5 - Investment planning

Summary

At the present time, the USSR is energetically implementing the Five-Year Plan for the construction of socialism … Heavy industry occupies a central place in this plan, in particular those branches of industry which are connected with increasing the defence capacity of the country … The basic goal of the Five-Year Plan is to increase military strength.

Lieutenant-colonel Kasakhara, Military attaché, Japanese Embassy in Moscow (July 1931)

The share of investment in the national income

The traditional model was generally effective in mobilising resources for investment. That was a major reason why it was developed and maintained. Ofer (1987: 1784) argued that: ‘The most outstanding characteristic of Soviet growth strategy is its consistent policy of very high rates of investment … These high rates … are almost without precedent for such long periods.’ This argument was based on official Soviet statistics which, certainly in the late Soviet period, overstated net investment (Kontorovich 1989, 2001). Furthermore, even higher rates of investment were attained in China after it discarded the traditional model. Nevertheless, it is certainly true that high investment rates were attained for long periods, especially in the early years of the traditional model.

These high investment rates were possible as a result of institutions quite different from those of capitalism (Mau and Drobyshevskaya 2013: 38):

the scale of economic accumulation was unfettered by the unpredictability of private savings and investment. Economic activity was not constrained by high levels of taxation or by the autonomous decisions of private enterprises. Any possibility of the flight of capital was effectively cut off by comprehensive financial controls. Totalitarian political control removed conventional limits to the quantity of financial resources that could be mobilized for the goal of accumulation. This exceptionally high level of national savings, stable in the long term, made possible a leap forward in industrialization and a sharp increase in rates of economic growth.