History of the Soviet Union

1965 Soviet economic reform
Working on a vehicle in 1969 at the new AvtoVAZ plant in Tolyatti ©Image Attribution forthcoming. Image belongs to the respective owner(s).
1965 Jan 1

1965 Soviet economic reform


The 1965 Soviet economic reform, sometimes called the Kosygin reform was a set of planned changes in the economy of the USSR. A centerpiece of these changes was the introduction of profitability and sales as the two key indicators of enterprise success. Some of an enterprise's profits would go to three funds, used to reward workers and expand operations; most would go to the central budget. The reforms were introduced politically by Alexei Kosygin—who had just become Premier of the Soviet Union following the removal of Nikita Khrushchev—and ratified by the Central Committee in September 1965. They reflected some long-simmering wishes of the USSR's mathematically-oriented economic planners, and initiated the shift towards increased decentralization in the process of economic planning.

The economy grew more in 1966–1970 than it did in 1961–1965. Many enterprises were encouraged to sell or give away excess equipment, since all available capital was factored into the calculation of productivity. Certain measurements of efficiency improved. These included rising sales per rouble worth of capital and falling wages per rouble of sales. The enterprises rendered large portions of their profits, sometimes 80%, to the central budget. These payments of "free" remaining profits substantially exceeded capital charges. However, central planners were not satisfied with the impact of the reform. In particular, they observed that wages had increased without a commensurate rise in productivity. Many of the specific changes were revised or reversed in 1969–1971. The reforms somewhat reduced the role of the Party in micromanaging economic operations. The backlash against economic reformism joined with opposition to political liberalization to trigger the full-blown invasion of Czechoslovakia in 1968.

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