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p The considerable economic achievements of the socialist countries formed the foundation for strengthening world socialism, which has solidly struck root as a socio-economic system. The USSR and the European People’s Democracies fulfilled and also partly overfulfilled long-term economic plans and undertook deep-going economic reforms in planning and administration whose purpose was to intensify economic development, to raise the efficiency of both production and exchange and to stimulate technological progress. The economic reforms emanate from a whole range of new problems which have arisen and are determined by socialism’s economic laws.

p Economic, political, military and cultural cooperation has further improved and co-ordination of economic plans and industrial co-operation have advanced to a new level. New forms of equal and mutually beneficial co-operation arose on the basis of the international socialist division of labour. It was in the 1960s, for example, that CMEA member states began jointly to build major projects of economic importance to the participants.

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p In ten years (1957-1967) CMEA countries concluded 14 bilateral and 2 multilateral agreements on co-operation in building industrial projects or developing individual industries. They jointly built a number of big economic projects like the Druzhba (Friendship) Oil Pipeline, the Mir (Peace) Power System with a central dispatcher service and the CMEA Standardisation Institute. Steps were taken to extend co-operation to agriculture and a top-level conference for the exchange of know-how was held in Moscow on February 2-3, 1960, with the participation of representatives of the Communist and Workers’ Parties of European socialist countries.

p A second Conference of Representatives of the Communist and Workers’ Parties of Socialist Countries, members of the Council for Mutual Economic Assistance, held in June 1962, was of exceptional importance, ratifying the "Basic Principles of the International Socialist Division of Labour”, drawn up by the 15th CMEA session. This document defined the main trend, content and basic forms of economic co-operation among CMEA countries at the present stage of their development when favourable conditions exist for the purposeful and planned international socialist division of labour. It clearly defined the aim of the international socialist division of labour, namely, to raise production efficiency, promote high growth rates in the economy and the standard of living in all socialist countries, to industrialise and gradually eliminate the historical differences in economic levels of the socialist countries and to create the material basis for their more or less simultaneous transition to communism, within a single epoch.

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p An inter-session standing body, the Executive Committee of the Council for Mutual Economic Assistance, was set up with broad powers at the 16th CMEA session. The 1962 Conference formulated general principles of co-ordinating economic plans and provided for their application by coordinating the five-year economic development plans for 1961-1965. It also resolved that the first secretaries of the fraternal Parties and Heads of Government of CMEA countries would meet regularly to discuss urgent problems of economic co-operation.

p This was an important step in furthering industrial specialisation and co-operation. Lenin had conceived the future socialist co-operation as a single world co-operative where the economy functions to a common plan. He said in 1918: "Now all we need is a single will to enter with an open heart that single world co-operative."  [235•1  The June 1962 Conference made a big step in that direction now that member states had irrevocably embarked on the path of socialism.

p This policy was continued by a conference of the First Secretaries of the Central Committees of the Communist and Workers’ Parties and Heads of Government of CMEA member countries held in Moscow on July 24-26, 1963. "Comradely mutual assistance and mutual benefit from economic co-operation of socialist countries, developing on the basis of the principles of equality, strict observance of sovereignty, comradely mutual assistance and mutual benefit,” the Conference pointed out, "help the world socialist system advance to new landmarks in 236 strengthening its economic might, developing science and technology, and improving the living standard of the working people in peaceful economic competition with capitalism.”  [236•1  The Conference approved the periods for co-ordination of national economic plans for the following five years (1966- 1970) and endorsed proposals drawn up by the Council for Mutual Economic Assistance on the change-over to multilateral settlements in trade between CMEA countries and the establishment for these purposes of an International Bank for Economic Co-operation (IBEC).

