The article examines the ideas behind the 1965 economic reform in the USSR and the way in which it was implemented. That reform is still central to discussions about whether it would have been feasible, at least in theory, to adjust the Soviet economic model in the post-war period without breaking it. The article sets proposals by well-known economists (such as those in an article by E. G. Liberman) against the economic debate that ran from 1962 to 1965. This facilitates reconstruction of an alternative model for a planned economy which was developed jointly at that time by mathematical economists, cyberneticists, and practical business operators. In contrast with the prevailing view, the author maintains that the struggle between proponents of economic liberalism and of improving planning through computerization arose later and that contemporaries of the reform, including V. S. Nemchinov, put forward a set of reform proposals that combined computerization, economic and mathematical methods, and the use of economic incentives (material interest), which were compatible with Liberman’s proposals. Several important elements of the proposed economic system were not implemented: pricing reform was carried out belatedly and only once; a way to collect economic information that would permit prompt price adjustments was not created; and stability of economic guidelines was not sustained. Guidelines were instead subject to change through annual approvals by ministries and industries. The Interdepartmental Commission (IDC), which was nominally empowered to advance reform, resorted largely to mere jockeying for “favorable” guidelines. No wholesale market for the means of production was created, and therefore the increased demand of enterprises for capital investment could not be satisified. The state arbitration mechanism, which was meant to ensure consistency in deliveries by economic means, worked only to a limited extent. The reform reduced government revenues and increased the population’s effective demand, which exceeded the ability to deliver commodities and exacerbated the deficit in the market for consumer goods. These negative outcomes might have been averted either by ratcheting up reform until a market economy was created, or else by reinstating administrative control over production quotas. But it proved impossible to refrain from choosing one of the two options. The administrative path was chosen even before the Prague Spring because the state bureaucracy was unwilling to give up its role in the economic and social development of the country. The inconsistency in the implementation of the reform led to contradictory results. Although a number of financial indicators improved, the transition to an intensive type of development did not occur.

The article analyzes the changes to industrial management that Alexei Kosygin devised and which have been a frequent topic of modern historiography. However, the restoration of sectoral ministries, one of the most important elements, has not been fully studied in academic literature. Preparation for the changes came in two stages, the first began in late 1964 and the second was completed in 1965. The collective leadership that came immediately after Khrushchev’s resignation had no ready-made plan. A comprehensive strategy began to take shape only after the formation of the Kosygin Commission at the end of 1964. The government took the first practical steps in 1965 when state committees for defense were transformed into ministries that were to supervise the enterprises previously under the Council of National Farms. Kosygin then presented a detailed plan for overhauling industrial management by creating ten sectoral ministries with nationwide authority and by expanding the role of the State Planning Committee. However, Brezhnev resisted taking industrial management functions away from the various regions in part because two thirds of the Soviet economy was already under the control of the Council of Ministers. In late 1965 the Kosygin Commission proposed a new plan abolishing the sovnarkhoses (regional economic councils formed under Khrushchev) and placing industries under the ministries, although the enterprises themselves would remain within the jurisdiction of the separate republics of the Soviet Union. These half-hearted measures made industrial management nominally more centralized, but the ministries lacked the power to impose far-reaching and binding solutions on enterprises.

The article analyzes USSR economic experiments aimed at increasing labor productivity by providing material incentives to workers and focuses in particular on such reforms during the late 1960s. The effectiveness of these experiments, their potential to transform the Soviet planned economy, and the impact of the political and economic context on their implementation are assessed. The author examines key initiatives (specifically, the Karpov, Shchеkinо and Bashkir programs) in order to understand their design, implementation, and consequences. The study is based on archival materials of the Ministry of the Chemical Industry, the USSR Council of Ministers, and the Secretariat of the CPSU Central Committee, as well as on documents from enterprises and periodicals. The analysis indicates that these economic experiments, despite their loudly proclaimed success, were undermined by political and bureaucratic factors. Their implementation was often merely formal, and any positive outcomes were due more to technological modernization than systemic change. The article also questions the claim that mass layoffs were the decisive reason for discontinuing the experiments and instead maintains that they were curtailed because of the exhaustion of resources and changing economic conditions.

