TAKING ON THE BUREAUCRACY

By George Russell

The system is the main barrier to reinvigorating the economy relations, above all economic ones . . . We should, we are bound to attain within the briefest period the most advanced scientific and technical positions, the highest world level in the productivity of social labor." --MIKHAIL GORBACHEV

In his inaugural speech to the Communist Party Central Committee last week, Mikhail Gorbachev got right to the point: his highest priority would be nothing less than a total transformation of the deeply troubled Soviet economy. That may be a far bigger task than any Kremlin chief, even a young and energetic one, can handle, because the challenge goes far beyond the realm of economics and technology, to the nature of the Soviet state itself. In order to achieve his bold aim, Gorbachev must first deal with a formidable, intractable and historically durable rival-cum-partner--the Soviet bureaucracy.

Even in purely economic terms, the prospect that the new General Secretary faces is daunting. Growth in national income, the closest Soviet equivalent to gross national product, was a respectable but disappointing 2.6% last year (in contrast to a GNP rise of 6.9% in the U.S.). That figure was down from 3.1% in 1983 and only about half the size of gains registered in the 1960s. Worse yet, the growth rate overstates how well the economy provides the things Soviet citizens want and need: personal consumption of goods and services per capita in the Soviet Union is less than in most East European nations and only one- third the U.S. level ($10,000 a year). Such essentials as appliances and clothing are as scarce or shoddy as ever; standing in lines to buy food and merchandise is an unpleasant national pastime in the U.S.S.R.

Soviet agriculture is a continuing saga of failure. Last year's grain harvest was an estimated 170 million tons, down from 195 million in 1983 and well below the 1978 peak of 237 million. To offset agricultural shortages, the Soviet Union depends on imports. Moscow is expected to buy up to 52 million tons of grain, including at least 20 million from the U.S., in the period from July 1984 through June 1985, an increase of 52% over the previous year. Says Olin Robison, president of Middlebury College in Vermont and a Soviet expert: "A very sad fact about Soviet agriculture is that it really does produce enough food to feed the people. But the methods of preserving, transporting and distributing that food are so archaic that the losses are phenomenal."

The country remains much better at stockpiling weapons than wheat. Military- industrial production has always been the Soviet Union's paramount priority, and the country's best brains are devoted to it. Soviet scientists and technicians, many of them first-rate by any standard, have put cosmonauts in space and built intercontinental ballistic missiles of fearsome power. But while that talent is concentrated in the military establishment, the civilian economy goes begging.

The emphasis given to the military, which absorbs an estimated 14% of the economy's total output, has long meant sacrifice for the Soviet people, and that sacrifice may worsen. In the past year Moscow has been able to generate enough export earnings to pay for most of its imports. Since 1983, however, world prices of such key Soviet natural resources as oil and gold have been falling dramatically. Moreover, Soviet oil production declined by .5% last year, the first drop since World War II. Even though supplies of natural gas are plentiful, export figures have lagged well below Soviet expectations. If such trends continue, the country's narrow trade surplus with the West, $6.6 billion in 1984, could easily turn into a deficit.

Those statistics may be cause for alarm among governing technocrats, but most Soviet citizens measure the reality of their country's inefficiency and mismanagement by a different yardstick, the daily diet of small and not-so- small bureaucratic horror stories. Some examples:

--In the Ukraine, an investigation into the breakdown of tractors led to the discovery that quality-control experts at a tractor-parts plant were routinely approving defective goods in order to meet (or surpass) production quotas. They thereby became eligible for bonuses, scrolls of honor and other incentives. Most startling of all, one of the suppliers had an officially sanctioned quota for defective merchandise: 5% of production.

--In the city of Rostov, authorities uncovered a huge black-market ring; 67 officials, including two highly placed state executives in Moscow, were arrested. The scheme involved rerouting, through bureaucratic channels, scarce meat, butter and clothing to warehouses where the merchandise could be sold under the counter. Realizing that the authorities were closing in, the crooks dumped most of their hoarded supplies onto the official market. In describing the outcome of the scam, the newspaper Izvestiya noted that for once, a Rostov citizen was able to walk into a state-owned store, ask for blue jeans and find them not only available but selling at the official price of $96, vs. the black-market figure of $200.

--In Uzbekistan, scene of a recent anticorruption drive, investigators discovered that much of the claimed 6 million-ton annual cotton crop existed only on paper. Farm officials were paying off bureaucrats at cotton-collection points in exchange for phony receipts acknowledging delivery of their crops. Bribes were also paid to employees of local cotton gins as the noncotton was nonprocessed. One result: while the announced volume of Uzbekistan's cotton harvest has increased over the past eight years, the amount of cotton fiber actually obtained has declined by 76,000 tons.

Most of the Soviet Union's economic and social ills can be traced to one source: the bureaucracy. Therein lies Gorbachev's basic problem. The bureaucracy is the Soviet system, its ubiquity guaranteed by the cardinal socialist tenet of central planning. Born in the mists of Russia's czarist past, rooted firmly in the totalitarian present, this permanent government has so far survived all attempts, most half-hearted, at reform.

