Material balance planning substituted for the market as the mechanism for allocating goods in the Soviet economy. Gosplan, the State Planning Committee, was responsible each year for equating supply and demand for the thousands of raw materials and manufactured goods that were used domestically in production processes, allocated to satisfy consumer needs, or earmarked for export. The three-stage process of constructing the annual plan involved identifying the sources and uses for high-priority (funded commodities), medium-priority (planned commodities), and low-priority (decentrally planned) goods, and then establishing a balance between sources and uses. In the first stage, planners sent “control figures” down through the economic hierarchy to the enterprise. Control figures reflected the priorities of top political officials, specified initially as aggregate output targets or percentage growth rates for strategic sectors of the economy, and then disaggregated and matched with projected input requirements by Gosplan. In the second stage, Soviet enterprises provided a detailed listing of the input requirements necessary to fulfill their output targets. In the third stage, planners constructed a material balance that ensured an equilibrium between the planned output target and the material input requirements for all goods involved in the planning process.
In a market economy, prices adjust to eliminate surpluses or shortages; in the Soviet economy, planners adjusted physical quantities to equate supply and demand for each product. A material balance was achieved when the sources of supply (current production, Qt, inventories, Qt-1, and imports Mt) equaled the sources of demand (interindustry demand, IDt, household demand, FDt, and exports, Xt). That is, a material balance existed on paper when, for each of the planned goods: Qt + Qt-1 + Mt = IDt + FDt + Xt.
The mechanics of establishing a material balance in practice was impeded by several planning policies. First, planners set annual output targets high relative to the productive capacity of the firm. If tire manufacturers failed to meet monthly or quarterly production quotas, for example, this adversely affected downstream firms (producers of cars, trucks, tractors, or bicycles) that relied on tires to fulfill their output targets, and reduced the availability of tires to consumers for replacement purposes. Second, planners constructed a bonus system that allowed additional payments as high as 60 percent of the monthly wage if output targets were fulfilled. Knowing that output targets would be high, managers over-ordered requisite inputs and under-reported their productive capacity during the second stage of the plan-formulation process. Third,
MATERIAL PRODUCT SYSTEM
when shortages arose, planners refrained from adjusting centrally determined prices of these “deficit” commodities (defitsitny). Instead, they used a priority system to restrict the availability of deficit goods to low- priority sectors, typically those sectors most closely involving goods demanded by consumers. See also: FULL ECONOMIC ACCOUNTING; GOSPLAN; TECH-PROMFINPLAN
Bergson, Abram. (1964). The Economics of Soviet Planning. New Haven: Yale University Press. Montias, John M. (1959). “Planning with Material Balances in Soviet-Type Economies.” American Economic Review 49: 963- 985.
For decades the Material Product System (MPS) was used in countries with centrally planned economies as a tool for analyzing economic processes at the macro level and policy making. Essentially, MPS performs the same functions as the System of National Accounts (SNA), but there are important difference between the two.
MPS divides the economy into two parts: material production, where national income (NMP) is created (industry, agriculture, construction, freight transportation, etc.), and the nonmaterial part of the economy. The concept of economic sectors and, hence, sectoral groupings, was entirely omitted in the MPS system. Such an approach toward estimation of macroeconomic indicators met the needs of planners and was instrumental in the process of centralized planning, centralized allocation of material resources, and tracking of plan fulfillment.
Essentially, MPS is a system of tables, of which the most important are the balance of production, consumption, and investment of the social product and national income; the balance of national wealth, the balance of fixed assets, and the balance of labor resources. A significant part of the MPS system was its series of input- output tables, which were compiled in the USSR beginning in 1959. In addition to the main MPS tables, there was a series of supplementary tables that gave a more detailed picture of certain aspects of the economic process. The MPS as a system of aggregate macro indicators was an important tool for general assessment of the economic situation under the central planning system. Its drawback, however, was that it reflected economic processes in a somewhat inconsistent and partial manner. A large part of the economy, the so-called nonproductive sphere, was neglected in the balance of the national economy. In Soviet statistics, a methodologically sound and systematically integrated system of indicators was available only for the material production and distribution of material product. This significantly reduced the role of macro estimates as an instrument for analysis of economic developments.
Estimates of economic growth and international comparisons were also hindered by the lack of coordination between MPS indicators and financial flows. In the balance of state financial resources and the state budget, the financial resources of enterprises and organizations of both productive and nonproductive spheres are represented as a single entry. The balance of money income and expenditure of households shows the total money income of the population earned from both “productive” and “nonproductive” activities. The method used to derive this indicator is such that it is impossible to separate these two sources of revenue.
As a result, the macroeconomic indicators that reflect material resources are not balanced and comparable with the volume and the structure of financial resources. Also, export and import indicators in MPS are presented in a simplified way and differ from the similar indicators used in the balance of payments (SNA concept). Missing in the MPS approach are such indicators as disposable income, savings, and public debt.
The MPS system, which underwent some changes in the USSR in 1957, remained essentially the same for more than thirty years thereafter until the SNA system was introduced in the statistical practice of the countries in transition following the breakup of the Soviet Union. See also: COMMAND ADMINISTRATIVE ECONOMY; ECONOMIC GROWTH, SOVIET
BIBLIOGRAPHY
Belkindas, Misha V., and Kostinsky, Barry L. (1990). “Official Soviet Gross National Product Accounting.” In Measuring Soviet GNP: Problems and Solutions, A Conference Report. Washington, D.C.: Central Intelligence Agency, Directorate of Intelligence.
World Bank. (1992). Statistical Handbook: States of the Former USSR (Studies of Economies in Transformation, 3). Washington, DC: World Bank. World Bank. (1993). Historically Planned Economies, A Guide to the Data, by Paul Marer, et al. Washington DC: World Bank.
The matryoshka, a set of four to eight hollow wooden dolls of graduated size nesting inside each other, is the most familiar item of Russian folk art today and possibly one of the most ancient. Legends abound of similar nesting dolls in Siberia, executed in precious metals, and the rounded female figure was a familiar fertility symbol in pagan Russia. Yet the matryoshka may well be of comparatively recent origin, its form derived from a Japanese prototype that caught the eye of the avant-garde artist Sergei Malyutin during the 1890s. Malyutin’s patroness, Princess Tenisheva, was an active promoter of the folk art revival of this period; he sought out items with appeal for the Russian market that could be made at the crafts school on her estate, Talashkino. It was here that Malyutin designed the first known matryoshka.
The most ubiquitous matryoshka is the pink-cheeked peasant woman in native sarafan, her head covered with the traditional scarf. Variations soon appeared, however. Nests of dolls with the faces of famous writers, members of artistic circles, military heroes, or members of a family were created during the early twentieth century. A century later, though the original doll is still being produced, matryoshka painters have adapted to the modern market, creating nesting sets of Soviet political leaders, U.S. presidents, Russian tsars, literary figures, and famous Russian portraits. Modern ma-tryoshkas by skilled artists, who often work in acrylic paint, command correspondingly
