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Enterprise Guidance in Eastern Europe: A Comparison of Four Socialist Economies

Enterprise Guidance in Eastern Europe: A Comparison of Four Socialist Economies

Copyright Date: 1975
Pages: 526
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  • Book Info
    Enterprise Guidance in Eastern Europe: A Comparison of Four Socialist Economies
    Book Description:

    The sixties were a decade of major reform in the guidance of industry in the socialist countries of Eastern Europe. In this comparative study of industrial management, the different directions taken by reform in the German Democratic Republic, Hungary, and Yugoslavia are examined against the pattern shown by Romania, a country in which no significant reform has occurred. The author focuses on the methods used to coordinate enterprises in the early 1970s. The book is the product of a remarkable opportunity: eleven months of interviews in the four countries. Those interviewed were mainly middle and upper managers of enterprises, but also include officials of ministries, planning commissions, banks, trade unions, and national Communist parties. The resulting data made possible new interpretations of enterprise management in Eastern Europe.

    Originally published in 1976.

    ThePrinceton Legacy Libraryuses the latest print-on-demand technology to again make available previously out-of-print books from the distinguished backlist of Princeton University Press. These paperback editions preserve the original texts of these important books while presenting them in durable paperback editions. The goal of the Princeton Legacy Library is to vastly increase access to the rich scholarly heritage found in the thousands of books published by Princeton University Press since its founding in 1905.

    eISBN: 978-1-4008-6919-0
    Subjects: Management & Organizational Behavior

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-x)
    (pp. xi-xiv)
    (pp. xv-1)
    (pp. 2-2)
    (pp. 3-9)

    This book is a comparative study of the contemporary management of industry in four socialist countries: Romania, the German Democratic Republic (G.D.R.), Hungary, and Yugoslavia. It is essentially ahistorical and gives no systematic attention to the evolution of the management systems of these countries.

    Management of industry is defined here as consisting of the methods used throughout all levels of the national management apparatus, from the Council of Ministers to the individual factory, to achieve stated objectives. Starting from the view that, in all of these socialist economies except Yugoslavia, industry as a whole may be viewed as though it...

  7. CHAPTER 1 The Analytic Framework
    (pp. 10-26)

    One way of viewing the four countries treated in this book is that they represent a continuum with regard to detailed, centralized decision making in industry, ranging from Romania to the G.D.R. to Hungary to Yugoslavia. The difficulty with this perspective, however, is that a major discontinuity exists between the three CMEA countries on the one hand, and Yugoslavia on the other.

    The three CMEA countries share the common feature that each is guided by central planning and decision making from a single center. In each of these three countries, all of industry can properly be regarded as a single...


      (pp. 29-32)

      Romania is a country at an early stage of development, and her rapid growth in national income has been due in considerable part to change in the structure of the economy. The industrial labor force has increased rapidly, primarily by movement out of agriculture. The capital stock of industry has also shown very high percentage increases. The expansion of industrial output has been fueled more by extensive (increase of inputs) than intensive (improvement of overall productivity) means, and this is neither surprising nor unfitting for her level of general economic development.

      Highly centralized methods of planning and plan enforcement have...

    • CHAPTER 2 The Romanian Industrial Setting
      (pp. 33-58)

      This chapter is intended to set the stage for discussion of Romanian managerial behavior at the ministry,centrala,and enterprise level in 1970. It does not enter into substantive matters of managerial decision making.

      Romania, with a population of twenty million, is one of the two larger of our four countries. It has two national minority groups of some size: Hungarian (8 percent of the population) and German (2 percent); 6 percent of all students through secondary education attend schools taught in a national-minority language. Unlike Hungary and the G.D.R., Romania has a nationalities problem and there are claims—which...

    • CHAPTER 3 Romania: Integration of the Economy Above the Level of the Centrala
      (pp. 59-87)

      This chapter is based primarily upon interviews conducted partly within the State Committee for Planning and the Ministry of Foreign Trade, but above all in the headquarters of seven of Romania’s thirteen industrial ministries. It represents an interpretation, taken from the standpoint of the branch ministries, of how the economy is coordinated.

      In Romania, much more than in any of the other three countries covered in this book, the economic decisions of the economy are concentrated above the level of the production unit. Thus my materials on the methods of economic decision making in Romania are concentrated in this chapter....

