This book describes how the Soviet economic bureaucracy works – how bureaucrats big and small make the routine and extraordinary decisions that determine Soviet resource allocation. The Soviet economic bureaucracy operates according to rules and practices that have proved resistant to change. Soviet bureaucratic practices represent a “spontaneous order.” That the working arrangements of the Soviet economic bureaucracy have much in common with bureaucracies everywhere shows that they were not created randomly. In fact, one of the most difficult problems of studying Soviet bureaucracy is to distinguish peculiarly “Soviet” features from those that are common to any large bureaucratic organization.

Soviet bureaucratic arrangements have been remarkably stable. The practices described in this book represent responses to an inherently complex resource-allocation problem that defies easy solution. The bureaucracy must manage hundreds of thousands of enterprises of various sizes and shapes, producing millions of distinct goods and services. The bureaucracy must implement the general directives of the political leadership, operating at a level of aggregation well above that at which production enterprises work. In many cases, it must impose tasks on its subordinates that are inconsistent and sometimes irrational.

The Soviet economic bureaucracy must manage an economy that lacks private property rights, the natural equilibrating forces of markets, and the discipline imposed by the need to seek out profit opportunities. It has had to establish a system of rewards and punishments that motivates participants to act in the interests of their superiors in an environment in which information is distributed unequally.