The program adopted at the 22nd Party Congress in October 1961 stated that prices must reflect socially necessary labor costs. Soviet economics held that it is these costs that form value. Meanwhile, Robert Campbell published an article under the title “Marx, Kantorovich, Novozhilov: Stoimost’ Versus Reality” supporting the view that Kantorovich and Novozhilov had revived Soviet economics. However, they had to reject the Marxist theory of value. In the opinion of many Soviet scholars, these economists withdrew from Marxism, which was not a positive contribution to economics. This article analyzes problems concerned with the content of the theory of value, whether it was adequately understood by Soviet economists and whether Kantorovich’s and Novozhilov’s approaches were compatible with Marxism. In fact, they developed interesting concepts of objectively determined valuations and differential costs. These indicators were to be used in the process of setting prices. Both Kantorovich and Novozhilov sincerely believed that their approaches were in line with Marxism. In his works, Novozhilov criticized Campbell’s article. This article attempts to prove that Marx did not complete the theory of value and, in fact, came to a dead end. With this in view, it would be incorrect to blame scholars for withdrawing from such an incomplete theory. The article studies the questions of correlation between Kantorovich’s and Novozhilov’s approaches and of their mutual estimation of each other’s thinking. In addition, the article demonstrates differences and similarities in the concepts of these outstanding economists. Although in correspondence with Canadian historian Vsevolod Holubnychy, Novozhilov tried to prove that his theory of differential costs was developed independently of Kantorovich’s works, this statement seems to be incorrect. The article also marks the influence of Kantorovich’s and Novozhilov’s ideas on the development of the concept of economic reform. The Appendix includes fragments from correspondence between Novozhilov and Holubnychy and excerpts from Campbell’s letter addressed to the author of this article. These excerpts contain quite a just rejoinder to critical remarks by Novozhilov concerning Campbell’s article.

The study examines how a set of ideas for eliminating the “bottlenecks” in the Stalinist economic model came about. The goal is to find out the factors responsible for the “maturation” of recognition by the political elite, public opinion and the scientific community that a market transformation of the economy was necessary. The authors chose to avoid analyzing the features of the Kosygin reform itself and instead focus on the logic behind the ways in which contemporaries addressed the need to improve the national economy’s efficiency. The research methodology is chronological and tracks the changes in positions on issues that determined the underpinnings of the Soviet economy. A comparative method was also used to distinguish the positions of reformers on the main issues: a planned or market economy, forms of ownership, the role of money, price and wage policy, structural policy, social aspects of the economy, etc. The authors employed an interdisciplinary approach that incorporated research from economic, historical, sociological and other social studies along with a concentration on research that probed the basic institutions of the Soviet economy. The study provides a fresh consideration of the issues raised among the political and economic elites and also connects them with extensive material on Soviet economic theory and prevailing public awareness and psychology. The study concludes that improving economic efficiency was a central concern of reformers throughout the Soviet period. The empirical material clearly demonstrates a growing demand for strengthening the role of “economic levers” in the planned economy. The sources examined, including both published and unpublished archival materials from the Russian State Archive of Socio-Political History and the Russian State Archive of Contemporary History, support the conclusion that the same Soviet society that had defended the country’s sovereignty in World War II gradually abandoned the messianic ideal of a new, unprecedented global victory for “social justice” and turned towards the consumer society that characterized the West. Although it had already become clear that the growing economic problems could not be solved without a radical change in the very foundations of the economy, an analysis of the late Soviet stage of reform reveals a number of factors that prevented all agents in the process from taking their rethinking of the socialist economy to its logical conclusion. In many ways, this paralysis predetermined the collapse of the economy and the difficult initial conditions under which post-Soviet states were forced to adopt market economic principles.

The sixtieth anniversary of the Kosygin reform that was carried out from 1965 to 1972 has been the occasion for theoretical accounts of the characteristic patterns of Russian socio-economic reforms and revolutions from the nineteenth to the twenty-first century and also for comparisons with the way other countries have managed catch-up development and how their traditional and innovative institutions have interacted. The Kosygin reform attempted to improve the Soviet planned economy by introducing elements of market competition into it. Sociologist Charles Tilly’s definition of revolution as a socio-political event that changes the “rules of the game” provides a guide for distinguishing such events along а continuum that ranges from ordinary reforms to major revolutions. The many instances of both circumstances in Russia during the last two hundred years is a manifestation of the typical groping ahead by institutions in countries undergoing catch-up development. The political elites of these countries have tried to replace revolutions with intensive and radical reforms (“revolutions from above”) in order to “catch up and overtake” while avoiding “great upheavals.” Although radical reforms may have certain shortcomings that are integral to them, such as fostering a dichotomy between a weak populace and a strong state, they may still have revolutionary outcomes and provide solutions for the problems of national modernization. The first shortcoming of the Kosygin reform from this point of view is that it was not (or could not be) clearly perceived even by its advocates as a far-reaching way to modify the Soviet Union’s model of national development from a totally planned economy dominated by institutions that had consolidated power and ownership to a mixed economy with substantial private property. The second and even more important shortcoming was a reluctance to garner social support from potential entrepreneurs. Inattention to this social dimension of reform meant that the implementation of any new ideas was relinquished to the existing state apparatus, whose interests contrasted sharply with them. In the absence of “pressure from below,” reform could have only limited results that did not materially change the course of development.