p The agreement on multilateral settlements in transferable rubles and the founding of the International Bank for Economic Co-operation, signed in Moscow in October 1963, put into operation a new system of settlement and monetary relations corresponding to the current level of economic co-operation. IBEC is to promote the economic co-operation and development of signatories to the agreement, to extend their mutually beneficial trade and economic ties, and also to stimulate co-operation of Bank members with other countries. The Bank’s purpose is to effect multilateral settlements in transferable rubles and operations in freely convertible and other currencies, to credit foreign-trade and other operations of member countries, attract and keep free resources in transferable rubles, keep an account of payment obligations of member countries and to engage in other banking operations conforming to the aims and tasks contained in its Charter. On the instructions of its members, the Bank finances and credits joint building, reconstruction 237 and operation of industrial enterprises and other projects with the resources allotted by these countries.

p The principles on which the activity of the International Bank for Economic Co-operation is based radically differ from those prevailing in monetary and financial organisations of capitalist countries. The United States, for example, has in the International Monetary Fund almost as many votes as 50 Asian, African and Latin American countries and has even more votes in the International Bank for Reconstruction and Development than all the participating less- developed countries combined. The Americans are the actual masters of these organisations and dictate to them decisions that suit Wall Street.

p IBEC activity, on the other hand, is based on truly democratic principles, full equality and respect for the sovereignty of member countries. All participants enjoy equal rights in its administrative bodies—the Council and the Board. Decisions in the supreme body of the Bank, the Council, are taken only with the consent of all the countries represented in it.

p The considerable achievements between 1956 and 1967 in intensifying and extending the international socialist division of labour and improving the forms and methods of economic ties, in developing new, better forms of co-operation enabled CMEA states to increase the economic and military potential of the world socialist system. It was pointed out in the statement of the Moscow Meeting of Representatives of the Communist and Workers’ Parties in 1960 that the socio-economic possibilities for restoring capitalism had been abolished in the Soviet Union and other socialist 238 countries. The combined forces of the socialist community reliably protect each socialist country from the encroachments of imperialist reaction. Thus, the welding together of the socialist states into a single community, its growing unity and might ensure the complete victory of socialism within the whole community.

p The economic and political level and militaryeconomic potential of the world community of socialist states, its iniluence in international relations, offered the 1960 Meeting of the Communist and Workers’ Parties grounds for conclusion that "the world socialist system is becoming the decisive factor in the development of society".  [238•1 

p Rational use of internal resources, in combination with the general advantages of the socialist mode of production, offers to each socialist country unlimited possibilities for effectively solving all problems of socialist and communist construction. Today Lenin’s forecast has come true in the Soviet Union and on an international scale, within the world socialist system. Lenin stated in November 1922: "Nobody believes that any important change can be achieved at a fantastic speed; but we do believe in real speed, speed compared with the rate of development in any period in history you like to take—especially if progress is guided by a genuinely revolutionary party; and this speed we shall achieve at all costs.”  [238•2 

p In our days the actual speed in building the new society is a result of the conscious use of the advantages of the socialist mode of production on 239 an international scale. Socialist countries, as before, firmly hold the lead in economic growth rates and are scoring new successes in peaceful economic competition with capitalism. In 1961- 1966 socialist economic development, as hitherto, was primarily of an industrial nature and was expressed in high industrial growth rates. Average annual growth in 1961-1965 was: in Bulgaria 11.7 per cent, Czechoslovakia 5.2 per cent, Hungary 7.5 per cent, German Democratic Republic 6 per cent, Mongolia 10.5 per cent, Poland 8.5 per cent, Rumania 13.8 per cent, and USSR 8.6 per cent. Between 1961 and 1964 industrial output of the Democratic Republic of Vietnam increased on the average by 13.9 per cent, the Korean People’s Democratic Republic 14.6 per cent, Yugoslavia 11.3 per cent and Albania 6.9 per cent. On the whole the average annual increase in the industrial output of the world socialist system was 7.4 per cent in 1961-1965, of which 8.5 per cent was in CMEA countries. In the rest of the world the increase during the same period was 6 per cent, of which it was 5.7 per cent in developed capitalist states. Let us also recall that whereas before the Second World War socialist countries accounted for about 17 per cent of the territory and 9 per cent of the population of the world, now their share is about 26 and 35.1 per cent respectively.

