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BOX-FOLDER-REPORT: 62-3-74
TITLE:             Soviet Defense Industries Get New Labels
BY:                Fritz Ermarth
DATE:              1965-3-4
COUNTRY:           Soviet Union
ORIGINAL SUBJECT:  USSR

--- Begin ---

RADIO FREE EUROPE Research

COMMUNIST AREA

USSR
4 March 1965

SOVIET DEFENSE INDUSTRIES GET NEW LABELS

Radio Moscow announced on 3 March 1965 that on
26 February the Presidium of the Supreme Soviet had ordered
the transformation of several state committees into
ministries, The changes made were as follows:

USSR State Committee for Aviation Technology -
All-Union Ministry of Aviation
Industry

USSR State Committee for Defense Technology -
All-Union Ministry of Defense
Industry

USSR State Committee for Radioelectronics -
Ail-Union Ministry of Radio
Industry

USSR State Committee for Shipbuilding - 
All-Union Ministry of Shipbuilding
Industry

USSR State Committee for Electronics -
All-Union Ministry for Electronics
Industry

USSR State Production Committee for Medium
Machine-building - All-Union Ministry
for Medium Machine-building

[page 2]

At the same time, the chairmen of the former committees --
Dementiev, Zveriev, Kalmykov, Butoma, Shokin, and Slavsky,
respectively -- were given the title of minister but
retained in effectively the same positions, It was also
announced that the old Ministry of General Machine-building,
merged with the Ministry of Defense Industries in May 1957,
was being resurrected, with Afanasyev as minister.

The significance of this re-designation -- it could
hardly be called a reorganization -- lies in the fact that
the institutions are all obviously concerned with defense
technology and production. Their new names represent a clear
increase in formal organizational stature, and the move might
be interpreted as a gesture of militancy in a tense
international climate. In fact, however, it represents an
organizational retreat from the great economic reform of
May 1957, or, to put it more accurately, the explicit
recognition that one aspect of that reform simply never worked out.

When Khrushchev presented his proposals on economic
reorganization and decentralization in 1957, he exempted
certain institutions from the wholesale dissolution of
ministries that was to take place.

The following industrial and construction
ministries shall be preserved: Ministry
of Aviation Industry, Ministry of
Ship-building Industry. Ministry of Radio
Industry, Ministry of Chemical Industry,
Ministry of Medium Machine-building, and
Ministry of Transport Construction. It
is proposed that the Ministry of Defense
Industry be merged with the Ministry of
General Machine Building...1

[Emphasis supplied]

This exception to the general plan was interpreted by
some as a concession to the military authorities, particularly
Zhukov, who insisted that the industrial suppliers of defense
goods retain their ministerial characteristics, that is
centralized control and extensive vertical integration.2 It
was especially the latter feature of the old system that
Khrushchev wanted to destroy, for the tendency of the

--------------------------
1. Pravda, 8 May 1957.

2. Soviet Strategy in the Nuclear Age, Raymond L. Garthoff,
(Praeger, New York, 1958), p. 30.

[page 3]

ministries to acquire direct administrative control over all
their supplies was, if a natural outgrowth of the mania
for plan fulfillment, a woefully inefficient procedure.
Khrushchev's remarks make it clear, however, that he was
trying to limit this concession to form while imposing his
new scheme in substance.

The above ministries should be preserved in
order to effect a more even transition to the
new type of management [decentralized],
without relaxing centralized supervision over the
development of these branches of our industry,
while carrying out our reorganization of the
management of industry and construction.
However, these ministries should be fundamentally
reorganized. They must plan the development
of their respective industries and ensure the
requisite technical level of production as well
as draw up plans for: research and design and
supervise their execution. These ministries
must be relieved of direct management of
enterprises concerned, and in this connection their
central staffs must be considerably reduced.

[Emphasis supplied]

The law enacting the proposals provided that "enterprises
and organizations which fall under the ail-Union ministries
of the Aviation Industry, Defense Industry, Radio Industry..."
be transferred "to the direct jurisdiction of the appropriate
economic councils of the economic administrative regions,"
in effect to the sovnarkhozi, "according to a list approved
by the USSR Council of Ministers." The functions of these
truncated ministries were specified as "planning...and seeing
to high technical standards..." but it was provided that these
functions "be carried out by the ministries through the 
economic councils..."3 If this language has any meaning,
these ministries became state committees in all but name and
were subject to the same decentralization that was applied
throughout the economy.