In administrative terms the web of central control emanates from a core of 64 federal ministries and 23 state committees. Those entities own and operate 50,000 enterprises and dominate a state-run labor union network of 132 million employees. The tentacles of central planning are duplicated in each of the nation's 15 union republics and 20 autonomous republics, and extend downward to the oblast (province) and raion (local administrative unit) levels.

Alongside the government bureaucracy is the separate and parallel structure of the Communist Party, with its 17.5 million members organized to penetrate and supervise every aspect of national life. At the top of this pyramid are the Central Committee and the ruling Politburo, now headed by Gorbachev. Starting with the Central Committee secretaries who oversee the functions of the government ministries, the party structure mirrors the framework of the bureaucracy in every respect, reaching down to people's control committees, with some 10 million inspectors, who check on local management. In fact, the party apparatus extends even further, to the shop floor.

The degree of microscopic control maintained at the top of that pyramid is almost beyond Western comprehension. In 1983, for example, a published summary of one Politburo meeting revealed that, among other things, the members of the Soviet Union's supreme decision-making body had considered whether to lower the price of fur collars on winter overcoats. They decided that the Council of Ministers should take swift action. A few days later, a decree cut the prices of the collars by 15%.

The obsession with the smallest detail of life, while rejecting a role for market forces and independent decision making, is both the system's political backbone and its crippling weakness. The chief beneficiaries of overcentralization are the nomenklatura, the 750,000 to 1 million members of the bureaucratic elite at the upper reaches of the system. Says Soviet Defector Michael Voslensky, whose 1984 book Nomenklatura: The Soviet Ruling Class described that bureaucratic layer: "All the key positions of the state, cultural, trade, sport, the military, down to the local collective leaders, include members of the nomenklatura . . . It is a class system 100% based on holding a monopoly of every kind of power and controlling virtually every means of production."

While the system delivers the goods for the nomenklatura, it does little for anyone else. Critics argue that the very goal of centralization is not so much to meet the national economic need or to ensure the welfare of the citizens as to perpetuate the chain of control, especially by feeding the military and security machines that protect the elite and its aspirations. As a result of the rejection of market-pricing mechanisms, production quotas set by the bureaucracy are based on arbitrary notions of supply and demand, and production tends toward the lowest possible output.

The system overachieves in one notable undertaking: paperwork. Soviet Economist Alexei Rumyantsev, writing in the official trade-union newspaper Trud, estimated in 1983 that Soviet bureaucrats generated 800 billion documents a year. In addition, Rumyantsev noted that factories and offices were constantly being disrupted by inspections: he told of a machine-tool factory that had been visited 145 times in a single year.

Another product in oversupply is excuses. In a remarkably candid appraisal of the system's resistance to prodding, Ivan Lukinov, director of the Economics Institute of the Ukrainian Academy of Sciences, described in an Izvestiya interview last year how the bureaucracy papers over its failures. Citing the disappointing performance of the Ukrainian food-processing industry, Lukinov noted that "when higher administrative agencies summon representatives from each of the branches and begin holding them strictly to account for scarcities, the trade organization will excuse itself by saying there is no place to store a particular product, or that conditions for trade in it do not exist, or that the orders it has placed for the item have been refused. Food- processing-industry officials will affirm that such a commodity has never been ordered at all, or that they lack the production facilities, or that the technology does not permit them to produce the required commodities. Each has more reasons than you can shake a stick at."

Demographic factors are adding to the bureaucracy's sclerosis. Perhaps the most ominous economic trend is the slowing growth of the Soviet labor force. In the 1970s the number of Soviet workers rose by 24 million, to 155 million. In the 1980s the increase will be only 6 million. The number of retirees that the Soviet economy must support is expected to increase dramatically, from 37 million today to 80 million by the end of the century. Labor shortages are hurting already low levels of productivity: supervisors hesitate to goad people into working harder for fear that they will quit and move on to another job.

The Soviet government no longer tries to hide many of its problems. Citizens read exposes of bureaucratic failings almost every day in the press. In addition, genuinely radical ideas for reform are being aired in theoretical journals. In a recent issue of Problems of History, Evgeni Ambartsumov, a - scholar at the Soviet Union's leading research institute dealing with East European economies, boldly advocated a greater role for private enterprise in the Soviet economy as an antidote to "bureaucratic deformations."

There may be a bit of tolerance for such views, but not surprisingly there has been very little action. Any reforms of the bureaucracy along private- enterprise lines would not only be ideologically unacceptable, they might threaten the supremacy of the nomenklatura. Says Alexander Nove, emeritus professor of economics at the University of Glasgow: "There are a whole series of problems stemming from the impossibility in principle of running a modern industrial economy from the center, and the impossibility in practice for the Politburo chieftains to devise any criteria for running their economy except by plans made at the center."

