A STAGNANT ECONOMY

Soviet leaders also failed to achieve their objective of revitalizing the national economy. Whereas growth rates during the early Khrushchev era had been impressive (prompting Khrushchev during one visit to the United States in the late 1950s to chortle, “We will bury you”), under Brezhnev, industrial growth declined to an annual rate of less than 4 percent in the early 1970s and less than 3 percent in the period 1975–1980. Successes in the agricultural sector were equally meager. Grain production rose from less than 90 million tons in the early 1950s to nearly 200 million tons in the 1970s but then stagnated at that level. One of the primary problems with the Soviet economy was the absence of incentives. Salary structures offered little reward for hard labor and extraordinary achievement. Pay differentials operated within a much narrower range than in most Western societies, and there was little danger of being dismissed. According to the Soviet constitution, every Soviet citizen was guaranteed an opportunity to work. There were, of course, some exceptions to this general rule. Athletic achievement was highly prized, and a gymnast of Olympic stature would receive great rewards in the form of prestige and lifestyle. Senior officials did not receive high salaries but were provided with countless “perquisites,” such as access to foreign goods, official automobiles with a chauffeur, and entry into prestigious institutions of higher learning for their children. For the elite, it was blat (influence) that most often differentiated them from the rest of the population. The average citizen, however, had little material incentive to produce beyond the minimum acceptable level of effort. It is hardly surprising that overall per capita productivity was only about half that realized in most capitalist countries. At the same time, the rudeness of clerks and waiters toward their customers in Soviet society became legendary. The problem of incentives existed at the managerial level as well, where the practice of centralized planning discouraged initiative and innovation. Factory managers, for example, were assigned monthly and annual quotas by the Gosplan (the “state plan,” drawn up by the central planning commission). Because state-owned factories faced little or no competition, factory managers did not care whether their products were competitive in terms of price and quality, so long as the quota was attained. One of the key complaints of Soviet citizens was the low quality of most locally made consumer goods. Knowledgeable consumers quickly discovered that products manufactured at the end of the month were often of lower quality (because factory workers had to rush to meet their quotas at the end of their production cycle) and attempted to avoid purchasing them. Often consumer goods were simply unavailable. Soviet citizens automatically got in line when they saw a queue forming in front of a store because they never knew when something might be available again. When they reached the head of the line, most would purchase several of the same item to swap with their friends and neighbors. Giv- ing in to this “queue psychology,” of course, was a timeconsuming process and inevitably served to reduce the per capita rate of productivity. Soviet citizens often tried to overcome the shortcomings of the system by operating “on the left” (the black market). Private economic activities, of course, were illegal in the socialized Soviet system, but many workers took to “moonlighting” to augment their meager salaries. An employee in a state-run appliance store, for example, would promise to repair a customer’s television set on his own time in return for a payment “under the table.” Otherwise, servicing of the set might require several weeks. Knowledgeable observers estimated that as much as onethird of the entire Soviet economy operated outside the legal system. Another major obstacle to economic growth was inadequate technology. Except in the area of national defense, the overall level of Soviet technology was not comparable to that of the West or the advanced industrial societies of East Asia. Part of the problem, of course, stemmed from the issues already described. With no competition, factory managers had little incentive to improve the quality of their products. But another reason was the high priority assigned to defense. The military sector of the economy regularly received the most resources from the government and attracted the cream of the country’s scientific talent.