p In 1950 the world share of industrial output of socialist countries was about 20 per cent. In 1953 it had risen approximately to 27 per cent, and in 1966 to about 38 per cent, of which the USSR contributed almost 20 per cent. The national income in the Soviet Union rose in 1965 by 261 per cent as compared with 1950 (182 per cent per 240 capita), Bulgaria 286 per cent (241 per cent per capita); Czechoslovakia 127 per cent (98 per cent per capita); Hungary 135 per cent (115 per cent per capita); German Democratic Republic 186 per cent and 209 per cent respectively; Poland 306 per cent and 119 per cent, and in Yugoslavia by 181 and 135 per cent.

p The following data give an idea of the course of the economic competition between the two systems in the 15 years since 1950.

p In 1965 world industrial output increased by 185 per cent as compared with 1950. The accretion achieved during this period in all countries, except the socialist states, was 125 per cent. In the developed capitalist states it amounted to 116 per cent (in the United States 91 per cent). In socialist countries industrial production increased during this period by 412 per cent (in the Soviet Union by 358 per cent).

p The average annual growth rate of world industrial production in 1951-1965 was 7.2 per cent, in non-socialist countries 5.6 per cent, and in developed capitalist states 5.3 per cent (the United States 4.4 per cent), whereas in socialist countries, industrial production rose by 11.5 per cent annually, and by 10.6 per cent in CMEA countries (the USSR 10.7 per cent). At the same time, in the five years (1961-1965) industrial growth rates in socialist countries declined somewhat: 7.4 per cent for all socialist countries, 8.5 per cent in CMEA countries and 8.6 per cent in the USSR. The decrease is explained by a number of reasons, including the serious lag in agriculture. Nevertheless in this five-year period industrial growth rates in the socialist countries were higher than those of the world (6.5 per cent) and of advanced 241 capitalist states (5.7 per cent, including 5.6 per cent in the USA).

p Socialist states attained a high level in industrial development: they accounted for a considerable part of world industrial output and, for some goods (per capita), already held a leading place in the world. There were, however, quite a few difficulties in socialist economic growth, particularly in the early 1960s, which appeared variously in different countries. For example, the Soviet Union did not fulfil the targets of the seven-year plan (1959-1965) in some industries, and agricultural output increased only by 14 per cent. The lag in agriculture resulted in non- fulfilment of the plan targets by the light and food industries, and this affected the growth rate of national income and material welfare. Growth rates of labour productivity decreased. While in 1956-1960 labour productivity in industry rose by 6.6 per cent annually on the average, in 1961- 1965 the figure was 4.8 per cent.

p One reason for the slower growth rate of national income was the increase in defence expenditure dictated by increasing international tension and the greater aggressiveness of US policy. Another reason was mistakes and miscalculations in formulating national economic plans and a voluntaristic approach to the solution of some economic problems, thus upsetting the balance between various economic sectors and within them. The 23rd Congress of the CPSU pointed out that the "deficiencies in economic development are largely due to the disparity that has appeared in the past few years between the steeply increased scale of production, the recently discarded methods of economic planning and 242 managemcnt, and the system of incentives. The initiative ol enterprises was held in eheek, their rights were restricted and their responsibility lowered. Costaccounting relations between enterprises were largely of a formal nature. The operation of objective economic laws was underrated in economic planning and management. Subjectivism, arbitrary changes of proportions in the development of some branches of production and economically unsubstantiated decisions all played a negative role.”  [242•1 

p The GPSU denounced subjectivism in deciding economic questions as amateurish contempt for science and practice, which is alien to Leninism. The decisions of the Plenary Meeting of the Party’s Central Committee in October 1964 and of subsequent Plenary Meetings put an end to such methods, restored the Leninist principles of scientifically guiding socialist construction and adapted them to modern conditions. These decisions were aimed at bringing administration and planning in line with socialism’s objective economic laws, at mobilising and placing at the service of communist construction all the advantages of a planned economy and stimulating popular initiative.

