Councils of the National Economy

(sovnarkhozy), government bodies for the territorial administration of industry and construction in the USSR (1917–32 and 1957–65).

The first local councils of the national economy were formed at the regional (oblast), provincial, and district levels in late December 1917-January 1918, after the establishment of the Supreme Council of the National Economy (VSNKh). Each regional (oblast) council of the national economy had jurisdiction over several provinces. Thus, the council of the Northern Industrial Region covered eight provinces; the council of the Moscow Region, 11; and the council of the Urals Region, eight. Under the Statute on Regional (Oblast) and Local Councils of the National Economy, which was ratified by the VSNKh on Dec. 23, 1917, the councils of the national economy were established “as local institutions for the organization and regulation of production, directed by the Supreme Council of the National Economy and operating under the general control of the appropriate soviets of workers’, soldiers’, and peasants’ deputies.” The basic functions of the local councils of the national economy were the resolution of questions of principle and general questions affecting the entire economic region; direction of the lowest bodies of workers’ control; the clarification of a region’s needs for fuel, raw materials, semifinished goods, implements of production, labor power, transportation, and foodstuffs; and the elaboration of plans for the distribution of orders. When the councils of the national economy began to function, the economy was in a state of ruin as a result of the imperialist war, and many enterprises and institutions had been paralyzed by the sabotage of the capitalists and civil servants. Under these conditions, the VSNKh and the local councils of the national economy carried out the historic task of outfitting and restoring nationalized industry. The sphere of activity of the councils of the national economy became broader as the number of nationalized enterprises increased. V. I. Lenin spoke at the three All-Russian Congresses of the Councils of the National Economy held between May 1918 and January 1920.

With the expansion of economic construction and the accumulation of experience, the system of state administration of the economy improved. In April 1920 the Council of Labor and Defense was formed, and in February 1921, the State Planning Committee (Gosplan). With the formation of the USSR in 1922, the VSNKh was granted the rights of a consolidated people’s commissariat. Enterprises of all-Union significance remained under the direct jurisdiction of the VSNKh of the USSR. In August 1926 central administrations (glavki) were established in the VSNKh for various branches of industry. As socialist industrialization developed successfully, the VSNKh glavki found it even more difficult to manage industries, which had greatly expanded. On Jan. 5, 1932, the Central Executive Committee and the Council of People’s Commissars of the USSR transformed the VSNKh of the USSR into an all-Union people’s commissariat, the People’s Commissariat of Heavy Industry (Narkomtiazhprom), removing light industry and forestry from its jurisdiction and forming the People’s Commissariat of Light Industry (Narkom-legprom) and the People’s Commissariat of Forestry (Narkom-lesprom). With the further development of industry and the creation of new branches of production, the people’s commissariats of industry (from March 1946, ministries) were divided into smaller units. By 1957 there were 37 Union and Union-republic ministries of industry and construction.

The forms of economic direction of industry that developed in the USSR—specialized ministries and departments for the major branches—made it possible for the party and the state to concentrate their efforts on establishing key branches of heavy industry and training highly skilled engineering and technical personnel, economists, and production organizers. By 1957 the volume of industrial production in the USSR was almost four times the prewar level of 1940. There were more than 200,000 industrial enterprises and more than 100,000 construction sites.

With the increase in enterprises, centralized direction became more complicated. There were also serious shortcomings in the ministries. Departmental barriers hindered the specialization and cooperative organization of enterprises and made it possible to take advantage of local initiative to the necessary degree. Seeking ways to improve the system of managing industry and construction, the February Plenum of the Central Committee of the CPSU (1957) adopted a resolution calling for the transition to a territorial principle of management by economic administrative regions and for the establishment of the councils of the national economy. In 1957, 105 economic administrative regions were formed, including 70 in the RSFSR, 11 in the Ukrainian SSR, nine in the Kazakh SSR, four in the Uzbek SSR, and one in each of the remaining 11 Union republics. Twenty-five all-Union and Union-republic ministries were abolished.

The structure of the councils of the national economy varied, depending on the characteristics of the economic region, but all of the councils conformed to the same organizational principles. Each council had branch and functional administrations and divisions. The branch administrations united similar enterprises (for example, metallurgical, fuel, machine-building, or food-processing enterprises). To coordinate, plan, and control performance, technical councils and functional administrations or divisions were established under the branch administrations, with responsibility for economic planning, technology, material and technical supply, capital investments, finance, labor and wages, and personnel.

With the formation of the councils of the national economy of the economic administrative regions, local party and soviet bodies received increased responsibility for the direction of the economy. Among the positive aspects of the work of the councils of the national economy were the unification of similar enterprises in a number of cases and the creation of interbranch enterprises for the repair of equipment and the production of semifinished products and instruments. However, in time, major shortcomings emerged in the territorial system of management. The abolition of the ministries was accompanied by the disruption of the centralized direction of each branch of industry as a unified whole, in an industrial and technical sense. The councils of the national economy were incapable of providing a unified technical policy or ensuring the comprehensive resolution of the scientific and technological problems in the development of a particular branch of industry. Among the attempts to eliminate these problems were the formation of republic-level councils of the national economy in the RSFSR, the Ukrainian SSR, and the Kazakh SSR (1960); the consolidation of the councils of the national economy (1962); the organization of the Council of the National Economy of the USSR (1962) and the Supreme Council of the National Economy of the USSR (1963–65); and the establishment of state committees for certain branches of industry. However, these organizational measures did not eliminate the contradictions between the basic tendency of branch development in contemporary industry and the territorial system of administration. As was pointed out in the Report of the Central Committee to the Twenty-third Congress of the CPSU (March 1966), negative phenomena emerged in industry, including declining rates of growth in industry and labor productivity and declining effectiveness in the use of production funds and capital investments. “As a result of the territorial system of administration, the direction of branches of industry was fragmented in many economic regions, the unity of technical policy was destroyed, and scientific research organizations were isolated from production. This retarded the development and introduction of new techniques” (XXIII s”ezd KPSS: Stenograficheskii otchet, 1966, p. 54).

After reviewing the questions of improving the administration of industry, perfecting planning, and increasing economic incentives in industrial production, the September Plenum of the Central Committee of the CPSU (1965) demanded that the forms of administration, planning, and incentives in industry be made to conform to contemporary technological and economic conditions and to the level of development of the country’s productive forces. The importance of combining centralized branch administration with local economic initiative was emphasized. The Plenum of the Central Committee of the CPSU acknowledged the necessity of forming Union-republic and all-Union ministries. Under a law adopted by the Supreme Soviet of the USSR on Oct. 2, 1965, the VSNKh of the USSR, the Council of the National Economy of the USSR, and the councils of the national economy at the level of the republic and the economic regions were abolished, and industrial ministries were established.