    • CHAPTER 4 Romania: Centrale and Enterprises
      (pp. 88-128)

      The task of this chapter is to investigate the scope, objectives, and process of decision making in the operating units of Romanian industry: thecentraleand enterprises. Their activities are guided by annual plan indicators, detailed instructions, and allocations received from branch ministries. Other organs—particularly the powerful regional committees of the Communist Party—also exercise a direct influence. How much freedom, and in what areas of decision making, is left to thecentrale? What goals do they pursue within the limits of freedom they possess? How effective do these operating units appear to be in exercising the powers which...


      (pp. 131-132)

      The German Democratic Republic is by far the most highly developed of the four countries we are studying, and is one of the two most industrialized nations within the CMEA bloc. There have been frequent statements, made both from inside and outside of the socialist camp, that highly centralized methods of planning and economic administration are more appropriate to economies at an early stage of development than to those that are relatively mature. In the light of this contention, it seems particularly important to have a study of the practice of economic administration in the G.D.R.

      The older centralized system...

    • CHAPTER 5 The East German Industrial Setting
      (pp. 133-170)

      The German Democratic Republic and Romania are at opposite ends of the macroeconomic spectrum covered by East European countries. The G.D.R. is highly industrialized, with little possibility for adding further to the labor force employed in industry. Its population enjoys a relatively high standard of living and has a plenitude of urban and industrial skills but, partly owing to substantial emigration, is little larger than that which existed in the same territory before the Second World War. Finally, the country is heavily dependent for its raw materials upon trade with other CMEA countries.

      The G.D.R. shares with Romania a high...

    • CHAPTER 6 East German VVBs, Kombinate, and Enterprises
      (pp. 171-209)

      I shall discuss in this chapter the nature of the planned tasks given to VVBS,Kombinate,and enterprises, and the behavior of these organizations within the constraints established by these tasks. Managerial bonuses will be discussed inter alia. There will also be a limited discussion of the role of the Party, the trade unions, and the Industry and Trade Bank in influencing the above units.

      The source of information consists of interviews conducted during the summer of 1970. The interviews ran an average of twenty-five hours per organization in each of the following: one machinebuilding WB, one of theKombinate...

    • CHAPTER 7 Conclusions as to the New Economic System, and Modifications since 1970
      (pp. 210-228)

      In Chapter 4, we saw that the operation of Romanian enterprises andcentraledeparts sharply from that depicted in the orthodox microeconomic model of Soviet-type economies. There, however, it was because of extreme centralization of all economic decisions within the ministerial headquarters. While “success indicator” suboptimizing by individual production units was absent, so too was local initiative.

      East German reality seems to be depicted no more effectively than the Romanian by the orthodox model. True, top managerial bonuses are more important than in Romania: the difference between major success and failure may well be rewarded by an annual increment on...


      (pp. 231-233)

      The Hungarian economic reform, introduced at the beginning of 1968, represents the most radical change which has been maintained over a period of years in the economic system of any CMEA country. Individual state enterprises receive no plan assignments whatsoever, and they act much more autonomously with respect to their branch ministries than is the case in any other CMEA country. With minor exceptions, there is neither output planning to the level of the enterprise nor materials allocation. Although planning at the level of major branches does exist, these plans are carried out not so much through instructions as by...

    • CHAPTER 8 Hungary: Objectives of Decentralized Planning and the Constraints on the System
      (pp. 234-256)

      The purpose of this chapter is to provide a background for the following two. However, even the reader who is informed as to the Hungarian economy is advised to read the section dealing with policy constraints.

      Hungary has the smallest population (10.3 million) of the four countries studied. But within this small population, substantial changes have been occurring. First, population aging has been substantial; those over sixty years of age comprised 17 percent of the population in 1970 compared to 12 percent in 1949. Second, there has been a heavy shift of the labor force from agriculture to industry; the...

    • CHAPTER 9 Hungary: The Reform Mechanisms in Practice
      (pp. 257-281)

      This chapter will deal with the main economic mechanisms of the reform, principally as they existed in early 1971. Their institutional development, as well as the ways in which they are used, are an adaptation of the conception of the reform to the various constraints which both grew out of the historical situation and resulted from higher-priority government objectives. While no Hungarian would assert that such adaptation was desirable per se, it is the result of this adaptation which represents the reform as it has actually functioned.

