Trajectories of Economic Transformations. Lessons from 2004 for 2024 and Beyond. Valery Kushlin

there has been a clear downward trend in the growth rate of such indicators as real per capita incomes and retail turnover of state and cooperative trade. During the Twelfth Five-Year Plan (1986—1990), for the first time in many years, the country faced a decline not only in the rate but also in the level of well-being of the people. This was so shocking that in 1986—1990 the government, glossing over this fact, removed the indicator of “real incomes of the population” from official statistics. It was replaced by the indicator of “cash incomes of the population”, which looked more decent due to the invisible presence of incipient inflation in it.

      The deterioration of the overall economic dynamics affected the weakening of the country’s position in foreign trade. The average annual growth rate of foreign trade turnover fell from 8.3% in 1966—1970 to 0.7% in 1986—1990.

      The dynamics of economic parameters in the USSR in 1985—1990 is indicative (Table 3.3).

      From a comparison of the data for 1985, it is not difficult to conclude that it was a clear reflection of economic stagnation. This underscored the urgent need for major changes in the economy and society. The figures for 1986 and partly for 1987 testify to attempts to implement these changes proclaimed by perestroika and Gorbachev’s policy of “accelerating” socio-economic development. The growth rate of capital investment sharply increased (to 8.4% in 1986).

      The growth rate of industry increased slightly, mainly due to investments in mechanical engineering. But then these intentions to accelerate economic development fizzled out. The year 1990 ended with an absolute decline in GNP, industrial and agricultural production, social labor productivity, and foreign trade turnover. In 1988—1990, as if in opposition to this, retail trade turnover and cash incomes of the population began to grow rapidly, which embodied the growing inflationary trends and, at the same time, the exhaustion of the ideas of “perestroika” and “acceleration”, which were replaced by new slogans of the “social orientation” of the economy.

      Fundamental Flaws in the Soviet Economic System

      It can be argued that the fundamental flaw of the economic system that existed for a long time in the country was its inability to overcome the extensive framework of economic development and to include the factors of economic intensification caused by the radical shifts in world science, technology, and management after the 1950s.

      The sphere of science and engineering in the country, especially after the end of the Second World War, was among the most privileged areas of activity. As can be seen from Table 3.4, the growth rates of investments in science were quite high.

      In terms of the level of knowledge intensity of the economy, the USSR quickly reached indicators commensurate with the most developed countries of the world. Even on the eve of the collapse of the USSR in 1990, expenditures on science from the state budget and other sources amounted to 5% of the country’s national income.

      The total expenditures on science from the state budget and other sources for the period 1986—1990 in the USSR amounted to 153.3 billion rubles, i.e., their growth compared to the previous five-year period (1981—1985) amounted to 116.9%.

      It is impossible not to admit that the initial period of the reversal in the world of the scientific and technological revolution was also full of events in our country that inspired great faith in its capabilities. In the USSR, there was a rapid increase in investment in the field of science. If in 1950 expenditures on science in our country amounted to 1 billion rubles, or less than 1.4% of the national income, then in 1960 it was 3.9 billion rubles (2.7%), in 1970 it was 11.7 billion rubles (4.0%). In the 1970s, the USSR was on par with the United States in terms of the relative value of spending on science to national income. Over the past 20 years (from 1950 to 1970), the number of scientific workers in the Soviet Union has increased by 5.7 times, and their share in the total number of workers and employees in the national economy has increased from 0.4% to more than 1%.

      The significant absolute and relative increase in resource investment in science, especially in the 1960s, did not, however, lead to an adequate increase in its contribution to the national economy. The transformation of the productive forces based on scientific discoveries and inventions and the proclaimed task of “combining the achievements of scientific and technological development with the advantages of the socialist economic system” proved to be a much more complicated matter in practice than it was seen in theoretical reflections on the future of scientific and technological revolution. There was a lack of perseverance and dedication to ensure the effective materialization of R&D achievements at the level of state programs, and due attention was not paid to the reorientation of investment policy to the process of accelerating scientific and technological progress. Although during each five-year plan the fixed assets in the national economy were on average renewed by about half (see Table 3.4), the involvement of means of labor of a fundamentally new scientific and technical level in the economy did not occur on the required scale. As a result, from one five-year plan to another (except for the Eighth Five-Year Plan, 1966—1970), there was a decrease in the efficiency of capital investments in the national economy. The increase in the national income produced per ruble of capital investment in the Eleventh Five-Year Plan (1981—1985) amounted to 11 kopecks, which is 2.1 times lower than in the Eighth Five-Year Plan, and 2.5 times lower than in the Sixth Five-Year Plan (1956—1960). Was it possible to reverse this trend at that time? In principle, yes, if it were possible to organically combine the investment process with scientific and technological progress, to turn capital investments into a reliable guide to the national economy of the most effective achievements of science and technology18.

      These assessments were made in the political conditions of the pre-reform period. They are rather harsh in their criticality, but inevitably still bear the imprint of faith in the country’s ability to correct the flaws of the system within the framework of evolutionary targeted reforms.

      Missed Opportunities and Unrealized Approaches

      Comprehending today, considering the time that has passed, what I, as a researcher, wrote in the pre-transformational period, I must be more critical of myself. Yes, at that time, many of my ideas about our economy and society, as well as those of a few other scientists, were formed under the influence of a priori belief in certain ideals. In addition, many of the deep-seated flaws of the socio-economic system were not fully revealed to researchers at that time due to insufficient access to information. It seemed that most of the shortcomings of economic management in the country depended on subjective causes and could be eliminated with proper adjustment of the policy of the authorities. There was a hope for the existence and operation of national (nationwide) economic interests as the main factor in motivating people’s behavior.

      In many of my developments, I and some other economists proceeded from the possibility, through rational transformations of economic structures and forms of economic management, of building such a system of economic interests of enterprises and associations that would correspond to the structure of the long-term needs of society. In our opinion, this should ensure a stable interest of economic entities in the best (most effective) satisfaction of the needs of society and, accordingly, generate and reproduce the economic responsibility of these subjects for the degree of satisfaction of the needs of society.

      All this presupposed a high degree of democracy in society, transparency of entrepreneurial aspirations and actions of the authorities, and broad opportunities for public control. At the same time, the mechanism of market competition (competitiveness) in the behavior of economic entities oriented towards satisfying the needs of society was thought to be organically immanent in the entire system of economic relations.

      From

18

Kushlin V. I. Scientific and Technical Revolution in the USSR: History and Modernity / History of the USSR. 1988. No. 5. Pp. 11—12.