The Wheels of A Command Economy: Allocating Soviet Vehicles

This paper traces the formal and informal allocation of vehicles by the Soviet administrative-command economy in the early and mid 1930s using the very same documents as did the Soviet dictator some 70 years earlier. Vehicles should present Soviet resource allocation in its most favorable light, since their production and allocation was highly centralized and tightly monitored. This case study, however, shows the complicated reality of vehicle allocation. Most newly-produced vehicles were initially allocated to large wholesale users directly by the top party leadership through quarterly plans, amid gaming tactics employed by the major players. Consumers distorted information; planners fought against arbitrary, unjustified requests; firm rules were lacking. This centralized “planned” distribution was anything but orderly as ad hoc political decrees overturned quarterly plans, especially during supply shocks; wholesalers ignored planned instructions by keeping vehicles for themselves or redirecting them to others; and the producer influenced allocation through its control of the planning “aftermarket”. Existing stocks of vehicles were redistributed by administrative mobilizations that were resisted and thwarted by those losing vehicles. Behind the scenes of planning, a complicated informal market reallocated used vehicles. INTRODUCTION The Soviet command economy, which emerged in late 1920s as Stalin’s team took control and existed in basically unchanged form until its breakdown in 1991, represents an extreme case of governmental control of the economy. It was characterized by the administrative planning of production and distribution, state ownership of the means of production, and the control of economic decision making by a dictatorship. The Soviet command system spread to Eastern Europe, China, and Cuba. How it worked, therefore, may yield instructive lessons for economies that combine some of its features, such as political dictatorship, state ownership, and/or administrative planning. The Soviet system created, at its peak, the world’s second largest military power and produced relatively high rates of growth from the late 1920s to the mid 1960s, but these achievements were accompanied by excess mortality, declining real consumption, industrial development heavily skewed toward military production, and the use of penal labor, costs the dictator accepted to secure the regime against internal and external threats. These apparent sacrifices of economic rationality have been widely discussed in the literature. This paper contrasts the theory and reality of the Soviet administrative-command system by using the recently-opened records of the Soviet state and party archives. In theory, all capital and natural resources were claimed (owned) by the state in order to ensure the economy caters to the interests of the dictator. In theory, a central planning apparatus, for the first time in economic history, replaced the market to command the allocation of major commodities. In 1 Gregory and Stuart, Russian and Soviet Economic Structure and Performance; Hunter and Szyrmer, Faulty Foundations: Soviet Economic Policies 1928-1940, and others. theory, the dictator exerted control of the resource allocation process by issuing orders to subordinates which were universally obeyed. This “scientific planning” stereotype pictured a highly centralized allocation process in which planners, following the party’s instructions, planned outputs and used “scientific” norms to construct a consistent distribution plan for key industrial commodities from input requests of non-opportunistic ministries and regional administrations, who distributed them according to economic criteria among their subordinate organizations. 2 The Western literature has attempted to examine the validity of these stereotypes: Scholars have pointed out that Soviet “scientific” planning was “non-scientific”. Plans were rarely realized and frequently amended. Enterprise managers evaded plans and overdemanded resources. Rather than being an economy of “balances”, the Soviet economy was a “shortage economy” due to over-optimistic (“taut”) target-setting, the state’s inability to impose hard budget constraints on its enterprises, planning errors, and perhaps even deliberate creation of opportunities for corruption. An exhaustive empirical study by Zaleski showed that the rate of 2 Gosplan SSSR, Metodicheskie ukazanii k rasrabotke gosudarstvennykh planov ekonomicheskogo I sotsial’nogo razvitiia SSSR. 3 Jasny, Soviet Industrialization, 1928-1942; Zaleski, Stalinist Planning for Economic Growth 19331952; Wilhelm, “The Soviet Union Has an Administered Not a Planned Economy.” 4 Berliner, Factory and Manager in the USSR; Granick, Management of Industrial Firms in the USSR. 5 Hunter, “Optimal Tautness in Development Planning.” 6 Kornai, Economics of Shortage. 7 Kushnirsky, Soviet Economic Planning, 1965-80. 