It should be noted, however, that the reorganization did
not apply to the Ministry of Medium Machine-building, which
deals with atomic energy, even though Khrushchev had specified
it in his original proposal. Evidently he had been persuaded
to leave this critical industry centralized and insulated
from the rest of the economy, i.e., self-sufficient regarding
supplies.

-----------------
3. Pravda, 11 May 1957.

[page 4]

In December 1957, the ministries specified above, except
for Medium Machine-building, were formally converted to
state committees under the Council of Ministries.[4] This
completion of the reorganization occurred, significantly,
after Zhukov had been deposed.

The point of the reorganization was to break up the
multitude of vast ministerial empires that had grown up
under Stalin. Under pressure for plan fulfillment, each
ministry had sought to acquire administrative control over
its material inputs so as not to be caught short by some bind
in the plan or supply system. As is well known, the result
was that plant X of a given ministry would order bolts from
thousands of miles away through intr-ministrial supply even
though plant Y across the street but under a different
ministry had a surplus of bolts. Defense industries, which
were under the greatest pressure for results, were probably
most prone to this disorder. As an optimist, Khrushchev
felt that the dismantling of these hierarchies and the
improvement of interbranch communication would improve
efficiency, in defense industries as well as in other
branches. As pessimists, those who objected felt that if
the defense industries were decentralized and subjected
to the vagaries of supply prevalent in the economy at large,
weapons output would suffer; if the old system was inefficient,
at least it was productive, i.e., the goods got produced.

Under the new system the state committees were supposed
to have no direct administrative responsibilities -- those
devolved upon the sovnarkhozi -- but were to oversee
technological innovation and promote branch-line efficiency.
The non-administrative character of the committees was
underscored by their names: Aviation Technology, for example.
But the fulfillment of these functions required corresponding
powers and, consequently, administrative authority began
almost immediately to filter back to the center, to the state
committees. Hence, arose the frequent complaints about
chairmen of state committees who acted like the ministers
of old.

Since the urgency of output in the defense industries
was no less than before, it proved most difficult to
subordinate them to the new system as had been planned.
Apparently, they continued to manifest vertical integration

----------------------------
4. Pravda, 21 December 1957.

[page 5]

and other inefficiencies characteristic of the old system.
It was very likely this feature of the defense industry to
which Khrushchev alluded in April 1963 when he complained:

There are considerable reserves for increasing
production even in the defense industry. But
poor use is being made of these reserves
because defense plant production is closed,
and this means that any shortcomings and
faults in the work of these enterprises are
also closed to criticism. (Stir in the hall.
Applause.)

The defense industry is coping successfully
with its tasks of creating and producing modern
armaments. But these tasks could be solved
more successfully with less expenditure.5

Khrushchev did not retreat formally from the system adopted
in 1957. In 1963, even the Ministry of Medium Machine-building
was abolished and replaced by the USSR State Production
Committee for Medium Machine-building.6

It seems relatively clear that, by the very nature of
their function, the defense industries were never really
decentralized under Khrushchev. Output remained more important
than efficiency in these branches, and they therefore had to
remain as invulnerable as possible to the supply bottlenecks
plaguing the rest of the economy. The administrative autonomy
resulting from this situation also rendered these industries
relatively more invulnerable to the reforming impulses of the
First Secretary, a fact which no doubt irritated him.

The formal reconversion of these industries to ministerial
status is a result of the inherent inadequacies of the 1957
reform and the peculiarities of defense production itself.
The new leaders, being men of both administrative experience
and a practical cast of mind, recognize that these industries
must remain more or less insulated from the rest of the
economy. They recognize that in Soviet defense industries,
as well as in those of the United States, for that matter,
efficiency must not be pushed to the point where it jeopardizes
total output.

----------------------
5. Pravda, 24 April 1963.

6. Pravda, 15 March 1963.

[page 6]

Is it possible to read this latest measure as a move
toward abolishing the sovnarkhoz system as a whole?

Possible, but not necessary. The Soviets must eventually
develop an improved system for combining branch integration
with better inter-branch communication, and the sovnarkhozi
may well be discarded in the effort. But formally recognizing
that the defense industries are a special case hardly
constitutes by itself a move in this direction. The Soviet
regime is in the process of experimenting with a variety of
economic innovations from which severe temporary dislocations
may possibly result. It has been found expedient at this
juncture to provide for the defense industries to be as
centralized and autonomous as possible until the new systems
have been tried and tested in the economy at large.

Fritz Ermarth

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