By Martin Cave
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4 Consumption goods and the allocation of labour So far this chapter has confined itself to the internal operations of the industrial sector, in which administrative control is pre-eminent. The relations of the production sector with the household sector are organised on different principles. The demand for labour in a centrally planned economy is determined by the plan. Typically the State Planning Commission compiles a labour balance in the same way as it compiles material balances for products; for annual planning balances are broken down by region and skill category.
The regions developed undesirable tendencies towards autarky, and it Economic Reforms and their Impact on Planning 41 became increasingly difficult to tackle problems which concerned an entire branch. As a result various state committees emerged in Moscow with responsibility for these very real problems; not surprisingly, these gradually assumed some of the powers previously devolved to the sovnarkhozy. Consequently, few were surprised when the leadership abolished the sovnarkhozy and reinstated the branch ministries in 1965.
Any profits made, after deduction of bonuses to which enterprise personnel are entitled, are transferred to the stage budget, where they are entered on the receipts side together with other revenue items. The expenditure side of the budget is made up of government disbursements on defence, social services and also on the economy (in particular, investment financed directly from the central budget). This arrangement means that the general level of prices within the industrial sector has little effect on the state budget, provided that it is insulated from retail prices.
Alternative Approaches to Economic Planning by Martin Cave