8 Shleifer and Vishny, “Pervasive Shortages under Socialism.” plan compliance was so low that the term “planned economy” is a misnomer. Instead impulsive “resource management,” largely outside the realm of formal planning, was the principal instrument of resource allocation. Powell, in an under-recognized article, proposed the only “model” of soviet resource management, suggesting that the system “worked” through nonmarket signals from subordinates to their superiors. Powell’s model was based on a thought experiment, given that he had no materials on how the system actually worked. Unresolved Issues This paper examines the following unresolved issues concerning the Soviet planned economy: First, although Western studies of the Soviet enterprise destroyed the myth of microeconomic obedience to orders from above, 11 the myth of obedience, or non-opportunistic behavior, by high level officials has persisted. The dictator gave orders to planners and to ministerial officials, who did their best to carry out these orders. Scholars have not been able to examine this “centralization myth” because of the excessive secrecy surrounding the Soviet system. We do not know who was obedient to the wishes of the dictator – who behaved opportunistically and who was loyal. Second, although the myth of the complete replacement of the market by the plan has been destroyed by the discovery of a large underground retail economy, the presence of market 9 Zaleski, Stalinist Planning for Economic Growth 1933-1952. 10 Powell, “Plan Execution and the Workability of Soviet Planning.” 11 Berliner, Factory and Manager in the USSR; Granick, Management of Industrial Firms in the USSR. 12 Belova and Gregory, “Dictator, loyal, and opportunistic agents: The Soviet archives on creating the soviet economic system.” or quasi-market forces at relatively high levels remains to be studied. Hayek and Mises questioned the feasibility of a single decision maker replacing the market already in the 1920s and 1930s. What we do not know is the extent to which high-level planning, ministerial, and territorial officials used market-like allocations in wholesale and capital markets. Third, the planning stereotype says virtually nothing about how the Soviet system redistributed existing stocks of assets. Economies must have ways of redistributing capital assets from lower to higher uses to adjust for changing conditions; so we must assume that the Soviet economy had some practical procedure in place. Fourth and most generally, we lack a picture of how and how well resource management was carried out and its relationship to planning. Why did adjustments and interventions take place after the plan was completed? Were they themselves chaotic or welfare improving? The excessive secrecy surrounding the Soviet system prevented Western researchers from dealing with these four issues. Gregory showed that we knew little about the practical operation of the Soviet economy above the level of the enterprise – about how planning (or Zaleski’s resource management) actually functioned. The opening of the formerly-secret State and Party Archives provides, at long last, an inside view of actual Soviet resource allocation. We can 13 Grossman, “The Second Economy of the USSR”; Treml, “Production and Consumption of Alcoholic Beverages in the USSR: A Statistical Study.” 14 Hayek, “Socialist Calculation: The Competitive Solution”; Mises, Socialism: An Economic and Sociological Analysis. 15 Gregory, Restructuring the Soviet Economic Bureaucracy. 16 Our study uses the archives of the Council of Ministers (State Archive of the Russian Federation Gosudarstvenny arkhiv Rosiyskoy Federatsii, hereafter referred to as GARF Fond 5446), minutes of the now use the same documents that the dictator, the planner, and the industrial minister themselves used to make their decisions and operate their organizations. We could tackle the four enumerated issues either generally or through case studies. Given the enormous complexity of the Soviet economy, we conclude that the case-study approach provides the best starting point. This paper traces the allocation of a single capital asset – vehicles, one of the most “deficit” of commodities – in the 1930s, using the operational plans and routine documentation, which have fallen below the radar screen of past studies based on published plans. We exclude production of vehicles from our study. Shocks to production are exogenous in our analysis. Vehicle distribution should present Soviet resource allocation in its most favorable light with respect to the Mises-Hayek information problem critique: In this period, a maximum of 160,000 vehicles were distributed per year; production was highly concentrated and fairly homogeneous; it should have been easy to keep track of stocks of cars and trucks; and their allocation was directed by a three-person committee of the top political/economic leadership. The Soviet State and Party Archives provide researchers with a unique opportunity to place themselves in the shoes of the Soviet dictator. We can reconstruct the allocation of vehicles Politburo (RGASPI, formerly Central Party Archives, Fond 17, Op.3), archives of Gosplan (State Archive of the Economy Gosudarstvenny arkhiv ekonomiki, hereafter referred to as RGAE Fond 4372), the Ministry of Heavy Industry (RGAE, Fond 7622), the Central Statistical Bureau (RGAE, Fond 1562), the Central Party Control Commission (RGANI, Formerly Archive of the Central Committee of the CPSU, Fond 6), GULAG (GARF, Fond 9414). The latter two are available in the Hoover Institution archives. For general descriptions of these archives see: State Archival Service, Stalinskoe Politburo,