p Other socialist countries, too, had shortcomings in economic planning and administration. Thus, the political report of the Central Committee ol the Communist Party of Czechoslovakia at its f 3th Congress pointed out that the current efficiency of the economy was inadequate for ensuring planned growth of consumption. "We did not do enough to improve the quality of output and to 243 prevent substantial losses and uneconomical functioning. The material incentive principle was utilised insufficiently, and this has led to levelling in payment for work. All these reasons and the gradual loss of efficiency by the old system of management led to a temporary imbalance between the creation of economic resources and their use.”  [243•1 

p Economic reforms were launched in the USSR and European socialist countries almost simultaneously in the mid-1960s and, naturally, they are being carried out differently in various countries being based on the specific economic features of each one along with the interests of further strengthening the world socialist economy. The purpose of the reforms is to improve economic guidance by perfecting planning, stimulating production, extending the initiative and economic independence of enterprises, and enhancing people’s material interest in their work.

p Proper combination of centralised planned guidance with greater initiative and independence for industrial enterprises is one of the primary demands of scientific economic management in socialist states. Introduction of the new economic management system opened wide scope for the operation of the law of planned proportional economic development, made it possible to eliminate disproportion between industries and raised production efficiency.

p Bourgeois commentators alleged that the economic reforms were a sign of “deviation” from socialism and “evolution” towards capitalism, that 244 they confirmed the hopes cherished by imperialist ideologists over the years. As early as 1962 Edgar Morin, a French sociologist, claimed that "the USSR is entering the phase of bourgeois civilisation...”.  [244•1  A "plurality of possibilities" for Soviet society supposedly exists and attempts are made to put a "theoretical basis" under such fabrications. For example, Walt Rostow, noted ideologist of American monopoly capital, has formulated a theory concerning the "stages of economic growth" which rejects the idea that countries belong to socio-economic systems and proclaims as the decisive factor oi history the attainment by them of a particular “stage”; moreover, at the "industrial stage" differences in social system are “ obliterated”. Bourgeois sociologists like Pitirim Sorokin and Raymond Aron put forward "the concept of synthesis" or “convergence” of capitalism and socialism.

p In the period preceding the 23rd Congress of the CPSU, the Western press was full of fabrications about the “crisis” in the socialist economy, the “adoption” by the socialist countries of capitalist economic methods, and the like. This was nonsense. The economic reforms in the Soviet Union and other socialist countries consolidated the socialist economy, ensured the necessary prerequisites for accelerating the growth rates of industry and agriculture, and material and cultural standards. They strengthened the positions of socialism in its economic competition with capitalism and promoted the fuller use of the advantages of the socialist system. This, as stressed by the 23rd Congress of the CPSU, disappointed the 245 imperialist politicians and propagandists. The New York Herald Tribune, for example, wrote that the 23rd Congress once again confirmed how dangerous it was to indulge in suppositions, particularly when the wish was taken for reality.  [245•1 

p The reforms are in full accord with the economic laws of socialism and the level of socio- economic development and achievements in socialist and communist construction.

p “The reform,” it was pointed out, for example, in the decision of the Central Committee of the Hungarian Socialist Workers’ Party, "is backed by economic and political arguments. It is necessary because the old important sources and potentialities of economic growth have been largely exhausted and in future swift growth is possible only through more intensively tapping the internal economic potentialities and accelerating technological progress. The political significance of the reform consists above all in that it is designed to ensure a swifter rise in the living standard of the masses and is aimed at making the living standard of every workingman individually depend, to a greater extent than now, on the social usefulness of his labour. Furthermore, the political aim is to remove excessive restrictions which hamper the development of personal initiative and responsibility, and to curb bureaucratic tendencies. Greater possibilities should be afforded for the free development of creative endeavour facilitating the progress of socialism and promoting the interests of society. Lastly, the political aim is to create, with the help of the reform, more 246 favourable conditions for (he further development of socialist democracy.”  [246•1 

