List of Chapters
8: Freedom to Hire and Fire

In introducing the "economic reform" in September 1965, Prime Minister Aleksei Kosygin drew attention to a slowdown in the rate of growth of the productivity of labour, which had occurred in recent years:

"It should be said that in recent years the volume of the national income and industrial output per ruble of fixed assets has declined somewhat. The rates of growth of labour productivity in industry... have slowed down somewhat in recent years".

(A.N. Kosygin: "On Improving Industrial Management, Perfecting Planning and Enhancing Economic Incentives in Industrial Production", in: "Izvestia" (News), September 28th., 1965, in; M.E. Sharpe (Ed.): Planning, Profit and Incentives in the USSR", Volume 2; New York; 1966; p. 7).

In fact, statistics of national income - defined by Soviet economists as

".. the value newly created in a given period, usually a year".

(D.A. Allakhverdyan: "National Income and Income Distribution in the USSR", in: "The Soviet Planned Economy"; Moscow; 1974; p. 76).

expressed as a percentage of the total value of production assets, showed a consistent decline in the years prior to 1965:

1959: 62.6%

1960: 61.6%

1961: 60.5%

1962: 58.2%

1963: 55.0%

1964: 54.7%

1965: 53.2%

(T.S. Khachaturov: "The Economic Reform and Efficiency of Investments", in: "Soviet Economic Reform: Progress and Problems"; Moscow; 1972; p. 158).

Tigran Khachaturov, a specialist in investment efficiency, describing this ratio as

"...the main indicator of efficiency for the national economy",

(T.S. Khachaturov: ibid.; p. 158)


"A decline of this indicator during the seven -year period (1959-65) speaks about the existence of unfavourable phenomena in the Soviet economy".

(T.S. Khachaturov: ibid.; p. 158).

The significance of these "unfavourable phenomena" is more striking when the rate of increase in the output per industrial worker is compared with the rate of increase in the amount of capital per industrial worker:

1950-55 1955-60 1960-65

Capital per worker (rate of increase): 50% 44% 43%

Capital per worker Output per worker

(rate of increase): 49% 37% 26%

Difference: -1% -7% -17%

(T.S. Khachaturov: "Improving the Methods of Determining the Effectiveness of Capital Investments", in: "Voprosy ekonomiki" (Problems of Economics), No. 3, 1973, in: "Problems of Economics", Volume 16, No. 5; September 1973; p. 21).

These last figures reveal that the rate of increase in output per worker declined much faster than the rate of increase in capital per worker in the fifteen years prior to 1965. In other words, the Soviet workers, during this period, were being supplied with more and more means of production but were producing proportionately less and less!

It is clear that the mass of the Soviet workers had responded to the social changes introduced under the Khrushchev regime by an attitude of passive resistance to increasing production, by a "go-slow". One is reminded of Marx's remark on the attitude of workers to production under a system where the means of production are seen as "another man's property":

"Since, in this mode of production, the workman finds the instruments of labour existing independently of him as another man's property, economy in their use appears.. to be a distinct operation, one that does not concern him".

(K. Marx: "Capital", Volume 1; London; 1974; p. 308).

This situation contrasted markedly with that which had existed in the period when a socialist society existed in the Soviet Union, and it was a cardinal aim of the "economic reform" to reverse this trend of economic decline.

Under the socialist system which formerly existed in the Soviet Union, a worker could be dismissed only for grave misconduct (usually involving a criminal offence in connection with his work) and then only with the consent of the enterprise trade union committee:

"Soviet labour legislation... permits the dismissal of a worker by management only with the agreement of the factory and local trade union committee and on grounds stipulated by law".

(Trudovoe pravo: Entsiklopedichesky slovar" (Labour Law: An Encyclopaedic Dictionary); Moscow; 1959, in: R. Conquest (Ed.): "Industrial Workers in the USSR"; London; 1967; p. 19).

An important aim of "economic reform", therefore, was to increase the productivity of labour, not only by giving the workers more effective economic incentives to do so, but also by giving the managements of enterprises relatively unhindered powers to dismiss workers, partly as a disciplinary measure against workers not "pulling their weight", partly as an essential element in a rationalisation programme.

In the propaganda campaign preceding and associated with the "economic reform", the demand was accordingly put forward that the economic independence of the enterprise should embrace the right of management to determine at all times the size of its labour force. Since it was agreed that wage levels should continue to be fixed by the state, this demand was sometimes put forwards in the form that the management of an enterprise should have the right to determine the size of the wage fund (i.e., the total sum paid out in wages):

"It would be advisable gradually to abolish control over the number of people to be employed and the wage fund".

(V. Belkin & I. Berman: "The Independence of the Enterprise and Economic Stimuli", in: "Izvestia" (News), December 4th., 1964, in: M.E. Sharpe (Ed.): op. cit., Volume 1. p. 229).

Under the "economic reform" this right was given to the managements of enterprises -- a right which was, in fact, the relatively unhindered right to engage and dismiss workers:

"The firms (transferred to the "reformed" system -- WBB) determine.. the wage fund".

(V. Sokolov, M. Nazarov & N. Kozlov: "The Firm and the Customer", in: "Ekonomicheskaya gazeta" (Economic gazette), No. 1, 1965, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p. 251).

"The size of the wage fund will also be determined by the entrprise".

("Direct Contracts are Expanding", in: "Ekonomicheskaya gazeta" (Economic gazette), No. 3, 1965, in: M.E. Sharpe (Ed.): op. cit., Volume 1; p. 279).

"The economic independence of those enterprises (transferred to the "reformed" system --WBB) was expanded; .. they were granted major rights as regards... savings in the wage fund".

(A.N. Kosygin: ibid.; p. 28).

"From now on the enterprises will not be assigned the number of people they are to employ. The introduction of comprehensive cost accounting... will, naturally, reveal surplus labour at some of the enterprises".

(L. Gatovsky: "Unity of Plan and Cost Accounting", in: "Kommunist" (Communist), No. 15, 1965, in: M.E. Sharpe (Ed.): op. cit., Volume 2; p. 83).

"The director.. will hire and dismiss personnel".

(Statute on the Socialist State Production Enterprise", in: M.E. Sharpe (Ed.) op. cit., Volume 2; p. 311).

"Shop heads have the right to hire and fire".

(S. Kamenitser: "The Experience of Industrial Management in the Soviet Union"; Moscow; 1975; p. 40).

Next Chapter: Chapter 9: The Primitive Accumulation of Capital

Previous Chapter: Chapter 7: The New Soviet Capitalist

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