How will Gorbachev cope with this dilemma? During his speech to the Central Committee last week, he referred to "speeding up the country's social and economic development," a strategy that he associated with the name of Yuri Andropov. The allusion was revealing. During Andropov's 15-month reign, the former KGB chief launched a campaign against worker absenteeism and nomenklatura corruption. At least one prominent black marketeer, with connections to the family of the late Soviet leader Leonid Brezhnev, was executed. Andropov fired several industrial ministers and began to appoint younger, more professional executives to senior posts. Andropov also set up a task force charged with streamlining the bureaucracy. It is thought to be headed by Central Committee Secretariat Member Nikolai Ryzhkov, a close associate of Gorbachev's.

At no point, however, did Andropov indicate that he intended to launch a wholesale attack on the main pillars of the bureaucratic system, such as central planning and nonmarket pricing. One of the few attempts to decentralize economic decision making under Andropov--legislation to encourage worker participation in factory management--left the Communist Party with close control over its worker delegates and required only that managers "consult and inform" workers about their plans twice a year.

Andropov also began the task of bringing new faces into the uppermost reaches of the bureaucracy, replacing 32 of the 157 regional party secretaries, often with younger men. That was only a small tremor in a shift that is still moving through the bureaucracy. According to a senior British diplomat, the largest turnover of local Communist officials in recent memory took place during biennial party committee elections between November 1983 and January 1984. Nonetheless, the pace of change remains slow, and most top officials in the Soviet bureaucracy are, like most Politburo members, in their 60s and 70s.

Another Andropov reform that has persisted is the so-called Five Ministries program, which took effect in January 1984. Under this plan, which now encompasses 2,300 factories and service centers, managers in designated industries such as heavy machinery and electrical equipment were given greater latitude in setting their goals. They were urged, for example, to introduce new technology into their enterprises, even if the changeover meant that they would miss production targets for one or even two years. So far, the experiment has been judged a success.

The pace of reform slowed under the leadership of Chernenko but, significantly, did not stop. An additional 16 regional party secretaries were replaced; sporadic anticorruption campaigns continued. The Five Ministries experiment was expanded.

Gorbachev evidently intends to speed up and expand those reforms even further. As he put it last week, "It is necessary to continue to perfect persistently the economic mechanism and the entire management system."

There is little doubt that once again the thickets of the bureaucratic system will stand in the way. The Soviets, for example, are not adept at translating basic scientific discoveries into practical manufacturing techniques and commercial products. Christopher Davis, a senior lecturer in Soviet studies at the University of Birmingham in England, blames the fragmentation of the research-and-development process. Says he: "In the Soviet Union, you might have the Academy of Sciences doing the basic research and a branch ministry doing the applied research, but the factory has to develop the prototype and go into mass production. No one is responsible for seeing that something goes through from the beginning to the end."

Even when the Soviets have been able to buy, steal or develop new technology, much of it has never been put to wide use. Says Gertrude Schroeder, a University of Virginia expert on the Soviet economy: "Soviet workers think that robots work too fast, and sabotage them. Supervisors have to build fences around the robots." Managers fear that testing new technologies will disrupt production and thereby prevent their factories from fulfilling assigned quotas. Says Herbert Levine, an expert on the Soviet economy at PlanEcon, a Washington consulting group: "All technological change means risk and a measurably high percentage of failure. Bureaucracies do not tolerate failure well."

Nor do they welcome innovations that might stray from their control. While the Soviets have been able to produce some large, sophisticated computers, the smaller machines found in so many plants, offices and homes in the West are unavailable. Communist ideology is partly responsible. Proliferation of computers for private use would mean the rapid circulation of information, and that is not something the Kremlin particularly wants to encourage. Nonetheless, the Soviets are reportedly looking to buy large numbers of Western-made personal computers, apparently for use in schools and scientific institutions.

In short, the system that Gorbachev inherits has done its job all too well. As intended, it has stifled the kind of ingenuity and spontaneous assertion that the new Soviet leader now sees as necessary to revitalize his country's economy and society. Says Zdenek Mlynar, a former top Communist Party official in Czechoslovakia who emigrated to Austria in 1977: "The type of human being ideal for the Soviet system is an obedient and reliable person, carrying out orders and directives but devoid of initiative and responsibility." Unlike the Chinese, the Soviets are not inclined to tamper significantly with the basic premises of their system. Gorbachev's ideological instincts appear to be no different from those of his predecessors. Nonetheless, Moscow has for the past four years been drafting a policy document that is being heralded as the first revision of the Communist Party's program since 1961. It would incorporate both domestic and foreign policy goals; its introduction is to coincide with the implementation in 1986 of the next FiveYear Plan.

For all of Gorbachev's exhortations, some Western experts doubt that even a modest reform of Moscow's bureaucratic absolutism is possible. Says Peter Reddaway, senior lecturer in political science at the London School of Economics: "There is no feeling the reforms are ever likely to be applied on a countrywide scale." Other experts caution, however, that the capacity of the Soviet bureaucracy to modernize, if only for survival's sake, should not be underestimated. Says Duke University Professor Jerry Hough: "The Soviet Union remains a dictatorial system where a strong leader can make a ) difference. A leader with a Central Committee behind him can do quite a bit." Gorbachev clearly intends to be such a man.

With reporting by Erik Amfitheatrof/Moscow, with other bureaus