  But agriculture provided the major disappointment.  Again a forecast increase of 70% in gross production from 1958 to 1965   the real increase was only 15%. (Munting 135)  Since 1958, the annual rate of industrial growth dropped from  10.6% (1950-58 average) to 7.3% in the last 3 years of Khrushchev's rule.  Overall growth rate also declined since then.  But the declined  the overall growth rate level was nearer overall growth rate of other industrial economies.  From 1958 to 1965, the annual average growth rate  was 5.2% compared with 5.1% for France and Italy, 4.8% for Western Germany, 4.5% for USA and 9.6% for Japan.  The USSR was among the European leaders, but the small deceleration suggests that the economy was much nearer to a stage of maturity with a tendency for growth to come much nearer to West European levels after the rapid recovery miracles of the 1950s. Thus the Soviet economy(industrial sector) was relatively well performed during this period.

On the whole, growth in the 1950s and 1960s was the result of improvements in labor productivity.  There was a tendency for the capital-labor ratio to rise from 6.9% per annum between 1950 - 1958 to 15.7% per annum between 1958 - 1964.  The capital-output ratio was also tending to rise.  Thus the increases in labor productivity were expensive, and the USSR was being "out-performed" by a number of capitalist countries.  The Soviet figure for output per man-hour is higher than per employed person because of the reduction in average working hours in this period.  (Munting 138)

Growth Rates of real GNP

    (annual average) 1953-1965

per employed
person(%)
per man-hour
USSR  3.8  5.2
France    4.6  4.6
West Germany4.6 5.4
Italy   4.3 4.5
USA 2.3 2.2
UK    2.4  2.7
Japan 7.7   7.8

(Munting 138)

 

Unlike industry sector, performance of agriculture sector was somewhat doubtful.  Even though peasant incomes increased substantially and agriculture took a far higher priority in the economy than under Stalin, Khrushchev's policies did not solve agricultural problems absolutely.  Under his power, both peasant income and increase in production were outstanding until 1958.  Virgin lands was the best known project for that.  The program was initiated in 1954 and created lots of new farm-entrees.  In short time it produced dramatic quantity of food production. The year 1958 diminishing returns started - over-cultivation, without provision for adequate fallow, exhausted the soil.  Overall, the virgin land scheme did not improve food supple.  By 1964, the virgin land program had to be acknowledged as a failure

There was an administrative reorganization in agricultural sector of  Khrushchev era.  It was the rapid consolidation of collective farms, the conversion of collective farms into state farms, and the build-up of new state farms in the developing eastern agricultural regions of the Soviet Union.  This policy originated at the end of the Stalinist era, and had been pursued by all of Stalin's successors.  Like Stalin, he also looked with favor on the Sovkhoz type of agricultural community, the state farm, more directly controlled by the government.  Khrushchev continued this major reform.  He doubled the previous pace of both Kolkhoz consolidation and the growth of state farms.  This sudden acceleration  of the tempo of peasant reorganization was implemented with similar lack of preparation and suffering.(Blackwell 156-157)

The policy of discriminating against private holdings underestimated the importance of personal ownership to the collective farmer and the importance of private holdings in peasant consumption.  Thus reducing private holdings simply increased demand for meat and milk through the state and co-operative network without there being a comparable increase in productive resources.  Khrushchev's attack on the private sector was arguably the most serious error in his agricultural policy.(Munting 148-149)

The performance of the economy in Khrushchev's years in office was far from negligible.  There were two clear achievements.  First, the consumer got a much better deal.  Real incomes increased, even though consumer-goods production did not match expectations and came nowhere near the wild claims of the seven-year plan.  Per capita private consumption increased by 5.5% pre annum, 1950-1965.  The second main achievement was in agriculture-  considerably as a failure.  Despite the strong and genuine concern with agricultural affairs he failed to meet his own high expectations. Khrushchev's policies did not solve agricultural problems absolutely.  However,  he brought new areas, Virgin Land, to cultivate and produce substantial amount of agricultural products(even though the virgin land scheme considered as a failure).  His efforts on reorganization of control system(collective farm) served to disorganization of peasants. His mistakes finally unseat him when the country was forced to import large quantities of food after the disastrous harvest of 1963.   But the gains made by Khrushchev indicate a totally changed priority to agriculture.   Comparing to Stalin's  period, Peasant income increased substantially and agriculture took a far higher priority in the economy.

References:

Blackwell, William. The industrialization of Russia. New York: New York University, 1970.

Munting, Roger. The Economic Development Of The USSR. New York:St. Martin's Press,1982

          

 

OK Economics was designed and it is maintained by Oldrich Kyn.
To send me a message, please use one of the following addresses:

okyn@bu.edu --- okyn@verizon.net

This website contains the following sections:

General  Economics:

http://econc10.bu.edu/GENEC/Default.htm

Economic Systems:  

http://econc10.bu.edu/economic_systems/economics_system_frame.htm

Money and Banking:

http://econc10.bu.edu/Ec341_money/ec341_frame.htm

Past students:

http://econc10.bu.edu/okyn/OKpers/okyn_pub_frame.htm

Czech Republic

http://econc10.bu.edu/Czech_rep/czech_rep.htm

Kyn’s Publications

http://econc10.bu.edu/okyn/OKpers/okyn_pub_frame.htm

 American education

http://econc10.bu.edu/DECAMEDU/Decline/decline.htm

free hit counters
Nutrisystem Diet Coupons