Soviet Economy: Incentives Under Communism

September 21, 1966

Report Outline
New Trends in Centralized Sovier System
Five Decades of Communism in Industry
The Soviet Economy Today and Tomorrow
Special Focus

New Trends in Centralized Sovier System

The soviet union—after almost half a century of Communist rule—is reassessing the system of centralized economic planning that has become the hallmark of a Marxist system. A cautious introduction of incentives into the production structure has begun, and Western observers expect the reforms to win further acceptance in the months ahead. Although couched in the conventional jargon of communism, the economic changes must be regarded as significant and far-reaching. The movement for reform and the emphasis on consumer goods cannot help but touch numerous aspects of Soviet life, perhaps even spill over into Russia's foreign policy. Success of the reforms might bring the 233 million people of the Soviet Union closer than now to the living standards of Western Europe and reduce tension between the East and the West.

During the relatively short span of five decades, Communist Russia has progressed from the status of a backward nation to become the world's second-ranking industrial power. Most of this advance was made under a system of tight economic controls which enabled the government to direct investment and labor into development of a heavy industrial base at the expense of other sectors of the economy.

As the Soviet economy became stronger and more complex, the system of central controls became more cumbersome and less able to meet the nation's needs. Furthermore, the rapid growth rate attained in the post-World War II years slowed. According to estimates by the U. S. Department of State, the average annual growth of gross national product in the Soviet Union fell from 6 per cent in the years 1956–60 to 4 per cent in 1961–65. If the comparison were made against the 1950–55 period, the decline in growth rate would be even more pronounced.

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