p In each country the economic reform is implemented in full conformity with the interests ol the national economy, but it also reflects improvements in economic management in almost all the European socialist states. "This is a general natural phenomenon dictated by similar tendencies, aims and tasks at the present stage of the socialist economy and the prospects for its further development,"  [246•2  Todor Zhivkov, First Secretary of the Central Committee of the Bulgarian Communist Party, stated at the Plenary Meeting of the Party’s Central Committee at the end of April 1966.

p The economic reform in the USSR, the German Democratic Republic, Czechoslovakia, Poland, Bulgaria and Hungary, includes a whole set of interconnected measures for improving socialist relations of production. As a result, the Party’s leading role in economic development is being consolidated on the basis of a precise delineation of functions and responsibility between the Party and the state apparatus. The problem of scientifically basing the economic plan of every fraternal country is also being tackled, particularly with a view to utilising science and technology to the full and securing the maximum efficiency of all economic sectors.

p An important element of the economic reform is the normalisation of commodity-money relations in the economy and wide use of the law of value and all economic instruments and stimuli (price, profit, credit, taxes, economic contracts) in 247 order to raise the efficiency of social production. The organisation of industrial production, capital construction, home and foreign trade is improving in the socialist countries where reforms are being carried out. The establishment of closer links between production and exchange of goods in both home and foreign markets is an important task being accomplished in the course of the reform.

p In implementing the reforms, each socialist country considers the specific features which have emerged in the process of building up the economy. Particular aspects in the reorganisation of economic management have assumed different forms in different countries.

p Quite a few specific problems result from the unequal level of economic development. This explains both the difference in the pace of the reforms and their scale and depth. The economic independence given to individual enterprises or production associations and the degree of use of commodity-money instruments also differ.

p Though the forms of transition to the new economic system vary greatly, the main trend of the reforms remains the same.

p The diversity of ways and means of reorganising economic control dictates the need for interstate exchange of know-how in guiding and developing the economy, for considering the internal conditions and interests of each country before deciding how to improve economic co- operation.

p Specific features of introducing new elements can be illustrated by the problem of the most rational and efficient combination of central planning with the economic independence of enterprises and industrial associations.

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p In the German Democratic Republic, associations of people’s enterprises and the enterprises themselves are given targets for marketable output, the share of export goods, size of profit, growth of labour productivity and number of workers. But most of the plan indicators are drawn up by the associations and the enterprises themselves. The new element in long-term planning is the introduction of two stages: the first stage is a forecast of the development of the productive forces covering a period of 15 to 20 years; the second stage involves comprehensive planning for a five-or seven-year period. Formerly, the main criterion in assessing the operation of an enterprise was the fulfilment of the gross output plan. Now chief attention is paid to the profit indicator, which has become the major criterion for judging the operation of an enterprise. This indicator is supplemented by data on the reduction of costs, growth of labour productivity, fulfilment of the export plan, and so on. Enterprises are given considerable financial independence, the right themselves to sell goods on the home market and, in a number of cases, on the foreign market too. At the same time, as pointed out earlier, under the new system the activity of enterprises is also regulated by obligatory plan targets received from above.

p In Bulgaria and Hungary, under the new system the plan is the main instrument for guiding the economy, but it does not involve directive regulation of the economy from above in all details. It is primarily a means of economically influencing production as a whole. The state sets the main proportions in the economy by pursuing a single policy in technological progress, capital investment, foreign trade, payment for work and finance.

