Excess equipment was allowed to be sold to other enterprises.
Already in the midst of work (1963-1964) it became clear that the tasks set out in the Party Program, including for 1970, could not be fulfilled. In this regard, the idea arises to develop another seven-year plan for 1966-1972. This was done in order to disguise the impossibility of fulfilling the tasks set by the XXII Party Congress.
But at the end of 1963, they decided to abandon this idea and returned to the need to develop a plan for the Eighth Five-Year Plan. In particular, it was planned to increase labor productivity in industry by 33-35%, profit – more than twice. 80% of the increase in production was planned to be provided by the growth of labor productivity (against 62% in the seventh and 72% in the sixth five-year plan). It was supposed to pay priority attention to the development of agriculture, production of consumer goods, growth of real incomes.
However, it was impossible to implement the plan without radical changes in the economy. In this regard, the problem of its reform became acute. In September 1965, the Plenum of the Central Committee adopted a resolution “On Improving Industrial Management, Improving Planning and Strengthening Economic Stimulation of Industrial Production,” in accordance with which a new economic reform began. It was decided to liquidate the soviet economies and return to the sectoral principle of management. The Union-Republican and All-Union Ministries were re-established in accordance with the sectoral principle.
The next important direction of this reform was to change the entire system of planning and economic incentives. It was considered expedient to eliminate too strict regulation of economic activity of personal narrative ideas high school enterprises. To this end, the number of targets set by the center was reduced. In contrast to the previous system, which was focused on gross indicators, now the main indicator was the increase in sales of enterprises. It was assumed that the criterion for assessing the economic activity of the enterprise will be the profit (profitability of production) and the implementation of tasks for the supply of the most important products.
Among the mandatory indicators were also defined as follows: the main range of products, wage fund, payments to the budget and budget allocations, indicators of the volume of centralized investment and commissioning of production facilities and fixed assets, the task of introducing new equipment and material -technical supply. All other indicators of economic activity were supposed to be established without approval in the ministries and departments.
In accordance with the resolution, it was decided to expand the economic rights of enterprises, to develop direct relations between producers and consumers on the principles of mutual responsibility and interest. It was planned to put into practice relations based on economic agreements between enterprises.
In order to increase the role of economic incentives, an attempt was made to improve the pricing system in favor of low-profit industries. The fact is that in the Soviet economy, along with highly profitable plants and factories, there has always been a large number of unprofitable enterprises (for example, the entire coal industry). Very often at some highly profitable enterprises there were sections which let out necessary for the population, but unprofitable production. Therefore, companies did not want to produce these products. In this regard, the importance of such levers as price, profit, premium, credit, which returned to their original value.
It was supposed to improve the system of remuneration, to link it not only with the centralized increase of tariff rates, but also with material incentives for employees through the use of part of the profits of enterprises, to determine wages by the end result.
At the expense of profit, enterprises were allowed to create (according to certain standards) funds for economic incentives: material incentives, socio-cultural activities, housing construction and production development fund. At the expense of these funds it was possible to reward workers in accordance with labor indicators, to build housing and cultural institutions, to expand production. All this is called economic calculation. In fact, enterprises were given operational and economic independence (within the established limits). They worked on the principles of self-sufficiency, profitability, material interest and material responsibility for the achieved results. At the same time, the state retained control over the use of material, financial and labor resources.
It was believed that the new principles of production and economic incentives should create interest in the teams of enterprises in the adoption of higher planning targets, more complete use of factors of production, scientific and technological progress, improving product quality.
Economic reform has begun very actively. Already in January 1966, the first 43 enterprises in 17 industries were transferred to the new working conditions. In October 1965, the Regulations on the Socialist State Enterprise were approved, which enshrined its rights in the sphere of production and economic activity, construction and overhaul, in the field of logistics, finance, labor and wages, as well as the range of responsibilities and measure of responsibility for their violation.
The relations between the enterprise and the state have noticeably changed. A fee was introduced for production assets, for land and water resources. Excess equipment was allowed to be sold to other enterprises. The relationship between the size of the production assets of the enterprise and its contribution to the state budget was established, which should have interested the enterprises in the better use of these funds.
There have been significant changes in the pricing system: wholesale prices have become more objectively reflect the real production costs and companies could already make a profit from the sale of their products. From this profit, companies had to pay to the budget for production funds, fixed (rent) payments, and could form their own incentive funds.
A state Quality Mark was established for enterprises that were transferred to the new management system. This mark confirmed the stability of the quality of this product, the high culture of production, and others.
In 1967, entire industries began to be transferred to new economic conditions, and by the end of the year, 15% of enterprises, which accounted for 37% of industrial output, were operating in a new way. Construction and trade enterprises soon began to move to a new order of planning and economic incentives.
Economic reform also affected agriculture. In 1965, the Plenum of the Central Committee of the CPSU set the task of eliminating the negative consequences of Khrushchev’s “experiments” in the countryside. Mandatory corn crops for all farms were abolished, homesteads were restored, and so on.
The system of purchases of agricultural products changed, firm (unchanged) and relatively low procurement plans were introduced for several years in advance, up to and including 1970. Purchase prices for wheat, rye and other crops were increased, and prices were differentiated in different climatic zones and regions of the country. During the unscheduled sale of grain, the state set a 50% supplement to the basic purchase price. Measures were taken to spread the economic calculation of agricultural enterprises.
Funding for the agricultural sector has increased sharply. In 1966-1980, according to official data, 383 billion rubles were sent there, which accounted for 75% of all investments in agriculture during the Soviet era. At the expense of these funds they tried to implement grandiose programs for complex mechanization, electrification of agriculture, land reclamation and chemicalization.
In 1966-1970 the tasks of industrial production were fulfilled, production capacities were increased, labor productivity was increased. An important feature of this period was the growth in Ukraine of the rate of production of consumer goods. During 1966-1970, the capacity of power plants and electricity production increased. All collective farms, state farms and settlements located in rural areas were connected to the state power systems.
The first successes were achieved in the chemical industry. Ukraine began to produce more than in previous years, mineral fertilizers, sulfuric acid, soda, chemical fibers, plant protection products and others. Light, food and local industries developed at an accelerated pace. The volume of production of the footwear industry increased 1.5 times.
What factors can explain the progressive changes in the economy? The impact of the reform was, of course, significant, but not decisive. Moreover, significant changes in the economy took place in the first half of the eighth five-year plan, when the mass transition to the new system was just beginning. The real reason is another: during the turn from the Soviet farms to the ministries, the enterprises were given some freedom to maneuver, for some time they were not bound by strict regulations, which gave a temporary positive result. It should also be noted that professional economists were involved in drawing up the eighth five-year plan, who tried to include in the plan the most optimal parameters of the country’s economic development.
In the late 1960s and early 1970s, the positive potential of economic reform began to be exhausted, and the national economy returned to traditional sources of economic growth through the fuel and energy and military-industrial complex. Attempts to introduce science-intensive technologies (radio electronics, computer science, computers, biotechnology, etc.) into mass production did not bring the desired result. The structure of the Soviet economy became increasingly irrational, one-sided, with a tendency toward heavy industry with minimal access to the immediate needs of the people.
In the early 1970s, when the economy was still affected by the 1965 reform, it became clear that it was gradually ending, although no one abolished economic management methods, and party documents constantly emphasized the need to increase capital efficiency, reduce production costs, and so on.