      A basic change in the pricing system was considered a necessary prelude to...

    • CHAPTER 10 Hungary: Enterprises and the Success of the Reform
      (pp. 282-316)

      This chapter concentrates primarily upon the microunits of industry, analyzing their responses to the various reform measures. It then examines several types of organizations which exercise some degree of direct control over the enterprises, and also treats the relationship between the enterprise directors and the managers of the constituent individual establishments. Finally, it draws upon macroeconomic data to supplement microeconomic sources in providing an analysis of the progress of the Hungarian economy under the reform mechanisms.

      One of the most prominent features of the prereform system in Hungary, as in all of the other CMEA countries, was the dominant role...

  11. PART IV YUGOSLAVIA (Slovenia)

      (pp. 319-322)

      Yugoslavia differs from the other three socialist countries examined in this book in that its economy is not centrally planned in the same sense as is that of the CMEA nations. The issue is not the absence of compulsory plans given to individual enterprises; in this regard, Yugoslavia is similar to Hungary. Nor is it even the more circumscribed and less detailed economic objectives of the Yugoslav central authorities as compared to those of the other nations. Rather, what is critical is that Yugoslav enterprises are independent of the central state apparatus, whereas industry in each of the other countries...

    • CHAPTER 11 The Yugoslav Industrial Setting
      (pp. 323-350)

      This chapter is intended only to introduce the two succeeding ones. It presents the industrial setting both of Yugoslavia as a whole and of Slovenia in particular, discusses the key concepts of self-management and workers’ management, and treats those controls over the enterprise activities which remained after the 1965 economic reform. The reader who is well informed as to the Yugoslav economy will learn little here.

      Yugoslavia stands out sharply among the four countries discussed in this book for its extreme regional diversity, both cultural and economic. Economic diversity is best shown by the degree of geographic variation in the...

    • CHAPTER 12 The Reality of Workers’ Management and Enterprise Goals in Yugoslavia
      (pp. 351-394)

      This chapter is concerned with the significance of workers’ management—other than as a legitimating device for the autonomy aspect of enterprise self-management—in the operation of Yugoslav enterprises. I shall approach this topic from three different perspectives.

      The first is the Yugoslav counterpart of the familiar Berle and Means issue with regard to large American capitalist firms: managerial versus stockholder control. In self-managed socialist enterprises, this issue takes the form of managerial versus worker control. Much of the discussion of workers’ management has been cast in this framework, with considerable evidence being presented that Yugoslav enterprises tend in fact...

    • CHAPTER 13 Enterprise Behavior in Yugoslavia
      (pp. 395-430)

      Chapters 11 and 12 have treated both the external environment within which the Yugoslav firm operates and the internal relationships of the workers’ managed enterprise. In this chapter I shall consider the behavior of enterprises in relation with the external environment, basing myself heavily upon interviews.

      Three areas of enterprise behavior will be given particular attention. The first is external sources of finance for industrial enterprises. The fifty-five business banks of the country play the primary role here; their operation as independent enterprises poses a particularly interesting problem for the efficient allocation of national capital resources. The functioning of these...


    • CHAPTER 14 The Managers: Backgrounds, Careers, and Earnings
      (pp. 433-465)

      The four country parts of this book have dealt with the behavior of enterprises, and with the methods and degree of their coordination. But they have been concerned only casually with the decision makers themselves. Yet it is obvious that managerial decisions will be influenced both by the characteristics of the decision makers and by the systems of rewards and punishments which they face.

      The first section of this chapter deals with certain characteristics of managers: their sociopolitical background, age, and education.

      The second section treats their careers, which can be viewed from two different perspectives. The first is that...

    • CHAPTER 15 Conclusion
      (pp. 466-494)

      Of the four socialist economies examined in this book, three incorporate significant elements of market socialism. In neither Yugoslavia nor Hungary are any plans at all given to microunits; coordination of the production and sales decisions of the enterprises is in theory carried out in the market place through the enterprises’ attempts to approximate some form of profit maximization. In the G.D.R., a major portion of state industry uses profitability criteria in determining its own product mix within rather broad limits, and least-cost considerations are significant in the choice among many forms of inputs. Only in Romania are economic choices...

  13. INDEX
    (pp. 495-506)
  14. Back Matter
    (pp. 507-507)