1957 Soviet economic reform

The 1957 Economic Reform in the Soviet Union (Russian: Экономическая реформа 1957 года в СССР) was a reform of national economic management carried out in 1957–1965. It was characterized by the replacement of the centralized sectoral management system, which had been used since the mid-1930s, with a decentralized, territorially distributed system, which in Soviet literature was called the "territorial principle management system". It is associated with First Secretary of the Central Committee of the CPSU and (since 1958) Chairman of the Council of Ministers of the Soviet Union, Nikita Khrushchev.

The reform consisted of dividing the territory of the Soviet Union into so-called "economic administrative regions" with the creation of a network of territorial economic councils within the regions, territories, and republics of the Soviet Union, to whose jurisdiction enterprises previously subordinate to industrial and agro-industrial ministries were transferred. According to the initiators of the reform, decentralization of the production management system would increase its growth, improve product quality, optimize resource distribution, reduce equipment repair costs, and improve the organization of material and technical supplies.

However, the short period of decentralization in the first years of the reform, aimed at breaking the rigidly centralized sectoral management system that had been in place since the mid-1930s, led to the destruction of a unified technical policy and the disintegration of economic ties in industry and agriculture. An attempt to rectify the situation by consolidating economic councils and merging administrative economic regions led to the emergence of intermediate levels of management in the form of republican and union councils of the national economy and sectoral state committees. Research, design, and engineering organizations that were under the jurisdiction of sectoral management bodies were cut off from industrial enterprises, which continued to be subordinate to territorial bodies. This led to a decrease in the quality of design, construction and reconstruction of enterprises, slowed down the introduction of new technologies, machines and equipment and, as a result, led to a decrease in the quality of industrial products.

Nevertheless, this reform led to significant economic growth. The transformation of the industrial management system from sectoral to territorial and the evolution of the latter into a hybrid "production-territorial" system could not eliminate the fundamental contradiction between the historically established system of vertical integration of production in industries and the attempt to manage industries on a territorial principle.

The problems of the Soviet economy continued to worsen, and by 1965 the trend towards centralization prevailed. As part of the 1965 Soviet economic reform, the economic councils were liquidated, and the territorially distributed system of economic management through economic councils was replaced by a rigidly centralized sectoral management system through sectoral ministries and inter-sectoral state committees that composed the Council of Ministers of the Soviet Union, which was familiar to the party and economic nomenklatura.