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p On the basis of the state five-year plan Bulgarian and Hungarian enterprises draw up their own five-year plans enjoying greater economic autonomy than, say, in the German Democratic Republic. In Bulgaria, for example, enterprises have the right to dispose of the state funds they receive, to sell surplus assets, to establish economic ties with one another, extend and technically improve production, assign money for collective and personal consumption, and so on. The criterion in assessing the operation of enterprises is the income (net output) created per employee and the ratio in which this income is distributed between the enterprise and society, between wages and the net income (profit).

p The national economic plans in Bulgaria, Hungary and Czechoslovakia are binding on enterprises in the sense that they must proceed from the long-term course of the country’s economic development, but not necessarily for every indicator, which can be in the nature of a guideline. Thus, in Czechoslovakia the plan for 1966 contained only about 70 obligatory and more than 330 guideline indicators (in the plan for 1965 there were more than 1,000 obligatory indicators).

p The relationship between the economic and the administrative influence exerted on economic sectors is of a differentiated character under the new system in Bulgaria, Czechoslovakia, Hungary and Poland. To a certain extent this also applies to the German Democratic Republic. The decisive part is played by the availability of goods and the export orientation of an enterprise or industry. Where economic reforms are carried out. measures are implemented lor greater application of 250 cost accounting in the sphere ol exchange, and more rational use of economic instruments, particularly in foreign trade.

p Under the old system of planning, enterprises were not duly interested in production for export, in increasing export receipts and in saving imported raw materials, machinery and equipment. The old system did not stimulate a country to participate more energetically in the international specialisation of production. The sphere of production, as it were, was divorced from the sphere ol exchange, from foreign trade, which adversely affected the international socialist division of labour.

p To eliminate these shortcomings, measures were taken in the German Democratic Republic, Poland, Czechoslovakia, Hungary and Bulgaria to establish closer business links between industrial enterprises (or associations) and foreign trade organisations (export and import associations). For example, in the German Democratic Republic some foreign-trade organisations were turned into affiliates of associations of people’s enterprises in charge of the sale of their output on foreign markets. In particular, the right to export complete plant for chemical factories and sugar refineries was given to the Chemieanlagen Association of People’s Enterprises, for which purpose the Chemieanlagen Export Company was set up. It is under dual jurisdiction of the Ministry of Foreign and Intra-German Trade and the Chemieanlagen Association.

p The right to operate independently on the foreign market was also given to individual industrial enterprises which produce mostly for export, for example, the Karl Zeiss enterprise.

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p Foreign-trade organisations, industrial enterprises (authorised by the Ministry of Foreign and Intra-German Trade) and also industrial enterprises and associations independently engaged in export and import operations thus represent the German Democratic Republic on the world markets. Similar measures have also been taken in other European socialist countries. Naturally, the accomplishment of this task as a whole involves overcoming quite a few difficulties and the solution of additional problems, such as the form of foreign-trade monopoly, elaboration of a system for properly calculating the efficiency indicators of foreign trade operations and so on.

p Greater application and development of the socialist principles of cost accounting in economic co-operation between CMEA countries is a matter that has acquired great significance. The point is the optimal use of the law of value in the world socialist economy, its more active employment for the planned intensification of industrial specialisation and the approximation of the economic levels. In particular, great importance attaches to the problem of applying economicallybased foreign-trade prices for specialised goods, which would take into account the interests of both the economy of each co-operating country and of the entire socialist community.

The long-term national economic plans of CMEA countries for f966-1970 were drawn up with an eye to the demands, tasks and trends of the new stage. Specifically they, alongside a further advance of the economy, ensured a fresh expansion of their economic co-operation. The consolidation and development of all forms and methods of economic and political co-operation 252 promote integration processes in the world socialist system and the removal of economic and political barriers between socialist countries by evening out the levels of their economic and political development. "The economic integration of the socialist countries,” it was pointed out in the Report of the CPSU Central Committee to the 24th Party Congress, "is a new and complex process. It implies a new and broader approach to many economic questions, and the ability to find the most rational solutions, meeting the interests not only of the given country but of all the co-operating participants. It requires firm orientation on the latest scientific and technical achievements, and the most profitable and technically advanced lines.”  [252•1