The article analyzes the behavior of economic agents with bounded rationality in a multiregional New Keynesian model in which the technological sovereignty of the national economy (macroregion) entails that resources imported from individual regions along with labor resources are factors of production. Evolutionary selection among relatively simple forecasting heuristics determines how agents’ expectations are formed. Adjustment in expectations provides an explanation for the coordination of individual behavior, which brings about different aggregate results. Under this model, individuals adapt their strategies over time in response to the relative effectiveness of forecasting heuristics. The weighted shares of agents applying these rules change endogenously. Simulation experiments that applied such heuristic switching showed that the stability of the model’s dynamics exhibits considerable dependence on the share of imports in the volume of output and on nominal price rigidity, as well as on the parameters of monetary policy. That stability also depends on the number of regions included in the macroregion, which affects their degree of integration. Nominal rigidity of regional prices favors the substitution of labor by imported products from other regions and contributes to stability in inflation dynamics and to the output gap. Price rigidity also reduces the volatility of inflation and therefore diminishes the inflation reaction coefficient under the Taylor rule. The article demonstrates and explains the stabilizing value of regional integration. The stability of the equilibrium between trajectories of the variables examined is also analyzed in relation to the evolutionary mechanism for selecting among various predictive heuristics. One important practical conclusion that emerges from this study is that the Central Bank can actually achieve convergence toward a stable equilibrium by managing the share of economic agents that subscribe to the expectation rules that are preferable at a certain point. In particular, the Central Bank can influence the behavior of agents derived from their expectations about adapting and about extrapolation of trends.

The article evaluates the impact of fiscal policy shocks on inflation in the Russian economy using updated econometric methods. Although a SVAR model with Cholesky decomposition would commonly be employed for this kind of analysis, it had to be replaced by more current models because its excessively narrow assumptions made it unsuitable for this article. Fiscal impulse indicators based on IMF methodology were constructed and applied in a proxy-SVAR approach, as well as in a local projections method with instrumental variables (LP-IV), in order to assess the impact of fiscal policy shocks on inflation in the Russian economy from 2012 to 2024. The structural budget deficits establish that the peak of fiscal stimulus following the start of the Special Military Operation occurred in mid2023 and that fiscal policy had returned to a neutral stance by mid-2024. The most restrictive fiscal policy during the past fifteen years came in mid-2019. The proxy-SVAR and LP-IV methods indicate that fiscal policy shocks affect inflation for the next 4 to 6 quarters and that an abrupt change in fiscal policy by 1% of GDP produces a median change in inflation of 0.9–1.3% after a year. The key recommendation for returning inflation to its target value is normalization of fiscal policy. This requires reducing the level of government expenditures to 34.5-35.0% of GDP and strictly adhering to that fiscal rule when devising the federal budget.

The external shocks from 2020 to 2021 and again from 2022 to 2023 induced an economic crisis that required the Russian government not only to ease tax, administrative, and other burdens so that businesses could quickly adapt, but also prompted greater financial support for small and mediumsized enterprises (SMEs). However, direct subsidies may not always produce the desired effect. This study examines the specifics of state support for SMEs and assesses how well it sustained the number of SMEs in the regions during these shocks. Official data from the register of SMEs receiving support indicates that assistance totaling 931.4 billion rubles was provided over the eighteen months from 2022 to the first half of 2023; that amount was 1.7 times greater than pandemic assistance (issued from 2020 to the first half of 2021). Guarantees and sureties accounted for 83% of the later rounds of support, whereas those instruments made up less than 50% of previous pandemic support. The coverage of SMEs by state assistance nevertheless decreased from 26.6% in 2020 to 6.3% in 2022. The federal government had shifted its focus from providing a mass of small subsidies and grants to more targeted guaranteed support for manufacturing and technology companies in order to stimulate import substitution. Overall, state support became more concentrated; approximately 2.1 million rubles per supported SME were allocated in 2022, which was 6.4 times more than during the pandemic. The proportion of indirect measures, such as those provided by development institutions, also increased, which could be attributed to a more ecosystem-based entrepreneurship policy. The study employed a system-GMM (system Generalized Method of Moments) approach to assess the effectiveness of various government policy approaches. The econometric results show that indirect assistance with increased volume per SME is effective for maintaining the number of SMEs, while increasing the coverage of SMEs has a beneficial effect when coupled with such direct measures as subsidies and grants. Going forward, the government should differentiate its approach to providing SME assistance using various instruments and build a support system that takes into account the shift from traditional strategies to the development of regional and local entrepreneurial ecosystems.