Leslie Holmes, Communist economy: Attempts at economic reform

By the 1960s, many Communist leaderships were recognizing the need to address problems in their economies, and that if their countries were ever to catch up with and overtake the West, as they were supposed to, changes would have to be made. Thus was introduced a series of economic reform packages that were intended to improve economic performance and the supply of consumer goods. The first of these, the New Economic System, was introduced in East Germany in 1963. The Soviets and Yugoslavs brought in their own version of reform in September 1965 – while what many analysts consider to have been the most radical package was Hungary’s New Economic Mechanism, introduced in 1968.

While each country’s reform package was unique, a number of features were common. One was that economic decision-making was to be partly devolved; the central agencies were to transfer some of their powers to the enterprises. Although Hungary’s New Economic Mechanism, which largely did away with central planning, was widely considered to have been the most successful, even its economy had slowed right down by the second half of the 1970s.

Since most of the economic reforms of the 1960s had failed to deliver the desired improvements, many Communist governments introduced further reforms in the 1970s. The most significant in several East European states and the USSR was the amalgamation of several enterprises into one larger unit, usually called an association or combine or corporation, depending on the actual arrangement. These were not entirely new in the 1970s; but there was in several countries a new focus on them and their numbers were significantly increased. Unfortunately for both the Communists and the consumers, economic growth figures reveal that these reforms did not work either.